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

GEORGE C. PAINE, II, Chief Bankruptcy Judge.

This matter came 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 Custom V.P. Associates and Vinepeal, Inc. with respect to a non-residential lease for premises located in Coral Gables, Florida. The issue is whether the attorney fees expended by the landlord are recoverable from the debtor pursuant to 11 U.S.C. § 365(b)(1)(B) or pursuant to 11 U.S.C. § 503(b).

Under § 365(b)(1), a right to cure is triggered "if there has been a default." 11 U.S.C. § 365(b)(1)(1999). The required cure of defaults does not create an independent right to attorney fees, but cure will include attorney fees if the contract or lease so provides and IF there has been a default. In re Best Products Co., Inc., 148 B.R. 413 (Bankr. S.D.N.Y. 1992). The landlord in this case cites the court to In re Westworld Community Healthcare, Inc., 95 B.R. 730 (Bankr. C.D. Cal. 1989). In that case the court held:

The purpose of § 365(b)(1)(B) is to indemnify the other party to the contract or lease being assumed, against loss. The purpose of an attorney's fee clause in a lease as well as an attorney's fee clause in a security agreement is the same, to indemnify the lessor or secured party against legal expenses incurred by reason of the other party's default. Bullock 17 B.R. at 439. In In re Foreign Crating, Inc., 55 B.R. 53 (Bankr.E.D.N.Y. 1985), the landlord demanded attorney's fees for the preparation of its motion to compel debtor to assume or reject the lease and for its answer to the motion. Landlord referred to a lease provision providing for attorneys' fees for any suit or action as a result of the lessee's default. Id. at 54. The court held that attorneys' fees "constitute a pecuniary loss resulting from debtors (sic) default pursuant to 11 U.S.C. § 365(b)(1)(B), and such fees must be recompensed by the debtor before it may assume its lease." Id. In other words, § 365(b)(1)(B) provides a separate right of compensation for loss related to a default under an assumed lease. The right is activated by a showing of loss resulting from or in connection with a default.

Westworld, 95 B.R. at 733 (emphasis added). Even the authority relied upon by the landlord which holds that § 365(b)(1)(B) may provide a right to attorney fees, acknowledges that the right to attorney fees is triggered by "default."

In this case, the Landlord has not demonstrated to the court that the debtor is in default under its lease. Absent a default, there is no right to attorney fees under the terms of the lease or the language of § 365(b)(1).

Alternatively, the landlord seeks an attorney fee award pursuant to 11 U.S.C. § 503(b)(3)(D). That section allows a creditor an administrative expense priority for the actual, necessary expenses incurred by the creditor in making a substantial contribution to a case in chapter 9 or 11. At this point, the court finds that the request is premature, and in any event that no showing of a substantial contribution has been made. Accordingly, the court will deny the landlord's request without prejudice.

The court hereby finds that the cure amount is $0, and directs the debtor to prepare on order not inconsistent with this decision.