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UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO 

RICO

As representative of

THE COMMONWEALTH OF PUERTO RICO, 

et al.,

Debtors.

NO. 17-BK-3283 (LTS)

Re: ECF No. 2795

PROMESA TITLE III

REPLY BRIEF TO THE “SUPPLEMENTAL BRIEF AND DECLARATION” OF THE 

COMMONWEALTH OF PUERTO RICO (COMMONWEALTH) IN COMPLIANCE WITH 

ORDER OF MARCH 9TH, 2018

To the Honorable United States District Court Judge Laura Taylor Swain:

NOW COME plaintiffs’ (Movants) certified class in cases 02-1179 (GAG) Gladys 

García Rubiera, et al. v. Hon. Luis G. Fortuño, et al; and Gladys García Rubiera, et al, v. 

Asociación de Suscripción Conjunta, et al, Civil Number K DP2001-1441 (801), 

represented by the undersigned counsel and submit their reply to the Commonwealth 

Supplemental Brief as directed by this Honorable Court.

I. DISAGREEMENT WITH PRELIMINARY STATEMENT OF THE COMMONWEALTH

In its Preliminary Statement, the Commonwealth labels Movants as “unsecured 

creditors seeking preferential treatment” vis a vis other creditors without any 

determination as to whether their claims should be allowed. Movants strongly disagree 

with such characterization. 

The Commonwealth also offers to consent to a modification of the stay in order 

that notice and the reimbursement of premiums resolution process may proceed in 

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the local civil case. The Movants decline to agree to such modification, because it 

would be a worthless remedy and, on the contrary, it will damage further the interests 

of Movants. Nothing would be gained by giving notice to the Movants, and yet deny 

the reimbursement of their premiums. Under the Stipulation and Judgment notice is 

ordered to be given so that the class may request reimbursement. Furthermore, there 

are no pending issues relating to the reimbursement process. If a member of the class 

is included in the list of automobile owners entitled to reimbursement, the duty of the 

Secretary of the Treasury pursuant to the Stipulation and Judgment is to reimburse 

said automobile owners once their application is processed. On the other hand, to 

require notification and that the owner proceed with his reimbursement application 

without providing for the corresponding reimbursement would be for owners to incur 

into worthless steps that will discourage and frustrate the reimbursement process.

Movants also disagree that they have not suffered any concrete injury, as alleged 

by the Commonwealth. Movants have already been deprived of their reimbursements 

for a long time1 and their rights cannot further be impaired by any plan of adjustment, 

as Movants are not creditors of debtor in this bankruptcy proceedings.

 

1 The class has suffered enough injury and impairment due to the reluctance of the local and federal lower Courts to 

grant proper remedy. The case has lasted 17 years overcoming dismissal of the class action through successful 

appeals. García-Rubiera v. Asociación Conjunta del Seguro de Responsabilidad Obligatorio, 2004 WL 1562555; 

García-Rubiera v. Asociación Conjunta del Seguro de Responsabilidad Obligatorio, 165 DPR 311 (2005); GarcíaRubiera v. Asociación Conjunta del Seguro de Responsabilidad Obligatorio, 2007 WL 5377629; García-Rubiera v. 

Asociación Conjunta del Seguro de Responsabilidad Obligatorio, 2007 WL 4780687; García-Rubiera v. Asociación 

Conjunta del Seguro de Responsabilidad Obligatorio, 2010 WL 4807486; García-Rubiera v. Asociación Conjunta 

del Seguro de Responsabilidad Obligatorio, 2010 WL 4792335; García-Rubiera v. Asociación Conjunta del Seguro 

de Responsabilidad Obligatorio, 2015 WL 5178179. García-Rubiera v. Flores Galarza, 516 F. Supp. 2d 180 (2007); 

García-Rubiera v. Calderón, 570 F3d 443 (2009); García-Rubiera v. Fortuño, 752 F. Supp. 2d 180 (2010); GarcíaRubiera v. Fortuño, 665 F3d 261 (2011); García-Rubiera v. Fortuño, 873 F. Supp. 2d 421 (2012); García-Rubiera v. 

Fortuño, 727 F3d 102 (2013).

 Meanwhile, vehicle owners have died or moved, forgotten their data as to the vehicles, rendering their 

reimbursement difficult. If finally the reimbursement process is implemented, the recovery of around 10% of the 

reimbursements at this stage is an optimistic estimate to the remedy to be obtained by the affected vehicle owners.

