C & A, S.E.

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE: 	:
:
C & A, S.E., 	: 	CASE NO. 05-05297 (GAC)
:
Debtor 	: 	CHAPTER 11
___________________________________:
:
C & A, S.E., 	:
:
Plaintiff 	:
:
v. 	: 	Index A
:
PUERTO RICO SOLID WASTE 	:
MANAGEMENT AUTHORITY, 	:
:
Defendant 	:
___________________________________:
DECISION AND ORDER
I. Background
Pending 	before 	this 	Court 	is 	a 	Motion 	for 	Relief 	from 	the
Automatic 	Stay, 	filed 	by 	Puerto 	Rico 	Solid 	Waste 	Management
Authority (“ADS”). In June of 2001, the debtor, C&A, S.E., (“C&A”)
commenced 	an 	arbitration 	proceeding 	against 	ADS. 	On 	February 	17,
2005, 	the 	panel 	of 	arbiters 	issued 	an 	award 	in 	favor 	of 	ADS. 	On
April 22, 2005, ADS filed an action in the San Juan Court of First
Instance, to confirm the award, Civil No. KAC05-2968 and on May 12,
2005, C&A filed a motion to vacate the award, Civil No. KAC05-3546.
C&A 	filed 	a 	voluntary 	petition 	under 	Chapter 	11 	on 	June 	9,
2005 and the civil action was automatically stayed pursuant to 11
U.S.C 	§ 362. On June 21, 2005, 	C&A 	filed an adversary proceeding
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against ADS removing the local court proceeding to vacate the award
to the bankruptcy court (Adv. No. 05-00149). By separate Decision
and Order of June 29, 2006, this Court remanded the proceeding to
the local court.
On 	July 	22, 	2005, 	ADS 	filed 	a 	motion 	for 	relief 	from 	the
automatic 	stay 	(Docket 	#16), 	seeking 	an 	order 	from 	the 	Court 	to
modify the automatic stay in order to allow the proceeding for the
confirmation 	of 	the 	arbitration 	award 	between 	ADS 	and 	C&A 	to
continue 	in 	the 	local 	court. 	ADS 	contends 	that 	the 	confirmation
action 	arises 	solely 	under 	local 	law 	and 	that 	the 	confirmation
action is the most efficient and satisfactory manner to resolve the
pending 	dispute. 	ADS 	argues 	that 	C&A 	wanted 	to 	arbitrate 	and 	C&A
commenced 	the 	arbitration 	proceeding. 	Finally, 	ADS 	provides 	a
background in its motion for relief from stay in which it describes
the breach of contract that led to the arbitration between the C&A
and ADS.
C&A 	filed 	an 	opposition 	to 	the 	motion 	for 	relief 	from 	the
automatic 	stay 	on 	August 	2, 	2005 	(Docket 	#21), 	arguing 	that
allowing ADS to proceed with the confirmation award action has no
basis in law. C&A argues that it would severely interfere with the
adversary case filed for removing the action to vacate the award to
this Court (Adv. No. 05-00149), resulting in duplicate proceedings
and 	contrary 	to 	the 	goal 	of 	judicial 	economy. 	C&A 	also 	maintains
that 	it 	would 	cause 	its’ 	estate 	to 	incur 	in 	unnecessary 	legal
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expenses.
Moreover, 	C&A 	maintains 	that 	the 	confirmation 	action 	is 	a
matter concerning the administration of the estate pursuant to 28
U.S.C. 157(b)(2)(A) and further asserts that the relief requested,
the vacation of the award, is conditioned on the continued stay of
the confirmation action. Finally, C&A asserts that the continuance
of 	the 	automatic 	stay 	is 	essential 	for 	its 	effective
reorganization, 	for 	the 	award 	issued 	in 	the 	local 	court 	is 	C&A’s
largest 	liability 	and 	directly 	affects 	the 	liquidation 	of 	the
assets 	of 	the 	estate 	and 	the 	adjustments 	of 	the 	debtor-creditor
relationship pursuant to 28 U.S.C. 157 (b)(2)(O).
At 	a 	hearing 	held 	on 	August 	12, 	2005, 	the 	court 	took 	the
matter under advisement (Docket #31).
II. DISCUSSION
A. Automatic Stay
The automatic stay provision is one of the fundamental debtor
protections 	in 	the 	Bankruptcy 	Code. 	It 	gives 	the 	debtor 	a
“breathing 	spell” 	from 	creditors 	and 	it 	stops 	all 	collection
efforts, all harassment, and all foreclosure actions. The automatic
stay 	was 	intended 	to 	prevent 	a 	dissipation 	of 	“the 	assets 	of 	the
estate 	and 	to 	avoid 	a 	multiplicity 	of 	forums 	where 	piecemeal
adjudication of a bankruptcy case could take place.” H. R. Rep. No.
