                                UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                                No. 07-1761


In Re:    LAMBERT OIL COMPANY, INCORPORATED,

                  Debtor.

------------------------------------

WILLIAM E. CALLAHAN, JR., Trustee,

                  Plaintiff - Appellee,

            v.

MOUNTAIN EMPIRE OIL COMPANY, INCORPORATED,

                  Defendant - Appellant,

            and

QUALITY PROPERTIES, L.P.; ST INVESTMENT COMPANY, LLC,

                  Defendants.



Appeal from the United States District Court for the Western
District of Virginia, at Abingdon.      James P. Jones, Chief
District Judge. (1:07-cv-00005-JPJ; BK-03-01183; AP-04-07135)


Argued:   September 24, 2008                  Decided:   October 30, 2008


Before WILLIAMS, Chief Judge, AGEE, Circuit Judge, and T. S.
ELLIS, III, Senior United States District Judge for the Eastern
District of Virginia, sitting by designation.


Affirmed by unpublished per curiam opinion.
Rick J. Bearfield, Johnson City, Tennessee, for Appellant. Lori
Dawn Thompson, LECLAIR RYAN, P.C., Roanoke, Virginia, for
Appellee.


Unpublished opinions are not binding precedent in this circuit.




                                2
PER CURIAM:

     William E. Callahan, Jr., trustee (the “Trustee”) of the

bankruptcy estate of Lambert Oil Company (“Lambert”), filed an

adversary proceeding in bankruptcy court seeking to recover the

fair market rental value for two convenience stores which were

assets of Lambert’s bankruptcy estate.                     The bankruptcy court

awarded judgment for unpaid rent in favor of the Trustee against

Mountain    Empire    Oil    Company    (“MEO”)      and    the    district    court

affirmed.     MEO now appeals.        Because the factual findings of the

bankruptcy    court    are    not    clearly   erroneous       and    because   the

bankruptcy court did not err in awarding judgment to the Trustee

for rent due from MEO for its pre-sale use and possession of the

stores, we affirm the judgment of the district court.



                                        I.

                                        A.

     Lambert    contracted      to     sell    two    convenience      stores    to

Quality      Properties,      L.P.      (“Quality”),         one     located     in

Jonesborough, Tennessee, and the other in Bristol, Virginia.                     In

exchange, Quality agreed to pay a cash amount, assume Lambert’s

secured obligations to Franchise Mortgage Assistance Corporation

(“FMAC”) regarding each store, and further assume a separate

lease for car wash equipment at the Jonesborough store.



                                        3
     The    purchase    contract      also   provided     that     Quality       would

assume possession and operation of the stores and continue in

possession until the sale closed.                During the period of pre-

closing possession, Quality was to “pay daily rent therefore

until    closing   in   an   amount   equal   to”      1/365th   of    the   annual

amounts payable under the car wash lease and the secured FMAC

indebtedness.       These    payments    would    be    credited      to   the    cash

payment Quality owed Lambert at closing; however, Quality was

not entitled to a return of the “daily rent” payments in the

event the sale did not close.

     For reasons not disclosed in the record, Quality never took

possession   of    or   operated   either     store,     made    no   payments      to

Lambert, and no closing took place.                 Rather, Lambert entered

into a separate agreement with MEO for the management of the

Jonesborough store under which MEO would satisfy all operational

expenses and, “during each day of the term of this Contract . .

. pay to or for the account of Lambert” 1/365th of the annual

amounts due under the secured FMAC indebtedness on that store

and its equipment lease, while MEO retained all gross receipts. 1

Although the record does not contain a corresponding agreement

for the Bristol store, the parties agreed that MEO also assumed


     1
       Quality and MEO are both owned and controlled by the same
majority shareholders, Warren Broyles and his family.



                                        4
possession of and operated that store and initially paid Lambert

an amount approximating 1/365th of the annual amount due on the

FMAC secured indebtedness for each day of operation.

     MEO   paid    Lambert     under   these   arrangements   from   April

through September 2002, at which time MEO learned that Lambert

was no longer making payments on the FMAC obligations.               After

September 30, 2002, MEO continued to possess and operate the

stores through June 2004 but made no further payments.

     In March 2003, Lambert filed a petition under Chapter 11 of

the United States Bankruptcy Code.          In September 2003, the case

was converted to a Chapter 7 proceeding and the Trustee was

appointed by the bankruptcy court.          The Trustee negotiated with

MEO for payment of the prior unpaid and ongoing rents, but the

parties did not reach an agreement.            Instead, MEO and Quality

proposed a purchase of the stores.

