Soto-Rios v. Banco Popular De Puerto Rico

United States Court of Appeals
For the First Circuit

No. 10-2270

LUIS A. SOTO-RIOS; BRENDA TOSADO-ARBELO,

Plaintiffs, Appellants,

v.

BANCO POPULAR DE PUERTO RICO,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jay A. García-Gregory, U.S. District Judge]

Before

Lipez, Ripple,* and Howard,
Circuit Judges.

Isabel M. Fullana, with whom Garcia-Arregui & Fullana, P.S.C.
was on brief, for appellants.
Lucas A. Córdova-Ayuso, with whom Patrick D. O'Neill and
O'Neill & Gilomore, P.S.C. were on brief, for appellee.

November 23, 2011

*
Of the Seventh Circuit, sitting by designation.
 HOWARD, Circuit Judge. Luis Soto-Rios and Brenda Tosado-

Arbelo ("debtors") filed for bankruptcy under Chapter 11, years

after they had executed three mortgage deeds in favor of Banco

Popular de Puerto Rico. In the midst of the bankruptcy

proceedings, the debtors sought to avoid the mortgages, and to

prevent any post-petition actions that would perfect them. See 11

U.S.C. §§ 362(a), 544(a), 547(b). On summary judgment, the

bankruptcy court rejected the debtors' efforts. When the district

court later affirmed this decision, the debtors pursued this appeal

before us. We affirm.

I. BACKGROUND

In 2004 and 2005 the debtors executed the three mortgage

deeds to secure two loans. The mortgagee Banco Popular, in turn,

presented the documents for recording to the Registry of the

Property for Puerto Rico (hereinafter, "registry" or "registrar").

Two deeds were presented in October 2004, and the third

approximately ten months later in 2005. Due to an administrative

backlog, however, the three presented mortgage deeds were still

pending recordation when the debtors filed for bankruptcy nearly

three years later.1

1
Because the registry has long suffered a substantial backlog,
while this appeal was pending the Commonwealth of Puerto Rico
enacted the "Property Registry Facilitation Act." Effective
February 10, 2011, all documents presented as of April 30, 2010,
with enumerated exceptions, are deemed registered as a matter of
law. See 2010 P.R. Laws No. 216; P.R. Reg. for the Implementation
of Act No. 216. The effects of the new law have not been fully

-2-
 During the bankruptcy proceedings, Banco Popular filed a

secured proof of claim regarding the loan debts putatively secured

by the three mortgage deeds. In response, the debtors filed an

adversary proceeding asserting their right to avoid the mortgages

under certain provisions of the Bankruptcy Code, including the

automatic stay, the "strong arm" power and the avoidance of

preferential transfers.2 See 11 U.S.C. §§ 362(a)(5), § 544(a),

547(b). After an exchange of pleadings, the parties agreed that

the case could be resolved on summary judgment and subsequently

filed competing motions. The bankruptcy court granted Banco

Popular's motion and dismissed the debtors' adversary action. In

ruling that exceptions to the automatic stay and strong arm power

applied, 11 U.S.C. §§ 362(b)(3), 546(b)(1)(A), the court rejected

the debtors' argument that, until the deeds were fully recorded,

Banco Popular lacked a pre-petition property interest. The

bankruptcy court also ruled that the debtors failed to establish

the necessary elements of a preferential transfer, 11 U.S.C. §§

litigated in this case or in Puerto Rico generally. See infra n.5.
Accordingly, we do not reach Banco Popular's suggestion that Law
216 renders this appeal moot, and instead affirm the lower court's
decision on the merits.
2
A debtor in possession stands in the shoes of the bankruptcy
trustee, generally having the same rights, powers, duties and
functions, with certain exceptions. See 11 U.S.C. § 1107(a).
Accordingly, we refer to "the debtors" and "the bankruptcy trustee"
interchangeably where appropriate.

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547(b), 547(e)(1)(A). After an unsuccessful appeal to the district

court, this appeal followed.

