FERNANDEZ FRANCO et al v. COOP A/C POLICIA PR et al

OCR transcription for search; preserved printed pages are authoritative

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AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

Document Page 1 of 16

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IN RE:
ORLANDO FERNANDEZ FRANCO : Case No. 89-05309(ESL)
ANA C, FERNANDEZ :
Chapter 7

Debtors.
ORLANDO FERNANDEZ FRANCO :
ANA C, FERNANDEZ : Adv. Proce. No. 05-00214

Plaintiffs

Violation of Automatic Stay;
vs. : Declaratory Judgment;
: Fraud Action;

COOPERATIVA DE AHORRO Y CREDITO : Intentional Infliction of
DE LA POLICIA (POLICOOP); : Emotional Distress;
CORPORACION PARA LA SUPERVISION — : Injunctive Relief and
Y SEGURO DE COOPERATIVAS DE : Damages
PUERTO RICO (COSSEC); JOHN DOE, :
JANE DOE & RICHARD ROE d/b/a SAN
ANTON DIVERSIFIED, INC. and/or SAN
ANTON PROPERTIES

Defendants

OPINION AND ORDER

This case is before the court on the Motion for Partial Dismissal (Docket No. 36) filed on
February 23, 2006 by co-defendant Corporacién para la Supervision y Seguro de Cooperativas de
Puerto Rico (“Cossec”), on its behalf and in its capacity as liquidating trustee of Cooperativa de
Ahorro y Crédito de la Policia (“Policoop”). Cossec moved for the partial dismissal of the above
captioned adversary proceeding based, in part, on the Plaintiffs’ lack of standing to pursue a
claim not scheduled as property of the estate and Plaintiffs failure to file the complaint within the

statute of limitations period. After careful consideration of the arguments presented and for the

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—s

reasons stated below, this court hereby grants the Motion for Partial Dismissal.

2 Procedural Background
On September 23, 2005 Orlando Fernandez Franco and Ana C, Fernandez filed the
5 present adversary proceeding against Cossec, Policoop, J ohn Doe, Jane Doe & Richard Roe d/b/a
6 || San Anton Diversified, Inc. and/or San Anton Properties for violation of automatic stay;
7 || declaratory judgment; fraud action; intentional infliction of emotional distress; injunctive relief
8 Ii and damages. The Complaint relates that back in 1988 Mr. Orlando Fernandez Franco and Ms.
? Ana C. Fernandez (the “Plaintiffs”) owned a residence located at Calle Arroyo #C-4, Urb, El
7 Remanso, Rio Piedras, Puerto Rico, encumbered by two liens, the first in favor of Doral
12, || Mortgage and the second in favor of First Federal Savings Bank. At that time, Plaintiffs owed
13 || on their mortgages, the amount of $89,150 to Doral Mortgage, and the amount of $24,445 to —
14 |! First Federal Savings Bank. It is alleged in the Complaint that the property was worth around
I $110,000 to $115,000. The Plaintiffs sought the refinancing of the debt with Policoop.
. Tn 1988 Policoop loaned the Plaintiffs approximately $92,000, which was distributed in
ig the following way: $20,000 on a Golden Certificate in Plaintiffs’ name and held as guarantee for
19 || the loan; $3,600 in “administrative costs”; $920 to appraiser Humberto Benitez for the appraisal
20 || which valued the property at $195,000, and $67,400 to Saint Anton Properties and/or San Anton
21 Diversified. It is alleged in the complaint that co-defendants John Doe and Jane Doe were two
officials, agents, representatives and/or high employees from co-defendant Policoop involved in
24 Saint Anton Properties and/or San Anton Diversified. After receiving the amount of $67,400
5 || Saint Anton, through John Doe, on November 3, 1988, issued a check in the amount of
26 || $24,445.26 payable to First Federal to liquidate in full the second mortgage. Allegedly, Saint
27 | Anton and/or John Doe and/or Jane Doe and/or Policoop unlawfully retained the balance of
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approximately $43,000.

After the refinancing with Policoop, Plaintiffs’ combined monthly payment for the two
mortgages encumbering their property was $2,000. By 1989 the Plaintiffs were in arrears in both
mortgages and filed a petition under Chapter 7 of the Bankruptcy Code; Case No. 89-
05309(ESL). The discharge order was entered on September 21, 1990.! The complaint provides
that on or about 1990 Policoop was put into receivership and managed by a trustee “due to the
serious financial condition it was left after co-defendants San Anton and/or John Doe and/or Jane
Doe and/or Richard Roe and/or Policoop had created a repeated fraudulent scheme over which
they were accused, found guilty and sentenced by the Federal District Court for the District of
Puerto Rico.” Complaint, Docket No. 1, page 9. Co-defendant Cossec, a governmental
corporation, obtained all outstanding assets as liquidating trustee of Policoop pursuant to Law
114 of August 17, 2001.

