Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-11-05116/USCOURTS-caDC-11-05116-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

---

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 2012 Decided April 6, 2012

No. 11-5116

NBC-USA HOUSING, INC., TWENTY-SIX,

APPELLANT

v.

SHAUN DONOVAN, IN HIS CAPACITY AS SECRETARY OF THE

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND

ROY S. LILLEY, IN HIS CAPACITY AS FORECLOSURE

COMMISSIONER FOR THE DEPARTMENT OF

HOUSING AND URBAN DEVELOPMENT,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:09-cv-02245)

Scott W. Reid argued the cause for appellant. With him on

the briefs were Robert K. Magovern and Dexter R. Hamilton.

David C. Rybicki, Assistant U.S. Attorney, argued the cause

for federal appellees. With him on the brief were Ronald C.

Machen Jr., U.S. Attorney, and R. Craig Lawrence, Assistant

U.S. Attorney.

Before: HENDERSON, ROGERS and KAVANAUGH, Circuit

Judges.

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 1 of 8
2

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: This is an appeal from the denial of

declaratory and injunctive relief against the foreclosure sale of

Fortner Manor, an apartment complex for elderly and disabled

low-income residents, by the Department of Housing and Urban

Development (“HUD”). The complex, funded under Section

811 of the Cranston-Gonzalez National Affordable Housing Act

(“Section 811”), 42 U.S.C. § 8013 (2006), was severely

damaged by Hurricane Katrina. Upon concluding that NBCUSA Housing, Inc., Twenty-Six (“NBC”) had failed to make

appropriate arrangements to restore the complex for occupancy,

as required under its Section 811 agreements, HUD declared

NBC in default on its mortgage in December 2008 and initiated

foreclosure proceedings in May 2009. Following the district

court’s grant of summary judgment and denial of injunctive

relief against the foreclosure sale, HUD resumed foreclosure

proceedings. In November 2011, HUD sold the property to a

third party not before the court. Consequently, the court cannot

grant NBC effective relief, and we dismiss the appeal as moot.

I.

Section 811 authorizes HUD “to provide assistance to

private, nonprofit organizations to expand the supply of

supportive housing for persons with disabilities” in two ways. 

42 U.S.C. § 8013(b)(2). First, HUD can provide a capital

advance that “shall bear no interest[,] and its repayment shall not

be required so long as the housing remains available for verylow-income persons with disabilities.” Id. § 8013(d)(1). “To

ensure its interest in the capital advance,” HUD requires a

receiving organization to sign a mortgage agreement, a

regulatory agreement, and a use agreement. 24 C.F.R.

§ 891.170(a) (2011). Second, HUD can provide project rental

assistance in the form of “monthly payments to cover any part

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 2 of 8
3

of the costs attributed to units occupied . . . by very low-income

persons with disabilities that is not met from project income.” 

42 U.S.C. § 8013(d)(2). In exchange for Section 811 assistance,

an organization must agree to operate the housing project for at

least forty years. See id. § 8013(e)(1). Throughout this time,

HUD requires the organization to ensure that the housing

remains “decent, safe, sanitary and in good repair.” 24 C.F.R.

§ 5.703 (2011). In the event the organization breaches a

covenant or condition in its mortgage, HUD can foreclose on the

property in accordance with the Multifamily Mortgage

Foreclosure Act of 1981 (“Mortgage Foreclosure Act”), 12

U.S.C. §§ 3701–17 (2006).

NBC is a private non-profit organization of the National

Baptist Convention, USA, Inc. In September 1999, NBC signed

a Section 811 mortgage with HUD to fund the construction of

Fortner Manor, an apartment complex for elderly and disabled

low-income residents, located in New Orleans. Pursuant to the

mortgage agreement, NBC received a capital advance of

$1,535,700, and HUD retained a security interest in Fortner

Manor. In the event of a monetary default of more than thirty

days or a “breach of any other covenant herein stipulated,” HUD

could accelerate NBC’s obligation to repay the entire principal

sum and would “have the right immediately to foreclose” on the

mortgage. NBC-HUD Mortgage Agreement ¶ 21, Sept. 29,

1999. Incorporated by reference was a regulatory agreement,

which required NBC to maintain Fortner Manor “in good and

substantial repair and condition” and provided that, upon

notification, NBC would have thirty days to remedy any

violation. NBC-HUD Regulatory Agreement ¶¶ 8, 15, Sept. 29,

1999. Upon NBC’s failure to do so, HUD could declare a

default of the regulatory agreement, declare the entire

indebtedness on the mortgage “immediately due and payable[,]

and then proceed with the foreclosure of the mortgage.” Id. ¶

15(c). NBC also entered into a project rental assistance contract

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 3 of 8
4

(“PRAC”) with HUD, which was incorporated by reference in

the regulatory agreement and required NBC “to maintain and

operate [Fortner Manor] . . . to provide decent, safe, and sanitary

housing.” NBC-HUD Project Rental Assistance Contract

§ 2.5(a), Aug. 1, 2001. 

