Guallini-Indij v. Banco Popular de Puerto Rico

• Court: Court of Appeals for the First Circuit
• Decided: March 4, 2026
• Docket: 23-1705
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 23-1705

IN RE: JUAN J. GUALLINI-INDIJ; RAQUEL MEDINA-RAMPOLLA,

Debtors, Appellants,

v.

BANCO POPULAR DE PUERTO RICO,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Aida M. Delgado-Colón, District Judge]

Before

Barron, Chief Judge, Thompson and Gelpí, Circuit Judges.

Javier Vilariño, with whom Vilariño & Associates LLC was on brief, for appellants.

Luis C. Marini-Biaggi, with whom Carolina Velaz-Rivero and Marini Pietrantoni Muñiz LLC were on brief, for appellee.

March 4, 2026 THOMPSON, Circuit Judge. Over five years after filing

an adversary proceeding in the United States Bankruptcy Court for

the District of Puerto Rico, debtors and appellants Juan J.

Guallini-Indij and Raquel Medina-Rampolla ("the Guallinis")

continue to diligently pursue their day in court. The Guallinis

seek to hold appellee, Banco Popular de Puerto Rico ("Banco

Popular") accountable for what they say was its predatory

collection practices towards them in violation of Puerto Rico law

and multiple federal laws. Along their path to our court, the

Guallinis have completed their bankruptcy plan with payment in

full, have been told twice by the United States District Court for

the District of Puerto Rico that it would not withdraw their

adversary proceeding from the bankruptcy court, and have had the

bankruptcy court close its doors to them for want of subject matter

jurisdiction. After a careful review of their claims, we think

their appeal has merit, so we vacate and remand for reasons we

explain.

I

A

We start with a recitation of the facts, while noting

that the Guallinis and Banco Popular have a long and fraught

history.1 To fully inform the gentle reader of this tumultuous

We recite the facts using the 65 undisputed facts found by 1

the bankruptcy court in its opinion. See In re O'Donnell, 728

- 2 - history -- which is necessary for our forthcoming resolution -- we

will be recapping almost two decades' worth of dates and

milestones.

Long before the Guallinis and Banco Popular got engaged

in their highly-charged court squabble, their commercial

relationship began. On November 29, 2005, the Guallinis and Banco

Popular entered into a loan agreement and mortgage secured by the

Guallinis' home in Dorado, Puerto Rico (referred to as "the home"

from here on out). Ten years later, the Guallinis experienced

financial hardship and, as a result, tendered their last mortgage

payment around May 1, 2015. Later that month, the Guallinis sought

the advice of Banco Popular's loss mitigation division and

requested a modification of their loan agreement attempting to

avoid foreclosure on the home. Banco Popular denied the Guallinis'

request to modify the loan agreement but informed the Guallinis

that it would entertain a "short sale" of the home (bank jargon

for offering to buy a home for less than the amount left on the

owner's mortgage and forgiving the rest).

In November 2015, Banco Popular initiated foreclosure

proceedings in the Court of First Instance of Bayamón ("state

court") seeking the collection of monies under the Guallinis' loan

agreement and to foreclose on the home. Circling the drain, the

F.3d 41, 43 n.1 (1st Cir. 2013).

- 3 - Guallinis made their first short sale offer to Banco Popular in

early January 2016. Before rejecting the first short sale offer,

Banco Popular moved for entry of default in the foreclosure

proceedings and the state court entered judgment in the bank's

favor soon after.2 These proceedings left the Guallinis with a

choice -- put up $185,527.73 in cash (plus interest) to satisfy

the judgment, or face foreclosure on the home.

With its judgment in hand, Banco Popular rejected the

first, second, and third short sale offers from the Guallinis.

Still not dissuaded, the Guallinis made a final short sale pitch,

and on October 25, 2016, Banco Popular accepted this offer under

the condition that the short sale close before the public auction

of the home scheduled for November 2, 2016. The Guallinis and

their realtor got to work but, despite their efforts, the short

sale did not close in time and Banco Popular foreclosed on November

2, 2016.

The home was auctioned off (to the same purchaser the

Guallinis provided in their final short sale offer) but Banco

Popular claimed there was an outstanding balance left on the

Guallinis' tab. To cover this amount, the bank procured an order

from the state court to confiscate and garnish $114,774.72 from

the Guallinis. This straw broke the camel's back, and the

2 The Guallinis did not appeal this judgment.

- 4 - Guallinis filed a voluntary petition for Chapter 13 bankruptcy on

December 27, 2017.

B

Before offering the details of the Guallinis' bankruptcy

proceedings, we briefly digress into the byzantine world of

bankruptcy law to prepare the reader for the upcoming series of

events.

Bankruptcy is recognized in the founding document of our

Nation. See U.S. Const. art. I, § 8, cl. 4. Per the Constitution,

Congress possesses the authority to establish "uniform Laws on the

subject of Bankruptcies throughout the United States." Id. And

we start here to say, bankruptcy is nothing new and its legal

framework carries its own vintage within our legal traditions.

Bankruptcy itself is a legal process for individuals and

businesses who can no longer repay their debts. It can provide

relief from financial hardship by allowing individuals a path to

either repaying some of their outstanding debts or having those

debts completely forgiven. See United States v. Valdés-Ayala, 900

F.3d 20, 24-25 (1st Cir. 2018). Chapter 13 of the bankruptcy code

(the one invoked by the Guallinis) allows individuals who have a

regular source of income to file a voluntary petition to pay off

their debts through a plan of reorganization and repayment (a

- 5 - "Chapter 13 plan") which is reviewed and approved by a bankruptcy

court.3 See id.; see also 11 U.S.C. §§ 1301-1330.

