MEMORANDUM AND ORDER
This matter is before this court on an appeal taken by Inland’s Monthly Income Fund, L.P., (“Inland”) from the order of the bankruptcy court denying in part its demand pursuant to 11 U.S.C. § 365(d)(3) for payment from the bankruptcy estate of Duckwall-ALCO Stores, Inc. (“Duck-wall”). 1 Duckwall rejected an unexpired lease of commercial real estate owned by Inland. The amounts claimed are alleged to have been obligations under the lease during the period following the order for relief and prior to the date of rejection.
The appellant raises two issues in this appeal. First, Inland disputes the bankruptcy court’s determination of the date Duckwall rejected its nonresidential property lease with Inland. Second, Inland argues that under 11 U.S.C. § 365(d)(3), based on the terms of the lease, it is enti-tied to payment for property taxes on the real estate that accrued before the date the bankruptcy petition was filed, but were not payable until June 1, 1989, a date subsequent to the filing of the petition but prior to Duckwall’s rejection of the lease.
Facts
The essential facts relevant to this appeal are not in dispute. In 1985, Duckwall executed a ten-year lease for retail store space with Inland’s predecessor-in-interest. The leased space, located in a shopping center in McHenry, Illinois, was adjacent to property leased by another tenant, a savings and loan association. Duckwall’s lease was expressly subject to the lease with the savings and loan association. The two tenants shared common areas such as the parking lot, driveways, and sidewalks.
The lease provided for guaranteed monthly rent payments of $14,784.79, to be paid in advance between the first and fifth of each month. 2 Commonly known as a “triple-net” lease, it also obligated the tenant to pay taxes and assessments; insurance premiums; and the cost of repairs, replacements, and maintenance of the premises; each in accordance with specific provisions of the lease. The section regarding taxes reads in pertinent part as follows:
24. As additional rental, the Tenant agrees to pay to the Landlord, when due, 'the amount of all taxes and assessments levied and assessed against the premises and that shall become due and payable during the original or any renewed term thereof. Provided, however, that for any partial tax year occurring during the original or any renewed term hereof, the Tenant shall be liable for only that proportion of such taxes and assessments as the number of days in such partial tax year bears to 365, based upon the last available assessment and levy.
Tenant may take the benefit of the provisions of any statute or ordinance permitting any assessment to be paid over a period of years, and Tenant shall be obligated to pay only those installments falling due during the term of this Lease.
(Emphasis added.)
In Illinois, property taxes are assessed on a calendar year basis, but are not billed to the taxpayer until the following spring. Taxpayers have the option of paying the entire tax liability for the previous calendar year on or before June 1, or paying in two equal installments on or before June 1 and September 1 respectively. The second installment is considered delinquent after September 1. Prior to 1989, Inland paid the property taxes in installments and billed Duckwall for reimbursement of its proportionate share of each half after it was paid. 3
Under the lease, Duckwall reserved the right to remove movable trade fixtures installed on the premises, provided that Duckwall repair any damage caused by their removal. The lease expressly acknowledged that Duckwall intended to lease its trade fixtures and equipment for use on the premises. Duckwall leased such fixtures and equipment from Manufacturer Hanover Leasing Corporation (“MHLC”) under a separate agreement.
On May 8, 1989, Duckwall, whose principal place of business is in Kansas, filed a voluntary petition in the United States Bankruptcy Court for the District of Kansas, seeking relief under Chapter 11 of the Bankruptcy Code. By stipulation, the date of the order for relief was also May 8, 1989. See 11 U.S.C. § 301. At the time the petition was filed, Duckwall was current on its lease payments to Inland and was not in default in any way.
Duckwall notified Inland in June 1989 of its intent to reject its unexpired lease in accordance with 11 U.S.C. § 365(d)(3). On June 27, 1989, Duckwall notified MHLC by letter of its intent to close the store in McHenry and requested that it remove the leased fixtures from the store between July 6 and July 15. 4
On July 7,1989, Duckwall notified Inland by telephone that it had closed its store, but it could not return possession of the premises until July 15 because the leased fixtures had not yet been removed from the premises.
