Yara Z. Mage de Jesus v. Oriental Bank

Opinion

IN THE UNITED STATES BANKRUPTCY COURT 1 FOR THE DISTRICT OF PUERTO RICO 2 IN RE: 3 CASE NO. 23-03589 YARA Z. MAGE DE JESUS 4 CHAPTER 13 Debtors 5

7 Plaintiff ADV. PROC. 24-00001 8 Vs.

9 ORIENTAL BANK 10 Defendant 11

14 This adversary proceeding is before the court upon the motion for summary judgment 15 (dkt. #15) and the statement of uncontested material facts in support of the motion for summary 16 judgment (dkt. #16) filed by Oriental Bank (“Oriental”) on February 2, 2024, and the response 17 filed by the debtor/plaintiff (dkt. #20) on February 27, 2024. Oriental alleges that the complaint 18 for turnover of property pursuant to 11 U.S.C. § 542 and preferential transfer pursuant to 11 19 U.S.C. § 547 refers to funds in possession of Oriental as a result of a prepetition setoff, which 20 Oriental voluntarily deposited in the debtor/plaintiff’s bank account upon knowledge of debtor’s 21 bankruptcy filing. Such amount corresponds to the amount claimed by the debtor/plaintiff as 22 exempt and the balance consigned with the court. Thus, Oriental avers that the complaint is moot. 24 The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core 25 proceeding pursuant to 28 U.S.C. §§ 157(a) and (b). Venue of this proceeding is proper under 28 26 U.S.C. §§ 1408 and 1409. 27 2 Oriental’s statement of uncontested facts (dkt. #16, pp. 1-3), duly supported by an 3 unsworn statement and documents filed therewith (dkt. #16, pp. 4-7), state the following: 4 1. Oriental reversed the setoff of $24,398.00 and the $13,673.24 originally claimed 5 as exempt by debtor were deposited in her bank account and were available effective January 2, 6 2023. See dkt. #16, ¶ 1. 7 2. The remainder non-exempt amount of $10,724.76 was consigned by Oriental in 8 the captioned proceedings. See dkt. #16, ¶ 2. 9 3. Debtor-Plaintiff filed a Motion to Withdraw the consigned funds to be disbursed 10 in the following manner: a) $8,973.63 to the order of Jose R. Carrion, Esq., Chapter 13 Trustee, 11 as per an amended plan filed at Dk. No. 33, which now proposes to pay those funds into the plan, 12 and b) $1,751.13 to the order of Debtor-Plaintiff as these funds are claimed as exempt in the 13 amended Schedule C filed on January 4, 2024 at Docket #31 in lead case 23-03589. See dkt. #16, 14 ¶ 3. 15 4. Prior to the filing of the captioned proceeding, debtor’s counsel became aware that 16 the sum of $13,673.24 claimed as exempt would be deposited in debtor’s account at Oriental, and 17 the non-exempt amount of $10,724.76 would be consigned with the court. See dkt. #16, ¶ 4. 18 5. In response to Oriental’s letter dated December 28, 2023, and with the knowledge 19 that Oriental was in the process of reopening debtor’s closed account at Oriental to deposit 20 $13,673.24 and the remainder would be consigned with the court, Plaintiff filed the captioned 21 complaint on January 2, 2024. See dkt. #16, ¶ 5. 22 6. Oriental filed a proof of claim for the full balance owed after deducting the full 23 amount of the setoff. See Proof of Claim No. 7; dkt. #16, ¶ 6. 24 Debtor/plaintiff, in its response (dkt. #20), states that it has a valid cause of action under 25 Section 547 of the Bankruptcy Code and concludes, without any supporting documentation, that 26 the pleadings in the complaint clearly state a cause of action (dkt. #20, ¶¶ 3-6). Also, that by 27 returning the funds to the estate without litigation, Oriental acknowledged these facts (dkt. #20, ¶ 1 7). The response does not include legal support or a declaration of facts in support of 2 debtor/plaintiff’s opposition. Debtor/plaintiff also contends that fees and costs are not warranted 3 as Oriental has not demonstrated plaintiff acted in bad faith (dkt. #20, ¶ 9). 5 Under Fed. R. Civ. P. 56, made applicable to adversary proceedings under Fed. R. Bankr. 6 P. 7056, summary judgment is appropriate when “the movant shows that there is no genuine 7 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. 8 Civ. P. 56(a). See also Fed. R. Bankr. P. 7056; Celotex Corp. v. Catrett, 477 U.S. 317, 322-332 9 (1986); In re Colarusso, 382 F.3d 51 (1st Cir. 2004); Alicea v. Wilkie, 2020 WL 1547064, 2020 10 U.S. Dist. LEXIS 57213 (D.P.R. 2020). 11 “The summary-judgment procedure authorized by Rule 56 is a method for promptly 12 disposing of actions in which there is no genuine dispute as to any material fact or in which only 13 a question of law is involved.” Charles A. Wright, Arthur R. Miller, & Mary K. Kane, 10A Federal 14 Practice and Procedure § 2712 (4th ed., West 2022). “Rule 56 provides the means by which a 15 party may pierce the allegations in the pleadings and obtain relief by introducing outside evidence 16 showing that there are no fact issues that need to be tried.” Id. (footnotes omitted). “[S]ummary 17 judgment is not a substitute for the trial of disputed fact issues. Accordingly, the court … is 18 empowered [only] to determine whether there are issues to be tried.” Id. (footnotes omitted). See 19 also Bernier v. Treasury Dep't (In re Bernier), 2022 WL 17096264, at *5, 2022 Bankr. LEXIS 20 3283, at *17-18 (Bankr. D.P.R. 2022) (“the court may only determine whether there are issues to 21 be tried, and it is improper if the existence of a material fact is uncertain.”). 