Once a Chapter 13 plan is in place, an appointed Chapter

13 trustee ensures that the debtor makes the agreed-upon payments

as set forth in the plan. See 11 U.S.C. § 1302. When the Chapter

13 plan is satisfied (meaning all debts to be repaid under the

plan have been paid), the bankruptcy court may grant the debtors

a discharge (unless, of course, one of the exceptions in the

Bankruptcy Code applies). See id. § 1328. This discharge order

grants debtors their fresh start by relieving them from all

pre-petition debt and permanently enjoining creditors from

collecting discharged debts. See Bessette v. Avco Fin. Servs.,

Inc., 230 F.3d 439, 444 (1st Cir. 2000).

As a bankruptcy case proceeds, but before a discharge is

granted, parties in interest (including debtors or creditors) may

file an adversary proceeding in the bankruptcy court. See Fed. R.

Bankr. P. 7001. In essence, "[a]n adversary proceeding is a

subsidiary lawsuit within the larger framework of a bankruptcy

case." Fin. Oversight & Mgmt. Bd. for P.R. v. Cooperativa de

Ahorro y Crédito Abraham Rosa, 54 F.4th 20, 26 n.1 (1st Cir. 2022)

(quoting In re Fin. Oversight & Mgmt. Bd. for P.R., 872 F.3d 57,

3 Once an individual files their bankruptcy petition, they take on the title of "debtor" in the subsequent proceedings, and those to whom they owe outstanding debts become the "creditors."

- 6 - 63 (1st Cir. 2017)). The goals of an adversary proceeding vary,

but typically seek recovery of money or property, a discharge

determination, or to subordinate certain claims.

In some instances (this case being one of them), a party

may file a motion for withdrawal of the reference and attempt to

transfer their adversary proceeding from the bankruptcy court to

the district court. See Reyes-Colón v. Banco Popular de P.R., 110

F.4th 54, 68-69 (1st Cir. 2024). It is the district court that

decides whether to grant a motion for withdrawal. See 28 U.S.C.

§ 157(d). If the district court grants the motion, the parties

continue to litigate the merits of their adversarial proceeding

from the confines of the district court, and the bankruptcy court

moves on to the next case on its busy docket. See id.

With our reader equipped with a baseline understanding

of the relationship between Chapter 13 bankruptcy and an adversary

proceeding, we can get back to the details of what unfolded for

the Guallinis below.

C

The bankruptcy court confirmed the Guallinis' Chapter 13

plan on September 5, 2018. The approved plan explicitly signaled

to the court that the Guallinis intended to pursue an adversary

proceeding against Banco Popular as it indicated that any proceeds

from their claims against the bank would be used to satisfy their

debts. Then, on February 4, 2019, more than a year after filing

- 7 - for bankruptcy, the Guallinis filed an adversary proceeding

against Banco Popular that serves as the catalyst for the present

appeal.

The Guallinis' adversarial complaint sought avoidance or

subordination of Banco Popular's claims,4 as well as actual,

emotional, and punitive damages under Puerto Rico and federal

laws.5 Banco Popular did not file an answer immediately. Rather,

without submitting to the jurisdiction of the bankruptcy court,

Banco Popular filed a motion to dismiss the adversarial complaint

premised on pleading deficiencies and statute of limitations

defenses. The bankruptcy court took the motion under advisement

and, months later, denied the motion. So, with the adversary

proceeding set to move forward, Banco Popular filed an answer to

the complaint on November 27, 2019.

An initial scheduling conference was held in the

bankruptcy court on December 4, 2019, giving the parties a few

months to conclude discovery and inform the court how they intended

4An avoidance action allows for the cancellation of an improper conveyance or recovery of the value of improperly conveyed property. In re Vázquez Laboy, 647 F.3d 367, 375 (1st Cir. 2011). Equitable subordination, on the other hand, allows the bankruptcy court to rearrange the priorities of creditors' claims so that a creditor who may have committed some wrongdoing has an inferior claim to other creditors. In re 604 Columbus Ave. Realty Tr., 968 F.2d 1332, 1353 (1st Cir. 1992). 5Due to this case's procedural posture and the claims presented on appeal, it is not necessary to detail these adversary claims as we will not be addressing their merits.

- 8 - to litigate the adversary proceeding. But, after a few joint

requests for extensions, delays due to the COVID-19 pandemic,6 and

several rounds of briefing over the Guallinis' request for leave

to amend their complaint which Banco Popular repeatedly opposed,

2021 came around and the proceedings had not proceeded very far.

And during this time, one of the Guallinis' parents passed away

leaving them an inheritance sufficient to satisfy their Chapter 13

plan in full.

The next event of importance (and we've tried our best

to limit our purview of the case to only such events) occurred on

May 11, 2021, when the Guallinis filed a separate complaint in the

United States District Court for the District of Puerto Rico. This

new complaint alleged similar issues arising from the same

operative facts as those in the ongoing adversary proceeding and

demanded a jury trial to resolve these claims.

Soon after filing their federal lawsuit, the Guallinis

filed a motion for withdrawal of reference in the bankruptcy court.

