Thank You For Submiting Feedback!
Pursuant to 11 U.S.C.S. § 362 (d)(1), a party in interest is entitled to relief from the automatic stay if it can show cause, which is defined to include the lack of adequate protections of an interest in property of such party in interest. When deciding whether to modify the automatic stay, the court must consider the particular circumstances of the case and ascertain what is just to the claimants, the debtor, and the estate.
Brooklyn Law School (“creditor”) entered agreement with debtor's predecessor which granted predecessor and debtor the exclusive right to operate a bookstore. Debtor filed for chapter 11 bankruptcy and operated store as debtor-in-possession following expiration of the agreement. Creditor moved under 11 U.S.C.S. § 362(d)(1) for relief from the automatic stay to permit creditor to: (i) serve a notice to quit with respect to certain space located at the premises, and (ii) to take any other action necessary to cause debtor to vacate the premises. Debtor opposed the motion.
Under the circumstances, should the court grant the creditor’s motion for relief from the automatic stay in bankruptcy?
The court granted creditor's motion for relief from the automatic stay in bankruptcy, holding that the creditor was a licensor at will which could not be required to continue its business relationship with debtor. The court said that the agreement could not be construed as vesting debtor with the right to operate a bookstore beyond its term. According to the court, the termination of creditor's relationship with debtor would promote creditor's policy of engaging in short-term contracts.