Viqueira v. First Bank

• Decision Date: 23 February 1998
• Docket Number: No. 97-2127,97-2127
• Parties: Dr. Jaime VIQUEIRA, a/k/a Jaime Viqueira Mariani, et al., Plaintiffs, Appellants, v. FIRST BANK, et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 12

140 F.3d 12

40 Fed.R.Serv.3d 618

Dr. Jaime VIQUEIRA, a/k/a Jaime Viqueira Mariani, et al., Plaintiffs, Appellants, v. FIRST BANK, et al., Defendants, Appellees.

No. 97-2127.

United States Court of Appeals, First Circuit.

Heard Feb. 23, 1998.

Decided March 30, 1998.

Conchita Toro-Rivera, with whom Madera & Toro was on brief, for appellants.

Carlos G. Latimer, with whom Latimer, Biaggi, Rachid & Godreau was on brief, for appellees.

Before TORRUELLA, Chief Judge, SELYA and STAHL, Circuit Judges.

SELYA, Circuit Judge.

There is less to this jurisdictional conundrum than meets the eye. Upon reflection, we resolve the matter adversely to the plaintiffs and therefore affirm the district court's dismissal of their complaint.

I. FACTUAL BACKGROUND

Because we are reviewing the grant of a motion to dismiss, see Fed.R.Civ.P. 12(b)(1), we accept as true the complaint's well-pleaded factual allegations, excluding, however, bald conclusions, unrelieved rhetoric, and pejorative epithets.

On April 27, 1987, the plaintiffs, through Rovica Development Corporation (Rovica or the corporation), ¹ obtained a $725,000 loan from Western Bank of Puerto Rico to acquire the land necessary to build a clinic. To augment this loan, Rovica borrowed an additional $250,000 from Bayamon Federal Savings. The plaintiffs proceeded to purchase the land. On September 30, 1988, they entered into a loan agreement with First Federal Savings, a federally chartered financial institution, to finance the construction project and repaid Western Bank in full from the proceeds of the First Federal loan. In due course, the planning board approved the plaintiffs' plans and authorized construction of the clinic.

Late in 1988, First Federal--which acted both as the plaintiffs' lender and as their financial advisor--told the plaintiffs that the addition of a branch bank would ensure the economic viability of their project and offered to relocate its Mayaguez branch to the site. To accommodate this addition, First Federal suggested that the proposed clinic be moved to the site's south side so that the putative branch bank would front on the north side. The plaintiffs succumbed to the bank's blandishments; the plans were changed to relocate the clinic and provide for a six-story bank and commercial office building on the north side of the land. A construction loan agreement, entered into by the plaintiffs and First Federal on July 14, 1989, embodied the terms of the joint venture. The new agreement raised the amount of the debt to $4,490,000 in order to finance the expanded project.

The planning board balked at approving the plans for the erection of the six-story structure. Because the bank refused to permit the plaintiffs to commence construction of the clinic until the planning board blessed the project as a whole, a stalemate developed. In an effort to placate the planning board, the plaintiffs borrowed an additional $405,000 from First Federal and bought more land (to be used for parking). The planning board yielded and construction finally began in October 1989--roughly six months behind schedule.

A year later, the project again was paralyzed--with the clinic 90% complete--when regulators placed First Federal under supervision. Shortly thereafter, the bank notified the plaintiffs that it would not disburse any more funds and suggested that the plaintiffs seek financing elsewhere, perhaps by selling a stake in the project to a third party.

To make a tedious tale tolerably terse, the plaintiffs transferred a one-third interest in Rovica to Dr. Roberto Kutcher, a First Federal client and a close personal friend of the loan officer with whom the plaintiffs were dealing (Luis Beauchamp). In consideration for the stock, Dr. Kutcher promised to invest approximately $500,000 in the project. From May 1991 through October 1992, Dr. Kutcher acted on behalf of the corporation and was in total control of the clinic's affairs, but, according to the plaintiffs, he failed to keep his end of the bargain.

In October 1992, the clinic opened under less than optimal conditions. Around the same time, Dr. Kutcher informed his fellow stockholders of the need for additional funds. Because the other stockholders could not raise the necessary money, Dr. Kutcher "bought" some Rovica shares in exchange for a promise to provide working capital. By the end of 1993, Dr. Kutcher had acquired 85% of Rovica's stock, but the corporation's total debt had increased. In June 1994, the corporation sought the protection of the bankruptcy court. The bankruptcy case was dismissed within eight months, however, and the clinic started to prosper.

First Federal converted to a state-chartered bank under the name of First Bank Puerto Rico on November 1, 1994. Within a matter of months, the bank began pressing for repayment of the loan.

