Source: http://kirschenbaumesq.com/article/-in-re-ames-dept-stores-inc-148-br-756-bankrsdny-jan-12-1993-no-90-b-11233-jag-90-b-11234-jag-90-b-11235-jag-90-b-11236-jag-90-b-11237-jag-90-b-11238-jag-90-b-11239-jag-90-b-11240-jag-91-6699a
Timestamp: 2018-12-15 09:12:11
Document Index: 195472219

Matched Legal Cases: ['§ 365', '§ 365', '§ 502', '§ 524', '§\n365', '§ 1334', '§ 157', '§\n502', '§ 502', '§ 502', '§ 524', '§ 365', '§ 365', '§ 502', '§ 524', '§ 365', '§ 1334', '§ 157', '§ 502', '§ 502', '§ 502', '§ 524']

In re Ames Dept. Stores, Inc., 148 B.R. 756 (Bankr.S.D.N.Y., Jan 12, 1993) (NO. 90 B 11233 (JAG), 90 B 11234 (JAG), 90 B 11235 (JAG), 90 B 11236 (JAG), 90 B 11237 (JAG), 90 B 11238 (JAG), 90 B 11239 (JAG), 90 B 11240 (JAG), 91-6699A)
In re: AMES DEPARTMENT STORES, INC., Eastern Retailers Service Corporation, et
Bankruptcy Nos. 90-11233 through 11285 (JAG).
Jan. 12, 1993.
Lessor brought action in Supreme Court of the State of New York, Nassau County,
seeking to recover under lease from assignor, which had assigned lease. Motion
was removed to the District Court and upon assignor's further motion, proceeding
was referred to the bankruptcy court based on assignee's Chapter 11 case. On
lessor's motion for summary judgment, the Bankruptcy Court, James A. Goodman,
J., held that: (1) rejection of lease by assignee in its Chapter 11 case was
breach of contract, but did not automatically terminate lease so as to relieve
assignor from further liability under lease, and (2) lessor's filing proof of
claim in Chapter 11 case of assignee did not act to "terminate" underlying
Partial summary judgment granted.
See also, 136 B.R. 353, 136 B.R. 357.
[1] Bankruptcy 3115.1
51k3115.1 Most Cited Cases
(Formerly 51k3115)
Rejection of lease by assignee in its Chapter 11 case was breach of contract,
but did not automatically terminate lease so as to relieve assignor from further
liability under lease. Bankr.Code, 11 U.S.C.A. § 365.
[2] Bankruptcy 3115.1
Rejection of lease does not equate to termination, but, rather, is tantamount to
breach of lease. Bankr.Code, 11 U.S.C.A. § 365.
[3] Landlord and Tenant 79(3)
233k79(3) Most Cited Cases
Lessor's filing proof of claim in Chapter 11 case of assignee of lease did not
act to "terminate" underlying lease so as to relieve assignor of further
liability under lease; proof of claim could only enhance position of assignor
by reducing its liability. Bankr.Code, 11 U.S.C.A. § 502(b)(6).
[4] Landlord and Tenant 79(3)
General rules of surety law did not apply to assignor of lease so as to relieve
assignor of liability under lease after lessee rejected lease in its Chapter 11
bankruptcy case, but, rather, under lease provisions, which specifically
indicated that assignor was to remain primarily liable for performing all
agreements notwithstanding any assignment of its interest, assignor remained
liable under lease.
[5] Bankruptcy 3412
51k3412 Most Cited Cases
Any discharge of lease assignee's liability under lease through its Chapter 11
case did not affect assignor's liability under lease as codebtor or guarantor.
Bankr.Code, 11 U.S.C.A. § 524(e).
*757 Luc A. Despins, Skadden, Arps, Slate, Meagher & Flom, New York City, for
Samuel Kirschenbaum, Kirschenbaum & Kirschenbaum, P.C., Garden City, N.Y., for
Douglas H. Meal, Ropes & Gray, Boston, Mass., for defendants.
