Rio Valley Motors Company L.L.C.

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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
RIO VALLEY MOTORS COMPANY, LLC
Debtor. 	No. 11-06-11866 SS
MEMORANDUM OPINION AND ORDER DENYING DEBTOR’S MOTION TO
RECONSIDER, VACATE, AMEND AND MODIFY ORDER OF DECEMBER 6, 2006
WHICH DENIED FURTHER USE OF CASH COLLATERAL
This matter is before the Court on Debtors’ Motion to
Reconsider, Vacate, Amend and Modify Order of December 6, 2006
Which Denied Further Use of Cash Collateral (with exhibits) and
the supporting affidavit from Debtor’s president Rick Trujillo
(docs 75 and 77 respectively), Valley National Bank’s response in
support of the Motion for Reconsideration (doc 76), and the
objection thereto (“Objection”) filed by Ford Motor Credit
Company (“FMCC”) (doc 79). 	On December 6, 2006, the Court had
entered its Memorandum Opinion and Order Denying Further Use of
Cash Collateral (doc 64). 	For the reasons set forth below, the
Court finds that the Motion for Reconsideration should be denied.
This is a core proceeding. 	28 U.S.C. § 157(b)(2)(L).
Analysis
Legal Standard
The Motion to Reconsider does not recite whether it is
brought under Rule 9023 F.R.B.P., incorporating Rule 59
F.R.Civ.P., or Rule 9024 F.R.B.P., incorporating Rule 60(b)
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1 Neither the Federal Rules of Civil Procedure nor the
Bankruptcy Rules recognize a motion for reconsideration. 	Dimeff
v. Good (In re Good), 281 B.R. 689, 699 (10th Cir. BAP 2002).
Although, when filed
[m]otions for “reconsideration” of a judgment should be
treated as motions to alter or amend judgment under
Rule 59(e) F.R.C.P., made applicable to bankruptcy by
Rule 9023 Fed.R.Bankr.P. 	Under those rules, a party
seeking to alter or vacate a judgment has 10 days from
entry of the judgment to file a motion for such relief.
Such motions will only be granted if there has been a
mistake of law or fact or there is newly discovered
evidence not previously available.
In re Bushman, 311 B.R. 91, 95 n.5 (Bankr. D. Utah 2004).
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F.R.Civ.P. 	However, a “motion for reconsideration” 1 filed within
ten days of the challenged ruling is considered a Rule 59 motion.
Adams v. Reliance Standard Life Ins. Co., 225 F.3d 1179, 1186 n.5
(10 th Cir. 2000), citing Hatfield v. Bd. of County Comm’rs for
Converse County, 52 F.3d 858, 861 (10 th Cir. 1995). 	The Court
will therefore review the Motion for Reconsideration under Rule
59.
Rule 59(a) provides in part as follows:
Grounds: A new trial may be granted to all or any of
the parties and on all or part of the issues...(2) in
an action tried without a jury, for any of the reasons
for which rehearings have heretofore been granted in
suits in equity in the courts of the United States.
A motion for reconsideration should be granted only to correct
manifest errors of fact or law or to present newly discovered
evidence. 	Id., citing Phelps v. Hamilton, 122 F.3d 1309, 1324
(10 th Cir. 1997).
A motion for reconsideration is the opportunity for the
court to (1) correct manifest errors of law or fact;
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(2) review newly discovered evidence; or (3) review a
prior decision in light of a recent change in the law.
Appropriate circumstances for a motion to reconsider
are where the court has obviously misapprehended a
party’s position on the facts or the law, or the court
has mistakenly decided issues outside of those the
parties presented for determination. 	A party cannot
invoke Rule 59(e) to raise arguments or present
evidence that should have been raised in the first
instance, or to rehash arguments previously considered
and rejected by the court. 	A party’s failure to
present its strongest case in the first instance does
not entitle it to a second chance in the form of a
motion to reconsider.
Sunflower Racing, Inc. V. Mid-Continent Racing & Gaming Co. I (In
re Sunflower Racing, Inc.), 223 B.R. 222, 223 (D. Kan. 1998).
(Internal citations omitted.) 	Because motions for
reconsideration are not intended to function as second bites of
the apple, they are frequently denied.
The Rule 59(e) motion may not be used to relitigate old
matter, or to raise arguments or present evidence that
could have been raised prior to the entry of judgment.
