Fonseca v. Gov't Emps. Ass'n (In re Fonseca)

• Decision Date: 07 May 2015
• Docket Number: ADVERSARY CASE NO. 13–00184,CASE NO. 12–06148 MCF
• Citation: 534 B.R. 261
• Parties: In re: Rafael Velez Fonseca, Debtor Rafael Velez Fonseca, Plaintiff v. Government Employees Association (AEELA), Defendant
• Court: U.S. Bankruptcy Court — District of Puerto Rico

534 B.R. 261

In re: Rafael Velez Fonseca, DebtorRafael Velez Fonseca, Plaintiff

v.Government Employees Association (AEELA), Defendant

CASE NO. 12–06148 MCF

ADVERSARY CASE NO. 13–00184

United States Bankruptcy Court, D. Puerto Rico.

Signed May 7, 2015

Carlos C. Alsina Batista, Carlos Alsina Batista Law Offices PSC, San Juan, PR, Edgardo Veguilla Gonzalez, Caguas, PR, for Plaintiff.

Javier Vilarino, Vilarino & Associates LLC, San Juan, PR, Rosario Vidal Arbona, San Juan, PR, for Defendant.

John Doe, pro se.

Richard Roe, pro se.

Insurance Companies X, Y, Z, pro se.

Roberto Roman Valentin, pro se.

OPINION AND ORDER

MILDRED CABAN FLORES, U.S. Bankruptcy Judge

Before the Court are cross-motions for summary judgment and oppositions thereto in relation to the adversary proceeding filed by plaintiff, Rafael Velez Fonseca (hereafter “Plaintiff”), against defendant, the Commonwealth of Puerto Rico Government Employees Association (hereafter “AEELA”),¹ alleging violations of the discharge injunction under 11 U.S.C. § 524.² For the reasons stated herein, AEELA's motion for summary judgment is granted and subsequently, Plaintiff's cross motion for summary judgment is denied.

I—JURISDICTION

The Court has jurisdiction to hear this case, pursuant to 28 U.S.C. § 157(a) and the general order of the United States District Court dated July 19, 1984, which refers title 11 proceedings to the Bankruptcy Court (Torruellas, C.J.). This is a core proceeding, pursuant to 28 U.S.C. § 157(b).

II—MOTION FOR SUMMARY JUDGMENT

Summary judgment is proper only where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c) ; Fed. R. Bankr.P. 7056. By agreement of the parties, this matter is appropriate for summary judgment disposition as there are no material facts in dispute and one of the parties is entitled to judgment as a matter of law, pursuant to Fed.R.Civ.P. 56(c), as made applicable to these proceedings by virtue of Fed. R. Bankr.P. 7056. Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ); Vega–Rodriguez v. Puerto Rico Tel. Co., 110 F.3d 174, 178 (1st Cir.1997).

III—UNDISPUTED MATERIAL FACTS

1. Plaintiff was a government employee and member of AEELA from 1986 until December 31, 2012.

2. On May 29, 2012, and on June 26, 2012, Plaintiff obtained two loans from AEELA.

3. On August 3, 2012, Plaintiff filed a voluntary bankruptcy petition under Chapter 7.

4. Plaintiff listed $18,457.76 in his savings and dividends accounts with AEELA as personal property in Schedule B.³

5. Plaintiff listed AEELA in Schedule D as having a claim for $27,400.64 that was partially secured by Plaintiff's savings and dividends accounts and partially unsecured for the remaining balance of $8,942.88.⁴

6. Plaintiff also listed a revolving credit account with AEELA in the amount of $1,086.00 as an unsecured non-priority debt in Schedule F.⁵

7. AEELA did not file a proof of claim in Plaintiff's bankruptcy case.

8. On September 12, 2012, the Chapter 7 Trustee filed a Report of No Distribution in the bankruptcy case, which was notified to creditors on September 13, 2012.⁶

9. On September 14, 2012, Plaintiff filed his petition for retirement from his position as an employee of the Municipality of Caguas.

10. On November 20, 2012, Plaintiff was granted a discharge under § 727 of the Bankruptcy Code.⁷

11. AEELA did not object to the order discharging the Plaintiff, nor did it object to the dischargeability of any specific debt.

12. The parties agree that the funds in the savings and dividends accounts served as collateral for the loans provided by AEELA to the Plaintiff. By agreement of the parties, AEELA collected the $18,457.76 available in Plaintiff's savings and dividends accounts as partial payment for its claims.

