Jorge Rivera Surillo & Co. v. Falconer Glass Industries, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-1047

JORGE RIVERA SURILLO & CO., INC.,
Plaintiff - Appellant,

v.

FALCONER GLASS INDUSTRIES, INC., ET AL.,
Defendants - Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Carmen Consuelo Cerezo, U.S. District Judge]

Before

Torruella, Chief Judge,

Boudin, Circuit Judge,

and Keeton,* District Judge.

Rafael Baella-Silva, with whom Luis Barcel -Gener and Baella

& Barcel , were on brief for appellant.

Thomas W. B. Porter, with whom DyKemata Gossett PLLC was on

brief for appellees.
Pedro A. Delgado-Hern ndez, Solicitor General, and Carlos

Lugo-Fiol, Deputy Solicitor General, Department of Justice,

Commonwealth of Puerto Rico, were on brief for the Commonwealth
of Puerto Rico.

October 12, 1994

* Of the District of Massachusetts, sitting by designation.

TORRUELLA, Chief Judge. Plaintiff-appellant Jorge

Rivera-Surillo & Co., Inc. ("JRS"), appeals the district court's

grant of summary judgment in favor of the defendants-appellees

Falconer Glass Industries, Inc. ("Falconer Glass"), Falconer

Lewiston, Inc. ("Falconer Lewiston") and Guardian Industries

Corp. ("Guardian") on JRS's claims for breach of contract, and

JRS appeals the district court's denial of its motion to alter or

amend the judgment. We affirm.

BACKGROUND

On November 2, 1990, subcontractor JRS entered into a

subcontract with contractor G.R.G. Engineering, S.E. ("GRG"), to

replace the windows at Building 31 at the Roosevelt Roads Naval

Base in Ceiba, Puerto Rico. GRG was the Navy's prime contractor

for this project.

The prime contract between the Navy and GRG contained

various specifications for the new window glass. Among the

specifications were the requirements that the glass provide 39%

visible light transmission and .005% ultraviolet light

transmission. Paragraph 1.3 of the prime contract

specifications provided that the glass was to be delivered to the

site in unopened containers, stored in a safe, dry place, and was

not to be unpacked until needed for installation.

JRS ordered the glass for the project from Falconer

Glass pursuant to a purchase order dated November 16, 1990. The

glass was packed and shipped by Falconer Lewiston. Guardian is

alleged to be the successor in interest to Falconer Glass.

-2-

The glass was delivered to JRS in or about April, 1991.

JRS stored the glass in its warehouse. JRS did not inspect the

glass until February of 1992, when it began installation. In

February 1992, JRS noticed defects in the glass. Glass panes

which had recently been installed were stained with rainbow-like

marks, which resulted in an iridescent effect on their surface.

The staining did not show when the glass was taken out of its

packaging, but rather appeared two or three days thereafter.

Laboratory tests performed at the request of JRS showed that the

glass did not meet the Navy's requirements for visible light

transmission. JRS notified the defendants of the alleged

defects, for the first time, in a telephone conversation on

February 25, 1992, and again, in writing, in a letter dated March

2, 1992.

The defendants did not replace the glass because JRS

failed to comply with their requirements for presentation of

claims. These requirements were set forth in the defendants'

"General Terms and Conditions of Sale" ("General Terms").

Falconer Glass and Falconer Lewiston both sent JRS

copies of the General Terms. The General Terms were set forth on

the order form that Falconer Glass sent JRS along with its

quotation. Additionally, Falconer Lewiston provided JRS with the

General Terms when Falconer Lewiston acknowledged the order.

Paragraph 16 of the General Terms provided:

Presentation of Claims -- Every claim on

account of defective or non-conforming

material or from any other cause shall be

deemed waived by the purchaser unless

-3-

made in writing within ten (10) days of

the receipt of the goods to which such

claim relates for breach of contract or
warranty and any action must be commenced
within one year after tender of goods by
the Seller, or receipt of goods by the
Purchaser or after the cause of action
has accrued, whichever shall be
applicable in the circumstances.

