2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit
6-29-2010 

# In Re: Go o dy 's F ami l

y C lothing P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de nt i al D ocke t N o . 09-2168

F o l low thi s a nd a dd it ion al work s at : http://d i git alc ommon s .l a w . vi l l a nova . e du/thir dc ir c uit_2010

Thi s de c i sion i s br ou ght t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

w Di git al Reposit or y

. It h as be e n a c c ept e d for inclusion in 2010 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sity S choo l of L a

w Di git al Reposit or y

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C a rl s on@l a

w . vi l l a no va . e du
. Re c omme nde d C it at ion

" In Re: Goody ' s F ami ly C lothin g " (2010). 2010 D e cisio n s . P ape r 1059. http://d i git alc ommon s .l a

w . vi l l a nova . e du/thir dc ir c uit_2010/1059P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT
N o. 09- 2168

In re : G O O D Y ’S F A M IL Y C L O T H IN G IN C ., e t a l., A p p e llan ts
A p p ea l from the U n it ed S tat es D istri ct C o u rt fo r th e D istri ct of

D elaw are ( D
. C
. C i vi l A ct i on N o. 1- 08- cv- 00585/ 819/ 820) Di s t r i c tJ u d g e : Ho n o r a b l e Re n e e M
. Bu mb
A r gued N ovember17, 2009 B efor e: A M B R O , A L D I SE R T , and R O T H , C i r cui tJ udges (O p inion fil ed Ju n e 2 9 , 2 0 1 0 )

Ian S
. F red erick s, E sq u ir e G r egg M
. G al ar di , E s qui r e ( A r gued) M arion M
. Q u irk , E sq u ir e Skadden, A rps , Sl at e, M eaghe r& Fl om O n e R o d n eyS q u are2 P. O
. B ox 636 W i l m i ngt on, D E 19899- 0000 C o u n se l f

o r A p p e llan ts D u an e D
. W erb , E sq u ir e W erb & Sul l i van 300 D el aw ar e A ve. , 13t h Fl oor P. O
. B ox 25046 W i l m i ngt on, D E 19899- 0000 C ouns el forA ppel l ee M o u n t a i n e e rPr o p e r t yCo. I I , LLC S h erryR u g g iero F all o n , E sq u ir e T yb o u t, R e d f

e a rn & P e ll 750 Shi py ar d D r i ve, Sui t e 400 W i l m i ngt on, D E 19899- 0000 J
. C ar ol e Thom ps on H or d, E s qui r e ( A r gued) Schr eede r , W heel er& Fl i nt 1 1 0 0 Pe a c h t r e e Str e e t , N. E. Sui t e 800 A t l ant a, G A 30309- 0000 C ouns el forA ppel l ee St a f f o r d Bl u f f t o n , LLC Jo h n D
. D em m y , E sq u ir e St evens & L ee 1105 N or t h M ar ketSt r eet3 Sui t e 700 W i l m i ngt on, D E 19801- 0000 N i chol as W
. W hi t t enbur g, E s qui r e ( A r gued) M ill e r & M a rtin 832 G eor gi a A venue Sui t e 1000, V ol unt eerB l dg. C hat t anooga, T N 37402- 0000 C ouns el forA ppel l ee Ea s t g a t e M a l l , LLC

OPI NI ON O F THE COURT
A M B R O , C i r cui tJ udge G oody ’ s Fam i l yC l ot hi ng, I nc. and ce r t ai n o f i t s di r ect and i ndi r ects ubs i di ar i es ( col l ect i vel y“G oody ’ s ” or“D ebt or s ”) appea l t he j udgm entof the D i s t r i ctC our taff irm i ng t he B ankrupt cy C our t ’ s deci s i on t o aw ar d “s tub r ent ” as an admi ni s t r at i ve expe ns e under 11 U
. S. C
. § 503( b) t o t hr ee of t he De b t o r s ’ l a n d l o r d s
— M ou nt a i n e e rP r o p e r t yCo
. I I , LL C, St aff or d B l uffon, L L C , and East gat e M al l , L L C ( c o l l ect i vel yt he “Landl or ds ”)
. “Stub r ent ” her e i s t he am ount due a l andl or d for t he per i od of occ upan cy and us e betw een the pet i t i on dat e andT h o u g h cal l ed “r ent , ” i ti s notnece s s ar i l yt i ed t o t he r ent 1 amount s i n t he under l y i ng l ease agr eement s . H er e, t he part i es hav e st i pu l at ed to t he “stub rent ” am ou nts
. 4 t h e f i r s tp o s t - p e t i t i o n r e n t p a yme n t
. I n d e c i d i n g t h i s i s s u e , we 1 con stru e furt her t he m eaning o f 11 U
. S
. C
. § 3 65 (d) (3) , fi rs t addr es s ed i n C enter

