Albarran v. Rivera (In re Rivera)

627 B.R. 765

Carmen Socorro RIVERA, Debtor.

Jose A. Mendez Albarran and Olga Cira Fontan La Santa, Appellants,

v.Carmen Socorro Rivera, Appellee.

BAP NO. PR 19-067

Bankruptcy Case No. 18-06035-MCF

United States Bankruptcy Appellate Panel of the First Circuit.

Signed May 20, 2021

Madeleine Llovet Otero, Esq., San Juan, on brief for Appellants.

Juan M. Suárez-Cobo, Esq., San Juan, on brief for Appellee.

Before Hoffman, Cary, and Panos, United States Bankruptcy Appellate Panel Judges.

Cary, U.S. Bankruptcy Appellate Panel Judge.

Jose Mendez Albarran and Olga Cira Fontan La Santa (collectively, the "Appellants") hold a lien on the residence of Carmen Socorro Rivera (the "Debtor") arising from a pre-petition judgment against the Debtor and her two brothers, who co-own the property with her. In her bankruptcy case, the Debtor moved to avoid the lien, claiming it impaired her homestead exemption. The Appellants objected, arguing that the Debtor's homestead deed was invalid as it did not comply with Puerto Rico law. The bankruptcy court granted the lien avoidance motion and then denied the Appellants' motion to alter or amend that order. The Appellants now appeal the order denying their motion to alter or amend the lien avoidance order. As they have not met their burden of demonstrating that the bankruptcy court abused its discretion in denying the motion to alter or amend, we AFFIRM .

BACKGROUND

I. Pre-Bankruptcy Events²

Prior to the petition date, the Debtor resided at property located in Carolina, Puerto Rico (the "Property"), which was owned by her parents. Doral Bank, holder of a mortgage on the Property, foreclosed on the mortgage in 2002. The Debtor's parents subsequently passed away and Doral Bank scheduled the Property for a foreclosure sale in early 2008. The Appellants planned to purchase the Property at that sale but, instead, they agreed to "pay off" the amounts owed to Doral Bank to help the Debtor "save her home." They maintain they paid Doral Bank approximately $48,000 in February 2008 and the Debtor promised to pay them back.³

After a proceeding in the local probate court, deeds establishing the Debtor and her two brothers as the legal owners of the Property were presented to the property registry in July 2011 and were recorded on February 13, 2012. Neither party disputes that the Debtor was, at all times relevant to this appeal, a titled and "registered" owner of the Property. It is also undisputed that in December 2011, the Debtor, but not her brothers, signed a homestead deed with respect to the Property. The Debtor executed the deed before a notary public, but it was not recorded in the property registry.

Meanwhile, in January 2011, the Appellants commenced a "collection of monies" action in the local court against the Debtor and her brothers. They obtained a $48,000 judgment in their favor on September 12, 2016, which was recorded in the property registry on December 5, 2017. A writ of execution was eventually issued, and the Property was scheduled for a public sale on October 16, 2018.

II. The Bankruptcy Proceedings

A. The Bankruptcy Filing

On the day of the public sale, the Debtor filed a chapter 13 petition. On her bankruptcy schedules, the Debtor indicated she co-owned the Property and that the value of her interest was $32,010. She also claimed a "100%" exemption of her interest in the Property under P.R. Laws Ann. tit. 31, §§ 1858-1858k, known as the Puerto Rico Homestead Protection Act (the "P.R. Homestead Act").⁴ She listed the Appellants as her only secured creditors, with a $48,000 claim arising from a "judgment lien from a lawsuit."

B. Proceedings Relating to Motion to Avoid Lien

In February 2019, the Debtor filed a motion seeking to avoid the Appellants' judicial lien pursuant to § 522(f) (the "Motion to Avoid Lien"), claiming it impaired her homestead exemption.⁵ The Appellants objected, arguing that § 522(f)(1) was inapplicable because their claim against the Debtor arose from a mortgage rather than a judicial lien. They also asserted that their lien did not impair a homestead exemption to which the Debtor was entitled. They claimed the Debtor's homestead deed was invalid because it was not executed by all three co-owners of the Property and was not recorded in the property registry as required under Puerto Rico law. Although the Appellants attached several supporting documents to their objection, they were all in Spanish.

The Debtor countered that the Appellants' lien was indisputably a judicial lien as it arose from a judgment entered in a "state court money collection lawsuit." She also argued she was entitled to her claimed homestead exemption because she was a registered owner of the Property and she had executed a homestead deed before a notary public which was all that was required by P.R. Laws. Ann. tit. 31, § 1858f. She stressed that the P.R. Homestead Act requires neither that all co-owners of a property execute a homestead deed nor that the homestead deed be recorded for a valid homestead right to exist.

