In re Rosado, Case No. 07-05871 (Bankr.P.R. 3/12/2010)
| Decision Date | 12 March 2010 |
| Docket Number | Case No. 07-05871. |
| Parties | In re: RIDEL ALEGRE FERNANDEZ ROSADO, Chapter 7, Debtor. |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
This case is before the court upon the Motion to Dismiss filed jointly by Mr. Celedonio Corredera Pablo ("Mr. Corredera"), Pablo López Báez ("Mr. López"), Emma Teresa Benítez ("Mrs. Benítez) and Osiris Delgado ("Mrs. Delgado") (hereinafter referred collectively as the "Creditors") on April 28, 2009 pursuant to 11 U.S.C. § 707(a) of the Bankruptcy Code and a "Memorandum In Support Of Motion for Reconsideration /Set Aside Of Order & Supplementing Opposition to Motion to Dismiss"(the "Motion for Reconsideration" or "Opposition to Motion to Dismiss") filed by Ridel Alegre Fernández (the "Debtor") on November 24, 2009 (Docket No. 76), of the Order entered in this case on May 29, 2009 (Docket No. 61) denying Debtor's second request that a discharge be entered forthwith pursuant to Fed. R. Bankr. P. 4004(c)(1)(B) and (D). On December 21,2009, Mr. López, Mrs. Benítez and Mrs. Delgado jointly filed their reply to the opposition to the motion to dismiss (Docket No. 80). On December 31, 2009 Mr. Corredera filed his Opposition to Debtor's Motion for Reconsideration (Docket No. 83). For the reasons stated below the Motion for Reconsideration is hereby denied, and an evidentiary hearing on the motion to dismiss will be scheduled to determine whether Debtor filed its bankruptcy petition in bad faith.
Defendant Ridel Alegre Fernández Rosado filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code on October 9, 2007. Creditors were included in Schedule F (Creditors Holding Unsecured Nonpriority Claims) as unsecured and all debts were labeled of a personal nature. Debtor in Schedule F listed the debts as follows: (i) Don Celedonio Correderra Pablos a personal debt incurred in the year 2005 in the amount of $68,400.00; (ii) Dr. Osiris Delgado a personal debt incurred in the year 2005 in the amount of $25,000.00; (iii) Dr. Pablo Lopez Baez a personal debt incurred in the year 2005 in the amount of $ 11,000.00; and (iv) Emma Teresa Benitez a personal debt incurred in the year 2006 in the amount of $27,000.00. Debtor on line item 4 of its Statement of Financial Affairs listed the following four (4) state court proceedings for collection of monies: (1) Pablo Lopez Baez, Cristine Wechgeler vs. Ridel Fernandez H/N/C Galeria Ridel K1CD2007-0083: (2) Don Celedonio Corredera Pablos vs. Galeria Ridel Inc. and Ridel Fernandez KCD2007-0809: (3) Emma Teresa vs. Ridel Fernandez KCD2007-11424; and (4) Dr. Osiris Delgado vs. Ridel Fernandez and Galeria Ridel KCD2007-1759. The 341 meeting of creditors was initially scheduled for November 1, 2007 (Docket No. 4). The meeting of creditors was rescheduled to November 15, 2007 (Docket No. 7 in lead case); and subsequently continued to December 13, 2007 (Docket No. 12 in lead case) and January 10, 2008 (Docket No. 20 in lead case). The deadline to file objections to the discharge and the dischargeability of debts was December 31, 2007 (Docket No. 4 in lead case).
On April 28, 2009 Creditors filed a Motion To Dismiss (Docket No. 55) alleging that Debtor filed its bankruptcy petition in bad faith and should be dismissed pursuant to 11 U.S.C. § 707(a) of the Bankruptcy Code. Creditors allege that Debtor's bad faith is based on the following: (i) "...to obtain a discharge of debts incurred as a result of Fernández's fraudulent representations to the Consignors and other similarly situated creditors and as a result of Debtor misappropriating or using without consent money or property belonging to the Consignors and other similarly situated creditors" (Docket No. 55, paragraph 5); (ii) "[t]his cumulative debt of at least $112,000.00 was incurred by Debtor as a direct result of Fernández using artworks that had been given to him on consignment for sale by the Consignors to pay for his own debts and from Fernández using the proceeds of the sales of artworks given to him by the Consignors to pay for his own debts" (Docket No. 55, paragraph 7); (iii) (Docket No. 55, paragraph 8); (iv) "Fernández fraudulently or under false pretenses made the Consignors provide him with the artworks on consignment for sale, under the pretense that he would turnover to them the proceeds of the sales of the consigned artworks, less Debtor's rightful part of said proceeds" (Docket No. 55, paragraph 9); and (v) "Debtor has constantly failed to provide the Consignors with the information requested at the meetings of creditors with regards to whom and for what amount were the consigned artworks sold and if they had been paid to him by the respective buyers" (Docket No. 55, paragraph 11).
