Davis v. Romney

• Decision Date: 13 February 1973
• Docket Number: Civ. A. No. 71-198.
• Citation: 355 F. Supp. 29
• Parties: Rubylee DAVIS et al., Plaintiffs, v. George W. ROMNEY, individually and in his capacity as Secretary of Housing and Urban Development, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

355 F. Supp. 29

Rubylee DAVIS et al., Plaintiffs, v. George W. ROMNEY, individually and in his capacity as Secretary of Housing and Urban Development, et al., Defendants.

Civ. A. No. 71-198.

United States District Court, E. D. Pennsylvania.

February 13, 1973.

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COPYRIGHT MATERIAL OMITTED

George D. Gould, Community Legal Services, Inc., for plaintiffs.

Louis C. Bechtle, U. S. Atty., Malcolm Lazin, Asst. U. S. Atty., Philadelphia, Pa., for defendants.

OPINION

JOHN MORGAN DAVIS, District Judge.

Presently before this Court are two motions, defendant's Motion to Dismiss filed pursuant to Rule 12(b) Fed.R.Civ. P. and plaintiff's Motion for Partial Summary Judgment filed pursuant to Rule 56 Fed.R.Civ.P.

Plaintiffs have filed suit on behalf of themselves as individuals and as members and representatives of all indigent residents of Philadelphia who have purchased, are in the process of purchasing, or may purchase in the future existing houses through mortgages insured by the Federal Housing Authority (hereinafter F.H.A.) under § 235 and § 221(d)(2) of the National Housing Act. Defendants are those individuals who are responsible for implementation of this legislation, commonly known as the 235 and 221(d) (2) Existing House Programs, in Philadelphia. The United States of America is also a named defendant.

In their Complaint, plaintiffs seek injunctive and declaratory relief to compel the defendants to insure only those mortgages under § 235 and § 221(d)(2) which are secured by properties which comply with the Philadelphia Housing Code. Further plaintiffs seek damages and injunctive relief to redress the violation of rights secured by these sections and the appointment of a master pursuant to Rule 53 Fed.R.Civ.P. to adjudicate the amount of damages in each individual case. Jurisdiction is alleged under 28 U.S.C. § 1361 (action in the nature of mandamus against federal officials), under 5 U.S.C. §§ 702-4 (action for judicial review of federal agency decisions), under 28 U.S.C. § 1337 (action arising under statutes regulating commerce), under 28 U.S.C. §§ 2201-2 (action for declaratory relief), and under 28 U.S.C. § 1346(a)(2) (action for certain claims against the government, commonly called the Tucker Act).

By their Motion to Dismiss, Defendants contend (1) that this Court does not have jurisdiction to order injunctive or declaratory relief or to grant the right to relief under the Tucker Act, and (2) that plaintiffs have failed to exercise their administrative remedies under 12 U.S.C. § 1735b(b), § 518(b) of the National Housing Act, rendering this Court without jurisdiction to hear plaintiff's claims for monetary damages at this time.

By their Motion for Partial Summary Judgment plaintiffs seek (1) a declaratory judgment that the 235 and 221(d) (2) Existing House Programs require properties to be in compliance with local housing and other codes as a condition for insuring the mortgage, (2) a writ in the nature of Mandamus and a permanent injunction requiring the individual defendants to insure only those mortgages under the 235 and 221(d)(2) Existing House Programs which are secured by properties which comply with the Philadelphia Housing Code, and (3) the right to damages from defendant United States in an amount which will enable them to correct all Philadelphia Housing Code violations existing at the time of the mortgage insurance commitment.

The Complaint before this Court arises from those provisions of § 235 and § 221 (d)(2) which are designed to assist members of the lower economic strata of our society in the purchase of rehabilitated existing houses. Other provisions of these sections permit low income families to purchase new homes or memberships in cooperatives. These two sections were amendments to the National Housing Act, § 235 being enacted in 1968, 12 U.S.C. § 1715z(i)(2), and § 221 (d)(2) being enacted in 1961, 12 U.S.C. § 1715(l)(d)(2).

Two qualifications must be met by a family in order to obtain a house under the 235 Existing House Program (1) It must have an income not exceeding 135 percent of the income of the same size family eligible to move into local public housing, and (2) it must have an acceptable credit rating. If determined to be eligible and F.H.A. funds are available, the family can receive a mortgage not exceeding $18,000-$20,000, depending upon its size and other special circumstances. The family must make a minimum down payment of $200.00 on the house and pay a mortgage insurance premium not to exceed ½%.

