Rentas v. TRM, LLC (In re Malavet)

• Decision Date: 31 May 2016
• Docket Number: CASE NO. 09–07657ESL,ADV. PROC. NO. 15–00006ESL
• Citation: 552 B.R. 24
• Parties: In re: Jesus Santiago Malavet, Debtor Noreen Wiscovitch Rentas, Plaintiff v. TRM, LLC as successor in interest of First Bank Puerto Rico, by and through Operating Partners Co., Defendant
• Court: U.S. Bankruptcy Court — District of Puerto Rico

552 B.R. 24

In re: Jesus Santiago Malavet, DebtorNoreen Wiscovitch Rentas, Plaintiff

v.TRM, LLC as successor in interest of First Bank Puerto Rico, by and through Operating Partners Co., Defendant

CASE NO. 09–07657ESL

ADV. PROC. NO. 15–00006ESL

United States Bankruptcy Court, D. Puerto Rico.

Signed May 31, 2016

Lucas A. Cordova Ayuso, Charles P. Gilmore, O'Neill & Gilmore PSC, Joel Gonzalez Toledo, San Juan, PR, for Plaintiff.

Rosamar Garcia Fontan, Fiddler Gonzalez & Rodriguez, Wallace Vazquez Sanabria, WVS Law LLC, San Juan, PR, for Defendant.

OPINION AND ORDER

Enrique S. Lamoutte, United States Bankruptcy Judge

This case is before the court upon the Motion for Summary Judgment and Memorandum of Law in Support Thereof on the Pleadings (Docket No. 13) filed by the Chapter 7 Trustee (hereinafter referred to as “Trustee” or “Plaintiff”) and the Opposition to Plaintiff's Summary Judgment and Cross Motion for Summary Judgment (Docket No. 25) filed by TRM, LLC (hereinafter referred to as “Defendant” or “TRM”). The Trustee seeks to avoid a pre-petition mortgage recorded over property of the estate pursuant to 11 U.S.C. § 544(a)(l) and the Puerto Rico Mortgage Law, 30 L.P.R.A. §§ 2001 et seq. The Trustee alleges that TRM's mortgage was not properly perfected pre-petition as required by Article 57 of the Puerto Rico Mortgage Law, 30 L.P.R.A. § 2260 (“Mortgage Law”) because there was a missing link in the chain of title holders, namely the Deed of Donation had not been registered, that impeded its recordation. TRM argues in its Opposition to Plaintiff's Summary Judgment and Cross Motion for Summary Judgment that: (i) the Trustee is time barred pursuant to 11 U.S.C. § 546 to file the present complaint under 11 U.S.C. § 544 ; (ii) the chain of ownership was followed because both owners of the real property; namely the Debtor and his mother Mrs. Malavet Rodriguez appeared in the Deed of Mortgage; (iii) the Property Registrar as part of his or her duties evaluated the mortgage deed, deemed that it complied with the Mortgage Law and allowed for its recordation; and (iv) TRM has a special protection under Article 105 of the Mortgage Law, 30 L.P.R.A. § 2355 as a third party who in good faith acquired a recorded real right (“tercero registral”) pursuant to Article 105 of the Mortgage Law which prevents the avoidance of the mortgage lien by the Trustee. Also before the court is TRM's Amended Motion to Dismiss (Docket No. 24) and the Trustee's Reply to Defendant's Opposition to Motion for Summary Judgment and to Amended Motion to Dismiss (Docket No. 30). The Trustee argues that the statute of limitations set forth in 11 U.S.C. § 546(a) is inapposite and that the applicable statute of limitations is determined pursuant to 11 U.S.C. § 108(a) and Article 1863 of the Puerto Rico Civil Code (“Civil Code”). TRM in its Reply to Plaintiff's Opposition to TRM's Amended Motion to Dismiss (Docket No. 38) contends that the Trustee should have filed an amended complaint pursuant to Fed. R. Civ. P. 15 since she now claims that the avoidance action is based on Articles 110 and 151 of the Mortgage Law. TRM also argues that Article 1863 is inapplicable to Trustee's claim. For the reasons stated below, TRM's Amended Motion to Dismiss is granted. Thus, both Plaintiff's Motion for Summary Judgment and Defendant's Cross Motion for Summary Judgment have become moot.

Jurisdiction

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)(2)(K). Venue of this proceeding is proper under 28 U.S.C. §§ 1408 and 1409.

Factual and Procedural Background

On September 12, 2009, Jesus Santiago Malavet (the “Debtor”) filed a voluntary Chapter 11 Bankruptcy Petition (Lead Bankruptcy Case No. 09–07657¹ ). The Debtor included in Schedule A–Real Property–the real estate property in controversy and described the same as follows:

“[p]roperty located at Urb. Roosevelt, 470 Ave. Hostos, San Juan, PR 00918. Consists of 2 story concrete residential building on a 313 sq mts. lot. Appraisal of $375,000 was based on similar sales in community in previous years. Actual devaluation in real property is 15% or $56,250.00. Debtor owns the property but Maria Malavet, [his] mother, has [a] life [e]state (“usufructo”) over the property. The commercial space is vacant.”

