Noreen Wiscovitch Rentas, Trustee of the Chapter 7 Estate of Irraga, Corp. v. QB Construction, Inc. & QB Construction S.E.

Opinion

IN THE UNITED STATES BANKRUPTCY COURT 1 FOR THE DISTRICT OF PUERTO RICO 2 IN RE: 3 IRRAGA, CORP. CASE NO. 12-02932 (MCF) 4 Debtor CHAPTER 7 5

6 7 ADV. PROCEEDING: 14-00120 (MCF) NOREEN WISCOVITCH RENTAS 8 TRUSTEE OF THE CHAPTER 7 9 ESTATE OF IRRAGA, CORP.

10 Plaintiff

11 vs.

12 QB CONSTRUCTION, INC. & QB 13 CONSTRUCTION S.E.

14 Defendants

15 16 OPINION AND ORDER 17 Noreen Wiscovitch Rentas (“Plaintiff”), Trustee of the Chapter 7 estate of Irraga, Corp. 18 (“Debtor”), filed the instant adversary proceeding to obtain the turnover of property and collection 19 of monies from QB Construction, Inc. and QB Construction S.E. (“Defendants”), alleging that 20 Defendants owed Debtor money for landscaping services and materials it provided to Defendants 21 on two occasions. The issues presented are whether the Plaintiff met her summary-judgment 22 burden on the turnover claim and whether the Plaintiff’s affidavit should be stricken from the 23 record. The Plaintiff claims that under Debtor’s prepetition contracts with Defendants, Debtor 24 completed the projects but payment was not received in full. Defendants argue that they paid 25 amounts owed under the contracts and that the Debtor did not fulfill its contractual obligations 26 and therefore is not eligible to receive payment in full. For the reasons stated below, the Court 27 1 denies the Plaintiff’s request for summary judgment because contested facts exist regarding the 2 alleged amounts owed and because the Plaintiff failed to provide undisputed facts in support of 3 the estate’s entitlement to outstanding payments under the contracts. The Court also denies 4 Defendants’ request to strike the Plaintiff’s affidavit. 5 JURISDICTION 6 The Court has jurisdiction to hear this case, pursuant to 28 U.S.C. §157(a), Local Civil 7 Rule 83K(a), and the general order of the United States District Court dated July 19, 1984, which 8 refers title 11 proceedings to the Bankruptcy Court. This is a core proceeding, pursuant to 28 9 U.S.C. § 157(b)(1) and (b) (2).1 10 PROCEDURAL HISTORY 11 The Debtor filed for chapter 7 bankruptcy on April 17, 2012. The Plaintiff filed this action 12 13 on May 22, 2014 alleging two causes of action: count 1) for turnover, pursuant to 11 U.S.C. 14 § 542; and count 2) for collection of monies or restitution, pursuant to P.R. Laws Ann. tit 31 15 §§ 2991-2992. The Plaintiff amended the complaint (Docket No. 8). Defendants answered the 16 amended complaint and Defendant QB Construction S.E. denied any involvement in the 17 contractual arrangements.2 In its answer, Defendant QB Construction, Inc. raised the statute of 18 limitations for the contractual claims that the Plaintiff asserts as an affirmative defense.3 19 Subsequently, the Plaintiff filed a summary-judgment motion premised under count one of the 20 21 1 Unless expressly stated otherwise, all references to “Bankruptcy Code” or to specific statutory sections shall be to 22 the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Pub. L. No. 109–8, 119 Stat. 23, 11 U.S.C. § 101, et seq. All references to “Bankruptcy Rules” 23 shall be to the Federal Rules of Bankruptcy Procedure. 2 Docket No. 29, at 2 ¶6. 24 3 Docket No. 24, at 4 ¶3. Defendants argue that the statute of limitations applicable to the Plaintiff’s claim has elapsed, leaving the Plaintiff without remedy. Defendants first argued that the five-year limitations period of the Commerce 25 Code, P.R. Laws Ann. tit. 10 § 1902, bars the Plaintiff’s contractual claims. Id. & Docket No. 29 at 3, ¶4. Subsequently, Defendants appear to argue that the applicable statute is a three-year limitations period in the Puerto Rico Civil Code, 26 P.R. Laws Ann. tit. 31 § 5297 (Docket No. 86, at 2). However, “[s]ection 542 does not impose a statute of limitations on turnover claims.” 5 Collier on Bankruptcy P 542.01 (16th 2019)(citing Burtch v. Ganz (In re Mushroom Transp. 27 Co.), 382 F.3d 325, 336–37 (3d Cir. 2004); Olsen v. Reuter (In re Reuter), 499 B.R. 655, 668 (Bankr. W.D. Mo. 2013) (stating that “[t]here are no strict deadlines or statute of limitations mandating when the Trustee must take such complaint for a § 542 (Docket No. 46) action, to which Defendants filed an opposition thereto 1 2 (Docket No. 57). The parties filed several reply and sur-reply motions.4 Defendants filed a motion 3 to strike the Plaintiff’s affidavit proffered in support of her summary-judgment motion for lack 4 of personal knowledge (Docket No. 88). Plaintiff opposed and Defendants filed a reply (Docket 5 Nos. 95 and 98). 6 DISCUSSION 7 Under Fed. R. Civ. P. 56(c), made applicable in bankruptcy by Fed. R. Bankr. P. 7056, a 8 summary judgment is available if the pleadings, depositions, answers to interrogatories, and 9 10 admissions on file, together with affidavits, if any, show that there is no genuine issue as to any 11 material fact that the moving party is entitled to a judgment as a matter of law. Fed. Civ. P. 56(c); 12 Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 4 (1st Cir. 2010). “The party moving for 13 summary judgment assumes the burden of affirmatively demonstrating that there is no genuine 14 issue of triable fact and if he does not discharge that burden, then he is not entitled to judgment.” 15 Transurface Carriers, Inc. v. Ford Motor Co., 738 F.2d 42, 45 (1st Cir. 1984)(citations omitted). 16 The parties stipulate that Debtor and Defendant QB Construction, Inc. subscribed a 17 18 contract dated March 23, 2006 (“the Airport Contract”) and a contract dated October 17, 2006 (the 19 “Condominium Contract”) (collectively, the “Contracts”), wherein Defendant QB Construction, 20 Inc. was the General Contractor and Debtor was the subcontractor in relation to landscaping 21 services and/or landscaping materials.5 22

