UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

 

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO, et. al.,

Debtors

 

PROMESA Title III

No. 17-03283 -LTS

(Jointly Administered) 

LUIS A. RIVERA SIACA

Movant, 

v. 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO 

as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.

Debtors

Re: ECF No. 23145

REPLY TO OBJECTION OF THE COMMONWEALTH OF PUERTO RICO TO 

MOTION FOR THE PAYMENT OF ADMINISTRATIVE RENT

The Debtors in these Title III cases, along with each Debtor’s respective Title III Case number and the last four (4) 

digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico (the 

“Commonwealth”) (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto 

Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of 

Federal Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy Case No. 17 

BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of 

the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 17 BK 3566-LTS) (Last Four Digits of Federal 

Tax ID: 9686); (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-LTS) (Last 

Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings Authority (“PBA”) (Bankruptcy Case 

No. 19 BK 5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title III case numbers are listed as bankruptcy 

case numbers due to software limitations).

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TABLE OF CONTENTS

Page

I. PRELIMINARY STATEMENT..............................................................1

II. BACKGROUND................................................................................6

III. ARGUMENT.....................................................................................7

A. The Board Utilizes a Congressionally-Authorized Policy Requiring Prior Board 

Review of Certain Unspecified Contracts is Applicable Only to Governmental 

Institutions of the Commonwealth When Entering Into Contracts or Leases 

Proposed Thereto Rather Than Those Proposed by Governmental Institutions to 

Third Parties Acting in Good Faith........................................................7

B. The Contract Should not be Subject to Review Pursuant to the Contract Review 

Policy........................................................................................14

C. The Contract Complies with Puerto Rico Certification and Registration 

Requirements...............................................................................15

D. The Motion is Not Barred as Untimely..................................................16

IV. CONCLUSION.................................................................................18

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TABLE OF AUTHORITIES

Cases Page(s)

Broadrick v. Okla., 413 U.S. 601, 607 (1973)..........................................................7

Butner v. United States, 440 U.S. 48 (1979).............................................................6

Centro de Periodismo Investigativo, Inc. v. Fin. Oversight & Mgmt. Bd. for P.R., 35 F.4th 1

(2022).........................................................................................................8

Connally v. General Construction Co., 269 U.S. 385, 391 (1926)...................................7

Duncan v. Walker, 533 U.S. 167, 174 (2001)...........................................................7

Grogan v. Garner, 498 U.S. 279, 283 (1991)...........................................................9

In re Fin. Oversight & Mgmt. Bd. for P.R., 2022 WL 1401506, at *4 (D.P.R. May 4, 2022)...9

In re Fin. Oversight & Mgmt. Bd., 481 F. Supp. 3d 60 (D.C. P.R. 2020).........................17

In re Fin. Oversight & Mgmt. Bd., 583 B.R. 626 (D.C. P.R. 2017)..................................8

In re GT Advanced Techs., Inc., 547 B.R. 3 (Bankr. N.H. 2016).....................................5

In re Hotel Airport, Inc., 2014 Bankr. LEXIS 3990 (Bankr. P.R. 2014)............................5

In re Mammoth Mart, Inc., 536 F.2d 950, 955 (1st Cir. 1976)........................................5

In re PYXSYS Corp., 288 B.R. 309, 317 (Bankr. D. Mass. 2003)....................................5

In re Salutaris Dialysis & Nephrology Ctr., 2012 Bankr. LEXIS 4914 (Bankr. P.R. 2012)......6

Rámos Lozada v. Orientalist Rattan Furniture, Inc., 130 P.R. Dec. 712 (1992)..................12

Stern v. Marshall, 564 U.S. 462, 495 (2011)............................................................6

Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443, 451 (2007).............................6

Trinidad Rodríguez v. Doe, 2001 TSPR 7, 153 P.R. Dec. 280......................................12

TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)..........................................................7

United States v. Davis, 139 S. Ct. 2319, 2323 (2019)..................................................7

Vicar Builders Dev., Inc. v. E.L.A., 192 D.P.R. 256 (2015).........................................13

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STATUTES

11 U.S.C. § 503(a).........................................................................................17

11 U.S.C. § 503(b)(1).......................................................................................5

11 U.S.C. § 503(b)(1)(A)...................................................................................5

23 L.P.R.A. § 108..........................................................................................10

3 L.P.R.A. § 9166..........................................................................................11

31 L.P.R.A. § 10101.......................................................................................12

31 L.P.R.A. § 10162.......................................................................................12

31 L.P.R.A. § 10162........................................................................................5

31 L.P.R.A. § 10171.......................................................................................12

31 L.P.R.A. § 8981..........................................................................................5

31 L.P.R.A. § 8983..........................................................................................7

31 L.P.R.A. § 9008..........................................................................................5

31 L.P.R.A. § 9009..........................................................................................5

PROMESA § 106...........................................................................................8

PROMESA § 204(b).................................................................................4, 8, 16

PROMESA § 204(b)(2)............................................................................3, 4, 7, 8

PROMESA § 204(b)(3)..................................................................................4, 9

OTHER AUTHORITIES

General Services Administration’s Regulation 9232.............................................13, 14

