Wells Fargo Bank, Nat'l Ass'n v. Se. N.M. Affordable Hous. Corp.

• Decision Date: 27 June 2012
• Docket Number: No. CIV 11–0182 JB/CG.,CIV 11–0182 JB/CG.
• Citation: 877 F.Supp.2d 1115
• Parties: WELLS FARGO BANK, National Association, Successor by Merger to First Security Bank, N.A., as Indenture Trustee for Southeastern New Mexico Affordable Housing Corporation Multifamily Housing Revenue Refunding Bonds (Casa Hermosa Apartments) Series 1997A, Plaintiff, v. SOUTHEASTERN NEW MEXICO AFFORDABLE HOUSING CORPORATION and The United States Department of Housing and Urban Development, Defendants.
• Court: U.S. District Court — District of New Mexico

877 F.Supp.2d 1115

WELLS FARGO BANK, National Association, Successor by Merger to First Security Bank, N.A., as Indenture Trustee for Southeastern New Mexico Affordable Housing Corporation Multifamily Housing Revenue Refunding Bonds (Casa Hermosa Apartments) Series 1997A, Plaintiff,
v.
SOUTHEASTERN NEW MEXICO AFFORDABLE HOUSING CORPORATION and The United States Department of Housing and Urban Development, Defendants.

No. CIV 11–0182 JB/CG.

United States District Court,
D. New Mexico.

June 27, 2012.

[877 F.Supp.2d 1118]

Douglas R. Vadnais, Duane E. Brown, Spencer L. Edelman, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, and Joseph L. Werntz, Jessica Ann Janet, Moses, Dunn, Farmer & Tuthill, P.C., Albuquerque, NM, for Plaintiff Wells Fargo Bank, National Association.

Nancy S. Cusack, Hinkle, Hensley, Shanor & Martin, LLP, Santa Fe, NM, for Defendant Southeastern New Mexico Affordable Housing Corporation.

Kenneth J. Gonzales, United States Attorney, Manuel Lucero, Assistant United States Attorney, United States Attorney's Office, Albuquerque, NM, for Defendant United States Department of Housing and Urban Development.

MEMORANDUM OPINION AND ORDER
JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on the United States' Motion to Dismiss, or in the Alternative, for Summary Judgment, filed November 15, 2011 (Doc. 24) (“Nov. 15, 2011 Motion”). The Court held a hearing on February 15, 2012. The primary

[877 F.Supp.2d 1119]

issues are: (i) whether Plaintiff Wells Fargo Bank, National Association can maintain an action under 28 U.S.C. § 1346(a) against Defendant United States Department of Housing and Urban Development (“HUD”); (ii) whether the HUD has contractually waived sovereign immunity for the relief Wells Fargo seeks; (iii) whether the twelve-year statute of limitations in 28 U.S.C. § 2409a bars any quiet title action Wells Fargo has brought against the HUD; (iv) whether Wells Fargo can maintain this action against the HUD under 28 U.S.C. § 2410; and (v) whether the Declaratory Judgment Act, 28 U.S.C. §§ 2201–02, permits Wells Fargo to bring its claims against the HUD. Because 28 U.S.C. § 1346(a) does not waive sovereign immunity against the United States ¹ for suits for declaratory relief, there is no waiver of sovereign immunity for this suit that Wells Fargo has brought seeking declaratory relief against the HUD. While the HUD has contractually consented to joinder in a foreclosure suit regarding the property in question, it has not contractually waived sovereign immunity for the relief Wells Fargo seeks. Because the twelve-year statute of limitations under 28 U.S.C. § 2409a has run for Wells Fargo's quiet title action against the HUD, there is no waiver of sovereign immunity for suit under that statute. Because the HUD does not hold a lien on the property in question, 28 U.S.C. § 2410 does not provide for a waiver of sovereign immunity for suit. Because the Declaratory Judgment Act does not provide an independent basis for federal subject-matter jurisdiction or a waiver of sovereign immunity, it does not permit Wells Fargo to obtain the relief it seeks against the HUD. The Court will grant the HUD's Nov. 15, 2011 Motion and dismiss all claims Wells Fargo has asserted against the HUD. Because the HUD has consented to joinder to this foreclosure action, and does not oppose remaining a party to this action, the HUD will remain a party to the action while the foreclosure sale occurs.

FACTUAL BACKGROUND

The facts in this case are largely undisputed. Wells Fargo has not sought to dispute any of the facts the HUD has presented. While the HUD both moves to dismiss the case under rule 12(b)(6) of the Federal Rules of Civil Procedure and for summary judgment under rule 56, the HUD has relied, to present the facts to the Court, almost exclusively on the allegations in Wells Fargo's pleadings as well as the attachments to Wells Fargo's pleadings. The HUD has also moved for dismissal under rule 12(b)(1), which permits the Court to consider evidence outside the plaintiff's pleadings. See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1499 (10th Cir.1995).

