# U ni te d S ta te s B an kr up tc y A pp el la te P an el For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _
No. 1 4- 60 16

__ __ __ __ __ __ __ __ __ __ __ __ __ _
In re: Sy lv a Co rp or at io n, In c.

ll ll ll ll ll ll ll ll ll ll l Deb to r

----- ----- ----- ----- ----- -----
GE Cap it al Co m

m erci al , Inc

.

ll ll ll ll ll ll ll ll ll ll l

Mov an t - Ap

pe ll an t

v.

Sy lv a Co rp or at io n, In c.

ll ll ll ll ll ll ll ll ll ll l Deb to r - Ap pe ll ee

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s B an kr up tc y Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __
Su bm it te d: Octo be r 28 , 21 04 Fi le d: Nov em

be r 26 , 20 14

__ __ __ __ __ __
Befo re FEDERMAN, Ch ie f Ju dg e, SALADINO and SHODEEN, Ban kr up tc y Ju dg es

.

__ __ __ __ __ __
SALADINO, Bank ru pt cy Ju dg e.The App el la nt , GE Cap it al Co m m erci al
, In c. (“ GE Ca p i t al ”), ap pe al s th e de ci si on of th e ba nk ru pt cy co ur t de nyin g it s m ot io n fo r al lo w a n c e of an ad m in is tra ti ve ex pe ns e cl ai m fo r un p a i d l eas e ob li ga ti on s ag ai ns t th e Deb to rApp el le e, Sy lv a Co rp or at io n, In c. (“ Sy lv a”). Fo r th e reas on s se t f o r th be lo w, we

rev ers e an d re m an d fo r fu rth er p ro ceed in gs

.

FACTUAL BACKGROUND

The pa rti es are in ag reem en t on th e pe rti ne nt fact s ap pl ic ab le to th is ap pe al

. 1

In Nov em be r 20 07
, Sy lv a en te red in to a “ Lift Leas e Agr eem en t” wit h a pr ed eces so r
to GE Cap it al fo r th e le as e of cert ai n eq ui pm en t us ed in Sy lv a’s bu si ne ss op erat io n. 2
The le as e was fo r an in it ia l te rm of 60 m on th s, ex pi rin g on Nov em be r 30
, 20 12
, an d

pr ov id ed fo r Sy lv a to m ak e m on th ly le as e pa y m en ts on th e te rm s se t fo rth in th e le as e
ag reem en t.

Para gr a p h 1 1 o f th e le as e ag reem en t ga ve Sy lv a th e op ti on to pu rch as e th e
eq ui pm en t du rin g th e le as e te rm or up on ex pi rat io n of th e in it ia l te rm by co m pl y in g wit h th e sp eci fic te rm s co nt ai ne d in th at pa rag rap h. Sy lv a di d no t d o s o

. P a rag rap h
23 of th e le as e ag reem en t ga ve Sy lv a th e rig ht to te rm in at e th e le as e ag reem en t up on

ex pi rat io n of th e in it ia l te rm by gi vi ng no ti ce an d ret ur ni ng th e eq ui pm en t. A g ai n, Sy lv a di d no t do so

. The refo re, p u r s u a n t to Para gr ap h 23
, th e le as e au to m at ic al ly

ren ewed on a m on th -to -m on th ba si s fo ll owi ng th e in it ia l te rm un ti l su ch ti m e as ei th er
pa rty pr ov id ed th e ot he r wit h at le as t 90 da y s’ writ te n no ti ce of it s in te nt to te rm in at e th e le as e ag reem en t. Upo n ex pi rat io n of th e in it ia l te rm on Nov em be r 30
, 20 12
, Sy lv a

Pri or to th e ev id en ti ary he ari ng in ba nk ru pt cy co ur t on Apr il 2 9
, 2 0 1 4
, th e 1
pa rti es fil ed a s t i p u l a t io n of fact s. The fact s in th is se ct io n are ta ke n fro m th at st ip ul at io n a nd fro m

un di sp ut ed po rti on s o f th e rec or d.

The eq ui pm en t co ns is te d of a Ro to ch op pe r Mo de l EC2 66 W oo d Gr i nd er 2 Pro ces so r an d a Su pe rio r Mo de l 2 0X7 0 S ta ck in g C on ve y or

.
-2

-h a d n o t pr ov id ed an y su ch no ti ce to GE Cap it al an d ret ai ne d po ss es si on of th e

eq ui pm en t. Th eref

or e, th e le as e co nt in ue d o n a m on th -to -m on th ba si s.

On Apr il 3, 20 13
, Sy lv a fil ed it s vo lu nt ary pe ti ti on fo r rel ie f un de r Ch ap te r 11
of th e Uni te d St at es Ban kr up tc y Co de in th e D i s t r i c t of Mi nn es ot a. Sy lv a is

co nt in ui ng in po ss es si on of it s pr op ert y an d op erat in g and m an ag in g it s bu si ne ss as a d eb to r-i n- po ss es si on

.

