United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 8, 2012 Decided April 6, 2012
No. 11-5116
NBC-USA HOUSING, INC., TWENTY-SIX,
APPELLANT
v.
SHAUN DONOVAN, IN HIS CAPACITY AS SECRETARY OF THE
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND
ROY S. LILLEY, IN HIS CAPACITY AS FORECLOSURE
COMMISSIONER FOR THE DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-02245)
Scott W. Reid argued the cause for appellant. With him on
the briefs were Robert K. Magovern and Dexter R. Hamilton.
David C. Rybicki, Assistant U.S. Attorney, argued the cause
for federal appellees. With him on the brief were Ronald C.
Machen Jr., U.S. Attorney, and R. Craig Lawrence, Assistant
U.S. Attorney.
Before: HENDERSON, ROGERS and KAVANAUGH, Circuit
Judges.
2
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: This is an appeal from the denial of
declaratory and injunctive relief against the foreclosure sale of
Fortner Manor, an apartment complex for elderly and disabled
low-income residents, by the Department of Housing and Urban
Development (“HUD”). The complex, funded under Section
811 of the Cranston-Gonzalez National Affordable Housing Act
(“Section 811”), 42 U.S.C. § 8013 (2006), was severely
damaged by Hurricane Katrina. Upon concluding that NBC-
USA Housing, Inc., Twenty-Six (“NBC”) had failed to make
appropriate arrangements to restore the complex for occupancy,
as required under its Section 811 agreements, HUD declared
NBC in default on its mortgage in December 2008 and initiated
foreclosure proceedings in May 2009. Following the district
court’s grant of summary judgment and denial of injunctive
relief against the foreclosure sale, HUD resumed foreclosure
proceedings. In November 2011, HUD sold the property to a
third party not before the court. Consequently, the court cannot
grant NBC effective relief, and we dismiss the appeal as moot.
I.
Section 811 authorizes HUD “to provide assistance to
private, nonprofit organizations to expand the supply of
supportive housing for persons with disabilities” in two ways.
42 U.S.C. § 8013(b)(2). First, HUD can provide a capital
advance that “shall bear no interest[,] and its repayment shall not
be required so long as the housing remains available for very-
low-income persons with disabilities.” Id. § 8013(d)(1). “To
ensure its interest in the capital advance,” HUD requires a
receiving organization to sign a mortgage agreement, a
regulatory agreement, and a use agreement. 24 C.F.R.
§ 891.170(a) (2011). Second, HUD can provide project rental
assistance in the form of “monthly payments to cover any part
3
of the costs attributed to units occupied . . . by very low-income
persons with disabilities that is not met from project income.”
42 U.S.C. § 8013(d)(2). In exchange for Section 811 assistance,
an organization must agree to operate the housing project for at
least forty years. See id. § 8013(e)(1). Throughout this time,
HUD requires the organization to ensure that the housing
remains “decent, safe, sanitary and in good repair.” 24 C.F.R.
§ 5.703 (2011). In the event the organization breaches a
covenant or condition in its mortgage, HUD can foreclose on the
property in accordance with the Multifamily Mortgage
Foreclosure Act of 1981 (“Mortgage Foreclosure Act”), 12
U.S.C. §§ 3701–17 (2006).
NBC is a private non-profit organization of the National
Baptist Convention, USA, Inc. In September 1999, NBC signed
a Section 811 mortgage with HUD to fund the construction of
Fortner Manor, an apartment complex for elderly and disabled
low-income residents, located in New Orleans. Pursuant to the
mortgage agreement, NBC received a capital advance of
$1,535,700, and HUD retained a security interest in Fortner
Manor. In the event of a monetary default of more than thirty
days or a “breach of any other covenant herein stipulated,” HUD
could accelerate NBC’s obligation to repay the entire principal
sum and would “have the right immediately to foreclose” on the
mortgage. NBC-HUD Mortgage Agreement ¶ 21, Sept. 29,
1999. Incorporated by reference was a regulatory agreement,
which required NBC to maintain Fortner Manor “in good and
substantial repair and condition” and provided that, upon
notification, NBC would have thirty days to remedy any
violation. NBC-HUD Regulatory Agreement ¶¶ 8, 15, Sept. 29,
1999. Upon NBC’s failure to do so, HUD could declare a
default of the regulatory agreement, declare the entire
indebtedness on the mortgage “immediately due and payable[,]
and then proceed with the foreclosure of the mortgage.” Id. ¶
15(c). NBC also entered into a project rental assistance contract
4
(“PRAC”) with HUD, which was incorporated by reference in
the regulatory agreement and required NBC “to maintain and
operate [Fortner Manor] . . . to provide decent, safe, and sanitary
housing.” NBC-HUD Project Rental Assistance Contract
§ 2.5(a), Aug. 1, 2001.