JAMES A. GOODMAN, Bankruptcy Judge.
The question presented to this Court is whether The TJX Companies, Inc.
("TJX") remains liable for certain lease obligations to Bond Street Associates,
Limited ("Bond Street"), in light of developments in the bankruptcy of Ames
Department Stores, Inc. ("Ames"), an assignee of TJX. By a lease dated April
8, 1985 (the "Lease"), Bond Street's predecessors in interest leased certain
real property located in Batavia, New York to TJX (then known as the Zayre
Corporation). On October 25, 1985, TJX assigned its interest under the lease
to Zayre Central, which at that time was a wholly-owned subsidiary of TJX. On
October 28, 1988, Ames purchased the stock of Zayre Central as part of a larger
acquisition of all the assets and business of the Zayre Stores division of TJX.
Approximately eight months later, in April of 1990, Ames and its 52 subsidiaries
filed petitions for reorganization pursuant to 11 U.S.C. Chapter 11. As part
of that reorganization effort, Ames rejected the Lease pursuant to 11 U.S.C. §
365, effective October 9, 1990, by order of the court dated October 15, 1990.
That rejection touched off a series of letters between Bond Street and TJX
which are of particular significance in this proceeding. By letter dated
October 22, 1990, Bond Street informed TJX that:
[I]t is not our intention to terminate the lease, or your continuing liability
thereunder, but that we look to you for the payment of all of the rent reserved
under the lease, together with your compliance with all other obligations
imposed upon the Tenant by the provisions of the lease....
Several more letters were exchanged in which Bond Street insisted that it was
not terminating the Lease, and wherein TJX asserted that the Lease had been
terminated by Ames' rejection.
Finally, this activity culminated in the commencement by Bond Street of an
action in the Supreme Court of the State of New York, County of Nassau, which,
upon motion by TJX, was removed to the U.S. District Court, Eastern District of
New York. Upon TJX's further motion to have this proceeding referred to the
bankruptcy court, the U.S. District Court transferred the proceeding to the U.S.
District Court for the Southern District of New York, which subsequently
referred it to this bankruptcy court. Because this is a proceeding related to
the Ames reorganization case, this Court has jurisdiction pursuant to 28 U.S.C.
§ § 1334(b) and 157(a) and, by *758 their conduct, the parties have indicated
their consent to this Court's entry of final orders and judgments in accordance
with § 157(c)(2).
In early 1992, Bond Street moved for summary judgment on Count I of its
complaint, seeking recovery from TJX of monthly rental payments and real estate
taxes due and owing Plaintiff as of Ames' rejection of the Lease, as well as
continuing defaults of such obligations, together with interest and attorneys'
In ruling on a motion for summary judgment, the court shall render judgment
"forthwith if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law." F.R.Bky.P. 7056(c).
The most relevant sections of the Lease are Article XIII regarding defaults and
Article XVII regarding assignments. Those provisions in part are as follows:
13.1 If Tenant shall default in the payment of rent or any other sum of money
payable by Tenant to Landlord and if Tenant shall fail to cure such default
within ten (10) days after receipt of notice of such default from Landlord,
without waiving any claim for breach of agreement, Landlord may send notice to
Tenant of the termination of the term of this lease and on the fifth day next
following the date of the sending of such notice, the term of this lease shall
terminate, Tenant hereby waiving all rights of redemption.
13.3 After any assignment of Tenant's interest in this lease, Landlord shall not
exercise any rights or remedies under this Article XIII on account of any
default in payment of any rent or other sum of money unless Landlord shall give
notice to the tenant named herein, as well as the tenant in possession, of such
default and the opportunity to cure each such default within the period of time
after such notice provided in Section 13.1 of this lease. After such notice,
if the term of this lease shall be terminated pursuant to the provisions of this
Article XIII, then the tenant named herein shall not be liable for the payment
of any rent or for the performance or observance of any agreements or conditions
to be performed or observed after the date of such termination unless about the
time of such termination Landlord shall have offered to the tenant named herein
a lease for the balance of the term of this lease upon the provisions of this
lease contained.
