In re Destron, Inc.

• Decision Date: 27 July 1984
• Docket Number: Bankruptcy No. 83 B 7390.
• Citation: 40 BR 927
• Parties: In re DESTRON, INC., Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

40 B.R. 927 (1984)

In re DESTRON, INC., Debtor.

Bankruptcy No. 83 B 7390.

United States Bankruptcy Court, N.D. Illinois, E.D.

July 27, 1984.

Louis W. Levit, Sharon P. Riley, Levit & Mason, Ltd., Bennett Shulman, Lasky, Shulman & Goldman, Chicago, Ill., for debtor.

Robert H. King, Jr., Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., for applicant.

MEMORANDUM AND ORDER

ROBERT L. EISEN, Bankruptcy Judge.

This matter came on to be heard upon the application of LaSalle Mortgage & Realty Co., Inc. ("LaSalle") for the entry of an order allowing its claim for damages incurred when Destron, Inc. (Debtor), rejected a certain lease of industrial property. In addition, LaSalle has applied for the allowance of its administrative claim for post-petition rent. LaSalle has further moved to modify the stay to permit LaSalle to offset a portion of its damage claim against a $15,000.00 fund in its possession, owed to debtor. The parties have submitted memoranda of law respecting the legal issues involved in LaSalle's application and motion. LaSalle's applications and motion will be denied.

Initially, the Court will address LaSalle's application to determine its claim for damages resulting from debtor's rejection of a lease of the second floor of the Skil Office Plaza located at 4801 W. Peterson Avenue, Chicago, Illinois. A copy of this lease is appended to debtor's Memorandum of Law in Response to LaSalle's Application, filed with the Court.

The term of this lease was to run from June 21, 1982 until June 20, 1987. The monthly base rent payable under the lease was $6,058.12. Additional rent for taxes and operating expenses incurred by lessor, calculated on a proportionate basis, was due from each tenant of the building, including the debtor.

The debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on June 13, 1983. By June 20, 1983, the debtor had moved some or most of its property out of the leasehold premises, and had notified LaSalle of its intent to quit the premises and reject the lease.

LaSalle disputes debtor's factual allegation regarding the extent to which it had vacated the leased premises on June 20, 1983. LaSalle denies debtor's assertion that it interfered with the debtor's efforts to vacate the premises on that date by denying access to the building's freight elevator. This Court entered an order on July 19, 1983, which authorized the debtor to reject the Skil Office Plaza lease.

LaSalle argues that it is entitled to an administrative claim for rent, as a matter of law, for the period commencing when debtor filed its voluntary petition (June 13, 1983) through the date when this Court authorized the rejection of the Skil Office Plaza lease (July 19, 1983). LaSalle further suggests that it is entitled to damages of $72,697.50 occasioned by the debtor's rejection of the lease, which sum amounts to one year's base rent under the rejected lease.

The debtor suggests that LaSalle's administrative claim for rent should be limited to one week's rent (June 13, 1983 to June 20, 1983), on account of LaSalle's alleged interference with debtor's attempt to vacate the building. Debtor further requests an opportunity to offer evidence with respect to LaSalle's claim for damages incurred as a result of the rejection of the lease.

The Court first observes that LaSalle's entitlement to an administrative expense for rent can be allowed only to the extent that debtor actually used and occupied the premises. This is so, regardless of the time period in which this Court formally approved the rejection of the lease. See, In re Cardinal Export Corp., 30 B.R. 682, 684 (Bankr.E.D.N.Y.1983); In re By the Sea Foods, Inc., 30 B.R. 262, 264 (Bankr.M. D.Fla.1983); In re Arzola, 11 B.R. 762, 765 (Bankr.D.P.R.1981) ("The trustee's obligation to pay rent as an administrative expense of liquidation commences with the adjudication, . . . and continues until the premises are returned to the landlord"); see also, In re Lanman, 24 B.R. 741, 743 (Bankr.N.D.Ill.1982). As a matter of law, LaSalle's administrative claim for rent does not accrue until the Court formally authorizes the rejection of the relevant lease. Nor can the Court determine whether LaSalle's administrative expense claim terminated on June 20, 1983, absent a more complete factual presentation by these parties with reference to LaSalle's alleged interference with debtor's attempt to vacate the leasehold premises on that date. LaSalle's application to determine its entitlement to an administrative claim for rent must be denied pending an evidentiary hearing or the submission of stipulated facts respecting the conduct of the parties on June 20, 1983.

For similar reasons, the Court will grant debtor's request for an evidentiary hearing regarding LaSalle's application to determine...