*1 charge for which knowing it was for In re Lee and Patricia Jim WIERSMA
had never been billed. Wiersma, Darlene Debtors. I not think it matters to the outcome do find, complaint whether I could Wiersma; Jim Lee Patricia Darlene find, might Wiersma, another Lundeen Appellants and $1,500.00 actually owed the for the Cross-Appellees, previous might work on the home. It be v. seductive to ask whether someone can de- Milling, O.H. Kruse Grain and nka by lying get fraud someone to them to Grain, Appellee Ferndale something actually to which he is entitled. Cross-Appellant, I question. decline to ask that Mrs. $1,500.00 Young disputes charge. v. presented Lundeen never an invoice for Bank, nka Bank United California previous might work. The debt have West, Appellee. disputed pre- been at the time Lundeen Wiersma; Jim Lee Patricia Darlene request repayment
sented his for the Wiersma, Appellants, Indeed, siding. Lundeen testified that he thought Youngs might pay. He v. $1,500.00 should not have hidden the Trustee; United States O.H. Kruse charge siding Youngs bill. had a Milling, Grain and nka Ferndale right commercially appropriate pro- to a Grain; Bank, United California nka dealing charges cess in with the for the West, Appellees. Bank of the stairs firewall. Lundeen subverted process giving Youngs no opportunity Milling, O.H. Kruse Grain and nka $1,500.00 dispute or question the Grain, Appellant, Ferndale charges. He did so fraud. v. I Jeffrey conclude that Lundeen ob- Wiersma; Lee Jim Patricia Darlene Wi money Youngs by repre-
tained from false ersma; Bank, United California nka Youngs’ against sentation and that claim West; Bank of the United States Lundeen, $1,500.00, to the extent of Trustee, Appellees. excepted from discharge Lundeen’s ID-02-1523-MAPB, BAP Nos. ID-02- 528(a)(2)(A). II Judgment U.S.C. shall 1541-MAPB, ID-03-1215-MAPB, accordingly. entered ID-03-1224-MAPB.
Bankruptcy No. 01-41874. Bankruptcy Appellate States United Panel of the Ninth Circuit. Argued July and Submitted 2004. Filed Feb.
Debtors’ subjected cows had been to elec- trical shocks from faulty wiring and had been culled until the herd completely liquidated. Debtors sued the electrical and, contractor upon settlement of the state court lawsuit for million cash (“Settlement Proceeds”), pro- posed to use the Settlement Proceeds to purchase begin cows and in Georgia. anew They proposed give major secured creditor, Bank, United California nka (“Bank”), Bank of the West a replacement cows, lien objected. new but Bank already court had deter- mined creditor, that Bank and another Robinson, Brent T. Ling, Nielsen & O.H. Kruse Grain Milling, nka Fern- Robinson, ID, Rupert, for Jim and Patricia (“Ferndale”) dale Grain had secured inter- Wiersma. ests in the Settlement Proceeds. Hollifield, Bevan, William R. Hollifield & confirmation, At plan the bankruptcy P.A., Falls, ID, Twin for O.H. Kruse Grain court held that new cows were not the Milling nka Ferndale Grain. equivalent” cash, “indubitable and fur- Kelly McConnell, Greene Pursley Givens ther found that was not feas- LLP, Boise, ID, for United California and, ible. It denied confirmation giv- after Bank nka Bank of the West. ing Debtors the chance to file a Third Plan, dismissed MARLAR, Before: PERRIS and case. BRANDT, Bankruptcy Judges. appeals These and cross-appeals OPINION (1) concern three orders: September
MARLAR, Bankruptcy Judge. 2002, order determining the secured inter ests of the Bank and Ferndale in the Set INTRODUCTION (“Order tlement Proceeds Re Secured Sta dairy tus”) Idaho (BAP farmers Jim and Patricia (2) 02-1541); Nos. 02-1523 and (“Debtors”) Wiersma filed a chapter 11, 111 February 2003, a denying order confir petition and proposed plan a to relocate mation of Debtors’ Second Amended Plan dairy failed Georgia. business to and approving settle;2 Debtors’ motion to indicatеd, 1. 661, Unless "chapter” (9th otherwise and Cir.1997) 118 F.3d 662 (citing Ni "section” Bankruptcy references are to the (In Johnny Nicholes), choles v. Appleseed re Code, 101-1330; §§ 11 U.S.C. rule references 82, 1995)). 