GERENA MENDEZ v. OSSAM CONSTRUCTION INC et al

OCR transcription for search; preserved printed pages are authoritative

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

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IN RE: : CASE NO. 05-11884
MACGREGOR ELECTRIC, S.E. ; CHAPTER 7
Debtor

MACGREGOR ELECTRIC, S.E. ; ADVERSARY NO. 08-00122
Plaintiff :

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VS.

OSSAM CONSTRUCTION, INC.;
ABC SURETY COMPANY

Defendants

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OPINION AND ORDER

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This adversary proceeding is before the court upon three (3) motions: plaintiffs motion to

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dismiss counterclaim, plaintiff's motion to strike affirmative defense, and defendant’s motion for

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judgment on the pleadings.

The first is a motion to dismiss the counterclaim filed on October 27, 2008 (Docket No. 14)

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by the Chapter 7 trustee, representing the estate of MacGregor Electric, S.E., alleging the following:

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(i) Ossam Construction, Inc. does not have a right to setoff under Articles 1149-1150 of the Puerto

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Rico Civil Code, 31 L.P.R.A.§§ 3321-3222 because it does not have a “liquid and demandable

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claim,” but rather a “litigious credit” (Motion to Dismiss, p. 4); (ii) Ossam Construction, Inc. has

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waived its right to the remedy of setoff since the same has not filed a proof of claim or demanded

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setoff until the filing of the Counterclaim on October 21, 2008; and (iii) the monies owed to

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MacGregor Electric, S.E. are subject to a lien in favor of the Chapter 7 trustee pursuant to §544 of

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the Bankruptcy Code once the case was converted to Chapter 7 on August 21, 2006. For the reasons

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set forth below the motion to dismiss the counterclaim is denied.

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The second motion is a “Motion Pursuant To Rule 12(F)” filed on October 27, 2008 (Docket

No. 15) by the Chapter 7 trustee, representing the estate of MacGregor Electric, S.E. (hereinafter

AUTHENTJPATED
U.S. GOVERHIMENT
INFORMAPION

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referred as “MacGregor,” “Plaintiff” or “Counter-Defendant”) to strike Defendant’s affirmative
defense number seven (7) in its Answer to Complaint regarding its alleged right of setoff under the
provisions of the Bankruptcy Code, 11 U.S.C. §553. Defendant did not file a response to this motion.
For the reasons set forth below the motion pursuant to Fed. R. Civ. P. 12(f) is denied.

The third is a motion for judgment on the pleadings filed on December 1, 2008 (Docket No.
20) by Ossam Construction, Inc. (hereinafter referred as “Ossam Construction,” “Defendant,” or
“Counter-Claimant”) alleging that the complaint fails to state a claim for relief since the same is
vacant on averments related to the assumption, performance and/or completion of two particular
contracts that Defendant and MacGregor Electric, S.E. had entered into and which are in controversy
in this adversary proceeding. Jorge Luis Gerena, Chapter 7 trustee, in representation of MacGregor
Electric, S.E. filed an “Opposition to Motion For Judgment on the Pleadings” on December 2, 2008
(Docket No. 24). For the reasons set forth below the motion for judgment on the pleadings is granted.

Facts and Procedural Background

Plaintiff, Macregor Electric, S.E., filed a bankruptcy petition under Chapter 11 of the
Bankruptcy Code on October 14, 2005. On August 8, 2006 MacGregor moved the court to convert
the case to Chapter 7 (Docket No. 58 in lead case 05-11884'). MacGregor included in Schedule B the
amounts retained by Ossam Construction as an account receivable as of 07/31/2006 for the amount
of $53,704.73 (Docket No. 70 in lead case). The detail of this account receivable consists of job 141-
Alturas del Bosque for the amount of $36,881.23 and job 161-Sunbay Marina Villas for the amount
of $16,823.50.

MacGregor filed the instant adversary proceeding against Ossam Construction, Inc. on August
18, 2008 alleging the following:

“1. Debtor MacGregor Electric, SE (MacGregor), did work for Ossam Construction (Ossam)

in two projects, one called Alturas del Bosque and the other for Sun Bay Manila Villas.

