MAYAGUEZ ADVANCED RADIOTHERAPY CENTER v. ADVANCED CARDIOLOGY CENTER, CORP

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IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO
IN RE:
MAYAGUEZ ADVANCED RADIOTHERAPY
CENTER
CASE NO. 09-4540 BKT
CHAPTER
Debtor(s) 	ADVERSARY NO. 09-00111
MAYAGUEZ ADVANCED RADIOTHERAPY
Plaintiff
ADVANCED CARDIOLOGY CENTER, CORP 	FILED & ENTERED ON 02/10/2010
Defendant(s)
OPINION AND ORDER
Before 	this 	Court 	is 	Plaintiff-Debtor 	Mayaguez 	Advanced 	Radiotherapy
Center’s (“MARC”) Brief in Support of Request for Sanctions [Dkt. No. 32] and
Defendant Advanced Cardiology Center Corporation’s (“ACC”) Legal Brief in Support
of Opposition to Motion for Sanctions and of Motion to Dismiss and/or to Prohibit
Use, Sell or Lease of Collateral and/or for adequate Protection Payment [Dkt. No.
33]. On 6/5/2009, MARC filed the instant adversary proceeding for the avoidance
of several attachments and garnishments over the assets of MARC and in favor of
ACC. 	The parties reached an agreement and filed a joint stipulation on 6/19/2009
[Dkt. 	No. 	5] 	which 	purportedly 	resolved 	all 	matters 	in 	dispute 	between 	the
parties. The stipulation was approved by the court on 7/9/209 [Dkt. No. 6], and
judgment was entered closing the adversary on 7/22/2009 [Dkt. No. 8]. 	Shortly
thereafter on 7/31/2009, plaintiff MARC moved the court for sanctions against
defendant ACC for failure to carry out the terms of the stipulation, specifically
with regards to a payment of $36,040.46 collected post petition.
On 11/12/2009, this Court held a hearing in which it ordered the parties to
file simultaneous briefs on the issue of the secured status of ACC and their
entitlement to adequate protection payments based on each parties interpretation
of the Stipulation, and to refrain from filing dispositive motions until this
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matter was determined by the Court. In response to this order the parties filed
the motions presently before us. Even though, Plaintiff MARC filed a sur-reply to
ACC’s Legal Brief on 1/25/2010 [Dkt. No. 34], the Court did not consider this
filing in determining the legal status of the parties for the purpose of this
Opinion and Order.
A stipulation is a negotiated contract between the parties that resolves
all or a portion of the outstanding issues between them. A well established
guideline for the interpretation of contracts is the “parol evidence rule” which
states “where the parties put their engagement in writing all prior negotiations
and agreements are merged in the instrument, and each is bound by its terms
unless his signature is obtained by fraud or the contract be reformed on the
grounds of fraud or mutual mistake, or the contract is illegal.” Wheeler v.
Blumling, 521 F.3d 1 (1 st Cir. 2008). In Wheeler, the Court refused to admit
extrinsic evidence where there was no allegation of fraud or mistake but was
offered 	to 	contradict 	particular 	terms 	in 	the 	contract. 	The 	introduction 	of
extrinsic evidence to escape the unwanted effects of a contract “is exactly what
the parol evidence rule forecloses.” Id. Article 1233 of the Puerto Rico Civil
Code, 31 L.P.R.A. § 3471 and the “parol evidence rule” both preclude reference to
extrinsic evidence where the terms are clear. Borshow Hosp. & Medical v. Cesar
Castillo, 96 F.3d 10, 15 (1 st Cir. 1996). 	The Puerto Rico parol evidence rule
will allow for the introduction of extrinsic evidence only in the event the
contract is ambiguous. Adria International Group v. Ferre Dev., Inc., 241 F3d 103
(1 st Cir 2001). In Graphics Supply v. Polychrome Corp., 116 F.3d 464 (1 st Cir
1997), the court determined that where the terms of the contract are clear and
unambiguous, a party may not offer external evidence to change the terms of the
contract for his benefit, and to the detriment of the other party.
The case law discussed above requires that the stipulation be taken at face
value and its clauses be read literally. 	Since the meaning of the stipulation
and its terms are clear, no extrinsic evidence provided by the parties will be
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allowed by this Court. 	The pertinent clause in the stipulation is paragraph 7
which reads as follows:
The parties hereby agree to the immediate release, except as otherwise
stated in this Stipulation, of any and all garnishments and/or attachments
in favor of ACC encumbering any of Debtor’s assets, including but not
limited 	to 	the 	[sic] 	medical 	and 	medical 	equipment 	and 	the 	accounts
receivables from the medical insurance companies. [Emphasis ours]
Black’s Law Dictionanry, 9 th Edition , 2009 defines the legal term “release” as
follows:
Liberation from an obligation, duty, or demand; the act of giving up a
right or claim to the person against whom it could have been enforced. –
Also termed discharge; surrender 2. The relinquishment or concession of a
right, title, or claim.
The language of paragraph 7 of the Stipulation is clear and leaves no room
for interpretation by the parties or this Court. 	The use of the term “release”
removes all doubt that any rights ACC may have had over the equipment and account
receivables has been extinguished.
However, even if the Court has erred with regards to the meaning of the terms of
the stipulation and the use of the “parol evidence rule”, the fact remains that
the 	perfection 	of 	the 	security 	interest 	once 	held 	by 	ACC 	over 	the 	medical
equipment and account receivables of MARC is flawed. 	The attachments are no
longer valid pursuant to Rule 56.4 of the Puerto Rico Rules of Civil Procedure.
Rule 56.4 states that for a garnishment over chattel property to be perfected,
the court has to take it into custody via a custodian assigned by the court. For
an embargo or garnishment over chattel property to continue in existence, the
property has to remain in the possession of the court appointed custodian. Burgos
v. Berretiaga & Martin, 33 D.P.R. 611 (1924). 	In Burgos, the court concluded
that the embargo was dissolved by the loss of the possession of the garnished
chattel 	property. 	The 	record 	in 	the 	case 	demonstrates 	that 	on 	two 	separate
occasions the medical equipment was turned over to a private party. 	The first
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party was RTCI, Inc in exchange for a monthly rental fee in May 2009, and as per
the terms of the stipulation the property was tuned over to plaintiff MARC in
September 2009. The fact that the property was turned over to these two parties
effectively dissolved the embargo.
CONCLUSION:
Based upon the foregoing, this Court determines that the plain meaning of
the stipulation released any and all rights, attachments and garnishments ACC
had 	over 	the 	equipment 	held 	by 	MARC. 	ACC 	is 	an 	unsecured 	creditor, 	and 	is
therefore 	not 	entitled 	to 	payments 	for 	adequate 	protection. 	It 	is 	further
ordered that ACC turn over the amount of $36,040.46 to MARC within thirty (30)
days in accordance with the terms of the stipulation. 	The Court does not award
sanctions or damages to MARC at this time. However, failure to turn over the
monies to MARC within the above mentioned time frame will result in a hearing
being scheduled to determine appropriate sanctions and/or damages.
SO ORDERED.
Ponce, Puerto Rico, this 10 day of February, 2010.
Brian K. Tester
U.S. Bankruptcy Judge
c: 	DEBTOR(S)
ADVANCED CARDIOLOGY CENTER, CORP
MAYAGUEZ ADVANCED RADIOTHERAPY CENTER
FAUSTO D GODREAU ZAYAS
ALEXIS FUENTES HERNANDEZ
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