Harry Carlton Wiley and Virginia Ruth Wiley

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
MEMORANDUM OPINION ON TRUSTEE’S
AMENDED MOTION FOR ORDER APPROVING
COMPROMISE OF CONTROVERSY
This matter came before the Court for final hearing on the
Trustee’s Amended Motion for Order Approving Compromise of
Controversy. 	The Trustee appeared through his attorney Moore,
Berkson & Gandarilla (Bonnie Gandarilla). 	Objecting creditor
True Value Company appeared through its attorney Rodey, Dickason,
Sloan, Akin & Robb, P.A. (Robert St. John and Charles Hughson).
For the reasons set forth below, the Court finds that the Motion
should be granted. 1
HISTORY OF THIS CONTESTED MATTER
Harry Wiley and Virginia Wiley filed a voluntary Chapter 7
petition on December 3, 2007. 	Philip Montoya was appointed as
Trustee (“Trustee”). 	On October 8, 2008, Trustee filed an
adversary proceeding against a bank and several relatives and
related businesses to recover preferential and fraudulent
transfers and for declaratory relief (08-1120, doc 1). 	Trustee
1The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§ 1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) and (O); and
these are findings of fact and conclusions of law as may be
required by Rule 7052 F.R.B.P.
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amended the complaint on March 10, 2009 to correct the identity
of two defendants 2. 	(08-1120, doc 11) 	Sometime thereafter the
Trustee and the Defendants engaged in a settlement conference.
On April 30, 2009 Count 2 against the bank was dismissed without
prejudice so that the preference action could be litigated in a
separate adversary proceeding (08-1120, doc 23). 	On May 22, 2009
Trustee filed the Motion to Approve Compromise under Rule 9019
(doc 50). 	Under the terms of the compromise, defendants would
pay $180,000 to the Trustee within one year, or $160,000 if paid
within six months, to be secured by a first mortgage on real
estate owned by the Charles Hayden Wiley and Elnora Williams
Wiley Revocable Trust (“Wiley Trust”). 	In return, Plaintiff
would dismiss the adversary with prejudice but would retain all
claims he has, if any, against HRW of Las Cruces, Inc. 	True
Value Company, which holds approximately 94% of the unsecured
claims, objected (doc 52). 	True Value claims that the Trustee
has not obtained appraisals or other opinions of value of HRW
Family, LLC or the Wiley Trust and therefore has no rational
2The amended complaint contained six counts: 1) to recover a
fraudulent transfer of the interests in HRW Family, LLC to
Virginia Oxford and Robert Wiley, or alternatively, to determine
ownership of property and recover it for the estate; 2) to
recover a preferential transfer against a bank; 3) to recover a
fraudulent transfer to Oxford Investments, LLC; 4) for turnover
and debt and money due against Debtors and the Wiley Trust; 5) to
recover a fraudulent transfer to the Wiley Trust; and 6) for a
declaration that the Wiley Trust’s assets are property of the
estate.
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basis for exercising his business judgment to settle the claims.
It also argues that the four creditors with timely proofs of
claim were not consulted on the mediation or on the terms of the
settlement.
After a final hearing on the Motion to Compromise, this
Court entered a Memorandum Opinion on March 11, 2010 that applied
the four part test adopted by the Bankruptcy Appellate Panel for
the Tenth Circuit in In re Kopexa Realty Venture Co., 213 B.R.
1020, 1022 (10th Cir. BAP 1997) and ruled that the Trustee had
not sufficiently addressed the elements of the test 3. 	In re
Wiley, 2010 WL 964082 at *5 (Bankr. D. N.M. 2010). 	The Court
then denied the Motion without prejudice. 	Id.
In October, 2010 the Court entered 1) a Memorandum Opinion
and Order denying a Motion to Dismiss Count 6 by Virginia Oxford
and Robert Wiley (Docs 26, 27); and 2) a Memorandum Opinion and
Order Granting (in part 4) a Motion for summary judgment on Counts
4 and 5 by Virginia Oxford and Robert Wiley (Docs 28, 29).
Therefore, only Counts 1, 3 and 6 remain (plus that part of Count
4 for the Debtors’ nonexempt cash).
