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Puerto Rico Freight System Files $9.3 Million Lawsuit Against Promoexport
Suit By PRFS Padilla For Breach Of Contract Goes Back To 1999 Legal Agreement
By MARIALBA MARTINEZ
June 5, 2003
On May 27, Puerto Rico Freight System Inc. (PRFS) filed a $9.3 million lawsuit against the Puerto Rico Corp. for the Development of Exports, better known as Promoexport, for damages claimed to have been caused when the agency allegedly refused to honor a contract to lease PRFS a building in Guaynabos Foreign Trade Zone (FTZ) No. 61.
PRFS President Mike Padilla is taking Promoexport to court for refusing to rent PRFS the 97,000-square-foot Building 15 at Promoexports International Trade Center in Guaynabo. Construction of Building 15 began in 1999 according to PRFS specifications, under an agreement between Padilla and Promoexport stemming from an earlier lawsuit regarding his current lease of Building 11.
"I have been leasing from Promoexport for the past 10 years," said Padilla. "PRFS 50 employees currently occupy Building 11s 51,000 square feet. In 1999, Promoexport tried to renege on its contract by eliminating a security clause and erecting a wall that would interfere with my companys traffic. The case went up before several courts until we reached an agreement satisfactory to both parties and approved by the judge."
Padilla showed CARIBBEAN BUSINESS a copy of the agreement and the correspondence and documents exchanged through the years. As part of the deal, Promoexport supposedly agreed to lease Building 15, which was under construction at the time, to PRFS for 10 years, renewable for another 10. In addition, the lease rate was not to exceed $5.50 per square foot during the life of the contract, PRFS would be responsible for all interior improvements to the building, and Promoexport would handle exterior improvements, designs, and structural construction.
According to Padilla, before construction of the building, Promoexport invested approximately $25,000 in the plans for Building 15 and PRFS spent another $60,000 to make additional changes. Errors made during construction extended the project more than three years. The governments administration changed in 2000, and Padilla attempted to start a dialogue with the new Promoexport officers. Promoexport officials, however, said Padillas problem is that the agencys board during the previous administration never ratified the agreement. Promoexport General Counsel Iris Cancio said, "Antonio Sosa Pascual became Promoexports executive director on Jan. 8, 2002. As soon as he became aware of the situation, the agreement was presented to the board of directors in February 2002, which denied the agreement based on the leasing protocols approved by the agency."
According to Cancio, Promoexport doesnt offer leasing contracts for more than five years and its leasing rates begin at $6.25 per square foot. "In April, PRFS was offered a leasing contract for Building 15 at $6.25 per square foot for the first two years and $7.75 per square foot for the next three years," she said. "Mr. Padilla refused this offer and in September 2002 sought an injunction to prohibit us from leasing the building to other companies, but it was turned down by the court."
This isnt the first time Padilla has sued the government. Since 1999, Padilla has sued the government twice, defending his right to do business on the island, and said he is ready for another court battle.
This Caribbean Business article appears courtesy of Casiano Communications.