Edward O. Sassower, P.C. James H.M. Sprayregen, P.C.

Joshua A. Sussberg, P.C. (admitted pro hac vice) Anup Sathy, P.C.

Emily E. Geier (admitted pro hac vice) Chad J. Husnick, P.C. (admitted pro hac vice)

KIRKLAND & ELLIS LLP KIRKLAND & ELLIS LLP

KIRKLAND & ELLIS INTERNATIONAL LLP KIRKLAND & ELLIS INTERNATIONAL LLP

601 Lexington Avenue 300 North LaSalle

New York, New York 10022 Chicago, Illinois 60654

Telephone: (212) 446-4800 Telephone: (312) 862-2000

Facsimile: (212) 446-4900 Facsimile: (312) 862-2200

-andMichael A. Condyles (VA 27807)

Peter J. Barrett (VA 46179)

Jeremy S. Williams (VA 77469)

KUTAK ROCK LLP

901 East Byrd Street, Suite 1000

Richmond, Virginia 23219-4071

Telephone: (804) 644-1700

Facsimile: (804) 783-6192

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

RICHMOND DIVISION

)

In re: ) Chapter 11

)

TOYS “R” US PROPERTY COMPANY I, LLC, et al.,

1

) Case No. 18-31429 (KLP)

)

Debtors. ) (Jointly Administered)

)

PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING THE ASSUMPTION OF THE LA MESA LEASE

Pursuant to the Court’s instruction at the conclusion of the evidentiary hearing on January 

24, 2019 (the “January 24 Hearing”), the above-captioned debtors and debtors-in-possession (the 

“Propco I Debtors” or “Debtors”) respectfully make this post-trial submission of (a) proposed 

findings of fact and (b) a legal memorandum applying the law to the facts proven at the January 

24 Hearing.

 

1 The Propco I Debtors in these chapter 11 cases, along with the last four digits of each Propco I Debtors’ federal 

tax identification number, are set forth in the Final Order (I) Directing Joint Administration of the Propco I 

Debtors’ Chapter 11 Cases and (II) Granting Related Relief [Docket No. 94]. The location of the Propco I 

Debtors’ service address is One Geoffrey Way, Wayne, NJ 07470.

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The Propco I Debtors are prepared to answer any additional questions the Court may have 

about this dispute at the status conference on February 25, 2019. 

Introduction

The Debtors sought and obtained Court approval to sell their unexpired lease in La Mesa, 

California, to an affiliate of the landlord for $11 million. The proposed purchaser and landlord 

were represented by the same counsel. Because assumption of a lease necessarily precedes 

assignment of a lease, the Court order authorizing the sale served as an assumption of the lease. 

See In re Mirant Corp., 440 F.3d 238, 253 (5th Cir. 2006) (“According to § 

365(f)(2)(A), assumption must precede assignment.”); Cinicola v. Scharffenberger, 248 F.3d 110, 

120 (3d Cir. 2001) (“Before an executory contract may be assigned, the trustee first must assume 

the contract....”); see also In re Specialty Foods of Pittsburgh, Inc., 91 B.R. 364, 376–77 (Bankr. 

W.D. Pa. 1988) (debtor need not use the word “assume” in its sale motion; “the motion to sell is 

sufficient and a motion to assume and sell would be superfluous”). The sale order expressly states 

that the Propco I Debtors met all requirements of section 365 of the Bankruptcy Code, and 

specifically sections 365(b) and 365(f)—which apply solely to assumption and assignment.

Similarly, the Purchase Agreement (approved as part of the sale order) provided that if the 

sale were to fall through, the Debtors’ obligation to pay rent would recommence. The parties’ 

behavior after the sale order was entered was consistent with an assumption, and entirely 

inconsistent with a rejection. The landlord/buyer paid additional consideration to extend the 

closing date (which would have been unnecessary and irrational if the lease were deemed rejected 

and had reverted to the landlord by operation of law) and requested additional rent and building 

repairs and improvements from the Debtors well after the assumption/rejection deadline had 

passed. And all of this makes sense: the sale was approved on September 13 but not scheduled to 

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close until November 12—approximately one month after the October 16 deadline to assume 

leasehold interests. Yet the landlord now takes the position that the lease was rejected by operation 

of law on October 17, and that the Debtors and their estates should only receive $400,000 (the 

landlord/buyer’s earnest money) for an asset that the landlord/buyer agreed to purchase for $11 

million.

The Court here should use its inherent authority to interpret its prior orders to clarify that 

the La Mesa sale order meant what everyone, including the landlord/buyer, understood it to mean: 

the Debtors assumed the La Mesa lease by obtaining approval of the sale. 

Proposed Findings of Fact

I. Background

1. On June 28, 2018, the Propco I Debtors filed the Propco I Debtors’ Motion for 

Entry of an Order Extending the Time Within Which the Propco I Debtors Must Assume or Reject 

Unexpired Leases of Nonresidential Real Property [Docket No. 195] (the “365(d)(4) Motion”), 

seeking to extend their time period to assume unexpired leases of nonresidential real property 

through October 16, 2018 (the “365(d)(4) Deadline”). 

