IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF PUERTO RICO

In re: :

:

THE FINANCIAL OVERSIGHT AND : PROMESA TITLE III

MANAGEMENT BOARD FOR PUERTO RICO, :

:

as representative of : Case No. 17 BK 3283-LTS

:

THE COMMONWEALTH OF PUERTO RICO : (Jointly Administered)

:

Debtor1:

_________________________________________ :

:

In re: :

:

THE FINANCIAL OVERSIGHT AND : PROMESA TITLE III

MANAGEMENT BOARD FOR PUERTO RICO, :

:

as representative of : Case No. 17 BK 3567-LTS

:

PUERTO RICO HIGHWAYS AND : THIS PLEADING RELATES

TRANSPORTATION AUTHORITY : ONLY TO THIS TITLE III CASE

_________________________________________ :

MOTION FOR RELIEF FROM THE AUTOMATIC STAY

TO THE HONORABLE COURT:

COMES NOW creditor, Las Monjas Realty II, SE (“Las Monjas”), represented by the 

 

1 The Debtors in these title III cases, along with the last four digits of each Debtor’s federal tax identification 

number, are the (i) Commonwealth of Puerto Rico (the “Commonwealth”) (No. 17-BK-3283-LTS) (3481); 

(ii) Employees Retirement System of the Government of the Commonwealth of Puerto Rico (No. 17-BK-3566-LTS) 

(9686); (iii) Puerto Rico Highways and Transportation Authority (No. 17-BK-3567-LTS) (3808); (iv) Puerto Rico Sales 

Tax Financing Corporation (“COFINA”) (No. 17-BK-3284-LTS) (8474); and (v) Puerto Rico Electric Power Authority 

(No. 17-BK-4780-LTS) (3747).

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 1 of 8
2

undersigned counsel, requesting relief from the automatic stay imposed by the filing of the 

above-captioned Title III cases to collect a nondischargeable debt, owed by the Puerto Rico 

Highways and Transportation Authority (“HTA”), arising from the expropriation of 

property; which debt has been liquidated in a firm and final judgment entered on April 29, 

2016, with the funds for payment on deposit in the local court since November 30, 2016.

BACKGROUND

On November 4, 2010, Las Monjas filed Case KAC-2010-1332 against HTA for 

inverse expropriation for the occupation of land owned by Las Monjas in Hato Rey, PR 

without the payment of just compensation since December 16, 2002. A stipulation was 

reached and signed between the parties on March 5, 2016. See Exhibit 1. The judge in 

KAC-2010-1332 also approved the stipulation on April 29, 2016, which is firm, final and 

unappealable. See Exhibit 2.

Case KEF-2016-0083 is an expropriation case filed by HTA against Las Monjas on 

November 30, 2016. See Exhibit 3. On the same date, HTA deposited the sum of 

$1,274,000.00 with the clerk of the local court. This suit and the deposit of funds were the 

result of the aforementioned transactional stipulation entered into between the parties in 

KAC-2010-1332.

Thereafter, in Case KEF-2016-0083, after some procedural issues, the inclusion of 

various potentially interested parties and HTA’s substitution of counsel, the matter was 

ultimately stayed with the filing of the Commonwealth’s petition under PROMESA on May 

3, 2017.

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 2 of 8
3

APPLICABLE LAW

I. Relief from Stay

It is important to delineate that the automatic stay only extends to property in which the 

debtor held an interest at the time of the commencement of the case. See e.g. Endeavour GP, 

LLC v. Endeavour Highrise, L.P. (In re Endeavour Highrise, L.P.), 432 B.R. 583, 629 

(Bankr. S.D. Tex. 2010). As will be further discussed below, if property does not belong to 

the debtor, it is not subject to the automatic stay under either sections 362(a) or 922(a) of the 

United States Code.

Section 362(d)(1) of the U.S. Bankruptcy Code, made applicable to these proceedings 

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

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

courts in this district rely on 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”)(citing In re Curtis, 40 Bankr. 795, 799-800 (Bankr. D. Utah 1984). See 

e.g., Brigade Leveraged Capital Structures Fund Ltd. V. Garcia-Padilla, 217 F.Supp. 3d 508, 

518 (D.P.R. 2016)(citing Sonnax); Goya Foods v. Unanue-Casal (In re Unanue-Casal), 159 

B.R. 90, 95 (D.P.R. 1993), as aff’d at 23 F.3d 395 (1st Cir. 1994). Of particular relevance in 

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.” “the lack of any connection 

with or interference with the bankruptcy case,” “whether litigation in another forum would 

prejudice the interest of other creditors and/or interested parties,” “the interests of judicial 

economy and the expeditious and economical resolution of litigation,” and the “impact of the 

stay on the parties and the balance of the harms.” Sonnax, 907 F.2d at 1286.

