Wiscovitch-Rentas v. Banco Popular De Puerto Rico (In re Rivera)Wiscovitch-Rentas v. Banco Popular De Puerto Rico (In re Rivera)
The Trustee asserted that BPPR was not entitled to the seized funds because it failed to perfect a security interest in the savings account in accordance with the requirements of the Puerto Rico Civil Code, and because the funds were not freely available for withdrawal by the Debtor-a prerequisite to a bank's ability to exercise a right of setoff. Needless to say, BPPR disagreed with both the Trustee's assertions. The bankruptcy court ruled that BPPR enjoyed a perfected security interest in the savings account. As a result, the court did not address the Trustee's alternative claim as to the unavailability of BPPR's setoff rights.
The bankruptcy court also granted summary judgment in favor of BPPR on count II of the complaint, in which the Trustee asserted a preference claim under § 547. As the Trustee neither identified that issue in her statement of issues nor briefed it, she has waived the issue for appeal purposes. See United States v. Bayard,
Accordingly, we AFFIRM the Order as to count II, and, for the reasons discussed below, we VACATE the Order as to count I and REMAND to the bankruptcy court for further proceedings consistent with this opinion.
BACKGROUND
I. Pre-bankruptcy Events
On October 19, 2012, BPPR loaned the Debtor $ 31,434.17. In a loan agreement memorializing this transaction, the Debtor agreed to make 83 monthly payments of $ 78.59 each, beginning on November 19, 2012, and a final lump sum payment of $ 31,512.76 on October 19, 2019. The Debtor authorized BPPR to debit the payments from his BPPR savings account ending in 6280. On the same date, the Debtor also
The Debtor defaulted in his monthly payment obligation to BPPR for the months of February and March 2015. Consequently, on April 30, 2015, BPPR debited the 1438 account in the amount of $ 31,434.17, thereby paying off the outstanding balance of the loan.
II. Bankruptcy Court Proceedings
Less than a week later, on May 5, 2015, the Debtor filed a petition for relief under chapter 7 of the Bankruptcy Code. On his schedules accompanying the petition, the Debtor listed approximately $ 77,000.00 in assets, and $ 185,000.00 in liabilities.
A. The Complaint
On April 6, 2017, the Trustee commenced an adversary proceeding against BPPR. In count I of her complaint, the Trustee alleged that BPPR's debiting the 1438 account was an improper setoff because the 1438 account had been pledged to BPPR as collateral for the loan to the Debtor and was unavailable to the Debtor, making it "a special purpose deposit" not subject to setoff under the Puerto Rico Civil Code.
B. BPPR's Answer and the Cross-Motions for Summary Judgment
BPPR answered the complaint, asserting several affirmative defenses, including that: (1) its claim was fully secured; (2) the complaint "was barred by the doctrine of setoff and/or recoupment"; and (3) the pledge agreement complied with the provisions of the Puerto Rico Civil Code.
The Trustee then followed with a motion for summary judgment accompanied by a supporting statement of uncontested facts.
BPPR countered with a cross-motion for summary judgment, asking the court to grant summary judgment in its favor, declare its claim secured, and deny the Trustee's summary judgment motion.
BPPR maintained that the pledge agreement satisfied the requirements for a valid pledge prescribed in Article 1756 of the Civil Code of Puerto Rico,
BPPR also challenged the Trustee's authentication argument, asserting that the Supreme Court of Puerto Rico held in Ramos Mimoso v. Tribunal Superior de P.R.,
Then, contrary to its prior argument, BPPR asserted in its cross-motion that the Commercial Transactions Act of Puerto Rico (also known as the Puerto Rico Uniform Commercial Code and hereinafter sometimes the "PR UCC")-and not Article 1756 of the Civil Code of Puerto Rico-governed the underlying transaction. BPPR attempted to reconcile the inherent inconsistency in its position by explaining that it looked to the Puerto Rico Civil Code merely to supply the definition of a pledge and then turned to the PR UCC to establish that it had a perfected security interest in the 1438 account, stating:
Section 2264 of the [PR UCC] establishes that a security interest in a depositaccount is perfected by control of the collateral. Section 2214(a)(1) establishes that a secured party has control of a deposit account if the secured party is the bank with which the deposit account is maintained.
