Angulo et al v. Editorial Televisa International, S.A. et al

Filing 133

OPINION AND ORDER DENYING Intervenor's motion for summary judgment (Docket No. 66 ); DENYING AS MOOT WBPR's motion for reconsideration (Docket No. 126 ) of our previous order for disbursement of funds (Docket No. 122 ), because we vacate d that order (Docket No. 124 ). We also DENY WBPR's motion for entry of default against Defendants (Docket No. 120 ) because Defendants have appeared in their defense (see Docket Nos. 62 ; 96 ). See Fed. R. Civ. P. 55(a). We reserve judgm ent on Defendants' motion for disbursement of funds (Docket No. 119 ) pending the resolution of the instant case. We ORDER Intervenor to SHOW CAUSE on or before July 29, 2010, as to why we should not order summary judgment in favor of Defendants. Show Cause Response due by 7/29/2010.Signed by Chief Judge Jose A Fuste on 7/16/2010.(mrj)

Angulo et al v. Editorial Televisa International, S.A. et al

Doc. 133

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UNITED STATES DISTRICT COURT D IS T R IC T OF PUERTO RICO G E R A R D O A. ANGULO-MESTAS, et al., Plaintiffs, v. E D IT O R IA L TELEVISA IN T E R N A T IO N A L , S.A. and ET P U B L IS H IN G INTERNATIONAL, INC., D e f e n d a n ts . -----------------------------------------------------B A N C O POPULAR DE PUERTO RICO, In te rv e n o r.

C iv il No. 09-1830 (JAF)

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O P I N I O N AND ORDER P la in tif f s , Gerardo A. Angulo-Mestas and several companies controlled by him, brought a n action against Defendants in diversity. (Docket No. 1.) Plaintiffs sought to compel D e f e n d a n ts to surrender certain properties in Defendants' possession that allegedly constituted c o lla te ra l for Plaintiffs' debt obligations to Westernbank Puerto Rico ("WBPR"). (Id.) WBPR in te rv e n e d in this case under Federal Rule of Civil Procedure 24, seeking a declaratory ju d g m e n t to establish its ownership of such collateral. (Docket No. 59.) We substituted In te rv e n o r Banco Popular de Puerto Rico for WBPR in this case, after Banco Popular took over th e operations of WBPR under an FDIC-supervised liquidation and transfer of assets. (Docket

Dockets.Justia.com

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N o s . 131; 132.) Intervenor moves for summary judgment under Federal Rule of Civil Procedure 5 6 (c ) (Docket No. 66), and Defendants oppose (Docket No. 96). I. F a c tu a l and Procedural Synopsis W e derive the following uncontested facts from the parties' briefs and submissions (D o c k e t Nos. 1; 59; 65; 66; 96) and the record in this case.1 Plaintiffs are engaged in the b u s i n e s s of publishing and distributing periodicals in Puerto Rico. Defendants are also p u b l is h e rs . WBPR is a Puerto Rico banking institution that ceased operations on April 30, 2 0 1 0 . (Docket No. 131.) T h ro u g h a series of secured transactions, WBPR became creditor to Plaintiffs with s e c u rity interests in various assets owned by Plaintiffs. In one of these transactions, WBPR lent A n g u lo -M e s ta s $6,500,000 under Loan No. 7350020579 on March 8, 2005. (Docket No. 1-3.) In exchange, Angulo-Mestas executed a note payable to WBPR in the amount of $6,500,000 p lu s interest. (Id.) To secure this loan, WBPR concluded a "Pledge and Security Agreement" w ith Angulo-Mestas and ten entities controlled by him. (Docket No. 1-2.) This security a g re e m e n t listed as collateral "Accounts": A ll presently existing or hereafter emerging accounts of [ A n g u lo -M e s ta s ] and [the ten companies]. The term "Accounts" in addition to the definition of accounts contained in the Uniform C o m m e rc ia l Code as adopted in Puerto Rico, means all accounts,

Because Intervenor has not opposed Defendants' statement of uncontested facts (Docket No. 96-2), we treat these facts as admitted to the extent they are supported by evidence in the record. See L. Cv. R. 56(e).

