1 IN THE UNITED STATES BANKRUPTCY COURT 2 FOR THE DISTRICT OF PUERTO RICO
3 IN RE: CASE NO. 23-02072 (ESL)
4 MARIA ELENA ORTIZ CORREA CHAPTER 13
5 Debtor 6 FILED AND ENTERED 8/7/2024 7 OPINION AND ORDER 8 This case is before the court upon the Motion to Dismiss for Bad Faith (Two-party 9 Dispute) filed by Franklin Credit Management Corporation as servicing agent for Wilmington 10 Fund Society, FSB, not in its individual capacity but solely as Certificate Trustee for Bosco Credit 11 II Series 2017-1 (“Franklin”) (dkt. #53)1 (the “Motion to Dismiss”), seeking the dismissal with 12 prejudice of the Debtor’s bankruptcy petition for bad faith; the Debtor’s Reply and Opposition to 13 Motion to Dismiss for Alleged Bad Faith Filed by [Franklin] Alleging Two Party Dispute (dkt. 14 #57) (the “Opposition”); and Franklin’s Motion in Compliance with Order to File Proposed 15 Findings of Facts and Conclusions of Law in Connection with Hearing of Motion to Dismiss for 16 Bad Faith (Two-party Dispute) (dkt. #64) (the “Proposed Findings of Facts and Conclusions of 17 Law”). 18 There is also a related adversary proceeding, Adv. Proc. No. 23-00063 (the “Adversary 19 Proceeding”), with various motions pending, including a request for dismissal by Franklin (Adv. 20 Proc. No. 23-00063, dkt. #15), the Debtor’s opposition thereto (Adv. Proc. No. 23-00063, dkt. 21 #19), and Franklin’s reply (Adv. Proc. No. 23-00063, dkt. #26), and requests for summary 22 judgment by both the Debtor (Adv. Proc. No. 23-00063, dkt. #19) and Franklin (Adv. Proc. No. 23 23-00063, dkt. #27) with their corresponding oppositions (Adv. Proc. No. 23-00063, dkt. #27, 24 #38). 25 26 27 1 Unless otherwise stated, docket entries shall refer to the main bankruptcy case, Bankr. Case No. 23-2072. 1 For the reasons discussed below, the Motion to Dismiss is GRANTED, and the main 2 bankruptcy case is dismissed with a twelve (12) month bar to re-file. Consequently, the Adversary 3 Proceeding, Adv. Proc. No. 23-00063, is also dismissed. 4 Jurisdiction 5 The court has jurisdiction pursuant to 28 U.S.C. §§1334(b) and 157(a). This is a core 6 proceeding pursuant to 28 U.S.C. §§157(a) and (b). Venue of this proceeding is proper under 28 7 U.S.C. §§1408 and 1409. 8 Procedural Background 9 A. The Main Bankruptcy Case, Bankr. Case No. 23-02072 10 1. This is not the Debtor’s first bankruptcy case. She has two (2) prior bankruptcy 11 petitions filed in 2011 and 2012 (see, the “First Bankruptcy Case”, Bankr. Case No. 11-04551; 12 and the “Second Bankruptcy Case”, Bankr. Case No. 12-01990). 13 2. The Debtor filed the instant voluntary Chapter 13 petition on July 6, 2023 (dkt. 14 #1) (the “Third Bankruptcy Case”). 15 3. Debtor filed, and thereafter amended, the required schedules on July 31, 2023 (dkt. 16 #20, #25). 17 4. In Schedule A/B, the Debtor identified two (2) properties: one located in Urb. Vista 18 al Mar in Cataño, Puerto Rico, which the Debtor owns in its entirety and attributes a value of 19 $90,000.00 (the “Property”); and one in Urb. Sierra Linda in Bayamón, Puerto Rico, which is part 20 of an inheritance, and in which the Debtor has a partial ownership valued at $12,749.00 (the 21 “Inheritance Property”) (dkt. #25, p. 2). 22 5. In the schedules initially filed, the Debtor did not identify any unsecured creditors 23 and only identified Wilmington Savings Fund Society as a secured creditor (dkt. #20, pp. 14 and 24 12-13). The Debtor later amended Schedule D to include Banco Popular de Puerto Rico (“Banco 25 Popular”) as a secured creditor with claim secured by a mortgage over the Inheritance Property 26 of $11,132.55 (dkt. #25, p. 8). The Debtor also amended Schedule D as to Wilmington Savings 27 Fund Society’s secured claim, disclosing the same as a disputed, noncontingent, liquidated claim 1 of $167,441.50 with a secured portion of $90,000.00 and an unsecured portion of $77,441.50 (id. 2 at p. 9).2 3 6. The Debtor did not identify any executory contracts or unexpired leases in 4 Schedule G (see, dkt. #20, p. 15). 5 7. There are two (2) proofs of claim filed in the Claims Register. The first is a proof 6 of claim filed by Franklin in the secured amount of $167,441.50 corresponding to a mortgage 7 (see, Claims Register, POC #1-1). The second, is a proof of claim filed by Capital One N.A. in 8 the unsecured amount of $437.99 related to a credit card (see, Claims Register, POC #2-1). 9 8. The filing deadline for proofs of claims, including that for governmental units, has 10 since expired with no additional filings (see, Notice of Bankruptcy Case, dkt. #14). 11 9. On August 11, 2023, the Debtor filed an Objection to Claim Number 1 of Franklin 12 Credit Management Corporation (dkt. #24) (the “Objection to Claim”),3 alleging that the 13 mortgage over the Property was not recorded and, thus, Franklin’s lien is inexistent. The Debtor 14 further argues that Franklin obtained a judgment in its favor in the State Court Foreclosure Case, 15 infra, because Franklin and the State Court did not understand the extent of the Debtor’s prior 16 discharge and the provisions of the Bankruptcy Code, and that the Debtor received a Notice for 17
18 2 The Debtor had previously identified Wilmington Savings Fund Society’s claim as a disputed, noncontingent, liquidated claim of $167,441.50 with a secured portion of $80,000.00 and an unsecured portion of $87,441.50 (see, 19 dkt. #20, pp. 12-13). 3 In the motion, the Debtor included six (6) exhibits, five (5) of which are in Spanish. Theafter, the Debtor provided 20 English translations of the following documents at dkt. #57: Municipal Ordinance #6 Series 2016-2017 dated July 13, 2016, and Karibe printout for property number 981-272-BY04. The Debtor did not provide English translations for 21 the following documents: Homestead Deed dated February 6, 2012, Certification by the Property Registry No. 123- Febrero-2012 dated February 17, 2012, and Karibe printout for property number 368-251-BY04. “It is well settled that the law incontrovertibly demands that federal litigation in Puerto Rico be conducted in English”, in accordance 22 with 48 U.S.C. §864. Banco Popular de P.R. v. Santiago-Salicrup, 630 B.R. 374, 378 (D.P.R. 2021), citing Estades- Negroni v. Assocs. Corp. of N. Am., 359 F. 3d 1, 2-3 (1st Cir. 2004). See also 48 U.S.C. §864 (“All pleadings and 23 proceedings in the United States District Court for the District of Puerto Rico shall be conducted in the English language.”); L. Civ. R. 5(c) (“All documents not in the English language which are presented or filed, whether as 24 evidence or otherwise, must be accompanied by a certified translation into English…”); P.R. LBR 9070-1(c) (“All Exhibits and documentary evidence in Spanish or other language shall be fully translated to the English language by 25 a certified translator.”); In re Bernier, 2022 WL 17096264, at *6-7, 2022 Bankr. LEXIS 3283, at *17-18 (Bankr. D.P.R. 2022) (holding that documents not in the English language should not be considered). By not providing the 26 English translations of the aforementioned documents, the Debtor failed to comply with 48 U.S.C. §864, L. Civ. R. 5(c), and P.R. LBR 9070-1(c). This court will only consider the merits of those documents filed in the English 27 language. 