Lourdes Fontanillas Lopez v. Morell Bauza Cartagena & Dapena, LLC

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: January 19, 2023
• Docket: 22-00042
• Status: Unknown

Opinion

IN THE UNITED STATES BANKRUPTCY COURT 1 FOR THE DISTRICT OF PUERTO RICO 2 IN RE : CASE NO. 21-02870 ESL 3 LOURDES FONTANILLAS LOPEZ CHAPTER 7 4 Debtor 5

6 LOURDES FONTANILLAS LOPEZ

7 Plaintiff

8 Vs. ADV. PROC. 22-00042

9 MORELL BAUZA CARTAGENA & 10 DAPENA, LLC FILED & ENTERED ON JAN/19/2023

11 Defendant

12 13 OPINION AND ORDER 14 The instant adversary proceeding is before the court upon the motion to dismiss filed on 15 November 14, 2022, by Defendants ANTONIO BAUZA SANTOS, EDGARDO CARTAGENA 16 SANTIAGO, RAMON ENRIQUE DAPENA GUERRERO, MORELL BAUZA CARTAGENA 17 & DAPENA LLC, MORELL CARTAGENA & DAPENA LLC, PEDRO ANTONIO MORELL 18 LOSADA, GIOVANNA PAOLA MORENO LOPEZ, and LOURDES M VAZQUEZ (“MBCD”) 19 as to counts I and II, and for partial judgment as to count III (dkt. #46); the opposition filed by 20 debtor/plaintiff, LOURDES FONTANILLA LOPEZ (“Debtor”) (dkt. #47); and the reply to the 21 opposition filed by MBCD (dkt. #56). 22 The case came before the court on December 9, 2022, for a preliminary pretrial. The 23 minutes of the pretrial summarize the issue before the court. See dkt. #57. The court incorporates 24 and references the same below. 25 [T]he complaint filed by plaintiff against the defendant [requests] damages 26 for an alleged violation of the automatic stay provisions arising from a state court 27 1 action initiated by the plaintiff herein against the defendant for requesting a writ of 2 certiorari from the Supreme Court of Puerto Rico. On November 3, 2022, the 3 parties filed a joint scheduling report. However, on November 14, 2022, the 4 defendant filed a motion to dismiss (dkt. #46), which was opposed by the plaintiff 5 (dkt. #47), and replies were filed by the defendant (dkt. #54 and dkt. #56). 6 [ . . . ] 7 ARGUMENTS PRESENTED AT THE HEARING 8 The parties argued their respective positions as to the motion to dismiss. 9 Plaintiff alleges and sustains that the Defendant violated the automatic stay 10 provisions of section 362(a) of the Bankruptcy Code by requesting a writ of 11 certiorari in the state court action. Defendant[s] contend that the request for a 12 certiorari in an action for collection of past due wages owed to plaintiff does not 13 constitute a violation of the automatic stay, thus, counts I and II of the complaint 14 should be dismissed. Defendant does not oppose that the plaintiff/debtor be paid 15 the wages owed and seeks the prompt termination of the instant action. Amount for 16 salaries owed will be paid by the Defendant to the Debtor within 30 days from entry 17 of the judgment of dismissal as to the first two counts. Defendant emphasized that 18 no counterclaim was filed against the Debtor in the state court action as none is 19 available on such proceedings. Therefore, there can be no de facto counterclaim as 20 alleged by the Debtor. 21 The court stated that the travel and litigious history between the parties to 22 this action appears from the documents filed by both. 23 The court summarized the bankruptcy proceedings as follows: the 24 voluntary chapter 7 petition was filed on September 28, 2021; no proof of claim 25 has been filed in the instant case; the chapter 7 trustee filed a report of no 26 distribution as no funds are available for distribution; a discharge order was entered 27 on April 4, 2022; and Adversary Proceeding 21-00120 initiated by MORELL 1 BAUZA CARTAGENA & DAPENA, LLC (“MBCD”) on the dischargeability of 2 its debt was dismissed on March 21, 2021. The court also stated that any amounts 3 owed and paid to the debtor as a result of the state court action filed by the Debtor 4 for unpaid wages was claimed as exempt, and is, thus, not property of the estate, 5 but property of the Debtor. Notwithstanding, the automatic stay provisions of 6 section 362(a) apply to both property of the estate and property of the Debtor. 