In re Winn-Dixie Stores, Inc.

345 B.R. 402, 2006 Bankr. LEXIS 1235, 2006 WL 1660814
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedMarch 22, 2006
DocketNo. 05-03817-3F1
StatusPublished

This text of 345 B.R. 402 (In re Winn-Dixie Stores, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Winn-Dixie Stores, Inc., 345 B.R. 402, 2006 Bankr. LEXIS 1235, 2006 WL 1660814 (Fla. 2006).

Opinion

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JERRY A. FUNK, Bankruptcy Judge.

This case came before the Court upon Sarria Enterprises, Inc.’s (“Sarria”) Motion for Relief from Stay (“Motion”) to commence eviction procedures with respect to Winn-Dixie Stores, Inc.’s (“Winn-Dixie”) Store Number 237, Interplaza Shopping Center, Fort Laudei'dale, Florida (the “Property”), and Winn-Dixie and twenty-three of its subsidiaries and affiliates’ (collectively, the “Debtors”)1 Response in Opposition to Sarria Enterprises, Inc.’s Motion for Relief from Stay [404]*404(“Response”). The Court conducted a hearing on February 13, 2006 (the “Hearing”). Sarria and the Debtors presented testimony of witnesses and offered exhibits into evidence. In lieu of oral argument, the Court directed the parties to submit memoranda in support of their respective positions; Sarria submitted a Memorandum in Support of Sarria Enterprises, Inc.’s Motion for Relief from Stay (the “Memorandum”), and Debtors submitted Debtors’ Post-Trial Brief (the “Brief’). The Official Committee of Unsecured Creditors (“Committee”) filed a Joinder to Debtors’ Post-Trial Brief (the “Joinder”). Upon representations by counsel at the Hearing and a review of the Motion, Response, Memorandum, Brief and the Join-der, the Court finds it appropriate to deny Sarria’s Motion.

FINDINGS OF FACT

Sarria filed the Motion seeking to commence eviction procedures as to the Property for Winn-Dixie’s failure to pay rent as defined under a lease dated December 18, 1980 (the “Lease”), which consisted of Winn-Dixie’s failure to pay its pro rata share of real estate taxes for the tax years 1999 to 2004 (the “Disputed Tax Liability”). Under the Lease, Sarria was the landlord and Winn-Dixie was the tenant. (Mot. ¶ 1; Resp. ¶ 1.) Sarria asserts in the Motion that pursuant to Paragraph 37 of the Lease, Winn-Dixie owes Sarria $124,035.70 for the Disputed Tax Liability. (Mot. ¶¶ 3, 4; see also Resp. ¶ 4; Br. ¶¶ 4, 9D.) Paragraph 37 of the Lease provides in pertinent part:

Upon request of Tenant, Landlord agrees to exhibit to Tenant the paid tax statements as evidence of the basis upon which any increase in taxes is chargeable to Tenant, and such additional rental shall be payable by Tenant on demand after payment by Landlord.

(Br. ¶ 9D; Tr. at 7-8.) Sarria further asserts in the Motion that it notified Winn-Dixie of the Disputed Tax Liability on January 26, 2005 (Mot. ¶ 4; see also Br. ¶ 8), which is 26 days prior to Winn-Dixie’s petition date of February 21, 2005 (the “Petition Date”) (Br-¶ 8).

Sarria seeks to have the Court grant relief from the automatic stay pursuant to 11 U.S.C. § 362(d), which states:

On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—
1) for cause, including the lack of adequate protection of an interest in property of such party in interest;
2) with respect to a stay of an act against property under subsection (a) of this section, if—
a) the debtor does not have an equity in such property; and
b) such property is not necessary to an effective reorganization; ...

