Markel American Insurance Comp v. Diaz-Santiago, et al

Filing

OPINION issued by Juan R. Torruella, Appellate Judge; Norman H. Stahl, Appellate Judge and Rogeriee Thompson, Appellate Judge. Published. [11-1101]

Case: 11-1101

Document: 00116348832

Page: 1

Date Filed: 03/16/2012

Entry ID: 5626624

United States Court of Appeals
For the First Circuit

No. 11-1101
MARKEL AMERICAN INSURANCE COMPANY,
Plaintiff,
v.
MICHAEL DÍAZ-SANTIAGO; OMAYRA RODRÍGUEZ-SORRENTINI;
MDS CARIBBEAN SEAS LIMITED,
Defendants, Appellants,
v.
BLUE WATERS INSURERS CORP.; SEGUROS JAVIER CALDERÓN, INC.;
LUIS F. PADILLA-GONZÁLEZ,
Defendants,
v.
FIRSTBANK OF PUERTO RICO,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen Consuelo Cerezo, U.S. District Judge]
Before
Torruella, Stahl, and Thompson,
Circuit Judges.
Laura Maldonado Rodríguez, on brief for appellants.
Cristina Belaval Burger and Martínez Odell & Calabria, on
brief for appellee.
March 16, 2012

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TORRUELLA, Circuit Judge.

Date Filed: 03/16/2012

Entry ID: 5626624

Defendant-Appellant Michael

Díaz-Santiago ("Díaz-Santiago")1 appeals the district court's grant
of

summary

judgment

("FirstBank").

to

Appellee

FirstBank

of

Puerto

Rico

Markel Am. Ins. Co. v. Díaz-Santiago, No. 09-

1672CCC, 2010 WL 3982292 (D.P.R. Sept. 30, 2010).

For the reasons

stated herein, we affirm the district court's decision.
I.

Background

On October 8, 2008, MDS Caribbean Seas Limited ("MDS"),
a company that Díaz-Santiago incorporated under the laws of the
British Virgin Islands, purchased a vessel, the "Black Sea."

That

same day, MDS executed a promissory note in favor of FirstBank,
which it secured by a preferred ship mortgage (the "Preferred Ship
Mortgage"

or "Mortgage"),

as

a

form

of

payment

guarantee

to

FirstBank. Also on October 8, Díaz-Santiago and his wife expressly
guaranteed MDS's compliance with the terms of the promissory note
and Preferred Ship Mortgage by executing and sending to FirstBank
a continuing letter of guaranty, jointly and severally binding
themselves

to

the

amount

owed

should

the

vessel

owner,

MDS,

default.

1

Díaz-Santiago has been the principal appellant throughout the
course of this dispute. Other appellants to this action include
Díaz-Santiago's wife and business partner, Omayra RodríguezSorrentini, and their company, MDS Caribbean Seas Limited. For
purposes of this appeal, we refer to all appellants as, "DíazSantiago."
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Pursuant

to

Page: 3

the

clear

Date Filed: 03/16/2012

terms

of

the

Entry ID: 5626624

Preferred

Ship

Mortgage, MDS, as the owner of the vessel, was required to "keep
the vessel fully and adequately insured . . . in at least the
amount of the unpaid principal balance of this Mortgage . . . ."
Stated differently, MDS was contractually obligated to insure the
Black Sea to protect FirstBank's position as a loss payee.

The

Mortgage additionally provided in the section entitled, "Default,"
that MDS would be liable for any advances, expenditures, or costs
that FirstBank incurred for, among other reasons, defending suits
related to the Preferred Ship Mortgage and promissory note.

The

provision states as follows:
5.
All advances and expenditures which
[FirstBank] in its discretion may make for
repairs, insurance, payment of liens or other
claims, defense of suits, or for any other
purpose whatsoever related hereto or to said
note and all damages sustained by [FirstBank]
because of defaults, shall be repaid by Owner
[MDS] on demand with interest at the same
interest rate provided for in the Promissory
Note, the payment thereof secured hereby, and
until so paid shall be a debt due from Owner
[MDS] to [FirstBank] secured by the lien
hereof. [FirstBank] shall not be obligated to
make any such advances or expenditures, nor
shall the making thereof relieve Owner [MDS]
of any obligation or default thereto.
(Emphasis added.)
Accordingly, Díaz-Santiago obtained insurance for the
vessel.

On

October

7,

2008,

he

prepared

marine

insurance

application materials and submitted them to Blue Waters Insurers,
Corp. ("Blue Waters"), an underwriting agent for various insurers,
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including Markel American Insurance Company ("Markel").

