Intimate Fashions, Inc. v. El Telar, Inc., Civil No. 06-1204 (JAG).

• Decision Date: 10 April 2008
• Docket Number: Civil No. 06-1204 (JAG).
• Parties: INTIMATE FASHIONS, INC., Plaintiff v. EL TELAR, INC., et al., Defendant(s).
• Court: U.S. District Court — District of Puerto Rico

570 F.Supp.2d 225

INTIMATE FASHIONS, INC., Plaintiff v. EL TELAR, INC., et al., Defendant(s).

Civil No. 06-1204 (JAG).

United States District Court, D. Puerto Rico.

April 10, 2008.

Eugene F. Hestres-Rodriguez, Eugene F. Hestres-Velez, Bird, Bird & Hestres, Old San Juan, PR, for Plaintiff.

Liz M. Cruz-Jimenez, Ricardo Pizarro, Pizarro Law Firm, P.SC., Carlos Lugo-Fiol, Saldana, Saldana-Egozcue & Vallecillo, PSC, San Juan, PR, for Defendant.

OPINION AND ORDER

GARCIA-GREGORY, District Judge.

Pending before the Court is Plaintiff Intimate Fashion, Inc.'s ("Plaintiff") Motion for Summary Judgment, (Docket Nos. 45 and 46), and Co-Defendant United Surety & Indemnity Company's ("USIC") Cross Motion for Partial Summary Judgment. (Docket Nos. 63, 64, and 65). For the reasons set forth below, the Court DENIES the pending Motions.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff is the owner and lessor of a 28,000 square-feet building in Las Piedras, Puerto Rico, which Co-Defendant El Telar ("Telar") leased. On July 1, 2003, both parties entered into a lease agreement for the property located at Las Piedras Industrial Park. Telar leased the aforementioned property in order to establish a warehouse facility for the business it is engaged in.

The lease agreement expired on June 30, 2006. However, on February 28, 2005, Telar vacated the building. Upon vacating the building prior to the date agreed, Plaintiff filed the present complaint against Telar and its bond company USIC¹ for breach of contract and collection of monies for the rent owned.² (Docket No. 1).

Telar then filed a counterclaim against Plaintiff indicating that the leased building did not meet government standards and requirements. Furthermore, Telar stressed that the building was not approved as a warehouse facility for lack of a water sprinkling system as required by the Fire Department.

Moreover, Telar contends that under the lease agreement Plaintiff was responsible for the structural repairs of the leased building. Telar further alleges that Plaintiff increased the rent payment to cover the costs of installing the water sprinkler system. However, according to Telar, Plaintiff never installed the sprinkler system³ and, as a result, a Fire Department permit was never issued. Additionally, Telar avers that due to the lack of a water sprinkler system, the Regulations and Permits Agency ("ARPE") never issued a use permit for the leased building.

Furthermore, Telar alleges that the Department of Health subsequently ordered it to cease operations because an order to close the building was forthcoming. Telar contends that as a result of said order it had to vacate the lease building and relocate to a new facility with additional costs. Telar is requesting the damages suffered from Plaintiff's alleged breach of contract.⁴ (Docket No. 10).

On October 1, 2007, Plaintiff filed a Motion for Summary Judgment with its Statement of Uncontested Facts and attached memorandum of law. (Docket Nos. 45 and 46). On November 9, 2007, the Opposition by Telar was filed. (Docket Nos. 61 and 62). On that date, USIC filed a Cross-Motion for Partial Summary Judgment. (Docket Nos. 63, 64 and 65). On November 30, 2007, the Response/Reply, as well as the Opposition to Cross-Motion were filed, upon leave of Court. (Docket Nos. 82, 83 and 85). These Motions were referred to a Magistrate Judge for a Report and Recommendation. (Docket No. 87).

On March 3, 2008, the Magistrate Judge issued a Report and Recommendation. Regarding Plaintiff's Motion for Summary Judgment, the Magistrate Judge concluded that the parties statements of contested and uncontested facts present irreconcilable conflicts of material facts which are not susceptible of resolution by summary disposition. The Magistrate Judge noted that both sides were able to present evidence favorable to their position. The Magistrate Judge stated that whether Plaintiff complied with its obligation to fix certain water leakages in the roof of the leased property and whether Plaintiff or Telar was responsible for the installation of the fire prevention system was in issue. As a result, the Magistrate Judge recommended that this Court deny Plaintiff's Motion for Summary Judgment.