24 25 26 4 Docket Nos. 70, 71, 79, 87, 94, & 97. 27 5 Docket Nos. 47 & 58. The reason for the Plaintiff’s inclusion of co-Defendant QB Construction, S.E. is not apparent from the Plaintiff’s filings. The Plaintiff’s summary-judgment evidence only demonstrates that co-Defendant QB Amount Owed 1 2 In her summary-judgment motion, the Plaintiff requests that the Court enter judgment in 3 the amount of $192,587.27 against Defendants for monies owed to the Debtor’s estate.6 After 4 receiving the affidavits submitted with Defendants’ opposition motion, the Plaintiff changes the 5 amount owed from $192,587.27 to $46,811.00.7 Defendants submitted check payments in the 6 amount of $319,688.40 which contest the Plaintiff’s claim for $192,587.27.8 In response to the 7 check payments, the Plaintiff appears to have then calculated the amount allegedly due to the estate 8 to $46,811.00. The Plaintiff then contends that at least $19,021.67 remains outstanding to be paid 9 10 to the estate because Defendants admitted in their declaration that “Once all required/certifications 11 had been produced, QB Construction, Inc. would have paid [Debtor] a retainage of $12,245.01 for 12 "Terminal A" project as well as a retainage of $6,776.66 for the "Coliseum" project, for a total of 13 $19,021.67.” 9 However, Defendants’ evidence reflects a collection letter whereby the Plaintiff 14 attempted to collect the amount of $19,021.68.10 This amount materially differs from the 15 $46,811.00 the Plaintiff later asserted in her reply-motion without submitting adequate summary- 16 judgment evidence for this new amount.11 Defendants claim that the Plaintiff is not entitled to any 17 18 monies because Debtor failed to submit the required certification to receive the final payments 19 under the Contracts. As such, based on the evidence, it is unclear to the Court the exact amount 20 that remains unpaid, if any. “It is not the obligation of the Court to play the role of plaintiff's 21