In 1994, the HUD sold through a Special Warranty Deed (dated November 4, 1994), filed October 25, 2011 (Doc. 22–3), a multifamily housing project, located at 920 East Michigan Drive, Hobbs, New Mexico (the “Casa Hermosa property”) for ten dollars to the Southeastern New Mexico Affordable Housing Corporation (“SNMAHC”). Nov. 15, 2011 Motion at 2 (setting forth this fact); Response in Opposition to Defendant United States Department of Housing and Urban Development's Second Motion to Dismiss, or in the Alternative, for Summary Judgment at 1–3, filed December 23, 2011 (Doc. 26) (“Response to Nov. 15, 2011 Motion”) (not disputing this fact). On November 10, 1994,

[877 F.Supp.2d 1120]

the Special Warranty Deed “was duly recorded and filed for record in Lea County, New Mexico at Deed Book 506, pages 233–242.” Nov. 15, 2011 Motion at 2 (setting forth this fact); Special Warranty Deed at 23 –32; Response to Nov. 15, 2011 Motion at 1–3 (not disputing this fact). “The Special Warranty Deed contains various deed restrictions giving HUD an equity position in all future refinancing or sales of the Property, and governing the operation and use of the Property by requiring maintenance of the land and its improvements be maintained for affordable housing for a specified amount of years.” Nov. 15, 2011 Motion at 2–3 (setting forth this fact). Accord Special Warranty Deed at 25–26, 28; Response to Nov. 15, 2011 Motion at 1–3 (not disputing this fact). These deed restrictions “run with the land” according to the terms of the Special Warranty Deed: “The covenants set forth in this Deed shall run with the land hereby conveyed and, to the fullest extent permitted by law and equity, shall be binding for the benefit and in favor of and enforceable by Grantor and his successors in office.” Nov. 15, 2011 Motion at 3 (setting forth this fact); Special Warranty Deed at 23; Response to Nov. 15, 2011 Motion at 1–3 (not disputing this fact).

The relevant provisions of Article IV in the Special Warranty Deed are as follows:

(1) If the Grantee, its successors, assigns or purchasers for value, sells, assigns, transfers or conveys the Property (collectively a “Sale”), the Sale proceeds, less any expenses incurred by the Grantee as approved by the Grantor consisting of (1) reasonable transaction costs, (2) purchase price paid by the Grantee for the Property, (3) amounts previously paid by the Grantee to the Grantor under Paragraph (2) of this Rider since the previous sale of the Property, or (4) other costs paid by Grantee as approved by Grantor, i.e., costs of renovation and rehabilitation other than routine maintenance and repairs, shall be assigned to the Grantor in the following amount:

(a) For any sale which occurs between the date of the Deed and fifteen (15) years from the date of the Deed, one hundred percent (100%);

(b) For any sale which occurs between sixteen and twenty (16–20) years from the date of the Deed, seventy-five percent (75%);

(c) For any sale which occurs between twenty-one and thirty (21–30) years from the date of the Deed, fifty percent (50%); and

(d) For any sale which occurs over thirty (30) years from the date of the Deed, twenty-five percent (25%);

.....

(4) Grantee acknowledges that Grantee is financing the acquisition and renovation of the Real Property through Grantee's Issuance of certain multifamily housing revenue bond acquisition notes and bonds which are known as the Multi–Family Housing Revenue Bonds (Casa Hermosa Project Series 1994A) in the aggregate principal amount of $1.255 million (“Notes”) and Grantee's Multi–Family Housing Revenue Bonds (Casa Hermosa Project Series 1994B), in an aggregate principal amount not to exceed $1.6 million (“Bonds”).

In order to have such Notes and Bonds properly secured, Grantee must be able to grant a mortgage of first priority to secure payment of the Notes and the Bonds. Accordingly, and notwithstanding anything contained herein to the contrary, the rights afforded to the United States Department of Housing and Urban

[877 F.Supp.2d 1121]

Development as set forth in Section IV of this Special Warranty Deed shall be expressly subordinate to the terms of the mortgage granted to secure payment of such Notes and Bonds in the following particulars:

(a) In the event Grantee defaults in any obligations undertaken by it pursuant to that certain Indenture dated October 5, 1994, between Southeastern New Mexico Affordable Housing Corporation and First Security Bank of New Mexico, N.A., as Trustee, the First Supplemental Indenture thereto dated October 5, 1994, and the Second Supplemental Indenture, the terms of the Notes or the Bonds, or the Mortgage on the Real Property pledged to secure payment of same, and in the further event as a result of such default, Mortgagor exercises its rights to foreclose the mortgage on the Real Property, then Grantor will not be entitled to participate in any equity in the property until such time as all costs of foreclosure and rehabilitation costs together with the mortgage debt secured by the Real Property and incurred in conjunction with the Issuance of the Multi–Family Housing Revenue Bonds Anticipation Notes (Casa Hermosa Project Series 1994A) and the Multi–Family Housing Revenue Bonds (Casa Hermosa Project Series 1994B) have been paid in full.

(b) By executing this Special Warranty Deed, Grantor expressly consents to Grantee's granting of a mortgage to secure payment of the Bond Anticipation Notes and the Bonds hereinbefore referred to, and specifically stipulates and agrees that the issuance of such notes and bonds will not constitute a refinancing, nor will the Issuance of the bonds cause such transaction to fall within the provisions of Paragraph (VI2) of this Special Warranty Deed.

Special Warranty Deed at 25–26. Article VIII in the Special Warranty...