(emphasis added).

JRS filed suit for breach of contract against the

defendants on May 22, 1992. The defendants moved for summary

judgment. The district court granted the motion and final

judgment was entered on November 18, 1993. The district court

found that JRS's claim was barred by Section 260 of the Puerto

Rico Commerce Code which establishes a thirty day time limit for

filing of certain claims. 10 L.P.R.A. 1718 (1989). The court

also indicated that the 10-day presentation-of-claims provision

in the General Terms may, by itself, determine the outcome of the

case, but found that issue to be moot in light of Section 260.

On December 3, 1993, JRS filed a motion to alter or

amend the judgment under Fed. R. Civ. P. 59(e). The court denied

the motion by order dated March 1, 1994.

STANDARD OF REVIEW

Entry of summary judgment is appropriate when "the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(c); Mack v. Great Atlantic & Pacific Tea Co.,

-4-

871 F.2d 179, 181 (1st Cir. 1989). Our review of a district

court's grant of summary judgment is plenary. LeBlanc v. Great

American Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). We view the

record in the light most favorable to the nonmoving party and

draw all reasonable inferences in the nonmoving party's favor.

Id.

We review the trial court's decision denying a motion

to alter or amend a judgment for manifest abuse of discretion.

Appeal of Sun Pipe Line Co., 831 F.2d 22, 24-25 (1st Cir. 1987),

cert. denied, 486 U.S. 1055 (1988).

DISCUSSION

The district court found that this case is governed by

the Commerce Code of Puerto Rico. Chapter 51 of the Commerce

Code provides that the Code applies to all commercial

transactions, regardless of whether they are consummated by

merchants. P.R. Laws Ann. tit 10, 1002. The district court

found, and the parties do not dispute, that they were merchants

engaged in a commercial transaction. The Code contains specific

provisions governing commercial purchases and sales. Section

243 defines "commercial purchase and sale" to which the code

applies:

A purchase and sale of personal property
for the purpose of resale, either in the
form it was purchased or in a different
form, for the purpose of deriving profit
in the resale, shall be considered
commercial.--Commerce Code, 1932, 243.

P.R. Laws Ann. tit. 10, 1701.

The district court determined that the 30 day time

-5-

limitation of Section 260 applied to JRS's claim. Section 260

provides:

-6-

Failure to file a claim on account of defects.

A purchaser who has not made any claim
based on the inherent defects in the
article sold, within the thirty days
following its delivery, shall lose all
rights of action against the vendor for
such defects.--Commerce Code, 1932,
260.

P.R. Laws Ann. tit. 10, 1718.

Because JRS failed to claim any defects in the glass

within 30 days of delivery, the court found that Section 260

barred its suit against the defendants.

On appeal, JRS contends that the district court erred

in applying Section 260 to this case. JRS contends that the

present case is an action for breach of contract and the

applicable statute of limitations is fifteen years. Camacho v.

Iglesia Cat lica, 72 P.R.R. 332, 340 (1951); Saavedra v. Central

Coloso, Inc., 85 P.R.R. 404, 405 (1962). The statute of

limitations for actions for breach of contract is determined by

Section 1864 of the Puerto Rico Civil Code which provides a

fifteen year statute of limitations for actions "which are

personal and for which no special term of proscription has been

fixed." P.R. Laws Ann. tit. 31, 5294. Hence, the fifteen year

statute of limitations period would apply only if no other

proscription, including that provided by Section 260 of the

Commerce Code, were applicable to this case.

