# S-Tek 1, LLC

> United States Bankruptcy Court, D. New Mexico · June 13, 2022

URL: https://www.frixlaw.com/law-library/cases/10459986

## Case

- **Court:** United States Bankruptcy Court, D. New Mexico
- **Decided:** June 13, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: S-Tek 1, LLC, No. 20-12241-j11
Debtor.
MEMORANDUM OPINION
The matter before the Court is the Motion to Value Collateral of Surv-Tek, Inc. Pursuant
to 11 U.S.C. § 506(a) (“Motion to Value” - Doc. 259), filed by the Debtor, S-Tek 1, LLC
(“Debtor”) on October 26, 2021. By the Motion to Value, the Debtor asks the Court to value the
assets Debtor pledged to Surv-Tek, Inc. (“Surv-Tek”) as collateral to secure payment of
indebtedness owed by Debtor to Surv-Tek. Having reviewed the evidence in light of applicable
caselaw, the Court concludes that, for confirmation purposes, the total value of the collateral
pledged to Surv-Tek is $499,709.54.

A. PROCEDURAL HISTORY
Debtor owns and operates a surveying company that it purchased from Surv-Tek in 2019,
before the filing of this bankruptcy case. Debtor’s chapter 11 case is pending under subchapter
V. Surv-Tek filed a proof of claim in which it asserts a claim secured by all or substantially all of
Debtor’s assets, including accounts, accounts receivable, contract rights, equipment, general
intangibles, goods, and inventory (the “Collateral”). Debtor filed a subchapter V plan and a plan
modification (Doc. 96 and Doc. 257–the plan, as modified, hereafter is called the “Plan”)
separately classifying Surv-Tek’s secured claim. The Plan proposes that Debtor will retain the
Collateral and use it in the operation of its post-confirmation business. Under the Plan, Debtor

proposes to pay Surv-Tek’s claim, if and to the extent the claim is allowed as a secured claim, in
deferred cash payments between the Initial Distribution Date (as defined in the Plan) and April 1,
2029 unless Surv-Tek makes the election described under 11 U.S.C. § 1111(b).1 The Plan
provides that if Surv-Tek makes the § 1111(b) election, Debtor intends to file another pre-
confirmation plan modification.
The Motion to Value asks the Court to value the Collateral pursuant to § 506(a)(1) for
purposes of confirmation of the Plan. Prior to the hearing on the Motion to Value, Debtor filed a

motion asking the Court to rule that Surv-Tek’s security interest did not extend to any after-
acquired assets or to $30,000 Mr. Dennis Smigiel paid Debtor in settlement of a commercial tort
claim. The Court entered an order (Doc. 300) and supporting Memorandum Opinion (Doc. 299)
ruling that, with the sole exception of $30,000 in settlement funds, Surv-Tek’s security interest
extends to after-acquired assets, subject to § 552, which governs the post-petition effect of
security interests. Id. The Court determined further that under § 552(b)(1), the Collateral includes
accounts receivable Debtor acquires post-petition under the conditions set forth in cash collateral
orders entered by the Court. Id.
The Motion to Value also requested valuation of Surv-Tek’s Collateral as of the date

Debtor commenced its chapter 11 case. By a Memorandum Opinion entered December 9, 2021
(Doc. 286), the Court determined that that for plan confirmation purposes, Collateral that Debtor
will retain for its post-confirmation business operations should be valued as of or near the date of
the confirmation hearing rather than as of the petition date.
B. FINDINGS OF FACT2
Jeremiah Grant’s Opinions of Value.

1 All future references to “Code,” “Section,” and “§” are to Title 11 of the United States Code, unless
otherwise indicated.
2 The parties agreed that all evidence admitted at the trial on the merits of Adversary Proceeding No. 20-
1074-j is admitted for purposes of the Motion to Value. The Court incorporates herein by reference all
findings of fact contained in its Memorandum Opinion (Doc. 132) entered in Adversary Proceeding No.
20-1074-j as fact findings made with respect to the Motion to Value..
The Court qualified Jeramiah Grant as an expert to testify about the value of Debtor’s
assets and admitted his expert report in evidence as Exhibit 1 (the “Grant Report”). Mr. Grant
opined on the fair market value of Debtor’s salable assets as of November 30, 2021. In reaching
his opinions of value, Mr. Grant took and compared three valuation approaches: 1) an income
approach, which he described as a forward-looking approach that determines what an investor

would pay today for the right to future cash flows from the business, adjusted for time and risk;
2) a market approach, which Mr. Grant described as a backward looking approach that bases
valuation on past performance and compares the business to transactions involving reasonably
similar companies whose values are known; and 3) a cost/asset approach, which Mr. Grant
described as a balance sheet approach that determines the cost to replace the assets of the
business.
Mr. Grant concluded that the fair market value of Debtor’s salable assets as of
November 30, 2021 is $174,000 (using a combination of the market approach and the income
approach and assuming a going concern value for the business) but also opined that $225,000 is

a reasonable estimate of the fair market value of Debtor’s salable assets (using a cost approach
that assumes the business is shut down and the individual assts of the business are sold in an
orderly liquidation).3
Mr. Grant’s valuation using a weighted market and income approach resulting
in a total fair market value of salable assets in the amount of $174,000

Using a market approach, Mr. Grant determined that the fair market value of Debtor’s
business is $486,956.4 Using an income approach, Mr. Grant determined that the fair market
value of Debtor’s business is $258,615.5 The $258,615 estimate of value under the income

3 Grant Report, Schedule 1, p.32.
4 Grant Report, Schedule 4, p.35.
5 Grant Report, Schedule 5, p. 39.
approach was net of a $100,572 deduction for lack of marketability.6 To arrive at a total fair
market value of $174,000 for Debtor’s salable assets as a going concern, Mr. Grant weighted
the market and income approach at 50%, resulting in a business enterprise value of $372,785,
and made the following adjustments: 1) added $30,000 in settlement proceeds held in Debtor’s
attorney trust account; 2) added excess cash of $41,686, and 3) subtracted $270,396,

representing a deficiency of working capital.7
Mr. Grant’s valuation using the Asset/Cost Approach resulting in a fair market
value of salable assets in the amount of $225,000

Mr. Grant opined further that $225,294.00 is a reasonable alternative estimate of the fair
market value of Debtor’s salable assets, using the asset/cost approach.8 To determine the
estimated salable value of assets under that approach, Mr. Grant used a liquidation value, also
known as “the adjusted net asset method.”9
The estimated value of $225,294.00 summarized on Schedule 13 of the Grant Report is
presented in three columns.10 The first column lists the book value of Debtor’s assets
categorized as the assets are presented on Debtor’s balance sheet.11 All of the book values were
based entirely on values provided by Debtor’s management, namely, Randy Asselin, one of
Debtor’s two principals. Book value is reported by asset category, such as accounts receivable,
computers and printers, furniture and fixtures, and inventory.12 The third column is an adjusted
value that represents the estimated salable value of each asset category.13 The middle column

