Hydroscope Group, Inc., et al v. Bloom

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
DANIEL WILLIAM COOK and
YOLANDA T. COOK,
Debtors. 	No. 7-04-17704 SA
HYDROSCOPE GROUP, INC.,
HYDROSCOPE INC.,USA
UNIVERSAL CONSTRUCTORS, INC.,
U-LINER, INC. OF ARIZONA,
U-LINER, INC. OF UTAH,
D. W. CONSTRUCTION CO., INC.,
HYDROSCOPE CANADA INC.,
U-LINER, INC. OF NM,
Plaintiffs,
v. 	Adv. No. 07-1165 S
LINDA S. BLOOM, CHAPTER 11 TRUSTEE,
Defendant.
MEMORANDUM OPINION ON MOTION TO REOPEN
ADVERSARY FILED BY DANIEL W. COOK
This matter is before the Court on Daniel W. Cook’s
(“Debtor”) Motion to Reopen Adversary Proceeding, filed August
10, 2011. 	Doc 32. 	Mr. Cook is self-represented. 	The Motion to
Reopen will be denied. 	This is a core proceeding concerning
administration of the estate. 	28 U.S.C. § 157(b)(2)(A).
This adversary caption has eight named corporate plaintiffs.
The opening paragraph of the complaint then lists nine corporate
plaintiffs, all eight in the caption plus Cook Construction
Company, Inc. (“CCCI”).
Paragraph 8 of the complaint states that Hydroscope Group,
Inc. (“Group”) has seven wholly owned subsidiaries, one of which
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1HCAN was sold to CBM Group, Inc., a Nevada corporation,
post-petition on July 27, 2005. 	See Adv. No. 07-1038 complaint.
2For the purposes of this Memorandum Opinion, the Court will
assume that the complaint’s allegations are true, i.e., that the
assignment and assumption took place in October, 2004.
Page -2-
is HUSA (the Court assumes this is Hydroscope, USA); HUSA in turn
had 1 one subsidiary HCAN (presumably Hydroscope Canada, Inc.).
Paragraph 9 states that HCAN was never owned by Group, nor
been a subsidiary of Group.
Paragraph 10 alleges that in October, 2004, Debtor, as
Chairman, CEO and President of Group and its seven wholly owned
subsidiaries (including HUSA but excluding HCAN) executed a hand-
written note that assigned all claims of Group and its
subsidiaries against the Garrett group, Wells Fargo Bank and Hunt
& Davis to the Debtor for $0.78 and the Cooks’ personal
assumption of the corporate debt of all of those entities.
Exhibit 1 to the complaint, doc 1 p. 15, is a photocopy of the
mostly illegible note, on a post-it, attached to a memorandum
from Kenneth J. Mink, Bookkeeper of Hydroscope Group and
Subsidiaries, to “Dan” (Debtor) dated February 21, 2005 2.
Exhibit 2 to the complaint, doc 1 p. 16, is a typewritten letter
“To Whom It May Concern” signed by Daniel W. Cook, Chairman, CEO,
President of all Corporations. 	It stated:
For consideration paid, Hydroscope Group, Inc. and its
subsidiaries, in the daily course of business, with the
approval of Directors, sold, conveyed, granted, or
otherwise assigned all past present and future title
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3The contents of the schedules and statements themselves are
not really that relevant to the issue under consideration.
Rather, they demonstrate an unexplained flow of assets from one
place to another, unexplained decreases in values of claims one
day worth one million dollars turning into claims for one dollar
the next, and a steadily and rapidly increasing estimation of the
value of businesses and claims against others. 	The continuously
changing landscape coupled with bizarre legal theories have
permeated this no asset chapter 7 case for seven years.