po i nt Prop e rties v. Mon t go m ery W

ard H o ld in gC o r

p . (In r e Mo n tg o m e r

y W a r d H o ld in gC o r

p .) , 268 F. 3 d 2 0 5 ( 3 d Ci r . 2 0 0 1 )
. W e h o l d t h a t § 3 6 5 ( d ) ( 3 ) d o e s not su p p lan t § 5 0 3 (b ) a n d th e L a n d lo rd s a re e n tit led to “ st u b re n t” as an admi ni s t r at i ve expe ns e. W e thus aff i r m t he j u d g m en tof t he D i s t r i ctC our t , and do s o fores s ent i al l yt he r eas ons gi ven by J udge B um b i n herexce l l entopi ni on. I . Fac t s and Pr oc e dur al Backg r ound T he rel ev antfac t s ar e undi s put ed. G oody ’ s and the L a n d lo rd s e n ter e d in to lea se s f o r n o n re sid e n tial re a l p ro p e rtyin vari o u s sh o p p ing v en u es a rou n d the c o u n try . E ac h p rov ided that re n t w o u ld b e p a id in a d v a n c e o n th e f irst d a yo f

e v e rym o n th dur i ng t he t erm of the l eas e. G oody ’s w as cur r enton i t s r ent obl i gat i ons unt i l J une 1, 200 8 , w hen i tdi d notpayr entdue un der t he leas es. O n J une 9, 2008, t he D ebt or s fi l ed vol unt ary pet i t i ons for b an k rupt cyr el i ef unde rt he B ankrupt cyC ode. T hey s i m ul t aneous l yfi l ed a mot i on w i t h t he B ankrupt cy C our tas ki ng fo rp e r mi s s i o n t o e n g a g e i n v a r i o u s a c t i v i t i e s r e l a t e d t o t he5 cl os i ng o f cer t ai n s t or es , i ncl udi ng t hos e l eas ed fr om t he L and l or ds , a nd t he l i qu i da t i on of t he pr od uc t s i n tho s e s t or es. T he s t or e- cl os i ng s al es w er e t o be handl ed byan age nt s peci fi cal l yhi r ed t o per for m t hatt as k. T he B ankrupt cyC our tgr anted the m ot i on, and a s t or ec lo sin g a g e n t w a s h ire d so o n th e re a f ter . G o o d y ’s c o n tin u e d to occupy the prope r t i es ow ned byt he Landl or ds , and the s al es occurr ed on pr emi s es . T he a g en t so l d t he mer chandi s e i n t he des i gnat ed s t or es , t aki ng a port i on for i t s el f and tur ni ng overt he b a l a n c e o f

t h e p r o c e e d s t o t h e e s t a t e . ByGo o d y ’ s o wn a d m iss io n , the sa le w a s “ p re ttysu c c e ss f u l” a n d b ro u g h t in 105. 4% of cos t s . A ddi t i onal l y , G oody ’ s r ece i ved fr om t he age nt an amountequal t o p e r d i e m r entas s oci at ed w i t h us e of the L andl or ds ’ pr oper t yt o conductt he cl os i ng s al es , i ncl udi ng t he ent i r e “s tub r ent ” per i od. G oo d y ’s , how ever , has notpai d t he Landl or ds fort he pos t - pet i t i on occupa ncyof the s t or es fr om J une 9 thr ough J une 3 0 , 2 0 0 8
. I n l i n e w i t h 1 1 U
. S
. C
. § 3 6 5 ( d ) ( 3 ) , G o o d y’ s d i d p a y, a n d th e L a n d lo rd s a c c e p ted , the re n t d u e f o r th e m o n th o f

