LUGO TORO et al v. SEGARRA MIRANDA et al

IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO
IN RE: * CASE NO. 07-06262 EAG
*
EDSON IVAN LUGO TORO and * CHAPTER 7
MARILY PADILLA ACOSTA, *
*
*
DEBTORS. *
____________________________________________________*
*
EDSON IVAN LUGO TORO and * ADVERSARY NO. 09-00017 EAG
MARILY PADILLA ACOSTA, *
*
PLAINTIFFS, *
*
v. *
*
WILFREDO SEGARRA MIRANDA, et al., *
*
DEFENDANTS. * FILED & ENTERED ON 03/15/2012
____________________________________________________*
OPINION AND ORDER
I. PROCEDURAL HISTORY
On February 2, 2009, joint debtors Edson Iván Lugo Toro and Marily Padilla Acosta
(together, “debtors” or “plaintiffs”) initiated an adversary proceeding against defendants Luan
Investment, S.E. (“Luan”); Marketing Fund; North Deck, Ltd. (“North Deck”); Ganz U.S.A., LLC
(“Ganz”); Atwell, Curtis & Brooks Ltd. (“Atwell”); Banco Popular de Puerto Rico (“BPPR”); the
Internal Revenue Service (“IRS”); and the chapter 7 trustee appointed to the case. (Adv.1
Docket No. 1.) Claiming that defendants willfully violated the automatic stay by mailing
While the case was filed under chapter 13, it was later converted to chapter 7 on debtors’ motion. (Bankr.
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Docket Nos. 53; 57.)
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collection notices to debtors’ business after the bankruptcy petition had been filed, plaintiffs
assert causes of action pursuant to 11 U.S.C. § 362 (k)(1) and (2), seeking actual damages,
including attorney’s fees, as well as punitive damages. Id. Plaintiffs subsequently settled all2
claims with defendants Ganz, Atwell, and BPPR, while claims against the IRS have been
dismissed. (Adv. Docket Nos. 10; 20; 28; 29; 43.) The remaining defendants, Luan and North
Deck, both filed joint answers to the complaint and motions to dismiss, which the court denied.
(Adv. Docket Nos. 68; 69; 76; 78.)
On July 18, 2011, plaintiffs filed a motion for partial summary judgment limited to the
issue of liability. (Adv. Docket No. 71.) After neither defendant filed a timely opposition, the
court entered an order on August 31, 2011, granting plaintiffs’ unopposed motion. (Adv.
Docket No. 77.) Defendant Luan filed a motion for reconsideration, which plaintiffs opposed.
(Adv. Docket Nos. 81; 82.) At a hearing held on the motion on November 22, 2011, the court
set aside the prior order granting partial summary judgment, directed defendants to file
responses in opposition within 14 days, and gave plaintiffs seven days to file their reply. (Adv.
Docket No. 87.) Luan, complying with the court’s order, filed an opposition to plaintiffs’
motion for summary judgment on December 6, 2011; however, defendant North Deck,
represented by the same counsel, did not file an opposition. (Adv. Docket No. 89.) Plaintiffs
filed their reply on December 27, 2011. (Adv. Docket No. 94.)
Having set aside the order granting partial summary judgment, the court now
considers again plaintiffs’ motion for partial summary judgment, as well as Luan’s opposition
thereto, and plaintiffs’ reply. (Adv. Docket Nos. 71; 89; 94.) Also pending is plaintiffs’ motion
Plaintiffs filed an amended complaint on December 24, 2009. (Adv. Docket No. 37.)
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to vacate the court’s November 22, 2011 order, Luan’s opposition thereto, and plaintiffs’ reply.
(Adv. Docket Nos. 86; 90; 95.)
II. PLAINTIFFS’ MOTION TO VACATE
Before reaching the merits of plaintiffs’ motion for partial summary judgment, the court
shall first address plaintiffs’ motion to vacate the court’s November 22, 2011 order. In their
motion, plaintiffs argue that the court’s order granting partial summary judgment constitutes
the law of the case, and that the court thus erred by revisiting the order absent a finding of
“manifest injustice.” (Adv. Docket No. 86.) Luan counters that the order in question does fall
under the law of the case doctrine because it is interlocutory, not final, and that the court acted
within its discretion. (Adv. Docket No. 90.)
It is well settled that orders granting partial summary judgment only as to the issue of
liability are interlocutory, not final. See Laboy v. Doral Mortg. Corp. (In re Laboy), 647
F.3d 367, 372 (1st Cir. 2011) (“if the issue of damages was still open when the court resolved
the [d]ebtors’ motion for partial summary judgment then the court's determination was not
final.”); Perez-Ruiz v. Crespo-Guillen, 25 F.3d 40, 42 (1st Cir. 1994)) (“Interlocutory orders ...
remain open to trial court reconsideration, and do not constitute the law of the case.”).
