Court Opinion

ID: 196348
Source: CourtListenerOpinion
Date Created: 2011-02-07 03:03:57+00
Date Added: 2024-06-11T12:34:42.765694
License: Public Domain

November 17, 1995 UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                             

No. 95-1575

              IN RE:  THINKING MACHINES CORPORATION,

                             Debtor.
                                             

                  THINKING MACHINES CORPORATION,

                            Appellee,

                                v.

            MELLON FINANCIAL SERVICES CORPORATION #1,

                            Appellant.

                                             

                           ERRATA SHEET
                                     ERRATA SHEET

     The opinion of  this court  issued on October  17, 1995,  is
corrected as follows:

On page  2, line 13;  page 6, line 24;  page 7, line  2; page 13,
line  10; page  15,  line  19;  page  17, line  22     change  " 
365(c)(3)" to "  365(d)(3)"

On page 7, line 11   change "  365(c)(4)" to "  365(d)(4)"

                  UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                             

No. 95-1575

              IN RE:  THINKING MACHINES CORPORATION,

                             Debtor.
                                             

                  THINKING MACHINES CORPORATION,

                            Appellee,

                                v.

            MELLON FINANCIAL SERVICES CORPORATION #1,

                            Appellant.

                                             

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. William G. Young, U.S. District Judge]
                                                                

                                             

                              Before

                 Selya and Stahl, Circuit Judges,
                                                          

                   and Gorton,* District Judge.
                                                        

                                             

     Kevin  J.  Simard, with  whom  Charles R.  Bennett,  Jr. and
                                                                       
Riemer & Braunstein were on brief, for appellant.
                             
     Charles  R. Dougherty, with whom Jonathan C. Lipson and Hill
                                                                           
& Barlow were on brief, for appellee.
                  

                                             

                         October 17, 1995

                                             

              
*Of the District of Massachusetts, sitting by designation.

          SELYA,  Circuit  Judge.    This appeal  compels  us  to
                    SELYA,  Circuit  Judge.
                                          

address a nagging question of bankruptcy law on which no court of

appeals  has yet  spoken and  on which  lower federal  courts are

divided.   The problem relates to the operation of section 365(a)

of the Bankruptcy Code, 11 U.S.C.   365(a) (1994), a statute that

permits a Chapter 11  trustee, subject to certain conditions,  to

assume or reject  any unexpired  lease or  executory contract  in

existence  on  the  date  the  insolvency  proceeding  commences.

Because the trustee's actions require court approval, and because

the  Code  treats nonresidential  leases  differently  than other

leases or  executory contracts, requiring the  estate to continue

paying rent at the contract rate until rejection takes effect, 11

U.S.C.     365(d)(3), a  question arises:    Is court  approval a

condition precedent or subsequent to the effective rejection of a

nonresidential lease  pursuant to section 365(a)?   This question

is of considerably more than academic interest.  Time is money in

the waiting game  that Chapter 11 often entails,  and substantial

sums  can ride  on how quickly  the trustee can  jettison a high-

priced  lease.  In this  case, for example,  the determination of

which  date controls  carries with  it a  swing of  approximately

$200,000.

          The courts  below disagreed on how  the question should

be  answered.  The  bankruptcy  court  ruled  that  the  debtor's

rejection  of its lease took effect only  on court approval.  See
                                                                           

In  re  Thinking Machines  Corp., 178  B.R.  31 (Bankr.  D. Mass.
                                          

1994).  The  district court reversed, holding that  the rejection

                                3

was effective on the date that the debtor gave appropriate notice

of  its decision to reject.1  See  In re Thinking Machines Corp.,
                                                                          

182 B.R.  365 (D. Mass.  1995).  Concluding,  as we do,  that the

statute is  most  propitiously  read to  make  court  approval  a

condition precedent to an effective rejection of a nonresidential

lease, we now reverse.

I.  BACKGROUND
          I.  BACKGROUND

          The material  facts are undisputed.   In 1990, Thinking

Machines Corporation ("TMC" or "the debtor") leased a building in

Cambridge,   Massachusetts,   from   Mellon  Financial   Services

Corporation  #1 ("Mellon").   Apparently,  the environs  were not

sufficiently  conducive to  fertile thought,  for, on  August 17,

1994, TMC filed a voluntary petition seeking relief under Chapter

11 of the Code, 11 U.S.C.    1101-1145.  TMC proceeded to operate

the business as a  debtor in possession.  It  continued to occupy

the demised  premises, using only  a fraction  of the space.   On

September  13, 1994,  TMC filed  a  motion asking  the bankruptcy

court  to approve  its decision to  reject the lease.   The court

granted the motion on October 4.