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Civil No. 09-1830 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 a c c o u n ts receivable, receivables, . . . amounts due or to become d u e . . . , all rights to the payment for goods or services sold or le a s e d , letters and credit and the payments and rights to receive p a ym e n t thereunder, . . . contract rights, . . . and all other debts, o b lig a tio n s , and liabilities in wherever form now or hereafter o w in g to [Angulo-Mestas] and [the ten companies], now existing o r hereafter acquired or arising, . . . and all cash . . . proceeds of th e foregoing . . . .2

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(Id . at 2.) As a publisher, Angulo-Mestas owns certain magazines and is entitled to receive p a ym e n t for the sales of such publications. (See Docket Nos. 1-13; 1-16.) U n d e r the security agreement, Angulo-Mestas and the ten companies would be in default o f their obligations if any of them failed to timely pay their debt obligations to WBPR. (Docket N o . 1-2 at 6-7.) In that event, all debts would be accelerated and become payable immediately. (Id .) In addition, WBPR would be able to enforce its "security interest in any manner permitted b y law" and take possession of any collateral listed in the agreement. (Id.) P re v io u s ly, on January 31, 1973, Defendants formed a distribution agreement with A g e n c ia de Publicaciones de Puerto Rico, Inc. ("APPR"), an entity controlled by AnguloM e s ta s , granting APPR the right to distribute Defendants' publications in Puerto Rico. On O c to b e r 30, 2007, Defendants terminated this distribution agreement to form a new distribution a rra n g e m e n t with a different company, Distribuidora Editoriales, LLC ("DE"). (Docket Nos. 1-

Defendants argue that we should not consider the "Pledge and Security Agreement" because it would be inadmissible at trial. (Docket No. 96-2.) On summary judgment, we may only consider material that has evidentiary value. Noviello v. City of Boston, 398 F.3d 76, 84 (1st Cir. 2005). The contract would be admissible as relevant evidence of WBPR's security interest in Plaintiffs' collateral. See Fed. R. Evid. 402. As Defendants cite no authority to rebut this threshold finding of admissibility, we reject their challenge.

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1 3 ; 1-14.) In exchange for the cessation of APPR's obligations by novation, Angulo-Mestas a g re e d to assume a portion of the trade debt of $4,938,905.54 that had accumulated under the f o rm e r agreement. (Docket No. 1-13.) Angulo-Mestas intended to repay $2,198,100.19 of the tra d e debt by assigning to DE the right to sell several of his publications and requiring DE to re m it the proceeds of such sales directly to Defendants rather than to him.3 (Id. at 2.) Under th is arrangement, DE would remit $10,000 per week until the end of 2007, and $15,000 per w e e k thereafter. (Id.) Angulo-Mestas represented to Defendants that he had full rights to these s a le s receipts that he assigned to Defendants. (Id. at 3-4.) Defendants were unaware of W B P R 's claim to the same accounts. (Docket No. 96-2.) O n May 12, 2009, WBPR informed Angulo-Mestas that he was in default on his debt o b lig a tio n s under Loan No. 7350020579, owing $6,396,540.92 in principal and interest. (D o c k e t No. 1-18.) On August 10, 2009, WBPR filed copies of the aforementioned "Pledge and S e c u rity Agreement" with the Puerto Rico Department of State as part of an UCC-1A-PR f in a n c in g statement. (Docket No. 59-2.) O n August 20, 2009, Plaintiffs filed a complaint in federal court, alleging that WBPR is entitled to certain "Trade Debt Payments" made to Defendants in satisfaction of APPR's trade d e b t. (Docket No. 1.) Plaintiffs sought, inter alia, declaratory and injunctive relief ordering D e f e n d a n ts to remit such payments to WBPR on the basis of WBPR's alleged status as a

As part of its distribution agreement with Defendants made the same day, DE assumed $1,507,807.07 of the trade debt incurred by APPR. (Docket No. 1-15.) DE paid $546,563.32 immediately and agreed to remit the balance in three equal installments from late 2007 to early 2008. (Id.)

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s e c u re d creditor. (Id.) The same day, Plaintiffs applied for a temporary restraining order (" T R O " ) pending the court's resolution of its equitable claims. (Docket Nos. 2; 8.) On S e p te m b e r 8, 2009, we granted Plaintiffs' application and issued a TRO that, inter alia, ordered D e f e n d a n ts to deposit any "Trade Debt Payments" received after May 12, 2009, with this court, a n d to instruct DE to further remit such payments to this court, pending the resolution of the c a s e . (Docket No. 26.) P u rs u a n t to our TRO, Defendants deposited $81,906.83 with this court on September 16. (D o c k e t No. 41.) According to Defendants, the funds constitute "the total amount of Trade D e b t Payments received by Defendants from Plaintiffs' publications after May 12, 2009." (D o c k e t No. 119.) Pursuant to our TRO and later orders, DE made four deposits with this court, a ttrib u tin g these funds to net proceeds from the sale of Angulo-Mestas' magazines that DE o th e rw is e would have remitted to Defendants: $33,470.24 on October 8 (Docket No. 61); $ 3 3 ,2 1 5 .0 4 on November 17 (Docket No. 81); $64,596.97 on November 24 (Docket No. 87); a n d $21,680.38 on February 11, 2010 (Docket No. 112). O n September 28, 2009, WBPR moved to intervene under Federal Rule of Civil P ro c e d u re 24(a)(2) (Docket No. 59), and Defendants opposed (Docket No. 62). WBPR sought a declaratory judgment as to its rights to Plaintiffs' collateral, monies deposited by Defendants a n d DE with this court, and further "Trade Debt Payments." (Docket No. 59.) On October 21, W B P R moved for summary judgment on its claims under Federal Rule of Civil Procedure 56(c) (D o c k e t No. 66), and Defendants opposed (Docket No. 96).

