Hector R. Marmol Torres, Mireira Lantigua Garcia v. Autoridad de Acueductos y Alcantarillados

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: May 13, 2020
• Docket: 18-00027
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2

3 IN RE: CASE NO. 14-04521-BKT13 4 Chapter 13 5 HECTOR R. MARMOL TORRES, 6 MIREIRA LANTIGUA GARCIA 7 Debtor(s) 8

9 HECTOR R. MARMOL TORRES, Adversary No. 18-00027 MIREIRA LANTIGUA GARCIA 10

11 Plaintiff(s) vs. 12 13 AUTORIDAD DE ACUEDUCTOS Y FILED AND ENTERED ON 05/13/2020 14 ALCANTARILLADOS

15 Defendant 16 OPINION AND ORDER 17

18 Before this court is a Motion for Summary Judgment [Dkt. No. 62], filed by Autoridad de 19 Acueductos y Alcantarillados (hereinafter “PRASA” or “Defendant”) and a Counter Motion for 20 Summary Judgment [Dkt. No. 64] filed by Hector R. Marmol Torres and Mireira Lantigua Garcia 21 (hereinafter, “Debtors” or “Plaintiffs”). 22 23 For the reasons stated herein, Defendant's Motion for Summary Judgment and Plaintiffs’ 24 Counter Motion for Summary Judgment are hereby DENIED. 25 I. Standard of Review

The role of summary judgment is to look behind the facade of the pleadings and assay the 1 1 parties' proof in order to determine whether a trial is required. Mulvihill v. Top-Flite Golf Co., 335 2 F.3d 15, 19 (1st Cir. 2003). Pursuant to Fed. R. Civ. P. Rule 56(c), made applicable in bankruptcy 3 by Fed. R. Bankr. P. 7056, a summary judgment is available if the pleadings, depositions, answers 4 to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no 5 genuine issue as to any material fact and that the moving party is entitled to judgment as a matter 6 7 of law. Fed. R. Civ. P. 56(c); Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 4 (1st Cir. 8 2010). As to issues on which the movant, at trial, would be compelled to carry the burden of proof, 9 it must identify those portions of the pleadings which it believes demonstrates that there is no 10 genuine issue of material fact. In re Edgardo Ryan Rijos & Julia E. Cruz Nieves v. Banco Bilbao 11 12 Vizcaya & Citibank, 263 B.R. 382, 388 (B.A.P. 1st Cir. 2001). A fact is deemed “material” if it 13 could potentially affect the outcome of the suit. Borges, 605 F.3d at 5. Moreover, there will only 14 be a “genuine” or “trial worthy” issue as to such a “material fact,” “if a reasonable fact-finder, 15 examining the evidence and drawing all reasonable inferences helpful to the party resisting 16 summary judgment, could resolve the dispute in that party's favor.” Id. at 4. The court must view 17 18 the evidence in the light most favorable to the nonmoving party. Alt. Sys. Concepts, Inc. v. 19 Synopsys, Inc., 374 F.3d 23, 26 (1st Cir. 2004). Therefore, summary judgment is “inappropriate if 20 inferences are necessary for the judgment and those inferences are not mandated by the record.” 21 Rijos, 263 B.R. at 388. 22 23 Although this perspective is favorable to the nonmoving party, she still must demonstrate, 24 “through submissions of evidentiary quality, that a trial worthy issue persists.” Iverson v. City of 25 Boston, 452 F.3d 94, 98 (1st Cir. 2006). Moreover, “[o]n issues where the non-movant bears the

