Alschuler v. Dept. of Housing & Urban Development

• Decision Date: 04 June 1981
• Docket Number: No. 80 C 4595.,80 C 4595.
• Court: U.S. District Court — Northern District of Illinois
• Parties: Frank ALSCHULER, Diane Sokolofski, Morton Weisman and the Hutchinson-Hazel-Junior Terrace Association, Plaintiffs, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Elmer C. Binford, Lawrence B. Simons, Monterey Apartments, a California Limited Partnership, Sabina Realty Corporation, G. Bliudzius Contractors, Inc., ADC Mortgage Corporation, Ranbir S. Sahni, George Gottfried and unknown Partners of Monterey Apartments, Defendants.

515 F. Supp. 1212

Frank ALSCHULER, Diane Sokolofski, Morton Weisman and the Hutchinson-Hazel-Junior Terrace Association, Plaintiffs, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Elmer C. Binford, Lawrence B. Simons, Monterey Apartments, a California Limited Partnership, Sabina Realty Corporation, G. Bliudzius Contractors, Inc., ADC Mortgage Corporation, Ranbir S. Sahni, George Gottfried and unknown Partners of Monterey Apartments, Defendants.

No. 80 C 4595.

United States District Court, N. D. Illinois, E. D.

June 4, 1981.

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Reuben L. Hedlund and Kevin A. Russell, Hedlund, Hunter & Lynch, Chicago, Ill., for plaintiffs.

Steven A. Miller and Michael S. O'Connell, Asst. U. S. Attys., Chicago, Ill., for federal defendants.

Edna Selan Epstein, Sidley & Austin, Chicago, Ill., for private defendants.

MEMORANDUM OPINION

BUA, District Judge.

Before the court is plaintiffs' motion for a preliminary injunction pursuant to Rule 65(a), Fed.R.Civ.P. The plaintiffs seek an order enjoining the Department of Housing and Urban Development and two of its officials from providing housing assistance payments to the owners of the Monterey Apartments on behalf of future tenants, and from providing mortgage insurance on the apartment project. The plaintiffs also seek to enjoin the developers of the Monterey Apartments from continuing rehabilitation work on the apartment buildings, since they allege that such work is proceeding in violation of a City of Chicago ordinance.

Procedural Background

On August 27, 1980, plaintiffs filed a three count complaint against defendants alleging violations of the United States Housing Act of 1937 (as amended by the Housing and Community Development Act of 1974, Pub.L.No.93-383, 88 Stat. 633, and, in particular by section 201 of the Housing and Community Development Act of 1977, Pub.L.No.95-128, 91 Stat. 1111, codified in part at 42 U.S.C. § 1437f(c)(1)), section 221(d)(2) of the National Housing Act of 1934, 12 U.S.C. § 1715l(d)(2), Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act of 1968, 42 U.S.C. § 3601 et seq., the Housing and Community Development Act of 1974, 42 U.S.C. § 5301 et seq., and the Lake Michigan and Chicago Lakefront Protection Ordinance, CHICAGO, ILL., MUNICIPAL CODE ch 194B (1979).

In essence, plaintiffs' complaint was two-fold: (1) the defendant Department of Housing and Urban Development's (HUD) approval of housing assistance payments to the owners of the Monterey Apartments under the section 8 leased housing assistance payments program, 42 U.S.C. § 1437f, see generally Holbrook v. Pitt, 643 F.2d 1261 (7th Cir. 1981), and its provision of mortgage insurance for the Monterey Apartments pursuant to section 221(d)(4), 12 U.S.C. § 1715l(d)(4), was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law," 5 U.S.C. § 706(2)(A); and (2) the private defendants violated the Lakefront Protection Ordinance by undertaking the rehabilitation of the Monterey Apartment without first having secured the approval of the Chicago Plan Commission.

On September 8, 1980, plaintiffs moved for a preliminary injunction to enjoin federal assistance to and construction of the Monterey Apartments. They claim that unless a preliminary injunction issues they will suffer irreparable injury in that the concentration of "publicly assisted, low-income, and minority persons in the Uptown area" will increase; racial and minority residential segregation will increase; and "additional strain will be placed on already burdened social services and community resources located in the Uptown area." They also contend that the provision of HUD assistance for the Monterey project will adversely affect the "special environmental, recreational, cultural, historical and aesthetic qualities of the Lake Michigan and Chicago Lakefront Protection District." See Motion for Preliminary Injunction.

On October 6, 1980, plaintiffs sought leave to amend their complaint to add William Duggan, Commissioner of the Department of Inspectional Services, as a defendant and to require him to revoke the building permits and issue a stop work order covering the Monterey Apartments. This issue has been fully briefed by the parties.

