B-131513, JUN. 14, 1957

B-131513, JUN. 14, 1957

TO THE HONORABLE ALBERT M. COLE, ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY:

YOUR LETTER OF APRIL 15, 1957, REQUESTS OUR DECISION CONCERNING THE LEGALITY OF CREDITING A MORTGAGE INDEBTEDNESS WITH THE AMOUNT OF $180,000 UNDER THE CIRCUMSTANCES HEREINAFTER SET FORTH.

THE PUBLIC HOUSING ADMINISTRATION CONVEYED PROPERTY COMPRISING THE AUDUBON PARK WAR HOUSING PROJECT TO THE AUDUBON MUTUAL HOUSING CORPORATION, A NON-PROFIT MUTUAL OWNERSHIP CORPORATION, LOCATED IN AUDUBON PARK, NEW JERSEY. TO SECURE THE PAYMENT OF THE PURCHASE PRICE OF THE PROJECT THE AUDUBON MUTUAL HOUSING CORPORATION EXECUTED A MORTGAGE DATED MAY 17, 1954, EFFECTIVE JUNE 1, 1954. PARAGRAPH 11 OF THE MORTGAGE PROVIDES, IN PERTINENT PART, AS FOLLOWS--- QUOTING FROM YOUR LETTER:

"IF WITHIN THE TWO YEARS SUBSEQUENT TO THE DATE OF THIS INSTRUMENT, THE BOROUGH OF AUDUBON PARK OR THE SCHOOL DISTRICT WITHIN WHICH IT IS SITUATED SHALL COMPLETE A SCHOOL BUILDING WHICH THE MORTGAGEE IS SATISFIED IS ADEQUATE TO MEET THE NEEDS OF THE RESIDENTS OF THE PROJECT, THEN, IN THAT CASE, THE MORTGAGOR SHALL BE ENTITLED TO A CREDIT AGAINST THE MONTHLY PAYMENTS OF PRINCIPAL OF THE BOND AND OF THE INTEREST THEREON, OF EITHER $180,000 OR THE COST OF SUCH SCHOOL BUILDING AS DETERMINED BY THE MORTGAGOR (LESS THE AMOUNT, IF ANY, RECEIVED IN AID OF SUCH CONSTRUCTION FROM THE UNITED STATES OR THE STATE OF NEW JERSEY, OR ITS POLITICAL SUBDIVISIONS) WHICHEVER AMOUNT IS THE LESSER.'

THE SCHOOL WAS NOT COMPLETED AS OF MAY 31, 1956. THE RECORD DISCLOSES THAT BIDS FOR THE SCHOOL WERE ACCEPTED ON SEPTEMBER 7, 1955; THAT CONTRACTS WERE AWARDED ON SEPTEMBER 21, 1955, AND THAT GROUND WAS BROKEN ON OCTOBER 22, 1955. THE RECORD ALSO DISCLOSES THAT IN ACCORDANCE WITH PARAGRAPH 4 OF THE CONSTRUCTION CONTRACT THE GENERAL CONTRACTOR, BY LETTER DATED FEBRUARY 3, 1956, TO THE ARCHITECT FOR THE AUDUBON PARK BOARD OF EDUCATION, REQUESTED A 6-WEEK EXTENSION OF TIME FOR CONSTRUCTION OF THE SCHOOL BUILDING DUE TO THE DELAYS CAUSED BY BAD WEATHER DURING THE PERIOD DECEMBER 14, 1955, TO JANUARY 29, 1956. THE EXTENSION WAS APPARENTLY GRANTED ALTHOUGH THE RECORD IS NOT CLEAR ON THAT POINT.

ON JUNE 1, 1956, A REPRESENTATIVE OF THE PUBLIC HOUSING ADMINISTRATION VISITED AUDUBON PARK TO NOTE THE STATUS OF CONSTRUCTION OF THE SCHOOL BUILDING AND ON JUNE 5, 1956, HE REPORTED AS OLLOWS:

"THE BUILDING IS ENCLOSED, EXCEPT FOR THE INSTALLATION OF ALUMINUM WINDOWS AND GLAZING, AND THE INTERIOR IS COMPLETE EXCEPT AS TO FINISH ITEMS MENTIONED BELOW. THE CONTRACTOR STATES THAT ALL WORK WOULD HAVE BEEN ENTIRELY COMPLETED IF HE HAD NOT BEEN DELAYED BY BAD WEATHER WHICH PREVENTED THE POURING OF THE CONCRETE FLOOR SLAB WHEN SCHEDULED. HE ALSO DELAYED IN COMPLETING THE INTERIOR FINISH BY THE FAILURE OF THE ALUMINUM WINDOWS, WHICH CAME FROM MIAMI, FLORIDA, TO ARRIVE WHEN NEEDED. THE ACTUAL STATUS OF THE WORK OF JUNE 1ST WAS AS FOLLOWS:

"ITEMS COMPLETED:

INTERIOR PARTITIONS.

