# EUROBANK

> United States Bankruptcy Court, D. Puerto Rico · December 29, 2011

URL: https://www.frixlaw.com/law-library/cases/11356423

## Case

- **Full name:** In re: Deckers Construction, Inc. v. Westernbank Puerto Rico
- **Court:** United States Bankruptcy Court, D. Puerto Rico
- **Decided:** December 29, 2011
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE: Case No. 05-12871 (MCF)
DECKERS CONSTRUCTION, INC., Chapter 7
Debtor(s).
ERUROBANK,
Adv. No. 09-00239 (MCF)
Plaintiff(s),
V.
WESTERNBANK PUERTO RICO,
Defendant(s).
OPINION AND ORDER
The controversy before the Court revolves around competing
security interests in accounts receivable of the Debtor, Deckers
Construction, Inc. (hereafter referred to as "Debtor" or
"Deckers"). Plaintiff, Eurobank, now Oriental Bank (hereafter
referenced to as "Eurobank"), asserts that it has a super
priority interest over Defendant, Westernbank Puerto Rico, now
Banco Popular de Puerto Rico (hereafter referenced to as
"Westernbank"), in the accounts receivable of Deckers even
though Westernbank's security interest was recorded prior to
Burobank's. Eurobank contends that its junior security interest
trumps Westernbank's because Eurobank's security interest falls
within the scope of a purchase money security interest
(hereafter referenced to as "PMSI"). Defendant disagrees and

argues that the general rule of "first in time, first in right"
governs rather than the exception of the purchase money security
interest.
For the reasons set forth below, the Court holds that
BFurobank's security interest does not fall within the scope of a
PMSI under the Puerto Rico Uniform Commercial Code, and,
consequently, the general rule of "first in time, first in
right" governs in this case.
I. UNCONTESTED MATERIAL FACTS AND PROCEDURAL HISTORY
By agreement of the parties at the initial scheduling
conference,! this matter is appropriate for summary judgment
disposition as there are no material facts in dispute and one of
the parties is entitled to judgment as a matter of law, pursuant
to Fed. R. Civ. P. 56(c), as made applicable to these
proceedings by virtue of Fed. R. Bankr. P. 7056. Celotex v.
Catrett, 477 U.S. 317 (1986) (citing Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250 (1986)); Vega-Rodriguez v. Puerto Rico
Tel. Co., 110 F.3d 174, 178 (1st Cir. 1997).
The relevant undisputed facts are as follows:
1. Desarrollo de Vivienda del Centro, Inc. (hereafter
referenced to as “DVC”) is the general partner of the Comerio
Housing Limited Partnership, S.E. (hereafter referenced to as

' Docket No. 43.

“Comerio Housing”) and Villalba Housing Limited Partnership,
S.E. (hereafter referenced to as “Villalba Housing”).
2. On January 10, 2002, Deckers executed a construction
contract with DVC and Comerio Housing in the amount of
$4,000,972.00 (hereafter referenced to as the “Comerio
Project”). On that same date, Deckers also executed a

construction contract with DVC and Villalba Housing in the
amount of $4,471,000.00 (hereafter referenced to as the
“Villalba Project”). Deckers' services under these contracts
were to construct mixed residence complex apartments for the
elderly and for families that qualify for a social housing
program (collectively referenced to as "The Projects").
3. On February 6, 2003, Westernbank granted Deckers a line of
credit in the amount of $1,500,000.00 for the operational
expenses in the following construction projects:
(a) Remodelación del Residencial Público Luis Muñoz Rivera;
(b) Starbucks San Patricio Plaza Shopping Center; (c) Starbucks

