Punta Lima, LLC v. Punta Lima Dev. Co.

• Decision Date: 27 November 2019
• Docket Number: Civil No. 19-1800 (FAB),Civil No. 19-1673 (FAB)
• Citation: 425 F.Supp.3d 87
• Parties: PUNTA LIMA, LLC, Plaintiff, v. PUNTA LIMA DEVELOPMENT COMPANY, LLC, Defendant. Punta Lima Wind Farm, LLC, Plaintiff, v. Punta Lima Development Company, LLC, Defendant.
• Court: U.S. District Court — District of Puerto Rico

425 F.Supp.3d 87

PUNTA LIMA, LLC, Plaintiff,

v.PUNTA LIMA DEVELOPMENT COMPANY, LLC, Defendant.

Punta Lima Wind Farm, LLC, Plaintiff,

v.Punta Lima Development Company, LLC, Defendant.

Civil No. 19-1673 (FAB)

Civil No. 19-1800 (FAB)

United States District Court, D. Puerto Rico.

Signed November 27, 2019

Alberto Jose Bayouth-Montes, Antonio L. Roig-Lorenzo, Gabriel A. Miranda-Rivera, Paul A. Cortes-Ruiz, Daniel Perez-Refojos, O'Neill & Borges, LLC, San Juan, PR, for Plaintiff

Crystal N. Acevedo-Jimenez, Rivera Tulla & Ferrer, Hato Rey, PR, Rafael Escalera-Rodriguez, Sylvia M. Arizmendi-Lopez-de-V, Gustavo Adolfo Pabon-Rico, Reichard & Escalera LLC, Carlos R. Rivera-Ortiz, San Juan, PR, for Defendant

OPINION AND ORDER

BESOSA, District Judge.

Hurricane María destroyed the parties' wind-powered electric generation project. Their business relationship is also in shambles. One side tells a story of an extortionist landlord blocking reconstruction of the project until it receives sums to which it has no entitlement. The other depicts a deadbeat tenant aligned with a designing bank who are trying to puncture property rights and contravene contractual bargains. As their tales whistle through the courthouse, the project lays in ruins.

The stormy relationship has brought a flood of litigation. Punta Lima, LLC ("Punta Lima") and Punta Lima Wind Farm, LLC ("Wind Farm," and together with Punta Lima, "Plaintiffs") filed complaints seeking declarations that Punta Lima Development Co., LLC ("Defendant") is not entitled to the rent it seeks and is not authorized to terminate the associated leases. See Docket Nos. 119, 120.¹ Wind Farm also requests a permanent injunction guaranteeing access to the project site during the lease terms, as well as restitution and damages for breach of contract, bad faith (dolo) in the performance of contractual obligations, and conversion. See Docket No. 119. Punta Lima and Wind Farm further desire preliminary injunctive relief guaranteeing access to the project site during the lease terms and blocking termination of the leases while this case is pending. See Docket Nos. 9, 12, 58, 87. Defendant asks the Court to dismiss the complaints, articulating an assortment of alternative arguments authorizing termination of the tenancy. See Docket Nos. 64 and 81.

It is left to the Court to discern the significant from the sound and fury. For the reasons discussed below, Defendant's motion to dismiss Punta Lima's complaint, (Docket No. 64,) is DENIED . Defendant's motion to dismiss Wind Farm's complaint, (Docket No. 81,) is GRANTED IN PART AND DENIED IN PART . Wind Farm's claims for conversion and restitution, (Docket No. 119 at pp. 30–32,) are DISMISSED WITHOUT PREJUDICE . The requests for preliminary injunctive relief, (Docket Nos. 9, 12, 58,) will be resolved after an evidentiary hearing on January 24, 2020 at 9:00 a.m. A trial on the merits of the remaining causes of action in the two complaints, (Docket Nos. 119 and 120,) will be consolidated with that hearing.

I. Background

A. Factual Background

The Court draws the following facts from the two complaints and the materials attached thereto. See Docket No. 119 at pp. 1–24 & Exs. 1–38; Docket No. 120 at pp. 1–12 & Exs. 1–22; see also Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (explaining that, except for a certain narrow class of documents, Federal Rule of Civil Procedure 12(b)(6) permits a court to consider only facts and documents that are part of or incorporated into the complaint). The Court "take[s] as true the allegations of the complaint[s], as well as any inferences [the Court] can draw from [them] in the plaintiff[s'] favor." Zenón v. Guzmán, 924 F.3d 611, 615 (1st Cir. 2019).

1. Description of the Parties

Wind Farm was organized to own the wind-powered electric generation project ("project"). See Docket No. 119 at p. 20. All of Wind Farm's activities consist of its Puerto Rico operation. Id.

Defendant is a limited liability company. Id. at p. 6. Its members are citizens of Puerto Rico. Id.

Wind Farm and Defendant used to be affiliates. See id. at pp. 1–3. That relationship changed hours before the first complaint in this judicial proceeding was filed on July 15, 2019. See Docket No. 120 at p. 7. Since July 15, Punta Lima has held the membership interest in Wind Farm. Id.

Punta Lima is a limited liability company. Id. at p. 2. Punta Lima is a wholly owned subsidiary of Santander Bank, N.A. ("Santander"), a national banking association located in Delaware.² Id. at p. 3.

