In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 15-2093 

IN RE: GREAT LAKES QUICK LUBE LP, 

Debtor. 

____________________ 

OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF GREAT

LAKES QUICK LUBE LP, 

Plaintiff-Appellant, 

v.

T.D. INVESTMENTS I, LLP, 

Defendant-Appellee. 

____________________ 

Appeal from the United States Bankruptcy Court for the 

Eastern District of Wisconsin. 

No. 13-02709-SVK — Susan V. Kelley, Bankruptcy Judge. 

____________________ 

ARGUED DECEMBER 4, 2015 — DECIDED MARCH 11, 2016 

____________________ 

Before POSNER, FLAUM, and WILLIAMS, Circuit Judges. 

POSNER, Circuit Judge. In 2012 a company named Great 

Lakes Quick Lube LP (Great Lakes for short), which owned a 
2 No. 15-2093 

series of stores throughout the Midwest that provided oil 

changes and other automotive maintenance services, filed 

for bankruptcy under Chapter 11 of the Bankruptcy Code. 

The committee appointed to represent the unsecured creditors filed an adversary action (in effect a separate suit within 

the overall bankruptcy proceeding) against T.D. Investments 

I, LLP, which had leased two oil-change stores to Great 

Lakes. Great Lakes had negotiated the termination of the 

leases 52 days before it declared bankruptcy, and the creditors’ committee contends that the termination was either a 

preferential or a fraudulent transfer of the leases to T.D. and 

that whichever it was the value of the leases belongs to the 

bankrupt estate and should therefore be available to the 

bankrupt’s creditors. 

T.D. denies that the terminations were transfers, let alone 

preferential or fraudulent, and the bankruptcy judge agreed 

but at the request of the creditors’ committee asked us to accept a direct appeal from her ruling. See 28 U.S.C. 

§ 158(d)(2)(A). We have accepted the appeal. 

Before its bankruptcy Great Lakes had acquired more 

than a hundred store leases, typically by buying a store, selling it to investors, and leasing it from the new owners under 

a long-term contract. In February 2012, with its debts mounting and bankruptcy looming, Great Lakes agreed with T.D. 

to terminate the two leases that it had obtained from that 

company—even though the leased stores were profitable—

plus leases which we can ignore on three unprofitable stores 

that it had obtained from affiliates of T.D. The creditors’ 

committee contends that the transaction with T.D. was both 

a preferential and a fraudulent transfer. A preferential transfer, forbidden by 11 U.S.C. § 547(b), is, so far as relates to this 
No. 15-2093 3 

case, a transfer by an insolvent debtor to a favored creditor 

within 90 days before bankruptcy that gave that creditor 

more than if it had waited for the bankrupt’s assets to be distributed in the bankruptcy proceeding. (T.D. was of course a 

creditor of Great Lakes.) The particular type of fraudulent 

transfer alleged by the creditors’ committee—what is called 

a “constructive” fraudulent transfer, see 11 U.S.C. 

§ 548(a)(1)(B)—is a transfer, made by an insolvent or nearly 

insolvent debtor to anyone (whether or not a creditor) within 

two years before the bankruptcy, that gave the debtor (and 

consequently the estate in bankruptcy) less than what he 

transferred. So far as relates to this case, there appears to be 

no difference between the two types of improper transfer. 

The transfer alleged is the surrender by Great Lakes of 

the two leases that it had been granted by T.D. The parties 

disagree about whether Great Lakes received equivalent 

value for the leases that it surrendered and whether T.D. received more value as a result of the surrender than it would 

have received had the leases been part of the bankrupt estate. The bankruptcy judge did not resolve these issues because as we said she ruled that the terminations had not 

been transfers. 

At trial, the head of Great Lakes, Jim Wheat, testified that 

the company had terminated the profitable leases for a variety of reasons including a strained relationship between 

Wheat and the head of T.D., John Theisen. According to 

Wheat, Theisen was demanding and inflexible, especially in 

insisting on prompt payment of Great Lakes’ rental obligations despite its parlous financial state. Wheat testified that 

other reasons for his decision to terminate the leases were 

fear of eviction by T.D. and that having fallen behind in its 
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rental payments and other obligations Great Lakes had also 

to fear being sued by T.D. 

It seems unlikely that Great Lakes terminated leases on 

two profitable stores just because the landlord was being difficult and making threats. But if Great Lakes knew it was going down the tubes it would have had no compelling reason 

to cling to the leases since if it did they would become assets 

of the estate in bankruptcy and thus property of Great 

Lakes’ creditors; and either way the leases would have no 

value to Great Lakes. Conceivably, therefore, even slight irritation with Theisen might have led Great Lakes to terminate 

them.

