In re Salzer
| Decision Date | 02 November 1993 |
| Docket Number | Bankruptcy No. 93-1046. |
| Parties | In re Thomas Rodger SALZER, Debtor. Thomas Rodger SALZER, Plaintiff, v. JOCQUEL SUPPLY, Donald Stinson, et al., Defendants. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana |
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Thomas Rodger Salzer, pro se.
Michael O'Hara, Fort Wayne, IN, for defendants.
R. David Boyer, Trustee, Fort Wayne, IN.
DECISION
By its complaint in this proceeding, the plaintiff/debtor, who is proceeding pro se, seeks to recover both compensatory and punitive damages from the defendants Jocquel Supply and Donald Stinson. Although the complaint is in six separate counts, each of which seeks recovery under a slightly different legal theory, in the ultimate analysis plaintiff's claims reduce themselves to the question of whether or not defendants violated the automatic stay. The matter is presently before the court on defendants' motion for summary judgment.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Bankr.P. 7056(c). Thus, summary judgment is essentially an inquiry as to "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986).
Initially, Rule 56 requires the moving party to inform the court of the basis of the motion and to identify "those portions of the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The non-moving party may oppose the motion with any of the evidentiary materials listed in Rule 56(c), but reliance on the pleadings alone is not sufficient to withstand summary judgment. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). In ruling on a summary judgment motion, the court accepts as true the non-moving party's evidence, draws all legitimate inferences in favor of the non-moving party, and does not weigh the evidence and credibility of witnesses. Anderson, 477 U.S. at 249, 106 S.Ct. at 2511.
Substantive law determines which facts are material; that is, which facts might affect the outcome of the suit under the governing law. Id. at 248, 106 S.Ct. at 2510. Irrelevant or unnecessary facts do not preclude summary judgment, even when they are disputed. Id. The issue of fact must be genuine. Fed.R.Bankr.P. 7056(c) & (e). To establish a genuine issue of fact the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). "The nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial'." Id. at 587, 106 S.Ct. at 1356 (emphasis in original).
Most of the facts surrounding the controversy between the parties are undisputed. Instead, it is the legal implications of those facts over which they differ. Debtor originally filed a petition for relief under Chapter 11 of the United States Bankruptcy Code on December 6, 1989. On or about July 28, 1992, debtor, while operating as a debtor-in-possession, entered into an oral month-to-month lease with the defendants, for nonresidential real estate located at 2206 Broadway, for a monthly rental of $500.00 payable in advance. After this date, rent was paid for the months of August, September, and October of 1992. No rent has been paid since that time.
On September 29, 1992, this case was converted from Chapter 11 to Chapter 7 and Mr. R. David Boyer was ultimately appointed as the Chapter 7 trustee. On the date of the conversion, property belonging to the debtor and unidentified third parties was located at the leased premises. Following the conversion, on January 4, 1993, debtor filed a claim of exemptions which included a claimed exemption for debtor's interest in a certain utility trailer. The claimed exemptions were subsequently amended on April 1, 1993. Neither the original nor the amended claim of exemptions was objected to within the time required.
The Chapter 7 trustee did not act to assume or reject the lease between the debtor and the defendants within the sixty days following the order for relief. All of defendants' actions which plaintiff contends violated the automatic stay occurred more than sixty days following the order for relief. On April 1, 1993, at the direction of the Chapter 7 trustee, defendants secured the leased premises and the personal property located there, which included personal property that debtor had included on his claimed exemptions. Prior to April 1, on March 1, 1993, defendants, as indicated by plaintiff's affidavit, took possession of or control over a utility trailer and a quantity of lumber. These items were placed into locked storage buildings under the control of Mr. Stinson.
Debtor contends that the defendants have improperly denied him access to the leased premises and the personal property located there which has been claimed as exempt. As a result, plaintiff contends defendants have violated the automatic stay of § 362(a)(3), which prohibits all entities from taking "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). Since the plaintiff contends that he has been injured by defendants' conduct, he seeks actual and punitive damages pursuant to 11 U.S.C. § 362(h).
The nature of defendants' conduct requires the court to analyze it in two distinct ways. Plaintiff is contending that defendants improperly excluded him from the leased premises and that the defendants improperly denied him access to property of the bankruptcy estate which plaintiff had claimed as exempt. Given the nature of defendants' actions, we must separately examine their conduct with regard to the leased premises and the personal property located there which had been claimed as exempt.
Insofar as the leased premises is concerned, defendants did nothing to violate the automatic stay. The property in question involved a lease of nonresidential real estate. As a result, pursuant to 11 U.S.C. § 365(d)(4), the trustee was required to assume or reject that lease within sixty days following the September 29, 1992 order for relief. As a matter of law, the failure to do so resulted in the lease being "deemed rejected" and the trustee required to "immediately surrender such nonresidential real property to the lessor." 11 U.S.C. § 365(d)(4). Debtor does not dispute that the trustee did not take any action to assume or reject the lease within the sixty days following the order for relief and that the time to do so was not extended. Consequently, on the 61st day following September 29, 1992, the lease was deemed rejected and possession of the leased premises was required to be surrendered to the lessor.
Although debtor recognizes that the lease was rejected and that the trustee no longer had a right to possess the leased premises, the debtor miscomprehends the consequences of a deemed rejection of a lease of nonresidential real estate. The debtor appears to believe that the rejection of the lease, with the concomitant loss of the estate's right to possession, somehow operated to vest him with the right to possession and, thus, required the landlord to seek relief from the automatic stay before debtor's possession could be disturbed. This is not so.
Leases of nonresidential real estate under which the debtor is the lessee are a unique species of executory contracts. For most executory contracts rejection represents nothing more than a breach of the agreement. 11 U.S.C. § 365(g). Congress, however, has decided that the rejection of a debtor's lease of nonresidential real estate is something more. Not only is the lease deemed rejected by the failure to assume it in a timely fashion but possession of the leased premises is to be surrendered to the lessor. Consequently, rejection under § 365(d)(4) does not operate in the same way that abandonment does, where the trustee's decision to not administer a particular asset for the benefit of creditors results in the property being returned to the bankruptcy debtor. See In re Gillis, 92 B.R. 461, 466 (Bankr.D.Haw.1988) (). A deemed rejection, pursuant to § 365(d)(4), specifically requires the trustee to return possession, not to the debtor, but to the lessor. Thus, rejection operates to terminate the lease. In re Southwest Aircraft Servs., Inc., 66 B.R. 121, 123 (9th Cir. BAP 1986), rev'd on other grounds, 831 F.2d 848 (9th Cir.1987), cert. denied, 487 U.S. 1206, 108 S.Ct. 2848, 101 L.Ed.2d 885 (1988); In re Chris-Kay Foods East, Inc., 118 B.R. 70, 72 (Bankr.E.D.Mich.1990). Following the rejection, neither the estate nor the debtor has any possessory interest in the leased premises.1
Only a very curious reading of the law would attempt to deny a landlord the right to possession specifically granted by § 365(d)(4) based upon the proposition that, before it can exercise that right, the landlord must first seek relief from the automatic stay. Thus, when the lease was deemed rejected, the automatic stay as to the leased premises was terminated as well. In re U.S. Fax, Inc., 114 B.R. 70, 72 (D.E.D.Pa.1990); In re...
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