GE Cap it al fil ed it s pr oo f of cl ai m on May 9, 20 13
, sp eci fic al ly id en ti fy in g th e ba si s o f it s cl ai m

as a “ tru e le as e” an d fu rth er as se rti ng :

Thi s is a co nt in ge nt cl ai m ari si ng fro m an eq ui pm en t le as e

ex cep t fo r th os e am ou nt s de si gn at ed as “ Pre- Pet it io n Am ou nt s Due ” be lo w. In th e ev en t th is le as e is reject ed al l

am ou nt s as se rte d he reu nd er be co m e a no n- co nt in ge nt li ab il it y of th e de bt or

. The cl ai m refl ect ed he rei n is

co ns is te nt wit h Cl ai m an t’s po si ti on th at th e co n tra ct s

un de rlyin g t he cla im

are t ru e le as es

. . . .
Sy lv a ha s no t ob

jecte d to GE C a p i t a l ’s p ro of of cl ai m no r ha s it co m m en ced

an ad ve rs ary pr oc eed in g to de te rm in e th e na tu re an d ex te nt of GE Cap it al ’s in te res t in th e eq ui pm en t.

On Octo be r 17
, 20 13
, GE Cap it al fil ed a m ot io n fo r an or de r co m pe ll in g Sy lv a
to as su m e or reject th e le as e ag reem en t an d fo r rel ie f fro m th e au to m at ic st ay or, i n th e al te rn at iv e, gr an ti ng ad eq ua te pr ot ect io n. Sy lv a fil ed it s res po ns e to GE Cap it al ’s

m ot io n a ss ert in g th at th e le as e ex pi red in Decem be r 20 12 an d th at th ere is no le as e in fo rce fo r Sy lv a to as su m e or reject

. Sy lv a as se rte d th at th e is su e sh ou ld be whe th er GE Cap it al is ad eq ua te ly pr ot ect ed
, no t whe th er th e le as e sh ou ld be as su m ed or reject ed

. The ba nk ru pt cy co ur t he ld an in it ia l he ari ng on Nov em be r 13
, 20 13
, an d se t th e m at te r fo r ev id en ti ary he ari ng to tak e p la ce o n F eb ru ary 8, 2 01 4.

-3

-In th e m ean ti m e, on Decem be r 2, 20 13
, Sy lv a fil ed an am en de d m ot io n to se ll

pr op ert y of th e es ta te free an d cl ear of li en s. The pr op ert y su bjec t t o t ha t m ot io n in cl ud ed
, bu t was no t li m it ed to , th e eq ui pm en t th at i s t h e su bjec t of th e le as e
ag reem en t wit h GE Cap it al

. In i t s o b je c ti on to Sy lv a’s sa le m ot io n, GE Cap it al

as se rte d th at Sy lv a is ob li ga te d to co nt in ue m ak in g m on th ly pa y m en ts an d ha d fai le d

to pe rf o rm it s ob li ga ti on s un de r th e te rm s of th e le as e ag reem en t as req ui red by 11 U.S.C. § 3 65

. Oth ers pa rti es in in te res t al so ob jecte d t o t he sa le m ot io n, an d i t was 3
la te r wit hd rawn by Sy lv a.

Pri or to th e sc he du le d hea rin g on GE Cap it al ’s m ot io n to co m pe l as su m pt io n

or reject i o n o f i t s le as e, th e pa rti es en te red in to a se tt le m en t whi ch res ul te d in th e fil in g of a st ip ul at io n wit h th e ba nk ru pt cy co ur t on Feb ru ary 21
, 20 14

. The st ip ul at io n
sp eci fic al ly stat es th at it is fil ed in res ol ut io n o f GE Cap it al ’s m ot io n t o c om pe l t he

as su m pt io n or reject io n of

it s l eas e an d t ha t it is en te red in to by an d be twee n Sy lv a

an d GE C a p i t a l

. The st ip ul at io n co nt ai ns a se ct io n en ti tl ed “ RECITALS,” whi ch

co nt a i n s man y un qu al ifi ed st at em en ts whi ch are di rect ly co nt rary to so m e of th e
po si ti on s ta ke n by Sy lv a in it s fil in gs rel at ed to th is ap pe al

. In pa rti cu la r, th e reci ta ls
id en ti fy th e le as e an d it s te rm s, st at e th at “ GECCI ha s a va li d le ss or ’s in te res t in [th e
eq ui pm en t]”; th at m on th ly ren ta l pa y m en ts fo r Feb ru ary, Marc h, an d Ap ril of 20 13

were du e an d un pa id
, to ge th er wit h sa le s/ us e ta x an d la te fees fo r a to ta l pr e-p et it io n
pa st du e am ou nt as o f th e b an kr up tc y fil in g d at e o f $1 2,7 66 .79

.

