In re: Angel Raul Figueroa Rivera; Grissel Vega Cardes v. Money’s People, Inc.; Héctor Morales Oliveras

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: June 22, 2009
• Docket: 08-00100
• Status: Unknown

Opinion

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2 3 IN RE: : CASE NO. 07-02528 4 : ANGEL RAUL FIGUEROA RIVERA; : 5 |GRISSEL VEGA CARDES : CHAPTER 13 6 Debtors 7 |ANGEL RAUL FIGUEROA RIVERA; g |GRISSEL VEGA CARDES : ADVERSARY NO. 08-00100 9 Plaintiffs 19 MONEY’S PEOPLE, INC.; : 11 IHECTOR MORALES OLIVERAS 12 Defendants 13S 14 3 OPINION AND ORDER 6 This adversary proceeding is before the court upon the complaint filed by Angel Raul Figueroa 7 Rivera and Grissel Vega Cardés (hereinafter referred as “Plaintiffs” and “Plaintiffs-Debtors”) to determine the amount of interest which corresponds to the amended claim! filed by Money’s People, 19 Inc. and Héctor Morales Oliveras (hereinafter referred as “Defendants” and “Money’s People”); and 50 the alleged damages caused to the T47 Sealine vessel named “Angelymar” due to Defendants’ failure, 34 as judicial depositary, to provide the proper maintenance and safekeeping to the vessel, as required 9 under the “good father of a family” standard of the Puerto Rico Civil Code. 3 A trial was held on January 15, 2009 in which Plaintiffs presented three (3) witnesses to attest to the damages suffered by the vessel due to Defendants’ failure to provide adequate maintenance to 35 the vessel as its judicial depositary which allegedly led to the vessel’s depreciation in value (Docket No. 36). The court ordered both the Plaintiffs and Defendants to submit their own briefs regarding 27 ' The Claims Register shows that Money’s People, Inc. on June 20, 2007 filed a proof of 28 || claim for a secured debt in the amount of $432,260.52, claim number 9-1. Subsequently, on January 12, 2009 Defendants’ filed an amended proof of claim for a secured debt in the amount of $460,757.29, claim number 9-2.

I calculation of interest that should be applied to the debt owed by Plaintiffs (Docket No. 36). 2 For the reasons set forth below this court determines that the interest amount owed is 3 $42,861.96, plus the amount of judgment ($272,459.38) obtained in state court, minus $50,000.00 4 jlof cash garnished from Plaintiffs- Debtors, for a total claim of $265,321.34. This court also 5 |idetermines that Defendants as judicial depository of the vessel Angelymar had the duty (obligation) 6 provide maintenance to the vessel, and that the lack of maintenance caused the vessel to deteriorate 7 |substantially, resulting in a decrease in its market value. This court awards damages to Plaintiffs in 8 |Ithe amount of $270,000.00. 9 10 Facts and Procedural Background ii Defendants Angel Rail Figueroa Rivera and Grissel Vega Cardés filed a bankruptcy petition 12 Chapter 13 of the Bankruptcy Code on May 9, 2007. Defendants were scheduled as an 13 |funsecured creditor and included in the master address list. Such debt was marked by Plaintiffs as 14 disputed and contingent in nature. The Defendants were duly notified of the filing of the 15 |fbankruptcy case. The 341 meeting of the creditors was held on June 11, 2007 (Docket No. 2 in lead 16 No. 07-02528”) and continued on June 12, 2007 (Docket No 7 in lead case), July 6, 2007 (Docket 17 13 in lead case), July 27, 2007 (Docket No. 19 in lead case) and August 29, 2007 (Docket No. 18 in lead case). 19 On July 26, 2007, Plaintiffs filed a “Motion Objecting Proof Of Claim #9” alleging that 20 |[proper documentation was not enclosed with the proof of claim, and that garnishment for such claim 21 already executed (Docket No. 30 in lead case). Defendants filed their “Reply Of Creditor Moneys 22 |People, Inc. To Objection To Proof Of Claim #9 Filed By Debtor And Enclosed Supporting 23 Documents” on July 30, 2007. Defendants filed with the court several documents with respect to the 24 of contract case # KAC 2001-8502 in which Money’s People was the Plaintiff and Angel R. 25 Figueroa Rivera was the Defendant. The documents filed with the court are the following: (i) 26 “References to the lead case are to the entries and documents filed in the bankruptcy case, 28 || case number 07-02528(ESL).

