Barreto v. Cooperativa De Ahorro Y Credito De Aguadilla (In re Barreto), CASE NO. 14-08712 (ESL)

CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico
Writing for the CourtEnrique S. Lamoutte United States Bankruptcy Judge
PartiesIN RE: JESUS JOEL BARRETO BARRETO Debtors JESUS JOEL BARRETO BARRETO, Noreen Wiscovitch Rentas, Chapter 7 Trustee on behalf of the estate. Plaintiff(s) v. COOPERATIVA DE AHORRO Y CREDITO DE AGUADILLA Defendant
Docket NumberADV. PROC. 16-0172,CASE NO. 14-08712 (ESL)
Decision Date07 November 2018


Noreen Wiscovitch Rentas, Chapter 7 Trustee on behalf of the estate.

CASE NO. 14-08712 (ESL)


November 7, 2018



This adversary proceeding is before the court upon the plaintiff's motion for summary judgment filed by the chapter 7 trustee ("trustee" or "plaintiff") and the opposition thereto filed by the Cooperativa de Ahorro y Crédito de Aguadilla ("Cooperativa" or "defendant"). Plaintiff alleges in the complaint that the payment made by the debtor to the defendant in the amount of $6,510.00 on September 5, 2014 is voidable under 11 U.S.C §§ 547 and 548 as a preferential or fraudulent transfer. In the motion for summary judgment plaintiff contends that the uncontested facts show that the payment meets the requirements of section 547 and that therefore, judgment should be entered as a matter of law. The defendant opposes the motion on the grounds that the payment was not made from debtor's funds but from monies lent by his sister on the specific condition that the same be used to pay the amounts owed to defendant as a result of a criminal restitution order in a criminal case before the courts of Puerto Rico. According to the defendant the earmarking doctrine provides an equitable defense to a preference action.

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This court has subject matter jurisdiction under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1). This is a core proceeding under 28 U.S.C. § 157(b). Venue is proper under 28 U.S.C. §§ 1408 and 1409.

Uncontested Facts

1. On September 5, 2014, the Debtor purchased a manager's check from Banco Cooperativo de Puerto Rico, check #152431, payable to the order of Cooperativa de Ahorro y Crédito de Aguadilla for the amount of $6,510.00.

2. On October 23, 2014 the Debtor filed the instant chapter 7 petition.

3. The defendant received the transfer of money on behalf of a criminal restitution order.

4. The transfer occurred within the 90-day period in section 547.

Contested Facts

1. The transfer would allow Defendant to receive more than it would under a Chapter 7 liquidation. See discussion below concerning the applicability of the earmarking doctrine to a preference action.

2. The source of the moneys to purchase the manager's check from Banco Cooperativo de Puerto Rico came from moneys lent to the Debtor by his sister, Ms. Yerlyn Barreto Barreto, conditioned that they be used to pay off the criminal restitution to Cooperativa de Ahorro y Crédito de Aguadilla.

Defendant has alleged that the debtor plead guilty to four (4) charges under Article 192 of the Penal Code as part of a plea-bargain in the case of Pueblo v. Jesus Barreto, Case No. ISRC201401329, and as a result was obligated to pay restitution in the amount of $6,510.00. Article 192 of the Penal Code, 33 L.P.R.A. § 4820 (Larceny) provides that "[a]ny person who without violence or intimidation illegally takes personal property belonging to another shall commit the crime of larceny and shall incur a misdemeanor. The court shall also impose the

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restitution." Although no specific evidence has been submitted in support of this fact, the same has not been contested. Thus, the court considers the same as uncontested. However, the second part of the proposed fact, that the monies were lent by his sister conditioned that the same be used to pay for the criminal restitution does not find support in the record nor in the sworn statement submitted by debtor's sister.

Debtor included Cooperativa in Schedule D, Creditors Holding Secured Claims, in the amount of $17,967.86, secured with shares in the amount of $3,339.06. Cooperativa filed proof of claim number 2 in the amount of $17, 302.79, of which the amount of $3,339.06 is secured by shares. The statement of affairs discloses in paragraph 3 that debtor paid Cooperativa on September 5, 2014 the amount of $6,510.00. There is no mention of the reason for the payment.

The sworn statement, in Spanish, submitted by debtor's sister declares in paragraph three (3) that her brother owed Cooperativa the amount of $6,510.00 on account of a loan and in paragraph four (4) that the debt was paid to Cooperativa from monies lent to her brother. There is no mention of any specific qualification for the use of the money.

Standard for Motion for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure is applicable to this proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Bankr. P. 7056; see also, In re Colarusso, 382 F.3d 51 (1st Cir. 2004), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"The summary-judgment procedure authorized by Rule 56 is a method for promptly disposing of actions in which there is no genuine issue as to any material fact or in which only a

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question of law is involved." Wright, Miller & Kane, Federal Practice and Procedure, 3d, Vol 10A, § 2712 at 198. "Rule 56 provides the means by which a party may pierce the allegations in the pleadings and obtain relief by introducing outside evidence showing that there are no fact issues that need to be tried." Id. at 202-203. Summary judgment is not a substitute for a trial of disputed facts; the court may only determine whether there are issues to be tried, and it is improper if the existence of a material fact is uncertain. Id. at 205-206.

Summary judgment is warranted where, after adequate time for discovery and upon motion, a party fails to make a showing sufficient to establish the existence of an element essential to its case and upon which it carries the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).

For there to be a "genuine" issue, facts which are supported by substantial evidence must be in dispute, thereby requiring deference to the finder of fact. Furthermore, the disputed facts must be "material" or determinative of the outcome of the litigation. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). When considering a petition for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Daury v. Smith, 842 F.2d 9, 11 (1st Cir. 1988).

The moving party invariably bears both the initial as well as the ultimate burden in demonstrating its legal entitlement to summary judgment. Adickes v. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). See also López v. Corporación Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st Cir. 1991). It is essential that the moving party explain its reasons for concluding that the record does not contain any genuine issue of material fact in addition to

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making a showing of support for those claims for which it bears the burden of trial. Bias v. Advantage International, Inc., 905 F.2d 1558, 1560-61 (D.C. Cir. 1990), cert. denied, 498 U.S. 958, 111 S.Ct. 387, 112 L.Ed.2d 397 (1990).

The moving party cannot prevail if any essential element of its claim or defense requires trial. López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that there is an absence of evidence supporting the nonmoving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. See also Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir. 1991); Daury, 842 F.2d at 11. In its opposition, the nonmoving party must show genuine issues of material facts precluding summary judgment; the existence of some factual dispute does not defeat summary judgment. Kennedy v. Josephthal & Co., Inc., 814 F.2d 798, 804 (1st Cir. 1987). See also, Kauffman v. Puerto Rico Telephone Co., 841 F.2d 1169, 1172 (1st Cir. 1988); Hahn, 523 F.2d at 464. A party may not rely upon bare allegations to create a factual dispute but is required to point to specific facts contained in affidavits, depositions and other supporting documents which, if established at trial, could lead to a finding for the nonmoving party. Over the Road Drivers, Inc. v. Transport Insurance Co., 637 F.2d 816, 818 (1st Cir. 1980).

The moving party has the burden to establish that it is entitled to summary judgment; no defense is required where an insufficient showing is made. López, 938 F.2d at 1517. The nonmoving party...

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