FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

FOR THE FIRST CIRCUIT

_______________________________

BAP NO. PR 21-012

_______________________________

Bankruptcy Case No. 19-00387-MCF

______________________________

PRESERBA COMPAÑÍA DE DESARROLLOS, INC.,

Debtor.

_______________________________

PRESERBA COMPAÑÍA DE DESARROLLOS, INC.,

Appellant,

v.

CONDADO 2, LLC,

Appellee.

_______________________________________________________

BAP NO. PR 21-013

_______________________________

Bankruptcy Case No. 19-00388-MCF

______________________________

INVERSIONES CARIBE DELTA, INC.,

Debtor.

_______________________________

INVERSIONES CARIBE DELTA, INC.,

Appellant,

v.

CONDADO 2, LLC,

Appellee.

_______________________________
2

_______________________________

Appeals from the United States Bankruptcy Court

for the District of Puerto Rico

(Hon. Mildred Cabán Flores, U.S. Bankruptcy Judge)

_______________________________

Before

Finkle, Cary, and Katz,

United States Bankruptcy Appellate Panel Judges.

_______________________________

Carmen D. Conde Torres, Esq., Luisa S. Valle Castro, Esq., and 

William J. Alemañy-Méndez, Esq., on brief for Appellants.

Sonia E. Colón, Esq., Gustavo A. Chico-Barris, Esq., Camille N. Somoza, Esq., and 

Frances C. Brunet-Uriarte, Esq., on brief for Appellee.

_________________________________

January 5, 2022

_________________________________
3

Finkle, U.S. Bankruptcy Appellate Panel Judge.

The chapter 11 debtors, Preserba Compañía de Desarrollos, Inc. (“Preserba”) and 

Inversiones Caribe Delta, Inc. (“Caribe Delta”) (collectively, the “Debtors”), appeal from the 

bankruptcy court’s orders confirming their respective chapter 11 plans of reorganization, as 

modified by the court. Both plans incorporated the terms of court-approved stipulations between 

the respective Debtors and Condado 2, LLC (“Condado”) fixing the amount and treatment of 

Condado’s secured claim in each case.

1 The plans also contained footnotes, which are at the 

heart of these appeals, providing for the reduction in the stipulated amounts of Condado’s claims 

to be paid under the plans by post-petition payments made by the Debtors. Condado objected to

confirmation of the plans on the grounds that such reduction of the stipulated claim amounts

conflicted with the express terms of the stipulations. The bankruptcy court agreed and confirmed 

the plans, but with the “elimination” of the disputed footnotes. On appeal, the Debtors challenge 

the bankruptcy court’s modification to their plans.

2

For the reasons set forth below, we AFFIRM.

1

 On December 29-30, 2021, all four attorneys of record for Condado filed motions seeking to withdraw 

their representation in these appeals, asserting that Condado’s claims have been transferred to another 

(unidentified) entity and Condado no longer has an interest in these appeals. There is, however, no 

evidence of the alleged transfers in the appellate record or on the bankruptcy court dockets.

2

 The Debtors’ cases were jointly administered, and the bankruptcy court held a combined confirmation 

hearing and entered substantively identical confirmation orders in each case. The stipulations which were 

incorporated in each plan were substantively similar as to the treatment of Condado’s claims and the plans 

contained nearly identical footnotes. The differences between the stipulations in the respective cases, 

which are not material to our analysis, relate to the description of the loan transactions and the stipulated 

amounts of Condado’s claims. Condado raised the same objections to confirmation of each plan and the 

parties presented the same arguments in each of these appeals. Consequently, the Panel joined the two 

appeals for oral argument and now for disposition. 
4

BACKGROUND

I. Pre-Bankruptcy Events

The Debtors are in the business of developing, selling, and leasing real estate. Prior to 

the petition date, Preserba constructed a 56-unit low-income housing project in Comerio, Puerto 

Rico (the “Preserba Property”). The project was financed by approximately $6 million in loans 

from Firstbank Puerto Rico (“Firstbank”), secured by several mortgages on the Preserba Property

and tax credits and rents derived from the property. 

Caribe Delta, a company related to Preserba, operated two commercial real estate projects 

in Puerto Rico: one located at Urbanización Industrial Bucana in Ponce which had commercial 

tenants, and the other located in Dorado which involved a multi-building renovation of historic 

property (the “Caribe Delta Property”). Caribe Delta’s projects were financed in part through 

approximately $3.8 million in loans from Firstbank, secured by mortgages on the Caribe Delta

Property and rents derived from the property. The Debtors’ obligations to Firstbank were crosscollateralized and cross-guaranteed.

After the Debtors defaulted on their loan obligations, Firstbank sold their loans to

Condado at a discount. Condado then sued the Debtors in separate actions in the Puerto Rico 

Court of First Instance to collect on the indebtedness and to foreclose against their properties.

The litigation concluded with the entry of consent judgments (the “Local Court Judgments”) in 

which the Debtors agreed to pay Condado $8.2 million in full satisfaction of their combined 

debts. The Debtors collectively paid Condado more than $3.5 million under the Local Court 

Judgments, but ultimately defaulted and Condado sought to execute on the judgments, 

precipitating the Debtors’ bankruptcy filings. 
5

II. The Bankruptcy Filings

In January 2019, the Debtors filed voluntary chapter 11 petitions, thereby staying the 

foreclosure proceedings. On its bankruptcy schedules, Preserba listed Condado with a $2.7

million claim secured by the Preserba Property, which it valued at $3 million. Caribe Delta 

listed Condado with a $2,296,978.63 claim secured by the Caribe Delta Property, which it valued 

at $6 million. 

Condado initially sought to prohibit the Debtors from using its cash collateral (consisting

of rental income from their respective properties), but the parties reached an agreement, 

approved by the court, for the Debtors to make monthly aggregate payments of $20,500 to 

Condado ($10,518 to be paid by Caribe Delta and $9,982 to be paid by Preserba) in exchange for 

their use of the rental income. The Debtors made monthly post-petition payments to Condado

under the cash collateral agreement for almost two years before their plans were confirmed.