Old San Juan; (d) Estacionamiento Municipal Guayama; (e) the
Villalba Project; and (f) the Comerio Project.
4. Westernbank's line of credit was guaranteed by the
accounts receivable of the above-listed construction projects,
including The Projects. Deckers and Westernbank executed before
a notary public several security agreements for the assignment
of the accounts receivable of The Projects, and executed
financing statements for these security agreements. The
financing statements were recorded before the Department of
State of Puerto Rico on March 18, 2003.
5. Subsequently, on November 26, 2003, Eurobank, granted a
loan to Deckers guaranteed by a security interest in the
accounts receivable of The Projects. The purpose of the loan was

for "the construction of the Comerio and Villalba projects,
guaranteed by a security interest in the accounts receivable
that the Comerio and Villalba construction projects would
generate." (Docket No. 1 ¶ 18).
6. Deckers and Eurobank executed before a notary public
certain security agreements for the assignment of the accounts
receivable of The Projects, and executed financing statements
for these security agreements. The financing statements were
recorded before the Department of State of Puerto Rico on
December 3, 2003.
7. Approximately two years later, on October 31, 2005, Deckers

filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code. (Case No. 05-12871, Docket No. 1).
8. The case was later converted to a proceeding under Chapter
7 of the Bankruptcy Code on January 24, 2008. (Case No. 05-
12871, Docket No. 586).
9. The Chapter 7 Trustee (hereafter the "Trustee") filed a
Stipulation on October 6, 2008, regarding the outstanding sums
due to Debtor by DVC under The Projects. (Case No. 05-12871,
Docket No. 656). As a result of said Stipulation, DVC tendered
to Trustee the net amount of $900,000.00 to be kept in an
interest-bearing escrow account by the Trustee pending the
resolution of an adversary proceeding to be filed to determine
which security interest is superior between Eurobank and

Westernbank. (Case No. 05-12871, Docket No. 656).
10. The Stipulation was approved by the Court on November
17, 2008. (Case No. 05-12871, Docket No. 684).
11. Eurobank filed the instant Adversary Proceeding
against Westernbank on November 30, 2009, to determine the
priority and extent of its, and Westernbank's, lien over the
accounts receivable in The Projects. (Docket No. 1).
12. Westernbank and Eurobank were respectively closed on
April 30, 2010 by the Financial Institutions of the Commonwealth
of Puerto Rico, which appointed the FDIC as receiver. The FDIC
entered into purchase and assumption agreements, as well as

loss-share transactions, with Banco Popular de Puerto Rico and
Oriental Bank to assume all of the deposits and assets of
Westernbank and Eurobank, respectively. As a result of this,
Banco Popular de Puerto Rico substituted Westernbank as
Defendant, and Oriental Bank substituted Eurobank as Plaintiff
in the instant case.
13. Westernbank and Eurobank filed their cross motions for
summary judgment on May 13, 2011. (Docket Nos. 56, 57, 58, and
60).
14. Oral arguments on the motions for summary judgment
were held before the Court on October 26, 2011. (Docket No. 79).
II. LEGAL ANALYSIS
It is undisputed and admitted by both parties that their
respective perfected security interests do, in fact, cover the
accounts receivable over The Projects. Both parties agree that
Westernbank's security interest was recorded before Eurobank's
security interest at the Puerto Rico Department of State.
However, Eurobank claims that the general rule of "first in
time, first in right" does not apply to its security interest
because the same is a PMSI, which is excepted from the general
rule and takes priority over previously perfected security
interests.
To resolve the super priority issue among these competing
secured creditors, we begin our analysis by looking at the
priority dispositions of the Puerto Rico Uniform Commercial
Code.
A) Priorities under the Puerto Rico Uniform Commercial Code
The Puerto Rico Uniform Commercial Code, also known as the
Commercial Transactions Act (known in the Spanish language as
the "Ley de Transacciones Comerciales"), 19 L.P.R.A. §§ 401 et

seq., was enacted through Law No. 208 of August 17, 1995
(hereafter referenced to as the "PR-UCC"). By creating the PR-
UCC, the Puerto Rico legislature adopted nine (9) of the
thirteen (13) articles of the Model Uniform Commercial Code (the
"UCC"), the premier commercial statute which has been
incorporated, either in whole or in part, by the fifty (50)

