IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA CHAPTER 7

Transcription

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA IN RE: BRIDALS BY KAUFMAN'S, AKA KAUFMAN'S WEDDING WORLD, AKA WEDDING WORLD, Debtor. ROSEMARY C. CRAWFORD, Chapter 7 Trustee, Movant, BANKRUPTCY NO BM CHAPTER 7 Related to Doc. No. 50 v. NO RESPONDENT, Respondent. OBJECTION OF PARK ASSOCIATES, L.P., TO MOTION FOR LIQUIDATION OF DEBTOR'S INVENTORY AND FOR APPOINTMENT OF LIQUIDATOR AND NOW comes PARK ASSOCIATES, L.P. ("Landlord"), by and through its undersigned counsel, and files the above captioned Pleading, whereof the following is a statement: 1. Landlord leased to Debtor non-residential real estate located in Robinson Town Centre, Robinson Township, Allegheny County, Pennsylvania (ALeased Premises@). A copy of the Basic Lease Terms, as set forth in Article I of the Lease, are attached to Landlord s Motion for Relief from Stay filed at Doc. No. 39 and is incorporated herein The Leased Premises is in a shopping center as that term is defined by In re Joshua 1 As set forth in the Motion for Relief from Stay, as of the filing date the Debtor was $35, in arrears under the Lease (on an unaccelerated basis). Rent is due on the first day of the month. Debtor is due, post-petition, for October rent in the amount of $3, (consisting of $2,875 base rent, $ CAM, $ Real Estate Taxes, and $43.75 Marketing Fund). Rent will continue to accrue at the monthly rate of $3,512.77, plus late charges and all other amounts under the Lease which become due in accordance with 365(d)(3).

2 Slocum Ltd., 922 F.2d 1081 (3d Cir. 1990). The Lease prohibits the conduct of any auction, going out of business sale, moving sale, liquidation sale, distress sale, fire sale or bankruptcy sale. See Article VII, Section 7.05(xv) of Lease, excerpted and attached hereto as Exhibit A. This prohibition, along with the other use and operating restrictions set forth in Article VII, was intended for the benefit of the tenant community of the shopping center Under 11 U.S.C. 365(d)(3) the trustee is obligated to timely perform all the obligations of the debtor under an unexpired lease, except those specified in 365(b)(2), after the order for relief, and until the lease is rejected. 4. Landlord believes, and therefore avers, that the plain language of 365(d)(3) imposes an obligation upon the trustee to comply with operating restrictions within a lease. Accordingly, the trustee is prohibited by the Lease and the Bankruptcy Code, in this case, from conducting the liquidation sale out of the Leased Premises. 5. In addition to objecting to the conduct of the liquidation sale generally, Landlord also objects to the apparent lack of protection of its rights and interests with respect to the conduct of the sale. The proposed order of court provides that the landlord-creditors be paid from the liquidation sale proceeds during the period from the onset of the liquidation through the completion of the liquidation sale (although it is not clear who, exactly, is suppose to pay the landlords). While this seems to acknowledge the trustee s statutory duty to the landlord(s) to pay rent, it does not go far enough. 3 Among other things, it is 2 Under Joshua Slocum the contractual interdependence of tenants, as evidenced by restrictive use provisions in their leases, is evidence of a shopping center. These restrictions are not imposed at the whim of the landlord, but rather are imposed to create and maintain a particular operating environment for the mutual benefit of the landlord and the tenant community. 3 To the extent the Court overrules the general objection to the liquidation sale, Landlord becomes an

