In re Penz, Bankruptcy No. 89-70451.
| Decision Date | 04 August 1989 |
| Docket Number | Bankruptcy No. 89-70451. |
| Citation | 102 BR 826 |
| Parties | In re Howard John PENZ, Deanne Penz, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of Oklahoma |
Robert Inglish, Okmulgee, Okl., for debtors.
Dominic Sokolosky, Tulsa, Okl., for Farm Credit Bank of Wichita, Kan.
(Determining Amount of Creditor's Secured Claim)
On July 27, 1989, a contested hearing was held to consider the Motion for Valuation of Security (Docket Entry # 18) filed by Farm Credit Bank of Wichita, Kansas (Bank) with the above Debtors' Response (Docket Entry # 24).
Appearances were made by D. Sokolosky for Bank and R. Inglish for Debtors.
After review of the Pre-Trial Memorandum, the evidence and the law of this core matter, the following Order shall constitute the ruling of this Court.
1. Bank's claim, filed July 11, 1989 in the above matter, is in the amount of $1,526,470.21 and is secured by a State Court Judgment foreclosing a first Real Estate Mortgage upon approximately 2,693 acres situated in Bryan County, Oklahoma, which is property of this estate.
2. Debtors have occupied the involved acreage at all times since granting the aforementioned Mortgage as a residence while conducting farm and ranching operations thereon. Debtors intend to continue their use of the acreage as in the past throughout the performance of their reorganization.
3. Debtors are unable to provide any books or records that would indicate the income and direct operating expense for the past two calendar years.
4. The property of this estate is divided into two tracts which are geographically separated by approximately twelve to fourteen miles of rural dirt road. Tract 1 is known as the Bokchito property and consists of almost 1,600 acres. Upon this tract is situated the eight year old residential dwelling of Debtors containing approximately 2,400 to 2,600 square feet. Debtors' past and present use of this tract is the grazing of 140 head of cows on approximately 1,300 acres of Bermuda and native pasture and "some" sprayed timber and the cultivating of approximately 45 acres for peanuts of the additional 300 acres available.
Tract 2 is known as the Blue River property and contains approximately 1,100 acres with its access limited to the use of rural dirt roads. This property contains no improvements and is not presently being used except a portion of the land capable of cultivation, approximately 120 acres, which is enrolled in a Department of Agriculture soil bank program. The remainder is native pasture and timber or lying dormant.
4. All appraisals offered by the parties are predicated upon the market value approach; that is, comparing the involved acreage in its present use, which is the highest and best use, to that of various sales in the area. Comparative sale prices are adjusted by each appraiser in accord with subjective factors such as accessibility, size, type of soil, utilities, etc. All appraisals appear to be founded upon similar factors used for this adjustment. The market value approach may consider the distressed farm and ranch industry which exists in Bryan County, Oklahoma, depending upon the individual appraiser.
5. Debtors' appraiser lumped the entire 2,693 acres together and adjusted his comparable sales to what are obviously samples of distressed sales concluding a value of $200 per acre; for a total of $536,160. This per acre valuation includes up-land, bottom-land, Bermuda pasture, nature pasture, good timber, poor timber, etc.
7. Bank presented appraisals with more detail and testimonial support which ranged from $746,500 to $766,000. However, their conclusions are founded upon comparable sales that raise the question of what importance is the factor of acreage size (all appraisers admitted it is a factor) to which Debtors' property is being compared. That is, all comparative sales are of acreages at least fifty percent smaller than either of Debtors' two tracts. The common denominator in Bank's appraisals between Debtors' property and the comparative sales appears to be use or the capable use of the tract. Also, and quite naturally, Bank's appraisals minimize the undisputed fact that the farm and ranch market in Bryan County, Oklahoma is distressed.
A. Since the sole issue in this matter is the determination of the amount of creditor's secured claim, the applicable Bankruptcy Code Section must be incorporated into the analysis. Title 11 of the United States Code, § 506, provides, in part, as follows:
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