In a letter dated July 17, 1989, and received by Inland the next day, Duckwall notified Inland that it had vacated the premises. With the letter Duckwall returned the keys to the store, and included a check for $14,707.05, representing payment of rent prorated for the period July 1 through July 18 ($8,584.72) and taxes prorated for the period from May 8, 1989, through July 18, 1989, ($6,122.33). 5 In addition, Duckwall’s letter notified Inland that MHLC had been advised to remove the fixtures in the store, and any questions concerning the fixtures should be addressed to MHLC. The letter listed the names and telephone numbers of MHLC’s representatives.
MHLC contacted Inland on at least two occasions in August, seeking additional time to remove the fixtures from the premises. Inland refused to grant permission, but took no action to eject MHLC or otherwise enforce its right to exclusive possession of the premises following Duckwall’s departure. Ultimately, MHLC’s agents obtained access to the store with a key that had been retained by the McHenry police department for security reasons, and con- ■ ducted an auction of the fixtures on Inland’s premises. According to Inland, it did not obtain exclusive possession of the premises prior to September 1, 1989.
Decision of the Bankruptcy Court
The bankruptcy court determined that Duckwall rejected the lease effective July 18, 1989, on the basis of its letter to Inland dated July 17, 1989. However, the court reasoned that Duckwall should have allowed MHLC a reasonable amount of time to remove the leased fixtures after Duck-wall ceased operations on the premises. The court determined that a reasonable amount of time ended on July 31,1989, and therefore required the estate to pay rent and taxes through that date as an “administrative expense.” Consequently, the bankruptcy court determined that Inland was entitled to $6,200.07 in additional monthly rent at the lease rate, prorated for the period July 19 to July 31. Further, based on the bankruptcy court’s interpretation of the lease, Inland was held entitled to payment of $1,099.93 for additional property taxes, prorating the 1988 taxes through July 31, 1989. 7
Scope of Review
In reviewing a decision of the bankruptcy court, findings of fact may not be set aside unless clearly erroneous. Bankruptcy Rule 8013. However, the district court considers
de novo
questions of law, as well as mixed questions of fact and law which involve “ ‘primarily a consideration of legal principles.’ ”
In re Ruti-Sweetwater, Inc.,
Analysis
I. Date of Rejection.
On appeal, Inland argues that the bankruptcy court erred in determining that July
The pertinent provisions of section 365 of the Bankruptcy Code read as follows:
(d)(3) The trustee [or debtor-in-possession] 8 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, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title. The court may extend, for cause, the time for performance of any such obligation that arises within 60 days after the date of the order for relief, but the time for performance shall not be extended beyond such 60-day period.
(4) ... [I]n a case under any chapter of this title, if the trustee [or debtor-in-possession] does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor.
The bankruptcy court concluded as a matter of law that Duckwall rejected the lease effective July 18, 1989, by sending the letter on July 17 along with the keys and payment for prorated rent and taxes. Nevertheless, the court held that Duckwall was obligated to pay rent and taxes for occupancy through July 31, 1989, as an administrative expense, reasoning that the lease with MHLC was not terminated until July 18, 1989, and Duckwall should have afforded MHLC a reasonable time after that date to remove the fixtures.
Pursuant to 11 U.S.C. § 365(g)(1), the rejection of an unexpired lease of the debtor constitutes a breach of the lease effective immediately before the date the bankruptcy petition was filed, if the lease has not been assumed. Without the special protections of § 365(d)(3), the lessor would simply have a prepetition unsecured claim against the estate for damages resulting from termination of the unexpired lease agreement, effective with the date of filing the petition.
See
11 U.S.C. §§ 502(b)(6), 502(g);
In re Cardinal Export Corp.,
The enactment of § 365(d)(3) and (4), which became effective in 1984, provided more favorable treatment to lessors of nonresidential property by ensuring ongoing timely payment of obligations under an unexpired lease pending a determination whether to assume or reject, notwithstanding the automatic stay protections of bankruptcy.
