Berrios v. P.R. Treasury Dep't (In re Berrios), CASE NO. 16-10163 (ESL)

IN RE: DAISY MARTINEZ BERRIOS Debtor

DAISY MARTINEZ BERRIOS Plaintiff v. PUERTO RICO TREASURY DEPARTMENT Defendant

CASE NO. 16-10163 (ESL)

ADV. PROC. NO. 17-0240 (ESL)

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO

April 8, 2020

CHAPTER 13

OPINION AND ORDER

This adversary proceeding is before the court upon the motion for partial summary judgment filed by Daisy Martinez Berrios ("Debtor" or "Plaintiff") on the ground that the uncontested facts show that the Puerto Rico Treasury Department willfully violated the automatic stay by continuing with collections efforts against the Debtor after the bankruptcy petition was filed. The Treasury Department of the Commonwealth of Puerto Rico ("Treasury" or "Defendant") answered by filing its own motion for summary judgment praying the court to dismiss the complaint as Treasury did not violate the automatic stay and "acted in accordance to the Bankruptcy Code and Puerto Rico Internal Revenue Code since the notification letter was not sent to the Plaintiff/Debtor, Mrs. Daisy N. Martínez Berrios." The Debtor filed an opposition to Treasury's motion for summary judgment and Treasury responded to the same.

The Debtor filed a petition under chapter 13 of the Bankruptcy Code on December 30, 2016. The chapter 13 plan dated May 17, 2017 was confirmed on June 19, 2017. The Debtor moved for post confirmation modification and submitted a chapter 13 plan dated January 9, 2019. The motion for post confirmation modification was granted and the amended chapter 13 plan is the confirmed plan. There are no pending matters in the bankruptcy case.

On August 21, 2017, Daisy Martinez Berrios filed the present complaint seeking redress for the alleged unlawful and deceptive practices committed by the Puerto Rico Treasury Department in connection with efforts to collect pre-petition debts from the debtor when the automatic stay was in effect, in violation of 11 U.S.C. §362. This complaint also seeks an order for the defendants to withdraw the notification of garnishment issued to the debtor's business, a "d/b/a." On January 9, 2018 the Treasury answered the complaint.

Jurisdiction

This court has jurisdiction under 28 U.S.C.§157 (a) (b) (1) and §1334. This action is a core proceeding under 11 U.S.C. §§362 and Fed. R. Bankr. P. 7001. Venue lies in this District pursuant to 28 U.S.C.§§1408;1409 and 1391(b).

Complaint

The factual allegations in the complaint state that Treasury was included in both the master address list and in Schedule D - Creditors Holding Secured Claims - for a pre-petition tax liability in the amount of $8,424.72. The court notes that, as stated in plaintiff's statement of uncontested facts, Defendant/Treasury was included in both the master address list, and in Schedule E/F - Creditors Holding Unsecured Claims - of the Bankruptcy Petition, disclosing Debtor's pre-petition tax debt in the amount of $8,424,72. On June 15, 2017 Treasury delivered a notification of garnishment to the Debtor's business, (d/b/a) Rene Auto Air, concerning years 2010, and 2016 tax liability. Treasury was given notice of the petition filing and the automatic stay provisions of 11 U.S.C. §362(a). Thus, Treasury had knowledge of the petition filing.

The factual allegations also state that the Debtor called Treasury after receiving the notification of garnishment to explain that after filing the voluntary petition she visited their Bankruptcy Department to deliver documents to avoid a garnishment. Treasury filed a proof of claim on June 15, 2017, in the amount of $15,808.39. The filing of the proof of claim proves that Treasury received notification of the voluntary petition and wanted to preserve its rights. Debtor/Plaintiff admits that proof of claim number 15 was amended by Treasury. The notification sent by Treasury "orders a garnishment of funds belonging to the debtor's d/b/a, René Auto Air, in any financial institution to retain $7,498.48 to cover for the pre-petition tax liability which will be paid through her Chapter 13 Plan."

