Puerto Rico court rules against Guaynabo in contract dispute

The Court of Appeals of Puerto Rico has ruled against the Municipio Autónomo de Guaynabo in a significant contract dispute. The court denied Guaynabo's request to annul contracts with VMF Design Group, PSC, and its insurers, XL Specialty Insurance Company and Aseguradora X. This ruling affects how municipal contracts are managed and highlights the importance of compliance with professional licensing laws.

The ruling stems from a case filed on June 18, 2026, with the docket number TA2026CE00777. Guaynabo sought to challenge a prior decision made by the Tribunal de Primera Instancia, Sala Superior de Bayamón, which had denied Guaynabo's motion for partial summary judgment. This decision is crucial as it addresses the legality of contracts awarded to VMF Design Group for engineering and consulting services.

Background

The Municipio Autónomo de Guaynabo filed its initial complaint on August 2, 2023. The dispute arose after the municipality's Office of Internal Audit found that VMF Design Group may have violated municipal contracting laws. Specifically, the audit indicated that VMF employed unlicensed personnel to provide engineering services, which raised concerns about the legality of the contracts.

Guaynabo's complaint sought a declaratory judgment to annul seven contracts with VMF, claiming that the contracts were void due to illegal practices. The municipality also requested the return of public funds paid to VMF, along with damages and attorney fees. VMF and its insurers contested these claims, arguing that they had fulfilled their contractual obligations and that the contracts should not be annulled.

The Ruling

The Court of Appeals, in its ruling dated June 18, 2026, upheld the lower court's decision to deny Guaynabo's motion for summary judgment. The court stated, "the Tribunal is convinced that there exist genuine controversies regarding material facts of the case." This indicates that the court found sufficient disagreement over key facts that necessitated a full trial rather than a summary judgment.

In its analysis, the court emphasized that for summary judgment to be granted, there must be no genuine issues of material fact. The lower court identified 32 facts in dispute, including whether VMF's personnel were properly licensed and whether they met the contractual obligations. The judges involved in the ruling included Judge Hernández Sánchez, Judge Rivera Torres, and Judge Marrero Guerrero.

Impact

This ruling has significant implications for municipal contracting practices in Puerto Rico. By denying the annulment of the contracts, the court reinforces the need for municipalities to ensure compliance with licensing laws when awarding contracts for professional services. It also highlights the importance of thorough audits and oversight in public contracting.

Moving forward, this case may set a precedent for how similar disputes are handled, particularly regarding the qualifications of professionals involved in municipal contracts. The ruling emphasizes that municipalities must be diligent in verifying the credentials of contractors to avoid potential legal issues and financial liabilities.

What's Next

Guaynabo may have the option to appeal this decision to a higher court. However, the court's ruling does not provide details on any related cases currently pending. The outcome of this case will likely influence future municipal contracts and compliance with professional licensing standards in Puerto Rico.