3The Memorandum Opinion is incorporated herein and its facts
and reasoning will not be repeated.
4The Court dismissed the claims against the movants, but
left standing a demand for turnover of $3,377.58 of non-exempt
funds in one of Debtors’ bank accounts.
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After the Court denied the motion to compromise, the Trustee
and the Defendants entered into an amended settlement agreement
and the Trustee sought Court approval. 	(Doc 70). 	The settlement
provides for payment of $200,000 within one year of closing, or
$180,000 if paid within six months, with 6% interest. 	The
agreement is secured by a first mortgage on certain acres owned
by the Wiley Trust. 	In exchange, the Trustee would release all
disclosed claims. 	HRW of Las Cruces is not a party and would not
be released from anything. 	The parties agree that the Trustee
owns all stock in HRW of Las Cruces.
True Value objected. 	(Doc 72).
STIPULATED FACTS
The parties stipulated to the following facts (doc 94):
1. 	In 1996 Hayden’s Hardware Center Inc. transferred its assets
in the form of a hardware store known as “Hayden’s Hardware” to
HRW of Las Cruces, Inc. After the transfer, Hayden’s Hardware
Center Inc. continued in existence as, inter alia, a manager of
HRW of New Mexico, Inc., HRW of Las Cruces, Inc., HRW of Texas,
Inc., HRW of Zaragosa, Inc. and HRW of El Paso, Inc.
2. 	The Debtors and their businesses ceased making payments to
True Value. True Value sued Debtors and their businesses in 2001
to recover the debt owed. In that state-court lawsuit the Debtors
denied they owed the debt, asserted affirmative defenses, and
brought counterclaims against True Value for damages to them and
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their businesses allegedly in the millions of dollars. 	True
Value successfully litigated that case through trial and obtained
a judgment against Debtors and their businesses in December 2006
in the principal amount of $587,127.32 plus prejudgment interest
in the amount of $553,894.31 and attorneys fees in the amount of
$373,513.99, for a total of $1,514,535.62 with statutory interest
on the judgment accruing at 9% per annum.
3. 	In September 1997, Harry Wiley filed articles of
organization for HRW Family LLC and obtained from the Office of
the State Corporation Commission for the State of New Mexico a
certificate of organization for that entity. 	Debtors jointly
owned 100% of HRW Family LLC at formation.
4. In 1998 Harry Wiley transferred into HRW Family LLC a Piper PA
18-150 aircraft, a 1975 Cessna A185 F aircraft; a 1995 Peterbilt
379 semi truck, and various storage van trailers.
5. On or about July 20, 2006, in order to receive proceeds from
the sale of the Piper PA 18-150 aircraft, which HRW Family LLC
then owned, a bank account in the name of HRW Family, LLC. was
opened at First NM Bank.
6. On or about July 25, 2006, HRW Family LLC sold the Piper PA
18-150 aircraft to a third party for $81,000, which proceeds were
deposited into the First NM Bank account for HRW Family LLC.
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7. 	The Debtors allege that they transferred their interest in
HRW Family, LLC. by gift to their children, Virginia Oxford and
Robert Wiley, by transfer of an interest of $9999 each year for
each of the six years from 1998 through 2003 to each child. 	No
written record of such alleged transfers exists except for the
Gift Valuation Transfer Forms that are undated; HRW Family LLC
filed its first tax return in 2006.
8. 	On the date of the filing of the petition, HRW Family, LLC.
owned the following assets:
A. One 1975 Cessna airplane currently valued at between
$78,745 wholesale and $100,956 retail;
B. One 1995 Peterbilt 379 semi truck that was sold for
$18,500 in the 4 th quarter of 2010;
C. One 2001 Dodge Ram 2500 truck, in good condition,
currently valued at $3,500;
D. One 1985 Airstream travel trailer, in good condition,
currently valued at $3,800;
E. Nine storage van trailers and flat bed trailers, of which
the 2008 Econohauler Trailer was sold in 2009 for
approximately $7,000, and the 1990 Fruehauf flatbed trailer
was sold for $3,000, and the remaining seven trailers are
currently valued at $9,950;
9. 	On the date of the filing of the petition, HRW Family, LLC.
also had an interest in the balance of a loan owed by Oxford
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Investments, LLC in the approximate amount of $2,348.50 on an
original loan balance of $10,000 for 48 months.