The original schedule B listed a stock interest in
Hydroscope Group Series A-Preferred with a value of $2,000,000
and an interest in Hydroscope Group-Common Stock with a value of
$1. 	Schedule B, item 20, listed other claims against: Eastern
Savings Bank, value $150,000; Wells Fargo Bank for fraud
($1,014,559), destruction of property, business interference and
fraud ($2,700,000) and treble damages ($8,100,000); and Scott
Garrett for fraud and other torts ($1,500,000) and damages for
business destruction ($10,000,000). 	Nowhere does this Schedule B
or any Amended Schedule B ever state that some or all of the
claims against others were transferred to Debtor for $0.78 and
(continued...)
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right and interest in and to any and all of its claims
and causes of action against Garrett Capital, LLC,
Scott Garrett, Catherine F. Davis, Esq., Hunt & Davis,
P.C., Wells Fargo Bank a/k/a Wells Fargo Bank New
Mexico, N.A.’s, to and including the parent or parents
of Wells Fargo Bank, to Daniel W. and Yolanda T. Cook
individually.
Paragraph 11 claims that the Debtors’ schedules of debt
included all debts of Group and the two subsidiaries that had
debt, HUSA and CCCI. 	It also alleges that the schedules
specifically excluded debts of HCAN including those to the
University of Alberta and to the law firm of Christensen O’Connor
Johnson Kindress. 	As proof, paragraph 11 cites to the original
statements and schedules in the main case, doc 14 (November 26,
2004), and to later amendments, docs 94 (May 27, 2005) and 216
(August 19, 2005). 3
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3(...continued)
his guarantee of corporate debts in the millions of dollars.
Original Schedule D listed 11 secured debts totaling $3,135,000
of which 10 are “disputed”. 	The single undisputed secured debt
was $13,376 owed to New Mexico for a personal income tax lien.
Original Schedule E listed one disputed priority tax debt to IRS
for $125,863. 	Original Schedule F listed 26 unsecured debts
totaling $3,141,000 of which 19 are “disputed.” 	The remaining
undisputed unsecured debts total $235,659 plus two
“undetermined.” 	On Schedule H, Group, HUSA and Cook Construction
Company, Inc. are listed as codebtors.
The first amendment was to Schedule B only. 	It included an
account receivable from Group in the amount of $1,017,000 that
had inadvertently been omitted.
The second amendments were extensive. 	On Schedule B, the
Group Preferred stock’s value dropped without comment or
explanation from $2,000,000 to $1. 	A new stock was listed, CBM
Group (the corporation that acquired HCAN postpetition) with a $1
value. 	The account receivable from Group dropped value from
$1,017,000 to $1. 	A new claim against Spica Properties for fraud
and conversion was listed at $500,000. 	The total claims against
Wells Fargo rose from $11,814,559 to $450,000,000. 	The claim
against Scott Garrett (and his attorneys) rose from $11,500,000
to $35,000,000. 	This Schedule B also lists an interest in CBM
and Group’s IP at $21,000 and a proposed license to CBM valued at
$10,000,000. 	Schedule E now listed a new $13,776 claim of New
Mexico, and no longer disputed the IRS claim of $125,536.
Amended Schedule F omits a liability arising under a personal
guarantee to Wells Fargo that appeared at $2,208,000 on the
original schedules, as well as a Bank One credit card in the
amount of $9,018. 	About a dozen formerly disputed claims are no
longer disputed. 	What is surprising, however, it the appearance
of twelve large claims (totaling $3,578,000) that mostly appear
to be liabilities for guarantees of corporate debts that
presumably the Debtor assumed before filing the case.
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The first claim for relief seeks 1) a declaration that
HCAN’s claims were never transferred to the Cooks and therefore
never estate property, and 2) entry of a judgment against Ms.
Bloom in an amount to be proven for damages HCAN has sustained as
a result of “her actions”. 	The second claim for relief seeks 1)
a declaration that “defenses against any claims that may be
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4This is one of the bizarre legal theories referenced in
footnote 3. 	Exhibit 2 to this adversary proceeding, doc 1 p. 16,
is an after-the-fact letter written by Mr. Cook to explain that
Hydroscope Group, Inc. and its subsidiaries, sold, conveyed,
granted, or otherwise assigned all past present and future title
right and interest in and to any of its claims and causes of
action against [various parties] to the Cooks, individually.