(To remind the reader, motions for withdrawal are the vehicles

parties can use to move their adversary proceedings from bankruptcy

6As we've previously recognized, "the COVID-19 virus vexed even the best-laid plans during this period in world history." United States v. Huertas, 148 F.4th 1, 16 (1st Cir. 2025) (detailing the continuation of court proceedings in the District of Puerto Rico). Needless to say, the United States Bankruptcy Court for the District of Puerto Rico was not immune to such delays. See U.S. Bankr. Ct. D.P.R., General Order 20-03: Court Closing (Mar. 16, 2020).

- 9 - court to district court.) In their motion, the Guallinis argued

their adversary complaint was "overwhelmed by the required

evaluation of non-bankruptcy law," and that they had a "fundamental

right to a jury trial in the District Court," thus warranting

withdrawal.7 The bankruptcy court referred the case to the

district court on May 27, 2021, with express notice that "the

administration of the [bankruptcy] case [did] not appear to be

affected by the motion for withdrawal of reference in the adversary

proceeding." Banco Popular vehemently opposed the motion,

alleging forum shopping by the Guallinis and claiming that (1) the

causes of action in the adversary proceeding were "core bankruptcy

proceedings" and that (2) "[p]rinciples of judicial economy, among

others, weigh heavily in favor of having [the bankruptcy court]

hear and decide the Adversary Proceeding."

While the motion for withdrawal was pending, Banco

Popular moved to dismiss the federal lawsuit accusing the Guallinis

again of forum shopping and asserting that the same causes of

action were already being adjudicated in the bankruptcy court.

But before the district court could resolve either the Guallinis'

first motion for withdrawal or the motion to dismiss the separate

We note -- as the district court did when reviewing this 7

motion for withdrawal -- that the Guallinis raised their jury trial argument in a reply brief before the district court. We express no view as to whether the Guallinis properly developed this claim.

- 10 - federal lawsuit, Banco Popular filed a motion for summary judgment

back in the bankruptcy court on August 25, 2021. And, just five

days after Banco Popular's summary judgment filing, the bankruptcy

court granted the Guallinis a discharge under their Chapter 13

plan, their debts having been satisfied. We'll return to Banco

Popular's summary judgment motion shortly but, to rehash, at this

juncture the parties had a motion to dismiss and a motion for

withdrawal pending in the district court and a summary judgment

motion in the adversary proceeding filed in the bankruptcy court

after the Guallinis had been granted a discharge.

Months later, the district court first addressed the

Guallinis' motion for withdrawal and dismissed it without

prejudice. The district court reasoned that, because two years

had elapsed from when the Guallinis filed their adversary

proceeding and when they moved for withdrawal, the motion was

untimely. Regarding the Guallinis' claim for a jury trial, the

district court found their claim likely waived for lack of

development and, in any case, "premature" considering that "it

serves the interests of judicial economy and efficiency to keep an

action in Bankruptcy Court for the resolution of pre-trial,

managerial matters, even if the action will ultimately be

transferred to a district court for trial." In re Enron Corp.,

295 B.R. 21, 28 (S.D.N.Y. 2003). So, from the district court's

perspective, the adversary proceeding belonged back in bankruptcy

- 11 - court and the Guallinis could "again seek withdrawal" after the

bankruptcy court completed all pre-trial proceedings.

After denying the motion for withdrawal, the district

court later granted Banco Popular's motion to dismiss the separate

federal lawsuit. In its order, the district court stated that

motions for summary judgment were pending in the parallel adversary

proceeding and that the Guallinis' motion for withdrawal had

already been denied. Therefore, "principles of comity and sound

judicial administration" precluded the Guallinis from litigating

parallel issues "simultaneously in bankruptcy and district courts,

especially when a withdrawal of reference has been denied." The

Guallinis' lawsuit against Banco Popular was summarily dismissed

without prejudice.

For the time being, circa early 2022, proceedings in the

district court concluded and the adversary proceeding returned to

bankruptcy court to settle Banco Popular's motion for summary

judgment. The Guallinis had filed an opposition to that summary

judgment motion and filed a cross-motion for summary judgment of

their own after their motion for withdrawal had been denied, but

before the court dismissed their federal lawsuit. When it came

time to resolve these motions, the bankruptcy court found 65

uncontested material facts but declined to propose any conclusions

of law applying those facts. Instead, the bankruptcy court sua

sponte dismissed the adversary proceeding without prejudice. In

- 12 - doing so, the bankruptcy court decided that it lacked subject

matter jurisdiction to hear the adversary proceeding after the

Guallinis had been granted a discharge.

Aggrieved that their claims remained unresolved, the

Guallinis moved for reconsideration in the bankruptcy court. Their

motion for reconsideration exudes frustration over the procedural

gambit that the Guallinis had fallen into: (1) the Guallinis filed

their motion for withdrawal knowing the bankruptcy court would

soon grant them a discharge; (2) the district court denied their

motion for withdrawal so that the bankruptcy court could conclude

pre-trial proceedings; and (3) the bankruptcy court declined to

conclude pre-trial proceedings for its lack of jurisdiction while

implicitly disagreeing with the district court's decision to deny

the motion for withdrawal. Banco Popular opposed the motion for

reconsideration, arguing that this was a clear-cut matter over

which the bankruptcy court no longer had subject matter

jurisdiction.