184 B.R. 86 Cir. BAP It are to the Bankruptcy Federal Rules of Proce- merged into the final dismissing order ("Fed. Bankr.P.”), 1001-9036, dure R. Rules S.B.A., 1361, case. See v. 644 F.2d Munoz incorporate certain Federal Rules of (9th Cir.1981). contrast, 1364 portion In ("Fed. Civ.P.”). Civil Procedure R. of the approved order which the settlement may have been a final order. We do not 11, appeal Debtors did February not finality question reach the because we dismiss denying order. An order confirmation appeal of the settlement order as moot. chapter of a interlocutory. See Discussion below. Lievsay W. v. Fin. Sav. Lievsay), Bank re brought both tort (3) Lawsuit was order zen an dismissal April and 03-1224). theories. (BAP and breach contract 08-1215 and Nos. Idaho’s these we construe appeals, In largest cred- Bank was Debtors’ secured Commer- Article 9 of the Uniform cows, revised its Following liquidation itor. (“UCC”),3 whether and decide cial Code million. was approximately $2.2 claim damage to of a lawsuit for cash settlement security perfected held а Bank valid proceeds either collateral constitutes and, dairy in herd interest5 Debtors’ or an after-ac- Bank’s livestock collateral in “In- among things, other all Debtors’ “payment intangible” collateral. quired ventory Rights ... and Contract Accounts ... ... Intangibles ... General Livestock or- AFFIRM the court’s We Monies, ... Quota Products [and] Milk ap- Ferndale’s exceptions. with two ders Ag- in Possession.” Deposits Accounts Re Status of the Secured peal Order 4, Section Agreement, p. ricultural Credit its interest in the Settle- granting secured III, (July D of Facts Stipulation Exh. order appeal and the of the ment Proceeds 2002). addition, a securi- had are both DIS- approving the settlement ty after-acquired property, MISSED moot. collat- proceeds products in “all to, pro- limited including, eral but FACTS4 any Id. insurance thereon.” ceeds Idaho operated an Debtors owned 2,000 dairy of two facilities with consisting $550,000 to owed about Debtors also They chapter petition cows. filed feed. This debt was Ferndale livestock 1, 2001. October by note and an promissory evidenced security assignment (“Assignment”) problems stemmed Debtors’ financial title, right, and interest Debtors’ faulty work pеrformed from electrical from Lawsuit. Fern- proceeds the Geitzen expansion dairy of their Geitzen by fil- security interest perfected dale its (“Geitzen”). result, Electric, Inc. As Financing Statement as ing a UCC-1 subjected to dairy cows were and all Debt- “[a]ny proceeds received degrees of electrical shocks which varying Financial from ....”. ors the lawsuit milk, be- produce less caused cows Statement, Facts Stipulation exh. J sick or die. The entire herd come 2002). (July eventually lost. Additionally, approxi- owed against Geit- Debtors initiated a lawsuit (“Geitzen Lawsuit”) $125,000 in taxes and they mately priority in which zen claims. Debtors’ damages. The Geit- million unsecured million in sought $6 *8 pre- undisputed underlying facts bankruptcy that re- 4. The 3.The court determined applied Stipulation UCC because Facts and parties' vised Article 9 of the in the sented bankruptcy revi- petition was filed after the bankruptcy court's decisions. ruling July This sion took effect on 2001. challenged appeal. Revised has been challenged validity one 5. No 9, and the official comments UCC Article thereto, claim, pre- bankruptcy court secured and legisla- the Idaho were enacted perfected. In re was See it valid and sumed Transactions, Code, Secured ture. Idaho Wiersma, 298 n. B.R. provides §§ 28-9-101 to 28-9-709. It 2002). (Bankr.D.Idaho lien with- applies "this act to a transaction or scope, lien if the in its even transaction this act entered into or created before was 28-9-702(a). takes effect.” Idaho Code Next, eventually dairies were foreclosed and court examined dairy operation their was terminated. Debtors’ transaction Ferndale. It concluded that note Assignment and Special their Debtors and Coun- security agreement constituted a written sel reached a settlement with Geitzen and gave rights Ferndale the Settle- its pay insurer to Debtors million. $2.5 ment Proceeds. approximately estate stood to receive The Order Re Status Secured was en- million of the Settlement $1.6 Proceeds tered on September Debtors upon approval bankruptcy court of the set- timely (ID-02-1523), appealed and Fern- However, tlement. Bank claimed the en- (ID-02-1541). timely dale cross-appealed collateral, tire as its estate’s interest cash They challenged both Bank’s secured in- and against Ferndale alsо claimed the Set- Proceeds, terest in the Settlement and tlement pursuant security Proceeds to its Debtors also disputed Ferndale’s secured agreement Assignment. interest, theory. under the same tort Motion to Secured Determine Interests Reorganization Plan of 506(a) Motion to Settle
Debtors then
filed
Motion to
Determine Secured
posi-
Status. Debtors’
While the Geitzen Lawsuit was still
tion was that
Bank nor
neither
Ferndale
pending, Debtors filed their first plan of
had a
secured
Settlement
reorganization
statement,
and disclosure
Proceeds because the Geitzen Lawsuit
thereafter,
shortly
their motion to set-
tort,
sounded
and UCC Article 9 exclud-
tle.
