Mann v. Pierce, 85-3810

• Decision Date: 13 November 1986
• Docket Number: No. 85-3810,85-3810
• Citation: 803 F.2d 1552
• Parties: Daniel E. MANN, Elizabeth Cannon and Lillian Rauh, Plaintiffs-Appellees, v. Samuel R. PIERCE, Jr. and U.S. Dept. of Housing & Urban Development, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1552

803 F.2d 1552

Daniel E. MANN, Elizabeth Cannon and Lillian Rauh, Plaintiffs-Appellees, v. Samuel R. PIERCE, Jr. and U.S. Dept. of Housing & Urban

Development, Defendants-Appellants.

No. 85-3810.

United States Court of Appeals, Eleventh Circuit.

Nov. 13, 1986.

David Deutsch, Trial Atty., U.S. Dept. of HUD, Barry F. Smith, Washington, D.C., for defendants-appellants.

Jawdit I. Rubaii, Clearwater, Fla., for plaintiffs-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT and KRAVITCH, Circuit Judges, and TUTTLE, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

This interlocutory appeal requires us to determine whether the tenants of a housing project owned by the United States Department of Housing and Urban Development (HUD) may sue their Federal landlord for breaching the warranty of habitability in their leases. We conclude that they may bring their claims in district court. ¹

I. BACKGROUND

The plaintiffs are tenants of the Mandalay Shores Apartments (the project). HUD owned and operated the project from 1977 to 1982. The tenants' two state law claims against HUD are: (1) a breach of Florida landlord-tenant law and (2) a common law contract action. Specifically, the tenants claim that, despite their pleas, HUD failed to adequately maintain the project during its ownership and was indifferent to the presence of carcinogenic asbestos. They allege that the project was infested with a wide array of vermin and that the ceiling tiles were crumbling and spewing asbestos whenever the roof leaked or the air conditioning was operated. They further allege that HUD failed to make reasonable provisions for running water and failed to maintain the project's elevators, plumbing, roof and common areas. The tenants seek redress including equitable restitution of rent paid while HUD allegedly maintained the project in substandard conditions.

II. ANALYSIS

HUD's defense is two-fold. First, HUD asserts that the tenants' claims sound in tort and therefore must be dismissed because the tenants have failed to satisfy the jurisdictional requisite of the Federal Tort Claims Act, 28 U.S.C. Sec. 2675, by pursuing an administrative remedy within HUD. ² Alternatively, HUD argues that if the tenants' claims sound in contract, the suit must still be dismissed because the limited sovereign immunity waiver in HUD's charter, 12 U.S.C. Sec. 1702, does not expose HUD to suits such as the present case. ³

A. Tort or Contract?

The Federal Tort Claims Act (FTCA) requires plaintiffs to exhaust administrative remedies before bringing tort actions against a federal agency. No one disputes that the tenants have not pursued administrative redress. The tenants argue that their complaint comprises contract claims, and is therefore beyond the requisites of the FTCA, while HUD steadfastly asserts that the tenants' claims are personal injury claims and must be dismissed due to the tenants' failure to exhaust administrative remedies.

The FTCA, 28 U.S.C. Sec. 1346(b) provides the federal courts with exclusive jurisdiction over tort claims brought against the United States where local law would hold a private person liable for the government's alleged wrongdoing. ⁴ HUD contends that any allegations that could be classified as tort claims must be brought pursuant to the FTCA. HUD essentially argues that because some of the tenants' consequential damages claims address personal injury, their suit should be regarded as sounding in tort. Simply because a breach of a contract may give rise to a tort action does not mean that a plaintiff is obligated to pursue a tort action. See Holbrook v. City of Sarasota, 58 So.2d 862, 864 (Fla.1952) (action properly brought in contract even though it could have properly been brought in tort); cf. Martin v. United States, 649 F.2d 701, 705 (9th Cir.1981) (breach of contractual duty gave rise to both tort and contract actions against the United States; plaintiff elected to pursue tort remedy); Bor-Son Building Corp. v. Heller, 572 F.2d 174 (8th Cir.1978) (tort claims against HUD barred by failure to satisfy FTCA requisites, contract claims based on same facts as tort claims not barred). The plaintiff is the author of his relief. By suing in contract instead of tort, plaintiffs ordinarily exchange the possibility of a punitive damages award for a less onerous burden of proof. See Keeton, Prosser and Keeton on Torts Sec. 92 at 664-65 (5th ed. 1984). ⁵ We therefore decline HUD's invitation to hold that because the tenants could have stated a claim sounding in tort, they were obligated to do so. ⁶

We look to Florida law to determine whether the tenants' claims sound in tort and thus could not have been brought in state court. See Murray v. United States, 405 F.2d 1361, 1366-67 (D.C.Cir.1968) (technical differences between tort and contract claims retain vitality in determining whether the government has waived its immunity). Although the borderline between tort and contract claims in landlord-tenant disputes is not always clear, we conclude that Florida would recognize the tenants' claims as sounding in contract. First, the tenants asserted that HUD has breached an explicit term of their lease agreements. Their leases provide:

3. It is further agreed that the LANDLORD will make all necessary repairs to said property except repairs necessary to be made caused by the acts or neglect of the TENANT.