The bankruptcy court took the motion under advisement

and, in the interim, the Guallinis filed their second motion for

withdrawal seeking (once again) to have their adversary proceeding

heard in the district court. Shortly after the second motion for

withdrawal was filed, the bankruptcy court denied the motion for

reconsideration and shut the doors of the courthouse. The

Guallinis timely appealed the bankruptcy court's decision to the

- 13 - district court and moved to consolidate their appeal with their

pending motion for withdrawal.8 The motion to consolidate was

granted, bringing all outstanding matters before the district

court.

Here we arrive at the penultimate stop on the tumultuous

travel of this case where the district court ultimately affirmed

the bankruptcy court's decision and denied the Guallinis' second

motion for withdrawal. Before its discussion of the merits, the

court "recognize[d] and commend[ed] [the Guallinis'] diligent

efforts to prosecute their case." However, starting with the

appeal, the court faulted the Guallinis for not raising any

argument "standing for the proposition that the Bankruptcy Court

erred in declaring itself without subject-matter jurisdiction."

(A view we do not share and will address momentarily.) To boot,

the court found that the Guallinis were "pleased with that

conclusion," and that they agreed "the plan completion triggered

an absence of jurisdiction." So, in the absence of any claimed

error related to the bankruptcy court's sole reason for dismissing

the adversary proceeding, the district court affirmed.

8In this circuit, bankruptcy appeals proceed through a two-tiered system. In re Curran, 855 F.3d 19, 24 (1st Cir. 2017). In tier one, a party can appeal a decision of the bankruptcy court to either the district court or to the Bankruptcy Appellate Panel for the First Circuit. Id. In tier two, our court of appeals offers a second layer of appellate review, regardless of where the party initially appealed in tier one. Id.

- 14 - The district court then shifted its focus to the

Guallinis' second motion for withdrawal which it swiftly denied.

Its analysis hinged on what it deemed "a rhetorical question," how

could a motion for withdrawal be timely in 2023 when it had already

been found untimely in 2021? On that basis, the district court

deemed the second motion for withdrawal untimely and denied it.

Notably, the court's decision did not comment on nor discuss the

Guallinis' request for a jury trial. The Guallinis timely appealed

the district court's decision on both fronts (the affirmance of

the bankruptcy court's decision and the denial of the motion for

withdrawal) thus concluding the travel of the case. We'll pick it

up from there.

II

As we previously noted in our presentation of the

procedural history, "[t]he bankruptcy code channels bankruptcy

appeals through a two-tiered framework." In re Shove, 83 F.4th

102, 108 (1st Cir. 2023). When reviewing appeals from this

framework, "[w]e afford no particular deference to decisions of

the first-tier appellate tribunal . . . and focus instead on the

bankruptcy court's decision." Id. (quoting In re Curran, 855 F.3d

19, 24 (1st Cir. 2017)). And, when holding the bankruptcy court's

decision up to appellate scrutiny, we review findings of fact for

clear error and conclusions of law de novo. Id. A court's

- 15 - determination of its own jurisdiction is a question of law subject

to de novo review. Reyes-Colón, 110 F.4th at 63.

To preserve an argument for appellate review of a

bankruptcy court's decision, it is well-settled that a party must

generally raise the argument to the bankruptcy court. See In re

Carp, 340 F.3d 15, 25-26 (1st Cir. 2003). Our circuit has not

addressed, however, whether a party must also raise that argument

in their first-tier appeal (here, to the district court) to

preserve the argument for appellate review before our court. See

In re Reyes-Colon, 922 F.3d 13, 18-19 (1st Cir. 2019) (noting that

"[a]t least two circuits have held that the losing party in the

bankruptcy court cannot raise on appeal to the circuit court

arguments not presented to the district court on intermediate

review," but deeming the circumstances distinguishable and not

reaching the issue).

Of equal import for this appeal is the lens with which

we review a district court's decision to deny a motion for

withdrawal. We have recently determined such decisions are

reviewed for an abuse of discretion, Reyes-Colón, 110 F.4th at 68,

meaning legal rulings are reviewed de novo, factual findings for

clear error, and "the degree of deference afforded to issues of

law application waxes or wanes depending on the particular

circumstances," T-Mobile N.E. LLC v. Town of Barnstable, 969 F.3d

33, 38 (1st Cir. 2020).

- 16 - Due to its relation to the scope of our review, we pause

to repeat a common thread between the Guallinis' arguments. The

Guallinis seek (and have been for several years) their day in

court. In their motion for reconsideration before the bankruptcy

court, the Guallinis argued that the bankruptcy court should have

concluded all pre-trial proceedings, and its subject matter

jurisdiction determination could "be construed as a manifest error

of law that would lead to a manifest injustice." Then, in their

appeal to the district court, the Guallinis requested the court

"revoke" the bankruptcy court's determination, adjudicate the

pending motions for summary judgment, or, "[i]n the alternative,"

send the case back to the bankruptcy court to finalize pre-trial

proceedings. And now, in their second appeal, this one to our

court, the Guallinis assert that the district court misunderstood

their arguments and continue to request that their case be remanded

back to the bankruptcy court (or be withdrawn to the district

court).

By repeatedly requesting that the bankruptcy court

finalize pre-trial proceedings, the Guallinis necessarily (but not

artfully) made a jurisdictional argument. That is because, as the

Guallinis point out on appeal, bankruptcy courts have statutory

subject matter jurisdiction over bankruptcy matters pursuant to 28

U.S.C. § 157, and that statute generally requires bankruptcy

courts to issue "proposed findings of fact and conclusions of law

- 17 - to the district court."9 Thus, by asking the bankruptcy court to

"conclude pre-trial proceedings" and consider the parties' legal

arguments in light of the uncontested material facts, the Guallinis

necessarily invoked § 157, which has been understood to provide a

jurisdictional basis for "related to" matters even post discharge.

