Royal Car Rental, Inc. v. Banco Popular de Puerto Rico
3:11-cv-01399
| D.P.R. | Aug 1, 2012Background
- Plaintiffs sue BPPR, successor to Westernbank, for breach of Line of Credit and related misconduct.
- Westernbank was insolvent and closed by FDIC; this action centers on their dealings with RCR, Bumpers Royal, López, and Soto.
- Line of Credit originally for $1,000,000 to purchase vehicles; collateral and guaranties were required.
- Westernbank allegedly increased the credit limit, induced vehicle purchases, then demanded liquidation and rejected renewals.
- Banking and fiduciary duties alleged; plaintiffs claim tortious, deceptive, and discriminatory conduct, and fraud against the Bankruptcy Court judgment.
- Bankruptcy Court in 2010 granted summary judgment to Westernbank; final judgment issued byBankruptcy Court June 16, 2010; issues of res judicata arise in this suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether res judicata bars this suit | RCR seeks relief despite fraud claims | Final Bankruptcy judgment precludes claims | Bankruptcy judgment has claim preclusion and privity bars claims |
| Whether the contract claims are barred by res judicata | Identical breach theories still viable | Claims precluded due to prior adjudication | Breaches of Line of Credit claims barred due to claim preclusion |
| Whether López, Soto, and Bumpers Royal are in privity with RCR | They were guarantors/related to RCR | Privity established; barred | Yes, all are in privity; claims barred |
| Whether Rule 60(b)(3) relief from the Bankruptcy judgment is warranted | Fraud on court evidenced by internal memorandum | Fraud not proven and timely appeal absent | Denied relief from judgment |
| Whether the Puerto Rico Civil Rights Act claims were properly dismissed | Discrimination via personal guarantees | Insufficient factual pleadings | Dismissed for lack of plausible discrimination claim |
Key Cases Cited
- Chicot County Dist. v. Bank, 308 U.S. 371 (U.S. 1980) (final bankruptcy judgments have claim preclusion when appropriate)
- F.D.I.C. v. Shearson-American Exp., Inc., 996 F.2d 493 (1st Cir. 1993) (bankruptcy orders preclusive where final and on the merits)
- Katchen v. Landy, 382 U.S. 323 (U.S. 1966) (bankruptcy decisions accord preclusion principles)
- In re Teltronics Services, Inc., 762 F.2d 185 (2d Cir. 1985) (preclusion when officer/shareholder controls prior action)
- Explosives Corp. of America v. Garlam Enterprises Corp., 817 F.2d 894 (1st Cir. 1987) (privity and control support preclusion principles)