Ortiz De Arroyo v. Barcelo, 84-1132

• Decision Date: 26 June 1985
• Docket Number: No. 84-1132,84-1132
• Citation: 765 F.2d 275
• Parties: Gloria J. ORTIZ DE ARROYO, et al., Plaintiffs, Appellees, v. Carlos Romero BARCELO, etc., et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 275

765 F.2d 275

Gloria J. ORTIZ DE ARROYO, et al., Plaintiffs, Appellees, v. Carlos Romero BARCELO, etc., et al., Defendants, Appellants.

No. 84-1132.

United States Court of Appeals First Circuit.

Argued Feb. 4, 1985.

Decided June 26, 1985.

Reina Colon de Rodriguez, San Juan, P.R., with whom Nestor D. Ramirez Cuebas, Isla Verde, P.R., and Howard Charles, Dept. of Justice, Carolina, P.R., were on brief, for defendants, appellants.

Robert H. Rout, Hato Rey, P.R., for plaintiffs, appellees.

Before COFFIN, Circuit Judge, WISDOM, ^* Senior Circuit Judge, and BOWNES, Circuit Judge.

WISDOM, Senior Circuit Judge.

This appeal presents the question whether plaintiffs who have succeeded on a significant issue in their section 1983 suit through the voluntary actions of defendants, without obtaining a favorable judgment or a formal settlement agreement, may be considered "prevailing parties" for purposes of the Attorney's Fees Awards Act, 42 U.S.C. Sec. 1988 (1982). Before reaching this question, however, we must answer the defendants' challenge to the district court's jurisdiction to hear the original controversy. We hold that the district court correctly exercised jurisdiction and affirm the award of attorney's fees.

I.

The plaintiffs own real property located in Barrio Cupey of Rio Padras, Commonwealth of Puerto Rico. In 1971, the Governor of Puerto Rico adopted a resolution of the Puerto Rico Planning Commission, reserving the plaintiffs' land for public use for a proposed highway intersection. ¹ This highway plan and land use restriction prohibited the Puerto Rico Administration of Regulations and Permits from issuing permits for any building or structure on the protected land that would conflict with the public use of the property for the highway intersection designated by the Planning Board. Funding for the highway construction was unavailable, however, and the plaintiffs' land remained undeveloped throughout the course of this litigation.

In 1980, the plaintiffs filed suit in the United States District Court for the District of Puerto Rico, alleging that the transportation and land use plan adopted by the Commonwealth effectively froze any development of the plaintiffs' lands for an indefinite period of time without compensating the property owners for the loss of the use of their lands. The plaintiffs averred that the land use restriction was arbitrary and capricious, was unrelated to any reasonable governmental purpose because the funds necessary for developing the highway system were not available, and that the defendants, in their individual capacity and as officers of the Commonwealth of Puerto Rico, had violated the plaintiffs' fifth and fourteenth amendment rights by depriving the plaintiffs of their property without due process of law. The plaintiffs sought: 1) a declaration that the defendants' acts violated the United States Constitution, 2) damages, 3) costs, 4) attorney's fees, 5) reimbursement of property taxes, and 6) any other relief deemed by the court to be just and proper.

The defendants filed a motion to dismiss the complaint for lack of subject matter jurisdiction and an answer to the substantive allegations of the complaint. In answer to interrogatories propounded by the plaintiffs, the defendants asserted that the subject property was part of the Highway Authority's then current Five Year Priority Construction Plan and that liberation of the property was, therefore, impossible. In October 1981, the Planning Board adopted a resolution permitting the development of lands affected by the 1971 transportation and land use plan, provided that the properties to be developed were not on the Highway Authority's most current Five Year Priority Construction Program. Later, the Highway Authority removed the plaintiffs' property from the Priority Construction Program for fiscal 1981-82 to 1985-86.

On February 24, 1982, while the parties to this suit continued in their attempts to settle this controversy without a trial, the Secretary of Transportation and Public Works of Puerto Rico recommended to the Planning Board that the property in question be removed from the Program in accordance with the provisions of the Board's October 1981 resolution. ² The Board approved this recommendation by resolution dated March 10, 1982.

