Harms v. Federal Housing Administration

• Decision Date: 14 June 1966
• Docket Number: Civ. A. No. 16868.
• Citation: 256 F. Supp. 757
• Parties: John E. HARMS, Jr. v. FEDERAL HOUSING ADMINISTRATION and C. H. Borcherding, Jr., individually.
• Court: U.S. District Court — District of Maryland

256 F. Supp. 757

John E. HARMS, Jr. v. FEDERAL HOUSING ADMINISTRATION and C. H. Borcherding, Jr., individually.

Civ. A. No. 16868.

United States District Court D. Maryland.

June 14, 1966.

COPYRIGHT MATERIAL OMITTED

Robert L. Sullivan, Jr., and Leslie M. Pittler, Sullivan & Pittler, Baltimore, Md., for plaintiff.

Thomas J. Kenney, U. S. Atty., and Fred K. Grant, Asst. U. S. Atty., for District of Maryland at Baltimore, for defendants.

WATKINS, District Judge.

Plaintiff (hereinafter Harms) having been the subject of an Unsatisfactory Risk Determination by the State Director of the Federal Housing Administration for the State of Maryland¹ (hereinafter Maryland Director) under 24 C.F.R. 200.200, brought this suit against the Federal Housing Administration, and the Maryland Director personally. Preliminary and permanent injunctions, at least partially mandatory in nature, were sought against F.H.A. in the first count; and a second count sought money damages in the amount of $66,278.00 against the Maryland Director personally, for alleged libel.

The Answer on behalf of the defendants admitted many of the factual allegations of the complaint, but denied that plaintiff was entitled to any of the relief sought; and as affirmative defenses alleged that the complaint failed to state a claim upon which relief can be granted; that the court lacked jurisdiction over the subject matter of the action; and as to the second count, that the Maryland director was acting in his official capacity and was therefore immune from personal liability.

After hearing, the application for a preliminary injunction was denied, and thereafter the case was heard on the merits, was argued, and briefs were filed. Efforts at compromise having failed, the case has been submitted for decision.

The second count, for libel, was not argued or briefed by Harms. Diversity of citizenship is not alleged, and the testimony clearly showed that diversity does not exist. The court is without jurisdiction, and it therefore is not necessary to consider whether or not, if jurisdiction did exist, the statements of the Maryland Director are absolutely privileged. See Barr v. Matteo, 1959, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434; Howard v. Lyons, 1959, 360 U.S. 593, 79 S.Ct. 1351, 3 L.Ed.2d 1454; Gregoire v. Biddle et al., 2 Cir. 1949, 177 F.2d 579.

The second count is dismissed.

Jurisdiction under Count I is asserted by Harms upon each and all of the following grounds:

1. Federal question plus amount in controversy, 28 U.S.C. § 1331.

(a) The complaint states no facts sufficient to state a cause of action "arising under the Constitution, Laws or treaties of the United States."

(b) No monetary damages are stated, and no monetary judgment is sought.

The first alleged ground of jurisdiction is clearly untenable.

2. Diversity jurisdiction and amount in controversy, 28 U.S.C. §§ 1332(a) and (d).²

(a) No monetary damages are stated, and no monetary judgment is sought.

(b) Even if there were diversity jurisdiction, while the court could probably give a declaratory judgment under 28 U.S.C. § 2201 as to the proper interpretation of the regulations here involved, it is doubtful if this would justify the injunctive or mandatory relief herein sought (and to be discussed later).

This ground of jurisdiction is likewise untenable.

3. Mandamus, 28 U.S.C. § 1361.

This section confers original jurisdiction in the district courts of an action in the nature of mandamus to compel an officer or agency of the United States to perform a duty owed to a plaintiff. This section contemplates action affirmative in nature, rather than injunctive relief to prohibit improper action or conduct. The parties are in agreement that this section cannot be used where an officer or agency has made a discretionary decision while acting within the scope of his or its delegated authority. The defendants herein concede, however, that relief would lie against an officer or agency of the Government where action taken goes beyond statutory authority.

Should it be found that the Maryland Director made a decision he was not authorized to make under his delegated authority and therefore that he acted arbitrarily and capriciously, jurisdiction would exist.

Alternatively, and preferably, jurisdiction, if it exists, would result from the following:

(a) 12 U.S.C. § 1702, which is a waiver of sovereign immunity by the F.H.A., and which permits suit to be brought by it in the name of the Commissioner, or against it in the name of the Commissioner. This section does not give jurisdiction but merely waives sovereign immunity as a defense to a suit against the Commissioner. See Larson v. Domestic and Foreign Commerce Corporation, 1949, 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628; Dugan v. Rank, 1963, 372 U.S. 609, 83 S.Ct. 999, 10 L.Ed. 2d 15.

