Opinion
Case No. 02-10294 Chapter 7, Adv. Proc. No. 03-0006.
October 31, 2008
OPINION AND ORDER
This adversary proceeding is before the court on the motions for judgment under Fed.R.Bankr.P. 7052(c) filed by the defendants Mr. Hector Mendez Vazquez on December 14, 2007 (Dkt. # 209), Dr. Johnny Rullan on December 17, 2007 (Dkt. # 211) and Mr. Juan Agosto Alicea (collectively the "Defendants") on December 17, 2007 (Dkt. # 213). Dr. Ismael Aguilo Rodriguez, his wife Maria Lourdes Rodriguez Irizarry and Total Medical Express, Inc. ("Plaintiffs") filed an opposition to the motions to dismiss on January 16, 2008 (Dkt. # 214). This is a non core matter but otherwise related to a case under Title 11 as determined in this court's Opinion and Order entered in this case on June 28, 2005. All parties to the proceeding have consented to this court's entry of the appropriate judgment after hearing the matter. For the reasons set forth below the complaint is hereby dismissed.
Defendant Hector Mendez Vazquez sought judgment under both Fed.R.Civ.P. 50 and 52. Rule 50 provides for the entry of a judgment as a matter of law in a jury trial case before the case is submitted to the jury. This was not a trial by jury, thus the rule is inapplicable here.
Background
On January 15, 2005 Plaintiffs filed a complaint against Defendants seeking relief under 11 U.S.C §§ 542, 543; 42 U.S.C § 1983 and for breach of contract. The complaint alleges that on March 17, 2000, Total Medical Express, Inc. ("Total Medical"), through its president, Dr. Ismael Aguilo Rodriguez ("Dr. Aguilo") submitted to the Puerto Rico Department of Health, the Puerto Rico Government Development Bank ("GDB") and other agencies, a written proposal to purchase the Diagnostic and Treatment Center ("DTC") located in the Municipality of Dorado, Puerto Rico, including land, structures, furniture, uses, licenses, certificates, equipment, machinery and inventories, which at the time was being operated by the Puerto Rico Health Department. It is alleged that it was the policy of the Puerto Rico government to sell to private entities and/or persons the buildings where the DTC's were located together with the operations, machinery, equipment and licenses.
Plaintiffs allege that through letter dated May 5, 2000 the Privatization Committee of the Government of Puerto Rico adjudicated and awarded to Total Medical the right to purchase the Dorado DTC for $2 million, title to be transferred free and clear of all liens and encumbrances. Then, Total Medical, the Puerto Rico Health Department and the GDB executed a letter agreement dated May 30, 2000 setting forth the terms and conditions of the purchase and sale agreement. In June 2000 the Department of Health and Total Medical signed an agreement called "Short Term Health Facility Transfer of Operations and Lease Agreement" whereby the Dorado DTC was leased to Total Medical and the latter obtained its operation after Total Medical made a deposit with the Department of Health/GDB of $100,000. This agreement was executed in lieu of the purchase and sale deed which the Department of Health informed it needed more time to prepare and execute. Total Medical agreed to pay $14,000 monthly rent to the Department of Health and the expiration of the short term lease was August 31, 2000, thus, only for one month. Total Medical began operating the Dorado DTC and providing medical services to patients insured by Triple S/Triple C by virtue of a contract entered with Triple S/Triple C. It was agreed by Total Medical, the Department of Health and Triple S/Triple C that the latter would pay $14,000 per month of the monies owed to Total Medical, directly to the Department of Health. The first of these payments was made by Triple S/Triple C in or about August or September 2000.
The lease was extended and renewed on various occasions and in November 2000 it was extended to expire on June 30, 2001. Plaintiffs allege that hundreds of thousands of dollars were spent in repairs of the Dorado DTC, as well as for the purchase and installation of medical equipment and other machinery and furniture. In January 2001 a new governor took office and Total Medical requested the new Secretary of the Department of Health, Dr. Johnny Rullan to proceed with the sale of the Dorado DTC. Plaintiffs allege that during 2001 Dr. Rullan, Mr. Agosto Alicea and Mr. Mendez Vazquez,
in an illegal, arbitrary, capricious, discriminatory manner, with bad faith and ill will, incurred in (a) the breach of the agreement entered with Total Medical for the sale of the Dorado DTC, in (b) gross culpable and negligent acts against the [p]laintiffs herein after set forth and in (c) violation of the civil rights of the [P]laintiffs that are protected by the Constitutions of the United States and the Commonwealth of Puerto Rico and by 42 U.S.C. § 1983, in the taking without due process of law of their property rights, done under color of authority and with intent to cause damages to [P]laintiffs, who are persons as defined in said act, when said [D]efendants:
a. Ignored Total Medical's numerous claims for the execution by the Department of Health of the deed of purchase and sale of the Dorado DTC to Total Medical and, thus, refused and failed to consummate the perfected agreement;
b. Informed Total Medical that Total Medical owed rentals that were not owed by Total Medical and were supposed to be paid or have been paid by Triple S/Triple C;
c. Cancelled the purchase and sale agreement of the Dorado DTC as it appears in the May 30, 2000 letter, in the lease document and in other documents;
d. Withheld all the repairs, betterments, equipment, machinery, furniture, inventories and services that Total Medical made to, placed in, and provided at the Dorado DTC;
f. Demanded that Total Medical vacate the Dorado DTC;
g. Filed an eviction action against Total Medical in the Court of First Instance of the Commonwealth of Puerto Rico (the "illegal eviction action");
h. Caused Total Medical to discontinue providing medical services in the Dorado DTC since February 2001;
i. Caused the complete economic demise of Total Medical and the other debtors.
