Robinson v. Chicago Housing Authority, 94-2656

• Decision Date: 28 July 1995
• Docket Number: No. 94-2656,94-2656
• Citation: 54 F.3d 316
• Parties: 33 Collier Bankr.Cas.2d 603 Doris ROBINSON, Debtor-Appellant, v. CHICAGO HOUSING AUTHORITY, Movant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 316

54 F.3d 316

33 Collier Bankr.Cas.2d 603

Doris ROBINSON, Debtor-Appellant, v. CHICAGO HOUSING AUTHORITY, Movant-Appellee.

No. 94-2656.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 1, 1994.

Decided April 26, 1995.

Rehearing Denied July 28, 1995.

Sheryl A. Fyock, Office of Trustee, Chicago, IL, for trustee Jack McCullough.

Cary G. Schiff (argued), Chicago, IL, for appellee Chicago Housing Authority.

David Yen (argued), Clara A. Carter, Legal Assistance Foundation of Chicago, Chicago, IL, for debtor-appellant Doris Robinson.

Before CUDAHY, ESCHBACH and MANION, Circuit Judges.

CUDAHY, Circuit Judge.

I. Facts

The debtor here, Doris Robinson, has lived in Chicago Housing Authority (CHA) housing for low-income individuals for about 35 years and in the apartment at issue here for 15 years. At the end of 1992 she had difficulty making her rent payments of $22 per month, and by December of 1992 she owed CHA $66 of back rent. She offered payment of $60, but CHA would not accept partial payment.

CHA served Robinson with a Notice of Termination of Tenancy on January 7, 1993. The notice informed Robinson that the failure to pay $88 within 14 days would result in termination of her lease on the 15th day. She did not meet the 14 day deadline, and CHA filed a Forcible Entry and Detainer Action against Robinson in the Circuit Court of Cook County on February 23, 1993.

The court entered a Judgment of Possession in favor of CHA on May 4th, 1993. The ruling determined that CHA could accept Robinson's rent if it so chose, but that, should it choose not to accept the rent, as was its right, a writ of possession would issue 30 days later on June 3, 1993. Robinson attempted to pay the full rent due before June 3rd, but CHA chose not to accept the payment. This apparently inflexible attitude of CHA has given us particular cause to consider carefully Robinson's claims.

On June 3, 1993, the day the writ of possession was to issue, Robinson filed for bankruptcy and asked that the trustee assume her lease under her Chapter 13 reorganization plan. As a result, she retained possession of the apartment. However, Bankruptcy Judge Sonderby granted CHA's subsequent motion for relief from the automatic stay, ruling that the trustee could not assume the lease as part of Robinson's Chapter 13 plan because there was no lease left to assume. The district court affirmed the bankruptcy court's decision. Robinson now appeals, arguing that a distinction exists between a "terminated" lease and an "expired" lease, and that this distinction allows the trustee to assume the lease in her case. We disagree and affirm.

II. Discussion

A. Federal Bankruptcy Law

Robinson argues that her lease may be assumed by the bankruptcy trustee under 11 U.S.C. Sec. 365(a). Section 365(a) states that "the trustee ... may assume or reject any executory contract or unexpired lease of the debtor" (emphasis added). When a debtor files for bankruptcy, the debtor's possible interest in such a lease is protected by an automatic stay under 11 U.S.C. Sec. 362. This stay prevents a landlord from initiating or pursuing claims against the debtor, including state eviction proceedings. 11 U.S.C. Sec. 362. However, a landlord may file for relief from the stay if the debtor does not have a valid interest in the leasehold.

Robinson filed for bankruptcy under Sec. 365(a), and the trustee in normal course assumed what Robinson claims was her unexpired lease. However, CHA filed for relief from the automatic stay, which otherwise applied, on the grounds that the lease was not "unexpired" and thus was not assumable. The bankruptcy court and, subsequently, the district court granted CHA the requested relief, agreeing that Robinson's lease was not assumable because it was not "unexpired." Robinson, however, argues that both federal bankruptcy law and state law establish that, although her lease may have been "terminated," it had not "expired" under Sec. 365(a) and should have been deemed assumable.