11 U.S.C. § 362(d). In reliance upon this section of the Bankruptcy Code, Sarria avers in the Memorandum that it has proven, as required by 11 U.S.C. § 362(g), that Winn-Dixie lacks equity in the Property. (Mem. at 5-7.) Sarria states that the Property “is not marketable” (Mem. at 5) because Sarria would be required to find a new tenant who would have to pay an additional $124,035.70 in order to move into the Property. (Mem. at 6; Tr. at 36.) Debtors countered with a multiple of arguments, many of which are peripheral and will not be addressed by the Court. The Committee addressed a single issue, namely that Sarria does not have a basis for seeking relief, as its “sole remedy is to file a motion to compel payment or compel assumption or rejection of its lease.” (Joinder at 2.)

[405]*405 CONCLUSIONS OF LAW

This case deals with an unexpired lease, which is covered by 11 U.S.C. § 365. This section permits a debtor in possession to assume or reject an unexpired lease of nonresidential real property within 60 days after the date of the order for relief, or within such additional time as the court grants for cause. 11 U.S.C. § 365(2)(4). “This hiatus gives the chapter 11 debtor a reasonable time to decide whether or not to assume or reject the unexpired lease.” Harris Int’l Telecomm., Inc. v. Three Star Telecast, Inc. (In re Three Star Telecast, Inc.), 73 B.R. 270, 273 (Bankr.D.Puerto Rico 1987) (citations omitted). This period is consistent with the “basic policy behind a chapter 11 petition[, which] is to permit the debtor to successfully rehabilitate itself.” Id. Therefore, § 365 offers protection under its umbrella, “operating] primarily to facilitate the debtor’s rehabilitation while still affording the non-debtor party the ability to protect its interests ....” In re El Paso Refinery, L.P., 220 B.R. 37, 44 (Bankr.W.D.Tex.1998) (citations omitted).

With respect to an unexpired lease, the customary course for relief for a non-debtor party is through § 365. Id. at 40. Thus, a motion for relief from stay filed pursuant to § 362(d) is a procedurally “improper statutory vehicle for determining the rights of parties involved in a non-terminated leasing arrangement.” Bistrian v. Easthampton Sand & Gravel Co., Inc. (In re Easthampton Sand & Gravel Co., Inc.), 25 B.R. 193, 197-98 (Bankr.E.D.N.Y.1982) (citation omitted). In the case at hand, the Lease had not been terminated prior to the Petition Date. As a result, until Winn-Dixie chooses to assume or reject the Lease, “the exercise of [Sar-ria’s] rights under § 362(d) are [sic] preempted.” Id. at 198. This is because the “rights of a party are not stayed under 11 U.S.C. 362, they are just unenforceable under section 365 until the debtor opts to assume or reject the contract or unexpired lease.” Harris Int’l Telecomm., 73 B.R. at 274.

In the present case, Winn-Dixie defaulted on the Lease pre-petition by failing to provide for but one element of the rental amount, to wit, its pro rata share of the real estate taxes, the Disputed Tax Liability. Overall, Winn-Dixie has been in substantial compliance with the Lease by continuing to pay rent month-to-month. (Tr. at 28-29.) Thus, Winn-Dixie has not fallen so far behind in its payments that it would be impossible for Winn-Dixie to assume the Lease and cure the default pursuant to § 365(d)(3), thereby terminating the lease. Cf. Buffkin v. Goodson (In re Goodson), 12 B.R.

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Related

In Re Sweetwater
40 B.R. 733 (D. Utah, 1984)
In Re Rocchio
125 B.R. 345 (D. Rhode Island, 1991)
Matter of Foxcroft Square Co.
184 B.R. 671 (E.D. Pennsylvania, 1995)
Buffkin v. Goodson (In Re Goodson)
12 B.R. 883 (S.D. Florida, 1981)
In Re El Paso Refinery, L.P.
220 B.R. 37 (W.D. Texas, 1998)

Cite This Page — Counsel Stack

Bluebook (online)
345 B.R. 402, 2006 Bankr. LEXIS 1235, 2006 WL 1660814, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-winn-dixie-stores-inc-flmb-2006.