Rentas v. Mapfre Praico Ins. Co.
| Decision Date | 11 January 2021 |
| Docket Number | BAP NO. PR 19-050,Adversary Proceeding No. 15-00207-EAG,Bankruptcy Case No. 13-06718-EAG |
| Parties | LUIS DIESEL SERVICES, INC., Debtor. NOREEN WISCOVITCH RENTAS, Chapter 7 Trustee, Plaintiff-Appellant, v. MAPFRE PRAICO INSURANCE COMPANY and PUMA ENERGY CARIBE, LLC, Defendants-Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
NOT FOR PUBLICATION
Appeal from the United States Bankruptcy Court for the District of Puerto Rico
(Hon. Brian K. Tester, U.S. Bankruptcy Judge)
Before Harwood, Cary, and Fagone, United States Bankruptcy Appellate Panel Judges.
Rafael A. González Valiente, Esq., on brief for Appellant.
José A. Sánchez-Girona, Esq., on brief for Appellee, MAPFRE PRAICO Insurance Company.
Carlos Infante, Esq., on brief for Appellee, Puma Energy Caribe, LLC.
The chapter 7 trustee, Noreen Wiscovitch Rentas (the "Trustee"), filed a complaint against MAPFRE PRAICO Insurance Company ("MAPFRE") and Puma Energy Caribe, LLC ("Puma") seeking to avoid and recover an allegedly preferential and/or fraudulent transfer under §§ 547 and 548.1 The bankruptcy court initially denied the parties' cross-motions for summary judgment and their requests for reconsideration. After a final pretrial hearing and court-ordered supplemental briefing, the bankruptcy court entered sua sponte: (1) an opinion and order vacating the order denying reconsideration and granting MAPFRE's motion for reconsideration of the order denying summary judgment; and (2) a judgment dismissing the complaint (collectively, the "Judgment"). The Trustee appealed the Judgment, as well as the bankruptcy court's denial of her motion to alter or amend the Judgment.
For the reasons discussed below, we AFFIRM.
Luis Diesel Services, Inc. (the "Debtor") purchased petroleum products from Puma for resale to third parties. In June 2013, MAPFRE, a Puerto Rico surety company, agreed to issue the Debtor a $200,000 bond to guarantee payment for the Debtor's future purchases from Puma. On July 5, 2013, the Debtor remitted $100,000 to MAPFRE in the form of three cashier's checks and MAPFRE issued a Financial Guarantee Bond in the amount of $200,000 (the "Bond"), with Puma designated as the obligee and the Debtor as the principal. The Bond provided thatMAPFRE, as surety, was obligated to pay Puma up to $200,000 for the Debtor's future purchases for a one-year period beginning July 5, 2013. In connection with the issuance of the Bond, the Debtor executed an indemnity agreement, as well as a pledge agreement providing MAPFRE with $100,000 of cash collateral (collectively, the "bond agreement").
Between July 5, 2013 and July 8, 2013, the Debtor purchased new products from Puma and, as of July 19, 2013, there were outstanding invoices for those purchases totaling $95,325. On August 21, 2013, MAPFRE paid Puma $95,325 by a check drawn from MAPFRE's account.3 A few days later, on August 27, 2013, MAPFRE remitted $4,675 to the Debtor, representing the difference between the Debtor's $100,000 payment to MAPFRE and MAPFRE's $95,325 payment to Puma.
The Debtor commenced a chapter 11 bankruptcy case on August 16, 2013. The case was later converted to one under chapter 7, and the Trustee was appointed.
In August 2015, the Trustee filed a two-count complaint against MAPFRE and Puma (collectively, "the Defendants") seeking to avoid and recover an allegedly preferential and/or fraudulent transfer under §§ 547 and 548. She alleged that on July 5, 2013, the Debtor transferred $95,325 to MAPFRE to obtain a $200,000 bond, and that MAPFRE never issued the bond but, instead, transferred the funds to Puma for payment of an antecedent debt owed by the Debtor.
Over the next four years, the parties engaged in extensive motion practice, including the filing of cross-motions for summary judgment.
The Trustee sought summary judgment as to her preferential transfer claim under § 547. She asserted that during the preference period and while the Debtor was insolvent, the Debtor transferred $100,000 to MAPFRE, which then transferred $95,325 to Puma as payment for an antecedent debt owed by the Debtor to Puma. According to the Trustee, MAPFRE "acted as an intermediary of the preferential transfer" which benefited Puma and she was entitled to avoid and recover the $100,000 transfer.