1 Sale of the Property “with the sole purpose of executing an inexistent and unrecordable lien at the 2 time of her discharge in [a prior bankruptcy case] and debt discharged that intends to collect in 3 the instance Bankruptcy case” (dkt. #24, p. 4).4 4 10. On August 14, 2023, the Debtor filed a Chapter 13 Plan dated July 18, 2023 (dkt. 5 #29) (the “Chapter 13 Plan”) with a base of $9,612.00, to be paid in thirty-six (36) installments 6 to the Chapter 13 Trustee with an additional $5,000.00 payment to be made “before month 33” 7 “from the results of case at local court” (id., p. 2). The Debtor included a request for valuation of 8 Franklin’s claim, identified the secured amount as $0.00 (id., p. 3), and included a note that reads 9 “[i]n regards to [Franklin] the claim has been objected and adversary filed because the Debtor 10 had a previous Order of Discharge of the guarantee that was not registered neither perfected” 11 (id.). 12 11. On September 1, 2023, Franklin filed an Objection to Confirmation of Plan dated 13 July 18, 2023, and filed on August 14, 2023 (dkt. #31) arguing that the Chapter 13 Plan (dkt. #29) 14 fails to provide for an acceptable treatment for curing the default to Franklin’s secured claim and 15 does not meet the requirements of 11 U.S.C. §1325(a)(5)(B)(i)(I)(aa) and (a)(6). 16 12. On that same date, September 1, 2023, Franklin filed an Answer to Objection to 17 Claim Number 1 (dkt. #32) arguing that the mortgage deed securing its claim was presented at 18 the Puerto Rico Property Registry (the “Property Registry”) on April 4, 2011, and registered on 19 April 3, 2019. Consequently, Franklin argues that it has a perfected lien. In support of its position, 20 Franklin submitted a Title Search and an uncertified print-out of Karibe, the digital platform of 21 the Puerto Rico Real Property Digital Registry (“Registro Inmobiliario Digital de Puerto Rico” 22 in Spanish).5 Franklin also argues that the Debtor used an improper procedural vehicle to 23
24 4 As a matter of background, Franklin filed an in rem mortgage foreclosure action against the Debtor before the Puerto Rico Court of First Instance (the “State Court”) in civil case no. BY2020CV03174 (the “State Court Foreclosure 25 Case”). On March 23, 2021, the State Court entered a foreclosure judgment against the Debtor in the State Court Foreclosure Case. 26 5 Because the Karibe print-out was submitted in Spanish and no certified English translation was provided, Franklin failed to comply with 48 U.S.C. §864, L. Civ. R. 5(c), and P.R. LBR 9070-1(c), and the document will not be 27 considered by this court. 1 determine the validity, priority, and/or extent of Franklin’s claim, which must be pursued and 2 adjudicated by way of an adversary proceeding pursuant to Fed. R. Bankr. P. 7001(2). 3 13. On September 20, 2023, the court entered an Order setting a Pretrial Conference 4 to address the Debtor’s Objection to Claim and Franklin’s response thereto (dkt. #40), but it was 5 later continued without a date pending a decision on the Adversary Proceeding (see, dkt. #49).6 6 14. On December 19, 2023, Franklin filed the Motion to Dismiss (dkt. #53), to which 7 the Debtor filed the Opposition on January 31, 2024 (dkt. #57). 8 15. On February 5, 2024, the court entered an Order setting an evidentiary hearing to 9 consider the Motion to Dismiss and the Opposition on May 14, 2024 (dkt. #58). Therein, the court 10 ordered the parties to file proposed findings of fact and conclusions of law seven (7) days prior 11 to the evidentiary hearing. The court advised the parties that it would not hold the evidentiary 12 hearing if they failed to timely submit the proposed findings of fact and conclusions of law. In 13 compliance, Franklin filed the Proposed Findings of Facts and Conclusions of Law on May 6, 14 2024 (dkt. #64) and submitted the related documents on May 7, 2024 (dkt. #66). The Debtor failed 15 to comply with the Order dated February 5, 2024 (dkt. #58), and the hearing was vacated and set 16 aside, and the contested matters before the court in the main bankruptcy case were deemed 17 submitted and taken under advisement (dkt. #67). 18 B. The Adversary Proceeding, Adv. Proc. No. 23-00063 19 16. On August 11, 2023, the Debtor filed the Adversary Proceeding against Franklin 20 regarding the validity, priority or extent of lien or other interest of Franklin’s claim and seeking 21 both a declaratory judgment and injunctive relief (dkt. #23; Adv. Proc. No. 23-00063, dkt. #1). In 22 sum, the Debtor alleges that she is the owner of the Property, that she filed a prior bankruptcy 23 petition in 2012 (Bankr. Case No. 12-01990) in which the court granted her homestead exemption 24 over said Property (Bankr. Case No. 12-01990, dkt. #73) and the Debtor was granted a discharge 25 (Bankr. Case No. 12-01990, dkt. #103). The Debtor alleges that there was an issue with the 26 recordation of the Property (and others in the same residential development or subdivision 27 6 The procedural background of the Adversary Proceeding is discussed in Section B below. 1 (“urbanización” in Spanish)) because the lot number where it was built was different from the lot 2 number it was registered under in the Property Registry. The forgoing was the object of a class 3 action in which the Debtor was a claimant. As a result of an Ordinance approved by the 4 Municipality of Cataño in 2016, the properties in the residential development – including the 5 Property – were recorded in a new parcel of land, which was different from the original parcel. 6 The Debtor further argues that Franklin knew that the debt on the Property was discharged in the 7 Second Bankruptcy Case “for lack of recording at the time of the [prior] bankruptcy petition” and 8 still filed the State Court Foreclosure Case to execute “an alleged lien that was inexistent at the 9 time of the Debtor’s obtaining her discharge” and “collect their debt thru the alleged inexistant 10 and unrecorded guarantee” (Adv. Proc. No. 23-00063, dkt. #1, p. 7, ¶14). The Debtor alleges that 11 Franklin violated the discharge order entered in the Second Bankruptcy Case and has acted in 12 “bad faith, willful intention, and complete temerity” and that she “is suffering distress for the 13 possibility of losing her home and homestead” (id. at pp. 7-8, ¶¶17-18). The Debtor requests an 14 award for compensatory damages in the amount of $150,000.00, plus punitive damages, 15 attorneys’ fees, and costs. 