United States Bankruptcy Appellate Panel of the First Circuit
INDUSTRIAS VASSALLO, INC., Debtor.
v.
PUERTO RICO ELECTRIC POWER AUTHORITY, Defendant-Appellee / Cross-Appellant. UNITED SURETY & INDEMNITY COMPANY, Plaintiff-Appellant / Cross-Appellee, INDUSTRIAS VASSALLO, INC., Debtor. UNITED SURETY & INDEMNITY COMPANY, Plaintiff-Appellant,
v.
PUERTO RICO ELECTRIC POWER AUTHORITY, Defendant-Appellee. INDUSTRIAS VASSALLO, INC., Debtor. UNITED SURETY & INDEMNITY COMPANY, Plaintiff-Appellant,
v.
PUERTO RICO ELECTRIC POWER AUTHORITY, Defendant-Appellee. Bankruptcy Case Nos. 08-07752-BKT, 08-07752-BKT, 08-07752-BKT Adversary Proceeding Nos. 09-00258-BKT, 09-00258-BKT, 09-00258-BKT
Appeals
from the United States Bankruptcy Court for the District of
Puerto Rico (Hon. Brian K. Tester, U.S. Bankruptcy Judge)
Héctor Saldaña Egozcue, Esq., Carlos Lugo Fiol,
Esq., and Jose A. Sánchez Girona, Esq., on brief for
Plaintiff-Appellant/Cross-Appellee.
Eduardo J. Corretjer Reyes, Esq., on brief for
Defendant-Appellee/Cross-Appellant.
Before
Bailey, Finkle, and Fagone, United States Bankruptcy
Appellate Panel Judges.
Fagone, U.S. Bankruptcy Appellate Panel Judge
United
Surety & Indemnity Company ("USIC") appeals
from a bankruptcy court judgment dismissing an adversary
proceeding (the "Judgment of Dismissal") brought by
Industrias Vassallo, Inc. (the "Debtor") against
one of its suppliers, Puerto Rico Electric Power Authority
("PREPA"). USIC also appeals from nine other orders
(collectively, the "Interlocutory Orders"),
including an order "denying" USIC's amended
complaint in intervention and an order denying a request for
reconsideration.[1] PREPA cross-appeals from the Judgment of
Dismissal.
We
AFFIRM the Judgment of Dismissal and decline
to consider USIC's appeals from the Interlocutory Orders.
We lack jurisdiction to hear PREPA's cross-appeal and so
that cross-appeal is DISMISSED.
BACKGROUND
The
procedural history is lengthy and somewhat complex. A
methodical description of that history informs our
decision.[2]
I.
Prepetition Events
PREPA
supplied electricity to the Debtor. In 1996, USIC issued a
bond (the "Bond") guarantying the Debtor's
payments to PREPA for electricity and equipment. The Bond was
originally for $250, 000, but was later increased to $450,
000. USIC cancelled the Bond effective August 17, 2008, and,
about three months later, the Debtor filed a petition under
chapter 11.
II.
Postpetition Events
Two
weeks after the chapter 11 filing, PREPA notified USIC that
the Debtor owed $2.4 million for prepetition electrical
services, and made a demand under the Bond.[3] The next day,
PREPA filed a proof of claim for that amount.
Months
passed without a response from USIC. PREPA again demanded
payment under the Bond. USIC finally acknowledged receipt of
PREPA's demand in September 2009, and asked the Debtor to
furnish information regarding its defenses to the claim. The
Debtor replied that it had a setoff defense based on a $3.4
million breach of contract claim against PREPA.
III.
The Pleadings in the Adversary Proceeding
In
December 2009, the Debtor commenced an adversary proceeding
against PREPA with a single-count complaint, asserting that
PREPA owed $3.4 million for damages resulting from
interruptions and/or fluctuations in the delivery of
electrical service to the Debtor's manufacturing plant.
Accordingly, the Debtor asked the bankruptcy court to
disallow PREPA's claim and to enter a judgment against
PREPA in the amount of $1.0 million.