Second, the tenants alleged that HUD violated Florida landlord-tenant law, Fla.Stat. Sec. 83.51. ⁷ Section 83.51 codifies Florida landlord maintenance obligations and Fla.Stat. Sec. 83.55 provides that a tenant may recover damages for a breach of these obligations. Section 83.51 implies a warranty of habitability in all Florida residential leases:

The Florida Residential Landlord and Tenant Act's provisions impose contractual--not tort--liability upon the landlord. The express intention of the Law Revision Council in drafting the proposed act was to create an implied warranty of habitability which, when breached, relieved or diminished the tenant's obligation to continue rental payments.

Mansur v. Eubanks, 368 So.2d 645, 650 n. 11 (Fla.Dist.Ct.App.1979) (Ervin, J., specially concurring) (citations omitted), quashed and remanded on other grounds, 401 So.2d 1328, 1330 (Fla.1981) (citing Ervin concurrence with approval). The Florida courts have further indicated that section 83.51 codifies contractual obligations by noting that a breach of these obligations does not establish negligence per se. Paterson v. Deeb, 472 So.2d 1210, 1216 (Fla.Dist.Ct.App.1985), review denied, 484 So.2d 8 (Fla.1986). ⁸ See also Cutler v. Board of Regents, 459 So.2d 413, 417 (Fla.Dist.Ct.App.1984) (suggesting that court would analyze breach of warranty of habitability claims as contract claims).

We hold, therefore, that the tenants' claims sound in contract and are not barred by the FTCA.

B. Sovereign Immunity

Title 12 U.S.C. Sec. 1702 authorizes the Secretary of HUD to sue and be sued in administering the National Housing Act (NHA). In Federal Housing Administration v. Burr, 309 U.S. 242, 60 S.Ct. 488, 84 L.Ed. 724 (1940), the Court noted that section 1702 did not implicitly waive immunity where waiver would be inconsistent with the goals of the NHA. Id. at 245, 60 S.Ct. at 490. Burr emphasized, however, that the Court would not imply a reservation of sovereign immunity absent a clear showing that waiver would be inconsistent with the NHA's goals. Id. (sue and be sued clause makes HUD "no[ ] less amenable to judicial process than a private enterprise under like circumstances would be"). HUD argues that paying personal injury damages--whether styled as contract or tort claims--does not come within the ambit of the Secretary's duties of administering the NHA and hence waiver of immunity here would be inconsistent with the goals of the NHA.

HUD contends that section 1702 was enacted to allay the fears of financial institutions that would refrain from extending loans secured by NHA insurance if HUD could not be sued in the event of default. See Korman v. Federal Housing Administrator, 113 F.2d 743, 746 & n. 15 (D.C.Cir.1940) (citing legislative history). It is beyond question, however, that section 1702 is not confined to mortgage defaults. See, e.g., Merrill Tenant Council v. United States Department of Housing & Urban Development, 638 F.2d 1086 (7th Cir.1981) (section 1702 authorizes suit by tenants of HUD owned property seeking payment of interest, mandated by state law, on security deposits); Industrial Indemnity, Inc. v. Landrieu, 615 F.2d 644 (5th Cir.1980) (section 1702 authorizes suit against HUD by contractor's assignees to recover payment for construction work on HUD insured property); Griffin v. Harris, 480 F.Supp. 1072 (E.D.Pa.1979) (section 1702 authorizes suit against HUD by federally subsidized tenants seeking restitution of wrongfully withheld rent subsidies). The Merrill court explicitly concluded that owning and operating rental property was within the Secretary's duties of administering the NHA and therefore the Secretary could be sued, pursuant to section 1702, on contractual obligations involving HUD rental property. District courts similarly have held that section 1702 waives immunity from suits seeking damages stemming from the improper management or maintenance of HUD owned property. See, e.g., Chase v. Theodore Mayer Bros., 592 F.Supp. 90 (S.D.Ohio 1983); Estrada v. Hills, 401 F.Supp. 429 (N.D.Ill.1975).

The goal of the NHA is to provide decent housing. In carrying out its congressional mandate, HUD often acquires ownership of housing projects and assumes the role of landlord. We hold, therefore, that the maintenance and management of HUD owned properties is within the Secretary's administrative duties and hence section 1702 waives immunity from suits stemming from the Secretary's performance of these duties. This determination, however, does not end our...