In re: Eliseo Morales Garcia; Maribel Mena Melendez v. Noreen Wiscovitch Rentas, Chapter 7 Trustee; Nelson L. Marchand Serrano et al.

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: January 13, 2017
• Docket: 15-00052
• Status: Unknown

Opinion

IN THE UNITED STATES BANKRUPTCY COURT | FOR THE DISTRICT OF PUERTO RICO 2 IN RE: CASE NO. 04-12461 (ESL) 3 ELISEO MORALES GARCIA; MARIBEL CHAPTER 7 4 || MENA MELENDEZ 5 Debtor 6 || NOREEN WISCOVITCH ~~ RENTAS, ADV. PROC. NO. 15-00052 (ESL) CHAPTER 7 TRUSTEE 7 Plaintiff/Trustee 9 VS. 10 || NELSON L. MARCHAND SERRANO ET. AL. 11 Defendants 12 13 OPINION AND ORDER 14 15 This case is before the court upon the Motion for Reconsideration of Order Denying 16 || Motion to Dismiss and for Additional Findings of Facts and Conclusions of Law (the “Motion 17 || for Reconsideration’) filed by the co-defendants, Francisco J. Amundaray-Rodriguez, Esq. and 18 || Maria E. Villares- Sefieriz Esq., (hereinafter referred to as the Defendants”) on May 16, 2016 19 || (Docket No. 57). Defendants allege that the court should reconsider its Opinion and Order 20 entered on May 2, 2016 (Docket No. 55) and this adversary proceeding should be dismissed 21 primarily due to the following: (i) the issue of the alleged violation of the automatic stay is 22 already pending adjudication by the probate court; (ii) this adversary proceeding is trying to 23 ||resolve the same legal issues as Adversary Proceeding 10-00170 in which the Bankruptcy 24 || Appellate Panel determined that this court lacked jurisdiction; and (iii) the court should have 25 ||made additional finds of fact and conclusions of law in particular, that the purchase of 26 || hereditary shares agreements and promissory notes are executory contracts, and since the 27

1 ||Chapter 7 Trustee (the “Trustee”) failed to assume these executory contracts the same are 2 || deemed rejected. The Trustee in her Opposition to Motion for Reconsideration (Docket No. 65) 3 || argues that: (1) the Defendants’ arguments brought forth in their motion for reconsideration 4 || were not raised in the Motion to Dismiss; (11) the Trustee did not request the probate court in its 5 || Motion in Opposition to Motion for Summary Judgment to rule on the validity and/ or extent of 6 || the automatic stay; and (iii) the argument that the sales contracts are executory in nature is being 7 ||raised for the first time in the motion for reconsideration. These sales contracts are not 8 ||executory in nature pursuant to section 365 because the contractual obligations of the parties 9 || were fulfilled in their entirety. 10 For the reasons stated below the Motion for Reconsideration is hereby denied. 11 Jurisdiction 12 The court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core 13 || proceeding pursuant to 28 U.S.C. $157(b)(1) and (b)(2)(A). Venue of this proceeding is proper 14 |) under 28 U.S.C. §§ 1408 and 1409. 15 Procedural Background 16 The procedural background leading to the Opinion and Order is detailed in the same. 17 ||See Wiscovitch Rentas v. Marchand Serrano et al. Un re Morales Garcia), 553 B.R. 1, 3-8 18 || (Bankr. D.P.R. 2016). 19 || Position of the Parties 20 Defendants request for reconsideration is based upon the following: (1) the issue of the 21 || alleged violation of the automatic stay is already being considered by the probate court in case 22 No. DAC1999-1252 (505); (i) this adversary proceeding is trying to resolve the same issues as 23 || adversary proceeding 10-00170 in which the Bankruptcy Appellate Panel determined that the 24 || court lacked subject matter jurisdiction; (ili) the court should have made additional findings of 25 ||fact and conclusions of law in particular, that the promissory notes (which resulted from the 26 || public deeds titled, “Sale of Hereditary Right, Cession of Rights and Shares”) that were 27

