# WBL SPO I, LLC v. APSCO, Inc.

> United States Bankruptcy Court, D. New Mexico · August 5, 2021

URL: https://www.frixlaw.com/law-library/cases/10459982

## Case

- **Court:** United States Bankruptcy Court, D. New Mexico
- **Decided:** August 5, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10459982

## How later opinions describe it (automated extraction)

- holding that questions of fact as to whether a party’s reliance on apparent authority was reasonable where neither party adduced evidence on this issue
- discussing the “usual caveats” in legal opinion letters
- stating that “[a]n inanimate entity . . . can act only through its agents” and that a limited liability company acts through its designated manager

## Opinion text

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO

In re: BELENDA M. LANE, No. 19-11901-j13
Debtor.
WBL SPE II, LLC,
Plaintiff,
v. Adversary No. 19-1079-j
APSCO, INC., JESSE LANE PROPERTIES, LLC,
LANE LAS CRUCES, LLC, and BELENDA M. LANE,
Defendants.

MEMORANDUM OPINION
THIS MATTER is before the Court on Plaintiff’s Partial Motion for Summary Judgment

(“Summary Judgment Motion”). See Docket No. 27. Defendants APSCO, Inc., Jesse Lane
Properties, LLC, and Lane Las Cruces, LLC filed a response1 to the Summary Judgment Motion
(“Response”), and Plaintiff replied (“Reply”). See Docket Nos. 28, 32. After consideration of the
arguments and evidence presented by the parties, the Court will deny Plaintiff’s Summary
Judgment Motion for the reasons set forth below.
I. SUMMARY JUDGMENT STANDARDS
Summary judgment will be granted when the movant demonstrates that there is no
genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See
Fed.R.Civ.P. 56(a), made applicable to adversary proceedings by Rule 7056, Fed.R.Bankr.P.

1 Defendant Belenda Lane did not respond to the Summary Judgment Motion.
“[A] party seeking summary judgment always bears the initial responsibility of informing the . . .
court of the basis for its motion, and . . . [must] demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Only if the properly supported
material facts entitle the requesting party to judgment as a matter of law is it appropriate for the
Court to grant summary judgment. Id. The Court evaluates a request for summary judgment by

drawing “all reasonable factual inferences in favor of the non-moving party.” Genberg v. Porter,
882 F.3d 1249, 1253 (10th Cir. 2018). Thus, summary judgment is appropriate “if the evidence
points only one way and no reasonable inferences could support the non-moving party’s
position.” Id.
In opposing a motion for summary judgment, a party may establish the existence of a
genuinely disputed material fact by: 1) citing to “depositions, documents, electronically stored
information, affidavits or declarations, stipulations ... admissions, interrogatory answers or other
materials” in the record; or 2) “showing that the materials cited [by the moving party] do not
establish the absence ... of a genuine dispute,” or that the moving party “cannot produce

admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1)(A) and (B). A dispute is
“genuine” where “the evidence is such that a reasonable jury could return a verdict for the non[-
]moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is “material”
if it “might affect the outcome of the suit under the governing law[.]” Id.
New Mexico Local Bankruptcy Rule 7056–1(c) provides that the party opposing
summary judgment must: 1) list the material facts as to which the party contends a genuine fact
exists; 2) “refer with particularity to those portions of the record upon which the opposing party
relies;” and 3) “state the number of the movant’s fact that is disputed.” NM LBR 7056–1(c).
Properly supported material facts in the movant’s motion are “deemed admitted unless
specifically controverted” by the party opposing summary judgment. NM LBR 7056–1(c).
II. FACTS NOT SUBJECT TO GENUINE DISPUTE
After review of the documents presented by Plaintiff and Defendants, including an
affidavit by Jesse Lane, as well as the Summary Judgment Motion, Response, and Reply, the

Court finds that the following facts are not in genuine dispute.
The Parties
1. Plaintiff, WBL SPE II, LLC (“Plaintiff”) is a New York limited liability
company. [First Amended Complaint (“FAC”), ¶ 1; Answer by APSCO, Inc., Jesse Lane
Properties, LLC, and Lane Las Cruces, LLC (“Answer”), ¶ 1 (admitted); Ex. T].
2. World Business Lenders, LLC (“WBL”) is a New York limited liability company
[Ex. U]. Although WBL was the lender when the loan documents were executed, Plaintiff was
the holder of the Notes and Mortgages when Plaintiff filed the complaint in the state court that is
the basis of this proceeding. [Ex. RR, SS, TT and UU]

3. Defendant APSCO, Inc. (“APSCO”) is a New Mexico corporation. [FAC, ¶ 2;
Answer, ¶ 1(admitted)].
4. Defendant Jesse Lane Properties, LLC (“JLP”) is a New Mexico limited liability
company. [FAC, ¶ 3; Answer, ¶ 1(admitted)].
5. Defendant Lane Las Cruces, LLC (“Lane Las Cruces”)2 is a New Mexico limited
liability company. [FAC, ¶ 4; Answer, ¶ 1(admitted)].

