627 B.R. 693
Bankr. S.D. Florida2021Background
- Debtors Cinemex Real Estate, Cinemex Holdings, and CB Theater filed Chapter 11 on April 25–26, 2020; CB Theater was lessee under the Lakeside Lease for a Florida movie theater.
- Governor DeSantis ordered Florida movie theaters closed March 20, 2020; theaters were allowed to reopen at 50% capacity on June 5, 2020 (with some county exceptions).
- Debtors moved to suspend rent payments under various leases, citing impossibility, frustration of purpose, takings, and force majeure; Lakeside moved to compel payment from the petition date.
- The Lakeside Lease contains Article 59 ("Effect of Unavoidable Delays") and Article 8 (force majeure language including acts of God and governmental restrictions).
- CB Theater argued closure and limited-capacity reopening made performance impossible or impracticable and that rent should be abated; Lakeside argued reopening made performance possible and Article 59 does not excuse rent payments.
- The Court ruled CB Theater owes no rent during the government-ordered closure (March 20–June 4), the lease term is extended by the closure period, and rent from June 5 forward is due and constitutes administrative expenses.
Issues
| Issue | Cobb Lakeside's Argument | CB Theater's Argument | Held |
|---|---|---|---|
| Whether rent was owed during the government-ordered closure (Mar 20–Jun 4, 2020) | Rent accrued from petition date and is payable despite closure | Government orders/force majeure/impossibility excused rent during closure | Rent not required for closure period; performance excused under lease force majeure; lease term extended by closure length |
| Whether reopening at 50% capacity (Jun 5 onward) excused rent via frustration/impracticability | Reopening made performance possible; rent owed in full | Reopening at 50% plus lack of new releases and safety concerns made performance impracticable/frustrated purpose; rent should be abated or reduced | After Jun 5 performance was possible; frustration/impracticability defense fails; rent from Jun 5 is due in full as administrative expense |
| Contract interpretation: does Article 59’s parenthetical bar excusing nonpayment? | Article 59’s “other than the failure to timely pay monies” means rent is never excused by acts of God/government action | Article 8 is the lease’s force majeure clause and governs excusal and extension of performance | Court treats Article 59 as an excuse-of-breach clause and Article 8 as the force majeure provision; rent excused during closure and the time extended |
| Remedy/status: are closure-period amounts payable now or deferred; are post‑Jun 5 arrears administrative claims? | Closure amounts are presently due; all unpaid rent from petition date is claimable | Closure amounts deferred/added to lease term; only post‑reopening rent should be administrative | No rent due for closure period; closure time added to lease term; rent from Jun 5 onward unpaid and administrative expense claims |
Key Cases Cited
- Home Design Ctr.--Joint Venture v. Cty. Appliances of Naples, Inc., 563 So. 2d 767 (Fla. 2d DCA 1990) (distinguishing impossibility of performance from frustration of purpose)
- Equitrac Corp. v. Kenny, Nachwalter & Seymour, P.A., 493 So. 2d 548 (Fla. 3d DCA 1986) (frustration of purpose can render contract unenforceable when the contract’s purpose is destroyed)
- Cook v. Deltona Corp., 753 F.2d 1552 (11th Cir. 1985) (test whether a supervening event so radically altered performance expectations that enforcement is unwise)
- Valencia Ctr., Inc. v. Publix Super Mkts., Inc., 464 So. 2d 1267 (Fla. 3d DCA 1985) (extreme impracticability may qualify as impossibility but courts reluctant to excuse mere expense or inconvenience)
- In re CHS Electronics, Inc., 265 B.R. 339 (Bankr. S.D. Fla. 2001) (section 365(d)(3) requires debtor to satisfy postpetition obligations under unexpired nonresidential leases)