Alvarado v. Walsh (In Re LCO Enterprises)

PERRIS, Bankruptcy Judge,

concurring:

Although I agree with the majority’s conclusion that summary judgment should be granted in favor of the landlord, I write separately to address more fully the section 547(b)(5) issue.

The bankruptcy court indicated that the section 547(b)(5) determination must necessarily involve a determination of whether a hypothetical Chapter 7 trustee would assume the leases and cure the pre-petition arrears. I disagree. The hypothetical liquidation under section 547(b)(5) should not, as the bankruptcy court’s reasoning suggests, be conducted in a vacuum. When, as in this case, post-petition events, such as the assumption of leases, have occurred, those events must be reflected in the hypothetical liquidation. See Seidle v. GATX Leasing Corp., 778 F.2d 659, 665 (11th Cir.1985). To require courts to examine whether such events would or would not have occurred if the case had been commenced under Chapter 7 calls for a tenuous inquiry that is not required by the language of the statute.

Under section 547(b)(5), if the transfers at issue had not been made, the landlord would have the rights in a Chapter 7 case of a lessor under an assumed lease. Pursuant to section 365(b)(1)(A), such a lessor would either be paid his claim for past due rent prior to the assumption or would have the right to prompt payment of such rent. *960Any unpaid rent is payable as a priority administrative expense. See In re Coast Trading Co., 744 F.2d 686, 692 (9th Cir.1984). Under the section 547(b)(5) analysis, therefore, in a Chapter 7 liquidation, the landlord would either be paid the amount of the payment at issue prior to the assumption or would have an administrative claim for that amount. Because the liquidation analysis in the disclosure statement indicates that all administrative claims will be paid in full, it follows that the landlord did not receive more, by virtue of the pre-petition transfers, than it was entitled to under the Code. Because the trustee has not met the requirement of section 547(b)(5), I agree that the bankruptcy court’s decision must be reversed.9

. I reach this conclusion solely on the basis of section 547(b)(5). I do not join in the majority’s implicit suggestion that any avoidance immunity agreement protected the transfers at issue because I find no evidence in the record that such an agreement was approved by the court following proper notice to interested parties. I disagree with the majority's suggestion that a preference immunity agreement was somehow incorporated into the approved plan because neither the plan nor the confirmation order provide for any such immunity.