Arcay v. Banco Santander De P.R. (In re Arcay)

• Decision Date: 27 September 2013
• Docket Number: Bankruptcy No. 11–06828 (ESL).,Adversary No. 12–00396 (ESL).
• Parties: In re Jose L. VELEZ ARCAY, Debtor. Jose L. Velez Arcay, Plaintiff v. Banco Santander de Puerto Rico, Defendant.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico

499 B.R. 225

In re Jose L. VELEZ ARCAY, Debtor.Jose L. Velez Arcay, Plaintiff

v.Banco Santander de Puerto Rico, Defendant.

Bankruptcy No. 11–06828 (ESL).

Adversary No. 12–00396 (ESL).

United States Bankruptcy Court, D. Puerto Rico.

Sept. 27, 2013.

Luis F. Del Valle Emmanuelli, Juan Manuel Suarez Cobo, Legal Partners PSC, San Juan, PR, for Plaintiff.

Luis M. Suarez Lozada, Luis M. Suarez Lozada Law Offices, San Juan, PR, for Defendant.

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, Bankruptcy Judge.

This case is before the court upon the Motion for Summary Judgement and Memorandum of Law in Support Thereof (the “ Motion for Summary Judgement ”, Docket No. 9) filed by the Defendant Banco Santander de Puerto Rico (“Banco Santander” or the “Defendant”) arguing that it did not violate the automatic stay when it sought to reopen a foreclosure proceeding pending before the Puerto Rico Court of First Instance, Superior Court of Bayamón, after the confirmation of the Chapter 13 Plan (which included a modification of the automatic stay for Santander to foreclose on the Plaintiff's real property) and obtained a foreclosure judgment that included both in rem and in personam remedies against the Plaintiff. Also before the court is the Opposition to Santander's Motion for Summary Judgement (Docket No. 32) filed by José L. Vélez Arcay (the “Plaintiff” or the “Debtor”) arguing that Banco Santander deliberately violated the automatic stay and exceeded the scope of the modification of the Chapter 13 Plan. For the reasons stated below, Banco Santander's Motion for Summary Judgement is hereby denied.

Procedural Background

Banco Santander filed a foreclosure complaint against the Debtor at the Puerto Rico Court of First Instance, Superior Court of Bayamón (the “State Court”), Case No. D CD2011–0652 (503), prior to the filing of the bankruptcy petition (Lead Case Docket No. 1).

On August 13, 2011, the Plaintiff filed a voluntary Chapter 13 petition (Lead Case Docket No. 1). In Schedules A and D, he reported a three-bedroom real property located at Edif. IX Gold Village Condo in Vega Alta, Puerto Rico (the “Real Property”),which is encumbered with a mortgage in favor of Banco Santander (Lead Case Docket No. 17, pp. 13 and 22). The meeting of creditors was held and closed on October 12, 2011 (Lead Case Docket No. 27).

On October 25, 2011, Banco Santander filed a secured Proof of Claim in the amount of $129,186.67. See Claims Register No. 20–1. The Debtor did not object it.

On February 20 2012, Plain tiff filed an Amended [Chapter 13] Plan Dated February 20, 2013 (the “ Amended Chapter 13 Plan”, Lead Case Docket No. 66), which was confirmed on March 20, 2012 (Lead Case Docket No. 73). The Amended Chapter 13 Plan provided for the modification of the automatic stay so that Banco Santander could foreclose the Real Property (Lead Case Docket No. 66, p. 4).

On July 18, 2012, the Defendant filed a Motion Requesting Re–Opening of the Case (Docket No. 37–3, p. 38) and a Motion in Compliance with Order And Reiterating Request for Judgment Without Hearing (Docket No. 37–3, p. 16) before the State Court. The Defendant's Motions resulted in the State Court entering Judgment on July 24, 2012 in favor of Banco Santander for collection of monies and foreclosure of mortgage (Docket No. 37–3, pp. 42–45). In that Judgment, the State Court expressly ordered the sale of the Real Property at public auction and “if the proceeds from said sale are insufficient to cover payment, the Bailiff may proceed with the seizure of other goods owned by the [Debtor]”. State Court Judgment in Default, p. 4 (Docket No. 37–3, p. 45).

On October 30, 2012, the Plaintiff filed the instant adversary proceeding arguing that Banco Santander exceeded the limited scope of the modification to the automatic stay and willfully violated it. It further alleges that Banco Santander has a significant history of violating automatic stays and discharge orders and has failed to implement an effective policy to assure that its collection personnel comply with the provisions of the Bankruptcy Code. As a result, the Plaintiff seeks actual and punitive damages, legal and attorneys' fees, and that Banco Santander be held in contempt and be ordered to cease and desist from violations of the automatic stay. See the Complaint, Docket No. 1.

On December 26, 2012, without answering the Complaint, the Defendant filed a Motion for Summary Judgment with its corresponding Statement of Uncontested Material Facts alleging that the Plaintiff had failed to state a claim upon which relief may be granted because the confirmed Amended Chapter 13 Plan provided for lift the automatic stay for Banco Santander to foreclose the Real Property. It further contends that it only requested from the State Court an in rem foreclosure relief, not an in personam relief, and that it had no control over the contents of the State Court's Default Judgment.See Docket Nos. 9 and 9–1.