6 Id.
7 Grant Report, Schedule 1, p.32.
8 Grant Report, Schedule 1, n.2, p. 32.
9 Grant Report, p.12.
10 Grant Report, Schedule 13, p. 48.
11 Id.
12 Id.
13 Id.
adjusts book value to the estimated salable value.14 The adjustment amounts were based entirely
on amounts provided by Debtor’s management. Mr. Grant performed no analysis regarding the
accuracy of the adjustments.
Schedule 13 reflects a total fair market value of Debtor’s salable assets in the amount of
$312,909.00, which consisted of current assets (the $30,000.00 in settlement funds held in

Debtor’s counsel’s trust account,15 accounts receivable, cash and checking, security deposits,
and loans to Randy Asselin and Christopher Castillo payable to Debtor) and fixed assets
(computers and printers, customer database, furniture and fixtures, inventory, a Non-Compete
Agreement, GPS and Surveying Equipment, and Accumulated Depreciation).16 Mr. Grant then
applied a discount of $87,614.00 for lack of marketability, for a net asset value of $225,294.17
Value of Debtor’s Fixed Assets in the Grant Report
Mr. Grant valued Debtor’s fixed assets using an adjusted cost approach. The summary
of the calculation of asset values is contained in Schedule 13 of the Grant Report.18 Mr. Grant
estimated, based entirely on values and adjustments supplied by Debtor’s management, that the

value of Debtor’s fixed assets (prior to the discount for lack of marketability) is $96,528, which
includes an adjusted value of $7,000 for furniture and fixtures.19 Mr. Grant did not appraise any
of Debtor’s individual assets and offered no opinion based on his own analysis of the value of
Debtor’s individual assets. The value of the fixed assets was determined making an adjustment

14 Id.
15 The settlement funds were paid to the Debtor by Dennis Smigiel in exchange for Debtor’s release of
all claims asserted against him arising from the sale of the business to Debtor. See Memorandum
Opinion Regarding Motion to Determine Scope of Security Interest of Surv-Tek, Inc.
16 Grant Report, Schedule 13, p. 48.
17 Id.
18 Id. .
19 Id. The adjusted value for furniture and fixtures was determined by deducting $193,000 from the $
200,000 book value. Id.
to the book value of each category of fixed assets on Debtor’s November 30, 2021 balance
sheet. Randy Asselin made the adjustments to book value in each fixed asset category reflected
in the Grant Report. Mr. Grant used those adjustments to book value to determine an adjusted
balance for each fixed asset category presented in the Grant Report as representing fair market
value for each fixed asset category.

Mr. Grant understood that the only remaining asset in the furniture and fixtures category
was a “plotter” that management estimated to have a value of $7,000.20 Mr. Asselin testified
that the $200,000 starting book value used in column 1 of Schedule 13 in the Grant Report for
furniture and fixtures resulted from a miscommunication with Mr. Grant and that Mr. Asselin
intended the line item for furniture and fixtures to include only $7,000 for furniture.21 Mr.
Asselin testified further that the $200,000 book value for furniture and fixtures also included
vehicles, equipment, and customer goodwill. There is no line item in Schedule 13 of the Grant
Report that expressly includes vehicles, equipment, or goodwill.22 Mr. Grant did not assign any
value to vehicles, equipment, or goodwill apart from the $200,000 book value for furniture and
fixtures reduced to an adjusted value of $7,000.23

The total estimated value of the fixed assets in Schedule 13 of the Grant Report also
included a book value for “Customer Database” in the amount of $1,418,015 reduced to an
adjusted value of $30,000.24 The Grant Report includes an explanation that “Customer Database”

20 Grant Report, p. 12.
21 Exhibit 12 includes a document titled, Sale of Surv-Tek, Inc.–Allocation of Purchase Price that ascribes
$200,000 to Furniture, Fixtures, Equipment, & Vehicles. Mr. Asselin testified that these figures reflected
how the Huggs wanted to allocate the purchase price to the assets.
22 Grant Report, Schedule 13, p. 48.
23 Id.
24 Id.
“includes the trade name, web domain, phone number, microfiche files, and archived surveys
(paper and digital).”25
The archived surveys included in the asset category for Customer Database consists of
information from prior surveys completed while Surv-Tek ran the business and other
information. Surv-Tek created an archived survey database by digitizing substantially all of the

archived surveys in paper form or on microfiche, and other information, and created a digital
directory to make the database usable. The archived survey database is an asset of the Debtor.
Mr. Grant based the $30,000 adjusted value of the Customer Database entirely on Mr. Asselin’s
opinion of value. Although the $30,000 total estimated value for “Customer Database” identified
in the Grant Report included Debtor’s archived survey database,26 Mr. Asselin assigned no value
to it. Mr. Asselin testified that he allocated value to the archived database in the Grant Report,
but he also testified at length about the formula he applied to arrive at a $30,000 value for the
Customer Database, which was tied solely to the business’s telephone number, the number of
calls needed to obtain job orders, and how many “clicks” on Debtor’s website are needed before

business is generated.
Mr. Asselin testified further that the archived survey database in reality has little value to
Debtor because a licensed surveyor other than Robbie Hugg or Russ Hugg would need to verify
the work performed by the Huggs on past surveys. For that reason, Mr. Asselin believes that the
archived surveys do not make Debtor’s surveying work more efficient, though they might
provide some benefit in estimating the cost of jobs. Although Mr. Asselin recognizes that the
archived surveys have some value, he does not believe they are marketable. Based on Mr.
Asselin’s testimony, and the fact that the figures in the Grant Report are based on Debtor’s

25 Grant Report, Schedule 13, n.5, p. 48.
26 Id.
balance sheets and input from management, the Court is convinced that the $30,000 value
attributed to the Customer Database in the Grant Report does not include any value for the
archived survey database.
No party presented any expert testimony regarding the value of the archived survey
database. Mr. Asselin’s lay opinion of its value is unreliable.27

Debtor did not present expert testimony regarding the value of its hard assets (furniture;
fixtures; vehicles; office, computer, surveying equipment; supplies) or its customer data base
other than Mr. Grant’s opinion of the value of the assets based on entirely on management’s lay
opinions of value. Mr. Grant was not asked to, and did not, inspect or appraise any of the hard
assets or make his own assessment of the value of those assets or the archived survey database.
No inventory was taken of the hard assets and there is no list of the individual assets in evidence
apart from the list of assets attached to the Bill of Sale made and delivered in late December
2018 when Debtor purchased the business from Surv-Tek. There is no evidence indicating
whether that list is complete.

The Court does not place any weight on Mr. Grant’s opinion of the value of Debtor’s
fixed assets separate from the weight the Court places on the values assigned to those assets by
Debtor’s management and Mr. Asselin’s testimony of value. Mr. Grant’s opinion does not
reflect his own evaluation of the hard asset values or archived survey database.

