United States Court of Appeals
For the First Circuit
No. 12-9005
IN RE: THE PLAZA RESORT AT PALMAS, INC.,
Debtor.
SCOTIABANK DE PUERTO RICO,
Plaintiff, Appellant,
v.
JOSEPH BURGOS; GILDA CRUZ; LETICIA FLORES BERGANZO;
NOREEN ORTIZ; ELISELINA ROSARIO; DAVID NIETO CARRERO;
LISSETTE VARGAS VALLE; RAFAEL ALMODÓVAR;
FRANCISCO SIERRA MÉNDEZ; MARÍA RODRÍGUEZ DE SIERRA;
CRUZ A. TORRES COLÓN; PAULITA COLÓN FLORES; ERNESTO BRITO;
MARIGLORIA DEL VALLE; CLAUDIO MEDINA; MARÍA ROMERO,
Defendants, Appellees.
APPEAL FROM THE BANKRUPTCY APPELLATE PANEL
FOR THE FIRST CIRCUIT
Before
Torruella, Selya and Lipez,
Circuit Judges.
Víctor J. Quiñones, with whom Morell Bauzá Cartagena & Dapena,
was on brief for appellant.
Gerardo Pavía-Cabanillas, with whom Pavía & Lázaro, PSC, was
on brief for appellees Ernesto Brito and Marigloria Del Valle.
January 16, 2014
TORRUELLA, Circuit Judge. The issue to be decided in
this appeal is whether Defendants/Appellees Ernesto Brito and
Marigloria Del Valle have a real property interest in an apartment
that is part of a timeshare real estate venture undergoing Chapter
11 bankruptcy proceedings. At summary judgment, based on the
Puerto Rico Timeshare and Vacation Club Act (the "Timeshare Act" or
the "Act"), P.R. Laws Ann. tit. 31, § 1251, et seq., and the sale
contract between Brito, Del Valle, and the developer of the
timeshare venture (the "Developer"), the bankruptcy court answered
that question in the affirmative.1 The Bankruptcy Appellate Panel
("BAP") affirmed. In disagreement, Plaintiff/Appellant Scotiabank
de Puerto Rico asks us to reverse the bankruptcy court's holding on
the ground that the requirements for creating real property rights
under the Timeshare Act were allegedly never satisfied. After
carefully reviewing the record and the applicable law, we affirm.
I. Background
The chronology of events leading up to this appeal has
been properly delineated by the courts below. See In re Plaza
Resort at Palmas, Inc., 469 B.R. 398 (B.A.P. 1st Cir. 2012); In re
Plaza Resort at Palmas, Inc., Ch. 11 Case No. 09-09980(SEK), Adv.
No. 10-00175 (Bankr. D.P.R. May 4, 2011). We therefore by-pass all
1
In a subsequent opinion and order, the bankruptcy court extended
its holding to all other timeshare owners similarly situated. Our
holding equally applies to those timeshare owners, although we omit
further reference to them for the sake of simplicity.
-2-
incidental details and focus our factual narrative on the
dispositive issues of this appeal, referencing only those facts
that are properly documented in the summary judgment record.
The timeshare regime at the center of this litigation was
constituted on June 1, 2001, through a public deed entitled
"Dedication of Timeshare Regime (The Plaza Resort at Palmas, A Time
Share Regime)" (the "Deed"). According to the Deed, the timeshare
property is located in Humacao, Puerto Rico, and encompasses 25
apartments "for independent use and occupancy" as vacation
residences. The Deed also delineates the terms and conditions
governing the timeshare regime as well as the rights and
obligations of both the Developer and prospective timeshare owners.
The Deed was duly recorded in the Puerto Rico Registry of Property.
Also on June 1, 2001, the Developer granted the Bank and
Trust of Puerto Rico a first mortgage (the "Mortgage") over the
timeshare property to secure payment on a loan obtained to develop
the timeshare regime. R-G Premier Bank of Puerto Rico succeeded
the Bank and Trust of Puerto Rico as the mortgagee. But the FDIC
took over R-G, and Scotiabank became the successor-in-interest and
the holder of the Mortgage. The Mortgage contains the following
subordination clause: "The Mortgagee, without payment, hereby
agrees to subordinate the lien created hereby in favor of the
personal ownership interest of each owner of an accommodation[] or
timeshare . . . so long as such owner remains in good standing with
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respect to his/her obligations under the timeshare plan documents
. . . ." Like the Deed, the Mortgage was duly recorded in the
Registry of Property.
The Developer formally commenced marketing the timeshare
regime around July 2001. Its marketing efforts included the
issuance of a Public Offering Statement explaining to prospective
owners the terms and conditions governing the timeshare regime.
The Offering Statement made plain that "two mortgages encumber[ed]
the real property underlying [the timeshare regime]" and that both
mortgages were subordinated "to the rights of the . . . owner of
any Unit [therein]."2
Approximately a year later, on June 1, 2002, the
Developer, Brito, and Del Valle entered into a purchase agreement
(the "Sale Contract") pursuant to which the Developer transferred
to Brito and Del Valle "a period of ownership . . . of seven (7)
days" in Unit No. F1 of the timeshare regime in exchange for
$18,200. The "period of ownership" -- which was transferred in
perpetuity, free and clear of all encumbrances except taxes and
assessments -- afforded Brito and Del Valle the exclusive right to
use and occupy Unit No. F1 during one week within a revolving
yearly schedule. The Sale Contract also established that Brito and
Del Valle's "period of ownership" required them to be "responsible
2
The holder of the second mortgage was the entity that sold to
the Developer the real property dedicated to the timeshare regime.
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for [their] share of any and all costs and expenses incurred in the
operation of the . . . timeshare regime" and to "assume all risks
and liabilities resulting from the use of the property and
facilities [of the timeshare complex]."
Brito and Del Valle appear to have enjoyed their "period
of ownership" over Unit No. F1 without significant impediments
during the first seven years of the Sale Contract. On November 20,
2009, however, the Developer filed for Chapter 11 bankruptcy
protection, and the litigation underlying this appeal eventually
ensued.
In its bankruptcy schedules, the Developer listed Brito
and Del Valle as secured creditors. Brito and Del Valle then filed
a proof of claim asserting a security interest over real property
worth $18,200 and attached the Sale Contract as an exhibit. In
affirming the bankruptcy court's holding, we need not, and do not,
address Brito and Del Valle's claim that they had a security
interest over the timeshare property. Scotiabank answered by
filing an adversary proceeding against Brito and Del Valle.3 Its
complaint sought a declaratory judgment that Brito and Del Valle
did not possess a valid lien over the timeshare property. For
their part, Brito and Del Valle opposed the complaint, and argued,
as an affirmative defense, that Scotiabank's secured interest was
3
The adversary complaint also named several other timeshare
owners as defendants. Brito and Del Valle, however, were the only
ones who appeared.