From this statement the Debtor argues that only claims were
assigned, but defenses to claims arising from those same parties
remained in the assignors. 	Neither Plaintiffs nor Debtor have
pointed out any authority for this proposition, nor has the Court
found any. 	Debtor’s best argument is that if the assignment were
of claims and defenses, it would have stated so. 	The Court’s
answer to this is that if the assignment were of claims without
related defenses, it would have stated so. 	An example of how
this could play out is as follows: Assume that in a particular
state, usury is a defense to payment of a mortgage and also
provides a cause of action for damages. 	Assume also that the
state has a provision exempting licensed mortgage bankers from
the operations of the usury laws. 	A, a licensed mortgage banker
in the state, makes a high interest loan to individual B, who
grants to A a mortgage on his property. 	A then, for adequate
consideration, sells, conveys, grants, or otherwise assigns all
past present and future title right and interest in and to any of
its claims and causes of action against B to an individual C.
(The hypothetical facts to this point are taken from Galatti v.
Alliance Funding Co., Inc., 228 A.D.2d 550, 644 N.Y.S.2d 330, 331
(Ct.App. 1996)). 	If B then defaults and C files suit for money
due and to foreclose the mortgage, B can defend with usury as a
defense and counterclaim against C for damages. 	If C has not
been assigned A’s “defenses” it could not claim exemption from
the usury laws, could not foreclose and might be liable for
damages. 	(In the actual case, the appellate court had no trouble
finding that defendants, as lawful assignees of the mortgage were
entitled to assert the exemption.) 	Furthermore, it is likely
that future litigation regarding the defense would be barred by
res judicata as something that should have been litigated in the
first suit. 	Blea v. Sandoval, 107 N.M. 554, 558, 761 P.2d 432,
436 (Ct.App.), cert. denied, 107 N.M. 413, 759 P.2d 200 (1988).
Page -5-
brought against” Group, its subsidiaries, and HCAN were never
transferred to the Cooks and therefore never estate property 4,
and 2) entry of a judgment against Ms. Bloom in an amount to be
proven for damages that Group, the subsidiaries and HCAN have
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Page -6-
sustained as a result of her actions. 	The third claim for relief
states that the purpose of the prepetition transfer of claims to
Mr. Cook was to allow him to pursue the claims while in
bankruptcy, and then he would use the proceeds of the litigation
to pay off corporate creditors. 	Doc 1, p. 13. 	Count 3 further
states that Ms. Bloom interfered with a means to pursue and
secure funds to pay off corporate creditors and has thwarted the
whole purpose of the transfer of claims to the Cooks, so she
should be ordered to abandon the claims.
RELEVANT BACKGROUND
The Debtors filed a Chapter 11 petition on November 21,
2004. 	They continued in possession of the estate.
On June 2, 2005, Wells Fargo filed a motion to appoint
trustee. 	Doc 96. 	On July 19, 2006 the Court entered an Order
directing the United States Trustee to appoint a case trustee.
Doc 366. 	On August 16, 2006, Linda Bloom accepted appointment as
the Chapter 11 Trustee.
On February 14, 2007 (doc 503) the Chapter 11 trustee, Wells
Fargo, and the Garretts filed a Motion to Approve Compromise
under Rule 9019, which, if approved, would settle all the
litigation pending in federal and state court regarding all of
the parties. 	The automatic stay would be terminated, the
estate’s stock interests and intellectual property interests
would be transferred to Garrett, Garrett would pay Wells Fargo a
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5Barton v. Barbour, 104 U.S. 126, 128 (1881)(“It is a
(continued...)