“general
ed tort claims from the
intangi-
stated,
Although Debtors
in their mo-
bles” category.
tion,
damages
believed their
million,
were at
argued
they agreed
least
Settlement Pro-
$6
accept a
ceeds were either
“total value”
million
“general intangibles” or
from
$2.5
Geitzen,
proceeds.
purchase
livestock
Ferndale
to be used
“the
pri-
claimed
ority
dairy
benefit,
it,
over Bank
cows for
and maintained that
to be uti-
alone,
lized
reorganizing
Debtors in
entitled to
Settlement Pro-
dairy operаtion.”
ceeds.
Motion for
Ap-
Order
(June 26,
proving
2002),
Settlement
at 3.
Following
hearing,
the bankruptcy
planned
use the
pur-
funds to
published opinion
rendered a
on the
cows, in
chase about 800
Georgia, which
Wiersma,
In re
matter.
103 ISSUES ments,” pro- in milk and milk well as as ceeds. subject panel the has mat- 1. Whether $60,000 a loan Debtors also obtained of jurisdiction appeal ter over the reduced startup capital, used be as the Re Secured Status. Order to other creditors their debt service bankruptcy 2. Whether the court erred budget $2,600. They revised their about determining in Bank Fern- flow, and cash to indicate an incrеased security perfected dale had valid and of em- one their a letter from presented in Pro- interests the Settlement South, had ployees, experience who ceeds. stating he would assist Debtors. of appeal the set- 8. Whether Debtors’ Bank hearing, confirmation At the next approval is tlement order moot. objection proposed to the maintained its bankruptcy 4. Whether the court erred new, argued approxi- that the plan. Bank denying plan confirmation based $200,000 cash “equity mate cushion” provide failure to Debtors’ for an estimated protection insufficient equivalent” of the “indubitable debt, and that Debtors million secured claim and lack of value its had no reserves. cash feasibility. court, ruling, in an bankruptcy The oral court bankruptcy Whether that, pro- the changes concluded even with dismissing its discretion abused Debtors, original concerns posed its case based on inabili- feasi- equivalent” to the “indubitable ty propose plan, a confirmable Third bility been had not rectified evidentiary conducting without Plan, a nor could Debtors reach Amended Third hearing on their estimated, It without consensus with Bank. Plаn. (because ruling the motions were not be- it), pending fore that Debtors’ motion not warrant a reduction
surcharge would STANDARD OF REVIEW more a few in Bank’s secured claim of than findings review factual We dollars, $178,000 thousand instead error and its bankruptcy court clear contemplated by Nor did Debtors. de v. conclusions of law novo. See Anastas equitable expect court it would find (In Anastas), 94 F.3d Am. Sav. Bank re claim under reasons to reduce Bank’s (9th Cir.1996). 1280, 1283 findings Factual 552(b) pending motion. only be should could concluded that Debtors court thus if a review the record leaves disturbed plan, grant- propose a confirmable mis firm conviction that a “definite and Trustee’s motion ed United States has committed.” United States take been the case. dismiss Co., 333 U.S. Gypsum v. United States timely order appealed (1948). L.Ed. 746 68 S.Ct. dismissal, therein the 2002 which included re questions of law and fact are Mixed Status, and the order Re Secured Order Pac. Ven viewed de novo. See Wattson confirmation of the Second which denied Valley Fed. & Loan re v. Sav. tures settle- approved Amended Plan and Trust), Self-Storage F.3d Safeguard ap- ment. then filed notice Ferndale (9th Cir.1993). Status, Re peal as to the Order Seсured which, assumed, reorganization merged into the Whether it had fact, question while feasible is final dismissal order. *12 BAP plan of whether a A provides panel determination motions then deter secured with the “indubitable that the creditor mined Order Re Secured Status question all, equivalent” interlocutory, of its claim is a mixed was not after but had order, always of law See Moun been a and fact. Woods v. Pine final a conclusion tain, (In Ltd.), Mountain, re Pine agree.12 panel Ltd. 80 with which we The motions 171, 172(9th 1987). B.R. Cir. BAP previous then vacated the dismissal orders appeals, original and reinstated the rea denying The order confirmation of soning that it the appellants. had misled cause, dismissing case 1112(b), question panel’s juris- now Appellees § is reviewed for an abuse id.; diction, both in previously Liquidat reinstating of discretion. See Pioneer (In appeals ing considering dismissed Corp. v. United States re Trustee Entities, appeals. 2003 Consolidated Pioneer Mortgage (9th Cir.2001)(con Inc.), 803, 264 F.3d 808 authority We have inherent 1112(b)).
