City of Philadelphia v. Page

• Decision Date: 07 September 1973
• Docket Number: Civ. A. No. 72-1706.
• Citation: 363 F. Supp. 148
• Parties: CITY OF PHILADELPHIA v. William PAGE and Gloria Page v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

363 F. Supp. 148

CITY OF PHILADELPHIA v. William PAGE and Gloria Page v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT et al.

Civ. A. No. 72-1706.

United States District Court, E. D. Pennsylvania.

September 7, 1973.

Martin Weinberg, City Sol., John S. Neeson Jr., Asst. City Sol., Philadelphia, Pa., for plaintiff.

George D. Gould, Community Legal Services, Inc., James A. Young, Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for defendants.

Gilbert J. Scutti, Asst. U. S. Atty., Robert E. J. Curran, U. S. Atty., Philadelphia, Pa., for additional defendants.

MEMORANDUM and ORDER

JOHN MORGAN DAVIS, District Judge.

This action was originally commenced in the Philadelphia Court of Common Pleas by the City of Philadelphia against William and Gloria Page. The relief sought is an order enjoining Defendants from violating the Philadelphia Health Code by allowing the continued presence of dangerous lead-based paint on their property. Defendants have joined the Department of Housing and Urban Development (HUD) and various officials thereof on a theory of liability over. The entire action is now before this Court following removal from the state court.

The Pages purchased a home from HUD on May 27, 1969. HUD also insured the mortgage under Section 221(d)(2) of the National Housing Act. On November 9, 1970, the Philadelphia Department of Public Health determined that the level of lead-based paint on the interior surfaces of the Pages' home exceeded the maximum percentage permitted under the Philadelphia Code. Following the Pages' failure to correct this hazardous condition, the instant action was started.

Now before the Court are two motions: the Third Party Defendants' Motion to Dismiss or Alternatively for Summary Judgment, and the Third Party Plaintiffs' (Defendants') Cross-Motion for Summary Judgment against the Third Party Defendants.

Initially it must be noted that the Third Party Complaint by the Pages against HUD sounds in contract rather than in tort. The theory advanced by the Pages is that HUD breached an implied warranty of habitability by selling a house containing numerous areas of lead paint in dangerous amounts. Therefore, they claim, the City of Philadelphia should require HUD, rather than the Pages, to undergo the expense of correcting the lead paint hazard.

The Pages allege two bases for Federal Court jurisdiction over this cause of action: (1) derivative jurisdiction over HUD by removal from the state court action in which HUD was liable under the "sue and be sued" clause in 12 U.S. C. § 1702; (2) direct jurisdiction over the United States of America under the Tucker Act, 28 U.S.C. § 1346(a)(2).

We will discuss the jurisdictional issues first and then consider the substantive claim of breach of implied warranty of habitability.

The last sentence of 12 U.S.C. § 1702 is:

"The Secretary of Housing and Urban Development shall . . . be authorized in his official capacity, to sue and be sued in any court of competent jurisdiction, State or Federal."

Title 28 U.S.C. § 1346(a)(2), otherwise known as the Tucker Act, provides that:

"(a) The district courts shall have original jurisdiction, concurrent with the Court of Claims, of:

* * * * * *

"(2) Any other civil action or claim against the United States, not exceeding $10,000 in amount, founded * * * upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort."

Concerning § 1702 above, the Supreme Court has said that a waiver of immunity must be strictly construed because immunity is disfavored. FHA Region No. 4 v. Burr, 309 U.S. 242, 60 S. Ct. 488, 84 L.Ed. 724 (1940). The courts have also decided that § 1702 is not limited by the Tucker Act and indeed, § 1702 authorizes suits for breach of contract in addition to any possible remedies under the Tucker Act. Merge v. Sharott, 341 F.2d 989 (3rd Cir. 1965); George H. Evans & Co. v. United States, 169 F.2d 500 (3rd Cir. 1948); Seven Oaks v. FHA, 171 F.2d 947 (4th Cir. 1948); Ferguson v. Union National Bank of Clarksburg, W. Va., 126 F.2d 753 (4th Cir. 1942); Travelers Indemnity Co. v. First Nat. Bank of N. J., 328 F.Supp. 208, 212 (D. of N.J. 1971); James T. Barnes & Co. v. Romney, 334 F.Supp. 657 (E.D. of Mich. 1971).

Therefore, this Court has jurisdiction under 12 U.S.C. § 1702.

