IN THE UNITED STATES BANKRUPTCY COURT 1 FOR THE DISTRICT OF PUERTO RICO
2 IN RE: CASE NO. 13-04867 (ESL) 3 BUILDERS GROUP & 4 DEVELOPMENT CORP. CHAPTER 7 Debtor 5 NOREEN WISCOVITCH RENTAS, ADV. PROC. NO. 15-00002 (ESL) 6 CHAPTER 7 TRUSTEE Plaintiff/Trustee 7 vs. 8 JORGE RIOS PULPEIRO 9 Defendant 10
11 OPINION AND ORDER 12 13 This adversary proceeding is before the court upon the Motion for Summary Judgment 14 (Docket Nos. 34 and 35) filed by the Chapter 7 Trustee (hereinafter referred to as “Trustee” or 15 “Plaintiff”) and the Opposition to Motion for Summary Judgment (Docket No. 39) filed by Jorge 16 Rios Pulpeiro (hereinafter referred to as “Mr. Rios” or “Defendant”). The Trustee requests that 17 the court find that Mr. Rios is personally liable to the estate and that he be ordered to turn over 18 $2,100,359.32 pursuant to 11 U.S.C. §542. The Defendant disputes several of the material facts 19 asserted by the Trustee and argues that the debts that the Trustee seeks to recover do not exist 20 and/or are unrecoverable under applicable law. In addition, Mr. Rios sustains that he is not 21 personally liable to the estate. 22 For the reasons stated below, the Trustee’s Motion for Summary Judgment is denied. 23 24 25 26 27 1 Jurisdiction 2 The Court has jurisdiction pursuant to 28 U.S.C. §§157(a) and 1334(b). Venue of this 3 proceeding is proper under 28 U.S.C. §§1408 and 1409. The nature of this proceeding pursuant to 4 28 U.S.C. §157(b)(1) and (b)(2)(E) will be further discussed below. 5 6 Facts and Procedural Background 7 The Debtor filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code on June 8 12, 2013 (lead case, No. 13-048671). The procedural background of the lead case is lengthy and 9 complex. Thus, the court will only reference dockets and events related to this adversary 10 proceeding. The petition contains Mr. Rios’ signature in his capacity as President of the Debtor 11 (lead case, Docket No. 1, p. 3). In addition, the Statement of Financial Affairs indicates that Mr. 12 Rios owned 100% of the Debtor’s stock (lead case, Docket No. 16, p. 11). The Debtor included 13 in Schedule B (Personal Property) $1,374,856.51 as due from affiliated companies (lead case, 14 Docket No.15, p. 14). The amounts are itemized as follows: (i) $111,487.36 due from Affordable 15 Housing Li; (ii) $995,060.89 due from 1959 Building Center; (iii) $221, 293.26 due from Goddess 16 Yacth; (iv) 46,000.00 due from Ocean Walk; and (v) $615.00 due from El Senorial Assistance 17 Living (lead case, Docket No. 15, Schedule B, Exhibit D, p. 18). 18 After several procedural events and motions, on January 10, 2014, the court granted a 19 request by two of the Debtor’s creditors to convert the case to Chapter 7. (lead case, Docket No. 20 197, Minute Entry and Docket No. 199, Audio File). On January 27, 2014, the Order converting 21 the case to Chapter 7 was entered (lead case, Docket No. 202). On January 28, 2014, a Notice was 22 entered appointing Noreen Wiscovitch Rentas as the Chapter 7 Trustee and scheduling the 341(a) 23 meeting for March 6, 2014 (lead case, Docket No. 203). 24 Subsequently, on January 7, 2015, the Trustee filed three adversary proceedings: 25 Adversary Proceeding Case Nos: 15-00001; 15-00002 and 15-000032. The Complaint (Docket
26 1 References to the lead case are to the entries and documents filed in the bankruptcy case, case number 13-04867 27 (ESL). 