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BURROUGHS v. HILLS

March 8, 1983

LEO BURROUGHS, JR., ESTHER ROBINSON, DONALD SCHATZ, EARL WHATLEY, STEVEN GOLDSMITH, ANTON SEALS, ISHMAEL SEYE, LIZZIE MAE BONNER, AND THE FIVE BLOCK CLUB, PLAINTIFFS,
v.
CARLA HILLS, SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, JOHN WANER, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE CHICAGO AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, MARTIN ROGAN, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS DEPUTY DIRECTOR OF THE CHICAGO AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, WILLIAM MILLER, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE HOUSING MANAGEMENT DIVISION OF THE CHICAGO AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, JOHN DAVIS, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS DIRECTOR OF PROPERTY DIVISION OF THE CHICAGO AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, STANLEY C. NYKIEL, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS REALTY SPECIALIST IN THE HOUSING MANAGEMENT DIVISION OF THE CHICAGO AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; AND SEWARD RIST, DEFENDANTS.



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

  MEMORANDUM AND ORDER

This action was instituted in 1976, charging various officials of the United States Department of Housing and Urban Development ("HUD") with violations of state and federal law in connection with the maintenance of HUD-owned property in Chicago. It is now before the court on the parties' cross-motions for summary judgment upon a stipulation of facts.

STIPULATION OF FACTS

The building that is the subject of this lawsuit is a three-story residence located at 7228 South Coles Avenue in Chicago. HUD acquired title to the property in November 1974, after entry of a decree of foreclosure on the owner's mortgage. During the period of HUD's ownership the building was uninhabited, boarded up, and in a state of disrepair. The building had structural problems, including a cracked foundation, dilapidated porch and steps, unstable floors, and broken windows. It was infested with rodents and debris was scattered around the building. There was neither a night watchman on the premises nor a fence around the building, as required by sections 39-13 and 99-4.1 of the Municipal Code for the City of Chicago ("municipal code"). During the period of its ownership HUD expended $285.00 in repairs on the building. In addition, pursuant to an Area Management Broker Contract, it paid defendant Seward Rist ("Rist") $17.50 per month to oversee the building.

HUD's disposition policy with respect to one- to four-unit buildings at the time it acquired the building in question was to maximize sales on a "cash only, as-is, without warranty" basis. When, in August 1975, the late Mayor Richard J. Daley objected to this policy, HUD agreed to place a moratorium on such sales of HUD-owned Chicago property pending development of a "Chicago Plan". Under the subsequently developed Chicago Plan, a purchaser of certain HUD-owned properties paid, in addition to the purchase price, $2,000.00 to be placed in an escrow fund and to be refunded to the purchaser upon certification by a City inspector that there were no major violations of the municipal code. The building in question was ultimately classified as eligible for disposition by this method.

HUD had a second property disposition program which operated in conjunction with the Chicago Plan. Under the Property Release Option Program ("PROP"), HUD would sell a qualifying building for $1.00 to the City and the City in turn would convey it to a not-for-profit organization for rehabilitation.

Shortly after HUD's acquisition of the property in question, Rist reported that it had a fair market value of $40,000.00. HUD then commissioned a repair specification study which indicated that, in March 1975, $17,389.00 in repairs would be necessary to bring the building into compliance with the municipal code. A study commissioned by the South Shore Senior Citizens Center in April 1976 indicated that it would cost $41,581.25 to rehabilitate the building. In May of 1976, Charles J. Shepard, of the City of Chicago Department of Urban Renewal, inspected the building and determined that it would cost $40,718.40 to bring the building into compliance with the occupancy requirements of the municipal code.

In March 1975 plaintiff Leo Burroughs wrote on behalf of plaintiff Five Block Club, an organization composed of individuals concerned with securing a safe, comfortable and healthy community environment and with advancing the community's interests, to defendant John Waner, Director of the Chicago Area Office of HUD, expressing concern over the deterioration of HUD-owned properties in the area. In April, seven members of the Five Block Club met with Waner and another HUD official to present them with a petition signed by 107 of the members of the Club and by defendant Rist, which requested immediate sale of the Coles property to a buyer who would rehabilitate the building. After this meeting HUD expended $40.00 to re-secure four windows in the building.

Shortly after the meeting Rist informed the Five Block Club, by letter, that the building was for sale and requested that members immediately report problems with the building to Rist or to the police. Copies of this letter were sent to Waner and defendant Stan Nykiel, a realty specialist in the Property Disposition Branch of the Housing Management Division of HUD's Chicago Area Office. Subsequently, several members communicated concern about the building to Rist. In June of 1975 defendant John Davis, Director of Property Disposition for HUD's Chicago Area Office, wrote to members of the Five Block Club expressing appreciation for their concern about the building.

In April of 1976 the City of Chicago requested that HUD keep the building off the real estate market for possible purchase by the City under PROP. Sometime in July, 1976, pursuant to PROP guidelines, HUD sold the building to the City for $1.00 and the City reconveyed it to the South Shore Senior Citizens Center for rehabilitation.

THE LITIGATION

Before HUD disposed of the building, the Five Block Club and eight of its members (Leo Burroughs, Jr., Esther Robinson, Donald Schatz, Earl Whatley, Steven Goldsmith, Anton Seals, Ishmael Seye, and Lizzie Mae Bonner) filed suit against defendants Rist, Waner, Nykiel, and Davis, as well as Carla Hills, then Secretary of HUD, Martin Rogan, Deputy Director of HUD's Chicago Area Office, and William Miller, Director of the Housing Management Division of HUD's Chicago Area Office. The complaint charged that these defendants had violated their duties under the National Housing Act ("NHA"), 12 U.S.C. § 1701 et seq., and HUD regulations to maintain and repair HUD-owned properties. It also charged them with violations of Illinois statutes and Chicago's municipal code. The original complaint sought an injunction against these continuing violations of federal, state, and local law. Plaintiffs also requested money damages for the hazards to their health, safety, and welfare allegedly resulting from the improper maintenance of the building.

After HUD sold the building plaintiffs amended their complaint, deleting the request for injunctive relief. Defendants subsequently filed a motion to dismiss for failure to state a claim, and both plaintiffs and defendants moved for summary judgment. Judge Leighton denied all motions, concluding that plaintiffs had stated a claim under the NHA and HUD regulations, and that the existence of material factual issues as to the condition of the building precluded summary judgment. He did not reach the question whether federally-owned property is subject to state and local housing laws. Burroughs, et al. v. Hills, et al., No. 76 C 1640 (N.D.Ill. October 11, 1978).*fn1

THE MOTIONS FOR SUMMARY JUDGMENT

A. Introduction

The stipulation of facts submitted by the parties makes it abundantly clear that HUD owned a building in Chicago, as a result of foreclosure, for a 19-month period beginning in 1974 and continuing into 1976; that it contracted routine maintenance of the building to defendant Rist; and that the building, due to neglect and vandalism, substantially deteriorated during the period of HUD ownership. The building was then sold to a non-profit organization for rehabilitation. The parties have stipulated that the total damages recoverable, assuming liability, is $1,000.00 against the HUD defendants and $350.00 against Rist. This suit has survived the conveyance and subsequent rehabilitation of the property primarily as a vehicle to determine whether neighbors of blighted HUD-owned property have a cause of action for damages as a means of compelling HUD and its ...


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