APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
Before Aldisert, Weis and Becker, Circuit Judges.
Alternatively interpreting and modifying a consent decree, the district court ordered the Secretary of Housing and Urban Development to set aside approximately $11 million in Government National Mortgage Associates (GNMA) tandem financing at an interest rate of 7.5% to finance rehabilitation of 111 units and construction of 20 units of subsidized rental housing in the Washington Square area of Philadelphia. 532 F. Supp. 540. The Secretary has appealed, contending that the language of the consent decree does not support the court's interpretation, and that modification of the consent decree to impose this substantial burden was unlawful. We agree with HUD and reverse.*fn1
The present appeal emerges from a class action suit brought in 1969 seeking to enjoin HUD and the City of Philadelphia from urban renewal activities in the Washington Square area because of inadequate provision for citizen participation. Various intervenors, including the private appellees here, joined the litigation contending that the urban renewal undertaken by the defendants violated federal law. They demanded that HUD and the City provide housing in the area for minorities and lower income persons displaced by renovations or forced to move because of increased rental rates. Following vigorous pre-trial skirmishes, described by the district court as "set in a bed of tensions generated by the nature of the parties and disputes involved," Fox v. U. S. Dept. of Housing & Urban Development, 468 F. Supp. 907, 909 (E.D.Pa.1979), the parties settled their differences in 1978 and obtained court approval of a consent decree in January 1979. The settlement provided for the construction or rehabilitation of 131 housing units in Washington Square by private developers and for rental subsidies under § 8 of the Housing Act for the tenants of those units.*fn2 The City Redevelopment Authority, also a defendant in the suit, agreed to assist eligible members of the affected classes to obtain housing in a § 8 housing project that the Postal Workers Union was planning to build. The defendants admitted no violation of applicable laws.
The essential facts leading to the current controversy over implementation of the consent decree are not in dispute. In accordance with the decree, HUD published a "Notification of Fund Availability" for § 8 assistance for 131 units and, following a review of proposals submitted by private developers, approved Wash West Properties as the developer in 1979. On June 19, 1981, Wash West Properties submitted to HUD an application for a firm commitment of FHA mortgage insurance on the development. The application assumed that GNMA would provide assistance under its "tandem financing" program to secure financing at an interest rate of 7.5%.*fn3 Although it had agreed to accept and process the application, HUD had informed the developer that a firm commitment for mortgage insurance did not guarantee financing, and that no funds had yet been allocated to GNMA. HUD took the position that, if funds were allocated, Wash West would be subject to all rules and requirements of GNMA, including the requirement that it participate with developers of other projects in a lottery for the limited funding available under the program. HUD encouraged Wash West "to seek other sources of financing so that this project may go to a construction start."
Upon learning of HUD's position, the plaintiffs demanded that it guarantee GNMA tandem financing for the project and announced that if HUD failed to do so, they would return to district court to obtain an order under the consent decree requiring the financing; they did so when HUD again advised them that financing would not be forthcoming unless the developer succeeded in the lottery. They argued first that HUD's failure to provide tandem financing violated the existing decree, and alternatively, that the court should modify the decree to require tandem financing because without it, the project would fail.
The court accepted both arguments. It first concluded that HUD was obliged to provide 7.5% GNMA financing under the following provision of the decree:
13. The parties shall use their best efforts to obtain approvals necessary to effectuate the terms of this settlement from the City of Philadelphia and any necessary federal, state or local agencies.
The district court interpreted this sentence as "capable of being fairly read as imposing on HUD the obligation to approve an application from Wash West Properties for (GNMA) financing" and stated that it could order the relief sought "on the basis of that language alone." To support its conclusion, the court observed that it was within HUD's power to set aside funds for the project because GNMA is under the control of the Secretary. Failure to do so, in the court's view, violated the requirement that HUD use its best efforts under the above clause. Nevertheless, "in the interest of clarity," the court examined the circumstances surrounding the formulation of the decree and the radical change in mortgage interest rates following its entry and modified the decree to require GNMA financing so that the § 8 housing could be built.
HUD appealed and while the appeal was pending Wash West participated unsuccessfully in the lottery for GNMA financing. In accordance with the district court's order, however, GNMA has set aside $11 million in mortgage funds pending the disposition of this appeal.
Notwithstanding the argumentum ad misericordiam advanced by the plaintiffs that unless 7.5% financing is available, the long-awaited redevelopment project will not materialize, what is before the court is not an adjudication of the merits of the original dispute. Irrespective of personal views regarding the desirability vel non of this particular redevelopment project and its impact on the Philadelphia community, the role of the court here is limited; it is not to supersede a Congressional mandate or administrative decisions of the Executive branch; our role requires dispassionate and neutral application of settled legal precepts governing consent decrees. We will ...