27 In Adversary Proceeding No. 20-1074-j Debtor asserted it was damaged as a result of Surv-Tek’s
alleged conversion of the archived surveys because Debtor lost a competitive advantage by losing access
to the archived surveys.
Asset Values in Debtor’s Bankruptcy Schedules28
Debtor’s bankruptcy schedules list office equipment, including all computer equipment,
communication systems equipment and software, valued at $47,145,29 vehicles valued at
$75,800,30 and other machinery, fixtures and equipment valued at $51,400, for a total of
$174,345.31 Debtor valued the vehicles on its bankruptcy schedules as of the petition date using

Kelly Blue Book values. Debtor valued the equipment in its bankruptcy schedules by looking at
sales prices on eBay. There are no documents in evidence supporting the values listed in
Debtor’s Schedules. The scheduled value for the equipment does not include any post-petition
depreciation in that value. The scheduled value for vehicles does not include any post-petition
appreciation in that value, which may have occurred since early 2021 because of a shortage in
used vehicles due to the COVID pandemic. Debtor’s Schedules did not identify any inventory.32
Other Assets/Asset Values Identified in Marketing Package and Bill of Sale
The Marketing Package33 Dennis Smigiel prepared in connection with the sale of Surv-
Tek’s business to Debtor in late December 2018 listed a total asset value of $505,000,

consisting of $500,000 for furniture, fixtures, equipment, and vehicles, and $5,000 for

28 Debtor filed amended schedules on June 11, 2021 (Doc. 159), admitted into evidence as Exhibit C.
29 This figure includes the “plotter” valued in Debtor’s Schedules at $3,200. Exhibit C, p. 45.
30 The vehicles identified in Debtor’s Schedule A/B are:
Silverado 2500 2013 $14,000
Silverado 2013 $14,400
Trailer 2006 $ 2,400
Silverado 1500LS 2017 $20,000
Silverado 1500LS 2017 $20,000
Cruze LS 2015 $ 5,000
Exhibit C, p. 46.
31 See Exhibit C–Schedules A/B, Parts 7 and 8.
32 See Exhibit C–Schedules A/B, Part 5.
33 Exhibit 9 admitted into evidence in the trial of Adversary Proceeding No. 20-1074-j.
inventory. However, the figures disclosed on the itemized list of assets attached to the
Marketing Package totals only $246,000.34 A summary of those assets is as follows:

Asset Value
Survey field equipment $161,000.00
Office equipment (including $26,500.00
computer equipment)
Vehicles $86,000.00
TOTAL $246,000.00

The field equipment identified in the exhibit to the Marketing Package identifies eleven Trimble
receivers, including three Trimble R6-4 receivers valued at $18,000 each; a Trimble S6 robotic
DR station valued at $40,000; a geodimeter valued at $10,000; and other equipment.35
In contrast, Debtor’s Schedules identify a total of only six Trimble receivers, including
three Trimble R6-4 receivers valued at $4,000 each, and a Trimble S6 robotic DR station valued
at $10,000. Randy Asselin testified that some of the equipment stopped working after Debtor
purchased the business, some equipment may have been decommissioned, and some items were
replaced. He testified further that since the Debtor purchased the business from Surv-Tek, the
Debtor purchased $20,000 in new equipment from Bob Green to replace certain items,
including a Trimble Robotic and Trimble controller. However, Mr. Asselin could not explain
with any specificity why the Debtor’s bankruptcy Schedules listed fewer Trimble receivers and
fewer Trimble controllers than identified in the Closing Statement.36

34 Id.
35 Id. at p. 13.
36 Compare Exhibit C, p. 47 listing 6 Trimble receivers, 4 Trimble controllers, 5 Trimble radios and 1
Trimble station with Exhibit A, p. 18-19, identifying 12 Trimble receivers, 10 Trimble controllers, 6
Trimble radios and 1 Trimble station.
The vehicles identified in the exhibit to the Marketing Package include two Polaris 450
Sportsman ATVs valued at $5,000 each, four Chevys valued at $11,000 each and two Chevys
valued at $18,000 each, and a Polaris Haulright trailer valued at $2,000.37 The list of assets with
assigned values attached to the Marketing Package did not include accounts receivable, cash, or
the archived survey database.38 It also did not separately list any fixtures or furniture.39 Debtor’s

Schedules included the ATVs with a value of $5,000 each, but included them in the aggregate
value of $51,400 for machinery and equipment.40
Attached to the Bill of Sale 41 executed and delivered at the closing of the sale of the
business is a more detailed listing of transferred assets but does not assign any values to the
assets. For example, the Bill of Sale lists twelve Trimble receivers, including two R8 Trimble
receivers and five Trimble R6 receivers whereas the Marketing Package lists no R8 Trimble
receivers and only three Trimble R6 receivers.42 Although the archived survey database and
hard copies of the archived surveys were included in the sale, they are not included in the list of
assets in either the Marketing Package or attached to the Bill of Sale.

The purchase price of $1.8 million the Debtor agreed to pay for the Surv-Tek business
was not based on asset value. The listing price for the business of $2.2 million was based on
enterprise value that the business broker determined by applying a multiplier to a computed
adjusted net profit. That calculation is set forth in the Marketing Package. Negotiations resulted
in a purchase price of $1,800,000.

37 Exhibit 9 (admitted into evidence in the trial of Adversary Proceeding No. 20-1074-j), p. 14.

38 Id.
39 Id.
40 Exhibit C, p. 47.
41 Exhibit 21 (pages 024–028) admitted into evidence at the trial in Adversary Proceeding No. 20-1074j.
42 Compare Marketing Package (Exhibit 9 admitted at trial of Adversary Proceeding No. 20-1074j) with
Bill of Sale (pages 024–048 of Exhibit 21 admitted at trial of Adversary Proceeding No. 20-1074j).
Cash Collateral Orders and the Value of Debtor’s Cash and Accounts Receivable43
As a condition to Debtor’s continued use of cash collateral, the Court granted Surv-Tek
a post-petition lien in accounts receivable and cash so that Surv-Tek will maintain a lien against
cash and accounts receivable in at least the minimum required amount (the “Cash Collateral
Base Amount”).44 The Cash Collateral Base Amount includes cash on deposit, cash on hand,

and other cash equivalents, and includes certain accounts receivable as of the date Debtor filed
its voluntary bankruptcy petition.45 The most recent cash collateral order requires Debtor to
maintain a minimum Cash Collateral Base Amount of $181,764.54 less the amount of any
adequate protection payments made by Debtor to Surv-Tek.46 Adequate protection payments are
not required unless the minimum Cash Collateral Base Amount is not maintained.47 The Debtor
has made no adequate protection payments to Surv-Tek.
Surv-Tek’s Expert on Valuation
The Court qualified Surv-Tek’s expert witness, Sam Baca, as an expert in accounting
and business valuation. The Court limited Mr. Baca’s testimony to the opinions contained in his
expert report48 and as a rebuttal witness to the Grant Report. He did not offer his own opinion of

