SUSAN G. BRADEN, District Judge.
The Pennsylvania Housing Financing Agency ("PHFA") has a contractual relationship with the United States Department of Veteran's Affairs ("VA") to service mortgages guaranteed by the VA. Am. Compl. ¶ 8. Pursuant to this contract, when a PHFA property becomes the subject of a foreclosure, the VA purchases the property from the PHFA and sells it. Am. Compl. ¶ 12. If marketable title cannot be obtained, the VA's purchase is "conditional" and the property may be returned to the PHFA and the PHFA is required to refund the VA's guarantee. Am. Compl. ¶¶ 13-14.
Vitti & Vitti & Associates, P.C.,
Under a separate agreement between Plaintiffs and PHFA, if a property is returned to the PHFA by the VA, Plaintiffs are required to indemnify the PHFA for any loss incurred. Am. Compl. ¶ 15.
This case concerns a property located at 2116 Walton Avenue in Pittsburgh, Pennsylvania, that was appraised at and purchased by the VA for $48,000. Am. Compl. ¶¶ 19-20 Ex. A at 1 (Uniform Residential Appraisal Report). On October 10, 2009, the PHFA initiated a foreclosure of this property that resulted in a sheriff's sale. Am. Compl. ¶ 11. Because of a title defect, the VA subsequently returned the property to the PHFA. Am. Compl. ¶ 17. Thereafter, title was resolved and the property was reconveyed to the VA. Am. Compl. ¶ 18. During the time the property was under the VA's control, it was vandalized. Am. Compl. ¶ 33.
On May 24, 2012, the VA denied an administrative tort claim, concerning the property damage, filed by Plaintiffs. Am. Compl. ¶ 34 & Ex. E.
On July 22, 2013, Plaintiffs filed an Amended Complaint in the United States Court of Federal Claims
On September 20, 2013, the Government filed a Motion To Dismiss. On September 30, 2013, Plaintiffs filed a Response. On November 4, 2013, the Government filed a Reply.
The United States Court of Federal Claims has jurisdiction under the Tucker Act "to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. § 1491(a)(1). The Tucker Act, however, is "a jurisdictional statute; it does not create any substantive right enforceable against the United States for money damages. . . . [T]he Act merely confers jurisdiction upon [the United States Court of Federal Claims] whenever the substantive right exists." United States v. Testan, 424 U.S. 392, 398 (1976).
Therefore, to pursue a substantive right under the Tucker Act, a plaintiff must identify and plead an independent contractual relationship, Constitutional provision, federal statute, and/or executive agency regulation that provides a substantive right to money damages. See Todd v. United States, 386 F.3d 1091, 1094 (Fed. Cir. 2004) ("[J]urisdiction under the Tucker Act requires the litigant to identify a substantive right for money damages against the United States separate from the Tucker Act. . . ."); see also Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) ("The Tucker Act . . . does not create a substantive cause of action; . . . a plaintiff must identify a separate source of substantive law that creates the right to money damages. . . . [T]hat source must be `money-mandating.'"). Specifically, a plaintiff must demonstrate that the source of substantive law upon which he relies "can fairly be interpreted as mandating compensation by the Federal Government." United States v. Mitchell, 463 U.S. 206, 216 (1983) (quoting Testan, 424 U.S. at 400). And, the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988) ("[O]nce the [trial] court's subject matter jurisdiction [is] put in question . . . . [the plaintiff] bears the burden of establishing subject matter jurisdiction by a preponderance of the evidence.").
A challenge to the United States Court of Federal Claims' "general power to adjudicate in specific areas of substantive law . . . . is properly raised by a [Rule] 12(b)(1) motion." Palmer v. United States, 168 F.3d 1310, 1313 (Fed. Cir. 1999); see also RCFC 12(b)(1) (allowing a party to assert, by motion, "lack of subject-matter jurisdiction"). When considering whether to dismiss an action for lack of subject matter jurisdiction, the court is "obligated to assume all factual allegations [of the complaint] to be true and to draw all reasonable inferences in plaintiff's favor." Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995).
The Government argues that the court does not have subject matter jurisdiction over the claims alleged in Count I of the Amended Complaint (Negligence), as they sound in tort. Gov't Mot. 7. As to the allegations in Count II of the Amended Complaint (Breach of Contract), Plaintiffs do not have privity with the United States, thereby depriving the court of jurisdiction. Gov't Mot. 8-9.
