reconstruction or rehabilitation of housing for sale or lease to persons of low or moderate incomes. Id. at §§ 1680.301a, 1680.401a. The agency also finances the purchase, construction, improvement or rehabilitation of owner-occupied single family residences by contract with lending institutions. Id. at § 1680.401b (Purdon Supp. 1984-85).
Finally, PHFA administers the Homeowner's Emergency Mortgage Assistance Fund. The Fund is a separate account used to make emergency loans to mortgagors who, through no fault of their own, are suffering financial hardships making them delinquent on their mortgage payments. Id. at §§ 1680.401c, 1680.404c. The program differs from others carried out by PHFA in that the Fund cannot be used by the agency unless funding is specifically authorized and appropriated by the Pennsylvania General Assembly for the purposes provided for by Article IV-C of the Act. Id. at § 1680.408c (Purdon Supp. 1984-85). PHFA also cannot independently raise revenue for the Fund. Aside from the General Assembly, which authorized appropriation of up to $25,750,000.00 for the Fund in fiscal year 1984-85, see Act of May 31, 1984, No. 73-1984, § 3, its funding comes from business entities, which may make tax deductible contributions to it. 35 P.S. § 1680.410c. Repayments to the Fund by mortgagors are to be transferred back to the source from which the money was appropriated. Id. at § 1680.408c.
We now apply the Urbano test in light of the above statutory organization of PHFA.
A. Whether PHFA has corporate powers and is automonous.
PHFA possesses those specific attributes the Court of Appeals considers significant in concluding that a governmental body is automonous. It is separately incorporated, can sue and be sued in its own name, can enter into contracts, acquire property, and perform all things necessary or convenient to carry out its corporate powers.
Against these indications of autonomy, defendant PHFA asserts the following: (1) four members of the governing board are also members of the governor's cabinet who serve at the governor's pleasure while the remaining six members are appointed by the governor subject to confirmation by the Senate; and (2) the issuance of PHFA's bonds and notes are subject to the written approval of the governor.
Defendant's contentions have some merit but not enough, in showing that PHFA is not independent of the Commonwealth. In connection with the governor's authority over the membership in the agency, we first note that defendant incorrectly asserts that the State Treasurer serves "at the pleasure of the Governor." Defendant's reply brief at 6. Actually, the office of State Treasurer is an elective one. See Pa. Const. Art. IV, § 18. As such, the State Treasurer is independent of the Governor. Additionally, 35 P.S. § 1680.202 provides that the six appointive members of the agency, who together with the State Treasurer, form a seven person majority of the agency and governing board, shall serve staggered six year terms. Thus, the governor cannot remove these members at his pleasure. Commonwealth ex rel. Sortino v. Singley, 481 Pa. 367, 392 A.2d 1337 (1978); Schluraff v. Rzymek, 417 Pa. 144, 208 A.2d 239 (1965). Even admitting that the remaining three members of the agency, the Secretary of Community Affairs, the Secretary of Commerce, and the Secretary of Banking, would serve at the whim of the governor, see Pa. Const. Art. VI, § 7; 71 P.S. § 67.1(d)(1) (Purdon Pamphlet 1984-85); Commonwealth ex rel. Houlahen v. Flynn, 348 Pa. 101, 34 A.2d 59 (1943), this statutory arrangement of the agency membership indicates that the governor's voice in the selection of agency members is less significant than their day-to-day autonomy in running the agency. The Pennsylvania Turnpike Commission has a similar method of choosing commissioners but the courts have concluded that the Turnpike Commission has no Eleventh Amendment immunity. See Linger v. Pennsylvania Turnpike Commission, 158 F. Supp. 900 (W.D.Pa.1958).
Defendant's second contention deals with the statutory requirement that the governor give his written approval before the agency issues any bonds or notes. If this were otherwise a "close case," see Blake v. Kline, 612 F.2d 718, 726 (3d Cir.1979), we would be inclined to develop a record, "beyond the mere statutory language," id., to determine how much control the governor actually exercises over the issuance of bonds and notes.
