Eastover Bank for Savings v. Sowashee Venture

EDITH H. JONES, Circuit Judge:

The debtor was a lessee under a ground lease and sublessor of a movie theater it built; it assigned its interest in the ground lease and the theater’s income stream to a bank as security for various loans. During its Chapter 11 proceeding, the debtor’s inaction led to an automatic rejection of its ground lease. 11 U.S.C. § 365(d)(4).1 The district court and bankruptcy court held that the “deemed rejection” of the lease effected the termination of the bank’s rights under the ground lease and the bank’s assignment of the theater sublease.2 We reverse and remand.

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