case 6:16-bk-10693-mw doc 57 filed 03/28/17 entered 03/28/17 … · z:\m-n\molina, russell\pld\sale...

$: Case 6:16-bk-10693-MW Doc 57 Filed 03/28/17 Entered 03/28/17 … · Z:\M-N\Molina, Russell\Pld\Sale Mtn (WY Property).docx 5101-000/56 SHULMAN HODGES & BASTIAN LLP 100 Spectrum Center$
Case 6:16-bk-10693-MW Doc 57 Filed 03/28/17 Entered 03/28/17 16:01:16 Desc Main Document Page 1 of 78

MOTION


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1 Z:\M-N\Molina, Russell\Pld\Sale Mtn (WY Property).docx

5101-000/56

SHULMAN HODGES & BASTIAN LLP

100 Spectrum Center Drive Suite 600

Irvine, CA 92618

Lynda T. Bui - Bar No. 201002 Brandon J. Iskander – Bar No. 300916 SHULMAN HODGES & BASTIAN LLP 100 Spectrum Center Drive, Suite 600 Irvine, California 92618 Telephone: (949) 340-3400 Facsimile: (949) 340-3000 Email: [email protected];

[email protected]

Attorneys for Charles W. Daff, Chapter 7 Trustee

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA, RIVERSIDE DIVISION

In re RUSSELL JOHN MOLINA aka RUSSELL J. MOLINA fdba COACHELLA VALLEY ORTHOPEDIC aka CV ORTHOPEDIC,

Debtor.

Case No. 6:16-bk-10693-MW Chapter 7 CHAPTER 7 TRUSTEE’S MOTION FOR ORDER: (1) APPROVING THE SALE OF REAL

PROPERTY OF THE ESTATE FREE AND CLEAR OF LIENS, SUBJECT TO OVERBIDS AND REQUEST FOR APPROVAL OF THE BIDDING PROCEDURES UTILIZED;

(2) SUBORDINATING TAX LIENS AND

DISTRIBUTING PROCEEDS UNDER 11 U.S.C. §§ 724(a) AND 724(b);

(3) APPROVING PAYMENT OF REAL

ESTATE COMMISSION; AND (4) GRANTING RELATED RELIEF; MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION OF CHARLES W. DAFF IN SUPPORT THEREOF

Hearing Date: Date: April 18, 2017 Time: 2:00 p.m. Place: Video Hearing Room 225 United States Bankruptcy 3420 Twelfth Street

Riverside, CA 92501


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TABLE OF CONTENTS

Page

I. RELIEF REQUESTED ........................................................................................................ 6

A. Brief Factual Background ........................................................................................ 6

B. Buyer and Sale Terms .............................................................................................. 7

C. Treatment of Liens and Encumbrances Through the Sale ....................................... 7

D. Bidding Procedures .................................................................................................. 8

E. Costs of Sale .......................................................................................................... 10

F. Tax Consequences ................................................................................................. 10

II. ARGUMENT ..................................................................................................................... 10

A. There is a Good Business Reason for the Sale and the Sale is in the Best Interest of the Estate. .............................................................................................. 10

B. The Sale Should be Approved Because it Will Net the Estate Significant Amounts Through the Treatment of Tax Penalties Under Section 724(a). ........... 11

C. The Sale Should be Approved Because it Will Net Another $41,000 for the Benefit of the Estate Under Section 724(b). .................................................... 12

D. To the Extent Applicable, the Trustee Has Met the Requirements for Subordinating the Tax Liens. ................................................................................. 14

E. Alternatively, the Court Should Surcharge Secured Creditors First State Bank and the Platte County Treasurer. .................................................................. 15

F. Courts have Allowed Trustees to Sell Fully Encumbered Property Using Bankruptcy Code Section 724(b). .......................................................................... 17

G. The Proposed Sale Should be Allowed Free and Clear of Liens. .......................... 18

1. Section 363(f)(1) – Applicable Non-bankruptcy Law Permits Sale of Such Property. ....................................................................................... 19

2. Section 363(f)(4) – Bona Fide Dispute. ..................................................... 19

3. Section 363(f)(5) – Compelled to Accept a Money Satisfaction. .............. 20

H. Request for Payment of Real Estate Commission to Broker. ................................ 20

I. The Court Has the Authority to Approve the Bidding Procedures. ....................... 20

J. The Court has the Authority to Waive the Fourteen-Day Stay of Sale ................. 21

III. CONCLUSION .................................................................................................................. 21

DECLARATION OF CHARLES W. DAFF ................................................................................. 23


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TABLE OF AUTHORITIES

Page

CASES

In re Anderson, 66 B.R. 97 (B.A.P. 9th Cir. 1986)........................................................................................... 15

In re Atwood, 124 B.R. 402 (Bankr. S.D. Ga. 1991) ..................................................................................... 19

In re Bino’s, 182 B.R. 784, 787-790 (Bankr. N.D. Ill. 1995) ...................................................................... 17

In re Bolden, 327 B.R. 657, 664 (Bankr. C.D. Cal. 2005) ............................................................................ 11

In re Cascade Hydraulics & Utility Srv., Inc., 815 F.2d 546 (9th Cir. 1987) .................................................................................................. 15

In re Compton Impressions, Ltd., 217 F.3d 1256 (9th Cir. 2000) ................................................................................................ 15

In re Dowco Petroleum, Inc., 137 B.R. 207 (Bankr. E.D. Tex. 1992) ................................................................................... 18

In re H.P. Tool Mfg. Corp., 12 B.R. 600 (Bankr. E.D. Pa. 1981) ....................................................................................... 15

In re Laredo, 334 B.R. 401, 410-411 (Bankr. N.D. Ill. 2005) ................................................................ 17, 18

In re Lionel Corp., 722 F.2d 1063, 1069 (2d Cir. 1983)........................................................................................ 11

In re Milford Group, Inc., 150 B.R. 904 (Bankr. M.D. Pa. 1992) .................................................................................... 19

In re Quality Health Care, 215 B.R.543 (Bankr. N.D. Ind. 1997) ............................................................................... 17, 18

In re Riker Indus., Inc., 122 B.R. 964 (Bankr. N.D. Ohio 1990) .................................................................................. 17

In re Sherrill, 78 B.R. 804, 807 (Bankr. W. D. Tex. 1987) ..................................................................... 15, 18

In re Suntastic USA, Inc., 269 B.R. 846, 849-850 (Bankr. D. AZ 2001) ......................................................................... 15

In re Wilde Horse Enterprises, Inc., 136 B.R. 830, 841 (Bankr. C.D. Cal. 1991) ............................................................................ 11

Matter of Owens, 208 B.R. 750, 754 (Bankr. S.D. Ga. 1996) ............................................................................. 18


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Morgan v. K.C. Machine & Tool Co. (In re K.C. Machine & Tool Co.), 816 F.2d 238 (6th Cir. 1987) ..................................................................................... 12, 17, 18

Sheehan v. Posin, 2012 WL 1413020 (N.D. W. Va. April 23, 2012) .................................................................. 12

Wurst v. City of New York (In re Packard Properties, Inc.), 112 B.R 154, 158-59 (Bank. N.D. Tex.) ................................................................................. 17

STATUTES

Bankruptcy Code Section 105(a) .................................................................................................. 20

Bankruptcy Code Section 327 ...................................................................................................... 20



Bankruptcy Code Section 363(b) .................................................................................................. 11

Bankruptcy Code Section 363(b)(1) ............................................................................................. 20

Bankruptcy Code Section 363(f) ............................................................................................ 18, 19

Bankruptcy Code Section 363(f)(2) .............................................................................................. 19


Bankruptcy Code Section 363(f)(4) ........................................................................................ 19, 20


Bankruptcy Code Section 363(m) ................................................................................................. 22


Bankruptcy Code Section 507(a)(1) ............................................................................................. 13

Bankruptcy Code Section 507(a)(1)(C) ........................................................................................ 17

Bankruptcy Code Section 507(a)(2) ................................................................................. 12, 13, 17





Bankruptcy Code Section 507(b) .................................................................................................. 12

Bankruptcy Code Section 507(b)(1)-(7) ....................................................................................... 13

Bankruptcy Code Section 522(c)(2)(B) .................................................................................. 17, 18


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Bankruptcy Code Section 551 ................................................................................................ 11, 21



Bankruptcy Code Section 724(a) ...................................................................................... 11, 13, 19

Bankruptcy Code Section 724(b) ........................................................................................... passim


Bankruptcy Code Section 724(b)(2) ....................................................................................... 13, 17


Bankruptcy Code Section 724(e) .................................................................................................. 14


OTHER AUTHORITIES

6-724 Collier on Bankruptcy P 724.03 (16th 2016) ..................................................................... 17

H.R.Rep. No. 686, 89th Cong., 1st Sess. (1965), U.S. Code & Admin. News at 2442, 2462) ............................................................................................................................. 17

RULES

Fed. R. Bankr. P. 6004(h) ....................................................................................................... 21, 22

Local Bankruptcy Rule 6004-1(c)(2)(C) ...................................................................................... 10


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TO THE HONORABLE MARK S. WALLACE, UNITED STATES

BANKRUPTCY JUDGE, THE OFFICE OF THE UNITED STATES TRUSTEE AND

ALL INTERESTED PARTIES:

Charles W. Daff, the Chapter 7 trustee (“Trustee”) for the bankruptcy estate (“Estate”) of

Russell John Molina (“Debtor”), brings this Motion for Order: (1) Approving the Sale of Real

Property of the Estate Free and Clear of Liens, Subject to Overbids and Request for Approval of

the Bidding Procedures Utilized; (2) Subordinating Tax Liens and Distributing Proceeds Under

11 U.S.C. §§ 724(a) and 724(b); (3) Approving Payment Of Real Estate Commission; and (4)

Granting Related Relief (“Sale Motion”) as follows:

I. RELIEF REQUESTED

Through the sale, the Trustee expects to generate net proceeds of approximately

$73,000.00 for the benefit of the Estate and its creditors through the sale free and clear of certain

tax penalties (which are then preserved for the benefit of the Estate) and the partial subordination

of tax liens pursuant to the Trustee’s powers under the Bankruptcy Code, including §§ 363(f),

551, 724(a), 724(b) and 726(a). Although the claims presently filed in the case total

$931,643.74, of which $513,044.62 are unsecured claims, the Trustee’s estimated distribution of

$73,000.00 is both substantial and meaningful because but for the proposed sale, the unsecured

creditors would likely receive nothing. The Trustee believes that good cause exists to grant the

Sale Motion so the creditors do not lose this favorable business opportunity.

A. Brief Factual Background

The Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on January

28, 2016.

Charles W. Daff is the Trustee appointed in the Debtor’s bankruptcy case.

On his Schedule A/B, item 1, the Debtor listed an ownership interest in the real property

identified as 320 Acres in Wheatland, WY, County of Platte (“Property”) and valued it at

$100,000.00. On his Schedule C, the Debtor did not claim an exemption in the Property. On his

Schedule D, the Debtor listed two (2) liens against the Property in favor of First State Bank for

$38,000.55 and the Platte County Treasurer for $369.92. At his 341(a) Meeting of Creditors,


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the Debtor testified that he did not reside or intend to reside at the Property and does not claim

any exemption in it.