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O n January 7, 2010, Magistrate Judge McGiverin issued a Report and Recommendation f in d in g that Plaintiffs' claims are committed to arbitration and that the court should allow W B P R ' s intervention. (Docket No. 108.) Adopting these findings on February 12, we d ism is s e d Plaintiffs' complaint and granted WBPR's motion to intervene. (Docket No. 115.) N o t i n g the dismissal of Plaintiffs' complaint, Defendants moved on March 25 for d isb u rs e m e n t of the funds deposited with this court, totaling $234,869.46. (Docket No. 119.) W B P R opposed on March 26 and moved for an entry of default against Defendants under F e d e ra l Rule of Civil Procedure 55. (Docket No. 120.) Defendants replied in opposition (D o c k e t No. 127), and WBPR surreplied (Docket No. 129). WBPR also moved for

re c o n sid e ra tio n of a previous order issued by this court. (Docket No. 126.) On May 21, we s u b s titu te d Intervenor for WBPR in this case because Intervenor is the successor to WBPR's b u s in e s s entity. (Docket Nos. 131; 132.) II. S ta n d a r d for Summary Judgment W e grant a motion for summary judgment "if the pleadings, the discovery and disclosure m a te ria ls on file, and any affidavits show that there is no genuine issue as to any material fact a n d the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A factual d isp u te is "genuine" if it could be resolved in favor of either party and "material" if it affects th e outcome of the case. Calero-Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19 (1st Cir. 2004).

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T h e movant carries the burden of establishing that there is no genuine issue as to any m a te ria l fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In evaluating a motion for s u m m a ry judgment, we view the record in the light most favorable to the nonmovant. Adickes v . S.H. Kress & Co., 398 U.S. 144, 157 (1970). "Once the moving party has made a preliminary s h o w in g that no genuine issue of material fact exists, the nonmovant must `produce specific f a c ts , in suitable evidentiary form, to establish the presence of a trialworthy issue.'" Clifford v . Barnhart, 449 F.3d 276, 280 (1st Cir. 2006) (quoting Triangle Trading Co. v. Robroy Indus., In c ., 200 F.3d 1, 2 (1st Cir. 1999)). The nonmovant "may not rely merely on allegations or d e n ia ls in its own pleading; rather, its response must . . . set out specific facts showing a genuine is s u e for trial." Fed. R. Civ. P. 56(e)(2). W e may also grant summary judgment sua sponte if discovery has progressed sufficiently f o r the court to determine relevant facts and the target has at least ten days' notice to contest the im p e n d in g judgment. Stella v. Town of Tewksbury, 4 F.3d 53, 55-56 (1st Cir. 1993). III. A n a ly s is T h e sole issue before this court is whether Intervenor's rights to certain accounts re c e iv a b le as a secured creditor trump Defendants' rights as assignees of the same accounts. (S e e Docket Nos. 66; 96.) For the reasons stated below, we decide in favor of Defendants. P u e rto Rico enacted a modified version of Article 9 of the Uniform Commercial Code to govern secured transactions. See 19 L.P.R.A. §§ 2001­2207 (2005). Accounts may be used

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a s collateral in such transactions. See § 2006. A security agreement may include collateral a c q u ire d by the debtor after the formation of the agreement "if the debtor acquires his rights in s u c h collateral . . . in the ordinary course of his business." § 2008. A creditor's security interest a tta c h e s to the debtor's collateral when "the debtor has signed a security agreement which c o n ta in s a description of the collateral"; "value has been given"; and "the debtor has rights in th e collateral." § 2053(1)­(2). Upon attachment of the security interest, the creditor becomes a secured party with an enforceable right in the collateral. See id. Generally, if the secured p a rty wishes to perfect his interest in the collateral, he must file a financing statement with the re le v a n t authority in Puerto Rico. See § 2102(1). T h e secured party's right to enforcement is tempered in some instances by protections a f f o rd e d to good-faith transferees of certain collateral. See § 2102(1)(c)­(d). Where the c o l l a te ra l is an account assigned by the debtor to a transferee who both gave value for the a s sig n m e n t and lacked knowledge of the secured party's interest, and the secured party has not p e rf e c te d his interest, the secured party's unperfected interest is subordinate to the right of the tra n s f e re e . § 2102(1)(d); accord U.C.C. § 9-317(d) & cmt. 6 (2005) (clarifying the priority of g o o d -f a ith transferees of accounts who give value before secured party's perfection). Although th e statutes on secured transactions do not define "value", a broad definition appears in the s ta tu te pertaining to negotiable instruments: "generally, . . . any consideration sufficient to s u p p o rt a simple contract." 19 L.P.R.A. § 451(44)(d).