III. Settlement of Condado’s Claims

A. Condado’s Proofs of Claim

Condado filed an initial proof of claim in Preserba’s case asserting a secured claim of 

$4,661,284.92, including nearly $600,000 in pre-petition interest accrued at a rate of 12% per 

annum. Likewise, in Caribe Delta’s case, Condado initially filed a proof of claim asserting a 

secured claim of $4,685,595.96, including more than $900,000 in pre-petition interest accrued at 

a rate of 8.75% per annum. The Debtors objected to Condado’s claims, contending that the 

claims should be reduced by the pre-petition payments made under the Local Court Judgments

and to accurately reflect the lower pre-petition interest rates agreed upon in those judgments

(4.25% as to Preserba and 3.5% as to Caribe Delta). 

Eventually, the parties resolved the interest rate disputes. Consistent with this partial 

resolution, Condado filed amended proofs of claim in both cases, reducing its claim against 
6

Preserba to $4,548,482.83, including pre-petition interest at the agreed rate of 4.25%, and 

reducing its claim against Caribe Delta to $4,665,085.77, including pre-petition interest at the 

agreed rate of 3.5%. 

B. Amended Joint Pretrial Report

With the dispute about the amounts of Condado’s claims still unresolved, the parties filed 

an amended joint pretrial report summarizing their respective positions. The Debtors included a 

Claims Reconciliation Report dated May 1, 2020, prepared by an accountant, that provided a 

“reconciliation” of the amounts claimed to be outstanding by the Debtors and Condado. The 

report highlighted several discrepancies between the parties’ asserted claim amounts and, in 

particular, the application of the Debtors’ post-petition payments to Condado. Of relevance here, 

the Debtors’ calculations applied the post-petition payments to reduce the principal balances due 

on their loans, while Condado’s calculations applied the post-petition payments to reduce 

accrued post-petition interest it had added to the pre-petition indebtedness. Condado’s accrual of 

post-petition interest was specifically flagged as an issue that “need[ed] to be addressed.” 

C. The Amount Stipulations

Prior to the scheduled evidentiary hearing on the Debtors’ objections to Condado’s proofs

of claim, the parties settled their disputes. Preserba and Condado filed a joint stipulation in 

Preserba’s case (the “Preserba Amount Stipulation”) in which they agreed that Condado held an 

allowed secured claim of $3.6 million, a reduction of more than $1 million from the original

claim amount. The Preserba Amount Stipulation provided, in pertinent part:

The Parties have engaged in good faith negotiations to settle the contested matter 

between them, that is, the Debtor’s Objection to Claim, and hereby submit the 

terms of their agreement for the Court’s approval.

. . . .

The Parties . . . acknowledge and agree that for purposes of this bankruptcy case, 

Condado agrees to amend the amount in Proof of Claim No. 2 to $3,600,000.00. 
7

Condado shall amend Proof of Claim No. 2 within seven (7) days from the 

Court’s approval of this Stipulation.

A similar stipulation was filed in Caribe Delta’s case (the “Caribe Delta Amount 

Stipulation”), in which the parties agreed Condado held an allowed secured claim of $4 million

and that it would also amend its proof of claim to reflect that amount. (Hereinafter, both 

stipulations are referred to collectively as the “Amount Stipulations,” and the respective amounts 

of Condado’s allowed secured claims set forth in those stipulations are referred to collectively as 

the “Stipulated Claim Amounts”).

The Amount Stipulations also identified certain “events of default,” including any 

amendment by Condado of its proofs of claim “in order to increase” the Stipulated Claim 

Amounts.

D. The Treatment Stipulations

A few weeks later, Preserba and Condado executed a second stipulation detailing the 

treatment of Condado’s $3.6 million secured claim under Preserba’s plan (the “Preserba 

Treatment Stipulation”). It provided in pertinent part: 

The Parties have engaged in good faith negotiations to settle the contested matter 

between them regarding the treatment of Condado’s claim in the Plan or in any 

subsequent Chapter 11 Plan that is filed in this case, and hereby submit the terms 

of their agreement for the Court’s approval, subject to the terms and conditions 

stated herein.

. . . .

. . . The Debtor [Preserba] agrees to fully pay Condado’s secured Claim in the 

amount of $3,600,000.00 through direct payments to Condado as follows: (a) 

monthly payments over a period of seven (7) years, that is, eighty-four (84) 

months, beginning within ten (10) days of the approval of this Stipulation by the 

Court and continuing on the first (1st) day of each month thereafter; (b) the 

applicable interest rate shall be of 150 points over the prime rate as of the date of 

the confirmation of the Plan, that is, prime rate plus 1.5%, publicly declared by 

J.P. Morgan Chase & Co., in the City of New York; (c) these monthly payments 

will be made using a thirty (30) year amortization schedule; and (d) a balloon 

payment of the balance of the Claim due at the end of the seven (7) year period. 
8

. . . This Stipulation shall be adopted by Debtor’s Plan and shall constitute the 

treatment for secured creditor Condado. Should there be any discrepancy 

between the terms and conditions of this Stipulation and the Chapter 11 Plan that 

is ultimately confirmed, the provisions of this Stipulation shall prevail over the 

content of such Chapter 11 Plan. 

. . . No part of this Stipulation may be amended unilaterally or without the other 

party’s full written consent. The Debtor shall not subsequently amend the terms 

of this Stipulation through a payment plan or post-confirmation modification 

without prior written consent by Condado. Any post-confirmation modification 

or treatment that the Debtor subsequently files in this case, shall keep the terms 

and conditions in favor of Condado, pursuant to this Stipulation, unless Condado 

agrees to any change in treatment. 

(italics in original; underlined emphasis added).

