In re Luis G. VÁzquez Laboy

• Decision Date: 27 May 2011
• Docket Number: No. 09–9022.,09–9022.
• Citation: 647 F.3d 367
• Parties: In re Luis G. VÁZQUEZ LABOY; Carmen D. García Calderón, Debtors.Luis G. Vázquez Laboy; Carmen D. García Calderón, Appellants,v.Doral Mortgage Corporation; Doral Financial Corporation; Edgardo Canales Idrach d/b/a Canales Law Offices; Ángel R. Rolán Prado, Appellees.
• Court: U.S. Court of Appeals — First Circuit

647 F.3d 367

In re Luis G. VÁZQUEZ LABOY; Carmen D. García Calderón, Debtors.Luis G. Vázquez Laboy; Carmen D. García Calderón, Appellants,

v.Doral Mortgage Corporation; Doral Financial Corporation; Edgardo Canales Idrach d/b/a Canales Law Offices; Ángel R. Rolán Prado, Appellees.

No. 09–9022.

United States Court of Appeals, First Circuit.

Heard Nov. 4, 2010.Decided May 27, 2011.

Juan M. Suárez Cobo, with whom Legal Partners, P.S.C. was on brief, for appellants.Giselle López Soler, with whom Néstor M. Méndez Gómez and Pietrantoni Méndez & Álvarez LLP were on brief, for appellees Doral Mortgage Corporation and Doral Financial Corporation.Giancarlo Font García, with whom Rivera–Carrasquillo, Martínez & Font was on brief, for appellees Edgardo Canales Idrach d/b/a Canales Law Offices and Ángel R. Rolán Prado.Before TORRUELLA, LIPEZ, and THOMPSON, Circuit Judges.THOMPSON, Circuit Judge.

Debtors Luis Vázquez Laboy and Carmen García Calderón claim they were unconstitutionally deprived of a hearing on damages due to them as a result of the Appellees' willful violation of the automatic stay in their bankruptcy case. Appellees Doral Mortgage Corporation—who set in motion the stay violation—and its former attorney-notaries at Canales Law Offices, Edgardo Canales Idrach and Ángel Rolán Prado (collectively, Canales)—who actually carried out the acts that violated the stay—have mounted a broad counter-attack, fighting everything from our jurisdiction to the willfulness of the violation. All this avails them nothing, however. Avoiding the constitutional issue, we nevertheless find that the Debtors are entitled to present evidence, and we remand so they can do so.

Shenanigans at the Registry

This case's decade-plus of court proceedings all stem from the Debtors' purchase of a property in Corozal, Puerto Rico on December 17, 1996.¹ Not long after the purchase—on December 30, 1996—the Debtors presented their conveyance deed to the Registry of Property. Under Puerto Rico law, the Registry has sixty days either to record a deed that has been presented or to notify the presenters of any defects. See 30 L.P.R.A. § 2255. If a deed's presenters do not correct any defect within sixty days of notification, then the presentation expires and the Registry will reject the deed. See id.

On February 15, 1997—before the initial sixty-day period was up, and with the conveyance deed still unrecorded—the Debtors borrowed $25,000 from Doral, secured by a mortgage on the property. Canales, acting as a notary retained by Doral, promptly presented the mortgage deed to the Registry.²

This is where things went awry. First, the Registry informed the Debtors that their conveyance deed was defective. So on May 5, 1997, the Debtors withdrew the deed, as was their right under 30 L.P.R.A. § 2254. But the mortgage deed remained in limbo; its presentation expired and it was never recorded. The Registry ought to have informed Doral or Canales that the mortgage deed was defective due to the withdrawal of the conveyance deed, see id. §§ 2255, 2272; Doral disputes that the Registry did so. But there is no question that by July 29, 1999, Doral had learned that the conveyance and mortgage deeds remained unrecorded. Nevertheless, it sat on its hands. And in the meantime, on January 31, 2000, the Debtors filed for Chapter 13 bankruptcy. Doral learned of the bankruptcy petition in February and entered the case in early March.

Now Doral was in a fix. The bankruptcy petition had triggered an automatic stay, forbidding any action to perfect a lien against estate property. See 11 U.S.C. § 362(a)(4). But this restriction hurt Doral: Doral's interest in the Debtors' property remained un-perfected, and its position in the bankruptcy proceedings suffered as a result.³ If the mortgage had been recorded then Doral's claim against the bankruptcy estate would have been secured by a lien on the property; the unrecorded mortgage, though, left Doral's claim effectively unsecured. So, heedless of the stay, on December 1, 2000, Canales—again acting as a notary retained by Doral—presented the mortgage deed to the Registry anew, this time with a corrected conveyance deed. ⁴ See 30 L.P.R.A. § 2275 (allowing for a new presentation after the correction of defects). The Debtors, however, did not take this lying down.

