309 N.Y. 527 | NY | 1956
Plaintiffs sue on their own behalf and on behalf of the other tenants in eleven apartment houses, all owned in one form or another by the defendants considered as a group. The substance of the complaint is this: that by committing various kinds of wrongs defendants were able to procure the Federal Housing Authority (F. H. A.) to insure mortgage loans on these buildings in excessive amounts, with the alleged result that the rent schedules approved by F. H. A. authorities for these tenants were greatly in excess of reasonable rentals, on account of all of which plaintiffs demand money damages. All the defendants moved at Special Term, under subdivisions 1 and 4 of rule 106 of the Buies of Civil Practice, to dismiss the complaint on the ground that the court did not have jurisdiction of the subject of the action, and on the second alleged ground that the complaint does not state facts sufficient to constitute a cause of action. This motion, which was heard on the complaint alone, was granted, with an opinion holding, in substance, this: that this complaint cannot stand in any of its parts because it is a collateral attack on a determination of the Federal Administrator, and that for reasons stated this cannot be considered a Lawrence v. Fox (20 N. Y. 268) type situation. Plaintiffs appealed to the Appellate Division, Second Department, which affirmed with a brief memorandum. There was in that court one dissent, principally on the ground that these tenants are beneficiaries of the National Housing Act “ and have a direct right of action against the owner if the latter violates the act or the resolutions adopted thereunder ”, citing a New Jersey case and
This lengthy complaint sets up five causes of action. The first three are almost identical and will be called herein the ‘ ‘ fraud ’ ’ counts. The fourth count alleges, in effect, that defendants were guilty of “ gross negligence ” in overestimating the cost of construction of these buildings as a basis for obtaining $24,000,000 in mortgages. The fifth and last count says that defendants constructed the development in an inferior manner at a cost of several million dollars less than what the cost would have been if defendants had complied with the drawings and specifications. Section 608 of the National Housing Act (U. S. Code, tit. 12, § 1743, passed in 1942, but as here applicable amended in 1946) provided, at the time (1946-1949) when these loans were made, for the insuring by the Federal Housing Administration of mortgages on properties where preference would be given to tenancies by World War II veterans and their families, no mortgage to be more than $5,000,000 in principal amount and no mortgage to exceed in principal amount 90% of the Federal Housing Administrator’s estimate of the necessary current cost of the whole property or project including land, architect’s fees, taxes and interest accruing during construction, and similar incidental charges.
The first three causes of action taken together allege that defendants, during the years 1946 to 1949, submitted to F. H. A. applications for insurance of mortgages on these eleven properties, which applications estimated total cost of construction, according to the drawings and specifications accompanying them, at about $26,700,000 for all the buildings, and that defendants requested, and were granted by F. H. A., insurance for mortgages aggregating $24,000,000, as requested, on the eleven buildings. These causes of action go on to allege that, pursuant to F. H. A. regulations, defendants were required to file and did file with the administrator rental schedules approved by him and that, under the policies of procedures of F. H. A., said rents
There are two different but equally conclusive reasons why this complaint cannot stand. The first of such reasons is that these allegedly excessive rentals were fixed by the Federal Housing Administrator or Commission (this, of course, has nothing to do with the emergency rent control laws but is a different statutory setup). Such a determination of the F. H. A. authorities represents Federal governmental action by authorized Federal officers. As made clear by Wasservogel v. Meyerowitz (300 N. Y. 125), Matter of Schmoll, Inc., v. Federal Reserve Bank (286 N. Y. 503) and older cases, the State courts have no power whatever to revise such official acts performed by Federal officials under authority of acts of Congress. In the Wasservogel case (supra) this court said flatly that when Federal authorities and Federal officers acting within their authority
The other and separate reason why this complaint is insufficient is found in a line of cases of which Rosner v. Textile Binding & Trimming Co. (300 N. Y. 319) is typical (see, also, Rosenbluth v. Sackadorf, 298 N. Y. 761; Valcich v. Depot Warehouse Realty, 308 N. Y. 892). All those cases, and some others in our court, hold that a tenant who claims to have been deprived of rights under rent laws by fraudulent misrepresentations made either to government authorities or to the tenant has no remedy by suit unless there be a specific statute giving him such remedy. The same or a quite similar idea is expressed as to commission-fixed electric utility rates in Montana-Dakota Utilities Co. v. Northwestern Public Service Co. (341 U. S. 246) and as to minimum wages fixed by the Secretary of Labor in Perkins v. Lukens Steel Co. (310 U. S. 113). As against this line of authority, plaintiffs cite to us two cases in other States, Brinkmann v. Urban Realty Co. (10 N. J. 113) and Parkin v. Damen-Ridge Apts. (348 Ill. App. 428). Both are readily distinguishable. Although each decision involves alleged overcharges of tenants in apartment houses financed with F. H. A.
