In re: MacGregor Electric, S.E. v. Surety Company

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: August 14, 2009
• Docket: 08-00122
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO

° IN RE: : CASE NO. 05-11884 ‘ MACGREGOR ELECTRIC, S.E. CHAPTER 7 ° Debtor a 7 |MACGREGOR ELECTRIC, S.E. ADVERSARY NO. 08-00122 8 Plaintiff

10 SURETY COMPANY i Defendants :

13 14 OPINION AND ORDER 15 This adversary proceeding is before the court upon three (3) motions: plaintiffs motion to 16 |ldismiss counterclaim, plaintiffs motion to strike affirmative defense, and defendant’s motion for 17 |judgment on the pleadings. : 18 The first is a motion to dismiss the counterclaim filed on October 27, 2008 (Docket No. 14) 19 the Chapter 7 trustee, representing the estate of MacGregor Electric, S.E., alleging the following: 20 Ossam Construction, Inc. does not have a right to setoff under Articles 1149-1150 of the Puerto 21 Civil Code, 31 L.P.R.A.§§ 3321-3222 because it does not have a “liquid and demandable 22 |Iclaim,” but rather a “litigious credit” (Motion to Dismiss, p. 4); (ii) Ossam Construction, Inc. has 23 |lwaived its right to the remedy of setoff since the same has not filed a proof of claim or demanded 24 until the filing of the Counterclaim on October 21, 2008; and (iii) the monies owed to 25 |[MacGregor Electric, S.E. are subject to a lien in favor of the Chapter 7 trustee pursuant to §544 of 26 Bankruptcy Code once the case was converted to Chapter 7 on August 21, 2006. For the reasons 27 forth below the motion to dismiss the counterclaim is denied. 28 The second motion is a “Motion Pursuant To Rule 12(F)” filed on October 27, 2008 (Docket 15) by the Chapter 7 trustee, representing the estate of MacGregor Electric, S.E. (hereinafter

1 llreferred as “MacGregor,” “Plaintiff? or “Counter-Defendant”) to strike Defendant’s affirmative 2 |\defense number seven (7) in its Answer to Complaint regarding its alleged right of setoff under the 3 |lprovisions of the Bankruptcy Code, 11 U.S.C. §553. Defendant did not file a response to this motion. 4 the reasons set forth below the motion pursuant to Fed. R. Civ. P. 12(f) is denied. 5 The third is a motion for judgment on the pleadings filed on December 1, 2008 (Docket No. 6 20) by Ossam Construction, Inc. (hereinafter referred as “Ossam Construction,” “Defendant,” or 7 |“Counter-Claimant”) alleging that the complaint fails to state a claim for relief since the same is 8 |lvacant on averments related to the assumption, performance and/or completion of two particular 9 licontracts that Defendant and MacGregor Electric, S.E. had entered into and which are in controversy 10 this adversary proceeding. Jorge Luis Gerena, Chapter 7 trustee, in representation of MacGregor 11 |Electric, S.E. filed an “Opposition to Motion For Judgment on the Pleadings” on December 2, 2008 12 |(Docket No. 24). For the reasons set forth below the motion for judgment on the pleadings is granted. 13 Facts and Procedural Background 14 Plaintiff, Macregor Electric, S.E., filed a bankruptcy petition under Chapter 11 of the 15 ||Bankruptcy Code on October 14, 2005. On August 8, 2006 MacGregor moved the court to convert 16 ||the case to Chapter 7 (Docket No. 58 in lead case 05-11884'). MacGregor included in Schedule B the 17 amounts retained by Ossam Construction as an account receivable as of 07/31/2006 for the amount 18 $53,704.73 (Docket No. 70 in lead case). The detail of this account receivable consists of job 141- 19 ||Alturas del Bosque for the amount of $36,881.23 and job 161-Sunbay Marina Villas for the amount 20 $16,823.50. 21 MacGregor filed the instant adversary proceeding against Ossam Construction, Inc. on August 22 1118, 2008 alleging the following: 23 “1. Debtor MacGregor Electric, SE (MacGregor), did work for Ossam Construction (Ossam) in two projects, one called Alturas del Bosque and the other for Sun Bay Manila Villas. 24 Ossam retained ten percent of the amount billed by MacGregor in both projects, to wit, $53,704.73. From at least March of 2005, MacGregor has attempted to collect said amount 25 to no avail. Although Ossam finished both projects, it has not paid MacGregor aforementioned retained amount. a7 ‘References to the lead case are to the entries and documents filed in the bankruptcy case, 28 || case number 05-11884(ESL).