2. To facilitate the sale of certain real estate assets, on July 26, 2018, the Court 

approved sale procedures relating to the sale of assets up to $10 million. See Order Establishing 

Procedures to Sell, Transfer, or Abandon Certain Non-Auction Assets [Docket No. 398] (the 

“Non-Auction Sale Procedures Order”). Any asset sales in excess of $10 million required a motion 

and hearing. 

3. The Propco I Debtors negotiated the sale of the unexpired lease for store number 

5671, located at 8165 Fletcher Parkway, La Mesa, California (the property, the “La Mesa 

Property” and the lease, the “La Mesa Lease”) for a purchase price of $11 million. Because this 

purchase price exceeded the $10 million cap set forth in the Non-Auction Sale Procedures Order, 

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the Propco I Debtors prepared a motion and sought Court approval of the sale. See Propco I 

Debtors’ Motion for Entry of an Order (I) Approving the Private Sale Free and Clear of Liens, 

Claims, Encumbrances, and Interests and (II) Granting Related Relief [Docket No. 479] (the “Sale 

Motion”).2

4. On September 13, 2018, after notice and a hearing, the Court entered the Order (I)

Approving the Private Sale Free and Clear of Liens, Claims, Encumbrances, and Interests and (II) 

Granting Related Relief [Docket No. 520] (the “Sale Order”), authorizing the sale of the La Mesa 

Lease, free and clear of all liens, encumbrances, and other interests (the “Sale”) to Wing Avenue 

Investment, LLC (the “Buyer”) for $11 million, as set forth in that certain Real Estate Purchase 

Agreement, by and between TRU 2005 RE I, LLC and Buyer, dated as of August 29, 2018 (the 

“Purchase Agreement”). 

II. The Sale Order Approved Assumption and Assignment of the Lease.

5. The Sale Order (which the Landlord/Buyer’s counsel reviewed and provided 

comments) expressly provided for assumption of the La Mesa Lease. It explained in more than 

one instance that the requirements of section 365 of the Bankruptcy Code—the Code provisions 

relating to assumption and rejection of executory contracts and unexpired leases—had been 

satisfied. See Sale Order ¶ F (“All the requirements of section 363 and 365 of the Bankruptcy 

Code have been met with respect to the sale of the Ground Lease.”); id. ¶ 5 (“The Propco I Debtors 

 

2 Contrary to arguments SAICO Gateway Company, LLC (“the Landlord”) raised at the January 24 Hearing, the 

Debtors did not violate any procedural orders previously entered by the Court. The Order (I) Authorizing and 

Approving Procedures to Reject or Assume Executory Contracts and Unexpired Leases and (II) Granting Related 

Relief [Docket No. 393] specifically provides that “[a]pproval of the Contract Procedures and this Order does not 

prevent the Propco I Debtors from seeking to reject or assume a Contract by separate motion,” id. ¶ 8—as the 

Debtors did with the Sale Motion. Likewise, by its terms the Order Establishing Procedures to Sell, Transfer, or 

Abandon Certain Non-Auction Assets [Docket No. 398] applies only to “the sale, transfer, or abandonment of 

assets of the Propco I Debtors with a sale price of up to $10 million,” id. at 1—thus excluding the La Mesa sale 

because of its $11 million purchase price.

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have met all requirements of sections 365(b) and 365(f) of the Bankruptcy Code in connection 

with the sale of the Ground Lease to the Buyer.”). Section 365(b) relates specifically to the criteria 

a trustee or debtor-in-possession must meet to assume a lease; section 365(f) provides, inter alia, 

that a trustee or debtor-in-possession “may assign an executory contract or unexpired lease of the 

debtor only if the trustee assumes such contract or lease in accordance with the provisions of this 

section.” 11 U.S.C. § 365(f)(2)(A). These references to section 365 would have been meaningless 

unless the Sale Order approved assumption of the La Mesa Lease. The Sale Order also gave the 

Propco I Debtors broad authority and direction to take “any and all actions necessary or appropriate 

to consummate the Purchase Agreement.” See Sale Order ¶¶ 2, 6. 

6. The Sale Order specifically approved the Purchase Agreement in the form 

negotiated between the Debtors and the Landlord/Buyer. See id. ¶ 2 (“The Purchase Agreement 

is hereby approved ...”). The Purchase Agreement was attached to the Sale Motion. See Sale 

Motion, Docket No. 479 at 26 of 49; see also Docket No. 477. Like the Sale Order, the Purchase 

Agreement plainly and expressly contemplates transfer pursuant to assumption and assignment 

rather than termination—using the phrase “Assignment and Assumption” no less than ten times. 

See id. at 35 of 49 (section 10) (“Transfer of the Premises shall be made pursuant to (a) an 

assignment and assumption of lease ...”); id. at 28 of 49 (section 2(e)) (the “Ground Lease ... is 

to be assigned to Buyer pursuant to the Assignment and Assumption of Lease (defined in section 

10)”); id. at 35 of 49 (section 11) (twice referencing “counterparts of the Assignment and 

Assumption of Lease”); id. at 37-38 of 49 (section 13) (four references to “the Assignment and 

Assumption of Lease”); id. at 48 of 49 (referencing “Exhibit ‘B’” as “Assignment and Assumption 

of Lease”). 

