Banco Popular De P.R. v. Santiago-Salicrup

630 B.R. 374

BANCO POPULAR DE PUERTO RICO, Appellant-Creditor,

v.Wanda I. SANTIAGO-SALICRUP, Appellee-Debtor.

Civil No. 20-1361 (ADC)

United States District Court, D. Puerto Rico.

Signed March 30, 2021

Juan C. Salichs-Pou, Salichs Pou & Assoc, San Juan, PR, for Appellant-Creditor.

Rosana Moreno-Rodriguez, Moreno & Soltero Law Office, LLC, Trujillo Alto, PR, for Appellee-Debtor.

OPINION AND ORDER

AIDA M. DELGADO-COLÓN, United States District Judge

Before the Court is a notice of appeal and statement of election of the U.S. District Court of Puerto Rico ("the Court") by Banco Popular de Puerto Rico ("appellant"), an unsecured creditor in Bankruptcy Case No. 19-6953 (ESL). ECF No. 1 . Appellant 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 appellant's objection to appellee's claim of exemption under the Puerto Rico Home Protection Act of 2011, as amended, PR Laws Ann. tit. 31, § 1858-1858k ("Home Protection Act"). ECF No. 1-2 . Appellant and appellee opportunely filed their corresponding briefs before this Court. ECF Nos. 6, 13, 16 . After thoroughly considering the parties' briefs and the record on appeal, for the reasons discussed below, the Court REVERSES the Bankruptcy Court's Opinion and Order. ECF No. 1-2 .

I. Procedural Background

On November 26, 2019, appellee filed a voluntary petition for bankruptcy under Chapter 13 of the United States Bankruptcy Code. ECF No. 1-3. On December 24, 2019, appellant filed an unsecured claim in the amount of $143,172.94 for a mortgage loan granted to appellee on July 30, 2013. ECF No. 6-1 at 26-77. On January 5, 2020, appellee presented an exemptions schedule which listed a claim for a homestead exemption¹ as to a residential property located in Urbanización San Genaro, Calle Nevada #310, San Juan, Puerto Rico, 00926 ("the property"). ECF No. 6-1 at 105.

On February 27, 2020, after the Meeting of Creditors was held, appellee submitted an Amended Plan and an amended Schedule C, including the homestead exception as to the property, citing the Home Protection Act of 2011. ECF No. 6-1 at 153-56, 168. On March 13, 2020, appellant filed before the Bankruptcy Court an objection to appellee's claim of homestead exemption under Section 522(l) of the Bankruptcy Code and Rule 4003(b)(1) of the Federal Rules of Bankruptcy Procedure, alleging that appellee failed to comply with the requirements of the Home Protection Act. Id. at 176-187.

Specifically, appellant argued that appellee did not (1) file a sworn motion including the description of the property as described in the Property Registry and a statement averring that the property is her primary residence; (2) disclose whether the property was registered in the Registry; (3) submit the sworn statement required by Article 12 of the Home Protection Act together with Schedule C; or (4) explain why the property was not registered in her name. ECF No. 6-1 at 179, 182.²

On June 10, 2020, appellee responded to appellant's objection and submitted various exhibits in the Spanish language, namely, the Deed of Purchase for the property, a Real Property Certificate issued by the Property Registry on December 18, 2019, a homestead deed dated November 25, 2019 and its certificate of presentation to the Property Registry. ECF No. 6-1 at 235-287. On July 2, 2020, appellant replied, rebutting appellee's arguments on the merits and moving the Bankruptcy Court to disregard the exhibits submitted by appellee in the Spanish language without leave of Court or certified English translations. ECF No. 6-1 at 308-321.

On July 10, 2020, the Bankruptcy Court issued the Opinion and Order denying appellant's objection to the homestead exception. ECF No. 6-1 at 374-79. On July 24, 2020, appellant opportunely filed a notice of appeal before this Court challenging the Bankruptcy Court's Opinion and Order, and the parties filed their corresponding briefs thereafter. ECF Nos. 1, 6, 13, 16 .