16 17. On October 10, 2023, Franklin responded to the Complaint with a Motion to 17 Dismiss for failure to state a claim for which relief can be granted under Fed. R. Civ. P. 12(b)(6) 18 (Adv. Proc. No. 23-00063, dkt. #15) (the “AP Motion to Dismiss”). Later, on November 20, 2023, 19 the Debtor filed a Reply and Opposition to Motion to Dismiss and Request for Summary Judgment 20 (Adv. Proc. No. 23-00063, dkt. #19) (“Opposition and Motion for Summary Judgment”).7 21 18. On December 13, 2023, Franklin filed a Sur-Reply to Plaintiff’s Opposition to 22 Motion to Dismiss (Adv. Proc. No. 23-00063, dkt. #26) (the “Sur-Reply”) and a Reply to 23 Plaintiff’s Request for Summary Judgment and Request for Judgment in Favor of Defendant 24 7 Amongst the exhibits in the Opposition and Motion for Summary Judgment, the Debtor included three (3) exhibits 25 in Spanish. The Debtor provided Spanish translations for two (2) of these exhibits – a Karibe printout for property 981-272-BY04 and Municipal Ordinance #6 Series 2016-2017 dated July 13, 2016 – in Adv. Proc. 23-00063, dkt. 26 #38. Because the Debtor did not provide an English translation for the Certification by the Property Registry No. 123- Febrero-2012 dated February 17, 2012, the Debtor failed to comply with 48 U.S.C. §864, L. Civ. R. 5(c), and P.R. 27 LBR 9070-1(c). As previously stated, this court will only consider the merits of those documents filed in the English language. 1 (Adv. Proc. No. 23-00063, dkt. #27) (the “Reply to Motion for Summary Judgment”). Franklin 2 argues in the Sur-Reply that there was no issue as to lack of tract, that the Debtor failed to file an 3 adversary proceeding to void Franklin’s lien in the Second Bankruptcy Case and that she was not 4 exempt from filing such adversary proceeding, that Scotiabank Puerto Rico (“Scotiabank”) 5 (Franklin’s predecessor in interest) presented the mortgage for recordation in the Property 6 Registry before the Debtor filed the Second Bankruptcy Case and, as such, Franklin’s security 7 interest was recorded and validly perfected–– prior to the filing of Debtor’s Second Bankruptcy 8 Case, and that Franklin’s in rem foreclosure action survived the discharge entered on August 19, 9 2014, in the Second Bankruptcy Case. Franklin argues in the Reply to Motion for Summary 10 Judgment that the Debtor failed to comply with Fed. R. Civ. P. 56(b) because she did not include 11 a statement of uncontested material facts or a memorandum of law with her Motion for Summary 12 Judgment, that the facts and conclusions of law are mixed together, and that the Debtor included 13 multiple exhibits in Spanish without certified English translations. Franklin argues that this court 14 should grant summary judgment in Franklin’s favor and dismiss the Adversary Proceeding. 15 19. The court held a status conference on December 15, 2023, in which neither the 16 Debtor nor her counsel appeared and did not request to be excused (see, Adv. Proc. 23-00063, 17 dkt. #29). There, the court stated the three (3) main challenges that the Debtor faces to prevail in 18 this case: that the Debtor did not file an adversary proceeding in the Second Bankruptcy Case 19 challenging Franklin’s lien; that the Second Bankruptcy Case was reopened at Franklin’s request 20 and the court granted its motion for reconsideration of the order disallowing the claim filed by 21 Franklin; and that Franklin obtained a final judgment in the State Court Foreclosure Case to 22 foreclose on its lien. The court ordered the Debtor to show cause why sanctions should not be 23 imposed against her for failure to appear at the hearing (id.). On January 2, 2024, the Debtor 24 complied with the court’s order and excused her failure to appear at the hearing (Adv. Proc. No. 25 23-00063, dkt. #32), which the court granted and did not impose sanctions (Adv. Proc. No. 23- 26 00063, dkt. #34). 27 1 20. On January 31, 2024, the Debtor filed a Sur-Reply and Opposition to Defendant 2 Motion Requesting to Grant Summary Judgment to Defendant and Reply to Sur-Reply to Our 3 Plaintiff Opposition to Motion to Dismiss Filed by Defendant (Adv. Proc. No. 23-00063, dkt. 4 #38) (“Debtor’s Response”), reiterating her position that Franklin’s lien was not pending 5 registration when the Debtor filed the Second Bankruptcy Case, and that the purchase and 6 mortgage deeds had expired and were declared null and void by the Property Registrar at the time 7 the court entered the discharge order in said case. The Debtor submitted as exhibits certified 8 English translations of various documents previously included in Spanish (see, Adv. Proc. No. 9 23-00063, dkt. #38-1, #38-2, #38-3, #38-4). 10 21. The court scheduled an evidentiary hearing for May 14, 2024, to consider the AP 11 Motion to Dismiss, the Opposition and Request for Summary Judgment, Franklin’s Reply, 12 Franklin’s Reply to the Request for Summary Judgment, and Debtor’s Response. The court 13 ordered the parties to submit proposed findings of fact and conclusions of law seven (7) days prior 14 to the hearing and advised them that it will not hold the evidentiary hearing without timely filed 15 proposed findings of facts and conclusions of law (Adv. Proc. No. 23-00063, dkt. #39). 16 22. On March 27, 2014, the Debtor filed a Request for Consolidation Pursuant Rule 17 7042 of the Bankruptcy Rules and Rule 42 of the Federal Rules of Civil Procedure (Adv. Proc. 18 No. 23-00063, dkt. #41) requesting to consolidate the Adversary Proceeding with Adv. Proc. No. 19 23-00031, which is related to the instant case because it concerns a property in the same 20 residential development or subdivision as the Property (the “Request for Consolidation”).8 21 Franklin filed an Opposition to Plaintiff’s Request for Consolidation Pursuant to Rule 7042 of 22 the Federal Rules of Civil Procedure on April 4, 2024 (Adv. Proc. No. 23-00063, dkt. #43) 23 (“Opposition to Consolidation”). 24 25
