572 F.2d 174 (8th Cir. 1978), 77-1632, Bor-Son Bldg. Corp. v. Heller

Docket Nº:77-1632.
Citation:572 F.2d 174
Party Name:BOR-SON BUILDING CORPORATION, Appellant, v. Keith R. HELLER et al., Appellees.
Case Date:March 08, 1978
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 174

572 F.2d 174 (8th Cir. 1978)



Keith R. HELLER et al., Appellees.

No. 77-1632.

United States Court of Appeals, Eighth Circuit

March 8, 1978

Submitted Jan. 12, 1978.

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Russell C. Brown, St. Paul, Minn., argued and filed brief, for appellant.

Stephen G. Palmer, Asst. U.S. Atty., Minneapolis, Minn., argued for appellees; Andrew W. Danielson, U.S. Atty., Minneapolis, Minn., Richard J. Flando and John H. Mahoney, Dept. of Housing & Urban Development, Chicago, Ill., Green, Merrigan & Johnson, Minneapolis, Minn., on brief.

Before GIBSON, Chief Judge, VAN OOSTERHOUT, Senior Circuit Judge, and ROSS, Circuit Judge.

VAN OOSTERHOUT, Senior Circuit Judge.

This appeal from the United States District Court for the District of Minnesota presents a number of related jurisdictional issues under a number of federal statutes. The underlying dispute between the parties arose in connection with the "Cedar-Riverside New Town in Town" housing project in Minneapolis. The beleaguered history of this project is summarized in our recent opinion in Cedar-Riverside Environmental Defense Fund v. Hills, 560 F.2d 377 (8th Cir. 1977).

Appellant Bor-Son Building Corporation (Bor-Son) commenced this action on June 11, 1975, with the filing of a six-count complaint in the District Court of Hennepin County, Minnesota. Named as defendants were the Secretary of the United States Department of Housing and Urban Development (the Secretary) and various other parties, including five whom we collectively refer to as the Developer defendants. 1 All six counts of the complaint were factually related to the failure of the Developer defendants to make final payment of $250,000 2 as required by contracts under which Bor-Son had performed general construction work on Stage I of the Cedar-Riverside project. The complaint sought foreclosure on certain alleged mechanic's liens as well as money damages.

On September 5, 1975, within thirty days of service of process upon her, the Secretary removed the action to United States District Court. After removal Bor-Son sought leave to amend its complaint in order to state with more clarity its allegations against the Secretary. The proposed amendment contained six new claims, all related to the same deficiency in final payment

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as alleged in the original complaint. The Secretary resisted Bor-Son's request for leave to amend and moved to dismiss the original complaint as against her all on the ground that the court lacked subject matter jurisdiction over any of the claims against her.

By unreported opinion and order dated July 21, 1977, the district court determined that it lacked jurisdiction over any of the claims against the Secretary in either the original complaint or the proposed amendment. It accordingly denied Bor-Son's motion for leave to amend, granted the Secretary's motion to dismiss as against her, and, because these rulings resolved the facet of the case upon which the removal was predicated, ordered the cause as to the remaining defendants remanded to the Hennepin County District Court.

The court certified its denial of leave to amend and its dismissal as to the Secretary for discretionary interlocutory review under 28 U.S.C. § 1292(b), and we authorized the appeal by order dated August 16, 1977. 3 The district court stayed execution of its judgment pending disposition of the appeal.

For the reasons stated below, we affirm the rulings of the district court with respect to Counts I, II, VI, IX, X, XI and XII and reverse the rulings of the district court with respect to Counts III, IV, V, VII and VIII.


A brief recitation of some essentially undisputed facts and of the material allegations of the original complaint and proposed amendment is essential to our disposition of the appeal.

