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In re Peking Duck USA, Inc

23 BK 05135
The Subchapter V Debtor/DIP filed a motion seeking to assume a commercial lease with its landlord under 11 U.S.C. § 365, which permits assumption of “unexpired” leases.  The Debtor sought to assume the lease to continue operating its restaurant on the leased premises in Chicago’s Magnificent Mile District.  In response, its landlord argued the lease was not assumable under § 365 because the lease had terminated/expired pre-petition under Illinois law.  It was undisputed that, pre-petition, the landlord served the Debtor-tenant with a statutory five-day notice per 735 ILCS 5/9-209 stating that (i) the tenant’s rights to possession would terminate if it failed to cure the rent default (then $1,081,936.64) within five days, and (ii) “[o]nly FULL PAYMENT” of the rent demanded in the notice would waive the landlord’s right to terminate the lease, unless the landlord agreed otherwise in writing.  The parties did not dispute that the Debtor did not cure the default in full within the five-day period.  The Debtor filed for bankruptcy after the five-day period expired, but before the landlord had obtained a judgment of possession.  In the eviction action and in the bankruptcy case, the Debtor argued the landlord waived strict compliance with the lease by continuing to accept the Debtor’s partial rent payments after the five-day period expired.  This court denied the motion to assume, finding the lease was not assumable under § 365 because under Illinois law, it had terminated/expired pre-petition after the Debtor failed to cure within the five-day statutory period, relying on In re Williams, 144 F.3d 544 (7th Cir. 1998), Robinson v. Chi. Hous. Auth., 54 F.3d 316 (7th Cir. 1995), and Vill. of Palatine v. Palatine Assocs., LLC, 2012 IL App (1st) 102707 (Ill. App. Ct. 2012).

Thursday, January 4, 2024