In re Memory Lane of Bremen, LLC

535 B.R. 901, 2015 Bankr. LEXIS 2834
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedJune 26, 2015
DocketCASE NUMBER 15-10371-WHD; 15-10374-WHD; 15-10373-WHD; 15-10372-WHD
StatusPublished
Cited by1 cases

This text of 535 B.R. 901 (In re Memory Lane of Bremen, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Memory Lane of Bremen, LLC, 535 B.R. 901, 2015 Bankr. LEXIS 2834 (Ga. 2015).

Opinion

[903]*903 ORDER

W. Homer Drake, U.S. Bankruptcy Court Judge

Before the Court is the Motion for Rejection and Termination of Lease, Relief from the Automatic Stay, and for Turnover of Premises and Financial Documents (hereinafter the “Motion”), filed in these related Chapter 11 cases by Dr. Hanimi and Mrs. Challa (hereinafter “Movants”). This matter constitutes a core proceeding, over which the Court has subject matter jurisdiction. See 28 U.S.C. § 157(b)(2)(A), (G), (0); § 1334.

Facts AND Prooedural History

Memory Lane of Bremen, LLC (hereinafter “Bremen”) and Southeast Senior Care Management Group, LLC (hereinafter “Southeast”) filed voluntary petitions under Chapter 11 of the Bankruptcy Code1 on February 20, 2015. Bremen, along with two other related debtors— Memory Lane Assisted Living, LLC (hereinafter “Ocala”) and Memory Lane of Bowdon, LLC (hereinafter “Bowdon” and collectively with Bremen, Ocala, and Southeast, the “Debtors”) — operate three separate senior long-term care facilities in Bremen and Bowdon, Georgia, and Ocala, Florida (hereinafter the “Bremen Facility”, the “Bowdon Facility”, and the “Ocala Facility”, and collectively, the “Facilities”). John Cheney is the sole member of each of the Debtors and, along with the vice-president of operations, Anita Hellmig, manages the Debtors’ operations.

On March 17, 2015, the Court directed the appointment of a patient care ombudsman in the cases of Bremen, Bowdon, and Ocala. The United States Trustee selected Melanie McNeil, the Georgia Long-Term Care Ombudsman, to serve in the Bremen and Bowden cases and Kathryn Hyer to serve in the Ocala case.

The Movants purport to own the various pieces of real property (hereinafter collectively the “Premises”) upon which Bowdon, Bremen, and Ocala operate the Facilities. The Movants have asserted that the arrangement betwéen the Movants and the Debtors is that of landlord and tenant. Specifically, the Movants contend that Southeast leases from the Movants the real property used to operate the Bowdon Facility and the Ocala Facility, while Bremen leases from Dr. Challa the property used to operate the Bremen Facility.

While the Debtors acknowledge the existence of executed, written documents that appear to be leases of the Premises, the Debtors have argued that the substance of the relationship between the parties is not one of landlord and tenant. Rather, the Debtors assert that a partnership exists between Dr. Challa and Cheney, through which Dr. Challa supplied the real property and cash for renovations and construction, while Cheney contributed cash, personal property, and business management expertise (including the ability to obtain a license to operate the Facilities). The Debtors contend that both Dr. Challa'and Cheney did so with the expectation that the partnership would acquire a certain number of operating facilities, and the partners would share in their ownership in some unspecified proportion. Consequently, the Debtors paint Dr. Challa as an equity investor in some form of business venture with Cheney, rather than the sole owner of the Premises with an unexpired lease of real property that must either be assumed or rejected by the Debtors. Although the Debtors have not presented fully their legal argument on this point, the Court assumes that, under the Debtors’ theory, the “partnership” that allegedly owns the Premises has entered some form of arrangement with regard to the [904]*904Premises, through which the Debtors occupy the Premises, as the Debtors have asserted no ownership interest in the Premises.

On March 16, 2015, the Movants filed the instant motion to compel rejection of the purported leases and for relief from the automatic stay to permit the Movants to dispossess the Debtors of the Premises. Further, the Movants seek the turnover of the Debtors’ financial and business documents. It appears that the Debtors have made no post-petition payments to the Movants, and the Movants contend that the Debtors have also failed to make necessary repairs to the Bremen and Bowdon Premises, which, under the purported leases, would be the Debtors’ responsibility. The Movants also assert that the Movants’ insurance on the Premises was at risk of being cancelled due to Southeast’s failure to make repairs pursuant to an inspection by the insurance company, which poses a risk of harm to the Movants’ interest in the Premises. The Movants’ primary argument, however, is that their interest in the Premises is not adequately protected because the Movants are unable to obtain access to the Premises or payment of rent for their use, while they remain obligated to pay debt service, property taxes, and insurance in order to retain the Premises.

Consequently, in an amendment to the Motion, the Movants urge the Court to compel the Debtors to reject the “leases” because: (1) the Debtor do not have the financial ability to make the post-petition lease payments as they come due, as required by section 365(d)(3); and (2) in order to assume the leases, the Debtors would be required to cure all defaults or provide adequate assurance that such default will be cured promptly, which the Debtors cannot do. Finally, the Movants allege that, in November 2014, the State of Florida Agency for Health Administration (hereinafter the “FAHA”) filed a complaint to revoke Cheney’s license to operate the Ocala Facility and issued a certified letter to the Debtor in which the FAHA “denied the renewal application of [Ocala].” At the last hearing on this matter, Cheney testified that he was currently operating the Ocala Facility with a temporary, but valid, license while he appeals the FAHA’s decision.

At an earlier hearing on April 29, 2015, the Debtors opposed the Movant’s request to lift the stay and requested additional time in order for the nature of the Cheney/Challa relationship to be determined in a suit filed by Cheney in the Superior Court of Haralson County — Cheney v. Challa, Case No. 15-CV-140-M (Sup. Ct. Ga.) (hereinafter the “State Court Action”). After considering the fact that the bankruptcy cases had been pending for only two months and the three facilities were operating with satisfactory reports from the appointed patient care ombuds-women, the Court concluded that maintaining the status quo by leaving the stay in place while the Debtors obtained a decision as to the validity of the Movants’ leases would be in the best interest of the Debtors’ bankruptcy estates, as well as the residents of the Facilities. The Court conditioned this ruling on the Debtors’ making a monthly payment to the Movants that would ensure that their interest in the Premises was adequately protected throughout the litigation. As the parties could not agree upon a suitable amount for such a payment, the Court held an eviden-tiary hearing on May 29, 2015, and June 2, 2015, and took the matter under advisement.

Conclusions op Law

The Movants seek enforcement of the language in section 365(d)(3), which requires a debtor-lessee under a lease of nonresidential real property to perform timely all obligations under the lease. The [905]*905Movants also assert that the Court should compel the Debtors to reject the leases and lift the automatic stay to permit the Movants to exercise their state law rights with regard to the Premises.

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Bluebook (online)
535 B.R. 901, 2015 Bankr. LEXIS 2834, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-memory-lane-of-bremen-llc-ganb-2015.