In re Jarris Discount Tire Co., Inc., Bankruptcy No. 83-04129G.

• Decision Date: 23 January 1984
• Docket Number: Bankruptcy No. 83-04129G.
• Citation: 36 BR 406
• Parties: In re JARRIS DISCOUNT TIRE CO., INC., Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

36 B.R. 406 (1984)

In re JARRIS DISCOUNT TIRE CO., INC., Debtor.

Bankruptcy No. 83-04129G.

United States Bankruptcy Court, E.D. Pennsylvania.

January 23, 1984.

Marvin Krasny, Adelman, Lavine, Krasny, Gold & Levin, Philadelphia, Pa., for debtor, Jarris Discount Tire Co., Inc.

Diane J. Sigmund, Bonnie Glantz Fatell, Wexler, Weisman, Forman & Shapiro, Philadelphia, Pa., for landlords, Leonard and Miriam Glantz and Max and Renee Glantz.

Lawrence J. Lichtenstein, Mesirov, Gelman, Jaffe, Cramer & Jamieson, Philadelphia, Pa., for trustee, Samuel Alper.

Harold K. Cohen, Fellheimer, Eichen & Goodman, Philadelphia, Pa., for Jay Arcus and Harris Katz, officers of the Corp.

Allen S. Kellerman, Philadelphia, Pa., for potential buyer, Deltona Discount Tire, Inc.

Samuel Alper, Philadelphia, Pa., trustee.

OPINION

EMIL F. GOLDHABER, Bankruptcy Judge:

The issue presented herein is whether a certain lease is part of the debtor's estate pursuant to section 541(a) of the Bankruptcy Code ("the Code"). Because the lease in question had not been effectively terminated before the order for relief was entered in the instant case, we conclude that said lease is unexpired and, therefore, is property of the debtor's estate.

The facts of the instant case are as follows:¹ In March of 1982, Jarris Discount Tire Company, Inc. ("the debtor") took possession of premises located at 7226 Germantown Avenue, Philadelphia, Pennsylvania ("the premises"), pursuant to two documents purporting to be lease agreements ("the lease")² with Leonard and Miriam Glantz and Max and Renee Glantz ("the landlords"). It is beyond question that the aforesaid documents were only signed by two of the landlords (Max and Renee Glantz) and not by the other two landlords (Leonard and Miriam Glantz) or the debtor. On October 24, 1983, an involuntary petition under chapter 11 of the Code was filed against the debtor and an order for relief was entered by consent on that same day. Thereafter, a trustee was appointed pursuant to section 1104 of the Code. The trustee then filed a "notice of intention of trustee to sell assets of the estate at private sale." Included among those assets was the debtor's interest in the unexpired balance of the lease on the premises in question. An objection to the trustee's sale was filed by two of the debtor's four shareholders who raised the issue as to whether the lease between the debtor and the landlords was, in any way, an asset of the debtor's estate.

The Pennsylvania Landlord and Tenant Act of 1951 provides:

Real property, including any personal property thereon, may be leased for a term of more than three years by a landlord to a tenant or by their respective agents lawfully authorized in writing. Any such lease must be in writing and signed by the parties making or creating the same, otherwise it shall have the force and effect of a lease at will only and shall not be given any greater force or effect either in law or equity, notwithstanding any consideration therefor, unless the tenancy has continued for more than one year and the landlord and tenant have recognized its rightful existence by claiming and admitting liability for the rent, in which case the tenancy shall become one from year to year (emphasis added).

Pa.Stat.Ann. tit. 68, § 250.202 (as amended) (Purdon).

It is undisputed that both of the documents purporting to represent the lease (either collectively or individually) between the debtor and the landlords are only signed by one of the parties involved herein (Max and Renee Glantz). The only testimony adduced at trial established that the debtor took possession of the subject premises in March of 1982, and paid rent to the landlords from that date through August of 1983, which, according to the provisions of the aforesaid statute, created a tenancy from year to year between the parties (N.T. 12/12/83 at 20, 29). The record further establishes that the debtor was "locked out" in late August of 1983, and that its business had ceased as a result thereof (N.T. 12/12/83 at 34).

The record also shows that the landlords notified counsel for the debtor, by a letter dated September 21, 1983, that they had "terminated" their oral lease with the debtor because the debtor had "defaulted in the rent payments due for August and September, 1983."³ While the debtor testified that it had received the aforesaid letter, there is no indication in the record as to when the debtor received said letter.

The dispositive question is whether the lease in question (the tenancy from year to year) was unexpired on October 24, 1982 (the date the order for relief was entered), and therefore was part of the debtor's estate pursuant to section 541(a) of the Code.⁴ Under Pennsylvania law, a tenancy from year to year cannot be terminated by notice of less than three months.⁵ The only testimony before us establishes that the debtor paid rent to the landlords through August of 1983, and that the debtor was locked out of the premises in late August of that year.⁶ On the basis of that record, we conclude that the debtor was wrongfully dispossessed of the premises in question since no notice of termination was given to the debtor, let alone the requisite three months required by law.⁷ Moreover, in light of the wrongful lockout, we conclude that the landlords are estopped from terminating the lease on the basis of the nonpayment of the September, 1983, rent. Furthermore, even if we were to assume that the debtor defaulted in its rent payments, and that this permitted the landlords to terminate the lease, no evidence has been presented establishing that the landlords complied with the notice requirements called for in that circumstance.⁸

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