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subordinated to their ownership interest pursuant to the
subordination clause of the Mortgage.
After preliminary procedural nuances, Scotiabank moved
for summary judgment, reasserting its contention that Brito and Del
Valle did not have a security interest over the timeshare property.
Scotiabank also advanced the argument presented to us on appeal;
namely, that Brito and Del Valle did not have a real property
interest because the applicable formalities of the Timeshare Act
had not been satisfied. Specifically, Scotiabank argued that "when
timeshare rights are created as real property rights [under the
Timeshare Act], the transfer or sale of said rights may only take
place through the execution and recordation of a public deed."4
Because neither of those formalities had been followed, Scotiabank
reasoned, the Sale Contract only afforded Brito and Del Valle the
right to use and occupy Unit No. F1 during the so-called period of
ownership.
Brito and Del Valle opposed and crossed-moved for summary
judgment, arguing that the Sale Contract made plain that they were
4
Scotiabank also underscored other formalities allegedly required
in connection with the recordation process. Moreover, although it
recognized being bound by the subordination clause, Scotiabank
alleged that this clause merely protected the contract rights
(rather than the real property rights) granted to Brito and Del
Valle. Scotiabank made these same arguments to the BAP and repeats
them before this court. Nevertheless, in light of our holding,
there is no need for us to pass upon them.
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acquiring a real property interest over Unit No. F1. They further
averred that (1) the Deed and the Mortgage expressly provided that
Scotiabank was subordinated to their ownership interest and (2)
both documents had been duly recorded, so that the protections of
the Timeshare Act had come into play. Lastly, Brito and Del Valle
claimed that they had acquired a statutory lien over the timeshare
property as soon as the protections of the Timeshare Act kicked in.
The bankruptcy court granted Brito and Del Valle's cross-motion.
In so doing, it first held that the subordination clause of the
Mortgage unequivocally established the mortgagee's agreement to
subordinate its lien in favor of the ownership interest of the
timeshare owners, "irrespective of whether the accommodation or
time share is of the type coupled with special property rights or
not." In re Plaza Resort at Palmas, Inc., Ch. 11 Case No. 09-
09980(SEK), Adv. No. 10-00175, slip op. at 9. For that reason, the
court noted, "the issue is not whether the purchasers obtained a
security interest by virtue of their agreements with [the
Developer] or by operation of law. Their interest is protected by
. . . virtue of the subordination agreement itself." Id.
The court next examined the terms of the Deed, the
Offering Statement, and the Sale Contract to establish the extent
of the parties' bargain. Id. at 10. In determining that they had
agreed to transfer and obtain a real property interest in Unit
No. F1, the court stated:
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[I]t is clear from the documents, taken as a
whole, that [the Developer] intended to
transfer interests in real property to the
purchasers and that the purchasers intended to
acquire an interest in real property. The
purchase contracts clearly evince a sale of
the timeshare interests, with title to unit
weeks being free and clear of all encumbrances
except taxes and assessments. Title was also
transferred in perpetuity, unlike a right to
use interest that grants a contractual right
to use a vacation facility for a specified
number of years.
Id. The court acknowledged the fact that the Sale Contract had
neither been formalized into a public deed5 nor presented for
recordation at the Puerto Rico Registry of Property. Id. The
court, however, impliedly discarded Scotiabank's argument that the
Timeshare Act required such formalities for the creation of real
property rights, underscoring two general principles of Puerto Rico
law: (1) that "property rights are acquired and transmitted[, inter
alia,] . . . in consequence of certain contracts"; and (2) that the
Puerto Rico "[R]egistry [of Property] does not give or take away
rights." Id. (citing, respectively, P.R. Laws Ann. tit. 31, § 1931;
5
A public deed in the Civil Law tradition, is a public document
that describes a legal transaction, composed by a "notary [who]
shall write regarding the contract or act submitted for his
authorization signed by the grantors . . . signed, marked, and
flourished by the notary himself." P.R. Laws. Ann. tit. 4, § 2031.
The notary has the power to attest as to the authenticity of the
contents of all public documents he or she authors. P.R. Laws Ann.
tit. 4, § 2002. Though a public document is required for the
creation of certain legal instruments, such as trusts, P.R. Laws
Ann. tit. 31, § 2543, and mortgages, P.R. Laws Ann. tit. 30,
§ 2607, it is not required for the conveyance of real property
interests.
-8-
and P.R. Prod. Credit Assoc. v. Registrador, 23 P.R. Offic. Trans.
213 (1989)).
Scotiabank appealed to the BAP, which affirmed the
bankruptcy court on all fronts. This appeal immediately followed.
II. Discussion
Federal Rule of Civil Procedure 56, applicable in
bankruptcy through Bankruptcy Rule 7056, was the procedural vessel
that gave rise to this appeal. Our inquiry therefore seeks to
answer whether the moving party is entitled to judgment as a matter
of law. Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st
Cir. 2010). At this juncture, we review the record de novo, in the
light most favorable to the nonmoving party, drawing all reasonable
inferences in its favor. Id. Being plenary, our review need not
follow the rationale espoused by the lower court, and we may affirm
"the grant of summary judgment on any basis that is manifest in the
record." Johan G. Danielson, Inc. v. Winchester-Conant Props.
Inc., 322 F.3d 26, 37 (1st Cir. 2003).
As stated above, Scotiabank's challenge to the bankruptcy
court's holding centers on the formalities that the Timeshare Act
allegedly requires for the creation of individual real property
rights. Our inquiry therefore seeks to determine whether those
formalities are indeed encompassed within the Act. Generally, "we
look to the pronouncements of a state's highest court in order to
discern the contours of that state's law." González-Figueroa v.
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J.C. Penney P.R., Inc., 568 F.3d 313, 318 (1st Cir. 2009) (citing
Andrew Robinson Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48,
51 (1st Cir. 2008)). Where, as here, on-point authority from the
highest state court is unavailable, however, "our task is to
vaticinate how that court likely would decide the issue." Id. For
this endeavor we employ "the same method and approach that the
state's highest court would use." IMS Health v. Ayotte, 550 F.3d
42, 61 (1st Cir. 2008).
Statutory construction in Puerto Rico begins with the
text of the underlying statute, and ends there as well if the text
is unambiguous. In this respect, the Puerto Rico Civil Code tells
us that "when a law is clear and free from all ambiguity, the
letter of the same shall not be disregarded, under the pretext of
fulfilling the spirit thereof." P.R. Laws Ann. tit. 31, § 14; see
also, e.g., Warner Lambert Co. v. Tribunal Superior, 1 P.R. Offic.