Page -7-
certain amount, the state court would foreclose the liens on the
properties, and some amount of funds would be made available to
the estate. 	The compromise was conditioned, in part, on the
estate’s ownership of certain assets. 	To obtain some of those
assets, the Chapter 11 Trustee executed and delivered to CBM
Group a Notice of Reversion of certain assets that it had
purchased from HCAN on July 27, 2005. 	See Adv. No. 07-1038
complaint.
On March 6, 2007, CBM Group filed an adversary seeking a
declaratory judgment that the estate did not own the assets on
which the trustee was claiming a reversion. 	Adv. No. 07-1038.
On January 31, 2008, the Court entered a judgment in the
adversary:
IT IS HEREBY DECLARED that neither the Cook bankruptcy
estate nor Linda Bloom, Trustee of the Cook bankruptcy
estate, or any person claiming through them has any
right, title or interest in or to that certain
intellectual property which was conveyed by Hydroscope
Canada, Inc. to CBM Group, Inc. by agreement made on
January 25, 2005, effective as of January 28, 2005 and
executed on June 17, 2005.
On February 14, 2008, the chapter 11 trustee resigned. 	Main
case, doc 674. 	The Court had a pretrial conference in this
adversary on April 17, 2008 (doc 23 minutes) at which it heard
arguments from Plaintiffs why the claims against the Trustee
should not be dismissed for failure to comply with the Barton 5
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5(...continued)
general rule that before suit is brought against a receiver leave
of the court by which he was appointed must be obtained.”); Sherr
v. Winkler, 552 F.2d 1367, 1374 (10 th Cir.1977)(Leave of the
appointing court must be obtained before suing a receiver or
trustee in bankruptcy.)(citing Barton v. Barbour, 104 U.S. 126
(1881)).
Page -8-
doctrine. 	At about this time the Court also terminated the
automatic stay with respect to all parties and all property
interests involved, to be litigated in an ongoing state court
proceeding. 	Therefore, on April 21, 2008, the Court entered an
Order Dismissing Adversary Proceeding without Prejudice. 	The
Order specifically states that if the Plaintiffs pursued a
hearing on a Barton motion, the case could be refiled against the
trustee. 	As to the other claims, there was no need for this
adversary to continue because the state court was dealing with
all the issues. 	On May 1, 2006, Plaintiffs filed a motion to
reconsider the dismissal order. 	Doc 27. 	They argue that they
should have been allowed to pursue Barton relief in the main
case, and to name the new trustee before dismissal. 	They also
argued that it was premature to dismiss because the outcome of
the state case was uncertain and might not resolve all issues.
On May 6, 2008 the Court denied the Motion to Approve Rule
9019 controversy. 	Main case, doc 746.
On October 15, 2008, the Court granted the Motion for
Reconsideration. 	Doc 27. 	Its first paragraph states: “The
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Page -9-
motion for Reconsideration will be granted as set out in this
order.” (Emphasis added.) 	The decretal portion stated:
IT IS THEREFORE ORDERED as follows:
1. The dismissal order (doc 24) is set aside;
2. Plaintiffs must amend the complaint to name the
current chapter 7 trustee as the defendant for all
purposes;
3. After conferring with opposing counsel to see if the
motion is opposed, Plaintiffs must request a hearing on
the Motion for Leave to Expand or Amend Suit Against
Trustee Bloom in her Official Capacity, not
Individually (doc 664); and
4. The parts of this adversary proceeding which seek a
ruling on the ownership of the claims and defenses are
stayed until the State District Court litigation is
completed, consistent with the stay orders entered in
the main case, until and unless the Court rules
otherwise.
(Emphasis added.) 	After October 15, 2008, the only thing that
happened was the withdrawal of Plaintiffs’ attorney. 	No amended
pleadings were filed. 	The new trustee was not substituted in.
No request for hearing was made in the main case to determine the
scope, if any, of a trustee’s liability.
