Asociacion de Empleados del Estado Libre Asociado v. Angel Ruben Mojica NievesAsociacion de Empleados del Estado Libre Asociado v. Angel Ruben Mojica Nieves
Javier Villariño, Esq., Carol J. Tirado López, Esq., and Rosario Vidal Arbona, Esq., on brief for Appellant.
Jesus E. Batista Sánchez, Esq., on brief for Appellees.
Asociación de Empleados del Estado Libre Asociado de Puerto Rico (“AEELA“) appeals from: (1) the July 2020 order denying its motion to dismiss the chapter 13 case of the debtors, Angel Ruben Mojica Nieves (“Mr. Mojica“) and Karen Melissa Navarro Pastor (“Ms. Navarro” and collectively with Mr. Mojica, the “Debtors“); (2) the October 2021 order denying its second motion for relief from the automatic stay; and (3) the October 2021 order confirming the Debtors’ plan of reorganization.
At the center of this dispute is approximately $6,000 that Ms. Navarro maintained in an account with AEELA. Through protracted litigation, which included a motion to dismiss, repeated motions for relief from stay, multiple objections to confirmation, and serial motions for reconsideration, AEELA has sought to set off this amount, consisting of savings and dividends, to satisfy the balance of outstanding loans taken by Ms. Navarro and has asserted a statutory lien with respect to these savings and dividends. The bankruptcy court rejected AEELA‘s arguments at every turn, consistently reasoning that the Debtors were not in default as of the petition date and that their chapter 13 plan proposed to preserve AEELA‘s lien and satisfy the Debtors’ contractual obligations to AEELA in accordance with the terms of AEELA‘s loan.
For the reasons set forth below, we AFFIRM the order denying the motion to dismiss and the order confirming the Debtors’ chapter 13 plan of reorganization.
BACKGROUND1
I. The Parties
AEELA “is a ‘non-profit savings and loan association’ established by Puerto Rico Law No. 133 of June 28, 1966.”2 In re Velez Fonseca, 542 B.R. at 630 (citations omitted). In English, AEELA is known as the “Commonwealth of Puerto Rico Government Employees Association,” and one of its purposes is to make loans to Puerto Rico government employees. In re Velez Fonseca, 534 B.R. at 268 (citations omitted). All permanent government employees are required to be members of AEELA, and by statute, a 3% deduction is taken from their salary and placed into a savings and loan fund. In re Velez Fonseca, 542 B.R. at 630 (citation omitted); see also
Ms. Navarro is an employee of the Department of Education‘s Food and Nutrition Services Program in Puerto Rico and, hence, a member of AEELA. Mr. Mojica is her spouse.3
II. Pre-Petition Events
In November 2017, Ms. Navarro received two loans from AEELA: (1) a “regular” $5,500.00 loan with a 7% interest rate, requiring $88.88 monthly payments; and (2) a $1,020.61 “disaster” or “emergency loan” (collectively, the “Loans“).4 According
III. The Bankruptcy Filing and Post-Petition Developments
On April 6, 2018, the Debtors filed a joint petition for chapter 13 relief. AEELA filed an amended proof of claim asserting a $6,378.97 claim secured by the Debtors’ “savings” and “dividends.” As the “basis for perfection” of its lien, AEELA cited various provisions of the Employee Association Act. The amended proof of claim did not assert that there was any
arrearage as of the petition date. It did, however, state the claim was subject to a right of setoff against the Debtors’ “[s]avings and dividends.” The Debtors did not object to the claim of AEELA.
A. The Plan and AEELA‘s Objection to Plan Confirmation
In their third amended plan filed on October 1, 2018 (the “Plan“), the Debtors proposed to “maintain the current contractual installment payments on” AEELA‘s secured claim in the amount of $88.88 per month and identified AEELA‘s collateral as “Savings and Dividends.” The length of the Plan was 60 months. The Plan reflected no existing arrearage owed to AEELA and did not propose to avoid any liens or to surrender any collateral.
AEELA filed its first objection to confirmation of the Plan on October 2, 2018. Citing In re Velez Fonseca and the Employee Association Act, AEELA again asserted that it was “a creditor with a statutory lien” on, among other things, “the savings and dividends that the Debtor[s] ha[d] deposited in AEELA.” As the specific basis for its claimed statutory lien, AEELA cited “Section 5” of the Employee Association Act,6 which provides:
In the event an employee has an outstanding debt with the Association and any retirement system, the savings and contributions that such employee may have in each body shall be used, firstly, to meet any unpaid obligations incurred with the respective body.