     In early 2004, at the Trustee’s request, the bankruptcy

court established bidding procedures for sale of the stores.

Quality’s bid was the high bid the Trustee received.               Pursuant

to   Quality’s    bid,   the    Trustee    executed   an   asset   purchase

agreement and conveyed the Jonesborough store to a subsidiary of

MEO and the Bristol store to Quality on June 29, 2004.                  As

required by the bankruptcy court’s order approving the sale, the

Trustee’s deeds of conveyance were “free and clear of liens,

claims, rights, and interests.”

                                       5
                                          B.

       In     November    2004,     the       Trustee       brought   an    adversary

proceeding in the bankruptcy court against MEO, Quality, and a

related party seeking recovery of unpaid rent for the period of

MEO’s pre-sale occupancy of the stores.                       The Trustee alleged

that unpaid rent from October 1, 2002, through June 28, 2004,

was an asset of the bankruptcy estate.                       Further, the Trustee

pled that an amount equal to the daily rent set out in the

purchase      contract    between      Lambert       and    Quality   and   similarly

under the management agreement between Lambert and MEO was the

fair    market    daily   rental       value    of    the    possession,      use,   and

occupancy of the stores.            MEO did not contest that it owed rent

for the pre-sale period (including the pre-bankruptcy, debtor-

in-possession, and Chapter 7 timespans), but argued, inter alia,

that no agreement on rent was ever reached and that rent thus

never       accrued.      As   a   consequence         MEO    contended     the      rent

obligation was an item of real property which passed upon sale

by the Trustee to the grantees (MEO’s affiliates).

       The bankruptcy court found that the amount MEO actually

paid    Lambert    during      MEO’s    use    and    possession      prior    to    the

bankruptcy established the fair market daily rental value for

both stores, limited to the $725.56 daily rent actually claimed

by the Trustee in his complaint.

                                          6
     The fact that MEO as the actual operating business
     entity was willing to enter into a Management Contract
     for the term of a year in which it agreed to pay the
     daily cost of the debt service on the two properties
     in question in exchange for the right to operate the
     convenience stores businesses located there and keep
     whatever excess cash flow resulting therefrom it might
     be able to generate. is likely as good evidence as a
     court is likely to get that, at least in the case of
     these two stores, the pro rata daily cost of the debt
     service upon these two stores was equivalent to the
     fair rental value of such properties as operating
     convenience stores businesses.

Callahan v. Mountain Empire Oil Co., Inc. (In re Lambert
Oil Co. Inc.), Ch. 7 Case No. 03-01183-WAS, Adv. No. 04-
07135, slip op. at 21 (Bankr. W.D. Va. Nov. 24, 2006).

     The bankruptcy court determined MEO, the entity in actual

possession, was liable to the Trustee for the unpaid rent and

pre-judgment interest.   The court also ruled that the Trustee’s

conveyance of the stores free and clear of all liens, claims,

and interests did not absolve MEO of liability for its pre-sale

rental obligation.

     MEO appealed to the United States District Court, which

affirmed the judgment of the bankruptcy court.   MEO now brings

this appeal.



                               II.