Ossam retained ten percent of the amount billed by MacGregor in both projects, to wit,

$53,704.73. From at least March of 2005, MacGregor has attempted to collect said amount

to no avail. Although Ossam finished both projects, it has not paid MacGregor
aforementioned retained amount.

‘References to the lead case are to the entries and documents filed in the bankruptcy case,
case number 05-11884(ESL).

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2. This debt constitutes a breach of the parties contract or obligation and plaintiff, as the

aggrieved party, seeks defendants’ specific compliance and damages, to wit, 6% interest on

the debt since accrued in accordance with Article 1061 of the Puerto Rico Civil Code, 31

L.P.R.A. §3025. The above mentioned amounts are liquid, demandable and due and are owed

by defendants to plaintiff as stated above.”

Defendant filed the answer to the complaint on October 20, 2008 (Docket No. 12), alleging
that it does not owe any monies to Plaintiff because it had defaulted on both contracts, thus losing its
interest in the retained amount, as stipulated in the contracts. In the alternative, Defendant alleges that
it has a right of setoff under the provisions of the Bankruptcy Code, 11 U.S.C. §553 and also that it
was not entitled to comply in whole or in part with its contractual obligations due to Plaintiffs breach
of contract under the doctrine of exceptio non rite adimpleti contractus’

Ossam Construction filed a counterclaim alleging that MacGregor “defaulted on both
contracts without finishing the agreed scope of work” (Counterclaim, paragraph #6) and that
MacGregor’s “incompliance with the contract not only caused such party to lose any property rights
and interest in the retained amounts, but also caused damages delays and losses to Ossam”
(Counterclaim, paragraph #8). The counterclaim alleges that “[t]he losses caused to Ossam on the
Alturas del Bosque project amounts to $81,555.29, excluding interests from the day the project was

abandoned by McGregor” and “[t]he losses caused to Ossam on the Sunbay project amounts to

$75,755.14, excluding interest from the day the project was abandoned by McGregor (Counterclaim,

The doctrine of exceptio non rite adimpleti contractus pursuant to Article 1077 of the
Puerto Rico Civil Code, 31 L.P.R.A. §3052 is a defense which is available to the defendant in the
event that the plaintiff demands the fulfillment of the obligations of the defendant in a contract,
despite having fulfilled partially or defectively its obligations in the contract. The effect of the
application of this doctrine is that the defendant will not be obliged to fulfill its obligations under
the contract until the plaintiff performs all of its obligations fully or free of defects. However, in
those cases in which the application of the doctrine of exceptio non rite adimpleti contractus is
contrary to the principles of contractual good faith the defendant is unable to assert that defense
successfully and thus the end result is that a monetary reduction is allocated based on the
obligations that have not been realized or those obligations which were defectively realized.
Alvarez de Choudens v. Rivera Vazquez, 165 D.P.R. 1, 21-23 (2005); Puig Brutau, José,
Fundamentos de Derecho Civil, Tome I, vol. II, 116-117 (Bosch 4 ed, 1988); See Mora Dev.
Corp. v. Sandin, 118 D.P.R. 733 (1987); Martinez v. Colén Franco, Concepcién, 125 D.P.R. 15
(1989); Costructora Bauza, Inc. v. Garcia Lopez, 129 D.P.R. 579 (1991); Master Concrete Corp. v.
Fraya, S.E., 152 D.P.R. 616 (2000).

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paragraphs #12 and 13). On October 27, 2008 (Docket No. 14) MacGregor filed a motion to dismiss
the counterclaim alleging that Ossam Construction does not have a right to setoff pursuant to Articles
1149-1150 of the Puerto Rico Civil Code, 31 L.P.R.A. §3221-3222 since it does not have a “liquid
and demandable claim” but rather a litigious credit (Motion to Dismiss, pg. 4). Ossam Construction
also alleges that MacGregor waived its claim to said remedy (setoff) since it did not file a proof of
claim or demanded setoff (Motion to Dismiss, pg. 4). On October 27, 2008 MacGregor filed a
“Motion Pursuant to Rule 12(F)” to strike Ossam Construction’s affirmative defense #7, namely its
alleged right to setoff pursuant to §553 of the Bankruptcy Code and Articles 1149-1150 of the Puerto
Rico Civil Code, 31 L.P.R.A. §3221-3222 (Docket No. 15).

