In re Llanos

578 B.R. 700

IN RE: Fernando LOPEZ LLANOS, Debtor

CASE NO. 16–07981 (ESL)

United States Bankruptcy Court, D. Puerto Rico.

Signed December 14, 2017

Anibal Medina Rios, Anibal Medina Rios Law Office, C–23 Calle Marginal URB Santa Cruz, Bayamon, PR, for Debtor.

Osmarie Navarro Martinez Alejandro Oliveras San Juan, PR, Pedro Rafael Medina Hernandez, Miriam D Salwen Acosta, Alejandro Oliveras Rivera, Alejandro Oliveras Chapter 13 Trustee, for Trustee.

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, U.S. Bankruptcy Judge

This case is before the court upon the Motion to Dismiss for Cause Under Section 1307(c) of the Bankruptcy Code with a two (2) year bar to refile (the "Motion to Dismiss ", Docket No. 50) filed by Toyota Motor Corporation and Toyota Motor Sales, U.S.A., Inc. (collectively, "Toyota") alleging bad faith and concealment of assets. Also before the court is the Request for Dismissal Pursuant to 11 U.S.C. § 1307(c)(1) and joining Toyota's request for a two (2) year bar to refile (Docket No. 52) filed by the Puerto Rico Housing Finance Authority ("PR Housing") alleging unreasonable delay in presenting a complete, organized and confirmable plan that is prejudicial to creditors. The Court held a hearing on December 5, 2017 to consider, inter alia , the Motions to Dismiss filed by Toyota and PR Housing. After considering the parties' arguments, for the reasons stated below, the Motions to Dismiss filed by Toyota and PR Housing are hereby granted with a two (2) year bar to re-file.

Procedural and Factual Background

On February 5, 2008, the Debtor filed a Chapter 13 bankruptcy petition in Case No. 08–00659 (the "First Petition"). On December 23, 2008, the First Petition was dismissed for failure to make the payments under the plan. See Case No. 08–00659 Docket Nos. 23 and 25.

On June 29, 2009, the Debtor filed a second Chapter 13 bankruptcy petition (the "Second Petition", Case No. 09–05245 Docket No. 1). On November 17, 2009, the Second Petition was dismissed for failure to make payments under the plan. See Case No. 09–05245 Docket Nos. 23, 24 and 28.

On January 30, 2013, the Debtor filed a Complaint against Toyota with the U.S. District Court for the District of Puerto Rico. See Civ. Case No. 13–01067–DRD Docket No. 1. This case was subsequently transferred to the U.S. District Court for the Central District of California (Southern Division—Santa Ana) by the Judicial Panel on Multidistrict Litigation, Civ. Case No. 13–00916–JVS (C.D. Cal.) (the "Civil Case"). See Docket No. 143–1.

On or about July 13, 2016, the Debtor and Toyota reached a Confidential Settlement Agreement (the "Settlement Agreement") pursuant to which on or about September 7, 2016, Toyota paid certain settlement funds to the Debtor by check (the "Settlement Proceeds"). See Docket No. 143–2, pp. 1–2. Pursuant to the Settlement Agreement, the Debtor also agreed to deliver clear title of a Toyota vehicle (the "Vehicle") to Toyota's counsel within 10 days from the execution of such document to facilitate its destruction. See Docket No. 143–2, p. 2.

On September 16, 2016, the U.S. District Court for the Central District of California entered an Order granting the stipulation between the Debtor and Toyota and dismissed the Civil Case. See Docket No. 143–3. The Court in the Civil Case retained jurisdiction for 90 days to enforce the Settlement Agreement. Id. at 2.

The Debtor defaulted the Settlement Agreement and did not deliver the Vehicle and clear title within the deadline approved by the Court in the Civil Case. See Docket No. 143–2.

On October 4, 2016 (the "Bankruptcy Petition Date"), that is, twenty-seven (27) days after receiving the Settlement Proceeds, the Debtor filed the instant bankruptcy case. Compare Docket No. 1 with Docket No. 143–2, p. 2.

On December 19, 2016, Toyota filed a Motion to Enforce the Settlement Agreement in the Civil Case (Civil Case Docket No. 54). On January 9, 2017, the Debtor filed a Short Reply Motion in that Civil Case alleging, inter alia , that: (a) Oriental Bank is the account holder of the Debtor's lease and therefore he could not transfer the Vehicle; (b) Toyota was aware that he could not transfer the title of the Vehicle; (c) the Settlement Agreement cannot be enforced; (d) this is a "matter of bad faith litigation"; and (e) the responsibility for the payment of keeping the Vehicle in the depository is Toyota's and not the Debtor's. See Docket No. 143–4. The Debtor stated in the Civil Case that he placed the Vehicle in a "depositary". See Docket No. 143–4, pp. 1–2, ¶¶ 2, 3.

