Opinion ID: 617777
Heading Depth: 3
Heading Rank: 2

Heading: Meaning of Interest in Property

Text: Local law ordinarily dictates the existence and extent of an entity's interest in property. See 229 Main St., 262 F.3d at 6; Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed.2d 136 (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 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.