In re Muñoz
| Decision Date | 18 September 2018 |
| Docket Number | CASE NO. 13-08171 EAG |
| Parties | IN RE: PEDRO LÓPEZ MUÑOZ, DEBTOR. |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Before the court is the confirmation of the debtor's proposed plan of reorganization and an objection to it filed by United Surety & Indemnity Company ("USIC"). The only requirement for confirmation that is in dispute here is whether the proposed plan meets the best-interest test of section 1129(a)(7)(A) of the Bankruptcy Code.1 The court held an evidentiary hearing on this contested matter on April 2, 4, and 30, 2018. [Dkt. Nos. 515, 516, 520, 521, 538 & 539.] For the reasons stated below, the debtor's plan as supplemented [at Dkt. Nos. 126, 165, 222, 484, 498, 532 & 534] is confirmed and USIC's objection to confirmation [at Dkt. No 354] is denied.
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 11Proceedings 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).
On October 1, 2013, the debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. [Dkt. No. 1.] The debtor filed his schedules and statement of financial affairs together with the petition. [Id.]
On January 24, 2014, Banco Popular de Puerto Rico filed secured proof of claim number 6 in the amount of $3,061,547.16. [Claims Register No. 6-1.] On January 29, 2014, USIC filed unsecured proof of claim number 10 in the amount of $2,700,000.00. [Claims Register No.10-2.]
On April 15, 2014, the debtor filed his first disclosure statement and plan of reorganization. [Dkt. Nos. 77 & 78.] On July 17, 2014, USIC objected to the disclosure statement and requested the appointment of a chapter 11 trustee. [Dkt. No. 103.]
On August 29, 2014, the debtor amended the disclosure statement and plan and opposed the request for a chapter 11 trustee. [Dkt. Nos. 125, 126 & 127.] That same day, the debtor also amended the schedules, summary of schedules, and statement of financial affairs. [Dkt. Nos. 128 & 129.]
On October 28, 2014, USIC replied to the debtor's opposition to the request for a chapter 11 trustee. [Dkt. No. 156.]
On March 13, 2015, USIC filed a motion for summary judgment on the request for a chapter 11 trustee. [Dkt. No. 217.] On March 17, 2015, the debtor filed an opposition. [Dkt. No. 219.]
On March 18, 2015, the debtor updated financial exhibits to the amended disclosure statement. [Dkt. No. 222.]
On April 16, 2015, the court entered an opinion and order denying USIC's motion for summary judgment. [Dkt. No. 231.] On April 17, 2015, USIC moved for reconsideration of the order denying its motion for summary judgment. [Dkt. No. 233.] The debtor opposed on April 20, 2015. [Dkt. No. 236.] On July 8, 2015, the court entered an opinion and order denying USIC's request for reconsideration. [Dkt. No. 254.]
The evidentiary hearing on USIC's request for a chapter 11 trustee was held on July 14 and 15, 2015. [Dkt. Nos. 259, 260 & 262.] After attending to post-hearing matters, the court issued an opinion and order on January 15, 2016 denying USIC's request for a chapter 11 trustee. [Dkt. No. 312.]
On January 29, 2016, USIC appealed to the United States Bankruptcy Appellate Panel for the First Circuit the opinion and order denying the request for a chapter 11 trustee. [Dkt. No. 315.]
On March 2, 2016, the court approved the debtor's amended disclosure statement at docket number 125, as supplemented at docket number 165. [Dkt. No. 337.] The court also scheduled the hearing on confirmation for April 20, 2016. [Id.]
On March 8, 2016, while the appeal before the Bankruptcy Appellate Panel was pending, USIC moved this court to stay the proceedings. [Dkt. No. 340.] On March 15, 2016,the debtor opposed the request to stay proceedings. [Dkt. No. 345.] The court held a hearing on March 23, 2016 where, after hearing argument by the parties, it denied USIC's request to stay the proceedings pending the appeal. [Dkt. Nos. 347 & 348.]
On April 1, 2016, Scotiabank filed an objection to the debtor's amended plan of reorganization. [Dkt. No. 350.] And, on April 7, 2016, USIC filed another objection to the amended plan. [Dkt. No. 354.] On April 11, 2016, the debtor filed his section 1129 statement. [Dkt. No. 356.]
On April 14, 2016, the debtor filed a motion to inform that USIC had moved the Bankruptcy Appellate Panel to order the stay of the bankruptcy proceedings pending the resolution of the appeal. [Dkt. No. 358.] On April 14, 2016, USIC also moved this court to continue the hearing on confirmation set for April 20, 2016. [Dkt. No. 359.] On April 18, 2016, the Bankruptcy Appellate Panel issued an order staying all proceedings in this case, including the confirmation hearing set for April 20, 2016. [Dkt. No. 361.] This court then entered an order continuing sine die the confirmation hearing. [Dkt. No. 362.]