Since this is just one factor among others, however, we can concede that PHFA's argument has some merit but also conclude that it is outweighed by the other statutory indications of autonomy and separateness.
B. Local Law defining the status and nature of PHFA and its relation to Pennsylvania.
Defendant contends that Edwards v. The Pennsylvania Housing Finance Agency, No. 2224 C.D. 1981 (Pa.Commw. Oct. 21, 1983) establishes that PHFA is not an independent agency. "State decisions concerning the relationship of an agency to the state may be an important, and under certain circumstances a controlling factor in the determination of immunity," Blake v. Kline, supra, 612 F.2d at 722 (brackets added), but Edwards is not such a case. It dealt solely with whether the governor's general counsel had the authority under the Commonwealth Attorneys Act, Act of October 15, 1980, P.L. 950, No. 164, § 101 et seq., 71 P.S. § 732-101 et seq., (Purdon Pamphlet 1984-85), to hire and discharge the agency's counsel. As the court itself noted in Edwards : "We do not find that our prior opinion in Pennsylvania Housing Finance Agency v. Abreen Corporation, [84 Pa.Commw. 571, 480 A.2d 335 (1982)] . . . requires a contrary conclusion. The P.H.F.A.'s financial status for purposes of sovereign immunity and the jurisdiction of this court and the Board of Claims is not relevant to a determination of the applicability of the Administrative Code of 1929 or its supplement, the Commonwealth Attorneys Act, to the agency." Edwards, slip op. at 7. (brackets added) Accordingly, we also do not consider Edwards relevant to a determination of PHFA's Eleventh Amendment immunity. Rather, Abreen is the appropriate case to look to in determining how state courts have construed the relationship of PHFA to the Commonwealth.
In Pennsylvania Housing Finance Agency v. Abreen Corp., 84 Pa.Commw. 571, 480 A.2d 335 (1982), the Commonwealth Court, using a financial independence test, held that PHFA was not the "Commonwealth" so that PHFA could invoke the exclusive jurisdiction of the Board of Claims under 72 P.S. § 4651-4 in a construction contract dispute. In doing so, the court relied upon Johnson v. Pennsylvania Housing Finance Agency, 453 Pa. 329, 309 A.2d 528 (1973), which upheld the constitutionality of PHFA's enabling legislation. The Supreme Court in Johnson emphasized the financial independence of PHFA. By statute, its bonds and notes were not the debts of the Commonwealth. Moreover, the Commonwealth had insulated itself from PHFA's liabilities. Abreen supports a conclusion here that PHFA is not the alter ego of the Commonwealth and therefore not entitled to Eleventh Amendment immunity.
C. Whether payment of the judgment will be made from the state treasury or from PHFA funds.
The statutory powers conferred on PHFA, detailed above, lead us to conclude, as the court in Abreen did, that any judgment rendered against PHFA would not be satisfied out of the state treasury.
PHFA can own real and personal property in its own name, raise revenue by issuing bonds and notes, and hold money in its own name. Clearly, a judgment entered against PHFA would not have to be paid out of state funds. Thus, the "most important factor in the determination of Eleventh Amendment immunity," Blake v. Kline, supra, 612 F.2d at 723, goes against the defendant.
D. Whether PHFA is performing a governmental or proprietary function.
The distinction between a governmental function and a proprietary one is difficult to draw. See Owen v. City of Independence, 445 U.S. 622, 644 n. 26, 100 S. Ct. 1398, 1412 n. 26, 63 L. Ed. 2d 673, 689 n. 26 (1980). Financing the construction and rehabilitation of homes and rental housing would traditionally be considered a role played by private entities, and hence a proprietary function, but "'views as to what constitutes a public use necessarily vary with changing conceptions of the scope and functions of government, so that today there are familiar examples of such use which formerly would not have been so considered. '" Johnson v. Pennsylvania Housing Finance Agency, supra, 453 Pa. at 337, 309 A.2d at 533 (quoting Dornan v. Philadelphia Housing Authority, 331 Pa. 209, 222, 200 A. 834, 841 (1938)). PHFA limits itself to providing financing for housing for low and moderate income persons, and does not compete generally with private entities in the construction and mortgage markets. Accordingly, PHFA retains elements of sovereignty in performing a governmental function of attempting to promote the health, safety and welfare of the Commonwealth's poorer citizens. See 35 P.S. § 1680.506a.