10. 	After the filing of the petition, HRW Family LLC sold the
1995 Peterbilt 379 semi for $18,500, which proceeds are on
deposit at First NM Bank.
11. 	The total assets of HRW Family, LLC are currently valued at
approximately $126,843.50.
12. 	On or about February 28, 2003, the Debtors sold their
commercial real estate in Canutillo, Texas for $760,000.
13. 	On or about May 13, 2005, Debtors sold their commercial real
estate located at 3135 North Main in Las Cruces. 	This sale
netted the Debtors $197,181.73.
14. 	On or about September 30, 2005, Debtors sold their
commercial real estate located at 3111 N. Main in Las Cruces.
This sale netted the Debtors $299,958.48.
15. 	On or about May 17, 2005, the Debtors deposited $100,000 of
proceeds from the sale of their commercial real estate in
downtown Las Cruces into an account at First New Mexico Bank
(“FNMB”)(certificate of deposit account number 82119130).
Debtors pledged the FNMB CD, with a balance of $100,000, as
collateral for a loan of $100,000 by First New Mexico Bank to
Hayden’s Hardware Center, Inc., HRW of New Mexico, Inc., HRW of
Las Cruces, Inc., HRW of Texas, Inc., HRW of Zaragosa, Inc. and
HRW of El Paso, Inc. (Loan No. 534901–67). 	As of May 17, 2005,
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only Hayden’s Hardware Center, Inc. and HRW of Las Cruces, Inc.
were in business.
16. 	On or about May 17, 2005, FNMB also took a security interest
in inventory, equipment, accounts, general intangibles,
instruments and chattel paper as well as proceeds of the listed
security owned by the corporate entities listed in the preceding
paragraph above (“HRW Corporate Entities”) as collateral for loan
no. 534901-67.
17. 	The term of loan 534901-67 from FNMB was on demand or no
later than one year with quarterly interest payments.
18. 	On or about May 18, 2006, FNMB agreed to a change in terms
whereby loan 534901-67 was extended to May 18, 2007. 	The
interest rate was increased and the borrower agreed to make
quarterly interest payments. 	The security and collateral were
unchanged.
19. 	On or about July 10, 2006, FNMB agreed to a change in terms
whereby loan 534901-67 was extended to July 10, 2007. 	The
interest rate was again increased. 	The security previously
pledged by the HRW Corporate Entities was unchanged. 	The Debtors
pledged a Merrill Lynch Account No. 198-10438 in the amount of
$100,000 as collateral instead of the certificate of deposit that
was pledged on May 17, 2005.
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20. 	On or about [July] 18, 2006, First New Mexico Bank filed a
UCC financing statement regarding the Merrill Lynch Account No.
198-10438.
21. 	On or about July 16, 2007, FNMB agreed to a change in terms
whereby loan 534901-67 was extended to July 15, 2008.
22. 	Sometime between September 28, 2007 and December 3, 2007,
loan no. 534901-67 was paid in full.
23. 	On or about November 23, 2007, HRW of Las Cruces conveyed
inventory, fixtures and receivables to Oxford Investments, LLC.
for a total of $179,008.76, with $8,000 down and $171,008.76 to
be paid over 15 years at 8% interest per annum.
24. 	On November 30, 2007, HRW of Las Cruces filed a UCC-1
financing statement in which HRW of Las Cruces claimed a security
interest in inventory, chattel, paper, accounts, equipment and
general intangibles of Oxford Investments, LLC.
25. 	On November 21, 2007, the receivables of HRW of Las Cruces
totaled $24,385.96.
26. 	On November 23, 2007, the date of the conveyance, the debts
of HRW of Las Cruces included the judgment in favor of Truserve
Corporation.
27. 	On November 23, 2007, the liabilities of HRW of Las Cruces
exceeded the assets of HRW of Las Cruces.
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28. 	Oxford Investments, LLC. has been making payments of
$1,634.25 per month into the HRW of Las Cruces, Inc. bank
account, No. 8821 for a total of $56,990.55, which is the current
balance of the bank account.