Plaintiffs respond that the claims alleged in Count I of the July 22, 2013 Amended Complaint are based on the Federal Tort Claims Act.
Count I of the July 22, 2013 Amended Complaint alleges that the VA was negligent in maintaining the property at issue. Am. Compl. ¶ 37. The Federal Tort Claims Act, 28 U.S.C. § 1346(b)(1), provides that the Government can be sued for claims sounding in tort; the United States Court of Federal Claims, however, does not have jurisdiction to adjudicate such claims. See 28 U.S.C. § 1491(a)(1) ("The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim . . . for liquidated damages . . . in cases not sounding in tort." (emphasis added)). Instead, United States District Courts are the proper forum. See 28 U.S.C. § 1346(b)(1). Accordingly, the claims alleged in Count I of the July 22, 2013 Amended Complaint must be dismissed for a lack of jurisdiction.
As a matter of law, for the Government to be sued under the Tucker Act, there must be privity of contract with a plaintiff. See Chancellor Manor v. United States, 331 F.3d 891, 899 (Fed. Cir. 2003) ("[The United States Court of Appeals for the Federal Circuit] has consistently held that for the government to be sued on a contract pursuant to the Tucker Act, there must be privity of contract[.]") (citing Cienega Gardens v. United States, 194 F.3d 1231, 1239 (Fed. Cir. 1998)). When a third party is neither a party to the contract nor a third-party beneficiary, as a matter of law, privity cannot be established. See Castle v. United States, 301 F.3d 1328, 1339 (Fed. Cir. 2002) (holding that parties who "neither negotiated with, nor promised any performance to, the government" did not have standing to sue the Government under a contract claim due to a lack of privity). In this case, the alleged contract is between the VA and the PHFA. Am. Compl. ¶ 8. Plaintiffs, however, are not a party to that contract and therefore privity cannot be established. Accordingly, the court does not have jurisdiction to adjudicate the claims alleged in Count II of the July 22, 2013 Amended Complaint.
For these reasons, the court grants the Government's September 20, 2013 Motion. Accordingly, the Clerk will dismiss Count II of the July 22, 2013 Amended Complaint in the United States Court of Federal Claims, without prejudice, and transfer Counts I and III of that Complaint to the United States District Court for the Western District of Pennsylvania for final disposition, pursuant to 28 U.S.C. section 1631.
This case has been designated as an electronic case in the court's case management/electronic case filing (CM/ECF) system. In addition to complying with the court's policy concerning CM/ECF, contained in Appendix E to the Rules of the Court and the Notice of Designation filed by the Clerk's Office, counsel are directed to provide a hard copy of all filings that exceed 100 pages, including any appendices or exhibits. The hard copy shall be delivered to the Clerk's Office for delivery to chambers and shall be addressed in a manner to ensure prompt delivery to the undersigned's chambers. All filings shall comply with the court's rules which are available on the court's website at
Pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims (RCFC), defendant, the United States, respectfully requests the Court to dismiss plaintiff, Vitti & Vitti & Associates, P.C.'s (Vitti) complaint for lack of subject matter jurisdiction. Vitti's tort claim falls outside the jurisdiction of this Court, and the Court does not possess jurisdiction to entertain Vitti's breach of contract claim because there is no privity of contract between Vitti and the United States. In support of our motion we rely upon the complaint, the following brief, and the attached appendix.
1. Whether this Court possesses jurisdiction to entertain Vitti's tort claim.
2. Whether this Court possesses jurisdiction to entertain Vitti's claim for money damages because of an alleged breach of the contract between the Pennsylvania Housing Finance Agency (PHFA) and the Department of Veterans Affairs (VA).
VA guarantees a portion of home mortgage loans made to veterans by private lenders pursuant to 38 U.S.C. § 3701 et. seq. See also 38 U.S.C. § 3703(a)(1)(A) (specifying amounts of guarantee). The VA's guarantee "operate[s] as the substantial equivalent of a down payment in the same amount by the veteran on the purchase price, in order to induce prospective mortgagee creditors to provide 100% financing for a veteran's home." United States v. Shimer, 367 U.S. 374, 383 (1961).