2 Adversary Proceeding 15-00001 was filed by the Trustee against Affordable Housing Living, Inc., and was closed 1 No.1) in this adversary proceeding contains seven causes of action against Mr. Rios: (1) recovery 2 of money in the amount of $2,100,358.32, and/or (2) fraudulent transfer pursuant to 11 U.S.C. 3 §§544, 547 and 548; (3) preferential transfer pursuant to 11 U.S.C. §547; (4) avoidance of 4 additional transfers pursuant to 11 U.S.C. §548; (5) rescission of transfers made in fraud of 5 creditors pursuant to 11 U.S.C. §544(b) and Art. 1243(3) of the Civil Code of Puerto Rico; (6) 6 Request for Declaration of Nullification of Contracts pursuant to Articles 1227 and 1228 of the 7 Civil Code of Puerto Rico; and/or (7) Personal Liability of the Defendant (Docket No. 1). On 8 January 14, 2015, an Order and Notice was entered setting a preliminary pre-trial conference on 9 May, 29, 2015 (Docket No. 6). On February 11, 2015, the Defendant, pro se, filed a Motion to 10 Extend Time to Answer Complaint (Docket No. 8) requesting an extension of thirty (30) days to 11 file a response to the Complaint and the same was granted on February 13, 2015 (Docket No. 9). 12 On March 17, 2015, Mr. Rios, pro se, filed his Answer to the Complaint denying several of the 13 allegations made by the Trustee and including several affirmative defenses (Docket No. 12). 14 On May 22, 2015, the parties filed a Joint Motion for Continuance of Hearing (Docket 15 No.13) requesting that the preliminary pre-trial be continued until the Defendant retained legal 16 representation. On May 26, 2015, the Court entered an Order granting the Joint Motion for 17 Continuance of Hearing and re-scheduling the hearing to September 18, 2015 (Docket No. 14). 18 Subsequently, the court entered an Order re-scheduling the hearing to November 6, 2015 (Docket 19 No. 16). On November 5, 2015, the parties filed a Joint Motion for Leave to Waive Compliance 20 with Order Entered on Dkt. No. 16 and Motion to Inform (Docket No. 18) requesting that they be 21 excused from filing a pre-trial report. On November 6, 2015, the court held a preliminary pre-trial 22 hearing and granted the parties two hundred and ten (210) days to conclude discovery and two 23 hundred and forty (240) days to file dispositive motions3 (Docket No. 19, Minute Entry and 24 Docket No. 20, Audio File). 25 00001). Likewise, Adversary Proceeding 15-00003 was filed by the Trustee against 1959 Building Center, Inc., and 26 was closed after Judgment by Default was entered against the defendant on April 7, 2017 (Docket No. 32 of Case No. 15-00003). 27 3 In addition, an attorney made an appearance on behalf of the Defendant. Thereafter, on November 20 2015, the attorney filed a Notice of Appearance (Docket No. 22). Subsequently, on August 17, 2016, the attorney filed a Motion 1 The court held a Status Conference on January 27, 2017 and granted the parties thirty (30) 2 days to file dispositive motions and fourteen (14) days to reply (Docket No. 28, Minute Entry and 3 Docket No. 30, Audio File)4. On February 27, 2017, the Trustee filed a Motion for Extension of 4 Time (Docket No. 31) requesting an extension of ten (10) days to file a motion for summary 5 judgment which was granted on March 1, 2017 (Docket No. 32). 6 On March 10, 2017, the Trustee filed the Chapter 7 Trustee’s Statement of Uncontested 7 Facts in Support of Motion for Summary Judgment (Docket No. 34) and Motion for Summary 8 Judgment (Docket No. 35). The Trustee sustains that the Defendant owes the Debtor the total 9 amount of $2,100,359.32, excluding interest and other charges. She declares that the CPA retained 10 by the Trustee in the legal case5, Mr. Albert Tamárez-Vazquez, CPA, CIRA, reviewed the 11 Debtor’s financial documents and “concluded that the Defendant, through several corporation 12 [sic] indirectly or directly controlled by him, received several sizable monetary transfers from the 13 Debtors in the years preceding Debtor’s filing of the voluntary petition. (Docket No. 35, pp.2-3, 14 ¶9). The Trustee segregates the amounts allegedly owed as follows6: 15 16 a. “Within one year preceding the Petition Date, Defendant, doing business as Goddess 17 Yatch, received the amount of $218,793.26 from the Debtor. 18 b. Within one year preceding the Petition Date, Defendant, doing business as Ocean 19 Walk, received the amount of $46,400.00 from the Debtor. 