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Super Nova 330 LLC v. Ian J. Gazes

August 2, 2012

SUPER NOVA 330 LLC, PLAINTIFF-APPELLANT,
v.
IAN J. GAZES, DEFENDANT-APPELLEE.



The opinion of the court was delivered by: Calabresi, Circuit Judge:

11-1773-bk

In re: Association of Graphic Communications, Inc. Super Nova 330 LLC v. Ian J. Gazes

(Argued: April 30, 2012

Before: CALABRESI, RAGGI, and CHIN, Circuit Judges.

28 Super Nova 330 LLC appeals from a judgment of the District Court (Sweet, J.), 29 affirming a judgment of the Bankruptcy Court (Lifland, J.), denying a claim, pursuant to 30 Section 365(d)(3) of the Bankruptcy Code, for recovery of post-petition rent, attorneys' fees, 31 and interest. We VACATE the judgment of the District Court and REMAND the case to 32 the District Court with instructions to remand to the Bankruptcy Court for further 33 proceedings consistent with this opinion.

2 Super Nova 330 LLC ("Super Nova") rented commercial property to Association of 3 Graphic Communications, Inc. ("AGC") pursuant to a lease agreement set to expire on 4 February 28, 2007. In 2006, AGC stopped making rent payments and Super Nova obtained 5 a warrant of eviction in New York City Civil Court. On February 2, 2007, before Super 6 Nova could execute the warrant, AGC filed for Chapter 7 bankruptcy protection and the 7 resulting automatic stay halted Super Nova's eviction efforts. Super Nova successfully 8 moved to lift the automatic stay and eventually executed the warrant on April 24, 2007. 9 Almost two years later, Super Nova moved, pursuant to Section 365(d)(3) of the Bankruptcy 10 Code, to recover post-petition rent, attorneys' fees, and interest for the period between the 11 Chapter 7 filing date and the date the warrant of eviction was executed. The Bankruptcy 12 Court denied the motion, concluding that the pre-petition issuance of the warrant of 13 eviction terminated the landlord-tenant relationship such that there was no "unexpired" 14 lease, the presence of which is necessary to obtain administrative expenses under Section 15 365(d)(3). The District Court affirmed for substantially the same reasons. We now 16 VACATE the judgment of the District Court and REMAND the case to the District Court 17 with instructions to remand to the Bankruptcy Court for further proceedings consistent with 18 this opinion.

I. BACKGROUND

Super Nova is the landlord of a commercial building located at 770 Seventh Avenue, 21 New York, New York. Prior to the dispute giving rise to this lawsuit, AGC was Super 22 Nova's tenant, occupying a portion of the ninth floor of the Seventh Avenue building. The 23 parties' landlord-tenant relationship was governed by a non-residential lease agreement, 1 dated February 10, 1992, between Four Star Holding Company ℅ David Yagoda (Super 2 Nova's predecessor-in-interest) and Association of the Graphic Arts, Inc. (AGC's 3 predecessor-in-interest), which subsequently was extended on February 11, 2002 and set to 4 expire on February 28, 2007. Sometime in the summer or fall of 2006, AGC ceased business 5 operations and stopped making rent payments. Super Nova first made informal requests for 6 payment, followed by a formal rent demand on October 13, 2006. When those requests 7 went unanswered, Super Nova began a nonpayment proceeding in New York City Civil 8 Court on November 27, 2006. AGC failed to appear to defend the action. The court 9 therefore granted Super Nova a default judgment of possession and issued a warrant of 10 eviction on February 1, 2007. The following day, February 2, 2007, AGC filed a voluntary 11 Chapter 7 petition for bankruptcy protection that automatically stayed all actions against the 12 company, see 11 U.S.C. § 362(a), thereby preventing Super Nova from executing the 13 warrant.

14 On March 28, 2007, Super Nova filed an unopposed motion before the Bankruptcy 15 Court to lift the automatic stay in order to execute the warrant of eviction. The Bankruptcy 16 Court granted the motion on April 11, 2007. With the stay lifted, Super Nova executed the 17 warrant on April 24, 2007, and Super Nova obtained both legal and actual possession of the 18 property. According to Super Nova, AGC abandoned certain personal property and debris 19 on the premises that cost Super Nova $10,000 to remove.

20 On January 30, 2009, Super Nova moved, pursuant to Section 365(d)(3) of the 21 Bankruptcy Code, see 11 U.S.C. § 365(d)(3), for unpaid rent, attorneys' fees, and 22 prejudgment interest. Super Nova sought payment for the period between the Chapter 7 23 petition date, February 2, 2007, and the eviction date, April 24, 2007. The Trustee promptly 1 opposed the motion and the Bankruptcy Court ordered discovery pursuant to Federal Rule 2 of Bankruptcy Procedure 9014(c). Following discovery, the Trustee moved for summary 3 judgment, arguing that--since the lease had been "terminated" pre-petition when the 4 warrant of eviction was issued--the lease was not "unexpired" and hence that a prerequisite 5 for relief under Section 365(d)(3) was not met.

6 On July 13, 2010, the Bankruptcy Court granted the Trustee's motion for summary 7 judgment and denied Super Nova's motion for administrative expenses. Accepting the 8 Trustee's argument, the court held that the lease was not "unexpired" because it was 9 "terminated" pre-petition by the issuance of the warrant of eviction, and, as such, Super 10 Nova was not entitled to post-petition rent, attorneys' fees, or interest. On appeal, the 11 District Court, agreeing that the lease was not "unexpired" as required by the Bankruptcy 12 Code, affirmed the Bankruptcy Court's decision. This timely appeal followed.*fn1

13 II. DISCUSSION

14 "We exercise plenary review over a district court's rulings in its capacity as an 15 appellate court in bankruptcy." Cmty. Bank, N.A., v. Riffle, 617 F.3d 171, 174 (2d Cir. 2010) 16 (per curiam). We "'independently examine the bankruptcy court's factual determinations 17 and legal conclusions, accepting the former unless clearly erroneous and reviewing the latter 18 de novo.'" Id. (quoting In re Dairy Mart Convenience Stores, Inc., 411 F.3d 367, 371 (2d Cir. 19 2005)).

20 The threshold question in this case is a purely legal one: Where a landlord seeks and 21 obtains a warrant of eviction in New York, but does not execute that warrant prior to the 1 tenant's filing of a bankruptcy petition, is the lease "unexpired" for purposes of Section 2 365(d)(3) of the Bankruptcy Code? We hold that it is and vacate the District Court's ruling 3 to the ...


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