In re: ACEVEDO et al

Filing 28

Judge Rya W. Zobel: ORDER entered. MEMORANDUM OF DECISION AND ORDER; Appellants appeal is ALLOWED IN PART and DENIED IN PART (Docket # 10).The bankruptcy courts order vacating the default judgments is itself vacated, as is thejudgment against Bonilla-Contreras in the amount of $260,602.07. The case isremanded to the bankruptcy court to conduct an evidentiary hearing to ascertain anydamages due consistent with this order.(Urso, Lisa)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

CIVIL ACTION NO. 16-11736-RWZ

In re ACEVEDO

MEMORANDUM OF DECISION AND ORDER
September 15, 2017

ZOBEL, S.D.J.
Vicente Pérez Acevedo appeals an order of the United States Bankruptcy Court
for the District of Massachusetts (Docket # 10). In that order, the bankruptcy court
vacated default judgments against appellees, Pablo Meléndez Bonilla, Nydia María
Negrón Contreras and their conjugal partnership (collectively “Bonilla-Contreras”), and
their attorney, Leniel Collazo Nazario, and further dismissed the adversary proceeding
for lack of jurisdiction.
I.

Background
The history of this case is lengthy and complicated. I note only the facts

necessary to this decision, which are drawn from the bankruptcy court filings and the
designated record on appeal.
A.

Purchase of the Property in Puerto Rico

In May 2006, Bonilla-Contreras obtained a mortgage and purchased a vacant
property (the “Property”) in Puerto Rico. Bonilla-Contreras and Acevedo then formed
an entity, Corporación Marcaribe Investment (“Marcaribe”), to acquire the Property,
which was transferred to Marcaribe in March 2007. Marcaribe was jointly owned by

Bonilla-Contreras and Acevedo. The parties “allegedly agreed to share equally the
responsibility to pay the Mortgage Loan until May 26, 2011.” Docket # 2, at 27.
B.

Puerto Rico Superior Court Proceedings

Appellees allege that Acevedo fell behind on his share of the mortgage
payments, and on April 22, 2010, Bonilla-Contreras, through their attorney, Nazario,
filed suit against Acevedo and Marcaribe in Puerto Rico superior court to (1) dissolve
Marcaribe; (2) order the appraisal and sale of the Property; and (3) recover moneys
from Acevedo in alleged damages that reflect his share of expenses related to the
purchase of the Property. During the pendency of the state court proceedings, BonillaContreras allegedly applied for a loan modification and posed as the sole owner of the
Property. The loan modification extended the repayment of the mortgage from July 1,
2011 to June 1, 2041.
On April 30, 2012, the superior court judge entered a partial judgment in favor of
Bonilla-Contreras and ordered the dissolution of Marcaribe, but refrained from resolving
the issues of liquidation and distribution of the assets, and Acevedo’s alleged debt to
Bonilla-Contreras.
On October 11, 2012, Acevedo filed a motion in the superior court to inform it of
his filing for bankruptcy and requested that the superior court “suspend[] solely the
collection of money.” Docket # 5-7, at 17. In response, on October 23, 2012, BonillaContreras filed a Motion Requesting Extension to “study the current situation” because
“the bankruptcy request is under Chapter 13 and it is exclusively of a personal nature”
but “it is [their] understanding that the collection of money [in the state court
proceedings] applies strictly to Marcaribe Corporation, Inc., within its liquidation,”

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Docket # 5-7, at 20–21. On November 9, 2012, Bonilla-Contreras, through their
counsel, Nazario, filed a motion for partial judgment without prejudice seeking to
dismiss Acevedo from the state court proceedings in light of his filing the Chapter 13
bankruptcy petition. On December 3, 2012, the Puerto Rico superior court dismissed
Acevedo in his individual capacity, but not Marcaribe, from the state court proceedings.
C.