The Debtor’s Schedules A/B, C, and D are attached as Exhibit 1 to the Declaration of

Charles W. Daff (“Daff Declaration”).

B. Buyer and Sale Terms

The Trustee has received an offer from Arthur E. Parker and/or his assigns (“Buyer”),

whose address is 51 Bluffview Road, Wheatland, WY 82201, to purchase the Estate’s interest in

the Property for $140,000.00, subject to overbids. The Buyer is paying in a combination of cash

and conventional loan financing and is purchasing the Property “AS IS” without warranties of

any kind, expressed or implied, being given by the Trustee, concerning the condition of the

Property or the quality of the title thereto, or any other matters relating to the Property. The sale

will be free and clear of liens pursuant to Bankruptcy Code § 363(b)(1) and (f) with distributions

to be made under Bankruptcy Code § 724(b). A chart describing the liens, claims or interests

impacting the Property and their treatment through the sale is set forth below.

C. Treatment of Liens and Encumbrances Through the Sale

All costs of sale, including escrow fees and real estate commissions will be paid at

closing. In addition, the following chart sets forth the liens and encumbrances against the

Property as detailed in the Preliminary Title Report obtained April 14, 2016 (“Title Report”), a

true and correct copy of which is attached as Exhibit 2 to the Daff Declaration, and the proposed

treatment of such liens and encumbrances through the sale:

Creditor Description Amount Owed

(Estimated)

Treatment of the LienThrough the Sale

First State Bank Real Estate Mortgage recorded on September 20, 2005 as Instrument No. 561948

$40,144.35 All outstanding real property taxes will be paid through escrow.

Platte County Treasurer

Secured unpaid property taxes as reflected in Claim 1-1

$777.65

All outstanding real property taxes will be paid through escrow.


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Creditor Description Amount Owed

(Estimated)

Treatment of the LienThrough the Sale

United States of America, Internal Revenue Service (“IRS”)

Federal tax liensrecorded on April 14, 2015 as Instrument No. 629888; on August 24, 2015 as Instrument No. 633813; on August 24, 2015 as Instrument No. 633814. IRS asserts it has a secured claim in the amount of $144,840.66 pursuant to a proof of claim filed on Dec. 20, 2016 (Claim 5-2 on the Court’s Claims Register) (“IRS Claim”). As discussed below, $32,205.24 of such amount is due to penalties which can be avoided. A true and correct copy of the IRS Claim is attached as Exhibit 4 to the Daff Declaration.

$144,840.66

The portion of this lien asserting secured tax penalties is disputed pursuant to Bankruptcy Code sections 724(a) and 726(a) as discussed herein. Further, a portion of this lien can be subordinated under Bankruptcy Code section 724(b) to cover claims with a priority greater than tax claims under Section 507 of the Bankruptcy Code, including but not limited to, administrative claims of the Estate. To the extent not avoided or subordinated, this lien will be paid in full. As such, the Property will be sold free and clear of this lien pursuant to Bankruptcy Code sections 363(f)(4) and (5).

D. Bidding Procedures

The Trustee has determined it would benefit the Estate to permit all interested parties to

receive information and bid for the Property instead of selling to the Buyer on an exclusive basis.

Accordingly, in order to obtain the highest and best offer for the Property, the Trustee is

utilizing, and seeks Court approval of, the following bidding procedures (“Bidding Procedures”):

1. Potential overbidder(s) must bid an initial amount of $142,000.00. Minimum bid increments thereafter shall be $2,000.00. The Trustee shall have sole discretion in determining which overbid is the best for the Estate and will seek approval from the Court of the same.

2. Overbids must be in writing and be received by the Trustee and the Trustee’s counsel, Shulman Hodges & Bastian LLP to the attention of Lynda T. Bui on or before three business days prior to the hearing on the Sale Motion.

3. Overbids must be accompanied by certified funds in an amount equal to three percent of the overbid purchase price.

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4. The overbidder must also provide evidence of having sufficient specifically committed funds to complete the transaction, or a lending commitment for the bid amount and such other documentation relevant to the bidder’s ability to qualify as the purchaser of the Property and ability to close the sale and immediately and unconditionally pay the winning bid purchase price at closing.

5. The overbidder must seek to acquire the Property on terms and conditions not less favorable to the Estate than the terms and conditions to which the Buyer has agreed to purchase the Property as set forth in the Contract to Buy and Sell Real Estate (Farm & Ranch) (Vacant Land) and Joint Escrow Instructions and all addendums thereto (“Agreement”) attached as Exhibit 3 to the Daff Declaration, including closing on the sale of the Property in the same time parameters as the Buyer.

6. All competing bids must acknowledge that the Property is being sold on an “AS IS” basis without warranties of any kind, expressed or implied, being given by the Trustee, concerning the condition of the Property or the quality of the title thereto, or any other matters relating to the Property. The competing bid buyer must represent and warrant that he/she is purchasing the Property as a result of his/her own investigations and is not buying the Property pursuant to any representation made by any broker, agent, accountant, attorney or employee acting at the direction, or on the behalf of the Trustee. The competing bidder must acknowledge that he/she has inspected the Property, and upon closing of escrow governed by the Agreement, the competing buyer forever waives, for himself/herself, his/her heirs, successors and assigns, all claims against the Debtor, her attorneys, agents and employees, the Debtor’s Estate, Charles W. Daff as Trustee and individually, and his attorneys, agents and employees, arising or which might otherwise arise in the future concerning the Property.

7. If overbids are received, the final bidding round for the Property shall be held at the hearing on the Sale Motion in order to allow all potential bidders the opportunity to overbid and purchase the Property. At the final bidding round, the Trustee or his counsel will, in the exercise of their business judgment and subject to Court approval, accept the bidder who has made the highest and best offer to purchase the Property, consistent with these Bidding Procedures (“Successful Bidder”).

8. At the hearing on the Sale Motion, the Trustee will seek entry of an order, inter alia, authorizing and approving the sale of the Property to the Successful Bidder. The hearing on the Sale Motion may be adjourned or rescheduled without notice other than by an announcement of the adjourned date at the hearing on the Sale Motion.

9. In the event the Successful Bidder fails to close on the sale of the Property within the time parameters approved by the Court, the Trustee shall retain the Successful Bidder’s Deposit and will be released from his obligation to sell the Property to the Successful Bidder and the Trustee may then sell the Property to the First Back-Up Bidder approved by the Court at the hearing on the Sale Motion.

10. In the event First Back-Up Bidder fails to close on the sale of the Property within the time parameters approved by the Court, the Trustee shall retain the First Back-Up Bidder’s Deposit and will be released from her obligation to sell the Property to the First Back-Up Bidder and the Trustee may then sell the Property to the Second Back-Up Bidder approved by the Court at the hearing on the Sale Motion.

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E. Costs of Sale

On March 20, 2017, the Court entered an Order granting Chapter 7 trustee’s application

to employ Nathan Genovese and Coldwell Banker-The Property Exchange (“Broker”) as the

Trustee’s real estate broker. Under the listing agreement, the Broker is entitled to a commission

on the sale in an amount not to exceed six percent (6%) of the purchase price (or $8,400.00) to

be split between the Trustee’s Broker and the Buyer’s broker.1 Escrow fees shall be split

between Buyer and the Estate in the manner customary in Platte County, Wyoming where the

Property is located.

F. Tax Consequences

The Trustee has not yet hired an accountant but given that the Property had been

originally purchased for $168,462.64 (approximately $28,000.00 more than the current offer),

the Trustee does not expect to pay any capital gains taxes on the sale. A true and correct copy of

Premier Title Company’s Disbursement Worksheet summarizing the original terms of the

Debtor’s purchase and financing of the Property with First State Bank is attached as Exhibit “5”

to the Daff Declaration.

II. ARGUMENT2

A. There is a Good Business Reason for the Sale and the Sale is in the Best Interest of

the Estate.

The duties of a trustee in a Chapter 7 filing are enumerated in Section 704 of the

Bankruptcy Code, which provide in relevant part as follows: (a) The trustee shall— (1) collect and reduce to money the property of the estate for which such

trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest;

(2) be accountable for all property received; 11 U.S.C. § 704.

1 On this current offer, the buyer’s side broker has waived her 3% commission and only a total of 3% will be paid to the Trustee’s Broker, if the current buyer prevails under the bidding procedures discussed, supra, Section I.D. 2 Although Local Bankruptcy Rule 6004-1(c)(2)(C) does not require that a memorandum of points and authorities be filed in support of the Sale Motion, the Trustee is nevertheless submitting one.


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Further, the Trustee, after notice and hearing, may sell property of the estate. 11 U.S.C. §

363(b). Courts will ordinarily approve a proposed sale if there is a good business reason for the

sale and the sale is in the bests interests of the estate. In re Wilde Horse Enterprises, Inc., 136

B.R. 830, 841 (Bankr. C.D. Cal. 1991); In re Lionel Corp., 722 F.2d 1063, 1069 (2d Cir. 1983).

In this case, the facts surrounding the sale support the Trustee’s business decision that the

proposed sale is in the best interests of the Estate and its creditors. The Trustee expects to

generate net proceeds of approximately $73,000.00 through the avoidance of liens securing

claims for penalties asserted by the IRS and through the subordination of the IRS liens (as

necessary).

The Debtor will not receive any monies from the sale of the Property as he has not claimed any

exemption in the Property.

B. The Sale Should be Approved Because it Will Net the Estate Significant Amounts

Through the Treatment of Tax Penalties Under Section 724(a).

Under 11 U.S.C. §724(a), “[t]he trustee may avoid a lien that secures a claim of a kind

specified in section 726(a)(4) of this title.” Section 726(a)(4) in turn, states: fourth, in payment of any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim.

11 U.S.C. §724(a)(4). See In re Bolden, 327 B.R. 657, 664 (Bankr. C.D. Cal. 2005)

(holding that “taken together, §§ 724(a) and 726(a)(4) establish a statutory basis to allow the

trustee to avoid tax penalty liens of the IRS . . . .” Here, the IRS Claim includes $32,205.24 in

penalties as set forth in the IRS Claim.3 (Page 4 of the IRS Claim attached as Exhibit 4 to the

Daff Declaration). Thus, under Section 724(a) and 726(b)(4) a total of $32,205.24 in penalties

should be voided and preserved for the benefit of the Estate pursuant to Bankruptcy Code

Section 551. 11 U.S.C. § 551 (stating in relevant part “any transfer avoided under section [. . .]

724(a) of this title [. . .] is preserved for the benefit of the estate.”).

3 These penalties assume that interests are not paid.


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C. The Sale Should be Approved Because it Will Net Another $41,000 for the Benefit of

the Estate Under Section 724(b).

