Throughout extended litigation regarding the validity of a junior mortgage (there are more than 300 docket entries in this Chapter 13 case), a motion to dismiss filed by the trustee remained pending due to the inability to confirm a plan. After more then five years when the court determined both liens were valid in In re Cooper, but demoted lien of First American, the Debtors proposed a plan surrendering the property to the secured creditors, with the collateral to satisfy those claims and the $61,554.84 paid by the debtors to date being held by the trustee.
First American, the holder of the second mortgage, opposed confirmation arguing that the plan was unfair and not proposed in good faith, since it had received no payments. At the same time, First American filed a separate motion seeking adequate protection payments, retroactive to the petition date, pursuant to 11 U.S.C. § 363(e).
Finding that adequate protection payments can be required “to the extent that the …use under this title … results in a decrease in the value of such entity’s interest in such property.” (Emphasis added.) Following BB&T v. Beaman (In re Constr. Supervision Servs. Inc.) , the bankruptcy court, however, held that it was not the “ use of the Property that resulted in the decrease in value of First American’s interest in the Property, but the reversal of lien position.” (Emphasis in the original.)
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