43 The Court takes judicial notice of the orders entered in this bankruptcy case.
44 See, e.g., Order Authorizing Use of Cash Collateral from June 1, 2021 through August 31, 2021 (Doc.
152).
45 Id.
46 See Stipulated Order Granting Debtor Authority to Use Cash Collateral for the Period from April 1,
2022 through June 30, 2022 (Doc. 345). Debtor has not made any adequate protection payments to Surv-
Tek because Debtor has been able to maintain the minimum Cash Collateral Base Amount. The Cash
Collateral Base Amount does not include the $30,000 in settlement proceeds. Compare Order
Authorizing Use of Cash Collateral From June 1, 2021 through August 3, 2021 (Doc. 152), which
provides for a Cash Collateral Base Amount of $211,764.54 with Stipulated Order Granting Debtor
Authority to Use Cash Collateral for the Period from April 1, 2022 through June 30, 2022 (Doc. 345),
which reflects a $30,000 deduction, resulting in a Cash Collateral Base Amount of $181,764.54. The
Court determined in December of 2021 that Surv-Tek does not have a security interest in the $30,000 in
settlement proceeds. See Doc. 299 and Doc. 300.
47 Id.
48 Mr. Baca’s report was marked as Exhibit Q, but not admitted into evidence.
the fair market value of Debtor’s salable assets, did not appraise any of Debtor’s individual
assets, and offered no opinion on the value of the Debtor’s individual assets. In Mr. Baca’s
view, Mr. Grant’s application of a discount for lack of marketability is not appropriate because
it conflates methodologies; it is not the equivalent of deducting the cost to dispose of assets in a
liquidation analysis; and should not be applied at all in an income valuation approach. Mr. Baca

opined further that it was not appropriate for Mr. Grant to rely on the client’s balance sheets as a
basis for fixing asset values. Finally, Mr. Baca pointed out that some of the assets listed in the
Grant Report, Schedule 13, such as the loan to Debtor’s principal, Randy Asselin, and the
$30,000 deposit in the attorney trust account, are not really salable assets.
Robbie Hugg’s Estimate of Value
Robbie Hugg, one of the two principals of Surv-Tek, testified that in his opinion, the
archived survey database is worth $1,000,000. He explained that the archived surveys are stored
in an electronic database that contains .pdf files of all of Surv-Tek’s surveys and AutoCAD
drawings from 1979 to 2018 (which includes as many as 40,000 surveys taken throughout New

Mexico), along with drawings, legal descriptions, GPS calibrations, photos, boilerplate
proposals, certifications, and data sheets from zone atlases from the City of Albuquerque and
the City of Rio Rancho. The archived survey database is organized with a directory. He
constantly used the archived survey database to estimate jobs and to establish surveying control
points and GPS calibrations from various public sources and from nonpublic information, which
gave Surv-Tek a substantial advantage over other surveying competitors in the marketplace on
many jobs, increasing profit by as much as 20% or more and sometimes by as much as 50%.
Robbie Hugg recognizes that a large portion of the $1,495,000 allocated to the total purchase
price of $1,800,000 as reflected in Exhibit 12 is attributable to the goodwill of the company at
the time of sale, which encompasses the value of the archived survey database, but in his view,
it is difficult to separate the value of the archived survey database from the value of the
company’s goodwill. The allocation of the purchase price to different asset categories in Exhibit
12 was created for tax purposes. The purchase price was fixed based on past income and
expenses, not individual asset values. Further, the total value of the business included the

workforce of skilled employees and the customer base.
Robbie Hugg also testified that he believes the vehicles have appreciated in value post-
petition, and that the values Debtor placed on equipment are too low. In his experience, eBay
values are not reliable to value survey equipment because all of the equipment needs to work
together and a dealer code is required to get the equipment running with the dealer’s software.
In other words, because the software must run on the equipment, it is impractical for a
surveying company to purchase used surveying equipment on eBay. Robbie Hugg opined that
value of the Trimble equipment alone is $150,000, although he did not place a value on any
individual item of equipment.

Other Evidence Regarding the Value of the Archived Survey Database
Kent Holland, Debtor’s current general manager, explained that the archived survey
database contains .pdf files of old surveys as well as CAD files. Those images can be used to
give an idea of what is on the site when Debtor is asked to do a survey that involves the same
site. He testified further that he seldomly uses the archived survey database because most
survey jobs are new jobs. He testified that the archived database could be used to get a basic
start on a new survey job, but the information would require verification. He estimated that S-
Tek uses the archived survey database on only 10% of its new survey jobs. Based on this
testimony, Robbie Hugg believes that Mr. Holland does not really understand the extent of the
archived survey database or how it remains useful for new survey projects.
Surv-Tek’s Proof of Claim
Surv-Tek filed a proof of claim for $1,768,941.83 based on breach of contract for the
purchase of its business. See Claim 6-1. Its original claim asserted that it has a secured claim of

$355,177.49 based on a Security Agreement and UCC-1 filing statement granting Surv-Tek a
security interest in all of the Debtor’s assets. Id. Surv-Tek later filed an amended proof of claim
for the same amount, asserting that the value of its collateral is $1,800,000 making the full
amount of its $1,768,941.83 claim a secured claim. See Claim 6-2. The amended claim contains
no information about the asserted value of any of Debtor assets by individual asset or asset
category. The Security Agreement, attached as Exhibit E to Surv-Tek’s Claim 6-2, grants Surv-
Tek a security interest in the following collateral:
All Goods Furniture Equipment, Inventory, Accounts, Account Receivables,
General Intangibles, Contract Rights and other personal property owned by Debtor
as of the effective date of this Agreement and all proceeds and products of the
foregoing including replacements thereof acquired with proceeds or by trade or
exchange of property of the Debtor owned as of the Effective Date hereof.

Claim 6-2, Exhibit E.

“Collateral” as defined in the Security Agreement, includes
(A) All products and proceeds of any of the Collateral described in this Collateral
section.
(B) All accounts, general intangibles, instruments, rents, monies, payments, and all other
rights, arising out of a sale, lease, consignment or other disposition of any of the
Collateral described in this Collateral Section.
(C) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other
disposition of any of the Collateral described in this Collateral section, and sums due
from a third party who has damaged or destroyed the Collateral or from that party’s
insurer, whether due to judgment, settlement or other process.
(D) All records and data relating to any of the Collateral described in this Collateral
section, whether in the form of a writing, photograph, microfilm, microfiche, or
electronic media, together with all of Debtor’s right, title and interest in and to all
computer software required to utilize, create, maintain, and process any such records or
data on electronic media.
Id.

The UCC-1 Financing Statement in favor of Surv-Tek dated January 2, 2019, covers the
following collateral:
All Goods, Furniture, Equipment, Inventory, Accounts, Account Receivables,
General Intangibles Contract Rights , and other personal property owned by Debtor
as of January 1,2 019, and all proceeds and products of the foregoing including
replacements thereof acquired with proceeds or by trade or exchange of property of
the Debtor owned as of January 1, 2019.

Claim 6-2, Exhibit F.

C. CONCLUSIONS OF LAW49
Surv-Tek’s Security Interest and Appropriate Valuation Date
The Court previously determined that Surv-Tek has a security interest in substantially all
of the Debtor’s assets, including collateral acquired after the effective date of the Security
Agreement, which includes post-petition accounts receivable (defined earlier as “Collateral”),
but that its security interest does not extend to the $30,000 in settlement funds held in Debtor’s
counsel’s attorney trust account.50 The Court also determined that the Collateral will be valued
as of the confirmation hearing or a date close to the confirmation hearing.51 In addition, with
respect to property acquired post-petition, the extent of the security interest is subject to the
limitations in § 552.

