1

UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO 

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

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.,

Debtors.1

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

PROMESA

Title III

No. 17 BK 3283-LTS

Re: ECF No. 2434

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of 

THE COMMONWEALTH OF PUERTO RICO

Debtor.

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

PROMESA

Title III

No. 17 BK 3283-LTS

This Objection relates only to 

the Commonwealth and shall 

only be filed in the lead Case No. 

17 BK 3283-LTS.

OBJECTION OF THE COMMONWEALTH TO 

MOTION REQUESTING RELIEF OF STAY UNDER 362(D)(1) 

OF THE BANKRUPTCY CODE FILED BY GLADYS GARCIA RUBIERA, ET AL.

 

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); (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); and (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-

LTS) (Last Four Digits of Federal Tax ID: 3747). (Title III case numbers are listed as Bankruptcy Case numbers 

due to software limitations).

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TABLE OF CONTENTS

Preliminary Statement.......................................................................................6

Objection.......................................................................................................7

Conclusion....................................................................................................17

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TABLE OF AUTHORITIES

Page(s)

CASES

Assoc. of St. Croix Condo Owners v. St. Croix Hotel Corp.,

682 F.2d 446 (3d Cir. 1982)...............................................................................9

Brigade Leveraged Capital Structures Fund Ltd. v. Garcia-Padilla,

217 F. Supp. 3d 508 (D.P.R. 2016)..................................................................10

Delpit v. Commissioner,

18 F.3d 768 (9th Cir. 1994) ...............................................................................9

Disciplinary Board of the Supreme Court of Pa. v. Feingold (In re Feingold),

730 F.3d 1268 (11th Cir. 2013) .......................................................................16

García-Rubiera v. Fortuño,

727 F.3d 102 (1st Cir. 2013)............................................................................14

In re 234-6 West 22nd St. Corp.,

214 B.R. 751 (Bankr. S.D.N.Y. 1997)...............................................................9

In re Breitburn Energy Partners LP,

No. 16-10992, 2017 WL 1379363 (Bankr. S.D.N.Y. Apr. 14, 2017)..............10

In re City of Stockton,

484 B.R. 372 (Bankr. E.D. Cal. 2012).......................................................11, 12

In re Cuba Electric & Furniture Corp.,

430 F. Supp. 689 (D.P.R. 1977).......................................................................11

In re Cummings,

221 B.R. 814 (Bankr. N.D. Ala. 1998) ............................................................13

In re Haas,

Case No. 04–11534, 2004 WL 3132027 (Bankr. E.D. Va. Dec. 22, 2004).....16

In re Jefferson Cty.,

491 B.R. 277 (Bankr. N.D. Ala. 2013) ..............................................................8

In re Motors Liquidation Co.,

No. 09-50026, 2010 WL 4630327 (S.D.N.Y. 2010)........................................12

In re Mu’min,

374 B.R. 149 (Bankr. E.D. Pa. 2007) ........................................................11, 16

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In re Murrin,

477 B.R. 99 (D. Minn. 2012)...........................................................................13

In re Neilsen,

443 B.R. 718 (Bankr. W.D. Va. 2011) ............................................................16

In re Plumberex Specialty Prod., Inc.,

311 B.R. 551 (Bankr. C.D. Cal. 2004).............................................................11

In re Residential Capital LLC,

2012 Bankr. LEXIS 3777 (Bankr. S.D.N.Y. 2012).........................................16

In re Residential Capital, LLC,

No. 12-12020, 2012 WL 3860586 (Bankr. S.D.N.Y. Aug. 8, 2012).........11, 12

In re Shayeb,

211 B.R. 390 (Bankr. D. Ariz. 1997)...............................................................16

In re Taub,

413 B.R. 55 (Bankr. E.D.N.Y. 2009)...............................................................12

In re Unanue-Casal,

159 B.R. 90 (D.P.R. 1993)...........................................................................9, 10

Jackson v. GMAC Mortg., LLC,

2013 U.S. Dist. LEXIS 181066 (S.D. Ala. Dec. 30, 2013) .............................16

Mass. Dep’t of Revenue v. Crocker (In re Crocker),

362 B.R. 49 (B.A.P. 1st Cir. 2007)....................................................................8

Montalvo v. Autoridad de Acueductos y Alcantarillados (In re Montalvo),

537 B.R. 128 (Bankr. D.P.R. 2015)...................................................................8

Peaje Invs. LLC v. Garcia-Padilla,

2016 U.S. Dist. LEXIS 153711 (D.P.R. Nov. 2, 2016)...................................10

Publicker Indus. Inc. v. United States (In re Cuyahoga Equip. Corp.),

980 F.2d 110 (2d Cir. 1992).............................................................................15

Soares v. Brockton Credit Union (In re Soares)

