Montoya v. HRW of Las Cruces, Inc. et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
HARRY CARLTON WILEY and
VIRGINIA RUTH WILEY,
Debtors. 	No. 7-07-13053 SL
PHILIPS J. MONTOYA,
Plaintiff,
v. 	Adv. No. 08-1120 S
HRW OF LAS CRUCES, INC.,
VIRGINIA OXFORD,
OXFORD INVESTMENTS, LLC.
FIRST STATE BANK,
ROBERT WILEY,
HRW FAMILY, LLC.,
HARRY CARLTON WILEY,
VIRGINIA RUTH WILEY,
HARRY CARLTON WILEY,
as TRUSTEE OF THE WILEY FAMILY TRUST,
FIRST NEW MEXICO BANK, LAS CRUCES,
and
HARRY CARLTON WILEY,
as TRUSTEE OF THE CHARLES HAYDEN WILEY
AND ELNORA WILLIAMS WILEY REVOCABLE TRUST,
Defendants.
MEMORANDUM OPINION ON DEFENDANTS’
MOTION FOR PARTIAL SUMMARY JUDGMENT
ON COUNTS FOUR AND FIVE OF 1 ST AMENDED COMPLAINT
This matter is before the Court on Defendants’ Virginia
Wiley and Robert Wiley (“Movants”) Motion for Partial Summary
Judgment on Counts Four and Five of Plaintiff’s First Amended
Complaint (doc 20) and supporting affidavit of Harry C. Wiley
(“Wiley”) (doc 21). 	Plaintiff did not file a response. 	Movants
appear through their attorney Thuma & Walker, P.C. (David T.
Thuma). 	This is a core proceeding. 	28 U.S.C. § 157(b)(2)(A) and
(H).
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1On August 2, 2010, the Bankruptcy Court for the District of
New Mexico adopted new local rules. 	This is the version of the
local rule in place when the Motion was filed. 	It is
substantially the same as the newer rule.
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DISCUSSION
Summary judgment is proper when there is no genuine issue as
to any material fact and the moving party is entitled to a
judgment as a matter of law. 	Bankruptcy Rule 7056(c). 	In
determining the facts for summary judgment purposes, the Court
may rely on affidavits made with personal knowledge that set
forth specific facts otherwise admissible in evidence and sworn
or certified copies of papers attached to the affidavits.
Fed.R.Civ.P. 56(e). 	When a motion for summary judgment is made
and supported by affidavits or other evidence, an adverse party
may not rest upon mere allegations or denials. 	Id. 	The court
does not try the case on competing affidavits or depositions; the
court's function is only to determine if there is a genuine issue
for trial. 	Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986).
New Mexico LBR 7056-1 1 governs summary judgment motions. 	It
provides, in part:
The memorandum in support of the motion shall set out
as its opening a concise statement of all of the
material facts as to which movant contends no genuine
issue exists. 	The facts shall be numbered and shall
refer with particularity to those portions of the
record upon which movant relies.
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2Count 4 also alleges that Debtors had non-exempt funds in a
checking account at Compass Bank and seeks a turnover of
$3,377.58. 	The Motion for Partial Summary Judgment does not
reference this claim.
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A memorandum in opposition to the motion shall contain
a concise statement of the material facts as to which
the party contends a genuine issue does exist. Each
fact in dispute shall be numbered, shall refer with
particularity to those portions of the record upon
which the opposing party relies, and shall state the
number of the movant's fact that is disputed. 	All
material facts set forth in the statement of the movant
shall be deemed admitted unless specifically
controverted.
Movants list twenty two undisputed material facts. 	Pursuant
to the rule, these facts are deemed admitted.
COUNT 4
Count 4 of the 1 st Amended Complaint is styled “For turnover
and debt and money due.” 	It alleges that in 1998, Farm Credit of
New Mexico made a loan to the Wiley Trust in the amount of
$325,000 secured by real estate owned by the Wiley Trust and
guaranteed by Debtors. 	It then alleges that Debtors repaid the
loan in the outstanding balance due of $307,639.38 from proceeds
of sales of their assets, which resulted in a claim for
subrogation against the Wiley Trust 2. 	The Plaintiff seeks a
turnover of the subrogation claim.
