Rodriguez-Borges v. Lugo-Mender

• Decision Date: 28 March 2013
• Docket Number: Civil Nos. 12–1171 (SEC), 12–1172 (SEC).
• Citation: 938 F.Supp.2d 202
• Parties: Ruth E. RODRIGUEZ–BORGES, Appellant, v. Wigberto LUGO–MENDER, et al., Appellees.
• Court: U.S. District Court — District of Puerto Rico

938 F.Supp.2d 202

Ruth E. RODRIGUEZ–BORGES, Appellant,

v.Wigberto LUGO–MENDER, et al., Appellees.

Civil Nos. 12–1171 (SEC), 12–1172 (SEC).

United States District Court,

D. Puerto Rico.

March 28, 2013.

Luis A. Melendez–Albizu, Luis A. Melendez Albizu Law Office, San Juan, PR, for Appellant.

Rafael E. Silva–Almeyda, Silva Almeyda Law Office, Emily D. Davila–Rivera, San Juan, PR, for Appellees.

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

The appellant, Ruth E. Rodríguez–Borges (“Borges”), a creditor in her ex-husband Manuel A. Domenech–Rodríguez's (“Domenech”) Chapter 7 bankruptcy proceeding, appeals from two bankruptcy court's orders dated January 12, 2012, 2012 WL 112971. In the first, an opinion and order entered in Adversary Proceeding No. 11–00168, the Bankruptcy Court granted the Chapter 7 Trustee Wigberto Lugo–Mender's (“Trustee”) request for immediate disqualification of Borges' legal representation due to a conflict of interest. Id. at 261–68. ¹ In the second, an order entered in Bankruptcy Case No. 10–05835, the Bankruptcy Court denied Borges' request to lift the automatic stay to pursue in state court the final division and liquidation of conjugal funds allegedly withheld and misappropriated by Domenech. Docket # 13, p. 363. The Court has consolidated both appeals. Because both orders are not “final orders” for purposes of 28 U.S.C. § 158(a), this appeal is hereby DISMISSED for lack of jurisdiction.

Factual and Procedural Background

Borges and Domenech were married in 1984, and are the parents of a minor child (“A.G.D.R.”). Docket # 16. They divorced on December 21, 2000. Id. In the divorce case, the state court imposed Domenech the obligation to pay monthly child support in favor of A.G.D.R. Docket # 25, p. 27.

Later, Borges and Domenech reached an agreement to liquidate and divide the conjugal partnership's assets. Id. A property located in San Juan was adjudicated to Borges, while Domenech received two promissory notes—each for a value of one hundred two thousand five hundred dollars ($102,500.00), for a total of two hundred five thousand dollars ($205,000.00)—as guarantee of payment of his participation over the San Juan property. Id.; Docket # 19–3, p. 4–5.

The notes matured on November 1, 2004, and Borges had not yet complied with her payment obligation. In view of the risk that the property could be foreclosed at any time, on June 21, 2005, the state court issued a resolution declaring the San Juan property the homestead of A.G.D.R. Docket # 19–4, p. 2–3.

On June 30, 2010, Domenech filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Docket # 11, p. 17–54. A few months later, Borges filed the state court case Ruth E. Rodríguez–Borges v. Manuel A. Domenech–Rodríguez, Civil No. KAC 2010–1557(906), requesting the division and liquidation of the conjugal funds allegedly withheld and misappropriated by Domenech [hereinafter “state court case”]. Docket # 13, p. 280–81. Upon the Trustee's request, the state court stayed the case pending further bankruptcy proceedings. Id.; Docket # 13, p. 299.

On August 11, 2011, the Trustee commenced an adversary proceeding by filing a complaint against Borges for collection and turnover of property of the estate [hereinafter “adversary case”]. The basis of the purported debt was the two promissory notes previously mentioned. Docket # 12, p. 159–178.

On November 8, 2011, Borges filed a motion in the bankruptcy case seeking to lift the automatic stay in the state court case. Docket # 13, p. 277–88. On even date, the Trustee requested in the adversary case the disqualification of Luis A. Meléndez–Albizu (“Albizu”), Borges' legal representative, due to a conflict of interest. Docket # 12, p. 220–25. The Trustee posited that Albizu appeared as the legal representative of Borges in the adversary proceeding, and also represented Borges “who, in turn, represent [ed] the Minor's interests in the bankruptcy estate by attempting to collect, enforce and obtain a declaration of non-discharge of a claimed domestic support obligation ... against Debtor's estate.” Docket # 13, p. 262. The Trustee alleged that “these two legal representations are in conflict with each other because if the Trustee prevails and obtains a successful outcome in the collection and turnover of property, it would mean an adverse decision for [Borges] but would result in recovery of money that will allow for distribution to the estate's creditors, including the Minor.” Id.