Plaintiff concludes that "[t]he actions of defendants in this case, in seeking to collect payments from Plaintiff to satisfy debts incurred before the filing of their bankruptcy case, and by continuing various forms of legal action, are in violation of the automatic stay entered inPlaintiff's bankruptcy case, entitle Plaintiff to the relief afforded under 11 USC sec. 362(k), and additionally constitute contempt of the bankruptcy court orders, including the order confirming debtor's plan."

Standard Motion for Summary Judgment

The court relies on the following prior decisions when analyzing the summary judgment standard: In re Román-Perez, 527 B.R. 844, 855 - 856, (Bankr. D.P.R. 2015); In re Otero Rivera, 511 B.R. 6 (Bankr. D.P.R. 2014); and In re Lopez, 492 B.R. 595 (Bankr. D.P.R. 2013).

Rule 56 of the Federal Rules of Civil Procedure is applicable to this proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Bankr. P. 7056; see also, In re Colarusso, 382 F.3d 51 (1st Cir. 2004), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"The summary-judgment procedure authorized by Rule 56 is a method for promptly disposing of actions in which there is no genuine issue as to any material fact or in which only a question of law is involved." Wright, Miller & Kane, Federal Practice and Procedure, 3d, Vol 10A, § 2712 at 198. "Rule 56 provides the means by which a party may pierce the allegations in the pleadings and obtain relief by introducing outside evidence showing that there are no fact issues that need to be tried." Id. at 202-203. Summary judgment is not a substitute for a trial of disputed facts; the court may only determine whether there are issues to be tried, and it is improper if the existence of a material fact is uncertain. Id. at 205-206.

Summary judgment is warranted where, after adequate time for discovery and upon motion, a party fails to make a showing sufficient to establish the existence of an element essential to its case and upon which it carries the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).

For there to be a "genuine" issue, facts which are supported by substantial evidence must be in dispute, thereby requiring deference to the finder of fact. Furthermore, the disputed facts must be "material" or determinative of the outcome of the litigation. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). Whenconsidering a petition for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Daury v. Smith, 842 F.2d 9, 11 (1st Cir. 1988).

The moving party invariably bears both the initial as well as the ultimate burden in demonstrating its legal entitlement to summary judgment. Adickes v. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). See also López v. Corporación Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st Cir. 1991). It is essential that the moving party explain its reasons for concluding that the record does not contain any genuine issue of material fact in addition to making a showing of support for those claims for which it bears the burden of trial. Bias v. Advantage International, Inc., 905 F.2d 1558, 1560-61 (D.C. Cir. 1990), cert. denied, 498 U.S. 958, 111 S.Ct. 387, 112 L.Ed.2d 397 (1990).

The moving party cannot prevail if any essential element of its claim or defense requires trial. López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that there is an absence of evidence supporting the nonmoving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. See also Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir. 1991); Daury, 842 F.2d at 11. In its opposition, the nonmoving party must show genuine issues of material facts precluding summary judgment; the existence of some factual dispute does not defeat summary judgment. Kennedy v. Josephthal & Co., Inc., 814 F.2d 798, 804 (1st Cir. 1987). See also, Kauffman v. Puerto Rico Telephone Co., 841 F.2d 1169, 1172 (1st Cir. 1988); Hahn, 523 F.2d at 464. A party may not rely upon bare allegations to create a factual dispute but is required to point to specific facts contained in affidavits, depositions and other supporting documents which, if established at trial, could lead to a finding for the nonmoving party. Over the Road Drivers, Inc. v. Transport Insurance Co., 637 F.2d 816, 818 (1st Cir. 1980).

The moving party has the burden to establish that it is entitled to summary judgment; no defense is required where an insufficient showing is made. López, 938 F.2d at 1517. The nonmoving party need only oppose a summary judgment motion once the moving party has met its burden. Adickes, 398 U.S. at 159, 90 S.Ct. 1598.

The summary judgment standard applies to both parties to the complaint as they have filed cross motions for summary judgment. The relevant facts are not in controversy. What is determinative is the reasonable inferences the court may make from the uncontested facts that is, was the notification of garnishment to the debtor's business, (d/b/a) Rene Auto Air, concerning years 2010, and 2016 tax liability, after Treasury was given notice of the petition filing and theautomatic stay provisions of 11 U.S.C. §362(a), a willful violation of the...