Court Opinion

ID: 812383
Source: CourtListenerOpinion
Date Created: 2012-11-21 19:28:22+00
Date Added: 2024-06-11T18:00:44.716877
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 12-1326

              IN RE:   REDONDO CONSTRUCTION CORPORATION,
                                Debtor.

                  REDONDO CONSTRUCTION CORPORATION,

                               Appellee,

                                  v.

        PUERTO RICO HIGHWAY AND TRANSPORTATION AUTHORITY,

                              Appellant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

       [Hon. Carmen Consuelo Cerezo, U.S. District Judge]

                                Before

                   Torruella, Howard and Thompson,
                           Circuit Judges.

     Raúl Castellanos-Malavé, with whom Development & Construction
Law Group, LLC was on brief, for appellant.
     Freddie Pérez-González, with whom Freddie Pérez-González &
Assoc., P.S.C. was on brief, for appellee.

                           November 21, 2012
           HOWARD,     Circuit      Judge.       Chapter     11    debtor    Redondo

Construction     Corporation        ("Redondo")         brought     an     adversary

proceeding against the Puerto Rico Highway and Transportation

Authority ("Authority") in the United States Bankruptcy Court for

the   District   of    Puerto    Rico,    claiming       amounts    due     for   work

performed on five construction projects.                   Following a lengthy

trial, the bankruptcy court awarded Redondo a total of nearly

$10,250,000 in damages, plus interest at 6% per annum from the

"payment due" date for each project.                 The district court affirmed

the judgment in all respects.            The crux of the Authority's claim

before this court concerns the award of interest.

                          I.     PROCEDURAL HISTORY

           After      filing    a    voluntary        petition     for    bankruptcy

protection   under     Chapter      11   of    the    Bankruptcy    Code,    Redondo

commenced an adversary proceeding against the Authority to collect

monies that the Authority allegedly owed Redondo for work performed

on five construction projects.1          Redondo claimed that the Authority

failed to compensate it for additional work Redondo had to perform

on each project due to unanticipated problems, including unforeseen

site conditions and flawed design plans.                The complaint was tried

before the bankruptcy court.

      1
       The five projects are: Las Cumbres Avenue, Río Grande de
Loíza Bridge, Ponce-Adjuntas PR-10, Kennedy Avenue, and Third
Millennium Park.    Redondo initially made a claim for a sixth
project but voluntarily dismissed the claim before trial.

                                         -2-
                  In its post-trial brief, Redondo argued that it was

entitled to prejudgment interest under Article 1061 of the Puerto

Rico Civil Code as damages for contractual delay.               See P.R. Laws

Ann.       tit.    31,   §   3025.   In   the   alternative,   Redondo   sought

prejudgment interest under Rule 44.3(b) of the Puerto Rico Rules of

Civil Procedure on the basis of the Authority's alleged obstinacy

in the course of the litigation.            See P.R. Laws Ann. tit. 32, app.

III, R. 44.3(b).

                  The bankruptcy court entered judgment in Redondo's favor

and awarded interest on all damages at the rate of 6% per annum

from the "payment due" date for each project.2             In its summary of

Redondo's claims, the court noted that Redondo sought interest for

contractual delay pursuant to Article 1061.            In awarding interest,

however, the court quoted the language of Rule 44.3(b) and, without

further reasoning, concluded that Redondo was entitled to the

"current legal interest" of 6%.

                  The Authority challenged the bankruptcy court's decision

in the district court, see 28 U.S.C. 158(a), arguing that the

bankruptcy court erred in awarding Redondo damages on some of the

claims and in assessing interest under Rule 44.3(b).             The district

       2
       The bankruptcy court awarded interest from August 10, 2001
for the Las Cumbres Avenue, Río Grande de Loíza Bridge, and Ponce-
Adjuntas PR-10 projects; from July 18, 1999 for the Kennedy Avenue
project; and from December 3, 2000 for the Third Millennium Park
project. In so doing, the court agreed with Redondo's expert that
interest began to accrue thirty days after the date of final
inspection for each project, when payment became due.

                                          -3-
court affirmed the judgment in all respects, without elaborating

its reasons for affirming the award of interest.           This timely

appeal followed.