Ju ly on J ul y1, 2008. T he “s tub r ent ” forJ une r emai ns i n di s put e. T he Landl or ds fi l ed adm i ni s t r at i ve expe ns e cl ai m s under § 5 0 3 (b )(1 ) f

o r th e “ stu b re n t,” c h a ra c ter izin g it as u n p a id , p o stpet i t i on r entt hatw as an ac tu al, n ec ess arycos tand expe ns e of p re se rv in g th e e sta te. G o o d y ’s o b jec ted , arg u in g th e “ stu b re n t” w a s d u e u n d e r th e L e a se s p rio r to th e p e tit io n d a te, m a k in g it aT h e iss u e o f im m e d iate p a ym e n t w a s n o t ap p e a led a n d it i s 2 no tbefo re us. 6 gener al , uns ecur ed pr e- pet i t i on cl ai m ent i tl ed t o no s peci al pr i or i t y . G oody ’ s fur t herar gued that § 3 6 5 w as t he exc l us i ve so urce of o bli gati on s and rem edies un der une xp i red l eases, m aki ng any ref

er ence t o § 503( b) ( 1) contr aryt o s t atut or yt ext a n d c o n tro lli n g p re c e d e n t. T he B ank rupt cy C ou rt heard argum ent on t he L and l ords’ m ot i ons and gr ant ed them al l as admi ni s t r at i ve expe ns es , but r e f u s e d t o r e q u i r e i mm e d i a t e p a yme n t
. 3 9 2 B. R. 6 0 4 ( Ba n k r . D. D el
. 2008)
. A n appea l w as t aken t o t he D i s t r ict C our t , w hi ch aff i r m ed. 401 B
. R
. 656 ( D
. D el
. 2009)
. D ebt or s t hen appe al ed

2 t o ourC our t
. T he D i s t r i ctC our thad juri sd i ct i on under28 U .S .C . § 1 5 8 (a )(1 ) o v e r th e a p p e a l f ro m th e B a n k ru p tcy C o u rt, w hi ch had j ur i s di ct i on under28 U
. S. C
. § 157( b)
. W e have juri sd ict ion u n d er 2 8 U
. S
. C
. § § 1 2 9 1 an d 1 5 8 (d). W e e x erc ise p lena ry rev iew o v er the D istri ct C o u rt ’s concl us i ons of l aw , i ncl udi ng m at t er s of s t atut or yi nt erpr et at i on. I n r e Tow erA i r, I

nc. , 397 F. 3d 191, 195 ( 3d C i r. 2 0 0 5 ). B eca us e the D i s t r i ct C our t s at as an appe l l at e courtt o r evi ew t he B ankrupt cy C our t , w e r evi ew t he B ankrupt cy C our t ’s l egal determ i nati on s de novo , i t s fac tual fi ndi ngs for cl earerr or , and its e x e rc is e s o f

d is c re tio n f

o r a b u s e th e re o f
. I

d. II . A n a ly sis7 T he thr es hol d ques t i on i s s im p le : does t he exi s t ence of § 365( d) ( 3) pr ecl ude t he att empt ed us e of § 503( b) ( 1) fort he “s tub r ent ”? I f s o, t he i nqui r y ends t her e. I f not , w e mustt hen det erm i n e w hethert he “s tub r ent ” maybe cons i der ed an a d m in istra tiv e e x p e n se u n d e r § 5 0 3 (b )(1 ). W e a n sw e r “ n o ” to t he fi r s tques t i on and “y es ” t o t he s econd. A . Sect i on 365( d) ( 3) does not preem pt § 503( b) ( 1) S ect i on 36 5(d)(3) of t he B ank rupt cyC od e i m po ses a sp eci al dut yw i t h r es pectt o unexpi r ed l eas es of nonr es i dent i al r e a l p r o p e r t y: T he tru stee s hal l t i m el yper for m al l t he o b lig a tio n s o f

th e d e b to r, ex c e p t those sp e c if ied in s ect i on 365( b) ( 2) , ar i s i ng fr om and aft er t he or der forr el i ef unde ranyunexpi r ed l eas e of n o n re sid e n tial re a l p ro p e rty , u n til su c h lea se is as s um ed orr ej ect ed, not w i t hs t andi ng s ect i on 503( b) ( 1) of t hi s t i t l e. T he cour tm ayext end, for caus e, t he t i m e forp erfor m ance of anys uch o b lig a tio n th a t ar ise s w ith in 6 0 d a y s a f ter th e d a te of the or derforr el i ef, but the ti m e for perf or m ance s hal l notbe ext ended be y ond s uch 60- dayper i od
. T hi s s ubs ect i on s hal l notbe deemed t o aff