29. 	True Value was offered the funds in the HRW of Las Cruces
bank account and the promissory note in exchange for withdrawing
its objection to this motion, but declined the offer.
30. 	On or about February 9, 1998, Farm Credit of New Mexico made
a loan to the Charles Hayden Wiley and Elnora Williams Wiley
Revocable Trust (“Wiley Trust”) and Debtors individually in the
amount of $325,000. The loan was secured by a promissory note and
a mortgage on real estate owned by the Wiley Trust. 	The loan was
payable over 30 years.
31. 	A reserve account was established in which $118,534.02 of
the loan proceeds were deposited and from which monthly payments
against interest and principal on the Farm Credit Loan were made.
Other deposits to and withdrawals from the reserve account were
made over a period from June 1998 through April 2006.
32. 	On or about February 28, 2003, the Debtors sold the building
in Canutillo where the HRW of Texas, Inc. store was located for
$760,000.
33. 	On or about October 27, 2003, $57,700.65 of principal was
paid on the Farm Credit loan.
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34. 	On or about October 28, 2003, $48,407.41 of principal was
paid on the Farm Credit loan.
35. 	On or about December 1, 2005, $135,426.31 of principal on
the Farm Credit loan was paid from the reserve account.
36. 	On or about April 28, 2006, the balance of the loan in the
amount of $23,911.72 was paid by application of $3,142.00 from
the reserve fund and a check from the Wiley Trust in the amount
of $20,924.16.
37. 	The Debtors reported the interest paid on the line of credit
mortgage on their tax returns.
38. 	The Wiley Trust was created in 1988.
39. 	The Wiley Trust Grantors, the Debtor Harry Wiley’s parents,
Charles Hayden Wiley, died in 1994, and Elnora Williams Wiley,
died on February 22, 2002.
40. 	The Wiley Trust has an ownership interest in farmland, known
as the “Wiley Farm,” consisting of 77 acres of land, guns,
vehicles, tractors and other farm equipment. 	In addition, the
Wiley Trust has an interest in a loan owed by Danny and Virginia
Oxford in the approximate amount of $5,975.
41. 	On or about April 25, 2006, Danny and Virginia Oxford
borrowed $20,000 from the Wiley Trust. 	The repayment terms of
the loan were 84 monthly payments in the amount of $292.17 at 6%
interest per annum, beginning May 15, 2006. Danny and Virginia
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Oxford have made monthly payments on the loan. 	The current
principal balance due is approximately $5,975.00.
42. 	On or about May 11, 2006, Danny and Virginia Oxford
purchased apartments located at 819 Madero St. and 1404 Montana
in Las Cruces, New Mexico on a real estate contract. 	The terms
of the real estate contract provided for a purchase price of
$285,000 with $20,000 down and the balance of $265,000 payable in
monthly installments of $1,588.81 per month.
43. 	On or about November 20, 2008, Danny and Virginia Oxford
assigned their interest in the real estate contract for the
apartments to Oxford Rental Properties, LLC.
44. 	On or about December 15, 2006, the apartments at 819 Madero
were sold, and on or about September 14, 2010, the apartments at
1404 Montana were sold.
45. 	Howard Dukes, a realtor with Coldwell Banker DeWetter
Hovious, Inc. in Las Cruces, NM performed a market analysis of
the Wiley Farm in which he determined that the land was worth
between $590,139 to $788,520 with the outbuildings and homes
valued at $350,000, for a total minimum value of $900,139.
46. 	On or about October 2005, Debtors sold an airplane hangar,
and the proceeds in the amount of $75,000 were used to construct
a building on the Wiley Farm that houses the 1975 Cessna A185,
the 2001 Dodge Ram 2500, and 1985 Airstream travel trailer, and
various other HRW Family LLC assets.
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47. 	In 2006, Hayden’s Hardware Center Inc was doing business out
of and had its office equipment located at 1414 S. Solano Dr.,
Las Cruces, NM.
48. 	In 2006, Hayden’s Hardware Center Inc gave its office
equipment to HRW of Las Cruces, Inc, receiving no money in
exchange.