Concerning the Tucker Act, the Government points to the distinction between contracts implied in fact, which are true contracts, and contracts implied in law, which are only quasi-contracts. Since the Tucker Act by its terms applies only to contracts, it follows that only contracts implied in fact are within the Act. The courts have so held: See C. F. Harms Co. v. Erie R. R., 167 F.2d 562, 564 (2nd Cir. 1948), and cases cited in footnote 6 therein; Alliance Assurance Co. v. United States, 252 F.2d 529 (2nd Cir. 1958).

However, this distinction is inapposite to the present case. Here we do not have an implied contract at all, but an express contract in which an implied warranty may arise. It has been held that claims can be brought founded upon implied promises or warranties in express contracts or contracts implied in fact. Alliance, supra; Crouch v. United States, 31 F.2d 211, 212 (E.D. of S.C. 1928)

Therefore, the Court also has jurisdiction under the Tucker Act.

Now that we have determined that this Court has jurisdiction under both 12 U.S.C. § 1702 and the Tucker Act, we can consider the substantive claim of breach of implied warranty of habitability.

The Supreme Court has long held that the law will imply a warranty of fitness for the purpose intended when a buyer has reason to rely on, and does rely on, the judgment of the seller who produces the product, especially as to latent defects. Kellogg Bridge Co. v. Hamilton, 110 U.S. 108, 3 S.Ct. 537, 28 L.Ed. 86 (1884). The application of this principle in the field of housing has resulted in the declaration of an implied warranty of habitability to exist between a builder-vendor of a new home and the purchaser thereof. Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771 (1972); Schipper v. Levitt & Sons, 44 N.J. 70, 207 A.2d 314 (1965).

HUD raises two arguments against its liability under such a warranty; (1) Such a warranty did not arise in the present situation; (2) The lead paint hazard is not within the purview of such a warranty.

I.

In April, 1969, after HUD acquired properties, they were sold in accordance with procedures as outlined in the HUD Handbook, Property Disposition Handbook One to Four Families, FHA 4310.5(1968).

HUD first argues that no implied warranty arose in the present case because the Pages bought the house on a "as is" basis, that is, "as is without warranty by the FHA as to physical condition." § 152 of the HUD Handbook. However, § 152 applies only to houses sold without a mortgage. In the present case, HUD insured the mortgage under § 221(d)(2) of the National Housing Act, 12 U.S.C. § 1715l(d)(2). Therefore, § 152 of the HUD Handbook does not apply to the present case.

Another reason that § 152 does not apply is that § 151 states:

"As-Is-Sales. As-is sales are restricted to those properties which, when acquired, are structurally sound and otherwise in acceptable condition to qualify for insured mortgage financing, and repairs, renovation, or upgrading will not increase maximum sales appeal."

Thus it is obvious that "as-is" sales cannot apply to reconditioned houses, such as the Pages bought. For these two reasons, we reject HUD's argument that the Pages bought the house on an "as-is" basis.

HUD next argues that all the cases cited by the Pages to support an implied warranty of habitability apply only to a builder-vendor, not to a reconditioner-vendor. This Court sees no difference between the circumstances regarding totally new housing and reconditioned housing. The cases supply no authority for drawing such a distinction, and the distinction between new and used housing should not be determinative of the existence of an implied warranty of habitability but rather the relative positions of the parties to the sale of the house.

HUD next contends that it was under no duty to warrant that the premises were free from a lead paint hazard when it sold the home and insured the mortgage. Whether it was under such a duty or not is beside the point; whether it actually did make such a warranty is the issue.

As stated, the mortgage for the residence in question was insured by HUD pursuant to § 221(d)(2) of the National Housing Act. This states in pertinent part that the residence must meet "the requirements of all State laws, or local ordinances or regulations, relating to the public health or safety, zoning, or otherwise, which may be applicable thereto . . ." Therefore, by granting the mortgage, HUD impliedly warranted that the residence met the requirements of any such local ordinances. Philadelphia Health Code, § 6-403 is an ordinance prohibiting the presence of excessive levels of lead-based paint. Therefore, by granting the mortgage, HUD impliedly warranted the absence of excessive levels of lead-based paint on the premises.

Furthermore, § 185 of the HUD Handbook provides as follows:

Repair and Maintenance Objectives. The overall objective is to (a) place properties in first-class condition to create maximum sales appeal at the highest obtainable sales price in order to contribute to maintenance of a firm real estate market; (b) eliminate potential default hazard attributable to physical deficiencies; (c) eliminate all structural, (including termite infestation) mechanical and surface deficiencies which, if not eliminated, would result in major repair or replacement expenditures by the purchaser, or demands upon FHA under the terms of the warranty on the Sales Contract, Form 2384. Careful examination of operating systems under actual working conditions is essential to discovery and correction of latent defects. . . . Since it is of utmost

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