I Judgment; (41) Notice of Judgment; (ii) Writ of Attachment; (iii) Order of Garnishment and 2 ||Execution of Judgment; (iv) Assignment of Properties (“Sefialamiento de Bienes”); (v) Affidavit of 3 |the General Marshall Mr. Juan M. Ortiz by Mr. M. Gonzalez, Auxiliary Marshall; and (vi) Request 4 Property Registrar of Caguas, Section II to register Extract of Judgment in the Registry of 5 |\Judgments of the Property Registry. 6 On August 6, 2007 the court issued an order setting the pretrial conference regarding the 7 |lobjection to claim #9 (Money People) for August 29, 2007 (Docket No. 33 in lead case). Plaintiffs 8 |jsur replied on August 8, 2007 praying that proof of claim 9-1 be disallowed since it was already 9 |jexecuted (Docket No. 36 in lead case), Defendants sur sur replied on August 16, 2007 alleging that 10 |[Plaintiffs’ statement regarding the execution of judgment in case K AC2001-8502 is incorrect, 11 (Docket No. 42 in lead case). 12 Subsequently, Defendants filed a “Motion For Relief of Automatic Stay For Cause Under 11 □ 13 }U.S.C. Section 362(d)” on August 21, 2007 requesting the lifting of the automatic stay for certain real 14 land personal property (Docket No. 44 in lead case). On August 24, 2007, Plaintiffs-Debtors filed a 15 "Reply To Motion Requesting Relief From Automatic Stay” in opposition to the lifting of the 16 jjautomatic stay since the claim is in controversy and the judgment that was entered in state court 17 jjimpairs the homestead exemption under 11 U.S.C. §522 (Docket No. 48 in lead case). On September 18 |[5, 2007 a hearing was held and the issue of the objection to proof of claim #9 was discussed in light 19 |lofan agreement that Plaintiffs-Debtors and Defendants were trying to reach with respect to this claim 20 jlonce an appraisal of the vessel is performed by an appraiser. It was also clarified that Scotiabank 21 }\(creditor) has the first lien over the vessel and Money’s People has the second lien (Docket No. 54 22 |jin lead case). 23 On September 11, 2007, Scotiabank filed a motion requesting the automatic stay to be lifted 24 |jwith regards to the vesse! Angelymar based on lack of adequate protection for Scotiabank’s security 25 |linterest; Plaintiffs- Debtors lack of equity in the vessel; and that the same is not needed for Plaintiffs- 26 Debtors effective reorganization (Docket No. 55 in lead case). Plaintiffs-Debtors on September 25, 27 |2007, filed a “Reply To Motion Requesting Relief From Automatic Stay” requesting that the motion 28 by Scotiabank soliciting the automatic stay to be lifted with respect to the vessel be held in