II. TRAVEL OF THE CASE

The plaintiffs filed suit in the United States District Court for the District of Puerto Rico against First Bank Puerto Rico, two of its officers, and Dr. Kutcher. The complaint alleged breach of contract, breach of fiduciary duty, tortious misrepresentation, and promissory fraud. The plaintiffs predicated federal jurisdiction on three bases: 28 U.S.C. § 1331, 28 U.S.C. § 1337, and 12 U.S.C. § 632. First Bank moved to dismiss for lack of subject matter jurisdiction on April 16, 1997. On May 1, the plaintiffs moved to extend the time to oppose the motion. This motion crossed in the mail with the district court's April 30 order granting the motion to dismiss. In that order, the court concluded that it lacked jurisdiction to hear the case under any of the three cited statutes. The court entered a final judgment, dismissing the suit without prejudice, on May 6, 1997.

On May 20, the plaintiffs filed a motion and accompanying memorandum requesting the court to reconsider its decision to dismiss the case and explaining why, in their view, federal jurisdiction attached. The district court considered the plaintiffs' arguments in support of jurisdiction, but stood pat. This appeal ensued.

III. DISCUSSION

We first limn the applicable standard of review and address a procedural point raised by the plaintiffs. We then inspect the two jurisdictional hooks on which the plaintiffs hang their case. ² Finally, we address a matter raised for the first time at oral argument in this court.

A. Standard of Review.

A district court's decision to grant a motion to dismiss for want of federal subject matter jurisdiction begets de novo review. See BIW Deceived v. Local S6, 132 F.3d 824, 830 (1st Cir.1997). The district court must construe the complaint liberally, treating all well-pleaded facts as true and drawing all reasonable inferences in favor of the plaintiffs. See Royal v. Leading Edge Prods., Inc., 833 F.2d 1, 1 (1st Cir.1987). Because federal courts are courts of limited jurisdiction, federal jurisdiction is never presumed. Instead, the proponent--here, the plaintiffs--must carry the burden of demonstrating the existence of federal jurisdiction. See Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.1996); Murphy v. United States, 45 F.3d 520, 522 (1st Cir.1995).

B. Timing.

The plaintiffs' first line of attack targets the district court's hastiness in dismissing the complaint before the period of time prescribed for responding to the motion to dismiss elapsed. Their premise is well-taken. Under the local rules, the plaintiffs had ten days after service of the motion within which to file an opposition. See D.P.R. Loc. R. 311.5. The Federal Rules of Civil Procedure affect this calculation in two ways. First, the Civil Rules exclude the date of filing, intermediate weekend days, and legal holidays from this ten-day period. See Fed.R.Civ.P. 6(a). Second, the Civil Rules provide an additional three days if service is by mail. See Fed.R.Civ.P. 6(e). First Bank filed the dismissal motion on April 16 and served it by mail. Consequently, the plaintiffs had until May 5 to respond, and the district court jumped the gun when it ruled on April 30--before any opposition had been served. The court's gadarene rush to judgment constituted legal error. See Berrios v. Department of Army, 884 F.2d 28, 33 (1st Cir.1989) ("Where the defendant has challenged the plaintiff's assertion of federal jurisdiction under Rule 12(b)(1), the court should give the plaintiff an opportunity to present facts in support of his jurisdictional contention.").

Withal, the error was harmless. Though the district court should not have ruled on the dismissal motion until the time for lodging an opposition had expired, the plaintiffs did in fact file a detailed memorandum in support of jurisdiction in connection with their motion for reconsideration. That memorandum spelled out the same asseverations that would have been contained in their pretermitted opposition. The district court fully considered this memorandum when, on June 25, it declined the plaintiffs' request to reinstate the action. Under these circumstances, it would be senseless to vacate the order of dismissal, permit the plaintiffs to file an opposition, and direct the district court--which already has considered and rejected the very arguments that would be featured in the opposition--to decide the matter anew.

In short, this is a situation in which an error, originally made, has been corrected, rendering remand an empty exercise, better eschewed. See, e.g., Gibbs v. Buck, 307 U.S. 66, 78, 59 S.Ct. 725, 732, 83 L.Ed. 1111 (1939); Aoude v. Mobil Oil Corp., 862 F.2d 890, 895 (1st Cir.1988). Such an approach is especially appropriate when, as now, appellate review is de novo, the critical issue is legal (not factual), and the court of appeals, following full briefing and oral argument by both sides, must decide that issue--here, whether or not the plaintiffs' complaint demonstrates the existence of federal subject matter jurisdiction--without deference to the lower court's views. See Camacho v. Autoridad de Telefonos...