BPPR claimed that it had perfected its security interest in the 1438 account under the PR UCC by maintaining control over the account.
In addition, BPPR defended its right of setoff with a three-pronged argument: (1) "Section 2367 [of the PR UCC] establishes that ... after default, if a secured party holds a security interest in a deposit account perfected by control, [it] may apply the balance of the deposit account to the obligation secured by the deposit account"; (2) "Section 2290 [of the PR UCC] establishes a right of [setoff] of a secured party as to a deposit account maintained with the secured party";
C. The Order
After the bankruptcy court received the motion for summary judgment and cross-motion, it entered an order directing the parties "to file opposing [statements of] material facts" pursuant to Rule 56(c) of the Local Civil Rules for the U.S. District Court for the District of Puerto Rico. In response, the Trustee and BPPR filed a "joint motion in compliance," representing that the cross-motions did "not require opposing statements since there [were] no material facts in controversy and the remaining unresolved dispute [was] primarily legal." Thereafter, the bankruptcy court, relying on the "stipulated [ ] salient" facts set forth in the parties' respective statements of uncontested material facts, and without a hearing, entered the Order that is the subject of this appeal. Wiscovitch v. Banco Popular de P.R. (In re Cruz Rivera), Adv. Pro. No. 17-00093 (MCF),
In the Order, the bankruptcy court acknowledged that "the parties filed a motion to indicate that all facts as alleged in their summary judgment motions [were] uncontested."
Deposit accounts fall within the scope of personal property regulated by Puerto Rico's Commercial Transactions Act,P.R. Laws Ann. tit. 19, § 2219 (a). Section 9-109 of the Commercial Transactions Act specifically states that the Civil Code of Puerto Rico shall not apply with regard to security interests in personal property covered by the Commercial Transactions Act.P.R. Laws Ann. tit. 19, § 2219 (e). The Debtor's savings account is within the Commercial Transactions Act's definition of a "deposit account." The Commercial Transactions Act defines a deposit account as "... a demand, time, savings, passbook, or similar account maintained with a bank."P.R. Laws Ann. tit. 19, § 2212 (29). Therefore, the applicable law for the creation and perfection of security interests in deposit accounts is the Commercial Transactions Act of Puerto Rico and not the Civil Code.
A security interest in a deposit account may be perfected by control, under Sections 9-104 and 9-314(a) of the Commercial Transactions Act.P.R. Laws Ann. tit. 19, § 2214 (a);P.R. Laws Ann. tit. 19, § 2264 . Section 9-314(a) expressly states that "a security interest in ... deposit accounts may be perfected by ... control under Section 9-104.P.R. Laws Ann. tit. 19, § 2264 . Section 9-104(a)(1) provides the requirements for control of the collateral; "A secured party has control of a deposit account if ... (1) the secured party is the bank with which the deposit account is maintained ...[.]"P.R. Laws Ann. tit. 19, § 2214 (a).
The bankruptcy court rejected the Trustee's reliance on In re Almacenes Gigante, Inc., supra, and her assertion that BPPR's security interest in the 1438 account was unperfected due to the pledge agreement's lacking authentication, stating:
The Trustee's argument omits more than 20 years of legislation in Puerto Rico regarding liens on personal property. Puerto Rico's Commercial Transactions Act-to some extent-adopted the Uniform Commercial Code's modernization of the law governing commercial transactions, beginning with Act No. 208 of August 17, 1995. Act No. 21 of January 17 of 2012 updated the Uniform Commercial Code's Article 9. Almacenes Gigante's holding regarding pledges was rendered in 1993 under applicable law at that time period. Since the new law was enacted, the provisions of the Civil Code are inapplicable to the case at hand.