ectt he trustee’s obl i gat i ons under th e p ro v isio n s o f s u b se c tio n (b ) o r (f ) o f th is s ect i on. A cce pt ance of anys uch per form an ceG oody ’ s al s o ar gues t hat§ 365 pr ovi des t he exc l us i ve 3 a v e n u e th r o u g h w h ich a d e b to r c a n b e m a d e to p a ylea se re n t. W e r ej ectt hi s ar gum ent for num er ous r eas ons . Fi r s t , w e ar e not c o n f ro n ted w ith le a se re n t; w e a re c o n f ro n ted w ith “ stu b re n t” u n d e r§ 5 0 3 ( b ) ( 1 ) , whi c h ma yo rma yn o tb e t i e d t o t h e actual l ease rat e. S econ d, other provis i on s i n the C od e add res s l eases, d is p e llin g a n y n o tio n th a t § 3 6 5 is e x c lu s iv e h e re . See, e. g. , 11 U
. S. C
. § 503( b) ( 7) ( addr es s i ng l eas es t hatar e as s um ed and then 8 does notcons t i tut e w ai verorr el i nqui s hm entof th e les so r’s rig h ts u n d e r su c h lea se o r u n d e r th is t i t l e. 11 U
. S. C
. § 365( d) ( 3)
. I n Mon t go m ery W

ard , w e i n terpret ed w hatC ongr es s m eant w hen i tr efe r r ed t o “obl i gat i ons of the debt or . . . aris i ng . . . aft ert he or derforr el i ef unde rany unexpi r ed l ease o f n o nr es i dent i al r eal pr oper t y . ” 268 F. 3d at 208. W e det erm i ned thatt he “c l ear an d ex p r es s i nt entof § 3 6 5 (d )(3 ) is to re q u ire th e [ d e b to r] to p e rf o r m th e lea se in acco rdance w i t h i t s t erm s . ” I d. at209. W e thus hel d t hat“an obl i gat i on ar i s es u ndera l eas e fort he purpos es of § 365( d) ( 3) w hen the l egal l yenfor cea bl e dutyto per for m ar i s es undert hat l eas e. ” I d. at211. G oody ’ s ar gues t hatt hi s compl et es t he i nqui r y
— t he r ent w as due on J une 1, 2008, pr i ort o t he pet i t i on dat e, s o i tdi d not need t o p ayfor t he o ccup ancyf ro m Ju n e 9 t o Jun e 30 becau se § 3 6 5 (d )( 3 ) d o e s n o t m a n d a te it. H o w e v e r, Mon t go m ery W

ard 3rej ect ed). T hird , b e cause § 36 5(d)( 3) does n ot address re sid e n tial le a se s, G o o d y ’s in ter p re ta ti o n w o u ld im p lyth a t a debt orcoul d o cc u p yreside n ti al real p rop ertyp ri o r t o assu m p t i on orrejecti on, l eavi ng no § 503( b) ( 1) r emedyfora l andl or d. Fi nal l y , G oody ’ s at t empt t o i nvoke ex p re ss io u n iu s e st ex c lu sio al t er i us (to e x p re ss o n e th in g is to e x c lu d e th e o th e rs) f a ils to su p p o rt th e e x c lu siv it y o f § 3 6 5 ( d ) ( 3 )

— h e r e , C o n g r e s s e x p re ss ly p rese rve d o ther righ ts un d er the C o d e in th e tex t of § 3 6 5 (d)(3 ). 9 cons i der ed onl yt he debt or ’ s obl i gat i ons under§ 365( d) ( 3) and n o t, as is asse rt ed h ere , it s o b li g ati o n s u n d er § 5 0 3 (b)(1 ). G oody ’ s i s notr equi r ed under§ 365( d) ( 3) t o m ake good on the Ju n e 1 , 2 0 0 8 , p re -p e tit io n o b lig a tio n , b u t Mon t go m ery W

ardd id notad d ress post - pet i t i on obl i gat i ons under§ 503( b) ( 1) of a debt orar i s i ng fr om actual occupa ncyi ndepende ntof the l eas e. W e tur n t o t hi s ques t i on. S e c tio n 5 0 3 (b )(1 ) is s p e c if ica llym e n tio n e d in § 3 6 5 (d )(3 ). T h e p ro v isio n im p o se s th e d u ties d is c u ss e d in Mon t go m ery W

