1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2
3 4 IN RE: JORGE E. RODRIGUEZ WILSON 5 CASE NO. 15-2794 (MCF) Debtor 6 CHAPTER 11
7 8 JORGE E. RODRIGUEZ WILSON 9 Plaintiff, 10 ADV. CASE NO. 15-163 (MCF)
11 v. 12 GLADYS ARROYO HEREDIA 13 AND JOSE NATAR VAZQUEZ 14 Defendants. 15 16
17 OPINION AND ORDER 18
19 Plaintiff Dr. Jorge E. Rodriguez Wilson filed an adversary complaint against Defendants, 20 Gladys Arroyo Heredia, a judgment creditor, and her attorney, Jose Nater Vazquez, Esq., alleging 21 willful violations of the automatic stay, damages and turnover of property. Nater moves to dismiss 22 23 the amended complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. 24 Bankr. P. 7012(b). (Docket Nos. 64, 75 & 77). Dr. Rodriguez opposes the motion to dismiss. 25 (Docket No. 71 & 76). For the reasons stated herein, the Court grants in part and denies in part the 26 27 motion to dismiss. 28
29 30 1 APPLICABLE LAW AND LEGAL ANALYSIS 2 A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure serves to 3 4 assess the legal sufficiency of a complaint. Velez-Arcay v. Banco Santander de P.R. (In re Velez- 5 Arcay), 499 B.R. 225, 230 (Bankr. D.P.R. 2013); Republican Party v. Martin, 980 F.2d 943, 952 6 (4th Cir. 1992). A complaint must contain a “short and plain statement of the claim showing that 7 8 the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Fed. R. Bankr. P. 7008. Detailed factual 9 allegations are not mandated but the complaint must have sufficient factual matter. Surita-Acosta 10 v. Reparto Saman, Inc. (In re Surita-Acosta), 464 B.R. 86, 90 (Bankr. D.P.R. 2012). 11 12 Under the standard established by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 13 (2007) and Aschcroft v. Iqbal, 556 U.S. 662, 678 (2009), the bankruptcy court must engage in a 14 two-step process to determine whether relief should be granted under Rule 12(b)(6). First, a court 15 16 must ascertain pleadings that are conclusory, and thereby not entitled to a presumption of truth. 17 Second, a court must assume that well-pleaded factual allegations are true. In other words, the 18 court must take the well-pled fact as true, drawing all reasonable inferences in the pleader’s favor, 19 and see if they plausibly narrate a claim for relief. Iqbal, 556 U.S. at 679; Crowe v. Henry, 43 F.3d 20 21 198, 203 (5th Cir. 1995)(a motion to dismiss for failure to state a claim admits the facts alleged in 22 the complaint but challenges the plaintiff’s right to any relief based on those facts). A cause of 23 action is plausible when the factual allegations permit the court to draw the reasonable inference 24 25 that the defendant is liable for the harm alleged. Bell Atlantic, 550 U.S. at 556. 26 I. AMENDED COMPLAINT 27 28 The amended complaint alleges that Gladys Arroyo Heredia (“Arroyo”) obtained a state 29 court judgment against Dr. Rodriguez for tort damages. Arroyo then pursued and obtained an 30 1 order and writ of attachment against Dr. Rodriguez’ income stemming from health insurance 2 providers. Nater represented Arroyo in the state court proceedings. 3 4 Plaintiff also alleges that due to the post-judgment attachments, Dr. Rodriguez’ income 5 became scarce forcing him to file a voluntary petition under chapter 13 of the Bankruptcy Code. 6 The garnishments of Dr. Rodriguez’ income continued, although the automatic stay was in effect. 7 8 The court dismissed the bankruptcy case because Dr. Rodriguez’ debt surpassed the limits 9 established under the Bankruptcy Code making him ineligible under chapter 13. Dr. Rodriguez 10 refiled for bankruptcy but under chapter 11 of the Bankruptcy Code which has no statutory limits. 11 Although both defendants had notice of the each of the bankruptcy filings, the garnishments 12 13 continued anyway. 14 Dr. Rodriguez seeks damages for willful violation of the automatic stay and turnover of the 15 16 monies garnished from Dr. Rodriguez due to the violations of stay and preferential transfer. 17 Specifically, count one of the amended complaint is for willful violation of the stay; count two is 18 for damages and count three is for turnover of property. 19 20 Nater moves to dismiss on the following grounds: a) no willful violation of the automatic 21 stay; b) Dr. Rodriguez has never provided adequate protection, so retention does not constitute a 22 willful violation of the stay; c) no cause of action for preferential transfer against a non-creditor; 23 24 and d) all cash collateral available after the first voluntary petition was dismissed and all the 25 bankruptcy estate closed is beyond the preference avoidance period. 26 II. TURNOVER/PREFERENCE 27 28 Nater argues that Dr. Rodriguez must prove every single element to establish a colorable 29 claim for preference under Section 547(b) of the Bankruptcy Code, to wit: 30 1 Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property- 2 (1) to or for the benefit of a creditor; 3 (2) for or on account of an antecedent debt owed by the creditor before 4 such transfer was made; (3) made while the debtor was insolvent; 5 (4) made- 6 (A) on or within 90 days before the date of the filing of the 7 petition; or 8 (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was 9 an insider; and 10 (5) that enables such creditor to receive more than such creditor would receive if 11 (A) the case were a case under chapter 7 of this title; 12 (B) the transfer had not been made; and 13 (C) such creditor received payment of such debt to the extent provided by the provisions of this title. 14
