Autoridad de Carreteras y Transportacion v. TransCore Atlantic, Inc.

Filing 161

MEMORANDUM AND ORDER re 66 Motion to Dismiss for Failure to State a Claim. The contract between PRHTA and TransCore is ambiguous and the extrinsic evidence is not susceptible to only one interpretation. Because TransCore has a plausible claim, the Court DENIES PRHTA's motion for judgment on the pleadings. Signed by Judge Francisco A. Besosa on 03/20/2017. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
AUTORIDAD DE CARRETERAS Y
TRANSPORTACION,
Plaintiff,
v.

Civil No. 15-1924 (FAB)

TRANSCORE ATLANTIC, INC.,
Defendant.

MEMORANDUM AND ORDER 1
BESOSA, District Judge.
Before the Court is a motion for judgment on the pleadings 2
filed

by

plaintiff

Authority

(“PRHTA”).

Puerto

Rico

(Docket

No.

Highway
66.)

and

Transportation

Defendant

TransCore

Atlantic, Inc. (“TransCore”) opposed the motion, (Docket No. 77),
PRHTA replied, (Docket No. 83), and TransCore filed a sur-reply,
(Docket No. 88.)

For the reasons that follow, the Court DENIES

PRHTA’s motion for judgment on the pleadings, (Docket No. 66).

1

Natalia Vilá-Palacios, a second-year student at the University
of Puerto Rico School of Law, assisted in the preparation of this
Memorandum and Order.

2

Although PRHTA titled their motion as a motion to dismiss, the
Court considers it as a motion for judgment on the pleadings
because PRHTA has answered TransCore’s counterclaim.
(Docket
No. 23.) See Monell v. Best Pers. Sys., Inc., 127 F. Supp. 2d 48,
50 (D.P.R. 2000) (Arenas, J.) (holding that a court may treat an
untimely filed motion to dismiss – one filed after a responsive
pleading – as a motion for judgment on the pleadings).

Civil No. 15-1924 (FAB)

2
BACKGROUND

I.

Factual Allegations
Because PRHTA moves for a judgment on the pleadings pursuant

to Federal Rule of Civil Procedure 12(c), the Court accepts as
true the following non-conclusory factual allegations stated in
TransCore’s counterclaim and draws all inferences in its favor,
see R.G. Financial Corp. v. Vergara-Nunez, 446 F.3d 178, 182 (1st
Cir. 2006):
On January 30, 2003, TransCore and PRHTA signed a contract
for the implementation and operation of a new toll collection
system (“NTCS”). 3

(Docket No. 1-8 at p. 46.)

As agreed, TransCore

would install a NTCS and administer a customer service center
(“CSC”) for PRHTA.

Id. at pp. 46-47.

As the parties neared the expiration of the contract on June
30,

2015,

a

contractual

dispute

regarding the ownership of the CSC.

emerged

between

the

parties

(Docket No. 25-8 at pp. 26-

27.)

3

The Court considers the numerous portions of the contract between
TransCore and PRHTA, see Docket No. 1-8 at p. 47, without
converting this motion for judgment on the pleadings into a motion
for summary judgment because the contract, including its numerous
parts, is adequately referenced in the complaint and is central to
PRHTA’s claims.
See Comite Fiestas de la Calle San Sebastian,
Inc. v. Cruz, 170 F. Supp. 3d 271, 273 n.1 (D.P.R. 2016) (Besosa,
J.) (citing Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).

Civil No. 15-1924 (FAB)
II.

3

Procedural Background
On

June

17,

2015

(Docket No. 25-1.)

PRHTA

brought

suit

against

TransCore.

In its complaint, PRHTA asked the Court to

issue a provisional restraining order to prevent TransCore from
removing

the

CSC

equipment.

(Docket

No.

25-1

at

p.

22.)

Additionally, PRHTA sought a declaratory judgment that it had
ownership of the CSC equipment.
TransCore
counterclaim.

answered

Id.

PRHTA’s

(Docket No. 25-8.)

complaint

and

filed

a

TransCore argued that both the

contract and the parties’ behavior demonstrate that TransCore owns
the

CSC

equipment.