Complaint, Docket No. 1, pages 7-8.
The Commonwealth of Puerto Rico filed an eviction action against Total Medical in the state court of First Instance. On August 31, 2001, the court of First Instance, with the consent of the parties, ordered that the operations of the Dorado DTC be transferred to the Municipality of Dorado during the pendency of the action, which continues to this day. Plaintiffs allege that the Municipality of Dorado is operating the DTC with the repairs made by Total Medical as well as the furniture, machinery, equipment and inventories of Total Medical worth hundreds of thousands of dollars.
Plaintiffs pray that Dr. Rullan and Mr. Mendez Vazquez be ordered to execute the sale agreement under the terms and conditions agreed in the year 2000, that is, for the amount of $2 million, less the $100,000 already paid by Total Medical, and deliver the licenses and permits needed to operate the DTC; that pursuant to §§ 542 and 543 of the Bankruptcy Code the Municipality of Dorado be ordered to transfer to Total Medical the operations of the Dorado DTC and the furniture, machinery, equipment and inventories property of Total Medical located at the Dorado DTC; that Defendants in their personal capacity, be ordered to pay for the damages caused to Total Medical; and that in the event the court does not order specific compliance with the sale agreement of the Dorado DTC to Total Medical, that Defendants be ordered to return the $100,000 deposit paid to the Department of Health/GDB in 2000, with interest, return all the furniture, machinery, equipment, amounts spent by Total Medical in repairs and betterments of the Dorado DTC, or compensate for the loss of said assets, deliver to Total Medical all certificates of need and convenience, licenses and permits that should have been issued to Total Medical, and pay for the loss of earnings, loss of corporate opportunities, of commercial reputation and of value of the realty. Finally, Plaintiffs pray that Defendants be ordered to pay punitive damages in excess of $1 million.
Defendants each filed motions to dismiss which were denied by Opinion and Order entered on June 28, 2005 (Docket No. 87). Of course, at that time upon considering the allegations made in the motions to dismiss, the court construed the complaint in the light most favorable to the plaintiff, its allegations taken as true and all reasonable inferences that could be drawn from the pleadings were drawn in favor of the pleader. See, Federal Practice and Procedure, § 1357 at 417. The court found that the Defendants enjoyed sovereign immunity in their individual capacity, that they are not protected from the recovery of damages by qualified immunity and, further, that they (or their successors) may be subject to a judgment of injunctive relief in this matter pursuant to the doctrine of Ex Parte Young.
The trial took place on November 13, 14 and 15, 2007. Plaintiffs presented documentary evidence and two witnesses: Dr. Johnny Rullan and Dr. Ismael Aguilo. After Plaintiffs' case was presented, Defendants each moved for judgment under Fed.R.Bankr.P. 7052 and the court granted them time to put the matter in writing, staying the presentation of further evidence until it ruled on the issue.
In his motion for judgment pursuant to Fed.R.Bankr.P. 7052 Mr. Mendez Vazquez alleges that based on Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 194-195 (1985), the takings claim should be dismissed because it is unripe; the claimant came directly to a federal court without first seeking compensation through state procedures. Mr. Mendez Vazquez alleges that to have a cognizable claim under the Fifth and the Fourteenth Amendments, Plaintiffs must establish that they have an entitlement to the payment and that the claim can be brought to the federal courts. Plaintiffs did not exhaust the state remedies, instead of concluding the state court action, they brought their claims to this court. The federal claim is not deemed ripe unless the claimant has pursued and exhausted the state-law remedy available. Furthermore, Mr. Mendez Vazquez concludes that Plaintiffs have tried to disguise this case as a takings case when it is really a breach of contract case and the evidence presented at trial only shows that Plaintiffs had been negotiating to acquire the Dorado DTC from the Department of Health when a change of administration and policy took place. The evidence failed to show that there was a perfected sales contract, binding on the parties. And even if there was a breach of contract, such breach does not become a constitutional tort. Finally, Mr. Mendez Vazquez argues that the Defendants are entitled to qualified immunity because the facts prove that the alleged acts they committed; the cancelling of the negotiations and the lease contract, were reasonable actions.
In his motion for judgment under Fed.R.Bankr.P. 7052 Dr. Johnny Rullan argues that the Plaintiffs failed to show that he took part in any way in the alleged taking of any property, which there was no evidence it existed. He alleges that the evidence presented only proves that Total Medical was in default in their monthly rental payments, was not providing emergency services 24 hours a day and accordingly the IPA 333, which operated at the Dorado DTC, was cancelled as per Total Medical's non compliance with the lease contract. Dr. Rullan concludes that Plaintiffs failed to state a claim upon which relief can be granted, failing to set forth any specific acts upon which a finding of liability under § 1983 could reasonably be based.
Mr. Agosto Alicea, in his motion for judgment, alleges that Plaintiffs failed to establish or even identify any clearly defined constitutionally protected right of which they were being deprived as provided in 42 U.S.C. § 1983, and cited the case ofCasey v. Depetrillo, 697 F.2d 22 (1st Cir. 1983) in stating that a mere breach of contract does not become a constitutional tort. Mr. Agosto Alicea argues that he is entitled to qualified immunity because the termination of a contractual relation does not violate Plaintiffs constitutional rights.