The IRS lien can be subordinated to payment of certain priority claims pursuant to

Section 724(b) which provides as follows: (b) Property in which the estate has an interest and that is subject to a lien that is not avoidable under this title (other than to the extent that there is a properly perfected unavoidable tax lien arising in connection with an ad valorem tax on real or personal property of the estate) and that secures an allowed claim for a tax, or proceeds of such property, shall be distributed—

(1) first, to any holder of an allowed claim secured by a lien on such property that is not avoidable under this title and that is senior to such tax lien; (2) second, to any holder of a claim of a kind specified in section 507(a)(1)(C) or 507(a)(2) (except that such expenses under each such section, other than claims for wages, salaries, or commissions that arise after the date of the filing of the petition, shall be limited to expenses incurred under this chapter and shall not include expenses incurred under chapter 11 of this title), 507(a)(1)(A), 507(a)(1)(B), 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of this title, to the extent of the amount of such allowed tax claim that is secured by such tax lien; (3) third, to the holder of such tax lien, to any extent that such holder’s allowed tax claim that is secured by such tax lien exceeds any amount distributed under paragraph (2) of this subsection; (4) fourth, to any holder of an allowed claim secured by a lien on such property that is not avoidable under this title and that is junior to such tax lien; (5) fifth, to the holder of such tax lien, to the extent that such holder’s allowed claim secured by such tax lien is not paid under paragraph (3) of this subsection; and (6) sixth, to the estate.

11 U.S.C. §724(b). Functionally, Section 724(b) creates a “carve out” of the claim of a tax lien

claimant for any creditor who holds a priority claim under 11 U.S.C. §§ 507(b)(1) through

(7). Among those priority claims are “administrative expenses” payable under 11 U.S.C.

§507(a)(2). Morgan v. K.C. Machine & Tool Company (In re K.C. Machine & Tool Company),

816 F.2d 238 (6th Cir. 1987) and Sheehan v. Posin, 2012 WL 1413020 (N.D. W. Va. April 23,

2012). Based on the above, property subject to a tax lien shall be distributed in the following


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order: first, to secured creditors having a superior lien position to the tax lien; second, to holders

of priority claims superior to the priority assigned in the Bankruptcy Code to priority tax claims;

third, to the secured tax lien claimant to the extent of the original lien less any amounts paid to

holders of priority claims; fourth, to junior secured lien claims; fifth, to the holder of the secured

tax lien claim subjected to the statutory carve out for priority creditors; and sixth, to the estate.

In this case, the calculations and proposed distribution under Section 724(b) from the sale

of the Property is as follows:

Description Amount Balance

Sale Price $140,000.00 $140,000.00

Cost of Sale (8% estimated) ($11,200.00) $128,800.00

Section 724(a): IRS Penalties Avoided for benefit of the Estate

($32,205.24) $96,594.76

Payment under Section 724(b)(1): First State Bank (payoff as of 3/15/2017)

($40,144.35) $56,450.41

Payment under Section 724(b)(1):Platte County Treasurer (estimated)

($777.65) $55,672.76

Available IRS tax lien to be subordinated: $144,840.66

Payment under Section 724(b)(2)[(payments under 507(b)(1)-(7)]

507(a)(1): domestic support4 $0.00

507(a)(2): administrative expenses Trustee’s fees/expenses: $10,750 (estimated) Attorneys’ fees/expenses: $28,250 (estimated) Accountant's fees/expenses: $2,000 (estimated)

($41,000.00) $14,672.76

507(a)(3): unsecured claim for involuntary $0.00

507(a)(4): Wages/commissions (cap of $12,850) $0.00

507(a)(5): employee benefit plans (cap of $12,850) $0.00

507(a)(6): fisherman claim (maximum of $6,325) $0.00

507(a)(6): undelivered household goods (cap of $2,850) $0.00

4 On May 31, 2016, Debtor filed a protective proof of claim 11-1 for a domestic support obligation under Bankruptcy Rule 3004. The proof of claim appears to be untimely and the Trustee reserves the right to seek to disallow the claim, but will hold such funds generated from the sale for allowed claims under § 507(a) of greater priority than tax claims until such time as the Court makes a final determination.


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Description Amount Balance

Payment to IRS under Section 724(b)(3)($144,840.66 less $41,000, equals $103,840.66. However, there is only a balance of $14,672.76 remaining. Therefore, only that amount will be paid.)

($14,672.76) $0.00

The IRS will receive an estimated $14,672.76 on account of its Tax Lien. There are no

other junior liens. However, the distribution amounts above are estimates only and the Trustee

proposes to hold sales proceeds (after payment of the Platte County Treasurer) in trust until

either further order of this Court or until the Trustee files his final report and accounting.

Notwithstanding, the sale is still beneficial to the Estate because the Estate is expected to receive

approximately $73,000.00 in net benefit, calculated as follows:

Penalties avoided $32,205.24

Administrative claims (estimated) $41,000.00

Total net benefit to the Estate (estimated) $73,205.24

As such, there is substantial benefit to the Estate warranting the sale of the Property and

proposed distribution under Section 724.

D. To the Extent Applicable, the Trustee Has Met the Requirements for Subordinating

the Tax Liens.

Bankruptcy Code Section 724(e) provides: before subordinating a tax lien on real or personal property of the estate, the trustee shall -

(1) exhaust the unencumbered assets of the estate; and

(2) in a manner consistent with section 506(c), recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving or disposing of such property.

11 U.S.C. § 724(e). In this case, the only potential asset is the Property and there are no other

unencumbered assets of the Estate to administer. Concerning Section 724(e)(2), it does not

appear that surcharging First State Bank and the Platte County Treasurer under Section 506(c) is

available to the Trustee in this case for two reasons. First, case law instructs that when Section

724(b) is available to enable the trustee to recover his administrative expenses, Section 506(c) is


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not available as an alternative. In re Sherrill, 78 B.R. 804, 807 (Bankr. W.D. Tex. 1987) (stating

“when 11 U.S.C.S. §724(b) is available to enable the trustee to recover his administrative

expenses, 11 U.S.C. §506(c) is not available as an alternative.”); see also In re Packard Props.,

112 B.R. 154, 158 n.8 (Bankr. N.D. Tex. 1990) (“Sherrill can be read narrowly to hold that a

trustee should look to § 724(b) before he resorts to § 506(c).”) Second, case law interpreting

Section 506(c) also requires that the surcharge be for the benefit of the estate (i.e. increase the

pool of unencumbered assets to pay other claims as opposed to benefiting an individual

administrative claimant). See In re Suntastic USA, Inc., 269 B.R. 846, 849-850 (Bankr. D. AZ

2001). Here, if the Trustee surcharges First State Bank or the Platte County Treasurer (the senior

secured creditors), the main beneficiary would be the IRS. Benefiting only one claimant as

opposed to many appears contrary to case law interpreting Section 506(c). Id. In addition, at

least one case has held that because Section 724(b) governs distribution of property of the estate

against which tax liens are asserted, that section in effect dictates that tax lien claimants, rather

than other secured creditors, will pay for the cost of estate administration. See Sherrill, 78 B.R.

at 807.

E. Alternatively, the Court Should Surcharge Secured Creditors First State Bank and

the Platte County Treasurer.

Notwithstanding the above and should the Court still require the Trustee to surcharge

secured creditors First State Bank and the Platte County Treasurer, the Trustee submits that

surcharge pursuant to section 506(c) is appropriate where the movant’s actions relieve a secured

creditor of expenses such as enforcing its rights and conducting a foreclosure sale. See In re H.P.

Tool Mfg. Corp., 12 B.R. 600, 601 (Bankr. E.D. Pa. 1981); see also In re Anderson, 66 B.R. 97

(B.A.P. 9th Cir. 1986). The Ninth Circuit has held that section 506(c) permits a trustee to

recover administrative expenses from a secured creditor’s collateral if three (3) conditions are

satisfied: (i) the expenses are necessary to preserve or dispose of the collateral, (ii) they are

reasonable and (iii) the incurrence of the expenses provides a benefit to the secured creditor. See

In re Compton Impressions, Ltd., 217 F.3d 1256 (9th Cir. 2000); see also, In re Cascade

Hydraulics & Utility Srv., Inc., 815 F.2d 546 (9th Cir. 1987). In allowing a trustee to recover


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administrative expenses, a court must measure the necessity and reasonableness of the movant’s

incurred expenses against the non-hypothetical benefits obtained for the secured creditor and the

amount that the secured creditor would have necessarily incurred through foreclosure and

disposal of the property. Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 612

(B.A.P. 9th Cir. 2002).

Here, the three conditions above have been fulfilled. The services performed and the

expenses incurred by the Trustee and his professionals preserved the value of assets of the Estate,

namely, the Property, for the benefit of First State Bank and the Platte County Treasurer. The

Trustee incurred expenses of his professionals and such expenses are reasonable and directly

related to securing, preserving and liquidating the Property for the benefit of First State Bank and

the Platte County Treasurer. The expenses incurred ensured the safety of the collateral,

established the basis for its accounting, and enabled the Trustee to dispose of it

appropriately. Additionally, by sitting back and watching the Trustee dispose of the Property,

First State Bank and the Platte County Treasurer avoided incurring likely costly legal expenses

associated with enforcing their liens. Unlike in Choo, where the objecting secured creditor had

already taken nearly all of the steps to proceed with a sheriff’s sale pre-petition, here Trustee has

encountered no evidence that First State Bank or the Platte County Treasurer began the

foreclosure process on the property pre-petition. Thus, without the efforts of the Trustee and his

professionals, First State Bank and the Platte County Treasurer would have had to enforce their

liens against their collateral and likely would not have been able to realize the value from its

collateral that the Trustee would achieve through the sale as discussed above.

Thus and should the Court so require, surcharging the collateral of First State Bank and

the Platte County Treasurer under section 506(c) as requested herein is appropriate and

necessary. The Trustee requests authorization to surcharge the collateral of First State Bank and

the Platte County Treasurer in an amount as determined by the Court at the Sale Motion

(assuming the Court requires that they be surcharged). Payment to First State Bank and the

Platte County Treasurer will then be reduced by the surcharged amount. Unsecured creditors

will not be prejudiced by the payment of the allowed fees and expenses of the Trustee and his


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attorneys from the collateral of the IRS in that such surcharge funds would not have been

available for the payment of any lower priority secured claims or any unsecured claims of the

Estate.

F. Courts have Allowed Trustees to Sell Fully Encumbered Property Using

Bankruptcy Code Section 724(b).

The legislative history of § 724(b) indicates that that “Congress made a policy decision to

favor the claims of wage earners, the costs of administration of the estate, and other priority

claims over tax liens.” In re Bino’s, 182 B.R. 784, 787-90 (Bankr. N.D. Ill. 1995) (citing

H.R.Rep. No. 686, 89th Cong., 1st Sess. (1965), U.S. Code & Admin. News at 2442, 2462).

