Joel T. Danley

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/11/06
Joel T. Danley
04-13378
Findings of Fact and Conclusions of Law by Judge James S. Starzynski Re: [5-1]
Motion For Relief From Stay As To The Pit, Corner of Florida and Desert Lakes
Road, Alamorgordo, NM by Western Bank - Alamogordo, or in the Alternative, [9-1]
Motion For Adequate Protection by Western Bank - Alamogordo.
Received on: 2004-09-30 09:39:43.000
2004-09-30 00:00:00.000
2004-09-30 00:00:00.000
James Burke
Case 04-13378-s11 Doc 65 Filed 09/30/04 Entered 09/30/04 11:21:00 Page 1 of 10

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JOEL DANLEY,
Debtor. No. 11-04-13378 SL
FINDINGS OF FACT AND CONCLUSIONS
OF LAW ON WESTERN BANK-ALAMOGORDO’S
MOTION FOR RELIEF FROM AUTOMATIC STAY
OR, IN THE ALTERNATIVE, FOR ADEQUATE PROTECTION
This matter came before the Court on July 26, 2004 for
final hearing on the Motion for Relief from Automatic Stay,
or, in the alternative, for Adequate Protection filed by
Western Bank - Alamogordo (“Bank”)(Doc. 5). Bank appeared
through its attorney Scott & Kienzle, P.A. (Paul M. Kienzle
III). Debtor appeared through its attorney Russell C. Lowe,
having filed an objection to the Motion (Doc. 11). Bank seeks
relief from the automatic stay to continue its pending
foreclosure against real property of the estate.
Three persons testified: Mr. Marshall Coker, Execute Vice
President of Bank; Dr. Vince Barrett, an Appraiser; and Mr.
Joel Danley, the Debtor. The parties stipulated to admit into
evidence Bank’s Exhibits A through S, and Debtor’s Exhibits 1
through 24. Having considered the testimony, the exhibits,
the arguments of the parties at trial, and the post trial
briefs submitted by the parties (docs. 47 and 48), the Court
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issues the following findings of fact and conclusions of law.
This is a core proceeding. 28 U.S.C. § 157(b)(2)(G).
FINDINGS OF FACT
1. The Bank’s loan documents appear as exhibits 1 through 9.
2. Exhibit 10 shows a total debt due Bank as of July 23,
2004 in the amount of $1,629,766.13.
3. Repayment of this debt is secured by perfected mortgages
on a sand and gravel pit (“Pit”) and a ranch.
4. Mr. Coker testified that the interest rate on the note
was 10.25%, but after default interest accrues at a
default rate of 21%. Exhibit 10 shows interest accruing
on the principal balance at $281.56 per day, but this is
at the 10.25% rate. The interest accrual at 21% would be
about $576 per day.
5. Exhibit 10, pages 1 and 3, show that the Bank paid the
real estate taxes on the Pit in the amount of $14,550.82.
6. Exhibit 10 also shows that the loan is due for the March
25, 2001 and all subsequent payments.
7. The Court has reviewed the several appraisals submitted
by the parties, and finds that Dr. Barrett’s is the most
credible, comprehensive and methodical. This appraisal
took into consideration both the supply or reserve of
materials, and the demand therefor in arriving at his
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valuation. This approach was not used in the other
appraisals. The Court finds the other appraisals not
credible.
8. Based on the Barrett appraisal, the Court finds that the
value of the Pit to be $826,000.
9. The parties stipulated that the value of the Ranch is
$180,000. See Factual Stipulations, doc. 26, ¶2.
10. The parties stipulated that the value of the stockpiled
material in the Pit is $100,000. See Id. ¶ 1.
11. The total value of the collateral is $1,106,000. There
is no equity in the collateral.
12. Debtor is not in physical possession of the Pit, and was
unaware if continued operations of others were removing
materials.
13. Debtor’s 2002 income consisted of: wages, $9,500;
unemployment compensation, $10,526; interest $206; a
state tax refund, $904; and a farming net loss of
<$2,715>. See Exhibit 18.
14. Debtor’s 2003 income consisted of: state tax refund,
$2,826; and a farming net loss of <$2,047>.
15. Debtor testified that he also had received $850 per week
from a party with which he is suing the State of New
Case 04-13378-s11 Doc 65 Filed 09/30/04 Entered 09/30/04 11:21:00 Page 4 of 10