The Complaint further provides that after the discharge in 1990, Plaintiffs realized the
circumstances surrounding their second mortgage with Policoop and they met with Policoop’s
legal representatives; Cancio, Nadal & Rivera. Copy of a letter written by attorney Alejandrina
Rivera Vicente to Mr. Angel R. Virella, Director of the Department of Collections of Policoop,
dated June 3, 1991, was attached to the Complaint.* The letter alludes to a meeting held on
March 23, 1991, with Plaintiffs’ legal representation, Mr. Porrata Doria (Plaintiffs’ attorney in

the present case), in which Plaintiffs alleged being the victims, as many others, of Policoop’s

! Plaintiffs’ personal liability to Policoop was discharged upon the entry of the discharge
order pursuant to 11 USC § 727 (b).

2 In her letter to Mr. Virella Ms. Rivera Vicente makes reference to another letter given by
Mr. Porrata Doria during their mecting, which she states, is attached thereto. However, this
attachment was not included with Ms. Rivera Vicente’s letter attached to the Complaint in the instant
case.

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“tyysiness”. In the letter, Ms. Rivera Vicente recommends Plaintiffs’ settlement offer but advises
that before a settlement is reached they must confirm that Plaintiffs only received the amount
paid to First Federal to cancel their second mortgage from Policoop.

On August 27, 1991 the Plaintiffs again filed a bankruptcy petition, Case No. 91-05748,
this time, under Chapter 13 of the Bankruptcy Code. The case was dismissed on February 20,
1992 upon motions to dismiss filed by both Policoop and HF Mortgage Bankers prior to the
confirmation of the plan.

HF Mortgage, holder of the first mortgage, filed a foreclosure action before the Superior
Court of Puerto Rico San Juan Part, Case No. KCD92-0301 and by January of 1993 the property
had been sold through a judicial auction to HF Mortgage. On May 27, 1994 Policoop filed a
complaint before the Superior Court of Puerto Rico against Plaintiffs herein, Case No, KCD94-
0286, requesting payment in full of the monies owed, foreclosure of the property and collection
of monies. The case was voluntarily dismissed by Policoop on June 20, 1995, judgment was
entered on July 5, 1995.

On February 12, 2004 Policoop and Cossec filed another case against Plaintiffs herein,
Case No. KCD 04-0157, before the Superior Court, San Juan Part, again requesting payment in
full of the amounts owed, foreclosure of the property and collection of monies. Judgment by
default was entered in that case on February 4, 2004. Plaintiffs herein have requested the
reopening of the case to answer the complaint, but such request has been denied by the state
court.

The Plaintiffs allege that “[c]o-defendants Policoop and Cossec’s direct and proximate

result of their actions in violation of the Automatic Stay provisions of Section 362(a), the

4.

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1 || violation against section 348(d)* of the Code providing debtor/plaintiffs with protection against
all personal liability existing on the date of commencement of the first bankruptcy case, and the
filing of a cause of action which for many reasons has seriously affected plaintiffs causing them
severe and grievous Emotional Distress for which they are entitled to damages and have
developed post-traumatic stress disorder.” Complaint, Docket No. 1, page 12. Plaintiffs farther
state that defendants willfully, intentionally, maliciously and with reckless disregard for their

tights, health and safety, acted in common concert between them to deprive Plaintiffs of their

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rights, life and property without due process.
10

Plaintiffs pray, in part, that this court issue a declaratory judgment that defendants acts,

12 || policies and procedures violated Plaintiffs’ rights; enjoin defendants from continuing their
13 || actions against Plaintiffs; issue an automatic stay order under 11 USC §362(a); retain jurisdiction
14 | to assure full compliance of the order and find co-defendants jointly and/or severally liabie to

I Plaintiffs in the amount of $1,000,000 for damages caused, and an additional $50,000 of punitive.

