United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-2483
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In re: Richard Burival, *
also known as Burival Brothers, *
A Partnership, *
Phillip Burival, *
also known as B & B Farms, *
also known as Burival Farms; *
Gary M. Burival, *
also known as B & B Farms, *
also known as Burival Farms; *
Joyce A. Burival, *
also known as B & B Farms, * Appeal from the United States
also known as Burival Farms, * Bankruptcy Appellate Panel
* for the Eighth Circuit.
Debtors. *
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Richard Burival, *
also known as Burival Brothers, *
A Partnership; Phillip Burival, *
also known as Burival Brother, *
A Partnership; *
Gary M. Burival, *
also known as B & B Farms, *
also known as Burival Farms; *
Joyce A. Burival, *
also known as B & B Farms, *
also known as Burival Farms, *
*
Appellants, *
v. *
*
Loretta Roehrich, *
Conservator of the Estate *
of Rosie Pritchett, *
a protected person, *
*
Appellee. *
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Loretta Roehrich, *
Conservator of the Estate *
of Rosie Pritchett, *
a protected person, *
*
Appellee, *
*
v. *
*
Richard Burival, *
also known as Burival Brothers; *
Phillip Burival, *
also known as Burival Brothers, *
A Partnership; *
Gary M. Burival, *
also known as B & B Farms, *
also known as Burival Farms; *
Joyce A. Burival, *
also known as B & B Farms, *
also known as Burival Farms, *
*
Appellants. *
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Submitted: March 9, 2010
Filed: July 23, 2010
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Before SMITH, BENTON, and SHEPHERD, Circuit Judges.
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BENTON, Circuit Judge.
On March 23, 2007, Burival Brothers – which includes four individuals (Richard
Burival, Phillip Burival, Gary M. Burival, and Joyce A. Burival) and three partnerships
(B& B Farms, Burival Brothers, and Burival Farms) – leased crop land for three years
from Rosie Pritchett. The lease required two payments, $75,329.78 on April 1 and
$90,799.22 on December 1. Burival Brothers filed Chapter 11 bankruptcy on
November 29, 2007 – two days before the rent was due. Burival Brothers rejected the
lease on March 19, 2008. Pritchett filed a claim for an administrative expense of
$90,799.22 for the December payment, under 11 U.S.C. § 365(d)(3), plus attorney fees
and costs.
The bankruptcy court allowed prorated rent of $50,521 as an administrative
expense, plus attorney fees, costs, and interest. In re Burival, 392 B.R. 793, 802
(Bankr. D. Neb. 2008). Burival Brothers appealed to the bankruptcy appellate panel
(BAP). Pritchett cross-appealed. The BAP1 reversed, allowing recovery of the entire
rent obligation as an administrative claim. In re Burival, 406 B.R. 548, 555-56
(B.A.P. 8th Cir. 2009). Having jurisdiction under 28 U.S.C. § 158(d)(1), this court
affirms the BAP.
The bankruptcy court’s findings of fact are reviewed for clear error and its
conclusions of law de novo. Granite Reinsurance Co. v. Acceptance Ins. Co. (In re
Acceptance Ins. Co.), 567 F.3d 369, 376 (8th Cir. 2009).
The 2007 crop year ended before Burival Brothers filed for bankruptcy. They
assert that the rent due on December 1 is a pre-petition unsecured claim because the
land’s value to the estate was used before the bankruptcy filing. They rely on a ninth
circuit BAP decision that a bankruptcy estate is liable only for the reasonable value of
1
The Honorable Barry S. Schermer, Member of the United States Bankruptcy
Appellate Panel for the Eighth Circuit Court of Appeals.
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the premises until a lease is deemed rejected. Great W. Savings Bank v. Orvco, Inc.
(In re Orvco, Inc.), 95 B.R. 724, 727-28 (B.A.P. 9th Cir. 1989), overruled by Towers
v. Chickering & Gregory (In re Pacific-Atlantic Trading Co.), 27 F.3d 401, 404-05
(9th Cir. 1994). Burival Brothers reason that the rent due is not an administrative
expense because it does not qualify under subsection 503(b)(1) of the bankruptcy code.
