Opinion ID: 609735
Heading Depth: 2
Heading Rank: 2

Heading: Pledge Agreement

Text: 21 Prudential says that, even assuming the FDIC had a valid attachment on the stock proceeds, Prudential holds a superior lien on the proceeds by virtue of a form signed by Serrano to open a brokerage account at Prudential (the Customer Agreement). 9 Prudential contends that the Customer Agreement operated, under Puerto Rico law, as a pledge of any securities held in the brokerage account. By virtue of this pledge, Prudential reasons, it acquired a lien over the Bayamon Federal stock shares and their proceeds prior to the FDIC's attachment because the stock was, up until 1987, held in Serrano's account at Prudential. 22 The district court correctly rejected Prudential's argument. Puerto Rico law provides, A pledge shall not be effective against a third person, when evidence of its date is not shown by authentic documents. 31 L.P.R.A. § 5023. The Supreme Court of Puerto Rico has stated: An authentic document is a legalized document, which is publicly attested, which is legally valid by itself. Ramos Mimoso v. Tribunal Superior, 93 P.R.R. 538, 540 (1966). A private agreement or writing is not an authentic document; a document verified before a notary public is an authentic document. In re Santos & Nieves, Inc., 814 F.2d 57, 60 (1st Cir.1987); Ramos Mimoso, 93 P.R.R. at 541. The record here supports the district court's finding that no notarized or other properly authenticated document evidenced the date of Serrano's alleged pledge of the stock shares. The only document alleging to show the date of the supposed pledge is the Customer Agreement, which is merely signed by the parties and not notarized. 23 Prudential concedes that no notarized or otherwise authentic document exists to evidence the date of the pledge, but argues that it is sufficient that the purpose of the authentic document requirement was fulfilled. Prudential filed a copy of the Customer Agreement in 1987 with the clerk of a court in which criminal proceedings against Serrano were being conducted, and now argues that this filing satisfies the policy behind 31 L.P.R.A. § 5023. However, the authentic document rule is a formal and absolute rule that is strictly construed. In re Supermercados San Juan, Inc., 575 F.2d 8, 12 (1st Cir.1978); Trueba v. Zalduondo, 34 P.R.R. 713, 716 (1925). Neither section 5023 nor any cases interpreting it support Prudential's theory that the authentic document requirement can be fulfilled simply by filing a copy of an unnotarized document in court. 24 Prudential attempts to analogize this case to Trueba v. Zalduondo, 34 P.R.R. 713 (1925), in which the Supreme Court of Puerto Rico held that a transfer of corporate stocks as collateral for a loan that was recorded in the corporations' official records was valid against later-attaching third parties, even though the transfer did not comply with the authentic document rule codified in the predecessor statute to 31 L.P.R.A. § 5023. However, Trueba expressly held that section 13 of the Private Corporations Act, (now codified as 14 L.P.R.A. § 1509), and not the predecessor to 31 L.P.R.A. § 5023, governed under those circumstances. The Trueba decision was based on the fact that stock so transferred would be authenticated by the public and formal records of the corporation as a transfer of a security interest. In re Supermercados San Juan, Inc., 575 F.2d at 12. The Trueba court did not create an exception to section 5023 and, in fact, reiterated that the authentic document rule is a rigid rule. Trueba, 34 P.R.R. at 716. Because Prudential does not contend that the Private Corporations Act, as opposed to 31 L.P.R.A. § 5023, governs this case, Trueba is inapposite. 10 25 The district court correctly held that Prudential's purported pledge agreement did not comply with the authentic document requirement of 31 L.P.R.A. § 5023 and thus was not valid against the FDIC as a pledge.