Angulo et al v. Editorial Televisa International, S.A. et al, No. 3:2009cv01830 - Document 133 (D.P.R. 2010)

Court Description: OPINION AND ORDER DENYING Intervenor's motion for summary judgment (Docket No. 66 ); DENYING AS MOOT WBPR's motion for reconsideration (Docket No. 126 ) of our previous order for disbursement of funds (Docket No. 122 ), because we vacate d that order (Docket No. 124 ). We also DENY WBPR's motion for entry of default against Defendants (Docket No. 120 ) because Defendants have appeared in their defense (see Docket Nos. 62 ; 96 ). See Fed. R. Civ. P. 55(a). We reserve judgm ent on Defendants' motion for disbursement of funds (Docket No. 119 ) pending the resolution of the instant case. We ORDER Intervenor to SHOW CAUSE on or before July 29, 2010, as to why we should not order summary judgment in favor of Defendants. Show Cause Response due by 7/29/2010.Signed by Chief Judge Jose A Fuste on 7/16/2010.(mrj)

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Angulo et al v. Editorial Televisa International, S.A. et al 1 2 3 Doc. 133 UNITED STATES DISTRICT COURT DISTRICT OF PUERTO RICO GERARDO A. ANGULO-MESTAS, et al., 4 Plaintiffs, 5 v. Civil No. 09-1830 (JAF) 6 7 8 9 10 11 EDITORIAL TELEVISA INTERNATIONAL, S.A. and ET PUBLISHING INTERNATIONAL, INC., 12 BANCO POPULAR DE PUERTO RICO, 13 14 Defendants. ------------------------------------------------------ Intervenor. OPINION AND ORDER 15 Plaintiffs, Gerardo A. Angulo-Mestas and several companies controlled by him, brought 16 an action against Defendants in diversity. (Docket No. 1.) Plaintiffs sought to compel 17 Defendants to surrender certain properties in Defendants possession that allegedly constituted 18 collateral for Plaintiffs debt obligations to Westernbank Puerto Rico ( WBPR ). (Id.) WBPR 19 intervened in this case under Federal Rule of Civil Procedure 24, seeking a declaratory 20 judgment to establish its ownership of such collateral. (Docket No. 59.) We substituted 21 Intervenor Banco Popular de Puerto Rico for WBPR in this case, after Banco Popular took over 22 the operations of WBPR under an FDIC-supervised liquidation and transfer of assets. (Docket Dockets.Justia.com Civil No. 09-1830 (JAF) -2- 1 Nos. 131; 132.) Intervenor moves for summary judgment under Federal Rule of Civil Procedure 2 56(c) (Docket No. 66), and Defendants oppose (Docket No. 96). 3 I. 4 Factual and Procedural Synopsis 5 We derive the following uncontested facts from the parties briefs and submissions 6 (Docket Nos. 1; 59; 65; 66; 96) and the record in this case.1 Plaintiffs are engaged in the 7 business of publishing and distributing periodicals in Puerto Rico. Defendants are also 8 publishers. WBPR is a Puerto Rico banking institution that ceased operations on April 30, 9 2010. (Docket No. 131.) 10 Through a series of secured transactions, WBPR became creditor to Plaintiffs with 11 security interests in various assets owned by Plaintiffs. In one of these transactions, WBPR lent 12 Angulo-Mestas $6,500,000 under Loan No. 7350020579 on March 8, 2005. (Docket No. 1-3.) 13 In exchange, Angulo-Mestas executed a note payable to WBPR in the amount of $6,500,000 14 plus interest. (Id.) To secure this loan, WBPR concluded a Pledge and Security Agreement 15 with Angulo-Mestas and ten entities controlled by him. (Docket No. 1-2.) This security 16 agreement listed as collateral Accounts : 17 18 19 20 All presently existing or hereafter emerging accounts of [Angulo-Mestas] and [the ten companies]. The term Accounts in addition to the definition of accounts contained in the Uniform Commercial Code as adopted in Puerto Rico, means all accounts, 1 Because Intervenor has not opposed Defendants statement of uncontested facts (Docket No. 96-2), we treat these facts as admitted to the extent they are supported by evidence in the record. See L. Cv. R. 56(e). Civil No. 09-1830 (JAF) 1 2 3 4 5 6 7 8 9 10 -3- accounts receivable, receivables, . . . amounts due or to become due . . . , all rights to the payment for goods or services sold or leased, letters and credit and the payments and rights to receive payment thereunder, . . . contract rights, . . . and all other debts, obligations, and liabilities in wherever form now or hereafter owing to [Angulo-Mestas] and [the ten companies], now existing or hereafter acquired or arising, . . . and all cash . . . proceeds of the foregoing . . . .2 (Id. at 2.) As a publisher, Angulo-Mestas owns certain magazines and is entitled to receive payment for the sales of such publications. (See Docket Nos. 1-13; 1-16.) 11 Under the security agreement, Angulo-Mestas and the ten companies would be in default 12 of their obligations if any of them failed to timely pay their debt obligations to WBPR. (Docket 13 No. 1-2 at 6-7.) In that event, all debts would be accelerated and become payable immediately. 