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RAWLINS v. M&T MORTGAGE CORPORATIONS

United States District Court, S.D. New York


September 1, 2005.

GILBERT RAWLINS, Plaintiff,
v.
M&T MORTGAGE CORPORATIONS, PRESCIENT, HUD, ST. STEPHENS BIBLE COLLEGE REALTY CORP., MICHAEL BLANCHARD, NATIONAL HOUSING GROUP INC., COBB MANAGEMENT, SANDRA GREER REAL ESTATE INC., Defendants.

The opinion of the court was delivered by: RICHARD CASEY, District Judge

MEMORANDUM & ORDER

Gilbert Rawlins ("Plaintiff") commenced this action, pro se, against M&T Mortgage Corps., Prescient, the United States Department of Housing and Urban Development ("HUD"), St. Stephens Bible College Realty Corp., Cobb Management ("Cobb"), National Housing Group Inc., Sandra Greer Real Estate Inc., and Michael Blanchard (collectively, "Defendants") in New York State court. HUD removed the case to this Court and now moves to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim. For the following reasons, the motion to dismiss is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

  Plaintiff, an independent contractor allegedly employed by Cobb to perform building maintenance services at 352 East 116th Street in Manhattan ("Property"), asserts that he is entitled to a mechanic's lien on the Property for providing those services. In addition, he appears to assert claims of breach of contract (which can reasonably be interpreted as a claim for quantum meruit or unjust enrichment) and fraudulent misrepresentation. The amount of the claimed lien is $1,431,169.44, representing labor, materials, services, and damages for the period of December 1999 through November 2004. Plaintiff alleges that he was originally employed by Cobb to provide the services, and that in 2002, presumably when the prior owner defaulted on the mortgage, the New York City Housing Court ordered him to continue to provide maintenance services on the Property until a new owner bought the Property. Plaintiff also alleges that the Housing Court asserted that he would be paid for his services by the new owner. HUD became the owner of the Property on or about March 25, 2004, after the previous owner defaulted on a mortgage that it insured.

  Plaintiff brought suit in state court, and HUD removed the case to this Court on the basis of 28 U.S.C. § 1442(a)(1). After removing the case, HUD moved to dismiss the complaint.*fn1 It argues that the Court lacks subject matter jurisdiction over Plaintiff's claims because the claims are within the exclusive jurisdiction of the Court of Claims, and because the Government has not waived its sovereign immunity to suit. In addition, HUD argues that Plaintiff has failed to state a valid claim under New York's lien law. Plaintiff did not respond to HUD's motion to dismiss.*fn2

  II. DISCUSSION

  Construing the pro se complaint liberally as the Court must, Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir 2002), Plaintiffs seeks to sue an agency of the United States on theories of breach of contract or quasi-contract*fn3 and tort, and to foreclose upon a lien. "In any suit in which the United States is a defendant, there must be a cause of action, subject matter jurisdiction, and a waiver of sovereign immunity." Presidential Gardens Assocs. v. United States ex rel. Sec'y of Hous. & Urban Dev., 175 F.3d 132, 139 (2d Cir. 1999). A waiver of sovereign immunity is a prerequisite to the Court's subject matter jurisdiction, but the issues of sovereign immunity and a grant of subject matter jurisdiction are distinct. Id. The Court concludes that it has subject matter jurisdiction over the contract claim*fn4 and that a valid waiver of sovereign immunity exists as to that claim. In contrast, the Court lacks subject matter jurisdiction over Plaintiff's tort claim because Plaintiff has failed to exhaust his administrative remedies under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2675(a). Finally, Plaintiff has failed to state a cause of action against HUD under New York's lien law.

  A. Plaintiff's Contract Claim

  Despite HUD's argument to the contrary, there exists a grant of subject matter jurisdiction and a waiver of sovereign immunity as to Plaintiff's contract claim.

  1. Grant of Subject Matter Jurisdiction

  Plaintiff here seeks well over $10,000 in damages against HUD, which argues that such a claim must be brought in the Court of Claims according to the Little Tucker Act, 28 U.S.C. § 1346(a)(2).*fn5 The Little Tucker Act provides both a grant of subject matter jurisdiction and a waiver of sovereign immunity. C.H. Sanders & Co. v. BHAP Hous. Dev. Fund Co., 903 F.2d 114, 119 (2d Cir. 1990). The act states that "[t]he district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of . . . any . . . civil action or claim against the United States, not exceeding $10,000 in amount, founded . . . upon any express or implied contract with the United States. . . ." 28 U.S.C. § 1346(a)(2). This provision, however, does not provide exclusive jurisdiction in the Court of Claims over contract claims seeking more than $10,000. See Ward v. Brown, 22 F.3d 516, 519 (2d Cir. 1994) ("[A]lthough an action could have been brought in the Court of Federal Claims under the Tucker Act, a district court has jurisdiction over the case as long as there is both a grant of subject matter jurisdiction and an independent waiver of sovereign immunity exists."); C.H. Sanders & Co., 903 F.2d at 119 (holding that a district court may entertain a breach-of-contract action against the United States in which the plaintiff seeks over $10,000 if there is federal-question jurisdiction and a waiver of sovereign immunity independent of the Little Tucker Act); Falls Riverway Realty, Inc. v. City of Niagara Falls, 754 F.2d 49, 55 (2d Cir. 1985) (holding that, when the Little Tucker Act does not provide subject matter jurisdiction or a waiver of sovereign immunity, "these prerequisites [to exercising jurisdiction] must be sought elsewhere"). That Plaintiff seeks over $10,000 on its contract claim against HUD, therefore, does not render the Court without subject matter jurisdiction.*fn6