II. STANDARD OF REVIEW AND ISSUES ON APPEAL

Bankruptcy practice encompasses traditional summary

judgment standards, as provided under Rule 56 of the Federal Rules

of Civil Procedure. See Bank. R. 7056; In re Varrasso, 37 F.3d

760, 762 (1st Cir. 1994). Accordingly, summary judgment is

warranted only if no genuine issue of material fact exists and the

moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); see Varrasso, 37 F.3d at 763. When a bankruptcy

court issues summary judgment, the losing party may seek

intermediate review by a district court or a bankruptcy appellate

panel. See In re Vázquez Laboy, 647 F.3d 367, 373 (1st Cir. 2011);

see also 11 U.S.C. § 158. With either path, our review focuses on

the bankruptcy court's decision, and we do not afford special

deference to the intermediate decision. Vázquez Laboy, 647 F.3d at

374; In re Spigel, 260 F.3d 27, 31 (1st Cir. 2001). We conduct de

novo review of the bankruptcy court's decision. In re Colarusso,

382 F.3d 51, 57-58 (1st Cir. 2004).

Before us, the debtors first challenge the bankruptcy

court's application of the exceptions to the automatic stay and

trustee strong arm power on the sole basis that Banco Popular never

obtained the required pre-petition property interest. They contend

that because recording is essential to the valid constitution of a

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mortgage deed under Puerto Rico law, the three deeds evidenced no

more than unsecured personal obligations at the time that the

bankruptcy petition was filed. The debtors also argue that the

bankruptcy court erred in ruling that they failed to establish the

elements of a preferential transfer. See 11 U.S.C. § 547(b). We

address each argument in turn.

III. GOVERNING LAW AND ANALYSIS

A. Exceptions to Automatic Stay and Strong Arm Power

Resolution of this appeal involves the interplay between

and among provisions of the Bankruptcy Code and Puerto Rico law.

Certain portions of the Bankruptcy Code serve as the framework for

the legal issue, and so we begin our endeavor there. We then will

turn to navigate local law. While the path is a bit meandering, in

the end the conclusion is clear.

1. Pertinent Bankruptcy Code Provisions

As a familiar bedrock of bankruptcy law, the automatic

stay creates "breathing room" for debtors, at least temporarily, by

foreclosing creditors from pursuing certain collection efforts

against the debtor's assets once a petition for bankruptcy has been

filed. 11 U.S.C. § 362(a); In re 229 Main St. Ltd. P'ship, 262

F.3d 1, 3 (1st Cir. 2001). The stay bars a variety of creditor

activities, including “any act to create, perfect, or enforce any

lien against property of the estate.” 11 U.S.C. § 362(a)(4); see

also 11 U.S.C. § 362(a)(5). This broad proscription has limits.

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Pertinent here, section 362(b)(3) provides that the stay does not

extend to "any act to perfect, or to maintain or continue the

perfection of, an interest in property to the extent that the

trustee's rights and powers are subject to such perfection under

section 546(b) of [the Bankruptcy Code] . . . ." Application of

this exception to the stay depends upon the existence of three

conditions: "there must be (1) an 'act to perfect' (2) an

'interest in property' (3) under circumstances in which the

perfection-authorizing statute fits within the contours of section

546(b)[ ]." 229 Main St., 262 F.3d at 4 (emphasis added).

While section 362(b)(3) limits the automatic stay, its

companion statute, section 546(b), limits the debtor's power to

avoid statutory liens under the so-called strong arm provision.

See id. The instant that a bankruptcy petition is filed, the

bankruptcy trustee is vested with the status of a hypothetical bona

fide purchaser of real property, and may ordinarily avoid any

transfer of the property or obligation of the debtor to the extent

allowed under state law. See 11 U.S.C. § 544(a)(3); In re Ryan,

851 F.2d 502, 505 (1st Cir. 1988); see also 11 U.S.C. § 544(a)(1)

(trustee deemed to have status of hypothetical judicial lien

holder). Section 546(b)(1)(A), however, staves off this pervasive

power when "generally applicable law . . . permits perfection of an

interest in property to be effective against an entity that

acquires rights in such property before the date of perfection."

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11 U.S.C. § 546(b)(1)(A) (emphasis added); see also 11 U.S.C. §

546(b)(1)(B). For a creditor to enjoy this haven, "(1) the

creditor must act pursuant to a law of general applicability; (2)

that law must allow the creditor to perfect an interest in

property; and (3) such perfection must be effective against

previously acquired rights in the property." 229 Main St., 262

F.3d at 10 (emphasis added). The gist of this exception "is that

the filing of a bankruptcy petition does not prevent the holder of

an interest in property from perfecting its interest if, absent the

bankruptcy filing, the interest holder could have perfected its

interest against an entity acquiring rights in the property before

the date of perfection." Id. at 12 (quotations omitted).

