1 IN THE UNITED STATES BANKRUPTCY COURT FOR 5 THE DISTRICT OF PUERTO RICO 3 4 || IN RE: CASE NO. 10-09211 BKT 5 Chapter 13 . JOSEFINA CRUZ MALDONADO &
7 CARLOS MANUEL BAIRAN RIVERA FILED & ENTERED ON 10/14/2014 8 Debtor(s) 9 10 OPINION AND ORDER 11 Before this court is a Motion to Withdraw Consigned Funds as Payment of Legal Fee filed by Carlos I. Leén Camacho (“Mr. Leén”), special counsel for Debtor, Josefina Cru Maldonado [Dkt. No. 188], Trustee’s Motion Outlining Controversy and Motion to Dismiss file 15 Chapter 13 Trustee, Alejandro Oliveras Rivera (“Trustee”) [Dkt. No. 192], Motion t 16 || Withdraw Settlement Funds in Compliance with Settlement and to Deem the Plan Bas Completed filed by Debtors, Josefina Cruz Maldonado and Carlos Manuel Bairan River: (“Debtors”) [Dkt. No. 194], Opposition to Motion Requesting Withdrawal of Consigned Fund by Carlos I. Leon Camacho, Esq. filed by Debtors [Dkt. No. 195], and Opposition to Trustee’ 21 || Motion Outlining Controversy and Motion to Dismiss filed by Debtors [Dkt. No. 197]. For th 22 ||reasons set forth below, Debtors’ Motion to Withdraw Settlement Funds in Compliance wit Settlement and to Deem the Plan Base Completed is GRANTED, Mr. Leén’s Motion t Withdraw Consigned Funds as Payment of Legal Fees is DENIED, and Trustee’s Motio Outlining Controversy and Motion to Dismiss is DENIED.
i I. Factual Background 2 On September 30, 2010, Debtors filed for relief under chapter 13 of the Bankruptcy Cod 3 [Dkt. No. 1]. Thereafter, Debtor Josefina Cruz Maldonado, learned of the existence of a cause 0 4 5 action (“Tort Claim”) in her favor against Wal-Mart De Puerto Rico, Inc. (“Walmart”). Debtor 6 amended their schedules to include said Tort Claim as part of the bankruptcy estate [Dkt. No. 7 1163]. On May 20, 2011, Debtors submitted their application to employ Mr. Leén as Specia 8 Counsel for the Debtors in the Tort Claim on a contingent basis at 33% of any amount 9 recovered for the Debtors and/or the estate, plus actual costs and expenses [Dkt. No. 64]. O 11 9, 2011 this Court approved said application [Dkt. No. 69]. 12 On December 8, 2011, this Court confirmed the Debtors’ amended plan [Dkt. No. 105], *S || At the time of approval, the Tort Claim was still pending. Therefore, this Court approved 14 contingent payment provision in the plan to account for any proceeds derived from the To 15 16 Claim. Said provision reads that a lump-sum payment of $7,753.00 is to be received: 17 From settlement or judgment of non-exempt proceeds from law suit. 18 19 Payment is contingent to when and if prevailing in the judicial action. 20 If the non exempt amount to be received, if and when received, 21 provides for greater distribution, this lamp sum amount should be 22 deemed amended for the lesser of: 23 (a) up to the non-exempt amount received, or (b) to the amount needed to pay 100% to general unsecured 24 creditors and 6% for present value for general unsecured creditors. 25 A few months later, the Tort Claim was settled for $35,000.00. This Court subsequentl approved Mr. Leén’s Application for Compensation, awarding $11,550.00 in attorney’s fees an
1 |} $1,002.00 in expenses [Dkt. No. 136]. On March 13, 2014, Walmart motioned for leave t 2 consign the $35,000.00 with the court [Dkt. No. 176]. This Court denied the motion, and ordere Walmart to deliver the settlement amount to the Trustee within fourteen (14) days [Dkt. No
|| 178]. 6 On April 1, 2014, Walmart and the Debtors requested that this Court reconside ’ || Walmart’s motion to consign the settlement funds [Dkt. No. 180]. Due to Walmart’s interna ° bureaucratic process, the reissuing of a new check paid to the order of the Trustee would tak months. Given the aforementioned, this Court granted the motion for reconsideration [Dkt. No,
31 || 182]. 12 On April 30, 2014, Mr. Leén submitted a motion requesting the withdrawal of hi consigned attorney’s fees [Dkt. No. 188]. Mr. Leén’s attorney’s fees and expenses tota $12,552.00. On May 13, 2014, the Trustee submitted a motion outlining the controversy and
16 motion to dismiss [Dkt. No. 192]. 17 In his motion, the Trustee argues that the non-exempt funds should be used to pa 18 unsecured creditors, as was allegedly envisioned when the plan was confirmed. The Debtor claimed a $22,447.00 exemption from the Tort Claim proceeds. This leaves $12,553.00 in non exempt funds (“non-exempt funds”). However, if the $12,552.00 in attorney’s fees and expense |{are deducted, only $1.00 in non-exempt funds will be left to distribute amongst the creditors. 23 || The Trustee argues that because the plan called for the possible payment in full of the genera 24 unsecured debt, the unsecured creditors have priority over the non-exempt funds. This woul leave $4,800.00 to compensate Mr. Leén.
