Summary:
The Debtors did not affirmatively assume or reject a lease, but argued that the acceptance of payments and the failure to provide the statutorily required Notice to Quit constituted an assumption. The bankruptcy court rejected this holding that 11 U.S.C. § 365(a) and Rule 9014 require court timely approval of the assumption or rejection of a lease. “To not follow these rather explicit rules would be to lead us back into the morass of attempting to judge the meaning and import of the conduct and conversations of the parties.” Id. at 144-45 (quoting Treat Fitness Ctr., Inc. v. Rainbow Inv. Co. (In re Treat Fitness Ctr., Inc.), 60 B.R. 878, 879 (9th Cir. B.A.P. 1986))
Commentary:
The result could be different with regarding the failure to reaffirm a secured claim, as there it is not a binary reaffirm/surrender option. If the sole default was under an ipso facto provision based on the filing of bankruptcy, subsequent acceptance of payment could constitute a waiver of that default, resulting in “ride through,” whereas a rejected executory contract cannot later be assumed.
For a copy of the opinion, please see:
Blog comments