Trans. 527, 559 (1973) ("No ambiguity in the letter of the law nor
doubts about the legislative intention exist. To enlarge by
judicial construction the definition of just cause, as suggested by
the intervener, would be tantamount to subverting the true sense
and purpose of the statute."). Here, we find no ambiguity in the
provisions of the Timeshare Act that Scotiabank relies upon, and,
in keeping with Puerto Rico's hermeneutic rules, we look no further
than the text of those provisions. Before delving into the merits
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of Scotiabank's contentions, however, brief contextual remarks
about the Act are in order.
Enacted in 1995, the Timeshare Act is a comprehensive
piece of legislation which constitutes "the sole and exclusive law
of Puerto Rico governing the creation and disposition of
accommodations, timeshares and vacation club rights." P.R. Laws
Ann. tit. 31, § 1269. The statement of purpose and scope of the
Timeshare Act unequivocally establish its place of prominence
within Puerto Rico's economic legislation: "th[e] [timesharing]
segment of the tourism industry continues to grow, both in volume
of sales and in complexity and variety of product structure;
[accordingly] . . . a uniform and consistent method of regulation
is necessary in order to safeguard Puerto Rico's tourism industry,
Puerto Rico's consumers and Puerto Rico's economic well-being."
Id. § 1251.
To effectuate its purpose, the Timeshare Act sets forth
a number of formalities that a timeshare developer must follow when
establishing a timeshare regime. The process starts with a
timesharing permit application filed with the Puerto Rico Tourism
Company (the "Company"), providing specific information about the
developer, the timeshare property, and the timeshare plan. Id.
§§ 1252a - 1252e. If the Company grants the timeshare permit, the
developer must establish the so-called timeshare regime through the
issuance and recordation of a public deed. Id. § 1252a. "The deed
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. . . shall . . . clearly and precisely state the use to which all
the area included in the real property and dedicated to the regime
shall be devoted . . . ." Id. § 1262.6 Moreover, "[o]nce
dedicated, the timeshare . . . regime may only be modified or
terminated with the express conformity of the Company . . . ." Id.
The Act affords several safeguards to prospective and
actual timeshare owners. For example, the developer is required to
provide prospective owners with an offering statement delineating
the terms and conditions that would govern a possible purchase as
well as the rights and obligations that would arise once a purchase
is closed. Id. §§ 1255-1255d. Furthermore, upon closing, a
timeshare owner is automatically protected against certain liens
and encumbrances inasmuch as the Act requires all lienholders with
an interest in the timeshare property to "execute[] and record[]
among the appropriate public records . . . a subordination
agreement" recognizing the superior rights of timeshare owners.
Id. § 1254. Such protection is "effective against the subordinating
lienholder's successors and assigns and any other person who
6
The public deed must also include specific and general
information about the timeshare regime, including, among other
things, (1) a description of each accommodation as well as a
description of the facilities of the property; (2) the term of the
timeshare regime; (3) the area of all the accommodations in the
property and area of each accommodation; (4) the share of each
accommodation in the corresponding common facilities; and (5) a
description of the entity that will manage the regime as well as
the duties, responsibilities, and obligations of the same. P.R.
Laws Ann. tit. 31, § 1264.
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acquires the accommodation . . . through foreclosure, by deed in
lieu of foreclosure or by any other legal means . . . ." Id. §
1262a-1.
Scotiabank does not dispute that a timeshare regime and
a binding subordination agreement are in place. Scotiabank instead
urges us to focus our sight on the type of rights available to
Brito and Del Valle under the timeshare regime. Section 1252a of
the Act provides a developer of a timeshare regime with the option
to confer to timeshare owners either (1) "a contractual right to
use and occupy an accommodation," or (2) "a special type of
property right with respect to a particular accommodation . . . ."
Id. § 1251a. According to Scotiabank, certain formalities must be
followed when the developer's intention is to confer special real
property rights. In particular, Scotiabank points to §§ 1262a and
1264a,7 which it cites to support its live-or-die proposition that
"when a timeshare regime is created to confer real property rights,
the transfer or sale of said rights may only take place through the
execution and recordation of a public deed." That proposition,
however, finds no support in the plain text of §§ 1262a and 1264a.
In pertinent part, § 1262a establishes that "[o]nce the
property is dedicated to the timeshare . . . regime . . . the
accommodations, may be . . . the object of . . . all types of
7
Sections 1262a and 1264a only apply if the timeshare developer
has structured the timeshare regime to confer special real property
rights. P.R. Laws Ann. tit. 31, § 1262.
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juridic[al] acts . . . and the corresponding titles may be recorded
in the Registry of Property . . . ." (emphasis supplied). Section
1264a, in turn, establishes that
[t]he deed of transfer of each individual
accommodation shall state [particular
information about] the accommodation concerned
and, also, the share pertaining to said
accommodation in the facilities.
Furthermore, said deed of transfer shall
contain a warning . . . stating that the
accommodation being transferred pursuant to
such deed is not subject to the . . .
Horizontal Property Act of Puerto Rico8 . . .
[or] the protective measures afforded
[therein] . . . .
To discard Scotiabank's contentions, we need go no
further than the "may be recorded" phrase in § 1262a. That phrase
unambiguously indicates that recordation of special real property
rights is an option, not an obligation. See, e.g., Blatt & Udell
v. Core Cell, 10 P.R. Offic. Trans. 179 (1980) (noting that the
verb "may" generally denotes discretion rather than a mandate); see
also López v. Davis, 531 U.S. 230, 240 (1997) (noting that the
legislative use of the word "may" generally indicates a grant of
discretion); Raselli v. Warden, Metro. Corr. Ctr., 782 F.2d 17,
23 (2d Cir. 1986) ("The use of a permissive verb -- 'may review'
instead of 'shall review' -- suggests a discretionary rather than
8
The Horizontal Property Act, now known as the Condominium Act,
P.R. Laws Ann. tit. 31, § 1291, et seq., provides a regime, and
organization requirements pertaining typically to condominiums and
multi unit residential developments.
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mandatory review process.")9. Furthermore, the Act uses the same
"may be recorded" phrase when referencing the individual timeshare
rights that can access the Registry -- "[The timeshare[] . . .
rights which may be recorded . . . ." P.R. Laws Ann. tit. 31,
§ 1265a (emphasis supplied). There can hardly be a clearer
indication that recordation is not required for the creation of
individual real property rights. See Pueblo de P.R. v. Hernández-
Maldonado, 1991 P.R.-Eng. 735, 865, P.R. Offic. Trans. (1991)
("Statutes should be treated as a harmonious whole, and should be
read together and not construed as divorced from their
provisions.") (internal quotations omitted); see also Ratzlaf v.
United States, 510 U.S. 135, 143 (1994) ("A term appearing in
several places in a statutory text is generally read the same way
each time it appears."). Although our analysis could very well end
here, see P.R. Laws Ann. tit. 31, § 14, there are at least two
other reasons why Scotiabank misses the mark.
