UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

In re: 

The Financial Oversight 

Management Board for Puerto 

Rico 

as representative of 

The Commonwealth of Puerto 

Rico, 

Debtor 

- - - - - - - - - - - - - 

PFZ Properties, Inc. 

Plaintiff 

v. 

COMMONWEALTH OF PUERTO RICO, 

Defendant 

 PROMESA Title III 

 No. 17 BK 3283 (LTS) 

(Jointly Administered) 

Adv. Proc. No. 18- _____ 

In 17-bk-3283 LTS 9 

Complaint

To the Honorable Court: 

Comes now PFZ Properties, Inc. (hereinafter, the Plaintiff), a 

creditor of the Commonwealth of Puerto Rico, the Debtor herein 

(hereinafter, the Debtor or the Commonwealth), through its 

undersigned counsel and respectfully states and prays as follows: 

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Jurisdiction and Venue 

This court has jurisdiction over Plaintiff’s federal claims 

under 28 U.S.C. 1331, because they arise under the Takings Clause 

and the Due Process Clause of the Fifth Amendment to the 

Constitution of the United States, applied to the Commonwealth 

either directly or through the Fourteenth Amendment1. Plaintiff’s 

claims based on Commonwealth law may be considered and decided by 

this Court because there is pendent or supplemental jurisdiction 

under 28 U.S.C. 1337. Jurisdiction is also predicated on Section 

306(a) of the Puerto Rico Oversight, Management and Economic 

Stabilization Act, 48 U.S.C. § 2166. Venue is proper under Section 

307(a)(1) of PROMESA, 48 U.S.C. 2167. 

Statement of Facts 

 

1 There has been substantial argument as to whether the Bill of Rights of 

the Constitution of the United States applies to the Commonwealth 

directly or through the Fourteenth Amendment. The Supreme Court has 

stated that “Puerto Rico is subject to the Due Process Clause of either 

the Fifth or the Fourteenth Amendment” Posadas de Puerto Rico Assoc. vs. 

Tourism Co. of Puerto Rico, 478 US 328, 331 n.1 (1986). And in Torres vs. 

Puerto Rico, 442 US 465 (1979), Justice Brennan’s concurrent opinion 

states that “whatever the validity of [the Insular Cases when] ...they 

were decided, these cases are clearly not authority for questioning the 

application of the Fourteenth Amendment, or any other provision of the 

Bill of Rights to the Commonwealth of Puerto Rico”, Torres, 442 US, at 

475-476. In its most recent decision applying a provision of the Bill of 

Rights to the Debtor, Commonwealth of Puerto Rico vs. Sánchez Valle, 136 

S. Ct. 1863 (2016), the Court did not discuss this issue because both 

parties had accepted that the Double Jeopardy Clause applied to the 

Commonwealth. The federal Government, however, in its brief as amicus 

curiae, at page 10, n. 1, asserted that “...the Double Jeopardy Clause 

could not apply to Puerto Rico through the Due Process Clause of the 

Fourteenth Amendment, because the Fourteenth Amendment applies only to 

‘state[s]’. The Double Jeopardy Clause thus must apply to Puerto Rico 

based on its status as a territory belonging to the United States”. There 

seems to be no question, in any case, that the fundamental guaranties of 

the Bill of Rights apply to all American citizens in Puerto Rico. 

1. Plaintiff is a Puerto Rico Corporation whose only asset, at 

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all times relevant to this Complaint, was beachfront land 

(hereinafter, the Property) comprising approximately 1,345.83 

cuerdas (each cuerda being equivalent to 0.97 acres) located in the 

Municipality of Loíza, only minutes away from San Juan, Puerto 

Rico, which it held for tourism-related development purposes. 

2. At all times relevant to this complaint Plaintiff had a 

project for tourism-related development of a parcel of the Property 

pending before the Planning Board of Puerto Rico, which conformed 

to the then-existing zoning regulations. The Puerto Rico 

Environmental Quality Board had approved a Final Environmental 

Impact Statement for that project. 

3. On November 13, 2005 Aníbal Acevedo-Vilá, then the Governor 

of the Commonwealth, issued Executive Order 2005-71, whereby he 

directed all departments, agencies and instrumentalities of the 

Commonwealth to acquire, either by purchase or expropriation, any 

private lands adequate for conservation purposes, in order to 

create an island-wide natural reserve which would add up to 100,000 

cuerdas (each cuerda being equivalent to 0.97 acres). The Property 

was among the parcels of land already scheduled to be acquired 

under the Governor’s plan. 

