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#1949

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

Atar, Inc.,

DEBTOR(S)

CHAPTER 11

NO. 93-40330-11

MEMORANDUM OF DECISION ON MOTION FOR

EXTENSION OF TIME TO ASSUME OR REJECT LEASE

This matter is before the Court on the debtor's motion for a second extension of the time in which to assume or reject a lease with Gwyn E. Riffel for property generally known as "Kite's Bar and Grill." The debtor appears by counsel Brenda J. Bell of Everett, Seaton, Miller & Bell of Manhattan, Kansas. Mr. Riffel, the agent for the owners of the property, GJL Real Estate and LaMoyne Riffel Trust, successors to Commerce Bank, appears by counsel David L. Stutzman and John Conderman of Arthur, Green, Arthur, Conderman & Stutzman of Manhattan, Kansas. The Court has reviewed the relevant pleadings and is now ready to rule.

FACTS

The debtor filed a chapter 11 bankruptcy petition on March 3, 1993. It is the lessee of certain nonresidential real property, so that lease is subject to 11 U.S.C.A. §365(d)(4). The predecessor to Mr. Riffel filed a motion for certain relief because the debtor allegedly failed to pay post-petition rent timely. In response, among other things, the debtor asked for an additional sixty days to decide whether to assume or reject the lease. At a hearing on May 5, the Court required the debtor to pay the disputed rent into escrow, and granted the sixty-day extension. That oral ruling was reduced to writing by an order filed on May 26, 1993.

On July 2, the debtor's counsel mailed a "motion to extend time to assume or reject leases," which was filed in the Clerk's Office on July 6, seeking an unspecified amount of time to assume or reject the "lease or unsecured transaction on the building" with Mr. Riffel along with two other items also described as a "lease or unsecured transaction." The motion indicated the debtor needed more time to negotiate with the lessors and to determine whether the "leases" are true leases or "unsecured transactions." Mr. Riffel filed an objection, to which the debtor filed a response. A hearing on this motion was held on August 25, and Mr. Riffel's counsel was given a short time to reply to the debtor's last brief.

On August 28, the debtor filed a "Notice to Assume Lease with Gwyn Riffle [sic]." Mr. Riffel also objected to this notice. The Court's ruling on the motion for extension of time will resolve this dispute as well.



CONCLUSIONS

The granting of an extension of time to assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee is controlled by 11 U.S.C.A. §365(d)(4). It provides in pertinent part that such a lease is deemed rejected if the debtor-in-possession fails to assume or reject it "within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes." The wording of this provision poses a number of problems for the debtor here. First, it suggests that not only must any extensions be requested before the time period has expired, but they must be granted before that as well. See In re Duckwall-Alco Stores, Inc., 150 B.R. 965, 972 (D.Kan. 1993). The Tenth Circuit has reached that conclusion about the provision in the Federal Rules of Bankruptcy Procedure that governs the time for objecting to exemptions. In re Brayshaw, 912 F.2d 1255 (10th Cir. 1990) (construing the words in FRBP 4003(b): "unless, within such period, further time is granted by the court"). However, at least one circuit court (in a two to one decision) has ruled that an extension may be granted after the period has expired so long as an adequate motion was filed before it expired. In re Southwest Aircraft Servs., Inc., 831 F.2d 848, 849-53 (9th Cir. 1987) cert. denied 487 U.S. 1206 (1988). Second, the wording of the provision suggests that any extensions can only be granted during the original sixty-day period fixed in the statute. Nevertheless, three circuit courts have ruled that additional extensions may be granted so long as the requirements for extending the original period are met. In re Channel Home Centers, Inc., 989 F.2d 682, 685-88 (3d Cir. 1993) (two to one decision); In re American Health Care, Inc., 900 F.2d 827, 829-30 (5th Cir. 1990); In re Victoria Station, Inc., 875 F.2d 1380, 1384-85 (9th Cir. 1989). Third, the wording suggests that motions for extension filed after the applicable period has expired may not be granted. The Court believes conclusions on this third point will resolve the present matter, and make consideration of the first two unnecessary.

In attempting to convince the Court that its second motion was timely, the debtor makes two arguments. The first addresses the date on which the first extension the Court granted began to run, and the second concerns the act a debtor must perform within the original or an extended period in order to obtain an extension. The Court concludes it must reject both assertions.

The debtor claims the order granting the first extension gave it until sixty days from the date of the order to assume or reject the Riffel lease, with the sixty days starting either from the Court's oral ruling at the May 5 hearing or from the date the order was reduced to writing. However, in responding on April 12 to the motion by Riffel's predecessor to compel rejection of the lease or for relief from stay, the debtor, among other things, asked for "an additional sixty (60) days to assume or reject the lease." The courtroom minute sheet for the May 5 hearing indicates the Court orally granted "an extension for additional 60 days." The order entered on May 26 stated that the debtor was "granted an extension of 60 days." In requesting an extension on April 12, before the original deadline of May 3(1) had passed, the debtor might have been asking for sixty days either from the date its pleading was filed or from the date on which the original period ended, but certainly not from the unknown date on which the Court might act on the request. The Court believes the most reasonable interpretation of the pleading is that the debtor was asking to be given an extension of sixty days from the end of the original period fixed by §365(d)(4), and nothing in the Court's ruling on the request should have led the debtor to believe the time would run from any later date. Sixty days after May 3 was July 2, a Friday, and the debtor's motion was not filed until July 6, the next working day since the following Monday was a federal holiday.

