Clow v. U.S. Dept. of Housing and Urban Development

Decision Date05 November 1991
Docket NumberNo. 90-35324,90-35324
Citation948 F.2d 614
PartiesWilson Lee CLOW, Jr., Lynne Ann Clow, Plaintiffs-Appellants, v. U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; Jack Kemp, Secretary of HUD, William Y. Nishimura, Regional Administrator, HUD, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Howard L. Graham, Tacoma, Wash., for plaintiffs-appellants.

Charles Pinnell, Asst. U.S. Atty., Seattle, Wash., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before TANG, O'SCANNLAIN and LEAVY, Circuit Judges.


The Clows defaulted on a federally insured home loan and applied for acceptance into the Department of Housing and Urban Development's mortgage assistance program. The Department ("HUD") denied the Clows' application, and the Clows sought judicial review. The district court rendered judgment for the Department on the merits, and the Clows appeal. We affirm.


Wilson and Lynne Ann Clow refinanced their home with a federally insured loan in March 1986. The Clows had purchased their home four years earlier and apparently had never missed a payment. One year after the refinancing, however, they defaulted.

Seeking to avoid foreclosure, the Clows applied for acceptance into HUD's mortgage assistance program under the National Housing Act, 12 U.S.C. § 1701 et seq. Under the terms of the program, the federal government agrees to acquire an eligible mortgagor's loan for a limited time to allow the mortgagor to overcome an unexpected financial hardship without losing his or her home. HUD denied the Clows' application on January 12, 1988. A week later, HUD invited the Clows to contest its ruling at an informal administrative meeting. The Clows appeared at the meeting, and presented additional materials in support of their application.

The Clows alleged that their inability to pay was the result of Mr. Clow's recent loss of his position with the Puget Sound Naval Shipyard, where he had worked as a marine electrician for four years. During that period, Mr. Clow had allegedly injured and reinjured his neck and right shoulder six times on the job, and he had not been able to return to work since the most recent of these episodes in February 1986. After efforts to find alternative work for him failed, the shipyard finally decided to release Mr. Clow in May 1987, the month in which the Clows defaulted. 1

The Clows then filed for bankruptcy on July 26, 1988. In an adversary proceeding dated September 14, 1988, they prayed for (1) a declaratory judgment that HUD could not legally deny their application for assistance, and (2) injunctive relief to prevent their lender from foreclosing on their home in the meantime. The complaint did not seek injunctive relief against HUD. The court denied the request for a temporary restraining order on November 15, 1988. On December 9, 1988, the case was withdrawn from bankruptcy on HUD's motion. The district court then denied the Clows' motion for a preliminary injunction on December 16, 1988. The Clows did not appeal from either denial of their motions for preliminary relief. Shortly thereafter, the Clows' lender, City Federal Mortgage Company ("Cityfed"), foreclosed.

On December 23, 1988, the Clows filed an amended complaint in the district court, repeating their requests for declaratory relief against HUD and injunctive relief against Cityfed. The Clows prayed in the alternative for a replacement home "of similar value ... under the same terms and conditions [as] their present mortgage." On May 9, 1989, apparently in response to learning that Cityfed had foreclosed on the home, the parties stipulated to Cityfed's dismissal. However, the Clows did not amend their complaint and seek injunctive relief against HUD. A year of litigation followed. In the meantime, Cityfed conveyed the foreclosed property to HUD in return for payment on the loan's federal insurance. In August 1989, with no pending motion for injunctive relief pled against it, HUD sold the home through its normal property disposition process. On January 16, 1990, the parties agreed to submit their case on the record. One month later, the district court rendered judgment for HUD on the merits. The Clows timely appeal.


