Opinion
CASE NO. 05-12779(SEK), ADV. NO. 07-00292.
July 14, 2008
OPINION AND ORDER
Relying on Juarbe Alicea v. Juarbe Auto Sales, Inc. , defendants challenge the Trustee's status as a bona fide purchaser of debtor's residence in this action for avoidance of their mortgage lien over the dwelling, because the pre bankruptcy "Bill of Entry of Presentation" was not recorded on the residence as of the date of the commencement of this bankruptcy case. Although applicable non bankruptcy law allows the Registrar to correct the recording error, the corrected entry may not relate back to the date and time the Bill of Entry was presented, if a third party acquires an intervening interest in the residence. Thus, the underlying and controlling issue here, is whether the Trustee is a bona fide purchaser/third party who acquired an intervening interest in the residence that is superior to Defendants' mortgage lien as of the commencement of the case, allowing the Trustee to avoid the lien under federal bankruptcy law and the laws of the Commonwealth of Puerto Rico. For reasons that follow, we rule in favor of the Trustee.
Juarbe Alicea v. Juarbe Auto Sales, Inc., 640 F. Supp. 110 (DCPR 1986).
I. Facts of the Case
We draw our factual findings from the undisputed statement of facts, documents submitted with the Trustee's motion for summary judgement and other documents of record. These show Debtor guaranteed repayment of a $166,500 loan, plus interest and other charges, expressed in the mortgage deed ("the deed") creating an unperfected lien on her residence. The deed was presented as a "Bill of Entry" in the Registry of the Property of Puerto Rico on November 10, 2004. The presentation was recorded in the Registry's daily book on real property number 31,780, instead of the residence's real property number 37,180. We cannot tell who committed this error. The Registrar corrected the mistake on February 13, 2007, sixteen months after Debtor filed for bankruptcy relief.
In January, 2007, the Trustee filed an application to appoint a realtor to help sell the residence. Trustee produced evidence that demonstrates the book of daily presentations kept by the Registrar showed the lien was recorded on realty number 31,780, when the residence's number was 37,180. Trustee asked for time to complete his investigation. Later, he filed this proceeding followed by the instant request for entry of judgment summarily.
See docket entry #89.
See docket entries #s 93, 97 102.
II. Position of the Parties
The Trustee claims relevant portions of the mortgage law of Puerto Rico require inscription of the mortgage deed for it to be perfected and valid against third parties, or "with omnibus effects". The process of inscription begins when the mortgage deed is presented and recorded in the daily book of presentations, kept by the Registrar. This entry preserves rank, as the inscription of the mortgage relates back to the date and time the Bill of Entry is recorded in the daily books, applying the principle "prior tempore potior iure". Now, if the Bill of Presentation is recorded on the wrong parcel of land, the inscription relates back to that mistaken entry. "The mortgage law recognizes the fact that an inscription or recording may not reflect the real status of the property . . . [providing] a process of rectification of inaccuracies . . . ". Juarbe Alicea v. Juare Auto Sales, Inc., 640 F. Supp. 110, 112 (DCPR 1986). Thus, the mortgage law allows the Registrar to rectify an erroneous entry in the daily books. 30 Laws of P.R. Ann. §§ 2501-2505. Specifically applicable to the situation at hand are sections 2502 and 2505 interpreting rectification of errors in daily books as relating back to date of presentation, explained in Gasolinas de Puerto Rico Corporation v. Registrador, 155 D.P.R. 652, (2001); 2001 WL1512702 (P.R.).
"The Registry of Property of Puerto Rico . . . [k]eeps track of title ownership and liens. It also creates rights with omnibus effects." Juarbe Alicea v. Juarbe Auto Sales, Inc. 640 F. Supp. 110, 112 (DCPR 1986).
We thank the Supreme Court of Puerto Rico for providing us with an official translation of Part III of Gasolinas de Puerto Rico Corporation v. Keeler Váquez, Registrar of the Property of Caguas, attached as Exhibit A explaining this process.
