Schneider v. US, Civ. A. No. 89-0670.

• Decision Date: 20 February 1990
• Docket Number: Civ. A. No. 89-0670.
• Citation: 734 F. Supp. 239
• Parties: David R. SCHNEIDER Jr., et al. v. UNITED STATES of America, et al.
• Court: U.S. District Court — Eastern District of Louisiana

734 F. Supp. 239

David R. SCHNEIDER Jr., et al. v. UNITED STATES of America, et al.

Civ. A. No. 89-0670.

United States District Court, E.D. Louisiana.

February 20, 1990.

Philippi P. St. Pe, Metairie, La., for plaintiffs.

Eneid A. Francis, Asst. U.S. Atty., New Orleans, La., for U.S.

ORDER AND REASONS

PATRICK E. CARR, District Judge.

This matter is before the Court on plaintiffs' motion for new trial. Determining in its discretion that oral argument and opposition are unnecessary,¹ the Court CANCELS the hearing on the motion, previously set for March 14, 1990, and now DENIES the motion.

I.

In 1963, The Pine Terrace Apartments were constructed in Slidell, Louisiana. The owner was Pine Terrace Apartments Corporation, and the contractor was Perrillat-Rickey Construction, Inc. The construction was financed by a loan secured by a mortgage. Under a regulatory agreement authorized by section 207 of the National Housing Act² (FHA Form No. 2466) and entered into between the property owner and the Federal Housing Administration (FHA), the FHA guaranteed to pay the loan to the lending bank in the event the property owner defaulted on its loan.

A "lump sum" construction contract (FHA Form No. 2442) between the property owner and the contractor, but not signed by the FHA, provided that the contractor would perform all work, subject to specifications that were prepared by the architect firm of Freret & Wolf and included, among others, "the FHA Supplementary General Conditions."³ The contract further provided:

All requests for changes in the Drawings and Specifications must be in writing signed by the Owner and the Lender and shall be conditioned upon acceptance by the Federal Housing Commissioner, which acceptance may be subject to such conditions and qualifications as the Commissioner in his discretion may prescribe, it being understood that the Commissioner at all times has the right to require compliance with the original Drawings and Specifications.

FHA Project Inspection Reports (FHA Form No. 2449) indicate that a Henry C. Hinrichs of the FHA performed six inspections of the construction work between February and August 1963. The form he signed August 27, 1963 indicates that construction was "100% completed," that progress was "satisfactory," and that "survey received shows all improvements acceptably located to date"; just above his signature appears the following printed paragraph:

CERTIFICATION: I certify that I have inspected this property on this date, that all corrections essential to compliance with the approved drawings and specifications have been reported, that the amounts reported herein represent acceptable work and materials....

The evidence in the record does not otherwise indicate that the FHA either designed or constructed the apartment complex.

In 1968, the property owner defaulted on the loan. Pursuant to section 10(a)(ii) of the regulatory agreement,⁴ the lender assigned the loan and mortgage to the Department of Housing and Urban Development (HUD).⁵ On December 28, 1968, the property was conveyed to HUD by deed in lieu of a foreclosure. HUD owned the property until November 13, 1972, at which time HUD conveyed the property to Pine Terrace Apartments, a partnership.

At some time subsequent to 1972, Crescent Federal Savings Bank, a federally-chartered savings bank whose accounts were insured by the Federal Savings and Loan Insurance Corporation (FSLIC), became the owner of the property, or at least of a portion covering Apartment No. A-201. By a resolution of the Federal Home Loan Bank Board dated June 19, 1986, FSLIC was appointed as receiver of the bank. On June 20, 1986, FSLIC as Receiver took over the bank and acquired, among other things, the above property.

By written contract effective June 21, 1986,⁶ FSLIC as Receiver retained B.J.F. Development, Ltd. (BJF) as an asset manager for, among other properties, the Pine Terrace Apartments, including Apartment A-201. Among the provisions of the contract are the following ones:

2.1. General Nature of Engagement. The RECEIVER hereby engages BJF as an independent contractor to provide the services relating solely to the management and disposition of Assets set forth in this Agreement. BJF hereby accepts such engagement and agrees to perform such services on the terms ... specified in this Agreement.

....

2.3. Goals of BJF. In carrying out its duties under this Agreement, BJF will at all times ... act in good faith, with the best interests of Crescent Federal's creditors ... and with the same standard of care of the RECEIVER itself.... BJF will use its best efforts to perform its duties under this Agreement in a manner reasonably expected to achieve that goal.