verting case cause under rectify misapprehension an inadvertent facts an actual and correct order to DISCUSSION reflect the court’s intentions. See Cisne I. BAP Jurisdiction: Order (In Cisneros), ros v. States re United 994 Re Secured Status (9th Cir.1993) 1462, F.2d 1466 (affirming (BAP 02-1541, 02-1523, Nos. court in sponte vacating sua 03-1224)
03-1215 & order); discharge mistaken Ford v. Ford (In Ford), (Bankr. 590, re 159 B.R. Both Bank and the United States Trus- D.Or.1993) (reading Cisneros “as a reaffir panel subject tee contend that lacks power mation of a court’s inherent to cor jurisdiction matter over errors”). rect its own clerical Compare Ferndale’s appeals the Order Re Se- 60(a) Federal Rule of Civil Procedure cured Status. (“Clerical mistakes in judgments, orders or 2002, In Debtors and Ferndale filed parts other of the record and errors there timely of appeal notices of the Order Re arising from oversight may or omission Secured panel mistakenly Status. The be- by be corrected the court at time of its interlocutory, lieved the orders ”). own initiative .... R. Fed. BankrP. when appellants failed to to a respond 60(a). R. Civ. P. We also have 9024/Fed. jurisdictional notice deficiency, it dis- power “rescind, reconsider, inherent missed appeals both for lack of prosecu- modify interlocutory order.” See City tion. Angeles, Los v. Harbor Div. Santa Mo In the bankruptcy after case was (9th nica Baykeeper, 254 F.3d 886-87 dismissed, Debtоrs and renewed Ferndale Cir.2001); 105(a). 11 U.S.C. appeals the Order Secured Re Status, dismiss and Bank moved to those We believe appeals that the 2002 appeals untimely. as mistakenly See Fed. R. BankrP. were dismissed for lack of 8002(a) (a appeal notice of be prosecution must filed when our orders were intend ed, within days entry although, so, ten after of the order incorrectly to dismiss the appealed). appeals interlocutory. (9th 1988) (citing We are bound the actions of the Cir. BAP Brady v. An panel. (In motions Bentley v. Coro re Corp.), drew Commercial W. Fin. 1985)). Crystal 84 B.R. F.2d 1332 n. 6 Props.), nado re Sands Cir. final order proceed would once requested appeal retrospect, the order finality issue was mislead- was entered. on the
briefing stated, pertinent part: ing and Furthermore, the doctrine screening jurisdictional routine excuses untimeliness unique circumstances BAP suggests
conducted *13 upon the the have relied appellants when concerning the may be an issue there v. McAuley In re panel’s action. See appeal.... on finality of the order (In re Orange & Loan Ass’n Coast Thrift will affect the proceedings If further 696, Cir. BAP McAuley), B.R. 700 66 appeal, on the order scоpe of the order 1986). year than a and for more 2002 is final.... not thereafter, led be appellants the were to herein appeal apparent- on The order inter original appeals that were lieve their secured status ly determined the (March Proceedings locutory. Tr. of in a and O.H. Kruse Bank of the West (counsel 2003), informing at 43-44 case, prior 11 chapter appeals had bankruptcy court that the ap- the on confirmation. order While order.) lack a final dismissed for been that not on its face indicate peal does dismissed, Then, case after the had been future any reserved for there are issues appeals were told that those appellants the indi- disposition, docket interlocutory, all. Due to were not after proceedings that confirmation cates confusion, had cover appellants both Bank of pending are and that opposing appeals Kruse file in 2003. West and O.H. are all their bases and new faith, unclear plan. relied, good It is whether in Debtors and Ferndale affect proceedings might confirmation renewing judicial action panel’s on the apрeal. of the on scope order Therefore, in 2003. both appeals timely as appeals stand will appeal have Any party this shall (14) the file- DAYS from filed. FOURTEEN of this order to file
stamped date finality paper addressing the serve a Re II. Merits of Order Secured Status issue.... (Decem- (a) Finality Re Security Issue Interest Clerk’s Order 2002). ber rul- challenge the Debtors and Ferndale ac- apparently and Ferndale perfected that Bank has valid ing analysis that the order cepted the Clerk’s Pro- security the Settlement interest interlocutory and did appeal on Debtors con- page supra. ceeds. See ap- respond, resulting in dismissal of was a com- Lawsuit tend that the Geitzen Unfortunately, the dismissal was peal. therefore, and, tort action mercial rather than prosecution of lack of the basis inapplicable. Article 9 was UCC R. Fed. jurisdictional basis. See on the (invol- 41(b) P. R. Civ. Bankr.P. 7041/Fed. have that Bank would undisputed It was jurisdiction is dismissal for lack untary Pro- security interest the Settlement merits). not on the a con- if were the Geitzen Lawsuit ceeds that, undisputed It was tract action. also been appeals should not have Since the action, it a tort Lawsuit were if the Geitzen dismissed, agree with we therefore so meaning of a “com- fall