In re: Cruz M. Mendez-Garcia

Filing 12

OPINION AND ORDER re 1 Bankruptcy Appeal - Transmittal Form filed by Cruz M Mendez Garcia. The Court hereby REVERSES the Bankruptcy Court's ruling at ECF No. 1-2. Moreover, the case is REMANDED to the Bankruptcy Court for proceedings consistent with this ruling. Signed by U.S. District Judge Aida M. Delgado-Colon on 9/27/2018.(wm)

THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

CRUZ M. MENDEZ GARCIA,
Appellant-Debtor,
vs.
RUSHMORE LOAN MANAGEMENT
SERVICES as service agent of Roosevelt
Cayman Asset Company,

Civil No. 17-2345 (ADC)

Appellee-Creditor.

OPINION AND ORDER
Before the Court is a notice of appeal and statement of election of the U.S. District Court
of Puerto Rico (“the Court”) by Cruz M. Méndez-García (“appellant-debtor”), a bankruptcy
petitioner under Chapter 13 of the Bankruptcy Code, Case No. 15-10374 (BKT), ECF No. 1.
Appellant-debtor requests this Court to review and reverse an Opinion and Order by the United
States Bankruptcy Court for the District of Puerto Rico (“Bankruptcy Court”) denying appellantdebtor-debtor’s motion for reconsideration of the Order granting Rushmore Loan Management
Services as service agent of Roosevelt Cayman Asset Company’s (“appellee-creditor”) objection
to appellant-debtor’s claim of exemption under the Puerto Rico Home Protection Act of 2011, as
amended, PR Laws Ann. tit. 31, § 1858-1858k (“Puerto Rico Home Protection Act”). ECF No. 12. Appellant-debtor and appellee-creditor opportunely filed their corresponding briefs before
this Court. ECF Nos. 6, 7, 10. After thoroughly considering the parties’ briefs and the record on

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appeal, the Court REVERSES the Bankruptcy Court’s Opinion and Order in question, ECF No.
1-2, for the reasons discussed below.
I.

Factual and procedural background

On April 5, 2004, appellant-debtor acquired a residential property located in Canóvanas,
Puerto Rico (the “residential property”), through a deed of sale executed before a Notary Public
(the “purchase deed”). ECF No. 6-1 at 17. On November 23, 2004, the purchase deed was
presented to the corresponding section of the Property Registry of Puerto Rico for recordation.
Id. However, the Notary Public did not perform corrections in the purchase deed that were
required by said agency for its recordation. Id. at 46. 1 Appellant-debtor subsequently withdrew
the purchase deed, and it has remained unrecorded with the Property Registry of Puerto Rico.
Id. at 1-2, 17.
On July 15, 2005, appellant-debtor executed a mortgage deed before a Notary Public as
guarantee in favor of mortgagee Sana Investment Mortgage Bankers, Inc. Id. at 17. Appelleecreditor is “the current holder of Sana’s interests in said [m]ortgage [d]eed.” Id. The mortgage
deed was presented to the corresponding section of the Property Registry of Puerto Rico for
recordation on August 2, 2005, and it was recorded pursuant to Act No. 216 of December 27,
2010, P.R. Laws Ann. tit. 30, § 1821 (“Act No. 216”). Id. The statute provides that “all documents
presented as of April 30, 2010, with enumerated exceptions, are deemed re[corded] as a matter

The record indicates that the executing Notary Public, attorney Frank Rodríguez-Calderón, “no longer practices
law; he has been disbarred.” ECF No. 6-1 at 48-49.