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1 executed were all executory contracts and that the Chapter 7 Trustee failed to assume these 2 || contracts within 60 days after the order of relief pursuant to 11 U.S.C. §365(d)(1), thus the same 3 ||must be deemed rejected; (iv) that the automatic rejection of these agreements gave the 4 || Defendants, as the other party to the contract the right to assert a claim for damages arising from 5 || that rejection as well as for any pre-petition default; and (v) the Chapter 7 Trustee has no private 6 || right of action for damages resulting from the automatic stay violations. The Trustee is limited 7 ||to the civil contempt remedy provided by 11 U.S.C. §105(a) if she can prove that the 8 || Defendants violated the discharge injunction under 11 U.S.C. §524(a). 9 The Trustee in her Opposition to Motion for Reconsideration argues that: (i) the 10 || Defendants’ arguments brought forth in their motion for reconsideration were not raised in the 11 || Motion to Dismiss; (i) the Trustee did not request the probate court in its Motion in Opposition 12 ||to Motion for Summary Judgment to rule on the validity and/ or extent of the automatic stay. 13 || The request in the Opposition to Motion for Summary Judgment is that the state court not rule 14 || on the issue of the violation of the automatic stay since the state court is not the proper court to 15 || entertain this matter because it does not have the experience or expertise to adjudicate this issue. 16 || Moreover, Plaintiff informed the state court of the instant complaint in a hearing held on 17 || February 20, 2016; and (iii) the argument that the sales contracts are executory in nature is 18 || being raised for the first time in the motion for reconsideration. These sales contracts are not 19 ||executory in nature pursuant to section 365 because the contractual obligations of the parties 20 || were fulfilled in their entirety. 21 Applicable Law and Analysis 22 “Motions to reconsider are not recognized by the Federal Rules of Civil Procedure or the 23 || Federal Rules of Bankruptcy Procedure in haec verba.” In re Lozada Rivera, 470 B.R. 109, 112 24 (Bankr. D.P.R. 2012), citing Jimenez v. Rodriguez (In re Rodriguez), 233 B.R. 212, 218-219 25 || (Bankr. D.P.R. 1999), conf’d 17 Fed. Appx. 5 (1 Cir. 2001); Van Skiver v. United States, 952 26 || F.2d 1241, 1243 do" Cir. 1991); Lavespere v. Niagara Mach. & Tool Works Inc., 910 F.2d 27

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1 |} 167, 173 (5" Cir. 1990), cert. denied 510 U.S. 859, abrogated on other grounds by Little v. 2 Liquid Air Corp., 37 F.3d 1069, 1075-1076 65" Cir. 1994). Rather, federal courts have 3 || considered motions so denominated as either a motion to “alter or amend” under Fed. R. Civ. P. 4 ||59(e) or a motion for relief from judgment under Fed. R. Civ. P. 60(b). See Fisher v. Kadant, 5 Inc., 589 F.3d 505, 512 (1“ Cir. 2009) (noting a motion for reconsideration implicated either 6 || Fed. R. Civ. P. 59(e) or 60(b)); Equity Security Holders’ Committee v. Wedgestone Financial 7 ||(n re Wedgestone Financial), 152 B.R. 786, 788 (D. Mass. 1993). “These two rules are 8 || distinct; they serve different purposes and produce different consequences. Which rule applies 9 || depends essentially on the time a motion is served. If a motion is served within [fourteen'] days 10 || of the rendition of judgment, the motion ordinarily will fall under Rule 59(e). If the motion is 11 || served after that time, it falls under Rule 60(b).” In re Lozada Rivera, 470 B.R. at 113, quoting 12 || Van Skiver, 952 F.2d at 1243. Also see Universal Ins. Co. v. DOJ, 866 F. Supp. 2d 49, 73 13 (D.P.R. 2012) (‘A motion is characterized pursuant to [Fed. R. Civ. P.] 59(e) or [Fed. R. Civ. 14 || P.] 60(b) based upon its filing date.”) “The substance of the motion, not the nomenclature used 15 or labels placed on motions, is controlling.” In re Lozada Rivera, 470 B.R. at 113. Under either 16 |} rule, “the granting of a motion for reconsideration is ‘an extraordinary remedy which should be 17 ||used sparingly.’” Palmer v. Champion Mortg., 465 F.3d 24, 30 (1 Cir. 2006) (citations 18 || omitted). 19 In this case, Defendants’ Motion for Reconsideration was filed within the fourteen (14) 20 || day period, but the Defendants’ request for reconsideration is premised upon Fed. R. Civ. P. 21 || 60(b), applicable to bankruptcy proceedings through Fed. R. Bankr. P. 9024. Thus, the court 22 || will consider the same under Fed. R. Civ. P. 60(b) since it is the substance of the motion that is 23 || controlling. “It is the invariable rule, and thus, the rule in the [First Circuit], that a litigant, as a 24 || precondition to relief under Rule 60(b), must give the trial court reason to believe that vacating 25 || the judgment will not be an empty exercise.” RBSF, LLC v. Franklin (In re Franklin), 445 B.R. 26 97 See Fed. R. Bankr. P. 9023.