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7. The Purchase Agreement expressly stated that if the sale fell through, the Debtors 

would be responsible for future rent—evidencing that the Debtors had assumed the La Mesa Lease 

even if assignment fell through. See Purchase Agreement, Docket No. 479 at 38 of 49 (section 

13(i)) (“if this Agreement is terminated ... then Seller’s obligation to pay Rent pursuant to the 

Ground Lease shall recommence on the date which this Agreement is terminated ...”).3 

8. The Sale Motion itself lists section 365 of the Bankruptcy Code as a basis for the 

relief requested. See Sale Motion at 2 of 49, ¶ 4. The Debtors included a broad reservation of 

rights towards the end of the Sale Motion, which stated, inter alia, that “[n]othing contained herein 

is intended or shall be construed as ... (e) a request or authorization to assume, adopt, or reject any 

agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code or pursuant to the 

CCAA.”4 Docket No. 479 at 15 of 49, ¶ 27. Notwithstanding the inclusion of this language, the 

Sale Order and the Purchase Agreement, which control, state that the Sale Motion requested and 

the Sale Order approved assumption and assignment. The Sale Order provides that “[t]o the extent 

this Order is inconsistent with any prior order or pleading with respect to the Motion in these cases, 

the terms of this Order shall govern.” Id. at 11 of 49, ¶ 14.

 

3 The Purchase Agreement also provided that rent under the La Mesa Lease began to abate following the month in 

which the Sale Order was entered by the Court, shifting the rent obligations as if the assumption and assignment 

occurred upon the entry of the Sale Order. See Purchase Agreement, Docket No. 479 at 38 of 49 (section 13(i)) 

(“Buyer and Seller acknowledge and agree that Seller shall not be obligated to pay any Rent ... to Buyer pursuant 

to the Ground Lease from the period of time then and after the end of the calendar month in which the Sale Order 

is entered by the Bankruptcy Court...”).

4 Landlord’s argument that the Debtors intentionally included this boilerplate language to leave their options open 

is incompatible with the terms of the Purchase Agreement and the timing associated with the proposed closing of 

the sale. Following entry of the Sale Order, the Debtors were irrevocably committed and obligated to consummate 

the transaction by assigning the La Mesa Lease to Landlord/Buyer, absent a default by Buyer under the Purchase 

Agreement. The Debtors’ obligation to assign the Lease to Landlord/Buyer was protected by Buyer’s right to 

obtain specific performance in the event the Debtors failed or refused to close the transaction by assigning the 

Lease to Landlord/Buyer. See Purchase Agreement, Docket No. 479 at 40 of 49 (section 18(a)) (“If Seller fails 

to perform any of Seller’s obligations under this Agreement... the Buyer’s sole and exclusive remedy shall be to 

either: (i) obtain specific performance of this Agreement, ....”).

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9. In the Sale Order, the Court “retain[ed] jurisdiction with respect to all matters 

arising from or related to the implementation, interpretation, or enforcement of [the] Order.” Sale 

Order ¶ 17. 

10. The Debtors and the Landlord/Buyer agreed to extend the closing date to November 

30. The Buyer failed to close the sale by the November 30 closing date and thus forfeited its 

earnest money. See Docket No. 1004 at 4 (“The sale did not close and Buyer forfeited its Earnest 

Money deposit of $400,000 ....”). On November 29 (prior to the November 30 closing date), the 

Debtors, out of an abundance of caution and in order to leave no doubt as to whether the lease was 

assumed, filed the Propco I Debtors’ Motion for Entry of an Order (I) Approving the Assumption 

of Certain Real Estate Assets and (II) Granting Related Relief [Docket No. 833]. The Landlord 

filed its opposition on January 3, 2019 [Docket No. 1004]. The Debtors filed their reply on January 

8 [Docket No. 1025]. 

11. The Court held a hearing on January 24. During that hearing, the Court received a 

number of documents into evidence: the Declaration of Michael J. Maher [Docket No. 1004-1]; 

the Declaration of Jared Oakes [Docket No. 1026]; and Exhibits A through F attached to the 

Debtors’ reply brief [Docket No. 1025 at 15 of 99 through 99 of 99]. See 1/24/19 Hr’g Tr. at 54:9-

55:24 (admitting evidence). 