Entry ID: 5626624

Markel,

via Blue Waters, issued a marine insurance policy (the "Policy") to
Díaz-Santiago in his name based on the information he had provided.
Notably, one of Díaz-Santiago's submitted materials stated that he
was the specific owner of the Black Sea, and not MDS, as was
actually stated in the vessel purchase materials.
In early March 2009, the Black Sea and its owners entered
rough waters.

The U.S. Customs and Border Protection ("CBP")

seized the vessel as part of a drug enforcement action.2

The

search and seizure of the vessel caused it to suffer a series of
damages,

significantly

decreasing

its

estimated

value.3

On

April 7, 2009, the CBP notified FirstBank of the vessel's seizure
and advised FirstBank of its rights pertaining to the ship.
FirstBank, seeking to protect its interest in the vessel,
took action to secure the Black Sea's release.

Specifically, it

initiated an administrative forfeiture proceeding before the CBP;
it also intervened in the subsequent criminal case and obtained a

2

None of the parties in this dispute were involved in the
subsequent criminal actions concerning the vessel. Details as to
the legal proceedings concerning this seizure are not relevant for
purposes of this appeal.

3

When MDS executed the promissory note for FirstBank, the
vessel's value was estimated at $1,212,000.00. Following the CBP's
seizure of the Black Sea, its value was estimated to have decreased
to $800,000.
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voluntary dismissal of the indictment against the vessel.4

Entry ID: 5626624

It then

submitted a claim to Markel on July 1, 2009 requesting payment
under the Policy for "the loss of the vessel including, without
limitation, the value of the Bank's collateral, legal fees incurred
in attempting to secure its release, as well as any applicable
costs and interests." After investigating the claim, Markel denied
it on July 9,

2009, offering two grounds for its denial of

FirstBank's payment request.
First, it asserted that the Policy was void ab initio
because Díaz-Santiago had made material misrepresentations during
the marine insurance application process, i.e., he declared himself
as the owner of the vessel, when in fact all paperwork concerning
the Black Sea's purchase identified MDS as the insured vessel's
owner.

Second, Markel noted that the Policy's "Use of Your Yacht"

provision specifically prohibited the insured yacht's usage for
illegal purposes.

That same day, Markel notified Díaz-Santiago

that the Policy had been declared null and void and issued him a
premiums refund check.
Sailing was hardly smooth for the parties thereafter. On
July 15, 2009, Markel filed a Complaint for declaratory judgment
against Díaz-Santiago and FirstBank, seeking a determination that

4

According to the record, the criminal case in which FirstBank
intervened and obtained the voluntary dismissal of the indictment
was United States v. Andújar-Aponte, Crim. No. 09-096 (D.P.R.
2009).
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the Policy was void due to Díaz-Santiago's misrepresentation or,
alternatively, that the Policy did not provide coverage to either
Díaz-Santiago or FirstBank for the alleged losses resulting from
the vessel's seizure.

On September 28, 2009, FirstBank filed its

Answer and Counterclaim against Markel; filed a Crossclaim against
Díaz-Santiago; and filed a Third Party Complaint against, among
others, Blue Waters and Díaz-Santiago's wife.

On October 9, 2009,

FirstBank filed an Amended Third Party Complaint, bringing MDS on
board the action.
A

series

of

dispositive

motions

soon

followed

--

including Markel's October 23, 2009 motion for summary judgment
against Díaz-Santiago and FirstBank, and FirstBank's December 4,
2009 opposition motion and cross-motion for summary judgment -with FirstBank and Markel predominantly contesting the validity of
the Policy.

Following this flurry of filings, Markel and Díaz-

Santiago filed a Joint Motion for Entry of Judgment by Consent (the
"Consent Motion") on March 26, 2010, with Díaz-Santiago, in effect,
authoring and signing his own demise in this action.
In the Consent Motion, the parties stated "that the
information regarding the identity of the owner of the vessel was
a material fact that should have been disclosed to Markel."

The

parties further sought entry of judgment for Markel, "declaring
that the [Policy] was null and void and does not provide coverage
for the damages and/or losses related to the [March 2009] seizure

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of the [vessel] by [CBP]."

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On April 9, 2010 the district court

granted the motion pursuant to its terms.
FirstBank acted swiftly.

Also on April 9, it moved for

partial summary judgment against Díaz-Santiago, his wife, and MDS
(the "April 9 motion").

FirstBank claimed that Díaz-Santiago's

admission that the governing insurance policy was null and void due
to his misrepresentation or concealment of material facts to Markel
-- i.e., identifying himself as the owner of the vessel, and not
MDS -- constituted a breach by MDS of its Preferred Ship Mortgage
with FirstBank, which specifically required MDS to "fully and
adequately" insure the vessel and to cover all "advances and
expenditures" that FirstBank incurred in defending suits related to
the Mortgage and promissory note.

