Southeast Mortg. Co. v. Mullins

• Decision Date: 16 June 1975
• Docket Number: No. 74-1993,74-1993
• Parties: SOUTHEAST MORTGAGE COMPANY, Plaintiff-Appellee, v. Betty Ruth MULLINS, Defendant-Third-Party Plaintiff-Appellant, v. Carla Anderson HILLS, as Secretary of the United States Department of Housing, etc., et al., Third-Party Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 747

514 F.2d 747

SOUTHEAST MORTGAGE COMPANY, Plaintiff-Appellee, v. Betty Ruth MULLINS, Defendant-Third-Party Plaintiff-Appellant, v. Carla Anderson HILLS, as Secretary of the United States

Department of Housing, etc., et al., Third-Party

Defendants-Appellees.

No. 74-1993.

United States Court of Appeals Fifth Circuit.

June 16, 1975.

Steven Wisotsky, Legal Services of Greater Miami, Inc., Miami, Fla., Robert

A. Bertisch, Legal Services of Greater Miami, Inc., Perrine, Fla., for defendant-third-party plaintiff-appellant.

Robert W. Rust, U. S. Atty., Carol M. Anderson, Mary Ella Johnson, Asst. U. S. Attys., Miami, Fla., William Saxbe, U. S. Atty. Gen., U. S. Dept. of Justice, Washington, D. C., for third-party defendants-appellees.

C. Victor Tutan, James A. Smith, Miami, Fla., for plaintiff-appellee.

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

Before WISDOM and DYER, Circuit Judges, and KRAFT, ^* District Judge.

DYER, Circuit Judge:

On this appeal we are called upon to review an order dismissing with prejudice a third party complaint filed against the Department of Housing and Urban Development (HUD) ¹ by the defendant in a state mortgage foreclosure proceeding. The action came before the district court following removal by HUD pursuant to 28 U.S.C.A. § 1442, and is somewhat complicated by the fact that, following HUD's dismissal, the suit was remanded to state court. See 28 U.S.C.A. § 1447(c). We conclude that the remand does not bar our review of the district court's order dismissing the third party complaint, and that on the merits its action was correct, except that the dismissal should have been ordered without prejudice. As so modified, we affirm the district court's judgment.

Since this suit was dismissed on the pleadings, the factual allegations of the complaint must be taken as true for the purposes of appeal. Ward v. Hudnell, 5 Cir. 1966, 366 F.2d 247, 249. The third party complaint alleges that the individual third party plaintiff, Betty Mullins, is a person of low income purchasing a home under the program established by § 235 of the National Housing Act, 12 U.S.C.A. § 1715z (the "235 program"). The 235 program is designed to assist low income families in procuring homes by making mortgage assistance payments directly to the mortgagee on behalf of the mortgagor and by providing insurance to protect the mortgagee against defaults. Only private mortgagees approved by HUD are authorized to participate in the program.

Mullins' 235 program mortgage was serviced by Southeast Mortgage Corporation. Due to the loss of her May, 1973, state assistance check under the Aid to Families with Dependent Children program, Mullins was unable to make the mortgage payment for June, 1973, when due. Although she explained that she would rectify the delinquency when the state reissued her welfare check, Southeast refused her subsequent tenders of individual monthly payments, and in September, 1973, demanded payment of all delinquent installments, attorney's fees, and related charges as a condition for reinstatement of the loan. Failing payment, Southeast instituted foreclosure proceedings in state court.

In addition to an answer, Mullins responded by filing a third party complaint against HUD which, as amended, sought relief on behalf of the class of all persons purchasing homes under the 235 program. The complaint alleged that HUD had violated the due process rights of the class by permitting the initiation of foreclosure proceedings, and the consequent suspension of government mortgage assistance payments, without a pretermination hearing; it also alleged that HUD was in violation of its duties under the National Housing Act by failing to enforce as mandatory regulations certain provisions contained in the "Mortgagees Guide." ² The Guide recommended the use of informal procedures including letters, telephone calls and personal visits by a mortgagee to determine why a mortgage payment was late, and suggested the consideration of alternatives, such as accepting reduced payments, recasting the mortgage, or assigning the mortgage to the FHA, in lieu of foreclosure. HUD promptly removed the action to federal court, and filed a motion to dismiss the third party complaint. Its motion was granted and this appeal ensued.

As a threshold matter, we determine that we have jurisdiction to review the district court's order of dismissal even though it resulted in a remand to state court. While by statute a remand order is non-reviewable "on appeal or otherwise," 28 U.S.C.A. § 1447(d), the situation before us is controlled by the Supreme Court's decision in Waco v. United States Fidelity & Guar. Co., 1934, 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244. In Waco, a "vouched-in" (third party) defendant removed the suit in which it had been impleaded to federal court. It then successfully moved for its own dismissal from the action, which in turn destroyed diversity jurisdiction and generated a remand to state court. The Court of Appeals dismissed an appeal from the order of dismissal as moot, reasoning that the non-reviewable remand order had irrevocably removed the controversy from the district court's jurisdiction. The Supreme Court reversed. Noting that the result reached below would also render the order of dismissal functionally non-reviewable, the Court distinguished between it and the order of remand, holding that

(i)n logic and in fact the decree of dismissal preceded that of remand and was made by the District Court while it had control of the cause. Indisputably this order is the subject of an appeal; and, if not reversed or set aside, is conclusive upon the petitioner.

293 U.S. at 143, 55 S.Ct. at 7.

Turning to the merits, we conclude that the claim Mullins seeks to assert cannot properly be raised by means of a third party complaint and that the district court acted correctly in dismissing it.

Under both Florida and federal rules of civil procedure, a third party defendant may be impleaded only when he "is or may be liable to (the defendant-third party plaintiff) for all or part of the plaintiff's claim against him." Fed.R.Civ.P. 14(a); Fla.R.Civ.P. 1.180(a). This permits the use of the procedural device of impleader only when the third party defendant's potential liability is dependent upon the outcome of the main claim, a concept discussed at some length in United States v. Joe Grasso & Son, Inc., 5 Cir. 1967, 380 F.2d 749. There we said:

(A)n entirely separate and...