2 The Court will refer to APSCO, Lane Las Cruces, and JLP collectively as “the Entities.”
6. Defendant Belenda Lane is an individual and the debtor in the underlying chapter
13 bankruptcy case, case number 19-11901-j13, which is pending. [FAC, ¶ 5; Answer, ¶ 1
(admitted); Case No. 19-11901-j13, Doc. 1].
The JLP Operating Agreement
7. Under JLP’s Operating Agreement (the “Operating Agreement”) effective at the

time of the transactions at issue, Ms. Lane and Jesse Lane are managers of JLP. [Ex. DD, p. 8,
§ 6.2)].
8. The Operating Agreement provides:
if more than one [m]anager is then serving, notwithstanding that any
reference herein to the [m]anagers may be stated in the plural, either shall
have the power, without the consent of the other, to take any action
hereunder that is within the authorized powers of the [m]anager hereunder.

[Ex. DD, p. 8, § 6.2 (A) (2)].

9. The Operating Agreement gives Ms. Lane, as a manager, the authority to borrow
money “for [JLP]” and to encumber and grant security interests against its property to secure
loans for JLP. [Ex. DD, p. 9, § 6.3(A)(2)].
10. WBL received a copy of the Operating Agreement prior to closing of the loans
and mortgages at issue. [MSJ, ¶ 33; Response, ¶ 19].
The Notes and Mortgages
11. On September 23, 2016, Ms. Lane signed a document entitled Business
Promissory Note and Security Agreement (“Note 1”) in the original principal amount of
$329,000.00 in favor of WBL. [Ex. A].
12. APSCO and JLP were named as the borrowers in Note 1. [Ex. A].
13. Ms. Lane signed Note 1 as “Corp. Sec” of both APSCO and JLP. [Ex. A].
14. In connection with Note 1, Ms. Lane signed a “Business Loan Purpose Affidavit”
as “Corp. Sec.” of JLP stating that the loan proceeds “will be used for business purposes only,
and not for personal, consumer, family or household purposes or to purchase personal, consumer,
family or household goods.” [Ex. I].
15. Also on September 23, 2016, Ms. Lane executed a mortgage (“Mortgage 1”),

which also contained an assignment of rents and a security agreement granting a security interest
in fixtures in favor of WBL, granting WBL a mortgage on real property, a lien against rents, and
a lien against fixtures affixed to the property as security for repayment of the debt evidenced by
Note 1. [Ex. B].
16. Ms. Lane signed Mortgage 1 as a manager of JLP. [Ex. B].
17. By its terms, Mortgage 1 encumbers the real property commonly known as 406
Fairgrounds Rd., Alamogordo, NM 88311, all improvements located thereon, and all other
property described in such Mortgage 1 (collectively, the “Property”), and was recorded with the
Otero County, New Mexico Clerk’s Office on September 27, 2016 as Instrument

No. 201607676. [Ex. B].
18. WBL subsequently transferred Note 1 to Plaintiff and Plaintiff was the holder
thereof on the date this case was filed in the state court. [Ex. SS, TT and UU].
19. Mortgage 1 was subsequently assigned by WBL to WBL SPO I, LLC on April 13,
2017. [Ex. C].
20. WBL SPO I, LLC subsequently assigned Mortgage 1 to WBL SPE II on June 29,
2017. [Ex. D].
21. After this case was filed in the state court, WBL SPE II, LLC assigned Mortgage
1 to WBL SPO I, LLC on October 24, 2019. [Ex. E].
22. On November 11, 2016, Ms. Lane executed another document entitled Business
Promissory Note and Security Agreement (“Note 2”) in the original principal amount of
$40,000.00 in favor of WBL. [Ex. J].
23. Ms. Lane signed Note 2 as “Corp. Sec.” of APSCO and JLP. [Ex. J, p. 7].
24. In connection with Note 2, Ms. Lane signed a “Business Loan Purpose Affidavit”

as “Corp. Sec.” of JLP stating that the proceeds of Note 2 “will be used for business purposes
only, and not for personal, consumer, family or household purposes or to purchase personal,
consumer, family or household goods.” [Ex. S].
25. On November 14, 2016, as security for repayment of Note 2, Ms. Lane signed a
mortgage (“Mortgage 3”)3, which also contained an assignment of rents and security agreement,
in favor of WBL, granting WBL a mortgage on the Property. [Exh. K].
26. Mortgage 3 was recorded with the Otero County, New Mexico Clerk’s Office on
November 15, 2016 as Instrument No. 201609081 (“Mortgage 3”). [Ex. K].
27. Ms. Lane signed Mortgage 3 as manager of JLP. [Ex. K, p. 11].

28. WBL subsequently transferred Note 2 to Plaintiff, and Plaintiff was the holder
thereof on the date this case was filed in the state court. [Ex. RR, TT and UU].
29. WBL subsequently assigned Mortgage 3 to WBL SPO I, LLC on April 6, 2017.
[Ex. L].
30. WBL SPO I, LLC subsequently assigned Mortgage 3 to WBL SPE II on June 29,
2017. [Ex. M].

3 Plaintiff refers to this mortgage as “Mortgage 3” because another mortgage was executed on the
same day to further secure Note 2. That mortgage, referred to as “Mortgage 2” by Plaintiff, is not at issue
in Plaintiff’s Summary Judgment Motion. For ease of reference in this Memorandum Opinion and Order
and future proceedings, the Court will adopt the parties’ nomenclature of the various instruments at issue
in this adversary proceeding and bankruptcy case 19-11901.
31. After this case was filed in the State Court, WBL SPE II, LLC assigned Mortgage
3 to WBL SPO I, LLC. [Ex. N].
32. After WBL inquired about Ms. Lane’s authority to enter into the Notes and
Mortgages on behalf of the Entities, WBL was provided an attorney opinion letter purportedly
issued by a law firm in Albuquerque (the “Purported Opinion Letter”). [Ex. CC].