See, e.g., In re Southwest Aircraft Services, Inc.,
Inland argues that Duckwall is liable for payment of its lease obligations until September 1, 1989, since it did not surrender the premises before that date. “Surrender” is a legal term of art in the law of landlord-tenant relations. The term refers to the tenant’s release from lease obligations prior to the end of the lease term, in exchange for the tenant’s voluntary return or “surrender” of the leased premises.
See In re McLean Enterprises, Inc.,
Inland contends, however, that the order of the bankruptcy court approving rejection of Inland’s lease set the effective date of rejection as the date of surrender, or no later than September 1, 1989. Hence, Inland argues that even if the Code itself does not incorporate the surrender doctrine, the court itself did so by virtue of the language of its order.
The bankruptcy court entered three different orders relevant to Duckwall’s intended rejection of the Inland lease. The first order, apparently drafted by Duck-wall’s counsel, was issued on July 19,1989. It ordered that numerous specified leases, including Inland’s, were rejected effective as of the earlier of the date of surrender of the premises by the debtor, or August 1, 1989. The second order, drafted by Inland’s counsel, was issued on July 24, 1989. The second order referred specifically to the Inland lease, ordering it rejected as of the earlier of the date of surrender of the premises by the debtor, or August 1, 1989. The second order also explicitly defined the term “surrender” to include several requirements, including the return of all keys, payment of all rentals accruing to the date of surrender, and the clearing and cleaning of the premises and adjacent parking lot of all property of the debtor and third parties caused to be located there by the debtor. Finally, on October 24, 1989, long after the premises were vacated by both Duckwall and MHLC, the court issued a third “clarifying order,” drafted by agreement of the parties, ordering the Inland lease rejected effective as of the earlier of (1) the date of surrender of the premises by the debtor (without defining the term “surrender”); (2) August 1,1989, provided that if the premises were not surrendered by August 1, 1989, rejection shall be effective as of surrender; or (3) September 1, 1989.
The time limit for assumption or rejection of an unexpired nonresidential lease is fixed by 11 U.S.C. § 365(d)(4) at 60 days after the order for relief, or within such additional time as the court, for cause, fixes
within such 60-day period.
To the extent that any of the three orders of the bankruptcy court purported to extend the period for rejection to alternative dates, all of which were beyond the 60-day period, they were invalid. The earliest of the three orders was issued July 19, 1989, 12 days after the end of the 60-day time period during which the court had the statutory authority to extend the period for cause.
12
See Sea Harvest Corp. v. Riviera Land Co.,
Under § 365(d)(4), if the trustee or debtor-in-possession does not assume or reject an unexpired lease of nonresidential real property within 60 days after the date of the order for relief (in this case, May 8, 1989), the lease is deemed rejected on the date the 60-day period expires. Although Duckwall filed its motion for rejection of the Inland lease, among others, on June 14, 1989, the bankruptcy court failed to act on the motion within the 60-day limit.
13
The order of the bankruptcy court awarded additional amounts to Inland on the assumption that, while the effective date of rejection was July 18, 1989, Duck-wall was responsible for prorated rent and property taxes as “administrative expenses” through July 31, 1989, the date the bankruptcy court determined was a reasonable time to permit MHLC to remove the fixtures. For all practical purposes, the amount awarded below to Inland assumed that Duckwall was responsible under the lease for rent, including tax payments characterized under the lease as “additional rents,” through July 31, 1989. However, the actual date of rejection, as a matter of law, was July 7, 1989, 60 days following the order for relief. Inland is therefore entitled to payment under 11 U.S.C. § 365(d)(3) only for lease obligations arising between May 8, 1989, the date of the order for relief, and July 7, 1989, the date of rejection. Although Inland may have a claim against the estate for damages as a result of breach of the lease, see 11 U.S.C. §§ 501(a), 502(a), 502(b)(6), or an administrative claim under 11 U.S.C. § 503(b), any such claims are not entitled to the special protections afforded commercial lessors by § 365(d)(3). 15
II. Lease Obligation to Pay Property Taxes.
Inland contends it is entitled to payment under § 365(d)(3) for the entire amount of real estate property taxes that accrued during calendar year 1988, and which became due and payable under Illinois law after Duckwall filed for bankruptcy but before the date of rejection. 17 For the following reasons, this court has determined that Duckwall is obligated to pay one-half of the property taxes for 1988, which were due on June 1, 1989, a date which fell within the post-petition period prior to the date of rejection.
