1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2 3 IN RE: : CASE NO. 12-01777 (ESL) : 4 JEANS.COM : CHAPTER 11 : 5 Debtor : ____________________________________: 6 OPINION AND ORDER 7 This case is before the court upon the Motion for Order under Section 365(d)(3) Directing 8 Debtor in Possession to Pay Nonresidential Lease Post-Petition Obligations and for Payment of 9 Administrative Expenses filed by DDR Norte LLC S.E., DDR Atlantico LLC S.E., DDR Palma Real 10 LLC S.E., and DDR Rio Hondo LLC S.E. (collectively “DDR”, the “Motion for Payment and 11 Administrative Expenses”, Docket No. 172) and the Opposition thereto filed by the Debtor (Docket 12 No. 196). Also before the court is a Motion for Reconsideration of Orders and Request that the 13 Motions to Assume Executory Contracts are Held in Abeyance until Further Disclosure by the 14 Debtor filed by the Unsecured Creditors Committee (“UCC”) (Docket No. 236). For the reasons 15 stated below, DDR’s Motion for Payment and Administrative Expenses is denied in part and granted 16 in part and the UCC’s Motion for Reconsideration (Docket No. 236) is denied. 17 Procedural Background 18 The Debtor filed a voluntary Chapter 11 bankruptcy petition on March 9, 2012 (the 19 “Petition”, Docket No. 1) and has since then been managing its affairs and operating its business as 20 a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. 21 On July 3, 5, and 9, 2012, the Debtor filed several Motions Assuming Executory Contracts 22 (Docket Nos. 130, 133, 135, 137 and 147) in regards to the lease agreements of commercial 23 properties located in #036 Yauco Plaza, San Lorenzo, Plaza Rio Hondo Shopping Center, Cidra 24 Shopping Center and Plaza San Sebastian. The Debtor alleged that, in its best business judgment, 25 assuming those lease agreements would result in the benefit of the bankruptcy estate. On July 31, 26 2012, the court entered an Order (Docket No. 160) scheduling a hearing for October 9, 2012 to 27 consider, inter alia, the Motions Assuming Executory Contracts filed by the Debtor. 28 On August 27, 2012, DDR filed the Motion for Payment and Administrative Expenses 1 (Docket No. 172) seeking an order for the Debtor to pay the post-petition rents for the use and 2 occupancy1 of certain commercial spaces. DDR contends that part of the bankruptcy estate’s assets 3 at the time of the Petition were the unexpired leases of certain nonresidential real property between 4 Debtor, as tenant, and DDR, as landlord, for commercial spaces at Plaza del Atlantico in Arecibo 5 and Plaza Rio Hondo in Bayamon (the “Debtor Premises”). DDR avers that the Debtor currently 6 uses those premises for its retail operations and maintains a “Jeans.com” store in each of them. 7 DDR contends that post-petition charges under the leases, as of August 17, 2012, amount to 8 $45,263.35 ($26,442.21 for Plaza del Atlantico and $18,821.14 for Plaza Rio Hondo). DDR also 9 sustains that the Debtor has also been using and deriving benefit from DDR’s Plaza del Norte 10 property, located in Hatillo, P.R., as well as the Plaza Palma Real property in Humacao, P.R. DDR 11 acknowledges that hese commercial spaces are currently leased to third-party, non-debtor entities, 12 which are related and/or affiliated to the Debtor (the “Related Premises”) but that the Debtor has 13 been using them for the operation, storage, and/or maintenance of certain “Jeans.com” stores. The 14 Debtor claims that post-petition charges as of August 17, 2012 for these Related Premises amount 15 to $70,051.99 ($29,597.45 for Plaza Palma Real and $40,454.54 for Plaza del Norte). DDR seeks 16 payment for post-petition rent for the Debtor’s use of DDR’s premises pursuant to Section 365(d)(3) 17 of the Bankruptcy Code and claims administrative expense treatment of these post-petition rents 18 under Section 503(b). 