mkv Doc 102 Filed 01/17/17 Entered 01/17/17 12:53:28 Main Document Pg 1 of 7

Transcription

1 Pg 1 of 7 The Chrysler Building 405 Lexington Avenue New York, NY (212) Evan J. Zucker Attorneys for 158 West 27 th Street Owner, LLC UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: GRACIOUS HOME LLC, et al., Chapter 11 Case No (MKV) (Jointly Administered) Debtors. LIMITED OBJECTION OF 158 WEST 27 TH STREET OWNER, LLC TO MOTION OF DEBTORS APPROVING (I) REJECTION OF CERTAIN UNEXPIRED NONRESIDENTIAL REAL PROPERTY LEASES PURSUANT TO 11 U.S.C. 365 AND (II) EXTENSION OF TIME TO PERFORM OBLIGATIONS UNDER 365(d)(3) 158 West 27 th Street Owner, LLC (the Landlord ), by and through its undersigned counsel, Blank Rome LLP, submits this limited objection (the Limited Objection ) to the Motion of Debtors Approving (i) Rejection of Certain unexpired Nonresidential real Property Leases Pursuant to 11 U.S.C. 365 and (ii) Extension of Time to Perform Obligations Under 365(d)(3) (the Rejection Motion ) filed by the above-captioned debtors (the Debtors ). In support of this Limited Objection, the Landlord respectfully states as follows: BACKGROUND 1. The Landlord and the Debtors are parties to that certain lease agreement, made as of April 21, 2011 (the Lease ) relative to office space at 158 West 27th Street, New York, NY (the Premises ). See Rejection Motion at Exhibit E. The Lease had a ten-year term. Upon the 1

2 Pg 2 of 7 expiration or other termination of the Lease, the Debtors are required to surrender the premises, broom-clean, in good order and condition, and such obligation shall survive the termination of the Lease. Lease at 21. To surrender the premises, the Debtors are required to, among other things, turnover all keys to the Premises to the Landlord or building superintendent. 2. On April 21, 2011 Isidore Mayrock entered into a guaranty agreement with the Landlord in which Isidore Mayrock guaranteed the performance of the Debtors obligations under the Lease. Paragraph 4C of the guaranty provides that the Guarantor shall not be liable under the Lease for any obligation, after the termination of the Lease, from the date upon which the Debtors vacate, broom-clean [condition], free of all tenancies or claims of right therein by any [p]erson claiming by, through or under Tenant and in condition required by the Lease... [and will deliver] to Landlord all of the keys for the [Demised] Premises. 3. On November 9, 2016, the Debtors notified the Landlord of their intent to surrender the Premises to the Landlord on November 30, The Debtors, however, failed to turn over all of the keys to the Premises on November 30, 2016, and to leave the premises in vacant, broomclean condition. 4. On December 14, 2016 (the Petition Date ), each of the Debtors filed a voluntary petitions for relief pursuant to chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). Upon information and belief the Debtors remain in possession of their properties and continue to manage their businesses as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 5. On December 16, 2016, the Landlord filed a Complaint against Isidore Mayrock in the Supreme Court of the State of New York, County of New York, seeking to recover at least $128, in unpaid rent, legal fees and expenses that the Debtors failed to pay. At that time, 2

3 Pg 3 of 7 property of the Debtors, including furniture and files remained at the Premises and all keys and dominion and control of the premises had not been surrendered to the Landlord 6. Sometime after December 16, 2016, upon information and belief, the Debtors entered the premises to remove remaining furniture and files and to clean the premises, but the Debtors did not surrender, and still have not surrendered, all of the keys to the Landlord or the building s superintendent. 7. On January 5, 2017, the Debtors filed the Rejection Motion contending that (a) the term of the Lease ended on November 21, , (b) the Lease expired pre-petition, and that the Debtors have vacated the Premises prior to the Petition Date, (c) although the Debtors believe the Lease was terminated prepetition, in an abundance of caution, the Debtors seek to reject the Lease as of the Petition Date. 8. To date, the Landlord has still not received possession of all of the keys to the Premises. LIMITED OBJECTION 9. The Landlord does not object to the Debtors business decision to reject the Lease. For the following reasons, however, the Landlord objects to certain aspects of the Rejection Motion. 10. First, the Landlord disagrees with the Debtors assertion that the Lease terminated pre-petition and that the Debtors have surrendered the premises. The Debtors have offered no factual support for either allegation. In fact, as of the Petition Date, the Premises were not vacant, broom-cleaned and the Debtors maintained possession of the Premises by retaining keys to the property. The rejection date of the Lease should be no earlier than the date that the Premises were 1 The Rejection Motion erroneously misstated the term of the Lease as running through November 21, The Lease s 10 year term runs through

