American Mariner Industries, Inc., In re

Decision Date04 June 1984
Docket NumberNo. 83-5806,83-5806
Citation10 C.B.C.2d 910,734 F.2d 426,12 B.C.D. 227
Parties10 Collier Bankr.Cas.2d 910, 12 Bankr.Ct.Dec. 227, Bankr. L. Rep. P 69,886 In re AMERICAN MARINER INDUSTRIES, INC., Debtor. CROCKER NATIONAL BANK, Plaintiff-Appellant, v. AMERICAN MARINER INDUSTRIES, INC., Debtor-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

J. Ronald Trost, Richard F. Broude, Sidley & Austin, Los Angeles, Cal., for plaintiff-appellant.

Thomas H. Jackson, Stanford, Cal., amicus curiae.

James E. Carter, Santa Ana, Cal., for debtor-appellee.

Appeal from Judgment of the United States Bankruptcy Appellate Panel of the Ninth Circuit.

Before GOODWIN and TANG, Circuit Judges, and JAMESON, * District Judge.

JAMESON, Senior District Judge:

Crocker National Bank, a secured creditor, has appealed from a judgment of the bankruptcy court, 10 B.R. 711 (Bkrtcy.C.D.Cal.1981), affirmed by the bankruptcy appellate panel, 27 B.R. 1004 (Bkrtcy. 9th Cir.1983) denying Crocker relief from the automatic stay imposed under 11 U.S.C. Sec. 362(a). We reverse and remand to the bankruptcy court for further findings.

I. Issue on Appeal

The sole issue is whether an undersecured creditor who is stayed by a bankruptcy petition from repossessing its collateral is entitled, under the concept of "adequate protection", 11 U.S.C. Sec. 361, 362, to compensation for the delay in enforcing its rights against the collateral.

II. Facts and Proceedings Below

The facts are not disputed. In 1978 Crocker made a loan to American Mariner secured by a perfected security interest in "basically all of the American Mariner's assets." On December 12, 1980, American Mariner filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. 11 U.S.C. Secs. 1101-46. At that time American Mariner's debt to Crocker, including accrued interest, was approximately $370,000, secured by collateral worth $110,000. Crocker filed a complaint for relief from or modification of the automatic stay under 11 U.S.C. Sec. 362(d)(1) on February 23, 1981. In its complaint, Crocker claimed inter alia that it was entitled to adequate protection under 11 U.S.C. Secs. 361 and 362(d)(1) in the form of monthly payments equal to Crocker's prospective return from reinvestment of the liquidation value of the collateral. Crocker argues that state law grants the secured creditor the right, on the debtor's default, to take possession of the collateral, sell it, and loan the money out at interest. To the extent that the automatic stay delays or prohibits the creditor from exercising these rights, Crocker contends, the creditor is denied the present value of its interest in the collateral. Since section 361(3) requires such "adequate protection" as will provide the secured creditor with the "indubitable equivalent" of its interest in the collateral, Crocker concludes that it was entitled to monthly payment as compensation for what it might have earned on the reinvestment of its liquidated interest in the collateral.

The bankruptcy court rejected Crocker's contention that the value of its interest in the collateral was not adequately protected. For the purposes of section 362(d)(2), the court found: (1) the liquidation value of the collateral was $110,000; (2) the collateral was not depreciating 1; and (3) the collateral was "necessary for an effective reorganization." 10 B.R. at 712. In this appeal, Crocker does not contest the bankruptcy court's appraisal of the collateral nor its finding that the collateral is necessary for effective reorganization. In any case these findings are not clearly erroneous, and must therefore be affirmed. Fed.R.Civ.P. 52(a).

Crocker appealed the adequate protection determination to the Bankruptcy Appellate Panel of the Ninth Circuit. The appellate panel majority 2 similarly rejected Crocker's contentions. The majority recognized, however, that "[i]t is difficult to determine what Congress intended should constitute adequate protection in the context of the stay.... Apart from inferences to be sought from the use of the indubitable equivalent language, there is no expression of an intent to compensate the secured party for the delay...." 27 Bankr. at 1009. While Crocker argued that the focus of protection was the value of its interest in the collateral, the majority concluded that "[a] construction more consistent with the language and policy to be served would recognize that it is the value of the collateral which is the focus of protection." 27 B.R. at 1010. Since the trial court had protected the collateral against depreciation, the majority affirmed the trial court's judgment as "consistent with the policy and language of Sec. 361(1)."

