Vistas De Canovanas I, Inc. v. Fed. Deposit Ins. Corp.

• Decision Date: 18 July 2017
• Docket Number: Civil No. 16–2568 (FAB)
• Citation: 266 F.Supp.3d 563
• Parties: VISTAS DE CANOVANAS I, INC., Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Doral Bank, Defendant.
• Court: U.S. District Court — District of Puerto Rico

266 F.Supp.3d 563

VISTAS DE CANOVANAS I, INC., Plaintiff,

v.FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Doral Bank, Defendant.

Civil No. 16–2568 (FAB)

United States District Court, D. Puerto Rico.

Signed July 18, 2017

Jose A. Hernandez-Mayoral, Hernandez Mayoral Law Office, San Juan, PR, for Plaintiff.

Jairo A. Mellado-Villarreal, Tessie Leal–Garabis, Mellado & Mellado Villareal, San Juan, PR, Jeffrey A. Sandell, Federal Deposit Insurance Corporation, Dallas, TX, for Defendant.

OPINION AND ORDER¹

FRANCISCO A. BESOSA, UNITED STATES DISTRICT JUDGE

Before the Court is Bautista Cayman Asset Company ("Bautista")'s unopposed motion to alter or amend the August 8, 2016, Puerto Rico Court of First Instance "Minutes Resolution" pursuant to Federal Rule of Civil Procedure 59(e) (" Rule 59(e)") and Vistas de Canovanas I, Inc. ("Vistas")'s motion to remand pursuant to 12 U.S.C. § 1819. (Docket Nos. 7 at p. 2; 3 at p. 1.) For the reasons set forth below, the Court DENIES Bautista's motion to alter or amend the judgment, and DENIES Vistas' motion to remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2009 Vistas filed a complaint against Doral Bank ("Doral Bank") in the Court of First Instance, San Juan Superior Division ("state court"),² seeking damages related to an alleged breach of contract regarding a loan Vistas obtained from Doral Bank to construct a housing project in Canovanas, Puerto Rico ("loan"). (Docket Nos. 1 at p. 1; 3 at p. 2.) Doral Bank asserted a counterclaim against Vistas seeking collection of the loan and a third party complaint against Ramon MacCrohon ("MacCrohon"), the guarantor of the loan. (Docket No. 1 at p. 1.)

During proceedings in state court, Doral Bank transferred the loan to a subsidiary, Doral Recovery II, LLC ("Doral Recovery"). (Docket Nos. 1 at pp. 1–2; 3 at p. 2.) Doral Recovery was subsequently joined to the state court action as a counterclaimant (for repayment of the loan) and as a third party plaintiff (in the action against MacCrohon). (Docket No. 1 at p. 2.)

In September 2014, Vistas requested the state court to prohibit transfer of the loan. (Docket No. 3 at p. 3.) Notwithstanding this motion, Doral Recovery transferred the loan back to Doral Bank on October 31, 2014. (Docket Nos. 1 at p. 2; 3 at p. 4; 3–1 at p. 3.) The state court issued an order in November 2014, prohibiting Doral Recovery from selling the loan. (Docket No. 3 at pp. 4–5.)

The Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico closed Doral Bank on February 27, 2015. (Docket No. 3 at p. 5.) The Federal Deposit Insurance Corporation ("FDIC") became Doral Bank's receiver. (Docket No. 1 at p. 2.)

The FDIC published a notice in El Nuevo Dia newspaper requiring Doral's creditors to submit their claims to the FDIC. (Docket No. 7 at p. 8.) Vistas did so, after which the FDIC disallowed its claim ("disallowance letter"). (Docket No. 7 at p. 9.) In the disallowance letter, the FDIC informed Vistas that "[p]ursuant to 12 U.S.C. § 1821(d)(6), if you do not agree with this disallowance, you have the right to file a lawsuit on your claim (or continue any lawsuit commenced before the appointment of the Receiver)." Id.

The FDIC, as Doral Bank's receiver, promptly sold the loan to Bautista. (Docket Nos. 3 at p. 6; 7 at p. 10.) Bautista then moved to substitute itself for Doral Bank in the state court action as owner of the contested loan. (Docket No. 3 at p. 6.) Vistas opposed, arguing that the transfer of the loan from Doral Recovery to Doral Bank violated the state court's November order, rendering the transfer from the FDIC to Bautista void. Id.

Bautista requested documentation from the FDIC to confirm its ownership of the loan. Id. Bautista received a number of documents from the FDIC, and submitted these documents to the state court during an August 8, 2016 hearing. (Docket No. 3 at p. 7.) The state court noted that the promissory note at issue lacked endorsement from Doral Bank to Doral Recovery, casting doubt on the validity of the transfer. (Docket No. 10–5 at p. 3.) In the same decision, the state court disqualified the attorneys for Doral Bank and Doral Recovery, and subsequently, because the FDIC had not yet appeared in the litigation, denied the motion to substitute ("August Order").³ Id. The state court continued trial for March 2017. (Docket Nos. 3 at p. 8; 10–5 at p. 3.)