          Three  weeks   later,   Mellon  moved   for   immediate

possession   of   the   premises  and   payment   of  $345,915.89
                    
                              

     1This date is sometimes  called, in bankruptcy parlance, the
"motion filing date."   The label refers to the  requirement that
the trustee or debtor  in possession must signify an  election to
accept or reject a particular lease  by the filing of a motion to
that effect in the bankruptcy court.  See Fed. R. Bankr. P. 6006,
                                                   
9014.  Mindful of the pithy advice that St. Ambrose is reputed to
have offered St.  Augustine ("When you  are at Rome  live in  the
Roman  style."), see Jeremy  Taylor, Ductor Dubitantium,  I, I, 5
                                                                 
(1660), we shall employ this terminology.

                                4

(representing administrative  rent accrued  at the  contract rate

through the date on  which the bankruptcy court had  approved the

debtor's rejection of the lease, plus associated expenses).   TMC

parried  this thrust  by touting  the motion  filing date  as the

effective  date  of  its  rejection (and,  therefore,  the  outer

boundary of its liability under the lease).  It  also tendered to

Mellon $143,326.45 (the  amount due under  the lease through  the

motion filing date).

          The bankruptcy  judge resolved the dispute  in Mellon's

favor,  ruling that the rejection  did not take  effect until the

court had  approved it,  and that,  accordingly, the  debtor owed

Mellon $210,150.26  (the difference between the  total amount due

under  the  lease through  October  4  and  the  partial  payment

previously made  by  the debtor)  plus interest  and common  area

maintenance  charges.2   See Thinking  Machines, 178 B.R.  at 34.
                                                         

When TMC appealed, the district court took a different slant.  It

held that  the  rejection occurred  on  September 13,  1994  (the

motion  filing date),  and that,  therefore, no  further payments

were  due.  See Thinking Machines, 182  B.R. at 369.  This appeal
                                           

ensued.

II.  STANDARD OF REVIEW
          II.  STANDARD OF REVIEW

          We afford plenary review  to determinations of law made

by a district court  sitting in appellate review of  a bankruptcy

                    
                              

     2We note  an $80 discrepancy between  the bankruptcy court's
judgment and the  total claimed  arrearage.  This  appears to  be
traceable to  the court  papers.   We  do not  pursue the  point,
confident that any necessary adjustment can be made on remand.

                                5

court order,  ceding no special deference to  the district court.

See,  e.g., In re Winthrop Old Farm  Nurseries, Inc., 50 F.3d 72,
                                                              

73 (1st Cir. 1995); In re  G.S.F. Corp., 938 F.2d 1467, 1474 (1st
                                                 

Cir. 1991); In re Navigation Technology Corp. 880 F.2d 1491, 1493
                                                       

(1st Cir. 1989).   This standard is fully applicable  here, as it

is in  all cases in which we are asked to decipher the meaning of

a statute.   See, e.g., In re Jarvis, 53  F.3d 416, 419 (1st Cir.
                                              

1995); United States  v. Holmquist,  36 F.3d 154,  158 (1st  Cir.
                                            

1994), cert. denied,  115 S.  Ct. 1797 (1995);  United States  v.
                                                                       

Gifford, 17 F.3d 462, 472 (1st Cir. 1994).
                 

III.  ANALYSIS
          III.  ANALYSIS

          We  organize our  analysis  in three  segments, dealing

with  the statutory framework, the  time when the  rejection of a

nonresidential lease  becomes effective under that framework, and

the implications of our exercise in statutory construction on the

calculus of relief.

