Arnold & Baker Farms v. United States ex rel. United States Farmers Home Administration

Debtor Arnold and Baker Farms petitioned for relief under Chapter 11 and filed a plan of reorganization which proposed to satisfy the claims of the creditors by transferring real property to them — colloquially known as a “dirt for debt” plan. When Arnold and Baker’s largest creditor, the Farmers Home Administration (FmHA), objected to the plan, Arnold and Baker invoked the “cram down” provision of the Bankruptcy Code, 11 U.S.C. § 1129 (b). The question presented is whether the plan’s proposal to transfer to FmHA a portion of the collateral securing FmHA’s claim will provide FmHA with the “indubitable equivalent” of its secured claim, as required by the “cram down” provision. See 11 U.S.C. § 1129 (b)(2)(A)(iii).

I

We adopt and quote verbatim the statement of facts set forth by the Bankruptcy Appellate Panel at United States v. Arnold and Baker Farms (In re Arnold and Baker Farms), 177 B.R. 648, 652-53 (9th Cir. BAP 1994):

(End of quote from 177 B.R. at 652-53 ).

FmHA appealed to the Bankruptcy Appellate Panel (“BAP”), which reversed the bankruptcy court’s order confirming the plan. In consolidated appeals, Arnold and Baker and Western Cotton appeal the BAP’s reversal.

II

We…