On December 1, 2008 Defendant filed a motion (Docket No. 20) for judgment on the
pleadings alleging that the complaint must be dismissed because it fails to state a claim upon which
relief can be granted, namely due to the following reasons: (i) it fails to plead sufficient facts to state
a claim for collection of monies; (ii) it fails to plead sufficient facts to state a claim for collection of
monies resulting from work done through an executory contract; and (iii) it fails to allege that Plaintiff
performed and completed the scope of work. Defendant further alleges that the right to collect
amounts retained under a construction contract is enforceable only after the work is performed and
completed under the terms of the contract and as such Plaintiff under Fed. R. Bankr. P. 7009(f) is
required to specify when and where completion of the work was effected (motion for judgment on
the pleadings, p. 4). Plaintiff filed an “Opposition to Motion for Judgment on the Pleadings” (Docket
No. 24) on December 2, 2008 alleging that the complaint satisfies the basic notice pleading
requirement of Fed. R. Civ. P. 8 and that it provides Defendant a fair notice of Plaintiffs claim and
the basis of the same. In addition, Plaintiff argues that it is not a requirement for a complaint to state
that a project was completed to survive a motion to dismiss (Opposition to Motion for Judgment on
the Pleadings, p. 3) and that Fed. R. Civ. P. 9(f) does not require a plaintiff to plead the time and place
of alleged conduct which gives rise to a claim for relief (Opposition to Motion for Judgment on the
Pleadings, p. 3-4). Plaintiff sustains that the contracts related to these projects are not executory
contracts since the debtor performed the same and attempted to secure payment since at least March

of 2005. Plaintiff also sustains that, “it must be inferred that plaintiff alleges that debtor performed

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its contract and hence, there is no executory contract.” (Opposition to Motion for Judgment on the
Pleadings, p. 6).

On December 15, 2008 Defendant filed a “Reply to ‘Opposition to Motion for Judgment on
the Pleadings’ and Supplemental Motion for Judgment on the Pleadings” (Docket No. 27) arguing
that pursuant to Fed. R. Civ. P. 9(c) a plaintiff must aver all conditions precedent that have been
performed, thus sustaining that an indispensable element Plaintiff must plead in the complaint is that
it complied with all conditions precedent of the contract in order to be able to state a claim for breach
of contract and specific performance. Plaintiff filed a “Motion to Strike Defendant’s Reply to
‘Opposition to Motion for Judgment on the Pleadings’ and Supplemental Motion for Judgment on
the Pleadings on December 21, 2008 (Docket No. 29) stating that Defendant’s reply should be
stricken from the record since it failed to request leave from the court to file its reply pursuant to L.
C.v.R.7.1(c). Plaintiff also argues that there is no procedural requirement under Article 1077 of the
Puerto Rico Civil Code, 31 L.P.R.A. §3052, that requires a complaint to allege that a party has
complied with its obligations (Motion to Strike, p.3).

Applicable Law and Analysis

Motion to Dismiss Counterclaim

Counter-Defendant’s motion to dismiss counterclaim is solely based on its position that, “[t]he
Counterclaim’s basis is a claim for setoff against the retainage sought v. a claim that the work
performed by MacGregor was defective and caused Ossam damages of $157,310.43.” (Motion To
Dismiss, p. 2). However, Ossam Construction in its counterclaim pleads the following: (i) “Plaintiff
McGregor Electric, SE. (McGregor) and defendant Ossam, Construction, Inc. (Ossam) agreed and
entered two separate executory construction contracts for the development of two residential
projects;” (ii) “Under the terms of both contracts Ossam was authorized to retain and hold 10% of the
amount billed by McGregor, until final completion and acceptance of all work covered by the
contract;” (iii) “Before final completion and acceptance of work, McGregor had financial trouble and
defaulted on both contracts without finishing the agreed scope of work;” (iv) McGregor’s
incompliance with the contract not only caused such party to lose any property rights and interest in

the retained amounts, but also caused damages delays and losses to Ossam;” (v) “Ossam had to bear