22 “A dispute is 'genuine' if the evidence about the fact is such that a reasonable jury could 23 resolve the point in favor of the non-moving party.” Thompson v. Coca-Cola Co., 522 F.3d 168, 24 175 (1st Cir. 2008), quoting Sánchez v. Alvarado, 101 F.3d 223, 227 (1st Cir.1996). See also 25 Andino-Oquendo v. Federal National Mortgage Association, 2023 WL 2245072, at *1, 2023 U.S. 26 Dist. LEXIS 34375, at *2 (D.P.R. 2023), quoting Alicea, 2020 WL 1547064, at *2, 2020 U.S. 27 Dist. LEXIS 57213, at *4. A fact is material only if it is determinative of the outcome of the 1 litigation. See Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904 2 (1976); Maymí v. P.R. Ports Auth., 515 F. 3d 20, 25 (1st Cir. 2008); In re Financial Oversight 3 and Management Board for Puerto Rico, 650 B.R. 334, 353 (D.P.R. 2023), quoting Vineberg v. 4 Bissonnette, 548 F.3d 50, 56 (1st Cir. 2008) (“Material facts are those that ‘possess[ ] the capacity 5 to sway the outcome of the litigation under the applicable law,’ and there is a genuine factual 6 dispute where an issue ‘may reasonably be resolved in favor of either party.’ ”). 7 When considering a petition for summary judgment, the court must review the evidence 8 in the light most favorable to the nonmoving party. See Thompson, 522 F.3d at 172, citing 9 Franceschi v. United States VA, 514 F.3d 81, 83 (1st Cir. 2008). The moving party invariably 10 bears both the initial as well as the ultimate burden in demonstrating its legal entitlement to 11 summary judgment. See Adickes v. Kress & Co., 398 U.S. 144, 157 (1970); López v. Corporación 12 Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st Cir. 1991); Alicea, 2020 WL 1547064, at *2, 13 2020 U.S. Dist. LEXIS 57213, at *4. It is essential that the moving party explain its reasons for 14 concluding that the record does not contain any genuine issue of material fact in addition to 15 making a showing of support for those claims for which it bears the burden of trial. See Bias v. 16 Advantage International, Inc., 905 F.2d 1558, 1560–61 (D.C. Cir. 1990), cert. denied, 498 U.S. 17 958 (1990). 18 To that end, L. Civ. R. 56(b) requires a movant to include a separate, short, and concise 19 statement of material facts and to support each factual assertion with a citation to the evidentiary 20 record. See L. Civ. R. 56(b), (e). “The court may disregard any statement of fact not supported 21 by a specific citation to record material properly considered on summary judgment,” and “shall 22 have no independent duty to search or consider any part of the record not specifically referenced 23 in the parties’ separate statement of facts.” L. Civ. R. 56(e). 24 The moving party cannot prevail if any essential element of its claim or defense requires 25 trial. See López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that 26 there is an absence of evidence supporting the nonmoving party's case. See Celotex, 477 U.S. at 27 325; Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir. 1991); Daury, 842 F.2d at 11. In its opposition, 1 the nonmoving party must show genuine issues of material facts precluding summary judgment; 2 the existence of some factual dispute does not defeat summary judgment. See Kennedy v. 3 Josephthal & Co., Inc., 814 F.2d 798, 804 (1st Cir. 1987); Kauffman v. Puerto Rico Telephone 4 Co., 841 F.2d 1169, 1172 (1st Cir. 1988); Hahn, 523 F.2d at 464. A party may not rely upon bare 5 allegations to create a factual dispute but is required to point to specific facts contained in 6 affidavits, depositions, and other supporting documents which, if established at trial, could lead 7 to a finding for the nonmoving party. See Over the Road Drivers, Inc. v. Transport Insurance Co., 8 637 F.2d 816, 818 (1st Cir. 1980). The moving party has the burden to establish that it is entitled 9 to summary judgment; no defense is required where an insufficient showing is made. See López, 10 938 F.2d at 1517. The nonmoving party need only oppose a summary judgment motion once the 11 moving party has met its burden. See Adickes, 398 U.S. at 159. 13 Costs and attorney’s fees may be awarded to the prevailing party under Fed R. Bankr. P. 14 7054(b). See also Fed. R. Civ. P. 54. The allowance of costs under Fed R. Bankr. P. 7054(b) is 15 within the discretion of the Bankruptcy Court. The court's discretion is guided by the so-called 16 “American Rule”, which acts as a point of reference and provides, generally, that each litigant 17 pays its own attorney's fees unless a statute or contract provides otherwise. See Chambers v. 18 NASCO, Inc., 501 U.S. 32, 45 (1991); Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121 (2015). 19 Notwithstanding, “a district court may use its inherent powers to assess attorneys’ fees against a 20 party that has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons’ ”. Whitney 21 Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir. 1995), quoting Chambers, 501 U.S. at 45-46, 111 22 S.Ct. at 2133, quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258- 23 259 (1975). A court exercising its inherent powers in this fashion must describe the conduct with 24 “sufficient specificity,” accompanied by a “detailed explanation of the reasons justifying the 25 award.” Id., quoting Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir. 1995) 26