1

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of law.” ACM Penfield LLC, v. Jolley-Talley, 13-cv-1729 (SEC), 2016 WL 715761 at *1 (D.P.R. 2013)
(not reported in F. Supp.3d). Act No. 216 “creates, in essence, a rebuttable presumption of valid
recordation.” In Re Ramos, 493 B.R. 355, 368 (Bankr. D.P.R. 2013).
On December 11, 2015, the appellant-debtor executed before a Notary Public a sworn
statement and a notarial act declaring the Puerto Rico homestead exemption as to the residential
property. ECF No. 4-2 at 37, 44-47. Appellant-debtor submitted the notarial act before the
Property Registry of Puerto Rico for recordation. Id. As fully discussed below, under the Puerto
Rico Home Protection Act, “the homesteader’s principal residence is protected from creditors’
enforcement of civil judgments against his home. However, this protection does not extend to
claims from mortgagees, state and federal tax authorities, eligible contractors, or other state and
federal entities specified therein.” In re Nazario, 533 B.R. 1, 4 (Bankr. D.P.R. 2015); PR Laws Ann.
tit. 31, § 1858-1858k.
On December 30, 2015, appellant-debtor filed a voluntary petition for bankruptcy under
Chapter 13 of the United States Bankruptcy Code. ECF No. 1-3 at 2. 2 As part of the bankruptcy
filings, appellant-debtor presented an exemptions schedule (amended Schedule C) on February
18, 2016, which included the homestead exemption as to the residential property pursuant to the
Puerto Rico Home Protection Act. ECF Nos. 1-3 at 6; 6-1 at 48.

The record reveals that appellant-debtor had filed two previous bankruptcy petitions under Chapter 13 that the
Bankruptcy Court dismissed for failure to make payments to the Chapter 13 Trustee. ECF No. 6-1 at 47-48.

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On April 8, 2016, appellee-creditor filed a claim as a secured creditor in the bankruptcy
proceedings regarding the mortgage executed over appellant-debtor’s residential property. ECF
No. 6-1 at 48. On May 10, 2016, appellant-debtor filed an adversary case in the bankruptcy
proceedings challenging the secured nature of appellee-creditor’s claim regarding the mortgage
debt in question. Id. On March 9, 2017, the Bankruptcy Court issued an Opinion and Order
holding that even though the mortgage deed had been recorded at the Property of Registry of
Puerto Rico pursuant to Act No. 216, the purchase deed had not been recorded due to the
uncorrected defects mentioned above, for which appellant-debtor had not been registered as the
owner of the residential property. Id. at 16-24. Thus, the Bankruptcy Court concluded that since
“there [was] a missing link in the successive chain of title, the mortgage deed [ecumbering that
property] is . . . invalid, thus making the lien void, and turning the obligation into an unsecured
personal one.” Id. at 21 (citing Roig Commercial Bank v. Dueño, 617 F. Supp. 913, 915 (D.P.R. 1985)).
On March 24, 2017, appellee-creditor filed before the Bankruptcy Court an Objection to
Claimed Exemption. Id. at 1-12. In essence, appellee-creditor argued that ”since [appellant-]
debtor is not the registered owner as per the Registry of the Property, she should not be able to
claim the state law exemptions,” particularly the homestead exemption over appellant-debtor’s
residential property under the Puerto Rico Home Protection Act. Id. at 2-3. Appellee-creditor
also averred that its objection was timely filed pursuant to Federal Rule of Bankruptcy Procedure
4003(b) (“Rule 4003(b)”) as interpreted in Schwab v. Reilly, 560 U.S. 770 (2010).

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The Bankruptcy Court granted as unopposed appellee-creditor’s objection to appellantdebtor’s claimed exemption under the Puerto Rico Home Protection Act, and appellant-debtor
filed a motion for reconsideration. ECF No. 4-1 at 29-49. Appellant-debtor contended that
appellee-creditor’s objection to the declaration of homestead exemption was tardy. Id. at 31-34.
Specifically, “[appellee-creditor] had the time prescribed by [Rule 4003(b) 3] to object to
[appellant-]debtor’s claimed exemption. Instead, [appellee-]creditor waited until the outcome of
the adversary proceeding to object when the basis for the objection is the lack of chain in
titleholders, present since the beginning of the case.” Id. at 37. Conversely, appellee-creditor
contends that pursuant to Schwab, 560 U.S. at 770, the term provided under the aforementioned
bankruptcy procedural rule to object to a debtor’s exemption did not apply to appellant-debtor’s
claimed exemption under the Puerto Rico Home Protection Act. ECF No. 10 at 8-9. Under
Schwab, 560 U.S. at 770, “the time limits for objection to homestead exemption do not apply if
the claimed exemption is valid on its face.” In re Massey, 465 B.R. 720, 726 (1st Cir. BAP 2012).
Moreover, appellant-debtor argued in her motion to reconsider that her claim for
homestead exemption is valid insofar as the purchase deed established her as the legal owner of
the residential property, even though appellant-debtor’s title as owner had not been registered
with the Property Registry of Puerto Rico. ECF No. 4-1 at 34-38. Specifically, she asserted that
[t]he Puerto Rico Home Protection Act does not require successive chain of
ownership for [appellant-debtor] to be able to claim the [homestead] exemption. It
Generally, under Federal Rule of Bankruptcy Procedure 4003(b)(1), “a party in interest may file an objection to
the list of property claimed as exempt within 30 days after the meeting of creditors held under § 341(a) is concluded
or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later.”

