IN RE SERVICE MERCHANDISE COMP., (Bankr.M.D.Tenn. 1999)

GOERGE C. PAINE, II, United States Bankruptcy Judge.

This matter caine before the court on the issue of what, if any, is the "cure amount" pursuant to 11 U.S.C. § 365(b)(1) owed by the debtor to Mid-South Development Company, Inc. ("MSDC") with respect to a non-residential lease for premises located in Tulsa, Oklahoma. The question of the cure amount is purely factual. After assessing the evidence and the credibility of the witnesses, the court finds that the cure amount is $7,200.

The lease was made between Gibson Products, as Sub-lessor and Service Merchandise Company as Sub-lessee. The relevant lease term provides:

The leased premises is delivered to Sub-lessee in a good state of repair and Sub-Lessee agrees to use the seine as a prudent administrator would do and to return the same to Sub-lessor upon termination hereof in the same condition as that when received, ordinary wear and tear incident to the use of the leased premises being excepted. Sub-lessee agrees to maintain the leased premises in a good and sound state of repair. Such obligation to maintain shall include, without limitation, maintenance of the root walls, foundation and other structural portions of the building, painting of the interior and exterior of the building as needed, maintenance of the plumbing, fixtures, air conditioning systems and equipment, sprinkler systems and equipment, light fixtures and equipment, all gas and electrical apparatus and equipment and all other fixtures and equipment attached to and used in connection with the building, replacement of broken glass and maintenance of the hard surfaced parking area included in the leased premises.

MSDC contends that its "cure amount" includes damages beyond ordinary wear and tear for the repair, overlay and restriping of the parking area, a new roof, and new carpet. These three items total approximately $295,390.00. The debtor insists that the repairs would cost about $7,200 and include repair and restripirig the parking area, repair of the existing roof, and cleaning and repairing the carpet. It is the debtor's position that the repairs to the roof, carpet and parking area are the result of ordinary wear and tear usage of a retailer.

In order to assume an executory contract or unexpired lease in which a default has occurred, the debtor must cure the default and provide compensation for pecuniary loss, or provide adequate assurance that the cure and compensation will occur promptly. 11 U.S.C. § 365(b)(1) (1999). In this case, the debtor seeks to cure the default and provide compensation, but the parties do not agree on the amount of compensation.

Unless a loss is shown to have occurred, the anus to remunerate for such loss does not arise. See In re Eagle Bus Mfg., Inc., 148 B.R. 481 (Bankr. S.D. Tex. 1992). It was incumbent upon MSDC to demonstrate that the losses it sought to be compensated for were caused by something beyond ordinary wear and tear as provided for in the lease. lit at 482 ("[The party seeking compensation] bears the burden of proving its right to payment for "all elements of compensation and damages for pecuniary loss'."); see also In re Joshua Slocum Ltd., 103 Bit 601, 605 (Bankr. E.D. Pa. 1989). No such loss was shown. The court heard no proof that the items at issue were unusual for a large retailer. The parking lot was traversed by large semis carrying inventory. The carpet was subject to heavy foot traffic and wide variety of inventory, and no information was provided about the age of the carpet or its life expectancy. Finally, the court found the debtor's witness credible that the roof could be repaired for about $4,000.

The debtor's proof showed that the parking lot had been well maintained with 80% of the space in good condition. The remaining 20% of the parking area could be easily repaired and restriped for about $1,200. As to the root Mr. Mayo explained that it is still in fair condition with a life expectancy of 6-8 more years. He estimated repair costs at about $2,000. The carpet has been exposed to heavy retail traffic and needs to be shampooed and repaired. It was his estimation that the carpet could be repaired for about $4,000. Mr. Mayo was knowledgeable, thorough and credible as to the needed repairs and the cost of those repairs.

Mr. Hutson testified for MSDC. The court found Mr. Hutson's figures as to what a new roof, new carpet, and newly overlain parking lot credible, but MSDC failed to demonstrate the need for these items. Most importantly, MSDC failed to show that the needed repairs were caused by anything beyond normal wear and tear of a retailer of this size.

The language of the Sub-lease provides tat the premises will be returned to the Sub-lessor in the same condition as it was at the beginning of the lease, "ordinary wear and tear incident to the use of the leased premises being excepted." The proof at the hearing failed to demonstrate any damages beyond ordinary wear and tear. According to the debtor's own witness, the carpet, roof and parking lot could be repaired for approximately $7,200. The court will therefore set the "cure amount" at $7,200. The court directs the debtor to prepare an order not inconsistent with this decision.

It is therefore SO ORDERED.