Berks Products Corp. v. Landreau, Civ. A. No. 80-3214.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Writing for the CourtA. H. Wilcox, Philadelphia, Pa., for Banco Mortgage Co
Citation523 F. Supp. 304
PartiesBERKS PRODUCTS CORPORATION, Chelten Manufacturing Company, D.B. Diefenderfer and Brother, Inc., Eastern Energy Savers, Inc. (formerly known as Eastern Industrial Insulation Company, Inc.), Esterly Contracting Company, Inc., D.S. Gitto Lathing/Plastering/Stucco Contractors, Harvey B. Good, Randy Kurtz Landscaping, Kurtz Brothers Concrete, Inc., Kurtz Precast Corporation, Manpower Inc. of Reading, Modernfold of Reading, Inc., J.C. McGinn Construction Company, Peerless Products, Inc., Scheler and Shifflet, D.E. Stoltzfus Construction Company, Thoro System Waterproofing, Inc., and Windsor Service, Inc. v. Moon LANDREAU, Secretary Department of Housing and Urban Development, Banco Mortgage Company, Donald Barsky, Melvin B. Miller, Resab and Vantage/Barsky, a Joint Venture, Paul Restall, Revere House Associates — Phase I, Title Services, Inc., and Vantage Development Corporation.
Decision Date24 September 1981
Docket NumberCiv. A. No. 80-3214.

523 F. Supp. 304

BERKS PRODUCTS CORPORATION, Chelten Manufacturing Company, D.B. Diefenderfer and Brother, Inc., Eastern Energy Savers, Inc. (formerly known as Eastern Industrial Insulation Company, Inc.), Esterly Contracting Company, Inc., D.S. Gitto Lathing/Plastering/Stucco Contractors, Harvey B. Good, Randy Kurtz Landscaping, Kurtz Brothers Concrete, Inc., Kurtz Precast Corporation, Manpower Inc. of Reading, Modernfold of Reading, Inc., J.C. McGinn Construction Company, Peerless Products, Inc., Scheler and Shifflet, D.E. Stoltzfus Construction Company, Thoro System Waterproofing, Inc., and Windsor Service, Inc.
v.
Moon LANDREAU, Secretary Department of Housing and Urban Development, Banco Mortgage Company, Donald Barsky, Melvin B. Miller, Resab and Vantage/Barsky, a Joint Venture, Paul Restall, Revere House Associates — Phase I, Title Services, Inc., and Vantage Development Corporation.

Civ. A. No. 80-3214.

United States District Court, E. D. Pennsylvania.

September 24, 1981.


523 F. Supp. 305
COPYRIGHT MATERIAL OMITTED
523 F. Supp. 306
Carl S. Tannenbaum, Philadelphia, Pa., for plaintiffs

Miles H. Shore, Philadelphia, Pa., for Paul Restall.

Gary Tilles, Asst. U.S. Atty., Philadelphia, Pa., for Moon Landreau, Secretary of Dept. of Housing and Urban Development.

Gerald P. Sigal, Reading, Pa., Jerome Lipman, Philadelphia, Pa., for Donald Barsky, Vantage/Barsky, Revere House Associates — Phase I and Vantage Development Corp.

Neil L. Albert, Lancaster, Pa., for Title Services, Inc.

A. H. Wilcox, Philadelphia, Pa., for Banco Mortgage Co.

MEMORANDUM

CAHN, District Judge.

This action involves claims by subcontractors for payment for labor and materials supplied during the construction of a multi-family apartment complex in Berks County, Pennsylvania, which was developed as a low and moderate income housing project under § 221(d)(4) of the National Housing Act, 12 U.S.C. § 1715l(d)(4). Before me are motions to dismiss on behalf of certain defendants including: (i) the Secretary of the Department of Housing and Urban Development

523 F. Supp. 307
("HUD"), (ii) Donald Barsky, Vantage Development Corporation ("Vantage"), Revere House Associates-Phase I ("Revere House"), and the Joint Venture ("Joint Venture") composed of Resab, Inc. and Vantage/Barsky, and (iii) Paul Restall, who plaintiffs allege is the president and sole shareholder of Resab, Inc

For the reasons stated herein, I will deny HUD's motion to dismiss under Fed.R. Civ.P. 12(b)(1) for claims arising under the National Housing Act for which jurisdiction is alleged under 28 U.S.C. § 1331 and § 1337, but will grant its motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to allege facts justifying relief under the National Housing Act. I will also reject plaintiffs' argument that their contract claims arise under the National Housing Act or federal common law. I hold, however, that plaintiffs have stated a claim against HUD in contract, which claim is governed by state law. Because plaintiffs' amended complaint eliminated the Tucker Act, 28 U.S.C. § 1346, as a basis for jurisdiction, I will dismiss plaintiffs' contract claims against HUD. Upon an appropriate motion, however, I will grant plaintiffs leave to reinstate their contract claims against HUD provided they amend their complaint to assert jurisdiction under § 1346 for claims of less than $10,000.