The first reason is that, rather than acknowledging the
permissive nature of § 1262a's language, much less attempting to
9
The "may be recorded" phrase became part of § 1262a in 1999 as
one of a number of amendments introduced into the statute that
year. 1999 P.R. Laws 003 (amending 1995 P.R. Laws 252). The new
language replaced the phrase "shall be recordable." Unfortunately,
the specific reasons behind the change in § 1262a are not
ascertainable, as there appears to be no legislative history or
interpretative commentary in this regard. We, however, see no
reason to interpret the amendment as anything other than an attempt
to clarify that recordation is not a conditio sine qua non under
§ 1262a by jettisoning from its text the mandatory verb "shall" and
replacing it with the permissive, "may."
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reconcile the obvious tension between that language and its
contentions, Scotiabank disingenuously rests its case entirely on
the one-sentence, perfunctory proposition previously quoted. We
routinely discard lackluster efforts of that sort. See, e.g.,
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) ("[T]he
settled appellate rule [is] that issues adverted to in a
perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived.").
The second reason is premised on the oft-quoted maxim of
statutory interpretation expressio unius est exclusio alterius,
which tells us that when a legislature "includes particular
language in one section of a statute but omits it in another . . .
it is generally presumed that [the legislature] acts intentionally
and purposely in the disparate inclusion or exclusion." Russello
v. United States, 464 U.S. 16, 23 (1983)(internal quotation marks
and citations omitted). Here, the Timeshare Act, when so required,
unequivocally establishes the specific formalities a given document
must follow. For instance, § 1251a expressly and unequivocally
establishes that the timeshare regime comes into being only after
both the issuance of a public deed and recordation. The same
expressed mandate is contained in many other sections of the Act.
See P.R. Laws Ann. tit. 31, §§ 1254, 1264, 1264a, 1266e.
Accordingly, the fact that § 1262a nowhere mentions "publication"
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or "recordation" as requisite formalities forecloses Scotiabank's
contentions.
Section 1264a does not provide Scotiabank any more
support. That section sets forth some of the specifics that a deed
of transfer must include, and, in so doing, arguably requires the
execution of such a document when formalizing the transfer of
individual timeshare rights. Section 1264a, however, nowhere
requires that the "deed of transfer" be embodied in any particular
form. Neither does it require that it be formalized into a public
deed, nor that it be recorded (which, of course, would contradict
the "may be recorded" language of §§ 1262a and 1265a). Moreover,
the term "deed of transfer" is not defined in the section
containing the terms of art of the Act, and Scotiabank has failed
to provide us with any applicable authority ascribing a specific
meaning to such a phrase. We therefore fail to see why or how
Scotiabank reads the terms "public deed" and "recordation" into
section § 1264a. The fact that Scotiabank cites § 1264a without
articulating a single word to explain why this provision is
controlling, does nothing to advance its cause.
The dissent would have us draw another theory from
Scotiabank's appeal, though admittedly not without a generous
reading. Throughout its brief, Scotiabank mentions repeatedly that
the Deed created only personal contractual rights. One might
construe this blanket assertion as a hint of a challenge to the
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bankruptcy court's conclusion that the rights conveyed to Brito and
Del Valle by way of the Deed are real property rights. The dissent
recites Scotiabank's empty proclamation, as proof that such an
argument has been preserved. As the catalogue provided by our
brother in the appendix shows however, Scotiabank's litany amounts
to little more than a conclusory assertion with essentially no
explanation or support provided. A mere passing reference on the
part of Scotiabank, however many times repeated, does not amount to
an argument that commands our attention. Zannino, 895 F.2d at 17.
The dissent even cites to specific sections of the Deed as well as
the Public Offering Statement, in an attempt to construct the
contract rights argument, an endeavor entirely foregone by
Scotiabank. Accordingly, we decline to afford a sophisticated
plaintiff an argument it has not made or elaborated, and that the
opposing litigant has had no opportunity to address. Landrau-
Romero v. Banco Popular de P.R., 212 F.3d 607, 616 (1st Cir. 2000)
("It is well settled that arguments not raised in an appellant's
initial brief are waived." (citations omitted)).
In any event the argument, if there is one, fails.
Perusal of the Deed reveals it is far from enlightening, and at
best ambiguous as to the nature of the rights in question. Though
Section V of the Deed states that an "Accommodation Unit" is
submitted to the timeshare regime via a contract that grants the
buyer the right to use and occupy the unit, Section II defines
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"Accommodation Unit" as a "Unit." "Unit" is in turn defined as
"that part of the Timeshare Property which is subject to ownership
by one or more persons." (emphasis supplied). The Deed defines
"Timeshare Property" as "The Parcel together with the concrete
buildings and other improvements constructed thereon, any easements
and other rights appurtenant to such buildings and improvements and
any personal property located thereon intended for the use
specified in the next paragraph hereof, now existing or hereafter
acquired." (emphasis supplied). The Deed incontrovertibly defines
"Parcel" as real property: "certain parcel of land located in
Humacao, Puerto Rico" that "is recorded in the Registry at page 197
of volume 382 of Humacao, property number 16,851." Because
"Timeshare Property" is defined as specific real property, a "Unit"
and, therefore, an "Accommodation Unit," seem to mean real property
that has been submitted to the timeshare regime for ownership.
Further, the definition of the term "Unit" also establishes the
rights that are conveyed by way of the contract to use and occupy,
referred to in Section V; the contract to use and occupy conveys a
"Unit Week" on an "Unit." Yet another defined term, "Unit Week" is
equivalent to a "period of ownership in an Unit." (emphasis
supplied). Further examination of the Deed only complicates the
inquiry. Therefore, Scotiabank's unsubstantiated assertions as to
the Deed's lucidity are clearly wrong.
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Our brother rejects our take on the Deed as, at most,
ambiguous, and points to other language that, according to the
dissent, makes clear that the Deed grants contract rights.
Respectfully, this view seems to ignore the language of the Deed
that we quote above regarding the definition of a "Unit" and
"Timeshare Property," and the, at best, ambiguous nature of the
Deed. The dissent also dismisses, though the bankruptcy court did
not, that the Deed provides for the "Units" to be transferred "free
and clear of all encumbrances" and in perpetuity. These are rarely
the features of a contract right, but rather are traits usually
reserved for transfers of title to real property. That the lower
court's take on the matter is contrary to that of the dissent is
alone quite telling of the Deed's, at best, ambiguous nature.
In any event, we need not continue down the path of
hermeneutics. Scotiabank, marshals no substantial challenge here
on appeal to the bankruptcy court's reasoning and findings. We
thus leave undisturbed the bankruptcy court's analysis, and its
conclusion, that the timeshare holders wield real property rights.
Landrau-Romero, 212 F.3d at 616.
