Concepción v. Banco Popular de P.R.

MARGARITA BRUNO CONCEPCIÓN Appellant, v. BANCO POPULAR DE PUERTO RICO, et al. Appellee.

Civil No. 20-1720 (PAD)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

June 17, 2021

REPORT AND RECOMMENDATION

This matter is before the Court on appeal of an order of the United States Bankruptcy Court dismissing debtor Margarita Bruno Concepción's ("Appellant") bankruptcy petition under Chapter 13 of the United States Bankruptcy Code. Appellant's brief was filed on March 19, 2021. Docket No. 5. Banco Popular de Puerto Rico's ("BPPR") brief was filed on March 29, 2021. Docket No. 6. On April 19, 2021, the matter was referred to the undersigned for a Report and Recommendation. Docket No. 7. For the reasons discussed below, the undersigned recommends that the United States Bankruptcy Court's dismissal of Appellant's Chapter 13 petition and its denial of Appellant's motion under Rule 9023 of the Federal Rules of Bankruptcy Procedure be AFFIRMED.

I. Background

On November 1, 2019, Appellant filed a voluntary petition under Chapter 13 of the Bankruptcy Code. Case No. 19-6453 (ESL) at Docket No. 1. On that same day, Appellant filed its proposed Chapter 13 plan. Id. at Docket No. 2. The plan proposed a base of $3,294.00 with 60 monthly installments of $54.90. Id. On April 27, 2020, the Chapter 13 trustee filed an unfavorable report on confirmation of the plan. Id. at Docket No. 27. The reasons provided by the Chapter 13 trustee for the unfavorable recommendation were that the plan was not feasible, was insufficiently funded, failed the disposable income test, failed the liquidation value test, did not provide for the payment of the secured creditor's claim, and the debtor had failed to disclose information. Id.

On June 3, 2020, the Chapter 13 trustee filed a motion to dismiss the bankruptcy petition under 11 U.S.C. § 1307 and 11 U.S.C. § 521 and/or 11 U.S.C. § 1325. Id. at Docket No. 31. As required by the Bankruptcy Court for the District of Puerto Rico's Local Rule 9013-1(c)(2), the motion included a notice which advised Appellant of her right to object to the dismissal within thirty (30) days (plus three (3) additional days provided for in Fed.Bank.P. 9006(f)) and warned Appellant that failure to file a timely objection could result in the motion deemed unopposed and granted unless: "(i) the requested relief is forbidden by law; (ii) the requested relief is against public policy; or (iii) in the opinion of the court, the interest of justice requires otherwise." Id. Appellant did not file an opposition to the motion to dismiss.

On July 13, 2020, the Bankruptcy Court deemed the Chapter 13 trustee's motion to dismiss unopposed and issued an order dismissing Appellant's bankruptcy petition "for the reasons stated in the motion to dismiss". Id. at Docket No. 34. Appellant filed a Motion for Reconsideration of Dismissal and For Conversion to Chapter 11 on July 23, 2020 at Docket No. 36, a corrected version on July 31, 2020 at Docket No. 39, and a second corrected version on August 7, 2020 at Docket No. 42. Id. Appellant argued that, for technical reasons, counsel for Appellant, albeit receiving an email with the notice of filing of the motion to dismiss, had failed to find the motion in his inbox in order to object in a timely manner. Appellant also argued that she had been unable to cure arrears due to inability to work as a result of the COVID-19 pandemic, that the case should be convertedto one under Chapter 11, and that, even though, admittedly, the viability of the plan depended on the outcome of an adversary proceeding against BPPR, as a matter of equity, the order dismissing Appellant's bankruptcy petition should be set aside. Id. at Docket Nos. 36, 39 and 42. Other than the matter of the arrears, Appellant did not address any of the reasons for dismissal included by the Chapter 13 trustee in the motion to dismiss. Appellant also filed a motion to convert the case to Chapter 11. Id. at Docket No. 43.

On August 12, 2020, BPPR filed an opposition to Appellant's motion for reconsideration and request for conversion to Chapter 11, which was supplemented on August 25, 2020. Id. at Docket Nos. 44 and 46. Appellant replied on August 27, 2020. Id. at Docket No. 48. Appellant then supplemented her request for reconsideration by submitting evidence that she had authorized automatic deductions from her bank account for the monthly payments under the plan. Id. at Docket No. 50. On November 20, 2020, the Bankruptcy Court denied Appellant's motion for reconsideration "for the reasons stated in the opposition filed by Banco Popular de Puerto Rico (docket #44), which this court adopts." Id. at Docket No. 55. This appeal followed.

On appeal, Appellant argues that the Bankruptcy Court erred by issuing an order dismissing her bankruptcy petition without making findings of fact and conclusions of law. This, the Appellant argues, violated her right to due process. Appellant also argues that the Bankruptcy Court erred by dismissing her bankruptcy petition for failure to make the monthly payments when Appellant had authorized the automatic debit of the monthly payments under the plan. This Report and Recommendation addresses Appellant's arguments in this same order.