The creditors’ committee presented evidence that the two 

stores together were worth between $327,000 and $450,000 to 

Great Lakes, figures derived from projections of how well 

the stores were likely to have done before the leases expired. 

The value estimates would make little difference to Great 

Lakes if, to repeat, it knew it was going to lose the stores regardless, whether to T.D. or to its other creditors. But to the 

extent that the leases would have had comparable or at least 

significant value to creditors of the bankrupt estate, Great 

Lakes’ surrender of the leases to T.D. could be regarded as a 

preferential transfer. 

T.D. argues that Great Lakes decided to terminate the 

leases in order “to rid itself of locations that were burdensome to its operations with the hopes that such action would 

allow it to avoid bankruptcy and continue operating.” 

Though discarding profitable locations could not stave off 

bankruptcy, T.D. argues that even though the two stores 

were profitable, ongoing maintenance, repairs, and other obligations would have cut so far into those profits that Great 
No. 15-2093 5 

Lakes would actually have lost money had it retained the 

leases. 

Another possible explanation for the terminations builds 

on the fact that Great Lakes may have expected to emerge 

from bankruptcy as a going concern—Chapter 11 is oriented 

toward reorganization rather than liquidation. And while 

the bankruptcy proceeding will not end until this adversary 

action between Great Lakes’ unsecured creditors and T.D. is 

resolved, Great Lakes has continued to operate its business, 

albeit in shrunken form—the number of stores it leased 

dropped from 107 at the company’s peak to 64 shortly after 

the bankruptcy. Once reorganized, it would be struggling 

for survival with its diminished number of stores. Still, a 

fresh start may be easier for Great Lakes’ management to obtain without its needing to deal with the irritating Theisen. 

T.D. argues that the leases were abandoned rather than 

transferred, and if they were not transferred the creditors 

have no valid avoidance claims. But the Bankruptcy Code 

defines “transfer” broadly, as including “each mode, direct 

or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with—(i) property; or (ii) an 

interest in property.” 11 U.S.C. § 101(54)(D) (emphasis added). 

Great Lakes had an interest in property—namely the leaseholds—which it parted with by transferring that interest to 

T.D. That was a transfer to one creditor of what might have 

been an asset to Great Lakes’ other creditors had the transfer 

not taken place; and if so it was a preferential transfer and 

therefore avoidable. 

T.D. invokes another provision of the Bankruptcy 

Code—11 U.S.C. § 365(c)(3), which provides that “the trustee 

[in bankruptcy] may not assume or assign any ... unexpired 
6 No. 15-2093 

lease of the debtor ... if ... such lease is of nonresidential real 

property and has been terminated under applicable nonbankruptcy law prior to the order for relief.” The bankruptcy 

judge thought the quoted language describes this case. But if 

true this would place section 365(c)(3) on a collision course 

with section 101(54)(D), quoted in the preceding paragraph. 

For remember that the latter section covers not only property but also an interest in property, and a lease is an interest in 

property. Section 365(c) is aimed at facilitating the re-leasing 

of commercial property during bankruptcy proceedings by 

forbidding the trustee to interfere with the occupancy of the 

new tenants. See Robinson v. Chicago Housing Authority, 54 

F.3d 316, 319 (7th Cir. 1995). It prohibits the trustee from “assum[ing] or assign[ing]” leases, as in selling a lease to someone who as lessee would be entitled to occupy the property. 

But Great Lakes’ creditors don’t want the leases; their actions for avoidance of the transfers of the leases (sections 

547(b) and 548(a)(1)) and recovery of the leases’ value (section 550(a)) do not require “assum[ing] or assign[ing]” the 

leases. Section 365(c)(3) is therefore inapplicable. 

Upon the termination of Great Lakes’ leases, T.D. leased 

the two stores to Super Lubes of Wisconsin, LLC, an oilchange company much like Great Lakes. If the bankruptcy 

court were to order the stores turned over to Great Lakes’ 

creditors, this would have the disruptive effect on commercial activity against which section 365(c)(3) is aimed. But to 

repeat, the creditors are seeking not the leases but the value

of the leases that Great Lakes transferred to T.D. They are 

not trying to evict anyone. 

This distinction between the value of the leases (value to 

which the creditors may be entitled) and the leases them-
No. 15-2093 7 

selves (which cannot lawfully be transferred to them) enables the purpose of section 365(c)(3) to be fulfilled without 

making inroads into section 101(54)(D). The bankruptcy 

judge’s reading of 365(c)(3) placed the two sections in needless conflict. 

The judgment of the bankruptcy court is reversed and 

the case remanded to that court to determine the value of 

Great Lakes’ transfer to T.D. and whether T.D. has any defenses to the creditors’ claims. 

Other issues are raised by the parties but do not warrant 

discussion. 

REVERSED, AND REMANDED WITH DIRECTIONS