In re Lightning Techs., Inc.
| Decision Date | 07 May 2021 |
| Docket Number | Case No. 21-41019 |
| Citation | 629 B.R. 608 |
| Parties | IN RE: LIGHTNING TECHNOLOGIES, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Dean R. Nelson, Jr., Erika D. Hart, Matthew Boyd, The Taunt Law Firm, Birmingham, Michigan, Attorneys for Fred J. Dery, Chapter 7 Trustee.
Robert N. Bassel, Clinton, Michigan, Attorney for DEMS Associates, LLC.
David R. Shook, David R. Shook Attorney at Law PLLC, Clarkston, Michigan, Attorney for DEMS Associates, LLC.
Phillip J. Neuman, Couzens, Lansky, Fealk, Ellis, Roeder & Lazar, P.C., Farmington Hills, Michigan, Attorneys for Ashley Orion Commerce Center, LLC.
Marc N. Swanson, Steven A. Roach, Miller, Canfield, Paddock and Stone, P.L.C., Detroit, Michigan, Attorneys for Palltronics, Inc.
James E. Morgan, H. William Burdett, Jr., Howard & Howard Attorneys, PLLC, Royal Oak, Michigan, Attorneys for Grow Michigan, LLC.
This case came before the Court for a telephonic hearing on May 5, 2021, on the following matters: (1) the issues described in paragraph 20 of the Court's March 18, 2021 Order Establishing Sale Procedures, etc. (Docket # 103, the "Sale Procedures Order") which are still not resolved (the "Unresolved Landlord Issues"); (2) the motion for relief from stay filed by DEMS Associates, LLC (Docket # 27, the "DEMS Stay Relief Motion"); and (3) the motion for relief from stay filed by Ashley Orion Commerce Center, LLC (Docket # 97, the "Ashley Orion Stay Relief Motion").
At the conclusion of the hearing, the Court took these matters under advisement.
The Court has considered all of the written and oral arguments, and exhibits filed, by the parties who appeared, through counsel, at the May 5, 2021 hearing. For the reasons stated below, the Court will enter the Order below.
The issues at hand arise against the backdrop of the Chapter 7 Trustee's proposed § 363 sale of substantially all the assets of the bankruptcy estate, for $5 million. Under the Sale Procedures Order, the Trustee's motion for approval of the sale is scheduled for a hearing to be held on May 12, 2021.
Following are the issues described in paragraph 20 of the Sale Procedures Order:
(a) setting a deadline to remove the Debtor's property from the Silverbell Premises and Xcelsior Premises and in what condition the premises are to be left; (b) determining the responsible party for removal of such property; (c) determining what fixtures or property attached to the Xcelsior Premises are excluded from the sale of the Debtor's Assets under the Sale Procedures Order and Sale Procedures; and (d) the removal of chemicals from the Xcelsior Premises.1
All of these issues have been resolved, by agreement of the parties and/or stipulated orders,2 except one issue not yet resolved, which is "(a) ... in what condition the [Silverbell Premises and Xcelsior Premises] are to be left." The Court will refer to this issue, solely for convenience, as the "Broom Clean Condition Issue."
The "Silverbell Premises" are the premises owned by Ashley Orion Commerce Center, LLC ("Ashley Orion"), located at 315 W. Silverbell Rd., Suite 190, Lake Orion, Michigan. The "Xcelsior Premises" are the premises owned by DEMS Associates, LLC ("DEMS"), located at 2171 Xcelsior, Oxford, Michigan.
Before this bankruptcy case was filed on February 5, 2021, the Debtor had leased the Silverbell Premises from Ashley Orion, under a written lease (the "Silverbell Lease"). That lease was terminated before the bankruptcy case was filed,3 but certain personal property of the Debtor continued to be stored at the Silverbell Premises, and the storage of the property, which is now property of the bankruptcy estate, has continued post-petition, through the present.
Also before this bankruptcy case was filed, the Debtor had leased the Xcelsior Premises from DEMS, also under a written lease (the "Xcelsior Lease"). That lease was terminated before the bankruptcy case was filed,4 but certain personal property of the Debtor continued to be stored at the Xcelsior Premises, and the storage of that property, which is now property of the bankruptcy estate, has continued post-petition, through the present.