The Trustee claims he became a bonafide purchaser of the residence before the Registrar rectified the error. Hence, the corrected entry could not relate back to the date the Bill of Entry was mistakenly recorded due to his intervening interest in the realty acquired under 11 U.S.C. § 544(a)(3). Under local law, the rectification cannot relate back to the date Bill of Entry was presented when there is an intervening third party such as a bona fide purchaser. Therefore, the Trustee argues that he can avoid the mortgage lien as a nullity pursuant to 11 U.S.C. § 544.
Defendants claim the Trustee's strong arm powers under 11 U.S.C. § 544 are limited to actions taken in good faith and with clean hands. Here, "the Trustee cannot not be deemed a bona fide purchaser of debtor's interest in real property because as part of any real property purchase transaction from the debtors, the Trustee would have become aware of Doral's indebtedness and the mortgage". Defendants also say that 11 U.S.C. § 546(b) authorizes the Registrar to rectify the error, opening the way for eventual perfection of the mortgage lien on the residence that would relate to the date of the mistaken recordation in the books of daily presentation. Consequently, Defendants' mortgage would be recorded before entry of the order for relief, and the Trustee would acquire Debtor's interest in her residence subject to the mortgage lien that cannot be avoided under 11 U.S.C. § 544(a)(3). Defendants distinguish Gasolinas de Puerto Corp. v. Registrador, 155 D.P.R. 652, 684 (2001), arguing that there the erroneous recording was caused by the creditor; here, it was caused by the Registrar. Lastly, Defendants challenge Trustee's claim that he is an intervening third party whose rights over the residence cannot be affected by the Registrar's rectification based on Juarbe Alicea v. Juarbe Auto Sales, supra. Without elaborating, Defendants state the Trustee is "imputed with debtor's knowledge of its debt and voluntary mortgage with Doral, hence he could not be deemed a third party with legitimate rights." To hold otherwise, would penalize the non negligent lien holder for the Registrar's mistakes and provide a windfall to the estate in bankruptcy.
IV. Discussion
In our discussion we have borrowed freely from Judge Kenner's opinion of In re Coletta Bros. of North Quincy, 172 B.R. 159 (Bkrtcy. Mass. 1994), resolving the same issues we face under facts similar to the ones at hand. We begin by reviewing federal law to determine the capacity in which the Trustee holds the residence: does he stand in the shoes of the Debtor as claimed by the Defendants, or of a bona fide purchaser/third party as stated by the Trustee.
Upon commencement of this case, all legal and equitable interests of the Debtor in her dwelling became property of the bankruptcy estate. 11 U.S.C. § 541(a)(1). Although this estate acquired no greater legal or equitable interest in the residence than the Debtor had at the commencement of the case, its rights are not limited by § 541(a)(1). 11 U.S.C. § 541(a)(3) (4) broaden the estate's property rights to include property recovered by the Trustee through the exercise of his "strong arm" powers under 11 U.S.C. § 544(a)(3).
Section 544(a)(3) provides the Trustee holds the residence not as the Debtor held it, but with the rights and powers of a hypothetical bona fide purchaser who acquired the dwelling from the Debtor on the date the Debtor filed her petition for bankruptcy. Furthermore, the Trustee enjoys these rights and powers over the residence "`without regard to any knowledge of the trustee or of any creditor'. Therefore, it is irrelevant that the Trustee or any creditor may have had actual or [imputed] knowledge of defendant's loan secured by the mortgage, either by documents filed in this case or otherwise." In re Coletta Bros. of North Quincy, 172 B.R. at 162. Therefore, the Trustee is deemed to be a bona fide purchaser regardless of any actual or imputed notice he might have had of Debtor's loan secured by a mortgage in favor of Defendants. Ibid.