5174, 	98th 	Cong., 	2d 	sess. 	(1984), 	reprinted 	in 	1984 	U.S. 	Code
Cong. & Ad. News 579 (statement of Robert W. Kastenmeir). See In re
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Corporacion 	de 	Servicios 	Medicos 	Hospitalarios, 	60 	B.R. 	920, 	931
(D.P.R. 	1986), 	aff'd, 	805 	F.2d 	440, 	(1st 	Cir. 	1986). 	Generally,
courts 	try 	to 	preserve, 	under 	the 	safeguarded 	concept 	of 	the
estate, 	all 	assets 	of 	the 	debtor. 	11 	U.S.C. 	sec. 	541; 	See
Midatlantic 	Nat’l 	Bank 	v. 	New 	Jersey 	Dep’t 	of 	Envtl. 	Prot., 	474
U.S. 494 (1986).
The 	automatic 	stay 	provision 	in 	Section 	362(a) 	of 	the
bankruptcy code bars:
[t]he commencement or continuation, including
the 	issuance 	or 	employment 	of 	process, 	of 	a
judicial, 	administrative, 	or 	other 	action 	or
proceeding 	against 	the 	debtor 	that 	was 	or
could 	have 	been 	commenced 	before 	the
commencement of the case under this title, or
to 	recover 	a 	claim 	against 	the 	debtor 	that
arose 	before 	the 	commencement 	of 	the 	case
under this title;
11 	U.S.C. 	§ 	362(a). 	Section 	362(a) 	expressly 	prohibits 	any 	post-
petition 	actions 	by 	creditors, 	while 	the 	stay 	is 	in 	effect, 	to
prosecute an action related to a pre-petition debt.
B. Relief from the Automatic Stay
Section 362(d) provides that on request of a party in interest
and after notice and hearing, the bankruptcy court may grant relief
from the stay "for cause, including the lack of adequate protection
of an interest in property of such party in interest." 11 U.S.C. §
362(d)(1). 	"Cause" 	is 	not 	defined 	under 	Section 	362(d) 	of 	the
bankruptcy 	code 	and 	is 	generally 	determined 	on 	a 	case-by-case
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basis. In re Haines, 309 B.R. 668, 674 (Bankr. D.Mass. 2004)(citing
In re Fernstrom Storage & Van Co., 938 F.2d 731, 735 (7th Cir.1991)
and In re Aleli Corp., 71 B.R. 330 (D.P.R. 1987)).
Section 	362(g) 	allocates 	the 	burden 	of 	proof 	in 	motions
seeking relief from stay. It provides as follows:
(g) In any hearing under subsection (d) or (e)
of 	this 	section 	concerning 	relief 	from 	the
stay 	of 	any 	act 	under 	subsection 	(a) 	of 	this
section--
(1) the party requesting such relief has
the burden of proof on the issue of the
debtor’s equity in property; and
(2) the party opposing such relief has
the burden of proof on all other issues.
11 	U.S.C. 	§ 	362(g). 	“The 	weight 	of 	authority 	explains 	that 	once
the 	moving 	party 	establishes 	cause 	for 	such 	relief, 	a 	[stricter]
burden then shifts to the debtor to demonstrate that he is entitled
to 	the 	stay.” 	In 	re 	Unanue-Casal, 	159 	B.R. 	90, 	94 	(D.P.R.
1993)(citing In re Unioil, 54 B.R. 192, 194 (Bankr. D.Colo. 1985)
and In Re Setzer, 47 B.R. 340, 345 (Bankr. E.D.N.Y. 1985)).
If 	a 	party 	in 	interest 	wishes 	to 	enforce 	a 	claim 	or 	lien
against property of the estate, it must obtain relief from the stay
pursuant to 11 U.S.C 	§ 362(d), in the bankruptcy court. See In re
Bright, 338 B.R. 530, 534 (B.A.P. 1st Cir. 2006).
The Congressional Reports indicate that:
[i]t will often be more appropriate to permit
proceedings 	to 	continue 	in 	their 	place 	of
origin, 	when 	no 	great 	prejudice 	to 	the
bankruptcy 	estate 	would 	result, 	in 	order 	to
leave the parties to their chosen forum and to
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relieve the bankruptcy court from duties that
may be handled elsewhere.
H. R. Rep. No. 95-595, at 341 (1977), U.S. Code Cong. & Admin. News
1978, 	at 	5963, 	6297; 	S.Rep. 	No. 	95-989, 	at 	50 	(1978), 	U.S. 	Code
Cong. & Admin. News 1978, at 5787, 5836).