states, the District of Columbia and the Virgin Islands.
Article 9 of the UCC, one of the articles adopted by the
PR-UCC, contains provisions regarding security interests,
negotiable instruments, and consignments. 19 L.P.R.A. §§ 2001-
2207. Those transactions covered by the Commercial Transactions
Act shall be applicable to, including "any transaction
(regardless of its form) which is intended to create a security
interest in personal property or fixtures including goods,
documents, instruments, general intangibles, chattel paper or
accounts." 19 L.P.R.A. § 2002(a). In order for the security
interest to be perfected over personal property, including

chattel paper and accounts, the financing statement must be
filed at the Puerto Rico Department of State. 19 L.P.R.A.
§ 2151(b).
Section 9-312 of the PR-UCC lists the order of priorities
with regards to conflicting security interests over the same
collateral. The same reads, at its pertinent parts:
(1) ...

(2) ...

(3) A perfected purchase money security interest
in inventory has priority over a conflicting
security interest in the same inventory and also
has priority in identifiable cash proceeds
received on or before the delivery of the
inventory to a buyer [under certain
circumstances].

(4) A purchase money security interest in
collateral other than inventory has priority over
a conflicting security interest in the same
collateral or its proceeds if the purchase money
security interest is perfected at the time the
debtor receives possession of the collateral or
within thirty (30) days thereafter.

(5) In all cases not governed by other rules
stated in this section (including cases of
purchase money security interests which do not
qualify for the special priorities set forth in
subsections (3) and (4) of this section),
priority between conflicting security interests
in the same collateral shall be determined
according to the following rules:

(a)Conflicting security interests rank
according to priority in time of filing or
perfection. Priority dates from the time a filing
is first made covering the collateral or the time
the security interest is first perfected,
whichever is earlier, provided that there is no
period thereafter when there is neither filing
nor perfection.

(b) So long as conflicting security
interests are unperfected, the first to attach
has priority.

(6) ...

(7) ...

19 L.P.R.A. § 2112.
When there are more than one perfected security interests
covering the same collateral, the general rule of priority is
that the security interest whose financing statement was
registered first at the Puerto Rico Department of State shall be
superior over the security interest whose financing statement
was registered later. 19 L.P.R.A § 2112(5). This general maxim

is known as the "first in time, first in right" rule. This rule,
however, is not absolute. One of the exceptions to the same is
the purchase money security interest. 19 L.P.R.A. § 2112(3)-(4).
i) Purchase money security interest ("PMSI")
The traditional concept of a PMSI is described as follows:
The purchase money secured creditor is often the
seller of a product who has retained a security
interest [over said product] to secure its
purchase price....

James J. White & Robert S. Summers, Uniform Commercial Code,
Hornbook Series, at 846 (5th ed. 2004).

In other words, "[a] purchase money security interest...can be
either an interest that a seller of property retains to secure
the property's purchase price or an interest taken by a creditor
who gives value to enable a debtor to acquire rights in the
collateral." Dana L. McAlister, Purchase Money Security
Interests and Their Continuing Priority as to Proceeds, 34
Boston College L. Rev. 655, 656 (1993).
PMSIs are granted "super priority" over a prior security
interest covering the same collateral in order to prevent a
"stranglehold" by a floating lienor on debtor's future access to
money from other creditors. By providing this preferential
treatment to PMSIs, the UCC tries to avoid the situation where:
an un-yielding creditor may be able to frustrate
future outside borrowing by his debtor, since any
future lender will be confronted with the fait
accompli of a prior perfected security interest
that gives the al-ready [sic] secured party
priority even for subseguent advances.[] Article
9 mitigates this undesirable consequence of the
floating lien by affording a special priority to
the ‘purchase money' lender. The Code's favorable
treatment of the purchase money lender rests ona
general policy...of giving new money priority
protection over old.
Thomas H. Jackson & Anthony T. Kronman, A Plea for the Financing
Buyer, Yale L.J., Vol. 85, No. 1-2, at 1 (1975). See also, 1A -
7B Secured Transactions under the UCC § 7B.05("the purchase-
money priority ‘'frees' the debtor to turn to other financers
when it decides to acquire new assets").
For these reasons, a PMSI will trump a previously perfected
security interest and disregard the general rule of "first in
time, first in right."
III. DISCUSSION
In order to consider whether Eurobank's security interest
qualifies for super priority status as a PMSI, Eurobank must
show that it either complies with Section 9-107(a) or Section 9-
(b) of the PR-UCC, 19 L.P.R.A. § 2007.
Section 9-107 of the PR-UCC states:
A security interest is a ‘purchase money security
interest' to the extent that it is

