Daily Development for Wednesday, January 19, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

BANKRUPTCY; LEASES; RESIDENTIAL LEASES; EVICTION: California county sheriffs must comply with landlord requests to evict bankrupt persons in from their residences, in all cases where the residential lease has been terminated and a judgment of unlawful detainer and writ of possession have been obtained prior to the commencement of the bankruptcy case.

Lee v. Block, 86 Cal.Rptr.2d 913 (2nd App. Dist. July 29, 1999).

Thus, a writ of mandate would issue against Los Angeles County Sheriff Block, in a suit brought by plaintiff landlord and several landlord associations. The California legislature lawfully enacted Code of Civil Procedure section 715.050, which provides that a writ of possession shall be enforced notwithstanding a subsequent bankruptcy filing; there was no preemption by federal bankruptcy law, the mere holding over by a tenant after lease termination and judgment for possession does not constitute property of the estate which can be administered in bankruptcy, pursuant to section 541 of the Bankruptcy Code.

In an intriguing footnote, the court notes that the question of whether bankruptcy law preempts the California statute may be answered differently in a commercial leasing context, where "a trustee might want to keep the enterprise in place in order to generate income for the benefit of all creditors, including the landlord." (Citing In re Acorn Investments, 8 B.R. 506 (Brktcy. S.D. Cal. 1981).

Reporter's Comments: It is always interesting when state courts make rulings on bankruptcy law. Here, the District Court of Appeal's ruling was consistent with "local" (Southern California) bankruptcy law. In contrast to those courts that strive to find a property interest protectible by bankruptcy where the residential lease has been terminated pre-petition (many of which having been reported here), the Bankruptcy Courts of Southern California have long been hostile to the idea. In re Smith, 105 B.R. 50 (Bankr. C.D.Cal. 1989) is the most frequently cited opinion.

Editor's Comment 1: Note that the case applies to post judgment evictions. Where a tenant has filed bankruptcy subsequent to notice of termination of the lease, but prior to the hearing and judgment, the court apparently will recognize that the automatic stay will preempt bar the pursuance of any eviction action.

Editor's Comment 2: Is the special language of the California statute, stating that evictions must be carried out notwithstanding the declaration of bankruptcy, really necessary. Even without such a statute, the court's analysis that the leasehold no longer is "property of the estate" would appear to apply.

BANKRUPTCY; RESIDENTIAL LEASES; EVICTION: So long as applicable law gave the residential tenant any right to cure and terminate the eviction proceedings on the date the bankruptcy case was commenced, the lease was still "unexpired" for bankruptcy purposes whether or not it was terminated.

In re Stolz, 1999 U.S.App.LEXIS 30677, 35 B.C.D. 71 (2nd Cir. 1999). Pursuant to Title ix, Section 4467(a), of the Vermont Statutes, a tenant may cure and cancel the lease default proceedings at any time until the earlier of the date of the issuance of the writ of possession or the date by which a notice of appeal of the judgment of ejectment must be filed. Since bankruptcy intervened before this date, the debtor had sufficient rights in the lease for administration in bankruptcy.

Reporter's Comment: Thus the question is framed for the Vermont Legislature (compare Lee v. Block, supra) whether to truncate such liberal lease reinstatement rights.

Editor's Comment: Missouri, and undoubtedly other states, offer landlords two options for summary eviction. One statute, called the "rent and possession" statute, permits the landlord to get a judgment for past and future rent in connection with the eviction, but permits the tenant to cure by paying back rent. Under the other statute, unlawful detainer, the landlord will already have terminated the lease due to tenant default and simply is suing to have the tenant vacate the property. This action does not permit damages claims other than double rent for the period of unlawful detainer. Too many "Vermont style" bankruptcy evasions of eviction may lead landlords to undertake the more cumbersome unlawful detainer statute to get their properties back in a timely fashion.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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