Id. at *4 n.6. The bankruptcy court then added: "[A]ll actual and potential creditors of the debtor are always on notice that the bank with which the debtor's deposit account is maintained may assert a claim against the deposit account." Id. at *4 (citation omitted). Lastly, the court observed that "if the parties have so agreed, the secured party may 'apply the balance of the deposit account to the obligation secured by the deposit account' in case of default." Id. (quoting
THE APPEAL
I. Positions of the Parties
A. The Trustee
The Trustee asserts that the bankruptcy court erred in concluding that BPPR held a perfected security interest in the 1438 account under the PR UCC by virtue of its control over the 1438 account. In support,
In addition, the Trustee maintains that the bankruptcy court erred in ruling that control alone was sufficient to perfect BPPR's lien on the 1438 account against third parties. She argues that Puerto Rico's "authentic document requirement" is an "absolute rule," and thus, even if the pledge agreement was valid between BPPR and the Debtor, it was "not binding on the Trustee" because it was not notarized. The Trustee bolsters her argument by citing In re Santos & Nieves, Inc.,
The law in Puerto Rico is clear in its statement that unauthenticated pledges are not effective against third parties. 31 L.P.R.A. § 5023.... An unauthenticated pledge agreement which is ineffective against third parties will necessarily be subordinate to the rights of the trustee, and may be avoided by the trustee pursuant to his powers under [ ] § 544(a)(1).
B. BPPR
BPPR argues that: (1) the provisions of the PR UCC, not the Civil Code of Puerto Rico, govern the creation of its security interest; (2) the 1438 account is a "deposit account" as defined in Section 9-102 of the PR UCC; and (3) BPPR "perfected its security interest through control" in accordance with the provisions of the PR UCC. In addition, BPPR asserts that the Trustee waived her "consumer transaction" argument by failing to raise it in the proceedings below. During oral argument and in its supplemental brief filed post-argument, BPPR also asserted that it had a right of setoff under Puerto Rico law, whether or not it had perfected its security interest in the 1438 account.
C. The Trustee's Reply
In response to the claim that her consumer transaction argument is late, the Trustee contends that she consistently argued in the proceedings below that the "Civil Code and its pledging provisions are the laws to be applied." In contrast, the Trustee points out, BPPR "neither raised an affirmative defense based on the PR UCC nor mentioned its applicability in the answer to the complaint." Citing Montalvo v. Gonzalez-Amparo,
We are mindful that exceptions to the raise-or-waive rule are reserved for rare cases. See Villafañe-Neriz v. F.D.I.C.,
JURISDICTION
We may hear appeals from final judgments, orders, and decrees, and, with leave of the court, from interlocutory orders and decrees. See
STANDARD OF REVIEW
We review appeals from grants of summary judgment de novo. See
DISCUSSION
I. The Applicable Standards
A. The Summary Judgment Standard
"In bankruptcy, summary judgment is governed in the first instance by Bankruptcy Rule 7056." Desmond v. Varrasso (In re Varrasso ),
"Under the protocols for summary judgment practice, '[t]he moving party bears the initial burden of informing the trial court of the basis for his motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any, that demonstrate the absence of any genuine issue of material fact.' " United States v. $ 100,000 in U.S. Currency,
"The same burdens exist on cross[-]motions for summary judgment." Skerry v. Mass. Higher Educ. Assistance Corp.,
B. Section 544(a)
Commonly referred to as the "strong arm clause," § 544(a) empowers a trustee to avoid a transfer of property by the debtor that is voidable by a hypothetical lien creditor or by a hypothetical bona fide purchaser of the property. See
II. The Standards Applied
There are two fundamental questions at the heart of this appeal: (1) whether BPPR perfected a security interest in the 1438 account; and (2) whether BPPR was entitled to set off the funds on deposit in the 1438 account against the Debtor's loan obligations. These questions embody two independent but powerful credit protection devices available to bank lenders like BPPR-a security interest and a right to setoff. We begin our analysis with the first question.
A. Whether BPPR Perfected its Security Interest in the 1438 Account
1. Article 9 of the Puerto Rico Uniform Commercial Code
"The Model Uniform Commercial Code ('[Model] UCC') was created in 1952[.]" In re Nat'l Promoters & Servs., Inc.,
Like its Model UCC progenitor, one of the purposes of Puerto Rico's Commercial Transactions Act is to "expedite and facilitate [ ] banking transactions in Puerto Rico ... by creating uniformity and consistency[.]" In re Nat'l Promoters & Servs., Inc.,
Here, the Debtor pledged the 1438 account to BPPR prior to the enactment of Revised Article 9, while BPPR's attempted enforcement of its alleged security interest occurred after that enactment. For reasons discussed later, this chronology compels us to examine Puerto Rico law governing perfection of security interests in deposit accounts both before and after the January 2013 revisions to Puerto Rico's Former Article 9.
