Notes on 11 U.S.C. § 1110 : US Code - Notes

Search Notes on 11 U.S.C. § 1110 : US Code - Notes

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2629; Pub. L. 103-272, Sec.
5(c), July 5, 1994, 108 Stat. 1373; Pub. L. 103-394, title II, Sec.
201(a), Oct. 22, 1994, 108 Stat. 4119; Pub. L. 106-181, title VII,
Sec. 744(b), Apr. 5, 2000, 114 Stat. 177; Pub. L. 109-304, Sec.
17(b)(2), Oct. 6, 2006, 120 Stat. 1707.)
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 1110 of the House amendment adopts an identical provision
contained in the House bill without modifications contained in the
Senate amendment. This section protects a limited class of
financiers of aircraft and vessels and is intended to be narrowly
construed to prevent secured parties or lessors from gaining the
protection of the section unless the interest of such lessor or
secured party is explicitly enumerated therein. It should be
emphasized that under section 1110(a) a debtor in possession or
trustee is given 60 days after the order for relief in a case under
chapter 11, to have an opportunity to comply with the provisions of
section 1110(a).
During this time the automatic stay will apply and may not be
lifted prior to the expiration of the 60-day period. Under section
1110(b), the debtor and secured party or lessor are given an
opportunity to extend the 60-day period, but no right to reduce the
period is intended. It should additionally be noted that under
section 1110(a) the trustee or debtor in possession is not required
to assume the executory contract or unexpired lease under section
1110; rather, if the trustee or debtor in possession complies with
the requirements of section 1110(a), the trustee or debtor in
possession is entitled to retain the aircraft or vessels subject to
the normal requirements of section 365. The discussion regarding
aircraft and vessels likewise applies with respect to railroad
rolling stock in a railroad reorganization under section 1168.
SENATE REPORT NO. 95-989
This section, to a large degree, preserves the protection given
lessors and conditional vendors of aircraft to a certificated air
carrier or of vessels to a certificated water carrier under section
116(5) and 116(6) of present Chapter X [section 516(5) and (6) of
former title 11]. It is modified to conform with the consolidation
of Chapters X and XI [chapters 10 and 11 of former title 11] and
with the new chapter 11 generally. It is also modified to give the
trustee in a reorganization case an opportunity to continue in
possession of the equipment in question by curing defaults and by
making the required lease or purchase payments. This removes the
absolute veto power over a reorganization that lessors and
conditional vendors have under present law, while entitling them to
protection of their investment.
The section overrides the automatic stay or any power of the
court to enjoin taking of possession of certain leased,
conditionally sold, or liened equipment, unless, the trustee agrees
to perform the debtor's obligations and cures all prior defaults
(other than defaults under ipso facto or bankruptcy clauses) within
60 days after the order for relief. The trustee and the equipment
financer are permitted to extend the 60-day period by agreement.
During the first 60 days, the automatic stay will apply to prevent
foreclosure unless the creditor gets relief from the stay.
The effect of this section will be the same if the debtor has
granted the security interest to the financer or if the debtor is
leasing equipment from a financer that has leveraged the lease and
leased the equipment subject to a security interest of a third
party.
AMENDMENTS
2006 - Subsec. (a)(3)(A)(ii). Pub. L. 109-304 substituted "vessel
documented under chapter 121 of title 46" for "documented vessel
(as defined in section 30101(1) of title 46)".
2000 - Pub. L. 106-181 amended section catchline and text
generally, substituting present provisions consisting of subsecs.
(a) to (d) for former subsecs. (a) to (c) which contained somewhat
similar provisions.
