Burger Boys, Inc., In re
| Decision Date | 28 August 1996 |
| Docket Number | D,No. 1240,1240 |
| Citation | 94 F.3d 755 |
| Parties | In re BURGER BOYS, INC., Debtor. SOUTH STREET SEAPORT LIMITED PARTNERSHIP, Creditor-Appellant, v. BURGER BOYS, INC., doing business as Burger Boys of Brooklyn, Debtor-Appellee. ocket 95-5077. |
| Court | U.S. Court of Appeals — Second Circuit |
Clifford M. Solomon, New York City (Eric D. Cherches, Corwin, Solomon & Tanenbaum, New York City, on the brief), for Creditor-Appellant.
Lance H. Klein, White Plains, NY (Edward F. Beane, Nicholas M. Ward-Willis, Keane & Beane, White Plains, NY, on the brief), for Debtor-Appellee.
Before: KEARSE, WALKER, and HEANEY, 1 Circuit Judges.
Creditor South Street Seaport Limited Partnership ("South Street") appeals from an order of the United States District Court for the Southern District of New York (Charles L. Brieant, District Judge ) that affirmed in part and reversed in part two orders of the United States Bankruptcy Court for the Southern District of New York (John J. Connelly, Bankruptcy Judge 2). In this appeal, South Street raises four arguments: (1) the district court erred in finding that the third motion of the debtor, Burger Boys, Inc., for an extension of time to assume or reject a We affirm in part, and vacate and remand in part.
lease (the "third extension motion") was filed timely; (2) the district court erred in vacating the bankruptcy court's order denying the third extension motion because Burger Boys was not current in its post-petition rent payments; (3) the district court abused its discretion in withdrawing the reference to the bankruptcy court; and (4) the district court erred in allowing Burger Boys to assume the lease without providing adequate assurance as to its pre-petition and post-petition lease payment obligations. Burger Boys argues that we should dismiss this appeal on the ground that it is moot.
In May 1983, South Street and Burger Boys entered into a lease for space located in the Market Building of the South Street Seaport complex in lower Manhattan. The parties amended the lease in February 1985, December 1988, and August 1991. Throughout the early 1990s, retail businesses gradually moved out of the Market Building. Burger Boys continued operating during this period, but was unable to keep current in its rental payment obligations. In October 1993, South Street commenced a summary proceeding (the "Summary Proceeding") in the Civil Court of the City of New York, alleging that Burger Boys owed rent from at least August 1993. In December 1993, on the eve of the trial of the Summary Proceeding, Burger Boys filed for bankruptcy protection under Chapter 11. Section 365(d)(4) of the Bankruptcy Code, 11 U.S.C. § 365(d)(4), provides that a debtor in a Chapter 11 case has sixty days in which to assume any unexpired lease of nonresidential real property; if the lease has not been assumed within sixty days, it will be deemed to be rejected. 3 In January 1994, Burger Boys, alleging that it was unsure about South Street's plans for the Market Building and therefore the future viability of Burger Boys' lease, filed its first motion for an extension of time to assume or reject the lease. The bankruptcy court granted the motion over South Street's objection.
In April 1994, Burger Boys made a second motion for an extension of time. On May 2, 1994, Burger Boys filed an adversary proceeding (the "Adversary Proceeding") in the bankruptcy court against South Street, asserting essentially the same claims that it had brought as counterclaims against South Street in the Summary Proceeding. On June 21, South Street moved for the bankruptcy court to abstain from hearing the Adversary Proceeding. At a hearing that same day, the bankruptcy court found that the Adversary Proceeding was a non-core proceeding and therefore, on the condition that South Street refile the Summary Proceeding in the New York Supreme Court, dismissed the Adversary Proceeding and lifted the automatic bankruptcy stay as to the Summary Proceeding. In addition, the bankruptcy court granted the extension motion and gave Burger Boys sixty days to assume or reject the lease. On July 1, 1994, Burger Boys filed a timely notice of appeal to the district court and on August 15, 1994, the bankruptcy court stayed its prior order pending the entry of a final order by the district court.
In a memorandum decision filed December 15, 1994, the district court (Barrington D. Parker, Jr., District Judge ) affirmed the bankruptcy court's earlier order. In re Burger Boys, Inc., 183 B.R. 682 (S.D.N.Y.1994). The district court concluded that Burger Boys' Adversary Proceeding was not a core proceeding under the Bankruptcy Code and that the bankruptcy court did not abuse its discretion in lifting the automatic stay. On December 19, 1994, the district court entered judgment on the appeal.