ard“notw it h sta ndi ng s ect i on 503( b) ( 1) of [the B an k rup tcyC o d e].” 1 1 U
. S
. C
. § 3 6 5 (d)(3 ). T h e k ey w o rd h ere i s “notw i t hs t andi ng. ” I tm ea n s “i n s pi t e of” or“w i t hout pr event i on orobs t ruct ion fr om orby
. ” W ebs t er ’s Thi r d N

ew I nt ’ lD i ct i onar

y 15 45 (1971 ). In this con t ext, § 3 65 (d) (3) i s best under s t ood as an exc ept i on t o t he gene r al pr o ce d u r es of § 5 0 3 ( b ) ( 1 ) t h a to r d i n a r i l y a p p l y. Post
- pet i t i on obl i gat i ons ar e or di nar i l ygi ven paym ent10 pri ori t yas adm i nis t rat i ve ex pen ses, t ho ug h such clai m s m ust still go t hroug h s t and ard proced ures of noti ce and a heari ng to demonst r at e thatt he cos t s w er e ac tual , n ec ess aryexpens es of p re s e rv in g th e e s ta te
. See 11 U
. S. C
. § 503( b) ( “A ft ernot i ce a nd a h e a ri n g , th e re s h a ll b e a llo w e d a d m in is tr a tiv e e x p e n s e s , . . . i ncl udi ng . . . t he ac tual , nece s s arycos t s and expe ns es of preserving t he est at e. ”). S ect i on 36 5(d)( 3) operat es t o d i spense w i t h t hes e r equ ir em ent s forpos t - pet i t i on obl i gat i ons underan u n e x p ire d lea se o f

n o n re sid e n tial re a l p ro p e rty , m e a n in g it f u n c t i o n s “ w i t h o u tp r e v e n t i o n o ro b s t ru c t i o n f r o m o rb y” § 503( b) ( 1)
. T hi s i s es s ent i al l yourhol di ng i n Mon t go m ery W ard
. Re l i e v i n g a l a n d l o r d u n d e r§ 3 6 5 ( d ) ( 3 ) o f b u r d e n s o me admi ni s t r at i ve pr ocedur es , how ever , does notfor ecl os e that lan d lo rd ’ s a b ili tyto u se th e m o re b u rd e n so m e p ro c e d u re s to r ecove ri n sit u ati ons out s i de the s cope of § 365( d) ( 3)
. Put sim p ly , § 3 6 5 (d )(3) d o es n o t sup p lant o r pre em p t § 5 0 3 (b)(1 ). T he l as t s ent ence of § 365( d) ( 3) m akes t hi s pl ai n: “A cce pt ance o f a n ysu c h p e rf

o rm a n c e [ u n d e r § 3 6 5 (d )(3 )] d o e s n o t co n stitu te w ai ver or r el i nq uis hm ent of the l essor ’s ri gh t s un der such lease o r u n d e r [ t h e B a n k ru p t c y C o d e ]
. ” 1 1 U. S
. C
. § 3 6 5 ( d ) ( 3 )
. By acc ept i ng t he J ul y1, 2008, p ay m entfr om G oody ’ s , t he L andl or ds di d not gi ve up anyot herr i ght s undert he B ankrupt cy C o d e , inc lu d in g th o se a c c o rd e d b y § 5 0 3 (b )(1 ). In d e e d , itw o u ld putl es s or s i n an aw kw ar d pl ace i f, w hi l e debt or s w er e r equi r ed t o p a y t h e m o n t i me p u r s u a n t t o § 3 6 5 ( d ) ( 3 ) , a c c e p t i n g s uch a p a ym e n t se rv e d a lso to d e p riv e les s o rs o f th e b a lan c e o f

th e ir11 r i ght s undert he C ode. T he t extof § 365( d) ( 3) i s cons i s t ent w i t h t he C onfer ence R e p o rt e x p la in in g th e p ro v isio n , w h ich w e re f e re n c e d in Mon t go m ery W

