2009 Judge Kaplan - Opinions
Judge Michael B. Kaplan -- Opinions signed in 2009
"The fund claimed that it was owed reimbursement from the debtor after the fund allegedly paid a former client of the debtor's for amounts that the debtor, an attorney, allegedly embezzled from the client. The fund had filed a claim alleging that the obligation was nondischargeable, and the fund was able to use the debtor's frozen tax funds to set-off all but $300 of the fund's claim. The court granted the fund's motion for a voluntary dismissal, and the debtor's counterclaim was the only matter remaining. After considering the degree of relatedness to the main bankruptcy case, the effect of abstention on the bankruptcy case, the interests of judicial economy, and the burden on the court's docket, the court determined that abstention was appropriate. The debtor's claim was not a core proceeding under 28 U.S.C.S. § 157(b)(2) and it was an impermissible stretch to find the counterclaim related to the bankruptcy case. "
PROCEDURAL POSTURE: A debtor filed for relief under the United States Bankruptcy Code, and became a debtor-in-possession. A landlord sought relief from the automatic stay for cause, pursuant to 11 USC 362(d)(1)
OVERVIEW: The debtor and the landlord entered into a commercial lease agreement. Over the years, the debtor did not make payments, and the debtor and the landlord eventually agreed to the entry of a consent judgment, so that the debtor could remain in possession of the premises provided that it paid the rent arrears and the current rent at the same time. The debtor did not meet the required obligations and before the landlord could enforce its rights under the consent judgment the debtor initiated bankruptcy proceedings. The court differentiated the landlord's rights under the consent judgment, compared with a holder of a judgment for possession, and concluded that the consent judgment did not grant the landlord possessor rights to the property. The consent judgment allowed the debtor to cure its past defaults pursuant to the terms and conditions of the consent judgment and the consent judgment did not terminate the lease. The consent judgment and the underlying lease constituted an executory contract under 11 USC 365. As such, the debtor could assume the contract through cure of its pre-petition defaults for unpaid rental payments and an exercise of its option to renew the lease.
OUTCOME: The court denied the landlord's motion for relief from the automatic stay, without prejudice to reinstatement pending resolution of the debtor's motion to assume the underlying lease.
CORE TERMS: lease, consent judgment, tenant, default, warrant of removal, cure, option to renew, debtor in possession, landlord, executory contract, renewal, rent, rental payments, issuance, tenancy, pre-petition, terminated, forfeiture, notice, bankruptcy filing, final judgment, equitable principles, additionally, prepetition, delinquent, possessory, terminate, bargain, clerk, Federal Rules