MMB Development Group, Ltd. v. Westernbank Puerto Rico
762 F. Supp. 2d 356
D.P.R.2010Background
- MMB and CMT formed HIMA S.P. in 2005 to develop a medical office building; MMB contributed $4,506,023, CMT contributed land and other assets; Westernbank agreed to finance via a Construction LOC of up to $39,635,000 and Take Out Financing; MMB paid $100,000 extension fee under Westernbank's assurances; Westernbank ultimately failed to fund the Take Out Financing and faced regulatory and financial distress by 2008-2009
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Puerto Rico Commerce Code | MMB contends the contract is an ordinary PR Civil Code contract | Westernbank argues it is a commercial loan under Commerce Code | Commercial Code applies; Puerto Rico law governs |
| Statute of Frauds—oral extension contract | MMB alleges an oral extension agreement exists needing enforcement | 1302 requires a writing for certain contracts to be enforceable | Statute of Frauds applicable; fact-specific denial not dispositive at dismissal stage |
| Breach of contract claim viability | Westernbank promised loans to HIMA SP; MMB paid $100,000 and expected funding | No loans were provided; no breach occurred | Breach claim survives at this stage; facts alleged show a breach of Westernbank's promise |
| Fraud and negligent misrepresentation viability | Westernbank misrepresented its ability to fund loans while under scrutiny | No intent to deceive shown; mere negligence unlikely | Fraud claim dismissed; negligent misrepresentation survives at pleading stage |
| Tortious interference with contractual relations viability | Westernbank knew of MMB’s contract with HIMA SP; misconduct interfered with that contract | No intentional interference established | Tortious interference claim dismissed |
Key Cases Cited
- Erie R.R. v. Tompkins, 304 U.S. 64 (U.S. 1938) (diversity: apply state substantive law; federal procedure)
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009) (two-pronged plausibility standard; non-conclusory facts needed)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Maldonado v. Fontanes, 568 F.3d 263 (1st Cir. 2009) (guides plausibility framework in First Circuit)
- Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385 (1st Cir. 2001) (Rule 12(b)(6) and Rule 12(h)(2) interplay)