As earlier noted, the debtors' challenge to the

application of sections 362(b) and 546(b)(1)(A) is solely based on

the existence of a single element common to both exceptions --

whether Banco Popular had acquired a pre-petition "interest in

property." See 229 Main St., 262 F.3d at 9 ("the simultaneous

postpetition creation and perfection of a lien may come within the

pertinent exception to the automatic stay so long as the creditor

holds a valid prepetition interest in the property"). We limit our

review accordingly.

2. Meaning of "Interest in Property"

Local law ordinarily dictates the existence and extent of

an entity's interest in property. See 229 Main St., 262 F.3d at 6;

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Butner v. United States, 440 U.S. 48, 54-55 (1979); see also In re

The Ground Round, Inc., 482 F.3d 15, 17 (1st Cir. 2007). We

emphasize, however, that "interest in property" under sections

362(b)(3) and 546(b)(1)(A) is a federal statutory term, and "the

meaning of [language under the Bankruptcy Code] is a matter of

federal law". See The Ground Round, Inc., 482 F.3d at 17. Thus,

our primary focus is whether Banco Popular gained a pre-petition

property interest in substance and scope that is superior to that

of a bona fide purchaser or a judicial lien holder in accord with

sections 362(b)(3) and 546(b)(1)(A) and as informed by the laws of

Puerto Rico. We thoroughly analyzed the meaning of the federal

term "interest in property" under the exceptions at issue here in

229 Main Street, 262 F.3d at 5-7. Therefore, we briefly review

that decision before proceeding further.

In 229 Main Street, the Commonwealth of Massachusetts

sought relief from the automatic stay so that it could establish

and secure a lien for monies that it had expended in the pre-

petition environmental cleanup of the debtor's property. Id. at 3.

Under Massachusetts environmental law, a debt comes into being once

the Commonwealth incurs the cleanup expenses, which simultaneously

ripens into a lien and becomes perfected when a claim statement is

recorded, registered or filed. See id. at 4, 7. The Commonwealth

had notified the property owner by letter of its intent to record

a claim statement and had entered into administrative proceedings

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relative to liability and the amount owed. Id. at 3. But the

debtor filed for bankruptcy before the administrative proceedings

had concluded and before a claim statement had been filed to effect

the recording of a lien. Id.

These circumstances required us to determine whether the

Commonwealth possessed a pre-petition "interest in property" under

sections 362(b)(3) and 546(b)(1)(A). See id. at 3-7. Applying the

plain language of the Bankruptcy Code, we held that the federal

statutory term "interest in property" is "unequivalent to, and

broader than," the term "lien." Id. at 7. We also concluded that

the "amalgam" of circumstances presented in the case gave rise to

a pre-petition property interest. See id. In particular, we

focused on the following: "the Commonwealth's expenditures,

together with its notice of intent to record a lien and its

tenacious pursuit of that lien through administrative channels."

Id. With this backdrop, we turn to examine the nature of Banco

Popular's pre-petition interest under the mortgage deeds which it

had presented for recording, as informed by Puerto Rico law.

3. Pre-petition "Interest in Property" Informed by Puerto Rico Law

In general, a mortgage comprises a conveyance or

retention of an interest in real property executed for the benefit

of the mortgagee to secure payment of a debt. See generally

Restatement (Third) of Property: Mortgages § 1.1 (1997); 54A Am.

Jur. 2d Mortgages §§ 1, 138 (2009); see also Liechty v. Descartes

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Saurí, 9 P.R. Offic. Trans. 660 (1980) (holding that "mortgage"

encompasses "a property right"). Some jurisdictions subscribe to

the so-called "title theory" in which a mortgage effects a

conditional conveyance vesting in the mortgagee legal title of the

property, which title is defeated once the mortgage debt is paid.

See generally 54A Am. Jur. 2d Mortgages §§ 1, 136 (2009);

Restatement (Third) of Property: Mortgages § 4.1, cmt. a(1)

(1997). Others follow the "lien theory," under which the mortgage

is mere security for the debt, creating a lien interest without

divesting the mortgagor of legal title during the period of debt

repayment. See generally 54A Am. Jur. 2d Mortgages §§ 1, 137;

Restatement (Third) of Property: Mortgages § 4.1, cmt. a(2). Under

either system, the act of recording, rather than marking the

inception of the mortgage interest itself, impacts the strength of

the mortgagee's security interest in the property relative to other

persons or entities claiming a competing interest. See generally

55 Am. Jur. 2d Mortgages §§ 278-81 (2009); Restatement (Third) of

Property: Mortgages § 7.1, cmt. a (1997). In some jurisdictions

even defectively executed mortgage documents may give rise to a

security interest in the property and be enforced as, for instance,

an equitable mortgage. See generally 54A Am. Jur. 2d Mortgages §§

10-11, 13, 82; 55 Am. Jur. 2d Mortgages § 301; see, e.g., In re

Williams, 584 S.E.2d 922 (W. Va. 2003); Citizens Nat'l Bank in

Zanesville v. Denison, 133 N.E.2d 329 (Ohio 1956).

