1988 #03, Rauch, 2-5-88
In re: LEROY JOHN RAUSCH and PATRICIA EVELYN RAUSCH, Chapter 12
MEMORANDUM DECISION
A hearing was held on January 19, 1988 on Federal Land Banks Motion for Relief from the Automatic Stay which alternatively requested adequate protection payments. The hearing was attended by Brent Wilbur, representing Federal Land Bank, and William Pfeiffer, representing the Debtors.
Federal Land Banks v:ritt:en motion and oral argument concerned three aspects of adequate protection. First, the Bank argues that the Debtors failure to keep county real estate taxes current on land mortgaged to the Bank impairs its collateral interest. At the hearing Debtors counsel agreed to bring the taxes current, and to keep them current in the future, and that an order in accordance could be entered. The concession obviates this aspect of Federal Land Banks motion.
As a second grounds for receiving adequate protection payments, the Bank argues that the value of its collateral has depreciated over the pendency of the bankruptcy case. The Banks appeal of Judge Eckers secured status valuation is presently pending.
At the adequate protection hearing Mr. Wilbur agreed with the Court that the depreciation issue could not be determined until the outcome of this appeal was; entered. This portion of the Banks motion is continued and may be renewed on ten days notice.
Finally, Federal Land Bank argues that under the (doctrine of In Re Ahlers, 794 F.2d 1388 (8th Cir. 1986) it is entitled to adequate protection payments to compensate it for the lost use of its security for the period following the time it could have completed foreclosure. At the hearinc3 the Bank requested this version of adequate protection in the form of interest on its claim at the rate set out in the debtors plan of reorganization. Similarly in paragraph b. of its prayer for relief in the Banks written motion it requests payment of "the reinvestment return on any proceeds which would be realized by foreclosure absent the existence of this bankruptcy proceeding, and further monthly payments in an amount equal to the interest accrual upon the indebtedness" owed to the Bank.
11 U.S.C. Section 1205 governs adequate protection awards in Chapter 12 proceedings. It expressly excludes the application of Section 361, the adequate protection statute of otherwise general applicability. In interpreting Section 1205, Judge Ecker has squarely addressed the Ahlers argument put forth by the Bank. In Re Rennich, 70 B.R. 69 (Bkrtcy. D.S.D.1987). In Judge Eckers words "a debtor in a case filed under Chapter 12 of the Bankruptcy Code is not required to pay lost opportunity costs in the form of interest payments or otherwise for the retention of secured equipment to 'adequately protect the affected creditor." Rennich 70 B.R. at 71. This opinion of the Chief Bankruptcy Judge for the District of South Dakota rested firmly on the legislative history of Section 1205, which criticizes lost opportunity cost payments as a serious barrier to farm reorganizations.
The United States Supreme Courts recent United States Association of Texas v. Timbers of Inwood Forest Associates, Ltd. (Slip. Op. No. 86-1602, decided January 20, 1988) decision resolves the split authority that existed in reference to Ahiers type adequate protection payments. It now appears that this type of request in bankruptcy proceedings under any chapter would be an exercise in futility.
The Banks request for adequate protection in the form of interest payments is denied.
Regarding the creditors motion for relief from stay, cause for lifting the stay has not been shown. This portion of the Banks motion is likewise denied.
Counsel for the Debtors is directed to prepare findings of fact, conclusions of law and an appropriate order.
Dated this 5th day of February, 1988.