i On June 9, 2014, Debtors filed their Motion to Withdraw Settlement Funds i 2 Compliance with Settlement and to Deem the Plan Base Completed [Dkt. No. 194], an 3 Opposition to Motion Requesting Withdrawal of Consigned Funds by Carlos I. Leédn Camacho, 4 5 Esq. [Dkt. No. 195]. In said motions, Debtors note that on March 14, 2014, they reached a 6 agreement with the Trustee as to the funds from the Tort Claim [Dkt. No. 177]. Said agreemen || states: 8 a. the tort claim proceeds of joint debtor JOSEFINA CRUZ 9 MALDONADO, in the amount of $35,000.00 are to be tendered, by defendant Wal-Mart de P.R. Inc., to the Chapter 13 trustee, Mr. 10 Alejandro Oliveras Rivera. 11 b. upon receipt of the $35,000.00, the trustee shall forthwith 12 disburse to JOSEFINA CRUZ MALDONADO, the portion claimed by her as exempt, $22,447.00 and, $12,552.00 to special counsel Mr. Mr. Carlos I. Leon Camacho. 14 As a result, the Debtors’ request that the court deny Mr. Ledn’s motion requesting fund 15 16 consigned with the court, and grant an order issuing a check for $35,000.00 in favor of th 17 || Trustee, to be distributed as agreed upon. 18 Lastly, on June 17, 2014, the Debtors submitted their Opposition to Trustee’s Motio 19 Outlining Controversy and Motion to Dismiss filed by Debtors [Dkt. No. 197]. Aside fro 20 reemphasizing the language in the aforementioned agreement, the Debtors note that there exist 21 55 || Strong public policy favoring settlement agreements. The Debtors argue that the parties ar 23 || bound by their agreement, particularly given the fact that it was made in writing and filed wit 24 || the court. For the following reasons, the court agrees with the Debtors. 25
1 Ii. Legal Analysis and Discussion 2 The main issue before this Court is whether Mr. Leén’s attorney’s fees and expense have priority over the payment of unsecured creditors. In order to resolve the matter at hand, “a
5 understanding of the statutory framework dealing with the allowance and payment of priorit 6 claims in Chapter 13 cases is required.” In re Busetta-Silvia, 314 B.R. 218, 222-23 (B.AP. 10t 7 |! Cir. 2004). ° Under 11 U.S.C. § 1322(a)(2), unless the holder of a priority claim agrees to differen treatment, a Chapter 13 plan shall “provide for full payment, in deferred cash payments, of al 11 Claims entitled to priority under section 507.” Id. Section 507(a)(2) affords first priority t 12 ||“administrative expenses allowed under section 503(b). 11 U.S.C. § 507. Furthermore, 11 U.S.C. tS § 503(b) states, in relevant part, that “there shall be allowed administrative expenses, . . including— .. . (2) compensation and reimbursement awarded under section 330(a) of this title.’
16 Busetta-Silvia, 314 B.R. at 222-23. “Section 330 authorizes the Court to award reasonabl 17 Compensation for actual, necessary services rendered by professionals.” In re Chewning & Fre 18 || Sec., Inc., 328 B.R. 899, 912 (Bankr. N.D. Ga. 2005).