DOWN SPOUTS INSTALLED.

BOILER INSTALLED BUT NOT CONNECTED.

COMPRESSORS BEING DELIVERED DURING MY VISIT.

WOOD TRIM AND MOST OF THE CASES INSTALLED.

TILEING COMPLETED ON FLOORS AND WALLS OF TOILET ROOMS.

WATER CLOSET PARTITIONS INSTALLED.

ALL ROUGH PLUMBING COMPLETED.

WIRING COMPLETED.

DEBRIS CLEARED FROM YARD.

WORKMEN INSTALLING METAL WINDOWS WHICH HAD BEEN

DELIVERED ON MAY 31. THREE SECTIONS IN PLACE.

THE SCHOOL EQUIPMENT IS AVAILABLE IN ANOTHER BUILDING

AT THE PROJECT.

"THE FOLLOWING WORK REMAINS TO BE DONE:

INSTALLATION OF WATER CLOSETS, LAVATORIES

AND DRINKING FOUNTAINS.

INSTALLATION OF LIGHTING FIXTURES.

RADIATORS IN STOCK, NOT INSTALLED.

ASPHALT FLOOR TILE IN STOCK, NOT INSTALLED.

WINDOW GLASS IN STOCK, NOT INSTALLED.

FINAL PAINTING OF TRIM AND INTERIOR WALLS.

FINISH GRADING.

STEEL WINDOWS ON FLOOR (3 SECTIONS ONLY INSTALLED).

"THE SUPERINTENDENT FOR THE GENERAL CONTRACTOR CLAIMS THAT ALL WORK WILL BE COMPLETED IN THREE WEEKS. I THINK HE IS A LITTLE OPTIMISTIC BUT HE MIGHT DO IT IF HE GETS AMPLE LABOR FOR THE VARIOUS TRADES.'

THE AUDUBON HOUSING CORPORATION HAS FORMALLY REQUESTED CREDIT IN THE SUM OF $180,000 AGAINST THE PRINCIPAL AMOUNT OF THE PURCHASE MONEY MORTGAGE ON THE BASIS THAT THE SCHOOL BUILDING WAS ,SUBSTANTIALLY" COMPLETED AS OF MAY 31, 1956, AND HAS CERTIFIED THAT THE COST OF THE SCHOOL WAS $182,344.54. YOU SAY THAT THE PUBLIC HOUSING ADMINISTRATION IS SATISFIED BY ITS INSPECTION OF THE SCHOOL BUILDING, AND BY THE STATEMENT OF THE PRESIDENT OF THE SCHOOL BOARD, THAT THE BUILDING MEETS THE NEEDS OF THE RESIDENTS OF THE AUDUBON PARK WAR HOUSING PROJECT AND THAT IT WAS 100 PERCENT COMPLETED FOR USE AT THE BEGINNING OF THE SCHOOL YEAR ON SEPTEMBER 6, 1956.

THE ARCHITECT FOR THE AUDUBON PARK BOARD OF EDUCATION HAS FURNISHED A "CERTIFICATE OF COMPLETION" DATED JANUARY 25, 1957, WHEREIN HE CERTIFIES THAT THE BUILDING WAS COMPLETED ON OR BEFORE AUGUST 1, 1956. HE ALSO CERTIFIES THAT THE BUILDING WAS "SUBSTANTIALLY" COMPLETED ON MAY 31, 1956, EXCEPT FOR THE INSTALLATION OF CHALK AND CORK BOARDS (BLACKBOARDS) WHICH WERE IN USE IN A TEMPORARY SCHOOL AND COULD NOT BE RELEASED UNTIL THE CLOSE OF THE SCHOOL TERM, JUNE 15, 1956. HE STATES THEREIN THAT THIS PREVENTED THE INSTALLATION OF THE BOARDS ALONG WITH FLOOR COVERING, PAINTING OF WALLS AND TRIMMING, AND THE CLEANING OF THE BUILDING AND SITE. HE FURTHER STATES IN THE CERTIFICATE THAT "IT IS ESTIMATED THAT ON MAY 31ST, 1956, THE BUILDING WAS COMPLETED TO THE EXTENT OF 95.5 PERCENT.'