Office of the Comptroller of Puerto Rico Regulation 33..............................................15

Puerto Rico Department of Education’s Regulation for the Acquisition, Sales and Auctions of 

Goods, Works and Non-Personal Services (Regulation 7040).........................................4

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TO THE HONORABLE COURT: 

Luis A. Rivera Siaca (“LARS”), through his undersigned counsel, files his reply to the 

objection of the Commonwealth of Puerto Rico’s (the “Commonwealth”) objection to LARS’

motion for the payment of administrative rent due LARS by the Commonwealth (the “Motion”)

and in support thereof respectfully states and requests: 

I. PRELIMINARY STATEMENT

1. LARS has two lease agreements with the Department of Education of the 

Commonwealth (“PRDE”), pursuant to which the PRDE has been occupying and utilizing leased 

premises from LARS without any payments thereto, owing LARS a substantial amount which 

increases from month to month, PRDE or the Financial Oversight and Management Board for 

Puerto Rico (the “Board”) pretending for PRDE to continue occupying and using the premises for 

PRDE and the Commonwealth’s benefit and that of its citizens of for free in constitutes a taking 

under the Fifth Amendment to the Constitution of the United States without just compensation to 

LARS. 

2. The first lease agreement consists of non-residential unexpired lease contract 

number 081-2021, object of a motion for an order directing PRDE, as lessee, to comply with the 

payment of post-petition rent due LARS, as lessor, regarding a 123,106.55 square feet building, 

including floors 1-5 and 150 parking spaces, where hundreds of employees from PRDE’s main 

offices work at Calle Calaf Number 34, San Juan, Puerto Rico, filed on July 1, 2022 at ECF No. 

21408. This contract was entered into on January 15, 2021, with an expiration date of December 

31, 2025, and was recorded with the Office of the Comptroller of Puerto Rico (“OCPR”) on 

January 22, 2021(the “First Contract”). As of January 9, 2023, PRDE owes LARS $3,741,755.27

for rent under the First Contract and water services (Exhibit I). PRDE has occupied the premises 

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under the First Contract since 1969 under different lease agreements renewed from time to time. 

As Exhibit II hereto, LARS is including the floor-by-floor occupancy by PRDE under the First 

Contract. 

3. The second lease agreement between LARS as lessor, and PRDE, as lessee, and 

object of the Motion, is non-residential unexpired lease agreement number 081-2021-0180

consisting of a one level 28,431 square feet building with a parking area for 135 vehicles, where 

PRDE’s offices for Postal Services, San Juan Region State Agency, Retirement Office, Auction 

Board, Human Resources, Technology Office, CATAL Time Assistance and License Support 

Center, Auction Review Office, TAL System of Time, Attendance and License, State Food 

Agency, Transportation Office and Security Office are located at Calle Juan Calaf Number 33, 

Puerto Rico. This contract was entered into on May 21, 2021, with an expiration date of June 30, 

2026, and was recorded with the OCPR on May 28, 2021 (the “Second Contract”). As of 

December 31, 2022, PRDE owes LARS $420,923.10 in rent for the premises leased under the 

Second Contract (Exhibit III). PRDE has been in occupancy of the premises under the Second 

Contract since 1989 pursuant to contracts renewed from time to time. The premises leased to 

PRDE under the Second Contract are an annex to those leased under the First Contract.

4. While the Motion is the one to which the captioned case refers, in its objection

thereto, filed at ECF No. 23210 (the “Objection”), it refers to the First and Second Contracts, 

treating them in common, sustaining that the Contracts are not enforceable because they were not 

entered into in compliance with applicable law. Since, as represented by the Commonwealth, “the 

facts, circumstances, and agreements” of the parties are substantially similar, LARS incorporates 

herein by reference all facts and argument to its Motion to Comply with Payment of Administrative 

Rent filed at ECF No. 21408 and his Response to Debtor’s Objection to Motion to Comply with 

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Payment of Administrative Rent filed at ECF No. 21706. LARS will address the objections to both 

Contracts jointly. 

5. The Commonwealth claims that the Contracts are not enforceable because they 

were executed without the Board’s prior review and approval in violation of the Board’s contract 

review policy established pursuant to PROMESA Section 204(b)(2) (the “Policy”). 

6. PROMESA Section 204(b)(2) and the Policy promulgated pursuant thereto are 

directed to the Commonwealth’s governmental agencies for them to establish a competitive 

procurement system, but such provisions and/or the Policy can’t undermine or render ineffective 

contracts validly entered by such agencies with third parties as LARS, pursuant to the Civil Code 

of Puerto Rico and the applicable case law, and under the guise thereof unconstitutionally take 

over LARS’ properties for PRDE’s use and enjoyment without compensation. 

