PR Highway and Transportation v. Redondo Construction Corp.

Filing

OPINION issued by Juan R. Torruella, Appellate Judge; Michael Daly Hawkins,* Senior Appellate Judge and David J. Barron, Appellate Judge. Published. * Of the Ninth Circuit, sitting by designation. [15-1397]

Case: 15-1397

Document: 00116957490

Page: 1

Date Filed: 02/10/2016

Entry ID: 5976270

United States Court of Appeals
For the First Circuit
No. 15-1397
IN RE: REDONDO CONSTRUCTION CORPORATION,
Debtor
___________________
PUERTO RICO HIGHWAY AND TRANSPORTATION AUTHORITY,
Plaintiff, Appellant,
v.
REDONDO CONSTRUCTION CORPORATION,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]

Before
Torruella, Hawkins,* and Barron,
Circuit Judges.

Héctor Benítez-Arraiza, with whom Quiñones & Arbona, P.S.C.,
was on brief, for appellant.
Charles A. Cuprill-Hernández, with whom Law Offices
Charles A. Cuprill, P.S.C., was on brief, for appellee.

February 10, 2016

*

Of the Ninth Circuit, sitting by designation.

Case: 15-1397

Document: 00116957490

Page: 2

TORRUELLA, Circuit Judge.

Date Filed: 02/10/2016

Entry ID: 5976270

This case returns to us

following our remand in In re Redondo Construction Corp. (Redondo
III), 678 F.3d 115 (1st Cir. 2012).

The Puerto Rico Highway and

Transportation Authority ("the Authority") appeals the district
court's affirmance of the bankruptcy court's award of prejudgment
interest to Redondo Construction Corporation ("Redondo") on its
contract claims under Article 1061 of the Puerto Rico Civil Code,
31 L.P.R.A. § 3025, accruing through the payment of principal.

As

explained below, we reject the Authority's contention that Redondo
forfeited its claim to prejudgment interest under Article 1061 but
agree with its argument that 28 U.S.C. § 1961 exclusively controls
awards of postjudgment interest in federal court.

We thus find

that we must vacate and remand for a calculation of § 1961 interest
and, to prevent double recovery, a recalculation of Article 1061
interest.
I.
Because one of the main issues in this appeal is whether
Redondo preserved its claim to Article 1061 interest, we focus on
the parties' motion practice.

We direct readers interested in the

factual history of this case to the bankruptcy court's opinion in
Redondo Construction Corp. v. Puerto Rico Highway & Transportation
Authority (Redondo I), 411 B.R. 89 (Bankr. D.P.R. 2009).

-2-

Case: 15-1397

Document: 00116957490

Page: 3

Date Filed: 02/10/2016

Entry ID: 5976270

In the 1990s, Redondo contracted with the Authority to
work on three construction projects.1
projects'

design

plans,

the

Each contract described the

construction

sites'

anticipated

conditions, and the procedures for implementing variances.

In

certain situations, Redondo could claim extra compensation for
unforeseen additional work.

These terms proved important because

all three of the construction projects experienced unanticipated
problems.
Redondo filed claims against the Authority on all three
contracts seeking compensation for additional work performed.
Before these claims were resolved, however, Redondo filed for
Chapter 11 bankruptcy. Through the Chapter 11 proceedings, Redondo
filed three complaints against the Authority for money owed under
the construction contracts.

In each of these complaints, Redondo

stated it was entitled to not only damages, but also prejudgment
interest accruing at a rate of 6.5% per annum.

Following a bench

trial, Redondo filed a memorandum reiterating its request for
prejudgment interest at a rate of 6.5% per annum.2

1

Redondo contracted to build a bridge and access road ("the
Patillas project"), to replace a different bridge ("the DoradoToa Alta project"), and to improve a highway ("the Mayagüez
project").
2

Neither the complaints nor the post-trial memorandum clearly
stated under which statute Redondo was claiming prejudgment
interest.
The complaint regarding the Mayagüez project stated
Redondo was entitled to prejudgment interest because federal funds
were used in the project.
Redondo's post-trial memorandum,
however, cited only Puerto Rico Rule of Civil Procedure 44.3 and
-3-

Case: 15-1397

Document: 00116957490

Page: 4

Date Filed: 02/10/2016

Entry ID: 5976270

The bankruptcy court ruled in Redondo's favor.

