Roses Stores Inc v. Saul Subsidiary I LP

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: ROSE'S STORES,
INCORPORATED,
Debtor.
ROSE'S STORES, INCORPORATED,
Plaintiff-Appellant,
No. 97-2654
v.
SAUL SUBSIDIARY I, L.P.; I.R.E. REAL
ESTATE INV., INCORPORATED;
SALISBURY ASSOCIATES, LTD;
SALISBURY MALL, LTD,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Terrence W. Boyle, Chief District Judge.
(CA-96-898-5-BO, BK-93-1365, AP-95-62-5-AP)
Argued: June 3, 1998
Decided: July 10, 1998
Before LUTTIG, WILLIAMS, and MICHAEL, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion. Judge Michael wrote a
dissenting opinion.
_________________________________________________________________
COUNSEL
ARGUED: Bettie Kelley Sousa, SMITH, DEBNAM, HIBBERT,
L.L.P., Raleigh, North Carolina, for Appellant. David Marshall
Schilli, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte,
North Carolina, for Appellees. ON BRIEF: William G. Berggren,
ADAMS, PORTNOY & BERGGREN, Raleigh, North Carolina, for
Appellant. Jean Winborne Boyles, Raleigh, North Carolina, for
Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
On September 5, 1993, Rose's Stores filed for Chapter 11 bank-
ruptcy. During the course of the subsequent bankruptcy proceedings,
Rose's paid several of its landlords (the appellees) rent which,
although it came due under its leases after the bankruptcy petition had
been filed, was for pre-petition occupancy of the premises. After con-
firmation of the bankruptcy plan, Rose's brought this suit against the
landlords to recover those rent payments as voidable post-petition
payments of pre-petition debts. The landlords defended on the ground
that the rent payments were properly made because they were
required by § 365(d)(3) of the Bankruptcy Code. The bankruptcy
court held that the payments were not required by§ 365(d)(3) and
thus were voidable transfers. The district court reversed, concluding
that the rent payments were obligations that arose post-petition by the
terms of the contracts and that § 365(d)(3) therefore required Rose's
to make the rent payments as it did. Thus, the district court granted
summary judgment for the defendant landlords.
Having had the benefit of oral argument and having reviewed the
record and the submissions of the parties, we conclude that the district
court's analysis was correct. Accordingly, we affirm on the reasoning
of that court.
AFFIRMED
2
MICHAEL, Circuit Judge, dissenting:
I agree with the bankruptcy court that the rent payment obligations
arose before Rose's Stores filed its petition and that the payments are
therefore voidable transfers that may be recovered by Rose's Stores.
The language of § 365(d)(3) is ambiguous as to whether an obligation
"aris[es]" when the obligation is due to be paid or when it accrues.
The overall structure of the Bankruptcy Code and the legislative his-
tory both indicate that Congress intended to adopt the accrual theory.
This is the approach applied by the overwhelming majority of courts
considering the matter. See, e.g., In re McCrory Corp., 210 B.R. 934,
940 (S.D.N.Y. 1997); In re William Schneider, Inc., 175 B.R. 769(S.D. Fla. 1994); In re Child World, Inc., 161 B.R. 571, 575-76
(S.D.N.Y. 1993); In re Best Products Co., 206 B.R. 404, 406-07
(Bankr. E.D. Va. 1997); In re All for A Dollar, Inc., 174 B.R. 358,
361-62 (Bankr. D. Mass. 1994). Using the accrual approach, the rent
payment obligations arose during the month before Rose's Stores
filed for bankruptcy, even though the payments were not due to be
made until five days after the end of that month (which was after the
petition was filed). The rent payments in question were prepetition
obligations that should not have been made by the bankruptcy estate.
Those payments are therefore voidable and should now be recovered
by Rose's Stores under §§ 549 and 550 of the Bankruptcy Code.
Accordingly, I would reverse the district court and reinstate the order
of the bankruptcy court granting summary judgment to Rose's Stores.
I therefore respectfully dissent.
3