Almeida-Leon v. WM Capital Mgmt.

• Decision Date: 15 September 2021
• Docket Number: Civil 3:16-cv-01394-JAW
• Parties: FRANCISCO ALMEIDA-LEÓN et al., Plaintiffs, v. WM CAPITAL MANAGEMENT, INC., Defendant.
• Court: U.S. District Court — District of Puerto Rico

FRANCISCO ALMEIDA-LEÓN et al., Plaintiffs, v. WM CAPITAL MANAGEMENT, INC., Defendant.

Civil No. 3:16-cv-01394-JAW

United States District Court, D. Puerto Rico

September 15, 2021

ORDER ON MOTION FOR TEMPORARY RESTRAINING ORDER

JOHN A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE

This long-running, bitter and contentious commercial dispute has escalated into a confrontation between the federal and state courts and under the United States Constitution and laws where there is an irreconcilable conflict between the federal and state courts in a matter within federal jurisdiction federal law must be supreme. Concluding that the Resolution and Order dated August 16, 2021 of the Superior Court of Puerto Rico, Court of First Instance, Superior Part of San Juan in Tenerife Real Estate Holdings, LLC v Emérito Estrada Rivera, Isuzu PR, Inc., Civil No K CD2009-0708 presents an irreconcilable conflict with the orders of this Court in this case and that WM Capital Management, Inc. has satisfied the requirements for a temporary restraining order, this Court enjoins the Superior Court of Puerto Rico from enforcing the August 16, 2021 Resolution and Order that the Superior Court issued in derogation and defiance of a final order of the federal court.

I. BACKGROUND

The commercial dispute among the parties in this case has been the subject of countless exhaustive opinions. In this Order, the Court addresses the essence of the conflict between the court orders leading to the issuance of this Order and will explain why the federal, not state, court orders must prevail.

A. The June 27, 2019 Final Judgment of the United States District Court

On June 27, 2019, the United States District Court issued a final judgment in this commercial dispute, granting relief to Defendant/Counterclaim Plaintiff WM Capital against the Almeida-León Plaintiffs.^[1] Final J. (ECF No. 289). The Final Judgment ordered the following relief:

Plaintiffs/Counter-Defendants' breach of contract claim against WM Capital Management, Inc. is DISMISSED with prejudice. WM Capital Management, Inc.'s counterclaim for specific performance against Plaintiffs/Counter-Defendants is GRANTED. The Court ORDERS the parties to undertake the following actions:

(1) The Plaintiffs/Counter-Defendants shall within three (3) business days from the entry of Judgment in this case consign the four mortgage notes identified in the Agreement into the Puerto Rico Court of First Instance, KCD2011-0142, as stated in paragraph 3.1.2 of the Agreement.

(2) The parties shall file a joint motion to the Puerto Rico Court of First Instance, KCD2011-0142, to foreclose on the four mortgage notes identified in paragraph 3.1.2 of the Agreement and sell the encumbered Kennedy Property via public auction as provided for under the Agreement.

(3) As stated in paragraph 3.1.6 of the Agreement, the minimum bid price of the public auction shall be $3, 850, 000.

(4) If a third party purchases the Kennedy Property at public auction for the minimum bid price, the proceeds of such sale will be deposited in the U.S. District Court for the District of Puerto Rico's Designated Financial Institution pursuant to Local Rule 67. If a third party does not purchase the Kennedy Property for the minimum bid price, the parties shall proceed as proscribed in the Agreement.

(5) Once the foreclosure is completed and all proceeds from the public auction have been deposited into the U.S. District Court for the District of Puerto Rico's Designated Financial Institution, WM Capital Management, Inc., shall be paid first and full from the sale proceeds up to $2, 828, 850.11, corresponding with the Judgment amount entered on September 26, 2013 in Federal Deposit Insurance Corporation as Receiver of RG Premier Bank of Puerto Rico v. Almeida-Leon et al., 3:12-cv-02025-FAB, J. (ECF No. 25), plus pre-judgment and post-judgment interest.

(6) After WM Capital Management, Inc. is paid first and in full satisfaction from the Kennedy Property sale proceeds up to $2, 828, 850.11 plus pre-judgment and post-judgment interest, the remaining sale proceeds shall be assigned to Francisco Almeida-León, Wanda Cruz-Quiles, their Conjugal Partnership, and Juan Almeida-León.

(7) WM Capital Management, Inc. is awarded post-judgment and pre-judgment interest. Post-judgment interest shall begin to accrue as of the entry of this Judgment at the rate provided for in 28 U.S.C. § 1961. Pre-judgment interest shall be calculated from June 7, 2016 until the date of the entry this Judgment at a rate of 6% per annum.

This is a Final Judgment on all claims in this lawsuit. It is a Final Judgment against Plaintiffs/Counter-Defendants' three claims: breach of contract; litigious credit, and co-owner redemption under Puerto Rico law; and it is a Final Judgment in favor of WM Capital Management, Inc.'s counterclaim for specific performance.