The st ip ul at io n ha s a se co nd se c t io n en ti tl ed “ STIPULATION” co nt ai ni ng
pr ov is io ns whe reb y Sy lv a ag reed to ceas e us in g th e eq ui pm en t an d to m ak e th e
eq ui pm en t av ai la bl e fo r recl am at io n by GE Cap it al

. The st ip ul at io n al so co nt ai ne d a
pr ov is io n st at in g th at “ [u ]pon ap pr ov al of th is St ip ul at io n by th e Co ur t, to th e ex te nt

In th is pa rti cu la r fil in g, an d ot he rs in th e ba nk ru pt cy co ur t, GE Cap it al 3

erro ne ou sl y refe rs to 11 U.S.C. § 36 5( B)(5 ) – a se ct io n whi ch do es no t ex is t

. Th is

erro r was co rrec te d in GE Cap it al ’s f i l i n gs on ap pe al
, an d we pr es um e th at th e refe ren ces in th e ba nk ru pt cy co ur t fil in gs were m ean t to be refe ren ces to § 36 5( d) (5 ).

-4

-th e Leas e Agr eem en t rem ai ns in fo rce, Deb to r is au th or iz ed to r e je c t t he Leas e Agr eem en t.” Fi na ll y , th ere is a res erv at io n of rig ht s pr ov is io n whe reb y th e pa rti es
ag ree th at th e st ip ul at io n wou ld be wit ho ut pr ejud ic e to GE Cap it al ’s rig ht to en fo rce ad di ti on al de fau lt -rel at ed rig ht s an d rem ed ie s, in cl ud in g, bu t no t li m it ed to , fil in g of

a m ot io n fo r al lo wan ce of a d mi n i s tra ti ve ex pe ns e. It was al so wit ho ut pr ejud ic e to Sy lv a’s ri gh ts , in cl ud in g t he rig ht to co nt es t an y cla im s m ad e b y

GE Capi ta l.

On Mar ch 4, 20 14
, GE Cap it al fil ed th e un de rlyin g m ot io n fo r ad m in is tra ti ve

ex pe ns e, Sy lv a ob

jecte d, an d th e m at te r was se t fo r ev id en ti ary he ari ng on Apr il 29
, 20 14 . S y lv a ag ai n arg ue d in it s ob jecti on th a t t h e a g r e e ment is no t a tru e le as e, bu t in st ead is a fin an ci ng ag reem en t. The ob jecti on al so in di cat es th at Sy lv a di d act ua ll y

us e th e eq ui pm en t fo r a t ot al of 1 30 ho ur s i n c al en da r y ear 2 01 3.

Pri or to th e ev id en ti ary he ari ng , th e pa rti es ag ai n f i l ed a st ip ul at io n of fact s. The st ip ul at io n in cl ud ed t h e ba ck gr ou nd fact s se t fo rth in th e pr io r st ip ul at io n
reg ard in g GE C ap it al ’s m ot io n to ass um e o r reject , des cri be d t he ev en ts le ad in g up
to Sy lv a’s co nf

irmed pl an , an d sp eci fic al ly pr o v i d ed th at “ [t]he Leas e Agr eem en t be twee n Deb to r an d G EC C I w a s reject ed by th e Deb to r on Apr il 1, 20 14 .” Thi s
st ip ul at io n d id no t i nc lu de a res erv at io n o f ri gh ts

.

BANKRUPTCY

COURT DECISI

ON

An ev id en ti ary he ari ng was he ld on G E Cap it al ’s m ot io n fo r ad m in is tra ti ve

ex pe ns e an d th e res is ta nc e of S yl v a o n Apr il 29
, 20 14
, an d th e ba nk ru pt cy co ur t

su bs eq ue nt ly iss ue d i ts ora l ru li ng de nyin g th e m ot io n fo r ad m in is tra ti ve ex pe ns es

. In it s ru li ng , th e ba nk r u p t c y co ur t ex pr es sl y st at ed th at it wou ld on ly an al y ze th e

m ot io n un de r § 50 3( b) (1 )(A) an d wou ld “ no t m ak e an y de te r mi n a t i on s ab ou t an ad m in is tra ti ve ex pe ns e cl ai m un de r 36 5( d) (5 )

. . . .” As a res ul t, th e ba nk ru pt cy co ur t de te rm in ed th at GE Cap it al ha d th e bu rd en to pr ov e by a pr ep on de ran ce of th e

ev id en ce th at th e es ta te rece iv ed a t a n g i b l e b e n efi t fo r th e us e of th e eq ui pm en t.

-5

-Ult im at el y , th e co ur t de te rm in ed th at GE Cap it al ha d fai le d to m eet it s bu rd en of

pr oo f an d d en ie d i ts m ot io n fo r an ad m in is tra ti ve ex pe ns e cl ai m

.