MAPFRE countered that it was entitled to judgment in its favor as the Trustee had failed to establish the necessary elements of a preferential transfer under § 547. It claimed the undisputed facts and the evidence showed that the Debtor did not owe anything to MAPFRE at the time of the $100,000 payment and, therefore, the transfer to MAPFRE was not made for the benefit of a creditor or on account of an antecedent debt.
Puma also filed a motion for summary judgment, arguing it was entitled to judgment in its favor as: (1) the Trustee had failed to establish the Debtor was insolvent at the time the $95,325 payment to Puma was made; (2) the Trustee could not avoid the $95,325 payment to Puma because it was a contemporaneous exchange for new value and/or made in the ordinary course of business under § 547(c); and (3) Puma "lacked the bad faith necessary for the Trustee to prevail under § 548."4
On March 1, 2019, the bankruptcy court entered an order denying the parties' respective motions (the "Order Denying Summary Judgment"), concluding there was a genuine issue of material fact as to whether the Debtor's $100,000 payment to MAPFRE "originated from property of the Debtor."
Both the Trustee and MAPFRE moved for reconsideration of the Order Denying Summary Judgment. The Trustee insisted there was no dispute that MAPFRE received $100,000 from the Debtor. MAPFRE, on the other hand, stressed that regardless of whether the funds transferred to MAPFRE were property of the Debtor, the Trustee could not prevail under § 547 as she had not established that the Debtor transferred $100,000 to MAPFRE for payment of antecedent debts owed by the Debtor before such transfer was made. Additionally, it maintained the Trustee could not prevail on her fraudulent transfer claim under § 548 as the undisputed facts "completely belie[d] the unsubstantiated allegations of fraud" made by the Trustee in the complaint. Based on the foregoing, MAPFRE asked the court to reconsider the Order Denying Summary Judgment and enter a judgment dismissing the complaint in its entirety. MAPFRE also filed a separate opposition to the Trustee's motion for reconsideration, arguing that the bankruptcy court correctly denied the Trustee's summary judgment motion.
In an order dated May 7, 2019 (the "Order Denying Reconsideration of S.J. Order"), the bankruptcy court denied both motions for reconsideration, reiterating there was a genuine issue of material fact regarding the origin of the $100,000 payment to MAPFRE which precluded summary judgment and required an evidentiary hearing.
The next day, in accordance with the court's pretrial scheduling order, the parties filed a joint pretrial report setting forth their stipulated facts, respective legal arguments, and supporting evidence. The court then conducted a final pretrial hearing on May 15, 2020. Although there is no transcript of that proceeding in the record, the parties contend that, at the hearing, Puma argued it should be dismissed from the adversary proceeding because the Trustee had not asserted any claims against it. After the hearing, the bankruptcy court entered an order granting Puma 20 days "to submit its jurisprudence to prove that it is not part of this litigation," and allowing the Trustee 20 days to file a reply.
Puma filed a memorandum of law, arguing that the Trustee was unable to prevail on her preferential and fraudulent transfer claims against it under §§ 547 and 548 because she could not establish that the funds it received from MAPFRE were property of the Debtor. Accordingly, Puma requested the bankruptcy court to dismiss the Trustee's claims against it.
MAPFRE responded to Puma's memorandum, reiterating its argument that the Debtor's $100,000 transfer to MAPFRE was neither to a creditor nor on account of an antecedent debt, and that it remitted $95,325 to Puma pursuant to its obligations under the Bond and on account of Puma's post-transfer invoices for the Debtor's new purchases of products. It requested the court to "enter judgment dismissing this case in its entirety with prejudice with respect to all defendants . . . ."
The Trustee also filed a response, reasserting that she had demonstrated a cause of action under § 547 as the undisputed facts showed that MAPFRE received $100,000 from the Debtorduring the preference period and then used the Debtor's money to pay $95,325 to Puma for antecedent debts owed by the Debtor.
On July 19, 2019, without further hearing, the bankruptcy court entered its opinion and order vacating the Order Denying Reconsideration of S.J. Order and granting MAPFRE's motion for reconsideration of the Order Denying Summary Judgment. See Wiscovitch Rentas v. MAPFRE PRAICO Ins. Co. (In re Luis Diesel Servs. Inc.), Adv. Pro. No. 15-0207, 2019 WL 3268799 (Bankr. D.P.R. July 19, 2019). The bankruptcy court made the following findings of fact:
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