4 Pg 4 of 7 both actually left vacant and broom-clean (i.e., a, post-petition date, sometime after December 16, 2016) and the Debtors shall have turned over all of the access and keys to the Premises (i.e., a date which still has not occurred). 11. Second, the Landlord submits that any rejection of the Lease must comply with the Debtors obligations under section 365 of the Bankruptcy Code. Section 365(d)(3) of the Bankruptcy Code provides, in relevant part, that: The trustee shall timely perform all obligations of the debtor arising from and after the order for relief under any expired lease of nonresidential real property, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title. 11 U.S.C. 365(d)(3). Accordingly, the Debtors are obligated to pay all of their obligations under the Lease at the contract rate until the Lease is rejected. In re Florida Lifestyle Apparel, Inc., 221 B.R. 897, 900 (Bankr. M.D. Fla. 1997) ( charges continue to accrue up to the date the rejection actually occurs ). 12. Consequently, the Debtors remain liable for all of the defaults post-petition Date and any and all amounts that become due and owing under the Lease up to and including the effective date of the rejection of the Lease. As such, any order authorizing the Debtor to reject the Lease should require the Debtors to satisfy all of their obligations under the Lease that become due and owing up to and including the effective date of the rejection of the Lease. 13. Third, any order authorizing the rejection of the Lease must require the Debtors to return the space to the Landlord in accordance with the terms of the Lease. WHEREFORE, the Landlord requests that the Court: (a) deny the Rejection Motion to the extent that it (i) seeks a determination that the Lease was rejected prior to the Petition Date, and/or (ii) approves rejection of the Lease as of the Petition Date; (b) determine that any rejection of the 4

5 Pg 5 of 7 Lease shall be no earlier than the date that the Premises were actually left vacant and broom-clean (i.e., a, post-petition date, sometime after December 16, 2016) and the Debtors shall have turned over all of the access and keys to the Premises (i.e., a date which still has not occurred); and (c) granting the Landlord such other and further relief as this Court deems just and appropriate under the circumstances. Dated: New York, New York January 17, 2017 By: /s/ Evan J. Zucker The Chrysler Building 405 Lexington Avenue New York, NY (212) Attorneys for 158 West 27th Street Owner, LLC 5

6 Pg 6 of 7 The Chrysler Building 405 Lexington Avenue New York, NY (212) Evan J. Zucker Attorneys for 158 West 27 th Street Owner, LLC UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: GRACIOUS HOME LLC, et al., Chapter 11 Case No (MKV) (Jointly Administered) Debtors. CERTIFICATE OF SERVICE I,, counsel to 158 West 27 th Street Owner, LLC, hereby certify as follows: 1. On January 17, 2017, I caused to be electronically filed the foregoing limited objection (the Limited Objection ) with the Court using the Court s CM/ECF system, which sent Notice of Electronic Filing of the Limited Objection to all individuals registered to receive CM/ECF notifications in the above-captioned cases. 2. I further certify that on January 17, 2017, I caused to be served the Limited Objection upon the persons listed on Exhibit A via U.S. first-class mail, postage fully pre-paid. Dated: New York, New York January 17, 2017 /s/ 6

7 Pg 7 of 7 Joseph J. DiPasquale Irena M. Goldstein 45 Rockefeller Plaza Suite 2000 New York, NY Serene K. Nakano, Esq. Office of the United States Trustee U.S. Federal Office Building 201 Varick Street, Suite 1006 New York, NY Honorable Mary Kay Vyskocil United States Bankruptcy Court Southern District of New York One Bowling Green New York, NY Exhibit A 7