Also, amendment of the judgment will be denied if it
would serve no useful purpose. 	In practice, because of
the narrow purposes for which they are intended, Rule
59(e) motions typically are denied....
11 Wright, Miller and Kane, Fed. Prac. & Proc. Civ.2d § 2810.1.
(Footnotes omitted.)
Collateral Values and Debt
Frequently the heart of a cash collateral decision is
whether the debtor’s use of cash collateral will cause the
creditor’s interest in the collateral to deteriorate; that is,
whether the creditor’s position in the collateral to be used is
being adequately protected. 	See A. Resnick and H. Sommer, 3
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2 	“In the absence of the creditor’s consent, the trustee
may use cash collateral only with the approval of the court which
will normally require adequate protection for the holder of the
adverse interest.” 	(Footnotes omitted.)
3 “In any hearing under this section ... the [debtor in
possession] has the burden of proof on the issue of adequate
protection;....” 	§363(p) (relettered but not otherwise amended
by the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005, Pub. L. No. 109-8, 119 Stat. 37 (2005)). 	References to the
Code in this memorandum opinion and order are to the Bankruptcy
Code as amended by BAPCPA unless otherwise stated.
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Collier on Bankruptcy ¶363.03[4] (15 th Ed. Rev. 2006) 2 . 	That was
and is the critical factor in this case, as was abundantly clear
from the collateral value and debt calculations that went into
the first order authorizing the use of cash collateral. 	Docs 46
(amended minutes of decision from November 3 hearing) and 61
(interim order authorizing use of cash collateral).
In consequence of the foregoing, the Debtor’s overriding
priority in the November 30 hearing should have been to clearly
demonstrate, by a preponderance of the evidence, what the
Debtor’s financial position and the creditor’s collateral
positions were as of November 29 or thereabouts. 3 	That
presentation generally speaking would have had to include a clear
and detailed accounting of the cash and cash equivalents
(including the contracts in transit) in the possession of the
Debtor, the inventory of vehicles, parts and supplies and the
values thereof, the tracing of cash out of the sales of inventory
and into the purchase of more inventory, what cash or other
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assets had been expended in the month of November, and a side-by-
side comparison of all those numbers for late November compared
with the analogous numbers for early November or mid-October,
when the petition was filed. 	This the Debtor simply did not do.
What the Debtor focused on instead was whether it turned a
profit for the month. 	Obviously there is nothing wrong per se
with the Debtor presenting that information to the Court and the
creditors. 	Even more obviously, turning a profit is a good thing
for a chapter 11 debtor. 	But this was a hearing that was
supposed to focus on the status of the creditor’s collateral.
That issue was far more of a priority than the monthly profit.
The creditor holding a secured claim may or may not care about
the success of the reorganization effort; the creditor clearly
cares about collecting its debt from the collateral (including
the replacement collateral), and will not want that collateral
diminished or put at risk of being diminished. 	And it is this
concern that the Court is obligated to take into consideration in
deciding adequate protection issues.
The exhibits that Debtor submitted with the Motion to
Reconsider provide a clearer picture of the Debtor’s finances and
assets (albeit as of December 8) than what it presented on
November 30, and in fact constitute a good start on providing the
side-by-side comparison. 	See Exhibit D attached to Motion to
Reconsider. 	The problem of course is that by not presenting this
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4 The Court uses the phrase “at least” to highlight that the
first estimate of value (from the November 3 hearing) discounted
the values offered by the Debtor to values that the Debtor or a
trustee might be more likely to obtain in a sale of the business.
The second and third columns of figures, which were drawn largely
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information adequately during the November 30 hearing, the Debtor
deprived the creditors of the ability to scrutinize the
information and cross examine Mr. Trujillo about it. 	That is one
of the vices that the prohibition on non-newly discovered
evidence is supposed to prevent. 	The fact that the Debtor has
been able to produce this information so quickly suggests that
had the Debtor could have produced this information, in as
organized a fashion as it appears in the exhibits to this motion,
at the November 30 hearing. 	And that is a major factor weighing
against granting the Motion to Reconsider.
Even were the Court to accept the Debtor’s new figures, it
would not make a difference, since those numbers, as FMCC has
pointed out, show even less collateral value than the Court had
calculated based on the evidence presented at the November 30
hearing. 	Attached to this memorandum opinion is an annotated
chart showing the collateral values based on the record,
including the exhibits attached to the Motion to Reconsider.