In the event of default on a loan guaranteed by VA, if the holder of the defaulted loan acquires the property securing the loan at a liquidation sale, the loan holder has the option, in certain circumstances, of conveying the property to the United States for payment by the Secretary of VA in an amount set by statute. 38 U.S.C. § 3732(c)(5)-(9) (describing circumstances when a loan holder can convey a property to the United States). To convey a property to VA, the holder must provide valid title "as . . . would be acceptable to prudent lending institutions, informed buyers, title companies, and attorneys, generally, in the community in which the property is situated." 38 C.F.R. § 36.4320(h)(5) (2009)
Carmen Miller, a veteran, obtained a loan of $45,750 on September 11, 1996, for a residential property located at 2116 Walton Avenue, Pittsburgh, Pennsylvania (the property). See Def. App. at 1 (Loan Guaranty Certificate)
Ms. Miller defaulted on the loan, and PHFA instituted foreclosure proceedings. Id. at ¶¶ 10-11. The foreclosure proceeded with a liquidation sale of the property in October 2009, and the property was conveyed from PHFA to VA. Pl. Compl. ¶¶ 10-12. Pursuant to 38 U.S.C. § 3732(c), VA paid PHFA the net value of the property, which was calculated as $42,303. Def. App. at 6 (check payable to PHFA); Pl. Compl. ¶ 23 ("VA paid the net value to PHFA"). But see Pl. Compl. ¶¶ 19-20 (indicating VA paid $48,000 to PHFA).
On August 25, 2010, VA, through its contracted agent, Bank of America, sent a letter to U.S. Bank National Association (U.S. Bank)
On September 23, 2010, VA, through its agent, Bank of America, sent U.S. Bank a "Final-Reconveyance" letter stating that VA was reconveying the property because "[t]he property had been in inventory for 288 days. There is an open mortgage . . . . [and] there is no record of release." Def. App. at 8-9 (Final Reconveyance Letter). Attached to the letter was a "Quit Claim Deed" transferring the property back to U.S. Bank. Id. at 10-14; see also Pl. Compl. ¶ 28. The letter also requested payment of the original net value of the property along with other expenses. Id. at 8; see also 38 C.F.R. § 36.4323(c). But see Pl. Compl. ¶ 29 (PHFA was required to refund VA the sum of $48,000). As a result of the reconveyance, PHFA sought indemnification from Vitti. Pl. Compl. ¶ 31. PHFA conveyed the property to Vitti, who in return paid PHFA $48,000. Id.
On May 24, 2012, VA denied an administrative tort claim submitted by plaintiff, Louis P. Vitti, Esquire, wherein Mr. Vitti alleged that VA was liable for damage (the removal of copper piping) to the property that occurred while the property was in VA's possession. See Pl. Compl. ¶ 34, Ex. E. In denying the claim, VA found no "evidence of any negligent or wrongful act or omission of any employee of the federal government. . . ." Id. Vitti subsequently filed a complaint in the United States District Court for the Western District of Pennsylvania. On July 22, 2013, Vitti filed a motion to requesting that the district court transfer the case to the Court of Federal Claims. Def. App. at 15-17. On April 30, 2013, the district court granted Vitti's motion and transfered Vitti's case to this Court. See Def. App. at 18.
On July 22, 2013, Vitti filed an amended complaint in this Court alleging a tort and breach of contract claim. Specifically, Vitti alleges that VA "owed a contractual duty to the PHFA to preserve the property while it was it was in its possession . . . in such a way as to . . . prevent vandals from entering the property and taking copper pipes . . . . [and] that VA did not so maintain the property. . . ." Pl. Compl. ¶¶ 36-37. Vitti contends that as a result of VA's breach of its contractual obligations to PHFA, VA is liable to Vitti in tort because he was required to indemnify PHFA for any damages that PHFA sustained when VA reconveyed the property due to issues with the property's title. Pl. Compl. ¶¶ 35-42. Vitti's complaint also includes a claim for breach of contract, but the basis of this claim is unclear because Vitti does not contend that it had a contract with the Government. Pl. Compl. ¶ 43. Vitti seeks $42,400 in damages, or in the alternative offers to reconvey the property to VA in exchange for $48,000. Pl. Compl., prayer for relief.