2. The Law Governing Perfection of Security Interests in Deposit Accounts under Former Article 9
Assignments of deposit accounts were excluded from Former Article 9. See Marion N. Benfield, Consumer Provisions in Revised Article 9,
The Civil Code of Puerto Rico establishes the requirements for a valid pledge agreement in its Article 1756[.]
The following are essential requisites of the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation.
(2) That the thing pledged or mortgaged is owned by the person who pledges or mortgages it.
(3) That the persons who constitute the pledge or mortgage have the free disposition of their property, and, should they not have it, that they are legally authorized for that purpose.
In re Almacenes Gigante, Inc.,
In Almacenes Gigante, the bankruptcy court ruled that in the absence of an authentication evidencing the date of the pledge, the pledge in that case was unenforceable against third parties.
In light of the foregoing, we conclude that prior to January 17, 2013, when Former Article 9 was operative in Puerto Rico, authentication was required for a pledge of a deposit account to be enforceable against third parties.
3. Perfecting Security Interests in Puerto Rico Deposit Accounts in Non-consumer Transactions after the Enactment of Revised Article 9
"Revised Article 9 includes numerous new provisions designed to clarify the proper treatment of Article 9 security interests in deposit accounts." Ben Carpenter, Security Interests in Deposit Accounts and Certificates of Deposit under Revised UCC Article 9,
Revised Article 9 is broad in scope. As evidence of this breadth, § 2219(a)(1) of Revised Article 9, which became effective January 17, 2013, provides, in relevant part: "Except as otherwise provided in subsections (c) and (d), this chapter applies to: [a] transaction, regardless of its form , that creates a security interest in personal property ...."
There is no dispute in this case that the 1438 account qualifies as a deposit account. Hence, so long as the transaction between the Debtor and BPPR was commercial in nature, Revised Article 9's deposit account provisions would apply.
To perfect a security interest in a deposit account given as original collateral in a commercial transaction, under Revised Article 9, the secured party must obtain "control." See Carpenter, supra, at 137.
In addition, Revised Article 9 provides collection remedies for creditors with a security interest in a deposit account as follows:
If so agreed, and in any event after default, a secured party:
(4) if it holds a security interest in a deposit account perfected by control under § 2265(a)(1) of this title, may apply the balance of the deposit account to the obligation secured by the deposit account ....
4. Perfecting Security Interests in Puerto Rico Deposit Accounts in Consumer Transactions after the Enactment of Revised Article 9
The foregoing provisions do not apply to security interests in deposit accounts in consumer transactions. In 2013, Revised Article 9 of the PR UCC adopted the exception for the assignment of deposit accounts in consumer transactions codified in the Model UCC over a decade earlier.
[A] transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transaction.
Comment 16 to Model UCC § 9-109 explains:
By excluding deposit accounts from the Article's scope as original collateral in consumer transactions, subsection (d)(13) leaves those transactions to law other than this Article. However, in both consumer and non-consumer transactions, sections 9-315 and 9-322 apply to deposit accounts as proceeds and with respect to priorities in proceeds.
U.C.C. § 9-109 cmt. 16. The exception makes clear that
although a security interest in a deposit account in a consumer transaction initially is excluded from Article 9, a security interest in the deposit account which represents proceeds of other collateral is not excluded simply because the other collateral's character has changed. Otherwise the debtor could frustrate secured creditors by the simple expedient of selling collateral subject to a security interest and depositing the monies into a bank account.
Frederick H. Miller & Carl S. Bjerre, 9A Hawkland UCC Series § 9-109:17 (William Henning & Carl S. Bjerre eds., 2018).