ST ANDARD OF

REVIEW

Here, th e ba nk ru pt cy co ur t’s fact ua l fin di ng s are no t at is su e. Rat he r, th e is su e is whe th er th e b a n k r up tc y co ur t pr op erl y ap pl ie d an d in te rp ret ed th e ap pr op ria te

st at ut e. Su ch a de te rm in at io n is rev ie wed de no vo

. W eg ne r v. Gru ne wa ld t , 82 1 F.3 d
13 17
, 13 20 (8 th Ci r. 19 87 ); Pummi ll v. Gre en sf el de r, Hemker & Gal e (In re Rich ar ds
& Co no ver

St eel Co .) , 26 7 B .R. 60 2, 6 09 (B.A.P. 8t h C ir. 2 00 1)

.

DIS CUS SI ON

The qu es ti on pr es en te d in th is ap pe al is whe th er th e ba nk ru pt cy co ur t erre d in

an al y zi ng GE Cap it al ’s m ot io n fo r de te rm in at io n of ad m in is tra ti ve ex pe n s e u si ng

on ly th e le ga l st an da rd s an d ev id en ti ary bu rd en s un de r 11 U.S.C. § 50 3( b) (1 )(A)
in st ead of th os e u nd er 1 1 U.S.C. § 36 5( d) (5 ). In it s m ot io n t o t he ba nk ru pt cy co ur t,
GE Cap it al req ue st ed al lo wan ce as an ad m in is tra ti ve ex pe ns e th e le as e pa y m en ts du e

un de r th e le as e ag reem en t fo r th e pe rio d fro m th e da te of ba nk ru pt cy fil in g un ti l th e d a t e th e le as e ag reem en t was reject ed
, pl us at to rn ey s’ fees an d ex pe ns es rel a t e d t o recl ai m in g th e eq ui pm en t. To com pl ic at e m at te rs , GE Cap it al as se rte d in it s m ot io n th at it was en ti tl ed t o t h e ad m in is tra ti ve ex pe ns e cl ai m un de r bo th § 36 5( d) an d § 50 3( b)

. The le ga l st an da rd s an d bu rd en s un de r th os e two se ct io ns are qu it e

4
di ffer en t, an d th e ba nk ru pt cy co ur t ex pr es sl y el ect ed to an a l yz e th e m ot io n un de r § 50 3( b) rat he r th an § 36 5( d) (5 ). Thu s, we m us t de te rmi n e w he th er th e ba nk ru pt cy

co ur t er red in do in g s o.

Fo r go od m eas ur e, GE Cap it al al so th rew in § 10 5( a), th e pr ov is io ns of whi ch 4 do no t co m e in to pl ay

in th is ap pe al

.
-6

-G E C a p it al arg ue s th at th e ba nk ru pt cy co ur t sh ou ld ha ve ap pl ie d th e l e g a l

st an da rd s an d b ur de ns un de r § 3 65 (d )(5 ), whi ch pro vi de s as fol lo ws:

The tru st ee sh al l t i m el y pe rfo rm al l of th e ob li ga ti on s of th e de bt or , ex cep t th os e sp eci fie d in se ct io n 36 5( b) (2 ), fir st ari si ng fro m or aft er 60 da y s aft er th e or de r fo r rel ie f in a c a s e u nd er ch ap te r 11 of th is ti tl e un de r an

un ex pi red le as e of pe rs on al pr op ert y (o th er th an pe rs on al
pr op ert y le as ed to an in di vi d u a l pr im ari ly fo r pe rs on al
, fam il y , or ho us eh ol d pu rp os es ), un ti l su ch le as e is as su m ed

or reject ed no twi th st an di ng sec ti on 50 3( b) (1 ) of th is ti tl e,

un le ss th e co ur t, af

te r no ti ce an d a he ar in g a nd ba se d on th e e q u i t ie s of th e ca se , or de rs ot he rw is e wi th re sp ect to th e o bl ig at io ns or

ti mely pe rf

or man ce t he re of

.
(Em ph as is ad de d.)

N ex t, GE Cap it al arg ue s th at du e to a rel at iv e la ck of co nt ro ll i n g l a w in te rp ret in g § 36 5( d) (5 ), we sh ou ld fo ll ow th e sa m e an al y si s th e Eig ht h Ci rcu it Co ur t of App eal s ha s es ta bl is he d fo r in te rp ret in g § 36 5( d) (3 ). W it h a co up le of si gn ifi can t

ex cep ti on s, § 36 5( d) (5 ) is ve ry si m il ar t o § 36 5( d) (3 ), whi ch pro vi de s:

The tru st ee sh al l t i mely pe rfo rm al l th e ob li ga ti on s of th e de bt or , e xc ep t th os e sp eci fie d in se ct io n 36 5( b) (2 ), ari si ng f r o m an d aft er th e or de r fo r rel ie f un de r an y

un ex pi red le as e of no nr es id en ti al real pr op ert y , un ti l su ch le as e is as su m ed or reject ed
, no twi th st an di ng se ct io n 50 3( b) (1 ) of

th is ti tl e.