III. Jurisdiction

In reviewing appeals from the bankruptcy courts, we have recognized "[o]ur obligation to determine sua sponte the finality of the order on appeal." In re Exennium, Inc., 715 F.2d 1401, 1402 (9th Cir.1983). In bankruptcy cases the jurisdiction of this court is limited to "all final decisions" of the bankruptcy appellate panels and those exceptional cases set out in 28 U.S.C. Sec. 1293(b). 28 U.S.C. Sec. 1293; In re Mason, 709 F.2d 1313, 1315 (9th Cir.1983). "A 'final decision' generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945). While the courts do not treat the finality requirement lightly, they recognize some special exceptions to the requirement, generally so as to avoid causing serious harm by delaying the appeal. See, e.g., Exennium, 715 F.2d at 1402 (citing Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964) ("danger of denying justice by delay" outweighed "inconvenience and costs of piecemeal reviews.")); Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) (collateral order doctrine); Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848) (Forgay-Conrad rule, order treated as final if it directs delivery of property and irreparable harm would result if appeal delayed).

A threshold issue presented by this case, apparently for the first time in this circuit, 3 is whether a decision of the appellate panel affirming an order that denies relief from the automatic stay is final for the purpose of this court's jurisdiction. We think it is. In reaching this conclusion, we adopt the reasoning of the court in In re Regency Woods Apartments, LTD, 686 F.2d 899, 902 (11th Cir.1982). In Regency, the court initially observed that the collateral order doctrine and Forgay-Conrad rule appeared to apply to a district court order granting relief from the automatic stay. More important, the court also noted the provisions of the Bankruptcy Code for expedited and ex parte proceedings on complaints for relief from the automatic stay. 11 U.S.C. Sec. 362(e), (f); see also H.Rep. No. 595, 95th Cong. 2d Sess. 344, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5963, 300-301. From these provisions the court concluded, and we agree, that Congress intended the courts to conclusively and expeditiously adjudicate, apart from the bankruptcy proceedings as a whole, complaints for relief from the automatic stay. Immediate appeal from decisions of the bankruptcy appellate panel is plainly necessary to fulfill such congressional intent. We hold, therefore, that decisions of the bankruptcy courts granting or denying relief from the automatic stay under section 362(d) are final decisions reviewable by this court.

IV. Standard of Review

This court reviews the bankruptcy court's findings of fact by the clearly erroneous standard of Fed.R.Civ.P. 52(a). In re Comer, 723 F.2d 737, 739 (9th Cir.1984). But the bankruptcy court's conclusions of law are subject to de novo review. Id.

V. Statutory Language and Legislative History
A. Section 361 Protects the Value of the Creditor's Interest in the Collateral

Crocker's contention that the concept of adequate protection entitles it to interest on the present value of its collateral is principally founded on two sections of the Bankruptcy Code, 11 U.S.C. Secs. 361, 362(d). Section 362(d) authorizes "a party in interest" to request relief from the automatic stay "for cause, including lack of adequate protection of an interest in property." Section 361 merely illustrates several means of providing adequate protection, and the methods illustrated are not exclusive. See generally 2 Collier on Bankruptcy p 361.01 (L. King 15th ed. 1983). Neither section, apparently by design, defines "adequate protection" or prescribes precisely what is to be protected. See H.R.Rep. No. 595, 95th Cong. 2d Sess. 339, reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6295. Our inquiry begins with these threshold issues and requires us to construe sections 361 and 362.

In construing the effect of a statute, we begin by examining the statutory language. The Supreme Court recently reviewed the fundamental principles of statutory construction that are relevant here:

We agree with the Secretary that "[t]he starting point in every case involving construction of a statute is the language itself." But ascertainment of the meaning apparent on the fact of a single statute need not end the inquiry. This is because the plain-meaning rule is "rather an axiom of experience than a rule of law, and does not preclude consideration of persuasive evidence if it exists." The circumstances of the enactment of particular legislation may persuade a court that Congress did not intend words of common meaning to have their literal effect.

Watt v. Alaska, 451 U.S. 259, 265-66, 101 S.Ct. 1673, 1677-78, 68 L.Ed.2d 80 (1981) (citations omitted).

The central issue in this case is not how to provide adequate protection but what is to be protected. The bankruptcy court and bankruptcy panel concluded "that it is the value of the collateral which is the focus of protection." 27...

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