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Scotiabank de Puerto Rico v. Burgos, 1st Cir. (2014)
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Transcript of Scotiabank de Puerto Rico v. Burgos, 1st Cir. (2014)
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7/26/2019 Scotiabank de Puerto Rico v. Burgos, 1st Cir. (2014)
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United States Court of AppealsFor the First Circuit
No. 12- 9005
I N RE: THE PLAZA RESORT AT PALMAS, I NC. ,
Debt or .
SCOTI ABANK DE PUERTO RI CO,
Pl ai nt i f f , Appel l ant ,
v.
J OSEPH BURGOS; GI LDA CRUZ; LETI CI A FLORES BERGANZO;NOREEN ORTI Z; ELI SELI NA ROSARI O; DAVI D NI ETO CARRERO;
LI SSETTE VARGAS VALLE; RAFAEL ALMODVAR;FRANCI SCO SI ERRA MNDEZ; MAR A RODR GUEZ DE SI ERRA;
CRUZ A. TORRES COLN; PAULI TA COLN FLORES; ERNESTO BRI TO;MARI GLORI A DEL VALLE; CLAUDI O MEDI NA; MAR A ROMERO,
Def endant s, Appel l ees.
APPEAL FROM THE BANKRUPTCY APPELLATE PANELFOR THE FI RST CI RCUI T
Bef or e
Tor r uel l a, Sel ya and Li pez,Ci r cui t J udges.
V ct or J . Qui ones, wi t h whomMorel l Bauz Car t agena & Dapena,was on br i ef f or appel l ant .
Ger ardo Pav a- Cabani l l as, wi t h whom Pav a & Lzar o, PSC, was
on br i ef f or appel l ees Er nest o Br i t o and Mar i gl or i a Del Val l e.
J anuar y 16, 2014
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TORRUELLA, Circuit Judge. The i ssue t o be deci ded i n
t hi s appeal i s whet her Def endant s/ Appel l ees Er nest o Br i t o and
Mar i gl or i a Del Val l e have a real pr oper t y i nt er est i n an apar t ment
t hat i s par t of a t i meshar e r eal est at e vent ur e under goi ng Chapt er
11 bankrupt cy proceedi ngs. At summar y j udgment , based on t he
Puer t o Ri co Ti meshare and Vacat i on Cl ub Act ( t he "Ti meshare Act " or
t he "Act " ) , P. R. Laws Ann. t i t . 31, 1251, et seq. , and t he sal e
cont r act bet ween Br i t o, Del Val l e, and t he devel oper of t he
t i meshar e vent ur e ( t he "Devel oper " ) , t he bankr upt cy cour t answer ed
t hat quest i on i n t he af f i r mat i ve. 1 The Bankr upt cy Appel l at e Panel
( "BAP") af f i r med. I n di sagr eement , Pl ai nt i f f / Appel l ant Scot i abank
de Puer t o Ri co asks us t o rever se the bankr upt cy cour t ' s hol di ng on
t he gr ound t hat t he r equi r ement s f or cr eat i ng r eal pr oper t y r i ght s
under t he Ti meshar e Act wer e al l egedl y never sat i sf i ed. Af t er
car ef ul l y revi ewi ng t he r ecor d and t he appl i cabl e l aw, we af f i r m.
I. Background
The chr onol ogy of event s l eadi ng up t o t hi s appeal has
been pr oper l y del i neat ed by t he cour t s bel ow. See I n r e Pl aza
Resor t at Pal mas, I nc. , 469 B. R. 398 ( B. A. P. 1st Ci r . 2012) ; I n r e
Pl aza Resor t at Pal mas, I nc. , Ch. 11 Case No. 09- 09980( SEK) , Adv.
No. 10- 00175 ( Bankr . D. P. R. May 4, 2011) . We t her ef ore by- pass al l
1 I n a subsequent opi ni on and order , t he bankr upt cy cour t ext endedi t s hol di ng t o al l ot her t i meshar e owner s si mi l ar l y si t uat ed. Ourhol di ng equal l y appl i es t o t hose t i meshar e owner s, al t hough we omi tf ur t her r ef er ence t o t hem f or t he sake of si mpl i ci t y.
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i nci dent al det ai l s and f ocus our f act ual nar r at i ve on t he
di sposi t i ve i ssues of t hi s appeal , r ef er enci ng onl y t hose f act s
t hat ar e pr oper l y document ed i n t he summar y j udgment r ecord.
The t i meshar e r egi me at t he cent er of t hi s l i t i gat i on was
const i t ut ed on J une 1, 2001, t hr ough a publ i c deed ent i t l ed
"Dedi cat i on of Ti meshare Regi me ( The Pl aza Resor t at Pal mas, A Ti me
Share Regi me) " ( t he "Deed") . Accordi ng t o t he Deed, t he t i meshar e
pr oper t y i s l ocat ed i n Humacao, Puer t o Ri co, and encompasses 25
apar t ment s " f or i ndependent use and occupancy" as vacat i on
r esi dences. The Deed al so del i neates t he t er ms and condi t i ons
gover ni ng t he t i meshar e r egi me as wel l as t he r i ght s and
obl i gat i ons of bot h t he Devel oper and pr ospect i ve t i meshar e owner s.
The Deed was dul y r ecor ded i n t he Puer t o Ri co Regi st r y of Pr oper t y.
Al so on J une 1, 2001, t he Devel oper gr ant ed t he Bank and
Tr ust of Puer t o Ri co a f i r st mor t gage ( t he "Mor t gage") over t he
t i meshare pr oper t y t o secur e payment on a l oan obt ai ned t o devel op
t he t i meshare r egi me. R- G Premi er Bank of Puer t o Ri co succeeded
t he Bank and Trust of Puer t o Ri co as t he mor t gagee. But t he FDI C
t ook over R- G, and Scot i abank became t he successor - i n- i nt er est and
t he hol der of t he Mor t gage. The Mor t gage cont ai ns t he f ol l owi ng
subordi nat i on cl ause: "The Mor t gagee, wi t hout payment , her eby
agr ees t o subor di nat e t he l i en cr eat ed her eby i n f avor of t he
personal ownershi p i nt erest of each owner of an accommodat i on[ ] or
t i meshar e . . . so l ong as such owner r emai ns i n good st andi ng wi t h
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r espect t o hi s/ her obl i gat i ons under t he t i meshar e pl an document s
. . . . " Li ke t he Deed, t he Mor t gage was dul y r ecor ded i n t he
Regi st r y of Pr oper t y.
The Devel oper f or mal l y commenced mar ket i ng t he t i meshar e
r egi me ar ound J ul y 2001. I t s mar ket i ng ef f or t s i ncl uded t he
i ssuance of a Publ i c Of f er i ng St at ement expl ai ni ng t o pr ospect i ve
owners t he t erms and condi t i ons gover ni ng t he t i meshare r egi me.
The Of f er i ng St at ement made pl ai n t hat " t wo mor t gages encumber [ ed]
t he r eal pr oper t y under l yi ng [ t he t i meshar e r egi me] " and t hat bot h
mor t gages wer e subor di nat ed " t o t he r i ght s of t he . . . owner of
any Uni t [ t her ei n] . " 2
Appr oxi mat el y a year l at er , on J une 1, 2002, t he
Devel oper , Br i t o, and Del Val l e ent er ed i nt o a pur chase agr eement
( t he "Sal e Cont r act " ) pur suant t o whi ch t he Devel oper t r ansf er r ed
t o Br i t o and Del Val l e "a per i od of owner shi p . . . of seven ( 7)
days" i n Uni t No. F1 of t he t i meshar e regi me i n exchange f or
$18, 200. The "per i od of owner shi p" - - whi ch was t r ansf er r ed i n
per pet ui t y, f r ee and cl ear of al l encumbr ances except t axes and
assessment s - - af f or ded Br i t o and Del Val l e t he excl usi ve r i ght t o
use and occupy Uni t No. F1 dur i ng one week wi t hi n a revol vi ng
year l y schedul e. The Sal e Cont r act al so est abl i shed t hat Br i t o and
Del Val l e' s " per i od of owner shi p" r equi r ed t hemt o be "r esponsi bl e
2 The hol der of t he second mor t gage was t he ent i t y t hat sol d t ot he Devel oper t he r eal pr oper t y dedi cat ed t o t he t i meshar e r egi me.
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subor di nat ed t o t hei r owner shi p i nt er est pur suant t o t he
subor di nat i on cl ause of t he Mor t gage.
Af t er pr el i mi nary pr ocedur al nuances, Scot i abank moved
f or summar y j udgment , r easser t i ng i t s cont ent i on that Br i t o and Del
Val l e di d not have a secur i t y i nt er est over t he t i meshar e pr oper t y.
Scot i abank al so advanced t he ar gument present ed t o us on appeal ;
namel y, t hat Br i t o and Del Val l e di d not have a r eal pr oper t y
i nt er est because the appl i cabl e f or mal i t i es of t he Ti meshar e Act
had not been sat i sf i ed. Speci f i cal l y, Scot i abank ar gued t hat "when
t i meshar e r i ght s ar e cr eat ed as r eal pr oper t y r i ght s [ under t he
Ti meshar e Act ] , t he t r ansf er or sal e of sai d r i ghts may onl y t ake
pl ace t hr ough t he execut i on and r ecor dat i on of a publ i c deed. "4
Because nei t her of t hose f or mal i t i es had been f ol l owed, Scot i abank
r easoned, t he Sal e Cont r act onl y af f or ded Br i t o and Del Val l e t he
r i ght t o use and occupy Uni t No. F1 dur i ng t he so- cal l ed per i od of
owner shi p.
Br i t o and Del Val l e opposed and cr ossed- moved f or summar y
j udgment , ar gui ng t hat t he Sal e Cont r act made pl ai n t hat t hey wer e
4 Scot i abank al so under scor ed ot her f or mal i t i es al l egedl y r equi r ed
i n connect i on wi t h t he r ecor dat i on pr ocess. Mor eover , al t hough i tr ecogni zed bei ng bound by t he subordi nat i on cl ause, Scot i abankal l eged t hat t hi s cl ause mer el y pr ot ect ed t he cont r act r i ght s( r at her t han t he r eal pr oper t y r i ght s) gr ant ed t o Br i t o and DelVal l e. Scot i abank made these same ar gument s t o the BAP and r epeat st hem bef or e t hi s cour t . Never t hel ess, i n l i ght of our hol di ng,t here i s no need f or us t o pass upon t hem.