1 2. This debt constitutes a breach of the parties contract or obligation and plaintiff, as the 2 aggrieved party, seeks defendants’ specific compliance and damages, to wit, 6% interest on the debt since accrued in accordance with Article 1061 of the Puerto Rico Civil Code, 31 3 L.P.R.A. §3025. The above mentioned amounts are liquid, demandable and due and are owed by defendants to plaintiff as stated above.” 4 Defendant filed the answer to the complaint on October 20, 2008 (Docket No. 12), alleging 5 that it does not owe any monies to Plaintiff because it had defaulted on both contracts, thus losing its 6 interest in the retained amount, as stipulated in the contracts. In the alternative, Defendant alleges that 7 it has a right of setoff under the provisions of the Bankruptcy Code, 11 U.S.C. §553 and also that it 8 was not entitled to comply in whole or in part with its contractual obligations due to Plaintiffs breach 9 of contract under the doctrine of exceptio non rite adimpleti contractus’ 10 Ossam Construction filed a counterclaim alleging that MacGregor “defaulted on both 11 contracts without finishing the agreed scope of work” (Counterclaim, paragraph #6) and that 12 MacGregor’s “incompliance with the contract not only caused such party to lose any property rights 13 and interest in the retained amounts, but also caused damages delays and losses to Ossam” 14 (Counterclaim, paragraph #8). The counterclaim alleges that “[t]he losses caused to Ossam on the 15 Alturas del Bosque project amounts to $81,555.29, excluding interests from the day the project was 16 abandoned by McGregor” and “[t]he losses caused to Ossam on the Sunbay project amounts to 17 $75,755.14, excluding interest from the day the project was abandoned by McGregor (Counterclaim, 18 19 doctrine of exceptio non rite adimpleti contractus pursuant to Article 1077 of the 20 | Puerto Rico Civil Code, 31 L.P.R.A. §3052 is a defense which is available to the defendant in the 1 || event that the plaintiff demands the fulfillment of the obligations of the defendant in a contract, despite having fulfilled partially or defectively its obligations in the contract. The effect of the 22 || application of this doctrine is that the defendant will not be obliged to fulfill its obligations under the contract until the plaintiff performs all of its obligations fully or free of defects. However, in 23 | those cases in which the application of the doctrine of exceptio non rite adimpleti contractus is 74 || contrary to the principles of contractual good faith the defendant is unable to assert that defense successfully and thus the end result is that a monetary reduction is allocated based on the 25 || obligations that have not been realized or those obligations which were defectively realized. 26 Alvarez de Choudens v. Rivera Vazquez, 165 D.P.R. 1, 21-23 (2005); Puig Brutau, José, Fundamentos de Derecho Civil, Tome I, vol. II, 116-117 (Bosch 4 ed, 1988); See Mora Dev. 27 || Corp. v. Sandin, 118 D.P.R. 733 (1987); Martinez v. Colén Franco, Concepcién, 125 D.P.R. 15 (1989); Costructora Bauza, Inc. v. Garcia Lépez, 129 D.P.R. 579 (1991); Master Concrete Corp. v. 28 || Fraya, S.E., 152 D.P.R. 616 (2000).