  The Court possesses subject matter jurisdiction over the contract claim because its adjudication involves a federal question. HUD removed the case to this Court based on 28 U.S.C. § 1442(a)(1), which provides for removal from state to federal district court of any action against "[t]he United States or any agency thereof." In its notice of removal, HUD maintained that the claim is barred by sovereign immunity. The removal statute provides jurisdiction to this Court provided that HUD asserts a defense arising under federal law. See Mesa v. California, 489 U.S. 121, 136-37 (1989). Under the "well-pleaded complaint rule," federal-question jurisdiction normally does not arise on the basis of a defense. Merrill Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986). But Congress adopted an exception to that rule in the removal statute applicable here. As the Supreme Court explained in Mesa, § 1442 "serves to overcome the `well-pleaded complaint' rule which would otherwise preclude removal even if a federal defense were alleged." Id. HUD's assertion of a sovereign immunity to the contract claim provides the Court with federal-question jurisdiction. See id. (holding that district courts have federal-question jurisdiction over suits removed under § 1442 when the defendant asserts a defense arising under federal law). Accordingly, the Court has subject matter jurisdiction over Plaintiff's contract claim against HUD. 2. Waiver of Sovereign Immunity

  It is well established that the federal government and its agencies are immune from suit absent an express waiver of sovereign immunity. See FDIC v. Meyer, 510 U.S. 471, 475 (1994); Presidential Gardens Assocs., 175 F.3d at 139. Furthermore, "the Government's consent to be sued must be construed strictly in favor of the sovereign, and not enlarge[d] . . . beyond what the language requires. . . ." United States v. Nordic Vill., Inc., 503 U.S. 30, 34 (1992) (internal quotation marks and citations omitted). Sovereign immunity may only be waived by statute. Presidential Gardens Assocs., 175 F.3d at 139. HUD argues that there is no valid waiver of sovereign immunity with respect to Plaintiff's contract claim. However, the National Housing Act, 12 U.S.C. § 1701 et seq., contains a waiver of sovereign immunity as to that claim against HUD.

  The National Housing Act provides that the Secretary of HUD "shall, in carrying out the provisions of [the National Housing Act] be authorized, in his official capacity, to sue and be sued in any court of competent jurisdiction, State or Federal." Id. § 1702. This provision has been construed as a waiver of sovereign immunity when: (1) HUD or its Secretary is sued for actions taken in carrying out the provisions of the National Housing Act, and (2) the funds sought are under the control of HUD. See Presidential Gardens Assocs., 175 F.3d at 141; S.S. Silberblatt, Inc. v. E. Harlem Pilot Block Bldg. 1 Hous. Dev. Fund Co., 608 F.2d 28, 36 (2d Cir. 1979).

  Plaintiff's claims arise out of HUD's actions taken in carrying out the provisions of the National Housing Act. Plaintiff maintains that HUD is liable to pay for services rendered under a contract that Plaintiff had with Cobb on a property whose mortgage HUD insured, and which is now owned by HUD. HUD's authority to insure mortgages and dictate terms of foreclosure is found in the National Housing Act. See 12 U.S.C. § 1709(a) (authorizing the Secretary of HUD "to insure . . . any mortgage offered to him which is eligible for insurance as hereinafter provided"); id. § 1709(b)(7) (requiring that all mortgages insured by HUD contain terms as to foreclosure proceedings that the Secretary of HUD prescribes). HUD therefore acquired ownership of the Property as a result of its authority under the National Housing Act. Plaintiff's claim is that, as a result of this acquisition of ownership, HUD became liable to pay for the maintenance services that the Housing Court ordered him to provide. Plaintiff's contract claim thus arises in connection with HUD's carrying out the provisions of the National Housing Act dealing with the insuring of mortgages.

  The second requirement "is satisfied if the judgment could be paid out of funds appropriated under the National Housing Act and in the control or subject to the discretion of the Secretary." S.S. Silberblatt, Inc., 608 F.2d at 36. There is every indication that any judgment could by paid out of such funds. Pursuant to 12 U.S.C. § 1735c, there exists a General Insurance Fund which is used by the Secretary of HUD "as a revolving fund for carrying out all the insurance provisions of [the National Housing Act]" with limited exceptions. Congress has provided that "expenses incurred in the handling, management, renovation, and disposal of properties acquired, in connection with mortgages and loans which are the obligation of such Fund, shall be charged to such Fund." Id. § 1735c(d). Any liability of HUD stemming from Plaintiff's maintenance of the Property would appear to be an expense that HUD incurred in the "handling, management, renovation, and disposal" of the Property acquired in connection with a mortgage under the National Housing Act. Thus, any liability arising from Plaintiff's claims could be paid out of the General Insurance Fund rather than the United States Treasury.