                             II.   ANALYSIS

           The Authority presents three claims of error. First, the

Authority argues that, to the extent that the 6% interest award

represents postjudgment interest, the rate instead should be 0.11%

in accordance with 28 U.S.C. § 1961.          Second, it argues that no

prejudgment interest was owed because the court did not make a

finding that the Authority had engaged in obstinate conduct in the

course of the litigation, as Rule 44.3(b) of the Puerto Rico Rules

of Civil Procedure requires.       Finally, it argues that the court

erroneously awarded Redondo an excess amount for its patent and

excise taxes claim for one project.

           We review the bankruptcy court's findings of fact for

clear error and its rulings of law de novo.             In re Advanced

Cellular Sys., Inc., 483 F.3d 7, 10 (1st Cir. 2007).       In so doing,

we provide "no particular deference" to the district court's

conclusions.   Id. (internal quotation marks omitted).

A.   Postjudgment Interest

           The parties agree that 28 U.S.C. § 1961 governs any

postjudgment interest award in this case. See Cummings v. Standard

Register Co., 265 F.3d 56, 68 (1st Cir. 2001) (federal law governs

postjudgment interest on a federal court judgment even in an action

                                   -4-
otherwise governed by state law).        Section 1961 provides that

"[i]nterest shall be allowed on any money judgment in a civil case

recovered in a district court" and is to be calculated "from the

date of the entry of the judgment" at a rate fixed in the statute.

28 U.S.C. § 1961; Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494

U.S. 827, 835 (1990).    Postjudgment interest is mandatory and the

prevailing party is entitled to it even if the district court made

no provision for its payment. Cordero v. De Jesus-Mendez, 922 F.2d

11, 15 (1st Cir. 1990).

          The interest awarded in this case was not intended to be

postjudgment interest.    The judgment provides that interest at 6%

per annum began to accrue from specified dates when the Authority

was required to pay Redondo's claims for each project, well before

the entry of judgment in Redondo's favor.      Although the judgment

does not specify the end date for the accrual of interest, there is

nothing to suggest that it would extend beyond the date of entry of

the judgment.

          The issue of postjudgment interest nonetheless remains.

The Authority deposited the amount of the judgment with the clerk

of the district court on February 17, 2012, stalling the accrual of

postjudgment interest as of that date.     See Cordero, 922 F.2d at

18-19 (postjudgment interest ceases to accrue as of the date of

deposit of funds with the court).      Because the judgment had been

entered on September 30, 2011, Redondo is entitled to postjudgment

                                 -5-
interest for the period between the entry of judgment and the date

of deposit.       The Authority suggests that the amount that it

deposited includes interest at a rate of 6% for that time period,

rather than the lower statutory rate.              Accordingly, we remand for

assessment of postjudgment interest from September 30, 2011 to

February 17, 2012 at the rate provided in Section 1961.

B.   Prejudgment Interest

            "When state-law claims (such as the contract claims at

issue   here)    are   adjudicated    by     a    federal    court,   prejudgment

interest is normally a matter of state law."                In re Redondo Constr.

Corp., 678 F.3d 115, 125 (1st Cir. 2012).                Here, the law of Puerto

Rico supplies the rule of decision concerning prejudgment interest.

See id.

            The bankruptcy court awarded Redondo prejudgment interest

on all damages at the rate of 6% per annum from the payment due

date for each project.        The parties disagree whether the interest

was assessed as a sanction under Rule 44.3(b) of the Puerto Rico

Rules of Civil Procedure or as damages for contractual delay under

Article   1061   of    the   Puerto   Rico       Civil   Code.    The   Authority

maintains that prejudgment interest was awarded pursuant to Rule

44.3(b) but erroneously so because the court failed to make the

requisite finding that the Authority was obstinate in litigating

the case.   Redondo concedes that the lack of a finding of obstinacy

precludes assessment of interest pursuant to Rule 44.3, but argues

                                      -6-
that the court awarded interest pursuant to Article 1061, not

pursuant to Rule 44.3.

            Rule 44.3(b) provides for prejudgment interest at a

specified rate when the court determines that the losing party was

obstinate in the course of the litigation.3             P.R. Laws Ann. tit.