Chapter 13 Bankruptcy Proceeding in District of Massachusetts

On October 10, 2012, nearly six months after the superior court ordered the
dissolution of Marcaribe but two months prior to Acevedo’s dismissal from the state
court proceedings, Acevedo filed a Chapter 13 bankruptcy proceeding in the District of
Massachusetts.1 He identified two creditors who held secured claims and two creditors
who held unsecured non-priority claims, resulting in a Chapter 13 plan cost of $7,368.
See Docket # 5-6, at 62. The Chapter 13 bankruptcy plan was confirmed on October
11, 2013.
D.

Adversary Proceeding in District of Massachusetts Bankruptcy Court

On March 3, 2013, while the bankruptcy case was still pending, Acevedo filed an
adversary proceeding in the bankruptcy court against appellees.2 The complaint
alleges, among other things, that: (1) appellees willfully violated the automatic stay by
continuing the state court litigation to dissolve and liquidate Marcaribe; (2) Bonilla and
Contreras fraudulently transferred real property; and (3) Bonilla and Contreras violated

1

The Chapter 13 bankruptcy petition, along with the related adversary proceeding, were
initially assigned to Bankruptcy Judge Hillm an.
2

Acevedo originally brought the adversary proceeding against m ultiple defendants,
including the FirstBank of Puerto Rico, Tribunal de Prim era Instancia Sala de San Juan (the Puerto Rico
superior court), and Aileen Navas Auger (the judge overseeing the superior court case). Those parties
separately m oved to dism iss the com plaint for defective service and failure to state a claim upon which
relief can be granted, which Judge Hillm an allowed on June 5, 2013. See Docket # 5-3, at 9.

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11 U.S.C. § 542 (turnover of property to the estate).3 Acevedo alleged that the state
court proceedings “aim to sell property–the Land–of the estate and to diminish such
property of the estate by applying [Acevedo’s] interest to a mortgage debt . . .
fraudulently obtained through the ultra vires action of a shareholder, of a now dissolved
corporation.” Docket # 5-3, at 38. He stated that “recovery of his interest in the Land is
integral to the success of his Chapter 13 Plan which aims to pay one hundred (100)
percent of all claims.” Id. at 39.
On April 12, 2013, Nazario filed a motion to extend the time to file an answer,
which was granted by Judge Hillman on April 15, 2013. Separately, on April 27, 2013,
Acevedo moved for default judgment against Bonilla-Contreras because they had failed
to file an answer or make an appearance. On May 13, 2013, Nazario filed a second
motion to extend time to answer or otherwise plead. During a hearing held on June 5,
2013, Judge Hillman granted both Nazario’s second motion to extend time and
Acevedo’s motion for default judgment against Bonilla-Contreras. See Docket # 5-8, at
37–51. Subsequently, on July 17, 2013, Judge Hillman entered default judgment
against Bonilla-Contreras in the amount of $260,602.07, and the writ of execution was
entered on August 14, 2013. Acevedo moved in the District Court for the District of
Puerto Rico for an order of execution on the judgment, which was allowed and entered
on June 26, 2014. The order directed a special master to seize any or all property of
Bonilla-Contreras to satisfy the judgment.
Meanwhile, although Nazario had moved for several extensions to file an
3

The additional counts of the com plaint include: “Count III - Im position of a Constructive
Trust on Meléndez interest in the Property that is subject to Count II”; “Count V - Recovery and
Preservation of Estate Assets”; and “Count VI - Attorney’s Fees.” Docket # 5-3, at 40–41.