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only requires for [appellant-debtor] to be the owner and . . . to use the property as
its main residence. Thus, [appellee-creditor] is incorrect in trying to apply the lack
of successive chain of ownership doctrine because Article 17[ 4] is strictly directed
to instances where dominion or other real rights are being declared, conveyed,
encumbered, modified, extinguished, or real rights on real property are being
affected.
Id. at 36.
On November 16, 2017, the Bankruptcy Court issued an Opinion and Order denying
appellant-debtor’s motion for reconsideration, holding that appellant-debtor could not claim the
homestead exemption under Puerto Rico law. ECF No. 1-2. Specifically, the Bankruptcy Court
held that “[c]urrently, the titular registrant [with the Property Registry of Puerto Rico] of the real
property in question is . . . not [appellant-debtor],” and that “[t]he titular registrant must be the
individual claiming the homestead protection.” ECF No. 1-2 at 4-5. 5 On December 5, 2017,
appellant-debtor opportunely filed a notice of appeal before this Court challenging the
Bankruptcy Court’s Opinion and Order denying appellant-debtor’s motion for reconsideration,
and the parties filed their corresponding briefs thereafter. ECF Nos. 1, 4, 6, 7, 10.
II.

Standard of Review

On appeal from the bankruptcy court, the district court may affirm, modify, or reverse a
bankruptcy judge’s judgment, order, or decree, or remand with instructions for further
proceedings. Fed. R. Bankr. P. 8013; 28 U.S.C § 158. District courts review a bankruptcy court’s

Appellant-debtor refers to Article 17 of the Puerto Rico Mortgage Act, as amended, P.R. Laws Ann. tit. 30, § 6032.
In the November 16, 2017 Opinion and Order, the Bankruptcy Court did not address the issue of the timeliness
of appellee-creditor’s objection to the homestead exemption.
4
5

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findings of fact under the “clearly erroneous” standard and its conclusions of law under de novo
review. Brandt v. Repco Printers & Lithographics, Inc. (In re Healthco Int’l, Inc.), 132 F.3d 104, 108
(1st Cir. 1997). Specifically, if the issue on appeal is essentially one of statutory interpretation,
the court shall review the issue de novo. In re San Miguel Sandoval, 327 B.R. 493, 506 (1st Cir. BAP
2005) (citing Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir. 1995)). For instance, a bankruptcy court’s
disallowance of an exemption is generally subject to de novo review. In re Massey, 465 B.R. at
723.
Additionally, “[t]he appellate court in a bankruptcy appeal may apply an abuse of
discretion standard of review of a decision or action by a Bankruptcy Court when such decision
is within the discretion of the Bankruptcy Court.” In re San Miguel Sandoval, 327 B.R. at 506
(quoting 9E Am. Jur. 2d Bankruptcy § 3512 (2004)). “’Abuse occurs when a material factor
deserving significant weight is ignored, when an improper factor is relied upon, or when all
proper and no improper factors are assessed, but the court makes a serious mistake in weighing
them.’” Perry v. Warner (In re Warner), 247 B.R. 24, 25 (1st Cir. BAP 2000) (quoting Indep. Oil &
Chem. Workers of Quincy, Inc. v. Procter & Gamble Mfg., Co., 864 F.2d 927, 929 (1st Cir.1988)). In
light of the above, the Court in the instant case reviews for abuse of discretion appellant-debtor’s
challenge regarding the timeliness of the filing of appellee-creditor’s objections to the homestead
exemption. Moreover, the Court reviews de novo the Bankruptcy Court’s granting of appelleecreditor’s objection to appellant-debtor’s claim for the homestead exemption.