Notwithstanding Scotiabank's failure to challenge, on
appeal the bankruptcy court's findings regarding the parties'
intent and the timeshare documents, the dissent would embark us on
a flight of fancy to consider extrinsic evidence as to the parties'
state of mind. Our brother apparently fails to note that
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Scotiabank not only failed to make such an argument, but also
explicitly stated in its brief before us that resorting to the
parties' intent is inapposite.10 Nevertheless, the dissent insists
that we look to the Public Offering Statement and Sale Contract to
address an issue specifically renounced by Scotiabank. We briefly
brush this orphaned contention, arguendo.
As to the Public Offering Statement, our dissenting
colleague "focuses with laser-like intensity" indeed, on the phrase
"contractual ownership interests" for the proposition that the
timeshare regime was meant to be contractual. However, the Public
Offering Statement also provides that "[t]he Timeshare Interests
will be sold to Purchasers pursuant to a Purchase Contract between
the Purchaser and the Developer." Accordingly, "Contractual
ownership interests" could reasonably mean those real property
ownership interests specified in, and sold by way of, the Sale
Contract.
As to the Sale Contract, the dissent, but not Scotiabank,
purportedly identifies two leads in favor of the contract rights
theory. First, that the agreement requires the buyer to pay for
the filing fees necessary to perfect a security interest over a
purchased timeshare unit, in favor of a specific lender identified
as Banco Financiero de Puerto Rico. This lender apparently offered
to provide financing to buyers, and required a security interest
10
Appellant's Br. at 19.
-21-
over the sold units as collateral in consideration for credit. The
dissent's theory follows, that since under Puerto Rico law security
interests over real property are perfected via recordation in the
Registry of Property, and not through UCC filings, this points to
the parties' belief that they bargained for contract rights only.
Particularly damning to this proposition is that the
record is devoid of any indication that any party here even
attempted to perfect a security interest. Furthermore, and to say
nothing of the inferential leap required of this imaginary peek
into the mind of a buyer, this theory rests on the assumption that
the appellees here sought financing as provided in the Sale
Contract. And though the Sale Contract between the parties hints
that the brunt of the purchase price would be financed, the
agreement also requires that loan documents to that effect be
submitted with the Sale Contract. Yet there are no loan documents
before us, nor anything else in the record, that allow such an
assumption. Moreover, our colleague's theory rests on yet another
assumption; that the UCC filing regime's exceptions apply under the
Timeshare Act. The problem with this assumption is that the
Timeshare Act nowhere states as much, and Puerto Rico courts have
thus far remained silent on the matter. Normally, when presented
with unanswered inquiries of state law we endeavor to resolve
matters as best we can surmise the state court would. Hatch v.
Trail King Indus., Inc., 699 F.3d 38, 46 (1st Cir. 2012). The
-22-
question here is particularly nuanced, given that the Timeshare Act
expressly creates a "special type of property right." P.R. Laws
Ann. tit. 31, § 1251a. However, we again decline to attempt to
answer it on a barren record, where neither party has briefed the
issue, nor have the courts below addressed it. See Landrau-Romero,
212 F.3d at 616. More is needed indeed.
Second, the dissent points to the Sale Contract's
purported failure to describe the timeshare units in the detailed
manner required by § 1264a and § 1264(1)(b) of the Timeshare Act
for real estate conveyances. However, the Sale Contract expressly
states, "[t]he terms used in this Contract shall have the same
meaning as the identical terms utilized in the Deed (defined below)
for this timeshare Plan (define[d] below) unless such terms are
otherwise define[d] herein." Each Sale Contract specifies a Unit
No., and the Deed describes the Unit corresponding to each Unit No.
in every bit of detail required by the Timeshare Act. Therefore,
the Sale Contract complies with the Timeshare Act by expressly
incorporating these meanings from the Deed.11
11
The dissent also contends that the appellees' failure to record
their real property interest in the Property Registry, is yet
another omen that the parties intended to transfer contractual and
not real property rights. On that point, elsewhere in our opinion
we have already discussed that the permissive language of §§ 1262a
and 1265a of the Timeshare Act makes clear that recordation of
timeshare property interests is not mandatory. The dissent itself
agrees that it "is both true and uncontroversial" that "recordation
of purchase agreements at the Registry of Property is not an
absolute requirement for the creation of a real property timeshare
regime." Furthermore, and as the bankruptcy court duly noted, it
-23-
In any event, we reiterate our steadfast opposition to
addressing documents not alluded to by Scotiabank, in light of
arguments not forwarded by it either. Landrau-Romero, 212 F.3d at
616. The bankruptcy court's finding that the timeshare regime
transferred real property rights, as well as the factual findings
regarding the parties' intent, went unchallenged and are foreclosed
from our review.
As our dissenting colleague cogently points out, the
appellants' purported arguments were "awkwardly developed in some
respects and did not always highlight the most telling aspects of
the relevant documents," which "evinces sloppy lawyering."
Nevertheless, according to his view, we are required to undertake
"some independent inquiry," because the appellants "did enough, if
barely, to preserve [the real property issue] for review." This,
of course, is a degree of benevolence not normally offered by a
court to a party in our adversarial system, particularly when
dealing with one that hardly classifies as an indigent pro se
litigant, or is lacking competent legal representation. Eureka
Broadband Corp. v. Wentworth Leasing Corp., 400 F.3d 62, 70 (1st
Cir. 2005). Accordingly, though we should not have to address our
is an axiomatic principle of Puerto Rico law that the Property
Registry "does not give or take away rights." P.R. Prod. Credit
Assoc. v. Registrador, 123 P.R. 231, 237-38 (1941), 23 P.R. Offic.
Trans. 213 (1989). Therefore, the appellees' failure to record
their real property interest, though perhaps unwise on their part,
is far from the smoking gun the dissent purports it to be.
-24-
brother's remaining thoughts on this matter, we are particularly
concerned with the issues raised by the dissent regarding the
specific treatment given to timeshare buyers by the Bankruptcy Code
pursuant to 11 U.S.C. §§ 101 (53D), 365(h)-(j). It is most telling
that the dissent concludes that "there are no findings" by the
prior courts that dealt with these provisions. The likely reason
for that, is that there is no mention of § 101 (53D) to be found
anywhere in the record, and § 365(h)-(j) was not addressed by
either party in the bankruptcy court. Courts do not usually make
findings on issues not raised before them.
The long and short of it is that the Timeshare Act
unambiguously provides that neither publication nor recordation is
a conditio sine qua non for the creation of individual real
property rights. Accordingly, the bankruptcy court correctly
endeavored to determine whether the parties had intended to create
real property rights with their bargain. Scotiabank failed to
challenge on appeal the bankruptcy court's finding regarding the
intention of the parties as to the creation and transfer of real
property interests. Thus, the bankruptcy court's conclusions are
entitled to remain unaltered. Landrau-Romero, 212 F.3d at 616.
