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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

IN RE:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO 

as representative of 

THE COMMONWEALTH OF PUERTO RICO

Debtor

 PROMESA

 TITLE III

 No. 17 BK 03283-LTS

 Relief of the Automatic Stay 

MOTION REQUESTING LIFT OF STAY

COMES NOW, Michael E. Danuz Reyes through the undersigned attorneys and 

very respectfully moves the Court for an Order pursuant to 11 U.S.C.A. § 362 for relief from 

the automatic stay and, in support of this motion, states as follows:

I. INTRODUCTION

1. Michael E. Danuz Reyes (hereinafter, “Danuz”) seeks the lifting of the 

automatic stay in the case Michael Danuz Reyes v. Estado Libre Asociado de Puerto Rico, et al., 

Civil No. KPPE-2004-2013, before the Court of First Instance in San Juan. Discovery in 

the case is still ongoing, and at this stage of the proceedings Danuz does not foresee to 

perform any further discovery.

2. The pending state court case is filed under the Whisteblower Act of Puerto 

Rico, Law No. 426 of November 7, 2000. This case has to do with the Department of 

Justice’s actions when Danuz, in the performance of his duties, informed of a situation 

whereby one of the agents of that agency kidnapped a citizen, threatened to kill him and 

asked an informant for an amount of money to deposit in his personal account. As a 

result of informing these situtations, Danuz was charged with misconduct and relieved 

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from his duties. In a previous case, Danuz v. Departamento de Justicia, Case No. 2003-08-

0142, the Court of Appeals confirmed the Comisión Apelativa de Servicio Público’s 

holding that the disciplinary measures imposed on Danuz were unlawful. As a result, he 

was reinstated to his position. The pending state court case ensued after this 

determination.

3. As stated before, Danuz does not foresee, at this stage of the proceedings, 

further discovery.

4. After the filing of the Complaint and years of litigation, on November 9, 2017, 

the State Court issued and entered an Order to stay the proceedings pending before the 

Court.

II. RELIEF REQUESTED

5. The appearing creditor seeks a modification of the stay imposed by Section 362 

of the Bankruptcy Code so that they may continue the Commonwealth Court litigation 

which deals with a reprisal complaint and is governed by Puerto Rico law, provided, 

however, that movant will not execute against any of the assets of the state, without further 

order of this Court.

III. ARGUMENTS FOR MODIFICATION OF STAY

6. Pursuant to 11 U.S.C.A. § 362(d), a bankruptcy court may modify the automatic 

stay “for cause” to permit the liquidation in a different court in a pending action. In re 

Murray Industries, Inc., 121 B.R. 635, 636 (Bankr. M.D. Fla. 1990). Although a creditor must 

make a prima facie case to justify the relief from the stay, the Debtor has the ultimate 

burden of persuasion that “cause” for relief does not exist under §362(d). In re Anton, 145 

B.R. 767, 769 (Bankr. E.D.N.Y. 1992).

7. In Peerles Insurance Company v. Peerless Insurance Comapany, 208 B.R. 313, 315 

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(D.R.I. 1997), discussed the term cause: 

Section 362(d)(1) permits a “party in interest” to obtain relief from the Bankruptcy 

Code's automatic stay provision “for cause.” 11 U.S.C. § 362(d)(1). The statute does not 

define “cause”; but, generally speaking, “cause” is said to exist when the harm that would 

result from a continuation of the stay would outweigh any harm that might be suffered by 

the debtor or the debtor's estate if the stay is lifted. Determining whether “cause” exists 

requires a fact intensive inquiry that must be made on a case by case basis 

8. Courts have identified a number of factors to be considered in making that 

determination. See In re Unanue-Casal, 159 B.R. 90, 95-96 (D.P.R.1993), aff'd, 23 F.3d 395 (1st 

Cir.1994) (listing twelve factors). Four factors that are especially applicable in this case are: 

1. the harm to the party seeking relief from the stay (i.e., Danuz) if the stay is not 

lifted; 

2. the harm to the debtor (i.e., Department of Justice) if the stay is lifted; 

3. the interests of creditors; and 

4. the effect on the fair and efficient administration of justice. 

