Conille v. Pierce

• Decision Date: 16 December 1986
• Docket Number: No. 85-2389-K.,85-2389-K.
• Citation: 649 F. Supp. 1133
• Parties: Marie CONILLE, Plaintiff, v. Samuel R. PIERCE, in his capacity as Secretary of the United States Department of Housing and Urban Development, and Interim Management, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

649 F. Supp. 1133

Marie CONILLE, Plaintiff, v. Samuel R. PIERCE, in his capacity as Secretary of the United States Department of Housing and Urban Development, and Interim Management, Inc., Defendants.

No. 85-2389-K.

United States District Court, D. Massachusetts.

December 1, 1986.

As Modified December 16, 1986.

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Marc Lauritsen, John Griffin, Paul R. Collier, William C. Spieth, Cambridge, Mass., for plaintiff.

Martha B. Sosman, Asst. U.S. Atty., for defendants.

KEETON, District Judge.

Plaintiff is a former tenant of an apartment in the Washington Apartments project in Dorchester. The Washington Apartments project was one of a group of five residential building projects, collectively known as the Granite Properties, which were rehabilitated in the late 1960s with mortgage loans insured by the United States Department of Housing and Urban Development ("HUD"). The loans were made as part of the Below Market Insurance Rate ("BMIR") program, 12 U.S.C. § 1715l (d)(3), of the National Housing Act ("NHA"), 12 U.S.C. § 1701, et seq. Under the BMIR program, a private lender makes a mortgage loan to the mortgagor at a reduced interest rate, and a division of HUD purchases the mortgage at 100% of face value. The result is a lowering of the debt service payments and a subsidizing of tenants' rents.

During plaintiff's tenancy, the owners of the Washington Apartments, as well as the owners of the other Granite Properties, defaulted on their mortgage obligations. HUD then paid the insurance claim on the Washington Apartments complex, took assignment of the mortgage, and on May 10, 1982, became mortgagee in possession ("MIP") pursuant to section 207(k) of the NHA, 12 U.S.C. § 1713(k). As MIP, HUD was responsible for all aspects of property management, including rent collection and property maintenance. HUD hired defendant Interim Management, Inc. to manage the Washington Apartments.

Plaintiff has brought this civil action against the Secretary of HUD and Interim Management, alleging that they failed to maintain her apartment in a habitable condition and seeking damages or restitution of rental payments. She asserts four causes of action against the Secretary: first, breach of an implied warranty of habitability owed to her under state and federal common law; second, breach of quiet enjoyment under Mass.Gen.Laws Ann. ch. 186, § 14 and federal law; third, unfair and deceptive practices under Mass. Gen.Laws Ann. ch. 93A, § 9; fourth, failure to return her security deposit at the termination of her tenancy under Mass. Gen.Laws Ann. ch. 186, § 15B(5) and (7).

The Secretary has asserted affirmative defenses of sovereign immunity and federal supremacy. A trial on these affirmative defenses was held on September 3, 1986, without the participation of defendant Interim Management. During oral argument, counsel for plaintiff and the Secretary agreed that they had submitted sufficient evidence to allow me to make fact findings concerning the conditions in plaintiff's apartment and to determine whether those conditions were in compliance with applicable legal standards.

I.

It is well established that the United States or a federal official acting in his or her official capacity cannot be sued without consent. The Secretary argues that plaintiff has failed to establish a waiver of sovereign immunity under either the NHA or the Tucker Act, 28 U.S.C. § 1346(a)(2).

Plaintiff contends that this action falls within the waiver of sovereign immunity contained in § 1 of the NHA, which states:

The Secretary shall, in carrying out the provisions of the NHA, be authorized, in his official capacity, to sue and be sued in any court of competent jurisdiction, State or Federal.

12 U.S.C. § 1702. Defendant responds that § 1702 does not apply because first, the payment of damages to tenants does not fall within the "carrying out" requirement of § 1702, second, HUD does not have separate funds under its control from which to satisfy plaintiff's damages claims, and third, waiver of sovereign immunity to allow suits for damages or restitution of rental payments would be inconsistent with the statutory grant of discretion to the Secretary to set rents in HUD-controlled properties.

