In re M. Fine Lumber Co.

383 B.R. 565 (2008)

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In re M. Fine Lumber Co.

United States Bankruptcy Court for the Eastern District of New York
383 B.R. 565 (2008)

Facts

M. Fine Lumber Company (Fine) (debtor) operated a lumberyard on premises leased from Peabody Webster Holdings LLC (Peabody). Fine defaulted on the lease and then filed for chapter 11 bankruptcy. A few months later, Fine moved to assume the lease under 11 U.S.C. § 365(a). Peabody objected, asserting that Fine owed $24,961.74 in prepetition rental arrears, $17,929.66 in postpetition real estate taxes, and $9,200 in attorney fees. Peabody also asserted that Fine had not provided adequate assurance of future performance under the lease, as required by § 365. Fine argued that Peabody was not entitled to attorney fees because the parties’ lease provided for reimbursement of attorney fees only in actions instituted by Peabody, and the assumption motion had been instituted by Fine. Shortly after Fine filed the assumption motion, the bankruptcy trustee moved for dismissal or conversion of Fine’s case to chapter 7 because Fine was not meeting its postpetition obligations. If the case were converted to chapter 7, the trustee would sell the lease. At a hearing on Fine’s assumption motion, Fine tried to pay Peabody for the prepetition and postpetition amounts owed. Peabody accepted only the postpetition payment at that time. During the motion hearing, Fine told the court that Greystone Business Credit II LLC had agreed to provide Fine with postpetition working capital, including $53,000 earmarked for making rent and other payments directly to Peabody if necessary. Fine also told the court that New York Timber had agreed to guarantee Fine’s rental payments for roughly six months. An expert testified that the lease price was under the market rent price for the space, which made the lease very valuable. Fine argued that the two agreements and the expert testimony provided adequate assurance that rent would be paid during the time in which Fine anticipated proposing a reorganization plan and that if a plan could not be confirmed, the lease would be saleable to a third party.

Rule of Law

Issue

Holding and Reasoning (Craig, C.J.)

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