When the Court denied the Rule 9019 compromise motion, all
of the issues in this adversary proceeding were mooted. 	If the
trustee was no longer attempting to sell assets allegedly
belonging to others, there was no need for an order preventing
that sale. 	If the Plaintiff corporations wanted to sue the
trustee, they could seek to do so by filing a motion in the main
case. 	They did not. 	This adversary was therefore closed as moot
on July 29, 2011, without any notice of forthcoming dismissal.
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6The Court has reviewed its decision in In re Seck and finds
no conflict with its decisions in this case. 	In Seck the case
trustee filed a report of no distribution and abandonment of
assets. 	The case then closed. 	This Court noted that, in
general, abandonments are not reversible. 	Under section 544(a),
a trustee may abandon property “after notice and a hearing” or
under section 544(b) the court may order abandonment on request
of a party in interest “after notice and a hearing.” 	Otherwise,
if the case closes without a scheduled asset being administered
by the trustee the scheduled asset is deemed abandoned. 	Section
544(c). 	Otherwise, property not abandoned or administrated
remains property of the estate unless the court orders otherwise.
Section 544(d). 	In Seck, the Court also noted that the section
341 meeting notice provides that a trustee may effect an
abandonment under section 544(a) without notice and hearing if no
requests for notices of proposed abandonments are filed with the
court. 	The Court did not state the obvious that if actual
objections to abandonment are filed, the trustee may not abandon
without a notice and hearing and an order.
In the Cook bankruptcy, the first issue of abandonment was
the Debtors’ Motion to Compel Abandonment, doc 578, filed July
25, 2007. 	The Chapter 11 Trustee, Wells Fargo, and the Garrets
filed a joint objection on August 9, 2007. 	Doc 587. 	From this
point on, there were existing objections to abandonment in the
record, so no assets could be abandoned without “notice and a
hearing.” 	No orders were entered authorizing abandonment. 	The
(continued...)
Page -10-
On August 10, 2011, Mr. Cook filed a Notice and Disclosure.
Doc 34. 	In it, he discloses that the Plaintiffs in this case,
except for HCAN, transferred causes of action to him prepetition
which were included on his Schedule B. 	He also states that he
believed that trustee Montoya abandoned all assets to him on July
1, 2009 by virtue of his stating that he would abandon assets.
Doc 844. 	On August 9, 2011, this Court entered an Order
declaring that the trustee’s proposed abandonment would not be
effective until the case closed. 	Debtor also argues that the
Court has reversed its position 6 from that stated in In re Seck,
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6(...continued)
Cook case has not closed. 	Therefore, no assets have been
abandoned. 	Mr. Cook has challenged this ruling on numerous
occasions, but the Court has steadfastly ruled that nothing has
been abandoned.
In Seck the trustee filed a notice of abandonment and the
case closed. 	Under section 544(c) the scheduled assets were
abandoned. 	In Cook, the case has not closed; there are
objections to abandonment, and no orders have allowed
abandonment. 	Seck is not binding on, persuasive, or even
relevant to the Cook case.
Page -11-
No. 7-05-21255-SS (Bankr. D. N.M. Memorandum Opinion January 19,
2007). 	Debtor further argues that because the trustee
misrepresented to everyone that the assets had been abandoned
(doc 844) the corporate entities relied on that misrepresentation
to not pursue this adversary (and, by the way, another adversary
they had filed against trustee Montoya and allowed to be
dismissed for want of prosecution, Adv. 08-1099, dismissed March
17, 2010). 	Debtor states that “Cook will pursue the damages by
the alleged false allegations of alleged estate ownership of
HCAN’s causes and exclusive ownership of all the corporate
entities [sic] defenses.” 	Finally, he argues that the adversary
case was “improvidently closed” without notice to Cook.
DECISION
This motion is not well taken for many reasons. 	First, and
easiest, is the fact that Cook was not a party to this adversary
proceeding and was not entitled to any notice.
Second, this adversary proceeding was dismissed as much for
being abandoned and unprosecuted as it was for being moot.
