Roberts v. Cameron-Brown Co.
Citation | 556 F.2d 356 |
Decision Date | 25 July 1977 |
Docket Number | CAMERON-BROWN,No. 75-3896,75-3896 |
Parties | Eva Mae ROBERTS, on behalf of herself and all others similarly situated, Plaintiffs-Appellees, v.COMPANY and Federal National Mortgage Association, Defendants-Appellants. |
Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Chas. E. Watkins, Jr., G. Lee Garrett, Jr., Atlanta, Ga., Regnald Maxwell, Jr., Augusta, Ga., for Federal, Etc.
Keith W. Benning, Augusta, Ga., for Cameron, Etc.
William J. Cobb, Ga. Legal Services Programs, Douglasville, Ga., David F. Walbert, Atlanta, Ga., for plaintiffs-appellees.
Appeals from the United States District Court for the Southern District of Georgia.
Before THORNBERRY and GEE, Circuit Judges, and MARKEY *, Chief Judge.
Plaintiff, Eva Mae Roberts, brought this class action alleging that a mortgagee's exercise of the private power of sale violated the due process clause. Plaintiff also insists that Cameron-Brown Company and the Federal National Mortgage Association ( FNMA ) failed in their duties to inquire into the circumstances leading to her defaults. Thus, they have allegedly violated HUD Handbook 4191.1. The district court, in response to a number of separate motions, upheld plaintiff's contentions in all respects, holding that the exercise of the private contractual power of sale provision in plaintiff's Deed to Secure Debt violated the due process clause of the fifth amendment. Roberts v. Cameron-Brown Co., 72 F.R.D. 483 (S.D.Ga.1975). The court also stated that although the HUD Handbook itself does not have the force and effect of law, it controls the servicing practice of private mortgagees because it is a valid administrative interpretation of a HUD regulation (24 C.F.R. § 203.9). Id. at 496-97. Thus, mortgagors with FNMA may raise the issue of noncompliance with the Handbook in foreclosure actions instituted by all Section 235 mortgagees and servicers. Defendants appeal from an order of September 9, 1975 preliminarily enjoining them from any nonjudicial foreclosure, as well as from a declaratory judgment order entered that same date regarding the issue of noncompliance with the HUD Handbook. We reverse.
The fact situation confronting this court is routine, and probably all too common. In October, 1972, Eva Mae Roberts bought a home in Augusta, Georgia, with the mortgage financed under Section 235 of the National Housing Act, 12 U.S.C. § 1715z. This program encourages private mortgagees to invest in low income housing, and provides for HUD-financed mortgage assistance payments. Cameron-Brown Co., the private mortgagee, assigned the mortgage to FNMA, and continued to service the mortgage under contract with FNMA.
Beginning in January, 1974, Mrs. Roberts failed to make her monthly payments on the mortgage. The failure continued for several months, until on May 6, 1974, FNMA's attorney notified Mrs. Roberts that FNMA would exercise its option to accelerate the debt. A month later, Mrs. Roberts filed this class action. As noted, the district court has upheld plaintiff's contentions, though in response to one of the earlier motions, he held there was no private cause of action under the HUD Handbook. Roberts v. Cameron-Brown Co., 410 F.Supp. 988 (S.D.Ga.1975). He essentially reversed that holding in a later order, concluding that mortgagors may raise the issue of noncompliance with the Handbook in foreclosure actions instituted by Section 235 mortgagees. Roberts v. Cameron-Brown Co., 72 F.R.D. 483 (S.D.Ga.1975).
The joint appellants, FNMA and Cameron-Brown Co., present two issues to the court. First, whether the exercise of a private power of sale by FNMA is governmental action and subject to the due process clause of the fifth amendment. Second, whether a private cause of action under the HUD Handbook should be implied to allow a mortgagor, as a defense to foreclosure, to assert that the mortgagee has failed to comply with the guidelines of HUD Handbook 4191.1.
Appellants contend first of all, and we agree, that there is no sufficient nexus to transform the private mortgagee's act into that of the federal government. The government must be involved with the activity that causes the actual injury, Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972), and it is not enough to show that the government heavily regulates the private company whose activities are challenged. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974). In Jackson, the Supreme Court held that a public utility's termination of electric service to petitioner's home without notice and hearing did not deprive her of her due process rights. The Court admitted that electric service is certainly a crucial matter, and that the Pennsylvania Public Utilities Commission closely regulated the electric company. Nevertheless, a "public function" is one that is usually reserved for the state eminent domain, elections, parks, and the like. It is related to sovereignty, and does not depend entirely on public importance, nor amount of government regulation. Likewise, this Circuit in Barrera v. Security Bldg. and Investment Corp., 519 F.2d 1166 (5 Cir. 1975) specifically held that nonjudicial foreclosure (private power of sale) is not state action.
Appellee insists that the electric service in Jackson and the mortgage in Barrera were created by the private parties, and that the government, not the mortgagee, creates the FNMA mortgage. The distinction is not apt. Cameron-Brown created the mortgage, not HUD, though HUD certainly exercises some control. HUD provides a convenient mechanism, regulations, and some payments. 1 Northrip v. FNMA, 527 F.2d 23 (6 Cir. 1975), confronts appellee as perhaps the closest case to ours on this point. There, the Sixth Circuit held that mortgage foreclosures through power of sale agreements are not powers of a governmental nature. Indeed, the court noted that Congress transferred FNMA to private control in 1968 specifically because its acts were thought to be non-governmental in nature. The court acknowledged the fact that FNMA was acting under the authority of a Michigan statute, yet even this was not a sufficient nexus to make FNMA's actions those of Michigan.