19 On September 14, 2012, the Debtor filed its Opposition to DDR’s Motion for Payment and 20 Administrative Expenses (Docket No. 196), acknowledging the imposition of post-petition rent and 21 administrative expenses for DDR’s premises at Plaza Rio Hondo, but arguing that DDR’s premises 22 at Plaza del Atlantico, Plaza Palma Real and Plaza del Norte are leased to a third-party, non-debtor 23 corporation named Felix Fanti and Michael Silva Enterprises, Inc. (“FFMSE”). The Debtor 24 25 1 “Use and occupancy” is a property right defined by state law. See e.g. Malden Mills Indus. v. Maroun (In re Malden Mills Indus.), 303 B.R. 688, 704 (1st Cir. BAP 2004). Article 1445(2) of Puerto Rico’s Civil Code, 31 26 L.P.R.A. § 4052(2), establishes that the use of the leased thing, in the absence of an agreement, may be inferred from the nature of the thing according to the nature of the land. In addition, the landlord’s obligation of providing the 27 tenant the use and occupancy of the thing is fulfilled in a continuous manner serving as the cause of the tenant’s obligation to make rental payments. See In re Quesada Vigo, 2009 Bankr. LEXIS 3847 at *21, 2009 WL 4040145 at 28 *6 (Bankr. D.P.R. 2009), citing Campos del Toro v. Tribunal Superior, 75 P.R.R. 348, 75 D.P.R. 370, 375 (1953). 2 1 concludes that post-petition rents and administrative expenses may only be allowed to DDR Rio 2 Hondo LLC S.E. in regards to the premise at Plaza Rio Hondo, but must be denied to DDR Norte 3 LLC S.E., DDR Atlantico LLC S.E. and DDR Palma Real LLC S.E. in regards to the premises at 4 Plaza del Atlantico, Plaza Palma Real and Plaza del Norte. 5 On September 18, 2012, the court entered an Order (Docket No. 199) scheduling a hearing 6 for October 9, 2012 to consider DDR’s Motion for Payment and Administrative Expenses (Docket 7 No. 172) and the Debtor’s Opposition thereto (Docket No. 196). On October 4, 2012, the court 8 entered several Orders Granting Unopposed Motions (Docket No. 206, 209, 210, 212 and 214) in 9 regards to the Debtor’s Motions Assuming Executory Contracts (Docket Nos. 130, 133, 135, 137 10 and 147). 11 On October 4, 2012, the UCC filed a Motion for Reconsideration of Orders and to Request 12 that the Motions to Assume Executory Contracts are Held in Abeyance until Further Disclosure by 13 the Debtor (Docket No. 215) sustaining that FFMSE was the party that appeared in some of the 14 assumed lease agreements, not the Debtor, and as such the information provided to assume the 15 contracts needed to be clarified in order to determine if they were assumable or not, and that the 16 same was true in other commercial properties. In addition, the UCC claims that no evidence of sub 17 leases or assignment of the leases between FFMSE and the Debtor has been provided and that 18 without that evidence, Section 365 of the Bankruptcy Code is inapplicable. The UCC also requested 19 that the court set aside the Orders granting the assumption of executory contracts entered at Docket 20 Nos. 206, 210, 212 and 214. 21 On October 4, 2012, DDR Rio Hondo LLC, S.E. filed a Motion to Vacate or Alter Order 22 Authorizing Assumption of Lease, Opposition to Dkt. 133 and Request to be Heard at Scheduled 23 Hearing (Docket No. 216) alleging that although it had entered into negotiations with the Debtor 24 for the assumption of the lease agreement for the Plaza Rio Hondo premises, the Debtor owed over 25 $35,000.00 in post-petition rent alone, and that under 11 U.S.C. § 365, the Debtor is required to pay 26 all pre-petition and post-petition rents outstanding as a condition to assume the executory contract. 27 DDR Rio Hondo LLC, S.E. requested that the Order granting assumption (Docket No. 209) be 28 vacated, or altered to conform to whatever stipulation is filed at or before hearing on October 9, 3 1 2012, and that DDR be heard at hearing as scheduled. 2 On October 8, 2012, DDR filed a Response to [the UCC]’s Position (Docket No. 215) and 3 Tender of Evidence Showing Debtor’s Use and Occupancy of Leased Spaces (Docket No 229) 4 alleging that since the Petition date, the Debtor has been utilizing and deriving a direct and 5 immediate benefit from the use and occupancy of DDR’s Plaza del Norte property, the Plaza Palma 6 Real property, the premises located at Plaza Atlantico, a space subject to an expired leased but which 7 Debtor continued to use thereafter, as well as the Plaza Rio Hondo property. DDR requested that 8 it be permitted to be heard at the October 9, 2012 hearing without prejudice to any objections raised 9 by the UCC or the Debtor, to which DDR reserved all rights to respond. 