Scotiabank failed to challenge the court's interpretation of the
documents underlying the parties' agreement, and rather pinned its
appeal only on a flawed interpretation of the Timeshare Act. The
result of that strategy is now binding on Scotiabank.
-25-
III. Conclusion
If presented with the record before us, we are confident
that the Puerto Rico Supreme Court would arrive at the same
conclusions we reach today. The bankruptcy court's judgment is
therefore affirmed.
Affirmed.
"Dissenting opinion follows"
-26-
SELYA, Circuit Judge (dissenting). The majority focuses
with laser-like intensity on the question of whether the intervals
purchased by the timeshare buyers in this case constitute real
property as opposed to purely contractual interests. After
deciding that those intervals comprise real property, the majority
then washes its hands of the matter.
In my view, the majority incorrectly answers the question
that it poses. Equally as important, this question — no matter how
it is answered — is not dispositive of the broader question of the
parties' rights in bankruptcy. For both of these reasons, I
respectfully dissent.
The scene is easily set. As the majority concedes, the
Timeshare Act allows a developer to choose between creating a
timeshare regime in which purchased intervals (Units) are either
contractual in nature or comprise "a special type of property
right." P.R. Laws Ann. tit. 31, § 1251a.
The majority rests its real property conclusion on two
primary foundations. First, it argues that recordation of purchase
agreements at the Registry of Property is not an absolute
requirement for the creation of a real property timeshare regime.
Ante at 14-17. That fact is both true and uncontroversial — but
simply because a developer can do something does not mean that this
developer followed such a course. The majority pays no heed to
this second step, noting ambiguity in the dedication deed and then
-27-
resting on conclusions of the bankruptcy court (conveniently
deeming them unchallenged).
But I cannot accept the majority's ipse dixit that the
appellant is foreclosed from arguing that the timeshare regime is
structured to convey wholly contractual rights. This argument has
been a mainstay of the appellant's case throughout the tortuous
course of this litigation. As the majority itself concedes, the
argument is "mention[ed] repeatedly" in the appellant's brief.
Ante at 17. Indeed, the appellant spotlights this issue in the
very first sentence of its argument summary, designates it as a
controverted issue on appeal, and refers to it many times in the
body of its brief.12
Nor was the argument waived below. The appellant raised
it before both the Bankruptcy Appellate Panel and the bankruptcy
court (and both of those tribunals acknowledged as much). See In
re Plaza Resort at Palmas, Inc., 469 B.R. 398, 404-05 (B.A.P. 1st
Cir. 2012); In re Plaza Resort at Palmas, Inc., Ch. 11 Case No. 09-
09980, Adv. No. 10-00175, slip op. at 5 (Bankr. D.P.R. May 4,
2011); see also Appendix A. To the extent that the bankruptcy
court found the timeshare interests to be real property, see ante
12
I enumerate some examples in Appendix A. In the same appendix,
I likewise list examples of similar arguments pressed by the
appellant before the Bankruptcy Appellate Panel and the bankruptcy
court.
-28-
at 20, the appellant preserved the question by continuing to press
the point to the Bankruptcy Appellate Panel and now to us.
In an effort to detour around this well-documented trail,
the majority questions whether the appellant has developed its
argument with sufficient meticulousness. In framing this question,
however, the majority sets the bar too high.13
It is true, of course, that an argument "adverted to in
a perfunctory manner" is waived. United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990). This rule of practice, however, does
not require that arguments be precise to the point of pedantry.
Where, as here, an issue has been squarely advanced, an appellate
court can — and in the interests of justice should — "go beyond the
reasons . . . articulated in the parties' briefs to reach a result
supported by law." United States v. One Urban Lot Located at 1 St.
A-1, 885 F.2d 994, 1001 (1st Cir. 1989) (emphasis in original).
The Supreme Court has made this point with conspicuous clarity:
"[w]hen an issue or claim is properly before the court, the court
is not limited to the particular legal theories advanced by the
parties, but rather retains the independent power to identify and
apply the proper construction of governing law." Kamen v. Kemper
Fin. Servs., Inc., 500 U.S. 90, 99 (1991). The inquiry, then,
13
This attempt to evade the issue is particularly ironic because
the majority relies on an interpretation of the Timeshare Act, see
ante at 14-17, that the appellees have never mentioned at any stage
of this litigation.
-29-
inevitably turns on the level of specificity that a court should
require in order to deem an argument preserved.
In this case, the appellant has surpassed the requisite
level of specificity. It advanced its contractual rights argument
plainly, prominently, and persistently. Even the majority
acknowledges that this argument presents the principal issue to be
decided on appeal. See ante at 2.
To be sure, the contractual rights argument was awkwardly
developed in some respects and did not always highlight the most
telling aspects of the relevant documents. But an argument is not
waived merely because it is inartfully crafted. See, e.g., United
States v. Dunbar, 553 F.3d 48, 63 n.4 (1st Cir. 2009) (treating
issue as preserved even though the "brief does not state [the]
claim artfully"); Michelson v. Digital Fin. Servs., 167 F.3d 715,
719-20 (1st Cir. 1999) (similar). What counts is that the
appellant hinged its argument to the framework of the timeshare
regime. That it did not parse each and every document evinces
sloppy lawyering, but that failure, without more, does not produce
a waiver. The documents are in the record, and an inquiring court
must be expected to carry out some independent inquiry.
Viewed against this backdrop, it is obvious to me that
the issue is properly before this court. The appellant did enough,
if barely, to preserve it for review. We are, therefore, duty-
-30-
bound to resolve the issue based on the record and the governing
law.
This brings me to the meat of the appeal. The timeshare
documents, read in light of the Timeshare Act, demonstrate that the
parties purposed to transfer contractual interests, not real
property. The Timeshare Act, which provides that the nature of the
interests to be conveyed is at the "option of the declarer," puts
the dedication deed (the Deed) at the center of this inquiry. P.R.
Laws Ann. tit. 31, § 1251a.
Although the Deed will not win any prize for legal
writing, it firmly supports the conclusion that the interests
conveyed are contractual. I describe some salient features:
C Section V of the Deed is titled "Specific Timeshare
Rights in Timeshare. (Contractual Interests in Unit
Weeks and Appurtenant Rights)."
C The same section speaks of execution of a "contract of
right to use and occupy," through which the developer
will grant "the contractual right to use and occupy."
C The Deed definitions call for "Units" to be committed to
the regime upon the execution of "contract[s] of right to
use and occupy."
Given this straightforward language, I disagree with the majority's
characterization of the Deed as "ambiguous." Ante at 18. To the
exact contrary, it describes the contractual nature of the regime
-31-
in terms that closely track section 1251a of the Timeshare Act.
See P.R. Ann. tit. 31, § 1251a (describing "[a] contractual right
to use and occupy").
