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In Re Kp Fashion Company v. Rich-Taubman Associates

August 29, 2011

IN RE KP FASHION COMPANY, DEBTOR.
JOHN S. PEREIRA, CHAPTER 7 TRUSTEE, APPELLANT,
v.
RICH-TAUBMAN ASSOCIATES, APPELLEE.



The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge

MEMORANDUM AND ORDER

This is an appeal brought by appellant John S. Pereira, the Chapter 7 Trustee of KP Fashion Company (the "Trustee" or "appellant") from an order of the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"), entered on September 29, 2010, denying the Trustee's motion for an order expunging an administrative claim (the "Administrative Claim") of the appellee, Rich-Taubman Associates ("Taubman" or "appellee"). For the reasons set forth below, the Bankruptcy Court's order is affirmed.

BACKGROUND*fn1

Taubman and KP Fashion Company (the "Debtor") were parties to a commercial real estate lease (the "Lease") dated February 12, 2008, under which the Debtor leased space (the "Premises") from Taubman in the Stamford Town Center in Stamford, Connecticut. Taubman maintained a letter of credit as collateral.

On December 31, 2008 (the "Petition Date"), the Debtor filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. The appellant was appointed as the Trustee pursuant to 11 U.S.C. § 701. On January 20, 2009, the Trustee filed a Notice of Presentment for the issuance of an order rejecting the Lease nunc pro tunc to the Petition Date. Taubman filed a limited objection the motion, challenging the request for nunc pro tunc relief. In its objection, Taubman stated that the Premises had not been vacated by the Trustee or returned to Taubman, that furniture and other equipment belonging to the estate was still on the Premises, and that representatives of the Trustee were marketing the space and showing it to potential assignees. See Taubman Br. at 3.

On January 30, 2009, the Bankruptcy Court entered an order which stated "that the [Lease] between the Debtor and [Taubman] for the [Premises] be and hereby is rejected effective as of a date no later than 5:00 p.m. on January 30, 2009, subject to (a) return to [Taubman] of all keys, and copies thereof, to the Premises, and (b) immediate surrender of the Premises to [Taubman], all of (a) and (b) being pursuant to 11 U.S.C. § 365(d)(4)." Bankr. Dkt. 82 (emphasis in original). On the same day that the Bankruptcy Court entered its order, a representative of the Trustee provided Taubman with the keys to the Premises. Taubman Br. at 4.

After the Court's order, Taubman filed two claims in connection with the Lease. At issue in this case is Taubman's Claim Number 5 (the "Administrative Claim") for $33,614.47, which reflects the amount due under the Lease on January 1, 2009 (adjusted downward to account for the fact that the Lease was rejected on January 30, 2009). Id. at 4.*fn2

On August 13, 2010, the Trustee filed a motion for an order expunging the Administrative Claim. In its motion to the Bankruptcy Court, the Trustee argued (1) that the Lease should be rejected nunc pro tunc to the Petition Date, (2) that if the Lease is not rejected nunc pro tunc to the Petition Date, "any administrative expense allowed to [Taubman,] should be in an amount far less than that set forth in the Lease between the Debtor and [Taubman]", and (3) that if any administrative claim is allowed, the Bankruptcy Court "should direct that the proceeds of the irrevocable standby letter of credit in the amount of $360,000.00 drawn by [Taubman] and which is collateralized with cash of the Debtor should be applied first to the payment of the administrative claim." Bankr. Dkt. 324. On September 8, 2010, Taubman filed a response to the Trustee's motion. Bankr. Dkt. 331. The Trustee filed a reply on September 15, 2010. Bankr. Dkt. 339.

At a hearing on September 16, 2010, the Bankruptcy Court denied the Trustee's objections and upheld Taubman's Administrative Claim. The Bankruptcy Court entered an order denying the motion and upholding the Administrative Claim on September 29, 2010. The Trustee filed a Notice of Appeal on October 8, 2010.

DISCUSSION

I.Standard of Review

When reviewing a Bankruptcy Court's decision, we "accept[ ] its factual findings unless clearly erroneous but review[ ] its conclusions of law de novo." DG Creditor Corp. v. Dabah (In re DG Acquisition Corp.), 151 F.3d 75, 79 (2d Cir. 1998); see also Olin Corp. v. Riverwood Int'l (In re Manville Forest Prods.), 209 F.3d 125, 128 (2d Cir. 2000).

II.Analysis

A.Collateral ...


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