Caribbean Seaside Heights Prop v. Erickon LLC

Filing

OPINION issued by Sandra L. Lynch, Appellate Judge; Rogeriee Thompson, Appellate Judge and David J. Barron, Appellate Judge. Published. [16-2156]

Case: 16-2156

Document: 00117186668

Page: 1

Date Filed: 08/08/2017

Entry ID: 6111368

United States Court of Appeals
For the First Circuit
No. 16-2156
CARIBBEAN SEASIDE HEIGHTS PROPERTIES, INC.,
Plaintiff, Appellant,
v.
ERIKON LLC,
Defendant, Appellee,
KOENIGER DEVELOPMENT, INC.; ERICK KOENIGER, in his personal
capacity,
Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]

Before
Lynch, Thompson, and Barron,
Circuit Judges.

Julián Rivera-Aspinall and Fernando L. Gallardo on brief for
appellant.
Iván Aponte-González, Héctor J. Quiñones Inserni, García,
Aponte & Quiñones, Tomás A. Román-Santos, and Román Santos, LLC on
brief for appellee.

Case: 16-2156

Document: 00117186668

Page: 2

Date Filed: 08/08/2017

August 8, 2017

- 2 -

Entry ID: 6111368

Case: 16-2156

Document: 00117186668

LYNCH,
Properties,

Inc.

Circuit

Page: 3

Judge.

("Seaside")

Date Filed: 08/08/2017

Caribbean

appeals

the

Entry ID: 6111368

Seaside

Heights

district

court's

determination on summary judgment that, under Puerto Rico law,
Seaside's suit for breach of contract against its former investment
partner Erikon LLC is barred by a release that Seaside had earlier
executed in Erikon's favor.

The court made this determination in

two separate unpublished opinions in which it rejected Seaside's
arguments that (1) the release does not cover the instant suit and
(2) the release is void for lack of consideration.1

Seaside argues

those rulings were erroneous and additionally argues there were
disputes

of

material

fact,

which

precluded

judgment on the basis of the release.

entry

of

summary

We disagree with Seaside

and affirm.
I.
We rely on the district court's two thorough opinions
for a full recounting of the case and summarize here only the

1

As the district court explained, under Puerto Rico law,
all contracts must be supported by "causa," P.R. Laws Ann. tit.
31, § 3391, which is translated in parts of the English version of
the Puerto Rico Civil Code as "consideration," see, e.g., id.
§§ 3431, 3434. See, e.g., Garita Hotel Ltd. P'ship v. Ponce Fed.
Bank, F.S.B., 954 F. Supp. 438, 448 n.13 (D.P.R. 1996). While the
civil law concept of "causa" that applies in Puerto Rico differs
somewhat from the common law concept of "consideration," like the
district court, we use the English term "consideration" in our
opinion. See, e.g., U.S. Fid. & Guar. Co. v. Maldonado-Lopez, No.
11-1179 (SEC), 2012 WL 262730, at *4 n.3 (D.P.R. Jan. 30, 2012).
- 3 -

Case: 16-2156

Document: 00117186668

essential background facts.

Page: 4

Date Filed: 08/08/2017

Entry ID: 6111368

See United States ex rel. Booker v.

Pfizer, Inc., 847 F.3d 52, 55 (1st Cir. 2017).
In 1998, Seaside and Erikon became co-investors in a
real estate project known as the Christopher Columbus Landing
Project in Aguadilla, Puerto Rico ("the Project"), as evidenced in
a public deed, which provided that "all expenses incurred" in
connection with the Project would be "distributed equally" between
the two parties. In 2006, the parties executed a private agreement
with Caribbean Management Group, Inc. ("Caribbean") to sell the
Project to Caribbean.

As part of that agreement, Seaside and

Erikon each agreed to execute releases in favor of Caribbean and
in favor of each other.