ard
. See 2 6 8 F .3 d a t 2 1 0

– 1 1 . W e sp e c if ica lly r efe r r ed t o t he s t at ement s of Senat or O r r i n H at ch, a conf er ee on th e o rig in a tin g a c t: T hi s s ubt i t l e cont ai ns thr ee maj ors ubsta nt i ve pr ovi s i ons w hi ch ar e i nt en d ed t o r emedys er i ous p ro b lem s c a u se d sh o p p in g c e n ter s a n d th e ir s ol ventt enant s byt he admi ni s t r at i o n of the bankrupt cycode.
. . . A s econd a nd r el at ed pr obl em i s t hatdur i ng t he t im e the debtorhas vacated s pace b u t h a s n o t y e t d e c id e d w h e th e r to as s um e orr ej ectt he l eas e, t he trus t ee ha s s t opped m a k in g p a ym e n ts du e u n d e r th e lea se . . . . In th is s i tuat i on, t he l andl or d i s for ced t o pr ovi de curr ent ser vices— th e use of

i t s property , uti l i t i es, s ecur i t y , and others ervi ces
— w i t houtcurr ent paym ent
. N o ot hercr edi t or i s puti n t hi s pos i t i on. In addit i on , t he o t her t enan t s o ft en m usti ncrease th e ir c o m m o n a rea charge p a y m e n ts to compensa t e fort he trus t ee’ s fai l u re t o m ake the re q u ire d p a ym e n ts f

o r th e d e b to r. T h e b ill w o u ld les se n th e se p ro b lem s b y re q u irin g th e tru s te e to p erf o rm all the o b li g ati o n s o f th e d e b to r u n d er a l e a s e o f n o n r e s i d e n t i a l r e a l pr op e r t ya tt h e t i me12 r equi r ed i n t he l eas e. T hi s ti m elyper for m ance r equi r ement w i l l [e] ns ur e t hat debt or - t enant s pay t hei rr ent , comm on ar ea, and otherchar ges on t i m e pendi ng t he t rus t ee’ s as s um pt i on orr ej ect i on of the l eas e. H .R . C o n f. R e p . N o . 9 8 -8 8 2 (1 9 8 4 ), 9 8 th C o n g . , 2 d S e s s ., re p rin tedin 1 9 8 4 U
. S
. C
. C
. A
. N
. 5 7 6 , 5 9 8

– 9 9 (em p h asis ad d ed ). T he s t at ement s uppor t s ourconcl us i on that § 365( d) ( 3) does not covert he s i tuat i on i n ourcas e. G oody ’ s nevervac ated the space. O n the con t rary , i tcon t i nu ed to occu pyt he L and l ords’ pr oper t i es t o conducts t or e- cl os i ng s al es . T h e p u rpos e of § 3 6 5 ( d ) ( 3 ) i s t o p r o t e c tl a n d l o r d s f r o m th e b u r d e n s o me r equi r ement s of § 503( b) ( 1) i n s ecur i ng paym entfr om nonoccupy i ng debt or s ; i t w oul d be per ver s e i ndeed t o concl ude that it th e n p re c lu d e d th e u s e o f § 5 0 3 (b )(1 ) to se c u re “ stu b re n t” from a deb t or actuall yoccu py i ng t he p rem i ses. W hen a de bt oroccupi es pos t - pet i t i on non -r es i dent i al s pace i tl eas es , t hat § 365(d) ( 3) pr ovi des w hen the r ent obl i gat i on ar i s es does noter as e w hen l es s or s m aym ake § 503( b) ( 1) cl ai m s for t he val ue conferr ed post

- pet i t i on byt hat o c c u p a n c y . W e th u s c o n c lu d e th a t th e L a n d lo rd s m a ya ss e rt a § 5 0 3 (b )( 1 ) c la im f

o r “ s tu b re n t.” B . D ebt ors ’ occupancy of t he l eas ed prem i s es w as a n a ctu a l an d n ec essa ry b en efit t o th e e stateA d m inistrati v e e x p en ses, i n clud ing the “ ac tual, n ec essa ry 4 cos t s and expe ns es of pr es ervi ng t he es t ate,” m aybe al l ow ed aft ernot i ce and a hear i ng. 11 U
. S. C
. § 503( b) ( 1)
. T her e i s no di s put e thatnot i ce a nd a hea r i ng occurr ed her e. 13 A s § 5 0 3 (b )(1 ) is a v a ilab le to th e les so rs h e re , w e tu rn to w hethert he “s tub r ent ” i s an admi ni s t r at i ve exp en se under 4 § 5 03 (b) (1)
. W e beli eve iti s. For a comm er ci al l es s or ’ s cl ai m t o getadmi n ist rat i ve expens e tr eatm entunder§ 503( b) ( 1) , the debt or ’ s occupa ncyof th e lea se d p re m ise s m u st c o n f e r a n a c tu a l an d n e c e ss a ryb e n e f it to th e d e b to r in th e o p e ra tio n o f its b u s in e s s . See C al

