Court Opinion

ID: 200704
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:58:12+00
Date Added: 2024-06-11T12:06:49.882365
License: Public Domain

Not for publication in West's Federal Reporter
              Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

          United States Court of Appeals
                       For the First Circuit

No. 02-2409

              THE EQUITABLE LIFE ASSURANCE SOCIETY
                      OF THE UNITED STATES,

                        Plaintiff, Appellant,

                                     v.

                   SOFTEX PRODUCTS, INC., P.R.,

                        Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF PUERTO RICO

        [Hon. Juan M. Pérez-Giménez, U.S. District Judge]

                                  Before

                        Lynch, Circuit Judge,

                 Arnold,* Senior Circuit Judge,

                    and Howard, Circuit Judge.

     Marshal D. Morgan, with whom Francisco A. Besosa and Adsuar
Muniz Goyco & Besosa, P.S.C. were on brief, for appellant.
     John R. O'Connor for appellee.

                           October 27, 2003

* Of the Eight Circuit, sitting by designation.
            Per Curiam.        Plaintiff Equitable Life Assurance Society

(“Equitable”) challenges, inter alia, the district court’s entry of

summary judgment in favor of defendant Softex Products, Inc., P.R.

(“Softex”) in a dispute over the allocation of property taxes in a

lease agreement.             After   due   consideration     of       the   record,   we

reverse.

                  I.    Factual and Procedural Background

            Beginning in November 1995, Softex leased a portion of a

building in an industrial park owned by Industrial Warehouses, Inc.

(“Industrial”).        In the lease, Softex agreed to pay monthly rent,

as well as its pro rata share (based on the square footage Softex

occupied)   of    property       taxes     assessed   to   the    parcel      owned   by

Industrial.      The lease term was five years.

            Softex manufactured paper products and, by virtue of its

business    line,      was    potentially     eligible     for    a    ninety-percent

reduction in taxes under Puerto Rico law.                        Softex sought and

obtained a tax exemption from the Puerto Rico Office of Industrial

Tax Exemption ("OITE") in 1996.1                 Industrial, as owner of the

     1
      The parties dispute the legal effect of this exemption.
Equitable, the successor to Industrial’s interest in the lease,
argues that the exemption applied only to real and personal
property that Softex owned, and that as to the leased property,
Softex could only take advantage of the exemption if the owner also
obtained a tax exemption. Neither Industrial nor Equitable ever
obtained a tax exemption from the Commonwealth for the property
leased by Softex.      At oral argument, counsel for Equitable
represented that as a result, Equitable is liable to the
Commonwealth for the full (i.e., unabated) amount of property taxes
during Softex’s tenancy, although it appears that those taxes have

                                           -2-
property leased to Softex, unsuccessfully sought a tax exemption

for the property in 1998; its application was denied with prejudice

because Industrial had outstanding debts to the government.

             In    June    1999,    Industrial     transferred      title     to   the

property (and assigned all related leases) to Equitable, a New York

corporation, as payment on an outstanding debt.                     At that time,

Softex   ceased      contributing      towards     the    taxes    on   the    leased

property.     When Softex’s lease expired at the end of 2000, the

parties became embroiled in a dispute over the amounts due from

Softex as a holdover tenant.                Equitable initiated an eviction

action against Softex in Puerto Rico superior court in March 2001,

and   soon   thereafter      brought       the   underlying    diversity       action

seeking overdue rent, taxes, insurance premiums, and operating

expenses.         Within   weeks,    the    parties      settled   most   of    their

differences by a stipulation in the eviction action.                    The dispute

over property taxes remained, however, and the federal action went

forward on this basis.

not yet been paid because of administrative delays. It likewise
appears that Softex paid some or all of its portion of the property
tax assessments during the period that Industrial owned the
property, without reduction on the basis of any purported
exemption.
     By contrast, Softex contends that the exemption entitled it to
reimbursement for ninety percent of its taxes, regardless whether
the taxes assessed on the property occupied by Softex were actually
reduced by the Commonwealth. Because our conclusion turns on the
language of the lease, we need not involve ourselves in this
dispute.

                                        -3-
            In    May     2001,    Softex      filed    counterclaims     against

Equitable, seeking relocation costs, reimbursement for property

taxes    previously       paid,   and   $50,000    in     unspecified    damages.

Equitable moved to dismiss the counterclaims for failure to state

a claim upon which relief may be granted.                   See Fed. R. Civ. P.

12(b)(6).        Softex    opposed,     and,    after   a   somewhat    irregular

progression of filings, the district court was presented with what

amounted    to     cross-motions        for     summary      judgment    on   the

counterclaims.2      Equitable also moved for summary judgment on its

own claims, alleging that the lease unambiguously required Softex

to pay its full share of property taxes.