III. The Landlord/Buyer Understood that the Debtors Assumed the Lease.

12. Buyer Wing Avenue Investment, LLC is an affiliate of Landlord SAICO Gateway 

Company, LLC. Moreover, Buyer has the same principal as the Landlord, and is and has been 

represented by the same counsel as the Landlord. See Maher Decl., Docket No. 1004-1 ¶ 1 (“I 

represent SAICO and various of its affiliates in connection with their acquisition, sale and leasing 

of real property. In particular I represented first SAICO and then its affiliate, Wing Avenue 

Investment, LLC, in connection with the Real Estate Purchase Agreement (“PSA”) between TRU 

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2005 RE I, LLC (“Seller”) and Wing Avenue Investment, LLC (“Buyer”)”); see also Purchase 

Agreement, Docket No. 479 at 27 of 49 (recital B) (“An affiliate of Buyer is the landlord ...”); id.

at 43 of 49 (providing that notice to Buyer related to the Purchase Agreement shall be given to 

SAICO Gateway Company, LLC (i.e., the Landlord)); id. at 43 of 49 (identifying Keith R. 

Anderson as Trustee of SAICO Gateway Company, LLC) and 47 of 49 (identifying Keith 

Anderson as Manager of Wing Avenue Investment, LLC); Oakes Decl., Docket No. 1026 ¶ 3 

(“During the course of these negotiations, I communicated primarily with Mr. Michael J. Maher, 

who represented SAICO Gateway Company, LLC (the “Landlord”) and Wing Avenue Investment, 

LLC (the “Buyer”). During the past six months, the Landlord and the Buyer have had the same 

principal and were represented exclusively by Mr. Maher.”). The Landlord and Buyer acted as 

one and the same entity in negotiations—for instance, the Purchase Agreement (nominally entered 

into by the Buyer) tolled the Debtors’ rent payments, which is a concession only the Landlord 

could make. See Purchase Agreement, Docket No. 479 at 38 of 49 (section 13(i)) (“Buyer and 

Seller acknowledge and agree that Seller shall not be obligated to pay any Rent... to Buyer 

pursuant to the Ground Lease from the period of time then and after the end of the calendar month 

in which the Sale Order is entered by the Bankruptcy Court”).5

13. Initially, the Propco I Debtors and the Landlord contemplated entering into a lease 

termination agreement to effectuate the sale of the La Mesa Lease to Landlord/Buyer. Oakes 

 

5 Because counsel to Landlord was also counsel to Buyer—and thus Landlord received actual notice of all filings 

and participated in all relevant negotiations with the Debtors—due process is more than satisfied. See, e.g., In re 

Parandeh, No. 14-12578-BFK, 2015 WL 430383, at *4 (Bankr. E.D. Va. Jan. 28, 2015) (explaining that “[d]ue 

process requires notice reasonably calculated, under all the circumstances, to apprise interested parties of the 

pendency of the action and afford them an opportunity to present their objections” and “[t]he overwhelming 

weight of authority is that, in bankruptcy cases, notice served on a creditor’s counsel is presumed to satisfy both 

bankruptcy and due process notice requirements as to the creditor, so long as there is a nexus between the 

creditor’s retention of the attorney and the creditor's claim against the debtor”) (citation omitted). 

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Decl., Docket No. 1026 ¶ 4. Early in negotiations—prior to the October 16 lease assumption 

deadline—the Propco I Debtors agreed to the Landlord/Buyer’s request that the sale be effectuated 

through an assumption and assignment of the La Mesa Lease, and not through a termination of the 

La Mesa Lease. Id. In fact, counsel who represented the Landlord/Buyer changed the initial draft 

of the Purchase Agreement to reflect this change. See Exhibit A, Docket No. 1025 at 26 of 99 

(Landlord/Buyer changing the purchase agreement to provide that “[t]ransfer of the premises shall 

be made pursuant to (a) an assignment and assumption of lease,” where it previously stated that 

transfer would be made pursuant to “a termination agreement”). In total, Landlord/Buyer inserted 

the phrase “assignment and assumption” into the Purchase Agreement at least ten times. See id.

at 19 of 99 (new section (e)); id. at 26 of 99 (section 10); id. at 26-27 of 99 (section 11); id. at 28-

29 of 99 (section 13); id. at 37 of 99 (inserting as new “Exhibit B” a placeholder for “Assignment 

and Assumption of Lease”).6 

14. Following the entry of the Sale Order (which occurred prior to the 365(d)(4) 

Deadline), the parties worked towards a closing. On October 26, 2018, counsel to Landlord/Buyer 

provided comments to the assignment and assumption agreement included in the set of closing 

documents. Exhibit B, Docket No. 1025 at 76 of 99 (Landlord/Buyer counsel explaining he 

“reviewed the closing documents,” and listing “Assignment and Assumption of Lease” among 

them). 

 

6 Landlord’s argument that the Purchase Agreement was structured such that assumption of the La Mesa Lease 

would not occur until the closing date pursuant to the Assignment and Assumption of Lease attached as Exhibit 

B to the Purchase Agreement is erroneous. The Assignment and Assumption of Lease attached as Exhibit B to 

the Purchase Agreement provides that, upon the closing date (i) Assignor assigns the La Mesa Lease to Assignee, 

and (ii) Assignee assumes Assignor’s right, title and interest in and to the La Mesa Lease. That assumption 

language relates to Buyer’s assumption of the Debtors’ obligations under the La Mesa Lease, not Debtors’ 

assumption of the La Mesa Lease. See Docket No. 477 at 79 of 90.