See
At the confirmation hearing held on October 3, 2018, the bankruptcy court overruled AEELA‘s objection to confirmation, after concluding its “claim [w]as not adversely affected by the” Plan (the “October 2018 Order Overruling Objection“); however, the court did not confirm the Plan at the conclusion of that hearing. Instead, the bankruptcy court continued the matter without a date, to consider the pending
B. AEELA‘s Motions for Reconsideration of the October 2018 Order Overruling Objection
AEELA moved for reconsideration of the October 2018 Order Overruling Objection, alleging it had not received any payments from Ms. Navarro since the petition date and reiterating that the Debtors’ proposal to “keep paying AEELA‘s debt directly outside of bankruptcy” amounted to a modification of its “substantive rights.” The Debtors opposed reconsideration. The bankruptcy court held another hearing on confirmation on February 27, 2019, again declined to confirm the Plan, and continued the matter without a date. The minutes of the hearing reflect that the bankruptcy court ordered the Debtors “to clarify, in writing, the treatment of AEELA‘s claim and lien within 21 days,” and afforded the Trustee and AEELA 21 days to reply.
In their response, the Debtors repeated that the Plan did not “modify . . . AEELA‘s lien rights” and argued that AEELA‘s proposed treatment under the Plan complied with
On October 7, 2019, the bankruptcy court entered an order denying reconsideration of its October 2018 Order Overruling Objection (the “October 2019 Denial of Reconsideration“), reasoning:
[I]n the present case, the court examined the Debtors’ plan and its treatment [of] AEELA. The court determined that the proposed treatment did not affect any of AEELA‘s rights and the treatment was compliant [with] [
§ ]1325(a)(5) . Accordingly, the court denied AEELA‘s objection to confirmation. The court‘s ruling did not contravene its previous ruling in [Ortiz Vega v. Asociación Empleados del Estado Libre Asociado de Puerto Rico (In re Ortiz Vega), 75 B.R. 858 (Bankr. D.P.R. 1987)], as argued by AEELA. The court ruled therein that AEELA‘s lien could not extend to future wages. However, the Debtors’ intent to provide [for] AEELA‘s secured claim through periodic payments is a choice within the alternatives provided by the Bankruptcy Code.
Additionally, the court acknowledged that AEELA was asserting a right to offset the Debtors’ obligation “with the accumulated shares and dividends,” and noted that the proper procedure for asserting that right was to file a motion for relief from stay. After the bankruptcy court denied reconsideration, the Debtors requested another hearing on confirmation.
On October 21, 2019, AEELA filed a second motion for reconsideration (the “Second Motion for Reconsideration“), this time seeking reconsideration of the October 2019 Denial of Reconsideration, which the Debtors again opposed. Citing In re Miranda Soto, 667 F.2d 235 (1st Cir. 1981),7 AEELA asserted it was prohibited from continuing payroll deductions once a member files for bankruptcy. Therefore, it contended it was unable to deduct loan payments from Ms. Navarro‘s payroll.
C. AEELA‘s Motion to Dismiss
On May 20, 2020, AEELA filed a motion to dismiss the case under
AEELA elaborated that the Debtors were 26 months in post-petition arrears because they failed to surrender their “savings and dividends” as required by the Employee Association Act and Velez Fonseca. AEELA further argued that the Debtors’ failure to “comply[] with the law” had caused “unnecessary” and “unreasonable delay” which constituted “cause” for dismissal under
The Debtors filed an opposition to the Motion to Dismiss, challenging the underlying premise that AEELA‘s statutory lien required the surrender of their savings and dividends. Moreover, the Debtors maintained that AEELA had raised the same argument previously and the court had rejected it more than 21 months earlier—on October 3, 2018—when it overruled AEELA‘s objection to confirmation.
D. AEELA‘s Motion Seeking Authorization to Proceed Against Its Collateral
Although the bankruptcy court conducted a confirmation hearing on June 17, 2020, it did not enter an order confirming the Plan and the matter was again continued without a date. A week later, AEELA filed a “Motion Requesting Order to Allow Creditor to Proceed Against Its Collateral, Which is Not Property of the Estate” (“Motion to Proceed Against Collateral“).
Claiming a perfected interest in the Debtors’ savings and dividends by virtue of a statutory lien, and further insisting that relief from stay was unnecessary to proceed against those savings and dividends, AEELA sought authorization to “proceed against” its collateral, citing
E. Order Denying Motion to Dismiss and Motion to Proceed Against Collateral
On July 15, 2020, the bankruptcy court issued a single opinion and order denying both the Motion to Dismiss and the Motion to Proceed Against Collateral, noting that the basis for both motions was the same (the “Order Denying Dismissal“). The bankruptcy court concluded that the issues raised in the two motions were already decided in the October 2019 Denial of Reconsideration, declined to revisit that decision on claim preclusion grounds, and incorporated its October 2019 Denial of Reconsideration by reference. After emphasizing that there was “no issue as to the validity of AEELA‘s statutory lien” and that the lien remained unaffected by the terms of the Plan, the bankruptcy court directed the Debtors “to consign with the court . . . all post-petition payments owed to AEELA should AEELA refuse to accept them.”