107 F. 3d 969 (1st Cir. 1997).............................................................................8

Sonnax Indus., Inc. v. TriComponent Prods. Corp. (In re Sonnax Indus., Inc.),

907 F.2d 1280 (2d Cir. 1990).......................................................................9, 10

Unisys Corp. v. Dataware Prods.,

Inc., 848 F.2d 311 (1st Cir. 1988)......................................................................8

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STATUTES

26 L.P.R.A. § 8055 ................................................................................................14

11 U.S.C. § 362(a) ...................................................................................................7

11 U.S.C. § 362(d)...................................................................................................7

11 U.S.C. § 362(d)(1) ..............................................................................................9

Compulsory Liability Insurance for Motor Vehicle Act ........................................15

PROMESA § 301(a) ..........................................................................................9, 13

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

The Commonwealth of Puerto Rico (the “Commonwealth”) respectfully submits this

objection (the “Objection”) to the Motion Requesting Relief of Stay Under 362(d)(1) of the 

Bankruptcy Code [ECF No. 2434] (the “Motion”) filed by the certified class (collectively, 

“Movants”) in the cases captioned Gladys García Rubiera, et al. v. Hon. Luis G. Fortuño, et al, 

Case No. 02-1179 (GAG) before the United States District Court for the District of Puerto Rico, 

and Gladys García Rubiera, et al, v. Asociación de Suscripción Conjunta, et al, Civil Number K 

DP2001-1441 before the Puerto Rico First Instance Court (the “Prepetition Actions”). The 

Commonwealth respectfully requests that the Court deny the Motion for the reasons set forth 

below.2

PRELIMINARY STATEMENT

1. On February 7th, 2018, Movants filed the Motion seeking relief from the stay and

the enforcement of two stipulations between the Movants and the Commonwealth entered into

prior to the commencement of this Title III case. At its core, the Motion is a claim by prepetition, 

unsecured creditors seeking preferential treatment to collect on their prepetition claims against the 

Commonwealth, without any determination as to whether such claims should be allowed, impaired 

or discharged in the Title III proceeding. This is not a case where Movants are seeking to lift the 

automatic stay to continue litigating prepetition causes of action. Rather, Movants are seeking 

relief from the automatic stay to collect on money judgments, in an attempted end run around the 

Title III process and the confirmation of a plan of adjustment.

 

2 The Financial Oversight and Management Board for Puerto Rico, as the Debtors’ representative pursuant to 

section 315(b) of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), has 

authorized the Department of Justice to file this Objection on behalf of the Commonwealth. 

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2. As further explained below, the Motion should be denied as Movants have failed 

to show “cause” exists to lift or modify the automatic stay under section 362(d) of title 11 of the 

United States Code (the “Bankruptcy Code”). Lifting the automatic stay would result in the 

Commonwealth having to expend valuable resources and pay out significant amounts of money 

from its General Fund both to comply with the reimbursement procedures required by the 

stipulations and to satisfy Movants’ prepetition claims, before it has been determined whether they 

will be impaired and discharged under a plan of adjustment. This will result in valuable resources 

being diverted from its recovery and reorganization efforts, and potentially result in Movants 

receiving an unjustifiable windfall compared to other creditors. Moreover, Movants have failed 

to show any harm they would suffer from maintaining the automatic stay, while the 

Commonwealth would be forced to divert critical resources to the fulfillment of prepetition, 

unsecured claims. Therefore, it is respectfully submitted that the Motion be denied.