33. Notes 1 and 2 (hereinafter referred to together as the “Notes”) granted a security
interest in favor of WBL in all collateral listed on the UCC Financing Statement filed by
Plaintiff. [Ex. A, J & V].
34. Ms. Lane signed a letter authorizing WBL to disburse $3,874.90 to the Otero
County Treasurer from Note 2 funds to bring property taxes owed by JLP current on the
Property. Ex. R. Beneath her signature, Ms. Lane indicated that she was the “Corp. Sec” of
APSCO and JLP. [Ex. R].
35. WBL wired the loan proceeds of the Notes, less fees and adjustments, to an
account at BBVA Compass Bank. Ex. Q, W, H, Z. [MSJ ¶ 46 and Response ¶ 25].

36. JLP was listed as the beneficiary of the account to which the loan proceeds were
wired. [Ex. W, Z].
Default on the Notes
37. APSCO and JLP failed to make the payments required by the Notes as the
payments became due. according to the terms of the Notes. Note 1 matured on September 28,
2018, at which time according to the terms of the Notes, all unpaid principal, interest, and other
charges were due and owing in full. Note 1 was not paid in full per the terms of Note 1. [Ex. PP,
QQ].
38. Notes 1 and 2 have cross-default provisions stating that a default under the terms
of one of the Notes is a default under the terms of the other Note. [Ex. K, p. 25-27].
39. WBL sent JLP a notice of default on January 11, 2017, informing them of their
default and demanding that the amounts due and owing be paid in full or WBL would exercise
any and all rights and remedies under the Notes and applicable law. [Ex. PP].

40. WBL then sent a final notice of default through counsel on March 16, 2017,
making final demand and stating that if the debt was not paid in full, WBL would seek judicial
foreclosure of the Mortgages. [Ex. QQ]
41. The Entities and Ms. Lane did not pay the amounts due and owing according to
the terms of the Notes. [FAC, ¶ 23; Belenda Lane Answer, ¶ 23 (admitting “certain payments
were not made according to the terms of the” Notes); Answer, ¶ 15 (admitting the Entities have
not paid the amounts due under the Notes)].
Plaintiff’s Complaint for Breach of Contract and Adversary Proceedings
42. The present adversary proceeding was initiated when Plaintiff filed a Complaint

for Breach of Contract and Foreclosure against the Entities, Ms. Lane and Lane Las Cruces on
September 19, 2017 in the Third Judicial District Court, Dona Ana County, New Mexico. The
case was removed to the Bankruptcy Court after Ms. Lane filed a petition for bankruptcy relief.
[AP 19-1079, Doc. 1].
43. In this case, the Entities plead several affirmative defenses: (a) failure to state a
claim upon which relief can be granted; (b) fraud/collusion; and (c) lack of due diligence.
[Answer, pp. 3-4, ¶¶ A-C].
44. The basis for the Entities’ affirmative defenses is their assertion that Ms. Lane did
not have authority to execute the loan documents on behalf of APSCO, Lane Las Cruces, and/or
JLP. [Ex. OO, LL and MM; Ex. NN, KK and JJ].
45. The current owner of the Notes and Mortgages, WBL SPO I, LLC, filed a
dischargeability complaint against Ms. Lane in this Court, commencing adversary proceeding

No. 19-1087, and that case is stayed pending resolution of adversary proceeding 19-1079.4
46. The Mortgages provide that in the event of a default under the Notes, the
mortgagee is entitled to foreclose its mortgage lien on the Property and to collect the rents from
the Property and apply the proceeds of both to the unpaid balance of each Note. [Ex. B, K].
47. The Notes and Mortgages provide that the note holder and mortgagee are entitled
to recover its reasonable attorney fees and costs incurred in enforcing the Mortgages and
collecting the Notes. [Ex. A, B, F, J, K, O].
48. There is no evidence that there existed any condition precedent to Plaintiff’s
collection on the Notes and enforcement of the Mortgages that was not satisfied. The

requirements for default notice prior to suit were satisfied. [Ex. PP, QQ; MSJ, ¶ 63; Response
(not disputing this assertion)].
III. DISCUSSION
The Court will first address the scope of Plaintiff’s Summary Judgment Motion, then
discuss the law related to agency and whether Plaintiff has shown that the facts not in genuine
dispute establish that Ms. Lane had actual or apparent authority to bind JLP. Finally, the Court
will address Plaintiff’s request that the Court deem facts established for trial.

4 By stipulation, AP 19-1087 is stayed pending resolution of this adversary proceeding and the
Court’s findings of fact, conclusions of law, and rulings made in this adversary proceeding will have
preclusive effect in AP 19-1087. AP 19-1087, Doc. 30.
A. The Scope of the Summary Judgment Motion
In its First Amended Complaint (“FAC”), Plaintiff asserts claims against APSCO and
JLP for breach of contract and seeks foreclosure of a mortgage. Plaintiff also asserts claims
against Lane Las Cruces and Ms. Lane for breach of contract arising from their guarantee
agreements.

