OCHOA POULTRY FARMS INC v. CEBOLLERO et al

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
In re: 	:
:
OCHOA POULTRY FARMS, INC., 	: 	Case No. 08-03906 (GAC)
:
Debtor 	: 	Chapter 11
___________________________________:
:
:
OCHOA POULTRY FARMS, INC., 	:
:
Plaintiff 	:
:
v. 	: 	Adv. No. 08-0156 (GAC)
:
JORGE CEBOLLERO, IRAIDA VENEGAS, 	:
and their Conjugal Partnership, 	:
:
Defendants 	:
___________________________________:
DECISION AND ORDER
Before 	the 	Court 	is 	a 	motion 	to 	dismiss 	this 	adversary
proceeding 	filed 	by 	Jorge 	Cebollero, 	Iraida 	Venegas 	and 	their
conjugal 	partnership 	(“Defendants”)(dkt. 	#8) 	and 	the 	debtor’s
opposition (dkt. #12).
On 	October 	27, 	2008, 	the 	debtor 	filed 	this 	adversary
proceeding 	against 	the 	Defendants, 	seeking 	damages 	for 	breach 	of
contract and turnover of property of the estate. 	The debtor also
seeks damages for an alleged violation of the automatic stay.
The 	debtor 	alleges 	that 	it 	entered 	into 	a 	Joint 	Venture
Agreement 	with 	the 	defendants 	for 	the 	development 	and 	sale 	of
industrial lots to be segregated from the debtor’s land in Salinas,
Puerto 	Rico. 	The 	debtor 	alleges 	that 	it 	agreed 	to 	contribute
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eighty acres of land to the joint venture and that the defendants
promised 	to 	contribute 	cash 	and 	to 	assist 	in 	liberating 	the
property 	from 	the 	lien 	that 	encumbered 	it 	and 	to 	effect 	the
segregation 	and 	sale 	of 	the 	lots. 	The 	debtor 	contends 	that 	the
parties agreed to share the expenses and proceeds from the sale of
the segregated lots, with a minimum guaranteed to the debtor. 	The
debtor 	alleged 	that 	Seaboard 	Corporation 	(“Seaboard”) 	had 	a
mortgage 	on 	the 	property, 	with 	a 	balance 	of 	approximately
$900,000.00 and that the defendants were to liberate the property
from this mortgage.
The 	debtor 	alleges 	that 	the 	defendants 	breached 	the 	Joint
Venture Agreement by failing to produce the funds to liberate the
land 	and 	that 	Seaboard 	sought 	to 	foreclose 	on 	its 	lien 	in 	U.S.
District 	Court. 	The 	debtor 	alleges 	that 	thereafter, 	the
defendants, 	in 	violation 	of 	the 	express 	provisions 	of 	the 	Joint
Venture 	Agreement, 	and 	in 	violation 	of 	their 	fiduciary 	duties 	to
the debtor, purchased the judgment from Seaboard and proceeded to
schedule a public sale of the debtor’s property.
The 	debtor 	alleges 	that 	after 	the 	filing 	of 	the 	bankruptcy
petition, 	the 	debtor’s 	representative 	appeared 	at 	the 	scheduled
public 	sale 	and 	delivered 	a 	copy 	of 	the 	Notice 	of 	Filing 	of 	the
present case and defendants insisted on continuing the public sale,
which was subsequently avoided and set-aside by the U.S. District
Court.
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The debtor contends that based on the defendants breach of the
Joint Venture Agreement, pursuant to Clause 15, they are required
to forfeit and surrender to the debtor all future economic interest
in the property and the joint venture, as well as all rights over
any 	permits, 	endorsements 	or 	authorizations 	pertaining 	to 	the
project. 	The 	debtor 	also 	claims 	that 	the 	defendants 	are 	liable
under the Puerto Rico Civil Code.
As 	to 	turnover 	of 	property, 	the 	debtor 	alleges 	that 	the
defendants 	hold 	several 	promissory 	notes 	that 	were 	the 	object 	of
the foreclosure proceeding and that they hold the judgment issued
in 	the 	foreclosure 	proceeding. 	The 	debtor 	claims 	that 	these 	are
property 	of 	the 	estate. 	Finally, 	the 	debtor 	alleges 	that 	the
defendants actions in insisting on holding the public sale, despite
the filing of the bankruptcy petition, violated 11 U.S.C. § 362.
On 	November 	17, 	2008, 	the 	defendants 	filed 	a 	motion 	seeking
dismissal, claiming that the debtor failed to serve the complaint
on 	defendant’s 	counsel, 	in 	accordance 	with 	Fed. 	R. 	Bankr. 	P.
4001(a) and L.B.R. 9014 (dkt. #8). 	The defendants also argue that
the debtor fails to allege sufficient facts to merit the remedies
requested and that the debtor breached the Joint Venture Agreement.
The defendants also claim that they did not violate the automatic
stay, 	since 	the 	debtor 	never 	gave 	notice 	of 	the 	filing 	of 	the
petition to the defendants nor to the U.S. Marshal, presiding over
the auction.
