Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT

> FOR THE DISTRICT OF PUERTO RICO

3 || IN RE: CASE NO. 12-03808 (ESL)

4 || ERNESTO ANTONIO MELENDEZ CHAPTER 11

PEREZ

5

6 Debtor

ADV. PROC. NO. 12-00386 (ESL)

7 || ERNESTO ANTONIO MELENDEZ

PEREZ

8

9 Plaintiff

10 VS.

11 |] MARGARITA DIAZ RIVERA

12 Defendant

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14 OPINION AND ORDER

15 This adversary proceeding is before the court upon the “MOTION TO ALTER OR

16 AMEND JUDGMENT UNDER BANKRUPTCY RULE 9023 AND/OR- FOR

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RECONSIDERATION UNDER BANKRUPTCY RULE 9024" FILED BY THE

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19 DEFENDANT (Dkt. #53) (hereinafter “the Motion’) and the opposition filed by the debtor

0 (Dkt. #54). For the reasons stated below the Motion is hereby denied.

21 Defendant alleges that this court “committed a manifest error of law when it failed to

22 ||take in account” three facts: that the motion filed by the defendant in state court was in

23 compliance with an order issued by the state court, that the defendant did not ask for payment

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from property of the estate but from exempt property, and that the defendant has not taken any

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action to attach or garnish any property as a result of the state court’s order.

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Applicable Legal Standard

2 “Motions to reconsider are not recognized by the Federal Rules of Civil Procedure or the

3 || Federal Rules of Bankruptcy Procedure in haec verba.” In re Lozada Rivera, 470 B.R. 109, 112

4 (Bankr. D.P.R. 2012), citing Jimenez v. Rodriguez (In re Rodriguez), 233 B.R. 212, 218-219

5 (Bankr. D.P.R. 1999), conf’d 17 Fed. Appx. 5 (1* Cir. 2001); Van Skiver v. United States, 952

6 ||F.2d 1241, 1243 (10" Cir. 1991); Lavespere v. Niagara Mach. & Tool Works Inc., 910 F.2d

7 11167, 173 (5" Cir. 1990), cert. denied 510 U.S. 859, abrogated on other grounds by Little v.

8 Liquid Air Corp., 37 F.3d 1069, 1075-1076 (5" Cir. 1994). Rather, federal courts have

9 |! considered motions so denominated as either a motion to “alter or amend” under Fed. R. Civ. P.

10 || 59(e) or a motion for relief from judgment under Fed. R. Civ. P. 60(b). See Fisher v. Kadant,

11 Inc., 589 F.3d 505, 512 Cir. 2009) (noting a motion for reconsideration implicated either

12 |! Fed. R. Civ. P. 59e) or 60(b)); Equity Security Holders’ Committee v. Wedgestone Financial

13 (In re Wedgestone Financial), 152 B.R. 786, 788 (D. Mass. 1993). “These two rules are

14 |! distinct; they serve different purposes and produce different consequences. Which rule applies

15 depends essentially on the time a motion is served. If a motion is served within [fourteen*] days

16 || of the rendition of judgment, the motion ordinarily will fall under Rule 59(e). If the motion is

17 || served after that time, it falls under Rule 60(b).” In re Lozada Rivera, 470 B.R. at 113, quoting

18 || Van Skiver, 952 F.2d at 1243. Also see Universal Ins. Co. v. DOJ, 866 F. Supp. 2d 49, 73

19 (D.P.R. 2012) (“A motion is characterized pursuant to [Fed. R. Civ. P.] 59(e) or [Fed. R. Civ.

20 P.] 60(b) based upon its filing date.”) “The substance of the motion, not the nomenclature used

21 |! or labels placed on motions, is controlling.” In re Lozada Rivera, 470 B.R. at 113. Under either

22 |Irule, “the granting of a motion for reconsideration is ‘an extraordinary remedy which should be

23 used sparingly.” Palmer _v. Champion Mortg., 465 F.3d 24, 30 Cir. 2006) (citations

24 || omitted). Because the Motion for Reconsideration was filed within 14 days from entry of the

25 opinion and order, it will be considered under Fed. R. Civ. P. 59(e), applicable to bankruptcy

26 proceedings through Fed. R. Bankr. P. 9023.

27 yf

1 See the most recently amended version of Fed. R. Bankr. P. 9023.

2.

1 Fed. R. Civ. P. 59(e) itself does not state the grounds on which relief under the rule may

2 be granted. Therefore, trial courts have considerable discretion in deciding whether to grant or

3 deny a motion to alter or amend under Fed. R. Civ. P. 59(e). See ACA Fin. Guar. Corp. v.