Díaz-Santiago failed to file an

opposition motion to FirstBank's April 9 motion, and so, on May 4,
2010, FirstBank moved for the district court to treat that motion
as unopposed.5
That same day, Díaz-Santiago moved to strike FirstBank's
April 9 motion for partial summary judgment on the grounds that it
did not comply with Local Rule 56 because it did not contain "a
separate, short, and concise statement of material facts."
Civ. R. 56.

D.P.R.

Specifically, Díaz-Santiago challenged FirstBank's

5

Although Díaz-Santiago suggests the district court improperly
characterized him as having failed to oppose FirstBank's motion, he
fails to point us to anything in the record showing such an
opposition. We likewise deem FirstBank's motion unopposed.
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decision to incorporate by reference the parties' statements of
uncontested material facts that already were on the record from the
various motions and cross-motions for summary judgment previously
filed in the case, rather than file a separate statement of
uncontested facts with the April 9 motion.6

Díaz-Santiago also

moved for a protective order, requesting that he not "be forced to
oppose an [sic] non-compliant motion for summary judgment until
Fistbank [sic] files an amended motion complying with Local Rule
56(a) and (b)."

On June 14, 2010, the district court issued an

order (the "June 14 order") denying Díaz-Santiago's motions.
On September 30, the district court granted FirstBank's
April 9 motion for partial summary judgment and awarded FirstBank
$74,512.50 in attorneys' fees for costs and expenses incurred in
securing release of the vessel and defending the validity of the
Policy (referred to hereinafter as the "September 30 order").
Díaz-Santiago subsequently filed a Rule 59 motion to either alter
or amend the court's order, set aside its judgment, or reconsider
its

opinion.

The

court

denied

Díaz-Santiago's

motion

on

November 30, 2010 (the "November 30 order"). This appeal followed,

6

Specifically, FirstBank included a footnote in its April 9
motion stating: "Considering that FirstBank already filed a motion
requesting summary judgment with regards to the validity of the
Policy and that all parties' statements of uncontested facts in
support of their respective motions are applicable to the instant
motion, FirstBank -- in the interest of judicial economy -- will
incorporate them by reference, instead of filing another statement
which, for the most part, will restate the previous ones."
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with Díaz-Santiago challenging the district court's (1) denial of
his motion to strike and/or motion for protective order, (2) grant
of summary judgment in favor of FirstBank, and (3) denial of his
motion to alter or set aside the grant of summary judgment to
FirstBank.
II.
A.

Discussion

Denial of Motion to Strike and/or Motion for Protective Order
FirstBank contends, first, that this Court does not have

jurisdiction over Díaz-Santiago's challenge to the district court's
denial of his motion to strike and/or motion for a protective order
(the "strike/protective order motions"), and second, that even if
we do, the district court committed no error.

We proceed to the

jurisdictional question.
FirstBank hangs its argumentative hat on the fact that
Díaz-Santiago's Notice of Appeal does not specifically designate
the district court's order denying his strike/protective order
motions.

Thus, so the argument goes, Díaz-Santiago failed to

provide the requisite notice to either this Court or to FirstBank
as to the issues it would be challenging on appeal.

In essence,

FirstBank alleges that Díaz-Santiago failed to comply with the
requirements

of

Rule

3(c)

of

the

Federal

Rules

of

Appellate

Procedure.
Rule 3(c) provides that a "notice of appeal must . . .
designate the judgment, order, or part thereof being appealed."

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Fed. R. App. P. 3(c)(1)(B); Lehman v. Revolution Portfolio LLC, 166
F.3d 389, 395 (1st Cir. 1999) (stating "a notice of appeal must
specify the order or judgment to which the appeal is addressed").
The Supreme Court has made clear that the rule's requirements,
while mandatory and jurisdictional, see Torres v. Oakland Scavenger
Co., 487 U.S. 312, 315-17 (1988), should be construed liberally,
Smith v. Barry, 502 U.S. 244, 248 (1992).

In performing such

liberal construction, however, we are aware that "noncompliance"
with

the

rule's

mandates

"is

fatal

to

an

appeal."

Id.

