Scotiabank Puerto Rico v. Figueroa Martinez

2016 | Cited 0 times | D. Puerto Rico | September 29, 2016




CIVIL NO. 15-2161 (JAG)

OPINION & ORDER GARCIA-GREGORY, D.J. Before the Court stands Appellant ( or appeal from the bankruptcy co Order - petition payment of interest and other costs, as well as the denial of for Reconsideration. Scotiabank filed a brief in support of its position. Docket No. 8. Appellee

For the reasons set forth, the Court AFFIRMS the bankruptcy co

BACKGROUND 1 This bankruptcy case was commenced by Debtor on August 23, 2013. On March 24, 2014 Debtor filed a Proposed Plan of Reorganization with a corresponding Disclosure Statement. The Proposed Plan included two mortgages owed to Scotiabank on properties owned by Debtor, 1 This background is derived from ich is filed at Docket No. 10, and includes its ten attachments.

namely the Caparra property and the Metropolis property approved on June 24, 2014. On August 29, 2014, the bankruptcy court held a hearing on the

nfirmation, Scotiabank filed a motion requesting payment of post-petition interest and other costs. ear as to the legal basis under which it was requesting these payments. seemingly

indicating that it was seeking administrative expenses under 11 U.S.C. § 503. However, at the end of the motion, The bankruptcy co s motion . Scotiabank filed a Motion for Reconsideration, in which, inter alia, it argued that its original request should have been considered under § 506(b). On August 3, 2016, the bankruptcy court .

STANDARD OF REVIEW The Court has jurisdiction to hear appeals from bankruptcy court orders and decrees. 28 U.S.C. § 158 (a)(1). On appeal, the Court must review de novo review standard to the lower

legal conclusions. See Palmacci v. Umpiérrez, 121 F.3d 781, 785 (1st Cir. 1997).

law or an abuse of discretion, the bankruptcy court ruling Picciotto v. Salem Suede, Inc. (In re Salem Suede, Inc.), 268 F.3d 42, 44 (1st Cir. 2001). An abuse of discretion can occur when the bankruptcy co eserves

significant weight, [relies] on an improper factor, or, even if it [considers] only the proper mix of factors, by making Id.

ANALYSIS In its appeal, Scotiabank asks this Court to vacate the Order and the Reconsideration Order for essentially the same arguments it pursued in its Motion for Reconsideration. First, Scotiabank argues that the bankruptcy co request for payment of interest and other costs. Second, Scotiabank argues that the bankruptcy

court committed clear error in finding that Scotiabank failed to establish that there was equity in Scot . The Court holds makes no effort to substantiate its contention. The Court also holds that the bankruptcy court

did not commit error, much less clear error, in finding that Scotiabank failed to prove its claims were over-secured.

A. The Bankruptcy Co

Interest and Other Costs Scotiabank first argues that the bankruptcy court erred in applying the law in denying quest for payment of interest and other costs under 11 U.S.C. § 506(b). Docket No. 8 at 6-9. The Court holds that Scotiabank has waived this argument, as it has made no attempt to adequately support it. ssues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived. United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) It is not enough merely to mention a possible argument in the most skeletal way, leaving the court to do counsel's work, create the ossature for the argument, and put flesh on its bones. Id. , a litigant has an

obligation to spell out its arguments squarely and distinctly, Rivera-Gomez v. de Castro, 843 F.2d 631, 635 (1st Cir. 1988) (internal quotation marks omitted).

on this point consists of: 1) a block quote reciting the language of 11 U.S.C. § 506(b), (c); 2) a general statement inviting the Court to read cases that presumably bankruptcy court as [11 U.S.C. § 503] is not applicable and

generic request for de novo review of the bankruptcy co Docket No. 8 at 6-9.

The Court is at a loss in understanding or where to begin to evaluate it. The Court gathers that Scotiabank contends that the bankruptcy court However, Scotiabank makes no attempt to analyze the contents of either of these statutes or to

explain to the Court their applicability or non- Neither does Scotiabank provide any scintilla of support, through reasoned argumentation or citation, for its contention. Scotiabank also declines to provide specific citations to the record to substantiate its characterization of the bankruptcy co 2

Moreover, even if this Court were to agree with Scotiabank that the bankruptcy court applied the wrong statute, Scotiabank again provides zero guidance as to how this would lead to a different result as to its request for interests and other costs.