4 || Advest, Inc., 512 F.3d 46, 55 (1" Cir. 2008) (“[Trial] courts enjoy considerable discretion in

5 || deciding [Fed. R. Civ. P.] 59(e) motions, subject to circumstances developed in the case law.”);

6 || Venegas-Hernandez v. Sonolux Records, 370 F.3d 183, 190 (1* Cir. 2004), citing Edward H.

7 || Bohlin Co. v. Banning Co., 6 F.3d 350, 355 65" Cir. 1993); Robinson v. Watts Detective

8 || Agency, 685 F.2d 729, 743 Cir. 1982). Generally, in order for a motion for reconsideration

9 || to proceed under Fed. R. Civ. P. 59(e), the movant must clearly establish a manifest error of law

10 || or present newly discovered evidence that could not have been diligently found during the case.

11 See Schwartz v. Schwartz (In re Schwartz), 409 B.R. 240, 250 (B.A.P. 1" Cir. 2008), citing In

12 ||re Rodriguez, 233 B.R. at 219. The Court of Appeals for the “First Circuit has explained that a

13 ||motion for reconsideration brought under Fed. R. Civ. P. 59(e) must be based upon newly

14 || discovered evidence or a manifest error of law or fact.” BBVA v. Vazquez (In re Vasquez), 471

15 || B.R. 752, 760 (B.A.P. 1° Cir. 2012), citing Aybar v. Crispin-Reyes, 118 F.3d 10, 16 (1™ Cir.

16 || 1997). “To meet the threshold requirements of a successful [Fed. R. Civ. P.] 59(e) motion, the

17 motion must demonstrate the reason why the court should reconsider its prior decision and must

18 || set forth facts or law of a strongly convincing nature to induce the court to reverse its earlier

19 || decision.” In re Schwartz, 409 B.R. at 250 (citations omitted).

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1 “A motion for reconsideration ‘does not provide a vehicle for a party to undo its own

22 || procedural failures and it certainly does not allow a party to introduce new evidence or advance

23 ||arguments that could or should have been presented to the district court prior to the

24 judgment.” Marks 3-Zet-Ernst Marks GmBh Co. KG y. Presstek, Inc., 455 F.3d 7, 15-16 □□□

25 || Cir. 2006) (citations omitted). Thus, a motion for reconsideration cannot be used as a vehicle to

26 Te-litigate matters already litigated and decided by the court. See Standard Quimica □□

97 || Venezuela vy. Central Hispano International, Inc., 189 F.R.D. 202, n.4 (D.P.R. 1999). In sum,

3.

1 “[a] party cannot use a Rule 59(e) motion to rehash arguments previously rejected or to raise

2 |}ones that could, and should, have been made before judgment issued.” See Soto-Padr6_v.

3 || Public Buildings Authority, 675 F.3d 1, 9 (1 Cir. 2012) (citations omitted). Conversely, the

4 court should renew and reconsider whether it “patently misunderstood a party .. or has

5 ||made an error not of reasoning by apprehension.” Ruiz Rivera v. Pfizer

6 || Pharmaceuticals, LLC, 521 F.3d 76, 82 (1* Cir. 2008). Also see Mulero-Abreu v. Puerto Rico

7 || Police Department, 675 F.3d 88, 94-95 (1* Cir. 2012) (granting reconsideration in cases of

8 || “manifest error of law’). “The granting of a motion for reconsideration is an extraordinary

9 ||remedy which should be used sparingly.” United States ex rel. Ge v. Takeda Pharm. Co., 737

10 || F.3d 116, 127 (1° Cir. 2013).

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12 In summary, motions for reconsideration under Fed. R. Civ. P. Rule 59(e) are generally

13 || recognized for three grounds: an intervening change in the controlling law, a clear legal error, or

14 || newly discovered evidence. See Soto-Padré, 675 F.3d at 9.

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16 In the Opinion and Order entered on July 29, 2014 (Dkt. #51), 2014 WL 3749531, the

17 || court concluded that:

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“In the instant case, the Defendant argues that she filed the Sur-Reply in the state court in

19 compliance with a prior state court order and the same was intended for the state court to determine that

the payment obligations of the Debtor according to the divorce decree were DSO pursuant to 11 U.S.C.