The op erat iv e la ng ua ge of bo th se ct io ns is pr eci se ly th e sa m e: “ Th e t r u s te e

s h a l l t i mely pe rfo rm al l th e ob li ga ti on s of th e de bt or

. . . un de r an [an y ] un ex pi r e d
le as e

. . . u nt il su ch le as e is as su m ed or r eject ed , no twi th st an di ng sec ti on 50 3( b) (1 )

-7

-of th is ti tl e.” Bo th s e c ti on s req ui re th e tru st ee (o r de bt or -in -p os se ss io n) to ti m el y 5

pe rfo rm al l po st -p et it io n ob li ga ti on s of th e de bt or un de r un ex pi red le as es un ti l su ch

t i m e as th e le as e is as su m ed or reject ed

. The re are, ho wev er, so m e di ffe r e n c e s

. Sect io n 36 5( d) (3 ) de al s w ith une xpi re d le as es of nonres id en ti al real pr op ert y , whe reas § 36 5( d) (5 ) de al s w i t h un ex pi red le as es of pe rs on al pr op ert y

. The ob li ga ti on to

pe rfo rm in § 36 5( d) (5 ) be gi ns “ fro m or aft er 60 da y s aft er” ba nk ru pt cy fil in g, whe reas th e ob li ga ti on i n § 3 65 (d )(3 ) be gi ns “ fro m an d aft er” th e or de r fo r rel ie f. Fi na ll y , §
36 5( d) (5 ) co nt ai ns an im po r t a n t e xc ep ti on to th e pe rfo rm an ce ob li ga ti on si nc e it

co nc lu de s with th e cl au se “ un le ss th e co ur t, aft er no ti ce and a he ari ng an d bas ed on th e eq ui ti es of t he cas e, or de rs ot he rwis e . . . .”

Rel y in g on an Eig ht h Ci rcu it cas e in te rp ret in g § 36 5( d) (3 ), GE Cap it al as se rts , bo th in it s m ot io n to th e ba nk ru pt cy co ur t an d in th is ap pe al
, th at it is “ au to m at ic al ly”

en ti tl ed to an ad m in is tra ti ve ex pe ns e cl ai m fo r th e po st -p et it io n ren t th at be cam e du e. In Bur iv al v. Roe hr ic h (

I n r e Bu r iv al

)
, 61 3 F.3 d 81 0 (8 th Ci r. 20 10 ), th e Eig ht h
Ci rcu it Co ur t of App eal s ha d th e op p o r t u n it y to in te rp ret a le ss or ’s rig ht to an ad m in is tra ti ve ex pe ns e cl ai m un de r 11 U.S.C. § 36 5( d) (3 ). In th at cas e, th e ap pe ll an ts

arg ue d th at th e la nd lo rd was no t en ti tl ed to an ad m in is tra ti ve ex pe n s e pr io rit y fo r
po st -p et it io n, p re-r eject io n l eas e p ay m en ts un de r th e Ban kr up tc y Co de . The Ei gh th
Ci rcu it di sa gr eed , st at in g:

To th e co nt rary, § 36 5( d) (3 ) cl ai m s ha ve pr io rit y st at us

. Sect io n 36 5(d) (3 ) ex pr es sly pr ee m pts subs ec tio n 503( b) (1 ), bu t no t th e in tro d u c to ry au th or iz at io n of “ ad m in is tra ti ve

ex pe ns es ” in § 50 3( b)

. The ad m in is tra ti ve ex pe ns es li st ed in th e su bs ect io ns of § 50 3( b) – pr eced ed by “ in cl ud in g”

–
are no t ex cl u s i v e. Se e 11 U.S.C. § 10 2( 3) (in th e ba nk ru pt cy co de
, “ in cl ud in g” is no t li m it in g)

. Bec a us e §

11 U.S.C. § 11 07 (a) st at es th at wit h cert ai n ex cep ti on s no t ap pl ic ab le he re, a 5 de bt or -in -p os se ss io n sh al l hav e al l of the rig ht s, po wers , an d du ti es of a Ch ap te r 11
tru st ee.

-8

-36 5( d) ( 3) cl ai m s ha ve a st at us at le as t eq ua l to a cl ai m

un de r su bs ect io n 50 3( b) (1 ), th e BAP co rrec tl y ap p ro ve d Pri tc he tt ’s c l ai m as an ad m in is tra ti ve ex pe ns e. In re Pac if ic -Atl an ti c Tr ad in g C

o. , 27 F.3d at 4 05

.

61 3 F .3d at 8 12 -1 3.

