GE Capital Commercial, Inc. v. Sylva Corp (In re Sylva Corp)

Summarized by Lars Fuller , BakerHostetler
11 years 3 months ago

Citation:

GE Capital Commercial, Inc. v. Sylva Corp (In re Sylva Corp), No. 14-61016 (BAP 8th Cir. Nov. 26, 2014)

Tag(s):

Ruling:

The BAP for the 8th Circuit reversed and remanded to the bankruptcy court (D. Minn.) after the bankruptcy court denied an equipment lessor's motion for administrative expense claim. The BAP ruled that the bankruptcy court erroneously failed to analyze the creditor's motion under 11 USC 365(d)(5), and instead applied the stricter burden of 11 USC 503(b)(1)(A). Under 11 USC 365(d)(5), the lessor under a personal property lease is presumptively entitled to an administrative claim for postpetition rents accruing after 60 days following the order for relief, subject to a showing by the debtor that the equities of the case should override the claim. Under 11 USC 503(b)(1)(A), an administrative claimant bears the burden of proving entitlement to the claim to the extent the claimant can demonstrate that the expense benefitted the estate. The BAP ruled that the bankruptcy court should have first evaluated whether the administrative claimant held a true lease, making 365(d)(5) applicable, and if so, should then have applied the standards of 365(d)(5) to the administrative claim, rather than the standards of 503(b)(1)(A).

Procedural context:

After the bankruptcy court (D. Minn.) denied an equipment lessor's administrative claim, the equipment lessor appealed to the 8th Circuit BAP.

Facts:

Equipment lessor leased lift to debtor. Lease expired prepetition, but debtor remained in possession of leased property. After debtor filed chapter 11, debtor continued to use leased property, but failed to make any further lease payments. Equipment lessor filed motion seeking to compel debtor to assume or reject lease. Debtor argued that lease was a disguised financing transaction, not a true lease. Lessor and debtor resolved motion by stipulation, with debtor stipulating that lease was true lease. Lessor filed motion for administrative claim for unpaid rents under 365(d)(5). Debtor objected that lease was not a true lease, but was a disguised financing transaction, and that under 503(b)(1)(A), creditor failed to carry burden demonstrating benefit to estate.

Judge(s):

Federman, Saladino, Shodeen

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