Likewise, Caribe Delta and Condado executed a stipulation detailing the treatment of 

Condado’s $4 million allowed secured claim under Caribe Delta’s plan (the “Caribe Delta 

Treatment Stipulation”) that included provisions nearly identical to those contained in the 

Preserba Treatment Stipulation, except for slight differences in the amortization schedule and the 

post-petition interest rate. It provided: 

The Debtor [Caribe Delta] agrees to fully pay Condado’s secured Claim in the 

amount of $4,000,000.00 through direct payments to Condado as follows: 

(a) monthly payments over a period of seven (7) years, that is, eighty-four (84) 

months, beginning within ten (10) days of the approval of this Stipulation by the 

Court and continuing on the first (1st) day of each month thereafter; (b) the 

applicable interest rate shall be of 200 points over the prime rate as of the date of 

the confirmation of the Plan, that is, prime rate plus 2.0%, publicly declared by 

J.P. Morgan Chase & Co., in the City of New York; (c) these monthly payments 

will be made using a twenty-five (25) year amortization schedule; and (d) a 

balloon payment of the balance of the Claim due at the end of the seven (7) year 

period.

(emphasis added). (Hereafter, the Debtors’ respective Treatment Stipulations will be referred to 

collectively as the “Treatment Stipulations”).

The Treatment Stipulations also provided that a unilateral amendment to Condado’s 

proofs of claim to increase the Stipulated Claim Amounts would constitute an “event of default.”

They further provided that in the event of a default under the Treatment Stipulations, Condado’s 
9

claims and the Debtors’ obligations to Condado under the confirmed plans would revert to their

original, pre-bankruptcy status, and the outstanding indebtedness would become immediately 

due and payable. 

By the express language of the Treatment Stipulations, the Debtors’ payments to 

Condado of the Stipulated Claims Amounts would begin after court approval of the stipulations. 

Significantly, the Stipulations did not provide that post-petition payments would be applied to 

reduce the Stipulated Claim Amounts or that the Debtors would actually pay a reduced amount

through their plans.

E. Orders Approving Stipulations and Amended Proofs of Claim 

The bankruptcy court approved the Amount Stipulations and the Treatment Stipulations. 

(The four stipulations are referred to collectively as the “Stipulations”). Consistent with the 

Amount Stipulations, Condado filed amended proofs of claim for the stipulated amount of $3.6 

million in Preserba’s case and $4 million in Caribe Delta’s case. The amended claims were 

automatically deemed allowed since no objections were filed. See 11 U.S.C. 502(a) (providing 

that a claim is deemed allowed unless a party in interest objects). 

IV. Plan Confirmation

A. The Plans of Reorganization

After court approval of the Stipulations, on December 30, 2020, the Debtors filed 

amended plans of reorganization (collectively, the “Plans”) “to incorporate the terms and 

conditions” of their respective Stipulations. The Preserba plan acknowledged Condado’s 

allowed secured claim in the amount of $3.6 million and provided for its treatment as follows: 

Pursuant to the Stipulation to Settle Debtor’s Objection to Condado’s Proof of 

Claim [the Preserba Amount Stipulation], the parties agreed to allow amended 

POC #2 in the amount of $3,600,000.00. See Proof of Claim No. 2-4.
10

Condado’s allowed secured claim will be paid pursuant to the terms of the 

Stipulation for the Treatment of Condado’s Claim [the Preserba Treatment 

Stipulation] filed at Docket No. 161 on October 30, 2020, and approved by the 

Court at Docket 169. The Stipulation is incorporated by reference as if fully 

transcribed herein. In short, Condado’s allowed secured claim in the amount of 

$3,600,000.003 will be paid under the Amended Plan, through monthly 

installments of $17,685.82, over a period of seven (7) years from the Effective 

Date, that is in eighty-four (84) consecutive monthly installments, bearing interest 

at the Prime Rate plus one point five percent (1.50%) as of the date of the 

confirmation of the Plan (estimated to be 4.75%), under an amortization schedule 

of thirty (30) years. Debtor will make a balloon payment of the balance of the 

Claim at the end of the seven (7) year period. See Docket Nos. 161 (Stipulation) 

and 169 (Order). 

(italics in original; underlined emphasis added) (footnote in original). 

Although not referenced in the Preserba Treatment Stipulation, footnote 3 of the plan

provided that the stipulated amount of Condado’s allowed secured claim had “been reduced by 

post-[]petition payments and [would] be recalculated as of [the plan’s] Effective Date.” An 

exhibit to the plan showed that Preserba had made $209,622 in post-petition payments, “reducing 

the obligation to $3,390,378 as of December 14, 2020,” and that Preserba would pay only the 

“balance of the allowed Secured Claim” through its plan. 

Caribe Delta’s plan provided essentially the same treatment for Condado’s allowed

$4 million secured claim: 

Pursuant to the Stipulation to Settle Debtor’s Objection to Condado’s Proof of 

Claim [the Caribe Amount Stipulation], filed at Docket No. 164 on October 6, 

2020, as approved by the Court at Docket 171[,] the parties agreed to allow 

amended POC #7 in the amount of $4,000,000.00. See Proof of Claim No. 7-3.

Condado’s allowed secured claim will be paid pursuant to the terms of the 

Stipulation for the Treatment of Condado’s Claim [the Caribe Delta Treatment 

Stipulation] filed at Docket No. 170 on October 30, 2020, and approved by the 

Court at Docket 178. The Stipulation is incorporated by reference as if fully 

transcribed herein. In short, Condado’s allowed secured claim in the amount 

of $4,000,000.005 will be paid under the Amended Plan, through monthly 

installments of $22,538, over a period of seven (7) years from the Effective Date, 

that is in eighty-four (84) consecutive monthly installments, bearing interest at 

the Prime Rate plus two percent (2.00%) as of the date of the confirmation of 

the Plan (estimated to be 5.25%), under an amortization schedule of twenty-five 

(25) years. Debtor will make a balloon payment of the balance of the Claim at the 
11

end of the seven (7) year period. See Docket Nos. 170 (Stipulation) and 178 

(Order). 

(italics in original; underlined emphasis added) (footnote in original). 

