Gregory Ranch a Partnership and Donald Wayne Gregory

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	GREGORY ROCKHOUSE RANCH,
Case No. 05-16120 MR
and
MARJORIE PARRISH GREGORY,
Case No. 05-16255 MR
and
DEBORAH LYN GREGORY,
Case No. 05-16261 SR
and
DONALD WAYNE GREGORY,
Case No. 05-16301 MR
and
GREGORY RANCH, a Partnership, 	Case No. 11-05-15405 MR
Jointly Administered
ORDER OVERRULING GLENN’S OBJECTION TO CLAIM #3 FILED BY
THE CARLSBAD NATIONAL BANK
THIS MATTER is before the Court on the objection filed by Clark Glenn and Glenn’s
Waterwell Service, Inc. (together, “Glenn”) to The Carlsbad National Bank’s claim number 3.
(See Docket # 353). The Carlsbad National Bank (“CNB”) filed a brief in response to Glenn’s
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1CNB’s memorandum also supports confirmation of the Debtors’ Chapter 11 Plans.
Confirmation matters, including Glenn’s assertion that the Debtors’ Chapter 11 Plans artificially
impair CNB’s claim in order to manufacture an accepting, impaired class, will be addressed by
separate memorandum opinion.
2Glenn’s response also addresses confirmation issues, which the Court will consider by
separate memorandum opinion.
3Glenn’s objection to CNB’s claim # 3 also asserts that the claim was filed maliciously
and falsely, in violation of 18 U.S.C. § 152(4).
4See Exhibit 6 from hearing on confirmation of Debtors’ plans of reorganization.
5See Exhibit 7 from hearing on confirmation of Debtors’ plans of reorganization.
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objection (See Docket # 385 1 ), and Glenn filed a memorandum in reply (See Docket #390 2 ). At
issue is whether CNB has a secured claim against the estate of Gregory Ranch, a Partnership
(“Gregory Ranch”). Upon review of the documents in light of the testimony on this issue, the
Court finds that CNB holds a security interest in partnership assets of Gregory Ranch. Glenn’s
objection to Claim # 3 of CNB will, therefore, be overruled. 3
FACTS AND DISCUSSION
CNB asserts that it has a security interest in the water rights of Gregory Ranch resulting
from a loan CNB granted to Union Home & Industrial, Inc. in March 18, 2003. 4 As part of this
loan transaction, Gregory Rockhouse Ranch, LLC, Larry L. Gregory, Marjorie P. Gregory, Scott
Gregory, Deborah Lynn Gregory, Wayne Gregory and Faye Jean Gregory granted CNB a
Mortgage, Security Agreement, Assignment and Financing Statement (“Mortgage”).5 The
Mortgage was signed by the following parties in the following identified capacities: 1) Gregory
Rockhouse Ranch, LLC, by Norman Scott Gregory, also known as Scott Gregory, manager and
member, and by Larry L. Gregory, manager and member; 2) Larry L. Gregory, individually; 3)
Marjorie P. Gregory (wife of Larry Gregory); 4) Scott Gregory, individually; 5) Deborah Lyn
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Gregory (wife of Scott Gregory); 6)Wayne Gregory, individually; and 7) Faye Jean Gregory
(wife of Wayne Gregory). The Mortgage grants to CNB
[A]ll of Mortgagor’s right title, and interest, whether now owned or hereafter acquired by
Mortgagor, in the lands, leases, contracts, wells, interests, and/or water rights described
in Exhibit “A” and Exhibit “B” attached hereto and made a part hereof . . .
Mortgage, p.1.
Exhibit “A” to the Mortgage is titled “Gregory Rockhouse Ranch Water Stations Information”
and identifies certain water stations by location, as well as certain other water rights contracts for
sale, a right of way grant/temporary use permit, a water development easement, and a water
station operating agreement. Station #2 as described on Exhibit “A” to the Mortgage, describes
its location and identifies Gregory Ranch as the property owner. Other stations identified on
Exhibit “A” recite that the property is owned by Rockhouse Ranch, Lois Clayton, Jerry and June
Lackey, or is leased from the state. 	Exhibit “B” to the Mortgage consists of Water Right
Summaries and Transaction Summaries from the New Mexico Office of the State Engineer
identifying certain permitted, and declared water rights. 	The documents attached as Exhibit
“B” to the Mortgage identify the following parties as “Owners”: 	Scott, Larry, Wayne Gregory;
Scott & Larry Gregory; Larry & Scott Gregory; Gregory Rockhouse Ranch - Contact: Scott
Gregory; and Gregory Rockhouse, LLC.