22 6 Docket 46, at 7, ¶7. 7 Docket 70, at 2, ¶7. 23 8 Docket No. 57. 9 Docket No. 57-2, at 2, ¶6. 24 10 Docket No. 57-6, at 1. 11 Docket 70, at 2, ¶7. Although in a footnote the Plaintiff cites to the Contract amounts—$131,500 for the 25 Condominium Contract and $235,000 for the Airport Contract—to account for the difference between the total Contracts’ amount and Defendants’ payments to Debtor of $319,688.40, the Plaintiff does not mention whether and 26 how change orders subscribed by the parties and included elsewhere in her summary-judgment evidence alter amounts allegedly due. Subsequently, Plaintiff filed an amended reply motion similar to that on Docket 70 where she amended 27 her allegations as to the outstanding amount, from $46,811.00 to $26,418.00. Docket No. 79 at ¶¶ 8, 14 & 16. But see ¶9 stating “$26,8110” as the outstanding balance and the “wherefore” paragraph, requesting “judgment in its favor for advocate, or to scour the record for evidence supporting a theory when plaintiff himself has 1 2 neglected to do so.” Bolduc v. Town of Webster, 629 F.Supp.2d 132 (D. Mass. 2009). As a result 3 of the conflicting amounts owed, there is a disputed material fact that prevents the Court from 4 granting summary judgment on count one in favor of the Plaintiff. 5 Final Payment Clauses 6 The Plaintiff bases her request for turnover of property on the notion that any outstanding 7 amount is collectible pursuant to the Contracts. However, the Plaintiff does not address whether 8 Debtor fulfilled its contractual obligations in order to receive any outstanding payments. 9 10 Defendants argue that upon completion of the projects, Debtor had to present documentation, 11 including a certification from the State Insurance Fund (also known as the “Fondo del Seguro del 12 Estado”) accrediting that there was no outstanding debt with this entity in relation to the Contracts; 13 thereby certifying that Debtor had no debts relating to the projects. The Condominium Contract 14 states the following: 15 ARTICLE V - Final Payment. The final payment shall be due within sixty (60) 16 days after completion and acceptance of the Work by the Contractor and the Architect, 17 provided first, however, that (1) the Contractor shall have received final payment therefor from the Owner, (2) the Subcontractor shall have furnished evidence 18 satisfactory-to the Contractor that there are no claims, obligations or liens outstanding or unsatisfied for labor, services, materials, equipment, taxes, Fondo 19 del Seguro del Estado premiums, or other items performed, furnished or incurred 20 for or in connection with the Work and (3) the Subcontractor shall have executed and delivered in a form satisfactory to the Contractor a General Release running to 21 and in favor of the Contractor and the Owner. Should there prove to be any such claim, obligation or lien, after final payment is made, the Subcontractor shall 22 refund to the Contractor all monies that the Contractor and/or the Owner shall pay in satisfying, discharging, or defending against any such claim, obligation or lien 23 or any action brought or judgment recovered thereon and all costs and expenses, including legal fees and disbursements, incurred in connection therewith all in 24 strict accordance with the Contract Documents, and payment to be consistent with Article lV and Article X Sections 1g, 20-23 inclusive of this Contract. 25 Docket No. 57-1, Condominium Contract, at 2. 26 The Airport Contract states the following: 27 [. . .] § 12.2 Before issuance of the final payment, the Subcontractor, if required, 1 shall submit evidence satisfactory to the Contractor that all payrolls, bills for materials and equipment, and all known indebtedness connected with the 2 Subcontractor’s Work have been satisfied.

3 Docket No. 47-1, Airport Contract, at 11. 4 According to Defendants’ evidence, upon completion of both projects, Debtor did not 5 present any evidence related to the certifications required for final payment of $12,245.01 under 6 the Airport Contract, as well as the final payment of $6,776.66 under the Condominium Contract, 7 8 for a total of $19,021.67.12 The Plaintiff provided some documentation required under the 9 Contracts but not all. For instance, the Plaintiff includes copies of State Insurance Fund 10 certifications in the Spanish language as part of her documentary evidence.13 The Plaintiff did not 11 provide complete evidence regarding State Insurance Fund debt certifications for the remaining 12 years (which appear to end in 2010). It is not clear to the Court—whether from the arguments or 13 the exhibits—the year Debtor completed each project. The Court may at the least conclude from 14 Defendants’ declarations that Debtor completed either project by 2010. Defendants rebutted the 15 16 Plaintiff summary-judgment motion by demonstrating that Debtor has an outstanding debt that the 17 State Insurance Fund assessed during years 2009 and 2010.14 18 The Contracts required that the Debtor demonstrate to QB Construction, Inc. that no 19 indebtedness to the State Insurance Fund existed in relation to the Contracts in order to receive 20 final payment.15 Defendants presented evidence contesting Debtor’s indebtedness with the State 21 Insurance Fund and therefore contesting Debtor’s entitlement to receive any final payment amount 22 23

