In re Carrero

• Docket Number: 22-00458 MAG11
• Decision Date: 27 May 2022
• Parties: IN RE: RODOLFO RAMIREZ CARRERO and KENDALL ROGGIO VEGA, Debtors.
• Court: U.S. Bankruptcy Court — District of Puerto Rico

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IN RE: RODOLFO RAMIREZ CARRERO and KENDALL ROGGIO VEGA, Debtors.

No. 22-00458 MAG11

United States Bankruptcy Court, D. Puerto Rico

May 27, 2022

Chapter 11

OPINION AND ORDER

María De Los Ángeles González, United States Bankruptcy Judge

Pending before the court is the motion for relief from stay filed by OSP Consortium, LLC ("OSP") [Dkt. 54]; the opposition filed by Dr. Rodolfo Ramirez Carrero and Mrs Kendall Roggio Vega (the "Debtors") [Dkt. 70]; and OSP's reply to Debtors' opposition [Dkt. 90.] OSP moves the court to lift the stay under 11 U.S.C.§ 362(d)(1) for "cause" based on a waiver of the automatic stay included in a forbearance agreement signed by Debtors prior to the filing of the instant case. The court held a preliminary hearing on OSP's motion for relief from stay on May 3, 2022 [Dkt. 93]. After hearing the parties' arguments and because the matter before the court is an issue of law, the court took the matter under advisement. For the reasons stated below, OSP's motion for relief from stay [Dkt. 54] is denied.

I. JURISDICTION

This court has jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a), Local Civil Rule 83K(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).

II. PRE-PETITION FACTUAL BACKGROUND

The origins of Debtors' loans with OSP's predecessor date back to March 2007.^[1] [Claims Register 1-1, Part 5.] Upon Debtors' default on the terms of the loan, Debtors and OSP's predecessor executed on August 26, 2014 an agreement titled Agreement of Recognition of Debt, Ratification of Guarantees, Payment Agreement and Judgment by Consent (the "Restructuring Agreement") setting forth the terms and conditions of a workout that would govern their contractual relationship. [Id.]

Debtors defaulted on the terms of this Restructuring Agreement and on December 6, 2017, OSP's predecessor obtained a judgment against Debtors issued by the state court. [Claims Register 1-1, Part 3.] In the judgment, the state court ordered Debtors to pay the following outstanding amounts for their two commercial loans with OSP's predecessor: (i) loan ending in number 9004: the principal amount of $514, 700.74 plus interest at a 2% rate that as of November 9, 2017 amounted to $191, 077.72, with a $120.71 per diem and $160, 000 for attorneys' fees; and (ii) loan ending in number 9005: the principal amount of $779, 773.93 plus interest at a 6% rate that as of November 9, 2017 amounted to $27, 099.69, with a $132.81 per diem, plus $81, 300 for attorneys' fees. [Id.]

On March 12, 2018, the state court issued an order and writ of execution of judgment ordering the public sale of Debtors' properties encumbered in favor of OSP's predecessor. [Id.]

On December 5, 2018, OSP acquired the interest on Debtors' loans. [Claims Register 1-1, Part 4.]

On May 1, 2019, Debtors filed their first Chapter 11 bankruptcy petition, which was dismissed on August 6, 2020. [Bankr. Case No. 19-02460, Dkts. 1 & 205.] An order directing Debtors to show cause why the case should not be dismissed for failure to file an amended disclosure statement and plan within the time set by the court was entered on April 15, 2020. [Bankr. Case No. 19-02460, Dkt. 168.] On April 28, 2020, Debtors did not object to the dismissal of the case stating that they were not in a position to file a new disclosure statement and plan because their property was severely damaged in the earthquakes that affected the southern part of Puerto Rico in January 2020 and subsequently, making it impossible for them to comply with the stipulation entered into with OSP. [Bankr. Case No. 19-02460, Dkt. 180.] OSP then requested that the court enter the dismissal with a bar to refiling for 180 days. [Bankr. Case No. 19-02460, Dkt. 190.] An evidentiary hearing was held on June 9, 2020 and an opinion and order was entered on August 6, 2020 dismissing the case and denying the request for the bar to refile. [Bankr. Case No. 19-02460, Dkt. 204.] The court explained that there was no "cause" for the imposition of the bar to re-file by stating that Debtors' determination to not file an amended plan of reorganization was not done in bad faith considering the unprecedented series of circumstances that affected Debtors' property and business [the January 2020 earthquakes and the Covid-19 pandemic] and the difficulty in trying to forecast the medical practice future earnings in light of the ongoing pandemic. [Id.]