OBJECTION

I. MOVANTS HAVE FAILED TO ESTABLISH CAUSE EXISTS TO LIFT THE 

STAY

3. Upon commencement of a Title III case, Bankruptcy Code section 362(a), made 

applicable by PROMESA section 301(a), provides for a stay of certain actions by non-debtor third 

parties including, among other things, the enforcement against the debtor “of a judgment obtained 

before the commencement of the case” and “any act to collect, assess, or recover a claim against 

the debtor that arose before the commencement of the case.” 11 U.S.C. § 362(a). The application 

of Bankruptcy Code section 362(a) to the Commonwealth’s Title III case was specifically 

confirmed by this Court pursuant to the Order Pursuant to PROMESA Section 301(a) and 

Bankruptcy Code Sections 105(a), 362(a), 365 and 922 Confirming (I) Application of the 

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Automatic Stay to Government Officers, Agents, and Representatives, (II) Stay of Prepetition 

Lawsuits, and (III) Application of Contract Protections [ECF No. 543] (the “Title III Stay Order”).

4. “The automatic stay is among the most basic of debtor protections under 

bankruptcy law.” Soares v. Brockton Credit Union (In re Soares) 107 F. 3d 969, 975 (1st Cir.

1997) (citing Midlantic Nat’l Bank v. New Jersey Dep’t of Envtl. Protection, 474 U.S. 494, 503 

(1986)). The stay “is extremely broad in scope and, ‘aside from the limited exceptions of 

subsection (b), applies to almost any type of formal or informal action taken against the debtor or 

the property of the estate.’” Montalvo v. Autoridad de Acueductos y Alcantarillados (In re 

Montalvo), 537 B.R. 128, 140 (Bankr. D.P.R. 2015). The broad scope of the automatic stay serves 

the cardinal purposes of bankruptcy and provides the debtor with a “breathing spell” essential to 

(a) the preservation of the debtor’s property for the collective benefit of the creditors and (b) the 

debtor’s ability to administer its case and engage in restructuring efforts without undue distraction 

or interference. See Unisys Corp. v. Dataware Prods., Inc., 848 F.2d 311, 313 (1st Cir. 1988) 

(“[T]he automatic stay gives the debtor a ‘breathing spell from his creditors’ and forestalls a ‘race 

of diligence by creditors for the debtor’s assets.’” (citation omitted)); In re Jefferson Cty., 491 B.R. 

277, 285 (Bankr. N.D. Ala. 2013) (explaining that a key purpose of municipal bankruptcy is “the 

breathing spell provided by the automatic stay” and stating “[i]f the automatic stay is to be lifted 

routinely to allow claimants to assert their claims in state court, a municipality will not have the 

time, opportunity or ability to confirm a plan”); Mass. Dep’t of Revenue v. Crocker (In re Crocker), 

362 B.R. 49, 56 (B.A.P. 1st Cir. 2007) (quoting H.R. Rep. No. 95-595 at 340 (1977)) (“[O]ne of 

the fundamental purposes of the automatic stay is to give the debtor ‘a breathing spell from his 

creditors’ and ‘to be relieved of the financial pressures that drove him into bankruptcy.’”); Assoc. 

of St. Croix Condo Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448 (3d Cir. 1982) (“[The 

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automatic stay] permits the debtor to attempt a repayment or reorganization plan or simply to be 

relieved from the financial pressures that drove him into bankruptcy.”); Delpit v. Commissioner, 

18 F.3d 768 (9th Cir. 1994) (“Congress intended to give debtors a breathing spell from their 

creditors and to stop all collection efforts, all harassment, and all foreclosure actions.”) (internal 

quotes and citations omitted) (emphasis added).

5. An order lifting the automatic stay is an “extraordinary remedy.” In re 234-6 West 

22nd St. Corp., 214 B.R. 751, 757 (Bankr. S.D.N.Y. 1997). Bankruptcy Code section 362(d)(1), 

made applicable by PROMESA section 301(a), provides that a court may grant relief from the 

automatic stay “for cause.” See 11 U.S.C. § 362(d)(1). “Cause” is not defined in the Bankruptcy 

Code. In re Unanue-Casal, 159 B.R. 90, 95–96 (D.P.R. 1993), aff’d 23 F.3d 395 (1st Cir. 1994). 