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 In their briefing, both parties use nomenclature

suggesting that Puerto Rico is a lien theory jurisdiction. But

they focus on different provisions of Puerto Rico law to reach

opposite conclusions on the critical issues. The debtors assert

that recordation of a mortgage deed is so essential to its validity

under Puerto Rico mortgage law that even when such a deed is

presented to the registry for recording, no property interest vests

until the deed is actually recorded by the registrar. According to

the debtors, because the mortgage deeds were unrecorded at the time

the bankruptcy petition was filed, they were no more than unsecured

personal obligations and did not confer a pre-petition property

interest on Banco Popular. Meanwhile, Banco Popular stands on

Puerto Rico's relation back doctrine to contend that a bona fide

third party who acquires rights in real property after a mortgage

security interest in the same property has been presented and is

pending recordation acquires the property interest subject to the

perfection of the first-in-time security interest. Thus, according

to Banco Popular, the execution of the mortgage deeds along with

the acts of presentment sufficiently vested in it a pre-petition

interest in the real property which the Bankruptcy Code allows to

continue to perfection.

After review of the relevant local law, along with the

instruction of 229 Main Street, we agree with Banco Popular's

position that it attained a pre-petition "interest in property"

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within the meaning of sections 362(b)(3) and 546(b)(1)(A) of the

Bankruptcy Code.

In Puerto Rico, the nature and effect of mortgages is

governed by the Commonwealth's Mortgage and Property Registry Act

of 1979 and portions of its Civil Code. See P.R. Laws Ann. tit.

30, § 2001 et. seq. (2005); P.R. Laws Ann. tit. 31, § 5001 et seq.

(1991). The mortgage law provides:

A mortgage directly and immediately
binds an estate and the rights on which it is
imposed, whoever its owner or titleholder may
be, to the fulfillment of the obligation for
the security of which it was constituted.
Recorded mortgages shall be strictly
real encumbrances, permitting mortgage loans
to be made regardless of any subsequent right
that is acquired on the same property or
mortgage rights. . . .

P.R. Laws Ann. tit. 30, § 2551; see also P.R. Laws Ann. tit. 31, §

5043 (effect of mortgage on property); P.R. Laws Ann. tit. 30, §

2601 (defining "voluntary mortgages"). The civil code sets forth

the "essential requisites" of a mortgage contract, including that

a mortgage "be constituted to secure the fulfillment of a principal

obligation." P.R. Laws Ann. tit. 31, §§ 5001, 5002.

Additionally, the civil code prescribes that "it is

indispensable, in order that the mortgage may be validly

constituted, that the instrument in which it is created be entered

in the registry of property." P.R. Laws Ann. tit. 31, § 5042. A

companion statute under the mortgage law also provides that "[i]n

order for voluntary mortgages to be validly constituted" the

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mortgage must be "stipulated in a deed" and must "be recorded in

the Property Registry." P.R. Laws Ann. tit. 30, § 2607. While

recording is a necessary prerequisite to "valid constitution," the

original date a mortgage deed is presented to the registry for

recording establishes priority between competing registrations.

Pursuant to P.R. Laws Ann. tit. 30, § 2256:

Registered titles shall become
effective for third parties from the date of
their registration. For all intents and
purposes, the registration date, including the
determination of the term needed for
cancellation of entries, must appear in the
registration itself.
In order to determine preference
between two or more registrations of the same
property, attention shall be given to the
date, hour and presentation number of the
respective titles in the Registry.

The debtors would have us conclude the analysis here.

They take the cut-and-dried position that a foundational

prerequisite for valid constitution was not in place and therefore

Banco Popular enjoyed no more than a personal obligation, not an

interest in property, at the time the bankruptcy proceedings

commenced. To support their stance, the debtors point to several

decisions of the Puerto Rico Supreme Court and those of federal

courts interpreting Puerto Rico law. See, e.g., Rosario Pérez v.

Registrador, 15 P.R. Offic. Trans. 644 (P.R. 1984); Roig Commercial

Bank v. Dueno, 617 F. Supp. 913 (D.P.R. 1985); In re Las Colinas,

Inc., 426 F.2d 1005 (1st Cir. 1970).