Such Congressional intent is instructive as courts around the nation have held that “so long as the

amount of the avoided tax lien exceeds the administrative costs of carrying and disposing of the

property, the property has value to the estate and the trustee is justified in selling the property

and avoiding the tax lien.” 6-724 Collier on Bankruptcy P 724.03 (16th ed. 2016) (citing In re

K.C. Machine & Tool Co., 816 F.2d 238 (6th Cir. 1987) (“[a]dministration promises a benefit in

this case by virtue of § 724(b)”); In re Riker Indus., Inc., 122 B.R. 964 (Bankr. N.D. Ohio 1990);

In re Quality Health Care, 215 B.R.543 (Bankr. N.D. Ind. 1997); see also Wurst v. City of New

York (In re Packard Properties, Inc.), 112 B.R 154, 158-59 (Bank. N.D. Tex. 1990) (holding that

“[t]ax liens were chosen by Congress as a means to pay administrative expenses . . . with a tax

lien on it, § 724(b) provides for taxing authorities to bear the cost to some extent.”).

In enacting § 724(b), Congress deliberately created a mechanism that allows Chapter 7

trustees to subordinate payment to the holder of the tax lien to specific priority interests

described in § 507(a)(1)-(7). Section 724(b)(2) lists § 507(a)(1)(C) and (a)(2), the provisions that

allow for priority payment of administrative claims, in the priority claims that may be paid

before a tax lien. Congress did not include any express reference to payment of a debtor’s

exemption in § 724(b) (had the Debtor in this case were to assert one). More importantly, as

discussed below, Section 522(c)(2)(B) specifically provides that if exempt property is subject to

a tax lien on that property, that debtor’s exemption is subordinate to the tax lien. See, In re

Laredo, 334 B.R. 401, 410-411 (Bankr. N.D. Ill. 2005). Thus, if Congress had intended debtor’s


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exemptions to be allowed priority payment above a tax lien, it would have expressly stated so.

Instead, it expressed the opposite with the plain language of §§ 522(c)(2)(B) and 724(b).

Indeed, courts around the nation have held that abandonment of a fully encumbered asset

is inappropriate when § 724(b) can be utilized to create a distribution to unsecured priority

claimants. See In re K.C. Machine & Tool Co., supra, at 247 (“[w]e conclude that compelled

abandonment is not available where administration promises a benefit to the estate.

Administration promises a benefit in this case by virtue of § 724(b).”); In re Quality Health

Care, supra, at 582 (11 U.S.C. § 724(b) justified an order requiring turnover by the IRS to the

trustee); In re Dowco Petroleum, Inc., 137 B.R. 207 (Bankr. E.D. Tex. 1992) (“[h]ad it not been

for section 724(b), the Trustee would have no incentive other than to abandon the property as a

burden to the estate. However, the presence of section 724(b) precludes any such

abandonment”); Matter of Owens, 208 B.R. 750, 754 (Bankr. S.D. Ga. 1996) (“Section 724(b) is

a distribution provision and may be asserted as a defense to compelled abandonment . . . .”); In

re Sherrill, 78 B.R. 804, 807 (Bankr. W.D. Tex. 1987) (“[b]ecause of the substantial benefit of

that can be realized from the sale of property subject to tax liens as a result of the operation of §

724(b), . . . abandonment of such property is not permitted even though there is no equity over

the liens in the property.”); In re Laredo, 334 B.R. 401, 416 (Bankr. N.D. Ill. 2005) (“[b]ased on

the foregoing, the existence of the IRS lien rendered the Property beneficial to the estate and not

susceptible to abandonment, notwithstanding a lack of equity in the Property, because the

provisions of § 724(b) can be invoked to satisfy administrative expenses.”). The Trustee is

properly exercising his statutory duties in using Section 724(b) to create a benefit to the Estate

from the Property.

G. The Proposed Sale Should be Allowed Free and Clear of Liens.

Bankruptcy Code Section 363(f) allows a trustee to sell property of the bankruptcy estate

“free and clear of any interest in such property of an entity,” if any one of the following five

conditions is met:

(1) applicable non-bankruptcy law permits a sale of such property free and clear of such interest;


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(2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;

(4) such interest is in bona fide dispute; or (5) such entity could be compelled, in a legal or equitable

proceeding, to accept money satisfaction of such interest.

11 U.S.C. § 363(f). Section 363(f) is written in the disjunctive and thus only one of the

enumerated conditions needs to be satisfied for Court approval to be appropriate. The Trustee

proposes to sell the Property under section 363(f)(1), 363(f)(4) and 363(f)(5).

1. Section 363(f)(1) – Applicable Non-bankruptcy Law Permits Sale of Such

Property.

Since the IRS as a junior lienholder could be foreclosed upon under applicable California

law (see Civil Code § 2924 et. seq.), the sale herein should be authorized under Bankruptcy Code

section 363(f)(1).

2. Section 363(f)(4) – Bona Fide Dispute.

A bona fide dispute has been defined by In re Atwood, 124 B.R. 402 (Bankr. S.D. Ga.

1991) as a “genuine issue of material fact that bears upon the debtor’s liability, or meritorious

contention as to the application of law to undisputed facts.” Id. at 407. In In re Milford Group,

Inc., 150 B.R. 904 (Bankr. M.D. Pa. 1992), the court stated it need not resolve a bona fide

dispute, but must determine whether the issues presented are genuine as to the existence of a

bona fide dispute. In doing so, the Milford Court found that the debtor had met its burden to

establish cause for the Court to allow for the sale of the property, free and clear of liens.

Certainly the penalties portion of the IRS liens are subject to avoidance under Section 724(a).

Further, to the extent that the IRS disputes the distribution as set forth under Section 724(b),

there is a bona fide dispute between the Estate and the IRS.

///

///

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Requiring resolution of those issues before the sale of the Property may likely take

substantial time, effort and expense by the parties. The need to resolve the IRS lien, however,

should not hinder, delay or in any way inhibit the Trustee’s efforts to maximize the value of the

sale of Property for the Estate. Thus, approval for the sale free and clear of the IRS lien as a

disputed lien pursuant to Bankruptcy Code Section 363(f)(4) is appropriate.

3. Section 363(f)(5) – Compelled to Accept a Money Satisfaction.

The IRS lien can be compelled to accept money satisfaction, if any, based on Section

724(b) as discussed above. Similarly, the IRS is forced to essentially subordinate its liens to the

extent said liens are for penalties on the taxes under Section 724(a). As such, the sale of the

Property free and clear of the IRS liens is appropriate under Section 363(f)(5).

H. Request for Payment of Real Estate Commission to Broker.

Bankruptcy Code Section 328 allows employment of a professional person under Section

327 “on any reasonable terms and conditions of employment, including on a retainer, on an

hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis.” 11 U.S.C. §

328(a). Through this Motion, the Trustee seeks authorization to pay a real estate broker

commission in the amount of $8,400.005 to the Broker to be split between the Seller’s brokers.

I. The Court Has the Authority to Approve the Bidding Procedures.

Implementing the Bidding Procedures is an action outside of the ordinary course of the

business. Bankruptcy Code Section 363(b)(1) provides that a trustee “after notice and hearing,

may use, sell or lease, other than in the ordinary course of business, property of the estate.” 11

U.S.C. § 363(b)(1). Furthermore, under Bankruptcy Code Section 105(a), “[t]he court may issue

any order, process, or judgment that is necessary or appropriate to carry out the provisions of this

title.” 11 U.S.C. § 105(a). Thus, pursuant to Bankruptcy Code sections 363(b)(1) and 105(a),

this Court may approve the Bidding Procedures, which will assist the Trustee to obtain the best

possible price on the best possible terms for the Property.

///

5 The total amount of real estate broker’s commission will increase if the purchase price for the Property is increased by a successful overbid; but in no event will exceed six percent of the purchase price.


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J. The Court has the Authority to Waive the Fourteen-Day Stay of Sale

Federal Rule of Bankruptcy Procedure 6004(h) provides that “[a]n order authorizing the

use, sale or lease of property other than cash collateral is stayed until the expiration of 14 days

after entry of the order, unless the Court orders otherwise.” Fed. R. Bankr. P. 6004(h). The

Trustee desires to close the sale as soon as practicable after entry of an order approving the sale.

Accordingly, the Trustee requests that the Court, in the discretion provided it under Federal Rule

of Bankruptcy Procedure 6004(h), waive the fourteen (14) day stay requirement.

III. CONCLUSION

WHEREFORE, based upon the foregoing, the Trustee respectfully submits that good

cause exists for granting the Sale Motion and requests that the Court enter an order as follows:

1. Approving the Bidding Procedures set forth above for the sale of the Property.

2. Authorizing the Trustee to sell the Property on an as-is, where-is basis, without

any warranties or representations, to the Buyer (or Successful Bidder) pursuant to the terms and

conditions as set forth in the Agreement attached as Exhibit 3 to the Daff Declaration.

3. Authorizing the sale of the Property free and clear of liens with treatment of liens

as set forth in the Sale Motion.

4. Authorizing the Trustee to sign any and all documents convenient and necessary

in pursuit of the sale as set forth above, including but not limited to any and all conveyances

contemplated by the Agreement attached as Exhibit 3 to the Daff Declaration.

5. Approving the payment of the real estate commission in the total amount not to

exceed six percent of the final purchase price to be paid to the Trustee’s Broker.

6. Authorizing the Trustee to pay the following from the proceeds of the sale of the

Property through escrow: (i) all costs of sale, including escrow fees at closing as allocated in the

Agreement, (ii) amount owed to First State Bank in the estimated amount of $40,144.35, and (iii)

amount owed to the Platte County Treasurer in the estimated amount of $777.65.

7. Avoidance of penalties asserted by the IRS pursuant to Bankruptcy Code Section

724(a) in the total amount of $32,205.24, which is preserved for the Estate under Bankruptcy

Code Section 551.


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8. Subordination of the IRS Claim under Section 724(b) in an amount to be

determined at a later date.

9. Alternatively, authorizing the Trustee to surcharge First State Bank and the Platte

County Treasurer for reasonable fees and costs associated with administration of the Property.

10. A determination by the Court that the Buyer is in good faith pursuant to

Bankruptcy Code Section 363(m).

11. Waiving the fourteen day stay of the order approving the sale of the Property

under Federal Rules of Bankruptcy Procedure 6004(h).

12. For such other and further relief as the Court deems just and proper under the

circumstances of this case. Dated: March 28, 2017

Respectfully submitted, SHULMAN HODGES & BASTIAN LLP /s/ Brandon J. Iskander Lynda T. Bui Brandon J. Iskander Attorneys for Charles W. Daff, Chapter 7 Trustee for the bankruptcy estate of Russell John Molina


DECLARATION


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DECLARATION OF CHARLES W. DAFF

I, Charles W. Daff, declare:

1. I am the duly appointed, qualified and acting Chapter 7 trustee for the bankruptcy

estate of Russell John Molina (“Debtor”). I have personal knowledge of the facts set forth

herein, and if called and sworn as a witness, I could and would competently testify thereto,

except where matters are stated on information and belief, in which case I am informed and

believe that the facts so stated are true and correct.

