Rivera-Rosario v. LSREF2 Island Holdings, Ltd., Inc.

79 F.4th 1

• Court: Court of Appeals for the First Circuit
• Decided: August 17, 2023
• Docket: 21-1533
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 21-1533

MIGUEL ANGEL RIVERA-ROSARIO,

Plaintiff, Appellant,

v.

LSREF2 ISLAND HOLDINGS, LTD., INC., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Francisco A. Besosa, U.S. District Judge]

Before

Gelpí, Howard, and Thompson, Circuit Judges.

Raul Barrera Morales for appellant. Nayuan Zouairabani-Trinidad, with whom Leany Prieto Rodriguez and McConnell Valdés LLC were on brief, for appellee HibiscusPR 73 LLC. Áurea Y. Rivera Alvarado, with whom Julio Nigaglioni-Arrache and Rivera-Munich & Hernández Law Offices, P.S.C., were on brief, for appellee LSREF2 Island Holdings, Ltd., Inc.

August 17, 2023 HOWARD, Circuit Judge. Res judicata -- also known as

claim preclusion -- is a longstanding legal doctrine that "a final

judgment on the merits of an action precludes the parties from

relitigating claims that were or could have been raised in the

prior action." Haag v. United States, 589 F.3d 43, 45 (1st Cir.

2009). The issue in this appeal involves the application of that

doctrine -- specifically, whether a prior dismissal with prejudice

of a complaint filed by Miguel Ángel Rivera-Rosario ("Rivera") in

2017 precludes him from bringing his claim anew in the instant

litigation. For the following reasons, we agree with the district

court in holding that his renewed claim is precluded.

I. Factual and Procedural History

This case arose from a dispute related to a foreclosure

action that began in 2010. Rivera failed to make timely mortgage

payments on a property in Torrecilla Alta in Loiza, Puerto Rico.

Consequently, First Bank, which held Rivera's mortgage, initiated

a foreclosure action in the Commonwealth Court of First Instance

in July 2010. In early 2012, while the foreclosure case was still

pending, Rivera sold a portion of the property called "Blue Iguana"

to a man named Nahum Gómez-Hidalgo ("Gómez"), with First Bank's

consent.

LSREF2 Island Holdings, Ltd. Inc., ("Island Holdings")

later acquired Rivera's mortgage from First Bank. It then refused

to release the Blue Iguana parcel from the foreclosure litigation

- 2 - and opposed Gómez's motion to intervene in the foreclosure

proceedings. In February 2016, Island Holdings attempted to

auction the Blue Iguana parcel along with the rest of the property,

thereby "plac[ing] a property belonging to somebody else for sale."

Rivera-Rosario v. LSREF2 Island Holdings, Ltd. Inc., No. 20-1639,

2021 WL 2547062, at *1 (D.P.R. June 21, 2021). This attempt was

unsuccessful. The Commonwealth Court of First Instance held the

auction in abeyance, allowed Gómez to intervene, ordered

segregation of the Blue Iguana parcel, and required Island Holdings

to pay $5,000 in attorneys' fees for "incurring in stubbornness."

Id.

Island Holdings appealed that decision to the

Commonwealth Court of Appeals. In February 2018, the Court of

Appeals reversed the Court of First Instance's opinion and

imposition of attorneys' fees, finding that it had erred "in

permitting Gómez to intervene" and "in determining that Island

Holdings became bound to liberate the Blue Iguana." Id. at *2

(cleaned up and internal quotations omitted). Rivera then filed

a petition for certiorari before the Puerto Rico Supreme Court.

Meanwhile, in June 2017, Rivera had filed a civil action

in the Commonwealth Court of First Instance against Island Holdings

seeking tort-based damages under Article 1802 of the Puerto Rico

Civil Code for Island Holdings' actions in the foreclosure

litigation. Island Holdings removed the action to federal district

- 3 - court. In March 2018 -- after the Puerto Rico Court of Appeals

reversed Rivera's win in the foreclosure litigation -- the district

court dismissed Rivera's complaint with prejudice. See Rivera

Rosario v. LSREF2 Island Holdings, Ltd. Inc., No. 17-1918, 2018 WL

1725222, at *5 (D.P.R. Mar. 30, 2018). The court construed

Rivera's complaint as potentially resting on two theories of tort:

abuse of process and malicious prosecution. Id. at *3-4. It held

that the abuse of process claim was time-barred and that the

malicious prosecution claim was premature because the foreclosure

litigation was still pending. Id. at *3-5.

That district court decision and Rivera's response to it

set the stage for our decision. The district court dismissed the

entire complaint with prejudice, without distinguishing between

the abuse of process and malicious prosecution claims. Id. at *5.

