Wilshire Credit Corp. v. G & C Plaza Inc.

• Decision Date: 31 July 1999
• Docket Number: No. CIV. 98-2135(DRD).,CIV. 98-2135(DRD).
• Citation: 62 F.Supp.2d 396
• Court: U.S. District Court — District of Puerto Rico
• Parties: WILSHIRE CREDIT CORPORATION, Plaintiff, v. G & C PLAZA INC., et al., Defendants.

62 F.Supp.2d 396

WILSHIRE CREDIT CORPORATION, Plaintiff, v. G & C PLAZA INC., et al., Defendants.

No. CIV. 98-2135(DRD).

United States District Court, D. Puerto Rico.

July 31, 1999.

Mildred Caban-Flores, Goldman Antonetti & Cordova, San Juan, PR, Ivan R. Fernandez-Vallejo, Rodriguez & Fernandez, San Juan, PR, for Plaintiff.

Rafael Ojeda-Diez, Ojeda & Ojeda, San Juan, PR, Pedro Zorrilla-Martinez, San Juan, PR, for Defendants.

OPINION AND ORDER

DOMINGUEZ, District Judge.

Plaintiff, Wilshire Credit Corporation ("Wilshire"), filed a diversity action for collection of monies and foreclosure of pledge and mortgages relating to a loan agreement, a promissory note, and several personal guarantees. Plaintiff acquired the promissory note and now seeks recovery against co-defendant, G & C Plaza, as issuer of the note. See Complaint ¶ 7-9 (Docket # 1). Plaintiff also seeks recovery against co-defendant Leticia Brunet González ("Brunet González") as one of the guarantors of said note. See Complaint (Docket # 1).

Pending before the Court is a motion to dismiss filed by co-defendant Leticia Brunet González pursuant to Fed. R.Civ.P. 12(b)(6). (Docket # 6). Brunet González contends that the complaint against her should be dismissed because plaintiff filed the suit beyond the three (3) year statute of limitations prescribed for actions for commercial notes as provided by Article 946 of the Commerce Code of Puerto Rico. P.R. Laws Ann. tit. 10 § 1908. Upon careful examination of the relevant facts, the applicable law and the arguments advanced by the parties, co-defendant's Motion to Dismiss (Docket # 6) is hereby GRANTED.

I. Motion to Dismiss Standard

The appropriate standard for Fed. R.Civ.P. 12(b)(6) motions to dismiss was reiterated by the U.S. Court of Appeals for the First Circuit in the case of Ronald C. Brown v. Hot, Sexy, And Safer Productions, Inc., 68 F.3d 525 (1st Cir.1995). The standard provides that a court must accept as true all well-pleaded allegations within the complaint and indulge all reasonable inferences in favor of the plaintiff. See Hot, Sexy, And Safer Productions, Inc., 68 F.3d at 530, McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 276, 96 S.Ct. 2574, 49 L.Ed.2d 493 (1976); Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir.1990); Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir.1989). However, "[b]ecause only well pleaded facts are taken as true, we will not accept a complainant's unsupported conclusions or interpretations of law." Washington Legal Foundation v. Massachusetts Bar Foundation, 993 F.2d 962, 971 (1st Cir.1993). Dismissal under Fed.R.Civ.P. 12(b)(6) is appropriate if the facts alleged, taken as true, do not justify recovery. Aulson v. Blanchard, 83 F.3d 1, 3(1st Cir. 1996).

In opposing a Rule 12(b)(6) motion, "a plaintiff cannot expect a trial court to do his homework for him." McCoy v. Massachusetts Institute of Technology, 950 F.2d 13, 22 (1st Cir.1991). Rather, plaintiff has an affirmative responsibility to put his best foot forward in an effort to present a legal theory that will support his claim. Id. at 23 (citing Correa-Martinez, 903 F.2d at 52; Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir.1989); Ryan v. Scoggin, 245 F.2d 54, 57 (10th Cir. 1957)). In order to survive a motion to dismiss, plaintiffs must set forth in his complaint "factual allegations, either direct or inferential, regarding each material element necessary to sustain recovery under some actionable theory." Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988).¹

II. Applicable Law/Analysis

Co-defendant Brunet González argues that plaintiff Wilshire's complaint should be dismissed because the cause of action brought by such corporation was time-barred pursuant to Article 946 of the Commerce Code, P.R. Laws Ann. tit. 10 § 1908. Under Section 1908, plaintiff is required to file an action within three (3) years after maturity of the promissory note and loan agreement. On the other hand, plaintiff states in its Motion in Opposition tom Motion to Dismiss (Docket # 14), that the above-mentioned loan agreement was not a commercial transaction and that as such the fifteen (15) year statute of limitations period prescribed for personal loans is applicable. Article 1873 of the Civil Code of P.R., P.R. Laws Ann. tit. 31 § 5303; F.D.I.C. v. Consolidated Mortgage and Finance Corp., 805 F.2d 14 (1st Cir.1986); F.D.I.C. v. Cardona, 723 F.2d 132, 134 (1st Cir.1983); Mediterranean Investment Corp. v. Rodriguez, 575 F.Supp. 268 (D.Puerto Rico 1983); Luengo v. Fernandez, 83 P.R.R. 613 (1961).