17.1 Notwithstanding any assignment of Tenant's interest in this lease or any
subletting of the whole or any part of the Demised Premises, Tenant shall remain
primarily liable for the performance of all agreements of Tenant hereunder,
except as expressly otherwise provided in Section 13.3.
On the primary issue of liability under the Lease, Bond Street relies heavily
on Section 17.1 for its contention that TJX remains liable for these obligations
despite the assignment to Zayre Central. In opposition, TJX argues that for
various reasons the Lease has been terminated, requiring Bond Street to offer
TJX a new lease pursuant to Section 13.3. Because Bond Street failed to do so,
TJX asserts that it is thereby relieved of all liability under the Lease for the
period following termination.
[1][2] TJX puts forth two reasons why the Lease has been terminated. First,
TJX argues that the rejection of the Lease by Ames in its reorganization efforts
terminated this Lease. Although there is no consensus on this issue, this
Court believes that the better reasoned decisions find that rejection of a lease
does not equate to termination, but rather is tantamount to a breach thereof.
See, e.g., Societe Nationale Algerienne v. Distrigas Corp., 80 B.R. 606
(D.Mass.1987); In re Storage Technology Corp., 53 B.R. 471 (Bankr.D.Colo.1985);
In re Picnic 'N Chicken, Inc., 58 B.R. 523 (Bankr.S.D.Cal.1986). Therefore,
Ames' rejection of the Lease did not automatically terminate the Lease.
*759 [3] TJX's alternative argument is based on Bond Street's alleged election
to terminate the Lease by filing a proof of claim pursuant to 11 U.S.C. §
502(b)(6) in Ames' bankruptcy case. TJX maintains that, even if rejection does
not terminate a lease, a landlord may subsequently choose to do so by filing a
proof of claim in the underlying bankruptcy case. In support thereof, TJX has
provided a copy of Bond Street's proof of claim # 10922 (the "Proof of Claim")
in which Bond Street has allegedly terminated the Lease by implication. While
this argument is tempting, this Court is not convinced that the Proof of Claim
either terminates the Lease or acknowledges its previous termination. The
language used in the Proof of Claim itself explicitly indicates that Bond Street
had not terminated the Lease, but is only making claim for Debtor's rejection
thereof. The reference to § 502(b)(6) most likely results from Bond Street's
reliance on In re Modern Textile, Inc., 900 F.2d 1184 (8th Cir.1990), which
treats § 502(b)(6) as a limit on the amount a lessor may claim following
rejection of an unexpired lease.
Based on the foregoing, this Court finds that Bond Street's Proof of Claim does
not act to terminate the underlying Lease. In fact, the recovery of any sum
from Ames by Bond Street as a result of the Proof of Claim can only enhance the
position of TJX by reducing its liability. It may well be that the amounts
sought therein may not be appropriately recoverable from the estate, but that
issue is not before the Court and, in any event, is one for Ames to argue.
[4][5] Finally, TJX cites various authorities for "general rules" that would
classify TJX as a surety of Zayre Central. While those rules may apply in
general, they do not apply here where this contract specifically provides in
Section 17.1 that TJX, as Tenant, is to remain primarily liable for the
performance of all agreements notwithstanding any assignment of its interest.
Moreover, any discharge of Ames' liability through the bankruptcy proceeding
does not affect TJX as co-debtor or guarantor. 11 U.S.C. § 524(e).
Because this Court finds that Bond Street did not terminate the Lease or
otherwise release TJX, this Court finds TJX directly responsible to Bond Street
for full compliance with the Lease, and grants partial summary judgment to Bond
Street to that effect. There remain disputed factual issues, due in part to
TJX's inability to complete its discovery, regarding the amount of damages and
mitigation thereof which require an evidentiary hearing.
