In re Ch Properties, Inc.

• Decision Date: 19 December 2007
• Docket Number: Civil No. 06-1802(JAG).,Civil No 06-2260(JAG).
• Citation: 381 B.R. 20
• Parties: In the Matter of CH PROPERTIES, INC., Debtor. CH Properties, Inc., Plaintiff-Appellant, v. Comite De Vecinos De Isla Verde, et al., Defendants-Appellees.
• Court: U.S. District Court — District of Puerto Rico

381 B.R. 20

In the Matter of CH PROPERTIES, INC., Debtor.

CH Properties, Inc., Plaintiff-Appellant, v. Comite De Vecinos De Isla Verde, et al., Defendants-Appellees.

Civil No. 06-1802(JAG).

Civil No 06-2260(JAG).

United States District Court, D. Puerto Rico.

December 19, 2007.

Alexis Fuentes-Hernandez, Fuentes Law Offices, Colleen H. Johnson, Charles A. Cuprill-Hernandez, Charles A. Cuprill PSC, Fausto D. Godreau, Latimer, Biaggi, Rachid & Godreau, San Juan, PR, for Plaintiff.

Jose L. Gandara, Bauza & Gandara Law Office, Alicia M. Arana-Rivera, Charlotten & Arana PSC, Pedro J. Saade-Llorens, Raul O. Hernandez-Gonzalez, Pedro J. Varela-Fernandez, San Juan, PR, for Defendant.,

Monsita Lecaroz-Arribas, U.S. Trustee Office, San Juan, PR, for U.S. Trustee.

OPINION AND ORDER

GARCIA-GREGORY, District Judge.

Pending before the Court are a set of consolidated bankruptcy appeals filed by CH Properties, Inc. ("CH" or "appellant"). For the reasons set forth below, the Court DISMISSES CH's appeals of the Bankruptcy Court's Opinions and Orders in Case 05-06118(ESL) and Case 06-00050(ESL).

FACTUAL AND PROCEDURAL BACKGROUND¹

These consolidated appeals arise from decisions of the United States Bankruptcy Court for the District of Puerto Rico in the case In re CH Properties Inc., Case No. 05-06118(ESL), and in the adversary proceeding CH Properties Inc. v. Comité de Vecinos de Isla Verde, Case No. 06-00050(ESL).

The underlying bankruptcy case, In re CH Properties Inc., Case No. 05-06118(ESL), commenced on July 1st, 2005, when CH filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 1101-1174. Since that date, CH has been managing its affairs as debtor in possession pursuant to 11 U.S.C. § 1107. On July 21st, 2005, CH filed a "Motion to Assume. Lease," requesting the Bankruptcy Court to grant the assumption of a lease contract between CH and the Municipality of Carolina, by virtue of which CH would develop a condo-hotel project in the Isla Verde area of. Carolina, Puerto Rico. CH claims that it is indispensable for its reorganization that it be allowed to assume the lease agreement, because said agreement is the principal asset of its estate. Comite de Vecinos de Isla Verde ("Comite" or "Appellee") and other parties opposed the request alleging that CH could not assume the lease agreement because, in order to do so, the agreement had to be valid and that, prior to the filing of the bankruptcy petition by CH, the lease agreement had been declared null and void ab initio by the Superior Court of Puerto Rico.²

On January 12th, 2006, the Bankruptcy. Court issued an Opinion and Order to the effect that the lease agreement is the only asset of CH's estate, and that its validity at the time of the filing of the petition is essential for a determination as to CH's request to assume the lease agreement, as well as to CH's reorganization in bankruptcy. The Bankruptcy Court, however, decided to discretionarily abstain from considering the validity of the lease agreement until the issue was finally decided, by the Courts of Puerto Rico.³ It is uncontested that CH never appealed the Bankruptcy Court's Opinion and Order of January 12th, 2006. In fact, CH acknowledged that it opted not to appeal said decision. (Docket No. 21 at 3 ¶ 7).

On February 28th, 2006, the adversary proceeding CH Properties Inc. V. Comité de Vecinos de Isla Verde, Case No. 06-00050(ESL), was commenced when CH filed a complaint in Bankruptcy Court against: 1) Comite; 2) Amigos del Mar Inc.; 3) Guardadores de Puerto Rico; 4) Ms. Maritza Bodee; 5) Mr. Osvaldo Romero; 6) Mr. Roberto. Delgado; and 7) several unknown defendants. The complaint alleges that defendants invaded the parcel of land on which CH would develop its condo-hotel project, and that defendants were interfering with CH's possession and control of the strip of land. CH claims that defendants' alleged actions resulted in a deprivation of the use and enjoyment of said parcel and loss of income, and that these circumstances will lead to CH's demise as a debtor-in-possession and dooms its financial reorganization. CH thus requested: 1) that defendants be directed to turn over the possession of the land; 2) that defendants be found in breach of the automatic stay provided for in 11 U.S.C. § 362(a); 3) damages; and 4) injunctive relief.

