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IN RE NEWKIRK MINING CO.

December 16, 1964

In the Matter of NEWKIRK MINING CO., Bankrupt


The opinion of the court was delivered by: GRIM

A lessor of certain coal bearing lands has petitioned this court to review the bankruptcy referee's order permitting a trustee in bankruptcy to sell free and clear of any interest of the lessor certain quantities of coal silt, slate and refuse material produced by the bankrupt lessee and deposited by it on lessor's premises prior to the bankruptcy.

Under a ten year renewable lease executed in 1956, Newkirk Mining Company, the bankrupt lessee, extracted coal from lessor's lands by deep mining and stripping operations until September 21, 1961, on which date Newkirk was adjudicated a bankrupt on its voluntary petition in this court filed on the same day. During this period, Newkirk also deposited on lessor's lands certain silt, slate and refuse material which were accumulated during the coal mining operations. Substantial quantities of this material, commonly referred to in the coal mining business as slush dams, were sold by Newkirk and removed from lessor's land during the term of the lease. Although the lease did not state specifically who, as between the lessor and the lessee, had title to the slush dams during the term of the lease, the action of the parties indicates that they regarded the lessee as the owner. During the period from the beginning of the lease to the date of the bankruptcy, the lessee sold quantities of this material and retained the proceeds. The lessor did not object to this and it makes no contention now that it owned the slush dams prior to the bankruptcy of that it is entitled to the proceeds.

 The question of the ownership of the material, which had not been removed prior to the filing of the petition in bankruptcy, creates the dispute in this case.

 The lease granted to Newkirk

 '* * * the right and privilege of depositing slate, refuse, dirt and silt * * * upon the premises herein demised * * * provided, however * * * that all of said slate, refuse, dirt and silt remaining anywhere upon the demised premises * * * shall, upon the termination of this lease, be and remain the property of Lessor.'

 The decision in the case must turn on the effect of the bankruptcy on the lease and the landlord-tenant relationship created by the lease.

 Section 70, sub. b of the Bankruptcy Act *fn1" provides that

 'the trustee shall assume or reject an executory contract, including an unexpired lease of real property, within sixty days after the adjudication or within thirty days after the qualification of the trustee, whichever is later. * * * Any such contract or lease not assumed or rejected within that time shall be deemed to be rejected. * * *'

 The trustee in this case did nothing to accept or reject the lease; therefore in accordance with the provisions of the statute, the lease is deemed to have been rejected.

 The lessor contends that the rejection of the lease by the trustee constituted a termination of the lease as of the date of the filing of the petition in bankruptcy, which termination, it is contended, brought into play the above-mentioned section of the lease providing that upon termination the ownership of the materials on the premises would revert to the lessor. The trustee, on the other hand, contends that the rejection by the trustee did not constitute such a termination.

 It is clear that a specific provision in a lease to the effect that the bankruptcy of a lessee will terminate the lease, is enforceable. *fn2" However there is no such provision in the lease in the present case. *fn3"

 Likewise, it seems clear that the rejection of the lease by the trustee did not terminate the lease. As succinctly stated in Collier on Bankruptcy,

 'the weight of authority has always been to the effect that bankruptcy, unless expressly otherwise provided, does not sever the relation of landlord and tenant and that a rejection by the trustee of a bankrupt lessee does not, in and of itself (as distinguished from a surrender by mutual consent) terminate the lease.' *fn4"

 In the case of In re Kreiger, 15 F.2d 90 (W.D.Pa.1926) aff'd sub nom. Sproul v. Help Yourself Store Co., 16 F.2d 554 (3d Cir.1926), it was said by Judge Thomson ...


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