Nesglo, Inc. v. Chase Manhattan Bank, NA

• Court: U.S. District Court — District of Puerto Rico
• Writing for the Court: Leopoldo J. Cabassa, Fiddler, González & Rodríguez, San Juan, P.R., for defendants
• Citation: Nesglo, Inc. v. Chase Manhattan Bank, NA, 562 F. Supp. 1029 (D. P.R. 1983)
• Decision Date: 08 February 1983
• Docket Number: Civ. No. 79-1674 (GG).
• Parties: NESGLO, INC., et al., Plaintiffs, v. The CHASE MANHATTAN BANK, N.A. et al., Defendants.

562 F. Supp. 1029

NESGLO, INC., et al., Plaintiffs, v. The CHASE MANHATTAN BANK, N.A. et al., Defendants.

Civ. No. 79-1674 (GG).

United States District Court, J.D. Puerto Rico.

February 8, 1983.

Edelmiro Salas García, Hato Rey, P.R., for plaintiffs.

Leopoldo J. Cabassa, Fiddler, González & Rodríguez, San Juan, P.R., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION

GILBERTO GIERBOLINI, District Judge.

In our Opinion and Order of December 2, 1980 we dismissed the complaint in this case, Nesglo, Inc. v. Chase Manhattan Bank, N.A., 506 F.Supp. 254 (DCPR 1980); however, parallel proceedings were being carried out in the state local courts which continued their course. Our dismissal of the complaint was appealed to the United States Court of Appeals for the First Circuit and on September 14, 1981 that court entered the following order:

"This Court, while retaining jurisdiction, remands this matter to the District Court for the purpose of receiving from the parties acceptable translations of such pleadings, docket entries, court actions, and other papers relating to litigation in the courts of the Commonwealth of Puerto Rico as may be relevant to the question whether such litigation may have rendered the instant appeal moot, and for the purpose to expeditiously deciding the issue of mootness and reporting its findings and conclusions to this court.

The parties have agreed to cooperate in assembling the necessary materials without delay. They are to share equally in advancing such monies as may be necessary, the ultimate allocation of such expenses to abide final decision."

In compliance with the aforementioned order, the parties were instructed to file the necessary documents. We also ordered the parties to brief and argue the related matters of res judicata and collateral estoppel.

The case was scheduled for hearing but at that time the parties had not reached an agreement as to the documents to be submitted or the translations required. Disagreements between the parties continued. After substantial delays due to that fact, the parties filed legal memoranda which were examined and again we set all the pending matters for oral argument. For the second time we afforded the parties an opportunity to provide the officially certified translation of the state court documents which were finally filed after extended procrastination. Oral arguments were heard and thereafter the parties requested and were granted an additional opportunity to expand upon the arguments made. The additional memoranda were filed and the case was taken under advisement.

After a careful evaluation of all the documentary evidence, the oral arguments and the extensive legal memoranda filed by the parties, we enter the following basic findings of fact and conclusions of law which will be supplemented in the Memorandum Opinion.

Findings of Fact

1- The parties or their privies in the state court action pending when we initially dismissed the complaint in this case, are the same as those participating in the instant proceedings.

2- The claim and/or defenses raised in the state court proceedings are substantially the same as those before this court.

3- There is a common nucleus of operative facts giving rise to both the state and federal court claims.

4- The plaintiffs in this case, defendants and counterclaimants and their privies in state court, had a full and fair opportunity to litigate their claims against the present defendants (plaintiff and its privies in state court).

5- In the exercise of its valid and proper jurisdiction, the state court dismissed plaintiffs' claims and/or defenses with prejudice for their willful and intentional failure to comply with a discovery order under rules of civil procedure identical to those governing civil actions for the federal district court.

6- The state court judgment became final, firm and unappealable when the state supreme court denied review.

7- No further review of the state court proceedings was sought by the present plaintiffs.

Based on the foregoing findings of fact, we reach the following:

Conclusions of Law

1- This court must accord full faith and credit to the state court judgment pursuant to 28 U.S.C. Sec. 1738.

2- By virtue of the full faith and credit statute, this court must give preclusive effect to the state court judgment.

3- In view of the fact that the state court judgment disposes of the pending controversy between the parties, the present action has been rendered moot.

Due to the complex procedural history of the present case, a more detailed analysis of the factual framework and the underlying legal theories—both local and federal— upon which it rests, is required. Therefore, we issue the following:

Memorandum Opinion

On or about November 9, 1978, defendant The Chase Manhattan Bank, N.A. (Chase) initiated a collection of monies and factor's lien suit in the Superior Court of Puerto Rico, San Juan Part (the state court) against plaintiffs Nesglo, Inc. (Nesglo), Néstor Cruz Soto (Néstor) and Gloria D. de Cruz (Gloria).

