# Petition — Perez v. Rodriguez de Quiñonez > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0333%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1979 - **Citation:** 444 U.S. 840 ## Text IN THE Supreme Court of the United States OCTOBER TERM, 1978 \ No. 78- HON. JULIO CESAR PEREZ, Secretary of the Treasury of the Commonwealth of Puerto Rico, et al Petitioners, Vv. JUDITH RODRIGUEZ DE QUINONEZ, LUIS S. PARRILLA AND ANTERO SOLIS LAZU Respondents, PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT HECTOR A. COLON CRUZ Solicitor General LIRIO BERNAL DE GONZALEZ Assistant Solicitor General TABLE OF CONTENTS Page EM eet Las, Wi eo pak wine aa kea es oe 2 I aes Sal SS dg Wha a 6 ba oeis 2 SUBTIONG PREGENTED occ. kc ccc cae 2 THE CONSTITUTIONAL PROVISIONS AND STATUTES EC ceri, RS Sore 0 oat ee i. Whether in reversing the judgment of the United States District Court for the District of Puerto Rico the United States Court of Ap- peals for the First Circuit: erred in the inter- pretation of the Statute under which the I OCU oon 5 kn kc cmc vedo ses 11 Whether the United States Court of Appeals for the First Circuit is Constitutionally bound to take judicial notice of the statute of the Commonwealth of Puerto Rico and their sub- sequent amendments in force at the time of the supposed violation of the Due Process Clause of the Fourteenth Amendment .... 13,14 Whether the United States Court of Appeals for the First Circuit erred in finding a viola- tion of a liberty interest protected by the Due Process Clause of the Fourteenth Amend- ment under a statute that does not require stigmatizing grounds for removal.......... 16 Sa ona St gr al a a a ga 20 TABLE OF AUTHORITIES Page CASES: American Seating Co. v. Zell, 138 F.2d 641 (2nd. Cir. ate GDRs ohne Os See SAA CA wake oe 14 Bishop v. Wood, 426 U.S. 341 (1976).......... 10, 19, 20 Board of Regents v. Roth, 408 U.S. 564 (1972) ....... 10 Feinburg v. Federal Ins. Corp. 522 F.2d 1335 Rs ahaa ea. CS VOM OS we KA 6.4 awk 6 Bienes 9 Gallager v. Ford Motor Comp., 226 F.2d 728 IN Se She ee Cie k EBL T ie bN «oko 8 Rha ae 14 Hoyt v. Russell, 117 U.S. 401 (1886). .............. 14 Jannanga v. Nationwide Life Ins. Co., 288 F.2d 169 NS Wek ects Sars. 6 We Gk of sais Oi dve.k kala es 15 Lamar v. Micou, 114 U.S. 218 (1885). .............. 14 Lilly v. Grand Trunk Western R. Co., 317 U.S. 481 SEAS DE CTSNET CO 19 interests safeguarded by the due process right of the Fourteenth Amendment. A state given right by itself or stigmatizing activ- ities by themselves do not constitute enough of a liberty interest to trigger the due process safeguards. In other words, if no stigma has been caused by the government then there is only a removal of an indi- vidual in compliance with specified procedures that are part of the state creation of a right and under which the individual accepts his state-given right." If the government activities merely stigmatize the individual without denying him of any state given right, then a defamation suit would be the appropriate remedy. In the case at bar, factual stigma was not present!” or statutorily required. Since stigma was not found here, only a mere conditional removal subject to spec- ified procedures was involved. There was no clear imputation of dishonesty flow- ing from removal under this statute. As in Bishop v. Wood, 426 U.S. 341 (1976) here unsound banking practices or violation of fiduciary duties do not measure up to the stigma required to conjoin with a state given right or status in order that a liberty interest be present. The unsound banking practices were patently evi- dent in the catastrophic economic condition in which the Banco Cooperativo ailed when some of the Direc- '' See Bishop v. Wood, 426 U.S. 341, 344 n 5 (1976). '* The United States District Court so concluded. (See App. IV) 20 tors were removed. These reasons for dismissal are quite different from those rather subjective, morally charged reasons for dismissal given to the respond- ents in Bishop v. Wood, supra. CONCLUSION For the foregoing reasons, the writ of certiorari should be granted. Respectfully submitted, San Juan, Puerto Rico, June 14, 1979. HECTOR A. COLON CRUZ Solicitor General LIRIO BERNAL DE GONZALEZ Assistant Solicitor General APPENDIX (ee ae APPENDICES Appendix Opinion of the United States Court of Appeals for the First Circuit of March 30, 1979................. I Judgment of United States Court of Appeals for the First Circuit entered on March 30, 1979.......... I] Magistrate's Report and Recommendation of April 27 Pcie ivivonkMavsss Khaebinesapekeeecuaess Ill Opinion and Order of the United States District Court for the District of Puerto Rico of June 20,1978... IV Petition for Rehearing of Defendants-Appellees in the United States Court of Appeals of April 10,1979.. V Per Curiam Opinion of United States Court of Appeals for the First Circuit on Petition for Rehearing of May Wp BEE ADSM ERAKRER ECE SEA SO RCAER OC RKEES OW OSS VI Order of United States Court of Appeal for the First eo eg a, re ree) or er Vil Motion for Stay of Mandate in United States Court of Appeal for the First Circuit of May 15,1979 .... VIII Order Granting Motion to Stay Manadate of May 18, NTA 05 6 0S RE eee OC eRe PERS bee eehaees IX Article 18A of Law 94 of May 31, 1976 (Title 7, LWP athe ME da | DE RAE AN ia cas FAS én 9 0 X Article 18A of Law 94 of May 31, 1976 as amended by Law No. 16 of May 5, 1977(7 L.P.R.A. sec 768(a)). XI Letters of Dismissal addressed to Plaintiffs by Secretary of the Treasury of May 9, 1977........ XII la Appendix I UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296 JUDITH RODRIGUEZ de QUINONEZ, ET AL., PLAINTIFFS, APPELLANTS, Vv. HONORABLE JULIO CESAR PEREZ, ETC., ET AL., DEFENDANTS, APPELLEES APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [HON. JOSE V. TOLEDO, U.S. District Judge] Before ALDRICH, CAMPBELL and BOWNES, Circuit Judges. A. J. Amadeo Murga, for appellants. Lirio Bernal De Gonzalez, Assistant Solicitor General, Department of Justice, with whom Hector A. Colon Cruz, Solicitor General, was on brief, for appellees. March 30, 1979 CAMPBELL, Circuit Judge. Plaintiffs, three former direc- tors of Banco Cooperativo de Puerto Rico, bring this suit under 42 U.S.C. § 1983 and 28 U.S.C. § 1343 against the Secretary of the Treasury of Puerto Rico and the directors 2a appointed to take their places. They contend that their removal as directors by the defendant Secretary deprived them of liberty and property without due process of law, in violation of the fourteenth amendment to the Consti- tution. Banco Cooperativo was organized under is subject to the provisions of title 7, chapter 66 of the laws of Puerto Rico. Plaintiffs, three of the bank's twelve-member board of directors, were elected to their positions for a three-year term by the general assembly of the bank's shareholders. Section 768a of chapter 66 authorizes the Secretary of the Treasury of Puerto Rico to suspend or remove directors. It provides, ‘‘When the Secretary of the Treasury determines there is evidence that any director or officer of the Cooperative Bank of Puerto Rico has violated this chapter, the rules and bylaws promulgated hereunder or a final cease and desist order, or has performed acts contrary to sound banking practices in connec- tion with the Bank, or has participated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank; and the Secretary determines that the Bank has sustained or will probably sustain a substantial financial loss of other prejudice on account of such violation or practice or failure to carry out his fidu- ciary responsibilities and that such violation or failure is one involving personal dishonesty on the part of the director or officer, the Secretary of the Treasury may issue a.written order suspending or removing him from his position in that Bank.”’ Acting pursuant thereto, the Secretary removed plaintiffs prior to the expiration of their terms. A fourth director, not a party to this action, was also dismissed; the other five elected directors were not. Arguing that removal without a prior or subsequent hearing deprived them of liberty and property without due ia PU, ort 3a process, plaintiffs seek a declaration that § 768a is uncon- stitutional, reinstatement to their positions as directors, damages, and attorneys’ fees. Because it determined that no operty”’ or ‘“‘liberty’’ interest within the fourteenth amendment was involved, the district court dismissed the complaint. Plaintiffs rely on Feinberg v. Federal Deposit Insurance Corp., 522 F.2d 1335 (D.C. Cir. 1975) for the proposition that a directorship may be a property interest within the meaning of the fourteenth amendment. In that case, how- ever, the plaintiff, who was president as well as director of a bank, was receiving a substantial salary, and it was the salary that the court specifically termed a a’’property”’ in- terest. Jd. at 1340. In contrast, plaintiffs here do not re- ceive a salary; a salary as such is forbidden by bank reg- ulations although a “fixed sum”’ is allowed to be set to compensate for attendance at meetings, and directors may be compensated for outside services to the Board.' Plain- tiffs’ sole monetary receipts for serving as directors were $25 for each day’s attendance at board meetings plus trav- elling expenses. The magistrate characterized this $25 per diem as a reimbarsement for expenses and the district court accepted the magistrate’s findings and determined that as there was no expectation of deriving any property interest from the position of director, no property interest within the meaning of the fourteenth amendment was in- volved. On this record, which fails to establish that a di- rectorship of this nature carries with it collateral benefits ' Regulation 10.08G of the Banco Cooperativo states: ‘None of the Directors have as such a right to salary but the Board can from time to time set a fixed sum as compen- sation for the attendance of Board meeting or meetings of any authorized committee. The Board can also authorize payment for compensation which it considers reasonable for any and all of its members for services rendered to the Board that are not for assistance to the meetings of the Board of Directors or such committees.”’ 