7 The court summarized the relevant state court proceedings, case number 8 JPE 2017-0033, as follows: on January 27, 2017 Debtor filed a complaint against 9 MBCD in the Ponce state court claiming unpaid wages; on July 13, 2021, the 10 Superior Court of Ponce issued a decision in favor of MBCD; the Debtor filed a 11 request for a writ of certiorari before the Puerto Rico Court of Appeals, and on 12 September 17, 2021 the Court of Appeals reversed the Superior Court of Ponce; on 13 September 28, 2021, the Debtor filed the voluntary chapter 7 petition; on October 14 7, 2021 MBCD filed a request for a writ of certiorari before the Supreme Court of 15 Puerto Rico; and on February 2, 2022, the Supreme Court of Puerto Rico, at 16 Debtor’s request, stayed proceedings because of the existing bankruptcy 17 proceedings. 18 The court stated to Plaintiff/Debtor that the key allegation in this case was 19 that the automatic stay provisions were violated by MBCD for filing the request for 20 a writ of certiorari before the Supreme Court of Puerto Rico. Upon questioning by 21 the court, counsel for Debtor/Plaintiff could not and did not identify a specific 22 collection action by MBCD when the state court action was an action initiated by 23 the Debtor against MBCD for collection of wages. 24 The court stated that it had addressed similar issues in Rentas v. Serrano (In 25 re Garcia), 553 B.R.1 (Bankr. D.P. R. 2016) and will take the motion to dismiss 26 under advisement. The court stayed discovery until a decision on the motion to 27 dismiss is made. 1 Dkt. #57, pp. 1-3. 2 Jurisdiction 3 The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core 4 proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and (b)(2). Venue of this proceeding is proper 5 under 28 U.S.C. §§ 1408 and 1409. 6 Fed. R. Civ. P. 12(b)(6) 7 “The purpose of a motion to dismiss under Fed. R. Civ. P. 12(b)(6) is to assess the legal 8 feasibility of a complaint, not to weigh the evidence which the plaintiff offers or intends to offer.” 9 Velez Arcay v. Banco Santander de P.R. (In re Velez Arcay), 499 B.R. 225, 230 (Bankr. D.P.R. 10 2013), citing Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 11 779 (2nd Cir. 1984); Citibank, N.A. v. K–H Corp., 745 F. Supp. 899, 902 (S.D.N.Y. 1990). 12 Fed. R. Civ. P. 8(a)(2), applicable to adversary proceedings through Fed. R. Bankr. P. 13 7008, mandates that complaints contain a “short and plain statement of the claim showing that 14 the pleader is entitled to relief.” “Although detailed factual allegations are not required, the Rule 15 does call for sufficient factual matter”. Surita Acosta v. Reparto Saman Inc. (In re Surita Acosta), 16 464 B.R. 86, 90 (Bankr. D.P.R. 2012). Therefore, to survive a Fed. R. Civ. P. 12(b)(6) motion to 17 dismiss, a complaint must contain sufficient factual matter that, accepted as true, “state[s] a claim 18 to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. 19 Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has facial plausibility when the pleaded factual content 20 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 21 alleged. Id. at 556, 127 S. Ct. 1955. The Twombly standard was further developed in Ashcroft v. 22 Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009), advising lower courts that 23 “determining whether a complaint states a plausible claim for relief will ... be a context-specific 24 task that requires the reviewing court to draw on its judicial experience and common sense.” 556 25 U.S. at 679, 129 S. Ct. 1937. “In keeping with these principles, a court considering a motion to 26 dismiss can choose to begin by identifying pleadings that, because they are no more than 27 conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the 1 framework of a complaint, they must be supported by factual allegations. When there are well- 2 pleaded factual allegations, a court should assume their veracity and then determine whether they 3 plausibly give rise to an entitlement to relief.” Id. at 679, 129 S. Ct. 1937. In sum, allegations in 4 a complaint cannot be speculative and must cross “the line between the conclusory and the 5 factual”. Peñalbert–Rosa v. Fortuño–Burset, 631 F.3d 592, 595 (1st Cir. 2011). “[A]n adequate 6 complaint must provide fair notice to the defendants and state a facially plausible legal claim.” 