On July 26, 2020, AEELA moved for reconsideration of the Order Denying Dismissal and several months later filed its
F. The November 17, 2020 Confirmation Hearing
At a hearing held on November 17, 2020, the bankruptcy court considered confirmation of the Plan, objections to confirmation, and AEELA‘s motion for reconsideration of the Order Denying Dismissal. AEELA argued that, under
to exercise control over those savings and dividends during the life of the Plan. AEELA continued to insist the Debtors were “changing” its lien. The hearing did not result in confirmation. Instead, the bankruptcy court ordered AEELA to brief several issues, including: (1) how “the filing of a bankruptcy petition trigger[ed] a loan default and/or a right to collect in full [from] the collateral, that is, the funds on deposit“; (2) how “the proposed chapter 13 plan alter[ed] the statutory lien held by AEELA“; and (3) “the statutory or legal support [for the] claim that AEELA may collect from collateral funds at any time, irrespective of whether the [debtor] is current or not[.]”
In its memorandum filed on January 19, 2021, AEELA explained that, pre-petition, it is the “recipient” of deductions made by government agencies that employ its members. Once AEELA receives notice of a member‘s bankruptcy filing, it immediately notifies the employer agency to cease the deductions as it asserts is required by In re Miranda Soto.
In support of its position that the filing of a bankruptcy petition triggers a loan default and a right to setoff against the Debtors’ savings and dividends, AEELA pointed to its “Collection Regulations Manual R-011” which is authorized by Section 5(f) of the Employee Association Act.9 In pertinent part, Article 12 of those Regulations provides:
The Association may declare past due the totality of the debt and foreclose on or cancel any and all loan guarantees, including the savings and dividends in a member‘s account . . .
. . . .
(4) When a member files for protection under the Bankruptcy [Code] and the corresponding government entity is obligated to cease making deductions for payment of the loan.
In further support of its “right to collect in full from its collateral,” AEELA pointed to Section 5 of the Employee Association Act, which provides that “the savings and contributions that such employee may have in each body shall be used, firstly, to meet any unpaid obligations incurred with the respective body.”
As for its overarching theory that the Debtors were altering its statutory lien by refusing to surrender the savings and dividends on deposit, AEELA argued that the Debtors had no right to “control, dispose or dictate the fate of the savings and dividends . . . .” For this argument, AEELA cited Section 24 of the Employee Association Act, which states that members may
In their March 3, 2021 response, the Debtors reiterated that the Plan “propose[d] to continue to pay AEELA based upon the same terms and conditions as pre-existed the bankruptcy petition.” (emphasis omitted). They asserted that the Plan complied with
Two days later, the Trustee filed a response, “adopting [the] Debtors’ position.” After acknowledging that AEELA did not accept its proposed treatment under the Plan and that the Debtors were not surrendering the subject collateral, the Trustee reasoned that the Plan was confirmable under
The Plan provides for the retention of [AEELA‘s] lien until payment of the debt or discharge under [
§ ]1328 . In light of this, the first requirement [of§ 1325(a)(5)(B) ] is fulfilled. Furthermore, the plan does provide that the total amount of the debt will be paid, directly by [the] Debtors in equal payments of $88.00. Said amount should be considered sufficient to provide adequate protection, given that it is the same amount of the monthly payments provided in the contract between Ms. Navarro and AEELA. The second and third requirements [under§ 1325(a)(5)(B) ], therefore, are also fulfilled.
Finally, the Trustee acknowledged that there were no pre-petition arrears on AEELA‘s claim and that the Debtors’ post-petition payments were being consigned with the bankruptcy court.
G. Order Overruling AEELA‘s Objection to Confirmation
On August 4, 2021, the bankruptcy court issued an opinion overruling AEELA‘s objection to confirmation. The bankruptcy court recited the travel of the case, beginning with the observation that, as early as the October 3, 2018 hearing on confirmation, it had recognized that “AEELA‘s claim was not adversely affected in any way by the Chapter 13 plan . . . .” Ultimately, the bankruptcy court ruled:
The discussion is brief as the court‘s conclusion is the same as the one stated at the confirmation hearing held on October 3, 2018, that is, AEELA‘s claim is not adversely affected in any way by the Chapter 13 plan. The legal basis for the conclusion is found in the opinion and orders of October 7, 2019 (dkt. #70) and July 15, 2020 (dkt. #126).10 The court fully agrees with the position expressed by the Chapter 13 trustee and the legal basis in the Debtors’ memorandum. The facts of this case do not support the concerns expressed by AEELA.
The bankruptcy court appears to have implicitly denied AEELA‘s motion for reconsideration of the Order Denying Dismissal.11
On August 18, 2021, AEELA filed a motion for reconsideration, which the bankruptcy court denied. AEELA then filed a second motion for reconsideration, which the bankruptcy court also denied.
H. AEELA‘s Second Stay Relief Motion
On September 24, 2021, AEELA filed another Motion for Relief from the Automatic Stay (the “Second Stay Relief Motion“). AEELA cited
I. The October 19, 2021 Hearing and the Order Denying the Second Stay Relief Motion
During a hearing conducted on October 19, 2021, the bankruptcy court denied the Second Stay Relief Motion. In an order entered following the day (the “Order Denying Second Stay Relief Motion“), the bankruptcy court summarized the reasons for its refusal to grant stay relief:
The court concludes that the First Circuit decision in Grella v. Salem Five Cent Savings Bank, 42 F.3d 26 (1st Cir. 1994), serves as [a] basis to dispose of the present contested matter, AEELA‘s request for relief from stay, in two respects. First, a hearing on a motion for relief from stay is a summary proceeding of limited effect. . . . Second, issue preclusion bars relitigation of matters previously decided.