We know turn to the laws of the Commonwealth of Puerto Rico, as these define the Trustee's rights and powers as a hypothetical bona fide purchaser of Debtor's dwelling. In re Coletta Bros, Inc., 172 B.R. at 163-164, citing Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 50 L.Ed.2d 136 and In re Ryan, 80 B.R. 266 (Bktrcy. Mass. 1987), aff'd. 851 F.2d 502 (1st Cir. 1988). Both parties agree that 30 Laws of P.R. Ann. §§ 2502 and 2505 are applicable to the facts at hand. Section 2502 provides that,
Errors made by the Registrar when making an entry may be rectified, provided they do not affect the rights of registered titleholders, either automatically or at the request of the interested party, provided the interest that motivated the action is at hand.
When rectification might affect the right of registered titleholders, their consent or judicial resolution ordering the rectification of the entries shall be required.
Section 2505 states,
Rectification of an error shall become effective on the date it took place, which date must appear in the rectification entry itself, without prejudice to the right which third parties may have to file a suit for misrepresentation or nullity of the title referred to in the entry containing the error or in the entry itself. (Our emphasis).
The rectification may be retroactive if, inter alia, the rights of an intervening third party are not adversely affected. Gasolinas de Puerto Rico Corporation v. Registrador, 155 D.P.R. 652, 684 (2001), and Exhibit A.
Is the Trustee's status of hypothetical bona fide purchaser acquired under federal law equivalent to a third party acting in good faith under the cited local law? This depends upon whether Trustee had direct and personal knowledge that Debtor had obtained the loan secured by the mortgage in favor of Defendants at the time he acquired his status of hypothetical bona fide purchaser over the dwelling. Pascual v. Fernández Sierra, 8 Official Translation, 447, 454-457 (1979); Juarbe Alicea v. Juarbe Auto Sales, 640 F. Supp. 111-113. The Trustee here was not a party to the mortgage loan. On the date the bankruptcy case was commenced the loan was not recorded as an encumbrance over the residence. The Registry of the Property, the Bankruptcy schedules and Defendants' proof of claim do not reveal the existence of a mortgage lien over the dwelling. Thus, on the filing date the Trustee had no actual knowledge of the mortgage loan in question.
The record reflects the following. Claims registry shows Defendants filed a proof of claim as secured creditors for the sum of $165,207.34, attaching a title study that reveals Oriental Bank and Trust and Banco Santander PR held liens over the residence. Defendants were not mentioned in this title study, and the claim has not been amended. Case records show Debtor did not schedule any liens on her residence valued at $190,000. She scheduled Doral Bank with a lien described as a "Non Purchase Money" over the residence with zero value. Debtor filed a statement of intention, upon conversion of the case to Chapter 7 showing she would continue making mortgage payments due to "Doral Bank" involving her residence.
Defendants allude to the Trustee's imputed knowledge of the mortgage loan as if this would somehow defeat the presumed good faith of the Trustee. As explained by Judge Kenner, imputed knowledge is a form of constructive knowledge; notice of the mortgage loan that the Trustee is deemed to have had as a matter of law, regardless of his actual knowledge. "[A]s a creature of law, constructive knowledge is effective only to the extent and under the circumstances prescribed by law". In re Coletta Bros. of North Quincy, Inc., 172 B.R. at 163. The Juarbe case, supra, describes evidence produced to refute the presumption as actual notice of the existence of the mortgage by a party to the contract. That opinion does not rely on imputed or constructive knowledge. Since local law cloathes the Trustee with a presumption of good faith and here Defendants have not refuted this presumption, without further development of this point by the Defendants, we do not have to delve into this portion of their argument. United States v. Zannino, 895 F. 2d 1, 17 (1st Cir. 1990); Ramallo Bros. Printing, Inc. v. El Día, Inc., 490 F.3d 86, 90 (1st Cir. 2007). Hence, we conclude that under local law the Trustee is also bona fide purchaser whose intervening rights in the dwelling precludes the rectification performed by the Registrar from relating back to the date of the mistaken entry.