Accordingly, in December 2006, Seaside

and its sole stockholder executed a release in favor of Erikon,
which provided as follows:
[Seaside] hereby remises, waives, releases and
forever discharges . . . [Erikon] of and from
any and all claims, actions, charges, suits,
debts, liabilities, contracts, agreements and
promises, of any kind or nature whatsoever,
which [Seaside] may have or assert against
[Erikon] . . . arising out of or relating to
[the Project]; Furthermore, [Seaside] further
promise[s] never to institute any claim,
action, charge or suit, of any kind or nature
whatsoever, against [Erikon] which arises from
or relates to [the Project] or any other event
or action which occurred before or after the
date of execution of this Release . . . .
More than six years later, on February 5, 2013, Seaside
for the first time issued to Erikon a collection notice demanding
- 4 -

Case: 16-2156

Document: 00117186668

Page: 5

Date Filed: 08/08/2017

Entry ID: 6111368

reimbursement for expenses Seaside had purportedly incurred in
connection with the Project.

After Erikon refused to pay, Seaside

initiated this diversity suit on May 20, 2013, alleging that Erikon
had breached the terms of the 1998 public deed, and claiming that
Erikon owed it more than $3 million.
On January 14, 2015, Seaside moved for summary judgment,
arguing that "there is no genuine issue of material fact as to
Erikon's obligation [under the 1998 deed] to pay 50% of the
expenses incurred in developing the Project."

In turn, Erikon

filed a cross-motion for summary judgment, asserting that Seaside
had released its claim in the 2006 release.

In response, Seaside

argued that (1) the release was not intended to cover, nor could
it cover, the claims made in the instant suit because such claims
allegedly did not exist at the time the release was executed; and
(2) the release, which was executed pursuant to the 2006 agreement,
is, in any event, void for lack of consideration because Erikon
never fulfilled its obligation under that agreement to execute a
release in favor of Seaside.2

2

Erikon argues that the release it executed in favor of
"[Caribbean] and each of its existing, former and future . . .
agents and affiliates" should be construed as satisfying Erikon's
obligation to execute a release in favor of Seaside, "considering
that Seaside is still involved in the development of the Project
as a partner to Caribbean."
The district court deemed that
argument irrelevant to its judgment, and we need not address it to
resolve this appeal.
- 5 -

Case: 16-2156

Document: 00117186668

Page: 6

Date Filed: 08/08/2017

Entry ID: 6111368

In an opinion dated September 30, 2015, the district
court held that the release, if valid, would bar the instant suit.
First, the court rejected Seaside's argument that the release was
not "intended" to excuse Erikon from its obligation under the 1998
deed to share Project-related expenses.

The court noted that,

under Puerto Rico law, "[i]f the terms of a contract are clear and
leave no doubt as to the intentions of the contracting parties,
the literal sense of its stipulations shall be observed."

P.R.

Laws Ann. tit. 31, § 3471; see also Exec. Leasing Corp. v. Banco
Popular de Puerto Rico, 48 F.3d 66, 69 (1st Cir. 1995).
observed

that

contracts,

and

the

release,

suits

which

related

to

waives
[the

all

"claims,

Project],"

It then
debts,

clearly

and

unambiguously covers this suit "to collect a debt arising from a
contract whose object is precisely [the Project]."
Second,

the

court

rejected

Seaside's

argument

that

Seaside did not have a "cause of action" against Erikon that it
could have waived at the time it executed the release in 2006
because Erikon had not yet refused its 2013 demand for payment.
The court explained that Seaside knew in 2006 that it had a
contractual right to collect a debt from Erikon related to the
Project, which it had simply chosen not to enforce.

That, the

court reasoned, was precisely the sort of claim that Seaside had
agreed to waive in the release.

And in any event, as the court

pointed out, the release explicitly covers suits arising from
- 6 -

Case: 16-2156

Document: 00117186668

Page: 7

Date Filed: 08/08/2017

Entry ID: 6111368

"event[s] or action[s]" related to the Project that "occur[]
. . . after the date of execution of th[e] Release."
As to Seaside's second argument -- that the release is
void for lack of consideration -- the court reserved in its first
opinion its decision pending its receipt of supplemental briefing,
as neither party had adequately briefed the issue as a matter of
"Puerto Rico contract law."
After receiving the parties' supplemental briefs, in an
opinion dated July 28, 2016, the district court held the release
valid and enforceable.
agreement,

even

First, the court found that the 2006

viewed

narrowly,

"contained

sufficient

consideration" to support the release under Puerto Rico law, which
presumes the existence of sufficient consideration.
Ann. tit. 31, § 3434.