            In a September 16, 2002 order, the district court denied

Equitable’s motion for summary judgment on its claims against

Softex, concluding that the lease agreement was ambiguous as to who

was responsible for the property taxes at issue.                 Turning to the

legislative intent behind the tax exemption laws for guidance in

interpreting the contract, the court found that Softex was entitled

to a tax exemption, although the OITE had not in fact granted such

     2
      Softex responded to the motion to dismiss in a filing titled
“Opposition to Motion to Dismiss And/Or Motion for Summary Judgment
Pursuant to Rule 56, Federal Rules of Civil Procedure.” It asked
the district court to consider an affidavit of a Softex officer who
negotiated the lease. Softex did not, however, attach a statement
of uncontested material facts as required by Local Rule 311.12.
Equitable responded with a request that its motion to dismiss be
treated as a cross-motion for summary judgment.           Equitable
submitted a statement of uncontested material facts in compliance
with the local rules.

                                        -4-
an exemption to Industrial or Equitable as owners of the property.

             The district court granted Equitable’s motion to dismiss

the counterclaims in part, concluding that Softex failed to state

any factual predicate for its claim of $50,000 in unspecified

damages.3      The district court did not expressly award Softex

relocation costs and reimbursement for prior property taxes paid,

but appeared to do so implicitly by granting Softex’s motion for

summary judgment without explanation.      Equitable appealed.

                             II.   Analysis

             Summary judgment is appropriate when there is no genuine

issue as to any material fact and the moving party is entitled to

judgment as a matter of law.       Rochester Ford Sales, Inc. v. Ford

Motor Co., 287 F.3d 32, 38 (1st Cir. 2002).      The district court’s

summary judgment ruling is subject to plenary review.        See id.

Typically, we construe the record in the light most favorable to

the nonmovant, resolving all reasonable inferences in that party's

favor.      See id.    But here, the district court accepted the

uncontested material facts submitted by Equitable because Softex

failed to comply with Local Rule 311.12. United Parcel Serv., Inc.

v. Flores-Galarza, 318 F.3d 323, 330 & n.10 (1st Cir. 2003).       We

uphold that ruling, which was well within the district court’s

discretion, see id., and consider the facts accordingly.

     3
         Softex has not appealed this ruling.

                                   -5-
          On appeal, Equitable contends that the district court

found contract ambiguity where there was none, and therefore acted

improperly in interjecting the legislative intent underlying the

tax laws into the parties' lease agreement.     Equitable further

argues that Softex is not entitled to the damages sought in the

counterclaims.   We find Equitable’s arguments persuasive.

A.        Property Tax Liability

          Equitable contends that the lease unambiguously assigned

responsibility for taxes on the subject property to Softex.

Section 4 of the lease agreement addressed the issue of taxes:

          (a) In addition to the minimum rental to be
          paid by LESSEE . . . LESSEE agrees to pay to
          LESSOR in the manner and at the times
          hereinafter provided an amount equal to
          26.716%4 of all real estate taxes and
          assessments levied or imposed upon any and all
          of the parcel of land before described and on
          the    building    erected   thereupon,    and
          improvements thereto, except that the LESSEE
          shall be under no obligation to pay any
          income, corporation, inheritance, devolution,
          gift or estate tax or any other tax which may
          be charged or assessed against the LESSOR, or
          any tax upon the sale, transfer, assignment of
          the title or estate of the LESSOR which at any
          time may be assessed against or become a lien
          upon the DEMISED PREMISES, this leasehold or
          the rent accruing therefrom. The LESSOR may
          have received or may receive in the future,
          tax exemptions on portion of the land and
          building for which the LESSEE may not be

     4
      The figure 26.716% is derived from the percentage of the
industrial park property that Softex occupied. During its tenancy,
Softex leased additional space, bringing its share of the property
to 43.076%.

                               -6-
           entitled, in which case the LESSEE will be
           responsible for aforementioned percentage of
           real estate taxes and assessments based on the
           full assessed value without regard to any tax
           credits or exemptions.

(emphasis added).

           The first part of § 4(a) states that Softex, as lessee,

is   responsible   for   its   share   of   real   estate   taxes.   This

responsibility is underscored in the next sentence, which states

that the lessee must pay its percentage of the full assessed value

of the property, “without regard to any tax credits or exemptions”

that the lessor obtains or may obtain in the future.

           The district court noted that, in this case, it was the

lessee, not the lessor, who held an exemption, and concluded that

4(a) “does not speak to [this] inverse situation.” Finding this an

ambiguity not addressed by the lease, the district court looked to

the tax exemption laws for guidance.        The district court concluded

that Softex should have had the benefit of a reduction in property

taxes, and therefore denied Equitable’s claim for past due property

taxes and granted Softex’s claim for reimbursement by Equitable.

           We take a different view of the lease, which required

Softex to pay its share of “all real estate taxes and assessments

levied or imposed” on the property owned by Equitable.               This

unqualified language governs, because nothing in the lease suggests

that the parties intended to cap Softex's tax obligation at the

tax-exempt rate.    If Softex wanted its tax obligation to be pegged

                                   -7-
to whether it received a discounted tax rate, it should have

negotiated such a condition in the lease.              See Martin v. Vector

Co., Inc., 498 F.2d 16, 24 (1st Cir. 1974).             Because the lease is

clear, we look no further than its four corners.            31 P.R. Laws Ann.

