at least the Senate would regard § 221(d)(2) as not authorizing the payments sought by the plaintiffs here.
This last expression of Congressional intent, when coupled with the general principles governing suits brought with the Tucker Act as the asserted jurisdictional basis, requires that the plaintiffs' claims for damages be dismissed for lack of jurisdiction.
The plaintiffs also seek a declaratory judgment that the present regulations under which the Secretary insures mortgages are invalid because they do not meet the mandate of § 221(d)(2) by requiring compliance with local health or safety codes before the insurance issues. An injunction requiring such compliance is also sought.
Assuming for the moment that this Court has jurisdiction to decide these issues under 28 U.S.C. §§ 1337, 1361, and 2201-2202, and 5 U.S.C. § 702-704 (1970), the Court finds that the plaintiffs lack standing to assert those claims. The relief the plaintiffs seek is a declaratory judgment that the present regulations of HUD with respect to § 221(d)(2) mortgages are invalid. All of the named plaintiffs' homes have mortgages which have been insured under prior regulations.
Thus it appears that the plaintiffs do not meet even the liberalized standing concepts announced in recent years by the Supreme Court. The plaintiffs must show, for standing under 5 U.S.C. § 702, that the action they challenge caused them injury in fact to an interest arguably within the zone of interests to be protected or regulated by the statute. Sierra Club v. Morton, 405 U.S. 727, 733, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972).
The party seeking review must be among those injured by the action. Id. at 735, 92 S. Ct. 1361. The plaintiffs have mortgages that have been insured by HUD. The alleged current failure of HUD to promulgate proper regulations in compliance with the mandate of § 221(d)(2) can inflict no harm upon them.
Likewise, the plaintiffs have no standing to assert claims under 28 U.S.C. § 1337 or § 1361. Once again, the plaintiffs are not suffering any injury from any action of the Secretary relative to current § 221(d)(2) regulations. The plaintiffs do not have such a "personal stake in the outcome of the controversy," Baker v. Carr, 369 U.S. 186, 204, 82 S. Ct. 691, 703, 7 L. Ed. 2d 663 (1962), that will insure that "the dispute sought to be adjudicated will be presented in an adversary context." Flast v. Cohen, 392 U.S. 83, 101, 88 S. Ct. 1942, 1953, 20 L. Ed. 2d 947 (1968).
Therefore the complaint must be dismissed insofar as it seeks relief regarding current HUD practices.
Finally, the plaintiffs seek a declaratory judgment that their mortgages were insured in contravention of § 221(d)(2) because compliance with the local building code was not required before the insurance issued. Assuming that the plaintiffs have standing to raise this issue and that the Court has jurisdiction under 28 U.S.C. §§ 1337, 1361 and 5 U.S.C. §§ 702-704 to hear the claim, this portion of the complaint must be dismissed for failure to state a claim upon which relief may be granted.
In United States v. Neustadt, 366 U.S. 696, 81 S. Ct. 1294, 6 L. Ed. 2d 614 (1961), the plaintiff-purchaser of a home with a mortgage insured pursuant to § 203 of the National Housing Act, 12 U.S.C. § 1709 (1970), brought an action under the Federal Tort Claims Act, 28 U.S.C. § 1346(b), for negligent misrepresentation by the FHA in its inspection and appraisal of the home.
The Court, after holding § 1346(b) inapplicable to negligent misrepresentations, went on to discuss the allegation that FHA owed the plaintiffs a duty to accurately appraise their home, 366 U.S. at 708-709, 81 S. Ct. at 1301:
It had been recognized in Congress that FHA appraisals would be a matter of public record, and would thus inure, incidentally, to the benefit of prospective home purchasers . . . . But at the same time, it was repeatedly emphasized that the primary and predominant objective of the appraisal system was the "protection of the Government and its insurance funds" [citing H.R.Conf.Rep. No. 2271, 83rd Cong., 2d Sess., p. 66]; that the mortgage insurance program was not designed to insure anything other than the repayment of loans made by lender-mortgagees [citing 78 Cong.Rec. 11981]; and that "there is no legal relationship between the FHA and the individual mortgagor" [citing H.R.Cong.Rep. No. 2271, 83rd Cong., 2d Sess. pp. 66-67]. Never once was it even intimated that, by an FHA appraisal, the Government would, in any sense, represent or guarantee to the purchaser that he was receiving a certain value for his money. (footnotes omitted)
The plaintiffs attempt to distinguish Neustadt on the grounds that the instant suit is not based on negligent misrepresentation and that Neustadt dealt with § 203, not § 221(d)(2).
Both grounds essentially are the same -- that § 221(d)(2) imposes a duty upon the Secretary to insure mortgages only on properties that conform with local building codes.
Neustadt concerned § 203 and § 226 (12 U.S.C. § 1715q), which requires sellers to inform prospective purchasers of the FHA-appraised value. In determining that the FHA did not owe the purchaser a duty of accurate appraisal, the Court could find no Congressional purpose
to convert the FHA appraisal into a warranty of value, or otherwise to extend to the purchaser any actionable right of redress against the Government in the event of a faulty appraisal. 366 U.S. at 709, 81 S. Ct. at 1302.