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

• Decision Date: 29 September 1975
• Docket Number: No. 74-1882,74-1882
• Citation: 519 F.2d 1160
• Parties: Robert HOFFMAN and wife, Joanna Hoffman, Plaintiffs-Appellants, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1160

519 F.2d 1160

Robert HOFFMAN and wife, Joanna Hoffman, Plaintiffs-Appellants, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT et

al., Defendants-Appellees.

No. 74-1882.

United States Court of Appeals, Fifth Circuit.

Sept. 29, 1975.

Malcolm L. Hughes, Wichita Falls, Tex., for plaintiffs-appellants.

Duncan Boeckman, Dallas, Tex., amicus curiae, for Federal Nat'l Mortgage Assoc.

Frank D. McCown, U. S. Atty., William L. Johnson, Asst. U. S. Atty., Fort Worth, Tex., John L. Hill, Atty. Gen., State of Tex., Robert W. Gauss, Asst. Atty. Gen., Austin, Tex., James T. Lynn, Sec. of Housing & Urban Dev., U. S. Dept. of Housing & Urban Dev., Wallace H. Johnson, Asst. Atty. Gen., Dept. of Justice, Washington, D.C., Keith Nelson, Wichita Falls, Tex., Carl Strass, John J Zimmerman, Attys., Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before RIVES, GEWIN and GOLDBERG, Circuit Judges.

RIVES, Circuit Judge:

This appeal is from a final judgment sustaining defendants' motion to dismiss for failure of the plaintiffs to state a claim within the jurisdiction of the district court, and also denying plaintiffs' request for the convening of a three-judge court.

We may consider the undisputed facts alleged in the complaint and disclosed in the hearing on plaintiffs' motion for a preliminary injunction. ¹ With the assistance ² of the Secretary of Housing and Urban Development (the Secretary), the Hoffmans purchased a low-income family home. For the $17,750 purchase price, the Hoffmans executed a promissory note to Ryan Mortgage Company (Ryan) secured by a deed of trust containing a power of sale in the event of default. To cover principal, interest, insurance and taxes, the Hoffmans agreed to pay $106.16 per month and the Secretary was to pay $68.42 per month. Ryan sold the purchase money note and the beneficial interest in the deed of trust to the Government National Mortgage Association (GNMA). Thereafter, Ryan, as service agent for GNMA, continued collecting from the Hoffmans. The Hoffmans made their monthly payments through September, 1972, but failed to make any further payments after that date.

Beginning on October 20, 1972, Ryan sent monthly notices of delinquency to the Hoffmans. The second notice suggested that if the Hoffmans were not able to pay, they might sell the property to a third party who could make the payments. The third notice indicated that continued delinquency could result in foreclosure and requested the Hoffmans to call Ryan. The fourth notice, dated January 15, 1973, informed the Hoffmans that, unless the delinquency was cured, the property would be posted on February 12, 1973, for foreclosure sale to be held March 6, 1973, and again requested a call from the Hoffmans. On February 15, 1973, Ryan mailed three letters to the Hoffmans, each giving notice that the property had been posted on February 12, 1973, for foreclosure sale on March 6, 1973. One of these letters was sent by "Certified Mail" and informed the Hoffmans that the sale would be held on March 6. One of the other letters, showing an itemization of the amount due, informed the Hoffmans that as of that date a total of $619.28 was necessary to bring their loan current and avoid foreclosure and suggested telephonic contact. The notices were posted and the sale was held on the date specified. The substitute trustee sold the property at public auction to GNMA. About two days after the foreclosure sale, Ryan received through the mails from Robert Hoffman a cashier's check for $619.28 payable to Ryan Mortgage Company. Ryan returned the check to Hoffman because the property had been sold at foreclosure before the check was received.

GNMA conveyed title to the Federal Housing Administration (FHA). The premises were repaired in preparation for a public sale by FHA on September 1, 1973. On August 15, 1973, the Hoffmans filed the complaint in this case.

The Hoffmans moved for a preliminary injunction to halt the scheduled FHA sale. The district court, after a hearing, granted the preliminary injunction, the Judge indicating that he would re-examine the propriety of the injunction when he could "see what the Defendants' real position is." After considering additional pleadings, motions to dismiss and memoranda, the district court entered its final judgment of dismissal from which this appeal is prosecuted. The questions to be decided are (1) whether the district judge properly declined the request to convene a three-judge district court, and (2) whether the Hoffmans' complaint states a claim, cognizable in the federal courts, upon which relief can be granted. We answer question (1) in the affirmative and question (2) in the negative, thereby affirming the holding of the court below.