See, e.g., In re Smith, 866 F.2d 576, 579-80 & n.4 (3d Cir. 1989)

(concluding that, pursuant to § 157, the bankruptcy court

"properly retained jurisdiction" over related claims post

discharge).

Even if we were of the view that the Guallinis had not

clearly presented this issue to the bankruptcy court, we could

still address it because the bankruptcy court squarely addressed

this issue in its opinion. See Holsum de P.R., Inc. v. ITW Food

Equip. Grp., 116 F.4th 59, 66 (1st Cir. 2024) ("Appellate courts

may . . . address an issue not presented to the lower court if the

lower court nevertheless addressed the issue."); see also In re

9 As the Guallinis quote in their briefing, the text of 28 U.S.C. § 157(c)(1) states: A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

- 18 - SPM Mfg. Corp., 984 F.2d 1305, 1316 (1st Cir. 1993) (reviewing the

"findings and rulings" of the bankruptcy court to find a litigant's

appellate claim waived for failing to raise it in bankruptcy

court). After the bankruptcy court discussed the issue of its own

subject matter jurisdiction at length, Banco Popular took the

opportunity to weigh in when opposing the Guallinis' motion for

reconsideration to the bankruptcy court. It is true that, in

addressing the Guallinis' motion for reconsideration, the

bankruptcy court did not clearly explain whether it was rejecting

that motion on the ground that it still believed that it

categorically lacked post-discharge jurisdiction over "related to"

proceedings, or whether it thought the Guallinis had done too

little to challenge its prior determination that it lacked

jurisdiction on that basis.

But Banco Popular weighed in on this jurisdictional

question again when opposing the Guallinis' first appeal to the

district court. Though the district court and Banco Popular share

the opinion that the Guallinis failed to challenge the bankruptcy

court's jurisdiction determination in the first-tier appeal, we

disagree and find that the Guallinis did enough to preserve this

argument for our second-tier appellate review. As explained above,

by asking the court to "direct the [b]ankruptcy [c]ourt to finalize

the pre-trial proceedings," the Guallinis necessarily invoked

§ 157 as a basis for the bankruptcy court's jurisdiction. The

- 19 - district court thus had an opportunity to address this

jurisdictional issue, at least to the extent of considering the

Guallinis' alternative request that their case be sent back to the

bankruptcy court for pre-trial proceedings, and despite its

position regarding the shortcomings of the Guallinis' briefing.

Banco Popular then submitted its position on this jurisdictional

issue for a third time in opposing the Guallinis' appeal to our

court. Therefore, our typical cautionary justifications for

finding waiver where a party failed to raise an argument below are

clearly absent here. See Holsum de P.R., Inc., 116 F.4th at 66

("This waiver rule is intended to ensure that opposing parties and

trial judges have the opportunity to address and to decide issues

in the first instance before an appellate court steps in.").

Candidly, the Guallinis' briefing on appeal (and in

proceedings prior) is not always a beacon of clarity. However,

before our court, the Guallinis discuss the bankruptcy court's

reasoning for deciding that it lacked subject matter jurisdiction,

insist that the circumstances of their adversary proceeding did

not "automatically deprive the bankruptcy court of its

consideration on the merits," and request that their adversary

proceeding be returned to the bankruptcy court for the completion

of pre-trial proceedings pursuant to § 157. Thus, we find their

appellate arguments expressed with enough perspicuity to allow us

to see the basis of their claims, thereby avoiding waiver and

- 20 - allowing us to enter judgment accordingly. See In re Plaza Resort

at Palmas, Inc., 741 F.3d 269, 282 (1st Cir. 2014) (Selya, J.,

dissenting) (explaining that our waiver rule does not require

"arguments be precise to the point of pedantry" and "[w]here, as

here, an issue has been squarely advanced, an appellate court

can -- and in the interests of justice should -- go beyond the

reasons articulated in the parties' briefs to reach a result

supported by law"). That said, we continue on and consider the

Guallinis' arguments.

We first address the Guallinis' appeal from the

bankruptcy court's dismissal for lack of subject matter

jurisdiction. (And, to remind, our focus is on the bankruptcy

court's decision, not the district court's view on this

jurisdictional matter.) The jurisdiction of the bankruptcy court

(like all federal courts) is grounded in, and limited by, statute.

Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995). The statute

conferring jurisdiction to the bankruptcy court is a familiar one;

with its two main sects distinguished as "cases under title 11"

and "all civil proceedings arising under title 11, or arising in

or related to cases under title 11." 28 U.S.C. § 1334(b); see

Gupta v. Quincy Med. Ctr., 858 F.3d 657, 661 (1st Cir. 2017).

An accompanying provision, § 157(c), authorizes a

bankruptcy court to hear "a proceeding that is not a core

- 21 - proceeding but that is otherwise related to a case under title

11."10 And "[i]n such proceeding, the bankruptcy judge shall submit

proposed findings of fact and conclusions of law to the district

court, and any final order or judgment shall be entered by the

district judge" after considering those findings and reviewing de

novo any objections from the parties. 28 U.S.C. § 157(c)(1). Or,

with consent from the parties, bankruptcy courts may hear and

"enter appropriate orders and judgments" in related to

proceedings. Id. § 157(c)(2). Indeed, the idea behind this "broad

jurisdictional grant" is so that "the bankruptcy courts [can] 'deal

efficiently and expeditiously with all matters connected with the

bankruptcy estate.'" Gupta, 858 F.3d at 662 (quoting Celotex, 514

U.S. at 308).

