Goodman v. New York City Shoes, Inc. (In Re New York City Shoes, Inc.)

86 B.R. 420, 1988 Bankr. LEXIS 717, 1988 WL 49667
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedMay 20, 1988
Docket19-11215
StatusPublished
Cited by14 cases

This text of 86 B.R. 420 (Goodman v. New York City Shoes, Inc. (In Re New York City Shoes, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Goodman v. New York City Shoes, Inc. (In Re New York City Shoes, Inc.), 86 B.R. 420, 1988 Bankr. LEXIS 717, 1988 WL 49667 (Pa. 1988).

Opinion

*421 OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

The instant adversary proceeding was deposited in our court, despite having only a slight connection with the bankruptcy case of which it is ostensibly a part, after visits to two other forums. It raises several issues of unsettled state landlord-tenant law which we must address in rendering this decision, but we nevertheless must determine this proceeding because the district court has designated it as a core proceeding. We predict that the Pennsylvania Supreme Court, at this juncture, would treat a real estate lease like any other contract, and hold that a landlord has a duty to mitigate damages for loss of rental income by making a reasonable effort to relet a premises after the tenant has vacated it in violation of a lease. We further predict that the Supreme Court would hold that, while the tenant has the initial burden of producing evidence that no reasonable effort at mitigation was made, the landlord would have the ultimate burden of persuasion that he did make a reasonable effort to mitigate damages. Applying these holdings to the facts of the instant case, we conclude that the landlord here has met his burden of proving that damages of only the rentals due on the first day of the month after the date of the tenant’s departure, plus rent for sixty (60) days additional thereafter, are reasonable. We therefore shall award the landlord damages of $21,-900.27, plus interest from February 1, 1987, and a right to obtain reasonable attorney’s fees, the latter being an issue concerning which we urge the parties to resolve between themselves without returning to us.

B. PROCEDURAL HISTORY

This proceeding was filed on February 20, 1987, in the Court of Common Pleas of Philadelphia County by MURRAY H. GOODMAN, trading as COVENTRY MALL ASSOCIATES (hereinafter referred to as "the Landlord”). The Landlord is the owner of about ten (10) shopping malls, including the Coventry Mall Shopping Center, the site of the store in issue. Named as defendants were the guarantors in a lease to MARTIN GORODETZER and eBn, LTD. (hereinafter collectively “the Tenant”), namely, NEW YORK CITY SHOES, INC. (hereinafter “the Debtor”); and ROBERT BLUMENTHAL, ROBERTA BLU-MENTHAL, BARNETT NAPPEN, and MARILYN NAPPEN (hereinafter “the Individual Guarantors”). Damages of $120,-369.28 were originally sought, representing the rent arrears, then alleged to be $15,-693.28, and $104,676.00 for minimum rent arrears through the balance of the lease term. On April 23, 1987, the Debtor joined MARTIN GORODETZER and SHEILA GORODETZER, who were in turn its in-demnitors (hereinafter “the Indemnitors”), as third party defendants.

This action had been stayed by the Debt- or’s bankruptcy filing on July 7, 1987. Therefore, on August 26, 1987, the Landlord removed the matter to the United States District Court for the Eastern District of Pennsylvania. On September 30, 1987, all of the Defendants joined in filing a Petition requesting the District Court to abstain under 28 U.S.C. §§ 1334(c)(1) and (c)(2) and to remand the matter back to the state court pursuant to 28 U.S.C. § 1452(b). On November 17, 1987, the Honorable James J. Giles of the District Court, finding the matter to “form a core proceeding” in the Debtor’s bankruptcy case, “remanded” the matter to us instead. Since this determination was unappealed, we are directed to not only hear the matter but, since it is designated as a “core proceeding,” to determine it. See 28 U.S.C. § 157(b)(1).

Ironically, on April 5, 1988, the Debtor and the Indemnitors filed a Stipulation acknowledging the latter’s duty to indemnify the Debtor. Also, on February 1, 1988, we approved a sale by the Debtor of virtually all of its assets for approximately $2 million, as a result of which it is not anticipated that any estate funds will be available for distribution to unsecured creditors. See generally In re New York City Shoes, Inc., Richard Royce Collections, Ltd. v. New York City Shoes, Inc., 84 B.R. 947, *422 952, 960 (Bankr.E.D.Pa.1988). Therefore, the Debtor has little or no value as a target, and no practical interest in this “core proceeding.” Cf. In re Humphreys Pest Control Co., 80 B.R. 687, 689 (Bankr.E.D.Pa.1987) (court determined matter removed to this court by a debtor even after the debtor was dismissed from the case).

Upon receipt of the file in this case, noting that discovery had been completed, we set it down for trial on March 22, 1988. The Indemnitors, now the principal target of the action, moved for a continuance, which we granted with the additional provisos of a Pre-trial Order requiring, inter alia, that the parties attempt to prepare a Stipulation of undisputed facts and that the trial would definitely take place on April 26, 1988. As it developed, the parties effected a Stipulation of most of the relevant facts and we were treated to but an hour of testimony, mostly from James D. Coppers-mith, the Landlord’s Vice President of Retail Leasing, whose home base is West Palm Beach, Florida.

At the close of the hearing, we allowed the parties until May 6, 1988, to supplement their rather substantial pre-trial Briefs. We are preparing our decision in the form mandated by Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52(a), although many of the Findings of Fact are drawn from the Stipulation, and some of the Conclusions of Law require somewhat extended discussions.

C. FINDINGS OF FACT

1. On September 24, 1985, the Tenant entered into a Lease Agreement for Store No. B-ll located in the Landlord’s Coventry Mall Shopping Center, North Coventry Township, Chester County, Pennsylvania, proximate to the Borough of Pottstown, beginning on October 1, 1985, and extending through December 31, 1990.

2. The Tenant rented the premises to operate therein a retail shoe store franchised by the Debtor.

3. On June 4, 1986, the Tenant advised the Landlord’s agent of their unanticipated financial difficulties in operating the store and requested that the monthly rental be deferred. This request was denied by letter dated June 11, 1986, from Mr. Coppers-mith.

4. On October 21,1986, the Tenant sent a letter to the Landlord advising that its financial difficulties had continued and recommending that the Landlord “may lease this location to others, if possible, and allow us our [sic — probably means “out”] of this lease so that we can pursue a location with less onerous rents and other fees....”

5. Mr. Coppersmith responded by letter dated November 13, 1986, in which he stated, inter alia, that “I agree with your efforts to date [?] outlined in your October 21 letter.”

6.

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Bluebook (online)
86 B.R. 420, 1988 Bankr. LEXIS 717, 1988 WL 49667, Counsel Stack Legal Research, https://law.counselstack.com/opinion/goodman-v-new-york-city-shoes-inc-in-re-new-york-city-shoes-inc-paeb-1988.