On July 28, 2016, the Bankruptcy Appellate Panel affirmed this court's decision denying USIC's motion for a chapter 11 trustee. [Dkt. No. 375.]
On August 25, 2016, BPPR and Condado 2, LLC filed a notice of transfer of claim number 6. [Dkt. No. 378.]
On September 2, 2016, this court set a status conference for September 15, 2016 to address confirmation-related issues. [Dkt. No. 380.]
On September 13, 2016, USIC appealed to the United States Court of Appeals for the First Circuit the decision of the Bankruptcy Appellate Panel affirming this court's denial of themotion a chapter 11 trustee. [Dkt. No. 388.] On August 9, 2017, the Court of Appeals for the First Circuit issued an opinion and order affirming the decision of the Bankruptcy Appellate Panel. [Dkt. No. 432.]
This court then re-set the status conference on confirmation for November 30, 2017, but later continued it to December 7, 2017 at the request of the debtor. [Dkt. Nos. 442 & 444.] The court held the status conference on December 7, 2017, where it scheduled the confirmation hearing for March 7and 8, 2018.3 [Dkt. Nos. 453 & 455.]
On February 20, 2018, the debtor again updated financial exhibits. [Dkt. No. 484.] On February 21, 2018, USIC's counsel requested the continuance of the confirmation hearing for health reasons. [Dkt. No. 485.] On February 21, 2018, the debtor and Scotiabank filed a stipulation to resolve Scotiabank's objection at docket number 350 to the amended plan. [Dkt. No. 487.] On February 22, 2018, the debtor supplemented his section 1129 statement and submitted additional ballots. [Dkt. No. 488.] On February 26, 2018, the court held a hearing on USIC's request to continue the confirmation hearing, and there rescheduled it to April 2 and 4, 2018. [Dkt. Nos. 495 & 496.] On March 21, 2018, the debtor updated his liquidation analysis. [Dkt. No. 498.] On March 28, 2018, the court approved the stipulation between the debtor and Scotiabank filed at docket number 487. [Dkt. No. 510.]
On April 2 and 4, 2018, the court held the confirmation hearing and scheduled a third hearing day for April 30, 2018. [Dkt. Nos. 515, 516, 520 & 521.] On April 9, 2018, the court scheduled for April 12, 2018 a telephonic, non-evidentiary hearing related to confirmation tomake preliminary findings and enter orders. [Dkt. No. 517.] A transcript of that hearing is at docket number 537. On April 26, 2018, the debtor and USIC submitted new liquidation analyses as requested by the court on April 12, 2018. [Dkt. Nos. 534 & 535.] After three days of testimony, the confirmation hearing concluded on April 30, 2018. [Dkt. Nos. 538 & 539.]
On May 14, 2018, the debtor and USIC submitted their respective proposed findings of fact and a memorandum of law limited as to trustee's fees in a chapter 7 liquidation case. [Dkt. Nos. 545 & 546.] On May 15, 2018, the debtor moved to strike portions of USIC's proposed findings of fact. [Dkt. No. 547.] USIC opposed the motion to strike on May 16, 2018. [Dkt. No. 548.] The court found that the motion to strike was unnecessary and would further delay a ruling on confirmation and, thus, denied it. [Dkt. No. 557.]
As mentioned, the confirmation hearing was held on April 2, 4, and 30, 2018. 2018. [Dkt Nos. 515, 516, 520, 521, 538 & 539.] During the hearing, the court heard testimony from five witnesses: appraiser Javier Ortiz del Valle (an expert witness for the debtor), CPA Doris Barroso (an expert witness for the debtor), debtor Pedro Lopez Muñoz (called by USIC), Jorge Vallejo Romeu (an expert witness for USIC), and CPA Rafael Perez Villarini ( an expert witness for USIC).
Appraiser Javier Ortiz del Valle testified on April 2, 2018 for the debtor. [Dkt Nos. 515 & 516.] CPA Doris Barroso testified for the debtor on April 4, 2018. [Dkt Nos. 520 & 521.] The debtor then made his section 1129 argument and submitted his case. [Id.] The hearing continued on April 4, 2018 with USIC calling debtor Pedro Lopez Muñoz, appraiser Jorge Vallejo Romeu, and CPA Rafael Perez Villarini. The hearing was then set to continue on April 30, 2018. [Id.]
But, on April 12, 2018, the court held a hearing by telephone to make preliminary findings and enter several orders related to confirmation. [Dkt. No. 517.] At that hearing, the court explained to the parties that there was a problem with the lumping of assets and liabilities in the debtor's liquidation analysis, which resulted in a misstatement of the liquidation value of the estate. [Dkt. Nos. 519, 524 & 537.] The court also ordered USIC to submit a separate liquidation analysis using its own proposed discount factor. [Id.] In order to facilitate comparison of opposing liquidation analyses, the court directed the parties to follow a format of liquidation analysis found in case 15-09593 at docket number 74-4. [Id.]
The confirmation hearing then continued on April 30, 2018 where...
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