Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

St. Mark's Place Housing Co., Inc. v. United States Dep't of Housing and Urban Development

June 3, 2009

ST. MARK'S PLACE HOUSING COMPANY, INC.; ST. MARK'S PLACE ASSOCIATES; STELLAR CP LP; AND CASTLETON GP LLC, PLAINTIFFS,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND ROY BERNARDI, AS ACTING SECRETARY OF THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT DEFENDANTS.



The opinion of the court was delivered by: Reggie B. Walton United States District Judge

Memorandum Opinion

The plaintiffs bring this case pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-06 (2006), seeking a declaratory judgment, Complaint ("Compl.") ¶¶ 48-56, injunctive relief, id. ¶¶ 57-58, and an order of mandamus, id. ¶¶ 59-64. Currently before the Court is the Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants' Motion to Dismiss.*fn1 For the reasons set forth below, the Court will grant the defendant's motion.

I. Background

A. Underlying Facts

The plaintiffs in this lawsuit are the intended buyer and seller on a contract to transfer ownership interest in a multifamily housing project in Staten Island, New York, known as the Castleton Park Apartments (the "Apartments"). Compl. ¶¶ 4, 11. The intended sellers, St. Marks Place Housing Co. ("The Housing Company") and St. Marks Place Associates, are respectively a limited profit housing company organized under the Private Housing Finance Law of the State of New York, id. ¶ 4, and a limited partnership organized under the laws of the State of New York, id. ¶ 5. The Housing Company is the nominal owner of the Apartments and currently holds title to the Apartments for the benefit of St. Marks Place Associates. Id. ¶ 4.

The Housing Company purchased the Apartments in 1974 with a non-insured mortgage loan of $19,715,000 made by the New York State Housing Finance Agency ("NY Finance Agency"). Id. ¶ 16. On October 13, 1977, the mortgage was refinanced and divided into a "HUD-insured Section 236-assisted" senior mortgage of $17,629,100 ("Mortgage Note"), and a "non-insured Section 236-assisted" junior mortgage of $3,360,900, under the authority of Section 207 of the National Housing Act ("NHA"), 12 U.S.C. 1713 (2006), and pursuant to Section 223(f) of the NHA, 12 U.S.C. 1715n(f) and 24 CFR § 207.32(a)(k) (1977). Id. ¶¶ 18-19; Pls.' Opp'n, Exhibit ("Ex.") B ("Mortgage Note" or "Note"). The first page of the Mortgage Note contains the following paragraph:

Privilege is reserved to pay the debt in whole or in an amount equal to one or more monthly payments on principal next due, on the first day or any month prior to maturity upon at least thirty (30) days' prior written notice to the holder.** If this debt is paid in full prior to maturity and while insured under the National Housing Act, all parties liable for payment of this debt hereby agree to be jointly and severally bound to pay to the holder hereof any adjusted premium charge required by the applicable Regulations.

Id. The double asterisk at the end of the first sentence references a footnote that reads: "**Subject to the prior approval of the Secretary of Housing and Urban Development." Id.*fn2

In May 2006, the shareholders of the Housing Company and St. Marks Associates (identified collectively in the parties' filings as the "St. Marks Plaintiffs"), jointly as the intended sellers, entered into a contract with Stellar CP LP and Stellar Castleton GP LLC (identified collectively in the parties' filings as the "Stellar Plaintiffs"), jointly as the intended buyers, in which the St. Marks Plaintiffs agreed to sell their beneficial interest in the Apartments and all of the outstanding stock in the Housing Company to the Stellar Plaintiffs. Compl. ¶ 11.