Id.

at

pp.

27-33.

TransCore

sought

a

declaratory judgment stating that the CSC equipment belongs to it.
Id. at p. 38.

Additionally, TransCore requested compensation for

the damages caused by its inability to use and enjoy property it
believed to be its own.

Id. at p. 38.

PRHTA answered TransCore’s counterclaim on August 12, 2015,
(Docket

No.

23),

and

then

filed

a

motion

counterclaim on April 8, 2016, (Docket No. 66).

to

dismiss

that

In its motion to

dismiss, treated by this Court as a motion for judgment on the
pleadings, PRHTA argues that the terms of the contract clearly
provide that the CSC equipment belongs to PRHTA.

Id. at p. 1.

PRHTA

the

claims

that,

because

the

written

text

of

contract

Civil No. 15-1924 (FAB)
disposes

of

the

issue

4
in

its

ownership of the CSC equipment.

favor,

TransCore

cannot

claim

Id.

MOTION FOR JUDGMENT ON THE PLEADINGS STANDARD
When considering a motion pursuant to Rule 12(c), a “court
must view the facts contained in the pleadings in the light most
favorable to the nonmovant and draw all reasonable inferences
therefrom . . . .”

Villafañe-Colon v. B Open Enterprises, Inc.,

932 F. Supp. 2d 274, 278 (D.P.R. 2013) (Besosa, J.) (quoting PerezAcevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008)).

“[A]n

adequate complaint must provide fair notice to the defendants and
state a facially plausible legal claim.”

Ocasio-Hernandez v.

Fortuño-Burset, 640 F.3d 178, 182 (1st Cir. 2006).

“The court may

supplement the facts contained in the pleadings by considering
documents fairly incorporated therein and facts susceptible to
judicial notice.”

Cruz v. Puerto Rico, 558 F. Supp. 2d 165, 179

(D.P.R. 2007) (Besosa, J.).
The standard for a motion for judgment on the pleadings is
essentially the same as that for deciding a motion to dismiss.
Perez-Acevedo, 520 F.3d at 29 (citing Curran v. Cousins, 509 F.3d
36, 43-44 (1st Cir. 2007)).

“Like Rule 12(b)(6), Rule 12(c) does

not allow for any resolution of contested facts; rather, a court
may enter judgment on the pleadings only if the uncontested and
properly

considered

facts

conclusively

establish

the

movant’s

Civil No. 15-1924 (FAB)

5

entitlement to a favorable judgment.”

Cruz, 558 F. Supp. 2d at

179 (citing Rivera-Gómez v. de Castro, 843 F.2d 631, 635 (1st Cir.
1988)).

There is, however, a modest difference between a motion

to dismiss and a motion for judgment on the pleadings.
12(c)

motion,

unlike

a

pleadings as a whole.”

Rule

12(b)(6)

motion,

“A Rule

implicates

the

Aponte-Torres v. Univ. of P.R., 445 F.3d

50, 55 (1st Cir. 2006).
DISCUSSION
I.

Interpretation of the Contract
Pursuant to Puerto Rico law, 4 when a court is faced with a

contractual dispute it must first determine if the terms of the
contract are clear.

See P.R. Laws Ann. tit. 31, § 3471.

“Once a

court determines that the terms of the contract are sufficiently
clear[,] . . . the court cannot dwell on the ‘alleged’ intent of
the

parties

at

the

time

they

entered

into

the

contract.”

Fernandez-Fernandez v. Mun. of Bayamon, 942 F. Supp. 89, 94 (D.P.R.
1996) (Cerezo, J.).

“Only if the literal terms of the contract

are in doubt will it be necessary . . . to examine or interpret
the contract with the help of extrinsic evidence.”

4

Hopgood v.

The parties agree, (Docket No. 1-8 at p. 77), and case law
confirms that “[i]n a diversity jurisdiction case, a federal court
must apply the substantive law of the forum where the action is
filed.” Cruz-Gascot v. HIMA-San Pablo Hosp. Bayamon, 728 F. Supp.
2d 14, 19 n. 5 (D.P.R. 2010) (Besosa, J.).