2. I make this Declaration in support of my Motion for Order: (1) Approving the

Sale of Real Property of the Estate Free and Clear of Liens, Subject to Overbids and Request for

Approval of the Bidding Procedures Utilized; (2) Subordinating Tax Liens and Distributing

Proceeds Under 11 U.S.C. §§ 724(a) and 724(b); (3) Approving Payment Of Real Estate

Commission; and (4) Granting Related Relief (“Sale Motion”). All capitalized terms not

otherwise defined herein shall have the meaning set forth in the Sale Motion.

3. I have read and I am aware of the contents of the Sale Motion and the

accompanying Memorandum of Points and Authorities. The facts stated in the Sale Motion and

the Memorandum of Points and Authorities are true to the best of my knowledge.

4. On his Schedule A/B, item 1, the Debtor listed an ownership interest in the

Property and valued it at $100,000.00. On his Schedule C, the Debtor did not claim an

exemption in the Property. On his Schedule D, the Debtor listed only one lien against the

Property in favor of First State Bank of $38,000.55. True and correct copies of the Debtor’s

Schedules A/B, C, and D are attached here as Exhibit 1.

5. At his 341(a) Meeting of Creditors, the Debtor told me the he does not reside at,

does not intend to reside at, and does not intend to claim an exemption in the Property.

6. The Title Report (a true and correct copy of which is attached here as Exhibit 2)

lists the liens and encumbrances against the Property. The sale of the Property will be free and

clear of certain liens pursuant to Bankruptcy Code § 363(b)(1) and (f). A chart describing the

liens, claims or interests impacting the Property and their treatment through the sale is set in the

Sale Motion.


Exhibit 1

Schedules A/B, C and D


Fill in this information to identify your case and this filing:

Debtor 1 Russell John MolinaFirst Name Middle Name Last Name

Debtor 2(Spouse, if filing) First Name Middle Name Last Name

United States Bankruptcy Court for the: CENTRAL DISTRICT OF CALIFORNIA

Case number Check if this is anamended filing

Official Form 106A/BSchedule A/B: Property 12/15In each category, separately list and describe items. List an asset only once. If an asset fits in more than one category, list the asset in the category where you thinkit fits best. Be as complete and accurate as possible. If two married people are filing together, both are equally responsible for supplying correct information. Ifmore space is needed, attach a separate sheet to this form. On the top of any additional pages, write your name and case number (if known). Answer every question.

Part 1: Describe Each Residence, Building, Land, or Other Real Estate You Own or Have an Interest In

1. Do you own or have any legal or equitable interest in any residence, building, land, or similar property?

No. Go to Part 2.

Yes. Where is the property?

1.1 What is the property? Check all that apply

Do not deduct secured claims or exemptions. Put theamount of any secured claims on Schedule D:Creditors Who Have Claims Secured by Property.

Single-family home

Duplex or multi-unit building

Condominium or cooperative

Street address, if available, or other description

Manufactured or mobile home

LandCurrent value of theentire property?

Current value of theportion you own?

City State ZIP Code Investment property $100,000.00 $100,000.00Timeshare Describe the nature of your ownership interest

(such as fee simple, tenancy by the entireties, ora life estate), if known.

Other

Who has an interest in the property? Check one

Debtor 1 only

Debtor 2 onlyCounty Debtor 1 and Debtor 2 only Check if this is community property

(see instructions)At least one of the debtors and anotherOther information you wish to add about this item, such as localproperty identification number:

320 Acres in Wheatland, WY, County of Platte

Official Form 106A/B Schedule A/B: Property page 1Software Copyright (c) 1996-2016 Best Case, LLC - www.bestcase.com Best Case Bankruptcy


EXHIBIT 1


Debtor 1 Russell John Molina Case number (if known)

If you own or have more than one, list here:1.2 What is the property? Check all that apply

Do not deduct secured claims or exemptions. Put theamount of any secured claims on Schedule D:Creditors Who Have Claims Secured by Property.

108 S 4th Street Single-family home

Duplex or multi-unit building

Condominium or cooperative

Street address, if available, or other description

Bellevue ID 83313-0000Manufactured or mobile home

LandCurrent value of theentire property?

Current value of theportion you own?

City State ZIP Code Investment property $121,640.00 $121,640.00Timeshare Describe the nature of your ownership interest

(such as fee simple, tenancy by the entireties, ora life estate), if known.

OtherWho has an interest in the property? Check one

Debtor 1 only 100%Blaine Debtor 2 onlyCounty Debtor 1 and Debtor 2 only Check if this is community property

(see instructions)At least one of the debtors and anotherOther information you wish to add about this item, such as localproperty identification number:

Encumb=$239,200.69 ($52,953.84 is deferred principal with no interestafter loan modification)

2. Add the dollar value of the portion you own for all of your entries from Part 1, including any entries forpages you have attached for Part 1. Write that number here...........................................................................=> $221,640.00

Part 2: Describe Your Vehicles

Do you own, lease, or have legal or equitable interest in any vehicles, whether they are registered or not? Include any vehicles you own thatsomeone else drives. If you lease a vehicle, also report it on Schedule G: Executory Contracts and Unexpired Leases.

3. Cars, vans, trucks, tractors, sport utility vehicles, motorcycles

No

Yes

3.1 Make: Toyota Who has an interest in the property? Check one Do not deduct secured claims or exemptions. Putthe amount of any secured claims on Schedule D:Creditors Who Have Claims Secured by Property.Model: Prius Debtor 1 only

Year: 2011 Debtor 2 only Current value of theentire property?

Current value of theportion you own?Approximate mileage: 120,000 Debtor 1 and Debtor 2 only

Other information: At least one of the debtors and another

$6,909.00 $6,909.00Check if this is community property (see instructions)

3.2 Make: Toyota Who has an interest in the property? Check one Do not deduct secured claims or exemptions. Putthe amount of any secured claims on Schedule D:Creditors Who Have Claims Secured by Property.Model: Tundra Debtor 1 only

Year: 2001 Debtor 2 only Current value of theentire property?

Current value of theportion you own?Approximate mileage: 228,766 Debtor 1 and Debtor 2 only

Other information: At least one of the debtors and another

$6,020.00 $6,020.00Check if this is community property (see instructions)



EXHIBIT 1



4. Watercraft, aircraft, motor homes, ATVs and other recreational vehicles, other vehicles, and accessoriesExamples: Boats, trailers, motors, personal watercraft, fishing vessels, snowmobiles, motorcycle accessories

No Yes

5.Add the dollar value of the portion you own for all of your entries from Part 2, including any entries forpages you have attached for Part 2. Write that number here.............................................................................=> $12,929.00

Part 3: Describe Your Personal and Household ItemsDo you own or have any legal or equitable interest in any of the following items? Current value of the

portion you own?Do not deduct securedclaims or exemptions.

6. Household goods and furnishingsExamples: Major appliances, furniture, linens, china, kitchenware

No Yes. Describe.....

2 bedrooms of furniture, livingroom furniture, 2 TV's, and mischousehold goods & furnishing (No single item worth more than$650) $5,000.00

7. ElectronicsExamples: Televisions and radios; audio, video, stereo, and digital equipment; computers, printers, scanners; music collections; electronic devices

including cell phones, cameras, media players, games No Yes. Describe.....

8. Collectibles of valueExamples: Antiques and figurines; paintings, prints, or other artwork; books, pictures, or other art objects; stamp, coin, or baseball card collections;

other collections, memorabilia, collectibles No Yes. Describe.....

Misc books & prints $100.00

9. Equipment for sports and hobbiesExamples: Sports, photographic, exercise, and other hobby equipment; bicycles, pool tables, golf clubs, skis; canoes and kayaks; carpentry tools;

musical instruments No Yes. Describe.....

10. FirearmsExamples: Pistols, rifles, shotguns, ammunition, and related equipment No Yes. Describe.....

11. ClothesExamples: Everyday clothes, furs, leather coats, designer wear, shoes, accessories No Yes. Describe.....

Misc Clothing $500.00

12. JewelryExamples: Everyday jewelry, costume jewelry, engagement rings, wedding rings, heirloom jewelry, watches, gems, gold, silver No Yes. Describe.....



EXHIBIT 1



13. Non-farm animalsExamples: Dogs, cats, birds, horses No Yes. Describe.....

14. Any other personal and household items you did not already list, including any health aids you did not list No Yes. Give specific information.....

15. Add the dollar value of all of your entries from Part 3, including any entries for pages you have attachedfor Part 3. Write that number here .............................................................................. $5,600.00

Part 4: Describe Your Financial AssetsDo you own or have any legal or equitable interest in any of the following? Current value of the

portion you own?Do not deduct securedclaims or exemptions.

16. CashExamples: Money you have in your wallet, in your home, in a safe deposit box, and on hand when you file your petition No Yes................................................................................................................

17. Deposits of moneyExamples: Checking, savings, or other financial accounts; certificates of deposit; shares in credit unions, brokerage houses, and other similar

institutions. If you have multiple accounts with the same institution, list each. No Yes........................ Institution name:

17.1. Checking AccountChase BankAcct no 9677 $43.65

18. Bonds, mutual funds, or publicly traded stocksExamples: Bond funds, investment accounts with brokerage firms, money market accounts No Yes.................. Institution or issuer name:

19. Non-publicly traded stock and interests in incorporated and unincorporated businesses, including an interest in an LLC, partnership,and joint venture No Yes. Give specific information about them...................

Name of entity: % of ownership:

Prosthetic & Orthotics Management, Inc. dbaCoachella Valley Orthotics & Prosthetic("CVO&P") (Current Book Value of corporationis $137,829.68 and is made up of $4,752.15 ofinventory at cost as of 1/28/16, A/R's ofapproximately $181,714.14 as of 1/28/16, ofwhich at least 60% are likely uncollectible, andcash of $60,391.87) 100% % $60,000.00

Molina Prostheitcs & Orthotics dba AdvancedProsthetics & Orthotics [The value of thisbusiness was calculated by adding thecorporation's $23,116,49 in cash (its only assetother than A/R's with a book value ofapproximately $10,757.16 as of 1/28/16, whichthe Debtor believes only 50% are collectible) andA/R's with a value of $5,378.58 and deductingliabilities of $7,141.85=Net value of $21,229.91] 35% % $7,430.47



EXHIBIT 1



20. Government and corporate bonds and other negotiable and non-negotiable instrumentsNegotiable instruments include personal checks, cashiers’ checks, promissory notes, and money orders.Non-negotiable instruments are those you cannot transfer to someone by signing or delivering them. No Yes. Give specific information about them

Issuer name:

21. Retirement or pension accountsExamples: Interests in IRA, ERISA, Keogh, 401(k), 403(b), thrift savings accounts, or other pension or profit-sharing plans No Yes. List each account separately.

