Portela v. Pierce

• Decision Date: 10 August 1981
• Docket Number: No. 79-4002,79-4002
• Citation: 650 F.2d 210
• Parties: , 11 Envtl. L. Rep. 20,792 Hector PORTELA, Emma Portela et al., Plaintiffs-Appellants, v. Samuel R. PIERCE, Jr. * , in his official capacity as Secretary of the United States Department of Housing and Urban Development et al., Defendants- Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 210

650 F.2d 210

16 ERC 1229, 11 Envtl. L. Rep. 20,792

Hector PORTELA, Emma Portela et al., Plaintiffs-Appellants, v. Samuel R. PIERCE, Jr. ^*, in his official capacity

as Secretary of the United States Department of

Housing and Urban Development et al.,

Defendants- Appellees.

No. 79-4002.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 12, 1980.

Decided July 6, 1981.

Rehearing Denied Aug. 10, 1981.

John O. Calmore, Berkeley, Cal., for plaintiffs-appellants.

Donna L. Martin, San Francisco, Cal., argued for defendants-appellees; Betty Wolfe, Sacramento, Cal., on brief.

Appeal from the United States District Court for the Eastern District of California.

Before SCHROEDER and FARRIS, Circuit Judges, and HARRIS ^**, District Judge.

SCHROEDER, Circuit Judge:

This action was brought by tenants of Hacienda Northgate, formerly a low income housing project, to set aside the Department of Housing and Urban Development (HUD)'s disposition of the project. The Sacramento, California project was financed in 1969 under Section 236 of the National Housing Act, 12 U.S.C. § 1715z-1. As a result of mortgage foreclosure proceedings and subsequent foreclosure sale, HUD assumed ownership of Hacienda Northgate in 1972. Three years later, after considering various disposition alternatives, HUD sold the complex to a private partnership insuring the mortgage under Section 221(d)(4) of the National Housing Act, 12 U.S.C. § 1715l (d)(4). This sale had the effect of changing the project from low to moderate income housing.

Faced with eviction by the new owner, the low income tenants sought a temporary restraining order and preliminary injunction in August of 1976. The district court found, upon review of the administrative record, that " HUD did consider, in a meaningful fashion, reasonable alternatives and that the alternative chosen was not an abuse of discretion." However, the court granted a preliminary injunction against the tenants' eviction, directing HUD to provide the tenants procedural due process and to submit a more detailed environmental assessment. The court subsequently approved HUD's receipt of written comments in accordance with its Interim Property Disposition Regulations, 24 C.F.R. § 290.35, as satisfying due process requirements. The Court also approved the special environmental clearance filed by the agency. The court then vacated the preliminary injunction and granted HUD's motion for summary judgment.

Tenants appeal from the summary judgment on three grounds. First, they contend that the Secretary did not properly evaluate alternative dispositions of the project, and thus violated the statutory obligation to provide tenants with decent, affordable housing as expressed in the National Housing Acts, 42 U.S.C. § 1441a; 12 U.S.C. § 1701t. Second, they allege that HUD failed to meet the requirements of the National Environmental Protection Act (NEPA), 42 U.S.C. § 4332(2)(C), because it did not file a formal Environmental Impact Statement. Third, they argue that the submission of written comments subsequent to the actual property disposition denied them procedural due process.

EVALUATION OF ALTERNATIVE DISPOSITIONS OF THE PROJECT

Appellants contend that, following acquisition of the project by foreclosure, the Secretary did not adequately consider alternatives to the sale of the project as middle income housing. More specifically, appellants contend that the Secretary failed to consider ways of maintaining the project as low income housing, and was guided solely by a desire to protect the General Insurance Fund. ¹