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 Without doubt, the debtors' cases set forth the fairly

unremarkable position that "recordation is a constitutive act

through which the security produces real effects and becomes

operative erga omnes [that is, "toward all"] in the sphere of real

rights." Rosario Pérez, 15 P.R. Offic. Trans. 644.3 Some do

appear to suggest that an unrecorded mortgage deed provides a

lender with no more than an unsecured personal debt under Puerto

Rico law. See, e.g., Roig Commercial Bank, 617 F. Supp. at 915.

The cases, however, do not address the precise question before us

-- namely, whether a creditor that has done essentially all that it

can by timely presenting otherwise valid mortgage deeds for

recording has obtained an interest in the property identified in

the mortgage deed.

For example, in Rosario Pérez the Supreme Court of Puerto

Rico faced the question of whether the registry had properly

refused to record a mortgage deed that had been presented for

recording after the presentment of a writ of attachment barring

alienation of the same property. Rosario Pérez, 15 P.R. Offic.

Trans. 644. The propriety of the registrar's decision depended on

application of a local statute that precluded recordation of a

"dispositive act" against property once a judicial order barring

alienation was presented, but provided that "dispositive acts

executed prior to the entry are not affected." Id. In affirming

3
No pincite is available for this decision.

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the registry, the court determined that no dispositive act had

occurred relative to the mortgage deed prior to the entry of the

writ because "the mortgage had not been recorded and, therefore,

the real security of the mortgage had not been constituted." Id.

This case offers us virtually no guidance, however, because unlike

the creditor in Rosario Pérez, Banco Popular actually presented

mortgage deeds to the registry for recording well before the

debtors obtained their hypothetical status of bona fide purchasers

or judicial lien holders. Rosario Pérez simply does not speak to

the legal effect of a creditor's prior presentment.

To cite one more example, in Roig Commercial Bank the

United States District Court for the District of Puerto Rico faced

the question of whether a mortgagee was a party in interest with a

right to redeem property that the Internal Revenue Service had

seized and then sold at public auction. Roig Commercial Bank, 617

F. Supp. at 914. The creditor originally had presented the

mortgage deed for recording before the tax seizure, but had

withdrawn the document. After the tax sale, the creditor presented

the deed for recording a second time and it was later recorded.

The court determined that the creditor did not have a pre-seizure

lien because "[r]ecording is essential to the validity of a

mortgage," and thus, "a mortgage must be recorded in order to

exist." Id. at 915. Additionally, it ruled that the lender did

not have a pre-seizure interest in real property because "[f]ailure

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to promptly record the mortgage deed turned the promissory note

into a personal obligation, unsecured, solely enforceable against

the maker." Id. at 915. Again, this case offers us no real help

because the creditor did not claim a property interest or a lien

based on a prompt presentment of an otherwise valid mortgage deed

which was filed with the registry before a later-in-time interest

developed.4

4
In a post-oral argument submission made pursuant to Federal
Rule of Appellate Procedure 28(j), the debtors argue that their
position is further strengthened by Puerto Rico Farm Credit, ACA v.
Ruiz-Valentin, No. 09-1377 (MEL), 2010 WL 1485668 (D.P.R. April 9,
2010) ("the 1377 case"). In that case, the mortgagors defended
against a foreclosure by arguing that the relevant mortgages had
been presented to the appropriate registries, but had not been
recorded. Id. at *2. The court ultimately allowed foreclosure
only against properties which were subject to recorded mortgages.
As the debtors here observe, the district court relied on a Puerto
Rico intermediate appellate court decision which held that
foreclosure of the unrecorded mortgages was not permitted even
though the deeds had been presented and were then-pending
recordation. Id. at *4 (citing Cooperativa de Ahorro y Crédito de
Aguada v. Ocasio Rodriguez, No. KLAN20081882, 2009 WL 2843418 (P.R.
Cir. June 30, 2009)). There is more to the story of the 1377 case,
however. At roughly the same time, the same issue -- involving the
same mortgagee and some of the same mortgagors -- was before a
different federal district court judge. See Puerto Rico Farm
Credit, ACA v. Ruiz-Valentin, No. 09-1348CCC, 2010 WL 2088744
(D.P.R. May 21, 2010) ("the 1348 case"). Although the district
court in the 1348 case quoted extensively from Ocasio Rodriguez,
id. at *4, it also observed that the Puerto Rico Supreme Court had
not passed on the issue, and thus it certified to the Supreme Court
the question of whether a creditor can seek foreclosure of a
mortgage where the deed has been presented but not recorded. Id.
at *5. Shortly thereafter, the judge in the 1377 case stayed those
proceedings with respect to the unrecorded mortgages pending the
resolution of the certified question. Law 216 was enacted and
became effective during the pendency of the ensuing Supreme Court
case, see supra n.1. After being informed by the mortgagee that
Law 216 resulted in the presented mortgages becoming properly
registered, the Supreme Court ruled the certified question moot.