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damages.
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18 On February 23, 2006 co-defendant Cossec, on its behalf and in its capacity as liquidating

19 || trustee of Policoop, filed a Motion for Partial Dismissal alleging: 1) Plaintiffs’ lack of standing to

20 || pursue a claim that was not scheduled by debtors as part of the property of the estate; 2) the

21 | court’s lack of subject matter jurisdiction to adjudicate the non-core portion of the claim which

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23 3 Section 348(d) provides that “[a] claim against the estate or the debtor that arises after the
34 order for relief but before conversion in a case that is converted under section 1112, 1208, or 1307

of this title, other than a claim specified in section 503(b) of this title, shall be treated for all purposes
95 || as if such claim had arisen immediately before the date of the filing of the petition.”

26 This provision is not applicable to the facts of this case; neither of Plaintiffs’ cases were

converted.
27

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seeks to make Cossec liable for the alleged fraud committed by Policoop; 3) in consideration
thereto that this court should abstain from entertaining the matter altogether; and 4) that this
claim against Cossec should be dismissed because it is time-barred.

The Motion for Partial Dismissal provides that Cossec was created pursuant to Law No.
114 of August 17, 2001, which transferred to Cossec the insurance, supervision and audit of
savings and credit unions previously delegated to the Commissioner of Financial Institutions and
Shares and Deposits Insurance Corporation for Cooperative Savings and Credit Unions pursuant
to Laws No. 5 and 6 of January 15, 1990 which were in effect and constitute the applicable law
when Policoop was put under receivership in 1991. According to co-defendants, Law 6
establishes the procedure for the dissolution or liquidation of a cooperative, which includes the
designation of a receiver by the Commissioner, notice of the dissolution of the cooperative
through publication in a newspaper of general circulation, the conversion of the cooperative’s
assets into cash, initiates the claims that are legally proper and pays the debts in the following
order: expenses incurred in the liquidation process, secured obligations, repayment to the insurer
for the amount paid to the insured depositors, obligations and deposits of members, depositors
and uninsured creditors. After the dissolution process is concluded, the receiver must render a
final report to the Commissioner, which when approved, shall be notified to the Secretary of
State, who shall proceed to register the report and issue the certificate of dissolution of the
cooperative. Cossec alleges that Law No. 6 specifically provides that any member or person
having a claim against a cooperative undergoing the process of liquidation must file said claim
with the insurer-receiver within 90 days following the date of publication of the notice of

dissolution. On December 1", 1993, the Inspector published the Notice of Dissolution in a

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newspaper of general circulation. The notice advised the public of their right to file a claim
against Policoop within 90 days. According to Cossec, at the present time it is still in the process
of liquidating Policoop, having paid secured claims and some claims filed in the liquidation
proceeding and state courts against Policoop. As liquidating trustee Cossec has filed on behalf of
Policoop claims for foreclosure and collection of monies.

Cossec argues that in a Chapter 7 bankruptcy case, such as this one, only the trustee has
standing to file a claim that was not scheduled by debtor as property of the estate. Cossec
further argues that any asset not properly scheduled remains property of the bankrupt estate and
the debtor loses all rights to enforce it in his own name even when the bankruptcy case is closed.
The trustee and not the debtor is the party in interest with standing to file a claim which is
property of the estate.

Cossec also argues that the claims against them and Policoop, now Cossec, are non-core
proceedings that must brought in an administrative proceeding, or alternatively, before the state
courts. Therefore, Cossec argues, the bankruptcy courts lack jurisdiction to enter a final decision
on the matter and should exercise its discretion to abstain pursuant to §1334(c)(1) of title 28.

Lastly, Cossec sustains that this matter is governed by local statute of limitations and in
Puerto Rico, when there is a defect in the consent of a party to a contract through fraud or deceit
said party may request the annulment of the contract within four years from the date of the
consummation of the contract. 31 P.R. Laws Ann. § 3512. Therefore under the statute this cause
of action is time prescribed. Cossec adds that the causes of action raised in the complaint are
also actionable under Article 1054 of the Puerto Rico Civil Code, 31 P.R. Laws Ann. § 3018

which provides that “[t]hose who in fulfilling their obligations are guilty of fraud, negligence, or

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delay ..., shall be subject to indemnify for the losses and damages caused thereby.” Cossec states
that the applicable statute of limitations for this type of action is one year, as with any type of tort
action. Therefore, it is Cossec’s contention that “to the extent that the acts allegedly committed
by Policoop’s officials constitute criminal offences actionable under Article 1802, the term to file
said claim was a year after plaintiffs knew or should have known of the fraud.” Motion for
Partial Dismissal, Docket No. 36 page 22. Even if this cause of action was a breach of contract,
for which the statute of limitations is fifteen years, the case would be time-barred, according to
Cossec, because the complaint was filed sixteen years after the discharge was entered in the
present bankruptcy case (September 24, 1990).