20 c. As a director, officer and/or shareholder of the Debtor and of the corporate affiliate 21 entity “1959 Building Center, Inc.”, Defendant received the amount of $999,249.53 22 from the Debtor in the years preceding the voluntary petition excluding interest and 23 other charges. 24 25 August 24, 2016 (Docket No. 24). However, it appears from the record that the Defendant later re-hired the attorney. 26 See Docket Nos. 36, 37and 39. 4 The court notes that no one appeared on behalf of the Defendant. 27 5 See lead case, Docket Nos. 201 and 212. 6 Attached to the Trustee’s Motion for Summary Judgment is a Declaration by Mr. Tamarez declaring under penalty 1 d. As a director, officer and/or shareholder of the Debtor and of the corporate affiliate 2 entity “Affordable Housing Living, Inc.”, Defendant received the amount of 3 $111,487.36 from the Debtor in the years preceding the voluntary petition, excluding 4 interests and other charges. 5 e. As a director, officer and/or shareholder of the Debtor and of the corporate affiliate 6 entity “Playa Bahia, Inc.”, Defendant received the amount of $729,429.17 from the 7 Debtor in the years preceding the voluntary petition, excluding interest and other 8 charges.” 9 10 Moreover, the Trustee sustains that the amounts owed are reflected in the Debtor’s general 11 ledgers. See Exhibits C, F, H, J and L of Docket No. 34. The Trustee argues that the “Debtor 12 received no consideration in return for any of the referenced amounts, nor did the affiliates ever 13 establish any method or plan or repayment to return the owed amounts to Debtor.” (Docket No. 14 35, pp-10-11, ¶48). Accordingly, she concludes that under Puerto Rico Law, specifically, Articles 15 1227, 1228 and 1255 of the Civil Code of Puerto Rico, that the “Defendant shall restore to the 16 Debtor all the referenced amounts with interest.” (Docket No. 35, p. 11, ¶48). In addition, she 17 alleges that “pre-petition amounts of accounts receivable [sic] of the Debtor are property of the 18 estate which shall be delivered to the Trustee.” (Docket No. 35, p. 11, ¶51). 19 With regards to the Defendant’s personal liability, the Trustee sustains that Mr. Rios “as 20 the sole stockholder, President, owner and officer in control of the Debtor, perpetrated a scheme 21 to operate (a) 1959 Building Center, Inc., (b) Affordable Housing Living Inc., and (c) Playa Bahia 22 Inc., using and withholding funds that were property Debtor’s estate, without any consideration 23 in return for Debtor.” (Docket No. 35, pp.13-14, ¶64). Based on the foregoing, the Plaintiff 24 requests an order finding that the Defendants owes the Debtor the amounts of: “(a) $994,249.53 25 owed from 1959 Building Center, Inc., (b) $111, 487.36 owed from Affordable Housing Living 26 Inc., and (c) $729,429.17 owed from Playa Bahia Inc., plus interest of four percent (4%) per 27 annum over such amounts.” (Docket No. 35, p. 15, ¶74). Furthermore, Plaintiff requests that 1 Defendant be found personally liable for the amounts of: “(a) $218, 793.26 owed by himself doing 2 business as Goddess Yatch and (b) $46,400.00 owed by himself doing business as Ocean Walk, 3 plus interest of four percent (4%) per annum over such amounts.” (Docket No. 35, p. 16, ¶75). 4 On March 24, 2017, the Defendant filed a Notice of Appearance (Docket No. 36) 5 requesting a seven (7) day extension of time to file answer to Trustee’s Motion for Summary 6 Judgment which was granted on March 27, 2017 (Docket No. 37). On March 31, 2017, the 7 Defendant filed his Opposition to Motion for Summary Judgment (Docket No. 39). In his 8 Opposition, Mr. Rios contests several of the Trustee’s facts and sustains that he is not personally 9 liable for any of the amounts allegedly owed by the several corporations/entities. Moreover, the 10 Defendant argues that “Debtor was a developer and its main business was to purchase properties 11 to develop, which it later sold or operated for income. All of the above transactions are legal, 12 valid and consideration is present in each.” (Docket No. 39, p. 9). As to Mr. Rios’ personal 13 liability, he declares that “these transactions were all legal and valid transactions made with 14 consideration at the time were for the benefit of the Debtor.” (Docket No. 39, p. 11). In addition, 15 the Defendant sustains that he “should not be held personally liable for the result of a nationwide 16 if not global market downturn of which he had no control and consequently lost most if not all of 17 his assets.” (Docket No. 39, p. 11). 