E. Whether PHFA's property is immune from state taxation.
In relevant part, 35 P.S. § 1680.506a provides as follows:
The Commonwealth covenants with the purchasers and all subsequent holders and transferees of the notes and bonds issued by the agency, in consideration of the acceptance of any payment for the notes and bonds, that the notes and bonds of the agency, issued pursuant to this act and the income therefrom, the income and revenues of the agency, and the agency and its property shall at all times be free from taxation or assessment of every kind and nature except for inheritance, estate, gift and transfer taxes.
This immunity from taxation is not shared by other entities in the housing and rental markets and has obviously been provided to PHFA by the Commonwealth to aid the former in pursuing its governmental function.
F. Whether the sovereign has immunized itself from responsibility for PHFA's operations.
As noted previously, 35 P.S. § 1680.502a provides that the general obligations of the agency shall not be deemed a debt of the Commonwealth or of its political subdivisions, or a pledge of the faith and credit of the Commonwealth or of its political subdivisions. In light of the other statutory provisions establishing PHFA's corporate autonomy, this section indicates the Commonwealth's intention to immunize itself from PHFA's operations.
Undoubtedly, almost every case dealing with Eleventh Amendment immunity for state agencies will contain mixed statutory signals concerning that agency's independence. Some of the above factors indicate that PHFA should share in Pennsylvania's sovereignty. These include its performance of a governmental function, its exemption from state taxation, control of appointments to its membership by the governor, and the requirement that its bonds and notes be issued only with the written approval of the governor. They are countered by the following. First, PHFA clearly has corporate autonomy. It can sue and be sued, and hold property, including money, in its own name. Second, these same corporate powers indicate that, on the most important factor in the determination of Eleventh Amendment immunity, any judgment rendered against PHFA would not be paid out of the state treasury. Third, state courts have not conferred sovereign immunity upon PHFA. Finally, the state has immunized itself from liability arising from PHFA's operations.
Based upon the foregoing, we conclude that PHFA is not a part of the Commonwealth of Pennsylvania and, accordingly, cannot assert Eleventh Amendment immunity from suit in federal court. We turn now to the joint motion of Dunbar and Baum to dismiss plaintiff's complaint.
III. Dunbar and Baum's Motion to Dismiss
Counts III and IV of the complaint assert state law claims against all the defendants. Specifically, plaintiff asserts in count III a violation of her state constitutional rights under Pa. Const., Art. I, §§ 1, 25, 26. In count IV she asserts a violation of her state due process rights under the same state constitutional provisions based upon a property right in her employment with PHFA.
Defendants Dunbar and Baum, relying upon Pennhurst State School & Hospital v. Halderman, supra, assert that this court lacks jurisdiction under the Eleventh Amendment to hear these claims because they are state officials. It is true that the Supreme Court stated in Pennhurst II as follows:
It is difficult to think of a greater intrusion on state sovereignty than when a federal court instructs state officials on how to conform their conduct to state law. Such a result conflicts directly with the principles of federalism that underlie the Eleventh Amendment.
Id. U.S. at , 104 S. Ct. at 911, 79 L. Ed. 2d at 82 (brackets added). The Court, however, further stated that "a federal suit against state officials on the basis of state law contravenes the Eleventh Amendment when . . . the relief sought and ordered has an impact directly on the State itself." Id. at , 104 S. Ct. at 917, 79 L. Ed. 2d at 89. We have already concluded that PHFA is not a part of the Commonwealth for Eleventh Amendment purposes. Thus, the relief sought would not have an impact directly on the state. Accordingly, whether or not Dunbar and Baum are, or were state officials, Pennhurst II does not bar this action against the individual defendants.
