United Surety & Indemnity Co. v. Puerto Rico Electric Power Authority

Citation:
____B.R. ____ (B.A.P. 1st Cir. 2016).BAP NOS. PR 15-046
Tag(s):
Ruling:
The Bankruptcy Appellate Panel affirms the judgment on voluntary dismissal of Debtor's adversary case against PREPA and declines to consider USIC's appeals from the interlocutory orders.
Procedural context:
USIC filed a complaint for intervention against PREPA in adversary proceeding brought by Debtor against PREPA. PREPA filed a counterclaim against USIC. The bankruptcy court granted PREPA's two partial motions for summary judgment against USIC and the later requested the bankruptcy court to enter the judgment in accordance to Federal Rule of Civil Procedure 54(b) in order to proceed on appeal. With PREPA's consent, the bankruptcy court entered an amended partial judgment which included the certification under Rule 54(b) that there was "no reason for further delay" in the entry of final judgment. On USIC's appeal, PREPA challenged the finality of the orders. The Bankruptcy appellate panel dismissed the appeal, ruling that the record “provide[d] no clear reason why the partial, final judgment should have issued. and, that there were significant issues of fact between the claim adjudicated and the claims pending in the bankruptcy court. After six years of litigation Debtor moved for the voluntary dismissal, USIC filed an amended complaint for intervention but never objected to the request for voluntary dismissal. The Bankruptcy Court granted the request for voluntary dismissal and disallowed the amended complaint in intervention. USIC appeal.
Facts:
USIC issued a bond (the “Bond”) guarantying the Debtor’s (Industrias Vasallo)payments to PREPA for electricity and equipment. The Bond was 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. Debtor, Industrias Vasallo, filed an adversary proceeding against PREPA 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 filed a complaint for intervention. PREPA asserted a counterclaim against USIC. The bankruptcy court granted partial motions for summary judgment against USIC and dismissed the complaint in intervention. After nearly six years of litigation Debtor decided to withdraw the complaint against PREPA. Within hours from the filing of Debtor's motion, USIC filed an amended complaint in intervention without seeking or obtaining leave from the court. PREPA represented that did not object to the voluntary dismissal. The Bankruptcy Court granted the voluntary dismissal and disallowed the amended complaint in intervention. USIC appeal and the BAP determined that its failure to object to the motion in the trial court is fatal to its effort to challenge the resulting order on appeal. The BAP rejected that USIC's argument that the filing of the amended complaint in intervention precluded dismissal of the adversary proceeding. In addition, USIC was not entitled to file the amended complaint pursuant to Fed. R. Civ. P. 15(a). the court noted that USIC waited five years to attempt to amend the pleading which is considered a case of undue delay and prejudice in proffering amendments. in the other issue, the BAP noted that the First circuit has expressed reluctance to review interlocutory order when a party, by his own inaction has suffered the dismissal. Concluded that "USIC allowed the adversary proceeding to be dismissed without any mention, let alone unequivocal expression, of its desire to preserve its right to appeal the interlocutory orders".
Judge(s):
Bailey, Finkle and Fagone

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