UNITED STATES BANKRUPTCY 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

Case No. 17-BK-3283 (LTS)

REPLY TO "OBJECTION OF THE COMMONWEALTH TO MOTION REQUESTING 

RELIEF FROM AUTOMATIC STAY FILED BY MITSUBISHI MOTORS (SIC) SALES OF 

CARIBBEAN, INC."

TO THE HONORABLE COURT:

COMES NOW, Mitsubishi Motor Sales of Caribbean, Inc. ("MMSC"), plaintiff in a civil 

action filed before the Puerto Rico Court of First Instance, San Juan Section, styled Mitsubishi 

Motor Sales of Caribbean, Inc. v. Hon. Raul Maldonado Gautier, as Secretary of the Puerto Rico 

Treasury Department, et al., Civil No. KCO 2016-0026 (903), regarding request for declaratory 

judgment and refund of excise taxes paid in excess by MMSC, which has been stayed pursuant 

to Title III of PROMESA (hereinafter, the "State Action"), by and through the undersigned legal 

counsel, seeking relief from the automatic stay to allow the continuation of the State Action, and 

very respectfully states and prays as follows:

I. INTRODUCTION

1. On February 13, 2018, MMSC filed a "Motion Requesting Relief from Automatic 

Stay", along with a "Memorandum in Support of Mitsubishi Motor Sales of Caribbean, Inc.’s 

Motion Requesting Relief from the Automatic Stay" (hereinafter, the "Stay Relief Motion").

2. In attention to the Stay Relief Motion, on February 14, 2018, this Honorable 

Court entered an "Order Scheduling Briefing of Motion Requesting Relief from Automatic 

Stay", setting, among other things, the deadlines for the filing of opposition and reply papers. 

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Pursuant to said scheduling order, "[o]pposition papers to the Motion must be filed by February 

27, 2018” and “[m]ovant’s reply papers must be filed by March 6, 2018".

3. On February 27, 2018, the Commonwealth of Puerto Rico (hereinafter, "Debtor"), 

filed the document entitled "Objection of the Commonwealth to Motion Requesting Relief from 

Automatic Stay Filed by Mitsubishi Motors Sales of Caribbean, Inc." (hereinafter, the 

"Opposition").

4. On its Opposition, throughout a brief discussion of the Unanue factors cited by 

MMSC on its Stay Relief Motion, Debtor asserted, in MMSC’s respectful opinion 

unsuccessfully, that MMSC failed to establish extraordinary circumstances to justify lifting the 

automatic stay for cause.

5. It is MMSC's position that Debtor's Opposition does not include arguments

specifically and concretely addressing the cause of action and remedy sought by MMSC on the 

State Action regarding the entering of a declaratory judgment, nor the basis in support for 

Debtor's position for not lifting the automatic stay in order for MMSC to pursue such cause of 

action and remedy before the local court. The fact is that Debtor's Opposition is completely 

silent with respect to said cause of action and remedy sought by MMSC. Therefore, MMSC 

respectfully understands that said cause of action and remedy is unopposed by Debtor before this 

Honorable Court, for all pertinent legal matters.

6. Debtor concentrated its Opposition on arguing why the automatic stay should not 

be lifted, generally, only addressing the cause of action and remedy regarding the reimbursement 

of excise taxes paid in excess by MMSC in the form of a credit, also sought by MMSC as part of 

its State Action. Regarding this cause of action and remedy, MMSC respectfully sustains that 

same is contingent upon the entering of the declaratory judgment being requested in the State 

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Action, in which MMSC seeks a determination from the local court as to the illegality of the 

computation formula that has been capriciously implemented by the Secretary of the Treasury of 

Puerto Rico to MMSC's prejudice. 

7. However, it is MMSC's respectful opinion that Debtor failed to effectively oppose 

MMSC's showing of cause to lift the automatic stay with respect to both of its causes of action 

and remedies sought by MMSC in its State Action. First, Debtor was unable to establish a

significant prejudice to the bankruptcy estate as a result of the continuation of the State Action,

inasmuch as the declaratory judgment does not grant any direct remedies and the credit sought 

by MMSC would be against future payments of excise taxes for motor vehicles to be imported 

by MMSC. Arguing that the excise taxes to be collected by the Treasury Department would be 

diminished is certainly not a significant prejudice to the bankruptcy estate.

