those buildings damaged 30% or more. Alternatively, they requested that "phase three" of their complex, comprised of five buildings, be considered as a separate entity suffering damage to approximately 32% of its market value. These requests were also denied by SBA.
The parties have agreed that Plaintiffs are ineligible for refinancing if the project is looked upon as one integral property unit, as uninsured damage amounted to approximately 15% of the market value of the entire complex. The parties have further agreed that if the project is not looked upon as a whole, and is instead considered as separate buildings or "phase three" is considered separately, then Plaintiffs are eligible for greater refinancing then has been agreed to by SBA.
Plaintiffs have alleged that refusal to consider each building or "phase three" as separate property units for purposes of loan refinancing is unreasonable, capricious, erroneous and beyond the scope of the authority of the SBA and its administrator.
Plaintiffs invoke jurisdiction under 15 U.S.C. § 634(b)(1), 28 U.S.C. § 1361, 5 U.S.C. § 701 et seq., 28 U.S.C. § 1346(a)(2) and 28 U.S.C. § 2201 and § 2202. Defendants contend that this Court lacks jurisdiction to review the action of the administrator. The issue is whether the administrator of the SBA has exceeded the bounds of his authority by denying refinancing on the terms requested by the Plaintiffs.
As stated in Raitport v. Small Business Administration, 380 F. Supp. 1059, 1060 (E.D. Pa. 1974), "The law has been clearly established that a court can review an SBA decision only if it is arbitrary, capricious or erroneous as a matter of law." The power to interpret SBA regulations is vested in the administrator, and the regulations will be sustained if they are reasonable and consistent with the statute and if the Plaintiff fails to show a weighty reason to overrule them. Capital Refrigeration, Inc. v. United States, 375 F. Supp. 462 (M.D. Pa. 1973).
The Small Business Administration Act, 15 U.S.C. § 636(b) gives the administrator broad discretionary powers in providing for disaster assistance loans.
The section of the statute which provides the current basis for dispute is contained in the unnumbered part of 15 U.S.C. § 636(b) following 15 U.S.C. § 636(b)(8). The unnumbered portion of the statute provides in pertinent part:
"In the administration of the disaster loan program under paragraphs (1), (2), and (4) of this subsection [ 15 U.S.C. 636(b)(1), (2), and (4)], in the case of property loss or damage or injury resulting from a major disaster as determined by the President or a disaster as determined by the Administrator which occurs on or after January 1, 1971, and prior to July 1, 1973, the Small Business Administration, to the extent such loss or damage or injury is not compensated for by insurance or otherwise --