Carlyle Gardens Co. v. DEL. STATE HOUSING AUTH.

• Decision Date: 28 April 1987
• Docket Number: Civ. A. No. 85-11-JLL.
• Citation: 659 F. Supp. 1300
• Parties: CARLYLE GARDENS COMPANY, Plaintiff, v. DELAWARE STATE HOUSING AUTHORITY and the Secretary of Housing and Urban Development, Defendants.
• Court: U.S. District Court — District of Delaware

659 F. Supp. 1300

CARLYLE GARDENS COMPANY, Plaintiff, v. DELAWARE STATE HOUSING AUTHORITY and the Secretary of Housing and Urban Development, Defendants.

Civ. A. No. 85-11-JLL.

United States District Court, D. Delaware.

April 28, 1987.

Nicholas H. Rodriguez and William W. Pepper of Schmittinger and Rodriguez, Dover, Del., and Joseph Burstein, Washington, D.C., for plaintiff.

Daniel M. Kristol and Wendie E. Cohen of Prickett, Jones, Elliott, Kristol and Schnee, Wilmington, Del., for defendant Delaware State Housing Authority.

William C. Carpenter, Jr., U.S. Atty., and Sue L. Robinson, Asst. U.S. Atty., Wilmington, Del., and Peter M. Campanella, Ann E. Harrison, and Sharon Marsha Matthews-Swain, U.S. Dept. of Housing and Urban Development, Region III, Philadelphia, Pa., for defendant Secretary of Housing and Urban Development.

LATCHUM, Senior District Judge.

I. INTRODUCTION

Plaintiff Carlyle Gardens Company ("plaintiff") originally filed this action in the Court of Chancery for the State of Delaware against defendant Delaware State Housing Authority ("DSHA") alleging that DSHA breached its Housing Assistance Payment Contract with the plaintiff by wrongfully reducing plaintiff's Section 8 housing assistance payments. (Docket Item "D.I." 1 at Exhibit "Ex." A.) DSHA removed the case to this Court and immediately moved to join the Secretary of Housing and Urban Development ("the Secretary") as a necessary party to this litigation. (D.I. 5.) While DSHA's motion was pending, the parties entered into a stipulation providing that DSHA would dismiss its motion in exchange for the plaintiff amending its complaint to join the Secretary as an additional defendant. (D.I. 9.) Pursuant to that agreement, the plaintiff amended its complaint alleging the same claim against DSHA in Count One, but adding a Count Two against the Secretary alleging that the Secretary directed DSHA to reduce the plaintiff's housing assistance payments in contravention of Section 8 of the United States Housing Act. (D.I. 10.)

Presently before the Court are the parties' cross motions for summary judgment. (D.I. 24; 31.) The plaintiff requests summary judgment against both defendants alleging that no genuine issue of material fact exists as to its entitlement to the housing assistance payments. (D.I. 26.) DSHA and the Secretary request that this Court deny plaintiff's motion and instead grant their cross motions for summary judgment or dismiss plaintiff's complaint on jurisdictional grounds.¹ (D.I. 27; 28.) For the reasons stated below, this Court holds that it lacks the subject matter jurisdiction to decide this case and will thus decline to decide all of the parties' motions for summary judgment and will transfer this case to the Claims Court.

II. FACTS PERTINENT TO THESE MOTIONS

Carlyle Gardens is a 112-unit housing complex located in Dover, Delaware. (D.I. 10 at ¶ 1.) Although the complex is currently in the process of being sold pursuant to a foreclosure order issued by this Court in a related case,² at all times relevant to this case, Carlyle Gardens was owned and operated by the plaintiff. (Id.)

Since its construction, Carlyle Gardens has participated in HUD's housing assistance program for existing housing under Section 8 of the United States Housing Act ("USHA"), 42 U.S.C. § 1437f (1978). (D.I. 10 at ¶ 1.) Under this program, the Secretary provides housing assistance to low and moderate income families.

The mechanics of the program are as follows. A Public Housing Authority ("PHA"), such as DSHA, applies to the Secretary for funds to supply its client population with rental assistance. The Secretary then executes an Annual Assistance Contract ("ACC") with the PHA obligating the Secretary to provide funds to the PHA so the PHA can provide housing assistance to the eligible families. 24 C.F.R. § 882.104(a) (1987). After receiving the Secretary's obligation, the PHA issues certificates of participation to the eligible families, who lease rental units directly from any owner they wish as long as the units meet with the Secretary's approval. Id. at 882.102; 882.103(a). Once a unit is chosen, the PHA enters into a Housing Assistance Payment ("HAP") contract with the owner of that unit obligating the PHA to provide housing assistance payments to the owner on behalf of the eligible tenants. Id. at 882.102.