Cogsec also requests the imposition of costs and attorney’s fees against Plaintiffs for
violation of Fed. R. Bankr. P, 9011.

On June 19, 2006 Plaintiffs filed a response to the request for partial dismissal. As to
Cossec’s argument of lack of standing, Plaintiffs states that in 1989, when the bankruptcy
petition was filed, the cause of action against Policoop did not exist, Policoop was simply a
secured creditor, holder of a second mortgage over the Plaintiffs’ residence. Consequently, the
cause of action against Cossec and Policoop could not have been listed in the Schedules as an
asset of the estate at that time. On September 21, 1990 the discharge order was entered, and even
then there was no potential claim. | The mortgaged property was abandoned by the Chapter 7
trustee. The Plaintiffs state that the cause of action cannot be time-barred because they became
aware of the alleged fraud after 1991. They conclude that any cause of action belongs to
debtors/Plaintiffs and not the Chapter 7 trustee.

As to the non-core case argument, Plaintiffs state that this is a core matter inasmuch as it

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entails the collection of a discharged debt* and the violations of other provisions of the
Bankruptcy Code. Plaintiffs contend that abstention is improper because the case does not
involve unsettled questions of state law or a pending state court proceeding. Lastly, Plaintiffs
maintain that the case is not time-barred and explain by only stating that “this case is based on
facts that constitute a pattern of moral harassment and the intentional infliction of emotional
distress and duress. A pattern that continues to this day and as can be plainly seen from
defendants actions both before this Court and before the state courts and through extra judicial
means.” Response to Motion for Partial Dismissal, Docket No. 51, page 15.
Discussion

Standard for Granting a Motion to Dismiss

Motions to dismiss are governed by Federal Rule of Civil Procedure 12(b)(6), which
provides that a defense of “failure to state a claim upon which relief can be granted” to a claim
for relief may be presented by motion before the filing of a responsive pleading.

For purposes of a motion to dismiss, “(1) the complaint is construed in the light most
favorable to the plaintiff, (2) its allegations are taken as true, and (3) all reasonable inferences
that can be drawn from the pleading are drawn in favor of the pleader.” Federal Practice and
Procedure § 1357 at 417, citing Viera Marcano v. Ramirez Sanchez, 224 F. Supp. 2d 397 (D.P.R.
2002). See also, Correa Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1* Cir. 1990). The

plaintiff must set forth “factual allegations, either direct or inferential, regarding each material

4 On even date an order was entered denying Cossec’s Motion Requesting that Plaintiffs’
Response to Motion for Partial Dismissal be Disregarded as Untimely, in the Alternative, Requesting
Leave to File Reply (Docket No. 53). However, Plaintiff's Response to Motion for Partial Dismissal
and Memorandum in Support Thereof (Docket No. 51) will not be considered as an amendment to
the Complaint.

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element necessary to sustain recovery under some actionable theory.” Id., citing Gooley v. Mobil

Oil Corp., 851 F.2d 513, 514 (1* Cir. 1988). See also, LaChapelle v. Berkshire Life Insurance

Company, 142 F.3d 507, 508 (1* Cir. 1998) (In considering a motion to dismiss under Rule
12(b)(6), the court must “determine whether the complaint, so read, limns facts sufficient to
justify recovery on any cognizable theory.”)

[A] complaint should not be dismissed for failure to state a claim unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Federal Practice and Procedure §1357 at 571, quoting Conley v. Gibson,
355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also, In re Diamond, 346 F.3d 224 (1* Cir.

2003); Leopoldo Fontanillas, Inc. v. Luis Ayala Colon Sucesores, Inc., 283 F. Supp.2d 579

(D.P.R. 2003); Eastern Food Services, Inc. v. Pontifical Catholic University of Puerto Rico

Service Association, Inc., 222 F. Supp.2d 131, 134 (D.P.R. 2002). Therefore, “the question on a

motion to dismiss under Rule 12(b)(6) is whether in the light most favorable to the plaintiff, and
with every doubt resolved in the pleader’s behalf, the complaint states any legally cognizable
claim for relief.” Id. at 640. “Because a dismissal terminates an action at the earliest stages of
the litigation, without a developed factual basis for decision, the court must carefully balance the
rule of simplified civil pleading against the need for something more than conclusory allegations.

Washington Legal Foundation v, Massachusetts Bar Foundation, 993 F. 2d 962, 971 (1* Cir.