10 A hearing was held on October 9, 2012. The UCC withdrew its Motion for Reconsideration 11 (Docket No. 215) in regards to the properties in the San Lorenzo premises (Docket Nos. 135 and 12 209) but preserved the objection to the assumption of leases in Yauco Plaza (Docket No. 130), Cidra 13 Shopping Center (Docket No. 137) and Plaza San Sebastian Shopping Center (Docket No. 147). 14 The court ordered the Debtor to oppose to the UCC’s Motion for Reconsideration in regards to those 15 particular leases. In addition, the court ordered DDR and the Debtor to file memoranda of law as 16 to whether the lessor (DDR) is entitled to administrative expenses for the use and occupancy by the 17 Debtor when the party to the lease is not the Debtor but a related corporation with common 18 principals and shareholders. DDR Rio Hondo LLC, S.E.’s Motion to Vacate or Alter Order... 19 (Docket No. 216) was denied for the reasons stated in open court. 20 On October 18, 2012, the Debtor filed an Opposition to Motion for Reconsideration (Dkt. 21 215) and Motion in Compliance with Order (Docket No. 234) informing that the leases for the 22 premises in Yauco Plaza (Docket No. 130), Cidra Shopping Center (Docket No. 137) and Plaza San 23 Sebastian Shopping Center (Docket No. 147) were all assigned to the Debtor and that therefore the 24 UCC’s Motion for Reconsideration should be denied. On October 22, 2012, the court entered an 25 Order granting the Debtor’s Opposition (Docket No. 235). 26 On October 24, 2012, the UCC filed a second Motion for Reconsideration of Orders and to 27 Request that the Motions to Assume Executory Contracts are Held in Abeyance until Further 28 Disclosure by the Debtor (Docket No. 236) in which it “reinstates its [prior] request for 4 1 reconsideration” and requests the court to set aside the Order entered at Docket No. 235 (granting 2 the Debtor’s Opposition to its initial Motion for Reconsideration). 3 On October 30, 2012, DDR filed a Memorandum in Compliance with Order and in Support 4 of Payment of Administrative Expenses for Use and Occupancy (Docket No. 239) since the Petition 5 date, the Debtor has been using and deriving benefit from its Premises at DDR’s Plaza del Norte 6 property, as well as the Plaza Palma Real property, that such Premises are currently leased to 7 third-party, non-Debtor entities, which are related and affiliated to the Debtor, but not used, nor 8 occupied, nor being paid by them. DRR sustains that the Debtor has been using the Premises for 9 the operation, storage, and/or maintenance of certain of its “Jeans.com” stores. According to DDR, 10 the post-petition charges under those leases have accrued and remain unpaid as of August 17, 2012, 11 in the total amount of $70,051.99, detailed as follows: (a) Plaza Palma Real - $29,597.45; and (b) 12 Plaza del Norte - $40,454.54. DDR also sustains that the Debtor continued to use and occupy the 13 Premises at Plaza del Norte until September 29, 2012 for its own benefit, presumptively worth the 14 lease charges of $7,883.43 for the month of September 2012, and the Premises at Plaza Palma Real 15 for presumptively worth the lease charges of $9,370.00 for the months of September and October 16 2012, also for its own use and benefit. DDR contends that despite the Debtor’s use of the Premises 17 for the operation of its business endeavors, neither the Debtor nor its related corporations have made 18 any payment to DDR for the post-petition rents accruing as to each of the properties and thus DDR 19 claims it is prejudiced and deprived of its property by the Debtor’s continued operation of its 20 “Jeans.com” stores (forcing DDR to continue to provide space and services, and depriving DDR of 21 the opportunity to re-let to a paying tenant) while denying the obligations to make post-petition rent 22 payments, asserting that Debtor’s related corporations’ obligation to pay exonerates the Debtor. 