Appellant's proffer that the Bankruptcy Court erred in denying its objection to the homestead exception rests on various arguments. ECF No. 6 . First, appellant avers that appellee was not the registered owner of the property at the time of the filing of the petition and failed to comply with the Home Protection Act's Articles 11 and 12. Second, appellant contends that the Bankruptcy Court's findings of facts improperly relied on untranslated Spanish documents, without the required certified English translations, in violation of Bankruptcy Local Rule 9070-1(c), Loc. Civ. R. 5(g) and 48 U.S.C. § 864. Lastly, appellant argues that the Bankruptcy Court failed to address the potential conflict of interest of appellee's bankruptcy attorney, who acted as notary public for appellee's homestead declaration deed and provided advice prior to the bankruptcy filing.

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 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. 720, 723 (1st Cir. BAP 2012).

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 reviews de novo the Bankruptcy Court's denial of appellant's objection to appellee's claim for the homestead exemption.

III. Discussion

As a threshold matter, this Court must address appellant's argument as to the lack of certified English translations of various key documents. It is well settled that the law incontrovertibly demands that federal litigation in Puerto Rico be conducted in English. Estades-Negroni v. Assocs. Corp. of N. Am. , 359 F.3d 1, 2-3 (1st Cir. 2004) (citing 48 U.S.C. § 864 (2003) ). This rule necessarily extends to bankruptcy proceedings as well as bankruptcy appeals. In re Ortíz , 2014 Bankr. LEXIS 4076, *2-3 (holding that U.S. Bankruptcy Courts are units of the U.S. District Courts. See 28 U.S.C. § 151 ). Pursuant to Local Civ. R. 5, all documents to be considered by the Court must be in English or certified translations thereof. Similarly, P.R. LBR 9070-1 requires that "[a]ll exhibits and documentary evidence in Spanish or other language shall be fully translated to the English language by a certified translator." The Bankruptcy Court for the District of Puerto Rico has been clear that "[a]ny evidence presented that does not comply with this rule will not be admitted into evidence." Barbosa v. Banco Popular de P.R. (In re Gómez) , 2014 WL 5454227, at *4, 2014 Bankr. LEXIS 4517, *8-9 (Bankr. D.P.R. 2014).

The United States Court of Appeals for the First Circuit requires strict enforcement of the English-language requirement "where the untranslated document is key to the outcome of the proceedings." Mendoza-Cardona v. Estado Libre Asociado de P.R. , 59 F. Supp. 3d 309, 310 (D.P.R. 2014) (citing Puerto Ricans for Puerto Rico Party v. Dalmau , 544 F.3d 58, 67 (1st Cir. 2008) ). As the First Circuit explained, allowing the outcome to turn on a non-English document would be "at odds with the premise of a unified and integrated federal courts system." Id. (citing Dalmau , 544 F.3d at 67 ). Therefore, district courts—and bankruptcy courts alike—should not consider such documents. González-De-Blasini v. Family Dep't , 377 F.3d 81, 89 (1st Cir. 2004).

A review of the record shows that, in support of her opposition to appellant's objection to the homestead exemption, appellee submitted the following documents to the Bankruptcy Court, in the Spanish language: Exhibit I, Deed of Purchase for the property; Exhibit II, Real Property Certificate dated December 18, 2019; and Exhibit III, Homestead Deed and presentation receipt. ECF No. 6-1 at 249-264. Appellee did not seek leave to file Spanish language documents nor submitted certified translations prior to the issuance of the Opinion and Order on appeal here. The Bankruptcy Court, moreover, did not address this matter despite appellant's timely request to disregard any documents in the Spanish language. In fact, as will be discussed below, some of the Bankruptcy Court's findings of fact regarding appellee's ownership of the property and presentation of the purchase and homestead deeds are premised on these Spanish language documents. This clearly controverts applicable rules on this point.

Moreover, on appeal, appellee submits for the first time certified English translations of the property's Deed of Purchase (ECF No. 13-1 at 1-6), Homestead Deed and presentation receipt (id. at 7-8, 11-14), Real Property Certificate dated December 18, 2019 (id. at 9-10), and a Title Search dated ...