AEELA, through the instant motion for relief from stay, renews the substantive allegations which this court has repeatedly rejected. A motion for relief from stay is not a substitute [for] an appeal. Therefore, the motion for relief from stay is hereby denied.
J. Confirmation and AEELA‘s Renewed Objection
On October 19, 2021, a week before the confirmation hearing, AEELA renewed its objection to confirmation, “for the purpose of maintaining a clear record and to preserve [its] rights.” Again, it asserted emphatically: “Nowhere in AEELA‘s Law and in its relationship with its members does a bankruptcy debtor become[ ] entitled to a right to retain the savings and dividends . . . post[-]discharge . . . .” AEELA argued the Plan was not confirmable under
AEELA‘s claim was filed in the amount of $6,349.22, which has not been objected to. A simple mathematic calculation denotes that $88.88 multiplied by 60 is $5,332.80, which is insufficient to cover AEELA‘s claim because it leaves an unpaid
outstanding balance under the allowed claim in the amount of $1,016.42.
In addition, AEELA argued the Debtors could not be permitted to cure any default and maintain payments during the pendency of the chapter 13 case because it was undisputed that there were no arrears as of the petition date as required under
The Debtors urged the bankruptcy court not to consider AEELA‘s latest objection to confirmation, arguing the court had previously rejected the same arguments nine times.12 Accordingly, the Debtors argued, the “[l]aw of the [c]ase is . . . that the Plan does comply with Section 1325(a)(5)[.]” One week later, on October 26, 2021, the court entered an order
confirming the Plan (the “Confirmation Order“), finding that “each of the requirements for confirmation of a Chapter 13 plan pursuant to . . .
These appeals followed. Pursuant to the terms of the Panel‘s order entered on December 15, 2021, the appeals were joined for briefing and argument and, now, for disposition.
POSITIONS OF THE PARTIES IN THE APPEAL
I. AEELA14
A. The Confirmation Order
AEELA argues the court erred in concluding the Plan‘s proposed treatment of AEELA‘s claim did not affect AEELA‘s rights and statutory lien because there were no arrears as of the petition date. AEELA states: “[T]here will never be arrears . . . pre-petition because the statutory lien mandates that the funds be directly deducted by the employer.” As in the proceedings below, AEELA insists that, to the extent the Plan permits the Debtors to “retain” the savings and dividends as to which AEELA asserts rights of setoff, the Plan‘s treatment of its claim amounts to a modification of AEELA‘s lien. This is so, it argues, because AEELA‘s regulations require “the member to surrender the savings or contributions . . . or agree to the setoff of the debt” upon the filing of a chapter 13 petition. AEELA further contends that none of the prongs of
AEELA claims the Plan did not “contemplate the same contractual terms and conditions as existed pre-petition.” (emphasis omitted). For instance, Ms. Navarro “obtained the regular loan in the amount of $5,500.00 with an annual interest [rate] of 7% and a monthly payment of $88.88, with an amortization of 77 months.” AEELA asserts: “In the Plan, [the] Debtors propose to maintain the equal monthly payments in the amount of $88.88 for the pendency of the bankruptcy case, which is for a period of 60 months.”
Additionally, AEELA maintains that the court confirmed the Plan in violation of In re Miranda Soto, 667 F.2d at 237, where, according to AEELA, the First Circuit established “AEELA‘s obligation to cease collecting post-petition payments.” The Plan “proposes to maintain the post-petition salary deductions, as if the bankruptcy had never happened,” AEELA argues.
B. The Order Denying Dismissal
As to the Order Denying Dismissal, AEELA argues there was cause to dismiss the case under
Although listed in AEELA‘s notice of appeal, the July 2020 denial of the Motion to Proceed Against Collateral is not mentioned in AEELA‘s appellate brief; therefore, AEELA‘s appeal of that portion of the Order Denying Dismissal is waived. See Tower v. Leslie-Brown, 326 F.3d 290, 299 (1st Cir. 2003)
(“[W]e have made it abundantly clear that failure to brief an argument does, in fact, constitute waiver for purposes of appeal.“) (citations omitted).
C. The Order Denying the Second Stay Relief Motion
AEELA reiterates that by establishing a right of setoff, it established cause for relief from the automatic stay. AEELA further asserts that Article 12 of its Collection Regulations authorizes setoff when a member files for bankruptcy and has an outstanding debt, as in the instant case. As in the proceedings below, AEELA also cites Section 5 of the Employee Association Act to support its claimed right of setoff. AEELA maintains that the setoff requirements articulated in National Promoters & Services, Inc. v. Multinational Life Ins. Co. (In re National Promoters & Services Inc.), Adv. Pro. No. 13-0051 (ESL), 2020 WL 1685755, at *5-6 (Bankr. D.P.R. Apr. 6, 2020) are met here.