| |lparagraphs #12 and 13). On October 27, 2008 (Docket No. 14) MacGregor filed a motion to dismiss 2 counterclaim alleging that Ossam Construction does not have a right to setoff pursuant to Articles 3 11149-1150 of the Puerto Rico Civil Code, 31 L.P.R.A. §3221-3222 since it does not have a “liquid 4 |jand demandable claim” but rather a litigious credit (Motion to Dismiss, pg. 4). Ossam Construction 5 alleges that MacGregor waived its claim to said remedy (setoff) since it did not file a proof of 6 or demanded setoff (Motion to Dismiss, pg. 4). On October 27, 2008 MacGregor filed a 7 |“Motion Pursuant to Rule 12(F)” to strike Ossam Construction’s affirmative defense #7, namely its 8 jlalleged right to setoff pursuant to §553 of the Bankruptcy Code and Articles 1149-1150 of the Puerto 9 Civil Code, 31 L.P.R.A. §3221-3222 (Docket No. 15). 10 On December 1, 2008 Defendant filed a motion (Docket No. 20) for judgment on the 11 |[pleadings alleging that the complaint must be dismissed because it fails to state a claim upon which 12 can be granted, namely due to the following reasons: (i) it fails to plead sufficient facts to state 13 |ja claim for collection of monies; (ii) it fails to plead sufficient facts to state a claim for collection of 14 |Imonies resulting from work done through an executory contract; and (iii) it fails to allege that Plaintiff 15 |performed and completed the scope of work. Defendant further alleges that the right to collect 16 |lamounts retained under a construction contract is enforceable only after the work is performed and 17 |jcompleted under the terms of the contract and as such Plaintiff under Fed. R. Bankr. P. 7009(f) is 18 |lrequired to specify when and where completion of the work was effected (motion for judgment on 19 pleadings, p. 4). Plaintiff filed an “Opposition to Motion for Judgment on the Pleadings” (Docket 20 |INo. 24) on December 2, 2008 alleging that the complaint satisfies the basic notice pleading 21 |lrequirement of Fed. R. Civ. P. 8 and that it provides Defendant a fair notice of Plaintiffs claim and 22 |Ithe basis of the same. In addition, Plaintiff argues that it is not a requirement for a complaint to state 23 a project was completed to survive a motion to dismiss (Opposition to Motion for Judgment on 24 Pleadings, p. 3) and that Fed. R. Civ. P. 9(£) does not require a plaintiff plead the time and place 25 |jof alleged conduct which gives rise to a claim for relief (Opposition to Motion for Judgment on the 26 ||Pleadings, p. 3-4). Plaintiff sustains that the contracts related to these projects are not executory 27 contracts since the debtor performed the same and attempted to secure payment since at least March 28 jlof 2005. Plaintiff also sustains that, “it must be inferred that plaintiff alleges that debtor performed

1 contract and hence, there is no executory contract.” (Opposition to Motion for Judgment on the 2 ||Pleadings, p. 6). 3 On December 15, 2008 Defendant filed a “Reply to ‘Opposition to Motion for Judgment on 4 Pleadings’ and Supplemental Motion for Judgment on the Pleadings” (Docket No. 27) arguing 5 pursuant to Fed. R. Civ. P. 9(c) a plaintiff must aver all conditions precedent that have been 6 |lperformed, thus sustaining that an indispensable element Plaintiff must plead in the complaint is that 7 complied with all conditions precedent of the contract in order to be able to state a claim for breach 8 contract and specific performance. Plaintiff filed a “Motion to Strike Defendant’s Reply to 9 |‘Opposition to Motion for Judgment on the Pleadings’ and Supplemental Motion for Judgment on 10 Pleadings on December 21, 2008 (Docket No. 29) stating that Defendant’s reply should be 11 stricken from the record since it failed to request leave from the court to file its reply pursuant to L. 12 R. 7.1(c). Plaintiff also argues that there is no procedural requirement under Article 1077 of the 13 Rico Civil Code, 31 L.P.R.A. §3052, that requires a complaint to allege that a party has 14 |complied with its obligations (Motion to Strike, p.3). 15 Applicable Law and Analysis 16 ||\Motion to Dismiss Counterclaim 17 Counter-Defendant’s motion to dismiss counterclaim is solely based on its position that, “[t]he 18 |Counterclaim’s basis is a claim for setoff against the retainage sought v. a claim that the work 19 |lperformed by MacGregor was defective and caused Ossam damages of $157,310.43.” (Motion To 20 Dismiss, p. 2). However, Ossam Construction in its counterclaim pleads the following: (i) “Plaintiff 21 McGregor Electric, S.E. (McGregor) and defendant Ossam, Construction, Inc. (Ossam) agreed and 22 llentered two separate executory construction contracts for the development of two residential 23 |\projects;” (ii) “Under the terms of both contracts Ossam was authorized to retain and hold 10% of the 24 amount billed by McGregor, until final completion and acceptance of all work covered by the 25 |Icontract;” (iii) “Before final completion and acceptance of work, McGregor had financial trouble and 26 |idefaulted on both contracts without finishing the agreed scope of work;” (iv) McGregor’s 27 ||incompliance with the contract not only caused such party to lose any property rights and interest in 28 retained amounts, but also caused damages delays and losses to Ossam;” (v) “Ossam had to bear