would within re- as appeals, reinstatement in re- is used tort” as term mercial panel’s real intentions flecting security 9.13 vised Article had a in the after-ac- quired Lawsuit if it Geitzen itself were Debtors, Ferndale, and the bank determined to be a tort commercial claim. ruptcy painstakingly analyzed whether the Geitzen Lawsuit was a breach responds such anal action, of contract or a tort commercial irrelevant, ysis plainly is because the UCC because, situations, a commercial some provides that the Settlement Proceeds tort from excluded Article such as “proceeds.” provides Article 9 two of “general intangi the definitions ways capture settlement proceeds of a “after-acquired” bles” and property. involving damage lawsuit to collateral. First, if a perfected security there is inter “general intangible” Article 9 defines in after-acquired “general est intangibles,” *14 follows: then lawsuit money, once the is settled for intangible” any per- “General means right payment the debtor’s to becomes property, things sonal including ac- a “payment intangible” transformed into to tion, accounts, than paper, other chattel which simply the tort exclusion does not claims, deposit commercial tort ac- Second, apply. lawsuit settlement funds counts, documents, instruments, goods, stemming from of destruction collateral property, investment of letter credit proceeds are to be of origi considered credit, rights, money, oil, of letters and nal, Therefore, damaged collateral. we gas, or other minerals before extraction. agree with Bank that the Settlement Pro payment intangibles The term includes “proceeds” ceeds its based on the and software. following analysis. 28-9-102(a)(42). § Idaho Code “Commercial tort claims” are consid- (I) Payment Intangible because, ered to “general intangibles” be Revised Article 9 created a new 9, they under the revised Article are a new subcategory “general intangible” of called category of collateral unto themselves. “payment intangible,” defined as 9—102(a)(13); § See § Idaho Code 28- 28— “a general intangible under which the ac 9-109(d)(12) (excluding assignment “an obligation count debtor’s principal is a tort, arising claim other than a com- monetary obligation.” § Idaho Code 28- claim”). mercial tort 9-102(a)(61). The authorities hold that it addition, In an after-acquired is irrelevant payment intangi whether the property clause cannot reach lawsuit, future com ble is based a tort because the § mercial tort claim, claims. See Idaho Code 28- collateral does not consist 9-204(b)(2). but, For a security rather, interest in a right the contractual to pay attach, tort claim to the claim must be in ment in any evident involving settlement agreement existence the security when Addressing is destruction of collateral. Therefore, created. scope § could not have provides Article 28-9-109 (B) presumed The that the the claimant is an individual 13. tort special category counts came within the claim: tort,” of a agree. "commercial we (i) See arose in course of claimant’s Wiersma, Idaho, B.R. at it is profession; business or defined as follows: (ii) arising damages does not include out personal injury "Commercial tort to claim” means a claim or the death of an arising respect in tort with to which: individual. (A) organization; 28-9-102(a)(13). thе claimant is an § or Idaho Code of payment of Article “because streams that, apply it does not although “[a]n tort, assigned from settlements are structured arising in other assignment of a claim zillions outright pledged as collateral in claim,” yet “sec- tort than commercial country.” transactions around apply with and 28-9-322 tions 28-9-315 Clark, & Law Barkley Barbara The Clark priorities pro- respect proceeds Secured Transactions Under the Uni- Idaho 28-9- Code ceeds.” Code, vol. Commercial 109(d)(12). form (2004). 1.08[11][B],p. 1-270.4 to this section The Official Comment of Appeals Ninth Circuit Court The provides: dicta, conclusion, in came to the same (d)(12) nar- Tort Claims. Subsection Partners, L.P. RMA v. Pac./ Fifteenth exclusion of rows somewhat broad Group, re West Inc. Communications under former of tort claims transfers Inc.), Group, Communications Pac./West 9-104(k). ap- Article This now Section (9th Cir.2002) (examining 301 F.3d tort assignments of “commercial plies provisions). identical California UCC 9-102) (defined in claims” Section “a with a issue there was whether creditor security in tort interests well as security personal in another’s proceeds claims that constitute other *15 intangibles, property, including genеral (e.g., right payment a to collateral thereof, can attach its proceeds all in- negligent destruction of the debtor’s the proceeds [arbitration interest to ventory). claim aris- Note once a ” .... a tort claim of commercial award] ing in has been and reduced tort settled added). (alteration at Id. 1151 obligation pay, a to the to contractual § applied the former 9- The court UCC payment a right payment becomes 104(k), prohibited as