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Page -12-
The authority of a federal trial court to dismiss
a plaintiff's action with prejudice because of his
failure to prosecute cannot seriously be doubted. 	The
power to invoke this sanction is necessary in order to
prevent undue delays in the disposition of pending
cases and to avoid congestion in the calendars of the
District Courts. 	The power is of ancient origin,
having its roots in judgments of nonsuit and non
prosequitur entered at common law, e.g., 3 Blackstone,
Commentaries (1768), 295-296, and dismissals for want
of prosecution of bills in equity, e.g., id., at 451.
Link v. Wabash Railroad Co., 370 U.S. 626, 629-30 (1962)(footnote
omitted).
The authority of a court to dismiss sua sponte for lack
of prosecution has generally been considered an
‘inherent power,’ governed not by rule or statute but
by the control necessarily vested in courts to manage
their own affairs so as to achieve the orderly and
expeditious disposition of cases.
Id. at 630-31 (footnote omitted.) 	See also Securities and
Exchange Commission v. Power Resources Corp., 495 F.2d 297, 298
(10th Cir. 1974):
A trial court may, on motion of a defendant or on
its own motion, dismiss an action for failure of the
plaintiff to prosecute it with reasonable diligence.
Rule 41(b), F.R.Civ.P. 	See also Link v. Wabash R. Co.,
370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962). Such
a dismissal is within the trial court's sound
discretion and should be sustained absent an abuse of
that discretion. 	Food Basket, Inc. v. Albertsons,
Inc., 416 F.2d 937 (10th Cir. 1969).
There is no precise rule as to what circumstances
justify a dismissal for failure to prosecute. 	Instead,
the procedural history of each case must be examined to
make such a determination.
(holding that a three year delay was sufficient.) 	In this case,
there was an order entered on October 15, 2008 reopening the
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Page -13-
case. 	As of July 29, 2011 the case did not move. 	This delay was
sufficient to justify closing the case for want of prosecution.
Third, a trial court may properly dismiss a case if a
plaintiff fails to comply timely with a court order. 	LaFleur v.
Teen Help, 342 F.3d 1145, 1150 (10th Cir. 2003). 	See also
Vazquez-Rijos v. Anhang, ___ F.3d ___, 2011 WL 3596733 (1st Cir.
2011):
In order to operate effectively and administer
justice properly, courts must have the leeway “to
establish orderly processes and manage their own
affairs.” 	Young v. Gordon, 330 F.3d 76, 81 (1st Cir.
2003). 	As such, trial courts have substantial
authority to impose sanctions, including dismissal,
against a party for noncompliance with various
procedural rules and court orders. 	Id.
The October 15, 2008 order ordered Plaintiffs to amend the
complaint to name the current trustee and to obtain a hearing on
their motion to authorize them to sue the trustee. 	They did
neither. 	The fact that there was no time limit imposed in the
order is not relevant. 	If an order does not require compliance
by a date certain, then it is interpreted to require compliance
within a reasonable time. 	Flinn v. Rains (In re Rains), 338 B.R.
99, 103 (Bankr. E.D. Cal. 2006). 	Thirty three months was not a
reasonable time in this case. 	Next, the fact that Plaintiffs’
attorney withdrew shortly after entry of the order does not give
Plaintiffs an automatic extension of time to comply. 	Gruenwald
v. Missouri Pacific Railroad Co, 331 F.2d 983, 987 (8th Cir.
1964)(citation omitted.) 	Finally, this was not just an ordinary
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Page -14-
order that Plaintiffs ignored. 	This order was entered with the
direction that the adversary case would be reopened “as set out
in this order.” 	In other words, the reopening was contingent on
Plaintiffs compliance with the requirements of the Order. 	When
Plaintiffs ignored the Order’s requirements, the adversary was
properly reclosed.