Civil No. 15-1924 (FAB)

6

Merrill Lynch, Pierce, Fenner & Smith, 839 F. Supp. 98, 106 (D.P.R.
1993) (Pieras, J.). 5
A.

Clarity of the Contract
“An agreement is clear when it can ‘be understood in one

sense alone, without leaving any room for doubt, controversies or
difference of interpretation.’”

In re Advanced Cellular Sys.,

Inc., 483 F.3d 7, 12 (1st Cir. 2007) (quoting Catullo v. Metzner,
834 F.2d 1075, 1079 (1st Cir. 1987)).
several

sections

or

clauses,

they

When a contract contains

“should

be

interpreted

in

relation to one another, giving to those that are doubtful the
meaning which may appear from the consideration of all of them
together.”

Yordan v. Burleigh Point, Ltd., 552 F. Supp. 2d 200,

204 (D.P.R. 2007) (Besosa, J.) (quoting P.R. Laws Ann. tit. 31,
§ 3475); see also P.R. Elec. Power Auth. v. Philipps, 645 F. Supp.
770, 772 (D.P.R. 1986) (Fuste, J.) (“[T]he terms of the contract
must be read together and harmonized to arrive at the intention of
the parties.”).

5

Although PRHTA argues that as a government entity all contracts
that bind it must be written, (Docket No. 83 at p. 3); see also
Colon Colon v. Mun. Arecibo, 170 P.R. Dec. 718, 726 (2007)
(requiring a written contract), the written documents here
constitute a contract and are subject to the general two-step
contract interpretation analysis. See Alto Corp. v. Mun. de Toa
Alta, 183 P.R. Dec. 530, 560 (2011) (clarifying that written
government contracts are subject to general contract laws).

Civil No. 15-1924 (FAB)
Here,

PRHTA

7
and

TransCore

signed

a

contract

that

consists of several documents: (1) Master Agreement; (2) Special
Provisions; (3) Statement of Work; (4) Functional Specifications;
(5)

Contractor

Plan(s);

(6)

Contractor Design Documents. 6

Contractor

Proposal,

and

(Docket No. 1-8 at p. 47.)

(7)
PRHTA

claims that these documents clearly provide that TransCore has no
stake over the CSC equipment.
TransCore

argues

that

the

(Docket No. 66 at p. 1).
terms

of

the

contract

Similarly,
undoubtedly

establish TransCore’s ownership of the CSC equipment.

(Docket

No. 7 at pp. 24-30.)
Neither party challenges PRHTA’s ownership of the NTCS.
The parties disagree, however, on the ownership of the CSC.

PRHTA

interprets the contract as establishing that the CSC is a component
of the NTCS thus making PRHTA the CSC’s owner as well.
No. 66 at p. 9.)

(Docket

Conversely, TransCore contends that the CSC is

a separate entity from the NTCS and that the parties never agreed
that PRHTA would acquire the CSC.
There
differing

6

are

four

interpretations

main
of

(Docket No. 77 at p. 27.)
areas

specific

that

the

parties

contractual

argue

provisions.

Although PRHTA claims that the hierarchy of the contract
documents is relevant to dispose of the issues here, (Docket No. 83
at pp. 7-10), both PRHTA and TransCore assert arguments based on
the text of the first priority and second priority documents.

Civil No. 15-1924 (FAB)

8

Both parties present compelling arguments that are well supported
by the record.
1.

Allocation of Taxes on the CSC Equipment
First,

provides

that

Article

of

the

shall

“[TransCore]

5.3

Special

be

Provisions

responsible

for

timely

identifying and paying all taxes assessed with respect to any
services, materials, equipment, processes or operations under,
incidental

to,

Services.”

(Docket No. 1-9 at p. 13.)

payment

of

ownership.

or

taxes

involved

for

the

in,

CSC

the

performance

the

CSC

TransCore argues that its

equipment

(Docket No. 77 at p. 37.)

of

is

an

indicator

of

PRHTA counters that Article

12.9 of the Master Agreement contemplates a compensation for the
taxes paid by TransCore.