ultimate burden of proof, [she] must present definite, competent evidence to rebut the motion.” 2 1 Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991). These showings may not rest upon 2 “conclusory allegations, improbable inferences, and unsupported speculation.” Medina-Muñoz v. 3 R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990). The evidence offered by the nonmoving 4 party “cannot be merely colorable, but must be sufficiently probative to show differing versions 5 of fact which justify a trial.” Id.; See also, Horta v. Sullivan, 4 F.3d 2, 7-8 (1st Cir. 1993) (holding 6 7 that the materials attached to the motion for summary judgment must be admissible and usable at 8 trial). “The mere existence of a scintilla of evidence” in the nonmoving party's favor is insufficient 9 to defeat summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 10 91 L.Ed.2d 202 (1986); González-Pina v. Rodríguez, 407 F.3d 425, 431 (1st Cir. 2005). 11 12 In the summary judgment motions presently before the court, Plaintiffs and Defendant 13 argue that there are no genuine issues as to any material facts and that therefore they are entitled 14 to judgment as a matter of law. Plaintiffs and Defendant contend the following facts to be 15 undisputed: 16 On May 30, 2014, Plaintiffs filed a Chapter 13 Bankruptcy petition, Case 17 18 No. 14-04521-BKT. Plaintiffs, however, did not list PRASA as a creditor neither 19 in Schedules F and /or G nor in the master address list. 20 As of the date of filing for relief under Chapter 13, Debtors had several 21 service accounts with PRASA, described as follows: 22 23 (1) Rental property 1, PRASA account # 20441556: URB. LEVITTOWN 1RA SECCION, 1094 PASEO DAMASCO, TOA BAJA, PR 00949, a two-story 24 structure with four (4) residential rental units, wholly owned by PLAINTIFFS. One (1) water meter servicing all apartment units of that property. 25

(2) Rental Property 2, PRASA account # 20392381: URB. LEVITTOWN 6TA SECCION, EG-01 CALLE ASTOL BUSATTI, TOA BAJA, PR 00949, a 3 1 two-story structure with three (3) residential rental units, wholly owned by PLAINTIFFS. One (1) water meter servicing all units of that property. 2 (3) Rental Property 3, PRASA account # 20407792: URB. LEVITTOWN 3 5TA SECCION, BA-35 CALLE JOAQUIN BOSCH, TOA BAJA, PR 00949, a 4 two-story structure with two (2) residential rental units, owned by PLAINTIFFS’ son, Hector Antonio Marmol Lantigua, but administered and leased by DEBTORS- 5 PLAINTIFFS. One (1) water meter with an account in name of DEBTORS- PLAINTIFFS servicing all units of that property. 6

7 Debtors did not list a debt with PRASA pending the determination of a 8 Debtors’ administrative claims (#AA12- 067, #AA12-190, #AA12-307, and #AA- 9 14-207) for adjustments decreed by PRASA of certain prepetition invoices for 10 water/sewage utility services billed. See, Dkt. No. 1, Statement of Financial Affairs, 11 12 item 4, of the lead case. 13 The Amended Chapter Plan dated January 14, 2015 did not assume any 14 executory contracts with PRASA. See, Dkt. No. 59 of the lead case. 15 The Amended Chapter Plan dated January 14, 2015 was confirmed on 16 February 2, 2015, without any mention as to the assumption of the Executory 17 18 contracts with PRASA. See, Dkt. No. 64 of the lead case. 19 Upon the final determination of Debtors’ administrative claim with PRASA 20 claims (#AA12-067, #AA12-190, #AA12-307, and #AA-14-207), on June 7, 2016 21 the resulting debts were included in the lead bankruptcy and the executory contracts 22 23 were listed as well. See, Dkt No. 79, Amended Schedules F and G of the lead case. 24 In the Amended Schedule G, PRASA’s accounts #20441556 and 25 #20392381 were listed as rejected while accounts #2042562 and 20407792 were

