Med. Educ. & Health Servs. Inc. v. Indep. Municipality of Mayaguez (In re Med. Educ. & Health Servs. Inc.)

• Decision Date: 02 September 2011
• Docket Number: Adversary No. 10–148.,Bankruptcy No. 10–04905 BKT.
• Citation: 459 B.R. 527
• Parties: In re MEDICAL EDUCATIONAL & HEALTH SERVICES, INC., Debtor.Medical Educational & Health Services, Inc., Plaintiff v. Independent Municipality of Mayaguez, et als., Defendants.
• Court: U.S. Bankruptcy Court — District of Puerto Rico

459 B.R. 527

In re MEDICAL EDUCATIONAL & HEALTH SERVICES, INC., Debtor.Medical Educational & Health Services, Inc., Plaintiff

v.Independent Municipality of Mayaguez, et als., Defendants.

Bankruptcy No. 10–04905 BKT.

Adversary No. 10–148.

United States Bankruptcy Court, D. Puerto Rico.

Sept. 2, 2011.

West Codenotes

Recognized as Unconstitutional

28 U.S.C.A. § 157(b)(2)(C)

Rafael Gonzalez Velez, San Juan, PR, for Plaintiff.

Antonio Valiente, Tessie Leal Garabis, Quinones & Arbona, PSC, Migda L. Rodriguez Collazo, Department of Justice, Arturo Gonzalez Martin, Arturo Gonzalez Law Office, Charles P. Gilmore, O'Neill & Gilmore, Kermit Ortiz Morales, Ortiz & Ortiz Law Offices, Jason R. Aguilo Suro, Pietrantoni Mendez & Alvarez LLP, San Juan, PR, Jorge I. Peirats, Pietrantoni, Mendez & Alvarez, Hato Rey, PR, for Defendants.Mary Doe Quiros, pro se.John Doe, pro se.Ridhard Doe, pro se.Insurance Companies A B and C, pro se.

OPINION AND ORDER

BRIAN K. TESTER, Bankruptcy Judge.

This matter is before the Court on a motion to dismiss [Docket No. 67] filed on March 5, 2011, by defendants Hon. Jose Guillermo Rodriguez (the “Mayor”), in his personal capacity, his wife Mrs. Marisel Mora Gonzalez (“Mrs. Gonzalez”) and their conjugal partnership (collectively, “Defendants”). Medical Educational & Health Services, Inc. (“Debtor” and “Plaintiff”) filed its opposition [Docket No. 85] to Defendants' motion to dismiss on April 12, 2011.

Plaintiff filed a complaint (the “Complaint”) in the adversary alleging violations of civil rights and bringing claims against Defendants and codefendants under section 1983 of Title 42 of the United States Code (“Section 1983”) for Fourteenth Amendment violations. In addition, Plaintiff asserts violations of the Racketeering Influenced Corruption Organization (“RICO”) Act. Defendants move to dismiss these claims for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure (“FRCP”). Plaintiff further asserts the following state law claims against Defendants: (1) breach of contract; (2) fraud; (3) damages incidental to contract; (4) tortious interference with contractual relations; (5) loss of opportunities and reputation; (6) loss of business opportunity; and (7) damages to other sublessors. In their motion, Defendants ask this Court to dismiss these state law claims for lack of jurisdiction. For the reasons set forth below, Defendants' motion to dismiss is GRANTED in part and DENIED in part.

I. FACTUAL BACKGROUND

Unless otherwise noted, the relevant allegations are derived from the Complaint [Docket No. 1], which was filed on September 1, 2010. We recite the facts and all reasonable inferences to be drawn therefrom in the light most favorable to Plaintiff.

On August 27, 2009, Plaintiff entered into an operation and administration agreement (the “Lease”) with the Autonomous Municipality of Mayagüez (the “Municipality”) to lease the Mayagüez Medical Center (the “Hospital”). The Lease involved the participation of Sistemas Integrados de Salud del Sur Oeste, Inc. (“SISSO”), who entered into a sublease and administration agreement (the “Sublease”) directly with Plaintiff. Under the Sublease, SISSO was authorized to sub-sublease portions of the Hospital under its administration to various medical service providers. Because SISSO was obligated to pay rents to Plaintiff, the Municipality required SISSO to guarantee the Lease since any default by SISSO would necessarily result in Plaintiff defaulting on its own obligation to the Municipality. Acting on behalf of the Municipality, the Mayor signed the Lease.

Throughout the Complaint, Plaintiff argues that the Municipality, under the direction of the Mayor, interfered with its ability to run the hospital and breached its contractual duties to Plaintiff on various occasions. For instance, the Municipality allegedly did not deliver possession of the Hospital until August 31, 2009 (four days after execution of the Lease), at which point Plaintiff discovered that three of the six floors were in a state of ruin and that the IRS had liens on every piece of equipment in the Hospital. The Municipality allegedly misrepresented the condition of the Hospital by failing to advise Plaintiff of the Hospital's true condition. Shortly thereafter, and allegedly without consulting with Plaintiff or considering the Lease, the Mayor announced at a press conference that the third floor of the Hospital would serve as a trauma ward. Plaintiff, however, had allegedly designated the third floor to a pediatric ward and had already begun negotiating with the appropriate groups. In turn, Plaintiff proposed that the Municipality repair another floor in order to accommodate both wards. Moreover, on October 7, 2010, Plaintiff allegedly issued a letter to the Municipality proposing that the rent be renegotiated because only half of the floors were functional. After the Municipality answered requesting specific proposals, Plaintiff submitted specific proposals for rent modification on November 2, 2010.

