Thibodeau v. Pierce, Civ. A. No. 87-0319 L.
| Citation | 683 F. Supp. 15 |
| Decision Date | 30 March 1988 |
| Docket Number | Civ. A. No. 87-0319 L. |
| Parties | Thomas R. THIBODEAU and Kathleen A. Thibodeau v. Samuel R. PIERCE, Jr., Secretary of Housing and Urban Development. |
| Court | United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island |
Mark H. Burnham, Providence, R.I., for plaintiffs.
Lincoln C. Almond, U.S. Atty., and Everett Sammartino, Asst. U.S. Atty., Providence, R.I., for defendant.
This matter is before the Court on defendant's motion to dismiss for lack of subject matter jurisdiction, failure to state a claim and lack of venue. At issue is the power of a federal district court to review the determination by the Secretary of Housing and Urban Development that the value of a homeowner's labor in making improvements upon his home is not a "reasonable cost of improvement" within the meaning of Section 235 of the National Housing Act and the regulations promulgated thereunder. 12 U.S.C. § 1715z (1980 & Supp.1987); 12 U.S.C. § 1751(d)(2) (1980 & Supp.1987); 24 C.F.R. § 235.12.
The overall aim of the National Housing Act is to stimulate housing production and community development, so as to remedy the housing shortage and realize as soon as possible the "national goal ... of `a decent home and a suitable living environment for every American family.'" 12 U.S.C. § 1701t (quoting Housing Act of 1949, 42 U.S.C. § 1441). To achieve these ends, Congress declared that "there should be the fullest practicable utilization of the resources and capabilities of private enterprise and of individual self-help techniques." 12 U.S.C. § 1701t.
The purpose of Section 235 is to assist lower income families acquire homeownership. The program helps eligible homeowners obtain mortgage financing from private lenders. The government guarantees repayment of the loan and makes monthly mortgage assistance payments to lenders to reduce homeowner interest payments. To qualify for assistance payments, the homeowner must meet certain requirements. Section 1715z(h) provides that the family income not exceed ninety-five percent of the median income for the area, as determined by the Secretary. Section 1715z(i)(3)(E) provides that a homeowner must make a down payment of three percent of the cost of acquisition. Section 1715z(i)(2) also expressly incorporates the eligibility requirements of Section 1715l (d)(2). Section 17151(d)(2) provides, inter alia, that "if the mortgagor is the owner and an occupant of the property, such mortgagor shall to the maximum extent feasible be given the opportunity to contribute the value of his labor as equity in such dwelling."
Section 1715z was amended in 1980 to require the recapture of assistance payments from the mortgagor under certain circumstances. The statute now provides:
The Secretary shall provide for the recapture of an amount equal to the lesser of (i) the amount of assistance actually received under this section, ... or (ii) an amount equal to at least 50 per centum of the net appreciation of the property, as determined by the Secretary. For the purpose of this paragraph, the term "net appreciation of the property" means any increase in the value of the property over the original purchase price, less the reasonable costs of sale, the reasonable costs of improvements made to the property, and any increase in the mortgage amount as of the time of sale over the original mortgage balance due to the mortgage being insured pursuant to section 1715z-10 of this title. Notwithstanding any other provision of law, any such assistance shall constitute a debt secured by the property to the extent that the Secretary may provide for such recapture.
12 U.S.C. § 1715z(2)(A) (Supp.1987)
Pursuant to this statute, the Secretary promulgated 24 C.F.R. § 235.12 which contains an identical formula for recapture and an identical definition of "net appreciation of the property." The rule provides for recapture at certain times including when the mortgagor requests a release of the Secretary's lien on the property. 24 C.F.R. § 235.12(a)(3).
In the present case, plaintiffs are mortgagors participating in the Government's housing assistance program. According to the complaint, plaintiffs purchased property in Seekonk, Massachusetts in 1981, for $45,200. On October 1, 1982, they executed a note and first mortgage for $38,060 to the Industrial National Bank of Rhode Island (now Fleet National Bank). On the same day, under the HUD program at issue here, plaintiffs executed a note and a second mortgage in favor of the Secretary of HUD securing the Mortgage Assistance payments. Under the terms of the note, plaintiffs were obligated to repay the mortgage assistance pursuant to Section 235 and "in accordance with regulations prescribed by the Secretary in 24 C.F.R. 235.12."
In the years that followed, plaintiffs added to the value of the property by completely finishing the basement into three useable rooms. They added a covered deck, storm windows and storm doors. They further improved the property through landscaping and fencing the yard. All labor was their own. A recent appraisal valued the property at $65,000.