10

(a) Taken or retained by the seller of the
collateral to secure all or part of its price, or

(b) taken by a person who by making advances or
incurring an obligation gives value to enable the
debtor to acquire rights in or the use of
collateral if such value is in fact so used.

Id.
A PMSI under Section 9-107(a) is "inspired by the
traditional conditional sales contract: the seller retaining
'title' to secure the purchase price of the goods...". 1A-7B
Secured Transactions under the UCC § 7B.04. Section 9-107(a) is
inapplicable to the instant case in light of the fact that
Eurobank's transaction consists of a financing transaction to
provide funds for the construction of the Comerio and Villalba
projects, and is not a sales agreement of any kind. Therefore,
Eurobank's security interest does not qualify as a PMSI under
Section 9-107(a).
Whether Eurobank's security interest qualifies as a PMSI
under Section 9-107(b), the Court must consider if Eurobank,
through the financing granted to Deckers, and the security
interests created therein: (1) extended new value to Deckers;
(2) to be used to enable Deckers to acquire rights in the
accounts receivable; and (3) whether Deckers used said value for
the intended purpose of acquiring rights over the accounts
receivable of The Projects. See MBank Alamo Nat'l Ass'n. v.
Raytheon Co., 886 F.2d 1449, 1453 (5th Cir. 1989) (the creditor
moving for PMSI consideration over accounts receivable must show
"(1) that it gave value; (2) that the value given enabled [the
debtor] to acquire rights in the accounts receivable; and (3)
that the accounts receivable qualify as collateral within the
meaning of the statute.").
These factors must be scrutinized in the following fashion:
(1) New value vs. antecedent debt. The purchase
money creditor took its interest to secure new
value either in the form of an advance, an
obligation or the delivery of the collateral
itself. As comment 2 to old Section 9-107 stated:
"any security interest taken as security for or
in satisfaction of a preexisting claim or
antecedent debt" is excluded from the purchase
money category.
(2) Acquisition vs. retention or production or
generation. The purchase money creditor enabled
the acquisition of the collateral rather than
enabling the retention of the assets or their
production or generation in the debtor
enterprise...
(3) Intent vs. happenstance. A creditor who
disbursed funds for general operational purposes
that did not involve acquisitions was not moved
into the purchase money category....
Secured Transactions under the UCC § 7B.04(emphasis added).
a) New Value
Both Eurobank's financing and security agreements over the
Villalba and Comerio Projects indicate that Eurobank did, in

12

fact, advance funds to Deckers.2 Said financing was for the
construction of The Projects, guaranteed by a security interest
in the accounts receivable that each of the construction
projects would generate.
According to Section 1-201(44) of the PR-UCC, a person
gives value when he acquires rights:

(a) In return for a binding commitment to extend
credit or for the extension of immediately
available credit whether or not drawn upon and
whether or not a charge-back is provided for in
the event of difficulties in collection; or

(b) as security for or in total or partial
satisfaction of a pre-existing claim; or

(c) by accepting delivery pursuant to a
preexisting contract for purchase, or

(d) generally, in return for any consideration
sufficient to support a simple contract.