Id. at

89. In addition to awarding Redondo damages, the bankruptcy court,
without stating its legal basis for doing so, found that Redondo
was entitled to prejudgment interest accruing at 6.5% per annum.
The Authority subsequently filed a timely motion to
amend the judgment pursuant to Federal Rule of Civil Procedure
59(e) and Federal Rule of Bankruptcy Procedure 9023.

Among other

claims, the Authority argued that the bankruptcy court erred in
awarding Redondo prejudgment interest.

Noting that prejudgment

interest is typically a matter of state law, the Authority argued
that it had not acted with temerity or obstinacy as required by
Puerto Rico Rule of Civil Procedure 44.3(b) in order to impose
prejudgment interest.3

argued that
payment.
3

the

Authority

acted

obstinately

by

delaying

Rule 44.3(b) states:
Except when the defendant is the Commonwealth of
Puerto
Rico,
its
municipalities,
agencies,
instrumentalities or officers acting in their
official capacity, the court will also impose on
the party that has acted rashly the payment of
interest at the rate fixed by the Board by virtue
of the previous subsection which is in effect at
the moment the judgment is pronounced, from the
time the cause of action arises in every case of
collection of money and from the time the claim is
filed in actions for damages until the date
judgment is pronounced, to be computed on the
amount of the judgment. The interest rate shall be
stated in the judgment.

-4-

its

Case: 15-1397

Document: 00116957490

Page: 5

Date Filed: 02/10/2016

Entry ID: 5976270

Redondo filed a response motion defending the bankruptcy
court's prejudgment interest award, arguing (1) that the three
construction projects "had federal funds participation allowing
for

the

computation

of

the

pre-judgment

interest

award[]"

(presumably referring to 41 U.S.C. § 7109(a)(1), which allows
parties to recover interest on the principal on contracts in which
the federal government is a party) and (2) that Article 1061
allowed for "indemnity" interest under Puerto Rico law.
Although the bankruptcy court ruled in the Authority's
favor on some claims, it left the prejudgment interest award
intact.

In re Redondo Constr. Corp. (Redondo II), 424 B.R. 29, 36

(Bankr. D.P.R. 2010).

The bankruptcy court concluded that the

parties contracted to incorporate the rate used for governmentparty contracts as set by 41 U.S.C. § 7109(a)(1).4

Id. at 33.

Following the bankruptcy court's ruling, the Authority
sought review first in the district court, and then in this Court.
In Redondo III, we found that the record did not show that 41
U.S.C.

§

7109(a)(1)

applied

either

independently

or

by

incorporation through contract. 678 F.3d at 125-26. We considered
alternative bases under which the bankruptcy court could have
awarded

prejudgment

interest

(including

4

Civil

Rule

44.3

and

The bankruptcy court cited 41 U.S.C. §§ 601-13, the provisions
of the U.S. Code previously containing 41 U.S.C. § 7109(a)(1).
See Act of January 4, 2011, Pub. L. No. 111-350, 124 Stat. 3677,
3816.
-5-

Case: 15-1397

Document: 00116957490

Page: 6

Date Filed: 02/10/2016

Entry ID: 5976270

Article 1061), but concluded there was no support in the record
that the bankruptcy court did so.

Id. at 126.

As a result, we

instructed the district court to "vacate the award of prejudgment
interest

and

return

the

case

to

the

bankruptcy

court

for

a

determination of whether prejudgment interest [was] appropriate
and, if so, at what rate and for what periods."

Id.