listed as to be assumed. See, Dkt No. 79, Amended Schedule G of the lead case. 4 1 Proof of Claim #11 for such pre-petition debts was filed and allowed to be 2 paid through a post confirmation plan modification with an attached revision by the 3 Puerto Rico Tribunal of General Justice, Tribunal of Appeals for the Region of San 4 Juan (Case No. KLRA201501296) of the adjustments determined by PRASA, 5 confirmed on revision by the San Juan Superior Court, of certain pre-petition 6 7 invoices for water/sewage utility services billed. The judicial revision was for 8 administrative claims #AA12-067, #AA12-190, #AA12-307, and #AA-14-207. 9 See, Claim #11 of the lead case. 10 Proof of Claim #11 filed by Debtors on behalf of PRASA was neither 11 12 objected by PRASA nor superseded by a claim of its own. 13 On July 11, 2017, Debtors paid PRASA a deposit of $500.00. The same was 14 applied to the same account of Calle Astol Busatti. (8/11/2016 Invoice ending in 15 X2381). 16 On July 12, 2017, Debtors paid PRASA another deposit of $500.00 the 17 18 deposit was applied to the same account of Calle Joaquin Bosch. (8/12/2016 Invoice 19 ending in x7792). 20 Subsequently, PRASA disconnected the utility services of the three 21 accounts, as follows: 22 23 1. On April 13, 2016 during an administrative hearing, the Plaintiff said that he filed for bankruptcy. The administrative hearing being held was for account number 24 2381. (Cases number, AA-14-207 and AA-14-207-A1.) Administrative hearing was to determine the correction of water charges in invoices from 05/06/2014 and 25 06/05/2014 in the amount of $203.16 each. Case AA-14-207 A1 included invoices from 1/10/13 in the amount of $196.39; 3/08/13 and 4/07/13 for $194.42 each; and 05/06/13 and 6/15/13 for $127.61 each. At the date specified above the outstanding 5 1 balance for the account was $3,364.22. The pre-petition outstanding balance was only $317.16. The administrative judge stayed the procedures and the case was 2 referred to PRASA’s Bankruptcy division.

3 2. On May 16, 2016 PRASA’S bankruptcy department codified account 2381 in 4 PRASA’s computerized administrative system with a “Q” meaning that all accrued debts before said date were protected by bankruptcy law. The remaining invoices 5 were protected by state Law 33 from June 27, 1985.

6 3. On June 7, 2016, Plaintiffs filed a separate motion to file Proofs of claim on 7 behalf of PRASA including the judgment issued by Commonwealth’s Court of Appeals (which was issued while the stay order was already in effect) on the 8 amount of $5,082.10. The said judgment only included litigated charges related to 9 account 7792. See, Dkt. No. 80 of the lead case).

10 4. On July 6, 2016, this Honorable Court granted Debtors’ unopposed Motion Requesting Leave to File Claims after the Bar Date. See, Dkt. No. 84 of the lead 11 case). 12 5. Account 1556 was not codified with a “Q”. The date PRASA received actual 13 knowledge of the Bankruptcy the account had invoice from 04/01/2015 in the amount of $203.16 (protected by law 33 from suspension of service) at 14 administrative review. The account had no other pre-bankruptcy outstanding 15 balance.

16 PRASA discontinued water service on two (2) occasions in account 7792 17 for the following post-bankruptcy debts: 18 (1) On January 11, 2017 for an outstanding balance of $1,780.02, 19 unprotected by state law no. 33. Service was restored on January 13, 2017.

20 (2) On June 27, 2017, for an outstanding balance of $792.78. The service 21 was restored on June 30, 2017.

22 PRASA discontinued Plaintiffs water service for account 1556 (PASEO 23 DAMASCO) on three (3) different occasions, for post-bankruptcy debts. 24 (1) December 28, 2016 the outstanding balance was $251.20. Service was 25 restored on December 29, 2016.

(2) July 12, 2017 with an outstanding balance of $358.52. Service was 6 1 restored on July 19, 2017.

2 (3) August 28, 2017, the outstanding balance was $297.20. Service was restored on August 29, 2017. 3

4 PRASA discontinued Plaintiffs water and sewer services for account 2381 5 (ASTOL BUSATTI) on two (2) occasions for post-bankruptcy debts: 6 (1) February 27, 2017, for an outstanding balance of $1,151.82 Service was 7 restored on February 28, 2017.

8 (2) June 27, 2017 for and outstanding balance of $353.41. Service was 9 restored on June 30, 2017.

