In re Freddy Victor Garrido JimÉnez

• Decision Date: 29 March 2011
• Docket Number: Civil No. 08–1663 (DRD).
• Parties: In re Freddy Victor GARRIDO JIMÉNEZ, Debtor(s).Wilfredo Segarra–Miranda, as Chapter 7 Trustee for the Estate of Freddy Víctor Garrido Jiménez, Plaintiff(s),v.RD Capital Group, Inc.; Ramon Dominguez; Jorge Blum; ABC Insurance; DEF Insurance Corp.,v.Freddy v. Garrido Jiménez; U.S. Trustee, Defendants(s).
• Court: U.S. District Court — District of Puerto Rico

455 B.R. 51

In re Freddy Victor GARRIDO JIMÉNEZ, Debtor(s).Wilfredo Segarra–Miranda, as Chapter 7 Trustee for the Estate of Freddy Víctor Garrido Jiménez, Plaintiff(s),

v.RD Capital Group, Inc.; Ramon Dominguez; Jorge Blum; ABC Insurance; DEF Insurance Corp.,

v.Freddy

v. Garrido Jiménez; U.S. Trustee, Defendants(s).

Civil No. 08–1663 (DRD).

United States District Court, D. Puerto Rico.

March 29, 2011.

Eldia M. Diaz Olmo, Eldia M. Diaz Olmo Law Office, San Juan, PR, for Plaintiff.Antonio N. Fiol Matta, Antonio Fiol Matta Law Offices, San Juan, PR, for RD Capital Group, Inc.; Ramon Dominguez; Jorge Blum; ABC Insurance; DEF Insurance Corp.Monsita Lecaroz Arribas, U.S. Trustee Office, San Juan, PR, for Defendants.

OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION

DANIEL R. DOMINGUEZ, District Judge.

Pending before the Court is a Transmittal of Opinion, Report and Recommendationfrom the Clerk of the United States Bankruptcy Court for the District of Puerto Rico, of the Opinion, Report and Recommendation entered by the Hon. Enrique S. Lamoutte, U.S. Bankruptcy Judge, in the Adversary Proceeding No. 06–0236 (ESL), Bankruptcy Case No. 05–2111 (ESL), on May 28, 2008. This matter was referred to the undersigned on June 17, 2008, under Civil No. 08–1663 (DRD), for review of the Opinion, Report and Recommendation issued by the bankruptcy judge and for the entering of a final order and judgment. For the reasons set forth below, the Opinion, Report and Recommendation, issued by the Hon. Enrique S. Lamoutte in Adv.Proc. No. 06–236 (ESL), Docket No. 46, is approved and adopted in toto.

Jurisdiction

This Court has jurisdiction to entertain the certification referred from the bankruptcy court under 28 U.S.C. §§ 157(c)(1), and 158(a).

Introduction

Mr. Wilfredo Segarra, the appointed Chapter 7 Trustee in the related bankruptcy proceeding, Bankruptcy No. 05–2111 (ESL) (hereinafter the “Trustee”), filed an adversary proceeding against defendants RD Capital Group, Inc. (“RD Capital”), and Messrs. Ramón Domínguez and Jorge Blum (hereinafter “Domínguez” and “Blum” or collectively the “defendants”),¹ “to recover damages suffered as a result of the defendants' acts in conspiring with the Debtor [Freddy Víctor Garrido Jiménez] to hinder, delay and defraud his creditors,² as well as to recover for the decline in value of the accounts, ill-gotten gains in commissions, interest and other benefits as a result of overtrading and sale of securities on margin.” See Opinion, Report and Recommendation, Adv. Proc. No. 06–236 (ESL), Docket No. 46, page 2. The Trustee, plaintiff herein, alleged in the complaint a breach of fiduciary duties under applicable Puerto Rico law, to wit, 31 L.P.R.A. §§ 3018 and 5141, as well as violations to the Securities Exchange Act of 1934, 15 U.S.C. § 78, et seq. ; the Securities and Exchange Commission Rule 10b–5, and unjust enrichment. See Opinion, Report and Recommendation, Adv. Proc. No. 06–236 (ESL), Docket No. 46, pages 2–3.

The Trustee moved the Court to find that the arbitration agreement signed by Virgilio Garrido Jiménez ³ cannot be enforced against Freddy Garrido, as the latter never signed the papers to open the investment accounts with RD Capital. The bankruptcy court concluded that “the arbitration agreement is not valid against the trustee, as representative of the Debtor's estate, because the Debtor, owner of the funds used to open the accounts at RD Capital, did not sign the same. The [Bankruptcy] Court recommends to the U.S. District Court that this conclusion be adopted.” See Opinion, Report and Recommendation, Adv. Proc. No. 06–236 (ESL), Docket No. 46, page 15.

Standard of Review

Pursuant to the provisions of 28 U.S.C. § 157(c)(1), the district court will enter a final order and judgment after “considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.”

When reviewing the bankruptcy judge's findings and conclusions of law, the district court will follow the standard for bankruptcy appeals, that is, the district court will review the findings of fact for clear error, and the objected legal conclusions will be reviewed de novo, as well as the bankruptcy court's “exercise of discretion for abuse thereof.” See Eastman v. Knight Adjustment Bureau, Inc., 2011 WL 382503, *1 (E.D.Pennsylvania, February 4, 2011), citing In re Trans World Airlines, Inc., 145 F.3d 124, 131 (3d Cir.1998) (citing In re Engel, 124 F.3d 567, 571 (3d Cir.1997)). See also Marshall v. Stern, 600 F.3d 1037, 1054–1055 (9th Cir.2010); Yukon Energy Corporation v. Brandon Investments, Inc., et al., 138 F.3d 1254, 1259–1260 (8th Cir.1998); Turner v. Universal Debt Solutions, Inc., 436 B.R. 153, 155–156 (Bankr.M.D. Alabama 2010). In sum, the district court will review a report and recommendation under the same standards as a bankruptcy appeal.