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1 || 34, 45 (Bankr. D. Mass. 2011)(quoting Teamsters, Chauffers, Warehousemen & Helpers Union, 2 || Local No. 59 v. Superline Transp. Co., 953 F. 2d 17, 20 (1 Cir. 1992)). Fed. R. Civ. P. 60(b) 3 || provides in pertinent part: 4 “To]n motion and just terms, the court may relieve a party or its legal 5 representative from a final judgment, order, or proceeding for the 6 following reasons: 7 (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not 8 have been discovered in time to move for a new trial under Rule 9 59a); (3) fraud (whether previously called intrinsic or _ extrinsic), 10 misrepresentation, or misconduct by an opposing party; (4) the judgment is void; 11 (5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it 12 prospectively is no longer equitable; or B (6) any other reason that justifies relief.” Fed. R. Civ. P. 60(b). 14 Fed. R. Civ. P. 60(b)(1)-(6) offers six (6) independent reasons for relief. The motion for 15 || reconsideration did not clearly indicate which of these reasons justified relief in this case. The 16 |! Defendants do not argue the existence of mistake, inadvertence or excusable neglect. They do 17 |! not offer newly discovered evidence nor argue that there is a manifest error of law or point to 18 fraud. Rather, the Defendants in their motion for reconsideration reference Fed. R. Civ. P. 60(b) 19 || and use bold letters only for Fed. R. Civ. P. 60(b)(6) which is a catch-all provision that requires 20 || the movant to demonstrate “any other reason which justifies relief,” “which authorizes relief for 21 ‘any other reason’—that is, any reason not encompassed within the previous five clauses—that 22 might justify relief.” Rivera Velazquez v. Hartford Steam Boiler Inspection & Ins. Co., 750 F. 23 3d 1, 4 1" Cir. 2014). Relief under Rule 60(b)(6) is reserved for “extraordinary circumstances” 24 that justify “extraordinary” relief. See E. Sav. Bank fsb v. Lafata (In re Lafata), 344 B.R. 715, 25 ||722 (B.A.P. 1° Cir. 2006) citing Valley Citizens for a Safe Environment v. Aldridge, 969 F. 2d 26 1315, 1317 C1" Cir. 1992). “This provision, which provides for relief from a judgment based on 27

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1 || ‘any other reason,’ is a ‘grand reservoir of equitable power to do justice in a particular case.’ 2 || The provision “vests power in courts adequate to enable them to vacate judgments whenever 3 ||such action is appropriate to accomplish justice.’” 12-60 Moore’s Federal Practice- Civil 4 || §60.48[1]. 5 Defendants first argument under Rule 60(b)(6), namely “any other reason which justifies 6 || relief’ is that the issue of the alleged violation of the automatic stay is already being considered 7 || by the probate court in case No. DAC1999-1252 (505). Contrary to this assertion, the Trustee’s 8 || position is that she did not request the probate court in its Motion in Opposition to Motion for 9 || Summary Judgment to rule on the validity and/ or extent of the automatic stay. Also, contrary to 10 || the Defendant’s allegations, the Trustee clarifies that the request in the Opposition to Motion for 11 || Summary Judgment is that the state court not rule on the issue of the violation of the automatic 12 || stay since the state court is not the proper court to entertain this matter because it does not have 13 || the experience or expertise to adjudicate this issue. 14 As to this particular issue, this court in its Opinion and Order stated as follows: 15 “{t]he Court infers from the parties’ motions in this adversary proceeding, that the issue of whether the Defendants have willfully violated the automatic stay pursuant to 11 16 U.S.C. §362(a) is not before the state probate court, and thus, the state probate court has not adjudicated this issue. Therefore, this court concludes that it has subject matter 17 jurisdiction to rule upon the applicability of the automatic stay to a prepetition state court proceeding.” In re Morales Garcia, 553 B.R. at 12. 8 This court concludes that Defendant’s argument is unfounded and misleading because it is evident that the Trustee did not request the state court to rule on an alleged violation of the “0 automatic stay via an Opposition to the Motion for Summary Judgment. Contrary to the Defendant’s allegations, the Trustee’s position in the Opposition to the Motion for Summary Judgment was that the Bankruptcy Court was the only court with jurisdiction to determine whether there was a violation to the automatic stay (Docket No. 57, pg. 24). Moreover, the Trustee’s key argument in her Opposition to the Motion for Summary Judgment was that the probate court is devoid of jurisdiction to determine whether the agreements (contracts) * regarding the “sale of hereditary right, cession of rights and shares” are valid or not and to 27