49. 	On or about June 1, 2006, Oxford Investments entered into a
real estate contract for the purchase of 1414 S. Solano Dr. from
the Debtors for $50,000. The purchase provided for a $20,000
deposit to be paid by Oxford Investments with the balance,
including interest at 6% per year, to be paid in monthly
installments over 30 years. In lieu of the $20,000 deposit,
Debtors gave Danny and Virginia Oxford credit for work allegedly
done by Danny and Virginia Oxford sometime in 2000 or 2001 on
real property in Colorado owned by Debtors but where Danny and
Virginia Oxford were then living rent free.
50. 	Debtors then filed a voluntary petition under chapter 7 on
December 3, 2007.
51. 	On or about February 25, 2008, Debtors delivered a cashier’s
check to the Trustee herein in the amount of $29,600.93, which
represented the pay off of the real estate contract for the
purchase of real estate located at 1414 S. Solano, Las Cruces, NM
by Oxford Investments, LLC.
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52. 	On or about March 25, 2008, Marcy Palmer, a realtor with
Steinborn & Associates in Las Cruces, New Mexico, reported that a
market analysis of the real property located at 1414 Solano had
been performed by Grady Oxford, another realtor at Steinborn in
August, 2007 and that the market value of the Solano property was
$70,000 in August, 2007.
53. 	The Wiley Trust owns a Honda Element that Virginia Wiley
uses without paying rent.
54. 	Harry Wiley is the only pilot in the Wiley family and the
only one to ever fly the Family LLC’s 1975 Cessna. 	Harry Wiley
never paid rent for his use of the Cessna. 	Harry Wiley uses the
Family LLC’s 2005 Dodge Ram 2500 truck and pays no rent for this
use.
EXHIBITS
The parties stipulated to the authenticity of all of the
exhibits (Trustee’s Exhibits 1 through 43 and True Value’s
Exhibits 1 through 54) except Trustee’s Exhibit 2. 	The parties
stipulated to the admissibility of all of the exhibits except the
following: Trustee’s Exhibit 2; True Value’s Exhibits 10, 11, and
45-52. 	(Doc 93).
At the final hearing, Trustee’s Exhibit 2 was admitted by
stipulation, as were True Value’s 45-52. 	True Value’s Exhibits
10 and 11 were denied admission. 	Trustee introduced an
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additional Exhibit 44 at the hearing, which was also admitted by
stipulation.
True Value’s Exhibit 9 is a transcript of the April 3, 2008
deposition of Debtor Harry Wiley. 	After the final hearing both
the Trustee and True Value filed designations from the
transcript. 	(Docs 98, 99). 	The Court reviewed all of the
designated portions of the transcript.
DISCUSSION
This was a difficult and close case. 	After reviewing the
testimony, exhibits, and arguments the Court finds that the
Trustee prevails by a preponderance of the evidence.
Specifically, True Value argues that the Trustee has not
evaluated the net worth of HRW Family LLC or the Wiley Trust and
has no basis for exercising his business judgment to settle
claims 1 or 6. 	(¶ 10). 	After the filing of this objection,
however, the parties filed the Stipulated Facts. 	Fact 11 states
that the total assets of HRW Family LLC are $126,843.50. 	Fact 45
states an estimated value of the Wiley Trust’s farm of between
$900,000 and $1,100,000. 	The Trust also owns some older, low
value vehicles, some loans to beneficiaries in an insignificant
amount, and a gun collection worth $40,000 to $50,000 5.
5The collection has 15 to 20 guns with a value of $40,000 t0
$50,000. 	Wiley 2004 examination, True Value exhibit 9, p. 53,
ll. 15-18 and p. 56, ll. 6-7.
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Therefore, the Court finds that the Trustee has, in fact,
evaluated the assets of HRW Family and the Trust.
True Value also objected to the settlement amount
considering the possible assets of the entities listed above as
well as the assets of Oxford Investments, LLC. 	The Trustee and
the Court need not consider the assets of Oxford Investments
because the only claim asserted against it could be to collect
the note due from it. 	This claim is owned by HRW of Las Cruces,
which is now in turn owned by the Trustee. 	Trustee believes that
HRW of Las Cruces is insolvent. 	But, HRW of Las Cruces is not a
party to the settlement and the Trustee can still attempt to
collect that note after the settlement.