Section 365(d)(3) requires the trustee or debtor-in-possession to “timely perform all the obligations ... arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected....” With regard to taxes, the lease explicitly provided, “Tenant shall be obligated to pay only those installments falling due during the term of this Lease.” 18 Under Illinois law, taxes on real property are payable in two equal installments. Ill.Rev.Stat. ch. 120 ¶ 675, § 194(a). A representative of Inland testified at the hearing before the bankruptcy court that the lessor’s practice in the past had been to pay the taxes in installments, and then bill the lessees for reimbursement of their proportionate shares.
The term “due” may have various meanings depending upon the context in which it is used.
See In re Vause,
It is undisputed that prior to 1989, when Duckwall filed for bankruptcy, Inland paid the property taxes in installments and billed Duckwall for reimbursement of each installment. Further, the meaning of the term “due” as used in the lease must be construed in a manner consistent with the language allowing the tenant the option of paying taxes in installments. It would be incongruous to hold that because the landlord, as taxpayer, elected to pay the entire tax bill in a. single payment, the tenant thereby lost the option under the lease to pay only the installments falling due during the lease term. The court therefore concludes that the parties them
It is undisputed that the first installment of 1988 property taxes was due June 1, 1989, and payment of the second installment was not required until September 1, 1989. Only the first installment was “due” prior to the date of rejection, which this court has determined as a matter of law was July 7, 1989. The court therefore concludes that Duckwall was obligated under the lease to pay the first half of the property taxes which had accrued in 1988 and which were due and payable post-petition on June 1, 1989. 19 Inland was thus entitled under § 365(d)(3) to immediate payment from Duckwall for the amount of $15,-737.64 20 for “additional rent” for reimbursement of property taxes that had accrued to Inland in 1988. 21
The bankruptcy court prorated the 1988 accrued taxes for the period July 18 through July 31,1989 on the reasoning that the lease provided for proration.
22
However, the proration clause in the lease applies only to “any partial tax year occurring during the original or any renewed term” of the lease. Pursuant to 11 U.S.C. § 365(g)(1), rejection of an unexpired lease constitutes a breach immediately prior to the date of filing the petition. Therefore, by operation of law the lease was retroactively terminated as of that date.
See In re Cardinal Export Corp.,
Even if the lease’s proration clause controlled during the period in question, the court would not agree with the bankruptcy court’s interpretation. The ten-year primary term of the lease commenced on April 1, 1985, and had not yet expired when
The question in this case is what payments the lease obligated Duckwall to make to Inland during the 60 days following the filing of the petition. In enacting § 365(d)(3), Congress wanted to ensure that lessors of commercial property would have a continuing flow of lease revenue pending a decision by the trustee or debtor-in-possession whether to reject or assume the lease. To require Duckwall to pay the first installment of taxes due on June 1, 1989, is consistent with this purpose and the prior course of dealings between the parties.
Duckwall paid Inland $6,122.33 for property taxes when it sent its notice to Inland on July 17, 1989. 23 Deducting this amount from the $15,737.54 lease obligation for additional rent for the first half of the 1988 taxes, the balance owed to Inland by the estate for its lease obligations for property taxes pursuant to § 365(d)(3) is $9,615.21. 24
IT IS BY THE COURT THEREFORE ORDERED that the judgment of the bankruptcy court is hereby modified as stated herein, and the matter is remanded for further proceedings consistent with this memorandum and order.