    MEO’s brief enumerates twenty issues on appeal, the gist of

which boil down to three:     (1) whether the bankruptcy court

erred in finding MEO liable to the Trustee, either because the

conveyance of the properties extinguished all pre-sale liability

                                7
from MEO or because there was never an agreement between the

parties that MEO was liable for rent; 2 (2) whether the bankruptcy

court erred because the evidence was insufficient to establish

the amount of fair market daily rental value for both stores,

either because the management agreement was ineffectual, applied

only to the Jonesborough store, or failed to properly reflect

any rental value; 3 and (3) whether the bankruptcy court erred in

failing to find that any liability for rent by MEO was abrogated

under 11 U.S.C. § 365. 4   5




     2
         Issues 2, 4, 7, 12, and 15.
     3
         Issues 3, 5, 6, 7, 8, 9, and 18.
     4
         Issue 19.
     5
       In Issues 1, 10, 11, 13, 14, 16, 17, and 20 MEO contends
among other things that the court erred in finding that the rent
obligation accrued daily, in finding that MEO was not entitled
to credit against its rent liability for payments paid under the
management agreement, in allowing the Trustee’s expert to
testify, in taking judicial notice of certain facts, and in
awarding pre-judgment interest.   However, MEO failed to supply
any legal argument supporting its position on these issues.
Accordingly, we consider these issues waived.    See 11126 Balt.
Boulevard v. Prince George’s County, 58 F.3d 988, 993 n.7 (4th
Cir. 1995), abrogated on other grounds by, City of Littleton v.
Z.J. Gifts D-4, L.L.C., 541 U.S. 774 (2004); see also Audler v.
CBC Innovis Inc., 519 F.3d 239, 255 (5th Cir. 2008) (“A party
‘waives an issue if he fails to adequately brief it.’”); United
States v. Gupta, 463 F.3d 1182, 1195 (11th Cir. 2006) (“We may
decline to address an argument where a party fails to provide
arguments on the merits of an issue in its initial or reply
brief. Without such argument the issue is deemed waived.”);
Travitz v. N.E. Dep’t ILGWU Health & Welfare Fund, 13 F.3d 704,
711 (3d Cir. 1994) (“When an issue is not pursued in the
argument section of the brief, the appellant has abandoned and
waived that issue on appeal.”).


                                  8
     On appeal from the district court, we review the judgment

of the bankruptcy court directly; we review findings of facts

for clear error and legal conclusions de novo.                   Spence v. Educ.

Credit Mgmt. Corp., No. 06-2114, slip op. at 8 (4th Cir. July

30, 2008); Bowers v. Atlanta Motor Speedway, Inc., 99 F.3d 151,

154 (4th Cir. 1996).



                                         A.

     MEO concedes that it used and possessed both stores between

October    2002    and    June   2004,    the   period     for   which    rent    was

awarded, but contends that no evidence provided a basis for the

bankruptcy court’s determination that a rent payment obligation

had accrued at the time the stores were conveyed by the Trustee.

In MEO’s view, because no payment obligation had accrued, any

right to collect the rent for MEO’s prior use and possession was

a   real   property      right   that     passed    to     the   grantees    (MEO’s

affiliates) when the Trustee conveyed the real property.                          We

disagree.

     The    use   and    possession      of   the   real   property   of    another

creates    a    contract    implied      at   law   under     the   law    of    both

Tennessee and Virginia.          Raven Red Ash Coal v. Ball, 39 S.E.2d

231, 237 (1946); Avent v. Hord, 40 Tenn. (3 Head) 458, 461

(1859).        Thus, MEO’s liability for use and possession arises

independently      from    the   pre-bankruptcy          purchase   contract      and

                                          9
management agreement.        Once accrued, the right to collect rent

for such use and occupation is not an item of real property

which passes to the grantee when the real property is conveyed

but remains personal property owned by the grantor (the Trustee

in this case).        See White v. Pleasants, 317 S.E.2d 489, 493

(1984); see also E.T., Ga. & Va. R.R. v. Henderson, 69 Tenn. (1

Lea) 1, 3 (1878) (a right to recover on contract is a chose in

action); Sharp v. Cincinnati, N.O. & T.P.R. Co., 179 S.W. 375,

376 (1915) (chose in action is personalty).             Therefore, MEO was

liable   for   rent   to   the   Trustee   if   the   rent    obligation   had

accrued.

     In determining whether MEO’s rent obligation had accrued,

the bankruptcy court looked first to the pre-bankruptcy purchase

contract and the management agreement but found no provision in

either   instrument    for   the   intervals     at   which    the   required

payments were to be paid.          However, the court found that “the

liability for rent ‘accrued’ daily,” and turned to the practice

of the parties during the occupancy of the stores, particularly

for the period in which MEO tendered payment to Lambert.                Those

payments were tendered monthly in arrears.            Thus, the bankruptcy

court held:

     the proper rule to apply for that period of time
     following the termination or effective abandonment of
     the contract by the parties was the same one
     applicable to a tenant who enters into possession and
     pays rent under an invalid lease, which thereby

                                     10
       creates a periodic tenancy with the period of tenancy
       being determined by the interval between rental
       payments.

Callahan, slip op. at 18.