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II. THE FUNDS TO BE REIMBURSED CONSIST OF REIMBURSEMENTS DUE FROM 

1998 TO 2010. NO REIMBURSEMENTS HAVE BEEN ESCHEATED BY THEIR 

TRANSFER TO THE GENERAL FUND OF THE COMMONWEALTH FROM ANY 

“RESERVE” ACCOUNT.

We strongly disagree that the funds received prior to 2006 are the property of the 

Commonwealth. Also disagree that the funds deposited in the reserve account from 

2006 and on for accounting purposes are the property of the debtor’s estate because 

the debtor claims a legal interest over such funds. 

The total amount transferred to the Secretary of the Treasury from “Asociación del 

Seguro Compulsorio de Responsabilidad Obligatorio” (JUA) from 1998 to 2010 are 

the following2:

1998 al 2001: $51,233,517.00

2002-2003: $45,312.301.00

2004-2005: $30,921,358.00 

2006: $9,803,120.00

2007: $11,252,724.00 

2008: $9,853,000.00

2009: $10,541,377.00

2010: $12,006,000.00

TOTAL: $179,943,397.00

Additional amounts were sent to the Secretary of the Treasury for the years 2011 

to 2012 that we are not including because the class was certified up to 2010.

 

2 This information was provided by the debtor in the local litigation. It was also provided by JUA.

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Movants are entitled to receive the total reimbursements for their individual share 

of the amounts held from the years 1998 to 2010, simply because Movants are not 

unsecured creditors of the Commonwealth that have to share in equal terms with the 

rest of the creditors of the debtor within a plan of adjustment. Movants are not seeking 

a claim from debtor’s estate. Movants are seeking recovery of their property which is 

not part of the debtor’s estate. The statement of the Supreme Court of the United 

States in Pearlman v. Reliance Ins. Co., 371 U.S. 132, 135-136 (1962), that: “The 

Bankruptcy Act simply does not authorize a trustee to distribute other people's

property among a bankrupt's creditors” is still valid. This is in spite of the expanded 

definition of the term “property of the estate” under § 541(d) of the Code. U.S. v. 

Whiting Pools, Inc., 462 U.S. 198 (1983).

Here the property of Movants was never transferred to the Commonwealth. The 

possession of the funds was obtained by the Commonwealth with the purpose of 

delivering it to the owners acting as a trustee for that purpose under the terms of Law 

230 of September 11, 2002. See Asociación De Suscripción Conjunta Del Seguro De 

Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 1 (1st Cir. 2007). Such 

property is excluded from the estate of debtor. See U.S. v. Whiting Pools, Inc, supra.

The Supreme Court expressly stated at footnote 8 of the opinion as follows:

Section 541(a)(1) speaks in terms of the debtor's “interests ... in property,” rather 

than property in which the debtor has an interest, but this choice of language was 

not meant to limit the expansive scope of the section. The legislative history 

indicates that Congress intended to exclude from the estate property of others in 

which the debtor had some minor interest such as a lien or bare legal title. See 

124 Cong.Rec. 32399, 32417 (1978) (remarks of Rep. Edwards); id., at 33999, 

34016–34017 (remarks of Sen. DeConcini); cf. § 541(d) (property in which debtor 

holds legal but not equitable title, such as a mortgage in which debtor retained 

legal title to service or to supervise servicing of mortgage, becomes part of estate 

only to extent of legal title); 124 Cong.Rec. 33999 (1978) (remarks of Sen. 

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DeConcini) (§ 541(d) “reiterates the general principle that where the debtor holds 

bare legal title without any equitable interest, ... the estate acquires bare legal title 

without any equitable interest in the property”). Similar statements to the effect that 

§ 541(a)(1) does not expand the rights of the debtor in the hands of the estate 

were made in the context of describing the principle that the estate succeeds to no 

more or greater causes of action against third parties than those held by the debtor. 

See H.R.Rep. No. 95–595, pp. 367–368 (1977). These statements do not limit the 

ability of a trustee to regain possession of property in which the debtor had 

equitable as well as legal title.

And again, at footnote ten (10) the Supreme Court stated:

See, e.g., §§ 543, 547, and 548. These sections permit the trustee to demand the 

turnover of property that is in the possession of others if that possession is due to 

a custodial arrangement, § 543, to a preferential transfer, § 547, or to a fraudulent 

transfer, § 548.