On May 7, 2021, Debtors and OSP executed a Stipulation for the Payment of the Foreclosure Judgment (the "Forbearance Agreement"). [Claims Register 1-1, Part 4.] In the Forbearance Agreement, OSP agreed to accept as full payment of their claim the reduced amount of $800, 000, plus interest at a rate of 8%. [Id. at ¶ 19.] Debtors also agreed to pay $50, 000 upon execution of the agreement, three installments of $5, 000 monthly plus interest at a rate of 8%, and a final balloon payment of $750, 000 on or before August 7, 2021. [Id.] The Forbearance Agreement provided that the repayment term could be extended for an additional three months if Debtors paid another $25, 000 on or before August 7, 2021, then paid another three $5, 000 monthly installments plus interest at a rate of 8% and paid the outstanding balance of the $800, 000 debt on or before November 7, 2021. [Id. at ¶ 23.]

The Forbearance Agreement also included the prepetition waiver subject of this dispute (the "Prepetition Waiver"), which provides the following:

H. Terms Applicable in the Event of Bankruptcy: As an incentive for OSP to accept this Stipulation; and in recognition of OSP's risks associated the granting and compliance with the terms and conditions of this Stipulation and the rest of the documents pertaining to the Loan; and taking into further consideration the reciprocal terms and conditions contained in this Stipulation and in the rest of the documents pertaining to the Loan; and due to other valuable considerations, including the settlement of all due payments, whose receipt is recognized by the Parties as complying with what it is stated in this Stipulation, the Debtor Party hereby agrees that the provisions detailed hereinbelow will apply under the following circumstances: (i) in the event of bankruptcy, reorganization, insolvency, or any other similar procedure (under the state or federal law) initiated by the Debtor Party or taken against it; or, (ii) if the Debtor Party initiates any legal action or procedure to limit or prevent OSP from exercising its rights to pursue remedies (procedures referred to as "Reorganization Procedures"):

a. Automatic Stay: The Debtor Party hereby acknowledges that, after the notification and the hearing, OSP will have the opportunity to exercise their right to lift and remove immediately and completely any automatic stay implemented on OSP's remedies (including, but not limited to, provisions under Section 362 of Title 11 of the laws of the United States of America, 11 USC, Section 362, amended accordingly) and that the Debtor Party can be protected during the course of any reorganization procedure; be it hereby determined that the Debtor cannot disagree to or question OSP's request for lift of such automatic stay.

b. Previous Negotiations. Effects of Reorganization Procedures. The Debtor Party acknowledges that extensive and bona fide negotiations have taken place with OSP in this Stipulation, and that, during such negotiation, the undersigned parties have considered and analyzed with their respective consultants the implementation of the Reorganization Procedures and their Effects. As result of such negotiations and being duly advised by their legal representatives, who are competent regarding Reorganization Procedures, the Debtor Party has come to the conclusion that implementing any Reorganization Procedure: (i) would cause a decrease in the value of the aforementioned immovable property; (ii) would increase the potential loss of the Debtor Party, OSP, and other creditors of the Debtor Party; (iii) would only delay OSP's rights to pursue legal remedies; and (iv) in case these reorganization procedures were implemented, these would not be of good faith.

[Claims Register 1-1, Part 4 at ¶ 44(h); Dkt. 54, pp. 30-31.] The bankruptcy attorney for Debtors at the time also signed the Forbearance Agreement. [Claims Register 1-1, Part 4.] Debtors made the initial $50, 000 payment upon execution of the Forbearance Agreement, paid an additional sum of $25, 000 in August 2021, and have made the $5, 000 monthly installments since June 2020 until now. [Dkt. 70, Exhibit 1.] As discussed in the May 3, 2022 hearing, Debtors defaulted on the balloon payment due on November 7, 2021 and filed the instant case on February 24, 2022. [Dkt. 1.]

Debtors own six real estate properties: Condominium Sea View Apt AC4 in Cabo Rojo, Puerto Rico (the "Sea View Apartment"); Apartment 36 in Condominium Diplomat, 1126 Ashford Ave. in San Juan, Puerto Rico (the "Diplomat Apartment"), their residence in 64 Calle Dr. Santiago Veve in San German, Puerto Rico (the "Debtors' residence"); a townhouse 4-A in Puerta del Mar Development in Lajas, Puerto Rico (the "Puerta del Mar Townhouse"); and Offices 103 and 104 in San Francisco Plaza, 5 de Diciembre Avenue in Sabana Grande, Puerto Rico (the "Debtors' office). [Amended Schedule A/B, Dkt. 42.]

Banco Popular de Puerto Rico is the first mortgage lienholder encumbering the Sea View Apartment, the Diplomat Apartment and the Puerta del Mar Townhouse. [Amended Schedule D, Dkt. 38; Claims Register 6-1, 8-1 & 9-1, respectively.] OSP is the first...