Daily Development for
Friday, November 22, 1996

by: Patrick A. Randolph, Jr.
Professor of Law

UMKC School of Law

The Reporter for today's Daily Development is Jim Stillman of Murphy, Weir & Butler, San Francisco.

BANKRUPTCY; PROPERTY OF THE ESTATE; PREPETITION LEASE TERMINATION: California bankruptcy courts enjoin operation of new state statute permitting the execution of a writ of possession notwithstanding the pendency of a bankruptcy case, if the lease had been terminated prepetition. In re Di Giorgio, 200 B.R. 664 (C.D. Cal. 1996).

The statute in question is California Code of Civil Procedure, section 715.050.

In conflict with several other courts which have considered the question, including In re Smith 105 B.R. 50 (Bankr. C.D. Cal. 1989), the District Court holds that, under California law, mere, naked occupancy carries with it some kind of interest in the property, and therefore some property of the estate inheres in the tenant's position. It concludes that this holding is based upon preemptive federal bankruptcy law, and is not subject to redetermination by the California legislature.

Reporter's Comment: The District Court cannot conceal its displeasure with the fractious and special-interest driven California state legislature for passing a statute that, by its express and crude terms, purported to countermand federal bankruptcy law. And one certainly is impressed by the breathtaking exercise of judicial power by an Article I court below, in enjoining the statute. It is not clear, however, that the opinion reaches the right result. The District Court describes the holding over tenant's interest as "equitable." In fact, in California at least the tenant has no equitable interest under the circumstances. The only interest to which the District Court refers is a statutory interest (p. 671), delineated as a right to statutory title based on "mere possession" (known as occupancy, see Civ. Code, sec. 1006) good only to the extent no stronger claimant comes forward. But a stronger claimant did come forward! That would be the terminating landlord, whose paramount title claim will always have been fully adjudicated prepetition in cases such as this.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

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