YORK ASSOCIATES v. Secretary of HUD, Civ. A. No. 91-3094(CRR).

• Decision Date: 01 March 1993
• Docket Number: Civ. A. No. 91-3094(CRR).
• Citation: 815 F. Supp. 16
• Parties: YORK ASSOCIATES, INC., Plaintiff, v. The SECRETARY OF HOUSING & URBAN DEVELOPMENT, et al., Defendants.
• Court: U.S. District Court — District of Columbia

815 F. Supp. 16

YORK ASSOCIATES, INC., Plaintiff, v. The SECRETARY OF HOUSING & URBAN DEVELOPMENT, et al., Defendants.

Civ. A. No. 91-3094(CRR).

United States District Court, District of Columbia.

March 1, 1993.

John J. Knapp of Powell, Goldstein, Frazer and Murphy, Washington, DC, for plaintiff.

Jay Stephens, U.S. Atty., John Bates and Jeffrey T. Sprung, Asst. U.S. Attys., District of Columbia, for defendants.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

The Plaintiff York Associates ("York") brought this action against the Defendants the Department of Housing and Urban Development ("HUD") and the Government National Mortgage Association ("GNMA") pursuant to violations of contracts and agreements among the parties.¹ This action was transferred to the United States Court of Federal Claims by this Court on February 17, 1993 with the voluntary consent of the parties. Following the withdrawal of the Plaintiff's consent, the Court vacated its transfer order on February 24, 1993. The Court now retains the action and considers the Defendants' Motion to Dismiss, which, following voluminous briefs by both sides and a status conference, is ripe for decision. The Defendants move to dismiss the Plaintiff's eleven counts for lack of subject matter jurisdiction and sovereign immunity under Fed. R.Civ.P. 12(b)(1) and (6) arguing only the United States Court of Federal Claims has jurisdiction over the Plaintiff's claims. As Justice Scalia, then Circuit Judge, remarked "if there is a less profitable expenditure of the time and resources of federal courts and federal litigants than resolving a threshold issue of which particular federal court should have jurisdiction, it does not come readily to mind." Sharp v. Weinberger, 798 F.2d 1521, 1522 (D.C.Cir.1986).

For the reasons set forth herein, the Court holds that it does not have subject matter jurisdiction as to Counts II, III, IV,² V, and VI of the Plaintiff's Complaint and grants the Defendants' Motion to Dismiss as to those counts excepted in the footnote below. The motion is denied as to all other claims and the Court will retain them.

I. BACKGROUND

This case involves several loan contracts between the Plaintiff York Associates and the Defendant, Department of Housing and Urban Development (HUD), and guaranty agreements among York, HUD and the Defendant, Government National Mortgage Association (GNMA). The terms and operations of these loans is very complicated, but only a limited description of the facts is necessary to decide this motion. The dispute is essentially whether HUD must pay interest on cash reimbursements allegedly made to York (and to GNMA on behalf of York) pursuant to the terms of the loan contracts.

The issue raised by the Defendants' Motion to Dismiss is whether violations of federal statutes and regulations, which were incorporated into the terms of the contracts at issue in this case, state a cognizable claim in federal district court.

York is a multifamily housing mortgage lender, which issued mortgage loans coinsured by the Department of Housing and Urban Development (HUD) pursuant to the National Housing Act (NHA), 12 U.S.C. § 1701 et seq. The multi-family housing loans in this case were made by York which were co-insured by HUD and guaranteed by GNMA. York sought reimbursement following default and cancellation of the loans at various times between April 1988 and April 1990. When a borrower defaults on loans to a lender such as York, that lender allegedly may, under prescribed conditions, elect to seek reimbursement from HUD (called a "default" of the lender). It allegedly may also select reimbursement payments in debentures or in cash. If payment is made in debentures, interest is due from the date of the lender's default.³ The payments which are the subject of this litigation, were made in cash and did not include an amount equal to the interest on debentures. The Plaintiff asserts that cash payments must include the interest pursuant to 12 U.S.C. § 1735d(a)⁴ and seeks to recover that amount in this case.

Additionally, under the terms of some of these loans, GNMA becomes the successor-in-interest to the lender who is in default. In that case, HUD makes reimbursement payments to GNMA, and HUD looks to the lender to make up the shortfall in funds. HUD has made a demand upon York for such a shortfall. It is the Plaintiff's position that the shortfall for which HUD has demanded money from York is the result of HUD withholding interest. GNMA is named as a defendant, because the Plaintiff alleges that GNMA also caused this shortfall by requesting payment in cash when it knew that HUD makes lesser payments in cash than it does when payment is made in debentures.