5. Whether Former Article 9 or Revised Article 9 Governs the Enforcement of BPPR's Security Interest
Because relevant activities of the parties in this case occurred both before and after the enactment of Revised Article 9, the question arises as to which version of Article 9 to apply. Generally, security interests created before the effective date of the revisions to Article 9 of the U.C.C. "are now enforced in accordance with the default rules found in revised Article 9." Eldon H. Reiley, Transition to Revised Article 9: Post-effective Date Issues, 2 Sec. Interests in Pers. Prop. § 38:3 (2018). The authority for this conclusion is found in
The enforcement option of
6. Applying Former Article 9 vs. Revised Article 9
Under
The record indicates that the bankruptcy court did not consider the alternative enforcement options provided in the Savings Clause,
1. The Legal Standards Governing Setoff
The remaining question is whether BPPR, irrespective of its status as a secured creditor, had the right, as a bank where a borrower's funds were on deposit, to offset those funds against the borrower's obligation.
Setoff is "a form of payment [where] the medium of payment is a reduction or extinguishment of a separate claim." William Hillman & Margaret Crouch, Bankruptcy Deskbook § 6:6.1 (4th ed. 2014). A setoff "occurs when the two debts-the one owed from the debtor and the one owed to the debtor-arise out of separate transactions."
"The right of a creditor to set off a prepetition debt owed the debtor against a prepetition claim against the debtor is provided for in [§] 553[.]" First Union Nat'l Bank of Fla. v. Abbey Fin. Corp. (In re Abbey Fin. Corp.),
(a) Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case ....
" Section 553 does not create a right of setoff; it merely preserves the rights available under state law ...." In re Abbey Fin. Corp.,
In order that compensation may be proper, it is required:
(1) That each of the persons bound should be so principally, and that he be at the same time the principal creditor of the other.
(2) That both debts consist of a sum of money or, when the things due are perishable, that they be of the same kind and also of the same quality, if the latter should have been stipulated.
(3) That both debts are due.
(4) That they be determined and demandable.
(5) That none of them is subject to any retention or suit instituted by a third person, and of which due notice has been given the debtor.
A "voluntary setoff may arise from a covenant between the parties," for instance, when a bank exercises its right created in a contractual agreement to "compensate any liability due to the bank by their depositor against any of its deposits in the bank." Villafañe Neris v. Citibank, N.A.,
If, however, a fund is deposited for a "special purpose" it is held in trust for the depositor, rather than "owed to the depositor." In re Almacenes Gigante, Inc.,
In general, where the liability of the one claiming a setoff arises from a fiduciary duty or is in the nature of a trust, the requisite mutuality of debts does not exist, and such person may not set off a debt owing from the debtor against such liability. Thus, when a bank holds funds of the debtor in a special account, known by the bank to be dedicated to a special use, the bank cannot set off those funds against its claim against the debtor.
2. The Setoff Standard Applied
Here, the bankruptcy court did not make any findings on the issue of whether the 1438 account qualified as a general deposit account or a special purpose account. Having concluded its analysis with a
Our own examination of the record reveals no dispute between the parties that the funds on deposit in the 1438 account were unavailable to the Debtor for withdrawal at will. In her statement of uncontested facts, the Trustee represented that the funds were "frozen" and unavailable "for use or withdrawal" until the Debtor paid off the loan. Consistent with this representation, BPPR acknowledged in its statement of uncontested facts that it had placed "a hold" on the 1438 account "for a total amount of $ 31,434.17 as [a] guarantee" for the loan. Because the 1438 account was a special account, the requisite mutuality was not present and setoff was not permitted. See In re Ben Franklin Retail Store, Inc.,
CONCLUSION
While we conclude that BPPR could not exercise setoff rights against the 1438 account, we are unable to conclude from the record before us whether BPPR's security interest in the account was avoidable by the Trustee. We, therefore, VACATE the Order as to count I and REMAND to the bankruptcy court for further proceedings consistent with this opinion, including consideration of: (1) the effect of the Savings Clause on this case; and (2) whether the Debtor's pledge of the 1438 account was given in connection with a consumer or commercial transaction. Count II is AFFIRMED on waiver grounds.
Notes
Unless expressly stated otherwise, all references to "Bankruptcy Code" or to specific statutory sections are to the Bankruptcy Reform Act of 1978, as amended,
The factual background set forth herein is undisputed, having been taken from the statements of uncontested facts the parties submitted in connection with the summary judgment proceedings below.
The Trustee cited § 553 as the basis for her claim. For a discussion of § 553, see below.
