Las Brisas, S.E. v. Department of Agriculture, Civil No. 97-1582(RLA).
| Decision Date | 28 May 1998 |
| Docket Number | Civil No. 97-1582(RLA). |
| Citation | 8 F.Supp.2d 141 |
| Parties | LAS BRISAS, S.E., Plaintiff, v. DEPARTMENT OF AGRICULTURE FARMER'S HOME ADMINISTRATION (UNITED STATES OF AMERICA), Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
Ernesto F. Rodríguez Suris, Hato Rey, PR, for Plaintiff.
United States Attorney, U.S. Attorney's Office, Hato Rey, PR, for Defendant.
This action involves the claims of two creditors vying for preference of their respective liens encumbering a debtor's property. Plaintiff, as current holder of a second mortgage, is attempting to displace defendant whose mortgage is registered as a first lien.
Additionally, plaintiff contends that the Government illegally failed to transmit to it all excess amounts received from an assignment of rents paid by the debtor's lessee.
The following facts are not in controversy.1
1. Plaintiff LAS BRISAS S.E., is a special partnership, duly organized and existing pursuant to the laws of the Commonwealth of Puerto Rico and authorized to sue and be sued.
2. Defendant, DEPARTMENT OF AGRICULTURE — Farmers Home Administration (FmHA) is duly represented by the Government of the United States of America.
3. On October 8, 1987, CARIBBEAN RESTAURANTS, INC. and PABLO ALICEA entered into a contract whereby CARIBBEAN RESTAURANTS, INC. leased from PABLO ALICEA certain real property for the establishment of a restaurant business.
4. On or about August 10, 1990, CARIBBEAN RESTAURANTS, INC. and PABLO ALICEA executed deed number thirty-four A (34-A) a deed of Lease Subordination.
5. Pursuant to the above-mentioned Lease of Subordination, CARIBBEAN RESTAURANTS, INC. acquiesced to subordinating the rank of its registered lease contract at the Registry of Property to a certain deed of mortgage or deeds of mortgage entered into and executed by and between PABLO ALICEA, as mortgagor, and FmHA, as mortgagee.
6. The above-mentioned deed(s) of mortgage was/were for loan(s) to be disbursed by FmHA to PABLO ALICEA for the sums of $230,000.00 and $200,000.00.
7. The $230,000.00 loan was registered in the corresponding Registry of Property as a first lien and the $200,000.00 as a second lien.
8. The $230,000.00 loan was an "emergency loan" with interest charged at 4½%. Payment was to be made by way of yearly installments with the last payment due in 10 years, i.e., August 2000.
9. An essential condition of the Lease of Subordination was that FmHA would pay and cause to be canceled, from the monies to be disbursed to PABLO ALICEA all prior liens and encumbrances, including those mentioned and listed in the Lease of Subordination.
10. On August 10, 1990 an additional contract was entered into between PABLO ALICEA and CARIBBEAN RESTAURANTS, INC. assigning to FmHA the rents due to PABLO ALICEA pursuant to the lease contract.
11. On or about August 17, 1993 PABLO ALICEA entered into a refinancing loan with R & G FEDERAL SAVINGS BANK ("R & G") for the total sum of $275,000.00.
12. The proceeds of this refinancing agreement were used to liquidate the $200,- 000.00 loan and the FmHA's second lien was duly canceled.
13. The R & G refinancing loan was secured by a mortgage which deed was also duly registered in the corresponding registry of Property and became a second lien.
14. From the proceeds of this refinancing loan with R & G, PABLO ALICEA was delivered by R & G a manager's check in the sum of $34,824.00 payable to FmHA. The purpose of this check was that it be delivered to FmHA so that the Agency would then allow CARIBBEAN RESTAURANTS, INC. to pay directly to R & G the monthly installments corresponding to said amount.
15. PABLO ALICEA breached his agreement and misapplied the proceeds of said check depositing it in his personal account.
16. On August 17, 1993 PABLO ALICEA and R & G entered into an assignment contract whereby PABLO ALICEA assigned and ceded to R & G, from the monthly rents to be paid to PABLO ALICEA by CARIBBEAN RESTAURANTS, INC., an amount equal to the monthly payment then and thereafter to become due and payable by PABLO ALICEA to R & G.
17. This assignment was made by PABLO ALICEA to R & G notwithstanding the fact that PABLO ALICEA had previously made an assignment in favor of FmHA.
18. On April 14, 1995 FmHA and PABLO ALICEA entered into an Accelerated Repayment Agreement for the amounts due under the August 10, 1990 emergency loan for $230,000.00. The principal amount due under the Accelerated Repayment Agreement was $139,649.83 (unpaid balance of $138,930.43 and the accrued interest of $719.40). The interest rate for the new loan was 9.25% and payment was to be made in monthly installments with the final payment due April 2000.
