Vause, In re
| Decision Date | 25 September 1989 |
| Docket Number | No. 88-4096,88-4096 |
| Citation | 886 F.2d 794 |
| Parties | , 21 Collier Bankr.Cas.2d 1346, 19 Bankr.Ct.Dec. 1400, Bankr. L. Rep. P 73,074 In re Joseph A. VAUSE and Virgie L. Vause, Debtors. Joseph A. VAUSE and Virgie L. Vause, Plaintiffs-Appellees, v. CAPITAL POLY BAG, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Thomas C. Scott, Thompson, Hine & Flory, Columbus, Ohio, for debtors.
Thomas R. Allen (argued), Thomas C. Scott, Columbus, Ohio, for plaintiffs-appellees.
Kenneth C. Johnson (argued), Sue A. Wyskiver, Bricker & Eckler, Columbus, Ohio, for defendant-appellant.
Before: KENNEDY and KRUPANSKY, Circuit Judges, and MILES, Senior District Judge. *
Defendant-appellant, Capital Poly Bag, Inc. (CPB) appeals the District Court's order affirming the Bankruptcy Court's denial of its claim for pre-petition rent. 1 The debtors, Joseph and Virgie Vause, filed a Chapter 11 bankruptcy petition on November 27, 1985, and concurrently requested permission to reject their lease. The lease required annual rent payments to CPB in arrears on December 1st of each year. CPB filed a $72,000 claim; $36,000 for 361 days' unpaid pre-petition rent as past damages under 11 U.S.C. Sec. 502(b)(6)(B), and $36,000 for one year's post-petition rent as future damages under 11 U.S.C. Sec. 502(b)(6)(A).
In deciding a question of first impression, the Bankruptcy and District Courts held that the lessor could not claim pre-petition rent because the plain language of section 502(b)(6)(B) limits a lessor's claim under a rejected lease to the amount of rent "due under [the] lease"; the rent for the past 361 days was not yet "due and payable" for another four days under the specific terms of CPB's lease on the date of the bankruptcy filing. While the Bankruptcy and District Courts' reading of section 502(b)(6)(B) may be correct in a narrow and technical sense, their "plain meaning" analysis is not instructive in this case because the word "due" has two possible meanings--"matured and payable" or "owing"--and is inherently ambiguous. A broader and more reasonable interpretation of the statute is supported by the statutory language, legislative history, and avoiding an inequitable result that Congress clearly could not have intended. Accordingly, we reverse in part and affirm in part. 2
The relevant facts are not in dispute. The Vauses entered into a lease agreement with CPB to rent 420 acres of farm land and attendant buildings for the time period April 1, 1982 through December 31, 1987. The total rent obligation of $201,000 was payable in an initial installment of $21,000 on December 1, 1982, and thereafter in annual installments of $36,000 payable on December 1st of each year through 1987. As is typical in many farm leases, each rent payment was payable in arrears to allow the farmers to first harvest and sell their crops. As the District Court explained, "a farm lease is unique in that the lessee is permitted to occupy and make use of the land but not pay for such use until the end of occupancy." 105 B.R. at 400-01 (emphasis in original). See also 72 B.R. at 648.
The Vauses harvested and sold their crops for the 1985 season. On November 27, 1985, four days before they were to make their annual rent payment, they filed a joint Chapter 11 bankruptcy petition, and concurrently filed a petition to reject their farm lease with CPB. The Bankruptcy Court approved this rejection on January 14, 1986. The debtors abandoned the leased property in December 1985, subsequent to their bankruptcy filing.
CPB filed a proof of claim for damages arising from the lease rejection in the amount of $72,000. See 11 U.S.C. Sec. 501(a). The two-part claim asserted past damages of $36,000 for 361 days' rent unpaid on the petition-filing date, 11 U.S.C. Sec. 502(b)(6)(B), and future damages of $36,000 for one year's loss of future rent, the maximum allowed under 11 U.S.C. Sec. 502(b)(6)(A). The debtors objected to the past damages part of the claim, 3 arguing that there was no unpaid rent "due under [the] lease" because their obligation did not become "due and payable" under the specific terms of CPB's lease until four days after the bankruptcy filing date. Therefore, the Vauses contended, the claim exceeded the ceiling established under 11 U.S.C. Sec. 502(b)(6)(B).