23 DDR claims an administrative claims for the post-petition rents of the Premises under 11 U.S.C. § 24 503(b)(1). 25 On October 30, 2012, the Debtor filed its Memorandum in Opposition to Motion for 26 Allowance of Administrative Payment (Docket No. 241) arguing that it is not a party in the leases 27 for DDR’s Premises at Plaza del Norte or Palma Real, and thus the party that owes the rent payments 28 to DDR is FFMSE, not the Debtor. The Debtor also argues that the case law cite by DDR in its 5 1 Memorandum is flawed because in those cases, the debtor either had a prior, although expired, 2 contractual relationship with the landlord or there was no agreement whatsoever with any party but 3 the debtor was using the premises. 4 On November 21, 2012, DDR filed a Motion to Supplement and Amend [its] Memorandum 5 in Compliance with Order and in Support of Payment of Administrative Expenses for Use and 6 Occupancy (Docket No. 245) alleging that upon further review and analysis of the post-petition rent 7 amounts provided in the Memorandum, DDR realized that the accruals were inadvertently 8 understated by $6,376.64 relative to the Plaza Palma Real property, and that the correct post-petition 9 rent amounts due and owing for the Plaza Palma Real property are $29,597.45 from March 9, 2012 10 to August, 2012, plus $15,746.64 for the months of September and October 2012, for a total sum of 11 $45,344.09, and $40,454.54 plus $7,883.43 for the month of September 2012, for a total sum of 12 $48,337.97 for Plaza del Norte. 13 On October 5, 2012, DDR filed a Motion to Inform Possession of Non-Conforming Payment 14 Check and Request for Determination of Pending Contested Matters (Docket No. 248) advising that 15 although the contested matter argued in its previous motions is still pending, on November 19, 2012, 16 the Debtor had tendered to DDR the check no. 1760 in the amount of $36,724.17, consisting of the 17 alleged post-petition arrears due for the Plaza Palma Real Property, not the full amount owed of 18 $45,344.09. Consequently, DDR informed that it forwarded check no. 1760 to the custody of its 19 legal counsel for safe-keeping pending the court’s resolution of the pending contested matters to 20 preserve DDR’s rights and allegations in the contested matters, as well as to prevent any mootness 21 or issue preclusion with regards to the payment of the post-petition rents due to the Plaza Palma Real 22 Property. 23 On December 21, 2012, DDR filed another Motion to Inform Possession of Additional Non- 24 Conforming Payment Checks and Request for Determination of Pending Contested Matters (Docket 25 No. 266) advising that shortly after the filing of the initial informative motion (Docket No. 248), the 26 Debtor tendered to DDR additional checks nos. 1723 and 1853, each in the amount of $8,334.59, 27 and that DDR forwarded them to the custody of its legal counsel for safe-keeping pending the 28 resolution of the contested matters in order to preserve DDR’s rights and allegations, as well as to 6 1 || prevent any mootness or issue preclusion with regards to the payment of the post-petition rents due 2 || to the Plaza Palma Real Property. 3 Applicable Law & Analysis DDR’s Motion for Administrative Expenses 5 The paramount objective of a Chapter 11 reorganization is to rehabilitate and preserve the 6 || value of the financially distressed business. Mason v. Official Comm. of Unsecured Creditors Un 7 || re FBI Distrib. Corp.), 330 F.3d 36, 41 (1* Cir. 2003) citing NLBR v. Bildisco, 465 U.S. 513, 528 8 |] (1983), and Otte v. United States, 419 U.S. 43, 53 (1974). To further that objective, Section 503 of 9 || the Bankruptcy Code allows administrative expenses of the actual and necessary costs and expenses 10 || to preserve and/or benefit the bankruptcy estate. Although an “administrative expense” is not 11 || defined in the Bankruptcy Code, Section 503(b) contains a non-exhaustive list of the types of 12 || expenses that are considered administrative. In its pertinent part, Section 503 provides as follows: 13 (a) An entity may timely file a request for payment of an administrative expense, or may tardily file such request if permitted by the court for cause. (b) After notice and a hearing, there shall be allowed administrative expenses, other 15 than claims allowed under section 502(f) of this title, including— 16 (1)(A) the actual, necessary costs and expenses of preserving the estate including— 17 (1) wages, salaries, and commissions for services rendered after the commencement of the case; ... 