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Saddleback Valley Community Church v. El Toro Materials Co. (in re El Toro Materials Co.)

504 F.3d 978 (2007)

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Saddleback Valley Community Church v. El Toro Materials Co. (in re El Toro Materials Co.)

United States Court of Appeals for the Ninth Circuit
504 F.3d 978 (2007)

Facts

El Toro Materials Co. (El Toro) (debtor) leased property from Saddleback Valley Community Church (Saddleback). El Toro filed for bankruptcy and terminated the lease with Saddleback. Saddleback brought suit against El Toro for injury to the property, alleging that El Toro had left one million tons of clay on Saddleback’s property. Saddleback’s claim for damages against El Toro was in the amount of $23 million. El Toro sought to limit its liability, asserting that § 502(b)(6) of the Bankruptcy Code set a cap on damages resulting from the termination of a lease of real property. The § 502(b)(6) cap limited damages for lost rental income to the amount of expected rent for a fraction of the remaining lease term. The bankruptcy court found that the claim for injury to the property would not be capped under § 502(b)(6). El Toro appealed to the Bankruptcy Appellate Panel (BAP). The BAP reversed and held that the damages would be capped. Saddleback appealed.

Rule of Law

Issue

Holding and Reasoning (Kozinski, J.)

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