Housing Corporation of America v. United States, 63-72.

• Citation: 199 Ct. Cl. 705,468 F.2d 922
• Decision Date: 10 November 1972
• Docket Number: No. 63-72.,63-72.
• Parties: HOUSING CORPORATION OF AMERICA, a Delaware Corporation, v. The UNITED STATES.
• Court: Court of Federal Claims

199 Ct. Cl. 705, 468 F.2d 922 (1972)

HOUSING CORPORATION OF AMERICA, a Delaware Corporation, v. The UNITED STATES.

No. 63-72.

United States Court of Claims.

November 10, 1972.

W. Gregg Kerr, Jr., Pittsburgh, Pa., attorney of record, for plaintiff; Dale Edward Williams, Pittsburgh, Pa., of counsel.

Gerald L. Schrader, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant.

Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges.

ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

BENNETT, Judge.

Plaintiff, Housing Corporation of America, performed work pursuant to its contract with the Monroe Housing Commission for the construction and sale of housing units for the poor and elderly of Monroe, Michigan. Plaintiff sues the United States as an alleged party to the contract. Defendant denies any privity of contract between plaintiff and defendant and asserts sovereignty in support of its motion for summary judgment.

The Monroe Housing Commission was a so-called local authority set up by the city to comply with the United States Housing Act of 1937 (42 U.S.C. §§ 1401 et seq.) and to become eligible for federal assistance in development of low-rent housing projects. The city, acting through the Commission, and the United States, acting through the Department of Housing and Urban Development (HUD), entered into a Consolidated Annual Contributions Contract on April 18, 1969, pursuant to which defendant was to lend up to 90 percent of the total project costs. In order to achieve and maintain the low-rent character of the project, defendant was to make annual contributions to the Commission for 40 years and the Commission was to repay the loan, with interest, from funds raised by the sale of project bonds.

On May 9, 1969, plaintiff entered into a Contract of Sale with the Commission for the development, construction and sale of the project. This contract was in the format suggested by defendant's handbook relating to such matters and was approved by HUD as one eligible for financial assistance. Defendant's approval was by signature of an authorized representative of HUD and appears on the contract document under the signatures for the plaintiff contractor and the Commission. Article IX of the contract stated:

Article IX. Approval by Government. The approval of this Agreement by the Government signifies that the undertaking by the Purchaser of the acquisition of the property constitutes a "project" eligible for financial assistance under the Annual Contributions Contract identified in Exhibit "C;" that said Annual Contributions Contract has been properly authorized; that funds have been reserved by the Government and will be available to effect payment and performance by the Purchaser hereunder; and the Government approval of the terms and conditions hereof.

Defendant also approved miscellaneous drawings, plans and specifications. Article IV of the Contract of Sale prohibited changes in the contract price in excess of $4,000, unless approved by the United States.

When the Contract of Sale was closed in August 1970, closing statements contained a paragraph pursuant to which plaintiff (the seller) reserved its claim for payment of certain change orders which had not been approved or funded by HUD and as to which the Commission had not admitted liability for payment, absent such approval by HUD. Since the petition was filed in this court some of the change orders have been approved and funded by defendant but others remain in dispute here. The question for resolution by the pending motion is whether plaintiff on its Contract of Sale with the Monroe Housing Commission, which contract was approved by defendant as eligible for financial assistance under defendant's Annual Contributions Contract with the Commission, has a claim within the jurisdiction of the Court of Claims against defendant for unapproved changes for additional work. The question must be answered in the negative.

The opening paragraph of the May 9, 1969 Contract of Sale states:

This Agreement made this 9 day of May, 1969, by and between Housing Corporation of America, a Delaware Corporation, hereinafter called the "Seller," and the Monroe Housing Commission, Monroe, Michigan, hereinafter called the "Purchaser," * * *.

This makes it rather clear who the parties are and defendant is not one of them. However, defendant's signature of approval at the bottom of the document, plus Article IX quoted above, cause plaintiff to contend that defendant must be considered a party and to have waived its sovereignty. Aside from these considerations, plaintiff contends that there is a fact question here which must defeat the motion because defendant's representatives made direct demands upon plaintiff for contract changes and agreed to pay for them. This is supported by an affidavit of plaintiff's chairman, Mr. Leonard E. Treister, who identifies defendant's agents as Joseph Sabella and Harold Brown, both from the Chicago Regional Office of HUD. Plaintiff believes that it has thus established a prima facie case of privity of contract between plaintiff and defendant regarding the changes. Finally, plaintiff believes that Article IX of the Contract of Sale creates a third-party beneficiary relationship between plaintiff and defendant, so as to confer jurisdiction upon this court.

The contract here in issue is one of many pursuant to which the Federal Government subsidizes projects of state and local authorities for the public betterment. The United States, however, does not make itself a party to the contracts relating to said projects but obligates itself by separate agreements, as here, to local authorities for the funding of those projects it approves. The significance of that approval is spelled out here in Article IX. This does not create an express or implied contract between plaintiff and defendant nor does it make the Commission defendant's agent through HUD. HUD's actions were performed in defendant's capacity as sovereign. This principle has been settled for some time by a similar case involving construction under the Federal-Aid Highways Act. D. R. Smalley & Sons v. United States, 372 F.2d 505, 178 Ct. Cl. 593, cert. denied, 389 U.S. 835, 88 S. Ct. 45, 19 L.Ed.2d 97 (1967). The Smalley case is squarely in point.

If then there is no privity between the parties based on the contract language and understanding, has plaintiff brought itself within our Rule 101 (d) by showing genuine issue as to a material fact which would, if true, as plaintiff represents, make a difference in the result? In such event, summary judgment is not appropriate. Any doubts must be resolved against defendant as the moving party. Garcia v. United States, 108 F.Supp. 608, 123 Ct.Cl. 722 (1952).

Plaintiff, as aforesaid, relies upon the affidavit of Mr. Treister that defendant ordered and plaintiff performed changes and additions to the work beyond the requirements of the contract and that defendant agreed to pay for same through its duly authorized agents, Sabella and Brown, thus creating an express contractual obligation between plaintiff and defendant which is within our general...