Memorandum of Decision Re: Relief From Stay

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re CSD, INC.,                                       No. 1-87-00890      Debtor. _______________________/
Memorandum of Decision
     Creditors Richard and Marina Welches hold the only deed of trust to the debtor's real property used as a recreational campground. They seek modification of the automatic stay in order to allow them to foreclose.      The moving parties established to the satisfaction of the Court that they are owed approximately $1 million and that the property is worth only $700,000.00. Up until last week, this finding alone would have entitled the moving parties to either adequate protection payments or relief from the stay. However, the debtor argues that the very recent decision of the Supreme Court in United Savings Assn. of Texas v. Timbers of Inwood Forest Associates, Ltd. (1988) -- U.S. --, changes the law in this circuit. Upon reflection, this Court agrees.      While often unarticulated, the rationale behind giving undersecured creditors relief from the stay in real property situations has been that such creditors must be compensated for the loss of interest they could earn on their secured claim if they foreclosed, sold the property, and invested their recovery. In re American Mariner Industries, Inc. (9th Cir.1984) 734 F.2d 426.      However, Timbers has overruled American Mariner; an undersecured creditor is no longer entitled to relief merely because the property is worth less than he is owed. Now such a creditor must show that his secured interest is in jeopardy of declining (by, for example, accruing arrears on a senior lien, depreciation of the property, or failure of the debtor to pay postpetition property taxes) before he can obtain relief from the stay on grounds of lack of adequate protection.      As Timbers has closed off one avenue of relief for undersecured creditors, it has highlighted and clarified another. It explains that undersecured creditors are entitled to relief if the debtor (upon whom the burden of proof rests as to all issues except equity) cannot show that a reasonable possibility exists for a successful reorganization within a reasonable time. Timbers clearly disapproves of cases such as In re Sunstone Ridge Associates (DC D.Utah 1985) 51 B.R. 560, which have held that the debtor need not show that a plan is feasible or imminent, but only that a plan is impossible without the property.      In this case, the debtor presented only an expert's testimony that a reorganization is theoretically possible if the campground were properly managed. No testimony was presented that there is proper management, nor that any feasible reorganization plan is imminent. The debtor having failed to meet its burden of proof on this issue, and more than eight months having elapsed since the commencement of the case without a plan even being proposed, the moving creditors are entitled to have their motion granted.      Pursuant to Bankruptcy Rule 9021, counsel for the moving party shall submit a form of order consistent with this decision.
Dated: January 31, 1988                                                                              _________________________                                                                                                                      ALAN JAROSLOVSKY                                                                                                                      U.S. BANKRUPTCY