Aquatic Pools, Inc. a New Mexico corporation

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
AQUATIC POOLS, INC., No. 15-11406 t11
Debtor.
MEMORANDUM OPINION
Before the Court is Debtor’s objection to Carol Ann Sanchez’s (“Sanchez’s”) proofs of
claim. Sanchez filed claims of $59,314 for wages and expense reimbursements. Debtor argues
Sanchez provided no value to its company and in any event was paid more than she was owed.
After considering all evidence and arguments, the Court finds that Sanchez has a non-priority,
unsecured claim of $11,979.
I. FACTS
The Court finds:
Debtor installs and repairs swimming pools. Debtor employs a small staff in its
Albuquerque, New Mexico headquarters and also employs field workers in New Mexico and
surrounding states. Ron Yates owns and operates Debtor with the assistance of his father Glenn
Yates.
In June 2014 Ron Yates called Sanchez to see if she could provide consulting services to
the Debtor. He had heard about Sanchez from an acquaintance of his, Raymond Sanchez. Sanchez
is Raymond Sanchez’s ex-wife. Debtor had suffered financially because of the economic
downtown, and also lacked normal accounting and financing procedures and controls. Debtor had
lost its relationships with several banks, could not get a line of credit to finance day-to-day
operations, and had to pay most of its expenses in cash.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 1 of 10

-2-
On June 9, 2014, Debtor engaged Sanchez to provide management services, prepare job
descriptions and an organizational chart, collect outstanding receivables, and get the business back
on track. Glenn Yates also hoped Sanchez would use her business and banking contacts to help
Debtor obtain a loan and a banking relationship. On or about June 11, 2014, the parties signed a
two-page agreement outlining Sanchez’s scope of services and compensation. Sanchez did not
produce the document in discovery or at the final hearing. Glenn Yates remembered that the
agreement entitled Sanchez to receive a fixed consulting fee that could have been as high as
$90,000. However, when testifying about Sanchez’s compensation, the parties all remembered a
figure of $7,500 a month. The Court therefore finds Debtor orally agreed to pay Sanchez $7,500
a month (or $1,731 a week) in compensation for consulting services.1 Sanchez worked for 19
weeks, earning $32,889.
Sanchez helped Debtor establish a new bank account at New Mexico Bank and Trust
(“NMBT”). Sanchez and Yates were signatories on the new account. Several times a week,
Sanchez wrote and cashed checks payable either to herself or to “cash.” Sometimes she kept the
entire amount, while sometimes she returned a portion to Ron Yates or Debtor’s office manager,
Felice Maes. On Mondays, Tuesdays, Fridays, and Saturdays, Ms. Maes would distribute the cash
to Debtor’s field workers for wages and anticipated out-of-pocket expenses for upcoming jobs.
Shortly after starting her consulting work, Sanchez and her domestic partner Patrick
Glennon began using their personal credit cards to pay some of Debtor’s expenses. Both also
made personal loans to Debtor.2 The loan totals are:
Lender Amount Type of loan
Sanchez $32,009 Charges to personal credit card for Debtor’s expenses
1 The Court makes no determination whether Sanchez was an employee or independent contractor.
The issue is not relevant to this dispute.
2 They occasionally gave cash to Ron Yates, who used it to pay Debtor’s expenses.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 2 of 10

-3-
Sanchez $1,600 Cash to Ron Yates for the benefit of Debtor
Glennon $8,8083 Charges to personal credit card for Debtor’s expenses
Glennon $6,000 Cash to Ron Yates for the benefit of Debtor
Total $48,417
Sanchez never received a normal paycheck from Debtor. For the most part, she paid herself
by cashing checks drawn on the NMBT account, which she wrote and signed.4 Once, Glenn Yates
wrote Sanchez a $4,000 check on Debtor’s behalf because Sanchez had reached her credit limit
and wanted to attend a wedding in New York.
By October 2014, the relationship between Debtor and Sanchez had broken down. The
Yateses decided that Sanchez had not accomplished enough, had not helped Debtor get a loan, and
was too secretive about the NMBT checking account activity. When Sanchez left town for a
vacation, Ron Yates went to NMBT and removed Sanchez’s name from the NMBT account.
Sanchez did not work with Debtor after that.
Because of the informal payment system described above, it is difficult to determine how
much Sanchez is owed. Debtor’s representatives asked Sanchez many times for an accounting,
including copies of her and Glennon’s bank statements. Sanchez provided some documents, but
the bank statement copies were heavily redacted. At one point Raymond Sanchez met with
Debtor’s accountant to negotiate on Sanchez’s behalf, but the parties were unable to agree on a
figure without the requested bank statements. In response to the impasse, the Debtor took the
position it did not owe her anything.
Debtor filed this case on May 28, 2015. Debtor did not schedule Sanchez’s claim, provide
3 Glennon used his card to pay three expenses for Debtor: $4,472 for utility block; $3,082 for utility
block; and $984 for an airline ticket. Ron Yates asserted at trial that at least one utility block
charge was reversed and that he never used the airline ticket. Glennon testified no charges were
reversed. The Court accepts Glennon’s testimony.
4 The Court analyzes each check below, and incorporates that chart into the findings by reference.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 3 of 10

