Blue Angel Realty, Inc. v. United States of America

Background

Blue Angel Realty, Inc. owns the Blandina Properties, a five-unit apartment complex in Utica, New York. In 1996, the United States Department of Housing and Urban Development (HUD) provided the prior owner, C.W.B. Housing Development Fund Corporation, with a $1,024,600 capital advance through the Section 811 supportive-housing program. The advance was secured by a mortgage, use agreement, and regulatory agreement recorded with the Oneida County Clerk. Those agreements required the property to remain supportive housing for eligible low-income or disabled people for at least 40 years. The mortgage listed a final maturity date of July 10, 2036.

CWB later lost the property after failing to satisfy local tax obligations. United Four Inc. acquired it at a tax foreclosure sale, and Blue Angel Realty acquired it from United Four in May 2006. Blue Angel Realty alleged that its title search did not reveal the HUD mortgage. In 2018, a proposed sale to the Utica Municipal Housing Authority did not close after that buyer's title search found the mortgage. Blue Angel Realty contacted HUD and alleged that HUD agents indicated they did not oppose removing the mortgage, but HUD's Washington, D.C. office later declined to remove it. Blue Angel Realty claimed financial losses from the failed sale and inability to sell the property free of the mortgage.

Blue Angel Realty asserted eight claims: mandamus, quiet title, declaratory judgment, negligence, violation of applicable federal law, unjust enrichment, fraudulent concealment, and prima facie tort. The defendants moved to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6).

Rule 12(b)(1) Claims

The court dismissed the negligence, fraudulent-concealment, prima-facie-tort, unjust-enrichment, and violation-of-applicable-federal-law claims under Rule 12(b)(1).

The court held that the negligence claim was, in substance, a claim that the defendants interfered with Blue Angel Realty's contract to sell the property. The Federal Tort Claims Act does not waive the government's immunity for claims arising from interference with contract rights. The court reached the same result for the prima facie tort claim because it relied on the same allegations. The fraudulent-concealment claim was based on alleged statements and omissions about whether HUD would remove the mortgage, so it fell within the Federal Tort Claims Act's exception for misrepresentation. The court also noted that the Act does not permit tort claims to be brought against a federal agency itself, rather than against the United States.

The unjust-enrichment claim was not ripe because it depended on a possible future attempt by the defendants to collect money when Blue Angel Realty sold the property. The property had not been sold, and the complaint did not allege that the defendants had tried to collect sale proceeds. The court therefore dismissed that claim for lack of jurisdiction without deciding the defendants' separate argument that it failed to state a claim.

The court also dismissed the claim alleging violation of applicable federal law. Blue Angel Realty did not identify a specific federal law that the defendants allegedly violated or establish a waiver of the United States' sovereign immunity for the requested monetary damages. The court observed that the federal-question statute, the Federal Tort Claims Act, and the Mandamus Act did not provide the required waiver for that claim.

Rule 12(b)(6) Claims

The court dismissed the quiet-title, mandamus, and declaratory-relief claims under Rule 12(b)(6).

For quiet title, Blue Angel Realty relied on 28 U.S.C. § 2410, which permits the United States to be named in an action concerning property on which it claims a mortgage or other lien. The court applied a six-year limitations period and held that the claim accrued no later than Blue Angel Realty's May 2006 purchase, because the mortgage had been recorded and the company had reason to discover it through a reasonable title investigation. The court declined to apply the continuing-violation doctrine and declined equitable tolling because the complaint did not allege the extraordinary circumstances required to excuse the late filing.

The court dismissed the mandamus claim because Blue Angel Realty did not identify a clear right to have the mortgage removed or a plainly defined, nondiscretionary government duty requiring its removal. The Section 811 program and the agreements instead supported continuing obligations connected to the property. The court also held that the quiet-title statute did not itself create a federal claim or require HUD to remove the mortgage. The alleged communications from HUD's Buffalo agents did not plausibly establish a binding commitment or nondiscretionary duty; the emails showed that the agents would recommend removal but did not promise that it would occur.

The court dismissed the request for a declaratory judgment because declaratory relief is a remedy rather than an independent claim, and all of Blue Angel Realty's underlying claims had been dismissed.

Leave to Amend and Disposition

The court granted leave to amend in part. It found that amendment would be futile for the negligence, fraudulent-concealment, prima-facie-tort, unjust-enrichment, violation-of-applicable-federal-law, and mandamus claims. It allowed Blue Angel Realty to file a second amended complaint limited to quiet title if it could plead additional facts supporting equitable tolling. The court stated that a second amended complaint merely repeating the existing allegations would be denied with prejudice. The court also said that Blue Angel Realty could seek declaratory relief in connection with a properly amended quiet-title claim, if appropriate.

Judge Katherine Polk Failla granted the defendants' motion to dismiss the Amended Complaint. She dismissed negligence, fraudulent concealment, prima facie tort, unjust enrichment, and violation of federal law under Rule 12(b)(1), and dismissed quiet title, mandamus relief, and declaratory relief under Rule 12(b)(6). Blue Angel Realty could file a second amended complaint limited to quiet title by February 11, 2022.