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UNITED STATES v. MUNROE TOWERS

May 27, 1968

UNITED STATES of America, Plaintiff,
v.
MUNROE TOWERS, INC., et al., Defendants



The opinion of the court was delivered by: WHIPPLE

 This matter is before the court on a motion of the plaintiff to dismiss the counterclaim of Carnell Construction Co., Inc., (Carnell) and also on motion of the Receiver of Carnell for leave to join as third-party defendants the National State Bank of Newark, (Bank) and the Federal Housing Commissioner (Commissioner).

 The facts substantially are not in dispute. On November 29, 1966 the plaintiff, United States of America, filed a complaint to foreclose a mortgage on lands and premises known as Munroe Towers Apartments, located at No. 610 Sewell Avenue, Asbury Park, Monmouth County, New Jersey. The plaintiff alleged that the defendant, Munroe Towers, Inc., (Munroe) was indebted to it in the principal sum of $3,724,449. It further prays for judgment against the defendant in the aforesaid sum, and also seeks a deficiency judgment against it in the event the sale price of the subject property is not sufficient to satisfy the judgment. A further allegation reveals that the plaintiff has a lien prior and superior to any other lien or claim against the real and personal property described in the security instrument.

 An amended complaint was subsequently filed and plaintiff joined as defendants the following, whose interests appeared of record, to wit: DeMatteis International Construction Co., Inc., name changed to Carnell Construction Co., Inc., (Carnell); Jersey Central Power & Light Company, (Jersey); B. J. Lucarelli & Co., Inc., (Lucarelli); Rudnick Bros., Inc., (Rudnick); Serge Elevator Company, Inc., (Serge); New Brunswick Roofing & Metal Co., (Brunswick); Stephen J. Gross, Inc., (Gross); All Service Painting Co., Inc., (Service); Standard Supply Co., Inc., (Standard); Harris Bros. Construction Company, (Harris); Semcor Equipment & Manufacturing Corp., (Semcor); Wilkinson & Son, Inc., (Wilkinson); Park Steel & Iron Co., (Park); Sika Chemical Corporation, (Sika); Middlesex Welding Supply, Inc., (Middlesex); Sochet Interiors, Ltd., (Sochet); Seeco Supply Corp., (Seeco); Israel Cohen & Son, (Cohen); Williamsburg Steel Products Co., (Williamsburg). The majority of these defendants have filed answers and counterclaims. Others have not answered - Jersey, Lucarelli, Brunswick, Service, Park, Sochet and Williamsburg. Following the filing of an answer and counterclaim Carnell went into a Chapter XI Proceeding in the Bankruptcy Court.

 The plaintiff filed a reply to these counterclaims seeking a dismissal or alternatively, that the plaintiff's mortgage lien be declared senior to the liens claimed by the defendant counterclaimants. Subsequently, on motion of the plaintiff, the amended complaint directed to Jersey and the counterclaims of Cohen, Carnell and Serge were dismissed. Later, by consent, the counterclaim of Carnell, only, was reinstated to argue the merits of same. The plaintiff now moves for dismissal of the counterclaim filed by the Receiver of Carnell on jurisdictional grounds. Carnell resists this and additionally moves for an order granting leave to join as third-party defendants the National State Bank of Newark, N.J., (Bank) and the Federal Housing Commissioner, (Commissioner).

 In conjunction with the granting of the mortgage a note was given by Munroe to the Bank as security for the loan, which was insured by the Federal Housing Administration, an agency of the United States. Upon Munroe's default, the Bank assigned the mortgage note to the Secretary of Housing and Urban Development (Secretary) together with all rights thereunder.

 The substance of the Carnell counterclaim through its receiver is that the assignment of the mortgage included in the transfer to the Secretary, that 10% retainage held by the Bank under terms of their construction contract, which Carnell claims is due to it; further alleging that this retainage, (approximately $500,000) is being held in escrow by the plaintiff. Carnell seeks judgment on its counterclaim against the plaintiff in the sum of $408,431.91, with interest.

 The receiver for Carnell, as has been stated, also seeks an order granting leave to join as third-party defendants in the foreclosure action the Bank and the Commissioner.

 The court now turns to the plaintiff's motion to dismiss the Carnell counterclaim filed against the plaintiff, acting on behalf of the Secretary, at the instance of the Commissioner.

 It is well settled that the United States as a sovereign enjoys immunity from suit except as it consents to be sued. United States v. Thompson, 98 U.S. 486, 25 L. Ed. 194 (1878); United States v. Lee, 106 U.S. 196, 1 S. Ct. 240, 27 L. Ed. 171 (1882); State of Minnesota v. United States, 305 U.S. 382, 387, 59 S. Ct. 292, 83 L. Ed. 235 (1938); Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 388, 59 S. Ct. 516, 83 L. Ed. 784 (1939); United States v. Shaw, 309 U.S. 495, 60 S. Ct. 659, 84 L. Ed. 888 (1940); United States v. Sherwood, 312 U.S. 584, 586, 61 S. Ct. 767, 85 L. Ed. 1058 (1941).

 This immunity extends to counterclaims and cross-claims. United States v. Shaw, supra. In some instances, Congress has waived the sovereign's immunity from suit, e.g., the Federal Tort Claims Act, (28 U.S.C. §§ 2671-2680). However, the terms of the sovereign's consent to be sued in any court define that court's jurisdiction to entertain the suit. State of Minnesota v. United States, supra; United States v. Sherwood, supra. Jurisdiction of the District Court to entertain suits founded upon express or implied contracts with the United States is defined in the Tucker Act, 28 U.S.C. § 1346. This jurisdiction is limited to claims not exceeding $10,000. Hammond-Knowlton v. United States, 121 F.2d 192 (2nd Cir. 1941), cert. denied 314 U.S. 694, 62 S. Ct. 410, 86 L. Ed. 555 (1941). Moreover, the jurisdiction conferred by 28 U.S.C. § 1346 does not encompass claims based on quasi contract or contract implied in law. Maryland National Bank v. United States, 227 F. Supp. 504, 507 (D.C.Md.1964).

 Rule 13(d) of the Fed.R. Civ.P. apparently confirms this immunity as applying to counterclaims and cross-claims. It provides:

 
"* * * These rules shall not be construed to enlarge beyond the limits now fixed by law the right to assert counterclaims or to claim credits against the United ...

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