Fortner Manor suffered extensive damage from Hurricane
Katrina in August 2005 and has since remained uninhabitable.
HUD and NBC engaged in a series of communications regarding
NBC’s plans and funding for the rehabilitation of Fortner
Manor. After two years had passed, HUD concluded that
NBC’s responses to its requests for information were inadequate
and began sending NBC notices of regulatory agreement
violations; the notices gave NBC thirty days to submit an
acceptable plan and forewarned NBC that its failure to remedy
the violations could lead to a declaration of default allowing
HUD to “seek any and all available remedies, including but not
limited to, acceleration of the outstanding principal
indebtedness, foreclosure or any other appropriate remedies,”
Notice of Regulatory Agreement Violation, Aug. 7, 2007; see
also Notice of Regulatory Agreement Violation, Nov. 8, 2007.
In March 2008, HUD sent NBC a notice of default on the
PRAC, stating NBC was in default of the Regulatory Agreement
and the PRAC and that HUD would “pursue any and all
remedies available to it without further notice.” Notice of
Default of PRAC, Mar. 5, 2008. HUD sent a similar notice to
NBC on December 18, 2008, this time declaring that the entire
indebtedness on the mortgage was due and payable, and giving
NBC twenty-one days to provide a statement why foreclosure
should not proceed or seven days to request a meeting with
HUD, or foreclosure proceedings would be instituted without
further notice. No such response from NBC appears in the
record.
5
In May 2009, exercising its authority under the Mortgage
Foreclosure Act to initiate nonjudicial foreclosure proceedings
against Section 811 projects in default on their mortgages, see
12 U.S.C. §§ 3705, 3707, HUD appointed Roy S. Lilley as
foreclosure commissioner to conduct the foreclosure sale of
Fortner Manor, see id. §§ 3704, 3707. Jim Hotard Properties,
LLC submitted the winning bid at the foreclosure sale held on
July 28, 2009; it transferred its interest in Fortner Manor to
Lapeyrouse Investments, LLC. Because NBC threatened suit,
however, Lapeyrouse Investments was unable to obtain title
insurance and, consequently, the loan necessary to close on the
sale. NBC filed suit in the federal district court on November
25, 2009, five days prior to the next scheduled foreclosure sale,
which yielded no bids on Fortner Manor.
In its complaint, NBC sought declaratory judgments that
HUD had discriminated against NBC and unlawfully singled out
Fortner Manor for foreclosure, had violated its own regulations,
and had otherwise acted arbitrarily and capriciously in
proceeding with the foreclosure sale. NBC also requested
injunctions against the transfer of the property “pursuant to the
illegal non-judicial foreclosure.” Compl. at 17 (requesting relief
for Count IV). The district court dismissed the complaint as to
defendants Jim Hotard Properties, LLC, NBC-USA Housing,
Inc., Twenty-Six v. Donovan, 741 F. Supp. 2d 55, 61 (D.D.C.
2010), and Roy S. Lilley, NBC-USA Housing, Inc., Twenty-Six
v. Donovan, 774 F. Supp. 2d 277, 294 (D.D.C. 2011), for lack
of personal jurisdiction. On March 31, 2011, the district court
dismissed the case in its entirety, ruling that NBC’s
discrimination and singling-out claims failed to state a claim,
HUD was entitled to summary judgment on NBC’s remaining
claims, and, accordingly, NBC was not entitled to a permanent
injunction against the foreclosure sale, see NBC-USA Housing,
774 F. Supp. 2d at 296–98, 309–10 & n.29. NBC timely
6
appealed; however, it did not seek a stay pending appeal in
either the district court or this court.
HUD recommenced foreclosure proceedings against Fortner
Manor in August 2011. At the foreclosure sale held on October
6, 2011, James S. Hotard, Jr. submitted the winning bid on
behalf of Elderly Housing of America, LLC (“EHA”). See
Supp. Decl. Roy S. Lilley ¶¶ 10–11 (filed Dec. 23, 2011). On
November 21, 2011, Lilley, who had been reappointed
foreclosure commissioner, “signed and finalized” a foreclosure
deed “conveying all rights, title, and interest” in Fortner Manor
to EHA. Id. ¶ 11; see 12 U.S.C. §§ 3713, 3714. The foreclosure
deed directed the Recorder of Mortgages of Orleans Parish,
Louisiana, to “cancel and erase” all listed inscriptions relating
to NBC’s Section 811 mortgage on Fortner Manor and its
default thereon. Lilley Supp. Decl. Ex. B at 3. The Mortgage
Foreclosure Act, in turn, required the Recorder of Mortgages “or
other appropriate official of the county or counties in which
[Fortner Manor] is located” to “accept[] for recordation” the
foreclosure deed “and any other instruments submitted for
recordation in relation to the foreclosure of the security
property.” 12 U.S.C. § 3714(b).