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answer, he never submitted any pleading in the adversary proceeding. Subsequently,
Acevedo moved for default judgment against Nazario, which was allowed on July 30,
2013. On August 13, 2013, Nazario moved the bankruptcy court to reconsider and
dismiss the adversary proceeding, arguing that he never received notice about Acevedo
filing the motion for default judgment and that in any event he did not willfully violate the
stay because he moved to dismiss the state court proceedings against Acevedo. He
further alleged that the “case is a frivolous one” and that Acevedo was “forum
shopping[] to avoid justice in Puerto Rico, and knowing most of the defendants cannot
defend themselves in [Massachusetts].” Docket # 5-3, at 103. Judge Hillman denied
Nazario’s motion for reconsideration.
Finally, on July 15, 2014, Roberto Maldonado entered an appearance pro hac
vice on behalf of Bonilla-Contreras, and filed a motion for relief from the default
judgment against them pursuant to Federal Rules of Civil Procedure 55 and 60(b). On
July 29, 2014, Nazario moved again for relief from the default judgment presenting
similar arguments as Bonilla-Contreras. The bankruptcy court originally set hearing for
these motions on August 22, 2014, but it was delayed to October 1, 2014. At the
hearing, the court deferred ruling on the motions for relief and ordered the parties to
show cause why the adversary proceeding should not be transferred to the District of
Puerto Rico. Judge Hillman, sua sponte, raised the issue of transfer to determine
whether it would be in the interest of justice or serve the convenience of the parties to
transfer to case to Puerto Rico because “the case would be administered more
economically and efficiently in Puerto Rico, where all parties to the adversary
proceeding except for the Debtor, the litigation the Debtor claims violates the automatic
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stay, and the real property in dispute are all located[.]” Docket # 5-5, at 110. At the
conclusion of the hearing on March 12, 2015, Judge Hillman decided to retain the case
in the District of Massachusetts because “it looks like no matter what happens there’ll
be action both [in Massachusetts due to the bankruptcy proceeding] and in Puerto Rico
[due to the foreclosure proceeding on the Property] before [the adversary proceeding]
finally [gets] resolved,” and released the order to show cause. Transcript of March 12,
2015 Hearing at 11, Acevedo v. Bonilla et al., (No. 13-01073), ECF No. 232.
1.

Assignment of Adversary Proceeding to Judge Feeney

On August 7, 2015, both the adversary and bankruptcy proceedings were
reassigned to Judge Feeney upon Judge Hillman’s retirement. A Notice of Inactivity
was issued to the parties by the court on May 16, 2016, after the case had remained
inactive for more than six months. That same day, Judge Feeney also issued an Order
of Discharge in the bankruptcy proceeding. On June 15 and 16, 2016, the appellees
filed responses with the court, informing it that the outstanding motions for relief were
still pending for the court to decide.
On August 4, 2016,4 Judge Feeney issued a memorandum that allowed
appellees’ motions for relief and vacated the default judgments. She then dismissed
the adversary proceeding for lack of subject matter jurisdiction because the bankruptcy
proceeding had been fully administered and “the outcome of the disputes among the
parties [in the adversary proceeding] can have no effect on the bankruptcy estate.”
Docket # 2, at 38. On August 5, 2016, she entered an order consistent with her

4

The mem orandum is dated August 4, 2016, but was entered on the docket one day later
on August 5, 2016.

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memorandum. Acevedo now appeals Judge Feeney’s memorandum and order.
II.

Standard of Review
I review the bankruptcy court’s decision to grant appellees’ motions for relief

from the default judgments for abuse of discretion. See United States v. Boch
Oldsmobile, Inc., 909 F.2d 657, 660 (1st Cir. 1990). “Abuse occurs when a material
factor deserving significant weight is ignored, when an improper factor is relied upon, or
when all proper and no improper factors are assessed, but the court makes a serious
mistake in weighing them.” Indep. Oil & Chem. Workers of Quincy, Inc. v. Procter &
Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir. 1988). Appellant bears the burden of
persuasion. See In re Zeitler, 221 B.R. 934, 937 (B.A.P. 1st Cir. 1998) (citing Jones v.
Winnepsaukee Realty, 990 F.2d 1, 5 (1st Cir. 1993)).
I review the bankruptcy court's factual findings for clear error and its legal
conclusions de novo. In re Handy, 624 F.3d 19, 21 (1st Cir.2010). “A finding is ‘clearly
erroneous’ when although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).
Mixed questions of law and fact “invok[e] a sliding standard of review, tending more
toward de novo review at the law end.” Braunstein v. McCabe, 571 F.3d 108, 124 (1st
Cir. 2009).
III.

Analysis
A.