Pursuant to Rule 54(b), an interlocutory order “may be revised at any time before the entry
of a judgment adjudicating all the claims and all the parties' rights and liabilities.” Fed. R. Civ.
P. 54(b). The First Circuit has held that courts have discretion in determining whether
interlocutory orders should be revisited, and that courts are to “rely on ‘the inherent power
of the rendering district court to afford such relief from interlocutory judgments ... as justice
requires.’” Golf Tech, LLC v. Edens Techs., LLC, 2009 U.S. Dist. LEXIS 37440, at *9-*11 (D. Me.
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Apr. 30, 2009) (quoting Greene v. Union Mut. Life Ins. Co. of Am., 764 F.2d 19, 22 (1st
Cir. 1985)).
In this case, the court determined that justice required that the order granting partial
summary judgment be set aside due to the fact that it was based on legal error. It is firmly
established that even where a party fails to file an opposition to a motion for summary
judgment, courts are nevertheless required to evaluate such a motion on its merits. See
Cordi-Allen v. Halloran, 470 F.3d 25, 28 (1st Cir. 2006) (noting that a district court is bound
to review an unopposed motion for summary judgment on the merits). Neither can a court
grant a motion for summary judgment as a sanction. See De La Vega v. The San Juan Star,
Inc., 377 F.3d 111, 113, 116 (1st Cir. 2004). Here, however, the order in question indicated
that plaintiffs' summary judgment motion was granted as unopposed, including no findings
of fact or conclusions of law upon which its holding was based. (Adv. Docket No. 77.) The
court thus found it necessary to revisit this order, and to evaluate plaintiffs’ motion on its
merits. In light of the above, the court DENIES plaintiffs’ motion to vacate. (Adv. Docket3
No. 86.)
III. UNCONTESTED FACTS
Turning to the merits of plaintiffs’ summary judgment motion, the court finds the
following facts to be uncontested pursuant to Rule 56 and D.P.R. Civ. R. 56:
Debtors, doing business as Foto Shoppe, filed a voluntary petition under chapter 13 of
the Bankruptcy Code on October 26, 2007. (Bankr. Docket No. 1.) On November 27, 2007,
It should be noted that at the November 22, 2011 hearing, the court mistakenly cited Rule 60 as the basis for
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setting aside the order in question. (Adv. Docket No. 87.) The relevant provision of Rule 60, however, applies only
to final orders. Fed. R. Civ. P. 60(b).
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defendant Luan, Foto Shoppe’s landlord, filed a motion for relief of stay in order to continue
with eviction proceedings already underway in state court. (Bankr. Docket No. 14.) On
December 18, 2007, debtors and Luan entered into a stipulation by which debtors agreed that
they would surrender the premises where their store was located by January 31, 2008, and
that, if they failed to do so, the stay would be lifted as to Luan to allow it to enforce the eviction
order entered in the state court proceedings. (Bankr. Docket No. 27 at p. 2.) The parties also
agreed that post-petition rent from the period from October 26, 2007 until the date the
premises were vacated and delivered to Luan would be treated as an administrative rent
expense. (Bankr. Docket No. 27 at pp. 2-3.) Following the filing of the bankruptcy petition and
prior to debtors receiving a discharge, defendants Luan and North Deck mailed two collection
statements to debtors’ place of business. (Adv. Docket Nos. 71 at 3; 71-1; 71-2; 71-3; 71-4;4
71-5; 71-6; 71-7; 71-8.) However, the exact relationship between defendants Luan and North
Deck, as well as North Deck’s relationship to debtors, is unclear based on the parties’
submissions.5
W hile debtors claim in their motion that Luan and North Deck mailed debtors seven statements dated
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November 26, 2007 and one dated December 27, 2007, the evidence attached to debtors’ motion indicates that
the submissions dated November 26, 2007 in fact comprise a single, seven-page statement. (Adv. Docket
Nos. 71-1; 71-2; 71-3; 71-4; 71-5; 71-6; 71-7.); cf. Claim #15 filed by Luan (Proof of Claim No. 15-1).
It is undisputed that debtors received collection statements dated November 26, 2007 and December 27, 2007
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from “Luan Investment S.E./Marketing Fund” bearing North Deck’s return address on the envelope. (Adv. Docket
No. 71 at p. 3; 71-1; 89 at 1-5.) While debtors refer to North Deck as Luan’s “agent” in their motion, debtors do
not provide support for this alleged relationship from the record. Fed. R. Civ. P. 56(c). Thus, despite the fact that
North Deck failed to submit an opposition to plaintiffs’ motion, this proposed fact is not deemed admitted. Fed.