On remand, Redondo argued it was entitled to prejudgment
interest under Article 1061.

The bankruptcy court agreed and

awarded Redondo Article 1061 interest accruing at a rate of 6% per
annum from the date of substantial completion for each construction
project, through the date of the Authority's final payment on the
principal.

In re Redondo Constr. Corp. (Redondo IV), 505 B.R.

388, 401 (Bankr. D.P.R. 2014).
Following the bankruptcy court's decision, the Authority
moved to amend the judgment, arguing that Redondo forfeited its
Article 1061 claim and that the bankruptcy court used incorrect
start and end dates for the accrual period.

After the bankruptcy

court denied the Authority's motion, In re Redondo Constr. Corp.
(Redondo V), 515 B.R. 410, 416 (Bankr. D.P.R. 2014), the Authority
appealed to the district court.

The district court affirmed the

bankruptcy court's decision in its entirety. In re Redondo Constr.
Corp. (Redondo VI), 523 B.R. 339, 346 (D.P.R. 2014).
appeal followed.

-6-

This timely

Case: 15-1397

Document: 00116957490

Page: 7

Date Filed: 02/10/2016

Entry ID: 5976270

II.
"When state-law claims (such as the contract claims
at issue here) are adjudicated by a federal court, prejudgment
interest is normally a matter of state law."

Redondo III, 678

F.3d at 125. Article 1061 of the Puerto Rico Civil Code provides
parties to a breach of contract with a right to interest as an
indemnity for default.
P.R.R. 43, 50 (1954).

Rivera v. Crescioni, 77 D.P.R. 47, 77
It states in full that

[s]hould the obligation consist in the payment of
a sum of money, and the debtor should be in default,
the indemnity for losses and damages, should there
not be a stipulation to the contrary, shall consist
in the payment of the interest agreed upon, and
should there be no agreement, in that of the legal
interest.
Until another rate is fixed by the Government,
interest at the rate of six percent (6%) per annum
shall be considered as legal.
31 L.P.R.A. § 3025.
In

its

appeal,

the

Authority

renews

its

arguments

regarding the bankruptcy court's award under Article 1061:

that

Redondo forfeited its claim, and that even if such an award was
warranted, the bankruptcy court used incorrect start and end dates
for accrual.

"On appeal from a district court decision reviewing

a bankruptcy court order, we review the bankruptcy court order
directly,

disturbing

its

factual

findings

only

if

clearly

erroneous, while according de novo review to its conclusions of
law."

In re Furlong, 660 F.3d 81, 86 (1st Cir. 2011) (quoting
-7-

Case: 15-1397

Document: 00116957490

Page: 8

Date Filed: 02/10/2016

Entry ID: 5976270

Spenlinhauer v. O'Donnell, 261 F.3d 113, 117 (1st Cir. 2001)).
All of the Authority's arguments concern questions of law so our
review

will

be

de

novo.

We

turn

first

to

the

Authority's

forfeiture arguments.
III.
The Authority proffers two main arguments for finding
that Redondo forfeited its claim to Article 1061 interest.

First,

the Authority argues that Redondo raised its claim through the
wrong procedural vehicle.

Second, the Authority argues that even

if Redondo's claim was procedurally proper, Redondo failed to
adequately develop its claim. Although we agree with the Authority
that

Article

1061

interest

is

discretionary

(and

therefore

forfeitable),5 neither of these claims has merit.

