Gebhardt v. Fundacion Lucha Pro Padres Convictos Por Pension, Corp. (In re Belen)
| Decision Date | 02 October 2013 |
| Docket Number | CASE NO. 11-8619 (EAG),ADV. NO. 12-00193,CASE NO. 11-9668 (BKT),ADV. NO. 12-00201,ADV. NO. 12-00204,CASE NO. 11-8986 (MCF),CASE NO. 11-8621 (ESL),ADV. NO. 12-00194,ADV. NO. 12-00192,CASE NO. 11-9669 (BKT),CASE NO. 11-8578 (EAG),ADV. NO. 12-00203,ADV. NO. 12-00219,CASE NO. 11-8254 (ESL) |
| Parties | ANIBAL VEGA BELEN, YANIRA COLON DE JESUS, ANGEL MANUEL GOMEZ ROMAN, EDWIN VELEZ ESPINOZA, JOSE ENRIQUE QUINONEZ FLORES, JOEL OMAR SALGADO NATAL, and MARIA V. NEGRON DIAZ, Debtors. GUY G. GEBHARDT, United States Trustee - Region 21, Plaintiff, v. FUNDACION LUCHA PRO PADRES CONVICTOS POR PENSION, CORP., VALENTIN VALDES AYALA, Defendants. |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Fundación Lucha Por Padres Convictos Por Pensión, Corp. ("Fundación") is a non-profit corporation whose stated mission is to help men and women in Puerto Rico facing incarceration or currently imprisoned for failing to comply with their child support obligations. One method Fundación employs to aid such individuals is to file chapter 13 bankruptcy cases on their behalf in order to forestall a finding of contempt by a state court, or to nullify such an order if alreadyentered.1 The court does not address herein the merits of such a strategy. However, the Bankruptcy Code does strictly regulate the involvement by non-attorney bankruptcy petition preparers and debt relief agencies in bankruptcy cases to ensure that they do not provide legal advice or legal services to debtors. See 11 U.S.C. §§ 110, 526-528.
On March 9, 2012, the United States trustee for Region 21 (the "U.S. trustee") initiated adversary proceedings in 17 cases in this court against Fundación and its president and CEO, Valentín Valdés Ayala ("Valdés," and together, "defendants"). (Adv. Docket No. 1.) The U.S. trustee contends that defendants violated various requirements of the relevant statutes regulating bankruptcy petition preparers and debt relief agencies. See 11 U.S.C. §§ 110, 526-528. Among other things, the U.S. trustee maintains that defendants provided legal advice to debtors despite not being attorneys and hid their involvement in the debtors' bankruptcy cases from the court by having an attorney who had never worked on the cases or, in some cases, even met the debtors submit the bankruptcy petitions and related filings. (Adv. Docket No. 1.) In addition, the complaints also claim that defendants misrepresented the nature of the services they could provide to the debtors and the viability of debtor's cases, and made use of deceptive advertising that did not explicitly state that they were not licensed to practice law. Id. On account of these various violations, the U.S. trustee seeks the imposition of sanctions, civil penalties, compensatory damages, and injunctive relief. Id.
Ten of the cases have since been dismissed or reassigned to another judge, and the seven remaining cases have been consolidated under lead case 12-192.2 (Adv. Docket No. 7.) Defendants filed an answer to the consolidated action on October 2, 2012. (Adv. Docket No. 23.)
Pending before the court is an unopposed motion for summary judgment filed by the U.S. trustee. (Adv. Docket No. 36.) For the reasons stated below, the U.S. trustee's motion is GRANTED as to the relief sought concerning Adv. Proc. Nos. 12-192, 12-201, 12-204, and 12-219, and DENIED as to relief sought regarding Adv. Proc. Nos. 12-193, 12-194, and 12-203.
