Carrión v. Scotiabank de P.R. (In re Vidal)
| Decision Date | 04 December 2017 |
| Docket Number | CASE NO. 15–02030 (ESL),ADV. PROC. NO. 15–00282 |
| Citation | 578 B.R. 481 |
| Parties | IN RE Victor J. COLÓN VIDAL; Xiomara Colón Arroyo, Debtors Jose R. Carrión, Chapter 13 Trustee; Victor J. Colón Vidal; Xiomara Colón Arroyo, Plaintiffs v. Scotiabank de Puerto Rico, Defendant |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Eduardo J. Mayoral Garcia, Francisco J. Ramos Gonzalez, San Juan, PR, for Plaintiffs.
Charles P. Gilmore, Patrick D. O'Neill, O'Neill & Gilmore, San Juan, PR, Joel Gonzalez Toledo, San Juan, PR, for Defendant.
PREFERENCE
This adversary proceeding is before the court upon a Motion for Summary Judgment (Docket No. 32) filed by the Debtors, subsequently adopted by the Chapter 13 Trustee (the "Trustee", Docket No. 46), seeking an order for the avoidance and cancellation of a cautionary notice of complaint ("Aviso de Demanda ") that was filed in the Property Registry by creditor Scotiabank de Puerto Rico ("Scotiabank") and for Scotiabank's Claim No. 7 to be allowed as a general unsecured creditor. Scotiabank filed its Opposition thereto (Docket No. 42), to which Debtors replied (Docket No. 53). After considering all the arguments and pleadings, for the reasons stated herein, the Debtors' and Trustee's Motion for Summary Judgment (Docket Nos. 32 & 46) is granted and Scotiabank's Opposition (Docket No, 42) is denied.
The Debtors filed a bankruptcy petition under Chapter 13 of the Bankruptcy Code on March 20, 2015 (Lead Case Docket No. 1). In Schedule A, Debtors listed a real property located in Carr. 857 Km 6.5 Bo. Canovanillas, Sector Los Jimenez, calle Orozco, Carolina, Puerto Rico (the "Real Property") with a scheduled value of $220,000.00 (Lead Case Docket No. 1, p. 8). The Debtors also included Scotiabank an unsecured creditor in Schedule F (Creditors Holding Unsecured Non Priority Claims) in the amount of $132,446.00 (Schedule F, Lead Case Docket No. 1, p. 20). On July 20, 2015 Scotiabank filed a secured proof of claim in the amount of $136,979.80 (Claim No. 7–1).
On December 3, 2015, the Debtors filed the instant Complaint (Docket No. 1) claiming that Scotiabank's secured claim is based in a cautionary notice of complaint that was filed in the Carolina Property Registry (the "Property Registry") 64 days prior to the bankruptcy filing. Debtors aver that the cautionary notice enabled Scotiabank to procure a secured status that would allow the creditor to receive more than it would have received if the cautionary notice had not been recorded. Thus, they contend that the recordation of the cautionary notice constitutes a transfer of interest that occurred within 90 days prior to the bankruptcy petition and that the cautionary notice can be avoided as a preferential transfer under 11 U.S.C. § 547(b). Based on the foregoing, the Debtors seek an order to avoid Scotiabank's cautionary notice and have Claim No. 7 be deemed as unsecured.
On January 29, 2016, Scotiabank filed its Answer to the Complaint (Docket No. 10) admitting most of the factual allegations but denying the Debtors' legal conclusions. Scotiabank affirmatively alleges that the purpose of the civil action that gave rise to the cautionary notice is to record a mortgage through the mechanisms established in the Mortgage Law. The creditor argues that to the extent judgment is entered in their favor in the civil action pending before the Court of First Instance the inscription of their mortgage deed would relate back to the date in which the cautionary notice was filed in the Property Registry. As a result, Scotiabank contends that the provisional entry created at the Property Registry by virtue of the filing of the cautionary notice would be converted into a properly and timely perfected permanent inscription of a mortgage, which is, a consensual lien.
On August 25, 2016, the Debtors filed a Statement of Uncontested Material Facts to which they attached the corresponding supporting documentary evidence. That same day, the Debtors filed their Motion for Summary Judgment and Memorandum of Law in Support Thereof (Docket Nos. 31 & 32). In essence, the Debtors sustain that the filing of the cautionary notice is a transfer under 11 U.S.C. § 547 and that it can be set aside and avoided because it happened 64 days prior to the bankruptcy petition.
In turn, Scotiabank filed its Opposition to Motion for Summary Judgment and Memorandum of Law on May 16, 2017 (Docket No. 42). The creditor contends that it acquired for value from R & G Mortgage the loan and the mortgage securing the loan presented for recording in the Registry of Property without knowing the future title issues of the mortgage due to the error in the description of the main land to which Plaintiff's parcel was to be segregated. Thus, Scotiabank argues that under 11 U.S.C. § 550(b) they are to be considered an immediate or mediate good faith transferee, not subject to the avoidable powers of the trustee (in this case, of the Plaintiffs).