4a capable of economic valuation, we uphold this determina- tion. There remains the question whether plaintiffs have a liberty interest in serving as directors which is protected by the fourteenth amendment. Apart from fundamental rights and rights guaranteed dy one of he provisions of the Bill of Rights which has been incorporated into the fourteenth amendment (which is not involved here), inter- ests comprehended within the meaning of fourteenth amendment liberty or property attain their constitutional status by virtue of the fact that they have been initially recognized and protected by state law, Paul v. Davis, 424 U.S. 693, 710 (1976), and the dimensions of these interests are shaped by state law. Bishop v. Wood, 426 U.S. 341 (1976). Arguably, plaintiffs are in a position somewhat similar to that of the plaintiff in Bishop v. Wood, who claimed that a city ordinance conferred upon him a suffi- cient expectancy of continued employment to constitute a protected property interest. The ordinance provided: ‘‘If a permanent employee fails to perform work up to the stand- ard of the classification held, or continues to be negligent, inefficient, or unfit to perform his duties, he may be dis- missed by the City Manager.” Jd. at 344 n.5. The Supreme Court, noting that plaintiff's interpretation of the ordi- nance was a possible one, stated it could also be read as “merely conditioning an employee’s removal on compli- ance with certain specified procedures,” Jd. at 345, and deferred to the district court’s interpretation to theatter effect. Thus, the ordinance in Bishop v. Wood, while set- ting forth conditions for termination, committed the de- termination of the existence of those conditions solely to the City Manager. See also Moore v. Otero, 557 F.2d 435, 437 n.6 (5th Cir. 1977) (department's operating procedure which set forth the conditions upon which police corporals are appointed and retained did not confer a property in- terest but merely informed the chief of police’s discretion). Section 768a may be open to an interpretation, in line with 5a that given the ordinance in Bishop v. Wood, negating the existence of any fourteenth amendment interest in serving as a director, although three factors not present in Bishop v. Wood—the existence of a specific term (three years), the exceptional grounds for removal (dishonesty), and the fact that the appointing authority (the shareholders) differs from the removing authority (the Secretary)—point against such an interpretation. We do not pursue the mat- ter further, however, because wholly apart from whether a directorship itself is an interest protected by the four- teenth amendment, we believe that adding the stigma of a discharge for dishonesty gives rise to such an interest. While defamation by a governmental official, standing alone, does not work a deprivation of liberty protected by the fourteenth amendment, Paul v. Davis, 424 U.S. 693 (1976), governmental action altering a right or status pre- viously held under state law “combined with the injury resulting from the defamation, justifie[s] the invocation of procedural safeguards.” Id. at 765-06. See also V enietulo v. Burke, No. 78-1305, slip op. (1st Cir. March 30, 1979). The Fifth Circuit has capsulized the import of Paul v. Davis into the following ‘‘stigma-plus’”’ test: ““To establish a liberty interest sufficient to implicate fourteenth amend- ment safeguards, the individual must be not only stigma- tized but also stigmatized in connection with a denial of a right or status previously recognized under state law.”’ Dennis v. S & S Consolidated Rural High School District, 577 F.2d 338, 341 (5th Cir. 1978), quoting Moore v. Otero, 557 F.2d at 437. We have said that “when a state holds out a right to citizens to engage in an activity on equa. terms with others, a state-recognized status exists.’’ Me- dina v. Rudman, 545 F.2d 244, 250 (1st Cir. 1976), cert. denied, 434 U.S. 891. Here, title 7, chapter 66 of the laws of Puerto Rico sets forth general terms pursuant to which an individual may serve as a director; hence, we think the “plus” of the stigma-plus test is satisfied. 6a Clearly, furthermore, there was serious “‘stigma’’ here. The very act of removal under this statute necessarily brings into question the directors’ integrity. The statutory grounds for removal, phrased in the conjunctive, require a determination by the Secretary that “there is evidence ... that such [statutorily enumerated] violations or failure is one involving personal dishonesty.’” It is true that, strictly read, the statute does not require an official determination or charge of dishonesty, but only a finding that there is sufficient ‘‘evidence’”’ of dishonesty to warrant invoking the statute. This superfine distinction would have little practical effect, however, in reducing the clear imputation of dishonesty flowing from removal under this statute.* We thus think that removal from bank di- * The conjunctive phrasing of § 768a distinguishes it from the disjunctive provision involved in Mitchell v. King, 537 F.2d 385 (10th Cir. 1976), a case upon which the district court relied. There, removal was allowed ‘‘for incompetence, neglect of duty, or malfeasance in office.’ (emphasis supplied). Jd. at 391. * The Secretary sent the following notification of removal to plaintiffs. ‘Pursuant to the authority conferred upon me by Article 18A of the Law No. 88, enacted June 21, 1976, as amended, Law of the Banco Cooperativo de Puerto Rico, [7 L.P.R.A. § 768a] I hereby remove you from the position of member of the Board of Directors of the Banco Cooperativo de Puerto Rico for having participated in acts contrary to sound bank- ing practices and having incurred in omissions or practices that constitute a violation of your fiduciary duties as direc- tors that has had as result that the Bank has suffered a substantial financial loss." Arguably, these allegations could be founded on exercises of poor business judgment rather than upon acts of dishonesty. As there is no indication in the record that this letter was published, we need not decide whether these charges alone could form the basis for a claim that plaintiffs’ ‘good name, reputation, honor, or pry en have been impaired. Bishop v. Wood, 426 U.S. 341, 2 en nal a Wie 6 ot 7a rector status, as it is recognized by Puerto Rico law, on the ground of dishonesty, actual or suspected, affects a liberty interest requiring due process safeguards. We turn next to the question of what process was due. We disagree with plaintiffs’ contention that a pre-termi- nation hearing was constitutionally required. There is par- ticular justification for summary action in the banking field. In Fahey v. Mallonee, 332 U.S. 245 (1947), a regula- tion authorizing the Federal Home Loan Bank Board, with- out prior hearing, to appoint a conservator to take posses- sion of a bank’s assets was challenged. The Supreme Court upheld the regulation stating that ‘“‘the delicate nature of the [banking] institution and the impossibility of preserv- ing credit during an investigation has made it an almost invariable custom to apply supervisory authority in this summary manner.” Jd. at 258. Similar reasons pertain to the removal of a director under the conditions set forth in Plaintiffs also claim they were stigmatized by the Governor's speech televised approximately one week before their removal. Apart from the question whether there exists a sufficient nexus between the speech and plaintiffs’ termination to remove it from the realm of simple governmental defamation which is not ac- tionable under 42 U.S.C. § 1983, Paul v. Davis, 424 U.S. 692 (1976) (but see Owen v. City of Independence, 560 F.2d 925 (8th Cir. 1977), vacated on other grounds, U.S. , 57 L.Ed.2d 1145 (absence of nexus between stigmatizing remark by one official and discharge by second official)), the speech does not stigmatize plaintiffs because it does not identify them as respon- sible for what the Government termed the “serious economic situation confronting the Banco Obrero and the Banco de Coop- erativas."" The speech refers to the “deep professional uncon- cern,”’ “irresponsibility,” and ‘‘immorality that has surrounded the handling’’ of bank funds. Blame is placed, at one point or another, on “‘the forces that rule a country’; the ruling class “composed of a self-serving group of individuals’’; individuals with close ties to officials, directors or persons in high govern- ment spheres; and one person who treated the Banco Coopera- tivas as ‘“‘his bank’ in the selfish and immoral sense of the phrase.”’ Plaintiffs are neither named nor identified. 8a § 768a. Requiring retention of plaintiffs as directors pend- ing a hearing would severely hamper, if not curtail, the Commonwealth's ability to deal with a perceived economic crisis. We have affirmed the denial of a pre-termination hearing under circumstances where the intrasion into gov- ernmental functioning, while substantial, was much less obstructive than it would have been here. Levesque v. Maine, 587 F.2d 78 (1st Cir. 1978). While, therefore, a pre-termination hearing was not re- quired, opportunity for a post-termination hearing afford- ing plaintiffs an opportunity to clear their names was re- quired. Section 768a is unconstitutional insofar as it is construed to empower the Secretary to remove elected directors on the stigmatizing ground set forth without affording them notice of the charges against them and a reasonably prompt post-termination hearing. We turn next to the question of relief. As their primary remedy, plaintiffs seek reinstatement to their positions as directors; in the alternative they ask for damages. We need not decide whether or not directors removed pursuant to § 768a would ever be entitled to reinstatement as that remedy is not now appropriate. The terms to which plain- tiffs were elected by the shareholders have long since ex- pired, and other elected directors are now serving. It would be an unwarranted interference with the bank’s internal affairs to order plaintiffs’ reinstatement. Neither party has briefed or argued the issue of dam- ages, and at this stage we cannot determine whether or not plaintiffs are entitled to more than nominal damages Perez v. Rodriguez Bou, 575 F.2d 21 (1st Cir. 1978). We therefore remand this issue to the district court but with several observations. The significant due process violation which occurred here was not the removal itself but the failure to accord plaintiffs a more detailed notification of charges and a reasonably prompt post-termination hearing at which to clear their names. Hence, ‘‘the remedy man- ey wren LACE ae Ah ES ce RD Lee ec pi ard Fan Cee SY isis 9a dated by the Due Process Clause of the Fourteenth Amendment is ‘an opportunity to refute the charge’”’ of dishonesty. Codd v. Velger, 429 U.S. 624, 