AEELA asks the Panel to reverse the Confirmation Order and lift the stay or, alternatively, to dismiss the bankruptcy case.
II. The Debtors
A. The Confirmation Order
The Debtors maintain the bankruptcy court properly confirmed the Plan. They challenge the notion that the Plan violates the Employee Association Act by permitting them to retain control and possession of their “savings and dividends.” They counter: “[T]he savings and dividends are in the possession and control of AEELA.” The Debtors further argue the bankruptcy court correctly ruled that the “inability to dispose of the savings and dividend[s]” did not “divest” them “from having an interest [i]n the same.” Citing
clause that declares default based solely on the event of insolvency or the filing of a bankruptcy petition constitutes an unenforceable ipso facto clause.
In further support of Plan confirmation, the Debtors argue that the Plan complies with
The Debtors also challenge AEELA‘s argument that the Plan‘s proposed treatment of AEELA‘s claim violates In re Miranda Soto. Nothing in that case, they contend, states that a debtor may not voluntarily offer a continuance of wage deductions in order to satisfy a pre-petition wage obligation under a confirmed chapter 13 plan. Thus, the bankruptcy court correctly ruled in its Order Denying Dismissal that even though “post-petition future wages may not constitute” a lien, that did not necessarily mean salary deductions could not be made under the appropriate circumstances to provide a means “to direct post-petition payments.”
B. The Order Denying Dismissal
The Debtors next challenge AEELA‘s appeal of the Order Denying Dismissal. First, as a procedural matter, they maintain that AEELA failed to argue how the bankruptcy court committed clear error when it declined to dismiss the case based on two essential findings of fact: (1) the Plan does not challenge AEELA‘s lien; and (2) the Debtors are willing to continue to make payments to timely pay off their obligation to AEELA. Second, as a substantive matter, the Debtors argue the premise underlying the Motion to Dismiss—namely, that the Debtors lacked any proprietary interest in the subject funds—lacked merit.
C. The Order Denying the Second Stay Relief Motion
Finally, the Debtors assert a two-pronged argument that the bankruptcy court did not abuse its discretion in denying the Second Stay Relief Motion. First, the Debtors maintain that AEELA possessed no right of setoff. Section 5 of the Employee Association Act, the law upon which AEELA relies, has nothing to do with setoff once a debtor files for bankruptcy, the Debtors assert. Instead, that provision grants AEELA a right to assert a claim against an employee who permanently separates from service for any reason. Nor does Article 12 of the Collection Regulations provide AEELA with the right of setoff, the Debtors argue. Even
APPELLATE JURISDICTION
Before addressing the merits of an appeal, we must determine whether we have jurisdiction, even if the question is not raised by the litigants. Formatech, Inc. v. Sovereign Bank
(In re Formatech, Inc.), 483 B.R. 363, 367 (B.A.P. 1st Cir. 2012) (citation omitted). The Panel has jurisdiction to hear appeals from final orders. See
The bankruptcy court‘s order denying AEELA‘s Motion to Dismiss is, likewise, a final appealable order. The Panel has previously recognized that, “[a]lthough orders denying motions to dismiss are generally interlocutory, such [orders are] final and appealable where a reorganization plan has already been confirmed, since the order effectively ends all litigation on the merits of dismissal.” Devila Vicenty v. San Miguel Sandoval (In re San Miguel Sandoval), 327 B.R. 493, 505 (B.A.P. 1st Cir. 2005) (citing Fleet Data Processing Corp. v. Branch (In re Bank of New Eng. Corp.), 218 B.R. 643, 646 (B.A.P. 1st Cir. 1998)); cf. Sasso v. Boyajian (In re Sasso), 409 B.R. 251, 254 (B.A.P. 1st Cir. 2009) (holding an order denying debtors’ motion to dismiss their chapter 13 case was a final order). Other courts have similarly stated that “the denial of a dismissal motion becomes final for appeal no later than confirmation.” Jue v. Liu (In re Liu), 611 B.R. 864, 877 (B.A.P. 9th Cir. 2020) (citing Moen v. Hull (In re Hull), 251 B.R. 726 (B.A.P. 9th Cir. 2000)). Here, the Order Denying Dismissal became final and appealable as of right upon the entry of the Confirmation Order on October 26, 2021.