Gregory Ranch is a general partnership comprised of Norman Scott Gregory, Donald
Wayne Gregory, and Larry Gregory. 	Each partner holds a one-third interest in the Gregory
Ranch Partnership. 	At the final hearing on confirmation, Norman Scott Gregory testified that
the following collateral listed on Exhibit “A” to the Mortgage is owned by Gregory Ranch:
Station #2, and the right of way grant/temporary use permit identified as item 2, page 2 of
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Exhibit “A”to the Mortgage. He testified further that the water rights on stations 1, 2, and 3 are
combined and comingled water rights on Gregory Rockhouse Ranch, LLC and Gregory Ranch.
With regard to Exhibit “B” to the Mortgage, Norman Scott Gregory testified that the only entity
that Scott Gregory, Larry Gregory and Wayne Gregory own together is Gregory Ranch, such that
the papers filed with the New Mexico State Engineer’s office that reflect Scott Gregory, Larry
Gregory, and Wayne Gregory as owners, are water rights of Gregory Ranch. 	As to some of the
water rights listed in Exhibits “A” and “B” to the Mortgage that are identified as water rights of
Gregory Rockhouse Ranch, LLC, Norman Scott Gregory testified that he thought they were
Gregory Ranch rights, or that Gregory Ranch had an interest in those even though it reflects
Gregory Rockhouse Ranch, LLC.
At issue is whether individual partners, not specifically identified as signing on behalf of
the partnership, can pledge partnership property as collateral for a loan granted to an entity or
party other than the partnership. 	Glenn asserts that because the partnership is not identified as
the mortgagor, and because the signatories to the Mortgage are not identified as signing on
behalf of Gregory Ranch, the fact that the property pledged as collateral may, in fact, constitute
partnership property fails to create a security interest in favor of CNB against the estate of
Gregory Ranch.
CNB cites Dotson v. Grice, 98 N.M. 207, 209, 647 P.2d 409, 411 (1982) for the
proposition that “[p]artners may treat realty as partnership property without changing the record
title to that of the partnership.” Based on this statement of the law, the fact that Norman Scott
Gregory, Donald Wayne Gregory, and Larry Gregory are the only partners to Gregory Ranch,
the fact that these parties signed the Mortgage, and the fact that these parties are identified as
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6After January 1, 2000, the Uniform Partnership Act (1994), N.M.S.A. 1978 §§ 54-1A-
101 to 54-1A-1005, applies to all partnerships. 	N.M.S.A. 1978 § 54-1A-1005(b) (Repl. Pamp.
1996).
7That section provides:
Partnership property held in the name of one or more persons other than the
partnership, without an indication in the instrument transferring the property to
them of their capacity as partners or of the existence of a partnership, may be
transferred by an instrument of transfer executed by the persons in whose name
the property is held.
N.M.S.A. 1978 § 54-1A-302(a)(3)(Repl. Pamp. 1996).
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owners of certain water rights listed in Exhibit “B” to the Mortgage, CNB asserts that it has a
security interest in Gregory Ranch assets listed on Exhibits “A” and “B” to the Mortgage. 	This
Court agrees.
Under applicable New Mexico partnership law6
, partnership property held in the name of
the individual partner(s) can be transferred “by an instrument of transfer executed by the
persons in whose name the property is held.” N.M.S.A. 1978 § 54-1A-302(a)(2) (Repl. Pamp.
1996). 7 Thus a security interest in partnership assets was created when the individual partners
signed the Mortgage individually to grant a security interest in the partnership assets listed in
Exhibits “A” and “B.” 	It is clear from the testimony that the parties intended to grant a security
interest in the water rights to CNB, and that some of the water rights listed in Exhibits “A” and
“B” are partnership assets of Gregory Ranch. By having all three partners of Gregory Ranch
sign the Mortgage, a security interest in Gregory Ranch partnership assets held in the name(s) of
the individual partners was granted in favor of CNB.
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WHEREFORE, IT IS HEREBY ORDERED that Glenn’s Objection to Claim #3 of CNB
is overruled.
____________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
COPY TO:
Daniel J Behles
Attorney for Clark Glenn and Glenn’s Water Well Service
226-A Cynthia Loop NW
Albuquerque, NM 87114-1100
Jennie D Behles
Attorney for Gregory Ranch, a Partnership and Donald Wayne Gregory
PO Box 7070
Albuquerque, NM 87194-7070
Louis Puccini, Jr.
Attorney for Gregory Rockhouse Ranch, LLC, Deborah Lyn Gregory, Marjorie Gregory
PO Box 30707
Albuquerque, NM 87190-0707
George “Dave” Giddens, Jr.
Attorney for The Carlsbad National Bank
10400 Academy Rd NE Ste 350
Albuquerque, NM 87111-1229
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