Hmg Property Investors, Inc. v. Parque Industrial Rio Canas, Inc.

847 F.2d 908, 11 Fed. R. Serv. 3d 655, 1988 U.S. App. LEXIS 6396, 1988 WL 47447
CourtCourt of Appeals for the First Circuit
DecidedMay 17, 1988
Docket87-1155, 87-1368
StatusPublished
Cited by132 cases

This text of 847 F.2d 908 (Hmg Property Investors, Inc. v. Parque Industrial Rio Canas, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hmg Property Investors, Inc. v. Parque Industrial Rio Canas, Inc., 847 F.2d 908, 11 Fed. R. Serv. 3d 655, 1988 U.S. App. LEXIS 6396, 1988 WL 47447 (1st Cir. 1988).

Opinion

SELYA, Circuit Judge.

The last lap of this marathon of a case was run when the United States District Court for the District of Puerto Rico entered a default judgment against appellant, Parque Industrial Rio Canas, Inc. (Parque), and thereafter ordered Parque to pay certain sums of money to appellee, HMG Property Investors, Inc. (HMG). 1 Parque offers a myriad of reasons in support of its strident claim that the district court let the race wander well off course. We do not share appellant’s view.

I. BACKGROUND

In July 1972, HMG entered into a $2,600,-000 construction loan agreement with Par-que for the development of an industrial park in Puerto Rico (the Rio Canas property), The loan was secured by a first mortgage on the real estate. It was to be repaid in stipulated monthly installments until July 1974, when a balloon payment would become due. Parque failed to meet the payment terms. In February 1976, with the loan substantially in arrears, Par-que carved out thirteen lots from the Rio Canas property and sold them to Compañía Aseguradora Interamericana S.A. of Panama (CA). The “proceeds,” which went to HMG to reduce the principal owed under the mortgage note, were not in coin of the realm, but consisted of an agreement by the transferee to assume debt and make payments in futuro. CA also bound itself to comply with the terms of a mortgage. Some nine months later, Parque entered into a similar transaction with Bambú Realty Corporation (Bambú); two more lots were segregated from the Rio Canas property, released, and sold. The principal amount of the mortgage note was again reduced.

At this point, we pause to recapitulate. Bambú, CA, and Parque were three of a kind: each was deep in debt to HMG, bound by a periodic payment schedule, and obligated under the mortgage documents to “pay all taxes, assessments and similar charges levied and assessed ... against the property....” Shuffling the deck in this fashion, however, did not solve the underlying problem. Before long, each debtor was in arrears, and both CA and Parque had fallen behind in payment of real estate taxes. HMG, as was its option under the mortgages, satisfied several of the tax bills and demanded that the mortgagors reimburse it for such payments. It did so in vain.

In December 1977, HMG invoked the federal district court's diversity jurisdiction, 28 *911 U.S.C. § 1332(a), and sued CA. It sought, inter alia, to foreclose its mortgage on the thirteen lots. CA joined Parque as a third-party defendant, claiming fraud. Within the framework of the same action, Parque thereafter filed a cross complaint (erroneously styled as a third-party complaint) against HMG, contending that the lender’s refusal to continue financing the deal had caused the collapse of the entire Rio Canas project. HMG counterclaimed, seeking damages and the right to foreclose on the remainder of the lots. Among other things, it alleged that Parque had defaulted on both the mortgage loan and the property tax obligation. 2 Parque and HMG each moved for summary judgment, but matters were delayed by a barrage of other motions, filed mainly by appellant. It was not until September 19, 1985 that the ax fell. On that date, the district court rejected most of Parque’s motions. Parque Industrial Rio Canas, Inc. v. HMG Property Investors, Inc., Civ. No. 77-1936 (D.P.R. Sept. 19, 1985) (Parque I). HMG’s motion for summary judgment was also denied because the court perceived an issue of fact as to whether HMG had made a verbal promise to postpone collection of principal and advance additional funds. Id.

Trial was set for February 6, 1986. In order to forestall a possible tax sale of the property, the court ordered, pendente lite, that Parque pay the outstanding taxes or post bond to cover the arrearage and the next six months’ tax payments. If the bond were posted, then HMG could pay the taxes with the assurance that its security would not be diminished or lost if it ultimately prevailed in the litigation. 3 In the order which it entered immediately following issuance of Parque I, the district court left no room to doubt that Parque’s failure to comply would not be lightly indulged. Because of its clear pertinence to the issues raised on appeal, we quote the admonition verbatim:

Parque is expressly forewarned that failure to comply with any of the terms and conditions of this Order shall entail the imposition of severe sanctions including the dismissal of its complaint, the striking of its defenses and the entering of judgment in favor of HMG on its foreclosure action.

After this order issued, Parque flooded the court with yet another deluge of motions aimed, one suspects, at delaying the actual posting of the bond. On December 12, 1985 the court rejected the principal reconsideration motion but reduced the required surety amount to reflect new information concerning Parque’s success in effectuating an administrative reduction of tax liability. Once again, the district judge warned that failure to comply with the bonding order by December 22 would “result in the imposition of any of the sanctions mentioned” in the original order. The judge also shut off further motion practice. She might well have saved her breath; Par-que ignored the moratorium.

*912 On December 18, appellant sought a ninety day extension. According to the district judge, Parque said “it was taking steps to raise money to make a payment plan for the tax debt.” Parque Industrial Rio Canas, Inc. v. HMG Property Investors, Inc., Civ. No. 77-1936, slip op. at 3 (D.P.R. Feb. 3, 1986) (Parque II). The request was denied the next day. The court-imposed deadline came and went. Appellant spumed the court’s order, neither paying the taxes nor posting the indemnity. HMG moved to impose sanctions. Parque objected and again asked reconsideration of the December 12 order; it hawked basically the same grounds which had proven unsuccessful on prior occasions. Appellant’s request was denied with predictable dispatch. On February 3, 1986, no bond having been tendered and the taxes remaining unpaid, the district court granted HMG’s motion and sanctioned Parque for noncompliance. The court dismissed Parque’s cross complaint, struck Parque’s remaining defense to HMG’s counterclaim, and allowed appellee to move for entry of a default judgment. Id. at 4. The judge characterized appellant’s course of conduct as evidencing a pattern of “callous disregard for court orders.” Id. at 3.

On August 25, 1986, a default judgment was entered against Parque. By its terms, appellant was ordered to pay HMG the sums owed under the loan agreement and the unpaid property taxes (in an amount to be certified by the taxing authority) for the current year and the five years next preceding. See P.R. Laws Ann. tit. 30, § 2651 (limiting tax liens vis-a-vis acquiring mortgage creditor to amounts owed for current tax year, plus last five tax years).

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Bluebook (online)
847 F.2d 908, 11 Fed. R. Serv. 3d 655, 1988 U.S. App. LEXIS 6396, 1988 WL 47447, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hmg-property-investors-inc-v-parque-industrial-rio-canas-inc-ca1-1988.