On November 13, 2009, the principal stockholder and CEO of SISSO, Dr. Orlando Marini (“Marini”), alleged a cash shortage that would inhibit SISSO from making timely payments to Plaintiff. Based on this allegation, SISSO's minority stockholders transferred 45% of their interest to Marini in order to capitalize and save the corporation. As an additional attempt to subsidize SISSO, Plaintiff allegedly agreed to temporarily relinquish its interest in SISSO by allowing SISSO to pay rent directly to the Municipality (which supposedly was an amount less than the rent SISSO was paying to Plaintiff). Plaintiff alleges that this informal agreement was a good faith effort to help SISSO and promote the forward movement of the project. Unbeknownst to Plaintiff, however, SISSO allegedly had collectibles totaling approximately $6,000,000, which Plaintiff argues could have been used as guarantee to raise capital.

On December 1, 2009, the Municipality informed Plaintiff that SISSO's tendered check bounced and demanded Plaintiff to pay the rent due. When Plaintiff informed SISSO of its noncompliance, SISSO allegedly explained that it was not required to pay rent because the Mayor advised SISSO that rent would not be paid by Plaintiff to the Municipality for a “reasonable period of time.” Compl. p. 21. Thus, SISSO would allegedly not have to pay rent to Plaintiff. On December 8, 2010, the Municipality again demanded payment of the rent due from Plaintiff. Plaintiff allegedly responded to SISSO, reaffirming that no agreement had been reached with the Mayor and reminding SISSO that it was contractually obligated to Plaintiff, not to the Municipality. Plaintiff further demanded payment of rent due from SISSO.

On January 4, 2010, Plaintiff was allegedly advised that Marini of SISSO, Mr. Jose Quiros (“Quiros”) of the Manati Medical Center (“MMC”), and the Mayor of the Municipality secretly met to discuss Quiros' acquisition of SISSO. At this meeting, the Municipality supposedly agreed to grant SISSO a six-month moratorium of rent and utility payments. As a result, SISSO could allegedly default on its obligation to Plaintiff and the Municipality would hold it harmless. Meanwhile, the Municipality continued to demand specific performance from Plaintiff. Allegedly, Plaintiff anticipated cancellation of the Lease, eviction of Plaintiff and its sub-lessees, and replacement by SISSO or its successor. Plaintiff immediately requested a meeting with Marini. Marini allegedly agreed, but conditioned his acceptance on having the meeting at the Mayor's counsel's office.

On January 5, 2010, representatives from the Municipality, SISSO, MMC and Plaintiff met. At the meeting, it was allegedly confirmed that Marini, Quiros, and the Mayor entered into an agreement in which Marini would sell its SISSO stock to Quiros, thereby transferring operation and administration of the Hospital to Quiros. Plaintiff refers to this agreement as the “scheme.” Before the meeting ended, SISSO representatives allegedly offered Plaintiff $400,000 in exchange for control of Plaintiff and relinquishment of Plaintiff's sub-lessees' facilities. Plaintiff declined the offer.

On January 29, 2010, the Mayor, acting on behalf of the Municipality, allegedly messengered a letter to Plaintiff terminating the Lease for “lack of payment” and requesting immediate surrender of the Hospital. Allegedly, the reason for the cancellation was a charade since the Municipality had supposedly granted the moratoria and knew that no rent was actually in arrears. Plaintiff claims that the cancellation letter was in violation of Sections 13.1.1 of the Lease because the Municipality breached its duty to resolve disputes in good faith. Also, the letter was not delivered to the contracted address in Section 14.2.

Marini allegedly responded to the Mayor's letter without authorization from Plaintiff and accepted the termination of the Lease. Marini explained that SISSO was unable to finance the operation of the Hospital and agreed to surrender the Lease (yet there was no lease agreement between SISSO and the Municipality to be surrendered since SISSO was only a guarantor). Allegedly, Marini's actions were taken in furtherance of the “scheme.” The Mayor allegedly accepted the surrender, ignored the contractual reality, and forgave SISSO's debt. Shortly thereafter on February 1, 2010, Plaintiff responded to the Mayor's cancellation letter expressing its position that “the only parties in violation of the contract were the Municipality and SISSO.” Compl. p. 30. Moreover, Plaintiff allegedly invited the Municipality to reconsider its position.

On January 29, 2010, the Mayor signed MCC's proposal letter, which allegedly contained inaccurate representations regarding Plaintiff's position. Supposedly, the proposal letter falsely alleged that Plaintiff, together with SISSO and MMC, requested approval of the transfer and payment moratorium. The...