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In re Nickels Midway Pier

September 28, 2010


The opinion of the court was delivered by: Hillman, District Judge


Appellant, Nickels Midway Pier, L.L.C. ("Nickels"), appeals the Bankruptcy Court's denial of its motion to compel appellee, Wild Waves, L.L.C., to pay full rent and real estate taxes on the premises that Wild Waves leases from Nickels pursuant to a lease agreement and to eliminate pre-existing rent and tax abatements altogether.

For the reasons expressed below, the Bankruptcy Court's decision, set forth in its Oral Opinion articulated on November 9, 2009 and in its Written Order dated December 10, 2009, will be affirmed.*fn1


United States district courts have mandatory jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. 28 U.S.C. S 158(a)(1).


Nickels owns boardwalk property in Wildwood, New Jersey, including an amusement pier that it operates. In or around May 1999, Nickels and Wild Waves entered into a lease agreement in which Wild Waves would lease a substantial portion of the pier, whereupon it would construct and operate a water park. Wild Waves maintained that, as part of their deal, Nickels agreed to sell the pier to Wild Waves. Nickels disputed that assertion. In 2001, Nickels filed a suit against Wild Waves in the Superior Court of the State of New Jersey, seeking to evict Wild Waves and to collect rent due under the lease. Wild Waves counterclaimed, arguing that Nickels was obligated to sell the pier pursuant to the parties' oral agreement of sale. Ultimately, the Superior Court found that the parties had entered into an oral contract for sale of the pier.*fn3

During the pendency of the state court litigation, fire ravaged Nickels' pier on two separate occasions, damaging the portion leased by Wild Waves.*fn4 The first fire, which occurred on January 16, 2002, destroyed "Dracula's Castle" (also known as "Haunted Castle and Dungeon," or "Castle"), an amusement attraction on the pier. As a result of these casualties, Nickels ultimately pursued claims against Wild Waves in this District, before the Honorable Jerome B. Simandle.*fn5

On December 8, 2003, just days after the trial commenced in state court, Nickels initiated Chapter 11 bankruptcy proceedings in the Bankruptcy Court. The Bankruptcy Court stayed its consideration of the lease until after the state court had reached its decision. In early 2005, however, the Bankruptcy Court decided that until the lease and sale issues were resolved, Wild Waves would make court-determined use and occupancy payments, totaling $87,000 per year, along with a share of real estate taxes, in lieu of the amounts specified by the lease.

In May 2006, Nickels filed a motion before the Bankruptcy Court seeking to compel Wild Waves to pay the full amount of rent and real estate taxes for the pier in accordance with the parties' lease agreement. After several hearings, the Bankruptcy Court, during a hearing held on January 4, 2007, held that Wild Waves was obligated to pay rent and real estate taxes pursuant to the parties' lease, but that the amounts due were entitled to an abatement on account of the loss of income resulting from the pier's fire, specifically the destruction of the Castle. The matter was appealed to the District Court and, subsequently, the Third Circuit. Both courts affirmed the Bankruptcy Court's decision, respectively. See Nickels Midway Pier, L.L.C. v. Wild Waves, L.L.C., 383 B.R. 595 (D.N.J. 2008), aff'd 348 F. App'x 781 (3d Cir. 2009).

In June and September of 2007, the Bankruptcy Court conducted hearings to consider, among other things, the parties' cross-claims alleging breaches of the lease agreement. On or around September 30, 2009, the Bankruptcy Court determined that each party breached the lease agreement, none of the breaches were material, and the lease agreement had not been terminated and remained executory.

Meanwhile, with respect to Nickels' action regarding the pier's fires, Judge Simandle held a bench trial and issued an Opinion on June 17, 2009. For the first fire and the resultant destruction of the Castle, the Judge found Wild Waves responsible for 30% of the damage, leading to a judgment in Nickels' favor of $389,182.50. See Scottsdale Ins. Co. v. Weiner, Civil Action No. 03-3857 (D.N.J. June 17, 2009). Judge Simandle concluded that Wild Waves' liability arose from its deactivation of the Castle's sprinkler system and smoke alarms, both of which constituted breaches of Wild Waves' duties and the lease, and enabled the fire to burn and spread, proximately causing damage to the Castle. Id. Wild Waves was exonerated of any liability with regard to the second fire. Id. Subsequently, Judge Simandle denied Nickels' motion for reconsideration of his decision. See Scottsdale Ins. Co. v. Weiner, Civil Action No. 03-3857, 2010 U.S. Dist. LEXIS 8936 (D.N.J. Feb. 1, 2010).

Soon after Judge Simandle's decision, Nickels again moved to compel Wild Waves to pay all past rent and taxes allegedly due under the lease and to eliminate the rent and tax abatements. On or around November 9, 2009, the Bankruptcy Court denied Nickels' motion, reiterating that Wild Waves was entitled to rent and tax abatements by virtue of the Castle's complete, unforeseen destruction and the loss of revenue that the Castle was expected to produce. The Court entered its Order memorializing the decision on or around December 10, 2009.*fn6 Nickels has appealed that Opinion and Order to this Court.


A. Standard of Review

On appeal, legal conclusions are subject to de novo review. In re United Healthcare Sys., 396 F.3d 247, 249 (3d Cir. 2005). Factual findings are reviewed for clear error. Discretionary ...

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