IN RE: REDONDO CONSTRUCTION CORPORATION, Debtor. PUERTO RICO HIGHWAY AND TRANSPORTATION AUTHORITY, Plaintiff, Appellant,
REDONDO CONSTRUCTION CORPORATION, Defendant, Appellee
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
PUERTO RICO. Hon. Francisco A. Besosa, U.S. District Judge.
Benítez-Arraiza, with whom Quiñones & Arbona,
P.S.C., was on brief, for appellant.
A. Cuprill-Herná ndez, with whom Law Offices Charles
A. Cuprill, P.S.C., was on brief, for appellee.
Torruella, Hawkins,[*] and Barron, Circuit Judges.
case returns to us following our remand in In re Redondo
Construction Corp. (Redondo III), 678 F.3d 115 (1st Cir.
2012). The Puerto Rico Highway and Transportation Authority
(" the Authority" ) appeals the district
court's affirmance of the bankruptcy court's award of
prejudgment interest to Redondo Construction Corporation
(" Redondo" ) on its contract claims under Article
1061 of the Puerto Rico Civil Code, 31 L.P.R.A. § 3025,
accruing through the payment of principal. As explained
below, we reject the Authority's contention that Redondo
forfeited its claim to prejudgment interest under Article
1061 but agree with its argument that 28 U.S.C. § 1961
exclusively controls awards of postjudgment interest in
federal court. We thus find that we must vacate and remand
for a calculation of § 1961 interest and, to prevent
double recovery, a recalculation of Article 1061 interest.
one of the main issues in this appeal is whether Redondo
preserved its claim to Article 1061 interest, we focus on the
parties' motion practice. We direct readers interested in
the factual history of this case to the bankruptcy
court's opinion in Redondo Construction Corp. v.
Puerto Rico Highway & Transportation Authority (Redondo
I), 411 B.R. 89 (Bankr. D.P.R. 2009).
1990s, Redondo contracted with the Authority to work on three
construction projects. Each contract described the
projects' design plans, the construction sites'
anticipated conditions, and the procedures for implementing
variances. In certain situations, Redondo could claim extra
compensation for unforeseen additional work. These terms
proved important because all three of the construction
projects experienced unanticipated problems.
filed claims against the Authority on all three contracts
seeking compensation for additional work performed. Before
these claims were resolved, however, Redondo filed for
Chapter 11 bankruptcy. Through the Chapter 11 proceedings,
Redondo filed three complaints against the Authority for
money owed under the construction contracts. In each of these
complaints, Redondo stated it was entitled to not only
damages, but also prejudgment interest accruing at a rate of
6.5% per annum. Following a bench trial, Redondo filed a
memorandum reiterating its request for prejudgment interest
at a rate of 6.5% per annum.
bankruptcy court ruled in Redondo's favor. Id.
at 89. In addition to awarding Redondo damages, the
bankruptcy court, without stating its legal basis for doing
so, found that Redondo was entitled to prejudgment interest
accruing at 6.5% per annum.
Authority subsequently filed a timely motion to amend the
judgment pursuant to Federal Rule of Civil Procedure 59(e)
and Federal Rule of Bankruptcy Procedure 9023. Among other
claims, the Authority argued that the bankruptcy court erred
in awarding Redondo prejudgment interest. Noting that
prejudgment interest is typically a matter of state law, the
Authority argued that it had not acted with temerity or
obstinacy as required by Puerto Rico Rule of Civil Procedure
44.3(b) in order to impose prejudgment
filed a response motion defending the bankruptcy court's
prejudgment interest award, arguing (1) that the three
construction projects " had federal funds participation
allowing for the computation of the pre-judgment interest
award" (presumably referring to 41 U.S.C. §
7109(a)(1), which allows parties to recover interest on the
principal on contracts in which the federal government is a
party) and (2) that Article 1061 allowed for "
indemnity" interest under Puerto Rico law.
the bankruptcy court ruled in the Authority's favor on
some claims, it left the prejudgment interest award intact.
In re Redondo Constr. Corp. (Redondo II), 424 B.R.
29, 36 (Bankr. D.P.R. 2010). The bankruptcy court concluded
that the parties contracted to incorporate the rate used for
government-party contracts as set by 41 U.S.C. §
7109(a)(1). Id. at 33.
the bankruptcy court's ruling, the Authority sought
review first in the district court, and then in this Court.
In Redondo III, we found that the record did not show that 41
U.S.C. § 7109(a)(1) applied either independently or by
incorporation through contract. 678 F.3d at 125-26. We
considered alternative bases under which the bankruptcy court
could have awarded prejudgment interest (including Civil Rule
44.3 and Article 1061), but concluded there was no support in
the record that the bankruptcy court did so. Id. at
126. As a result, we instructed the district court to "
vacate the award of prejudgment interest and return the case
to the bankruptcy court for a determination of whether
prejudgment interest [was] appropriate and, if so, at what
rate and for what periods." Id.
remand, Redondo argued it was entitled to prejudgment
interest under Article 1061. The bankruptcy court agreed and
awarded Redondo Article 1061 interest accruing at a rate of
6% per annum from the date of substantial completion for each
construction project, through the date of the Authority's
final payment on the principal. In re Redondo Constr.
Corp. (Redondo IV), 505 B.R. 388, 401 (Bankr. D.P.R.
the bankruptcy court's decision, the Authority moved to
amend the judgment, arguing that Redondo forfeited its
Article 1061 claim and that the bankruptcy court used
incorrect start and end dates for the accrual period. After
the bankruptcy court denied the Authority's motion,
In re Redondo Constr. Corp. (Redondo V),515 B.R. 410,
416 (Bankr. D.P.R. 2014), the Authority appealed to the
district court. The district court affirmed the bankruptcy