Opinion ID: 3176495
Heading Depth: 2
Heading Rank: 1

Heading: Start of Article 1061 Interest Accrual

Text: Article 1061 does not provide for a specific accrual period. It simply states that creditors have a right of indemnity when the obligation consist[s] in the payment of a sum of money, 7 Based on its view that Redondo raised Article 1061 for the first time at oral argument, the Authority also argues that Redondo's claim is barred by a fifteen-year statute of limitations. See 31 L.P.R.A. § 5294. We reject this argument by finding that Redondo developed its claim to Article 1061 interest in its response motion filed in Redondo II. We make no comment on whether § 5294 delineates the appropriate statute of limitations for Article 1061 or whether the statute of limitations would have run during the litigation. -13- and the debtor [is] in default. 31 L.P.R.A. § 3025. The parties agree that under these terms, Article 1061 interest begins accruing when a party defaults. They disagree, however, about when default occurred in this case. Looking to other provisions of the Puerto Rico Civil Code, Article 1053 defines when parties default under contract law. Normally, a party is in default from the moment when the creditor demands the fulfilment [sic] of [its] obligation, judicially or extrajudicially. 31 L.P.R.A. § 3017. Pursuant to this provision, the Authority argues that the bankruptcy court should have started calculating the accrual of prejudgment interest from the date Redondo filed its complaints demanding additional compensation. Article 1053, however, first provides two exceptions to this rule: (1) as otherwise provided by law and (2) [i]f by reason of its nature and circumstances it may appear that the fixing of the period within which the thing was to be delivered or the service rendered was a determinate cause to constitute the obligation. Id. § 3017(1), (2). Further, Article 1053 provides that default for contracts of mutual obligation commences when one of the persons obligated fulfills his obligation the default begins for the other party. Id. § 3017. The Puerto Rico Supreme Court has held that construction contracts, such as the ones between Redondo and the Authority, are -14- contracts of mutual obligation. Constructora Bauzá, Inc. v. García López, 129 D.P.R. 579, 1991 P.R.-Eng. 735, 859 (1991). Thus, Article 1053's general rule that a party is in default only upon the demand of the creditor does not apply. 31 L.P.R.A. § 3017. Rather, Article 1053's terms for contracts of mutual obligations control and the Authority was in default from the time Redondo fulfilled its obligations -- in other words, from the dates the construction projects were substantially completed. Id. These were the start dates used by the bankruptcy court and thus we find no error.8