Furr's Supermarkets, Inc.

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/14/06
Furr's Supermarkets, Inc.
01-10779
Findings of Fact and Conclusions of Law on Lease-Attorney fee issue .
Received on: 2002-01-04 10:14:24.000
2002-01-04 10:14:24.000
2002-01-04 00:00:00.000
Case 01-10779-nlj7 Doc 1468 Filed 01/04/02 Entered 01/04/02 15:11:00 Page 1 of 10

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
FURRS SUPERMARKETS, INC.
Debtor. No. 11-01-10779 SA
FINDINGS OF FACT AND CONCLUSIONS
OF LAW ON LEASE-ATTORNEY FEE ISSUE
This matter is before the Court on the Briefs of Lakeway
Shopping Center (“Lakeway”)(docket # 922), Charlene W. Green
(“Green”)(docket # 923) and River Oaks Properties (“River
Oaks”)(docket # 921) in Support of Award of Attorney Fees as
Part of Cure Amount for Assumption of Leases, and the
objections thereto by the Debtor (docket # 928). This is a
core proceeding. 28 U.S.C. § 157(b)(2)(A) and (B).
FACTS
1. Lakeway is the lessor under a written lease for
nonresidential real property located in Truth or
Consequences, New Mexico. Green is the lessor under a
written lease for nonresidential real property located in
El Paso, Texas. River Oaks is the lessor under written
leases for three nonresidential real properties, one in
Albuquerque (store 874) and two in El Paso, Texas (stores
950 and 952.) Debtor is lessee under these leases.
2. Debtor was in default under the leases. Debtor and the
three lessors agreed to the amounts that it would take to
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cure the leases, but reserved the issue of whether debtor
had to pay the lessors’ attorneys fees. (Based on this
factual finding, the Court below finds that the lessors
are “prevailing parties”.)
3. The Lakeway lease provides:
24. Attorney’s fees. If lessor or lessee
files a suit against the other which is in
any way connected with this lease, the
unsuccessful party shall pay to the
prevailing party a reasonable sum for
attorney’s fees, which shall be deemed to
have accrued on the commencement of such
action and shall be enforceable whether or
not such action is prosecuted to judgment.
4. The Green lease has no express provision for attorney
fees.
5. All three River Oaks leases provide in Articles 19:
In the event the Landlord finds it necessary to
retain an attorney in connection with the
default by Tenant in any of the agreements or
covenants contained in this Lease, Tenant shall
pay reasonable attorney’s fees to said attorney.
In the event of any litigation regarding this
Lease, the losing party shall pay to the
prevailing party reasonable attorney’s fees. If
Landlord or Tenant files a suit against the
other which is in any way connected with this
Lease, the unsuccessful party shall pay to the
prevailing party a reasonable sum for attorney’s
fees, which shall be deemed to have accrued on
the commencement of such action and shall be
enforceable whether or not such action is
prosecuted to judgment.
6. Lakeway seeks $2,116.18 in attorney fees and costs up to
the hearing on assumption and assignment, attaching
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itemized bills to its brief. The attorneys fees are for
the period July 2, 2001 through August 10, 2001 and all
fees relate to the assumption and assignment of the
lease. The Court has reviewed the documents and finds
the fees and expenses reasonable.
7. Green seeks $2,762.49 in attorney fees and costs up to
the hearing on assumption and assignment, attaching
itemized bills to its brief. The attorneys fees are for
the period June 26, 2001 through August 10, 2001 and all
fees relate to the assumption and assignment of the
lease. The Court has reviewed the documents and finds
the fees and expenses reasonable.
8. River Oaks seeks $13,238.71 in attorney fees and costs up
to the hearing on assumption and assignment, attaching
itemized bills to its brief. The attorneys fees are for
the period February 8, 2001 through August 10, 2001. The
Court has reviewed the documents, and finds that
substantially all attorney fees relate to the cure,
assumption or assignment of the leases. The Court finds
that 4.85 hours ($800.25) are not related to the leases
(e.g., dealing with Motion to Appoint Trustee and Motion
for Extension of Exclusivity – the deadlines imposed on
the estate by §365(d)(4) operate regardless of the
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appointment of a trustee or the Debtor-in-Possession’s
exclusivity, clerical work of indexing pleadings, letters
to the Clerk’s office and reviewing motions to employ
professionals) and not properly billed as part of the
cure amount. The Court finds the remaining fees and
expenses in the amount of $12,438.46 reasonable.
CONCLUSIONS
1. Bankruptcy Code Section 365 provides, in part:
(a) [T]he trustee, subject to the court’s
approval, may assume or reject any
executory contract or unexpired lease of
the debtor.
(b)(1) If there has been a default in an
executory contract or unexpired lease of
the debtor, the trustee may not assume such
contract or lease unless, at the time of
assumption of such contract or lease, the
trustee–
(A) cures, or provides adequate assurance
that the trustee will promptly cure, such
default;
(B) compensates, or provides adequate
assurance that the trustee will promptly
compensate, a party other than the debtor
to such contract or lease, for any actual
pecuniary loss to such party resulting from
such default; and
(C) provides adequate assurance of future
performance under such contract or lease.
2. The purpose of Section 365(b)(1)(B) is to indemnify the
other party to the contract or lease being assumed
against loss. Andrew v. KMR Corporation (In re Bullock),
17 B.R. 438, 439 (9th Cir. B.A.P. 1982).
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3. Bankruptcy Courts consistently hold that lessors are
entitled to recover reasonable attorney fees under §
365(b)(1)(B) as a condition of assumption of a lease, if
those fees would be allowed under state law.