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acqui r i ng a r eal pr oper t y i nt er est over Uni t No. F1. They f ur t her
aver r ed t hat ( 1) t he Deed and t he Mor t gage expr essl y pr ovi ded t hat
Scot i abank was subor di nat ed t o t hei r owner shi p i nt er est and ( 2)
bot h document s had been dul y recor ded, so t hat t he pr ot ect i ons of
t he Ti meshar e Act had come i nt o pl ay. Last l y, Br i t o and Del Val l e
cl ai med t hat t hey had acqui r ed a st at ut or y l i en over t he t i meshar e
pr oper t y as soon as t he pr ot ect i ons of t he Ti meshar e Act ki cked i n.
The bankr upt cy cour t gr ant ed Br i t o and Del Val l e' s cr oss- mot i on.
I n so doi ng, i t f i r st hel d t hat t he subor di nat i on cl ause of t he
Mor t gage unequi vocal l y est abl i shed t he mor t gagee' s agr eement t o
subor di nat e i t s l i en i n f avor of t he owner shi p i nt er est of t he
t i meshar e owners, " i r r espect i ve of whether t he accommodat i on or
t i me shar e i s of t he t ype coupl ed wi t h speci al pr oper t y r i ght s or
not . " I n r e Pl aza Resor t at Pal mas, I nc. , Ch. 11 Case No. 09-
09980( SEK) , Adv. No. 10- 00175, sl i p op. at 9. For t hat r eason, t he
cour t not ed, " t he i ssue i s not whet her t he pur chasers obt ai ned a
secur i t y i nt er est by vi r t ue of t hei r agr eement s wi t h [ t he
Devel oper ] or by oper at i on of l aw. Thei r i nt er est i s pr ot ect ed by
. . . vi r t ue of t he subor di nat i on agr eement i t sel f . " I d.
The cour t next exami ned t he t er ms of t he Deed, t he
Of f er i ng St at ement , and t he Sal e Cont r act t o est abl i sh t he extent
of t he par t i es' bar gai n. I d. at 10. I n det er mi ni ng t hat t hey had
agr eed t o t r ansf er and obt ai n a real pr oper t y i nt er est i n Uni t
No. F1, t he cour t st at ed:
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[ I ] t i s cl ear f r om t he document s, t aken as awhol e, t hat [ t he Devel oper ] i nt ended t ot r ansf er i nt er est s i n r eal pr oper t y t o t hepur chaser s and t hat t he pur chaser s i nt ended t oacqui r e an i nt er est i n r eal pr oper t y. Thepur chase cont r act s cl ear l y evi nce a sal e of
t he t i meshar e i nt er est s, wi t h t i t l e t o uni tweeks bei ng f r ee and cl ear of al l encumbr ancesexcept t axes and assessment s. Ti t l e was al sot r ansf er r ed i n per pet ui t y, unl i ke a r i ght t ouse i nt er est t hat gr ant s a cont r act ual r i ghtt o use a vacat i on f aci l i t y f or a speci f i ednumber of year s.
I d. The cour t acknowl edged t he f act t hat t he Sal e Cont r act had
nei t her been f or mal i zed i nt o a publ i c deed5 nor pr esent ed f or
r ecor dat i on at t he Puer t o Ri co Regi st r y of Pr oper t y. I d. The
cour t , however , i mpl i edl y di scarded Scot i abank' s argument t hat t he
Ti meshar e Act r equi r ed such f or mal i t i es f or t he cr eat i on of r eal
pr oper t y ri ght s, under scor i ng t wo gener al pr i nci pl es of Puer t o Ri co
l aw: ( 1) t hat "proper t y r i ght s ar e acqui r ed and t r ansmi t t ed[ , i nt er
al i a, ] . . . i n consequence of cer t ai n cont r act s"; and ( 2) t hat t he
Puer t o Ri co " [ R] egi st r y [of Pr oper t y] does not gi ve or t ake away
r i ght s. " I d. ( ci t i ng, r especti vel y, P. R. Laws Ann. t i t . 31, 1931;
5 A publ i c deed i n t he Ci vi l Law t r adi t i on, i s a publ i c documentt hat descr i bes a l egal t r ansact i on, composed by a "not ar y [ who]shal l wr i t e r egar di ng t he cont r act or act submi t t ed f or hi saut hor i zat i on si gned by t he gr ant or s . . . si gned, mar ked, andf l our i shed by t he not ar y hi msel f . " P. R. Laws. Ann. t i t . 4, 2031.
The not ar y has t he power t o at t est as t o t he aut hent i ci t y of t hecont ent s of al l publ i c document s he or she aut hors. P. R. Laws Ann.t i t . 4, 2002. Though a publ i c document i s r equi r ed f or t hecr eat i on of cer t ai n l egal i nst r ument s, such as t r ust s, P. R. LawsAnn. t i t . 31, 2543, and mor t gages, P. R. Laws Ann. t i t . 30, 2607, i t i s not r equi r ed f or t he conveyance of r eal pr oper t yi nt er ests.
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and P. R. Pr od. Cr edi t Assoc. v. Regi st r ador , 23 P. R. Of f i c. Tr ans.
213 ( 1989) ) .
Scot i abank appeal ed t o t he BAP, whi ch af f i r med t he
bankrupt cy cour t on al l f r ont s. Thi s appeal i mmedi at el y f ol l owed.
II. Discussion
Feder al Rul e of Ci vi l Pr ocedur e 56, appl i cabl e i n
bankr upt cy t hr ough Bankr upt cy Rul e 7056, was t he pr ocedur al vessel
t hat gave r i se t o t hi s appeal . Our i nqui r y t her ef or e seeks t o
answer whether t he movi ng par t y i s ent i t l ed t o j udgment as a mat t er
of l aw. Est at e of Hevi a v. Por t r i o Cor p. , 602 F. 3d 34, 40 ( 1st
Ci r . 2010) . At t hi s j unct ur e, we r evi ew t he r ecor d de novo, i n t he
l i ght most f avor abl e t o t he nonmovi ng par t y, dr awi ng al l r easonabl e
i nf er ences i n i t s f avor . I d. Bei ng pl enar y, our r evi ew need not
f ol l ow t he r at i onal e espoused by t he l ower cour t , and we may af f i r m
"t he gr ant of summary j udgment on any basi s t hat i s mani f est i n the
r ecor d. " J ohan G. Dani el son, I nc. v. Wi nchest er - Conant Pr ops.
I nc. , 322 F. 3d 26, 37 ( 1st Ci r . 2003) .
As st at ed above, Scot i abank' s chal l enge to t he bankr upt cy
cour t ' s hol di ng cent er s on t he f or mal i t i es t hat t he Ti meshar e Act
al l egedl y r equi r es f or t he cr eat i on of i ndi vi dual r eal pr oper t y
r i ght s. Our i nqui r y t her ef or e seeks t o det er mi ne whet her those
f or mal i t i es ar e i ndeed encompassed wi t hi n t he Act . Gener al l y, "we
l ook t o t he pr onouncement s of a st at e' s hi ghest cour t i n or der t o
di scer n t he cont our s of t hat st at e' s l aw. " Gonzl ez- Fi guer oa v.
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J . C. Penney P. R. , I nc. , 568 F. 3d 313, 318 ( 1st Ci r . 2009) ( ci t i ng
Andr ew Robi nson I nt ' l , I nc. v. Har t f or d Fi r e I ns. Co. , 547 F. 3d 48,
51 ( 1st Ci r . 2008) ) . Wher e, as her e, on- poi nt aut hor i t y f r om t he
hi ghest st at e cour t i s unavai l abl e, however , "our t ask i s t o
vat i ci nat e how t hat cour t l i kel y woul d deci de t he i ssue. " I d. For
t hi s endeavor we empl oy "t he same met hod and approach t hat t he
st at e' s hi ghest cour t woul d use. " I MS Heal t h v. Ayot t e, 550 F. 3d
42, 61 ( 1st Ci r . 2008) .
St at ut or y const r uct i on i n Puer t o Ri co begi ns wi t h t he
t ext of t he under l yi ng st at ut e, and ends t her e as wel l i f t he t ext
i s unambi guous. I n t hi s r espect , t he Puer t o Ri co Ci vi l Code t el l s
us t hat "when a l aw i s cl ear and f r ee f r om al l ambi gui t y, t he
l et t er of t he same shal l not be di sr egar ded, under t he pr et ext of
f ul f i l l i ng t he spi r i t t her eof . " P. R. Laws Ann. t i t . 31, 14; see
al so, e. g. , War ner Lamber t Co. v. Tr i bunal Super i or , 1 P. R. Of f i c.
Tr ans. 527, 559 ( 1973) ( "No ambi gui t y i n t he l et t er of t he l aw nor
doubt s about t he l egi sl at i ve i nt ent i on exi st . To enl ar ge by
j udi ci al const r uct i on t he def i ni t i on of j ust cause, as suggest ed by
t he i nt er vener , woul d be t ant amount t o subver t i ng t he t r ue sense
and pur pose of t he st at ut e. " ) . Her e, we f i nd no ambi gui t y i n t he
pr ovi si ons of t he Ti meshar e Act t hat Scot i abank rel i es upon, and,
i n keepi ng wi t h Puer t o Ri co' s her meneut i c r ul es, we l ook no f ur t her
t han t he t ext of t hose pr ovi si ons. Bef or e del vi ng i nt o t he mer i t s
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of Scot i abank' s cont ent i ons, however , br i ef cont ext ual r emar ks
about t he Act ar e i n or der .
Enact ed i n 1995, t he Ti meshare Act i s a compr ehensi ve
pi ece of l egi sl at i on whi ch const i t ut es "t he sol e and excl usi ve l aw
of Puer t o Ri co gover ni ng t he cr eat i on and di sposi t i on of
accommodat i ons, t i meshar es and vacat i on cl ub r i ght s. " P. R. Laws
Ann. t i t . 31, 1269. The st atement of pur pose and scope of t he
Ti meshar e Act unequi vocal l y est abl i sh i t s pl ace of pr omi nence
wi t hi n Puer t o Ri co' s economi c l egi sl at i on: "t h[ e] [ t i meshar i ng]
segment of t he t our i sm i ndust r y cont i nues t o gr ow, bot h i n vol ume
of sal es and i n compl exi t y and var i et y of pr oduct st r uct ur e;
[ accor di ngl y] . . . a uni f or m and consi st ent met hod of r egul at i on
i s necessar y i n or der t o saf eguar d Puer t o Ri co' s t our i sm i ndust r y,
Puer t o Ri co' s consumer s and Puer t o Ri co' s economi c wel l - bei ng. "
I d. 1251.
