United States Appeals Court for the Ninth Circuit
85 F.3d 1415 (1996)
Arnold & Baker Farms (A&B) (defendant) purchased 1,440 acres from Philip and Dorothy Ladra in the 1970s and provided them a first deed of trust on the property. Between 1978 and 1983, the Farmers Home Administration (Farmers) (plaintiff) provided financing to A&B for crops and also loaned money to A&B so that it could make installment payments to the Ladras. In return, Farmers was provided a second deed of trust on the property. A&B began experiencing financial difficulties in the 1970s. The Ladras began foreclosure proceedings in the mid-1980s. In April 1986, A&B filed a Chapter 11 petition under the Bankruptcy Code. In May 1986, the bankruptcy court approved a sale of 840 acres to two entities, Cardon Oil Company (Cardon) and the Corks. On account of the sale, A&B was then able to satisfy the Ladras’s secured claim. Cardon and the Corks both defaulted on their notes to A&B. In settlement, they transferred back most of the land that A&B had sold to them. At this point, Farmers now held a $3,837,618 note secured by a first deed of trust in 1,320 acres of A&B property. In 1991, A&B filed a reorganization plan in which it proposed to transfer 515 acres to Farmers in satisfaction of Farmers’ secured claim. A&B estimated the value of the land to be $7,300 per acre, or $3,759,500 for the 515 acres. Farmers objected, claiming that the land was worth only $1,381 per acre. In 1993, the court approved the plan with the modification that Farmers receive 10 percent more acreage. Farmers appealed to the Bankruptcy Appellate Panel (BAP), which reversed the plan confirmation. A&B appealed that decision.
Rule of Law
Holding and Reasoning (Norris, J.)
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