(additionally stating "[t]his principle of liberal construction
does not, however, excuse noncompliance with the Rule," as its
"dictates are jurisdictional in nature, and their satisfaction is
a

prerequisite

to

appellate

review");

Constructora

Andrade

Gutiérrez, S.A. v. Am. Int'l Ins. Co. of P.R., 467 F.3d 38, 43 (1st
Cir. 2006) ("The failure to include a particular issue in a notice
of appeal can be fatal to this court's jurisdiction over that
issue.").
In

assessing

appellate

jurisdiction

cognizant

that

'the

whether
over

notice

the

Notice

of

Díaz-Santiago's
afforded

by

a

Appeal
claim,

document,

confers
"we

are

not

the

litigant's motivation in filing it, determines the document's
sufficiency as a notice of appeal.'"

Kotler v. Am. Tobacco Co.,

981 F.2d 7, 11 (1st Cir. 1992) (quoting Smith, 502 U.S. at 248).
Specifically, we review the notice to determine whether Díaz-

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Santiago's intent to appeal the district court's June 14 order
denying

his

strike/protective

order

motions

was

sufficiently

manifest so as to provide clear notice to FirstBank.

See id.

(citing Smith, 502 U.S. at 248); see also Torres, 487 U.S. at 318
(noting that Rule 3(c)'s "specificity requirement" serves to ensure
"fair notice"
appeal).

to

both the

court

and

opposition

regarding

an

In conducting this review, we do not examine the notice

in isolation, but consider the record in its entirety.

See

FirsTier Mortg. Co. v. Investors Mortg. Ins. Co., 498 U.S. 269, 276
n.6 (1991); Kotler v. Am. Tobacco Co., 926 F.2d 1217, 1221 (1st
Cir. 1990), vacated on other grounds 505 U.S. 1215 (1992) ("In
determining

whether

appellant's

notices

of

appeal

.

.

.

sufficiently demonstrated an intent to appeal that order, we are
not limited to the four corners of the notices, but may examine
them in the context of the record as a whole.").
The Notice of Appeal in this case specifically provides:
[A]n appeal will be taken to the United States
Court of Appeals for the First Circuit, to
challenge the order and judgment entered on
summary judgment and the subsequent order
denying post judgment relief.
On the one hand, a review of the Notice reveals no
express reference to the district court's June 14 order denying
Díaz-Santiago's strike/protective order motions, a seemingly fatal
flaw under Rule 3(c)'s clear provisions. See Fed. R. App. P. 3(c);
Poy v. Boutselis, 352 F.3d 479, 486 (1st Cir. 2003) (holding that

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appellant's failure to include an issue in its notice of appeal "is
fatal to our jurisdiction").

The only judgment designations

contained in Díaz-Santiago's Notice of Appeal are to the district
court's September 30 order (granting FirstBank's motion for partial
summary judgment) and the court's November 30 order (denying DíazSantiago's motion under Rule 59 for alteration or amendment of
judgment).

The

Notice

of

Appeal's

omission

of

any

specific

reference to the district court's June 14 order "while, at the same
time,

designating

.

.

.

completely

separate

and

independent

order[s] loudly proclaims [Díaz-Santiago's] intention not to appeal
from the former [June 14] order."
On

the

other

hand,

we

Kotler, 981 F.2d at 11.
remain

mindful that

we

must

construe the Notice of Appeal liberally and look beyond the limited
confines of the notice document itself to the record as a whole.
A careful review of such record shows that in Díaz-Santiago's
motion to alter or set aside the district court's September 30
order, he makes mention of the court's June 14 order denying his
strike/protective order motions and specifically cites to the
order's docket number.

In citing that order, appellant states as

follows:
As expressed by the court, defendants did not
oppose the motion for summary judgment, but
they did request remedies concerning the
response to that motion which were entirely
denied. ([Docket No.] 98) Among the remedies
requested, defendants requested to be allowed
to respond if their requests for protective
order were denied.
Defendants move for the
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court to review the opinion and order issued,
and vacate the judgment entered.
(Emphasis added.)
Díaz-Santiago's Russian nesting doll-esque technique of
raising his challenge to the district court's June 14 order within
his challenge to the court's September 30 order was not the most
express or direct means to highlight for this Court or FirstBank
his intention to appeal such judgment.

However, while we are

somewhat skeptical that Díaz-Santiago's linguistic turn of hand
here was sufficient to satisfy Rule 3(c)'s specific designation
requirements, we are able to dodge this jurisdictional conundrum.
Rather than draw our own conclusions concerning Díaz-Santiago's
appellate intent from the record, we "take shelter instead under
the familiar principle that where an appeal presents a difficult
jurisdictional issue, yet the substantive merits underlying the
issue are facilely resolved in favor of the party challenging
jurisdiction, the jurisdictional issue may be avoided."