Subsequently, on May 29, 2009 the court dismissed the instant case for the reasons set forth in Creditors' motion to dismiss. On June 1, 2009 Debtor filed a motion for reconsideration of dismissal under Fed. R. Bankr. P. 7055(c) (Docket No. 67). Debtor filed his Answer and Opposition to the Motion to Dismiss on June 1, 2009 (Docket No. 68). Debtor as part of its Affirmative Defenses in its Opposition to the Motion to Dismiss argues that there is no good faith filing requirement under 11 U.S.C. § 707(a) of the Bankruptcy Code. On June 19, 2009 Creditors filed their opposition to Debtor's motion for reconsideration pursuant to Fed. R. Bankr. P. 7055(c) (Docket No. 69). The court, on September 9, 2009, granted Debtor's motion for reconsideration of the dismissal order since the same was entered prematurely. The order dismissing the case was vacated and set aside. (Docket No. 70). On October 20, 2009, Creditors jointly filed a motion to stay the pretrial hearing until the court rules on the motion to dismiss (Docket No. 72). Creditors through this motion also requested the court to convert the motion to dismiss to a motion for summary judgment. On October 21, 2009 the court ordered the pretrial hearing scheduled for October 23, 2009 to be continued without a date, pending a decision on Creditors' motion to dismiss (Docket No. 73).
On November 24, 2009 Debtor filed his Opposition to Motion to Dismiss and Memorandum of Law (Dockets No. 75 & 76) arguing the following: (i) the motion to dismiss should not be granted without a hearing since Debtor should be given a full and fair opportunity to be heard pursuant to 11 U.S.C. §§ 707(a), 102(1) of the Bankruptcy Code and P.R. LBR 9013-1(d); (ii) Creditors have not offered any evidence whatsoever in support of their motion to dismiss based on bad faith pursuant to 11 U.S.C. § 707(a) of the Bankruptcy Code; (iii) the movant bears the burden for establishing that there is "cause" for dismissal pursuant to 11 U.S.C. § 707(a) of the Bankruptcy Code; (iv) a motion to dismiss which is devoid of any evidence whatsoever but relies on unspecific allegations of fraud and innuendos fails to establish "cause" pursuant to 11 U.S.C. § 707(a) of the Bankruptcy Code; (v) "...Debtor respectfully submits that any perceived failure to respond to the Motion to Dismiss with specific facts in evidence should not provide a basis for the Court to grant the motion, and most certainly should not justify doing so without a hearing" (Docket No. 76, p. 12); and (vi) the motion to dismiss under Section 707(a) is an untimely Section 707(b)(3)(A) motion in disguise. On December 21, 2009 Mr. López, Mrs. Benítez and Mrs. Delgado jointly filed their reply to the opposition to the motion to dismiss (Docket No. 80) by which they present transcribed portions of the 341 creditor's meeting, Debtor's answer to interrogatories and Debtor's deposition in which he acknowledged having received the works from Mr. López, Mrs. Benítez and Mrs. Delgado in consignment and selling the same to third parties and paying other debts with the proceeds from the artworks but never remitting the proceeds from such artworks to the consignors. Lastly, Mr. Corredera in his opposition to the motion for reconsideration argues the following: (i) "[n]either 11 U.S.C. § 707(a) nor LBR 9013-1(d) require that an actual hearing be held, unless a party in interest requests such an actual hearing" (Docket No. 83, paragraph 5); (ii) "...Debtor's motion for reconsideration of the order dismissing the case nor in Debtor's opposition to the Motion to Dismiss did Debtor request that an actual hearing be held as to the Motion to Dismiss" (Docket No. 83, paragraph 6); and (iii) Debtor's lack of good faith pursuant to Section 707(a) consisted in misappropriating the artworks that had been given to him on consignment for sale and using the proceeds of the consigned artworks to pay other debts and thus, failing to remit the proceeds from these artworks to the consignors.
Right to a Hearing Pursuant to 11 U.S.C. §§ 707(a) & 102(1)
Section 707(a) authorizes a bankruptcy court to, "dismiss a case under this chapter only after notice and a hearing and only for cause." 11 U.S.C. § 707(a). The phrase "after notice and a hearing" under Section 102(1) is construed to mean such notice and opportunity for a hearing "as is appropriate in the particular circumstances." 11 U.S.C. 102(1)(A). However, after proper notice is given, a hearing is not required under three (3) circumstances, namely: (i) if no party in interest timely requests a hearing; (ii) if there is insufficient time for the hearing to be commenced before the act must be done and (iii) the bankruptcy court has sufficient information to act without a hearing even if one was requested by a party in interest. 11 U.S.C. § 102(1)(B); Alan N. Resnick & Henry J. Sommer, 2 Collier on Bankruptcy ¶ 102.03 [a]-[c] (16th ed. 2009). "The particular...
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