Front Street Prop v. Easton Petroleum

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: EASTON PETROLEUM COMPANY,
INC.,
Debtor.
FRONT STREET PROPERTIES,
Plaintiff-Appellant,
v.
EASTON PETROLEUM COMPANY, INC.,
No. 97-1619
Defendant-Appellee,
UNSECURED CREDITORS COMMITTEE, of
Easton Petroleum Company,
Incorporated,
Party in Interest-Appellee,
and
OFFICE OF US TRUSTEE,
Party in Interest.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-97-70-AMD, BK-91-1746-5-ESD)
Argued: October 1, 1997
Decided: December 3, 1997
Before WILKINSON, Chief Judge, and WILKINS
and LUTTIG, Circuit Judges.
_________________________________________________________________
Vacated and remanded for further proceedings by unpublished opin-
ion. Judge Wilkins wrote the opinion, in which Chief Judge Wilkin-
son and Judge Luttig joined.
_________________________________________________________________
COUNSEL
ARGUED: Joseph Schiffer Kaufman, SCHULMAN & KAUFMAN,
L.L.C., Baltimore, Maryland, for Appellant. Kim Yvette Johnson,
WHITEFORD, TAYLOR & PRESTON, L.L.P., Baltimore, Mary-
land; Michael Joseph Abromaitis, WRIGHT, CONSTABLE &
SKEEN, L.L.P., Baltimore, Maryland, for Appellees. ON BRIEF:
Stephen F. Fruin, WHITEFORD, TAYLOR & PRESTON, L.L.P.,
Baltimore, Maryland, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
WILKINS, Circuit Judge:
Front Street Properties (FSP) appeals a decision of the district court
affirming a ruling of the bankruptcy court that it lacked jurisdiction
to adjudicate FSP's claim that a Chapter 11 bankruptcy debtor, Easton
Petroleum Company, Inc. (Easton), was liable to FSP for damages
arising out of Easton's breach of a commercial lease. Because we
agree with FSP that the bankruptcy court possessed jurisdiction over
this matter, we vacate the judgment of the district court and remand
for further proceedings in accordance with this decision.
I.
Easton operated a number of service stations, including one on
property leased from FSP in Milford, Delaware. In March 1991, Eas-
ton filed for Chapter 11 bankruptcy protection, and soon afterward,
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Easton timely sought to assume the lease on the Milford property. See
11 U.S.C.A. § 365(a) (West 1993). Although the bankruptcy court
failed to act on the motion for a considerable period of time, Easton
continued in possession of the property, paying rent as agreed in the
lease. More than four years later, but still prior to a ruling by the
bankruptcy court on Easton's motion for approval to assume the
lease, Easton informed FSP of its intent to make no further rental pay-
ments for periods after June 30, 1995 and moved to reject the lease.
On August 4, 1995, Easton vacated the Milford property.
In the meantime, on July 17, 1995, the bankruptcy court approved
Easton's amended plan of reorganization and entered a confirmation
order. The order provided that it was to be without prejudice to the
rights, if any, of FSP to oppose Easton's attempt to reject the lease.
Additionally, the confirmation order expressly reserved jurisdiction in
the bankruptcy court over a number of matters. Of particular rele-
vance here, Article XVII of the order retained jurisdiction "to deter-
mine any and all controversies, adversary proceedings, contested
matters and other litigated matters pending on the Confirmation Date,
and disputes arising under, or in connection with, the Plan." J.A. 53.
Thereafter, the bankruptcy court ruled that Easton had exercised
reasonable business judgment in seeking to have the court approve the
assumption of the lease, and by order of May 6, 1996, the bankruptcy
court approved Easton's assumption of the lease nunc pro tunc to
September 10, 1991. The bankruptcy court then concluded that Eas-
ton had breached the lease, explaining that "[t]he expression of an
intent not to pay rent beyond June 30 could be regarded as an antici-
patory breach" and that "the later vacation triggered the damage
clauses of the lease." J.A. 95. Also, the bankruptcy court found that
FSP had established damages in the amount of $100,000 as a result
of Easton's breach. Nevertheless, the bankruptcy court concluded that
it possessed jurisdiction to award only a portion of these damages--
a pro rata portion of the rent attributable to the period from July 1
through July 16, 1995, which could be considered as an administra-
tive expense of the bankruptcy estate. The bankruptcy court held that
it lacked jurisdiction to award damages for what it characterized as "a
post-confirmation breach" by Easton. J.A. 88. FSP appealed to the
district court, which affirmed the ruling of the bankruptcy court.