8. Second, the potential prejudice or hardship to MMSC if the automatic stay is not 

lifted by this Honorable Court, considerably outweighs any potential hardship to Debtor, whereas 

absent the declaratory judgment sought by MMSC, it will leave MMSC exposed to the 

continuous overcharging of excise taxes with practically no way of enforcing an action to seek 

the reimbursement of the amounts paid in excess that will continue to be illegally overcharged by 

the Treasury Department while the automatic stay is in effect. Debtor's assertion that lifting the 

automatic stay will encourage other creditors to seek similar relief constitutes an argument in the 

abstract, absent a disclosure of specific instances of other creditors similarly situated to MMSC, 

which have actually filed pre-petition claims against the Treasury Department for reimbursement 

of excise taxes paid in excess and/or overcharged by the Treasury Department.

9. Third, MMSC has a great probability of prevailing on the merits on its request for 

a declaratory judgment, which only entails that the local court interpret the law, specifically in a 

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matter that MMSC respectfully sustains that the Honorable Supreme Court of Puerto Rico has 

already pronounced itself in the case of Yiyi Motors v. Secretario de Hacienda, 177 D.P.R. 230 

(2009). See, In re Fernstrom Storage and Van Co., 938 F.2d 731 (7th Cir.1991).

II. DISCUSSION AND ANALYSIS

10. Following is MMSC's reply discussion on the Unanue factors (also called Sonnax

factors) that were cited by MMSC on its Stay Relief Motion and how Debtor failed to properly 

oppose their application in favor of lifting the automatic stay for cause in the instant case.

11. Regarding FACTOR No. 1, "whether the relief will result in a partial or 

complete resolution of the issues", MMSC's argument on its Stay Relief Motion sustained that 

"[i]n the event the relief from the automatic stay is granted by this Honorable Bankruptcy Court, 

it will certainly result in a complete resolution of the issues between MMSC and the debtor 

(PRTD/Commonwealth of Puerto Rico)". However, Debtor pointed, citing In re Tuab, 413 B.R. 

55, 62, that MMSC's argument is mistaken since "[t]he first Sonnax factor does not focus on the 

issues in the stayed litigation"; "[i]nstead, the first Sonnax factor primarily focuses on whether 

the separate litigation would expeditiously resolve issues relevant to the bankruptcy case" and, 

therefore, "the lifting of the stay would not resolve issues relevant to the Commonwealth’s Title 

III plan of adjustment ..."

12. MMSC takes exception with Debtor's position. Not only will the issues between 

MMSC and Debtor, which are object of the State Action, be resolved through the lifting of the 

automatic stay, but the entering of the declaratory judgment sought by MMSC in the State 

Action will avoid the filing of additional actions against Debtor's bankruptcy estate seeking 

reimbursement of any overcharged excise taxes absent such declaratory judgment, thus avoiding 

potential recurrent actions for reimbursement.

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13. With respect to FACTOR No. 10, that is "the interest of judicial economy and the 

expeditious and economic determination of litigation for the parties", MMSC argued that lifting 

the automatic stay would serve as a deterrent for future legal actions that could be initiated by

MMSC and other importers of motor vehicles against Debtor, since the declaratory judgment 

sought by MMSC in its State Action will establish the legality or illegality of any formula 

implemented by the Secretary of the Treasury that is inconsistent with the formula provided on

the Puerto Rico Internal Revenue Code ("PRIRC") and in accordance with the ruling of the 

Puerto Rico Supreme Court in the case of Yiyi Motors v. Secretario de Hacienda, supra. On its

part, Debtor asserted that the aforementioned factor is not satisfied because, in Debtor's opinion, 

allowing the continuation of MMSC's State Action would result in MMSC receiving a credit of 

excise taxes of 100% of the amount claimed, leading inexorably to the filing of a multitude of 

suits by other creditors seeking the same treatment. Debtor added that, on the other hand, 

keeping the stay in place would lead to the centralized processing of all claims before this 

Honorable Court and the equal treatment of all creditors and, as such, factor number 10 supports 

the denial of the Stay Relief Motion.

