Multiple Allied Services, Inc

OCR transcription for search; preserved printed pages are authoritative

Entered on Docket
October 15, 2010

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

FILED
OCT 15 2010

UNITED STATES BANKRUPTCY COURT
GAN FRANCISCO, GA 5%

UNITED STATES BANKRUPTCY COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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In re Case No. 09-47577 RLE

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MULTIPLE ALLIED SERVICES, INC.,
dba MIRACLE AUTO PAINTING,

Chapter 7

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Debtor.

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MEMORANDUM RE KAYLAND OF SACRAMENTO, LLC’S MOTION TO FIX THE AMOUNT
OF ATTORNEYS’ FEES AND COSTS DUE AS ADMINISTRATIVE RENT

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Landlord is entitled to an administrative claim for all legal

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services performed from the petition date until the leasehold was

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surrendered on January 22, 2010. The court determines the amount

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of such fees to be $28,066.

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The lease was deemed rejected on December 17, 2009, when

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Debtor failed to assume it within 120 days after the filing of the
24|/petition. 11 U.S.C. § 365(d) (4).

25 Although section 365(d) (4) requires Debtor to surrender the
26llpremises immediately upon rejection, Judge Jellen determined that
27||Debtor did not surrender the premises before it was ordered to do

28 ]/so on January 22, 2010.

MEMORANDUM RE AMOUNT OF
ATTORNEYS’ FEES AND COSTS
DUE AS ADMINISTRATIVE RENT -1-

us coversex Ege, O9-47577 Doc#168 Filed: 10/15/10 Entered: 10/15/10 13:40:31 Page 1 of

INFORMATION

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Landlord and Trustee stipulated on March 4, 2010 that
Landlord’s administrative claim included unpaid rent from the
petition date through date of actual surrender of the premises
(rather than the date of deemed rejection), and that “rent” for
such period included any contractual obligation to pay attorneys
fees (the Stipulation).

Trustee argues that, but for the Stipulation, Landlord could
recover only those fees incurred between the petition date and the
date of rejection. Cukierman v. Uecker (In re Cukierman), 265 F.3d
846, 852 (9th Cir. 2001).

Trustee seeks to be relieved of the Stipulation on three
grounds: mistake; lack of notice to creditors; and lack of
consideration. Mistake is not a sufficient basis to set aside the
Stipulation, because the mistake was neither mutual nor caused by
Landlord. The Stipulation stated very clearly that Landlord could
recover attorneys fees incurred through the date of surrender.
Lack of notice to creditors is not a sufficient basis to set aside
the Stipulation, because the court declines to permit Trustee to
attack his own act as ultra vires, especially where that act was
not a settlement of all issues, but merely a narrowing of issues
for a final hearing. Lack of consideration is also not a
sufficient basis to set aside the Stipulation. By narrowing the
issues to be resolved at a final hearing, the Stipulation provided
a benefit to the estate by reducing the estate’s litigation costs.
At the same time, it is also far from clear that the Stipulation
gave away a valid defense to a claim for fees incurred between
rejection and surrender. Debtor’s failure to surrender the

premises upon rejection violated Debtor’s duties under section

MEMORANDUM RE AMOUNT OF
ATTORNEYS’ FEES AND COSTS
DUE AS ADMINISTRATIVE RENT -2-

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365(d) (4), which gave rise to an administrative claim for damages

caused by that violation. see In re Malden Mills Industries, Inc.,

303 B.R. 688 (lst Cir. BAP 2004); see also In re TSB, Inc., 302

B.R. 84 (Bankr. D. Idaho 2003).

The attorneys fees provision in the lease makes all fees
incurred by Landlord to enforce its rights under the lease payable
immediately as rent. The services performed from the petition date
though the date of surrender meet that criterion. The lease
provision does not limit the amount payable to reasonable fees
(although it also appears that the amounts sought are reasonable).
It thus appears that all attorneys fees incurred from the petition
date through the date of surrender constitute an allowable

administrative claim. See Cukierman, 265 F.3d at 852 (whether fees

recoverable as administrative expense depends upon whether those
fees are payable during administrative rent period under terms of
lease).

Under the bright-line test adopted by the Ninth Circuit in
Cukierman, fees incurred after the surrender date cannot be
accorded administrative expense priority, even if those fees relate
directly to the enforcement of pre-surrender lease obligations. In
Cukierman, the BAP had held that the landlord was entitled to fees
incurred post-rejection in enforcing its rights to pre-rejection
rent, but the court of appeals expressly rejected that approach and

reversed the award of fees incurred after surrender. Id.

OF 15 Loi \ ~

Date Hon. Thomas E. Carlson

MEMORANDUM RE AMOUNT OF
ATTORNEYS’ FEES AND COSTS
DUE AS ADMINISTRATIVE RENT =e

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