-4-
her with notice of the bankruptcy, or send her a copy of the order setting a bar date for filing a
proof of claim. The general claims bar date was September 4, 2015. Sanchez filed two claims on
December 1, 2015: a $40,000 priority wage claim (Claim 14) and a $19,314 general unsecured
claim (Claim 15). By a memorandum opinion entered May 27, 2016, the Court determined Claim
14 was not entitled to priority.
Sanchez now asserts she is owed $90,883, which includes all compensation, credit charges,
and loans discussed above without any deductions for money she kept from the cashed checks.5
Debtor contends it owes Sanchez nothing. According to Debtor, the compensation
agreement is unenforceable because it was not in writing; Sanchez provided no value to Debtor;
and the amount of cash she received exceeded the expenses she and Glennon paid.6
II. DISCUSSION
A. The Oral Consulting Agreement is Enforceable.
Debtor’s primary legal argument is that any oral agreement to pay Sanchez for consulting
services is void under the statute of frauds. The argument fails. New Mexico has adopted the
fourth section of the English Statute of Frauds, which states:
‘no action shall be brought ... upon any agreement that is not to be performed within
the space of one year from the making thereof; unless the agreement upon which
such action shall be brought, or some memorandum or note thereof, shall be in
writing, and signed by the party to be charged therewith or some other person
thereunto by him lawfully authorized.’
Jennings v. Ruidoso Racing Ass’n, 441 P.2d 42, 44 (N.M. 1968). Thus, “agreements not to be
performed within one year are … void.” Skarda v. Skarda, 536 P.2d 257, 261 (N.M. 1975).
5 The Court finds that Glennon assigned Sanchez his right to collect from the Debtor. Because of
their long-standing relationship, the Court will treat the claims of Glennon and Sanchez as a single
claim.
6 In its claim objection, Debtor also argued that Sanchez’s claim was time-barred. However,
Debtor abandoned that argument at trial, presumably because it never served Sanchez notice of the
bankruptcy filing, bar date order, etc. See In re Unioil, 948 F.2d 678 (10th Cir. 1991).
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 4 of 10

-5-
Agreements for personal services, including employment, construction work, advertising,
etc., do not need to be in writing if they can be performed within one year. Professional Bull
Riders, Inc. v. Autozone, Inc., 144 Fed. App’x 735, 737 (10th Cir. 2005) (oral sponsorship
agreement could be performed within a year, and was not void under the statute of frauds);7
Kestenbaum v. Pennzoil Co., 766 P.2d 280, 283-284 (N.M. 1988) (at-will employment contract
did not fall within the statute of frauds because it could be performed in under one year); Leon v.
Kelly, 618 F. Supp. 2d 1334, 1341 (D.N.M. 2008) (oral partnership agreement was not void
because it could theoretically be performed within one year); Keeth Gas Co., Inc. v. Jackson Creek
Cattle Co., 570 P.2d 918, 921 (N.M. 1977) (statute of frauds did not apply to oral contract to
construct oil pipeline because it could be completed within one year). A contract with an express
three year term, on the other hand, must be in writing. Gonzales v. United Southwest Nat. Bank of
Santa Fe, 602 P.2d 619, 621 (N.M. 1979).
The oral agreement here -- under which Sanchez provided consulting services to Debtor in
exchange for $7,500 a month -- was open-ended. It could be, and in fact was, performed within a
year. The statute of frauds therefore does not bar enforcement of the agreement. Sanchez is
entitled to $32,889 under the oral consulting agreement for 19 weeks of work.
B. The Accounting.
Aside from Debtor’s statute of frauds argument, this contested matter hinges on how much
Sanchez is owed. To calculate the claim amount, the Court used the following formula: A (total
compensation) + B (total loans) – C (total reimbursements) = D (claim amount). The total
compensation and total loan amounts are set out above.
7 Professional Bull Riders applied Colorado law, which is not materially different than New
Mexico’s on this point.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 5 of 10