Type of account: Institution name:

22. Security deposits and prepaymentsYour share of all unused deposits you have made so that you may continue service or use from a companyExamples: Agreements with landlords, prepaid rent, public utilities (electric, gas, water), telecommunications companies, or others No Yes. ..................... Institution name or individual:

Security Deposit with Landlord of Debtor'sresidence

$2,100.00

23. Annuities (A contract for a periodic payment of money to you, either for life or for a number of years) No Yes............. Issuer name and description.

24. Interests in an education IRA, in an account in a qualified ABLE program, or under a qualified state tuition program.26 U.S.C. §§ 530(b)(1), 529A(b), and 529(b)(1).

No Yes............. Institution name and description. Separately file the records of any interests.11 U.S.C. § 521(c):

25. Trusts, equitable or future interests in property (other than anything listed in line 1), and rights or powers exercisable for your benefit No Yes. Give specific information about them...

26. Patents, copyrights, trademarks, trade secrets, and other intellectual propertyExamples: Internet domain names, websites, proceeds from royalties and licensing agreements No Yes. Give specific information about them...

27. Licenses, franchises, and other general intangiblesExamples: Building permits, exclusive licenses, cooperative association holdings, liquor licenses, professional licenses No Yes. Give specific information about them...

Money or property owed to you? Current value of theportion you own?Do not deduct securedclaims or exemptions.

28. Tax refunds owed to you No Yes. Give specific information about them, including whether you already filed the returns and the tax years.......

29. Family supportExamples: Past due or lump sum alimony, spousal support, child support, maintenance, divorce settlement, property settlement No Yes. Give specific information......



EXHIBIT 1



30. Other amounts someone owes youExamples: Unpaid wages, disability insurance payments, disability benefits, sick pay, vacation pay, workers’ compensation, Social Security

benefits; unpaid loans you made to someone else No Yes. Give specific information..

$2500 from debtor's son, Russell Molina, Jr. (Debtor believesthis debt is presently uncollectible) $0.00

31. Interests in insurance policiesExamples: Health, disability, or life insurance; health savings account (HSA); credit, homeowner’s, or renter’s insurance No Yes. Name the insurance company of each policy and list its value.

Company name: Beneficiary: Surrender or refundvalue:

Annuity Contract:Allianz Life Insurance CompanyContract No 1950Accumulation Value=$0.00Cash Surrender Value=$0.00 $0.00

32. Any interest in property that is due you from someone who has diedIf you are the beneficiary of a living trust, expect proceeds from a life insurance policy, or are currently entitled to receive property becausesomeone has died. No Yes. Give specific information..

33. Claims against third parties, whether or not you have filed a lawsuit or made a demand for paymentExamples: Accidents, employment disputes, insurance claims, or rights to sue No Yes. Describe each claim.........

34. Other contingent and unliquidated claims of every nature, including counterclaims of the debtor and rights to set off claims No Yes. Describe each claim.........

Possible recovery in a class action suit against Centers forMedicare & Medicaid Service $0.00

35. Any financial assets you did not already list No Yes. Give specific information..

36. Add the dollar value of all of your entries from Part 4, including any entries for pages you have attachedfor Part 4. Write that number here..................................................................................................................... $69,574.12

Part 5: Describe Any Business-Related Property You Own or Have an Interest In. List any real estate in Part 1.

37. Do you own or have any legal or equitable interest in any business-related property? No. Go to Part 6.

Yes. Go to line 38.

Current value of theportion you own?Do not deduct securedclaims or exemptions.

38. Accounts receivable or commissions you already earned No



EXHIBIT 1



Yes. Describe.....

39. Office equipment, furnishings, and suppliesExamples: Business-related computers, software, modems, printers, copiers, fax machines, rugs, telephones, desks, chairs, electronic devices No Yes. Describe.....

40. Machinery, fixtures, equipment, supplies you use in business, and tools of your trade No Yes. Describe.....

41. Inventory No Yes. Describe.....

42. Interests in partnerships or joint ventures No Yes. Give specific information about them...................

Name of entity: % of ownership:

Slater Wind Energy Association, LLC as alimited partner (This LLC has had no income forat least the last two years and is no longeroperating and its only asset is a bank accountwith approx $10,000) 1.553% % $0.00

43. Customer lists, mailing lists, or other compilations No.

Do your lists include personally identifiable information (as defined in 11 U.S.C. § 101(41A))?

No Yes. Describe.....

44. Any business-related property you did not already list No Yes. Give specific information.........

45. Add the dollar value of all of your entries from Part 5, including any entries for pages you have attachedfor Part 5. Write that number here..................................................................................................................... $0.00

Part 6: Describe Any Farm- and Commercial Fishing-Related Property You Own or Have an Interest In.If you own or have an interest in farmland, list it in Part 1.

46. Do you own or have any legal or equitable interest in any farm- or commercial fishing-related property? No. Go to Part 7.

Yes. Go to line 47.

Part 7: Describe All Property You Own or Have an Interest in That You Did Not List Above

53. Do you have other property of any kind you did not already list?Examples: Season tickets, country club membership No Yes. Give specific information.........



EXHIBIT 1



54. Add the dollar value of all of your entries from Part 7. Write that number here .................................... $0.00

Part 8: List the Totals of Each Part of this Form

55. Part 1: Total real estate, line 2 ...................................................................................................................... $221,640.0056. Part 2: Total vehicles, line 5 $12,929.0057. Part 3: Total personal and household items, line 15 $5,600.0058. Part 4: Total financial assets, line 36 $69,574.1259. Part 5: Total business-related property, line 45 $0.0060. Part 6: Total farm- and fishing-related property, line 52 $0.0061. Part 7: Total other property not listed, line 54 + $0.00

62. Total personal property. Add lines 56 through 61... $88,103.12 Copy personal property total $88,103.12

63. Total of all property on Schedule A/B. Add line 55 + line 62 $309,743.12



EXHIBIT 1


Fill in this information to identify your case:


Debtor 2(Spouse if, filing) First Name Middle Name Last Name


Case number(if known) Check if this is an

amended filing

Official Form 106CSchedule C: The Property You Claim as Exempt 12/15

Be as complete and accurate as possible. If two married people are filing together, both are equally responsible for supplying correct information. Usingthe property you listed on Schedule A/B: Property (Official Form 106A/B) as your source, list the property that you claim as exempt. If more space isneeded, fill out and attach to this page as many copies of Part 2: Additional Page as necessary. On the top of any additional pages, write your nameand case number (if known).

For each item of property you claim as exempt, you must specify the amount of the exemption you claim. One way of doing so is to state aspecific dollar amount as exempt. Alternatively, you may claim the full fair market value of the property being exempted up to the amount ofany applicable statutory limit. Some exemptions—such as those for health aids, rights to receive certain benefits, and tax-exempt retirementfunds—may be unlimited in dollar amount. However, if you claim an exemption of 100% of fair market value under a law that limits theexemption to a particular dollar amount and the value of the property is determined to exceed that amount, your exemption would be limitedto the applicable statutory amount.

Part 1: Identify the Property You Claim as Exempt

1. Which set of exemptions are you claiming? Check one only, even if your spouse is filing with you.

You are claiming state and federal nonbankruptcy exemptions. 11 U.S.C. § 522(b)(3)

You are claiming federal exemptions. 11 U.S.C. § 522(b)(2)

2. For any property you list on Schedule A/B that you claim as exempt, fill in the information below.

Brief description of the property and line onSchedule A/B that lists this property

Current value of theportion you ownCopy the value fromSchedule A/B

Amount of the exemption you claim

Check only one box for each exemption.

Specific laws that allow exemption

320 Acres in Wheatland, WY, Countyof PlatteLine from Schedule A/B: 1.1

$100,000.00 $0.00 C.C.P. § 703.140(b)(5)

100% of fair market value, up toany applicable statutory limit

108 S 4th Street Bellevue, ID 83313Blaine CountyEncumb=$239,200.69 ($52,953.84 isdeferred principal with no interestafter loan modification)Line from Schedule A/B: 1.2

$121,640.00 $0.00 C.C.P. § 703.140(b)(5)


2011 Toyota Prius 120,000 milesLine from Schedule A/B: 3.1

$6,909.00 $5,100.00 C.C.P. § 703.140(b)(2)


2001 Toyota Tundra 228,766 milesLine from Schedule A/B: 3.2

$6,020.00 $7,625.00 C.C.P. § 703.140(b)(6)


Official Form 106C Schedule C: The Property You Claim as Exempt page 1 of 3Software Copyright (c) 1996-2016 Best Case, LLC - www.bestcase.com Best Case Bankruptcy


EXHIBIT 1








2 bedrooms of furniture, livingroomfurniture, 2 TV's, and mischousehold goods & furnishing (Nosingle item worth more than $650)Line from Schedule A/B: 6.1

$5,000.00 $5,000.00 C.C.P. § 703.140(b)(3)


Misc books & printsLine from Schedule A/B: 8.1

$100.00 $100.00 C.C.P. § 703.140(b)(5)


Misc ClothingLine from Schedule A/B: 11.1

$500.00 $500.00 C.C.P. § 703.140(b)(3)


Checking Account: Chase BankAcct no 9677Line from Schedule A/B: 17.1

$43.65 $43.65 C.C.P. § 703.140(b)(5)


Prosthetic & Orthotics Management,Inc. dba Coachella Valley Orthotics &Prosthetic ("CVO&P") (Current BookValue of corporation is $137,829.68and is made up of $4,752.15 ofinventory at cost as of 1/28/16, A/R'sof approximately $181,714.14 as of1/28/16Line from Schedule A/B: 19.1

$60,000.00 $24,680.35 C.C.P. § 703.140(b)(5)


Molina Prostheitcs & Orthotics dbaAdvanced Prosthetics & Orthotics[The value of this business wascalculated by adding thecorporation's $23,116,49 in cash (itsonly asset other than A/R's with abook value of approximately$10,757.16 as of 1/28/16, whicLine from Schedule A/B: 19.2

$7,430.47 $0.00 C.C.P. § 703.140(b)(5)


Security Deposit with Landlord ofDebtor's residenceLine from Schedule A/B: 22.1

$2,100.00 $2,100.00 C.C.P. § 703.140(b)(5)


$2500 from debtor's son, RussellMolina, Jr. (Debtor believes this debtis presently uncollectible)Line from Schedule A/B: 30.1

$0.00 $0.00 C.C.P. § 703.140(b)(5)


Annuity Contract:Allianz Life Insurance CompanyContract No 1950Accumulation Value=$0.00Cash Surrender Value=$0.00Line from Schedule A/B: 31.1

$0.00 $0.00 C.C.P. § 703.140(b)(5)




EXHIBIT 1








Annuity Contract:Allianz Life Insurance CompanyContract No 1950Accumulation Value=$0.00Cash Surrender Value=$0.00Line from Schedule A/B: 31.1

$0.00 $13,675.00 C.C.P. § 703.140(b)(8)


Possible recovery in a class actionsuit against Centers for Medicare &Medicaid ServiceLine from Schedule A/B: 34.1

$0.00 $0.00 C.C.P. § 703.140(b)(5)


Slater Wind Energy Association, LLCas a limited partner (This LLC hashad no income for at least the lasttwo years and is no longer operatingand its only asset is a bank accountwith approx $10,000)1.553%Line from Schedule A/B: 42.1

$0.00 $0.00 C.C.P. § 703.140(b)(5)


3. Are you claiming a homestead exemption of more than $155,675?(Subject to adjustment on 4/01/16 and every 3 years after that for cases filed on or after the date of adjustment.)