As to Defendants' remaining arguments, we say our ruling here is not intended to penalize anyone. It is intended to uphold the principle of "fé pública registral" which has served us well. We also say that our ruling does not provide a windfall to the estate in bankruptcy, as Defendants will receive the largest distribution from the sale of the residence, and may have other undisclosed sources of recoupment.
WHEREFORE, as there are no material facts in dispute and applicable law favors the Trustee's position, we grant the motion for summary judgment, allowing the Trustee to avoid Defendants' lien over Debtor's residence.
We may enter summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." [cit. omitted]. Garrido, et al. v. Garrido, et al., 370 B.R. 878, 880 (1st Cir. BAP 2007).
`Summary judgment's role is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial,' or whether the evidence is so one sided that one party must prevail as a matter of law. [cit. omitted]
The moving party bears the burden of showing the absence of evidence to support the nonmoving party's position. [cit. omitted] If the moving party has properly supported its position, the burden then shifts to the nonmoving party who must produce sufficient evidence to demonstrate a genuine issue for trial. [cit. omitted] In assessing whether summary judgment is warranted, a reviewing court must view the entire record in the light most favorable to the nonmoving party, indulging all reasonable inferences in the nonmovant's favor. [cit. omitted]
In re Beaulac, 298 B.R. 31, 33 (Bkrtcy. Mass. 2003).
SO ORDERED, in San Juan, Puerto Rico.
IN THE SUPREME COURT OF PUERTO RICO Gasolinas de Puerto Rico Corporation, Petitioner v. No. RG-2000-2 Administrative Appeal Richard F. Keeler Vázquez, Registrar of the Property of Caguas, Respondent.III
As stated earlier, when the deed was presented for recordation in the Registry, the number of the main property from which the property involved in the deed of lease was segregated was mistakenly entered in the Bill of Entry of Presentation. Consequently, the Registrar of Property notified this incident as a deficiency and informed that said deed of lease had to be presented anew with a new bill bearing the correct property number and without cross-outs. The problem, therefore, lies in determining whether it is possible to correct the inadequate entry of the property number in a bill of entry of presentation when presenting a deed in the Registry of Property, or whether this deed has to be presented anew.Before we address this matter, however, let us briefly examine this mechanism of the Registry and the mortgage-law principles involved.
A. The document known as the bill of entry of presentation is closely related to the registry principles of priority or rank. By virtue of this fundamental principle, the recordable acts first presented in the Registry of Property shall have precedence (exclusionary or preferential) over any act presented thereafter, even if the act presented last has an earlier date (prior tempore potior iure). Ramón M. Roca Sastre, Derecho hipotecario: fundamentos de la publicidad registral 1, Barcelona, Ed. Bosch (8th ed. 1995). In this sense, time is an essential factor, because the rank or precedence of the rights will be based on a specific chronology of events.
Thus, according to Mortgage Law sec. 53 (30 L.P.R.A. § 2256), "[r]egistered titles shall become effective for third parties from the date of their registration." The law also provides: "For all intents and purposes, the [presentation] date . . . must appear in the registration itself." Id.
[Translator's note: The Spanish term presentación was erroneously translated in the English version of this section as registration instead of presentation.
Thus, although registered titles become effective for third parties from the date of recordation, the date of their presentation shall be the decisive moment for this recordation to become effective, because the effects of recordation in the Registry are retroactive to the specific date of presentation. Roca Sastre, supra, at 5; Rivera Rivera, supra, at 188; Ponce Federal Savings v. Registrador, 105 D.P.R. 486 [5 P.R. Offic. Trans. 671] (1976).