                   A.  The Statutory Framework.
                             A.  The Statutory Framework.
                                                        

          Section  365(a) states,  with  exceptions not  relevant

here,  that "the  trustee, subject to  the court's  approval, may

assume or reject any executory contract or unexpired lease of the

debtor."   11  U.S.C.    365(a).3    This proviso  furnishes  the

trustee  with a multipurpose elixir for use in nursing a business
                    
                              

     3For ease in  reference, we  discuss the issue  in terms  of
trustees.   We recognize, however, that under Chapter 11 a debtor
in possession has essentially the same rights, powers, and duties
as a trustee, see 11 U.S.C.    1107(a), 1108, including the right
                           
under   365(a) to assume or reject a nonresidential lease.  Thus,
our  comments and  conclusions,  context permitting,  are equally
applicable to debtors in possession.

                                6

back to good health.  On one hand, the trustee  may prescribe the

elixir as a tranquilizer to ease the fears of squeamish suppliers

and  customers so that they  will continue doing  business with a

bankrupt  corporation.   On  the  other  hand,  the  trustee  may

prescribe  it  as an  emetic to  purge  the bankruptcy  estate of

obligations that promise to hinder a reorganization.

          Having  originally  given  Chapter  11  trustees  broad

latitude in dispensing the  elixir, Congress subsequently diluted

the  potion.    Since   section  365(a),  as  initially  enacted,

contained no temporal  boundaries within which  a trustee had  to

assume  or reject an unexpired lease, and did not require debtors

to pay rent at  the contract rate while the  trustee equivocated,

commercial  landlords  felt  themselves   unfairly  disadvantaged

because,  unlike other  creditors, they  were forced  to continue

extending  credit to  the  debtor  during  the  pendency  of  the

reorganization  proceeding.   See  130  Cong.  Rec. 20084,  20088
                                           

(daily  ed. June 29,  1984), reprinted in  1984 U.S.C.C.A.N. 590,
                                                   

598-99 (statement of Sen. Hatch).   Whether or not love  of money

is the root of all evil, it is at the least a powerful motivator.

Spurred   by  financial  self-interest,   the  landlords  lobbied

successfully  for   passage  of  the  so-called  Shopping  Center

Amendments  (the  "S/C Amendments")  as  part  of the  Bankruptcy

Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353,

98 Stat. 333.

          The  S/C   Amendments   alter  the   equation  in   two

significant respects.    First, they  direct  the trustee,  in  a

                                7

timely fashion, to "perform all the obligations of the debtor . .

.  under any  unexpired  lease of  nonresidential real  property,

until such lease is assumed or rejected."  11 U.S.C.   365(d)(3).

This  provision requires  the trustee,  inter alia,  to  pay rent
                                                            

under the lease at the contract  rate unless and until he rejects

it, and gives the landlord what  amounts to a preference   in the

form of an administrative claim   for such avails.  Thus, section

365(d)(3)  is  a  marked  departure  from  the  tenet,  reflected

throughout the  Code, that post-petition  administrative expenses

should be allowed only for "actual, necessary costs and  expenses

of   preserving  the   [bankruptcy]   estate."     11  U.S.C.    

503(b)(1)(A).  Second, if the trustee fails to take a position in

regard to the lease within sixty days from the date  of the order

for relief under Chapter 11 (or within such  longer period as the

court,  on application, may fix), the lease is deemed rejected at

that juncture.  See 11 U.S.C.    365(d)(4).  This provision gives
                             

the bankruptcy estate a  measure of protection against indecision

or inadvertence on the trustee's part.

          These  modifications  ameliorate, but  do  not entirely

solve,  several of  the problems  related to  tenant bankruptcies

that  historically   have  plagued  commercial  landlords.    One

surviving problem concerns the  rampant uncertainty as to whether

a rejection will be deemed effective on the date of the trustee's

decision or only when the court thereafter endorses the decision.

It is to this question that we now turn.

                B.  When Is A Rejection Effective?
                          B.  When Is A Rejection Effective?
                                                           

                                8

          The best hope for  capturing congressional intent is by

focusing   on  the   language   purposefully   deployed  by   the

legislature.    Thus,  a  statute ordinarily  will  be  construed

according  to its plain meaning.  See Estate of Cowart v. Nicklos
                                                                           

Drilling Co., 112 S. Ct. 2589, 2594 (1992); In re Jarvis, 53 F.3d
                                                                  

at 419;  Pritzker v. Yari,  42 F.3d  53, 67-68  (1st Cir.  1994),
                                   

cert. denied,  115 S. Ct. 1959 (1995).  But, when Congress' words
                      

admit of more than one reasonable interpretation, "plain meaning"

becomes  an impossible dream, and an inquiring court must look to

the policies,  principles and purposes underlying  the statute in

order to  construe it.   See Pritzker,  42 F.3d at  67; see  also
                                                                           

Sullivan  v. CIA, 992 F.2d 1249, 1252 (1st Cir. 1993) (explaining
                          

that  courts  may  "look  behind  statutory  language"  when  the

legislature "blows an uncertain  trumpet").  Congress, after all,

does not legislate in a vacuum.