To ef f ect uat e i t s pur pose, t he Ti meshar e Act set s f or t h
a number of f ormal i t i es t hat a t i meshar e devel oper must f ol l ow when
est abl i shi ng a t i meshar e r egi me. The pr ocess st ar t s wi t h a
t i meshar i ng per mi t appl i cat i on f i l ed wi t h t he Puer t o Ri co Tour i sm
Company ( t he "Company") , pr ovi di ng speci f i c i nf ormat i on about t he
devel oper , t he t i meshar e pr oper t y, and t he t i meshar e pl an. I d.
1252a - 1252e. I f t he Company gr ant s t he t i meshar e permi t , t he
devel oper must est abl i sh t he so- cal l ed t i meshar e r egi me t hr ough t he
i ssuance and r ecor dat i on of a publ i c deed. I d. 1252a. "The deed
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. . . shal l . . . cl ear l y and pr eci sel y st at e t he use t o whi ch al l
t he area i ncl uded i n t he r eal pr oper t y and dedi cat ed t o t he r egi me
shal l be devot ed . . . . " I d. 1262. 6 Moreover , " [ o] nce
dedi cated, t he t i meshar e . . . r egi me may onl y be modi f i ed or
t er mi nat ed wi t h t he expr ess conf or mi t y of t he Company . . . . " I d.
The Act af f or ds several saf eguar ds t o pr ospect i ve and
act ual t i meshar e owner s. For exampl e, t he devel oper i s r equi r ed t o
pr ovi de pr ospect i ve owner s wi t h an of f er i ng st at ement del i neat i ng
t he t er ms and condi t i ons t hat woul d gover n a possi bl e pur chase as
wel l as t he r i ght s and obl i gat i ons t hat woul d ar i se once a pur chase
i s cl osed. I d. 1255- 1255d. Fur t her mor e, upon cl osi ng, a
t i meshar e owner i s aut omat i cal l y pr ot ect ed agai nst cer t ai n l i ens
and encumbr ances i nasmuch as t he Act r equi r es al l l i enhol der s wi t h
an i nt er est i n t he t i meshar e pr oper t y t o "execut e[ ] and r ecor d[ ]
among t he appr opr i at e publ i c r ecor ds . . . a subor di nat i on
agr eement " r ecogni zi ng t he super i or r i ght s of t i meshar e owner s.
I d. 1254. Such pr ot ect i on i s "ef f ect i ve agai nst t he subor di nat i ng
l i enhol der ' s successors and assi gns and any ot her per son who
6 The publ i c deed must al so i ncl ude speci f i c and gener ali nf ormat i on about t he t i meshar e r egi me, i ncl udi ng, among othert hi ngs, ( 1) a descr i pt i on of each accommodat i on as wel l as a
descr i pt i on of t he f aci l i t i es of t he pr oper t y; ( 2) t he t er mof t het i meshar e r egi me; ( 3) t he area of al l t he accommodat i ons i n t hepr oper t y and area of each accommodat i on; ( 4) t he share of eachaccommodat i on i n t he cor r espondi ng common f aci l i t i es; and (5) adescr i pt i on of t he ent i t y t hat wi l l manage t he r egi me as wel l ast he dut i es, r esponsi bi l i t i es, and obl i gat i ons of t he same. P. R.Laws Ann. t i t . 31, 1264.
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acqui r es t he accommodat i on . . . t hr ough f or ecl osur e, by deed i n
l i eu of f or ecl osur e or by any ot her l egal means . . . . " I d.
1262a- 1.
Scot i abank does not di sput e t hat a t i meshare r egi me and
a bi ndi ng subor di nat i on agr eement ar e i n pl ace. Scot i abank i nst ead
ur ges us t o f ocus our si ght on t he t ype of r i ght s avai l abl e t o
Br i t o and Del Val l e under t he t i meshar e r egi me. Sect i on 1252a of
t he Act pr ovi des a devel oper of a t i meshar e r egi me wi t h t he opt i on
t o conf er t o t i meshar e owner s ei t her ( 1) "a cont r act ual r i ght t o
use and occupy an accommodat i on, " or ( 2) "a speci al t ype of
pr oper t y ri ght wi t h r espect t o a par t i cul ar accommodat i on . . . . "
I d. 1251a. Accor di ng t o Scot i abank, cer t ai n f or mal i t i es must be
f ol l owed when t he devel oper ' s i nt ent i on i s t o conf er speci al r eal
pr oper t y r i ght s. I n par t i cul ar , Scot i abank poi nt s t o 1262a and
1264a, 7 whi ch i t ci t es t o suppor t i t s l i ve- or - di e pr oposi t i on t hat
"when a t i meshar e r egi me i s cr eat ed t o conf er r eal pr oper t y r i ght s,
t he t r ansf er or sal e of sai d r i ght s may onl y take pl ace t hr ough t he
execut i on and r ecor dat i on of a publ i c deed. " That pr oposi t i on,
however , f i nds no suppor t i n t he pl ai n t ext of 1262a and 1264a.
I n per t i nent par t , 1262a est abl i shes that "[ o] nce t he
pr oper t y i s dedi cat ed t o t he t i meshar e . . . r egi me . . . t he
accommodat i ons, may be . . . t he obj ect of . . . al l t ypes of
7 Sect i ons 1262a and 1264a onl y appl y i f t he t i meshare devel operhas s t r uct ur ed t he t i meshar e regi me to conf er speci al r eal pr oper t yr i ght s. P. R. Laws Ann. t i t . 31, 1262.
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j ur i di c[ al ] act s . . . and t he cor r espondi ng t i t l es may be r ecor ded
i n t he Regi st r y of Pr oper t y . . . . " ( emphasi s suppl i ed) . Sect i on
1264a, i n t ur n, est abl i shes t hat
[ t ] he deed of t r ansf er of each i ndi vi dualaccommodat i on shal l st at e [ par t i cul ari nf or mat i on about ] t he accommodat i on concer nedand, al so, t he shar e per t ai ni ng t o sai daccommodat i on i n t he f aci l i t i es.Fur t her mor e, sai d deed of t r ansf er shal lcont ai n a war ni ng . . . st at i ng t hat t heaccommodat i on bei ng t r ansf er r ed pur suant t osuch deed i s not subj ect t o t he . . .Hor i zont al Pr oper t y Act of Puer t o Ri co8 . . .[ or ] t he pr ot ect i ve measur es af f or ded[ t her ei n] . . . .
To di scar d Scot i abank' s cont ent i ons, we need go no
f ur t her t han t he "may be r ecorded" phr ase i n 1262a. That phr ase
unambi guousl y i ndi cat es t hat r ecor dat i on of speci al r eal pr oper t y
r i ght s i s an opt i on, not an obl i gat i on. See, e. g. , Bl at t & Udel l
v. Cor e Cel l , 10 P. R. Of f i c. Tr ans. 179 ( 1980) ( not i ng t hat t he
ver b "may" gener al l y denotes di scr et i on r ather t han a mandate) ; see
al so Lpez v. Davi s, 531 U. S. 230, 240 ( 1997) ( not i ng t hat t he
l egi sl at i ve use of t he wor d "may" gener al l y i ndi cat es a gr ant of
di scret i on) ; Rasel l i v. War den, Met r o. Cor r . Ct r . , 782 F. 2d 17,
23 ( 2d Ci r . 1986) ( "The use of a per mi ssi ve ver b - - ' may r evi ew'
i nst ead of ' shal l r evi ew' - - suggest s a di scret i onar y r at her t han
8 The Hor i zont al Proper t y Act , now known as the Condomi ni um Act ,P. R. Laws Ann. t i t . 31, 1291, et seq. , pr ovi des a r egi me, andor gani zat i on r equi r ement s per t ai ni ng t ypi cal l y t o condomi ni ums andmul t i uni t r esi dent i al devel opment s.
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mandat or y r evi ew pr ocess. " ) 9. Fur t hermore, t he Act uses t he same
"may be recorded" phr ase when ref er enci ng the i ndi vi dual t i meshar e
r i ght s t hat can access t he Regi st r y - - "[ The t i meshar e[ ] . . .
r i ght s whi ch may be r ecor ded . . . . " P. R. Laws Ann. t i t . 31,
1265a ( emphasi s suppl i ed) . Ther e can hardl y be a cl earer
i ndi cat i on t hat r ecor dat i on i s not r equi r ed f or t he creat i on of
i ndi vi dual r eal pr oper t y r i ght s. See Puebl o de P. R. v. Her nndez-
Mal donado, 1991 P. R. - Eng. 735, 865, P. R. Of f i c. Tr ans. ( 1991)
( "St atut es shoul d be t r eated as a har moni ous whol e, and shoul d be
r ead t oget her and not const r ued as di vor ced f r om t hei r
pr ovi si ons. ") ( i nt er nal quot at i ons omi t t ed) ; see al so Rat zl af v.
Uni t ed St at es, 510 U. S. 135, 143 ( 1994) ( "A t er m appear i ng i n
sever al pl aces i n a st at ut or y text i s gener al l y r ead t he same way
each t i me i t appear s. " ) . Al t hough our anal ysi s coul d ver y wel l end
her e, see P. R. Laws Ann. t i t . 31, 14, t her e ar e at l east t wo
ot her r easons why Scot i abank mi sses t he mar k.
The f i r st r eason i s t hat , r at her t han acknowl edgi ng t he
per mi ss i ve natur e of 1262a' s l anguage, much l ess at t empt i ng t o
9 The "may be r ecor ded" phr ase became par t of 1262a i n 1999 asone of a number of amendment s i nt r oduced i nt o t he st at ut e t hatyear . 1999 P. R. Laws 003 ( amendi ng 1995 P. R. Laws 252) . The newl anguage r epl aced t he phr ase " shal l be r ecor dabl e. " Unf or t unat el y,
t he speci f i c r easons behi nd t he change i n 1262a ar e notascer t ai nabl e, as t her e appear s t o be no l egi sl at i ve hi st or y ori nt er pr et at i ve comment ary i n t hi s r egard. We, however , see nor eason t o i nt erpr et t he amendment as anyt hi ng ot her t han an at t emptt o cl ar i f y that r ecor dat i on i s not a condi t i o si ne qua non under 1262a by j et t i soni ng f r omi t s t ext t he mandat or y ver b " shal l " andr epl aci ng i t wi t h t he per mi ssi ve, "may. "
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r econci l e t he obvi ous t ensi on bet ween that l anguage and i t s
cont ent i ons, Scot i abank di si ngenuousl y r est s i t s case ent i r el y on
t he one- sent ence, per f unct or y pr oposi t i on pr evi ousl y quot ed. We
r out i nel y di scar d l ackl uster ef f or t s of t hat sor t . See, e. g. ,
Uni t ed St at es v. Zanni no, 895 F. 2d 1, 17 ( 1st Ci r . 1990) ( " [ T] he
set t l ed appel l at e r ul e [ i s] t hat i ssues adver t ed t o i n a
per f unct or y manner , unaccompani ed by some ef f or t at devel oped
argument at i on, are deemed wai ved. " ) .
