Opinion
No. 78 B. 1923
January 31, 1980
Former Bankruptcy Act — Arrangement-Unsecured Debts — VAutomatic Stay — Leases — Bankruptcy Termination Clause
A bankruptcy court will not enforce a bankruptcy termination clause in a lease and grant relief from the automatic stay of Bankruptcy Rule 11-44(a) if the debtor has a realistic ohance of rehabilitation and there is not demonstration that the landlord will suffer hardship warranting termination. See Sec. 313(1) at ¶ 3318 and Sec. 365(a) at ¶ 8629, and Rule 11-44 at ¶ 20,744.
[Digest of Opinion]
The creditor, the landlord of premises rented to the Chapter XI debtor, sought either to recover the leased premises pursuant to the bankruptcy termination clause in its lease with the debtor, or to obtain relief from the automatic stay of Bankruptcy Rule 11-44(a) in order to proceed with a stayed but pending case in state court to dispossess the debtor for specified rent default. The bankruptcy court, relying on Queens Boulevard Wine Liquor Corp. v. Blum, CCH Dec. at ¶ 8639A.08, concluded that the debtor had a realistic chance of rehabilitation and refused to enforce the bankruptcy termination clause.This court noted that the debtor had kept current with its basic monthly rental payment since the institution of Chapter XI proceedings, and had been making monthly payments on tax escalation charges. These payments were at a lower rate than had been agreed upon prior to institution of Chapter XI proceedings, but the landlord would eventually be paid in full. The lack of evidence on the record that the landlord has suffered the kind of hardship which had been relied on as warranting termination of the lease in In rc D. H. Overmyer Co. Inc., CCH Dec. at ¶ 8639A.08, supported the decision of the bankruptcy court to refuse to enforce the termination clause.