On October 17, 1980, private defendants moved to strike and dismiss Count III of the complaint. This issue has been fully briefed by the parties.

On October 23, 1980, private defendants, complaining that plaintiffs' lawsuit was "wholly frivolous and without merit," filed a three count counterclaim against plaintiffs alleging interference with property rights, abuse of process, and tortious interference with contract, and seeking damages in excess of one million dollars and injunctive relief.

On October 28, 1980, plaintiffs moved to dismiss private defendants' counterclaim.

On October 30, 1980, the federal defendants moved to dismiss plaintiffs' complaint. Federal defendants have filed a memorandum in support of their motion in which private defendants have joined.

On November 21, 1980, plaintiffs were given leave to file an amendment to their preliminary injunction motion to bring into issue the Monterey Apartments' compliance with the court orders in the Gautreaux litigation.

The preliminary injunction hearing began on November 5, 1980 and continued for eleven trial days. At the completion of the plaintiffs' case on November 26, 1980, defendants moved for a directed verdict. The court denied defendants' motion. The taking of evidence was completed on December 2, 1980. The court heard the testimony of twenty witnesses during the evidentiary hearing. Also submitted in evidence were designated portions of a number of depositions and many exhibits.

The Parties

The plaintiffs in this case are the Hutchinson-Hazel-Junior Terrace Association and three of its members. The Association is an unincorporated voluntary membership association whose members own single family residences on R-1 zoned lots on West Hutchinson Street, North Hazel Street, West Junior Terrace and West Buena Avenue in the City of Chicago. All of the members of the Association live within a two block distance from the Monterey. Frank Alschuler resides and owns property at 832 West Junior Terrace, which is approximately 150 feet west of the Monterey Apartments. Morton Weisman resides at 811 West Junior Terrace, which is directly across the street and to the south of the Monterey Apartments. Diane Sokolofski resides at 819 West Junior Terrace, which is also on the south side of the street and two lots west of the Monterey Apartments.

The members of the Association are generally upper middle and upper class families with incomes that are well above the mean and median incomes of Chicago families. Almost all of the members live in large single family homes. The individual plaintiffs valued their homes between $150,000 and $250,000. Out of over sixty families represented by the Association, all of the membership is white with the exception of one black member and one Oriental member. The only member of the Association with a child attending a Chicago Public School is plaintiff Frank Alschuler. His daughter attends Lane Technical High School which is outside of the Uptown community.

The federal defendants are the Department of Housing and Urban Development, an agency of the United States Government responsible for the administration of the rental supplements and mortgage insurance guarantees that have been promised to the private defendants, Elmer Binford and Lawrence B. Simons. Elmer Binford is sued in his capacity as Manager of the Chicago Area Office of HUD. Lawrence B. Simons is sued in his capacity as the federal housing administrator responsible for the administration of the federal mortgage insurance program.

Defendant Monterey Apartments is a California Limited Partnership, with an office at 1011 East Touhy Avenue, Suite 395, Des Plaines, Illinois 60018, and is the record title-holder of the property located at 808 and 812-814 Junior Terrace, Chicago, Illinois, which is within a Private Use Zone of the Lake Michigan and Chicago Lakefront Protection District.

Defendant Ranbir S. Sahni is the general partner and a limited partner of the partnership. He was also the sponsor with respect to the application filed by the owners of the Monterey Apartments for mortgage insurance. Sahni has an office at 1011 East Touhy Avenue, Suite 395, Des Plaines, Illinois, 60018 and is a resident of California. Sahni is also the sole shareholder and president of defendants ADC Mortgage Corporation and Sabina Realty Corporation. Ranbir Sahni has participated in the development of over sixty federally assisted housing developments across the country including four projects in the City of Chicago.

Sabina Realty is a California corporation qualified to do business in Illinois and has an office at 1011 East Touhy Avenue, Suite 395, Des Plaines, Illinois, 60018. Sabina is the Managing Agent of the Monterey development. Sabina Realty has managed other Sahni sponsored developments with general success and has on a number of occasions been requested by HUD to take over developments that were in default in order to bring properties back into a state of financial health and has done so successfully.

Defendant G. Bliudzius Contractors, Inc., an Illinois corporation, is a limited partner of Monterey Apartments and is the contractor for the rehabilitation of the Monterey buildings.

The Property

The property at the center of this litigation consists of two apartment buildings known as the Monterey Apartments. One is a nine-story building located at 808 West Junior Terrace. The other is an adjacent three-story building located at 812-814 West Junior Terrace. The buildings are located at the northwest corner of West Junior Terrace and North Clarendon Avenue. Both buildings are presently vacant and are undergoing substantial rehabilitation. No leases...