Panola Land Buyers Ass'n v. Shuman, s. 84-7136

• Citation: 762 F.2d 1550
• Decision Date: 12 June 1985
• Docket Number: Nos. 84-7136,84-7225,s. 84-7136
• Parties: PANOLA LAND BUYERS ASSOCIATION, Plaintiffs-Appellants, v. Charles W. SHUMAN, Administrator, Farmer's Home Administration, United States Department of Agriculture, in his official capacity; Dale N. Richey, State Director, Farmer's Home Administration, United States Department of Agriculture, in his official capacity, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1550

762 F.2d 1550

2 Fed.R.Serv.3d 546

PANOLA LAND BUYERS ASSOCIATION, Plaintiffs-Appellants, v. Charles W. SHUMAN, Administrator, Farmer's Home Administration, United States Department of Agriculture, in his official capacity; Dale N. Richey, State Director Farmer's Home Administration, United States Department of Agriculture, in his official capacity, Defendants-Appellees.

Nos. 84-7136, 84-7225.

United States Court of Appeals Eleventh Circuit.

June 12, 1985.

Richard J. Ebbinghouse, Birmingham, Ala., Greg Bass, Legal Services Corp. of Alabama, Selma Regional Office, Demopolis, Ala., Abigail Turner, Legal Services Corp. of Alabama, Mobile, Ala., for plaintiffs-appellants.

John S. Koppel, Robert S. Greenspan, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for defendants-appellees in both cases.

Frank W. Donaldson, U.S. Atty., Frank S. James, III, Asst. U.S. Atty., Birmingham, Ala., for defendants-appellees in No. 84-7225.

Appeals from the United States District Court for the Northern District of Alabama.

Before HENDERSON and HATCHETT, Circuit Judges, and ALLGOOD ^*, District Judge.

HATCHETT, Circuit Judge:

In this appeal we review the district court's rulings on jurisdiction, sovereign immunity, exhaustion of administrative remedies, and the granting of summary judgment for the Farmers Home Administration and against a loan applicant. We remand for further proceedings.

FACTS

Section 515 of the National Housing Act of 1949, 42 U.S.C.A. Sec. 1485(a) (1978, Supp.1984), authorizes the Secretary of Agriculture to "make loans to private non-profit organizations to provide rental or cooperative housing, for elderly or handicap persons or families of low or moderate income or other persons and families of low income in rural areas." The Rural Cooperative Housing (RCH) and Rural Rental Housing (RRH) loan programs are two such programs. It is the provisions governing eligibility for the RCH loans which concern us in this case.

An applicant for an RCH loan must possess the "financial capacity to incur and carry out the undertaking and obligations required for the loan." 7 C.F.R. Sec. 1944.211(a)(6) (1984). Further, a housing project which is to receive an RCH loan must be in a project location which promotes

an equal opportunity for the inclusion of all groups regardless of race, color, religion, sex, national origin, age, marital status, or physical or mental handicap ... thereby opening up nonsegregated housing opportunities for minorities and helping overcome the effects of any past discrimination. To the extent possible, the location of an RRH project [also an RCH project] should provide housing opportunities for minorities outside areas of minority concentration and areas which are already substantially racially mixed.

7 C.F.R. Sec. 1944.215(q)(2) (1984) (emphasis added). Further, "housing projects must be located in residential areas as part of established rural communities where essential public facilities ... and services ... are readily available in close and convenient proximity to the site." 7 C.F.R. Sec. 1944.215(q)(3) (1984). The Farmers Home Administration (FmHA) administers the loan program. To become eligible for an RCH loan, a "preapplication is to be filed with the District Director of FmHA to determine the applicant's eligibility and feasibility and priority for available funds." 7 C.F.R. Sec. 1944.231 (1984). If the district In 1966 in Sumter County, Alabama, forty black families of former sharecroppers formed the Panola Land Buying Association (Panola), the appellant. The families formed the association following their evictions resulting from a dispute involving the correct share of deferred acreage payments from the Department of Agriculture. No longer able to live on the land which they had worked, Panola, in 1967, redeemed a 900-acre parcel of land in a foreclosure sale. In 1970, Panola contacted FmHA and discussed the possibility of obtaining an RCH loan to build 50 houses, the first phase of constructing 200 units. FmHA determined that the available water and sewage treatment for the Panola site (Wendy Hills) was inadequate. By 1978, adequate water and sewage treatment became available to the site, partly by FmHA financing, and Panola applied for funding for the construction of 100 units on the site. FmHA provided an RCH loan for forty units with section 8 subsidies, and Panola constructed the units.

director determines that a preapplication is eligible and feasible, the application is then evaluated by the district director in accordance with a priority processing system which establishes preference in selecting and processing loan requests within the annual allocations. 7 C.F.R. Sec. 1944.231(b)(3) (1984).