On March 1st, 2006, CH filed a motion for preliminary injunction requesting an order enjoining the defendants from interfering with the possession and control of the disputed parcel, and instructing them to vacate said property. On June 30th, 2006, the Bankruptcy Court denied CH' s request for preliminary injunctive relief. The Court noted that an adjudication of the injunction request would contravene its January 12th, 2006 decision in the underlying bankruptcy case of discretionarily abstaining from considering the validity of the lease agreement until the matter is finally decided by the. Courts of the Commonwealth of Puerto Rico. On July 7th, 2006, CH filed in, the Bankruptcy Court a Notice of Appeal from the order denying CH's request for injunctive relief. The Bankruptcy Court notified the parties that it had received the record on appeal, assigning it case number 06-1802.⁴

Back in the underlying case (that is, In re CH Properties, Inc., 05-6118(ESL)), CH filed a "Restated Motion to Assume Lease Contract" on October 9th, 2006. On October 25th, 2006, the Bankruptcy Court denied said motion, restating its reasoning for exercising discretionary abstention and noting, once again, that an adjudication of said request would contravene the January 12th, 2006 Opinion and Order. On October 31st, 2006, CH filed in the Bankruptcy Court another Notice of Appeal to the District Court, this time from the order denying CH's restated request to assume the lease agreement. On December 14th, 2006, the Bankruptcy Court transmitted the record on appeal, and the District Court acknowledged receipt of the appeal on the next day, assigning it case number 06-2260.

On January 17th, 2007, at the request of Comite, the two appeals were consolidated in case 06-1802.⁵ Subsequently, on January 31st, 2007, Comite filed a Motion to Dismiss the consolidated appeals alleging lack of jurisdiction pursuant to CH's failure to comply with Fed.R.Bankr.P. 8002(a) and 8009. Comite essentially claims that the only matter raised in each of the appeals is the petition to overturn the Bankruptcy Court's Opinion and Order of January 12th, 2006, whereby said Court decided to abstain from considering the validity of the lease agreement pending a final disposition of that issue by the Courts of the Commonwealth of Puerto Rico. Thus, Comite contends that CH was required to file a notice of appeal of the abstention order by January 22nd, 2006, as required by Fed.R.Bankr.P. 8002(a). Comite further argues that CH cannot rely on appealing the June 30th and October 25th, 2006 decisions, which reiterate the. Bankruptcy Court's determination to abstain, to indirectly appeal the January 12th, 2006 decision.⁶

On March 19th, 2007, CH filed an Opposition to the Motion to Dismiss. CH admits that it "chose not to challenge the January 12, 2006 order and decided to appeal the other two orders, which directly relate to the order of January 12, 2006, and most importantly, clearly restate the Bankruptcy Court's determination to exercise its discretionary abstention." (Docket No. 21 at ¶ 7). In addition, CH contends that the notices of appeal from the June 30th and October 5th, 2006 orders were filed within the term of ten days from the entry of each of those orders, as provided by Fed.R.Bankr.P. 8002(a). On March 28th, 2007, Comite filed a "Reply to Opposition to Motion to Dismiss" essentially restating the same arguments presented in the Motion to Dismiss.

The consolidated appeals were referred to Magistrate Judge Marcos E. Lopez for a Report and Recommendation. On August 3rd, 2007, Magistrate Judge Lopez issued a Report and Recommendation to grant the Motion to Dismiss. The Magistrate Judge found that the Bankruptcy Court's decision to abstain under 28 U.S.C. § 1334(c)(1) "was reviewable by this Court, provided that CH complied with all the jurisdictional requirements" established by the Federal Rules of Bankruptcy Procedure. (Docket No. 27 at 13). However, the Magistrate Judge deemed it "evident" that the appeals from the June 30th and October 25th, 2006 decisions are, as a matter of fact, appeals from the January 12th, 2006, Bankruptcy Court's Opinion and Order. Id. at 10. Thus, the Report and Recommendation concludes that "in as much CH never filed a timely notice of appeal from the order dated January 12, 2006, nor requested an extension of time to do so, and considering that the timely filing of a notice of appeal is mandatory and jurisdictional, the Court does not have jurisdiction to review said appeal." Id. at 13.

On August, 13, 2007, CH filed timely objections to the aforementioned Report and Recommendation. (Docket No. 28). Afterwards, Comite duly responded to the objections raised by CH. (Docket No. 31).

On October 3, 2007, this Court issued an Opinion and Order adopting in part and rejecting in part Magistrate Judge Lopez's Report and Recommendation. This Court held that CH's appeals are timely and, as such, the Court has jurisdiction to pass upon them. Furthermore, the Court concluded that the gist of CH's appeals is whether the Bankruptcy Court erred in abstaining under 28 U.S.C. § 1334(c)(1). Moreover, the Court noted that the Bankruptcy Court's discretionary abstention decision was deliberately not appealed by CH and thus became final.

The Court ordered CH to show cause why its consolidated appeals should not be dismissed under the doctrine of collateral estoppel. Specifically, CH was required to discuss whether it was precluded from relitigating the Bankruptcy Court's discretionary abstention through the "Restated Motion to Assume Lease Contract" in case 05-06...