FITZ & PAL v. INTL. PIPE

OPINION OF THE COURT

SUSAN T. KLUEWER, J. This summary holdover proceeding (see RPAPL art 7) presents facts which require that I make a determination not squarely made before, that is, whether an exception to the automatic-stay provisions of the United States Bankruptcy Code (see 11 USC § 362 et seq.) applies in a commercial lease setting where the bankruptcy petition is filed before any court has declared that the landlord-tenant relationship is over. Because the lease establishing the relationship in this case terminated by the expiration of its stated term, I conclude that this proceeding to regain possession of the leased premises comes within an exception to the automatic-stay rule (see 11 USC § 362 [b] [10]) and may therefore proceed. I also conclude, however, that petitioner's request for "use and occupancy" that accompanies its claim for recovery of possession must be determined in or on referral by the Bankruptcy Court.

The Underlying Facts

By written agreement signed December 4, 2000, the parties entered into a lease of commercial premises located on Royal Avenue in Oceanside, Nassau County, New York. The term of the lease was for only three months commencing December 2001. The rent was $17,500 for the first month, and $8,500 for each of the next two months. By the lease, the tenant had the exclusive, nonassignable option to extend the term "to and including April 30, 2001," conditioned upon its giving timely written notice and making timely payment of rent for the month of March 2001 in the amount of $6,000. Rent for April 2001 was fixed at $6,000 as well. Respondent paid its rent, and effectively exercised its option to extend the term to and including April 30, 2001, or, as the parties by their conduct deemed the term, to and including May 4, 2001. Respondent did not vacate the premises at the end of its extended term. According to petitioner's witness, petitioner, by telephone, and by letter dated May 7, 2001 that it "faxed," sent by regular mail, and sent by certified mail which respondent declined to claim, demanded that respondent vacate the premises and surrender the keys. Respondent has not done so. Petitioner thus commenced this holdover summary proceeding.

The Procedural Facts

Service of process on respondent was effectuated June 5, 2001. The proceeding was first returnable June 12, 2001, and the file reflects that respondent appeared by its president on The Law

The filing of a petition in bankruptcy by a "debtor" stays enforcement of a judgment against property in the debtor's estate (11 USC § 362 [a]). It also stays any act to obtain possession of the property of the estate (id.). There are statutory exceptions to the stay, however. Thus, the filing of a petition in bankruptcy does not operate as a stay

"of any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement or during a case under [title 11] to recover possession of such property." (11 USC § 362 [b] [10].)

Congress highlighted its intention that a commercial lessee whose lease has expired could not, by the mere filing of a petition under title 11, revive an already expired lease (see Bell v Alden Owners, 199 Bankr 451 [SD NY 1996, Sweet, J.]; In re Neville, 118 Bankr 14 [ED NY 1990, Eisenberg, J.]). It did so by defining what is, and what is not, in the bankruptcy estate. Thus, the debtor's estate is comprised of "all legal or equitable interests of the debtor in property as of the [date of filing]" (11 USC § 541 [a] [1]) but does not include:

"any interest of the debtor as a lessee under a lease of nonresidential real property that has terminated at the expiration of the stated term of such lease before commencement of the case under [title 11], and ceases to include any interest of the debtor as a lessee under a lease of nonresidential property that has terminated at the expiration of the stated term of such lease during the case." (11 USC § 541 [b] [2].)

Notwithstanding the clear language of both section 362 (b) (10) and section 541 (b) (2), respondent urged in its memorandum that its "mere possession" of the property is sufficient to trigger the automatic stay. It cited In re 48th St. Steakhouse (835 F2d 427 [2d Cir 1987]) to support this contention. It also posited that every reported case where the court has applied the exception to the automatic-stay rule also involved a prior judicial determination that the landlord-tenant relationship is over. It reasoned that, since it is still in possession of the premises, and since no court has formally declared the landlord-tenant relationship in this case at an end, this Court is stayed from exercising any jurisdiction in this proceeding. I disagree. The exception to the automatic-stay rule articulated in 11 term (see Nadine Props. v Bergmann & Co., supra). But the fact that there may be no reported case applying 11 USC § 362 (b) (10) that does not also involve a prior judicial determination (see e.g. In re Neville, supra) or judgment by stipulation (see e.g. Radol v Centeno, supra) declaring the lease or tenancy at an end merely suggests that, heretofore, the plain language and underlying purpose of 11 USC § 362 (b) (10) and § 541 have been applied to situations like the one before me without controversy (cf. Little v Bright Holding Corp., 155 Misc 2d 686 [Civ Ct, Kings County 1992, Rudtizky, J.] [where the prior judicial declaration was so unimportant to the holding, it is mentioned only parenthetically]).

Conclusion

There is no basis for staying this proceeding. Moreover, petitioner, who at the inquest addressed and refuted the respondent's prior and implicitly abandoned assertions that a month-to-month tenancy was discussed and thereby created (cf. In re Neville, supra), has established that it owns the Royal Avenue premises; that it leased them to respondent pursuant to a written agreement which, including an extension, provides for a stated term; that the stated, extended term has expired; and that respondent has continued in possession. Petitioner is thus entitled to the judgment of possession it seeks. It is also entitled to a warrant of eviction. Because of the imminent, and final, closing date for a contract of the sale of the premises about which respondent is fully aware, issuance of the warrant should be immediate. It appears, however, that sums from which to pay what is owed for "use and occupancy" is within the definition of property of the bankrupt's estate (see 11 USC § 541; cf. In re Damianopoulos, supra). The request for "use and occupancy" is therefore dismissed without prejudice to an assertion of that claim in the Bankruptcy Court, or as that court might otherwise direct or allow.