Now then, written proof of the turn or rank achieved through the presentation of a document is preserved in the Registry of Property through the entry of presentation. In gist, it involves a preliminary entry that must be issued in the order that titles are submitted to the Registry of Property. Its purpose is to accurately set forth the exact moment or instant of the presentation so that the applicant is guaranteed his or her turn according to the order of arrival. Roca Sastre, supra, at 220; 15 Eduardo Vázquez Bote, Derecho privado puertorriqueño: derecho inmobilario registral [(II)] § 19.4, at 494, New Hampshire, Butterworths Pubs. (1992). See Flores v. Arroyo, 43 P.R.R. 268, 269 (1932). ("The entry of presentation is constructive notice to all the world until the document is actually recorded. Once presented, if entitled to record, a deed has all the effects of such a record.")
In practice, the Registry of Property keeps a daily record system in which the documents filed are entered in chronological order. Mortgage Law sec. 34 (30 L.P.R.A. § 2154). This system is applied in Puerto Rico through the mechanism of the bill of entry of presentation. See G.R. sees. 31.1-31.11 of the Mortgage Regulations.
According to this system, all documents sought to be presented shall have attached one of these bills, and the applicant shall be responsible for attaching to all pertinent documents the original and a copy of this sheet. The original bill will be the entry of presentation, and the copy will be the receipt given to the applicant. G.R. sees. 31.4, 31.6, and 31.8 of the Mortgage Regulations. The original bills are then compiled into folders that will, in turn, constitute the Day Book. G.R. sec. 31.9 of the Mortgage Regulations. The Day Book is one of the official books that attest to the contents of the Registry, because it is open to the public and contains all the entries of presentation issued when the bills of presentation are submitted. That is, the Day Book — through the bills it contains — preserves the order of titles presented for recordation and attests to such fact. G.R. sees. 29.1 and 31.9 of the Mortgage Regulations.
"The official volumes kept in the Registry of Property and that shall attest to their content shall be . . . and the Day Book." Section 29.1 of the General Regulations for the Execution of the Mortgage and Property Registry Act 278 (spec. ed. 1998) (Mortgage Regulations).
Since the entry of presentation confirms the information necessary to give public notice of titles presented that may affect a specific property and of their respective rankings, or order of precedence, a mistake made in the original bill of entry of presentation regarding the property number could disrupt the correct publicity that must be guaranteed by Registry entries. Consequently, each bill must accurately set forth the necessary information to fulfill the purpose of the entry of presentation in terms of providing adequate identification of the title being presented and attesting to the fact of its recordation in the Registry.
Among other things, the Bill of the Entry of Presentation must contain: (1) entry and Day Book number; (2) date and time of presentation; (3) identification of document; (4) the rights whose recordation, cancellation or annotation is sought; (5) description of the properties with respect to which the registry procedures are sought and their location; (6) the person in whose name registration is sought; and (7) description of the documents attached thereto. G.R. sec. 31.10 of the Mortgage Regulations.
Consequently, since the property number in the bill of entry of presentation identifies the property affected by a legal transaction, the erroneous statement of such number is tantamount to a lack of adequate notice of the fact that, in the sphere of legal reality outside the Registry, a title has been conveyed encumbering said property and, thus, giving rise to the undesirable anomaly of an inaccuracy in the Registry.
In the instant case, when the wrong property number was recorded in the bill, the entry of presentation publicized the wrong property. Therefore, the mistaken presence of an entry of presentation for property No. 2,264 entailed the publication of an absence of encumbrances on property No. 30,049. In these circumstances, we deem that the Registrar of Property acted correctly in not making the recordation sought based on this mistake that had previously gone undetected in the bill. However, we believe that instead of requesting a new presentation of the document, he should have followed the statutory and regulatory procedures for correcting entries.
B. As a general rule, the Registrar of Property has the obligation to issue the entry of presentation to every applicant, inasmuch as the Mortgage Law itself provides that "[t]he Registrar shall make a note in the Day Book of every title presented at the Registry for registration or annotation, even though he believes that some legal requirement may be missing." Mortgage Law sec. 50 (30 L.P.R.A. § 2253). Undoubtedly, this section sought to clearly establish that all applicants have the right to demand that the Registry accept all the documents filed and to have the entry of presentation issued to preserve their corresponding turn, regardless of the fact that not all the necessary requirements are met. Of course, the survival of the rank obtained will be subject to a subsequent process of qualification and correction of notified deficiencies.