49 To the extent this Section D contains facts not enumerated in Subsection C, the Court adopts them as
additional fact findings.
50 See Memorandum Opinion Regarding Motion to Determine Scope of Security Interest of Surv-Tek,
Inc. (Doc. 299), published as In re S-Tek 1, LLC, 635 B.R. 860 (Bankr. D.N.M. 2021), and Order
Granting, in Part and Denying in Part Debtor’s Motion to Determine Scope of Security Interest of Surv-
Tek, Inc. (Doc. 300).
51 See Memorandum Opinion and Order on Valuation Date (Doc. 286), published as In re S-Tek 1, LLC,
No. 20-12241-J11, 2021 WL 5860020 (Bankr. D.N.M. Dec. 9, 2021).
Burden of Proof
Debtor asks the Court to determine the amount of Surv-Tek’s secured claim under
11 U.S.C. § 506(a) 52 by valuing the Collateral that secures the claim. Section 506(a) provides,
in relevant part:
An allowed claim of a creditor secured by a lien on property in which the estate has an
interest . . . is a secured claim to the extent of the value of such creditor’s interest in the
estate’s interest in such property . . . .

In some contexts the Bankruptcy Code assigns the burden of proof on valuation of a
secured creditor’s collateral. Under § 362(g)(1), a party requesting relief from the automatic stay
(generally a creditor) has the burden of proof regarding the debtor’s equity in property. By
contrast, under § 363(p)(1), the debtor has the burden of proof to show a creditor is adequately
protected under § 363(e) by an equity cushion with respect to the use, sale or lease of its
collateral.
Section 506(a) does not expressly assign the burden of proof to establish value on a
motion to value a creditor’s collateral to determine the amount of its secured claim, and courts
are split on which party bears the burden of proof. The Third Circuit identified three possible
approaches to burden of proof for determining the amount of a secured claim under 11 U.S.C.
§ 506(a). In re Heritage Highgate, Inc., 679 F.3d 132, 139 (3d Cir. 2012) (“Three approaches to
the burden of proof in proceedings to value secured claims under § 506(a) have predominated in
bankruptcy cases.”). One approach places the burden of proof on the secured creditor to establish
the amount and extent of its lien. Id. at 139 (citing In re Sneijder, 407 B.R. 46, 55 (Bankr.
S.D.N.Y. 2009)); see also In re Montreal, Main & Atl. Ry., Ltd., 956 F.3d 1, 8 (1st Cir. 2020)
(“The secured creditor must demonstrate this value [under § 506(a)] by a preponderance of the

52 All future references to “Code”, “Section,” and § are to the Bankruptcy Code, Title 11 of the United
States Code, unless otherwise indicated.
evidence.”); In re Panther Mountain Land Dev., LLC, 438 B.R. 169, 193 (Bankr. E.D. Ark.
2010) (same). A second approach places the burden of proof on the party seeking to value the
claim, which, in most cases, is the debtor. Heritage Highgate, 679 F.3d at 140 (citing In re
Weichey, 405 B.R. 158, 164 (Bankr. W.D. Pa. 2009)); see also In re Henry, 457 B.R. 402, 405
(Bankr. E.D. Pa. 2011) (the party challenging the claim bears the burden of proof of collateral

value under § 506(a)); Miller v. Citibank, N.A. (In re Miller), 558 B.R. 146, 154 (Bankr. E.D. Pa.
2016) (“In the context of a valuation under § 506(a), ‘the Debtor bears the burden of proof.’”
(quoting Hamilton v. Partners for Payment Relief De III, LLC (In re Hamilton), No. 12-19762
ELF, 2013 WL 1819546, at *3 (Bankr. E.D. Pa. Apr. 22, 2013))). The third approach, and the
approach ultimately adopted by the Third Circuit given the circumstances of the case before it, is
a burden-shifting approach that places the initial burden on the debtor to present evidence
sufficient “to overcome the presumed validity and amount of the creditor’s secured claim,”
which, once met, shifts the ultimate burden of persuasion to the creditor to establish both the
extent of its lien and the value of the collateral securing its claim by a preponderance of the

evidence. Heritage Highgate, 679 F.3d at 140 (citing In re Robertson, 135 B.R. 350, 352 (Bankr.
E.D. Ark. 1992)).
There are drawbacks to all three approaches. The first approach, which places the burden
solely on the creditor, overlooks typical motions practice, which generally contemplates that the
moving party bears the burden of proving entitlement to the relief requested. See, e.g., In re
Henkel, 408 B.R. 699, 701 (Bankr. N.D. Ohio 2009) (“Generally, the burden of proof . . . is
upon the movant . . . . ”); In re Irwin, 558 B.R. 743, 750 (Bankr. E.D. Pa. 2016) (the moving
party in a contested matter bears the burden of proof); In re Maylin, 155 B.R. 605, 614 (Bankr.
D. Me. 1993) (“Generally, a movant bears the burden of proof on the elements necessary to
warrant the relief he or she seeks.”). Here, the debtor, not the creditor, is the movant. Placing the
burden of proof solely on the creditor also appears to deem inapplicable Fed.R.Bankr.P. 3001(f),
which provides that a properly filed proof of claim is entitled to prima facie evidence of the
validity and amount of the claim. The second approach, which places the burden solely on the
debtor, ignores the general rule that a creditor has the burden of proof on the extent, validity, and

priority of its lien. In re Tex-Gas Holdings, LLC, No. 21-80092, 2022 WL 569085, at *5 (Bankr.
S.D. Tex. Feb. 24, 2022); Madison Inv. Trust v. The Covenant at S. Hills, Inc. (In re Covenant at
S. Hills, Inc.), 410 B.R. 426, 430 (Bankr. W.D. Pa. 2009).
The burden-shifting approach applies the rules governing objections to proofs of claim to
motions to value collateral under § 506(a) to determine the amount of an allowed claim that is a
secured claim. This appears to make sense because a proof of claim filed by a secured creditor
includes a total amount claimed and the portion claimed as a secured claim. The definition of
“claim” in § 101(5) includes a secured claim. However, it is not entirely clear that
Fed.R.Bankr.P. 3001(f) (which imposes the presumption of validity for properly filed proofs of

claim) applies to a valuation motion governed by § 506(a) to which Fed.R.Bankr.P. 3012
(establishing the procedure for determining the amount of a secured claim) applies. A motion to
value a secured creditor’s collateral under § 506(a) for purposes of plan confirmation is not the
equivalent of an objection to a secured claim under § 502(a). Claims for which proofs of claim
are filed are claims arising from conduct that occurred prepetition,53 whereas the value of the
secured creditor’s interest in collateral under § 506(a) is determined at or near the plan
confirmation date because that is the purpose for which the collateral is being valued. See In re
S-Tek 1, LLC, No. 20-12241-J11, 2021 WL 5860020, at *2 (Bankr. D.N.M. Dec. 9, 2021) and

53 The Tenth Circuit has adopted the “conduct” theory to determine when a claim arises. In re Parker, 313
F.3d 1267, 1269 (10th Cir. 2002).
cases cited therein. The bankruptcy court in In re Bassett, No. 18-25410-B-13, 2019 WL 993302,
at *4 (Bankr. E.D. Cal. Feb. 26, 2019) explained:
This court’s concern with the [burden-shifting] approach . . . is that [it] appear[s] to
conflate, and therefore do[es] not recognize, the distinction between the claims
allowance process under § 502(a) and Bankruptcy Rule 3001(f) and the claims
bifurcation and valuation process under § 506(a) and Bankruptcy Rule 3012.