Accepting the Vauses' argument, the Bankruptcy Court found that, "the language of Sec. 502(b)(6)(B) is unambiguous and specific in its meaning." 72 B.R. at 651. The District Court agreed with the Bankruptcy Court that,
section 502(b)(6)(B) is unambiguous and specific in its meaning, that the determinative date in the case was the filing date, and that there was no unpaid rent due under the Lease on the date of [debtors'] bankruptcy filing. In making these determinations, [the Bankruptcy Court] considered the applicable statutory language, the lack of specific legislative history indicating an expansive or unusual meaning for the statutory language, the usual connotations of the terms "due" and "accrued," the explicit provisions of the Lease, and the absence of reported cases favorable to [CPB's] position.
Before addressing the merits of the District Court's disposition of this case, we are obligated to determine sua sponte whether we are presented with a final order on appeal. See Bowers v. Connecticut Nat'l Bank, 847 F.2d 1019, 1022 (2d Cir.1988); In re Exennium, Inc., 715 F.2d 1401, 1402 (9th Cir.1983). This Court's jurisdiction is confined to "appeals from all final decisions, judgments, orders, and decrees" of district courts sitting in review of bankruptcy courts. 28 U.S.C. Sec. 158(d) (emphasis added). Although the Bankruptcy Court explicitly reserved ruling on the claim for future damages, see note 2, supra, the District Court nevertheless concluded that the Bankruptcy Court's order was final under 28 U.S.C. Sec. 158(a), 105 B.R. at 401.
The finality of the order, however, is put in doubt because CPB presented a single, two-part claim under 11 U.S.C. Sec. 502(b)(6) for damages it suffered from the lease rejection. The claim sought past damages (pre-petition rent) under subsection 502(b)(6)(B), and future damages (the upcoming year's rent) under subsection 502(b)(6)(A). Only the past damages part of the two-part claim for past and future damages was ruled on by the Bankruptcy Court. The Seventh Circuit has explained that, "Finality of the order comes from the fact that it resolves all of [the creditor's] claims against the estate." In re Morse Elec. Co., 805 F.2d 262, 265 (7th Cir.1986) (emphasis in original). The mere fact that a dispute is "separable" does not automatically make it a final appealable order. The order sought to be appealed "must constitute final determination of the rights of the parties to secure the relief they seek in this suit." In re Texas Extrusion Corp., 844 F.2d 1142, 1155 (5th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 311, 102 L.Ed.2d 330 (1988).
We nevertheless conclude that the future damages half of the claim is effectively final, and that this Court therefore has jurisdiction to decide the appeal on its merits. The parties informed the Court during oral argument that the debtors have never objected to CPB's future damages claim, and that the claim is currently a part of the debtors' reorganization plan. "A claim ... is deemed allowed, unless a party in interest ... objects." 11 U.S.C. Sec. 502(a). Although the Bankruptcy Code does not place a time limit on objecting to a claim, it is doubtful that the debtors could raise such an objection at this late date. In addition, there is no question of whether CPB might mitigate its future damages claim, since CPB was unable to rent the property during 1986. Finally, there is no bankruptcy procedure available to appellants to secure a ruling on an unobjected-to claim.
Our conclusion on jurisdiction is strengthened because courts may decide the merits in cases of "marginal" finality under the Supreme Court's Gillespie doctrine. Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964). In certain close cases where finality cannot be conclusively resolved, the "danger of denying justice by delay" outweighs "the inconvenience and costs of piecemeal review," particularly when the questions on appeal are "fundamental to the further outcome of the case." Id. at 152-54, 85 S.Ct. at 310-12. "The Gillespie doctrine, therefore, permits the courts of appeals to decide the merits in cases of marginal finality where the course of litigation would be impeded, rather than advanced, by dismissing the appeal." In re Exennium, 715 F.2d at 1402-03 (citations omitted).
In this case, the Bankruptcy Court decided the past damages part of the claim over two-and-one-half years ago, and the future damages part of the claim has been decided de facto through its participation without objection in debtors' reorganization plan. To dismiss the litigation now would impede rather than advance the litigation because the past-damages claim will be a fundamental component of the reorganization plan, affecting not only CPB's rights, but also those of other creditors and the Vauses. Moreover, effective finality of the future damages issue minimizes the prospect of piecemeal review. 4
Because this Court has jurisdiction, we must decide the proper interpretation of "any unpaid rent due under such lease" under section 502(b)(6)(B). Statutory interpretation is a question of law which this Court reviews de novo. In re Southwest Aircraft Servs., Inc., 831 F.2d 848,...
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