Despite the Registrar's duty to issue the entry of presentation, the Mortgage Regulations incorporate an exception to this obligation that is relevant to the instant case. G.R. sec. 31.6(a) of the Mortgage Regulations at 285-286, provides in pertinent part:
It shall be the responsibility of the applicant to properly fill out said bill, which may not contain ink blots, crossing-outs or erasures. The employee shall verify the correction of the bill in light of the document submitted for his or her consideration. If they coincide, the applicant and the Registry employee shall sign it prior to moving on to the next stage of the presentation process.
If the bill of entry of presentation is not correctly filled out, the document involved will not be presented. The document presentation process may not be held up because applicants need time to correct or to add information missing from the bill of entry ofpresentation. [Emphasis added.]
This section incorporated into our body of registry and mortgage laws — in line with the authority conferred by Mortgage Law sec. 36 (30 L.P.R.A. § 2156) on the Secretary of Justice to regulate and require these bills — a situation in which the Registrar may refuse to make the entry of presentation by not receiving the document sought to be submitted.
This also occurs in other circumstances. For instance, the entry of presentation cannot be made if the total fees are not included (30 L.P.R.A. § 1767d); when the refusal is not appealed, the defects are left uncorrected and the document is presented anew (Mortgage Law sec. 79 (30 L.P.R.A. § 2282)), and when the refusal is affirmed by the Supreme Court, the deficiencies remain uncorrected, and the document is presented again by the same party or by another person (Mortgage Law sec. 79 (30 L.P.R.A. § 2282)). Luis Rafael Rivera Rivera, Derecho registral inmobiliario puertorriqueño 260, San Juan, Jurídica Eds. (2000).
Now then, this regulatory provision was not applied here. Ordinarily, if the official in charge of receiving the documents presented in the Registry of Property confronts this type of situation, he or she must return the bill to the applicant so that the latter may prepare a new one and record it according to its turn in the Registry. Here, however, the deficiency in the bill of presentation was not noticed during the presentation process, since it went undetected, and an entry of presentation was made on a property whose number appeared in the bill. In fact, when the Bill of Entry of Presentation was included in the Day Book, the Registry books showed the presentation of a deed of lease on property No. 2,264, and not on property No. 30,049. It was not until after the document was presented that the Registrar of Property noticed the mistake in the bill when he observed the anonymous correction and cross-out.
Certainly, according to sec. 31.6(a) of the Mortgage Regulations, it is the applicant's responsibility to correctly fill out the bill. However, the employee of the Registry of Property also has the responsibility of "verify[ing] the correction of the bill in light of the document submitted for his or her consideration." Id. In this sense, the responsibility is shared and both, in this case, contributed to what transpired: one, for failing to adequately fill out the bill, and the other, for failing to examine it carefully by comparing it to the deed of lease.
In any event, the lack of circumspection on the part of the Registry of Property official in failing to detect the mistake in the bill led to a situation of error in the Registry, a scenario governed by the provisions related to the correction of errors by the Registrar in Registry entries. See Mortgage Law secs. 150-154 (30 L.P.R.A. §§ 2501-2505), and G.R. sees. 141.1-144.1 of the Mortgage Regulations. See also Rivera Rivera, supra, at 318-323.
It is appropriate to clarify on this point that in deciding this case under this statutory and regulatory scheme, we cannot lose sight of the reality announced by the Registry entries regarding the situation of the properties in question and of the effect this could have had on the trust placed in the records of the Registry by third parties who have legitimately acquired rights over these properties. In this respect, a commentator has remarked:
[I]n all situations of error, one must bear in mind that the entry, as worded, produces its normal effects with regard to its entire content until it is corrected by legal means, and the mere allegation that it is mistaken does not suffice to strip it of any of those effects.