Surv-Tek urges the Court to apply the burden-shifting approach, which this Court has
previously applied, see In re Twin Pines. LLC, No. 19-10295-J11, 2021 WL 312674, at *7
(Bankr. D.N.M. Jan. 29, 2021), arguing that Debtor has failed to satisfy its initial burden of
demonstrating that Surv-Tek’s claim set forth in its proof of claim is not entitled to prima facie
evidence of the validity and amount of its claim. Based on the Debtor’s failure to meet its
initial burden, Surv-Tek would have the Court value the Collateral in the full $1,800,000
amount asserted in its amended proof of claim. Debtor asserts that it has met its burden of
proving that the value of Surv-Tek’s Collateral is less than the amount asserted in its amended
proof of claim, and that the Debtor has provided other evidence of the value of the Collateral in
the form of a) the values listed in its bankruptcy schedules, even though those values give a
value as of the petition date not a date at or near confirmation, and b) the values in the Grant
Report, with reported adjustments.
Under the burden shifting approach applicable to proofs of claim, the party filing the
claim has the ultimate burden of persuasion. But a properly filed proof of claim has a
presumption of validity, requiring the party objecting to the claim to come forward with
sufficient evidence to rebut the presumption of validly of the claim. This requires the objecting
party to come forward with evidence “of probative force equal to that of the allegations
contained in the proof of claim.” In re Geneva Steel Co., 260 B.R. 517, 524 (10th Cir. BAP
2001), aff'd, 281 F.3d 1173 (10th Cir. 2002). Expressed slightly differently, it requires the
objecting party to come forward with evidence “equal in force to the prima facie case.” In re
Allegheny Int'l, Inc., 954 F.2d 167, 173 (3d Cir. 1992). In practice, that means that “the objector
must produce evidence which, if believed, would refute at least one of the allegations that is
essential to the claim's legal sufficiency.” Id. at 173-74.
The valuation evidence presented at the hearing left many unanswered questions.

Neither party presented a comprehensive itemized list of Debtor’s presently owned assets with
associated values for each asset. The Debtor’s Grant Report is flawed in several respects. Mr.
Grant’s opinion of value based on the income and market approaches is less than the estimated
value using an asset approach even though Debtor proposes to continue operating the business
as a going concern rather than sell the business assets in an orderly liquidation. The asset values
contained in the Grant Report were pulled from the Debtor’s balance sheets, with adjustments to
arrive at liquidation value (not replacement value), based on discussions with management and
without any effort to independently value the assets. Surv-Tek’s expert was not asked to give an
opinion of the total value of the Collateral, and his opinion was limited to a critique of the Grant

Report. Other evidence of value, consisting of the values listed in Debtor’s Schedules, were as
of the petition date, rather than at or near the confirmation date, and were unsupported by any
documentary evidence. The bankruptcy case had been pending for more than a year prior to the
date of the final hearing on the Motion to Value.
Nevertheless, sufficient evidence was presented at the hearing to demonstrate that the
value of Surv-Tek’s Collateral is less than the $1,800,000 value asserted in its amended proof of
claim. The $1,800,000 value asserted in the amended proof of claim is equal to the sales price
Debtor agreed to pay for the Surv-Tek business, which was based on a multiplier applied to
projected adjusted net profits independent from the value of the underlying assets, then reduced
through negotiations. Debtor’s profits have declined considerably since the sale took place in
late 2019. The Court is also convinced that Debtor’s enterprise value is less than the value of its
underlying assets determined on a replacement cost basis, making it inappropriate to use
enterprise value to determine the value of the property securing Surv-Tek’s claim for the
reasons discussed below.

Under the circumstances of this case, the Court declines to decide Collateral value under
§ 506(a) based on one party’s failure to meet its burden of proof, especially where the caselaw
regarding the applicable burden of proof is not uniform. The Court, as fact-finder, will exercise
its sound discretion based on the best evidence presented, to fix the value of the Collateral
subject to Surv-Tek’s security interest.54
Replacement Value vs. Going Concern
Section 506(a) provides that “value shall be determined in light of the purpose of the
valuation and of the proposed disposition or use of such property . . . . ” Section 506(a) does
not, however, “specify the appropriate valuation standard.” Heritage Highgate, 679 F.3d at 141.

Instead, “Congress envisioned a flexible approach to valuation whereby bankruptcy courts
would choose the standard that best fits the circumstances of a particular case.” Id.
In Assocs. Com. Corp. v. Rash, 520 U.S. 953, 963 (1997), the Supreme Court adopted a
replacement value standard rather than foreclosure value for valuation of collateral under
§ 506(a) in chapter 13 cases where the debtor intends to retain and use the collateral (usually a
vehicle) and seeks to “cram down” the value of the secured creditor’s claim to the value of its

54 Cf. Bassett, 2019 WL 993302 at *4 (determining that the evidentiary presumption of Bankruptcy Rule
3001(f) does not apply to motions to value collateral under § 506(a) so as to “preserve[ ] the court’s fact-
finding function in the valuation process . . . . [t]hat necessarily includes assessing and weighing evidence
of a collateral’s condition and value . . . .”). As section 506(a) contemplates, the Court enjoys some
flexibility in the valuation process. Id.
collateral under § 1325(a)(5)(B). Replacement value for purposes of § 506(a) “is the price a
willing buyer in the debtor’s trade, business, or situation would pay to obtain like property from
a willing seller.” Rash, 520 U.S. at 960. Although the replacement value standard has been
applied to value collateral under § 506(a) outside the chapter 13 context,55 “[n]owhere in [Rash]
does the Supreme Court hold that all valuations under § 506(a) must be based on a replacement

value standard.” In re Weber, 332 B.R. 432, 436 (10th Cir. BAP 2005).
For profitable, operating companies, the ongoing concern value of the business is
usually greater than the cost to replace the individual assets of the business. For this reason,
when a creditor holds a lien in all or substantially all of the debtor’s assets, courts may use an
ongoing concern value, also known as the “enterprise value” of a business, to value a secured
creditor’s collateral when the debtor intends to reorganize and continue to operate the business.
See, e.g., In re Hawaiian Telcom Commc’ns, Inc., 430 B.R. 564, 602 (Bankr. D. Haw. 2009)
(“Where debtors intend to reorganize and continue to operate their business, and prospects for
reorganization appear favorable, collateral should be valued using the going concern value for

purposes of determining the extent of the creditor’s secured claim under 506(a).”); In re Nellson
Nutraceutical, Inc., No. 06-10072 (CSS), 2007 WL 201134 (Bankr. D. Del. Jan. 18, 2007)
(using enterprise value to value secured claim under § 506(a)); In re Savannah Gardens-
Oaktree, 146 B.R. 306 (Bankr. S.D. Ga. 1992) (applying a going concern valuation standard to