The second r eason i s pr emi sed on t he of t - quot ed maxi mof
st at ut or y i nt er pr et at i on expr essi o uni us est excl usi o al t er i us,
whi ch t el l s us t hat when a l egi sl at ur e "i ncl udes par t i cul ar
l anguage i n one sect i on of a st at ut e but omi t s i t i n anot her . . .
i t i s gener al l y pr esumed t hat [ t he l egi sl at ur e] act s i nt ent i onal l y
and pur posel y i n t he di spar at e i ncl usi on or excl usi on. " Russel l o
v. Uni t ed St at es, 464 U. S. 16, 23 ( 1983) ( i nt er nal quot at i on mar ks
and ci t at i ons omi t t ed) . Her e, t he Ti meshare Act , when so r equi r ed,
unequi vocal l y est abl i shes t he speci f i c f or mal i t i es a gi ven document
must f ol l ow. For i nst ance, 1251a expr essl y and unequi vocal l y
est abl i shes t hat t he t i meshar e regi me comes i nt o bei ng onl y af t er
both t he i ssuance of a publ i c deed and r ecordat i on. The same
expr essed mandate i s cont ai ned i n many ot her sect i ons of t he Act .
See P. R. Laws Ann. t i t . 31, 1254, 1264, 1264a, 1266e.
Accor di ngl y, t he f act t hat 1262a nowher e ment i ons " publ i cat i on"
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or "r ecor dat i on" as r equi si t e f or mal i t i es f or ecl oses Scot i abank' s
cont ent i ons.
Sect i on 1264a does not provi de Scot i abank any mor e
suppor t . That sect i on set s f or t h some of t he speci f i cs t hat a deed
of t r ansf er must i ncl ude, and, i n so doi ng, ar guabl y requi r es t he
execut i on of such a document when f ormal i zi ng t he t r ansf er of
i ndi vi dual t i meshar e r i ght s. Sect i on 1264a, however , nowher e
r equi r es t hat t he "deed of t r ansf er " be embodi ed i n any par t i cul ar
f or m. Nei t her does i t r equi r e t hat i t be f or mal i zed i nt o a publ i c
deed, nor t hat i t be r ecor ded ( whi ch, of cour se, woul d cont r adi ct
t he "may be r ecorded" l anguage of 1262a and 1265a) . Mor eover ,
t he t er m "deed of t r ansf er " i s not def i ned i n t he secti on
cont ai ni ng t he t er ms of ar t of t he Act , and Scot i abank has f ai l ed
t o pr ovi de us wi t h any appl i cabl e aut hor i t y ascr i bi ng a speci f i c
meani ng t o such a phr ase. We t heref ore f ai l t o see why or how
Scot i abank reads t he t er ms " publ i c deed" and " r ecor dat i on" i nt o
sect i on 1264a. The f act t hat Scot i abank ci t es 1264a wi t hout
ar t i cul at i ng a si ngl e wor d t o expl ai n why thi s pr ovi si on i s
cont r ol l i ng, does not hi ng t o advance i t s cause.
The di ssent woul d have us dr aw another t heor y f r om
Scot i abank' s appeal , t hough admi t t edl y not wi t hout a gener ous
r eadi ng. Thr oughout i t s br i ef , Scot i abank ment i ons r epeat edl y t hat
t he Deed cr eated onl y personal cont r actual r i ght s. One mi ght
const r ue t hi s bl anket asser t i on as a hi nt of a chal l enge t o t he
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bankrupt cy cour t ' s concl usi on t hat t he r i ght s conveyed t o Br i t o and
Del Val l e by way of t he Deed ar e r eal pr oper t y r i ght s. The di ssent
r eci t es Scot i abank' s empt y pr ocl amat i on, as pr oof t hat such an
ar gument has been preser ved. As t he cat al ogue provi ded by our
br other i n t he appendi x shows however , Scot i abank' s l i t any amount s
t o l i t t l e mor e t han a concl usor y asser t i on wi t h essent i al l y no
expl anat i on or suppor t pr ovi ded. A mer e passi ng r ef er ence on t he
par t of Scot i abank, however many t i mes r epeat ed, does not amount t o
an ar gument t hat commands our at t ent i on. Zanni no, 895 F. 2d at 17.
The di ssent even ci t es t o speci f i c sect i ons of t he Deed as wel l as
t he Publ i c Of f er i ng St at ement , i n an at t empt t o const r uct t he
cont r act r i ght s ar gument , an endeavor ent i r el y f or egone by
Scot i abank. Accor di ngl y, we decl i ne t o af f or d a sophi st i cat ed
pl ai nt i f f an ar gument i t has not made or el abor at ed, and t hat t he
opposi ng l i t i gant has had no oppor t uni t y t o addr ess. Landr au-
Romero v. Banco Popul ar de P. R. , 212 F. 3d 607, 616 ( 1st Ci r . 2000)
( "I t i s wel l set t l ed t hat ar gument s not r ai sed i n an appel l ant ' s
i ni t i al br i ef ar e wai ved. " ( c i t at i ons omi t t ed) ) .
I n any event t he ar gument , i f t her e i s one, f ai l s.
Per usal of t he Deed r eveal s i t i s f ar f r om enl i ght eni ng, and at
best ambi guous as t o t he nat ur e of t he r i ght s i n quest i on. Though
Sect i on V of t he Deed st ates t hat an "Accommodat i on Uni t " i s
submi t t ed t o the t i meshar e regi me vi a a cont r act t hat gr ant s t he
buyer t he r i ght t o use and occupy t he uni t , Sect i on I I def i nes
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"Accommodat i on Uni t " as a "Uni t . " "Uni t " i s i n t ur n def i ned as
" t hat par t of t he Ti meshar e Pr oper t y whi ch i s subj ect t o owner shi p
by one or more persons. " ( emphasi s suppl i ed) . The Deed def i nes
"Ti meshar e Pr oper t y" as " The Par cel t oget her wi t h t he concr et e
bui l di ngs and ot her i mpr ovement s const r uct ed t hereon, any easement s
and ot her r i ght s appur t enant t o such bui l di ngs and i mpr ovement s and
any per sonal pr oper t y l ocat ed t her eon i nt ended f or t he use
speci f i ed i n t he next par agr aph her eof , now exi st i ng or her eaf t er
acqui r ed. " ( emphasi s suppl i ed) . The Deed i ncont r over t i bl y def i nes
"Par cel " as r eal pr oper t y: "cer t ai n par cel of l and l ocat ed i n
Humacao, Puer t o Ri co" t hat " i s r ecor ded i n t he Regi st r y at page 197
of vol ume 382 of Humacao, proper t y number 16, 851. " Because
"Ti meshar e Pr oper t y" i s def i ned as speci f i c r eal pr oper t y, a "Uni t "
and, t her ef ore, an "Accommodat i on Uni t , " seemt o mean r eal pr oper t y
t hat has been submi t t ed to t he t i meshar e regi me f or owner shi p.
Fur t her , t he def i ni t i on of t he t er m "Uni t " al so est abl i shes t he
r i ght s t hat are conveyed by way of t he cont r act t o use and occupy,
r ef er r ed t o i n Sect i on V; t he cont r act t o use and occupy conveys a
"Uni t Week" on an "Uni t . " Yet another def i ned t er m, "Uni t Week" i s
equi val ent t o a "per i od of owner shi p i n an Uni t . " ( emphasi s
suppl i ed) . Fur t her exami nat i on of t he Deed onl y compl i cat es the
i nqui r y. Ther ef or e, Scot i abank' s unsubst ant i at ed asser t i ons as t o
t he Deed' s l uci di t y ar e cl ear l y wr ong.
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Our br other r ej ect s our t ake on t he Deed as, at most ,
ambi guous, and poi nt s t o ot her l anguage t hat , accor di ng t o t he
di ssent , makes cl ear t hat t he Deed gr ant s cont r act r i ght s.
Respect f ul l y, t hi s vi ew seems t o i gnor e t he l anguage of t he Deed
t hat we quot e above r egar di ng t he def i ni t i on of a "Uni t " and
"Ti meshar e Pr oper t y, " and the, at best , ambi guous nat ur e of t he
Deed. The di ssent al so di smi sses, t hough t he bankr upt cy cour t di d
not , t hat t he Deed pr ovi des f or t he "Uni t s" t o be t r ansf er r ed "f r ee
and cl ear of al l encumbr ances" and i n per pet ui t y. These ar e r ar el y
t he f eat ur es of a cont r act r i ght , but r at her ar e t r ai t s usual l y
r eser ved f or t r ansf er s of t i t l e t o r eal pr oper t y. That t he l ower
cour t ' s t ake on t he mat t er i s cont r ar y t o t hat of t he di ssent i s
al one qui t e t el l i ng of t he Deed' s, at best , ambi guous nat ur e.
I n any event , we need not cont i nue down t he pat h of
her meneut i cs. Scot i abank, marshal s no subst ant i al chal l enge her e
on appeal t o t he bankr upt cy cour t ' s r easoni ng and f i ndi ngs. We
t hus l eave undi st ur bed t he bankrupt cy cour t ' s anal ysi s, and i t s
concl usi on, t hat t he t i meshar e hol der s wi el d r eal pr oper t y r i ght s.
Landr au- Romer o, 212 F. 3d at 616.
Not wi t hst andi ng Scot i abank' s f ai l ur e t o chal l enge, on
appeal t he bankr upt cy cour t ' s f i ndi ngs r egar di ng t he par t i es'
i nt ent and t he t i meshare document s, t he di ssent woul d embar k us on
a f l i ght of f ancy t o consi der ext r i nsi c evi dence as t o t he par t i es'
st at e of mi nd. Our br ot her appar ent l y f ai l s t o not e t hat
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Scot i abank not onl y f ai l ed t o make such an argument , but al so
expl i ci t l y stat ed i n i t s br i ef bef or e us t hat r esor t i ng t o t he
par t i es' i nt ent i s i napposi t e. 10 Never t hel ess, t he di ssent i nsi st s
t hat we l ook t o the Publ i c Of f er i ng St at ement and Sal e Cont r act t o
addr ess an i ssue speci f i cal l y r enounced by Scot i abank. We br i ef l y
br ush thi s or phaned cont ent i on, arguendo.
