Alejandro Oliveras Rivera, Chapter 13 Trustee v. Antonio Otero Nazario
Filing
23
OPINION AND ORDER - AFFIRMING IN PART and REVERSING IN PART the Bankruptcy Court's 7/15/2015 Order sustaining the Trustee's objection to Debtor's homestead exemption. Signed by Judge Carmen C. Cerezo on 4/2/2019. (mld)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE:
ALEJANDRO OLIVERAS RIVERA
Appellant
vs
ANTONIO OTERO NAZARIO
Debtor-Appellee
CIVIL 15-2035CCC
OPINION AND ORDER
Appellant Alejandro Oliveras-Rivera (“Chapter 13 Trustee” or “Trustee”)
appeals the Bankruptcy Court’s July 15, 2015 Order denying his objection to
appellee Antonio Otero Nazario’s (“Debtor”) claim of a homestead exemption
in real property pursuant to the Homestead Right and Family Home Protection
Act, P.R. Laws Ann. tit. 31, §§ 1851-1857, as amended by Act No. 195 of
September 13, 2011 (“Act 195”). For the reasons that follow, the Court
AFFIRMS IN PART and REVERSES IN PART the Bankruptcy Court’s order
sustaining the Trustee’s objection to Debtor’s homestead exemption.
BACKGROUND
Debtor Antonio Otero Nazario filed for bankruptcy relief under Chapter 13
on June 28, 2013.1 He claimed a homestead exemption in the amount of
$140,000.00 over his interest in real property owned by him and his non-filing
spouse consisting of a two-story cement house.2 Debtor declared under
1
Case No. 13-05391-MCF (d.e. 1).
2
Case No. 13-05391-MCF (d.e. 1 at p. 22).
CIVIL 15-2035CCC
2
penalty of perjury that the property was his principal residence and that he had
not claimed any other property in or outside Puerto Rico as a homestead.3 The
Trustee filed an objection to Debtor’s claim of a homestead exemption on
August 2, 2013, arguing that the property was not used exclusively as his
principal residence since the lower level was leased.4 The Bankruptcy Court
sustained the Trustee’s unopposed objection and the Debtor filed for
reconsideration.5
The
Bankruptcy
Court
granted
the
Motion
for
Reconsideration on September 18, 2013, vacating its previous order sustaining
the Trustee’s objection.6
On September 26, 2013, the Trustee filed a
Memorandum of Law in Support of Trustee’s Objection to Exemptions arguing
that Debtor’s lease of his property’s lower level precluded him from claiming a
homestead exemption under Act 195.7 On November 27, 2013, Debtor filed
a Response and Memorandum of Law In Opposition To Trustee’s Objection to
Exemptions, and the Trustee filed a sur-reply on February 24, 2014.8 The
Bankruptcy Court heard oral argument on October 14, 2014 and allowed the
parties to file supplemental briefs.9 A final hearing was held on May 14, 2015.10
3
Id.
4
Case No. 13-05391-MCF (d.e. 12 at p. 2).
5
Case No. 13-05391-MCF (d.e. 16 and d.e. 17).
6
Case No. 13-05391-MCF (d.e. 19).
7
Case No. 13-05391-MCF (d.e. 22).
8
Case No. 13-05391-MCF (d.e. 30).
9
Case No. 13-05391-MCF (d.e. 57).
10
Case No. 13-05391-MCF (d.e. 69).
CIVIL 15-2035CCC
3
The Bankruptcy Court issued an Opinion and Order on July 15, 2015 denying
the Trustee’s objection to the homestead exemption.11 On July 16, 2015, the
Bankruptcy Court entered an Order confirming Debtor’s Chapter 13 Plan dated
June 26, 2013.12 Appellant Trustee filed this appeal on July 29, 2015. (d.e. 1).
JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction pursuant to 28 U.S.C. § 158(a).
Section 158(a) (1) provides, in relevant part, that “[t]he district courts of the
United States shall have jurisdiction to hear appeals: (1) from final judgments,
orders, and decrees . . . .” 28 U.S.C. § 158(a) (1). An order sustaining an
objection to exemption is a reviewable final order.
In re Gordon,
487 B.R. 600, 602 (B.A.P. 1st Cir. 2013).
This Court reviews a Bankruptcy Court’s findings of fact for clear error
and the legal conclusions are reviewed de novo. Id. There are no disputed
facts involved in this appeal.
Bankruptcy Court's Order rests on its
construction and application of Puerto Rico’s homestead statute. Therefore,
our scope of review is de novo.
DISCUSSION
Section 522 of the Bankruptcy Code allows a debtor to exempt certain
property from the bankruptcy estate that would otherwise be available for
distribution to creditors. Specifically, section 522(b) allows debtors to choose
11
Case No. 13-05391-MCF (d.e. 71).
12
Case No. 13-05391-MCF (d.e. 72).
CIVIL 15-2035CCC
4
between the federal bankruptcy exemptions listed in section 522(d), or the
exemptions provided by the state of residence together with those provided by
federal law. See 11 U.S.C. § 522.
An individual is entitled to a homestead exemption under Puerto Rico’s
Act 195 if (1) (s)he owns the residential property and (2) (s)he occupies the
property as his/her principal residence. Specifically, section 3 of Act 195 states
that:
Every individual or head of family residing in Puerto Rico shall be
entitled to own and enjoy, under the homestead right concept, a
parcel and the structure located thereon, or a residence under the
regime established in the Condominiums Act, which belongs to
him/her or which he/she lawfully owns, and occupied by
him/her or his/her family exclusively as a principal residence.
For the purposes of this Act, the term domicile shall be defined as
provided in Article 11 of the Political Code of 1902, as amended.
Act No. 195 of September 13, 2011, Section 3. (emphasis ours).