55 See Heritage Highgate, 679 F.3d at 141 (“Courts have recognized that [Rash’s] similar reasoning
applies with equal force in the Chapter 11 reorganization context.”); In re Creekside Senior Apartments,
LP, 477 B.R. 40, 55 (6th Cir. BAP 2012) (“Although Rash was decided in the context of Chapter 13, its
holding applies equally to valuation of secured claims in Chapter 11.”); In re Adam Aircraft Indus., Inc.,
No. 12-cv-01573-CMA, 2013 WL 773044, at *6 (D. Colo. Feb. 28, 2013) (“Although Rash was decided
in the narrow context of an individual debtor’s Chapter 13 reorganization, courts have recognized that the
logic of Rash applies with equal force in other contexts.”).
determine the amount of the creditor’s secured claim under § 506(a) where debtor intended to
retain the collateral under chapter 11 plan).
Here, Debtor intends to reorganize the business and continue to operate it as a surveying
company. Yet, Jeremiah Grant’s opinion of the value of the Collateral as part of an ongoing
concern was significantly less than his estimate of the fair market value of the individual salable

assets of the company. Under these circumstances, it is not appropriate to fix the value of the
Collateral based on enterprise value. Rather, the Court will value the Collateral using a
replacement value standard, determined from the totality of the evidence presented at the final
hearing, including testimony, Debtor’s scheduled asset values, the Marketing Package, the Bill
of Sale, portions of the Grant Report, and the cash collateral orders. See In re Rozinski, 487 B.R.
549, 553 (Bankr. D. Colo. 2013) (“The Supreme Court left ‘to bankruptcy courts, as triers of
fact, identification of the best way of ascertaining replacement value on the basis of the
evidence presented.’” (quoting Rash, 520 U.S. at 965 n. 6)).
D. VALUATION CONCLUSIONS

Based on the foregoing findings of fact and conclusions of law, the Court determines
that, for purposes of confirmation, the total value of the Collateral pledged to secure Surv-Tek’s
claim is $499,709.54. The expert testimony of Jeremiah Grant as supported by the Grant Report
is, for the most part, not useful to determine replacement cost asset value because he
inappropriately used a liquidation value and applied a discount for lack of marketability,
omitted Debtor’s vehicles and surveying equipment from the valuation calculation, and based
other values on figures lifted from the Debtor’s own balance sheet and discussions with
management without performing an independent evaluation. It is appropriate for the Court to
rely in part on the Debtor’s scheduled values in fixing the Collateral value, especially for assets
that reflect a value greater than the value reported by Debtor’s expert and where the expert’s
valuation was flawed in several respects.
The Court has made additional valuation adjustments based on other evidence. For
example, Debtor’s Bankruptcy Schedules did not include several items that were itemized in the
Marketing Package and the Bill of Sale. The items that appear in both places show much higher

values in the Marketing Package than in the Debtor’s Bankruptcy Schedules. Debtor testified
that he valued the surveying equipment based on prices he found for similar equipment on
eBay. Robbie Hugg credibly testified that eBay values are not a good indicator of value because
a surveying company would not buy equipment from eBay. The Court agrees that the scheduled
values for the surveying equipment are too low and that eBay valuations are not a good
indication of actual fair market replacement values for that equipment where the debtor is an
operating surveying company. Debtor also included the two ATVs as part of the $51,400 in
equipment value, even though the ATVs are more properly characterized as vehicles.
Having considered and weighed the evidence the Court concludes that Debtor has

undervalued the surveying equipment. Even if the Court accepts that the Debtor no longer owns
all of the surveying equipment identified in the Bill of Sale and the Marketing Package, the
surveying equipment that is identified in the Debtor’s Schedules has a significantly lower value
than the value assigned to the same equipment in the Marketing Package. The Court is
convinced that the surveying equipment in Debtor’s Schedules is significantly undervalued.
Based on the figures in the Marketing Package (which give a total value of $161,000, but
includes equipment Debtor did not list in his Bankruptcy Schedules and may no longer own and
may exclude surveying equipment Debtor does own), and Robbie Hugg’s testimony that the
Trimble equipment alone is worth $150,000, the Court concludes that the total value of the
equipment should be increased from $51,400, as listed in Debtor’s Bankruptcy Schedules, to
$100,000, and that $10,000 attributable to the two ATVs should be added to the total vehicle
value.
Assigning a value to the archived survey database is more problematic. Debtor’s
principal, Mr. Asselin, acknowledged that it has some value but believes that the archived

survey database is currently unmarketable and, at this time, he would not pay anything for it. He
reasoned further that because all current surveys must be certified and stamped by a licensed
surveyor, another surveyor would not rely on an archived survey completed by someone else.
The Court gives that testimony little weight. No foundation was laid to support the reliability of
those conclusions. Based on trial evidence admitted in Adversary No. 20-1074, the Court has
concluded that Mr. Asselin’s personal knowledge of the surveying process renders unreliable
his opinion that the archived survey database has no value. On the other hand, Robbie Hugg,
one of the principals of the business before it was sold to Debtor, testified that he constantly
used the archived survey database to assist with bidding on surveying jobs and that, even though

all new surveys must be verified, the archived survey database enabled Surv-Tek achieve
considerable costs savings for new survey jobs.56 In his opinion, the archived survey database is

56 Based on evidence admitted at trial in Adversary No. 20-1074, the Court has found that use of the
archived survey database gave Surv-Tek a substantial competitive advantage on many jobs, increasing
profitably by as much as 20% or more and sometimes by as much as 50%. Use of the archived survey
database enabled Surv-Tek to underbid competitors and still make a good profit. The information in the
archived survey database was also helpful in formulating job proposals more quickly and efficiently to
obtain work and in preparing Surv-Tek’s final work product. The archived survey database could enable
Surv-Tek to put together a proposal in a day that might take a competitor several days. S-Tek acquired the
archived survey database and the backup hard copies and microfiche as part of its purchase of Surv-Tek’s
business. John Montoya, who S-Tek promoted to general manager, similarly used the archived survey
database when employed by Surv-Tek for the approximate one year period that Robbie Hugg took a leave
of absence following a back surgery.
worth $1,000,000. Robbie Hugg gave no testimony to explain or support how he arrived at this
opinion of value nor is that valuation supported by any expert testimony.
Given this large discrepancy in value, it is difficult for the Court to assign a value to the
archived survey database. Clearly, it is worth substantially more than zero. Based on the
testimony, the Court is also persuaded that Debtor is not using the archived survey database to