4. Late in 2006 then Governor Acevedo-Vilá, who was aware that 

a project to develop a parcel of the Property was pending before 

the Puerto Rico Planning Board, approached an officer of the 

Plaintiff at a reception held in his official residence, and 

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informed him that the Secretary of the Department of Natural 

Resources would contact the Plaintiff to discuss the acquisition of 

the Property. It became clear to the Plaintiff from its 

conversations with the Governor and the Secretary that if a 

purchase and sale contract could not be negotiated the Property 

would de expropriated. 

5. On March 6, 2007 Plaintiff and the Debtor executed a 

contract whereby the Property would be acquired by the Department 

of Natural Resources, the purchase price to be determined on the 

basis of an appraisal by a professional appraiser selected and paid 

by the Department with the approval of the Plaintiff. 

6. The Debtor, however, manipulated the appraisal process in 

its favor and the Plaintiff refused to sell at the resulting 

appraisal price and instead sued the Debtor and other responsible 

parties before this Court on April 1 of 2008, case number 2008-

01379 (JP). 

7. On August 13 of 2008, to prevent the litigation then 

pending before this Court between the Plaintiff and the Debtor, 

concerning Debtor’s non-performance of the contract for the 

acquisition of the Property, case number 2008-01379 (JP), 

previously described, from coming to trial on July 23 of 2009, the 

Debtor exercised its sovereign right to condemn the Property, by 

filing eminent domain proceedings (case number KEF-2008-0480) 

before the Court of First Instance of the Commonwealth, San Juan 

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Part (hereinafter, the Trial Court). 

8. At the time it filed the expropriation proceedings the 

Debtor invoked its powers under the Declaration of Taking Act of 

Puerto Rico, Section 5(a) of the Ley de Expropiación Forzosa (the 

Commonwealth legislation governing eminent domain procedures, 

hereinafter the Act), 32 L.P.R.A. 2907 (identical in essence to the 

homonymous federal statute, 40 U.S.C. 3114, 3115, formerly 40 

U.S.C. 258 (a)-(e), and immediately took title to and possession of 

the Property. 

9. Plaintiff immediately contested the estimate of just 

compensation supporting the taking, $4,911,000.00, and also 

challenged the underlying appraisal relied upon by the Debtor on 

several grounds, including that the appraisal was based on a parcel 

of only 62 cuerdas out of the 1,345.83 cuerdas comprising the 

Property. 

10. Shortly before the condemnation pretrial conference was 

held in April 10 of 2012, the Debtor had the entire property 

reappraised by a different appraiser of Debtor’s own choosing, who 

concluded that the Property was worth $32,561,003.00 at the time of 

the taking. 

11. This new appraisal was offered and admitted at the 

pretrial conference, together with other exhibits, as Debtor’s 

evidence on the value of the Property, and the parties were then 

summoned to proceed to trial shortly thereafter. 

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12. Nevertheless, and notwithstanding the fact that 

Plaintiff’s own appraiser had estimated a much higher value for the 

Property, to wit, $75,550,000.00 at the time of the taking (August 

13th, 2008), the Plaintiff, to avoid years of litigation and 

considering the then-present value of a putative judgement in its 

favor rendered years in the future, requested the Trial Court to 

enter judgement in its favor for the amount stated (and admitted) 

by the Debtor in the pretrial documents and proceedings to be the 

value of the Property. 

13. The Debtor, incongruously, then informed the Trial Court 

that it could not pay the Plaintiff owner the amount that Debtor’s 

own appraiser had estimated the Property was worth at the time of 

the taking, and therefore would move to voluntarily dismiss the 

case. 

14. Shortly thereafter, on April 17, 2012 the Debtor formally 

filed for voluntary dismissal of the action and the Plaintiff 

opposed its motion on the grounds that not only the Declaration of 

Taking Act, as interpreted by the Commonwealth courts and the 

Federal judiciary, but the Constitutions of both the United States 

(the Takings Clause of the Fifth Amendment) and Puerto Rico 

(Article II, Section 9) prevent a condemning government authority 

from voluntarily dismissing a case in eminent domain unilaterally 

after it has taken title to or possession of the condemned 

property. 

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15. Both parties exhaustively briefed the voluntary dismissal 

issue, but at oral argument, not held until June 26th, 2013, more 

than one year after Debtor’s voluntary dismissal motion, the Debtor 

announced that it no longer wanted to dismiss the proceedings. 

16. The Trial Court allowed the Debtor to withdraw its motion 

to voluntarily dismiss the proceedings and more than another year 

went by while the Commonwealth judiciary decided whether a motion 

by the Debtor to reappraise the Property once more should be 

granted. All three, the Trial Court, the Court of Appeals and the 

Supreme Court of Puerto Rico had agreed, by October of 2014, that 

it should not. 