Kotler,

926 F.2d at 1221.
The district court's June 14 order denied Díaz-Santiago's
contention that FirstBank's motion for partial summary judgment
violated Local Rule 56 because it did not include "a separate,
short, and concise statement of material facts, set forth in
numbered paragraphs, as to which the moving party contends there is
no genuine issue of material fact to be tried."
56(b).

D.P.R. Civ. R.

Díaz-Santiago asserts the court's consideration of this
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motion, despite its alleged noncompliance, was improper because all
previously

submitted

motions

or

statements

were

"inevitably

intertwined with numerous other motions and responses that might or
might not have been relevant" to FirstBank's April 9 motion.
We are particularly deferential to a district court's
application and interpretation of its own local rules.

Crowley v.

L.L. Bean, Inc., 361 F.3d 22, 25 (1st Cir. 2004); see also P.R. Am.
Ins. Co. v. Rivera-Vázquez, 603 F.3d 125, 131 (1st Cir. 2010)
("[I]t is primarily the role of the district court to determine
what departures from a local rule may be tolerated.").

Here, the

record shows that FirstBank's April 9 motion expressly incorporated
by reference all parties' statements of uncontested facts that were
previously submitted in support of their prior respective motions.
One such motion and corresponding statement of uncontested facts
included FirstBank's previous cross-motion for summary judgment
(filed on December 4, 2009), which was in full compliance with
Local Rule 56's requirements.

Indeed, in incorporating all prior

filed statements of uncontested facts in its April 9 motion,
FirstBank made express reference to its December 4 cross-motion for
summary judgment and corresponding statement of uncontested facts.
A review of the docket leaves no doubt that the parties
here had ample opportunity to flex their motion-practice muscles
(of which they took clear advantage), and that, in doing so, the
parties consistently asserted substantive facts and arguments that

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did not noticeably vary from one motion to the next.

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While we will

not speculate as to the district court's reasons for denying DíazSantiago's strike/protective order motions, which are unclear from
the court's brief order, we see no abuse of discretion in its
determination to, at the very least, conserve judicial resources
and rely on the ample record before it -- which FirstBank expressly
cited

to,

specifically

directed

the

court,

and

unequivocally

incorporated by reference -- containing similar legal allegations
and factual averments throughout.

Local Rule 56 nowhere mandates

that a district court deny motions that incorporate matters by
reference.

Under the facts of this case, we see no error in the

district court's decision to permit such incorporation here.
Díaz-Santiago

also

challenges

FirstBank's

subsequent

filing of an addendum to its April 9 motion providing the specific
attorneys' fees and costs it had incurred in securing the vessel's
release and defending the Policy's validity.

He contends that

FirstBank's submission of attorney declarations detailing hours
worked also constituted a violation of Local Rule 56(b) because
"the attorneys' alleged work before administrative agencies or
before other judges could not be automatically attributable to
defendants in this case."

We find no merit to Díaz-Santiago's

cursorily raised argument.
To begin with, we are not convinced that Local Rule
56(b), addressing the filing of uncontested statements of fact, is

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the proper rule on which Díaz-Santiago should be relying.

The

addendum here was clearly not meant to be included as part of a
statement of uncontested facts; rather, it was offered as further
support

for

FirstBank's

summary

judgment

argument

that

Díaz-

Santiago was liable for all costs and attorneys' fees incurred in
securing the vessel's release and defending the Policy's validity.
See Docket No. 89 at 2 ("As a direct result of MDS's breach of
contract, FirstBank is requesting the Honorable Court to grant all
costs and attorneys' fees incurred by the latter in securing
release of the Vessel . . ., as well as those fees incurred in
defending the validity of the policy in the instant case. For this
reason, FirstBank hereby files the following declarations . . . to
evidence the amount incurred in attorneys' fees to secure the
release of the Vessel and to defend the validity of the policy."
(emphasis added)).
The addendum consisted of several attorneys' affidavits
identifying the specific proceedings on which they worked in the
dispute -- all of which consisted of representing FirstBank in the
underlying criminal proceedings, its administrative proceeding
before the CBP, and in the litigation concerning the Policy's
validity.

Under the clear terms of the Mortgage, Díaz-Santiago

could be held liable for expenses associated with such proceedings,
and

moreover,

for

his

conceded

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of

the

terms

of

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agreement.

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The question of such fees was thus part and parcel of

FirstBank's argument in support of summary judgment.
FirstBank's April 9 motion specifically flagged for the
court that the addendum setting forth such fees would be swiftly
forthcoming; in fact, it was filed approximately five days after
the summary judgment motion's filing.

