I. INTRODUCTION Before the court is an appeal from the decision of the Bankruptcy Court, In re Ralar Distributors, Inc., 166 B.R. 3 (Bankr.D.Mass. 1994). In that decision the bankruptcy judge held that BayBank, a secured creditor of debtor Ralar Distributors, Inc., was not entitled to a superpriority claim for lost interest, fees and costs on its secured claim, pursuant to 11 U.S.C. § 507(b).
It may seem odd that a § 503(b) administrative expense can be created by a debtor's postpetition use (against the secured creditor's wishes) of collateral which the debtor had also used before going bankrupt. It seems odd because when we think of § 503(b) administrative expense claims, we think of claims "allowed for those who agree to extend postpetition credit to the bankruptcy estate as a loan or in the furnishing of goods or services." In re Ralar Distrib., Inc., 166 B.R. 3, 8 (Bankr.D.Mass. 1994) ("Congress granted this priority to offer an inducement for the postpetition extension of credit, in order to promote reorganization."); see Brief of Appellants at 17 (the Dobbinses emphasize that FMCC provided no "new money" to the estate postpetition). It may seem like somewhat of a stretch, then, to say that a creditor whose collateral is being used by the debtor against the creditor's wishes somehow is extending postpetition credit to the estate. But, as we said in Grundy, "what constitute actual and necessary costs and expenses of preserving the estate might well be opened to judicial construction."
A decline in the amount of an equity cushion is not equivalent to denial of adequate protection of a secured claim. In re Ralar Distribs., Inc., 166 B.R. 3, 8 (Bankr. D. Mass. 1994). Statements made in Timbers of Inwood Forest do not suggest that an oversecured creditor is entitled to adequate protection of the entire equity cushion. In re Senior Care Props., Inc., 137 B.R. 527, 529 (Bankr. N.D. Fla. 1992). A secured creditor's rights are confined to those specified in § 506.
In re J.F.K. Acquisitions Group, 166 B.R. 207, 211 (Bkrtcy.E.D.N.Y.). Reading these sections together, it is clear that section 507(b) grants superpriority only "if" the claimant has an allowable section 503(b) administrative expense claim. In re Ralar Distributors, Inc., 166 B.R. 3, 8 (Bkrtcy.D.Mass. 1994); aff'd 182 B.R. 81 (D.Mass. 1995); aff'd 69 F.3d 1200 (1st Cir. 1995). Section 507(b) does not create a new, independent basis for an administrative expense.
Therefore, the case law suggests that the appropriate value to protect is the foreclosure value of the property and not the fair market value of the property."), aff'd in part, In re SCOPAC, 624 F.3d 274, 285-86 (5th Cir. 2010); In re Ralar Distribs., Inc., 166 B.R. 3, 7 (Bankr. D. Mass. 1994) ("The value relevant for adequate protection purposes, however, is not book value. It is liquidation value realizable by the creditor."), aff'd, 182 B.R. 81 (D. Mass. 1995), aff'd, 69 F.3d 1200 (1st Cir. 1995); Sharon Steel Corp. v. Citibank, N.A. (In re Sharon Steel Corp.), 159 B.R. 165, 169 (Bankr. W.D. Pa. 1993) (using liquidation value for adequate protection purposes); United States v. Case (In re Case), 115 B.R. 666, 670 (9th Cir. B.A.P. 1990) ("If we were attempting to value FmHA's interest in the property for adequate protection purposes, the possibility of forced liquidation would be assumed and a deduction for selling costs would be logical."); La Jolla Mortg. Fund v. Rancho El Cajon Assocs., 18 B.R. 283, 289 (Bankr. S.D. Cal. 1982) ("In this regard, we must evaluate the collateral, being the adequate protection, in the hands of the claim holder.
”), aff'd in part, In re SCOPAC, 624 F.3d 274, 285–86 (5th Cir.2010); In re Ralar Distribs., Inc., 166 B.R. 3, 7 (Bankr.D.Mass.1994) (“The value relevant for adequate protection purposes, however, is not book value. It is liquidation value realizable by the creditor.”), aff'd,182 B.R. 81 (D.Mass.1995), aff'd,69 F.3d 1200 (1st Cir.1995); Sharon Steel Corp. v. Citibank, N.A. (In re Sharon Steel Corp.), 159 B.R. 165, 169 (Bankr.W.D.Pa.1993) (using liquidation value for adequate protection purposes); United States v. Case (In re Case), 115 B.R. 666, 670 (9th Cir. BAP 1990) (“If we were attempting to value FmHA's interest in the property for adequate protection purposes, the possibility of forced liquidation would be assumed and a deduction for selling costs would be logical.”); La Jolla Mortg. Fund v. Rancho El Cajon Assocs., 18 B.R. 283, 289 (Bankr.S.D.Cal.1982) (“In this regard, we must evaluate the collateral, being the adequate protection, in the hands of the claim holder.
Moreover, the cost or expenditure incurred by the creditor must be more than the delay and opportunity cost associated with the debtor's continued possession of the collateral, which is not the type of cost contemplated by the Code. Ford Motor Credit Co., 35 F.3d at 868-869 and n. 7; In re Ralar Distribs., Inc., 166 B.R. 3, 8 (Bankr.D.Mass. 1994) (literally interpreting § 507(b) and stating that the section "grants [a] superpriority only `if' the claimant has an allowable section 503(b) administrative expense claim. It does not `convert' the claim into a section 503(b) claim."); NL Indus., Inc. v. GHR Energy Corp., 940 F.2d 957, 966 (5th Cir. 1991), cert. denied, 502 U.S. 1032, 112 S.Ct. 873, 116 L.Ed.2d 778 (1992); In re CIS Corp., 142 B.R. 640, 643 (S.D.N.Y. 1992) (holding that estate must accrue real benefit rather than focusing on whether creditor sustained a loss); Kinnan Kinnan Partnership v. Agristor Leasing, 116 B.R. 162, 166 (D.Neb. 1990) (same).