As t o t he Publ i c Of f er i ng St at ement , our di ssent i ng
col l eague "f ocuses wi t h l aser - l i ke i nt ensi t y" i ndeed, on t he phr ase
"cont r act ual owner shi p i nt er est s" f or t he pr oposi t i on t hat t he
t i meshare r egi me was meant t o be cont r act ual . However , t he Publ i c
Of f er i ng St at ement al so pr ovi des t hat " [ t ] he Ti meshar e I nt er est s
wi l l be sol d t o Pur chaser s pur suant t o a Pur chase Cont r act bet ween
t he Pur chaser and t he Devel oper . " Accor di ngl y, " Cont r act ual
owner shi p i nt er est s" coul d reasonabl y mean those r eal pr oper t y
owner shi p i nt er est s speci f i ed i n, and sol d by way of , t he Sal e
Cont r act .
As t o t he Sal e Cont r act , t he di ssent , but not Scot i abank,
pur por t edl y i dent i f i es t wo l eads i n f avor of t he cont r act r i ght s
t heor y. Fi r st , t hat t he agr eement r equi r es t he buyer t o pay f or
t he f i l i ng f ees necessar y t o per f ect a secur i t y i nt er est over a
pur chased t i meshar e uni t , i n f avor of a speci f i c l ender i dent i f i ed
as Banco Fi nanci er o de Puer t o Ri co. Thi s l ender appar ent l y of f er ed
t o pr ovi de f i nanci ng t o buyer s, and r equi r ed a secur i t y i nt er est
10 Appel l ant ' s Br . at 19.
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over t he sol d uni t s as col l at er al i n consi der at i on f or cr edi t . The
di ssent ' s t heor y f ol l ows, t hat si nce under Puer t o Ri co l aw secur i t y
i nt er est s over r eal pr oper t y ar e per f ect ed vi a r ecor dat i on i n t he
Regi st r y of Pr oper t y, and not t hr ough UCC f i l i ngs, t hi s poi nt s t o
t he par t i es' bel i ef t hat t hey bar gai ned f or cont r act r i ght s onl y.
Par t i cul ar l y damni ng t o t hi s pr oposi t i on i s t hat t he
r ecor d i s devoi d of any i ndi cat i on t hat any par t y her e even
at t empt ed t o per f ect a secur i t y i nt er est . Fur t her mor e, and t o say
not hi ng of t he i nf er ent i al l eap r equi r ed of t hi s i magi nar y peek
i nt o the mi nd of a buyer , t hi s t heor y rest s on t he assumpt i on t hat
t he appel l ees her e sought f i nanci ng as pr ovi ded i n t he Sal e
Cont r act . And t hough t he Sal e Cont r act bet ween t he par t i es hi nt s
t hat t he br unt of t he pur chase pr i ce woul d be f i nanced, t he
agr eement al so requi r es t hat l oan document s t o t hat ef f ect be
submi t t ed wi t h t he Sal e Cont r act . Yet t her e are no l oan document s
bef or e us, nor anythi ng el se i n t he r ecor d, t hat al l ow such an
assumpt i on. Mor eover , our col l eague' s t heor y r est s on yet anot her
assumpt i on; t hat t he UCC f i l i ng r egi me' s except i ons appl y under t he
Ti meshar e Act . The pr obl em wi t h t hi s assumpt i on i s t hat t he
Ti meshar e Act nowhere st at es as much, and Puer t o Ri co cour t s have
t hus f ar r emai ned si l ent on t he mat t er . Normal l y, when pr esent ed
wi t h unanswer ed i nqui r i es of st ate l aw we endeavor t o r esol ve
mat t ers as best we can sur mi se t he st at e cour t woul d. Hat ch v.
Tr ai l Ki ng I ndus. , I nc. , 699 F. 3d 38, 46 ( 1st Ci r . 2012) . The
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quest i on her e i s par t i cul ar l y nuanced, gi ven t hat t he Ti meshar e Act
expr essl y cr eat es a "speci al t ype of pr oper t y r i ght . " P. R. Laws
Ann. t i t . 31, 1251a. However , we agai n decl i ne t o at t empt t o
answer i t on a bar r en r ecor d, wher e nei t her par t y has br i ef ed t he
i ssue, nor have t he cour t s bel ow addr essed i t . See Landr au- Romer o,
212 F. 3d at 616. Mor e i s needed i ndeed.
Second, t he di ssent poi nt s t o t he Sal e Cont r act ' s
pur por t ed f ai l ur e t o descr i be t he t i meshar e uni t s i n t he det ai l ed
manner r equi r ed by 1264a and 1264( 1) ( b) of t he Ti meshare Act
f or r eal est at e conveyances. However , t he Sal e Cont r act expr essl y
st at es, " [ t ] he t er ms used i n t hi s Cont r act shal l have t he same
meani ng as t he i dent i cal t er ms ut i l i zed i n t he Deed ( def i ned bel ow)
f or t hi s t i meshar e Pl an ( def i ne[ d] bel ow) unl ess such t er ms are
ot her wi se def i ne[ d] her ei n. " Each Sal e Cont r act speci f i es a Uni t
No. , and t he Deed descr i bes t he Uni t cor r espondi ng to each Uni t No.
i n ever y bi t of det ai l r equi r ed by t he Ti meshar e Act . Ther ef or e,
t he Sal e Cont r act compl i es wi t h t he Ti meshar e Act by expr essl y
i ncorporat i ng t hese meani ngs f r om t he Deed. 11
11 The di ssent al so cont ends t hat t he appel l ees' f ai l ur e t o r ecor dt hei r r eal pr oper t y i nt er est i n t he Pr oper t y Regi st r y, i s yetanot her omen t hat t he par t i es i nt ended t o t r ansf er cont r act ual andnot r eal pr oper t y r i ght s. On t hat poi nt , el sewher e i n our opi ni on
we have al r eady di scussed t hat t he permi ss i ve l anguage of 1262aand 1265a of t he Ti meshare Act makes cl ear t hat r ecor dat i on oft i meshar e pr oper t y i nt er est s i s not mandat or y. The di ssent i t sel fagr ees t hat i t " i s bot h t r ue and uncont r over si al " t hat "r ecor dat i onof pur chase agr eement s at t he Regi st r y of Pr oper t y i s not anabsol ut e requi r ement f or t he cr eat i on of a real pr oper t y t i meshar er egi me. " Fur t her mor e, and as t he bankr upt cy cour t dul y not ed, i t
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I n any event , we rei t er at e our st eadf ast opposi t i on t o
addr essi ng document s not al l uded t o by Scot i abank, i n l i ght of
argument s not f orwarded by i t ei t her . Landr au- Romer o, 212 F. 3d at
616. The bankr upt cy cour t ' s f i ndi ng t hat t he t i meshar e r egi me
t r ansf er r ed r eal pr oper t y r i ght s, as wel l as t he f act ual f i ndi ngs
r egar di ng t he par t i es' i nt ent , went unchal l enged and ar e f or ecl osed
f r om our r evi ew.
As our di ssent i ng col l eague cogent l y poi nt s out , t he
appel l ant s' pur por t ed argument s were "awkwardl y devel oped i n some
r espect s and di d not al ways hi ghl i ght t he most t el l i ng aspect s of
t he rel evant document s, " whi ch "evi nces s l oppy l awyer i ng. "
Never t hel ess, accor di ng t o hi s vi ew, we ar e r equi r ed t o under t ake
"some i ndependent i nqui r y, " because t he appel l ant s "di d enough, i f
bar el y, t o pr eser ve [ t he r eal pr oper t y i ssue] f or r evi ew. " Thi s,
of cour se, i s a degr ee of benevol ence not nor mal l y of f er ed by a
cour t t o a par t y i n our adver sar i al syst em, par t i cul ar l y when
deal i ng wi t h one t hat har dl y cl assi f i es as an i ndi gent pr o se
l i t i gant , or i s l acki ng compet ent l egal r epr esent at i on. Eur eka
Br oadband Corp. v. Went wor t h Leasi ng Corp. , 400 F. 3d 62, 70 ( 1st
Ci r . 2005) . Accordi ngl y, t hough we shoul d not have t o addr ess our
i s an axi omat i c pr i nci pl e of Puer t o Ri co l aw t hat t he Pr oper t yRegi st r y "does not gi ve or t ake away r i ght s. " P. R. Pr od. Cr edi tAssoc. v. Regi st r ador , 123 P. R. 231, 237- 38 ( 1941) , 23 P. R. Of f i c.Tr ans. 213 ( 1989) . Ther ef or e, t he appel l ees' f ai l ur e t o r ecor dt hei r r eal pr oper t y i nt er est , t hough per haps unwi se on t hei r par t ,i s f ar f r om t he smoki ng gun t he di ssent pur por t s i t t o be.
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br ot her ' s r emai ni ng t hought s on t hi s mat t er , we ar e par t i cul ar l y
concer ned wi t h t he i ssues r ai sed by the di ssent r egar di ng t he
speci f i c t r eatment gi ven t o t i meshare buyer s by the Bankr upt cy Code
pur suant t o 11 U. S. C. 101 ( 53D) , 365( h) - ( j ) . I t i s most t el l i ng
t hat t he di ssent concl udes t hat " t her e ar e no f i ndi ngs" by t he
pr i or cour t s that deal t wi t h t hese pr ovi si ons. The l i kel y r eason
f or t hat , i s t hat t her e i s no ment i on of 101 ( 53D) t o be f ound
anywher e i n t he record, and 365( h) - ( j ) was not addr essed by
ei t her par t y i n t he bankr upt cy cour t . Cour t s do not usual l y make
f i ndi ngs on i ssues not r ai sed bef or e t hem.
The l ong and shor t of i t i s t hat t he Ti meshare Act
unambi guousl y pr ovi des t hat nei t her publ i cat i on nor r ecor dat i on i s
a condi t i o si ne qua non f or t he cr eat i on of i ndi vi dual r eal
pr oper t y r i ght s. Accor di ngl y, t he bankrupt cy cour t cor r ect l y
endeavor ed t o determi ne whether t he par t i es had i nt ended t o cr eat e
r eal pr oper t y r i ght s wi t h t hei r bar gai n. Scot i abank f ai l ed t o
chal l enge on appeal t he bankr upt cy cour t ' s f i ndi ng r egar di ng t he
i nt ent i on of t he par t i es as t o t he cr eat i on and t r ansf er of r eal
pr oper t y i nt er est s. Thus, t he bankrupt cy cour t ' s concl usi ons ar e
ent i t l ed t o r emai n unal t er ed. Landr au- Romer o, 212 F. 3d at 616.