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the cost of completing McGregor’s unfinished work;” and (vi) “McGregor’s default in the contracts
is the proximate cause of Ossam’s damages and losses, and McGregor is responsible and liable for
such damages and losses.” (Counterclaim, paragraphs #1, 5, 6, 8, 10 and 15). After perusing Ossam
Construction’s Counterclaim in its totality, this court finds that the Counterclaim is devoid of an
allegation that Counter-Claimant has a right to setoff under §553 of the Bankruptcy Code, nor is such
concept alluded to in the Counterclaim. Thus, this court finds that Counter-Claimant has pleaded a
cause of action sufficient to entitle it to offer evidence in support of its claim for breach of contract.
Motion to Strike- Fed. R. Civ. P. 12(f)

Fed. R. Civ. P. 12(f) establishes that, “[t]he court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on
its own; or (2) on motion made by a party either before responding to the pleading or, if a response
is not allowed, within 20 days after being served with the pleading.” Fed. R. Civ. P. 12(f). “Courts
do not, however, view motions to strike affirmative defenses for legal insufficiency under Federal

Rule of Civil Procedure12(f) favorably.” Bio-Vita, Ltd. v. Rausch, 759 F. Supp. 33, 39 (D. Mass.

1991). Moreover, under Fed. R. Civ. P. 12(f) motions to strike an insufficient defense are not favored
by the courts given their dilatory nature, and thus the same are often not granted unless there is a

showing of prejudice to the moving party. See SC Wright & Miller, Federal Practice and Procedure:

Civil 3d_ § 1381 at 421-422. An insufficient defense under Fed. R. Civ. P. 12(f) depends upon the
claim for relief sought and the particular defense that is in question. Id at 410.

A motion to strike a defense pursuant to Fed. R. Civ. P. 12(f) will be granted only if: (i) there
are no questions of fact; (ii) that there are no disputed questions of law; and (ii) that under no set of
circumstances the defenses could succeed. See Johnson v. Chrysler Corp., 187 F.R.D. 440, 441 (D.
Me. 1999) and Gilbert v. Eli Lilly Co., Inc., 56 F.R.D. 116, 121 (D. P.R. 1972). When considering

the defenses to a complaint all well pleaded matters will be accepted as true and no matters contained
outside the pleadings will be considered. Id. at 121. “Nor will a Rule 12(f) motion be granted if there
is a substantial question of fact or a mixed question of law and fact that cannot be resolved, even if
it is possible to determine the issue by drawing inferences from acts and statements that are not

disputed.” 5C Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1381 at 426-427. Thus,

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a motion to strike a defense must be denied if there are either questions of facts or disputed questions

of law. See Gilbert v. Eli Lilly Co., Inc., 56 F.R.D. at 121. “But even when the defense seems to

present a purely legal question, federal courts are very reluctant to determine disputed or substantial
issues of law on a motion to strike; these questions quite properly are viewed as best determined only
after further development by way of discovery and a hearing on the merits, either on a summary

judgment motion or at trial.” 5C Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1381

at 423-425.

Plaintiff's motion to strike affirmative defense #7 was timely filed as it was filed within
twenty (20) days after the Defendant filed its answer to the complaint. Plaintiffs claim for relief is
due to an alleged breach of contract and the affirmative defense at issue is number seven, namely that,
“[d]efendant does not owe any amount of money to plaintiff. In the alternative defendant is entitled
to a setoff under §553 of the Bankruptcy Code.” (Answer to Complaint, affirmative defense #7).° In
the instant case, there is a disputed fact which is key to this case, namely which party (Plaintiff,
Defendant or both) defaulted on such contracts. This controlling fact is at issue and will ultimately
control the outcome of this adversary proceeding. Thus, the court denies the motion to strike defense
#7 as an insufficient defense.

Standard for Judgment on the Pleadings

A Rule 12(c) motion serves as a mechanism to dispose of cases when there is no dispute of
the material facts and a judgment on the merits can be achieved by focusing on the content of the
pleadings, exhibits, matters incorporated by reference in the pleadings, whatever is central or integral
to the claim for relief or defense, and any facts of which the court may take judicial notice. 5C Wright

& Miller, Federal Practice and Procedure: Civil 3d §1367 at 206-207. See Tavares de Almeida v.