On bankruptcy appeals, the district court reviews rulings of law de novo and findings of fact for clear error. Prebor v. Collins ( In re I Don't Trust) 143 F.3d 1, 3 (1st Cir.1998); Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir.1995). “Under an abuse of discretion standard, a reviewing court cannot reverse unless it has a ‘definite and firm conviction that the court below committed a clear error of judgment’ in the conclusion it reached upon a weighing of the relevant factors.” Taylor v. Hosseinpour–Esfahani, 198 B.R. 574, 577 (9th Cir.1996), citing Marchand v. Mercy Medical Ctr., 22 F.3d 933, 936 (9th Cir.1994). “Evidentiary rulings by the bankruptcy court are subject to the ‘abuse of discretion’ standard.” Williamson v. Busconi, 87 F.3d 602, 603, n. 4 (1st Cir.1996), citing United States v. Cotto–Aponte, 30 F.3d 4, 6 (1st Cir.1994). See also General Electric Co. v. Joiner, 522 U.S. 136, 141–142, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997) (referring to experts related evidentiary rulings); Ruiz–Troche v. Pepsi Cola of Puerto Rico Bottling Co., 161 F.3d 77, 83 (1st Cir.1998) (evidentiary rulings are reviewed “for abuse of discretion”). “While this standard of review [for abuse of discretion] is ‘not appellant friendly,’ ” Ruiz–Troche, 161 F.3d at 83, citing Lussier v. Runyon, 50 F.3d 1103, 1111 (1st Cir.1995).

“The standard of review on this appeal requires that we respect, unless ‘clearly erroneous,’ all findings of fact by the bankruptcy court, which includes any finding of actual reliance and any raw fact findings pertinent to the issue of justifiable reliance. Brandt v. Repco Printers & Litographics [ Lithographics] , Inc., 132 F.3d 104, 107–08 (1st Cir.1997).” In re Spadoni, 316 F.3d 56, 58 (1st Cir.2003). “A court reviewing a decision of the bankruptcy court may not set aside findings of fact unless they are clearly erroneous, giving ‘due regard ... to the opportunity of the bankruptcy court to judge the credibility of the witnesses.’ (Citations omitted).” Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir.1997).

“A finding of fact is clearly erroneous, although there is evidence to support it, when the reviewing court, after carefully examining all the evidence, is ‘left with the definite and firm conviction that a mistake has been committed.’ ” Palmacci, 121 F.3d at 785, citing Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). “Deference to the bankruptcy court's factual findings is particularly appropriate on the intent issue ‘[b]ecause a determination concerning fraudulent intent depends largely upon an assessment of the credibility and demeanor of the debtor.’ ” Id. citing In re Burgess, 955 F.2d 134, 137 (1st Cir.1992). “Particular deference is also due to the trial court's findings that depend on the credibility of other witnesses and on the weight to be accorded to such testimony.” Id. citing Fed.R.Bank.R. 8013; Keller v. United States, 38 F.3d 16, 25 (1st Cir.1994).

Moreover, when the parties do not contest the findings of fact made by the bankruptcy court, the appeals court will not disturb them. In re Joelson, 427 F.3d 700, 702 (1st Cir.2005) (“Because the parties do not specifically contest the bankruptcy court's findings of fact, the court will not disturb this ruling on appeal”), citing Jenkins v. Hodes (In re Hodes), 287 B.R. 561, 570 (D.Kan.2002), aff'd, 402 F.3d 1005 (10th Cir.2005).

In the instant case, the district court will only review the objected findings for clear error and review de novo the objected conclusions only. The Court now proceeds to review the facts following the path set by Judge Lamoutte's “excellent canvass of the issues,” after a two day trial held on August 27–28, 2007. See Eastman v. Knight Adjustment Bureau, Inc., 2011 WL 382503, *1.

Issues

The issues before the Court are: (a) whether the issue of the enforceability of the arbitration agreement is a non core matter, which is a jurisdictional issue; and (b) whether the arbitration agreement is valid and enforceable against Freddy Garrido's estate and/or the Trustee.

Factual and Procedural Background

The bankruptcy judge set forth the uncontested facts, as they were stipulated by the parties. See Opinion, Report and Recommendation, Adv. Proc. No. 06–236 (ESL), Docket No. 46, p. 3. The findings of fact are set forth in the Opinion, Report and Recommendation, Adv. Proc. No. 06–236 (ESL), Docket No. 46, pp. 3–10.

Notwithstanding, it is necessary to at least summarize some general facts. Freddy Garrido filed for voluntary relief under Chapter 13 of the Bankruptcy Code on March 9, 2005. The chapter 13 case was converted to a case under chapter 7, on August 8, 2005, Docket No. 32, Bankruptcy No. 05–2111 (ESL). The chapter 7 Trustee was duly appointed on August 9, 2005, Docket No. 33, Bankruptcy No. 05–2111 (ESL). On December 22, 2006, the Trustee filed a complaint under Adv. Proc. No. 06–236 (ESL), to recover damages from the defendants, including Freddy Garrido, for fraud to creditors, breach of fiduciary duties under Puerto Rico law, and...