15 11 U.S.C. § 547(b). 16 Dr. Rodriguez cannot establish the first element that the transfer was made “to or for the benefit of 17 18 a creditor” because Nater is a non-creditor of Dr. Rodriguez; he is merely the attorney of the 19 judgment creditor in the state court litigation. 11 U.S.C. § 547(b)(1). Nater argues that count three 20 of the amended complaint for turnover and/or preferential transfer must be dismissed. 21 22 We agree. Dr. Rodriguez does not contest this point. The amended complaint does not 23 make any allegations that Nater is a creditor of Dr. Rodriguez but acknowledges that Nater 24 represented the judgment creditor in the state court action. As a matter of fact, the amended 25 26 complaint does not appear to direct any preference action against Nater. If the amended complaint 27 could be construed as a preference action against Nater under Section 547(b), Dr. Rodriguez could 28 not prevail because Nater is a non-creditor of Dr. Rodriguez. Thus, the motion to dismiss is granted 29 30 1 as to count three of the amended complaint with respect to Nater.1 2 III. VIOLATION OF STAY AND DAMAGES 3 4 Turning to the first and second counts of the amended complaint, Dr. Rodriguez alleges that 5 the first petition was filed on February 13, 2015. On February 23, 2015, Dr.
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1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2
3 4 IN RE: JORGE E. RODRIGUEZ WILSON 5 CASE NO. 15-2794 (MCF) Debtor 6 CHAPTER 11
7 8 JORGE E. RODRIGUEZ WILSON 9 Plaintiff, 10 ADV. CASE NO. 15-163 (MCF)
11 v. 12 GLADYS ARROYO HEREDIA 13 AND JOSE NATAR VAZQUEZ 14 Defendants. 15 16
17 OPINION AND ORDER 18
19 Plaintiff Dr. Jorge E. Rodriguez Wilson filed an adversary complaint against Defendants, 20 Gladys Arroyo Heredia, a judgment creditor, and her attorney, Jose Nater Vazquez, Esq., alleging 21 willful violations of the automatic stay, damages and turnover of property. Nater moves to dismiss 22 23 the amended complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. 24 Bankr. P. 7012(b). (Docket Nos. 64, 75 & 77). Dr. Rodriguez opposes the motion to dismiss. 25 (Docket No. 71 & 76). For the reasons stated herein, the Court grants in part and denies in part the 26 27 motion to dismiss. 28
29 30 1 APPLICABLE LAW AND LEGAL ANALYSIS 2 A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure serves to 3 4 assess the legal sufficiency of a complaint. Velez-Arcay v. Banco Santander de P.R. (In re Velez- 5 Arcay), 499 B.R. 225, 230 (Bankr. D.P.R. 2013); Republican Party v. Martin, 980 F.2d 943, 952 6 (4th Cir. 1992). A complaint must contain a “short and plain statement of the claim showing that 7 8 the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Fed. R. Bankr. P. 7008. Detailed factual 9 allegations are not mandated but the complaint must have sufficient factual matter. Surita-Acosta 10 v. Reparto Saman, Inc. (In re Surita-Acosta), 464 B.R. 86, 90 (Bankr. D.P.R. 2012). 11 12 Under the standard established by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 13 (2007) and Aschcroft v. Iqbal, 556 U.S. 662, 678 (2009), the bankruptcy court must engage in a 14 two-step process to determine whether relief should be granted under Rule 12(b)(6). First, a court 15 16 must ascertain pleadings that are conclusory, and thereby not entitled to a presumption of truth. 17 Second, a court must assume that well-pleaded factual allegations are true. In other words, the 18 court must take the well-pled fact as true, drawing all reasonable inferences in the pleader’s favor, 19 and see if they plausibly narrate a claim for relief. Iqbal, 556 U.S. at 679; Crowe v. Henry, 43 F.3d 20 21 198, 203 (5th Cir. 1995)(a motion to dismiss for failure to state a claim admits the facts alleged in 22 the complaint but challenges the plaintiff’s right to any relief based on those facts). A cause of 23 action is plausible when the factual allegations permit the court to draw the reasonable inference 24 25 that the defendant is liable for the harm alleged. Bell Atlantic, 550 U.S. at 556. 