627 (1977) quot- ing Roth v. Board of Regents, 408 U.S. 564, 573 (1972). See also Cox v. Northern Virginia Transportation Commission, 551 F.2d 555, 559 (4th Cir. 1976) (compensatory damages for injury to reputation denied). The record does not indi- cate whether or not plaintiffs ever requested a post-ter- mination hearing, and plaintiffs do not ask for one now. It is very questionable whether plaintiffs may elect to bypass this primary remedy, assuming the Commonwealth is now willing to grant a hearing, and collect damages in the al- ternative. If, however, the district court determines that due to the Commonwealth’s continued refusal, lapse of time, or other reason not due to plaintiffs’ volition, a hear- ing now would be impossible or ineffectual, damages may be proper. In that event, however, the court must carefully ascertain whether any damage to plaintiffs’ reputations stemmed from the failure to accord plaintiffs a hearing. In the absence of proof of injury‘ resulting from the procedural due process violation, damages other than nom- ‘On the present record it is not clear to what extent, if any, plaintiffs have suffered any injury flowing from the denial of procedural due process. The magistrate found and the plaintiffs have not disputed that plaintiffs retained the same employment after their removal as prior thereto. The magistrate further found “that [plaintiffs’] standing in the community has remained in- tact’’ and that ‘‘[t]here was no showing that defendant’s action had impaired plaintiffs’ ability to earn their chosen profession’’; hence, he reasoned plaintiffs had sustained no harm to their reputations. As the district court concluded no liberty interest was at stake, it did not pass upon the latter findings. Plaintiffs argue that under Puerto Rico law there is a pres imption that damage has been suffered as a result of the Secretary’s action. Whether or not plaintiffs’ assertion is correct, it does not follow that said damage was caused by the specific denial of procedural due process which occurred here—the absence of a reasonably prompt post termination hearing at which plaintiffs would have been afforded an opportunity to meet the Secretary’s charges. 10a inal damages are generally not appropriate. Carey v. Pi- phus, 435 U.S. 247, 260 (1978). Thus, if the alleged tarnish of plaintiffs’ reputations would have occurred even had plaintiffs been afforded an appropriate hearing, plaintiffs’ reputations have not been damaged by the due process violations.’ This would be the case, for example, if the Secretary had sufficient evidence of plaintiffs’ dishonesty at the time of discharge and if plaintiffs’ then available rebuttals would have been ineffectual. We leave final de- termination of these matters to the district court which will have the benefit of the parties’ input on the subject. The issue of attorneys’ fees is also remanded for deter- mination by the district court in accordance with our guidelines set forth in King v. Greenblatt, 560 F.2d 1024 (1st Cir. 1977), cert. denied, U.S.___, 98 S.Ct. 3146. Reversed. * Plaintiffs, however, may still recover for mental and emotion- al distress actually caused by the denial of procedural due process upon proof thereof. Carey v. Piphus, 435 U.S. at 263.64. See also Perez v. Rodriguez Bou, 575 F.2d at 25 (general discussion of the award of substantial compensatory damages for intangible loss of civil rights or purely mental suffering). is 200 WRN AAO he gt MG Ld La NSE A RTEA CRORE RABAT ba lla Appendix II UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296. JUDITH RODRIGUEZ de QUINONEZ, ET AL., Plaintiffs, Appellants v. HONORABLE JULIO CESAR PEREZ, ETC., ET AL., Defendants, Appellees. JUDGMENT Entered: March 30, 1979 This cause came on to be heard on appeal from the United States District Court for the District Court for the District of Puerto Rico, and was argued by counsel. Upon consideration whereof, It is now here ordered, ad- judged and decreed as follows: The judgement of the District Court is vacated and the cause is remanded for further proceedings con- sistent with the opinion filed this day. By the Court: /s) DANA H. GALLUP /s/ Clerk. 12a Appendix III UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO IVIL NO. 77-908 JUDITH RODRIGUEZ QUINONEZ, et al, Plaintiffs v. HONORABLE JULIO CEASAR PEREZ, etc., Defendants MAGISTRATE’S REPORT AND RECOMMENDATION Plaintiffs Judith Rodriguez de Quinonez, Luis S. Parril- la, and Antero Solis Lazu filed the instant complaint on June 15, 1977. The action was brought under Title 42, United States Code, Section 1983, and its jurisdictional counterpart, Title 28, United States Code, Sections 2201 and 2202. Plaintiffs allege that article 18(A) of Law 94 of May 31, 1976, (7 L.P.R.A. 768 (A)) utilized by the Secretary of the Treasury of the Commonwealth of Puerto Rico to remove them from their position as members of the Board of Di- rectors of the Cooperative Bank of Puerto Rico, is null and void because it enabled their removal as Directors without prior hearing and without notification of the acts, omis- sions and unsound banking practices warranting said re- moval; that in so dismissing them, defendant accused and determined that plaintiffs were guilty of violating Com- monwealth laws. Said removal has resulted in a stigma of ridicule and dishonor, while depriving them of property and liberty in violation of their constitutional rights to due process. + Btw EET. aS Le wae. he Ri AT atl oe Elen OS CNA tree el ET ne 0 13a Defendant has submitted a motion for summary judg- ment alleging that: 1) the complaint failed to state a claim upon which relief may be granted because the statute in question is constitutional; 2) that the plaintiffs do not have standing to challenge the statute in question on grounds of due process. We must first bear in mind that the statute in question deals with banking, and that the bank in question is one created under special legislation enacted in furtherance of the Commonwealth’s policy of aiding and strengthening cooperative business activity. Thus, an inherent attribute of government is the police power to regulate business activity within the jurisdiction in protection of the public interest and welfare. The Commonwealth of Puerto Rico has exercised its police power in many areas such as zoning restrictions, taxes and duties, professions through licen- sing, promulgating health and safety standards, and other such regulations concerning economic and social activity. The exercise of the Commonwealth’s police power has been valid and constitutional in accordance with the standards laid down by the United States Supreme Court. North Dakota Pharmacy Board v. Synder’s Stores, 414 U.S. 156 (1973); Ferguson v. Skrupa, 372 U.S. 726 (1962); Goldblatt v. Hempstead, 369 U.S. 590 (1961). It is clear that banking is an economic activity which must be strictly regulated if governmental economic policy is to be effective. It is an activity which must be carried out in accordance with the public interest. K. C. Davis, in his Administrative Law Treatise, Section 4.04, page 247, states: ‘““... the regulation of banks and other such insti- tutions bonded with a public trust have never been treated as an ordinary case and rightfully so. The banking business more than any other, has been sub- ject yl the most careful scrutiny of regulatory agen- cies. The unique character and tradition of banking often justify the delegation of extremely broad dis- l4a cretionary powers to state banking commisioners which, if attempted elsewhere, would like by violate due process.” (Underlining ours) As previously mentioned, we are dealing with a bank created to fulfill a public need and which is subject to the banking law as well as to the requirements of the law under which it was organized. The Cooperative Bank was orga- nized under the provisions of Law No. 88 of June 21, 1966, 7 L.P.R.A. 751, et seq. Its purpose is stated in Section 752 and reads as follows: “The purpose of the Bank is to promote the general welfare of the community by the proper canalization of the resources of cooperative enterprises and their members, in addition to other resources the institu- tion may raise, in order to meet the credit require- ments of the cooperative organizations, their mem- bers, and the community in general; to facilitate the creation of new cooperatives and other enterprises; and to expand and improve those already existing.” (Underlining ours) On the basis of all of the above considerations the power, of the Commonwealth of Puerto Rico to regulate banking institutions in furtherance of the public good and welfare is undeniable. Given the special nature of the Cooperative Bank, the Legislature of the Commonwealth of Puerto Rico deemed it necessary that the Secretary of Treasury closely monitor the operation of the bank. (Sec. 18 of Law 88, 7 L.P.R.A. 768). It was also provided in Section 19 (7 L.P.R.A. 769) that the Secretary assume direction and management of the bank should the bank’s economic condition appear unstable. Faced with the steadily deteriorating condition of the Bank, the Legislature enacted Law No. 94 of +ay 31, 1966, to amend Law 88 of June 21, 1966. This law established a new section (7 L.P.R.A. 768(A() which allowed the Secre- tary to remove the directors of the Bank. The statute clearly promotes the general welfare by providing means ee ee eee Se leh NIN ik We hae as TE eae ~ i en li Ne we l5a whereby the existence and viability of the Bank may be protected. The statute in question is clearly an exercise of the Commonwealth's police power. The right to be a director of the Cooperative Bank is not a fundamental right found in the Federal Constitution nor one based on an inherently suspect criterion. The standard of review is not the strict scrutiny test but the rationality test established in Mc- Gowan v. Maryland, 366 U.S. 420 (1961), which states that a statute's constitutionality will be upheld if any state of facts can be conceived to uphold it. The present applica- bility of the rationality test when no fundamental personal rights are involved was established in Hughes v. Alexan- dria Scrap Corp., 426 U.S. 794, 810-814 (1976); San Antonio School District v. Rodriguez, 411 U.S. 1, 51 (1972). In short, the questioned statute meets the rationality test, enacted to provide the Secretary of the Treasury with an efficient alternative to remedy the Bank’s undesirable condition and thus protect the public welfare. Defendant's second contention is that plaintiffs lack standing to challenge the statute on due process grounds because their constitutional rights to property and liberty were not abridged or violated. Plaintiffs were directors, not employees of the Bank and did not earn their livelihood from their services as direc- tors. Said positions are of a fiduciary nature, the main factor being the element of trust. Plaintiffs cite Feinberg v. Federal Deposit Insurance Corp., 522 F.2d 1335 (1975) to support their argument that they were denied their rights to property and liberty. A thorough reading of Lein- berg reveals that Leinberg had a substantial annual salary; owned 28% of the stock and managed another 23%, thus making this case distinguishable due to Leinberg’s undis- puted property right. Plaintiffs in the case at bar only received a compesation of $25.00 per meeting which amounts to a reimbursement of expenses. Their livelihood 16a is derived from teaching and/or other employment for the Commonwealth. One plaintiff is a retired accountant and the other two plaintiffs retain the same employment as prior to their removal as directors. “‘Property interests are not created by the Constitution. Rather they are created and their dimensions are defined by existing rules or un- derstandings that stem from an independent source such as state law, rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.’’ Board of Regents of State Colleges v. Roth, 408 U.S. 564 (1972). It appears quite clear that plaintiffs have no property right in relation to their position as directors under the laws of the Commonwealth or the Federal Con- stitution. The action taken by the Secretary of the Treas- ury did not unconstitutionally violate plaintiff's property right. As to the alleged deprivation of liberty without due process, it is defendant’s contention that plaintiffs’ con- stitutional rights to liberty were not violated. Plaintiffs presented no evidence sustaining their allegation ot harm to their reputation, good name and integrity. Their chosen professions and their standing in the community has re- mained intact. There was no showing that defendant's action had impaired plaintiffs’ ability to earn their chosen profession. As stated in Paul v. Davis, 424 U.S. 693 (1976): ‘*... The words ‘liberty’ and ‘property’ as used in the Fourteenth Amendment do not in terms single out reputation as a candidate for special protection over and above other interest that may be protected by state law. While we have in a number of our prior cases pointed out the ches ged drastic effect of the ‘stigma’ which may result from defamation by the Pesan ae in a variety of contexts, this line of cases oes not establish the proposition that reputation alone, apart from some more tangible interests such as employment, is either ‘liberty’ or ‘property’ by it- self sufficient to invoke the procedural protection of the Due Process Clause. ... We think that the weight of our decisions establishes no constitutional doctrine a. CO ween eee ae as Rte ner tees Bln Saha Rt 17a converting every defamation by a public official into a deprivation of liberty within the meaning of the Due Process Clause of the Fifth of Fourteenth Amend- ments. . .”’ In any case, should such harm exist, plaintiffs must litigate their claims in the courts of the Commonwealth of Puerto Rico, for redress in this Court under the Civil Rights Act is improper. THEREFORE, for the reasons previously stated, it is recommended that plaintiffs’ complaint be dismissed. Par- ties have 10 days to oppose to this Magistrate's recom- mendation. San Juan, Puerto Rico, April 27, 1978. JUAN M. PEREZ-GIMENEZ United States Magistrate 18a Appendix IV IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO CIVIL NO. 77-908 JUDITH RODRIGUEZ DE QUISONEZ; LUIS S. PARRILLA and ANTERO SOLIS LAZU Plaintiffs Vs. HONORABLE JULIO CESAR PEREZ, officially as Secretary of the Treasury of the Commonwealth of Puerto Rico; ARTURO TORREGROSA; AIDA PEREZ; ADALBERTO ORTIZ and CARLOS FIGUEROA Defendants OPINION AND ORDER Plaintiffs herein filed the instant action under Title 42, United States Code, Section 1983 invoking the jurisdiction of this court under Title 28, United States Code, Sections 2201 and 2202. In the complaint filed herein it is alleged that Article 18A of Law 94 of May 31, 1976 (Title 7, Laws of Puerto Rico, Section 768A) used by the Secretary of the Treasury of the Commonwealth of Puerto Rico to remove them from their position as members of the Board of Directors of the Cooperative Bank of Puerto Rico, is null and void and unconstitutional because it allowed their removal as direc- tors without prior hearing and without notification of the acts, omissions and unsound practices warranting said re- moval. It is further alleged that in so dismissing them, defendant accused and adjudged plaintiffs guilty of vio- lating Commonwealth laws and of being involved in per- Deh on le ee he ee ee 19a sonal dishonesty; that said removal denied them their right to serve on the Board of Directors and constituted punish- ment without trial; that as a result of their removal they received a stigma of ridicule, embarrassment and dishonor; and, in short, that their removal had deprived them of their property and liberty in violation of their constitu- tional right to due process. As remedy, plaintiffs requested that the Court declare the statute unconstitutional and their removal null and void, and that an injunction be issued reinstating them to their positions as directors of the Cooperative Bank and restraining defendants from preventing plaintiffs’ partici- pation as such directors. The matter was referred to the United States Magistrate for his report and recommendation, and the record reveals that after the filing of a Stipulation of Facts, a hearing was held herein before the Magistrate as to the unstipu- lated matters. Thereafter, on April 28, 1978, the Honorable Magistrate filed his Report and Recommendation, to which plaintiffs have filed a timely objection. The matter stands thus submitted for our consideration. In his report and recommendation the Magistrate sug- gests that the questioned statute is constitutional. This conclusion is based on two main grounds: 1) that said statute is a permissible exercise of the Commonwealth’s police power; 2) that piaintiffs’ constitutional rights to property and liberty have not been violated. In their objection plaintiffs accept that the statute here in question is weil within the province of the police power of the state. However, they press their claim by stating that even when within the area of the police power of the state to supervise banking institutions, said power is to be subjected to the procedural safeguards of due process. The constitutional guaranty invoked herein provides that a person shall not be deprived of life, liberty or prop- 20a erty without due process of law. Thus, in the present case it was necessary to make a preliminary determination as to whether plaintiffs have suffered a deprivation of liberty or property in the constitutional sense. The Magistrate correctly determined that plaintiffs were not deprived of their property rights. The record reveals, and the Magistrate so found, that plaintiffs did not earn their livelihood from their services or directors. Nor did any statute of the Commonwealth create an expectation of deriving any property interest from their position as di- rectors. Thus, there being no property right at stake, there was no reason to invoke the Due Process Clause. See Board of Regents v. Roth, 408 U.S. 564 (1972). However, plaintiffs’ contention that they were deprived of their liberty rights without due process because their removal as directors subjected them to a loss of reputation, presents a more complex issue. The Magistrate concluded that plaintiffs failed to sus- tain their allegations of harm to their reputation, good name and integrity and that their chosen professions and their standing in the community remained intact. In their objections to the Magistrate's report plaintiffs allege that in so removing them as directors of the bank, public im- putations were made in regard to a dishonest and illegal conduct on their part, a serious offense, and that they suffered great embarrassment. They contend that there is a presumption that damages have been suffered as a result of the publication and utterance and rely on local case law as to this point. In Paul v. Davis, 424 U.S. 693 (1975) the Supreme Court specifically rejected the notion that the infliction by state officials of a ‘‘stigma’’ to one’s reputation, without more, would constitute a violation of a federal constitutional ee a i ey et leer — ee es oe oe oe ec ie > en ee 2la right so as to make the Due Process Clause automatically applicable: ‘... The words “‘liberty”’ and ‘‘property”’ as used in the Fourteenth Amendment do not in terms single out reputation as a candidate for special protection over and above other interests that may be protected by state law. While we have in a number of our prior _ cases pointed out the frequently drastic effect of the “stigma” which may result from defamation by the deep in a variety of contexts, this line of cases oes not establish the proportion that reputation alone, apart from some more tangible interests such as employment, is either “‘liberty’’ or “‘property”’ by itself sufficient to invoke the procedural protection of the Due Process Clause .. ."’ Id. at 701. In their Memorandum before us, plaintiffs cite Wiscon- sin v. Constantineau, 400 U.S. 433 (1971) in support of their contention that the damage to reputation alleged here is cognizable as a liberty interest within the protection of the Due Process Clause. However, in Paul v. Davis, supra, the Supreme Court specifically rejected said possible in- terpretation of the Constantineau case by stating: ‘... As we have said, the Court of Appeals, in reaching a contrary conclusion, relied primarily upon Wisconsin v. Constantineau, 400 U.S. 433 (1971). We think the correct import of that decision, however, must be derived from an examination of the prece- dents upon which it relied, as well as consideration of the other decisions by this Court, before and after Constantineau, which bear upon the relationship be- tween srr ag defamation and the guarantees of the Constitution. While not uniform in their treat- ment of the subject, we think that the weight of our decisions establishes no constituticnal doctrine con- verting every defamation by a public official into a deprivation of liberty within the meaning of the Due Process Clause of the Fifth or Fourteenth Amend- ment....’’ Id. at pps. 701-702. (Emphasis added). The aftermath of the holding of the Supreme Court in Paul v. Davis can be summarized into a phrase or thumb- 22a rule: ‘‘loss of reputation plus loss of employment” present a cognizable liberty-property claim under the appropriate Due Process Clause. Even in cases when the property right analysis led to a finding that no such property right existed under state law, as when plaintiff had a non-tenured position, when the damage to reputation resulted in failure to rehire, or affected the possibilities of obtaining future employment, then a cognizable interest was found to exist under the Due Process Clause. This rule was adopted by the Seventh Circuit in Colaizzi v. Walker, 542 F.2d 969 (1976) at 973: “In other words, infliction of a stigma to reputation accompanied by a failure to rehire (or, a fortiori, by a discharge) states a claim for deprivation of liberty without due process within the meaning of the Four teenth Amendment. Moreover, this combination of stigma plus failure to rehire/discharge states a claim even if the failure to rehire or discharge of itself de- prives the eng of no property interest within the meaning of the Fourteenth Amendment. We reach this conclusion because on the facts of Roth itself the Supreme Court found that the plaintiff responcent had no claim of entitlement to or property interest in his job. Roth, supra, 408 U.S. at 478, 92 S.Ct. 2701. Since the Court in Paul v. Davis specifically approved the Roth dictum concerning stigma to reputation, it follows that stigma to reputation (not itself a depri- vation of liberty as defined in the Fourteenth Amend- ment) plus failure to rehire or discharge (not necessar- ily involving deprivation of property as defined in the Foubipaiih Amendment) may nevertheless when found in conjunction state a claim under 42 U.S.C. Section 1983 for deprivation of a Fourteenth Amena- ment liberty interest without due process.” See also: Edelberg v. Illinois Racing Board, 540 F.2d 279 (7 C.A., 1976); Ryan v. Aurora City Board of Education, 540 F.2d 222 (6 C.A., 1976 at fnt. 2). In Stretten v. Wadsworth Veterans Hospital, 537 F.2d 361 (9 C.A., 1976) the Ninth Circuit did not find a liberty interest at stake. Although Stretten contains a language = es Goss et > 23a which could lead to a conclusion that when the stigma to reputation is one that implies moral turpitude or dishon- esty then a cognizable liberty interest would exist.' How- ever, in Stretten plaintiff suffered a tangible loss of being dismissed from his employment as a medical resident. Nevertheless, the Court found that Dr. Stretten’s liberty interest had not been infringed by a dismissal without hearing because the charges leveled against him were not the kind which were likely to preclude him from practicing medicine. /d. at 366. The Fourth Circuit has also adhered to this interpretation of Paul v. Davis, in the case of Cox v. Northern Virginia Transportation Commission, 551 F.2d 555 (4th Cir., 1976) at 558. We find that the case of Mitchell v. King, 537 F.2d 385 (10th Cir., 1976) is of utmost application to the facts pres- ent herein. In Mitchell a former member of the Board of Regents of the Museum of New Mexico brought an action against the Governor of New Mexico, contending that by revoking his appointment as a regent of the museum, the Governor had deprived him of rights to property and lib- erty without due process. The Court of Appeals for the Tenth Circuit found that Mitchell did not have a property interest as a Regent entitling him to minimum standards of procedural due process before he can be removed as a regent. Like in the present case, the Regents of New Mexico Museum were not compensated for their services as such, nor did the New Mexico statute create any expectation akin to prop- ' At pps. 365-366 the Court stated: ‘‘... this Court has concluded that Roth’s notion of lib- erty, while imprecise, distinguishes between a stigma of moral turpitude, which infringes the liberty interest, and a charge of incompetence or inability to get along with co- workers which does not. Gray v. Unicon County Intermediate Educ. Dist., 520 F.2d 803 (9th Cir., 1975); Jablon v. Trustees of California State Colleges, 482 F.2d 997 (9th Cir., 1973).”’ 24a erty, because it did not provide for a pre-dismissal hearing. Again, like in Section 768A challenged herein, possible negative implications could result from the regents’ re- moval because the New Mexico statute provided that the Governor could remove the regent without a hearing ‘‘for incompetency, neglect of duty or malfeasance in office.” However, the Tenth Circuit refused to find that injury to reputation alone constituted a deprivation of a federally protected property or liberty right. See also: Adams v. Walker, 492 F.2d 1003 (7th Cir., 1974). We find that in the present case the Magistrate's con- clusion that plaintiffs had no property interest at stake is well founded. After such determination, plaintiffs’ liberty claim has no merits, in the federal constitutional sense. We must bear in mind that the “‘liberty’’ guaranteed by the Due Process Clause of the Fourteenth Amendment is that “to engage in any of the common occupations of life.’’ See Meyer v. Nebraska, 262 U.S. 390 (1923). In the present case, plaintiffs’ liberty to exercise their chosen profession or to earn a livelihood has not been affected. In the present case, if plaintiffs have a cause of action their remedy is a suit for defamation in the Commonwealth courts. This is consonant with the holding of the Supreme Court in Paul v. Davis when it stated: ‘Respondent brought this action, however, not in the state courts of Kentucky but in a United States District Court for that state. He asserted not a claim for defamation under the laws of Kentucky, but a claim that he had been deprived of rights secured to him by the Fourteenth Amendment of the United States Constitution. Concededly, if the same allega- tions had been made about respondent by a private individual, he would have nothing more than a claim for defamation under state law ... But, he contends, since petitioners are respectively an official of the city and of county government, his action is thereby trans- muted into one for deprivation by the State of rights secured under the Fourteenth Amendment.” [Id. at 697-698]. i. alee. Pa a RE 25a The Court went on to add: “It is apparent from our decisions that there exists a variety of interests which are difficult of definition but are nevertheless comprehended within the mean- ing of either “‘liberty’’ or ‘“‘property’’ as meant in the Due Process Clause. These interests attain this con- stitutional status by virtue of the fact that they have been initially recognized and protected by state law, and we have repeatedly ruled that the procedural guarantees of the Fourteenth Amendment apply whenever the State seeks to remove or significantly alter that protected status. In Bell v. Burson, 402 U.S. 535 (1971), for example, the State by issuing drivers’ licenses recognized in its citizens a right to —— a vehicle on the highways of the State. The ourt held that the State could not withdraw this right without giving petitioner due process. In Mor- rissey v. Brewer, 408 U.S. 471 (1972), the State af- forded parolees the right to remain at liberty as lon as the conditions of their parole were not violated. Before the State could alter the status of a parolee because of alleged violations of these conditions we held that the Fourteenth Amendment's guarantee of due process of law required certain procedural safe- guards. In each of these cases, as a result of the state action complained of, a right or status previously recognized by state law was distinctly altered or extinguished. It was this alteration, officially removing the interest from the recognition and protection previously afford- ed by the State, which we found sufficient to invoke the procedural guarantees contained in the Due Pro- cess Clause of the Fourteenth Amendment. But the interest in reputation alone which respondent seeks to vindicate in this action in federal court is quite different from the “‘liberty”’ or ‘property’ recognized in those decisions. Kentucky law does not extend to respondent any legal guarantee of present enjoyment of reputation which has been altered as a result of petitioners’ actions. Rather his interest in reputation is simply one of a number which the State may protect against injury by virtue of its tort law, providing a forum for vindication of those interests by means of 26a damages ac:ions. And any harm or injury to that in- terest, even where as here inflicted by an officer of the State, does not result in a deprivation of any “liberty” or “property"’ recognized by state or federal law, nor has it worked any change of respondent’s status as theretofore recognized under the State’s laws. For these reasons we hold that the interest in reputation asserted in this case is neither ‘“‘liberty’’ nor ‘‘prop- erty’’ guaranteed against state deprivation without due process of law. Respondent in this case cannot assert denial of any right vouchsafed to him by the State and thereby protected under the Fourteenth Amendment. That being the case, petitioners’ defamatory publications, however seriously they may have harmed respond- ent’s reputation, did not deprive him of any “‘liberty”’ or “property” interests protected by the Due Process Clause.”’ [Id. at pps. 710-712, Emphasis added]. Wherefore, in view of all the above, the recommenda- tions of the United States Magistrate are hereby adopted. The complaint filed in the instant case shall be dismissed. The Clerk shall enter judgment accordingly. IT IS SO ORDERED. San Juan, Puerto Rico, June 20, 1978. JOSE V. TOLEDO Chief U.S. District Judge ja ml we th Bold Cb A ata Nn BET Deakin Sete peat PY 27a IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO CIVIL NO. 77-908 JUDITH RODRIGUEZ DE QUINONEZ; LUIS S. PARRILLA and ANTERO SOLIS LAZU Plaintiffs vs. HONORABLE JULIO CESAR PEREZ, officially as Secretary of the Treasury of the Commonwealth of Puerto Rico; ARTURO TORREGROSA; AIDA PEREZ; ADALBERTO ORTIZ and CARLOS FIGUEROA Defendants JUDGMENT The Court having entered an Opinion and Order through Honorable Jose V. Toledo dismissing this complaint It is ORDERED AND ADJUDGED that the complaint be dismissed. IT IS SO ORDERED. San Juan, Puerto Rico, June 22, 1978. RAMON A. ALFARO Clerk of the court 28a Appendix V IN THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296 JUDITH RODRIGUEZ DE QUINONEZ, LUIS S. PARRILLA and ANTERO SOLIS LAZU Plaintiffs-Appellants v. HONORABLE JULIO CESAR PEREZ, officially as Secretary of the Treasury of the Commonwealth of Puerto Rico; ARTURO TORREGROSA; AIDA PEREZ; ADALBERTO ORTIZ and CARLOS FIGUEROA , Defendants-Appellees On Appeal From A Judgment Of The United States District Court For The District Of Puerto Rico Petition For Rehearing Of Defendants-Appellees HECTOR A. COLON CRUZ Solicitor General LIRIO BERNAL DE GONZALEZ Assistant Solicitor General Department of Justice Box 192 San Juan, Puerto Rico 00902 Phone: (809) 723-5906 29a IN THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296 JUDITH RODRIGUEZ DE QUINONES, LUIS S. PARRILLA and ANTERO SOLIS LAZU Plaintiffs-Appellants Vv. HONORABLE JULIO CESAR PEREZ, officially as Secretary of the Treasury of the Commonwealth of Puerto Rico; ARTURO TORREGROSA; AIDA PEREZ; ADALBERTO ORTIZ and CARLOS FIGUEROA Defendants-Appellees On Appeal From A Judgment Of The United States District Court For The District Of Puerto Rico Petition For Rehearing Of Defendants-Appellees TO THE HONORABLE COURT: Come now defendants, appellees, through their under- signed attorney and pursuant to Rule 40 of the Rules of Appellate Procedure and Rule 15 of this Honorable Court respectfully aver and pray: INTRODUCTORY STATEMENTS This petition for rehearing is based on the fact that the law which governs the case at bar is Law No. 16 of May 5, 1977 (7 LPRA sec. 768 (a)) and not Article 18 (a) of Law 94 of May 31st, 1976. 30a In neither appellees’ nor appellants’ briefs is it made clear that an amendment was present and this Honorable Court has decided the issue under Article 18 (a) of Law 94, which was amended by Law #16 of May 5, 1977, without considering the latter. Appellees inadvertenly cited and added as Addendum Law #14 of May 5, 1977 instead of Law #16 of that same date. Law #14 amended the law creating the Labor Savings and Loan Bank of Puerto Rico and is almost exactly the same as Law 416, herein at issue. Due to the above, neither party on its brief argued the significant differences between both laws and this Honor- able Court was inadvertently led to confusion as to which law governs the case. GROUNDS FOR THE PETITION FOR REHEARING I THE LAW TO BE APPLIED IN THIS CASE IS ARTICLE 18 (a) of LAW 94 ENACTED MAY 31st, 1976, AS AMENDED. The amendment occurred on May 5, 1977 by virtue of Law No. 16 which reads as follows: ‘‘When the Secretary of the Treasury determines there is evidence that any director or officer of the Cooperative Bank of Puerto Rico has violated this act, the rules and bylaws promulgated hereunder or a final cease and desist order, or has performed acts contrary to sound banking practices in connection with the Bank, or has participated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank, or the Secretary determines that the Bank has sus- tained or will probably sustain a substantial financial loss or other prejudice on account of such violation or practice or failure to carry out his fiduciary respon- sibilities or that such violation or failure is one in- ee eee teat kh ee ee ee 3la volving personal dishonesty on the part of the director or officer, the Secretary of the Treasury may issue a written order suspending or removing him from his position in that Bank. The Secretary is hereby em- powered to appoint substitute directors for such term that in his opinion and discretion he may deem con- venient to assure a sound and safe management of the business of the bank.”’ (See Addendum) (emphasis supplied) . The plaintiffs in this case were dismissed on May 9, 1977 by codefendant appellee Julio Cesar Perez who acted pursuant to the amended law as above cited, that is, the law to be applied in the case at bar. This law is clearly distinguish from the law cited on page two of the Opinion of March 30, 1979, of this Honorable Court, reading as follows: ‘When the Secretary of the Treasury determines there is evidence that any director or officer of the Cooperative Bank of Puerto Rico has violated this chapter, the rules and bylaws promulgated hereunder or a final cease and desist order, or has performed acts contrary to sound banking practices in connec- tion with the Bank, or has participated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank, and the Secretary determines that the Bank has sustained or will probably sustain a substantial financial loss of other prejudice on account of such violation or practice or failure to carry out his fidu- ciary responsibilities and that such violation or failure is one involving personal dishonesty on the part of the director or officer, the Secretary of the Treasury may issue a written order suspending or removing me = his position in that Bank.” (emphasis sup- p The amendment makes it clear that no charge of dishon- esty need be made in order that dismissal of the directors occur. 32a In this context it is significant to consider the clear difference that is present in the concepts of the words “and”, “or’’. Sutherland Statutory Construction, sec. 21.14 Vol. 1A (1972) reads in this respect as follows: ‘Where two or more requirements are provided in a section and it is the legislative intent that all of the requirements must be fulfilled in order to comply with the statute the conjunctive ‘and’ should be used. Where a failure to comply with any requirement im- poses liability, the disjunctive ‘or’ should be used.” There Is No Liberty Interest Involved In The Case A careful reading of the amended law whereby the word “‘and”’ is substituted by “‘or’’ leads us to conclude that the act ef removal under this statute did not bring into ques- tion any of the Directors integrity.' Yet, is must again be emphasized that sec. 768 (a) had been amended when Julio Cesar Perez dismissed plaintiffs. The amendment makes it clear that no charge of dishon- esty need be made in order that dismissal be warranted. ‘This Honorable Court however, acting under the law before its amendment, as cited by the defendants decided in its Opinion of March 30, 1979 that: ‘*... removal from bank directors status, as it is recognized by Puerto Rico law, on the ground of dishonesty, actual or suspected, affects a liberty interest requir'ng due process safeguards.’ This Court also considered that: ‘““. .. The statutory grounds for removal, phrased in the conjunctive, require a determination by the Secretary that ‘there is evidence ... that such [statutorily enumerated] violations or failure is one involving personal dishonesty’ "’. an ai at OF it AEE onde A ital Se ee ee ee ee ee ee eT es 33a As a matter of fact this Honorable Court determined that the letter sent to plaintiff by itself alone need not form the basis for a claim that plaintiffs ‘“‘good name, reputation, honor or integrity’’ had been impaired and made it clear that it was in the statute itself that an imputation of dishonesty was present. We must bear in mind that the amended law leaves no doubt as to the fact that dishonesty need not be present for dismissal to occur. Yet, that is precisely what led this Honorable, Court, under the law before being amended, to intepret that stigma was present. But we must respectfully argue that since no stigma is statutorily recognized in the cited amended law, the thumb-rule of Paul v. Davis, 424 U.S. 693 (1975) “loss of employment”’ is not present, and thus no cognizable liberty-property claim under the Due Process Clause is present. III The Case Of Mitchell v. King Is Fully Applicable In The Case At Bar In Mitchell? a former member of the Board of Regents of the Museum of New Mexico brought an action against the Governor of New Mexico, for revoking his appointment as a Regent of the Museum, alleging that the Governor had deprived him of rights to property and liberty without due process. The Court of Appeals for the Tenth Circuit found that Mitchell did not have a property interest as a Regent entitling him to minimum standards of procedural due process before he could be removed as a regent. It must be observed that the members of the Board of Regents of New Mexico Museum were not compensated for their serv- ices as such, nor did the New Mexico statute create any * 537 F. 2d 385 (1976) 34a expectation akin to property, because it did not provide for a pre-dismissal hearing. Again, as in the present case, possible negative implications could result provided that the Governor could remove the regent without a hearing ‘for incompetency, neglect of duty or malfeasance in of- fice.”’ However, the Tenth Circuit refused to find that injury to reputation alone constituted a deprivation of a federally protected property or liberty right. Citing the case of Paul v. Davis, supra, the Court said: ‘... The Court in Davis, supra, observed—and uite pertinently in relation to the case at bar—that the governmental action complained of must deprive the petitioner of a right which has its genesis in state law, and the protective shield of §1983 extends only to those interests which attain this constitutional sta- tus by virtue of the fact that they have been initially recognized and protected by state laws, and we have repeatedly ruled that procedural guarantees of the Fourteenth Amendment apply whenever state seeks to remove or significantly alter that protected sta- tis... This Honorable Court distinguishes the case of Mitchell v. King, supra, from the case at bar precisely in that in Mitchell the disjunctive provision made it clear that re- moval was allowed for incompetence, neglect of duty, or malfeasance in office. The same is true in this case if the right law is applied. Under sec. 768(a) as amended (see Addendum) the statute clearly establishes that removal is allowed when the director has performed acts contrary to sound banking practices, or has committed or participated in the commission of any act, omission or practice consti- tuting a violation of his fiduciary duties as director of the bank, or the Secretary determines that the Bank has sus- tained or will probably sustain financial loss or other prej- udice on account of such violation or that such violation is one involving personal dishonesty. sss inanceisol 35a With this in mind, clearly Mitchell v. King, supra, is applicable. We must again emphasize the great similarity between the case at bar and the Mitchell case. CONCLUSION Even though no mention of the amended law, applicable in this case, was made either in appellant’s or appellees’ brief, the same was fully discussed at the hearing of