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1 IN THE UNITED STATES BANKRUPTCY COURT FOR 5 THE DISTRICT OF PUERTO RICO 3 4 || IN RE: CASE NO. 10-09211 BKT 5 Chapter 13 . JOSEFINA CRUZ MALDONADO &
7 CARLOS MANUEL BAIRAN RIVERA FILED & ENTERED ON 10/14/2014 8 Debtor(s) 9 10 OPINION AND ORDER 11 Before this court is a Motion to Withdraw Consigned Funds as Payment of Legal Fee filed by Carlos I. Leén Camacho (“Mr. Leén”), special counsel for Debtor, Josefina Cru Maldonado [Dkt. No. 188], Trustee’s Motion Outlining Controversy and Motion to Dismiss file 15 Chapter 13 Trustee, Alejandro Oliveras Rivera (“Trustee”) [Dkt. No. 192], Motion t 16 || Withdraw Settlement Funds in Compliance with Settlement and to Deem the Plan Bas Completed filed by Debtors, Josefina Cruz Maldonado and Carlos Manuel Bairan River: (“Debtors”) [Dkt. No. 194], Opposition to Motion Requesting Withdrawal of Consigned Fund by Carlos I. Leon Camacho, Esq. filed by Debtors [Dkt. No. 195], and Opposition to Trustee’ 21 || Motion Outlining Controversy and Motion to Dismiss filed by Debtors [Dkt. No. 197]. For th 22 ||reasons set forth below, Debtors’ Motion to Withdraw Settlement Funds in Compliance wit Settlement and to Deem the Plan Base Completed is GRANTED, Mr. Leén’s Motion t Withdraw Consigned Funds as Payment of Legal Fees is DENIED, and Trustee’s Motio Outlining Controversy and Motion to Dismiss is DENIED.
i I. Factual Background 2 On September 30, 2010, Debtors filed for relief under chapter 13 of the Bankruptcy Cod 3 [Dkt. No. 1]. Thereafter, Debtor Josefina Cruz Maldonado, learned of the existence of a cause 0 4 5 action (“Tort Claim”) in her favor against Wal-Mart De Puerto Rico, Inc. (“Walmart”). Debtor 6 amended their schedules to include said Tort Claim as part of the bankruptcy estate [Dkt. No. 7 1163]. On May 20, 2011, Debtors submitted their application to employ Mr. Leén as Specia 8 Counsel for the Debtors in the Tort Claim on a contingent basis at 33% of any amount 9 recovered for the Debtors and/or the estate, plus actual costs and expenses [Dkt. No. 64]. O 11 9, 2011 this Court approved said application [Dkt. No. 69]. 12 On December 8, 2011, this Court confirmed the Debtors’ amended plan [Dkt. No. 105], *S || At the time of approval, the Tort Claim was still pending. Therefore, this Court approved 14 contingent payment provision in the plan to account for any proceeds derived from the To 15 16 Claim. Said provision reads that a lump-sum payment of $7,753.00 is to be received: 17 From settlement or judgment of non-exempt proceeds from law suit. 18 19 Payment is contingent to when and if prevailing in the judicial action. 20 If the non exempt amount to be received, if and when received, 21 provides for greater distribution, this lamp sum amount should be 22 deemed amended for the lesser of: 23 (a) up to the non-exempt amount received, or (b) to the amount needed to pay 100% to general unsecured 24 creditors and 6% for present value for general unsecured creditors. 25 A few months later, the Tort Claim was settled for $35,000.00. This Court subsequentl approved Mr. Leén’s Application for Compensation, awarding $11,550.00 in attorney’s fees an
1 |} $1,002.00 in expenses [Dkt. No. 136]. On March 13, 2014, Walmart motioned for leave t 2 consign the $35,000.00 with the court [Dkt. No. 176]. This Court denied the motion, and ordere Walmart to deliver the settlement amount to the Trustee within fourteen (14) days [Dkt. No
|| 178]. 6 On April 1, 2014, Walmart and the Debtors requested that this Court reconside ’ || Walmart’s motion to consign the settlement funds [Dkt. No. 180]. Due to Walmart’s interna ° bureaucratic process, the reissuing of a new check paid to the order of the Trustee would tak months. Given the aforementioned, this Court granted the motion for reconsideration [Dkt. No,
31 || 182]. 12 On April 30, 2014, Mr. Leén submitted a motion requesting the withdrawal of hi consigned attorney’s fees [Dkt. No. 188]. Mr. Leén’s attorney’s fees and expenses tota $12,552.00. On May 13, 2014, the Trustee submitted a motion outlining the controversy and
16 motion to dismiss [Dkt. No. 192]. 17 In his motion, the Trustee argues that the non-exempt funds should be used to pa 18 unsecured creditors, as was allegedly envisioned when the plan was confirmed. The Debtor claimed a $22,447.00 exemption from the Tort Claim proceeds. This leaves $12,553.00 in non exempt funds (“non-exempt funds”). However, if the $12,552.00 in attorney’s fees and expense |{are deducted, only $1.00 in non-exempt funds will be left to distribute amongst the creditors. 23 || The Trustee argues that because the plan called for the possible payment in full of the genera 24 unsecured debt, the unsecured creditors have priority over the non-exempt funds. This woul leave $4,800.00 to compensate Mr. Leén.