In essence, the Court is left to guess why Scotiabank contends the bankruptcy court applied the wrong statute, and to blindly search the record and the relevant jurisprudence for 2 A cursory review of the record seems to indicate that the bankruptcy court did in fact extensively Reconsideration Order. See Docket No. 10-10 at 432-439.

any support for Scotiaban . Given Scotiabank's lack of substance or reasoned argumentation on this point, argument would be helplessly futile. Rivera-Gomez, 843 F.2d at 635 court to do counsel's

work, create the ossature for the argum Zannino, 895 F.2d at 17. in this section is waived.

B. The Bankruptcy Co Finding that Scotiabank Failed to Prove Equity in the Collateral

Scotiabank further argues that the bankruptcy court committed clear error in finding that Scotiabank failed to establish that there was equity at 9-12. The Court disagrees. 3

Under § 506(b), a creditor whose claim is over-secured also known as having equity in the collateral is entitled to post-petition interest. A creditor seeking post-petition interest has the burden of proving by a preponderance of the evidence that the claim is over-secured. See In re SW Boston Hotel Venture, LLC, 748 F.3d 393, 408 (1st Cir. 2014). Thus, in this case, the burden was on Scotiabank to prove its claims were over-secured.

In addition, both parties agree that this is a factual issue and thus this Court reviews under a clearly erroneous standard. In re Watson, 309 B.R. 652, 658 (B.A.P. 1st Cir. 2004), aff'd, 403 F.3d 1 (1st Cir. 2005) finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm 3 The Court believes that this argument is also waived, as once again Scotiabank puts forth no legal support for its argument, and relies on vague generalities to ask this Court to reverse the bankruptcy co rather than providing specific citations to evidence in the record, Scotiabank makes the grand assertion that [b]ased on the totality of the record and the Appendix which is extensive this Court can determine that there never was an issue as to the valuation of the collateral and to the fact there was equity." Docket No. 8 at 10. Scotiabank once again asks this Court to embark is See Zannino, 895 F.2d at 17. However, in an abundance of caution, and because Scotiabank does allude to one piece of evidence to support its contention D s Disclosure Statement the Court proceeds to consider the merits of this argument.

conviction that a mistake has been committed. In re Watson, 309 B.R. 652, 658 (B.A.P. 1st Cir. 2004), affd, 403 F.3d 1 (1st Cir. 2005).

This Court cannot determine that the bankruptcy court committed error, much less clear error, in finding that Scotiabank had failed to prove it was over-secured. The only evidence that Scotiabank points to in the record to support its contention is the Doriginal Disclosure S s claims were over-secured. See Docket No. 10-3 at 70. In particular, it shows that the Metropolis property was valued at $162,000 with an estimated debt of $148,854.24, and the Caparra Property was valued at $125,000 with an estimated debt of $65,178.75. Id.

However, as the bankruptcy court correctly concluded, see Docket No. 10-10 at 436-38, -secured. As the lower court stated:

Nevertheless, First Circuit precedent and the statute require that values need to be substantiated by evidence. SW Boston Hotel, 748 F. 3d at 409 (finding that bankruptcy court was correct in not relying on schedules because they were based on book values that were not substantiated by evidence); see also 11 U.S.C §506(a). In this case, the record is unclear as to whether those values were estimates or an accurate market value, and Scotiabank has not presented the necessary evidence to substantiate that those values are an accurate market value of the asset. Therefore, the property valuations in the schedules are not binding for purposes of section 506(b). SW Boston Hotel, 748 F.3d at 411. Docket No. 10-10 at 437. Scotiabank provides no reasons for this Court to question the above analysis, and upon review, the Court agrees with this analysis.

Moreover, the timing and purpose s disclosure statement gives further support to the fact that Scotiabank could not rely solely on the disclosure statement to prove it had equity. a valuation made for one purpose at one point in a bankruptcy proceeding has no binding effect on valuations performed for other purposes at

other points in the proceeding. SW Boston Hotel, 748 F.3d at 411. The assets and liabilities contained in D s Disclosure Statement were calculated at the time of the petition date, which is August 23, 2013. Docket No. 10-3 at 69-70. -petition interest was filed on September 15, 2014, Docket No. 10-8 at 295-98, and a hearing was held on April 17, 2015, Docket No. 10-9 at 359. It is likely that the value of the properties would have changed from August 23, 2013 to April 17, 2015. Thus, the valuations in Debtor Disclosure Statement had no binding effect in determining Motion for post-petition interest nearly two years later.

Thus, after review, the Court does not find that the bankruptcy court committed clear error in finding that Scotiabank failed to establish that there was equity collateral.

CONCLUSION In light of the foregoing, the Court hereby AFFIRMS the bankruptcy co

IT IS SO ORDERED. In San Juan, Puerto Rico, this 28th day of September, 2016.

S/ Jay A. Garcia-Gregory JAY A. GARCIA-GREGORY United States District Judge

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