Rivera then moved for reconsideration of the dismissal of the abuse

of process claim but did not move for the district court to amend

the judgment regarding the malicious prosecution claim. His only

reference to the malicious prosecution claim in his motion for

reconsideration was in a footnote, stating: "It should be noticed

that in its opposition to Defendant's motion to dismiss the amended

complaint, plaintiff indicated that in relation to a malicious

prosecution cause of action, 'said doctrine at the present moment

does not apply to the present case.'" Rivera-Rosario, 2021 WL

2547062, at *2.

- 4 - The district court denied the motion for reconsideration

of the abuse of process claim and did not mention the malicious

prosecution claim. Rivera did not appeal from that decision.

Meanwhile, the foreclosure litigation continued in the

Commonwealth court system. In May 2018, the Puerto Rico Supreme

Court granted Rivera's motion for a writ of certiorari, and it

issued a decision about two years later. The court revoked the

Commonwealth Court of Appeals decision, held that Gómez could

intervene, affirmed the imposition of attorneys' fees, and

returned the case to the Commonwealth Court of First Instance for

additional proceedings. In November 2020, the Court of First

Instance reinstated the imposition of attorneys' fees and issued

an order of attachment against HibiscusPR 73 LLC ("Hibiscus"),

which had by that point acquired Island Holdings' interest in

Rivera's mortgage.

Also in November 2020, with the foreclosure litigation

seemingly wrapping up, Rivera attempted for a second time to bring

a tort-based action against Island Holdings (now adding Hibiscus

as the new holder of the mortgage). The new litigation, which

commenced in federal district court on November 11, 2020, repeated

many of the allegations from the dismissed 2017 action. Hibiscus

and Island Holdings moved to dismiss the complaint based on the

res judicata doctrine, due to the prior dismissal with prejudice

of the 2017 action.

- 5 - The district court granted the motion to dismiss,

agreeing with Hibiscus and Island Holdings that the dismissal in

the 2017 case precluded Rivera's 2020 claim. Rivera-Rosario, 2021

WL 2547062, at *5. The court reasoned that because the prior

dismissal had been with prejudice, it constituted a final judgment

on the merits and therefore had preclusive effect under federal

law. Id. at *4-5.

Rivera challenges that decision in this appeal. Before

us, he argues that the dismissal of the 2017 complaint does not

bar his assertion of the malicious prosecution claim now and that

his complaint therefore should not have been dismissed.

II. Analysis

"[W]e review the grant of a motion to dismiss de novo,

accepting well-pled facts as true and drawing all inferences in

favor of the non-moving party." Triangle Cayman Asset Co. v. LG

and AC, Corp., 52 F.4th 24, 32 (1st Cir. 2022) (internal citations

omitted) (citing Lyman v. Baker, 954 F.3d 351, 359 (1st Cir. 2020)

and Irizarry v. United States, 427 F.3d 76, 77 (1st Cir. 2005)).

When reviewing a motion to dismiss based on res judicata, we may

consider the record in the original action in addition to the well-

pleaded facts in the subsequent complaint. Andrew Robinson Int'l,

Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51 (1st Cir. 2008).

The resolution of this case turns on whether the federal

district court's prior dismissal with prejudice of Rivera's

- 6 - complaint in the 2017 litigation precludes him from bringing a

malicious prosecution claim in the instant litigation. For the

following reasons, we hold that it does.

As an initial matter, we must address whether federal

claim preclusion law or Puerto Rico claim preclusion law applies.

The district court here applied federal law, citing to a 1991 case

from our circuit seemingly dictating that choice of law. Rivera-

Rosario, 2021 WL 2547062, at *3 (citing Johnson v. SCA Disposal

Servs. of New England, Inc., 931 F.2d 970, 974 (1st Cir. 1991)

("[W]e now adopt the rule that, in diversity cases, federal law

governs the preclusive effect of prior federal judgments.")).

However, following the Supreme Court's 2001 decision in Semtek

Int'l, Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001), "[w]e

apply 'the law that would be applied by state courts in the State

in which the federal diversity court sits'" to successive diversity

actions, unless "the state law is incompatible with federal

interests." Hatch v. Trail King Industries, Inc., 699 F.3d 38, 44

(1st Cir. 2012) (quoting Semtek Int'l, Inc., 531 U.S. at 508-09).

Puerto Rico is "the functional equivalent of a state" for purposes

of this claim preclusion analysis. Medina-Padilla v. U.S. Aviation

Underwriters, Inc., 815 F.3d 83, 86 n.3 (1st Cir. 2016) (quoting

Cruz v. Melecio, 204 F.3d 14, 18 n.2 (1st Cir. 2000)). Here, as

in Medina-Padilla, "[w]ith no argument made that Puerto Rico law

- 7 - is incompatible with federal interests, we proceed in applying

Puerto Rico law." Id. at 86.