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 3 of 8
4

Other courts have established that the moving party need not prove a plurality of the 

factors. Courts will generally rely on only a few factors to determine whether cause exists to 

grant relief from the stay. C & A, S.E. v. P.R. Solid Waste Mgmt. Auth., 369 B.R. 87, 94-95 

(D.P.R. 2007)(citing Goya, 159 B.R. at 95-96. The court in Goya, supra at 96, correctly 

stated that “the question of what is cause . . . is developed primarily by case law.” In other 

words, the determination of cause is made on a case by case basis.

II. Nondischargeablility of debt

The Constitution of the Commonwealth of Puerto Rico provides that “[n]o person shall be 

deprived of his liberty or property without due process of law.” P.R. Const. Art. II, § 7. 

Moreover, the Puerto Rico Constitution provides that “private property shall not be taken or 

damaged for public use except upon payment of just compensation in the manner provided by 

law.” P.R. Const. Art. II, § 9.

Likewise, the Takings Clause of the Fifth Amendment to the United States Constitution

mandates that ''[p]rivate property [shall not] be taken for public use, withnut just 

compensation." U.S. Const. Amend. V. This amendment is made applicable to the States and 

Puerto Rico through the Fourteenth Amendment. U.S. Const. Amend. XlV. In re City of 

Detroit, 524 B.R. 147, 268 (Bankr. E.D. Mich. 2014) citing Dolan v. City of Tigard, 512 

U.S. 374, 383 (1994); Penn Cent. Transp. Co. v. City of N.Y., 438 U.S. 104, 122 (1978).

In First English Evangelical Lutheran v. Los Angeles, 482 U.S. 304, 315-16 (1987),

the Supreme Court of the United States stated regarding the Fifth Amendment:

This basic understanding of the Amendment makes clear that it is designed not to 

limit the governmental interference with property rights per se, but rather to 

secure compensation in the event of otherwise proper interference amounting to a 

taking. Thus, government action that works a taking of property rights necessarily 

implicates the "constitutional obligation to pay just compensation." Armstrong v. 

United States, 364 U.S. 40, 49 (1960).

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 4 of 8
5

We have recognized that a landowner is entitled to bring an action in inverse 

condemnation as a result of "'the self-executing character of the constitutional 

provision with respect to compensation. . . .'" United States v. Clarke, 445 U.S. 

253, 257 (1980), quoting 6 P. Nichols, Eminent Domain § 25.41 (3d rev. ed. 

1972).

The Supreme Court has stated that a Takings Clause violation is defined by two elements: 

(1) the public taking of private property, and (2) the subsequent denial of just compensation for 

that taking. See Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 

195, n.13 (1985).

The Fourteenth Amendment of the United States Constitution provides that "nor shall any 

State deprive any person of life, liberty, or property, without due process of law." U.S. 

Const. Amend. XIV. The limitations of the Fifth Amendment also apply, through the Due 

Process Clause of the Fourteenth Amendment, to takings by state governments and their 

subdivisions. See, e.g., Lucas v. S.C. Coastal Council, 505 US. 1003 (1992). Consequently, 

the Fifth Amendment is applicable to both the Commonwealth of Puerto Rico and HTA, and 

neither may take property without just compensation.

The Supreme Court of the United States has addressed the takings issue in the context of 

bankruptcy on several occasions, holding each time that the bankruptcy power is limited by the 

Fifth Amendment. See United States v. Security Indus. Bank, 459 U.S. 70, 75, 78 (19821;

Wright v. Vinton Branch of Mtn. Trust Bank, 300 U.S. 440, 456-58 (1937); Louisville Joint 

Stock Land Bank v. Radford, 295 US. 555, 589 (1935). The protections afforded by the Fifth

Amendment are not abrogated by the Bankruptcy Code. The legislative history of the

Bankruptcy Code indicates that the drafters of the Bankruptcy Code considered the Fifth

Amendment to be a limitation upon the impairment of property rights in bankruptcy, and 

current bankruptcy law gives great deference to property rights. Patterson Forrester, Julia,

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 5 of 8
6

Bankruptcy Takings, 51 Fla. L. Rev. 851, 863 (Dec. 1999).

Section 944( c)(1) of the Bankruptcy Code also provides that "the debtor is not discharged

under subsection (b) of this section for any debt- (1) excepted from discharge by the plan or

order confirming the plan[.]" 11. U.S.C. § 944.

