## Facts

- A tenant operated a restaurant under a long-term commercial lease in New York City that was later assigned to the corporate debtor.
- The tenant repeatedly failed to pay rent, and the landlord began a New York summary eviction proceeding.
- The state court entered a default judgment for the landlord and issued a warrant of eviction.
- Before the warrant was executed, a marshal served notice and scheduled an eviction date.
- On the same day the notice was served, the tenant filed a voluntary Chapter 11 petition and became a debtor in possession.
- When the marshal attempted to execute the warrant, execution halted upon notice of the bankruptcy filing and the automatic stay.
- The landlord moved in the bankruptcy court for relief from the automatic stay to proceed with the eviction, arguing the warrant’s issuance had already ended any tenant interest; alternatively, the landlord argued cause existed due to nonpayment and continuing carrying costs.
- The debtor asserted that, despite issuance of the warrant, it retained an equitable interest, including a right under New York law to seek vacatur of the warrant for good cause, and it was pursuing such relief in state court.

## Issues

1. After a New York court issues (but does not execute) a warrant of eviction, does the debtor-tenant retain a legal or equitable interest that becomes property of the estate under 11 U.S.C. § 541, making execution subject to the automatic stay under 11 U.S.C. § 362(a)?
2. If an estate interest exists, did the landlord show “cause” under 11 U.S.C. § 362(d) to modify or lift the stay to allow execution of the eviction warrant?

## Decision

- The court held that issuance of the warrant terminated the debtor’s legal leasehold under New York law, but the debtor retained an equitable possessory interest and an equitable right to seek vacatur of the warrant before execution for good cause.
- That equitable interest became property of the estate under 11 U.S.C. § 541(a)(1).
- Because the landlord sought to enforce a prepetition judgment against property of the estate, execution of the warrant was stayed by 11 U.S.C. § 362(a)(2).
- The court denied the landlord’s motion to modify the stay at that time, given the debtor’s ongoing state-court effort to vacate the warrant and the importance of continued possession to the reorganization.

## Legal Principles

- Property of the estate under 11 U.S.C. § 541 includes equitable interests held by the debtor at the petition date, even if the debtor’s legal interest has been terminated under state law.
- Under New York RPAPL § 749(3), issuance of a warrant of eviction annuls the landlord-tenant relationship, but the tenant may still seek vacatur of the warrant for good cause prior to execution; this remedial right, tied to continued possession, is an equitable interest.
- Enforcement of a prepetition eviction judgment by executing an unexecuted warrant can be barred by the automatic stay when the debtor retains an equitable possessory/vacatur interest that is estate property.
- Relief from the automatic stay under 11 U.S.C. § 362(d) requires a showing of cause; pending state-court proceedings to vacate the warrant and the reorganization need for the premises may justify continuing the stay.

## Conclusion

The bankruptcy court ruled that a debtor-tenant facing an issued but unexecuted New York eviction warrant retains an equitable possessory and vacatur right that becomes estate property, so executing the warrant is stayed, and the landlord was not entitled to lift the stay while the debtor’s state-court challenge to the warrant remained unresolved.


In re Onio’s Italian Restaurant Corp., 42 B.R. 319 (Bankr. S.D.N.Y. 1984)