7. At paragraph three (3) of the Objection, it is stated that since May 18, 2022, the 

Board has been reviewing the Second Contract “engaged in analysis and correspondence, 

including several requests for additional information from PRDE, all in an effort to determine the 

Second Contract’s market competitiveness and compliance with Puerto Rico contracting law and 

the 2022 Commonwealth Fiscal Plan (the “Fiscal Plan”). During such review, the Board identified 

irregularities with respect to PRDE’s procurement process with LARS and overall lack of 

competitive procurement process involving the Second Contract”. 

8. As illustrated by the quoted language, it is clear that the Policy and the intended 

procurement process is directed to the governmental agencies and not to third parties entering into 

contracts therewith, particularly when as here, the Contracts are not initial contracts but renewals 

of existing ones, with PRDE in possession of the leased premises for many years. As will be 

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shown hereafter, under both Contracts LARS is the lowest, responsive, responsible available party 

to meet PRDE’s existing rental needs. 

9. The nature, intent and purpose of the Policy and PROMESA Section 204(b)(2), as 

being directed to governmental agencies of the Commonwealth, is made clear by the Board’s 

expressions in the Objection and its findings of deficiencies in the approval of the Second Contract 

by the Real Property Review Board (“REPRB”) and the Office of Management and Budget 

(“OMB”) as to not approving its full term and PRDE not adequately explaining why it did not 

follow a competitive procurement process as required by Regulation 7040 for real estate 

agreements with terms exceeding five (5) years. The Second Contract exceeds by thirty-nine (39) 

days the 5-year term and the First Contract is for less than 5 years. 

10. LARS agrees that by enacting PROMESA Section 204(b), Congress intended for 

the agencies of the Commonwealth to promote competitive bidding and efficient use of the 

Commonwealth’s resources, but a thereof reveals that any established policies by the Board for 

said purposes requiring its review and approval of non-defined contracts, are directed to

governmental entities or government-owned corporations rather than private enterprises or persons 

such as LARS. This becomes clear when PROMESA Section 204(b)(2) is read in conjunction 

with Section 204(b)(3), which states “[i]t is the sense of Congress that any policies established by 

the Board pursuant to paragraph two (2) should be designated to make the government contracting 

process more effective, to increase the public’s faith in this process, to make appropriate use of the 

Board’s time and resources, to make the territorial government a facilitator and not a competitor to 

private enterprise, and to avoid creating any additional bureaucratic obstacles to efficient 

contracting”. 

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11. In its submission, the Board ignores that the Motion, as well as that relative to the 

First Contract, refers to a demand for payment pursuant to a valid lease agreement entered into 

after the filing of the Commonwealth Title III petition, which has been breached and is subject to 

specific performance by the provisions of Articles 1060, 1073, 1074 and 1346(e) of Puerto Rico’s

Civil Code1, independently of those of 11 U.S.C. § 503(b)(1)(A), warranting the payment of what 

is due LARS for the use and occupancy of the leased premises by PRDE, consisting in itself 

“actual, necessary costs of preserving” the Commonwealth by allowing PRDE to be able to 

operate, and as such allowable under 11 U.S.C. § 503(b)(1). 

12. As held in In re GT Advanced Techs., Inc., 547 B.R. 3 (Bankr. N.H. 2016) under 

First Circuit precedent, a claim is entitled to administrative priority under 11 U.S.C. §

503(b)(1)(A) if: 1) the right to payment arose from a post-petition transaction with the estate; and 

2) the consideration supporting the claimed right to payment was beneficial to the estate. See In re 

PYXSYS Corp., 288 B.R. 309, 317 (Bankr. D. Mass. 2003). When the debtor-in-possession’s 

actions themselves give rise to a legal liability, as here, the claimant is entitled to the priority of a 

cost and expense of administration. In re Mammoth Mart, Inc., 536 F.2d 950, 955 (1st Cir. 1976).

13. Here, the two Contracts entered into post-petition are necessary to preserve or 

rehabilitate the Commonwealth’s estate. 

14. By continuing with the use and occupancy of the leased premises, PRDE ratified 

the Contracts and its post-petition performance, at the very least, falls within the scope of 

administrative expenses with priority status under 11 U.S.C. § 503(b)(1)(A). In re Hotel Airport, 

Inc., 2014 Bankr. LEXIS 3990 (Bankr. P.R. 2014).

15. It is settled that the rights of the parties to a lease are governed by state law. See Butner v. 

1 Both Contracts were executed after November 28, 2020, the effective date of Puerto Rico’s New Civil Code and 

the cited Articles to in this Reply are those of the New Code. 