To determine whether “cause” exists to grant relief from the stay, courts examine numerous 

different factors, including those set forth in Sonnax Indus., Inc. v. TriComponent Prods. Corp. (In 

re Sonnax Indus., Inc.), 907 F.2d 1280, 1286 (2d Cir. 1990):

(1) whether relief would result in complete or partial resolution of the issues; 

(2) the lack of any connection with or interference with the bankruptcy case; 

(3) whether the foreign proceeding involves the debtor as fiduciary; 

(4) whether a specialized tribunal has been established to hear the cause of action at issue; 

(5) whether the debtor’s insurance carrier has assumed full financial responsibility for 

defending the litigation;

(6) whether the action essentially involves third parties rather than the debtor;

(7) whether the litigation could prejudice the interest of other creditors;

(8) whether a judgment in the foreign action is subject to equitable subordination;

(9) whether movant’s success in the foreign proceeding would result in a judicial lien 

avoidable by the debtor;

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(10) the interest of judicial economy and the expeditious and economical determination of 

litigation for the parties;

(11) whether the foreign proceedings have progressed to the point where the parties are 

prepared for trial; and

(12) the impact of the stay on the parties and the “balance of hurt.”

In re Sonnax Indus., 907 F.2d at 1286.

6. Courts in this Circuit have adopted these “Sonnax factors.” See Brigade Leveraged 

Capital Structures Fund Ltd. v. Garcia-Padilla, 217 F. Supp. 3d 508, 518 (D.P.R. 2016) (“To help 

guide their analysis of whether to enforce or vacate the stay, some courts, including those in this 

district, have relied upon a laundry list of assorted factors.” (citing Sonnax, at 1286; C & A, S.E. 

v. P.R. Solid Waste Mgmt. Auth., 369 B.R. 87, 94-5 (D.P.R. 2007)); In re Unanue-Casal, 159 B.R. 

at 95–96; Peaje Invs. LLC v. Garcia-Padilla, 2016 U.S. Dist. LEXIS 153711, at *13 (D.P.R. Nov. 

2, 2016). 

7. No one factor is dispositive; instead, courts “engage in an equitable, case-by-case 

balancing of the various harms at stake” and will lift the stay only if the harm engendered by 

allowing the stay to remain in place outstrips the harm caused by lifting it. Brigade, 217 F. Supp. 

3d at 529 n.12. Movants bear the burden of establishing cause, id., and when the movant is not a 

secured claimholder asserting a lack of adequate protection, that burden is a high one. See In re 

Breitburn Energy Partners LP, No. 16-10992, 2017 WL 1379363, at *4 (Bankr. S.D.N.Y. Apr. 

14, 2017).

8. Movants have not established that cause exists to lift the Title III Stay. Indeed, 

Movants are merely seeking to collect on a money judgment, would directly contradict the very 

purpose of the stay, which is “to prevent interference with, or diminution of, the debtor’s property.” 

In re Cuba Electric & Furniture Corp., 430 F. Supp. 689 (D.P.R. 1977); see also In re Mu’min, 

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374 B.R. 149, 162 (Bankr. E.D. Pa. 2007) (allowing creditors to get a “head start on collection [is] 

precisely what the Bankruptcy Code was designed to prevent so that creditors could share equally 

in the distribution of available assets.”) The Sonnax factors point squarely toward maintaining the 

automatic stay and against awarding the remedy Movants seek here. First, forcing the 

Commonwealth to pay out the reimbursements and abide by the procedures sought by Movants 

would interfere with its Title III case and the overall restructuring and recovery effort by diverting 

the Commonwealth’s attention and resources away from its restructuring and the provision of 

essential services and toward the payment of prepetition creditors. Accordingly, the second 

Sonnax factor supports denial of the Motion. See, e.g., In re Residential Capital, LLC, No. 12-

12020, 2012 WL 3860586, at *6 (Bankr. S.D.N.Y. Aug. 8, 2012) (denying lift-stay motion in part 

because “[t]he new litigation in non-bankruptcy courts would hinder the Debtors’ attempts to 

reorganize by forcing the Debtors to utilize time and resources that would otherwise be spent in 

resolution of the Debtors’ chapter 11 cases.”); In re City of Stockton, 484 B.R. 372, 378 (Bankr. 

E.D. Cal. 2012) (denying lift-stay motion where it would consume the time and attention of the 

debtor’s officers).

