Rosado-Ortiz v. Beal Bank (In Re Rosado-Ortiz) ( 2006 )

Not For Publication in West's Federal Reporter
Citation Limited Pursuant to 1st Cir. Loc. R. 32.3
United States Court of Appeals
For the First Circuit
No. 06-1617
IN RE: OSVALDO ROSADO-ORTIZ; ANA O. SANTOS-ORTIZ,
Debtors
OSVALDO ROSADO-ORTIZ; ANA O. SANTOS-ORTIZ,
Appellants,
v.
BEAL BANK,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen Consuelo Cerezo, U.S. District Judge]
Before
Torruella, Circuit Judge,
Stahl, Senior Circuit Judge,
and Howard, Circuit Judge.
Joseph Deliz-Hernández on brief for appellant.
James W. McGarry and Goodwin Proctor LLP on brief for
appellee.
November 8, 2006
STAHL, Senior Circuit Judge. Osvaldo Rosado-Ortiz and
Ana O. Santos-Ortiz (“debtors”) appeal from a decision of the
district court denying reconsideration of its decision affirming
the judgment of the bankruptcy court. Because debtors’ argument is
without merit, we affirm.
On October 12, 2000, debtors sought Chapter 13 bankruptcy
protection. Appellee Beal Bank filed claims against the estate
based on a loan for which it was the servicing agent. The
underlying loan had been made to debtors by First Bank Puerto Rico
and was secured by debtors’ residential property. The loan was
guaranteed by the U.S. Small Business Administration (“SBA”), which
sold the loan to LPP Mortgage, Ltd. (“LPP”), which in turn hired
Beal Bank as its servicing agent. Debtors challenged Beal Bank’s
claims on several different grounds, but after a thorough review of
the loan documents and the servicing agreement, the bankruptcy
court ruled that Beal Bank was a secured creditor with standing to
make a claim against the estate. Debtors appealed to the district
court, and now to us.
Debtors make one argument on appeal: that, as to third
parties, the assignment of the loan from SBA to LPP did not
automatically transfer the security interest in the collateral
without registration; and that debtors should be considered third
parties in their capacity as debtors-in-possession. They rely
exclusively on Crefisa, Inc. v. Washington Mutual Bank, F.A. (In re
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Colonial Mortgage Bankers Corp.), 186 F.3d 46 (1st Cir. 1999), in
which we held, under the facts of that case, that a bankruptcy
trustee was a third party vis-à-vis the assignment of a note and
secured interest, and thus, under Puerto Rico law, the secured
claim was not valid against the estate without registration.
Crefisa is distinguishable from this case. The district
court’s opinion makes this abundantly clear, so we will only
briefly discuss the reasons. Under the unusual facts of Crefisa,
the trustee in bankruptcy was treated as a third party, not because
of his trustee status, but because the estate he represented was
not a party to the instrument in question, even though the
underlying collateral ended up in the estate; here, the debtors
were parties to and signatories of the underlying instruments that
allowed the transfer. Furthermore, even if this were an advantage
that all trustees had, we will not automatically give a debtor-in-
possession the same rights as a trustee when to do so would destroy
the rights of secured creditors under contracts that the debtors-
in-possession have themselves executed. Finally, the instruments
themselves are distinguishable, since those in Crefisa did not make
any reference to the underlying security interest, and thus would
not have given a third-party transferee notice; here, the notes
clearly referenced the security interest and allowed for its
transfer.
Affirmed.
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