The Trustee appended to the statement of uncontested facts several Spanish-language exhibits but did not include certified translations. She also attached a single English-language document-her own Unsworn Declaration under Penalty of Perjury, in which she stated that she learned at the meeting of creditors under § 341 that the funds had been "frozen for ten (10) years."
Presumably, the Trustee sought to avoid the purported lien created by that agreement.
The Trustee had not raised the invalidation of the pledge agreement in her complaint but, as noted below, BPPR treated this claim as having been pled, thereby allowing the bankruptcy court to consider it.
An examination of the bankruptcy court docket reveals that BPPR submitted only Spanish-language documents without certified translations as exhibits to the cross-motion. See U.S. Bank N.A. v. Blais (In re Blais),
By engaging with the Trustee over the issue of authentication at the summary judgment stage, BPPR has dispelled any concern we otherwise might have had regarding the Trustee's failure to previously articulate her authentication argument in the complaint. See Cruz-Acevedo v. Toledo-Dávila, No. 07-2104 JAF,
In rendering its decision, the bankruptcy court did not consider any of the Spanish-language documents the parties submitted in connection with their summary judgment motions. This is consistent with the English-language rule. See
By noting the Trustee's "personal loan" characterization, we are not suggesting that the terms "personal loan" and "consumer transaction" are synonymous.
Resolving the question of whether the Trustee has sufficiently preserved her consumer transaction argument for appeal purposes is a close call, especially when we consider that the Trustee's failure to explicitly and timely raise the issue below might have contributed to the bankruptcy court's omission of any findings of fact on this issue. We note, however, that even if we were to conclude that the Trustee had waived the argument, the nature of de novo review would nonetheless require us to reach the issue of whether the bankruptcy court correctly determined, as a matter of law, that the PR UCC governs, or whether the underlying transaction is excluded from the scope of the PR UCC. See Knight Kitchen Music v. Pineau (In re Pineau),
Although the bankruptcy court did not memorialize the judgment in a separate document as required by Fed. R. Civ. P. 58, that omission does not alter our finality assessment. See Fed. R. Civ. P. 58(a). The Supreme Court has ruled that the separate-document requirement of Fed. R. Civ. P. 58 may be waived where the parties are not misled and the lower court "evidenced its intent that the opinion and order from which an appeal was taken would represent the final decision in the case."Bankers Tr. Co. v. Mallis,
Section 544(a) provides, in relevant part:
The trustee ... may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by-
(1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien, whether or not such a creditor exists; [or]
....
(3) a bona fide purchaser of real property ... from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.
There is a dearth of case law and secondary source material regarding the deposit account provisions of Revised Article 9. Because Revised Article 9 substantially parallels the uniform text of the Model UCC, articles written about that legislation inform our understanding of its Puerto Rico counterpart.
This provision mirrors the language of Model UCC § 9-109(d)(13).
Except as otherwise provided in subsection (c) and §§ 2403-2409 of this title:
(1) Transactions and liens that were not governed by former Chapter 9 of the Commercial Transactions Act, were validly entered into or created before this act takes effect, and would be subject to this chapter if they had been entered into or created after this act takes effect, and the rights, duties, and interests flowing from those transactions and liens remain valid after this act takes effect, and
(2) the transactions and liens may be terminated, completed, consummated, and enforced as required or permitted by this chapter or by the law that otherwise would apply if this chapter had not taken effect.
The Trustee's reliance on the characterization of the transaction as a "personal loan" is not an adequate basis upon which to conclude it was a consumer transaction as defined in the PR UCC.
The bankruptcy court impliedly answered this question in the affirmative, stating: "[I]f the parties have so agreed, the secured party may 'apply the balance of the deposit account to the obligation secured by the deposit account' in case of default." In re Cruz Rivera,
One commentator cautioned: "[I]n enforcement of remedies, the depositary bank may wish to be clear about how it is proceeding; proceeding under a security interest brings with it the obligation to proceed in a commercially reasonable way. ... Setoff rights are not similarly regulated by Revised Article 9." Markell, supra, at 1005 n.226.
"Compensation" is Puerto Rico's equivalent of setoff. Phico Ins. Co. v. Pavia Health, Inc.,