In light of the foregoing, we conclude that we have jurisdiction to review the Confirmation Order and the Order Denying Dismissal. Our jurisdictional assessment concerning the Order Denying Second Stay Relief Motion proceeds differently, however. Because an order denying relief from stay is not presumptively final, see Pinpoint IT Servs., LLC v. Landrau Rivera (In re Atlas IT Exp. Corp.), 761 F.3d 177, 185 (1st Cir. 2014), we must determine
whether the Order Denying Second Stay Relief Motion is final under the circumstances presented by this record. The question is whether that order “definitively decided a discrete, fully-developed issue that is not reviewable somewhere else.” Id. (citing Tringali v. Hathaway Mach. Co., 796 F.2d 553, 558 (1st Cir. 1986)). “If yes, the order is final; if no, it is not.” Id. When evaluated against this standard, the Order Denying Second Stay Relief Motion satisfies the finality test. Indeed, pursuant to the Order Denying Second Stay Relief Motion, the bankruptcy court conclusively determined that AEELA was not entitled to a right of setoff and unequivocally expressed its intent not to revisit AEELA‘s substantive arguments. Finality, however, is “not the sole determinant” for establishing our jurisdiction. In re Formatech, Inc., 483 B.R. at 367. Mootness will also deprive us of jurisdiction when it becomes apparent that it is “impossible” for us “to grant any effectual relief whatever to the prevailing party[.]” Chafin v. Chafin, 568 U.S. 165, 172 (2013) (citation and internal quotation marks omitted). That is the case with the Order Denying Second Stay Relief Motion. Despite the finality of that order, our jurisdiction to review it is lost because the appeal has become moot. See Discussion, infra at p. 38.STANDARDS OF REVIEW
We review the bankruptcy court‘s findings of fact for clear error and its conclusions of law de novo. Jeffrey P. White & Assocs., P.C. v. Fessenden (In re Wheaton), 547 B.R. 490, 496 (B.A.P. 1st Cir. 2016) (citation omitted). The applicable standard of review for the Confirmation Order is de novo. See Viegelahn v. Essex, 452 B.R. 195, 199 (W.D. Tex. 2011) (stating the standard of review for confirmation orders is de novo); see also U.S. Bank Nat‘l Ass‘n v. Vertullo (In re Vertullo), 610 B.R. 399, 403 (B.A.P. 1st Cir. 2020); Hildebrand v. Thomas (In re Thomas), 395 B.R. 914, 917 (B.A.P. 6th Cir. 2008). The Order Denying Dismissal is reviewed for abuse of discretion. See Stevenson v. TND Homes I, LP (In re Stevenson), 583 B.R. 573, 579 (B.A.P. 1st Cir. 2018) (“[The Panel] review[s] a bankruptcy court‘s decision to dismiss a chapter 13 case for abuse of discretion.“) (citing Witkowski v. Boyajian (In re Witkowski), 523 B.R. 300, 305 (BAP 1st Cir. 2014); Zizza v. Pappalardo (In re Zizza), 500 B.R. 288, 292 (BAP 1st Cir. 2013)); Simon v. Amir (In re Amir), 436 B.R. 1, 9 (B.A.P. 6th Cir. 2010) (“[R]ulings on motions to dismiss a bankruptcy case are reviewed for an abuse of discretion.“) (citation omitted).
DISCUSSION
I. The Confirmation Order
A. Chapter 13 Plan Confirmation: Sections 1322 and 1325
Addressing the view that the permissive provisions of
Though there is no cross-reference in
§ 1325(a)(5) to§ 1322(b)(5) , it is reasonable that a secured claim holder can be satisfied at confirmation by compliance with§ 1322(b)(5) without also being entitled to satisfaction in one of the three ways provided in§ 1325(a)(5) . That is, if the debtor cures defaults and maintains contract payments with respect to a long-term allowed secured claim, the debtor need not also pay the present value of the allowed secured claim during the life of the plan. Some courts have harmonized§§ 1325(a)(5) and1322(b)(5) by finding that long-term treatment under§ 1322(b)(5) is a form of present value for purposes of§ 1325(a)(5)(B) . This logic breaks down if the contract rate of interest is less thanthe rate necessary to provide present value for purposes of § 1325(a)(5)(B)(ii) . It is probably true that Congress just overlooked the need for a cross-reference to§ 1322(b)(5) in the list of ways to satisfy an allowed secured claim holder in§ 1325(a)(5) . The two sections are accommodated by holding that if the debtor desires to keep property that secures a long-term debt and provides that any arrearage will be cured within a reasonable time and future payments maintained during the plan, the claim holder is not also entitled to payment in full during the plan under§ 1325(a)(5)(B) or to surrender under§ 1325(a)(5)(C) .
Lundin, supra § 78.4, at ¶18 (emphasis added) (footnotes omitted).
The Supreme Court has considered the interplay between
1. Majority View
An interpretation that the debtor who proposes to cure and maintain under
[T]he present value test of section 1325(a)(5) . . . is [not] applicable where a default is cured pursuant to section 1322(b)(5). The present value test[] compensate[s] creditors whose rights have been modified by reductions in payments, interest charges or the total amount due; where a default is cured, however, the creditor‘s rights are not modified. Since the contract terms remain in force . . . the time value of money is irrelevant. The creditor receives the interest, charges and costs to which it is entitled under the contract and applicable nonbankruptcy law.
In re Capps, 836 F.2d at 776 (quoting 5 Collier on Bankruptcy ¶ 1322.09[4] (15th ed. 1986)).