Under Puerto Rico law as it existed when Rivera commenced

the 2020 litigation,1 a party asserting claim preclusion "must

establish three elements: '(i) there exists a prior judgment on

the merits that is "final and unappealable"; (ii) the prior and

current actions share a perfect identity of both "thing" and

"cause"; and (iii) the prior and current actions share a perfect

identity of the parties and the capacities in which they acted.'"

Medina-Padilla, 815 F.3d at 86 (quoting García-Monagas v. De

Arrellano, 674 F.3d 45, 51 (1st Cir. 2012)); see also P.R. Laws

Ann. tit. 31, § 3343 (repealed 2020); Lausell Marxuach v. Diaz de

Yanez, 3 P.R. Offic. Trans. 742, 745 (1975).

Rivera's argument centers on the first and second prongs

of this test.2 Specifically, he argues that the 2017 complaint

1 The former statute setting out the law of res judicata in Puerto Rico (P.R. Laws Ann. tit. 31, § 3343) was repealed in 2020 by the new Civil Code, which went into effect November 28, 2020. See 2020 P.R. Laws Act 55 (June 1, 2020) (going into effect 180 days after its approval). However, § 3343 was still in effect at the time Rivera initiated the instant litigation on November 11, 2020, so we apply the law as it existed in Puerto Rico at that time, in line with the practice of Puerto Rico courts. See, e.g., Cancio v. Park Blvd. Inn, Corp., KLAN202200038, 2022 WL 3355252, at *10 n.29 (TA PR July 18, 2022); Santander Fin. Services, Inc. v. Rayfran, Inc., KLAN202200158, 2022 WL 2187872, at *7 n.11 (TA PR May 6, 2022). Additionally, Rivera has advanced no argument that his claim would be treated differently following the repeal of § 3343. 2 Regarding the third prong, two actions share a perfect identity of the parties under Puerto Rico law "if either (1) the

- 8 - never advanced a malicious prosecution claim and that, therefore,

the district court's dismissal with prejudice did not constitute

a judgment on the merits of that claim. Additionally, he argues

that the district court in the 2017 case lacked jurisdiction to

enter a judgment on the merits of the malicious prosecution claim

once it determined the claim was premature. For the following

reasons, we find these arguments unavailing.

A dismissal with prejudice constitutes a judgment on the

merits under Puerto Rico law. See P.R. Laws Ann. tit. 32A, App.

V, R. 39.2(c) (Unless otherwise specified, "any dismissal other

than a dismissal for lack of jurisdiction or for failure to join

an indispensable party[] operates as an adjudication upon the

merits."); Medina v. Chase Manhattan Bank, N.A., 737 F.2d 140, 143

(1st Cir. 1984) ("Rule 39.2(c) provides that an involuntary

dismissal operates as an adjudication on the merits unless the

court provides otherwise."); Ramos González v. Félix-Medina, 21

P.R. Offic. Trans. 304 (P.R. 1988) (noting a dismissal with

prejudice operates as res judicata under Rule 39.2(c)). The

dismissal with prejudice of Rivera's 2017 complaint therefore is

a judgment on the merits.

parties in the current action were also parties in the prior action or (2) the parties in the current action are in 'privity' with the parties in the prior action." García Monagas, 674 F.3d at 51 (citing P.R. Laws Ann. tit. 31, § 3343). Rivera does not argue that the third prong is not satisfied here with the addition of Hibiscus as a party.

- 9 - Rivera first attempts to avoid the preclusive effect of

that judgment by asking us to construe the district court's

dismissal as being limited to the abuse of process claim and not

including the malicious prosecution claim he advances now. But

the district court's opinion forecloses that outcome. Although

Rivera's 2017 complaint did not explicitly use the phrase

"malicious prosecution," the district court's opinion in that case

made clear that it construed the complaint as "allud[ing] to" two

possible theories of tort: malicious prosecution and abuse of

process. Rivera Rosario, 2018 WL 1725222, at *3. The district

court noted that the complaint itself alleged "a general theory of

continuing tort based on Puerto Rico's broad negligence statute."

Id. It then found that abuse of process and malicious prosecution

were the only theories under Puerto Rico law whereby this general

theory of negligence could proceed, and it analyzed each in turn.

Id. at *3-5. Regarding the malicious prosecution claim, the court

noted that the cause of action does not accrue until the allegedly

malicious proceeding concludes. Id. at *3 (citing Bonilla v.

