UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
MIDWEST COMMUNICATIONS CORPORATION
DEBTOR CASE NO. 91-21031
This matter is before the Court on the Motion filed herein on November 20, 1992, by Forbes Technology Center, Ltd. ("Forbes"), for an administrative expense pursuant to 11 U.S.C.'503(b)(1)(A).. The matter was heard on April 6, 1993. The debtor filed its Memorandum in Opposition to the Motion on April 14, 1993, and Forbes filed its Responsive Memorandum on April 19, 1993.
Forbes' claim is for rent it alleges is due and owing on premises leased by the debtor. Forbes maintains that the debtor left furniture and equipment on the leased premises after the filing of the debtor's Chapter 11 petition on June 25, 1991, that it continued to pay rent for the month of July 1991, but that it owes rent for the months of August through October and a pro-rated portion of November 1991. The amount claimed is $29,768.94, based on a monthly rental obligation for the period of $8,489.00.
The debtor responds that since there was no attempt to assume the lease it was rejected by operation of law sixty days after the filing of the debtor's petition. The debtor left certain office furniture and equipment on the premises, and later sold the furniture for $500.00. At some point the furniture was stored in "warehouse space". The debtor contends that it had no agreement with Forbes for storage of the furniture, and that after September 24, 1992, when the furniture was purchased, Forbes and the purchaser agreed among themselves concerning its storage.
In order for a creditor to claim an administrative expense, it must show that the expense arose from a transaction with the debtor and that it represents an actual and necessary cost or expense of preserving the estate. In In re Mainstream Access, Inc., 134 B.R. 743, 748-750 (Bkrtcy.S.D.N.Y. 1991), the debtor had equipped leased office space with furnishings and fixtures. After the filing of its Chapter 11 petition, no action was taken to assume or reject the lease and it was deemed rejected by operation of 11 U.S.C.'365(d)(4). The landlord did not ask the debtor to remove its personal property, but rather frustrated the debtor's efforts to remove it. The debtor had paid rent for the period covered by the time of its filing through the rejection of the lease. The landlord sought administrative expenses for pro-rated rent and related charges for approximately five months after rejection of the lease.
The court found that the debtor received "no actual benefit from having its property sit in the leased premises after rejection of the lease." The court pointed out that the landlord "wound up with the personal property, the value of which was the sole source of benefit to the estate." The court rejected the landlord's claim in its entirety because the landlord "got all the value to be had and the estate got none." At page 750.
This matter differs from the Mainstream Access case in that there has been no allegation by the debtor that it attempted to physically remove its property and was prevented from doing so by the landlord. However, the debtor did sell the property. The debtor has filed the affidavit of King Harrison, the purchaser, who states that he paid for the furniture by check on September 24, 1991. He further states that he contacted a Forbes representative about removing the furniture, that he did remove some, and was told by the representative that there was "no urgency" in removing the remainder.
It appears to the Court that the estate herein derived benefit from the leased premises until September 24, 1991, when the property was sold, but not after that date. Therefore, Forbes' claim for administrative expense will be limited to rental from August 1, 1991, until August 24, 1991, when the lease was rejected and storage of the debtor's property thereafter until September 24, 1991. Forbes contends that it should have $7.50 per square foot for 6,619 square feet of storage space. The debtor points out that comparable warehouse storage space is available at considerably lower rates, and that storage of the furniture in question would not require more than 1500 square feet of space.
Evidence submitted by the debtor does indicate that comparable storage space is available for $4.50 per square foot. Forbes has tendered a listing of storage space which appears to range from $5.00 to $8.00 per square foot. Since both the debtor and Forbes have submitted evidence that storage space is available at the lower end of the price range, the Court will accept $4.50 per square foot as a reasonable rate. The Court also believes that the furniture in question could have easily been stored in 1500 square feet of space. Therefore the Court will set the amount allowable for storage at $6750.00. Rental for the period August 1-24, 1991, will be set at $6572.13, or 24/31 of the contract monthly rental rate of $8,489.00.
In consideration of all of the foregoing, it is therefore the opinion of this Court that Forbes' Motion should be sustained. An order in conformity with this opinion will be entered separately.
By the Court -
Michael W. Troutman, Esq.
Margaret W. Burgin, Esq.