Movants facts establish, however, that it was Wiley who
needed to borrow money to construct a store building in Texas.
He and his wife lacked the ability to borrow the funds, so he
asked his mother Elnora Williams Wiley (co-trustee of the Wiley
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Trust with Wiley) to pledge trust assets to secure the loan. 	She
agreed. 	The Trust granted a mortgage on land it owned. 	During
the course of the loan only Mr. Wiley deducted loan interest on
his tax returns; the Trust did not take any deductions. 	Wiley
used the loan proceeds in his business. 	The majority of the
regular monthly payments on the loan were made by Wiley or his
hardware business. 	Although the Trust did take some draws on the
loan, the net result of all payments and withdrawals was that the
Trust withdrew $13,861.08 more than it paid toward the loan.
With the exception of this $13,861.08, the loan was intended to
and did benefit Wiley and his hardware business. 	Wiley Trust was
involved only as an accommodation to Wiley.
In Dairyland Ins. Co. v. Herman, 1998-NMSC-005, ¶ 23, 124
N.M. 624, 631, 954 P.2d 56, 63 (1997), the New Mexico Supreme
Court discussed the concept of subrogation.
Subrogation ... is an equitable remedy of civil law
origin whereby through a supposed succession to the
legal rights of another, a loss is put ultimately on
that one who in equity and good conscience should pay
it. 	It is a remedy for the benefit of one secondarily
liable, who has paid the debt of another and to whom in
equity and good conscience should be assigned the
rights and remedies of the original creditor.
Id. (citing United States Fidelity & Guar. Co. v. Raton Natural
Gas Co., 86 N.M. 160, 162, 521 P.2d 122, 124 (1974)). 	See also
Restatement (Third) of Suretyship and Guaranty § 27 cmt. a
(1967):
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Subrogation is a term used by the law to describe the
remedy by which, when the property of one person is
used to discharge a duty of another or a security
interest or lien upon property of another, under such
circumstances that the other will be unjustly enriched
by the retention of the benefit thus conferred, the
former is placed in the position of the obligee or
lienholder.
Subrogation does not apply to the facts presented. 	Wiley
was the borrower. 	He was not secondarily liable to Farm Credit
of New Mexico. 	He paid the debt. 	Wiley Trust only pledged land.
Wiley Trust was not the primary obligor. 	Wiley did not pay a
debt of Wiley Trust. 	Count 4 should be dismissed.
COUNT 5
Count 4 of the 1 st Amended Complaint is styled “To Recover a
Fraudulent Transfer to the Wiley Trust.” 	Based on the same facts
as Count 4, it alleges that the payment of $307,639.38 to Farm
Credit was a fraudulent transfer. 	Bankruptcy Code section 548
permits avoidance of transfers made with the specific intent to
hinder, delay, or defraud creditors. 	Section 548 also permits
avoidance of transfers made by an insolvent debtor for less than
reasonably equivalent value. 	Wiley received reasonably
equivalent value for the payment because the Farm Credit loan,
his debt, balance decreased by that amount. 	See Jobin v. McKay
(In re M & L Business Machine Co., Inc.), 84 F.3d 1330, 1342
(10 th Cir.), cert. denied, 519 U.S. 1040 (1996)(A debtor receives
reasonably equivalent value for payments to a creditor when that
creditor’s claim is reduced accordingly.) 	And, the inference of
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fraudulent intent is rebutted by the fact that the transfers were
simply payments on a bona fide preexisting loan. 	Butler v.
Loomer (In re Loomer), 222 B.R. 618, 	623 (Bankr. D. Neb. 1998).
The payment to Farm Credit was not a fraudulent transfer. 	Count
5 should be dismissed.
The Court will enter an order dismissing counts four (except
for the turnover claim of $3,377.58) and five with prejudice.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 15, 2010
Copies to:
Bonnie Bassan Gandarilla
Moore, Berkson & Gandarilla, P.C.
PO Box 7459
Albuquerque, NM 87194
George M Moore
Moore, Berkson & Gandarilla, P.C.
PO Box 7459
Albuquerque, NM 87194
David T Thuma
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
Michael K Daniels
PO Box 1640
Albuquerque, NM 87103-1640
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