As with Preserba’s plan, Caribe Delta’s plan similarly provided, in footnote 5, that the 

stipulated amount of Condado’s allowed secured claim had “been reduced by post-petition 

payments and [would] be recalculated as of [the plan’s] Effective Date.” Attached to the plan 

was an exhibit showing that Caribe Delta had made $238,878 in post-petition payments, 

“reducing the obligation to $3,761,122 as of December 14, 2020,” and that Caribe Delta would 

pay only the “balance of the allowed Secured Claim” through its plan.

B. Condado’s Objections to Confirmation

Condado objected to confirmation of the Plans on the grounds that each plan 

“contemplate[d] a loan balance that [wa]s lower than the amount stipulated . . . .” Condado

argued that the terms of the Treatment Stipulations were clear and provided for the payment of 

the Stipulated Claim Amounts “through prospective monthly payments,” beginning after court 

approval of the Stipulations. Condado asserted that the Stipulations “d[id] not contemplate the 

reduction of the settled claim amount[s]” or call for “retroactive” payments. Leaving “no doubt 

as to the intentions of the contracting parties,” Condado contended, the Treatment Stipulations 

were binding on the parties and should be enforced according to their unambiguous terms. 

Further, Condado argued that the Treatment Stipulations constituted “contract[s] of compromise”

under Puerto Rico law with res judicata effect, and the Debtors were “estopped from relitigating” the amounts to be paid to Condado through the Plans. Accordingly, Condado 

requested that the bankruptcy court deny confirmation of the Plans or, in the alternative, 

eliminate the contested footnotes and confirm the Plans.

The Debtors countered that because the Treatment Stipulations were silent about the 

post-petition payments made to Condado, such payments must be applied to the principal amount 
12

of Condado’s claims to reduce the Stipulated Claim Amounts to be paid through the Plans. 

Otherwise, they argued, the post-petition payments would constitute a “gift” and Condado would 

receive more than its allowed pre-petition claims in violation of §§ 502 and 506(b).

3

 

In response, Condado reiterated that the Debtors had “forfeited” any right to have their 

post-petition payments applied to the Stipulated Claims Amounts because they failed to raise the 

issue during their extensive settlement negotiations of the Stipulations, and res judicata barred

them from raising it at plan confirmation. Additionally, Condado argued that under § 506, the 

court could not direct the reallocation of the post-petition payments to the Stipulated Claims 

Amounts without first determining that Condado was undersecured. See 11 U.S.C. § 506(b) 

(providing that only oversecured creditors are entitled to post-petition interest).4 Condado 

contended that the court had made no findings about the value of its collateral. Thus, its status as 

an oversecured or undersecured creditor was a disputed issue that was settled through the 

Treatment Stipulations. 

C. Confirmation of the Plans

The bankruptcy court held a combined confirmation hearing on the Plans. At the 

hearing, the parties reiterated the arguments they presented in their written submissions to 

the court. The Debtors also pressed that Condado was an undersecured creditor as established

3

 All references to specific statutory sections are to the United States Bankruptcy Code, 11 U.S.C. 

§§ 101-1532. 

4

 As a general rule, interest stops accruing when the bankruptcy petition is filed. See 11 U.S.C. 

§ 502(b)(2). “However, Congress has created an exception to this rule in the case of ‘oversecured’ 

creditors.” Prudential Ins. Co. of Am. v. SW Bos. Hotel Venture, LLC (In re SW Bos. Hotel Venture, 

LLC), 748 F.3d 393, 403 (1st Cir. 2014) (citing United Sav. Ass’n of Tex. v. Timbers of Inwood Forest 

Assocs., Ltd., 484 U.S. 365, 372-73 (1988)) (other citation omitted). “[Section] 506(b) ‘permits an 

oversecured creditor to receive post-petition interest and other charges, and generally prohibits an 

undersecured creditor from receiving these benefits.” In re Lichtin/Wade, L.L.C., 486 B.R. 665, 675 

(Bankr. E.D.N.C. 2013). “An oversecured creditor may allocate adequate protection payments to 

postpetition interest to the extent of its oversecurity[.]” In re Vest Assocs., 217 B.R. 696, 705 (Bankr. 

S.D.N.Y. 1998) (citations omitted).
13

by the pre-petition appraisals attached to their respective disclosure statements. Under § 506(b), 

the Debtors argued, Condado was not entitled to accrue post-petition interest. 

After hearing the parties’ arguments, the bankruptcy court issued a bench ruling agreeing 

with Condado’s position. Focusing on the express terms of the Treatment Stipulations, the court 

emphasized that the Debtors had agreed “to fully pay” the Stipulated Claim Amounts through 

“direct payments to Condado . . . beginning within 10 days of the approval of the stipulation[s]

by the Court . . . .” The court then reasoned:

The Court approved these respective stipulations in both cases. And according to 

the language of these stipulations in both cases, the amount was reduced by 

payments made after the Court’s approval of the agreement. 

So . . . for the case of [Preserba], those payments would be [applied starting] 

December 1st, 2020, and monies paid prior to December 1st, 2020 are not applied 

to the settlement amount. And for the [Caribe Delta] case . . . , the Court 

approved the stipulation on November 30th, 2020 . . . . And according to the 

language of that stipulation, the [$4 million] amount is reduced by the payments 

made after the Court’s approval of the agreement, November 30, 2020. So 

monies paid prior to November 30, 2020 are not applied to the settlement amount 

of [$4] million.

. . . [T]he treatment stipulations in both cases call for prospective payments of the 

allowed amount of Condado’s claims—not retroactive[—]as stipulated in the 

amount stipulations[,] through monthly payments over a period of seven years, 

with a balloon payment for the balance of the claims due at the end of the sevenyear period.

So the Court agrees that . . . footnote[] number 3 in Preserba and footnote number 

5 in Inversiones Caribe [Delta] should be removed or will not apply to the 

situation. The Court points out that the cash collateral stipulations, those 

payments [have] already been applied. They were applied to interest, in 

accordance [with] the terms of the original loan documents, which called [for

applying] payments to interest, both parties agreed to that, and that [was before] 

the stipulations [that are] before the Court. So we’re moving prospectively and 

not retroactively. That’s the ruling of the Court.

