In re Intern. Coins & Currency, Inc., Bankruptcy No. 81-00023
| Decision Date | 15 March 1982 |
| Docket Number | Adv. No. 81-0131.,Bankruptcy No. 81-00023 |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re INTERNATIONAL COINS & CURRENCY, INC., Debtor. INTERNATIONAL COINS & CURRENCY, INC., v. BARMAR CORPORATION, and BARMAR CORPORATION, Plaintiff, v. INTERNATIONAL COINS & CURRENCY, INC., Defendant. |
Peter B. Brittin, Montpelier, Vt., for debtor.
Robert J. Kurrle, Montpelier, Vt., for Barmar Corp.
FINDINGS, MEMORANDUM AND ORDER
The Debtor filed an Application for Order Permitting it to Reject an Executory Contract with Barmar Corporation. In response, Barmar Corporation submitted a Complaint against the Debtor in an adversary proceeding to recover rent under a lease between the parties and damages allegedly caused to the premises by the Debtor. The Application of the Debtor for rejection of the lease and the Complaint of Barmar Corporation for damages were consolidated and heard with the following appearances:
From the records in the case, the evidence adduced at the hearing and the exhibits received, the following Facts have been established:
International Coins & Currency, Inc., filed its Petition for Reorganization under Chapter 11 of the Bankruptcy Code on February 9, 1981. On that date there was in existence a lease between the Debtor and Barmar executed on July 1, 1980. Under this lease Barmar, as lessor, leased to the Debtor, as tenant, certain space consisting of 12,230 square feet on the second, third and fourth floors of the Hillside Building, so-called, at the corner of Court Street and Hillside Avenue in the City of Montpelier, Vermont, and so much of the first floor thereof as was not leased to Spectrum Research, Inc., together with the right to use any and all of the basement and 44 parking spaces in an adjacent lot.
This lease was for a term of two years beginning November 1, 1980 and ending October 31, 1982, with a fixed rental of $6.73 per square foot per annum for 12,230 square feet of floor space, said rental amounting to $6,857.00 monthly beginning November 1, 1980. The lease also contained an option on the part of the tenant to extend the lease for a one-year term but this provision is not relevant since the original term had not expired on the date of the filing of the Petition for Relief by the Debtor.
The lease contained numerous covenants including the following:
The lease also contained a provision that the Debtor as a tenant would be liable for any reasonable costs or expenses, including reasonable attorney's fees, incurred by the Lessor in enforcing any terms of this lease, or in pursuing any legal action for the enforcement of either Lessor's rights enumerated in this lease, remedies authorized by law, or both.
By an Amendment dated July 1, 1980 and effective December 1, 1980, the rent was reduced to $6,567.00 since the landlord was no longer to provide janitorial service.
The Debtor continued in possession of the Barmar premises under its lease but notified Barmar by letter dated April 28, 1981 that it would vacate the premises by May 4, 1981 and, in fact, the Debtor did give up possession by that date. The decision to vacate the Barmar premises was made by the Debtor's President, and it was based on the desire to locate the activities of the Debtor under one roof for closer supervision rather than three different locations where it did business prior to the filing of the Petition under Chapter 11. In addition, by relocating in the old A & P warehouse building in Montpelier, the Debtor was able to reduce its rent expense from $6,567.00 to $1,700.00 a month. In relocating, however, the Debtor was obliged to expend a considerable sum by way of improvements at the new location before it could be occupied for the conduct of business.
During the occupation of the Barmar premises by the Debtor and especially after the filing of its Petition under Chapter 11 it damaged the premises extensively, far in excess of reasonable wear and tear, and the cost incurred by Barmar in repairing the damage is $19,395.25. Barmar further incurred legal expenses of $2,063.80 in the prosecution of its claim against the Debtor and this charge appears to be reasonable.
After the premises were vacated by the Debtor Barmar did lease 7,700 square feet of space on the second and third floors plus 500 square feet of storage space on the first floor to the State of Vermont for five years beginning August 1, 1981 at a monthly rental of $3,997.50.
The Debtor, through its president as a witness, conceded that there had been damage to the premises leased from Barmar but it tried to establish that it was in the vicinity of $2,000.00. The President testified that he had had the damage appraised by another representative of the Debtor who apparently was qualified to testify as to the amount of actual damage sustained. However, it appeared that a proper foundation was not laid for the receipt of testimony on this point from the President and for that reason this testimony was excluded. The representative of the Debtor who actually appraised the damage was not called as a witness. Under the circumstances the Court is satisfied that the actual damage sustained by Barmar is $19,395.25.
The Debtor contends that by virtue of § 502(g) any claim for damages or for rent arising from the rejection of an unexpired lease is relegated to a pre-petition unsecured claim and that Barmar is not entitled to the allowance of its claim as an administrative expense. § 502(g) reads as follows:
"A claim arising from the rejection, under section 365 of this title or under a plan under chapter 9, 11, or 13 of this title, of an executory contract or unexpired lease of the debtor that has not been assumed shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition."
Barmar, on the other hand, argues that the Debtor did not exercise sound business judgment in terminating its lease without prior notice so that the party could possibly negotiate for a more favorable lease to the Debtor in view...
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