10 II. Legal Analysis 11 After reviewing the Plaintiffs and Defendant’s arguments, and the relevant law, this Court 12 concludes that there are genuine issues as to material facts and that the moving parties are not 13 entitled to judgment as a matter of law. In a motion for summary judgment, in order to carry its 14 15 burden of production, the moving party must either produce evidence negating an essential element 16 of the nonmoving party's claim or defense or demonstrate that the nonmoving party does not have 17 sufficient evidence of an essential element to carry its ultimate burden of persuasion at trial. Lopez 18 v. Corporacion Azucarera de Puerto Rico, 938 F.2d 1510, 1516-17 (1st Cir. 1991); High Tech 19 Gays v. Defense Indus. Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir.1990). Regardless, in 20 21 order to carry its ultimate burden of persuasion on the motion, the moving party must persuade the 22 court that there is no genuine issue of material fact. Id. Therefore, the primary inquiry this Court 23 must decide first is whether the Plaintiffs and Defendant, as moving parties, carried this initial 24 burden of production. 25

7 1 The merits of this instant case turn on Section 366 of the Bankruptcy Code. This Section 2 lays out the rights and obligations of debtors as they seek to retain utility services after filing a 3 bankruptcy petition. Section 366 provides: 4 (a) Except as provided in subsection (b) of this section, a utility may not alter, 5 refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt 6 owed by the debtor to such utility for service rendered before the order for relief 7 was not paid when due.

8 (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor 9 the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after 10 such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security 11 necessary to provide adequate assurance of payment. 12 11 U.S.C. § 366. 13 By the operation of the Code, individual debtors and business debtors alike rely on the 14 15 continuation of utility services throughout the pendant duration of their bankruptcy proceedings. 16 This Court has previously stated that “[t]he term “utility” [in Section 366] is not defined in the 17 Bankruptcy Code, but its ordinary meaning is “a service (such as light, power, or water) provided 18 by a public utility.” The term “public utility” is defined as “a business organization (as an electric 19 company) performing a public service and subject to special governmental regulation.” In re PMC 20 21 Mktg. Corp., 501 B.R. 17, 24 (Bankr. D.P.R. 2013) (internal citations omitted).1 22

23 1 The Court in In re NE Opco, Inc., 501 B.R. 233, 255 (Bankr.D.Del. 2013), in deciding the question of whether electricity is a good, criticized this Court’s approach in In re PMC Mktg. Corp., 501 B.R. 17 (Bankr.D.P.R. 2013) 24 answering the same question. This Court previously decided this question based on Section 366 of the bankruptcy code, which is relevant to this instant case, that because of the monopolistic relationship between the two parties, the 25 utility company and the consumer, the electricity in that case cannot be considered as a good because it qualifies as a service under Section 366. The NE Opco, Inc. Court points out that because electricity can be bought and sold at the wholesale level, electricity could potentially be sold as a good and end as a service. However, consider this scientific reality as explained by the New York Independent System Operator (“NYISO”) website [see http://www.nyiso.com/public/about_nyiso/understanding_the_markets/wholesale_retail/index.jsp (last visited Dec. 8 1 This distinctive power utility companies possess in light of debtors bankruptcy prompted 2 Congress to establish a bankruptcy provision that would prevent the threat of termination from 3 being used to collect pre-petition debts that would not otherwise force utility companies to provide 4 services that they may never receive payment for. See e.g., Begley v. Philadelphia Elec. Co. (In re 5 Begley), 760 F.2d 46, 49 (3d Cir.1985). Seeking to strike a balance between the general right of a 6 7 creditor to refuse to do business with a debtor post-petition, and the debtor's need for utility service, 8 Congress enacted Section 366 as part of the Bankruptcy Code of 1978. In re Jones, 369 B.R. 745, 9 748-50 (B.A.P. 1st Cir. 2007); In re Best Products Co., 203 B.R. 51, 53 (Bankr.E.D.Va.1996); see 10 also Hanratty v. Philadelphia Elec. Co. (In re Hanratty), 907 F.2d 1418, 1424 (3d Cir.1990); see 11 12 also, In re Rivera, 12-05331 BKT, 2013 WL 5661477 (Bankr. D.P.R. Oct. 15, 2013). Section 13 366(a) bans utility companies from altering, refusing, or discontinuing service to, or discriminating 14 against, a trustee or a debtor solely on the grounds that the debtor has not paid its prepetition debts 15 when due. This Section fundamentally reveals the Congressional concerns of the monopoly powers 16 17 18 30, 2013)]: 19 wholesale electricity is typically viewed as a service even within the wholesale to retail sale 20 relationship. The relationship starts when a step-up transformer provides wholesale energy to a step- down transformer as a service, who in turn refines such high voltage energy into lower voltage 21 electricity that is suitable for domestic and commercial use to individual consumers and homes.

