Industries Vassallo, Inc. v. Puerto Rico Electric Power Authority

CourtUnited States Bankruptcy Court, D. Puerto Rico
DecidedOctober 2, 2014
Docket09-00258
StatusUnknown

This text of Industries Vassallo, Inc. v. Puerto Rico Electric Power Authority (Industries Vassallo, Inc. v. Puerto Rico Electric Power Authority) is published on Counsel Stack Legal Research, covering United States Bankruptcy 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
Industries Vassallo, Inc. v. Puerto Rico Electric Power Authority, (prb 2014).

Opinion

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

4 IN RE: CASE NO. 08-07752 5 Chapter 11 6 INDUSTRIAS VASSALLO, INC

7 Adversary No. 09-00258 8 9 Debtor(s)

10 INDUSTRIAS VASSALLO, INC 11 12 Plaintiff vs. 13

14 PUERTO RICO ELECTRIC POWER AUTHORITY 15

16 Defendant(s) FILED & ENTERED ON 10/02/2014

19 20 OPINION AND ORDER 21 The Court issued its Opinion & Order on December 19, 2013 ("Opinion") [Dkt. No. 184] 22 which GRANTED, in part, Defendant Puerto Rico Electric Power Authority's ("PREPA") Motions 23 24 for Partial Summary Judgment Against Intervenor United Surety & Indemnity Company ("USIC") 25 [Dkt. No.'s 138, 150 & 149] as to the counterclaim and the dismissal of USIC's complaint in

intervention. The Court ordered the payment of $450,000 to PREPA under the bond ("Bond"), and DENIED without prejudice PREPA's request for additional interest and attorney's fees because it lacked evidence demonstrating PREPA is entitled to such an award. The parties were ordered to 1 simultaneously brief the court on this issue thirty (30) days from the date of the Opinion. After 2 several procedural turns not relevant to our inquiry, the parties filed the briefs together with 3 numerous exhibits, oppositions and replies. [See, Docket entries 222, 224, 225, 227, 228, 230, 236, 4 5 246, 247, 248, 249, 250, 255].1 6 PREPA contends that USIC’s failure to pay the claims that it submitted to USIC on 7 December 1, 2008 and September 15, 2009 within ninety (90) days of their presentation constituted 8 9 an unfair claims adjustment practice under the Puerto Rico Insurance Code. Also, that it amounted to 10 obstinate and frivolous conduct, which entitles PREPA to collect from USIC interest and attorney's 11 fees. The interest claimed by PREPA is (i) default interest at the rate of 8% per year pursuant to 31 12 13 L.P.R.A. § 3025; (ii) compound interest at the rate of 6% per year over the default interest due 14 pursuant to 31 L.P.R.A. § 3026; (iii) interest for temerity (“temeridad”) at the rate set by the Finance 15 Board of the Office of the Commissioner of Financial Institutions of Puerto Rico pursuant to 32 16 17 L.P.R.A. Ap. V R. 44.3(b); and (iv) post-judgment interest pursuant to 28 U.S.C. § 1961. PREPA 18 alleges that interest started to accrue on March 3, 2009. PREPA’s request for attorney’s fees for 19 temerity is made pursuant to 32 L.P.R.A. Ap. V R. 44.1(d). PREPA argues that neither the request 20 21 for attorney’s fees nor the interest requires the submission of additional evidence or involves 22 genuine issues as to material facts. The court will tackle its inquiry against the backdrop of the legal 23 standard for summary judgment. 24 25