On August 2, 2019, the bankruptcy court, without a hearing and without any explanation, entered an order granting the Motion to Avoid Lien (the "Lien Avoidance Order").

C. Proceedings Relating to Motion to Alter or Amend

The Appellants filed a motion to alter or amend the Lien Avoidance Order (the "Motion to Alter or Amend"), advancing several new arguments.⁶ First, they argued the Debtor failed to produce any evidence demonstrating that their lien was the only encumbrance on the Property, and that a title search conducted on February 11, 2019 reflected several tax liens against the Debtor and one of her brothers. Second, they contended that the Debtor could not avoid their lien in its entirety because she only owned a partial interest in the Property. Once again, all the supporting documents attached to the Motion to Alter or Amend were in Spanish.

The Debtor opposed the Motion to Alter or Amend, arguing that the Appellants did not identify any newly discovered evidence, intervening change in law, or manifest error of law or fact to support the requested relief. She also challenged the Appellants' allegation that there were IRS liens against the Property, highlighting that the title report contained disclaimers that the registry could not certify that the owners of the Property were the same persons as the "encumbered taxpayer[s]." Further, she maintained the Appellants had waived their argument that her partial ownership of the Property precluded total avoidance of the lien because they raised it for the first time in the Motion to Alter or Amend.

Responding to the Debtor's opposition, the Appellants asserted, for the first time, that there was "intervening law" which warranted reconsideration. They cited Money's People Inc. v. López Llanos, 202 P.R. Dec. 889, 202 D.P.R. 889 (2019), in which, they claimed, the Puerto Rico Supreme Court ruled that the P.R. Homestead Act is prospective in nature and only applies to claims asserted in suits after its enactment. As they commenced their collection of monies action against the Debtor prior to the enactment of the P.R. Homestead Act in September 2011, the Appellants contended, the prior version of the act was applicable and any homestead exemption to which the Debtor was entitled was limited to $15,000, as prescribed by the prior act.

On December 9, 2019, the bankruptcy court entered an order denying the Motion to Alter or Amend (the "Order Denying Motion to Alter or Amend"), "adopt[ing] the findings of facts and conclusions of law set forth in the Debtor's Opposition ...."

II. The Appeal

The Appellants timely filed a notice of appeal solely with respect to the Order Denying Motion to Alter or Amend. They did not identify the underlying Lien Avoidance Order in their notice of appeal or brief any issues relating to that order. Thus, this appeal is limited to the Order Denying Motion to Alter or Amend. See Nieves Guzmán v. Wiscovitch Rentas (In re Nieves Guzmán), 567 B.R. 854, 861 (B.A.P. 1st Cir. 2017) (stating that an appeal from an order denying a Rule 59(e) motion does not include the underlying judgment unless "it is clear that the appellant intended to appeal both orders, and ... both parties brief issues relating to the underlying judgment") (citation omitted); see also Mariani-Giron v. Acevedo-Ruiz, 945 F.2d 1, 3 (1st Cir. 1991) (stating that "an appeal from the denial of a Rule 59(e) motion is not an appeal from the underlying judgment" unless "appellant's intent to appeal the judgment is clear") (citations omitted).

APPELLATE JURISDICTION

We have jurisdiction to hear appeals from final orders of the bankruptcy court. 28 U.S.C. § 158(a), (c) ; see also Ritzen Grp., Inc. v. Jackson Masonry, LLC, ––– U.S. ––––, 140 S. Ct. 582, 587, 205 L.Ed.2d 419 (2020) ; Bullard v. Blue Hills Bank, 575 U.S. 496, 135 S. Ct. 1686, 1692, 191 L.Ed.2d 621 (2015). An order denying a motion to alter or amend an order "is final if the underlying order is final and together the orders end the litigation on the merits." United States v. Monahan (In re Monahan), 497 B.R. 642, 646 (B.A.P. 1st Cir. 2013) (citation omitted). As "a bankruptcy court order granting lien avoidance is a final order," Ross v. Garcia (In re Garcia), 532 B.R. 173, 181 (B.A.P. 1st Cir. 2015) (citation omitted), so too is the Order Denying Motion to Alter or Amend. Consequently, we have jurisdiction to hear this appeal.

STANDARD OF REVIEW

We review an order denying a motion to alter or amend under Rule 59(e) "for manifest abuse of discretion." See Rodriguez Rodriguez v. Banco Popular de P.R. (In re Rodriguez Rodriguez), 516 B.R. 177, 183 (B.A.P. 1st Cir. 2014) (citation omitted). "The abuse of discretion standard is quite deferential[.]" Berliner v. Pappalardo (In re Sullivan), 674 F.3d 65, 68 (1st Cir. 2012) (citation omitted). We will set aside a bankruptcy court's discretionary ruling only if it clearly appears the court "ignored a factor deserving significant weight, relied upon an...