Scot i abank f ai l ed t o chal l enge t he cour t ' s i nt er pr et at i on of t he
document s under l yi ng t he par t i es' agr eement , and rat her pi nned i t s
appeal onl y on a f l awed i nt er pr et at i on of t he Ti meshar e Act . The
r esul t of t hat st r at egy i s now bi ndi ng on Scot i abank.
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III. Conclusion
I f pr esent ed wi t h t he r ecor d bef or e us, we ar e conf i dent
t hat t he Puer t o Ri co Supr eme Cour t woul d ar r i ve at t he same
concl usi ons we r each t oday. The bankr upt cy cour t ' s j udgment i s
t her ef or e af f i r med.
Affirmed.
"Dissenting opinion follows"
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r est i ng on concl usi ons of t he bankr upt cy cour t ( conveni ent l y
deemi ng t hem unchal l enged) .
But I cannot accept t he maj or i t y' s i pse di xi t t hat t he
appel l ant i s f or ecl osed f r om ar gui ng t hat t he t i meshar e r egi me i s
st r uct ur ed t o convey whol l y cont r act ual r i ght s. Thi s ar gument has
been a mai nst ay of t he appel l ant ' s case t hr oughout t he t or t uous
cour se of t hi s l i t i gat i on. As t he maj or i t y i t sel f concedes, t he
ar gument i s "ment i on[ ed] r epeat edl y" i n t he appel l ant ' s br i ef .
Ant e at 17. I ndeed, t he appel l ant spot l i ght s t hi s i ssue i n t he
ver y f i r st sent ence of i t s argument summar y, desi gnat es i t as a
cont r over t ed i ssue on appeal , and r ef er s t o i t many t i mes i n t he
body of i t s br i ef . 12
Nor was t he argument wai ved bel ow. The appel l ant r ai sed
i t bef ore both t he Bankr upt cy Appel l ate Panel and t he bankr upt cy
cour t ( and both of t hose t r i bunal s acknowl edged as much) . See I n
r e Pl aza Resor t at Pal mas, I nc. , 469 B. R. 398, 404- 05 ( B. A. P. 1st
Ci r . 2012) ; I n r e Pl aza Resor t at Pal mas, I nc. , Ch. 11 Case No. 09-
09980, Adv. No. 10- 00175, sl i p op. at 5 ( Bankr . D. P. R. May 4,
2011) ; see al so Appendi x A. To t he ext ent t hat t he bankr upt cy
cour t f ound t he t i meshar e i nt er est s t o be r eal pr oper t y, see ant e
12 I enumer at e some exampl es i n Appendi x A. I n t he same appendi x,I l i kewi se l i st exampl es of si mi l ar ar gument s pr essed by t heappel l ant bef ore t he Bankr upt cy Appel l at e Panel and t he bankr upt cycourt.
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at 20, t he appel l ant pr eserved t he quest i on by cont i nui ng t o pr ess
t he poi nt t o t he Bankr upt cy Appel l ate Panel and now t o us.
I n an ef f or t t o det our ar ound t hi s wel l - document ed t r ai l ,
t he maj or i t y quest i ons whet her t he appel l ant has devel oped i t s
ar gument wi t h suf f i ci ent met i cul ousness. I n f r ami ng t hi s quest i on,
however , t he maj or i t y set s t he bar t oo hi gh. 13
I t i s t r ue, of cour se, t hat an ar gument "adver t ed t o i n
a per f unct ory manner " i s wai ved. Uni t ed St ates v. Zanni no, 895
F. 2d 1, 17 ( 1st Ci r . 1990) . Thi s r ul e of pr act i ce, however , does
not r equi r e t hat ar gument s be pr eci se t o t he poi nt of pedant r y.
Where, as here, an i ssue has been squarel y advanced, an appel l at e
cour t can and i n t he i nt er est s of j ust i ce shoul d " go beyond t he
r easons . . . ar t i cul at ed i n t he par t i es' br i ef s t o r each a r esul t
suppor t ed by l aw. " Uni t ed St ates v. One Ur ban Lot Located at 1 St .
A- 1, 885 F. 2d 994, 1001 ( 1st Ci r . 1989) ( emphasi s i n or i gi nal ) .
The Supr eme Cour t has made t hi s poi nt wi t h conspi cuous cl ar i t y:
"[ w] hen an i ssue or cl ai m i s pr oper l y bef or e t he cour t , t he cour t
i s not l i mi t ed t o t he par t i cul ar l egal t heor i es advanced by t he
par t i es, but r at her r et ai ns t he i ndependent power t o i dent i f y and
appl y t he pr oper const r uct i on of governi ng l aw. " Kamen v. Kemper
Fi n. Ser vs. , I nc. , 500 U. S. 90, 99 ( 1991) . The i nqui r y, t hen,
13 Thi s at t empt t o evade t he i ssue i s par t i cul ar l y i r oni c becauset he maj or i t y r el i es on an i nt er pr et at i on of t he Ti meshar e Act , seeant e at 14- 17, t hat t he appel l ees have never ment i oned at any st ageof thi s l i t i gat i on.
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i nevi t abl y t ur ns on t he l evel of speci f i ci t y t hat a cour t shoul d
r equi r e i n order t o deem an argument pr eser ved.
I n t hi s case, t he appel l ant has sur passed t he r equi si t e
l evel of speci f i ci t y. I t advanced i t s cont r act ual r i ght s ar gument
pl ai nl y, pr omi nent l y, and per si st ent l y. Even t he maj or i t y
acknowl edges t hat t hi s ar gument pr esent s t he pr i nci pal i ssue t o be
deci ded on appeal . See ant e at 2.
To be sur e, t he cont r act ual r i ght s ar gument was awkwar dl y
devel oped i n some respect s and di d not al ways hi ghl i ght t he most
t el l i ng aspect s of t he r el evant document s. But an ar gument i s not
wai ved mer el y because i t i s i nar t f ul l y craf t ed. See, e. g. , Uni t ed
St at es v. Dunbar , 553 F. 3d 48, 63 n. 4 ( 1st Ci r . 2009) ( t r eat i ng
i ssue as preserved even t hough t he "br i ef does not st at e [ t he]
cl ai m ar t f ul l y") ; Mi chel son v. Di gi t al Fi n. Ser vs. , 167 F. 3d 715,
719- 20 ( 1st Ci r . 1999) ( si mi l ar ) . What count s i s t hat t he
appel l ant hi nged i t s ar gument t o the f r amework of t he t i meshar e
r egi me. That i t di d not parse each and every document evi nces
sl oppy l awyer i ng, but t hat f ai l ur e, wi t hout mor e, does not pr oduce
a wai ver . The document s ar e i n t he r ecord, and an i nqui r i ng cour t
must be expect ed t o car r y out some i ndependent i nqui r y.
Vi ewed agai nst t hi s backdr op, i t i s obvi ous t o me t hat
t he i ssue i s pr oper l y bef or e t hi s cour t . The appel l ant di d enough,
i f bar el y, t o pr eser ve i t f or r evi ew. We ar e, t her ef or e, dut y-
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bound t o r esol ve t he i ssue based on the record and t he gover ni ng
l aw.
Thi s br i ngs me t o t he meat of t he appeal . The t i meshar e
document s, r ead i n l i ght of t he Ti meshar e Act , demonst r at e t hat t he
par t i es pur posed t o t r ansf er cont r act ual i nt er est s, not r eal
pr oper t y. The Ti meshar e Act , whi ch pr ovi des t hat t he nat ur e of t he
i nt er est s t o be conveyed i s at t he "opt i on of t he decl ar er , " put s
t he dedi cat i on deed ( t he Deed) at t he cent er of t hi s i nqui r y. P. R.
Laws Ann. t i t . 31, 1251a.
Al t hough t he Deed wi l l not wi n any pr i ze f or l egal
wr i t i ng, i t f i r ml y suppor t s t he concl usi on t hat t he i nt er est s
conveyed ar e cont r act ual . I descr i be some sal i ent f eat ur es:
C Sect i on V of t he Deed i s t i t l ed "Speci f i c Ti meshar e
Ri ght s i n Ti meshar e. ( Cont r act ual I nt er est s i n Uni t
Weeks and Appur t enant Ri ght s) . "
C The same sect i on speaks of execut i on of a "cont r act of
r i ght t o use and occupy, " t hr ough whi ch t he devel oper
wi l l gr ant "t he cont r act ual r i ght t o use and occupy. "
C The Deed def i ni t i ons cal l f or "Uni t s" t o be commi t t ed t o
t he r egi me upon t he execut i on of "cont r act [ s] of r i ght t o
use and occupy. "
Gi ven t hi s st r ai ght f or war d l anguage, I di sagr ee wi t h t he maj or i t y' s
char act er i zat i on of t he Deed as "ambi guous. " Ant e at 18. To t he
exact cont r ar y, i t descr i bes t he cont r act ual nat ur e of t he r egi me
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i n t er ms t hat cl osel y t r ack sect i on 1251a of t he Ti meshar e Act .
See P. R. Ann. t i t . 31, 1251a ( descr i bi ng "[ a] cont r act ual r i ght
t o use and occupy") .
Even i f t he Deed wer e ambi guous on t hi s poi nt , ext r i nsi c
evi dence woul d then become rel evant t o an ensui ng i nqui r y i nt o t he
par t i es' i nt ent i ons. See Smar t v. Gi l l et t e Co. LTD Pl an, 70 F. 3d
173, 178 ( 1st Ci r . 1995) ( descr i bi ng appr opr i at e uses of ext r i nsi c
evi dence t o ai d i nt er pr et at i on of ambi guous cont r act ) . As thi s
case was deci ded bel ow at summar y j udgment , our r evi ew i s de novo.
The publ i c of f er i ng st at ement and t he pur chase- and- sal e agreement
are key pi eces of ext r i nsi c evi dence i n the summary j udgment r ecord
and our i nspect i on of t hese document s conf i r ms t hat t hese
t i meshar e i nt er est s are cont r act ual .