19 L.P.R.A. § 451(44). See, e.g., MBank Alamo, 886 F.2d at 1452
("The value requirement is satisfied by any consideration
sufficient to support a simple contract.").

Based on the above, it is clear from the contractual
documentation that Eurobank, through the financing extended on
November 26, 2003, meets the "value" portion of the PMSI
analysis.

2 Exhibit IX of Docket No. 57; Claim No. 54-1 of Case No. 05-12871(MCF);
Exhibit X of Docket No. 57; Claim No. 55-1 of Case No. 05-12871(MCF); and
Docket No. 1 ¶ 18.
b) The value enabled the acquisition of the
collateral
Both Eurobank and Westernbank cite the same case law to
support their respective positions as to whether Eurobank's
security interest over the accounts receivable of The Projects
qualify as a PMSI under Section 9-107(b):? Northwestern Nat'l
Bank v. Lectro Syst., Inc., 262 N.W.2d 678 (Minn. 1977), In re
Woodworks Contemporary Furniture, Inc., 44 B.R. 971 (Bankr. W.D.
Wis. 1984), MBank, 886 F.2d 1449, and First Interstate Bank of
Utah v. Internal Rev. Serv., 930 F.2d 1521 (10th Cir. 1991).
Of the four cases relied upon by the parties, the decision
of MBank Alamo, 886 F.2d 1449, provides us with the most
comprehensive discussion as to the general concept and
requirements of PMSIs. In MBank Alamo, the Court of Appeals for
the Fifth Circuit, with regards to the second and third prongs
of the test, the court expressed that:

To create a PMSI, the value must be given ina
manner that enables the debtor to acquire
interest in the collateral . This is accomplished
> From a philosophical standpoint, there has been some debate as to whether
accounts receivable can even enjoy PMSI status. Uniform Commercial Code,
Hornbook Series, at 847("Except when they are proceeds, security interests in
accounts receivable and other intangibles will not enjoy purchase money
status."). However, it has been considered that, "although traditionally the
only type of purchase money security interest the law has concerned itself
with is that in goods, there is no reason why the purchase money concept
should not apply to intangible property such as contract rights." In re
Woodworks, 44 B.R. at 972 (citing Gilmore, The Purchase Money Priority, 76
Harvard Law Review 1333, 1374).
Defendant has not raised the issue of whether accounts receivable qualify for
PMSI status. Therefore, the Court will make no determination whatsoever as to
the applicability of one viewpoint over the other on this matter.

14

when a debtor uses an extension of credit or loan
money to purchase a specific item. See Ingram v.
Ozark Prod. Credit Assoc., 468 F.2d 564, 565 (5th
Cir. 1972); In re Dillon, 18 Bankr. 252, 254
(Bkrtcy.E.D.Cal. 1982) (PMSI lien attaches to
item actually purchased); Jackson & Kronman,
Secured Financing and Priorities Among Creditors,
88 Yale L.J. 1143, 1165 (1979) (PMSI priority
limited "to loans that can be traced to
identifiable, discrete items of property.").

Id. at 1453(emphasis added).

The decisive factors under the second and third prongs of
the three part test rely on the interplay between "value given"
and "acquisition of collateral." The collateral must be obtained
on or after the debtor receives the new value, and that said
collateral was obtained as a result of such value. Id.
The court in Northwestern, reasoned that the definition of
a PMSI "contemplates that the loaned funds be intended, and
actually used, for the purchase of an identifiable asset which
stands as the secured party's collateral." 262 N.W.2d at 680.
The Northwestern court denied the creditor super priority status
because "[t]his is not a case in which funds were advanced and
used for purchase of a receivable; the contract was already in
existence between Agate and Lectro when Cox loaned funds to
Agate and entered into a security agreement with it." Id. This
case supports the notion that accounts receivable that stem from
an already existing contract prior to obtaining new value by the
creditor, may not qualify for PMSI status.
In the case of Woodworks, 44 B.R. 971, 973, which makes
reference to the decision in Northwestern, the Bankruptcy Court
for the Western District of Wisconsin expressed that
transactions in which funds were loaned so that borrowers could
perform under preexisting contracts do not fall within the scope
of a PMSI.