Vacating Default Judgments Under Rule 60(b)

Once a default judgment has been entered, relief must be sought under Federal
Rule of Civil Procedure 60(b). See Fed. R. Civ. P. 55(c). Motions for relief under Rule
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60(b) must be brought “within a reasonable time,” but motions under Rule 60(b)(1)–(3)
must be filed no more than a year after the entry of judgment. Fed. R. Civ. P. 60(c).5
Although appellees did not explicitly cite to the particular subsections of Rule 60(b)
under which they brought their motions, I infer from their papers that they sought relief
under Rule 60(b)(3), which grants relief due to “fraud (whether previously called intrinsic
or extrinsic), misrepresentation, or misconduct,” and 60(b)(6), which grants relief for
“any other reason that justifies relief.” Fed. R. Civ. P. 60 (b)(3) and 60(b)(6); see
Docket # 5-4, at 7–8 (Bonilla-Contreras arguing that court may relieve a party from a
final judgment due to “fraud, misrepresentation, or misconduct by an opposing party; or
any other reason that justifies relief.”); id. at 45–46 (Nazario arguing same). The
bankruptcy court did not address relief under Rule 60(b)(3). Instead, it granted relief
under Rule 60(b)(6). See Docket # 2, at 36–37 (finding that relief was warranted
because “exceptional circumstances” existed).
Acevedo argues, however, that appellees’ motions were “written though as []
Rule 60(b)(1) motion[s],” Docket # 10, at 18, which “contemplates the possibility of relief
in cases involving ‘mistake, inadvertence, surprise, or excusable neglect.’” Id. at 35
(quoting Fed. R. Civ. P. 60(b)(1)). I agree. Here, Bonilla-Contreras claimed that they

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Acevedo contends that both Bonilla-Contreras and the bankruptcy court were dilatory.
Specifically, he contends that Bonilla-Contreras filed their m otion for relief m ore than a year after the entry
of judgm ent, which he asserts was entered on June 6, 2013. The bankruptcy court did not address this
argum ent, but I do not find that it clearly erred. The record reflects that on June 6, 2013, the bankruptcy
court allowed Acevedo’s m otion to am end the court’s order allowing default judgm ent against BonillaContreras. But the court did not enter default judgm ent until July 17, 2013. Bonilla-Contreras filed their
m otion for relief on July 15, 2014, which was within one year after entry of judgm ent.
Acevedo also takes issue with the bankruptcy court’s “failure to act on the m otions for relief [in a
tim ely m anner],” Docket # 10, at 13. However, the tim e taken by the court to resolve the m otions for relief
is of no consequence to the issue of whether the appellees tim ely filed their Rule 60(b) m otions, which, as
discussed above, was tim ely filed.

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failed to appear due to Bonilla’s personal health issues and lack of resources to engage
an attorney to represent them in Massachusetts. Nazario, who requested multiple
motions for extensions but failed to file a pleading, also claimed that it was difficult to
retain counsel in Massachusetts. These reasons for defaulting can soundly be
characterized as neglectful. Defendants, however, cannot use Rule 60(b)(6) to obtain
relief on a ground that comes within Rule 60(b)(1). See Claremont Flock Corp. v. Alm,
281 F.3d 297, 299 (1st Cir. 2002) (“If a party is ‘partly to blame,’ Rule 60(b)(6) relief is
not available to that party; instead, ‘relief must be sought within one year under
subsection (1) and the party’s neglect must be excusable.’” quoting Pioneer Inv. Servs.
Co. v. Brunswick Assoc., 507 U.S. 380, 393 (1993)); see also Cintron-Lorenzo v.
Departmento de Asuntos del Consumidor, 312 F.3d 522, 527 (1st Cir. 2002) (rejecting
plaintiff’s claim that “her personal problems and her inability to retain counsel” were
“exceptional circumstances justifying relief from judgment” and finding “that she failed to
bring any of [her] travails to the attention of the district court in a timeous fashion.”)
Appellees were “partly to blame” for their failure to appear, and therefore, cannot seek
relief under Rule 60(b)(6). Thus, the bankruptcy court erred in its application of Rule
60(b)(6) to their motions for relief. The court’s citation and reliance on Ungar v.
Palestine Liberation Org., 599 F.3d 79 (1st Cir. 2010), was also misplaced. In Ungar,
the court explained that “a negligently defaulting party [] cannot employ Rule 60(b)(6) to
obtain relief because ‘a motion under Rule 60(b)(6) is appropriate only when none of
the first five sections pertain, and section (6) may not be used as means to circumvent
those five preceding sections.’” 599 F.3d at 85 (quoting Ahmed v. Rosenblatt, 118 F.3d
886, 891 n. 9 (1st Cir. 1997)). In Ungar, the court found that defendants appropriately
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sought relief under Rule 60(b)(6) because they had willfully defaulted due to a
“deliberate strategic choice,” and therefore could not seek relief under Rule 60(b)(1).
Id. at 86. In contrast, appellees here claim that their “default was not willful,” Docket #
5-4, at 10, 46, and therefore they cannot invoke relief under 60(b)(6).
B.

