Subscription Television of Greater Atlanta, In re

• Decision Date: 23 May 1986
• Docket Number: No. 85-8883,85-8883
• Parties: Bankr. L. Rep. P 71,159 In re SUBSCRIPTION TELEVISION OF GREATER ATLANTA, Debtor. BROADCAST CORPORATION OF GEORGIA, Plaintiff-Appellant, v. Herbert C. BROADFOOT, II, As Trustee For the Estate of Subscription Television of Greater Atlanta, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1530

789 F.2d 1530

Bankr. L. Rep. P 71,159

In re SUBSCRIPTION TELEVISION OF GREATER ATLANTA, Debtor.

BROADCAST CORPORATION OF GEORGIA, Plaintiff-Appellant, v. Herbert C. BROADFOOT, II, As Trustee For the Estate of

Subscription Television of Greater Atlanta,

Defendant-Appellee.

No. 85-8883.

United States Court of Appeals, Eleventh Circuit.

May 23, 1986.

John C. Weitnauer, Atlanta, Ga., for plaintiff-appellant.

David W. Pollard, Joseph J. Burton, Jr., Atlanta, Ga., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before VANCE and JOHNSON, Circuit Judges, and BOWEN ^*, U.S. District Judge:

BOWEN, District Judge:

Broadcast Corporation of Georgia (Broadcast) appeals from an order of the federal district court for the Northern District of Georgia which reversed in part and affirmed in part an order of the bankruptcy judge which allowed as an administrative expense Broadcast's claim in the Chapter 7 bankruptcy case of Subscription Television of Greater Atlanta (Subscription). Broadcast Corp. of Georgia v. Broadfoot, 54 B.R. 606 (N.D.Ga.1985). The district court allowed as an administrative expense only that portion of Subscription's claim which related to the period of time during which the bankruptcy trustee operated the debtor's business and actually used the services of Broadcast. We AFFIRM.

I. THE FACTS AND COURSE OF PROCEEDINGS BELOW

As its name implies, Subscription operated a subscription television service providing television programming to Atlanta area subscribers who also rented "decoders" which allowed those subscribers to "unscramble" broadcast television signals. Subscription and Broadcast entered into a "contract for the provision of subscription television by and between Broadcast Corporation of Georgia and STV of Georgia, Inc." The contract created an obligation on Broadcast to provide Subscription with a scrambled television signal during certain hours of the day for which Subscription was obligated to pay Broadcast. Subscription filed a Chapter 11 bankruptcy case during which it continued the operation of its business. When the case was converted to a Chapter 7 bankruptcy, Herbert C. Broadfoot, II, was appointed as trustee on July 6, 1983. Trustee Broadfoot continued the operations of the debtor for seventeen days during which he supplied video tapes containing programming to Broadcast which Broadcast scrambled and transmitted in accordance with the contract.

After the seventeen-day period of operation, the trustee terminated operations and began his role as a liquidator. Broadcast made repeated requests that the trustee reject or assume the executory contract between Broadcast and Subscription, but the trustee declined. Instead, the trustee kept the contract as an assumable, executory contract for the full sixty-day period contemplated in 11 U.S.C. Sec. 365(d)(1) with the hope that the contract would prove valuable to the estate.

During the sixty-day period the trustee was motivated by a desire to preserve the estate and to find a purchaser for the debtor's business, including the contract. During the sixty-day period, Broadcast was obligated by the contract to keep the signal available to the trustee and was deprived of its own use thereof. At the end of the sixty-day period, the contract was rejected by operation of law, and Broadcast regained the ability to market the television signal which was the subject matter of the executory contract.

The bankruptcy judge allowed as an administrative expense Broadcast's claim for contract payments accruing during the full sixty-day period that the trustee had use of the television signal. On appeal, the district court held that Broadcast was not entitled to the priority of an administrative expense for that portion of its claim which exceeded the seventeen-day period of operation and actual use by the trustee. Other issues were presented to the bankruptcy judge and the district court, but in this appeal the sole remaining issue is the priority to be accorded to Broadcast's claim for the period of time during which the scrambled signal was available but not actually utilized by the trustee.

II. DISCUSSION

The issue presented is a straightforward one. The trustee actually utilized the subject matter of an executory contract during the operation of the debtor's business for a seventeen-day period. Thereafter the trustee retained the right to use the subject matter of the executory contract with the hope of enhancing the estate and to preserve the assets of the estate. It was the trustee's desire to keep the debtor's assets and business together during the section 365(d)(1) period with a view toward selling them as a unit. During the seventeen-day operation period the estate received an actual benefit from the trustee's use of...