Phalanx Capital Series LLC Series 11 v. Ortiz Rivera, Joel
KLCE202301403
Tribunal De Apelaciones De Pue...Aug 29, 2024Background
- Joel Ortiz Rivera signed a $142,300 mortgage note in 2004, secured by a property in Puerto Rico.
- Due to nonpayment since January 2018, PRIH LLC sued Ortiz and others for foreclosure and execution of the mortgage.
- During litigation, Grace Monge La Fosse acquired the defendants' litigated credit and sought to exercise the right of retracto de crédito litigioso under the 2020 Civil Code, aiming to pay off the debt for the price Phalanx paid to acquire it.
- The trial court allowed Monge to intervene and exercise the right of retracto; Phalanx challenged this, arguing controlling law barred the use of retracto on negotiable instruments (promissory notes).
- On certiorari, the Appellate Panel reviewed whether Monge could invoke retracto and whether she could appear as a party given her prior disbarment from legal practice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can Monge exercise the right of retracto | Not permitted on negotiable notes | Allowed under new Civil Code | Not permitted; DLJ precedent applies, no repeal by code |
| Does the 2020 Civil Code repeal DLJ holding? | No express repeal | Code intent was to restore retracto rights | No; Code is compatible with DLJ, except for bad faith |
| Did Monge have standing to participate as a party? | No, due to her prior disbarment | She was now a credit assignee | Yes, as assignee she can appear via substitution |
| Did Phalanx act in bad faith to justify retracto? | Retracto not available regardless | Implied evidence of bad faith | No bad faith shown; good faith is presumed |
Key Cases Cited
- DLJ Mortgage Capital, Inc. v. Santiago Martínez, 202 DPR 950 (P.R. 2019) (retracto de crédito litigioso does not apply to negotiable instrument assignments)
- Consejo de Titulares v. C.R.U.V., 132 DPR 707 (P.R. 1993) (requirements and purpose of retracto de crédito litigioso in Puerto Rico)
- Teachers Annuity v. Sociedad de Gananciales, 115 DPR 140 (P.R. 1984) (discretionary substitution of parties following assignment of interest)
- Mun. de San Juan v. Bosque Real, S.E., 158 DPR 743 (P.R. 2003) (substitution of parties not required for assignees in ongoing litigation)