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15. The Sale Order—which was entered on September 13, 2018—gave the Debtors full 

authority to complete a sale that was set to close on November 12, 20187—after the deadline to 

assume or reject would have passed. The Landlord/Buyer requested and the Propco I Debtors 

accommodated amendments to the Purchase Agreement to delay the closing date to the end of 

November. Certain amendments requested by the Landlord/Buyer proposed paying an additional 

non-refundable deposit in exchange for additional time to close the transaction, and were requested 

and executed well after the expiration of the 365(d)(4) Deadline. See Exhibit C, Docket No. 1025 

at 79 of 99 (Landlord/Buyer counsel inquiring “whether it would be difficult to move the closing 

to November 20”); id. at 80 of 99 (Landlord/Buyer counsel attaching “a first amendment moving 

the closing date to November 20th”); id. at 83 of 99 (Landlord/Buyer counsel proposing “a further 

extension of the closing to November 30th, with the Buyer putting up an additional $100,000 hard 

deposit”). The agreed extensions were memorialized in amendments to the Purchase Agreement, 

with Landlord/Buyer paying an additional and nonrefundable $100,000 hard deposit to delay the 

closing date until November 30, 2018. See Exhibit D, Docket No. 1025 at 87 of 99. Additionally, 

on November 27, 2018, counsel to Landlord/Buyer requested a further extension of the Closing 

Date to December 31, 2018 and offered an additional non-refundable deposit of $50,000 in 

exchange for the extension. See Exhibit E, Docket No. 1025 at 96 of 99 (Landlord/Buyer counsel 

inquiring “whether an additional $50,000.00 hard deposit would be sufficient for the seller to agree 

to extend the closing from this Friday to December 31st”). 

 

7 Section 13 of the Purchase Agreement states that “[c]losing shall take place on that date which is forty-five (45) 

days after the later of: (i) expiration of the Due Diligence Period, or (ii) the date on which the Sale Order is entered 

by the Bankruptcy Court (such date for Closing, the “Closing Date”.” The Sale Order was entered on September 

13 and the Due Diligence Period expired on September 28. Forty-five days after September 28 is November 12.

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16. If—as Landlord/Buyer now claims—the La Mesa Lease had been deemed rejected 

as of October 16, 2018, the Landlord/Buyer would have no reason to pay for these extensions; the 

lease would already belong to the Landlord. In addition, the Landlord would have just terminated 

on October 17 and taken back the property it was under contract to purchase after the 365(d)(4) 

deadline passed.

17. Similarly, Landlord/Buyer’s counsel sent the Debtors an email on December 13, 

2018, that is entirely inconsistent with the notion that the La Mesa Lease had been rejected. See 

Exhibit F, Docket No. 1025 at 99 of 99. Specifically, Landlord/Buyer requested December rent 

from the Debtors—noting that “the December semi-annual installment of property taxes was paid; 

however, rent for December has not been paid.” Id. The Landlord/Buyer also informed the 

Debtors about issues on the premises—alarms going off and the roof leaking—suggesting that the 

Debtors fix these issues and provide “contact information for the new person responsible so that 

[Landlord/Buyer] can be assured these matters are being addressed or will be addressed.” Id. If 

the Landlord/Buyer believed the lease had been rejected, it would not be requesting December rent 

from the Debtors, nor would the Debtors have any ongoing maintenance obligations.8 

Proposed Conclusions of Law

I. The Sale Order Functioned as an Assumption of the La Mesa Lease.

18. The Court has inherent authority to interpret its orders, including the Sale Order. 

See In re Merry-Go-Round Enterprises, Inc., 400 F.3d 219, 227 (4th Cir. 2005) (“a bankruptcy 

 

8 At the January 24 Hearing, counsel to the Landlord asserted that the Landlord had not cashed three rent checks. 

1/24/19 Hr’g Tr. at 68:15-69:20. The Landlord did not present any evidence to support this contention. Further, 

the Landlord provided the Debtors with no notice that it had stopped accepting rent. To the contrary, the Landlord 

sought December rent from the Debtors, even after the November 30 closing deadline had expired and even after 

the Debtors had filed their Motion to ensure that the La Mesa Lease was assumed [Docket No. 833], as reflected 

in Exhibit F, Docket No. 1025 at 99 of 99. Thus, even if the Landlord did not cash the Debtors’ checks it 

nonetheless gave them every reason to believe that all parties believed the lease was assumed.

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court is deemed to be in the best position to interpret its own orders”) (citations omitted); Weiner 

v. Fort, 197 F. App’x 261, 263 (4th Cir. 2006) (“the bankruptcy court drew upon 

its inherent authority to interpret its own orders”). In this case, the Sale Order specifically 

provides that the Court “retain[ed] jurisdiction with respect to all matters arising from or related 

to the implementation, interpretation, or enforcement of [the] Order.” Sale Order ¶ 17 (emphasis 

added). Section 105(a) of the Bankruptcy Code further vests in the Bankruptcy Court the ability 

to interpret its own orders. See, e.g., In Matter of Motors Liquidation Co., 829 F.3d 135, 153 (2d 

Cir. 2016) (“[T]he Code charges the bankruptcy court with carrying out its orders, see [11 U.S.C.]