collateral “[a] which intangible be a claim aris- and ceases to any of claim part in whole or transfer ing in tort. tort,” and held that the out of arising added). Id., (emphasis cmt. 15 the could not attach to security interest words, Article 9 In other revised Id. at 1152-54. The court proceeds. of payment intangibles considers either the would have been opined that outcome actions commercial tort to be consumer or 9-109, § the UCC under revised different intangibles. payment the general Once security to be which allows a interest “now existence, into in this intangible comes a proceeds the of tort claim.” attached to after-acquired fund case as an sеttlement (emphasis original). Id. at 1152 automatically it is with general intangible, summary, argument In part the scope in the of Article 9 as of are excluded Proceeds Settlement creditor’s collateral. secured interest is security from Bank’s based plain language The case law. purpose pre-revision and effect of “The that Bank provides of current statutes certainty are to so these revisions enhance in the security has interest Settlement provide more a willing that lenders will be after-acquired as characterized types per Proceeds credit on the basis these affirm bank therefore provided are collateral. We property when sonal Lander, on this other ruptcy court’s conclusion David “Under collateral.” A. Pre Bankruptcy Petition ground. In re Scope of Revised standing Expanded BAP UCC,” B.R. 140 Cir. parers, Bankr.L. Article 9 9 Norton 2004) (a any (2000). reviewing may affirm on court It sense that the Adviser 1 makes record). basis scope supported fund should be within settlement (ii) Stone), (Bankr. Livestock Collateral Proceeds re B.R. W.D.Ky.1985)). The nature of Bank’s Alternatively, de- transaction Debtors was extensive monetary that a terminеd settlement complete dairy opera and related work, claim defective electrical which tion. “Proceeds” under such a scenario destroyed harmed the livestock collat- must in a apply broad sense in order to eral, “proceeds” constituted under Idaho compensate the secured creditor. 28-9-102(a)(64).14 Code Since security interest perfect- the cows was analogous Washington case from ed, too proceeds so was the interest in the (under 9) state, it was held former Article 28-9-315(a)(2), providing that “[a] of a “proceeds” dairy logically herd security interest identifi- attaches to encompassed government payments pursu- proceeds able of collateral”. dairy ant to a federal program termination required slaughter export however, maintains, Ferndale the cattle. The state Supreme Court the Settlement Proceeds emanated from opined: coverage wrong the insurance of Geitzen’s acts,
ful not damage to cows. This granting security of a argument unpersuasive. is herd, dairy together product with the thereof, proceeds obviously contem-
It is clear that rights arising from
security in
plates
more than the individ-
damage
loss or
are “pro
collateral
ual cows. The herd
represents
con-
ceeds,” whether or not insurance covers
tinuing
production
source of
resulting in
the loss:
repetitive
security
income flow. This
(D) to the extent of the
value
collater-
quite
different
security
from a
in a
al,
loss,
claims arising out
*16
sold,
single crop to be harvested
or
and
nonconformity, or
with
interference
cattle which are
only
slaugh-
raised
for
of,
the use
infringement
defects or
ter for meat.
It was
type
this
of collat-
rights in,
to,
of
or damage
the col-
eral which debtors have destroyed and
lateral;
removed from
security
Bank’s
interest
28-9-102(a)(64)(D).
§
Code
Idaho
More-
over, in this
provides
case the insurance
Bachmann,
Rainier Nat’l Bank v.
only
funds,
the source of the settlement
298, 302,
Wash.2d
757 P.2d
981-82
and,
itself,
in
replacement
is not
collateral.
(1988).
Ninth
The
Circuit
legisla-
has held that
intent
give
tive
was to
“proceeds”
Also,
“the
was
in
Stone
cited
the
approvingly
”
possible
‘broadest
definition.’
analysis
Ninth Circuit’s
of the current
Pac./West
Group,
Communications
at
301 F.3d
1153 UCC in
Communications
Pac./West
Nolin
(quoting
Prod. Credit Ass’n v. Stone Group,
(a) Cows for Cash: Failure to Provide Approval Agreement III. of Settlement Bank with the “Indubitable
(BAP 03-1215) Equivalent” of its Claim No. Debtors contend that the bankruptcy attempted Debtors to cram down approving court’s order the the settlement Second Plan over Bank’s agreement objection. between Debtors and Geitzen Before the cramdown, They may should be reversed. maintain that a consider all of applica the copy of agreement 1129(a), § the was not ble requirements mailed to of excluding and, 1129(a)(8), § all parties creditors and interested must met. See 11 be U.S.C. result, 1129(b)(1). § the court’s order was inconsistent by of thе most indu- unless a substitute challenge the equivalence. bitable plan purchase finding that their court’s the Pro- cows with Settlement replacement Id. at 942. equitable” “fair and
ceeds
not
was
words,
Hand’s
Paraphrasing Judge
1129(b)(2)(A).
