To secure a loan, the debtor recorded a cautionary note in favor of the creditor on an apartment owned by the debtor and a mortgage, even though at the time the mortgage was recorded, the apartment was foreclosed by another creditor. The debtor also recorded a mortgage on another apartment, even though at the time it was already mortgaged to a bank with a note prohibiting other mortgages recordings. After bankruptcy of the debtor, the question arose as to whether the creditor is a secured creditor with priority over other creditors due to the fact that he registered a cautionary note and even a mortgage, even though both were recorded in a manner that contradicts existing records.
The Court held that the recording of a cautionary note preventing the sale of an asset will create of a secured creditor status in the apartment but not when a previous mortgage exist because such previous mortgage creates the mortgaging bank the right to sell the apartment and then the cautionary note is canceled. The mortgage recorded contrary to the foreclosure of no power. However, the mortgage recorded contrary to the existing mortgage of the bank with a note preventing additional mortgages will be of no power vis-à-vis the mortgaging bank because the note is intended to protect only the rights of the existing mortgagor. Because of this, towards the other creditors the mortgage is valid and therefore the creditor will be a secured creditor having priority over other creditors.