1 Notwithstanding the voluminous nature of the motions and exhibits filed by both parties, there remained unaddressed several material and relevant facts and legal issues, which in turn compelled the Court to independently research the legal issues presented in this controversy at both the state and federal levels, causing a significant delay in rendering this Opinion. 1 Summary Judgment Standard 2 "In bankruptcy, summary judgment is governed in the first instance by Bankruptcy Rule 3 7056.” In re Varrasso, 37 F.3d 760, 762 (1stCir.1994). “By its express terms, the rule incorporates 4 5 into bankruptcy practice the standards of Rule 56 of the Federal Rules of Civil Procedure.” Id.; see 6 also Fed. R. Bankr.P. 7056; Fed.R.Civ.P. 56. “It is apodictic that summary judgment should be 7 bestowed only when no genuine issue of material fact exists and the movant has successfully 8 9 demonstrated an entitlement to judgment as a matter of law.” In re Varrasso, 37 F.3d at 763 (citing 10 Fed.R.Civ.P. 56(c)). “As to issues on which the nonmovant has the burden of proof, the movant need 11 do no more than aver an absence of evidence to support the nonmoving party's case.” Id. at 763, n. 1 12 13 (citation omitted). “The burden of production then shifts to the nonmovant, who, to avoid summary 14 judgment, must establish the existence of at least one question of fact that is both genuine and 15 material.” Id. (internal quotations and citations omitted). The “mere existence of some alleged factual 16 17 dispute between the parties will not defeat an otherwise properly supported motion for summary 18 judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty 19 Lobby, Inc., 477 U.S. 242, 247–48 (1986). 20 21 Insurance Code of Puerto Rico 22 In the case at hand, the transaction between these two parties is regulated by the Insurance 23 Code of Puerto Rico. Article 22.050 of the Insurance Code, 26 L.P.R.A. §2205, states as follows: 24 25 § 2205. Payment of claims

The surety insurer committed under the provisions of § 2204 of this title shall be bound to pay the debt of his principal at the request of the creditor, after verifying, within a term of ninety (90) days, that the claim exists, and is liquidable and demand- able. If within that term the insurer does not pay the claim without good cause he shall be guilty of a violation of § 2716a of this title. 1 The plain language is self-evident that the term of ninety (90) days is applicable only to insurers that 2 lack good cause to deny payment of a claim. Moreover, Article 27.162 of the Insurance Code, 26 3 L.P.R.A. §2716 (b), sets forth as follows: 4 5 § 2716b. Term for resolution of claims 6 (1)… . 7 (2) In the event that an insurer is unable to resolve a claim within the term established in subsection (1) of this section, he/she shall maintain in its records any documents 8 attesting to the existence of a just cause to exceed the term previously provided. 9 (3) ... 10 Pre-Judgment Interest 11 “Neither the Bankruptcy Code nor the United States Code contain a general statute granting 12 13 pre-judgment interest. Therefore, pre-judgment interest is generally subject to the court's discretion 14 depending on the equities of the case.” Lassman v. Keefe (In re Keefe), 401 B.R. 520, 526 (B.A.P. 15 1st Cir.2009). In In re Redondo, the First Circuit ruled and instructed as follows, "[w]hen state-law 16 17 claims ...are adjudicated by a federal court, pre-judgment interest is normally a matter of state law." 18 In re Redondo, 678 F.3d 115, 125 (1st Cir.2012). 19 In Puerto Rico, pre-judgment interest stem from two separate legal grounds: one is procedural 20 21 and the other is substantive. Each serves a different purpose and provides different remedies for 22 different conducts. The procedural pre-judgment interest penalty imposed by Rule 44.3(b) of the 23 Puerto Rico Rules of Civil Procedure responds to a party's obstinate conduct during the course of the 24 25 litigation. See Montañez v. U.P.R., 156 D.P.R. 395, 422–423 (2002) ( Rule 44.3(b) of the Puerto

Rico Rules of Civil Procedure establishes the pre-judgment interest on the amount of the judgment that shall be imposed on the obstinate party). The substantive penalty is governed by Article 1061 of the Civil Code of Puerto Rico and serves as an indemnity for damages. See Rivera v. Crescioni, 77 1 D.P.R.

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Industries Vassallo, Inc. v. Puerto Rico Electric Power Authority, Counsel Stack Legal Research, https://law.counselstack.com/opinion/industries-vassallo-inc-v-puerto-rico-electric-power-authority-prb-2014.