18 Applicable Law and Analysis 19 20 (A) Standard for Motion for Summary Judgment 21 Rule 56 of the Federal Rules of Civil Procedure, is applicable to this proceeding by Rule 22 7056 of the Federal Rules of Bankruptcy Procedure. Summary judgment should be entered “if the 23 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 24 affidavits, if any, show that there is no genuine issue as to any material fact and that the moving 25 party is entitled to a judgment as a matter of law.” Fed. R. Bankr. P. 7056; see also, In re 26 Colarusso, 382 F.3d 51 (1st Cir. 2004), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 27 (1986). “The summary-judgment procedure authorized by Rule 56 is a method for promptly disposing 1 of actions in which there is no genuine issue as to any material fact or in which only a question of 2 3 law is involved.” Wright, Miller & Kane, Federal Practice and Procedure, 3d, Vol 10A, § 2712 at 4 198. “Rule 56 provides the means by which a party may pierce the allegations in the pleadings 5 and obtain relief by introducing outside evidence showing that there are no fact issues that need to 6 be tried.” Id. at 202-203. Summary judgment is not a substitute for a trial of disputed facts; the 7 court may only determine whether there are issues to be tried, and it is improper if the existence 8 of a material fact is uncertain. Id. at 205-206. 9 10 Summary judgment is warranted where, after adequate time for discovery and upon 11 motion, a party fails to make a showing sufficient to establish the existence of an element essential 12 to its case and upon which it carries the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 13 317, 322 (1986). The moving party must “show that there is no genuine issue as to any material 14 fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). 15 For there to be a “genuine” issue, facts which are supported by substantial evidence must 16 be in dispute, thereby requiring deference to the finder of fact. Furthermore, the disputed facts 17 18 must be “material” or determinative of the outcome of the litigation. Hahn v. Sargent, 523 F.2d 19 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904 (1976). When considering a petition for 20 summary judgment, the court must view the evidence in the light most favorable to the nonmoving 21 party. Poller v. Columbia Broadcasting Systems, Inc., 368 U.S. 464, 473 (1962); Daury v. Smith, 22 842 F.2d 9, 11 (1st Cir. 1988). 23 The moving party invariably bears both the initial as well as the ultimate burden in 24 demonstrating its legal entitlement to summary judgment. Adickes v. Kress & Co., 398 U.S. 144, 25 26 157 (1970). See also López v. Corporación Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st 27 Cir. 1991). It is essential that the moving party explain its reasons for concluding that the record does not contain any genuine issue of material fact in addition to making a showing of support for 1 those claims for which it bears the burden of trial. Bias v. Advantage International, Inc., 905 F.2d 2 3 1558, 1560-61 (D.C. Cir. 1990), cert. denied, 498 U.S. 958 (1990). 