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The instant matter on appeal concerns the denial by the Bankruptcy Court of appellantdebtor’s motion to reconsider. ECF No. 1-2. Thus, in addition to the standards summarized
above, the Court shall evaluate the order being appealed pursuant to Federal Rule of Bankruptcy
Procedure 9023 (“Rule 9023”) and Federal Rule of Civil Procedure 59 (“Rule 59”). In re Sonera,
14-03925 BKT, 2015 WL 4464502 at *2 (Bankr. D.P.R. July 21, 2015) (Slip Copy). Under Rule 9023,
“[a] motion for a new trial or to alter or amend a judgment shall be filed, and a court may on its
own order a new trial, no later than 14 days after entry of judgment.” Furthermore, pursuant to
Rule 59, a party seeking reconsideration “must ‘either clearly establish a manifest error of law
or must present newly discovered evidence.’” Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 7
n. 2 (1st Cir. 2005) (quoting Pomerleau v. W. Springfield Pub. Sch., 362 F.3d 143, 146 n. 2 (1st Cir.
2004)). In Marie, the First Circuit noted four grounds under which for granting a Rule 59 motion
for reconsideration may be granted: “manifest errors of law or fact, newly discovered or
previously unavailable evidence, manifest injustice, and an intervening change in controlling
law.” 402 F.3d at 7 n. 2 (citing Charles Alan Wright et al., 11C Federal Practice & Procedure
§ 2810.1 (2d ed. 1995)). A reconsideration of a judgment under Rule 59 is directed at allowing a
court to correct its own errors. Aybar v. Crispín-Reyes, 118 F.3d 10, 15 (1st Cir. 1997).
III.

Discussion

Appellant-debtor brings forth two main arguments: (i) abuse of discretion by the
Bankruptcy Court in considering appellee-creditor’s objection to appellant-debtor’s claim of the
homestead exemption, even though appellee-creditor’s objections were tardy; and (ii) erroneous

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application and interpretation of law as to appellant-debtor’s claim of the homestead exemption.
ECF Nos. 4-1, 6. Appelle opposes. ECF No. 10.
1The Bankruptcy Court did not abuse its discretion in entertaining appelleecreditor’s objection to appellant-debtor’s claim for the homestead exemption.
When a debtor files a bankruptcy petition, all of his/her/its assets become property of the
bankruptcy estate subject to the debtor’s right to reclaim certain property as exempt under
applicable law. 11 U.S.C. §§ 522, 541, In Re Colón, 525 B.R. 1, 2 (Bankr. D.P.R. 2015). In Puerto
Rico, among the exemptions that may be claimed is the homestead exemption over a debtor’s
principal residential property under the Puerto Rico Home Protection Act. Exempt property will
be excluded from the bankruptcy estate unless a party in interest objects. 11 U.S.C. § 522(l); see
Schwab, 560 U.S. at 770. A creditor generally shall file objections to a debtor’s claimed exemptions
under the thirty-day term provided under Rule 4003(b). However, said term to object does not
apply if a claimed exemption is valid from the face of the debtor’s pertinent filings. Id., In re
Massey, 465 B.R. at 726.
As summarized above, the appellant-debtor declared the Puerto Rico homestead
exemption in a notarial act and a sworn statement prior to filing the ongoing bankruptcy
petition. She then filed an amended Schedule C in the bankruptcy proceedings including said
exemption. Subsequently, appellee-creditor filed a claim as secured creditor in the bankruptcy
proceedings as to the mortgage that encumbered the residential property. Appellant-debtor then
initiated adversary proceedings against appellee-creditor, disputing the latter’s secured creditor