2. Minority View
A number of courts have attempted to harmonize
[E]ven if [§] 1325(a)(5) is deemed applicable, the requirements of [§] 1325(a)(5)(B) have been met. The payments provided for in the Bankruptcy Court‘s order meet the present value test of [§] 1325(a)(5)(B)(ii). The debtors’ allowed secured claim is $15,500.00. Said order sets the principal amount of Appellant‘s allowable secured claim at $15,500.00. The claim is to be paid by payments of $144.00 per month for 24 months through the Plan to cure the default and payments of $372.06 per month outside the Plan. The order requires that the principal accrue interest at the contract rate of 14.6%, that the payments be applied first to interest and then to principal, and that payments of $372.06 continue until the principal and accrued interest are paid. The order also provides for extinguishment of the lien only upon satisfaction of the debt, and thus the requirement of [§] 1325(a)(5)(B)(i) has been met. Since 14.6% per annum is a more than adequate discount rate, the present value of these payments mandated by the confirmation order equals the amount of the allowed secured claim as mandated by [§] 1325(a)(5)(B)(ii).
Id. at 64-65 (footnote omitted).
In In re Gordon, 217 B.R. 973, 975 (Bankr. S.D. Ga. 1997), the court specifically held that
Section 1325(a)(5) . . . requires that a plan . . . permit the creditor to retain the lien (which this plan provides) and distribute property to the secured creditor of a value which is not less than the
allowed amount of the claim. Debtor‘s plan accomplishes this. Clearly it does not distribute value in cash to the holder of the claim. It does distribute periodic payments to maintain debt service on this obligation to the Internal Revenue Service for the life of the plan. The remaining balance owed the United States is excepted from discharge pursuant to . . . § 1328(a)(1) . The total value distributed to the Service, therefore, is the cash reduction in the principal balance which was owed on the date of filing and a nondischargeable unpaid balance. Combining these two value components meets the requirements of§ 1325(a)(5) .
Id. at 976 (footnote omitted) (citation omitted). While the Gordon court acknowledged the awkwardness of this construction, it simultaneously observed that “[p]ayment of long[-]term debts under
B. Section 1322(b)(5), Generally
Courts interpret
The Debtor may . . . take advantage of [
§] 1322(b)(5) by keeping the same . . . contract rate and making the same payments of principal and interest called for by the note during the life of the plan and during such further period of time as is necessary to have the total principal payments equal the amount of the secured claim as valued by this court. There would then be “maintenance of payments.” And those payments would be maintained on the “secured claim” as that claim is computed in accordance with [§] 506(a). The three to five year limitation on plan payments of [ §] 1322(c) would then have no application because [ §] 1322(b)(5) permits payments lasting longer than five years. It speaks of maintenance of payments on a claim “on which the last payment is due after the date on which the final payment under the plan is due.”
In re McGregor, 172 B.R. 718, 721 (Bankr. D. Mass. 1994).
C. Section 1322(b)(5) Requires Neither a Default Nor a Cure
AEELA argued below that the Debtors were not entitled to the cure and maintain option where there was no default at the time of the filing of the petition.16 However, courts have ruled that
[N]otwithstanding the reference in
§ 1322(b)(5) to the “curing of any default,” nothing in the statutory language suggests that the provision is restricted to circumstances where there is an existing default, and the court concludes that the provision permits the “maintenance of payments while the case is pending” on any debt where the final payment is due after the last payment under the plan even in the absence of default.
189 B.R. at 644. The Jones court, embracing Delauder‘s view, further reasoned:
There is . . . no principled basis for preventing a debtor from taking advantage of maintaining payments on a long-term debt under
§ 1322(b)(5) merely because the debtor has not defaulted, because the original agreement can be given effect without resort to a cure. A debtor should not be penalized for failing to default.