This court has jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. §§1334 and 157(a) and the General Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of Puerto Rico, dated July 19, 1984 (Torruella, C.J.). This is a core proceeding in accordance with 28 U.S.C. §157(b). See McDermott v. Jonak (In re Shadley), 2013 Bankr. LEXIS 1358, at *10 (Bankr. D. Minn. Mar. 29, 2013) ().3
Pursuant to Rule 56, made applicable to this proceeding by Fed. R. Bankr. P. 7056, a court shall grant summary judgment when the record shows that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir. 2011) (quoting Rodriguez-Rivera v. Federico Trilla Reg'l Hosp., 532 F.3d 28, 30 (1st Cir. 2008)). The party moving for summary judgment bears the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Once a properly supported motion has been presented before the court, the opposing party "can shut down the machinery only by showing that a trial-worthy issue exists" that would warrant the court's denial of the motion for summary judgment. McCarthy v. Northwest Airlines, 56 F.3d 313, 315 (1st Cir. 1995). That being said, when a motion for summary judgment is unopposed, courts are nevertheless required to evaluate such a motion on its merits. See Cordi-Allen v. Halloran, 470 F.3d 25, 28 (1st Cir. 2006) ().
In assessing a motion for summary judgment, the court "must view the entire record in the light most hospitable to the party opposing summary judgment, indulging in all reasonable inferences in that party's favor." Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990) (citations omitted). The court may safely ignore "conclusory allegations, improbable inferences, and unsupported speculation." Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990) (citations omitted). However, there is "no room for credibility determinations, no room for the measured weighing of conflicting evidence such as the trial process entails, [and] no room for the judge to superimpose his own ideas of probability and likelihood [of success] (no matter how reasonable those ideas may be) . . . ." Greenburg v. P. R. Mar. Shipping Auth., 835 F.2d 932, 936(1st Cir. 1987); see also Mulero-Rodriguez v. Ponte, Inc., 98 F.3d 670, 677 (1st Cir. 1996) () (quoting Petitti v. New England Tel. & Tel. Co., 909 F.2d 28, 34 (1st Cir. 1990)).
The following facts are uncontested. Fundación is a non-profit company that was incorporated in Puerto Rico in July 2006. Valdés serves as its president and CEO. He is not an attorney, nor is he now or has he ever been otherwise authorized to practice law in Puerto Rico. Fundación does not disclose in its advertisements that its business concerns bankruptcy relief services, nor do its advertisements explicitly state that Fundación is a debt relief agency that helps people file for bankruptcy.
Due in part to the nature of the U.S. trustee's allegations, which contend that defendants purposely hid their involvement in debtors' bankruptcy cases, the court cannot determine which cases defendants actually were involved with simply from the face of the dockets. However, the U.S. trustee attached to its motion for summary judgment unsworn statements under penalty of perjury by four debtors (and, in some cases, their relatives) who engaged defendants' services and whose cases have been consolidated in this proceeding: Anibal Vega Belen, 11-8578(BKT)/12-192; Edwin Velez Espinosa, 11-8619(BKT)/12-201, together with his wife; Joel Omar Salgado Natal, 11-9669(BKT)/12-204, together with his sister; and Maria Negron Díaz, 11-9668(BKT)/12-219. (Adv. Docket Nos. 36-1, 36-2, 36-3, 41-3.) With respect to these four cases only, bearing in mind that the motion for summary judgment was unopposed, the court makes the following findings of fact:
Valdés, alone and through Fundación, advertised his services to men and women facingincarceration or in some cases already imprisoned due to child support arrearage, either directly or by targeting their family members. Valdés promised the debtors in question that they could avoid jail time by filing for bankruptcy under chapter 13. After receiving payment for their services, defendants prepared legal documents on behalf of debtors including the bankruptcy petition, schedules, and the statement of financial affairs despite not being licensed to practice law.4 Defendants also counseled debtors as to what other information and documentation was required for the filing, and submitted certifications on behalf of debtors indicating that they had attended the requisite credit counseling sessions when they had not done so. When the cases were filed, defendants failed to submit Official Bankruptcy Form B19, which requires the disclosure under penalty of perjury of any fee received by a bankruptcy petition preparer. Nor did defendants otherwise disclose their involvement in the cases to the court. Rather, defendants contracted with an attorney, Angel Olivera Soto ("Olivera"), to file with the court the documents defendants prepared and to sign the petition and other filings despite not drafting the documents himself or even on some occasions meeting with the debtors prior to the cases being filed. Olivera was paid a flat fee of approximately $350 per case for his work.
As to the other three adversary proceedings where no declaration was filed, the court finds that it remains an issue of fact as to whether the defendants prepared and filed those debtors' bankruptcy cases. In so finding, the court notes that it has not been established that attorney Olivera filed cases only on behalf of Fundación.
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