1 cost of completing McGregor’s unfinished work;” and (vi) “McGregor’s default in the contracts 2 |lis the proximate cause of Ossam’s damages and losses, and McGregor is responsible and liable for 3 |isuch damages and losses.” (Counterclaim, paragraphs #1, 5, 6, 8, 10 and 15). After perusing Ossam 4 ||Construction’s Counterclaim in its totality, this court finds that the Counterclaim is devoid of an 5 llallegation that Counter-Claimant has a right to setoff under §553 of the Bankruptcy Code, nor is such 6 |iconcept alluded to in the Counterclaim. Thus, this court finds that Counter-Claimant has pleaded a 7 of action sufficient to entitle it to offer evidence in support of its claim for breach of contract. 8 Motion to Strike- Fed. R. Civ. P. 12(f) 9 Fed. R. Civ. P. 12(f) establishes that, “[t]he court may strike from a pleading an insufficient 10 ||defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on 11 own; or (2) on motion made by a party either before responding to the pleading or, if a response 12 |jis not allowed, within 20 days after being served with the pleading.” Fed. R. Civ. P. 12(f). “Courts 13 not, however, view motions to strike affirmative defenses for legal insufficiency under Federal 14 Rule of Civil Procedure12(f) favorably.” Bio-Vita, Ltd. v. Rausch, 759 F. Supp. 33, 39 (D. Mass. 15 1991). Moreover, under Fed. R. Civ. P. 12(f) motions to strike an insufficient defense are not favored 16 |by the courts given their dilatory nature, and thus the same are often not granted unless there is a 17 |lshowing of prejudice to the moving party. See 5C Wright & Miller, Federal Practice and Procedure: 18 |}Civil 3d_ § 1381 at 421-422. An insufficient defense under Fed. R. Civ. P. 12(f) depends upon the 19 for relief sought and the particular defense that is in question. Id at 410. 20 A motion to strike a defense pursuant to Fed. R. Civ. P. 12(f) will be granted only if: (i) there 21 jlare no questions of fact; (ii) that there are no disputed questions of law; and (ii) that under no set of 22 |\circumstances the defenses could succeed. See Johnson v. Chrysler Corp., 187 F.R.D. 440, 441 (D. 23 1999) and Gilbert v. Eli Lilly Co., Inc., 56 F.R.D. 116, 121 (D. P.R. 1972). When considering 24 |ithe defenses to a complaint all well pleaded matters will be accepted as true and no matters contained 25 jloutside the pleadings will be considered. Id. at 121. “Nor will a Rule 12(f) motion be granted if there 26 |lis a substantial question of fact or a mixed question of law and fact that cannot be resolved, even if 27 |jit is possible to determine the issue by drawing inferences from acts and statements that are not 28 |\disputed.” 5C Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1381 at 426-427. Thus,

1 |ja motion to strike a defense must be denied if there are either questions of facts or disputed questions 2 law. See Gilbert v. Eli Lilly Co., Inc., 56 F.R.D. at 121. “But even when the defense seems to 3 |ipresent a purely legal question, federal courts are very reluctant to determine disputed or substantial 4 |lissues of law on a motion to strike; these questions quite properly are viewed as best determined only 5 jjafter further development by way of discovery and a hearing on the merits, either on a summary 6 ||judgment motion or at trial.” 5C Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1381 7 423-425. 8 Plaintiff's motion to strike affirmative defense #7 was timely filed as it was filed within 9 |[twenty (20) days after the Defendant filed its answer to the complaint. Plaintiffs claim for relief is 10 to an alleged breach of contract and the affirmative defense at issue is number seven, namely that, 11 |“[dJefendant does not owe any amount of money to plaintiff. In the alternative defendant is entitled 12 ||to a setoff under §553 of the Bankruptcy Code.” (Answer to Complaint, affirmative defense #7).° In 13 instant case, there is a disputed fact which is key to this case, namely which party (Plaintiff, 14 |Defendant or both) defaulted on such contracts. This controlling fact is at issue and will ultimately 15 |icontrol the outcome of this adversary proceeding. Thus, the court denies the motion to strike defense 16 as an insufficient defense. 17 |\Standard for Judgment on the Pleadings 18 A Rule 12(c) motion serves as a mechanism to dispose of cases when there is no dispute of 19 material facts and a judgment on the merits can be achieved by focusing on the content of the 20 |jpleadings, exhibits, matters incorporated by reference in the pleadings, whatever is central or integral 21 the claim for relief or defense, and any facts of which the court may take judicial notice. 5C Wright 22 ||& Miller, Federal Practice and Procedure: Civil 3d §1367 at 206-207. See Tavares de Almeida v. 23 |-——_ 24 > “Tn general, a creditor must file a proof of claim in order to participate in any distribution from a debtor’s bankruptcy estate. It does not necessarily follow, however, that a creditor who fails 25 || to file a proof of claim thereby waives a right to setoff for all purposes. The prevailing view is that the failure to file a proof of claim does not prevent the creditor from asserting the right as a 26 Il defensive matter, although the creditor may be barred from collecting a dividend with respect to the 27 || amount of the claim that exceeds the creditor’s offsetting debt to the debtor.” Alan N. Resnick and Henry J. Sommer, 5 Collier on Bankruptcy J 553.07[1] (15" ed. 2008).

