Opinion
Case No. 300-03373
September 13, 2000
MEMORANDUM
This case is before the Court on the movant's Verified Motion to Enforce Post-Petition Lease Agreement. For the reasons stated below, which constitute the Court's findings of fact and conclusions of law pursuant to Rule 7052, Federal Rules of Bankruptcy Procedure, the Court finds that the "Pest-Petition Lease Agreement" should not be enforced. The Court, however, does find that the debtor is obligated to pay the movant rent for the month of June 2000.
FACTS
The debtor's corporate headquarters were located at the movant's property pursuant to a lease agreement, dated May 22, 1996. The matter was originally brought before this Court upon the movant?s motion for relief from the automatic stay. The movant argued that the lease with the debtor had been terminated pre-petition. While the debtor agreed that the lease was terminated pre-petition, it argued that it had a possessory right to continue its occupancy of the premises.
With the exception of whether the debtor vacated the premises on June 4 or June 5, 2000, there is no dispute as to the facts in this matter. Pursuant to the debtor's lease agreement with the movant, the rent was due an the first of each month. The debtor failed to pay its rent in January 2000, and the movant sent notice of the default by letter dated January 27, 2000. When the debtor failed to pay rent in February 2000 or to cure the default, the movant sent a letter of termination, band-delivered on March 1, 2000. The debtor refused to vacate the property, so the movant filed a detainer warrant against the debtor in general sessions court. Judgment was granted orally in favor of the movant on April 17, 2000. The debtor filed for bankruptcy on April 19, 2000.
On May 3, 2000, the debtor tendered a check for post-petition rent for the months of April and May to the movant. The debtor was seeking to remain in possession of the property until it could transfer its operations to new office space, paying post-petition rent. The debtor's main concern was the time needed to transfer the debtor's wide area network interface system, which the debtor was told by MCI would require a 45-day minimum.
The motion for relief from stay was to be heard on May 16, 2000, however the parties announced in open court that an agreement had been reached. Thereafter, the parties submitted an agreed order to the Court, signed by counsel for both sides. Pursuant to the order, the debtor was to pay an additional holdover rent of $1687.67 by 5 p.m. on May 31, 2000, in order to stay on the premises until midnight on June 4, 2000. In addition, the order provided that the debtor would be allowed to continue to store its network interface system until July 31, 2000, at midnight for an additional $17,000, to be paid by 5 p.m. on May 31, 2000. Before the order was entered by the Court, counsel for the debtor contacted the courtroom deputy, asking that she inform the Court that "they" were working on something else, implying that the deal had fallen apart and that the parties were working on an alternative agreement. While the courtroom deputy agreed to give this information to the Court, she did not indicate whether the agreed order which had already been submitted to the Court would be held. Based on the information, the Court held the order, presuming that the parties were working on a different agreement.
Subsequently, on July 11, 2000, the movant filed its Verified Motion to Enforce Post-Petition Lease Agreement that is now before the Court. Specifically, the movant seeks to have the Court enforce the order which was never entered. In the alternative, the movant requests that the debtor be required to pay rent for the entire month of June because the debtor did not vacate the premises until June 5, 2000. The uncontroverted proof was that the June rent would have been $10,969.86 after credit for the small payment made by the debtor.
At the hearing, the debtor asserted that it moved its network interface system sooner than anticipated and that the premises had been completely vacated by midnight on June 4, 2000. As a result of this material change in circumstances, the debtor submitted that it was not in the best interest of the estate to comply with the agreement reached. Thus, the debtor only remitted a check for the pro rated rent for June 1 to June 4. The movant presented testimony that an employee of the debtor was working on the premises on June 5, 2000, and the debtor presented testimony that the employee was not on the premises that date.
DISCUSSION
The movant is requesting that this Court enforce the agreed order that was signed by the parties but was not entered by the Court. The movant does not provide any legal authority to support its request. "[T]he court speaks only through its orders or decrees, duly signed or entered of record." Donald v. San Antonio Join Stock Land Bank of San Antonio, 100 F.2d 312, 314 (5th Cir. 1938). While this Court is troubled by the way this matter has been handled, the order was not entered, and thus, the order cannot be enforced.
The next issue is whether the debtor should be required to pay rent for the entire month of June 2000 rater than the pro rated amount of $1687.67, which has already been remitted by the debtor. The movant asserts that the debtor should be responsible to pay rent for the entire month of June 2000 because the debtor occupied the premises beyond June 1, 2000, and under the lease, the rent was due on the first of the month. The movant cites Koenig Sporting Goods, Inc., 203 F.3d 986 (6th Cir. 2000), for support of its position. As pointed out by the debtor, this case is not applicable to the facts of this case because the parties agree that the lease was terminated pre-petition.
While the parties agree the lease was clearly terminated as of March 1, 2000, the debtor did not vacate the premises until June 4, 2000, or June 5, 2000. Thus, under the lease, the debtor became a holdover tenant. See Brooks v. Networks of Chattanooga, Inc., 946 S.W.2d 321 (Tenn.App. 1996). Holding over is addressed by ¶ 26 of the lease agreement:
Although conflicting testimony as to which of these dates the debtor vacated the premises was presented at the hearing, the Court finds that which of these dates the debtor actually vacated the premises is irrelevant.
The debtor argued that even though the lease was terminated it had a possessory interest in the property pursuant to 11 U.S.C. § 108(b) because it had 60 days to appeal the General Sessions judgment granting a detainor warrant. That possession is questionable but is, in any event irrelevant. Regardless, during any holdover period, rent is due as set forth in the lease.
If Tenant remains in possession of Premises or any part thereof after expiration of the Term hereof, with or without Landlord's acquiescence and without any written agreement between the parties, Tenant shall be a tenant at will and such tenancy shall be subject to all provisions hereof and there shall be no renewal of this lease by operation of law. Nothing in this Paragraph shall be construed as a consent by Landlord to the possession of Premises by Tenant after the expiration of the Term other than as Tenant at will.
As a holdover tenant, the debtor was bound by the terms of the lease. Regarding rent, ¶ 3(a) of the lease agreement sets forth the yearly rent, to be paid in equal monthly installments due on the first of each month. Thus, the debtor was obligated to pay the June rent on June 1, 2000.
The debtor asserts that it is only responsible for the $1637.67 which it already paid to the movant. The debtor bases this argument upon the provision of the agreed order which allowed the debtor to pay a pro rated amount for occupying the premises until June 4, 2000. Basically, the debtor asks the Court to approve the agreement included in the agreed order but not entered by the Court only to the extent that it allows the debtor to pay a pro rated amount of rent. At the same time, the debtor asks the Court not to enforce the portion of the agreement requiring the debtor to pay an additional $17,000. The debtor cannot have it both ways.
CONCLUSION
Accordingly, for the reasons stated, the Court denies the movant's Verified Motion to Enforce Post-Petition Lease Agreement. Furthermore, the Court finds that the debtor is responsible for the balance of the June 2000 rent in the amount of $10,969.86.
An appropriate order will enter.