§ 105(a) (providing that bankruptcy court “may issue any order, process, or judgment that is 

necessary or appropriate to carry out the provisions of this title”). Hence, a bankruptcy court 

plainly has jurisdiction to interpret and enforce its own prior orders.”) (citation omitted). 

19. As explained in the Findings of Fact, the Sale Order serves as an assumption and 

assignment of the La Mesa Lease for a number of reasons: the Sale Order specifically stated that 

the Debtors met the criteria for assumption and assignment under section 365 of the Bankruptcy 

Code; pursuant to the terms of the Purchase Agreement, the Debtors were contractually obligated 

to assign the La Mesa Lease to the Landlord/Buyer but for a default by Landlord/Buyer; and the 

Purchase Agreement approved by the Sale Order provided that if the sale fell through, the Debtors 

would be responsible for future rent.

20. Accordingly, the Sale Order was an “express order of the court” necessary to 

effectuate an assumption of a lease. See In re A.H. Robins Co., 68 B.R. 705, 708 (Bankr. E.D. Va. 

1986); see also In re Stamp Farms, LLC, No. 12-10410, 2014 WL 1017041, at *8 (Bankr. W.D. 

Mich. Mar. 13, 2014) (holding that in an instance where a purchase agreement and sale order were 

“replete with references to the Debtor’s assumption of various leases,” those leases were not 

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deemed to be rejected under section 365(d)(4)). The court in In re A.H. Robins Co. stated that an 

election to assume an executory contract “requires a positive action on the part of the debtor-inpossession”; the Propco I Debtors met that standard. 68 B.R. at 711. 

21. This conclusion is bolstered by the legal framework in which assumption and 

assignment occurs. The courts that have examined the issue have concluded that assumption 

necessarily precedes assignment. See In re Mirant Corp., 440 F.3d at 253 (“According to § 

365(f)(2)(A), assumption must precede assignment.”); Cinicola v. Scharffenberger, 248 F.3d at 

120 (“Before an executory contract may be assigned, the trustee first must assume the 

contract....”); In re Eastman Kodak Co., 495 B.R. 618, 622 (Bankr. S.D.N.Y. 2013) (“The cases 

that have construed § 365(f)(2)(A) hold only that assumption must occur before assignment. ... 

The plain reading of the statute is that an assignment cannot occur unless the debtor has satisfied 

the provisions of § 365 governing assumption”); In re 315 Franklin, LLC, No. 17-00512, 2017 

WL 6371342, at *1 (Bankr. D.D.C. Dec. 12, 2017) (“Without a request to assume and assign, there 

cannot be an assignment of the leases”) (citing cases); In re Qintex Entm’t, Inc., 950 F.2d 1492, 

1495 (9th Cir. 1991) (“the sale of Qintex’s assets will not include any contract that is executory 

unless Qintex first assumes the contract”); In re MPF Holding U.S. LLC, 495 B.R. 303, 321 

(Bankr. S.D. Tex. 2013) (a debtor “cannot transfer the executory contract without first assuming 

it under section 365”). 

22. The Sale Order—which authorized the Debtors to assign their lease to the 

Landlord/Buyer—thus approved the Debtors’ assumption of that lease.9 See In re Specialty Foods 

 

9 Counsel for Landlord conceded at the January 24 Hearing that the Sale Order authorized the Debtors to complete 

the transaction. See 1/24/19 Hr’g Tr. at 66:15-20 (The Court: “Well, this order authorized them to go forward 

with the transaction -- ” Mr. McIntyre: “Absolutely.” The Court: “ -- which they would have had to assume to 

assign to complete the transaction, right?” Mr. McIntyre: “They would have ...”). This means the lease was 

assumed—otherwise the transaction was incapable of closing in November because of the 354(d)(4) deadline.

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of Pittsburgh, Inc., 91 B.R. at 376–77 (“When, as in this case a motion to sell and a motion to 

assume and sell would have the identical effect and when the procedural safeguards are the same, 

the motion to sell is sufficient and a motion to assume and sell would be superfluous.”); id. (“It 

would be counterproductive to require the Trustee and an overburdened Bankruptcy Court to 

duplicate the effort, time and expense involved in filing two separate motions, providing notice 

twice, and conducting two separate adjudications to dispose of one estate asset simply because the 

asset may be characterized as an executory contract. It would be equally nonsensical to require 

the Trustee to use the technical term ‘assume’ in a motion to sell in order to have the sale before 

the court in a confirmable posture. ... [T]his court holds that the sale of executory contracts under 

the facts at bar is confirmable notwithstanding the fact that the Trustee did not file a separate 

motion to assume or use the word ‘assume’ in his motion to sell.”). 

II. Landlord/Buyer Waived and/or is Estopped from Contending the Lease Has Been 

Rejected.