32, app. III, R. 44.3(b); Dopp v. Pritzker, 38 F.3d 1239, 1252 (1st

Cir. 1994).        "A finding of obstinacy requires that the court

determine    a     litigant   to   have    been    unreasonably   adamant    or

stubbornly       litigious,   beyond      the   acceptable   demands   of   the

litigation, thereby wasting time and causing the court and the

other litigants unnecessary expense and delay."              Dopp, 38 F.3d at

1252 (internal quotation marks omitted).               The bankruptcy court

cited Rule 44.3(b) as the basis for the interest award.                But the

court made no finding of obstinacy, precluding the assessment of

interest pursuant to Rule 44.3(b).                See In re Redondo Constr.

Corp., 678 F.3d at 126 (rejecting the argument that Rule 44.3(b)

provided the basis for prejudgment interest award in a different

adversary proceeding between the same parties "because the court

made no finding regarding the Authority's temerity or obstinance").

            To salvage the interest award, Redondo argues that the

bankruptcy court did not mean what it said. Redondo maintains that

     3
       Although the rule does not apply when the defendant is the
Commonwealth of Puerto Rico or one of its agencies, the exemption
does not extend to public corporations like the Authority.
Rodriguez Cancel v. P.R. Elec. Power Auth., 16 P.R. Offic. Trans.
542 (1985).

                                       -7-
the court in fact awarded interest for contractual delay pursuant

to Article 1061 but instead cited to Rule 44.3(b) either in error

or to indicate its inapplicability.4        We cannot indulge such

speculation.     The bankruptcy court did acknowledge that one basis

for Redondo's interest claim was Article 1061.       Nothing in the

opinion, however, indicates that the court awarded interest on this

basis.

          Nor can we determine from the record before us that

Redondo is entitled to the prejudgment interest award pursuant to

Article 1061.5     Unless parties agree otherwise, when a contract

obliges a party to pay a sum of money, Article 1061 provides for

payment of interest "as an [] indemnity for damages, by way of

penalty, for default in payment." Rivera v. Crescioni, 77 P.R. 43,

51 (1954); accord P.R. & Am. Ins. Co. v. Superior Court of P.R., 84

P.R. 597, 599 (1962).    Default in payment occurs "as of the date in

     4
        Redondo indeed goes further and explains the court's
apparent blunder as "the result of [the judge's] time constraints
in the drafting of his decision[.]" The judge retired on the day
he issued the opinion.
     5
       Captioned "Interest as indemnity for nonpayment of money,"
Article 1061 provides:
     Should the obligation consist in the payment of a sum of
     money, and the debtor should be in default, the indemnity
     for losses and damages, should there not be a stipulation
     to the contrary, shall consist in the payment of the
     interest agreed upon, and should there be no agreement,
     in that of the legal interest. Until another rate is
     fixed by the Government, interest at the rate of six
     percent (6%) per annum shall be considered as legal.
P.R. Laws Ann. tit. 31, § 3025.

                                  -8-
which judicial or extrajudicial demand was made for [payment]."

Widow of Vázquez v. Vázquez Cintrón, 85 P.R. 266, 268 (1962)

(citing 31 P.R. Laws Ann. tit. 31, § 3017).                We cannot determine

when   such    demands   were   made    in   this   case    and   whether   they

correspond to the dates that the bankruptcy court designated for

the accrual of interest.

              Because uncertainty surrounds the prejudgment interest

award, we remand the case to the district court with instructions

to vacate that award and return the case to the bankruptcy court

for a determination of whether an award of prejudgment interest is

appropriate, and, if so, the basis for the award, the applicable

rate of interest, and the period of accrual.           We take no view as to

the outcome of this further inquiry.

C.   Revised Amount for One Claim

              The Authority's final claim is that the court erroneously

awarded Redondo an excess amount for its patent and excise taxes

claim for the Ponce-Adjuntas PR-10 project.                 Specifically, the

court awarded a sum of $1,082,654.56 for the claim despite the fact

that Redondo revised the amount to $818,302 at trial and presented

evidence only as to that amount.             Reducing the amount for this

claim requires further modification of the judgment because Redondo

was awarded 15% profit on all its successful claims.                   Redondo

concedes the error and consents to the modification of the judgment

                                       -9-
as requested by the Authority. Accordingly, we remand for entry of

a revised partial judgment bearing such modifications.

                         III.   CONCLUSION

           We vacate the district court's judgment to the extent

necessary to allow for resolution of the aforementioned issues and

remand the case for further proceedings consistent with this

opinion.   The parties shall bear their own costs of this appeal.

                                -10-