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United States, 440 U.S. 48 (1979); Stern v. Marshall, 564 U.S. 462, 495 (2011); Travelers Cas. & 

Sur. Co. of Am. v. PG&E, 549 U.S. 443, 451 (2007); In re Salutaris Dialysis & Nephrology Ctr., 

2012 Bankr. LEXIS 4914 (Bankr. P.R. 2012) (Under Puerto Rico law, obligations from contracts 

have legal force between the contracting parties, and must be fulfilled in accordance therewith).

16. A court cannot release a party from its contractual obligations when said contract is legal 

and valid and has no defect whatsoever. In re Salutaris Dialysis & Nephrology Ctr., supra at p. 13.

17. As a general rule, "the fact that a plaintiff who alleges a breach of contract has an adequate 

remedy by way of damages does not bar him from seeking performance of the contract." In re 

Salutaris Dialysis & Nephrology Ctr., supra at p. 13

II. BACKGROUND

18. Of the Background section of the Objection, LARS admits the statements of paragraph 8, 

9, 10 and 19, that it negotiated the First Contract, as the Second Contract with PRDE, averring that 

the Contracts were submitted by PRDE to LARS in the form in which they were executed 

following all applicable requirements under Commonwealth law, as set forth therein2, the only 

item subject to arm’s length negotiation being the contract price, resulting in the execution of the 

First Contract on January 15, 2021, and the Second Contract on May 21, 2021.

19. The remaining statements of paragraphs 10 to 22 of the Background section of the 

Objection consisting of matters and issues between PRDE, the Board, OCPR, the Puerto Rico 

Department of Justice, REPRB or OMB, are unknown to LARS, who had no participation therein, 

and can’t be attributed to him. 

20. As admitted by the Board at paragraph twenty-two (22) of the Background section of the 

Objection “both contracts remain under the Board’s review”. 

2 See Exhibit A to ECF No. 22338, the First Contract, and Exhibit A to ECF No. 23212, the Second Contract.

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III.ARGUMENT

A. The Board Utilizes a Congressionally-Authorized Policy Requiring Prior Board 

Review of Certain Unspecified Contracts is Applicable Only to Governmental 

Institutions of the Commonwealth When Entering Into Contracts or Leases 

Proposed Thereto Rather Than Those Proposed by Governmental Institutions to 

Third Parties Acting in Good Faith

21. The Board can only apply the control it advocates in the manner indicated above, since 

otherwise a contracting party, as LARS, would be totally blindsided as to the contracts proposed 

thereto by governmental entities and entered into in good faith3, relying on the representations 

made thereto by the governmental entities, as LARS did. 

22. At page 8 of the Objection, without any legal source, the Board states that the Policy 

pertains to contracts with an aggregate expected value of $10 million or more, to be entered into 

by the Commonwealth or any covered instrumentality, which excludes the Second Contract. 

Furthermore, the authority claimed by the Board under Section 204(b)(2) would otherwise be 

constitutionally vague in its application to LARS constituting an unbridled prohibited delegation 

of legislative powers to the Board. 

23. A statute is vague, when as here, a person of reasonable intelligence “must necessarily 

guess at its meaning” Broadrick v. Okla., 413 U.S. 601, 607 (1973) (quoting Connally v. General 

Construction Co., 269 U.S. 385, 391 (1926)). The statute “should be so construed that, if it can be 

prevented, no clause, sentence, or word shall be superfluous, void, or insignificant” TRW Inc. v. 

Andrews, 534 U.S. 19, 31 (2001) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)). “When 

Congress passes a vague law, the role of courts under our Constitution is not to fashion a new, 

clearer law to take its place, but to treat the law as a nullity and invite Congress to try again”.

United States v. Davis, 139 S. Ct. 2319, 2323 (2019). 

3 As set forth in Article 1062 of the Civil Code of Puerto Rico, 31 L.P.R.A. § 8983, both the debtor and the 

creditor must perform in good faith in compliance with the obligation. 

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24. As held in Centro de Periodismo Investigativo, Inc. v. Fin. Oversight & Mgmt. Bd. for 

P.R., 35 F.4th 1 (2022), in interpreting PROMESA Section 106, regarding the abrogation of the 

Board’s sovereign immunity “[w]hile we write on a blank slate with respect to this part of

PROMESA, however, we are guided by long-standing and well-settled principles of statutory 

construction. "[T]he critical first step in any statutory-interpretation inquiry" is to "closely examine 

the statutory text." We give the phrases or words Congress did not specifically define within 

PROMESA their "ordinary meaning." As we have previously noted when interpreting 

PROMESA, "[c]ourts interpret statutes to 'give effect, if possible, to every word Congress used,' 

and . . . reject 'interpretation[s] of the statute that would render an entire subparagraph 

meaningless.'" This court "indeed prefer[s] 'the most natural reading' of a statute, one that 

'harmonizes the various provisions in [it] and avoids the oddities that [a contrary] interpretation 

would create.'" (Citations omitted) 