17. Nevertheless, when the decision not to allow reappraisal 

was final, the Trial Court, for the better part of an additional 

year, refused to grant Plaintiff judgement upon the basis of 

Debtor’s admitted appraisal value, and the Debtor again filed for 

voluntary dismissal on July 14, 2015. 

18. This time, on December 16 of 2016, after another eighteen 

months had elapsed (the time needed by the debtor to approve a new 

Land Use Plan), the Trial Court, without even addressing 

Plaintiff’s extensively-briefed legal and constitutional 

objections, granted Debtor’s second motion for voluntary dismissal. 

The Court of Appeals, also without addressing Plaintiff’s 

constitutional and statutory objections, agreed with the Trial 

Court and the Commonwealth’s Supreme Court denied certiorari to 

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review the decision. 

19. Shortly before the Trial Court’s order granting the motion 

to voluntarily dismiss the proceedings, the Debtor, on November 

30th, 2015, to be certain that the Property, which it intended to 

return to the Plaintiff, could never be developed, approved a new 

Land Use Plan by means of which the Property was classified as a 

natural reserve (“Suelo Rústico Especialmente Protegido-Ecológico”, 

or “rustic land especially protected for ecological reasons”), a 

classification that prevents the Plaintiff from developing the 

Property or dedicating it to any economically productive or 

beneficial use whatsoever. 

20. The preceding Land Use Plan (promulgated in 1995 

specifically for this geographic area) had divided the Property in 

several parcels, each of which was susceptible of some sort of 

economic development, and under its provisions the Plaintiff had, 

at the time of the taking, a tourism-related development project 

for a 62-acre parcel pending before the Puerto Rico Planning Board. 

21. By so rezoning the Property, the Commonwealth effectively 

foreclosed its economic viability and became its de facto owner 

(even if pretending to return it to the Plaintiff by voluntarily 

dismissing the expropriation proceedings) without having payed the 

Plaintiff just compensation therefor. 

22. The expropriation proceedings and the purchase-and-sale 

process that preceded it, as may be seen in detail in paragraph 30 

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hereof, were clearly a sham, intended by the Commonwealth to hide 

its true intention of availing itself, as it did, with the actual 

control and de facto ownership of the Property for its own benefit, 

without having to pay just compensation for it. 

First Cause of Action

23. Paragraphs 1-22 are incorporated herein by reference. 

24. On November 30th, 2015, the eve of the Trial Court’s 

expected approval of its motion to voluntarily dismiss the 

expropriation proceedings, the Debtor approved a new Land Use Plan 

that would be in effect at the time the Property was to be returned 

to the Plaintiff. 

25. In the new Land Use Plan the Property was classified as a 

natural reserve, so that by those means the Debtor achieved, 

through regulatory activity, what Governor Acevedo Vilá had 

envisioned ten years earlier in Executive Order 2005-71: preventing 

the Plaintiff from developing the Property or dedicating it to any 

economically productive or beneficial use whatsoever, but without 

compensation. 

26. By depriving the Property of all possible economically 

productive or beneficial uses the Debtor effected a regulatory 

taking of the Property for which the Takings Clause of the Fifth 

Amendment to the Constitution of the United States2 and Article II, 

 

2 See note 1 above.

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Section 9 of the Commonwealth Constitution require just 

compensation. 

27. Plaintiff, therefore, requests that this Court declare 

that the Debtor has effected a regulatory taking of the Property 

and enter judgement against the Debtor providing for just 

compensation for the Property to the Plaintiff, in the amount of 

$75,550,000.00 (the value of the Property at the time of the 

original taking), plus interest at market rates, plus costs and 

attorney’s fees. 

Second Cause of Action 

28. Paragraphs 1-22 are incorporated herein by reference. 

29. At least since Governor Acevedo-Vilá promulgated Executive 

Order 2005-71 the Debtor pursued a single aim regarding the 

Property: preventing the Plaintiff, and any successor in interest, 

from developing the Property or dedicating it to any economically 

productive or beneficial use, in order for the Debtor to conserve 

it as a natural reserve. 

30. The means by which the Debtor pursued that objective [to 

wit: forcing the Plaintiff to enter into an agreement to sell the 

Property to the Debtor and withdraw its development project from 

official consideration; then, manipulating the appraisal process by 

which the purchase price would be determined; then, filing eminent 

domain proceedings and acquiring title to and possession of the 

Property (in the eve of trial of Plaintiff’s federal claims to 

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obtain redress for such activity); then, voluntarily dismissing the 

expropriation proceedings (again, in the eve of the trial set to 

determine just compensation); then, withdrawing its first motion 

for voluntarily dismissal, only to file it for a second time when 

the Commonwealth courts denied its request to reappraise the 

Property; and, finally, rezoning the Property as a natural reserve 

before returning it, worthless, to the Plaintiff], are clearly 

arbitrary, capricious, unfair and unreasonable, and amount to an 

unconstitutional violation of Plaintiff’s rights to substantive due 

process under the Due Process Clause of the Fifth Amendment to the 

Constitution of the United States and the Fourteenth Amendment3. 