This Court in Russell v. Landrieu, 621 F.2d 1037 (9th Cir. 1980) held that HUD cannot act solely on the basis of protection of the Fund, and that the Secretary must act "in a manner which is consistent with the objectives and priorities of the National Housing Act." Id. at 1041. The Secretary was required to consider and implement alternatives to effect the policies and objectives of the National Housing Acts. ² Id.; In this case, the district court found the Secretary considered various options, including: sale as a Section 236 (12 U.S.C. § 1715z-1) project which would provide rental and cooperative housing for lower income families; sale as individual townhouses under Section 235 (12 U.S.C. § 1715z(b)) which would provide subsidized mortgage insurance for low and moderate income home buyers; and conveyance to the Sacramento Housing and Redevelopment Agency (SHRA), with funds for rehabilitation. The only specific alternative which the appellants claim was not considered was the use of funds under the Section 8, Lower Income Housing Assistance Program of Title II of the Housing and Community Development Act of 1974, 42 U.S.C. § 1437f. Yet the record reflects that the contemplated sale to the SHRA was contingent upon availability of such funds. This sale was thwarted by the unavailability of additional Section 8 contract authority for Sacramento. Further, regulations were not promulgated to authorize the use of Section 8 funds in connection with the disposition of HUD-owned, multi-family properties until several months after the sale of this project. 41 Fed.Reg. 13603 (March 31, 1976).

Accord, Pennsylvania v. Lynn, 501 F.2d 848 (D.C.Cir.1974) (agency decision to discontinue funding upheld because based on program-related, not exclusively fiscal factors); Shannon v. HUD, 436 F.2d 809 (3rd Cir. 1970) (agency decision reversed because concentrated solely on land use considerations); Tenants for Justice v. Hills, 413 F.Supp. 389 (E.D.Pa.1975) (tenants granted interim injunctive relief because agency decision was based on "virtually irrational" economic calculation). In Russell we held that judicial relief would be appropriate under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., for any abuse of discretion. Russell, 621 F.2d at 1042. However, the Court expressly stated that there is no requirement that the Secretary maintain a low income project as low income housing. "(I)f disposition of the property as low income housing is not feasible, then HUD has no obligation to dispose of the property in this manner." Id. at 1041.

Appellants rely upon Cole v. Lynn, 389 F.Supp. 99 (D.D.C.1975) in which the court found that HUD had not considered certain specific alternatives. That is not the case here. Moreover, the project in Cole was considerably more viable as a low income housing project than this project. At the time of repossession by HUD, Hacienda Northgate was overcrowded, lacked proper recreational facilities for children, and was beset by vandalism; only 29 percent of the tenants were paying rent. By the time of sale, occupancy had been reduced to 14 percent and, as the district court noted, the project had "failed" as low income housing. Unlike Cole v. Lynn, supra, the agency's consideration of alternatives here, as well as the reasons for their rejection, were apparent in the record of this case.

THE ENVIRONMENTAL CLEARANCE STATEMENT

Appellants challenge the failure of the agency to prepare a full Environmental Impact Statement (EIS), arguing in essence that HUD should have documented the need for low income housing in the Sacramento area. Under the guidelines established by HUD to isolate those projects which may require a formal EIS, the disposition of Hacienda Northgate only required a "normal environmental clearance" rather than a full EIS because less that 200 units were affected. ³ The district court, nevertheless, initially found that the statement which had been supplied was inadequate because the section dealing with physical impact and tenant relocation was too conclusory to allow meaningful review. See Sadler v. 218 Housing Corp., 417 F.Supp. 348 (N.D.Ga.1976). The court therefore required a fuller statement in the form of a "special environmental clearance". This statement was provided. With respect to physical impact, the statement concluded that conversion of the project to middle income would have a positive impact and would contribute to the elimination of urban blight. With respect to relocation, the statement indicated that only eighteen low income tenants remained at the project at the time of the sale, and that ten would not have to relocate. It concluded that the burden placed on the tenants and the community was offset by the benefit to the community through revitalizing the project as middle income housing. That report was accepted by the district court after it reviewed an affidavit by the owner of the project stating that the low income tenants who remained in the facility and had not been relocated were receiving Section 8 subsidies, and...