The Magistrate Judge also recommended that this Court deny USIC's Cross Motion Cross-Motion for Partial Summary Judgment. In the Report and Recommendation, the Magistrate Judge noted that USIC alleged that since there is a dispute regarding which party breached its contractual obligation, it merely holds an accessory and subsidiary liability, one which derives from the principal obligation it guaranteed. Furthermore, the Magistrate Judge stated that USIC deposited $15,000, the total amount of the bond, with the Court, pending resolution of the case as to Telar. However, the Magistrate Judge stressed that USIC refused to release the full amount of the bond deposited to Plaintiff inasmuch as it reserved its right to contest liability and submit defenses attributable to the principal.

After considering the above mentioned facts, the Magistrate Judge determined that pursuant to Puerto Rico contract law, USIC liability in the instant claim is capped at $15,000.⁵ The Magistrate Judge noted that the bond was drafted to cover "payment of rent only" and, therefore, USIC would only be liable for Telar's delinquent payments, not any property taxes or insurance premiums due.⁶ However, USIC would only be liable if there is a finding that Plaintiff has an actionable claim under the bond. Furthermore, the Magistrate Judge stated that having Plaintiff also claimed interest against USIC,⁷ and having the latter already deposited with the Court the funds for which it may be found liable, interest or attorney's fees would attain solely if there is a determination that USIC acted with rashness or temerity mostly referred as an obstinate party.⁸

Nonetheless, the Magistrate Judge recommended that USIC's Motion be denied because USIC is also seeking summary disposition on the grounds that there is no actionable claim against it since Telar could cancel the aforementioned lease agreement for breach or non-compliance of its obligations by Plaintiff. According to the Magistrate Judge, such contentions raise genuine issues of material fact in controversy that lead to the recommendation that Plaintiff's Motion for Summary Judgment be denied. (Docket No. 90).

On March 17, 2008, USIC filed an objection to the Magistrate Judge's Report and Recommendation. USIC seeks to dismiss Plaintiffs bad faith claim against it. (Docket No. 93). On April 3, 2008, Plaintiff objected to the Report and Recommendation. Plaintiff contends that in the case at bar there are no genuine issues of material facts and this Court should enter Summary Judgment granting its complaint and dismissing Telar's counterclaim. Plaintiff further avers that this Court should not dismiss the bad faith claims against USIC. (Docket No. 96).

STANDARD OF REVIEW

1) Summary Judgment Standard

The court's discretion to grant summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 states, in pertinent part, that the court may grant summary judgment only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c); See also Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52. (1st Cir.2000).

Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." See Fed. R.Civ.P. 56(c). The party moving for summary judgment bears the burden of showing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once a properly supported motion has been presented before the court, the opposing party has the burden of demonstrating that a trial-worthy issue exists that would warrant the court's denial of the motion for summary judgment. For issues where the opposing party bears the ultimate burden of proof, that party cannot merely rely on the absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute. See Suarez v. Pueblo Int'l, Inc., 229 F.3d 49 (1st Cir. 2000).

In order for a factual controversy to prevent summary judgment, the contested facts must be "material" and the dispute must be "genuine". "Material" means that a contested fact has the potential to change the outcome of the suit under governing law. The issue is "genuine" when a reasonable jury could return a verdict for the nonmoving party based on the evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). It is well settled that "[t]he mere existence of a scintilla of evidence is insufficient to defeat a properly supported motion for summary judgment." Id. at 252, 106 S.Ct. 2505. It is therefore necessary that "a party opposing summary judgment must present definite, competent evidence to rebut the motion." Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir.1994).

In making this assessment, the court "must view the entire record in the light most hospitable to the party opposing summary judgment, indulging in all reasonable inferences in that party's favor." Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990). The court may safely ignore "conclusory allegations, improbable inferences, and unsupported speculation." Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990).

2) Standard for Reviewing a Magistrate-Judge's Report and Recommendation

Pursuant to 28 U.S.C. §§ 636(b)(1)(B); Fed.R.Civ.P. 72(b); and Local Rule 503; a District Court may refer dispositive motions to a United States Magistrate...