> “Tn general, a creditor must file a proof of claim in order to participate in any distribution
from a debtor’s bankruptcy estate. It does not necessarily follow, however, that a creditor who fails
to file a proof of claim thereby waives a right to setoff for all purposes. The prevailing view is that
the failure to file a proof of claim does not prevent the creditor from asserting the right as a
defensive matter, although the creditor may be barred from collecting a dividend with respect to the
amount of the claim that exceeds the creditor’s offsetting debt to the debtor.” Alan N. Resnick and
Henry J. Sommer, 5 Collier on Bankruptcy J 553.07[1] (15" ed. 2008).

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Children’s Museum, 28 F. Supp. 2d 682, 685 (D. Mass. 1998). A motion for judgment on the

pleadings “tests the legal sufficiency of the complaint, not the plaintiffs likelihood of ultimate

success.” LaManque v. Massachusetts Dep’t of Employment & Training, 3 F. Supp. 2d 83, 89 (D.
Mass. 1998) referring to Furtick v. Medford Housing Authority, 963 F. Supp. 64, 67, n.9 (D. Mass.

1997). In ruling on such motion, the court must accept all of the material facts as alleged in the

complaint and view the same in the light most favorable to the plaintiff. See Santiago de Castro v.

Morales Medina, 943 F. 2d 129, 130 (1* Cir. 1991); Rivera-Gomez v. Castro, 843 F. 2d 631, 635 (1*

Cir. 1988); Gaskell v. Harvard Coop. Soc’y, 3 F. 3d 495, 497 (1* Cir. 1993); International Paper Co.
v. Jay, 928 F. 2d 480, 482 (1° Cir. 1991); Furtick v. Medford Housing Authority, 963 F. Supp. at 67,

n.9 “The motion for a judgment on the pleadings only has utility when all material allegations of fact
are admitted or not controverted in the pleadings and only questions of law remain to be decided by
the district court.” 5C Wright & Miller, Federal Practice and Procedure 3d§ 1367 at 207-208. See
Nelson v. University of Maine Sys., 914 F. Supp. 643, 647 (D. Me. 1996); and Geupel v. Benson, 704

F. Supp. 312, 313 (D. Mass. 1989). However, ifthe pleadings do not resolve all of the factual issues
in the case, then a trial on the merits is deemed more appropriate. SC Wright & Miller, Federal

Practice and Procedure: Civil 3d_ §1367 at 216.

A motion under Fed. R. Civ. P. 12(c) may be made at any time after the pleadings are closed,

but early enough not to delay trial. 5C Wright & Miller, Federal Practice and Procedure: Civil 3d

§ 1367 at 211-212.“Rule 7(a) provides that the pleadings are closed upon the filing ofa complaint and
an answer (absent a court-ordered reply), unless a counterclaim, cross-claim, or third-party claim is

interposed, in which event the filing of a reply to a counterclaim, cross-claim answer, or third-party

answer normally will mark the close of the pleadings.” 5C Wright & Miller, Federal Practice and
Procedure: Civil 3d. § 1367 at 213.

Fed. R. Civ. P. 12(c) may be employed by the defendant as a vehicle for raising several of the
defenses enumerated in Fed. R. Civ. P. 12(b), including the defense of failure to state a claim upon

which relief may be granted. See 5C Wright & Miller, Federal Practice and Procedure: Civil 3d

§ 1367 at 216, 218. “A motion for judgment on the pleadings is treated much like a Rule 12(b)(6)
motion to dismiss.” Perez Acevedo v. Rivero-Cubano, 520 F. 3d 26, 29 (1* Cir. 2008) referring to

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Curran v. Cousins, 509 F. 3d 36, 43-44 (1* Cir. 2007); See also Marrero-Gutierrez v. Molina, 491 F.

