Opinion
Civil No. 23-1597(lead case) Civil No. 23-1598 (FAB) Bankr. No. 22-00036 (MCF)
2024-05-09
EL FARMER, INC. et al., Appellants, v. Commonwealth of PUERTO RICO, et al., Appellees.
Homel Mercado Justiniano, Ensanche Martinez, PR, for Appellant El Farmer, Inc. in Nos. 23-1597, 23-1598. Gustavo A. Chico-Barris, Tomas F. Blanco-Perez, Ferraiuoli LLC, San Juan, PR, for Appellant Condado 5 LLC in Nos. 23-1597, 23-1598. Migda Liz Rodriguez-Collazo, Department of Justice of the Government of Puerto Rico of Federal and Bankruptcy Division, San Juan, PR, for Appellee Commonwealth of Puerto Rico in No. 23-1598. Edward W. Hill-Tollinche, The Law Offices of Edward W. Hill, San Juan, PR, for Appellee Department of Agriculture, ORIL in No. 23-1598.
Homel Mercado Justiniano, Ensanche Martinez, PR, for Appellant El Farmer, Inc. in Nos. 23-1597, 23-1598. Gustavo A. Chico-Barris, Tomas F. Blanco-Perez, Ferraiuoli LLC, San Juan, PR, for Appellant Condado 5 LLC in Nos. 23-1597, 23-1598. Migda Liz Rodriguez-Collazo, Department of Justice of the Government of Puerto Rico of Federal and Bankruptcy Division, San Juan, PR, for Appellee Commonwealth of Puerto Rico in No. 23-1598. Edward W. Hill-Tollinche, The Law Offices of Edward W. Hill, San Juan, PR, for Appellee Department of Agriculture, ORIL in No. 23-1598.
MEMORANDUM AND ORDER
BESOSA, Senior District Judge.
Appellants El Farmer, Inc. ("El Farmer") and Condado 5, LLC ("Condado 5") (collectively, "appellants") are engaged in Chapter 12 bankruptcy proceedings before the United States Bankruptcy Court for the District of Puerto Rico ("bankruptcy court"). In re El Farmer, Inc., No. 22-00036, 2023 WL 2603211 (Bankr. D.P.R. Mar. 22, 2023) (Cabán-Flores, Bankr. J.). On October 25, 2023, the bankruptcy court granted Condado 5's unopposed motion to dismiss the case based on El Farmer's material breach of a previously approved stipulation agreement. (Docket No. 9 p. 11.) On November 8, 2023, appellants moved for the bankruptcy court to alter the judgement and reopen the case pursuant to Federal Rule of Civil Procedure 59(e) ("Rule 59(e)"), citing a new interim stipulation agreement that the parties had negotiated. Id. The bankruptcy court denied appellants' Rule 59(e) motion. Subsequently, El Farmer and Condado 5 filed an appeal in this Court. (Docket No. 9.) For the reason set forth below, the disposition of the bankruptcy court is AFFIRMED. I. Procedural Background
The Court takes the following facts from the bankruptcy court record attached to appellants' brief. (Docket No. 9.)
El Farmer, a company that owns and operates a dairy farm in Isabela, Puerto Rico, filed a Chapter 12 petition for bankruptcy relief on January 12, 2022. (Docket No. 9 p. 8.) Condado 5 is El Farmer's principal creditor. Id. Pursuant to a stipulation submitted to and approved by the bankruptcy court, Condado 5 and El Farmer came to an agreement under which El Farmer would satisfy their debt by making certain payments within the timeframe established by the stipulation agreement. Id. at 9. The terms of the stipulation agreement allowed for Condado 5 to move for dismissal of the bankruptcy case should El Farmer default under the payment play laid out in the agreement. Id. app. 418.
