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Caribbean Seaside Heights Properties, Inc. v. Erikon LLC

United States Court of Appeals, First Circuit

August 8, 2017

ERIKON LLC, Defendant, Appellee, KOENIGER DEVELOPMENT, INC.; ERICK KOENIGER, in his personal capacity, Defendants.


          Julián Rivera-Aspinall and Fernando L. Gallardo on brief for appellant.

          Iván Aponte-González, Héctor J. Quiñones Inserni, García, Aponte & Quiñones, Tomás A. Román-Santos, and Román Santos, LLC on brief for appellee.

          Before Lynch, Thompson, and Barron, Circuit Judges.

          LYNCH, Circuit Judge.

         Caribbean Seaside Heights Properties, Inc. ("Seaside") appeals the district court's determination on summary judgment that, under Puerto Rico law, Seaside's suit for breach of contract against its former investment partner Erikon LLC is barred by a release that Seaside had earlier executed in Erikon's favor. The court made this determination in two separate unpublished opinions in which it rejected Seaside's arguments that (1) the release does not cover the instant suit and (2) the release is void for lack of consideration.[1] Seaside argues those rulings were erroneous and additionally argues there were disputes of material fact, which precluded entry of summary judgment on the basis of the release. We disagree with Seaside and affirm.


         We rely on the district court's two thorough opinions for a full recounting of the case and summarize here only the essential background facts. See United States ex rel. Booker v. Pfizer, Inc., 847 F.3d 52, 55 (1st Cir. 2017).

         In 1998, Seaside and Erikon became co-investors in a real estate project known as the Christopher Columbus Landing Project in Aguadilla, Puerto Rico ("the Project"), as evidenced in a public deed, which provided that "all expenses incurred" in connection with the Project would be "distributed equally" between the two parties. In 2006, the parties executed a private agreement with Caribbean Management Group, Inc. ("Caribbean") to sell the Project to Caribbean. As part of that agreement, Seaside and Erikon each agreed to execute releases in favor of Caribbean and in favor of each other. Accordingly, in December 2006, Seaside and its sole stockholder executed a release in favor of Erikon, which provided as follows:

[Seaside] hereby remises, waives, releases and forever discharges . . . [Erikon] of and from any and all claims, actions, charges, suits, debts, liabilities, contracts, agreements and promises, of any kind or nature whatsoever, which [Seaside] may have or assert against [Erikon] . . . arising out of or relating to [the Project]; Furthermore, [Seaside] further promise[s] never to institute any claim, action, charge or suit, of any kind or nature whatsoever, against [Erikon] which arises from or relates to [the Project] or any other event or action which occurred before or after the date of execution of this Release . . . .

         More than six years later, on February 5, 2013, Seaside for the first time issued to Erikon a collection notice demanding reimbursement for expenses Seaside had purportedly incurred in connection with the Project. After Erikon refused to pay, Seaside initiated this diversity suit on May 20, 2013, alleging that Erikon had breached the terms of the 1998 public deed, and claiming that Erikon owed it more than $3 million.

         On January 14, 2015, Seaside moved for summary judgment, arguing that "there is no genuine issue of material fact as to Erikon's obligation [under the 1998 deed] to pay 50% of the expenses incurred in developing the Project." In turn, Erikon filed a cross-motion for summary judgment, asserting that Seaside had released its claim in the 2006 release. In response, Seaside argued that (1) the release was not intended to cover, nor could it cover, the claims made in the instant suit because such claims allegedly did not exist at the time the release was executed; and (2) the release, which was executed pursuant to the 2006 agreement, is, in any event, void for lack of consideration because Erikon never fulfilled its obligation under that agreement to execute a release in favor of Seaside.[2]

         In an opinion dated September 30, 2015, the district court held that the release, if valid, would bar the instant suit. First, the court rejected Seaside's argument that the release was not "intended" to excuse Erikon from its obligation under the 1998 deed to share Project-related expenses. The court noted that, under Puerto Rico law, "[i]f 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." P.R. Laws Ann. tit. 31, § 3471; see also Exec. Leasing Corp. v. Banco Popular de Puerto Rico, 48 F.3d 66, 69 (1st Cir. 1995). It then observed that the release, which waives all "claims, debts, contracts, and suits related to [the Project], " clearly and unambiguously covers this suit "to collect a debt arising from a contract whose object is precisely [the Project]."

         Second, the court rejected Seaside's argument that Seaside did not have a "cause of action" against Erikon that it could have waived at the time it executed the release in 2006 because Erikon had not yet refused its 2013 demand for payment. The court explained that Seaside knew in 2006 that it had a contractual right to collect a debt from Erikon related to the Project, which it had simply chosen not to enforce. That, the court reasoned, was precisely the sort of claim that Seaside had agreed to waive in the release. And in any event, as the court pointed out, the release explicitly ...

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