Rentas v. Claudio (In re Garcia)

Citation484 B.R. 1
Decision Date14 December 2012
Docket NumberBankruptcy No. 04–12461 (ESL).,Adversary No. 10–00170 (ESL).
PartiesIn re Eliseo Morales GARCIA, Maribel Mena Melendez, Debtors. Noreen Wiscovitch Rentas, Plaintiff/Trustee v. Orlando Gonzalez Claudio; Mercedes Gonzalez Claudio; et al., Defendants.
CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico

OPINION TEXT STARTS HERE

Alexis Fuentes Hernandez, Fuentes Law Offices, San Juan, PR, for Debtors.

Enrique N. Vela Colon, San Juan, PR, for Plaintiff/Trustee.

Orlando Gonzalez Claudio, pro se.

Wilfredo Gonzalez Claudio, Dorado, PR, pro se.

Maria Victoria Gonzalez Santiago, pro se.

Estefania Rolon Claudio, pro se.

Lizette Maritza Marchand Gonzalez, pro se.

Magali Minerva Marchand Gonzalez, pro se.

Rosa Maria Raquel Gonzalez Santiago, pro se.

Juan Ramon Gonzalez Rivera, pro se.

Octavio Manuel Gonzalez Rivera, pro se.

Aida Rosa Gonzalez Rivera, pro se.

Carlos Ivan Gonzalez Nogueras, pro se.

Nelson Javier Marchand Gonzalez, pro se.

Sandra Esther Molina Gonzalez, pro se.

Josefa Maria Gonzalez Vega, pro se.

Olga Esther Ortiz Gonzalez, pro se.

Jaime Albizu Lamboy Riley, San Juan, PR, for Defendant.

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, Bankruptcy Judge.

This adversary proceeding is before this Court upon the Motion [for] Summary Judgment (Docket No. 148) filed by the Chapter 7 Trustee (Plaintiff or Chapter 7 Trustee) of the estate of Eliseo Morales Garcia and Maribel Mena Melendez (Debtors) and the Reply to Plaintiff's Motion for Summary Judgment [ and Cross Motion for Summary Judgment ] filed by co-defendants Héctor and René, both Torres Dávila (the “Torres Defendants, Docket No. 184). The Plaintiff seeks the turnover of certain funds consigned at the Puerto Rico Court of First Instance, Superior Court of Bayamón (the “PR Court of First Instance”) resulting from the public auction of certain properties in which the Debtors claim a participation of 78.54%. The Torres Defendants, on the other hand, seek to nullify the contracts and transactions whereby the Debtors acquired said participation or, alternatively, they contend that equitable remedies warrant that they should be compensated in full prior to having the consigned funds in controversy turned over to the bankruptcy estate. Also before the Court are several oppositions to Plaintiff's Motion [for] Summary Judgment filed by co-defendants Maria M. Molina Gonzalez and Manuel Gonzalez Alvarado 1 (“Molina–Gonzalez” and “Gonzalez–Alvarado”, Docket Nos. 163 and 176) claiming that the Puerto Rico Court of Appeals (the PR Court of Appeals) annulled and voided the sales and deeds whereby the Debtors obtained their 78.54% participation of the properties in controversy and the Plaintiff's replies thereto (Docket Nos. 163, 165, 176 and 179). For the reasons stated below, the Plaintiff's Motion [for] Summary Judgment is hereby granted.

Procedural Background

Debtors Eliseo Morales García and Maribel Mena Meléndez filed a Voluntary Chapter 11 Bankruptcy Petition on December 9, 2004, Case No. 04–12461 (the Lead Case). On May 28, 2009, the case was converted to a Chapter 7 upon Debtors' request and on May 29, 2009, Noreen Wiscovitch–Rentas was appointed as Chapter 7 Trustee (the Chapter 7 Trustee or Plaintiff). See Lead Case Docket Nos. 205, 207 and 208.

During the course of the Lead Case, two previous adversary proceedings were filed. The first one (Adv. Proc. No. 05–00102) was filed by Debtors against Hon. Luisa Colom García (Judge of the Puerto Rico Court of First Instance, Superior Court of Bayamon) and the members of the estate of Maria Josefa, Maria de las Mercedes and Jose Antonio Gonzalez Rodríguez (the “Gonzalez Estate”) to annul and void a public auction of real properties belonging to it and to recover damages for alleged violations to the automatic stay provisions in 11 U.S.C. § 362. An Opinion and Order (Adv. Proc. 05–00102 Docket No. 145) was entered in that proceeding on December 18, 2007 dismissing the case under Fed.R.Civ.P. 12(b)(1) for failure to state a claim upon which relief could be granted. The Debtors appealed that Opinion and Order2 to the Bankruptcy Appellate Panel, which transferred the appeal to the District Court for the District of Puerto Rico (Case No. 07–02159(ADC)) under 1st Cir. BAP R. 8001–3(b)(2). The appeal was dismissed on February 4, 2008. See Adv. Proc. 05–00102 Docket Nos. 148, 157 and 161.

