MORALES CABAN et al v. R & G MORTGAGE

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Case:05-00233-BKT Doc#:44 Filed:11/03/09 Entered:11/18/09 13:47:25 Desc: Main
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IN RE:

ADRIAN CABAN MORALES, : Case No. 04-00951 (ESL)
OLGA M. SANTOS SANTANA, :

Debtors : CHAPTER 13

ADRIAN CABAN MORALES,
OLGA M. SANTOS SANTANA,

Plaintiffs
Vv. : Adv. No. 05-00233
R&G MORTGAGE CORPORATION,

Defendant

DECISION AND ORDER

Background

The debtors filed a petition under Chapter 13 on February 2,
2004. The debtors’ amended plan of May 24, 2004 (dkt. #12),
which was confirmed (dkt. #21), included a provision that the
debtors agreed to lift the stay in favor of R&G Mortgage
Corporation (“R&G”). On June 16, 2004, R&G filed a motion for
relief from stay (dkt. #16). In the motion R&G contends that it
is the holder of a mortgage note over real property, that the
debtors are in arrears and that there is cause for relief from
stay under 11 U.S.C. § 362(d)(1) and (d) (2). At the hearing on

the motion for relief from stay, the stay was lifted in R&G’s

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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favor (dkt. #23) and a separate order was entered indicating that
the motion for relief from stay was granted (dkt. #24).

R&G filed a complaint, dated October 13, 2004, in the
Superior Court of Puerto Rico, Arecibo Section, for the ordinary
foreclosure of the mortgage (dkt. #31, Exhibit A). The complaint
names the debtors, indicates the amounts owed by them to R&G and
prays that they be condemned to pay the debt, plus interest and
additional costs, and that the court order the foreclosure of the
property.

The debtors filed this adversary complaint on October 6,
2005, alleging that R&G’s complaint is for collection of monies
and the foreclosure of the collateral and that to the extent that
R&G seeks to hold them liable for the monies owed, R&G violated
the automatic stay. The debtors contend that R&G’s actions
constitute a collection effort against them in violation of the
automatic stay and that they can possibly be held personally
liable for the debt. The debtors request damages.

The debtors filed a motion for partial summary judgment
(dkt. #18), which R&G opposed (dkt. #30) and R&G filed a cross-
motion for summary judgment (dkt. #26), which the debtors’
opposed (dkt. #31).

The debtors’ plan was subsequently completed and the case is

awaiting entry of discharge.

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DISCUSSION

The Court concludes that there are no material facts in
dispute. The only issues are the extent of the relief granted to
R&G in the order granting relief from stay and the scope of the
foreclosure complaint filed by R&G. Assuming, arguendo, that R&G
needed to seek specific language in the order granting relief
from stay to obtain a deficiency judgment against the debtors in
the local court action, nothing in the local court complaint
suggests that R&G is requesting a deficiency judgment. Ré&G had
the option of foreclosing its mortgage in the “ordinary” way.

See 30 L.P.R.A. § 2701. The ordinary method is to utilize the
mechanism provided in App. III, Rule 51.3 of Title 32. See

Atanacia Corp. V. J.M. Saldana, Inc., 233 D.P.R. 284 (1993).

Pursuant to Rule 51.3(b) in App. III of Title 32, “[j]udgments
entered in actions for the foreclosure of mortgages and other
liens shall order that plaintiff recover his debt, interests and
costs through the sale of the encumbered property.”

In the present case, the debtors defaulted on their mortgage
to R&G. R&G obtained relief from stay to foreclose on the
collateral subject to the mortgage. The debtors’ confirmed plan
also provided that R&G would be granted relief from stay. R&G
filed a complaint in the local court seeking foreclosure in the
ordinary way, which would include a judgment against the debtors

condemning them to pay the outstanding mortgage indebtedness

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through the sale of the encumbered property. No evidence has
been presented to demonstrate that R&G has sought to obtain or
enforce a deficiency judgment against the debtors. Moreover, the
Court concludes that upon entry of the discharge, any deficiency
judgment will be discharged as an unsecured debt. Accordingly,
the Court concludes that R&G did not violate the automatic stay
of 11 U.S.C. § 362 and that it is entitled to judgment, as a
matter of law, in this adversary proceeding.
ORDER

Wherefore IT IS ORDERED that the debtors’ complaint shail
be, and it hereby is, DISMISSED.

Judgment shall enter accordingly.

SO ORDERED. . ;
2 hg drrenter)
San Juan, Puerto Rico, this od ei day of Octoher 2009.

walle

Lamoutte
Chief, Oe. Bankruptcy Judge