Fourth, Debtor states that “Cook will pursue the damages by
the alleged false allegations of alleged estate ownership of
HCAN’s causes and exclusive ownership of all the corporate
entities [sic] defenses.” 	In other words, Debtor seeks to use
Bankruptcy Court resources to avenge claimed harms to
corporations that were not bankruptcy debtors. 	The Bankruptcy
Court lacks jurisdiction over these causes of action which are
unrelated to bankruptcy and which will yield nothing for
unsecured creditors. 	Additionally, Mr. Cook received his
discharge. 	There is no provision in the Bankruptcy Code that
gives discharged debtors the broad trustee-like powers that Mr.
Cook desires.
Fifth, to the extent that the subsidiaries and Group
transferred their rights to Mr. Cook prepetition, those rights
passed to the estate upon filing. 	Therefore, after filing the
Chapter 11, the subsidiaries and Group no longer had standing to
attempt to interfere with the trustee’s administration of those
rights. 	As President and CEO of the subsidiaries and Group, Mr.
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Page -15-
Cook attempted in this adversary proceeding to impede and impair
the trustee’s attempted resolution of the case that would have
yielded a dividend (admittedly small) to the creditors by
obfuscating ownership of claims and “defenses” and threatening
personal liability to the trustee if she pursued her duties under
the Bankruptcy Code. 	Also, to the extent Group and subsidiaries
asserted residual rights where there were none they were in
direct violation of the automatic stay by asserting control over
estate assets. 	11 U.S.C. § 362(a)(3). 	Actions taken in
violation of the automatic stay are void. 	Franklin Savings
Assoc. v. Office of Thrift Supervision, 31 F.3d 1020, 1022 (10th
Cir. 1994). 	And allowing Debtor to reopen this case (to which he
was never a party) would not be just.
Finally, as an observation and not as a ruling, the Court
would find that reopening would be pointless. 	As discussed
above, the injunctive relief is moot because no trustee is
attempting to sell anything. 	The only damage claim is premised
on the trustee’s false claim of ownership of assets of others,
with resulting damages that would have been proved at trial.
This is an acceptable and recognized cause of action in New
Mexico, see, e.g., Gregory Rockhouse Ranch, L.L.C. v. Glenn’s
Water Well Service, Inc., 144 N.M. 690, 696, 191 P.3d 548, 554,
2008-NMCA-101, {17}:
“Slander of title occurs when one who, without the
privilege to do so, willfully records or publishes
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Page -16-
matter ‘which is untrue and disparaging to another's
property rights in land as would lead a reasonable man
to foresee that the conduct of a third [person as]
purchaser might be determined thereby.’” Vill. of Wagon
Mound v. Mora Trust, 2003–NMCA–035, ¶ 74, 133 N.M. 373,
62 P.3d 1255 (emphasis added) (quoting Den–Gar Enters.
v. Romero, 94 N.M. 425, 430, 611 P.2d 1119, 1124
(Ct.App.1980)).
And, the cause of action is not limited to damages to land.
Under the facts of this case, the tort committed
by Ruiz is also akin to slander of title, a form of
tort that Professors Prosser and Keeton call by the
generalized name, “injurious falsehood.” 	[W.P. Keeton,
D. Dobbs, R. Keeton, D. Owen,] Prosser and Keeton [on
the Law of Torts] § 128 [(5th ed. 1984)]. 	“For the
most part the injurious falsehood cases have been
concerned with aspersions upon the title to property *
* *. 	Any type of legally protected property interest
that is capable of being sold may be the subject of
disparagement, including land * * *.” 	Id. at 965.
“The gist of the tort is the interference with the
prospect of sale or some other advantageous relation.”
Id. at 966.
Ruiz v. Varan, 110 N.M. 478, 480-81, 797 P.2d 267, 269-70 (1990)
(footnote omitted.) 	See also Restatement (Second) of Torts §
623A (1977):
One who publishes a false statement harmful to the
interests of another is subject to liability for
pecuniary loss resulting to the other if
(a) he intends for publication of the statement to
result in harm to interests of the other having a
pecuniary value, or either recognizes or should
recognize that it is likely to do so, and
(b) he knows that the statement is false or acts
in reckless disregard of its truth or falsity.
and id. § 629:
A statement is disparaging if it is understood to cast
doubt upon the quality of another's land, chattels or
intangible things, or upon the existence or extent of
his property in them, and
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Page -17-
(a) the publisher intends the statement to cast
the doubt, or
(b) the recipient's understanding of it as casting
the doubt was reasonable.