          Here,  the protagonists  assure us  that the  statutory

language is plain, and that we need not go beyond it.  The debtor

says that under section 365(a)  the rejection of a nonresidential

lease "plainly" becomes effective on the motion filing date (when

notice of rejection is given), subject to defeasance in the event

a judge later vetoes  the trustee's decision.  The  landlord says

that under section 365(a) the rejection of a nonresidential lease

"plainly" cannot  become effective until the  court approval date

(when  the   bankruptcy  court  places  its   imprimatur  on  the

decision).      The  authorities   are   divided   as  to   which

interpretation of  the statutory  language is appropriate.   Some

                                9

courts (albeit a minority) believe that section 365(a) should  be

read,  as TMC successfully argued in the district court, to align

judicial  approval as  a  condition subsequent  to the  trustee's

independently  effective rejection  of  a  nonresidential  lease.

See, e.g.,  In re Joseph C. Spiess Co., 145 B.R. 597, 604 (Bankr.
                                                

N.D. Ill.  1992); In  re 1  Potato 2, Inc.,  58 B.R.  752, 755-56
                                                    

(Bankr. D. Minn.  1986).  Other  courts (more numerous,  overall)

believe, as  Mellon successfully argued in  the bankruptcy court,

that section 365(a)  should be read to  require judicial approval

as  a  condition  precedent  to  an  effective  rejection  of   a

nonresidential lease.  See, e.g., In re Paul Harris Stores, Inc.,
                                                                          

148 B.R. 307, 309 (S.D. Ind. 1992); In re Federated Dept. Stores,
                                                                           

Inc., 131 B.R. 808, 815-816 (S.D. Ohio 1991); In re Swiss Hot Dog
                                                                           

Co., 72 B.R. 569,  571 (D. Colo. 1987);  In re 1 Potato 2,  Inc.,
                                                                          

182 B.R.  540, 542  (Bankr. D.  Minn.  1995); In  re Revco  Dept.
                                                                           

Stores, Inc., 109 B.R 264, 267 (Bankr. N.D. Ohio 1989).  No court
                      

of appeals has ventured to answer the question.4

          In   our  judgment,   this   collision  of   viewpoints

underscores  the obvious:   although the  text of  section 365(a)

plainly indicates that a  trustee's rejection of a nonresidential

                    
                              

     4Contrary   to  Mellon's  characterization,  In  re  Arizona
                                                                           
Appetito's Stores, Inc., 893 F.2d 216 (9th Cir. 1989),  is not on
                                 
point.  There, the Ninth Circuit merely  observed that "rejection
of an unexpired lease can be accomplished only by an order of the
bankruptcy court."   Id. at  219-20 (dictum).   The statement  is
                                  
correct as far as it goes   but  it does not go far enough.   The
issue  here  is  not whether  court  approval  is required  under
section  365(a)     clearly, it  is     but  whether a  purported
rejection  becomes legally  effective  before court  approval  is
                                                       
secured.

                                10

lease  is conditional upon court approval, the text is unclear as

to  whether that  approval constitutes  a condition  precedent or

subsequent  to  an effective  rejection.    Consequently, section

365(a)  is ambiguous  in  this respect.    See United  States  v.
                                                                       

Gibbens, 25 F.3d 28, 34 (1st  Cir. 1994) ("A statute is ambiguous
                 

if it can be read in more than one way.").

          While  the  competing interpretations  proposed  by the

parties are both reasonable renditions of the statute's language,

we  believe that section 365(a) is most faithfully read as making

court approval a  condition precedent to  the effectiveness of  a

trustee's rejection  of a  nonresidential lease.   Therefore, the

date of court approval, not the motion filing date, controls.  We

are guided to this conclusion by several signposts.