2. Land Leases and Related Agreements

The project uses three parcels of land. Id. at pp. 4–5. One parcel is owned by Defendant. Id. at p. 4. Defendant leased the parcel to Wind Farm in 2012. Id.

Two other parcels are owned by third parties. See id. at pp. 4–5. Wind Farm leased both parcels from their owners. Id. Afterwards, in 2012, Wind Farm assigned its interests and obligations in those leases to Defendant, then subleased the land from Defendant. Id.

Wind Farm and Defendant also reached other accords at around the same time those leases and subleases were agreed upon. (Docket No. 119 at pp. 7–9.) Among these accords was an agreement that, should Wind Farm default on the lease or subleases between Wind Farm and Defendant, Punta Lima would have the right, but not the obligation, to cure the default. Id. Defendant also granted Punta Lima the right to enter the three parcels during the term of the lease and subleases between Wind Farm and Defendant. See id., Ex. 2 at p. 3 & Ex. 6 at p. 3 & Ex. 10 at p. 3.

In this opinion, the three land parcels discussed above are collectively described as the "project site." The leases, subleases and related agreements between Defendant and Wind Farm discussed in the three preceding paragraphs are collectively described as the "land leases."

3. Equipment Lease

Approximately a week after the land leases were consummated, Wind Farm and Santander entered into a lease ("facility lease"). (Docket No. 120 at p. 5.) Through the facility lease, Wind Farm leased wind-powered generating equipment and related material from Santander. Id. at pp. 5–6. Santander later assigned its interests in the facility lease to Punta Lima. Id. at p. 6.

The facility lease addresses destruction of the project. (Docket No. 119, Ex. 11 at p. 23.) If the project is destroyed, Wind Farm can choose either to rebuild the project or to terminate the facility lease. Id. The facility lease requires Wind Farm to choose within four months of the destructive incident or be deemed to have elected to terminate the agreement. Id. In the event of termination, Wind Farm owes Punta Lima a sum referred to here as the "termination payment." See id., Ex. 11 at p. 24.

4. Subordination Agreement

Defendant and Wind Farm also executed a subordination agreement ("subordination agreement"). Id., Ex. 12. Defendant agreed to subordinate Wind Farm's payment obligations to itself (except those concerning rent payments to the third-party owners of the two land parcels) in favor of Wind Farm's obligations to Punta Lima. Id., Ex. 12 at p. 2. Specifically, the agreement states,

[Defendant] hereby consents and agrees to (i) the subordination of all the payment obligations of [Wind Farm] under the Punta Lima Lease, including, but not limited to, the payment of rent or any other payments due by [Wind Farm] to [Defendant] under the Punta Lima Lease, and (ii) the subordination of all payment obligations of [Wind Farm] to [Defendant] under each of the Subleases, except for that portion of the annual rent payable to each respective Owner in each case, in favor of any and all the obligations of [Wind Farm] owing to [Punta Lima] under, or pursuant to, that certain Facility Lease Agreement ....

Id.

Defendant and Wind Farm thereafter amended their sublease agreements to reflect the subordination. Id., Ex. 13 at p. 4 & Ex. 14 at pp. 4–5. The amended subleases refer broadly to Wind Farm's "obligations," stating,

[Defendant] hereby consents and agrees to the subordination of all the obligations of [Wind Farm] under the Sublease, including, but not limited to, the payment of rent or any other payment due by [Wind Farm] to [Defendant] under the Sublease, in favor of any and all obligations of [Wind Farm], now existing or hereinafter constituted, with [Punta Lima], as the same may be amended, restated or in any way modified from time to time, except for that portion of the annual rent payable by [Defendant] to the [third-party landowner].

Id., Ex. 13 at p. 4 & Ex. 14 at pp. 4–5.

5. Project Operation and Destruction

Wind Farm operated the project through September 19, 2017. Id. at p. 11. Defendant was compensated. Id.

Hurricane María destroyed the project on September 20, 2017. Id. Since then, the project has been inoperative. Id.

6. Negotiations After Destruction of the Project

After the hurricane, the parties and their parent companies began negotiations to rebuild the project. Id. at pp. 12-13, 22–23. These negotiations are ongoing. Id. at p. 13.

In 2018 and early 2019, Defendant did not assert there was unpaid rent. Id. at p. 22. Meanwhile, Wind Farm approved all withdrawal requests from Defendant for rent payments and management fees. Id. at p. 23. At this time, Defendant and Wind Farm were still under common control. Id.

In 2018 and 2019, Punta Lima and Santander agreed to extend the time in which Wind Farm was required to decide whether to rebuild the project or terminate the facility lease. Id. at pp. 12–13. According to Punta Lima, the final date for Wind Farm's decision was set at March 15, 2019.³ Id. at p. 13.

Wind Farm did not decide by the final decision date whether to rebuild or terminate. Id. Consequently, Wind Farm was deemed to have elected to terminate the facility lease. Id.

7. Wind Farm Defaults on Land Leases

On May 9 and 31, 2019, Defendant informed Wind Farm of defaults pursuant to the land leases. Id. at pp. 13–14. According to the notices, Wind Farm failed to pay rent due in February 2018 and February...