19. The assigned rental payments from CARIBBEAN RESTAURANTS, INC. exceeded the monthly payments now due by PABLO ALICEA to FmHA under the Accelerated Repayment Agreement. This difference was returned by FmHA to PABLO ALICEA.
20. Premised on PABLO ALICEA's continued and continuous default of his obligations towards R & G, the latter filed suit for collection of monies and mortgage foreclosure.
21. On or about December 31, 1993 LAS BRISAS purchased or acquired from R & G the credit or promissory note which evidence the amounts owed by PABLO ALICEA to R & G, as well as all related guarantees and collateral.
22. On January 12, 1994 LAS BRISAS notified PABLO ALICEA that it had acquired such credit and guarantees.
23. LAS BRISAS continued the civil action begun by R & G against PABLO ALICEA and on March 18, 1997 the Court of First Instance of Puerto Rico, Bayamon Part issued judgment whereby PABLO ALICEA was ordered to satisfy to plaintiff certain sums of money, a certain pledge agreement be foreclosed, as well as the foreclosure and public sale of the property encumbered by the mortgage lien therein executed.
The claims asserted by plaintiff in this action are two-fold.
First we must determine whether or not the Accelerated Repayment Agreement entered into between FmHA and PABLO ALICEA constituted a novation of the original loan and if so, whether the guarantees offered as collateral were thus extinguished.
Further, we must also inquire as to whether or not FmHA had an obligation to remit to R & G/LAS BRISAS — as opposed to PABLO ALICEA — any surplus of the rental payments received from CARIBBEAN RESTAURANTS, INC. pursuant to the assignment of rents.
The court finds that based on the facts not in controversy as well as the evidence in the record we may dispose of this action by way of summary judgment. Cadle Co. v. Hayes, 116 F.3d 957 (1st Cir.1997).
Plaintiff argues that the modifications to the August 1990 loan caused by the Accelerated Repayment Agreement of April 1995 were such that it constituted a new contract and that all related guarantees were thereby extinguished. Defendant insists that the original obligation remained unchanged.
The Civil Code of Puerto Rico provides that subsequent agreements entered into between contracting parties may modify or even extinguish their previous obligations. This is called "novation" which can be accomplished by either changing the object and/or the principal conditions of existing obligations. P.R. Laws Ann. tit. 31, § 3241(1) (1991); José Ramón Vélez Torres, Derecho de Obligaciones 228 (2nd ed.1997). Novation may take different forms depending on whether it has the effect of extinguishing the original obligation — extinctive — or merely modifying it — modificative. Id. at 227; Miranda Soto v. Mena Ero, 109 D.P.R. 473, 1980 WL 138572 (1980) ().
Extinctive novation has been defined as the extinction of an obligation by the creation of a new one destined to replace it; that is, the substitution of an obligation by another one. Guaroa Velázquez, Las Obligaciones § 351, 195-6; Vélez Torres at 224. Extinctive novation has the effect of completely suppressing and extinguishing the former relationship and creating a new one. Guaroa Velázquez § 352 at 196. Extinctive novation has a double effect; it extinguishes the previous obligation and a new one arises in its place. Id. § 362 at 201.
However, in order for an obligation to replace another, the parties' intention to bring about this result must be evident and/or the old and new obligations must mutually exclude each other.
In order that an obligation may be extinguished by another which substitutes it, it is necessary that it should be so expressly declared, or that the old and the new be incompatible in all points.
P.R. Laws Ann. tit. 31, § 3242 (1991).
Thus, in order to determine the possible effect subsequent obligations may have upon a prior relationship, the intention of the parties must be examined. However, this intention is not always explicit, it may be tacitly implied from the nature of the changes to either the object of the contract and/or its principal obligations. Since novation denotes the abandonment of a right by the creditor, there must be an intention to novate on his part. This intention may be express or tacit. Tacit is when incompatibility is a result of the two obligations. Guaroa Velázquez § 359 at 22.
Novation is never presumed; it must be clearly established. Warner Lambert v. Tribunal Superior, 101 D.P.R. 378, 389, 1973 WL 35652 (1973). Therefore, he who alleges novation carries the burden of proof. Guaroa Velázquez § 359 at 200. The courts, as a mixed question of law and fact, will have to determine whether variances exist between both obligations and whether or not both obligations may subsist simultaneously. If total incompatibility is proven, extinctive novation exists. Vélez Torres at 226.
When the variation to the object or conditions of the contract is merely incidental the prior obligation has not been substituted by a new one. See Vélez Torres at 229; I-II José Puig Brutau,...
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...this statute by itself does not create jurisdiction. Ellis v. Cassidy, 625 F.2d 227, 229 (9th Cir.1980); Las Brisas, S.E. v. Dep't of Agriculture, 8 F.Supp.2d 141, 148 (D.P.R. 1998). In her complaint, Plaintiff cites to no statute other than section 1331 to support her claim of jurisdiction......
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