What it shows is that the Court’s memorandum opinion denying
further use of cash collateral (doc 64) calculated a decrease in
the collateral value of at least $184,000, and that the Motion to
Reconsider shows a decrease of at least $227,000. 4
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from the Debtors proffers, are largely not discounted.
5 In its Objection, FMCC claims an additional charge of
$60,000 for “delinquent Wholesale charges”. 	Objection at 8 n.3.
Whether FMCC is entitled to that extra payment is of course
subject to the terms of the contract and security documents and
to the availability of collateral value. 	See United Savings
Association of Texas v. Timbers of Inwood Forest Associates,
Ltd., 484 U.S. 365 (1988). 	Should the estate lose the value of
the franchise, for example, FMCC’s claim may well turn out to be
undersecured. 	That loss of the franchise value would not result
from the Debtor’s postpetition use of cash collateral, and so
FMCC would not, on account of that loss, have an administrative
claim pursuant to §507(b) or the interim order authorizing the
use of cash collateral (doc 61). 	The Court issues this reminder
of the obvious in part because of the call the Court received
from Debtor’s counsel late Tuesday afternoon, December 20,
inquiring when this decision would be issued. 	(The Court
instructed its staff to tell counsel’s office that the Court has
been working on this decision for the last two days; in fact, it
had been several days.) 	Part of the message from counsel was
that the Debtor had two offers to purchase the business.
(Presumably the Debtor had promptly communicated those
developments to FMCC.) 	Whether either of those offers comes to
fruition, and what value the estate receives, may depend on
whether the Debtor and FMCC are able to reach an accommodation on
the Debtor’s operating expenses.
6 	This figure treats as a wash the amount of the Bank’s
claim secured by the trailers with the value of the trailers.
The Court’s use of this figure is not intended to be an
adjudication of which creditor has a priority in the trailer
collateral or what its value is.
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FMCC’s debt is approximately $1,985,000, taking into account
the delivery to FMCC of the $315,000. 5 	Valley National Bank’s
claim is about $260,000. 6 	If the estate does not realize the
value of the franchise for whatever reason, including because the
Debtor “goes dark” before a sale can be accomplished, the value
of FMCC’s collateral may exceed its debt by as little as
($2,052,000 - $1,985,000 =) $67,000 or less. 	That small a margin
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on that large a debt does not constitute “relief ... as will
result in the realization by such entity of the indubitable
equivalent of [FMCC’s] interest in the property.” 	§361(3); see
Metropolitan Life Ins. Co. v. Murel Holding Corporation (In re
Murel Holding Corporation), 75 F.2d 941, 942 (2 nd Cir. 1935)
(defining “adequate protection” as “a substitute of the most
indubitable equivalence”). 	In consequence, the Debtor’s Motion
to Reconsider does not present a basis for the Court to find that
it committed a clear factual or legal mistake that needs to be
redressed.
Other Issues
The Motion to Reconsider, including Mr. Trujillo’s
affidavit, makes a number of assertions about or challenges to
the Court’s order denying the further use of cash collateral
which deserve a response.
Paragraph 12 of the Motion to Reconsider states that the
Court’s order permitting the use of cash collateral was not
“finalized” until November 11, when the minutes were finalized
and filed (doc 45). 	In fact, the order was not really
“finalized” until the written order was prepared by Valley
National Bank’s counsel (acting proactively) and entered by the
Court. 	However, the Debtor knew what it could do and what it had
to do by the close of the November 8 hearing at which the Court
delivered its oral ruling (including ruling on Mr. Trujillo’s
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supplemental request to be able to pay off trade-in liens that
had not been specified in the Debtor’s original request).
Paragraph 14 recites that “time did not permit” the updating
of the vehicle inventory lists. 	From what the Court has
observed, it appears that Debtor’s counsel either did not
allocate sufficient time to work with Mr. Trujillo to adequately
prepare for the November 30 hearing, or did not provide adequate
counsel to the Debtor about what information was needed and how
it should be organized for that hearing. 	At the November 30
hearing it was clear that there were errors in the exhibits which
could have been avoided had Mr. Trujillo and his staff had the
instructions or attention from counsel to begin assembling the
data earlier in the month and then keep it updated. 	The Court
is, and was, aware that the Thanksgiving holiday took place just
one week before the November 30 hearing, and that assembling the
requisite information on an ongoing basis in order to avoid a
“crunch” at the end was a burden for the Debtor. 	Indeed the
Court expressed some sympathy for the number and size of the
tasks ahead for Mr. Trujillo at the November 8 hearing.
