Brook Village v HUD 06-CV-046-JD 11/13/06 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Brook Village North Associates

v. Civil No. 06-CV-046-JD Opinion No.

Alphonso Jackson. Secretary of the Department of Housing and Urban Development

O R D E R

Brook Village North Associates, which owns Brook Village

North Apartments, brought suit seeking a declaratory judgment

that it is entitled to prepay its mortgage loan held by the

Federal National Mortgage Association ("Fannie Mae") and that the

United States Department of Housing and Urban Development ("HUD")

lacks authority to interfere with Brook Village's prepayment of

the balance on the loan.1 Brook Village also alleges that Fannie

Mae has breached the loan agreement by refusing its tender of

prepayment. Four tenants of Brook Village North Apartments move

to intervene in the suit as defendants in order to assert

defenses and a counterclaim against Brook Village. Brook Village

opposes the motion to intervene.

1Because Brook Village's claim against Alphonso Jackson is brought in his official capacity, HUD rather than Jackson is deemed to be the defendant. Background

Brook Village North Apartments ("the Apartments") is a 160-

unit rental housing project in Nashua, New Hampshire. The

Apartments project was built with financing authorized by 12

U.S.C. § 1715z-l, known as Section 236 of the National Housing

Act. Under that program, HUD insured the loan and made mortgage

interest reduction payments, and Brook Village was obligated to

provide affordable housing for eligible tenants. In addition,

HUD and Brook Village entered into a rent supplement contract,

under 12 U.S.C. § 1701s, which provides for rent supplements for

qualified tenants. Brook Village has been providing affordable

housing to qualified tenants since it was built in the early

1970s.

Discussion

Four tenants who live in Brook Village North Apartments,

Roberta O'Dell, Linda Jean, Jarretta Copeland, and Evelyn Hukvari

("the Tenants"), move to intervene in this case, pursuant to

Federal Rule of Civil Procedure 24, to preserve their interests

in maintaining affordable low-income housing at the Apartments.

Specifically, the Tenants state in their pleading attached to

their motion, "Interveners' Counterclaim," that they agree with

2 HUD that Brook Village is receiving payment under the rent

supplement contract. They allege that Brook Village is obligated

under 12 U.S.C. § 1715z-l(b), a provision of the National Housing

Act, and related HUD regulations to fully use the rent supplement

funds that are available under the rent supplement contract with

HUD. The Tenants' counterclaim seeks a declaratory judgment that

Brook Village is violating its obligations under the National

Housing Act and its implementing regulations and a permanent

injunction requiring Brook Village to use all available funds

under the rent supplement contract.

The Tenants contend that they have a right to intervene as

defendants in the action brought by Brook Village against HUD, as

a matter of right, under Federal Rule of Civil Procedure 24(a).

Alternatively, the Tenants contend they meet the requirements for

permissive intervention under Rule 24(b)(2). Brook Village

opposes the motion to intervene. HUD did not file a response to

the motion.

A. Intervention as of Right

To be entitled to intervene as of right as defendants in

Brook Village's action against HUD, the Tenants "must show that

(1) [they] timely moved to intervene; (2) [they have] an interest

relating to the property or transaction that forms the basis of

3 the ongoing suit; (3) the disposition of the action threatens to

create a practical impediment to [their] ability to protect

[their] interest; and (4) no existing party adequately represents

its interests." B. Fernandez & Hnos., Inc. v. Kellogg USA. Inc..

(1st Cir. 2006). Brook Village concedes

that the Tenants' motion to intervene is timely and that as

tenants of the Apartments, they have an interest related to the

property that is the subject of this case. It challenges the

Tenants' ability to satisfy the requirements that disposition of

the case without them will impair their ability to protect their

interests and that the existing defendants will not adequately

represent the Tenants' interests.

1. Ability to Protect Their Interest

The Tenants assert interests in preserving affordable

housing, as has been available under the Section 236 loan

program, at the Apartments. They argue that if Brook Village is

allowed to prepay the loan and eliminate its affordable housing

obligations, rents at the Apartments will become unaffordable for

them. Further, the Tenants assert that if Brook Village

renovates the Apartments, as they have heard will happen, the

number of rental units will be decreased or eliminated and

housing will not be available for them there. Brook Village

4 contends that if it is permitted to repay the Section 236 loan,

thereby eliminating its affordable housing obligations, another

HUD program, the enhanced voucher program under 42 U.S.C. §

1437f(t), will be available to the Tenants to protect their need

for affordable housing.

The Tenants appear to concede that the voucher program would

provide an alternative means of making affordable housing

available to them but argue that there is no guarantee "each

tenant" will be eligible for that program. They state that

"[t]here is a distinct possibility that any given resident of

[the Apartments] who . . . would ordinarily be eligible for a

Section 8 voucher (enhanced or ordinary) would be found

ineligible due to one of many reasons set forth in

(c)." Reply at 3. The Tenants have not shown that the

four of them, specifically, would not be eligible under the

voucher program. Because only the four tenants who filed the

motion to intervene are potential parties, the circumstances of

other tenants are not relevant to whether these Tenants can meet

the requirements for intervention as a matter of right.

The Tenants also argue that they have an interest in staying

in the particular units they currently occupy at the Apartments.

They contend that the voucher program would not guarantee that

they could stay in their present apartments if Brook Village were

5 allowed to prepay the balance of the Section 236 mortgage. They

fear that Brook Village will reduce the number of rental units at

the Apartments or convert the property into condominiums, which

would force them to move. They also fear that the rents will

increase and will exceed the market rent for the locality, making

units at the Apartments ineligible for the voucher program. The

Tenants concede that their month-to-month leases do not give them

a long-term right to occupy their present units. They contend,

however, that provisions of Section 236 prevent Brook Village

from evicting them without good cause, which has the effect of

extending the terms of their leases to the term of the Section

236 loan.