Certain other issues remain unresolved, related to the DEMS Stay Relief Motion and the Ashley Orion Stay Relief Motion. With respect to each such motion, those issues are (1) what the Court will refer to, solely for convenience, as the "Stay Relief Effective Date Issue," which is: when and under what conditions stay relief is to be granted and become effective, to permit DEMS and Ashley Orion to exercise their rights under state law to remove any of the bankruptcy estate's current property from the Xcelsior Premises and the Silverbell Premises, respectively, if and to the extent any such property remains on the premises after June 30, 2021; and (2) what the Court will refer to, solely for convenience, as the "Post-Close Rent Issue," which is: whether either the bankruptcy estate or the Winning Bidder at the § 363 asset sale (the "§ 363 purchaser"), or both, will be liable to pay DEMS and Ashley Orion the value of storing the estate's former (sold) and unsold property on the premises, for the time period from the closing of the asset sale to the date that is the earlier of (a) the date on which all the assets are removed from the premises, or (b) the date on which stay relief becomes effective. As to issue (2), with respect to any liability of the bankruptcy estate, there is a sub-issue, which is: whether such liability will be an allowed administrative expense, or in the alternative, an allowed non-priority unsecured claim.
A third issue related to the stay relief motions also is related to the "Broom Clean Condition" issue described above. That issue is whether either the bankruptcy estate or the § 363 purchaser, or both, will be liable to pay DEMS and Ashley Orion for any failure by the bankruptcy estate or by the § 363 purchaser to leave the Xcelsior Premises and the Silverbell Premises in broom clean condition, and/or for any damage done to the premises during the process of removal of the bankruptcy estate's sold and unsold property. And a sub-issue, with respect to any liability of the bankruptcy estate, is whether such liability will be an allowed administrative expense.
In a stipulated order filed on May 5, 2021, the Court ordered:
The deadline for the removal of the Assets (as such term is defined in the Amended 363 Sale Asset Purchase Agreement filed at Docket # 88-2) from the Silverbell Premises and the Xcelsior Premises will be June 30, 2021. The deadline for the removal of any Excluded Assets (as defined in Docket # 88-2) from the Silverbell Premises and the Xcelsior Premises by the Trustee will also be June 30, 2021, with any Excluded Assets which are not removed to be deemed abandoned by the bankruptcy estate.5
The Court finds and concludes that there is cause, under 11 U.S.C. § 362(d)(1), to order, and the Court will order, that DEMS and Ashley Orion both are granted relief from the automatic stay, and that such relief from stay will become effective on July 1, 2021.6 On that day, which is one day after the June 30, 2021 deadline for the removal of all of the property at issue, DEMS and Ashley Orion will have stay relief to permit them each to pursue all remedies available under non-bankruptcy law to remove any remaining property from their premises.
It is clear that under applicable non-bankruptcy law, DEMS and Ashley Orion are each entitled to full possession of their respective owned premises, free from any hindrance or interference caused by the continuing unwanted presence of any personal property that was owned by the Debtor. The bankruptcy estate has no right to such possession of the premises owned by DEMS or Ashley Orion, and the estate has no right to continue to store any property on the premises owned by DEMS and Ashley Orion. This is definitively established by the fact that before this bankruptcy case was filed, DEMS and Ashley Orion each had obtained against the Debtor a final judgment of possession, and an eviction order, from a Michigan state court.7 This Court must give full faith and credit to these Michigan state court judgments, see generally Lenchner v. Korn (In re Korn ), 567 B.R. 280, 297-99 (Bankr. E.D. Mich. 2017) (); Taleb v. Kramer (In re Kramer ), 543 B.R. 551, 553-54, 559-60 (Bankr. E.D. Mich. 2015) (same). And the bankruptcy estate is bound by these judgments, as successor to the Debtor. This alone establishes cause to grant stay relief in favor of DEMS and Ashley Orion. See In re Indiana Hotel Equities, LLC , 589 B.R. 315, 318 (Bankr. E.D. Mich. 2018).
Cause for stay relief in this situation is further established when the Court considers "the hardships imposed on the parties with an eye towards the overall goals of the Bankruptcy Code." In re Combs , 435 B.R. 467, 470-71 (Bankr. E.D. Mich. 2010) (quoting In re Plastech Engineered Products, Inc. , 382 B.R. 90, 106 (Bankr. E.D. Mich. 2008) ). The June 30, 2021 deadline imposed by this Court's May 5, 2021 Order, which all relevant parties agreed to, is quite generous to the bankruptcy estate and to any potential buyer of the estate's assets. It should give ample time for the contemplated § 363 sale to be approved (as is likely to occur on May 12, 2021), to close (likely to be shortly after May 12, 2021), and for all sold and unsold property of the estate to be removed from the premises owned by DEMS and Ashley Orion. Once the property is removed from the premises, or abandoned by the estate under the terms of the May 5, 2021 Order, the bankruptcy estate will have no...
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