its full potential. In weighing all of the evidence, including the evidence from the trial of
Adversary Proceeding No. 20-1074, but arriving at what the Court believes is a very
conservative value given the state of the evidence, the Court concludes that the reasonable fair
market value of the archived survey database is at least $50,000.00 and assigns a $50,000.00
value to the archived survey database for purposes of deciding the Motion to Value.
Surv-Tek’s security interest includes a security interest in general intangibles, such as
goodwill, and contract rights, which would include S-Tek’s rights under the Non-Compete
Agreement. Exhibit 12 allocated $100,000 to the Non-Compete Agreement for tax purposes.
This figure was imported into the Grant Report, and then adjusted to zero. No other evidence to

support the value of the Non-Compete Agreement was presented by either party. The Court has
found that Surv-Tek no longer is bound by its obligations under the Non-Compete Agreement.
The Court assigns no value to the Non-Compete Agreement. Nor does the Court assign any
value to goodwill apart from the $30,000 value placed on the Customer Database, which was
based on Mr. Asselin’s testimony.
In sum, based on the totality of the evidence, the Court finds and concludes that the total
value of the Collateral pledged to Surv-Tek for purposes of confirmation is $499,709.54,
consisting of the following:

Collateral Description Value Explanation
Collateral Base Amount (cash and $181,764.54 This figure is from the most recent
accounts receivable) stipulated order authorizing use of
cash collateral (Doc. 345) and does
not include the $30,000 in settlement
proceeds that the Court determined is
not subject to Surv-Tek’s security
interest. See Doc. 300.
Machinery and equipment, $100,000.00 The figure on Debtor’s Schedule A/B
including GPS and Surveying under the heading “other machinery
Equipment fixtures and equipment (excluding
farm machinery and equipment)” is
$51,400, and matches the figure listed
on Schedule 13 of the Grant Report as
the adjusted balance for GPS and
Surveying Equipment. That figure
includes 2 ATVs valued together at
$10,000, which should not be
included in equipment. The Marketing
Package valued the survey field
equipment at $161,000, including
three Trimble receivers valued at
$18,000 each, a Trimble station
valued at $40,000, and a geodimeter
valued at $10,000, which together
total $104,000, and do not include all
of the items included in the itemized
list of equipment on the Bill of Sale.
Robbie Hugg testified that the
Trimble equipment alone is worth
$150,000. All this valuation evidence,
taken as a whole, leads the Court to
conclude that the total value of the
machinery and equipment including
GPS and surveying equipment, but
not including the ATVs, is $100,000.
Vehicles57 $75,800.00 This figure is from Debtor’s Schedule
A/B. The Grant Report excluded

57 New Mexico’s Uniform Commercial Code regarding security interests applies to security interests in
vehicles. In re Elkins Welding & Constr., Inc., 251 B.R. 441m *3 (10th Cir. BAP 2000) (unpublished)
(“[B]oth the provisions of New Mexico’s Commercial Code and Motor Vehicle Code make clear that . . .
Article 9 applies to security interests in vehicles.”). The Security Agreement grants Surv-Tek a security
interest the Collateral, which includes “goods.” See Exhibit E. Under the Uniform Commercial Code,
“goods” includes vehicles. See N.M.S.A. 1978 § 55-2-105(1) (“‘Goods’ means all things . . . which are
vehicles by mistake; this figure does
not account for post-petition
depreciation, but also does not make
any adjustment for possible (likely)
appreciation in value due to vehicle
shortages as a result of the pandemic.
ATVs $10,000.00 The ATVs were included in the
Debtor’s Schedule A/B as part of
machinery and equipment. Debtor did
not include these in the vehicle
category. Nor were the ATVs
separately identified or valued in the
Grant Report. The Marketing Package
identified two Polaris 450 Sportsman
ATVs valued at $5,000 each. The Bill
of Sale also included the two ATVs.
Computers and Printers, including $47,145.00 This figure is from Debtor’s Schedule
office furniture A/B, which includes an itemized
attachment identifying scanners,
printers, and includes the “plotter”
valued at $3,200; The Grant Report
valued computers and printers at
$3,128, and separately valued the
“plotter” at $7,000.
Archived Survey Database $50,000.00 The Grant Report included the
archived survey database as part of
the Customer Database, with a total
value of $30,000. Randy Asselin’s
testimony revealed that the $30,000
figure was reached based on a formula
that values the phone number based
on the number of “clicks,” and that no
portion of the $30,000 figure is
attributable to the archived survey
database.
Robbie Hugg testified that he believes
the archived survey database is worth
$1MM. The archived survey database
is worth more than zero, and less than

movable . . . . ”); In re Morgan, 291 B.R. 795, 801 (Bankr. E.D. Tenn. 2003) (“Motor vehicles are goods
for the purpose of Article Nine, and therefore, the Uniform Commercial Code applies to transactions
intended to create a security interest in automobiles.” (quoting Keep Fresh Filters, Inc. v. Reguli, 888
S.W. 2d 437, 442 (Tenn. Ct. App. 1994) (applying the Uniform commercial Code as adopted in
Tennessee)). Perfection of a creditor’s security interest in a vehicle is a separate issue governed by
N.M.S.A. 1978 §§ 66-3-201 – 66-3-204 of New Mexico’s Motor Vehicle Code. Elkins Welding, 251 B.R.
at *3. No evidence of a perfected security interest in Debtor’s vehicles was presented to the Court.
$1MM. The Court, in its discretion as
fact-finder, assigns a reasonable but
conservative value of $50,000 to the
archived survey database.
Customer Database $30,000.00 | From Grant Report; corroborated by
Randy Asselin’s testimony regarding
formula applied to value the phone
number and name.
Inventory $5,000.00 | From Grant Report and Marketing
Package; also matches the figure on
Exhibit 12 - Allocation of Purchase
Price
Non-compete $0.00 | The Debtor and Surv-Tek executed a
Non-Compete Agreement at closing.
The Court has found that Surv-Tek is
no longer bound by its non-compete
obligations under that agreement.
Other than Exhibit 12, which
allocated a value of $100,000 to the
Non-Compete Agreement for tax
purposes, and the Grant Report, which
simply imported the $100,000 value
from the allocation then adjusted its
value to zero, no other evidence of the
value of the Non-Compete Agreement
was presented.
Database
| TOTAL COLLATERAL VALUE [$499,709.54 |

The Court will enter a separate order consistent with this Memorandum Opinion.

Kolck A □□□
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: June 13, 2022

-30-

COPY TO:

Nephi Hardman
Attorney for Debtor
Nephi D. Hardman Attorney at Law, LLC
9400 Holly Ave NE Bldg 4
Albuquerque, NM 87122

Christopher M Gatton
Attorney for Surv-Tek, Inc.
Giddens, Gatton & Jacobus, P.C.
10400 Academy Rd., #350
Albuquerque, NM 87111

Patrick Malloy, III
Patrick J. Malloy, III, Trustee
401 S. Boston Ave, Ste 500
Tulsa, OK 74103

Jaime Pena
Office of the United States Trustee
PO Box 608
Albuquerque, NM 87103

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10459986. Public record. Not legal advice.