The second adversary proceeding (Adv. Proc. No. 06–00135) was filed by the Debtors against Arsan, Inc. and its owners seeking damages for an alleged breach of contract and violations to the automatic stay and for the turnover of property of the bankruptcy estate (Adv. Proc. 06–00135 Docket No. 1). That proceeding was subsequently settled and judgment was entered approving the stipulation (Adv. Proc. 06–00135, Docket Nos. 19, 20 and 25).

The third and instant adversary proceeding was filed by the Chapter 7 Trustee on October 29, 2010, whereby the Plaintiff seeks a determination that the bankruptcy estate owns 78.54% of the proceeds of the sale of certain real properties belonging to the González Estate that were sold in a public auction. Thus, she requests an order to the Clerk of the Puerto Rico Court of First Instance, Superior Court of Bayamon (the “PR Court of First Instance”), to turn over 78.54% of the proceeds of the public auction, representing approximately $2,878491.00, plus accrued interests. Said proceeds are currently consigned at the PR Court of First Instance. See Docket No. 1.

The Torres Defendants initially questioned this Court's subject-matter jurisdiction under Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). See Docket No. 83. On March 26, 2012, this Court issued an Opinion and Order (Docket No. 128), which is incorporated herein, wielding subject-matter jurisdiction over the instant proceeding 3. The Opinion and Order was not appealed.

On May 3, 2012, the Plaintiff filed the Motion [for] Summary Judgment (Docket No. 148). She argues that the Debtors duly acquired the participation rights of the inheritance rights of several members of the Gonzalez Estate by virtue of various public deeds authorized by Notary Public Olga M. Shepard de Mari from 1996 through 1999, and that the sum of those participation rights amount to 78.54% of the total inheritance of the Gonzalez Estate. The Plaintiff also avers that the real properties of the Gonzalez Estate in controversy were sold at a public auction for $3,665,000.00 and that said amount was consigned at the for PR Court of First Instance. Thus, the Plaintiff seeks an order to have 78.54% of the proceeds of that auction be turned over to the bankruptcy estate.

On May 24, 2012, co-defendants Molina–Gonzalez and Gonzalez–Alvarado filed a New Motion in Opposition of Summary Judgment ... and Asking for Complaint Dismissal (Docket No. 163) arguing that the PR Court of Appeals “annulled all th[ose] sales and deeds” 4 whereby the Debtors acquired the 78.54% of the participation in the real properties of the Gonzalez Estate when it ruled that:

Even in the case that intervenors [the Debtors in this case] show that they really substitute 78.54% of the heirs, specifying for the record the names and co-share percentages, the auction process does not affect them because from the very beginning what they were entitled to is a proportional share of the auction proceeds since they could never acquire in that manner, nor have they acquired, any concrete share in rem of any of the three properties described. Gonzalez Santiago v. Gonzalez Caruso, Case No. KLCE200401584 at p. 20 5, 2005 PR App. LEXIS 385 at *28, 2005 WL 808015 at *11.

On June 6, 2012, the Plaintiff filed an Answer to the Opposition filed by co-defendants Molina–Gonzalez and Gonzalez–Alvarado (Docket No. 164) asserting the Debtors paid $1,570, 808.89 (part in money and part in promissory notes 6) to purchase 78.54% of the participation of certain heirs in the Gonzalez Estate and that because those shares were duly purchased pursuant to the public deeds authorized by Notary Public Olga Shepard de Mari, the Debtors own and could have sold their 78.54% to any person for any price.

On June 13, 2012, co-defendants Molina–Gonzalez and Gonzalez–Alvarado filed a Reply to Answer (Docket No. 176) restating that the PR Court of Appeals declared null and void all the deeds in which the Debtors purchased their 78.54% participation in the Gonzalez Estate's properties, which to this date is res judicata.

On June 27, 2012, the Plaintiff filed an Answer to Motion to Reply (Docket No. 179) insisting that what the Debtors purchased was the “hereditary participation of several heirs” of the Gonzalez Estate, not the properties in controversy.

On July 6, 2012, the Torres Defendants filed their Reply to Plaintiff's Motion for Summary Judgment [and Cross Motion for Summary Judgment] (Docket No. 184). They contend that the Plaintiff's proposed facts “are undisputed” but claim other additional facts warrant summary judgment in their favor. In essence, they seek to nullify in this adversary proceeding all the options contracts and subsequent purchase agreements that the Debtors executed with them for lack of licit cause arguing that those documents contravene Article 95 of the Puerto Rico Mortgage Law, 30 L.P.R.A. § 2316. In the alternative, they allege that they are entitled to equitable remedies such as a constructive trust and/or payment of their claims under the unjust enrichment tort doctrine 7.

On August 14, 2012, the Plaintiff filed a Reply to Co–Defendants Hector and Rene Torres['] Reply to Motion for Summary Judgment (Docket No. 194) contending that in regards to the “equitable remedies”, the “purpose of the Bankruptcy Code is that all creditors are in the same position” and that “all the creditors are owed money by the Debtors and are not being paid preferably”. Therefore, she sustains that “all unsecured creditors in this case are in the same position”.

A hearing was held on September 4, 2012, to consider the Plaintiff's Motion [for]...

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