25. This Court in In re Fin. Oversight & Mgmt. Bd., 583 B.R. 626 (D.C. P.R. 2017) in 

discussing the limitation of the Board’s power under PROMESA Section 204 to review new 

legislation and executive acts as being tied to the Commonwealth government’s initial 

responsibility to present certifications as to lack of significant inconsistency with the Fiscal Plan, 

and to respond to requests by the Board for information and explanation, stated: 

Similarly, the FOMB's negative power to review contracts under section 

204(b) is limited to "certain contracts," and is granted to enable the FOMB to 

ensure that those contracts "promote market competition and are not 

inconsistent with the approved [f]iscal [p]lan." Id. § 204(b)(2). By denying 

approval, the FOMB can prevent the Commonwealth or an instrumentality 

from going forward with a proposed course of action, but nothing in section 

204(b) affirmatively grants the FOMB the power to "control virtually 

everything PREPA does." The Court need not attempt to map the boundaries 

of the FOMB's contracting-related power at this juncture, but the plain 

language of section 204(b) makes clear that it cannot be read to reach any 

and all contracts. Although the FOMB could conceivably use its power 

under section 204(b) to create bureaucratic obstacles to hobble PREPA's 

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day-to-day functions, such actions would be irresponsible in this Court's 

view, and would be directly contrary to the sense of Congress expressed in 

section 204(b)(3). See PROMESA § 204(b)(3) ("[A]ny policies established 

by the Oversight Board . . . should be designed to make the government 

contracting process more effective, to increase the public's faith in this 

process, to make appropriate use of the Oversight Board's time and 

resources, to make the territorial government a facilitator and not a 

competitor to private enterprise, and to avoid creating any additional 

bureaucratic obstacles to efficient contracting.").

26. The quoted language is equally applicable to PRDE’s contracting with LARS.

27. Different from In re Fin. Oversight & Mgmt. Bd. for P.R., No. 17-bk-4780, 2022 WL 

1401506, at *4 (D.P.R. May 4, 2022), here PRDE’s obligation to pay rent to LARS arises from 

LARS’ contractual rights under the Civil Code of Puerto Rico, Grogan v. Garner, 498 U.S. 279,

283 (1991) (“The validity of a creditor's claim is determined by rules of state law”). This aside 

from the amount due LARS thereunder constituting “actual, necessary costs and expenses” of 

preserving the Commonwealth’s Department of Education. 

28. Due to his long-standing relationship with PRDE and his financial position, LARS has 

refrained to date from going forward with a request for Writs of Possession of the leased premises 

or from eviction proceedings against PRDE, which would create a chaos in PRDE’s operations, if

not a shutdown, due to the indispensable use of the leased premises by PRDE for its operations,

where hundreds of governmental employees work and earn their livelihood. However, LARS can’t 

refrain from doing so much longer, while not been paid for PRDE’s occupancy and having to 

continue providing services thereto. 

29. LARS’ inequitable position is underscored by having ex-post facto learned of the dispute 

regarding the process resulting in the execution of the Contracts, entirely performed by PRDE 

with no responsibility on LARS’ part or involvement in the internal governmental affairs. LARS 

followed every notification and instruction from PRDE in the process of executing the Contracts 

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and can’t be made responsible for any governmental errors or internal controversies relative 

thereto. There is no justification for PRDE’s failing to pay LARS what is due under the Contracts. 

30. According to the provisions of Law 147-1980, OMB is precluded from committing a 

governmental budget beyond the fiscal year in which general elections are held4. This responds to 

fiscal measures that limit OMB’s power to allocate funds for the execution of contracts during the 

governmental transition process. Therefore, it is under that framework that any evaluation of the 

First Contract should be made. Here, OMB’s authorization of the First Contract occurred on 

November 10, 20205, the year in which general elections were held. As such, by the limitations 

imposed by law, although OMB had the Contract in hand when authorizing the same, it could only 

allocate funds thereto until June 30, 2021, the day on which the fiscal year ended. Although from 

an outsider’s perspective, what transpired may seem irregular, when the relevant legal background 

is considered, it becomes evident that there was no wrongdoing, since by virtue of the statute the 

OMB could only budget funds to PRDE for the term allowed by law. For the subsequent term, 

PRDE had to procure an additional budgetary allocation. If there were any subsequent mishaps or 

negligence on the part of PRDE and/or OMB’s process, it falls outside LARS’ control or 

responsibility. Note that from the foregoing it appears that the allocation of funds made by the 

OMB until June 30, 2021, responds to the limitation, and not to non-availability of funds or a 

question as to the legality of the First Contract.

