Idaho, Dept. of Lands v. Arnold (In re Arnold)

This case concerns a bankruptcy dispute in which the creditor asked the district court to lift an automatic stay in order that it may execute its security interest. The district court granted this request. We now reverse.

FACTS

In November 1982, the Idaho Department of Lands sold three parcels of public property to several buyers. The buyers paid ten percent down and executed land contracts for payment of the balance. Idaho retained title.

These buyers later assigned their interests in the parcels to the debtors in possession, the Arnolds. Soon after acquiring the land, the Arnolds encountered financial difficulties and, like the original buyers, failed to make payments on the purchase contracts. In January 1984, the Arnolds filed a Chapter 11 petition in bankruptcy.

They have continued to farm the parcels while negotiating with their creditors a reorganization of the bankruptcy estate’s assets. They proposed to their creditors a reorganization plan that included payment of $280,000 for the land. Idaho dissented, claiming that, because these parcels were public school endowment lands, state and federal law required that it receive the contract purchase price of $310,000. Idaho…