11 U.S.C. § 503. 18 19 A principal aim of Section 503 is to encourage parties to render post-petition services to 20 || debtors by ensuring that payment will be made on a priority basis in the post-petition period. See 21 || Inre FBI Distrib. Corp., 330 F.3d at 41, citing H.R. Rep. No. 595, 95" Cong., 1* Sess. 186, 186-87 22 || (1977); Doctor’s Hospital v. Vilar (in re Doctor’s Hospital), 1995 U.S. App. LEXIS 1576 at *3, 23 || 1995 WL 30903 at *1 (Per Curiam, 1* Cir. 1995), citing In re Mammoth Mart, Inc., 536 F.2d 950 24 |) (1* Cir. 1976); Alan N. Resnick & Henry J. Sommer, 4 Collier on Bankruptcy §] 503.06[2] (16" ed. 25 || 2013) at pp. 503-526 (“allowing administrative expense priority under Section 503(b)(1) is 26 || important to provide an incentive for creditors to continue doing business with a debtor and an 27 || incentive for others to engage in business transactions with the debtor.”) “There are several essential 28 || policies underlying the priority for administrative expenses: to encourage activities that will benefit
1 || the estate; to advance reorganization efforts which would be hampered by the necessity of advance 2 || payments for supplies of the estate; to compensate those injured by the estate; and to prevent unjust 3 || enrichment of the estate at the expense of its creditors.” Nancy C. Dreher, Joan N. Feeny and 4 || Michael J. Stepan, Bankruptcy Law Manual, Volume 1, § 6.32 (5" ed. 2012-2), p. 1124. 5 Section 503 derives its importance from Section 507, which sets forth the categories of 6 || expenses and claims that are entitled to priority treatment in the distribution of a debtor’s estate. 7 || Alan N. Resnick & Henry J. Sommer, 4 Collier on Bankruptcy 503.01 (16" ed. 2013) at p. 503- 8 || 508; 11 U.S.C. § 507. Administrative expenses are entitled to priority in payment pursuant to 9 |} Section 507(a)(2). “[B]ankruptcy courts have broad discretion in determining whether to award 10 || administrative expense priority. That discretion is limited by the clear intent of section 11 | 503(b)(1)(A): the actual and necessary costs of preserving the estate.” In re Woodstock Assocs. I, 12 Inc., 120 B.R. 436, 451 (Bankr. N.D. Ill. 1990). 13 In Cramer v. Mammoth Mart, Inc. dn re Mammoth Mart, Inc.), 536 F.2d at 954, the Court 14 || of Appeals for the First Circuit (the “First Circuit”) established a two-prong test to determine 15 || whether or not a claim qualifies as an administrative expense. The first prong asks whether the 16 || “transaction” arose between the creditor and the bankruptcy estate post-petition; the second prong 17 || inquires as to whether the incurred expense benefitted the estate in some demonstrable way. Id. at 18 || 954. This two-prong test was subsequently upheld by the First Circuit in In re FBI Distrib. Corp. 19 || as follows: “[i]n general, for a claim to qualify as an administrative expense under subsection 20 || 503(b)(1): (1) it must have arisen from a transaction with the trustee or debtor in possession, rather 21 || than from a pre-petition transaction with the debtor, and (2) the consideration supporting the claim 22 || must have benefitted the estate in some demonstrable way”. 330 F.3d at 36. The fact that the debtor 23 || has deprived the non-debtor of its property does not automatically trigger an administrative claim. 24 || The pertinent inquiry is the actual benefit to the estate, not the loss sustained by the creditor. See 25 || Inre Enron Corp., 279 B.R. 79, 85 (Bankr. S.D.N.Y. 2002). “The burden of proving entitlement to 26 || priority payment as an administrative expense ... rests with the party requesting it.” In re 27 || Hemingway Transport, Inc., 954 F.2d 1, 5 (1* Cir.1992). 28 In the instant case, there is no dispute that the Debtor used and occupied post-petition DDR’s