9. Second, Sonnax factor seven weighs in favor of denying the Motion because lifting 

the automatic stay would prejudice other creditors. Any time and money consumed by the 

enforcement of the judgments is time and money diverted from the overall recovery and 

reorganization of the Commonwealth and from the ultimate distribution to other creditors, a factor 

that numerous courts have recognized counsels against the lifting of a bankruptcy stay. See, e.g., 

In re Plumberex Specialty Prod., Inc., 311 B.R. 551, 563-64 (Bankr. C.D. Cal. 2004) (rejecting 

effort to lift stay in part because “the cost of protracted litigation of a separate proceeding in a nonbankruptcy forum would prejudice the interests of other creditors of the estate”); In re Residential 

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Capital, 2012 WL 3860586, at *6 (holding that “[o]ther creditors are further prejudiced by 

litigation of the California Actions because such litigation will diminish the estate’s assets, 

resulting in a smaller distribution under a chapter 11 plan of reorganization” and denying lift-stay 

motion); In re Motors Liquidation Co., No. 09- 50026, 2010 WL 4630327, at *4 (S.D.N.Y. 2010) 

(finding no abuse of discretion where bankruptcy court concluded in denying lift-stay motion that 

“allowing Appellant to proceed with the ERISA suit would force [debtor] to expend estate 

resources to defend that” and thus “would prejudice the interests of other creditors”); see also In 

re City of Stockton, 484 B.R. at 379 (declining to lift stay in part because it “will deplete the coffers 

of the City treasury”).

10. Third, the first Sonnax factor—whether relief would result in complete or partial 

resolution of the issues—far from supporting the Movants’ contentions, instead militates against 

the lifting of the stay. The Movants assert that “the lifting of the stay would [] result in the complete 

resolution of the issues in the long-protracted cases.” Memorandum by Plaintiffs’ Class in Support 

of Request for Relief From the Automatic Stay Pursuant to PROMESA’s Sections 4, 7, 301(c)(3) 

and Bankruptcy Codes Sections 362(d)(1), ECF No. 2434-1 at 8. However, the first Sonnax factor 

does not focus on the issues in the stayed litigation, contrary to the Movants’ arguments. Indeed, 

if it did, the first Sonnax factor would always favor lifting the stay because every lawsuit eventually 

resolves the issues in that particular proceeding. Instead, the first Sonnax factor primarily focuses 

on whether the separate litigation would expeditiously resolve issues relevant to the bankruptcy 

case. See, e.g., In re Taub, 413 B.R. 55, 62 (Bankr. E.D.N.Y. 2009) (lifting the stay because nonbankruptcy litigation “would resolve significant open issues in the Debtor's bankruptcy case, and 

would assist the Debtor in pursuing the confirmation of a [] plan”). Accordingly, many courts 

characterize this factor as whether the non-bankruptcy proceeding would result in “the resolution 

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of preliminary bankruptcy issues.” See, e.g., In re Murrin, 477 B.R. 99, 109 (D. Minn. 2012); In 

re Cummings, 221 B.R. 814, 818 (Bankr. N.D. Ala. 1998). Here, the lifting of the stay would not 

resolve any issues relevant to the Commonwealth’s Title III plan of adjustment – indeed, if 

anything, it would short-circuit the resolution of bankruptcy issues by foreclosing on the 

impairment and discharge of Movants’ claims. Therefore, the first Sonnax factor actually supports 

the denial of the Motion. 

11. Fourth, the Movants have not stated any harm they would suffer from the denial of 

the Motion or the continued applicability of the stay. The stay simply maintains the status quo of 

the Prepetition Actions and does not adversely impact Movants in the slightest. In addition, nothing 

in the Motion suggests the existence of any exigent circumstances such that time is of the essence

(indeed, the pace at which the Prepetition Actions have dragged on for years, if anything, suggests 

the opposite). On the other hand, the Commonwealth will suffer harm from the distraction and 

encumbrance on the Commonwealth’s resources if the stay is lifted. Thus, the balance of equities 

(embodied by the twelfth Sonnax factor) tips in favor of denying the Motion.

12. Finally, Movants argue that the automatic stay should be lifted due to the third 

Sonnax factor—whether the other proceeding involves the debtor as a fiduciary. This is because 

the Movants assert that the property that will used to satisfy their claims is merely held by the 

Commonwealth on trust and as a fiduciary, and thus is excluded from the property of the estate 

due to Bankruptcy Code section 541(d)—a section of the Bankruptcy Code that is not even 

incorporated into PROMESA. See PROMESA § 301(a). 