14. It is MMSC's respectful position that Debtor's argument to rule out the application 

of FACTOR No. 10 is insufficient, since it does not take into consideration the totality of the 

causes of action and/or remedies procured by MMSC in its State Action, which are the subject of 

MMSC's Stay Relief Motion. Consequently, as previously argued by MMSC, Debtor limited its

Opposition on MMSC's cause of action pertaining to the reimbursement of excise taxes paid in 

excess by MMSC and remained silent with respect to MMSC's cause of action for declaratory 

judgment in its State Action. MMSC respectfully understands that Debtor lacks any argument to 

oppose MMSC's position on this regard inasmuch as a declaratory judgment merely constitutes a 

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ruling by the local court as to the applicable law and does not grant any specific remedies.

MMSC understands that it is important to note that in its State Action, MMSC is not attributing

negligence or breach of contract to the Debtor, but instead, an illegality and/or ultra vires and/or

capricious action undertaken by the former Secretary of the Treasury Department.

15. Debtor, in turn, cited case law establishing, on its pertinent part, that "granting 

relief from stay would, among other things, encourage the filing of "similar requests for relief by 

plaintiff of pending lawsuits", but fails to establish and/or identify if at present there are other 

pending lawsuits before local courts and/or before this Honorable Court presenting the same 

controversy regarding the reimbursement of overcharged excise taxes with respect to imported

motor vehicles imposed by the Treasury Department. In fact, Debtor did not even argue the 

above-mentioned citation, as it understands is applicable to the instant controversy. MMSC 

reasonably understands that if Debtor's concern was genuine and that similar requests for relief 

from the automatic stay will be filed by other plaintiffs in other pending cases, then, at most, and 

for the sake of placing this Honorable Court in a position to issue a determination with respect to 

this matter, Debtor should have detailed in its Opposition all lawsuits pending before the local 

courts, which have been filed prior to Debtor's filing of its Petition under Title III of PROMESA,

or pending before this Honorable Court, requesting, like MMSC, a reimbursement of 

overcharged excise taxes by virtue of the illegal, arbitrary, ultra vires and capricious application 

of an excise tax computation formula inconsistent with the formula that the PRIRC dictates, and 

in accordance with the opinion rendered by the Puerto Rico Supreme Court in the case of Yiyi 

Motors. Debtor failed to identify any such cases which are purportedly similar to MMSC's State 

Action, inasmuch as MMSC's State Action entails a very particular controversy which only

affects the importers of motor vehicles into Puerto Rico. In other words, it does not consist of an 

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ordinary civil action as would be an action for debt collection and/or for breach of contract 

and/or a torts action seeking damages, where it would be fair to speculate of a multitude of 

pending lawsuits, but rather it is a particular case initiated by MMSC as an importer of motor 

vehicles against the Treasury Department.

16. On the other hand, and with respect to Debtor's argument on MMSC's request for 

reimbursement of excise taxes paid in excess in the form of a credit, pointing out that granting 

the relief from the automatic stay would inexorably lead to a multitude of other creditors filing 

suits seeking the same treatment as MMSC, it is MMSC's respectful position that there is no such

potential for prejudice against Debtor, since there is already an automatic stay in full force and 

effect and any new post petition claim against Debtor would have to meet and or satisfy the 

Unanue/Sonnax factors test for a determination of cause to lift the stay. Therefore, MMSC 

respectfully understands that Debtor's arguments to oppose the application of FACTOR No. 10

to MMSC's Stay Relief Motion are vacuous, vague and weak, and fail to rebut with concrete 

foundations MMSC's arguments in favor of lifting the stay.

17. Regarding FACTOR No. 11, that is "whether the non-bankruptcy proceedings 

have progressed to the point where the parties are prepared for trial", Debtor sustained that 

MMSC's State Action is still at an early stage, adding that Debtor has not yet filed a responsive 

pleading or otherwise filed a dispositive motion, and therefore, that the parties are not ready for 

trial.