On January 12, 2012, the Bankruptcy Court issued an opinion and order in the adversary proceeding granting the disqualification of Borges' legal representative. The Bankruptcy Court agreed with “the Trustee's position that ... Albizu is representing the conflicting interests of both, a creditor and a debtor to the bankruptcy estate.” Docket # 13, p. 276. Finally, the Bankruptcy Court issued an order in the bankruptcy case denying Borges' motion for relief from stay. The Bankruptcy Court indicated in its order that the motion for relief from stay was denied “for the reasons stated in the Opinion and Order in the adversary proceeding”. Docket # 13, pp. 261–68, 363. This appeal followed.

Standard of Review

On appeal, a district court may affirm, modify, or reverse a bankruptcy court's judgment, or remand with instructions for further proceedings. Fed. R. Bkrtcy. P. 8013. The scope of this task, however, varies depending on whether the appeal revolves around findings of facts or conclusions of law. “Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Bkrtcy. R. 8013; see alsoFed.R.Civ.P. 52(a)(6). Accordingly, under the “clearly erroneous” standard, a reviewing court will only reverse a prior decision if it has the “definite and firm conviction that a mistake has been committed.” In re the Bible Speaks, 869 F.2d 628, 630 (1st Cir.1989) (citing Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (finding no clear error where conclusion of the bankruptcy court and the facts underlying it were supported by the record.). And if the finding of fact “is based on [the judge's] decision to credit the testimony of one of two or more witnesses, each of whom has told a coherent and facially plausible story that is not contradicted by extrinsic evidence, that finding, if not internally inconsistent, can virtually never be clear error.” Anderson, 470 U.S. at 574, 105 S.Ct. 1504.

In contrast, conclusions of law are reviewed de novo. Prebor v. Collins (In re I Don't Trust), 143 F.3d 1, 3 (1st Cir.1998). This standard of review calls for the district court to analyze and solve issues from the same perspective of the bankruptcy court, as if the issues were to be decided for the first time. Water Keeper Alliance v. U.S. Dept. of Defense, 271 F.3d 21, 31 (1st Cir.2001).

Of course, to be reviewable on appeal, the issue at play (whether of fact or law) must have been properly preserved during the challenged proceedings. Pomerleau v. West Springfield Public Schools, 362 F.3d 143, 146 (1st Cir.2004) (“If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal.”). In other words, where the appellant raises an issue for the first time on appeal, the matter is generally deemed waived, unless he demonstrates either “clear and gross injustice” or “plain error.” Muñiz v. Rovira, 373 F.3d 1, 5 (1st Cir.2004).

Applicable Law and Analysis

The Trustee challenges this court's jurisdiction to review the order disqualifying Borges' counsel, and the order denying Borges' request to lift the automatic stay. Essentially, he argues that both bankruptcy court's orders are interlocutory orders unreviewable under 28 U.S.C. § 158(a). Docket # 25, p. 12. In contrast, Borges asserts that the orders are “final orders” reviewable as of right by this court. Docket # 16, p. 10–11; Docket # 28, p. 7–8. For the reasons stated below, the Court agrees with the Trustee's contentions.

This Court has jurisdiction to review bankruptcy court's decisions pursuant to 28 U.S.C. § 158(a). In pertinent part, 28 U.S.C. § 158(a) provides that “[t]he district courts of the United States shall have jurisdiction to hear appeals: (1) from final judgments, orders, and decrees; (2) ...; and (3) with leave of the court, from other interlocutory orders and decrees.” Id. (emphasis added). Thus, “final orders” are reviewable as a matter of right by the district courts, but review of interlocutory orders rests on the discretion of the court. Similarly, under 28 U.S.C. § 158(d), an appellate order entered by a district court sitting in bankruptcy is not appealable to the court of appeals unless it is “final,” In re Harrington, 992 F.2d 3, 5 (1st Cir.1993), and, outside the bankruptcy context, “28 U.S.C. § 1291 grants the courts of appeals jurisdiction of appeals from all ‘final decisions of the district courts.’ ” Richardson–Merrell, Inc. v. Koller, 472 U.S. 424, 429, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985).²

A decision is considered final if it “ ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment,’ ” In re Vázquez Laboy, 647 F.3d 367, 372 (1st Cir.2011) (quoting Catlin v. U.S., 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945)); whereas an interlocutory order “only decides some intervening matter pertaining to the cause, and ... requires further steps to be taken in order to enable the court to adjudicate the cause on the merits.” Harrington, 992 F.2d at 6 (quoting In re American Colonial Broadcasting Co., 758 F.2d 794, 801 (1st Cir.1985)). The finality statutory requirement means “that ‘a party must ordinarily raise all claims of error in a single appeal following final...