i On June 9, 2014, Debtors filed their Motion to Withdraw Settlement Funds i 2 Compliance with Settlement and to Deem the Plan Base Completed [Dkt. No. 194], an 3 Opposition to Motion Requesting Withdrawal of Consigned Funds by Carlos I. Leédn Camacho, 4 5 Esq. [Dkt. No. 195]. In said motions, Debtors note that on March 14, 2014, they reached a 6 agreement with the Trustee as to the funds from the Tort Claim [Dkt. No. 177]. Said agreemen || states: 8 a. the tort claim proceeds of joint debtor JOSEFINA CRUZ 9 MALDONADO, in the amount of $35,000.00 are to be tendered, by defendant Wal-Mart de P.R. Inc., to the Chapter 13 trustee, Mr. 10 Alejandro Oliveras Rivera. 11 b. upon receipt of the $35,000.00, the trustee shall forthwith 12 disburse to JOSEFINA CRUZ MALDONADO, the portion claimed by her as exempt, $22,447.00 and, $12,552.00 to special counsel Mr. Mr. Carlos I. Leon Camacho. 14 As a result, the Debtors’ request that the court deny Mr. Ledn’s motion requesting fund 15 16 consigned with the court, and grant an order issuing a check for $35,000.00 in favor of th 17 || Trustee, to be distributed as agreed upon. 18 Lastly, on June 17, 2014, the Debtors submitted their Opposition to Trustee’s Motio 19 Outlining Controversy and Motion to Dismiss filed by Debtors [Dkt. No. 197]. Aside fro 20 reemphasizing the language in the aforementioned agreement, the Debtors note that there exist 21 55 || Strong public policy favoring settlement agreements. The Debtors argue that the parties ar 23 || bound by their agreement, particularly given the fact that it was made in writing and filed wit 24 || the court. For the following reasons, the court agrees with the Debtors. 25
1 Ii. Legal Analysis and Discussion 2 The main issue before this Court is whether Mr. Leén’s attorney’s fees and expense have priority over the payment of unsecured creditors. In order to resolve the matter at hand, “a
5 understanding of the statutory framework dealing with the allowance and payment of priorit 6 claims in Chapter 13 cases is required.” In re Busetta-Silvia, 314 B.R. 218, 222-23 (B.AP. 10t 7 |! Cir. 2004). ° Under 11 U.S.C. § 1322(a)(2), unless the holder of a priority claim agrees to differen treatment, a Chapter 13 plan shall “provide for full payment, in deferred cash payments, of al 11 Claims entitled to priority under section 507.” Id. Section 507(a)(2) affords first priority t 12 ||“administrative expenses allowed under section 503(b). 11 U.S.C. § 507. Furthermore, 11 U.S.C. tS § 503(b) states, in relevant part, that “there shall be allowed administrative expenses, . . including— .. . (2) compensation and reimbursement awarded under section 330(a) of this title.’