Finally, in the case of First Interstate, 930 F.2d at
1526 - 1527, the Court of Appeals for the Tenth Circuit states
that, in a situation where a lender advances funds to a debtor
for operational expenses to allow the debtor to fulfill
preexisting contractual obligations, and for which the debtor,
in turn, extends a security interest over the accounts
receivable of said obligations to the lender, said transaction
does not constitute a PMSI.
An important distinction exists between funds
extended for asset acquisition and those extended
for the ordinary operation of business. A bright-
line demarcation must always exist between these
two purposes. To accept the lender's contention
in this case would be to blur, if not eliminate,
that line... Accordingly, we conclude that the
right to perform the pre-existing executory
contract in this case is not "collateral" or the
"rights in collateral" within the requirements of
the U.C.C.

Id.
The instant case contains a similar situation to the one
considered in Woodworks and First Interstate. Particularly as to
the fact that:
(1) we are dealing with a situation in which Deckers had
already incurred in preexisting contractual obligations at the
time it incurred in the financing with Eurobank (i.e., the
constructions contracts entered between Deckers and DVC and
Comerio Housing, as well as between Deckers and DVC and Villalba
Housing);

(2) the financing was obtained for purposes of allowing
Deckers to perform under the preexisting construction contracts;
and
(3) while the financing did allow Debtor to perform under
the construction contracts, the advance was not intended, nor
actually used, for the purchase of an identifiable asset which
stands as Eurobank's collateral (i.e., the accounts receivable).
See Northwestern, 262 N.W.2d at 679; Woodworks, 44 B.R. at 973;
First Interstate, 930 F.2d at 1526-1527.
The "acquisition" of Decker's right to generate and receive
accounts receivable under The Projects took place back on

January 10, 2002, when Deckers entered into the construction
contracts with DVC, Comerio Housing, and Villalba Housing.
Through the financing provided, Eurobank supplied funds to
Deckers for the construction of the Comerio and Villalba
Projects, and not for the specific purpose to allow Deckers to
purchase or acquire rights on any accounts receivable. The
accounts receivable were given as a security for the repayment
of the monies loaned for the construction of The Projects.
It is clear from the facts at hand that Eurobank's value
enabled Deckers to fulfill its obligations under the preexisting
construction contracts. Said value did not enable Deckers to
acquire any rights or interest over the accounts receivable of

The Projects. Furthermore, we are not faced with a situation in
which the funds were advanced exclusively for purposes of
allowing Deckers to acquire and/or purchase new accounts
receivables. Woodworks, 44 B.R. 973; MBank Alamo, 886 F.2d
1453. In other words, Eurobank "did nothing more than fund the
debtor's performance of its contracts in its ordinary business
operations; it did not enable the debtor to acquire a discrete
new asset." First Interstate, 930 F.2d at 1524.
In view of the foregoing, by having extended financing
solely to permit Deckers to perform under a pre-existing
executory contract, Eurobank's security interest in this case