26 I. AMENDED COMPLAINT 27 28 The amended complaint alleges that Gladys Arroyo Heredia (“Arroyo”) obtained a state 29 court judgment against Dr. Rodriguez for tort damages. Arroyo then pursued and obtained an 30 1 order and writ of attachment against Dr. Rodriguez’ income stemming from health insurance 2 providers. Nater represented Arroyo in the state court proceedings. 3 4 Plaintiff also alleges that due to the post-judgment attachments, Dr. Rodriguez’ income 5 became scarce forcing him to file a voluntary petition under chapter 13 of the Bankruptcy Code. 6 The garnishments of Dr. Rodriguez’ income continued, although the automatic stay was in effect. 7 8 The court dismissed the bankruptcy case because Dr. Rodriguez’ debt surpassed the limits 9 established under the Bankruptcy Code making him ineligible under chapter 13. Dr. Rodriguez 10 refiled for bankruptcy but under chapter 11 of the Bankruptcy Code which has no statutory limits. 11 Although both defendants had notice of the each of the bankruptcy filings, the garnishments 12 13 continued anyway. 14 Dr. Rodriguez seeks damages for willful violation of the automatic stay and turnover of the 15 16 monies garnished from Dr. Rodriguez due to the violations of stay and preferential transfer. 17 Specifically, count one of the amended complaint is for willful violation of the stay; count two is 18 for damages and count three is for turnover of property. 19 20 Nater moves to dismiss on the following grounds: a) no willful violation of the automatic 21 stay; b) Dr. Rodriguez has never provided adequate protection, so retention does not constitute a 22 willful violation of the stay; c) no cause of action for preferential transfer against a non-creditor; 23 24 and d) all cash collateral available after the first voluntary petition was dismissed and all the 25 bankruptcy estate closed is beyond the preference avoidance period. 26 II. TURNOVER/PREFERENCE 27 28 Nater argues that Dr. Rodriguez must prove every single element to establish a colorable 29 claim for preference under Section 547(b) of the Bankruptcy Code, to wit: 30 1 Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property- 2 (1) to or for the benefit of a creditor; 3 (2) for or on account of an antecedent debt owed by the creditor before 4 such transfer was made; (3) made while the debtor was insolvent; 5 (4) made- 6 (A) on or within 90 days before the date of the filing of the 7 petition; or 8 (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was 9 an insider; and 10 (5) that enables such creditor to receive more than such creditor would receive if 11 (A) the case were a case under chapter 7 of this title; 12 (B) the transfer had not been made; and 13 (C) such creditor received payment of such debt to the extent provided by the provisions of this title. 14
15 11 U.S.C. § 547(b). 16 Dr. Rodriguez cannot establish the first element that the transfer was made “to or for the benefit of 17 18 a creditor” because Nater is a non-creditor of Dr. Rodriguez; he is merely the attorney of the 19 judgment creditor in the state court litigation. 11 U.S.C. § 547(b)(1). Nater argues that count three 20 of the amended complaint for turnover and/or preferential transfer must be dismissed. 21 22 We agree. Dr. Rodriguez does not contest this point. The amended complaint does not 23 make any allegations that Nater is a creditor of Dr. Rodriguez but acknowledges that Nater 24 represented the judgment creditor in the state court action. As a matter of fact, the amended 25 26 complaint does not appear to direct any preference action against Nater. If the amended complaint 27 could be construed as a preference action against Nater under Section 547(b), Dr. Rodriguez could 28 not prevail because Nater is a non-creditor of Dr. Rodriguez. Thus, the motion to dismiss is granted 29 30 1 as to count three of the amended complaint with respect to Nater.1 2 III. VIOLATION OF STAY AND DAMAGES 3 4 Turning to the first and second counts of the amended complaint, Dr. Rodriguez alleges that 5 the first petition was filed on February 13, 2015. On February 23, 2015, Dr. Rodriguez filed an 6 urgent motion to stay the proceedings before the state court case.2 During the pendency of the first 7 8 bankruptcy petition from February 26, 2015 to April 10, 2015, Dr. Rodriguez’ monies were 9 attached by defendants. The amended complaint also alleges that after the second bankruptcy case 10 was filed Dr. Rodriguez’ income continued to be attached even though various motions were filed 11 12 in state court to stay the proceedings due to the second bankruptcy filing.3 Dr. Rodriguez also 13 alleges Nater was notified of both bankruptcy cases and asked to return the monies that were 14 attached. 15 16 Nater argues that the amended complaint must be dismissed because he personally did not 17 undertake the seizure of monies from Dr. Rodriguez. Nater points the finger at the marshal who 18 executed the attachment order issued by the state court judge. After the issuance of the writ of post- 19 20 judgment attachment, no additional action is ever required of or performed by Nater. 21
