521 B.R. 395
Bankr. N.D. Ga.2014Background
- Debtor leased commercial premises from Jamestown under a 10-year lease (July 1999). Debtor vacated and stopped paying rent in December 2000.
- Jamestown obtained a writ of possession and a default judgment in January 2001, then later obtained a larger judgment in October 2003 for unpaid rent and attorney fees.
- Jamestown recorded the state-court judgments as liens against certain patents in November 2003; the Trustee later recovered the patents for the estate as avoidable.
- Jamestown filed proofs of claim (unsecured, then amended asserting a secured judgment lien). Trustee objected: claim not secured, subject to disallowance under § 502(d), and capped by § 502(b)(6).
- At hearing Jamestown conceded any invalid lien was turned over and reduced its claimed amount; court treated Jamestown’s claim as general unsecured but considered whether § 502(b)(6) caps it and from what date.
Issues
| Issue | Trustee's Argument | Jamestown's Argument | Held |
|---|---|---|---|
| Whether Jamestown’s claim is secured or disallowed under § 502(d) | Lien avoidable because patents transferred pre-recording and judgment lien avoidable; 502(d) should disallow until turnover | Jamestown conceded any avoidable lien was turned over and reduced claim amount | Claim treated as general unsecured; 502(d) does not disallow after turnover (claim allowed unsecured) |
| Whether § 502(b)(6) applies (must be "damages resulting from termination") | Rejection/surrender/replevin is equivalent to termination for cap purposes; cap should apply | Lease never terminated under state law; claim arises from prepetition amounts so cap inapplicable | Court adopts broader (Flanigan) definition of termination: effective termination (writ of possession) triggers cap; § 502(b)(6) applies |
| When cap period begins (petition date vs. surrender/repossession) | Surrender occurred when debtor vacated in Dec 2000 or repossession on Jan 19, 2001; cap should run from earlier date | Repossession not until writ issued; state-law surrender requires landlord acceptance so cap start is writ date | Cap runs from earlier of petition date or repossession/surrender; here repossession date (Jan 19, 2001) is used to calculate cap |
| Burden of proof on § 502(b)(6) issues | Trustee seeking limitation should bear burden to show cap applies | If Trustee proves applicability, landlord must prove amount of capped claim | Trustee bears burden to show § 502(b)(6) applies; if met, burden shifts to Jamestown to prove amount of capped claim |
Key Cases Cited
- U.S. v. Ron Pair Enterps., 489 U.S. 235 (statutory interpretation; unambiguous statutes enforced as written)
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (each statutory word must be given meaning)
- Begier v. Internal Revenue Serv., 496 U.S. 53 (bankruptcy distribution and priority principles)
- International Biochemical Indus. v. Jamestown Mgmt. Corp., 262 Ga. App. 770 (state-court ruling on lease not terminating under Georgia law)
- In re Flanigan, 374 B.R. 568 (adopted broader definition of termination for §502(b)(6) to avoid inequitable results)
- In re MDC Systems, Inc., 488 B.R. 74 (applied a federal/ordinary-meaning definition of "surrender" for §502(b)(6))