PASKAY, Bankruptcy Judge
The court may not permit the forefeiture of a lease for alleged techical breaches which have not harmed the lessor and have been or will be cured if a leasehold interest is essential to the successful rehabilitation of the Chapter XI debtor. See Sec. 70b at ¶ 2691 and Sec. 365(a) at ¶ 8629.
[Digest of Opinion]
The Chapter XI debtor sought an injunction prohibiting the creditor, the lessor, from interfering with the debtor's peaceful use and occupancy of its premises and a declaration that the lease under which the debtor occupied the premises was still valid and outstanding and could be assigned by the debtor. The creditor answered that the debtor had materially breached its lease by failing to pay monthly rental payments and by permitting real estate taxes on the property to become delinquent and by failing to pay the 1979 real estate taxes. Further, the creditor alleged that the debtor had breached a covenant of the lease which prohibts the lessee from encumbering its leasehold interest.
In granting the debtor the relief sought, the court stated that it would be unfair and inequitable to permit the forefeiture of the lease because the leasehold interest was indispensable to the successful consummation of the arrangement and therefore essential to the successful rehabilitation of the debtor. Additionally, it found that the alleged breach for nonpayment of taxes had been cured and that during the time the taxes were delinquent, the landlord had not suffered any measurable harm. Further, the lease failed to provide any time period within which the taxes had to be paid by the lessee. As to the second alleged breach, the placing of a mortgage on the property, the court found that this action also failed to inflict any measurable harm or injury on the creditor and that under a proposed settlement with the mortgagor, the mortgage lien would be removed from the record, thereby curing this breach. Additionally, the court noted that the creditor's tacit approval, by accepting payments from the debtor after the breach, estopped the creditor from citing the breach as grounds for termination.
Having found that the technical breaches failed to harm the lessor, and that all of them have been or will be cured, the court held that to permit the creditor to recover the property and gain a benefit of improvements paid for by the debtor "would present an unjust and inequitable windfall which this Court, as a court of equity, cannot permit or condone." Accordingly, the debtor was granted an injunction and the creditor was prohibited from interfering with the debtor's leasehold.