The contract was drafted so the Apartments could be withdrawn from the "Mitchell-Lama" Program, a program authorized under Article II of the New York State Private Housing Finance Law (the "PHF Law"). Id. ¶ 12. The PHF Law "encourage[s] [private enterprises] to invest in companies regulated by law . . . and engaged in providing . . . housing facilities . . . for families or persons of low income." N.Y. Priv. Hous. Fin. Law § 11 (McKinney 1987). To withdraw from the Mitchell-Lama program, a participant must extinguish any government subsidized or assisted mortgage debts and dissolve or reconstitute the limited profit housing company that owns the housing development. Id. § 35(2)-(3); Compl. ¶ 15.

In four separate letters dated December 1, 2006, March 30, 2007, July 31, 2007, and November 30, 2007, the plaintiffs attempted to notify the defendants of their intention to prepay the Mortgage Note. Compl. ¶ 32. At the request of the defendants, the plaintiffs provided a written summary explaining why they believed the defendants' consent to prepayment was not required. Id. ¶ 33. According to the plaintiffs, in June 2007, HUD's Office of the General Counsel advised HUD's Secretary's office that Section 250(a) of the NHA, which subjects mortgage prepayment to restrictions determined by the defendants,*fn3 did not apply to the prepayment restriction contained in the Mortgage Note. Id. ¶ 34. In September 2007, the plaintiffs' counsel met with HUD's General Counsel to discuss the plaintiffs' intent to prepay the Mortgage Note and argue why Section 250(a) did not apply to their Note. Id. ¶ 35. On October 11, 2007, HUD's Office of the General Counsel again allegedly advised HUD's Secretary's office that it had concluded that Section 250(a) was not applicable to the plaintiffs' Mortgage Note. Id. ¶ 36; Pls.' Opp'n at 8 & Ex. C (Memorandum from Millicent B. Potts to Beverly J. Miller). After HUD's Office of the General Counsel allegedly advised the Secretary's office for the second time about the inapplicability of the prepayment requirement, the Secretary met with New York Senator Charles Schumer, who purportedly conveyed to the Secretary his belief that the Secretary's approval was required and that Section 250(a) applied to the plaintiffs' Mortgage Note. Compl. ¶ 37; Pls.' Opp'n at 8-9 & Ex. D (Press Release from the Office of Senator Charles Schumer (D-NY)) at 1.

On December 20, 2007, the defendants notified the Housing Company that because prepayment of the Mortgage Note was conditioned on the approval of the Secretary, the plaintiffs' prepayment was "subject to the restrictions of Section 250(a) of the NHA," and their prepayment request had been denied because the intended prepayment had not met the restrictions of this statutory provision. Compl. ¶ 39; Defs.' Mem. at 9 & Ex. A (Letter from Teresa M. Bainton to Jean-Pierre Vaganay). The plaintiffs were advised that the Section 250(a) restrictions required: (1) that 150 days notice must be given to the residents of the Apartments, (2) that the plaintiffs "must provide a minimum of $15,000 per unit in repairs/rehabilitation or replace two or more major building components" with funds in escrow at the time of prepayment approval, and (3) that the plaintiffs would have to"execute a rental use agreement that will be recorded in first lien position on the property until what would have been the maturity date of the first mortgage, November 1, 2017." Defs.' Mem. at 9 & Ex. A (Letter from Teresa M. Bainton to Jean-Pierre Vaganay). Not agreeing with the defendants' positions, six weeks later, on February 1, 2005, the plaintiffs filed this lawsuit.

B. The Mitchell-Lama Program

In 1955, the New York State Legislature enacted The Limited-Profit Housing Companies Act, also known as the Mitchell-Lama Program. See N.Y. Priv. Hous. Fin. Law § 11. The program was designed to encourage the development of affordable housing for low to middle income tenants. Id. By offering financial incentives to developers, including the option to prepay mortgages, the New York State Legislature hoped to encourage developers to build rental or co-op apartments in spite of the lengthy time constraints on when such developers could sell their property. See generally id. §§ 11-37. The New York State Legislature contemplated that projects developed and operated under the Mitchell-Lama Program might be established in conjunction with assistance from the Federal government. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.