Matter of Florida Airlines, Inc., Bankruptcy No. 80-79.

• Decision Date: 12 February 1982
• Docket Number: Bankruptcy No. 80-79.
• Citation: 17 BR 683
• Parties: In the Matter of FLORIDA AIRLINES, INC., Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Florida

17 B.R. 683 (1982)

In the Matter of FLORIDA AIRLINES, INC., Debtor.

Bankruptcy No. 80-79.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

February 12, 1982.

Domenic L. Massari III, Sarasota, Fla., for Blue Crab.

Shirley C. Arcuri, Tampa, Fla., for Trustee.

Chris C. Larimore, Bradenton, Fla., Trustee.

ORDER ON APPLICATION FOR PAYMENT OF ADMINISTRATIVE RENT

ALEXANDER L. PASKAY, Chief Judge.

THIS CAUSE came on for hearing upon an Application for Payment of Administrative Rent filed by Blue Crab Processing, Inc. (Blue Crab), sub-lessor of the property leased by Florida Airlines, Inc. Florida Airlines is the Debtor in this Chapter 7 proceeding, which was converted from a Chapter 11. It is the contention of Blue Crab that the Debtor's estate owes rent, pursuant to the terms of the lease agreement, for use and occupancy of the premises referred to as "Hangar A-2". The Trustee contends that the Debtor's estate should not be liable for the rent since the property housed in Hangar A-2 has been abandoned, and therefore there has been no benefit to the estate. In support of its position, the Trustee cites In the Matter of Furniture-in-the-Raw, Inc., 4 B.C.D. 519 (S.D.N.Y.1978) and In the Matter of Datamation Services, 1 B.C.D. 1698 (S.D.N.Y.1975). Blue Crab counters the argument, stating that there has been, in fact, benefit to the estate, and in any case, that the existence or nonexistence of benefit should not govern the decision, citing In re Atlantic Boat Builders Co., Inc., 5 B.C.D. 128 (M.D.Fla.1979).

The facts germane to the resolution of this matter are without dispute and can be summarized as follows:

The Debtor's Chapter 11 reorganization was converted to a Chapter 7 liquidation proceeding on September 10, 1981. Up until that time, the Debtor had continued to pay rent and perform in accordance with the terms of the lease. After the conversion, the Chapter 7 trustee continued in possession of the leased premises; however, no rent has been paid since the conversion. The lease agreement was rejected by the Trustee pursuant to § 365 of the Bankruptcy Code on December 1, 1981, but the Trustee did not deliver possession of the premises until January 7, 1982. The Trustee also filed a Notice of Intention to Abandon the property housed in Hangar A-2 on December 11, 1981. Upon an objection filed thereto, a hearing was held on the matter December 30, 1981, and the objection was overruled. An appropriate order was entered February 4, 1982, nunc pro tunc to December 30, 1981. Under the terms of the lease, the rent payments are $6,649.11 per month, plus sales tax of $265.98, plus pro rata insurance payments of $132.45 per month, plus late charges for payments not made timely. Blue Crab demands rent only for the period October 1, 1981 through January 7, 1982, although the abandoned property remained in the hangar after January 7 and apparently is still there.

It is well settled that if the Trustee chooses to adopt an unexpired lease, the Debtor's estate becomes liable for the rent which accrued under the terms of the lease from the date of filing the petition until the date of assumption. However, where, as here, a lease is ultimately rejected, or for the period pending the Trustee's decision, the estate is liable only for the reasonable value of use and occupancy of the premises. Philadelphia Co. v. Dipple, 312 U.S. 168, 61 S.Ct. 538, 85 L.Ed. 651 (1941); In re Standard Furniture Co., 3 B.R. 527, 6 B.C.D. 270 (S.D.Cal.1980); 2 Collier on Bankruptcy ¶ 365.03(2) (15th Ed. 1981). That amount is ordinarily fixed at the rent reserved in the lease. 2 Collier on Bankruptcy ¶ 365.03(2) (15th Ed. 1981).

The Trustee contends that since the inventory and property held on the leased premises has been abandoned, there was no benefit to...