Miranda v. Banco Popular de P.R. (In re Ortiz)
| Decision Date | 29 January 2020 |
| Docket Number | ADV. PROC. NO. 16-00042 (ESL),CASE NO. 10-10228 (ESL) |
| Parties | IN RE: ARMANDO TORRES ORTIZ AND MILDRED LA TORRE RAMOS Debtors WILFREDO SEGARRA MIRANDA, CHAPTER 7 TRUSTEE Plaintiff v. BANCO POPULAR DE PUERTO RICO Defendant |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
This adversary proceeding is before the court upon the Motion to Dismiss (Docket No. 50) filed by defendant Banco Popular de Puerto Rico (hereinafter referred to as the "Defendant" or "BPPR") arguing: (i) that the complaint now fails to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6) because the trustee's avoiding power is subject to two exceptions that are present in the instant adversary proceeding; namely: the relation-back exception pursuant to 11 U.S.C. §546(b) and the authorized post-petition "transfer" under 11 U.S.C. §549; (ii) the court concluded that, "[t]he post-petition registration of BPPR's lien was authorized by the court pursuant to the order lifting the automatic stay;" (iii) thus, no violation of the automatic stay was incurred by BPPR or the Property Registrar; and (iv) the court must act in conformity with the law of the case and must enter an order dismissing the present adversary proceeding. The Chapter 7 Trustee filed his Opposition to [the] Motion to Dismiss contending that: (i) the Order granting the motion for relief from stay was filed for the limited purpose of continuing the in rem procedure of a mortgage foreclosure over the Property; (ii) article 214 of the Mortgage Law provides in pertinent part, "....[w]hen rectification might affect the rights of registered titleholders, their consent or a judicial resolution ordering the rectification of the entries shall be required." The title studies submitted by BPPR evince that the bill of presentation ("asiento de presentación") of the R&G Mortgage was mistakenly presented as a lien over property #7187, and not property #25105, which is property of the bankruptcy estate; (iii) the trustee became a bona fide purchaser of the residence before the Registrar rectified the error. As a bona fide purchaser, the trustee took title to all property in which the debtor held an interest as of the date of the petition, free and clear of all unrecorded conveyances. Thus, the corrected entry cannot relate back to the date the bill of entry was mistakenly recorded due to his intervening interest in the realty acquired under 11 U.S.C. §544(a)(3); (iv) article 211 of the Puerto Rico Mortgage Law, provides that the correction done to the presentation inscription by the Registrar of the Property cannot impair rights legitimately acquired before that date by a third party such as the Trustee, who meet the conditions thereby established; (v) the Property Registrar acted incorrectly in making the recordation over property #25105; (vi) the post-petition and post-conversion lien created by the R&G mortgage should be set aside pursuant to section 544(a); and (vii) the R&G lien is preserved in favor of the bankruptcy estate by virtue of 11 U.S.C. §§544 and 551. DeGiacomo v. Traverse (In re Traverse), 753 F. 3d 19 (1st Cir. 2014) (Docket No. 57). BPPR filed its Reply to Trustee's "Opposition to Request for Dismissal" (Docket No. 65). For the reasons stated herein, BPPR's Motion to Dismiss is hereby denied.
The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core proceeding pursuant to 28 U.S.C. §§157(b)(1) and (b)(2). Venue of this proceeding is proper under 28 U.S.C. §§1408 and 1409.
The Debtors filed a bankruptcy petition under Chapter 13 of the Bankruptcy Code on October 29, 2010 (Lead Case No. 10-10228). The Debtors included in Schedule A- Real Property,the real property in controversy with a current value of $190,000 and a secured claim in the amount of $153,837.67 (Lead case No. 10-10228, Docket No. 1, pg. 20). The Debtors listed in Schedule D- Creditors Holding Secured Claims, a mortgage over a house located in Toa Alta, PR with a value of $190,000 and BPPR's claim in the amount of $124,367.84 (Lead Case, Docket No.1, pg. 25). On December 27, 2010, BPPR filed proof of claim #2-1 as a secured claim in the amount of $124,367.84 based on a mortgage note and secured by real estate with a value in the amount of $190,000. On December 30, 2010, the Debtor's plan of reorganization dated October 19, 20101 was confirmed (Lead Case, Docket No. 16). On January 12, 2011, BPPR filed proof of claim 4-1 as a secured claim in the amount of $124,672.86 based on a mortgage note and secured by real estate with a value that has not been estimated.