pi ne C or p. v. O ’ B r i en Envt l

. E ner

gy, Inc

. (

In r e O ’ B r i en Envt l

. E ner

gy, In c .) , 1 8 1 F
. 3 d 5 2 7 , 5 3 2

– 3 3 (3d C ir
. 1 9 9 9 ) ( ci ti n g C ra m erv. Ma m m o th Ma r t, In c . (In r e M a m m o th M

a r t, I n c .) , 536 F. 2d 950, 9 5 4 (1 s t C ir
. 1 9 7 6 ))
. P ro v in g th is is th e le s s o r’ s b u rd e n . I d. at 533. T hus , t he Landl or ds “must
. . . carr yt he hea vybur den of demonst r at i ng t hatt he [‘ s tub r ent ’ ] forw hi ch [they ] s eek[ ] paym entpr ovi ded an a ctu al bene fi tt o t he es t at e and that [i ncurr i ng ‘ s tub r ent ’ w as ] nece s s ary t o pr es erve t he val ue of t he es t at e as s et s . ” I

d. (cit ati o n o m itted). W e l ook t o t he M

a m m o th Ma rt tes t w e a d o p ted in O ’ B r i en , an d n o te th a t “[ w ]h e n th ird p a r ti e s a re in d u c e d to su p p ly g o o d s o r se rv ice s to th e d e b to r-in -p o ss e ss io n p u rsu a n t to a contr a c tt h a th a s n o tb e e n r e j e c t e d , t h e p u rp o s e s of [admi ni s t r at i v e clai m s ] pl ai nl yr equi r e thatt hei rcl ai m s be14 affor ded pr i or i t y . ” In re M am m oth M

art , 5 3 6 F
. 2 d at 95 4
. In contr as t , w hen t he contr acthas been f ul l yper for m ed pr i ort o t he p e tit io n d a te, it is n o lo n g e r e x e c u to rya n d th u s n o t e n tit led to paym entpr i or i t yas an admi ni s t r at i ve expe nse. I n ourcas e, G oody ’ s has cont i nued t o occupyt he pr emi s e s pos t - pet i t i on, and i ti s at t empt i ng t o do s o w i t hout pr ovi di ng anypos t - pet i t i on cons i der at i on t o t he L andl or ds w ho w er e s t i l l pr ovi di ng s ervi ces forthe pr emi s es i n t he t i m e pr i ort o r ej ect i on. T hi s i s s i m i l ar , t hough notdi r ect l yanal o g o us , t o t he s i tuat i on i n Za g a ta , w her e w e hel d t hat“[a ] ta mi ni m um , [a cr edi t or ] i s . . . en ti tl ed t o a r eas onabl e val ue fort he us e and occupa ncyof i t s l and as an admi ni s t r at i ve cost unders ect i on 503 of the B an k rup tcyC ode. ” Za g a ta Fa b ric a to rs v . Su p e rio r A ir P rods. , 8 9 3 F .2 d 6 2 4 , 6 2 7

– 2 8 (3 d C ir. 1 9 9 0 ). A lth o u g h it a d d re s s e d a n e x p ir e d le a s e , Za g a ta su p p ort s that the D ebtor s’ re tain in g p o s s e ss io n o f th e p re m ise s, th e re b yin d u c in g p o stpet i t i on s erv i ces fr om t he Landl or ds , i s s uffi ci entundert he O ’ B r i en a nd Mam m oth M arti nqui r i es t o be a tr ans act i on j us t i fy i ng admi ni s t r at i ve pr i or i t y . T hi s acc or ds w i t h t he appl i cat i on of Za g a ta in th e B a n k ru p tcy C o u r ts o f o u r C irc u it. See I n r e D V I , I nc. , 308 B
. R
. 703, 707–08 ( B ankr
. D
. D el
. 2004) ( “A l andl or d i s ent i t l ed t o an admi ni s t r at i ve cl ai m i n t he amount o f th e f air m ark et v alue o f th e p rem ises w h en a d eb tor occupi es an d u ses th e m p o st-p e tit io n .” (e m p h a sis a d d e d )); I n r e ZB C o. , 3 0 2 B .R . 3 1 6 , 3 1 9 (B a n k r. D . D e l. 20 0 3 ) (“ It is be y o n d d isp u te t hatal l of the D ebt or s ’ l andl or ds w hos e pr oper t i es ar e occupi ed and us ed p o s t- p e titio n h a v e v a lid a d m in is tr a tiv e c la im s .”15 (e m p h a sis a d d e d )); I