I will grant the private defendants' motions to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1). Lack of a substantial federal claim makes pendent jurisdiction inappropriate here. Finally, although defendants Banco Mortgage Company and Title Services, Inc. and Melvin Miller have not moved to dismiss plaintiffs' claim, I will dismiss plaintiffs' claim against these three defendants sua sponte for lack of subject matter jurisdiction, there being no federal question or complete diversity of citizenship in this case.

The dismissal under Fed.R.Civ.P. 12(b)(6) of plaintiffs' claims against HUD arising under the National Housing Act will be with prejudice. All other dismissals will be without prejudice.

I. THE PARTIES

Plaintiffs are a group of eighteen subcontractors who claim that they have not been paid for labor and materials they allegedly supplied to the project. Plaintiffs are corporations and individuals that appear to be citizens of the Commonwealth of Pennsylvania.

Defendant Revere House owns the project. Revere House is a limited partnership with two general partners, Vantage and Barsky, and twenty-one limited partners. Defendant Melvin Miller is the escrow agent of the subscription funds of the limited partners of Revere House. Defendant Barsky is the president and chief operating officer of Vantage. Barsky and Melvin Miller are both citizens of Pennsylvania. Vantage is a corporation organized under the laws of Delaware, with its principal place of business in Pennsylvania. The amended complaint does not allege the citizenship of the limited partners of Revere House.

The prime contractor of the project was a joint venture composed of Resab, Inc., now insolvent, and defendants Vantage and Barsky. Paul Restall is alleged to be the president and sole shareholder of Resab, Inc. Banco Mortgage Company, an Iowa corporation with its principal place of business in Minnesota, is the construction lender and mortgagee. Defendant Title Services, Inc. ("Title") was the disbursing agent of the construction loan proceeds. The complaint does not allege Title's state of incorporation, but states that its principal place of business is in Minnesota. Defendant HUD insured the mortgage under the National Housing Act. In this connection HUD investigated the economic viability of the project. Many of the agreements between parties other than plaintiffs hereto were in the form mandated by the Act and the rules and regulations promulgated under it. 12 U.S.C. § 1715l.

II. FACTS

I assume all facts pleaded by plaintiffs to be true for the purposes of these motions.

523 F. Supp. 308

The defendants contemplated that the project would be financed by a mortgage insured by HUD under § 221(d) of the National Housing Act. The Joint Venture was formed to be the general contractor in order to provide the identity of interest between owner and contractor which allowed the parties to forego posting a surety bond for the completion of the project. The various defendants executed a number of agreements among themselves, many in forms prescribed by HUD, including a construction contract between Revere House and the Joint Venture; a building loan agreement setting forth terms and conditions for the mortgagee's advancement of construction funds; a regulatory agreement for multifamily housing projects between Revere House and HUD; a completion assurance agreement approved by HUD between Revere House, the Joint Venture and Banco; and a construction loan disbursement agreement between Revere House, the Joint Venture, Banco and Title.

During the course of the construction of the project HUD was required to monitor the construction and the financial arrangements pursuant to its obligations under the Act and regulations. HUD was required to approve progress payments under the building loan agreement.

When Resab, Inc. began to fail in its obligations, Revere House became the contractor. HUD had the power under 24 C.F.R. § 221.513 to withhold final endorsement of the building loan to secure payment to subcontractors, but did not exercise this power. Plaintiffs allege that HUD failed to do this despite the fact that it knew there were outstanding claims by plaintiff subcontractors. It is for this reason that HUD required the defendants to set up an escrow account pursuant to the escrow agreement concerning completion assurance funds. The agreement gave HUD power to control the escrowed funds. Plaintiffs allege that the funds required by the escrow agreement were never set up. Plaintiffs do not allege that HUD now has or controls any such escrow funds.

III. DISCUSSION

The complaint consists of twenty-nine counts. The first fourteen counts are against HUD alone or together with other defendants and charge violations of the National Housing Act, breach of contract, breach of duties under the National Housing Act and breach of fiduciary duties. All but count three of the first fourteen counts refer to a breach of a fiduciary duty created either by the National Housing Act or by the contract. Only count three speaks directly of breach of contract. Various other counts charge the private defendants with breach of contract and unjust enrichment. Plaintiffs seek equitable and monetary relief for all of the defendants.