Counsel for the parties held settlement conferences before Judge James H. Watson on February 26 and March 15, 1982. According to the minutes of the February 26 conference, the plaintiffs demanded full release of the property and damages. The defendants' counsel represented that the defendants were willing to release the property with the restriction that only one-story buildings would be constructed on the property. A further settlement conference was held March 15, at which time the defendants' counsel advised that the Planning Board would issue a resolution freeing the property from all restrictions. The plaintiffs, in turn, agreed to abandon their claim for monetary damages. The parties were instructed to file a stipulation of settlement within fifteen days; the plaintiffs were given thirty additional days to file their motion for attorney's fees.

After numerous attempts to reach a formal settlement failed, the plaintiffs moved for a voluntary dismissal with prejudice, reserving to themselves the right to seek attorney's fees. The court granted this motion on April 30, 1982; the defendants did not appeal that order. The plaintiffs then submitted a motion requesting attorney's fees as "prevailing parties" under 42 U.S.C. section 1988. ³ This motion was heard before Judge Juan R. Torruella on September 16, 1983, at which time the defendants reasserted their earlier motion to dismiss for lack of subject matter jurisdiction. The district court denied the defendants' motion and awarded attorney's fees to the plaintiffs in the sum of $21,131.25, finding the plaintiffs to have prevailed on a significant issue in the suit. On appeal from the district court judgment entered December 29, 1983, the defendants reassert their jurisdictional challenge and contend that the district court erred in awarding attorney's fees to the plaintiff.

II.

The plaintiffs invoked the jurisdiction of the district court under 28 U.S.C. section 1331. ⁴ The defendants argue on appeal, however, that the district court lacked jurisdiction to consider the plaintiffs' original suit and request for attorney's fees because the plaintiffs failed to establish a valid claim arising under the constitution and laws of the United States. The defendants assert that the plaintiffs had not established that there had been a "taking" without due process of law; that the plaintiffs' claim essentially was a tort claim for inverse condemnation which could be redressed in state court; and that the complaint did not, therefore, state a federal cause of action.

The defendants' jurisdictional arguments confuse the issue of the district court's authority to hear a case with the issues of the adequacy of the complaint and the plaintiffs' ability to prevail on the merits of their claim. Subject matter jurisdiction does not depend on the plaintiffs' ability to prove the elements of their cause of action in their complaint. The complaint must merely demonstrate that the matter in controversy arose under the Constitution or laws of the United States. "Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy". Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946). Once a court has assumed jurisdiction over the controversy, it may then dismiss the case on the merits if it determines that the plaintiffs have failed to state a ground on which a federal court may grant relief. Id. The court may not, however, refuse jurisdiction because the plaintiffs have failed to prove the substantive allegations of the complaint or because the plaintiffs' ultimate recovery may be limited to tort damages. Id.

The plaintiffs alleged in their complaint that the defendants, officers of the Commonwealth of Puerto Rico, ⁵ arbitrarily and capriciously deprived the plaintiffs of their property without due process of law. As in Bell, it is clear from the allegations of the complaint in this case that the plaintiffs' suit was grounded in the alleged violation of the plaintiffs' constitutional right of due process. The district court was, therefore, required to exercise jurisdiction over the controversy: "[W]here the complaint, as here, is so drawn as to seek recovery directly under the Constitution or laws of the United States, the federal court ... must entertain the suit." ⁶ Id. at 681-82, 66 S.Ct. at 776.

This conclusion is bolstered, not defeated, by the recent decisions of the Supreme Court and this circuit cited by the defendants in their appellate brief. This court was faced with claims substantially similar to those made by plaintiffs in the instant case in Pamel Corporation v. Puerto Rico Highway Authority, 621 F.2d 33 (1st Cir.1980), and in Citadel Corporation v. Puerto Rico Highway Authority, 695 F.2d 31 (1st Cir.1982), cert. denied, --- U.S. ----, 104 S.Ct. 72, 78 L.Ed.2d 85 (1983). In Pamel and Citadel, as in the case now before us, the plaintiff brought an "inverse condemnation suit" ⁷ seeking damages for the value of its property rights allegedly extinguished by various officers and agencies of the Commonwealth of Puerto Rico as a result of restrictive zoning and land use policies. In each of these cases, we recognized that "[r]egulation of property use may be so oppressive or arbitrary that it crosses the wavering line separating a valid exercise of the police power from an exercise of the eminent domain power, which would be invalid without payment of ... just compensation...". Pamel, 621 F.2d at 35; see also Citadel, 695 F.2d at 33. We held,...