1 On cross examination Debtor did acknowledge that there
was a joint prosecution agreement under which the first
$700,000 of lawsuit proceeds would be split between Johnson &
Danley Construction and Meadow Valley, but Debtor could not
recall the details.
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Mexico for “claim support”, but that these payments
stopped in May.
16. Debtor owns 50% of Johnson and Danley Construction, and
100% of JD Materials, Inc.
17. Johnson and Danley Construction and Meadow Valley
Contractors, Inc. filed a lawsuit in the Twelfth Judicial
District Court, Otero County, New Mexico on May 25, 2004
against the State of New Mexico ex rel. New Mexico
Department of Transportation. These plaintiffs seek
damages in an amount to be determined at trial. Debtor
testified that he believed the value of the lawsuit was
$7 million in hard cost damages (i.e., what they spent
over what they were paid) and $15 million in special
damages for loss of the two companies. Debtor did not
support these estimates with any expert testimony or
additional evidence. Debtor also did not explain how any
of these funds would flow to him1, or whether the
Plaintiffs were solvent. Debtor guessed that this case
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2 In Debtor’s Bench Brief (doc 31, page 3), he states that
the trial would be completed within 60 months.
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could get to trial in 1 to 2 years2. The Court therefore
finds that the valuation of this asset is speculative,
and that the timing for receipt of any proceeds is
speculative.
18. Debtor has no other significant assets.
19. As of September 29, 2004, no plan or disclosure statement
is on file in this case.
20. Debtor filed a Bench Brief (docs. 31 and 44) that
outlines several possible reorganization efforts that may
be attempted. One is a sale of the Pit by auction.
Another is to put the Pit out for bid with a “stalking
horse.” As of the trial, Debtor had 14 or 15 aggregate
users in mind who might be interested. He had not
contacted them about specific procedures nor had he
provided appraisals to them. Therefore, the Court finds
that no real efforts have been undertaken to effectuate
such a sale.
CONCLUSIONS OF LAW
1. Relief from the automatic stay is governed by 11 U.S.C. §
362(d), which provides in relevant part:
On request of a party in interest and after
notice and a hearing, the court shall grant
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relief from the stay provided under subsection
(a) of this section, such as by terminating,
annuling, modifying, or conditioning such stay–
(1) for cause, including the lack of adequate
protection of an interest in property of such
party in interest; [or]
(2) with respect to a stay of an act against
property under subsection (a) of this section,
if-
(A) the debtor does not have an equity in
such property; and
(B) such property is not necessary to an
effective reorganization.
2. Under Section 362(d)(1) lack of adequate protection is a
ground for relief from the stay. Means for “adequate
protection” are listed in Section 361:
(1) requiring the trustee to make a cash payment
or periodic cash payments to such entity, to the
extent that the stay under section 362 of this
title ... results in a decrease in the value of
such entity’s interest in such property;
(2) providing to such entity an additional or
replacement lien to the extent that such stay
... results in a decrease in the value of such
entity’s interest in such property; or
(3) granting such other relief ... as will
result in the realization by such entity of the
indubitable equivalent of such entity’s interest
in such property.
3. In United Savings Assoc. of Texas v. Timbers of Inwood
Forest Assoc., 484 U.S. 365, 375-76 (1988), the United
States Supreme Court addressed Section 362(d)(2):
Once the movant under § 362(d)(2) establishes
that he is an undersecured creditor, it is the
burden of the debtor to establish that the
collateral at issue is “necessary to an
effective reorganization.” See § 362(g). What
this requires is not merely a showing that if
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there is conceivably to be an effective
reorganization, this property will be needed for
it; but that the property is essential for an
effective reorganization that is in prospect.
This means, as many lower courts, including the
en banc court in this case, have properly said,
that there must be “a reasonable possibility of
a successful reorganization within a reasonable
time.” 808 F.2d, at 370-71, and nn. 12-13, and
cases cited therein. The cases are numerous in
which § 362(d)(2) relief has been provided
within less than a year from the filing of the
bankruptcy petition. And while the bankruptcy
courts demand less detailed showings during the
four months in which the debtor is given the
exclusive right to put together a plan, see 11
U.S.C. §§ 1121(b), (c)(2), even within that
period lack of any realistic prospect of
effective reorganization will require §
362(d)(2) relief.
(Footnotes omitted; emphasis in original.)
4. The Court finds cause to terminate the automatic stay
under Section 362(d)(1). Debtor has made no payments in
over 3 years. Interest is accruing at over $560 per day.
Bank has been forced to pay the taxes on the property.
Materials at the Pit are not safeguarded and, in fact,
may be being removed by others. Debtor lacks any
capacity to make periodic payments to Bank. Debtor lacks
any significant asset on which to offer a replacement
lien. Debtor did not demonstrate that his ownership
interest in the companies, or his possible future
entitlement to lawsuit proceeds, were of any value. And,
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realization of that value, if any, might come in the
distant future.
5. The Court also finds that the automatic stay should be
terminated under Section 362(d)(2). Debtor has no equity
in the properties. Debtor did not prove that there is any
likelihood of an effective reorganization that is in
prospect. Debtor did suggest that perhaps he could
auction off or otherwise sell the Pit, but did not prove
to the Court’s satisfaction that this would yield more
than Bank’s debt. In fact, the Court has found that the
Pit is worth considerably less than the Bank’s debt.
Furthermore, Debtor has not taken any steps to actually
initiate the process for any sale outside of a plan, and
to date has not filed a plan or disclosure statement.
CONCLUSION
By separate order, the Court will enter an Order granting
Western Bank - Alamogordo’s Motion for Relief from Automatic
Stay.
Honorable James S. Starzynski
United States Bankruptcy Judge
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I hereby certify that on September 30, 2004, a true and correct
copy of the foregoing was electronically transmitted, faxed,
delivered, or mailed to the listed counsel and/or parties:
Russell C Lowe
PO Box 90536
Albuquerque, NM 87199-0536
Paul M Kienzle, III
PO Box 587
Albuquerque, NM 87103-0587
Office of the United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
-and to the following additional interested parties:
Curtis A Jennings
2800 N Central Ste 1800
Phoenix, AZ 85004-1049
Ann Maloney Conway
PO Box 1190
Albuquerque, NM 87103-1190
Jeanne Y Sohn
PO Box 1945
Albuquerque, NM 87103-1945
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