22 23 24
25 1 Having determined that there is no preference action against Nater, there is no need to consider Nater’s argument that all 26 cash collateral available after the first voluntary petition was dismissed and the bankruptcy estate closed is beyond the preference avoidance period. 27 2 See Exhibit to the Amended Complaint, Docket No. 25. In considering a Rule 12(b)(6) motion, a court may evaluate “not only the complaint itself, but also attached exhibits and documents incorporated into the complaint by reference.” 28 Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)(internal quotations and citations omitted). 3 Paragraph 12 of the amended complaint alleges that $45,714.10 (from February 26, 2015 to April 10, 2015) was 29 garnished during the pendency of the first case and $16,318.09 (from April 24, 2015 to September 3, 2015) was garnished during the current case. There is slight discrepancy of four cents between the amounts expressed in paragraph 12 and 30 paragraph 17 of the amended complaint. Paragraph 17 avers $45,714.10 and $16,318.05. Docket No. 25 at 3 & 5. 1 From the allegations of the amended complaint, the post-judgment attachment order and 2 writ were issued by the state court prior to the filing of the first bankruptcy case. However, from 3 the dates alleged in the complaint, monies were attached after both bankruptcy cases were filed. 4 5 Although Nater blames the marshal for that action, the legal practice in the jurisdiction is that the 6 judgment creditors through the assistance of their counsel present the writ of attachment to the 7 marshal. This court is not stating that this actually occurred in the state court action. For such a 8 9 finding, a trial must take place. However, it could be that once the first prepetition attachment 10 occurred, the marshal or the health insurance provider continued to garnish after the bankruptcy 11 case(s) had been filed. The court may ascertain “whether a complaint states a plausible claim for 12 13 relief will…be a context-specific task that requires the reviewing court to draw on its judicial 14 experience and common sense.” Aschcroft, 556 U.S. at 679. Drawing from judicial experience, 15 common sense and the amended complaint as written, counts one and two survive the motion to 16 17 dismiss. 18 Nater’s secondary argument does not persuade the court to dismiss the amended complaint. 19 Nater argues that the stay violations must be dismissed against him because Dr. Rodriguez never 20 21 provided adequate protection and that retention does not constitute a willful violation of the stay. 22 Nater misses the point. Based on the allegations of the amended complaint, which are treated as 23 true for purposes of a 12(b)(6) motion, post-petition attachments occurred after the filing of the first 24 25 and second bankruptcy cases. Those attachments are void because they occurred during the 26 bankruptcy cases. Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997). 27 The automatic stay operates to prevent “the enforcement, against the debtor or against property of 28 29 the estate, of a judgment obtained before the commencement of the case under this title.” 11 U.S.C. 30 1 § 362(a)(2). 2 3 Dr. Rodriguez is not required to afford adequate protection for post-judgment attachments 4 || that occurred after the bankruptcy case was commenced because such action is void. Soares, 107 > 11F.3d 969. To support his 12(b)(6) motion, Nater cites In re Linsenbach, 482 B.R. 522 (Bankr. M.D. 6 Penn. 2012), Miller v. Dusbabek (In re Miller), 2011 WL 6217342, 2011 Bankr. LEXIS 4982 (D. 7 g 2011), In re Giles, 271 B.R. 903 (Bankr. M.D. Fla. 2002); In re Olivas, 129 B.R. 122 9 || (Bankr. W.D. TX 1991), for the proposition that the bankruptcy court cannot require a judgment 10 creditor to release garnished funds and therefore plaintiff is unable to establish a violation of the 11 12 || automatic stay. However, these cases are inapplicable because they referred to garnished funds that 13 || were acquired prepetition. In the present case, the amended complaint seeks violations of the stay 14 and turnover of funds for the post-petition garnished funds. The amended complaint also seeks 15 16 || turnover of prepetition garnished funds under the theory of preferential transfer. As stated above, 17 || the claims for preferential transfer apply to the judgment creditor and not to the attorney of the 18 judgment creditor. 19 20 CONCLUSION 21 Based on the aforementioned, Nater’s motion to dismiss is granted as to count three of the 22 |! amended complaint but is denied as to counts one and two of the amended complaint. 23 24 IT IS SO ORDERED. 25 In San Juan Puerto Rico, this 25th day of February 2016. 26 27 . “”
MIEDRED CABAN FLORES 29 U.S. Bankruptcy Judge 30 31 32