We do not now decide the outer boundaries of the bankruptcy estate. We note only 

that Congress plainly excluded property of others held by the debtor in trust at the 

time of the filing of the petition. See § 541(b); H.R.Rep. No. 95–595, p. 368 (1977); 

S.Rep. No. 95–989, p. 82 (1978). Although it may well be that funds that the IRS 

can demonstrate were withheld for its benefit pursuant to 26 U.S.C. § 7501 

(employee withholding taxes), are excludable from the estate, see 124 Cong.Rec. 

32417 (1978) (remarks of Rep. Edwards) (Service may exclude funds it can trace), 

the IRS did not attempt to trace the withheld taxes in this case. See Tr. of Oral Arg. 

18, 28–29.

The cases cited in our Memorandum in Support for the Lift of Stay reiterated that 

money held in trust by debtor is not part of debtor’s estate. The exclusion applies also to 

constructive trusts. Matter of Haber Oil Co., Inc., 12 F.3d 426 (5th Cir. 1994). This result 

is not altered by any action of the Commonwealth that may have resulted in the 

commingling the funds by depositing the reimbursements in the General Fund. As 

discussed by the First Circuit Court of Appeals in García-Rubiera v. Fortuño, 665 F. 3d. 

261, 278 (2011), the trust continues even after the Secretary has transferred the monies 

to the General Fund. See also García-Rubiera v. Flores Galarza, 516 F.Supp.2d 180, at 

footnote no. 14. And as stated in said footnote, the fact that the Secretary transferred part 

of the money to the General Fund does not bar Movants’ claim seeking the specific 

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remedy of the return of their property (citing Taylor v. Westly, 402 F3d at 974 (2005)). Any 

use of said private monies commingling them with public monies would be 

unconstitutional. Asociación De Suscripción Conjunta Del Seguro De Responsabilidad 

Obligatorio v. Flores Galarza, supra; Com. ex rel. Armstrong v. Collins, 709 S.W.2d 437, 

446-447 (1986); Beshear v. Haydon Bridge Co., Inc., 416 S.W.3d 280 (2013).

The total amount of funds belonging to Movants transferred to the Commonwealth 

by Law 230, remains the private property of Movants and have not escheated to the 

government as they were unconstitutionally deprived of their funds without proper notice.

Taylor v. Westly, 402 F.3d 924 (2005). The Stipulation and Judgment recognizes this 

legal result and agreed to return all funds from 1998 to 2010.

The Commonwealth accepts that the funds for the years 2006 to 2010 are 

deposited in a “reserve account for accounting purposes”. The sums from to 2006 to 2010 

amount to $53,456,101.00. Although they may be in a “reserve account for accounting 

purposes” or in the General Fund, these funds are part of the funds to be reimbursed. 

III. CONCLUSION 

The funds subject to the Stipulation and Judgment entered in local case K DP2001-

1441 amounting to around $179,943,397.00 are the property of Movants and are not part 

of the estate of debtor. Therefore, Movants do not have to share their funds with the rest 

of the creditors in a future adjustment of the debts of the Commonwealth. Neither the 

funds have been escheated and could not have been based on constitutional principles 

in the absence of a proper constitutional notice. Neither the fact that some of them may 

have been deposited in the General Fund is of any consequence.

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WHEREFORE it is respectfully requested from the Honorable Court that the 

Lift of Stay be GRANTED, and Movants may be allowed to proceed to execute the 

Stipulation and Judgment on all its terms.

RESPECTFULLY SUBMITTED 

CERTIFICATE OF SERVICE

I hereby certify that, on March 28, 2018, I electronically filed the foregoing with the Clerk 

of the Court using the CM/ECF system, which will send notification of such filing to all 

counsel of record and parties in the Master Service List. 

In San Juan, Puerto Rico, March 28, 2018.

s/ Antonio J. Amadeo Murga s/ Mario M. Oronoz Rodríguez

USDC-PR No. 110103 USDC-PR No. 120606

A.J. AMADEO MURGA LAW OFFICES ORONOZ & ORONOZ

1225 Ponce de León, Ave. Urb. Torrimar, K-4 Bambú St.

Ste. 904 Guaynabo, PR 00966-3109

San Juan, PR 00907 Tel. (787)294-5255 

Tel. (787)764-0893 mmo@oronozlaw.com

ajaamadeo@gmail.com

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