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Sale of Mortgage Note Not Subject to Right of Redemption of Litigious Credit

An McV Litigation and Real Estate Alert

August 23, 2019

On July 23, 2019 in the case of DLJ Mortgage Capital, Inc. v. David Santiago Martínez, Diana Ortiz Borges y la Sociedad de Bienes Gananciales compuesta por ambos, 2019 TSPR 129, the Puerto Rico Supreme Court (the “PR Supreme Court”) issued an Opinion regarding the applicability of the right of redemption of a litigious credit (“retracto de crédito litigioso”) provisions of the Puerto Rico Civil Code (the “PR Civil Code”) to the sale of a mortgage note constituting a negotiable instrument. 

The issue before the PR Supreme Court was whether the provisions of the PR Civil Code regarding the right of redemption of a litigious credit apply to the sale of a mortgage note constituting a negotiable instrument. In its analysis,  the PR Supreme Court examined the relationship among the provisions of the PR Civil Code regarding the right of redemption of litigious credit, the Registry of Property Act of the Commonwealth of Puerto Rico and the Puerto Rico Commercial Transactions Act (the “PR CTA”) and concluded that the sale in good faith, for value received, and prior to maturity of a mortgage note constituting a negotiable instrument is not subject to the provisions of the PR Civil Code regarding the right of redemption of litigious credits.   The PR Supreme Court further concluded that the PR CTA expressly negates the applicability of the provisions of the PR Civil Code regarding the pledge and transfer of credits, which transactions are governed by Chapter 9 of the PR CTA.

The content of this McV Alert has been prepared for information purposes only. It is not intended as, and does not constitute, either legal advice or solicitation of any prospective client. An attorney-client relationship with McConnell Valdés LLC cannot be formed by reading or responding to this McV Alert. Such a relationship may be formed only by express agreement with McConnell Valdés LLC.

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