The court followed its ruling with the entry of orders confirming the Preserba plan “with 

the elimination of footnote 3” and the Caribe Delta plan “with the elimination of footnote 5.”
14

V. The Appeal

The Debtors filed timely appeals of their respective confirmation orders. They also filed 

motions seeking a stay pending appeal. The bankruptcy court denied the motions concluding 

that the Debtors had not shown a strong likelihood of success on the merits of their appeals. In 

Preserba’s case, the court stated:

The Debtor is appealing this court’s exclusion of footnote 3 from the confirmed 

plan, which sought to apply post-petition payments in a manner that did not honor 

a stipulation with Condado. The agreement to treat Claim No. 2 at Docket No. 

161 stated that:

“[t]he Debtor agrees to fully pay Condado’s secured claim in the amount of 

$3,600,000 through direct payments to Condado as follows: (a) monthly 

payments over a period of seven (7) years, that is, eighty-four (84) months, 

beginning within ten (10) days of the approval of this Stipulation by the 

Court and continuing on the first (1st) day of each month thereafter . . .”

Docket No. 161 at page 4.

Such language precludes a finder of fact from understanding anything different 

than what was stipulated by the parties. Had the parties intended to apply the 

post-petition payments to the stipulated amounts, they should have explicitly 

included it in the agreement. Instead, the parties incorporated into the plan their 

agreement, approved by the court, that binds the parties to proceed in a certain 

manner. The settled amount under this agreement was to be reduced by the 

payments that were to be made after court approval.

A substantively identical order denying a stay was entered in Caribe Delta’s case. The Debtors’

subsequent motions to the Panel for a stay pending appeal were also denied. 

POSITIONS OF THE PARTIES

I. The Debtors

The Debtors present three arguments on appeal. First, again asserting that Condado was 

undersecured, they argue that the bankruptcy court erred in ruling that their post-petition 

payments were properly applied to post-petition interest rather than to reduce the Stipulated 

Claim Amounts to be paid through the Plans. This ruling, the Debtors maintain, violated 

§ 502, which provides that no secured creditor can receive more than its allowed secured claim, 
15

and § 506(b), which provides that only oversecured creditors are entitled to accrue post-petition 

interest. 

Second, citing principles of contract interpretation under the Puerto Rico Civil Code, the 

Debtors argue that the bankruptcy court erred by failing to consider the provisions of the 

Stipulations “as a whole,” overlooking the “unequivocal[]” language that Condado cannot claim 

or receive more than the Stipulated Claim Amounts. They emphasize the default provisions of 

the Treatment Stipulations, which define a unilateral amendment of Condado’s proofs of claim to 

increase the Stipulated Claim Amounts as an event of default. By not reducing the Stipulated

Claim Amounts by the post-petition payments, the Debtors contend, Condado is receiving more 

than the agreed claim amounts.

Third, the Debtors challenge the application of the doctrine of res judicata here because 

the Stipulations are silent on the allocation of post-petition payments and the issue was not 

litigated prior to the confirmation hearing. Res judicata, the Debtors insist, “cannot be applied to 

a fact not considered in the Stipulations.” 

II. Condado

It comes as no surprise that Condado takes the opposite position. It asserts that the 

bankruptcy court correctly concluded that the Treatment Stipulations mandated full payment of 

the Stipulated Claim Amounts through prospective monthly payments commencing in December 

2020. The Debtors’ proposed application of post-petition, pre-confirmation payments to reduce 

the Stipulated Claim Amounts to be paid through the Plans directly contravened the Stipulations, 

Condado contends. It reiterates that the Debtors forfeited any right to reallocation of the postpetition payments by failing to raise the issue when settling all the disputed issues regarding 

Condado’s claims. Finally, Condado contends that the doctrine of res judicata barred the 
16

Debtors from challenging Condado’s entitlement to post-petition interest and attempting to 

reallocate the Debtors’ post-petition payments to principal through their respective plans. 

APPELLATE JURISDICTION

We have jurisdiction to hear appeals from final orders of the bankruptcy court. 28 U.S.C. 

§ 158(a)-(c); see also Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 587 (2020); 

Bullard v. Blue Hills Bank, 575 U.S. 496, 501-02 (2015). Generally, orders confirming chapter 

11 plans, such as the confirmation orders before us, are final appealable orders. PRLP 2011 

Holdings LLC v. Manuel Mediavilla, Inc. (In re Manuel Mediavilla, Inc.), 568 B.R. 551, 566 

(B.A.P. 1st Cir. 2017). Accordingly, we have jurisdiction over these appeals.5 

STANDARD OF REVIEW

We review the bankruptcy court’s findings of fact for clear error and its conclusions of 

law de novo. Jeffrey P. White & Assocs., P.C. v. Fessenden (In re Wheaton), 547 B.R. 490, 496 

(B.A.P. 1st Cir. 2016). Typically, “[t]he bankruptcy court’s decision to confirm a Chapter 11 

plan is reviewed for abuse of discretion.” Todeschi v. Juarez (In re Juarez), 836 F. App’x 557, 

559 (9th Cir. 2020) (citation omitted). In these appeals the Debtors only challenge the 

bankruptcy court’s elimination of footnotes 3 and 5 from their respective confirmed Plans based 

on the court’s interpretation of the Stipulations. “Questions regarding the bankruptcy court’s 

interpretation of a settlement agreement are legal issues reviewed de novo.” In re Manuel 

5

 Appeals of orders confirming chapter 11 plans can raise questions of equitable mootness. See, e.g., 

United Sur. & Indem. Co. v. López-Muñoz (In re López-Muñoz), 983 F.3d 69, 72-73 (1st Cir. 2020). But 

mootness is not implicated here. Equitable mootness “concerns whether changes to the status quo 

following the order being appealed make it impractical or inequitable to ‘unscramble the eggs.’” 