14 (Id.) In addition, WBPR would be able to enforce its security interest in any manner permitted 15 by law and take possession of any collateral listed in the agreement. (Id.) 16 Previously, on January 31, 1973, Defendants formed a distribution agreement with 17 Agencia de Publicaciones de Puerto Rico, Inc. ( APPR ), an entity controlled by Angulo- 18 Mestas, granting APPR the right to distribute Defendants publications in Puerto Rico. On 19 October 30, 2007, Defendants terminated this distribution agreement to form a new distribution 20 arrangement with a different company, Distribuidora Editoriales, LLC ( DE ). (Docket Nos. 1- 2 Defendants argue that we should not consider the Pledge and Security Agreement because it would be inadmissible at trial. (Docket No. 96-2.) On summary judgment, we may only consider material that has evidentiary value. Noviello v. City of Boston, 398 F.3d 76, 84 (1st Cir. 2005). The contract would be admissible as relevant evidence of WBPR s security interest in Plaintiffs collateral. See Fed. R. Evid. 402. As Defendants cite no authority to rebut this threshold finding of admissibility, we reject their challenge. Civil No. 09-1830 (JAF) -4- 1 13; 1-14.) In exchange for the cessation of APPR s obligations by novation, Angulo-Mestas 2 agreed to assume a portion of the trade debt of $4,938,905.54 that had accumulated under the 3 former agreement. (Docket No. 1-13.) Angulo-Mestas intended to repay $2,198,100.19 of the 4 trade debt by assigning to DE the right to sell several of his publications and requiring DE to 5 remit the proceeds of such sales directly to Defendants rather than to him.3 (Id. at 2.) Under 6 this arrangement, DE would remit $10,000 per week until the end of 2007, and $15,000 per 7 week thereafter. (Id.) Angulo-Mestas represented to Defendants that he had full rights to these 8 sales receipts that he assigned to Defendants. (Id. at 3-4.) Defendants were unaware of 9 WBPR s claim to the same accounts. (Docket No. 96-2.) 10 On May 12, 2009, WBPR informed Angulo-Mestas that he was in default on his debt 11 obligations under Loan No. 7350020579, owing $6,396,540.92 in principal and interest. 12 (Docket No. 1-18.) On August 10, 2009, WBPR filed copies of the aforementioned Pledge and 13 Security Agreement with the Puerto Rico Department of State as part of an UCC-1A-PR 14 financing statement. (Docket No. 59-2.) 15 On August 20, 2009, Plaintiffs filed a complaint in federal court, alleging that WBPR 16 is entitled to certain Trade Debt Payments made to Defendants in satisfaction of APPR s trade 17 debt. (Docket No. 1.) Plaintiffs sought, inter alia, declaratory and injunctive relief ordering 18 Defendants to remit such payments to WBPR on the basis of WBPR s alleged status as a 3 As part of its distribution agreement with Defendants made the same day, DE assumed $1,507,807.07 of the trade debt incurred by APPR. (Docket No. 1-15.) DE paid $546,563.32 immediately and agreed to remit the balance in three equal installments from late 2007 to early 2008. (Id.) Civil No. 09-1830 (JAF) -5- 1 secured creditor. (Id.) The same day, Plaintiffs applied for a temporary restraining order 2 ( TRO ) pending the court s resolution of its equitable claims. (Docket Nos. 2; 8.) On 3 September 8, 2009, we granted Plaintiffs application and issued a TRO that, inter alia, ordered 4 Defendants to deposit any Trade Debt Payments received after May 12, 2009, with this court, 5 and to instruct DE to further remit such payments to this court, pending the resolution of the 6 case. (Docket No. 26.) 7 Pursuant to our TRO, Defendants deposited $81,906.83 with this court on September 16. 8 (Docket No. 41.) According to Defendants, the funds constitute the total amount of Trade 9 Debt Payments received by Defendants from Plaintiffs publications after May 12, 2009. 10 (Docket No. 119.) Pursuant to our TRO and later orders, DE made four deposits with this court, 11 attributing these funds to net proceeds from the sale of Angulo-Mestas magazines that DE 12 otherwise would have remitted to Defendants: $33,470.24 on October 8 (Docket No. 61); 13 $33,215.04 on November 17 (Docket No. 81); $64,596.97 on November 24 (Docket No. 87); 14 and $21,680.38 on February 11, 2010 (Docket No. 112). 