In general, "related to" adversary proceedings will be

dismissed following the termination of the underlying bankruptcy

proceedings. This is so because a bankruptcy court's retention of

jurisdiction over a related proceeding depends on the proceeding's

nexus to the underlying bankruptcy case. See In re Porges, 44

F.3d 159, 162 (2d Cir. 1995) (explaining that the "general rule

10 Beyond the two sects just identified, bankruptcy matters are further divided into two categories: "core" and "non-core" proceedings. Cases that arise under or in title 11 are "core" proceedings, while proceedings that are "related to" an underlying bankruptcy case are considered "non-core" proceedings. See Stern v. Marshall, 564 U.S. 462, 474-77 (2011) (citing 1 Collier on Bankruptcy ¶ 3.02[2], p. 3-26, n.5 (16th ed. 2010) ("The terms 'non-core' and 'related' are synonymous.")).

- 22 - favors dismissal because a bankruptcy court's jurisdiction over

such related proceedings depends on the proceedings' nexus to the

underlying bankruptcy case"). But this rule is not a command set

in stone, and nothing in the Bankruptcy Code requires the automatic

dismissal of a related adversary proceeding following the

termination of an underlying bankruptcy case. Id.; see also In re

Smith, 866 F.2d at 580 (finding a bankruptcy court appropriately

retained its jurisdiction over a related adversary proceeding

following a discharge); cf. Reyes-Colón, 110 F.4th at 64

("Post-dismissal jurisdiction depends on the basis for

jurisdiction over the proceeding and the specific circumstances

and nature of the proceeding itself." (emphasis added)).

Now, we do not fault the bankruptcy court for assessing

its jurisdiction post discharge. An objection to a federal court's

subject matter jurisdiction may be raised by any party, or by a

court's own initiative, at any stage of litigation. Arbaugh v.

Y&H Corp., 546 U.S. 500, 506 (2006); In re Recticel Foam Corp.,

859 F.2d 1000, 1002 (1st Cir. 1988) ("It is too elementary to

warrant citation of authority that a court has an obligation to

inquire sua sponte into its subject matter jurisdiction, and to

proceed no further if such jurisdiction is wanting." (irony

added)). But it does not follow from the obligation to inquire

into jurisdiction that a court must then find itself automatically

divested of its jurisdiction. For example, a federal court can

- 23 - decide to retain jurisdiction over pendent state law claims after

dismissing all federal claims if "doing so would serve the

interests of fairness, judicial economy, convenience, and comity."

Zell v. Ricci, 957 F.3d 1, 15 (1st Cir. 2020) (citation modified).

So, to preview our forthcoming conclusion, the error here lies not

with inquiring into subject matter jurisdiction but with finding

that the court's previously vested jurisdiction had automatically

dissipated following the Guallinis' discharge. See In re Porges,

44 F.3d at 162.

With these jurisdictional principles in mind, we return

to the matter at hand. The Guallinis agree with the bankruptcy

court that their adversary proceeding fell into the "related to"

bucket of bankruptcy jurisdiction. However, they argue that the

completion of their Chapter 13 plan did not "automatically deprive

the bankruptcy court of its consideration on the merits" such that

the bankruptcy court could have "proposed findings and

conclusions" to be further reviewed (de novo) by the district

court. See 28 U.S.C. § 157(c)(1). We agree.

Recall that the Guallinis filed their adversary

proceeding with the bankruptcy court on February 4, 2019, after

implicating their causes of action into the Chapter 13 plan. At

that point, the bankruptcy court certainly had jurisdiction over

the adversary proceeding because the Guallinis' claims "related

to" their bankruptcy proceedings and "potentially ha[d] some

- 24 - effect on the bankruptcy estate, such as altering debtor's rights,

liabilities, options, or freedom of action, or otherwise ha[d] an

impact upon the handling and administration of the bankrupt

estate." Gupta, 858 F.3d at 663 (citation modified).11 In other

words, any proceeds that may have resulted from the adversary

proceeding would have become property of the estate and available

for distribution to creditors. See Celotex, 514 U.S. at 308 n.6.

Exercising its jurisdiction, the bankruptcy court thereby oversaw

pre-trial matters and denied Banco Popular's motion to dismiss the

adversary proceeding while administering the bankruptcy plan

before ultimately granting the Guallinis a discharge.

Because it is undisputed the bankruptcy court had

subject matter jurisdiction over the adversary proceeding when the

Guallinis filed it, we hold that the court erred as a matter of

law in sua sponte dismissing the Guallinis' adversary proceeding

when it assumed that it automatically lost its jurisdiction because

of the discharge. Recently, in assessing the jurisdiction of a

bankruptcy court post discharge, we (like other courts)

specifically declined to adopt a blanket rule that jurisdiction

automatically terminates following the dismissal of an underlying

11We add (as the Guallinis point out in their briefing) that Banco Popular opposed the first motion for withdrawal, in part, because by its lights the bankruptcy court had jurisdiction over the proceeding and Banco Popular had already filed its motion for summary judgment in the bankruptcy court pursuant to that jurisdiction.