4 The moving party cannot prevail if any essential element of its claim or defense requires 5 trial. López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that there 6 is an absence of evidence supporting the nonmoving party’s case. Celotex, 477 U.S. at 325. See 7 also Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir. 1991); Daury, 842 F.2d at 11. In its opposition, 8 the nonmoving party must show genuine issues of material facts precluding summary judgment; 9 10 the existence of some factual dispute does not defeat summary judgment. Kennedy v. Josepthal 11 & Co., Inc., 814 F.2d 798, 804 (1st Cir. 1987). See also, Kauffman v. Puerto Rico Telephone Co., 12 841 F.2d 1169, 1172 (1st Cir. 1988); Hahn, 523 F.2d at 464. A party may not rely upon bare 13 allegations to create a factual dispute but is required to point to specific facts contained in 14 affidavits, depositions and other supporting documents which, if established at trial, could lead to 15 a finding for the nonmoving party. Over the Road Drivers, Inc. v. Transport Insurance Co., 637 16 F.2d 816, 818 (1st Cir. 1980). 17 18 The moving party has the burden to establish that it is entitled to summary judgment; no 19 defense is required where an insufficient showing is made. López, 938 F.2d at 1517. The 20 nonmoving party need only oppose a summary judgment motion once the moving party has met 21 its burden. Adickes, 398 U.S. at 159. 22 The controversy currently before the court is two-fold: (1) has the Trustee met her burden 23 pursuant to Section 542(a); and (2) can Mr. Rios be held personally liable for the debts owed by 24 the entities/corporations to the estate. 25 26 27 (B) Action for Turnover of Property of the Estate Pursuant to Section 542(a) 1 Section 542(a) provides7: 2 3 (a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that 4 the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account 5 for, such property or the value of such property, unless such property is of 6 inconsequential value or benefit to the estate. 7 11 U.S.C. § 542.
8 “The purpose of section 542 of the Bankruptcy Code is “to expand the trustee’s power to ‘bring 9 into the estate property in which the debtor did not have a possessory interest at the time the 10 11 bankruptcy proceedings commenced’, ensuring that a broad range of property is included in the 12 estate to promote the congressional goal of encouraging reorganizations.” Alan N. Resnick & 13 Henry J. Sommer, 5 Collier on Bankruptcy ¶542.01(16th ed. 2015). Thus, “[t]o support a cause of 14 action for turnover, the trustee has the burden of proof, by a preponderance of the evidence, to 15 establish that: (1)the property is in the possession, custody or control of a noncustodial third party; 16 (2) the property constitutes property of the estate; (3) the property is of the type that the trustee 17 18 could use, sell or lease pursuant to section 363 or that the debtor could exempt under section 522, 19 and (4) that the property is not of inconsequential value or benefit to the estate.” Alan N. 20 Resnick & Henry J. Sommer, 5 Collier on Bankruptcy ¶542.03 and 542.03[1] (16th ed. 2015). 21 Although Section 542(a) does not define the property subject to turnover, “the term is generally 22 23 7 The Trustee’s Motion for Summary Judgment (Docket No. 35) only makes reference to Section 542(a) and does not 24 cite Section 542(b) which provides: 25 “(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such 26 debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.” 27 11 U.S.C. § 542(b). understood to mean “property of the estate”, as defined in Section 5418.” Alan N. Resnick & Henry 1 J. Sommer, 5 Collier on Bankruptcy ¶542.03[2] (16th ed. 2015). 2 3 In the instant case, the Trustee is seeking that the Defendant be ordered to turnover the 4 total amount of $2,100,359.32 allegedly owed by the related entities/corporations. As to the 5 amounts be owed by Affordable Housing Living, Inc., the court notes that a judgment by default 6 was entered in Adv. No. 15-00001 awarding the Trustee the amount of $111,487.40, plus 7 prejudgment interest at the prevailing rate of 4% (Docket No. 43 of Adv. No. 15-00001). Likewise, 8 as to 1959 Building Center, Inc., judgment by default was entered in Ad. No. 15-00003 awarding 9 10 the Trustee $351,639.59, plus prejudgment interest at the prevailing rate of 4% and post judgment 11 interest at the legal rate of 6%, plus charges (Docket No. 32 of Adv. No. 15-00003). Both 12 judgments are final. Nevertheless, although the default judgments are final, they were entered 13 against Affordable Housing Living, Inc.9 and 1959 Building Center, Inc., not against Mr. Rios in 14 his personal capacity. 