1993). The court will not accept unsupported conclusions or interpretations of the law. Id.
In order to dismiss a claim for the time-barring effects of a statute of limitations, the
complaint and related documents must show beyond doubt that the claim is out of time. Rodi v.

Southern New England School of Law, 389 F.3d 5, 21 (1 Cir. 2004) citing La Chapelle v.

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Berkshire Life Ins. Co., 142 F.3d 507, 509 (1* Ci. 1998).

Violation of the Automatic Stay

The Bankruptcy Code in its section 362 provides in its pertinent part as follows:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301,
302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities
Investor Protection Act of 1970, operates as a stay, applicable to all entities, of-

(1) the commencement or continuation, including the issuance or employment of
process, of a judicial, administrative, or other action or proceeding against the
debtor that was or could have been commenced before the commencement of the
case under this title, or to recover a claim against the debtor that arose before the
commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a
judgment obtained before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the
estate or to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to
the extent that such lien secures a claim that arose before the commencement of
the case under this title;

(6) any act to collect, assess, or recover a claim against the debtor that arose
before the commencement of the case under this title;

(7) the setoff of any debt owing to the debtor that arose before the commencement
of the case under this title against any claim against the debtor; and

(8) the commencement or continuation of a proceeding before the United States
Tax Court concerning a corporate debtor's tax liability for a taxable period the
bankruptcy court may determine or conceming the tax liability of a debtor who is
an individual for a taxable period ending before the date of the order for relief
under this title.

(c} Except as provided in subsections (d), (e), (f), and (h) of this section--

(1) the stay of an act against property of the estate under subsection (a) of this
section continues until such property is no longer property of the estate;

(2) the stay of any other act under subsection (a) of this section continues until the
earliest of--

(A) the time the case is closed;

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(B) the time the case is dismissed; or

(C) if the case is a case under chapter 7 of this title concerning an
individual or a case under chapter 9, 11, 12, or 13 of this title, the time a
discharge is granted or denied;
11 USC § 362. The facts alleged in the Complaint fail to state a claim upon which relief may be
granted for a violation of the automatic stay. There have been two bankruptcy cases filed by
Plaintiffs during which the automatic stay provision was in effect; one (89-05309(ESL)) filed
under Chapter 7, on November 28, 1989 and closed on October 21, 1992 after the discharge of
debtor was entered on September 24, 1990; and the other (91-05748), filed under Chapter 13, on
August 27, 1991 and dismissed on February 20, 1992.
The Complaint alleges that Policoop filed an action before the Superior Court of Puerto
Rico against the Plaintiffs herein, on May 27, 1994, Case No. KCD94-0286, requesting payment
in full of the monies owed, foreclosure of the property and collection of monies. The case was
voluntarily dismissed by Policoop on June 20, 1995, judgment was entered on July 5, 1995.
Later, on February 12, 2004, Policoop and Cossec filed another case against Plaintiffs hercin,
Case No. KCD 04-0157, before the Superior Court, San Juan Part, again requesting payment in
full of the amounts owed, foreclosure of the property and collection of monies. No other
collection efforts violating section 362 of the Bankruptcy Code were alleged in the Complaint.
Neither of the collection cases filed by Policoop were filed while the automatic stay
provision was in effect. The two bankruptcy cases filed by Plaintiffs were closed before Cossec

and Policoop filed their actions, therefore the stay had been terminated before the collection

actions were filed. See, 11 USC § 362(c)(2). Under these circumstances there could not have

been a violation of the automatic stay and thus, this cause of action is hereby dismissed.

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1 || Statute of Limitations

2 In 1988 Policoop loaned the Plaintiffs $92,000. According to the Complaint, after paying
° in full the outstanding balance on the second mortgage on Plaintiffs’ residence to First Federal
Savings Bank, Policoop and/or co-defendants John Doe and Jane Doe, two officials, agents,

6 || representatives and/or high employees from co-defendant Policoop involved in Saint Anton

7 || Properties and/or San Anton Diversified, unlawfully retained the balance of approximately

8 $43,000. By 1991, according to the allegations made in the Complaint regarding the meeting

° with the attorney for Policoop, Ms. Alejandrina Rivera Vicente, Plaintiffs knew about the alleged
7 fraudulent scheme they had been made part of. This Complaint was filed on September 23,

12 || 2005, that is, seventeen years after the loan was given and, at least, fourteen years after Plaintiffs

13 || knew of the fraud.

