UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In re: COLLINS & AIKMAN CORPORATION, et al.,

Chapter 11 Case No. 05-55927-SWR Jointly Administered Hon. Steven W. Rhodes /

Debtors.

MOTION OF DOVE STREET INDUSTRIAL TO COMPEL COMPLIANCE WITH DEBTORS OBLIGATIONS UNDER 11 U.S.C. 365(D)(3) FOR PAYMENT OF RENT AND REAL PROPERTY TAXES AND ALTERNATIVELY, FOR PAYMENT OF ADMINSTRATIVE EXPENSE CLAIMS PURSUANT TO 503(B)

Dove Street Industrial L.L.C., (Dove Street Industrial) by and through its attorneys, Kerr, Russell and Weber, PLC, hereby moves to compel compliance with Debtors obligations under 11 U.S.C. 365(d)(3) for payment of rent and real property taxes and alternatively, for payment of administrative expense claims pursuant to 503(b) (the Motion). In support of its Motion, Dove Street Industrial states as follows: BACKGROUND AND PROCEDURAL HISTORY 1. On May 17, 2005 (Petition Date), Collins & Aikman Corporation and its debtor

subsidiaries (Debtors) filed their voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code 1101, et. seq. (Bankruptcy Code). 2. Debtors are operating their businesses and managing their properties as debtors-

in-possession pursuant to 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these Chapter 11 cases.

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3.

This Court has jurisdiction pursuant to 28 U.S.C. 157 and 1334. This is a core

proceeding pursuant to 28 U.S.C. 157(b)(2). 4. Dove Street Industrial (sometimes hereinafter referred to as Landlord) and

Collins & Aikman Products Co (Collins & Aikman), one of the Debtors in the abovecaptioned case, are parties to a Lease Agreement dated April 30, 2002 (Lease Agreement) for an industrial building and addition commonly known as 2100 Dove Street, Port Huron, Michigan 48060 (the Premises). A copy of the Lease Agreement is attached as Exhibit B. Upon information and belief, the Premises are used for manufacturing operations in connection with Debtors interior plastics division. 5. (2). 6. The Lease Agreement requires Collins & Aikman to pay a total base rent of The Lease Agreement term is from May 2002 through April 30, 2012. Exhibit B,

$7,689,068.00, payable in monthly installments on the first of each month, over the Term of the lease. Exhibit B, (2). 7. The Lease Agreement requires Collins & Aikman to pay as additional rent,

property taxes and property assessments [u]pon receipt of the property tax bills from the Landlord or directly from the taxing authority. Exhibit B, (3). 8. Collins & Aikman has notified Landlord that Collins & Aikman intends to reject

the Lease Agreement on the Effective Date of its plan of reorganization. It is unclear when the Effective Date may occur as the confirmation date has been extended until July 12, 2007. 9. In or about June 2005, approximately one month after Debtors Petition Date,

Collins & Aikman received the July 2005 property tax notice, seeking real property taxes in the amount of $111,835.51. A copy of the tax bill is attached as Exhibit C. The due date for those

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taxes was August 1, 2005. Collins & Aikman refused to pay those taxes, except to the extent the taxes related to a post-petition period. 10. Because Collins & Aikman failed to pay the July 2005 property taxes upon

receipt of the property tax bill from the Landlord, as required in the Lease Agreement, the Premises were at risk of foreclosure by the taxing authority. To avoid imminent foreclosure to the Premises, on or about February 28, 2007, Dove Street Industrial paid the taxing authority $59,570.63 (the Taxes). A copy of the Delinquent Tax Receipt is attached as Exhibit D. 11. In addition, between June 2006 and January 2007, Collins & Aikman reduced its

rental payments by $7,245.83 per month. Total amounts due and owing for the post-petition period that remain unpaid are $43,474.98 (the Rent). The rent reduction was in connection with an informal agreement that contemplated that the reduced rent payments would ultimately be paid as administrative expenses in Collins & Aikmans bankruptcy case. 12. Since the Petition Date, Collins & Aikman has continued in possession of the

Premises, and has benefited by its use of the Premises, to the detriment of the Landlord. Collins & Aikman continues to occupy the Premises more than 2 years beyond the Petition Date. If

Landlord had allowed the Premises to be foreclosed by the taxing authority, Collins & Aikman would have lost the use of the premises. 13. 365(d)(3). Rent. Landlord is entitled to payment of the Taxes and Rent pursuant to 11 U.S.C. By this motion, Landlord seeks an order compelling payment of the Taxes and