On February 16, 1995, Burger Boys filed the third extension motion. South Street again opposed the motion, arguing, among other things, that Burger Boys had been given sufficient time in which to decide whether to assume the lease and that the On June 15, however, Burger Boys had appealed the June 7 order to the district court (Brieant, J.). At a hearing on September 7, 1995, the district court found that the bankruptcy court had erred in requiring Burger Boys to accept or reject the lease by June 21. The district court further found that "because of the staleness of the entire proceeding a remand on this appeal would serve no useful purpose except to create further delay and additional over-lawyering." Therefore, the district court gave Burger Boys an additional fifteen days in which to accept or reject the lease, and, if it accepted the lease, an additional fifteen days thereafter to deposit with the court adequate security for the entire post-petition rental payments owed to South Street. Burger Boys timely elected to assume the lease and paid the required funds into the district court.
third extension motion was filed after the allowable period. On June 7, 1995, the bankruptcy court issued an order, holding that the third extension motion was filed timely but requiring that Burger Boys become current on its post-petition rental payments to South Street by June 15, 1995; failure to do so would bar any hearing on the third extension motion. The bankruptcy court further held that "in the event [Burger Boys] fails to comply with [these] requirements ... counsel for South Street may settle an Order denying [Burger Boys'] motion and deeming the lease rejected." On June 14, the bankruptcy court extended the time for Burger Boys to become current until June 21. Nonetheless, Burger Boys failed to do so. Accordingly, in an order entered June 22, the bankruptcy court deemed the lease rejected, found the third extension motion to be moot, and authorized South Street to pursue appropriate remedies under state law
South Street now appeals the district court's order. South Street argues that the bankruptcy court did not err in requiring the payment of all post-petition obligations prior to holding a hearing on the third extension motion, and that, in any event, the district court lacked the authority to allow Burger Boys to assume the lease. In addition, South Street repeats its argument that the third extension motion was untimely. Burger Boys contends that the district court did not err in any respect and that, in any event, this appeal has been mooted by Burger Boys' assumption of the lease.
We find that this appeal is not moot and that the third extension motion was timely. We affirm the district court's conclusion that the bankruptcy court abused its discretion when it conditioned the third extension motion solely on the payment of the post-petition obligations to South Street. We also find that the district court did not err in withdrawing the mandate from the bankruptcy court, but vacate the district court's decision to allow Burger Boys to assume the lease and remand that issue for reconsideration.
DISCUSSION
"Our review of the orders of district courts in their capacity as appellate courts in bankruptcy cases is plenary." In re Best Prods. Co., 68 F.3d 26, 29 (2d Cir.1995). Therefore, we review the district court's determinations of law de novo and its determinations of fact for clear error only. Id.
As a preliminary matter, Burger Boys contends that we do not have jurisdiction to decide this appeal because it has been mooted by Burger Boys' subsequent assumption of the lease. Under Article III of the Constitution, our jurisdiction is limited to live cases and controversies. Freedom Party v. New York State Bd. of Elections, 77 F.3d 660, 662 (2d Cir.1996) (per curiam) (citing Jefferson v. Abrams, 747 F.2d 94, 96 (2d Cir.1984)). Therefore, under the mootness doctrine, we do not have jurisdiction over a case " 'when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome.' " Id. (quoting New York City Employees' Retirement Sys. v. Dole Food Co., 969 F.2d 1430, 1433 (2d Cir.1992) (internal quotations omitted)). In addition, a bankruptcy appeal is rendered moot under the equitable considerations of bankruptcy "when 'even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.'
" In re Best Prods., 68 F.3d at 30 (quoting In re Chateaugay Corp., 988 F.2d 322, 325 (2d Cir.1993)).
South Street plainly has a legally cognizable interest in the outcome of this case. Although the district court allowed Burger Boys to assume the lease, that decision is capable of reversal by an order of this court deeming the lease rejected. Such relief would be effective--it would place South Street in nearly the same position it would have been in had Burger Boys not been allowed to assume the lease--and would also be equitable. Indeed, Burger Boys has neither made any showing that we or the...
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