15 On September 28, 2009, WBPR moved to intervene under Federal Rule of Civil 16 Procedure 24(a)(2) (Docket No. 59), and Defendants opposed (Docket No. 62). WBPR sought 17 a declaratory judgment as to its rights to Plaintiffs collateral, monies deposited by Defendants 18 and DE with this court, and further Trade Debt Payments. (Docket No. 59.) On October 21, 19 WBPR moved for summary judgment on its claims under Federal Rule of Civil Procedure 56(c) 20 (Docket No. 66), and Defendants opposed (Docket No. 96). Civil No. 09-1830 (JAF) -6- 1 On January 7, 2010, Magistrate Judge McGiverin issued a Report and Recommendation 2 finding that Plaintiffs claims are committed to arbitration and that the court should allow 3 WBPR s intervention. (Docket No. 108.) Adopting these findings on February 12, we 4 dismissed Plaintiffs complaint and granted WBPR s motion to intervene. (Docket No. 115.) 5 Noting the dismissal of Plaintiffs complaint, Defendants moved on March 25 for 6 disbursement of the funds deposited with this court, totaling $234,869.46. (Docket No. 119.) 7 WBPR opposed on March 26 and moved for an entry of default against Defendants under 8 Federal Rule of Civil Procedure 55. (Docket No. 120.) Defendants replied in opposition 9 (Docket No. 127), and WBPR surreplied (Docket No. 129). WBPR also moved for 10 reconsideration of a previous order issued by this court. (Docket No. 126.) On May 21, we 11 substituted Intervenor for WBPR in this case because Intervenor is the successor to WBPR s 12 business entity. (Docket Nos. 131; 132.) 13 II. 14 Standard for Summary Judgment 15 We grant a motion for summary judgment if the pleadings, the discovery and disclosure 16 materials on file, and any affidavits show that there is no genuine issue as to any material fact 17 and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A factual 18 dispute is genuine if it could be resolved in favor of either party and material if it affects 19 the outcome of the case. Calero-Cerezo v. U.S. Dep t of Justice, 355 F.3d 6, 19 (1st Cir. 2004). Civil No. 09-1830 (JAF) -7- 1 The movant carries the burden of establishing that there is no genuine issue as to any 2 material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In evaluating a motion for 3 summary judgment, we view the record in the light most favorable to the nonmovant. Adickes 4 v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). Once the moving party has made a preliminary 5 showing that no genuine issue of material fact exists, the nonmovant must produce specific 6 facts, in suitable evidentiary form, to establish the presence of a trialworthy issue. Clifford 7 v. Barnhart, 449 F.3d 276, 280 (1st Cir. 2006) (quoting Triangle Trading Co. v. Robroy Indus., 8 Inc., 200 F.3d 1, 2 (1st Cir. 1999)). The nonmovant may not rely merely on allegations or 9 denials in its own pleading; rather, its response must . . . set out specific facts showing a genuine 10 issue for trial. Fed. R. Civ. P. 56(e)(2). 11 We may also grant summary judgment sua sponte if discovery has progressed sufficiently 12 for the court to determine relevant facts and the target has at least ten days notice to contest the 13 impending judgment. Stella v. Town of Tewksbury, 4 F.3d 53, 55-56 (1st Cir. 1993). 14 III. 15 Analysis 16 The sole issue before this court is whether Intervenor s rights to certain accounts 17 receivable as a secured creditor trump Defendants rights as assignees of the same accounts. 18 (See Docket Nos. 66; 96.) For the reasons stated below, we decide in favor of Defendants. 19 Puerto Rico enacted a modified version of Article 9 of the Uniform Commercial Code 20 to govern secured transactions. See 19 L.P.R.A. §§ 2001 2207 (2005). Accounts may be used Civil No. 09-1830 (JAF) -8- 1 as collateral in such transactions. See § 2006. A security agreement may include collateral 2 acquired by the debtor after the formation of the agreement if the debtor acquires his rights in 3 such collateral . . . in the ordinary course of his business. § 2008. A creditor s security interest 4 attaches to the debtor s collateral when the debtor has signed a security agreement which 5 contains a description of the collateral ; value has been given ; and the debtor has rights in 6 the collateral. § 2053(1) (2). Upon attachment of the security interest, the creditor becomes 7 a secured party with an enforceable right in the collateral. See id. Generally, if the secured 8 party wishes to perfect his interest in the collateral, he must file a financing statement with the 9 relevant authority in Puerto Rico. See § 2102(1). 10 The secured party s right to enforcement is tempered in some instances by protections 11 afforded to good-faith transferees of certain collateral. See § 2102(1)(c) (d). Where the 12 collateral is an account assigned by the debtor to a transferee who both gave value for the 13 assignment and lacked knowledge of the secured party s interest, and the secured party has not 14 perfected his interest, the secured party s unperfected interest is subordinate to the right of the 15 transferee. § 2102(1)(d); accord U.C.C. § 9-317(d) & cmt. 6 (2005) (clarifying the priority of 16 good-faith transferees of accounts who give value before secured party s perfection). Although 17 the statutes on secured transactions do not define value , a broad definition appears in the 18 statute pertaining to negotiable instruments: generally, . . . any consideration sufficient to 19 support a simple contract. 