Opinion ID: 725498
Heading Depth: 2
Heading Rank: 3

Heading: The Bankruptcy Court's Decision on the Third Extension Motion

Text: 17 In its June 7, 1995 order relating to Burger Boys' third extension motion, the bankruptcy court conditioned any hearing on Burger Boys becoming current on all its post-petition obligations to South Street. If Burger Boys failed to do so, no hearing on the motion would be held and the motion would be denied. Burger Boys contends that the bankruptcy court erred. The district court agreed with Burger Boys that the Bankruptcy Court's decision was clearly erroneous so far as it deems the Debtor's lease rejected. 18 The decision to grant or deny a motion for an extension of time is generally within the discretion of the appropriate court, and we see no reason to deviate from that rule here. Cf. Association for Retarded Citizens v. Thorne, 68 F.3d 547, 554 (2d Cir.1995) (motion to enlarge time to move for reconsideration); Wesolek v. Canadair Ltd., 838 F.2d 55, 58 (2d Cir.1988) (motion to extend time for filing an objection to a magistrate's report). Nonetheless, even under this standard, if the bankruptcy court applied the wrong legal standard, we must reverse its ruling. See Pashaian v. Eccelston Properties, Ltd., 88 F.3d 77, 85 (2d Cir.1996). Because we conclude that the bankruptcy court improperly considered only one factor in deciding the third extension motion, we agree with the district court that the bankruptcy court erred. 19 In Theatre Holding Corp. v. Mauro, 681 F.2d 102 (2d Cir.1982) (per curiam), we faced the question of what constituted a reasonable time for a debtor-in-possession to assume a lease under the Bankruptcy Code. Although we found that the matter was within the discretion of the bankruptcy court, we held that there were a number of considerations that the court should weigh, including (1) whether the debtor was paying for the use of the property; (2) whether the debtor's continued occupation ... could damage the lessor[ ] beyond the compensation available under the Bankruptcy Code; (3) whether the lease is the debtor's primary asset; and (4) whether the debtor has had sufficient time to formulate a plan of reorganization. Id. at 105-06. Since our decision in Theatre Holding, Congress has amended § 365 of the Bankruptcy Code, which now requires assumption or rejection within sixty days. Nonetheless, we agree with the bankruptcy court's view in In re Wedtech Corp., 72 B.R. 464, 471 (Bankr.S.D.N.Y.1987), that the factors we discussed in Theatre Holding are still relevant to a bankruptcy court's decision on a debtor's motion for extension of time to assume or reject a lease. This list of factors is by no means exhaustive and, in appropriate cases, there may be other factors that a bankruptcy court should consider, such as the complexity of the case facing the debtor, the number of leases that the debtor must evaluate, and the need for judicial determination of whether a lease exists. Wedtech, 72 B.R. at 472; see also 2 Lawrence P. King, Collier on Bankruptcy p 365.03, at 365-38 (15th ed.1995) (stating that the factors to be considered under § 365(d)(4) include whether the lease is the primary asset, whether the landlord would receive a windfall, whether rent has been or is being paid, the complexity of the case, and the amount of time the trustee has had to analyze the estate). 20 In this case, several of the factors arguably weighed in favor of finding that the motion should be granted. First, Burger Boys' lease with South Street is its most important asset. Second, the state court's determination of the Summary Proceeding will determine whether there is, in fact, any lease for Burger Boys to assume. Finally, South Street does not contend that it has suffered any harm other than lost rents from Burger Boys' continued occupation of its space. 21 The bankruptcy court's ruling, however, considered only one of the relevant factors: Burger Boys' failure to become current on its post-petition lease obligations. Distilled to its essence, the bankruptcy court's ruling was that unless Burger Boys was current in its post-petition rent payment, the court would not grant the third extension motion. We disagree with this ruling. Although § 365(b)(1) may require that a debtor, before it assumes a lease, become current on or provide adequate assurance of its payment of past-due lease obligations (an issue we address below), we see nothing in § 365(d)(4) that requires a debtor to be current before the bankruptcy court grants a motion for an extension of time. Of course, as we noted in Theatre Holding, the debtor's current payment status remains a relevant consideration for the bankruptcy court. It is not, however, the only consideration, and we agree that the bankruptcy court abused its discretion by considering only this factor in deciding whether or not to grant the third extension motion. 22