While it is unclear why

FirstBank did not include the addendum with the summary judgment
motion itself, the record shows it was filed soon after, and far in
advance

of

judgment.

the

court's

September

30

order

granting

summary

Tellingly, Díaz-Santiago points us to no local rule or

applicable case law establishing that such a supplemental filing of
supporting

materials,

specifically

referenced

in

the

original

motion, is improper.
We thus again face a question of a district court's
application of its own local rules, to which we accord "a special
degree of deference - above and beyond the traditional standards of
decisionmaking and appellate oversight."
416, 422 (1st Cir. 1995).

In re Jarvis, 53 F.3d

We find no abuse of discretion in the

district court's consideration of the addendum, which contained
relevant

information

to

FirstBank's

overall

summary

judgment

position.
For these reasons, we reject Díaz-Santiago's challenges
to the district court's denial of his strike/protective order
motions.

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B. Grant of Partial Summary Judgment and Denial of Motion to Alter
or Amend Judgment
Díaz-Santiago does not clearly set forth his specific
arguments as to why the district court should not have granted
FirstBank's summary judgment motion.

Instead, he inserts his

summary judgment challenges in his discussion against the district
court's denial of his Rule 59(e) motion to alter or amend judgment.
We attempt to parse each argument out, addressing the district
court's grant of summary judgment first.
1.

Partial Summary Judgment Grant

We review the district court's grant of summary judgment
de novo.

Insituform Tech., Inc. v. Am. Home Assurance Co., 566

F.3d 274, 276 (1st Cir. 2009). To prevail on summary judgment, the
moving party must show that "there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of
law."

Fed. R. Civ. P. 56.

A fact is material if it "might affect

the outcome of the suit" under governing law, Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986); likewise, an issue of fact
is genuine if "a reasonable jury could resolve it in favor of
either party," Basic Controlex Corp., Inc. v. Klockner Moeller
Corp., 202 F.3d 450, 453 (1st Cir. 2000).

In determining whether

a genuine issue of material fact exists, we construe the evidence
in the light most favorable to the non-moving party and make all
reasonable inferences in that party's favor. Flowers v. Fiore, 359
F.3d 24, 29 (1st Cir. 2004).
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Díaz-Santiago points us to nothing in the record that
raises a genuine issue of material fact.

At most, Díaz-Santiago

directs us to the fact that FirstBank allegedly knew the Policy
contained a discrepancy as to the Black Sea owner's name (listing
Díaz-Santiago as the owner instead of MDS), but still executed the
Preferred Ship Mortgage and promissory note in MDS's name despite
such

knowledge.

Specifically,

Díaz-Santiago

contends

that

FirstBank received a copy of the Policy -- containing the owner
error -- on October 7, 2008, but that the Mortgage and promissory
note were not signed with FirstBank until October 8, 2008, the same
day Díaz-Santiago signed all documents officially incorporating MDS
in the Virgin Islands and purchasing the Black Sea in MDS's name.
In essence, Díaz-Santiago argues that FirstBank held all
the cards as of October 8, 2008, should have seen the documents'
discrepancies for itself, and either informed Díaz-Santiago of such
errors and/or refused to accept the Policy for its material error.
Because it did not do so, Díaz-Santiago contends that FirstBank was
acting

with

unclean

hands7

at

the

7

time

of

the

Mortgage

and

The doctrine of unclean hands is grounded in the maxim that
"[h]e who comes into equity must come with clean hands." Keystone
Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 241 (1933).
Pursuant to this doctrine, a claimant may not recover where his
"misconduct is directly related to the merits of the controversy
between the parties." Dr. José S. Belaval, Inc. v. Pérez-Perdomo,
488 F.3d 11, 15 (1st Cir. 2007) (quoting Texaco P.R., Inc. v. Dep't
of Consumer Affairs, 60 F.3d 867, 880 (1st Cir. 1995)). Stated
differently, the doctrine will "close[] the doors of a court of
equity to one tainted with inequitableness or bad faith relative to
the matter in which he seeks relief." Precision Instrument Mfg.
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promissory note's execution and should not be rewarded for such
actions.
For reasons set forth infra in our Rule 59(e) discussion,
we need not address the merits of Díaz-Santiago's unclean hands
argument.

We therefore examine the record as it stands to assess

whether a genuine issue of material fact is present, construing the
record and drawing all inferences therefrom in Díaz-Santiago's
favor.

We conclude that Díaz-Santiago's arguments on appeal are

nothing more than a smokescreen to try and artfully evade the
writing on the wall, which clearly shows the following:
First, MDS, and not Díaz-Santiago, is listed as the
purchaser of the Black Sea vessel. Second, after MDS purchased the
Black Sea,

it

executed

a

promissory

note

and

Preferred

Ship

Mortgage in FirstBank's favor, obligating itself to insure the
Black Sea to protect FirstBank's interest as a loss payee, and to
pay for any costs incurred by FirstBank in defending suits related
to the aforementioned agreements.