Under t he Ti meshar e Act , a publ i c of f er i ng st atement must
be approved by t he Puer t o Ri co Tour i sm Company and present ed t o
ever y pr ospect i ve buyer pr i or t o any pur chase of a Uni t . P. R. Laws
Ann. t i t . 31, 1255. The publ i c of f er i ng st at ement f or t hi s
devel opment i s par t of t he r ecor d, as are t he appel l ees'
r epr esent at i ons t hat t hey recei ved, r evi ewed, and f ul l y under st ood
i t . Consequent l y, t he publ i c of f er i ng st at ement i s a pr i me sour ce
of ext r i nsi c evi dence her e.
Thi s st at ement l eaves no doubt but t hat t he t i meshar e
r egi me was meant t o be cont r act ual . I t pr ovi des unequi vocal l y t hat
" [ u] nder t he t i meshar e r egi me, cont r act ual owner shi p i nt er est s wi l l
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be sol d t o t he Pur chasers. " I t goes on t o say t hat t he owner s wi l l
be gi ven " t he excl usi ve use and occupancy" of cer t ai n Uni t s by
means of "cont r act ual owner shi p i nt er est s. " To ci nch mat t er s, i t
def i nes "Ti meshar e I nt er est " and "Uni t Week" as " t he t i meshar e
cont r act ual owner shi p i nt er est i n t he Pl aza Resor t owned by the
Owner , whi ch t i meshar e cont r act ual owner shi p i nt er est gi ves t he
Owner t he excl usi ve use and occupancy of " a cer t ai n Uni t . Read i n
i t s ent i r et y, t he publ i c of f er i ng st at ement f ur ni shes
i ncont r over t i bl e evi dence of t he devel oper ' s i nt ent t o cr eat e and
t r ansf er cont r actual r i ght s.
I f mor e i s needed, t he t i meshar e i nt er est s her e wer e
conveyed by a purchase- and- sal e agr eement ( t he Sal e Cont r act )
t ai l or ed t o t hi s t i meshar e r egi me. The Sal e Cont r act qui t e cl ear l y
i ndi cat es t hat t he par t i es i nt ended t o t r ansf er and r ecei ve
cont r act ual i nt er est s. For exampl e, t he devel oper f aci l i t at ed bank
f i nanci ng f or pur chaser s, and t he Sal e Cont r act r equi r es t he
pur chaser s t o pay t he " f ees r el at i ng t o t he UCC f i l i ng t o per f ect
t he secur i t y i nt er est " of t he l ender i n t hei r Uni t s. Whet her or
not t hese buyer s act ual l y avai l ed t hemsel ves of t hi s f i nanci ng
ar r angement , t hi s pr ovi si on i s mat er i al because, under appl i cabl e
Puer t o Ri co l aw, 14 secur i t y i nt er est s i n r eal pr oper t y ar e per f ect ed
14 Puer t o Ri co r ecent l y r evi sed i t s ver si on of t he UCC. See Puer t oRi co Act No. 21 of J an. 17, 2012. Those r evi si ons, not yetcodi f i ed, do not appl y t o t he mat t er s at i ssue her e. Accor di ngl y,an expl i cat i on of t hem woul d serve no usef ul pur pose.
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t hr ough r ecor di ng i n t he Regi st r y of Pr oper t y, see P. R. Laws Ann.
t i t . 30, 2577, not t hr ough UCC f i l i ngs, see i d. t i t . 19,
2004( j ) ( excl udi ng r eal pr oper t y i nt er est s f r om scope of UCC
f i l i ng r egi me) . Seen i n t hi s l i ght , i t i s evi dent t hat t he
appel l ees di d not consi der t he pur chase of t hei r Uni t t o be a r eal -
est at e t r ansact i on.
The Sal e Cont r act suppl i es yet another cl ue t hat t he
par t i es meant t o make t he t r ansf er r ed owner shi p cont r act ual i n
nat ur e. Sect i on 1264a of t he Ti meshar e Act appl i es onl y t o r eal
pr oper t y t i meshar e r egi mes. See i d. t i t . 31, 1262. Al t hough t he
maj or i t y i s cor r ect i n not i ng t hat t hi s pr ovi si on does not
expl i ci t l y requi r e t he i nst r ument of t r ansf er t o "be embodi ed i n
any par t i cul ar f or m, " ant e at 17, i t does demand t hat , as a r eal -
est at e conveyance, t he i nst r ument i ncl ude " t he par t i cul ar s
pr escri bed i n [ sect i on] 1264( 1) ( b) . " P. R. Laws Ann. t i t . 31,
1264a. I n t ur n, sect i on 1264( 1) ( b) r equi r es a descr i pt i on of t he
Uni t , i ncl udi ng "i t s measur es, l ocat i on, r ooms, " and ot her speci f i c
det ai l s. I d. 1264( 1) ( b) .
Her e, t he Sal e Cont r act whi ch di d not cont ai n t hi s
i nf or mat i on const i t ut ed t he i nst r ument of t r ansf er . I t woul d
seem, t her ef or e, t hat t he Sal e Cont r act was i ncapabl e of conveyi ng
an i nt er est i n r eal pr oper t y.
The maj or i t y' s r i post e st ems f r oma pr o f or ma decl ar at i on
t hat t erms used i n the cont r act shal l have the same meani ng as
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i dent i cal t er ms used i n t he Deed. From t hi s si ngl e sent ence, t he
maj or i t y ext r avagant l y concl udes t hat t he Sal e Cont r act compl i es
wi t h sect i on 1264a. Ant e at 23. I t hi nk t hat t hi s concl usi on i s
over l y opt i mi st i c and, i n al l event s, i t woul d be hi ghl y unusual
f or par t i es t o dr af t a r eal est at e conveyance t hat omi t t ed a
meani ngf ul l egal descr i pt i on of t he pr oper t y conveyed. At t he ver y
l east , such a gl ar i ng omi ssi on woul d make any f ai r - mi nded obser ver
skept i cal of whet her t he par t i es i nt ended t o t r ansf er r eal pr oper t y
at al l .
Thi s power f ul ar r ay of document ar y evi dence i s not
di mi ni shed by the maj or i t y' s r el i ance on t he use of wor ds l i ke
"owner " and "owner shi p" i n t he Deed. See, e. g. , ant e at 19. The
Ti meshar e Act def i nes t he t er m "owner" i n a manner t hat r eaches
t i meshar e buyer s under both cont r actual and r eal pr oper t y r egi mes.
See P. R. Laws Ann. t i t . 31, 1251b( 25) ( def i ni ng "owner " ) .
Mor eover , t he concept of "owner shi p" appl i es nat ur al l y t o bot h
cont r act ual i nt er est s and r eal pr oper t y i nt er est s and t he f or mer
r eadi ng i s a super i or f i t f or t he l anguage of t he Deed and ot her
t r ansact i on document s. I f t hi s wer e not t he case, phr ases l i ke
"cont r act ual owner shi p i nt er est " woul d make no sense.
Much t he same i s t r ue of t he bankr upt cy cour t ' s emphasi s
on t he phr ase " f r ee and cl ear of al l encumbr ances" and t he f act
t hat t he gr ant ed r i ght s run i n per pet ui t y. See I n r e Pl aza Resor t
at Pal mas, I nc. , Ch. 11 Case No. 09- 09980 (SEK) , Adv. No. 10- 00175,
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sl i p op. at 10- 11. These t r ansact i on t er ms ar e neut r al ; t her e i s
no ear t hl y r eason why t hei r use woul d be i nappr opr i ate under a
cont r act ual r i ght s regi me.
Based on t he t ot al i t y of t he document ar y evi dence, i t
seems vi r t ual l y unar guabl e not onl y that t he devel oper i nt ended t o
cr eat e and t r ansf er cont r act ual t i meshar e i nt er est s but al so t hat
t he appel l ees accept ed t hei r Uni t on such an under st andi ng. I t
f ol l ows t hat t he maj or i t y' s heavy r el i ance on t he per mi ssi ve "may
be r ecorded" l anguage of sect i on 1262a, see ant e at 14- 17, i s
mi spl aced. Af t er al l , t he Ti meshar e Act speci f i cal l y excl udes
cont r act ual t i meshar e r egi mes f r omt he gr asp of sect i on 1262a. See
P. R. Laws Ann. t i t . 31, 1262.
I ndeed, i f t he par t i es' f ai l ur e t o r ecor d i s rel evant at
al l , i t cut s the ot her way. Had t he appel l ees bel i eved t hat t hey
wer e pur chasi ng r eal pr oper t y i nt er est s, t hey al most cer t ai nl y
woul d have r ecorded t hose i nt er est s. I t i s common gr ound t hat an
owner ' s f ai l ur e t o r ecor d an i nt er est i n r eal pr oper t y exposes t he
owner t o si gni f i cant r i sk. Shoul d a subsequent good- f ai t h
pur chaser of t he same pr oper t y recor d f i r st , he wi l l become t he
r i ght f ul owner even t hough hi s deed i s l at er i n t i me. See P. R.
Laws Ann. t i t . 31, 3822; see al so Uni t ed St ates v. One Ur ban Lot
Locat ed at 1 St . A- 1, 865 F. 2d 427, 429 ( 1st Ci r . 1989) ( di scussi ng
t he "saf eguar ds of [ Puer t o Ri co' s] st r i ct Regi st r y syst em") ; Uni t ed
St ates v. V & E Eng' g & Const r . Co. , 819 F. 2d 331, 333 ( 1st Ci r .
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1987) ( descr i bi ng Puer t o Ri co' s r egi st r y syst em as pr omot i ng
"r el i ance on publ i c r ecor ds of pr oper t y owner shi p" ) . Because
r ecor dat i on pr ovi des such i mpor t ant pr ot ect i ons f or r eal pr oper t y
buyer s, i t woul d be hi ghl y unusual f or anyone, l et al one par t i es
who had l awyer s and f i nanci ng banks l ooki ng over t hei r shoul der s,
t o st r uct ur e a r eal - est at e conveyance wi t hout pr ovi di ng f or
r ecor dat i on. 15
To sumup, I di sagree wi t h t he maj or i t y' s concl usi on t hat
t he r i ght s possessed by t he appel l ees ar e r eal pr oper t y r i ght s. I
al so di sagr ee wi t h t he maj or i t y' s assumpt i on t hat answer i ng t hi s
quest i on ends t he i nqui r y. Let me expl ai n.