13. Movants’ arguments on the Sonnax’s third factor fail for various reasons. First, it 

is clear, and not denied by Movants, that Movants’ claims encompass the years 1998-2010, and 

thus, pursuant to the governing statute, any payments to the Movants (or, at the very least, a large

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part of them) will come from the General Funds of the Commonwealth.3 Therefore, the lifting of 

the stay sought by the Movants will directly result in the expenditure of money the Commonwealth 

owns. Second, the stipulations the Movants seek to enforce require the Commonwealth to incur 

significant administrative expenses. Among other things, the Commonwealth is required to (a) 

send, at its own cost and by first class mail, a notice to all members of the class; (b) publish, at its 

own cost and in a website to which vehicle owners can have ready access, the lists for the years 

1998 to 2010 that the Department of the Treasury received of the vehicle owners; (c) publish, at 

its own cost, in the newspapers El Nuevo Día and The San Juan Star, once a week for six 

consecutive weeks, a full-page notice; and (d) for a four-week period, twice a day and ten times 

per week, broadcast a radio notice on WKAQ, Radio Isla and Radio Oro containing a summary of 

the terms of this stipulation and the manner in which potential claimants may apply for 

reimbursement. See ECF No. 2517-1 at ¶ 6.C. On top of that, the Commonwealth will also be 

required to expend its own moneys to reimburse attorneys’ fees, in an amount not less than $1 

million. Id. It is thus blatantly incorrect to argue that the Commonwealth’s property will not be 

affected by the lifting of the stay.

 

3 Section 2 of Law 230 provides: 

The Secretary of the Treasury shall retain the funds transferred by the Joint Underwriting Association in its 

fiduciary capacity for a five (5)-year term counting from the date in which the retained funds are transferred 

by the Joint Underwriting Association to the Secretary of the Treasury. The income generated by these funds 

shall revert to the General Fund of the Commonwealth Treasury as they are accrued. The Secretary of the 

Treasury shall establish a procedure for processing the reimbursement request of any person alleging a right 

to the retained funds. Once five (5) years have elapsed without the consumer claiming the retained funds, 

these shall become property of the Commonwealth of Puerto Rico and they shall be transferred to the General 

Fund of the Commonwealth Treasury.

26 L.P.R.A. § 8055. It is only from 2013 that, by virtue of an injunction issued by the First Circuit, the 

Commonwealth was prevented from transferring the unclaimed funds to the General Fund “until it has established 

and complied with a reimbursement procedure which meets the basic requirements of constitutional due process.” 

García-Rubiera v. Fortuño, 727 F.3d 102, 117 (1st Cir. 2013). 

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14. Third, whether the Commonwealth is acting as a fiduciary in relation the moneys 

claimed by the Movants, and whether the Movants’ entitlements are unimpairable property rights, 

or are impairable, dischargeable claims, as the Commonwealth maintains, is an issue that is 

disputed and has not yet been resolved, contrary to the Movants’ assertions.4 These issues will 

doubtless be resolved during the confirmation of a plan of adjustment, and adjudication of them 

now will require significant and costly briefing and analysis, which will further distract the 

Commonwealth and waylay its attempts to propose a plan of adjustment. This issue is central to 

Commonwealth’s Title III case and any determination on it directly impacts both the 

Commonwealth and its other creditors. Lifting the automatic stay to permit Movants to collect 

their judgment against the Commonwealth would undermine the Title III process, prejudicing the 

interests of other creditors and upending the “strong bankruptcy code policy that favors centralized 

and efficient administration of all claims in the bankruptcy court . . . .” See Publicker Indus. Inc. 

v. United States (In re Cuyahoga Equip. Corp.), 980 F.2d 110, 117 (2d Cir. 1992) (citations 

omitted). This would contravene the tenth Sonnax factor, as it would require the piecemeal 

determination and payment of claims, rather than a consolidated, efficient resolution of them 

through the Title III process.