La Trinidad Elderly LP SE v. Loíza Ponce Holdings LLC (In re La Trinidad Elderly LP SE), 627 B.R. 

779, 794 (B.A.P. 1st Cir. 2021) (quoting Castaic Partners II, LLC v. Daca-Castaic, LLC (In re Castaic 

Partners II, LLC), 823 F.3d 966, 968 (9th Cir. 2016)). Here, it would not be impossible or inequitable to 

“unscramble the eggs” if the Debtors were to prevail on appeal. These appeals raise an insular issue 

between Condado and the Debtors about the total amount of payments to be made to Condado through the 

Plans. There are no complicated transactions to unwind, and no other creditors are affected by the dispute 

before us.
17

Mediavilla, Inc., 568 B.R. at 566 (citation omitted); see also Banco Popular de P.R. v. Babilonia 

Santiago (In re Babilonia Santiago), BAP No. PR 19-048, 2020 WL 7706918, at *11 (B.A.P. 1st 

Cir. Dec. 23, 2020) (“[I]f a contract is deemed unambiguous, interpreting the written provisions 

of that contract is a question of law and thus subject to a de novo review standard.”) (quoting 

Institut Pasteur v. Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), 212 B.R. 10, 16-

17 (D. Mass. 1997)). 

DISCUSSION

The Debtors’ primary argument on appeal is that the bankruptcy court erred when it ruled 

Condado could apply post-petition payments to post-petition interest, rather than to reduce the 

respective Stipulated Claim Amounts because Condado was an undersecured creditor and was 

not entitled to accrue post-petition interest. We need not resolve whether or not Condado’s 

claims are undersecured. The Plans incorporated the terms of the Stipulations and specified the 

amount of Condado’s allowed secured claim as to each of the Debtors based on the Amount 

Stipulations. Further, they expressly stated that such agreed amounts would be paid pursuant to 

the terms of the Treatment Stipulations. Our only focus then is on the proper interpretation of 

the Stipulations.

I. Principles of Contract Interpretation

Our analysis of the Stipulations is governed by principles of contract interpretation. 

See Lestage v. Coloplast Corp., 982 F.3d 37, 48 n.5 (1st Cir. 2020) (“Stipulations are interpreted 

according to general contract law principles.”) (citation omitted). The “construction of private 

contracts” is “a matter committed to state law[.]” HSBC Bank USA v. Branch (In re Bank of 

New Eng. Corp.), 364 F.3d 355, 363 (1st Cir. 2004) (citing Volt Info. Scis., Inc. v. Bd. of Trs. of 

Leland Stanford Jr. Univ., 489 U.S. 468, 474 (1989)). The Treatment Stipulations provided that 
18

they were to be “interpreted and enforced under the laws of the Commonwealth of Puerto Rico.” 

We also note that the parties and the collateral securing Condado’s claims are all located in 

Puerto Rico. Without doubt, Puerto Rico law applies here. See In re Babilonia Santiago, 2020 

WL 7706918, at *11 (recognizing that “Puerto Rico law [is] the functional equivalent of state 

law”).

A. Contracts of Compromise

In Puerto Rico, contracts are governed by the Puerto Rico Civil Code. Fraterfood Serv., 

Inc. v. DDR Del Sol LLC, S.E., No. 15-02009 (ADC), 2016 WL 1604702, at *5 (D.P.R. Mar. 

31, 2016). “Under Puerto Rico law, a contract comes into existence when: (1) the contracting 

parties consent; (2) there is a definite object which may be the subject of the contract; and 

(3) there is cause for the obligation.” Maldonado-Solano v. MMM Health Care, No. 08-2246 

(JAG), 2010 WL 11679334, at *1 (D.P.R. Feb. 2, 2010) (citing P.R. Laws Ann. tit. 31, § 3391). 

“[T]he Puerto Rico Civil Code defines [a] settlement contract as a special contract of 

compromise . . . ‘by which each of the parties in interest, by giving, promising, or retaining 

something, avoids the provocation of a suit, or terminates one that has already been instituted.’”

Id. (quoting P.R. Laws Ann. tit. 31, § 4821). “[J]udicial stipulation[s] between litigants to 

terminate court action,” such as the Stipulations in this case, constitute “contract[s] of 

compromise.” In re Cantero Frau, No. 09-11136 ESL, 2014 WL 1464842, at *8 (Bankr. D.P.R. 

Apr. 15, 2014) (citation omitted). They are “binding and enforceable, and ha[ve] the same 

authority of res judicata; the parties must consider the points discussed to be definitely resolved 

and cannot go over them again.” Id. (quoting Empresas Inabón, Inc. v. Hatton Gotay (In re 

Empresas Inabón, Inc.), 358 B.R. 487, 524 (Bankr. D.P.R. 2006)); see also P.R. Laws Ann. 
19

tit. 31, § 4827 (“A compromise has, with regard to the parties, the same authority as res 

[]judicata[.]”).

6

 The parties to the stipulation are “also bound to the principle of pacta sunt 

servanda arising from Article 1044 of the Civil Code of Puerto Rico, . . . which holds parties to 

strict compliance with the terms of their bargain.” In re Cantero Frau, 2014 WL 1464842, at *8; 

see also P.R. Laws Ann. tit. 31, § 2994 (“Obligations arising from contracts have legal force 

between the contracting parties, and must be fulfilled in accordance with their stipulations.”).

Here, the Stipulations constitute contracts of compromise and have res judicata effect as 

to the amount and treatment of Condado’s secured claims. See Caraballo Cordero v. Banco 

Financiero de P.R., 208 F. Supp. 2d 185, 189 (D.P.R. 2002) (“Once the existence of a 

compromise has been established, such a contract becomes res judicata.”). We must determine 

then how to interpret the Stipulations.