26 8 Adv. Proc. No. 23-00031 was filed prior to the filing of the instant adversary proceeding (Adv. Proc. No. 23-00063) and is currently pending before Judge Mildred Cabán Flores. Defendants in Adv. Proc. No. 23-00031 are Banco 27 Popular de Puerto Rico, Velma E. Díaz Carrasquillo, Yanira Millard, and Noreen Wiscovitch Rentas, who is the Chapter 7 Trustee in the main bankruptcy case, Bankr. Case No. 13-10532. 1 23. After the deadline for the Debtor to reply to the Opposition to Consolidation lapsed 2 without the Debtor filing a reply, Franklin filed a Motion Requesting Entry of Order Denying 3 Plaintiff’s Motion to Consolidate (Adv. Proc. No. 23-00063, dkt. #44), which is sub judice. 4 24. On May 7, 2024, Franklin filed a Motion in Compliance with Court Order to 5 Submit Franklin’s Proposed Statements of Fact and Conclusions of Law (Adv. Proc. No. 23- 6 00063, dkt. #45) with proposed findings of fact referencing supporting documents, and its 7 proposed conclusions of law supporting its position. 8 25. Upon the Debtor’s failure to comply with the court’s Order at docket number 39, 9 on May 8, 2024, the court issued an Order Vacating Hearing vacating and setting aside the 10 evidentiary hearing scheduled for May 14, 2024, providing that the contested matters before the 11 court are deemed submitted and taken under advisement and establishing that no further pleadings 12 will be allowed (Adv. Proc. No. 23-00063, dkt. #46). 13 26. On May 14, 2024, the Debtor filed a Motion for Reconsideration of Order (Adv. 14 Proc. No. 23-00063, dkt. #48), a Motion in Compliance of Order of Plaintiff Proposed Statement 15 of Facts and Conclusions of Law with multiple exhibits (Adv. Proc. No. 23-00063, dkt. #49), and 16 an Objection to [Franklin’s] Opposition to Consolidation (Adv. Proc. No. 23-00063, dkt. #50), 17 arguing that the facts and the issues in the adversary proceedings are the same and, thus, they 18 involve common questions of law and fact. 19 27. On May 24, 2024, Franklin filed an Opposition to Debtor’s Motion Requesting 20 Reconsideration of Order (Adv. Proc. No. 23-00063, dkt. #51), arguing that the Debtor’s Motion 21 for Reconsideration does not include allegations to support a request for reconsideration under 22 Fed. R. Civ. P. 59 or 60, to the effect that the court committed a manifest error of law or related 23 to the existence of newly discovered evidence. Franklin also argues that the Motion for 24 Reconsideration is untimely, that this is not the first time that the Debtor has failed to comply 25 with a court order, and that the Debtor is attempting to stall the proceedings from moving forward. 26 27 1 Issues 2 The issues before the court are whether there is cause to dismiss pursuant to 11 U.S.C. 3 §1307 for bad faith and because the case constitutes a two-party dispute wherein the doctrine res 4 judicata is applicable in light of this court’s determination in the Second Bankruptcy Case and 5 the State Court Foreclosure Case. 6 Position of the Parties 7 A. Franklin’s Position 8 In the Motion to Dismiss, Franklin argues the Debtor filed the Third Bankruptcy Case in 9 bad faith as this is a two-party dispute between the Debtor and Franklin because the Debtor has 10 sufficient liquid assets to pay Capitol One, N.A.’s unsecured claim in the amount of $437.99 in 11 full, and Franklin is the only other pending creditor. 12 Franklin further argues that, in the Second Bankruptcy Case, the court did not discharge 13 Franklin’s in rem mortgage foreclosure cause of action, which was later adjudicated in the State 14 Court Foreclosure Case through a foreclosure judgment against the Debtor notified to the parties 15 on March 23, 2021. Franklin argues that both the Second Bankruptcy Case and the foreclosure 16 judgment in the State Court Foreclosure Case constitute res judicata and contends that the Debtor 17 is trying to relitigate issues that have already been adjudicated. 18 B. Debtor’s Position 19 In the Opposition, the Debtor argues that there is no two-party dispute, and that Franklin 20 cannot collect the debt because it “was previously discharged in case no. 12-01990” (dkt. #57, 21 ¶9) or enforce the foreclosure judgment over the Property because the mortgage was not pending 22 recordation when the Second Bankruptcy Case was filed. Thus, Franklin lacks standing as a 23 creditor in this case. 24 Uncontested Material Facts 25 After reviewing the record and Franklin’s Proposed Findings of Facts and Conclusions 26 of Law (dkt. #64), the court finds that the following material facts are uncontested: 27 1 A. The First and Second Bankruptcy Case, and the State Court Foreclosure Case 2 1. This is not the Debtor’s first bankruptcy case as she has filed two (2) prior 3 bankruptcy petitions (see, Bankr. Case No. 11-04551, dkt. #1, and Bankr. Case No. 12-01990, 4 dkt. #1; see also, dkt. 57, ¶3, dkt. #64, Proposed Finding of Fact #2). 5 2. The Debtor’s First Bankruptcy Case was filed under Chapter 13 on May 31, 2011, 6 and voluntarily dismissed on March 5, 2012 (see, Bankr. Case No. 11-04551, dkt. #19, #20). A 7 confirmation order had previously been entered (id., at dkt. #15). 8 3. The Debtor’s Second Bankruptcy Case was filed under Chapter 13 on March 16, 9 2012 (see, Bankr. Case No. 12-01990, dkt. #1). 10 4. On April 3, 2012, Scotiabank, Franklin’s predecessor in interest, filed a proof of 11 claim in the secured amount of $90,302.08 corresponding to a mortgage secured by the Property 12 (see, Bankr. Case No. 12-01990, Claims Register, POC #1-1). 13 5. On April 16,2012, the Chapter 13 Trustee filed an Objection to Claim #01-1 filed 14 by Scotiabank de Puerto Rico, alleging that “no evidence of perfection of claimed security interest 15 was filed with the proof of claim” as required in Fed. R. Bankr. P. 3001 (see, Bankr. Case No. 16 12-01990, dkt. #20). 17 6. On May 3, 2012, Scotiabank filed a response to the objection to claim (see, Bankr. 18 Case No. 12-01990, dkt. #23). 19 7. On May 9, 2012, the court entered an Order denying the Chapter 13 Trustee’s 20 objection stating that “[t]he supporting documents to the proof of claim show that the mortgage 21 deed was presented before the Registry of Property” (Bankr. Case No. 12-01990, dkts. #31). 22 8. On June 22, 2012, the Debtor filed an Objection to Claim No. 1 filed by Scotiabank 23 de Puerto Rico, alleging that certain deeds, including the mortgage deed, had been withdrawn 24 from the Property Registry and submitting a partial certification therefrom (Bankr. Case No. 12- 25 01990, dkt. #37). 26 9. On June 22, 2012, the Chapter 13 Trustee filed a Motion for Reconsideration of 27 Order Entered on May 9, 2012, requesting reconsideration of the order denying their objection to 1 Scotiabank’s claim on the same grounds stated in Debtor’s objection to claim (see, Bankr. Case 2 No. 12-01990, dkt. #39). 3 10. On July 19, 2012, Scotiabank filed a Response to “Motion for Reconsideration of 4 Order Entered on May 9, 2012” (see, Bankr. Case No. 12-01990, dkt. #43). 5 11. On November 28, 2012, the court held a hearing on confirmation in which it 6 granted the Debtor’s objection to Scotiabank’s claim and determined that Scotiabank had an 7 unsecured claim based on a partial certification submitted by the Debtor to the court (see, Minute 8 Entry, Bankr. Case No. 12-01990, dkt. #67). 