| jlabeyance until the value of the vessel is determined (Docket No. 65 in lead case). 2 At a hearing held on September 11, 2007 it was disclosed that Scotiabank performed an 3 appraisal of the vessel, and valued the same for $280,000.00 in a private sale, $240,000.00 at 4 |liquidation price, and $200,000.00 at dealer price. It was also disclosed by Scotiabank that Money’s 5 People also performed an appraisal on February of 2007 and the value of the vessel was $387,000.00 6 |jat the time (Docket No. 63 in lead case). The court granted Plaintiffs, Defendants and Scotiabank 7 (60) days to file a stipulation or joint motion for consent judgment regarding the vessel 8 ||Angelymar (Docket No. 60 in lead case). 9 On October 2, 2007 a hearing was held to inform on the agreement between Plaintiffs-Debtors 10 Scotiabank. The proposed agreement basically consisted of the following: (i) Plaintiffs- Debtors 11 jjagreeing to the lifting of the automatic stay with regards to the vessel; (ii) Scotiabank allowing 12 ||Plaintiffs-Debtors a period of six (6) months to sell the vessel; and (iii) foreclosing on the same if 13 |Plaintiffs-Debtors are unable to sell the vessel. Both Scotiabank and Plaintiffs-Debtors requested ten 14 (10) days to draft the agreement and submit the same to the court (Docket No. 69 in lead case). The 15 granted the parties ten (10) days to file a stipulation or joint motion for consent judgment; and 16 jthat upon failure to so file, the court will enter an order lifting the automatic stay in favor of 17 ||Scotiabank (Docket No. 67 in lead case). The court granted the agreement/stipulation on December . 18 2007 between Scotiabank and Plaintiffs-Debtors (Docket No. 77 in lead case). i9 Money’s People on November 28, 2007 filed a motion moving the court to enter an order 20 jentering the lift of stay (Docket No. 75 in lead case). On November 28, 2007, Plaintiffs objected to 21 |{the lifting of the automatic stay (Docket No. 76 in lead case), The matter was scheduled for a hearing 22 |January 22, 2008 (Docket No. 78 in lead case). 23 On January 22, 2008 the parties agreed that the automatic stay be lifted under the same terms 24 llof the agreement that was entered into between Scotiabank and Plaintiffs-Debtors (Docket No. 84 and 25 in lead case). 26 On July 1, 2008, Plaintiffs filed the present adversary proceeding including two claims for 27 |relief. Plaintiffs first claim for relief is Defendants’ alleged willful violation of the automatic stay 28 |junder the provisions of the Bankruptcy Code, 11 U.S.C. §362(a). The second claim for relief is that

i Defendants erroneously calculated the interests owed by Plaintiffs on their debt, and for damages 2 caused to the vessel Angelymar due to Defendants’ failure to fulfill its obligations as judicial 3 [depository and provide adequate maintenance and safekeeping to the vessel. 4 On September 24, 2008 a status conference was held in which Plaintiffs’ withdrew the first 5 |iclaim for relief. The court denied Defendants’ motion to dismiss the complaint on res judicata 6 ||grounds as the state court judgment did not address or considered the claim for relief in this adversary 7 |proceeding. The court indicated that a trial would be scheduled to determine whether or not Money’s 8 [People was providing proper maintenance and safeguarding to the vessel and if there was any 9 i\depreciation due to the alleged lack of prudent care towards the vessel (Dockets No. 15 and 17). Trial 10 scheduled for January 15 and 16, 2009 (Docket No. 18). On January 8, 2009, Plaintiffs filed their proposed findings of fact and conclusions of law 12 (Docket No. 28). Defendants filed their proposed findings of fact and conclusions of law on January 13 9, 2009 (Docket No. 30). Plaintiffs on January 9, 2009 filed a motion to supplement its proposed 14 |findings of fact and conclusions of law (Docket No. 32). On January 14, 2009, Plaintiffs filed a 15 |motion to inform the witnesses they were going to present at trial (Docket No. 35). 16 On January 15, 2009, a trial was held before this court regarding the second claim for relief 17 the complaint, namely, whether or not Money’s People (Mr. Héctor Morales Oliveras) as the 18 [judicial depository of the vessel had failed to provide the same with adequate maintenance and 19 |lsafekeeping and if there was any depreciation due to this alleged negligent care of the vessel (Docket 20 36). The court granted Plaintiffs thirty (30) days to file a brief regarding the calculation of 21 |finterest. Defendant was granted twenty (20) days to reply. Defendants did not present any witness or 22 |fevidence and waived their right to present closing arguments at trial (Docket No. 36). Plaintiffs filed 23 brief regarding the interest calculation and the disallowance of the proof of claim on February 24 1/18, 2009 (Docket No. 38). Defendants filed their brief on March 2, 2009 (Docket No. 39). 25 Applicable Law and Analysis 26 of a Judicial Depository Under State Law 27 The fact that Mr. Héctor Morales Oliveras, president of Money’s People, was the judicial 28 |\depository of the vessel Angelymar is not disputed. The issue is whether he provided adequate

