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In Re: Redondo Construction Corporation v. Puerto Rico Highway and Transportation Authority

November 21, 2012

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]

The opinion of the court was delivered by: Howard, Circuit Judge.

Before Torruella, Howard and Thompson, Circuit Judges.

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.*fn1 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.

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.*fn2 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 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 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 ...


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