Initially, the Plaintiff filed a Motion for Deferment Under Fed.R.Civ.P. 56(d) on January 22, 2013 alleging that he needed to conduct discovery to file a duly supported opposition (Docket No. 14), which the court granted on February 20, 2013 (Docket No. 23). After conducting the requested discovery, the Plaintiff filed an Opposition to Santander's Motion for Summary Judgment on June 28, 2013 (Docket No. 32) arguing that Banco Santander “willfully violated the automatic stay in plaintiff's bankruptcy by submitting a draft judgment to the [S]tate [C]ourt which openly contradicted and exceeded the limited scope of the modification to the automatic stay that allowed this creditor to proceed exclusively with in rem relief against the collateral guaranteeing plaintiff's loan with [Banco] Santander” (Docket No. 32, p. 4). The Plaintiff further avers that the Defendant “was the main moving force behind the offending judgment that granted [its] foreclosure and collection of monies action against plaintiff personally and/or any other personal goods of the plaintiff sufficient to satisfy the amounts demanded by [Banco] Santander, that is, beyond the scope of plaintiff's amended plan” (Docket No. 32, p. 4). The Plaintiff did not seek summary judgment relief in his favor.

On August 19, 2013, the Defendant filed a Reply to Plaintiff's Opposition to Banco Santander's Motion for Summary Judgment (Docket No. 37) acknowledging that although its local counsel inadvertently submitted a “defective judgment draft”, it is the State Court Judge's responsibility to ensure every judgment is correct, not Banco Santander's, and thus it cannot be held accountable for the mistaken Judgment against the Plaintiff that included both in rem and in personam remedies. Banco Santander also insists that its State Court counsel only requested the foreclosure of its collateral in rem when it requested the reopening of the case against the Plaintiff in the State Court.

Material Uncontested Facts

The court proceeds to determine the material uncontested facts pursuant to Fed.R.Civ.P. 56(g)¹, applicable to bankruptcy proceedings through Fed. R. Bankr.P. 7056:

1. Banco Santander filed a pre-petition action in the State Court for foreclosure and collection of monies against the Plaintiff, Case No. D CD2011–0656 (503). See Docket Nos. 9–1, p. 2, and 32–1, p. 2.

2. On August 13, 2011, the Plaintiff filed a voluntary Chapter 13 bankruptcy petition (Lead Case Docket No. 1).

3. On October 25, 2011, Banco Santander filed a secured Proof of Claim in the amount of $129,186.67 for its mortgage over the Plaintiff's Real Property. See Claims Register No. 20–1.

4. Banco Santander has a validly registered lien on the Plaintiff's Real Property (Docket No. 33–1, p. 12).

5. Banco Santander is the current owner and holder of the Mortgage Promissory Note, and is also empowered to declare the debt due and payable prior to its due date in case of default. See Docket No. 37–3, p. 43.

6. The Plaintiff defaulted on the Real Property's mortgage payments since September 1, 2010. See Docket No. 37–3, p. 43.

7. The Plaintiff filed an Amended Chapter 13 Plan (Lead Case Docket No. 66), which provided in Section 6(b) as follows:

Upon confirmation, the stay is ... lifted as to the collateral only, to allow lien holder to proceed with in rem remedies only. Any allowed claim by a creditor or creditors provided for in this section shall receive no distribution under the plan, as to its secured portion. All payments and deduction regarding the obligation secured by collateral shall immediately cease and shall be stopped by any entity making them or withdrawing them. Any unsecured portion of the claim as filed, or latter filed amending the same to reflect a deficiency balance after surrender, shall be paid as an unsecured claim pursuant to the plan, within the terms and condition of Section 10(c) of this plan.

See Lead Case Docket No. 66, p. 7; Docket No. 37–2, pp. 4–5 and 16.

8. The Amended Chapter 13 Plan was confirmed on March 22, 2012 (Lead Case Docket No. 73).

9. On July 18, 2012, Banco Santander filed two separate motions before the State Court requesting that the foreclosure proceedings be reopened and moved forward and for judgment in default to be entered against the Plaintiff. See Docket 37–3, pp. 16–17 and 38. The caption in both motions reads as follows: “Re: Foreclosure of Mortgage ( In Rem)”. The pleadings and prayers for relief in those motions did not seek an in rem remedy. Id.

10. The Defendant prepared and submitted to the State Court a judgment draft which the State Court Judge subsequently signed and issued as a Judgment on July 24, 2012. Compare Docket No. 33–1, p. 5, ¶ 12, and pp. 23–26, with Docket No. 37–3, pp. 34–37 and pp. 42–46. The State Court's Judgment in favor of Banco Santander, as prepared by the Defendant, expressly ordered the sale of the Real Property at public auction and “if the proceeds from said sale [were] insufficient to cover payment, the Bailiff may proceed with the seizure...