Nevertheless, those tasks were critical for the Debtor to
perform; if Mr. Trujillo had been counseled to fully appreciate
their importance, he would have seen to it that they were
accomplished well and timely.
Concerning paragraphs 15 and 16, it is true that the best
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scheduling the Court could come up with required the Debtor to
testify on November 30 what its numbers were, rather than two or
three or more days later, when presumably it would have been able
to submit month end figures with more finality. 	But the Debtor’s
problem was not the lack of absolute finality for the November
numbers. 	In fact, the Court and the creditors effectively
accepted and used the Debtor’s estimates for the final day or two
of November.
The Debtor’s complaint in this regard perhaps raises the
question of how much control over its record-keeping the Debtor
has. 	Nevertheless the Court has assumed that the Debtor can, on
any given day, provide a reasonably accurate snapshot of what its
inventory, finances, cash flow, etc. are. 	Compare In re
Glasstream Boats, Inc., 110 B.R. 611, 614 (Bankr. M.D. Ga. 1990)
(use of cash collateral denied to debtor which could produce
financial statements only monthly).
It is true, as stated in paragraph 16, that the Debtor
received the Court’s order denying further use of cash collateral
on December 6, which of course was six days after the November 30
hearing. 	The Court would have preferred to have the decision out
much sooner. 	However, as is apparent from the decision, the
disheveled presentation of the Debtor’s case required the Court
to spend significant time sorting out the facts upon which to
base its decision.
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7 See In re Glasstream Boats, Inc., 110 B.R. at 612
(Debtor’s failure to pay over proceeds of sales as ordered by
court).
8 This finding is based on Mr. Trujillo’s testimony during
his cross examination by Valley National Bank’s counsel on
November 3.
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The foregoing comments should make clear that the charge
leveled in paragraph 27, that the Court is critical of Mr.
Trujillo, is incorrect. 	Mr. Trujillo has worked diligently to
make this chapter 11 reorganization work. 	The problem appears to
lie with Debtor’s counsel, who has not spent enough time guiding
the Debtor through the very tricky maze that constitutes the
opening weeks of a chapter 11 case and who has lacked the
flexibility to deal with a judge that has not met his
expectations. 	The lack of flexibility is illustrated by counsel
not advising Mr. Trujillo to immediately forward the $315,000 to
FMCC as explicitly ordered by the Court 7, and even more important
by counsel not advising Mr. Trujillo to more urgently select a
broker and begin soliciting a sale. 	The Debtor addressed that
critical issue most cursorily in the November 30 hearing; its
explanation now in paragraph M of Mr. Trujillo’s affidavit is
still puzzling in light of the fact that by November 3 the Debtor
had winnowed the list down to two at the most. 8 	In fact, at the
November 3 hearing the Debtor appeared to commit to a sale as
soon as possible, albeit with the qualifier that such a sale
could not be accomplished in sixty days.
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Mr. Trujillo also points out in paragraph E of his affidavit
that the Court obviously does not understand how contracts in
transit work, and how a vehicle sold for $27,000 with a trade in
of $22,000 can result in a contract for $35,000. 	Mr. Trujillo is
correct; the Court did not understand those transactions at the
time it was making its decision not to allow the further use of
cash collateral. 	The Court also acknowledges that Mr. Trujillo
has eighteen years of experience in the car sales business, and
is undoubtedly an expert. 	And it is perhaps therein that the
problem lies. 	For it is the Debtor’s burden to prove up its case
for cash collateral, part of that burden is making clear, on the
record, all the facts the Court needs to know to make that
decision, and apparently Mr. Trujillo and Debtor’s counsel
assumed that the Court was familiar with many of the esoteric
details of the auto sales business such as how these contracts
worked. 	It is now clear that those assumptions were incorrect.
But at least the Debtor is now on notice to lay an adequate
factual foundation in any future hearings. 	In the meantime, as
it turns out, it did not make a difference that the Court did not
have that particular knowledge; accepting the Debtor’s numbers
from its Motion to Reconsider (which presumably takes into
account all the relevant facts) results in a collateral value
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9 This conclusion applies as well to the criticism in
paragraph K of this Court’s hesitation about the contracts in
transit since the Court could not tell, from the evidence
presented at the hearing, what the source (“provenance”) of the
contracts were.
