Santana v. Hacienda San Jose Homeowners Ass'n (In re Santana)

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IN RE: LAURA MARGARITA SERRANO SANTANA Debtor

LAURA MARGARITA SERRANO SANTANA Plaintiff v. HACIENDA SAN JOSE HOMEOWNERS ASSOCIATION Defendants

No. 23-00797 (MCF)

Adv. No. 23-00055 (ESL)

United States Bankruptcy Court, D. Puerto Rico

December 10, 2024

Chapter 13

OPINION AND ORDER

Enrique S. Lamoutte, United States Bankruptcy Judge

This case is before the court upon the Debtor/Plaintiff's Motion for Summary Judgment (the "Motion for Summary Judgment") (dkt. #35) and Hacienda San José Homeowners Association, Inc.'s ("HSJ" or "the Defendant") Opposition to Plaintiff's Motion [for] Summary Judgment and Request for Summary Judgment (the "Opposition") (dkt. #38).

For the reasons discussed below, the Motion for Summary Judgment (dkt. #35) and the Opposition (dkt #38) are hereby DENIED.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Bankruptcy Case, Bankr. Case No. 23-00797

1. On March 20, 2023, Laura Margarita Serrano Santana (the "Debtor/Plaintiff") filed a voluntary petition under Chapter 13 of the Bankruptcy Code (the "Bankruptcy Case") (Bankr. Case No. 23-00797, dkt. #1).

2. On the same date, the Debtor/Plaintiff filed a Chapter 13 Plan (Bankr. Case No. 23-00797, dkt. #4). The Debtor/Plaintiff filed Amended Chapter 13 Plans on May 24, 2023, on September 21, 2023, and on September 25, 2023 (Bankr. Case No. 23-00797, dkt. #14, #21, #23).

3. After various procedural events, the Bankruptcy Case was stayed, and the confirmation of the Amended Chapter 13 Plan (Bankr. Case No. 23-00797, dkt. #23) was held in abeyance, pending a decision on this Adversary Proceeding. See, Bankr. Case No. 23-00797, dkt. #44.

II. The Adversary Proceeding, Adv. Proc. No. 23-00055

4. On July 10, 2023, the Debtor/Plaintiff filed a Complaint (dkt. #1) (the "Adversary Proceeding") against HSJ and Preferred Home Services, Inc.^[1] to determine the validity of a lien allegedly held by HSJ over the Debtor/Plaintiff's residential real property located at Hacienda San Jose Villa Caribe Development, 220 Campiña Street, Caguas, Puerto Rico (the "Property"). The Complaint includes two (2) claims: the first claim alleges that HSJ does not hold a perfected security interest over the Property because the judgment lien, infra, was not recorded in the Puerto Rico Property Registry (the "Property Registry") and, thus, HSJ's POC #5-1 must be classified as a general unsecured claim; while the second claim argues, in the alternative, that HSJ's POC #5-1 is unsecured because, pursuant to 11 U.S.C. § 506(a), the Property has no equity as it is encumbered by a first mortgage in favor of Banco Popular de Puerto Rico ("BPPR") for $265,298.03 and has an estimated market value of $240,000.00.

5. HSJ filed an Answer to Complaint on August 9, 2023 (dkt. #9) arguing that because the Property is located at the Hacienda San Jose Development, it is governed by Deed No. 212 of Declaration of Covenants and Restrictions of Hacienda San Jose Development Villa Caribe of June 6, 2001 ("Deed No. 212"), and Deed No. 335 of Establishment of Master Association Declaration of Covenants and Restrictions of Hacienda San Jose Development of September 25, 2000 ("Deed No. 335"), which provide that if homeowners' association (or "HOA") assessments are not paid when due, such assessment shall "become [a] continuing lien on the property" (dkt. #9, p. 5, ¶ 1). HSJ further argues that because Deed No. 335 and Deed No. 212 were recorded in the Property Registry, HSJ's claim for homeowners' association assessments owed is secured (id., p. 5, ¶ 1).

6. On January 2, 2024, the Debtor/Plaintiff and HSJ filed a joint Initial Scheduling Conference Report which included their discovery plan and proposed deadlines for the management of the Adversary Proceeding. The agreed deadline for the filing of dispositive motions was April 9, 2024 (dkt. #27).

7. After various procedural events, the Adversary Proceeding was reassigned to the undersigned Judge on January 10, 2024 (dkt. #30).

8. The court scheduled a Pretrial Hearing for April 12, 2024, if no dispositive motion was filed before April 9, 2024 (dkt. #32).

9. The Debtor/Plaintiff filed the Motion for Summary Judgment on April 4, 2024 (dkt. #35) with a statement of material uncontested facts referencing supporting documents and record citations, and conclusions of law supporting her position. HSJ filed the Opposition on April 11, 2024 (dkt. #38). The Debtor/Plaintiff did not file a reply.

10. On April 8, 2024, the Debtor/Plaintiff filed a motion requesting continuance of the Pretrial Hearing scheduled for April 12, 2024, due to the filing of the Motion for Summary Judgment (dkt. #36). The court granted the Debtor/Plaintiff's request on April 9, 2024, and continued the Pretrial Hearing without a date pending a decision on the Motion for Summary Judgment and the Opposition (dkt. #37).