See P.R. Laws

The Puerto Rico Civil Code makes clear that

"the prestation or promise of a thing or service[]" constitutes
"consideration," id. § 3431, and the Supreme Court of Puerto Rico
has long held that "consideration" includes any licit "benefit[]
which one party . . . obligates himself to confer upon" the other,
Adria Int'l Grp., Inc. v. Ferré Dev., Inc., 241 F.3d 103, 107 (1st
Cir. 2001) (quoting Guerra v. Treasurer, 8 P.R. 280 (1905)).
As the district court explained, in the portion of the
2006 agreement addressing releases, Seaside and Erikon assumed
reciprocal

obligations

of

the

type

that

"ha[ve],

consideration, the promise offered in exchange."
- 7 -

as

[their]

Id. at 107

Case: 16-2156

Document: 00117186668

Page: 8

Date Filed: 08/08/2017

Entry ID: 6111368

(emphasis added) (quoting United States v. Pérez, 528 F. Supp.
206, 209 (D.P.R. 1981)).

"[T]here is no question," the court

concluded, "that the parties' mutual promise to execute a release
in

favor

of

the

other

constitute[d]

valid

and

sufficient

consideration" under Puerto Rico law.3
In addition, the court pointed out that, even if Erikon's
promise
numerous

did

not

other

provide
benefits

sufficient
conferred

consideration,
on

Seaside

by

there
Erikon

were
and

Caribbean pursuant to the 2006 agreement that could independently
qualify as consideration for Seaside's release.

These included

Caribbean's payment of $11.5 million for Seaside's interest in the
Project and Erikon's payment of hundreds of thousands of dollars
in "legal fees associated with the Project." Thus, the court found

3

The district court recognized that Seaside's argument
"confuses a void contract with a breached one." Adria Int'l Grp.,
241 F.3d at 108 n.2. While a party's failure to tender an agreedupon consideration may give rise to a claim for breach of contract,
it does not void the underlying agreement that the consideration
supported.
Id.; see also Rivera Esparra v. Merheb, No.
B2CI200401302, 2010 WL 2885654, at *2 (T.C.A. Apr. 21, 2010)
(noting that under Puerto Rico law, the existence vel non of
consideration is determined at the time a contract is perfected,
not at the time it is performed).
Seaside did assert for the first time in its supplemental
brief to the district court that Erikon had breached its obligation
to an extent warranting rescission under P.R. Laws Ann. tit. 31,
§ 3052. But the court rejected that argument as waived and, in
any event, meritless under the Supreme Court of Puerto Rico's
decision in Ramírez v. Club Cala de Palmas, 23 P.R. Offic. Trans.
311 (1989). Seaside does not appeal that ruling. It challenges
the validity of the release solely for lack of consideration.
- 8 -

Case: 16-2156

Document: 00117186668

Page: 9

Date Filed: 08/08/2017

Entry ID: 6111368

that Seaside "failed to shoulder its burden of proving [a] lack of
consideration."

Cf. P.R. Laws Ann. tit. 31, § 3434.

Having found the release both valid and applicable, the
court dismissed the suit with prejudice.
II.
On de novo review, we agree that the release executed by
Seaside

provides

Erikon

with

a

defense

against

this

action,

substantially for the reasons articulated by the district court in
its two thorough opinions.4
summarily affirm.

Without adopting those opinions, we

See 1st Cir. R. 27.0(c).

So ordered.

4

Seaside's argument that "the issue of the validity of
the [r]elease is a genuine issue of material fact" precluding
summary judgment is easily dispatched. Seaside fails to direct
our attention to any disputed fact material to the outcome
correctly reached by the district court, and we find none
ourselves.
- 9 -