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status. The Bankruptcy Court declared appellee-creditor’s claim as unsecured due to the lack of
successive chain of ownership title at the Property Registry of Puerto Rico, rendering the
mortgage lien void.
Generally, the homestead protection “does not extend to claims from mortgagees, state
and federal tax authorities, eligible contractors, or other state and federal entities specified [in
the Puerto Rico Home Protection Act].” In re Nazario, 533 B.R. at 4; P.R. Laws Ann., Tit. 31
§ 1858a. In that respect, according to appellee-creditor, “as of . . . the time when [d]ebtor filed
her amended Schedule C, [appellee-creditor] had a recorded lien senior to any homestead claim
the Debtor may have had. Accordingly, neither appellee-creditor nor the Chapter 13 trustee were
in need of filing an objection” at that time. ECF No. 6-1 at 50.
In light of the above, the Court holds that appellant-debtor’s claim of homestead
exemption seemed valid on its face when she claimed it in the bankruptcy proceedings by means
of an amended Schedule C, for which appellee-creditor was not bound by the 30-day term to file
an objection under Rule 4003(b). See Schwab, 560 U.S. at 770; In re Massey, 465 B.R. at 726. The
objection in question was prompted by appellee-creditor’s subsequent loss of its securedcreditor status upon the Bankruptcy Court’s order in the adversary proceedings initiated by
appellant-debtor. As such, the Bankruptcy Court did not abuse its discretion by entertaining
appellee-creditor’s objection to appellant-debtor’s claim of homestead exemption.

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2The Bankruptcy Court erred in its interpretation of applicable law when it
denied appellant-debtor’s motion to reconsider.
Even though the Bankruptcy Court did not abuse its discretion by entertaining appelleecreditor’s objection to appellant-debtor’s Puerto Rico homestead exemption, it reached an
erroneous legal conclusion when adjudicating the substantive legal controversy at hand, thus
warranting reversal. In essence, the Bankruptcy Court held that appellant-debtor could not
claim the Puerto Rico homestead exemption because appellant-debtor did not appear as the title
owner with the Property Registry of Puerto Rico, even though she is the legal owner of the
residential property by virtue of a purchase deed. ECF No. 1-2.
“A fundamental component of an individual debtor’s fresh start in bankruptcy is the
debtor’s ability to set aside certain property as exempt from the claims of creditors.” In re Nazario,
533 B.R. at 4 (citations and internal quotation marks omitted). When construing state-law
exemptions, a state’s rules must be followed. Id. at 5. “In Puerto Rico, exemptions are construed
in the most liberal light to effectuate the humanitarian purpose of the lawmaker. Questions of
applicability of a Puerto Rico exemption must be resolved in favor of the exemption.” In re López,
No. 12-09126 (ESL) (Bankr. D.P.R. 2013), 2013 WL 3490920 at *3 (not reported in B.R.) (citing
Laguna v. Quiñones, 23 P.R. R. 358, 360–361, 23 D.P.R. 386, 389 (1916); Marty Pérez v. Ramírez
Cuerda, 75 P.R.R. 808, 814, 75 D.P.R. 858, 864 (1954)); see Caron v. Farmington Nat’l Bank (In re
Caron), 82 F.3d 7, 10 (1st. Cir. 1996) (federal courts are required to interpret exemption laws
liberally in a debtor’s favor “to reflect their remedial purposes”).

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As summarized above, the exemption object of the appeal at hand is under the Puerto
Rico Home Protection Act. PR Laws Ann. tit. 31, § 1858-1858k. It was amended in 2012 “to clarify
that the intent of the Puerto Rico Legislature is to provide the broadest protection to the homes
or principal residences of the residents of Puerto Rico and their families in bankruptcy
proceedings.” In re Hernández, 487 B.R. 353, 356 (Bankr. D.P.R. 2013). A bankruptcy debtor who
wishes to properly claim the Puerto Rico Home Protection Act exemption must comply with the
requirements of said law as of the date of the filing of the bankruptcy petition. Id. at 365. A review
of the Puerto Rico Home Protection Act reveals a “less than artful construction” that requires a
careful analysis of that statute “as a harmonious whole, with its various parts being interpreted
within their broader statutory context in the manner that furthers statutory purposes.” Id. at 362,
367.
Article 3 of the Puerto Rico Home Protection Act establishes the two essential
requirements for an individual’s entitlement to the Puerto Rico homestead right: (1) ownership
of the property over which the homestead right is being claimed; and (2) that it be occupied as
the principal residence by the individual claimant or his/her family. 31 P.R. Laws Ann. § 1858;
see In re Nazario, 533 B.R. at 4; In re Hernández, 487 B.R. at 357; Rivera García v. Registradora, 189
P.R. Dec. 628, 636-637 (2013). The legislative intent of bestowing importance and security to the
homestead right is reflected in Article 4, which provides that “[t]he homestead right shall not be
waived[,] and any agreement to the contrary shall be declared null.” 31 P.R. Laws Ann. § 1858a.
That article lists exceptions to the homestead protection, including “all cases in which the