B. Applicable Rules of Contract Interpretation 

Contracts of compromise are to be “interpreted restrictively” and “in accordance with the 

general rules of contract interpretation[.]” In re Cantero Frau, 2014 WL 1464842, at *8 

(citations omitted). Puerto Rico’s general rules of contract interpretation are set forth in the 

Puerto Rico Civil Code. P.R. Tel. Co. v. SprintCom, Inc., 662 F.3d 74, 90 (1st Cir. 2011) (citing 

P.R. Laws Ann. tit. 31, §§ 3471-3479). Under the Puerto Rico Civil Code, “[i]f the terms of a 

6

 Puerto Rico law codifies the doctrine of res judicata in P.R. Laws Ann. tit. 31, § 3343, “which

provides that a prior judgment will have preclusive effect when there is ‘the most perfect identity 

between the things, causes, and persons of the litigants, and their capacity as such.’” Cruz Berríos v. 

González-Rosario, 630 F.3d 7, 11-12 (1st Cir. 2010) (quoting P.R. Laws Ann. tit. 31, § 3343). “This 

provision encompasses both of the two traditional aspects of res judicata: claim preclusion and issue 

preclusion.” Id. at 12 (citation omitted). “Puerto Rico courts do not interpret the phrase ‘perfect identity’ 

literally.” Boateng v. InterAmerican Univ., Inc., 210 F.3d 56, 61 (1st Cir. 2000) (citations omitted). “A 

prior and current action will share a perfect identity of thing if they involve the same object or matter and 

will share a perfect identity of cause if they flow from the same principal ground or origin, or, put another 

way, if they derive from a common nucleus of operative facts[.]” García Monagas v. García-Ramirez de 

Arellano, 674 F.3d 45, 51 (1st Cir. 2012) (citations and internal quotation marks omitted). Perfect 

identity of parties exists when “parties in the current action were also parties in the prior action . . . .” Id.

(citation omitted).
20

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. 

Applying Puerto Rico law, “when a court is faced with a contractual dispute it must first 

determine if the terms of the contract are clear.” Autoridad de Carreteras y Transportacion v. 

TransCore Atl., Inc., 387 F. Supp. 3d 163, 166 (D.P.R. 2017) (citing P.R. Laws Ann. tit. 31, 

§ 3471); see also In re Babilonia Santiago, 2020 WL 7706918, at *12. “‘[C]lear’ terms are those 

that ‘in themselves are lucid enough to be understood in one sense alone, without leaving any 

room for doubt, controversies or difference of interpretation.’” Wells Real Estate Inv. Tr. II, Inc. 

v. Chardon/Hato Rey P’ship, S.E., 615 F.3d 45, 53 (1st Cir. 2010) (quoting Home Ins. Co. v. Pan 

Am. Grain Mfg. Co., 397 F.3d 12, 16 (1st Cir. 2005)). The provisions of the contract also

“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.” P.R. Laws Ann. tit. 31, 

§ 3475; see also Wells Real Estate Inv. Tr. II, Inc., 615 F.3d at 54. Only if the contract is 

ambiguous should the court consider extrinsic evidence to determine the intentions of the parties. 

See Autoridad de Carreteras, 387 F. Supp. 3d at 169.

II. Application of Puerto Rico Contract Interpretation Principles 

A. The Terms of the Stipulations are Unambiguous 

The terms of the Stipulations are straightforward and unambiguous. In the Amount 

Stipulations, the parties “settle[d] the contested matter between them” as to the specific amounts

of Condado’s claims and agreed that Condado would amend its proofs of claim to reflect those

agreed amounts—$3.6 million in Preserba’s case and $4 million in Caribe Delta’s case. 

The Treatment Stipulations, in turn, “settle[d] the contested matter between them regarding the 

treatment of Condado’s claim in the Plan[s] . . . .” Viewed as a whole, the Stipulations were 

obviously intended by the parties to completely resolve any and all issues relating to the amount 
21

and treatment of Condado’s claims to be paid through the Plans. The Treatment Stipulations also 

required that they “be adopted by Debtor[s’] Plan[s] and constitute[d] the treatment for secured 

creditor Condado.” Moreover, they explicitly provided that if there were any discrepancies 

between the Stipulations and the Plans, the terms of the Stipulations would prevail. Consistent 

with the Stipulations, the Plans also provided that Condado would hold allowed secured claims

of $3.6 million and $4 million, respectively, that would be paid pursuant to the terms of the 

Treatment Stipulations.

The Treatment Stipulations, in turn, provided that the Debtors would “fully pay” 

Condado’s claims in monthly installment payments “beginning within (10) days of the approval 

of th[e] Stipulation[s] by the Court and continuing on the first (1st) day of each month 

thereafter” with “a balloon payment of the balance of the Claim[s] due at the end” of the 

applicable referenced time period. (emphasis added). Interpretation of this provision turns on 

the meaning of the phrase “fully pay.” The word “fully” is defined as: “in a full manner or 

degree: COMPLETELY.” Merriam-Webster Online Dictionary, https://www.merriamwebster.com/dictionary/fully (last visited Jan, 3, 2022); see also Cambridge Dictionary, 

https://www.dictionary.cambridge.org/us/dictionary/english/fully (last visited Jan, 3, 2022) 

(defining “fully” as meaning “completely”). Clearly, the Debtors were to completely pay 

Condado $3.6 million in Preserba’s case and $4 million in Caribe Delta’s case in the manner 

provided in monthly installments “beginning” after court approval of the Treatment Stipulations. 

The word “beginning” is defined as “the point at which something begins: START.” MerriamWebster Online Dictionary, https://www.merriam-webster.com/dictionary/beginning (last visited 

Jan. 3, 2022). These payment terms are susceptible of only one meaning: the Debtors were to 

completely pay Condado’s secured claims in the stipulated amounts of $3.6 million and $4 

million, respectively, through prospective, not retroactive, monthly payments commencing ten 
22

days after court approval of the Treatment Stipulations. The terms of the Stipulations are clear,

and the bankruptcy court correctly construed them.