       While MEO’s liability for use and possession of the stores

arises      independently          from      the       pre-bankruptcy          management

agreement     and     purchase      contract,       those    instruments          and    the

conduct of the parties thereunder are nevertheless informative

on the question of when the right to collect rent accrued.                               The

management agreement clearly provided that “[d]uring each day of

the term of this Contract, MEO shall pay” and the pre-bankruptcy

purchase     contract     clearly      provided        for   “daily     rent.”           The

Trustee      submitted       uncontested         evidence    that     MEO        made     six

payments, one each in May, June, July, August, September, and

October     2002,    ostensibly      for    the    preceding      month     of    use    and

possession.         Accordingly, there is adequate evidentiary support

for   the    bankruptcy      court’s       factual     findings     that    MEO’s        rent

obligation accrued daily and was paid monthly in arrears.                               There

is    no    clear    error    in    these        findings.        Consequently,          the

bankruptcy court correctly concluded, as a matter of law, that

the accrued rent was personal property, which remained an asset

of    the   bankruptcy       estate,      and    was   not   a   part     of     the     real

property conveyed by the Trustee.

       The bankruptcy court did not err in further holding that

the terms of conveyance of the real property by the Trustee

                                            11
“free   and    clear   of   any    liens,    claims,     or   interests”    had   no

effect on MEO’s accrued rental obligation.

      Such language has nothing to do with liability for use
      and occupation of these stores by any of the
      purchasers prior to the sale . . . .     In short, the
      language of this Court’s Order pursuant to the
      Trustee’s Motion provided the same protection to
      Quality and MEO as any purchaser of the stores from
      liabilities associated with acquisition of ownership
      of the properties, but did not release them from
      liability for their own pre-sale enjoyment of the
      economic benefits flowing from their operation of the
      convenience store businesses at the subject locations.

Callahan, slip op. at 24-25.

      This     conclusion     is   further     supported       by    the   specific

exclusion of any relief from indebtedness for MEO’s occupancy

and possession of the stores in the Trustee’s asset purchase

agreement.

      The foregoing exclusion of liability is applicable
      only to the liabilities of . . . Lambert Oil Company’s
      ownership or occupancy of the Purchased Assets and
      shall not operate as a discharge or release of any
      liability incurred by the Purchaser as a result of the
      Purchaser’s occupancy and use of the Purchased Assets.

      The bankruptcy court did not err in determining that MEO

was   liable    to   the    Trustee   in    rent   for   the   two    stores   from

October 2002 through June 2004.




                                        12
                                           B.

     MEO next contends that, even if liable to the Trustee for

rent, the evidence was insufficient to support the bankruptcy

court’s award of $462,181.72.            We disagree.

     While the bankruptcy court considered the testimony of the

Trustee and the Trustee’s expert witness, it ultimately relied

on the actual conduct of the parties during the occupancy and

use of the stores to establish the rental value.                    The payments

made by MEO supporting a finding that the fair market daily

value for use and possession of the stores was $732.19 from the

actual   conduct     of   the    two    independent     parties   engaged   in   an

arm’s length transaction.              We therefore find no clear error in

the bankruptcy court’s finding that the fair market daily rental

value of the two stores was $725.56, the amount pled by the

Trustee in his complaint, or in the resulting cumulative award

of rent.



                                           C.

     Lastly, MEO contends any liability derived from the pre-

bankruptcy    purchase          contract      or   management     agreement      was

abrogated when neither Lambert, as debtor-in-possession, nor the

Trustee assumed the contracts, thereby effecting a rejection of

the agreements by operation of 11 U.S.C. § 365.                   The bankruptcy

court    correctly    determined       that     the   statute   applies   “to    any

                                           13
‘unexpired’ lease,” and, as no lease was in effect at the time

the bankruptcy petition was filed, the statute could not apply

to expired pre-bankruptcy agreements as a matter of law.

     Moreover,    as   noted   above,   MEO’s   liability   to   pay   rent

arises out of the contract implied at law from its use and

possession of the two stores before and during the bankruptcy,

not the pre-bankruptcy agreements.

     The fact that the two written contracts had either
     expired or failed according to their terms long before
     bankruptcy transpired cannot alter the facts that the
     parties had agreed and acted upon a specific rate of
     compensation for the use, occupancy and enjoyment of
     the Bristol and Jonesborough stores during a period of
     time and MEO remained in actual possession of such
     properties thereafter without any express agreement as
     to the terms and conditions therefore and without any
     compulsion to do so other than its own financial self-
     interest.

Callahan, slip op. at 27.

     Accordingly, we affirm the bankruptcy court’s holding that

11 U.S.C. § 365 had no effect on MEO’s liability for rent.



                                  III.

     For the foregoing reasons, we affirm the judgment of the

district court.

                                                                 AFFIRMED




                                   14