5

Redondo argues that we need not address the Authority's
forfeiture arguments because Article 1061 interest automatically
attaches upon judgment and as such, cannot be waived or forfeited.
All of the cases Redondo cites in support of its claim concern
Rule 44.3. See Municipio de Mayagüez v. Rivera, 113 D.P.R. 467, 13
P.R. Offic. Trans. 597, 602 (1982) ("[A]ccording to [Rule
44.3(a)'s] provisions, the court must, upon rendering a money
judgment, impose the payment of legal interest on the amount of
judgment, without exception."); Fuentes v. Hull Dobbs Co. of P.R.,
88 D.P.R. 562, 88 P.R.R. 544, 553 (1963) (awarding prejudgment
interest on appeal after concluding "that appellee's action in
defending itself in this case was manifestly obstinate" even though
it "ha[d] not been claimed in the complaint"). The Puerto Rico
Supreme Court has unambiguously stated that Rule 44.3 and Article
1061 are different in kind:
In [the case of Rule 44.3], interest should be
considered automatically part of the judgment, by
express provision of law. However, [Article 1061]
interest is not in the same category. It is not an
integral part or inherently inseverable from the
-8-

Case: 15-1397

Document: 00116957490

Page: 9

Date Filed: 02/10/2016

Entry ID: 5976270

The bankruptcy court found Redondo's Article 1061 claim
preserved by its response motion in Redondo II.

The Authority now

argues that a Rule 59 response motion is not the proper vehicle
through which a party may claim prejudgment interest.6

principal obligation, but is considered as
independent indemnity for damages, by way
penalty, for default in payment.

Rule 59

an
of

Rivera, 77 P.R.R. at 51.
Based on this view, the Puerto Rico
Supreme Court found that Article 1061 interest "may be waived by
the creditor by not appealing to this Court from the failure of
the lower court to order its payment." Id. at 51-52. We thus
conclude an Article 1061 claim can be forfeited if not raised at
the appropriate stage.
6

The Authority makes much of our statement in Redondo III that
Article 1061 "was [not] cited to the bankruptcy court." 678 F.3d
at 126. The Authority argues that we definitively decided that
Redondo did not raise Article 1061 until appeal and, under the law
of the case doctrine and mandate rule, the bankruptcy court could
not look at Redondo's pre-remand motions for discussion of Article
1061. But forfeiture was not a legal issue in Redondo III: all
we decided in Redondo III was that Article 1061 could not have
been the basis of the bankruptcy court's award in Redondo II. Id.
We do not believe our cursory statement about whether Article 1061
was discussed in the bankruptcy court proceedings was a legal
decision that bound the bankruptcy court on remand.
See Naser
Jewelers, Inc. v. City of Concord, 538 F.3d 17, 20 (1st Cir. 2008)
("[W]hen a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the
same case." (quoting Arizona v. California, 460 U.S. 605, 618
(1983))).
The Authority also views Redondo's focus on 41 U.S.C.
§ 7109(a)(1) in previous litigation as inconsistent with its
Article 1061 claim on remand and therefore barred by judicial
estoppel. Judicial estoppel requires us to find (1) "the estopping
position and the estopped position [are] directly inconsistent,
that is, mutually exclusive" and (2) "the responsible party . . .
succeeded in persuading a court to accept its prior position."
Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 33 (1st
Cir. 2004). We neither think Redondo's claims are inconsistent,
-9-

Case: 15-1397

Document: 00116957490

Page: 10

Date Filed: 02/10/2016

Entry ID: 5976270

motions are typically the proper way for a prevailing party to
raise prejudgment interest arguments.

See Oserneck v. Ernst &

Whinney, 489 U.S. 169, 175 (1989) (holding that a motion for
discretionary prejudgment interest "constitute[d] a motion to
alter or amend the judgment under Rule 59(e)"); Redondo III, 678
F.3d at 122 ("While arguments presented for the first time in a
Rule 59(e) motion ordinarily are deemed forfeited, the grant or
denial of prejudgment interest is an exception to this general
rule."

(citation

omitted)).