does not qualify as "collateral" or the "rights in collateral"
within the scope of a PMSI pursuant to Section 9-107(b) of the
PR-UCC.
As a means to overcome the deficiencies of the PMSI test,
Eurobank proposes an alternate interpretation to its
transactions and its security interest thereto distinguishable
from the reasoning in the Woodwork case. Specifically, Eurobank
argues that it "is not claiming a security interest over the
"rights in the contract;' conversely, it is claiming a security
interest or priority over the part of the project receivables
representing the reimbursement of construction costs advanced by
Eurobank, its predecessor in interest.™
However, according to Eurobank's contractual documentation,
Burobank's security interest consists of "moneys, rights and
credits to be perceived under" The Projects (i.e., the accounts
receivable).”’ Said documentation in no way distinguishes between
accounts receivable and "the part of the project receivables
representing the reimbursement of construction costs." The Court
does not find any distinction between one characterization over
the other, constituting an issue of the proverbial "tomato
(/ta'mertou/), tomato (/te'ma:tou/)."° Furthermore, Eurobank has
not shown how this alleged characterization in any way
demonstrates how its value allowed the acquisition over new
collateral and contractual rights by Deckers, so as to comply
with the PMSI test.
Burobank also argues that it has superior rights to the
proceeds from the construction contracts for The Projects under
Article 1152 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3224,

Docket No. 60 at 8(emphasis added).
° Exhibit IX of Docket No. 57; Claim No. 54-1 of Case No. 05-12871 (MCF), and
Exhibit xX of Docket No. 57; Claim No. 55-1 of Case No. 05-12871(MCF). (our
translation)

19

due to the fact it notified its assignment of the contract
proceeds to the owners of The Projects, who, in turn,
acknowledged and consented to make direct payments to Eurobank.’
EBurobank, then, goes on to admit that "[n]Jotification to a
debtor of a potential account receivable is not a requirement
for perfection of the lien, " but that said notification "is to
establish clearly the proper payee of the contract funds, and to
protect the debtor from having to pay twice."®
At the oral argumentation for the cross motions for summary
judgment,’ Westernbank explained that the notification provisions
of Article 1152 is, in fact, a mechanism to protect a debtor
from having to pay twice in those cases where the indebtedness
has been assigned to a different creditor. However, contrary to
Burobank's assertion, Westernbank asserts that compliance with
the same does not control the issues of perfection and priority
of security interests under Article 9 of the PR-UCC.
The Court agrees with Westernabk's position that Article
1152 of the Puerto Rico Civil Code has no bearing with regards
to issues of perfection or priority of the instant security
interests. This matter is governed by Article 9 of the PR-UCC
because Section 9-102 (4) expressly excludes from its
dispositions those provisions of the Puerto Rico Civil Code

’ Docket No. 60 at 8.
® Docket No. 60 at 8(emphasis added).

20

"with respect to pledges and with respect to transmission of
credits," such as the assignments contained in the case at bar.
19 L.P.R.A. § 2002(4) (emphasis added).
For the reasons stated above, the Court finds that
BFurobank's security interests do not fall within the scope of a
PMSI under Section 9-107 of the PR-UCC, 19 L.P.R.A. § 2007.
Consequently, the applicable priority scheme in the instant case
is the general rule of "first in time, first in right" contained
at Section 9-312(5) of the PR-UCC, 19 L.P.R.A. § 2112(5).
In light of the undisputed and admitted fact that
Westernbank filed its financing statement before Eurobank at the
Puerto Rico Department of State, the Court hereby finds that
Westernbank's security interest has priority over Eurobank in
the accounts receivable of the Villalba and Comerio projects.
ORDER
WHEREFORE, IT IS HEREBY ORDERED that Plaintiff's motion for
summary judgment (Docket No. 60) shall be DENIED; Defendants'
motion for summary judgment (Dockets No. 56 - 58) shall be
GRANTED; and all remaining matters (Dockets No. 65, 66, and 68)
are deemed MOOT.
Consequently, the Chapter 7 Trustee is hereby ORDERED to
disburse to Banco Popular de Puerto Rico the consigned amount of
$900,000.00, plus all accrued interest since deposited, within

Docket No. 79.

21

thirty (30) days as a result of the "Motion for
Compromise."(Case No. 05-12871, Docket No. 656).
SO ORDERED.
San Juan, Puerto Rico, this 29th day of December, 2011.

BY THE COURT:

Mildred Caban Flores
U.S. Bankruptcy Judge

22

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11356423. Public record. Not legal advice.