In re Dial-A-Tire, 78 B.R. at 16 (emphasis supplied). A third reported decision, In re United Cigar Stores Co., 86 F.2d 629 (2d Cir. 1936), cert. den'd, 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed. 883 (1937), also is instructive of the principles relevant to the instant controversy, notwithstanding that the court interpreted and applied a bankruptcy statute other than the one relevant here. The applicability and relevance of the Second Circuit's analysis to this ยง 365(d)(4) issue is self-explanatory and apparent from the language quoted here:
Id. at 907. Landlords, particularly, like to cite a case from the 1930's, In re United Cigar Stores Co. of America, 86 F.2d 629 (2d Cir. 1936), cert. denied, 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed. 883 (1937), in which Judge Augustus Hand considered whether the cost of repair and maintenance "was by the terms of the lease a part of the `rent.'" Judge Hand found that "[s]uch items are described in [the lease] as `additional rent' and that `these expenditures seem to us to have been made rent by agreement of the parties.'"
Furthermore, the case cited by the Trustee for the proposition that under ยง 63(a)(9) of the Bankruptcy Act repair and maintenance claims were treated as "future rent," does not say quite what the Trustee asserts. See In re United Cigar Stores Co. of America, 86 F.2d 629 (2d Cir. 1936). At the time of United Cigar Stores, ยง 63(a)(9) permitted a lessor on a rejected lease to claim damages in an amount up to the rent reserved by the lease for the three years following the earlier of the lessee's surrender of the property or the landlord's reentry.
In the instant case, the Bankruptcy Court rejected the Bank's argument that "surrender" for purposes of Section 353 can occur only when the Court has allowed rejection of the lease by Winner. On appeal the Bank relies heavily on In re United Cigar Stores Co. of America, 86 F.2d 629 (2nd Cir. 1936). That case involved a bankrupt tenant who had subleased the property to a number of subtenants. Under the lease, the tenant was required to pay a monthly rental plus, "as rent", repairs, maintenance, and taxes on the premises.
Other items, such as maintenance, insurance and utilities, were written in terms of covenants rather than actual rent. It is clear, however, that for purposes of a landlord's rent claim under a "net-net" lease, these items are recoverable. In re United Cigar Stores Co. of America, 86 F.2d 629 (2d Cir. 1936), cert. den. 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed. 883 (1937), involved a landlord's rental claim under the statutory predecessor of ยง 202. In addition to the three years' rental, the lessor claimed expenses incurred in making repairs and maintaining the property during the relevant three-year period.
The notice provided to a primary landlord of a debtor-tenant's rejection of a lease places the primary landlord in control of the property with respect to the subtenant. Chatlos 147 B.R. at 100 ( citing In re United Cigar Stores, 86 F.2d 629 (2d Cir. 1936). The Chatlos court reasoned that because the debtor-tenant had rejected the primary lease, it no longer had any "statutory, contractual or possessory rights in the property to enable it to evict the subtenant and, therefore, once the landlord under the primary lease receives notice of the order rejecting the primary lease, the debtor-tenant has "done everything possible to surrender the premises to [the landlord].
Accordingly, the Court is convinced that under the second prong of McSheridan, the repair and maintenance charges are not rent under Section 502(b)(6). The McSheridan court cited each of these cases and, as well, discussed a decision by Judge Augustus Hand in In re United Cigar Stores Co. of America, 86 F.2d 629 (2d Cir. 1936), cert. denied 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed. 883 (1937), in which Judge Hand found that the costs of repair and maintenance were rent because the lease referred to them as "additional rent." Judge Hand speculated that the additional tenant obligations were in the nature of rent because "regular" rent would have been larger in the absence of the tenant's additional obligations.
Union Central, the successor to the lease in question, admits that its lease does not label the disputed amounts as "rent," but claims that this prong of the Conston test should not be applied and that mere labels are not controlling. Rather, Union Central appears to argue that the only test for "rent reserved" under ยง 502(b)(6) should be whether the parties intended the charge to be part of the rent, regardless of labels. Union Central points to the dicta in United Cigar Stores Co. v. Irving Trust, 86 F.2d 629, 633 (2d Cir. 1936), cert. denied 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed. 883 (1937), to the effect that pure rent in a lease is undoubtedly "fixed with reference to the other burdens assumed by the tenant and it is reasonable to assume that the `regular' rent would have been larger if the tenant had not agreed to assume the [other] very substantial obligations [in the lease]." The only relevant decision by a court in the Fourth Circuit cited by either party is In re Heck's, Inc., 123 B.R. 544 (Bankr.S.D.W.Va. 1991).
1986) (attorney's fees not allowed "[e]ven though the parties defined `rent reserved' as including attorney's fees," because such charges do not relate to use of the property). In support of their position that the utility charges in issue should be included within the term "rent reserved," the landlords can muster only dictum from In re United Cigar Stores of America, Inc., 86 F.2d 629, 633 (2d Cir. 1936), cert. denied, 300 U.S. 679, 57 S.Ct. 671, 81 L.Ed.883 (1937) (charges for repair and maintenance might be so "regular" as to be regarded as rent); and In re Parkview-Gem, Inc., 465 F. Supp. 629, 634 (W.D.Mo. 1979) (payments for maintenance, insurance, and utilities, as opposed to remodelling expenses, might be considered as rent). Despite their lack of precedential support, we believe that the landlords are entitled to prevail on this issue on the basis of the clear meaning of the terms in the context of these particular leases, as they did on the first issue in question due to the clear meaning of the pertinent Code language. Article 5E of the lease in issue specifically categorizes the contested utility charges as "additional rent."