United States Fidelity and Guaranty Company v. New Partnership & Co.,S.E. et al, No. 3:2006cv02201 - Document 65 (D.P.R. 2009)
Court Description: ORDER granting 38 plaintiff's motion for summary judgment, denying 50 defendants' opposition and cross-motion. Plaintiff to file updated statement of losses and expenses by 8/31/2009. Signed by Judge Raymond L. Acosta on 8/7/09. (ans)
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United States Fidelity and Guaranty Company v. New Partnership & Co.,S.E. et al 1 Doc. 65 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO 2 3 4 UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff, 5 CIVIL NO. 06-2201 (RLA) v. 6 7 NEW PARTNERSHIP & CO., S.E., et al., 8 Defendants. 9 10 ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT 11 12 13 14 15 16 17 18 Before the Court are Plaintiff United States Fidelity and Guaranty Company’s (USF&G) Motion for Summary Judgment (docket No. 38), and an Opposition and Cross-Motion for Summary Judgment filed by defendants New Partnership and Co., S. E. (New Partnership); Roberto M. Cacho-Pérez, Ileana Cambó-Saavedra, and the Conjugal Partnership formed by them; and Casa de Playa Beach Villages, S.E. 1 (docket No. 50).2 As more fully Plaintiff’s motion. explained below, the Court hereby GRANTS Defendants’ cross-motion is DENIED. 19 20 1 21 22 23 Martineau Bay Resorts S. en C. (SE), also a defendant, filed for protection under Chapter 11 of the Bankruptcy Code on February 10, 2003, Case No. 03-01165, which was dismissed on July 12, 2004. It was not served with process in this action. Martineau Bay Resorts and Spa, The Vieques Hotel Corporation, and Vieques Hotel Partners, entities who are not named in the complaint, filed a Motion to Quash service of process on December 27, 2006 (docket No. 4). 24 2 25 26 See also, Plaintiff's Motion Supplementing Motion for Summary Judgment, docket No. 55; Plaintiff's Opposition to Defendants' CrossMotion, docket No. 56; Defendants' Motion to Strike, docket No. 57; and Plaintiff's Opposition to Motion to Strike, docket No. 58. Dockets.Justia.com 1 CIVIL NO. 06-2201 (RLA) Page 2 2 I. BACKGROUND 3 On December 1, 2006 USF&G filed this action seeking 4 indemnification in an amount of no less than $121,953.21 for all 5 losses and expenses incurred by reason of having executed bonds on 6 behalf of defendant New Partnership (docket No. 1). 7 On March 28, 2007, defendants filed a Motion to Dismiss under 8 Fed. R. Civ. P. 12(b)(1) and (6) (docket No. 15), claiming that the 9 indemnity action did not meet the amount in controversy requirement 10 of 28 U.S.C. § 1332(a), or was otherwise barred. The Court denied 11 the motion on March 28, 2008 (docket No. 27). 12 Plaintiff moved for summary judgment in its favor (docket No. 13 38), claiming that it had received claims in connection with the 14 above described bonds, including pending, resolved litigation, and 15 disputed matters under the following actions: 16 17 18 Ezequiel Vazquez et al. v. Isla Nena Paving Corp et al., Case No. NSCI200200213; Professional Equipment Corp., v. USF&G Co., et al. v. Martineau Bay Resort S. en C., S.E., Case No. KICD2004-1588 (908); 19 20 21 Commissioner of Insurance of Puerto Rico v. United States Fidelity and Guaranty Company, Case No.: l-2004-69; PRISMA Air Conditioning and Electrical Services Inc. v. Isla Nena Paving Corporation, NSCI 2001-00866(302); 22 Isla Nena v. Martinueau Bay Resort, NCSI 2001-0807; 23 Cantera Aeropuerto v. Martinueu Bay Resort, CD 2001-119. 24 By the date of that motion, USF&G’s losses and expenses had 25 allegedly incremented to $139,779.13. 26 1 CIVIL NO. 06-2201 (RLA) Page 3 2 Defendants moved to stay consideration of the summary judgment 3 request until further discovery was conducted. Upon the conclusion 4 of discovery, defendants opposed plaintiff’s motion and cross-moved 5 the Court for summary judgment in their favor (docket No. 50). 6 Defendants’ motion espoused most of the arguments raised in their 7 earlier motion to dismiss, denied by the Court, with the addition of 8 sworn statements from Cacho-Pérez and Cambó-Saavedra stating that 9 they had not received notice of plaintiff’s tender and indemnity 10 letters notifying that USF&G would be pursuing indemnity. 