## Facts

- Panther Mountain Land Development, LLC, a real-estate developer, owned and was developing two tracts near Little Rock, Arkansas: Sunset Lake Estates and Panther Mountain Estates.
- National Bank of Arkansas held two secured notes, each backed by deeds of trust on the respective properties, with balances of roughly $1.2 million (Sunset Lake) and $690,000 (Panther Mountain) as of the chapter 11 filing.
- The debtor filed a voluntary chapter 11 petition on September 20, 2009.
- National Bank filed an initial motion for relief from the automatic stay one day after the petition; after evidentiary hearings, the court denied that motion by order entered December 8, 2009.
- The debtor filed a small-business chapter 11 plan on December 16, 2009, proposing continued development and lot sales to service the secured debt.
- On April 26, 2010, National Bank filed a second motion for stay relief as to both properties and a separate motion asking the court to set collateral values for purposes of its secured claims.
- The court conducted multi-day evidentiary hearings in August 2010, receiving competing appraisals and testimony regarding market conditions, absorption rates, pricing, and the debtor’s asserted buyer interest and prospective transactions.

## Issues

1. Whether National Bank established “cause,” including lack of adequate protection, to obtain relief from the automatic stay under 11 U.S.C. § 362(d)(1).
2. Whether National Bank proved the debtor had no equity in the properties and, if so, whether the properties were necessary to an effective reorganization under 11 U.S.C. § 362(d)(2).
3. Whether the court should set specific collateral values at that stage to determine the amount of National Bank’s allowed secured claims.

## Decision

- The court denied National Bank’s second motion for relief from the automatic stay.
- The court found National Bank did not carry its burden to show lack of adequate protection or other cause under § 362(d)(1).
- The court denied stay relief under § 362(d)(2), concluding National Bank did not prove lack of equity and that the properties were necessary to an effective reorganization.
- The court denied the motion to set collateral values, declining to fix binding values on the contested record and at that stage of the case.

## Legal Principles

- Under § 362(d)(1), the movant must show “cause,” including a lack of adequate protection, based on the evidentiary record.
- Adequate protection may be shown through an equity cushion; whether an equity cushion exists depends on credible, case-specific valuation evidence.
- Under § 362(d)(2), the creditor bears the burden to prove lack of equity; if met, the debtor must show the property is necessary to an effective reorganization by demonstrating a reasonable possibility of a successful reorganization within a reasonable time.
- Courts may reject appraisal-driven valuations where assumptions (e.g., absorption rates, discount rates, pricing) are materially disputed by credible testimony and evidence of likely transactions.
- A motion to value collateral may be denied where the evidence is sharply conflicting and a fixed valuation is not necessary at that point for case administration (including where valuation can be addressed in confirmation or claim-allowance disputes).

## Conclusion

The bankruptcy court refused to lift the automatic stay and declined to set collateral values because the secured lender did not prove its interest lacked adequate protection or that the debtor lacked equity, and the debtor showed the properties were central to a feasible reorganization effort on a reasonable timeline.


In re Panther Mountain Land Dev., L.L.C., 438 B.R. 169 (Bankr. E.D. Ark. 2010)