627 B.R. 765
1st Cir. BAP2021Background
- Appellants paid Doral Bank in 2008 to prevent foreclosure of property in Carolina, PR; title later vested in Debtor and her two brothers after probate proceedings.
- Debtor executed a notarial homestead declaration in December 2011 (only she signed); that homestead deed was never recorded in the Property Registry. Debtor was a registered owner at all relevant times.
- Appellants obtained a money-collection judgment against Debtor and her brothers in 2016; their judgment lien was recorded in 2017 and a sale was scheduled for October 16, 2018.
- On the day of the sale Debtor filed Chapter 13, claimed a 100% homestead exemption under the Puerto Rico Homestead Act, and moved under 11 U.S.C. § 522(f) to avoid the Appellants’ judicial lien as impairing her exemption.
- The bankruptcy court granted the lien-avoidance motion without a hearing. Appellants moved to alter or amend under Rule 59(e), arguing (inter alia) the homestead deed was invalid because (1) all co-owners did not sign and (2) it was not recorded, and citing a recent Puerto Rico decision (Money’s People). The court denied reconsideration and the Panel affirmed.
Issues
| Issue | Appellants' Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether a homestead declaration requires all co-owners to execute the notarial deed | All titled owners must execute the homestead deed (citing Rivera García/Bones Cruz) | A single titled owner may execute a notarial declaration under Art. 9; co-owners’ signatures not required | Appellate panel: Appellants failed to show manifest legal error; bankruptcy court’s implicit ruling sustained (Appellants also failed to provide required English translations of authorities) |
| Whether recordation in the Property Registry is required for a homestead right | Homestead must be recorded to be valid against creditors | Recordation is declarative; ownership and residence are the essential requisites and the homestead may exist unrecorded | Panel: Failure to record did not show manifest error; Puerto Rico precedent recognizes registry is declarative, not the source of rights |
| Nature of Appellants’ lien: judicial lien vs. security interest | Lien is security/quasi-contractual interest tied to amounts paid to bank (not a typical judicial lien) | Lien arises from a judgment in a collection action and is thus a judicial lien under 11 U.S.C. §101(36) | Panel: Lien is a judicial lien (created by judgment) and therefore subject to avoidance under §522(f) |
| Whether intervening Puerto Rico law (Money’s People) limited the homestead to pre-2011 protections | Money’s People makes the Homestead Act prospective so prior claims are limited to $15,000 cap | Money’s People was not an intervening change for reconsideration (was issued before the lien order) and exemptions are governed by statute in effect on petition date | Panel: Denial of reconsideration proper — Money’s People untranslated and issued before the lien order; debtor’s rights measured as of petition date |
Key Cases Cited
- Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582 (U.S. 2020) (jurisdictional rule on appeals from bankruptcy court final orders)
- Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (U.S. 2015) (finality in bankruptcy proceedings)
- Wilding v. CitiFinancial Consumer Fin. Servs., Inc., 475 F.3d 428 (1st Cir. 2007) (elements for avoiding a lien under §522(f))
- Garran v. SMS Fin. V, LLC, 338 F.3d 1 (1st Cir. 2003) (interpretation of §522(f) framework)
- Law v. Siegel, 571 U.S. 415 (U.S. 2014) (bankruptcy courts lack equitable power to deny exemptions beyond the Code)
- Rockwell v. Hull (In re Rockwell), 968 F.3d 12 (1st Cir. 2020) (debtor’s exemption rights are determined as of the petition date)
- Puerto Ricans for P.R. Party v. Dalmau, 544 F.3d 58 (1st Cir. 2008) (non-English materials must be accompanied by certified English translations)
- Berliner v. Pappalardo (In re Sullivan), 674 F.3d 65 (1st Cir. 2012) (abuse-of-discretion standard for reviewing denials of reconsideration)