Third, Díaz-Santiago and his

wife

of

signed

a

continuing

letter

guaranty,

confirming

for

FirstBank that they would jointly and severally assume any costs
owed under the agreements should MDS default.

Fourth, when Díaz-

Santiago, on behalf of MDS, obtained the requisite insurance for
the Black Sea from Markel, he misrepresented himself as the owner
of the vessel, and not MDS.

Fifth, following the Black Sea's

Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945).
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seizure, FirstBank incurred various costs and expenses seeking to
secure its release, but when it submitted its claim to Markel (the
vessel's insurer), Markel denied the claim due to the material
owner identification error in the insurance papers.

Lastly,

hammering the final nail into the coffin, Díaz-Santiago and Markel
filed a Consent Motion with the court affirming that the vessel's
insurance policy was null and void and did not provide coverage for
any damages or losses related to the Black Sea's seizure.

Stated

differently, Díaz-Santiago conceded that MDS had failed to fulfill
its side of the bargain with FirstBank by not obtaining valid
insurance for the vessel, and had breached one of its contractual
obligations under the Preferred Ship Mortgage.
Puerto Rico law makes clear that contracts shall be
binding, regardless of the form in which they were executed,
"provided the essential conditions required for their validity
exist."

P.R. Laws Ann. tit. 31, § 3451.

Where the terms of a

contract are clear, leaving no doubt as to the contracting parties'
intentions, such contract will be observed according to "the
literal sense of its stipulations."

Id. § 3471.

It is widely

accepted that "[o]bligations arising from contracts have legal
force between the contracting parties, and must be fulfilled in
accordance with their stipulations."

Id. § 2994.

Where a party

fails to uphold or abide by the contract's essential obligations,
such failure will be deemed a breach of the contract.

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See

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Dantlzer, Inc. v. Lamas-Besos, No. 10-1004(PG), 2010 WL 2572618, at
*3 (D.P.R. June 22, 2010) (stating that the elements of a cause of
action for breach of contract under Puerto Rico law include "1) a
valid contract and 2) a breach by one of the parties to the
contract"); Torres v. Bella Vista Hosp., Inc., 523 F. Supp. 2d 123,
152 (D.P.R. 2007).
No party has disputed the validity of the contractual
agreements between FirstBank and Díaz-Santiago, nor does the record
reveal any facts suggesting their possible voidability.

Pursuant

to the express terms of the Preferred Ship Mortgage, MDS was
required to "keep the vessel fully and adequately insured . . . in
at

least

Mortgage,"

the

amount

and

would

of
be

the

unpaid

held

principal

liable

for

balance

any

of

advances

the
or

expenditures that FirstBank incurred in defending suits related to
the promissory note or Mortgage.

Regarding the former obligation,

Díaz-Santiago sealed his fate upon filing the Consent Motion with
Markel, establishing a breach of his contractual obligation to
FirstBank to obtain and maintain insurance on the Black Sea.8

8

Indeed, had the Policy been valid, FirstBank's costs as a loss
payee in securing the vessel's release presumably would have fallen
to Markel the insurer, as the Policy specifically provided: "[i]n
the event of a covered loss to property, you must protect the
property from further loss and make every effort to recover it. We
shall pay the reasonable costs you incur under this condition in
addition to any other payments we make for loss or damage under
PROPERTY COVERAGE . . . ."
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Regarding the latter obligation, it is clear that MDS,
through the Mortgage, and Díaz-Santiago, via the continuing letter
of guaranty, contractually bound themselves to reimburse FirstBank
for any costs it incurred in defending suits related to the
Mortgage or promissory note. FirstBank has more than satisfied its
burden of establishing such costs.
Specifically,

FirstBank

initiated

an

administrative

proceeding before the CBP, seeking to foreclose on the vessel's
Mortgage when MDS defaulted in payments following the Black Sea's
seizure.

It then intervened in the subsequent criminal case,

obtaining the voluntary dismissal of the indictment against the
vessel.

Lastly,

it

actively

participated

in

the

aggressive

litigation that ensued amongst the parties concerning the Policy's
validity, which concluded with Díaz-Santiago and Markel's filing of
the Consent Motion.
involved

clearly

The various suits in which FirstBank was

fall

within

the

Preferred

Ship

Mortgage's

"Default" provision, stating that MDS will be liable for all
advances and expenditures that FirstBank may incur in "defense of
suits . . . related [to the Mortgage] or to [the promissory] note
(emphasis added)."

