UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
MIDWEST COMMUNICATIONS CORPORATION
DEBTOR CASE NO. 91-21031
This matter is before the Court on creditor Zandale Center's ("Zandale") Motion for Administrative Expense filed herein on November 12, 1992. In response, the debtor filed its Memorandum in Opposition and Motion to (i) Strike All Claims Filed by Zandale, and (ii) Award the Debtor Costs for Responding to Zandale's Motion. This matter was heard on December 1, 1992, and submitted for decision.
Zandale contends that it should receive an administrative expense for the storage of furniture and equipment in an office rented to the debtor. According to Zandale, the debtor abandoned the furniture and equipment, and has not made any arrangements to retrieve it. The debtor maintains that it attempted to remove the furniture and equipment soon after the filing of its bankruptcy petition, but was denied access to the office by Zandale. In its answers to requests for admissions, Zandale admits that the debtor attempted to remove the property before the filing of the bankruptcy petition.
The debtor owed Zandale $908.59 in back rent for which it originally filed a secured proof of claim. Zandale had claimed a "landlord's lien" pursuant to KRS 383.070. However, as the debtor pointed out in its objection, 11 U.S.C.'545 allows the trustee to avoid a lien for rent. In an order entered on July 23, 1992, this Court sustained the debtor's objection to the secured proof of claim, leaving the claim unsecured. Zandale was granted the option of filing an unsecured proof of claim or a claim for administrative expense in regard to the rent owed. Zandale's Motion requests leave to file its amended unsecured proof of claim.
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. The sequence of events in this case makes it obvious that Zandale regarded the furniture and equipment as security for the back rent owed by the debtor. Zandale does not document a storage expense. Its Motion merely states that "a fair storage charge would be $100.00 per month." The "storage" of this property was not an "actual and necessary" cost of preserving the estate, but rather an unnecessary cost resulting from the creditor's refusal to allow the debtor to remove the property.
In In re Mainstream Access, Inc., 134 B.R. 743, 748-750 (Bkrtcy.S.D.N.Y. 1991), a case very similar to the within matter, 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.
It is therefore the opinion of this Court that Zandale's Motion for Administrative Expense should be overruled. Zandale may file its amended unsecured proof of claim. In addition, the debtor's Motion to (i) Strike All Claims Filed by Zandale and (ii) Award the Debtor Costs for Responding to Zandale's Motion should be overruled. An order in conformity with this opinion will be entered separately.
By the Court -
John O. Morgan Jr., Esq.
Margaret Burgin, Esq.