While El Farmer's Chapter 12 petition for bankruptcy relief was pending with the bankruptcy court, El Farmer and Condado commenced an adversary proceeding against the Commonwealth of Puerto Rico, the Puerto Rico Department of Agriculture, and the Office for Regulation of the Dairy Industry ("ORIL"). See El Farmer, Inc. v. Dept. of Agric., Adv. Proc. No. 22-067, 2023 WL 2603211, 2023 Bankr. LEXIS 715 (Bankr. D.P.R. Mar. 22, 2023) (Cabán-Flores, Bankr. J.). Condado 5 and El Farmer alleged that regulatory changes set in motion by ORIL would devalue El Farmer's milk quotas, one of its more valuable assets, and therefore damage both Condado 5's ability to collect from El Farmer, and El Farmer's ability to pay off its debts. Id. The bankruptcy court dismissed the adversary proceeding pursuant to the Burford abstention doctrine. Id. El Farmer and Condado 5 filed an appeal in this Court, which resulted in the reversal of the bankruptcy court's dismissal. El Farmer, Inc. v. Puert Rico, No. AP 22-067 (MCF), 2023 WL 6167783 (D.P.R. Sept. 22, 2023)(Besosa, J.)
Known as the "Oficina para la Reglamentación de la Industria Lechera" in Spanish.
On July 30, 2023, while the appeal of the dismissal of adversary proceedings was pending and approximately one week after the bankruptcy court issued a confirmation order approving the stipulation agreement, Condado 5 moved to dismiss the bankruptcy case alleging that El Farmer materially breached the stipulation agreement by failing to make the necessary payments for April and May 2023. (Docket No. 9 app. 429.) El Farmer requested, and was granted, three extensions totaling 90 days in order to respond to Condado 5's motion to dismiss, before ultimately failing to submit any kind of filing. (Docket No. 12 app. 453.) Without a response from El Farmer, the bankruptcy court granted the motion to dismiss without opposition and declined to retain jurisdiction over the adversary proceedings against ORIL. Id.
On November 8, 2023, El Farmer and Condado 5 settled on a new stipulation agreement in order to resolve El Farmer's debt and filed an Interim Stipulation to Cure Arrears alongside Joint Motions to Vacate Order Dismissing Case. (Docket No. 9 app. 458.) Appellants requested, in light of their new agreement and because the issues that had motivated Condado 5's motion to dismiss had been cured, that the bankruptcy court alter its judgment pursuant to Rule 59(e), which is made applicable to bankruptcy proceedings by Bankruptcy Rule 9023, and re-open the case. Id. On November 28, 2023, the Bankruptcy Court entered an order denying the Joint Motions to Vacate Order Dismissing Case. Id. app. 0457. Condado 5 and El Farmer appealed that decision to this Court and ORIL opposed their appeal. (Docket Nos 9, 12.)
II. Standard of Review
Reconsideration of a judgment under Rule 59(e) is an extraordinary remedy, which should be used sparingly and only when the need for justice outweighs the interests set forth by a final judgment. In re Schwartz, 409 B.R. 240, 250 (B.A.P. 1st Cir. 2008). Because Rule 59(e) does not clearly state the grounds on which relief may be granted, courts have "considerable discretion" in deciding whether to grant or deny a motion under the rule. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 55 (1st Cir. 2008). A party moving for relief pursuant to Rule 59(e) must "(1) clearly establish a manifest error of law or fact; (2) clearly establish a manifest injustice; (3) present newly discovered or previously unavailable evidence; or (4) establish an intervening change in controlling law." Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 7 n.2 (1st Cir. 2005); see also In re Nieves Guzmán, 567 B.R. 854, 864 (B.A.P. 1st Cir. 2017) ("[t]o prevail on their [Rule 59(e)] motion then, the Debtors needed to either present to the bankruptcy court newly discovered evidence unavailable prior to the entry of the order, or demonstrate that the bankruptcy court made a manifest error of law or fact.")