The Plaintiff seeks damages and declaratory and injunctive relief from HUD and GNMA.

II. FOR EACH OF THE PLAINTIFF'S CLAIMS, THERE MUST BE SUBJECT MATTER JURISDICTION AND A WAIVER OF SOVEREIGN IMMUNITY IN THE DISTRICT COURT

Although the issues of sovereign immunity waiver and subject matter jurisdiction are closely related, they are two separate requirements which must be satisfied for each claim. When an action involving a contract is brought against an agency of the United States government, the key inquiry for disposition of these two questions is whether the source of rights which the Plaintiff asserts is the contract, or if the source is the laws and Constitution of the United States. Transohio Savings Bank v. Director, OTS, 967 F.2d 598 (D.C.Cir.1992).

A. This Court Has No Jurisdiction Over Plaintiff's Claims Which Allege Breach of Contract and Seek Monetary Damages, Because the United States Court of Federal Claims Has Exclusive Jurisdiction Under the "Tucker Acts."

The Plaintiff has explicitly stated a claim for breach of contract and prayed for damages in excess of $10,000 in Counts II, IV, V, and VI of its Complaint. The Plaintiff claims that violation of the contracts and agreements creates federal question subject matter jurisdiction.⁵ However, federal question subject matter jurisdiction exists only for "civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The contracts and guaranty agreements among the parties are not laws or treaties of the United States, and accordingly, a violation of those agreements alone does not create a federal question. There is no other statute that provides subject matter jurisdiction for the Plaintiff's breach of contract claims in a United States District Court. In fact, jurisdiction over contract and damages claims for over $10,000 is granted exclusively to the United States Court of Federal Claims by the "Tucker Acts." 28 U.S.C. §§ 1346(a)(2) and 1491(a)(1).⁶ See Sharp v. Weinberger, 798 F.2d 1521, 1523 (D.C.Cir.1986). Therefore, this Court cannot adjudicate these claims and need not decide whether sovereign immunity has been waived as to these claims, because a finding that the Court has jurisdiction is a threshold requirement that must be met before considering other grounds for dismissal. Jones v. State of Georgia, 725 F.2d 622, 623 (11th Cir.1984).

B. The Plaintiff Has Established Federal Question Subject Matter Jurisdiction by Invoking Federal Statutes and Alleging Claims Under Them.

The Plaintiff's remaining claims in Counts I, III, VIII, IX, X, XI, XII and IV (insofar as it makes a claim for injunctive relief under the APA) allege federal question subject matter jurisdiction through federal statutes and regulations, which are incorporated into the documents in questions in this case.⁷ The Complaint alleges claims under the National Housing Act (NHA), 12 U.S.C. § 1735d(a), and the Administrative Procedure Act (APA), 5 U.S.C. §§ 702, 704.⁸ The provisions of the relevant sections of the NHA were incorporated into the terms of the contracts here involved. It is hornbook law that a complaint need only contain an allegation of a non-frivolous claim made under federal law in order to defeat a motion to dismiss for lack of subject of matter jurisdiction. Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). Here, the Plaintiff has alleged violations of the National Housing Act and injury under the APA. These allegations are sufficient to establish federal question subject matter jurisdiction under 28 U.S.C. § 1331.

C. Claims for Injunctive and Declaratory Relief Brought Under Federal Statutes Are Not Contract Claims or Claims For Money Damages, and Are Therefore Properly Brought in the United States District Courts

The defendants argue that the district court does not have subject matter jurisdiction over these claims, because the statutory violations are really violations of the terms of the contract and are therefore breach of contract claims, which may only be brought in the United States Court of Federal Claims. The defendants make the same argument to claim that there is no waiver of sovereign immunity.⁹ The APA § 702 does not waive immunity for damages actions and the Tucker Act provides a waiver of sovereign immunity only in the Court of Federal Claims.

These two issues are both resolved by deciding whether "despite the presence of a contract, plaintiffs' claims are founded only on a contract, or whether they stem from a statute or the Constitution." Transohio 967 F.2d at 598. This Court is aware of the law of this Circuit providing that the Plaintiff may not circumvent the jurisdiction of the Court of Federal Claims simply by labelling contract claims as statutory violations. Sharp v. Weinberger, 798 F.2d 1521, 1523 (D.C.Cir.1986). Therefore, the question presented still is whether these actions really are contract claims for damages or are they based on the laws or Constitution of the United States.

The Defendants argue, in the first, instance that because the relief requested would compel the payment of money, this action is one for damages. The Supreme Court has explicitly rejected this argument in Bowen v. Massachusetts, 487 U.S. 879, 108...