Paragraph 15 of True Value’s objection is based on what
appears to be settlement negotiations which took place between
the Trustee, his attorneys, and True Value before the objection
was filed. 	The Court should not consider settlement
negotiations.
True Value also objected to the settlement on the grounds
that the Trustee did not respond to a Motion for Partial Summary
Judgment on Counts 4 and 5. 	Both the Trustee and his attorney
testified at the final hearing that they simply had no documents
or other evidence that could, in good faith, be filed to defeat
the motion. 	The Court has also not seen any such evidence in the
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record. 	And the Court on its own 6 examined that motion on its
merits and concluded that the undisputed facts and the law
justified entry of the partial summary judgment. 	(08-1120, doc
28.) 	The Court finds the explanation of Trustee and his counsel
credible, and further finds there is no evidence before the Court
that the dismissal of Counts 4 and 5 have had any adverse impact
on the settlement or the motion to approve it.
Virginia Oxford and Robert Wiley filed a motion to dismiss
Count 6, relating to assets in the Wiley Trust. 	The Court
entered a Memorandum Opinion and Order denying that relief.
(Docs 26, 27). 	True Value claims that this claim is still viable
and worth large sums of money that the Trustee should pursue.
However, the Court disagrees for several reasons.
First, the Memorandum Opinion stated that the Wiley Trust
documents were not in evidence at that time. 	They now are. 	See
Trustee Exhibit 24. 	The Court has thoroughly reviewed the Trust
document. 	At page 5, ¶ 5.3(C) it states: “Under no circumstances
may the child who is serving as Trustee make any disbursements
6 Fed.R.Civ.P. 56(a) provides in part: “The court shall
grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” 	See Champion v. Artuz,
76 F.3d 483, 486 (2d Cir. 1996):
The fact that there has been no response to a
summary judgment motion does not, of course, mean that
the motion is to be granted automatically. Such a
motion may properly be granted only if the facts as to
which there is no genuine dispute “show that the moving
party is entitled to a judgment as a matter of law.”
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from Trust B to himself or herself or his or her descendants.”
Then, at page 21, Article XV, “Spendthrift Provision”, states in
full as follows:
Except as otherwise provided in this Agreement, no
beneficiary may anticipate, assign, sell, or transfer
any benefits to be derived under this trust and no
assignment or order by way of anticipation of any part
of the income or principal of this trust shall be
valid, not shall such be accepted by the Trustee, and
no beneficiary shall have the power to encumber or
change his or her interest. 	In addition, no such
beneficial interest, while in the possession of the
Trustee, shall be liable for, or subject to, the debts,
obligations, liabilities, torts, or contracts of any
beneficiary. 	Moreover, all payments, whether of income
or of principal, shall be made by the Trustee directly
to the beneficiary, or for his or her benefit. 	The
interest of any beneficiary in either the principal or
income of this trust shall not be subject to the claims
of any creditor of any such beneficiary, nor be subject
to the attachment, garnishment, execution, or other
legal or equitable process or lien brought by or in
favor of any creditor. 	However, this clause shall not
be construed as prohibiting disclaimers or assignments
to lineal descendants.
Spendthrift trusts are governed by statute in New Mexico.
Section 46A-5-502 NMSA, Spendthrift provision, states:
A. 	A spendthrift provision is valid only if it
restrains both voluntary and involuntary transfer of a
beneficiary's interest.
B. 	A term of a trust providing that the interest of a
beneficiary is held subject to a “spendthrift trust”,
or words of similar import, is sufficient to restrain
both voluntary and involuntary transfer of the
beneficiary's interest.
C. 	A beneficiary may not transfer an interest in a
trust in violation of a valid spendthrift provision
and, except as otherwise provided in this article, a
creditor or assignee of the beneficiary may not reach
the interest or a distribution by the trustee before
its receipt by the beneficiary.
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The Wiley Trust satisfies the requirements and is a valid
spendthrift trust.
Second, the Memorandum Opinion cited the Restatement (Third)
of Trusts, § 58 cmt.f (2003) for the proposition that any self-
settled amounts in a spendthrift trust may not be immune from
creditors. 	At this point, the record in this case has evidence
that Mr. Wiley did not transfer any assets into the Wiley Trust.
