No, the Contract Doesn’t Protect the School from Creditors (Part 3)

Published: 2025-07-22

The direct and unfortunate answer is: It is almost certainly too late for the County to terminate the lease now and shield it from the Trustee.

The moment Mr. Boone’s bankruptcy was filed, an Automatic Stay (like a forcefield), was erected around his assets, and this lease option is now considered one of them. The County’s contractual rights are now superseded by federal bankruptcy law.

Analysis of the Lease’s Termination Clauses (Section 22)

The lease lists specific events that constitute a “material default” allowing the County (the “Owner”) to terminate. Let’s look at each one and see why it won’t work now.

1. The “Bankruptcy Clause” – Section 22(e)

  • What it says: The lease can be terminated if ACA files for bankruptcy, has a Trustee appointed, or has its assets seized.
  • Why it Fails: This is called an “ipso facto” clause (Latin for “by the fact itself”). Federal bankruptcy law makes these clauses completely unenforceable. The Bankruptcy Code (specifically 11 U.S.C. § 365(e)(1)) was written to prevent a party from terminating a valuable contract just because the other side filed for bankruptcy. If these clauses were allowed, a debtor could never reorganize or effectively liquidate.
  • Conclusion: The County cannot use the bankruptcy filing itself as a reason to terminate. This escape hatch is legally void.

2. Failure to Maintain Non-Profit Status – Section 22(b)

  • What it says: The lease can be terminated if ACA fails to maintain its status as a valid non-profit corporation.
  • The Potential: This is a factual issue. The County Attorney could immediately check with the Virginia State Corporation Commission (SCC) to see if Appomattox Christian Academy is in “good standing.” If its registration has lapsed, this would technically be a default.
  • Why it Fails: Even if ACA is not in good standing, it’s too late for the County to act unilaterally. To terminate, they would have to:
    1. Get permission from the bankruptcy judge by filing a “Motion for Relief from the Automatic Stay.”
    2. The Trustee would immediately oppose it, arguing that this is a minor, “curable” default. He would pay the small fee to the SCC, reinstate the non-profit, and cure the default, thus keeping the valuable lease option alive for the creditors. A judge would almost certainly allow the Trustee to do this.
  • Conclusion: This is a dead end. The default is too minor and easily fixed by the Trustee.

3. Vacating or Ceasing Operations – Sections 22(a) and 22(c)

  • What it says: The lease can be terminated if ACA abandons the property or stops regularly using it.
  • Why it Fails: This is a factual question. If the school is still operating in any capacity, it has not been abandoned. Even if it’s closed for renovations, it’s not legally “abandoned.” The Trustee would argue that the estate is preserving the asset. This argument is a non-starter unless the building is literally sitting empty with the doors chained.

4. Failure to Perform Other Covenants (e.g., repairs, utilities) – Section 22(d)

  • What it says: The County can terminate if ACA breaches another part of the lease (like failing to make repairs under Section 11) and doesn’t fix it within 30 days of receiving a written notice of default.
  • Why it Fails: The Automatic Stay. The County is legally prohibited from sending a “written notice of default” right now. Doing so would be a violation of the stay and could subject the County to sanctions. They would first have to ask the bankruptcy judge for permission, and the judge would likely just give the Trustee time to fix the problem. The Trustee could simply authorize payment for a leaky roof from the estate’s funds to preserve a multi-million dollar asset.
  • Conclusion: The automatic stay blocks the first step needed to trigger this clause.


The County’s Only (and Doomed) Path

The only legally proper way for the County to act right now would be to file a Motion for Relief from the Automatic Stay with the bankruptcy court, asking for permission to terminate the lease.

This motion would fail spectacularly.

The Trustee would object, telling the judge: “Your Honor, this lease option is a hugely valuable asset that I intend to liquidate for the benefit of the 100+ creditors in this case. The County is trying to snatch it away for nothing. I ask you to deny their motion so I can do my job.”

The judge, whose duty is to see that the estate’s assets are preserved for creditors, would deny the County’s motion in a heartbeat.

The Bottom Line

We cannot cancel this contract. The moment Mr. Boone’s bankruptcy was filed, our lease agreement became a federal asset under the control of the bankruptcy court.

  1. Our Contract is Frozen by a “Federal Forcefield.” Federal bankruptcy law’s “Automatic Stay” prevents us from taking any action to terminate the lease, including sending a default notice.
  2. The Trustee Now Owns the Deal. The Bankruptcy Trustee will step into the shoes of the non-profit. He doesn’t care about the original intent; his only legal duty is to sell this deal to the highest bidder to pay Mr. Boone’s creditors.
  3. The “Bankruptcy Clause” in Our Lease is Legally Meaningless. The part of our contract that says we can terminate in case of bankruptcy is void under federal law. We cannot use it.
  4. We Have Lost Control. The time to act was before the bankruptcy was filed. Now, we are no longer in a negotiation with a local non-profit. We are subject to the powers of a federal Trustee whose goals are directly opposed to the community’s interest. Our only remaining power is the “Right of First Refusal,” which is a financial trap forcing us to pay market value to keep our own property.

Knowing this, what did the county do? They attempted to modify the contract (Click to Read Part 4)

Something Must Be Done About Appomattox County

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