In their answer to the FAC, the Entities state that Ms. Lane lacked authority to bind them
and that she signed the Notes ultra vires. In addition, the Entities assert three affirmative
defenses. First, they argue that Plaintiff failed to state a claim upon which relief can be granted.
See Fed.R.Civ.P 12(b)(6). Second, they argue that “there may be such collusion between the
Plaintiff and other parties as to render the actions complained of . . . fraudulent as to these
[Entities].” Third, they contend that Plaintiff failed to exercise its legal duty to verify that the
Entities approved the Notes and Mortgages.
In the Summary Judgment Motion, Plaintiff argued that the FAC is sufficient to state a
claim under Rule 12(b)(6) and that the Entities have not offered any evidence to support their

assertion of fraud. In their Response, the Entities did not address either defense. Moreover, it is
undisputed that all the affirmative defenses rest on the Entities’ position that Ms. Lane lacked
actual and apparent authority to bind them. Hence, in resolving the Summary Judgment Motion,
the Court will address those defenses only as they relate to Ms. Lane’s authority.
In the Summary Judgment Motion, Plaintiff sought judgment that 1) JLP and APSCO are
liable to Plaintiff for the balances owed on the Notes, 2) Lane Las Cruces, as guarantor, is liable
to Plaintiff for the balances due on the Notes; and 3) Plaintiff is entitled to foreclosure of
Mortgages 1 and 3 subject to the Court’s determination of the amounts owed to Plaintiff.
Plaintiff sought, in the alternative, a judgment that it is entitled to an in rem judgment against the
Property without prejudice to the Court’s grant of money judgments against the Entities at a later
time.
Plaintiff also stated in the Summary Judgment Motion that it is entitled to summary
judgment that the Notes and Mortgages are valid and enforceable as to JLP, even if Ms. Lane did
not have actual or apparent authority to bind APSCO or Lane Las Cruces. The Entities did not

address this contention in their Response.
In Plaintiff’s Reply, Plaintiff narrowed its request for relief. Plaintiff is now only asking
that the Court enter summary judgment that “the Notes and Mortgages 1 and 3 are valid and
enforceable as against JLP . . . and its Property, including that [Ms.] Lane had authority (either
apparent or actual) to execute such contracts on behalf of JLP.” Congruent with Plaintiff’s
request in the Reply, the Court will address only whether entitled to collect on the Notes or
enforce the Mortgages against JLP.
B. Ms. Lane’s Authority to Sign the Notes on Behalf of JLP
To establish that it is entitled to collect amounts due under the Notes, Plaintiff must show

that it is the holder of the Notes, the Notes became due, and the amounts due have not been paid.
See Wilmington Sav. Fund Soc’y, FSB v. Hutchins, No. CV 18-0346 JCH/JHR, 2020 WL
1910284, at *9 (D.N.M. Apr. 20, 2020), report and recommendation adopted sub nom.
Wilmington Sav. Fund Soc'y, FSB as Tr. of Residential Credit Opportunities Tr. III v. Hutchins,
No. CV 18-0346 JCH/JHR, 2020 WL 2764765 (D.N.M. May 28, 2020) (quoting MTGLQ Inv’rs,
LP v. Wellington, No. CV 17-487, 2019 WL 4600196, at *7 (D.N.M. Sept. 23, 2019)); see
NMSA 1978, §§ 55-3-301, 304, 402 (addressing enforcement of instruments). At the time the
state court action was filed, Plaintiff was the holder of the Notes. Although Plaintiff’s interest in
the Notes has since been transferred to WBL SPO I, Plaintiff may continue the action under Rule
25 of the Federal Rules of Civil Procedure.5 Plaintiff is therefore entitled to seek enforcement of
the Notes. In addition, by its terms Note 1 became due and payable in September 2018 and was
not paid in full, which constituted a default according to the terms of Note 1. A default on Note 1
constitutes a default under Note 2. After they were notified of the default, neither the Entities nor
Ms. Lane paid the amounts due and owing according to the terms of the Notes.

To enforce the Notes against JLP, Plaintiff must demonstrate that JLP is obligated to pay
the amounts due under the terms of the Notes. If the facts not in genuine dispute establish that
Ms. Lane had authority, either actual or apparent, to bind JLP to the Notes, Plaintiff is entitled to
summary judgment. Like in their answer to the FAC, the Entities assert that Ms. Lane did not
have actual authority to bind JLP and did not have apparent authority to bind JLP because it was
not reasonable for Plaintiff to rely on Ms. Lane’s representations of her authority to bind JLP and
the JLP operating agreement without inquiring further into the scope of her authority.
1. Agency Law
“An agent is a person who, by agreement with another called the principal, represents the

principal in dealings with third persons or transacts some other business, manages some affair or
does some service for the principal, with or without compensation.” Tercero v. Roman Cath.
Diocese of Norwich, Connecticut, 2002-NMSC-018, ¶ 12, 132 N.M. 312, 48 P.3d 50 (quoting
UJI 13–401 NMRA). “The authority of an agent may be actual or apparent.” Id. Plaintiff asserts
that it is entitled to summary judgment because the undisputed facts establish that Ms. Lane had
either actual or apparent authority to bind JLP by executing the loan and mortgage documents.

