
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-1770                             GEORGIA PACIFIC CORPORATION,                                 Plaintiff, Appellee,                                          v.                          PABLO EGUIA & SONS, INC., ET AL.,                               Defendants, Appellants.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                  [Hon. Juan M. Perez-Gimenez, U.S. District Judge]                                               ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                            Coffin, Senior Circuit Judge,                                    ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            Federico Lora Lopez for appellants.            ___________________            Manuel  Fernandez-Bared  with  whom  Nestor  Duran  and  McConnell            _______________________              _____________       _________        Valdes were on brief for appellee.        ______                                 ____________________                                   January 31, 1994                                 ____________________                       BREYER,  Chief  Judge.   The  sole  issue  on this                                ____________             appeal is whether  a three-year, or a  fifteen-year, statute             of limitations applies to plaintiff's claims.  We agree with             the  district court  that  a  fifteen-year statute  applies.             And,  we  affirm  its  grant  of  summary  judgment for  the             plaintiff.                                          I                                      Background                                      __________                       The  parties agree  about all the  relevant facts.             In 1981, the  plaintiff, Georgia Pacific Corp.,  promised to             pay  the defendant,  Pablo Eguia  & Sons,  a commission  for             finding retailers  who would  sell the  plaintiff's bathroom             tissue in Puerto Rico.  The defendant, as an "inducement" to             the  plaintiff to enter into the  contract, promised that it             would  "guaranty"  the retailers'  consequent  "payment[s]."             And, it entered into a  Guaranty Agreement that spelled  out             the details.                       Apparently, over the years,  certain retailers did             not pay for bathroom tissue that they bought.  And, in 1991,             the plaintiff brought this diversity action in Puerto Rico's             federal  district  court  to  collect  on   the  defendant's             guarantee.    The  only  meaningful  defense  concerned  the             statute  of limitations.  Defendant argued that a three-year                                         -2-                                          2             statute of limitations applied, in which case (the plaintiff             concedes) it would bar the  plaintiff's $214,000 claim.  The             plaintiff argued,  however, that  a different,  fifteen-year             statute of limitations  applied to its claim,  in which case             (the defendant concedes) the claim is not time-barred.   The             district court, finding the fifteen-year statute applicable,             granted  summary  judgment  for  the  plaintiff.   Defendant             appeals.   We agree with the plaintiff that the fifteen-year             statute applies.                                            II                                       Analysis                                       ________                       The  defendant  rests  its  "three year"  argument             primarily  upon  two provisions  of  Puerto  Rico's Commerce             Code.  The first says:                            The liability of  . . .  commercial                                                     __________                       brokers  . .  .  in  the obligations  in                       _______                  _______________                       which  they take part by reason of their                       ________________________________________                       office  shall   prescribe  after   three                       ______                       years.             10 (App. I) L.P.R.A.   1904  (Article 942) (emphasis added).             The second provision says:                            Actions arising  from drafts  shall                                                  ______                       extinguish     three     years     after                       maturity . . . .                             A similar rule shall be applied  to                       commercial   bills   of   exchange   and                                    ___________________________                       promissory  notes,  checks,   stubs  and                       ________________________________________                       other instruments of draft or exchange .                       ______________________________________                       . . .                                         -3-                                          3             10  (App. I) L.P.R.A.   1908 (Article 946) (emphasis added).             If either of these provisions applies, the plaintiff's claim             is barred.                       Unfortunately for the  defendant, neither of these             provisions applies.   The  first provision  does not  govern             because, whether or not the defendant acted as a "commercial             broker," one cannot fairly characterize the  obligation upon                                                          __________             which the  plaintiff is now suing as a "commercial broker's"             obligation.     Rather,   that  obligation  is   a  guaranty                                                                 ________             obligation,  and the defendant, in guaranteeing the debts of             another, acts as a  surety, not as a commercial broker.  See                                                                      ___             31  L.P.R.A.     4871  (Article  1721  of  the  Civil  Code)             (defining surety as "a person  [who] binds himself to pay or             perform for a third person in case the latter should fail to             do so").   The fact that the defendant  offered the guaranty             as  an   "inducement"  to   obtain   an  (exclusive)   sales             representation arrangement makes no  difference.  One  might             offer all sorts of promises as inducements to obtain such an             arrangement -- say, a promise to sell a private home, or the             family silver,  or a  car.  But,  we should  normally expect             that the nature of the promise, not the promisor's  motives,             determines  the  appropriate  prescriptive provision.    One             would  normally expect,  for example, that  the prescription                                         -4-                                          4             provisions  applicable to  real  estate contracts,  not some             other  provisions, govern  a promise  to  sell real  estate,             irrespective of the reason why the  owner wants to sell.  We                                 ______             have  found nothing  in the  codes,  commentators, or  cases             suggesting the contrary.                       The  second  provision   (referring  to  "drafts,"             "commercial   bills   of  exchange,"   "promissory   notes,"             "checks,"  "stubs,"  and  "other  instruments  of  draft  or             exchange")   does   not   apply   because  its   "three-year             prescription   bars   actions    arising   from   negotiable                                                               __________             instruments."   5  R. Gay  de Montella,  Codigo de  Comercio             ___________             Espanol  Comentado 503-04  (1936) (describing  corresponding             provision  in  Spanish Code  of  Commerce)  (translated, and             quoted,  in Portilla  v.  