affidavit establishes that, apart from the acceleration,
defendants' delinquency as of August 31, 1983 was
Defendants resist plaintiff's motion for summary judgment on
the basis of the affirmative defenses raised in their answer.
These defenses assert that HUD has failed to pursue
alternatives to foreclosure, that foreclosure would harm
tenants of the property, and that HUD will not benefit from
The court is guided by United States v. Winthrop Towers,
628 F.2d 1028 (7th Cir. 1980). In that case the Court of Appeals
held that under 42 U.S.C. § 1441a HUD's decision to foreclose
may be reviewed to determine whether it is consistent with
national housing objectives. Id. at 1034-35 & n. 3. The
standard for review comes from the Administrative Procedure
Act, 5 U.S.C. § 706(2)(A), and judicial review "should be
narrowly limited to the question whether HUD's actions were
`arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.'" Id. at 1036. "[O]n a scale of 1
to 9, where 1 represents the narrowest and most constrained
discretion and 9 represents unlimited (or unreviewable)
discretion, then HUD's discretion in foreclosing a mortgage
granted, for example, by a large commercial developer would be
somewhere in the area of 7 or 8." Id. Defendants have argued
that Winthrop generally allows broader review than these
passages would seem to suggest, but they have not argued that
the 7 or 8 appropriate for a large commercial developer would
be inappropriate in this case.
Defendants' most substantial argument relates to the
exploration of alternatives to foreclosure. In May 1982
defendants proposed a workout plan including major repairs to
the property. (Donile Aff. ¶ 13) HUD rejected this plan two
weeks later. (Donile Aff. ¶ 14.) HUD's rejection letter, dated
June 10, 1982 and signed by Vernon A. Washington, adequately
explains that the proposed plan provided for unacceptably small
payments against defendants' delinquency, and that the
delinquency would grow, under the plan, to an unacceptable
size. Defendants observe that HUD made no counteroffer, but the
court agrees with plaintiff that the proposed plan did not
necessarily warrant a counteroffer. Defendants were free to
make a second proposal. Although defendants did not propose a
second workout plan, they did renew a proposal to convert their
buildings to condominium ownership. (Donile Aff. ¶¶ 12, 23.)
HUD plausibly could have concluded that condominium conversion
would not advance national housing goals materially. Finally,
some confusion over the timing of a rent increase, possibly
attributable to misdirected mail, does not undermine HUD's
The court holds that defendants have not raised a genuine
issue of fact to support their argument that HUD acted
arbitrarily or capriciously, or otherwise abused its
discretion, by not exploring alternatives to foreclosure. HUD
indicated its reasons for rejecting defendants' workout
proposal, and defendants could have made a second proposal
responsive to HUD's concerns. HUD was not obligated to
formulate its own plan, at least on the facts presented in
Defendants' other affirmative defenses also must fail.
Defendants argue that they are managing the complex well, but
good management is not enough to make foreclosure
inappropriate, if a sizable delinquency is accumulating. The
same must be said about defendants' demonstrated concern for
their tenants' well-being. Defendants' argument that
foreclosure would be harmful is supported only by defendants'
suggestions for returning to financial stability. (Donile Aff.
Although plaintiff is the movant, defendants are in the
position of urging that HUD has abused its discretion. Having
reviewed the parties' supporting exhibits, the court concludes
that defendants have raised no genuine issue as to any
material fact. Foreclosure, when appropriate, is part of the
statutory scheme, and HUD has not abused its discretion in
deciding to foreclose.
In Winthrop the Court of Appeals stated explicitly that a
summary judgment motion frequently would be an appropriate
mechanism for testing affirmative defenses such as those raised
in this case. 628 F.2d at 1036. Plaintiff's motion for summary
judgment is granted.
Plaintiff shall submit a draft judgment order. The court
notes that there has been some confusion as to the proper name
of the defendant trust beneficiary. (See, e.g., defendants'
memo p. 1 n. 1.) Along with its draft judgment order,
plaintiff may present any motion necessary to correct this
problem. The court expects that plaintiff and defendants will
be able to agree on a solution.
It is so ordered.
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