5 Rule 25 provides: “If an interest is transferred, the action may be continued by or against the
original party unless the court, on motion, orders the transferee to be substituted in the action or joined
with the original party.” No motion for substitution has been filed.
2. The facts not in genuine dispute fail to establish that Ms. Lane acted within her
actual authority to sign the Notes on behalf of JLP.
“Actual authority is given to the agent by the principal in terms that are express, or in
terms that are implied from words or conduct of the principal to the agent or from the
circumstances of the relationship.” In re Lamey, No. 14-13729 TA7, 2020 WL 1884189, at *1
(Bankr. D.N.M. Apr. 15, 2020) (emphasis added) (quoting Comstock v. Mitchell, 1990-NMSC-
054, ¶ 14, 110 N.M. 131, 134 (1990) (Ransom, J., specially concurring). “A limited liability
company can act only through its agents and [an o]perating [a]greement can provide actual
authority for a managing member’s acts.” Hudson Specialty Ins. Co. v. Brash Tygr, LLC, 870 F.
Supp. 2d 708, 720 (W.D. Mo. 2012), rev’d on other grounds, 769 F.3d 586 (8th Cir. 2014).
Here, Ms. Lane is named as one of two managers of JLP in the Operating Agreement.

The Operating Agreement states that each manager has the “power and authority” to “borrow
money for [JLP] from banks” and to “encumber and grant security interests in the assets of [JLP]
to secure payment of the borrowed sums.” WBL received a copy of the Operating Agreement
prior to closing of Note 1 and Mortgage 1.
The Entities argue that “[o]nly Jesse Lane, as the trustee [of the Lane Family Revocable
Trust] which was clearly shown in the operating agreement, could act on behalf of JLP[].” In his
affidavit attached to the Response, Jesse Lane states that he is “the only person who has ever
been authorized to borrow any money on behalf of JLP[] or to encumber its assets.” He also
states, “I have never advised anyone, or held out to anyone, that Belenda Lane ever had any

authority to borrow any money on behalf of JLP[], or to pledge or otherwise encumber any of its
assets.” [Response, Ex. 3].
These statements do not create a dispute that precludes summary judgment because they
are blatantly contradicted by the Operating Agreement, which names Ms. Lane as a manager of
JLP and gives each manager–both Jesse Lane and Ms. Lane–authority to borrow money and
encumber JLP’s property. “When opposing parties tell two different stories, one of which is
blatantly contradicted by the record, so that no reasonable jury could believe it, a court should
not adopt that version of the facts[.]” York v. City of Las Cruces, 523 F.3d 1205, 1210 (10th Cir.
2008) (quoting Scott v. Harris, 550 U.S. 372, 380 (2007) in the context of summary judgment).

Moreover, elsewhere in their response, the Entities do not dispute that Ms. Lane had authority
“to borrow money on behalf of JLP[] and to encumber its property to secure loans.” [Response,
¶ 19 (not disputing that the Operating Agreement gave Ms. Lane authority to borrow money on
behalf of JLP)]. The Court concludes that facts not in genuine dispute establish that Ms. Lane
had actual authority under the Operating Agreement to borrow money for JLP and encumber
JLP’s property to secure such loans.
The Entities also argue that Ms. Lane acted outside the scope of her actual authority by
borrowing funds from WBL for her personal use, rather than for JLP. [Response, ¶ 19]. The
evidence before the Court creates a genuine dispute of material fact as to whether Ms. Lane acted

for the benefit of JLP. First, Jesse Lane stated in his affidavit that “none of the funds from
[Plaintiff] were ever used by[] or benefitted APSCO, JLP[] or [Lane Las Cruces].”6 However, he
also stated that some of the funds from Plaintiff were deposited in an account held by APSCO,
although this assertion is contradicted by evidence presented by Plaintiff indicating that the loan
funds were disbursed to accounts held by JLP. Second, wire transfer documents presented by

6 Relying on Rule 1002 of the Federal Rules of Evidence, Plaintiff argues that Jesse Lane’s
statement may not be considered because Jesse Lane’s testimony that JLP never received any funds from
Plaintiff “would not be admissible without bank statements or some proof showing the companies did not
receive funds.” Rule 1002 does not prevent admission of Jesse Lane’s testimony on this issue: “No
evidentiary rule prohibits a witness from testifying to a fact simply because the fact can be supported by
written documentation.” Rodriguez v. Senor Frog’s de la Isla, Inc., 642 F.3d 28, 34 (1st Cir. 2011)
(quoting R & R Assocs., Inc. v. Visual Scene, Inc., 726 F.2d 36, 38 (1st Cir.1984)).
Plaintiff name JLP as the beneficiary of the accounts to which the funds related to the Notes
were disbursed. Third, Ms. Lane authorized Plaintiff to disburse $3,874.90 to the Otero County
Treasurer to bring the property taxes owed by JLP on the Property current. [Exh. R]. This
evidence demonstrates a genuine issue of material fact over whether Ms. Lane acted for the
benefit of JLP when she executed the Notes and Mortgages. Summary judgment on this ground

