Pealo v. Farmers Home Administration

• Decision Date: 06 April 1976
• Docket Number: Civ. A. No. 1028-73.
• Parties: Willard La Vern PEALO et al., Plaintiffs, v. FARMERS HOME ADMINISTRATION et al., Defendants.
• Court: U.S. District Court — District of Columbia

412 F. Supp. 561

Willard La Vern PEALO et al., Plaintiffs, v. FARMERS HOME ADMINISTRATION et al., Defendants.

Civ. A. No. 1028-73.

United States District Court, District of Columbia.

April 6, 1976.

Lee P. Reno, Florence Wagman Roisman, Washington, D. C., for plaintiffs.

Thomas G. Corcoran, Asst. U. S. Atty., Washington, D. C., for defendants.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

I. INTRODUCTION AND BACKGROUND

On July 3, 1973, this Court entered an order to compel defendants to implement the Farmers Home Administration's interest credit loan program, pursuant to Section 521 of Title V of the Housing Act of 1949, 42 U.S.C. § 1490a. In its accompanying Memorandum Opinion, reported at 361 F.Supp. 1320, this Court held that for the defendants to certify various qualified members of plaintiff class as being eligible to receive direct housing loans under Sections 502 and 515 of the Act, and then to deny such individuals Section 521 interest credit loans by virtue of defendants' unilateral suspension of the program, would operate to frustrate the intent of Congress in enacting the Section 502 and 515 direct loan programs. It would have meant, in effect, that persons whom the Secretary of Agriculture, at his discretion, had determined would be unable to meet their necessary housing needs "with financial assistance from other sources"¹ would, nonetheless, have to be charged the maximum amount of interest allowable on such housing loans. The defendants' action was therefore found to be in derogation of the 1959 Housing Act.

Defendants appealed the Court's order to the United States Court of Appeals for the District of Columbia Circuit. A stay was granted but was subsequently dissolved. Just prior to the date scheduled for oral argument in the Court of Appeals, defendants represented to the court that they would continue to implement the programs in question as mandated by Congress, at least until the expiration of the current congressional authorization in 1977. The court of appeals thereupon granted plaintiffs' motion to dismiss the appeal on grounds that the appeal was moot.

The matter is now before this Court on plaintiffs' motion for reasonable attorneys' fees and related expenses for the work of counsel in pursuing this matter to a successful conclusion. Counsel for the plaintiffs aver by detailed affidavit that they have spent a total of 411.5 hours in connection with this matter, both in this court and at the appellate level, and have also incurred a total of $482.68 in expenses for which they seek to be reimbursed.

The defendants have interposed the following objections to the payment of fees in this case: (1) the Rural Housing Insurance Fund (RHIF) is comprised of public money and any judgment of attorneys' fees against the RHIF would be a judgment of attorneys' fees against the United States which is prohibited by 28 U.S.C. § 2412; (2) there is no "common fund" in existence from which fees can be awarded; and (3) the "legal fees" provision of the Act cannot be read to permit the award of attorneys' fees of the kind sought by plaintiffs. The Court finds that defendants' objections do not prevent an award of attorneys' fees in this case.

II. THE NATURE OF THE RHIF

The defendants' objection to the award of attorneys' fees in this case is based upon the nature of the RHIF. The Associate Administrator of the Farmers Home Administration, Frank W. Naylor, Jr., has submitted several affidavits concerning the nature and operation of the RHIF. They reveal the following pertinent information:

"The RHIF is a revolving fund and as such does not receive an annual loan appropriation from Congress. It does receive annually an appropriation sufficient in amount to cover the losses incurred two years previously. Congress recommends annual loan authorization levels for the current fiscal year. Thus, there are no funds to carry forward. The most that can be said to exist is a recommended loan level that has not been reached. There are no monies to transfer or to revert.

As a revolving fund, cash needs are met by the sale of certificates of beneficial ownership CBO's to the Federal Financing Bank, collections on outstanding borrowers' accounts, and borrowings from the Department of the Treasury.

The Federal Financing Bank (Bank) was established to provide a source of funds for Federal agencies so as to lessen competition among the agencies in the private money market and to provide lower interest cost to the United States. In operation, the Bank purchases CBO's from FmHA thereby financing FmHA's loan programs. Bank officials have informed FmHA that the Bank finances its purchases by borrowing from the Treasury.

It is anticipated the Federal Financing Bank will be the sole purchaser of CBO's for the foreseeable future. The Bank is used to finance FmHA loan programs as it results in the lowest cost for financing to the United States.