9 12. After various procedural events, on May 7, 2014, the Debtor filed a Notice of 10 Conversion to Chapter 7 (Bankr. Case No. 12-01990, dkt. #86). 11 13. On May 8, 2014, the Second Bankruptcy Case was converted from Chapter 13 to 12 Chapter 7 (Bankr. Case No. 12-01990, dkt. #88). 13 14. On June 17, 2014, the Chapter 7 Trustee filed a Notice of Abandonment of Property 14 and Request for Clerk to Notice abandoning the Property (Bankr. Case No. 12-01990, dkt. #95), 15 and a Report of No Distribution (Bankr. Case No. 12-01990, dkt. #96, #97). 16 15. On August 19, 2014, the Debtor received a discharge under 11 U.S.C. §727 17 (Bankr. Case No. 12-01990, dkt. #103) and the estate was closed (Bankr. Case No. 12-01990, dkt. 18 #104). 19 16. On November 21, 2016, Scotiabank filed a Motion to Reopen Case and for 20 Reconsideration of the Disallowance of Proof of Claim No. 1 under Section 502(j) of the 21 Bankruptcy Code (Bankr. Case No. 12-01990, dkt. #110) (the “Motion to Reopen and for 22 Reconsideration”) arguing, inter alia, that the Debtor misrepresented Scotiabank’s security 23 interest to the court and requesting that the court allow its claim as secured under Section 502(j) 24 of the Bankruptcy Code. 25 17. Although the Debtor requested, and was granted, an extension of time to respond 26 (Bankr. Case No. 12-01990, dkt. #112, #113), the extended deadline lapsed and Scotiabank’s 27 Motion to Reopen and for Reconsideration went unopposed. 1 18. Consequently, on February 2, 2017, the court entered an Order granting 2 Scotiabank’s request to reopen the Second Bankruptcy Case (Bankr. Case No. 12-01990, dkt. 3 #116) and an Order granting Scotiabank’s request for an entry of order granting the Motion to 4 Reopen and for Reconsideration as unopposed (Bankr. Case No. 12-01990, dkt. #117). 5 19. On March 10, 2017, the Second Bankruptcy Case was again closed (see, Bankr. 6 Case No. 12-01990). 7 20. On October 12, 2020, Franklin filed the State Court Foreclosure Case and therafter 8 obtained an in rem foreclosure judgment against the Debtor in Civil Case No. BY2020CV03174, 9 before the Court of First Instance of the Commonwealth of Puerto Rico, Bayamón Superior 10 Court.9 11 21. An in rem foreclosure judgment was entered by the State Court on February 19, 12 2021, and was notified to the parties on March 23, 2021 (see, Adv. Proc. No. 23-00063, dkt. #45- 13 4, p. 5). 14 22. The in rem foreclosure judgment was affirmed by the Puerto Rico Court of 15 Appeals on November 5, 2021, in Case No. KLAN202100576 (see, Adv. Proc. No. 23-00063, 16 dkt. #45-4, p. 5). 17 23. On February 8, 2023, the State Court entered an Order to Enforce Judgment and 18 Sale of Assets ordering the sale of the Property at public auction (see, Adv. Proc. No. 23-00063, 19 dkt. #45-4, pp. 5-6). 20 24. On April 19, 2023, the Debtor filed an Urgent Motion for Reopening of the 21 Instance[sic] Bankruptcy Cae[sic] Pursuant to 11 USC §350 of the Bankruptcy Code Due to 22 Violation of Order of Discharge and Pursuant to Bankruptcy Rule 5010 in the Second Bankruptcy
23 9 The extent to which a court may consider extrinsic evidence outside the four corners of the complaint depends upon whether that record, or the facts within it, are susceptible to judicial notice under Fed. R. Evid. 201. See Freeman v. 24 Town of Hudson, 714 F.3d 29, 36 (1st Cir. 2013) (citations omitted) (“Under certain ‘narrow exceptions,’ some extrinsic documents may be considered without converting a motion to dismiss into a motion for summary judgment. 25 These exceptions include ‘documents the authenticity of which are not disputed by the parties; ... official public records; ... documents central to plaintiffs' claim; [and] ... documents sufficiently referred to in the complaint.’”). The 26 docket of the State Court Foreclosure Case and the Order to Enforce Judgment and Sale of Assets included by Franklin as exhibits to its Motion in Compliance with Court Order to Submit Franklin’s Proposed Statements of Fact and 27 Conclusions of Law in the related adversary proceeding (Adv. Proc. No. 23-00063, dkt. #45-4) fit into these enumerated categories. The court takes judicial notice thereof under Fed. R. Evid. 201. 1 Case (the “Emergency Motion to Reopen Chapter 7 Case”) (Bankr. Case No. 12-01990, dkt. 2 #121) stating, inter alia, that Scotiabank “willfully and intentionally, obtained a judgment in their 3 favor” in the State Court notwithstanding Debtor’s discharge (id.). 4 25. On that same date, April 19, 2023, the Debtor filed an adversary proceeding 5 against Franklin and others seeking injunctive relief (Bankr. Case No. 12-01990, dkt. #123; Adv. 6 Proc. No. 23-00029, dkt. #1). 7 26. On April 20, 2023, the court denied the Debtor’s Emergency Motion to Reopen 8 Chapter 7 Case (Bankr. Case No. 12-01990, dkt. #124), stating that the Second Bankruptcy Case 9 was opened and the Motion to Reopen and for Reconsideration of the disallowance of 10 Scotiabank’s claim was granted as unopposed. 11 27. Adversary proceeding Adv. Proc. No. 23-00029 was closed on May 8, 2023 (see, 12 Adv. Proc. No. 23-00029). 13 B. The Third Bankruptcy Case 14 28. The Debtor filed the instant voluntary Chapter 13 petition on July 6, 2023 (dkt. 15 #1; see also, dkt. #53, ¶1; dkt. #64, Proposed Finding of Fact #1). 16 29. The Debtor filed the required schedules on July 31, 2023 (dkt. #20). 17 30. In Schedule A/B, the Debtor identified two (2) properties: one located in Urb. Vista 18 al Mar in Cataño, Puerto Rico, which the Debtor owns and has a value of $90,000.00; and one in 19 Urb. Sierra Linda in Bayamón, Puerto Rico, which is part of an inheritance and in which the 20 Debtor has a partial ownership for a value of $12,749.00 (dkt. #25, p. 2; see also, dkt. #64, 21 Proposed Finding of Fact #8 and #11). 22 31. The Debtor represented that the Inheritance Property is expected to be sold and 23 that there is an “option to contract” (dkt. #30, p. 3). 24 32. In the schedules initially filed, the Debtor did not identify any unsecured creditors 25 and only identified Wilmington Savings Fund Society as a secured creditor (see, dkt. #20, p. 14 26 and 12-13). 27 1 33. The Debtor later amended Schedule D to include Banco Popular as a secured 2 creditor with a mortgage on the Inheritance Property for $11,132.55 with a collateral of 3 $12,749.00 (dkt. #25, p. 8). 4 34. The Debtor also amended the information provided as to Wilmington Savings 5 Fund Society’s secured claim as a disputed, noncontingent, liquidated claim of $167,441.50 with 6 a secured portion of $90,000.00 and an unsecured portion of $77,441.50 (id. at p. 9). 7 35. The Debtor had previously identified Wilmington Savings Fund Society’s claim 8 as a disputed, noncontingent, liquidated claim of $167,441.50 with a secured portion of 9 $80,000.00 and an unsecured portion of $87,441.50 (dkt. #20, pp. 12-13). 