Court Opinion

ID: 9647306
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:30:21.368952+00
Date Added: 2024-06-11T18:11:47.726514
License: Public Domain

KRESSEL, Chief Judge,
dissenting.
I agree with the majority on two of the three issues it decided. I agree that the contractual requirement to make the second lease payment is an obligation of the debtor that arose after the order for relief. As such, 11 U.S.C. § 365(d)(3) required the debtor to timely make the rent payment on December 1, 2007, in the amount of $90,799.22. I also agree that since § 365(d)(3) gives the landlord a right to payment, § 101(5)(a) gives her a claim for that amount.
I disagree with the majority, however, that the landlord’s claim is entitled to any priority, since Congress has given it none. The Bankruptcy Code has an elaborate system for dealing with claims. We have already seen that “claim” is a term defined in § 101(5). The priority of claims, however, is determined by § 507. Any party, including the landlord in this case, who claims priority over the claims of others must find a provision of § 507(a) that gives it such priority. The landlord relies on § 507(a)(2) which grants a second priority to “administrative expenses” allowed under § 503(b). Section 503(b) itself has a long list of expenses that are included in the description “administrative expenses.” Obviously none of the iterated examples obtains. The landlord instead relies on the generalized introductory language “the actual, necessary costs and expenses of preserving the estate.” Unfortunately for the landlord, it is well settled law that the amount of a rent payment that is entitled to priority under this section is limited to the benefit enjoyed by the estate which may be more, less, or the same as the rent for the period that the land is occupied, which is a factual issue to be determined by the bankruptcy court. See Reiter v. Fokkena (In re Wedemeier), 237 F.3d 938 (8th Cir.2001). This is an appropriate standard, since the only amount for which Congress granted an administrative expense priority is for necessary costs and expenses of preserving the estate. In my mind, this should be the end of the inquiry.
The landlord points to no provision of § 503(b) by which Congress granted her an administrative expense priority nor is there any provision in the § 365(d)(3) or anywhere else which grants her such a priority. The landlord makes three related arguments in her attempt, successful it seems, to convince us to create a priority claim for her, in spite of the fact that Congress has not.
First, she argues that somehow the requirement to pay would be meaningless unless the failure to pay resulted in a priority claim. However, that is plainly not true. The obligation by the debtor or the trustee to pay is a powerful weapon in a landlord’s arsenal. For example, it can go to the bankruptcy court and ask it to order the debtor to pay; it can ask for relief from the automatic stay, alleging that the failure to pay constitutes cause under § 362(d); it can move to dismiss the case under § 1112(b); it can argue for a shortening of the period in which the debt- or is allowed to assume or reject the lease; and it can object to the debtor’s request to extend the time for it to assume or reject. However, like most rights granted creditors, they must be exercised to be effec*557tive. What a landlord cannot do is allow time to run and then assert a large priority claim at the expense of other creditors, some of whom have congressionally granted priority claims.
Second, the landlord argues that giving her a priority claim would be consistent with congressional intent. With all due respect, there is no legislative history from which to determine congressional intent: the statement of one member of Congress on the floor is not legislative intent. In any case, the best way to determine congressional intent is from the statute. As part of what are commonly referred to as the shopping center amendments, Congress made a number of amendments favorable to landlords. If it had wanted to grant landlords a priority claim for the obligation that it created under § 365(d)(3), it could easily have done so but did not.
Last, the landlord relies heavily on the last clause of the first sentence of § 365(d)(3): “notwithstanding section 503(b)(1) of this title.” Somehow, the landlord reads this to be an override of § 503. Actually, it is quite to the contrary. It is an acknowledgment that a landlord’s administrative expense claim is limited to the extent that it benefitted or preserved the estate, but requires the payment of full rent and performance of other obligations anyway. In this regard, I agree with the Ninth Circuit Bankruptcy Appellate Panel when it said “in our view, the language of § 365(d)(3), ‘notwithstanding § 503(b)(1)’ means that notwithstanding the administrative or nonadministrative status of a claim by a lessor, the bankruptcy court must order its payment pending assumption or rejection. It does not mean that the necessity for showing the reasonableness of the rent or any of the other factors considered under § 503(b)(1)(A) has been completely abrogated.” Great Western Sav, Bank v. Orvco, Inc. (In re Orvco, Inc.), 95 B.R. 724 (9th Cir. BAP 1989). I realize that the bankruptcy appellate panel’s opinion in Orvco has been overruled by the Ninth Circuit Court of Appeals, Towers v. Chickering & Gregorgy (In re Pacific-Atlantic Trading Co.), 27 F.3d 401 (9th Cir.1994). However, that means only that Orvco is not the law in the Ninth Circuit, not that it was wrong. The Ninth Circuit said “the granting of administrative priority for this period is consistent with the intent of section 365(d)(3) and necessary to carry out its objectives.” Id. at 405. As noted, there is no way of knowing the intent of § 365(d)(3) other than reading it nor, as we have seen, is it necessary to carry out its objectives. Congress apparently wants shopping center lessees to pay for ongoing services that the shopping center was required to provide lessees. That goal is not necessarily advanced by giving the landlord a large after-the-fact priority claim.
So, what is the landlord’s administrative expense claim? It is not the per diem computation that was done by the bankruptcy court. The administrative expense claim must be determined under the standards of § 503(b)(1). In making that determination, the Eighth Circuit has acknowledged that, while contractually rent might be payable in equal payments over a certain period of time, the value of the property to the estate may differ over time. This is especially true in farm cases. Under the Eighth Circuit’s opinion in Wedemeier, the bankruptcy court should have determined the reasonable rental rate of the property from the date that the case was filed until the lease was rejected. Wedemeier, 237 F.3d 938.