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II.
The post-confirmation powers of a bankruptcy court, generally
speaking, are limited "to matters concerning the implementation or
execution of a confirmed plan." Goodman v. Phillip R. Curtis Enters.
(In re Goodman), 809 F.2d 228, 232 (4th Cir. 1987). But, a bank-
ruptcy court may retain jurisdiction over additional matters in the con-
firmation order. See Official Dalkon Shield Claimants' Comm. v.
Mabey (In re A. H. Robins Co.), 880 F.2d 769, 776 (4th Cir. 1989).
Apparently contending that the award of an administrative expense
relates to the implementation of the confirmed plan, FSP first asserts
that the bankruptcy court possessed jurisdiction to award all of the
damages suffered by FSP because the entire amount, including
amounts attributable to post-confirmation periods, should have been
considered to be an administrative expense. We disagree. "[A]ny
claim arising out of an assumed contract constitutes an administrative
expense only if, and to the extent that, the contract conferred an actual
benefit to the estate." Stewart Foods, Inc. v. Broecker (In re Stewart
Foods, Inc.), 64 F.3d 141, 145 n.2 (4th Cir. 1995). Because the bank-
ruptcy estate terminated on the date that Easton's plan of reorganiza-
tion was confirmed--July 17, 1995--the lease on the Milford
property could not have benefited the bankruptcy estate after that
date. See 11 U.S.C.A. § 1141 (West 1993); Harstad v. First Am.
Bank, 39 F.3d 898, 904 (8th Cir. 1994). Thus, rent for periods after
the entry of the confirmation order is not an administrative expense.
We are similarly unpersuaded by FSP's contention that the bank-
ruptcy court possessed jurisdiction to adjudicate FSP's claim for dam-
ages resulting from Easton's breach of the lease because the
confirmation order retained jurisdiction to permit the bankruptcy
court to determine the question of Easton's acceptance or rejection of
the lease. The question of Easton's acceptance or rejection of the
lease was expressly reserved in the confirmation order. But, that issue
is distinct from, and does not incorporate, any issue relating to Eas-
ton's subsequent breach of the lease.
The dispositive issue then is whether the remaining provisions of
the confirmation order retained jurisdiction to permit the bankruptcy
court to consider FSP's claim. As noted above, the confirmation order
4
retained jurisdiction "to determine any and all controversies ... pend-
ing on the" date of plan confirmation--July 17, 1995. J.A. 53. Thus,
if a controversy concerning Easton's breach of the lease was pending
between FSP and Easton on the date the confirmation order was
entered, the bankruptcy court did possess jurisdiction over the matter.
It is clear that prior to the entry of the confirmation order, Easton
had three times written to FSP that it intended to repudiate the lease
and to make no rental payments after June 30, 1995.* Under these cir-
cumstances, Easton committed a total breach of the lease prior to the
confirmation of the plan, and as such, a controversy over the entire
amount of FSP's damages for the lease was pending on the date of
confirmation. Hence, we conclude that the confirmation order
expressly retained jurisdiction over the controversy created by Eas-
ton's breach of the lease for the Milford property.
III.
In sum, we hold that the bankruptcy court possessed jurisdiction
over FSP's claim that Easton committed a total preconfirmation
breach of the lease. We also agree with the bankruptcy court that only
$584.16 of the resulting damages was entitled to administrative
expense priority. Although we presume that in light of the foregoing
the remaining damages accepted as established by the bankruptcy
court will be treated as a general unsecured claim against the estate,
we are uncertain on the present record whether all relevant issues--
for example, mitigation of damages by FSP--have been addressed by
the bankruptcy court. Consequently, we vacate the judgment of the
district court and remand for proceedings consistent with this opinion.
VACATED AND REMANDED FOR FURTHER PROCEEDINGS
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*During the period from June through early August 1995, FSP and
Easton were negotiating for Easton to purchase the Milford property. On
three occasions prior to July 17, 1995, Easton informed FSP that Easton
would pay no rent after June 30, 1995 and that if negotiations to purchase
the property were not fruitful, Easton would evacuate the premises.
5