23. “[E]quitable considerations retain their validity in determining whether a lease 

should be deemed rejected by operation of law....” In re Pier 5 Mgmt. Co., 83 B.R. 392, 394 

(Bankr. E.D. Va. 1988). Courts in a number of circumstances have estopped landlords from 

claiming that a lease is rejected by operation of law because the debtor failed to timely assume the 

lease where the landlord’s conduct was incompatible with rejection or contributed to the missed 

deadline. In In re Pier 5 Mgmt. Co., this court held that discussions between landlord and debtor 

in which the landlord promised (but failed) to provide information necessary to accurately compute 

rent under the lease estopped the landlord from asserting that the lease had been rejected. Id.

(“Having promised to provide the information necessary to resolve the rent dispute, the Court finds 

[landlord’s] subsequent change of position without notice to [debtor] operates to estop [landlord] 

from asserting the forfeiture of § 365(d)(4). Therefore, this Court holds that the lease is not deemed 

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rejected and may be assumed by the Chapter 7 Trustee within 60 days of this ruling.”). Courts 

have also applied waiver and estoppel where the debtor and landlord had negotiated a tentative 

settlement allowing the debtor to retain the benefit of the lease. See In re Car-Gill, Inc., 125 B.R. 

133, 138 (Bankr. E.D. Pa. 1991) (“[B]oth waiver and estoppel can be successfully invoked by the 

Debtor here. By agreeing to settle the Motion ... on terms which would allow the Debtor to retain 

the benefits of the Lease, contingent only on a further agreement between the parties as to the 

amount of rent arrearages owed by the Debtor, the Landlord voluntarily forfeited the right to 

unconditionally evict the Debtor with which it had been vested by the terms of § 365(d)(4).”). 

24. In light of the Landlord/Buyer’s conduct evidencing an assumption and compatible 

only with an assumption (and not a rejection), the doctrines of waiver and estoppel further support 

the Court’s conclusion that the Sale Order either functioned as an assumption or, alternatively (as 

discussed below), consent to extended time in which to assume. See In re Pier 5 Mgmt. Co., 83 

B.R. at 394 (“It is particularly disingenuous of [landlord] to demand the benefit of § 365(d)(4) 

when its own action created the reasonable belief in [debtor] that negotiations ... were ongoing.”); 

see also Matter of Haute Cuisine, Inc., 57 B.R. 200, 203 (Bankr. M.D. Fla. 1986) (“The record is 

clear that [landlord] was aware of the Debtor’s intention to assume the Lease Agreement, and in 

addition, it is estopped to insist on forfeiture of the lease based on its conduct.”); Matter of J. 

Woodson Hays, Inc., 69 B.R. 303, 309 (Bankr. M.D. Fla. 1987) (finding waiver and explaining 

that “there is no reason why a lessor may not waive the right accorded to the landlord by the 

provision of the statute or it may not be estopped to assert the same if there is evidence to establish 

that because of its conduct the failure to comply strictly with the provisions of the statute was not 

the fault of the debtor/tenant, but it was done in reliance of the conduct of the landlord”). This 

outcome comports with the general equities at play in waiver and estoppel doctrines. See generally 

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In re Cassell, 41 B.R. 737, 741 (Bankr. E.D. Va. 1984) (party can waive or relinquish right by 

conduct inconsistent with intent to enforce that right); Strong v. Cty. of Santa Cruz, 543 P.2d 264, 

266 (Cal. 1975)10 (“The doctrine of equitable estoppel is founded on concepts of equity and fair 

dealing. It provides that a person may not deny the existence of a state of facts if he intentionally 

led another to believe a particular circumstance to be true and to rely upon such belief to his 

detriment.”); In re Royal Meadows Stables, Inc., 187 B.R. 516, 518 (Bankr. E.D. Va. 1995) (citing 

Thomasson, Adm’r v. Walker, 190 S.E. 309, 312–313 (Va. 1937)) (“The general rule 

of equitable estoppel, or, as it is frequently called, estoppel in pais, is that when a person, by his 

statements, conduct, action, behavior, concealment, or even silence, has induced another, who has 

a right to rely upon those statements, etc., and who does rely upon them in good faith, to believe 

in the existence of the state of facts with which they are compatible, and act upon that belief, the 

former will not be allowed to assert, as against the latter, the existence of a different state of facts 

from that indicated by his statements or conduct, if the latter has so far changed his position that 

he would be injured thereby.”); In re MBA, Inc., 51 B.R. 966, 971 (Bankr. E.D. Va. 1985) (citing 

Section 90 of the Restatement (First) of Contracts (1932)) (explaining that promissory estoppel 

occurs when “the promisor should reasonably expect to induce action or forbearance of a definite 

and substantial character on the part of the promisee and which does induce such action or 

forbearance is binding if injustice can be avoided only by enforcement of the promise”). 

25. Section 105(a) provides the Court with further authority to enforce these equitable 

considerations, and to prevent an outcome where the Debtors’ estates would be deprived of an 

asset that Landlord/Buyer agreed to purchase for $11 million, instead receiving only the $400,000, 

 

10 The Purchase Agreement provides that it “shall be construed and enforced in accordance with the laws of the 

State where the Premises is located, notwithstanding the application of any principles of conflicts of laws.” 