-6-
1. Total Reimbursement. This figure is hard to calculate based on the trial
evidence. Debtor offered a series of checks cashed by Sanchez to show that she received more
than she was owed. Sanchez testified that she returned much of the cash to Debtor, but often could
not remember the amount she returned in connection with any given check. Sanchez testified that
she made copies of each check and kept a spreadsheet detailing the amounts she kept and the
amounts she returned to Debtor. She referred to this spreadsheet often, but did not produce it at
trial. The chart she did produce, Exhibit 3, is not very helpful because it does not include many of
the checks she allegedly received.
The trial evidence showed:
Date Exhibit Face
Amount
Net
Retained
Enough evidence about amount retained, if less
than face amount?
Checks to Sanchez
6/20/2014 CC-6 $2,000 $2,000 No. Sanchez admitted she kept all of the money.
7/4/2014 CC-7 $2,492 $2,492 No. Sanchez admitted she kept all of the money.
7/4/2014 CC-7 $4,000 $4,000 No. Sanchez said she returned some of the
money but did not identify the amount.
7/28/2014 CC-8 $4,000 $4,000 No.8
8/29/2014 P9 $900 $900 No. Sanchez could not remember what portion,
if any, of the funds she returned, and her chart
shows she kept the full amount.
8/30/2014 C $6,000 $3,000 Yes. Sanchez testified she returned $3,000 to
Ron Yates.
8/30/2014 L $2,000 $2,000 No. Sanchez’s counsel represented she kept the
full amount, which her chart supports.
9/2/2014 D $6,000 $6,000 No. Sanchez did not know whether or to what
extent she returned any funds.
9/2/2014 E $5,000 $3,000 Yes. Sanchez testified the check was partially for
loans and partially for compensation, and her
8 In closing, Sanchez’s counsel admitted she received the entire $4,000 check in Exhibit CC. Since
there are two $4,000 checks in Exhibit CC, it is unclear to which check he was referring. In any
event, there is insufficient evidence that she returned any funds from either $4,000 check.
9 Unlike other exhibits, Exhibit P does not contain a second page with a receipt showing that the
check was cashed. However, Exhibit H could be the second page to Exhibit P: It is a receipt
without a check image showing that a $900 check was cashed on 8/29/2014. The only testimony
on this issue was that Sanchez received a $900 check in August 2014. The Court therefore infers
Exhibits H and P reflect the same $900 paid to Sanchez.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 6 of 10

-7-
chart shows she returned $2,000.10
9/4/2014 I $3,000 $3,000 No. Sanchez’s counsel represented she kept the
full amount, which her chart supports.
9/8/2014 J $2,000 $2,000 No. Sanchez’s counsel represented she kept the
full amount, which her chart supports.
9/9/2014 R $2,000 $2,000 No. The check was payable to cash, and Sanchez
cashed it. It is unclear what amount, if any, was
returned.
9/11/2014 M $837.79 $0 Yes. Sanchez testified she did not receive any of
the funds.
9/12/2014 S $1,000 $1,000 No. The check was payable to cash, and Sanchez
signed it. It is unclear what amount, if any, was
returned.
9/12/2014 XYZ $5,315 $5,315 No. Glenn Yates testified Sanchez received the
funds as a credit card reimbursement. Sanchez
testified she never received the check. The check
was not proffered, but the Court finds Glenn
Yates’ testimony more credible on this point.
9/13/2014 U $3,000 $3,000 No. The check is payable to “cash,” and Sanchez
signed it. Although the memo line says “Ron
Yates Monday distribution,” there was no
testimony about what amount went to Yates
versus Sanchez.
9/15/2014 Q $3,500 $1,000 Yes. Sanchez testified that she met with field
workers to deliver a portion of the funds, and her
chart shows she returned $2,500.
9/15/2014 T11 $2,500 $2,500 No. The check is payable to “cash,” and Sanchez
signed it. Although the memo line says “Ron
Yates distribution,” there was no testimony about
what amount went to Yates versus Sanchez.
9/20/2014 O $6,000 $3,000 Yes. Sanchez thought she returned some of the
funds; her chart shows she returned $3,000.12
9/24/2014 N $500 $500 No. Sanchez testified she could have kept the
entire amount.
10/8/2014 G $2,000 $2,000 No. Sanchez testified it was difficult to tell how
10 Glenn Yates testified Sanchez received the entire $5,000 check when accusing Sanchez of
reimbursing herself twice for the same expenses. However, Glenn Yates may not have known
how much she returned, and Sanchez’s evidence on this check is more concrete. The Court
therefore finds Sanchez returned $2,000 and kept $3,000.
11 The second page of Exhibit T shows the back of what appears to be a different check for $6,000
cashed on 10/2/2014. Unlike Exhibit H, it is unclear whether the second page of Exhibit T was
meant to be a stand-alone exhibit. The Court therefore disregarded the second page of Exhibit T.
12 The entry in Sanchez’s chart is actually dated 9/19/2014 but clearly refers to this check. Further,
although the chart accidentally omits the amount returned to Felice Maes and/or Ron Yates, it
explicitly states she kept $3,000.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 7 of 10