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protected property is [a] pledge for a mortgage.” Id. Article 5 establishes the extent of the legal
protection under the homestead right, while Articles 6, 7 and 8 provide that under certain
circumstances, homestead rights shall continue after death, abandonment or divorce, and in
cases of leasing or sale of the property. Id. at §§ 1858b-1858e.
Article 9 provides two ways in which property owners can assert their homestead right
in certain cases: (i) by declaring it in the purchase deed upon acquisition of the property; or (ii)
if the property has already been recorded with the Property Registry of Puerto Rico in the name
of the homestead claimant, by “executing a declaration before a notary public stating that the
parcel is covered by homestead protection.” Id. at § 1858f. Neither of these instances are
applicable in this case, since appellant-debtor purchased the residential property in 2004,
whereas the Puerto Rico Home Protection Act object of this Opinion and Order was enacted in
2011 and amended in 2012. Id. at § 1858. Additionally, the residential property has not been
recorded with the Property Registry of Puerto Rico in appellant-debtor’s name, as summarized
above.
Article 9 further establishes that “[i]nsofar as [a] property has been declared a homestead,
the Property Registrar shall be required to make a notation stating that the property was so
declared by its owner. Such declarations or notations shall only constitute prima facie evidence
of the homestead right of such property.” Id. at § 1858f. Accordingly, the recordation mandate
included in Article 9 is directed at the Property Registry of Puerto Rico regarding notarial acts
declaring homestead rights that titular registrants may present in order to secure legal rights

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over real property before third parties. Id. at §§ 1858f, 1871-1872; see Marín v. Montijo, 109 P.R.
Dec. 268, 272 (1979); 9 P.R. Offic. Trans. 351, 355-356. As such, Article 9 does not entail a
recordation requirement directed at homestead claimants upon which the validity of a
homestead rights declaration depends. See id.
Article 10 establishes a criminal penalty for the unlawful recording of a homestead right,
while Article 11 provides that “[t]he fact that a parcel has not been registered in the Property
Registry of Puerto Rico, or that the declaration of homestead has not been filed with or entered
in the Property Registry, shall in no way impair the owner’s homestead right thereon, provided
that such right has been timely claimed as provided in [Article 12].” 31 P.R. Laws Ann. §§ 1858g1858h.
Article 12 indicates the procedural requirements for a judicial claim of homestead rights
when the claimant is faced with a foreclosure, garnishment, or other pre-judgment remedy
against the homestead property. Id. at § 1858i. Additionally, Article 12 states that “[n]o rural or
urban parcel shall be sold by virtue of judgment or foreclosure if it has been claimed to be or
held as homestead, whether or not it has been registered as such in the Property Registry, unless
any of the exemptions in [Article 4] applies.” Id. Finally, Articles 13 and 14 provide that the
filing of homestead declarations before the Property Registry of Puerto Rico is exempted from
fees, and that the Office of Notarial Inspection shall inform the legal community of the
homestead rights law. Id. at §§ 1858j-1858k.