provides three
§
The Code
Nat’l Bank v.
in Crocker
Ninth Circuit
of an
treatment
of nonconsensual
examples
(In
Indus., Inc.
re Am. Mar
Am. Mariner
The
treat-
Inc.),
claim.
third
Indus.,
secured
allowed
734 F.2d
Cir.
iner
1984),16
provides:
facts.15 It
to our
stated:
applies
ment
that
Judge
concluded
credi-
Hand
(iii)
holders
realization
such
for the
money or at
right
get
tor’s
“to
his
least
equivalent of such
of
indubitable
denied under a
property” may
be
claims.
if the
only
debtor
reorganization
1129(b)(2)(A)(iii).
11 U.S.C.
of
most indu-
provides “a substitute
bitable
Such
substitute
equivalence.”
not define “indubitable
does
The Code
clearly
compensate
pres-
must both
phrase
The
was coined
equivalence.”
safety
of the
ent
and insure
value
Judge
Metropolitan
Learned Hand
Life
principal.
(In
Holding
re
Corp.
Ins. Co. v. Murel
Id. at 433.
(2d
Corp.),
113 Acequia, bankruptcy Inc. v. The court stated of success.” probability (In Inc.), a “close feasibility plan the of Debtors’ was re F.2d Acequia, 787 Clinton (Feb. 11, 2003), Cir.1986). call.” Dec. at 54. Mem. proposed 1364 It was the fol appropriately troubled visionary not be must a scheme plan (1) a lowing undisputed facts: relocation to can more than the debtor deliver. promises completely different climate and the effect Haw., Shakey’s, Inc. v. Inc. Pizza See of (2) business; dairy on the a new business Inc.), Haw., 761 re Pizza F.2d of environment, new employees new and (9th Cir.1985). 1382
market, accompanying personal and (fluid (3) are changes; product Several factors relevant a different milk “(1) plan including: product is feasible form Florida versus for cheese whether (2) (4) structure; Idaho); startup of with no capital the the business adequacy (5) (3) business; reserves; power capital high substantial level earning of the (6) (4) service; conditions; seven-year repay and ability of of debt economic (5) pay ment for Bank with a balloon management; probability of ment, the source of which was nebulous.17 management; continuation the same (6) any related matter which other testimony presented detailed Debtors prospects sufficiently of a determines they and documentation which showed operation performance successful to enable expenses would be able to meet their Sage provisions plan.” of the re However, beginning. in the debt service wood, P’ship, B.R. Manor Assocs. Ltd. many there uncertainties evident were (Bankr.D.Nev.1998). 756, 763 witness, testimony of from the Debtors’ for Although price Robert Matlick. the bankruptcy Debtors contend that South, higher milk in the Mr. might be by holding as a of law court erred matter production Matlick that milk testified startup not be dairy that a could feasible. humidity. partly lower due to heat and They dispute findings do not the court’s Debtors, who He testified that also facts, rather but the determination take over planned operаtion plan was feasible. Georgia, they existing dairy projected greater production, would have milk First, record and the income, cows by milking the therefore any decisions reflect court’s do not error Yet, day three instead of two. times law; applied the cor in the experience dairying had no determining feasibility rect standard for South, any realistic to conclude nor basis 1129(11). Whether determi aggressive milking that a schedule more question fact. nation was erroneous is milk more would either more produce at 1358. Under the Acequia, F.2d income. standard, give we clearly erroneous must projections for fu- optimistic Debtors’ regard to the court’s eval due dairy might have testimony ture in their new infer success uation witness possible, neither reli- See Air been but ences drawn the court. Beech States, convincing. per- was no v. able nor There Corp. United F.3d craft (9th Cir.1995). could main- suasive that Debtors evidence (March 2003), attorney Proceedings at 17. Such Additionally, had testi- consequences liability tax available fied that there would be reduce new tax would cash, estate, due to the settlement cash resources. $281,000. apрroximate Tr. amount of *21 114 seven-year payment plan
tain the
or earn
or a modification
plan.”
of a
(b)(5).
1112(b)(2),
enough
§
excess income to make the balloon U.S.C.