3d 1, 5(1* Cir. 2007); Pasdon v. City of Peabody, 417 F. 3d 225, 226 (1* Cir. 2005); and Collier v.
City of Chicopee, 158 F. 3d 601, 602 (1* Cir. 1998). “Because [a Rule 12(c)] motion calls for an

assessment of the merits of the case at an embryonic stage, the court must view the facts contained
in the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences
therefrom...” Id. citing “R.G. Fin. Corp. v. Vergara-Nunez, 446 F. 3d 178, 182 (1* Cir. 2006). “Under
Bell Atlantic v. Twombly, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007), to survive a Rule

12(b)(6) motion (and, by extension, a Rule 12(c) motion) a complaint must contain factual allegations
that ‘raise a right to relief above the speculative level, on the assumption that all allegations in the

complaint are true...”” ” Perez Acevedo v. Rivero-Cubano, 520 F. 3d at 29.

Standard for Granting a Motion to Dismiss

Motions to dismiss for failure to state a claim upon which relief may be granted are governed
by Federal Rule of Civil Procedure 12(b)(6), which provides that a defense of “failure to state a claim
upon which relief can be granted” to a claim for relief may be presented by motion before the filing
of a responsive pleading. A motion to dismiss a counterclaim pursuant to Fed. R. Civ. P. 12(b)(6) is
available to test a claim for relief in any pleading, including a defendant’s counterclaim. See 5B

Wright & Miller, Federal Practice and Procedure: Civil 3d_ § 1356 at 368-369.

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted

as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937,

1949 173 L. Ed. 2d. 868 (2009) citing Bell Atlantic v. Twombly, 127 S. Ct. at 1974. Thus, a

“complaint must plead facts ‘that raise a right to relief above the speculative level’” Dixon v.
Shamrock Fin. Corp., 522 F. 3d 76, 79 (1% Cir, 2008); Cook v. Gates, 528 F. 3d 42, 48 (1* Cir. 2008);
Gray v. Evercore Restructuring L.L.C., 544 F. 3d 320, 324 (1* Cir. 2008); Gagliardi v. Sullivan, 513

F. 3d 301, 305 (1* Cir. 2008);_Perez Acevedo v. Rivero-Cubano at 29; Trans-Spec Truck Serv. v.
Caterpillar Inc., 524 F. 3d 315, 320 (1* Cir. 2008); Citibank Global Markets, Inc. v. Rodriguez

Santana, —F. 3d — 2009 WL 2100215, C.A. 1 (Puerto Rico), July 17, 2009. “Because a dismissal
terminates an action at the earliest stages of the litigation, without a developed factual basis for

decision, the court must carefully balance the rule of simplified civil pleading against the need for

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something more than conclusory allegations. Washington Legal Foundation v. Massachusetts Bar
Foundation, 993 F. 2d 962, 971 (1* Cir. 1993). The court will not accept unsupported conclusions

or interpretations of the law. Id.
Conditions Precedent- Fed. R. Civ. P. 9(c)

Fed. R. Civ. P. 9(c) establishes that, “[i]n pleading conditions precedent, it suffices to allege
generally that all conditions precedent have occurred or been performed. But when denying that a
condition precedent has occurred or been performed, a party must do so with particularity.” Fed. R.

Civ. P. 9(c). The rule is applicable in all actions in the federal courts, even when the pleading practice

in the state in which the court is sitting is different. Watson v. Nalco Chem. Co, 272 F. 3d 13, 21 (1*
Cir. 2001) citing SA Wright, & Arthur Miller, Federal Practice and Procedure § 1302, (2d ed. 1987).

“Despite its liberality, Rule 9(c) still obliges the pleader to allege compliance with the contract or the
performance or occurrence of the conditions precedent was waived or excused.” SA Wright & Miller,

Federal Practice and Procedure: Civil 3d_ § 1303 at 326. “A failure to allege the performance or

occurrence of conditions precedent can be challenged by a motion to dismiss but normally should be
curable by amendment under Rule 15.” Id at 329. The court must also consider that, “[n]Jeither Rule
9(c) nor Rule 8(a)(2) expressly requires that the performance or occurrence of conditions precedent
be pleaded by a claimant. Rather, Rule 9(c) simply describes how performance or occurrence of
conditions precedent is to be pleaded. However, some courts have found that such conditions must
be at least generally alleged for the pleading to state a claim for relief.” 2-9 Moore’s Federal Practice-

Civil § 9.04[1] .