In order to determine whether Section 260 applies to

this case we are guided by the Puerto Rico Supreme Court's

decision in Julsrud v. Peche de Puerto Rico, Inc., 115 P.R.R. 23

-7-

(1983). In Julsrud, the court distinguished circumstances under

which the statute of limitations for breach of contract applies

from circumstances to which claims of defects apply:

The first distinction we must consider is
that existing between another thing
(aliud) and defective thing. When a

specific thing different from the one
agreed upon is delivered, the figure of
another thing or aliud pro alio, comes

into play, which allows the buyer to
bring an action for breach of contract
within the corresponding period of
limitation. When the very thing required
is delivered, even if it is defective,
the seller has complied with his
obligation to furnish the thing required.
What we have then is the delivery of a
defective thing, and the actions
available are the aedilitian actions--the
redhibitory or quanti minoris actions--

whose life is much shorter than the
action for breach of contract.

115 P.R.R. at 28-29 (footnote and internal citation omitted).

Equating "inherent defect" to a "hidden defect," id. at

31, the court defined a "hidden defect" to which the thirty day

limitation of Section 260 applies:

A hidden defect is that which escapes the
eye of an ordinarily diligent person, the
defect that is inherent to the imperfect
way in which the merchandise was
manufactured, packed, handled, or stored,
and which renders the thing inadequate
for the use for which it is destined.

Id. at 30 (internal citation omitted).

JRS has not claimed that defendants failed to deliver

the glass. Rather, they claim that the glass delivered was

inadequate for its intended use. JRS has indicated that the

staining of the glass did not start to show when the glass was

-8-

taken out of its packaging, but rather, two or three days

thereafter, and JRS contends that the source of the defect was

the glass manufacturing process. JRS's claims falls squarely

into the definition of "inherent" or "hidden" defect set forth in

Julsrud.

Furthermore, this Court has held that litigants cannot

circumvent a specific provision of the Puerto Rico Code by

characterizing their claims generally as a "breach of contract"

in order to obtain the benefit of a longer statute of limitations

period. Kali Seafood, Inc. v. Howe Corp., 887 F.2d 7, 9 (1st

Cir. 1989); Betancourt v. W.D. Schock Corp., 907 F.2d 1251 (1st

Cir. 1990).

In Kali, we determined that litigants who had a claim

for hidden defects, to which the six month statute of limitations

period of P.R. Laws Ann. tit. 31, 3847 applied, could not

circumvent that limitations period by characterizing their claim

as one for breach of contract:

Because virtually every sale results from
a contract (express or implied), a
disappointed vendee could always bypass
the statute's narrow window of
opportunity in favor of the thirty-times-
wider window afforded by P.R. Laws Ann.
tit. 31, 5294. Unrestrained access to
such an end run would serve completely to
eviscerate the special statute of
limitations which the legislature thought
should apply to product sales in Puerto
Rico. We do not believe that the
legislative will can be flouted with such
ease, or that Commonwealth law is so one-
sided as to make the appropriate
limitation period depend strictly and
solely on how a plaintiff chooses to
costume its complaint.

-9-

887 F.2d at 11-12. See also M rquez v. Torres Campo, 111 P.R.

Dec. 854 (1982) (official English translation: No. R-79-101, slip

op. at 1103 (P.R. Jan. 18, 1982) (affected purchaser may not use

a general action to evade applicable rules related to a special

action that are incompatible with the provisions of the general

action). We therefore conclude that the district court did not

err in applying Section 260 to this case.1

JRS's remaining arguments were raised for the first

time in its motion to alter or amend the judgment under Fed. R.

Civ. P. 59(e) which the district court denied. JRS raised four

arguments in its Rule 59(e) motion which it now pursues on

appeal: 1) when the defendants agreed to the Navy specifications,

they superseded the 10-day term contained in their order and

waived the 30-day term prescribed by Article 260 of the Puerto

Rico Commerce Code; 2) defendants somehow acted in bad faith by

failing to make clear at the time of contracting that, despite

Navy specifications, defendants would limit the time in which to

notify claims to the 10 or 30 day notice periods provided in the

"General Terms" and Section 30 respectively; 3) the inclusion by

the defendants in the "General Terms" of a different limitation

period from the one implied by the Navy Specifications,

constitutes an act contrary to good faith and as such, should be

rendered invalid and illegal; and 4) insofar as Section 260

1 JRS contends that Section 260 does not apply to specially
manufactured products. However, JRS has failed to cite any legal
authority in support of this contention. We have not found any
such authority and decline their invitation to create new law.