15. Furthermore, even if the Movants did eventually establish that they beneficially 

own the moneys, that those moneys are held solely by the debtor as a fiduciary and that their claims 

 

4 Section 2 of Law 230 clearly provides that once 5 years have elapsed moneys that are not claimed “shall become 

the property” of the Commonwealth. It has not been conceded (contrary to Movant’s assertions), that the moneys 

that were transferred to the General Fund after being retained for 5 years are held on trust or otherwise in a 

fiduciary capacity. Rather, they are the unencumbered property of the Commonwealth. Furthermore, Act 

Number 253 of December 27, 1995, known as the Compulsory Liability Insurance for Motor Vehicle Act, as 

amended by Law 230 and others, does not provide in any provision an intention to create a trust for the benefit of

the insured or Joint Underwriting Association. The mere reference of “holding the funds in a fiduciary capacity” 

set forth in Article 6 of Act 253 does not constitute a trust pursuant to Puerto Rico law. Act 219-2012 known as 

the “Trust Law” requires the execution of a public deed before a notary public in order to constitute a trust. Prior 

to the enactment of Act 219 trusts were regulated by Articles 834-874 of the Civil Code of Puerto Rico. The Civil 

Code also provided that a trust had to be created through a public deed in order to be effective. 

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are not dischargeable, it is clear from the jurisprudence that this alone is not enough to lift the stay. 

See In re Residential Capital LLC, 2012 Bankr. LEXIS 3777 *8 (Bankr. S.D.N.Y. 2012) (holding 

that “[e]ven if [the debtors were liable as fiduciaries], however, that alone would not be a basis for 

lifting the stay in this matter”); Jackson v. GMAC Mortg., LLC, 2013 U.S. Dist. LEXIS 181066 

(S.D. Ala. Dec. 30, 2013) (same); In re Shayeb, 211 B.R. 390, 391 (Bankr. D. Ariz. 1997) 

(concluding that finding a debt is nondischargeable does not constitute cause to lift the automatic 

stay); Disciplinary Board of the Supreme Court of Pa. v. Feingold (In re Feingold), 730 F.3d 1268, 

1277-78 (11th Cir. 2013) (“We agree . . . that nondischargeability alone cannot supply the cause 

contemplated by § 362(d)(1), otherwise the statutory automatic exceptions for the enumerated 

nondischargeable debts—like domestic support obligations— found in § 362(b) would be 

meaningless.”); In re Mu’min, 374 B.R. 149, 161 (Bankr. E.D. Pa. 2007) (“[T]he conscious 

decision of Congress to make an express exception for one nondischargeable debt implies that 

Congress intended that collection of other nondischargeable debts be subject to the automatic 

stay.”); In re Neilsen, 443 B.R. 718, 720 (Bankr. W.D. Va. 2011) (denying motion for relief from 

the stay where movant’s request to have the automatic stay lifted was in reality an attempt to have 

the debt in question declared non-dischargeable); In re Haas, Case No. 04–11534, 2004 WL 

3132027, at *2 (Bankr. E.D. Va. Dec. 22, 2004) (holding that the holder of a non-dischargeable 

claim must wait until “the debtor is granted or denied a discharge, the case is dismissed, or the 

case is closed” to pursue collection of his debt, lest he run afoul of the automatic stay). Therefore, 

given the significant attendant costs of lifting the stay, the prejudice that would befall other 

creditors and the lack of harm to the Movants, the lifting of the stay here is inappropriate.5 

 

5 The remaining Sonnax factors ((4) whether a specialized tribunal has been established to hear the cause of 

action at issue; (5) whether the debtor’s insurance carrier has assumed full financial responsibility for defending 

the litigation, (6) whether the action essentially involves third parties rather than the debtor, (8) whether a 

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CONCLUSION

16. For the foregoing reasons, the Court should deny the Motion requesting relief 

from the automatic stay.

[Remainder of Page Left Intentionally Blank]

 

judgment in the foreign action is subject to equitable subordination, (9) whether movant’s success in the foreign 

proceeding would result in a judicial lien avoidable by the debtor, and (11) whether the parties are ready for trial 

in the other proceedings) are not addressed as they are inapplicable here.

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Dated: February 21, 2018.

San Juan, Puerto Rico 

Respectfully submitted, 

WANDA VÁZQUEZ GARCED 

Secretary of Justice 

/s/ Wandymar Burgos Vargas

WANDYMAR BURGOS VARGAS 

USDC 223502 

Deputy Secretary in Litigation 

Department of Justice 

P.O. Box 9020192 

San Juan, Puerto Rico 00902-0192 

Phone: 787-721-2940 Ext. 2500, 2501

wburgos@justicia.pr.gov 

Attorneys for the Commonwealth of Puerto Rico 

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