DISCUSSION

Las Monjas seeks to collect the $1,274,000.00 deposited in Case KEF-2016-0083. As 

cause, Las Monjas asserts that HTA has been in possession of the real property subject of 

these lawsuits since December of 2002. Such possession resulted from a taking of the 

property under both the U.S. and Puerto Rico Constitutions. The parties agreed to the 

amount of just compensation and the liability of HTA was already determined by a 

judgment issued on April 29, 2016. In fact, HTA filed KEF-2016-0083 and deposited the 

$1,274,000.00 with the court on November 30, 2016. HTA has no further interest in the 

funds deposited and thus the collection of these funds not only does not interfere with the 

PROMESA case, but lacks any connection with the PROMESA case.

With respect to the impact of the stay on the parties and the balance of harms, the claim 

of Las Monjas is nondischargeable in these Title III proceedings. Only this reading of 11 

U.S.C. 944(c)(1) would allow a prospective confirmation order to be constitutional. Las 

Monjas is harmed by the denial of access to its just compensation and the withdrawal of 

such funds is of no legal consequence to HTA. Allowing collection will not prejudice HTA 

in any way. HTA will suffer no harm if the stay is lifted. However, not allowing Las 

Monjas to withdraw the funds, would be prejudicial to La Monjas, which was deprived of 

its property in 2002 without compensation. The continuance of the automatic stay is 

detrimental to Las Monjas as it is being deprived of its constitutional right to obtain 

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 6 of 8
7

compensation for a taking that occurred sixteen years ago. The balance of the harms favors 

allowing Las Monjas to collect its judgment from the funds deposited with the local court.

Allowing collection will provide relief in this case which will result in a complete 

resolution of the issues between the parties and result in the withdrawal of Proof of Claim 

No. 1961 in the consolidated case and Claim No. 71 in HTA’s case, both filed by Las 

Monjas. The fact that liability and damages have already been resolved in the litigation 

between Las Monjas and HTA demonstrates that the interests of judicial economy, and of 

the expeditious resolution of litigation, are best served by permitting the collection of the 

judgment and the withdrawal of Las Monjas’ proof of claim in this case. Allowing 

collection of the funds deposited does not prejudice other creditors, as it has no direct or 

indirect effect upon their claims against HTA or their ability to collect those claims.

Accordingly, Las Monjas contends that cause exists for the automatic stay to be lifted to 

allow it to collect the damages deposited in the local court.

WHEREFORE it is respectfully requested that the Court grant Las Monjas Realty II, 

SE’s request for relief from the automatic stay of 11 U.S.C. § 362(d)(1) for cause in order for 

Las Monjas to collect its nondischargeable debt.

CERTIFICATE: We hereby certify that pursuant to the Order Further Amending Case 

Management Procedures (fourth)(Dkt. No. 2839), on March 30, 2018, we notified the 

Oversight Board and AAFAF by E-mail of our intention to seek relief from stay unless a 

response was received by April 20, 2018, and no response was received.

NOTICE OF TIME TO RESPOND: Respondent is hereby notified that, unless 

otherwise ordered by the Court, this motion will be heard at the omnibus hearing scheduled 

for September 12, 2018 at 9:30 a.m. Accordingly, pursuant to the fourth amended case 

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 7 of 8
8

management order entered on April 4, 2018 (Docket No. 2839)(the “CMP Order”), the 

objection deadline is eight calendar days prior to the hearing scheduled. See CMP Order at 

¶III.R.

CERTIFICATE OF SERVICE: We hereby certify that on this 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 the Office of the United States Trustee and to 

the attorney of record. We further certify that the foregoing is being sent to all creditors and 

parties in interest included in the Master Address List on even date.

RESPECTFULLY SUBMITTED.

In San Juan, Puerto Rico, this 20th day of June, 2018.

G.A. Carlo-Altieri Law Offices, LLC

Attorneys at Law

254 San Jose St., Third Floor

San Juan, Puerto Rico 00901

Phone: (787) 247-6680

Fax: (787) 919-0527

/s/ Kendra Loomis

Kendra Loomis

USDC PR No. 227408

E-mail: loomislegal@gmail.com

Mobile: (787) 370-0255

/s/ Gerardo A. Carlo-Altieri

Gerardo A. Carlo, Esq.

USDC PR No. 112009

E-mail: gacarlo@carlo-altieri.com

Case:17-03283-LTS Doc#:3321 Filed:06/20/18 Entered:06/20/18 09:22:34 Desc: Main

Document Page 8 of 8