The Secretary's first argument, that plaintiff's claims do not come within the § 1702 waiver because the payment of her damages claims would not itself involve the "carrying out" of any provision of the NHA, is a rather strained interpretation of the "carrying out" requirement. A more natural reading of this provision focuses on the actions underlying the claim, rather than on the relief sought. Plaintiff's claims are based on the Secretary's actions in operating the project as MIP. Because the Secretary's authority to take possession of and operate plaintiff's project derives from the NHA, his actions in operating the project necessarily involve carrying out the provisions of the Act, and therefore satisfy the "carrying out" requirement of § 1702. See Chase v. Theodore Mayer Bros., 592 F.Supp. 90, 93 (S.D.Ohio 1983).

Defendant further argues that plaintiff's claims do not involve the Secretary's actions in carrying out the NHA because her claims are for breaches of state statutory and state and federal common law duties that defendant contends are not imposed by the NHA. If plaintiff's claims did not involve duties imposed by the NHA, the argument that a suit based on a breach of such duties would not be based on the Secretary's carrying out the provisions of the Act might have merit. However, because I conclude, infra, that plaintiff's claims are based on duties imposed by the NHA, it is not necessary for me to decide the merit of that argument.

The Secretary next argues that plaintiff's damages claims cannot fall within the § 1702 waiver because the Secretary does not have funds under his control from which a damage award could be satisfied. The separate fund requirement on which defendant relies is derived from interpretations of FHA v. Burr, 309 U.S. 242, 60 S.Ct. 488, 84 L.Ed. 724 (1940), which the First Circuit has called the seminal case concerning § 1702. See Armor Elevator Co. v. Phoenix Urban Corp., 655 F.2d 19, 21 (1st Cir.1981). In Burr, the Court stated:

Claims against a corporation are normally collectible only from corporate assets. That is true here. Congress has specifically directed that all such claims against the Federal Housing Administration of the type here involved "shall be paid out of funds made available by this Act." § 1. Hence those funds, and only those, are subject to execution. The result is that only those funds which have been paid over to the Federal Housing Administration in accordance with § 1 and which are in its possession, severed from Treasury funds and Treasury control, are subject to execution.

309 U.S. at 250, 60 S.Ct. at 493. Subsequent lower court decisions have interpreted this passage of Burr as mandating that the Secretary possess and control a separate fund from which a judgment could be satisfied in order for a § 1702 waiver to apply. E.g. Merrill Tenant Council v. HUD, 638 F.2d 1086 (7th Cir.1981).

The First Circuit commented on the separate fund requirement in Armor Elevator, supra, stating, "We believe this too narrow an interpretation." 655 F.2d at 21. The defendant argues that this criticism of the separate fund requirement, included only as an alternative ground of decision, is not binding on district courts in this circuit. Nevertheless, this court considers itself bound by the considered dicta of the First Circuit and therefore holds that a separate fund is not required in order to create a valid waiver of sovereign immunity under § 1702. Taylor Woodrow Blitman Construction Corp. v. Southfield Gardens Co., 534 F.Supp. 340, 343 (D.Mass.1982).

The Secretary's third argument is that claims based on the alleged overpayment of rent are inconsistent with his statutory discretion to set rents, and therefore should be excepted from the § 1702 waiver provision. In Burr, the Supreme Court held that exceptions to the § 1702 waiver could not be lightly assumed to be implied:

When Congress establishes such an agency, authorizes it to engage in commercial and business transactions with the public, and permits it to "sue and be sued," it cannot be lightly assumed that restrictions on that authority are to be implied. Rather if the general authority to "sue and be sued" is to be delimited by implied exceptions, it must be clearly shown that certain types of suits are not consistent with the statutory or constitutional scheme, that an implied restriction of the general authority is necessary to avoid grave interference with the performance of a governmental function, or that for other reasons it was plainly the purpose of Congress to use the "sue and be sued" clause in a narrow sense. In the absence of such showing, it must be presumed that when Congress launched a governmental agency into the commercial world and endowed it with authority to "sue or be sued," that agency is not less amenable to judicial process than a private enterprise under like circumstances would be.

309 U.S. at 245, 60 S.Ct. at 490 (footnote omitted). Thus, to prevail in this argument, the Secretary must clearly show that plaintiff's claims are inconsistent with the statutory scheme.

The Secretary argues that claims for restitution or damages based on the amount of rent paid are inconsistent with his discretion to regulate rents under 12 U.S.C. § 1715l (d)(3) and to expend funds "to preserve or protect the lien" of the mortgage during the MIP period under 12 U.S.C. § 1713(k). This argument rests on the characterization of a retrospective judicial order of damages or restitution as a prospective rent-setting procedure, and on the assumption that the Secretary has absolute discretion over the management of MIP properties so that any judicial enforcement of a duty owed by the Secretary to...