621 F.2d 1037 (9th Cir. 1980), 77-2078, Russell v. Landrieu

Docket Nº:77-2078.
Citation:621 F.2d 1037
Party Name:Debbie RUSSELL, Ernestine Reyes, Dorothy Kirby, Earline Robinson, Gloria Pullman, Helen Hernandez, as Individuals and on behalf of all other tenants similarly situated, Plaintiffs-Appellants, v. Moon LANDRIEU, [*] in his capacity as Secretary of Housing and Urban Development, Roland E. Camfield, Jr., Individually and in his capacity as Director, Lo
Case Date:July 03, 1980
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1037

621 F.2d 1037 (9th Cir. 1980)

Debbie RUSSELL, Ernestine Reyes, Dorothy Kirby, Earline

Robinson, Gloria Pullman, Helen Hernandez, as

Individuals and on behalf of all other

tenants similarly situated,

Plaintiffs-Appellants,

v.

Moon LANDRIEU, [*] in his capacity as Secretary of

Housing and Urban Development, Roland E. Camfield, Jr.,

Individually and in his capacity as Director, Los Angeles,

Area Office, Department of Housing and Urban Development,

and the City of Port Hueneme, Defendants-Appellees.

No. 77-2078.

United States Court of Appeals, Ninth Circuit

July 3, 1980

Page 1038

John Calmore, Berkeley, Cal., for plaintiffs-appellants.

Sally Warner Watts, Los Angeles, Cal., for defendants-appellees; Eva S. Halbreich, Asst. U. S. Atty., Andrea Sheridan Ordin, U. S. Atty., Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Central District of Californa.

Before TRASK, KENNEDY, and ANDERSON, Circuit Judges.

KENNEDY, Circuit Judge:

The principal issue in this appeal is whether housing project tenants continue to maintain a statutory entitlement to operation of a project for low-income renters notwithstanding foreclosure on the property by the Department of Housing and Urban Development (HUD) and the conveyance to a later purchaser. In dismissing the action and denying plaintiffs' leave to file an amended complaint, the district court ruled that the passage of title from HUD before commencement of this action precluded any relief. We affirm in part and reverse in part.

The Seaview Apartments is a 90-unit housing complex located in Port Hueneme, California. It was constructed in 1972 under the nonprofit sponsorship of the Communication Workers of America (CWA). The mortgage was insured by HUD under section 236 of the National Housing Act, 12 U.S.C. § 1715z-1. In 1975 the CWA defaulted on the mortgage payments and the mortgage was assigned to HUD under section 207(g) of the National Housing Act, as

Page 1039

incorporated by section 238(a) (2), 12 U.S.C. § 1715z-3(a)(2). HUD acquired the project under foreclosure proceedings on February 5, 1975.

On June 30, 1976, HUD sold the Seaview Apartments to the City of Port Hueneme, California, for $1,050,000. It took back a 40-year purchase money mortgage of $976,000 at six percent interest. HUD granted the City a twelve-month deferment on interest and principal payments.

The mortgage from the city to HUD incorporated a regulatory agreement between those parties under which HUD authorized an immediate rent increase and restricted future increases to those warranted by actual operating costs. After purchasing the project, the City raised rents by 25 percent, the maximum increase authorized by HUD.

Tenants of the Seaview Apartments brought suit naming as defendants the Secretary of HUD, the Director of the Los Angeles Area Office of HUD, and the City of Port Hueneme. The theory of the suit was that the Secretary violated the National Housing Act and the due process clause of the fifth amendment by selling the Seaview Apartments to the City and permitting the City to raise rents without giving tenants prior notice and an opportunity to be heard. The tenants asked that the sale and the proposed rent increases be enjoined. Prior to HUD's responsive pleading, plaintiffs filed a motion for leave to file an amended complaint which alleged further claims for relief. The motion was denied. The district court also granted defendants' motion to dismiss the action with prejudice for failure to state a claim "because at the time the action was filed, there was no title interest in the real property in HUD." Plaintiffs brought this appeal.

Standard of Review

An action should not be dismissed for failure to state a claim under Fed.R.Civ.P. 12(b)(6) unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101, 2 L.Ed.2d 80 (1957). We therefore read the complaint in the light most favorable to plaintiffs. McKinney v. DeBord, 507 F.2d 501 (9th Cir. 1974); De Witt v. Pail, 366 F.2d 682 (9th Cir. 1966); 5 C. Wright & A. Miller, Federal Practice & Procedure, § 1357 at 604 (1969).

Standing

The Secretary initially claims that the plaintiffs lack standing to bring the action since their tenancies began after HUD acquired the project in foreclosure. Since the plaintiffs were not tenants when the project was subsidized, the Secretary argues, they...

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