JOEL T. MARKER, Bankruptcy Judge.
"It is one thing to prevent expiration, and quite another to attempt to breathe life back into something which has already died."
The Debtor in this chapter 11 case has operated its business in leased premises for around nine years, and the Debtor now asks this Court to allow assumption of its commercial lease. But the lessor objects to the assumption and requests stay relief along with a determination that there is no viable lease for the Debtor to assume. For the reasons set forth herein based on the Court's review of the papers, evidence, arguments, and applicable case law, the Court holds that the lease terminated before the petition date—irreversibly so—and accordingly that there is no unexpired lease for the Debtor to assume.
Tri-Park Partnership leases certain real property in North Logan, Utah that is owned by Utah State University. In turn, Tri-Park subleased that property to the Debtor under the terms of a Building Lease executed on or about March 31, 2006.
By letter dated April 28, 2011, Tri-Park declared the Debtor's default under the Building Lease for, among other things, failing to make timely rent payments for each year since the lease's execution.
Based on the February 2014 Memorandum Decision, the First District Court entered an Order Granting Partial Summary Judgment on May 9, 2014 finding breach of the lease and "quieting title in favor of [Tri-Park] and against [the Debtor]. Accordingly, [Tri-Park] is hereby granted judgment to re-enter and take possession of the subject premises and every part thereof which is subject to the Building Lease."
In this bankruptcy case, Tri-Park filed a Motion for Relief from Automatic Stay on December 17, 2014 requesting stay relief to continue its efforts to remove the Debtor from the property. Two days later, the Debtor filed a Motion to Assume Unexpired Lease requesting authorization to assume the Building Lease under § 365 of the Bankruptcy Code. Given their connection, these two contested matters were set for a combined evidentiary hearing on March 10, 2015. But in the interim, Tri-Park filed a Motion for Summary Judgment and for Protective Order. At a continued status conference on February 9, the Court stayed any further discovery regarding the Building Lease, struck the combined evidentiary hearing set for March 10, and replaced it with a hearing on Tri-Park's Motion for Summary Judgment, which is the matter now before the Court.
Under Federal Rule of Civil Procedure 56(a), the Court is required to grant a motion for summary judgment "if the movant shows that there is no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law." Substantive law determines which facts are material and which are not. "Only disputes over facts that might affect the outcome of the [contested matter] under the governing law will properly preclude the entry of summary judgment."
The moving party bears the burden to show that it is entitled to summary judgment,
The crux of the present dispute involves § 365(c)(3) of the Bankruptcy Code, which provides that a debtor cannot assume any unexpired lease "if such lease is of nonresidential real property and has been terminated under applicable nonbankruptcy law prior to the order for relief." The parties do not dispute the obvious point that the Building Lease is a commercial lease, so the only issue is whether the Building Lease was "terminated" before the petition date. If it was, then the Building Lease did not become part of the bankruptcy estate, and there is nothing for the Debtor to assume.
It is clear that unless some federal interest requires a different result, "[p]roperty interests are created and defined by state law."
Here, the First District Court has done all of the heavy lifting during three years of prepetition litigation about the Building Lease. The Court found that the Debtor breached the Building Lease by failing to make five years of stock payments; that neither the Building Lease nor any actions by Tri-Park gave the Debtor any right to cure the delinquent payments; that the Debtor's belated and ongoing transmission of stock certificates to Tri-Park did not preserve the Building Lease; that Tri-Park had always sought repossession of the property; and, at least implicitly, that quiet title was an appropriate cause of action under the circumstances. As such, the Court entered judgment quieting title in favor of Tri-Park, allowing Tri-Park "to re-enter and take possession of the subject premises and every part thereof which is subject to the Building Lease," and ultimately lifting the stay of its judgment after ruling against the Debtor on the waiver issue.
In the face of all these findings and conclusions as well as the quiet title judgment, and citing Cache County v. Beus, 978 P.2d 1043 (Utah Ct. App. 1999), the Debtor's main argument is that the only valid methods for terminating a lease under Utah law are through an action for unlawful detainer under U.C.A. § 78B-6-801 et seq. or an action for common law ejectment. And since Tri-Park instead prosecuted a quiet title action under U.C.A. § 78B-6-1301, its efforts were all for naught. But while Beus does recognize the continued availability of an action for common law ejectment in addition to the statutory action for unlawful detainer, it does not prohibit the possibility of other remedies, and this Court is aware of no statute, case, or other Utah law that precludes a landlord's admittedly unusual use of a quiet title action under U.C.A. § 78B-6-1301 as a means of terminating a lessee's leasehold interest.
The Debtor also makes the interesting and related arguments that because the First District Court's May 9, 2014 Order Granting Partial Summary Judgment was not a final judgment of the entire action on the merits, the Order and the various Memorandum Decisions could be revised at any time, and this Court cannot give preclusive effect to those rulings. It is true that Utah Rule of Civil Procedure 54(b), like Federal Rule of Civil Procedure 54(b), allows for "entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination by the court that there is no just reason for delay and upon an express direction for the entry of judgment." It is true that nothing in the record demonstrates that the First District Court made any such determination as to the Order Granting Partial Summary Judgment. And it is true that a final judgment on the merits is one of the required elements before this Court may invoke either claim preclusion (res judicata) or issue preclusion (collateral estoppel).
But under these circumstances, the Rooker-Feldman doctrine accomplishes what the preclusion doctrines cannot. Rooker-Feldman prevents lower federal courts from reviewing "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments."
The Debtor's final argument in its Memorandum in Opposition to Tri-Park Partnership's Motion for Summary Judgment and for Protective Order is that this Court should consider "other relevant case law" that may support the Debtor's ability to assume the Building lease, citing specifically to In re C.W. Mining Company, 422 B.R. 746 (10th Cir. BAP 2010) and In re Pomodoro Restaurant, 251 B.R. 441 (10th Cir. BAP 1999) (table). But neither of these cases is on point for the propositions that the Debtor suggests. The lease in C.W. Mining, unlike the lease here, did not provide for automatic termination—a fact which the C.W. Mining court itself noted when contrasting that lease with the leases at issue in cases such as In re Trigg, 630 F.2d 1370 (10th Cir. 1980) and Moody v. Amoco Oil Company, 734 F.2d 1200 (7th Cir. 1984). And in Pomodoro Restaurant, there was an appealed declaratory judgment but also a pending unlawful detainer action on the petition date, as opposed to the prepetition entry of the quiet title judgment in this case, and the strict time limitations for assumption of commercial leases did not get added to § 365(d)(4) of the Bankruptcy Code until enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
"[W]hatever rights a debtor has in property at the commencement of the case continue in bankruptcy—no more, no less."