A bankruptcy court's order denying a motion for reconsideration of a previous judgement is reviewed by the district court for manifest abuse of discretion. In re Rodríguez, 516 B.R. 177, 183 (B.A.P. 1st Cir. 2014); see also In re San Miguel Sandoval, 327 B.R. 493, 506 (B.A.P. 1st Cir. 2005) (quoting 9E Am. Jur. 2d Bankruptcy § 3512 (2004)) ("[t]he appellate court in a bankruptcy appeal may apply an abuse of discretion standard of review of a decision or action by a bankruptcy court when such decision is within the discretion of the bankruptcy court.") "An abuse of discretion occurs when the trial court ignores a material factor deserving significant weight, relies upon an improper factor, or assesses all proper and no improper factors, but makes a serious mistake in weighing them." Benoit v. Deutsche Bank Nat'l Tr. Co., 564 B.R. 799, 805 (B.A.P. 1st Cir. 2017) (citations omitted). When, as in this instance, the court below has not disclosed the findings and conclusions upon which relief was denied, the Court may sustain "on any independently sufficient ground made manifest by the record." In re Rodríguez, 516 B.R. 177, 183 (B.A.P. 1st Cir. 2014) (quoting Aguiar v. Interbay Funding, LLC (In re Aguiar), 311 B.R. 129, 132 (1st Cir. BAP 2004)) (additional citations omitted).
III. Discussion
As a preliminary matter, appellants' request for oral argument is denied pursuant to Federal Rule of Bankruptcy Procedure 8019(a)(3). The Court finds the facts and legal arguments are adequately presented in the briefs and record, and the decision process would not be significantly aided by oral argument. See Fed. R. Bankr. P. 8019(a)(3).
The sole issue presented before this Court on appeal is whether "the Bankruptcy Court erred and/or abused its discretion in denying the Appellants' Joint Motions to Vacate Order Dismissing Bankruptcy Case . . . after they had settled the dismissal contested matter." (Docket No. 9 p. 5.) Appellants argue that the bankruptcy court abused its discretion by ignoring a material factor that deserved significant weight, specifically the Interim Stipulation to Cure Arrears that was filed alongside their Rule 59(e) motion. Id. Appellants claim the bankruptcy court should have granted their motion to reconsider because settlement agreements are favored within our legal system and bankruptcy courts play an important function in enforcing these agreements. Id. at 12. Appellants further argue that the bankruptcy court ignored the common practice of using Rule 59(e) motions as a vehicle to reopen cases once the debtor shows that arrears have been cured. Id. at 15.
El Farmer and Condado 5 are unable to overcome the abuse of discretion threshold. Admittedly, the order issued by the bankruptcy court does not explain the reason for denying appellants' Rule 59(e) motion. This Court may affirm, however, on any "independently sufficient ground made manifest by the record." In re Rodríguez, 516 B.R. 177, 183 (B.A.P. 1st Cir. 2014) (quoting Aguiar v. Interbay Funding, LLC (In re Aguiar), 311 B.R. 129, 132 (1st Cir. BAP 2004)) (additional citations omitted). Appellants' claim that the bankruptcy court ignored their newly negotiated agreement is unavailing. The sole argument made by appellants before the bankruptcy court was that they had "negotiated the repayment of [the] arrears" (Docket No. 9 app. 457), and that therefore, in order to rule on the motion, the bankruptcy court must necessarily have made a judgment on the Interim Stipulation to Cure Arrears. Furthermore, not only did El Farmer default on its payments pursuant to the original stipulation agreement, but it also failed to oppose Condado 5's motion to dismiss even after receiving three 30-day extensions. This factor alone is an independently sufficient ground for the bankruptcy court to deny reconsideration of its judgment. See e.g., In re Rodríguez, 516 B.R. 177, 185 (B.A.P. 1st Cir. 2014) (holding that multiple failures by the parties to comply with deadlines justified a denial of their motion to reconsider). The bankruptcy court was well within its discretion to find that the Interim Stipulation Agreement was not enough of a change in circumstances to warrant the extraordinary relief contemplated by a Rule 59(e) motion.
IV. Conclusion
For the above reasons the bankruptcy court's dismissal of appellants' Joint Motions to Vacate Order Dismissing Bankruptcy Case is AFFIRMED.