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IN RE NORTH ATL. & GULF S.S. CO.

August 22, 1958

In the Matter of NORTH ATLANTIC AND GULF STEAMSHIP COMPANY, Incorporated, (a New York Corporation), Debtor


The opinion of the court was delivered by: BRYAN

This proceeding for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. ยง 501 et seq., was commenced on May 23, 1958 by the filing of an involuntary petition. On June 19, 1958 the petition was approved by the court, and Edward Schilling was appointed trustee of the debtor.

The petitioner, 120 Wall Associates, is the owner of the premises 120 Wall Street, New York City. The debtor occupied the twenty-seventh floor and part of the second floor of these premises under a lease entered into on February 27, 1956. Pursuant to an order of this court, dated July 31, 1958, the trustee has elected to disaffirm the lease.

This petition asks the court for an order directing the trustee to pay petitioner a reasonable rent for the use and occupancy of the leased premises from May 23, 1958, the date of filing of the involuntary petition, to the present, and to pay also for electric current supplied by the petitioner during that period.

 The trustee denies that he ever occupied the twenty-seventh floor space, and, while acknowledging his liability for the reasonable value of his use and occupancy of the second floor space, contends that such liability did not accrue until July 1, 1958, the first day of the month following his appointment as trustee. He contends that the debtor had surrendered its space on the twenty-seventh floor to the landlord prior to the commencement of the reorganization proceedings, that there was no use and occupancy of the twenty-seventh floor by the trustee, and that the several articles of furniture which admittedly remained on the twenty-seventh floor until their removal by the trustee on July 10, 1958, did not constitute use and occupancy of that space.

 There is also a dispute as to the reasonable rental value of the second floor space which the trustee claims to be $ 15,000 per year and the petitioner.$ 19,000.

 1. Did the debtor surrender the twenty-seventh floor space to the landlord prior to the commencement of the reorganization proceedings?

 The uncontroverted testimony of Robert D. Murdock, vice-president of the petitioner, negatives any surrender or acceptance of a surrender between the debtor and the landlord. He testified that the tenant communicated its desire to terminate its occupancy of the twenty-seventh floor, but that the landlord informed the debtor that it still considered the debtor to be bound by the terms of the lease.

 Furthermore, paragraph 24 of the lease provides that

 'No act or thing done by Landlord or Landlord's agents during the term hereby demised * * * shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by the Landlord.'

 Since there is no claim that a written acceptance of a surrender was ever executed and signed by the landlord, as required by paragraph 24, it is plain that there was never a surrender of the twenty-seventh floor premises by the debtor.

 2. Is the trustee liable for the use and occupancy of the twenty-seventh floor space because several articles of furniture left there by the debtor were not removed by the trustee until July 10, 1958?

 The criteria for determining the trustee's liability for use and occupancy of premises formerly held by the debtor are as follows (Remington on Bankruptcy, 5th Ed., Vol. 6, Section 2653, pp. 189-190):

 'The owner of the property is entitled to payment for use and occupation thereof by a bankruptcy receiver or trustee, as in other cases, if the use was for the benefit of the estate, though not otherwise, and perhaps not unless he first demands surrender of the premises or reaches a rental agreement with the receiver or trustee. He must substantiate his demand, or the receiver or trustee must do so for him, assuming the burden, as he is not entitled to compensation as an expense-priority item on the mere basis of semblance of continuance of occupation under a financially shattered lease because of the non-removal of few dreary assets.'

 The few pieces of furniture, dreary or not, which remained on the twenty-seventh floor after the appointment of the trustee did not constitute use and occupancy of the premises by the trustee. Crook v. Zorn, 5 Cir., 100 F.2d 792, certiorari denied 307 U.S. 630, 59 S. ...


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