W hi le we ag ree wit h GE Cap it al th at th e op erat iv e la ng ua ge of § 36 5( d) (3 ) an d (d )(5 ) are si m il ar eno ug h th at cas es un de r § 36 5( d) (3 ), su ch as Bur iv al
, are rele va nt

to pr ov id e gu id an ce to a co ur t in te rp ret in g a si tu at io n un de r § 36 5( d) (5 ), th ey are no t

ne ces sa ril y “ au to m at ic ” or d i s p o s i ti ve

. In st ead
, whe n ap pl ie d to a si tu at io n un de r § 36 5( d) (5 ), th e Eig ht h Ci rcu it ’s an al y si s in Bur iv al is a st art in g po in t th at is su bjec t

to th e ex cep ti on s an d qu al ifi cat io ns fo un d i n § 3 6 5 ( d ) (5 ) an d no t in § 36 5( d) (3 )

–

na m el y th e 60 -d ay ex cl us io n an d th e ex cep ti on ba se d on th e eq ui ti es of th e cas e. Se e CIT C ommc’ ns Fin

. Co rp

. v. Mid wa y Air li ne s C

or p. (I n r e Mid wa y) , 40 6 F .3d 22 9,
23 4 (4 th Ci r. 20 05 ) (s ta ti ng th at in co ns tru in g § 36 5( d) (1 0) [n ow § 36 5( d) (5 )], co ur ts of te n l oo k t o d eci si on s co ns tru in g § 36 5( d) (3 )).

Here, th e ba nk ru pt cy co ur t ex pr es sl y de c l i n e d to co ns id er th e m at te r un de r § 36 5( d) (5 ). Howev er, we no te th at GE Capi ta l ex pr es sl y arg ue d i n i ts m ot io n th at 6
it was en ti tl ed t o a n a d m in is tra ti ve ex pe ns e cl ai m un de r § 36 5( d) (5 ) fo r th e po st

pe ti ti on ren t pa y m en ts , whi ch is a po si ti on it ha s co ns is te nt ly ta ke n th ro ug h o u t t h e ba nk ru pt cy

cas e. Fo r ex am

pl e, it s p ro of of cl ai m cl earl y as se rte d it s rig ht s u nd er i ts le as e as a “ tru e le as e.” On Octo be r 1 7
, 2 0 1 3
, GE Cap it al fil ed a m ot io n to co m pe l,

Sp eci fic al ly, th e ba nk ru pt cy co ur t st at ed “ I do no t m ak e an y de te rm in at io ns 6 ab ou t an adm in is tra ti ve ex pe ns e cl ai m un de r 36 5( d) (5 ) be cau se [an at to rn ey fo r GE Cap it al ] arg ue d th at th e co nf li ct in g cas e la w un de r 3 6 5 ( d ) ( 5) is irr el ev an t he re be cau se GECC c o u l d n’t sa ti sf y th e req ui rem en ts of 50 3( b) (1 )(A).” W e are no t

en ti rel y cl e a r a s t o w hy th e ba nk ru pt cy co ur t to ok th at po si ti on si nc e GE Cap it al
rep eat ed ly as se rte d it s cl ai m un de r § 36 5 th ro ug ho ut th e ba nk r u p t c y c a s e , an d we fo un d no su ch arg um en t by GE Cap it al on th e reco rd to th e effe ct th at § 36 5( d) (5 ) is irr el ev an t.

-9

-am on g ot he r th in gs , as su m pt io n or reject io n of it s le as e an d de m an de d pe rfo rm an ce of Sy lv a’s ob li ga ti on to pa y th e po st

- p e t i ti on ren t pa y m en ts un de r § 36 5. On
Decem be r 6, 20 13
, GE Cap it al ob jecte d to Sy lv a’s m ot io n to se ll
, ag ai n as se rti ng it s rig ht to be pa id it s le as e pa y m en ts

. In Feb ru ary 20 14
, Sy lv a an d GE Cap it al en te red
in to a st ip ul at io n res ol vi ng GE Cap it al ’s m ot io n t o as su m e or reject
, in whi ch GE Cap it al ex pr es sl y res erv ed it s rig ht to se ek an ad m in is tra ti ve ex pe ns e cl ai m

. Fi na ll y , GE Cap it al di d i n fa ct fil e a m ot io n s eek in g a n a dm in is tra ti ve ex pe ns e cl ai m whi ch

res ul te d in th is ap pe al

. Thu s, th e writ te n reco rd su pp or ts GE Cap it al ’s req ue st th at it s

m ot io n b e co ns id ered un de r§ 36 5. 7

W e no te , a s d i d t h e ba nk ru pt cy co ur t, th at th e bu rd en of pr oo f un de r §
50 3( b) (1 ) is on th e cl ai m an t se e ki ng an ad m in is tra ti ve ex pe ns e cl ai m

. W il li ams v. IMC Mor tg

. Co

. (In re W

il li ams )
, 24 6 B.R. 59 1, 59 4 (B.A.P. 8t h Ci r. 19 99 ). Howev er,

un de r § 36 5( d) (5 ), th e en ti tl em en t to th e ad m in i s t rat iv e ex pe ns e cl ai m is au to m at ic

un le ss th e de bt or or ob

jecti ng pa rty ca n sh ow th at th e co ur t sh ou ld or de r ot he rwis e ba se d on th e eq ui ti es of th e cas e. CIT Co mmc’n s Fin