          First and foremost, we think that the  structure of the

Bankruptcy  Code and  the  nature of  judicial  oversight in  the

Chapter  11 milieu combine to make it highly likely that Congress

intended judicial  authorization to  be a condition  precedent to

rejection.   Bankruptcy is inherently  a judicial process.   From

the  moment that a debtor's  petition is filed  in the bankruptcy

court, the debtor's property is in custodia legis.  See 1 William
                                                                 

C.  Norton,  Jr., Norton  Bankruptcy Law  and  Practice 2d    3:2
                                                                    

(1994).  From that point forward, the bankruptcy court is charged

with overseeing the trustee's management in order  to ensure that

the interests of the bankruptcy estate are served.  See 4 Norton,
                                                                 

supra,   77:4.
               

          Judicial oversight of the reorganization  process takes

                                11

two  forms.   Many  routine decisions  are  made by  the  trustee

without any specific clearance from the bankruptcy court, and are

reviewed (if at all) only in  the course of an examination of the

trustee's overall stewardship (say, when a plan of reorganization

is proposed  or when an  application for  fees is filed).   Other

decisions  are  not   effective  unless  they   are  specifically

sanctioned by the court.   In those instances,  judicial approval

is  almost  invariably a  condition  precedent  to the  trustee's

action.5     Arranging  matters  in  this   sequence  facilitates

judicial  oversight,  minimizes false  starts,  and  enhances the

efficiency of the process.  We can  think of no convincing reason

why  Congress  would  abruptly  depart  from  this tried-and-true

formula.   More importantly,  we are  confident that if  Congress

wished to inaugurate  so radical  a change, it  would have  taken

pains to mark the trail brightly.

          A second  reason for reading section  365(a) to require

judicial  approval as  a condition  precedent  to rejection  of a

nonresidential  lease is  rooted  in history.   Congress  enacted

section 365(a) as  part of  the Bankruptcy Code  of 1978,  making

court approval of such rejections  obligatory for the first time.
                    
                              

     5We  note  several  examples.   Before  using,  selling,  or
leasing property  of the  estate outside  the ordinary course  of
business, the trustee must seek court approval.  See  11 U.S.C.  
                                                              
363(b)(1).    Unless each  entity that  has  an interest  in cash
collateral  consents, the  trustee  may not  use cash  collateral
unless the bankruptcy court  first grants authorization.  See  11
                                                                       
U.S.C.    363(2)(A),  (B).   If the  trustee seeks  extraordinary
post-petition financing,  he  must first  obtain court  approval.
See 11 U.S.C.   364(b).  And the trustee may not abandon property
             
of  the  estate,  even  if burdensome,  without  obtaining  court
approval.  See 11 U.S.C.   554(a).
                        

                                12

The  predecessor   to  section  365(a),  section   70(b)  of  the

Bankruptcy Act of 1898,  11 U.S.C.   110(b) (repealed  1978), and

the applicable bankruptcy  rule governing actions taken  pursuant

to  section 70(b), Fed. R. Bankr. P. 607 (repealed 1978), did not

explicitly require judicial approval  of a trustee's rejection of

a lease, and  many courts  held that the  trustee, acting  alone,

could make a rejection stick.   See, e.g., Villas &  Sommer, Inc.
                                                                           

v. Mahony  (In re Steelship Corp.),  576 F.2d 128, 132  (8th Cir.
                                            

1978).  The conclusion is irresistible that Congress, by changing

the protocol in 1978, intended to involve bankruptcy courts  more

actively  in the decisional process.  We believe that this policy

of  increased involvement  is better  served by  viewing judicial

approval  as  a condition  precedent  to the  effectiveness  of a

rejection instead of as a condition subsequent.

          In  a related  vein, we  note that several  courts have

found  support  for  requiring  court  approval  as  a  condition

precedent  to  rejection  in   two  extant  rules  of  bankruptcy

procedure, namely, Fed. R. Bankr.  P. 6006 and 9014.   See, e.g.,
                                                                          

Revco, 109  B.R. at 268.   Read  together, these rules  require a
               

trustee who  desires to reject a lease to file a formal motion to

that  effect.     This,  too,  constitutes   an  innovation  for,

previously,  the rules  did not  provide a  formal  procedure for

rejecting  leases.  We think  this is another  sign that Congress

intended  courts  to  become  more  involved  in  the  decisional

process,  and, thus, reinforces our vision of court approval as a

condition  precedent to  a  valid rejection  of a  nonresidential

                                13

lease.