On June 8, 2017, the Chapter 13 Trustee filed a Motion Requesting to Join the Above–Caption Adversary Proceeding, to Ratify Averments and for Leave to Amend Complaint (Docket No. 46). On June 16, 2017, the court granted the Trustee's Motion (Docket No. 46). On June 30, 2017, the Trustee filed an Amended Complaint (Docket No. 52) essentially to be added as plaintiff to the instant adversary proceeding.
On July 7, 2017, the Debtors filed a Reply to Scotiabank's Opposition to Debtor's Motion for Summary Judgment (Docket No. 53). The Debtors argue that Scotiabank's good faith transferee defense under 11 U.S.C. § 550(b) is inapplicable since debtors are only seeking to avoid a transfer under 11 U.S.C. § 547 and not recover property under 11 U.S.C. § 550.
After considering the totality of the record, the court finds that the following material facts are uncontested:
1. The debtors are the owners of a property located at Carr. 857 Km 6.5 Bo. Canovanillas, Sector Los Jimenez, calle Orozco, Carolina Puerto Rico, PR 00987 ("the residence").
2. The debtors acquired this residence pursuant to a Deed of Segregation and Sale executed on April 16, 2002 before notary public Agustín R. Hernández.
3. The Deed of Sale and Segregation was filed in the Property Registry.
4. On May 19, 2005, debtors executed a Deed of Mortgage in favor of R & G Mortgage to secure a note in the amount of $144,000.00.
5. On May 31, 2005, debtors executed a Deed of Amendment of Mortgage.
6. The Deed of Mortgage and the Deed of Amendment of Mortgage were filed in the Property Registry.
7. The Property Registry notified defects to the Deed of Segregation and Sale, the Deed of Mortgage, and the Deed of Amendment of Mortgage.
8. The defects notified by the Property Registry were not corrected. As such the entry of presentation of said documents expired.
9. R & G Mortgage assigned the debtors' loan, including the mortgage note and Deed of Mortgage, to Scotiabank.
10. On October 29, 2014, Scotiabank filed a civil lawsuit against the debtors in the Court of First Instance, Carolina Part ("Court of First Instance").
11. In the complaint, Scotiabank states that the mortgage executed by the Debtors could not be recorded due to failure to correct the defects notified by the Property Registry.
12. Scotiabank requested the Court of First Instance to enter judgment ordering the Property Registry to record the Deed of Segregation and Sale, the Deed of Mortgage, and the Deed of Amendment of Mortgage.
13. Simultaneously with the filing of the complaint, Scotiabank filed a Motion Requesting the Court to Authorize a Cautionary Notice of Complaint.
14. On November 10, 2014, the Court of First Instance issued an Order directing the Property Registry to enter a cautionary notice of complaint over debtors' residence. The Court also issued a Writ for the execution of the Order ("mandamiento") directing the court's marshal to file copy of the Order in the Property Registry.
15. On January 13, 2015, the cautionary notice Order was filed in the Property Registry.
16. On January 15, 2015, the Property Registry entered a cautionary notice of complaint over debtors' property.
17. On March 20, 2015, the debtors filed for bankruptcy.
18. On Schedule A of the petition, the debtors informed that they are the owners of a real property located in Carr. 857 Km 6.5 Bo. Canovanillas, Sector Los Jimenez, calle Orozco, Carolina Puerto Rico. The debtors valued their property in $220,000.00.
19. The debtors executed a sworn statement under penalty of perjury declaring that the property identified in Schedule A was their principal residence, that it was used for residential purposes only, and that they had designated the property as their homestead pursuant to the Puerto Rico Homestead Act. The debtors included copy of the Sworn Statement with their schedules.
20. On Schedule C of the petition, the debtors claimed the full value of the property ($220,000.00) exempt pursuant to the PR Homestead Act.
21. Debtors' claimed exemptions were not objected by any party.
22. The debtors reported no secured creditors in Schedule D of the petition.
23. In Schedule F of the petition, the debtors listed Scotiabank as the holder of an unsecured claim in the amount of $132,446.39.
24. On July 20, 2015 Scotiabank filed a secured proof of claim in the amount of $136,979.80 (Claim No. 7–1).
25. Scotiabank's Proof of Claim indicates that the basis for perfection of the claim is "Mortgage/Recorded ‘Aviso de Demanda ’ ". The creditor attached to its Proof of Claim a copy of the Cautionary Notice Order entered by the Court of First Instance.
26. At the date of the filing of the petition, and still today, the Deed of Mortgage executed by the debtors is neither presented nor recorded in the Property Registry.
27. As per debtors' schedules, they have non-exempt assets in the amount of $20,000.00 and liabilities in the amount of $207,312.38.
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