IT IS FURTHER ORDERED that Duck-wall’s prayer for costs (Doc. 8, p. 21) is hereby denied.
Notes
. This court has jurisdiction pursuant to 28 U.S.C. § 158(a).
. In addition, the lease required Duckwall to pay an annual "percentage rental” based on a percentage of gross annual sales in excess of a fixed sum. However, the parties have stipulated that no percentage rental accrued during the period of time pertinent to this appeal.
. The balance of Inland’s property tax obligation for the subject real estate was billed to the adjacent savings and loan association.
. The parties stipulated that Duckwall rejected the fixture lease with MHLC pursuant to the order of the bankruptcy court. See 11 U.S.C. § 365(a).
.Absent evidence to the contrary in the record designated for appeal, the court assumes that Duckwall timely paid Inland the guaranteed monthly rent due in early June 1989.
. The total amount claimed by Inland included insurance premiums, maintenance and repair expenses, utilities, and cleaning expenses, which were disallowed by the bankruptcy court to the extent incurred after July 31, 1989. The lower court’s determinations as to these miscellaneous expenses are not specifically challenged in this appeal. However, Inland argues that if the date of rejection was September 1, 1989, as it contends, then these expenses must be paid as lease obligations together with post-petition rent and taxes.
. The parties stipulated to the bankruptcy court that the per diem amount for prorated taxes for the period between May 8, 1989, and the date of rejection was $84.61, based on the 1988 tax assessment. Apparently the bankruptcy court granted Inland prorated taxes for the period July 19, 1989, through July 31, 1989, or 13 days at the stipulated per diem rate of $84.61, yielding $1,099.93. This amount is in addition to the sum of $6,122.33 paid by Duckwall with its letter dated July 17, 1989.
In its appeal, Inland does not dispute the bankruptcy court’s calculation of the tax liability, but rather contends that the estate is liable under § 365(d)(3) for the entire amount of 1988 taxes that Inland paid on June 1, 1989, or $31,-475.28. The parties had stipulated that taxes accruing from January 1, 1988 through December 31, 1988, amounting to $31,475.28, were additional rentals payable by Duckwall pursuant to the lease; that taxes accruing from January 1, 1989, through May 7, 1989, were additional rentals payable by Duckwall pursuant to the lease, and that taxes accruing from May 8, 1989 through the effective date of rejection were "entitled to 11 U.S.C. § 365(d)(3) treatment.” This court takes no position with regard to whether the parties’ stipulations to the bankruptcy court regarding Duckwall’s obligations for taxes have a legal basis in the lease.
. The trustee’s statutory duty also applies to a debtor-in-possession. See 11 U.S.C. § 1107(a).
. Prior to enactment of § 365(d)(3), the lessor could also file a claim for administrative expenses under 11 U.S.C. § 503(b)(1)(A) for the "actual and necessary costs and expenses of preserving the estate.” Under this language, however, the courts held that the estate was obligated only for the reasonable value of the use and occupancy of the premises pending assumption or rejection of the lease.
See, e.g., In re Cardinal Export Corp.,
. Although these payments have been characterized by many courts, including the court below, as "administrative expenses," this court cannot agree. Lease obligations under § 365(d)(3) are not subject to requirements of § 503 for payment of administrative expenses.
See, e.g., In re Paul Harris Stores, Inc.,
The command of Section 365(d)(3) is clear and unambiguous. It means exactly what it says. We decline the ... invitation to disfigure with the patina of judge made law the clean surface of a statute.
See also In re Telesphere Communications, Inc.,
. However, § 365(a) is expressly subject to § 365(d)(4), which provides that an unexpired lease of nonresidential real property is deemed rejected if it is not assumed or rejected within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes. Hence, the lease is rejected by operation of law 60 days after the petition is filed, unless it is rejected sooner with the approval of the court or unless it is assumed with the approval of the court.
See Sea Harvest Corp. v. Riviera Land Co.,
868
. Even if one or more of the orders had been entered within the 60-day period, none of the orders indicates that the bankruptcy court determined that cause existed for extending the time period beyond 60 days. See 11 U.S.C. § 365(d)(4) (bankruptcy court may fix additional time beyond 60 days for cause).