I maintenance and safekeeping to the vessel. The documents entitled, “Order of Garnishment in 2 Execution of Judgment” and “Writ of Garnishment in Execution of Judgment” issued by the Court 3 jlof First Instance of the Commonwealth of Puerto Rico, San Juan Part, on October 11, 2006, case 4 |#KAC2001-8502, specifically establish that Mr. Héctor C. Morales Oliveras is the judicial depository 5 respect to all necessary garnishment proceedings. Mr. Morales was acting as judicial depositary 6 he attached Plaintiffs-Debtors vessel to secure the effectiveness of the judgment that was 7 |lrendered by the Court of First Instance, San Juan Part, on September 24, 2004 and registered on 8 [October 28, 2004. 9 “A depositum contract can arise in various contexts.” Jewelers Mutual Insurance Company 10 N. Barquet, Inc., 410 F. 3d 2, 12 (1* Cir. 2005). “Further, a creditor can act as depositary when it 1] jjattaches a debtor’s property in order to secure the effectiveness of a judgment.” Jewelers Mutual 12 |{nsurance Company v. N. Barquet, Inc., 410 F. 3d at 12 referring to Rodriguez Soto v. Adorno, 4 P.R. 13 Trans. 901, 104 P.R. Dec. 640 (1976). 14 The judicial depositary contract is governed by Articles 1685-1689 of the Puerto Rico Civil 15 }Code, 31 P.R. Laws Ann. §§4711-4715. The standard of care a judicial depositary must exercise over 16 deposited (attached) item(s) is that of a “good father of a family.” See 31 P.R. Laws Ann. §4714, 17 3021. The “good father” standard of care established in section 3021 of the Fourth Book of Contracts 18 Obligations of the Puerto Rico Civil Code, “is a default standard when the parties have not 19 |jestablished some other standard, and it is not exclusive to depositum contracts, but is applied more 20 ||broadly to certain other areas of the law.” Jewelers Mutual Insurance Company v. N. Barquet, Inc., 21 3d at 14. “The Puerto Rico Supreme Court has interpreted the standard in a way that has made 22 quite similar to ordinary negligence. The question is whether the depositor exercised ‘the proper 23 |jdiligence, which generally should be that which ‘an average or normal type of diligent person’ would 24 ||have exerted” Id referring to Rodriguez Soto v. Adomo, 4 P.R. Offic. Trans. at 909. The Puerto Rico 25 Code in employing the concept of the “good father of a family” had the purpose of allowing the 26 to decide on a case by case basis the proper diligence which the average or normal type of 27 |Idiligent person should have taken. Sce Rodriguez Soto v. Adorno, 104 D.P.R. 640 referring to P.R. 28 American Ins. Co. V. Duran Manzanal, 92 D.P.R, 289 (1965) and American Sec. Ins, Co. v.

