ELR Citation: ELR 20191
No(s). 382-03742 (Bankr. D. Or. Dec 3, 1985)

The court holds that a lessor may not claim administrative priority for the costs of cleaning up a bankrupt lessee's hazardous waste site. The court first holds that a lease signed after the debtor filed for Chapter 11 bankruptcy is avoidable as an unauthorized postpetition transaction. A debtor may not take action that causes a prepetition obligation to become a postpetition administrative expense without notice to the creditors and a hearing. The lease was not an ordinary course-of-business transaction and would not have been approved by the creditors. The lessor's right to compel cleanup is merely a claim against the debtor, and nothing in the Bankruptcy Code gives it special priority. Neither may the court grant the claim priority as a matter of public policy. The court notes that this case may be distinguished from those involving abandonment or claims by a government for costs of cleaning up post-filing spills. The court reserves judgment on the priority of any claims for damage resulting from the debtor's postpetition operations.

Counsel for Debtor
Richard C. Josephson
Stoel, Rives, Boley, Fraser & Wyse
900 SW 5th Ave., Portland OR 97204-1268
(503) 224-3380

Counsel for Creditor Committee
Kevin D. Padrick
Stoel, Rives, Boley, Fraser & Wyse
900 SW 5th Ave., Portland OR 97204-1268
(503) 224-3380