The complaint should be amended to name as defendant the Housing Commissioner, who is now exercising his delegated authority as an Assistant Secretary of the Department of Housing and Urban Development.³

(b) Venue in this District is conceded under 28 U.S.C. § 1391(e), providing that suit may be brought against any "officer or employee of the United States or any agency thereof acting in his official capacity or under color of legal authority * * * where the cause of action arose, or * * * the plaintiff resides if no real property is involved in the action," if there is jurisdiction.

(c) The actual basis for jurisdiction would then be under the Administrative Procedure Act, 5 U.S.C. § 1009. Plaintiff in effect has alleged a black listing or debarment by arbitrary and capricious action on the part of the Maryland Director. In a case where a similar charge was made, the court found review under the Administrative Procedure Act to be appropriate. Gonzalez v. Freeman, 1964, 118 U.S.App.D.C. 180, 334 F.2d 570. The Court said (pages 574-575 of 334 F. 2d):

"* * * An allegation of facts which reveal an absence of legal authority or basic fairness in the method of imposing debarment presents a justiciable controversy in our view. The injury to appellants alleged in their complaint gives them standing to challenge the debarment processes by which such injury was imposed. See Copper Plumbing & Heating Co. v. Campbell, 110 U.S.App.D.C. 177, 179-180, 290 F.2d 368, 370-371 (1961)."

And more specifically to the contention of the Secretary of Agriculture that the controversy came within the exception to permissible judicial review as it involved agency action committed by law to agency discretion, the court replied (page 575):

"* * * Nothing in the statute confers unreviewable finality on determinations of the Secretary as to questions of the scope of his congressional authority or of the requisite procedural safeguards. Cf. Harmon v. Brucker, 355 U.S. 579, 582, 78 S.Ct. 433, 2 L.Ed.2d 503 (1958) (per curiam)."

Jurisdiction being dependent upon a finding that the Maryland Director made a decision he was not authorized to make under his delegated authority and therefore acted arbitrarily and capriciously, a rather extended statement of facts is required to determine whether or not these grounds exist. The court finds the facts to be as follows:

Plaintiff Harms is a graduate registered engineer, a member of a number of local and national engineering societies, active in civic work and has done substantial sanitary work for the State of Maryland and several of the Maryland Counties. He has prepared engineering plans and designs for some 3,000 lots in sixteen subdivisions on which the F.H.A. has issued final commitments. There is no record of any complaint as to the adequacy and accuracy of any of these plans.

Harms' engineering capacity and ability are conceded by the Maryland Director, and in the brief filed on his behalf. The Unsatisfactory Risk Determination is based upon collateral matters, claimed by the Maryland Director to make Harms an unsatisfactory "moral" risk.

Harms prepared the engineering plans for Maryland City Corporation, which was engaged in an extensive development project, contemplating the seriatim development of fourteen Sections. He, along with two other individuals also determined by the Maryland Director to be Unsatisfactory Risks (but not parties to, or involved in, the current litigation) were "minor stockholders"⁴ in Maryland City Corporation.

Final commitments were authorized by F.H.A. on Sections 1-11 of the Maryland City Corporation development. There were some complaints as to non-completion of work in Sections 1-8, but there was every reason to believe these complaints would be remedied. The F.H.A. had, however, serious and reasonable concern as to the situation with respect to Sections 9, 10 and 11, as to which little work had been done, although deposits had been made by lot purchasers. None, or very few, of the houses had been completed and several proposed completion dates had passed, without the promised performance. It was quite clear that Maryland City Corporation did not have ready cash⁵ to complete Sections 9, 10 and 11. Application was made to F.H.A. for conditional commitments as to Section 12. The record does not disclose how such conditional commitments, which would in terms be restricted to lots in Section 12, would provide or release funds for Sections 9, 10 and 11; and there is a rather unpleasant implication that F.H.A. contemplated, but winked at, the possible diversion of funds from Section 12 loans for work in Sections 9, 10 and 11. The F.H.A. was adamant, however, that no conditional commitments would be made as to Section 12, "or subsequent sections" unless satisfactory assurances were obtained from Harms and the other two small minority stockholders of Maryland City that down payments already made with respect to lots in Sections 9, 10 and 11 would be repaid if work were not completed thereon, and also that "in Section 12 and subsequent Sections, all down payments" were to be "held in escrow, in a manner...