8. In addition, other courts have considered the following factors: 

a. Whether relief would result in a partial or complete resolution of the issue; 

b.The lack of any connection with or interference with the bankruptcy case; 

c.Whether a specialized tribunal with the necessary expertise has been 

established to hear the cause of action; 

d.Whether litigation in another forum would prejudice the interests of other 

creditors; 

e.Whether the judgment claim arising from the other litigation is subject to 

equitable subordination; 

f. The interests of judicial economy and the expeditious and economic 

resolution of litigation; 

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See e.g., In re Sonnax Indus., Inc., 907 F.2d 1280, 1286 (2d Cir. 1990) and In re Curtis, 40 B.R. 

795 (Bankr. D. Utah 1984). 

9. As discussed, a bankruptcy court, may consider many factors when deciding 

whether to allow existing litigation related to a debtor to continue outside the bankruptcy 

court. However, bankruptcy courts consistently modify the stay to allow pending litigation 

to continue when, as in this case, the requested relief from the stay will promote judicial 

economy and create saving for the litigants without undue prejudice to the estate. See, e.g. 

In re Tricare Rehabilitation Systems, Inc., 181 BR 569 (Bankr. N.D. Ala. 1994); In re Robbins, 964 

F.2d 342 (4th Cir. 1992). 

10. Here, the cause of action arose before the bankruptcy, litigation was begun 

before the filing of the petition. Moreover, any decision by the state court would decide the 

issue of whether the Department of Justice acted unlawfully, destituting Danuz as a reprisal 

for his actions. The state court resolution of the case would not interfere with the 

management of this Title III case or prejudice creditors. In addition, since the state court 

would only have to celebrate the pretrial and trial, this would result in judicial economy and 

an expeditious and economic resolution of this litigation. Hence, the balance of equities and 

the Sonnax factors weight in favor of lifting the stay as herein requested. 

11. Also, as in In Re Annie’s, Inc., 201 B.R. 29, 30 (Bankr. R.I. 1996), stated “[w]here 

neither prejudice to the bankruptcy estate nor interference with the bankruptcy proceeding 

is demonstrated, the desire of a stayed party to proceed in another forum is sufficient cause 

to warrant lifting the automatic stay.” See also, In C & A, S. E., v. Puerto Rico Solid Waste 

Management Authority, 360 B.R. 12 (Bankr.P.R. 2006). Since that is the case here, the 

Honorable Court should grant the request for modification of the automatic stay. 

12. In sum, the Court should modify the automatic stay and allow the continuation 

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of the Pending Litigation, as there is “cause” pursuant to Section 362(d)(1) of the 

Bankruptcy Code: the Pending Litigation is a purely a matter of Commonwealth law; as of 

the Bankruptcy Petition date the aforesaid litigation had already commenced and can be 

timely adjudicated. Hence, movants request the modification of the automatic stay. 

13. Movant Danuz files Motion Seeking Lifting of the Stay pursuant to Paragraph 

III.Q of the operative Case Management Order. Movant certifies that pursuant to 

Paragraph III.Q, it conferred and met with debtor via telephone during the required Lift 

Stay Notice period prior to filing the instant motion but could not come to any agreements. 

WHEREFORE: Danuz respectfully requests from the Honorable Court a 

modification of the stay imposed by Section 362 of the Bankruptcy Code so that they 

may continue the Commonwealth Court litigation, all issues which are governed by 

Puerto Rico law, provided, however, that movant will not execute against any assets of 

the estate, without further order of this Court. 

Respectfully submitted on this 10th day of October, 2018. 

I HEREBY CERTIFY: that on this same date, copy of this motion was filed with 

the Clerk of the Court, using the CM/ECF System which will send notification of such 

filling to the attorneys of record.

 

INVENIO LAW LLC

PO Box 9021829

San Juan, P.R. 00902-1829

Tel. (787)724-8117/(787) 622-8800

s/Juan J. Hernández López de Victoria

U.S.D.C. No. 210713

jjhernandez@inveniolaw.com

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s/Laura Beléndez Ferrero

U.S.D.C. No. 216301

lbelendez@msn.com

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