1 ||Children’s Museum, 28 F. Supp. 2d 682, 685 (D. Mass. 1998). A motion for judgment on the 2 |pleadings “tests the legal sufficiency of the complaint, not the plaintiffs likelihood of ultimate 3 |jsuccess.” LaManque v. Massachusetts Dep’t of Employment & Training, 3 F. Supp. 2d 83, 89 (D. 4 1998) referring to Furtick v. Medford Housing Authority, 963 F. Supp. 64, 67, n.9 (D. Mass. 5 In ruling on such motion, the court must accept all of the material facts as alleged in the 6 ||complaint and view the same in the light most favorable to the plaintiff. See Santiago de Castro v. 7 |Morales Medina, 943 F. 2d 129, 130 (1* Cir. 1991); Rivera-Gomez v. Castro, 843 F. 2d 631, 635 □□ 8 1988); Gaskell v. Harvard Coop. Soc’y, 3 F. 3d 495, 497 (1* Cir. 1993); International Paper Co. 9 Jay, 928 F. 2d 480, 482 (1° Cir. 1991); Furtick v. Medford Housing Authority, 963 F. Supp. at 67, 10 “The motion for a judgment on the pleadings only has utility when all material allegations of fact 11 jlare admitted or not controverted in the pleadings and only questions of law remain to be decided by 12 |Ithe district court.” SC Wright & Miller, Federal Practice and Procedure 3d§ 1367 at 207-208. See 13 Nelson v. University of Maine Sys., 914 F. Supp. 643, 647 (D. Me. 1996); and Geupel v. Benson, 704 14 |/F. Supp. 312, 313 (D. Mass. 1989). However, ifthe pleadings do not resolve all of the factual issues 15 the case, then a trial on the merits is deemed more appropriate. 5C Wright & Miller, Federal 16 |[Practice and Procedure: Civil 3d_ §1367 at 216. 17 A motion under Fed. R. Civ. P. 12(c) may be made at any time after the pleadings are closed, 18 early enough not to delay trial. 5C Wright & Miller, Federal Practice and Procedure: Civil 3d 19 1367 at 211-212.“Rule 7(a) provides that the pleadings are closed upon the filing ofa complaint and 20 |jan answer (absent a court-ordered reply), unless a counterclaim, cross-claim, or third-party claim is 21 |jinterposed, in which event the filing of a reply to a counterclaim, cross-claim answer, or third-party 22 |lanswer normally will mark the close of the pleadings.” 5C Wright & Miller, Federal Practice and 23 ||Procedure: Civil 3d. § 1367 at 213. 24 Fed. R. Civ. P. 12(c) may be employed by the defendant as a vehicle for raising several of the 25 |\defenses enumerated in Fed. R. Civ. P. 12(b), including the defense of failure to state a claim upon 26 relief may be granted. See 5C Wright & Miller, Federal Practice and Procedure: Civil 3d 27 1367 at 216, 218. “A motion for judgment on the pleadings is treated much like a Rule 12(b)(6) 28 |lmotion to dismiss.” Perez Acevedo v. Rivero-Cubano, 520 F. 3d 26, 29 (1* Cir. 2008) referring to