Redondo,

however,

developed

its

prejudgment interest arguments in its response to the Authority's
Rule

59

motion.

bankruptcy

court

Of

course,

that

is

understandable

gave

Redondo

the

exact

prejudgment

as

the

interest

relief it requested in its complaints and post-trial memorandum.
We conclude that Redondo preserved its claim by stating
in its response motion that Article 1061 could support an award of
prejudgment interest as an alternative to 41 U.S.C. § 7109(a)(1).
Ruling in the Authority's favor would create a rule requiring
prevailing parties to file a Rule 59 motion to amend a favorable
judgment in order to preserve their ability to defend their
judgment on alternative grounds or assert alternative claims. Such
a rule goes against a commonsense understanding of the word amend
-- Redondo, understandably, would not want the bankruptcy court to

nor do we think our decision in Redondo III adopted the view that
Redondo pursued interest exclusively under 41 U.S.C. § 7109(a)(1).
-10-

Case: 15-1397

Document: 00116957490

Page: 11

amend the favorable judgment.
that

the

Authority

would

Date Filed: 02/10/2016

Entry ID: 5976270

Even if it seemed highly probable

challenge

the

unexplained

award

of

prejudgment interest, Redondo was under no obligation to shore up
the bankruptcy court's reasoning until the Authority moved.

See

Field v. Mans, 157 F.3d 35, 41-42 (1st Cir. 1998) (refusing to
view unchallenged holding by trial court that was unfavorable to
prevailing party as law of case on remand because "[i]t would be
extremely unrealistic to expect [the prevailing party's] attorney
to buttress his client's case by putting forward an alternate
theory in support of the lower court's judgment. . . . We are loath
to find that [the prevailing party] waived the [issue] merely by
failing to file either a procedurally dubious cross-appeal . . .
or to brief and argue what, to any attorney, might have seemed an
entirely redundant point" (citations omitted)); cf. Bath Iron
Works Corp. v. Coulombe, 888 F.2d 179, 179-80 (1st Cir. 1989) (per
curiam) (holding party could not appeal favorable judgment).

We

are reluctant to find forfeiture based on Redondo's failure to
file a "procedurally dubious" Rule 59 motion.

Field, 157 F.3d at

41.
Additionally, adopting the Authority's position would
disadvantage parties who raise a kernel of a prejudgment interest
claim prior to judgment vis-à-vis those who wait to file a Rule 59
motion.

Our rule permitting prejudgment interest claims in Rule

59 motions is based, in part, on our belief that parties should
-11-

Case: 15-1397

Document: 00116957490

Page: 12

Date Filed: 02/10/2016

Entry ID: 5976270

not be "required to put the cart before the horse and argue about
prejudgment interest before the underlying issues of liability and
damages have been resolved."
thus

find

it

excusable

Redondo III, 678 F.3d at 122.

that

Redondo

did

not

develop

We

every

conceivable prejudgment interest claim in its complaint and posttrial memorandum, when the issue of any recovery was still open
and commanded its full attention.

Redondo should not be held to

its merits stage theory when a party who did not apprise the court
at all would be allowed to litigate the issue fully in a Rule 59
motion.

Finding Redondo's Article 1061 claim procedurally sound,

we turn to the Authority's argument that Redondo's response motion
did not adequately develop its claim.
It is true that "issues adverted to in a perfunctory
manner, unaccompanied by argumentation are waived."

Global NAPS,

Inc. v. Verizon New England, Inc., 706 F.3d 8, 16 (1st Cir. 2013)
(quoting United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)).
But Redondo's response motion did not mention Article 1061 in a
perfunctory

manner.

In

response

to

the

Authority's

characterization of Rule 44.3 as the only basis for prejudgment
interest under Puerto Rico law, Redondo argued the Authority
incorrectly "concentrate[d] itself on Rule 44.3 . . . and ignore[d]
the provisions of the Civil Code of Puerto Rico as to interest
relative indemnity [sic] for nonpayment of money" and quoted
Article 1061.

We find these statements made it sufficiently clear
-12-

Case: 15-1397

Document: 00116957490

Page: 13

Date Filed: 02/10/2016

Entry ID: 5976270

that Redondo was proposing Article 1061 as an alternative basis
for

awarding

prejudgment

interest

and

therefore

reject

the

Authority's contention that Redondo forfeited its claim to Article
1061 interest.7
IV.
We
bankruptcy

now

court

address

the

calculated

incorrect time interval.