The debtor also argues its motion for extension was timely because it served the motion on July 2, relying on another Ninth Circuit decision, In re Victoria Station, Inc., 840 F.2d 682, 684 (9th Cir. 1988). In that case, the debtor mailed a motion to assume on the last day of the §365(d)(4) period and filed it with the court three days later. The Circuit ruled the motion was timely. The difference between that case and this one, however, is that §365(d)(4) requires the debtor to act to assume or reject but requires the Court to act to extend the debtor's time for doing so. Consequently, the debtor's notice to the proper parties is all that is required to assume, subject to the Court's later approval of the assumption. However, even in those decisions cited above in which courts have construed §365(d)(4) to allow the bankruptcy court to grant an extension after the period has expired, the courts have indicated the debtor's motion seeking the extension must be filed before the period ends. While FRBP 9006(e) indicates that service on opposing parties is complete upon mailing, this Court is not willing to stretch the language of §365(d)(4) so far as to allow the mailing, on the last day of the previously-extended time to assume or reject, of a motion for extension of time to be considered a timely request for a further extension. Even if they can be construed to allow a court to grant an extension after the period has expired, the words "within such additional time as the court, for cause, within such 60-day period, fixes" must be construed to require the motion for extension to be filed with the court before the previous period expires.(2)

In the alternative, in the event the Court should reach the conclusion which it now has, the debtor argues the late filing of its motion resulted from neglect of its counsel which should be excusable under FRBP 9006(b). However, while subsection (a) of that rule indicates its counting rules apply to time periods established by statute as well as by rule or order of the court, subsection (b) states that its rules for enlargements of time apply only to periods established by rule or order of the court. Section 365(d)(4) itself not only does not indicate that tardiness may ever be excused, it may even preclude courts, once the period has expired, from granting extensions that were requested within the period. The Court has found no case which has granted an extension under §365(d)(4) that was requested after the expiration of either the original period or a previously-granted extension. Although the period the debtor now wants extended was one previously granted by the Court so that Rule 9006(b) might appear to be applicable, the Court believes the language of §365(d)(4) overrides the excusable neglect provision of the rule and precludes the Court from excusing the late filing of the request for extension.

For these reasons, the Court concludes that the debtor's motion for an extension of time must be denied. Conseqently, under §365(d)(4), the Court must deem the lease to be rejected and order the debtor to immediately surrender the premises to the lessor.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this ____ day of November, 1993.













_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS





In Re: )

Atar, Inc., ) NO. 93-40330-11

DEBTOR(S). ) CHAPTER 11

JUDGMENT ON DECISION

This matter was before the Court on the debtor's motion for a second extension of the time in which to assume or reject a lease with Gwyn E. Riffel for property generally known as "Kite's Bar and Grill." The debtor appeared by counsel Brenda J. Bell of Everett, Seaton, Miller & Bell of Manhattan, Kansas. Mr. Riffel, the agent for the owners of the property, GJL Real Estate and LaMoyne Riffel Trust, successors to Commerce Bank, appeared by counsel David L. Stutzman and John Conderman of Arthur, Green, Arthur, Conderman & Stutzman of Manhattan, Kansas. The Court has considered this matter and issued its Memorandum of Decision on Motion for Extension of Time to Assume or Reject Lease explaining its resolution of the matter.

For the reasons stated in the Memorandum of Decision, the Court hereby denies the debtor's motion for an extension of time. Conseqently, under §365(d)(4), the lease is hereby deemed to be rejected and the debtor is ordered to immediately surrender the premises to the lessor.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of November, 1993.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

1. 1The debtor filed for bankruptcy on March 3, and its voluntary filing constituted an order for relief. Sixty days from that date was May 2, which fell on a Sunday in 1993. Fed. R. Bankr. P. 9006(a) extends statutory deadlines which fall on a weekend or holiday until the next working day. Consequently, the original sixty-day period under §365(d)(4) expired on May 3.

2. 2The same distinction is made between certain post-trial motions, which need only be "served" under FRBP 9023 (incorporating FRCP 59), and notices of appeal from bankruptcy to district court, for which "filing" is required by FRBP 8001(a). FRBP 9006 provides that "service" is complete upon mailing, but under the rule governing appeals from district courts to courts of appeal, Federal Rule of Appellate Procedure 3(a), which is nearly identical to FRBP 8001(a), "filing" has been construed to require receipt in the clerk's office within the specified period and not just service on the opposing party or deposit in the mail. See 16 Wright, Miller, Cooper & Gressman, Fed. Prac. & Pro.: Jurisdiction, §3949 at 356 (1977).

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