MATTER OF DH OVERMYER CO., INC.(TEXAS)

• Decision Date: 15 July 1981
• Docket Number: Bankruptcy No. 73 B 1129.
• Citation: 12 BR 777
• Parties: In the Matter of D.H. OVERMYER CO., INC. (TEXAS) and D.H. Overmyer Co., Inc. (Ohio), Debtors. Natalie SHAPIRO and Harry I. Subin, individually and as trustees, doing business as Arcadia Enterprises, Plaintiffs, v. D.H. OVERMYER CO., INC. (TEXAS) and D.H. Overmyer Co., Inc. (Ohio), Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

12 B.R. 777 (1981)

In the Matter of D.H. OVERMYER CO., INC. (TEXAS) and D.H. Overmyer Co., Inc. (Ohio), Debtors Natalie SHAPIRO and Harry I. Subin, individually and as trustees, doing business as Arcadia Enterprises, Plaintiffs, v. D.H. OVERMYER CO., INC. (TEXAS) and D.H. Overmyer Co., Inc. (Ohio), Defendants.

Bankruptcy No. 73 B 1129.

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

July 15, 1981.

COPYRIGHT MATERIAL OMITTED

Graubard, Moskovitz, McGoldrick, Dannett & Horowitz, New York City, for plaintiffs Harry Subin and Natalie Shapiro; Lawrence D. Bernfeld, and Jack Weinberg, New York City, of counsel.

Robson & Miller, New York City, for debtor; Morton S. Robson and Michael Venditto, New York City, of counsel.

Patterson, Belknap, Webb & Tyler, New York City, for custodial receiver; Robert Soriano, New York City, of counsel.

JOEL LEWITTES, Bankruptcy Judge.

I INTRODUCTION

Plaintiffs, Natalie Shapiro and Harry I. Subin, as trustees and doing business as Arcadia Enterprises ("lessors" or "plaintiffs"), have commenced this adversary proceeding¹ against the substantively consolidated Chapter XI debtors², D.H. Overmyer Co., Inc. (Texas), as lessee of the subject premises ("lessee" or "DHO Texas") and D.H. Overmyer Co., Inc. (Ohio) ("DHO Ohio") as guarantor of the lessee's lease obligations (collectively referred to sometimes as ("defendants").

Plaintiffs, in their complaint, which was served upon defendants on December 24, 1980, allege two claims for relief: (1) damage caused them as lessors by reason of the defendants' untimely lease payments of rent without interest; and (2) that lessor's mortgage loan with its mortgagee, Mortgage and Trust Inc., may be subject to foreclosure by reason of defendants' failure to make the repairs required under the lease between lessors and defendants.

The relief requested in the complaint is (1) a declaration by the Court that the lease is terminated; (2) a direction by this Court that defendants quit and surrender possession of the subject premises; (3) a direction by this Court that defendants pay, inter alia, all outstanding rent obligations, interest on late payments of rent and costs of repairs; and (4) granting to plaintiffs, inter alia, plaintiffs' costs, disbursements and attorneys fees incurred in connection with this adversary proceeding.

Defendants, in their answer, deny that plaintiffs have been damaged and deny that the latter can reasonably be expected to suffer irreparable injury by defendants' actions. Moreover, on information and belief, they deny plaintiffs' allegations of untimely payment of rent and that plaintiffs' mortgagee informed plaintiffs that the latter's mortgage was in jeopardy because of failure to keep the subject premises in good repair.

No affirmative defenses were asserted by defendants in their answer.

Additionally, it is noteworthy that the only two contentions of fact set forth by defendants, in the pre-trial order, are that: (a) defendants have made all of the rent payments required pursuant to the lease; and (b) defendants have maintained the subject premises in

". . . thorough repair and good, safe and substantial order and condition and at present have three contractors working on paving, roofing and painting the demised premises."³

After hearing the testimony adduced by the parties on the trial of this adversary proceeding, examining the exhibits, the pleadings, the pre-trial order and the briefs submitted by counsel, this Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52(a) and its procedural bankruptcy analogue, Bankruptcy Rule 752(a).⁴

II FINDINGS OF FACT

1. Defendants DHO Texas or DHO Ohio built certain warehouse premises on Sea Mist and Overmyer Drives, in the City of Houston, Harris County, Texas ("subject premises").

2. In June 1970, DHO Texas sold the subject premises to one David L. Subin.

3. By written agreement, dated June 12, 1970 ("lease"), David L. Subin, leased the subject premises to DHO Texas for a term of twenty (20) years, commencing June 1, 1970 and terminating July 31, 1990.

4. The lease is representative of a form lease prepared and used by Overmyer defendants and various affiliates which are consolidated debtors in this Chapter XI case in sale and leaseback transactions similar to the sale and leaseback transaction between plaintiffs and defendants.