On January 17, 2017, the U.S. District Court for the Central District of California entered an Order in the Civil Case instructing the Debtor to deliver the Vehicle within 15 days and all documents necessary to evidence transfer of clear title to Toyota. See Docket No. 143–2, p. 3. The Court in the Civil Case cautioned the Debtor that if he failed to comply, he may be subject to sanctions, including being held in contempt of court. Id. The 15–day period expired on February 1, 2017. Id. The U.S. District Court for the Central District of California specifically ruled as follows:

[g]iven that the [V]ehicle was the key piece of evidence in the case, it was Lopez–Llanos' obligation-not Toyota's—to preserve the vehicle. Any contention that Toyota previously agreed to pay storage costs is superseded by Section 19 of the Settlement Agreement ("Settlement Agreement supersedes all prior agreement or understanding, whether written or oral."). Toyota has no obligation under the Settlement Agreement to pay storage costs.

See Civil Minutes entered in the Civil Case, Docket No. 143–3, pp. 2–3.

The Debtor did not disclose the instant bankruptcy petition to the U.S. District Court for the Central District of California in the Civil Case.

On October 5, 2016, the Court issued a Notice of Chapter 7 and 13 Case Review and Possible Dismissal for failure to submit schedules, the statement of financial affairs and chapter 13 statement of current monthly income and means test calculation. See Docket No. 6.

On October 18, 2016, the Debtor filed the corresponding Schedules describing his income, expenses, properties and debts (Docket No. 9). Schedules D and E/F did not include Toyota as a secured or unsecured creditor or as a party in interest in this case. See Schedule D , Docket No. 9, pp. 12–15; Schedule E/F , Docket No. 9, pp. 19–26. Schedule D did not include PR Housing as a secured creditor even though it is the holder of a mortgage lien—duly registered with the Puerto Rico Property Registry—over the Debtor's residential property listed in Schedule A. See Schedule D , Docket No. 9, pp. 12–15.

The Debtor disclosed two vehicles: a 2015 KIA Forte and a 2001 Suzuki Baleno. See Schedule A/B , Docket No. 9, p. 4. The Debtor did not disclose the Toyota Vehicle, which is the object of the Civil Case. See id. The Debtor did not include any information related to the alleged storage or the balance thereof in the schedules he filed in the instant case. See Schedule D and Schedule E/F , Docket No. 9, pp. 12–14; pp. 19–26, respectively. The Debtor did not list any creditor as having a lien over the Vehicle, nor did he include Oriental Bank as a creditor in the schedules or the creditors' matrix list. See Schedule D and Schedule E/F , Docket No. 9, pp. 12–14, 19–26, respectively. The Debtor did not disclose having an executory contract with any party related to the Vehicle or a lease thereof. See Schedule G , Docket No. 9, p. 27. The Debtor did not disclose having any executory agreement with a depositary for storage of the Vehicle in the Schedules. See Schedule G , Docket No. 9, p. 27.

On October 18, 2016, the Debtor filed his Statement of Financial Affairs (Docket No. 8). The Debtor did not include reference to the Toyota Vehicle, the Civil Case, the Settlement Agreement and/or the Settlement Proceeds he received therefrom less than a month prior to filing the instant case. Specifically, question 5 of the Statement of Financial Affairs requires the Debtor to disclose information of any income received during the two years prior to the bankruptcy filing date, and question no. 9 requires the Debtor to disclose information of any lawsuit in which the Debtor was a party one year prior to the bankruptcy filing. See Docket No. 8, pp. 2–3.

The § 341 meeting of creditors was scheduled for November 15, 2016 (the "§ 341 Meeting"). Both the Debtor and his attorney were present at the § 341 Meeting; oath was taken to the Debtor, but the meeting was not held because of lack of information and documents including evidence of income the six (6) months prior to filing. See Minutes of 341 Meeting , Docket No. 15. Neither the Debtor nor his attorney mentioned the Vehicle, the Civil Case, the Settlement Agreement and/or the funds received in the Civil Case. See Docket No. 15. The Chapter 13 Trustee (the "Trustee") continued the § 341 meeting of creditors for December 29, 2016 at 10:30 am (the "Second § 341 Meeting", Docket No. 15).

On December 28, 2016, the Debtor filed an Amended Chapter 13 Payment Plan (the "Amended Plan ", Docket No. 25). The Debtor did not provide any treatment for Toyota or for PR Housing as secured creditors. Id.

The Second § 341 Meeting was not held as the Debtor did not attend due to medical reasons. The Debtor's attorney was present but did not mention the Vehicle, the Civil Case, the Settlement Agreement and/or the funds received in the Civil Case. The Chapter 13 Trustee continued the Second § 341 Meeting for January 25, 2017 at 1:00 pm (the "Third § 341 Meeting", Docket No. 26).

On January 25, 2017, the Trustee held and closed the Third § 341 Meeting. The Chapter 13 Trustee stated that "Debtor received funds from a stipulation reached in a claim to Toyota few months prior filing. Debtor has to disclose it in SOFA and provide copy of stipulation. Also, to inform the use of said funds." Minutes , Docket No. 31, p. 3, ¶ 8. The Amended Plan dated December 28, 2016 was not recommended for...