          The  third reason  for  our view  is  that reading  the

statute  in the  manner favored  by the  district court  tends to

reduce a bankruptcy court's order of approval to a bagatelle.  So

interpreted, the provision would trivialize judicial oversight of

the rejection  process.   Court orders are  customarily important

events in the life of a judicial proceeding; they are the primary

means through  which courts  speak, see, e.g.,  Advance Financial
                                                                           

Corp. v. Isla Rica Sales, Inc.,  747 F.2d 21, 26 (1st Cir. 1984),
                                        

and they should  carry commensurate weight.  We see no reason for

allowing a trustee to substitute his voice for that of the court.

The trustee may sing all he wants, but it is  the court that must

call the tune.  Cf. W.A. Mozart,  Le Nozze di Figaro, Act 1, sc.2
                                                              

(1786) (Figaro's Aria).

          Along  the  same  lines,  we think  that  the  district

court's "valid,  but voidable" construct, see  Thinking Machines,
                                                                          

182 B.R.  at 368, is largely bereft of meaning.  In the rejection

scenario,  the sole reason for  seeking court approval  is to cut

off  the debtor's  post-petition  liability, imposed  by  section

365(d)(3),  under the  unexpired  nonresidential lease.   If  the

bankruptcy court  disapproves the trustee's motion for rejection,

then the "rejection"  never had any meaningful legal existence in

the first  place   the trustee will remain liable for rent at the

contract rate  from the  inception of the  insolvency proceeding.

As  judicial approval  will  always  be  the  last  step  in  the

rejection  pavane, it follows that the trustee's repudiation of a

                                14

lease can never be valid in any meaningful sense until the  court

has acted.

          A final reason for  our view stems from a  concern that

treating a  rejection as  "valid, but  voidable" from the  motion

filing date forward would further ensnarl the tangles inherent in

the complexities  of modern commerce.   If "valid,  but voidable"

were the rule, the parties could act on the trustee's notice, and

their  actions would  have  to  be  undone  if  the  court  later

disagreed.     Traditionally,   attempts  to   unwind  bankruptcy

transactions after the fact have proven nettlesome, see, e.g., In
                                                                           

re Stadium  Mgmt. Corp., 895 F.2d 845, 849 (1st Cir. 1990); In re
                                                                           

Texaco, 92 B.R.  38, 50 (S.D.N.Y. 1988), and  we will not lightly
                

assume  that   Congress   intended   to   invite   these   myriad

complications.

          This round  trip back to the future serves to highlight

the importance of factual certainty in the rejection process.  In

adopting  a  requirement of  court  approval,  Congress overruled

precedent that allowed trustees to  show by informal conduct that

they had either  assumed or rejected  leases (or other  executory

contracts, for that matter).  Thus, the requirement seems to have

been designed at least  in part to remedy the  problems attendant

upon informal or  equivocal rejections   particularly the lack of

clear notice to landlords as to when they could safely redeem and

relet  their property.    See  Gregory  G.  Hesse,  A  Return  to
                                                                           

Confusion and Uncertainty as  to the Effective Date  of Rejection
                                                                           

of  Commercial Leases in Bankruptcy,   9 Bankr.  Dev. J. 521, 531
                                             

                                15

(1993) (discussing  legislative history).   Treating  a trustee's

rejection of a nonresidential lease as "valid, but voidable" tugs

in  the  opposite direction,  promoting  uncertainty  rather than

dispelling it.6

          In an effort to resist the force of these four reasons,

TMC counters with two principal points.  First, it notes that the

language  used   in  section   365(a)  is  atypical.     Congress

traditionally employs the vocabulary  of prior authorization when

inserting  a  requirement of  court approval  in  the Code.   For

example, the statutes cited in note  5, supra, all say that  "the
                                                       

court,  after notice  and  a hearing,"  may authorize  particular

actions.    TMC  visualizes  the somewhat  different  wording  of

section  365(a) as betokening a  different mechanism.   But it is

risky  to  read too  much into  Congress'  use of  an alternative

formulation,  especially when the new language is opaque.  We are

unwilling,  without  more, to  construe  the mere  absence  of an

explicit  reference to securing  court approval in  advance as an

intentional departure  from the  pattern of prior  court approval

woven throughout the fabric of the Bankruptcy Code.
                    
