Lomas & Nettleton Co. v. Pierce, 79-3562

• Decision Date: 09 February 1981
• Docket Number: No. 79-3562,79-3562
• Citation: 636 F.2d 971
• Parties: The LOMAS & NETTLETON COMPANY, Plaintiff-Appellant, v. Samuel R. PIERCE, Jr., Secretary, Department of Housing and Urban Development et al., Defendants-Appellees. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 971

636 F.2d 971

The LOMAS & NETTLETON COMPANY, Plaintiff-Appellant, v.Samuel R. PIERCE, Jr., Secretary, Department of Housing and Urban Development et al., Defendants-Appellees.

No. 79-3562.

United States Court of Appeals, Fifth Circuit.

Unit A

Feb. 9, 1981.

Brice & Barron, W. S. Barron, Jr., Dallas, Tex., for plaintiff-appellant.

William Kanter, John F. Cordes, Appellate Staff, Civil Div., Dept. of Justice, Washington, D. C., for defendants-appellees.

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

Before AINSWORTH, CHARLES CLARK and WILLIAMS, Circuit Judges.

AINSWORTH, Circuit Judge:

Appellant, The Lomas & Nettleton Company, brought this suit in the amount of $2,500,000 damages against the Government National Mortgage Association(GNMA), its president, and the Secretary of Housing and Urban Development (HUD).The claim is based on an alleged breach of contract by defendants involving twenty-eight option applications for the purchase of mortgages being offered for sale by GNMA.The district court ruled that since any judgment sought by appellant must be satisfied from the federal treasury, the suit was actually a claim against the United States.Accordingly, the court dismissed the suit, holding that waiver of sovereign immunity is available only under the Tucker Act, which requires that the action be brought exclusively in the Court of Claims, 28 U.S.C. §§ 1346,1491.We agree.

GNMA is a federal agency organized under the Department of Housing and Urban Development.12 U.S.C. § 1717(a)(2)(A).As one of its services, GNMA provides for a secondary mortgage market for selected types of federally insured mortgages under a system known as Special Assistance Functions.12 U.S.C. § 1720.Under this program, GNMA purchases and sells the mortgages in order to assist the financing of home mortgages.See12 U.S.C. § 1716.

Mortgages purchased pursuant to these programs are normally sold by auction to FHA-approved mortgagees such as appellant.However, because of the expectation of a soft market, GNMA initiated a program in the summer of 1975 to sell mortgages on a first-come, first-served basis at a purchase price set by GNMA.This program provided for the immediate sale of the project mortgages or the sale of an option giving the option holder the right to purchase the mortgages at a specified price any time during a sixty-day period following the acceptance by GNMA of the option offer.Appellant offered to buy twenty-eight of these options on federally insured project mortgages having a total face value of $56,747,925 at a price of $75.34 per $100 face value of any such mortgage.

Appellant alleges that GNMA, through its representative, the Federal National Mortgage Association( FNMA ), orally accepted appellant's offer.However, the following day FNMA declined delivery of the options, explaining that GNMA had cancelled the entire set price program.Appellant filed this action to recover the amount by which the fair market value of the mortgages increased during the option period.¹The issue before the court, however, is not appellant's claim for breach of contract.Rather, we must decide whether, as a matter of law, the suit is actually against the United States, as the district court held, and therefore precluded from disposition in the district court by the doctrine of sovereign immunity.

The district court agreed with respondents' contention that the Court of Claims is the only court with jurisdiction to hear appellant's claim.The court found that since the plaintiff's complaint is in actuality against the United States, sounds in contract, and alleges damages in excess of $10,000, the Tucker Act provides the only applicable statutory waiver of sovereign immunity.28 U.S.C. §§ 1346,1491.

The court rejected appellant's contention that it had jurisdiction by virtue of 12 U.S.C. § 1702, which authorizes the Secretary of HUD "to sue and be sued" in the district court.²It concluded that section 1702 was a waiver of HUD's immunity, but not of the immunity of the United States generally.³Therefore, section 1702 was not applicable since the instant action, while nominally against the Secretary of HUD and GNMA, was in reality against the United States.

Any uncertainty in this circuit on the subject has recently been resolved.In Industrial Indemnity, Inc. v. Landrieu, 615 F.2d 644(5th Cir.1980), we held that a contractor's assignee could bring suit in the district court against the Secretary of HUD to recover construction retainages withheld from the contractor on construction of a low income housing project, the mortgage for which HUD had insured.Industrial Indemnity makes it clear that section 1702 is a waiver of the immunity of HUD only, and that the section is neither a grant of jurisdiction nor a waiver of the immunity of the United States generally.615 F.2d at 646.In Industrial Indemnity, we held that the crux of the matter is whether the judgment sought would have to be satisfied from the United States Treasury.⁴The program involved in that case was funded from the General Insurance Fund, a specific mortgage insurance fund created in 1965 within the control of HUD.12 U.S.C. § 1735c.Accordingly, we decided that the action was against the Secretary of HUD and not in reality against the United States since a judgment could be "paid out of money in the General Insurance fund that is a separate fund in the control and possession of the Secretary."615 F.2d at 646.

There is no such "separate fund" in the control and possession of the Secretary of HUD or GNMA from which a judgment could be satisfied in the present case and there is no special insurance fund that has a separate existence from the normal agency budget.GNMA derives its funding for mortgage purchases from interest-bearing loans from the United States Treasury, and pays interest on its borrowings at a rate determined by the Secretary of the Treasury.12 U.S.C. § 1720(d).GNMA then uses its mortgage sales to replenish its commitment authority, permitting additional purchases.

Since no separate fund is available, a judgment for appellant would have to be paid from these general funds upon which GNMA operates.According to 12 U.S.C. § 1722, any funds involved in...