1 Curran v. Cousins, 509 F. 3d 36, 43-44 (1* Cir. 2007); See also Marrero-Gutierrez v. Molina, 491 F. 2 |3d 1, 5(1* Cir. 2007); Pasdon v. City of Peabody, 417 F. 3d 225, 226 (1 Cir. 2005); and Collier v. 3 of Chicopee, 158 F. 3d 601, 602 (1* Cir. 1998). “Because [a Rule 12(c)] motion calls for an 4 |jassessment of the merits of the case at an embryonic stage, the court must view the facts contained 5 the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences 6 |therefrom...” Id. citing “R.G. Fin. Corp. v. Vergara-Nunez, 446 F. 3d 178, 182 (1* Cir. 2006). “Under 7 Atlantic v. Twombly, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007), to survive a Rule 8 |/12(b)(6) motion (and, by extension, a Rule 12(c) motion) a complaint must contain factual allegations 9 |Ithat ‘raise a right to relief above the speculative level, on the assumption that all allegations in the 10 |icomplaint are true...”” ” Perez Acevedo v. Rivero-Cubano, 520 F. 3d at 29. 11 Standard for Granting a Motion to Dismiss 12 Motions to dismiss for failure to state a claim upon which relief may be granted are governed 13 ||by Federal Rule of Civil Procedure 12(b)(6), which provides that a defense of “failure to state a claim 14 which relief can be granted” to a claim for relief may be presented by motion before the filing 15 a responsive pleading. A motion to dismiss a counterclaim pursuant to Fed. R. Civ. P. 12(b)(6) is 16 |javailable to test a claim for relief in any pleading, including a defendant’s counterclaim. See 5B 17 | Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1356 at 368-369. 18 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted 19 true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 20 111949 173 L. Ed. 2d. 868 (2009) citing Bell Atlantic v. Twombly, 127 S. Ct. at 1974. Thus, a 21 |‘complaint must plead facts ‘that raise a right to relief above the speculative level’” Dixon v. 22 [Shamrock Fin. Corp., 522 F. 3d 76, 79 (1* Cir, 2008); Cook v. Gates, 528 F. 3d 42, 48 (1* Cir. 2008); 23 ||Gray v. Evercore Restructuring L.L.C., 544 F. 3d 320, 324 (1* Cir. 2008); Gagliardi v. Sullivan, 513 24 IF. 3d 301, 305 (1* Cir. 2008); Perez Acevedo v. Rivero-Cubano at 29; Trans-Spec Truck Serv. v. 25 ||Caterpillar Inc., 524 F. 3d 315, 320 (1* Cir. 2008); Citibank Global Markets, Inc. v. Rodriguez 26 |Santana, —-F. 3d — 2009 WL 2100215, C.A. 1 (Puerto Rico), July 17, 2009. “Because a dismissal 27 |terminates an action at the earliest stages of the litigation, without a developed factual basis for 28 |\decision, the court must carefully balance the rule of simplified civil pleading against the need for

1 something more than conclusory allegations. Washington Legal Foundation v. Massachusetts Bar 2 |[Foundation, 993 F. 2d 962, 971 (1* Cir. 1993). The court will not accept unsupported conclusions 3 interpretations of the law. Id. 4 Conditions Precedent- Fed. R. Civ. P. 9(c) 5 Fed. R. Civ. P. 9(c) establishes that, “[i]n pleading conditions precedent, it suffices to allege 6 jigenerally that all conditions precedent have occurred or been performed. But when denying that a 7 |\condition precedent has occurred or been performed, a party must do so with particularity.” Fed. R. 8 P. 9(c). The rule is applicable in all actions in the federal courts, even when the pleading practice 9 jlin the state in which the court is sitting is different. Watson v. Nalco Chem. Co, 272 F. 3d 13, 21 (1* 10 2001) citing SA Wright, & Arthur Miller, Federal Practice and Procedure § 1302, (2d ed. 1987). 11 |‘Despite its liberality, Rule 9(c) still obliges the pleader to allege compliance with the contract or the 12 |performance or occurrence of the conditions precedent was waived or excused.” 5A Wright & Miller, 13 Federal Practice and Procedure: Civil 3d_ § 1303 at 326. “A failure to allege the performance or 14 floccurrence of conditions precedent can be challenged by a motion to dismiss but normally should be 15 llcurable by amendment under Rule 15.” Id at 329. The court must also consider that, “[n]Jeither Rule 16 nor Rule 8(a)(2) expressly requires that the performance or occurrence of conditions precedent 17 |ibe pleaded by a claimant. Rather, Rule 9(c) simply describes how performance or occurrence of 18 |lconditions precedent is to be pleaded. However, some courts have found that such conditions must 19 at least generally alleged for the pleading to state a claim for relief.” 2-9 Moore’s Federal Practice- 20 § 9.04[1] . 21 Discussion for Judgment on the Pleadings 22 Defendant in its motion for judgment on the pleadings, states that, “...the allegations of the 23 |icomplaint taken as a whole fail to state a claim upon relief can be granted since nowhere in the -24 complaint it is alleged that plaintiff performed and completed the scope of work it did for Ossam, and 25 and where such completion was effected.” (Motion for Judgment on the Pleadings, paragraph 26 In addition, Defendant states that, “[b]ased on the applicable law it is evident that plaintiffs 27 |claim cannot survive unless it states whether or not the executory contract with defendant Ossam was 28 |jperformed and completed” (Motion for Judgment on the Pleadings, p. 7). Plaintiffin its Opposition 10