Purchase Agreement, Docket No. 479 at 44 of 49, § 23(d). The Premises is located in California.

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as a result of the Landlord/Buyer’s failure to close. Section 105(a) provides that “[t]he court may 

issue any order, process, or judgment that is necessary or appropriate to carry out the provisions 

of this title,” and underscores that the Court may “tak[e] any action or mak[e] any determination 

necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of 

process.” 11 U.S.C. § 105.

III. The Landlord Consented to an Extension of 365(d)(4) By Allowing the Assumption 

and Assignment of the La Mesa Lease to Be Delivered on the Closing Date.

26. In the alternative, the Court’s approval of a sale scheduled to close after the section 

365(d)(4) deadline of October 16, 2018, coupled with the Landlord/Buyer’s requests for further 

closing date extensions function as approval and consent to an extension of section 365(d)(4). 

27. The Sale Order—which was entered on September 13, 2018—gave the Debtors full 

authority to complete a sale that was set to close on November 12, 2018—after the deadline to 

assume or reject would have passed. The Sale Order provided the Debtors with authority “to take 

any and all actions necessary or appropriate to consummate the Purchase Agreement.” Docket No. 

520 at 3, ¶ 2. The Landlord’s argument that the Debtors would have needed to take some further 

action to close the sale the Court already approved is mistaken. Following entry of the Sale Order, 

the Debtors were contractually bound to consummate the transaction absent the Buyer’s default—

the Purchase Agreement entitled the Buyer to specific performance in the event the Debtors failed 

or refused to close the transaction. See Purchase Agreement, Docket No. 479 at 40 of 49 (section 

18(a)) (“If Seller fails to perform any of Seller’s obligations under this Agreement... the Buyer’s 

sole and exclusive remedy shall be to either: (i) obtain specific performance of this Agreement, 

....”). Thus, to the extent the Debtors needed authority to extend the section 365(d)(4) deadline 

past October 16, the Sale Order (which allowed for closing on November 12) provided that 

authority.

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28. Likewise, because the Purchase Agreement, as approved by the Court, expressly 

contemplated an assignment of the La Mesa Lease, and the Landlord/Buyer continued to work 

with the Debtors to negotiate and finalize closing documentation throughout the weeks leading up 

to the October 16, 2018 deadline and well beyond, the Landlord/Buyer consented to an extension 

of the assumption deadline. The Landlord/Buyer requested multiple extensions of the deadline to 

close, and even provided additional consideration in the amount of $100,000 for an extension of 

the deadline to close, ultimately extending that deadline to November 30, 2018 (and requesting an 

extension to December 30 for an additional $50,000 deposit). See Exhibits C, D, E. 

29. If the La Mesa Lease was rejected by operation of law on October 16, as the 

Landlord now claims, then the Landlord/Buyer paid well over $100,000 (and offered to pay 

another $50,000) to extend its right to close on an asset the Landlord/Buyer already owned. 

Likewise, the Landlord would have no basis to request December rent or repairs to the premises if 

the La Mesa Lease had been terminated. See Exhibit F. This course of conduct by the 

Landlord/Buyer evidences that all parties understood that the La Mesa Lease already had been 

assumed, or at the very least indicates that the Landlord consented to an extension of the Propco I 

Debtors’ period to assume the La Mesa Lease.

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Richmond, Virginia

Dated: February 14, 2019

/s/ Jeremy S. Williams

KUTAK ROCK LLP KIRKLAND & ELLIS LLP

Michael A. Condyles (VA 27807) KIRKLAND & ELLIS INTERNATIONAL LLP

Peter J. Barrett (VA 46179) Edward O. Sassower, P.C.

Jeremy S. Williams (VA 77469) Joshua A. Sussberg, P.C. (admitted pro hac vice)

901 East Byrd Street, Suite 1000 Emily E. Geier (admitted pro hac vice)

Richmond, Virginia 23219-4071 601 Lexington Avenue

Telephone: (804) 644-1700 New York, New York 10022

Facsimile: (804) 783-6192 Telephone: (212) 446-4800

Email: Michael.Condyles@KutakRock.com Facsimile: (212) 446-4900

Peter.Barrett@KutakRock.com Email: edward.sassower@kirkland.com

Jeremy.Williams@KutakRock.com joshua.sussberg@kirkland.com

emily.geier@kirkland.com

Co-Counsel to the Propco I Debtors -andand Debtors in Possession

James H.M. Sprayregen, P.C.

Anup Sathy, P.C. 

Chad J. Husnick, P.C. (admitted pro hac vice)

300 North LaSalle

Chicago, Illinois 60654

Telephone: (312) 862-2000

Facsimile: (312) 862-2200

Email: james.sprayregen@kirkland.com

 anup.sathy@kirkland.com

 chad.husnick@kirkland.com

Co-Counsel to the Propco I Debtors 

and Debtors in Possession

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