19 L.P.R.A. § 451(44)(d). Civil No. 09-1830 (JAF) -9- 1 In the case before us, WBPR concluded its security agreement with Angulo-Mestas on 2 March 8, 2005, which listed hereafter emerging accounts of Angulo-Mestas as after-acquired 3 collateral. (Docket No. 1-2.) WBPR gave value for this security interest by issuing Loan 4 No. 7350020579 in favor of Angulo-Mestas. (See Docket No. 1-3.) 5 When Angulo-Mestas assigned the right to sell his magazines to DE in late 2007, he 6 created accounts receivable for the sale of said publications and was entitled to receive 7 payments from DE. (See Docket Nos. 1-13; 1-16.) Because these accounts receivable arose 8 in the ordinary course of Angulo-Mestas business after the formation of the security agreement, 9 such accounts became after-acquired collateral under the 2005 agreement (Docket No. 1-2). 10 See 19 L.P.R.A. § 2008. As the security agreement includes after-acquired accounts as 11 collateral, WBPR gave value for this interest, and Angulo-Mestas had rights in the accounts 12 receivable, WBPR has an enforceable interest attached to said accounts. See § 2053(1) (2). 13 Upon Angulo-Mestas default in May 2009 (Docket No. 1-18), WBPR ostensibly was 14 entitled as a secured party to accelerate payment on the loan (Docket No. 1-2) and take 15 possession of the accounts receivable. See § 2203. However, Angulo-Mestas assigned his right 16 to receive such payments to Defendants in 2007. (See Docket No. 1-13.) DE confirms that it 17 made remittances pursuant to the assignment. (Docket No. 61.) Thus, the funds deposited with 18 this court constitute Angulo-Mestas accounts. (See Docket Nos. 41; 61; 81; 87; 112; 119.) 19 Nevertheless, Defendants argue that they are entitled to priority as good-faith transferees 20 of the accounts receivable, vis-à-vis Intervenor as a holder of an unperfected security interest. Civil No. 09-1830 (JAF) -10- 1 (Docket No. 96.) Angulo-Mestas assigned his rights to the accounts receivable to Defendants 2 in late 2007. 3 relinquishing their rights to demand Angulo-Mestas and APPR s performance under the 1973 4 distribution agreement and to seek recovery from them for certain liabilities. (See Docket 5 Nos. 1-13; 1-14.) Because Angulo-Mestas represented that he had full rights to the assigned 6 payments (Docket No. 1-13), Defendants were unaware of WBPR s security interest in the 7 accounts receivable. (See Docket No. 1-13.) Defendants gave value for this assignment by 8 WBPR did not perfect its security interest in Angulo-Mestas accounts receivable until 9 August 2009, when it filed copies of the security agreement with the Puerto Rico Department 10 of State as part of a financing statement (Docket No. 59-2). See 19 L.P.R.A. § 2102(1). 11 Because WBPR failed to perfect its security interest in the accounts receivable before Angulo- 12 Mestas assignment of said accounts, Defendants claims as good-faith transferees defeat 13 Intervenor s competing interest. See § 2101(1)(d). 14 Accordingly, Defendants, not Intervenor, are entitled to the Trade Debt Payments 15 deposited with this court. As it appears that Defendants are entitled to judgment as a matter of 16 law on their rights to the accounts receivable, we order Intervenor to show cause as to why we 17 should not order summary judgment in favor of Defendants. See Stella, 4 F.3d at 55-56. Civil No. 09-1830 (JAF) -11- 1 IV. 2 Conclusion 3 In view of the foregoing, we hereby DENY Intervenor s motion for summary judgment 4 (Docket No. 66). We DENY as MOOT WBPR s motion for reconsideration (Docket No. 126) 5 of our previous order for disbursement of funds (Docket No. 122), because we vacated that 6 order (Docket No. 124). We DENY WBPR s motion for entry of default against Defendants 7 (Docket No. 120) because Defendants have appeared in their defense (see Docket Nos. 62; 96). 8 See Fed. R. Civ. P. 55(a). We reserve judgment on Defendants motion for disbursement of 9 funds (Docket No. 119) pending the resolution of the instant case. We ORDER Intervenor to 10 SHOW CAUSE on or before July 29, 2010, as to why we should not order summary judgment 11 in favor of Defendants. 12 IT IS SO ORDERED. 13 San Juan, Puerto Rico, this 16 th day of July, 2010. 14 15 16 s/José Antonio Fusté JOSE ANTONIO FUSTE Chief U.S. District Judge

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