In re Unit Portions of Delaware, Inc.

• Decision Date: 18 September 1985
• Docket Number: Bankruptcy No. 885-50424-18.
• Citation: 53 BR 83
• Parties: In re UNIT PORTIONS OF DELAWARE, INC., Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of New York

53 B.R. 83 (1985)

In re UNIT PORTIONS OF DELAWARE, INC., Debtor.

Bankruptcy No. 885-50424-18.

United States Bankruptcy Court, E.D. New York.

September 18, 1985.

Gerst & Pullin, Garden City, N.Y., for debtor.

Schwartz, Sachs & Kamhi, Carle Place, N.Y., for landlord.

Finkel, Goldstein & Berzow, New York City, for Creditors committee.

C. ALBERT PARENTE, Bankruptcy Judge.

The debtor, Unit Portions of Delaware, Inc., filed a petition for relief under Chapter 11 of the Bankruptcy Reform Act (the "Code") on March 20, 1985.

On May 16, 1985 the debtor submitted to the court an order to show cause in which, pursuant to § 365(d)(4), the debtor sought an extension of time to determine whether it would assume or reject an executory nonresidential lease of real property located at 146 Albany Avenue, Lindenhurst, New York. In the application accompanying the order to show cause, the debtor stated that it required an additional three months to determine whether its reorganization efforts would generate sufficient revenues to justify assuming the lease. The court signed the debtor's order to show cause on May 19, 1985 and set the matter down for a hearing on June 6, 1985.

At the hearing, the landlord objected to the granting of an extension of the debtor's time for assuming the lease, contending that pursuant to § 365(d)(4) the court's statutory power to grant the extension had expired on May 20, 1985, marking the sixtieth day after the entry of the debtor's order for relief.

DISCUSSION

Section 365(d)(4) provides that:

In a case under any chapter of this title, if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor. (Emphasis added.)

Pursuant to 11 U.S.C. §§ 1107 and 1101, the debtor, as debtor-in-possession, fulfills the role of a trustee in a Chapter 11 case and thus is bound by the requirements of § 365(d)(4).

The landlord, relying on the plain language of the provision, contends that the court cannot grant the debtor/trustee an extension once the sixtieth day after the date of the order for relief has passed, and that it is irrelevant that the debtor submitted its request for an extension to the court before the expiration of the 60 day period.

The court finds the landlord's construction of the statute untenable. Although as a general rule a court must adhere to the literal requirements of an unambiguous statute, it has long been recognized that a court has a duty to look beyond the language where a literal reading would produce absurd, unintended, or manifestly unjust results. As the Supreme Court held in Rector, Etc., of Holy Trinity Church v. U.S., 143 U.S. 457, 460, 12 S.Ct. 511, 512, 36 L.Ed. 226 (1892) ("Holy Trinity"):

If a literal construction of the words of a statute be absurd, the act must be so construed as to avoid the absurdity.

The holding of Holy Trinity was affirmed in U.S. v. American Trucking Assns., 310 U.S. 534, 542, 60 S.Ct. 1059, 1063, 84 L.Ed. 1345 (1940) ("American Trucking"), where the Court expanded upon a court's obligation in construing statutory language where literal adherence would be absurd or futile.

In the interpretation of statutes, the function of the courts is . . . to construe the language so as to give effect to the intent of Congress. . . . Often the words of the statute are sufficient in and of themselves to determine the purpose of the legislation. In such cases we have followed their plain meaning. When that meaning has led to absurd or futile results, however, this Court has looked beyond the words to the purpose of the act. . . . Even when the plain meaning did not produce absurd results but merely an unreasonable one `plainly at variance with the policy of the legislation as a whole\' this Court has followed that purpose, rather than the literal words. (Emphasis added.)

The holdings of Holy Trinity and American Trucking were reaffirmed by the Court in Perry v. Commerce Loan Co., 383 U.S. 392, 400; 86 S.Ct. 852, 857, 15 L.Ed.2d 827 (1966) and have been consistently followed by lower courts when confronted by statutory language found to produce absurd or unintended results. See, e.g., U.S. v. Mendoza, 565 F.2d 1285 (5th Cir.1978); de los Santos v. Immigration and Naturalization Service, 525 F.Supp. 655, 664 (S.D.N.Y.1981).

As was stated in a recent Law Review article:

Reliance on literal meaning is a wholly inadequate response to the problems and efforts of the law-drafter and law-giver. . . . A good faith, common sense effort to reconstruct the context and purpose is essential. Literal meaning is a wholly insufficient tool.

Kernochan, Statutory Interpretation: An Outline of Method, 3 The Dalhousie L.J. 334 (1976).

Section 365(d)(4) was enacted to enable a trustee to review a debtor's executory contracts or leases, to assume those which are necessary to an effective reorganization, and to reject those which are burdensome. In re Steelship, 576 F.2d 128, 132 (8th Cir.1978). In order to minimize the hardship to those parties with whom the debtor has such a contract or lease, the trustee is required to act expeditiously. House Rep. No. 595, 95th Cong., 1st Sess. 348-9 (1977); Senate Report No. 989, 95th Cong., 2d Sess. 59 (1978), U.S. Code Cong. & Admin. News 1978, 5787. As a general rule, the trustee must either assume or reject the lease within 60 days of the order for relief or the lease will be deemed rejected. However, Congress recognized that there may be times when it is not possible for the trustee to make a careful and informed assessment of the benefits and burdens of the lease within this 60 day period. Accordingly, it empowered the court to grant a trustee who...