Fowler, In re, Nos. 89-35118

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore WRIGHT, REINHARDT and O'SCANNLAIN; EUGENE A. WRIGHT
Citation903 F.2d 694
Parties, 22 Collier Bankr.Cas.2d 1659, Bankr. L. Rep. P 73,390 In re John FOWLER, d/b/a Wyola Creek Ranch, Debtor. FARM CREDIT BANK OF SPOKANE; (formerly Federal Land Bank of Spokane); Interstate Production Credit Association, Appellants/Cross-Appellees, v. John FOWLER, d/b/a Wyola Creek Ranch, Appellee/Cross-Appellant.
Docket NumberNos. 89-35118,89-35133
Decision Date16 May 1990

Page 694

903 F.2d 694
58 USLW 2734, 22 Collier Bankr.Cas.2d 1659,
Bankr. L. Rep. P 73,390
In re John FOWLER, d/b/a Wyola Creek Ranch, Debtor.
FARM CREDIT BANK OF SPOKANE; (formerly Federal Land Bank of
Spokane); Interstate Production Credit
Association, Appellants/Cross-Appellees,
v.
John FOWLER, d/b/a Wyola Creek Ranch, Appellee/Cross-Appellant.
Nos. 89-35118, 89-35133.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted March 6, 1990.
Decided May 16, 1990.

Page 695

Gregory G. Murphy, Moulton, Bellingham, Longo & Mather, P.C., Billings, Mont., for appellant/cross-appellee Farm Credit Bank of Spokane.

Charles W. Hingle, Dorsey & Whitney, Billings, Mont., for appellant/cross-appellee Interstate Production Credit Ass'n.

Appeal from the United States District Court for the District of Montana.

Before WRIGHT, REINHARDT and O'SCANNLAIN, Circuit Judges.

EUGENE A. WRIGHT, Circuit Judge:

The question is whether the bankruptcy court applied the correct cramdown rate in confirming a reorganization plan under Chapter 12 of the Bankruptcy Code.

BACKGROUND

John Fowler operates a ranch in Big Horn County, Montana. He petitioned for relief under Chapter 12 of the Bankruptcy Code, 11 U.S.C. Sec. 1201-31. At the time of filing, he owed the Farm Credit Bank (FCB) approximately $159,000 on two 35-year variable rate promissory notes, and the Interstate Production Credit Association (IPCA) approximately $22,000 on a one-year note. FCB's debt was secured by real property which the bankruptcy court valued at $125,595. IPCA had a security interest in Fowler's livestock, farm equipment and machinery, and was fully secured.

After filing his bankruptcy petition, Fowler proposed a plan of reorganization. After hearing testimony regarding the appropriate cramdown rate of FCB's and IPCA's debt, and the plan's feasibility, the bankruptcy court confirmed Fowler's plan. See In re Fowler, 83 B.R. 39, 44 (Bankr.D.Mont.1987). The amount owed to FCB, to the extent of the value of the security, was to be repaid at 9.5% over 25 years. Interest was to be deferred during the first three years, resulting in negative amortization. The amount owed to IPCA was to be repaid at 9.5% over seven years. The court based the 9.5% interest rate on the prime rate at plan confirmation, 8.75%, plus a .75% risk factor.

FCB and IPCA appealed to the Bankruptcy Appellate Panel (BAP), but Fowler objected, and the appeal was heard in federal district court. The district court reversed the bankruptcy court's interest rate determination in an unpublished order, and set the rate at 10.5%. It then remanded to the bankruptcy court to determine if the plan was feasible applying the "correct" interest rate. 1

FCB and IPCA appeal the district court's decision because they believe it erred in setting the rate at 10.5%. Fowler cross-appeals, arguing that the district court should have affirmed the bankruptcy court's interest rate determination of 9.5%.

DISCUSSION

I. JURISDICTION

We first consider if this court has jurisdiction over the appeal. 2 We have jurisdiction over appeals from final orders of the district court reviewing final bankruptcy court orders. 28 U.S.C. Sec. 158(d); In re Crevier, 820 F.2d 1553, 1555 (9th Cir.1987).

The bankruptcy court's order confirming Fowler's Chapter 12 reorganization plan was final, so the district court had jurisdiction. See In re Pizza of Hawaii, Inc., 761 F.2d 1374, 1378 (9th Cir.1985) (an order confirming a Chapter 11 plan is final). We must determine if the district court's order reversing the bankruptcy court and remanding for further proceedings is a final appealable order.

This case is similar to Pizza of Hawaii, where we asserted jurisdiction over an appeal

Page 696

from a district court's order reversing the confirmation of a Chapter 11 plan and remanding to the bankruptcy court to consider, among other things, the plan's feasibility. 761 F.2d at 1376-78. As in Pizza of Hawaii, we have jurisdiction over this appeal. 3 See also In re Stanton, 766 F.2d 1283, 1288 n. 8 (9th Cir.1985) (indicating that we should assert jurisdiction if the case presents a central legal issue, the resolution of which would materially aid the disposition of the case on remand); United States v. Arnold, 878 F.2d 925, 926 n. 2 (6th Cir.1989) (asserting jurisdiction in a Chapter 12 interest rate determination appeal where "there are no factual determinations relevant to the issues to be made by the bankruptcy court upon the district court's remand").

II. DETERMINATION OF CRAMDOWN INTEREST RATE

In this case, we interpret the cramdown provision under Chapter 12 of the Bankruptcy Code, which provides in relevant part:

(a) except as provided in subsection (b), the court shall confirm a plan if--

* * * * * *

(5) with respect to each allowed secured claim provided for by the plan--

* * * * * *

(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and

(ii) the value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim.

