Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BROWN v. LYNN

February 12, 1975

JOHNNIE D. BROWN ET AL., PLAINTIFFS,
v.
JAMES T. LYNN ET AL., DEFENDANTS.



The opinion of the court was delivered by: Will, District Judge.

MEMORANDUM OPINION

  On October 11, 1974, this court issued an opinion on motions to
dismiss filed by the Department of Housing and Urban Development
(hereinafter HUD) and the mortgagee defendants, holding that,
although jurisdiction was proper over all defendants, only the
claim charging HUD with violation of its mandate to provide a
decent home and suitable living environment for every American
family constituted a valid cause of action. We specifically
rejected plaintiffs' contention in Count IV of their complaint
that the mortgagee defendants had violated legally binding
federal regulations by failing to pursue the prescribed
alternatives to foreclosure outlined in the HUD Guidebook, FHA G
4015.9. We stated in our opinion that:

   . . the HUD guidelines upon which the plaintiffs
  have particularly relied as a source for the
  "regulatory" scheme underlying the programs, have not
  been issued pursuant to the Administrative Procedure
  Act. As such, they only contain statements of policy
  and not regulations, per se, having the force and
  effect of law. Faggins V. Kassler & Co., 72 C 125
  (N.D. Ill., July 26, 1972). Statements of policy have
  no binding effect upon the mortgagees, FHA v. Morris
  Plan Co., 211 F.2d 756 (9th Cir. 1954), and are
  unenforceable in the courts. Faggins, supra. The
  guidelines, in their present form, therefore, cannot
  be used to require the mortgagees to pursue the
  alternatives listed therein, and, accordingly, do not
  give rise to a claim of a duty owed or a remedy. (385
  F. Supp. at 998).

On December 6, 1974, the plaintiffs filed a motion for clarification and reconsideration of this particular aspect of our opinion. Their challenge focused upon our holding that, before the Guidebook could be considered rules and regulations, and consequently binding upon the mortgagees, they had to be published in the Federal Register. Plaintiffs argue that, while it is true that § 553(b) of the Administrative Procedure Act (APA), requires notice of proposed regulations to be published in the Federal Register, § 553(a)(2) excludes "matter[s] relating to agency management or personnel or to public property, loans, grants, benefits, or contracts" from these notice requirements. Plaintiffs contend that the HUD Guide (FHA G 4015.9), which was the subject matter of plaintiffs' original complaint and our October 11, 1974 opinion, as well as the HUD Handbook (4191.1), which was issued in April, 1974, to supercede the Guide, are covered by the § 553(a)(2) exemption. In support, they rely principally upon Brown v. Housing Authority of City of Milwaukee, 471 F.2d 63 (7th Cir. 1972) and Housing Authority of City of Omaha, Nebraska v. United States Housing Authority, 468 F.2d 1 (8th Cir. 1972), which held the notice provisions of the APA inapplicable to circulars issued by HUD in conjunction with other federal housing programs to the extent that the agency has a proprietary interest in the property, funds, or contracts involved. Citing language from these decisions, plaintiffs argue that the Guide and Handbook "effectuate the government's stewardship" over the housing programs by setting forth obligations and sanctions arising out of the contract between HUD and the mortgagees, and that these publications should likewise be exempt under § 553(a)(2).

The plaintiffs further contend that, when a document is not published in the Federal Register, "whether it is a regulation . . . depend[s] in part on its contents and in part on agency intent ascertained by extrinsic evidence." Piccone v. United States, 407 F.2d 866, 186 Ct.Cl. 752 (Ct.Cl. 1969) (Judge Nichols, concurring). Where basic policies and procedures are couched in mandatory terms such as "shall," "will," and "must" they suggest an underlying agency intention to make the rules binding. The plaintiffs submit that the later HUD Handbook replaced the permissive language of the Guide with more precise, obligatory language.

They particularly point to statements in the Handbook which provide:

  It is to be noted that the Handbook sets forth, in
  considerable detail, procedural standards to be
  observed by those servicing HUD insured mortgages.
  (Introduction)
  Mortgagees with poor servicing practices will be
  identified and the failure of any mortgagee to
  satisfactorily correct any servicing deficiencies in
  HUD-insured mortgages in accordance with the
  provisions of this Handbook, may result in suspension
  or termination of the lender's acceptability as a
  HUD-approved mortgagee. (page 1)
  Foreclosures of a mortgage shall be undertaken only
  after the mortgagee or servicer has assured itself
  that the case has been handled in full accordance
  with the servicing practices outlined herein. (p. 44)
  Any of the relief measures discussed in the Chapter
  may be used and mortgagees are expected to refrain
  from foreclosure where it is determined that the case
  may be salvaged through the use of one or more
  procedures. (p. 47)

Plaintiffs contend that the clear import of such language, especially when compared with the precatory language of the Guide, evidences an intention by HUD to make the sections dealing with alternatives to quick foreclosures binding upon mortgagees. While we earlier stressed that HUD should have made these sections legally binding, and that their failure to do so has subverted the 203 and 235 low income housing programs, we are not persuaded by plaintiff's argument that either HUD's Guide or Handbook was intended to have the power and effect of law, and accordingly we deny plaintiffs' motion for reconsideration.

  We do not reach the merits of plaintiffs' challenge to the APA
publication requirement, for even if the Guide or Handbook were
arguably exempt under § 553(a)(2), HUD would still be bound by
its own regulations controlling publication. It is a fundamental
principle of administrative law that "when an administrative
agency promulgates rules to govern its proceedings, these rules
must be scrupulously observed . . . even when the defined
procedures are `generous beyond the requirements that bind such
agency'." Mandina v. Lynn, 357 F. Supp. 269 (W.D.Mo. 1973). See
also, Vitarelli v. Seaton, 359 U.S. 535, 79 S.Ct. 968, 3 L.Ed.2d
1012 (1959); Service v. Dulles, 354 U.S. 363, 77 S.Ct. 1152, 1
L.Ed.2d 1403 (1957); United States v. Shaughnessy, 347 U.S. 260,
74 S.Ct. 499, 98 L.Ed. 681 (1954). HUD's own "mini APA," 24
C.F.R. 10, provides in § 10.5 that HUD:

   . . will, although not required to do so,
  voluntarily publish in the Federal Register its rules
  and regulations . . . at least 30 days before their
  effective date to afford interested persons an
  opportunity to participate in the formulation of the
  final language of such rules and regulations through
  the submission of written data, views or
  arguments . . . The Department will not make such
  advance publication where the Secretary has
  determined in the particular case or class of cases
  that such advance publication and notice and public
  procedure are impracticable, unnecessary, or contrary
  to public interest.

In addition, although there is some ambiguity in the apparent forcefulness of certain language in the recently, issued HUD Handbook, the express purpose of the Handbook is clearly articulated in the Introduction:

  The purpose of this Handbook is to provide procedural
  information and policy guidelines for use by HUD
  approved mortgagees ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.