Subject matter jurisdiction is a threshold issue. Int'l Mgmt. Servs., Inc. v. United States, 80 Fed. Cl. 1, 4 (Fed. Cl. 2008) (citation omitted). The central provision granting consent to suit in this Court is the Tucker Act, 28 U.S.C. § 1491. United States v. Testan, 424 U.S. 392, 397 (1976); Aetna Casualty & Surety Co. v. United States, 655 F.2d 1047, 1051 (Ct. Cl. 1981). Pursuant to this statute, an action may be maintained in this Court only if it is "founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. § 1491(a).
The plaintiff bears the burden of proving, by a preponderance of the evidence, that the Court possesses subject matter jurisdiction. McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936); Myers Investigative and Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1369 (Fed. Cir. 2002) (citation omitted). In ruling upon a motion to dismiss for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1), "the Court accepts as true the undisputed allegations in the complaint, and draws all inferences in favor of the plaintiff." Lavezzo v. United States, 74 Fed. Cl. 502, 507 (2006) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Harlow v. Fitzgerald, 47 U.S. 800 (1982)). Nonetheless, when considering an RCFC 12(b)(1) motion, the Court "may look outside the complaint and receive evidence for the purpose of resolving the jurisdictional issue of fact." Morris v. United States, 33 Fed. Cl. 733, 742 (1995). If a defendant challenges the jurisdiction of the Court, the plaintiff may not rely merely upon allegations in the complaint, but must instead identify relevant, competent proof to establish jurisdiction. McNutt, 298 U.S. at 189. Indeed, "conclusory allegations unsupported by any factual assertions will not withstand a motion to dismiss." CC Distrib., Inc. v. United States, 38 Fed. Cl. 771, 775 (1997). If jurisdiction is found to be lacking, this Court must dismiss the action. RCFC 12(h)(3).
As we establish below, Vitti has failed to meet its burden of proving this Court's subject matter jurisdiction to entertain the claims in its complaint.
The gravamen of Vitti's complaint sounds in tort. Count one of Vitti's complaint—which forms the majority of its complaint—alleges that VA is liable to Vitti in tort for VA's purported failure to "preserve the property[,]" Pl. Compl. ¶ 36, and its value while it was in VA's "possession, custody, and control[,]" id.; see also id. at ¶ 40 ("[C]onsequently it [VA] is liable in Tort to Vitti."). Vitti's specifically contends that by breaching its contractual duty to PHFA, VA is liable in tort to "third persons [presumably including Vitti] regardless of any privity of contract who might be injured as a result of the . . . [VA's] failure to properly perform its contractual duties and undertakings." Id. at ¶ 38 (citing Section 324 of the Restatement of Torts 2nd). Vitti contends that this Court possess jurisdiction to entertain its tort claims pursuant to 28 U.S.C. § 2675 (Tort Claims Procedure) and 28 U.S.C. § 2401 (prescribing time and procedures for filing a tort claim). See also Pl. Compl. ¶ 34 (presumably alleging that its claim was filed "within the six month time period" prescribed by section 2401(b)).
It is well-settled that this Court does not possess jurisdiction over claims sounding in tort. The Tucker Act expressly precludes this Court from exercising jurisdiction over tort claims. 28 U.S.C. § 1491 ("The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States . . . in cases not sounding in tort.") (emphasis added); see also Gibbons v. United States, 75 U.S. (8 Wall.) 269, 275 (1868) ("The language of the statutes which confer jurisdiction upon the Court of Claims, excludes by the strongest implication demands against the government founded on torts."); Keene Corp. v. United States, 508 U.S. 200, 214 (1993) ("tort cases are outside the jurisdiction of the Court of Federal Claims today") (footnote omitted).
Moreover, the Federal Tort Claims Act, 28 U.S.C. § 1346(b)(1), provides the United States District Court with exclusive jurisdiction over civil actions sounding in tort against the United States. Section 1346(b)(1) does not authorize this Court to hear civil tort actions. 28 U.S.C. § 1346(b)(1). Accordingly, the Court should dismiss Vitti's tort claim.