18. With respect to FACTOR No. 11, it is important to note that MMSC did not

raise said factor in support of its Stay Relief Motion. It is well known that in order to lift the 

automatic stay not all the Unanue factors (or Sonnax) have to be present and established by the 

movant party of a request for relief of the an automatic stay, since there are factors that do not

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even apply to the underlying facts of a particular case. C & A, S.E. v. P.R. Solid Waste Mgmt., 

369 B.R. 87 (D.P.R. 2007). Therefore, it is MMSC's respectful opinion that Debtor's burden lies 

on opposing the application of the factors that were in fact raised by MMSC in its Stay Relief 

Motion and not arguing over other factors that were not even raised by MMSC in its Stay Relief 

Motion.

19. Notwithstanding, and without it constituting a waiver of the above-stated 

regarding FACTOR No. 11, MMSC herein below incorporates an excerpt of ¶ 70 of its Stay 

Relief Motion, where it argued how FACTOR No. 2 is satisfied ("the lack of any connection 

with or interference with the bankruptcy case"):

[...]It is MMSC’s respectful position that the time required for the debtor to 

defend itself from MMSC’s claims and causes of action should not be an adverse 

burden the estate. The civil action initiated by MMSC against the PRTD is not a 

complex case, since it mostly entails the interpretation of the law and the 

applicable case law. In fact, the documents MMSC has to support the allegations 

set forth in the amended complaint have already been notified to the debtor, since 

all were included as exhibits of the complaint and amended complaint. Therefore, 

the Department of Justice/Commonwealth of Puerto Rico cannot claim that relief 

of the automatic stay sough may MMSC should not be granted because the 

subject civil action pending before the local court is at an early procedural stage, 

since the case merely entails an action seeking a pronouncement from the local 

court as to applicable law and case law, and the additional cause of action for 

refund of excise taxes paid in excess by MMSC depends on the determination of 

the local court with respect to MMSC’s request for declaratory judgment. 

Therefore, the discovery phase will certainly not be time consuming, if there is 

any discovery to be done in the case at all.

[Emphasis and underline added].

It is MMSC's respectful position that, pursuant to the above-mentioned, the requirements of 

FACTOR No. 11 are satisfied, clearly favoring the lifting of the automatic stay.

20. With respect to FACTOR No. 2, "the lack of any connection with or interference 

with the bankruptcy case", with respect to which MMSC argued in its Stay Relief Motion as set 

forth in the excerpt cited from ¶ 70, incorporated on the previous paragraph, Debtor opposed 

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MMSC's position by arguing that "[l]ifting the automatic stay to proceed with the Prepetition 

Action will divert the Commonwealth’s attention and resources to defending Movant’s claims 

and will encourage other creditors to seek similar relief", adding that "[a]ny time and money 

consumed defending these actions is time and money diverted from the recovery and 

reorganization of the Commonwealth and from other creditors, a factor that numerous courts 

have recognized counsels against lifting a bankruptcy stay". However, as earlier examined in 

the discussion of FACTOR No. 11, Debtor's position is not correct. MMSC hereby makes 

references to its discussion of FACTOR No. 11 herein above and incorporates said discussion as 

if fully set forth herein, as its reply to Debtor's Opposition regarding FACTOR No. 2.

21. On the other hand, regarding FACTOR No. 7 "whether litigation in another 

forum would prejudice the interests of other creditors, the creditors 'committee or other 

interested parties", MMSC argued that "...the other creditors in the debtors' bankruptcy shall 

not be harmed by granting MMSC’s request for relief of the automatic stay, since the declaratory 

judgment sought by MMSC does not seek the enforcement and/or any action in detriment of the 

creditors nor the estate" and that "[w]ith respect to the refund of excise taxes paid in excess by 

MMSC, said claim and cause of action may be granted in the form of a credit for the payment of 

future excise taxes to be paid by MMSC to the PRTD, as this Honorable Court deems 

appropriate, thus in no way affecting the debtor nor the estate". Debtor opposed the application 

of the aforementioned factor, but only as to MMSC's request for reimbursement of excise taxes

paid in excess through a credit for the payment of future excise taxes. Notwithstanding, Debtor 

once again remained silent regarding the cause of action and remedy of the declaratory 

judgment, which is the main remedy sought by MMSC in its State Action, since the 

reimbursement of excise taxes paid in excess is contingent upon the entering of the declaratory 

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judgment in its favor. Therefore, Debtor did not object to the application of FACTOR No. 7

favoring the lift of the automatic stay with respect to the declaratory judgment sought by MMSC

and, thus, MMSC's position to that effect is unopposed by Debtor for all pertinent legal matters.