31. As to the Board’s position regarding competitive bidding, the fact is that for the time 

period during which PRDE entered into the First Contract, the governing process was established 

by Act 235-2014. The purpose of the statute was to establish a Multidisciplinary Board composed 

of different Heads of Agencies to ensure the preservation of public funds. In order to do so, the 

4 See, Art. 8, Law 147-1980, Organic Law of the Office of Management and Budget (23 L.P.R.A. § 108)

5 The authorization came quite some time before OGP’s Circular Letter 001-2021.

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REPRB had to perform the corresponding financial analysis. As such, to muster a generic 

argument of market rates and competitive bidding would be to turn a blind eye to the scope of 

work performed by REPRB. Throughout the relevant period, RPRB was the entity responsible for 

issuing resolutions to the public agencies, dependencies or instrumentalities of the 

Commonwealth, denying or granting the entry into lease agreements or purchases6. In this case, 

on July 22, 2022, REPRB issued resolution no. 2021-000148 authorizing the First Contract until 

December 31, 2025. Therefore, not only the First Contract complies with all applicable legislation, 

but the process of acquiring the required authorizations was undertaken according to the law. As it 

turned out, PRDE and REPRB were so zealous in the process that no single comparable contract 

has been found providing for a rent lower than the one set forth (but unpaid) in the First Contract, 

as indicated below.

32. An examination of all the existing leases for PRDE’s main offices reveals that LARS’ 

rental rates are significantly less than any other competitor. Yet, for unknown reasons, LARS is 

the entity suffering the consequences of the breach of the First Contract, albeit it being the one 

with lower rates to PRDE. For example, the following tenants have sizeable contracts and rates 

with PRDE vis a vis LARS: 

Company name: Sq. ft. Price/Sf Average 

Over Contract

Contract 

number:

LARS Floors 1-5: 

123,106.55

Annex: 28,431

$20.93

$20.43

081-000148 /

2021-000148

081-2021-0180 /

2021-000180

Alisios 13,586.1553 $25.74 081-2023-000036

Desarrollos 

Inmobiliarios Hato 

Tejas, LLC

108,296.171 $23.00 2021-000142

6 See, Art. 6 Law to create the Real Property Review Board of the Commonwealth of Puerto Rico, Law 235-2014. 

(3 L.P.R.A. § 9166)

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33. Pursuant to Puerto Rico’s Civil Code: “By the lease agreement, the lessor agrees to 

temporarily give the lessee the use and enjoyment of a good in exchange for a certain price7.” The 

Civil Code further provides that one of the obligations of the lessee is to: “pay the rent on time, 

according to the agreed terms8” and that the lessor is entitled to terminate the contract when the 

lessee fails to comply with the lease payments9. 

34. As an abecedarian principle applicable to breach of contracts, the case law has consistently 

held that: “[...] once a contract is perfected, it is binding upon the parties with regard to the 

fulfillment of what was expressly stipulated and to the consequences derived therefrom, in 

accordance with good faith, use, and the law10.” Likewise, the Puerto Rico Supreme Court has 

held that: “Actions ex contractu are based on the breach of a duty that arises from an express or 

implied contract and seek fulfillment of promises agreed to by the contracting parties11.” The 

Supreme Court has repeatedly held that: “[...] an action for damages for breach of contract lies 

only when the damage suffered arises exclusively as a consequence of the breach of an obligation 

specifically agreed upon, which damage would not occur without the existence of a contract12.” In 

the scenario of a contractual relationship between a lessor and a lessee, the Supreme Court has 

stated: “ [...] this does not bar, in appropriate cases, the action for damages13.” When perfecting 

contracts with a governmental entity in Puerto Rico, it has been said that the private vendor must 

execute additional steps which in this case were all performed.

35. Regarding the governmental contracting processes, Puerto Rico’s Supreme Court has held 

that the following requirements must be met: 1) reduce the contract to writing, 2) keep a record to 

7 See, 31 L.P.R.A. § 10101.

8 See, 31 L.P.R.A. § 10162.

9 See, 31 L.P.R.A. § 10171.

10 See also, Trinidad Rodríguez v. Doe, 2001 TSPR 7, 153 P.R. Dec. 280.

11 Id.

12 See, Rámos Lozada v. Orientalist Rattan Furniture, Inc., 130 P.R. Dec. 712 (1992)

13 Id.

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establish its existence, 3) send a copy to OCPR, 4) certify the certainty of time, all of which was 

complied with in the execution of the Contract. See, Vicar Builders Dev., Inc. v. E.L.A., 192 

D.P.R. 256 (2015). All the internal affairs as to any additional process to be completed with other 

agencies within the Commonwealth or even the Board are matters outside LARS’ responsibility.

36. Just 4 days prior to the execution of the First Contract, OMB issued Circular Letter 001-

2021. When that letter was distributed is unknown to LARS. It provides that the entities of the 

Executive Branch interested in contracting services in excess of ten thousand dollars ($10,000.00) 

in the same fiscal year: “[..] must initiate the request for authorization through OMB, using the 

Contract Processing System (PCo)”. The Circular Letter also establishes that: “[t]he remainder of 

the process will be governed by the General Services Administration (GSA) [...] and the 

regulations applicable to the GSA.” In what is relevant, GSA’s Regulation 9232 states that any 

lease must be carried out in accordance with the provisions of the applicable statutes, to wit: the 

statute creating the REPRB, Act 235 of December 19, 2014. Act 235 effectively superseded all 

regulations or other statutes related to real estate leasing transactions. Again, LARS is an innocent 

bystander that had no vision, knowledge or control of the process followed by PRDE in its

dealings for the execution of the Contract.