will be denied.
3. The facts not in genuine dispute fail to establish that Ms. Lane had apparent
authority to sign the Notes on behalf of JLP.
In contrast to actual authority, apparent authority arises when the principal manifests to a
third party that the agent holds authority to act on the principal’s behalf. In re Lamey, 2020 WL
1884189, at *2 (“A principal may be held liable for the acts of its agent if the principal clothed
the agent with the ‘apparent authority’ to act on the principal’s behalf.”); Tercero, 2002-NMSC-
018, ¶ 12 (stating that apparent authority rests on manifestations by the principal to a third party).
Apparent authority to act on the principal’s behalf may be manifested to third parties when the
agent is appointed by the principal to “a position, such as that of manager[], which carries with it
generally recognized duties.”7 Townsend v. Daniel, Mann, Johnson & Mendenhall, 196 F.3d
1140, 1146 (10th Cir. 1999) (quoting Restatement (Second) of Agency § 27 cmt. a (1958)).
“[T]o those who know of the appointment there is apparent authority to do the things ordinarily

7 See also Roscoe v. United States, 134 F. App’x 226, 228 (10th Cir. 2005) (stating that “[a]n
inanimate entity . . . can act only through its agents” and that a limited liability company acts through its
designated manager); Restatement (Third) of Agency § 3.03 (2006) (stating that “[a] principal may also
make a manifestation by placing an agent in a defined position in an organization or by placing an agent
in charge of a transaction or situation. Third parties who interact with the principal through the agent will
naturally and reasonably assume that the agent has authority to do acts consistent with the agent’s position
or role unless they have notice of facts suggesting that this may not be so.”); NMSA 1978, § 53-19-15
(providing that management of a limited liability company may be vested in one or more managers and
that managers designated in an operating agreement “shall have exclusive power to make all decisions on
behalf of the limited liability company that are not specifically reserved to the members by the Limited
Liability Company Act”).
entrusted to one occupying such a position, regardless of unknown limitations which are imposed
upon the particular agent.” Townsend, 196 F.3d at 1146.
When a third party deals with an agent, the third party has a responsibility to inquire “as
to the extent of [the agent’s] authority.” Diversified Dev. & Inv., Inc. v. Heil, 1995-NMSC-005,
¶ 22, 119 N.M. 290, 889 P.2d 1212; Bozza v. Gen. Adjustment Bureau, 1985-NMCA-068, ¶ 12,

103 N.M. 200, 704 P.2d 454 (“Due diligence must be employed by a third person with an agent
to ascertain the truth of the facts with reference to authority . . . .”). “Where a principal claims
not to be bound by an agreement with a third party because it was made by an agent who
exceeded his or her authority, the proper inquiry is whether the third party ‘knew or through the
exercise of due diligence should have known that [the agent’s] authority was limited’ to the
extent that the principal claims.” Barron v. Evangelical Lutheran Good Samaritan Soc., 2011-
NMCA-094, ¶ 16, 150 N.M. 669, 265 P.3d 720 (quoting Comstock, 110 N.M. at 133, 793 P.2d
at 263). A third party “may not impose in the agent a blind confidence” and, “if business usage
applicable to the particular business indicates to a reasonable person that the agent is not acting

within the scope of his apparent or ostensible authority, it is the duty of the third person to make
inquiry concerning the scope of [the agent’s] authority.” Anheuser-Busch, Inc., v. Grovier-Starr
Produce Co., 128 F.2d 146, 152 (10th Cir. 1942); Raby v. Am. Int’l Specialty Lines Ins. Co.,
No. 203CV01353KJDPAL, 2006 WL 8442050, at *6 (D. Nev. Mar. 13, 2006) (stating that “a
party cannot allege apparent authority agency where there was evidence contradicting this
reliance and the party chose to ignore such evidence”), aff’d, 268 F. App’x 566 (9th Cir. 2008).
“[W]ithout reliance that is reasonable, there can be no finding of apparent authority . . . .” WMCV
Phase 3, LLC v. Shushok & McCoy, Inc., 750 F. Supp. 2d 1180, 1190 (D. Nev. 2010). Plaintiff
bears the burden of showing that its reliance on Ms. Lane’s apparent authority was reasonable.
See Rosenquist v. Genesis Healthcare, LLC, No. A-1-CA-36609, 2020 WL 2507655, at *4 (N.M.
Ct. App. May 13, 2020) (citing Snyder v. Stahlman Lumber Co., 1935-NMSC-057, ¶¶ 1-3, 39
N.M. 374, 47 P.2d 901).
By naming Ms. Lane as a manager in the Operating Agreement and specifying that
managers of JLP have authority to borrow money “for [JLP]” and to encumber and grant security

interests against its property to secure loans for JLP, JLP manifested to Plaintiff that Ms. Lane
had such authority. See Pitman Place Dev., LLC v. Howard Invs., LLC, 330 S.W.3d 519, 528
(Mo. Ct. App. 2010) (stating that the plaintiff “cloaked [an agent] with apparent authority when
it manifested its consent for [the agent] to act as ‘[m]anager’ of [the plaintiff] in the [o]perating
[a]greement, and gave the ‘[m]anager’ general authority to enter into transactions such as the . . .
loan transaction”).
The Entities argue that JLP cannot be bound by Ms. Lane’s actions because Plaintiff
failed to exercise reasonable due diligence to verify Ms. Lane’s apparent authority when the
Purported Opinion Letter gave Plaintiff notice that execution of the loan and mortgage