II. Discussion

A. Jurisdiction of the United States District Court for the District of Puerto Rico

Pursuant to 28 U.S.C. § 158(a)(1), the United States District Court has jurisdiction to hear appeals from final judgments, orders or decrees issued by a United States Bankruptcy Court. Under Rule 9023 of the Federal Rules of Bankruptcy Procedure, a motion for a new trial or to alter or amend judgment must be filed within fourteen (14) days of the entry of judgment. Fed.Bank.P. 9023. Motions under this rule are treated as motions to alter or amend judgment under Rule 59(e) of the Federal Rules of Civil Procedure. See Surita Acosta v. Reparto Saman Inc. (In re Surita Acosta), 497 B.R. 25, 31 (Bankr. D.P.R. 2013). Under Rule 8002(b) of the Federal Rules of Bankruptcy Procedure, a party who has filed a motion to alter or amend a judgment under Rule 9023 of the Federal Rules of Bankruptcy Procedure has fourteen (14) days from the entry of the order disposing of such a motion to file its notice of appeal. Fed.Bank.P. 8002(b).

The Bankruptcy Court issued its order dismissing Appellant's case on July 13, 2020. Case No. 19-6453 at Docket No. 34. Appellant filed its first motion for reconsideration on July 23, 2020. Id. at Docket No. 36. Appellant's motion for reconsideration was denied on November 20, 2020. Id. at Docket No. 55. Appellant filed her notice of appeal on December 3, 2020. Id. at Docket No. 57. The Court has jurisdiction to entertain the instant appeal.

B. Standard of Review

Findings of fact made by bankruptcy courts are reviewed for clear error whereas conclusions of law are reviewed de novo. See In re Fuentes-Padilla, 534 B.R. 77, 79 (Bankr. D.P.R. 2015) (citing In re Soto, 491 B.R. 307, 311 (B.A.P. 1^st Cir. 2013)). Where the issue on appeal is one of statutory interpretation, a review de novo is warranted. See Wiscovitch-Rentas v. Plastic Piping Prod. of Puerto Rico, Inc., 2009 WL 393639 at *1 (Bankr. D.P.R. 2009) (citing In re SanMiguel Sandoval, 327 B.R. 493, 506 (B.A.P. 1^st Cir. 2005)). When the decision of the Bankruptcy Court is discretionary, the appellate court applies an abuse of discretion standard of review. Id. (quoting 9E Am. Jur.2d Bankruptcy § 3512 (2004)). "Abuse occurs when a material factor deserving significant weight is ignored, when an improper factor is relied upon, or when all proper and no improper factors are assessed, but the court makes a serious mistake in weighing them." In re Fuentes-Padilla, 534 B.R. at 79 (citing Perry v. Warner (In re Warner), 247 B.R. 24, 25 (B.A.P. 1^st Cir. 2000)).

C. Issues on Appeal

1. Absence of Findings of Facts and Conclusions of Law in the Bankruptcy Court's Orders Dismissing the Chapter 13 Bankruptcy Petition and Denying Reconsideration.

The motion to dismiss filed by the Chapter 13 trustee in this case was premised on the following grounds: (1) debtor had four (4) months in arrears with the trustee, (2) debtor was not disclosing any payment for mortgage, (3) lack of disclosure of income from September and October 2019, (4) need to review duplicate information, (5) the disclosed gross income was incorrect, (6) value of the real property was not disclosed, (7) property and value of interest in an inheritance was not disclosed, (8) value of CRIM reimbursement and of claim against BPPR was not disclosed, (9) pending adversary proceeding against BPPR, (10) pending proof of claim filed by BPPR on account of pre-petition mortgage arrears of approximately $41,000.00, which could affect feasibility of the plan, (11) failure to disclose complete number of previous bankruptcy petition, (12) no creditors disclosed in certain portions of the plan, (13) incomplete information as to attorney fees, (14) incomplete information as to lease payments, and (15) disclosure of possession of clothing and furniture belonging to others. Case No. 19-6453 (ESL) at Docket No. 31. Despite having reasonable notice and opportunity for hearing, Appellant did not oppose. TheBankruptcy Court issued an order deeming the motion unopposed and dismissing the case incorporating by reference the reasons set forth by the Chapter 13 trustee in his motion. Id. at Docket No. 34.

Appellant's first argument on appeal is that the Bankruptcy Court's failure to make separate findings of fact and conclusions of law in its orders dismissing Appellant's bankruptcy petition and denying reconsideration is contrary to Rule 7052 of the Federal Rules of Bankruptcy Procedure and runs afoul her due process rights. The Court disagrees. In short, while the requirement of Rule 52(a)(1) of the Federal Rules of Civil Procedure for courts to issue findings of facts and conclusions of law applies to contested matters in bankruptcy and motions to dismiss are considered...