Bautista requested more information from the FDIC, and on September 1, 2016 the FDIC provided Bautista with a sworn affidavit from Edward M. Mertic, declaring that the loan had, indeed, been transferred to Doral Bank before the state court prohibited transfer (the "affidavit").⁴ (Docket Nos. 3 at p. 8; 3–1 at p. 3.) That same day, September 1, 2016, the FDIC filed a notice of substitution of party in the state court to take the place of Doral Bank in the litigation and then removed the case to federal court. (Docket Nos. 1 at pp. 1 and 2.) Vistas timely filed a motion to remand. (Docket No. 7.) The FDIC filed an opposition. (Docket No. 10.) Vistas' motion for leave to file a reply was denied as untimely. (Docket No. 20.)

Additionally, on September 1, Bautista timely filed a motion requesting that this Court reconsider the August Order. (Docket No. 3.) Vistas did not file an opposition.

II. DISCUSSION

A. Motion to Reconsider⁵

1. Initial Adoption of State Court Ruling

Upon removal, the federal court essentially "takes the case up where the State court left it off." Granny Goose Foods, Inc. v. Bhd. of Teamsters and Auto Truck Drivers Local No. 70 of Alameda Cty., 415 U.S. 423, 436, 94 S.Ct. 1113, 1122, 39 L.Ed.2d 435 (1974) (citations omitted). To that end, district courts adopt "all injunctions, orders, and other proceedings" present in the state court action at the time of removal.⁶ 28 U.S.C. § 1450.

2. Analysis

Bautista argues that the state court denied its motion to substitute because Bautista's lawyers failed to demonstrate that Doral Recovery transferred the loan to Doral Bank before the November order. (Docket No. 3 at p. 8.) Bautista avers that because the FDIC affidavit clarified that certain transfers were not endorsed, the Court should amend the August Order and grant Bautista's motion to substitute. (Docket No. 3 at p. 8.) The motion for reconsideration is unopposed by Vistas.

Rule 59(e) is "an extraordinary remedy which should be used sparingly." Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir. 2006) (citations omitted). Motions to amend judgment are only appropriate "if they seek to correct manifest errors of law, present newly discovered evidence, or when there exists an intervening change in law." Citizens of Karst, Inc. v. United States Army Corps of Engineers, Civil No. 14-1592, 320 F.R.D. 7, ––––, 2017 WL 773597, at *1 (D.P.R. Feb. 28, 2017) (Besosa, J.) (citing Rivera-Surillo & Co. v. Falconer Glass Indus., Inc., 37 F.3d 25, 29 (1st Cir. 1994) ). Rule 59(e) is not "a vehicle for a party to undo its own procedural failures, and it certainly does not allow a party to introduce new evidence or advance arguments that could and should have been presented to the district court prior to the judgment." Aybar v. Crispin–Reyes, 118 F.3d 10, 16 (1st Cir. 1997) (citations omitted).

The Court first notes that even if Bautista prevailed on the motion to reconsider, the Court would only clarify that the state court "denial" of the motion to substitute was a "denial without prejudice." Granted, Bautista is correct in that the state court mentions a lack of evidence in the August Order;⁷ however, the state court reserved judgment on the merits of Bautista's substitution motion. See Docket No. 10–5. Indeed, the August Order contains no legal discussion or analysis of Puerto Rico law governing substitution of parties, much less an analysis of Bautista's motion. See id. The most the Court can decipher from the August Order is that the state court denied the substitution motion because Doral's lawyers had been disqualified and the FDIC had not yet appeared—leaving plaintiff Vistas and third party Bautista as the only parties with counsel present at the hearing. (Docket No. 10–5 at p. 3.) ("Given that defendant [Doral] does not have counsel at this time, and the FDIC has not appeared in this case [...] the substitution of party requested by Bautista Cayman Assets Company is denied.") Because removal to federal court occurred before the Court of First Instance addressed the merits of the substitution motion, there is no analysis from the state court upon which the Court may "alter or amend."⁸

Bautista may not avoid an adjudication on the merits of its substitution motion by invoking Rule 59(e).⁹ The proper pleading to litigate this issue is a motion for substitution, not a motion for reconsideration. See e.g., Fed. R. Civ. P. 25(c).

With regard to the Rule 59(e) motion, aside from stating in a conclusory manner that "the newly discovered evidence [was] not previously available," Bautista offers no substantive reason why it could not have presented the FDIC affidavit to the state court.¹⁰ Bautista received evidence from the FDIC before the state court hearing. (Docket No. 3 at pp. 6–7.) Bautista could have requested the affidavit regarding possession of the loan at that time. This deficiency alone merits denial of the Rule 59(e) motion. See Mas Marques v. Digital Equip. Corp., 637 F.2d 24, 29–30 (1st Cir. 1980) ("A defeated litigant cannot set aside a judgment [...] because he failed to present on a motion for summary judgment all of the facts known to him that might be useful to the court."); Shell Co., Ltd. v. Los Frailes Serv. Station, Inc., 596 F.Supp.2d 193, 201 (D.P.R. 2008) (Besosa, J.) (denying a motion to alter judgment when defendant's new evidence was not material and "LFSS had ample opportunity to present Mr. Rosa's evidence earlier.")

Accordingly, the Court DENIES with prejudice Bautista's motion to alter or amend the state court judgment.

B. Motion to Remand

Vistas moves to remand this action on three...