USIC
promptly moved to intervene. In its accompanying complaint in
intervention (the "Complaint in Intervention"),
USIC alleged that it was not liable under the Bond because
PREPA's liability to the Debtor exceeded the Debtor's
liability to PREPA. In its prayer for relief, USIC sought
only a declaratory judgment that it had no liability to PREPA
under the Bond. The bankruptcy court granted USIC's
motion to intervene.
PREPA
answered the Complaint in Intervention, and asserted a
counterclaim against USIC. PREPA's counterclaim sought
$450, 000, plus interest, costs, and attorneys' fees.
PREPA
alleged, inter alia, that USIC had "acted obstinately or
frivolously in denying PREPA's claim and in failing to
respond to PREPA's claim within the shortest period
possible . . . ."
In
September 2012-almost three years after commencing the
adversary proceeding-the Debtor obtained leave to amend its
complaint by reducing the amount of its claim against PREPA
from $3.4 million to $1.1 million. Accordingly, in its prayer
for relief of the amended complaint (the "Amended
Complaint"), the Debtor asked the bankruptcy court to
reduce PREPA's proof of claim to $1.3 million. PREPA
answered the Amended Complaint, alleging that the Debtor owed
it at least $2.4 million in prepetition charges and
requesting the dismissal of the Amended Complaint, plus costs
and attorneys' fees.
IV.
The Motions for Summary Judgment
PREPA
then filed two summary judgment motions. In October 2012,
PREPA filed its first motion for partial summary judgment on
its counterclaim against USIC, on the theory that the Debtor
had admitted in the Amended Complaint that it owed PREPA over
$1.0 million more than the amount PREPA allegedly owed to the
Debtor. Two months later, PREPA filed a second motion for
partial summary judgment, this time asking the bankruptcy
court to enter summary judgment in its favor on the Complaint
in Intervention and to dismiss that complaint. PREPA argued
that USIC's claim was premised on the Debtor's
"admittedly non-existent" setoff right. USIC
opposed both summary judgment requests, contending that the
Debtor had miscalculated its own damages, which, according to
USIC, exceeded $2.4 million. In other words, according to
USIC, the Debtor had a complete offset and thus owed nothing
to PREPA.
Thereafter,
the bankruptcy court entered the December 2013 Partial
Summary Judgment Order, granting PREPA's motions for
partial summary judgment against USIC, dismissing the
Complaint in Intervention, awarding PREPA the amount of the
Bond, and denying, without prejudice, PREPA's request for
interest and attorneys' fees. The court reasoned, in
relevant part:
There is no dispute that the USIC bond is valued at $450,
000.00. Such amount will need to be paid since according to
the [Debtor's] Amended Complaint the damages they
sustained total $1, 053, 036.87. Thus, [the Debtor] would
still owe PREPA at least $1, 382, 216.61 and USIC would be
liable to PREPA for the full $450, 000 under the Bond. . . .
This Court recognizes that PREPA also requests damages in the
form of interest and attorneys['] fees. Although there
are some contentions between the parties to this point, this
Court cannot address this instant issue because of the lack
of evidence demonstrating PREPA is entitled to such an award.
The parties are therefore ordered to simultaneously brief the
court on this issue thirty (30) days from the date of this
Opinion and Order.
USIC
requested reconsideration of the December 2013 Partial
Summary Judgment Order. In response, the bankruptcy court
entered the First Denial of Reconsideration concluding that
USIC had failed to establish a manifest error of law. PREPA
and USIC then briefed their positions regarding PREPA's
request for interest and attorneys' fees and, in its
brief, USIC again requested reconsideration of the December
2013 Partial Summary Judgment Order.
In
October 2014, the bankruptcy court entered the Second Denial
of Reconsideration, in which it denied: (1) PREPA's
request for prejudgment and postjudgment interest as well as
its request for attorneys' fees; and (2) USIC's
renewed request for reconsideration of the December 2013
Partial Summary Judgment Order. The bankruptcy court
concurrently entered the October 2014 Judgment, in which it
memorialized the rulings of the Second Denial of
Reconsideration as follows:
[I]t is now ADJUDGED and DECREED that PREPA's Motion for
Summary Judgment against Intervenor USIC is DENIED as to the
awarding of pre-judgment interest, attorney's fees and
post[-]judgment interest. Furthermore, USIC's request to
reconsider the ...