Documente Academic
Documente Profesional
Documente Cultură
April 3, 1995
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
____________________
No. 94-2025
IN RE WINTHROP OLD FARM NURSERIES, INC.,
Debtor.
_____________________
WINTHROP OLD FARM NURSERIES, INC.,
Appellant,
v.
NEW BEDFORD INSTITUTION FOR SAVINGS, ET AL.,
Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
___________________
____________________
Before
Selya, Boudin and Stahl,
Circuit Judges.
______________
____________________
ERRATA SHEET
ERRATA SHEET
Please make
22, 1995.
the opinion
issued on Ma
Chapter 11 debtor
Winthrop
court order
to determine
of undersecured junior
mortgagee
New
Bedford
pursuant to 11 U.S.C.
"Property")
Institution
for
Savings
("NBIS")
should be valued at
value.
We
shop
and
affirm.
I.
I.
__
BACKGROUND
BACKGROUND
__________
Winthrop
operates
retail
Rehoboth, Massachusetts.
11 of the
Winthrop
filed
at
On February
"Code").
Disclosure
its
garden
On July
Statement
and
16, 1993,
Plan
of
which will
in turn lease
it back
to
is encumbered by a
first mortgage in
the
-22
junior
mortgage
$576,000.
on
the
Property,
is
owed
approximately
mortgage.
The Plan
the liquidation
entirely
unsecured.
The
cents on
the dollar
over a
creditors,
whose
Plan proposes
four-year
claims,
mortgage to
a payout
of twenty
period to
unsecured
including
NBIS's,
total
approximately $756,761.
NBIS
Property
objected
should
liquidation
value.
be
to
valued
the
Plan,
claiming
at
fair
market
that
the
value,
not
value,
NBIS
would have
approximately
$100,000,
a secured
claim
with
remainder
the
in the
amount of
of its
claim
unsecured.
The
holding
that
bankruptcy
fair
court,
market or
going
the
Property
at
citing
line
concern
of
cases
value is
the
$400,000.
The
district
court
-33
"In
bankruptcy
an
court
appeal from
order,
district
we
court
independently
review of
review
a
the
to
findings
of
fact
and
de
novo
review
to
conclusions of law."
F.3d 26,
of
law.
Its application
error."
court's
Williams v.
________
of
506(a) presents a
the statute
to the
of law
bankruptcy
of
is de novo.
analysis
Poulos, 11
______
was
"infected
F.3d
271, 278
by
legal
(1st Cir.
1993).
III.
III.
____
DISCUSSION
DISCUSSION
__________
Section 506(a) governs the determination of whether
any portion of a
secured claim:
(a) An allowed claim of
a creditor
secured by a lien on property in which
the estate has an interest, or that is
subject to setoff under section 553 of
this title, is a secured claim to the
____________________________
extent of the value of such creditor's
_________________________________________
interest in the estate's interest in such
_________________________________________
property, or to the extent of the amount
________
subject to setoff, as the case may be,
and is an unsecured claim to the extent
that
the
value of
such creditor's
interest or the amount so subject to
setoff is less than the amount of such
allowed claim.
Such value shall be
______________________
as a
-44
U.S.C.
506(a) (emphasis
given
type
language
in
apparently did
liquidation
or
As
evidenced
by the
second
sentence,
statute's
not intend
___
fair
The
of case.
the
added).
that
market
courts would
value
emphasized
Congress
use either
standard
exclusively,
standard
to
fit
the
circumstances.
Relevant
states:
Subsection (a) of [ 506] separates an
undersecured creditor's claim into two
Rep.
No.
595,
95th
Cong.,
Senate
Report's
for
356
(1977),
added).
commentary
adequate
1st
on
Sess.
506
offers
little
protection
payments
to
secured
-55
creditors in
some circumstances -- is
Congress
intended
that
courts
would
sometimes
value
necessarily
looks to
506(a)
amount
claim.1
of
addressed to
secured
for
Although this
506(a), it
361 purposes
a determination
Indeed,
is
since
of the
adequate
plan will
valuation standard
be extremely conservative.
____________________
1.
logical").
and
deduction for
Nevertheless,
even in a
costs
would
be
suggests that
collateral at
361 context, a
of
not previously
courts, however,
including four
Circuit Courts,
based
hypothetical
a debtor proposes
foreclosure
sale.
to
These
proposes
___
if it were being liquidated;
collateral
proposal to retain it
506(a)
in accordance with
____________________
(1993));
their
interpretation
to the
first
sentence
of
506(a),
use
enterprise,
the
of
the
statute
collateral
in
commands
the
reorganized
valuation
of
the
Thus, if
Commercial
it could
the collateral
the U.C.C.;
if real
creditor would be
is
subject to
the Uniform
a commercially reasonable
estate, then from
sale under
a foreclosure
sale,
the right
at fair
ability to bid
in
119
B.R.
1,
(recognizing
second
declining to
ascribe any
mortgage
make it "unreasonable to
see generally James F.
___ _________
5-6
(Bankr.
holder's
value to them
D.
bid-in
Mass.
1990)
rights
but
where circumstances
____________________
through a pending sale.")
-99
Com. L.J.
18, 60
"should
are
persuaded that
the
to exercise
line of
cases
the flexibility
retaining collateral,
first
a Chapter
Congress intended.
11 debtor is
By
ensuring that
time,
the debtor
valuing the
should
not be
heard
At the same
to argue
that,
in
event that, according to the debtor's plan, will take place ____
- namely, the debtor's
income stream.
of
In ordinary circumstances
generate an
market
value.
faithful
creditor's
to
Under
the
such circumstances,
dictates
interest
in
proposed post-bankruptcy
economic benefit
the
of
a court
506(a)
collateral
reality:
by
valuing
light
the
no foreclosure sale
and
court, using
the
of
in
remains
its informed
Our approach
discretion
case
is
the
valuation
method
prevailing circumstances.
that
fairest
given
the
-1010
renders
meaningless.
to
the second
sentence
Moreover, it
506(a)
virtually
value
and
quickly selling
the
of
Butner
______
(bankruptcy
v.
collateral
at fair
market
law should
440
"prevent
U.S.
a party
48,
55
(1979)
from receiving
omitted).
to reorganize under
And
while it is
also true
that,
through
its
state
law rights,
we
would
not
not
as a "windfall" to the
creditor,
and
one that
will
spur
secured
creditors
find
that
506(a) as
among possible
the
bankruptcy
correctly
standards of valuation,
court
Winthrop
-1111
proposes
in its Plan to
continue
generate
income.
bankruptcy court
In
retain control of
light
of
this
committed no error in
proposed
use,
the
-1212
IV.
IV.
___
CONCLUSION
CONCLUSION
__________
For
the
district court is
Affirmed.
Affirmed
________
foregoing
reasons,
the
order
of
the
-1313