j |Ocasio, 102 D.P.R. 166 (1974). 2 In this case, an evidentiary hearing was held on January 15, 2009 in which an expert witness 3 |jand two (2) lay witnesses testified regarding the depreciation in value of the vessel which resulted 4 Defendants’ failure to provide maintenance and safekeeping to the vessel. 5 The only expert witness which testified during court proceedings was Mr. Joseph Barlia, a 6 marine surveyor, who surveyed (appraised) the vessel on February 28, 2005 and concluded that at that 7 [point in time the fair market value of such vessel would be approximately $550,000.00 and its 8 |replacement value would be approximately $675,000.00. Mr. Barlia testified that according to his 9 survey at the time the vessel, “is deemed to be a good fire and marine risk if recommendations are 10 complied with.” The mandatory recommendations consisted of replacing anchor lights and the sound 11 |idevice system. Mr. Barlia also testified that a vessel needs continuous maintenance in its different 12 ||systems (in particular its propulsion system, alternate current system, direct current system, hydraulic 13 |lsystem and navigation system) to remain in good operating condition. He also testified that the 14 [propulsion and generator systems need weekly maintenance to prevent the metals from getting 15 |jcorroded and damage to the engines. In addition, the oil, filters and hoses need to be changed and or 16 |lchecked, and the condition of the transmission also needs to be checked. Mr. Barlia further testified 17 ||that if such maintenance was not given it would cause the vessel to undoubtedly depreciate and it 18 cause the vessel not to be operational. Mr. Barlia testified that the cost of such maintenance 19 |idepended upon the vessel and the person who performed such services since it was cheaper if the 20 of the vessel provided such maintenance. If this was not the case, one would have to hire 21 somebody at approximately $50-$60 an hour to perform such services, plus the cost of replacement 22 |Iparts. , 23 Mr. Barlia was presented with a survey of the vessel performed by marine surveyor, Mr. 24 |\Carlos Suarez, on August 1, 2007. The survey contained a list of fifteen (15) recommendations which 25 |inceded to be done to the vessel in order for the same to be in functional conditions. Amongst the 26 |jrecommendations were the following: (i) “engine comp bilge access hatch doesn’t have air assisted 27 |\jcylinders installed, will not stay open; install cylinders, or lock;” (ii) “starboard engine raw water 28 hose has corroded stainless steel strap at hose;” (iii) “starboard engine stuffing box hose

] stainless steel strap present signs of corrosion;” (iv) “replace corroded fitting on hydraulic steering 2 |lhose at cylinder;” (v) “replace corroded nuts and bolts at port and start starboard rudder base;” (vi) 3 or replace bow thruster; start and test starboard engine;” and (vii) “port engine will not go 4 1900 RPM on neutral.” Mr. Barlia testified that if the systems of the vessel are as per the 5 ||conditions of this survey, then the vessel may not operate in a safely manner. The fair market value 6 jjas of the date of the survey was $280,000.00. Mr. Barlia upon comparison of the two surveys inferred 7 the vessel did not receive proper maintenance. He also stated that if you do not move any vessel 8 the slip, the systems get corroded, and stop operating; and thus, the value of the vessel may 9 ||\decrease significantly. Mr. Barlia was also presented with a comparable from the internet webpage 10 |boatshop which showed an internet advertisement dated July 27, 2007 of a Sealine T47 vessel with 11 same engine as the one in question whose asking price was $588,000.00. 12 Mr. Rudy de la Cruz was the second witness (first lay witness) to testify as to the conditions 13 the vessel Angelymar. Mr. de la Cruz testified that he was interested in buying a boat about 14 approximately a year and half ago (within the last 2 years) from the trial date (~July 2007~January 15 and that he went to see the vessel Angelymar, accompanied with a boat mechanic, and found 16 |jthe same in very poor condition. Mr. de la Cruz identified in court Mr. Héctor Morales as the person 17 gave him access to enter the vessel. Mr. de la Cruz testified that the upper deck of the vessel was 18 a “disastrous conditions,” the canopy was ripped and that nothing in the vessel was in operating 19 |icondition. He further testified that the battery was not charged, the electric generator was not working, 20 that initially the engine wouldn’t start, but that some FURA (special police force) officers that 21 nearby the docking facilities helped start the engine. Mr. de la Cruz testified that after consulting 22 the boat mechanic he offered $125,000.00 for the vessel since he would have to spend more than 23 {$100,000.00 to repair the vessel. Mr. de la Cruz testified that his best recollection of the asking price 24 the vessel was approximately $300,000.00. 25 The third witness (second lay witness) to testify was Plaintiff Grissel Vega Cardés. Mrs. 26 ||Cardés testified that the vessel Angelymar was garnished about two (2) years ago. She testified that 27 ther husband provided continuous maintenance to the vessel since he would hire people that were 28 in the marina to perform the work maintenance to the vessel. Mrs. Cardés also testified that the