In this diversity claim, local law determines the limitations period applicable to commercial loans. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938); ("When parties litigate in Federal Courts on the basis of diversity jurisdiction, state law supplies the substantive rules of decision.") Fitzgerald P.P.A. v. Expressway Sewerage Construction, Inc., 177 F.3d 71, 74 (1st Cir.1999); (In diversity jurisdiction, in the federal courts of Puerto Rico, Puerto Rican law controls, Advance Financial Corporation v. Isla Rica Sales, Inc., 747 F.2d 21, 28 (1st Cir.1984)).

The three (3) year prescription period set forth in Art. 946, P.R. Laws Ann. tit. 10 § 1908, for actions on promissory notes is only applicable to commercial loans. F.D.I.C. v. Barrera, 595 F.Supp. 894, 897 (D.Puerto Rico 1984) (citing Banco de Puerto Rico v. Rodriguez, 53 P.R.R. 166 (1938)). The Puerto Rico Supreme Court and federal courts in the island have specifically stated that a non-mercantile note is not subject to the three (3) period of limitations, but to the fifteen (15) year period set forth under Article 1873 of the Puerto Rico Civil Code. See F.D.I.C. v. Barrera, 595 F.Supp. 894; Mediterranean Investment Corp. v. Rodriguez, 575 F.Supp. 268; Luengo v. Fernandez, 83 P.R.R. 613.

Article 1746 of the Civil Code of Puerto Rico states that "the obligation of the surety will expire at the same time as that of the debtor." P.R. Laws Ann. tit. 31 § 4951. As a guarantor, co-defendant Brunet González "is liable to the extent the person she guaranteed is liable." Barrera, 595 F.Supp. at 897. Thus, if the statute of limitations has expired on enforcement of the commercial notes as to the principal debtor, it has also expired on enforcement as to any guarantor. Id.

In synthesis, co-defendant Brunet González avers that the note in question here is commercial in nature and, as such, actions to recover on said note are subject to the three (3) year statute of limitations period of Article 946. Because plaintiff filed suit beyond the three (3) year statute of limitations period, co-defendant argues the complaint should be dismissed as time-barred. Plaintiff filed the complaint seeking collection of money and foreclosure of pledge and mortgage note as to a loan agreement subscribed by co-defendant G & C Plaza. Several personal guarantors, including codefendant Brunet Gonzalez, signed as guarantors. The loan agreement, promissory note and personal guarantees subject of the instant case were all executed on May 24, 1990. See Complaint and Motion to Dismiss (Docket # 1 and #6, respectively). Wilshire filed suit on October 9, 1998. Brunet González was served with process and notified of the pending action against her on October 20, 1998. The loan in question, evidenced by the promissory note and loan agreement, had a twenty-four (24) month term commencing on May 24, 1990. As such, it matured on May 24, 1992. See Exhibit # 1 to the Motion to Dismiss (Docket # 6). Based on these facts, co-defendant Brunet González contends that having filed the complaint in excess of three (3) years after the loan matured, plaintiff's claim is time-barred.² See Motion to Dismiss. (Docket #6). The critical issue for this Court to determine is whether the loan made to G & C Plaza should be considered "commercial" under Puerto Rican law, mandating the application of the three (3) year statute of limitation period for actions that are commercial loans. F.D.I.C. v. Consolidated Mortgage and Finance Corp., 805 F.2d 14 (1st Cir.1986); F.D.I.C. v. Cardona, 723 F.2d 132 (1st Cir.1983).

In Garita Hotel Ltd. Partnership v. Ponce Federal Bank, F.S.B., 954 F.Supp. 438, 452-454 (D.Puerto Rico 1996), affirmed by 122 F.3d 88, 89 (1st Cir.1997), the court discussed the potential applicability of the Puerto Rico Commerce Code to transactions. In order to decide whether a loan is commercial in nature, two conditions must be established: (1) that one of the contracting parties thereto be a merchant, and (2) that the articles loaned be destined to commercial transactions. Article 229 of the Puerto Rico Commerce Code, P.R. Laws Ann. tit.10 § 1651; Barrera, 595 F.Supp. 894; Garita, 954 F.Supp. 438. Both conditions must be proven to exist. Garita, 954 F.Supp. 438; Pescaderia Rosas, Inc. v. Lozada, 116 P.R.R. 582 (1985); F.D.I.C. v. Marco Discount House, 575 F.Supp. 730 (1983). The Court finds the loan at issue to be commercial in nature under the Commerce Code of Puerto Rico. The Court briefly explains.

A. Banks are merchants for purposes of Commerce Code applicability

Banks are merchants for purposes of the Commerce Code. Article 1 of the Puerto Rico Commerce Code, P.R. Laws Ann. tit. 10 § 1001; Garita, 954 F.Supp. 438. The Court in Garita found that, "there is some authority supporting the view that any loan to which a bank is a party should be considered a commercial transaction." Garita, 954 F.Supp. at 452.³ In its analysis, the Court discussed the origin and purpose of Article 2 of the Puerto Rico Commerce Code. This article states that "commercial transactions, be they consummated by merchants or not, ... shall be governed by the provisions contained in the same... Commercial transactions shall be considered those enumerated in this Code and any other of a similar character." P.R. Laws Ann. tit. 10 § 1002; Pescaderia Rosas...