Thus, pursuant to the clear terms of the

Preferred Ship Mortgage, MDS -- or if MDS is unable to pay, then
Díaz-Santiago and his wife -- may be held liable for FirstBank's
shown costs for defending such suits.

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Stated most simply, FirstBank upheld its end of the
bargain, and now Díaz-Santiago/MDS must do the same.

We thus

affirm the district court's grant of summary judgment to FirstBank,
and its award of attorneys' fees, costs, and expenses arising from
FirstBank's procured release of the Black Sea and defense of the
policy's validity.
2.

Motion to Alter or Amend Judgment

Charging once more unto the breach, Díaz-Santiago argues
that the district court wrongly denied his Rule 59(e) motion in
which he asserted that FirstBank violated the equitable doctrine of
unclean hands when it permitted the execution of the Mortgage and
promissory note in MDS's name despite knowing that the Policy
already

listed

Díaz-Santiago

as

the

vessel

owner.

Because

FirstBank produced the discrepancy in the underlying documents,
Díaz-Santiago asserts that FirstBank "was not entitled to relief,"
and "the judgment entered represents clear legal error and a
manifest injustice" warranting an amendment or setting aside of the
judgment pursuant to Federal Rule of Civil Procedure 59(e).
This Court reviews the district court's denial of postjudgment relief under Rule 59(e) for abuse of discretion. Williams
v. Poulos, 11 F.3d 271, 289 (1st Cir. 1993) ("The decision to grant
or deny a Rule 59 motion is committed to the wide discretion of the
district court and must be respected absent abuse."); Fernández v.
Leonard, 963 F.2d 459, 468 (1st Cir. 1992).

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Generally, to prevail

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on a Rule 59(e) motion, the moving party "must either clearly
establish a manifest error of law or must present newly discovered
evidence."

F.D.I.C. v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir.

1992); see also Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 7
n.2 (1st Cir. 2005) (acknowledging four grounds for granting a Rule
59(e) motion: "manifest errors of law or fact, newly discovered or
previously

unavailable

evidence,

manifest

injustice,

and

an

intervening change in controlling law.") (citing 11 C. Wright et
al., Federal Practice and Procedure § 2810.1 (2d ed. 1995)).
Notably, a party moving for Rule 59(e) relief may not repeat
arguments previously made during summary judgment, Prescott v.
Higgins, 538 F.3d 32, 45 (1st Cir. 2008), nor may it present new
arguments on a Rule 59(e) if such arguments "could, and should,
have been made before judgment issued."

ACA Fin. Guar. Corp. v.

Advest, Inc., 512 F.3d 46, 55 (1st Cir. 2008) (quoting F.D.I.C.,
978 F.2d at 16).
A review of the record confirms that Díaz-Santiago raised
his unclean hands argument for the first time in his Rule 59(e)
motion.

As we have repeatedly admonished parties, such motion is

not the place to present arguments that could, and should, have
been raised before the court's pulling of its judgment trigger.
Id.

Given the amount of motion practice that took place amongst

the parties in this case, along with the similar nature of the
parties' claims as to their respective liabilities under the

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various contractual agreements at issue, we are hard pressed to
accept that Díaz-Santiago could not have made his equitable defense
argument

before

FirstBank's

the

April

district
9

court

motion.

entered

judgment

Díaz-Santiago

had

granting
repeated

opportunities to oppose FirstBank's April 9 motion, and he simply
failed to do so.

Díaz-Santiago effectively waited until the die

was cast to substantively challenge FirstBank's summary judgment
motion for the first time.

But Rule 59(e) motions "are aimed at re

consideration, not initial consideration."

Harley-Davidson Motor

Co. v. Bank of New Eng.-Old Colony, N.A., 897 F.2d 611, 616 (1st
Cir. 1990).

We reject Díaz-Santiago's attempt to ante up and play

a new hand when he is long past being a day late and well over a
dollar short.
Additionally, neither the Rule 59(e) motion itself nor
Díaz-Santiago's arguments on appeal in support of such motion show
a manifest error of law or fact, a presentation of newly discovered
evidence, or a significant change in governing law.

Thus, Díaz-

Santiago has failed to show any grounds that, under Rule 59(e),
warrant an amendment, alteration, or setting aside of the district
court's September 30 order, or any abuse of discretion on the part
of the district court in applying Rule 59(e)'s standards.

We thus

affirm the district court's denial of Díaz-Santiago's Rule 59(e)
motion.

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III.

Date Filed: 03/16/2012

Entry ID: 5626624

Conclusion

Finding no error in the district court's rulings, we
affirm.
Affirmed.

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