Trebol Motors Corp., 913 F. Supp. 655, 659 (D.P.R. 1995)). Because

the foreclosure case remained pending, the court concluded that,

"to the extent Rivera seeks recovery on a theory of malicious

prosecution, which is not abundantly clear, Rivera's claim is

premature." Id. It then assessed the other possible theory of

recovery -- abuse of process -- and concluded that such a claim

- 10 - was time-barred. Id. at *4-5. As a result, the district court

dismissed Rivera's entire complaint with prejudice. Id. at *5.

The opinion thus demonstrates that the district court

considered -- and dismissed -- both the malicious prosecution and

abuse of process claims. Although the district court noted that

it was "not abundantly clear" that Rivera was then seeking recovery

on a theory of malicious prosecution, it nevertheless chose to

address the issue, finding that, "to the extent" he did make such

a claim, it was "premature." Id. at *3. The district court's

decision to address this issue was not untethered from the

complaint itself -- Rivera's amended complaint alleged that Island

Holdings "intentionally, maliciously, with fault and/or

negligence" refused to segregate the Blue Iguana parcel and

attempted to auction it in foreclosure proceedings, among other

related actions. (Emphasis added.) Although the complaint did not

specifically use the term "malicious prosecution," neither did it

use the phrase "abuse of process," instead leaving the court to

fill in the gaps in legal reasoning.

If Rivera disagreed with the district court's decision

to address the malicious prosecution issue, he should have sought

to amend or appeal the district court's judgment regarding that

claim. This he did not do. Rivera sought reconsideration solely

of the dismissal of the abuse of process claim and addressed the

malicious prosecution claim only in a footnote, noting that the

- 11 - doctrine "d[id] not apply" to this case. Had Rivera wished to

ensure he could bring this claim anew, he should have done more to

ensure its dismissal was without prejudice. For example, he could

have moved under Federal Rule of Civil Procedure 60 for the

district court to amend its judgment to dismiss the malicious

prosecution claim without prejudice, or he could have appealed the

district court's decision. As he did not, we are bound by the

prior court's dismissal with prejudice as a final judgment on the

merits. See Medina, 737 F.2d at 143 ("A final judgment does not

lose its res judicata effect simply because another court might

consider the decision erroneous.").

Alternatively, Rivera attempts to argue that the

district court in the 2017 litigation no longer had jurisdiction

over the malicious prosecution claim once it determined that the

claim was premature and therefore could not have issued a judgment

on the merits of that claim. This argument is not without some

foundation -- we have recognized that "a dismissal for lack of

subject matter jurisdiction normally operates without prejudice,"

given that the court then lacks jurisdiction to enter a judgment

on the merits. Hochendoner v. Genzyme Corp., 823 F.3d 724, 736

(1st Cir. 2016). However, Rivera has failed to develop any

argument that the federal district court in the 2017 litigation

lost jurisdiction over the malicious prosecution claim once it

found them to be premature. He cites only to Puerto Rico law and

- 12 - does not explain how such cases would govern whether a federal

court has jurisdiction over a case. Cf. 28 U.S.C. § 1332 (giving

federal courts jurisdiction in certain cases involving diversity

of citizenship); Pleasantdale Condominiums, LLC v. Wakefield, 37

F.4th 728, 734-35 (1st Cir. 2022) (applying state substantive law

in federal court where the court had diversity jurisdiction under

federal law); Philibotte v. Nisource Corporate Servs. Co., 793

F.3d 159, 163 & n.4, 165-68 (1st Cir. 2015) (applying federal law

when determining jurisdiction, then applying state substantive law

after determining there was jurisdiction to hear a state law

claim). We therefore find this argument to be waived.3 See United

States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (noting "the

settled appellate rule that issues adverted to in a perfunctory

manner, unaccompanied by some effort at developed argumentation,

are deemed waived").

III. Conclusion

For the foregoing reasons, we find that Rivera's

malicious prosecution claim in the case at hand is precluded under

3 Although it is true that subject matter jurisdiction "is a constitutional requirement that can never be waived," Unión Internacional UAW, Local 2415 v. Bacardí Corp., 8 F.4th 44, 52 n.5 (1st Cir. 2021), we note that Rivera is not challenging the district court's jurisdiction in the case before us. Rather, he is challenging the 2017 court's jurisdiction over the malicious prosecution claim. Therefore, his argument before us now is one of claim preclusion, not jurisdiction, so it can be -- and has been -- waived.

- 13 - the doctrine of res judicata. We therefore affirm the district

court's dismissal in this case on res judicata grounds, noting,

however, that the court's dismissal of the malicious prosecution

claim in this case is without prejudice as to Rivera's right to

seek relief before the court that issued the judgment in the 2017

litigation, Rivera Rosario, No. 17-1918, 2018 WL 1725222.

- 14 -