1994 - Pub. L. 103-394 amended section generally. Prior to
amendment, section read as follows:
"(a) The right of a secured party with a purchase-money equipment
security interest in, or of a lessor or conditional vendor of,
whether as trustee or otherwise, aircraft, aircraft engines,
propellers, appliances, or spare parts, as defined in section
40102(a) of title 49, or vessels of the United States, as defined
in section 30101 of title 46, that are subject to a purchase-money
equipment security interest granted by, leased to, or conditionally
sold to, a debtor that is an air carrier operating under a
certificate of convenience and necessity issued by the Secretary of
Transportation, or a water carrier that holds a certificate of
public convenience and necessity or permit issued by the Interstate
Commerce Commission, as the case may be, to take possession of such
equipment in compliance with the provisions of a purchase-money
equipment security agreement, lease, or conditional sale contract,
as the case may be, is not affected by section 362 or 363 of this
title or by any power of the court to enjoin such taking of
possession, unless -
"(1) before 60 days after the date of the order for relief
under this chapter, the trustee, subject to the court's approval,
agrees to perform all obligations of the debtor that become due
on or after such date under such security agreement, lease, or
conditional sale contract, as the case may be; and
"(2) any default, other than a default of a kind specified in
section 365(b)(2) of this title, under such security agreement,
lease, or conditional sale contract, as the case may be -
"(A) that occurred before such date is cured before the
expiration of such 60-day period; and
"(B) that occurs after such date is cured before the later of
-
"(i) 30 days after the date of such default; and
"(ii) the expiration of such 60-day period.
"(b) The trustee and the secured party, lessor, or conditional
vendor, as the case may be, whose right to take possession is
protected under subsection (a) of this section may agree, subject
to the court's approval, to extend the 60-day period specified in
subsection (a)(1) of this section."
Subsec. (a). Pub. L. 103-272 substituted "section 40102(a) of
title 49" for "section 101 of the Federal Aviation Act of 1958 (49
U.S.C. 1301)", "section 30101 of title 46" for "subsection B(4) of
the Ship Mortgage Act, 1920 (46 U.S.C. 911(4))", and "Secretary of
Transportation" for "Civil Aeronautics Board".
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-181 applicable only to fiscal years
beginning after Sept. 30, 1999, see section 3 of Pub. L. 106-181,
set out as a note under section 106 of Title 49, Transportation.
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by Pub. L. 103-394 effective Oct. 22, 1994, with this
section, as amended by section 201 of Pub. L. 103-394, applicable
with respect to any lease, as defined by subsec. (c) of this
section, entered into in connection with a settlement of any
proceeding in any case pending under this title on Oct. 22, 1994,
see section 702 of Pub. L. 103-394, set out as a note under section
101 of this title.
ABOLITION OF INTERSTATE COMMERCE COMMISSION AND TRANSFER OF
FUNCTIONS
Interstate Commerce Commission abolished and functions of
Commission transferred, except as otherwise provided in Pub. L. 104-
88, to Surface Transportation Board effective Jan. 1, 1996, by
section 702 of Title 49, Transportation, and section 101 of Pub. L.
104-88, set out as a note under section 701 of Title 49. References
to Interstate Commerce Commission deemed to refer to Surface
Transportation Board, a member or employee of the Board, or
Secretary of Transportation, as appropriate, see section 205 of
Pub. L. 104-88, set out as a note under section 701 of Title 49.
AIRCRAFT EQUIPMENT SETTLEMENT LEASES
Pub. L. 103-7, Mar. 17, 1993, 107 Stat. 36, provided that:
"SECTION 1. SHORT TITLE.
"This Act may be cited as the 'Aircraft Equipment Settlement
Leases Act of 1993'.
"SEC. 2. TREATMENT OF AIRCRAFT EQUIPMENT SETTLEMENT LEASES WITH
THE PENSION BENEFIT GUARANTY CORPORATION.
"In the case of any settlement of liability under title IV of the
Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et
seq.] entered into by the Pension Benefit Guaranty Corporation and
one or more other parties, if -
"(1) such settlement was entered into before, on, or after the
date of the enactment of this Act [Mar. 17, 1993],
"(2) at least one party to such settlement was a debtor under
title 11 of the United States Code, and
"(3) an agreement that is entered into as part of such
settlement provides that such agreement is to be treated as a
lease,
then such agreement shall be treated as a lease for purposes of
section 1110 of such title 11."