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1 || determine whether the hereditary participations (shares) are property of the bankruptcy estate 2 || (Docket No. 57, pgs. 25-26). However, these issues are for the probate court to determine. 3 Defendants’ second argument is that this adversary proceeding is trying to resolve the 4 ||same issues as adversary proceeding 10-00170 in which the Bankruptcy Appellate Panel 5 || determined that this court lacked subject matter jurisdiction. The court finds that this particular 6 || issue was discussed thoroughly in this court’s Opinion and Order and adjudicated upon. See In 7 Morales Garcia, 553 B.R. at 11-13. This court’s holding regarding this particular issue of lack 8 || of subject matter jurisdiction to determine an alleged violation of the automatic stay was as 9 || follows: “It]he issue before the court is whether it has subject matter jurisdiction to 10 adjudicate an alleged willful violation of the automatic stay pursuant to 11 ll U.S.C. §362(a) in a state court probate case in which the Trustee seeks to collect monies for the benefit of the bankruptcy estate premised upon the ownership of 12 78.54% of the hereditary participations (shares) which are property of the estate. The court finds that determining whether the Defendants violated the automatic 13 stay in a state court proceeding is not infringing upon the narrow probate 4 exception of disposing of property that is in the custody of the state probate court. The BAP’s decision gave broad authority to litigate claims before the state 15 court, but did not authorize collection action against the bankruptcy estate.” Id. at 13. 16 Defendants’ third and fourth arguments consist in that this court should have made 17 18 additional findings of fact and conclusions of law, in particular that the agreements regarding 19 || the sale of hereditary right, cession of rights and shares and the resulting promissory notes 20 || related to these sales are all executory contracts and that the Chapter 7 Trustee failed to assume 21 |! these contracts (agreements) within 60 days after the order of relief pursuant to 11 U.S.C. 22 §365(d)(1). Thus, Defendants argue that these agreements must be deemed rejected resulting in 23 a claim for damages resulting from the rejection as well as for any pre-petition default. The 24 arguments that the Defendants brought forth in their Motion to Dismiss were the following: (1) %6 lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and failure to state a 27

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claim upon which relief may be granted pursuant to Fed. R. Civ. P. 12(b)(6); (i) the recoupment ||claim defense was made by the state court defendants against the Debtors and/or their 3 || bankruptcy estate; and (iii) the document attached and filed as an Exhibit to the complaint 4 || pertaining to this adversary proceeding is in the Spanish language, without a certified translation 5 and thus, should be disregarded by the court (Docket No. 34). Defendants’ position regarding 6 that the court should have made the legal conclusion that these agreements were executory contracts, and since the Trustee failed to accept them, the same are deemed rejected, is

9 meritless. The court is unable to reconsider an argument that has never been presented in this 10 || Proceeding and is being presented for the first time in a motion for reconsideration. See Marks 11 || 3-Zet-Ernst Marks GmBh & Co. KG v. Presstek, Inc, 455 F.3d 7, 15-16 (1* Cir. 2006) 12 || (citations omitted) (“A motion for reconsideration ‘does not provide a vehicle for a party to 13 undo its own procedural failures and it certainly does not allow a party to introduce new evidence or advance arguments that could or should have been presented to the district court prior to the judgment”). 7 The Defendant’s last argument is that the Trustee has no private right of action for 18 || damages resulting from the automatic stay violations under 11 U.S.C. §362(k). The Trustee is 19 || limited to the civil contempt remedy provided by 11 U.S.C. §105(a) if she can prove that the 20 |! Defendants violated the discharge injunction under 11 U.S.C. §524(a). The court finds that it is 21 unable to reconsider an argument that has never been presented in this proceeding and is being presented for the first time in a motion for reconsideration. Thus, Defendants’ last argument is

unfounded. 25 26 27

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1 Conclusion 2 For the reasons set forth above, the Motion for Reconsideration (Docket No. 57) is 3 hereby denied. The Motion for Reconsideration did not clearly indicate which of these reasons 4 || justified relief in this case, and did not argue the existence of mistake, inadvertence or excusable 5 neglect, and did not offer newly discovered evidence nor argue that there is a manifest error of 6 ||law or point to fraud. The court further concludes that the Defendants arguments failed to 7 ||demonstrate any ‘other reason’ that justified relief under the catch-all provision as has been 8 || explained herein. 9 SO ORDERED. 10 In San Juan, Puerto Rico, this 13" day of January, 2017. 11

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