Bond Street Associates, Ltd. ("Bond Street") has moved for summary judgment on
Count I of its complaint regarding the liability of the TJX Companies, Inc.
("TJX"), as tenant, under a lease which TJX has assigned. As to TJX's
liability, this Court finds no genuine issues of material fact, and further
finds that Bond Street is entitled to judgment as a matter of law. There
remain certain disputed factual issues regarding the amount of damages and any
mitigation thereof. Therefore, in accordance with a Memorandum of Decision
executed on even date herewith, it is hereby
ORDERED that Bond Street is granted partial summary judgment on Count I of its
complaint as to liability, and it is further
ORDERED that summary judgment is denied as to damages, which issue will require
an evidentiary hearing to be held at the Court's earliest convenience.
148 B.R. 756
In re: AMES DEPARTMENT STORES, INC., Eastern Retailers Service Corporation, etal., Debtors.BOND STREET ASSOCIATES LIMITED, Plaintiff,v.The TJX COMPANIES, INC., Defendants.
Bankruptcy Nos. 90-11233 through 11285 (JAG).Adv. No. 91-6699A.
Lessor brought action in Supreme Court of the State of New York, Nassau County, seeking to recover under lease from assignor, which had assigned lease. Motion was removed to the District Court and upon assignor's further motion, proceeding was referred to the bankruptcy court based on assignee's Chapter 11 case. On lessor's motion for summary judgment, the Bankruptcy Court, James A. Goodman, J., held that: (1) rejection of lease by assignee in its Chapter 11 case was breach of contract, but did not automatically terminate lease so as to relieve assignor from further liability under lease, and (2) lessor's filing proof of claim in Chapter 11 case of assignee did not act to "terminate" underlying lease.
[1] Bankruptcy 3115.151k3115.1 Most Cited Cases (Formerly 51k3115)
Rejection of lease by assignee in its Chapter 11 case was breach of contract, but did not automatically terminate lease so as to relieve assignor from further liability under lease. Bankr.Code, 11 U.S.C.A. § 365.
[2] Bankruptcy 3115.151k3115.1 Most Cited Cases (Formerly 51k3115)
Rejection of lease does not equate to termination, but, rather, is tantamount to breach of lease. Bankr.Code, 11 U.S.C.A. § 365.
[3] Landlord and Tenant 79(3)233k79(3) Most Cited Cases
Lessor's filing proof of claim in Chapter 11 case of assignee of lease did not act to "terminate" underlying lease so as to relieve assignor of further liability under lease; proof of claim could only enhance position of assignor by reducing its liability. Bankr.Code, 11 U.S.C.A. § 502(b)(6).
[4] Landlord and Tenant 79(3)233k79(3) Most Cited Cases
General rules of surety law did not apply to assignor of lease so as to relieve assignor of liability under lease after lessee rejected lease in its Chapter 11 bankruptcy case, but, rather, under lease provisions, which specifically indicated that assignor was to remain primarily liable for performing all agreements notwithstanding any assignment of its interest, assignor remained liable under lease.
[5] Bankruptcy 341251k3412 Most Cited Cases
Any discharge of lease assignee's liability under lease through its Chapter 11 case did not affect assignor's liability under lease as codebtor or guarantor. Bankr.Code, 11 U.S.C.A. § 524(e). *757 Luc A. Despins, Skadden, Arps, Slate, Meagher & Flom, New York City, for debtor.
Samuel Kirschenbaum, Kirschenbaum & Kirschenbaum, P.C., Garden City, N.Y., for plaintiff.
