Municipality of Mayagüez v. Corporación Para el Desarrollo del Oeste
824 F. Supp. 2d 289
D.P.R.2011Background
- CPDO was a private nonprofit formed in 1978 to promote Northwestern/Southern Puerto Rico development and served as HUD CDBG subrecipient.
- Mayagüez participated in CDBG/UDAG and administered funds, with land transfers to CPDO for Villa Sultanita project (1980–1984).
- Deed 91 transferred ceded lands to CPDO to develop Villa Sultanita; CPDO to develop in compliance with CDBG requirements; Mayagüez provided endorsements.
- Mayor in 1994 ordered CPDO to cease transactions on transferred lands due to alleged AMA violations and citizen complaints.
- HUD audit in 1997 identified findings (1-D, 1-E, 2-A, 4-A) about CPDO and Mayagüez handling of CDBG funds; subsequent state court litigation arose.
- Mayagüez sued CPDO in 2006 for breach of contract seeking injunctive relief, declaratory relief, rescission, and damages; through trial, court rejected breach claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CPDO complied with the AMA conversion requirement | Mayagüez contends CPDO violated AMA by remaining non-special | CPDO argues 1995 amendment did not require conversion since CPDO ceased receiving municipal property after 1985 | No violation; CPDO not required to convert and remained compliant under 14 L.P.R.A. § 4815. |
| Whether Deed 91 breach occurred due to HUD findings | Mayagüez alleges HUD findings show contract breach by CPDO | CPDO asserts findings relate to grantee/municipality actions, not CPDO breach | No breach; CPDO acted within contractual framework and Mayagüez failed to engage CPDO to address findings. |
| Whether Mayagüez’ repayment plan mitigated HUD findings | Plaintiff emphasizes failure to address findings and seek CPDO’s data | CPDO contends Mayagüez could have negotiated;HUD encouraged transparency | Mayagüez's choice to repay via local projects rather than address merits did not prove breach. |
| Whether documentation establishes CPDO misused CDBG funds | HUD findings alleged improper use of program funds by CPDO | Evidence insufficient to prove misappropriation by CPDO | Not proven; CPDO not shown to have breached contract. |
Key Cases Cited
- Sierra Fria Corp. v. Donald J. Evans, P.C., 127 F.3d 175 (1st Cir. 1997) (necessity of adequate Rule 52(a) findings for appellate review)
- Fasolino Foods Co., Inc. v. Banca Nazionale del Lavoro, 961 F.2d 1052 (2d Cir. 1992) (thorough opinion required; not every factual contention must be addressed)
- Torres v. Bella Vista Hosp., Inc., 523 F.Supp.2d 123 (D.P.R. 2007) (elements of breach of contract under Puerto Rico law; contract terms control)