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June 11, 1971

In the Matter of PITTSBURGH-DUQUESNE DEVELOPMENT CO., a limited partnership

Rosenberg, District Judge.

The opinion of the court was delivered by: ROSENBERG

Presently before me for consideration is the "Application of Trustee for Authority to Borrow Money" in a sum not to exceed $30,000.00 for the purpose of making certain repairs and improvements on the remaining asset of the debtor's estate, in order to prepare that asset in accordance with a sub-lease agreement with the United States General Services Administration ("GSA").

 This action was commenced as a Real Property Arrangement under § 422 of Chapter XII of the Bankruptcy Act, 11 U.S.C. § 822. On May 29, 1969 the debtor was authorized to remain in possession and all persons were enjoined from interfering with that possession. On August 14, 1969, the Trustee was appointed.

 The property to which the Trustee came into possession consisted of an apartment building known as the Cricklewood Hill Apartments, and an older brick building estimated to be about 75 years old, known as the Pepsi-Cola Building, and sometimes known as the Geyer Building. The more valuable of the two was the apartment building. The apartment building was encumbered by two mortgages. The first as security for a sum of money owing to Prudential Insurance Company of America ("Prudential"), and the second as security for a sum of money owing to Equitable Gas Company.

 The Urban Redevelopment Authority of Pittsburgh ("Urban") had entered into a lease with the debtor and the lease related to certain improvements to be made in combination with both the apartment building and the Pepsi-Cola Building, such as landscaping and street improvements.

 In particular Sections 601 and 602 of the lease, in essence provided that no later than three (3) months from the date of the lease the redeveloper was to commence landscaping of the property, the construction of an open air-parking lot, the renovation of the Pepsi-Cola Building, and certain street improvements, to be completed within thirty (30) months of commencement of the construction.

 While no evidence was presented at the last hearing, I am aware of the circumstances regarding the plans that the landscaping and street improvements were appurtenant to the Cricklewood apartment building rather than to the Pepsi-Cola Building, and that these actually do not relate to the Pepsi-Cola Building. The Trustee at the last hearing testified that he was informed by Urban's Executive Director that the only requirement for fulfilling the original plan as it related to the Pepsi-Cola Building was to bring in electricity and water, and that the use of the facility as a garage was most appropriate. The electricity and water repairs, the Trustee testified, were being included in the present repairs now being made to the Pepsi-Cola Building.

 After a series of unsuccessful attempts to present arrangements, on April 1, 1971 upon petition of Prudential as holder of the first mortgage on the apartment building, Prudential was allowed to foreclose on its mortgage against the apartment building real estate of the debtor. There remained as assets of the debtor only the so-called Pepsi-Cola Building which is here now for consideration.

 Over a long period of time the Trustee attempted to lease the Pepsi-Cola Building for any reasonable commercial or parking purpose, and only recently succeeded in procuring such a lease from GSA. The lease requires that the Trustee put the building in a useable condition. Pursuant to the terms of the sublease, the Trustee has already commenced and has made provisions for removing substantial amounts of debris; removing and replacing defective and obsolete pipes and electrical conduits; replacing damaged and missing doors; replacing broken windows; spray painting the entire two floors involved in the sub-lease with a basic coat of white paint; replacing the fittings in an old office; replacing damaged or missing washroom and toilet facilities; and correcting walls which were buckling due to earth pressure. These repairs were considered necessary to render the 75 year old structure which had previously been used as a commercial building and garage in a condition suitable for such occupancy.

 Because certain funds now in the hands of the Trustee are being claimed by Prudential for tenants in the apartment building as deposits on the payment of rents, Prudential asserts it is entitled to such funds, or at least a part of them. Accordingly, the Trustee has no funds for the payment of the repairs and petitioned this Court for the allowance to borrow a sum of money up to $30,000.00 for the payment of repairs being made to the Pepsi-Cola Building.

 Urban has objected to allowance of this petition on the grounds that the Trustee is in default on the original lease between Urban and the debtor and for this reason Urban has informed the Trustee that it has terminated the lease. The lease in question was for a term of ninety-nine years commencing on November 25, 1966. It provides for a monthly rental of $461.50 with an option to the lessee to purchase the leased premises for a price of $92,300.00 plus certain adjustments.

 It would seem that Urban claims that the lease has been terminated for reasons which are not exactly explicit, but which include in its contention that the Trustee has not complied with the requirement for the renovation of the Pepsi-Cola Building, and that the expenditure of funds for improvements amounts to a renovation*of the building in accordance with the terms of the lease.

 The Trustee contends that because of conditions which existed at the commencement of his trusteeship, he was barred from performing these particular covenants because of circumstances beyond his control. It is provided in Section 1104 of the lease that where due to circumstances beyond the control of the parties, situations arise which prevent fulfillment of the provisions of the lease, then performance is excused for the length of time in which it has become impossible. Thus the provisions of Section 602, if such contemplate renovation of the Pepsi-Cola Building were, according to the Trustee, not fulfilled because of the financial reorganization.

 It would seem that the provisions of § 602 were included in the lease agreement for the benefit of the lessor. We have no information before us concerning the condition of the building as of the time of the lease, although we do have information that this was a 75 year old dilapidated brick building. And thus it would seem that as a part of the consideration for the lease, the lessor desired renovations and landscaping thereabouts to compare favorably with the surrounding community in accordance with the redevelopment plans. The Urban lease had provided that the lessee was to commence the improvements within three months and to have them completed within thirty months. We have no evidence on if or when any such improvements were commenced, except only as already stated to the effect that the landscaping and roadway improvements ...

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