1 || premises at Plaza Palma Real and Plaza del Norte. This fact satisfies the first prong of the 2 || Mammoth and FBI Distrib. Corp. test (whether the “transaction” arose between the creditor and the 3 || estate, as opposed to a pre-petition transaction with the debtor). It is also uncontested that the use 4 and occupancy of DDR’s Premises by the Debtor resulted in benefit for the bankruptcy estate for 5 || the Debtor sells its merchandise in those Premises from which it derives revenues. Therefore, the 6 || second prong of Mammoth and FBI Distrib. Corp. test is also satisfied. 7 The Debtor’s only argument is that it is not a party to the pre-petition lease contracts with 8 || DDR and that in the cases cited by DDR ---In re Gray, 2005 Bankr. LEXIS 374 (Bankr. D. Kan. 9 |} 2005), and Geltzer v. Helen-May Holdings LLC (In re Kollel Mateh Efraim), 2009 Bankr. LEXIS 10 || 2236 (Bankr. S.D.N.Y. 2009)--- the debtor either had a prior but expired contractual relationship or 11 |} there was no agreement whatsoever with the debtor albeit the debtor was using the premises. A 12 || careful analysis of the pleadings shows that DDR cited those two cases for the proposition that the 13 || post-petition “transaction” required in Mammoth and FBI Distrib. Corp. does not require a pre- 14 || existing written contract. See DDR’s Memorandum, Docket No. 239. The court agrees with DDR’s 15 || analysis as long as the conditions established in Mammoth and FBI Distrib. Corp. are satisfied. In 16 || the instant case, both conditions are met, and therefore, DDR 1s entitled to administrative expenses 17 || for the post-petition arrears for the Premises used and occupied by the Debtor. 18 Notwithstanding, once the claimant establishes that the estate actually benefitted from the 19 || use of its property, the court must quantify the administrative expense. In re JAS Enterprises, 180 20 || B.R. 210, 217 (Bankr. D. Neb. 1995); In re Carmichael, 109 B.R. 849, 851 (Bankr. N.D. Ill. 1990). 21 || For instance, if the estate only used a portion of the property, the estate must pay an administrative 22 || expense only for the portion it used. In re Dant & Russell, Inc., 853 F.2d 700, 707 (9" Cir. 1988); 23 || Inre Thompson, 788 F.2d 560, 562 (9" Cir. 1986); In re Patient Educ. Media, Inc., 221 B.R. 97, 102 24 || (Bankr. S.D.N.Y. 1998). The contract rate is typically presumed to set the reasonable value, but 25 || either party may offer evidence to prove a different reasonable value. Dant & Russell, Inc., 853 F.2d 26 || at 707; In re Thompson, 788 F.2d at 563. “In the absence ofa lease or rental agreement, there is no 27 || presumptively reasonable rental rate.” In re Kollel Mateh Efraim, LLC, 2010 Bankr. LEXIS 3197 28 |] at *21, 2010 WL 3782050 at *7 (Bankr. S.D.N.Y. 2010), citing In re Aerospace Techs., Inc., 199
1 B.R. 331, 340 (Bankr M.D.N.C. 1996) (“[w]hile the court has discretion to fix the reasonable 2 administrative rent, the contract rent is presumptively the reasonable value for such use and 3 occupancy.”) Because in the instant case there is no written lease agreement between DDR and the 4 Debtor for certain Premises, there is no presumptively reasonable rental rate established. See In re 5 Kollel Mateh Efraim, LLC, 2010 Bankr. LEXIS 3197 at *21, 2010 WL 3782050 at *7. DDR has 6 not alleged, much less demonstrated, how the rates it intends to charge the Debtor for the Premises 7 at Palma Real and Plaza del Norte are reasonable, even though it carries the burden of proof of 8 establishing it. In re Hemingway Transport, Inc., 954 F.2d at 5. Instead, DDR parts from the 9 premise that the lease rate in the contract with FFMSE is automatically reasonable. That may be so, 10 but it must be established through evidence. Absent of evidentiary support, the court cannot declare 11 that the amounts claimed by DDR are reasonable because there is a lease contract with another 12 entity. Thus, an evidentiary hearing to that effect will be scheduled. 