Wards Co. v. Jonnet Development Corp.

761 F.2d 84
CourtCourt of Appeals for the Second Circuit
DecidedApril 3, 1985
DocketNo. 47, Docket 84-5016
StatusPublished
Cited by2 cases

This text of 761 F.2d 84 (Wards Co. v. Jonnet Development Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wards Co. v. Jonnet Development Corp., 761 F.2d 84 (2d Cir. 1985).

Opinion

KEARSE, Circuit Judge:

Defendant Jonnet Development Corporation (“Jonnet”) appeals from a judgment of the United States District Court for the Eastern District of New York, Jacob Mish-ler, Judge, which, adopting certain proposed findings of fact and conclusions of law submitted by the United States Bankruptcy Court for the Eastern District of New York, C. Albert Párente, Bankruptcy Judge, principally (1) held that Jonnet as lessor of certain premises had violated a judgment of the bankruptcy court (a) allowing Lafayette Radio Electronics Corp. (“Lafayette”) — predecessor in interest of plaintiff Wards Company, Inc. (“Wards”) — to assume as lessee a lease on the premises, and (b) ordering Jonnet to make certain repairs to the premises; (2) declared terminated the lease and a sublease entered into by Wards; and (3) awarded damages to Wards in the amount of the profits it would have earned on the sublease had Jonnet obeyed the bankruptcy court’s judgment. On appeal, Jonnet contends chiefly that the district and bankruptcy courts lacked subject matter jurisdiction, that venue was improper, and that Jonnet was improperly denied a jury trial. Finding no merit in any of Jonnet’s contentions, we affirm.

I. Background

A. The Lease and Lafayette’s Bankruptcy

The matter arises out of a 1967 long-term lease (the “Lease”) of a retail store owned by Jonnet and the subsequent treatment of the Lease in the lessee’s chapter 11 bankruptcy . proceeding. On March 21, 1967, Lafayette Radio Electronics Corporation of Monroeville, Pennsylvania (“Mon-roeville Lafayette”), a wholly-owned subsidiary of Lafayette, leased a retail store in Monroeville (the “Store”) from Jonnet Enterprises, Inc., corporate predecessor of Jonnet. The Lease was for a term of ten years and gave Monroeville Lafayette two options to renew for additional terms of five years each. Apparently, the first such renewal option was exercised in 1977.

On January 4, 1980, Lafayette and six of its subsidiaries, including Monroeville Lafayette, filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy. Code, 11 U.S.C. §§ 1101-1146 (1982), in the United States Bankruptcy Court for the Eastern District of New York. Pursuant to a plan of reorganization confirmed by the bankruptcy court in 1981, the six subsidiaries were merged into Lafayette, and Lafayette was then merged into Wards.

In the meantime, Lafayette had reached agreement for a 7-year sublease (the “Sublease”) of the Store to Roamon’s Stores of Pennsylvania, Inc. (“Roamon’s”), and in July 1980, Lafayette submitted an application to the bankruptcy court for (1) authorization to assume the Lease and enter the Sublease, and (2) an order directing Jonnet to make certain repairs to the Store. Jon-net opposed Lafayette’s application on the merits and on grounds of the bankruptcy court’s lack of jurisdiction and improper venue.

At about the time Lafayette filed its application, Jonnet took possession of the Store and changed the locks, thereby depriving Lafayette of possession. For these actions, the bankruptcy court held Jonnet in contempt for having “violated the automatic stay provisions of § 362(a) of the [86]*86Bankruptcy Code ... with full knowledge of the pendency of the ... chapter 11 proceedings,” and eventually fined Jonnet $2,500.

In early 1981, having rejected Jonnet’s jurisdictional and procedural contentions, the bankruptcy court held hearings on the merits of Lafayette’s July 1980 application for authorization to assume the Lease and enter the Sublease. In June 1981, the bankruptcy court granted Lafayette’s application, ruling that

(1) [Lafayette] has provided the adequate assurances necessary pursuant to § 365(b)(1) and (3) and is, therefore, permitted to assume the ... [L]ease; (2) [Jonnet’s] affirmative defenses are hereby dismissed, as [Jonnet] has failed to sustain its burden of proof with respect to said defenses; (3) [Jonnet] has a duty under the terms of the ... [L]ease to promptly repair the roof and all resulting damages to the leasehold premises; (4) the agreement between [Lafayette] and Roamans [sic ] is a sublease; and (5) the proposed sublease is in the best interests of the creditors and estate and is hereby approved. 12 B.R. 302, at 313.

A Judgment was entered (“1981 Judgment”) allowing Lafayette to assume the Lease and approving the Sublease, and ruling that Lafayette’s only defaults under the Lease were the nonpayment of rents totaling $9,375.03 and that Lafayette was authorized to cure those defaults by paying such rents within 30 days. In addition, and most pertinent for purposes of this appeal, the 1981 Judgment ordered Jonnet to make repairs to the Store:

8. [Jonnet] is hereby directed at its sole expense to forthwith undertake to:
(i) repair the roof of the leased premises so as to make it watertight;
(ii) repair the interior of the leased premises to remedy all water damage caused by the leaking roof; and
(iii) [Jonnet] shall make repairs of the water damage and roof as listed in (i) and (ii) hereof so as to satisfy the requirements of the Fire Marshal and/or the appropriate municipal authority for the issuance of occupancy permits for the leased premises.
9. [Jonnet] shall have until August 31, 1981 to complete the repairs, and in the event that said repairs are not completed and the occupancy permit not obtained by August 31, 1981, [Jonnet] shall be deemed to be in contempt of this Court and a proceeding shall be commenced to determine the amount of the fine to be levied against [Jonnet].

Jonnet’s appeal from the 1981 Judgment was discontinued by consent.

Apparently, Jonnet failed to make the repairs ordered by the 1981 Judgment. As a result, by letter dated September 3, 1981, Wards, into which Lafayette had by then been merged, notified Jonnet of this failure and withheld both the rent payments ruled overdue in the 1981 Judgment and the rent payments for subsequent months. On September 5, 1981, Jonnet once again took possession of the Store and changed the locks. In November 1981, Jonnet moved in the bankruptcy court for an order directing Wards to pay Jonnet the rent due under the Lease, including the $9,375.03 found overdue in the 1981 Judgment. This motion resulted in a preliminary direction to Wards to pay the rent into escrow and an eventual order (“1982 Order”) awarding $9,375.03 from the escrow account, plus interest, to Jonnet. Prior to this resolution of Jonnet’s motion, however, Wards had commenced the present action in the bankruptcy court.

B. The Proceedings Below

Ward’s complaint, filed in December 1981, alleged that Jonnet’s failure to make the repairs ordered by the bankruptcy court in the 1981 Judgment and Jonnet’s repeated efforts to deny Wards possession of the Store constituted defaults by Jonnet under the Lease. Further, Wards claimed that Jonnet’s actions had foreshortened the available term of occupancy under the Lease and Sublease and had therefore substantially diminished their value. Accordingly, Wards sought, inter alia, a declaration terminating both the Lease and the [87]

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Motown Record Co. v. Motown Beverage Co.
28 F. App'x 107 (Second Circuit, 2002)
In Re Lafayette Radio Electronics Corp.
761 F.2d 84 (Second Circuit, 1985)

Cite This Page — Counsel Stack

Bluebook (online)
761 F.2d 84, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wards-co-v-jonnet-development-corp-ca2-1985.