In re: Mayaguez Advanced Radiotherapy Center v. Advanced Cardiology Center, Corp.

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: February 10, 2010
• Docket: 09-00111
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2

3 IN RE:

4 MAYAGUEZ ADVANCED RADIOTHERAPY CASE NO. 09-4540 BKT 5 CENTER CHAPTER

6 Debtor(s) ADVERSARY NO. 09-00111

7 MAYAGUEZ ADVANCED RADIOTHERAPY

8 Plaintiff

9 ADVANCED CARDIOLOGY CENTER, CORP FILED & ENTERED ON 02/10/2010

10 Defendant(s)

11 OPINION AND ORDER 12 Before this Court is Plaintiff-Debtor Mayaguez Advanced Radiotherapy 13 Center’s (“MARC”) Brief in Support of Request for Sanctions [Dkt. No. 32] and 14 Defendant Advanced Cardiology Center Corporation’s (“ACC”) Legal Brief in Support 15 of Opposition to Motion for Sanctions and of Motion to Dismiss and/or to Prohibit 16 Use, Sell or Lease of Collateral and/or for adequate Protection Payment [Dkt. No. 17 33]. On 6/5/2009, MARC filed the instant adversary proceeding for the avoidance 18 of several attachments and garnishments over the assets of MARC and in favor of 19 ACC. The parties reached an agreement and filed a joint stipulation on 6/19/2009 20 [Dkt. No. 5] which purportedly resolved all matters in dispute between the 21 parties. The stipulation was approved by the court on 7/9/209 [Dkt. No. 6], and 22 judgment was entered closing the adversary on 7/22/2009 [Dkt. No. 8]. Shortly 23 thereafter on 7/31/2009, plaintiff MARC moved the court for sanctions against 24 25 defendant ACC for failure to carry out the terms of the stipulation, specifically with regards to a payment of $36,040.46 collected post petition. On 11/12/2009, this Court held a hearing in which it ordered the parties to file simultaneous briefs on the issue of the secured status of ACC and their entitlement to adequate protection payments based on each parties interpretation of the Stipulation, and to refrain from filing dispositive motions until this 1 matter was determined by the Court. In response to this order the parties filed 2 the motions presently before us. Even though, Plaintiff MARC filed a sur-reply to 3 ACC’s Legal Brief on 1/25/2010 [Dkt. No. 34], the Court did not consider this 4 filing in determining the legal status of the parties for the purpose of this 5 Opinion and Order. 6 A stipulation is a negotiated contract between the parties that resolves 7 all or a portion of the outstanding issues between them. A well established 8 guideline for the interpretation of contracts is the “parol evidence rule” which 9 states “where the parties put their engagement in writing all prior negotiations 10 and agreements are merged in the instrument, and each is bound by its terms 11 unless his signature is obtained by fraud or the contract be reformed on the 12 grounds of fraud or mutual mistake, or the contract is illegal.” Wheeler v. 13 Blumling, 521 F.3d 1 (1st Cir. 2008). In Wheeler, the Court refused to admit 14 extrinsic evidence where there was no allegation of fraud or mistake but was 15 offered to contradict particular terms in the contract. The introduction of 16 extrinsic evidence to escape the unwanted effects of a contract “is exactly what 17 the parol evidence rule forecloses.” Id. Article 1233 of the Puerto Rico Civil 18 19 Code, 31 L.P.R.A. § 3471 and the “parol evidence rule” both preclude reference to 20 extrinsic evidence where the terms are clear. Borshow Hosp. & Medical v. Cesar 21 Castillo, 96 F.3d 10, 15 (1st Cir. 1996). The Puerto Rico parol evidence rule 22 will allow for the introduction of extrinsic evidence only in the event the 23 contract is ambiguous. Adria International Group v. Ferre Dev., Inc., 241 F3d 103 24 (1st Cir 2001). In Graphics Supply v. Polychrome Corp., 116 F.3d 464 (1st Cir 25 1997), the court determined that where the terms of the contract are clear and unambiguous, a party may not offer external evidence to change the terms of the contract for his benefit, and to the detriment of the other party. The case law discussed above requires that the stipulation be taken at face value and its clauses be read literally. Since the meaning of the stipulation and its terms are clear, no extrinsic evidence provided by the parties will be 1 allowed by this Court. The pertinent clause in the stipulation is paragraph 7 2 which reads as follows: 3 The parties hereby agree to the immediate release, except as otherwise stated in this Stipulation, of any and all garnishments and/or attachments 4 in favor of ACC encumbering any of Debtor’s assets, including but not limited to the [sic] medical and medical equipment and the accounts 5 receivables from the medical insurance companies. [Emphasis ours]

6 Black’s Law Dictionanry, 9th Edition , 2009 defines the legal term “release” as 7 8 follows: 9 Liberation from an obligation, duty, or demand; the act of giving up a right or claim to the person against whom it could have been enforced. – 10 Also termed discharge; surrender 2. The relinquishment or concession of a right, title, or claim. 11 12 The language of paragraph 7 of the Stipulation is clear and leaves no room 13 for interpretation by the parties or this Court. The use of the term “release” 14 removes all doubt that any rights ACC may have had over the equipment and account 15 receivables has been extinguished. 16 17 However, even if the Court has erred with regards to the meaning of the terms of 18 the stipulation and the use of the “parol evidence rule”, the fact remains that 19 the perfection of the security interest once held by ACC over the medical 20 equipment and account receivables of MARC is flawed. The attachments are no 21 longer valid pursuant to Rule 56.4 of the Puerto Rico Rules of Civil Procedure. 22 Rule 56.4 states that for a garnishment over chattel property to be perfected, 23 the court has to take it into custody via a custodian assigned by the court. For 24 an embargo or garnishment over chattel property to continue in existence, the 25 property has to remain in the possession of the court appointed custodian. Burgos

v. Berretiaga & Martin, 33 D.P.R. 611 (1924). In Burgos, the court concluded that the embargo was dissolved by the loss of the possession of the garnished chattel property. The record in the case demonstrates that on two separate occasions the medical equipment was turned over to a private party. The first 1 party was RTCI, Inc in exchange for a monthly rental fee in May 2009, and as pe 2 |/the terms of the stipulation the property was tuned over to plaintiff MARC i 3 September 2009. The fact that the property was turned over to these two parties 4 effectively dissolved the embargo. > || CONCLUSION: 6 . . . . . Based upon the foregoing, this Court determines that the plain meaning of 7 the stipulation released any and all rights, attachments and garnishments ACC 8 had over the equipment held by MARC. ACC is an unsecured creditor, and is 9 therefore not entitled to payments for adequate protection. It is further 10 ordered that ACC turn over the amount of $36,040.46 to MARC within thirty (30) 11 days in accordance with the terms of the stipulation. The Court does not award 12 1B Sanctions or damages to MARC at this time. However, failure to turn over the 14 monies to MARC within the above mentioned time frame will result in a hearing 15 being scheduled to determine appropriate sanctions and/or damages. 16 SO ORDERED. 17 Ponce, Puerto Rico, this 10 day of February, 2010. 18 20 rian K. Tester 21 U.S. Bankruptcy Judge 22 |la: DEBTOR(S) 23 ADVANCED CARDIOLOGY CENTER, CORP MAYAGUEZ ADVANCED RADIOTHERAPY CENTER 24 FAUSTO D GODREAU ZAYAS ALEXIS FUENTES HERNANDEZ 25