13 (B) The UCC’s second Motion for Reconsideration 14 The UCC filed its first Motion for Reconsideration on October 4, 2013 (Docket No. 215) 15 contending that while discussing draft of the disclosure statement, it brought to the attention of the 16 Debtor that several lease agreements it intended to assume were not with the Debtor, but with an 17 affiliated corporation, namely FFMSE, and consequently requested that the orders granting the 18 Debtor’s motions to assume the leases for the properties at Yauco Plaza (Docket No. 130), Cidra 19 (Docket No. 137) and Yabucoa (Docket No. 147)2 used by the Debtor should be set aside. The 20 UCC’s Motion for Reconsideration was considered at the October 9, 2013 hearing, when the court 21 ordered the Debtor to oppose to the Motion for Reconsideration (Docket Nos. 230 and 231). The 22 Debtor did so on October 18, 2013 (Docket No. 234) alleging that for those specific premises, the 23 lease agreements had been assigned to the Debtor. The court granted the Debtor’s Opposition on 24 October 22, 2013 (Docket No. 235), which effectively denied the UCC’s Motion for 25 Reconsideration. It is from that denial that the UCC filed its second Motion to Reconsider 26 27 2 Although initially UCC had also questioned the leases for the premises in San Lorenzo (Docket No . 135), 28 it subsequently withdrew that objection at the October 9, 2013 hearing (Docket Nos. 230 and 231). 10 1 || reinstating its prior request for reconsideration (Docket No. 236). 2 Contested matters in bankruptcy proceedings are governed by Fed. R. Bankr. P. 9014. 3 || Subsection (c) of that rule expressly makes Fed. R. Bankr. P. 7054 (judgments) applicable to 4 || contested matters like the instant one. 5 Motions to reconsider are not recognized by the Federal Rules of Civil Procedure or the 6 || Federal Rules of Bankruptcy Procedure in haec verba. See Jimenez v. Rodriguez (In re Rodriguez), 7 || 233 B.R. 212, 218-219 (Bankr. D.P.R. 1999), conf’d 17 Fed. Appx. 5 (1* Cir. 2001); Van Skiver v. 8 || United States, 952 F.2d 1241, 1243 (10" Cir. 1991); Lavespere v. Niagara Mach. & Tool Works 9 | Inc., 910 F.2d 167, 173 (5 Cir. 1990), cert. denied 510 U.S. 859, abrogated on other grounds by 10 || Little v. Liquid Air Corp., 37 F.3d 1069, 1075-76 (5" Cir. 1994); Perez Mujica v. FirstBank P.R. (In 11 || re Perez Mujica), 470 B.R. 251, 253 (Bankr. D.P.R. 2012). Rather, federal courts have considered 12 || motions so denominated as either a motion to “alter or amend” under Fed. R. Civ. P. 59(e) or a 13 || motion for relief from judgment or order under Fed. R. Civ. P. 60(b). See Fisher v. Kadant, Inc., 14 || 589 F.3d 505, 512 (1* Cir. 2009) (noting a motion for reconsideration implicated either Fed. R. Civ. 15 || Pro. 59(e) or 60(b)); Equity Security Holders’ Committee _v. Wedgestone Financial (In □□ 16 || Wedgestone Financial), 152 B.R. 786, 788 (D. Mass. 1993). “These two rules are distinct; they 17 || serve different purposes and produce different consequences. Which rule applies depends 18 || essentially on the time a motion is served. If a motion is served within [fourteen]’ days of the 19 || rendition of judgment, the motion ordinarily will fall under Rule 59(e). Ifthe motion is served after 20 || that time, it falls under Rule 60(b).” Van Skiver, 952 F.2d at 1243. “The substance of the motion, 21 || not the nomenclature used or labels placed on motions, is controlling.” See In re Lozada Rivera, 470 22 || B.R. 109, 112-113 (Bankr. D.P.R. 2012). 23 Because the UCC filed its second Motion for Reconsideration (Docket No. 236) within the 24 || 14-days afforded in Fed. R. Bankr. P. 9023, it will be considered under the scope of Fed. R. Civ. P. 25 || 59(e), made applicable in bankruptcy cases through Fed. R. Bankr. P. 9023. See Van Skiver, 952 26 || F.2d at 1243; In re Lozada Rivera, 470 B.R. at 113. Where a final judgment has been entered, and 27 28 > See the most recently amended version of Fed. R. Bankr, P, 9023. 11