- 25 - bankruptcy petition. Reyes-Colón, 110 F.4th at 64. Instead, we

concluded that the question of a bankruptcy court's post-dismissal

(or discharge) jurisdiction is "a case- and fact-specific

inquiry." Id. What the bankruptcy court should have done (but

did not) was make a case-specific inquiry as to whether it had any

basis for retaining jurisdiction over the adversary proceeding

post discharge. See id.; In re Porges, 44 F.3d at 163. Should

the proceeding ultimately return to the bankruptcy court on

remand,12 the court will then be in a position to conduct this

inquiry in light of its own views and the parties' presentations

of their arguments.

As guidance for that analysis, we endorse the approach

taken by other circuits that the case-specific inquiry should be

gauged by several familiar factors: judicial economy, convenience

to the parties, fairness, and comity. In re Porges, 44 F.3d at

163 (finding a bankruptcy court properly exercised its

jurisdiction over an adversary proceeding after dismissing the

underlying bankruptcy case because "[t]o have declined

jurisdiction at that stage would have served no useful purpose,

and would have wasted the resources already invested by the parties

12After all, even though we vacate the bankruptcy court's determination that it lacked subject matter jurisdiction over that proceeding, if the district court grants the Guallinis' motion for withdrawal on remand, the proceeding will remain with the district court rather than returning to the bankruptcy court.

- 26 - and the court"); cf. Carnegie-Mellon Univ. v. Cohill, 484 U.S.

343, 350 n.7 (1988) (listing these four factors for courts to

balance under the pendent jurisdiction doctrine); Marquis v. FDIC,

965 F.2d 1148, 1154 (1st Cir. 1992) ("It is difficult to conceive

of anything less efficient than dismissing a suit that has been,

say, two years in process, only to have an identical suit started

afresh some six months later."). Though we decline to decide how

those factors should be applied to the Guallinis' adversary

proceeding, in our view, between the bankruptcy court's

still-existent jurisdiction and the particular circumstances of

this adversary proceeding, the bankruptcy court was primed to

exercise its jurisdiction and accompany its 65 findings of fact

with conclusions of law for the district court's review.

We hasten to add that our resolution ameliorates the

irreconcilable tension between the district court's denial of the

Guallinis' first motion for withdrawal and the bankruptcy court's

decision -- which ultimately prevented the adversary proceeding

from advancing in the normal course. The district court denied

the Guallinis' first motion for withdrawal on timeliness grounds.

While the bankruptcy court later commented that the district

court's opinion and order did not address the Guallinis'

"completion of plan payments and the . . . bankruptcy discharge"

a closer inspection of the district court's opinion reveals that

it did. The district court reasoned that the "fact that one form

- 27 - of relief that [the Guallinis] requested may now be moot does not

restart their withdrawal clock." (Emphasis added.) The district

court recognized the already existent discharge and nevertheless

referred the adversary proceeding back to the bankruptcy court

because the discharge possibly implicated issues of mootness,

rather than subject matter jurisdiction. We cannot read (as it

appears the bankruptcy court did) a glaring oversight into the

district court's decision that it would refer a matter to a court

that lacked any authority to issue a decision. Rather, we see the

district court as understanding the typical practice for related

adversary proceedings filed in bankruptcy court: the bankruptcy

court would handle pre-trial proceedings and propose findings that

the district court could later review before entering final

judgment.13 See Stern v. Marshall, 564 U.S. 462, 475 (2011)

(explaining the process of "related to" proceedings); cf. In re

Vestavia Hills, Ltd., 630 B.R. 816, 850 (S.D. Cal. 2021)

("[S]ending every proceeding that required passing consideration

of non-bankruptcy law back to the district court would eviscerate

much of the work of the bankruptcy courts." (citation modified)).

13Or, based on the consent of the parties, the bankruptcy court could have entered judgment subject to the district court's first-tier appellate review. 28 U.S.C. § 157(c)(2).

- 28 - B

The Guallinis also appeal the district court's denial of

their second motion for withdrawal. So, that is where we train

our focus next. In short order, the Guallinis claim that the

district court abused its discretion by "relying on inapplicable

facts argued on the first attempt to Withdraw the Reference,"

failing to consider "that the timing of the second request was

proximate to the appealed opinion and order," and by "not taking

into consideration [the Guallinis'] right to a jury trial." Banco

Popular disagrees in full, arguing that the district court did not

abuse its discretion in denying "the clearly belated request for

withdrawal of reference." Again, we find the Guallinis' claims

meritorious.

District courts have "original but not exclusive

jurisdiction" over "related to" adversary proceedings. 28 U.S.C.

§ 1334(b). Accordingly, district courts are permitted to refer

such proceedings to bankruptcy courts. See Gupta, 858 F.3d at 662

(citing 28 U.S.C. § 157). A district court may later withdraw its

reference of a particular case on its own initiative or by "timely

motion of any party, for cause shown." 28 U.S.C. § 157(d). But

district courts "have been cautious in applying" this authority as

the statute makes clear "that Congress intended to have bankruptcy

proceedings adjudicated in the bankruptcy court unless withdrawal

[is] essential to preserve a higher interest." United States v.

- 29 - Kaplan, 146 B.R. 500, 502-03 (D. Mass. 1992). Furthermore, motions

for withdrawal of reference do not address any substantive issues

but, rather, address which court will decide those issues. See

Reyes-Colón, 110 F.4th at 69. Motions for withdrawal can be either

mandatory or permissive, see id. & n.19, but motions of either

persuasion must be timely, see 28 U.S.C. § 157(d).