A plaintiff pursuing a breach of contract claim against the United States pursuant to the Tucker Act, 28 U.S.C. § 1491, must, as a threshold issue, demonstrate privity of contract with the United States. Normandy Apartments, Ltd. v. United States, 100 Fed.Cl. 247 (2011) (citing Chancellor Manor v. United States, 331 F.3d 891, 899 (Fed. Cir. 2003)). Privity of contract is a question of subject matter jurisdiction and a lack of privity deprives this Court of jurisdiction.
Vitti fails to meet its burden of establishing this Court's jurisdiction over its breach of contract claim because it fails to allege—nor does it have—a contract with the United States. See Castle v. United States, 301 F.3d 1328, 1339 (Fed. Cir. 2002) (holding that only direct parties to the contract have standing to allege breach of contract claims based upon the contract). In its complaint, Vitti alleges that PHFA had a contract with VA, Pl. Compl. ¶¶ 12, 14 (alleging a contract between PHFA and VA), and that Vitti had a separate and distinct "agreement" with PHFA, id. at ¶ 15 (describing Vitti's agreement with PHFA). Accordingly, the only privity of contract that Vitti may possess is privity of contract with PHFA. Indeed, Vitti's breach of contract claim is not based upon any contract that Vitti had with the Government. Rather, Vitti's claim is based upon its obligation to indemnify PHFA, and Vitti's damages stem from Vitti's failure to fulfill its obligation under its agreement with PHFA: the obligation to obtain clear and marketable title. See id. at ¶ 15. Accordingly, this Court does not possess jurisdiction to entertain Vitti's contract claim.
Because neither of Vitti's claims fall within the jurisdiction of this Court, its complaint should be dismissed for lack of subject matter jurisdiction.
For these reasons, we respectfully request that the Court dismiss Vitti's complaint for lack of subject matter jurisdiction.
Plaintiffs (Vitti & Vitti & Associates, P.C.; Louis P. Vitti; and Edith Moen Vitti) commenced this lawsuit against the United States Department of Veterans Affairs ("VA") as a negligence action under the provisions of the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346, 2671 et seq. These claims arise out of the financial obligations incurred by Plaintiffs following a foreclosure of a residential property whose loan was guaranteed by the VA pursuant to the VA Home Loan Guarantee Program, 38 U.S.C. § 3701 et seq.
The VA Home Loan Guarantee Program was conceived in the Servicemen's Readjustment Act of 1944, Pub. L. 78-346, in order to assist veterans returning from World War II in the purchase of homes with favorable loan terms and interest rates. See Ex. 1 (Affidavit of Carl Wasson) at ¶ 3. The loan program continues in existence today and has assisted millions of veterans in the construction, purchase, and refinance of various loans. Id. A key benefit of this program is the automatic guarantee by the United States Government of a veteran's loan up to a certain amount specified by statute, 38 U.S.C. § 3703(a)(1)(A). This guarantee "operate[s] as the substantial equivalent of a down payment in the same amount by the veteran on the purchase price, in order to induce prospective mortgagee creditors to provide 100% financing for a veteran's home." United States v. Shimer, 367 U.S. 374, 383 (1961). As a result, veterans are able to obtain favorable mortgage credit that would otherwise not be available. Ex. 1 at ¶ 3.
Carmen Miller, a veteran, obtained a loan of $45,750 on September 11, 1996, for a residential property located at 2116 Walton Avenue, Pittsburgh, Pennsylvania ("the Walton Avenue property"). See Ex. 2 (Loan Guaranty Certificate). The loan was initially financed through Allstate Financial Services, Inc., with a mortgage that was guaranteed by the VA. Id.; Ex. 1 at ¶ 5. The loan was eventually transferred and serviced by the Pennsylvania Housing Finance Agency ("PHFA"). Compl. at ¶¶ 7, 10.
Ms. Miller defaulted on the loan, and the PHFA instituted foreclosure proceedings. Ex. 1 at ¶ 5, Att. 1. As part of the foreclosure procedure, PHFA requested that the property be appraised. Ex. 3 (Appraisal Request); 38 C.F.R. § 36.4322(b)(1). The Walton Avenue property was physically inspected on August 22, 2009, and an appraisal report was finalized on August 31, 2009, valuing the property at $48,000. See Ex. 4 (Uniform Residential Appraisal Report); Compl. at ¶ 9. The appraisal report noted that the property was "functionally acceptable," and there were "[n]o apparent problems with the heating, electrical or plumbing systems." Ex. 4 at p. 1 of 6. The appraisal report further indicated that there were no "physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property." Id. An additional inspection of the Walton Avenue property was conducted on October 13, 2009, and the property was found to be "secure" and "okay." See Ex. 5 (Property Inspection Report dtd. 10-13-09).