] recommendations of the 2005 survey were followed. Plaintiff Cardés testified that after the vessel 2 garnished sometime after the year 2006, neither she or her husband had possession or access to 3 vessel. Mrs. Cardés also testified that she and her husband acquired the vessel Angelymar in a 4 |property exchange transaction and a photocopy of the invoice of the vessel was admitted as evidence 5 |during trial. This invoice (document #4) established that the sale price of the vessel on July 8, 2002 6 ilwas $740,000.00. 7 The Defendants did not present any witnesses nor any documentary evidence during trial and 8 |lwaived presentation of their closing argument(s) before the court. 9 After considering the evidence presented to the court, the court concludes that Defendants as 10 }judicial depositories had the responsibility to provide adequate maintenance and safekeeping to the 11 vessel, and that adequate maintenance and safekeeping were not provided to the vessel. This type of 12 Jomission (lack of proper maintenance and safekeeping) fails to satisfy the standard of care of the 13 “good father of a family” which is that of “an average or normal type of diligent person” which 14 Article 1688 of the Puerto Rico Civil Code, 31 P.R. Laws Ann. § 4714 imposes on the judicial 15 |\depositary. In the case at hand, Defendants as judicial depositories failed to provide maintenance and 16 jlsafekeeping to the vessel which led to the vessel’s significant deterioration and depreciation in value. 17 |For these reasons, the court awards Plaintiffs damages in the amount of $270,000.00. 18 19 |Unterest Calculation of State Judgment 20 During the trial the court granted Plaintiffs thirty (30) days to file a brief regarding the 21 |lcalculation of interest and Defendant was granted twenty (20) days to reply to the same. The state 22 |udgment for breach of contract was rendered on September 24, 2004 and the total amount owed per 23 [judgment was $272,459.38 of which $52,912.62 was allocated as principal and $219,546.76 was 24 |lallocated as interest. Both Plaintiffs and Defendants agree in their legal briefs that Rule 44.3(a) of the 25 of Civil Procedure, 32 L.P.R.A. App. I R. 44.3(a) regarding legal interest applies for the 26 |\calculation of interest accrued from the date of judgment (September 24, 2004) until the date on 27 Plaintiffs filed for bankruptcy (May 9, 2007). Thus, the applicable interest rate to be applied 28 ||to the amount owed ($272,459.38) is six (6)% annual interest to be computed from September 24,

{ until May 9, 2007. Plaintiffs’ calculation resulted in $42,912.35 of interest. Defendants’ interest 2 calculation resulted in $42,957.55. The court’s independent interest calculation of two (2) years and 3 days yields the amount of $42,861.96. Thus, the total claim for Money’s People amounts to 4 $265,321.34 ($272,459.38 per judgment plus $42,861.96 of interest minus $50,000.00 of cash that 5 garnished by Defendants). 6 The other issue raised by Plaintiffs was that Defendants as judicial depositories had the 7 responsibility to make the monthly payments to Scotiabank for the first preferred ship mortgage 8 securing a promissory note that was executed between Plaintiffs and Scotiabank. However, Plaintiffs 9 |jin their brief failed to provide the legal explanation supporting their allegation that a judicial 10 |Idepository is responsible for the payments of a promissory note that was entered into between 1] |Plaintiffs and Scotiabank. Moreover, no evidence was presented during trial on this issue. Therefore, 12 ||Plaintiffs waived their argument that a judicial depository is responsible for making the monthly 13 ||payments of a promissory note entered into between Plaintiffs and Scotiabank which was secured by 14 |Ithe vessel Angelymar. 15 Conclusion 16 The court holds that Defendants, as judicial depositories, failed to provide adequate 17 maintenance and safekeeping to the vessel Angelymar which led to the vessel’s significant 18 deterioration and depreciation in value. For the reasons herein stated the court awards Plaintiffs 19 damages in the amount of $270,000.00. The court also holds that the interest from the date the state 20 |judgment was rendered (September 24, 2004) until the date of the filing of Plaintiffs’ bankruptcy 21 ||(May 9, 2007) amounts to $42,861.96. 22 23 Judgment will be entered accordingly. 24 SO ORDERED. 25 In San Juan, Puerto Rico, this □□□ ry of June 2009

ENRAQUE'S. LAMOUTTE 28 U.'S. Bankrupicy Judge 10