3 unclear who is to pay rent, or when, exactly, rent will be paid. In addition, the rent should continue until the space is returned to the landlord broom clean, will all FF&E removed. Landlord believes that fairness and 365(d)(3) requires that the following provisions be added to any Order authorizing the sale: (A) that the sale be conducted in strict compliance with all rules, regulations and use and operating restrictions in effect in the shopping center except for the prohibition pertaining to liquidation sales set forth in Section 7.05(xv) of the Lease, which restrictions shall include, but not limited to, the prohibition against any posters, signage, flyers, etc., outside of the Debtor s store; 4 (B) that the duty to pay rent (and all other charges coming due under the Lease) is an expense of the sale and is to be paid by the liquidator (or something similar to make sure that Landlord is paid currently and not made to wait for some possible distribution at the end of the case); 5 (C) that rent (and all other charges coming due under the Lease) be paid within ten (10) days of the due date (except for rent which came due between October 1 st and the date that the sale involuntary provider of what are critical services to the liquidation sale, services which are at least as important as those to be provided by the liquidator. By way of contrast to the limited protection afforded Landlord in the sale documentation, consider that provided for the liquidator. The liquidator protects itself with a detailed multi-page proposal (setting forth its rights and remedies) and, in addition, has language in the proposed order which, among other things, grants it a superpriority lien in the inventory and a superpriority Chapter 7 administrative expense. 4 See Section of the Lease, excerpted and attached hereto as Exhibit B. Note that this prohibits any banners, signs or posters from being hung on the outside of the store window(s), but would allow a banner to be hung on the inside window facing out. 5 The motion indicates that the liquidator s proposal details the costs for liquidation which includes store rental. Landlord does not see that the liquidator s GOB Sale Expense Budget includes rent, and, in any event, under that proposal it appears that rent is the Estate s responsibility. Exhibit 5 references an occupancy expense of $68,000 although it is not clear that is sufficient to pay all rent that will accrue, out of whose pocket that expense is to be paid, and who is to make the actual physical payment.

4 commences, in which case such rent must be paid within ten (10) days after the date the sale commences); (D) that it be the joint and several duty of the liquidator, Bankruptcy Estate, and Omega Bank, to clean all unsold inventory and FF&E out of the Leased Premises at the conclusion of the sale and return the space to the Landlord in good order, broom clean, normal wear and tear excepted, and that all damage caused by the removal of all FF&E and inventory be repaired and that the Leased Premises be returned to the condition it was in prior to the installation of the articles so removed, and that in the event of a default in this condition that Landlord has a claim against all three, jointly and severally, for the costs it incurs in cleaning up and repairing the space;6 and (E) that the Lease will be rejected, and deemed terminated, and Landlord will have relief from stay to retake possession and dispose of any remaining materials left in the space (which would be a default of the preceding paragraph), effective upon the filing by the Trustee of a notice of rejection of the Lease, provided, however, Landlord shall have a right for ongoing administrative rent and claims if, at the effective date of the rejection, the Leased Premises is not in good order, broom clean, normal wear and tear excepted, with all damage caused by the removal of all FF&E and inventory having been repaired. WHEREFORE, it is requested that this Honorable Court deny the Motion as it affects the Leased Premises (in accordance with ECF Proposed Order A ), or, in the alternative, condition such sale on the terms and conditions set forth above (in accordance with ECF Proposed Order B ), together with such 6 Other than making sure that all FF&E is removed (and thereby preventing the liquidator from cherry picking ), this adds nothing to what the liquidator has already promised to do. Landlord seeks this provision to make sure that all FF&E is removed and to give it recourse if the liquidator should fail to do what it has promised.

5 other relief as the Court should determine is fair, just and equitable. Respectfully submitted, Date: October 14, 2004 PARK ASSOCIATES, L.P. By: /s/ Owen W. Katz Owen W. Katz, Esquire Pa. I.D. #36473 Two Gateway Center, 15th Floor 603 Stanwix Street Pittsburgh, PA (412)

6 CERTIFICATE OF SERVICE I, the undersigned, certify that I served or caused to be served the foregoing pleading on October 14, 2004, upon each of the persons and parties in interest at the following addresses, by first class U.S. mail, postage prepaid: Norma Hildenbrand Office of the United States Trustee Suite 960 Liberty Center 1001 Liberty Avenue Pittsburgh, PA Rosemary C. Crawford Crawford McDonald Greene, LLC. P.O. Box Pittsburgh, PA Elizabeth A. Dupuis, Esq. Miller, Kistler, Campbell, Miller, Williams & Benson, Inc. 720 South Atherton Street State College, PA /s/ Owen W. Katz