No

Yes. Did you acquire the property covered by the exemption within 1,215 days before you filed this case?NoYes



EXHIBIT 1


Fill in this information to identify your case:


Debtor 2(Spouse if, filing) First Name Middle Name Last Name


Case number(if known) Check if this is an

amended filing

Official Form 106DSchedule D: Creditors Who Have Claims Secured by Property 12/15

Be as complete and accurate as possible. If two married people are filing together, both are equally responsible for supplying correct information. If more space isneeded, copy the Additional Page, fill it out, number the entries, and attach it to this form. On the top of any additional pages, write your name and case number (ifknown).

1. Do any creditors have claims secured by your property?

No. Check this box and submit this form to the court with your other schedules. You have nothing else to report on this form.

Yes. Fill in all of the information below.

Part 1: List All Secured Claims2. List all secured claims. If a creditor has more than one secured claim, list the creditor separately foreach claim. If more than one creditor has a particular claim, list the other creditors in Part 2. As muchas possible, list the claims in alphabetical order according to the creditor’s name.

Column A

Amount of claimDo not deduct thevalue of collateral.

Column B

Value of collateralthat supports thisclaim

Column C

UnsecuredportionIf any

2.1 Blaine County TaxCollector Describe the property that secures the claim: $0.00 $121,640.00 $0.00Creditor's Name 108 S 4th Street Bellevue, ID 83313

Blaine CountyEncumb=$239,200.69 ($52,953.84 isdeferred principal with no interestafter loan modification)219 1st Ave South Ste.

102Hailey, ID 83333

As of the date you file, the claim is: Check all thatapply.

ContingentNumber, Street, City, State & Zip Code Unliquidated

DisputedWho owes the debt? Check one. Nature of lien. Check all that apply.

Debtor 1 only Debtor 2 only

An agreement you made (such as mortgage or securedcar loan)

Debtor 1 and Debtor 2 only Statutory lien (such as tax lien, mechanic's lien) At least one of the debtors and another Judgment lien from a lawsuitCheck if this claim relates to acommunity debt

Other (including a right to offset) Secured Property Taxes

Date debt was incurred 2015-2016 Last 4 digits of account number 0090

2.2 First State Bk, DivGlacierbank Describe the property that secures the claim: $38,000.55 $100,000.00 $0.00Creditor's Name 320 Acres in Wheatland, WY,

County of Platte

Po Box 39Wheatland, WY 82201






Debtor 1 and Debtor 2 only Statutory lien (such as tax lien, mechanic's lien) At least one of the debtors and another Judgment lien from a lawsuit

Official Form 106D Schedule D: Creditors Who Have Claims Secured by Property page 1 of 4Software Copyright (c) 1996-2016 Best Case, LLC - www.bestcase.com Best Case Bankruptcy


EXHIBIT 1


Debtor 1 Russell John Molina Case number (if know)First Name Middle Name Last Name

Check if this claim relates to acommunity debt

Other (including a right to offset) First Trust Deed

Date debt was incurredOpened9/09/05 Last 4 digits of account number 0905

2.3 Platte County Treasurer Describe the property that secures the claim: $369.92 $100,000.00 $0.00Creditor's Name 320 Acres in Wheatland, WY,

County of Platte

806 9th St.Wheatland, WY 82201







Other (including a right to offset) Secured Property Taxes

Date debt was incurred2014 taxyear Last 4 digits of account number 3100

2.4 Seterus for Citimortgage,Inc. Describe the property that secures the claim: $235,075.43 $121,640.00 $113,435.43Creditor's Name 108 S 4th Street Bellevue, ID 83313

Blaine CountyEncumb=$239,200.69 ($52,953.84 isdeferred principal with no interestafter loan modification)PO Box 2008

Grand Rapids, MI49501-2008







Other (including a right to offset) First Trust Deed

Date debt was incurredOpened10/13/05 Last 4 digits of account number 4047

2.5 Toyota FinancialServices Describe the property that secures the claim: $4,561.99 $6,909.00 $0.00Creditor's Name 2011 Toyota Prius 120,000 miles

PO Box 5855Carol Stream, IL60197-5855




Official Form 106D Additional Page of Schedule D: Creditors Who Have Claims Secured by Property page 2 of 4

Software Copyright (c) 1996-2016 Best Case, LLC - www.bestcase.com Best Case Bankruptcy


EXHIBIT 1






Other (including a right to offset) Purchase Money Security

Date debt was incurred 7/2011 Last 4 digits of account number 6937

Add the dollar value of your entries in Column A on this page. Write that number here: $278,007.89If this is the last page of your form, add the dollar value totals from all pages.Write that number here: $278,007.89

Part 2: List Others to Be Notified for a Debt That You Already ListedUse this page only if you have others to be notified about your bankruptcy for a debt that you already listed in Part 1. For example, if a collection agency is tryingto collect from you for a debt you owe to someone else, list the creditor in Part 1, and then list the collection agency here. Similarly, if you have more than onecreditor for any of the debts that you listed in Part 1, list the additional creditors here. If you do not have additional persons to be notified for any debts in Part 1,do not fill out or submit this page.

Name, Number, Street, City, State & Zip CodeCitibank, NA701 East 60th Street NorthAttn: Officer, Director,or ManagingAgentSioux Falls, SD 57104

On which line in Part 1 did you enter the creditor? 2.4

Last 4 digits of account number

Name, Number, Street, City, State & Zip CodeCitibank, NA701 East 60th Street NorthAttn: Agent for Service of ProcessSioux Falls, SD 57104



Name, Number, Street, City, State & Zip CodeCitimortgagePO Box 6243Sioux Falls, SD 57117



Name, Number, Street, City, State & Zip CodeCitimortgagePo Box 9438Gaithersburg, MD 20898



Name, Number, Street, City, State & Zip CodeCitimortgage, Inc.Attn: Agent for Service of ProcessCT Corporation Systems818 West Seventh St, 2nd FloorLos Angeles, CA 90017



Name, Number, Street, City, State & Zip CodeCitimortgage, Inc.1000 Technology Drive, MS 420RO Fallon, MO 63368-2240






EXHIBIT 1



Name, Number, Street, City, State & Zip CodeCitiMortgage, Inc.PO Box 30509Attn: Officer, Director or ManagingAgentTampa, FL 33631



Name, Number, Street, City, State & Zip CodeFirst State BankDivision of Glacier Bank1405 16th StWheatland, WY 82201



Name, Number, Street, City, State & Zip CodeSeterusPO Box 1077Hartford, CT 06143-1077






EXHIBIT 1


Exhibit 2

Title Report


ALTA Plain Language Commitment Form INFORMATION

The Title Insurance Commitment is a legal contract between you and the Company. It is issued to show the basis on which we will issue a Title Insurance Policy to you. The Policy will insure you against certain risks to the land title, subject to the limitations shown in the Policy. The Company will give you a sample of the Policy form, if you ask. The Policy contains an arbitration clause. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or you as the exclusive remedy of the parties. You may review a copy of the arbitration rules at http://www.alta.org/. The Commitment is based on the land title as of the Commitment Date. Any changes in the land title or the transaction may affect the Commitment and the Policy. The Commitment is subject to its Requirements, Exceptions and Conditions. THIS INFORMATION IS NOT PART OF THE TITLE INSURANCE COMMITMENT. YOU SHOULD READ THE COMMITMENT VERY CAREFULLY. Reference: Russell J. Molina/To Be Determined No Address Available, Wheatland, WY 82201

_________________________________________________________________

TABLE OF CONTENTS PageAgreement to Issue Policy 1 Conditions 2 Schedule A 3 1. Commitment Date 2. Policies to be Issued, Amounts and Proposed Insured 3. Interest in the Land and Owner 4. Description of the Land Schedule B-I - Requirements 4 Schedule B-II - Exceptions 5

YOU SHOULD READ THE COMMITMENT VERY CAREFULLY.

If you have any questions about the Commitment, contact: First American Title Insurance Company 1560 Johnston Street, Suite E, Wheatland, WY 82201 Phone: (307)322-2133 - FAX (866)407-7904 - Email: For Title questions call: Millette Jaren For Closing questions call: Millette Jaren For loan questions contact: TBD at Lender To Be Determined For Real Estate questions contact: at Nathan Genovese and/or Kay Pope at Coldwell Banker The Property Exchange

EXHIBIT 2


ALTA Plain Language Commitment (2006) Commitment Page 2

Commitment Number: 4591-2646848 W2

First American Title Insurance Co

TITLE INSURANCE COMMITMENT

BY


AGREEMENT TO ISSUE POLICY We agree to issue a policy to you according to the terms of the Commitment. When we show the policy amount and your name as the proposed insured in Schedule A, this Commitment becomes effective as of the Commitment Date shown in Schedule A. If the Requirements shown in this Commitment have not been met within 90 DAYS after the Commitment Date, our obligation under this Commitment will end. Also, our obligation under this Commitment will end when the Policy is issued and then our obligation to you will be under the Policy. Our obligation under this Commitment is limited by the following: The Provisions in Schedule A. The Requirements in Schedule B-I. The Exceptions in Schedule B-II. The Conditions on Page 3 . This Commitment is not valid without SCHEDULE A and Sections I and II of SCHEDULE B.

Issued by: First American Title Insurance Company Address: 1560 Johnston Street, Suite E, Wheatland, WY 82201

EXHIBIT 2





CONDITIONS

1. DEFINITIONS

(a) "Mortgage" means mortgage, deed of trust or other security instrument. (b) "Public Records" means title records that give constructive notice of matters affecting your title according to the state statutes where your Land is located.

2. LATER DEFECTS

The Exceptions in Schedule B - Section II may be amended to show any defects, liens or encumbrances that appear for the first time in the public records or are created or attach between the Commitment Date and the date on which all of the Requirements (a) and (c) of Schedule B - Section I are met. We shall have no liability to you because of this amendment.

3. EXISTING DEFECTS

If any defects, liens or encumbrances existing at Commitment Date are not shown in Schedule B, we may amend Schedule B to show them. If we do amend Schedule B to show these defects, liens or encumbrances, we shall be liable to you according to Paragraph 4 below unless you knew of this information and did not tell us about it in writing.

4. LIMITATION OF OUR LIABILITY

Our only obligation is to issue to you the Policy referred to in this Commitment, when you have met its Requirements. If we have any liability to you for any loss you incur because of an error in this Commitment, our liability will be limited to your actual loss caused by your relying on this Commitment when you acted in good faith to: Comply with the Requirements shown in Schedule B - Section I or Eliminate with our written consent any Exceptions shown in Schedule B - Section II. We shall not be liable for more than the Policy Amount shown in Schedule A of this Commitment and our liability is subject to the terms of the Policy form to be issued to you.