Even if the Deed were ambiguous on this point, extrinsic
evidence would then become relevant to an ensuing inquiry into the
parties' intentions. See Smart v. Gillette Co. LTD Plan, 70 F.3d
173, 178 (1st Cir. 1995) (describing appropriate uses of extrinsic
evidence to aid interpretation of ambiguous contract). As this
case was decided below at summary judgment, our review is de novo.
The public offering statement and the purchase-and-sale agreement
are key pieces of extrinsic evidence in the summary judgment record
— and our inspection of these documents confirms that these
timeshare interests are contractual.
Under the Timeshare Act, a public offering statement must
be approved by the Puerto Rico Tourism Company and presented to
every prospective buyer prior to any purchase of a Unit. P.R. Laws
Ann. tit. 31, § 1255. The public offering statement for this
development is part of the record, as are the appellees'
representations that they received, reviewed, and fully understood
it. Consequently, the public offering statement is a prime source
of extrinsic evidence here.
This statement leaves no doubt but that the timeshare
regime was meant to be contractual. It provides unequivocally that
"[u]nder the timeshare regime, contractual ownership interests will
-32-
be sold to the Purchasers." It goes on to say that the owners will
be given "the exclusive use and occupancy" of certain Units by
means of "contractual ownership interests." To cinch matters, it
defines "Timeshare Interest" and "Unit Week" as "the timeshare
contractual ownership interest in the Plaza Resort owned by the
Owner, which timeshare contractual ownership interest gives the
Owner the exclusive use and occupancy of" a certain Unit. Read in
its entirety, the public offering statement furnishes
incontrovertible evidence of the developer's intent to create and
transfer contractual rights.
If more is needed, the timeshare interests here were
conveyed by a purchase-and-sale agreement (the Sale Contract)
tailored to this timeshare regime. The Sale Contract quite clearly
indicates that the parties intended to transfer and receive
contractual interests. For example, the developer facilitated bank
financing for purchasers, and the Sale Contract requires the
purchasers to pay the "fees relating to the UCC filing to perfect
the security interest" of the lender in their Units. Whether or
not these buyers actually availed themselves of this financing
arrangement, this provision is material because, under applicable
Puerto Rico law,14 security interests in real property are perfected
14
Puerto Rico recently revised its version of the UCC. See Puerto
Rico Act No. 21 of Jan. 17, 2012. Those revisions, not yet
codified, do not apply to the matters at issue here. Accordingly,
an explication of them would serve no useful purpose.
-33-
through recording in the Registry of Property, see P.R. Laws Ann.
tit. 30, § 2577, not through UCC filings, see id. tit. 19,
§ 2004(j) (excluding real property interests from scope of UCC
filing regime). Seen in this light, it is evident that the
appellees did not consider the purchase of their Unit to be a real-
estate transaction.
The Sale Contract supplies yet another clue that the
parties meant to make the transferred ownership contractual in
nature. Section 1264a of the Timeshare Act applies only to real
property timeshare regimes. See id. tit. 31, § 1262. Although the
majority is correct in noting that this provision does not
explicitly require the instrument of transfer to "be embodied in
any particular form," ante at 17, it does demand that, as a real-
estate conveyance, the instrument include "the particulars
prescribed in [section] 1264(1)(b)." P.R. Laws Ann. tit. 31,
§ 1264a. In turn, section 1264(1)(b) requires a description of the
Unit, including "its measures, location, rooms," and other specific
details. Id. § 1264(1)(b).
Here, the Sale Contract — which did not contain this
information — constituted the instrument of transfer. It would
seem, therefore, that the Sale Contract was incapable of conveying
an interest in real property.
The majority's riposte stems from a pro forma declaration
that terms used in the contract shall have the same meaning as
-34-
identical terms used in the Deed. From this single sentence, the
majority extravagantly concludes that the Sale Contract complies
with section 1264a. Ante at 23. I think that this conclusion is
overly optimistic and, in all events, it would be highly unusual
for parties to draft a real estate conveyance that omitted a
meaningful legal description of the property conveyed. At the very
least, such a glaring omission would make any fair-minded observer
skeptical of whether the parties intended to transfer real property
at all.
This powerful array of documentary evidence is not
diminished by the majority's reliance on the use of words like
"owner" and "ownership" in the Deed. See, e.g., ante at 19. The
Timeshare Act defines the term "owner" in a manner that reaches
timeshare buyers under both contractual and real property regimes.
See P.R. Laws Ann. tit. 31, § 1251b(25) (defining "owner").
Moreover, the concept of "ownership" applies naturally to both
contractual interests and real property interests — and the former
reading is a superior fit for the language of the Deed and other
transaction documents. If this were not the case, phrases like
"contractual ownership interest" would make no sense.
Much the same is true of the bankruptcy court's emphasis
on the phrase "free and clear of all encumbrances" and the fact
that the granted rights run in perpetuity. See In re Plaza Resort
at Palmas, Inc., Ch. 11 Case No. 09-09980 (SEK), Adv. No. 10-00175,
-35-
slip op. at 10-11. These transaction terms are neutral; there is
no earthly reason why their use would be inappropriate under a
contractual rights regime.
Based on the totality of the documentary evidence, it
seems virtually unarguable not only that the developer intended to
create and transfer contractual timeshare interests but also that
the appellees accepted their Unit on such an understanding. It
follows that the majority's heavy reliance on the permissive "may
be recorded" language of section 1262a, see ante at 14-17, is
misplaced. After all, the Timeshare Act specifically excludes
contractual timeshare regimes from the grasp of section 1262a. See
P.R. Laws Ann. tit. 31, § 1262.
Indeed, if the parties' failure to record is relevant at
all, it cuts the other way. Had the appellees believed that they
were purchasing real property interests, they almost certainly
would have recorded those interests. It is common ground that an
owner's failure to record an interest in real property exposes the
owner to significant risk. Should a subsequent good-faith
purchaser of the same property record first, he will become the
rightful owner even though his deed is later in time. See P.R.
Laws Ann. tit. 31, § 3822; see also United States v. One Urban Lot
Located at 1 St. A-1, 865 F.2d 427, 429 (1st Cir. 1989) (discussing
the "safeguards of [Puerto Rico's] strict Registry system"); United
States v. V & E Eng'g & Constr. Co., 819 F.2d 331, 333 (1st Cir.
-36-
1987) (describing Puerto Rico's registry system as promoting
"reliance on public records of property ownership"). Because
recordation provides such important protections for real property
buyers, it would be highly unusual for anyone, let alone parties
who had lawyers and financing banks looking over their shoulders,
to structure a real-estate conveyance without providing for
recordation.15
To sum up, I disagree with the majority's conclusion that
the rights possessed by the appellees are real property rights. I
also disagree with the majority's assumption that answering this
question ends the inquiry. Let me explain.
