Microf LLC v. Cumbess (In re Cumbess)

Paul Cumbess (debtor) leased an HVAC unit from Microf LLC (creditor) for his home. Two years later, Cumbess filed a petition for bankruptcy under Chapter 13. At that time, there was still time left on the lease. In the bankruptcy proceeding, the court-appointed trustee did not agree to continue the lease obligations, also called assuming the lease. However, Cumbess personally agreed to assume the lease obligations, and the court confirmed the reorganization plan with that personal assumption. After the plan was confirmed, Cumbess missed multiple lease payments and soon owed Microf over $1,700. Microf filed a motion with the bankruptcy court, seeking to have this debt paid from the bankruptcy estate as an administrative expense of the estate. Microf argued that the lease had been assumed by the bankruptcy estate, which meant that any missed payments were necessary costs of preserving the estate, which, in turn, meant the payments were administrative expenses. The bankruptcy court ruled that the first element of this chain of causation was missing because the bankruptcy estate had not assumed the lease. The bankruptcy court held that (1) only the trustee could assume a lease on behalf of the bankruptcy estate and (2) the trustee’s failure to assume this lease meant that any continuation of the lease had occurred outside the bankruptcy estate. The bankruptcy court denied Microf’s claim. The federal district court affirmed that denial. Microf appealed.