Kagan v. El San Juan Hotel Corp. (In Re El San Juan Hotel Corp.)

149 B.R. 263, 1992 U.S. Dist. LEXIS 20402, 1992 WL 404065
CourtDistrict Court, D. Puerto Rico
DecidedDecember 29, 1992
DocketCiv. No. 92-1940 (JAF), Bankruptcy No. 80-00259 (SEK), Adv. No. 83-0183
StatusPublished
Cited by19 cases

This text of 149 B.R. 263 (Kagan v. El San Juan Hotel Corp. (In Re El San Juan Hotel Corp.)) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kagan v. El San Juan Hotel Corp. (In Re El San Juan Hotel Corp.), 149 B.R. 263, 1992 U.S. Dist. LEXIS 20402, 1992 WL 404065 (prd 1992).

Opinion

OPINION AND ORDER

FUSTE, District Judge.

Plaintiff is appealing an order entered by the bankruptcy court on March 26, 1992, awarding him compensation for discharge from employment without just cause under 29 L.P.R.A. § 185a. Plaintiff is not appealing the severance pay award, but rather the court’s determination that this state statute is his only compensatory remedy, excluding other substantial monetary amounts of damage allegedly suffered. In addition, plaintiff-appellant raises two additional issues on appeal: whether the bankruptcy court erred in finding that the successor trustee owed no fiduciary duly requiring him to write plaintiff letters of recommendation and provide compensation for plaintiff’s termination, and whether the bankruptcy court erred in finding that it had no authority to hear the claims against the estate’s attorney on both the issues of his fiduciary duty to plaintiff and plaintiff’s claim that he provided false information to the court. We find that the bankruptcy court correctly determined that section 185a is plaintiff’s sole remedy under Puerto Rico law. We find that neither the successor trustee nor the estate’s attorney owed a fiduciary duty to the plaintiff. We also find that plaintiff had no standing to bring an action under 11 U.S.C. § 827 regarding the appointment of the estate’s attorney. This court has appellate jurisdiction under 28 U.S.C. § 157.

I.

FACTS

This case involves two interconnected episodes. One is the account of the bankruptcy of the El San Juan Hotel. Plaintiff, Mr. Kagan, was involved in uncovering the corruption which pervaded that bankruptcy. The other story is that of plaintiff’s termination from his position as comptroller of the El San Juan Hotel. That is the topic of this suit. However, the two episodes are so tangled that it is difficult to sort one from the other. We must sketch the outlines of the first episode to make the second story comprehensible.

A. The Bankruptcy of the El San Juan Hotel

Plaintiff, a certified public accountant, was the comptroller of the El San Juan Hotel when it filed for Chapter 11 bankruptcy in May of 1980. At the time of the filing of the petition for bankruptcy, the plaintiff had been working for the hotel for less than a year, having been hired for an indefinite term. In the context of the Chapter 11 bankruptcy, the hotel continued its normal operation under the auspices of the court-appointed trustee according to law. 11 U.S.C. §§ 1101-1146. Plaintiff *266 continued in his job as comptroller until he was terminated by the court-appointed trustee, Héctor Rodríguez-Estrada, for unsatisfactory performance. Plaintiff claims that he was dismissed in retaliation for his attempts to have the trusteeship of Rodrí-guez-Estrada investigated and that he should be compensated for the harm done to him by the dismissal.

1. The Corrupt Trusteeship of Rodrí-guez-Estrada

Rodríguez-Estrada was appointed as trustee for the estate of the El San Juan Hotel on July 11, 1980. From the beginning, Rodríguez-Estrada and the plaintiff had disagreements as to how to manage the estate. Subsequent litigation revealed Rodriguez-Estrada’s management strategy to have been an abuse of Rodriguez-Estrada’s trusteeship. In re San Juan Hotel Corp., 71 B.R. 413 (D.P.R.1987), aff'd in part, 847 F.2d 931 (1st Cir.1988). “The ... trustee, Rodríguez-Estrada, seeking personal gain, and by willful, deliberate, intentional, and reckless conduct, disregarding the impact his actions and omissions would have upon the debtor’s estate, failed to follow the advice of the hotel comptroller, Marshall J. Kagan, on proposed actions which could have substantially reduced operating expenses.” Id. at 420. These disagreements caused plaintiff to begin pressing for the investigation of Rodriguez-Estrada’s trusteeship. Plaintiff represents his role in exposing the corruption of the trusteeship of Rodríguez-Estrada as having been substantial. It is certainly true that plaintiff’s complaints contributed to the investigation of the trustee. Plaintiff alleges he was terminated shortly after he gave testimony before the Puerto Rico House of Representatives’ Committee on Tourism. His televised statements were highly critical of the trusteeship of Rodrí-guez-Estrada. Plaintiff was terminated on December 29, 1982 for unsatisfactory performance. He filed suit for slander and wrongful termination against Rodríguez-Estrada and the estate in bankruptcy court on March 10, 1983.

The fortunes of the hotel continued to decline under the trusteeship of Rodrí-guez-Estrada. At the end of March of 1983, the hotel closed to the public. On March 24, 1983, the financial condition of the hotel being unstable, the Chapter 11 proceeding was converted to a Chapter 7 proceeding on the motion of Puerto Rico Electric Power Authority. Rodríguez-Es-trada acted as the Chapter 7 liquidation trustee until September of 1983, when he was removed from the trusteeship by a unanimous vote of the creditors at a section 341 creditors’ meeting plaintiff alleges he arranged. Plaintiff, having an outstanding lawsuit, was a creditor and presumably allowed to participate in creditors' meetings. It is clear from the record that he was determined to oust Rodríguez-Es-trada. Rodríguez-Estrada was replaced as trustee by Hans López-Stubbe.

2. The Cautious Trusteeship of López-Stubbe

It was under the trusteeship of López-Stubbe that the question of whether an action should be filed against Rodríguez-Estrada first arose. Plaintiff actively lobbied various people related to the estate to bring suit against Rodríguez-Estrada. When plaintiff urged López-Stubbe to file suit against Rodríguez-Estrada for abuse of his position as trustee, López-Stubbe refused. Plaintiff corresponded with Ló-pez-Stubbe during this period. On December 29, 1983, the anniversary of his termination, he wrote to López-Stubbe, exhorting him to take action in accordance with information Kagan had provided. On January 3, 1984, Rodrigo Otero-Bigles, the estate’s attorney, wrote to Kagan on behalf of López-Stubbe, in response to the letter. In that letter, the trustee stated that it was his opinion that there was not sufficient evidence to sustain an action against Rodrí-guez-Estrada. The trustee’s refusal may have been based upon the advice of Otero-Bigles, who was appointed by López-Stubbe in his capacity as trustee. Kagan accused Otero-Bigles of representing the interests of Rodríguez-Estrada in recommending that the trustee not bring suit against the former trustee. During this period, Otero-Bigles was apparently repre *267 senting Rodríguez-Estrada in another matter before the bankruptcy court. Otero-Bigles had submitted an affidavit representing to the court that he was “disinterested” as required by 11 U.S.C. § 327, and the court had approved his appointment.

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Cite This Page — Counsel Stack

Bluebook (online)
149 B.R. 263, 1992 U.S. Dist. LEXIS 20402, 1992 WL 404065, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kagan-v-el-san-juan-hotel-corp-in-re-el-san-juan-hotel-corp-prd-1992.