15 However, no judgment has been issued as to the amounts allegedly owed by Goddess Yatch 16 Inc.,10; Ocean Walk; and Playa Bahía Inc. Therefore, as to these amounts, the court would have to 17 18 find that they are owed and then proceed to determine whether the Defendant can be held 19 personally liable. The only evidence submitted by the Trustee are the amounts as reflected in the 20 Debtor’s general ledgers. In addition, the Trustee makes reference to Articles 1227, 1228 and 1255 21
22 8 Pursuant to Section 541(a) the “estate is comprised of all the following property, wherever located and by whomever held: 23 “(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.” 24 11 U.S.C. § 541. 25 9 The default judgment was also entered against defendant La Trinidad Elderly L.P.S.E. (Docket No. 43 of Ad. No. 26 15-00001). 10 The Trustee sustains that “as of the Petition Date, Defendant was doing business as Goddess Yatch…” (Docket No. 27 34, p. 7, ¶28). However, Mr. Rios declares that “Goddess Yatch, Inc. was a duly incorporated corporation in the State of Delaware…” See Docket No. 39, p. 1, ¶3(a) and Certificate of Incorporation attached to Docket No. 39-5. The of the Civil Code of Puerto Rico and sustains that “Debtor received no consideration in return for 1 any of the referenced amounts, nor did the affiliate corporations ever establish any method or plan 2 3 of repayment to return the owed amounts to Debtor.” (Docket No. 35, pp.10-11, ¶48). Accordingly, 4 she declares that “under Puerto Rico law, the Defendant shall restore to the Debtor all the 5 referenced amounts, with interest.” Id. Mr. Rios submits that all the transactions were “legal, valid, 6 and consideration is present in each.” (Docket No. 39, p.9). In addition, he provides an explanation 7 for each of the transactions. See Docket No. 39, pp.9-10. For example, he describes the transaction 8 between the Debtor and Goddess Yatch as “a purchase of stock and an investment for Debtor in 9 10 exchange for a loan for a capitalization of Goddess.” Id. Likewise, he declares that the amounts 11 attributed to Ocean Walk “represents costs incurred in drawings and blueprints for a project under 12 his name. Where Debtor investment in these documents to later develop the property and profit 13 from its sale and/or operation.” Id. As to the amounts attributed to Playa Bahia, Inc., the Defendant 14 submits that “[t]his amount represents a loan granted by Oriental (then Eurobank) in 2008 (five 15 years before the petition) which was granted to Debtor acting as the developer to satisfy a credit 16 line for the acquisition by Playa Bahia, Inc. of a parcel of land with the intention of developing a 17 18 real estate project.” (Docket No. 39, p. 8). Mr. Rios sustains that “Debtor’s bankruptcy advisor 19 instructed to record the entry to recognize the unpaid amount of the aforementioned loan.” Id. 20 Based on this record, this court cannot conclude that these amounts are owed. As this court 21 has previously stated, “[i]t is important to note that an account receivable action such as this one 22 cannot be considered a turnover of property of the estate action as long as there is some doubt as 23 to the defendant's liability.” In re Mec Steel Bldgs., Inc., 136 B.R. 606, 610 (Bankr. D.P.R. 1992). 24
