## Facts

- Premier Golf Properties, LP operated two 18-hole golf courses and a driving range in California.
- Far East National Bank made a secured loan to Premier, taking liens on real and personal property, including accounts, contract rights, general intangibles, and “rents, issues, revenues and profits,” expressly listing green fees and driving-range fees.
- Premier filed for Chapter 11 and continued operating; postpetition income largely came from daily green fees and driving-range fees paid by customers.
- The Bank moved to prohibit Premier’s use of the postpetition fees as cash collateral, arguing the fees were either rents of real property or proceeds of prepetition collateral preserved by 11 U.S.C. § 552(b).
- The bankruptcy court denied the motion, concluding § 552(a) cut off the Bank’s lien as to the postpetition fees because they were neither rents nor proceeds.
- The Bank appealed to the Bankruptcy Appellate Panel for the Ninth Circuit.

## Issues

1. Whether postpetition green fees and driving-range fees are “rents” from real property so that a prepetition lien continues under 11 U.S.C. § 552(b).
2. Whether those fees are “proceeds” of prepetition collateral (including accounts, contract rights, or general intangibles) so that a prepetition lien continues under 11 U.S.C. § 552(b).

## Decision

- The BAP affirmed the order denying the Bank’s request to restrict use of the fees as cash collateral.
- Postpetition green fees and driving-range fees were not “rents” within the meaning of § 552(b).
- The fees were not “proceeds” of the Bank’s prepetition collateral; they were new revenue generated by postpetition operations and services.
- Because § 552(b) did not apply, § 552(a) severed the Bank’s lien from the postpetition fees, allowing Premier to use them in Chapter 11 without treating them as the Bank’s cash collateral.

## Legal Principles

- Under 11 U.S.C. § 552(a), prepetition security interests generally do not attach to property acquired after the petition date.
- Section 552(b) preserves a lien only for specified categories (including proceeds and, for real property, rents) when the postpetition value is sufficiently derived from prepetition collateral.
- “Rent” for § 552(b) purposes generally requires a landlord-tenant type payment for a possessory interest in real property; revenue primarily attributable to operator-provided services and amenities is not rent.
- “Proceeds” require a sufficient nexus to the disposition, exchange, or collection of prepetition collateral; revenue primarily attributable to postpetition labor, services, and new customer transactions is not proceeds of prepetition collateral.
- Collateral labels in loan documents cannot extend a secured creditor’s postpetition lien beyond the limits imposed by § 552.

## Conclusion

The BAP held that a secured lender’s prepetition lien did not continue in a golf course operator’s postpetition green fees and driving-range fees because the payments were service-based operating revenue, not real-property rents or proceeds of prepetition collateral under § 552(b), and were therefore free of the lien under § 552(a).


In re Premier Golf Props., LP, 477 B.R. 767 (B.A.P. 9th Cir. 2012)