HUD initially contends that because the home now belongs to an innocent third party, the case is moot. We disagree. In their first amended complaint, the Clows prayed for "[a]n order requiring defendants HUD, Pierce and Nishimura to accept an assignment of plaintiff's home loan or provide a home of similar value to Plaintiffs under the same terms and conditions of their [previous] mortgage." ER 10 (emphasis added). Hence, even after their home had been sold to an innocent third party, the Clows' complaint asserts an avenue of relief which they claimed was available to them: HUD's providing them with a home of similar value to their own under the same terms and conditions of their previous mortgage. "Where one of the several issues presented becomes moot, the remaining live issues supply the constitutional requirement of a case or controversy." Powell v. McCormack, 395 U.S. 486, 497, 89 S.Ct. 1944, 1951, 23 L.Ed.2d 491 (1969). Accordingly, without deciding whether that relief is available to the Clows, we reject HUD's contention that this case is moot. To the extent that the relief sought by the Clows implicates jurisdictional considerations of sovereign immunity, we assume--without deciding--the existence of subject matter jurisdiction over the Clows' action. See Norton v. Mathews, 427 U.S. 524, 530-32, 96 S.Ct. 2771, 2774-76, 49 L.Ed.2d 672 (1976); Wolder v. United States, 807 F.2d 1506, 1507 (9th Cir.1987). 2


The Clows contend that the district court did not properly discharge its duty to conduct an inquiry into the merits of their claim. In Citizens to Protect Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), the Supreme Court stated that to be proper, judicial review of an administrative decision "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Id. at 416, 91 S.Ct. at 823-24 (citations omitted). The reviewing court's obligation is threefold. First, it must determine whether the agency or department in question acted within the scope of its authority. Id. at 415-16, 91 S.Ct. at 823. Second, under the Administrative Procedure Act, it must decide whether the challenged action was " 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' " Id. at 416, 91 S.Ct. at 823 (quoting 5 U.S.C. § 706(2)(A)). Finally, the court must ensure that the agency or department "followed the necessary procedural requirements." Id. at 417, 91 S.Ct. at 824.

We conclude that the district court satisfied these obligations. In ruling for the defendants, the district court explicitly stated:

A review of the record presented to HUD indicates that the record facts supporting the agency action were adequately adduced and rationally applied, and that the decision was based on a consideration of the relevant factors, that there was no clear error of judgment, [and] that the act of HUD was not an abuse of discretion, contrary to law, [or] arbitrary or capricious.

Clow v. Department of Housing & Urban Dev., No. C88-528TB, at 3 (W.D.Wash. Feb. 14, 1990). Our review of the several orders and rulings of the district court convinces us that it adequately considered the numerous memoranda, affidavits, and exhibits submitted by the parties in order to reach its conclusion. 3


The Clows also contend that HUD's denial of their application was arbitrary and capricious, an abuse of discretion, and constituted a clear error of judgment. The Clows maintain that HUD incorrectly applied the criteria established in 24 C.F.R. § 203.650.

Under the applicable regulations, HUD will accept assignment of mortgages only when an applicant satisfies six conditions. 24 C.F.R. § 203.650(a). In the instant case, HUD determined that the Clows had not satisfied two of the six requirements for relief under its mortgage assistance program. These two criteria are as follows:

(5) The mortgagor's default has been caused by circumstances beyond the mortgagor's control which render the mortgagor unable to correct the delinquency within a reasonable time or make full mortgage payments.

(6) There is a reasonable prospect that the mortgagor will be able to resume full mortgage payments after a period of reduced or suspended payments not exceeding 36 months and will be able to pay the mortgage in full by its maturity date extended, if necessary, by up to ten years.

Id. § 203.650(a)(5)-(6) (emphasis added).

Upon review of the administrative record, we conclude that HUD's determination that the Clows' default had not been caused by circumstances beyond their control was not an abuse of discretion, arbitrary or capricious, or a clear error of judgment. Although the record supports the Clows' assertion that Mr. Clow was disabled and unable to perform his previous duties as an electrician, the record does not reasonably support the inference that Mr. Clow was unable to perform any job at the shipyard. On the contrary, the record supports HUD's conclusion that Mr. Clow had been offered and refused offers of alternative employment. The Supervisor's Statement indicates that "[t]his employee was offered jobs within his limitations though it/they would have been at a lower rate of pay." Exh. XVI, ER 63. Mr. Clow's letter to the Office of Workers Compensation also indicated that he was "tired of being an assistant secretary and other such low minded jobs." Exh. XVIII, ER 66. Finally, the record supports HUD's conclusion that Mr. Clow had encouraged his termination so that he could pursue other options. The Notice of Proposed Termination indicates...

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