This case was commenced as an adversary proceeding that
sought a declaration as to whether the appellees should be regarded
as secured creditors. But regardless of whether the appellees
possess contractual or real property interests, their claim to
secured creditor status requires a further determination because
the Bankruptcy Code includes specific safeguards for timeshare
buyers. See 11 U.S.C. §§ 101(53D), 365(h)-(j); see also 3 Collier
on Bankruptcy ¶¶ 365.11(4), 365.12(3) (Alan N. Resnick & Henry J.
Sommer eds., 16th ed. 2013).
The Bankruptcy Code has long furnished special
protections to lessees or buyers of real property when the lessor
15
In this regard, it is noteworthy that the transaction here was
not geared to recordation. For aught that appears, the signatures
on the pertinent documents were not even notarized.
-37-
or seller enters bankruptcy and seeks to reject the lease or
purchase agreement as an executory contract. See 11 U.S.C.
§ 365(h)-(j). In 1984, Congress extended these protections to
owners of timeshare interests. See Bankruptcy Amendments and
Federal Judgeship Act of 1984, Pub. L. No. 98-353, §§ 401-404, 98
Stat. 333, 366-67 (1984). This extension was intended to overrule
cases like In re Sombrero Reef Club, Inc., 18 B.R. 612 (Bankr. S.D.
Fla. 1982), which had allowed timeshare agreements to be rejected
out of hand as executory contracts. See In re Lee Road Partners,
Ltd., 155 B.R. 55, 61 (Bankr. E.D.N.Y. 1993); 3 Collier on
Bankruptcy, supra, ¶ 365.11(4).
Under this prophylaxis, when a bankrupt debtor seeks to
reject a timeshare agreement as an executory contract, the
timeshare owner has two options. If the timeshare owner is in
possession or the term of the timeshare interest has commenced, he
may remain in possession of his timeshare interest. 11 U.S.C.
§ 365(h)(2)(A)(ii), (i)(1). If he does so, he can set off any
damages caused by the debtor's post-rejection nonperformance
against any payments due to the debtor, including deferred purchase
price installments and annual maintenance fees. Id.
§ 365(h)(2)(B), (i)(2)(A).
As an alternative, the timeshare owner can treat the
timeshare interest as terminated and file a claim for damages
against the bankruptcy estate. Id. § 365(h)(2)(A)(i), (i)(1).
-38-
Under section 365(i), his damages claim would seem to be secured
(at least up to the amount of the purchase price paid). See id.
§ 365(j). Under section 365(h), however, the claim would seem to
be unsecured. See 3 Collier on Bankruptcy, supra, ¶ 365.11(4)
(discussing availability of lien under subsection (i) but not under
subsection (h)).
The facts here are inscrutable: the record before us does
not indicate whether the appellees' timeshare contract was ever
formally rejected. By like token, it does not indicate whether the
appellees were ever afforded an opportunity to make their election
under section 365.
An authoritative determination as to whether the
appellees are secured creditors cannot be made in a vacuum. On the
one hand, unless and until the appellees' timeshare interest is
rejected, it may represent a valid and enforceable contract despite
the bankruptcy. On the other hand, if the debtor has formally
rejected the agreement — a course of action that seems consistent
with the reorganization plan — section 365 would come into play and
the appellees would have to be allowed to make elections as
provided therein.
The situation is further complicated because the
relationship between sections 365(h) and 365(i) is especially
tenebrous in the timeshare context. See id. To the extent that
these subsections may be relevant, it seems likely that factual
-39-
findings will be helpful in determining not only which subsection
will apply but also whether the appellees should be considered "in
possession." See generally 3 Collier on Bankruptcy, supra,
¶ 365.12(3) (discussing unique difficulty of "in possession"
concept in timeshare context).
Here, there are no findings. With only a single
(meaningless) exception, neither the parties nor the courts below
have so much as acknowledged the existence of the relevant
statutory provisions.
Given the utter absence of such findings, the appellees'
claim to secured creditor status is left up in the air. I would,
therefore, reverse the decision holding the appellees' timeshare
interest to be a real property interest and remand to the
Bankruptcy Appellate Panel with instructions that it remand to the
bankruptcy court for further proceedings.
-40-
APPENDIX A
Appellant's Court of Appeals Brief
The appellant's brief to this court contains its
contractual rights argument in at least the following places:
C The appellant's argument summary begins: "[p]ursuant to
the Timeshare Act, the Regime subject of this appeal was
constituted to grant contractual (personal) rights to the
timeshare owners since [the Deed], which dedicated the
Regime, explicitly declares so."
C The appellant's second issue is framed as "[w]hether the
owners . . . may be granted secured creditor status
. . . despite the fact that the Regime was constituted by
[the Deed] to grant contractual (personal) rights to the
timeshare owners and no real property interest was
conveyed."
C The first bolded header in the brief's argument section
reads: "[t]he Timeshare Regime was structured to confer
contractual (personal) rights to the timeshare owners."
C Later in the brief the appellant argues that "[the Deed]
constituted the Timeshare Regime to grant contractual
(personal) rights to the timeshare owners and no real
property interest was conveyed pursuant to the Timeshare
Act."
C The appellant also declares that "[the Deed], which
constituted the Regime in the present case, explicitly
states, using the statutory language, that the timeshare
rights in the Regime are of a contractual (personal)
nature."
Appellant's Brief to the Bankruptcy Appellate Panel
The appellant's brief to the Bankruptcy Appellate Panel
contained its contractual rights argument in at least the following
places:
-41-
C The brief presents the second issue as "[w]hether the
owners of timeshare rights in the Regime may be granted
secured creditor status . . . despite the fact that the
Regime was constituted by [the Deed] to grant personal
(contractual) rights to the timeshare owners and no real
property interest was conveyed."
C The second sentence of the brief's statement of the case
reads: "[the Deed] specifically states that the timeshare
rights in the Regime are of a personal (contractual)
nature."
C In its synopsis of the facts, it declares that "[the
Deed] specifically states that the timeshare rights in
the Regime are of a personal (contractual) nature."
C The first bolded header of its discussion section reads:
"[t]he Timeshare Regime was structured to confer personal
(contractual) rights to the timeshare owners."
Proceedings Before the Bankruptcy Court
In proceedings before the bankruptcy court, the appellant
pressed its contractual rights argument in at least the following
places:
C The appellant's initial adversarial complaint argues that
"[the Deed] specifically states that timeshare rights in
the Regime are of a personal (contractual) nature."
C The first paragraph of the appellant's memorandum of law
in support of its motion for summary judgment argues that
"the owners of timeshare rights in this particular regime
have no property rights, but merely a contractual
(personal) right."
C The first sentence of the section of the appellant's
memorandum of law in support of its motion for summary
judgment that applies the law to the facts reads: "[i]n
this case, the Timeshare Regime was constituted to grant
personal (contractual) rights to timeshare owners."
-42-