Perez v. U.S., No. 78-1107

• Decision Date: 15 March 1979
• Docket Number: No. 78-1107
• Citation: 594 F.2d 280
• Parties: Antonio RAMOS PEREZ et al., Plaintiffs, Appellants, v. UNITED STATES of America et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 280

594 F.2d 280

Antonio RAMOS PEREZ et al., Plaintiffs, Appellants, v. UNITED STATES of America et al., Defendants, Appellees.

No. 78-1107.

United States Court of Appeals First Circuit.

Argued Nov. 8, 1978.

Decided March 15, 1979.

Harvey B. Nachman, Santurce, P.R., for plaintiffs, appellants.

Morton Hollander, Atty., Dept. of Justice, Washington, D.C., with whom Julio Morales-Sanchez, U. S. Atty., San Juan, P.R., Barbara Allen Babcock, Asst. Atty. Gen., Leonard Schaitman and Michael Kimmel, Attys., Civ. Div., App. Staff, Dept. of Justice, Washington, D.C., on brief, for defendants, appellees.

Before COFFIN, Chief Judge, CAMPBELL and BOWNES, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

On February 21, 1974, Nancy Ramos De Jesus sustained severe injuries when she fell from the balcony of her parents' third-floor apartment in Llorens Torres, a San Juan housing project owned and operated by the Corporacion de Renovacion Urbana Y Vivienda (CRUV), a Puerto Rican public housing authority. The Llorens Torres project had been built between 1950 and 1954 by the Municipal Housing Authority of San Juan, a predecessor of CRUV, with funds provided under the United States Housing Act of 1937, Pub.L. No. 412, 50 Stat. 888 (current version at 42 U.S.C. §§ 1437-40), by the Public Housing Administration (PHA), a predecessor of the United States Department of Housing and Urban Development (HUD). ¹ Alleging that the railing of the balcony from which Nancy Ramos fell was dangerously low, the plaintiffs sued the United States, CRUV, and CRUV's insurer, the Commonwealth Insurance Company (CIC), under the Federal Tort Claims Act, 28 U.S.C. §§ 1346, 2671-80, in the federal district court of Puerto Rico.

It was alleged in the complaint ² that the "designing, construction, supervision, control and approval and financing" of the housing project was carried out by the United States, CRUV and CIC "in a negligent manner, as the height of the balcony rails (in Llorens Torres) does not comply with the minimum standard safety regulations of neither the Federal government nor the Commonwealth of Puerto Rico . . . ." Recovery from the United States was sought on the basis that HUD "provided financing" for the project, "reviewed the project plans and specifications . . . and sent an inspector to make periodic inspections . . . ." Later plaintiffs advanced the additional theory, that United States employees had required the raising of part of the balcony floor in the plaintiffs' apartment, that this may have led to raising the entire floor, and that the end result was to reduce the height of the balcony railings from four feet to 37.5 inches.

To recover against the United States under the Federal Tort Claims Act, the plaintiffs had to show that Nancy Ramos' fall was due to the "negligent or wrongful act or omission" of an "employee of the (Federal) Government." 28 U.S.C. § 1346(b). This had to be done either by showing negligence on the part of employees of HUD or by establishing that CRUV was in fact, if not in name, a federal agency and that Its employees had been negligent. See 28 U.S.C. § 2671. The United States took the position that plaintiffs could establish neither that HUD employees had been negligent nor that CRUV was a federal agency, and moved to dismiss. Fed.R.Civ.P. 12(b)(6).

Treating the government's motion as a motion for summary judgment, Fed.R.Civ.P. 56, the district court held that CRUV was not a federal agency and that the United States therefore was not liable for any negligence on the part of its employees in constructing and maintaining the Llorens Torres project. It also held that the United States could not be liable as a principal for Nancy Ramos' injuries because, under Puerto Rican law, no liability could arise from constructing a balcony with a 37.5 inch railing. It concluded that it could "perceive of no fact pattern which would entitle Plaintiff to recovery under the Federal Tort Claims Act," and that any doubts as to the facts were immaterial. As there were no independent grounds for federal jurisdiction over CRUV and CIC, the action as to all three parties was dismissed. ³

Plaintiffs' assignments of error on appeal are not clearly formulated but are best characterized as follows: They say that there are "genuine issues of material fact" as to whether CRUV was in fact a government agency. Alternatively, they argue that there are facts from which a court, on one of several theories, might find that HUD's own employees were directly at fault with respect to the alleged balcony defect.

