MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
Presently before the Court is a cross-motion of Eton Centers Co. (“Eton”) filed Feb *7 ruary 20, 1996, in response to a motion filed on January 19, 1996, by Victory Market Inc. (“Debtor”) seeking a further extension of time to assume or reject a non-residential real property lease through March 20, 1996. 1 Eton requests that Debtor’s motion be denied аnd seeks to have its lease with the Debtor rejected based on the argument that Debtor has failed to comply with § 365(d)(3) of the Bankruptcy Code (11 U.S.C. §§ 101-1330) (“Code”).
Debtor’s motion, as well as Eton’s cross-motion, were heard by the Court at its regular motion term on February 27, 1996, in Utica, New York. Both parties agreed that the Debtor was оbligated to pay any postpe-tition obligations pursuant to the terms of the lease if the Court was to grant the Debt- or’s request for an extension of the lease. The question of the extent of the obligations, in particular Eton’s demand that the Debtor pay its pro rata share of real property taxеs paid by Eton, was submitted to the Court for decision.
JURISDICTIONAL STATEMENT
The Court has core jurisdiction over the parties and subject matter of this contested matter pursuant to 28 U.S.C. §§ 1334(b), 157(a), (b)(1), (b)(2)(A) and (0).
FACTS
Debtor, along with five of its wholly-owned subsidiaries, filed voluntary petitions pursuant to Chapter 11 of the Code on September 20, 1995. At the time of filing, Debtor operated approximately fifty grocery stores throughout the northern and central New York State regions under the trade name “Great American Food Stores.” Since filing its petition, Debtor has continued to operate and manage its business as a debtor-in-possession pursuant to §§ 1107 and 1108 of the Code.
Eton is the ownеr of a shopping center complex on Genesee Street in Utica, New York. Eton leases a portion of the nonresidential real property at the shopping center to Debtor pursuant to the terms of a lease agreement dated June 24, 1955, which was subsequently modified on July 31, 1961, and again on March 27, 1981 (“Lease”). Said Lease was assigned and assumed by Victory on or about April 5, 1993, and was to expire by its terms on March 31, 1996, although Debtor had the option to renew it. Pursuant to the modification of the Lease on March 27, 1981,
The Tenant [Debtor] shall ... reimburse the Landlord [Eton] for its pro rata share of the Landlord’s annual reаl estate taxes on the shopping center.... The Tenant’s obligation pursuant to this paragraph shall become due and payable within 30 days after the payment by the Landlord of such property taxes, upon submission to the Tenant by the Landlord of a statement showing the computations upon which the Tenаnt’s payment under this paragraph is based ...
See ¶4 of Lease Modification Agreement, Exhibit “A” of Eton’s Cross-Motion, dated February 20,1996.
On or about August 23, 1995, Debtor was sent a statement (“Statement”) by Eton indicating that Debtor’s share (51.3%) of the real estate taxes for 1994-95 paid by Eton to-talled $69,456.46 (see Exhibit “C” of Eton’s Cross-Motion).
ARGUMENTS
Eton contends that Debtor should not be allowed to extend the Lease unless it pays Eton the full amount of its 51.3% share of the taxes paid by Eton as billed, namely $69,-456.46. Eton argues that it is a postpetition obligation of the Debtor for which Code § 365(d)(3) requires timely payment. Debt- or argues that as the Statement was sent to the Debtor on or about August 23, 1995, the obligation arose prepеtition. In other words, it is Debtor’s position that it is the date that the Statement was submitted to the Debtor and not the date the obligation comes due for *8 payment by the Debtor that should establish the nature of the obligation.
In addition, the Debtor, relying on
In re Child World, Inc.,
DISCUSSION
It appears from a review of the case law that the District Court for the Northern District of New York has not as yet had occasion to address this issue. In support of its arguments, Debtor has referred this Court to the decision of U.S. District Judge Gerald Goettel, sitting in the Southern District of New York, issued on November 29, 1993, in
Child World.
Interestingly enough, U.S. District Judge Sonia Sotomayor, sitting in the Southern District of New York as well, rendered a decision three months later also interpreting Code § 365(d)(3).