                              

     6We do  not think that  it is any  real answer to  insinuate
that "valid, but voidable" is workable because a bankruptcy court
will usually  support a  trustee's desire to  scrap an  unexpired
nonresidential  lease.  The magnitude of the harm that a landlord
might suffer  if the bankruptcy court  subsequently disapproved a
particular  rejection after  the  landlord  diligently relet  the
rejected   premises,  or   incurred   substantial   expenses   to
rehabilitate or  advertise them, brings into  focus the potential
unfairness inherent  in adopting  the motion  filing date  as the
effective  date of a rejection.  We  have no reason to think that
Congress  intended to add an  element of Russian  roulette to the
already  tumultuous effects  of  the   reorganization process  on
commercial landlords.

                                16

          Next,  TMC  complains  that  using the  date  of  court

approval  as  the  termination  date of  a  nonresidential  lease

burdens  the scarce  resources  of bankruptcy  estates.   In this

respect,  section 365(a), in  conjunction with section 365(d)(3),

departs from one of the  general themes of Chapter 11 in  that it

hinders  the trustee's  efforts to  rid the bankruptcy  estate of

unnecessary  baggage.   But  general themes  are, by  definition,

general;  they are  not necessarily  controlling in  all specific

instances.  Since the S/C Amendments purposefully discounted this

general theme in relation to the specific circumstances presented

by nonresidential leases, TMC's  policy argument is best directed

to the legislative, not the judicial, branch.

          We need go no  further.  For the reasons  limned above,

we  hold that a rejection of a nonresidential lease under section

365(a) becomes legally effective only after judicial approval has

been obtained.

                 C.  Relief Under Section 365(a).
                           C.  Relief Under Section 365(a).
                                                          

          Although we have decided the precise issue presented on

appeal, we think it behooves us to make clear that nothing in our

holding  today precludes  a bankruptcy  court, in  an appropriate

section 365(a)  case, from approving  a trustee's rejection  of a

nonresidential  lease retroactive to the  motion filing date.  We

explain briefly.

          Bankruptcy courts  are courts of equity,  see Pepper v.
                                                                        

Litton, 308 U.S.  295, 304-05  (1939), and,  particularly in  the
                

Chapter  11  context,  they  may  sometimes  abandon   mechanical

                                17

solutions in favor  of the pliant reins of  fairness.  See, e.g.,
                                                                          

Winthrop Old Farm  Nurseries, 50  F.3d at 75  (explaining that  a
                                      

bankruptcy  court,  applying principles  of  equity,  may in  its

discretion choose between valuation methods).  In the section 365

context, this means that  bankruptcy courts may enter retroactive

orders of approval, and should do so when the balance of equities

preponderates in favor of  such remediation.  See In  re Jamesway
                                                                           

Corp., 179 B.R. 33, 39 (S.D.N.Y. 1995) (holding that a bankruptcy
               

court  can order  rejection retroactive  to an  earlier date  "to

avoid penalizing the  debtor for an  unnecessary delay caused  by

the creditor"); see also  In re Garfinckels, Inc., 118  B.R. 154,
                                                           

154  (Bankr. D.D.C.  1990)  (suggesting that,  in the  absence of

unfair  prejudice, a bankruptcy court may enter an order nunc pro

tunc  setting the  motion filing  date as  the effective  date of

approval);  see   generally  11  U.S.C.      105(a)  (authorizing
                                     

bankruptcy courts to "issue any order,  process, or judgment that

is necessary or appropriate to carry out the provisions" of Title

11).

          Of course,  the equitable powers  of bankruptcy  courts

are  not unlimited.   They  can only  be brought  to bear  in the

service  of the Bankruptcy Code.   See Norwest Bank, Worthington,
                                                                          

v. Ahlers, 485 U.S. 197, 206 (1988).   Thus, a bankruptcy court's
                   

exercise of its residual equitable  powers must be connected  to,

and  advance the  purposes of,  specific provisions in  the Code.