The foreclosure proceeded with a liquidation sale of the Walton Avenue property on October 5, 2009, and the property was conveyed to the VA. Ex. 6 (Sheriff's Sale Documents); Compl. at ¶ 10 (indicating that "the Defendant VA did take possession of the property and relieved the servicer PHFA of the obligation to secure the property."); see also 38 U.S.C. § 3732(c)(1)(B) (stating that "[t]he term `liquidation sale' means a judicial sale or other disposition of real property to liquidate a defaulted loan that is secured by such property."). This conveyance was made by the transferring and recording of the deed into the VA's name, and the assurance from the PHFA (and its foreclosing attorney — Plaintiff Louis Vitti) that the property was transferred with a valid, fee-simple title. In fact, the title is and had become a valid, fee simple title which is acceptable to the VA but which the VA arbitrarily refused to accept. See Ex. 6 (Deed); 38 C.F.R. §§ 36.4323(d)(5)(i)(B), (d)(5)(iii)(A). Because the Walton Avenue property involved a guaranteed VA loan, the conveyance also required the VA to pay the mortgage holder (i.e., PHFA) for the net value of the property, which was calculated as $42,303. Ex. 1 at ¶ 5, Att. 1 (Net-Value Calculation); 38 U.S.C. §§ 3732(c)(3)(B), (c)(6). On October 21, 2009, a check from the United States Treasury, in the amount of $42,303, was issued to the PHFA. Ex. 7 (PHFA Check); Compl. at ¶ 12.
The Walton Avenue residence was now considered a "foreclosed" property, and it was prepared for sale. As part of this process, a contractor performed maintenance on the residence, and the "Completion Results" for this work, dated November 12, 2009, did not reveal any major problems. Ex. 8 (REM Agent Walk Thru Check List — Completion Results). On January 21, 2010, an official inspection was conducted of the Walton Avenue property that included "visual inspection of the interior" and an appraisal. Ex. 9 (Uniform Appraisal Report dtd. 1-21-10). The report did not reveal any major discrepancies, and the property was described as follows: "[t]he dwelling is generally consistent with others in the area and is functionally acceptable . . . [n]o functional inadequacies or external obsolescence noted." Id. at p. 1 of 6. The report also did not identify any "physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property." Id. The appraisal compared the Walton Avenue property to three other sales within a 2-mile radius and concluded that the comparable value of the property was $28,000. Id. at p. 2 of 6.
On January 29, 2010, an additional inspection and appraisal of the property was conducted in the form of a "Residential Broker Price Opinion." Ex. 10 (Broker Price Opinion dtd. 1-29-10). Once again, the property was described as being in "overall fair condition" with "[n]o adverse conditions noted." Id. Comparable listings and sales were analyzed, and the Broker Price Opinion determined that the suggested list price of the property ("as is") was $27,900. Id.
On February 15, 2010, the VA accepted a cash offer of $24,900 from Hanula Properties, L.L.C., to purchase the Walton Avenue property. Ex. 11 (Offer to Purchase and Contract of Sale). As part of the proposed sale, the VA identified a title insurance policy dated October 22, 2009, and represented that it had "a good, fee-simple title to the property." Ex. 12 (VA Letter dtd. 2-23-10). However, during the closing process, an open mortgage was discovered on the Walton Avenue property that was not previously revealed by the foreclosing attorney (i.e., Plaintiff Louis Vitti) at the October 2009 foreclosure. Ex. 13 (Affidavit of Richard Zimnoch) at ¶ 4. During the ensuing months, the foreclosing attorney was able to resolve the outstanding lien and obtain clear title to the Walton Avenue property; however, the VA chose not to complete the proposed sale of the property.