 

3 See note 1 above.

31. Plaintiff, therefore, requests that this Court declare 

that the Debtor, by engaging in the above-described conduct, has 

violated Plaintiff’s constitutional rights to substantive due 

process of law, and enter judgement providing for compensation to 

the Plaintiff in an amount of not less than $75,550,000.00 (the 

value of the Property at the time of the original taking), plus 

interest at market rates, plus costs and attorney’s fees.

Third Cause of Action 

32. Paragraphs 1-22 are incorporated herein by reference. 

33. On August 13th, 2008 the Debtor exercised its sovereign 

right to condemn the Property, by filing eminent domain proceedings 

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(case number KEF-2008-0480) before the Trial Court. Under the 

Declaration of Taking Act of Puerto Rico, Section 5(a) of the Act, 

32 L.P.R.A. § 2907, it immediately took title to and possession of 

the Property. 

34. On July 14 of 2015, however, the Debtor for a second time 

(two years after voluntarily withdrawing its first identical 

request) filed a motion to voluntarily dismiss those proceedings 

under Section 5(d) of the Act and Rule 58.8(c) of the Puerto Rico 

Rules of Civil Procedure, and the Trial Court granted it on 

December 16, 2016. 

35. Section 5(d)of the Act, 32 L.P.R.A. § 2910, provides that 

the owner of a property as to which the Commonwealth has 

voluntarily dismissed eminent domain proceedings has a claim 

against the Commonwealth for all damages it may have sustained on 

account of the taking of its property and the subsequent voluntary 

dismissal of the proceedings. 

36. Likewise, Puerto Rico Rules of Civil Procedure Rule 

58.8(c) provides that the owner of a property as to which the 

Commonwealth has voluntarily dismissed eminent domain proceedings 

is entitled to an adjudication of just compensation for the 

possession of the property and the taking of its title by the 

Commonwealth. 

37. The Plaintiff, therefore, requests that this Court 

determine the compensation it is entitled to receive under the 

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above-cited provisions of Commonwealth law, in an amount not less 

than $75,550,000.00 (the value of the Property at the time of the 

original taking less its value at the time of the voluntary 

dismissal), plus interest at market rates, plus costs and 

attorney’s fees, and enter judgement against the Debtor providing 

for such compensation to the Plaintiff. 

PRAYER FOR RELIEF 

WHEREFORE, Plaintiff prays that this Court enter judgment: 1) 

declaring that the Debtor has effected a regulatory taking of the 

Property, and ordering Debtor to pay just compensation to the 

Plaintiff for the taking of the Property, in the amount of 

$75,550,000.00 (the value of the Property at the time of the 

original taking), plus interest at market rates, plus costs and 

attorney’s fees; 2) declaring that Debtor has violated Plaintiff’s 

constitutional rights to substantive due process of law, and 

ordering Debtor to pay compensation to the Plaintiff, in an amount 

of not less than $75,550,000.00 (the value of the Property at the 

time of the original taking), plus interest at market rates, plus 

costs and attorney’s fees; 3) and declaring that Plaintiff is 

entitled to receive just compensation under the above-cited 

provisions of Commonwealth law and ordering Debtor to pay Plaintiff 

an amount not less than $75,550,000.00 (the value of the Property 

at the time of the original taking less its value at the time of 

the voluntary dismissal), plus interest at market rates, plus costs 

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and attorney’s fees. 

Respectfully submitted. 

In San Juan, Puerto Rico, this 14th day of May 2018. 

/s/ DAVID CARRION BARALT 

USDC PR 207214 

Attorney for Plaintiff 

P.O. Box 364463 

San Juan, P.R. 00936-4463 

Tel. (787) 758-5050 

Fax. (787) 296-3434 

E-mail: davidcarrionb@aol.com 

/s/ RUSSELL A. DEL TORO 

USDC PR 121302 

DEL TORO & SANTANA 

Attorneys for Plaintiff 

Plaza 273, Suite 900 

273 Ponce de León Ave. 

San Juan, Puerto Rico 00917-1934 

Telephone (787) 754-8700 

Fax (787) 756-6677 

E-mail: rdeltoro@dtslaw.com

/s/ JOSE ÁNGEL REY 

USDC PR 118103 

Attorneys for Plaintiff 

P.O. Box 10127 

San Juan, P.R. 00908-1127 

Tel. (787) 396-2600 

E-mail: joseangelrey46@gmail.com 

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