-10-

requires a purchaser to make a claim for inherent defects before

obtaining knowledge of their existence, the provision is

unconstitutional because it violates the purchaser's property

rights without due process of law.

This court has explained that a motion under Rule 59(e)

is not appropriately used to present new issues or evidence:

Rule 59(e) motions are aimed at
reconsideration, not initial

consideration. Thus, parties should not
use them to raise arguments which could,
and should, have been made before
judgment issued. Motions under Rule
59(e) must either clearly establish a
manifest error of law or must present
newly discovered evidence. They may not
be used to argue a new legal theory.

Federal Deposit Ins. Corp. v. World Univ., Inc., 978 F.2d 10, 16

(1st Cir. 1992) (internal citations and quotations omitted).

Because the first of these arguments raises issues

addressed by the district court in its opinion, we address it

below. The remaining three arguments, however, neither "clearly

establish a manifest error of law" nor "present newly discovered

evidence" and are therefore not properly before us. Id.

Paragraph 1.3 of the prime contract specifications in

the contract between the Navy and GRG provided:

1.3 DELIVERY, STORAGE, AND HANDLING

Deliver products to the site in
unopened containers, labeled plainly with
manufacturers' names and brands. Store
glass and setting materials in safe, dry
locations and do not unpack until needed
for installation. Handle and install
materials in a manner that will protect
them from damage.

-11-

Throughout this litigation, JRS has contended that they

were bound by these specifications and therefore, could not

inspect the glass when it was delivered. The district court

found that this argument was irrelevant to the issues presented

in this case because the contracts between the Navy, GRG, and JRS

in no way involve or bind Falconer, Lewiston, or Guardian.

Furthermore, the district court noted that the Navy specification

referred to "delivery" and "unpacking" and that neither of these

terms prohibits inspecting the product to insure its safe arrival

and conformance to contract specifications.

JRS concedes that the defendants did not enter into a

direct contractual relationship with either the Navy or GRG.

However, because the Navy specifications were forwarded to the

defendants for their acceptance before contracting, JRS contends

that the specifications became a medullary part of the

contractual relationship between JRS and the defendants.

We find several problems with JRS's argument. Like the

district court, we do not believe that the Navy specifications

prevented JRS from inspecting the glass. Not only do the Navy

specifications say nothing about inspection, but the "General

Terms" provided to JRS by the defendants contained the following

provision:

6. INSPECTION--The Buyer may inspect or
provide for inspections at the place of
manufacture. Such inspections shall be
conducted as not to interfere
unreasonably with the manufacturer's
operations, and consequent approval or
rejection shall be made before shipment
of the material. Notwithstanding the

-12-

foregoing the Buyer shall inspect the
material upon his receipt of same, and if
the same shall appear not to conform to
the contract between the Buyer and the
Seller, the Buyer shall immediately
notify the Seller of such condition and
afford the Seller a reasonable
opportunity to inspect the material. No
material shall be returned without the
Seller's consent.

If JRS felt that it should not open the goods for

inspection on arrival, it could have arranged to inspect the

goods at the place of the manufacturer's operations. Otherwise,

it could have arranged to delay delivery until it was ready to

use the materials. JRS could have also removed samples of the

glass and subjected them to whatever testing it deemed

appropriate. Finally, the "General Terms" clearly show that

defendants did not intend to incorporate into their contract with

JRS any limitation on the inspection of goods but rather required

inspection and immediate notification to the Seller of any

nonconformity of the goods.

Affirmed.

-13-