In their opposition to the Defendants' motions for judgment Plaintiffs argue that the evidence presented at trial shows that they had a valid contract for the purchase of the Dorado DTC. The parties signed a letter of intent dated May 30, 2000 which contained the terms and conditions of the sale, that is, the purchase price was $2,000,000 payable at time of closing, and Total Medical would pay a deposit of $100,000 which would be applied towards the purchase price on the closing date. The facilities of the Dorado DTC would be delivered to Total Medical free and clear of all liens together with the certificates of need and convenience and other licenses and permits required to operate. Thereafter, Total Medical and the Department of Health executed the Short Term Health Facility Transfer of Operations and Lease Agreement whereby the operation of the Dorado DTC was transferred to Total Medical and the parties agreed on the basic terms and conditions of the sale. According to Plaintiffs, there was no valid or legal reason or basis for Defendants not to sell to Total Medical the Dorado DTC.
Plaintiffs allege that the main source of Defendants' obligation to Plaintiffs is Art. 1044 of the Puerto Rico Civil Code, 11 L.P.R.A. § 2994, which provides that obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. Therefore, Total Medical is entitled to demand specific performance of the perfected contract and cause the sale of the DTC to Total Medical. Furthermore, the successors of Dr. Rullan must be ordered to issue al licenses and certificates of need and convenience needed to operate the DTC to Total Medical. Plaintiffs also state that in connection with the civil rights action the evidence showed that "[D]efendants, under color of state law, deprived [P]laintiffs of their rights without due process of law, in an illegal, arbitrary, capricious, discriminatory manner, with bad faith and ill will and with intent to cause damages to [P]laintiffs to the degree of being violations of the Plaintiffs civil rights." Plaintiffs' Opposition to All Defendants' Motions to Dismiss, Docket No. 214, page 12. Plaintiffs maintain that all allegations set forth in the complaint were supported by the evidence presented at trial and that the threshold issue was proven, that Total Medical had a valid and binding contract to purchase the Dorado DTC. They allegedly proved that Defendants violated their constitutional rights by keeping their deposit for the purchase of the Dorado DTC without executing the sale contract, and by also keeping the equipment, furniture and other improvements, which were in the DTC at the time Plaintiffs were kept from entering the premises before an eviction judgment was entered.
Findings of Fact
During the trial Dr. Rullan testified that he commenced as Secretary of the Department of Health on January 16, 2001, replacing Pedro Ramos Hiraldo in that position. He stated that the policy of sale while he was Secretary of Health was a hybrid; make sure that the DTC was working before selling. He stated that the Dorado DTC was completely out of service. The Mayor of Dorado and the townspeople were calling his office to learn what was going on. The DTC's doors were chained and there were signs on the walls sending patients to Vega Baja. He decided not to sell the DTC to Total Medical and Dr. Aguilo because he believed he would not be able to get it operational and there was no contract with the Triple S/Triple C the insurance company. Furthermore, Dr. Aguilo was not paying the rent or the nurses. The reason for closing was the cancellation of the contract with Triple S/Triple C. He knew that his predecessor Mr. Ramos Hiraldo had terminated the lease agreement on January 29, 2001 through letter.
Dr. Aguilo testified that in 1998-1999 he became interested in the purchase of the Dorado DTC which was being operated by the Department of Health; he learned from the newspaper that the DTC was being sold. At that time the Dorado DTC and its IPA 323 were operated by the Department of Health. On March 17, 2000 he submitted a proposal to the Department of Health and its Secretary Dr. Carmen Feliciano de Melecio, to purchase the DTC for $2 million. On May 30, 2000 Dr. Carmen Feliciano de Melecio on behalf of the Department of Health, Ms. Lourdes M. Rovira on behalf of the GDB Development Bank and Dr. Ismael Aguilo Rodriguez on behalf of Total Medical, signed a letter of intent for the sale of the DTC to Total Medical for $2 million (the "Letter of Intent") (Plaintiffs' Ex. 4). At that time Total Medical also submitted to the Department of Health a notification of intent to commit to a loan subject to certain terms and conditions and expiring on June 30, 2000, by Regional Mortgage Service Corp. (Plaintiffs' Ex. 5). By that time the Department of Health terminated its IPA 323.
Independent Practice Association. Generally an IPA consists of a network of physicians in a region or community — solo practitioners and groups of physicians — who agree to participate in an association to contract with health maintenance organizations, other managed care plans, and also vendors for the benefit of each of the physicians in the IPA. The original premise underlying the formation of IPA's in the late 1980's was for physicians to retain control over medical decision-making and to negotiate better fees and contract terms from the HMO's which were, at that time, changing the face of medicine and the role of the physician.
Bruce D. Armon, Esq. and Howard A. Miller, M.D., Physician's News Digest, Published in July 2001.
The Letter of Intent provides that "the Seller would negotiate exclusively with Buyer and will not provide information with respect to the Facilities to any other person or entity that may express or had expressed an interest in acquiring the Facilities." The Letter of Intent expired within 30 days under its terms as a definitive purchase agreement was not executed on or before June 29, 2000. Paragraphs 3 and 4 of this letter provide as follows:
3. Upon the execution of this Letter of Intent the Buyer will deposit with the GDB the sum of $100,000 (the "Deposit") in immediately available funds. The Deposit will be applied towards the Purchase Price payable on the closing date. If a Purchase Agreement is not executed for any reason attributable to Buyer, the Buyer will forfeit the Deposit, and all accrued interest thereon, as liquidated damages to compensate Seller for its expenses, and all obligations arising under this Letter of Intent will be terminated. If a Purchase Agreement is not executed for any reason directly and solely attributable to Seller, the Deposit and any accrued interest thereon will be refunded to Buyer, and all obligations arising under this Letter of Intent will terminate.