R. Civ. P. 56(c); D.P.R. Civ. R 56(e). Of note, Luan attached to its opposition a sworn statement by the director of
its collection agency denying that North Deck has any relation to Luan or, more generally, to the shopping center
where debtors’ store was located. (Adv. Docket No. 89 at 13.) However, Luan’s submission fails to comply with
the local district court rules, and is thus not considered for purposes of this motion. D.P.R. Civ. R. 56(c) (“A party
opposing a motion for summary judgment shall submit with its opposition a separate, short, and concise statement
of material facts. The opposing statement shall admit, deny or qualify the facts supporting the motion for summary
judgment by reference to each numbered paragraph of the moving party’s statement of material facts.”).
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IV. SUMMARY JUDGMENT STANDARD
Pursuant to Rule 56, made applicable to this proceeding by Fed. R. Bankr. P. 7056, a
court shall grant summary judgment when the record shows that “there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). “A dispute is genuine if the evidence about the fact is such that a reasonable jury6
could resolve the point in the favor of the non-moving party. A fact is material if it has the
potential of determining the outcome of the litigation.” Farmers Ins. Exch. v. RNK, Inc., 632
F.3d 777, 782 (1st Cir. 2011) (quoting Rodriguez-Rivera v. Federico Trilla Reg’l Hosp., 532
F.3d 28, 30 (1st Cir. 2008)). The party moving for summary judgment bears the burden of
showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986).
Once a properly supported motion has been presented before the court, the opposing
party “can shut down the machinery only by showing that a trial-worthy issue exists” that
would warrant the court's denial of the motion for summary judgment. McCarthy v. Northwest
Airlines, 56 F.3d 313, 315 (1st Cir. 1995). For issues where the opposing party bears the
ultimate burden of proof, that party cannot merely “rely on the absence of competent evidence,
but must affirmatively point to specific facts that demonstrate the existence of an authentic
dispute.” Id.
In assessing a motion for summary judgment, the court “must view the entire record
Rule 56 was amended effective December 1, 2010, after this adversary proceeding was filed. However, “[t]he
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substantive standard for summary judgment remains unchanged.” Tropigas De P.R. v. Certain Underwriters at
Lloyd's of London, 637 F.3d 53, 56 n.5 (1st Cir. 2011). Therefore, since the application of the amended rule to the
present case would be “feasible” and would not work an “injustice,” Rule 56, as amended, shall govern the
determination of the parties’ motions. Farmers Ins. Exch., 632 F.3d at 777 n.4 (citing 28 U.S.C. § 2074(a)).
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in the light most hospitable to the party opposing summary judgment, indulging in all
reasonable inferences in that party's favor.” Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st
Cir. 1990) (citations omitted). The court may safely ignore “conclusory allegations, improbable
inferences, and unsupported speculation.” Medina-Munoz v. R.J. Reynolds Tobacco Co., 896
F.2d 5, 8 (1st Cir. 1990) (citations omitted). However, there is “no room for credibility
determinations, no room for the measured weighing of conflicting evidence such as the trial
process entails, [and] no room for the judge to superimpose his own ideas of probability and
likelihood (no matter how reasonable those ideas may be) ....” Greenburg v. P. R. Mar. Shipping
Auth., 835 F.2d 932, 936 (1st Cir. 1987); see also Mulero-Rodriguez v. Ponte, Inc., 98 F.3d 670,
677 (1st Cir. 1996) (reversing summary judgment and emphasizing that “determinations of
motive and intent ... are questions better suited for the jury”) (quoting Petitti v. New England
Tel. & Tel. Co., 909 F.2d 28, 34 (1st Cir. 1990)).
V. LEGAL ANALYSIS
When a debtor files a bankruptcy petition, he or she is immediately protected by an
automatic stay that prohibits, among other things, “any act to collect, assess, or recover a claim
against the debtor that arose before the commencement of the case....” 11 U.S.C. § 362(a)(6).
The automatic stay imposes on non-debtor parties an affirmative duty of compliance.
Sternberg v. Johnston, 595 F.3d 937, 943 (9th Cir. 2010). Section 362(k) of the Bankruptcy
Code provides individuals with a means to redress violations of the stay, stating that “an
individual injured by a willful violation of a stay provided by this section shall recover actual
damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover
punitive damages.” 11 U.S.C. § 362(k)(1).
