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UNITED STATES v. DCS DEV. CORP.

July 31, 1984

UNITED STATES OF AMERICA, Plaintiff,
v.
DCS DEVELOPMENT CORPORATION,1 ESTATE OF BERNARD P. BIRNBAUM, SAUL BIRNBAUM and JANICE BIRNBAUM, as Executors of the Estate of Bernard P. Birnbaum and NEW YORK STATE COMMISSIONER OF HEALTH, Defendants.



The opinion of the court was delivered by: ELFVIN

MEMORANDUM and ORDER

This is an action by the United States Department of Housing and Urban Development ("HUD") to foreclose a mortgage on the Abbott Manor Nursing Home ("the home") in Buffalo, N.Y. The New York State Commissioner of Health ("the Commissioner") was made a defendant on the grounds that, at the time the Complaint was filed, a receiver was operating the home at the Commissioner's request. The Commissioner had been appointed receiver of the home pursuant to section 2810 of New York's Public Health Law May 8, 1978 by Order of New York Supreme Court Justice Theodore S. Kasler. People of the State of New York v. Abbott Manor Nursing Home et al., Index No. E34616 (Erie Co.). The Estate of Bernard P. Birnbaum and defendants Birnbaum, co-executors of the estate (collectively, "the Birnbaum defendants") have cross-claimed for money damages against theCommissioner, alleging various constitutional deprivations.The Commissioner has moved for summary judgment dismissing the Complaint on the grounds that the receivership is no longer in possession of the home and dismissing the cross-claims on Eleventh Amendment grounds.

 The Commissioner supports the motion for summary judgment dismissing the Complaint principally by citation to my Order entered June 24, 1980 in this case, denying the Birnbaum defendants' motion to dismiss for lack of subject matter jurisdiction on the grounds that possession of the home had been transferred to them by a September 12, 1979 order of New York Supreme Court Justice James B. Kane in said state proceeding. The Commissioner characterizes my Order as stating that by the transfer of possession to the Birnbaum defendants "the relevance of the receivership to the instant action was rendered moot." In fact I held only that the transfer of possession to the Birnbaum defendants rendered moot their motion to dismiss. The Commissioner also asserts that his possession of the home as its receiver is the sole basis for HUD's complaint against him and that such possession having terminated there exists no reason for the continuance of this action against him.

 Plaintiff does not oppose the Commissioner's motion to dismiss the Complaint. The Birnbaum defendants, however, assert in their Memorandum in opposition to the Commissioner's motion to dismiss their cross-claims that the Commissioner's receivership continues for various purposes, including an accounting, and that the Commissioner is a necessary party to this action in order that complete relief may be afforded among the other parties.

 It appears at this time that the Commissioner's section 2810 receivership of the home does indeed continue for some purposes as was expressly recognized by the above-cited order of the New York Supreme Court.However, legal title to the property covered by the receivership is vested not in the Commissioner, but in the Estate of Bernard P. Birnbaum. Section 2810(c) provides that the receiver appointed thereunder "shall have all the powers and duties of a receiver appointed in an action to foreclose a mortgage on real property." In New York, during a receivership of mortgaged premises, the legal title of the premises remains in the mortgager until passed at the foreclosure sale. Greenwich Sav. Bank v. Samotas, 17 N.Y.S. 2d 772 (N.Y.Mun.Ct. 1940). Thus section 2810(h) provides that the appointment of a receiver does not "suspend during the receivership any obligation of the owner for the payment of taxes or other operating and maintenance expenses of the facility nor of the owner or any other person for the payment of mortgages or liens," although pursuant to section 2810(e) the receiver is during the term of his husbandry ordinarily to see to the discharge of such obligations.

 The Commissioner's receivership, without possession or responsibility for maintenance, is no bar to the provision of complete relief among the other parties and the Commissioner therefore is not a necessary party defendant to this lawsuit under Fed.R.Civ.P. rule 19(a). Whether the Commissioner may be liable to the Birnbaum defendants for the conduct of such receivership, as asserted in their cross-claims, is an entirely separate question and has no bearing upon whether the Complaint should be dismissed as to the Commissioner. Accordingly, the Commissioner's motion for summary judgment dismissing the Complaint is hereby ORDERED granted.

 Generally, the Birnbaum defendants' cross-claims charge the Commissioner with having conspired with plaintiff to permit the deterioration of the home, to let the HUD mortgage payments become hopelessly delinquent and to fail to provide adequate reimbursements to the Birnbaum defendants and to prior receivers as required by unspecified Medicaid provisions of the federal Social Security Act. The alleged conspiracy between the Commissioner and HUD had for its object the making possible for HUD to gain ownership of the home for far less than what its value had been prior to the beginning of the receiverships. The threatened foreclosure of HUD'S mortgage is thus characterized as an impending deprivation of the Birnbaum defendants' property without due process of law, and the alleged denial of adequate reimbursements to them as a deprivation of a right secured by the United States Constitution and laws, both of which claims are sought to be asserted pursuant to 42 U.S.C. ยง 1983. The cross-claims also seek an award of $550,000 in attorneys' fees incurred in the Birnbaum defendants' efforts in administrative proceedings to recover sums owing to them due to the Commissioner's alleged failure to reimburse them as required by federal law. Judgments totalling in the millions of dollars are requested upon the claims for reimbursement and for damages anticipated from the foreclosure of HUD's mortgage.

 The Commissioner argues that, in the absence of either an express consent to suit by a state or an express congressional authorization of a suit against a state pursuant to the Fourteenth Amendment, the Eleventh Amendment bars all suits by private citizens against states or state officers that seek to recover from the state treasury money damages for past misconduct. Edelman v. Jordan, 415 U.S. 651, 39 L. Ed. 2d 662, 94 S. Ct. 1347 (1974). As the Commissioner points out, section 1983 does not authorize suits against a state that would otherwise be barred by the Eleventh Amendment. Quern v. Jordan, 440 U.S. 332, 59 L. Ed. 2d 358, 99 S. Ct. 1139 (1979).

 The Birnbaum defendants urge that section 17 of New York's Public Officers Law constitutes a consent by the State of New York to respond in damages to section 1983 claims. The relevant portions of section 17 read as follows:

 "2.(a) * ** [T]he state shall provide for the defense of [a state] employee in any civil action or proceeding in any state or federal court arising out of any alleged act or omission which occurred or is alleged in the complaint to have occurred while the employee was acting within the scope of his public employment or duties, or which is brought to enforce a provision of section nineteen hundred eighty-one or nineteen hundred eighty-three of title forty-two of the United States Code.

 * * *

 "3.(a) The state shall indemnify and save harmless its employees in the amount of any judgment obtained against such employees in any state or federal court * * *.

 "9. Except as otherwise specifically provided in this section, the provisions of this section shall not be construed in any way to impair, alter, limit, modify, abrogate or restrict any immunity available to or conferred upon any unit, entity, officer or employee of the state or any other level of government * * * by, in accordance with, or by reason of, any other provision of state or federal statutory or common law."

 Trotman v. Palisades Interstate Park Com'n, 557 F.2d 35 (2d Cir. 1977), rejected an argument that the "sue-and-be-sued" clause of an interstate compact constituted a waiver by the States involved of the Eleventh Amendment's ...


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