I. Liability for acts of CRUV

The district court was correct in holding that CRUV, on the facts presented, was not a federal agency within the meaning of the Federal Tort Claims Act. The court properly relied on three Supreme Court decisions, United States v. Orleans, 425 U.S. 807, 96 S.Ct. 1971, 48 L.Ed.2d 390 (1976), Logue v. United States, 412 U.S. 521, 93 S.Ct. 2215, 37 L.Ed.2d 121 (1973), and Maryland v. United States, 381 U.S. 41, 85 S.Ct. 1293, 14 L.Ed.2d 205 (1965). Under these cases, whether a government contractor is a federal agency is determined by "the power of the Federal Government 'to control the detailed physical performance of the contractor' ", Orleans, 425 U.S. at 814, 96 S.Ct. at 1976, Citing Logue, 412 U.S. at 528, 93 S.Ct. 2215. The issue, "is not whether the (alleged tortfeasor) receives federal money and must comply with federal standards and regulations, but whether its day-to-day operations are supervised by the Federal Government." Orleans, 425 U.S. at 815, 96 S.Ct. at 1976.

In Maryland, a member of the Maryland National Guard who received his pay from the United States and had to meet federal requirements was held not to be a United States employee, in part because state authorities appointed and exercised immediate control over him. ⁴ 381 U.S. at 48-49, 85 S.Ct. 1293. In Logue, the United States was exonerated from liability for the negligence of a county jail in caring for a federal prisoner. The jail was required to meet federal standards of treatment, and the United States had " 'the right to enter the institution . . . at reasonable hours for the purpose of inspecting the same and determining the conditions under which federal offenders are housed.' " But, as the United States had "no authority to physically supervise the conduct of the jail's employees," 412 U.S. at 530, 93 S.Ct. at 2220, the jailkeeper was not a federal employee. ⁵ Finally, in Orleans the Court held that the United States was not liable for the alleged negligence of employees of a community action agency funded by the United States Officer of Economic Opportunity (OEO) pursuant to the Economic Opportunity Act of 1964, 42 U.S.C. §§ 2781-2837 (EOA). The agency had been created to carry out the community action programs of the EOA, it received funds exclusively from the OEO, it "conducted only programs 'formulated and funded by the federal government,' " and it and its activities were closely supervised by the OEO. 425 U.S. at 811, 96 S.Ct. at 1974. It was required to "comply with extensive regulations which include employment policies and procedures . . . accounting and inspection procedures, expenditure limitations, and programmatic limitations and application procedures. . . ." 425 U.S. at 817-18, 96 S.Ct. at 1977. ⁶ Nevertheless, the federal funding was given in response to private initiatives and left control of the community action agencies in private, local hands. 425 U.S. at 817, 96 S.Ct. 1971. The Court said that neither establishing guidelines nor supplying federal aid, advice and oversight in order to ensure that federal funds are not "diverted to unauthorized purposes" gives the government the "day-to-day control" over funded organizations that is a prerequisite to its liability under the Federal Tort Claims Act. 425 U.S. at 818, 96 S.Ct. 1971.

Viewed in light of these principles, the record before us indicates that the United States cannot be liable for the negligence if any of CRUV. The information as to HUD's control over CRUV showed only that HUD, like OEO, was a financier with particular goals that recipients of its funds were expected to share, and that CRUV, although required to meet certain federal specifications, was fully responsible for the design and construction of the project. It was CRUV who proposed and requested financing for Llorens Torres. It and HUD's Puerto Rican office then agreed to a development program, which established the cost and basic design of the project in accordance with minimum federal standards. After this was approved by Washington, they signed an Annual Contributions Contract. Although this contract contained provisions covering the construction and eventual management of the project, it was primarily a financing agreement. ⁷ It required CRUV to hire qualified architects and engineers to design and supervise construction of the project, and to include certain employment benefits in its contracts with its construction crews. After the project's completion, CRUV was to be responsible for its maintenance, and was to repair any parts that became unsafe or unsanitary.

The Annual Contributions Contract gave HUD the right to review "all work, materials, pay rolls, records of personnel, conditions of employment, and other relevant data and records," and to "inspect, to the extent it deems necessary, the construction work and equipment in order to check compliance with the construction contracts . . . and this Contract." HUD was to inform CRUV of any noncompliances it observed, but was not to deal directly with any of CRUV's contractors. HUD monitored and inspected the project to ensure that it was built according to specifications, that federal funds were not misused, and that it did not exceed its budget. It reserved the right to enter and repair the project if the local authorities failed to do so.

The Annual Contributions Contract did not go beyond ensuring...