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ADMINISTRATIVE EXPENSE CLAIM UNDER 11 U.S.C. 365(d) 14. As a general rule, 11 U.S.C. 365(d)(3) requires the debtor-tenant to provide the

landlord of nonresidential real property full and timely payment for services due under an unexpired lease during the post-petition, pre-rejection period. The purpose of this provision is to prevent parties in contractual or lease relationships with the debtor from being in doubt concerning their status vis-a-vis the estate. H.R. Rep. No. 595, 95th Cong., 2d Sess. 348, reprinted in 1978 U.S.C.C.A.N. 5963, 6304, see also In re Cannonsburg Envtl. Assocs., 72 F.3d 1260, 1266 (6th Cir. 1996). It was enacted to relieve the burden placed on nonresidential real property landlords during the period between the date a tenants bankruptcy petition is filed and assumption or rejection of a lease. In re Koenig Sporting Goods, Inc., 203 F.3d 986, 989 (6th Cir. 2000). 15. Pursuant to 11 U.S.C. 365(d)(3), Collins & Aikmans continued possession and

use of the Premises was dependant upon payment for post-petition use of the Premises, including payment of the Rent and Taxes that became due and payable during the post-petition period. 16. Courts in the Sixth Circuit utilize a billing date approach to determine whether a

debtor was required to pay rents or taxes that accrued during the pre-petition period but became payable during the post-petition period under the terms of the lease. In re Koenig Sporting

Goods, Inc., supra (rents accruing post-petition but pre-rejection due in full, despite that the majority of the rent was for the post-rejection period); In re F&M Distributors, 197 B.R. 829 (Bankr. E.D. Mich 1995)(taxes due post-petition but attributable to a pre-petition period, nevertheless must be paid pursuant to 365(d)(3)). See also, In re Baby NKids Bedrooms, Inc,

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200 U.S. Dist. LEXIS 29930 (E.D. Mich. 2007)(affirming a bankruptcy court ruling that adopted the billing date approach and rejected the apportionment theory). 17. Pursuant to applicable Sixth Circuit law, Dove Street Industrials claim for Rent

and Taxes must be paid pursuant to 11 U.S.C. 365(d)(3). Dove Street Industrials claim for Taxes is identical to the facts in F&M, supra, where based on the billing date theory, the Court held that taxes due post-petition must be paid in full, despite that some of the taxes related to a pre-petition period. 18. With respect to the unpaid Rent, all of that Rent came due and was attributable

to a post-petition period. ADMINISTRATIVE EXPENSE CLAIM UNDER 11 U.S.C. 503(B) 19. If this Court disallows recovery of the Taxes that came due in the post-petition

period under 365(d), because they accrued in the pre-petition period, despite becoming due post-petition, then, in the alternative, Dove Street Industrial has a claim for payment of the Taxes as an administrative expense under 503(b)(3) since it is established that an administrative claim is allowed for the actual, necessary costs and expenses of preserving the estate. 20. The term administrative expense is not defined in the Bankruptcy Code, but an

administrative expense is generally one which provides some benefit to the estate and one which arises after the bankruptcy filing. See In re White Motor Corp., 831 F. 2d 106 (6th Cir. 1987). 21. The Taxes that became due post-petition to prevent foreclosure in 2007 certainly

arose during the post-petition period, even if they are arguably attributable to the pre-petition period. If the Landlord had not paid the Taxes to avoid a tax foreclosure, Collins & Aikman

may have lost the use of the Premises.

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22.

As such, because Collins & Aikman benefited from the payment of the Taxes and

the Taxes were necessary to preserve the bankruptcy estate, Dove Street Industrial is entitled to a post petition administrative expense claim under 503(b) for the Taxes. WHEREFORE, Dove Street Industrial respectfully requests that this Court compel payment of the Rent and Taxes pursuant to 11 U.S. C. 365(d)(3) or grant landlord an administrative expense claim pursuant to 11 U.S.C. 503(b) of the Bankruptcy Code, and enter the proposed order attached as Exhibit A.

Dated: July 2, 2007

KERR, RUSSELL AND WEBER, PLC

By: /s/ Laura J. Eisele Laura J. Eisele (P42949) Allison Clements (P70467) Attys. for Dove Street Industrial L.L.C. 500 Woodward Avenue Suite 2500 Detroit, Michigan 48226 Telephone: 313-961-0200 Facsimile: 313-961-0388

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EXHIBIT A

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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In re: COLLINS & AIKMAN CORPORATION. et al.,

Chapter 11 Case No. 05-55927-SWR Jointly Administered Hon. Steven W. Rhodes / ORDER COMPELLING PAYMENT OF RENT AND TAXES

Debtors.

Upon review and consideration of the Motion to Compel Compliance with Debtors Obligations Under 11 U.S.C. 365(D)(3) for Payment of Rent and Real Property Taxes and Alternatively, for Payment of Administrative Expense Claims Pursuant to 503(B), and any response thereto, and after due deliberation and sufficient cause appearing therefore: IT IS HEREBY ORDERED THAT: 1. 2. The Motion is GRANTED; and Pursuant to 11 U.S.C. section 365(d)(3), Collins & Aikman Products Co., a debtor

in these chapter 11 proceedings, is hereby compelled to immediately pay Dove Street Industrial, L.L.C. the Rent and Taxes as defined in the Motion.

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