The family can also receive a mortgage subsidy which may reduce the interest charges on the mortgage to 1%. The responsibility for administration of this program is delegated to the Commissioner of the Federal Housing Authority by the Secretary of Housing and Urban Development.

Section 221(d)(2) is similar to § 235 but is geared to low and moderate income families, the maximum income allowed being higher than that established under the 235 program. If approved, the family can get a mortgage of $18,000 to $21,000, as with the 235 program, but must make a minimum down payment of 3% of the purchase price. The 221(d) (2) program unlike the 235 program does not provide for a mortgage interest charge subsidy.

To obtain an F.H.A. insured mortgage under § 221(d)(2) or § 235 of the National Housing Act an application must be made to the Philadelphia Office of the F.H.A. When this initial contact is made, the Philadelphia Office sends out an appraiser, either a member of the staff or a "fee appraiser", an individual employed on a part time basis and paid a flat rate per appraisal, who estimates the value of the property. After the appraisal, the Philadelphia Office will issue a "conditional commitment", a statement which indicates the F.H.A.'s estimate of the value of the property and sets the maximum amount of loan it will issue for an acceptable purchaser. If the appraiser notices serious defects he may add on the conditional commitment a list of repairs which must be made as a condition for obtaining mortgage insurance. He may also require, if necessary, certificates as to lack of termites and the adequacy of heating, plumbing, electrical systems, and the roof. Upon determination that the purchaser is eligible and the F.H.A. has available funds, a firm commitment to insure the mortgage on the property is issued. At closing, or just before, the certifications are transmitted to the mortgagee and sent to the Philadelphia Office with other closing documents. On the basis of these documents, the F.H.A. insures the mortgage on the property.

The allegations made in the Complaint as to plaintiffs' common home buying experience can be summarized as follows. Plaintiffs are inexperienced home buyers, none of whom has ever owned a home previously. They are desperate for safe and adequate housing due to the lack of decent housing in Philadelphia. Attracted by the promise of the 235 and 221(d)(2) Existing House Programs, with their liberal credit arrangements, they consult with real estate brokers who often use the term "F.H.A. approved" or the expression "the Federal Government will stand by it", to create interest in a particular house. After their interest is thus aroused, they are shown houses which are substandard as defined by the Philadelphia Housing Code. Since the inspections are often cursory and conducted by brokers using a hard sell technique, they do not easily or often reveal defects to the inexperienced purchaser. Some defects are latent, and some impossible for the purchaser to detect because they involved utilities which had been shut off. Such defects as are discovered are often explained away or represented by the real estate agent as repairs which the F.H.A. will require the seller to make or which the seller plans to make before he moves. Sometimes the real estate agents manage to prevent the purchaser from seeing all or part of the house before settlement. At closing the purchaser, usually not represented by an attorney, is told that the house is "F.H.A. approved." Only when he finally moves in does the purchaser realize that ignorance, need, and insidious business tactics have combined to place him in a house that does not meet his aspirations or his expectations.

The result is that plaintiffs find themselves in houses with local housing and other code violations ranging from minor violations to major structural, heating, electrical, plumbing and health violations which render them unfit for human habitation and dangerous to the health and safety of the occupants. The responsibility for these conditions they attribute to the practices and procedures of the Philadelphia Office of the F.H.A. Primarily they challenge defendants' use of Chapter IV of the F.H.A. Minimum Property Standards, "General Acceptability Criteria" (F.H.A. No. 300) and the stated objectives contained in that publication to determine eligibility for an insured mortgage rather than local housing codes. In line with this plaintiffs contend (1) that the F.H.A. staff and fee appraisers are not trained or sufficiently knowledgeable to be able to determine whether a property meets local housing and other code standards or even whether it meets the standards the F.H.A. has established; (2) that the F.H.A. and fee appraisers often overlook obvious defects; (3) that the actual practices and policies of the Philadelphia Office of the F.H.A., its staff and fee appraisers are so vague, incomplete and inconsistent as to render almost impossible F.H.A.'s following the standards for eligibility which it has adopted; and (4) that the Philadelphia Office of the F.H.A. has been aware that the F.H.A. is insuring substandard housing but instead of trying to rectify the situation has attempted to cover up their administration of the 235 and 221(d)(2) Existing House Programs.

We shall first consider the injunctive and declaratory relief aspects of the Motion for Partial Summary...