082917 MEM ORDER RE DIAZ CASTRO LIFT STAY VERSION AUGUST 29, 2017 1 

UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO 

----------------------------------------------------------x 

In re: PROMESA 

 Title III 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of No. 17 BK 3283-LTS 

THE COMMONWEALTH OF PUERTO RICO, (Jointly Administered) 

et al., 

 Debtors.1

----------------------------------------------------------x 

MEMORANDUM ORDER DENYING 

MARIA J. DIAZ CASTRO’S URGENT MOTION FOR RELIEF FROM STAY (DOCKET ENTRY NO. 849)

Before the Court is a motion filed by Maria J. Diaz Castro (the “Movant”) for 

relief from the automatic stay imposed by the filing of the above-captioned Title III case in a 

money damages action, as a result of her wrongful imprisonment, commenced on October 25, 

2016 in the District Court for the District of Puerto Rico, against the Commonwealth of Puerto 

Rico and certain inhabitants of Puerto Rico in their personal capacity, captioned Maria Judith 

Díaz-Castro, representing her minor age son W.C.D. v. Commonwealth of Puerto Rico, et al., 

Civil Case No. 16-2873 (the “Lawsuit”). Although the Court is deeply mindful of the serious 

nature of the factual allegations underlying the Lawsuit, the Movant has not made the requisite 

 

1

 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case 

number and the last four (4) digits of each Debtor’s federal tax identification number, as 

applicable, are the (i) Commonwealth of Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) 

(Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation 

(“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 

8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy Case No. 

17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); and (iv) Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 

17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686). (Title III case numbers are listed 

as Bankruptcy Case numbers due to software limitations). 

Case:17-03283-LTS Doc#:1205 Filed:08/29/17 Entered:08/29/17 17:28:41 Desc: Main

Document Page 1 of 5

3:17-BK-3283 (LTS) Aversary Proceeding

Exhibit C

Case:17-03283-LTS Doc#:21821-3 Filed:08/12/22 Entered:08/12/22 10:24:18 Desc:

Exhibit Exhibit C Page 1 of 5
082917 MEM ORDER RE DIAZ CASTRO LIFT STAY VERSION AUGUST 29, 2017 2 

showing of cause for relief from the automatic stay and, for the reasons explained below, her 

motion is denied. 

BACKGROUND

Movant, the named Plaintiff in the Lawsuit, which was filed against the 

Commonwealth of Puerto Rico (the “Commonwealth” or the “Debtor”), the Commonwealth’s 

Department of Justice attorneys and a police officer, among other inhabitants of the 

Commonwealth who are alleged to have wronged Movant while acting as agents of the 

Commonwealth, in their personal capacities, seeks to continue to prosecute the Lawsuit. (Case 

No. 17-3283, Docket Entry No. 849, Urgent Motion for Relief from Stay (the “Motion”), ¶¶ 1 & 

3.) In the Lawsuit, Movant seeks $30 million in money damages in connection with her 

allegedly wrongful conviction and subsequent lengthy incarceration. Movant asserts that she is 

not a creditor of the Commonwealth because her claim will be excluded from a bankruptcy 

discharge. (Id. ¶ 3.) Movant further asserts that there are defendants being sued in their personal 

capacities. (Id.) On August 16, 2017, the Commonwealth filed its objection (the “Debtor’s 

Objection”) to the Motion. (Case No. 17-3283, Docket Entry No. 1060.) Movant did not file a 

reply to the Debtor’s Objection. The Court has reviewed the submissions thoroughly. 

The Debtor argues that the Motion must be denied for several reasons, including 

interference with the “breathing space” needed by the Commonwealth to formulate and 

implement procedures for efficient management of pending litigation and the claims process, and 

burdens on Debtor resources that would be occasioned by resumption of the litigation of the 

Lawsuit. The Debtor proffers that the parties were in the middle of discovery, which was 

scheduled to continue through September 22, 2017, when the Commonwealth filed its Title III 

Case:17-03283-LTS Doc#:1205 Filed:08/29/17 Entered:08/29/17 17:28:41 Desc: Main

Document Page 2 of 5

3:17-BK-3283 (LTS) Aversary Proceeding

Exhibit C

Case:17-03283-LTS Doc#:21821-3 Filed:08/12/22 Entered:08/12/22 10:24:18 Desc:

Exhibit Exhibit C Page 2 of 5
082917 MEM ORDER RE DIAZ CASTRO LIFT STAY VERSION AUGUST 29, 2017 3 

petitions, and that dispositive motions were to be filed 30 days following the conclusion of 

discovery. (Debtor’s Objection, ¶ 7.) The Debtor further proffers that the first settlement 

conference was not scheduled to occur until February 21, 2018, with a jury trial to begin on May 

11, 2018. (Id. ¶¶ 7 & 9.) The Debtor asserts that there is no applicable insurance coverage for 

the claims raised in the Lawsuit, and also argues that, notwithstanding the naming of the 

individual defendants as persons sued in their individual capacities, the action is subject in its 

entirety to the stay imposed by 11 U.S.C. Sections 362 and 922, as it is brought against the 

Commonwealth and inhabitants of the Commonwealth and seeks to enforce a claim against the 

Commonwealth. (Id. ¶ 16 & 17.) 