22 Wholesale electricity, just like retail electricity providers, can effectively monopolize a given market. Accordingly, when a wholesale electricity company sells its unrefined service to a retail electricity company and such retail 23 electricity company refines such service for consumer usage, these service-based relationships between the three different players, namely the wholesale provider, the retail provider, and the consumer, do not shift into goods based 24 relationships. In other words, envision the following: a wholesale cell phone provider or a wholesale internet provider, upon their sale of such service to retail service providers, these retail service providers refine such service in order to 25 tailor to their individualistic consumer preferences. This refinement does not morph a “service” into a “good.” Moreover, a monopoly does not simply mean that a wholesale provider would potentially enter markets tailoring to individualistic preferences, it simply means that the wholesale provider could potentially enter new refined markets but may never do so. Regardless, parties’ relationships must be examined to ensure congressional intent is adequately protected and to guard against unwarranted judicial activism. 9 1 exercised by most utility companies and therefore mandates these companies to provide debtors 2 with initial services post-commencement of a bankruptcy proceeding. See e.g., In re PMC Mktg. 3 Corp., 501 B.R. 17, 23-24 (Bankr. D.P.R. 2013) ((“[Section 366] gives debtors protection from a 4 cut-off of service by a utility because of the filing of a bankruptcy case. This section is intended to 5 cover utilities that have some special position with respect to the debtor, such as an electric 6 7 company, gas supplier, or telephone company that is a monopoly in the area so that the debtor 8 cannot easily obtain comparable service from another utility.”) (quoting, H.R.Rep. No. 95–595, at 9 350 (1977), as reprinted in 1978 U.S.C.C.A.N. 5963, 6306; S.Rep. No. 95–989, at 60 (1978), as 10 reprinted in 1978 U.S.C.C.A.N. 5787, 5846.). Section 366(a)’s prohibition power, however, is not 11 12 absolute. Rather, this prohibition is carefully balanced and is limited by Section 366(b)’s 13 requirement that the trustee or debtor furnish "adequate assurance of payment" for post-petition 14 service to the utility within 20 days after the filing of the petition. Case law reveals that Section 15 366(b) is often read as an exception to the automatic stay, thus permissibly allowing utility 16 companies to alter, refuse or discontinue service for failure to provide adequate assurance of 17 18 payment without recourse to the bankruptcy court. See, In re Jones, 369 B.R. 745, 748-50 (B.A.P. 19 1st Cir. 2007); see e.g., Carter v. South County Water System (In re Carter), 133 B.R. 110, 112 20 (Bankr.N.D.Ohio 1991) (establishing, in a chapter 13 case that, the utility's right to terminate 21 service for debtor's failure to tender adequate assurance of payment under Section 366(b) is “self- 22 23 executing” and that “a formal proceeding by the utility is not required.”); see also, In re Penn 24 Jersey Corp., 72 B.R. 981, 985 (Bankr.E.D.Pa.1987); In re Lease–A–Fleet, Inc., 131 B.R. 945, 25 949–50 (Bankr.E.D.Pa.1991); Marion Steel Co. v. Ohio Edison Co. (In re Marion Steel), 35 B.R.

