UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: ROSE'S STORES,

INCORPORATED,

Debtor.

ROSE'S STORES, INCORPORATED,

Plaintiff-Appellant,

No. 97-2654

v.

SAUL SUBSIDIARY I, L.P.; I.R.E. REAL

ESTATE INV., INCORPORATED;

SALISBURY ASSOCIATES, LTD;

SALISBURY MALL, LTD,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

Terrence W. Boyle, Chief District Judge.

(CA-96-898-5-BO, BK-93-1365, AP-95-62-5-AP)

Argued: June 3, 1998

Decided: July 10, 1998

Before LUTTIG, WILLIAMS, and MICHAEL, Circuit Judges.

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Affirmed by unpublished per curiam opinion. Judge Michael wrote a

dissenting opinion.

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COUNSEL

ARGUED: Bettie Kelley Sousa, SMITH, DEBNAM, HIBBERT,

L.L.P., Raleigh, North Carolina, for Appellant. David Marshall
Schilli, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte,

North Carolina, for Appellees. ON BRIEF: William G. Berggren,

ADAMS, PORTNOY & BERGGREN, Raleigh, North Carolina, for

Appellant. Jean Winborne Boyles, Raleigh, North Carolina, for

Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

On September 5, 1993, Rose's Stores filed for Chapter 11 bankruptcy. During the course of the subsequent bankruptcy proceedings,

Rose's paid several of its landlords (the appellees) rent which,

although it came due under its leases after the bankruptcy petition had

been filed, was for pre-petition occupancy of the premises. After confirmation of the bankruptcy plan, Rose's brought this suit against the

landlords to recover those rent payments as voidable post-petition

payments of pre-petition debts. The landlords defended on the ground

that the rent payments were properly made because they were

required by § 365(d)(3) of the Bankruptcy Code. The bankruptcy

court held that the payments were not required by§ 365(d)(3) and

thus were voidable transfers. The district court reversed, concluding

that the rent payments were obligations that arose post-petition by the

terms of the contracts and that § 365(d)(3) therefore required Rose's

to make the rent payments as it did. Thus, the district court granted

summary judgment for the defendant landlords.

Having had the benefit of oral argument and having reviewed the

record and the submissions of the parties, we conclude that the district

court's analysis was correct. Accordingly, we affirm on the reasoning

of that court.

AFFIRMED

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MICHAEL, Circuit Judge, dissenting:

I agree with the bankruptcy court that the rent payment obligations

arose before Rose's Stores filed its petition and that the payments are

therefore voidable transfers that may be recovered by Rose's Stores.

The language of § 365(d)(3) is ambiguous as to whether an obligation

"aris[es]" when the obligation is due to be paid or when it accrues.

The overall structure of the Bankruptcy Code and the legislative history both indicate that Congress intended to adopt the accrual theory.

This is the approach applied by the overwhelming majority of courts

considering the matter. See, e.g., In re McCrory Corp., 210 B.R. 934,

940 (S.D.N.Y. 1997); In re William Schneider, Inc., 175 B.R. 769

(S.D. Fla. 1994); In re Child World, Inc., 161 B.R. 571, 575-76

(S.D.N.Y. 1993); In re Best Products Co., 206 B.R. 404, 406-07

(Bankr. E.D. Va. 1997); In re All for A Dollar, Inc., 174 B.R. 358,

361-62 (Bankr. D. Mass. 1994). Using the accrual approach, the rent

payment obligations arose during the month before Rose's Stores

filed for bankruptcy, even though the payments were not due to be

made until five days after the end of that month (which was after the

petition was filed). The rent payments in question were prepetition

obligations that should not have been made by the bankruptcy estate.

Those payments are therefore voidable and should now be recovered

by Rose's Stores under §§ 549 and 550 of the Bankruptcy Code.

Accordingly, I would reverse the district court and reinstate the order

of the bankruptcy court granting summary judgment to Rose's Stores.

I therefore respectfully dissent.

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