. Co rp

. v. Mid wa y Air li ne s Co rp

. ( In re Mid

wa y)
, 40 6 F.3 d 22 9, 24 0- 24 1 (4 th Ci r. 20 05 ) (“ Thi s in te rp r e t a t i o n i s

co ns is te nt wit h th e ov eral l pu rp os e o f § 36 5( d) (1 0) [n ow § 36 5( d) (5 )], whi ch is to ‘shi ft to th e de bt or t h e b ur de n of br in gi ng a m ot io n whi le al lo win g th e de bt or

su ffi ci en t br eat hi ng ro om aft er th e ba nk ru pt cy pe ti ti on to make an in fo rm ed
d e c is io n.’” (ci ti ng H.R. Rep

. No. 10 3- 83 5, at 50 (1 99 4)
, re pr in te d i n 1 9 9 4

W e al so reco gn iz e th at th e ba nk ru pt cy co ur t ga ve so m e de fere nc e to th e 7
arg um en t by Sy lv a to th e effe ct th at an at to rn ey fo r GE Cap it al ha d st at ed at an earl ie r he ari ng th at th e l e as e ha d ex pi red an d th e on ly th in g ex ecu to ry was th e pu rch as e op ti on

. Tha t st at em en t was m ad e at a he ari ng in N o v e mb er 20 13 on GE Cap it al ’s

m ot io n to co m

pe l as su m

pt io n or reje c t i o n o f i ts le as e, an d in th e co nt ex t of a di sc us si on ab ou t an an ti ci pa te d sa le of th e eq ui pm en t by Sylva . Th e pa rti es di d no t st ip ul at e o r co ns en t to an y th in g at th at he ari ng , ot he r th an set ti ng th e m ot io n fo r an

ev id en ti ary h eari ng . I n an y ev en t, th e st at em en t is cl earl y in accu rat e an d is di rect ly

c o n tra ry to th e writ te n po si ti on ta ke n by GE Cap it al th ro ug ho ut th e c a s e

. Acco rd in gl y , we gi ve it no weig ht in th is ap pe al

.
-1 0-U.S.C.C.A.N. 33 40
, 33 59 )); se e al so Bur iv al v. Roe hr ic h (In re Bur iv al )
, 61 3 F.3 d
81 0, 81 2 (8 th Ci r. 20 10 ) (h ol di ng th at un de r § 36 5( d) (3 ), th e de bt or ’s ren t ob li ga ti on s “m us t be pe rfo rm ed whe n th ey ari se aft er fil in g an d be fo re reject io n” reg ar d l e s s o f
whe th er t he lea se pre se rv ed or b en efi tt ed th e es ta te ).

By de cl in in g to co ns id er GE Cap it al ’s m ot io n un de r 11 U.S.C.§ 36 5( d) (5 ), th e ba nk ru pt cy co ur t sh ift ed th e bu rd en of pr oo f fro m th e ob jecti ng pa rty to th e cl ai m an t, whi ch is erro ne ou s as a m at te r of law.

Fi na ll y , th ere was so m e di sc us si on in th e ba nk ru pt cy co ur t’s or al ru li ng an d in
th e br ie fs on ap pe al as to whe th er th e le as e ag reem en t GE Cap it al ha d wit h Sy lv a was

a “ tru e le as e” or a di sg ui se d se cu rit y ag reem en t. The ba nk ru pt cy co ur t di d no t ru le on th i s is su e. W e no te th at pr io r to th e ba nk ru pt cy co ur t he ari ng on th e m ot io n fo r ad m in is tra ti ve ex pe ns e, GE Cap it al an d Sy lv a fil ed a st ip ul at io n wit h th e ba nk ru pt cy

co ur t in whi ch th ey ag reed th at th e pa rti es en te red in to th e le as e ag reem en t, th at it

co nt in ue d on a m on th -to -m on th ba si s fol lo win g th e in it ia l term , th at Sy lv a fai le d to

m ak e an y pa y m en ts un de r th e le as e si nc e th e pe ti ti on fil in g da te , an d th at “ th e Leas e Agr eem en t be twee n Deb to r an d GECCI was reject ed by th e Deb to r on Apr il 1, 20 14 .”
Not wit hs ta nd in g th os e st ip ul at io ns , an d it s earl ie r st ip ul at io ns in co nn ect io n wit h th e

m ot io n to co m

pe l as su m pt io n or reject io n, Sy lv a co nt in ue s to arg ue in op po si ti on to th e m ot io n fo r ad m in is tra ti ve ex pe ns e th at th e le as e is no t a “ tru e le as e,” bu t is real ly
a fi na nc e ag reem en t.