Authority's

prejudgment

contention

interest

that

based

on

the
an

We find no error with the bankruptcy

court's start date based on Puerto Rican law.

However, because

federal

of

law

exclusively

controls

the

award

postjudgment

interest, we conclude that the bankruptcy court should not have
extended the prejudgment interest accrual period past the entry of
judgment. As a result, we vacate and remand the bankruptcy court's
decision for further proceedings consistent with this opinion.
A.

Start of Article 1061 Interest Accrual
Article 1061 does not provide for a specific accrual

period.

It simply states that creditors have a right of indemnity

when "the obligation consist[s] in the payment of a sum of money,

7

Based on its view that Redondo raised Article 1061 for the first
time at oral argument, the Authority also argues that Redondo's
claim is barred by a fifteen-year statute of limitations. See 31
L.P.R.A. § 5294. We reject this argument by finding that Redondo
developed its claim to Article 1061 interest in its response motion
filed in Redondo II.
We make no comment on whether § 5294
delineates the appropriate statute of limitations for Article 1061
or whether the statute of limitations would have run during the
litigation.
-13-

Case: 15-1397

Document: 00116957490

Page: 14

and the debtor [is] in default."

Date Filed: 02/10/2016

31 L.P.R.A. § 3025.

Entry ID: 5976270

The parties

agree that under these terms, Article 1061 interest begins accruing
when a party defaults.

They disagree, however, about when default

occurred in this case.
Looking to other provisions of the Puerto Rico Civil
Code, Article 1053 defines when parties default under contract
law.

Normally, a party is in default "from the moment when the

creditor

demands

the

fulfilment

judicially or extrajudicially."

[sic]

of

[its]

obligation,

31 L.P.R.A. § 3017.

Pursuant to

this provision, the Authority argues that the bankruptcy court
should

have

started

calculating

the

accrual

of

prejudgment

interest from the date Redondo filed its complaints demanding
additional compensation.
Article 1053, however, first provides two exceptions to
this rule:

(1) as otherwise provided by law and (2) "[i]f by

reason of its nature and circumstances it may appear that the
fixing of the period within which the thing was to be delivered or
the service rendered was a determinate cause to constitute the
obligation."

Id. § 3017(1), (2).

Further, Article 1053 provides

that default for contracts of mutual obligation commences when
"one of the persons obligated fulfills his obligation the default
begins for the other party."

Id. § 3017.

The Puerto Rico Supreme Court has held that construction
contracts, such as the ones between Redondo and the Authority, are
-14-

Case: 15-1397

Document: 00116957490

Page: 15

Date Filed: 02/10/2016

Entry ID: 5976270

contracts of mutual obligation. Constructora Bauzá, Inc. v. García
López, 129 D.P.R. 579, 1991 P.R.-Eng. 735, 859 (1991).

Thus,

Article 1053's general rule that a party is in default only upon
the demand of the creditor does not apply.

31 L.P.R.A. § 3017.

Rather, Article 1053's terms for contracts of mutual obligations
control and the Authority was in default from the time Redondo
fulfilled its obligations -- in other words, from the dates the
construction projects were substantially completed.

Id.

These

were the start dates used by the bankruptcy court and thus we find
no error.8
B.

End of Article 1061 Interest Accrual
We

must,

however,

vacate

and

remand

the

bankruptcy

court's calculation of prejudgment interest to the extent it
includes accrual past the entry of judgment.

Although prejudgment

interest is usually governed by state law when the underlying
claims are based on state law, postjudgment interest is governed
exclusively by federal law under 28 U.S.C. § 1961.

Vázquez-

Filippetti v. Cooperativa de Seguros Múltiples de P.R., 723 F.3d
24, 28 (1st Cir. 2013) ("[T]he plaintiffs tell us that the laws of
Puerto Rico require [the defendant] to pay postjudgment interest.