documents may fall outside Ms. Lane’s authority, arguing that the Purported Opinion Letter,
rather than giving assurance of Ms. Lane’s authority, actually “gave [Plaintiff] [e]very reason in
the world to [further] verify her authority.” In response, Plaintiff argues that Plaintiff’s reliance
on the Operating Agreement was reasonable, that “nothing on [the] face [of the Purported
Opinion Letter] or in its content . . . indicate[s] that it is not a bona fide attorney opinion letter”
and that it was reasonable for Plaintiff to rely on it.
Since Plaintiff bears the burden of proof at trial on whether Ms. Lane had apparent
authority, summary judgment must be denied if Plaintiff “fails to make a showing sufficient to
establish the existence of” reasonable reliance. Celotex, 477 U.S. at 324. Plaintiff has not met
this burden. Plaintiff did not rely on the Operating Agreement alone as evidence of Ms. Lane’s
authority. Instead, Plaintiff obtained further assurance in the form of an opinion letter by an
attorney. Having done so, Plaintiff could not reasonably ignore any red flags raised by that letter.
WMCV Phase 3, LLC, 750 F. Supp. 2d at 1190 (“[T]the party who claims reliance must not have
closed his eyes to warnings or inconsistent circumstances.” (quoting Great Am. Ins. Co. v. Gen.

Builders, Inc., 113 Nev. 346, 934 P.2d 257, 261 (1997)).
The “purpose of an opinion letter . . . is to offer assurances to the creditor about the inner
workings of the borrower’s business . . . .” Prudential Ins. Co. of Am. v. Dewey, Ballantine,
Bushby, Palmer & Wood, 80 N.Y.2d 377, 385–86, 605 N.E.2d 318 (1992). An opinion letter
provided for lending transactions commonly addresses whether “further corporate formalities are
necessary to make the loan documents valid; . . . the documents are fully authorized under
applicable law; . . . the terms, as written, are enforceable against the borrower; and . . . the
proposed transaction does not violate some other obligation by which the borrower is bound.” Id.
Typically, an opinion letter provided in a banking transaction includes “the reason for giving the

opinion (most commonly in satisfaction of a specified condition in the financing documents); . . .
the role of counsel in the transaction;. . . the definition of certain terms; . . . the jurisdictions
whose laws are covered by the opinion . . . ; any limitation on the laws considered; and . . . the
scope of the factual investigation undertaken for purposes of the opinion letter.” Legal Opinion
Letters: A Comprehensive Guide to Opinion Letter Practice, Opinions of Borrower’s Counsel
§ 4.8. The giving of an opinion letter may create a duty of care running from the attorney giving
the opinion to a third party who relies on that opinion. Friedman v. Hartmann, No. 91 CIV. 1523
(PKL), 1994 WL 97104, at *7 (S.D.N.Y. Mar. 23, 1994). Because of the potential liability that
may arise from an opinion letter, opinion letter authors typically are careful to delineate the
scope of their opinion, avoid making statements of fact based only on representations by their
clients, state their assumptions, and qualify their opinions. See, e.g., In re Wyly, 552 B.R. 338,
482 (Bankr. N.D. Tex. 2016) (discussing the “usual caveats” in legal opinion letters).
The Purported Opinion Letter is on letterhead of Hurley, Toevs, Styles, Hamblin &
Panter, P.A., a law firm in Albuquerque, New Mexico and is purportedly signed by Thomas H.

Toevs. It is addressed to Plaintiff and references the borrowers, guarantors, amount, and
collateral pledged related to Note 1. The Purported Opinion Letter references APSCO and JLP as
“Borrowers” of Note 1 and Ms. Lane and Lane Las Cruces as “Guarantors” of Note 1. It also
referenced the collateral for Note 1. The Purported Opinion Letter stated that the author of the
letter “represent[ed],” among other things, that:
(a) “The referenced loan transaction has been duly authorized by [APSCO and JLP].”
(b) Ms. Lane was “authorized to execute the related loan documents on behalf of
APSCO[].”
(c) “Jesse Lane, Trustee of the Lane Family Revocable Trust and [Ms. Lane] manager

[sic] either are authorized to execute the related loan documents on behalf of The
Lane Family Revocable Trust.”
(d) “Borrowers and Guarantors have informed the undersigned that they understand (i)
the payments required to be paid under the terms of the loan from lender to
Borrowers, (ii) that the Collateral has been pledged by the Collateral Owners to
Lender to secure Borrowers’ performance under the terms of loan documents
executed (or to be executed) by Borrowers and Guarantors in favor of Lender, and
(iii) that Lender has the right to foreclose on the Collateral in the event of default by
Borrowers under the terms of the related loan agreements, and/or default by
Guarantors under the terms of the related guaranty agreements.”
(e) “After inquiry by the undersigned, Borrowers and Guarantors have informed the
undersigned that Borrowers have the capacity to make all payments required under
the terms of the related loan agreements on the basis of existing and projected

revenues over the term of the loan evidenced by the loan documents.”
(f) “In making the above representation the undersigned acknowledged that Lender is
relying on same in connection with this funding of a loan to Borrowers on or about
the date first written above.”
The Purported Opinion Letter contains clues that it may not be genuine. Perhaps the most
obvious clue is that no opinions are given in the letter, only “representations.” The purpose of an
opinion letter, as the name suggests, is to render opinions. In addition, while the letter includes a
representation that Ms. Lane “is authorized to execute the related loan documents on behalf of
APSCO” and the Lane Family Revocable Trust, it does not include a statement that Ms. Lane is