24 12 Docket No. 57-2, at 2, ¶¶6-7. 13 Docket No. 46-1, 34-37. Local Rule 5(g) requires in part, that “[a]ll documents not in the English language which 25 are presented or filed, whether as evidence or otherwise, must be accompanied by a certified translation into English prepared by an interpreter certified by the Administrative Office of the United States Courts.”Collazo-Perez v. Estado 26 Libre Asociado De Puerto Rico, (D.P.R. June 5, 2017). 14 Docket 98, Exhibit 1. 27 15 The Plaintiff argued that should “Debtor have outstanding debts stemming from the worked [sic] performed for Defendants, they shall be paid by the Bankruptcy Estate, pursuant Section 726 of the Bankruptcy Code.” Docket No. as per the Contracts. As such, Defendants have contested whether the Plaintiff’s claim has matured 1 2 under the Contracts. 3 Payment of debts that are property of the estate is governed by § 542(b) which provides in 4 part that "an entity that owes a debt that is property of the estate and that is matured, payable on 5 demand, or payable on order, shall pay such debt to, or on the order of, the trustee." 11 U.S.C. 6 § 542(b). An action under § 542(b) applies to an undisputed debt when presently payable. In re 7 Conex Holdings, LLC, 518 B.R. 792, 801 (Bankr. D. Del. 2014) ("A properly pleaded complaint 8 asserting a claim for turnover must allege an undisputed right to recover the claimed debt."). It is 9 10 not appropriate to bring a turnover action on an unliquidated claim for breach of contract. See 11 United States v. Inslaw, Inc., 932 F.2d 1467, 1472 (D.C. Cir. 1991) ("It is settled law that the 12 debtor cannot use the turnover provisions to liquidate contract disputes . . . "); In re Picacho Hills 13 Util. Co., Inc., 579 B.R. 245, 252 (Bankr. D.N.M. 2017) (". . . unliquidated state law damage 14 claims are not within the scope of § 542(b)."). 15 The Plaintiff’s summary-judgment motion does not support the elements of a turnover 16 claim, i.e.: that Defendants owe a debt that is matured, payable on demand, or payable on order. 17 18 Defendants have provided the Court with evidence that contests the Plaintiff’s entitlement to 19 payment under the Contracts. For this reason, the Plaintiff must present evidence at trial that 20 supports the elements of a turnover action under count one of the amended complaint. In the 21 alternative, the Plaintiff must also prove at trial the estate’s entitlement to the monies at issue under 22 her collection of monies or restitution claims in count two, pursuant to P.R. Laws Ann. tit. 31 23 §§ 2991-2992. 24 25 26 27 MOTION TO STRIKE 1 2 Defendants filed a “Motion to Strike Plaintiff’s Statement of Facts and Trustee’s 3 Declaration in Support of its Motion for Summary Judgment.”16 Defendants argue that the 4 Plaintiff’s Sworn Statement,17 cannot be relied on as summary-judgment evidence by this Court 5 because “the plaintiff lacks personal knowledge to declare as to the allegation that the company 6 complied with the terms of the services agreement reached between QB and Irraga.”18 Defendants 7 argue that Rule 56(c)(4) of Federal Rules of Civil Procedure require personal knowledge and as 8 such, the Plaintiff’s affidavit is procedurally deficient. Specifically, Defendant argues that Plaintiff 9 10 has not laid the “grounds or foundation for personal knowledge. She relies on the revision of 11 documents not prepared by her,” thus not meeting the standard set forth by Rule 56.19 However, 12 Plaintiff’s affidavit submitted in support of the summary-judgment motion is based on Plaintiff’s 13 personal knowledge as trustee of the chapter 7 petition and on the tasks associated with the 14 Plaintiff’s review of the Debtor’s books and records, which are in her custody. In Re Walker, 566 15 B.R. 504, 513 (Bankr. E.D. Tenn. 2017). Defendants’ Motion to Strike is meritless and is therefore 16 denied. 17 18 19 CONCLUSION 20 The Court concludes that there are genuine issues as to material facts. As a result, the 21 Plaintiff is not entitled to summary judgment as to count one of the amended complaint. Secondly, 22 Defendant’s motion to strike is denied. The Court will enter a separate order scheduling a hearing 23

24 25 26 16 Docket No. 88. 27 17 Docket No. 46-1, at 69. 18 Docket 88, at 2. 1 in this case. 2 IT IS SO ORDERED. 3 In San Juan, Puerto Rico, this 16" day of April, 2019. - VA tcl cb Cabain 5 MILDRED CABAN FLORES United States Bankruptcy Judge 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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