
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________        No. 97-1293                        GARITA HOTEL LIMITED PARTNERSHIP d/b/a                              GARITA HOTEL CORPORATION,                                Plaintiff, Appellant,                                          v.                                 PONCE FEDERAL BANK,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                   [Hon. Daniel R. Dominguez, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                Boudin, Circuit Judge,                                        _____________                            Gibson,* Senior Circuit Judge,                                     ____________________                         and Pollak,** Senior District Judge.                                       _____________________                                 ____________________            Eric A. Tulla  with whom  Rivera Tulla  & Ferra  was on brief  for            _____________             _____________________        appellant.            J. Anthony Downs with whom A.  Lauren Carpenter, Goodwin,  Procter            ________________           ____________________  _________________        & Hoar,  Harold D.  Vicente and  Vicente &  Cuebas were  on brief  for        ______   __________________      _________________        appellee.                                  ____________________                                  September 5, 1997                                 ___________________        _____________________        *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                 __________            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                                                                   ______            Hotel L.P. v.  Ponce Fed. Bank, 958 F.2d 15 (1st Cir. 1992) ,            __________     _______________            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.            _______            Grenier v.  Vermont Log Bldgs.,  Inc., 96 F.3d 559,  562 (1st            _______     _________________________            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.            ___________________     ___________________________                                         -2-                                         -2-            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).                                   ___ ___            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                                                ___  ____    ____________            Mortgage & Fin. Corp., 805 F.2d 14, 18 (1st Cir. 1986).            _____________________                 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.                      ___  ____  ____    __________________            851, 868-70 (D.P.R. 1987); or  where the loan was  apparently                                         -3-                                         -3-            made for largely  personal reasons, see, e.g., Barcel   & Co.                                                ___  ____  ______________            v. Olmo Reyes, 48  P.R.R. 239, 241-42 (1935).   But any  loan               __________            agreement  between Garita  and  Ponce  Federal  was  for  the            clearly commercial purpose  of real estate development.   See                                                                      ___            Consolidated Mortgage, 805 F.2d at 18.            _____________________                 Garita  also relies  on  FDIC  v.  Francisco  Investment                                          ____      _____________________            Corp.,  638  F.  Supp.  1216 (D.P.R.  1986),  rev'd  on other            _____                                         _______________            grounds, 873 F.2d  474 (1st Cir. 1989).   There, the district            _______            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                                                           _________            F.2d at 476.                 Francisco  rested heavily  on  the  notion that  medical                 _________            practice was inherently  not a  "commercial" endeavor  within            the  specialized meaning of  section 1651, Francisco,  638 F.                                                       _________            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                                                  _________            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 &                                                        ___  ____  ______            Hnos,  17  P.R.  Offic. Trans.  at  990,  995-96 (corporation            ____                                         -4-                                         -4-            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.                 ________                                         -5-                                         -5-
