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Jose Antonio Santiago Vazquez v. Jose Antonio Santiago Vazquez

May 25, 2012

JOSE ANTONIO SANTIAGO VAZQUEZ, A/K/A JOSE A. SANTIAGO VAZQUEZ, A/K/A JOSE SANTIAGO VAZQUEZ, A/K/A JOSE SANTIAGO, A/K/A JOSE A. SANTIAGO, DEBTOR. BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, PLAINTIFF-APPELLANT,
v.
JOSE ANTONIO SANTIAGO VAZQUEZ, DEFENDANT-APPELLEE.



Appeal from the United States Bankruptcy Court for the District of Puerto Rico (Hon. Brian K. Tester, U.S. Bankruptcy Judge) Bankruptcy Case No. 09-01574-BKT Adversary Proceeding No. 10-00088-BKT

The opinion of the court was delivered by: Bailey, U.S. Bankruptcy Appellate Panel Judge.

FOR PUBLICATION

Before Boroff, Deasy, and Bailey, U.S. Bankruptcy Appellate Panel Judges.

Before this Panel are two appeals by Banco Bilbao Vizcaya Argentaria Puerto Rico ("BBVA") from a total of three bankruptcy court orders. The appeals have been consolidated for briefing and oral argument. In the first, BAP No. PR 11-088, BBVA appeals from an order granting the motion of Jose Antonio Santiago Vazquez (the "Debtor") for fees and costs (the "Fee Order") and from a related order, set forth in the same document, denying BBVA's motion for an extension of time to file a surreply to the fee motion (the "Surreply Order"). In the second, BAP No. PR 11-089, BBVA appeals from an order denying its motion to amend the Fee Order (the "Reconsideration Order"). For the reasons set forth below, the Panel concludes: (i) the appeal of the Surreply and Fee Orders is untimely and, therefore, must be DISMISSED; and (ii) that the bankruptcy court did not abuse its discretion in denying BBVA's motion to amend and therefore that the Reconsideration Order must be AFFIRMED.

BACKGROUND

On May 24, 2010, BBVA filed a complaint seeking a denial of the Debtor's discharge (the "Complaint") pursuant to § 727(a)(7)*fn1 (authorizing denial of discharge where "the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case, under this title or under the Bankruptcy Act, concerning an insider"). In the Complaint, BBVA explained that the Debtor is the former president and principal stockholder of J&B Enterprises Inc. ("J&B"), which operated a beauty spa. BBVA financed J&B's acquisition of spa equipment via a loan of $345,080, secured by a lien on the equipment. J&B filed a petition for relief under chapter 7 of the Bankruptcy Code in 2005. The chapter 7 trustee in that case abandoned the spa equipment in 2006, and in that same year that case was closed. From 2005 through 2007, BBVA contended, it unsuccessfully attempted to recover the spa equipment. BBVA alleged that the Debtor, as an insider of J&B and with intent to hinder, delay, or defraud BBVA, transferred, removed, destroyed, mutilated or concealed the spa equipment after J&B filed for bankruptcy relief and thereby committed an act specified in § 727(a)(2) in the J&B case, warranting denial of his discharge in this, his own bankruptcy case.

On January 4, 2011, the Debtor filed a motion to dismiss the Complaint (the "Dismissal Motion") for failure to state a claim on which relief could be granted. He argued that the Complaint failed to state a claim on which relief could be granted because, on the facts alleged - specifically, that the J&B trustee abandoned the J&B property in 2006, and that the J&B case was closed in 2006 - the Debtor cannot have committed an act specified in § 727(a)(2) in the J&B case on or within one year before March 3, 2009, the date of the filing of the Debtor's bankruptcy petition: at no time in the year before March 3, 2009, did the J&B property remain property of the J&B bankruptcy estate. At the conclusion of the Dismissal Motion, the Debtor requested that the Complaint be dismissed and that costs and attorney's fees be imposed for bringing the Complaint against the Debtor.

Initially, BBVA moved for a one-week extension of time to respond to the Dismissal Motion because it was exploring settlement. The court extended the response deadline as requested, but BBVA never filed a response. On March 7, 2011, the court entered a two-sentence order that granted the Dismissal Motion and ordered the Debtor's attorney to "file a motion stating his attorney's fees and costs."*fn2

In accordance with the court's order, on March 24, 2011, the Debtor filed a motion for fees of $7,272.50 and costs of $18.88 (the "Fee Motion"). As justification for the award of fees and costs, the Debtor stated in the Fee Motion only that BBVA's Complaint "was not substantially justified." The Fee Motion did not specify a statutory or other legal basis for the requested award of fees. The Debtor further explained that the fees and costs he requested were reasonable, necessary, and actually incurred in defending the Complaint. The Debtor's counsel attached detailed time entries to the Fee Motion.

On April 26, 2011, BBVA filed an opposition to the Fee Motion in which it argued: (1) that, in the absence of bad faith, statutory authorization, or contractual provision, attorney's fees may not be awarded in an adversary proceeding; (2) that although it made a crucial mistake in understanding the relevant law, BBVA did not act in bad faith; and (3) that there exists no statutory or contractual basis for an award of fees. In its opposition, BBVA did not dispute the amount of the fees and costs that the Debtor had requested but, without an explanation as to why further time was required or warranted, asked the court to afford it more time to do so if the court concluded that an award of fees and costs was appropriate at all.

The Debtor moved for leave to file a reply to BBVA's opposition to the Fee Motion, and the court granted leave.*fn3 In his reply, filed June 15, 2011, the Debtor explained that the Complaint had no basis in law, particularly given BBVA's admissions in its opposition, and the Debtor alleged that, contrary to BBVA's opposition, BBVA had made little attempt to settle the matter. The Debtor further asserted that there was ample authority for the court to impose sanctions; he cited Fed. R. Bankr. P. 9011, 28 U.S.C. § 1927, 11 U.S.C. § 105, and case law that he alleged stands for the proposition that federal courts have the inherent power to sanction misconduct.

On June 22, 2011, BBVA filed a motion to extend the time to file a surreply to July 15, 2011.*fn4 BBVA alleged that the Debtor's reply contained false factual contentions and that its surreply would respond to these and to the "legal arguments in reference to Rule 11."

On July 1, 2011, before BBVA filed a surreply, the bankruptcy court entered, in a single document, orders that denied BBVA's motion for extension of time to file a surreply and granted the Fee Motion. The court did not at this time issue findings and rulings or any explanation of its reasons for these orders.

On July 14, 2011, BBVA moved under Fed. R. Bankr. P. 7052 for issuance of findings of fact and conclusions of law with respect to the Surreply and Fee Orders (the "Rule 7052 Motion").*fn5 On August 31, 2011, the court issued a document entitled Opinion and Order (the "Opinion and Order") in which it provided the requested findings and conclusions and amended the Fee Order in two respects: first, by specifying that the fees and costs were being assessed against both the plaintiff and its counsel,*fn6 and second, by setting a 20-day deadline for payment of the fees and costs. In the Opinion, the court set forth the procedural background, including the numerous extensions that BBVA had obtained during the course of the adversary proceeding. The court cited various authorities--Fed. R. Bankr. P. 7054(b), Fed. R. Bankr. P. 9011, 11 U.S.C. § 105, 28 U.S.C. § 1927, ...


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