In March 1986 plaintiffs sought a determination of the amount of recapture that HUD would require to release the Secretary's lien on their property. Plaintiffs claimed that they only owed fifty percent of the net appreciation of the property which they calculated as follows:
First they calculated the gross appreciation:
Present value $65,000
—Purchase price 45,200
_______
Gross Appreciation $19,800
Next, they claimed certain deductions as reasonable costs of improvements:
Materials $6,791.39
Labor 6,815.00
Costs of Sale 3,900.00
__________
Total deductions $17,506.39
They then calculated net appreciation:
Gross appreciation $19,800.00
—Deductions 17,506.39
___________
Net appreciation $ 2,293.61
Finally, they calculated fifty percent of net appreciation to be $1,146.80. Plaintiffs submitted a check to HUD in this amount.
On April 8, 1986 HUD's Boston office, determined that plaintiffs had improperly calculated the recapture amount. That office reasoned that plaintiffs had improperly deducted the value of plaintiffs' labor in improving the property and the costs of sale. They calculated the amount owed as follows:
Present value $65,000
—Purchase price 45,200
________
Gross Appreciation $19,800
Less deductions
Materials $ 5,565.38
Labor not allowed
Costs of Sale not allowed
Net Appreciation $14,234.62
50% of Net Appreciation $ 7,171.31
The Boston office returned to plaintiffs their check for $1,146.80.
Plaintiffs appealed the decision of the Boston office to the Department's main office in Washington. On May 30, 1986 the Washington office affirmed the initial determination. On June 4, 1986 a final appeal was sent to HUD. On June 30, 1986 HUD informed plaintiffs that the decision that no credit would be given for their "sweat equity" was final.
Having exhausted their administrative remedies, plaintiffs filed a complaint in this Court seeking injunctive and declaratory relief. Specifically, plaintiffs requested that this Court declare the Secretary's interpretation of 24 C.F.R. 235.12 to be unauthorized by law, and to interpret the relevant statutes, determine the appropriate recapture amount and order defendant to release the lien upon payment of the appropriate amount. Plaintiffs alleged that the Court had subject matter jurisdiction under 28 U.S.C. § 1331(a); that the action arises under 12 U.S.C. § 1715l(d)(2) and that it was brought pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. Venue was based on 28 U.S.C. § 1391(e).
On November 16, 1987 defendants moved to dismiss the complaint for lack of subject matter jurisdiction, failure to state a claim, and for lack of venue. Essentially, defendant contends that the plaintiffs seek equitable relief based upon a mortgage contract between the parties. Defendant claims that because the action is founded upon a contract with the United States, the Tucker Act, 28 U.S.C. § 1346(a)(2), provides the exclusive basis for jurisdiction. Moreover, under the Tucker Act the district court is limited to awarding damages and cannot grant the equitable relief sought here. Finally, under the Tucker Act the action must be brought in the jurisdiction where the plaintiff resides — here, Massachusetts. 28 U.S.C. §§ 1346, 1402.
In their objection to defendant's motion to dismiss, plaintiffs argue that "this matter is not a simple contract dispute, rather it is a dispute over the interpretation of defendant's guidelines as applied to a contract existing between the plaintiffs and the defendant." Plaintiffs argue that, because they are not seeking money damages, the Tucker Act's limitation of jurisdiction, relief and venue are irrelevant. Plaintiffs claim jurisdiction and waiver of sovereign immunity under 28 U.S.C. § 1331(a) and 5 U.S.C. § 702. On December 10, 1987 the Court heard oral arguments and took the case under advisement. The matter is now in order for decision.
To establish the jurisdiction of a federal court over a suit against the United States, it must be shown that the court has subject matter jurisdiction of the issues raised by the suit, that the United States has waived its immunity for suits of that kind, and that the United States has consented to be sued in the paticular court. "`The United States, as sovereign, is immune from suit save as it consents to be sued ... and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit.'" Massachusetts v. Departmental...
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Eckmann v. Northwestern Federal Sav. & Loan Ass'n, 880184
...the property, whichever is less. 12 U.S.C.A. Sec. 1715z(c)(2)(A) (Supp.1988); 24 C.F.R. Sec. 235.12 (1988). See also, Thibodeau v. Pierce, 683 F.Supp. 15, 17 (D.R.I.1988). Because Eckmann also qualified for assistance under the Section 235 program, she was eligible to assume the Pavlishes' ......