On or about February 23, 1972, Bor-Son entered into four contracts with Stage I Land Company under which Bor-Son agreed to perform certain general construction work on the Cedar-Riverside project. On February 24, 1972, pursuant to Sections 220 and 236 of the National Housing Act, as amended, 12 U.S.C. §§ 1715k & 1715z-1, mortgage notes covering construction loans were initially endorsed by the Secretary. By endorsement the Secretary became obligated to insure the mortgagees to the extent of approved disbursements in the event of default by the mortgagor.

Pursuant to the contracts, Bor-Son furnished labor, materials and equipment up to and including June 12, 1974. On June 25-26, 1974, Bor-Son filed mechanic's lien statements with respect to such work with the Hennepin County Recorder of Deeds.

The total cost of the work performed by Bor-Son under the contracts exceeded twenty-three million dollars. As of July 2, 1974, when Stage I final closing occurred, $1,618,717.66 remained owing to Bor-Son on this sum. At closing $1,368,717.66 was disbursed to Bor-Son. One week later an unsecured promissory note for the $250,000 balance, with maturity date of December 31, 1974, was delivered to Bor-Son by Cedar-Riverside Properties. Bor-Son delivered a written satisfaction of the mechanic's liens previously filed.

On July 9, 1974, the Secretary finally endorsed the four mortgage notes in the total amount of nearly twenty-eight million dollars. As a result of defaults on the mortgages, the Secretary has subsequently acquired the mortgages under assignment from the mortgagees.

Cedar-Riverside Properties is allegedly in default on the $250,000 promissory note. It is this sum which Bor-Son now seeks to recover.

As already noted, Bor-Son's original complaint was in six counts. Count I alleged that Bor-Son was induced to execute the above-mentioned lien satisfactions on the basis of fraudulent representations by defendants that Bor-Son would ultimately be paid in full. Count I sought expungement of the satisfactions from the record, reinstatement

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of the liens, an adjudication of the validity and priority of all liens and encumbrances on the property in question, and foreclosure. Count II sought monetary recovery on the underlying contracts, and Count III sought similar recovery in quantum meruit. Count IV sought impressment of an equitable lien on the property, together with foreclosure. Count V alleged that defendants had under their control "a source of funds for the payment of the project construction costs" and sought to have a constructive trust imposed thereon for the use and benefit of Bor-Son. Count VI sought recovery on the promissory note.

Count VII, the first count of the proposed amendment, alleged that, because Bor-Son's improvements were intended for the accomplishment of the goals of national housing policy, the Secretary had been unjustly enriched and was accordingly liable to Bor-Son in quasi-contract. Count VIII alleged that the Secretary was engaged in a joint venture with the Developer defendants and was accordingly jointly and severally liable with them for the venture's debts. Count IX sought reformation of the closing documents on the theory that either the defendants misrepresented or all parties were mistaken about the present or future ability of the Developer defendants to pay Bor-Son in full. Counts X, XI and XII sounded in tort, and no issue is raised concerning them.


We agree with the district court that it lacked jurisdiction over the claims against the Secretary asserted in Counts I, II, VI, IX, X, XI and XII, and we affirm the action of the district court with respect to each of them. With the exception of Counts II and VI, as to which there is no challenge on appeal, 4 the claims asserted in these counts sounded in tort, and the exclusive remedy for such claims is the one provided by the Federal Tort Claims Act.

It is fundamental that the United States, as sovereign, is immune from suit save as it consents to be sued and that the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit. United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941); Peterson v. United States, 428 F.2d 368, 369 (8th Cir. 1970). As to claims sounding in tort, the remedy under the Federal Tort Claims Act is exclusive, and this is expressly so despite the statutory authority of any federal agency "to sue and be sued." 28 U.S.C. §§ 1346(b) & 2679(a).

The district court properly concluded it lacked jurisdiction over tort claims asserted by Bor-Son because Bor-Son did not file a timely administrative claim as required by 28 U.S.C. § 2675(a). See also 28 U.S.C. § 2401(b) and Peterson v. United States, supra at 369. The court also properly observed that all claims for...

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