Banco Popular  de Puerto  Rico, 75                         ________      ______________________________             P.R.R.  94, 119  (1953)) (emphasis  added).   A  "negotiable             instrument"  is  a financial  instrument  that, among  other             things, embodies an "unconditional promise or order to pay a             sum  certain."    19  L.P.R.A.     2  (defining  "negotiable             instrument[]");  see also  id.    361 (defining  "promissory                              ___ ____  __             note" similarly);  id.    221 (defining  "bill of  exchange"                                __             similarly); id.   362 (defining "check" as a kind of bill of                         __             exchange).   The promise before us --  one of guaranty -- is             plainly   not  a   negotiable  instrument;  it   is  neither                       ___                                         -5-                                          5             "unconditional"  (for  it  is  conditioned  on  the debtor's             default),  nor is it for a "sum certain" (for it promises to             pay only to the extent the debtor defaults).                       What, then, is the  proper prescription period for                                   __             a  promise of  guaranty under  Puerto Rico  law?   The Fifth             Circuit,  applying  Louisiana's civil  law system,  tells us             that "the limitations period that applies in  a suit against             a surety is normally the same as that which applies to suits             against the principal  debtor for payment of  the underlying             debt."   Browning Seed, Inc.  v. Bayles, 812 F.2d  999, 1002                      ___________________     ______             (5th Cir. 1987)  (citation omitted).  This  Circuit has held             the same  in  respect to  Puerto Rico's  law.   See FDIC  v.                                                             ___ ____             Consolidated Mortgage  & Fin.  Corp., 805  F.2d 14,  20 (1st             ____________________________________             Cir. 1986) (prescription period for guarantee  of promissory             note given by prescription period for underlying  promissory             note);  see also  FDIC v.  Barrera,  595 F.  Supp. 894,  898                     ___ ____  ____     _______             (D.P.R. 1984) (Torruella,  C.J.) (same).  Barrera,  on which                                                       _______             Consolidated Mortgage relied, noted that Puerto Rico's Civil             _____________________             Code says  that  the  "obligation[s]"  of  a  surety  (or  a             guarantor) "expire" at the same time as those of the debtor.             31 L.P.R.A.    4951  (Article 1746 of  the Civil  Code); see                                                                      ___             also  10  (App. I)  L.P.R.A.     1824  (Article 352  of  the             ____             Commerce Code) ("obligations" of a surety "continue in force                                         -6-                                          6             until  .  . .  the  complete  termination  of the  principal             contract which is secured").  And, from that fact, the court             reasoned that  the same prescription period normally applies             as well.                       Consistent with  this rule, defendant, in  a post-             argument brief,  now seems  to acknowledge  that its  appeal             succeeds or fails depending upon whether or not an action on             the underlying debts guaranteed, those of the retailers, are             themselves  time-barred.   That being  so,  its appeal  must             fail.  That is because the Supreme Court of Puerto Rico  has             held,  at least  twice, that  the  prescription period  that             applies to  a reseller's  promise to pay  a supplier  is the             Civil  Code's  fifteen-year  "catch  all"   provision  --  a                            ____________             provision that applies to "personal" actions for which other             codes  specify  "no  special  term  of  prescription."    31             L.P.R.A.    5294 (Article 1864); see Ramallo Bros. Printing,                                              ___ _______________________             Inc.  v.  Guillermo  Ramis, 93  J.T.S.  84  (1993) (applying             ____      ________________             fifteen-year "catch  all" provision  to advertising  company             that bought, for  resale to its clients, business  cards and             the like  from a printer);  Davila v. Torres, 58  P.R.R. 880                                         ______    ______             (1941)  (same for  retail grocer  that  bought produce  from             wholesale  grocer);   see  also  Fernando   Sanchez  Calero,                                   ___  ____             Institutions  of  Business  Law 448  (13th  ed.  1988) ("The             _______________________________                                         -7-                                          7             prescriptive term of  the seller's right to pay[ment]  . . .             in the  sale for  resale is .  . . fifteen  years . .  . .")             (citation  omitted)  (translation supplied  in  Supplemental             Appendix);  Luis Diez Picazo, Prescription in the Civil Code                                           ______________________________             214(1964)(same)(translation suppliedinSupplementalAppendix).                       In reaching this conclusion, the  Supreme Court of             Puerto  Rico has rejected  one other  prescription provision             that we  have not yet  mentioned, namely a provision  in the             Civil Code that sets a three-year prescriptive term for                       the payment  . .  . to  traders for  the                       value  of goods sold  to others  who are                       not  traders, or  who,  being such,  are                       engaged in a different trade.             31 L.P.R.A.   5297 (Article  1867).  This provision does not             apply  here because supplier and retailer are both "traders"             and  both are  engaged in  the same,  not in  a "different,"             trade.   See Davila,  58 P.R.R. at  884 ("The  trade [i]n  a                      ___ ______             specific [commodity]  is the  same whether  at wholesale  or             retail . . . .").                         It may seem somewhat anomalous, as the Puerto Rico             Supreme  Court itself has noted, that the limitations period             applicable to  merchants  in the  same business  is so  much             longer than that applicable to those in different businesses             or to non-traders.  See Ramallo  Bros., 93 J.T.S. at 86 ("We                                 ___ ______________             are dealing with  a situation which strays from  the guiding                                         -8-                                          8             observation  that,   as  a  general   rule,  the  mercantile             prescriptive terms  are much  shorter than  in the  civil in             keeping  with  the  peculiar   demands  of  the   commercial             traffic.")  (citations  omitted).     It  may  be,   as  one             commentator suggests, that same-business traders tend to pay             their bills to each other less promptly than do others.  See                                                                      ___             Picazo, supra, at 215.  But, anomalous or not, we follow the                     _____             Supreme Court  of Puerto Rico, which follows the language of             the Code.                       For these reasons, this action is not time-barred.             There being no other significant  legal issue before us, the             judgment of  the district  court, requiring  payment of  the             guaranteed amounts, is                       Affirmed.                       ________                                         -9-                                          9