Appellants argue that this complaint states a cause of action under the “ Third Party Beneficiary ” rule of Lawrence v. Fox (20 N. Y. 268, supra). For purposes of argument we will read the complaint here as attempting to set out such a claim. However, there are a number of reasons why the Lawrence v. Fox doctrine does not help plaintiffs. That doctrine makes actionable a promise made by a defendant upon valid consideration to a third person for the benefit of the plaintiff although the plaintiff was not privy to the consideration. Presumably, the contract that appellants rely on here is the contract between defendants and the F. H. A. Of course, that contract was in a sense made for the benefit of a large class of American citizens, including plaintiffs, who could not at the time find adequate housing. However, it is notable that even the Brinkmann case (supra), cited by appellants, says (p. 118) that the primary design of the National Housing Act as originally passed was “ to stimulate building and increase employment ”, citing United States v. Emory (314 U. S. 423, 430), although Brinkmann goes on to say that one of the significant purposes of the act was to benefit “ low-income tenants by affording them suitable housing accommodations at reasonable rentals ”. But, for all that, the making of this F. H. A. contract for the insurance by the United States of these mortgages was an act of government intended, as all such acts are supposed to be, to benefit some or all of the citizens. To carry out a public policy of the United States Government, the Administrator was authorized to facilitate the construction of buildings by insuring the mortgages taken by lending institutions on those buildings. The Federal Administrator was authorized by the same statute to approve a rent schedule, not
Appellants have still another string to their bow in that they say this complaint can be held sufficient under Advance Music Corp. v. American Tobacco Co. (296 N. Y. 79) as discussed in Rager v. McCloskey (305 N. Y. 75) and Rochette & Parsini Corp. v. Campo (301 N. Y. 228). Appellants say that the Advance Music case (supra) makes actionable “ any intentional infliction of temporal damage ” but, of course, if that were literally true it would abolish all other forms and theories of action. The Advance Music theory does not go far enough to give these plaintiffs a cause of action on the facts they allege. What plaintiffs are alleging is not that the defendants set out to harm or wrong plaintiffs but that defendants defrauded the United States Government into legislative action fixing rents which action would not have been taken had not defendants so defrauded the Government.
The substance of all this is, as we see it, that plaintiffs cannot have any relief in the courts unless and until they are able in some fashion to set aside the rent schedules or unless some legislative body, such as the United States Congress, provides them with a remedy by suit. In all of this we are assuming, as we must on an appeal like this, the truth of all the allegations in plaintiffs’ complaint.
In one of their points, plaintiffs say that if the dismissal of their complaint be affirmed here they should, nonetheless, be given by this court leave to plead over which was refused them by the courts below. It is clear that permission to plead over is discretionary but it is a particular form of discretion which
The judgment should be affirmed, with costs.
Conway, Ch. J., Fuld, Van Voorhis and Burke, JJ., concur; Dye and Froessel, JJ., taking no part.
Judgment affirmed.