authorized to execute the loan documents on behalf of JLP, even though JLP is named in the
letter as one of the borrowers on Note 1. Another immediate clue, apart from the substance of the
letter, is that the Purported Opinion Letter contains numerous typographical and grammatical
errors, which are uncommon in letters prepared by law firms.
Most importantly, the Purported Opinion Letter does not contain the customary
components of an opinion letter. Specifically, it does not:
1. include a salutation, such as “Ladies and Gentlemen,”
2. name the Hurley firm’s client or address the scope of the Hurley firm’s
representation,
3. define the investigation conducted by the Hurley firm or the documents upon
which it relied,
4. include the assumptions the Hurley firm made,
5. provide a statement regarding the governing state law,
6. render opinions (instead it makes representations), or

7. state any qualifications or limitations with respect to the representations.
Finally, the Purported Opinion Letter includes a representation that according to the
borrowers’ existing and projected revenues over the term of the loan the borrowers will have the
ability to repay the loan. That type of opinion is highly unusual in attorney opinion letters.
WBL apparently had the Purported Opinion Letter in its possession before transferring
the funds related to Note 1 to the designated account and could have delayed the wire transfer
after review of the Purported Opinion Letter. The Purported Opinion Letter is dated Friday,
September 23, 2016, the same date that Ms. Lane executed Note 1 and Mortgage 1. The wire
transfer document related to Note 1 states that it was created at 2:16 p.m. EST on Monday,

September 26, 2016. As to Note 2, Ms. Lane executed the documents related to Note 2 and
Mortgage 3 on November 14, 2016. There is no opinion letter related to Note 2 in the record.
While it is obvious to the Court from a review of the letter that the Purported Opinion
Letter may not be a bona fide attorney opinion letter, as no competent attorney would issue such
a letter, the question before the Court is whether the anomalies in the Purported Opinion Letter
would have given notice to a reasonable lender that it should make further efforts to verify Ms.
Lane’s authority to execute the Notes and Mortgages on JLP’s behalf. No evidence was
presented on this issue by either party. Thus, Plaintiff has not established that it was reasonable
for it to rely on Ms. Lane’s apparent authority despite the potential warning signs in the
Purported Opinion Letter. Plaintiff’s Summary Judgment Motion, therefore, must be denied. See
WMCV Phase 3, LLC, 750 F. Supp. 2d at 1190 (holding that questions of fact as to whether a
party’s reliance on apparent authority was reasonable where neither party adduced evidence on
this issue).
C. Facts Established in This Case Under Rule 56(g)

Relying on Rule 56(g), Plaintiff also requests that the Court, if it does not grant partial
summary judgment to Plaintiff, enter an order establishing in the case all facts that the Court has
determined to be undisputed for purposes of ruling on the Summary Judgment Motion. Rule
56(g), made applicable to adversary proceedings by Fed.R.Bankr.P. 7056, provides: “If the court
does not grant all the relief requested by the motion, it may enter an order stating any material
fact—including an item of damages or other relief—that is not genuinely in dispute and
treating the fact as established in the case.” Whether to grant a request to deem facts as
established under Rule 56(g) falls within the court's sound discretion. See 10B Charles Alan
Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2737 (4th ed.).

The Entities did not oppose Plaintiff’s request.
The Court will grant Plaintiff’s request to the extent it relates to undisputed facts
necessary to resolution of Plaintiff’s Summary Judgment Motion. The facts set forth in the
section of this opinion entitled “Facts Not in Genuine Dispute” will be deemed established for all
purposes in this adversary proceeding, including for purposes of trial.
IV. CONCLUSION
Genuine issues of material facts persist as to 1) whether Ms. Lane acted in whole or in
part for the benefit of JLP, and therefore within the scope of her actual authority, when she
executed the Notes and Mortgages and 2) whether it was reasonable for Plaintiff to rely on Ms.
Lane’s representations of her authority after it recerved the Purported Opinion Letter. These
factual disputes must be resolved at trial. In a separate order, the Court will deny Plaintiff's
Summary Judgment Motion and grant in part Plaintiff's request that the Court deem established
for trial the facts not subject to genuine dispute in this Memorandum Opinion.

Robert H. Jacobvitz
United States Bankruptcy Judge

Date Entered on Docket: August 5, 2021
Copy To:
Robert R. Feuille
Counsel for Plaintiff
PO Box 99123
El Paso, TX 79999-9123
Shay Elizabeth Meagle
Counsel for Plaintiff
Moses, Dunn, Farmer & Tuthill, P.C.
P.O. Box 27047
Albuquerque, NM 87125-7047
Richard A. Hawthorne
Counsel for APSCO, Jesse Lane Properties, and Lane Las Cruces
1221 Mechem Dr Ste 2
Ruidoso, NM 88345-7224
John D. Wheeler
Counsel for Defendant Belenda Lane
PO Box 1810
Alamogordo, NM 88311-0600
R Trey Arvizu, III
Counsel for Debtor Belenda Lane
PO Box 1479
Las Cruces, NM 88004-1479

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10459982. Public record. Not legal advice.