The Debtor listed the nature of its interest on the property as “JTWROS.” The Debtor listed the current value of the property in the amount of $318,750.00 and the secured claim is included in the amount of $141,536.11. The Debtor in Schedule D-Creditors Holding Secured Claims listed FirstBank of Puerto Rico as a fully secured creditor of a first mortgage over a residential property located at Urb. Roosevelt, 470 Ave. Hostos, San Juan in the amount of $141,536.11. The Debtor listed that the value of the residential property was in the amount of $318,750. On October 20, 2009, FirstBank Puerto Rico filed proof of claim # 5–1 in which it listed that it was a secured creditor (based upon a first mortgage) in the amount of $141,536.11.

On March, 2, 2011, the case was converted to Chapter 7 (Lead Case, Docket No. 208). The Order converting the case to Chapter 7 was set aside on May 10, 2011 (Lead Case, Docket No. 229). On May 16, 2011, RNPM, LLC (as the “Purchaser/Transferee/Asignee”) filed a Notice of Transfer of Claim Pursuant to FRBP Rule 3001(e)(2) Waiver of Opportunity to Object and Request for Notice Pursuant to FRBP 2002 informing that it had purchased FirstBank's claim pursuant to a Purchase and Sale Agreement dated December 22, 2010 (Lead Case, Docket No. 232).

On September 6, 2011, the court ordered the case to be reconverted to Chapter 7 for Debtor's failure to adequately address the reasons for not having filed a disclosure statement and plan (Lead Case, Docket No. 263). On September 7, 2011, the Notice of Re–Appointment of Interim Trustee and Approval of Blanket Bond was filed whereby Noreen Wiscowitch–Rentas was appointed as Interim Trustee (Lead Case, Docket No. 264). On October 4, 2011, the Debtor filed several amended schedules, including Amended Schedule A—Real Property—in which the Debtor included in the description of the real property in controversy that the property at Urb. Roosevelt, 470 Ave. Hostos was the Debtor's principle residence and that, “[t]he $318,750.00 is divided as follows: $159,375.00 dollars life estate (“usufructo”) [and] $159,375.00 dollars Debtor's ownership.” (Lead Case, Docket No. 270). Schedule D was not amended.

Subsequently, on August 7, 2012, the Debtor filed an Urgent Motion Requesting Determination by Trustee requesting the Trustee to express her intent to abandon the property or to attempt to invalidate the impending judicial sale (Lead Case, Docket No. 345). On August 8, 2012, the court granted the Debtor's Urgent Motion Requesting Determination by Trustee, and ordered the Trustee to reply (Lead case, Docket No. 347). On August 12, 2012, the Trustee filed her Response to Order and Response to Debtor's Motion for Determination (Lead Case, Docket No. 349). On September 24, 2012, the Trustee filed the Notice of Private Sale of Estate's Interest in Property Free and Clear of Liens informing that she will sell the real property in controversy at a private sale to JIMF Asset Management Corp. in the amount of $250,000.00. The real estate property taxes owed to CRIM amount to $6,580.88 as of September 20, 2012. In the Notice, the Trustee disclosed that: “[t]he mortgage owed to FirstBank of Puerto Rico is approximately $141,536.11. However, the Trustee reserves the right to dispute the validity of the lien.” The notice also stated that the closing costs are estimated in the amount of approximately $5,500 for notary stamps and cancellation of deeds and the realtor fee is in the amount of $10,000. The Trustee will also pay the remaining value of the usufruct held by Debtor's mother, Mrs. Maria Milagros Malavet Rodriguez (Lead Case, Docket No. 365). The value of the usufruct was not disclosed or estimated. On October 19, 2012, the Debtor filed an Objection to Private Sale of Hostos 470 premised upon the reasonability of the offer as well as the estate's interest in the property (Lead Case, Docket No. 369).

On January 31, 2013, a Notice of Transfer of Claim Pursuant to FRBP Rule 3001(e)(2) Waiver of Opportunity to Object and Request for Notice Pursuant to FRBP 2002 was filed by TRM (as the “Purchaser/Transferee/Assignee”) informing that it had purchased RNPM, LLC's claim in a Purchase and Sale Agreement dated July 17, 2012 (Lead case, Docket No. 389).

On February 1, 2013, a hearing was held to consider the Trustee's Notice of Private Sale of Estate's Interest In Property Free and Clear of Liens and Debtor's Objection to Private Sale of Hostos 470 in which the following material uncontested facts were established: (i) the property at Hostos # 470 is part of the bankruptcy estate in this case and is subject to an usufruct on behalf of Maria Milagros Malavet Rodriguez; and (ii) apart from the claimed exemption on Hostos # 470, the Debtor has no other pecuniary interest in the real property (Lead Case, Docket No. 396). At the hearing, the court established that the parties must move the court on the applicable procedure to calculate the usufruct on the real property. The court after considering the testimony of witnesses, the pleadings filed and the exhibits admitted, found that $275,000 is a reasonable value for the Hostos # 470 property under the circumstances (Lead Case, Docket No. 396).

On February 1, 2013, the Trustee filed adversary proceeding 13–00021 to obtain court approval to sell the real estate property pursuant to 11 U.S.C. § 363(f) and (h). On November 14, 2013, this court rendered its Opinion and Order in which it denied the Defendant's motion for summary judgment on the pleadings and also denied the Plaintiff's motion for summary judgment because neither of the parties provided sufficient material uncontested facts...