Jones, 2010 WL 11546121, at *3. Another bankruptcy court similarly stated: “Nothing about the permissive nature of
Here, the record establishes that AEELA‘s claim qualifies as a “long-term debt” within the meaning of
D. The Confirmation Standards Applied
AEELA challenges the Plan within the framework of
Ultimately, why the court held that the Plan complied with
As required by P.R. LBR 3015-3(b), the Plan is in the form prescribed by Chapter 13 Plan Local Form G (“LBF-G“). Part 3 of the Plan provides for “Treatment of Secured Claims,” and Part 3.1 provides for “Maintenance of payments and cure of default, if any.” AEELA‘s claim is treated in Part 3.1 and provides for payments of $88.88 per month to be disbursed by the Debtors and that the Debtors “will maintain the current contractual installment payments.” While the form plan does not specifically reference
We conclude that the Plan appropriately “provide[s] for” AEELA‘s claim under
Nothing in either the Employee Association Act or AEELA‘s Collection Regulations alters our analysis. Upon the filing of the Debtors’ bankruptcy case, to the extent they conflict, those statutes and regulations were preempted by the provisions of the Bankruptcy Code, including
A. The § 1307(c)(1) Standard Governing Dismissal
“Section 1307 governs dismissal of a chapter 13 case.” Benoit v. Deutsche Bank Nat‘l Tr. Co. (In re Benoit), 564 B.R. 799, 805 (B.A.P. 1st Cir. 2017) (quoting In re Baril, No. 09-20112, 2015 WL 1636442, at *2 (Bankr. D. Me. Apr. 10, 2015)). ”
Because the first two requirements for dismissal under
When “evaluating whether there has been unreasonable delay [by the debtor] which is prejudicial to creditors, the court must consider whether the debtor has engaged in some form of unreasonable delay, and whether the delay has been prejudicial.” Zareas v. Bared Espinosa (In re Bared Espinosa), Adv. Pro. No. 04-0298, 2006 WL 3898379, at *4 (Bankr. D.P.R. Jan. 27, 2006) (discussing cause for dismissal under analogous
B. The § 1307(c)(1) Dismissal Standard Applied
AEELA relies exclusively on Velez Fonseca as support for the proposition that the Debtors were required to surrender the subject savings and dividends to
If anything caused delay in the underlying bankruptcy case, it was AEELA‘s persistence in continuing to litigate the same theory long after it was initially rejected by the court in the October 2019 Denial of Reconsideration (of its 2018 order overruling AEELA‘s objection to confirmation). By the time AEELA filed the Motion to Dismiss in May of 2020, it had already pressed the same claims by objecting to confirmation and, when that objection was overruled, filing two successive motions for reconsideration. Serial requests for reconsideration, by their very nature, raise the specter of impropriety. See Harris v. HSBC Bank USA, Nat‘l Ass‘n (In re Harris), 450 B.R. 324, 336 (Bankr. D. Mass. 2011) (stating “serial requests for reconsideration are improper“). Accordingly, the record reflects that AEELA did not satisfy its burden under
Additionally, we are unpersuaded by AEELA‘s reliance on In re Miranda Soto for the assertion that AEELA is prohibited from making any post-petition deductions from a debtor‘s wages whatsoever. We agree with the bankruptcy court‘s conclusion that nothing in that case prevents a debtor from voluntarily offering a continuation of wage deductions in order to satisfy a pre-petition obligation under a confirmed chapter 13 plan.
Therefore, the Order Denying Dismissal is AFFIRMED.
III. The Order Denying the Second Stay Relief Motion
As we noted above, AEELA also appeals the Order Denying Second Stay Relief Motion. The Second Stay Relief Motion was yet another vehicle for AEELA to challenge the Debtors’ refusal to surrender the subject savings and dividends.
A. The Standard Governing Stay Relief
Subject to certain exceptions not applicable here,
“[T]he First Circuit has instructed that the test for determining standing to bring a motion for stay relief is ‘whether a creditor has a colorable claim to property of the estate.‘” In re Harris, No. 17-31042-CJP, 2018 WL 6729689, at *5 (Bankr. D. Mass. Dec. 21, 2018) (quoting Grella, 42 F.3d at 32). “To obtain relief from the stay, a movant is required to ‘show cause for relief, in addition to its colorable claim on property of the estate.‘” Id. (quoting United States v. Fleet Bank of Mass. (In re Calore Express Co.), 288 F.3d 22, 36 (1st Cir. 2002)).
B. The Effect of the Confirmation Order on the Appeal of the Denial of the Second Stay Relief Motion
Once, as here, a plan is confirmed by the bankruptcy court, “‘cause’ for relief from stay must be based upon post[-]confirmation circumstances, such as a default by the debtor under the terms of the plan.” In re Dumbuya, 428 B.R. 410, 416 (Bankr. N.D. Ohio 2009) (quoting In re Shultz, 325 B.R. 197, 201 (Bankr. N.D. Ohio 2005)). Thus, under these circumstances, pre-confirmation issues “become[ ] moot.” Id. The Dumbaya court reasoned:
The goal in a Chapter 13 bankruptcy is to formulate a plan of reorganization. Once a plan is formulated and then confirmed by the court, its provisions are final and binding—
§ 1327(a) sets forth that “[t]he provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.”
Id. (quoting In re Shultz, 325 B.R. at 201). Here, the Second Stay Relief Motion was based solely on pre-confirmation events. As the Plan has been confirmed, cause for relief from stay must be based upon post-confirmation events. Accordingly, there is no relief we can fashion based on this record with respect to the Second Stay Relief Motion. The appeal of the Order Denying Second Stay Relief Motion is therefore DISMISSED as MOOT. See Pinto-Lugo v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.), 987 F.3d 173, 181 (1st Cir. 2021) (stating that a court must dismiss an appeal as moot under Article III when it is “impossible . . . to grant any effectual relief whatever“) (quoting Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652, 1660 (2019)). Accordingly, we do not address AEELA‘s setoff argument and, in particular, whether Section 5(a) of Act No. 9 of April 25, 2013 codifies a right of setoff upon a member‘s bankruptcy filing as AEELA asserts or whether that provision merely addresses AEELA‘s rights upon a member‘s separation.
CONCLUSION
Based on the above analysis, we AFFIRM: (1) the Confirmation Order, and (2) the Order Denying Dismissal. The appeal of the Order Denying Second Stay Relief Motion is DISMISSED as MOOT.