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AMMCON, INC. v. KEMP

July 7, 1993

AMMCON, INC., Plaintiff,
v.
JACK F. KEMP, Secretary of Housing and Urban Development, Defendant.



The opinion of the court was delivered by: I. LEO GLASSER

 GLASSER, United States District Judge.

 Plaintiff Ammcon, Inc. ("Ammcon") was the general contractor on a housing project located at 224-246 Kingston Avenue, Brooklyn, New York, the David Chavis Apartments, to provide housing for elderly persons. The First Baptist Church of Crown Heights Senior Citizens Housing Development Fund Corporation ("First Baptist"), an assetless, not-for-profit corporation, sponsored that housing project and owned the property upon which it was to be built. Defendant Jack Kemp was formerly the Secretary of Housing and Urban Development ("HUD"), *fn1" the federal agency which had advanced funds to First Baptist under § 202 of the Housing Act of 1959, 12 U.S.C. § 1701q, to aid in the construction of those apartments. HUD extended a mortgage in the amount of $ 8,786,000 to First Baptist pursuant to a Building Loan Agreement between First Baptist and HUD, dated December 21, 1981 and a Mortgage, Mortgage Note and Regulatory Agreement, dated December 23, 1981. Exs. J, K, and L to Aff. of Anthony Mazzucca, dated February 14, 1992 ("Mazzucca Aff.").

 The project was completed by March 30, 1983 in accordance with Art. 2(A) of the Construction Contract. Complaint P 5. Thereafter, Ammcon submitted a request for payment in the amount of $ 404,720. HUD reviewed that request and determined that Ammcon was only entitled to receive $ 182,076 at final closing on the property. On January 29, 1986, Ammcon served a demand for arbitration against First Baptist in accordance with the mandatory arbitration provision of the Construction Contract. See Construction Contract Art. 1(A) (incorporating Rule 7.9.1 of AIA Document A201). In its demand for arbitration, Ammcon characterized the dispute as "[First Baptist's] failure to pay [Ammcon] for work performed under a written construction contract, for extra and additional work ordered by [First Baptist], and for damages sustained by [Ammcon] due to a suspension of work by [First Baptist]." Consequently, Ammcon sought "a monetary award in the approximate sum of $ 750,000.00."c Ex. B to Mazzucca Aff. However, HUD was not served with the demand for arbitration.

 First Baptist participated in the arbitration proceedings which were held on May 7 and 29, July 1 and 2, November 5, 6 and 18, and December 2, 1986. At that hearing, First Baptist offered documentary evidence, presented the testimony of witnesses, and cross-examined Ammcon's witnesses; thereafter, it submitted post-hearing memoranda. Mazzucca Aff. PP 10, 11. On or before May 5, 1987, the arbitrators ruled in favor of Ammcon and awarded it $ 479,932.00 against First Baptist to be reduced by any additional payments made after February 2, 1987. The arbitral award included $ 309,239.00 representing "Change orders issued by [First Baptist], some of which were approved by [HUD] and others [i.e., change orders] which were unapproved." Ex. D to Mazzucca Aff.

 Final closing on the property was held at HUD's office on June 4, 1987. At closing, First Baptist gave Ammcon a $ 221,425.22 check and a $ 28,940.78 note ("Note") to be paid from future rents. Ex. F to Mazzucca Aff. Ammcon's principal, Anthony Mazzucca, signed a letter confirming "that at closing today the unpaid items shown as due to [Ammcon] on [First Baptist's] Certificate of Actual Cost are being paid." Ex. F to Mazzucca Aff. Attached to that exhibit is a two-page handwritten note between Ammcon and First Baptist, reserving Ammcon's right to enforce the arbitration award and merely crediting the amounts paid at closing to the balance due under the arbitration award. See id. This document was not found in HUD files and HUD personnel have no knowledge of its veracity. See Aff. of Edwin Sprenger, dated April 9, 1992, PP 15-16 ("Sprenger Aff."). Subsequently, Ammcon commenced an Article 75 proceeding in state court to confirm the arbitral award. Only First Baptist was served in that action; HUD was not notified of the confirmation proceeding. In March 1988, the state court entered a judgment in the amount of $ 384,192.65 because First Baptist did not oppose the confirmation of the arbitral award. When HUD declined to pay that amount to Ammcon, Ammcon commenced this action on December 23, 1991, to enforce the judicial confirmation of the arbitral award against HUD as the alter ego of First Baptist, as well as to recover the amount of the Note.

 Ammcon moves for summary judgment on the ground that the Article 75 proceeding confirms the amount of damages for which HUD is liable as a matter of law because HUD is precluded from relitigating the validity of that award. HUD cross-moves for summary judgment on the grounds that: (1) the action is time-barred; (2) that certain construction cost increases were improvidently granted by the arbitrators; and (3) sovereign immunity. For the following reasons, Ammcon's motion is denied and HUD's cross-motion is denied.

 DISCUSSION

 This action is the "identical twin" of an earlier action before this Court, C.H. Sanders v. BHAP Housing Dev. Fund Co., 750 F. Supp. 67. In that case, as in this case, a contractor sued HUD to recover monies due for work performed on an elderly housing project based on an arbitration award which ordered the non-profit corporate sponsor of the housing project to pay a sum certain to the contractor. The Court of Appeals determined that this Court had subject matter jurisdiction over that controversy because the gist of the contractor's claim was predicated on unjust enrichment and on HUD's failure to discharge its duties under 12 U.S.C. § 1701q. C.H. Sanders v. BHAP Housing Dev. Fund Co., 903 F.2d 114, 118 (2d Cir. 1990). In addition, the court noted that the plaintiff's recovery, if any, would be limited to funds within HUD's control; that is, the plaintiff in Sanders could not otherwise recover funds from the United States Treasury. Id. at 120. The court also affirmed that part of this Court's decision, holding that HUD was precluded from relitigating the arbitration award either on the ground that the asset-less, non-profit corporate sponsor was HUD's alter ego or because HUD declined to participate in the arbitration proceeding despite being invited to do so. Id. at 121.

 In this action, the players have different names but assume nearly identical roles. *fn2" Accordingly, Sanders is instructive in the resolution of this case and is binding insofar as it holds that this Court has subject matter jurisdiction over this action and that HUD is not immune from suit. The government, however, in opposing Ammcon's summary judgment motion and in support of its cross-motion for summary judgment, raises additional arguments in this case that were not addressed in Sanders. This Court will address these contentions in turn.

 A. Summary Judgment Standard

 Summary judgment "shall be rendered forthwith if . . . there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In opposing a properly supported summary judgment motion, "an adverse party may not rest upon the mere allegations or denials of [its] pleading, but [its] response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). The nonmovant, however, "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).

 In deciding a summary judgment motion, the court need not resolve disputed issues of fact, but need only determine whether there is any genuine issue to be tried. Eastman Mach. Co., Inc. v. United States, 841 F.2d 469, 473 (2d Cir. 1988). A genuine factual issue exists if there is sufficient evidence favoring the nonmovant such that a jury could return a verdict in its favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), and "credibility determinations, the weighing of the evidence, and the drawing of legitimate ...


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