On August 25, 2010, the VA, through its contracted agent, Bank of America, sent a letter to U.S. Bank notifying them of the "open mortgage" issue. See Ex. 13 at ¶ 4, Ex. 14 (Bank of America ltr. dtd. 8-25-2010). The letter stated that the foreclosing attorney provided a Letter of Indemnity, but this was insufficient to satisfy the open mortgage, and a release was never recorded. Id. The VA further indicated that when a holder conveys property to the VA, such conveyance is conducted with the understanding that "the title should be in such condition `as is or would be generally acceptable to prudent lending institutions, informed buyers, title companies, and attorneys in the community in which the property is situated.'" Id. (quoting 38 C.F.R. § 36.4320(h)(5)). The August 25, 2010 letter notified U.S. Bank that the VA would reconvey the property and request reimbursement of the funds that were paid by the VA at foreclosure. Ex. 14. On September 23, 2010, the VA (again, through its contracted agent, Bank of America) sent U.S. Bank a "Final-Reconveyance" letter stating the reason for reconveyance as follows:
Ex. 15 (Final-Reconveyance Letter). Attached to the letter was a "Quit Claim Deed" evidencing the VA's termination of rights and claims to the Walton Avenue property and transferring said property back to U.S. Bank. Id. The Final-Reconveyance letter also requested payment of the original net value of the property along with other expenses. Id.; see also 38 C.F.R. § 36.4328(c) (VA's recovery provision).
On December 28, 2010, over three months after the reconveyance, the Walton Avenue property was inspected and appraised via a Broker Price Opinion. Ex. 16 (Broker Price Opinion dtd. 12-27-10). An interior inspection of the property revealed that it was in "fair condition"; however, repairs totaling $7,000 were needed to replace copper plumbing that had been removed and to repair damage to walls, ceilings, and the kitchen area. Id. Although the current market conditions were listed as "slow," the broker still suggested that the property be listed, "as is," for $28,000 based on other comparables in the area. Id.
On March 25, 2011, Plaintiff, Louis P. Vitti, Esquire, submitted an administrative tort claim to the VA. Ex. 17 (Claim for Damage, Injury, or Death). In the claim, Mr. Vitti explained that his interest in this property was based upon an obligation to indemnify the PHFA. Id. At Statement of Case at ¶ 2. The tort claim further alleged that while the Walton Avenue property was in the custody of the VA, it was vandalized and damaged, resulting in a lower appraisal and thousands of dollars in repair costs. Ex. 17 at Box 8. The tort claim requested $23,100 in total damages. Id. at Box 12d. However, the VA investigated the tort claim and concluded that there was no evidence of any negligence or wrongful act while the Walton Avenue property was in the VA's possession. Ex. 18 (Administrative Claim — Denial Letter). Therefore, the claim was denied by the VA in a letter dated May 24, 2012. While in possession of property a duty to protect and maintain is incurred as the property was essentially being held for the benefit of a third party.
On November 1, 2012, Plaintiffs filed the instant Complaint and raised two claims. First, Plaintiffs presented a negligence claim, pursuant to the FTCA, alleging that the "VA had an obligation to secure the property in such a way as to preserve its value and prevent vandals from entering the property and taking copper pipes, or in the alternative be responsible for the diminution in value." Compl. at ¶ 21. Second, Plaintiffs presented a contract claim alleging that the "VA entered into an agreement [with Plaintiffs] to convey the property valued at $48,000.00" and that this agreement was allegedly breached. Id. at ¶ 25. Plaintiffs requested $42,000 in damages or, alternatively, the sum of $48,000 and reconveyance of the property back to the VA. Id. at p. 7.
"A secured party shall use reasonable care in the custody and preservation of collateral and the secured property's possession." 13 Pa.CSA 9207 Restatement (Second) of Torts 324a.
In any case sounding in negligence, a Plaintiff must demonstrate (1) a duty of care; (2) the breach of the duty; (3) a causal connection between the conduct and the resulting injury; and (4) actual loss or damage resulting to the Plaintiff.
