DALLAS-FORT WORTH REG. AIRPORT v. Braniff Airways
| Decision Date | 17 December 1982 |
| Docket Number | Civ. A. No. 4-82-388-E. |
| Parties | DALLAS-FORT WORTH REGIONAL AIRPORT BOARD and Braniff Special Facilities Bondholders Committee v. BRANIFF AIRWAYS, INCORPORATED. |
| Court | U.S. District Court — Northern District of Texas |
Robert L. Hoffman, Strasburger & Price, Dallas, Tex., for plaintiffs.
William J. Rochelle, Jr., Rochelle, King & Balzersen, Dallas, Tex., Michael Crames, Mitchel Perkiel, Andrew A. Kress, Levin & Weintraub, New York City, David Bonderman, Washington, D.C., for defendant.
This case comes before the Court on appeal from the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division. The Court has received briefs from the Appellant, Dallas-Fort Worth Regional Airport Board, from the Appellee, Braniff Airways, Inc., and from an Appellant-Intervenor, Braniff Special Facilities Bondholders Committee. Counsel presented oral arguments to the Court on October 14, 1982. Having now considered these arguments and briefs, and having examined the record on appeal, the Court makes the following ruling:
I. Factual Background
The Appellant is the public agency given the duty to operate the Dallas-Fort Worth Regional Airport under State and Federal laws. Appellee, Braniff Airways, Inc., was a major air carrier operating out of the Airport until May 13, 1982, when it filed a Chapter 11 Bankruptcy proceeding in the United States Bankruptcy Court for the Northern District of Texas. Braniff's headquarters and major hub were both located at the Dallas-Fort Worth Airport. In several agreements between Braniff and the Board, Braniff leased an airport terminal (the 2W terminal), fuel system facilities, a hangar, a cargo building, a ground services building, kitchen facilities, and its headquarters, known as "Braniff Place."
Two types of bonds have been issued to finance the construction of the airport facilities: general revenue bonds, payable out of the general revenues of the Airport, and special facility bonds, payable solely from the revenue generated by the facilities financed with the particular bond issue. The facilities leased to Braniff under the special facility agreements provide two types of revenue: ground rent is paid as part of the general revenue of the Airport, and net rent is a debt service payment to cover the interest and sinking fund of the corresponding bond issue or issues.
The Board seeks, through this action, to be allowed to re-enter the leased premises and lease the area to other parties. On June 25, 1982, after hearing four days of testimony, the Honorable John Flowers, Bankruptcy Judge, ordered that the Board was not entitled to such complete relief. The court did condition extension of the bankruptcy stay, however, requiring Braniff to pay rent in full for all the Airport facilities and for the facilities actually being used at Braniff Place. Also, the court found that paragraph 9 of the EDS Agreement, under which Braniff had been allowed to sublease a portion of the facilities to the EDS Corporation, was ambiguous and of no effect between the Board and Braniff. More detailed facts are presented below where necessary.
II. Standard of Review
Pursuant to 28 U.S.C. § 2075, the Supreme Court of the United States has prescribed the rules by which bankruptcy matters are to be governed. Part VIII of the current Rules governs the procedure to be followed in the District Court. Rule 810, reported by the Supreme Court to Congress on April 24, 1973, see 411 U.S. 989, 93 S.Ct. 3164, 37 L.Ed.2d lxxv (1973), requires the reviewing court to accept the referee's findings of fact unless clearly erroneous, id. at 1090.
The United States Court of Appeals for the Fifth Circuit, in Fruehauf Corp. v. Revitz (In re Transystems, Inc.), 569 F.2d 1364, 1369 (5th Cir.1978), and in Acacia Mutual Life Insurance Co. v. Perimeter Park Investment Associates, Ltd. (In re Perimeter Park Investment Associates, Ltd.), 616 F.2d 150, 151 (5th Cir.1980), cited the Supreme Court's explanation of this standard of review: "A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948). As to legal conclusions, however, this court must "independently determine the correctness of the ultimate legal conclusion adopted by the bankruptcy judge on the basis of the facts found." Borg-Warner Acceptance Corp. v. Fedders Financial Corp. (In re Hammons), 614 F.2d 399, 402-03 (5th Cir.1980). Conclusions of law are "freely reviewable" in this court. Machinery Rental, Inc. v. Herpel (In re Multiponics, Inc.), 622 F.2d 709, 713 (5th Cir.1980).
III. Appellant's Issues
Appellant raises essentially five issues on appeal:
(1) Did the Bankruptcy Court err in its construction of the "EDS Agreement" (Record, Tab 40)?
(2) Were the Airport Leases properly terminated as to Braniff?