Of co ur se , th e fo reg oi ng di sc us si on reg ard in g § 36 5( d) (3 ) an d (d )(5 ) wou ld be

ap pl ic ab le on ly if th e “ le as e ag r e e ment ” were a tru e eq ui pm en t le as e an d no t a

se cu red fin an ci ng arra ng em en t. Se e, e.g

. , Aleg re v. Mic ha el H. Cl emen t Co rp

. (In re Mic ha el H. Cl emen t Cor

p.)
, 44 6 B.R. 39 4, 40 2 (N.D. Cal

. 20 11 ) (ci ti ng Ci ty of Sa n Fra nc is co Mar ket Co rp

. v. W al sh (In re Mor eg

gi a & So ns , In c.)
, 85 2 F.2 d 11 79
, 11 82 (9 th Cir . 19 88 ) an d Gib so n v . Har ri s Pi ne Mil ls (In re Har ri s Pi ne Mil ls ) , 86 2 F .2d
21 7, 22 0 n.5 (9 th Ci r. 19 88 )); W es ts hi p, In c. v. Tr id en t Sh ip wo rk s, In c. , 24 7 B.R. 85 6

-1 1-(M.D. Fl a 20 00 ); In re Extr ac t io n Tech

. of VA, L.L.C.
, 29 6 B.R. 39 3, 39 9 (Ban kr

.

E.D. Va. 20 01 ). Thu s, w e b el ie ve th at is th e th res ho ld is su e th at m us t be de ci de d
be fo re an y an al y si s un de r § 36 5 or § 50 3. Se e, e.g

. , Gen

. Elec

. Ca pi ta l Co rp

. v. Co ll in s & Aikma n Co rp

. (In re Co ll in s & Aikma n Cor p.)
, 35 1 B.R. 45 9 (E.D. Mi ch

. 2006 ) (d ism iss ing int er locu to ry ap pe al be cau se ba nk ru pt cy co urt ha d not co nc lus ive ly
de te r mi ne d whe th er ag reem en ts at is su e were tru e le as es or ex ecu to ry co nt ract s) ; Hot el Sy ra cu se , In c. v. Ci ty of Sy ra cu se I n d u s. Dev. Age nc

y (In re Hot el Sy ra cu se , In c.) , 1 55 B.R. 82 4 (Ban kr

. N

. D.N.Y. 1 99 3) (in ad ve rs ary p ro ceed in g to de te rm in e whe th er de bt or m ay a s s u me ex ecu to ry co nt ract , th e co ur t m us t fir st de te rm in e whe th er th e ag reem en t is a t ru e le as e or so m e ot he r type of fin an ci al arra ng em en t).
The ba nk ru pt cy

co ur t d id no t ru le on th at is su e an d we wi ll no t ei th er.

Upo n rem an d, th e ba nk ru pt cy co ur t sh ou ld fir st de t e r m in e whe th er Sy lv a’s

as se rti o n t ha t th e le as e ag reem en t is no t a “ tru e le as e” is st il l a di sp ut ed is su e fo ll owi ng th e st ip ul at io ns en te red in to by th e pa rti es an d th e co nf irmed pl an of

reo rg an iz at io n of Sy lv a. If it is
, th e co ur t sh ou ld es ta bl is h a pr oc ed ur e to ad jud ic at e th at is su e. If th e ba nk ru pt cy co ur t ul ti m at el y de te rm in es th at th e le as e ag reem en t i s

a “ tru e le as e,” i t s h o u ld th en an al y ze th e is su e un de r 11 U.S.C. § 36 5( d) (5 ) fo r th e
pe rio d fro m or aft er 60 da y s aft er th e fil in g da te to th e da te of reject io n. Bec au se §
36 5( d) (5 ) do es no t m an da te pe rfo rm an ce pr io r to th e 60 th d a y p o s t-p et it io n, th e
req ue st fo r an ad m in is tra ti ve ex pe ns e cl ai m fo r th e le as e pa y m en ts du e du rin g th at

pe rio d is pr op erl y an al y zed un de r § 50 3( b) (1 )(A). Se e In re Dou bl e G Tr uc ki ng of th e Arl at ex, In c. , 44 2 B.R. 68 4, 68 9 (Ban kr

. W .D. Ark

. 20 10 ). Acco rd in gl y , up on rem an d
th e ba nk ru pt cy co ur t sh ou ld m ak e sp eci fic fact ua l an d le ga l fin di ng s wit h res pe ct to th e u se of t he eq ui pm en t an d t he be ne fit to th e es ta te du rin g t ha t p eri od of t im e.

-1 2-CONCL USI ON

Fo r th e reas on s se t fo rth ab ov e, th e de ci si on of th e ba nk ru pt cy co ur t is rev ers ed

an d re m an de d fo r fu rth er p ro ceed in gs co ns is te nt wit h t hi s o pi ni on

.

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-1 3-