Judicial efficiency may constitute cause to lift a stay. In re
Quay Corporation, Inc., 2006 WL 208704, 2 (N.D.Ill. 2006)(citing In
re 	Betzol, 	316 	B.R. 	906, 	918 	(N.D.Ill. 	2004)). 	In 	In 	re 	Quay
Corporation, 	Inc., 	the 	automatic 	stay 	was 	lifted 	to 	allow 	an
already 	pending 	and 	almost 	fully 	litigated 	case 	to 	proceed 	to
judgment. The bankruptcy court found that judicial efficiency would
be met by lifting the stay. In re Quay Corporation, Inc., 2006 WL
208704, 2 (N.D.Ill. 2006).
Likewise, 	in 	a 	case 	similar 	to 	the 	one 	before 	us, 	in 	In 	re
Betzol, the court lifted the stay to allow pending arbitration to
proceed where the only remaining issues were the fixing of damages,
a 	motion 	to 	reconsider 	and 	any 	post-arbitral 	proceedings. 	In 	re
Betzold, 	316 	B.R. 	906, 	918 	(N.D.Ill. 	2004). 	The 	court 	also 	held
that 	if 	arbitration 	was 	not 	allowed 	to 	proceed, 	the 	time 	and
expense already expended would be duplicated. Id. at 918.
Finally, in In re Aleli, there were two cases before the local
court 	to 	determine 	whether 	or 	not 	Aleli 	was 	the 	holder 	in 	due
course of a valid and enforceable promissory note guaranteed by a
first-ranking mortgage over the same property. In re Aleli, 71 B.R.
330, 331 (D.P.R. 1986). The court concluded that because this was
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totally 	dependent 	on 	local 	law, 	relying 	on 	Northern 	Pipeline
Constr. 	Co. 	v. 	Marthon 	Pipeline 	Co., 	458 	U.S. 	50 	(1982), 	the
automatic stay should be lifted so the local court could decide the
issue.
III. Analysis
ADS requests that the Court modify the automatic stay in order
to allow the action related to the confirmation of the arbitration
award 	to 	continue 	in 	the 	local 	court. 	The 	breach 	of 	contract
between 	the 	parties 	has 	already 	been 	litigated 	in 	full 	in 	the
arbitration proceeding. The two pending actions in the local court,
one 	for 	vacating 	the 	award 	and 	the 	other 	for 	the 	confirmation 	of
the 	award, 	are 	post-arbitral 	proceedings 	regarding 	the 	decision
reached by the arbiters on February 17, 2005.
Although, 	the 	automatic 	stay 	provision 	gives 	the 	debtor 	a
“breathing 	spell” 	from 	creditors 	it 	may 	be 	modified 	for 	cause 	on
request of a party in interest. As stated, supra, once the moving
party establishes cause for such relief, then the burden shifts to
the debtor to demonstrate that he is entitled to the stay. Like the
court 	in 	In 	re 	Betzol, 	supra, 	this 	Court 	finds 	that 	judicial
efficiency 	constitutes 	cause 	for 	modifying 	the 	automatic 	stay 	in
the present case.
ADS has met its burden demonstrating that there is cause to
modify the automatic stay and allow the local court proceeding to
continue because of the late stage of those proceedings. C&A has
not demonstrated that it is entitled to a continuance of the stay.
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The arbitration proceeding has ended and what is pending is merely
post-arbitral proceedings.
C&A 	argues 	that 	it 	will 	be 	required 	to 	incur 	in 	unnecessary
legal 	expenses, 	however, 	by 	avoiding 	the 	possible 	duplicate
litigation 	of 	the 	same 	issues 	in 	the 	bankruptcy 	court 	that 	have
already 	been 	determined 	by 	the 	arbiters, 	C&A’s 	litigation 	costs
will be less than if these issues are re-litigated here. See In re
Betzold, 316 B.R. at 918.
While allowing exceptions to Section 362(a) is to be decided
on 	a 	case-by-case 	basis, 	this 	is 	a 	case 	in 	which 	the 	exception
applies. 	Thus, 	relief 	will 	be 	granted 	in 	order 	to 	let 	the 	local
courts determine if the award should be confirmed or vacated.
The other issues raised by C&A, regarding the removal of the
action to vacate the arbitration award raised in Adversary Case No.
05-0149, were resolved by separate Order.
ORDER
WHEREFORE IT IS ORDERED that the defendants motion to modify
the automatic stay pursuant to 362(d) is GRANTED. Therefore, this
court 	modifies 	the 	stay 	in 	order 	to 	permit 	the 	local 	court 	to
continue the post-arbitral proceeding in case Civil No. KAC05-2968.
SO ORDERED.
San Juan, Puerto Rico, this 29th day of June, 2006.
S/Gerardo A. Carlo-Altieri
_____________________________
GERARDO A. CARLO-ALTIERI
Chief, U.S. Bankruptcy Judge
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