Arrieta-Gimenez v. Arrieta-Negron

• Citation: 859 F.2d 1033
• Decision Date: 29 July 1988
• Docket Number: No. 88-1085,ARRIETA-GIMENEZ,ARRIETA-NEGRON,88-1085
• Parties: Carmen Felicita, etc., et al., Plaintiffs, Appellants, v. Alberto, et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1033

859 F.2d 1033

Carmen Felicita ARRIETA-GIMENEZ, etc., et al., Plaintiffs, Appellants, v. Alberto ARRIETA-NEGRON, et al., Defendants, Appellees.

No. 88-1085.

United States Court of Appeals First Circuit.

Heard July 29, 1988.

Decided Oct. 18, 1988.

Ivan Diaz de Aldrey, San Juan, P.R. for plaintiff, appellant Conjugal Partnership Earl D. Waldin, Jr., Miami, Fla., (Florida issues), and Stanley L. Feldstein, Old San Juan, P.R. (Puerto Rico issues), with whom Kelley Drye & Warren, Smathers & Thompson, Miami, Fla., Stanley L. Feldstein, Edward A. Godoy and Feldstein, Gelpi, Hernandez & Gotay, Old San Juan, P.R., were on brief, for defendants, appellees.

and Blas C. Herrero, Jr., Hato Rey, P.R. for plaintiff, appellant Carmen Felicita Arrieta-Gimenez.

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

LEVIN H. CAMPBELL, Chief Judge.

The resolution of this case depends on the answer to two questions of Florida law on which we have been unable to find controlling precedent from the courts of Florida. These questions concern 1) the constitutionality under the "access to the courts" provision of the Florida constitution of Fla.Stat. Sec. 95.031(2) (1987) as applied to fraud; and 2) the res judicata effect of a consent judgment which is attacked more than one year later on the ground of fraud. Accordingly, we certify two questions to the Supreme Court of Florida. In the present opinion, which will accompany our certification, we detail those aspects of the case that we have been able to resolve, and we discuss the two questions that we are certifying.

I. FACTUAL AND PROCEDURAL BACKGROUND

The case from which this appeal is taken was brought in 1983 in the United States District Court for the District of Puerto Rico by the plaintiff, Carmen Arrieta Gimenez, ¹ against her four half-siblings, Alberto Arrieta Negron, et al. Plaintiff is the daughter of the late Rafael Arrieta Rios (Mr. Arrieta) and his second wife; defendants are the children of Mr. Arrieta and his first wife. In 1960, plaintiff and defendants entered into a contract in Dade County, Florida, in settlement of a dispute over the division of their late father's estate. Plaintiff thereafter sued defendants in the present diversity action to set aside that contract on the ground of fraud. The district court awarded summary judgment to defendants, for the reasons outlined below. 672 F.Supp. 46.

According to the complaint, Mr. Arrieta provided in his will that his estate--aside from a legacy to his widow--should go in equal shares to his five children, plaintiff and defendants. At the time of his death in 1958, Mr. Arrieta owned extensive properties in Florida and Puerto Rico. Plaintiff had been living in Florida with her mother since her childhood. For several years, one or more of the defendants had been managing certain of their father's properties in Florida and Puerto Rico. Plaintiff claims that in the course of settling their dispute over their father's estate, her half-brother Alberto Arrieta Negron represented to her that almost all of their father's properties were located in Florida, and that their father's sugar mill in Puerto Rico had only "scrap value." He did not disclose the existence of any other property in Puerto Rico. On July 27, 1960, as a result of these representations, plaintiff signed a settlement agreement that provided that defendants would pay her $175,000 for her share of their father's property in Florida, and that defendants would pay the balance of a mortgage on property owned by plaintiff in Puerto Rico (amounting to about $18,000) in exchange for her share of her father's properties in Puerto Rico. This settlement agreement was embodied in a consent judgment entered in the County Judges' Court of Dade County, Florida. Within the next two years, plaintiff was paid all that was due her under the agreement.