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In light of the above, the Court holds that contrary to the Bankruptcy Court’s conclusion
in the instant case, the Puerto Rico Home Protection Act does not require that a homestead
claimant’s ownership title of a property be registered with the Property Registry of Puerto Rico
in order for the claimant to declare a homestead right over that property. On the contrary, the
essential requirements are the legal ownership of the property being claimed as a homestead,
and that the property claimed as a homestead be the claimant’s principal residence or that of
his/her family. Id. at § 1858; In re Nazario, 533 B.R. at 4. Importantly, under Puerto Rico law, the
existence or validity of legal ownership over real property does not depend on the owner’s title
being registered in the Property Registry of Puerto Rico. Specifically,
[i]t is a well-known fact that, except for a mortgage title, art. 1774 of the Civil Code,
or a title subject to the provisions of the Horizontal Property Act, 31 L.P.R.A. §
1291, the recording with the Registrar of Property is merely declarative and it is
not a source of rights. See Goenaga v. O'Neill de Milán, 85 P.R.R. 162, 196 (1962);
Baldrich v. Registrar, 77 P.R.R. 700, 705 (1954). The recording with the Registry is
not a way of acquiring an interest on property, but of securing legally those rights
already existing through publication in the registry. Goenaga v. O'Neill de Milán,
supra; see Jiménez v. Alvarez, 69 P.R.R. 299, 308 (1948). Save for the two exceptions
already mentioned,[ 6] in our jurisdiction property rights are constituted, conveyed,
modified and extinguished pursuant to the provisions of the Civil Code and other
applicable substantive laws.
Marín, 109 P.R. Dec. at 272; 9 P.R. Offic. Trans. at 355-356. For that reason and in light of the
chronic recordation backlog at the Property Registry of Puerto Rico, “Article 11 of the [ ] Home
Protection Act precisely addresses situations where the homestead right is claimed on a
residence that is not registered at the Property Registry or where the express declaration of

6

The exceptions are titles subject to the Horizontal Property Act and mortgages. 31 P.R. Laws Ann. §§ 1291, 5042.

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homestead has not been annotated or entered at the Property Registry.” In re Hernández, 487 B.R.
at 366; 31 P.R. Laws Ann. § 1858i.
In sum, appellant-debtor’s right to the homestead claim is predicated on her legal
ownership of the residential property and it being her principal residence or that of her family.
31 P.R. Laws Ann. § 1858; see In re Nazario, 533 B.R. at 4; Rivera García, 189 P.R. Dec. at 636-637.
Her ownership of that residential property is established by a purchase deed pursuant to the
Puerto Rico Civil Code. 31 P.R. Laws Ann. § 3453; see Marín, 109 P.R. Dec. at 272, 9 P.R. Offic.
Trans at 355-356. Since the purchase deed was not recorded with the Property Registry of Puerto
Rico, appellant-debtor is not the titular registrant of the residential property, but she is its legal
owner nonetheless. 31 P.R. Laws Ann. §§ 3453, 1871-1872; see In re Hernández, 487 B.R. at 366;
Marín, 109 P.R. Dec. at 272; 9 P.R. Offic. Trans. at 355-356. Furthermore, prior to the filing for
bankruptcy in the ongoing case, appellant-debtor asserted her claim of Puerto Rico homestead
rights over her residential property by means of a notarial act and a sworn statement before a
Notary Public addressing the pertinent factors under the Puerto Rico Home Protection Act. ECF
No. 4-1 at 40-47. 7

The Court could not and did not consider the content of the notarial act, inasmuch as appellant-debtor did not
provide a certified English translation of the same, as required under Local Civ. R. No. 5(g); see Colón-Fontánez v.
Municipality of San Juan, 660 F.3d 17, 27 (1st Cir. 2011). Nonetheless, as summarized above, it is uncontested that
appellant-debtor executed a notarial act and a sworn statement asserting the homestead rights prior to the filing of
the ongoing bankruptcy case. Furthermore, the notarized sworn statement is in both English and Spanish, and the
Court considered its content. ECF No. 4-1 at 44-48.
7

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Conclusion

The Bankruptcy Court did not abuse its discretion in entertaining appellee-creditor’s
objections to appellant-debtor’s claim for exemption. ECF Nos. 1-2, 4-1 at 29-49. However, the
Bankruptcy Court’s denial of appellant-debtor’s motion to reconsider is based on an erroneous
interpretation of the legal precepts applicable to Puerto Rico homestead rights, as discussed
above. The fact that appellant-debtor’s title as legal owner of the residential property is not
recorded with the Property Registry of Puerto Rico does not preclude her from claiming the
Puerto Rico homestead exemption. The Bankruptcy Court erred in concluding otherwise. Thus,
the Court hereby REVERSES the Bankruptcy Court’s ruling at ECF No. 1-2. Moreover, the case
is REMANDED to the Bankruptcy Court for proceedings consistent with this ruling.
SO ORDERED.
At San Juan, Puerto Rico, on this 27th day of September, 2018.
S/AIDA M. DELGADO-COLÓN
United States District Judge