16 Busetta-Silvia, 314 B.R. at 222-23. “Section 330 authorizes the Court to award reasonabl 17 Compensation for actual, necessary services rendered by professionals.” In re Chewning & Fre 18 || Sec., Inc., 328 B.R. 899, 912 (Bankr. N.D. Ga. 2005). “Reading these statutes together, attorney fee awarded under § 330(a) is entitled to a [second] priority under § 507(a)({2]) an must be paid in full under the terms of the Chapter 13 plan, unless the attorney agree || otherwise.” Id. The only unsecured claims that have priority over an attorney fee awarded unde 23 || § 330(a) are those related to domestic support obligations. 11 U.S.C. § 507(a). 24 When interpreting a statute, the court must start with the statute’s plain text. In r ° BankVest Capital Corp., 360 F.3d 291, 296 (1st Cir. 2004). “In this case it is also where th inquiry should end, for where, as here, the statute's language is plain, the sole function of th
1 || courts is to enforce it according to its terms.” U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235 * (1989) (citing Caminetti v. United States, 242 U.S. 470, 485, (1917)). It is undisputed tha 3 that Mr. Leén provided actual and necessary services that benefitted the Debtors [Dkt. No. 64 4 5 69]. The Trustee admits that Mr. Leon is entitled to his attorney’s fees & expenses as “hi 6 || services benefitted” the Debtors [Dkt. No. 192, § 14]. Given the reasonableness of his service |) and the lack of opposition from the Trustee or any creditor, this Court saw fit to grant Mr. Leén’ 8 application for compensation [Dkt. No. 116, 134, 135 & 136]. Therefore, it is undisputed tha 9 Mr. Leon is entitled to his attorney’s fees and expenses under the Bankruptcy Code, and that sai 11 || fees and expenses have priority over the payment of unsecured creditors. 12 Regardless of the Bankruptcy Code’s clear language favoring Mr. Le6n’s priority, th || Trustee argues that because the confirmed plan envisioned the possibility of payment in full o 14 the general unsecured debt with the funds received from the Tort Claim, the unsecured creditor 15 16 have priority over the non-exempt funds. Even if this Court were to ignore the Bankruptcy Cod 17 |; and solely analyze the issue based on the confirmed plan’s language, the Trustee’s argumen 18 || would nonetheless fall short. The confirmed plan reads as follows: 19 From settlement or judgment of non-exempt proceeds from law 20 suit. at Payment is contingent to when and if prevailing in the judicial 22 action. 23 If the non exempt amount to be received, if and when received, provides for greater distribution, this lump sum amount should 24 be deemed amended for the lesser of: 25 (a) up to the non-exempt amount received, or (b) to the amount needed to pay 100% to general unsecured creditors and 6% for present value for general unsecured creditors.
1 5 [Dkt. 95] (emphasis added). As per its terms, the confirmed plan anticipated the possibility o 3 || proceeds from the Tort Claim. If and when the bankruptcy estate were to receive said proceeds “ non-exempt amount would be distributed through the plan. While the plan estimated ° $7,553.00 distribution, said amount was no more than just that, an estimate. The confirme plan’s language makes clear that the possibility of receiving no proceeds from the Tort Clai
3 || was taken under consideration and account for. 9 Additionally, the confirmed plan acknowledged the possibility of receiving more tha 10 $7,553.00. If the non exempt amount received would have totaled more than $7,553.00, the lum sum amount would have been amended to the lesser of the non exempt amount received or th amount needed to pay 100% to general unsecured creditors and 6% for present value. However 14 ||the non exempt amount does provide for greater distribution, as only $1.00 is available fo 15 || payment into the plan. It is evident that the confirmed plan did not foresee the possibility of receiving less th $7,553.00. However, once the reality the situation became apparent, the Trustee acknowledge 19 and acquiesced to the lump sum payment of $1.00 for distribution through the plan. In a join 20 || motion with the Debtors, the Trustee agreed to the following stipulations: at a. the tort claim proceeds of joint debtor JOSEFINA CRUZ 29 MALDONADO, in the amount of $35,000.00 are to be tendered, by defendant Wal-Mart de P.R. Inc., to the Chapter 13 trustee, Mr. 23 Alejandro Oliveras Rivera. 24 b. upon receipt of the $35,000.00, the trustee shall forthwith 25 disburse to JOSEFINA CRUZ MALDONADO, the portion claimed by her as exempt, $22,447.00 and, $12,552.00 to special counsel Mr. Mr. Carlos I. Leon Camacho.
i || [Dkt. 116]. The Trustee has provided no explanation as to why he is refusing to uphold his end 0 2 the agreement, and this Court cannot justify not enforcing it according to its terms. Ul. Conclusion
5 WHEREFORE, IT IS ORDERED that Debtors’ Motion to Withdraw Settlement Funds i 6 || Compliance with Settlement and to Deem the Plan Base Completed is GRANTED, Mr. Leén’ ’ Motion to Withdraw Consigned Funds as Payment of Legal Fees is DENIED, and Trustee’ ° Motion Outlining Controversy and Motion to Dismiss is DENIED. The Clerk of Court wil tender a check in the amount of $35,000.00, plus any and all interests accrued, to the order o 11 || Chapter 13 trustee, Mr. Alejandro Oliveras Rivera. Once deposited, the Trustee is to tender: (1) 12 || check in the amount of $12,552.00 to the order of special counsel Carlos I. Leén Camacho; (2) *3 || check in the exempted amount of $22,447.00 to the order of the Debtors; and (3) distribute th . remaining $1.00 in accordance with the confirmed plan.
16 In San Juan, Puerto Rico this 14th day of October, 2014. 17 18
Brian K. Tester 21 U.S. Bankruptcy Judge 22 23 24 25