n r e H Q G l obalH

oldi ngs , I

nc. , 2 8 2 B. R. 169, 173 ( B ankr
. D
. D el
. 2002) ( “A l es s ori s gener al l yent i t l ed to a n a d m in istra tiv e c la im u n d e r se c tio n 5 0 3 (b ) f o r th e f a ir r e n t a l v a l u e o f

t h e l e s s o r ’ s p r o p e r t y act ual l y us ed b yth e d e b to r.” (e m p h a sis a d d e d )); cf

. I n r e U ni digi t al , I nc. , 262 B
. R
. 283, 288 (B a n k r. D
. D e l. 2 0 0 1 ) (u n e x p ire d lea se o f e q u ip m e n t so u g h t to be a b a n d o n e d wi t h n o c o n t i n u i n g u s e t h e r e o f d eni ed a d m in istra tiv e p rio ri ty ); I n r e Pi nnacl e Brands , I nc. , 2 5 9 B. R. 4 6 , 5 1

– 5 2 ( Ba n k r . D. Del
. 2 0 0 1 ) ( d e n y i n g a d mi n i s t r a t i ve pr i or i t ybeca us e i ndemni fi cat i on, t hough undera pr e- pet i t i on c o n tr a c t, is n o t an o n g o in g a c tu a l u se o f se rv ice s); I

n r e Mi dA m . W as t e Sys

. , I

nc. , 228 B
. R
. 816, 821 ( B ankr
. D
. D el
. 1999) (sam e). A l t hough m er e occ upancyi s notal w ay s an actual and nece s s aryexpens e thatbenefi t s an es t at e, t her e ca n be no r eas onabl e di s put e thatt he occ upat i on of the l eas ed prem i s es her e conf

err ed a be nefi t
. G oody ’ s obt ai ned a be t t ert han 105% r ecove r yfr om t he s t or e- cl os i ng s al es , and thes e s al es w er e an i nt egr al par tof the bankrupt cy pr ocee di ngs . T he s al es r equi r ed a phy s i cal venue, and r emai ni ng i n exi s t i ng pr emi s es w as j us tas nece s s aryand bene fi ci al t o t he es t at e as l eas i ng new pr emi s es s p e c i f i c a l l yf o rs t o r e - c l o s i n g s a l e s . I n d e e d , Go o d y ’ s o wn con du cti nd i cat es that i tsaw the oc cup at i on of the L and l ords’ pr emi s es as a nec es s aryexpens e w hen i t char ged ( and col l ect ed from ) i t s l i qu i dati on agen t“actual [o]ccupan cy[e]xpen ses” equal t o p e rd i e m r entpur s uantt o t he s t or e cl os i ng agr eement a p p r o v e d b yth e B a n k ru p tc yC o u rt
. See A pp. 937, 977–78. It16 w oul d be i l l ogi cal t o al l ow G oody ’ s t o col l ectthe equi val entof “s tub r ent ” fr om i t s l i qui dat i on agent , butnott o r equi r e paym ent t o the L and l ords of “stub rent ” as “necessaryexp enses. ” T hu s, t he Landl or ds ar e ent i t l ed t o a r eas onabl e “stub re nt ” as an actual and nec es s aryexpens e fort he bene fi tof the es t at e. * * * * * T he La n d lords ar e ent i t l ed t o r ece i ve paym entunder B ankrupt cyC ode § 503( b) ( 1) for us e of thei rnonr es i dent i al r eal pr oper t y dur i ng t he s tub per i od of J une 9–J u n e 3 0 , 2008. Sect i on 365( d) does not pr eempt § 503 i n t hi s reg ard
. T he j udgm entof the D i s t r i ctC our ti s aff i r m ed.