14 Tn the Complaint Plaintiffs do not specify under which statute they are bringing the fraud
IS action, however, it is clear that this matter is governed by state law and by the local statute of

: limitations. Rodriguez Narvaez v. Nazario, 895 F.2d 38, 43 (1* Cir. 1990); Bornstein v. Poulos,
18 793 F.2d 444 (1* Cir. 1986). The fraud action raised in the Complaint arises from the fact that in

19 || 1988 Policoop lent the Plaintiffs approximately $92,000.00 guaranteed with a second mortgage

20 || over Plaintiffs’ residence and co-defendants San Anton and/or John Doe and/or Jane Doe and/or

21 Policoop unlawfully retained the amount of $43,000 from the loan of approximately $92,000,
22

The Plaintiffs state that the aforementioned co-defendants “had created a repeated fraudulent
23
74 scheme over which they were accused, found guilty and sentenced by the Federal District Court

25 || for the District of Puerto Rico.” Complaint, Docket No. 1, page 9. The Complaint does not

26 || provide the case number or any reference to the same.

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“Civil obligations, arising from crimes and misdemeanors, shall be governed by the
provisions of this title [the Civil Code of Puerto Rico]”. 31 L.P.R.A. § 2995, These civil
obligations arising from crimes and misdemeanors are governed by the provisions related to tort

liability. Guzman v. Vidal, 19 D.P.R. 841 (1913). Article 1802 of the Civil Code of Puerto Rico

provides that “[a] person who by an act or omission causes damage to another through fault or
negligence shall be obliged to repair the damage so done. Concurrent imprudence of the party
agarieved does not exempt from liability, but entails a reduction of the indemnity.” 31 L.P.R.A. §
5141. In relation to this provision Article 1868 of the Civil Code sets a one-year prescriptive
term to file an action under § 5141. “The following prescribe in one (1) year: ... (2) Actions to
demand civil liability for grave insults or calumny, and for obligations arising from the fault or
negligence mentioned in § 5141 of this title, from the time the aggrieved person had knowledge
thereof.” 31 L.P.R.A. § 5298. It has been established that the one year prescriptive term applies
to other indemnification actions of a similar nature, provided that they are not governed by
special statutes. Olmo v. Young & Rubicam of P.R., Inc., 110 D.P.R. 740 (1981). Furthermore,
a civil action based on the violation of a criminal statute is an action ex delicto with the same
prescriptive period as an action for fault or negligence, and would be untimely if brought more

than one year after the aggrieved party had knowledge of the injury. Bussati v. Grace &

Compania, Puerto Rico, 274 F.Supp. 601 (D.P.R. 1967); Guzman v. Vidal, 19 D.P.R. 841

(1913)(A tort action based on a rape was dismissed as it was filed more than one year after the

crime took place.)

Plaintiffs filed a Chapter 7 petition in 1989, Case No. 89-05309, because they were

unable to comply with the mortgage payments, became aware of the “problem” or “situation”

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with Policoop after the discharge order was entered in 1990, discussed the problem with counsel
for Policoop in 1990, and received a letter from Policoop’s counsel in 1991, Therefore, Plaintiffs
had knowledge of the alleged fraud they had been victims of, by 1991. Under these

circumstances the fraud cause of action is time-barred.
Also, the Civil Code of Puerto Rico in its Article 1054 provides as follows:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and
those who in any manner whatsoever act in contravention of the stipulations of the same,
shall be subject to indemnify for the losses and damages caused thereby.

31 L.P.R.A. § 3018. Policoop had a contractual obligation with the Plaintiffs and they failed to

discharge their obligations under the contract. In a breach of contract action the applicable

statute of limitations is fifteen (15) years. “A mortgage action prescribes after twenty (20) years,
and those which are personal and for which no special term of prescription is fixed, after fifteen
(15) years.” 31 L.P.R.A. § 5294. Even then, considering that the contract between the parties
was executed in 1988 and the Complaint was filed, at least, sixteen years later, in 2005, the cause

of action is clearly time-barred.

In view that the fraud related causes of action are time-barred, this court needs not discuss

the other grounds raised in Cossec’s Motion for Partial Dismissal.

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Conclusion
For the reasons stated above, the Motion for Partial Dismissal is hereby granted and the
case is dismissed as to co-defendants Cossec and Policoop, each party to bear their own costs.
The Clerk shall enter partial judgment dismissing the claims for relief against Cossec and
Policoop.
SO ORDERED.

In San Juan, Puerto Rico, this 16" day of March 2007.

Waseanulls

ENRIQUE S. LAMOUTTE
U.S. Bankruptcy Judge

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