In re: Steelman Enterprises, LLC, Nos. 4:09-bk-33960-JMM, 4:09-br-33962-JMM, 4:09-bk-33963-JMM (Bankr. D. Ariz., January 3, 2011).
In a jointly administered Chapter 12 case, an Arizona bankruptcy court considered a motion to renew an existing lease and continue farming the leased ground through 2011, over an objection filed by the land's current owner, Stearns Bank.
In a Chapter 12 bankruptcy case, the debtor is a family farm requesting reorganization in a bankruptcy proceeding. In this case, the debtor farm sought to renew its lease over the objection of the land's owner. The owner claimed that under their lease agreement, it is permitted to elect not to renew the lease, and it has. However, the debtor farm argued that the lease provision requires notification of non-renewal be given to them by October 30 of each year, and that if they fail to do so the lease is automatically renewed, and that the bankruptcy court should be permitted to renew the lease by court order. The bank did give the debtor bank notification of non-renewal in a timely manner.
The bankruptcy court denied the motion of the debtor farm. In its decision, the court reasoned that the debtor farm assumed the lease according to its terms when it submitted its confirmation plan. The terms of the lease clearly permit the bank to elect to not renew the lease, and it has done so according to the specifications in the agreement. The court held it has no authority to extend an assumed lease which has been terminated according to its own terms. Once a bankruptcy plan is confirmed by the court, the terms are binding both on the debtor and any creditor.
It should be noted that if the debtor had not agreed in the bankruptcy proceedings to accept the terms of this agreement, the court might have had some more lee-way in making its decision. However, such certainty can be good in bankruptcy with the help of a competent attorney.