II.
Article III, Section 2 of the Constitution authorizes federal
courts to adjudicate only “actual, ongoing controversies.” Honig
v. Doe, 484 U.S. 305, 317 (1988). Accordingly, federal courts
may not “issu[e] advisory opinions or ‘decid[e] questions that
cannot affect the rights of litigants in the case before them.’”
Pub. Utilities Comm’n of Cal. v. FERC, 236 F.3d 708, 713 (D.C.
Cir. 2001) (quoting Better Gov’t Ass’n v. Dep’t of State, 780
F.2d 86, 90–91 (D.C. Cir. 1986)). If, pending an appeal, an
“intervening event” makes it impossible for the court to grant a
prevailing party “any effectual relief whatever,” the appeal must
7
be dismissed as moot. Calderon v. Moore, 518 U.S. 149, 150
(1996) (quoting Mills v. Green, 159 U.S. 651, 653 (1895))
(internal quotation marks omitted).
HUD’s foreclosure sale of Fortner Manor is such an
intervening event. NBC did not ask the district court to issue an
injunction pending appeal, see FED. R. CIV. P. 62(c), or move in
either the district court or this court for a stay pending appeal,
see FED. R. APP. P. 8(a)(1)(A), (2). Nor did the appeal itself
operate as a stay of the district court’s judgment entered March
31, 2011, or of the foreclosure proceedings. See FED. R. CIV. P.
62(a)(1); Chesapeake W. Ry. v. Jardine, 8 F.2d 794, 795 (D.C.
Cir. 1925). Thus, HUD was not barred from proceeding with
the foreclosure sale of Fortner Manor on October 6, 2011, at
which EHA submitted the highest bid. The execution of the
foreclosure deed on November 21, 2011, rendered the
foreclosure sale final and concluded HUD’s involvement in the
transfer of Fortner Manor to EHA, leaving no further action by
HUD for a court to enjoin.
Because HUD has sold Fortner Manor to a third party not
before the court, NBC’s appeal of the denial of its “request for
an injunction against the sale is [] moot and accordingly beyond
our jurisdiction.” Kessler v. Surface Transp. Bd., 637 F.3d 369,
372 (D.C. Cir. 2011) (citing Calderon, 518 U.S. at 150; Bunn v.
Werner, 210 F.2d 730, 731 (D.C. Cir. 1954)). Where “all of the
parties to the transaction are before the court,” it may remain
possible for the court to grant effective relief notwithstanding
the completion of the transaction sought to be enjoined, for “[i]f
unraveling the transfer is necessary after the [] court decides the
merits, it will be within the court’s power to do so.” Lemon v.
Geren, 514 F.3d 1312, 1316 (D.C. Cir. 2008) (citing Porter v.
Lee, 328 U.S. 246, 251 (1946); Indus. Bank of Wash. v.
Tobriner, 405 F.2d 1321, 1323 (D.C. Cir. 1968)). The
purchaser, EHA, is not before the court; therefore, it would not
8
be within the court’s power to unravel the sale of Fortner Manor
were NBC ultimately to prevail on the merits of its claims. Nor
can NBC’s requests for declaratory judgment shore up the
court’s ability to grant effective relief. Where an intervening
event renders the underlying case moot, a declaratory judgment
can no longer “affect[] the behavior of the defendant towards the
plaintiff,” Hewitt v. Helms, 482 U.S. 755, 761 (1987) (emphasis
omitted), and thus “afford[s] the plaintiffs no relief whatsoever,”
Rhodes v. Stewart, 488 U.S. 1, 4 (1988). NBC’s response —
that mootness is premature because “Fortner Manor still is
deeded to NBC and title still rests with NBC,” Reply Br. 2, and
HUD could not sell a property on which it does not have good
title — is irreconcilable with the terms of its Section 811
agreements with HUD, the foreclosure deed, and the Mortgage
Foreclosure Act.
Accordingly, we dismiss the appeal as moot and do not
reach the merits of NBC’s appeal.