Fortner Manor suffered extensive damage from Hurricane

Katrina in August 2005 and has since remained uninhabitable. 

HUD and NBC engaged in a series of communications regarding

NBC’s plans and funding for the rehabilitation of Fortner

Manor. After two years had passed, HUD concluded that

NBC’s responses to its requests for information were inadequate

and began sending NBC notices of regulatory agreement

violations; the notices gave NBC thirty days to submit an

acceptable plan and forewarned NBC that its failure to remedy

the violations could lead to a declaration of default allowing

HUD to “seek any and all available remedies, including but not

limited to, acceleration of the outstanding principal

indebtedness, foreclosure or any other appropriate remedies,” 

Notice of Regulatory Agreement Violation, Aug. 7, 2007; see

also Notice of Regulatory Agreement Violation, Nov. 8, 2007. 

In March 2008, HUD sent NBC a notice of default on the

PRAC, stating NBC was in default of the Regulatory Agreement

and the PRAC and that HUD would “pursue any and all

remedies available to it without further notice.” Notice of

Default of PRAC, Mar. 5, 2008. HUD sent a similar notice to

NBC on December 18, 2008, this time declaring that the entire

indebtedness on the mortgage was due and payable, and giving

NBC twenty-one days to provide a statement why foreclosure

should not proceed or seven days to request a meeting with

HUD, or foreclosure proceedings would be instituted without

further notice. No such response from NBC appears in the

record. 

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 4 of 8
5

In May 2009, exercising its authority under the Mortgage

Foreclosure Act to initiate nonjudicial foreclosure proceedings

against Section 811 projects in default on their mortgages, see

12 U.S.C. §§ 3705, 3707, HUD appointed Roy S. Lilley as

foreclosure commissioner to conduct the foreclosure sale of

Fortner Manor, see id. §§ 3704, 3707. Jim Hotard Properties,

LLC submitted the winning bid at the foreclosure sale held on

July 28, 2009; it transferred its interest in Fortner Manor to

Lapeyrouse Investments, LLC. Because NBC threatened suit,

however, Lapeyrouse Investments was unable to obtain title

insurance and, consequently, the loan necessary to close on the

sale. NBC filed suit in the federal district court on November

25, 2009, five days prior to the next scheduled foreclosure sale,

which yielded no bids on Fortner Manor.

In its complaint, NBC sought declaratory judgments that

HUD had discriminated against NBC and unlawfully singled out

Fortner Manor for foreclosure, had violated its own regulations,

and had otherwise acted arbitrarily and capriciously in

proceeding with the foreclosure sale. NBC also requested 

injunctions against the transfer of the property “pursuant to the

illegal non-judicial foreclosure.” Compl. at 17 (requesting relief

for Count IV). The district court dismissed the complaint as to

defendants Jim Hotard Properties, LLC, NBC-USA Housing,

Inc., Twenty-Six v. Donovan, 741 F. Supp. 2d 55, 61 (D.D.C.

2010), and Roy S. Lilley, NBC-USA Housing, Inc., Twenty-Six

v. Donovan, 774 F. Supp. 2d 277, 294 (D.D.C. 2011), for lack

of personal jurisdiction. On March 31, 2011, the district court

dismissed the case in its entirety, ruling that NBC’s

discrimination and singling-out claims failed to state a claim,

HUD was entitled to summary judgment on NBC’s remaining

claims, and, accordingly, NBC was not entitled to a permanent

injunction against the foreclosure sale, see NBC-USA Housing,

774 F. Supp. 2d at 296–98, 309–10 & n.29. NBC timely

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 5 of 8
6

appealed; however, it did not seek a stay pending appeal in

either the district court or this court. 

HUD recommenced foreclosure proceedings against Fortner

Manor in August 2011. At the foreclosure sale held on October

6, 2011, James S. Hotard, Jr. submitted the winning bid on

behalf of Elderly Housing of America, LLC (“EHA”). See

Supp. Decl. Roy S. Lilley ¶¶ 10–11 (filed Dec. 23, 2011). On

November 21, 2011, Lilley, who had been reappointed

foreclosure commissioner, “signed and finalized” a foreclosure

deed “conveying all rights, title, and interest” in Fortner Manor

to EHA. Id. ¶ 11; see 12 U.S.C. §§ 3713, 3714. The foreclosure

deed directed the Recorder of Mortgages of Orleans Parish,

Louisiana, to “cancel and erase” all listed inscriptions relating

to NBC’s Section 811 mortgage on Fortner Manor and its

default thereon. Lilley Supp. Decl. Ex. B at 3. The Mortgage

Foreclosure Act, in turn, required the Recorder of Mortgages “or

other appropriate official of the county or counties in which

[Fortner Manor] is located” to “accept[] for recordation” the

foreclosure deed “and any other instruments submitted for

recordation in relation to the foreclosure of the security

property.” 12 U.S.C. § 3714(b). 