5 Buenaventura Camy Sánchez-Cañete, Comentarios a la legislación hipotecaria 683, Pamplona, Ed. Aranzadi (1983). (Emphasis added.)
On this last point, we take judicial notice of the fact reported by the Registrar of Property in the sense that after the Bill of Entry of Presentation in question was submitted, titles on property No. 30,049 (the property referred to in the deed of lease presented) were presented. The documents submitted by the Registrar specifically point out that several deeds that encumber property No. 30,049 have been presented after May 5, 1997 (the date on which the deed of lease was presented) and up to the date on which this Administrative Appeal was instituted.
Among these deeds, the following ones are pending recordation: (1) Deed No. 4, executed on February 10, 1999, before notary public Orlando R. González, Entry 186, Day Book 859; (2) Deed No. 10, executed on February 17, 1999, before notary public Orlando R. González, entry 95, Day Book 861; (3) Deed No. 3, executed on February 6, 1999, before notary public Orlando R. González, entry 187, Day Book 859; (4) Deed No. 5, executed on February 10, 1999, before notary public Orlando R. González, entry 188, Day Book 859; (5) Deed No. 6, executed on February 3, 1998, before notary public Rafael Fernández Britto, entry 138, Day Book 819. See Notice, September 28, 1999, at 2; Certificate of the Registrar of Property, August 24, 1999 (Answer to Administrative Appeal, Appendix III).
The Mortgage Law of 1893 (30 L.P.R.A. former § 31 et seq.), which preceded our current statute, set forth the circumstances and procedures to be followed for correcting an entry in the Registry of Property, depending on whether the error committed was a so-called material error or an error of construction. See secs. 254-264 of the Mortgage Law of 1893 (30 L.P.R.A. former §§ 431-441).
However, with the enactment of the 1979 Mortgage Law, the Legislative Assembly opted to dispense with this distinction among the types of errors to be corrected and rather stressed the availability to the Registrar of the title filed for recordation. Thus the Mortgage Law currently in force allows for the correction of errors in the Registry provided that the document that triggered the action is available for inspection, and as long as the correction does not affect the rights of registered titleholders. Pino Development Corp. v. Registrador, 133 D.P.R. at 380 [33 P. R. Offic. Trans. at ___].
See Informe de la Comisión de lo Juridico del Senado sobre el P. del S. 792 [Report of the Senate Committee on Legal Matters on S. B. 792], 8th Leg., 3d Ord. Sess. 12 (May 18, 1979):
"We recommend that the established practice of correcting errors be accepted, provided that the title that caused the recordation is available for scrutiny, regardless of the nature of the error, provided that the subsequent titleholders are not harmed or consent to it."
See also Informe de la Comisión de lo Jurldico de la Cámara de Representantes sobre el P. del S. 792 [Report of the House Committee on Legal Matters on S. B. 792], 8th Leg., 3d Ord. Sess. 17 (June 1979):
"The current law established a classification of errors of construction and material errors for the correction of errors committed in the entries made by the Registrar. In light of the developments in this field, this classification is not justified. Given the problems entailed by the classification and attendant difficulties, our bill adopts Sections 150 and 151, which do away with all classifications and stress the fact whether the document is still at hand and available to the Registrar."
Mortgage Law sec. 150 (30 L.P.R.A. § 2501) provides in pertinent part:
When errors have been made in presentation entries or notes which are not made directly and specifically by virtue of a title, and in reference indications, they may be rectified even though the title motivating the registration may not be available, provided that the corresponding main registration is sufficient to reveal the error and it is possible to rectify the latter by it. [Emphasis added.]
Likewise, G.R. sec. 141.3 of the Mortgage Regulations, at 391, provides, in pertinent part:
Registrars may themselves correct, under their responsibility, the errors committed:
. . . .
