Court Opinion

ID: 2964906
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:32:49.73621+00
Date Added: 2024-06-11T15:01:15.318969
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 97-1293

                        GARITA HOTEL LIMITED PARTNERSHIP d/b/a
                              GARITA HOTEL CORPORATION,

                                Plaintiff, Appellant,

                                          v.

                                 PONCE FEDERAL BANK,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF PUERTO RICO

                   [Hon. Daniel R. Dominguez, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________

                            Gibson,* Senior Circuit Judge,
                                     ____________________

                         and Pollak,** Senior District Judge.
                                       _____________________

                                 ____________________

            Eric A. Tulla  with whom  Rivera Tulla  & Ferra  was on brief  for
            _____________             _____________________
        appellant.
            J. Anthony Downs with whom A.  Lauren Carpenter, Goodwin,  Procter
            ________________           ____________________  _________________
        & Hoar,  Harold D.  Vicente and  Vicente &  Cuebas were  on brief  for
        ______   __________________      _________________
        appellee. 

                                 ____________________
                                  September 5, 1997
                                 ___________________

        _____________________

        *Hon. John R. Gibson, of the Eighth Circuit, sitting by designation.
        **Of the Eastern District of Pennsylvania, sitting by designation.

                 Per Curiam.  In the district court, Garita Hotel claimed
                 __________

            that  Ponce  Federal Bank  had unconditionally  contracted to

            lend  Garita $6  million for  the  expansion, renovation  and

            operation of  a hotel complex  in Carolina, Puerto  Rico, and

            that  the bank  breached  that contract  when  it refused  to

            advance  funds unless Garita obtained  a casino license.  The

            district court, acting after a remand from this court, Garita
                                                                   ______

            Hotel L.P. v.  Ponce Fed. Bank, 958 F.2d 15 (1st Cir. 1992) ,
            __________     _______________

            granted summary judgment  to Ponce Federal.   Garita's appeal

            to this court followed.

                 We review the district court's grant of summary judgment

            de novo,  drawing reasonable  inferences  in Garita's  favor.
            _______

            Grenier v.  Vermont Log Bldgs.,  Inc., 96 F.3d 559,  562 (1st
            _______     _________________________

            Cir. 1996).  On the record before the district court, most of

            the  undisputed facts strongly suggested that approval of the

            casino license had been an understood condition  of the loan.

            Garita's main  argument to the  contrary rests on  an alleged

            oral  statement to Garita representatives, by a Ponce Federal

            agent in  September 1986,  that the bank  had "approved"  the

            loan.   Internal  bank  documents  arguably  corroborate  the

            making of this statement.

                 Under Puerto  Rico law,  a commercial  contract must  be

            corroborated,  and this requirement  extends not just  to the

            existence of an  agreement but also  to its essential  terms.

            Vila &  Hnos,  Inc. v.  Owens Ill.  de Puerto  Rico, 17  P.R.
            ___________________     ___________________________

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            Offic.  Trans.  987,  997-1000 (1986).    The  district court

            invoked this requirement, holding that there was certainly no

            corroboration for the claim that  the bank had agreed to make

            the loan unconditionally  and without regard to  the approval

            of the  casino license.   On appeal,  Garita argues  that the

            loan  agreement  should   not  have  been  classified   as  a

            commercial contract.

                 A Puerto  Rican statutory  provision defines  a loan  as

            commercial if (1) at least one party is a "merchant"  and (2)

            the loan proceeds "are destined to  commercial transactions."

            10  L.P.R.A.    1651;  see id.     1001 (defining  merchant).
                                   ___ ___

            Here, where an established bank proposed to extend a  sizable

            loan  to an experienced  hotel and casino  management company

            for  the purpose of renovating and  operating a luxury hotel-

            casino  complex,  we  agree  with  the  district  court  that

            whatever contract the  parties may have formed  is commercial

            in nature under  Puerto Rican law.  See  FDIC v. Consolidated
                                                ___  ____    ____________

            Mortgage & Fin. Corp., 805 F.2d 14, 18 (1st Cir. 1986).
            _____________________

                 Garita contends that the loan was not commercial because

            it  was  extended  for  a  purpose  (hotel  renovation)  that

            differed   from   Garita's    traditional   business   (hotel

            management).  It is true that courts have found noncommercial

            transactions  where  borrowed funds  were  used  for personal

            purposes, see, e.g., FDIC v. Martinez Almodavar, 671 F. Supp.
                      ___  ____  ____    __________________

            851, 868-70 (D.P.R. 1987); or  where the loan was  apparently

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            made for largely  personal reasons, see, e.g., Barcel   & Co.
                                                ___  ____  ______________

            v. Olmo Reyes, 48  P.R.R. 239, 241-42 (1935).   But any  loan
               __________

            agreement  between Garita  and  Ponce  Federal  was  for  the

            clearly commercial purpose  of real estate development.   See
                                                                      ___

            Consolidated Mortgage, 805 F.2d at 18.
            _____________________

                 Garita  also relies  on  FDIC  v.  Francisco  Investment
                                          ____      _____________________

            Corp.,  638  F.  Supp.  1216 (D.P.R.  1986),  rev'd  on other
            _____                                         _______________

            grounds, 873 F.2d  474 (1st Cir. 1989).   There, the district
            _______

            court  held  that  a  loan  to a  corporation  controlled  by

            doctors, who borrowed the money to  buy all the shares of  an

            incorporated  nursing  home,  intending to  operate  it  as a

            hospital or other medical facility, was not commercial.  This

            court had no  occasion to resolve the issue.   Francisco, 873
                                                           _________

            F.2d at 476.

                 Francisco  rested heavily  on  the  notion that  medical
                 _________

            practice was inherently  not a  "commercial" endeavor  within

            the  specialized meaning of  section 1651, Francisco,  638 F.
                                                       _________

            Supp. at 1218-19,  a notion that has little  application to a

            hotel and  casino company  proposing a new  hotel and  casino

            venture.  There  is some language in  Francisco arguably more
                                                  _________

            helpful to  Garita, but that  language may itself be  in some

            tension with Puerto Rico case  law indicating that a loan may

            be "commercial" even though the planned use of  funds differs

            from  the borrower's historical business.   See, e.g., Vila &
                                                        ___  ____  ______

            Hnos,  17  P.R.  Offic. Trans.  at  990,  995-96 (corporation
            ____

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            engaged  in transportation of sand and stone sought financing

            to purchase property capable of supplying these materials).

                 Thus,  we agree  with the district  court that  the loan

            agreement in  this case was  a commercial contract  for which

            corroborating  evidence was required  as to the  existence of

            the agreement and its essential terms.  Nothing in the record

            corroborates Garita's contention that Ponce Federal agreed to

            a  loan  regardless  of government  approval  of  the planned

            casino.  Summary judgment was properly granted.

                 Affirmed.
                 ________

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