11 Plaintiff opposed defendants' cross motion and also supplemented 12 its summary judgment request with copies of the invoices supporting 13 plaintiff’s payments of attorneys fees (docket No. 55).3 14 II. FACTS 15 On April 14, 1998, defendants entered into a Master Surety 16 Agreement (“MSA”) with USF&G, a surety company. The MSA contains a 17 clause where the defendants agreed to hold harmless, indemnify, and 18 keep indemnified USF&G against any claims or demands, losses, and 19 expenses of any kind or nature, in which the latter may incur by 20 reason of having to execute, provide or procure bonds on behalf of 21 New Partnership. Effective that date, USF&G issued payment and 22 performance bonds for the construction of the Hotel Martineau Bay 23 24 25 3 26 Defendants' request to strike these pleadings (docket No. 57) was denied. 1 CIVIL NO. 06-2201 (RLA) Page 4 2 Resort in Vieques, Puerto Rico. The Occupancy and Use Permit was 3 issued on November 30, 2001. 4 On January 10, 2001, USF&G sent a letter to defendant New 5 Partnership advising of a claim against the bond of Plom Electric 6 Corp., and requesting its written position and intentions regarding 7 the claim in fifteen (15) days. Not receiving a response, on 8 June 28, 2001, USF&G sent another letter, this time to all the 9 defendants, reminding them of their contractual obligations under the 10 MSA to indemnify and keep USF&G harmless against all liabilities, 11 losses, and expenses by reason of having executed bonds on behalf of 12 New Partnership. A copy of this letter was reissued on August 1, 13 2001, to all defendants at different addresses, as the June 28th 14 communication had been returned as undeliverable. 15 On November 13, 2001, USF&G sent a letter to New Partnership, 16 this time advising of a claim against the bond from Professional 17 Equipment Corporation. An affidavit of said claim was sent to New 18 Partnership on January 22, 2002, with a reminder letter on March 6, 19 2002. Not receiving a response to any of these letters, USF&G sent 20 a letter reminding New Partnership of its contractual obligations 21 under the MSA to indemnify and keep USF&G harmless against all 22 liabilities, losses, and expenses by reason of having executed bonds 23 on behalf of New Partnership. This letter was responded by defendant 24 Cacho-Pérez in a letterhead with the same address to which all 25 previous communications to New Partnership had been sent. Additional 26 1 CIVIL NO. 06-2201 (RLA) Page 5 2 letters requesting backup information on this claim were sent by 3 USF&G on July 11, 2002, August 13, 2002, and October 14, 2002. 4 On August 15, 2002, USF&G sent by facsimile and certified mail 5 two letters to defendant New Partnership enclosing the summons 6 received on July 25, 2002, in the Isla Nena Paving Corp. v. Martineau 7 Bay et al. and Cantera Aeropuerto, Inc. v. Martineau Bay matters, and 8 tendering the defense of USF&G so that it would be at the sole cost 9 of defendant New Partnership. A similar letter was sent by USF&G on 10 September 10, 2002, notifying the Prisma Air Conditioning and 11 Electric Services, Inc., matter (for which service was made on August 12 12, 2002), and again attempting to tender the defense. 13 The Ezequiel Vazquez Santiago v. Isla Nena Paving Corp. matter 14 was referred to USF&G on February 10, 2005, however, no letter 15 informing the same appears to have been sent to defendants. 16 III. ANALYSIS 17 USF&G moved for summary judgment in its favor under Rule 56(a), 18 Fed. R. Civ. P. 56(a), arguing that pursuant to the clear terms of 19 the MSA, defendants are obligated to indemnify and hold USF&G 20 harmless from and against all demands, claims, liabilities, losses, 21 expenses, costs, damages, attorneys’ fees that it may incur as a 22 result of having procured the bonds or due to defendants’ failure to 23 perform and comply with the provisions of the MSA. USF&G claims that 24 it has incurred losses and expenses in investigating and litigating 25 defendants’ alleged default, defending actions in connection with the 26 1 CIVIL NO. 06-2201 (RLA) Page 6 2 bonds, and by having to file this complaint as a result of the 3 defendants’ failure to comply with the provisions of the MSA. 4 Plaintiff claims that it is also entitled to relief under §§ 4911 and 5 4916 of the P.R. Civil Code, 31 P.R. Laws Ann. §§ 4911 and 4916(1). 