Family Kingdom v. EMIF New Jersey Ltd. Partnership
| Decision Date | 29 April 1998 |
| Docket Number | Bankruptcy No. 97-61137.,No. CIV. A. 98-1704,CIV. A. 98-1704 |
| Citation | 225 BR 65 |
| Parties | FAMILY KINGDOM, INC., Appellant, v. EMIF NEW JERSEY LIMITED PARTNERSHIP, Appellee. In re FAMILY KINGDOM, INC., Debtor. |
| Court | U.S. District Court — District of New Jersey |
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Arthur J. Abramowitz, Davis, Reberkenny & Abramowitz, P.C., Cherry Hill, NJ, for Debtor and Appellant, Family Kingdom, Inc.
John T. Carroll, III, Swartz, Campbell & Detweiler, Mt. Laurel, NJ, and Brett D. Anders, Lathrop & Gage L.C., Kansas City, MO, for Appellee, EMIF New Jersey Limited Partnership.
In connection with its appeal and pursuant to Rule 8005 of the Federal Rules of Bankruptcy Procedure, Debtor-Appellant, Family Kingdom, Inc., has moved for a stay pending appeal of the Bankruptcy Court's denial of a motion to assume a lease with respect to certain real property in Wildwood, New Jersey. While the majority of the arguments advanced on appeal are not likely to succeed, I conclude that Family Kingdom, Inc., is likely to succeed in showing that the Bankruptcy Court erred in disposing of its estoppel claim. In particular, it is likely to show on appeal that Judge Wizmur erred in holding that no estoppel was possible where the lease was not ambiguous. Because of the substantial harm to Family Kingdom, Inc. which would result absent a stay, and the minimal, if any, harm which would result to EMIF if a stay is granted, and because the public interest favors a stay, I will grant the motion for a stay pending appeal, and vacate Judge Wizmur's order denying the stay pending appeal.
Debtor-Appellant, Family Kingdom, Inc. ("Family Kingdom"), operates an amusement theme park on Hunt's Pier in Wildwood, New Jersey under the name Dinosaur Beach. Certification of Anthony Catanoso ¶ 2 (dated March 1998) (hereinafter Catanoso Certif.). The owner of Hunt's Pier is Appellee, EMIF New Jersey Limited Partnership ("EMIF"). See Affidavit of Jeff Johnson ¶ 2 (dated Jan. 22, 1998) (hereinafter Johnson Aff). Beginning on January 1, 1996, EMIF leased the pier to Family Kingdom. See Catanoso Certif. at ¶ 8 & Exh. A; Johnson Aff. at ¶ 4 & Exh. A (Lease between EMIF New Jersey Limited Partnership and Family Kingdom, Inc. (dated Jan. 1, 1996) (hereinafter the "Lease")). On May 22, 1996, the Lease was modified in several respects. See Catanoso Aff. at ¶ 16 & Exh. B. At that time, the parties agreed that "the Lease and the Modification of Lease Agreement constitutes sic the entire agreement between the parties regarding the matters set forth herein and supersede all prior written understandings and agreements, whether written or oral, between the parties relating to the amount that EMIF shall pay for the costs of certain Work described herein" and that, except to effect the terms of the modification, "all of the terms, conditions, covenants and provisions of the Lease shall remain unmodified and in full force and effect in accordance with their original terms." Id., Exh. B at §§ 4-5.
After an initial letter notifying Family Kingdom that it had defaulted on its obligations under the Lease, see Johnson Aff., Exh. E, on June 10, 1997, EMIF wrote to Family Kingdom, inter alia, claiming that several Events of Default, within the meaning of section 22 of the Lease, had occurred. Of particular relevance to this action, EMIF claimed that Family Kingdom had failed to pay Basic Rent, as defined by the Lease, in 1996. Accordingly, pursuant to section 23 of the Lease, EMIF elected to terminate the Lease. See Affidavit of Stephen Hankin ¶ 5 (dated Feb. 4, 1998) (hereinafter Hankin Aff.) & Exh.A.1
On June 13, 1997, Family Kingdom responded by disputing EMIF's contention that Family Kingdom was in default. Id. at ¶ 5 & Exh. B. On June 23, 1997, EMIF acknowledged, but ultimately still disagreed with, Family Kingdom's position regarding default, and asserted that, if there indeed had been no default (and accordingly, no proper termination), EMIF specified August 1, 1997 and September 5, 1997, as the dates on which certain monies were due pursuant to section 23(c)(i) of the Lease. Johnson Aff, Exh. D. On July 22, 1997, EMIF informed Family Kingdom that, even if Family Kingdom's position with respect to the default were correct, Family Kingdom was obligated to pay certain monies to EMIF on July 15, 1997 pursuant to section 6(a) of the Lease. Because those monies had not been paid, EMIF asserted that this non-payment was an alternative basis for finding an Event of Default and, accordingly, an alternative basis upon which to terminate the Lease. Id., Exh. G.
