USCA1 Opinion
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
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No. 97-1293
GARITA HOTEL LIMITED PARTNERSHIP d/b/a
GARITA HOTEL CORPORATION,
Plaintiff, Appellant,
v.
PONCE FEDERAL BANK,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Dominguez, U.S. District Judge]
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Before
Boudin, Circuit Judge,
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Gibson,* Senior Circuit Judge,
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and Pollak,** Senior District Judge.
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Eric A. Tulla with whom Rivera Tulla & Ferra was on brief for
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appellant.
J. Anthony Downs with whom A. Lauren Carpenter, Goodwin, Procter
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& Hoar, Harold D. Vicente and Vicente & Cuebas were on brief for
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appellee.
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September 5, 1997
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*Hon. John R. Gibson, of the Eighth Circuit, sitting by designation.
**Of the Eastern District of Pennsylvania, sitting by designation.
Per Curiam. In the district court, Garita Hotel claimed
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that Ponce Federal Bank had unconditionally contracted to
lend Garita $6 million for the expansion, renovation and
operation of a hotel complex in Carolina, Puerto Rico, and
that the bank breached that contract when it refused to
advance funds unless Garita obtained a casino license. The
district court, acting after a remand from this court, Garita
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Hotel L.P. v. Ponce Fed. Bank, 958 F.2d 15 (1st Cir. 1992) ,
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granted summary judgment to Ponce Federal. Garita's appeal
to this court followed.
We review the district court's grant of summary judgment
de novo, drawing reasonable inferences in Garita's favor.
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Grenier v. Vermont Log Bldgs., Inc., 96 F.3d 559, 562 (1st
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Cir. 1996). On the record before the district court, most of
the undisputed facts strongly suggested that approval of the
casino license had been an understood condition of the loan.
Garita's main argument to the contrary rests on an alleged
oral statement to Garita representatives, by a Ponce Federal
agent in September 1986, that the bank had "approved" the
loan. Internal bank documents arguably corroborate the
making of this statement.
Under Puerto Rico law, a commercial contract must be
corroborated, and this requirement extends not just to the
existence of an agreement but also to its essential terms.
Vila & Hnos, Inc. v. Owens Ill. de Puerto Rico, 17 P.R.
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Offic. Trans. 987, 997-1000 (1986). The district court
invoked this requirement, holding that there was certainly no
corroboration for the claim that the bank had agreed to make
the loan unconditionally and without regard to the approval
of the casino license. On appeal, Garita argues that the
loan agreement should not have been classified as a
commercial contract.
A Puerto Rican statutory provision defines a loan as
commercial if (1) at least one party is a "merchant" and (2)
the loan proceeds "are destined to commercial transactions."
10 L.P.R.A. 1651; see id. 1001 (defining merchant).
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Here, where an established bank proposed to extend a sizable
loan to an experienced hotel and casino management company
for the purpose of renovating and operating a luxury hotel-
casino complex, we agree with the district court that
whatever contract the parties may have formed is commercial
in nature under Puerto Rican law. See FDIC v. Consolidated
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Mortgage & Fin. Corp., 805 F.2d 14, 18 (1st Cir. 1986).
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Garita contends that the loan was not commercial because
it was extended for a purpose (hotel renovation) that
differed from Garita's traditional business (hotel
management). It is true that courts have found noncommercial
transactions where borrowed funds were used for personal
purposes, see, e.g., FDIC v. Martinez Almodavar, 671 F. Supp.
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851, 868-70 (D.P.R. 1987); or where the loan was apparently
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made for largely personal reasons, see, e.g., Barcel & Co.
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v. Olmo Reyes, 48 P.R.R. 239, 241-42 (1935). But any loan
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agreement between Garita and Ponce Federal was for the
clearly commercial purpose of real estate development. See
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Consolidated Mortgage, 805 F.2d at 18.
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Garita also relies on FDIC v. Francisco Investment
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Corp., 638 F. Supp. 1216 (D.P.R. 1986), rev'd on other
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grounds, 873 F.2d 474 (1st Cir. 1989). There, the district
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court held that a loan to a corporation controlled by
doctors, who borrowed the money to buy all the shares of an
incorporated nursing home, intending to operate it as a
hospital or other medical facility, was not commercial. This
court had no occasion to resolve the issue. Francisco, 873
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F.2d at 476.
Francisco rested heavily on the notion that medical
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practice was inherently not a "commercial" endeavor within
the specialized meaning of section 1651, Francisco, 638 F.
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Supp. at 1218-19, a notion that has little application to a
hotel and casino company proposing a new hotel and casino
venture. There is some language in Francisco arguably more
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helpful to Garita, but that language may itself be in some
tension with Puerto Rico case law indicating that a loan may
be "commercial" even though the planned use of funds differs
from the borrower's historical business. See, e.g., Vila &
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Hnos, 17 P.R. Offic. Trans. at 990, 995-96 (corporation
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engaged in transportation of sand and stone sought financing
to purchase property capable of supplying these materials).
Thus, we agree with the district court that the loan
agreement in this case was a commercial contract for which
corroborating evidence was required as to the existence of
the agreement and its essential terms. Nothing in the record
corroborates Garita's contention that Ponce Federal agreed to
a loan regardless of government approval of the planned
casino. Summary judgment was properly granted.
Affirmed.
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