Republic Security Corp. v. Puerto Rico Aqueduct & Sewer Authority

674 F.2d 952, 10 Fed. R. Serv. 216
CourtCourt of Appeals for the First Circuit
DecidedMarch 23, 1982
DocketNos. 81-1518, 81-1575
StatusPublished
Cited by7 cases

This text of 674 F.2d 952 (Republic Security Corp. v. Puerto Rico Aqueduct & Sewer Authority) 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
Republic Security Corp. v. Puerto Rico Aqueduct & Sewer Authority, 674 F.2d 952, 10 Fed. R. Serv. 216 (1st Cir. 1982).

Opinion

BREYER, Circuit Judge.

On June 2, 1960, the Puerto Rico Aqueduct and Sewer Authority (“Aqueduct”) agreed with Mechanical Contractors, Inc. [954]*954(“Mechanical”) that Mechanical would carry out certain construction work. Mechanical assigned to Republic Security Corporation (“Republic”) on November 23, 1960, “any and all sums of money now due or to become due” under this contract, “including any and all sums of money due or to become due ... as a result of claims of any nature arising out of said contract.” Mechanical found the work far more difficult than it had initially expected and concluded that it had agreed to the contract through “error.” Civil Code, Articles 1217-18, 31 L.P.R.A. §§ 3404-05. Consequently, on June 2,1961, it sued Aqueduct in the Superior Court of Puerto Rico, asking the court to annul the contract. For reasons not revealed in the record, the litigation took 15 years. On December 3, 1976, the Superior Court annulled the 1960 contract. It also ordered restitution under Article 1255 of the Civil Code, 31 L.P.R.A. 3514,1 requiring Aqueduct to pay Mechanical $248,980.44 “representing the construction expenses incurred by Mechanical .. . not reimbursed by Aqueduct” and also to pay “the interest on said amount from the date of the filing of the complaint.”

The Supreme Court of Puerto Rico reviewed the Superior Court’s decision, affirming it as to annulment, but reversing it as to restitution. In its unpublished opinion of December 28, 1977, that court reasoned that Mechanical had assigned to Republic all its monetary claims, of which the claim for restitution was one. Hence, Mechanical while entitled to seek an annulment, could not seek restitution. Since Republic was not a party to the suit, the restitution award was improper and was set aside.

Two years later, on January 10, 1980, Republic filed this diversity action in the federal district court for Puerto Rico, seeking the restitution that Mechanical had failed to obtain. On August 4, 1981, the district court granted restitution, awarding Republic $248,980.44 along with interest from 1961 determined at a 6 percent rate. Both parties appealed. Aqueduct attacks the decision granting restitution; Republic attacks the interest rate figure of 6 percent. Judging these appeals under the law of Puerto Rico, we affirm the district court’s decision in all respects.

Aqueduct’s Appeal

1. Aqueduct argues that Republic’s claim was barred by the applicable 15 year statute of limitations, Civil Code Article 1864, 31 L.P.R.A. § 5294.2 We do not agree. Civil Code Article 1869, 31 L.P.R.A. § 5299, states that the “time for the prescription of all kinds of actions, when there is no special provision to the contrary, shall be counted from the day on which they could have been instituted.” (Emphasis added.) The commentators make clear that this means that the statute begins to run only if the relevant cause of action has actually arisen — if the plaintiff has a vested legal right. The statute of limitations does not run if there remains a legal obstacle to the assertion of the right, if it is legally contingent or “expectant.” F. de Castro y Bravo, Temas de derecho civil 151 (1972). Republic’s action is brought under Civil Code Article 1255, 31 L.P.R.A. § 3514, which provides for restitution “when the nullity of an obligation has been declared.” Since the contract between Mechanic and Aqueduct was not finally declared void until 1977, Republic’s claim for restitution did not become valid, and the statute of limitations did not begin to run, before that date.

[955]*955Aqueduct seeks to escape this logic by pointing out that Article 1255, which creates the right to restitution, creates in the same sentence the right to seek annulment of the contract. The entire article reads,

When the nullity of an obligation has been declared, the contracting parties shall restore to each other the things which have been the object of the contract with their fruits, and the value with its interest, without prejudice to the provisions contained in the following sections.

31 L.P.R.A. § 3514. This article provides both for a judicial declaration that a contract is void and also creates a right to restitution, both of which claims may be asserted in the same action. F. de Castro y Bravo, Tratado practico y critico de derecho civil, tome X, 504-05 (1971); R. Ruiz Serramalera, Derecho civil: El negocio juridico, 406 n.28 (1980). And, Republic could have intervened in Mechanical’s 1980 Superior Court action under Puerto Rico Rule of Civil Procedure 17.1.3 Consequently, argues Aqueduct, 1960 is when Republic’s restitution action “could have been instituted.”

We reject this argument because the words “could have been instituted” do not refer to the type of procedural convenience that Rule 17.1 and Article 1255 offered Republic — permission to intervene in a proceeding that is later likely to concern it. Rather, those words, as previously pointed out, refer to the existence of a noncontin-gent legal claim or cause of action. The commentators state that even when a party seeks both a declaration that a contract is void and restitution in the same action, there can be no restitution without the declaration of invalidity; only when the contract is declared void, and not before, does the obligation to provide restitution arise. F. de Castro y Bravo, Tratado, at 505; F. Clemente de Diego y Gutierrez, Institu-ciones de derecho civil español, tome II, 112-13 (1930); A. Martinez Ruiz, El Codigo civil interpretado por el Tribunal Supremo, tome VIII, 690 (1907). Prior to that declaration, Republic had only a contingent claim, an “expectation” of being able to ask for restitution. Therefore, in our view, the courts of Puerto Rico would hold that, since Republic’s restitution claim was not perfected until 1977, the statute of limitations did not begin to run until that time.

2. Aqueduct claims that the district court erred in refusing to allow it to reliti-gate the claim that the contract is void. The court found that such relitigation was barred by the doctrine of res judicata both under Puerto Rico Code of Civil Procedure, Article 421, 32 L.P.R.A. 1793, which provides that a prior judgment

in respect to the matter directly adjudged, [is] conclusive between the parties and their successors in interest by title . . . litigating for the same thing under the same title and in the same capacity . . .,

and under Article 1204 of the Civil Code, 31 L.P.R.A. 3343. Aqueduct notes, however; that this latter article states that for

the presumption of res judicata [to] ... be valid in another suit, . . . there must be the most perfect identity between the things, causes, and persons of the litigants, and their capacity as such.4

[956]*956Aqueduct argues that there is not sufficient “identity” between Republic and Mechanic. That is to say, in Aqueduct’s view, the suits involve different parties.

Aqueduct is wrong, however, for Article 1204 goes on to state specifically that

there is identity of persons whenever the litigants of the second suit are legal representatives of those who litigated in the preceding suit ....

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674 F.2d 952, 10 Fed. R. Serv. 216, Counsel Stack Legal Research, https://law.counselstack.com/opinion/republic-security-corp-v-puerto-rico-aqueduct-sewer-authority-ca1-1982.