Thi s case was commenced as an adver sar y pr oceedi ng t hat
sought a decl arat i on as t o whether t he appel l ees shoul d be r egarded
as secur ed cr edi t or s. But r egar dl ess of whet her t he appel l ees
possess cont r actual or r eal pr oper t y i nt er est s, t hei r cl ai m t o
secur ed cr edi t or st at us r equi r es a f ur t her det er mi nat i on because
t he Bankr upt cy Code i ncl udes speci f i c saf eguar ds f or t i meshar e
buyer s. See 11 U. S. C. 101( 53D) , 365( h) - ( j ) ; see al so 3 Col l i er
on Bankr upt cy 365. 11( 4) , 365. 12( 3) ( Al an N. Resni ck & Henr y J .
Sommer eds. , 16t h ed. 2013) .
The Bankr upt cy Code has l ong f ur ni shed speci al
pr ot ect i ons t o l essees or buyer s of r eal pr oper t y when t he l essor
15 I n t hi s regar d, i t i s not ewor t hy t hat t he t r ansact i on her e wasnot gear ed t o r ecor dat i on. For aught t hat appear s, t he si gnat ur eson t he per t i nent document s were not even not ar i zed.
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or sel l er ent er s bankrupt cy and seeks t o rej ect t he l ease or
pur chase agr eement as an execut ory cont r act . See 11 U. S. C.
365( h) - ( j ) . I n 1984, Congr ess ext ended t hese pr ot ect i ons t o
owner s of t i meshar e i nterest s. See Bankr upt cy Amendment s and
Feder al J udgeshi p Act of 1984, Pub. L. No. 98- 353, 401- 404, 98
St at . 333, 366- 67 ( 1984) . Thi s extensi on was i nt ended t o over r ul e
cases l i ke I n r e Sombr er o Reef Cl ub, I nc. , 18 B. R. 612 ( Bankr . S. D.
Fl a. 1982) , whi ch had al l owed t i meshar e agr eement s t o be rej ect ed
out of hand as execut ory cont r act s. See I n r e Lee Road Par t ners,
Lt d. , 155 B. R. 55, 61 ( Bankr. E. D. N. Y. 1993) ; 3 Col l i er on
Bankr upt cy, supr a, 365. 11( 4) .
Under t hi s prophyl axi s, when a bankr upt debt or seeks t o
r ej ect a t i meshar e agr eement as an execut ory cont r act , t he
t i meshar e owner has t wo opt i ons. I f t he t i meshar e owner i s i n
possessi on or t he ter m of t he t i meshar e i nt er est has commenced, he
may r emai n i n possessi on of hi s t i meshare i nt er est . 11 U. S. C.
365( h) ( 2) ( A) ( i i ) , ( i ) ( 1) . I f he does so, he can set of f any
damages caused by the debt or ' s post - r ej ect i on nonper f ormance
agai nst any payment s due t o t he debt or , i ncl udi ng def er r ed pur chase
pr i ce i nst al l ment s and annual mai nt enance f ees. I d.
365( h) ( 2) ( B) , ( i ) ( 2) ( A) .
As an al t er nat i ve, t he t i meshar e owner can t r eat t he
t i meshar e i nt er est as t er mi nat ed and f i l e a cl ai m f or damages
agai nst the bankr upt cy est at e. I d. 365( h) ( 2) ( A) ( i ) , ( i ) ( 1) .
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Under sect i on 365( i ) , hi s damages cl ai m woul d seem t o be secur ed
( at l east up t o t he amount of t he pur chase pr i ce pai d) . See i d.
365( j ) . Under sect i on 365( h) , however , t he cl ai m woul d seem t o
be unsecur ed. See 3 Col l i er on Bankr upt cy, supr a, 365. 11( 4)
( di scussi ng avai l abi l i t y of l i en under subsect i on ( i ) but not under
subsect i on ( h) ) .
The f act s here ar e i nscr ut abl e: t he r ecor d bef or e us does
not i ndi cat e whet her t he appel l ees' t i meshar e cont r act was ever
f or mal l y r ej ect ed. By l i ke t oken, i t does not i ndi cat e whet her t he
appel l ees wer e ever af f or ded an oppor t uni t y to make t hei r el ect i on
under sect i on 365.
An aut hor i t at i ve det er mi nat i on as t o whet her t he
appel l ees ar e secur ed cr edi t or s cannot be made i n a vacuum. On t he
one hand, unl ess and unt i l t he appel l ees' t i meshar e i nt er est i s
r ej ect ed, i t may repr esent a val i d and enf or ceabl e cont r act despi t e
t he bankr upt cy. On t he ot her hand, i f t he debt or has f or mal l y
r ej ect ed t he agr eement a cour se of act i on t hat seems consi st ent
wi t h t he r eorgani zat i on pl an sect i on 365 woul d come i nt o pl ay and
t he appel l ees woul d have t o be al l owed t o make el ect i ons as
pr ovi ded ther ei n.
The si t uat i on i s f ur t her compl i cat ed because t he
r el at i onshi p bet ween sect i ons 365( h) and 365( i ) i s especi al l y
t enebr ous i n t he t i meshar e cont ext . See i d. To t he extent t hat
t hese subsect i ons may be r el evant , i t seems l i kel y t hat f act ual
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f i ndi ngs wi l l be hel pf ul i n det er mi ni ng not onl y whi ch subsect i on
wi l l appl y but al so whet her t he appel l ees shoul d be consi der ed " i n
possessi on. " See gener al l y 3 Col l i er on Bankrupt cy, supr a,
365. 12( 3) ( di scussi ng uni que di f f i cul t y of "i n possessi on"
concept i n t i meshar e cont ext ) .
Her e, t her e ar e no f i ndi ngs. Wi t h onl y a si ngl e
( meani ngl ess) except i on, nei t her t he par t i es nor t he cour t s bel ow
have so much as acknowl edged the exi st ence of t he r el evant
st at ut or y pr ovi si ons.
Gi ven t he ut t er absence of such f i ndi ngs, t he appel l ees'
cl ai m t o secur ed credi t or st at us i s l ef t up i n t he ai r . I woul d,
t her ef or e, r ever se t he deci si on hol di ng t he appel l ees' t i meshar e
i nt er est t o be a real pr oper t y i nt er est and r emand t o the
Bankrupt cy Appel l at e Panel wi t h i nst r uct i ons t hat i t r emand t o t he
bankrupt cy cour t f or f ur t her pr oceedi ngs.
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APPENDIX A
Appellant's Court of Appeals Brief
The appel l ant ' s br i ef t o t hi s cour t cont ai ns i t s
cont r act ual r i ght s ar gument i n at l east t he f ol l owi ng pl aces:
C The appel l ant ' s ar gument summar y begi ns: " [ p] ur suant t ot he Ti meshar e Act , t he Regi me subj ect of t hi s appeal wasconst i t ut ed t o gr ant cont r act ual ( per sonal ) r i ght s t o t het i meshar e owner s si nce [ t he Deed] , whi ch dedi cat ed theRegi me, expl i ci t l y decl ar es so. "
C The appel l ant ' s second i ssue i s f r amed as " [ w] hether t heowner s . . . may be gr ant ed secur ed cr edi t or st at us. . . despi t e t he f act t hat t he Regi me was const i t ut ed by
[ t he Deed] t o gr ant cont r act ual ( per sonal ) r i ght s t o t het i meshar e owner s and no real pr oper t y i nt er est wasconveyed. "
C The f i r st bol ded header i n t he br i ef ' s ar gument sect i onr eads: " [ t ] he Ti meshar e Regi me was st r uct ur ed t o conf ercont r act ual ( per sonal ) r i ght s t o t he t i meshar e owner s. "
C Lat er i n t he br i ef t he appel l ant ar gues t hat " [ t he Deed]const i t ut ed t he Ti meshar e Regi me to gr ant cont r actual( per sonal ) r i ght s t o t he t i meshar e owner s and no realpr oper t y i nt er est was conveyed pur suant t o t he Ti meshar e
Act . "C The appel l ant al so decl ar es t hat " [ t he Deed] , whi ch
const i t ut ed t he Regi me i n t he pr esent case, expl i ci t l yst at es, usi ng t he st at ut or y l anguage, t hat t he t i meshar er i ght s i n t he Regi me ar e of a cont r act ual ( per sonal )nat ur e. "
Appellant's Brief to the Bankruptcy Appellate Panel
The appel l ant ' s br i ef t o t he Bankr upt cy Appel l at e Panel
cont ai ned i t s cont r act ual r i ght s ar gument i n at l east t he f ol l owi ng
pl aces:
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C The br i ef pr esent s t he second i ssue as " [ w] hether t heowners of t i meshar e r i ght s i n t he Regi me may be gr ant edsecur ed credi t or st at us . . . despi t e t he f act t hat t heRegi me was const i t ut ed by [ t he Deed] t o gr ant personal( cont r act ual ) r i ght s t o t he t i meshar e owner s and no r ealpr oper t y i nt er est was conveyed. "
C The second sent ence of t he br i ef ' s st at ement of t he caser eads: "[ t he Deed] speci f i cal l y st at es t hat t he t i meshar er i ght s i n t he Regi me ar e of a per sonal ( cont r act ual )nat ur e. "
C I n i t s synopsi s of t he f act s, i t decl ar es t hat "[ t heDeed] speci f i cal l y st at es t hat t he t i meshar e r i ght s i nt he Regi me ar e of a per sonal ( cont r act ual ) nat ur e. "
C The f i r st bol ded header of i t s di scussi on sect i on r eads:" [ t ] he Ti meshar e Regi me was st r uct ur ed t o conf er per sonal( cont r act ual ) r i ght s t o t he t i meshar e owner s. "
Proceedings Before the Bankruptcy Court
I n pr oceedi ngs bef or e t he bankr upt cy cour t , t he appel l ant
pr essed i t s cont r act ual r i ght s ar gument i n at l east t he f ol l owi ng
pl aces:
C
The appel l ant ' s i ni t i al adver sar i al compl ai nt ar gues t hat"[ t he Deed] speci f i cal l y st at es t hat t i meshar e r i ght s i nt he Regi me ar e of a per sonal ( cont r act ual ) nat ur e. "
C The f i r st paragraph of t he appel l ant ' s memor andumof l awi n suppor t of i t s mot i on f or summary j udgment argues t hat"t he owner s of t i meshar e r i ght s i n t hi s par t i cul ar r egi mehave no pr oper t y r i ght s, but mer el y a cont r act ual( per sonal ) r i ght . "
C The f i r st sentence of t he sect i on of t he appel l ant ' smemorandum of l aw i n suppor t of i t s mot i on f or summary
j udgment t hat appl i es t he l aw t o t he f act s r eads: " [ i ] nt hi s case, t he Ti meshar e Regi me was const i t ut ed to gr antper sonal ( cont r act ual ) r i ght s t o t i meshar e owner s. "