In Re Prestige Motorcar Gallery, Inc.
456 B.R. 541
Bankr. N.D. Fla.2011Background
- Debtor Prestige Motorcar Gallery, Inc. filed Chapter 11 petition on January 6, 2011.
- Joseph Luzinski was appointed Chapter 11 Trustee on March 30, 2011.
- The adjacent property lease at issue was originally signed by Hornsby (not by the Hornsby trusts) and was not listed as an asset in the APA or sale orders.
- June 3, 2011, a trustee auction sold the main dealership assets and property to Napleton's Tallahassee Imports for $1.5 million; the adjacent parcel was not transferred.
- The APA's Schedule 2.1(c) listed no assumed contracts; sale order (June 14, 2011) stated no executory contracts or unexpired leases would be assumed by the purchaser.
- On July 5, 2011, the Trustee filed a Motion to assume and assign the adjacent-leased property to Napleton, which Hornsby objected to.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May the Trustee assume and assign the adjacent lease? | Hornsby argues the Trustee may not. | Hornsby contends no valid lease to assume and assign; ownership issues render lease invalid. | Denied; Trustee failed to show a benefit to the estate and to meet 365(a) requirements. |
| Is the adjacent lease an executory contract subject to assumption? | Trustee relies on 365 that allows assuming executory contracts. | Lease is not properly executable by the Trustee due to signatory/ownership issues. | Not approved; the court found lack of evidence that assumption would benefit the estate. |
| Does signing by Hornsby personally undermine the lease's validity for estate purposes? | Estate could assume to avoid rejection damages and cure arrearages. | Lease invalid because not signed by the trustees of the Hornsby trusts. | Undecided in favor of denial; lease not shown to be validly held by the estate for assumption. |
| Did the Trustee meet the business judgment standard to assume and assign? | Assumption benefits the estate by avoiding rejection damages and curing arrears. | No credible evidence of any estate benefit beyond avoiding rejection damages. | Denied; failure to demonstrate a reorganization-benefiting business judgment. |
Key Cases Cited
- In re government securities corp., 101 B.R. 343 (S.D. Fla. 1989) (purpose of 365 is to benefit the estate in reorganization)
- In re Midway Airlines, Inc., 6 F.3d 492 (7th Cir. 1993) (trustee should be allowed to retain favorable contracts to benefit the estate)
- In re Talley, 69 B.R. 219 (Bankr. M.D. Tenn. 1986) (trustee may accept or reject property that benefits the estate)
- In re Prime Motor Inns, 124 B.R. 378 (Bankr. S.D. Fla. 1991) (trustee bears burden to show contract rejection/assumption benefits the estate)
- In re Sun City Investments, Inc., 89 B.R. 245 (Bankr. M.D. Fla. 1988) (emphasizes business judgment standard under 365)
- Sparhawk v. Yerkes, 142 U.S. 1 (1891) (assignment in bankruptcy allows election to accept or reject property)