Suburban Mortg. v. U.S. Dept. of Housing and Urban, 06-1207.

Citation480 F.3d 1116
Decision Date12 March 2007
Docket NumberNo. 06-1207.,06-1207.
PartiesSUBURBAN MORTGAGE ASSOCIATES, INC., Plaintiff-Appellee, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Alphonso Jackson, Secretary of Housing and Urban Development, Federal Housing Administration and John Weicher, Assistant Secretary for Housing/FHA Commissioner, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Michael J. Schaengold, Patton Boggs LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief was Douglas C. Proxmire.

Mark R. Freeman, Attorney, Appellate Staff, Civil Division, United States Department of Justice, of Washington, DC, argued for defendants-appellants. With him on the brief were Peter D. Keisler, Assistant Attorney General, and Michael S. Raab, Attorney.

Before RADER, Circuit Judge, PLAGER, Senior Circuit Judge, and LINN, Circuit Judge.

PLAGER, Senior Circuit Judge.

This case requires us to reexamine the jurisdictional boundary between the Tucker Act and the Administrative Procedure Act, as that boundary is understood in the light of the Supreme Court's decision in Bowen v. Massachusetts.1 The case began as a dispute between plaintiff Suburban Mortgage Associates, Inc. ("Suburban"), and defendants, the United States Department of Housing and Urban Development ("HUD") et al. ("Government"),2 with regard to a contract for insurance. Plaintiff sued the Government in the United States District Court for the District of Columbia. The suit was cast in part as an action for specific performance of the contract and in part as a declaratory judgment action. The relief sought was to require the Government to perform its contract obligations so that Suburban Mortgage could get the money allegedly due it under the insurance agreement.

The action quickly morphed into a dispute over what court had been authorized by Congress to hear the case: was it the district court (the plaintiff's choice) or was it the United States Court of Federal Claims (the Government's choice)? The Government forced the issue by moving in the district court to have that court either dismiss the entire case or transfer it from the district court to the Court of Federal Claims. The district court denied the Government's motion.

Litigation over where to litigate is the unfortunate consequence of the complex of statutes and courts that comprise the federal system. "Nothing is more wasteful than litigation about where to litigate, particularly when the options are all courts within the same legal system that will apply the same law." Bowen, 487 U.S. at 930, 108 S.Ct. 2722 (Scalia, J., dissenting). This court plays a role in such litigation. When a district court denies a motion to transfer an action to the Court of Federal Claims as provided by 28 U.S.C. § 1631, an interlocutory appeal from such a denial may be taken to the United States Court of Appeals for the Federal Circuit. 28 U.S.C. § 1292(d)(4)(A). The Government has exercised that right in this case.

For the reasons we shall explain, and despite Suburban's valiant effort to frame the suit as one for declaratory or injunctive relief, this kind of litigation should be understood for what it is. At bottom it is a suit for money for which the Court of Federal Claims can provide an adequate remedy, and it therefore belongs in that court. The district court's determination to the contrary is reversed, and the matter is remanded to that court with instructions to either dismiss the suit in its entirety or transfer it to the Court of Federal Claims.

BACKGROUND

Suburban is a commercial mortgage3 lender based in Maryland. In 1998 Suburban made a loan, secured by a mortgage on the subject property, to Hillside Nursing Home ("Hillside"), a now defunct nursing home and assisted living facility in Rhode Island.4 To encourage development of such facilities for the elderly, Congress has authorized HUD to underwrite such loans, that is, to guarantee payment of the mortgage loan. See National Housing Act ("NHA") § 232, 12 U.S.C. § 1715w. In effect, the Government insures the loan. At Suburban's request, HUD, in exchange for premiums paid by Suburban, undertook that obligation with regard to the Hillside loan.

The agreement with HUD means that, should the borrower (Hillside) default on the underlying loan and the lender (Suburban) consequently incur loses, HUD will reimburse the lender pursuant to the terms of the insurance agreement. In order to collect the insurance proceeds when there has been a default by the borrower, the lender must first transfer its interest in the mortgage and mortgaged property to HUD. The lender has the option of foreclosing and taking title to the property, then transferring the property to HUD, 24 C.F.R. § 207.258(c),5 or directly assigning the defaulted note and mortgage to HUD, 24 C.F.R. § 207.258(b). In either case, HUD pays the lender the outstanding debt the borrower owed, less certain charges. 24 C.F.R. § 207.259.

