Court Opinion

ID: 8947077
Source: CourtListenerOpinion
Date Created: 2022-11-27 08:27:37.780714+00
Date Added: 2024-06-11T17:09:52.526169
License: Public Domain

McMILLIAN, Circuit Judge, dissenting.
I respectfully dissent. The district court lacked legal or equitable power to order HUD to pay for the full-scale physical rehabilitation of the Little Earth housing project. HUD is merely a mortgagee seeking foreclosure and its financial responsibility for the project is accordingly limited. HUD cannot be required to fund work beyond (1) what it has voluntarily agreed to pay for work already completed, (2) what is reasonably necessary to preserve the property for resale, e.g., emergency repairs, and (3) what is needed to protect the health and safety of tenants. HUD acknowledges that it is obliged to pay for work within these parameters. This court should not, either by directly affirming the district court orders of August 5, August 14, September 5, September 12, and October 3, 1985, or by applying the doctrine of the law of the case, require more.
HUD has the statutory authority under § 207(k) of the National Housing Act, 12 U.S.C. § 1713(k), to fund nonessential rehabilitation work, but this is a decision within the agency's discretion. The statute creates no enforceable right to compel HUD to fund such work. Thus, the proper standard of judicial review of HUD’s decision not to undertake the full-scale physical rehabilitation of the Little Earth housing project is the “arbitrary and capricious” standard of 5 U.S.C. § 702. Under this standard, HUD’s determination that the full-scale physical rehabilitation would not be cost-effective or promote national housing policy because the investment could not be recouped at resale is rational. See United States v. Victory Highway Village, 662 F.2d 488 (8th Cir.1981) (HUD has broad discretion in determining how to pursue goals of National Housing Act).
The majority contends that by agreeing to the appointment of a receiver, HUD relinquished this discretionary authority and subjected itself to the district court’s equitable powers. Slip op. at 19. Even if this is true, the district court plainly abused its discretion in defining the responsibilities of the receiver and in allocating the expenses of the receivership.
HUD requested appointment of a receiver for the Little Earth housing project to assure that the property would not continue to deteriorate and that basic services such as utilities would be continued after the agency’s planned foreclosure was enjoined pending resolution of underlying civil rights claims. Contrary to the majority’s conclusion, however, a court exceeds its equitable authority by ordering a mortgagee to pay receivership expenses in excess of the property’s value merely because the mortgagee requests appointment of a receiver where no special circumstances are present that make such an imposition of costs equitable. Atlantic Trust Co. v. Chapman, 208 U.S. 360, 375-76, 28 S.Ct. 406, 411, 52 L.Ed. 528 (1908). Where the mortgagee is a government agency, it is even more imperative that the court exercise its equitable authority over a receiver within the bounds of financial reasonableness. The public trust is injured by requiring HUD to pour into only one of its many projects massive amounts of the already scarce resources allocated to implement housing policy nationwide.
The district court justified the scope of the rehabilitation it had ordered as necessary to protect the health and safety of Little Earth residents and to preserve the property. Little Earth of United Tribes, Inc. v. HUD, No. 3-82-1096, slip op. at 8, 17, 20 (D.Minn. Oct. 3, 1985) (October 3 order). But HUD has already voluntarily agreed to fund repairs within these parameters, which are defined by paragraph 10(f) of the receivership order. The district court’s factual findings thus do not justify an order for further and nonessential rehabilitation, which the district court believes would ensure the long term “viability” of the project and would protect rehabilitation work already completed. October 3 order *1445at 17, 20. Because the remedy ordered by the district court exceeds the scope that can be justified by its factual findings, I would conclude the district court abused its sound judicial discretion in ordering HUD to fund rehabilitation beyond that specified in paragraph 10(f).
The majority, however, avoids basing its decision on the merits of the district court’s orders by invoking the doctrine of law of the case. Supra at 1441. Because HUD attack. Supra at 1437-38. The majority interprets the 1985 orders challenged in this appeal to be mere clarifications of the November 8 order because the earlier order “implicitly raised and resolved” the issue HUD now appeals as to whether the district court could order funding of rehabilitation of this scope. Supra at 1440. The majority acknowledges that the law of the case doctrine is a discretionary principle, invoked by a court to protect the settled expectations of parties or to promote judicial efficiency. Supra at 1440 (citations omitted). The court concludes that because Westminster has already undertaken extensive rehabilitation of Little Earth under the November 8 order, it would be unjust to not consider that order final. Id.
This rationale is flawed. Westminster cannot reasonably claim to have relied on the earlier order. Since September 1985, the receiver has been stayed by order of this court from contracting for future rehabilitation work and, in fact, has not contracted for such work. HUD has agreed to pay for all rehabilitation work completed to date. Thus, there can be no claim that the receiver justifiably relied on the November 8 order such that reopening the issues implicitly settled in that order would do an injustice.
Even if the doctrine of law of the case were properly invoked in this case, the majority fails to apply the “changed circumstances” exception to that doctrine’s finality. The majority holds that HUD failed to show “extraordinary” changed circumstances that would justify its failure to timely appeal the November 8 order. Supra at 1441. “While the monetary effect of the November 8 order may not have been felt by HUD until the onset of the so-called changed circumstances,” writes the majority, “the legal meaning of the order and its ramifications were evident the day the order was issued.” Supra at 1441.
This statement misrepresents the course of events since entry of the November 8 order. That order authorized the receiver to “begin rehabilitation,” which the receiver estimated at that time would cost between $1.5 and $2.8 million. At the time of this appeal, the scope of the rehabilitation contemplated had evolved into a plan for full-scale physical rehabilitation of the housing project and the most recent estimates put the cost of such full-scale rehabilitation at approximately $7 million. The district court itself has acknowledged that the price has increased due to expansion in the scope of the work the receiver believes is necessary. October 3 order at 15. Thus, it is apparent that at the time the November 8 order was entered, neither HUD nor the district court appreciated the scope and cost of rehabilitation work that would eventually be undertaken or scheduled. In my view, this expansion of both the scope and cost of contemplated work constitutes a change in circumstances that makes it inappropriate and unjust not to reconsider on the merits what work HUD must fund at Little Earth.
I share the evident concern of the district court and of the majority for the well-being of Little Earth tenants. I am aware, too, of the community purposes the Little Earth project serves by providing affordable housing to Native Americans in a culturally supportive environment. These worthy purposes, however, cannot be realized by unwarranted exercise of the broad power a court may exercise in the name of equity.
For the reasons set out above, I would reverse in part the August 5, August 14, September 5, September 12, and October 3, 1985, orders of the district court and remand the case, directing entry of a mod*1446ified receivership order consistent with the views set out in this dissent.