the case held on November 7, 1978 before this Honorable Court. Therefore, it is respectfully submitted that it is only fair and just that the case be decided pursuant to Law No. 16 of May 5, 1977, that is, the only law governing at the time of dismissal. At San Juan, Puerto Rico, April 10, 1979 HECTOR A. COLON CRUZ Solicitor General LIRIO BERNAL DE GONZALEZ Assistant Solicitor General 36a PROOF OF SERVICE I hereby certify that on this same date two copies of the foregoing Motion have been served by certified mail on A.J. Amadeo Murga, Attorney for Plaintiffs-Appellants, to his address of record, 1105 Banco Popular Center, Hato Rey, Puerto Rico - 00919. At San Juan, Puerto Rico, April 10, 1979 ~ LIRIO BERNAL DE GONZALEZ Assistant Solicitor General Department of Justice Box 192, San Juan, Puerto Rico - 00902 Phone: (809) 723-5906 37a ADDENDUM COMMONWEALTH OF PUERTO RICO BUREAU OF TRANSLATIONS SAN JUAN, PUERTO RICO May 17, 1977 Vicente Corchado Colon, Director of the Bureau of Trans- lations of the Legislature of Puerto Rico, hereby certifies to the Secretary of State that he has duly compared the English and Spanish texts of Act No. 16 (S. B. 375) of the First Session of the 8th Legislature of the Commonwealth of Puerto Rico, entitled: AN ACT to amend Section 18A and Section 19 of Act No. 88, rome June 21, 1966, as amended, ‘‘Co- operative Bank Act of Puerto Rico”, : and finds the same are full, true and correct versions of each other. Vicente Corchado Colon Director, Bureau of Translations 38a (S. B. 375) (No. 16) (Approved May 5, 1977) AN ACT To amend Section 18A and Section 19 of Act No. 88, approved June 21, 1966, as amended, ‘Cooperative Bank Act of Puerto Rico”’. BE IT ENACTED BY THE LEGISLATURE OF PUER- TO RICO: Section 1.- Sections 18A and 19 of Act No. 83, approved June 21, 1966, as amended, are hereby amended to read as follows: “Section 18A.- Suspension or Removal of Directors or Officers. When the Secretary of the Treasury determines there is evidence that any director or officer of the Coop- erative Bank of Puerto Rico has violated this act, the rules and bylaws promulgated hereunder or a final cease and desist order, or has performed acts contrary to sound banking practices in connection with the Bank, or has participated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank, or the Sec- retary determines that the Bank has sustained or will probably sustain a substantial financial loss or other rejudice on account of such violation or practice or ailure to carry out his fiduciary responsibilities or that such violation or failure is one involving personal dishonesty on the part of the director or officer, the Secretary of the Treasury may issue a written order suspending or removing him from his Position in that bank. The Secretary is hereby empowered to appoint substitute directors for such term that in his opinion and discretion he may deem convenient to assure a —— and safe management of the business of the yank.” Saas Saat 2 eae ae aa ives ol tht aridy ett din oot 39a “Section 19. If as a result of an examination made of the Bank, the Secretary of the Treasury obtains evi- dence that the Bank is not in sound economic condi- tions to continue its business, or that it is being man- aged 1n such mannner that its depositors are in jeop- rt | of being defrauded, the Secretary of the Treasury shall assume the direction and management of the Bank avd shall Promptly appoint a receiver, which may be the Federal Deposit bassiones Corporation. The receiver thus appointed shall manage the Bank according to the provisions of this act and the appli- cable regulations. Said receivership shall terminate with the total liqui- dation of the Bank, if so necessary, or when the op- erations thereof, as certified by the receiver, will per- mit, in the opinion of the Secretary of the Treasury, the return of the Bank’s management to its officials and officers, duly elected and appointed under such circumstances as the Secretary of the Treasury may stipulate. The Secretary of the Treasury may fix a reasonable compensation for the services of the re- ceiver and his employees. The determination of the Secretary of the Treasury to appoint a receiver shall be reviewable by the Superior Court. The decision of the Court shall be final and executory, and, once en- .tered, the said Court shall forfeit all jurisdiction over the case. In addition to the aforesaid provisions, the Secretary of the Treasury may opt not to decree the receivership and, in lieu of, to carry out the provisions of Section 18A for the substitution of directors, with- out prejudice to his opting for the receivership at any time.” Section 2.- This act shall take effect immediately after its approval. DEPARTMENT OF STATE I DO HEREBY CERTIFY: That this is a true and correct copy of the originai approved and signed by the Governor of the Commonwealth of Puerto Rico on May 5, 1977 As of date: April 5, 1979. Assistant Secretary of State ts 40a Appendix VI UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296 JUDITH RODRIGUEZ de QUINONEZ et al., PLAINTIFFS, APPELLANTS, Vv. HONORABLE JULIO CESAR PEREZ et al., DEFENDANTS, APPELLEES. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO {[Hon. JOSE V. TOLEDO, U.S. District Judge] Before ALDRICH, CAMPBELL AND BOWNES, Circuit Judges. ON PETITION FOR REHEARING A. J. Amadeo Murga, for appellants. Lirio Bernal De Gonzalez, Assistant Solicitor General, Department of Justice, with whom Hector A. Colon Cruz, Solicitor General, was on brief, for appellees. May 7, 1979 PER CURIAM. This case was brought, and heard, to determine plaintiffs’ rights under 7 L.P.R.A. § 768(a) as established by Article 18(a) of Law No. 94 of May 31, 1976. Thereafter the case was briefed and argued on appeal on Ne ae OT et te A Sn ae ke nee t — 4la the same basis. Defendants have now filed a petition for rehearing on the ground that, four days before plaintiffs were removed from office, section 768(a) had been amended by Law No. 16 of May 5, 1977. This rewrote the statute, in the disjunctive, instead of in the conjunctive, in a matter that figured in our opinion. It does not follow that we should grant the petition. Even under the amended statute, it is a close question, given the accompanying circumstances, whether there was not such a stigma as to give rise to the due process rights discussed in our opinion. In any event, we find defendants’ failure to call our attention to the amended language inex- cusable. Defendants, by virtue of their official positions, were no strangers to the banking laws. Their counsel was not some fly-by-night, but the Solicitor General of the Common- wealth. After taking the time of a magistrate, a district judge, and a court of appeals, they offer no explanation why they were not familiar with their own statutes; not even an apology. Instead, their petition concludes with the extraordinary statement that “[e]ven though no mention of the amended law, applicable in this case, was made either in appellants’ or appellees’ brief, the same was fully discussed at the hearing of the case held on November 7, 1978 before this Honorable Court.”’ The court has no such recollection. Rather, defendants’ counsel presented the court with individual copies of the May, 1976 law, with no indication of any change. Black does not become white with the stroke of a pen. Seldom, if ever, do we grant petitions to rehear matters which were not presented merely because of some counsel’s oversight. By the same token, where so elementary an error is com- mitted as the failure to acquaint the court with the text of a controlling amendment, particularly one to which we have no ready access except through the parties, this is not excusable neglect. Cf. Spound v. denied, 429 U.S. 886. 42a We find it an intolerable imposition on our time and limited resources to grant a rehearing for the purpose of enter- taining arguments addressed to that hitherto undisclosed statute. The case stands on the statute prior to the amend- ment and the district court is instructed so to regard it. Petition denied. 43a Appendix VII UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296. JUDITH RODRIGUEZ DE QUINONEZ, ET AL., Plaintiffs, Appellants, v. HONORABLE JULIO CESAR PEREZ, ETC., ET AL.., Defendants, Appellees. ORDER OF COURT Entered May 7, 1979 It is ordered that the petition for rehearing filed on April 11, 1979, be, and the same hereby is, denied. /s) DANA H. GALLUP Clerk. [cc: Messrs. Amadeo Nurga and Bernal da Gonzalez. ] 44a Appendix VIII UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296 JUDITH RODRIGUEZ DE QUINONEZ, ET AL., ' Plaintiffs, Appellants, v. HONORABLE JULIO CESAR PREZ, ETC., ET AL., Defendants, Appellees On Appeal from a Judgement of the United States District Court for the District of Puerto Rico Motion For Stay Of Mandate Under The Provisions Of Rule 41 Of Appellate Procedure TO THE HONORABLE COURT: Come now defendants-appellees and through their un- dersigned attorneys respectfully aver and pray: 1. That being dissatisfied with both Judgment rendered on March 30, 1979, and Order dated May 7, 1979 denying their Petition for Rehearing,' defendants-appellees will file ' The Order of May 7, 1979 was received in this Office on April 14, 1979. 45a a Petition for a Writ of Certiorari under Rules 19 to 23 of the Rules of the Supreme Court of the U.S. and under 28 U.S.C. 1254 (1). 2. That Rule 41 of the Rules of Appellate Procedure states as follows: (a) Date of Issuance.—The mandate of the court shall issue 21 days after the entry of judgment unless the time is shortened or enlarged by order. A certified copy of the judgment and a copy of the opinion of the court, if any, and any direction as to the costs shall constitute the mandate, unless the court directs that a formal mandate issue. The timely filing of a petition for rehearing will stay the mandate until disposition of the petition unless otherwise ordered by the court. If the petition is denied, the mandate shall issue 7 cae after entry of the order denying the petition unless the time is shortened or enlarged by order. (b) Stay of Mandate Pending Application for Certior- ari. A stay of the mandate pending application to the Supreme Court for a writ of certiorari may be granted upon motion, reasonable notice of which shall be given to all parties. The stay shall not exceed 30 days unless the period is extended for cause shown. If during the eriod of the stay there is filed with the clerk of the ourt of Appeals a notice from the clerk of the Su- plo Court that the party who has obtained the stay as filed a petition for the writ in that court, the stay shall continue until final disposition by the Supreme Court. Upon filing of a copy of an order of the Su- preme Court denying the petition for writ of certiorari the madate shall issue immediately. A bond or other security may be required as a condition to the grant or continuance of a stay of the mandate. 