-8-
much she kept.
10/10/2014 V $1,900 $400 Yes. The check is payable to cash, and the memo
line reads “payroll [ ] reimbursement Jeff
10/10/14.” Sanchez’s chart shows that she
distributed $1,500 to Debtor’s employees.
10/14/2014 W $150 $150 No. The check is payable to “cash,” and Sanchez
signed it. There was no testimony that any funds
were returned.
11/03/2014 CC-4 $270 $270 No. Sanchez admitted she kept all of the money.
11/10/2014 F $2,900 $2,900 No. Sanchez admitted she kept the entire
amount, which her chart supports.
11/10/2014 K $2,900 $2,900 No. Sanchez admitted she kept the entire
amount, which her chart supports.
Late June
or early
July, 2014
n/a $4,000 $4,000 No. Glenn Yates testified he wrote Sanchez a
personal check for $4,000 because she had
reached her credit limit and was about to travel to
New York.
Checks to Glennon
9/20/2014 AA $5,500 $2,000 Yes. Sanchez and Glennon testified that Glennon
only kept a portion of the funds; Sanchez’s chart
shows that he returned $3,500.
9/27/2014 BB $8,000 $4,000 Yes. Glennon returned $4,000 to Ron Yates.
Total $69,327
The Court considered the following in calculating Sanchez’s claim amount:
 The Court combined Claims 14 and 15 for purposes of its calculation since
there was no way to determine how much Sanchez received for compensation
versus loan repayments;
 The Court considered: (1) all checks in Exhibits C-W, AA, and BB; (2) any
check to Sanchez in Exhibit CC, to the extent not duplicated in Exhibits C-W; (3)
the line item in Exhibit XYZ identifying a $5,315 payment by Debtor to Sanchez;13
and (4) Glenn Yate’s testimony that he wrote a $4,000 check to Sanchez;
 For the most part, the Court disregarded the memo notations on the checks.
The notations were often either blank or incorrect, reflecting Debtor’s aspirational
tax classification rather than reality;
13 The Court considered that line item based on Glenn Yates’ testimony that Sanchez received the
$5,315 check. The remaining line items did not establish she received any checks. Further, the
balance of Exhibit XYZ was admitted as a true and correct copy of Debtor’s bank statements, not
to show Sanchez received any specific amount.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 8 of 10

-9-
 Where Debtor produced a check payable to Sanchez, Glennon, or “cash,”14
the Court assumed Sanchez kept the entire amount unless she identified the specific
amount she returned to Debtor, either through testimony or as a notation in her
chart;
 The Court finds that any personal checks to Sanchez from either of the
Yateses were written on Debtor’s behalf, and that any loans from Sanchez or
Glennon given to either were for the benefit of the Debtor;
 The Court did not, as Sanchez’s counsel urged, attempt to estimate the
average amount she returned to Debtor from the checks she cashed. Even if it were
appropriate to do so (the Court is doubtful), there was not enough evidence to
estimate an average.
The Court finds that Sanchez received $71,057 from Debtor.
2. Final Calculation. The claim amount is:
A (total compensation) $32,889
+
B (Total Loans) $48,417
-
C (Total reimbursements) $69,327
Claim amount $11,979
III. CONCLUSION
Based on the parties’ unusual dealings and disorganized business practices, the amount of
Sanchez’s claim is difficult to determine. After reviewing the evidence and making its own
calculations, the Court concludes Sanchez has an unsecured, non-priority claim for $11,979. A
separate order will be entered.
____________________________________
Hon. David T. Thuma
United States Bankruptcy Judge
14 The Court finds Sanchez cashed the checks payable to “cash;” she signed each check, and they
were written when she was in charge of obtaining cash from the NMBT account.
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 9 of 10

-10-
Entered: August 26, 2016
Copies to:
Nephi Hardman
6709 Academy NE, Ste. A
Albuquerque, NM 87109
James T. Burns
1801-B Rio Grande Blvd NW
Albuquerque, NM 87104
Case 15-11406-t11 Doc 150 Filed 08/26/16 Entered 08/26/16 09:04:45 Page 10 of 10