I. Three-Judge Court.

a. 28 U.S.C. § 2281 requires the convening of a three-judge district court when a plaintiff seeks "(a)n interlocutory or permanent injunction restraining the enforcement, operation or execution of any State statute by restraining the action of any officer of such State in the enforcement or execution of such statute. . . ." As the language of the statute discloses, Congress intended this special judicial treatment only in cases where injunctive relief was sought against an officer of the state. Although the Governor and Attorney General of Texas are named as nominal parties defendant in this case, the controversy does not involve their attempt to enforce the statute in question. ³ Here, the statute regulates rights among private parties and does not require enforcement by state officials for its effectuation. See Bell Mining Co. v. Butte Bank, 1895, 156 U.S. 470, 477-78, 15 S.Ct. 440, 39 L.Ed. 497. The Supreme Court has said:

". . . the requirement that the action seek to enjoin a state officer cannot be circumvented 'by joining, as nominal parties defendant, state officers whose action is not the effective means of the enforcement or execution of the challenged statute.' Wilentz v. Sovereign Camp, 306 U.S. 573, 579-580, 59 S.Ct. 709, 83 L.Ed. 994."

Moody v. Flowers, 1967, 387 U.S. 97, 102, 87 S.Ct. 1544, 1548, 18 L.Ed.2d 643. Since no attempt to restrain the action of any officer of the State of Texas is presented section 2281 does not require the convening of a three-judge court. Accord, Law v. United States Department of Agriculture, N.D.Ga.1973, 366 F.Supp. 1233; Gibbs v. Titelman, E.D.Pa.1973, 369 F.Supp. 38.

b. 28 U.S.C. § 2282 requires a three-judge district court in any action seeking to restrain the enforcement, operation, or execution of any Act of Congress for violation of the United States Constitution. The provisions of § 2282 have not been read as parallel to those of § 2281. While § 2281 mandates a three-judge court to hear challenges to state administrative orders, the same is not true under § 2282 for federal regulations. William Jameson & Co. v. Morgenthau, 1939, 307 U.S. 171, 173-74, 59 S.Ct. 804, 83 L.Ed. 1189. In line with this interpretation of § 2282, it is necessary to determine when a controversy does not involve an Act of Congress, but merely an administrative order. This is no easy task when one considers that regulations must be authorized by some statute. See Currie, The Three Judge District Court in Constitutional Litigation, 32 U.Chi.L.Rev. 1, 50-55 (1964). Professor Currie has suggested that the Jameson distinction between a federal administrative order and an Act of Congress "must turn upon the nature either of the administrative decision or of the plaintiff's attack." Id. at 53. Each complaint must be scrutinized on an individual basis, and the need for three judges determined by the breadth and object of the attack. Id. at 54.

In Sardino v. Federal Reserve Bank of New York, 2d Cir. 1966, 361 F.2d 106, cert. denied, 385 U.S. 898, 87 S.Ct. 203, 17 L.Ed.2d 130, Judge Friendly wrote that a three-judge court was not required when

"an Act of Congress confers authority on an administrator in general terms which could be read either to embrace or to exclude the challenged action, and application of the statute is clearly constitutional in certain cases but arguably not so in the administrative scheme under attack." 361 F.2d at 115.

Accord, National Student Ass'n v. Hershey, 1969, 134 U.S.App.D.C. 56, 412 F.2d 1103, 1124 n. 56 (the injunction sought would have left the statute wholly intact).

This controversy involves the foreclosure of a mortgage insured under the provisions of 12 U.S.C. § 1715z (commonly referred to as section 235; see 82 Stat. 477). ⁴ No provision is made in the statute for foreclosure of section 235 mortgages, but under HUD regulations, 24 C.F.R. §§ 235.201, 203.355, it is contemplated that the mortgagee will foreclose in the manner prescribed by the laws of the state of the situs of the mortgaged property. Upon acquiring good and marketable title to and possession of the property, the mortgagee must convey the property to the Federal Housing Commissioner to receive the benefits of the mortgage insurance, 24 C.F.R. §§ 235.201, 203.359-61. The mortgagee in this case is the Government National Mortgage Association (GNMA), a branch of the Department of Housing and Urban Development. GNMA foreclosed under the power of sale in the deed of trust as permitted by Texas law. ⁵ A decision restraining GNMA from foreclosing in this manner would leave intact the provisions of 12 U.S.C. § 1716 et seq. creating GNMA and 12 U.S.C. § 1715z providing for section 235 mortgage insurance and assistance payments. Since no Act of Congress has been challenged as unconstitutional, 28 U.S.C. § 2282 would not require the convening of a three-judge court to decide this controversy.

II. Claim Upon Which Relief Can Be Granted.

The original and supplementary complaints of the plaintiffs give no jurisdictional grounds or legal theories upon which relief can be granted; we have only the allegations...