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even less than the Court had calculated on its own. 9
Conclusion and Order
For the foregoing reasons, the Court finds that there are no
grounds for changing the decision refusing to allow the further
use of cash collateral. 	The Court accepts that this decision may
have disastrous consequences for the Debtor, for the Debtor’s
constituent member, for most if not all of the creditors, and
especially for the employees. 	Unfortunately, the Court is
compelled to this conclusion by the facts presented by the Debtor
and the law. 	It was a decision that the Court thought long and
hard about, as it has this decision to deny the Motion to
Reconsider.
Unquestionably the Debtor desperately needs the use of the
cash collateral not only to preserve its chances (whatever they
may be) of realizing the full value of its business, but also to
pay its expenses, most prominently the back and future wages of
its employees. 	The Court in its previous decision characterized
the denial of cash collateral as a “disaster” for the business
and particularly for the employees. 	That continues to be the
case. 	However, the Bankruptcy Code demands that protection of
the creditor’s interest take precedence over the Debtor’s needs,
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10 “Yet it appears that this Debtor believes that the
authorization for use of a creditor’s cash collateral can be
given solely upon a demonstration that the debtor’s need for the
use of the cash collateral may be more drastic than that of the
creditor and that, absent such authorization, the Debtor may be
unable to attempt the confirmation of a chapter 13 plan. 	While
the Court understands that the ramifications of failing to get
such authorization can be devastating to a debtor’s case, that
fact alone simply cannot suffice as the sole means by which to
justify the use of a creditor’s cash collateral, when the Debtor
cannot offer any other means by which to protect that creditor’s
interest in a meaningful way.” 	Citations omitted.
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no matter how desperate. 	In re Goode, 235 B.R. 584, 590 (Bankr.
E.D. Tx. 1999) 10 .
IT IS THEREFORE ORDERED that the Debtors’ Motion to
Reconsider, Vacate, Amend and Modify Order of December 6, 2006
Which Denied Further Use of Cash Collateral (doc 75) is denied.
James S. Starzynski
United States Bankruptcy Judge
COPY TO:
Walter L Reardon, Jr
3733 Eubank Blvd NE
Albuquerque, NM 87111-3536
William L Needler
555 Skokie Blvd #500
Northbrook, IL 60062
Alice Nystel Page
PO Box 608
Albuquerque, NM 87103-0608
Donald Cram
Severson & Werson
One Embarcadero Ctr
San Francisco, CA 94111
Duane Geck
Severson & Werson
One Embarcadero Ctr
San Francisco, CA 94111
James Jurgens
100 La Salle Cir Ste A
Santa Fe, NM 87505-6976
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11 All entries are in thousands of dollars; some figures
have been rounded.
12 Based on the oral findings delivered by the Court on
November 8, 2006 and appearing in the minutes of that hearing
(doc 46).
13 Other than the machinery and fixtures figure, these
numbers are taken at face value from the Debtor’s exhibits and
not “discounted”, as are the Nov. 3 column figures. 	As a result,
a more accurate estimate of the real value of the Motion to
Reconsider figures could be even lower.
14 Net of the $315,000 which the Court ordered to be paid to
FMCC. 	The gross figure would be $534,000; this is the figure
that appears in the minutes.
15 Net of the $315,000 which the Court ordered to be paid to
FMCC. 	The gross figure would be $476,000, which appears in the
order.
16 This figure is net of the $315,000 which the Court
ordered to be paid to FMCC.
17 Debtor’s Exhibit D admitted at the first cash collateral
evidentiary hearing incorporated the wires in transit figure into
the cash at hand. 	The Court found in the Memorandum Opinion and
Order Denying Further Use of Cash Collateral (doc 64) that these
funds could effectively be treated as cash.
18 These figures are “formatted” somewhat differently than
in the Nov. 8 minutes, where the Court listed the cash in hand
separately from the rest of the collateral.
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ASSET 11 	AS OF NOV. 3 12 	ORDER-DOC 64 	M/RECONSIDER-
DOC 75 13
Cash on Hand 	219 14 	161 15 	264 16
Contracts or wires
in transit 	000 17 	118 	000
Vehicle
inventory 	1,800 	1,656 	1,499
Parts and
supplies 	90 	45 	132
Machinery and
fixtures 	40 	40 	40
Receivables 	130 	75 	117
Franchise 	600 	600 	600
Totals 	2,879 18 	2,695 	2,652
Decrease in collateral value 	(184) 	(227)
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