Kodak Americas v. Caribbean Photo & Imaging, CIV. 01-1157(JAF).
| Decision Date | 19 December 2002 |
| Docket Number | No. CIV. 01-1157(JAF).,CIV. 01-1157(JAF). |
| Citation | 242 F.Supp.2d 117 |
| Court | U.S. District Court — District of Puerto Rico |
| Parties | KODAK AMERICAS, LTD., Plaintiff, v. CARIBBEAN PHOTO & IMAGING COMPANY, INC.; Ignacio Martinez Castro, his wife Yolanda Prohias, and the Conjugal Partnership composed by them, and Alicia Martinez Castro, Defendants. |
Edgardo Munoz-Maldonado, Garcia & Fernandez, San Juan, for Kodak Americas, Ltd. plaintiff.
Charles A. Cuprill-Hernandez, San Juan, for Caribbean Photo & Imaging Company, Inc., Ignacio Martinez-Castro, Yolanda Prohias, Conjugal Partnership Martinez-Prohias, Alicia Martinez-Castro defendants.
Plaintiff Kodak Americas Ltd. ("Plaintiff) and Co-Defendant Yolanda Prohias ("Defendant"), personally and as a member of the conjugal partnership composed with Ignacio Martinez Castro ("Martinez Castro"), filed a joint motion requesting, inter alia, voluntary dismissal of the counter-claims and a consent judgment. Docket Document No. 61. The parties submitted to this court the narrow question whether, as a matter of law, Yolanda Prohias is liable personally or as a member of the conjugal partnership for the monies owed to Kodak under the various agreements that were the object of the original complaint. Id.
Unless indicated otherwise, we derive the following factual summary from the complaint. Docket Document No. 1.
Plaintiff Kodak is incorporated and maintains its principal place of business in the state of New York, and is authorized to do business in Puerto Rico. Plaintiff Kodak distributes and sells photographic film, paper, chemicals, equipment, and other products.
Defendant Caribbean Photo is a corporation organized under the laws of Puerto Rico and maintains its principal place of business in Puerto Rico. Plaintiff Kodak owns ten percent of the stock of Caribbean Photo.
Defendants Ignacio Martinez-Castro, Prohias, and Alicia Martinez-Castro are domiciliaries of Puerto Rico. Defendants Ignacio and Alicia Martinez-Castro are siblings. Docket Document No. 26, Exh. A. Defendant Ignacio Martinez-Castro owns fifty-one percent of the stock of Caribbean Photo and is the president of said corporation. Defendant Alicia Martinez-Castro owns thirty-nine percent of the stock of Caribbean Photo.
On May 28, 1998, Plaintiff Kodak and Caribbean Photo entered into an asset purchase and sale agreement. Plaintiff Kodak sold to Caribbean Photo the operations of its imaging and photo finishing retail stores in Puerto Rico in return for 1,000 shares of Caribbean Photo valued at $424,778 and an additional $2,556,222 to be paid over several years. On August 19, 1998, Caribbean Photo executed a promissory note which outlined the terms of payment of the latter sum and was guaranteed by a security agreement. Under the promissory note, the principal amount of $2,556,222, plus interest, was to be paid by Caribbean Photo to Plaintiff Kodak in ten semi-annual payments, beginning February 19, 1999. The security agreement gave Plaintiff Kodak a security interest in the accounts receivable, inventory, equipment, and other collateral of Caribbean Photo.
On August 19, 1998, Plaintiff Kodak and Caribbean Photo executed a supply agreement through which Plaintiff Kodak appointed Caribbean Photo as one of its nonexclusive retailers. Caribbean Photo agreed to purchase photographic products only from Plaintiff Kodak.
On that same date, Plaintiff Kodak and Defendants Ignacio and Alicia Martinez-Castro entered into a shareholders agreement. Defendants Ignacio and Alicia Martinez-Castro signed a guaranty agreement securing the obligations incurred by Caribbean Photo pursuant to the purchase and sale agreement, the promissory note, the security agreement, the supply agreement, and the shareholders agreement. Furthermore, the parties executed a non-competition agreement. Docket Document No. 21, Exh. A.