Dunbar and Baum also object to count VI of the complaint. They assert that this breach of contract claim, arising from provisions in PHFA's employee manual, is not cognizable under 42 U.S.C. § 1983 because no federal rights are involved. Plaintiff, however, has not attempted to pursue this count under the Civil Rights Act of 1871. Rather, plaintiff simply asserts a state claim for breach of contract. Accordingly, in the absence of an Eleventh Amendment bar, we may in our discretion exercise pendent jurisdiction over this state law claim. See Ambromovage v. United Mine Workers, 726 F.2d 972 (3d Cir.1984).
In count II of the complaint, plaintiff asserts a property right in her employment. She alleges that when she was discharged, her Fourteenth Amendment due process rights in that employment were violated. The individual defendants deny that plaintiff had a property right in her employment and, accordingly, the count should be dismissed. Plaintiff can and does rely upon state law to establish her property right. See Klein v. Califano, 586 F.2d 250 (3d Cir.1978). She cites Appeal of Colban, 58 Pa.Commw. 104, 427 A.2d 313 (1981), and DeFrank v. Greene County, 50 Pa.Commw. 30, 412 A.2d 663 (1981) which held that when an employee has been given a property right in his employment which cannot be eliminated without a hearing prior to discharge under the Local Agency Law, 2 Pa.C.S. § 551 et seq. Citing Scott v. Philadelphia Parking Authority, 402 Pa. 151, 166 A.2d 278 (1960), defendants deny that such a state law right exists here. In Scott, the Pennsylvania Supreme Court concluded that a public parking authority had no power to enter into a three year contract with an employee when that power had not been specifically conferred upon it by its enabling legislation. Hence, the employee could be discharged despite the contract. Defendants contend that we cannot rely upon the Commonwealth Court authority because we must accept the holding of Scott as the latest pronouncement of Pennsylvania's highest court on the issue of an employee's right to continued employment.
We reject defendants' contention. Scott did not deal with rights created by an employee manual. It simply decided that, absent statutory authority, an employee had no right to continued employment with a local agency.
Accordingly, we may consider the pronouncements of the Commonwealth Court as an indication of how the Pennsylvania Supreme Court would rule, see Mazzula v. Monarch Life Insurance Co., 487 F. Supp. 1299 (E.D.Pa.1980), and we conclude that the state's highest court would find, in the circumstances of Colban and DeFrank, a property right in "a form of guarantee of employment," see Colban, supra, 58 Pa.Commw. at 107, 427 A.2d at 314, as expressed by certain procedural rights conferred upon an employee before she can be discharged. See Abraham v. Pekarski, 537 F. Supp. 858 (E.D.Pa.1982), aff'd, 728 F.2d 167 (3d Cir.1984) (local ordinance created property right in employment when it provided that employee would not be discharged "without just cause").
We cannot conclude, however, on the pleadings before us now whether or not Colban and DeFrank would apply to the instant case. The provisions of the personnel manual are not before us. Count II could be based upon procedural safeguards set forth in the manual and we would have to examine these to determine if they would create a property interest under Pennsylvania law consisting of certain guarantees in connection with plaintiff's employment.
On the other hand, the claim in count II may not be based upon procedural safeguards. Paragraph 44 indicates that plaintiff may be claiming a property right in her employment merely because she had successfully completed her probationary period and had become a "permanent" employee. If this is the basis of her claim, she cannot prevail because permanent employment status, by itself, is not a property right. See Bishop v. Wood, 426 U.S. 341, 96 S. Ct. 2074, 48 L. Ed. 2d 684 (1976); Amesbury v. Luzerne County Institution District, supra. If plaintiff pursues count II, we will examine her claim of a property interest in her employment, upon appropriate motion, when an adequate record exists.
Defendants also briefed, but did not raise in their motion, a statute of limitations defense. Since they admit it has only been raised to preserve the issue and that the defense must be rejected in light of Knoll v. Springfield Township School District, 699 F.2d 137 (3d Cir.1982), and Fitzgerald v. Larson, 741 F.2d 32 (3d Cir.1984), we need not discuss it.
We will issue an appropriate order.
AND NOW, this 4th day of December, 1984, it is ordered that:
1. The motion of defendant, Pennsylvania Housing Finance Agency, to dismiss plaintiff's complaint against it be and is hereby denied.