In this case, the nursing home (Hillside) defaulted on its mortgage loan. Thereafter Suburban notified HUD that it wished to exercise its contractual right under 24 C.F.R. § 207.258(b) to assign the defaulted Hillside mortgage to HUD. HUD, however, declined to accept assignment. Under HUD's statutory authority for these insurance agreements, there is an incontestability clause that generally precludes HUD from challenging its duty to pay. See NHA § 203(e), 12 U.S.C. § 1709(e). However, an exception to that clause exists when the agreement involves "fraud or misrepresentation on the part of [the lender]." Id. In this case, HUD thought it had sufficient reason to believe that Suburban had committed fraud or made material misrepresentations to HUD.6

An extensive period of negotiation between the parties proved fruitless. Suburban then sued HUD in the District Court for the District of Columbia, asserting jurisdiction under 28 U.S.C. § 1331 as well as the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-06; the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02, and the Fifth Amendment to the United States Constitution. The complaint contained two counts.

The first count, entitled "Declaratory Judgment: for HUD to comply with its obligations pursuant to § 232 of the NHA," asked the district court to declare HUD's actions unlawful and to order HUD to perform its duties under the agreement, specifically, to accept assignment of the loan with ultimate reimbursement of the loan balance to Suburban. Echoing the language of the APA, Suburban alleged that the Government, by denying its assignment, acted arbitrarily, capriciously, and in violation of Suburban's due process rights under the Fifth Amendment. The second count, entitled "Breach of Contract: Request for Specific Relief under § 702 of the APA," asked the court for "specific relief in the form of payment of the insured loan amount" and reimbursement of certain taxes and fees as losses plaintiff suffered because the Government allegedly did not perform its duties under the insurance contract.

The Government moved in the district court to dismiss the suit for lack of subject matter jurisdiction on the grounds that the suit was basically a contract action, and therefore can only be heard in the Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1). As an alternative to dismissal, the Government requested that the district court transfer the case to the Court of Federal Claims pursuant to 28 U.S.C. § 1631.

In ruling on the motion, the district court looked for guidance to the precedent of its regional circuit, the United States Court of Appeals for the District of Columbia Circuit. The district court recognized that it could exercise subject matter jurisdiction over claims against the Government only if a plaintiff identifies an explicit waiver of sovereign immunity. Citing Transohio Savings Bank v. Office of Thrift Supervision, 967 F.2d 598, 607 (D.C.Cir. 1993), the court noted that the APA provides the necessary waiver of sovereign immunity for challenges to agency action, subject to three exceptions found in 5 U.S.C. §§ 702 and 704: "the APA excludes from its waiver of sovereign immunity (1) claims for money damages, (2) claims for which an adequate remedy is available elsewhere, and (3) claims seeking relief expressly or impliedly forbidden by another statute." Suburban Mortgage Assocs., Inc. v. U.S. Dep't of Hous. & Urban Dev., No. 05-00856, 2005 WL 3211563, at *6 (D.D.C. Nov.14, 2005). The court then examined Suburban's claims in light of these exceptions.

With regard to Count II of the complaint, the district court viewed that as a contract claim asking for "essentially `the classic contractual remedy of specific performance.'" Id. at *8 (citing Spectrum Leasing Corp. v. United States, 764 F.2d 891, 894 (D.C.Cir.1985)). The court read the relevant precedent as precluding it from hearing contract claims against the Government, whether for money damages or specific relief, because the Tucker Act "impliedly forbids" (as that term is used in the APA) any such relief by district courts. Id. (citing Transohio, 967 F.2d at 609; Sharp v. Weinberger, 798 F.2d 1521, 1524 (D.C.Cir.1986)). Applying this case law, the district court concluded that the APA did not waive sovereign immunity for Count II, and accordingly that Count II was outside of its jurisdiction.

The district court viewed Count I differently. With regard to the first exception limiting the APA's waiver of sovereign immunity, the district court cited Bowen v. Massachusetts for the proposition that a claim for money is not necessarily a claim for "money damages" as that term is used in the APA. Citing Maryland Department of Human Resources v. Department of Health and Human Services, 763 F.2d 1441, 1446 (D.C.Cir.1985), the court drew a distinction based on the purpose behind the payment sought: is the plaintiff seeking money damages "to substitute for a suffered loss," or is the plaintiff...

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