6 Defendants opposed plaintiff’s request, arguing that there are 7 issues of fact relating to compliance with the bond and the 8 construction contract that impede summary judgment. In essence, they 9 submit that the complaint is time-barred, that not all defendants 10 were notified that plaintiff would be seeking indemnity for these 11 losses and expenses related in the complaint, and that those losses 12 and expenses relate mostly to attorney fees and costs, not payments 13 made under the bonds. Lastly, defendants argue that the Court lacks 14 jurisdiction because the case does not meet the jurisdictional 15 amount. 16 The MSA provides in Section III(A) that defendants… 17 18 19 20 21 …shall exonerate, hold harmless, indemnify and keep indemnified, SURETY from and against any and all demands, claims, liabilities, losses and expenses of whatsoever kind or nature (including, but not limited to, interest, court costs and counsel fees) imposed upon, sustained, or incurred by SURETY by reason of: (1) SURETY having executed, provided or procured BOND(S) in behalf of PRINCIPAL, or (2) UNDERSIGNED’S failure to perform or comply with any of the provisions of this AGREEMENT. 22 (See docket No. 1, Ex. 1.) 23 Section IV(C) of the MSA further states that, 24 25 26 …the voucher(s) or other evidence of such payment(s) or an itemized statement of payment(s) sworn to by an officer of SURETY shall be prima facie evidence of the fact and extent of the liability of UNDERSIGNED to SURETY. 1 CIVIL NO. 06-2201 (RLA) Page 7 2 3 Defendants do not dispute that they executed the MSA, nor their 4 duty to indemnify and keep harmless USF&G. 5 finds that the terms of the MSA are clear and unambiguous and warrant 6 enforcement. 7 Summary judgment shall be granted Therefore, the Court if “the pleadings, 8 depositions, answers to interrogatories, and admissions on file, 9 together with the affidavits, if any, show that there is no genuine 10 issue as to any material fact and that the moving party is entitled 11 to a judgment as a matter of law.” 12 March 21, 2007, 2007 WL 878571 *2 (D.P.R. 2007), quoting Fed. R. Civ. 13 P. 56(c), and Sands v. Ridefilm Corp., 212 F.3d 657, 660 (1st Cir. 14 2000). USF&G v. Díaz Matos, Opinion of 15 To succeed, the moving party must demonstrate the absence of a 16 genuine issue as to any outcome-determinative fact in the record 17 through “definite and competent evidence.” 18 660, quoting DeNovellis v. Shalala, 124 F.3d 298, 306 (1st Cir. 1997), 19 and Maldonado-Denis v. Castillo Rodriguez, 23 F.3d 576, 581 (1st Cir. 20 1994). Id., Sands 212 F.3d at 21 The mere existence of “some alleged factual dispute between the 22 parties will not affect an otherwise properly supported motion for 23 summary judgment.” Id., quoting Anderson v. Liberty Lobby, Inc., 477 24 U.S. 242, 247-48 (1986). 25 26 This Court has found summary judgment appropriate to enforce the provisions of an indemnity agreement like the one at bar. See, e.g., 1 CIVIL NO. 06-2201 (RLA) Page 8 2 Díaz Matos, 2007 WL 878571 at p. *3 (“After reviewing the arguments 3 of the parties, the Court finds that USF&G is entitled to partial 4 summary judgment on the issue of … defendants’ liability pursuant to 5 the MSA… [A]s plaintiff posits, the question is clearly amenable for 6 resolution as a matter of law at this stage.”) 7 Furthermore, this conclusion is amply supported by Puerto Rico 8 law. Diaz Matos at 3, quoting 31 P.R. Laws Ann §§ 4911-4916; Segovia 9 Dev. Corp. v. Constructora Maza, Inc., 628 F.2d 724 (1st Cir.1980); 10 and Professional Underwriters Ins. Co. v. Distribuidora Automotriz, 11 121 D.P.R. 536 (1988). See also Constructora Andrade Gutierrez, 12 S.A., v. American International Insurance Company of Puerto Rico, 467 13 F.3d 38, 45 (1st Cir. 2006); and Autoridad de Acueductos y 14 Alcantarillados de Puerto Rico v. Builders Insurance Co., 115 D.P.R. 15 57 (1984) (recognizing surety’s right to seek recovery and indemnity 16 from indemnitors). 17 Article 1044 of the Puerto Rico Civil Code, 31 P.R. Stat. Ann. 18 §2994, prescribes that “obligations arising from contracts have legal 19 force between the contracting parties, and must be fulfilled in 20 accordance with their stipulations.” López Torres v. González 21 Vázquez, 2004 T.S.P.R. 172, Op. of November 12, 2004. 