37. As the government contracting doctrine provides, the process met all the necessary 

requirements. To this effect, the Contracts were reduced to writing, a record was kept establishing 

their existence, a copy thereof was sent to OCPR, and finally, the requirement of them being 

registered fifteen days thereafter was met.

38. PRDE recently forwarded a draft of an amendment to the First Contract proposing for 

LARS to relinquish his contractual rights by terminating the First Contract on December 31, 2022. 

LARS has requested the reasons for such a proposal, PRDE failing to date in providing an answer.

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39. Notwithstanding, as established Circular Letter 001-2021, and admitted by the Board,

PRDE has requested the corresponding authorization to ratify the First Contract. According to the 

same Circular Letter, the remainder of the process was carried out through GSA and its Regulation 

9232. The latter establishes that the authorization process for the leasing of real estate was 

specifically delegated to REPRB, who on July 22, 2022, issued resolution no. 2021-000148, 

authorizing the Contract until December 31, 2025. As such, to simply propose the unilateral 

cancellation of the Contract by amending its termination date without payment of the arrears up to 

said date is untenable.

40. To further underscore LARS’ position as to the legitimacy of the Contracts and the right to 

be paid what is owed to him, on December 8, 2022, PRDE issued an invitation for bids for the 

administrative offices object of the two Contracts, with a pre-bid meeting scheduled for December

14, 2022 at and January 18, 2023, as the bar date for submission of bids as to a contract which 

mirrors LARS, for a minimum term of 5 years. The only participants at the pre-bid meeting were 

LARS’ representatives making evident the legitimacy of the two Contracts, underscoring LARS 

being the lowest, responsive, responsible bidder as to both.

B. The Contract Should Not be Subject to Review Pursuant to the Contract Review Policy

41. While here, the Board limits its statement to the Second Contract, as set forth in paragraph 

5, page 3 of the Objection it admits that both Contracts are still under review, for what is an 

extraordinary unreasonable period of time. 

42. There is no reason for the Board to combine the value of both Contracts to vacuously

argue that they exceed $15,787,611.42 in rent, when they are 2 and distinct contracts. A reading of 

the Contracts show that the First Contract is for $12,883,100.46 and the Second Contract for 

$2,904,510.96.

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43. The only purpose in the Board commingling the value of the Contracts can be to mislead 

the Court in believing that the Second Contract surpasses the $10,000,000.00 threshold as a 

requisite for its prior review and approval as its doesn’t exceed the 5 years mark. 

44. It would be totally inequitable and unfair for LARS to be tangled in the governmental 

maze as to which he doesn’t have any knowledge or control. 

C. The Contract Complies with Puerto Rico Certification and Registration

Requirements

45. As indicated above, both Contracts were registered with the OCPR within 15 days of their 

execution. As to the First Contract see Exhibit A at ECF No. 22338. As to the Second Contract 

see Exhibit A at ECF No. 23212. Both Contracts were submitted by PRDE and registered by 

OCPR with their full terms and conditions. In addition to the above requirements having been met 

in the case of the two Contracts, the Board seeks to impose on LARS additional requirements 

which by the clear letter of the law are PRDE’s responsibility, that is the keeping of a registry of 

the Contracts. (See paragraphs 30-32 of the Objection), particularly when in paragraph 32 the 

Board states as to the Second Contract that “while it appears to have been submitted and registered 

with OCPR, the contract value that the registry identifies is inaccurate because it only reflects the 

Second Contract’s annual rent payment for the first year of each of the lease agreements and not 

its total amount”. If there are any errors in their recording by OCPR neither PRDE or LARS can 

be blamed therefor. The fact is that both Contracts were delivered to OCPR by PRDE and 

recorded with their full terms and conditions, see Exhibit B at ECF No. 22338 and Exhibit C at 

ECF No. 23212. In any event as recognized by the Board, Article 8.1(f) of Regulation 33 is 

directed to government entities, such as PRDE, which are required thereunder, when registering a 

contract with OCPR, to submit the total amount to be paid, as PRDE did as to the two Contracts 

by submitting full copies to said office. 

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46. At paragraph 33 of the Objection, the Board states that OMP and REPRB approved the 

Second Contract only until June 30, 2021, that is for forty (40) days, when the term of the Contract 

is for five (5) years and forty (40) days. This posture is untenable, senseless and contrary to the 

provisions of the Second Contract, not only as to its term but as to the PRDE’s representations 

therein that as well as in the First Contract as to having “obtained all approvals required by law 

prior to the execution of this Agreement, including the approval of the Office of Management and 

Budget, the Office of the Governor and the Real Estate Property Review Board pursuant to Act 

235 of 2014 and circular letters enacted thereunder”. Exhibit A at ECF No. 22338 and Exhibit A

at ECF No. 23212.