11 U.S.C. Sec. 1225(a) (emphasis added).

A. Standard of Review

We review the district court's decision de novo. In re Camino Real Landscape Maintenance Contractors, Inc., 818 F.2d 1503, 1505 (9th Cir.1987). We review the bankruptcy court's findings of fact for clear error, and its conclusions of law de novo. Id.

The BAP has summarized the standard for reviewing a bankruptcy court's Chapter 12 cramdown interest rate determination:

The determination of what factors to apply in a valuation calculation pursuant to 11 U.S.C. Sec. 1225 is an interpretation of a statute which is reviewed de novo. However, the application of these factors to a certain case is a question of fact which is reviewed under a clearly erroneous standard.

In re Patterson, 86 B.R. 226, 227 (BAP 9th Cir.1988) (citations omitted). A bankruptcy court should be accorded substantial deference in making cramdown interest rate determinations. See Camino Real, 818 F.2d at 1508.

B. Determining the Cramdown Interest Rate

1. The "Market" Approach

We first must determine if the bankruptcy court's use of a "market" approach in determining the cramdown interest rate was correct. A standard bankruptcy treatise explains the process used by the bankruptcy court in applying 11 U.S.C. Sec. 1225(a)(5)(B), the Chapter 12 cramdown provision:

When the debtor's plan proposes to pay a secured claim in deferred cash installments, the court must find that the present value of the proposed payments is not less than the allowed amount of the secured claim. In order to make this finding, it will be necessary for the court to apply a discount factor to the proposed stream of payments to determine the present value of those payments. This is typically accomplished by ascribing an interest rate to the allowed amount of the claim and by requiring

Page 697

payment of the amount of the claim along with interest at the specified rate.

5 Collier on Bankruptcy p 1225.03[c], at 1225-21 (15th ed.1989).

In Camino Real, we considered the appropriate interest rate on deferred federal tax payments under 11 U.S.C. Sec. 1129(a)(9)(C) in a Chapter 11 reorganization. 818 F.2d at 1504. We adopted the case-by-case "market"...

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88 practice notes
  • Gugliuzza v. Fed. Trade Comm'n (In re Gugliuzza), No. 15-55510
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • March 24, 2017
    ...Credit Mgmt. Corp. (In re Saxman) , 325 F.3d 1168, 1172 (9th Cir. 2003) ); see also Farm Credit Bank of Spokane v. Fowler (In re Fowler) , 903 F.2d 694, 695–96 (9th Cir. 1990) (holding that where the district court remanded to the bankruptcy court only for the ministerial function of applyi......
  • Bonner Mall Partnership, In re, No. 92-36754
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • August 4, 1993
    ...court in reaching its disposition on remand. 766 F.2d at 1288 n. 8; see also Farm Credit Bank of Spokane v. Fowler (In re Fowler), 903 F.2d 694, 696 (9th Cir.1990) (citing second Stanton criterion with approval). We believe that the Stanton principle is sound and we adopt it here. The prese......
  • Evabank v. Baxter, Civ.A. No. 02-AR-0083-NE.
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • May 30, 2002
    ...Inns, Inc. [11th Cir.] provide further support for the proposition that the market rate is the proper rate of interest"); In re Fowler, 903 F.2d 694, 697 (9th Cir.1990). See also, 5 Norton Bankruptcy Law and Practice 2d § 122:8 (2d ed.1997)("most consistent with the general theory of presen......
  • Vylene Enterprises, Inc., In re, No. 91-55087
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 29, 1992
    ...158(d), we have "jurisdiction over appeals from final orders of the district court reviewing final bankruptcy court orders." In re Fowler, 903 F.2d 694, 695 (9th Cir.1990). Because the bankruptcy court cannot enter a final order in an otherwise related proceeding, § 1291 Page 892 would prov......
  • Request a trial to view additional results
88 cases
  • Gugliuzza v. Fed. Trade Comm'n (In re Gugliuzza), No. 15-55510
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • March 24, 2017
    ...Credit Mgmt. Corp. (In re Saxman) , 325 F.3d 1168, 1172 (9th Cir. 2003) ); see also Farm Credit Bank of Spokane v. Fowler (In re Fowler) , 903 F.2d 694, 695–96 (9th Cir. 1990) (holding that where the district court remanded to the bankruptcy court only for the ministerial function of applyi......
  • Bonner Mall Partnership, In re, No. 92-36754
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • August 4, 1993
    ...court in reaching its disposition on remand. 766 F.2d at 1288 n. 8; see also Farm Credit Bank of Spokane v. Fowler (In re Fowler), 903 F.2d 694, 696 (9th Cir.1990) (citing second Stanton criterion with approval). We believe that the Stanton principle is sound and we adopt it here. The prese......
  • Evabank v. Baxter, Civ.A. No. 02-AR-0083-NE.
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • May 30, 2002
    ...Inns, Inc. [11th Cir.] provide further support for the proposition that the market rate is the proper rate of interest"); In re Fowler, 903 F.2d 694, 697 (9th Cir.1990). See also, 5 Norton Bankruptcy Law and Practice 2d § 122:8 (2d ed.1997)("most consistent with the general theory of presen......
  • Vylene Enterprises, Inc., In re, No. 91-55087
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • June 29, 1992
    ...158(d), we have "jurisdiction over appeals from final orders of the district court reviewing final bankruptcy court orders." In re Fowler, 903 F.2d 694, 695 (9th Cir.1990). Because the bankruptcy court cannot enter a final order in an otherwise related proceeding, § 1291 Page 892 would prov......
  • Request a trial to view additional results

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