Plaintiffs claim subject matter jurisdiction exists for their claims against HUD under 12 U.S.C. § 1702, 28 U.S.C. § 1331(a), and 28 U.S.C. § 1337.1 Although plaintiffs pleaded Tucker Act jurisdiction over breach of contract claims against HUD in their original complaint, the amended complaint eliminated allegations of jurisdiction under 28 U.S.C. § 1346. Plaintiffs plead jurisdiction on the claims against the private defendants under §§ 1331, 1337 and would have this court invoke pendent jurisdiction to consider those claims in the event the court decides they do not arise under National Housing Act or federal common law.

A. PLAINTIFFS' CLAIMS AGAINST HUD DISMISSED

1. NO JURISDICTION UNDER NATIONAL HOUSING ACT

The National Housing Act carries no independent grant of subject matter jurisdiction.

523 F. Supp. 309
12 U.S.C. § 1702 states, in relevant part
The Secretary of HUD shall, in carrying out the provisions of ... the National Housing Act, be authorized, in his official capacity, to sue and be sued in any court of competent jurisdiction, State or Federal.

A number of courts have held that this "sue and be sued" clause is not an independent jurisdictional grant. Bor-Son Building Corp. v. Heller, 572 F.2d 174 (8th Cir. 1978); Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir. 1974); ...

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  • Crown Cork & Seal v. TEAMSTERS PENSION FUND, ETC., Civ. A. No. 80-4230.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 13, 1982
    ...(D.Minn.1981) (§ 1331 jurisdiction exists to decide employer suit for mistaken contributions); Cf. Berks Products Corp. v. Landreau, 523 F.Supp. 304, 309 (E.D.Pa.1981) (1331 jurisdiction exists to decide whether The National Housing Act gives rise to a duty by HUD to subcontractors).549 F. ......
  • Raquel v. Education Management Corp., Civil A. No. 95-1620.
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • November 25, 1996
    ...is not based upon diversity of citizenship and because there is no federal question jurisdiction. Berks Products Corp. v. Landreau, 523 F.Supp. 304, 313 Parenthetically, the court recognizes that Geffen is a California corporation; however, the Raquel action against Geffen is based upon an ......
  • Kunkler v. Fort Lauderdale Housing Authority, No. 90-6814-CIV.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
    • May 15, 1991
    ...not require the pivotal interpretation of federal law necessary to confer jurisdiction. See, e.g., Berks Products Corp. v. Landreau, 523 F.Supp. 304 (E.D.Pa.1981); Lindy v. Lynn, 501 F.2d 1367 (3rd Cir.1974); Jemo Associates Inc. v. Greene Metropolitan Housing Authority, 523 F.Supp. 186 (S.......
  • TAYLOR WOODROW BLITMAN, ETC. v. SOUTHFIELD, ETC., Civ. A. No. 75-3895-N.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • February 22, 1982
    ...such a clear intent to benefit the third party as there was in Holbrook and International Paper. See Berks Products Corp. v. Landreau, 523 F.Supp. 304, 310 (E.D.Pa.1981) (The court held in a suit similar to this case, that nothing in the National Housing Act or its Regulations indicated any......
  • Request a trial to view additional results
7 cases
  • Crown Cork & Seal v. TEAMSTERS PENSION FUND, ETC., Civ. A. No. 80-4230.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 13, 1982
    ...(D.Minn.1981) (§ 1331 jurisdiction exists to decide employer suit for mistaken contributions); Cf. Berks Products Corp. v. Landreau, 523 F.Supp. 304, 309 (E.D.Pa.1981) (1331 jurisdiction exists to decide whether The National Housing Act gives rise to a duty by HUD to subcontractors).549 F. ......
  • Raquel v. Education Management Corp., Civil A. No. 95-1620.
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
    • November 25, 1996
    ...is not based upon diversity of citizenship and because there is no federal question jurisdiction. Berks Products Corp. v. Landreau, 523 F.Supp. 304, 313 Parenthetically, the court recognizes that Geffen is a California corporation; however, the Raquel action against Geffen is based upon an ......
  • Kunkler v. Fort Lauderdale Housing Authority, No. 90-6814-CIV.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
    • May 15, 1991
    ...not require the pivotal interpretation of federal law necessary to confer jurisdiction. See, e.g., Berks Products Corp. v. Landreau, 523 F.Supp. 304 (E.D.Pa.1981); Lindy v. Lynn, 501 F.2d 1367 (3rd Cir.1974); Jemo Associates Inc. v. Greene Metropolitan Housing Authority, 523 F.Supp. 186 (S.......
  • TAYLOR WOODROW BLITMAN, ETC. v. SOUTHFIELD, ETC., Civ. A. No. 75-3895-N.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • February 22, 1982
    ...such a clear intent to benefit the third party as there was in Holbrook and International Paper. See Berks Products Corp. v. Landreau, 523 F.Supp. 304, 310 (E.D.Pa.1981) (The court held in a suit similar to this case, that nothing in the National Housing Act or its Regulations indicated any......
  • Request a trial to view additional results

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