## Facts

- M.J. & K. Co., Inc. operated a law-school bookstore on Brooklyn Law School’s premises under an agreement granting the “right, permission, license, and privilege” to operate a bookstore for a limited term beginning in December 1982.
- The agreement contemplated an initial one-year period and a potential additional term conditioned on the school’s satisfaction; after the stated term, the parties executed no written or oral renewal or modification.
- Brooklyn Law School directed the bookstore’s relocation within its buildings, reflecting the school’s retained control over the space and operations.
- Faculty and administrators complained the bookstore lacked required course materials; an inventory showed less than half of needed books for an upcoming semester and included erroneous course lists and inventory references.
- The school learned the debtor had filed Chapter 11, faced publisher-related business difficulties, and that publishers required cash-on-delivery terms.
- The debtor’s principal conceded the bookstore lacked cash to purchase books and relied on personal financing and credit lines as assurance of future stocking.
- After the debtor filed a Chapter 11 petition and remained in possession, Brooklyn Law School sought relief from the automatic stay to serve a notice to quit and pursue state-law procedures to require the debtor to vacate.

## Issues

1. Whether the parties’ bookstore arrangement was an unexpired lease or executory contract constituting a protectable estate interest, or instead a revocable license terminable under state law.
2. Whether “cause” existed under 11 U.S.C. § 362(d)(1) to modify the automatic stay to permit the school to serve a notice to quit and pursue state-law proceedings to remove the debtor from the premises.

## Decision

- The court granted Brooklyn Law School relief from the automatic stay under 11 U.S.C. § 362(d)(1).
- The court found the arrangement was a license rather than a lease and did not confer a traditional possessory real-property interest.
- The court concluded cause existed to permit the school to serve a notice to quit and take state-law steps to cause the debtor to vacate, with termination and dispossession to be determined in the appropriate state forum.

## Legal Principles

- Whether an occupancy arrangement is a lease or a license turns on substance under state law, including whether the agreement conveys exclusive possession for a term or instead grants a personal privilege subject to the owner’s control.
- A license is typically personal, revocable, and non-assignable; language granting “permission” or “privilege” to conduct a limited activity, coupled with owner control over location and use, supports license characterization.
- Under 11 U.S.C. § 541, the bankruptcy estate succeeds only to the debtor’s state-law interest; the automatic stay does not enlarge a debtor’s rights beyond what nonbankruptcy law provides.
- Relief from the automatic stay “for cause” under 11 U.S.C. § 362(d)(1) requires a case-specific balancing of harms and may be warranted where continued stay protection imposes material nondebtor harm with limited countervailing estate benefit.
- Operational failures and inability to provide credible near-term assurance of performance can support cause to lift the stay to allow termination of a revocable license and pursuit of state-law remedies.

## Conclusion

The bankruptcy court treated the bookstore arrangement as a revocable license that had not been renewed into a protected possessory interest and held that the school showed cause to lift the automatic stay, allowing it to proceed under state law to terminate the relationship and seek the debtor’s removal from the premises.


In re M.J. & K. Co., Inc., 161 B.R. 586 (Bankr. S.D.N.Y. 1993)