47. At paragraph 34 of the Objection, the Board avers that the costs asserted in the Motion as 

to the Second Contract are not within the period covered by the existing certifications from 

REPRB and OMP, and the registration with OCPR, and therefore the asserted costs are not 

entitled to administrative expense priority. In doing so, the Board ignores that the Motion is also 

premised on a specific performance of contract action under the Civil Code of Puerto Rico.

48. The two Contracts don’t contravene the goals with respect to any policy established

pursuant to Section 204(b), considering the specific facts thereof, underscored by LARS being the 

sole appearing bidder at the pre-bid meeting of December 14, 2022 regarding a new bidding 

process established by PRDE, which mirrors the needs fulfilled by the First Contract as 

complemented by the Second Contract, both of which were entered into by LARS and PRDE in 

the best interests of the Commonwealth and the citizens of Puerto Rico, and which the Board 

represents are still being evaluated thereby. 

D. The Motion is Not Barred as Untimely

49. The Board avers that pursuant to Section 1.51 and Article III of the Modified Eighth 

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Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico (the “PAD”) 

(ECF No. 19813-1) and the confirming the PAD (ECF No. 19813), the deadline for filing proof 

of claims or requests for payment of Administrative Expense Claims was June 13, 2022 (the “Bar 

Date”), and that LARS being notified of such bar date on March 15, 2022, having filed the Motion

as to the Second Contract on December 22, 2022, the same is untimely.

50. The Board forgets that the Motion constitutes an action for specific performance of a 

contract pursuant to the Civil Code of Puerto Rico, which is of a continuous nature, where the 

amount claimed increases from month to month and not finally by a date certain prior to the 

establishment of the Bar Date. To this effect the Confirmation Order exempts from the Bar Date, 

the filing of an administrative claim if it, as in the case of the Second Contract, relates to actions 

occurring in the ordinary course during the period from and after the petition date up to and 

including the Effective Date. Assuming the applicability of the Bar Date, which is denied, due to 

the special circumstances relative to the Second Contract and the promises of payment by PRDE,

in consideration of the fundamental fairness doctrine, pursuant to the provisions of 11 U.S.C. §

503(a) the Court can grant LARS leave to tardily file the Motion, as there would be sufficient 

cause therefor. 

51. As held by the Court in In re Fin. Oversight & Mgmt. Bd., 481 F. Supp. 3d 60 (D.C. P.R.

2020), the “fundamental fairness” doctrine has been interpreted within the First Circuit to support 

administrative expense priority to tortious actions arising from post-petition activities by a debtor 

or when the post-petition actions deliberately violate applicable law and damage others. 

Inclusively an administrative claim as to the contracts may not be ripe at this moment, since the 

Board has repeatedly stated that both Contracts are still under its evaluation, meaning that it may 

grant its approval thereto. Thus, LARS claims under the Contracts are in a limbo status and 

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warrant the decision of the Board approving the Contracts. To underscore this enigma if the Board 

approves the two Contracts, and LARS is paid pursuant thereto, the matters at bench will become 

moot. If the Board disapproves the Contracts, LARS’ claims will still be alive with the possible 

consequences of PRDE having to vacate the leased premises and relocate hundreds of 

governmental employees and the creation of a chaos in PRDE, with the resulting adverse 

consequences on the Commonwealth and its citizens. Thus, more than justification for the Court to 

decide LARS’ claim as to the Second Contract. 

IV. CONCLUSION

52. Considering the particular facts relative to the two Contracts and the unusual 

circumstances under which PRDE is in the use and possession of the leased premises, without 

paying rent therefor, it is warranted that this unconstitutional taking of LARS’ properties be 

remedied by this Court directing PRDE to pay LARS what is owed thereto, as set forth in 

Exhibits I and III to this Reply and further directing the Board to state its final position regarding 

its review and approval or disapproval of the two Contracts entered into by LARS and PRDE. 

Respectfully submitted. 

San Juan, Puerto Rico this 13th day of January 2023

s/Charles A. Cuprill-Hernández

USDC-PR 114312

Charles A. Cuprill, P.S.C. Law Offices

356 Fortaleza Street - Second Floor

San Juan, PR 00901

Tel. 787-977-0515

Fax: 787-977-0518

E-mail: cacuprill@cuprill.com

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CERTIFICATE OF SERVICE: I hereby certify that on this same date I electronically 

filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send 

notification of such filing to all ECF participants; and to those parties listed in this Court’s 

Sixteenth Amended Notice, Case Management and Administrative Procedures (ECF No. 

20190-1) not served by the CM/ECF system.

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