27 2 Oriental has alleged that the prayer in the complaint is moot as the refund requested was 3 completed on the same date the complaint was filed. These facts, as alleged, stand uncontested. 4 The court agrees with Oriental’s statement that:

5 The filing of the captioned complaint was unnecessary, as 5 days prior to the filing 6 of the complaint, debtor’s counsel received a written letter from Oriental’s counsel stating Oriental that the setoff would be reversed and the sum of $13,673.24 7 claimed as exempt would be deposited in debtor’s account at Oriental, and the non- exempt amount of $10,724.76 would be consigned in court. In fact, the $13,673.24 8 claimed as exempt were already made available in Plaintiff’s bank account on the same date she filed the captioned complaint, and, Plaintiff has already requested 9 the withdrawal of additionally exempted funds consigned with the Court, as debtor 10 amended her exemptions after the funds were returned by Oriental. The money is no longer in Oriental’s possession and the subject matter of the captioned complaint 11 is moot.

12 Dkt. #15, pp. 1-2. 13 The conclusory allegations in debtor/plaintiff’s opposition do not show genuine issues of 14 material facts precluding summary judgment or otherwise show that the complaint is not moot as 15 the request was previously met. Therefore, Oriental’s motion for summary judgment is granted. 16 Although the facts presently before the court do not explicitly establish bad faith on 17 debtor/plaintiff’s part, the decision to continue prosecution of an action “requesting the turnover 18 of funds” which have already been returned and/or consigned with the court constitutes conduct 19 which promotes unnecessary litigation. Therefore, the court is moved to exercise its discretion 20 under Fed. R. Bankr. P. 7054(b) and awards costs and attorney’s fees in favor of Oriental that 21 were incurred since the filing of the motion for summary judgment on February 2, 2024. 23 In view of the foregoing, the court grants Oriental’s motion for summary judgment and 24 concludes that the complaint is moot. The court further orders and awards costs and attorney’s 25 fees incurred by Oriental since the filing of the motion for summary judgment. 26 Judgment will be entered accordingly. 27 2 In San Juan, Puerto Rico, this 7" day of March 2024. 3

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