1 || a timely filed Fed. R. Civ. P. 59 motion resulted in the entry of a second judgment that changed the 2 || legal rights of the parties, and the parties filed a successive Rule 59 motion, “[t]he timeliness of the 3 |] successive motion comes from the alteration of the judgment. A significant change in a judgment 4 }| starts all time periods anew, whether the district court alters the judgment at the request of a party 5 | or on its own motion.” Charles v. Daley, 799 F.2d 343, 348 (7" Cir. 1986) (citing FTC v. 6 || Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 211 (1952)). Accordingly, in Kraft, Inc. v. 7 || United States, 85 F.3d 602, 605 (Fed. Cir. 1996), the Court of Appeals for the Federal Circuit noted 8 || that “a motion to reconsider a revised judgment tolls the time for appeal only in instances where the 9 |] second judgment presents a new significant adverse ruling against the movant which the movant has 10 || had no previous opportunity to challenge”. Courts discourage the filing of successive Fed. R. Civ. 11 P. 59(e) motions as “wasteful of judicial resources.” Arnold v. Farmers Ins. Co., 2012 U.S. Dist. 12 || LEXIS 67262 at *19, 2012 WL 1684537 at *7 (D.N.M. 2012). The United States Court of Appeals 13 || for the Federal Circuit has explained that “[s]uccessive motions periods, which would encourage 14 || piecemeal attack on a judgment and delay appeals, are not authorized. Once a district court has 15 || denied timely filed tolling motions, the litigants must appeal if they wish to further challenge a 16 || judgment, except for the special circumstances recognized in [Fed. R. Civ. P.] 60(b).” Kraft, Inc. 17 || v. United States, 85 F.3d 602, 605 (Fed. Cir. 1996) (citation omitted). Also see Venable v. Haislip, 18 || 721 F.2d 297, 299 (10" Cir. 1983) (noting that “a motion to reconsider an order disposing of a 19 | motion that tolled the running of the time for appeal typically does not again toll the running of the 20 || appeal period”). The Court of Appeals for the Fifth Circuit has also ruled that “[t]he interest in 21 || finality requires that parties generally get only one bite at the [Fed. R. Civ. P.] 59(e) apple for the 22 || purpose of tolling the time for bringing an appeal” and that, even when a federal trial court grants 23 || an initial “motion for reconsideration [brought under Fed. R. Civ. P. 59] but, in the same order, had 24 || made it clear that the effect of the judgment was unchanged,” a second motion for reconsideration 25 || is “condemned by well-established authority in this and other circuits.” Charles L.M. v. Northeast 26 || Independent School Dist., 884 F.2d 869, 870-871 (5" Cir. 1989). Also see Ysais v. Richardson, 603 27 || F.3d 1175, 1178 (10" Cir. 2010) (holding in case where plaintiff filed a motion seeking 28 || reconsideration of an “order denying his motion for reconsideration of the amended final judgment 12
1 || ... [that] this second motion for reconsideration ... did not extend the time for filing a notice of appeal 2 || from the underlying amended final judgment”). 3 In short, a second motion for reconsideration under Fed. R. Civ. P. 59(e) 1s viable only when 4 || the judgment from which reconsideration was initially sought was significantly altered. A party 5 || cannot repeatedly renew a reconsideration on the same grounds that were denied. In the instant case, 6 || the Order denying the UCC’s initial Motion for Reconsideration (Docket No. 235) did not 7 || significantly amend or alter the initial Orders from which reconsideration was sought (Docket Nos. 8 || 206, 212 and 214). The UCC did not allege or demonstrate any of the circumstances set in Fed. R. 9 || Civ. P. 60. Thus, the second Motion for Reconsideration (Docket No. 236) cannot be entertained 10 || and is therefore hereby denied. 11 Conclusion 12 For the reasons stated herein, the court grants in part and denies in part DDR’s Motion for 13 || Payment and Administrative Expenses (Docket No. 172) and schedules a hearing to determine the 14 || reasonableness and amounts of the expenses claimed by DDR for June 19, 2013 at 2:00 p.m. The 15 || parties shall file proposed findings of fact and conclusions of law 10 days prior to the hearing. The 16 |} UCC’s second Motion for Reconsideration (Docket No. 236) is hereby denied. 17 SO ORDERED. 18 In San Juan, Puerto Rico, this 12" day of April, 2013. 19 20
22 SNES SREGS BENEEIREEY EG 23 24 25 26 27 28 13