Caridev, Inc. v. Stubbe (In re J. Gus Lallande, Inc.)

167 B.R. 742, 1994 Bankr. LEXIS 820
CourtDistrict Court, D. Puerto Rico
DecidedMay 20, 1994
DocketBankruptcy No. B-86-00030(ESL); Adv. No. 92-0036
StatusPublished
Cited by2 cases

This text of 167 B.R. 742 (Caridev, Inc. v. Stubbe (In re J. Gus Lallande, Inc.)) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Caridev, Inc. v. Stubbe (In re J. Gus Lallande, Inc.), 167 B.R. 742, 1994 Bankr. LEXIS 820 (prd 1994).

Opinion

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, Chief Judge.

Before the Court is a Motion for Summary Judgment (docket' No. 9, filed on January 8, 1993)1 submitted by the trustee for the debt- or J. Gus Lallande, Inc. (Lallande) against plaintiff Caridev, Inc. (Caridev) in an action involving a contract for the sale of property by the trustee on behalf of debtor estate to plaintiff corporation. Caridev submitted its Opposition and Cross-Motion for Summary Judgment (docket No. 11, filed on February 9, 1993) to which the trustee submitted a Reply (docket No. 13, filed on April 20,1993).

[744]*744 Introduction

On March 3, 1988 the trustee for Lallande executed the sale of property to Caridev located in Reparada Industrial Park, Ponce, Puerto Rico for the sum of fifty-five thousand dollars ($55,000).2 The sale was negotiated through Willie Vicens Realty, who had been commissioned by the trustee to sell the property in question. It appears that the president of Caridev initiated contact with the realtor for the purchase of property in Ponce to build a warehouse.

At the time of the sale, the parties were not aware that the property was located in a flood prone zone.3 See Trustee’s Statement of Material Facts ..., docket No. 10, p. 2 ¶ 3 and exhibit No. 2, p. 9 ¶ 29. This was first learned by Caridev from a letter dated October 13, 1992 sent by the Puerto Rico Planning Board (Junta de Planificación). The letter notified the buyer that in 1981 the area had been classified by FEMA (Federal Emergency Management Agency) as a flood zone and that this classification was adopted by the Planning Board on July 22,1987. See Trustee’s Statement of Material Facts ..., docket No. 10, exhibit No. 2, p. 9 ¶¶ 29 & 30.

On March 2, 1992, plaintiff filed an action in the Superior Court of Puerto Rico, Ponce Part, requesting that the contract for the sale of the property be declared null and void pursuant to title 23 L.P.R.A. § 225g. The case was dismissed without prejudice by Order of the Court dated March 17, 1992 in response to plaintiffs Motion for Voluntary Dismissal. See Trustee’s Statement of Material Facts ..., docket No. 10, p. 3 ¶ 11 and exhibit Nos. 3 & 4.

On April 8,1992, Caridev filed a Complaint before the United States Bankruptcy Court for the District of Puerto Rico whereby Cari-dev seeks to have the sale contract be declared null in void. Plaintiff alleges that the sale of property in floodable zones for the purpose of construction is prohibited by the Floodable Zone Building Control Act, effective September 27, 1961, title 23 L.P.R.A. § 225g. Moreover, plaintiff avers that the sale should be declared null and void because consent by both parties was lacking in that they were acting under the mistaken belief that the property could be used to build a warehouse. See Complaint, filed on April 8, 1992, p. 2 ¶6 & p. 3 ¶8.

Discussion

The trustee asserts several grounds for summary judgment including: (1) plaintiffs right to assert this action is extinguished pursuant to Article 1253 of the Civil Code of Puerto Rico, 31 L.P.R.A. § 3512, as it was filed more than four years from the date of the sale; (2) plaintiff is prohibited from asserting error as a basis to void the sale due to plaintiffs inexcusable neglect of failing to exercise due care and diligence in investigating the status of the property; and (3) title 23 L.P.R.A. § 225g, dated September 27, 1961, only prohibits the construction of family dwellings in floodable zones rather than all construction.

In its cross-motion for summary judgment, plaintiff alleges that the defendant improperly states the issue. Accordingly, it argues, the first two arguments rest on grounds which are only applicable to contracts which are voidable and the third is the result of misinterpretation' of the statute. Rather, plaintiff alleges, the contract in question was executed in direct violation of the law and, therefore, it is null and void ab initio. Furthermore, the law does not prescribe a finite period of time for a party to bring an action to void an illegal contract.

The first issue to be resolved by the Court is whether the contract for the sale of property is void or merely voidable. Each classification has a distinct legal effect. A contract is voidable when the defect can be cured or ratified by an effected party while a void contract is not curable for reasons of public policy. Millán v. Caribe Motors Corp., 83 P.R.R. 474, 483 (1961). See also Zayas v. Orraca, 80 P.R.R. 327, 339 (1958) quoting, 3 Castán, Derecho Civil Español, Común y Foral, p. 440 (8th ed. 1954):

Unlike absolutely void, which implies such faultiness in a contract as to render it [745]*745incapable, ipso jure, of producing its proper effects, voidableness means milder fault — derived, above all, from certain defects of capacity or will — which gives rise to an action of nullity or of challenge, which, if successfully prosecuted, produces the destruction of the act with retroactive force.

(emphasis original).

A contract is voidable where a party is the victim of his own inexperience or error, or subject to violence, intimidation and deceit when contracting. Zayas, 80 P.R.R. at 339. The right to annul the contract thereby is optional but must be exercised within four years from the date of consummation pursuant to title 31 L.P.R.A. § 3512. Id. A voidable contract has the force of a valid contract until it is declared null by the court. Id.

On the other hand, a contract is considered “nonexistent” or “wholly void” when one of the elements essential for formation is missing, or where the contract was made in violation of a legal prescription or prohibition established for reasons of public order. 3 Castán, Derecho Civil Español, Común y Floral, p. 437-38 (8th ed. 1954). Unlike voidable contracts, void contracts may not be ratified or validated by a lapse of time; a void contract has no legal effect and is not subject to the prescription of title 31 L.P.R.A. § 3512. Guzmán v. Guzmán; Rodríguez, Int., 78 P.R.R. 640, 649 (1955).

Contracts executed in violation of the law are governed by title 31 L.P.RA. § 4 which states, in pertinent part:

Acts executed contrary to the provisions of the law are void except where the law preserves their validity.

The void acts referred to in 31 L.P.RA. § 4 are those which are void per se or nonexistent. Corporación Azucarera v. Sugar Board, 77 P.R.R. 374, 386-87 (1954). The Supreme Court of Puerto Rico has consistently held that contracts executed in violation of the law are void and the contracting parties have no right to performance thereunder. Reyes v. Jusino, 116 Of. Trans, of the Op. of the S.Ct. of P.R. 338, 353-54 (1985). See also Rubio v. Roig, 84 P.R.R. 331, 337 (1962); Gúzman, 78 P.R.R. at 644; Sanchez v. Coll, 69 P.R.R. 863, 865 (1949).

The provisions governing the sale of land in floodable areas is found in the Floodable Zone Building Control Act, title 23 L.P.RA. § 225g effective July 1,1975,4 which states in pertinent part:

In “Floodable Zones unfit for building” it shall hereafter be unlawful:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
167 B.R. 742, 1994 Bankr. LEXIS 820, Counsel Stack Legal Research, https://law.counselstack.com/opinion/caridev-inc-v-stubbe-in-re-j-gus-lallande-inc-prd-1994.