10 36. The Debtor did not identify any executory contracts or unexpired leases in 11 Schedule G (see, dkt. #20, p. 15). 12 37. There are two (2) proofs of claim filed in the Claims Register of the Third 13 Bankruptcy Case (see, Claims Register; dkt. #64, Proposed Finding of Fact #7): POC #1 filed by 14 Franklin for the secured amount of $167,441.50 corresponding to a mortgage secured by the 15 Property (Claims Register, POC #1-1); and POC #2 filed by Capital One N.A. for an unsecured 16 claim of $437.99 related to a credit card (Claims Register, POC #2-1). 17 38. The filing deadline for proof of claims, including that for governmental units, has 18 since expired with no additional filings (see, Notice of Bankruptcy Case, dkt. #14). 19 39. Per Schedule I, the Debtor is currently employed as a Store Attendant for the 20 Municipality of Bayamón and receives Social Security benefits as well as benefits from the 21 Nutrition Assistance Program (“PAN” for its Spanish acronym) and help from her daughter (dkt. 22 #25, pp. 12-13; dkt. #64, Proposed Finding of Fact #9). 23 40. Per Schedule J, the Debtor’s monthly disposable income is $267.86 (dkt. #25, p. 24 15). 25 26 27 1 Applicable Law and Analysis 2 (A) Dismissal under Section 1307 of the Bankruptcy Code, 11 U.S.C. §1307 3 “Section 1307 governs dismissal of a chapter 13 case.” Benoit v. Deutsche Bank Nat'l 4 Trust Co. (In re Benoit), 564 B.R. 799, 805 (1st Cir. B.A.P. 2017), quoting In re Baril, No. 09- 5 20112, 2015 WL 1636442, at *2 (Bankr. D. Me. 2015). “Section 1307(c) provides that, ‘on 6 request of a party in interest or the United States trustee and after notice and a hearing,’ the court, 7 ‘for cause,’ may dismiss a case under chapter 13 or convert the case to chapter 7, ‘whichever is 8 in the best interests of creditors and the estate.’” In re Acevedo, 2014 WL 1664255, at *3 (Bankr. 9 D. Mass. 2014) (quoting 11 U.S.C. §1307(c)). The moving party under §1307(c) bears the burden 10 of proof. See, In re Stevenson, 583 B.R. 573, 579 (1st Cir. B.A.P. 2018), citing Zizza v. 11 Pappalardo (In re Zizza), 500 B.R. 288, 292 (1st Cir. B.A.P. 2013) (citation omitted). Dismissal 12 under §1307(c) is committed to the bankruptcy court's discretion. See In re Benoit, 564 B.R. at 13 805, citing Howard v. Lexington Invs., Inc., 284 F.3d 320, 322-323 (1st Cir. 2002). 14 “Cause for dismissal is not specifically defined in [Section] 1307, but subsection (c) sets 15 forth [a] non-exclusive list of eleven examples of cause”. In re Stevenson, 583 B.R. at 579, 16 quoting In re Acevedo, 2014 WL 1664255, at *3 (citing 11 U.S.C. §1307(c)) (citations omitted). 17 See, also, Marrama v. Citizens Bank of Mass., 549 U.S. 365, 373 (2007) (stating that §1307(c) 18 “includes a nonexclusive list of [ ] causes justifying” dismissal or conversion of a chapter 13 19 proceeding). Although bad faith is not specifically listed as a ground for dismissal, the United 20 States Supreme Court has recognized that bad faith may constitute cause for dismissal or 21 conversion. See, Marrama, 549 U.S. at 379. Similarly, the United States Bankruptcy Appellate 22 Panel for the First Circuit has observed “it is well established that lack of good faith (or bad faith) 23 is ‘cause’ for dismissal or conversion of a Chapter 13 case under §1307(c).” Sullivan v. Solimini 24 (In re Sullivan), 326 B.R. 204, 211 (1st Cir. B.A.P. 2005), citing In re Cabral, 285 B.R. 563, 573 25 (1st Cir. B.A.P. 2002). “The determination of whether the movant has established prima facie that 26 there is a lack of good faith (or bad faith) in the filing of a bankruptcy petition is a fact intensive 27 inquiry in which the court analyzes the totality of the circumstances.” In re Lopez Llanos, 578 1 B.R. 700, 707 (Bankr. D.P.R. 2017), quoting In re Costa Bonita Beach Resort Inc., 479 B.R. 14, 2 40 (Bankr. D.P.R. 2012). 3 “Bankruptcy courts generally consider the following factors in analyzing the totality of 4 the circumstances test to determine whether a Chapter 13 petition has been filed in bad faith: (1) 5 the Debtor's accuracy in stating her debts and expenses; (2) the Debtor's honesty in the bankruptcy 6 process, including whether [she] has attempted to mislead the court and whether [she] has made 7 any misrepresentations; (3) whether the Bankruptcy Code is being unfairly manipulated; (4) the 8 type of debt sought to be discharged; (5) whether the debt would be dischargeable in a Chapter 7; 9 (6) the Debtor's motivation and sincerity in seeking Chapter 13 relief; (7) the Debtor's history of 10 filings and dismissals; and (8) whether egregious behavior is present.” In re Lopez Llanos, 578 11 B.R. at 707, citing In re Cabral, 285 B.R. at 573. A finding of bad faith does not require fraudulent 12 intent by the Debtor. See, In re Fleury, 294 B.R. 1, 6 (Bankr. D. Mass. 2003). 13 Courts also routinely find Chapter 13 petitions to be in bad faith where the bankruptcy 14 case involves the resolution of a two-party dispute. See, e.g., In re Shead, 2008 WL 1995373, at 15 *3 (S.D. Tex. 2008) (“Bankruptcy law is not implicated in a two-party dispute…”); In re Fonke, 16 310 B.R. 809, 817 (Bankr. S.D. Tex. 2004) (“Courts have found a chapter 13 to be in bad faith 17 where the Debtor's reorganization essentially involves the resolution of a two-party dispute”), 18 citing In re Plagakis, 2004 WL 203090 (E.D.N.Y. 2004), In re Virden, 279 B.R. 401 (Bankr. D. 19 Mass. 2002), and In re Petersen, 228 B.R. 19 (Bankr. M.D. Fla. 1998); In re Starmark Clinics, 20 LP, 388 B.R. 729, 736 (Bankr. S.D. Tex. 2008) (noting that the court “had generally found cause 21 to dismiss cases in which it appeared that the Debtor was attempting to use the provisions of the 22 Bankruptcy Code to gain an unfair advantage in a two party dispute”); In re Anderson Oaks (Phase 23 I) Ltd. P'ship, 77 B.R. 108, 112 (Bankr. W.D. Tex. 1987) (“Two-party disputes such as this simply 24 have no place in bankruptcy”), citing In re Landmark Cap. Co., 27 B.R. 273, 281 (Bankr. D. Ariz. 25 1983), In re Gilbert Broad. Corp., 54 B.R. 2, 4 (Bankr. D.N.J. 1984), In re Volpe, 53 B.R. 46, 48 26 (Bankr. M.D. Fla. 1985); In re Turner, 2022 WL 3363687, *3 (Bankr. W.D. Tex. 2022) (finding 27 a two-party dispute where debtor had additional post-petition claims or claims for lesser 1 “insignificant” amounts than that of UBS (a pre-petition creditor), and where the filing of the 2 debtor’s bankruptcy petition did not serve a legitimate reorganizational purpose and instead 3 appeared to be intended to frustrate UBS’s attempt to litigate its alleged claim against the debtor). 