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 At the same time, at a minimum Puerto Rico law regards

presentment to be a legally significant act that initiates the

certifying role of the registrar, begins the process of

registration, and as previously noted, operates as the decisive

point for resolving any competing registrations in the same

property. See P.R. Laws Ann. tit. 30, § 2256. Generally, once

presented, the registrar must pass judgment on the documents within

sixty days, or some "just cause" period thereafter, and then either

act to record them or alert the applicant to any defect. See P.R.

Laws Ann. tit. 30, §§ 2255, 2267, 2270-72. Indeed, the registrar

must keep detailed records to memorialize the very "moment of

presentation" by entering "the exact time of day" into the day book

(filing entry). See P.R. Laws Ann. tit. 30, §§ 2152, 2154, 2253.

Such precision is required, of course, because the filing entry is

"intimately linked to the registry principle called rank or

priority"; the first filing entry prevails. Gasolinas, P.R. v.

Registrador, 155 P.R. Dec. 652, 675 (P.R. 2001).

Puerto Rico Farm Credit, ACA v. Ruiz Valentin (P.R. Apr. 15, 2011)
(case number unavailable). The judge in the 1348 case then ruled
that the mortgagor's defense to foreclosure "had been dispelled by
the effects of Law 216" and granted the mortgagee's long-pending
motion for summary judgment. Puerto Rico Farm Credit, ACA v.
Ruiz-Valentin, No. 09-1348CCC, 2011 WL 2293220, at *2 (D.P.R. June
8, 2011). The 1377 case apparently remains open. The upshot of
this tangled history is twofold. First, it reinforces our decision
to eschew resolution of the appellee's mootness claim, supra n.1.
Second, the rulings in both the Puerto Rico Supreme Court and the
1348 case suggest that the debtors have placed significantly more
weight on the 1377 case and Ocasio Rodriguez than either can bear.

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 Puerto Rico law also circumscribes whether and how

presented documents may be withdrawn before recording occurs,

requiring "notarized consent of the person entitled to withdraw" if

other documents may be "affected adversely by the withdrawal." P.R.

Laws Ann. tit. 30, § 2254. The most pointed statutory clue is the

relation back provision establishing the moment of presentment as

the priority marker. P.R. Laws Ann. tit. 30, § 2256; Gasolinas, 155

P.R. Dec. at 675 ("[Presentment's] purpose is to acknowledge, in a

precise manner, the exact point or time of such filing, inasmuch as

same guarantees the filing party his turn, according to order of

arrival."). In other words, "[a] filing of an entry is an implicit

advisement to everyone, until the document is actually registered.

A deed, once filed and deemed recordable, retains all the effects

of stated registration." Id. (citing to and parenthetically quoting

Flores v. Arroyo, 43 P.R. Dec. 282, 283 (1932)); see also generally

P.R. Laws Ann. tit. 30, §§ 2101, 2152.

To diffuse the importance of presentment, the debtors

contend that for the relation back doctrine "to be activated, an act

to record must be undertaken by the [registry]," yet "such an act

is clearly stayed" by the automatic stay provision. They also argue

that "[r]ecordation cannot be presumed upon the presentation of

documents for inscription with the Registrar" because the registrar

has a legal duty "to review and qualify the documents presented for

inscription before the act of recording can take place."

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 We recognize that the relation back provision speaks of

competing "registrations," P.R. Laws Ann. tit. 30, § 2256, and that

the registrar bears the legal obligation of "passing judgment" on

presented documents to determine whether to record them, P.R. Laws

Ann. tit. 30, § 2267. We further acknowledge that under Puerto Rico

law recording is a "constitutive" act for a mortgage, and without

the existence of a mortgage, a creditor only has an unsecured

personal obligation regarding the underlying debt. See Rosario

Pérez, 15 P.R. Offic. Trans. 644; Roig Commercial Bank, 617 F. Supp.

at 915.