22. As to FACTOR No. 7, Debtor commenced its argumentation by offering the 

definition of a "claim" under the Bankruptcy Code, as a "right to payment [...]". Regarding the 

applicability of factor number 7 to the cause of action and remedy seeking the reimbursement of 

overcharged excise taxes in the form of a credit, Debtor argued that such request is "subject to 

the claim resolution process that will be undertaken in the Commonwealth's Title III case and to 

potential impairment in a plan of adjustment". Debtor added that "[l]ifting the stay would result 

in unwarranted preferential treatment to Movant and (by the application of the tax credit to fully 

pay movant's claim) reduce the tax collected by the Commonwealth, and, concomitantly the 

resources available for distribution to other creditors". MMSC takes exception to Debtor's 

position, since an order from this Honorable Court lifting the automatic stay as to such 

reimbursement, yet containing specific directives to the local court so that the subject 

reimbursement be solely satisfied in the form of a credit from the Treasury Department for the 

payment of future excise taxes to be paid by MMSC in no way has the effect of reducing the 

resources available to be distributed to the creditors. Therefore, said credit should not be 

considered as a "payment" pursuant to the Bankruptcy Code, which may otherwise be 

understood as a disbursement. First, a declaratory judgment would need to be issued and entered 

by the local court in the State Action, contingent to which MMSC would enforce the credit in its 

favor, as ordered by this Honorable Court, for the amount of excise taxes that were illegally 

overcharged, plus interest. Therefore, FACTOR No. 7 also favors MMSC's position for the 

lifting the automatic stay.

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23. Regarding FACTOR No. 4, "whether a specialized tribunal has been established 

to hear the particular cause of action and that tribunal has the expertise to hear such cases", 

MMSC did not raise said factor in support of its Stay Relief Motion, inasmuch as the proponent 

of a Stay Relief Motion needs only to comply with some of the factors, since it is not necessary 

to establish all the Unanue factors (or Sonnax). C & A, S.E. v. P.R. Solid Waste Mgmt., supra. 

Notwithstanding the foregoing, in its Opposition Debtor argued FACTOR No. 4 stating that 

"The Puerto Rico Court of First Instance is not a “specialized tribunal,” and no assertion has 

been made by Movant to the contrary". Debtor added that "[t]his Court is very capable of 

dealing with such issues".

24. It is MMSC's respectful opinion that although it believes the State Action is not a 

complex case, since it mostly entails the interpretation of the law and the applicable case law, the 

most expeditious and economical process for the parties leads to the resolution of the State 

Action before the local court. Specially, since the alternative option would entail the litigation of 

such matters before this Honorable Court, which would be tantamount to involving this 

Honorable Court in matters that require the application of local public tax laws, concepts, 

regulations and its interpretative local case law. In addition, and as it has been repeatedly noted 

by the Honorable Bankruptcy Court throughout its case law, "[t]he legislative history to section 

362(d)(1) emphasizes the section's applicability to proceedings in another forum: "It will often 

be more appropriate to permit proceedings to continue in their place of origin, when no great 

prejudice to the bankruptcy estate would result in order to leave the parties to their chosen 

forum and to relieve the bankruptcy court from duties that may be handled elsewhere." In re 

Consol. Distribs., 2013 Bankr. LEXIS 3101, citing H.R.Rep. No. 595, 95th Cong., 1st Sess., 341 

(1977), U.S. Code & Admin. News 1978, pp. 5787, 5297. [Emphasis ours]. Therefore, 

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FACTOR No. 4 favors lifting the automatic stay and for MMSC to continue with its State 

Action before the local court.