§ 3471 (“If the terms of a contract are clear and leave no doubt as

to the intentions of the contracting parties, the literal sense of

its stipulations shall be observed. If the words should appear

contrary to the evident intention of the contracting parties, the

intention    shall    prevail.”);    Executive    Leasing    Corp.   v.     Banco

Popular de P.R., 48 F.3d 66, 69 (1st Cir. 1995) (“[T]o consider the

extrinsic evidence at all, the court must first find the relevant

terms of the agreement unclear.").

            In addition to the rationale provided by the district

court, Softex points to the absence of an integration clause in the

lease, inviting us to consider extrinsic evidence purportedly

showing   that     the   parties   intended    that    Softex    would    not   be

responsible for its full share of property taxes.                See Executive

Leasing, 48 F.3d at 69.            Even if we assume arguendo that the

absence of    an     integration    clause    allows   us   to   consider    such

evidence, the outcome would be no different.                Having failed to

contest Equitable’s version of the facts or to present a statement

of uncontested material facts in support of its own theory of the

case, Softex is bound by the facts as presented by Equitable, which

                                      -8-
do not include the parol evidence on which Softex hopes to rely.5

          We conclude that, by virtue of the clear and unambiguous

lease terms, Softex bore liability for the specified percentages of

the property taxes ultimately imposed on the subject property, as

well as the risk that the amounts assessed by the Commonwealth

would not be reduced on the basis of a tax exemption.       We therefore

reverse the district court’s entry of summary judgment in favor of

Softex and remand with instructions that judgment be entered in

favor of Equitable on this issue.

B.        Relocation Expenses

          Equitable argues that the district court erroneously, and

perhaps   inadvertently,   awarded    Softex   relocation    costs   and

reimbursement for prior property taxes paid.      Although the record

is somewhat ambiguous, it appears that after the district court

dismissed Softex’s claim for $50,000 in unspecified damages on

Equitable’s motion, it granted summary judgment in favor of Softex

     5
      Softex also contends that the language of the lease itself
demonstrates that the parties intended that Softex would have the
benefit of its tax exemption. As support, Softex points to the
portion of § 4(a) that states that Softex “shall be under no
obligation to pay any income, corporation, inheritance, devolution,
gift or estate tax or any other tax which may be charged or
assessed against the LESSOR” (emphasis added). Softex would have
us conclude that this general “or any other tax” language prevails,
rendering meaningless the preceding clause specifically assigning
to Softex an obligation to pay a portion of the taxes on the
property. Because we consider the terms of the lease together,
rejecting interpretations that would render portions of the
contract meaningless, see 31 P.R. Laws Ann. § 3475, we find this
argument meritless.

                                -9-
on the remainder of Softex’s counterclaim (i.e., relocation costs

and prior property taxes paid by Softex).6   The district court did

not make any factual findings regarding the relocation costs, nor

did it draw any legal conclusions that could form a basis for

imposing liability on Equitable.

          Equitable argues that any costs sought by Softex would

have been incurred in vacating the property at the conclusion of

the lease, and that Softex has neither alleged nor proven any

wrongdoing on Equitable’s part that would give rise to liability

for such costs.   Faced with the uncontested facts as presented by

Equitable, and the dearth of documentation regarding the amount and

nature of the damages sought by Softex,7 we agree with Equitable.

     6
      We reverse the district court’s award of property taxes to
Softex for the reasons discussed in Section II.A., above, and
therefore limit our discussion of Softex’s counterclaims to the
issue of relocation expenses.
     7
      Even if we did not adopt Equitable’s version of the facts,
Softex’s opposition to Equitable’s motion to dismiss (a putative
motion for summary judgment on its counterclaims) presented no
evidence documenting its purported $33,620.61 in relocation costs.
Its sole supporting affidavit, a statement by an officer of the
company, merely stated that Softex incurred “relocation expenses .
. . due to the bad faith perpetrated by landlord onto the tenant.”
On appeal, Softex asks us to take judicial notice of the fact that
it was forced to move equipment and machinery approximately thirty
miles, which resulted in various fees and costs. Such matters are
not susceptible to judicial notice. American Foreign Ins. Assn. v.
Seatrain Lines of P.R., Inc., 689 F.2d 295, 297 (1st Cir. 1982).

                               -10-
Accordingly, we also reverse the judgment below to the extent it

awards Softex damages on its claim for relocation expenses.

                         III.   Conclusion

          For the foregoing reasons, we reverse and remand with

instructions to enter judgment for Equitable on the issue of

liability and dismissal of the counterclaims asserted by Softex.

The case is remanded to determine the amount of Equitable’s damages

in further proceedings consistent with this opinion.

          So ordered.

                                -11-