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In the case before us, WBPR concluded its security agreement with Angulo-Mestas on M a rc h 8, 2005, which listed "hereafter emerging accounts" of Angulo-Mestas as after-acquired c o lla te ra l. (Docket No. 1-2.) WBPR gave value for this security interest by issuing Loan N o . 7350020579 in favor of Angulo-Mestas. (See Docket No. 1-3.) W h e n Angulo-Mestas assigned the right to sell his magazines to DE in late 2007, he c re a te d accounts receivable for the sale of said publications and was entitled to receive p a ym e n ts from DE. (See Docket Nos. 1-13; 1-16.) Because these accounts receivable arose in the ordinary course of Angulo-Mestas' business after the formation of the security agreement, s u c h accounts became after-acquired collateral under the 2005 agreement (Docket No. 1-2). S e e 19 L.P.R.A. § 2008. As the security agreement includes after-acquired accounts as c o lla te r a l , WBPR gave value for this interest, and Angulo-Mestas had rights in the accounts re c e iv a b le , WBPR has an enforceable interest attached to said accounts. See § 2053(1)­(2). U p o n Angulo-Mestas' default in May 2009 (Docket No. 1-18), WBPR ostensibly was e n title d as a secured party to accelerate payment on the loan (Docket No. 1-2) and take p o s s e ss io n of the accounts receivable. See § 2203. However, Angulo-Mestas assigned his right to receive such payments to Defendants in 2007. (See Docket No. 1-13.) DE confirms that it m a d e remittances pursuant to the assignment. (Docket No. 61.) Thus, the funds deposited with th is court constitute Angulo-Mestas' accounts. (See Docket Nos. 41; 61; 81; 87; 112; 119.) N e v e rth e le s s , Defendants argue that they are entitled to priority as good-faith transferees o f the accounts receivable, vis-ŕ-vis Intervenor as a holder of an unperfected security interest.

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(D o c k e t No. 96.) Angulo-Mestas assigned his rights to the accounts receivable to Defendants i n late 2007. (See Docket No. 1-13.) Defendants gave value for this assignment by

re lin q u is h in g their rights to demand Angulo-Mestas and APPR's performance under the 1973 d istrib u tio n agreement and to seek recovery from them for certain liabilities. (See Docket N o s . 1-13; 1-14.) Because Angulo-Mestas represented that he had full rights to the assigned p a ym e n ts (Docket No. 1-13), Defendants were unaware of WBPR's security interest in the a c c o u n ts receivable. W B P R did not perfect its security interest in Angulo-Mestas' accounts receivable until A u g u st 2009, when it filed copies of the security agreement with the Puerto Rico Department o f State as part of a financing statement (Docket No. 59-2). See 19 L.P.R.A. § 2102(1). B e c a u s e WBPR failed to perfect its security interest in the accounts receivable before AnguloM e s ta s ' assignment of said accounts, Defendants' claims as good-faith transferees defeat In te rv e n o r's competing interest. See § 2101(1)(d). A c c o rd in g ly, Defendants, not Intervenor, are entitled to the "Trade Debt Payments" d e p o s ite d with this court. As it appears that Defendants are entitled to judgment as a matter of la w on their rights to the accounts receivable, we order Intervenor to show cause as to why we s h o u ld not order summary judgment in favor of Defendants. See Stella, 4 F.3d at 55-56.

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IV . C o n c lu s io n In view of the foregoing, we hereby DENY Intervenor's motion for summary judgment (D o c k e t No. 66). We DENY as MOOT WBPR's motion for reconsideration (Docket No. 126) o f our previous order for disbursement of funds (Docket No. 122), because we vacated that o rd e r (Docket No. 124). We DENY WBPR's motion for entry of default against Defendants (D o c k e t No. 120) because Defendants have appeared in their defense (see Docket Nos. 62; 96). S e e Fed. R. Civ. P. 55(a). We reserve judgment on Defendants' motion for disbursement of f u n d s (Docket No. 119) pending the resolution of the instant case. We ORDER Intervenor to S H O W CAUSE on or before July 29, 2010, as to why we should not order summary judgment in favor of Defendants. I T IS SO ORDERED. S a n Juan, Puerto Rico, this 16 th day of July, 2010. s/J o s é Antonio Fusté JO S E ANTONIO FUSTE C h ie f U.S. District Judge