(Docket No. 1-8 at p. 71 (providing that

“[t]he Contract Price includes full compensation to [TransCore]
for all such taxes in force as of the Final proposal Submission
Date.”))

PRHTA, thus, interprets that any payment of taxes for

the CSC equipment by TransCore does not allocate ownership, but
rather it is simply a business expense assumed by TransCore and
included in the overall price that TransCore charged PRHTA for the
goods and services provided.
2.

(Docket No. 66 at p. 9.)

Definition of Service Property
Next,

Appendix

I

of

the

NTCS

Master

Agreement

defines TransCore’s property as the “[p]ersonal property owned or

Civil No. 15-1924 (FAB)

9

leased by [TransCore] that is not part of the Service Property or
the NTCS.”

(Docket No. 1-8 at p. 114.)

“Service Property” is

then defined as “[t]he fixed facilities and the NTCS including but
not limited to plazas, CSCs,” and other equipment.

Id. at p. 119.

PRHTA argues that if TransCore owns what is not part of the service
property, and the service property includes the CSC, then these
definitions logically suggest that TransCore cannot own the CSC.
(Docket No. 66 at pp. 9-10.)

TransCore argues, however, that

these definitions merely establish the inventories of the NTCS and
do not allocate any type of ownership.

(Docket No. 77 at pp. 34-

35.)
3.

Definition of Electronic Toll Collection System
The parties then argue that Article 1.1.1 of the

NTCS Master Agreement establishes that the NTCS is “more fully
described in the Statement of Work.”

(Docket No. 1-8 at p. 46.)

The Statement of Work provides that the NTCS “shall consist of an
electronic

toll

collection

system

(ETC)

that

operates

simultaneously with, but independent of, existing toll operations
at the Authority’s facilities.”

(Docket No. 77-7 at p. 3.)

The

ETC is then described in the Functional Specifications with the
following ill illustration:

Civil No. 15-1924 (FAB)

10

(Docket No. 77-8 at p. 3.)

TransCore argues that if the NTCS

consists only of an ETC, then, as it can be appreciated from the
diagram, the NTCS does not include the CSC and thus, PRHTA is
unable to claim ownership of the CSC.
27.)

(Docket No. 77 at pp. 26-

PRHTA counters that the ETC, like the CSC, is just one

component of the NTCS and the CSC may be part of the NTCS without
being part of the ETC.
4.

(Docket No. 83 at p. 9.)

Acquisition of the NTCS v. Operation of the CSC
Finally,

the

parties

disagree

on

their

interpretation of several provisions of the NTCS Master Agreement
read together.

The NTCS Master Agreement reads:

Article 1.1.1 The NTCS
[PRHTA] has undertaken the development and installation
of a stand-alone electronic toll collection system (the
“NTCS”), for certain plazas on the toll highways owned
and operated by [PRHTA] and more fully described in the
Statement of Work.
Article 1.1.2 Acquisition of the NTCS
[PRHTA] wishes to acquire the NTCS from [TransCore] and
[TransCore] wishes to develop and provide the NTCS to
[PRHTA], upon the terms and conditions of the Contract.

Civil No. 15-1924 (FAB)

11

Article 1.1.3 NTCS Maintenance and Customer Service
Center Management & Operations
The Contract also includes the maintenance of the NTCS
installed, as well as management and operation of [the]
Customer Service Center (“CSC”).
(Docket No. 1-8 at pp. 46-47.)

TransCore argues that a reading

of this section suggests that the CSC is an independent entity
from the NTCS because it establishes the acquisition of the NTCS,
but it only alludes to the management and operation of the CSC.
(Docket No. 77 at p. 25.)

PRHTA, nevertheless, claims that other

contract documents contradict this conclusion.
p. 10.)
of

(Docket No. 66 at

PRHTA cites the Special Provisions, which has the purpose

delineating

the

development,

operation of the NTCS.

installation,

(Docket No. 1-8 at p. 136.)

has a section that includes the CSC.
interprets

that

if

maintenance

the

Special

This document

Id. at p. 146.