The Bankruptcy Court determined after an analysis of the statutory
construction of section 3 that the adverb “exclusively” modifies “as a principal
residence” and not “occupied.” The Bankruptcy Court reasoned as follows:
Upon a plain reading of the statute, the adverb “exclusively”
modifies “as a principal residence” and not “occupied.” The
adverb's placement and purpose in the clause are determinative
factors of statutory interpretation in our analysis.
The portion at issue in Section 3 reads “and occupied by him/her
or his/her family exclusively as a principal residence.” This clause
may be severed into three syntactic components. The first
component, a coordinating conjunction and a verb, “and occupied,”
respectively, joins this clause to the rest of Section 3. The second
component—“by him/her or his/her family”—joins the first thereby
indicating possession and resulting in an adverbial phrase that
modifies “occupied.” The third part—“exclusively as principal
residence”—is a prepositional phrase, resulting from the adverb
“exclusively” and the preposition that follows.
As a general rule, an adverb should be placed as near as possible
to the word it modifies. Here, the adverb “exclusively” immediately
precedes the prepositional phrase “as a principal residence” rather
CIVIL 15-2035CCC
5
than “occupied.” If the adverb “exclusively” preceded “occupied”
then the occupancy of the principal residence would be
unequivocally modified by the adverb “exclusively.” The trustee
would then be correct in his analysis that the debtor is disqualified
from claiming the homestead protection over his residence
because he shares the occupancy of his residence with a tenant.
Nevertheless, the adverb's placement trumps the trustee's
interpretation because exclusively is in close proximity and
precedes the prepositional phase “as a principal residence.”
Moreover, the adverb's purpose in the sentence structure is to
modify the prepositional phrase, “as a principal residence.”
Adverbs may modify prepositional phrases. Adjusting the purpose
of the adverb “exclusively” as read by the trustee to modify
“occupied” would render the remaining portion—“as a principal
residence”—needless in the text of Act 195.
The word
“exclusively” refers to the homesteader's principal residence as the
sole residence eligible for entitlement to the homestead grant, with
the exclusion of any other properties that a homesteader may own.
For this reason, the adverb's purpose in the sentence structure
undermines the trustee's reading of Section 3.
The parties disagree as to whether “exclusively” modifies “as a principal
residence” and not “occupied.” We agree with the Bankruptcy Court’s statutory
construction that the word “exclusively” modifies “as a principal residence” and
refers to the homesteader's principal residence as the sole residence eligible
for entitlement to the exemption, excluding any other properties owned. Debtor
owns the real property and has not claimed any other property in or outside
Puerto Rico as a homestead. Accordingly, he is entitled to the protections
afforded by the homestead exemption.
We turn then to the second issue of whether the Bankruptcy Court erred
in not considering Appellant’s alternative argument to grant the homestead
exemption only as to the portion of the structure that is used by him as principal
residence. The Bankruptcy Court determined that the homestead exemption
extends to the whole property, even the portion of the property that is leased.
It reasoned that Section 3 of Act 195 “preserves for every homesteader
CIVIL 15-2035CCC
6
residing in Puerto Rico the right to own and enjoy a principal residential
property under the homestead grant.”13 Referring to Article 288 (P.R. Laws
Ann. tit. 31, § 1141), which defines a property owner’s right of enjoyment and
accession to fruits, and Article 289 (Id. at § 289), which defines civil fruits to
include rents of buildings. The Court concluded that the “right to own and
enjoy” in Section 3 of Act 195 provides for the protection of the entire two story
home as debtor’s homestead.14 We disagree.
The legislative purpose of Law 195 is to protect an individual’s primary
residence from the claims of creditors. See Doña Antonia Rivera García,
Peticionaria v. Lcda. Namyr I. Hernández Sánchez, Registradora de la
Propiedad, Sección III de Bayamón, Recurrido, 189 D.P.R. 628, 637,
2013 PR Sup. LEXIS 115, *9, 2013 TSPR 107.
Under the statute, the
homestead is limited to the “parcel and the structure . . . occupied . . .
exclusively as a principal residence.” We agree with the decision of the
Bankruptcy Court in In re Navarro, 504 B.R. 316, 321 (Bankr. D.P.R. 2014),
“that the homestead exemption afforded in [Act 195] only extends to the portion
of the property used as the principal residence and cannot include any portion
rented to and occupied by third parties and/or used for commercial purposes.”
Finding otherwise would accomplish an illogical result: a person could own an
apartment building with five units and claim the entire building as his
homestead merely by using one of the apartments as his or his family’s
principal residence while renting the rest. The debtor would therefore be able
13
Case No. 13-05391-MCF (d.e. 71 at pp. 8-9).
14
Id. at pp. 9-10.
CIVIL 15-2035CCC
7
to claim the entire structure as his homestead when (s)he would not be using
it “exclusively” as his/her principal residence. This would stretch the purpose
of the statutory protection beyond its reach, which is to protect the family home.
It is uncontested that at the time he claimed a homestead exemption,
Debtor had leased the lower level of his property. Accordingly, we remand to
the Bankruptcy Court for proceedings consistent with this finding that allows for
a homestead exemption only as to the portion of the two-story cement house
located in BDA. POLVORIN #500, Manatí, P.R., listed in Schedule A of the
Notice to Consumer Debtor(s) Under § 342(b) of the Bankruptcy Code (d.e. 1
of Bankruptcy Case No. 13-05391-MCF13), occupied by debtor as a principal
residence.
CONCLUSION
For the reasons discussed, the Bankruptcy Court’s Order sustaining the
Trustee’s objection to Debtor’s homestead exemption is AFFIRMED IN PART
and REVERSED IN PART.
SO ORDERED.
At San Juan, Puerto Rico, on April 2, 2019.
S/CARMEN CONSUELO CEREZO
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?