Damages

Appellees counter that even if judgment stands, “[t]he lack of an evidentiary
record before the Court with admissible evidence precludes the entry of a default
judgment without a hearing.” Docket # 24, at 23. They claim that the court erred in
entering a default judgment in the amount of $260,602.07 because under Rule 54(c),
“no default judgment can be greater in amount or different in kind from the demand
contained in the complaint.” Id. at 22. They are correct. “Following the entry of default,
a district court can enter a final judgment without requiring further proof of damages
only in limited situations.” KPS & Assoc., Inc. v. Designs by FMC, Inc., 318 F.3d 1, 19
(1st Cir. 2003) (citations omitted); cf. Fed. R. Civ. P. 55(b)(1) (authorizing court clerk to
enter default judgment “on the plaintiff’s request,” “[i]f the plaintiff’s claim is for a sum
certain or a sum that can be made certain by computation”); compare HMG Property
Investors, Inc. v. Parque Indus. Rio Canas, Inc., 847 F.2d 908, 919 (holding that district
court did not abuse its discretion when it entered default judgment without a hearing
because “the proper judgment amount was calculable from the mortgage and loan
agreements, certifications by the taxing authorities, and other documents of record”),
with In re The Home Restaurants, Inc., 285 F.3d 111, 114 (1st Cir. 2002) (“A hearing
may be required, however, to set damages when the amount is in dispute or is not
ascertainable from the pleadings.”).
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The nature of Acevedo’s claims is not a sum certain case. “In the Rule 55
context, a claim is not a sum certain unless there is no doubt as to the amount to which
a plaintiff is entitled as a result of the defendant’s default.” KPS & Assoc., Inc., 318
F.3d at 19 (citations omitted). The amount of damages Acevedo is entitled to is unclear
based on his complaint and does not clearly support an entry of judgment of
$260,602.07 particularly since appellees had dismissed their claims against Acevedo
individually in the state court proceedings shortly after he filed the Chapter 13
bankruptcy petition. Nevertheless, the bankruptcy court, without explanation, vacated
the hearing that was to be held on July 18, 2013, and did not look beyond Acevedo’s
affidavit in fixing the amount of damages.6 Accordingly, the bankruptcy court erred in
failing to hold a hearing before fixing the amount of damages.
IV.

Conclusion
Appellant’s appeal is ALLOWED IN PART and DENIED IN PART (Docket # 10).

The bankruptcy court’s order vacating the default judgments is itself vacated, as is the
judgment against Bonilla-Contreras in the amount of $260,602.07. The case is
remanded to the bankruptcy court to conduct an evidentiary hearing to ascertain any
damages due consistent with this order.

September 15, 2017

/s/Rya W. Zobel

DATE

RYA W . ZOBEL
SENIOR UNITED STATES DISTRICT JUDGE

6

For instance, in support of his claim for dam ages, Acevedo included the m ortgage
am ount that Bonilla-Contreras obtained to purchase the Property. See Docket # 5-4, at 12. It is unclear
how that am ount relates to Acevedo’s claim s in the adversary proceeding, and whether it was an
appropriate sum to be included in the dam ages calculation.

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