25 26 27 (C) Piercing the Corporate Veil 1 Nevertheless, even if the court assumes that all the amounts are owed by the different 2 3 corporations, to succeed in the instant adversary proceeding the Trustee has to prove that the 4 Defendant is personally liable for said amounts. The Trustee filed the instant adversary proceeding 5 against Mr. Rios, not against Goddess Yatchs, Inc., or Playa Bahia Inc. Likewise, the default 6 judgments already entered are against 1959 Building Center, Inc., and Affordable Housing Living, 7 Inc., not against Mr. Rios. Thus, the adversary proceeding hinges on whether Mr. Rios is 8 personally liable. 9 10 The imposition of personal liability is governed by state law. In re Aoki, 323 B.R. 803, 811 11 (B.A.P. 1st Cir. 2005) (“The existence and legal characteristics of a corporation are governed by 12 state law.”). “Under Puerto Rico law, corporations are presumed to be legal entities separate from 13 their officers, directors, and shareholders.” Nieto-Vincenty v. Valledor, 22 F. Supp. 3d 153, 162 14 (D.P.R. 2014) (citations omitted). The Supreme Court of Puerto Rico has declared that courts may 15 hold stockholders liable for the debts of corporations when: 16 17 “[T]he corporation is the mere “alter ego” or business conduit of its only 18 stockholders, with the benefits produced by the corporate business accruing exclusively and personally to them, . . . if it is necessary to prevent fraud or the 19 accomplishment of an illicit purpose, or to prevent an injustice or a wrong.” 20 D.A.Co. v. Alturas Fl. Dev. Corp. y otro, 1993 WL 840226 (P.R. Mar. 9, 1993), quoting Cruz v. 21 Ramírez, 75 D.P.R. 947, 954 (1954). “[A] corporation is the alter ego or business conduit of its 22 stockholders when there is such unity of interest and ownership that the personalities of the 23 corporation and the stockholders--whether natural or artificial persons--are intermingled and, as a 24 result, the corporation actually is not a separate and independent entity.” Id. However, 25 “[a]pplication of this principle shall depend on the specific facts and circumstances of each case, 26 27 in the light of the evidence presented.” Id. The party seeking to pierce the corporate veil bears the burden of proof and must prove “that there is no adequate separation between the corporation and 1 the stockholder, and that the facts are such that acknowledging said legal personality would be 2 3 tantamount to “sanctioning fraud, promoting injustice, evading a legal obligation, defeating public 4 policy, justifying inequity, protecting fraud, or defending crime.” Id. (citations omitted). The 5 burden “is not met by simply alleging that the corporation is an alter ego of a person, but with 6 concrete evidence that there was no adequate separation between the personalities of the 7 corporation and the stockholders.” Id. Lastly, the evidence presented by the party seeking to pierce 8 the corporate veil must be “strong and robust.” Gonzalez v. San Just Corp., No. R-71-177, 1973 9 10 WL 35683, at *2 (P.R. Feb. 5, 1973); Situ v. O'Neill, 124 F. Supp. 3d 34, 50 (D.P.R. 2015), 11 reconsideration denied, 2015 WL 5671162 (D.P.R. Sept. 25, 2015) (“The party seeking to pierce 12 the corporate veil has the burden of producing “strong and robust evidence” that the corporate 13 form should be disregarded.”) (citations omitted). 14 The Trustee has failed to submit any evidence, much less “strong and robust” evidence of 15 the kind required for this court to find that facts and circumstances of this case warrant the piercing 16 of the corporate veil. The Plaintiff’s Motion for Summary Judgment simply alleges that Mr. Rios 17 18 was the officer in charge of the corporations or that the he was/remains the director, incorporator 19 and/or sole shareholder. Accordingly, the court finds that the Trustee has failed to meet her burden 20 and the Trustee’s request for summary judgment is denied. Harley-Davidson Credit Corp. v. 21 Galvin, 807 F.3d 407, 411 (1st Cir. 2015) (“When the movant bears the burden of proof at trial, he 22 must demonstrate every element of his case such that “no reasonable trier of fact could find other 23 than for [him].”) (quoting Lopez v. Corporación Azucarera de P.R., 938 F.2d 1510, 1516 (1st 24 25 Cir.1991)). 