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4.1. General Duties. In general, BJF's duties under this Agreement are to take charge of the Assets, to prepare Business Plans for the Assets ..., and to provide asset management services and dispose of such Assets as provided in this Agreement.

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(c) Supervisory Construction Management. Where completion or renovation of an Asset is contemplated in a Business Plan approved by the RECEIVER, BJF will, consistent with such approved Business Plan ... negotiate and contract for all necessary services ... and inspect all work in place....

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4.2. Authority Prior to Approval of Business Plan.

(a) Preservation of the Assets. Prior to approval of the Business Plan, BJF ... shall take such actions as may be necessary to preserve each Asset and continue each Asset operation in a commercially reasonable manner....

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5.1. Engagement of Third Parties to Perform BJF's Duties. BJF may enter into agreements with Third Parties to carry out BJF's obligations under this Agreement. To the extent that BJF's duties under this Agreement are performed by Third Parties, BJF will monitor the execution of such duties and supervise the performance of such Third Parties, and BJF will remain ultimately responsible to the RECEIVER for the performance of BJF's duties.

On July 21, 1987, FSLIC approved of a management agreement between BJF as representative of FSLIC as Receiver and Capital Realty Services, Inc. for, among other properties, the Pine Terrace Apartments, including Apartment A-201. Among the provisions of this contract are the following ones:

4.1 Appointment of Manager. During the term of this Agreement, Capital Realty agrees ... to supervise and direct the management and operation of the Properties. Capital Realty shall act in a fiduciary capacity with respect to the proper protection of and accounting for the Properties. Under this Agreement all transactions performed by Capital Realty will be done as an independent contractor....

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4.6 Budget Operation. Capital Realty shall operate and manage the Properties in a prudent manner consistent with standards customary and usual in the operation of comparable properties and facilities, and shall provide such services as are customarily provided by managers and operators of properties of comparable class and standing consistent with the Properties....

In addition to the other obligations of Capital Realty set forth herein, Capital Realty shall render the following services and perform the following duties for BJF and FSLIC as Receiver in a faithful, diligent and efficient manner:

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5. Use its best efforts at all times during the term of this Agreement to operate and maintain the Properties according to the highest standards achievable consistent with the operation of comparable quality properties; and ....

10. Consult with BJF on special problems that may arise in connection with the Properties.

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4.7 Alternations, Repairs and Maintenance. Capital Realty shall maintain or cause to be maintained the Properties and common areas thereof ... and purchase supplies required for the operation and maintenance of the premises.... Capital Realty shall report promptly to BJF any conditions in the Properties requiring the attention of BJF.

Capital Realty shall provide, or cause to be provided by subagents, and supervise all services necessary for the proper repairs, alteration, decoration, operations, care, protection and maintenance of the Properties....

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Capital Realty shall consult with BJF on special problems that may arise in connection with the Properties.

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5.2 Subrogation and Indemnity or Deductible Provisions.

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Capital Realty shall indemnity and hold harmless BJF and FSLIC as Receiver from any loss, damage, injury or liability imposed on either BJF, or FSLIC as Receiver as result of Capital Realty's performance of its duties hereunder with the scope of Capital Realty's responsibilities under this Agreement.

It is undisputed that FSLIC did not otherwise "supervise or direct" the work of either BJF or Capital Realty.

Pursuant to its authority under these agreements, Capital Realty acting for FSLIC as Receiver executed a written lease with plaintiff David R. Schneider Jr. on July 10, 1987 for Apartment A-201 at the apartment complex. Next to the printed provision "The leased premises shall be occupied by the following persons only:" is hand-written "Self & 2 children part-time." The lease also contains the following provision:

Lessee assumes responsibility for the condition of the premises. Lessor will not be responsible for damage caused by ... any vices or defects of the leased property, or the consequences thereof, except in case of positive neglect or failure to take action toward remedying of such defects and the damage caused thereby. Should Lessee fail to promptly so notify Lessor, in writing, of any such defects, Lessee will become responsible for any damage resulting to Lessor or other parties.

Apartment A-201 is located on a second or higher floor. The apartment contains a sliding-glass door that opens onto a balcony overlooking the courtyard below.

On July 24, 1987, Derrick Schneider, David's 14-month baby, was with his father at the apartment. According to plaintiffs, David opened the sliding-glass door and ...