Court Opinion

ID: 9460688
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:57:42.72242+00
Date Added: 2024-06-11T17:36:44.271958
License: Public Domain

ON PETITION FOR REHEARING
The petition for rehearing is denied. Although the case is close on its facts, we remain of opinion that our disposition was the correct one.
Vector argues that the court failed to recognize that the HUD Regulations “which had the force and effect of law” were incorporated into and were “the very reason and purpose of clause 5(a)”. These, it is argued, provided in “clear and certain terms” the reasons for clause 5(a) and incorporated the mandatory trade custom or usage calling for a condition of “feasibility”, including profit. We were aware, however, of this possible argument. In particular, we considered Mr. Fortunato’s testimony outlining the steps in the manual and remarking (see footnote 6) that Vector had, on several occasions, withdrawn as the developer of a turnkey project, as, vis-a-vis the government, it had a perfect right to do. But Vector was in those situations acting as the sole developer. We do not think a developer’s right, prior to contracting with the local authority, to withdraw from the project is a “trade cus*25tom” shedding much light on the meaning of this contract between two private parties both of whom are on the “developer” side of negotiations with URHC. The project could indeed be terminated, but it remains necessary to determine what obligations the private parties had, in such event, created by their prior voluntary agreement. The regulations govern relations between a developer and the governmental authorities. They do not refer to situations of the sort here in dispute (viz. between developers), and we are unable to agree with Vector that this contract (which it drafted) provides in “clear and certain terms”, or anything approaching them, that Vector was to have the same rights as to plaintiffs that a developer would have with the local authority. Nothing in the regulations prevents private parties from allocating the risks among themselves as they see fit. The thrust of Vector’s position seems to be that, notwithstanding its execution of what appears to be a contract of purchase and sale, it bound itself to do no more than look out for its own interest, retaining at all times the right but not the duty to appropriate the benefits of the turnkey deal. Such a one-sided interpretation, placing all the risk on plaintiffs is, if not utterly beyond belief, at least so unusual in the case of a bilateral contract that we think it unsupportable in the absence of evidence that such was actually intended.
Vector’s argument that the concept of feasibility, incorporated in HUD regulations, includes recognition of a profit factor cuts against, as well as for, Vector. Vector would more likely assume the risk of unprofitability knowing that any arrangement with HUD would, at least in theory, allow for a developer’s profit. In any event we are confronted with a contract drafted by and for a sophisticated company by its attorney; there was evidence that Vector was well aware of what conventional option agreements were, and this was plainly not that; and we have no evidence to go on from those who negotiated the contract as to what might actually have been intended. We think Vector must bear the cost of ambiguity.
We are aware that the regulations refer expressly to the availability of the HUD commitment to enable the developer to secure usual commercial financing. However, the record does not establish that it was commercially impossible to secure bank financing for the project on the terms available. Cf. Restatement, § 231, illustration 4. A question relating to the availability of financing was asked of only one witness who answered that he could not answer whether or not financing could have been obtained.
Vector’s final argument, that the court erroneously “shifted the burden of persuasion to Vector”, is not convincing. The burden was upon the plaintiffs to establish the existence of a contract and failure of performance. Plaintiffs made these allegations in their complaint and Vector admitted them in its answer. (See note 3.) Vector was then entitled to argue that its nonperformance was justified by the Agreement itself, given an interpretation of 5(a) favorable to Vector — but not too favorable to Vector lest the condition be deemed “performed” under Article 1068, 31 L.P.R.A. §§ 3043, 3373. (See opinion page 22.) Plaintiffs contested this reading of the provision and the issue was joined. After that joinder it is not helpful to speak of a “burden of persuasion” concerning the relevant law and guides to construction of a contract. In the absence of relevant evidence, the duty is upon the court to ascertain and apply the necessary legal rules, with the aid of both parties. Moreover, to the extent Vector is now arguing that, because the 5(a) condition on its face put performance solely within Vector’s discretion, the plaintiffs were under a duty to introduce evidence of a contrary meaning, the argument is brought up short by the civil law. An absolutist or “plain words” reading of the 5(a) condition would have resulted in its being consid*26ered as “performed”. In order to avert that consequence, the burden fell upon Vector, if it fell upon anyone, to show what content the condition “really” had. But whether the burden fell upon Vector, upon the plaintiffs, or upon no one, there must be some support for construing 5(a) to include an implied permission to decline to proceed because of unprofitability.