On January 23, 2015, BPPR filed a Motion for Relief from Stay Pursuant to 11 U.S.C. §362 contending that it is a secured creditor and has not been offered nor provided adequate protection as required by section 362(d)(1) and thus, requests that the automatic stay be lifted in order to proceed with the foreclosure of the mortgage against the property (Lead Case, Docket No. 37). On February 12, 2015, the court granted by default BPPR's motion for relief (Lead Case, Docket No. 43).
On February 11, 2015, the Chapter 13 Trustee filed a Motion to Dismiss the case because the Debtors are in material default with the terms of the confirmed plan (Lead Case, Docket No. 42). On March 19, 2015, the Debtors filed a Notice of Conversion to Chapter 7 (Lead Case, Docket No. 53). On March 24, 2015, Wilfredo Segarra Miranda was appointed as the Chapter 7 trustee (Lead Case, Docket No. 60). On April 13, 2015, the Debtors filed a Statement of Purpose of Amended Schedules A, B, C, I and J in which amended Schedule A- Real Property, was listed with a current value of $140,000 and a secured claim in the amount of $137,938.40 (Lead Case, Docket No. 67).
On March 10, 2016, the Chapter 7 Trustee filed the present adversary proceeding to avoid a post-petition and post-conversion lien over property #25105, which belongs to the bankruptcyestate. The Chapter 7 Trustee in the complaint contends the following: (i) according to the inscription, the mortgage deed number 133 was presented for registration over property #7187 and not property 25105 which is the property of the bankruptcy estate; (ii) at the time of the filing of the petition, the property was not encumbered by the mortgage; (iii) on or around November 9, 2015, the Property Registrar registered the mortgage under property #25105 (instead of over property #7187 where it had been presented for recordation and registry); (iv) the process of registration begins when the mortgage deed is presented and recorded in the daily book of presentations kept by the Property Registrar. This entry preserves [the] rank, as the inscription of the mortgage relates back to the date and the time the Bill of Entry is recorded in the daily books, applying the principle, "prior tempore, potior iure;" (v) the preference or rank of any deed will be determined through the date of the Bill of Presentation ("Asiento de Presentación"). Gasolinas de PR Corp. v. Registrador, 155 D.P.R. 652, 675 (2001). If the Bill of Presentation is recorded on the wrong parcel of land, the inscription relates back to that mistaken entry. Segarra Miranda v. Doral (Adv. Proc. 07-00292, Docket No. 34); (vi) the mortgage law allows Property Registrars to rectify an erroneous entry in the daily books, 30 L.P.R.A. §§2501-2505; (vii) However, "[w]hen rectification might affect the rights of registered titleholders, their consent or a judicial resolution ordering the rectification of the entries shall be required;" 30 L.P.R.A. §2502. Thus, before correcting or rectifying any fact set forth in the Registry of Property, the consent of the titleholders whose rights could be affected by the correction must be sought; and in the absence of this consent, the Registrar or the party seeking the correction must first obtain a court decision ordering the correction of the entry; (viii) in the instant case, the title studies submitted by BPPR in support of its claims show that the Bill of Presentation of the mortgage deed was mistakenly presented for registration over property #7187, and not property #25105, which is property of the bankruptcy estate; (ix) footnote 1 in the complaint states that, "Plaintiff is unaware whether the mistake was made by the Notary Public in the preparation of the minutes of presentation or by the Property Registrar. Nevertheless, identification of the wrongdoer is not a material fact in terms of the cause of action presented by the Trustee; (x) Article 110 of the Mortgage Law providesthat, "[i]n no case, may correction of the Registry impair the rights legitimately acquired by a third party who meets the conditions hereby established;" 30 L.P.R.A. §2360. The rectification may be retroactive if, inter alia, the rights of an intervening third party are not adversely affected; and (xi) "the Puerto Rico Mortgage and Property Act, specifically provides that the correction done to the presentation inscription by the Registrar of the Property as of November 9, 2015, cannot impair the rights legitimately acquired before that date by a third party like the Trustee herein, who meets the conditions thereby established." The four causes of action that the complaint is based upon are the following: (i) the post-petition and post-conversion lien created by the mortgage deed should be set aside pursuant to 11 U.S.C. §544(a). The trustee as a hypothetical lien creditor and a bona fide purchaser who perfected his rights as of the date of the filing of the petition, or ultimately upon conversion, has preference over any unrecorded transfer of the property and, thus is entitled to avoid the post-petition and post-conversion lien created by the Property Registrar in recording the mortgage deed over property #25105. Pursuant to the provisions of the Puerto Rico Mortgage Law, 30 L.P.R.A. §2360, any annotation or correction made by the Property...
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