Efron v. Candelario (In re Efron)

529 B.R. 396
CourtBankruptcy Appellate Panel of the First Circuit
DecidedApril 21, 2015
DocketBAP Nos. 14-027, 14-035; Bankruptcy No. 11-02466-MCF
StatusPublished
Cited by22 cases

This text of 529 B.R. 396 (Efron v. Candelario (In re Efron)) is published on Counsel Stack Legal Research, covering Bankruptcy Appellate Panel of the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Efron v. Candelario (In re Efron), 529 B.R. 396 (bap1 2015).

Opinion

FINKLE, Bankruptcy Judge.

The debtor appeals from the bankruptcy court’s April 17, 2014 order and judgment in which it: (1) abstained and dismissed the case pursuant to § 305(a)(1);1 and, alternatively, (2) dismissed the case pursuant to § 1112(b)(4)(E) and (P) due to the debtor’s failure to comply with court orders requiring the payment of post-petition domestic support obligations. The debtor contends that dismissal was not in his or his creditors’ best interests, and seeks reversal of the order and judgment and reinstatement of his bankruptcy case. The debtor’s ex-spouse, Madeleine Cande-lario, filed a cross-appeal arguing that the case should have been converted to chapter 7 rather than dismissed because conversion was in the best interests of creditors.

For the reasons set forth below, we AFFIRM the bankruptcy court’s decision.

BACKGROUND

A. The Pre-Petition Divorce Proceedings

On May 3, 2001, the Commonwealth of Puerto Rico, Court of First Instance, San [399]*399Juan Part (“CFI”), issued a divorce judgment dissolving the marriage of the debtor and Candelario. The CFI granted the debtor complete control over the marital assets, but ordered him to pay a monthly sum of $50,000 to Candelario for her maintenance until the marital assets were divided and liquidated.2 The debtor never voluntarily made any of these payments, resulting in fierce litigation in the state courts that is still on-going with regards to the division of marital property and Can-delario’s efforts to collect the monthly payments from the debtor.3 At a hearing on March 4, 2011, almost ten years after the issuance of the divorce judgment, the CFI determined the debtor owed Candelario at least $3,314,936.40 for past-due ordered payments, plus interest.

B. The Bankruptcy Proceedings

On March 25, 2011, the debtor filed a chapter 11 petition, mainly to stay an order of execution to enforce the $50,000 monthly payment imposed by the CFI and to stay the state court proceedings.

Candelario filed a proof of claim asserting a $42’ million claim for her share of the marital assets and past-due support payments, a motion for relief from the automatic stay to continue the state court proceedings, and a motion seeking an order compelling the debtor to make the monthly payments to her ordered by the CFI during the pendency of the bankruptcy case. The debtor objected to Candelario’s claim and opposed the motions. After a hearing on April 24, 2012, the bankruptcy court lifted the automatic stay, authorizing the state court actions to proceed.4

On August 20, 2012, Candelario objected to confirmation of the debtor’s proposed plan of reorganization because the debtor was not current on the monthly payments ordered by the CFI and the plan did not provide for their payment. In his response, the debtor argued the payments were not domestic support obligations. (“DSO”) as defined by § 101(14A), but rather advances on Candelario’s share of the marital assets, the amount of which was still being determined by the state court. At a confirmation hearing on August 29, 2012, the bankruptcy court determined confirmation could not occur until the dispute regarding the nature of the payments ordered by the CFI was resolved, and ordered the parties to seek an order from the CFI clarifying the nature of those payments. On September 21, 2012, the debtor and Candelario informed the bankruptcy court that the CFI declined to issue an interpretative order.

In January 2013, the bankruptcy court appointed an examiner to perform the duties set forth in §§ 1104 and 1106. The examiner’s final report issued on October 4, 2013, however, was inconclusive regarding the appropriate reporting of the assets and liabilities of the debtor on his schedules and allegations relating to fraud, misconduct, mismanagement or irregularities in the management of the debtor’s affairs. [400]*400The examiner blamed this outcome on the debtor’s failure to produce information pertaining to certain entities under his common ownership and management. He reported that he had “significant doubts regarding if all assets of [the debtor] were properly disclosed to [the bankruptcy court].”

On June 28, 2013, more than two years into the extremely contested bankruptcy case, the bankruptcy court entered an order (the “DSO Order”) determining that the $50,000 monthly payments ordered by the CFI constituted DSO payments as defined by § 101(14A).5 The debtor filed a timely notice of appeal of the DSO Order. He also requested a stay of that order pending appeal, which the bankruptcy court denied in an order dated September 16, 2013 (the “September 16, 2013 Order”). On October 1, 2013, the Panel dismissed the appeal as interlocutory.

In the meantime, on July 12, 2013, Can-delario filed a motion requesting that the bankruptcy court direct the debtor to immediately commence making the monthly DSO payments in accordance with the DSO Order. On July 29, 2013, the bankruptcy court denied the motion for lack of jurisdiction due to the pending appeal. Candelario moved for reconsideration on the basis that she was not seeking to vacate or reverse the DSO Order, but was asking the court to direct the debtor to comply with the order. Candelario also filed a motion to convert the case to chapter 7 because of the debtor’s on-going failure to comply with the DSO Order and with certain reporting requirements. The debtor opposed the motion, and the court scheduled the matter for hearing on October 23, 2013:

At the October 23, 2013 hearing, the bankruptcy court stated, among other things, that in denying the motion for a stay pending appeal, it intended for the debtor to commence making the monthly DSO payments, and it would “put on the docket a clarification that the intention of that order [] denying the stay pending appeal was to allow the enforcement of th[e DSO Order] to go forward.” The bankruptcy court then entered an order (the “October 23, 2013 Order”) in which it clarified that, in addition to denying the debtor’s motion for a stay pending appeal, its September 16, 2013 Order also granted Candelario’s motion for reconsideration to direct the debtor to comply with the DSO Order. The bankruptcy court held in abeyance the motion to convert, scheduling the matter for further hearing to consider whether: “(1) the matters in dispute between Debtor and creditor Ms. Candelario have been settled by the parties, (2) a plan is proposed which has alternate treatment as to Ms. Candelario[’s] claim dependent upon the outcome of the state court litigation wherein the community property is being divided, or (3) the case should be converted or dismissed.”6

At a hearing on January 22, 2014, before addressing scheduled matters, the bankruptcy court inquired about the bankruptcy purpose of the case. The debtor opposed dismissal and responded that he filed the case for two reasons — to attempt to reorganize through chapter 11 and as a “protective measure in view of the litigation with his ex-spouse,” specifically to stay the proceedings pending in the CFI and avoid garnishments and attachments arising from those proceedings. He asserted that he had filed a feasible and confirmable plan of reorganization which [401]*401proposed alternative treatments for Can-delario^ claims.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
529 B.R. 396, Counsel Stack Legal Research, https://law.counselstack.com/opinion/efron-v-candelario-in-re-efron-bap1-2015.