These rules do not, however, preclude the conclusion that

presentment, though arguably falling short of creating a valid

mortgage lien, could create an interest in the real property

superior to a later-in-time bona fide purchaser or judicial lien

holder. As we held in 229 Main Street, "interest in property" is

a broader term than "lien." 229 Main St., 262 F.3d at 7. We also

concluded that a creditor had obtained a pre-petition "interest in

property" under circumstances in which it had incurred a debt, had

a present right to create and record a lien, and had affirmatively

pursued that right via administrative channels. Id. Thus, our task

is to consider whether the "amalgam" of circumstances, informed by

all relevant aspects of Puerto Rico law, "sufficed to satisfy [the

Bankruptcy Code's] 'interest in property' requirement." Id.; see

The Ground Round, Inc., 482 F.3d at 17 (emphasizing that "the label

-19-
that state law affixes to a particular [property] interest in

certain contexts is not always dispositive."). We find that they

do.

Banco Popular presented the latest mortgage deed for

recording two years before the debtors' bankruptcy filing. There

is no claim that the mortgagee dawdled in doing so. In the normal

course of events anticipated by the statutory scheme, there is a

fair certainty that, absent noticed and uncured defects, recording

of the three mortgage deeds would have occurred well before the

debtors filed for bankruptcy. And the record is devoid of any

suggestion that the documents were defective in any manner or that

Banco Popular bears any responsibility for the lengthy delay.

Indeed, the "explanatory statement" prefacing the new Property

Registry Facilitation Act indicates that registrar delay has been

widespread in Puerto Rico for quite some time without the fault of

applicants. See 2010 P.R. Laws No. 216. Moreover, the local

statutes give no indication that mere passage of time caused by

registrar delay somehow nullifies or expires the filing entry or its

priority rank. Cf. P.R. Laws Ann. tit. 30, § 2255 (entry of

presentation expires where notified defect is not seasonably

corrected).

Like the Commonwealth of Massachusetts as the creditor in

229 Main Street, Banco Popular obtained a concrete, pre-petition

debt owed to it by the property owner. See 229 Main St., 262 F.3d

at 7 (holding that "debtor was liable to the Commonwealth for past

and future clean-up costs"). Even more than Massachusetts, though,

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Banco Popular had acted to secure this right to payment by actually

presenting all three executed mortgage deeds to the registrar for

recording years before the bankruptcy proceeding commenced. See id.

("the Commonwealth had a present right to record a lien on the

Property"). Presentment, as the decisive act for securing rank,

provided notice to the public, including to any bona fide purchaser,

of the parties' mortgage transaction and the acts to preserve

priority. See Gasolinas, 155 P.R. Dec. at 675. Banco Popular

thereby took all possible administrative steps in its power to

effectuate due recording. See 229 Main St., 262 F.3d at 7 (the

Commonwealth "notif[ied] the debtor of its intentions and

participat[ed] vigorously in the administrative hearing process").

Ultimately, in our view, this amalgam provided Banco Popular with

an "interest in property."

To accept the debtors' narrow view would, in effect,

place Banco Popular in the same position as a creditor who, before

a bankruptcy petition was filed, either never presented executed

mortgage deeds, withdrew presented deeds or failed to correct known

defects. This view, however, does not comport with Puerto Rico law,

because the act of presenting a mortgage deed itself has legal

significance. Moreover, the approach urged by the debtors does not

accord with the federal bankruptcy principles that are in play.

This is not a situation in which a creditor is jockeying for an

undue advantage over other creditors or engaging in harassing debt

collection conduct in the midst of bankruptcy proceedings. See Mann

v. Chase Manhattan Mortg. Corp., 316 F.3d 1, 3 (1st Cir. 2003)

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(noting that automatic stay provision is designed to "forfend

against the disorderly, piecemeal dismemberment of the debtor's

estate outside the bankruptcy proceedings"); 229 Main St., 262 F.3d

at 9-10 (reviewing policy for exception to trustee strong arm

power).

After considering the circumstances through the prisms of

both federal bankruptcy law and Puerto Rico law, we are satisfied

that Banco Popular enjoyed a pre-petition interest in property

within the meaning of sections 362(b)(3) and 546(b)(1)(A).

Accordingly, we conclude that the debtors have failed to demonstrate

that the bankruptcy court erred in ruling that the exceptions to the

automatic stay and the trustee's strong arm power apply in this

case. See Butner, 440 U.S. at 56 (a "federal bankruptcy court

should take whatever steps are necessary to ensure that the

mortgagee is afforded in federal bankruptcy court the same

protection he would have under state law if no bankruptcy ensued").