4 (B) The Doctrine of Res Judicata 5 “The doctrine of res judicata bars parties from litigating or re-litigating any issue or claim 6 that has already been adjudicated in a prior case”. In re Garcia, 340 B.R. 680, 686 (Bankr. D.P.R. 7 2006), citing Suarez Cestero v. Pagan Rosa, 198 F.Supp.2d 73, 84 (D.P.R. 2002); Del Carmen 8 Tirado v. Department of Education, 296 F.Supp.2d 127, 130 (D.P.R. 2003). The doctrine 9 of res judicata serves the important purpose of preventing “the waste of judicial and party 10 resources through vexatious and multiple lawsuits and encourage[s] the rendering of consistent, 11 reliable adjudications.” In re Garcia, 340 B.R. at 686, quoting Esteves v. Ortiz Alvarez, 678 12 F.Supp. 963, 965 (D.P.R. 1988). The application of the doctrine of res judicata precludes issues 13 that were actually litigated and adjudicated, as well as those which could have been litigated and 14 adjudicated in a previous suit. See, Del Carmen Tirado, 296 F.Supp.2d at 130. 15 The United States Court of Appeals for the First Circuit has explained that a party 16 asserting a res judicata defense under Puerto Rico law must establish the following three (3) 17 elements: (i) the existence of a prior judgment on the merits that is final and unappealable; (ii) a 18 perfect identity of thing or cause between both actions and (iii) a perfect identity of the parties 19 and the capacities in which they acted. See, Boateng v. InterAmerican University, Inc., 210 F.3d 20 56 (1st Cir. 2000). 21 (C) Discussion 22 In the instant case, Franklin argues that the Debtor filed this Third Bankruptcy Case in 23 bad faith, which constitutes cause to dismiss the case under §1307. Franklin lays out several 24 grounds to support its contention, including that the Property has no equity and is burdensome to 25 the estate because Franklin’s security interest is for the aggregate amount of $167,441.50 while 26 its market value, as disclosed by the Debtor in Schedule A/B, is $90,000.00; and there are only 27 two (2) claims filed in the Claims Register of the Third Bankruptcy Case: Franklin’s secured 1 claim in the amount of $161,441.67 (Claims Register, POC #1), and an unsecured claim by 2 Capital One N.A. in the amount of $437.99 (Claims Register, POC #2). Franklin argues that, per 3 the information provided by the Debtor in the Schedules, the Debtor has sufficient funds to pay 4 Capital One N.A.’s unsecured claim and, thus, this is a rehash of an ongoing two-party dispute 5 between the Debtor and Franklin that was resolved by the State Court in the State Foreclosure 6 Case. 7 The Debtor argues that there no is two-party dispute “because Franklin [ ] is impelled to 8 be a creditor in the instance [sic] case” (dkt. #57, ¶6), and because “Franklin not only cannot 9 collect the debt because [it] was previously discharged [ ], but also it cannot enforce the 10 foreclosure of the [Property] because their alleged mortgage [ ] was not pending of recording, 11 was re-filed in other (sic) land in 2020, therefore, Franklin lacks standing as a creditor in this 12 case” (dkt. #57, ¶9). The Debtor did not address or rebut Franklin’s arguments that there is only 13 one other proof of claim filed, which is both unsecured and for substantially less than Franklin’s 14 secured claim. Instead, the Debtor recognized that there is another “valid creditor with the 15 appropriate standing in this case” when referring to Capital One, N.A. (dkt. #57, ¶10). 16 The court notes that there is only one filed claim in addition to Franklin’s POC #1 in the 17 Claims Register: an unsecured claim of $437.99 by Capital One N.A. (Claims Register, POC #2- 18 1), which is for an insignificant amount in comparison to that of Franklin. The court further notes 19 that while the Debtor discloses a secured claim by Banco Popular in the amount of $11,132.55, 20 such claim is secured by the Inheritance Property, which has a purported value of $12,749.00 21 (see, Schedule D, dkt. #25, p. 8) and is expected to be sold as per an “option to contract” (see, dkt. 22 #30, p. 3). 23 In addition, it appears that the filing of this petition is intended to frustrate Franklin’s 24 attempt to enforce the judgment in its favor from the State Court Foreclosure Case. Following the 25 issuance of the Order to Enforce Judgment and Sale of Assets by the State Court on February 8, 26 2023, the Debtor filed a motion to reopen the Second Bankruptcy Case on April 19, 2023, and 27 filed an adversary proceeding against Franklin (Bankr. Case No. 12-01990, dkt. #123; Adv. Proc. 1 No. 23-00029, dkt. #1). After such request was denied by the court (Bankr. Case No. 12-01990, 2 dkt. #123), the Debtor filed the instant Third Bankruptcy Case and the Adversary Proceeding 3 against Franklin. Notably, both the Adversary Proceeding and Debtor’s Opposition to the Motion 4 to Dismiss are centered on issues that were addressed in the State Court Foreclosure Case. 5 Franklin avers that the Debtor is trying to relitigate issues – namely, the validity, priority 6 or extent of Franklin’s claim – that have already been resolved in prior bankruptcy petitions and/or 7 in the State Court Foreclosure Case (see, dkt. #53, ¶14). Specifically, Franklin argues that the 8 cause of action upon which the Debtor rests her case to challenge the validity, priority or extent 9 of Franklin’s lien was adjudicated in the Second Bankruptcy Case “at docket entries number 117, 10 115, and 110” (dkt. #53, ¶12). Franklin further argues that, as a secured creditor, its in rem 11 mortgage foreclosure cause of action was not discharged by the discharge order entered on August 12 19, 2014 (Bankr. Case No. 12-01990, dkt. #103). The Debtor, in turn, argues that the judgment 13 in the State Court Foreclosure Case “is null and void because [it] is against the injunctive 14 protection that grants the Bankruptcy Discharge in Chapter 7, not a valid ‘in rem’ foreclosure 15 judgment” (dkt. #57, ¶8). The Debtor further argues that the court cannot grant a preclusive effect 16 to the judgment in the State Court Foreclosure Case because it is null and void, and because “In 17 Re Ditech Holdging [sic] Corp.[], 2022 Bankr. LEXIS 3630[,] 2022 [WL]19905335 (Bankr. 18 S.D.N.Y. 2022) requirements and other case cited do not apply” (dkt. #57, ¶13) (boldface omitted) 19 without further discussion on this conclusory statement. 