465 B.R. 196
10th Cir. BAP2012Background
- Woods farm hay and board horses near Ignacio, Colorado; property secures Bank loan via construction loan and purchase-money mortgage.
- Construction loan closed Apr 2008 for $480,000; a separate proposed permanent loan of similar size was contemplated.
- Bank allegedly failed to provide permanent financing; dispute led to foreclosure and Woods filed Chapter 12.
- Bank sought to add about $78,000 of attorneys’ fees to its secured claim after plan confirmation; court did not allow.
- Bank challenged Woods’ plan treatment of its claim and the Woods’ eligibility as family farmers under §101(18).
- Bank’s final plan confirmation order affirmed; appeal followed focusing on farm-debt status, cramdown rate, feasibility, and fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Woods are family farmers under §101(18) | Woods’ farm operation uses the home; debt arises from farming. | Construction-related debt is not farm debt under §101(18). | Yes; home-related debt can arise from farming; farm-debt test satisfied. |
| Whether Woods’ plan treatment complies with §1225(a)(5) | Plan provides lien retention and present-value equal to allowed secured claim. | Proposed rate and terms fail market-rate requirements. | Compliant; rate set using Till framework; value and terms satisfy §1225(a)(5). |
| Whether the plan is feasible | Cash flow projections show positive and growing capacity to meet payments. | Concerns about years 4-7 balloon payments and long-term viability. | Feasible; court rejected challenge; projections supported by expert testimony. |
| Whether the Bank’s §506(b) fees should be added to the claim | Fees incurred for collection are allowed if reasonable. | Bank failed to provide detailed time records and reasonableness of fees. | No; insufficient documentation; fees not added to claim. |
Key Cases Cited
- Till v. SCS Credit Corp., 541 U.S. 465 (2004) (formula approach: prime rate plus risk adjustment for cramdown interest (Chapter 12/13))
- In re Hardzog, no official reporter cited in text (N/A) (market-rate approach; Till overruled per court in Chapter 12 context)
- In re Saunders, 377 B.R. 772 (Bankr.M.D. Ga. 2007) (debt arises out of farming operation; purpose test for arising debt)
- In re Nauman, 213 B.R. 355 (9th Cir. BAP 1997) (test for feasibility and related considerations)
- In re Sun ’N Fun Waterpark LLC, 408 B.R. 361 (10th Cir. BAP 2009) (attorneys’ fees/fees within plan context; governing standards)