B. Preferential Transfer

The debtors also challenge the bankruptcy court's ruling

that the necessary elements of a preferential transfer were not

established. See 11 U.S.C. § 547. We are not convinced.

Pursuant to section 547(b), the bankruptcy trustee is

authorized to avoid certain transfers of "an interest of the debtor

in property" made during the ninety days preceding the bankruptcy

petition, with certain enumerated exceptions. In re Net-Velázquez,

625 F.3d 34, 38 (1st Cir. 2010). For purposes of preferential

transfer analysis the timing of a "transfer" depends upon when and

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whether the transfer was "perfected." 11 U.S.C. § 547(e)(2). Under

section 547 the "transfer of real property . . . is perfected when

a bona fide purchaser of such property from the debtor" cannot

acquire an interest superior to the interest of the transferee. 11

U.S.C. § 547(e)(1)(A) (emphasis added). State law governs whether

a bona fide purchaser can acquire an interest superior to that of

the transferee. See In re Computer Eng'g Assoc., 337 F.3d 38, 45

(1st Cir. 2003).

Applying the Puerto Rico relation back provision, P.R.

Laws Ann. tit. 30, § 2256, the bankruptcy court ruled that the

transfers of the mortgage deeds to Banco Popular were "perfected"

for purposes of section 547 as of the dates of presentment in 2004

and 2005 -- well outside the ninety day window for preferential

transfers -- because only a bona fide purchaser presenting documents

earlier than Banco Popular could have acquired a superior interest.

See 11 U.S.C. § 547(e)(2). The debtors disagree with this ruling,

arguing that the mortgage deeds can be avoided as preferential

transfers because (1) Puerto Rico's relation back doctrine cannot

be applied to determine when Banco Popular's interest became

perfected for purposes of section 547(e)(1)(A), and (2) therefore

the transfer of the unperfected deeds is deemed to have occurred

immediately before the bankruptcy petition was filed in accord with

section 547(e)(2)(C). They point to Fidelity Fin. Serv., Inc. v.

Fink, 522 U.S. 211 (1998), as their sole legal support for claiming

bankruptcy court error. Our review, however, triggers no alarm.

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 In Fink, the Supreme Court rejected a creditor's attempt

to rely on a state relation back provision to place perfection of

a lien on personal property within the twenty-day period required

under the "enabling loan" exception under section 547(c)(3). 522

U.S. at 216. It held that the creditor must have actually acted to

perfect its security interest within twenty days, as the Code

demands, and the state's relation back doctrine could not "deem" the

date of that act as having occurred at an earlier time. See id.5

The Court's ultimate conclusion was that a "transfer of a security

interest is 'perfected' under [the enabling loan exception] on the

date that the secured party has completed the steps necessary to

perfect its interest," such that "a creditor may invoke the enabling

loan exception only by satisfying state-law perfection requirements

within the 20-day period required by the federal statute," section

547(c)(3)(B). Id. at 212-13. We find this authority inapposite.

We first note the obvious -- that Fink involved a

different Code provision relative to perfection than the one at

issue here. Because the case involved personalty -- a car -- rather

than realty, the perfection language in Fink tracked section

547(e)(1)(B), which states that perfection occurs when "a creditor

. . . cannot acquire a judicial lien that is superior to the

interest of the transferee" (emphasis added). Here, on the other

hand, we focus on section 547(e)(1)(A), which defines perfection on

5
The Court in Fink noted that it was resolving a circuit
dispute. 522 U.S. at 214 n. 2. Each of the cases cited by the
Court involved an automobile loan.

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the basis of an "interest that is superior to the interest of the

transferee" (emphasis added). As earlier noted, the Code's

differentiation between an "interest" and a "lien" is meaningful,

and the debtors here make no effort to take this distinction into

account in their reliance on Fink.

More importantly, Banco Popular has not invoked the

enabling loan exception and is not looking to rely on the local

relation back doctrine to extend a perfection period limited by

section 547. See id. at 212. Indeed, the acts taken by Banco

Popular to "perfect" its interest in the real property against a

bona fide purchaser occurred in 2004 and 2005 -- well before the

ninety day preferential transfer time period. See 11 U.S.C. §§

547(e)(1)(A), (e)(2). In short, we discern no error in the

bankruptcy court's decision that the debtors failed to establish the

necessary elements of a preferential transfer.

IV. CONCLUSION

The judgment is affirmed.

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