Super Nova 330 LLC v. Gazes

Summarized by Janice Grubin , Barclay Damon, LLP
13 years 7 months ago

Citation:

Docket No. 11-1773-bk (August 2, 2012)

Tag(s):

Ruling:

First, in vacating the lower courts’ rulings finding the lease at issue not to be unexpired, the Court held that a lease is unexpired for purposes of section 365(d)(3) of the Bankruptcy Code where a landlord seeks and obtains a warrant of eviction in New York but does not execute on that warrant prior to the tenant’s filing of a bankruptcy petition. The Court reasoned that, under New York law, the tenant retains a residual interest in the lease -- wherein the state court may vacate the warrant of eviction for good cause and reinstate the lease – until the execution of the warrant even though the lease was previously terminated “nominally” when the eviction warrant was issued. The Court expanded its ruling by clarifying that a lease is “unexpired” for purposes of section 365 (d)(3) when the tenant can revive the lease under applicable state law. Second, the Court remanded to the Bankruptcy Court the legal issue of whether the Trustee should be obligated to reject a terminated but unexpired lease or whether the lease should be treated as presumptively rejected since the issue was neither briefed or argued below. Third, the Court vacated and remanded the Bankruptcy Court’s finding that AGC was not in possession of the premises since it was not an issue that could be decided at summary judgment given the significant divergence in the parties’ accounts on the issue of possession. The Court directed the Bankruptcy Court to decide the factual issue of possession only if it was necessary to decide Super Nova’s administrative motion, and only after examining the disputed factual issues.

Procedural context:

Appeal from an order of the United States District Court for the Southern District of New York affirming the order of the United States Bankruptcy Court for the Southern District of New York denying Super Nova’s claim, pursuant to section 365(d)(3), for recovery of post-petition rent, attorneys’ fees on pre-petition issuance/post-petition execution of warrant of eviction. Vacated and remanded.

Facts:

On February 1, 2007, Landlord Super Nova 330 LLC (“Super Nova”) obtained a warrant of eviction against Association of Graphic Communications, Inc. (“AGC”). On February 2, 2007, AGC filed a voluntary petition under chapter 7 of the Bankruptcy Code. On April 24, 2007, Super Nova executed on the warrant of eviction and obtained legal and actual possession of the premises, after receiving relief from the automatic stay. According to Super Nova, it spent $10,000 removing personal property and debris on the premises when AGC vacated. Super Nova then moved under section 365(d)(3) of the Bankruptcy Code for unpaid rent from the petition date to the eviction date, attorneys’ fees and prejudgment interest. The Bankruptcy Court granted the Trustee’s motion for summary judgment and denied Super Nova’s motion for administrative expenses on the basis that the lease was not unexpired since it had terminated prepetition by the issuance of the warrant of eviction. On Super Nova’s appeal, the District Court affirmed that the lease was not unexpired.

Judge(s):

Calabresi, Raggi, and Chin, Circuit Judges

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