As Robinson concedes, neither Sec. 365 nor the rest of the federal bankruptcy code defines "unexpired." See, e.g., In re Collier, 163 B.R. 118, 120 (Bankr.S.D.Ohio 1993); In re Talley, 69 B.R. 219, 223 (Bankr.M.D.Tenn.1986). In fact, it is well established that courts look to state law to determine what constitutes an "unexpired" lease. See, e.g., Cunningham v. Lifelink Corp., 159 B.R. 230 (N.D.Ill.1993); In re Maxwell, 40 B.R. 231 (N.D.Ill.1984); Collier, 163 B.R. at 120; Talley, 69 B.R. 219; In re Goodloe, 61 B.R. 1016 (Bankr.M.D.Tenn.1986). However, Robinson argues that a distinction exists in the federal bankruptcy code between "terminated" and "expired." This distinction is controlling here, she contends, because it signifies that a terminated lease may still be unexpired and thus assumable by the trustee. Therefore, she asserts that, even if her lease is terminated, Congress intended that such terminated residential leases continue to be assumable while the stated term of the original lease is "unexpired"; hence, her lease is assumable.

Robinson points to 11 U.S.C. Sec. 362(b)(10), Sec. 541(b)(2) and Sec. 365(c)(3) as evidence of congressional intent to treat "terminated" leases differently than "expired" leases. Section 362(b)(10) provides that the automatic bankruptcy stay does not apply to actions by a lessor of nonresidential real property against a debtor with respect to a lease that has "terminated by the expiration of the stated term of the lease." Similarly, Sec. 541(b)(2) excepts from property of the estate any possible interest a debtor might have in a lease of nonresidential property that has "terminated at the expiration of the stated term of such lease." These provisions protect lessors of nonresidential property from having to petition for relief from the automatic stay if the stated term of the lease has run. These provisions thus apply when certain leases have been brought to an end in a particular way and create special rules for those circumstances. These provisions may not, however, be construed to mean that the reaching of the stated term is the only way that leases can expire, nor do they indicate that premature termination under state law is not another applicable mode of expiration of the lease. See, e.g., Talley, 69 B.R. at 223. Thus Sec. 362(b)(10) and Sec. 541(b)(2) do not support Robinson's argument that their use of the words "terminated" and "expiration," with the qualification that the "expiration" be of the stated term of the lease, has significance for Sec. 365(a). The structure of Sec. 362(b)(10) and Sec. 541(b)(2) does not suggest that the word "unexpired" without qualification as used in Sec. 365(a) must be construed to signify only those leases whose stated term has not run.

Section 365(c)(3), Robinson's third basis for her argument, presents a possibly more difficult problem. It provides that a lease may not be assumed by the trustee if "such lease is of nonresidential real property and has been terminated under applicable nonbankruptcy law prior to the order for relief." 11 U.S.C. Sec. 365(c)(3). Robinson argues that Congress deliberately drafted Sec. 365(c) to apply to nonresidential leases that have been terminated under the provisions of nonbankruptcy law in order to draw a distinction between "terminated" leases in Sec. 365(c) and "unexpired" leases in Sec. 365(a). This distinction, she argues, creates broader federal protections for residential leases because it means that the only non-assumable residential leases are those whose stated term has run. Residential leases that have ended for reasons other than the running of the stated term, she asserts, are "unexpired" while the stated term of the lease is still running, even if the lease has been ended under state law before its stated term. To read the statute otherwise, she claims, would ignore the distinction Congress was trying to make between nonresidential leases in Sec. 365(c) and residential ones in Sec. 365(a).

At least superficially, Robinson's argument has some appeal, principally because the application of state law to Sec. 365(a) means that Sec. 365(a) and Sec. 365(c) will ordinarily be applied in the same way. In the usual interpretation of Sec. 365(a), courts look to state law to determine whether a lease is "unexpired." The question is whether the lease has ended under state law, either through eviction proceedings, the running of the stated term of the lease or through other means that otherwise legally sever the landlord-tenant relationship. In this analysis, any method that fully severs the rights of the tenant in the property renders the lease expired; the only question is at what point in time the severance is final and complete.

The ultimate result of looking to state law in applying Sec. 365(a), however, renders the analysis under Sec. 365(a ) no different than that under Sec. 365(c ), which provides that nonresidential leases cannot be assumed if they have been "terminated under applicable nonbankruptcy law." Yet Sec. 365(c) was drafted to apply only to nonresidential leases, apparently in an effort by Congress to create some difference in assumability between residential and nonresidential leases. As a result, there is some apparent merit to Robinson's argument that, in view of what appears to be an obvious attempt to differentiate residential from nonresidential leases, we cannot continue to rely on state law to determine when a lease has expired under Sec. 365(a) because in doing so, we would be using essentially the same analysis for residential leases under Sec. 365(a) as for nonresidential leases under Sec. 365(c).

Despite this apparent difficulty, however, neither the legislative history of Sec. 365(c) nor the debtor here provides any authority for the proposition that Congress intended its choice of words to create expanded federal protection for residential leases. Section 365(c) was added to the Code by the Bankruptcy Amendm...