On September 10, 1997, based on Family Kingdom's failure to make the August 1, 1997, and September 5, 1997, payments, and assuming, arguendo, the propriety of Family Kingdom's original position with respect to default and termination, EMIF again terminated the Lease. Id., Exh. I. Finally, EMIF eventually reiterated the position it had articulated on July 22, 1997, with respect to monies it claimed were due on August 15, 1997 and September 15, 1997, again claiming a default and terminating the Lease. Id., Exh. H, J.
At some point in early September, EMIF filed an action for summary dispossession against Family Kingdom in the Superior Court of New Jersey, Atlantic County, Law Division, Special Civil Part, EMIF v. Family Kingdom, Inc., ATL-LT-4205-97.2 Pursuant to N.J.S.A. 2A:18-60, which allows for removal from the Special Civil Part to the Law Division "at any time before an action for the removal of a tenant comes on for trial," N.J.S.A. 2A:18-60, Family Kingdom moved to transfer the case to the Law Division. On November 10, 1997, Judge Michael Winkelstein denied the motion. See Johnson Aff., Exh. L, Exh. K at 64-65. On December 19, 1997, the Appellate Division of the Superior Court, in a one-page order and without discussion, reversed Judge Winkelstein's determination that the case should not be transferred to the Law Division and so transferred the case. Id., Exh. M.3
On December 18, 1997, Family Kingdom filed its Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey. On February 9, 1998, pursuant to Rules 9014 and 6006(a) of the Federal Rules of Bankruptcy Procedure, Family Kingdom moved to assume the Lease between Family Kingdom and EMIF under 11 U.S.C. § 365(a).
Section 365(c) provides that:
11 U.S.C. § 365(c) (emphasis added).4 Accordingly, the central issue presented to Judge Wizmur on Family Kingdom's motion to assume the Lease was whether the Lease had been properly terminated under applicable nonbankruptcy law prior to the order for relief. Affidavit of Arthur J. Abramowitz (dated Mar. 31, 1998), Exh. A at 44-47 (Transcript (dated Feb. 9, 1998)) (hereinafter Trans.)). For "if a lease of nonresidential property has been terminated under state law before the filing of a bankruptcy petition, there is nothing left for the trustee to assume." See In re Bryant Universal Roofing, Inc., 218 B.R. 948, 1998 WL 112577 (Bankr. D.Ariz.1998); see generally In re DiCamillo, 206 B.R. 64, 68 (Bankr.D.N.J.1997) (Wizmur, B.J.) (discussing distinction between expired and terminated leases and noting that "nonresidential tenant/debtor may assume an unexpired lease, but only if the lease has not been terminated pre-petition under state law").
Judge Wizmur determined that an appropriate termination of the Lease occurred on June 10, 1997, and therefore, denied Family Kingdom's motion to assume the Lease. Trans. at 44, 46-47. She then denied Family Kingdom's motion for a stay pending appeal, finding that there was no likelihood of success on the merits of its appeal of the denial of the motion to assume the Lease, although she did note the substantial harm that would come to the Debtor if the stay were not granted. Id. at 48-49; see also Order (dated Mar. 3, 1998).5
In reviewing the orders of the bankruptcy court, findings of fact are reviewed under a "clearly erroneous" standard, and conclusions of law are reviewed de novo. See Fed.R.Bankr.P. 8013; Green Point Bank v. Treston, 188 B.R. 9, 11 (S.D.N.Y.1995); In re Blackwell, 162 B.R. 117, 119 (E.D.Pa.1993). Parties seeking a stay pending appeal of an order of the bankruptcy court "must ordinarily apply to the bankruptcy judge in the first instance." Fed.R.Bankr.P. 8005. Only then may a party move for a stay in the district court, provided that "the motion shows why the relief . . . was not obtained from the bankruptcy judge." Id. Such a stay is designed to "protect the rights of all parties in interest." Id.; see In re Mocco, 176 B.R. 335, 339-40 (Bankr.D.N.J.1995).
In order to determine whether to grant a stay pending appeal, a district court considers the following factors: 1) whether the appellant is likely to succeed on the merits of the appeal; 2) whether the appellant will suffer irreparable injury if the stay is not granted; 3) whether a stay would substantially harm other parties in the litigation; 4) whether a stay is in the public interest. See, e.g., Green Point Bank, 188 B.R. at 11; In re Sharon Steel Corp., 159 B.R. 730, 733 (Bankr.W.D.Pa.1993); accord In re Forty-Eight Insulations, Inc., 115 F.3d 1294, 1300-01 (7th Cir.1997); In re T.R. Acquisition Corp., 208 B.R. 635, 636 (S.D.N.Y. 1997); In re St. Mary Hosp., 157 B.R. 235, 237 (E.D.Pa.1993).6
Family Kingdom's position on appeal is basically as follows: 1) the language of the Lease is ambiguous; 2) discovery as to how the parties conducted...
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