That subsection allows administrative expenses including those for “the actual,
necessary costs and expenses of preserving the estate .” 11 U.S.C. § 503 (b)(1)(A).
The bankruptcy code has a specific provision on unexpired leases of
nonresidential real property:
The trustee shall timely perform all the obligations of the
debtor, except those specified in section 365(b)(2),
arising from and after the order for relief under any
unexpired lease of nonresidential real property, until such
lease is assumed or rejected, notwithstanding section
503(b)(1) of this title.
11 U.S.C. § 365(d)(3). Burival Brothers assert that this provision, among those
informally called “Shopping Center Amendments,”2 should not control crop leases.
The bankruptcy court agreed with the decisions that find § 365(d)(3) ambiguous.
See El Paso Props. Corp. v. Gonzalez (In re Furr’s Supermarkets, Inc.), 283 B.R. 60,
66 n.9 (B.A.P. 10th Cir. 2002) (listing cases). The majority of cases hold to the
contrary, that § 365(d)(3) unambiguously provides that a debtor must perform a rent
obligation in full, until a lease is rejected. See id. at 66 n.10 (listing cases).
2
Congress’s title for the group of amendments that includes § 365(d)(3) is:
“Leasehold Management Bankruptcy Amendments Act of 1983.” Pub. L. No. 98-353,
98 Stat. 333, 361, 363 (1984).
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This court agrees with the BAP that § 365(d)(3) is not ambiguous. The plain
language of § 365(d)(3) governs an “unexpired lease of nonresidential real property”
and excepts “section 503(b)(1).” See Lamie v. United States Trustee, 540 U.S. 526,
534 (2004) (a statute that is plain must be enforced “according to its terms”). Rent
obligations in such leases must be performed when they arise after filing and before
rejection; any reduction based on subsection 503(b)(1) would violate the specific
language of § 365(d)(3). In re Pacific-Atlantic Trading Co., 27 F.3d at 404-05.
Burival Brothers must perform the December rent obligation whether or not it
preserves the estate. See HA-LO Indus., Inc. v. CenterPoint Props. Trust, 342 F.3d
794, 798-99 (7th Cir. 2003); Koening Sporting Goods, Inc. v. Morse Road Co. (In re
Koening Sporting Goods, Inc.), 203 F.3d 986, 989-90 (6th Cir. 2000).
Burival Brothers finally argue that the rent claim has no priority under the
bankruptcy code. See In re Burival, 406 B.R. at 556-57 (Kressel, J., dissenting). To
the contrary, § 365(d)(3) claims have priority status. Section 365(d)(3) expressly
preempts subsection 503(b)(1), but not the introductory authorization of
“administrative expenses” in § 503(b). The administrative expenses listed in the
subsections of § 503(b) – preceded by “including” – are not exclusive. See 11 U.S.C.
§ 102(3) (in the bankruptcy code, “including” is not limiting). Because § 365(d)(3)
claims have a status at least equal to a claim under subsection 503(b)(1), the BAP
correctly approved Pritchett’s claim as an administrative expense. In re Pacific-
Atlantic Trading Co., 27 F.3d at 405.
Even if it is an administrative expense, Burival Brothers assert the rent should not
be allocated evenly throughout the year relying on this court’s holding in Reiter v.
Fokkena (In re Wedemeier), 237 F.3d 938, 941 (8th Cir. 2001). The debtors in
Wedemeier filed for bankruptcy on June 8 but the trustee neither assumed nor rejected
the crop-land leases. They were deemed rejected on August 7. Id. at 940. No rent was
due between June 8 and August 7. Id. The debtors had missed a rent payment in
March (before filing bankruptcy) but still planted crops in May (also before
bankruptcy). Id. After filing, they continued to care for the crops. Id. This court
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found that the reasonable rental value of the property was an administrative expense.
Id. at 941.
Unlike this case, in Wedemeier no rent was due during the period between the
filing for bankruptcy and the rejection of the lease. This explains why this court does
not even cite § 365(d)(3) in Wedemeier. Section 365(d)(3) is unambiguous and
requires payment, in full, of post-petition, pre-rejection rent obligations in unexpired
leases of nonresidential real property. The Wedemeier case is irrelevant here.
The BAP’s decision is affirmed.
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