The question presented to this Court is whether The TJX Companies, Inc. ("TJX") remains liable for certain lease obligations to Bond Street Associates, Limited ("Bond Street"), in light of developments in the bankruptcy of Ames Department Stores, Inc. ("Ames"), an assignee of TJX. By a lease dated April 8, 1985 (the "Lease"), Bond Street's predecessors in interest leased certain real property located in Batavia, New York to TJX (then known as the Zayre Corporation). On October 25, 1985, TJX assigned its interest under the lease to Zayre Central, which at that time was a wholly-owned subsidiary of TJX. On October 28, 1988, Ames purchased the stock of Zayre Central as part of a larger acquisition of all the assets and business of the Zayre Stores division of TJX. Approximately eight months later, in April of 1990, Ames and its 52 subsidiaries filed petitions for reorganization pursuant to 11 U.S.C. Chapter 11. As part of that reorganization effort, Ames rejected the Lease pursuant to 11 U.S.C. § 365, effective October 9, 1990, by order of the court dated October 15, 1990.
That rejection touched off a series of letters between Bond Street and TJX which are of particular significance in this proceeding. By letter dated October 22, 1990, Bond Street informed TJX that: [I]t is not our intention to terminate the lease, or your continuing liability thereunder, but that we look to you for the payment of all of the rent reserved under the lease, together with your compliance with all other obligations imposed upon the Tenant by the provisions of the lease....
Several more letters were exchanged in which Bond Street insisted that it was not terminating the Lease, and wherein TJX asserted that the Lease had been terminated by Ames' rejection.
Finally, this activity culminated in the commencement by Bond Street of an action in the Supreme Court of the State of New York, County of Nassau, which, upon motion by TJX, was removed to the U.S. District Court, Eastern District of New York. Upon TJX's further motion to have this proceeding referred to the bankruptcy court, the U.S. District Court transferred the proceeding to the U.S. District Court for the Southern District of New York, which subsequently referred it to this bankruptcy court. Because this is a proceeding related to the Ames reorganization case, this Court has jurisdiction pursuant to 28 U.S.C. § § 1334(b) and 157(a) and, by *758 their conduct, the parties have indicated their consent to this Court's entry of final orders and judgments in accordance with § 157(c)(2).
In early 1992, Bond Street moved for summary judgment on Count I of its complaint, seeking recovery from TJX of monthly rental payments and real estate taxes due and owing Plaintiff as of Ames' rejection of the Lease, as well as continuing defaults of such obligations, together with interest and attorneys' fees.
In ruling on a motion for summary judgment, the court shall render judgment "forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." F.R.Bky.P. 7056(c).
The most relevant sections of the Lease are Article XIII regarding defaults and Article XVII regarding assignments. Those provisions in part are as follows: 13.1 If Tenant shall default in the payment of rent or any other sum of money payable by Tenant to Landlord and if Tenant shall fail to cure such default within ten (10) days after receipt of notice of such default from Landlord, without waiving any claim for breach of agreement, Landlord may send notice to Tenant of the termination of the term of this lease and on the fifth day next following the date of the sending of such notice, the term of this lease shall terminate, Tenant hereby waiving all rights of redemption.
. . . . .13.3 After any assignment of Tenant's interest in this lease, Landlord shall not exercise any rights or remedies under this Article XIII on account of any default in payment of any rent or other sum of money unless Landlord shall give notice to the tenant named herein, as well as the tenant in possession, of such default and the opportunity to cure each such default within the period of time after such notice provided in Section 13.1 of this lease. After such notice, if the term of this lease shall be terminated pursuant to the provisions of this Article XIII, then the tenant named herein shall not be liable for the payment of any rent or for the performance or observance of any agreements or conditions to be performed or observed after the date of such termination unless about the time of such termination Landlord shall have offered to the tenant named herein a lease for the balance of the term of this lease upon the provisions of this lease contained.
. . . . .17.1 Notwithstanding any assignment of Tenant's interest in this lease or any subletting of the whole or any part of the Demised Premises, Tenant shall remain primarily liable for the performance of all agreements of Tenant hereunder, except as expressly otherwise provided in Section 13.3.