Second: In the entries of presentation, margin notes not made directly or specifically by virtue of a title, and in reference indications, even if the titles are not available in the Registry office, provided that the corresponding main registration suffices to reveal the error and that it is possible to rectify the latter by it. [Emphasis added.]
The cited provisions show that, ordinarily, an error in the entry of presentation (and, consequently, in the bill of entry of presentation) may be corrected by the Registrar, motu proprio, regardless of whether the titles that gave rise to the entries are in the Registry office; and if they are not available, they may be corrected by the Registrar of Property when the error and the information necessary to correct it arise from the main recordation. Under no circumstances, however, may the Registrar correct the error by crossing it out; the preparation of a new entry is necessary. G.R. sec. 141.1 of the Mortgage Regulations.
The law, however, does provide that the authority to correct, motu proprio, an entry of presentation comes into effect when such a correction may affect the rights of registered titleholders, as is the situation in this case. In that respect, the second paragraph of Mortgage Law sec. 151 provides:
When rectification might affect the rights of registered titleholders, their consent or a judicial resolution ordering the rectification of the entries shall be required.
30 L.P.R.A. § 2502. (Emphasis added.) See also G.R. secs. 141.5 and 142.1 of the Mortgage Regulations.
Thus, before correcting or rectifying any fact set forth in the Registry of Property, the consent of these titleholders whose rights could be affected by the correction must be sought; and, in the absence of this consent, "the Registrar or the party seeking the correction must first obtain a court decision to that effect" ordering the correction of the entry. G.R. sec. 141.5 of the Mortgage Regulations, at 392.
With regard to the manner in which this consent of subsequent titleholders must be presented, the Regulations specify that it should be presented to the Registrar through a signed petition authenticated before a notary public. G.R. sec. 142.1 of the Mortgage Regulations.
Now then, the Mortgage Law provides that rectification of an error shall become effective on the date said correction takes place (Mortgage Law sec. 154 (30 L.P.R.A. § 2505)), provided, of course, that said change would not affect those third persons protected by the Registry's attestation authority. See Mortgage Law sec. 110 (30 L.P.R.A. § 2360): "In no case, may correction of the Registry impair the rights legitimately acquired by a third party who meets the conditions hereby established."
In other words, ordinarily, according to the law, the effectiveness of the correction of errors in Registry entries under this statutory scheme shall be effective as of the moment they are made. Nonetheless, we must clarify that if all the titleholders affected by the correction give their consent — including subsequent titleholders who trusted and believed in the status publicized by the Registry — the effect of the correction may be retroactive to the date on which the deed was presented for recordation. Otherwise, it would make no sense to seek the consent of the titleholders because if, even with their consent, the correction was always prospective, their rights would not be affected in any way, and such consent would be absurd.
It arises from the above that it was the duty of the Registrar of Property to notify the applicant that it had to seek the consent of those registered titleholders whose rights could be affected by the correction of the bill of presentation in order to then correct the bill. In the alternative, the Registrar should have asked the Court of First Instance — or notified the applicant and asked it to do so — to order that said correction be made if appropriate. See sec. 141.1 et seq. of the Mortgage Regulations.
We must reiterate that the Registrar of Property did not have the option of simply ignoring the error in the bill and recording the title presented, thus validating a cross-out that no one knows when it was made. The crucial importance of the bill of entry of presentation in the registry law system — in terms of how it guarantees correctness in the publicity of the date and other circumstances surrounding the titles presented — simply eliminates this option. Moreover, the Mortgage Regulations provide that the errors committed by the Registrar "shall not be corrected by cross-outs, interlineations or erasures, but rather by drawing up a new entry in the manner set forth in Title IX of the Law." G.R. sec. 141.1 of the Mortgage Regulations, at 390. Consequently, the Registrar was correct in refusing to record the deed. However, the Registrar should not have notified this deficiency in order to demand a new presentation of the public deed, given the fact that another legal mechanism was available to him.