Attorney’s fees incurred in attempting to
collect sums due from debtors following default
may be recovered as pecuniary loss under §
365(b)(1)(B) if such monies were expended as the
result of a default under the contract or lease
between the parties and are recoverable under
the contract and applicable state law.
Three Sisters Partners, L.L.C. v. Harden (In re Shangra-
La, Incorporated), 167 F.3d 843, 849 (4th Cir. 1999).See
also In re Westview 74th Street Drug Corp., 59 B.R. 747,
756 (Bankr. S.D. N.Y. 1986)(Cases consistently recognize
that an express contractual provision for attorney’s fees
gives rise to a right to obtain those fees as part of
curing the default and in compensation for actual
pecuniary loss.)
4. Section 365 by itself does not give a creditor greater
rights than it would have under the contract or lease
that gives rise to the debt. In re Ryan’s Subs, Inc.,
165 B.R. 465, 468 (Bankr. W.D. Mo. 1994).
5. Section 365(b)(1)(B) does not create an independent basis
for recovery of attorney fees that are not provided for
in the lease being assumed. In re Mid American Oil,
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Inc., 255 B.R. 839, 841 n. 1 (Bankr. M.D. Tn. 2000);
Lacey v. Westside Print Works, Inc. (In re Westside Print
Works, Inc.), 180 B.R. 557, 564 (9th Cir. B.A.P. 1995)(“We
also conclude that the American rule prohibits award of
attorney’s fees pursuant to subsection (B).”); Ryan’s
Subs, Inc., 165 B.R. at 468.
6. In general, under Texas law, attorneys fees are not
recoverable unless provided for by statute or by contract
between the parties. Twelve Oaks Tower I, Ltd. v.
Premier Allergy, Inc., 938 S.W.2d 102, 118 (Tx. Ct. App.
1997) (treating real property lease as a contract).
7. In general, under New Mexico law, absent contract,
statute, or rule of court, attorney fees are not
recoverable. New Mexico Right to Choose/NARAL v.
Johnson, 127 N.M. 654, 657, 986 P.2d 450, 453 (1999).
8. The Lakeway lease, for New Mexico real property, provides
for an award of attorney fees to the prevailing party.
Lakeway incurred attorney fees with respect to Debtor’s
cure, assumption and assignment of the lease. Lakeway is
a prevailing party because Debtor was in default under
the terms of the leases; at the August 14, 2001 hearing
Debtor and Lakeway announced an agreement on the cure
amount and Lakeway reserved the attorney fee issue
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pending this ruling. Lakeway’s fees are therefore
recoverable under §365(b)(1)(B).
9. The Green lease does not provide for an award of attorney
fees. Therefore, if she is entitled to fees it would be
pursuant to statute.
10. Under the Texas Civil Practice & Remedies Code § 38.001:
A person may recover reasonable attorneys
fees from an individual or corporation, in
addition to the amount of a valid claim and
costs, if the claim is for ...
(8) an oral or written contract.
Texas Civil Practice & Remedies Code chapter 38 allows
for recovery of attorneys fees associated with a
successful claim on an oral or written contract. Federal
Deposit Insurance Corporation v. Graham, 882 S.W.2d 890,
900 (Ct. App. Tx. 1994). In order to recover fees under
Chapter 38, a party must be the “prevailing party” in the
case. Id. A prevailing party is “one of the parties to
a suit who successfully prosecutes the action or
successfully defends against it, prevailing on the main
issue, even though not to the extent of its original
contention.” Id.
11. Section 38.001 has been applied in the context of written
leases to award lessors’ attorney fees in the absence of
an explicit provision for such an award in the lease.
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See Estes v. Wilson, 682 S.W.2d 711, 718 (Tx. Ct. App.
1984).
12. Section 38.002 governs the procedure for recovery of
attorney’s fees. The claimant must present the claim to
the opposing party and payment for amounts owed must not
have been tendered within 30 days. Texas Civil Practice
& Remedies Code § 38.002(2) and (3).
13. Under state law, Green may be entitled to her attorney
fees. The record does not indicate whether demand was
made or when any payment was made; nor have the parties
argued that the automatic stay interacts with the Texas
statute to excuse demand. The Court will set a
preliminary hearing on these issues.
14. The River Oaks leases provide for an award of attorney
fees. River Oaks incurred attorney fees with respect to
Debtor’s cure, assumption and assignment of the lease.
River Oaks is a prevailing party because Debtor was in
default under the terms of the leases; at the August 14,
2001 hearing Debtor and River Oaks announced an agreement
on the cure amount and River Oaks reserved the attorney
fee issue pending this ruling. River Oak’s fees are
therefore recoverable under § 365(b)(1)(B), in the amount
permitted by the Court.
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Honorable James S. Starzynski
United States Bankruptcy Judge
I hereby certify that on January 4, 2002, a true and correct
copy of the foregoing was either electronically transmitted,
faxed, delivered, or mailed to the listed counsel and parties.
David T. Thuma
500 Marquette NW Suite 650
Albuquerque, NM 87102
Carlos Miranda
4695 N. Mesa St.
El Paso, TX 79912
Yvette Gonzales
PO Box 1037
Placitas, NM 87043-1037
Office of the United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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