DISCUSSION

Section 362(a) of the Bankruptcy Code, made applicable by Section 301(a) of 

PROMESA, 48 U.S.C. § 2161, imposes an automatic stay on “the commencement or 

continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that 

was or could have been commenced before the commencement of the case under this title . . . .” 

11 U.S.C. § 362(a)(1); see also PROMESA § 301(a) (incorporating 11 U.S.C. § 362 into Title III 

cases). Section 922(a)(1), made applicable by Section 301(a) of PROMESA, 48 U.S.C. § 2161, 

stays actions and proceeding against officers or inhabitants of a Title III debtor that seek to 

enforce claims against the Debtor. These stays apply here to Movant’s claims against the 

Commonwealth, the Commonwealth’s Department of Justice and police department, and the 

Commonwealth’s inhabitants who are sued for actions taken as agents of the Commonwealth. 

Section 362(d)(1) of Title 11 of the United States Code, made applicable in these 

proceedings by Section 301 of PROMESA, 48 U.S.C. § 2161, permits a court to grant relief from 

Case:17-03283-LTS Doc#:1205 Filed:08/29/17 Entered:08/29/17 17:28:41 Desc: Main

Document Page 3 of 5

3:17-BK-3283 (LTS) Aversary Proceeding

Exhibit C

Case:17-03283-LTS Doc#:21821-3 Filed:08/12/22 Entered:08/12/22 10:24:18 Desc:

Exhibit Exhibit C Page 3 of 5
082917 MEM ORDER RE DIAZ CASTRO LIFT STAY VERSION AUGUST 29, 2017 4 

the automatic stay “for cause.” To determine whether cause exists to lift the bankruptcy stay, 

courts in this district examine the factors first enumerated by the United States Court of Appeals 

for the Second Circuit in In re Sonnax Indus., Inc., 907 F.2d 1280, 1286 (2d Cir. 1990) 

(“Sonnax”). See, e,g., Brigade Leveraged Capital Structures Fund Ltd. v. Garcia-Padilla, 217 F. 

Supp. 3d 508, 518 (D.P.R. 2016) (citing Sonnax). Of particular relevance to the instant case are 

the following factors identified by the Sonnax Court: “whether relief would result in a partial or 

complete resolution of the issues,” “lack of any connection with or interference with the 

bankruptcy case,” “the interests of judicial economy and the expeditious and economical 

resolution of litigation,” “whether litigation in another forum would prejudice the interests of 

other creditors,” and the “impact of the stay on the parties and the balance of harms.” Sonnax, 

907 F.2d at 1286. 

Movant has not demonstrated that the Sonnax criteria weigh in her favor with 

respect to the continuation of the Lawsuit. Continuation of the Lawsuit would not necessarily 

result in an expeditious resolution of Movant’s claims. Rather, the Lawsuit is far from ready for 

trial; furthermore, any remaining pretrial proceedings and a trial would require the expenditure of 

Debtor resources and potentially disrupt the claims resolution process established by the 

bankruptcy code and incorporated into PROMESA. The interests of judicial economy and of the 

expeditious resolution of litigation are not served by permitting the Lawsuit to continue. 

Movant’s unsecured claims for monetary relief can be liquidated and addressed through the 

claims process in this district court proceeding. Movant has not demonstrated that the harm from 

delay of liquidation of her claim outweighs the burden that would accrue to the Debtor by 

recommencement of full litigation of the Lawsuit in the near term. 

Case:17-03283-LTS Doc#:1205 Filed:08/29/17 Entered:08/29/17 17:28:41 Desc: Main

Document Page 4 of 5

3:17-BK-3283 (LTS) Aversary Proceeding

Exhibit C

Case:17-03283-LTS Doc#:21821-3 Filed:08/12/22 Entered:08/12/22 10:24:18 Desc:

Exhibit Exhibit C Page 4 of 5
082917 MEM ORDER RE DIAZ CASTRO LIFT STAY VERSION AUGUST 29, 2017 5 

Accordingly, the Court concludes that Movant has not demonstrated that cause 

exists for the automatic stay to be lifted to allow the Lawsuit to proceed. Movant’s motion for 

relief from the automatic stay is denied. 

CONCLUSION

For the foregoing reasons, Movants’ motion for relief from the automatic stay is 

denied. The automatic stay continues in place as against all defendants in the Lawsuit. See 11 

U.S.C. §§ 362(a) and 922(a). This Memorandum Order resolves docket entry no. 849 in case no. 

17-3283. 

 SO ORDERED. 

Dated: August 29, 2017 

 /s/ Laura Taylor Swain 

 LAURA TAYLOR SWAIN

 United States District Judge 

Case:17-03283-LTS Doc#:1205 Filed:08/29/17 Entered:08/29/17 17:28:41 Desc: Main

Document Page 5 of 5

3:17-BK-3283 (LTS) Aversary Proceeding

Exhibit C

Case:17-03283-LTS Doc#:21821-3 Filed:08/12/22 Entered:08/12/22 10:24:18 Desc:

Exhibit Exhibit C Page 5 of 5