20 §101(14A) and as such the same were exempted from the automatic stay provisions pursuant to Section

362(b)(2)(A)Gi). Defendant also argues that: “[t]he only language that could be interpreted as a collection

1 effort is in the ‘wherefore’ wherein it was requested that the [state court] order Debtor-Plaintiff to comply

with all the obligations of the divorce decree because these were domestic support obligations” (Docket

No. 50). This court in its March 12, 2013 Opinion and Order (Docket No. 97) in the lead case concluded

22 the following regarding the Sur-Reply and the state court order granting the same: (i) the prayer of the

Sur-Reply requested the state court to order the Debtor to comply with each and every one of the

23 obligations included in the Divorce Petition and Judgment since the same are not dischargeable under the

Bankruptcy Code and form part of valid order of domestic obligations (Docket No. 33, lead case pgs. 4-5);

24 (ii) the state court did not adjudicate whether the various obligations contained in the stipulations were

DSO’s under 11 U.S.C. §101014A) and it may not because that is a matter of federal jurisdiction; and (iii)

25 the state court granted this motion, thus ordering the Debtor to comply with the payments associated with

the obligations included as part of the stipulations of the Divorce Judgment (Docket No. 97, lead case, pgs

26 13-14). The court’s analysis of the Sur-Reply and the state court order is as follows:

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_A-

‘Mrs. Diaz also presented the argument that due to Debtor’s default in his domestic

1 support obligations she had to file in state court a motion requesting an Order directing

the Debtor to pay all domestic support obligations, and the state court rendered an Order

2 granting the same, wherein it is specifically decided that the obligations are non-

dischargeable domestic support obligations that the Debtor must continue to pay post-

3 petition (Docket No. 71, pgs. 2-3). The prayer pertaining to this particular motion

requested the state court to order attorney Melendez to comply with each and every one

4 of the obligations included in the Divorce Petition and Judgment since the same are not

dischargeable under the Bankruptcy Code and form part of valid order of domestic

5 obligations (Docket No. 33-3, pgs. 4-5). However, no particular section of the

Bankruptcy Code was referenced in the prayer of said motion. The state court granted

6 this motion (“Con Lugar’). The state court ordered Mr. Melendez to comply with the

payments associated with the obligations included as part of the stipulations of the

7 Divorce Judgment.

8 The stipulations in the Divorce Petition included both domestic support obligations and

property settlement debts in connection with a separation agreement, which are not

dischargeable debts in an individual Chapter 11 case pursuant to 11 U.S.C. §§ 523(a)(5),

9 523(a)(15) and 1141(d)(2). Debts that are in the nature of alimony, maintenance or

support, and property settlement debts are non-dischargeable in an individual Chapter 11

10 case. The state court did not adjudicate whether the various obligations contained in the

stipulations were domestic support obligations under 11 U.S.C. § 101(14A) and, arguably

11 it may not, as determining if an obligation qualifies as support is a matter of federal

bankruptcy law, not state law. Therefore, the state court decision does not have effect on

12 the matters before the court.” (Docket No. 97, lead case, pgs. 13-14).’

13 On April 4, 2013, this court in its Opinion and Order (Docket No. 21) denied Defendant’s motion

to dismiss this adversary proceeding. The court concluded that the Defendant’s representations to the state

14 court included in the Sur-Reply was a request to compel payment, not for the establishment or clarification

of a domestic support obligation pursuant to 11 U.S.C. §$362(b)(2)(A)Gi). This court stated as follows:

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16 ‘The representations made to the state court are that these obligations constitute

‘domestic support obligations’ and as such are not subject to the automatic stay and are

17 not dischargeable. Thus, according to the representations made by the Defendant to the

state court, the debtor must continue making payment. Clearly, such a request is not for

18 the establishment or clarification of a domestic support obligation. It is a request to

compel payment of the established obligation. The court at this juncture, need only

19 decided whether or not the actions in the subject pleading are excepted under section

362(b)(2)(A) Gi). The court finds that they are not.’ (Docket No. 21, pg. 5).

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This court finds that it has already adjudicated in the negative whether the Defendant’s state court

21 Sur-Reply was exempted under section 362(b)(2)(A)(Gi). The court held that the same was not exempted

9 under section 362(b)(2)(A)(il).

23 Defendant also argues that the Sur-Reply filed in state court is exempted under section

362(b)(2)(B) because “....even t[hJough there was a general request for the obligations to be complied

94 with, there was no specific request for the default to be cured with property of the estate; which falls

within the exception to the automatic stay of [s]ection 362(b)(2)(B).” (Docket No. 50, pg. 9). This court

25 finds that this exception is inapplicable in the instant case for two (2) reasons, namely; (1) the Defendant

sought collection of obligations which this court has determined do not constitute domestic support

26 obligations under section 101(14A); and (ii) all property owned by the Debtor on the date of filing, plus all

earnings from services performed after commencement of the case, but before the case is closed,

7 converted or dismissed is property of the estate pursuant to 11 U.S.C. §§541 and 1115.”

_5-

I Conclusion

2 For the reasons stated herein, the Motion does not establish that there was an intervening

3 change in the controlling law, a clear legal error, or newly discovered evidence. The alleged

‘ factual omissions were considered by the court and rejected. Thus, the Motion is hereby denied.

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SO ORDERED.

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8 In San Juan, Puerto Rico, this 27" day of October, 2014.

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D unitdd states Bankruptcy Judge

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