IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
RICHARD L. SHOWN, No. 93-11848
Memorandum of Decision
In 1989, debtor sold his residence and vineyard to Reginald Oliver. Under the terms of the
sale, Shown leased the property back from Oliver for 20 years at $1 per year. However, the
lease imposed other duties on Shown including the obligation to maintain a winery permit
which ran with the land.
In 1993, Oliver commenced an unlawful detainer action seeking recovery of the premises
because Shown had not paid the county $22,000.00 necessary to maintain the winery permit.
On July 9, 1993, the Napa County Municipal Court issued an order which gave Shown until
5:00 P.M. on July 16, 1993, to make the payment necessary to preserve the winery permit. The
order provided that if the payment was not made by that time, Oliver was awarded possession
of the premises and the lease was deemed forfeited.
Shown obtained an extension of the deadline to July 30, 1993. Unable to make the payment,
he filed his Chapter 13 petition one hour before the deadline expired. Oliver made the payment
necessary to preserve the permit, and now seeks relief from the automatic stay in order to
enforce the state court order. Shown has made a motion to assume the lease under section 365
of the Bankruptcy Code.
This situation is clearly governed by section 108(b) of the Code which provides, in pertinent
[I]f . . . an order entered in a nonbankruptcy proceeding
. . . fixes a time within which the debtor . . . may
. . . cure a default, or perform any other similar act,
and such period has not expired before the date of filing
of the petition, the trustee may only file, cure, or
perform, as the case may be, before the later of-
(2) 60 days after the order for relief.
It therefore follows that Shown had until September 28, 1993, to comply with the order of the
state court. Shown's tender of $5,000.00 within the 60-day period does not fully comply with
the state court order, and is therefore irrelevant.
Shown argues that section 365 of the Code prevails over the express language of section
108, and gives him an indeterminate amount of time to cure the default and assume the lease.
The court does not agree with this analysis of the Code, and notes that none of the cases relied
upon by Shown involved a specific deadline (to the hour) ordered by another court. However,
even if section 365 does trump section 108, it is still too late to assume the lease. Under
California law, a real property lease terminates upon default. However, it may be assumed
under bankruptcy law if, under state law, the debtor may still seek relief from forfeiture. In re
Windmill Farms, Inc.
, 841 F.2d 1467 (9th Cir.1988). In the unlawful detainer proceeding, the
state court recognized that the lease had been terminated by Shown's breach and used its
equitable powers to prescribe a period during which Shown, by making the payment needed to
preserve the winery permit, could have reinstated the lease. Having exhausted his equitable
remedies before filing, there is no longer any lease left for Shown to assume.
For the foregoing reasons, Oliver's motion for relief from the automatic stay will be granted
and Shown's motion to assume the lease will be denied. This ruling shall be effective ten days
after entry of an appropriate order, which counsel for Oliver shall submit forthwith along with
proof that the proposed form of order has been served on counsel for Shown.
Dated: December 23, 1993 _______________________