25. Regarding FACTOR No. 12, "the impact of the stay on the parties and the 

balance of hurt", which was discussed by MMSC in support of its Stay Relief Motion, Debtor's

opposition to same is very general, stating that the "[t]he procedural status of the Prepetition 

Action, the large number of pending lawsuits against the Debtors, the diversion of the 

Commonwealths’s resources to defend Movant’s claims, and the prejudice to interests of other 

similarly situated creditors" favor the continuation of the automatic stay. On the other hand, 

Debtor asserted that postponing the liquidation of MMSC's claims would not adversely affect 

MMSC nor promote the judicial economy, advancing that there is nothing urgent in MMSC's 

claims.

26. MMSC respectfully sustains that Debtor's position is not correct. While the 

declaratory judgment MMSC is seeking continues to be delayed, MMSC will continue to be 

exposed to the collection of illegal excise taxes being imposed over new imported motor 

vehicles, which MMSC will inevitably be forced to pay, in order for the Secretary of the 

Treasury Department to issue the corresponding documents so that MMSC can lift the shipment, 

take possession of its brand new Mitsubishi motor vehicles and distribute them to its authorized 

dealers throughout the Island. This situation could potentially expose MMSC to the payment of

thousands of dollars in excise taxes which are being illegally imposed and collected, situation 

that can certainly be avoided with a determination from the local court in the State Action

regarding the applicable law and with the issuance and entering of the declaratory judgment 

sought by MMSC on its State Action. In fact, as long as the automatic stay remains in force, it 

will be more difficult, if not impossible, for MMSC to claim reimbursement for any excise taxes

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that may be illegally overcharged in the future. Therefore, failing to lift the automatic stay, as 

requested by MMSC, would leave MMSC exposed to the continuous illegal overcharging of

excise taxes while at the same time leaving MMSC with absolutely no remedies to recover the 

amounts of excise taxes paid in excess in the future. The foregoing clearly demonstrates the fact 

that, even though MMSC is an unsecured creditor in Debtor's bankruptcy, the extraordinary 

circumstances underlying MMSC's State Action, as discussed in this reply, more than justify the 

granting of the Stay Relief Motion, inasmuch as the most relevant factors weigh strongly in favor 

of lifting the automatic stay.

WHEREFORE, MMSC respectfully requests this Honorable Court to enter an order 

lifting the automatic stay pursuant to 11 U.S.C. Sec. 362(d)(1), permitting MMSC to exercise all 

remedies under non-bankruptcy and non-PROMESA law to enforce its rights and obligations 

related in any way to the claims and causes of action subject of the local court civil action filed 

by MMSC against Debtor, objet of Stay Relief Motion and the foregoing reply, including the 

continuation and culmination of the proceedings in the civil action styled Mitsubishi Motor Sales 

of Caribbean, Inc. v. Hon. Raul Maldonado Gautier, as Secretary of the Puerto Rico Treasury 

Department, et al., Civil No. KCO 2016-0026 (903), before the Court of First Instance, San Juan 

Section, and grant MMSC such other relief as may be just and proper pursuant to Law.

RESPECTFULLY SUBMITTED.

III. CERTIFICATION

WE HEREBY CERTIFY that on his same date, we electronically filed the foregoing 

with the Clerk of the Court using the CM/ECF system, which will send notification of such filing 

to al CM/ECF participants in this case. We further certify that, on this same date, we served the 

foregoing upon all the Standard Parties as identified and defined at ¶ II of the PR USDC’s CMP 

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Order, as amended on October 24, 2017 (Docket No. 1512 of Case No. 17-03283) “Third 

Amended Notice, Case Management and Administrative Procedures.

In San Juan, Puerto Rico, this 6

th day of March, 2018.

BELK & GROVAS LAW OFFICES

PO Box 194927

San Juan, PR 00919-4927

Tel. (787) 754-2424/Fax (787) 754-2454 

E-mail: belkgrovas@gmail.com

BY: S/James Belk-Arce

JAMES BELK-ARCE 

USDC-PR No. 130506 

BY: S/Carlos J. Grovas-Porrata

CARLOS J. GROVAS-PORRATA

USDC-PR No. 209714

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