On September 29, 2000 and January 12, 2001, Plaintiff Kodak declared Caribbean Photo to be in default on its payment obligations under the promissory note and supply contract, and Plaintiff Kodak demanded full payment of the money owed by Caribbean Photo.
On February 6, 2001, Plaintiff Kodak filed the instant complaint. On May 15, 2001, Defendants filed their answer. Docket Document No. 12. Defendants brought a counterclaim against Plaintiff Kodak. Id.
On June 4, 2002, the parties filed a motion for dismissal, consent judgment, and other matters. Docket Document No. 61. Co-Defendant Yolanda Prohias, personally and as a member of the conjugal partnership composed with Ignacio Martinez Castro, voluntarily dismissed, with prejudice, the counterclaim that had been filed against Kodak, withdrew her affirmative defenses with prejudice, and consented that judgment be entered against her subject to a determination whether, as a matter of law, Yolanda Prohias is liable personally or as a member of the conjugal partnership for the monies owed to Plaintiff Kodak. Id.
However, Defendant Prohias submits that the agreements in question were only signed by her husband, Ignacio Martinez Castro. She argues that under Article 1308 of the Civil Code of Puerto Rico, 31 L.P.R.A. § 3661 (1991 & Supp.1998), she is not liable, personally or as a member of the conjugal partnership formed with her husband, Ignacio Martinez Castro. Docket Document No. 77.
Plaintiff Kodak disagrees with this interpretation of Article 1308, and avers that Yolanda Prohias is liable both individually and as a member of the conjugal partnership. Docket Document Nos. 65, 84.
Article 1308 of the Puerto Rico Civil Code states that the following shall be chargeable to the community property:
(1) All debts and obligations contracted during the marriage by either of the spouses.
(2) The arrears or credits deriving during the marriage from obligations encumbering the private property of the spouses as well as the community property.
(3) Minor repairs or mere maintenance repairs made during the marriage on the private property of either of the spouses. Major repairs shall not be chargeable to the community property.
(4) Major or minor repairs of the community property.
(5) The support of the family and the education of the children begotten in common and of those of either of the spouses.
(6) Personal loans incurred by either of the spouses.
This passage has been interpreted by the Supreme Court of Puerto Rico to create a rebuttable presumption in favor of conjugal partnership liability. The court in WRC Properties, Inc. v. Heriberto Santana, 116 D.P.R 127 (1985), stated that either spouse could obligate the conjugal partnership so long as the debt or obligation was made in the family interest and not for the sole personal benefit of the borrower, and so long as there was no intent to defraud the other spouse. Id. at 135.
To effectively counter the presumption, the non-contracting spouse must make a prima facie showing that he or she received no benefit from the incurred debt. F.D.I.C. v. Perez Perez, 637 F.Supp. 358, 361 (D.P.R.1986). If such a showing is made, the liability of the conjugal partnership becomes subsidiary to the "prior marshalling of assets belonging to the debtorspouse." Id. at 361 ( the WRC Properties opinion). A mere denial that the conjugal partnership benefitted from the spouse's dealings is not sufficient to rebut the presumption delineated by Article 1308. F.D.I.C. v. Monterrey, 847 F.Supp. 997, 1004 (D.P.R.1994), affd 45 F.3d 423 (1st Cir.1995).
In the case at bar, Defendant Prohias does not argue that the contracts executed by Martinez Castro were executed fraudulently or for the sole benefit of Martinez Castro. Instead, Defendant Prohias conclusively asserts that the application of the WRC Properties factors, supra, should lead us to find "that the debt incurred by Martinez Castro was for the benefit of codefendant, and not for the benefit of the conjugal partnership formed with Defendant [Prohias]." Docket Document No. 77. In support, Defen...
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