26 (C) Jurisdiction 27 universally accepted that federal courts have the power to determine their own jurisdiction. This 1 is true, also, of the ability of bankruptcy courts to determine their authority to finally determine 2 3 proceedings.” Alan N. Resnick & Henry J. Sommer, 1 Collier on Bankruptcy ¶3.02[6][a](16th ed. 4 2015). 5 The court notes that it has previously held that “[a]ctions initiated in the bankruptcy court 6 7 to collect pre-petition account receivables are clearly non-core matters and should not be 8 considered as matters affecting the administration of the estate or actions for the turnover of 9 property of the estate in order to categorize them as core.” In re Mec Steel Bldgs., Inc., 136 B.R. 10 at 609. In addition, this court declared that “[t]urnover proceedings are core matters when their 11 purpose is to collect a debt rather than create it, recognize it or liquidate it.” Id. at 610. 12 Furthermore, following the decision of the Supreme Court of the United States in Stern v. 13 Marshall, 564 U.S. 462, 131 S. Ct. 2594,180 L. Ed. 2d 475 (2011), this court declared: 14 15 “Turnover disputes are core proceedings pursuant to Section 157(b)(2)(E) of the 16 Code of Judiciary and Judicial Procedure, 28 U.S.C. § 157(b)(2)(E). Still, as previously discussed, that is not enough for this court to be able to issue a final 17 determination on the controversy: “the question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance 18 process.” Stern v. Marshall, supra, 131 S.Ct. at 2618.” 19 In re Garcia, 471 B.R. 324, 330 (Bankr. D.P.R. 2012). This is so because “following Stern, the 20 relevant determination no longer is whether a proceeding is core or related, but whether the 21 proceeding, be it core or related, can be finally determined by the bankruptcy court.” Alan N. 22 23 Resnick & Henry J. Sommer, 1 Collier on Bankruptcy ¶3.02[6][a] (16th ed. 2015). As stated above, 24 this proceeding hinges on piercing the corporate veil, a state law claim. See In re Tolomeo, 537 25 B.R. 869, 872–73 (Bankr. N.D. Ill. 2015), adopted sub nom. In re: Tolomeo, No. 15 C 8118, 2015 26 WL 8741730 (N.D. Ill. Dec. 15, 2015) (“Although turnover orders are statutorily defined as core 27 matters under 28 U.S.C. § 157(b)(2)(E), the Plaintiffs' turnover action in this case is predicated upon alter ego and veil-piercing theories of liability under Illinois law. Under Stern, alter ego an
2 || veil-piercing are not issues that “stem[ ] from the bankruptcy itself or would necessarily b 3 || resolved in the claims allowance process.” Stern, 131 S.Ct. at 2618.) 4 Accordingly, the court hereby orders the parties to submit within thirty (30) days thei 5 positions as to whether this matter is a core-or non-core matter and/or whether the court can issu 6 a final determination in this adversary proceeding". See 28 U.S.C. $157. 4 Conclusion 8 9 For the reasons stated herein, the court finds that the Trustee has failed to meet the 10 requirements of Section 542(a). In addition, there are material facts in controversy. Moreover, 11 |/even assuming that all the amounts requested by the Trustee are owed, she has failed to submit 12 “strong and robust” evidence of the kind required to pierce the corporate veil. Therefore, the 3 Trustee’s Motion for Summary Judgment (Docket Nos. 34 and 35) is hereby denied. 14 Furthermore, the court hereby orders the parties to submit within thirty (30) days their 15 16 positions as to whether this matter is a core-or non-core matter and/or whether the court can issue
7 final determination in this adversary proceeding. 18 SO ORDERED. 19 In San Juan, Puerto Rico, this 15" day of December, 2017. 20 21 22 ip ique S. Lamoutte United States Bankruptcy Judge 23 24 25 26 27 ‘| The court notes that in the Complaint the Trustee alleged that “[t]his is a core proceeding as defined by 28 U.S.C] §157(b)(2)(E) and (F).” See Docket No.1, p. 4, 94. Mr. Rios stated in response in his Answer to the Complaint as t paragraph four “[t]his statement does not require an answer. If it did, it is denied.” See Docket No. 12, p.1, □□□ -15-