22 Contracts shall be binding, whatever may be the form in which 23 they have been executed, provided the essential conditions required 24 for their validity exist.” P.R. Stat. Ann. T. 31 § 3451. Parties 25 may agree to any terms and conditions so long as they are not 26 1 CIVIL NO. 06-2201 (RLA) Page 9 2 contrary to the law, moral, or public order. Luan Investment v. 3 Rexach Construction, 152 D.P.R. 652 (2000), citing Art. 1207 PRCC, 31 4 L.P.R.A. §3372. 5 “If the terms of a contract are clear and leave no doubt as to 6 the intentions of the contracting parties, the literal sense of its 7 stipulations shall be observed.” P.R. Stat. Ann. T. 31 § 3471. When 8 terms are clear, courts are not free to relieve a party from its 9 obligations under an agreement of indemnity. Olazábal v. United 10 States Fidelity & Guaranty, 103 D.P.R. 448 (1975); and Mercado v. 11 Universidad Católica de PR, 143 D.P.R. 610 (1997). 12 Indeed, the Puerto Rico Civil Code specifically recognizes that 13 a surety may proceed against its indemnitors for indemnification. 14 See, e.g., Art. 1737, P.R. Stat. Ann. T. 31 § 4911; and Art. 1742, 15 P.R. Stat. Ann. T. 31 §4916. See also Acosta & Rodas, Inc. v. Puerto 16 Rican-American Ins. Co., 112 D.P.R. 583 (1982); and Segovia, 628 F.2d 17 at 727. 18 Section 4911 of the Puerto Rico Civil Code law states: 19 20 21 22 23 24 25 26 A surety who pays for a debtor shall be indemnified by the latter. The indemnity consists of: (1) The total amount of the debt. (2) Legal interest on the same from the day on which the payment may have been communicated to the debtor, even when it did not produce interest for the creditor. (3) The expenses incurred by the surety after the latter has informed the debtor that he has been sued for payment. (4) Losses and damages, when proper. The provisions of this section shall be valid, even should the security have been given without knowledge of the debtor. 1 CIVIL NO. 06-2201 (RLA) Page 10 2 P.R. Stat. Ann. 31 § 4911. 3 Moreover, the Court finds that USF&G’s claims are not time4 barred. Section 4916 of the Civil Code states: 5 6 7 8 9 10 11 The surety, even before paying, may proceed against the principal debtor: (1) When he is sued for the payment. (2) In case of bankruptcy or insolvency. (3) When the debtor has bound himself to relieve him from the security within a specified term, and this term has expired. (4) When the debt has become demandable because the term in which it should have been paid has expired. (5) At the end of ten (10) years, when the principal obligation has not a fixed term for its expiration, unless it be of such a nature that it cannot be extinguished except in a period greater than ten (10) years. 12 PR ST T. 31 § 4916. 13 Lastly, the Court is not persuaded by defendants’ claims that 14 the indemnitors other than New Partnership are not liable to USF&G 15 because only New Partnership was noticed of the claims against the 16 bonds. Pursuant to the MSA, defendants are jointly and severally 17 liable to USF&G. Although the MSA does not impose upon USF&G a duty 18 to provide notice prior to seeking indemnity, under Article 1094 of 19 the Puerto Rico Civil Code, PR ST T. 31 § 3105, actions held against 20 a joint debtor prejudice all joint debtors. Therefore, the numerous 21 communications sent to New Partnership, of which Mr. Cacho-Pérez 22 acknowledged in writing receiving at least one, tolled any applicable 23 limitations period. 24 25 26 1 CIVIL NO. 06-2201 (RLA) Page 11 2 IV. CONCLUSION 3 For the above reasons, the Court holds that USF&G has a right to 4 be indemnified by defendants for the amounts claimed in the 5 complaint. Accordingly, Plaintiff USF&G’s Motion for Summary 6 Judgment (docket No. 38) is GRANTED, and Defendant’s Opposition and 7 Cross-Motion for Summary Judgment (docket No. 50) is DENIED. 8 Plaintiff is ORDERED to file with the Court on or before August 31, 9 2009, an updated statement of losses and expenses, sworn under 10 penalty of perjury by a duly appointed officer of the Surety, 11 indicating (1) the amounts incurred by reason of having executed 12 bonds on behalf of New Partnership; (2) the legal interests computed 13 from the time payments for such expenses were made; and (3) the 14 attorney’s fees expended in relation to this action. 15 IT IS SO ORDERED. 16 San Juan, Puerto Rico, this 7th day of August, 2009. 17 18 19 20 21 22 23 24 25 26 S/Raymond L. Acosta RAYMOND L. ACOSTA United States District Judge
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