See, e.g., In re Hoffman Bros. Packing Co.,  173 B.R. 177, 185-86
                                                    

(Bankr. 9th  Cir. 1994)  (invalidating nunc pro  tunc order  that

                                18

contradicted  an  express  Code  provision).    There  is  little

question, however, that a retroactive order may be appropriate as

long   as  it   promotes   the  purposes   of  section   365(a).7

Consequently, we rule that a bankruptcy court, when principles of

equity  so dictate, may  approve a rejection  of a nonresidential

lease pursuant to section 365(a) retroactive to the motion filing

date.8

          The fact  that the  bankruptcy court has  the power  to

approve the  trustee's rejection  of an  unexpired nonresidential

lease retroactive to the  motion filing date has a  salutary side

effect; it should act  as a stimulus to all parties  to cooperate

in getting the trustee's motion to reject heard and determined at

the  earliest practicable  date.   Moreover,  the possibility  of

retroactivity  helps to explain the seeming rift in the case law.

Witness,  for example, In re  Joseph C. Spiess  Co., 145 B.R. 597
                                                             

(Bankr. N.D. Ill. 1992),  the leading case cited by  the district

court in support of its "valid, but voidable" rationale.  A close

reading of Spiess indicates  that the court may have  reached its
                           

ultimate  conclusion    that  the  rejection took  effect  on the
                    
                              

     7Retroactive approval orders do not  contradict   365(c)(3).
While  that provision  commands the  trustee to  pay rent  at the
contract rate until  a nonresidential lease is rejected,  it does
not   stipulate  that  a  rejection   cannot  be  made  to  apply
retroactively.  See Jamesway, 179 B.R. at 37.
                                      

     8We note, in this  connection, that because such retroactive
orders  are  within  the  bankruptcy  court's  sound  discretion,
appeals from  a bankruptcy court's  disposition of a  request for
retroactive relief will be reviewed only for abuse of discretion.
See, e.g., Jarvis, 53 F.3d at 420; Grella v. Salem Five Cent Sav.
                                                                           
Bank, 42 F.3d 26, 30  (1st Cir. 1994); In re Gonic  Realty Trust,
                                                                          
909 F.2d 624, 626 (1st Cir. 1990).

                                19

motion filing date as opposed to the court approval date   on the

basis  of  equitable, rather  than  statutory,  principles.   The

court's actual holding is  illuminating.  After determining "that

the trustee's rejection of  a lease should be retroactive  to the

date  that trustee takes  affirmative steps to  reject said lease

such as serving notice on motion to reject," the  court held that

a court-approved rejection of  an unexpired nonresidential  lease

could  "apply retroactively to  the date the  trustee notices the

motion requesting same."  Spiess, 145 B.R. at 606.   Thus, Spiess
                                                                           

can  fairly  be  read  as  an  instance  of  a  bankruptcy  court

recognizing  that  retroactive  approval  orders  are within  its

equitable  powers  under  section  365(a),  and  acting  on  that

realization.

          Reading  Spiess  in  this manner  bridges  the apparent
                                   

conflict  in the case law.  Doctrinal incoherence vanishes, and a

single black-letter rule emerges:  rejection under section 365(a)

does  not take effect until judicial approval is secured, but the

approving court  has the equitable  power, in suitable  cases, to

order a rejection to operate retroactively.9

IV.  CONCLUSION
          IV.  CONCLUSION

          We reverse  the decision of the  district court, vacate

its order, and direct that it remand the matter to the bankruptcy

court (which, if it  so elects, may in its  discretion reconsider

                    
                              

     9Because  no  two cases  are  exactly alike,  we  eschew any
attempt to  spell  out  the  range of  circumstances  that  might
justify the use of  a bankruptcy court's equitable powers in this
fashion.  That exercise is best handled on a case-by-case basis.

                                20

its original order in light of this opinion).

          The judgment of the district court is reversed, and the
                    The judgment of the district court is reversed, and the
                                                                           

cause is  remanded  to the  district court  with instructions  to
          cause is  remanded  to the  district court  with instructions  to
                                                                           

remit  the case  to  the bankruptcy  court.   Costs  in favor  of
          remit  the case  to  the bankruptcy  court.   Costs  in favor  of
                                                                           

appellant.
          appellant.
                   

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