On July 27, 1981, the Panola Land Buying Association Housing Development Corporation (Panola) submitted a preapplication to the FmHA District Director, Obery Lawson (Lawson), on July 27, 1981, for an RCH loan and rental assistance for the construction of an additional sixty units. On November 24, 1981, Lawson notified Panola of the denial of its preapplication stating that "there will be no rental assistance available for new construction." The written notice, form AD 622, implied that if HDC reapplied during the March, 1982, review period, then its preapplication would be considered "feasible" if the application did not require "rental assistance deep subsidy." On December 1, 1981, a Panola official telephoned the district director's office and asked the basis for the statement that rental assistance funds were not available. On December 2, 1981, Director Lawson amended the November 24, 1981, form AD 622 to include additional reasons for denial of the preapplication, including: (1) the units would concentrate too many low income and black persons in a majority black community and (2) the site was not close enough to "an established rural community." The denial of the preapplication meant that the preapplication could not be ranked within the priority processing system. This was true even though a FmHA official had ranked the Panola preapplication at the maximum level. Further, applications which were ranked in October, 1981, but not funded, could be updated for reconsideration in April, 1982, without being ranked a second time. On December 2, 1981, Panola submitted the preapplication for a second time to take advantage of this ranking procedure. Director Lawson returned the preapplication without evaluation indicating that the site problems "must be cleared" before the preapplication could be considered.

Panola appealed the denial of the preapplication to the state FmHA director. At an administrative hearing in November, 1982, Panola presented evidence showing that the application of the minority concentration regulations adversely impacted on poor blacks in the majority black county of Sumter, and showing that the overwhelming need for decent housing met the need-exception in the regulations. The evidence revealed that 84 percent of the housing in the county was substandard, and almost all the substandard houses were occupied by blacks. ¹

Panola also offered evidence that the Wendy Hills project site was adjacent to On May 27, 1984, Panola filed suit in United States District Court alleging in four causes of action racial discrimination in the denial of the preapplication. ³ Panola prayed for a declaratory judgment that FmHA violated the various laws alleged and that FmHA should give greater weight to the housing need of low and moderate income persons in Sumter County in evaluating the eligibility of applications for funding. Panola also prayed for a permanent injunction requiring that its application for section 515 rural housing funds be considered on a priority basis, and requiring that rental assistance funds be made available to tenants occupying the project. Panola also requested attorney's fees and costs.

                essential public services such as schools, shopping, medical services, and a health clinic.  The hearing officer, however, upheld the district director's denial of the preapplication because (1) the project would not be feasible without rental assistance, and (2) the site was not located in a residential area in an "established rural community where essential public facilities and services are readily available in close and convenient proximity to the site." 2   Panola appealed to the Administrator of FmHA arguing that the site had previously been approved, that the hearing officer was biased, and that racial discrimination was part of the administrative decision-making as indicated by thinly veiled racist statements.  The Administrator upheld the intermediate administrative decision on the ground that the project site was not located in a residential area as part of an established rural community
                

Appellees filed motions to dismiss on the pleadings or alternatively, for summary judgment, contending that Panola did not have standing, that it failed to state a statutory or constitutional claim, and that FmHA denied the preapplication for legitimate, nondiscriminatory reasons. FmHA also moved for a protective order against Panola's request for production of documents and interrogatories pending a ruling on FmHA's motion for summary judgment or motion to dismiss. The United States Magistrate allowed discovery to proceed on the issue of the availability of rental assistance funds, but suspended all other discovery pending the district court's determination of the motion to dismiss or motion for summary judgment. The district court upheld the magistrate's order and granted the motion for summary judgment, holding that

(1) plaintiff has failed to state a constitutional claim upon which this court's jurisdiction can be invoked;

(2) under the circumstances of this case, defendants' actions are protected by sovereign immunity;

(3) plaintiff has failed to exhaust his adequate administrative remedies;

(4) plaintiff has made absolutely no showing that ...