3. As defendants appellees will seek review of the Judg- ment and Order rendered by this High Court under 28 U.S.C. 1254 (1) through the Writ of Certiorari, they re- spectfully pray that this Honorable Court retain its man- date, or if already forwarded, order its del’ ery to the Clerk’s Office, for a period of thirty (30) days in which 46a herein appellees shall file the corresponding writ before the Supreme Court of U.S. RESPECTFULLY SUBMITTED, this 15th day of May, 1979 HECTOR A. COLON CRUZ Solicitor General LIRIO BERNAL DE GONZALEZ Assistant Solicitor General PROOF OF SERVICE I hereby certify that on this same date two copies of the foregoing Motion have been served by certified mail on A. J. Amadeo Murga, Attorney for Plaintiffs-Appellants, to his address of record, 1105, Banco Popular Center, Hato Rey, Puerto Rico, 00919. San Juan, Puerto Rico, this 15th day of May, 1979 LIRIO BERNAL DE GONZALEZ Assistant Solicitor General Department of Justice Box 192 San Juan, Puerto Rico 00902 (Phone: (809) 723-5906 47a Appendix IX UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT No. 78-1296. JUDITH RODRIGUEZ DE QUINEZ ET AL., Plaintiffs, Appellants, v. HONORABLE JULIO CESAR PEREZ, ETC., ET AL.. Defendants, Appellees. ORDER OF COURT Entered May 18, 1979 Upon motion of appellees, It is ordered that mandate be, and the same hereby is, stayed pending the filing and disp: ition of a petition for writ of certiorari in the Supreme Court of the United States, the same to be filed by June 14, 1979, and notice ~ such filing to be filed promptly with the Clerk of this ourt. By the Court: /s/ Dana H. Gallup Clerk. [cc: Messrs. Amadeo Murga and Bernal de Gonzalez. | 48a Appendix X § 768a. Suspension or removal of directors or officers When the Secretary of the Treasury determines there is evidence that any director or officer of the Cooperative Bank of Puerto Rico has violated this chapter, the rules and bylaws promulgated hereunder or a final cease and desist order, or has performed acts contrary to sound bank- ing practices in connection with the Bank, or has partici- pated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank, and the Secretary determines that the Bank has sustained or will probably sustain a substantial financial loss or other prejudice on account of such violation or practice or failure to carry out his fiduciary responsibilities and that such violation or failure is one involving personal dishonesty on the part of the director or officer, the Sec- retary of the Treasury may issue a written order suspend- ing or removing him from his position in that Bank.—June 21, 1966, No. 88, p. 257, § 18A, added May 31, 1976, No. 94, p. 277, § 2, eff. May 31, 1976. 49a Appendix XI COMMCNWEALTH OF PUERTO RICO BUREAU OF TRANSLATIONS May 17, 1977 Vicente Corchado Colon, Director of the Bureau of Trans- lations of the Legislature of Puerto Rico, hereby certifies to the Secretary of State that he has duly compared the English and Spanish texts of Act No. 16 (S. B. 375) of the First Session of the 8th Legislature of the Commonwealth of Puerto Rico, entitled: AN ACT to amend Section 18A and Section 19 of Act No. 88, approved June 21, 1966, as amend- ed, ‘Cooperative Bank Act of Puerto Rico”’, and finds the same are full, true and correct versions of each other. Vicente Corchado Colon Director, Bureau of Translations 50a (S. B. 375) (No. 16) (Approved May 5, 1977) AN ACT To amend Section 18A and Section 19 of Act No. 88, approved June 21, 1966, as amended, ‘Cooperative Bank Act of Puerto Rico”. BE IT ENACTED BY THE LEGISLATURE OF PUER- TO RICO: Section 1.—Sections 18A and 19 of Act No. 88, approved June 21, 1966, as amended, are hereby amended to read as follows: ‘Section 18A.—Suspension or Removal of Direc- tors or Officers. When the Secretary of the Treasury determines there is evidence that any director or officer of the Coop- erative Bank of Puerto Rico has violated this act, the rules and bylaws promulgated hereunder or a final cease and desist aide. or has performed acts contrary to sound banking practices in connection with the Bank, or has participated in them, or has committed or participated in the commission of any act, omission or practice constituting a violation of his fiduciary duties as director or officer of the Bank, or the Sec- retary determines that the Bank has sustained or will probably sustain a substantial financial loss or other rejudice on account of such violation or practice or ailure to carry out his fiduciary responsibilities or that such violation or failure is one involving personal dishonesty on the part of the director or officer, the Secretary of the Treasury may issue a written order suspending or removing him from his position in that Bank. The Secretary is hereby empowered to appoint substitute directors for such term that in his opinion and discretion he may deem convenient to assure a sound and safe management of the business of the bank.”’ 5la “Section 19.—If as a result of an examination made of the Bank, the Secretary of the Treasury obtains evidence that the Bank is not in sound economic con- ditions to continue its business, or that it is being managed in such manner that its depositors are in jeopardy of being defrauded, the Secretary of the Treasury shall assume the direction and management of the Bank and shall promptly appoint a receiver, which may be the Federal Deposit Insurance Corpo- ration. The receiver thus appointed shall manage the Bank according to the provisions of this act and the applicable regulations. Said receivership shall terminate with the total liqui- dation of the Bank, if so necessary, or when the op- erations thereof, as certified by the receiver, will per- mit, in the opinion of the Secretary of the Treasury, the return of the Bank's management to its officials and officers, duly elected and appointed under such circumstances as the Secretary of the Treasury may stipulate. The Secretary of the Treasury may fix a reasonable compensation for the services of the re- ceiver and his employees. The determination of the Secretary of the Treasury to appoint a receiver shall be reviewable by the Superior Court. The decision of the Court shall be final and executory, and, once en- tered, the said Court shall forfeit all jurisdiction over the case. In addition to the aforesaid Provisions, the Secretary of the Treasury may opt not to decree the receivership and, in lieu of, to carry out the provisions of Section 18A for the substitution of directors, with- out prejudice to his opting for the receivership at any time.’’ Section 2.—This act shall take effect immedi- ately after its approval. DEPARTMENT OF STATE I DO HEREBY CERTIFY: That this is a true and correct copy of the original approved and signed by the Governor of the Common- wealth of Puerto Rico on May 5, 1977. As of date: April 5, 1978. 52a Appendix XII COMMONWEALTH OF PUERTO RICO SUPREME COURT Office of the Secretary San Juan, Puerto Rico CLERK’S CERTIFICATE I, Ernesto L. Chiesa, Clerk of the Supreme Court of Puerto Rico, DO HEREBY CERTIFY: That the annexed documents are a true, exact, and of- ficial translation (said translation having been made under the authority of Act No. 87 of May 31, 1972) of the letters of May 9, 1977, sent by the Secretary of the Treasury to Mr. Antero Solis Lazu, Mr. Luis S. Parrilla Castro, and Mrs. Judith Rodriguez de Quinones, members of the Board of Directors of the Cooperative Bank of Puerto Rico. IN-WITNESS WHEREOF, at the request of the inter- ested party, I issue these presents for official use, free of charge, under my hand and the seal of this Court, in San Juan, Puerto Rico, this 5th day of June 1979. Ernesto L. Chiesa Clerk Supreme Court of Puerto Rico 53a May 9, 1977 Mr. Antero Solis Lazu Calle Juan J. Jimenez 514-B Urb. Parque Central Hato Rey, Puerto Rico Sir: By virtue of the authority vested in me by Article 18A of Act No. 88 of June 21, 1966, as amended, the Law of the Cooperative Bank of Puerto Rico, | hereby remove you from your position as a member of the Board of Directors of the Cooperative Bank of Puerto Rico for having partic- ipated in acts that are contrary to sound banking practices and for having participated in omissions or practices con- stituting a violation of your fiduciary duty as a director, as a result of which the Bank has sustained a substantial financial loss. This removal shall take effect upon your receipt of this communication. Very truly yours, /s/ Julio Cesar Perez Secretary of the Treasury 54a May 9, 1977 Mr. Luis S. Parriila Castro Calle 429, Blg. 156 #6 Urb. Villa Carolina Carolina, Puerto Rico Sir: By virtue of the authority vested in me by Article 18A of Act No. 88 of June 21, 1966, as amended, the Law of the Cooperative Bank of Puerto Rico, | hereby remove you from your position as a member of the Board of Directors of the Cooperative Bank of Puerto Rico for having partic- ipated in acts that are contrary to sound banking practices and for having participated in omissions or practices con- stituting a violation of your fiduciary duty as a director, as a result of which the Bank has sustained a substantial financial loss. This removal shall take effect upon your receipt of this communication. Very truly yours, /s/ Julio Cesar Perez Secretary of the Treasury 55a May 9, 1977 Mrs. Judith Rodriquez de Quinones Calle Rosich No. 13 Ponce, Puerto Rico Madam: By virtue of the authority vested in me by Article 18A of Act No. 88 of June 21, 1966, as amended, the Law of the Cooperative Bank of Puerto Rico, | hereby remove you from your position as a member of the Board of Directors. of the Cooperative Bank of Puerto Rico for having partic- ipated in acts that are contrary to sound banking practices and for having participated in omissions or practices con- stituting a violation of your fiduciary duty as a director, as a result of which the Bank has sustained a substantial financial loss. This removal shall take effect upon your receipt of this communication. : Very truly yours, /s/ Julio Cesar Perez Secretary of the Treasury --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0333%3A1. Public record. Not legal advice.