188, 197 (Bankr.N.D.Ohio 1983). Debtors have a choice in exercising what the bankruptcy code 10 1 would consider as adequate assurance. The choice comes in two forms: (1) a deposit with the utility 2 or (2) another security. Both may be modified by an order of court on request of a party in interest 3 after notice and a hearing. 4 After examining the relevant background, this Court finds that the ultimate question the 5 summary judgments hinge on is not what the parties have brought to the attention of the court, but 6 7 rather, the relevant inquiry here is whether the Debtor provided adequate assurance of payment in 8 due time as mandated by the Code. If a debtor fails to provide adequate assurance of payment, a 9 majority of the bankruptcy courts have rested on the conclusion that Section 366(b) grants utility 10 companies the unilateral right to terminate service. Johnson v. Philadelphia Elec. Co., 80 B.R. 30, 11 12 31 (E.D.Pa.1987); MFS Telecom, Inc. v. Motorola, Inc. (In re Conxus Communs.,Inc.), 262 B.R. 13 893 (D.Del.2001); Robinson v. Michigan Consol. Gas Co., 918 F.2d 579, 588 (6th Cir.1990) 14 (establishing that, in a chapter 7 case, where a debtor provides adequate assurance of payment, it 15 is well established that the utility may still terminate service upon the debtor's failure to pay for 16 post-petition services); Robinson v. Michigan Consol. Gas Co., 918 F.2d 579, 588 (6th Cir.1990); 17 18 Penn Jersey Corp., 72 B.R. at 985; Allen v. Philadelphia Elec. Co. (In re Allen), 69 B.R. 867, 876 19 (Bankr.E.D.Pa.1987). These courts reasoned that “if failure to provide adequate assurance of 20 payment is grounds for a utility to terminate service, then failure to make post-petition payments 21 likewise allows for termination without requesting permission from the bankruptcy court.” In re 22 23 Jones, 369 B.R. 745, 749 (B.A.P. 1st Cir. 2007). As seen above, the majority has authorized utility 24 companies to terminate services for post-petition delinquencies without obtaining relief from stay. 25 Another set of reasoning, leading to the same conclusion as above, is in line with the word “solely”

found in Section 366(a), which some courts have found to imply that a utility may refuse to furnish 11 1 services on other grounds, but not because of the commencement of the bankruptcy case nor 2 because of prepetition debt. These courts reasoned that a utility company may exercise discretion 3 to refuse service to any debtor for any reason that would validly constitute a ground for refusal if 4 that debtor was not in bankruptcy, with the single exception of nonpayment for past services. 5 Memphis Light, Gas & Water Division v. Farley, 135 B.R. 292, 294 (W.D.Tenn.1991); 6 7 Hendrickson v. Philadelphia Gas Works, 672 F.Supp. 823, 834 (E.D.Pa.1987); Morris v. Detroit 8 Edison (In re Morris), 66 B.R. 28, 29 (E.D.Mich.1986); In re Webb, 38 B.R. 541, 544 9 (Bankr.E.D.Pa.1984); Begley v. Philadelphia Elec. Co. (In re Begley), 760 F.2d 46, 49 (3d 10 Cir.1985) (“[t]he restriction on termination in section 366(a) bars only those terminations which 11 12 issue “solely on the basis” that a debt incurred prior to the bankruptcy order, was not paid when 13 due.”). Conclusively, as the above cases imply, Section 366(a) does not seem to bar utility 14 companies from terminating service as a result of debtors’ failure to pay post-petition amounts 15 owed. 16 III. Conclusion 17 18 After a comprehensive review of the parties’ arguments and the evidence presented, this 19 Court cannot answer the relevant inquiry of whether the Debtor provided adequate assurance of 20 payment in due time as mandated by the Bankruptcy Code. This question, therefore, must be 21 answered in trial. 22 23 Further, Defendant’s request for dismissal is without merit. The court finds that the 24 allegations contained in the Complaint are specific, and the facts sustaining those allegations are 25 complete and detailed sufficiently to defeat Defendant's request for dismissal.

12 1 WHEREFORE, IT IS ORDERED that Defendant’s Motion for Summary Judgment an 2 Plaintiffs’ Counter Motion for Summary Judgment shall be, and they hereby are, DENIED. Cler to schedule a final pre-trial hearing. 5 SO ORDERED. 6 In San Juan, Puerto Rico this 13" day of May 2020. Se Vie 3 Brian K. Tester 10 U.S. Bankruptcy Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25