Adversary Action

On August 22, 2001, the Debtors filed an adversary action against Doral in bankruptcy court, claiming that Doral's presentation of the mortgage deed willfully violated the automatic stay and seeking various relief, including damages, costs, and fees.⁵ Doral moved to dismiss the complaint. For their part, the Debtors filed a motion for partial summary judgment on liability. There followed a flurry of filings, including an amended complaint that brought Canales into the case. Canales responded with its own summary judgment motion. Finally, on August 29, 2003 the court dismissed the action, holding that Doral's post-petition attempt to perfect its mortgage fell under an exception to the automatic stay. See 11 U.S.C. § 362(b)(3).⁶

The Debtors moved for reconsideration, and after kicking the issue about for three years the court obliged by reversing itself, granting the Debtors' motion for partial summary judgment, and effectively denying Doral and Canales's dispositive motions. The court recognized that Doral had been aware well in advance of the bankruptcy petition that its mortgage was unrecorded, and concluded that the attempt to perfect the mortgage had constituted a violation of the automatic stay. As a result, the court ordered Doral to withdraw the mortgage deed and turn it over to the Debtors for cancellation. An untimely appeal by Canales to the Bankruptcy Appellate Panel (also “BAP” or “Panel”) was swiftly dismissed for want of jurisdiction. See Fed. R. Bankr.P. 8002(a) (establishing time to file); In re Abdallah, 778 F.2d 75, 77 (1st Cir.1985) (Rule 8002 time limit is jurisdictional).

Buoyed by their string of successes, the Debtors petitioned the court for damages, which then-section 362(h) authorized following a willful violation of the automatic stay.⁷ The former 11 U.S.C. § 362(h) read: “An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.” The Debtors explicitly sought both a preliminary conference and a full hearing on damages. The court acceded to the request for a conference, which occurred on June 22, 2007,⁸ but the hearing on damages never happened: on October 8, 2008, the court denied both the hearing and damages, and attorneys' fees to boot, finding that the cancellation of the mortgage was remedy enough. On December 17, 2008, the court entered a final judgment denying damages. The Debtors appealed to the Bankruptcy Appellate Panel, which summarily affirmed due to a missing transcript; now they seek our review.

Jurisdiction

Before reaching the parties' substantive arguments, we must determine whether we have jurisdiction to consider the matter at all. Doral and Canales say we do not, for two reasons. First, they say, the bankruptcy court's order on the motion for reconsideration constituted a final judgment, so the Debtors' request for damages and subsequent appeal months later were untimely. And second, they say, even if there were some question as to whether the court's order was a final judgment, the law of the case requires us to hold that it was because the Bankruptcy Appellate Panel so held and no one challenged the Panel's determination. Both of these arguments fail. We plainly “have jurisdiction of [timely] appeals from all final decisions, judgments, orders, and decrees” of intermediate bankruptcy tribunals. 28 U.S.C. § 158(d)(1). Here, the BAP issued a final decision and judgment in the form of a summary affirmance. Therefore, we have jurisdiction.

We will, however, address Doral and Canales's jurisdictional arguments as applied to the bankruptcy court, because if the bankruptcy court had no authority to entertain the Debtors' request for damages then no hearing on damages was necessary and our review can end there.

The first jurisdictional argument, again, goes to timeliness. Specifically, Doral and Canales say that the Debtors' request for damages was functionally equivalent to a motion to alter or amend a judgment under Fed.R.Civ.P. 59(e) because it sought additional relief after the court had already granted summary judgment. As a basis for this argument Doral and Canales say the order granting summary judgment was a “final judgment”; if it was then the motion may be properly characterized as one under Rule 59. And if this is the case then the motion had to be filed within ten days of the original judgment. See Fed.R.Civ.P. 59(e) (amended in 2009 to extend filing period to twenty-eight days). Rule 59's time limit is jurisdictional. Barrett v. United States, 965 F.2d 1184, 1187 (1st Cir.1992). So, Doral and Canales conclude, because the damages request was not filed within ten days of the summary judgment grant, the bankruptcy court had no jurisdiction to entertain it. But if, as the Debtors argue, the motion was something other than one to set aside judgment, then the Rule 59 ten-day window would not apply.

The term “final judgment” is no misnomer—the Supreme Court has held consistently for generations that it applies only to a determination that leaves nothing more for the court to do than to execute judgment. See Riley v. Kennedy, 553 U.S. 406, 128 S.Ct. 1970, 1981, 170 L.Ed.2d 837 (2008) (“A final judgment is ‘one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’ ”) (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945)). It follows that if the issue of damages was still open when the court resolved the Debtors' motion for partial summary judgment then ...