7 Ocasio–Hemandez v. Fortuño–Burset, 640 F.3d 1, 11 (1st Cir. 2011). 8 In Schatz v. Republican State Leadership Committee, 669 F.3d 50, 55 (1st Cir. 2012), the 9 U.S. Court of Appeals for the First Circuit (the “First Circuit”) established a two-step standard 10 for motions to dismiss under Fed. R. Civ. P. 12(b)(6). Step one: isolate legal conclusions. Step 11 two: take the complaint's well-pleaded (non-conclusory) allegations as true, drawing all 12 reasonable inferences in favor of the plaintiff and determine if they plausibly narrate a claim for 13 relief. See Pérez v. Rivera (In re Pérez), 2013 WL 1405747 at *3, 2013 Bankr. LEXIS 1561 at 14 *9–10 (Bankr. D.P.R. 2013); Zavatsky v. O'Brien, 902 F.Supp.2d 135, 140 (D. Mass. 2012); 15 Guadalupe–Báez v. Pesquera, 819 F.3d 509, 514 (1st Cir. 2016). 16 The court construes the factual allegations in the complaint in favor of the Debtor/Plaintiff. 17 The relevant facts in the complaint are not dispositive. The issue before the court hinges on 18 determining whether the actions plead in the complaint, namely, the request for a writ of certiorari 19 before the Supreme Court of Puerto Rico in a state court action initiated by the Debtor/Plaintiff 20 constitutes a violation of the automatic stay provisions of section 362 (a). 21 Violation of the Automatic Stay 22 The automatic stay provision in 11 U.S.C. § 362(a) is one of the basic protections under 23 the Bankruptcy Code and becomes operative by the mere filing of the bankruptcy petition. Soares 24 v. Brockton Credit Union (In re Soares), 107 F.3d 969, 971 (1st Cir. 1997). The automatic stay is 25 extremely broad in scope and, “aside from the limited exceptions of subsection (b), applies to 26 almost any type of formal or informal action taken against the debtor or the property of the estate.” 27 Alan N. Resnick & Henry J. Sommer, 3 Collier on Bankruptcy ¶ 362.03 (16th ed. 2022). 1 Furthermore, the automatic stay also protects creditors since it prevents the “dismemberment of 2 a debtor's assets by individual creditors levying on the property. This promotes the bankruptcy 3 goal of equality of distribution” Id. The automatic stay provides debtors with one of the 4 cornerstone protections under bankruptcy law, giving debtors a “breathing room” from the 5 pressures of their creditors. See In re Soares, 107 F.3d at 975. Given its utmost importance in the 6 bankruptcy system, courts “must display a certain rigor in reacting to violations of the automatic 7 stay.” Id. 8 The court is fully conscious of the importance of the automatic stay in bankruptcy 9 proceedings. However, whether the automatic stay has been violated depends to a large extent 10 on the facts of the case and the totality of the circumstances. 11 Extent of the automatic stay to state court proceedings 12 This court held the following in In re Garcia, supra: 13 Courts have held that, “defensive acts by defendants (whether bankrupt or 14 not) are not considered automatic stay violations” because the automatic stay 15 should not tie the hands of defendants while plaintiff-debtors have “free reign to 16 litigate.” See Gordon v. Whitmore (In re Merrick), 175 B.R. 333, 337–338 (9th Cir. 17 BAP 1994). The 9th Circuit Bankruptcy Appellate Panel in In re Merrick discussed 18 this particular issue and stated as follows: 19 “The automatic stay gives the debtor a breathing spell from his creditors 20 and allows the trustee to marshal assets of the estate for the benefit of creditors. 