Nacio Systems, Inc.

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
NACIO SYSTEMS, INC., No. 08-10078
Debtor(s).
______________________________________/
Memorandum on Motion Regarding Leasehold Interest
_________________
This Chapter 11 case was commenced on January 18, 2008. On June 25, 2008, creditor Condiotti
Enterprises, Inc., filed a motion for relief from stay. The motion alleged that it was the landlord of commercial
premises leased to the debtor at 55 and 68 Leveroni Court in Novato and that prior to bankruptcy the Marin
County Superior Court had issued a judgment terminating the debtor’s leasehold and had issued a writ of
possession. The only relief sought in the motion was “permission to levy the writ of execution for possession”
of the premises. On July 10, 2008, the court granted the motion but provided that if the debtor paid Condioti
$55,000.00 within 10 days then the motion would be deemed granted 30 days thereafter. A formal order
was entered on July 16, 2008.
On August 4, 2008, Condioti filed a second stay relief motion, seeking leave to obtain a new writ of
possession before the time specified in the prior motion had expired. That motion was denied on August 14,
2008.
On October 23, 2008, Condioti filed the motion now before the court. It appears that since the
court granted relief in July there has been considerable litigation in state court in which Condioti has not been
entirely successful. It now seeks, for the first time, an order from this court requiring the debtor to
immediately surrender the leased premises to it.
Entered on Docket
November 07, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-10078 Doc# 180 Filed: 11/07/08 Entered: 11/07/08 14:11:37 Page 1 of
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Condioti is correct in noting that § 365(d)(4) of the Bankruptcy Code requires a debtor in
possession to surrender possession of commercial real property subject to an unexpired and unassumed lease
within 120 days after the order for relief. The debtor argues that this provision does not apply because in this
case the lease had terminated prepetition. The court does not address this issue because the court finds that
by failing to assert the alleged right to surrender, not once but twice, by seeking only to enforce its state court
rights, and by proceeding to litigate the right of possession before the state court, Condioti has waived any
right to enforcement of § 365(d)(4).
While the acceptance of postpetition rent does not waive any rights, postpetition litigation in state
court as in this case by Condioti does. A landlord can waive a right under § 365(d)(4) if the court finds the
existence at the time of the waiver of a right to possession, the actual or constructive notice thereof, and the
intention to relinquish the right. In re George, 177 F.3d 885, 889 (9th Cir. 1999). At the time Condioti filed
its first motion, the time for assumption had long-since expired, and Condioti’s counsel surely knew it.
Moreover, it is clear from the tortured litigation history of this dispute, both before and after bankruptcy, that
Condioti and the debtor have been dancing with each other in a complex minuet, alternating negotiations and
posturing with aggressive litigation. The court therefore has no difficulty determining that Condioti intentionally
did not seek possession from this court in its prior motions.
The court will accordingly abstain from involvement in the dispute over possession in favor of the
Marin County Superior Court, which should proceed as it deems proper. This court suggests it is appropriate
for the Superior Court to act as if no bankruptcy had ever been filed, and should accordingly apply only state
law. Counsel for the debtor shall submit an appropriate form of order forthwith.
Dated: November 7, 2008
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 08-10078 Doc# 180 Filed: 11/07/08 Entered: 11/07/08 14:11:37 Page 2 of
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