But, the Plaintiffs’ complaint totally ignores the fact that
the Trustee’s actions were taken in furtherance of her position
as a bankruptcy trustee that had initiated litigation (the Rule
9019 motion). 	This cloaks her actions with absolute immunity.
“An absolute or unqualified privilege means absolute
immunity from liability for defamation.” 	Neece v.
Kantu, 84 N.M. 700, 705, 507 P.2d 447, 452 (Ct.App.
1973). 	Generally, statements made in the course of
judicial proceedings enjoy an absolute privilege from
later charges of defamation or slander of title.
Superior Constr., Inc. v. Linnerooth, 103 N.M. 716,
719, 712 P.2d 1378, 1381 (1986); and see generally
Restatement (Second) of Torts § 635 (1977) (providing
that the varieties of absolute privilege which apply to
defamation also apply to the tort of injurious
falsehood—i.e., slander of title). 	Under appropriate
circumstances, this privilege applies even to
statements made outside the proceedings themselves:
It is not absolutely essential, in order to obtain
the benefits of absolute privilege, that the
language claimed to be defamatory be spoken in
open court or contained in a pleading, brief, or
affidavit.... If the alleged defamatory statement
is made to achieve the objects of the litigation,
the absolute privilege applies even though the
statement is made outside the courtroom and no
function of the court or its officers is invoked.
Romero v. Prince, 85 N.M. 474, 477, 513 P.2d 717, 720
(Ct.App. 1973) (alteration in original) (internal
quotation marks and citation omitted).
Gregory Rockhouse Ranch, L.L.C., 144 N.M. at 696, 191 P.3d at
554. 	See also Superior Construction, Inc. v. Linnerooth, 103
N.M. 716, 719, 712 P.2d 1378, 1381 (1986)(“New Mexico courts have
long recognized the absolute privilege accorded judicial
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proceedings.”)(citations omitted.); Neece v. Kantu, 84 N.M. 700,
705, 507 P.2d 447, 452 (Ct.App.), cert. denied, 84 N.M. 696, 507
P.2d 443 (1973):
[A]bsolute immunity does apply to defamatory
matter in judicial pleadings, even if false and
malicious, when the defamatory matter is reasonably
related to the subject of inquiry.
An absolute or unqualified privilege means
absolute immunity from liability for defamation. 	It
has been confined to very few situations where there is
an obvious policy in favor of permitting complete
freedom of expression, without any inquiry as to the
defendant's motives. 	It is generally limited to
judicial proceedings, legislative proceedings,
executive communications, consent of the plaintiff,
husband and wife, and political broadcasts.
(Citations omitted.) 	And, the immunity also extends to protect
statements made even if litigation is only under “serious
consideration.” 	Helena Chemical Co. v. Uribe, 149 N.M. 789, 794,
255 P.3d 367, 372, 2011-NMCA-060, {18} (Ct.App.), cert. granted,
(June 08, 2011).
CONCLUSION
For all of the above reasons, the Court finds that Debtor’s
Motion to Reopen is not well taken and should be denied. 	The
Court will enter a separate Order denying the Motion.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date entered on docket: September 11, 2011
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Copies to:
All Plaintiffs Listed
c/o their former attorney
William J. Waggoner
529 W San Francisco
Santa Fe, NM 87501
Daniel William Cook
Interested party
920 Galeras Street NW
Albuquerque, NM 87120
Linda S. Bloom
Defendant
PO Box 218
Albuquerque, NM 87103-0218
United States Trustee
P.O. Box 608
Albuquerque, NM 87103
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