21 While restraint of a defendant in a suit subject to prosecution by the estate arguably 22 could contribute to an orderly processing of estate assets, we could find no case that 23 supports the proposition that the automatic stay prevents a defendant from 24 continuing to defend against a pre-bankruptcy lawsuit. To the contrary, there is 25 substantial authority that the stay is inapplicable to postpetition defensive action in 26 a prepetition suit brought by the debtor. The following portion of an opinion 27 authored by Judge Posner is pertinent: 1 “For in any event the automatic stay is inapplicable to suits by the bankrupt 2 (‘debtor,’ as he is now called). This appears from the statutory language, which 3 refers to actions ‘against the debtor,’ 11 U.S.C. § 362(a)(1), and to acts to obtain 4 possession of or to exercise control over ‘property of the estate,’ § 362(a)(3), and 5 from the policy behind the statute, which is to protect the bankrupt's estate from 6 being eaten away by creditors' lawsuits and seizures of property before the trustee 7 has had a chance to marshal the estate's assets and distribute them equitably among 8 the creditors. H. R. Rep. No. 595, 95th Cong. & Admin. News 1978, p. 5787. The 9 fundamental purpose of bankruptcy, from the creditors' standpoint, is to prevent 10 creditors from trying to steal a march on each other, In re Holtkamp, 669 F.2d 505, 11 508 (7th Cir.1982), and the automatic stay is essential to accomplishing this 12 purpose. There is, in contrast, no policy of preventing persons whom the bankrupt 13 has sued from protecting their legal rights. True, the bankrupt's cause of action is 14 an asset of the estate; but as the defendant in the bankrupt's suit is not by opposing 15 that suit, seeking to take possession of it, subsection (a)(3) is no more applicable 16 that (a)(1) is. Martin–Trigona v. Champion Fed. Sav. & Loan Ass'n., 892 F.2d 575, 17 577 (7th Cir.1989). Accord, United States v. Inslaw, Inc., 932 F.2d 1467, 1473 18 (D.C.Cir.1991), cert. denied, 502 U.S. 1048, 112 S. Ct. 913, 116 L.Ed.2d 813 19 (1992); Merchants & Farmers Bank of Dumas Ark. v. Hill, 122 B.R. 539, 541 20 (E.D.Ark.1990).” In re Merrick, 175 B.R. at 336–337. 21 To determine whether a “proceeding” is subject to the automatic stay under 22 section 362(a)(1), many courts have followed the analysis employed in the Third 23 Circuit which is the following: 24 “Whether a specific judicial proceeding falls within the scope of the 25 automatic stay must be determined by looking at the proceeding “at its inception.” 26 “That determination should not change depending on the particular stage of the 27 litigation at which the filing of the petition in bankruptcy occurs.” Thus, the ] dispositive question is whether a proceeding was “originally brought against the 2 debtor.” Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1204-1205 (3d 3 Cir.1992) (citations omitted). 4 553 B. R. at 14-15. 5 This court agrees with MBCD’s position that “[t]o the extent that the claim was not 6 || ‘against’ the debtor at its inception because the debtor occupied a plaintiffs position, its further 7 || prosecution is not stayed pursuant to § 362(a)(1).” Dkt. #46, pp. 9-10. Therefore, and in 8 || accordance with In re Garcia, supra, the court concludes that MBCD’s request for a certiorari in 9 state court action initiated by the Debtor against MBCD does not constitute a violation of the 10 || automatic stay provisions. Moreover, MBCD’s request for Partial Judgment in relation to Count 11 || III awarding debtor/plaintiff the amount of $6,847.48, to be paid by MBCD thirty days after the 12 || entry of the Partial Judgment dispels any conclusory allegation of an intent by MBCD to avoid 13 || payment, irrespective of the merits of the contention. 14 Conclusion 15 In view of the foregoing, the motion to dismiss Counts I & II and to enter a Partial 16 || Judgment in relation to Count III is hereby granted, and consequently the amount of $6,847.48, 17 || shall be paid by MBCD to debtor/plaintiff thirty (30) days after the entry of the Judgment. 18 Judgment will be entered accordingly. 19 IT IS SO ORDERED. 20 In San Juan, Puerto Rico, this 19 day of January 2023. 21 nn0le 23 Lamoutte United States Bankruptcy Judge 24 25 26 27 -8-