20 The court finds that this Third Bankruptcy Case contains all three (3) res judicata 21 elements. First, there is a judgment in the State Court Foreclosure Case that is final and 22 unappealable (see, Adv. Proc. No. 23-00063, dkt. #45-4, p. 5). It is an uncontested fact that the 23 State Court entered a judgment in the State Court Foreclosure Case on February 19, 2021 (notified 24 to the parties on March 23, 2021), that was confirmed by the Puerto Rico Court of Appeals on 25 November 5, 2021, and that the Supreme Court of Puerto Rico denied the Debtor’s writ of 26 certiorari on May 13, 2022. Second, there is identity of cause between the State Court Foreclosure 27 Case and the instant bankruptcy case and the Adversary Proceeding. “ ‘Cause’ refers to the 1 principal basis, main ground or origin of the action or exceptions raised and decided”. In re Garcia, 2 340 B.R. at 687, citing Boateng, 210 F.3d at 61, and Esteves, 678 F.Supp. at 965. The State Court 3 Foreclosure Case concerns the in rem foreclosure of the mortgage over the Property, mortgage 4 which is the object of Franklin’s claim (as filed in both the Second and Third Bankruptcy Case) 5 and the Debtor’s objection to Scotiabank’s claim in the Second Bankruptcy Case (now 6 Franklin’s), and its validity is the object of Adv. Proc. No. 23-00063. Third, there is identity of 7 persons as the parties in the State Court Foreclosure Case were Franklin as plaintiff and the Debtor 8 as defendant, and they are both parties in this bankruptcy case and in the Adversary Proceeding. 9 Based on the above, the court agrees with Franklin, finds that the elements necessary to 10 apply the doctrine of res judicata are present herein, and concludes that this is a two-party dispute 11 between the Debtor and Franklin and that the Third Bankruptcy Case appears to have been filed 12 in bad faith to thwart Franklin’s efforts to enforce the judgment its favor. Thus, dismissal of the 13 instant Third Bankruptcy Case is warranted. The State Court Foreclosure Case dealt with the in 14 rem foreclosure of the mortgage over the Property, and the State Court ordered the sale of the 15 Property by public auction. Notwithstanding, the Debtor is using the Third Bankruptcy Case and 16 the Adversary Proceeding to once more question the validity of Franklin’s lien over the Property 17 and of the judgment issued in the State Court Foreclosure Case. This court will not address the 18 Debtor’s arguments on these matters as there both a prior determination in the Second Bankruptcy 19 Case as to the secured status of Franklin’s claim and a prior State Court judgment as to the 20 enforcement of Franklin’s lien. If Debtor believes that such judgment is null and void as argued 21 in the Opposition, she had to her avail various remedies to seek review thereof. However, having 22 determined that the doctrine of res judicata is applicable, the bankruptcy court is not the proper 23 venue for this controversy. 24 Lastly, Franklin summarized the statutory provisions and case law that provides for 25 dismissal with prejudice (see, dkt. #53, ¶¶28-32). Franklin further requested that the case be 26 dismissed with a bar to re-file for eighteen (18) months (see, dkt. #53, p. 9). The Debtor did not 27 include any arguments in response to Franklin’s request for dismissal with a bar to re-file in the 1 Opposition. This court has declared its authority to sanction serial or bad faith filers by baring 2 future filings for reasons and longer periods of time other than those specified by 11 U.S.C. § 3 109(g), from either 11 U.S.C. § 105(a), 11 U.S.C. § 349(a), or both. In Re Llanos, 578 B.R. 700, 4 711 (Bankr. D.P.R. 2017). Section 349(a) of the Bankruptcy Code provides that, “[u]nless the 5 court, for cause, orders otherwise, the dismissal of a case under this title does not bar the 6 discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; 7 nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a 8 subsequent petition under this title, except as provided in section 109(g) of this title”. 11 U.S.C. 9 §349(a). As such, Section 349(a) “expressly confers bankruptcy courts the authority and 10 discretion to make exceptions to the general rule that the dismissal of a case is without prejudice 11 to the filing of a subsequent petition”. In re Ortiz Jimenez, 2019 WL 2369510, at *3 (Bankr. 12 D.P.R. 2019). “Dismissals with prejudice are [ ] generally reserved for extreme situations, such 13 as when a debtor conceals information from the court, violates injunctions, files unauthorized 14 petitions, or acts in bad faith.” Id., quoting In re Hall, 304 F.3d 743, 746 (7th Cir. 2002). A 15 determination of bad faith may be “cause” for a dismissal with prejudice under § 349(a). In re 16 Ortiz Jimenez, 2019 WL 2369510, at *3, citing Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 17 1224 (9th Cir. 1999). 18 The court finds that the uncontested facts of the case and the following factors add up in 19 considering a bar to re-file in the instant case: (1) the Debtor’s multiple bankruptcy petitions and 20 the fact that the validity of Franklin’s lien was already addressed in the Second Bankruptcy Case; 21 (2) the Debtor’s attempt to open the Second Bankruptcy Case to file an adversary proceeding 22 against Franklin shortly before filing the Third Bankruptcy Case; (3) the fact that there is a 23 judgment in the State Court Foreclosure Claim in Franklin’s favor; and (4) the fact that it is clear 24 from the record that the Debtor’s intention behind the Third Bankruptcy Case is to avoid 25 Franklin’s efforts to enforce the judgment it obtained in its favor in the State Court Foreclosure 26 Case. The Debtor's conduct qualifies as the conspicuous behavior that warrants a dismissal with 27 1 || prejudice. Thus, the court dismisses the Third Bankruptcy Case with a twelve (12) month bar to 2 || re-file. 3 Conclusion 4 This bankruptcy case warrants dismissal as it is a two-party dispute between the Debtor 5 || and Franklin that was presented to avoid Franklin’s efforts to enforce the judgment it obtained in 6 ||its favor in the State Court Foreclosure Case. Because the Debtor's other creditors are either 7 || oversecured (as in Banco Popular’s case) or are owed insignificant amounts in comparison to 8 || Franklin’s claim (as in Capital One N.A.’s case), the court does not believe that this bankruptcy 9 || case serves a legitimate reorganizational purpose. In addition, and despite the Debtor's efforts to 10 || bring the dispute within the jurisdiction of this court, the bankruptcy court is barred by the 11 || doctrine of res judicata from addressing issues related to the validity of Franklin’s lien and the 12 || foreclosure of the Property since these have been previously adjudicated. 13 For these reasons, the Motion to Dismiss (dkt. #53) is hereby GRANTED, and the Third 14 || Bankruptcy Case is dismissed under §1307(c) with a twelve (12) month bar to re-file. The Clerk 15 || shall dismiss and close any contested matter or adversary proceeding related to the instant case, 16 || including Adv. Proc. No. 23-00063. 17 Judgment will be entered accordingly. 18 IT IS SO ORDERED. 19 In San Juan, Puerto Rico, this 7" day of August 2024. 20
22 unitdd States Bankruptcy Judge 23 24 25 26 27 -23-