5. Defendant, DHO Ohio, by written instrument dated June 12, 1970, guaranteed performance of DHO Texas' obligations under the lease.

6. Plaintiffs Natalie Shapiro and Harry I. Subin individually, and as trustees for their respective children, doing business as Arcadia Enterprises, obtained an ownership interest in the subject premises on December 13, 1976 and presently are the owners of such subject premises.

7. By letter dated February 8, 1977, defendants were notified that plaintiffs were the owners of the subject premises and that all future payments and correspondence pertaining to such premises should be sent to Arcadia Enterprises.

8. The Subject Premises:

There are four warehouses: two large warehouses, designated at trial as Buildings 1 and 2 — each made up of two units designated A & B, Building 1, and A & B Building 2, and two smaller single unit warehouses designated as Buildings 3 and 4, or Building 3C and Building 4C;

each of the six units (i. e Units A and Units B of Buildings 1 and 2 and Unit C, Buildings 3 and Unit C, Building 4, are approximately 268 feet (east to west) by 150 feet (north to south);

the warehouse floors are made of concrete slabs and are at the level of motor truck beds, three and one-half to four feet above ground;

the perimeter walls of each warehouse are made of Dur-O-Wal, i.e., steel reinforcement, and concrete blocks with two cores through each block;

the roof assembly over each warehouse consists of gravel, asphalt, felt, insulation, gravel guard, gutters and downspouts;

the roof assembly over each warehouse rests on a 22" gauge steel deck;

there is a small office building attached to Building 2, Unit B and having its own roof there is a small office building attached to Building 1, Unit B and having its own roof;

the site paving at the truck doors is made of concrete; the balance of the site paving is made of asphalt;

there is a railroad siding with two tracks running east to west between Buildings 1 and 2 and Buildings 3 and 4.

9. Two of the warehouses, Buildings 2 and 3, are vacant and have been vacant, since January 1, 1981 and November, 1980, respectively.

10. Warehouses, Buildings 1 and 4, are occupied by J.C. Penney, Inc. under a sublease between Overmyer and Penney which is to expire on August 31, 1981.

11. By stipulation dated April 18, 1974, between plaintiffs' father and predecessor in interest, David L. Subin, and Overmyer, which was "So Ordered" by this Court, it was agreed that:

"The Landlord understands and agrees that the current bankruptcy proceeding involving Overmyer which is pending in the United States District Court, for the Southern District of New York, is not and shall not be considered a default under the Lease. . . . so long as the Receiver, or his successor,⁵ continues to make the use and occupancy payments and the other obligations undertaken herein and all other obligations of Overmyer under the Lease are performed by the Receiver or his successor. . . . "

12. The subject lease, dated June 12, 1970, contains the following provisions with respect to defendants' obligations to pay rent:

"Section 3.01. Tenant shall pay to Landlord, at either his principal office or such other place as Landlord shall specify in writing, rent . . . payable on the first day of the month. . . .

* * * * * *

"Section 3.04. The net rents, additional rents, and all other sums payable under this Lease to or on behalf of Landlord, shall be paid, without notice or demand and without set-off, counterclaim, abatement, suspension, deduction or defense.

"Section 3.05. Tenant waives all rights now or hereafter conferred by law . . . (b) to any abatement, suspension, deferment or reduction of the net rents or additional rents or any other sums payable under this Lease, except as expressly provided in this Lease."

13. The subject lease contains the following provisions relevant to defendants' obligations to repair the subject premises:

"Section 6.01. Landlord shall not be required to furnish any services or facilities to the Demised Premises, and shall have no obligation to Tenant except as expressly provided in this Lease, Tenant hereby assuming the full and sole responsibility for the condition, construction, operation, repair, replacement, maintenance and management of the improvements to the Demised Premises. Tenant hereby expressly waives the right to make repairs at the expense of Landlord as provided in any statute or law in effect at the time of the execution of this Lease or which may be hereafter enacted. Landlord shall not be required to rebuild any improvements on the Demised Premises or to make any repairs, replacements or renewals of any nature or description to the Demised Premises or any improvement thereon, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure whatever in connection with this Lease or to maintain the Demised Premises in any way.

"Section 6.02. Tenant shall, at all times and at its own cost and expense, keep, replace and maintain in thorough repair and good, safe and substantial order and condition all buildings and improvements and paved areas erected on the Demised Premises, or forming a part thereof (including all building equipment which is an integral part of the building structure), both inside and outside, structural and non-structural, extraordinary and ordinary . . . and Tenant shall likewise at all times and at its own cost and expense put, keep, replace and maintain all personal property and equipment attached to or used in connection with the Demised

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