The sale by the FmHA of CBO's to the Federal Financing Bank (Bank) is made at an interest rate set by the Bank. This rate is based on the cost of money to the Department of the Treasury with an addon for the Bank's administrative expenses. Because the rate paid to the Bank may from time to time be lower than the interest rates for unsubsidized loans made by the FmHA out of, for example, the RHIF, at these times the FHIF may actually make money on the unsubsidized loans. It has been true, however, that in the past the FmHA has had to annually request Congressional appropriations to cover the actual losses sustained by the Fund in prior years. Nevertheless, it cannot be said that the Fund will always lose money. For one thing, Congress constantly reviews loan programs and might in the future take action which would prevent the making of subsidized loans. Then too, those borrowers who do receive interest credits currently have their situation reviewed every two years, and their financial posture may have improved to the point where they could be taken off of interest credits. Conceivably, if no more subsidized loans were being made and if a substantial number of borrowers with interest credits were taken off the program, then the RHIF might not continue to lose money and subsequent Congressional appropriations would not then have to be sought."

The defendants have sought to impress upon this Court that if additional monies were collected by the sale of CBO's for payment of attorneys' fees, Congress would have to make up any deficit, which would be a direct violation of 28 U.S.C. § 2412. On the other hand, the defendants maintain that if the RHIF happens to create an "overage," that could likewise not be used to pay attorneys' fees because of 42 U.S.C. § 1489, which requires overages to be paid to the Treasury.

III. THAT THIS COURT CANNOT PAY PLAINTIFF'S ATTORNEYS' FEES AND COSTS FROM RHIF MONIES

OBTAINED FROM THE SALE OF CBO'S TO THE FEDERAL FINANCING BANK DOES NOT PRECLUDE AN AWARD OF ATTORNEYS' FEES AND COSTS FOR WHICH THEY ARE ENTITLED.

It is clear that the nature of the RHIF is such that if the Court were to award attorneys' fees from the monies obtained from the sale of CBO's to the Federal Financing Bank it would be diminishing the public treasury in violation of 28 U.S.C. § 2412. This is so not just because the monies would come from the Federal Financing Bank and thereby add to the national debt, but also because if such a payment did create a deficit it would require Congressional appropriation from the Treasury, which would clearly violate 28 U.S.C. § 2412. Nor does the Court find any Congressional permission, either express or implied, to use monies designated by statute for legal fees incurred in administering the RHIF for payment of the attorneys' fees sought herein, as the plaintiffs suggest. This statutory provision and its effectuating regulations, 7 C.F.R. §§ 1822.6 and 1822.85, merely permit the payment of legal fees for title searches and closing costs.

However, the foregoing does not preclude an award of attorneys' fees in this case. It merely prevents this Court from paying the fees from RHIF monies obtained from the sale of CBO's to the Federal Financing Bank.

Plaintiffs, by bringing this action, have incurred costs in conferring a benefit on the members of the class by releasing RHIF monies for their use, and are entitled to be reimbursed. See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 392, 90 S.Ct. 616, 625, 24 L.Ed.2d 593, 606 (1970); Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1882). Defendants have opposed the award on the assumption that any award would come out of RHIF monies obtained from the sale of CBO's to the Federal Financing Bank. Under this belief, defendants have argued that since the RHIF is a loan program, and, therefore, there are no available monies, no fund exists from which an award could be given, thus defeating plaintiffs' motion for attorneys' fees. While it is true that the revolving nature of the RHIF makes it impossible to say that the plaintiffs have created a fund, per se, the fact that no monetary fund exists has been held to be an insufficient basis by the United States Supreme Court and the Court of Appeals for this Circuit for denying an award of attorneys' fees to a plaintiff who has secured a benefit for others. Mills, supra, 396 U.S. at 392-96, 90 S.Ct. at 625, 24 L.Ed.2d at 606; National Treasury Employees Union v. Nixon, 521 F.2d 317, 320-21 (D.C.Cir. 1975).

The fact that there is no "fund" per se was inevitable in this case. As was the case in Mills, this case was not an action to recover monies for the members of the class, as opposed to, for example, an impoundment case. See National Council of Community Mental Health Centers, Inc. v. Weinberger, 387 F.Supp. 991 (D.D.C.1975). Rather, plaintiff sought to secure a benefit for the class: the possibility of obtaining a loan at low interest rates.² Since the loans must be repaid, and since the CBO's are only used to raise enough money to cover...