UNITED STATES COURT OF APPEALS December 12, 2023

Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________

In re: CHUZA OIL COMPANY,

Debtor.

--------------------------------

PHILIP J. MONTOYA, Chapter 7 Trustee,

Plaintiff - Appellee,

v. No. 22-2073

PAULA GOLDSTEIN; BOBBY GOLDSTEIN PRODUCTIONS INC.; ROBERT (BOBBY) GOLDSTEIN,

Defendants - Appellants. _________________________________

Appeal from the Bankruptcy Appellate Panel (BAP No. 21-029-NM) _________________________________

David C. Japha (Evan J. House, with him on the briefs), Levin Jacobson Japha, P.C., Denver, Colorado, for Defendants-Appellants.

Daniel A. White, Askew & White, LLC, Albuquerque, New Mexico, for Plaintiff- Appellee. _________________________________

Before TYMKOVICH, BACHARACH, and PHILLIPS, Circuit Judges. _________________________________

TYMKOVICH, Circuit Judge. _________________________________ Appellate Case: 22-2073 Document: 010110967059 Date Filed: 12/12/2023 Page: 2

Bobby Goldstein operated Chuza Oil Co., a New Mexico petroleum company.

After encountering financial difficulties, he petitioned for Chapter 11 bankruptcy,

which resulted in a plan establishing the order of priority for paying Chuza’s

creditors. During reorganization, Mr. Goldstein and another company he owned

infused additional capital into Chuza. Some of the funds transferred into Chuza were

earmarked to pay interest on a promissory note held by Mr. Goldstein’s mother,

Paula. After Chuza went into involuntary Chapter 7 bankruptcy, the trustee sought to

claw back the payments to Paula because she was paid before creditors with higher

priorities under the Chapter 11 plan.

The bankruptcy court declined to avoid the payments because it concluded

Chuza did not have an interest in the earmarked funds, a requirement for avoidance

under the Bankruptcy Code. On appeal, the Bankruptcy Appellate Panel saw it

differently, finding Chuza had a cognizable interest because the transfers depleted the

bankruptcy estate by replacing subordinated debt (the debt on Paula’s note) with

unsubordinated debt (debt from Mr. Goldstein’s loans). Because the bankruptcy

court did not clearly err in its findings that Chuza did not have an interest in the

earmarked funds and that the bankruptcy estate was not diminished, we disagree with

the BAP and affirm the bankruptcy court.

I. Background

Chuza was a New Mexico petroleum production company that Mr.

Goldstein controlled as shareholder, CEO, and director. He also operated another

company, Bobby Goldstein Productions, Inc. (BGPI), which Mr. Goldstein used to

2 Appellate Case: 22-2073 Document: 010110967059 Date Filed: 12/12/2023 Page: 3

help run Chuza. In 2012, Mr. Goldstein’s father loaned Chuza $500,000 under a

promissory note guaranteed by Mr. Goldstein and BGPI. The note was due in a

year, although it could be (and was) extended. After his father died, his mother Paula

held the note.

In 2014, Chuza filed for Chapter 11 bankruptcy to reorganize its affairs. Its

plan was confirmed in March 2016. The confirmed plan established the priority for

Chuza to pay back its creditors, placing repayment to insider unsecured creditors, like

Paula, below other creditors.

But business did not improve. Beginning in September 2016 and continuing

through December 2017, Mr. Goldstein, BGPI, and Paul

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