On the primary issue of liability under the Lease, Bond Street relies heavily on Section 17.1 for its contention that TJX remains liable for these obligations despite the assignment to Zayre Central. In opposition, TJX argues that for various reasons the Lease has been terminated, requiring Bond Street to offer TJX a new lease pursuant to Section 13.3. Because Bond Street failed to do so, TJX asserts that it is thereby relieved of all liability under the Lease for the period following termination.
[1][2] TJX puts forth two reasons why the Lease has been terminated. First, TJX argues that the rejection of the Lease by Ames in its reorganization efforts terminated this Lease. Although there is no consensus on this issue, this Court believes that the better reasoned decisions find that rejection of a lease does not equate to termination, but rather is tantamount to a breach thereof. See, e.g., Societe Nationale Algerienne v. Distrigas Corp., 80 B.R. 606 (D.Mass.1987); In re Storage Technology Corp., 53 B.R. 471 (Bankr.D.Colo.1985); In re Picnic 'N Chicken, Inc., 58 B.R. 523 (Bankr.S.D.Cal.1986). Therefore, Ames' rejection of the Lease did not automatically terminate the Lease.
*759 [3] TJX's alternative argument is based on Bond Street's alleged election to terminate the Lease by filing a proof of claim pursuant to 11 U.S.C. § 502(b)(6) in Ames' bankruptcy case. TJX maintains that, even if rejection does not terminate a lease, a landlord may subsequently choose to do so by filing a proof of claim in the underlying bankruptcy case. In support thereof, TJX has provided a copy of Bond Street's proof of claim # 10922 (the "Proof of Claim") in which Bond Street has allegedly terminated the Lease by implication. While this argument is tempting, this Court is not convinced that the Proof of Claim either terminates the Lease or acknowledges its previous termination. The language used in the Proof of Claim itself explicitly indicates that Bond Street had not terminated the Lease, but is only making claim for Debtor's rejection thereof. The reference to § 502(b)(6) most likely results from Bond Street's reliance on In re Modern Textile, Inc., 900 F.2d 1184 (8th Cir.1990), which treats § 502(b)(6) as a limit on the amount a lessor may claim following rejection of an unexpired lease.
Based on the foregoing, this Court finds that Bond Street's Proof of Claim does not act to terminate the underlying Lease. In fact, the recovery of any sum from Ames by Bond Street as a result of the Proof of Claim can only enhance the position of TJX by reducing its liability. It may well be that the amounts sought therein may not be appropriately recoverable from the estate, but that issue is not before the Court and, in any event, is one for Ames to argue.
[4][5] Finally, TJX cites various authorities for "general rules" that would classify TJX as a surety of Zayre Central. While those rules may apply in general, they do not apply here where this contract specifically provides in Section 17.1 that TJX, as Tenant, is to remain primarily liable for the performance of all agreements notwithstanding any assignment of its interest. Moreover, any discharge of Ames' liability through the bankruptcy proceeding does not affect TJX as co-debtor or guarantor. 11 U.S.C. § 524(e).
Because this Court finds that Bond Street did not terminate the Lease or otherwise release TJX, this Court finds TJX directly responsible to Bond Street for full compliance with the Lease, and grants partial summary judgment to Bond Street to that effect. There remain disputed factual issues, due in part to TJX's inability to complete its discovery, regarding the amount of damages and mitigation thereof which require an evidentiary hearing.
Bond Street Associates, Ltd. ("Bond Street") has moved for summary judgment on Count I of its complaint regarding the liability of the TJX Companies, Inc. ("TJX"), as tenant, under a lease which TJX has assigned. As to TJX's liability, this Court finds no genuine issues of material fact, and further finds that Bond Street is entitled to judgment as a matter of law. There remain certain disputed factual issues regarding the amount of damages and any mitigation thereof. Therefore, in accordance with a Memorandum of Decision executed on even date herewith, it is hereby
ORDERED that Bond Street is granted partial summary judgment on Count I of its complaint as to liability, and it is further
ORDERED that summary judgment is denied as to damages, which issue will require an evidentiary hearing to be held at the Court's earliest convenience.