In re Empresas Omajede, Inc., Civ. No. 98-1374(JAF)

• Decision Date: 22 December 1998
• Docket Number: Bankruptcy No. 90-03612 ESL.,Civ. No. 98-1374(JAF)
• Citation: 227 BR 767
• Parties: In re EMPRESAS OMAJEDE, INC., Debtor. Antonio BETANCOURT, Delfina Betancourt, and Olga Capo-Roman, Movants-Appellants, v. A.J. BENNAZAR-ZEQUEIRA; Antonio I. Hernandez-Rodriguez; William M. Vidal-Carvajal; Ismael R. Colon-Perez; La Electronica, Inc.; Carlos R. Rios-Gautier; Juan C. Pou, and Maria Luisa Betancourt, Respondents-Appellees.
• Court: U.S. District Court — District of Puerto Rico

227 B.R. 767 (1998)

In re EMPRESAS OMAJEDE, INC., Debtor Antonio BETANCOURT, Delfina Betancourt, and Olga Capo-Roman, Movants-Appellants, v. A.J. BENNAZAR-ZEQUEIRA; Antonio I. Hernandez-Rodriguez; William M. Vidal-Carvajal; Ismael R. Colon-Perez; La Electronica, Inc.; Carlos R. Rios-Gautier; Juan C. Pou, and Maria Luisa Betancourt, Respondents-Appellees.

Civ. No. 98-1374(JAF), Bankruptcy No. 90-03612 ESL.

United States District Court, D. Puerto Rico.

December 22, 1998.

Charles A. Cuprill-Hernandez, Ponce, PR, Antonio Betancourt-Capo, New York City, for Empresas Omajede, Inc.

Jose R. Garcia-Perez, A.J. Bennazar Zequeira Law Offices, Hato Rey, PR, for A.J. Bennazar-Zequeira.

Michael Trias-Fraticelli, Hato Rey, PR, for La Electronica, Inc.

William M. Vidal-Carvajal, San Juan, PR, Pro se.

Antonio I. Hernandez-Rodriguez, Hernandez & Vidal, San Juan, PR, Pro se.

Ismael R. Colon-Perez, Hernandez & Vidal, San Juan, PR, Pro se.

Carlos R. Rios-Gautier, Hato Rey, PR, Pro se.

Juan C. Pou-Martinez, Latimer, Biaggi, Rachid & Godreau, San Juan, PR, Pro se.

OPINION AND ORDER

FUSTE, District Judge.

This is an appeal from the January 26, 1998 order of the United States Bankruptcy Court for the District of Puerto Rico ("Bankruptcy Court") denying the motion of Olga Capó-Román, Delfina Betancourt-Capó, and Antonio Betancourt-Capó, as equity security holders of Empresas Omajede, Inc. ("Omajede") (hereinafter "Appellants") for the imposition of sanctions pursuant to Fed. R.Civ.P. 11 against attorneys A.J. Bennazar-Zequeira; Antonio I. Hernández-Rodríguez; William M. Vidal-Carvajal; Ismael R. Colón-Pérez; Carlos R. Ríos-Gautier; and Juan Carlos Pou; and La Electrónica, Inc. (all of these parties jointly, "Appellees"). This court has jurisdiction to hear the present appeal under 28 U.S.C. § 158(a) (1994).

Sitting as an appellate court reviewing decisions of a bankruptcy court, we review the bankruptcy court's factual findings under a clear error standard, and its conclusions of law under a de novo standard. In re G.S.F. Corp., 938 F.2d 1467, 1474 (1st Cir.1991); Matter of Torres Lopez, 138 B.R. 348, 349 (D.P.R.1992).

I.

On January 31, 1997, this court issued an opinion and order directing the Bankruptcy Court to make further findings addressing the reasons underlying its margin order denying Appellant's request for the entry of sanctions against several attorneys. In that opinion and order, we indicated that while the Bankruptcy Court is free to reaffirm its original margin order, it must make findings of fact and explain its denial of the imposition of sanctions. The Bankruptcy Court subsequently reaffirmed its margin order and expounded its reasons for its denial of the imposition of sanctions in its February 5, 1998 opinion. It is that February 5, 1998 opinion of the Bankruptcy Court which we now review on appeal.

As to attorney Bennazar-Zequeira, the Bankruptcy Court stated in its February 5, 1998 order that the record clearly reflects that he has not engaged in any conduct warranting the imposition of sanctions pursuant to Fed.R.Civ.P. 11 as his involvement in the case was limited, and his motion to dismiss was not frivolous, lacking in factual or legal basis, or part of a pattern of abusive litigation tactics. Appellants had argued to the Bankruptcy Court that Bennazar-Zequeira's motion to dismiss had no reasonable basis in law or fact, and that his failure either to reply to Omajede's opposition or withdraw his motion to dismiss was a violation of Rule 11. The Bankruptcy Court articulated the reasons behind its disagreement with Appellants:

While this court ultimately agreed with Omajede\'s legal reasoning and sustained some of their arguments with regard to the motion to dismiss, it also agreed with Bennazar\'s position regarding the disqualification of Omajede\'s counsel for having a conflict of interest. The fact that Omajede prevailed does not mean that Bennazar\'s setting forth of his client\'s position constitutes sanctionable conduct under Rule 11.

In Re: Empresas Omajede, Inc., B90-3612 at 7 (Feb. 5, 1998 Bankr.D.P.R.).

Similarly, the Bankruptcy Court found that attorney Vidal-Carvajal's first and second motion to dismiss merely articulated the position of his client, were not unreasonable, and did not demonstrate a lack of good faith.

As to attorney Ríos-Gautier, the Bankruptcy Court held that his "Motion to Dismiss for Lack of Proper Authority and Disqualification of Attorney for Debtor" was not problematic. Appellants argued that Ríos-Gautier was "bold" in requesting the disqualification of Omajede's counsel, and that Ríos-Gautier himself had a conflict of interest in representing his client. The Bankruptcy Court stated that it "fails to see how one affects the other, not to mention why it would constitute a violation of Rule 11." Id. at 8. The Bankruptcy Court also stated that it was not a violation of Rule 11 when Ríos-Gautier continued to argue the right to a jury trial after the Bankruptcy Court had already granted Omajede's motion to strike the jury demand.

As to attorney Pou, Appellants argued that his requests for an appointment of trustee and a stay of the proceedings violated Rule 11 because they contained baseless and false allegations and were used to relitigate the issues of conflict of interest and disqualifications.

As to attorneys Hernández-Rodríguez and Colón-Pérez, Appellants argued that their complaint, which commenced...