7

 

The Debtors do not argue that the Stipulations are ambiguous. Rather, they contend that 

the bankruptcy court failed to consider the Stipulations “as a whole,” ignoring provisions that, 

they claim, “provided unequivocally that Condado w[ould] not claim or receive more than $3.6 

[million or $4 million, respectively].” In support, they point to language in the Stipulations 

which define a unilateral amendment of Condado’s proofs of claim to increase the Stipulated 

Claim Amounts as an event of default. This argument is unpersuasive. Condado complied with 

the Stipulations and did not amend its proofs of claim to increase the Stipulated Claim Amounts. 

And the bankruptcy court’s conclusion that the Stipulated Claim Amounts were to be paid 

through prospective payments aligns with the literal language of the Stipulations.

The Debtors make much of the absence in the Treatment Stipulations of any reference to 

the allocation of their post-petition, pre-confirmation payments to Condado. While in some 

circumstances silence in a contract can lead to ambiguity, see Adria Int’l Grp., Inc. v. Ferré Dev., 

Inc., 241 F.3d 103, 110 (1st Cir. 2001), such ambiguity is not present here. Indeed, it would 

trample Puerto Rico’s contract principles to interpret the Stipulations in the manner espoused by 

the Debtors to permit them, in hindsight, to ignore the plain language of the Stipulations 

and further reduce the already compromised amounts of Condado’s claims under the 

confirmed Plans. The Treatment Stipulations required payment in full of the Stipulated Claim 

Amounts through prospective payments commencing after court approval of the Stipulations. 

7 Although the bankruptcy court did not discuss contract interpretation principles or expressly state that it 

found the Stipulations unambiguous, it is evident from the court’s explanation at the confirmation 

hearing, as well as its orders denying the Debtors’ motions for stay pending appeal, that it applied the 

literal terms of the Stipulations when issuing its rulings. See supra at 13-14.
23

In confirming the Plans without inclusion of footnotes 3 and 5, the bankruptcy court correctly 

enforced the settlement terms to which the parties agreed to be bound.

B. Allocation of Post-Petition Payments 

We also conclude that the bankruptcy court did not commit legal error by not requiring 

Condado to reallocate the Debtors’ post-petition payments to reduce the Stipulated Claim 

Amounts. The Debtors raised this argument for the first time in response to Condado’s objection 

to plan confirmation, months after the parties’ negotiations settling disputed cash collateral 

issues and the entry of the court-approved Stipulations resolving all disputed issues about 

Condado’s claims and their payment under the Plans. Bluntly stated, the Debtors forfeited any 

right they may have had to challenge Condado’s application of their post-petition payments in an 

effort to reduce the stipulated amounts of Condado’s claims. See Kontrick v. Ryan, 540 U.S. 

443, 458 n.13 (2004) (stating that “forfeiture is the failure to make the timely assertion of a 

right”) (citation and internal quotation marks omitted); United States v. Cezaire, 939 F.3d 336, 

339 n.2 (1st Cir. 2019) (“Forfeiture is the failure to make the timely assertion of a right, an 

example of which is an inadvertent failure to raise an argument.”) (citation and internal quotation 

marks omitted).

Moreover, the Debtors fail to acknowledge that they are bound by the unambiguous terms 

of the Stipulations, which, as discussed earlier, have res judicata effect on all issues that were or 

could have been litigated. See Ruiz-Sánchez v. Goodyear Tire & Rubber Co., 717 F.3d 249, 

253 n.1 (1st Cir. 2013) (“Although it may seem unconventional to use the res judicata label in 

th[e] context [of a contract of compromise] due to the absence of an earlier judgment, Puerto 

Rico law nonetheless gives res judicata effect to . . . compromises.”) (citing P.R. Laws Ann. 

tit. 31, § 4827). “Under Puerto Rico’s res judicata scheme, claim preclusion ‘binds parties 
24

from litigating or relitigating any claim that was or could have been litigated in a prior 

adjudication . . . .’” Cruz Berríos, 630 F.3d at 12 (emphasis added) (citation omitted); see also

In re Cantero Frau, 2014 WL 1464842, at *6 (“The doctrine of res judicata . . . forecloses 

litigation of all matters which have been litigated or might have been litigated in an earlier 

case.”) (citation omitted). 

At the time the parties were negotiating the amount and treatment of Condado’s claims, 

Condado had already added post-petition interest to its claims and applied the post-petition, preconfirmation payments received from the Debtors to post-petition interest. This allocation of 

post-petition payments was reflected in the Reconciliation Report the Debtors submitted with the 

Joint Pretrial Report in June 2020. Just a few months later, when settling their disputes with 

Condado, the Debtors did not: challenge Condado’s allocation of such payments to post-petition 

interest; advance any argument that Condado was undersecured with no right to post-petition 

interest; assert that such payments should be reallocated to reduce the Stipulated Claim 

Amounts; or seek a valuation hearing to determine whether Condado was oversecured or 

undersecured. The issue of the application of the Debtors’ post-petition payments is directly 

related to the treatment of Condado’s claims under the Plans, and the Debtors could have, and 

should have, addressed it in the Stipulations. Having failed to do so, the Debtors were precluded 

from seeking to reallocate the post-petition payments at confirmation through the inclusion of the 

disputed footnotes. 

We conclude, therefore, that the bankruptcy court did not err in determining that 

footnotes 3 and 5 of the Debtor’s respective Plans conflicted with the unambiguous terms of the 

Stipulations and striking them from the confirmed Plans.8

 

8

 One final note bears mentioning. After the bankruptcy court concluded that the Plans could not be 

confirmed with their proposed reduction of Condado’s claims as provided in footnotes 3 and 5 of their 

respective Plans, the Debtors reserved their appeal rights, but nonetheless, requested that the Plans be 
25

CONCLUSION

For the reasons discussed above, we AFFIRM. 

confirmed rather than denied altogether. On appeal, the Debtors do not challenge the bankruptcy court’s 

confirmation of the Plans; they challenge only its modification of the Plans. Therefore, any challenge to 

confirmation is waived, and we need not address the same. See United States v. Bayard, 642 F.3d 59, 63 

(1st Cir. 2011) (stating appellant’s failure to brief an issue waives it).