Discussion for Judgment on the Pleadings

Defendant in its motion for judgment on the pleadings, states that, “...the allegations of the
complaint taken as a whole fail to state a claim upon relief can be granted since nowhere in the
complaint it is alleged that plaintiff performed and completed the scope of work it did for Ossam, and
when and where such completion was effected.” (Motion for Judgment on the Pleadings, paragraph
#3). In addition, Defendant states that, “[b]ased on the applicable law it is evident that plaintiff's
claim cannot survive unless it states whether or not the executory contract with defendant Ossam was

performed and completed” (Motion for Judgment on the Pleadings, p. 7). Plaintiff in its Opposition

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to Motion for Judgment on the Pleadings responds the following to this particular argument, “[u|nder
said definition, the contract at hand is not an executory contract for it is plaintiff’ s position that debtor
performed the contract and is therefore owed money by Ossam. Not only is that plaintiffs contention
but also the complaint states that debtor attempted to secure payment since at least March 2005. Since
the bankruptcy petition was filed on October 14, 2005, it must be inferred that plaintiff alleges that
debtor performed its contract and hence, there is no executory contract.” (Opposition to Motion for
Judgment on the Pleadings, pgs. 5-6).

Plaintiff's complaint only alleges with respect to the retainage funds owed by Ossam
Construction that, “[t]his debt constitutes a breach of the parties contract or obligation and plaintiff,
as the aggrieved party, seeks defendants’ specific compliance and damages, to wit 6% interest on the
debt since accrued in accordance with Article 1061 of the Puerto Rico Civil Code, 31 L.P.R.A. §
3025.”(Complaint, paragraph #2). It is clear from this particular pleading, that the complaint stems
from an alleged breach of contract, and that Fed. R. Civ. P. 9(c) is applicable. However, the
complaint does not contain allegations or general averments regarding the performance of all
conditions precedent under the two contracts. The only averment the complaint contains regarding
the completion of both projects is the following, “Although Ossam finished both projects, it has not
paid MacGregor aforementioned retained amount” (Complaint, paragraph #1). The allegation is that
Ossam, the Defendant, and not MacGregor, the Plaintiff, finished the project. The absence of an
allegation that Plaintiff completed the work it was contracted to perform is fatal. Therefore, the
complaint fails to state a cause of action upon which relief can be granted for the alleged breach of
the two contracts. Also, the record shows that Plaintiff, after Defendant’s challenge, has failed to
move the court for leave to file an amended complaint to comply with the pleading standards under
Fed. R. Civ. P. 9(c), namely to include a general pleading that it complied with all conditions
precedent under the two (2) contracts.

Conclusion

In view of the foregoing, the court denies the motion to dismiss the counterclaim as the same

pleads with sufficient particularity a cause of action for breach of contract. The court also denies the

motion to strike affirmative defense #7 pursuant to Fed. R. Civ. P. 12(f), as there is a key fact in

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co Oo SS DH A FF WY NO

NO BPO dN KR BDO KD NOD DN De pw eet
Oo “J DW WO BP WD NO w CT Oo CO ST HD A FPF WD NY KF DS

llCase:08-00122-ESL Doc#:37 Filed:08/14/09 Entered:08/14/09 14:08:43 Desc: Main
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controversy. Moreover, this court finds that Plaintiff's complaint stems from an alleged breach of
contract action involving two (2) particular contracts, and that Fed. R. Civ. P. 9(c) is applicable to the
instant case. The court concludes that the complaint fails to conform to the pleading requirements
under Fed. R. Civ. P. 9(c) since the same is vacant of general pleadings or averments regarding the
performance of all conditions precedent under these two (2) contracts. Thus, the complaint fails to
state a claim for relief upon which relief may be granted under the standards of Fed. R. Civ. P.
12(b)(6).

Consequently, Plaintiffs motion to strike affirmative defense #7 and to dismiss the
counterclaim are hereby DENIED. Furthermore, Defendant’s motion for judgment of the pleadings
is hereby GRANTED and the complaint is hereby DISMISSED.

Judgment shall be entered accordingly.

In San Juan, Puerto Rico, this/ 42H day of August 2009-

JA

WLAUAL AA
YRIQUE S. LAMOUT
WS. Bankruptcy Judge

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