These enu
payment.
no
There was also
evidence to merated causes are nonexclusive. St.
they
period
show that
could weather a
of Paul
Storage
P’ship
Ltd.
v. Port Au
Self
any large-scale
thority
underachievement or
prob-
re St. Paul
Storage Ltd.
Self
dairy,
employees, P’ship),
lems with the new
new
B.R.
BAP
Cir.
1995).
or new cows.
plan may
While the
not have been whol-
proposed
Debtors’
Third Amend
ly speculative, that
it was uncertain was
ed Plan attempted to address the bank
beyond
Therefore,
argument.
our review ruptcy court’s concerns.
example,
For
of the record does not leave us with a Debtors
monthly
reduced their
debt ser
“definite and firm conviction that a mis-
$2,600,
vice
about
and obtained a loan
take has been committed.” United States
$60,000
startup
However,
costs.
Co.,
Gypsum
We conclude that court’s sidering proposed monthly total ex findings feasibility as to clearly were not penses addition, and debt service. In erroneous. proposed give Debtors Bank a total of $210,000 ($160,000 $50,000 plus cash from 1112(b) § V. Dismissal — loan). equity $210,000 A equity cash (BAP 03-1215) No. inadequate protection, cushion was howev er, considering that Bank assumed all of Finally, the bankruptcy gave court losing risks of its million $1.4 Debtors the opportunity to file a Third security. Plan, they indeed filed (apparently along with new documentary Debtors proposed also to enhance evidence). 506(c) § Debtors also filed a position Bank’s collateral by granting surcharge collateral, motion to as well Bank a lien the new cows and “all as equitable a motion for removal of replacements” livestock well as milk Bank’s lien after-acquired on the property proceeds. However, and milk Bank con- 552(b). § Although the bankruptcy object tinued to to its treatment under the court did not hear the merits of those Third Amended Plan plan’s and to the (and they motions are not included feasibility. record), excerpts nevertheless, Finally, Debtors have not challenged the bankruptcy court considered impact bankruptcy court’s observations that and that proposed Third Amended 506(c) 552(b) § estimated surcharge and Plan on ability reorganize. Debtors’ deductions from Bank’s claim likely would Dеbtors contend that the court abused far projections. short of Debtors’ its discretion dismissing the case with- summary, In proposals new holding out complete another confirmation were nothing more than “beating a dead hearing on their Third Amended Plan. (or cow), horse” here a dead and did not 1112(b),
Pursuant the bank remove the court’s substantial doubt as to ruptcy may dismiss a case for whether Bank was receiving its indubitable “cause” including “inability to equivalent, effectuate a nor did improve signifi- plan,” or “denial of confirmation every cantly the likelihood of success of the new proposed plan and denial request of a plan when it was reviewed in context. made for additional filing half, time for year another and a proposed had *22 panel’s real in- plans, but were unable to dismissals not reflect separate four unique tentions. The circumstances ex- achieve a consensual crammed- either because the respect ception prem- to their does not work down confirmation with ise, interlocutory, the order was largest Proceeding See Tr. creditor. (March Rather 2003), panel not a determination. it was 11:7-11. at Since appellants in essence a were query, disputed, facts were premise invited to show incorrect. deny- not abuse its discretion did prior respond, ap- When did not at ing another chance confir- peals were dismissed. properly dismissing finally mation and the case. appeals I would dismiss the Order CONCLUSION untimely. Re Secured Status as security interest extended in the Pro- Debtors’ interest Settlement
ceeds, is and the Order Re Secured Status as to Bank. Because no col-
AFFIRMED satisfy any part
lateral of Fern- exists interest, junior appeal
dale’s secured its is
hereby as moot. DISMISSED the order appeal approving
the settlement for cash also DIS- moot,
MISSED as as circumstances have changed radically prevent us from In so re Sandra and Samuel SAWYER, being grant any relief. Debtors. meaningful able to Debtors’ Second Plan satisfied Bankruptcy No. 04-01279-PHX-SSC. equitable” neither the “fair and rule Adversary No. 04-00838. 1129(b)(2)(A)(iii) feasibility nor the re- 1129(a)(ll), quirement court’s Court, Bankruptcy United States denial of confirmation is AF- therefore D. Arizona.
FIRMED. March plan, the absence of confirmable dismissing court’s order chapter 11 also AFFIRMED. case is
BRANDT, Judge, Bankruptcy
dissenting part. join foregoing I the balance of the
While I
opinion, respectfully part I dissent from discussion, jurisdic- respecting our prior
tion. I not see mistake in the do although the clerk’s notices
dismissals: premise on the incorrect based interlocutory, Debtors and order was asleep at the switch.
Ferndale were misap- was neither an inadvertent
There facts, nor initial
prehension of the did the