In re Alonso

546 B.R. 1

In re: Raquel Noemi Figueroa Alonso, Debtor

CASE NO. 09–06996 (ESL)

United States Bankruptcy Court, D. Puerto Rico.

Signed February 17, 2016

Filed February 18, 2016

Juan Manuel Suarez Cobo, Legal Partners PSC, San Juan, PR, for Debtor.

OPINION AND ORDER

Enrique S. Lamoutte, United States Bankruptcy Judge

This case is before the court upon the Amended Motion Requesting Sanctions(Docket No. 66) filed by the Debtor. The Debtor seeks sanctions against Banco Popular de Puerto Rico (hereinafter referred to as "BPPR") and/or its attorneys for the filing of an amendment to BPPR's claim three months before plan completion. The Debtor alleges that the filing of the amended claim propelled the Debtor into unreasonable and vexatious litigation about an issue that was not warranted by existing law pursuant to Fed. R. Bankr. P. 9011(b)(2). Consequently, Debtor requests monetary sanctions pursuant to Fed. R. Bankr. P. 9011(c)(2) in the form of payment of the attorney's fees and costs incurred in prosecuting its objection to BPPR's amended proof of claim. The attorney's fees and costs amount to $6,052.17 as per the attached itemized detail. BPPR filed its Response to "Amended Motion for Sanctions" (Docket No. 73). For the reasons stated herein, the request for sanctions is hereby granted in part and denied in part.

Procedural Background

The Debtor filed a bankruptcy petition under Chapter 13 of the Bankruptcy Code on August 25, 2009. On that same date, the Debtor filed her Chapter 13 Plan of Reorganization (Docket No. 4). On October 22, 2009, BPPR filed proof of claim # 8–1 in the amount of $81,321.93 of which $3,763.84 was disclosed as pre-petition arrearages. On October 29, 2009, the Debtor filed her Amended Plan and Notice of Opportunity to Object and for a Hearing (Docket No. 23). On November 18, 2009, the Court entered an Order confirming the Debtor's Chapter 13 plan dated October 29, 2009 (Docket No. 27).

Subsequently, on May 23, 2014, fifty-five (55) months after filing its original claim, BPPR filed amended secured claim # 8–2 in the amount of $83,209.53 of which $13,298.34 was allocated to pre-petition arrearages. On May 28, 2014, BPPR filed an Informative Motion informing that it had amended its claim which requires payments in the amount of $13,298.34 and thus, it appears that the plan is insufficiently funded (Docket No. 32).

On June 24, 2014, the Debtor filed a Motion Requesting Entry of Order (Docket No. 34) informing the court that on June 20, 2014, the Debtor, through counsel, sent BPPR's legal representation a safe harbor letter under Fed. R. Bankr. P. 9011 regarding its amended claim to which no response had been received to date. In addition, the Debtor also requested an extension of time to file an objection to BPPR's amended claim. On June 25, 2014, the court granted the Debtor's request for an extension of time to file her objection to BPPR's amended claim (Docket No. 35).

On July 24, 2014, the Debtor filed her Objection to Claim number (8–1) by Creditor Banco Popular de Puerto Rico and/or request for entry of Order for the Trustee to Perform a Recovery of Disbursed Funds (the "Objection to Claim ", Docket No. 38). In the Objection to Claim the Debtor argued, among other things, that the amendment to proof of claim # 8 constituted a collateral attack on the confirmed plan which pursuant to 11 U.S.C. § 1327 had become res judicata amongst the parties to the claim and the bankruptcy estate. Moreover, the Debtor stated that in the case of In re Ayala Pagán, case no. 09–07451(EAG) the court reasoned that a confirmed plan has res judicata effect pursuant to section 1327 and that a post-confirmation amendment to a proof of claim to include charges not included in the confirmed plan was a collateral attack of the plan's confirmation. Finally, the Debtor also appealed to the equitable powers of the court and declared that "[h]ad BPPR originally filed Proof of Claim # 8 for $13,298.34, the amount it now claims is the correct amount of pre-petition arrears, the plan would have been sufficient to cover the pre-petition arrears now claimed" and that "BPPR's lack of diligence places Debtor in an untenable situation and could probably force her to file a second bankruptcy case or have her residential property foreclosed, slashing her hopes for a fresh start after dutifully complying with the terms of the confirmed Chapter 13 Plan" (Docket No. 38).