LEGAL ISSUE

The issue before this court is whether HSJ holds a perfected security interest and/or a valid lien over the Property which would entitle POC #5-1 to be classified as a secured claim under Section 506 of the Bankruptcy Code.

POSITION OF THE PARTIES

(A) The Debtor/Plaintiff

In the Motion for Summary Judgment, the Debtor/Plaintiff requests that the court determine that HSJ's claim (POC #5-1) is unsecured. The Debtor/Plaintiff argues that Section 7 of Deed No. 335 provides that, upon default in payment of homeowners' association assessments, HSJ is entitled to bring an action against the owner personally obligated to pay the same or to foreclose on its lien over the Property by filing an action against the owner in the state court, obtaining a judgment, and recording such judicial lien against the owner's real and/or personal property (dkt. #35, p. 15, ¶ ¶ 58-59). As such, the alleged pre-petition homeowners' association assessments lien is not self-perfecting. The Debtor/Plaintiff also argues that HSJ's claims are governed by state law - specifically the Municipal Code of Puerto Rico, Act No. 107-2020 - which HSJ followed by filing the State Court Case, infra, and obtaining a default judgment against the Debtor/Plaintiff. However, HSJ failed to record the judicial lien against the Property or against any other personal property owned by the Debtor/Plaintiff (see, dkt. #35, pp. 15-16, ¶ ¶ 61-63; 65-68). Thus, the Debtor/Plaintiff contends that the Defendant has a fully unsecured claim against the Debtor/Plaintiff for non-payment of pre-petition HOA fees.

In the alternative, should the court determine that HSJ's claim is secured, the Debtor/Plaintiff states that a value must be established for HSJ's collateral under 11 U.S.C. § 506 to determine the secured portion (if any) of such claim (dkt. #35, p. 2, ¶ 2). No evidence of the collateral's purported value was filed therewith.

(B) The Defendant HSJ

HSJ argues that Deed No. 335 and Deed No. 212 - which are recorded in the Property Registry - create a voluntary mortgage over the Property, as such term is defined in Article 57 of the Commonwealth's Property Registry Act ("Ley del Registro de la Propiedad Inmobiliaria del Estado Libre Asociado de Puerto Rico", in Spanish), Act No. 210-2015, P.R. Laws Ann. tit. 30, § 6084. Thus, HSJ argues that POC #5-1 is secured.

The Defendant also argues that it did not need to register the judicial lien because the lien on its claim was already constituted when Deed No. 335 and Deed No. 212 were presented and recorded in the Property Registry.

HSJ avers that because Deed No. 335 and Deed No. 212 are recorded in the Property Registry, they constitute real rights opposable erga omnes, and contends that the Puerto Rico Municipal Code does not apply in this case as the Property is governed by the voluntary mortgage and the easements in equity and restrictive covenants created by Deed No. 335 and Deed No. 212.

UNCONTESTED MATERIAL FACTS

In this case, the Defendant failed to comply with Local Civil Rule 56(c), infra, by only affirming and/or denying the entirety of the Debtor/Plaintiff's Motion for Summary Judgment in an endnote to the Opposition without supporting its denials with a record citation.^[2] The Defendant also did not provide a separate, short, and concise statement of material facts to support its own position. The court is not required to ferret through the record to find support for said blanket denials such as those found in the Defendant's endnote. As such the court finds that the Defendant failed to controvert the Debtor/Plaintiff's proposed material uncontested facts. After reviewing the record and the Debtor/Plaintiff's Statement of Material Uncontested Facts (dkt. #35, pp. 4-8, ¶ ¶ 11-33), which are admitted as unopposed upon the Defendant's noncompliance with Local Civil Rule 56(c), the court finds that the following material facts are uncontested:

1. On September 25, 2000, Levitt Homes Builders Corporation, through its president Rafael Angel Torrens Salvá, executed Deed No. 335. See, dkt. #35, p. 5, ¶ 18; Deed No. 335, dkt. #35, pp. 23-50.

2. Deed No. 335 was presented for recordation at entry 101 of volume 959 of the Property Registry, First Section of Caguas. See, dkt. #35, ¶ 18; Deed No. 212, dkt. #35, p. 53, ¶ Third (Charges, Liens and Encumbrances); dkt. #38, p. 13, endnote iii; and dkt. #38, p. 14.

3. On June 6, 2001, Levitt Homes Builders Corporation, through its president Rafael Angel Torrens Salvá, executed Deed No. 212. See, dkt. #35, ¶ 19; Deed No. 212, dkt. #35, pp. 51-64.

4. Deed No. 212 provides, among other things, that Villa Caribe is subject to the covenants, restrictions, easements, charges and liens imposed in Deed No. 335. See, Deed No. 212, dkt. #35, p. 53, ¶ Third (Charges, Liens and Encumbrances).

5. Deed No. 212 was presented for recordation at the Property Registry, First Section of Caguas. See, dkt....