Court Opinion

ID: 9461051
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:04:40.453578+00
Date Added: 2024-06-11T17:36:52.160976
License: Public Domain

HAYS, Circuit Judge
(dissenting):
I dissent.
The applicable federal statute, 11 U. S.C. § 110(b), states clearly that a covenant like the one used here is enforceable. The courts have created two exceptions to this rule. The first is where the landlord has waived his rights. There is no waiver here. The second is where enforcement would run" contrary to a strong public interest. Smith v. Hoboken R.R., Warehouse & S.S. Connecting Co., 328 U.S. 123, 66 S.Ct. 947, 90 L.Ed. 1123 (1946); Weaver v. Hutson, 459 F.2d 741 (4th Cir. 1972), cert. denied, 409 U.S. 957, 93 S.Ct. 288, 34 L.Ed.2d 227 (1973); In re Fleetwood Motel Corp., 355 F.2d 857 (3d Cir. 1964). Smith, the only such case decided by the Supreme Court, is clearly distinguishable from the instant case. It involved important considerations under the Interstate Commerce Act and a degree of public interest with which this case cannot compare.
Weaver and Fleetwood Motel, even if they were correctly decided, are also distinguishable in that forfeiture in those cases would have created a windfall to the landlords by virtue of improvements on the leased properties. This fact was especially important because the debtors were publicly held and forfeiture would have resulted in loss to innocent shareholders. In both cases the SEC appeared on behalf of the shareholders. This underscores the public interest involved in those cases. There is nothing approaching that degree of public interest in this ease.
To affirm here would essentially deprive section 110(b) of any force. The claim that a liquor store involves the public interest is frivolous. The interest of the creditors is no different from what it would be in any bankruptcy proceeding. There is no windfall to the landlord here other than higher rent from a new tenant, and this “windfall” is present in every case like this because the landlord would never terminate the lease unless he could relet at a higher rent. If section 110(b) does not apply here, it is hard to imagine a case where it would apply.