The complaint alleged that Nesglo had defaulted on a loan and factor's lien contract and owed Chase $460,000 plus interest and $46,000 in legal fees. It requested entry of judgment against Nesglo, Néstor and Gloria in the aforementioned sums of money and, pursuant to the terms of the loan documents¹ including the factor's lien contract, that the court order the transfer to Chase of all Nesglo's inventory, account receivables, and related utilities.

Simultaneously with the filing of the complaint, Chase moved for attachment of Nesglo's inventory, account receivables, ledgers, and other assets described in its motion to that effect. Chase also requested the appointment of defendants Stanley Zych (Zych) and Enrique Fernández (Fernández) both officers of the Bank, as custodians of the property to be attached.

On November 15, 1978 the state court issued an attachment order granting Chase's motion to secure the effectiveness of judgment, and appointed Zych and Fernández as custodians of the property to be attached. The court also issued orders attaching personal real estate and other property belonging to guarantors Néstor and Gloria. Corresponding writs were also issued and Chase designated the Nesglo goods to be attached.

The attachment was executed by the state court marshals and an inventory prepared, copy of which was delivered to Fernández.

On February 17, 1979 Chase moved for summary judgment accompanying a sworn statement by Mr. Luis Ledee, an officer of the Bank.

On February 27, 1979 Néstor and Gloria replied to Chase's motion for summary judgment denying that they or Nesglo owed any money to Chase and that, in any event, Chase collected usurious interest from Nesglo, the latter being a close corporation.

On or around March 26, 1979 defendants Néstor and Gloria filed a motion accompanying a sworn statement by Néstor dated March 19, 1979. Together with Nesglo, they also filed an answer to Chase's complaint raising a series of affirmative defenses very similar to the allegations found in their complaint before this court. Néstor and Gloria also filed a counterclaim, sworn to by Néstor, as president of Nesglo, and a motion to join Zych and Fernández as defendants.

Néstor's sworn statement dated March 19, 1979 alleged that there was no credit due to Chase from Nesglo, that Chase had not credited certain amounts to Nesglo, had misappropriated certain funds, had refused to honor certain letters of credit, had not given an accounting to Nesglo, had charged Nesglo illegal interest and had imposed certain burdensome and anticompetitive conditions on Nesglo such as forbidding Nesglo to do business with other financial institutions and favoring competitors of Nesglo, also clients of the Bank.

The answer and affirmative defenses filed by Nesglo, Néstor and Gloria generally deny the allegations of Chase's complaint and raise as affirmative defenses fraud, deceit and material misrepresentations, lack of consideration, lack of compliance by Chase of its own obligations, compensation, novation, estoppel and unjust enrichment. They also adduce a defense that Chase violated the Commerce Code of Puerto Rico, the Tie-in Amendments to the Bank Holding Company Act of 1970, P.L. 91-607, Title I, Sec. 106(a) et seq., 12 U.S.C. 1971, et seq. (the Tie-in Amendments), the usury statutes of Puerto Rico and those found in the national banking laws, 12 U.S.C. Secs. 85 and 86.

Néstor's and Gloria's counterclaim incorporates the previous affirmative defenses and pleads claims for relief very similar to those pleaded by them and Nesglo before this court. They also name Zych and Fernández as counterdefendants in the third cause of action of the counterclaim.

In essence, the counterclaim seeks damages arising out of the commercial contractual relationship between Nesglo and Chase because of violations of the Tie-in Amendments; usurious interest under both the federal banking and local laws; federal and local civil rights violations arising out of Chase's, Zych's and Fernández' attachment of Nesglo's goods, account receivables, ledgers and other property; violations of the Commerce Code of Puerto Rico due to the exaction of interest over interest; general breach of contract theories under the laws of Puerto Rico as well as lack of an accounting by Chase; and false and material misrepresentations relating to the promissory note sought to be collected by Chase.

Simultaneously with the filing of the foregoing pleadings, Néstor and Gloria moved to have Zych and Fernández joined as party counterdefendants to the suit. The motion asserted that these Chase officers were indispensable parties with respect to the alleged illegality of the attachment.

On April 25, 1979 Chase moved to dismiss Néstor's and Gloria's counterclaim before the state court. Néstor and Gloria opposed Chase's motion to dismiss asserting, inter alia, that their counterclaim...