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Court Holds Subtenant Rent Payments Not Part of Farmer Jack Bankruptcy Estate

The Michigan Court of Appeals recently addressed the bankruptcy estate of Borman’s, the company connected with the now defunct Farmer Jack grocery store chain. In Ashley Livonia A&P v. The Great Atlantic & Pacific Tea Co., et al. (Case No. 319288, June 16, 2015), Borman’s asserted that the security deposit and rent payment it collected from its subtenant was part of its bankruptcy estate and, therefore, beyond the reach of the property’s owner. The Court disagreed, noting that Borman’s collected these payments after the landlord had already evicted Borman’s. “Because Borman’s could not legally provide its subtenant, Mastronardi, with possession and quiet enjoyment of the property, its right to receive rent was terminated.” Therefore, the proceeds could not be part of Borman’s bankruptcy estate.

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