Notably, the relevant statute is silent on what it means

for a motion for withdrawal to be "timely." See id. We have

previously read this term (in the context of permissive

withdrawals) to mean "a motion for withdraw is timely if it was

made as promptly as possible in light of the developments in the

bankruptcy proceeding, or if filed at the first reasonable

opportunity." Reyes-Colón, 110 F.4th at 69 (citation modified).

Thus, timeliness determinations can vary and "must be measured by

the stage of the proceedings in the bankruptcy court." Id. at 70

(quoting Kaplan, 146 B.R. at 504); see also In re Baldwin-United

Corp., 57 B.R. 751, 753 (S.D. Ohio 1985) ("At the very least,

timeliness would require that action be taken without undue delay.

In determining whether something is timely, it must be evaluated

in the context of the specific situation."); In re Vestavia Hills,

Ltd., 630 B.R. at 851 (stating that once the grounds for withdrawal

become apparent, "a party has a plain duty to act diligently -- or

else, to forever hold his peace" (citation omitted)).

- 30 - Here, the district court correctly began its inquiry

into the Guallinis' second motion for withdrawal with the

"threshold determination" of timeliness. Reyes-Colón, 110 F.4th

at 69. In doing so, the district court posed what it deemed "a

rhetorical question: if the withdrawal of the reference was

two-years late in 2021, how is it no [sic] also untimely in 2023?"

It also concluded that there was "no discernible difference in the

status of the Adversary Proceeding that would allow this Court to

disregard the ruling of a sister District Court" and, therefore,

the second motion must be untimely. Because, in reaching this

conclusion, the district court did not make clear whether it relied

upon the proper factors, we vacate its decision. Here's why.

A court abuses its discretion "if it ignores a material

factor deserving of significant weight, relies upon an improper

factor or makes a serious mistake in weighing proper factors." In

re Fin. Oversight & Mgmt. Bd. for P.R., 939 F.3d 340, 346 (1st

Cir. 2019) (citation modified). As we just explained, the district

court relied on the un-timeliness of the Guallinis' first motion

for withdrawal to conclude their second motion must also be

untimely. In doing so, the court referenced "the status of the

Adversary Proceeding," but its opinion is ambiguous as to whether

it considered the changes in that status following the rejection

of the Guallinis' first motion for withdrawal. Insofar as the

court relied only on the timing of the first motion in rejecting

- 31 - the second, it cites no authority (and we can find none) for the

proposition that once a party's motion for withdrawal is deemed

untimely, that party is forever barred from filing a timely motion

in the future. See In re Adelphi Inst., Inc., 112 B.R. 534, 539

(S.D.N.Y. 1990) (denying a motion for withdrawal of reference

"without prejudice to its renewal in the event the claims of the

Trustee occasion a jury trial").14 And our caselaw provides a

different metric for measuring timeliness: "[t]he timeliness of a

motion to withdraw must be measured by the stage of the proceedings

in the bankruptcy court." Reyes-Colón, 110 F.4th at 70 (citation

modified); see also In re Vestavia Hills, Ltd., 630 B.R. at 852

(supporting its conclusion that a motion for withdrawal was timely

because, at that stage of proceedings, withdrawal would not "impair

judicial economy"). When presented with the Guallinis' second

motion for withdrawal, the district court should have considered

the present status of proceedings in the bankruptcy court (i.e.,

that the pre-trial proceedings prolongedly shepherded by the

bankruptcy court had yet to conclude). Because it is not clear

from the district court's opinion whether it improperly relied on

the status of the proceedings at the time of the first motion

without considering that the first motion was denied without

Indeed, the Guallinis' first motion for withdrawal was 14

denied without prejudice meaning that the district court must have contemplated the likelihood of a second motion down the road given the nature of the causes of action to be resolved.

- 32 - prejudice, we vacate its decision and remand for further

proceedings consistent with this opinion.

In doing so, we expect the district court to address the

Guallinis' request for a jury trial. The Guallinis' second motion

for withdrawal expressly invoked their Seventh Amendment right to

a jury trial, yet the district court's focus elsewhere omitted

analysis of this request. As expressed beyond our court, a party's

request for a jury trial may justify its removal to a district

court. See In re Adelphi Inst., Inc., 112 B.R. at 538 ("The

appropriateness of removal of the case to a district court for

trial by jury, on asserted Seventh Amendment grounds, will become

a question ripe for determination if and when the case becomes

trial-ready."); Desmond v. Ng, 552 B.R. 781, 785 (D. Mass. 2015)

("[A]s the Adversary Proceeding is now ready for trial, the

reference should be withdrawn if Defendant is entitled to a jury

trial so it can be held in the District Court."). We decline to

wade into whether the Guallinis' adversary claim is sufficiently

ripe for trial to warrant withdrawal on this basis, nor whether

this claim has been waived. However, the fact remains that the

Guallinis sought a withdrawal of reference on this basis, and the

district court did not engage their request. See In re Fin.

Oversight & Mgmt. Bd. for P.R., 939 F.3d at 346.

- 33 - III

For the foregoing reasons, we vacate the decision of the

district court and remand with instructions to vacate the decision

of the bankruptcy court and to conduct further proceedings

consistent with this opinion. Furthermore, we vacate the district

court's denial of the motion for withdrawal of reference, and

remand to the district court for further consideration of the

motion for withdrawal consistent with this opinion.

Appellants shall recover their costs on appeal from

- 34 -