On September 19, 2014, BPPR filed its Response to "Objection to Claim Number (8–1) by Creditor Banco Popular de Puerto Rico and/or Request for Entry of Order for the Trustee to Perform a Recovery of Disbursed Funds" (the "Response to Debtor's Objection to Claim ", Docket No. 47) by which it argued that: (i) the Debtor cannot modify the rights of secured claims secured by debtor's principal residence pursuant to 11 U.S.C. § 1322(b)(2) ; (ii) BPPR's case is distinguishable from In re Ayala Pagán, case no. 09–07451(EAG) because in In re Ayala Pagán the plan confirmed was a pay in full through the plan and in BPPR's case the confirmed plan proposed to cure arrears and maintain current payments; (iii) In re Jimenez Galindez is distinguishable because in the instant case the Debtor was aware of BPPR's mistake, given that the Debtor had proposed to pay $16,000 in pre-petition arrears; (iv) the totality of circumstances indicated that the plan confirmed was not filed in good faith pursuant to 11 U.S.C. § 1325(a)(3) because the same was filed to take advantage of BPPR's mistake; and (v) the established precedent in the First Circuit is that amendments to proof of claims timely filed are freely allowed to particularize the amount due under a previously asserted right to payment or simply to cure technical defects in the original claim. See In re Hemingway Transp., 954 F.2d 1, 10 (1st Cir.1992) ; In re Crane Rental Co., 341 B.R. 118 (Bankr.D.Mass.2006) (Docket No. 47).

On December 9, 2014, the Debtor filed her Reply to Banco Popular de Puerto Rico's Response to Objection to Claim # 8–1 as a supplement to her original argument due to recent case law developments in In re Jimenez Galindez, 514 B.R. 79 (Bankr.D.P.R.2014) and In re Ruiz Martinez, 513 B.R. 779 (Bankr.D.P.R.2014) arguing that the facts of the case before the court were "virtually undistinguishable" from the facts that generated the opinion and orders in of In re Jimenez Galindez and In re Ruiz Martinez. The Debtor also moved the court for the imposition of costs and attorney's fees to BPPR pursuant to Fed. R. Civ. P. 11 and 68 for Debtor's prosecution of the matter (Docket No. 53).

On January 15, 2015, this court rendered its Opinion and Order (Docket No. 54) granting Debtor's objection to BPPR's amended claim and thus disallowing BPPR's amended claim # 8–2. In the Opinion and Order, the court began its analysis by stating that:

"[t]he core issue before the court is an objection to an amended proof of claim filed three (3) months before Debtor's completion of payments under a confirmed plan and which asserts additional pre-petition arrears owed. However, before addressing the objection to the amended proof of claim this court must determine whether the Debtor is precluded by 11 U.S.C. § 1322(b)(2) from providing BPPR with the treatment it received under the Debtor's plan. The secured creditor argues that pursuant to 11 U.S.C. § 1322(b)(2) the Debtor cannot modify the rights of holders of secured claims which are secured by debtor's principal residence and thus BPPR should be allowed to amend its claim" (Docket No. 54, pgs. 7–8); In re Figuer oa Alonso, 525 B.R. 195, 200 (Bankr.D.P.R.2015).

After a thorough analysis of whether the Debtor is precluded by 11 U.S.C. § 1322(b)(2) from providing BPPR with the treatment it received under the Debtor's plan, the court held that:

"the Debtor's plan did not violate section 1322(b)(2) or (b)(5) since the Debtor paid the secured creditor pursuant to the arrearage amount it disclosed in its original proof of claim and amended her plan to pay the pre-petition arrears in conformity with the secured creditor's original proof of claim. There were no discrepancies between the amended confirmed plan and the timely filed original proof of claim. In this case the Debtor paid the amount of pre-petition arrears that she was required to pay under the original proof of claim and the amended confirmed plan. The Debtor did not modify the rights of the secured creditor by lowering the monthly payments, changing the interest rate, or extending the maturity date of the mortgage note. Therefore this court concludes that the Debtor is not precluded by 11 U.S.C. § 1322(b)(2) from providing BPPR with the treatment it received under the Debtor's plan" (Docket No. 54, pg. 11); In re Figueroa Alonso, 525 B.R. at 202.

In In re Figueroa Alonso, the court differentiated the controversy in the instant case from the issue in In re Jimenez Galindez by clarifying that:

"In In re Jimenez Galindez, the secured creditor filed an amended proof of claim five (5) months before completion of payments under the debtors' plan. This amended claim was deemed allowed because it was not objected by any party, thus the court had to delve into the core issue of whether an allowed amended claim pursuant to section 502 trumps the binding effect of a confirmed plan, in that case a post confirmation modified plan pursuant to sections 1327(a) and 1329(b)(2). The issue in the instant case is whether an amended proof of claim filed three (3) months before completion of plan payments which asserts additional pre-petition arrears owed should be allowed pursuant to the two-prong test established in In re Hemingway Transp., 954 F.2d 1 (1st Cir.1992). The same is before the court upon the Debtor's objection to BPPR's amended proof of claim" (Docket No. 54, pg. 14); In re Figueroa Alonso, 525 B.R. at 204.

The court employed the two-prong test established in In re Hemingway Transp., 954 F.2d 1 (1st Cir.1992) to determine whether BPPR's amended proof of...