II.

Article III, Section 2 of the Constitution authorizes federal

courts to adjudicate only “actual, ongoing controversies.” Honig

v. Doe, 484 U.S. 305, 317 (1988). Accordingly, federal courts

may not “issu[e] advisory opinions or ‘decid[e] questions that

cannot affect the rights of litigants in the case before them.’” 

Pub. Utilities Comm’n of Cal. v. FERC, 236 F.3d 708, 713 (D.C.

Cir. 2001) (quoting Better Gov’t Ass’n v. Dep’t of State, 780

F.2d 86, 90–91 (D.C. Cir. 1986)). If, pending an appeal, an

“intervening event” makes it impossible for the court to grant a

prevailing party “any effectual relief whatever,” the appeal must

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 6 of 8
7

be dismissed as moot. Calderon v. Moore, 518 U.S. 149, 150

(1996) (quoting Mills v. Green, 159 U.S. 651, 653 (1895))

(internal quotation marks omitted).

HUD’s foreclosure sale of Fortner Manor is such an

intervening event. NBC did not ask the district court to issue an

injunction pending appeal, see FED.R.CIV. P. 62(c), or move in

either the district court or this court for a stay pending appeal,

see FED. R. APP. P. 8(a)(1)(A), (2). Nor did the appeal itself

operate as a stay of the district court’s judgment entered March

31, 2011, or of the foreclosure proceedings. See FED.R.CIV. P.

62(a)(1); Chesapeake W. Ry. v. Jardine, 8 F.2d 794, 795 (D.C.

Cir. 1925). Thus, HUD was not barred from proceeding with

the foreclosure sale of Fortner Manor on October 6, 2011, at

which EHA submitted the highest bid. The execution of the

foreclosure deed on November 21, 2011, rendered the

foreclosure sale final and concluded HUD’s involvement in the

transfer of Fortner Manor to EHA, leaving no further action by

HUD for a court to enjoin. 

Because HUD has sold Fortner Manor to a third party not

before the court, NBC’s appeal of the denial of its “request for

an injunction against the sale is [] moot and accordingly beyond

our jurisdiction.” Kessler v. Surface Transp. Bd., 637 F.3d 369,

372 (D.C. Cir. 2011) (citing Calderon, 518 U.S. at 150; Bunn v.

Werner, 210 F.2d 730, 731 (D.C. Cir. 1954)). Where “all of the

parties to the transaction are before the court,” it may remain

possible for the court to grant effective relief notwithstanding

the completion of the transaction sought to be enjoined, for “[i]f

unraveling the transfer is necessary after the [] court decides the

merits, it will be within the court’s power to do so.” Lemon v.

Geren, 514 F.3d 1312, 1316 (D.C. Cir. 2008) (citing Porter v.

Lee, 328 U.S. 246, 251 (1946); Indus. Bank of Wash. v.

Tobriner, 405 F.2d 1321, 1323 (D.C. Cir. 1968)). The

purchaser, EHA, is not before the court; therefore, it would not

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 7 of 8
8

be within the court’s power to unravel the sale of Fortner Manor

were NBC ultimately to prevail on the merits of its claims. Nor

can NBC’s requests for declaratory judgment shore up the

court’s ability to grant effective relief. Where an intervening

event renders the underlying case moot, a declaratory judgment

can no longer “affect[] the behavior of the defendant towards the

plaintiff,” Hewitt v. Helms, 482 U.S. 755, 761 (1987) (emphasis

omitted), and thus “afford[s] the plaintiffs no relief whatsoever,”

Rhodes v. Stewart, 488 U.S. 1, 4 (1988). NBC’s response —

that mootness is premature because “Fortner Manor still is

deeded to NBC and title still rests with NBC,” Reply Br. 2, and

HUD could not sell a property on which it does not have good

title — is irreconcilable with the terms of its Section 811

agreements with HUD, the foreclosure deed, and the Mortgage

Foreclosure Act. 

Accordingly, we dismiss the appeal as moot and do not

reach the merits of NBC’s appeal.

USCA Case #11-5116 Document #1367468 Filed: 04/06/2012 Page 8 of 8