511 B.R. 567
N.D. Iowa2014Background
- Debtors Vander Vegt and the L.L.C. filed Chapter 12 in Iowa; First Security held a priority lien on the Butler County Farm and other collateral.
- Debtors sought to incur $300,000 of new secured debt with priming liens to fund two facilities (waste storage and rotational grazing).
- Bankruptcy court found §364(d) financing met with inability to obtain credit elsewhere and adequate protection—granting conditional approval contingent on NRCS grant conditions.
- First Security objected, arguing lack of alternative financing and insufficient adequate protection; also moved to dismiss the Chapter 12 case.
- Bankruptcy court also denied First Security’s motion to dismiss; concluded Debtors had sufficient revenue to service the potential loan during construction.
- Appeal by First Security challenged both the §364(d) financing ruling and the denial of the dismissal motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §364(d) financing requirements are met | First Security: Debtors failed to prove no credit available and inadequate protection. | Vander Vegt: Debtors showed lack of alternative credit and provided adequate protection. | Yes; the court affirmed §364(d) findings. |
| Adequate protection under §364(d)(1)(B) | First Security: grants do not ensure adequacy of protection. | Vander Vegt: grants and bonds plus timing provide indubitable equivalence. | Yes; adequate protection established. |
| Whether NRCS grants cover cost of both projects | First Security: grants may not cover 100% of costs; potential co-pay required. | Vander Vegt: record supports full coverage by grants; no co-pay language present. | Not clearly erroneous that grants cover costs. |
| Whether there is sufficient revenue to pay financing charges | First Security: debt service unlikely given current cash flow. | Vander Vegt: projected net monthly profits suffice to cover interest during construction. | Yes; sufficient revenue shown. |
| Whether denial of motion to dismiss is final or interlocutory; if interlocutory, whether leave to appeal appropriate | First Security: denial should be final or appealable. | Vander Vegt: denial is interlocutory; court may grant leave to appeal. | Interlocutory denial granted leave to appeal; order affirmed. |
Key Cases Cited
- In re 495 Cent. Park Ave. Corp., 136 B.R. 626 (S.D.N.Y. 1992) (flexible, case‑by‑case adequate protection; burden on debtor to show no other financing)
- Suntrust Bank v. Den-Mark Constr., Inc., 406 B.R. 683 (E.D.N.C. 2009) (adequate protection assessment under §364(d))
- In re Snowshoe Co.,, 789 F.2d 1088 (1st Cir. 1988) (adequate protection factual determination; value measurements)
- In re Coleman Enters., Inc., 275 B.R. 533 (BAP 2002) (finality of orders; discretion in interlocutory appeals)
- In re M & S Grading, Inc., 526 F.3d 363 (8th Cir. 2008) (standards for interlocutory appeal under §1292(b))