13. On December 31, 2012, Plaintiff officially retired from his position with the Municipality of Caguas.

14. On January 9, 2013, AEELA issued a written communication to the Municipality of Caguas' payroll department requesting Plaintiff's pre-bankruptcy balance of accumulated vacation and sick leave licenses and also indicating that Plaintiff had a pending debt balance of $7,611.68 (the “first letter”). The letter further added that no payment or deduction of any kind should be processed until authorized by the Bankruptcy Court.⁸

15. On January 15, 2013, the Human Resources Office of the Municipality of Caguas certified that up to the date of his retirement, Plaintiff had a balance of 40.87 days of accumulated vacation leave in excess of 13 days and 99.75 days of accumulated sick leave in excess 8 days.⁹

16. On February 6, 2013, AEELA issued a second written communication to the Municipality of Caguas informing that Plaintiff's bankruptcy case had concluded and therefore, no authorization was required to withhold the payment of the $7,611.28 owed to AEELA, from the liquidation of Plaintiff's accumulated vacation and sick leave licenses (the “second letter”).¹⁰

17. AEELA did not send any written communication to Plaintiff to collect the $7,611.28.

18. Neither AEELA nor Plaintiff has received any transfer of monies in relation to the vacation and sick leave licenses from the Municipality of Caguas.

IV—PROCEDURAL HISTORY

1. On May 22, 2013, Plaintiff requested the reopening of his bankruptcy case in order to file the present adversary proceeding based on AEELA's alleged violation of the discharge injunction as a result of the two communications it sent to the Municipality of Caguas.¹¹

2. On June 7, 2013, AEELA opposed Plaintiff's motion to reopen the bankruptcy case.¹²

3. On July 8, 2013, the Court granted Plaintiff's request to reopen his Chapter 7 bankruptcy case.¹³

4. Plaintiff filed his adversary complaint against AEELA for violation of the discharge injunction, pursuant to 11 U.S.C. § 524.¹⁴

5. On March 11, 2014, AEELA filed a motion for summary judgment (Docket No. 18).

6. On March 25, 2014, Plaintiff filed his opposition to AEELA's motion for summary judgment and filed his own cross motion for summary judgment (Docket Nos. 21 & 22).

7. On January 14, 2015, an oral argument was held whereby the parties agreed that there are no disputed material facts that prevent the Court from entering summary judgment.¹⁵

8. On January 27, 2015, AEELA submitted the Spanish and English versions of Law No. 133 of June 28, 1966 and the Spanish version of Law No. 9 of April 25, 2013.¹⁶

9. On March 9, 2015, AEELA provided the English translation of Law No. 9 of April 25, 2013.¹⁷

V—PARTIES' CONTENTIONS

A—Plaintiff's Position

Plaintiff alleges that AEELA violated the discharge injunction set forth by § 524 of the Bankruptcy Code by sending two letters to the Municipality of Caguas, Plaintiff's former employer, after a discharge order had been entered in his Chapter 7 bankruptcy case. Plaintiff claims that both letters violated the discharge injunction, inasmuch as they relate to the collection of a discharged debt. Plaintiff argues that the first letter recognized the existence of a debt of $7,611.28 and instructed the Municipality of Caguas to refrain from making any liquidation or deduction of vacation and sick leave licenses accumulated because he filed a bankruptcy petition. The second letter informs the Municipality of Caguas that the Plaintiff's bankruptcy case has concluded and they are now authorized to withhold $7,611.28 from the liquidation of his accumulated sick and vacation leave licenses. He adds that AEELA was properly notified of the bankruptcy petition and of the discharge order. Although he accepts that AEELA's communications were not sent to him, Plaintiff states that AEELA's actions have prevented him from collecting monies he is entitled to, since he has been unable to obtain the liquidation of his vacation and sick leave licenses.

Plaintiff recognizes that AEELA has a statutory lien that secures the loans granted to him. Nevertheless, he contends that the statutory lien only extends to his savings and dividends accounts because it was the only collateral available to collect from at the time of the bankruptcy filing. Plaintiff argues that AEELA's statutory lien did not extend to the vacation and sick leave licenses liquidation because such lien had not been created or perfected prior to the filing of the bankruptcy petition. Plaintiff claims that there are three requirements in order for AEELA's statutory lien to attach to the accumulated vacation and sick leave licenses of its members. These three requirements are: (1) that the member has ceased his employment permanently; (2) that the employee has a debt with AEELA at that time and (3) that the available funds have not been alienated by the employee's retirement system. After the discharge order was entered on November 20, 2012, Plaintiff no longer owed AEELA any monies on account of such loans. According to Plaintiff's position, AEELA's statutory lien was conceived after his retirement on December 31, 2012, after the discharge order had been entered. Therefore, the three requirements are not met because at the moment he retired, there was no existing personal debt with AEELA that could be attached. Plaintiff asserts that his position has been consistent since the inception of the bankruptcy case as reflected in his Chapter 7 schedules whereby AEELA's claims were partially secured and partially unsecured. AEELA did not object to this classification of its claim and it did not file a proof of claim. Once AEELA collected the $18,457.76 in Plaintiff's savings and dividends accounts, the remaining balance did not have any collateral to secure the debt. Consequently, after deducting the amounts from the savings and dividends accounts the remaining debt balance was unsecured and subject to discharge pursuant to § 524.

B—AEELA's Position

In its motion for summary judgment, AEELA asserts that it has not incurred in any act “in personam” against P...