8

The parties stipulated that the dates of substantial completion
were: November 1, 1993 for the Mayagüez project; March 18, 1994
for the Patillas project; and September 5, 1995 for the DoradoToa Alta project.
These dates were adopted by the bankruptcy
court. Redondo IV, 505 B.R. at 399.
-15-

Case: 15-1397

Document: 00116957490

Page: 16

Date Filed: 02/10/2016

Entry ID: 5976270

Yet it is well established that federal law governs the entitlement
to postjudgment interest in any federal civil suit, including a
diversity suit such as the instant action.").

And under federal

law, "[p]ostjudgment interest is mandatory and the prevailing
party is entitled to it even if the district court made no
provision for its payment."

In re Redondo Const. Corp., 700 F.3d

39, 42 (1st Cir. 2012).9
The

bankruptcy

court's

order

in

Redondo

IV

clearly

accrues Article 1061 interest past the entry of judgment, thus
overlapping with § 1961's postjudgment interest period.
at 401.
must

505 B.R.

Because § 1961 interest is exclusive and mandatory, we

remand

Redondo's

case

to

the

bankruptcy

court

for

a

calculation of postjudgment interest in accordance with § 1961's
terms.
Redondo argues that it is entitled to interest under
both statutes, but "a plaintiff is entitled to only one full
recovery, no matter how many different legal grounds may support
the verdict."
(1st

Cir.

Freeman v. Package Mach. Co., 865 F.2d 1331, 1345

1988).

Redondo's

full

recovery

entitles

it

to

prejudgment interest under Article 1061 and postjudgment interest
under § 1961 only.

Allowing the Article 1061 interest accrual

9

This case is not part of the present litigation -- although it
involves the same parties, we reviewed different contracts,
claims, and proceedings.
-16-

Case: 15-1397

Document: 00116957490

Page: 17

Date Filed: 02/10/2016

Entry ID: 5976270

period to extend into the period already covered by § 1961 would
result in Redondo receiving more than its full recovery.
We
reasoning

in

also

reject

allowing

the

bankruptcy

recovery

under

and
both

district

courts'

statutes.

When

challenged by the Authority in a motion to amend, the bankruptcy
court explained in Redondo V that it believed that Redondo could
recover under both Article 1061 and § 1961 because Article 1061
interest is "an independent indemnity for damages, by way of
penalty, for default in payment."

Redondo V, 515 B.R. at 414

(quoting Rivera v. Crescioni, 77 D.P.R. 47, 55-56 (1954)).
district court echoed this reasoning in its affirmance.
VI, 523 B.R. at 345.

The

Redondo

We, however, find little support for the

bankruptcy and district courts' view that Article 1061 acts as a
separate "penalty" rather than compensation for delay based on the
time value of money,10 and Redondo never develops its claim beyond
a bare assertion.

Finding no authority to the contrary, we must

direct that the Article 1061 interest award be recalculated to
take into account an award of postjudgment interest consistent
with § 1961's terms.

10

The bankruptcy court's reasoning also appears to be based in
part on its view that Article 1061 interest is an inseparable part
of the judgment. See Redondo V, 515 B.R. at 414 ("Moreover, prejudgment interest under Article 1061 may be awarded even when they
have not been claimed in the complaint.
Hence, Article 1061
applies until the obligation is no longer in default." (citation
omitted)). We rejected this argument above in footnote 5 of this
opinion.
-17-

Case: 15-1397

Document: 00116957490

Page: 18

Date Filed: 02/10/2016

Entry ID: 5976270

V.
Although we find that Redondo is entitled to Article
1061 interest, we must vacate the district court's judgment to
allow for an award of postjudgment interest consistent with 28
U.S.C. § 1961 and a reduction of the Article 1061 interest award
to the extent their accrual periods overlap.
bear their own costs.
Vacated and Remanded.

-18-

The parties are to