Id. at 1-3.

Despite having been issued this order more than two years ago, the Almeida-León parties have failed to comply with the final judgment and have instead now obtained a state court order that contradicts and defies the final judgment of this Court and imposes significant sanctions on WM Capital and its attorneys for complying with the final judgment of this Court.

B. The March 26, 2021 Opinion of the United States Court of Appeals for the First Circuit: Almeida-León v. WM Capital, Inc., 993 F.3d 1 (1st Cir. 2021).

The Almeida-León Plaintiffs disagreed with the final judgment of this Court and on July 19, 2019, they appealed that judgment to the Court of Appeals for the First Circuit. Notice of Appeal (ECF No. 410); Notice of Appeal (ECF No. 411). On March 26, 2021, the First Circuit issued its opinion, rejecting the Almeida-León Plaintiffs' appeals and affirming the final judgment. Almeida-León v. WM Capital, Inc., 993 F.3d 1, 15 (1st Cir. 2021) (“For the reasons stated above, we disagree with the appellants' challenges to the district court orders and final judgment. We affirm.”). On April 16, 2021, the First Circuit issued its formal man Dated:

In accordance with the judgment of March 26, 2021, and pursuant to Federal Rule of Appellate Procedure 41(a), this constitutes the formal mandate of this Court.

Mandate (ECF No. 413).

C. The June 28, 2021 Order to Show Cause

Rather than comply with the final judgment of this Court as affirmed by the Court of Appeals for the First Circuit, the Almeida-León Plaintiffs simply defied it.^[2]Finally, on June 28, 2021, the Court issued an Order to Show Cause, requiring the Almeida-León Plaintiffs and their attorneys to demonstrate why the Court should not hold them in contempt of court for their willful failure to comply with the Court's Final Judgment. Second Am. Order to Show Cause (ECF No. 464).

D. The August 12, 2021 Contempt Order

On August 12, 2021, the Court issued an order holding the Almeida-León Plaintiffs and their attorneys in contempt of court. Order on Civil Contempt and Pending Mots. (ECF No. 477). To encourage compliance, the Court imposed no sanction for two weeks to allow the Almeida-León Plaintiffs and their counsel to comply with the Final Judgment. The Court imposed a sanction of $10, 000 per day against the Almeida-León Plaintiffs and their counsel beginning two weeks after the August 12, 2021 order, and if no party demonstrated compliance with the Final Judgment of the Court within four weeks after the August 12, 2021 order, the Court authorized Attorney Dora L. Monserrate^[3] to execute documents in place of the Almeida-León Plaintiffs in order to effect the terms of the Final Judgment.

E. The August 16, 2021 Resolution and Order of the Court of the First Instance

On August 16, 2021, Raul A. Candelario Lopez, a judge of the Court of the First Instance, Superior Part of San Juan (the GMAC Court) issued a forty-two-page Resolution and Order. Tenerife Real Estate Holdings, LLC v. Emérito Estrada Rivera, Isuzu PR, Inc., Civil No. K CD2009-0708. Mot. Submitting English Translation of Spanish Language Doc. at ECF No. 492-1, Attach. 1, Resolution and Order (ECF No. 498) (Resolution and Order). In its Resolution and Order, the GMAC Court concludes that the federal court orders in this case contradict a November 7, 2011 Final Judgment of the Court of the First Instance and a January 17, 2018 Resolution and Opinion of the same Court. Id. at 3. Finding that the Puerto Rico Court of the First Instance has had primary in rem jurisdiction, the GMAC Court concludes that the federal court lacked jurisdiction to issue its orders. Id. Moreover, the GMAC Court finds that the “post judgment jurisdictional, substantive and due process defect contained in the final Federal Judgment is a continuation of the same fraudulent, non-compliant conduct of WM Capital and its agents.” Id. at 34. The GMAC Court concludes that “[t]he Federal Court induced such conduct and judgment. In doing so, it has repeatedly, intentionally and illegally deprived Tenerife of its property by not allowing it to enforce its judgment for seven years.” Id.

The GMAC Court further finds that in taking its legal positions against the judgments of the Puerto Rico courts, “WM Capital has incurred in insistent recklessness sustained for six or seven years” and that WM Capital's counsel have “breached their obligations under Rule 9.1 of Civil Procedure by insisting on disregarding the orders of this Court and in vacating the judgment of November 7, 2011.” Id. at 35. The GMAC Court concludes that “relief under Rule 9.3 is appropriate, both in the form of monetary and procedural sanctions and disqualification of WM Capital's attorneys, including Mellado, Leal and Orejuela.” Id.

Having made these findings and drawn these conclusions, the GMAC Court ordered the following remedies:

1) That WM Capital and its attorneys

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