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A debtor alleging a violation of the automatic stay must demonstrate, by a
preponderance of the evidence, that “a violation of the automatic stay has occurred, that the
violation was willfully committed by the [defendant], and that the debtor suffered damage as
a result of the violation.” In re Panek, 402 B.R. 71, 76 (Bankr. D. Mass. 2009). A willful
violation does not require a specific intent to violate the automatic stay; rather, the debtor
must show that the defendant intended the actions that constituted the violation and had
knowledge of the stay. See Fleet Mortg. Group v. Kaneb, 196 F.3d 265, 269 (1st Cir. 1999). As
debtors’ motion limits itself to the issue of liability, if debtors establish that such a willful
violation occurred here, a separate hearing shall be held at which the parties may present
further evidence regarding injury and damages. See Laboy v. Doral Mortg. Corp. (In re
Laboy), 647 F.3d 367, 376 (1st Cir. 2011).
In this case, the court finds that debtors have met their burden of proof on the issue of
liability as to Luan, but not as to North Deck. Regarding the first element, it is uncontested that
Luan and North Deck, leaving aside for a moment the exact nature of the defendants’
relationship, sent debtors two collection notices at some point after debtors filed for
bankruptcy on October 26, 2007 (triggering the automatic stay) but prior to debtors’ receiving
their discharge on April 20, 2009. Of the two notices, only the first, dated November 26, 2007,7
sought to collect on pre-petition debts. (Adv. Docket Nos. 71-1; 71-2; 71-3; 71-4; 71-5; 71-6;
71-7.) In the second notice, dated December 27, 2007, Luan wrote off all pre-petition amounts
While the case was briefly dismissed on May 28, 2008 before being reinstated on June 20, 2008, neither party
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claims that the collection statements at issue were sent during this period. (Bankr. Docket Nos. 50; 55; Adv.
Docket Nos. 71; 89; 94.)
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owed. (Adv. Docket No. 71-8 at 7.) Nevertheless, although Luan rectified its error in seeking8
to recover pre-petition amounts owed from a debtor in bankruptcy by the following month,
the fact remains that the November 26, 2007 statement constitutes a violation of the automatic
stay.
As to whether the violation was willful, “where the creditor received actual notice of the
automatic stay, courts must presume that the violation was deliberate.” Fleet Mortg.
Group, 196 F.3d at 269. Here, Luan entered the bankruptcy case on November 6, 2007, and
is thus presumed to have knowledge of the stay from at least that date. (Bankr. Docket No. 8.)
Furthermore, Luan does not dispute that it knew of the stay during the relevant period. (Adv.
Docket No. 89.) Thus, the court finds that Luan’s violation of the stay was willful, and therefore
GRANTS debtors’ motion for partial summary judgment on the issue of liability as to Luan.
North Deck, however, never appeared in the main case, did not file a proof of claim, is
not listed as a creditor in debtors’ petition, nor is it included in the creditor matrix. (Bankr.
Docket Nos. 1; 10.) While debtors appear to rely on a theory of agency to impute Luan’s
knowledge of the stay to North Deck, such an agency relationship, even if proven, would not
be sufficient to attribute knowledge from a principal to an agent, as that principle actually
works in the reverse. (Adv. Docket No. 71); see, e.g., Restatement (Third) of Agency § 5.03
(with some exceptions, “notice of a fact that an agent knows or has reason to know is imputed
to the principal if knowledge of the fact is material to the agent's duties to the principal.”). In
Although the November 2, 2007 entry writing off debtors’ pre-petition debts indicates a remaining balance
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of $3,826.57, this amount is comprised solely of various post-petition charges including common area
maintenance, insurance, real property tax, promotion funds, and rent for November 2007, as well the pro-rated
rent from October 26, 2007 (the date debtors filed their bankruptcy petition) until the end of that month. (Adv.
Docket No. 71-8 at 7.)
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any event, debtors have not established that an agency relationship exists between Luan and
North Deck, as they did not properly support their proposed fact on this point with citation to
record material. D.P.R. Civ. R. 56(e) (“The court may disregard any statement of fact not
supported by a specific citation to record material properly considered on summary
judgment.”) The court therefore does not take the alleged relationship into consideration in
deciding the present motion. Based on the foregoing, the court finds that an issue of material
fact remains as to whether North Deck’s violation of the automatic stay was willful. Therefore,
debtors’ motion for partial summary judgment as to North Deck is hereby DENIED.
VI. CONCLUSION
In view of the foregoing, debtors’ motion for partial summary judgment on the issue of
liability is GRANTED as to defendant Luan and DENIED as to defendant North Deck. A separate
hearing shall be held regarding the issue of damages as to defendant Luan and the issues of
liability and damages as to defendant North Deck. Furthermore, plaintiffs’ motion to vacate
the court’s November 22, 2011 order is DENIED.
In San Juan, Puerto Rico, this 15 day of March, 2012.th
Edward A. Godoy
U.S. Bankruptcy Judge
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