4. Seller reserves the right to cancel and terminate this Letter of Intent (i) at any time prior to the date of execution of the Purchase Agreement if the professional, financial, and economic conditions and characteristics related to Buyer and relevant to Seller have substantially changed, (ii) if a Purchase Agreement has not been executed by the parties by the 30th day after the date hereof (provided the Seller may, its option, extend the term of this Letter of Intent for an additional period in the event that, despite the diligence of Buyer, for reasons beyond the control of Buyer and Seller, Buyer has been unable to consummate the acquisition of the Facilities), or (iii) if Buyer fails to comply with its agreement set forth in paragraph 14(iv) Buyer has failed to pay any outstanding amount owed to the Department or has failed to negotiate a payment plan for the payment of such amounts.
The $100,000 deposit referred to in paragraph 3 of the Letter of Intent was paid to the GDB on June 6, 2000. On that same date Dr. Aguilo wrote a letter addressed to Dr. Feliciano of the Department of Health and Ms. Lourdes Rovira of the GDB (Plaintiffs' Ex. 7) in which he explains that Total Medical needed the Hemodialisis license which would have to be issued without the need of a hearing in order to avoid waiting time which could represent a negative financial factor in their operations.
Dr. Aguilo testified that on June 15, 2000 he was called to a meeting at the Department of Health in which he was told by Attorney Jo-Ann Maldonado, Executive Director of the Department of Health and in charge of the Health Reform, that they could only get a laboratory license by June 30, 2000. He was directed to S.A.R.A.F.S. within the Department of Health to obtain the other required licenses. Dr. Aguilo further stated that he made these requests through a letter dated June 15, 2000 but stamped as received on June 30, 2006. (Plaintiffs' Ex. 10).
In June 2000 Total Medical and the Department of Health executed a Short Term Health Facility Transfer of Operations and Lease Agreement (the "Lease Agreement") (Plaintiffs' Ex. 11), and as per Dr. Aguilo's testimony, it became effective on July 16, 2000 for a period of 30 days. The Lease Agreement provides in part as follows:
The document does not provide the specific day in which it was signed.
WHEREAS, The Corporation [Total Medical], the Department [of Health] and the Government Development Bank for Puerto Rico (GDB) pursuant to the provisions of Act 190, have agreed on the basic terms and conditions for the sale to the Corporation of the Dorado DTC and will execute a Letter of Intent therefore; however, certain aspects required for the closing of the transaction remain to be provided for. In order to allow the Corporation to begin the operation of the Dorado DTC prior to the final closing of the purchase and sale transaction, the Department and the Corporation have negotiated in good faith such terms and conditions as were deemed pertinent and in the best interests of the respective parties, and hereto have agreed to enter into an agreement regarding the transfer of operations and short term lease of the Dorado DTC to the Corporation.
The Letter of Intent was signed before the Lease Agreement but it is apparent that they were meant to be executed contemporaneously.
The Lease Agreement further provides for Total Medical's monthly payment of $14,000 in consideration for the lease of the facilities of the Dorado DTC. (Plaintiffs' Ex. 11, pages 6-7). The failure to pay any of the amounts payable under the Lease Agreement when due, remaining unpaid for ten days following the date the same became due, would constitute an event of default. (Lease Agreement, Plaintiffs' Ex. 11, p. 21) If an event of default occurred the Lease Agreement provides that the Department of Health could, in its discretion, "declare th[e] Agreement terminated . . . and declare all amounts payable to be immediately due and payable . . ., and exercise any and all other rights and remedies existing at law . . . as well as any right or remedy contained in the Letter of Intent., [and] retain and confiscate, to the extent needed to satisfy any amount due to the Department [of Health]. any amount of the "good faith" deposit delivered to the GDB under the terms and conditions of the Letter of Intent., which would otherwise had been returned to [Total Medical] by the GDB under the terms of such Letter of Intent. (Plaintiff's Ex. 11, page 22). Furthermore, in its section 3.09 the Lease Agreement provides that "all alterations, decorations, additions, Type II equipment installed and improvements made by the Corporation shall be deemed to have attached to the leasehold and to have become the property of the Department upon such attachment." (Lease Agreement, Plaintiffs' Ex. 11, page 8).
Plaintiffs presented a letter dated June 27, 2000 from Dr. Feliciano addressed to Mr. Melvin Acosta, Director Vice-President of Services to the Provider Triple C, Inc., informing that Total Medical was adjudicated the lease of the Dorado DTC and that they were authorized to begin the process to obtain the provider number and contract directly with the insurance plans to bill for the services provided to their insured effective July 16, 2000. (Plaintiffs' Ex. 12). Triple C assigned them the IPA 333.
Dr. Aguilo testified that the facilities were not in condition to offer services. Therefore, he went ahead with repairs and hired people who had been working for the Department of Health and who had not received their salary. He understood that at the time of the sale the necessary adjustments would take place and he would be reimbursed for the expenses he incurred and the wages of the employees for the transition period; from July 16-30, 2000. Doctors were retained until July 30, 2000 under the IPA 323. Dr. Aguilo stated that he repaired the plumbing, electricity, water center, and painting. He purchased the air conditioning, monitors, beds and other equipment required by Triple C with money from the affiliates of Total Medical and his medical practice, according to his testimony.
