464 B.R. 651
Bankr. D. Del.2011Background
- Debtors filed for Chapter 13 on July 13, 2010 and listed a Ford lease debt for a 2008 Ford Edge.
- Plan provision 5 assumed the Ford lease and required Debtors to continue payments to Ford Motor Credit.
- Court confirmed the plan on September 30, 2010.
- Debtors surrendered the vehicle on April 25, 2011 with $1,291.68 remaining on the lease and $1,513.60 in excess mileage charges.
- Ford moved for an administrative claim totaling $3,209 for post-petition breach damages and related charges.
- Court awards Ford an administrative claim of $2,371.28 and requires a modified plan to address payment of this claim.]
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach of an assumed lease creates an administrative expense. | Ford asserts damages from post-confirmation breach are admin expenses. | Debtors contend plan confirmation binds creditors and priority should not be elevated. | Yes; breach damages may be admin expenses. |
| How to calculate the administrative claim for an assumed lease breach. | Ford seeks full damages attributed to breach during the estate-benefiting period. | Debtors argue only estate-benefiting damages qualify as admin expenses. | Admin claim limited to damages that benefited the estate, not all breach damages. |
| Whether attorney fees for filing the motion are recoverable as administrative expenses. | Ford seeks all costs as admin expenses. | Fees for filing motion are not necessary expenses of preserving the estate. | No; motion-attorney fees are not Included as admin expense. |
| Whether plan confirmation affects the admin priority of the lease breach damages. | Plan confirmation does not preclude admin treatment for breach damages. | Plan terms govern the allocation and priority of claims. | Administrative priority is limited to damages that benefited the estate, despite plan confirmation. |
Key Cases Cited
- In re Michalek, 393 B.R. 642 (Bankr. E.D. Wis. 2008) (supports limited admin priority for breach damages that benefited the estate)
- In re Johnston, Inc., 164 B.R. 551 (Bankr. E.D. Tex. 1994) (administrative treatment for breach of assumed contracts discussed)
- In re Multech Corp., 47 B.R. 747 (Bankr. N.D. Iowa 1985) (assumption of contracts creates estate obligations distinct from pre-petition)
- In re Wells, 378 B.R. 557 (Bankr. S.D. Ohio 2007) (treatment of admin expenses for assumed contracts)
- In re Enderle, 352 B.R. 444 (Bankr. E.D. Mich. 2006) (discussion of administrative expense treatment for contract breaches)
- In re Smith, 315 B.R. 77 (Bankr. W.D. Ark. 2004) (administrative priority considerations for breached leases)
- In re Parmenter, 527 F.3d 606 (6th Cir. 2008) (windfall concerns in admin expense treatment)