On July 19, 1983, according to the complaint, plaintiff discovered in the property registry of Bayamon, Puerto Rico, a declaration of trust that had been presented by defendants for recording in 1981. From this declaration of trust plaintiff learned for the first time of a trust established by Defendants moved for summary judgment and, after consideration of discovery materials and affidavits, the district court granted the motion. The district court held that the case was governed by the law of Florida, including Florida's statutes of limitations. It ruled that even taking all of plaintiff's allegations of fraud and concealment to be true, plaintiff's suit was barred by Fla.Stat. Sec. 95.031(2), which provides that fraud actions "must be begun within 12 years after the date of the commission of the alleged fraud, regardless of the date the fraud was or should have been discovered." We will refer to this statute, which bars a cause of action even before a fraud is discovered or discoverable, as a "statute of repose." Because plaintiff did not file suit until 1983, more than 20 years after the allegedly fraudulent agreement, her suit could not be maintained. The district court noted that the constitutionality of the statute of repose had been questioned, but it did not discuss the constitutional issues. Because the district court found the statute of repose to be dispositive, it did not find it necessary to consider defendants' additional claim that the court order approving the settlement agreement had the effect of precluding any further actions.

her father encompassing over 2,000 acres of land in Puerto Rico. Plaintiff now claims a one-fifth share in this trust. Plaintiff's discovery prompted her to undertake an investigation, as a result of which she learned that her father had many real estate holdings in Puerto Rico besides those mentioned in the declaration of trust. She also discovered that in 1963 defendants had sold the machinery from the sugar mill for more than $2 million. Plaintiff asserts that the true value of her father's estate was much greater than what she had been led to believe. She claims that her share of her father's estate was worth more than $5 million, and that she was defrauded by her half-siblings into forfeiting her inheritance for a small fraction of its value.

The district court also held that the alleged fraud had been discoverable by plaintiff within the 12-year period of the statute of repose. According to the court, "When the plaintiff signed the Agreement she was already a college graduate; twelve years later she was certainly mature enough, and had been for some time, to investigate any wrongs that may have been committed by her brothers and sisters."

II. WHICH STATE'S LAW GOVERNS?

We agree with the district court that Florida law, including the relevant Florida statutes of limitations and repose, governs this case. Federal courts must apply the substantive law of the state in which they sit, including state choice of law provisions. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Advance Financial Corp. v. Isla Rica Sales, Inc., 747 F.2d 21, 28 (1st Cir.1984). Accordingly, we must look to Puerto Rico choice of law standards. Under these standards, the substantive law of Florida is applicable to this case. Puerto Rico has adopted the doctrine of dominant contacts for determining which state's law to apply. See Green Giant Co. v. Superior Court, 104 D.P.R. 682 (1975). In the case at hand, the "dominant contacts" are with the state of Florida. As the district court noted, between 1958 and 1962 plaintiff and at least one of the defendants resided in Florida; the settlement agreement was signed in Florida and approved by the Dade County Judges' Court; and all of the parties retained Florida lawyers. We accept the district court's conclusion that "the parties had reason to expect Florida law to govern their transaction, that Florida retains an interest in regulating the conduct of those making agreements in that state, and that no purpose of the Commonwealth of Puerto Rico is served by applying Puerto Rican law to the transaction."

Although the parties agree that Florida substantive law governs this case, they differ as to the applicability of the Florida statute of limitations if the Florida statute of repose is unconstitutional. Defendants accept the district court's conclusion that section 95.031(2)--the 12-year statute of repose--should be applied to this We are not persuaded by this analysis. First, we observe that defendants presented this argument--that, were the Florida statute of repose to be invalidated, the Puerto Rico statute of limitations would apply--for the first time in their brief to us. They did not place it before the district court in their motion for summary judgment. Accordingly, we view the argument as having been waived. See Johnston v. Holiday Inns, Inc., 595 F.2d 890, 894 (1st Cir.1979) (a legal theory not presented to the district court cannot ordinarily be raised for the first time on appeal). Even if the argument had not been waived, we are by no means persuaded that if the Florida statute of repose were found to be unconstitutional, Puerto Rico courts would then turn to Puerto Rico statutes of limitations. Defendants do not cite any Puerto Rico choice of law cases that support their argument. In the absence of any directly supporting precedent, we think it at least as likely that, under these circumstances, Puerto Rico courts would apply Florida's four-year statute of limitations for fraud, Fla.Stat. Sec. 95.11(3)(j) (1987). Indeed, there is some precedent under the civil law of Puerto Rico for viewing matters similar to these as substantive, rather than procedural, suggesting, although we do not decide, that Puerto Rico courts would borrow the statutes of limitations of the state whose substantive law governs--in this case, Florida. See Febo Ortega v. Superior Court, 102 D.P.R. 506, 509 (1974) ("the limitation of actions is not a procedural, but a substantive matter");...