1 Motion for Judgment on the Pleadings responds the following to this particular argument, “[u|nder 2 |\said definition, the contract at hand is not an executory contract for it is plaintiff’ s position that debtor 3 performed the contract and is therefore owed money by Ossam. Not only is that plaintiffs contention 4 also the complaint states that debtor attempted to secure payment since at least March 2005. Since 5 bankruptcy petition was filed on October 14, 2005, it must be inferred that plaintiff alleges that 6 |\debtor performed its contract and hence, there is no executory contract.” (Opposition to Motion for 7 Judgment on the Pleadings, pgs. 5-6). 8 Plaintiff's complaint only alleges with respect to the retainage funds owed by Ossam 9 ||\Construction that, “[t]his debt constitutes a breach of the parties contract or obligation and plaintiff, 10 jas the aggrieved party, seeks defendants’ specific compliance and damages, to wit 6% interest on the 11 since accrued in accordance with Article 1061 of the Puerto Rico Civil Code, 31 L.P.R.A. § 12 3025.”(Complaint, paragraph #2). It is clear from this particular pleading, that the complaint stems 13 from an alleged breach of contract, and that Fed. R. Civ. P. 9(c) is applicable. However, the 14 |icomplaint does not contain allegations or general averments regarding the performance of all 15 |iconditions precedent under the two contracts. The only averment the complaint contains regarding 16 completion of both projects is the following, “Although Ossam finished both projects, it has not 17 MacGregor aforementioned retained amount” (Complaint, paragraph #1). The allegation is that 18 |}Ossam, the Defendant, and not MacGregor, the Plaintiff, finished the project. The absence of an 19 jlallegation that Plaintiff completed the work it was contracted to perform is fatal. Therefore, the 20 |lcomplaint fails to state a cause of action upon which relief can be granted for the alleged breach of 21 two contracts. Also, the record shows that Plaintiff, after Defendant’s challenge, has failed to 22 the court for leave to file an amended complaint to comply with the pleading standards under 23 |iFed. R. Civ. P. 9(c), namely to include a general pleading that it complied with all conditions 24 |Iprecedent under the two (2) contracts. 25 Conclusion 26 In view of the foregoing, the court denies the motion to dismiss the counterclaim as the same 27 with sufficient particularity a cause of action for breach of contract. The court also denies the 28 |motion to strike affirmative defense #7 pursuant to Fed. R. Civ. P. 12(f), as there is a key fact in 11

1 controversy. Moreover, this court finds that Plaintiff's complaint stems from an alleged breach of 2 |jcontract action involving two (2) particular contracts, and that Fed. R. Civ. P. 9(c) is applicable to the 3 jlinstant case. The court concludes that the complaint fails to conform to the pleading requirements 4 Fed. R. Civ. P. 9(c) since the same is vacant of general pleadings or averments regarding the 5 |lperformance of all conditions precedent under these two (2) contracts. Thus, the complaint fails to 6 a claim for relief upon which relief may be granted under the standards of Fed. R. Civ. P. 7 1112(b)(6). 8 Consequently, Plaintiffs motion to strike affirmative defense #7 and to dismiss the 9 |jcounterclaim are hereby DENIED. Furthermore, Defendant’s motion for judgment of the pleadings 10 jis hereby GRANTED and the complaint is hereby DISMISSED. 11 Judgment shall be entered accordingly. 12 In San Juan, Puerto Rico, this/ □□□ day of August 2009 13 sy, j.

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