The Tenants have not shown that their intervention in this

case is necessary to protect their interest in affordable

housing. They have persuasively argued, however, that the

voucher program would not necessarily allow them to stay in their

current units at the Apartments. Because Brook Village does not

contest the Tenants' interest in staying at the Apartments, they

have made a sufficient showing on the third element for mandatory

intervention.

6 2. Adequacy of representation.

The Tenants must also satisfy the requirement of showing

that HUD cannot adequately represent their interest in staying in

their present units at the Apartments. Although " [t]ypically, an

intervenor need only make a ■'minimal'’ showing that the

representation afforded by a named party would prove inadequate,

. . . in cases where the intervenors ultimate objective matches

that of the named party, a rebuttable presumption of adequate

representation applies." B. Fernandez & Hnos..

.

More specifically, in cases where a private party seeks to

intervene in defense of an action against the government, a

presumption exists, "subject to evidence to the contrary, that

the government will adequately defend its actions, at least where

its interests appear to be aligned with those of the proposed

intervenor." State v. Director. U.S. Fish & Wildlife Serv., 262

F .3d 13, 19 (1st Cir. 2001).

To the extent the Tenants seek to intervene simply to add

their voices in support of HUD's defenses against Brook Village's

declaratory judgment action, they have not shown that their

assistance is needed. The Tenants and HUD share an interest in

preventing Brook Village from prepaying the Section 236 loan and

in preserving the rent supplement program that is currently in

place. Therefore, the Tenants have not rebutted the presumption

7 that HUD can adequately defend against Brook Village's

declaratory judgment action.

The Tenants' counterclaim raises a different issue. The

Tenants allege that they have low incomes and are eligible for

rent supplements under 12 U.S.C. § 1701s and its implementing

regulations. They also allege that there is a current rent

supplement contract between Brook Village and HUD that would now

provide $57,395 per year in rent supplements for eligible tenants

at the Apartments, which is enough to subsidize the Tenants and

several additional lower income families. The Tenants claim

Brook Village is violating that part of the National Housing Act,

codified at § 1715z-l(b), that requires Section 236 mortgagors to

use available rent supplement funds to benefit lower income

families who are tenants at Section 236 projects.

If the Tenants were successful in their counterclaim. Brook

Village would be forced to receive rent supplement payments from

HUD, making Brook Village ineligible for prepayment under the

terms of the Section 236 loan note and the applicable HUD

regulation,

. HUD has not raised that claim in

the present action. Therefore, HUD is not adequately

representing any interest the Tenants would have in enforcing §

1701z-l(b), as alleged in the counterclaim.

In objecting to permissive intervention, however. Brook Village argues that jurisdiction is lacking to consider the

Tenants' counterclaim because no private right of action exists

to enforce the National Housing Act in this context. In

response, the Tenants do not contest that jurisdiction would be

lacking as to their counterclaim. Instead, they focus on their

intent to join in HUD's defense against Brook Village's

declaratory judgment action. Because HUD adequately represents

those defenses, however, there is no need for the Tenants to

intervene on that basis. The Tenants can satisfy the last

requirement for mandatory intervention only on the ground of

representing their interests in their counterclaim.

Under

(a), federal courts have supplemental

jurisdiction over claims raised by intervenors that are part of

the same case or controversy as the original case over which the

court has jurisdiction. Nevertheless, "[w]here required,

standing is fundamental." Manqual v. Rotqer-Sabat,

(1st Cir. 2003). The circuits are split as to whether

standing is required for intervention as of right, and the First

Circuit has not decided the question. Id.; see also San Juan

County. UT v. United States.

(10th Cir.

2005) (discussing circuit split). In addition, it is far from

apparent whether the Tenants would have standing to bring their

counterclaim. See. e.g.. Gonzaqa Univ. v. Doe.

,

9 285-86 (2002); Wright v. City of Roanoke Redevelopment & Housing

Auth.,

(1987); Perry v. Housing Authority of

Charleston.

(4th Cir. 1981); Kingston

Sguare Tenants Ass'n v. Tuskegee Gardens. Ltd..

(S.D. Fla. 1992).

To be entitled to intervene as of right, the Tenants bear

the burden of showing that their participation is necessary

because HUD cannot adequately represent their counterclaim to

enforce § 1701z-(b) and its implementing regulations. See " B.

Fernandez & Hnos..

. If the Tenants lack

standing to bring their counterclaim, their intervention would

not remedy a lack of adequate representation by the existing

parties. Therefore, as currently presented, the Tenants have not

shown that they can satisfy the fourth element which is necessary

for mandatory intervention under Rule 24(a).

B. Permissive Intervention

Alternatively, the Tenants seek permissive intervention

under Federal Rule of Civil Procedure 24(b)(2), which requires a

showing that the Tenants' counterclaim shares a question of law

or fact with the claims in the main action. Permissive

intervention is a matter left to the discretion of the court.

Whether standing is required for permissive intervenors is also

10 an unsettled question. Manqual,

. Therefore^ the

court declines to permit the Tenants to intervene absent a

showing that they have standing to assert the counterclaim.

Conclusion

For the foregoing reasons, the motion to intervene (document

no. 17) is denied without prejudice to filing a second motion

that more completely addresses the issues identified in this

order. If a second motion to intervene is filed, HUD shall file

a response that provides its position on the standing issues

raised by the Tenants' proposed counterclaim.

SO ORDERED.

United States District Judge

November 13, 2006

cc: Elliott Berry, Esquire Michael G. Perez, Esquire T. David Plourde, Esquire Andrew W. Serell, Esquire Jonathan M. Shirley, Esquire Daniel E. Will, Esquire

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