The parties are in agreement as to the following facts. Carlyle Gardens was classified into a special subcategory of Section 8 housing known as existing recently completed housing. (D.I. 27 at 7; 29 at 5.) The existing recently completed housing program permitted PHAs to pay owners of eligible projects additional rents for units being leased by Section 8 eligible tenants where construction or substantial rehabilitation of the units was completed no more than six years prior to execution of the HAP contract between the PHA and the owner. (D.I. 27 at 5; 29 at 7.) The higher rent levels remained in effect beyond the six-year period until such time as the family which occupied the unit in the sixth year was either no longer in occupancy or no longer receiving Section 8 payments. (D.I. 27 at 5; 29 at 8.)

One of the parties' disagreements centers around the number of units still eligible for the higher rents. The Secretary maintains that during one of HUD's routine examinations of the plaintiff's file, he discovered that the plaintiff was receiving the higher "recently completed" rents for 12 units which were no longer eligible for those rents since the tenants had moved in after the six-year eligibility period expired. (D.I. 27 at 7.) The plaintiff insists that all of the units for which it was receiving the higher rents were occupied by tenants who moved in before the six-year period expired. (D.I. 26 at 5.)

The more significant disagreement between the parties centers on the question of whether DSHA was permitted to authorize higher rents at Carlyle Gardens without prior HUD approval. The plaintiff contends that any rent increases it received was pursuant to the "automatic rent adjustments" it was entitled to as a recently completed project. (D.I. 26 at 4.) The Secretary does not dispute that the plaintiff adhered to the regulations under Section 8 in obtaining the rent increases. (D.I. 35 at 28.) However, the Secretary maintains that the plaintiff was obligated under a separate HUD program in which the plaintiff also participated, the Mortgage Insurance Program, to seek prior HUD approval before obtaining any rent increases. (Id.) This the plaintiff failed to do.

Under the Mortgage Insurance Program, 12 U.S.C. § 1707-1715 (1980), the Secretary is authorized to insure mortgages on multi-family rental housing projects for low and moderate income families. The owner of the project obtains the mortgage from a lending institution with the understanding that the Secretary will satisfy that mortgage obligation in the event the owner defaults. This insulates the lending institution from any financial risk in lending the project money and thus enables projects such as Carlyle Gardens to obtain loans where they otherwise could not have. In consideration of the mortgage insurance, the owner executes a regulatory agreement which governs the operation of the project.

The Secretary insured the mortgage and note covering the Carlyle Gardens project. (D.I. 27 at A-6.) Pursuant to the regulatory agreement entered into by the Secretary and the plaintiff, the Secretary was authorized to set the rents charged by the plaintiff and require that the plaintiff submit all proposed rent increases to him for approval. (Id.)

Thus the Secretary's argument basically is that the plaintiff complied with its obligations under the Section 8 housing assistance program but failed to comply with its contractual duty under the mortgage insurance program to get prior HUD approval for any rent increases. In response, the plaintiff maintains that the provision of the regulatory agreement requiring prior HUD approval on rent increases was repealed by the Secretary in 48 Fed.Reg. 16,670 (1983) (to be codified at 24 C.F.R. pts. 207, 220, 221 and 236) (April 19, 1983). (D.I. 35 at 21.) The Secretary maintains that this repeal was not self-executing and that each project must apply to the Secretary for a rescission of the requirement in its regulatory agreement that HUD approve all rent increases. (D.I. 35 at 16.)

III. ANALYSIS

Because this Court can render a decision on the merits only if it has proper jurisdiction, the Court must first consider two jurisdictional arguments advanced by the Secretary. First, the Secretary contends that the plaintiff's claim against him ("federal claim") is in reality a claim against the United States and is thus barred by the doctrine of sovereign immunity. (D.I. 27 at 9-10.) Second, the Secretary claims that if a waiver of that immunity does exist with regard to the plaintiff's federal claim, it can be found only in the Tucker Act, 28 U.S.C. §§ 1346, 1491 (1973 & 1976), which vests exclusive jurisdiction for suits of this nature in the Claims Court. (Id. at 10-13.)

The plaintiff offers the same argument in response to both of the Secretary's contentions. The plaintiff insists that its federal claim is against the Secretary, not the United States, and thus is neither barred by the doctrine of sovereign immunity, nor within the exclusive jurisdiction of the Claims Court under the Tucker Act. (D.I. 29 at 11-14.)

For the reasons stated below the Court agrees with the Secretary's second argument and will therefore transfer the plaintiff's federal claim to the Claims Court pursuant to the Tucker Act.

A. Sovereign Immunity

It is fundamental that the United States, as sovereign, is immune from suit absent its expressed waiver of that immunity. United States v. Mitchell, 463 U.S. 206, 212, 103 S.Ct. 2961, 2965, 77 L.Ed.2d 580 (1983); United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769-70, 85 L.Ed. 1058 (1941). This defense is...