  The Court emphasizes that its ruling here has no bearing on whether Plaintiff has stated a claim against HUD in contract or quasi-contract. The Court merely holds that there is a grant of subject matter jurisdiction and that there appears to be a waiver of sovereign immunity with respect to that claim against HUD. Given the lack of briefing on the National Housing Act's waiver of sovereign immunity, however, the Court will permit HUD to address the ruling that the National Housing Act provides an applicable waiver of sovereign immunity as to Plaintiff's contract claim. HUD's motion to dismiss the claim for lack of subject matter jurisdiction is therefore denied without prejudice to the filing of supplemental briefing on the issue of sovereign immunity.

  B. The Court Lacks Subject Matter Jurisdiction Over Plaintiff's Tort Claim Against HUD

  In contrast to the contract claim, the Court lacks subject matter jurisdiction over Plaintiff's tort claim against HUD. The FTCA is the exclusive damages remedy for tort actions against the United States and its agencies. Djordjevic v. Postmaster Gen., 911 F. Supp. 72, 75 (E.D.N.Y. 1995). Under 28 U.S.C. § 2675(a), a claimant must first present his or her claim to the appropriate federal agency and have the claim finally denied.*fn7 Failure to follow this procedure renders a court without subject matter jurisdiction. See Adeleke v. United States, 355 F.3d 144, 153 (2d Cir. 2004). "This procedural hurdle applies equally to litigants with counsel and to those proceeding pro se." Id. Here, Plaintiff has not alleged that he filed a claim with HUD as required by the FTCA. Therefore, Plaintiff has failed to exhaust his administrative remedies as required by the FTCA, and the Court lacks subject matter jurisdiction over the tort claim against HUD. Dismissal of the claim shall be without prejudice as Plaintiff may amend his complaint to show that he did exhaust such remedies, if possible. See Fed.R.Civ.P. 15(a) (requiring leave to amend a complaint "when justice so requires").

  C. Plaintiff Has Not Stated a Claim Under New York's Lien Law

  There is both a grant of subject matter jurisdiction and a waiver of sovereign immunity as to Plaintiff's lien claim. See 28 U.S.C. § 2410(a) (providing that "the United States may be named a party in any civil action or suit in any district court . . . to foreclose a mortgage or other lien upon . . . real or personal property on which the United States has or claims a mortgage or other lien"); C.H. Sanders & Co., 903 F.2d at 120 (noting that § 2410 provides both a grant of subject matter jurisdiction and a waiver of sovereign immunity as to lien claims against HUD). HUD does not argue to the contrary. Instead, HUD moves to dismiss the claim on the merits.

  Plaintiff does not allege to have previously filed and served a valid notice of lien in accordance with the New York lien law requirements for a mechanic's lien. See New York Lien Law §§ 9-11-b (requiring prospective lienors to file a notice of lien containing certain information with the proper county clerk no later than eight months after the final performance of the work or furnishing of the materials, and then to serve the notice upon the owner of the property within five days before or thirty days after the filing). Failure to serve the notice of lien in strict compliance with this statute will result in the lien being discharged, and a court cannot excuse noncompliance. In re HMB Acquisition Corp. v. F&K Supply, Inc., 618 N.Y.S.2d 422, 423 (App. Div. 1993). Plaintiff also does not allege to be a duly licensed contractor, which is necessary to foreclose on a mechanic's lien. See Marple v. Song, 646 N.Y.S.2d 543, 544 (App. Div. 1996); Mortise v. 55 Liberty Owners Corp., 277 N.Y.S.2d 2, 3 (App. Div. 1984).

  As HUD acknowledges, Plaintiff may be claiming that the Housing Court order that he continue to provide maintenance on the Property until a new owner takes possession and pays Plaintiff for his services is a judgment levied upon the Property. Section 1505 of the New York City Civil Court Act provides, "In order for an execution on a judgment of this court to be levied against real property, a transcript of such judgment must be filed with the county clerk of the county wherein judgment was entered." N.Y.C. Civil Court Act § 1505. Plaintiff has not pled the filing of a transcript of judgment or appended such a transcript, or the Housing Court's order, to the complaint. It is not clear that the alleged Housing Court order constitutes a judgment, or if it does, whether any such judgment can be executed under section 1505. For these reasons, Plaintiff's lien claim must be dismissed, but, like the tort claim, it shall be dismissed without prejudice to the filing of an amended complaint which alleges the necessary elements of either a mechanic's lien or a judgment lien on the Property.

  III. CONCLUSION

  For the foregoing reasons, HUD's motion to dismiss is GRANTED IN PART and DENIED IN PART. The tort and lien claims against HUD are dismissed pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), respectively, but without prejudice to the filing of an amended complaint by October 17, 2005. HUD's motion to dismiss the contract claim under Rule 12(b)(1) is denied, but HUD may file supplemental briefing on the issue of whether the National Housing Act is an applicable waiver of sovereign immunity by October 17, 2005. Plaintiff may file a response to any such submission by October 31, 2005.

  So Ordered.

20050901

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