Opinion
No. 80-01923-JG
February 9, 1981
Bankruptcy Reform Act — Lease of Property — Adequate Protection — Relief from Stay
If the debtor states that he will not make any offer of adequate protection, cure defaults, or make future payments, and merely seeks to sell the lease to prevent forfeiture, the court will grant the creditor's request for relief from the stay and deny the debtor's motion for an extension of time. See Sec. 363(e) at ¶ 8613.
[Digest of Opinion]
The creditors alleged that the debtor entered into a lease agreement with them for the lease of a computer system, and that the lease payment for October, 1980 was not made. They sought adequate protection or, in the alternative, relief from the stay.
Section 363(e) of the Bankruptcy Code provides "that a court may prohibit or condition such lease as is necessary to provide adequate protection of such interest." If a party is not offered adequate protection, he is entitled to relief as a matter of law, and not as a matter of discretion with the court.
The debtor, stating he had no intention of assuming the lease, curing defaults or making any future payments, maintained that he could not or would not make any offer of adequate protection. In addition, the security deposit itself could not be looked upon as adequate protection, the court held, since it was all but totally consumed as a result of the several months of non-payment of rent.
Rather, the debtor, since November 1980, searched for a purchaser in order to avoid forfeiture of the lease. At the first hearing on January 22, 1981, on debtor's motion to continue the automatic stay beyond thirty days, the debtor indicated that he needed a further short period of time to put together a potential sale. The court continued the matter until February 4, 1981 to give the debtor that opportunity. The debtor, however, was not close to materializing such a sale, but continued only to suggest potential for such a sale. Certainly, the court held, the suggestion of such a sale, enuring only to the benefit of the debtor, could in no way rise to the level of adequate protection for the creditor. Accordingly, the court was left with no alternative but to deny the debtor's motion and grant the creditor's request for relief from the stay.