Plaintiffs submitted a reissue of the conditional loan commitment by Regional Mortgage Service, Corp dated August 7, 2000, which expired on September 7, 2000. As with the first one, this was a notification of intent to commit a loan under certain terms and conditions including receipt of an original fire and extended coverage hazard insurance policy, satisfactory verification of employment, proof of funds to close, proof of equity investment ($250,000), original appraisal with minimum value of $2,890,000, etc. (Plaintiffs' Ex. 14)
Plaintiffs also submitted a letter dated August 25, 2000 addressed to the President of Triple S, Inc. from Dr. Feliciano, which provides that Total Medical owed the Department of Health $14,000 in rent for the period of July 16 — August 15, 2000 and instructs him to retain 50% of the amounts payable to Total Medical for medical services rendered, and forward such amount to the Department of Health until the debt is covered. (Plaintiffs' Ex. 16). In November, 2000 (the document does not provide the exact day of its execution), Dr. Aguilo for Total Medical and Dr. Feliciano for the Department of Health, signed an Amendment to Transfer of Operations and Lease Agreement, extending the Lease Agreement until midnight June 30, 2001 (the "Amendment") (Plaintiffs' Ex. 17). Dr. Aguilo stated that Dr. Feliciano told him that the sale of the Dorado DTC would have to be executed by the new incoming administration.
In November 2000 the people of Puerto Rico elected a new governor who took office in January 2001. During the year 2001 Mr. Juan Agosto Alicea became President of the GDB followed by Mr. Hector Mendez Vazquez in 2002. Dr. Rullan became the Secretary of the Department of Health in 2001. Dr. Aguilo sent two letters dated January 17, 2001, one to Dr. Rullan and the other to Mr. Agosto Alicea requesting the date for the closing of the sale of the Dorado DTC. (Plaintiffs' Ex. 18 and 19).
Through letter dated January 11, 2001 Triple C cancelled the contract with Total Medical effective January 15, 2001 based on the "crass non compliance with the contractual provisions" in particular "the limitation to the access to services and the lack of sufficient primary physicians to attend to our insured." (Defendants' Ex. B). This letter further provides that Dr. Aguilo, as Administrator of the IPA 333, acknowledged the significant debts that this IPA had with its primary physicians which would be deducted from funds withheld in the event Triple S responded for any of these debts. Through letter dated January 29, 2001, the Interim Secretary of the Department of Health, Dr. Pedro Ramos Hiraldo terminated the Lease Agreement. (Plaintiffs' Ex. 20). In said letter Dr. Ramos Hiraldo states that Total Medical failed to pay the monthly rent of $14,000, owing the Department of Health the amount of $84,000 up to January 15, 2001. The letter further provides that the failure to pay constitutes an event of default. The letter continues to inform that Total Medical ceased operations in violation of the agreements and commitments with the Department of Health including the operation of the emergency ward 24 hours a day. This action also constitutes an event of default pursuant to section 8.01(d) of the Lease Agreement. The letter further provides that if the Department of Health does not receive the owed amount by January 31, 2001, they will retain and forfeit the deposit amount. Finally, the letter demands that Total Medical abandon and hand over the possession of the facilities on January 31, 2001 at 10:30AM. Dr. Aguilo testified that he understood the Lease Agreement was terminated but not the Department of Health's obligation under the Letter of Intent to sell the Dorado DTC to Total Medical. He further stated that he did not agree with Dr. Ramos Hiraldo in that he owed the lease payments because he signed the Amendment in November which did not provide anything about amounts owed. Dr. Aguilo sent a letter to Dr. Ramos Hiraldo pointing out that Total Medical did not owe $84,000 to the Department of Health because they, in turn, were owed other amounts retained by the Department of Health and Triple C. (Plaintiffs' Ex. 21). Again he requested the execution of the sale agreement in accordance with the Letter of Intent, having the money available for said transaction.
The Dorado DTC was closed on February 4, 2001, although the urgency ward had ceased operations since January 4, 2001. Through letter dated January 21, 2001 Regional Mortgage withdrew its intent to commit to a mortgage loan. Dr. Aguilo testified that he complied with all of his responsibilities under the Letter of Intent. However, on cross examination he testified that he did not sign any document extending the term of the Letter of Intent and that he did not have a final loan approval within the 30-day term of the Letter of Intent, he only had a conditional approval. The first letter Dr. Aguilo sent indicating he was ready to close the sale agreement was in January 2001. Before then, he verbally expressed that the was ready to sign the purchase agreement to Dr. Feliciano who told him he would have to enter into such transaction with the new administration. Dr. Aguilo did not pursue any legal action against Dr. Feliciano to force the Department of Health to sell the Dorado DTC to Total Medical.
Plaintiffs introduced into evidence letters he sent to the Defendants requesting that the Department of Health sell the Dorado DTC to Total Medical ("Plaintiffs' Exs. 24, 25, 28). Through letter dated April 28, 2001, sent through certified mail, attorney Pedro Ortiz Alvarez, in representation of the GDB, informed Dr. Aguilo that the GDB and the Department of Health had decided not to sell to Total Medical the Dorado DTC, citing paragraph 4 of the Letter of Intent. (Plaintiffs' Ex. 27). On or about March 29, 2001 the Commonwealth of Puerto Rico filed an eviction and collection action against Total Medical. (Plaintiffs' Ex. 26). In said action an order dated August 31, 2001 was entered directing the transfer of the Dorado DTC to the Municipality of Dorado on September 4, 2001, ordering the Mayor of Dorado and the parties in the case including Total Medical, to take an inventory of the equipment located in the facilities of the DTC, authorizing all to video record the entrance, physical condition of the structure and equipment in the inside, and authorizing Dr. Aguilo as a representative of Total Medical to remove all pharmaceutical materials found in such DTC and take them with him. (Plaintiffs' Ex. 31). During the hearing in which the order was entered Dr. Aguilo stated that he had medical equipment valued in $300,000 in the DTC, in addition to medicines, that he spent $1 million in services and that there was an issue as to the title of the property. Plaintiffs' attorney suggested the inventory be taken and that Total Medical file an ordinary action to present its claims. At that time Dr. Aguilo voluntarily handed over the operations of the medical facilities to the Municipality of Dorado. The state court converted the action into an ordinary one. The action has been stayed since Total Medical's bankruptcy filing in 2002.
Discussion
Fed.R.Civ.P. 52 made applicable here through Fed.R.Bankr.P. 7052 provides in part as follows:
(c) Judgment on Partial Findings. If a party has been fully heard on an issue during a nonjury trial and the court finds against the party on that issue, the court may enter judgment against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue. The court may, however, decline to render any judgment until the close of the evidence. A judgment on partial findings must be supported by findings of fact and conclusions of law as required by Rule 52(a).
This rule allows the court "to enter judgment at any time a party has been heard fully on an issue and the court can make an appropriate disposition on the evidence." 9C Wright and Miller,Federal Practice and Procedure, § 2573.1 (Thompson West 2008). "[A] Rule 52(c) motion does not require the court to view the evidence in the light most favorable to the non-moving party . . . [i]nstead, in determining whether the motion should be granted, the court independently evaluates and weighs the evidence. U.S. v. Davis, 20 F.Supp. 2d 326 (D.R.I. 1998). Judgment on partial findings is appropriate when a party making a claim either: fails to prove one of the essential elements of its claim or presented evidence that constitutes an adverse party's defense to that claim. 9 Moore's Federal Practice, § 52.50[2].
The Letter of Intent and the Lease Agreement
We agree with Plaintiffs in that the threshold issue here is whether they had a valid contract for the purchase of the Dorado DTC. The evidence presented at trial shows that in 2001 the Department of Health did not have an obligation to sell the Dorado DTC to Total Medical. The Letter of Intent signed by the Department of Health, the GDB and Total Medical clearly provides that its term is 30 days, during which time the Department of Health will only negotiate with Total Medical and will not provide information regarding the Dorado DTC to any other person that may be interested in purchasing the DTC. It was not a promise to sell. The 30-day term passed and no evidence was presented supporting that such 30-day term was extended. The Letter of Intent provides that the Department of Health has the right to cancel and terminate such agreement if the purchase agreement is not executed by the 30th day after the date of the Letter of Intent or Total Medical fails to pay any outstanding amount owed to the Department of Health. It is an uncontested fact that the purchase agreement was not executed during the 30-day term, which was not extended. The evidence before the court is that Total Medical did not make its lease payments to the Department of Health, as provided in the Lease Agreement. Failure to make the payments constituted a default that gave the Department of Health the right to cancel the contract and whatever commitment it had under the Letter of Intent.
Black's Law Dictionary defines "letter of intent" as follows:
letter of intent. A written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement; a noncommittal writing preliminary to a contract. • A letter of intent is not meant to be binding and does not hinder the parties from bargaining with a third party. Businesspeople typically mean not to be bound by a letter of intent, and courts ordinarily do not enforce one; but courts occasionally find that a commitment has been made.
Black's Law Dictionary (8th ed. 2004). This court agrees that the Letter of Intent in this case presents a commitment not to negotiate with any party other than Total Medical for the sale of the Dorado DTC during a 30-day term which could be extended by the Department of Health. However, we disagree with Plaintiffs in that it contains a promise to sell. In fact the Letter of Intent contemplates that if the purchase agreement is not executed for reasons solely attributable to Total Medical, then the deposit is forfeited in favor of the Department of Health as liquidated damages to compensate for the Department's expenses. If, on the other hand the purchase agreement is not executed for a reason directly attributed to the Department of Health, the deposit and any accrued interest is to be refunded to Total Medical. The Letter of Intent clearly provides that in any of either situation "all obligations arising under this Letter of Intent will terminate." If it were the case that the Letter of Intent contained a promise to sell, the Letter of Intent would provide that either party would have the right to demand specific performance of the contract upon the noncompliance of either party.
Plaintiffs showed that the term of the Lease Agreement was extended to June 30, 2001 through an amendment to the Lease Agreement executed in November 2000. (Plaintiffs' Ex. 17). Such amendment provides that "[i]n consideration of the lease of the [Dorado DTC] [Total Medical] shall pay during the Term of this Agreement a monthly lease amount (the "Lease Amount") of $14,000.00. The Lease Amount shall be payable advance and each not later than the first day of each 30 day period. All other terms and conditions of the agreement shall remain unchanged." The Lease Agreement also provided for the monthly payment of $14,000. The evidence during trial shows that Total Medical failed to make the lease payments as provided in the Lease Agreement, a fact undisputed by Plaintiffs. However, Plaintiffs argue that Triple C agreed to remit to the Department of Health the rent payments themselves, deducted from the monies owed to Total Medical. No documentary evidence was presented to substantiate this argument. The only evidence presented showed an isolated request for Triple C to retain 50% of the amounts owed to Total Medical until satisfaction of the lease payments in arrears. More importantly, no evidence was presented showing that Total Medical was relieved from its obligation to pay the lease to the Department of Health. Dr. Aguilo testified that he thought that Triple C was making the rent payments directly to the Department of Health, and that he ignored none had been made by them. His ignorance does not excuse his noncompliance. The fact remains that Total Medical failed to comply with the terms of the Lease Agreement by not making the agreed lease payments, and this gave the Department of Health the right to terminate the Lease Agreement as provided in such contract.
In his response to the letter cancelling the Lease Agreement Dr. Aguilo argues that Total Medical does not owe anything to the Department of Health because it is the Department of Health and Triple C that owes Total Medical. The obligation Triple C may have with Total Medical is independent from the obligation between the Department of Health and Total Medical. Furthermore, the evidence presented at trial shows that Dr. Aguilo did not claim any monies from the Department of Health prior to 2001 and that this was the first time he made this assertion. No evidence was presented supporting the claim that the Department of Health has a debt due and payable with Total Medical which could serve to set-off Total Medical's debt to the Department of Health.
In conclusion, by the year 2001 the Department of Health was under no obligation to sell the Dorado DTC to Total Medical. Furthermore, the Department of Health had the right to terminate the Lease Agreement in accordance with the same, in light of Total Medical's failure to make the lease payments as agreed by the parties. Therefore, having determined that there was no obligation to sell, we then proceed to analyze the constitutional takings claim made under 42 U.S.C. § 1983 when Plaintiffs allegedly withheld all the repairs, betterments, equipment, machinery, furniture, inventory and services that Total Medical made to, place in, and provided to the Dorado DTC, and forfeited the $100,000 deposit made in connection with the Letter of Intent.
42 U.S.C. § 1983Section 1983 of 42 U.S.C. provides as follows:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia.
42 U.S.C. § 1983. This statute supplies a private right of action against a person who while acting under color of state law deprives another of a right secured by the U.S. Constitution and federal laws. Plaintiffs allege Defendants violated their constitutional civil rights in the taking without due process of their property rights. Plaintiffs center their primary takings claim in that the Defendants deprived them of their rights over the acquisition of the Dorado DTC, the $100,000 deposit made in connection with the Letter of Intent and the property allegedly installed in the DTC while they operated the facility, without just compensation.
The Fifth Amendment of the Constitution provides that "private property [shall not] be taken for public use, without just compensation." To make a cognizable claim of a taking in violation of the Fifth Amendment Plaintiffs must first show that they have a property interest which was taken for public use. The court has determined that in 2001 Total Medical did not have a right to the acquisition of the Dorado DTC. Notwithstanding, it is arguable that Plaintiffs have a right over the $100,000 deposit made in connection with the Letter of Intent and that they may have a claim for the equipment, furniture and repairs Total Medical allegedly purchased for the Dorado DTC.
The Fifth Amendment does not prohibit the taking of property, it proscribes the taking without just compensation and such compensation does not have to be paid in advance of, or contemporaneously with the taking; "all that is required is that a "reasonable, certain, and adequate provision for obtaining compensation" exist at the time of the taking." Deniz v. Municipality of Guaynabo, 285 F.3d 142 (1st Cir. 2002) citingWilliamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 194, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). Therefore, a plaintiff in a takings claim must first seek compensation through state procedures before seeking such relief in federal courts. Williamson, 473 U.S. at 194-195. Before bringing a takings claim against state entities in federal court "such a plaintiff must demonstrate that he has both received a final decision from the state on the use of his property and sought compensation through the procedures the State has provided for doing so." Asociacion de Subscripcion Conjunta del Seguro de Responsabilidad Obligatorio v. Flores Galarza, 484 F.3d 1, 13-14 (1st Cir. 2007) (citations omitted). If the state provides adequate procedures to claim just compensation and after following those procedures compensation is awarded, then there is no takings claim, consequently the takings claim is premature until just compensation has been sought and a final decision from the state has been obtained on the use of the property. Id. at 14. One exception to this general rule, albeit narrowly construed, is when all potential state remedies are "unavailable or inadequate". Williamson, 473 U.S. at 196-97. However, the claimant must satisfy the "heavy burden" of showing that the state remedies are unavailable or inadequate. Gilbert v. City of Cambridge, 932 F.2d 51, 65 (1st Cir. 1991). "Thus, if it is unclear whether a particular state-law remedy pertains, the claimant must attempt to exploit it — and his federal takings claim will not be deemed ripe unless and until he has pursued, and exhausted, that course." Deniz, 285 F.3d at 146.
In this case Plaintiffs raised their claims before the state courts, however, a final decision was not rendered before Plaintiffs decided to bring their claims to federal court. It is clear then that the takings claim is unripe, there cannot be a taking yet if the state court has not entertained the issue of just compensation in connection with Plaintiffs' alleged property rights.
Furthermore, the court finds that the facts and evidence presented in this case may arguably involve a breach of contract. The evidence has not established that there is a constitutional violation in the form of a taking. The Lease Agreement provides for the forfeit of the deposit in favor of the Department of Health if the purchase agreement is not executed for reasons attributable to Total Medical, which may be present here. In fact, it was shown that Total Medical did not have a firm loan commitment (other than a conditional loan approval), during the 30-day term of the Letter of Intent. Also, the Lease Agreement provides that the Department of Health may retain and confiscate to the extent needed to satisfy any amount due to the Department under that contract, any amount of the deposit made in connection with the Letter of Intent. It was shown that Total Medical failed to make the lease payments as agreed. Similarly, the Lease Agreement provides that the betterments made to the facilities of the DTC by Total Medical become property of the Department of Health. Dr. Aguilo testified that as part of the sale he would be able to deduct his expenses from the purchase price. The First Circuit has stated that a "mere breach of a contractual right is not a deprivation of property without constitutional due process of law . . . [o]therwise, virtually every controversy involving an alleged breach of contract by a government or a governmental institution or agency or instrumentality would be a constitutional case. No different result is required under the Takings Clause." Casey v. Depetrillo, 697 F.2d 22, 23 (1st Cir. 1983). But such breach of contract claim must be brought against the contracting party; the Commonwealth of Puerto Rico, and not its representatives.
Qualified Immunity
Defendants again raise that they are entitled to the qualified immunity defense. "The doctrine of qualified immunity offers public officials a defense against liability under 42 U.S.C. § 1983." Guzman-Rivera v. Rivera-Cruz, 98 F.3d 664, 666 (1st Cir. 1996). This defense may be raised at different stages of a case: pre-discovery in a motion to dismiss, post-discovery in a motion for summary judgment and, of course, at trial. Id. at 667 (citations omitted); see also, Philip v. Cronin, 537 F.3d 26 (1st Cir. 2008) (the qualified immunity defense was raised in a motion for directed verdict filed by the defendant in the case after the close of plaintiff's evidence at trial. The district court judge entered the directed verdict and the First Circuit affirmed on the basis that qualified immunity was available.) The doctrine of qualified immunity provides that "government officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Mihos v. Swift, 358 F.3d 91, 101 (1st Cir. 2004), quoting Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S. Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). The doctrine "aspires to `balance [the] desire to compensate those whose rights are infringed by state actors with an equally compelling desire to shield public servants from undue interference with the performance of their duties and from threats of liability which, though unfounded, may nevertheless be unbearably disruptive.'"Cox v. Hainey, 391 F.3d 25, 29 (1st Cir. 2004), citing Buenrostro v. Collazo, 973 F.2d 39, 42 (1st Cir. 1992). Qualified immunity "protects public officials from the specter of damages liability for judgment calls made in a legally uncertain environment." Santana v. Calderon, 342 F.3d 18, 23 (1st Cir. 2003), quoting Ryder v. United States, 515 U.S. 177, 185, 115 S. Ct. 2031, 132 L.Ed.2d 136 (1995).
In order for plaintiffs to overcome a qualified immunity defense they must prove that their allegations, if true, show a constitutional violation of a clearly established right and that a reasonable official would have known that his actions violated the right at issue. Mihos, 358 F.3d at 98. In determining whether the allegations establish a constitutional violation, the court should examine whether the facts as alleged make out a constitutional violation. Mihos, 358 F.3d at 102. This factor "should be treated as a `threshold question' and "operates at a high level of generality." Cox, 391 F.3d at 30 (citations omitted)
The second part of the test examines whether the right claimed was clearly established at the time of the alleged violation. As to this point, "the Supreme Court has cautioned against applying general definitions of constitutional rights in the qualified immunity context" because "[t]he level of abstractness at which the `right' in question is articulated can often determine the outcome of [the] inquiry." Mihos, 358 F.3d at 109.
The third step in the qualified immunity analysis requires the court to analyze "whether an objectively reasonable officer in the defendant's position would have understood [his] action to violate the plaintiff's rights." Mihos, 358 F.3d at 110 (citation omitted). For its purposes, "the operative inquiry is not whether the defendant's actions actually abridged some constitutional right, but, rather, whether those actions were obviously inconsistent with that right." Cox, 391 F.3d at 31 (citations omitted). Thus, the doctrine of qualified immunity "draws a line that separates unconstitutional but objectively reasonable acts from obviously unconstitutional acts" and said line "provides ample protection to all but the plainly incompetent or those who knowingly violate the law." Cox, 391 F.3d at 31 (citations omitted).
After considering Plaintiffs' evidence attempting to establish Defendants' liability, the court finds that the Defendants are protected by qualified immunity. A reasonable officer in Defendants' position could believe that their conduct did not violate the Fifth Amendment of the Constitution. The evidence at trial shows that the contract termination decision was made based on the provisions of the Letter of Intent and the Lease Agreement. After considering the provisions in both documents, the events of default to the same, and the financial difficulties experienced by Plaintiffs, the court finds that the decisionmakers reasonably believed that their actions did not violate the Plaintiffs' constitutional rights.
The evidence presented shows that the decisionmakers had reasons unrelated to Plaintiffs' Fifth Amendment rights when determining that the Department of Health would not sell the Dorado DTC to Total Medical, and when the deposit was not returned to them. Among the reasons were that the Letter of Intent's 30-day term had expired and had not been extended, and that Total Medical breached its obligations under the Lease Agreement by not making the monthly lease payments, accruing $84,000 in debt, which according to the provisions of the contract, could be set off against the deposit made in connection with the Letter of Intent. The Letter of Intent further provided that deposit could be forfeited in the event the purchase agreement was not executed for reasons attributable to Total Medical. The evidence at trial shows that Total Medical was not ready to execute the purchase agreement during the Letter of Intent's 30-day term; there was no final loan approval and Dr. Aguilo did not demand the execution of the purchase agreement during this time. A reasonable officer in Defendants' position could believe that the Department of Health had a right to forfeit the deposit in their favor based on this provision of the Letter of Intent. Furthermore, the Lease Agreement provides that any repairs and betterments made to the Dorado DTC would become property of the Department of Health, thus it was reasonable that an officer in Defendants' position at this stage, would think that this property belongs to the Department of Health. "Even if this reasoning were mistaken, it would not have been egregious so and, accordingly, qualified immunity is available." Philip v. Cronin, 537 F.3d at 34 (citation omitted).
Conclusion
In light of the above stated, the motions for judgment filed by Defendants are granted; the complaint is hereby dismissed. The Clerk shall enter judgment accordingly.
SO ORDERED.