Unpublished Disposition, 867 F.2d 612 (9th Cir. 1989)

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US Court of Appeals for the Ninth Circuit - 867 F.2d 612 (9th Cir. 1989)


No. 88-5543.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 13, 1989.Decided Jan. 27, 1989.

Before WALLACE, CANBY and TROTT, Circuit Judges.


China Peacock Restaurant, the debtor in bankruptcy, appeals the determination that its nonresidential lease was rejected under 11 U.S.C. § 365, and the dismissal of its adversary proceeding. We affirm.

Assumption of the Lease

China Peacock's lease of nonresidential real property could not be assumed if it had terminated, under applicable state nonbankruptcy law, before the bankruptcy petition was filed. 11 U.S.C. § 365(d) (3); see Vanderpark Properties, Inc. v. Buchbinder (In re Windmill Farms, Inc.) 841 F.2d 1467, 1469 (9th Cir. 1988). A lease that has already terminated is not part of the bankruptcy estate under 11 U.S.C. § 541. See L. Cherkis, L. King, Collier Real Estate Transactions and the Bankruptcy Code p 3.01 [a] (1988); W. Norton, Norton Bankruptcy Law and Practice Sec. 23.11.55 (Rev.1986). But if the termination of the lease could be reversed under state anti-forfeiture statutes, or other applicable state law, then the lease would still be assumable by the debtor. Windmill Farms, 841 F.2d at 1471-72; City of Valdez v. Waterkist Corp. (In re Waterkist Corp.), 775 F.2d 1089, 1091 (9th Cir. 1985). China Peacock claims that its lease was wrongfully terminated, and should be reinstated.

We need not decide whether the termination is subject to reversal under state law in this case, however, because China Peacock made no effort to assume the lease. A debtor in bankruptcy may assume or reject an unexpired lease or executory contract under 11 U.S.C. § 365(a). Here, where a lease of nonresidential real property was involved, China Peacock was required either to assume the lease, or to file for an extension of time, within sixty days after filing a petition in bankruptcy. 11 U.S.C. § 365(d) (4); see Bankr.R. 6006, 9014. Because it took no such action, the lease was deemed rejected. Id. Moreover, assumption of the lease under Sec. 365 required the express approval of the court. Lindsey v. Department of Labor (In re Harris Management Co.), 791 F.2d 1412, 1414 (9th Cir. 1985). None was sought or given.

Dismissal of the Adversary Proceeding

The bankruptcy court also dismissed the adversary proceeding previously filed by China Peacock as moot. China Peacock's complaint had four claims for relief: (1) turnover of property of the estate under Sec. 542 (presumably to regain possession of the premises); (2) relief for violation of the automatic stay; (3) declaratory relief as to its rights under the lease; and (4) damages for wrongful eviction from the premises under California law.

The adversary proceeding was correctly dismissed. The debtor's due process rights are not implicated by the court's dismissal on its own motion because the court must determine its own jurisdiction. Aguirre v. S.S. Sohio Intrepid, 801 F.2d 1185, 1189 (9th Cir. 1986). If the lease had been terminated prior to the filing of the bankruptcy petition the court would have no jurisdiction because the terminated lease was not part of the bankruptcy estate. If the lease was assumable by China Peacock, it was subsequently rejected, and the allegations in China Peacock's complaint are moot. By rejecting the lease, China Peacock relinquished all its rights, interest and benefits from the lease. See Cheadle v. Appelatchee Riders Ass'n (In re Lovitt), 757 F.2d 1035, 1041 (9th Cir.), cert. denied, 474 U.S. 849 (1985).1  The bankruptcy petition and subsequent rejection of the lease have eliminated the present, live controversy required for federal jurisdiction. See e.g. Aguirre, 801 F.2d at 1189; Lindquist v. Idaho State Bd. of Corrections, 776 F.2d 851, 853-54 (9th Cir. 1985). Once China Peacock rejected the lease, the bankruptcy court could not grant the relief requested.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


Although In re Lovitt was decided under the old Bankruptcy Code, the provisions regarding the assumption or rejection of unexpired leases and executory contracts are analogous. 757 F.2d at 1040 n. 3