True Value Exhibit 9, p. 65, ll. 9-14. 	While evidence at trial
might show otherwise, the Court does not conduct a mini-trial to
determine if a case should settle. 	The issue is whether the
Trustee has made a rational decision.
Third, the Memorandum Opinion recognized that in some
situations a trust’s assets may be property of a debtor’s
bankruptcy estate. 	(Doc 26, p. 8). 	True Value argues that Mr.
Wiley had and has sole and absolute discretion over the trust.
The Court disagrees that the evidence supports this broad
statement. 	Virginia Oxford maintains the books and signs the
checks for the trust. 	The bookkeeper also has signing authority
on the checks. 	To date they may have allowed Mr. Wiley to use
assets, but they are under no legal obligation to do so and there
was no evidence that they would do so in the future. 	The Wiley
2004 examination was not completely clear about loans Mr. Wiley
took. 	Either his mother lent him money, and the balance due
became a trust asset upon her death, or possibly the trust loaned
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some money. 	Most was repaid, with a balance remaining of $28,000
which presumably will be discharged if Mr. Wiley receives a
discharge. 	Mr. Wiley testified that he had not “received” money
from the trust. 	True Value, Exhibit 9, p. 65, ll. 15-16.
Again, whether Mr. Wiley actually exercised too much control
is not the precise issue before the Court 7. 	This is not a mini-
trial. 	Based on the evidence available the Court finds the
Trustee’s reasoning reasonable.
Finally, there was no evidence that the trust assets were so
co-mingled with the Debtors that they would be untraceable. 	The
Trust has its own books and records and files its own tax
returns. 	Property is held in the Trust’s name.
CONCLUSION
The Court’s earlier opinion on the Trustee’s first motion to
compromise the adversary proceeding set forth the elements that
the Court must consider in ruling on this type of motion. 	The
7Even if this were the issue, the Trustee would not
necessarily get to recover the Wiley Trust’s assets. 	See Wetzel
v. Regions Bank (In re Reagen), 649 F.3d 831, 836 (8 th Cir. 2011)
(Applying Arkansas Code § 28-73-502, which is identical to NMSA §
46A-5-502; both statutes are verbatim adoptions of the Uniform
Trust Code § 502 (2000)). 	In Reagen, the debtor was executrix of
her late husband’s estate as well as a beneficiary under a trust
that contained a spendthrift provision. 	She diverted assets from
his probate to her own use instead of properly funding the trust
of which she was beneficiary. 	The Trustee attempted to include
the trust in her bankruptcy estate. 	The Eighth Circuit
distinguished previous Arkansas cases and ruled that under § 502
the spendthrift provisions were still in effect because the terms
of the trust itself did not give the beneficiary any power to
change the terms of the trust.
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Court has undertaken an independent review of the Trustee’s
business decision and finds that the Trustee provided the Court
with sufficient information to understand his reasoning. 	The
Trustee evaluated the strengths and weaknesses of both Count 1
and Count 6. 	He pointed out to the Court that Count 3 is not at
issue; HRW of Las Cruces is not a party to the settlement and
anything he can collect on account of his ownership of that
entity will come into the estate. 	The settlement amount is more
than the total net worth of the Wiley Family LLC. 	Even if the
Trustee were successful in the lawsuit against the Debtors’
children for fraudulent transfers, his recovery on Count 1 is
less than the amount in the settlement. 	Therefore, the Trustee
needs to prevail on both Counts 1 and 6. 	Everyone agrees that
Count 6 would be an “uphill battle.” 	The Court finds that the
Trustee has exercised judgment such that the compromise of the
adversary proceeding should be approved. 	The Court will enter an
Order overruling True Value’s objection and granting the
Trustee’s Motion.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date entered on docket: Dec 26, 2012
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Copies to:
Charles R. Hughson
Rodey, Dickason, Sloan, Akin & Robb, P.A
P.O. Box 1888
Albuquerque, NM 87103-1888
Robert St. John
Rodey, Dickason, Sloan, Akin & Robb, P.A
P.O. Box 1888
Albuquerque, NM 87103-1888
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
Michael K Daniels
PO Box 1640
Albuquerque, NM 87103-1640
Thomas Walker
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
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