To prove a cause of action for negligence, a Plaintiff must show "(1) a legal duty to use reasonable care, (2) breach of that duty, and (3) approximate cause between the breach and for the Plaintiff's injury", Mendoza v. City of Los Angeles, 66 Cal.App. 4
Plaintiffs in the within case argue that while the VA takes under its care, custody and control real property and elects to transfer such property in a deteriorated or inferior condition and demand the same consideration for the property while being transferred while the property was maintained and without the necessity for repairs caused during the ownership or control of the VA. In the event that the VA were to select the option or elect to transfer the property back to the original conveying party, it would stand to reason that the property be in the identical or, at least, similar condition requiring the grantee to accept the property in a damaged condition should allow the grantee to recover the difference in the value or the cost of repair.
In an instance where an individual has the right to possession of property, a party having the lawful right to exercise dominion and control over his own property may not sit idly by and see that property destroyed through forces negligently set in motion by another and then collect damages occasioned by his own failure to make reasonable exertions to arrest the threat and disaster. In such a case, the party whose property is jeopardized is required to act when the fact of jeopardy is known and upon the theory that the way is open to that party to act. Palmer v. Costello, 41 App. D.C. 165 L.R.A. 1915a, 193 (1913), Mark Hudson River Bridge Company, 103 N.Y. 28, 8 N.E. 243. It can easily be said that the VA being the property owner sat idly by and permitted their own property over which they exercised unquestionable dominion and control to suffer damage. See also Western Real Estate v. Hughes, 96 C.C.A. 658, 172 Fed. 206; Pennsylvania R. Co. v. Washburn, 50 Fed. 335; Harrison v. Missouri, P.R.Co. 88 Mo. 625.
At all times the VA had total control over the property in question and under 42 Pa. C.S. 8542(b)(3), following the City of Pittsburgh v Estate of Stahlman, 677 A.2d 384, 387 (Pa. Cmwlth. 1996), "possession under the real property exception means total control over the premises." According to the VA Handbook 5.04 Risk of Loss, (38 CFR 36.4320(h)(10), "The holder remains responsible for loss due to property damage or personal injury at the property from the date it acquires the property until risk of loss is assumed by VA. Assumption of the risk of loss by VA usually occurs when VA receives the holder's VA Form 26-8903 and accepts custody. At this time the holder should discontinue all property management functions unless it is retaining custody." Clearly by the rules set forth by the VA after they accepted the property and before reconveyance to the servicer, the risk of loss was clearly upon the VA.
Liability is imposed for any negligence in the care, custody and control of real property in the possession of the Defendant, Hough v. Commonwealth, Department of Transportation, 155 Pa. Cmwlth. 162, 624 A.2d 780, Petition for Disallowance of Appeal denied, City of Pittsburgh v Estate of Stahlman, 677 A.2d 384 (1996).
The question whether the Defendant owes a duty to the Plaintiff is a question of law, Greater Houston Transportation Company v Phillips, 801 S.W.2d 523, 525 (Tex. 1990), but whether the duty was breached or whether the Defendant failed to adhere to the applicable standard of care is a question of fact. Rudolph v ABC Pest Control, Inc., 763 S.W.2d 930, 933, McGonigal v Gearhart Indus., Inc., 788 F.2d 321, 326 (5
All individuals owe a duty to exercise reasonable care to avoid foreseeable injuries to others.
This action is viable and exclusive jurisdiction rests in the claims court as:
The Federal Tort Claims Act provides generally that the United States shall be liable to the same extent as a private party for injury or loss of property caused by the negligent or wrongful act or omission of any employee of the government while acting within the scope of his office or employment. During the period of time when the Defendant was in possession of the real estate and pending a reconveyance back to the assignor of the Plaintiff, a trust relationship occurs.
Given the existence of a trust relationship, it naturally follows that the government should be liable in damages for the breach of its fiduciary duties as a trustee is accountable for damages for the breach of that trust. Mitchell 2, 4
A repair or act of preservation is clearly within such duty whenever such repair or act is necessary to prevent a progressive deterioration of the land or structures or whenever the condition existing as a result of the failure to make such repair will amount to substantial deterioration of the land or structures from the condition in which such land and structure were at the time of the commencement of the fiduciary relationship.
Pursuant to Rule 16 of the United States Court of Federal Claims, the Government's October 9, 2013 Request For A Stay In Light Of Lapse Of Appropriations is granted. All proceedings are stayed until Congress has restored appropriations to the Department of Justice. The Government will inform the court as soon as Congress has appropriated funds for the Department of Justice.