(3) Has the Appellant proven cause under 11 U.S.C. § 362(d)(1) requiring that it be granted relief from the automatic stay?
(4) Should the Appellant be granted relief from the automatic stay under 11 U.S.C. § 362(d)(2)?
(5) Should the Bankruptcy Court have required the Appellee to accept or reject the Airport leases?
All of these issues are reviewable by this Court, as they were presented to the Bankruptcy Court for determination. See Novack v. Gardner (In re Novack), 639 F.2d 1274 (5th Cir.1981).
IV. Discussion
On May 21, Braniff applied to the Bankruptcy Court for approval of its agreement with E.D.S. Airline Systems Corp. (EDS). In that Agreement, Braniff transferred control and operation of an automatic computerized reservation system and title to computer software and accounts receivable to EDS in exchange for almost $578,000. Record, Tab 40. Included in this agreement was a letter agreement between Braniff and the Appellant. Id. at 373-75. A dispute has developed as to the interpretation of paragraph 9, which relates to the rent or occupancy charge Braniff is to pay for use of Braniff Place. The Bankruptcy Court found the paragraph was ambiguous, that the parties had ascribed different interpretations to the paragraph, and therefore there was no "meeting of the minds" on this particular portion of the contract. Finding of Fact No. 28, Record, Tab 36, at 334. This led the Bankruptcy Court to conclude that paragraph 9 was not an agreement between the parties, and since it was not an essential part of the contract, it was severed from the remainder of the agreement. Id.; Record at 338-39.
Under Texas law, the question of whether a contract is ambiguous is a question of law. R & P Enterprises v. La Guarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex.1980); Richland Plantation Co. v. Justiss-Mears Oil Co., 671 F.2d 154, 156 (5th Cir.1982). Where a question of construction of the contract's language is involved, the Court should consider "the wording of the instrument . . . in the light of the surrounding circumstances. . . ." City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 519 (Tex.1968). This construction is also a question of law for the Court. Maples v. Erck, 630 S.W.2d 488, 490 (Tex.App. — Corpus Christi 1982, writ ref'd n.r.e.).
In the contract before this Court, as in Pinehurst, there was a change in the wording which affects the construction to be given the contract. See 432 S.W.2d at 519. As paragraph 9 was first proposed by the Appellant, it suggested Braniff would agree to pay "rent" on Braniff Place until the premises were surrendered to the Appellant. See Tr. vl. IV, at 72-73; Defendant's Exhibit 20. That suggestion was changed, at Braniff's insistence, to "use and occupancy." Id.; Record, Tab 40, at 375.
"Use and occupancy," or administrative rent, is a term readily subject to definition under prior case law. When an unexpired lease is ultimately rejected by the trustee in bankruptcy, the estate becomes liable for administrative rent based on the reasonable value to the estate of actual occupation and use of the premises. See In re Standard Furniture Co., 3 B.R. 527, 530 (Bkrtcy.S.D.Cal.1980). The contractual rental is presumed to be the reasonable and appropriate rate. Diversified Services, Inc. v. Harralson, 369 F.2d 93, 95 (5th Cir.1966). This rate is applied, however, on a pro rata basis according to the time and area actually used. See Weil v. Lansburgh (In re Garfinkle), 577 F.2d 901, 904 n. 2 (5th Cir.1978); Brown v. Danning (In re Fredrick Meats, Inc.), 483 F.2d 951, 952 (9th Cir.1973); Reisenwebers, Inc. v. Irving Trust Co. (In re United Cigar Stores Co.), 69 F.2d 513, 515 (2d Cir.), cert. denied, 293 U.S. 566, 55 S.Ct. 76, 79 L.Ed. 665 (1934). Where the parties show the contract rate is not reasonable, the Court makes a finding, on the evidence presented to it, as to what a reasonable rate is. Diversified Services, supra, at 95.
In the instant case, however, the Court is not trying to determine administrative rent under the bankruptcy statute. The parties in this case, with the consent of the Bankruptcy Judge, entered a contract in which Braniff was to pay a specified amount of rent. In construing that provision, this Court has recourse to prior case law to define the terms used in that contract. Paragraph 9 sets the rate Braniff must pay as the contract rate, apportioned according to the area and time Braniff actually occupies Braniff Place. This is the construction to be given the contract, considering the wording of the contract, as we must, in light of the circumstances surrounding the contracting. The Bankruptcy Court's conclusion that the phrase is ambiguous is reversed, and the Court finds that Braniff is to pay rent at the contract rate for the area actually occupied.1
As to the question of actual occupation or possession, an issue...
To continue reading
Request your trial