Appellee's response is two-fold. First, she mentions that, as in Barrera, the mortgage in Northrip was wholly the creation of the mortgagor and the investor. That attempted distinction fails utterly, as Northrip involved an FNMA mortgage. Secondly, appellee simply admits that she does not approve of the case, and much prefers FNMA v. Lefkowitz, 390 F.Supp. 1364 (S.D.N.Y.1975). In Lefkowitz, the court declared FNMA a "federal instrumentality." The problem for appellee is that the question before the New York District Court was different from the instant one. In Lefkowitz, the question involved the unconstitutionality of a New York state law as it applied to FNMA. The court held that for the purposes of the supremacy clause, FNMA is a federal instrumentality. In other words, the court merely held that FNMA was analogous to a national bank. A national bank's status as a federal instrumentality may exempt it from certain state laws and regulations, but as against private citizens, its actions are not the actions of the federal government.
Appellee also relies on McQueen v. Druker, 317 F.Supp. 1122 (D.Mass.1970), aff'd, 438 F.2d 781 (1 Cir. 1971). There the court held that notice and hearing must be given before evicting tenants from federally regulated and subsidized rental projects, which are owned and operated by private individuals. The court found that the "governmental function," admittedly not as well-established as some, was the state's specific priority objective of providing for urban renewal displacees and the general goal of providing good quality housing at lower rents. The court acknowledged that governmental regulation and financial subsidy, even together, were not enough. But when a specific governmental function is carried out by heavily subsidized private firms whose freedom of decision-making has, by contract and the reserved governmental power of continuing oversight, been circumscribed substantially more than that generally accorded an independent contractor, the coloration of state action fairly attaches. Thus, the court acknowledges housing as a governmental function. Perhaps the main distinguishing factor is that the landlord in McQueen was infringing on a first amendment right: freedom of speech. He was evicting tenants for exercising their first amendment rights with regard to an alleged "rebellion" in the housing project.
In the instant case, FNMA and Cameron-Brown Co. invoke foreclosure by private power, a traditional creditor's remedy under state law. This Circuit recognized the contractual nature of the power of sale provision and the traditional nature of the remedy when we upheld the Texas statute, Article 3810, Tex.Rev.Civ.Stat., setting minimum procedural requirements for private powers of sale. Barrera v. Security Building and Investment Corp., supra. The power of sale provision in the instant contract is part of the parties' contractual undertaking and is not grounded on either federal or state statutes. Ga.Code Ann. § 67-1506 does govern the exercise of private powers of sale, but it does not require the inclusion of nonjudicial foreclosure in a deed to secure debt or a mortgage. The statute does not come into operation unless there already exists a power of sale in a deed to secure debt, mortgage, or other lien contract. See Law v. U. S. Dept. of Agriculture, 366 F.Supp. 1233 (N.D.Ga.1973).
HUD retains only a limited role in a mortgagee's decision to exercise the private power of sale. The HUD mortgage form does authorize foreclosure by power of sale as well as by judicial foreclosure, but HUD does not prescribe the method of foreclosure and does not in any manner regulate...
To continue reading
Request your trial-
Castrillo v. American Home Mortg. Servicing, Inc., Civil Action No.: 09-4369.
...factors leads us to conclude that no private cause of action can be implied from the National Housing Act."); Roberts v. Cameron-Brown Co., 556 F.2d 356, 361 (5th Cir.1977) ("No evidence exists demonstrating that Congress intended to create a private cause of action under the National Housi......
-
Guckenberger v. Boston University, Civil Action No. 96-11426-PBS.
...to determine whether there is a private right of action to sue under administrative enactments as well. See, e.g., Roberts v. Cameron-Brown, 556 F.2d 356, 360 (5th Cir. 1977) (applying the Cort analysis to decide whether an implied private cause of action exists to enforce the provisions of......
-
Angleton v. Pierce, Civ. A. No. 82-2163.
...Inc., 409 F.Supp. 1332, 1349 (D.Md. 1976) (mortgage insurance under 12 U.S.C. §§ 1715l(d)(3), 1715z-1(e)). Cf. Roberts v. Cameron-Brown Co., 556 F.2d 356, 362 (5th Cir.1977) (HUD insured mortgage pursuant to 12 U.S.C. § 1715z; tenants held not to be third-party beneficiaries of any implied ......
-
U.S. Dept. of Labor v. Kast Metals Corp., 83-4311
...785, 789, 101 S.Ct. 1468, 1471, 67 L.Ed.2d 685 (1981) (per curiam) (SSA Claims Manual without legal effect); Roberts v. Cameron-Brown Co., 556 F.2d 356, 362 & n. 11 (5th Cir.1977) (HUD handbook not intended to have force of law); Powderly v. Schweiker, 704 F.2d 1092, 1098 (9th Cir.1983) (SS......
-
Chapter 8-4 FHA Home Loan Defenses
...rejected . . . attempts by borrowers to bring claims under the [NHA] and its implementing regulations."); Roberts v. Cameron-Brown Co., 556 F.2d 356, 360, 361 (5th Cir. 1977) (HUD regulations "deal only with the relations between the mortgagee and the government, and give the mortgagor no c......
-
Chapter 8-4 FHA Home Loan Defenses
...rejected . . . attempts by borrowers to bring claims under the [NHA] and its implementing regulations."); Roberts v. Cameron-Brown Co., 556 F.2d 356, 360, 361 (5th Cir. 1977) (HUD regulations "deal only with the relations between the mortgagee and the government, and give the mortgagor no c......