. Had Duckwall sought immediate rejection of the Inland lease, it might seem harsh to hold the debtor-in-possession liable for lease obligations until expiration of the 60-day period, pending action by the court on the motion to reject. However, the party seeking relief in any court
. The court acknowledges the stipulation of the parties before the bankruptcy court to the effect that the date of rejection, although in dispute, was sometime after July 17, 1989. However, since the unexpired lease was rejected as a matter of law pursuant to § 365(d)(4) effective 60 days after Duckwall filed its bankruptcy petition, the parties’ stipulation has no legal effect.
The court recognizes that some courts have held that the 60-day limit does not preclude the bankruptcy court from entering a subsequent order approving a motion to assume an unexpired lease, or a motion for an extension of time to decide whether to assume or reject.
See, e.g., In re Southwest Aircraft Services, Inc.,
. The court acknowledges that the bankruptcy court’s judgment characterized the amounts awarded as "administrative expenses,” without specifying whether they were allowed under § 365(d)(3) or § 503(b). The Bankruptcy Code distinguishes between lease obligations within the 60-day post-petition period and administrative expenses under § 503(b).
See, e.g., In re Rare Coin Galleries of America, Inc.,
The record designated for appeal does not include a request for administrative expenses pursuant to 11 U.S.C. § 503(a). The motion and proof of claim submitted by Inland to the bankruptcy court sought payment under § 365(d)
Nor is this court asked to decide the extent, if any, of Inland’s general unsecured claim for post-rejection unpaid rents pursuant to 11 U.S.C. § 502(b)(6).
See In re Federated Dep’t Stores, Inc.,
. Whether or not the stipulated proration of the monthly rent obligation finds legal support in the lease is not before this court for review.
. As the court understands Inland’s argument, this court’s determination on appeal that the date of rejection was July 7, 1989, rather than July 18, 1989, has no effect on the tax issue.
. The language of the lease contradicts Inland’s assertion that the lease did not give the right to pay in installments to the debtor/lessee.
. Although Inland contends that it paid the entire 1988 tax bill on June 1, 1989, the court notes that the language of the lease is clear in allowing the tenant to take advantage of the statute allowing payment in installments. While the lessor as taxpayer may elect to pay the tax in one lump sum under Illinois law, the tenant’s lease obligation is not altered by the taxpayer/lessor’s election to do so. Although the lessor’s 1988 tax liability for the real property accrued prepetition, the debtor’s lease obligation to pay the additional rent by reimbursing Inland for the property taxes did not arise until after the petition was filed on May 8, 1989.
. The parties stipulated that 1988 accrued property taxes amounted to $31,475.28. See supra n. 7, 2.
. The court notes that the second installment on the 1988 accrued taxes was not due and payable under the lease until September 1, 1989, after the date of rejection.
Compare In re Ames Dep't Stores, Inc.,
.The bankruptcy court did not order payment of prorated property taxes for the pre-petition period through May 7, 1989, despite its reasoning that the parties intended the tax obligation to accrue as the debtor occupied the premises. However, § 365(d)(3) requires performance only of obligations "arising from and after the order for relief under any unexpired lease.” Apparently the bankruptcy court reasoned that property taxes accruing during the pre-petition period did not arise after the order for relief. Duckwall paid Inland prorated taxes for the post-petition period May 8, 1989 through July 17, 1989, with its letter dated July 17, 1989.
. The court rejects Duckwall’s argument that its liability is limited to taxes accruing between the date of the petition and the date of rejection. The language of § 365(d)(3) is clear in imposing the duty to comply with all lease obligations arising after the order for relief. The lease in this case obligated Duckwall to pay the first installment of 1988 property taxes on June 1, 1989. The lease did not provide for payment of taxes to the landlord as they accrued.
. This figure does not take into account the bankruptcy court’s order directing payment to Inland of $1,099.93 for property taxes.