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As to the first allegation of the motion to dismiss, the Court
concludes 	that 	neither 	Fed. 	R. 	Bankr. 	P. 	4001(a) 	nor 	L.B.R. 	9014
are applicable to adversary proceedings. 	The cited Federal Rule of
Bankruptcy Procedure relates to motions seeking relief from stay or
prohibiting 	or 	conditioning 	the 	use, 	sale 	or 	lease 	of 	property.
Likewise, Local Bankruptcy Rule 9014 governs contested matters, not
adversary proceedings. 	Summons were issued in this case on October
27, 2008 and debtor’s counsel filed a notice of service of summons
and complaint on October 30, 2008, indicating that the summons and
complaint were served by first class mail in accordance with Fed.
R. 	Bankr. 	P. 	7004(b)(1). 	Accordingly, 	the 	Court 	will 	deny 	the
defendants request for dismissal based on improper service.
As to the motion to dismiss on the merits, the defendants fail
to submit an affidavit or cite any legal basis for the dismissal of
the complaint. 	The defendants merely deny the allegations of the
complaint and oppose the debtor’s entitlement to the relief sought.
If 	the 	Court 	were 	to 	assume 	that 	the 	defendants 	are 	moving 	under
Fed. 	R. 	Civ. 	P. 	12(b)(6), 	to 	survive 	a 	Rule 	12(b)(6) 	motion 	to
dismiss, 	a 	complaint 	must 	allege 	“a 	plausible 	entitlement 	to
relief,” 	id. 	(quoting 	Bell 	Atl. 	Corp. 	v. 	Twombly, 	550 	U.S. 	544,
127 S.Ct. 1955, 1967 (2007)), and must contain factual allegations
sufficient 	to 	“raise 	a 	right 	to 	relief 	above 	the 	speculative
level.” 	Morales-Tanon 	v. 	Puerto 	Rico 	Elec. 	Power 	Authority, 	524
F.3d 	15, 	18 	(1st 	Cir. 	2008) 	(citing 	Twombly, 	127 	S.Ct. 	at 	1965).
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“While 	a 	complaint 	attacked 	by 	a 	Rule 	12(b)(6) 	motion 	to 	dismiss
does 	not 	need 	detailed 	factual 	allegations, 	a 	plaintiff’s
obligation 	to 	provide 	the 	‘grounds’ 	of 	his 	‘entitle[ment] 	to
relief’ requires more than labels and conclusions, and a formulaic
recitation 	of 	the 	elements 	of 	a 	cause 	of 	action 	will 	not 	do.”
Twombly, 127 S.Ct. at 1964-65 (citations omitted). 	“Dismissal for
failure to state a claim is appropriate if the complaint fails to
set 	forth 	“factual 	allegations, 	either 	direct 	or 	inferential,
respecting 	each 	material 	element 	necessary 	to 	sustain 	recovery
under 	some 	actionable 	legal 	theory.” 	Gagliardi 	v. 	Sullivan, 	513
F.3d 	301, 	305 	(1st 	Cir. 	2008) 	(quoting 	Centro 	Médico 	del 	Turabo,
Inc. v. Feliciano de Melecio, 406 F.3d 1, 6 (1st Cir. 2005)).
The debtor has alleged that the defendants violated the Joint
Venture 	Agreement 	by 	failing 	to 	provide 	capital 	to 	liberate 	the
debtor’s 	property 	from 	Seaboard’s 	lien 	and 	that 	the 	defendants
subsequently purchased the promissory note from Seaboard and sought
to 	have 	the 	property 	sold 	in 	a 	public 	sale. 	The 	Court 	concludes
that 	the 	allegations 	are 	sufficient 	to 	allege 	a 	plausible
entitlement 	to 	relief 	under 	a 	breach 	of 	contract 	theory. 	The
defendants deny that they breached the Joint Venture Agreement or
that 	the 	debtor 	is 	entitled 	to 	damages 	or 	any 	other 	remedy. 	The
determination of which party breached the agreement is the primary
issue to be determined by the Court, subject to evidence. 	If it is
determined that the defendants breached the agreement, the remedies
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available 	to 	the 	debtor 	will 	be 	determined 	by 	the 	Joint 	Venture
Agreement and statutory law. 	Accordingly, the motion to dismiss on
the merits will be DENIED.
ORDER
WHEREFORE IT IS ORDERED that the defendants motion to dismiss
(Dkt. #8) shall be, and it hereby is, DENIED.
IT IS FURTHER ORDERED that the debtor shall file a certified
English 	translation 	of 	the 	Joint 	Venture 	Agreement 	and 	any
statutory 	authority 	that 	the 	debtor 	intends 	to 	rely 	on, 	within
twenty (20) days.
The defendants are granted twenty (20) days to file an answer
to the complaint.
The 	pretrial 	hearing 	is 	scheduled 	for 	June 	24, 	2009 	at 	9:30
a.m. to consider this adversary proceeding, as well as the debtor’s
objection to Claim #7 (dkt. #54) and the defendants’ answer (dkt.
#79), which involve the same issue. 	The parties shall comply with
the original pretrial order (dkt. #5) and file the pretrial report
five (5) days prior to the hearing.
SO ORDERED.
San Juan, Puerto Rico, this 31st day of March, 2009.
BY THE COURT:
s/ Gerardo A. Carlo
_______________________
GERARDO A. CARLO
U.S. Bankruptcy Judge
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