In re Arnold & Baker Farms
United States Appeals Court for the Ninth Circuit
85 F.3d 1415 (1996)
Arnold & Baker Farms (debtor) owed the Farmers Home Administration (Farmers) (plaintiff) roughly $3.8 million secured by a first deed of trust on 1,320 acres, and proposed a Chapter 11 reorganization plan transferring 515 acres (which the debtor valued at $7,300/acre, but Farmers valued at only $1,381/acre) to satisfy Farmers' secured claim; the bankruptcy court approved the plan with a 10% acreage increase for Farmers, but the Bankruptcy Appellate Panel reversed that confirmation, and the debtor appealed.
Whether a debtor's transfer of part of the encumbered property to a secured creditor under the Chapter 11 cramdown provision constitutes the required "indubitable equivalent" of the secured claim when the property's value remains disputed and subject to future decline.