Provisions’

scope

and

is

PRHTA
for

the

installation of the NTCS and it includes a section regarding the
CSC, it can be concluded that the CSC is a part of the NTCS and
thus owned by PRHTA.

(Docket No. 66 at p. 11.)

Reading the contract as a whole, as required by
P.R. Laws Ann. tit. 31, § 3475, the Court is unable to conclude
that the language of this contract is clear.
can

be

read

in

such

a

way

that

Because the contract

supports

either

party’s

interpretation of the contract, the Court finds that the contract
is not clear and unambiguous.

Civil No. 15-1924 (FAB)
II.

12

Extrinsic Evidence Should Go to the Factfinder
“When a contract is ambiguous, extrinsic evidence may be

considered to determine the intention of the parties.”

Yordan,

552 F. Supp. 2d at 204 (citing Innovation Mktg. v. Tuffcare, Inc.,
31 F. Supp. 2d 218, 222-223 (D.P.R. 1998) (Dominguez, J.)).

“In

order to judge as to the intention of the contracting parties,
attention must principally be paid to their acts, contemporaneous
and subsequent to the contract.”

P.R. Laws Ann. tit. 31, § 3472.

“Consideration of extrinsic evidence to establish the intent of
the contracting parties is an issue for the factfinder unless the
extrinsic evidence is ‘so one-sided that no reasonable person could
decide the contrary.’”

Fiestas, 170 F. Supp. 3d at 9 (quoting

Wells Real Estate Inv. Tr. II, Inc. v. Chardon/Hato Rey P’ship,
S.E., 615 F.3d 45, 54 (1st Cir. 2010)); Den Norske Bank AS v. First
Nat’l Bank of Bos., 75 F.3d 49, 52-53 (1st Cir. 1996)).
Here, TransCore introduces three pieces of extrinsic evidence
related to tax payments, to a prior course of dealings between the
parties, and to a subsequent contract between PRHTA and a third
party.

See Docket No. 77 at pp. 12-13, 31.

First, TransCore

contends that if PRHTA actually owned the CSC there would have
been no need for a payment of taxes related to the CSC because
PRHTA is a tax-exempt entity.

(Docket No. 77 at p. 12.)

Civil No. 15-1924 (FAB)

13

Second, TransCore claims that during the course of dealings,
TransCore “continuously provided inventories [to PRHTA] of the
equipment belonging to [PR]HTA and that the CSC equipment was not
included in these.”

(Docket No. 77 at. p. 13.)

TransCore argues

that, by accepting these inventory reports without objections,
PRHTA indicated that it understood that the CSC equipment belonged
to TransCore.

Id.

Finally, TransCore indicates that the subsequent course of
dealings between PRHTA and Gila, LLC (“Gila”) further supports
TransCore’s ownership of the CSC.

(Docket No. 77 at p. 31.)

In

its contract with Gila, PRHTA requested that Gila provide CSC
equipment.

Id.

TransCore argues that if PRHTA owned the existing

CSC, then it would not have asked Gila to provide a new CSC.

Id.

The Court finds that, although these pieces of evidence may
support TransCore’s argument of ownership, they do not exclude any
other possible argument that may provide for PRHTA’s ownership. In
other words, the extrinsic evidence is not “so one-sided that no
reasonable person could decide to the contrary.”
F. Supp. 3d at 275.

See Fiestas, 170

Thus, resolution of the ambiguity should go

to the jury.
CONCLUSION
The contract between PRHTA and TransCore is ambiguous and the
extrinsic evidence is not susceptible to only one interpretation.

Civil No. 15-1924 (FAB)

14

Accordingly, extrinsic evidence of the true meaning of the contract
should go to the factfinder, here the jury, in order to determine
who owns the CSC equipment.
claim,

the

Court

DENIES

Because TransCore has a plausible

PRHTA’s

motion

for

judgment

on

the

pleadings, (Docket No. 66).
IT IS SO ORDERED.
San Juan, Puerto Rico, March 20, 2017.

s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE