Cecort Realty Development, Inc. v. Llompart-Zeno
100 F. Supp. 3d 145
D.P.R.2015Background
- Cecort Realty Development (one-owner corporation) built two custom high-rise buildings for the Puerto Rico Court of Appeals and the Office of Administration of the Courts (OAT) under a lease executed in 2000 that provided an initial 10‑year term with two 10‑year renewal options (total potential 30 years). Cecort financed, designed, and constructed the buildings and received monthly rent.
- The Puerto Rico Comptroller issued a 2012 report finding the lease was a long‑term contract requiring public bidding and that the rent exceeded market rates; the Puerto Rico Supreme Court later endorsed reforms and criticized the transaction.
- OAT negotiated with Cecort after the Comptroller’s report, disputed the lease term start date, sought renegotiation, and sent written notice of nonrenewal in May 2014. OAT later contracted to relocate the Court and OAT offices effective June 1, 2015.
- Cecort sued in Puerto Rico Superior Court seeking higher rent and unpaid change orders; OAT counterclaimed seeking rescission and reimbursement of excess rent. Cecort then filed this § 1983 federal suit against the Court Administrator (personal and official capacities) alleging deprivation of property, due process violations, and a taking; it sought injunctive relief to prevent relocation and to enjoin OAT’s counterclaim.
- After consolidated preliminary‑injunction and merits hearing, the district court found federal jurisdiction was properly pled but ruled the lease was null and void as a long‑term public contract that lacked required bidding, that OAT timely gave nonrenewal notice, and that the defendant was entitled to qualified immunity; the § 1983 complaint was dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Federal jurisdiction under § 1983 | Cecort alleged deprivation of property (unpaid excess rent and expectancy of lease renewals) invoking § 1983, § 1331, § 1343(3). | OAT contended the dispute is principally contractual/state law and belongs in Commonwealth courts. | Court: Jurisdiction adequately pleaded; did not abstain; proceeded to merits. |
| Validity of lease (public bidding / nullity) | Cortés argued the lease was a short‑term 10‑year contract and/or an OAT‑driven pre‑contract; claimed entitlement to renewals. | OAT and Comptroller: lease was effectively a long‑term (30‑year) public contract requiring bidding; lack of bidding renders it null as contrary to public order. | Held: Lease is a long‑term public contract subject to bidding and is null and void. |
| Timeliness of nonrenewal notice | Cecort argued OAT failed to give timely 360‑day notice because each building’s ten‑year term began when each building was accepted. | OAT argued both buildings constituted the leased “facilities” accepted June 1, 2005, so notice by May 2014 was timely; it mailed certified notice May 21, 2014. | Held: Contract language read plainly to start ten‑year term June 1, 2005; OAT’s May 2014 notice was timely (and properly delivered/received); nonrenewal upheld. |
| Claim for injunctive relief against counterclaim for excess rent / takings/due process | Cecort sought to enjoin OAT from pursuing reimbursement of alleged excess rent and from relocating (arguing due process/takings). | OAT maintained counterclaim in Commonwealth court to recover excess public funds; relocation and reimbursement follow from nullity and Comptroller findings. | Held: Injunctive/declaratory relief denied; excess‑rent remedy is for Commonwealth court; dismissal of § 1983 claims. |
| Qualified immunity for administrator | Cecort alleged arbitrary, conscience‑shocking conduct violating constitutional rights. | Defendant: acted under contract terms and prior decisions, relied on Comptroller/Supreme Court findings; no clearly established constitutional right to renewal. | Held: Defendant entitled to qualified immunity in her individual capacity; no clearly established property right in renewal and actions reasonable. |
Key Cases Cited
- Pearson v. Callahan, 555 U.S. 223 (qualified immunity two‑step framework)
- Harlow v. Fitzgerald, 457 U.S. 800 (qualified immunity standard)
- Borschow Hosp. & Med. Supplies, Inc. v. Cesar Castillo, Inc., 96 F.3d 10 (1st Cir. 1996) (contract interpretation; extrinsic evidence not considered when terms clear)
- Wehran‑Puerto Rico, Inc. v. Municipality of Arecibo, 106 F. Supp. 2d 276 (D.P.R. 2000) (commercial contract and protected property interest discussion)