5. CLAIMS MUST BE BASED ON THIS COMMITMENT

Any claim, whether or not based on negligence, which you may have against us concerning the title to the Land must be based on this Commitment and is subject to its terms.

EXHIBIT 2





SCHEDULE A

1. Commitment Date: April 14, 2016 at 5:00 p.m.

2. Policy (or Policies) to be issued: a. ALTA Owners Policy 1402.06 (06-17-06) $130,000.00 Proposed Insured:

To Be Determined and agreed to by the Company

b. ALTA Loan Policy 1056.06 (06-17-06) $TBD Proposed Insured:

Lender To Be Determined and agreed to by the Company, its successors and assigns as their interests may appear

3. Fee interest in the land described in this Commitment is owned, at the Commitment Date, by Russell J. Molina, a single man.

4. The Land referred to in this Commitment is described as follows:

Township 22 North, Range 66 West of the 6th P.M., Platte County, Wyoming Section 4: W½

EXHIBIT 2





SCHEDULE B - I

REQUIREMENTS

The following requirements must be met:

a. Pay the agreed amounts for the interest in the land and/or the mortgage to be insured.

b. Pay us the premiums, fees and charges for the policy.

c. You must tell us in writing the name of anyone not referred to in this Commitment who will get an interest in the land or who will make a loan on the land. We may then make additional requirements or exceptions.

d. Documents satisfactory to us creating the interest in the land and/or the mortgage to be insured

must be signed, delivered and recorded.

1. Proper disposition of the Land from United States Bankruptcy Court, Case No. 6:16-bk-10693-MW, in the District of California , wherein Russell John Molina aka Russell J. Molina fdba Coachella Valley Orthopedic aka CV Orthopedic is the Debtor.

2. Release of the Land from the Federal Tax Lien: Taxpayer: Russell John Molina Tax ID No.: XX-XXX4835 Amount: $5,223.50 Recorded: August 24, 2015 Recording Information: as Instrument No. 633813

3. Release of the Land from the Federal Tax Lien: Taxpayer: Russell Molina Tax ID No.: XXX-XX-3824 Amount: $73,658.21 Recorded: August 24, 2015 Recording Information: as Instrument No. 633814

4. Release of the Land from the Federal Tax Lien: Taxpayer: Russell Molina Tax ID No.: XXX-XX-3824 Amount: $55,415.79 Recorded: April 14, 2015 Recording Information: as Instrument No. 629888

EXHIBIT 2





5. Release of the Mortgage: Mortgagor: Russell J. Molina, a single man Mortgagee: First State Bank Amount: $84,000.00 Recorded: September 20, 2005 Recording Information: Book 401, Page 466

6. Warranty Deed from Russell J. Molina to To Be Determined.

NOTE: A Statement of Consideration is required with each transfer of title in the State of Wyoming.

The Company may provide a sample of a conveyance, which if properly completed and executed, would meet this requirement. Seller and Buyer should each consult legal counsel regarding its use. Should Seller and Buyer require additional language to be contained in the sample conveyance in order to comply with the terms of their agreement that language must be provided to Company or a substitute conveyance must be presented for execution at closing.

7. Pay all due and delinquent taxes.

EXHIBIT 2





SCHEDULE B - II

EXCEPTIONS FROM COVERAGE

Any policy we issue will have the following exceptions unless they are taken care of to our satisfaction.

1. Any facts, rights, interests, or claims that are not shown in the Public Records but that could be ascertained by an inspection of the Land or by making inquiry of the persons in possession of the Land.

2. Easements, claims of easements or encumbrances that are not shown in the Public Records.

3. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title including discrepancies, conflicts in boundary lines, shortage in area, or any other facts that would be disclosed by an accurate and complete land survey of the Land, and that are not shown in the Public Records.

4. Any lien, or right to a lien, for services, labor or material theretofore or hereafter furnished, imposed by law and not shown in the Public Records.

5. (a) Unpatented mining claims; (b) Reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) Water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the Public Records.

6. Any claim to (a) ownership of or rights to minerals and similar substances, including but not limited to ores, metals, coal, lignite, oil, gas, uranium, clay, rock, sand and gravel located in, on or under the Land or produced from the Land, whether such ownership or rights arise by lease, grant, exception, conveyance, reservation, or otherwise; and (b) any rights, privileges, immunities, rights of way, and easements associated therewith or appurtenant thereto, whether or not the interests excepted in (a) or (b) appear in the Public Records or are shown in Schedule B.

7. The lien of real estate taxes or assessments imposed on the Title by a governmental authority that are not shown as existing liens in the records of the County Treasurer or in the Public Records.

Taxes for the year 2015.

NOTE: Taxes for the year 2015 appear to be in the amount of $762.79, Account No. R0000503 according to the County Treasurer. The first installment is due and payable September 1, delinquent November 10. The second installment is due and payable March 1 of the following year, delinquent May 10. The first installment is $381.40, and DELINQUENT, and the second installment is $381.39, and DUE.

EXHIBIT 2





8. Easement, including terms and conditions contained therein: Granted to: Wheatland Rural Electric Association For: Electric transmission or distribution line or system Recorded: September 2, 1983 Recording Information: Book 245, Page 698

9. Right of way, including terms and conditions contained therein: Granted To: Wheatland Rural Electric Association, a cooperative corporation For: Electric distribution line or system Recorded: March 7, 2008 Recording Information: Book 427, Page 826

10. Lease and the terms and conditions thereof: Lessor: Russell J. Molina Lessee: Pathfinder Renewable Wind Energy, LLC As disclosed by: Memorandum of Wind Lease Recorded: May 19, 2010 Recording No.: Book 450, Page 730; Corrections & Clarifications to Wind Energy

Purposes Lease Regarding Ownership and/or Legal Descriptions recorded September 17, 2014 in Book 491, Page 450

11. South Gap Road as it may cross the Land.

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The First American Corporation First American Title Insurance Company

Privacy Information We Are Committed to Safeguarding Customer Information In order to better serve your needs now and in the future, we may ask you to provide us with certain information. We understand that you may be concerned about what we will do with such information - particularly any personal or financial information. We agree that you have a right to know how we will utilize the personal information you provide to us. Therefore, together with our subsidiaries we have adopted this Privacy Policy to govern the use and handling of your personal information. Applicability This Privacy Policy governs our use of the information that you provide to us. It does not govern the manner in which we may use information we have obtained from any other source, such as information obtained from a public record or from another person or entity. First American has also adopted broader guidelines that govern our use of personal information regardless of its source. First American calls these guidelines its Fair Information Values. Types of Information Depending upon which of our services you are utilizing, the types of nonpublic personal information that we may collect include:

• Information we receive from you on applications, forms and in other communications to us, whether in writing, in person, by telephone or any other means; • Information about your transactions with us, our affiliated companies, or others; and • Information we receive from a consumer reporting agency.

Use of Information We request information from you for our own legitimate business purposes and not for the benefit of any nonaffiliated party. Therefore, we will not release your information to nonaffiliated parties except: (1) as necessary for us to provide the product or service you have requested of us; or (2) as permitted by law. We may, however, store such information indefinitely, including the period after which any customer relationship has ceased. Such information may be used for any internal purpose, such as quality control efforts or customer analysis. We may also provide all of the types of nonpublic personal information listed above to one or more of our affiliated companies. Such affiliated companies include financial service providers, such as title insurers, property and casualty insurers, and trust and investment advisory companies, or companies involved in real estate services, such as appraisal companies, home warranty companies and escrow companies. Furthermore, we may also provide all the information we collect, as described above, to companies that perform marketing services on our behalf, on behalf of our affiliated companies or to other financial institutions with whom we or our affiliated companies have joint marketing agreements. Former Customers Even if you are no longer our customer, our Privacy Policy will continue to apply to you. Confidentiality and Security We will use our best efforts to ensure that no unauthorized parties have access to any of your information. We restrict access to nonpublic personal information about you to those individuals and entities who need to know that information to provide products or services to you. We will use our best efforts to train and oversee our employees and agents to ensure that your information will be handled responsibly and in accordance with this Privacy Policy and First American's Fair Information Values. We currently maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. Information Obtained Through Our Web Site First American Financial Corporation is sensitive to privacy issues on the Internet. We believe it is important you know how we treat the information about you we receive on the Internet. In general, you can visit First American or its affiliates’ Web sites on the World Wide Web without telling us who you are or revealing any information about yourself. Our Web servers collect the domain names, not the e-mail addresses, of visitors. This information is aggregated to measure the number of visits, average time spent on the site, pages viewed and similar information. First American uses this information to measure the use of our site and to develop ideas to improve the content of our site. There are times, however, when we may need information from you, such as your name and email address. When information is needed, we will use our best efforts to let you know at the time of collection how we will use the personal information. Usually, the personal information we collect is used only by us to respond to your inquiry, process an order or allow you to access specific account/profile information. If you choose to share any personal information with us, we will only use it in accordance with the policies outlined above. Business Relationships First American Financial Corporation's site and its affiliates' sites may contain links to other Web sites. While we try to link only to sites that share our high standards and respect for privacy, we are not responsible for the content or the privacy practices employed by other sites. Cookies Some of First American's Web sites may make use of "cookie" technology to measure site activity and to customize information to your personal tastes. A cookie is an element of data that a Web site can send to your browser, which may then store the cookie on your hard drive. FirstAm.com uses stored cookies. The goal of this technology is to better serve you when visiting our site, save you time when you are here and to provide you with a more meaningful and productive Web site experience. -------------------------------------------------------------------------------- Fair Information Values Fairness We consider consumer expectations about their privacy in all our businesses. We only offer products and services that assure a favorable balance between consumer benefits and consumer privacy. Public Record We believe that an open public record creates significant value for society, enhances consumer choice and creates consumer opportunity. We actively support an open public record and emphasize its importance and contribution to our economy. Use We believe we should behave responsibly when we use information about a consumer in our business. We will obey the laws governing the collection, use and dissemination of data. Accuracy We will take reasonable steps to help assure the accuracy of the data we collect, use and disseminate. Where possible, we will take reasonable steps to correct inaccurate information. When, as with the public record, we cannot correct inaccurate information, we will take all reasonable steps to assist consumers in identifying the source of the erroneous data so that the consumer can secure the required corrections. Education We endeavor to educate the users of our products and services, our employees and others in our industry about the importance of consumer privacy. We will instruct our employees on our fair information values and on the responsible collection and use of data. We will encourage others in our industry to collect and use information in a responsible manner. Security We will maintain appropriate facilities and systems to protect against unauthorized access to and corruption of the data we maintain.

Form 50-PRIVACY (9/1/10) Page 1 of 1 Privacy Information (2001-2010 First American Financial Corporation)

EXHIBIT 2


Exhibit 3

Purchase Agreement


EXHIBIT 3


Exhibit 4

IRS Claim


EXHIBIT 4


Exhibit 5

Premier Title Company Disbursement Worksheet


EXHIBIT 5