See In re R.H. Macy & Co., Inc.,
Rather than rely on either case, this Court begins its analysis with an examination of the language of Code § 365(d)(3), which provides that the “trustee shall timely perform all the obligations of the debtor ... arising from and after the order for relief under any unexpired lease of nonresidential real property ...” Code § 365(d)(3) was added to the Code in 1984 to “insure that debtor-tenants pay thеir rent, common area, and other charges on time pending the trustee’s assumption or rejection of the lease.” 130 Cong.Rec. S8894-95 (daily ed. June 29,1984) (remarks of Senator Hatch). Specifically, the trustee is required “to perform all the obligations of the debtor under a lease of nonresidential real prоperty at the time required in the lease.”
Id.
The District Court in
Child World
concluded that Code § 365(d)(3) is “ambiguous as to when a debt- or-tenant’s obligation under a lease to reimburse the landlord for real estate taxes arises.”
Child World, supra,
In
In re R.H. Macy & Co., Inc.,
Judge Sotomayor, affirming Judge Lif-land’s decision in
R.H. Macy,
found Judge Goettel’s policy arguments in
Child World
“very persuasive” but concluded that it was a “judicial philosophy issue as to whether or not or how much the clear, plain meaning of words should be strained because of policy questions or legislative history.”
R.H. Macy, supra,
Since Bankruptcy Judges Lifland and Sehwartzberg rendered their decisions, there have been a number of other courts that have considered the application of Code § 365(d)(3) under similar circumstances.
See e.g. In re Almac’s Inc.,
The courts that have relied on the billing date in determining the method of payment of the debtor’s “obligation” assert that the language of Code § 365(d)(3) is unambiguous and requires strict adherence to the terms of the lease. Although acknowledging the fact that awarding payments pursuant to the terms of the lease may produce arbitrary results depending on the date the petitiоn was filed, the courts have declined to alter what appears clear in the language of Code § 365(d)(3).
See e.g. In re The Krystal Co.,
In this case, the legislative history is limited to the remarks of Senator Hatch. Absent from his remarks is any reference to the landlord’s responsibility for paying taxes on the real property in connection with the services being provided to the debtor. Instead, Senator Hatch expresses concern that the trustee [debtor in possession] has stopped making payments such as rent and common area charges, as well as charges for services rendered to the debtor. These are current expenses that debtor should anticipate incurring on a monthly basis in connection with its day-to-day operations. On the other hand, real estate taxes are generally accrued expenses which, when ultimately billed, are for a period encompassing several months, either retroactively or prospectively.
Prior to the enactment оf Code § 365(d)(3), it was the practice of the courts to prorate real estate taxes accruing only during the postpetition, prerejection period regardless of when they were billed.
Schneider, supra,
The Court concludes that by requiring that the Debtor fulfill its obligatiоns set forth in the lease on a pro rata basis during the postpetition, prerejection period, the interests of both debtor and landlord, as well as other creditors, are served.
As the Court has concluded that it is inappropriate to rely solely on the billing date to determine the extent of Debtor’s оbligations to reimburse Eton for its payment of real estate taxes, it is unnecessary for the Court to address whether the full amount of the obligation arose pre- or postpetition based on the Statement submitted to the Debtor on or about August 23, 1995, requiring payment within 30 days.
Based on the foregoing, it is hereby
ORDERED that the Debtor’s motion which sought an extension of timе to assume or reject the Lease with Eton through March 20, 1996, is granted
nunc pro tunc
provided that the Debtors make payment to Eton of Debtor’s 51.3% share of taxes, prorated on a monthly or per diem basis as appropriate, for the period from November 20, 1995 through March 20, 1996, within ten (10) days of the date of this Order,
2
and remains current on its obligation for any subsequent period until such time as said Lease is rejected pursuant to Code § 365(d)(3), and this Court’s recent decision in
In re New Almacs, Inc.,
*11 ORDERED that Eton’s cross-motion seeking reimbursement for Eton’s payment of real property taxes for 1994-95 is granted to the extent described in the aforementioned paragraph; and it is further
ORDERED that Eton be allowed an administrative expense claim pursuant to Code § 507(a)(1) for Debtor’s 51.3% share of taxes paid by Eton, on a prorated basis for the period from September 20, 1995 through November 19,1995. See id.
Notes
. On November 6, 1995, Debtor filed a similar motion seeking an extension through January 20, . 1996, which the Court granted at a hearing in Syraсuse, New York, on November 21, 1995. An Order was signed on December 5, 1995, to that effect and required that the Debtor comply with Code § 365(d)(3).
. To the extent that Eton has not received a bill for some portion of the taxes for 1995-96, the Court deems it appropriate to use the prior year’s amounts unless it is presented with evidence to the contrary which would warrant scheduling an evidentiary hearing.