YOU SAY THAT THE INCLUSION OF THE PROVISION IN QUESTION IN THE MORTGAGE WAS A COMPROMISE REACHED IN DETERMINING THE FINAL SALE PRICE OF THE PROJECT. A MEMORANDUM DATED APRIL 1, 1957, FROM THE ASSISTANT COMMISSIONER, PUBLIC HOUSING ADMINISTRATION TO THE ASSISTANT GENERAL COUNSEL (PROGRAMS), PUBLIC HOUSING ADMINISTRATION INDICATES THAT THE PROVISION WAS INCLUDED IN THE MORTGAGE AS A RESULT OF AN AUTHORIZATION CONTAINED IN A MEMORANDUM DATED FEBRUARY 9, 1953, TO THE DIRECTOR OF THE NEW YORK REGIONAL OFFICE FROM THE COMMISSIONER,AS AMENDED BY WIRE DATED FEBRUARY 25, 1953, TO THE DIRECTOR FROM THE COMMISSIONER. THE MEMORANDUM DISCLOSES THE AUTHORIZATION WAS ISSUED BECAUSE IT WAS RECOGNIZED THAT THE VALUE OF THE HOUSING PROJECT WOULD BE LESS THAN THE ESTABLISHED PRICE WITHOUT ADEQUATE SCHOOL FACILITIES BUT THAT THE AUDUBON PARK SCHOOL DISTRICT HAD BEEN USING SCHOOL FACILITIES OF ADJACENT SCHOOL DISTRICTS ON A TUITION BASIS AND THE PUBLIC HOUSING ADMINISTRATION DID NOT WANT TO ALLOW CREDIT ON THE SALE PRICE FOR A NEW SCHOOL BUILDING UNLESS THE BUILDING WAS TO BE ACTUALLY CONSTRUCTED. THE MEMORANDUM ALSO SHOWS THAT AT THE TIME OF THE AUTHORIZATION IT WAS FELT THAT TWO YEARS WAS THE BEST GUESS OF THE APPROXIMATE TIME REQUIRED TO BUILD A SCHOOL. THE MEMORANDUM CONTINUES:

"WE UNDERSTAND THAT A NEW SCHOOL BUILDING WAS CONSTRUCTED AND WAS 95.5 PERCENT COMPLETED WITHIN TWO YEARS AFTER THE EFFECTIVE DATE OF THE MORTGAGE. WE ALSO UNDERSTAND THAT THE BUILDING WAS ENTIRELY COMPLETED AND IN USE AT THE BEGINNING OF THE FOLLOWING SCHOOL TERM. THE FACT THAT IT TOOK A LITTLE LONGER FOR COMPLETION THAN THE ESTIMATE OF APPROXIMATELY TWO YEARS DOES NOT INDICATE THAT THE MORTGAGOR DID NOT COMPLY WITH THE INTENT OF THE COMMISSIONER'S AUTHORIZATION. IT IS OUR OPINION THAT THE MORTGAGOR DID COMPLY WITH SUCH INTENT.'

IT APPEARS FROM THE FOREGOING THAT THE PUBLIC HOUSING ADMINISTRATION INTENDED TO ALLOW A CREDIT AGAINST THE PURCHASE PRICE IF A SCHOOL BUILDING WAS ACTUALLY CONSTRUCTED WITHIN A REASONABLE TIME FROM THE SALE. THE TWO YEAR PERIOD PROVIDED FOR IN THE MORTGAGE WAS AN ESTIMATE AND PRESUMABLY A REASONABLE TIME IN EXCESS OF TWO YEARS WOULD HAVE BEEN AUTHORIZED IF IT WERE FELT AT THE TIME OF THE AUTHORIZATION THAT MORE THAN TWO YEARS WOULD BE REQUIRED TO BUILD A SCHOOL. EVEN IF THE SCHOOL HAD BEEN COMPLETED AS OF MAY 31, 1956, IT DOES NOT APPEAR THAT IT WAS DESIRED FOR USE UNTIL THE BEGINNING OF THE NEXT SCHOOL YEAR, THAT THE SCHOOL YEAR STARTING IN SEPTEMBER 1956. INASMUCH AS THE SCHOOL BUILDING WAS SUBSTANTIALLY COMPLETED AS OF MAY 31, 1956, AND SINCE THE PUBLIC HOUSING ADMINISTRATION IS OF THE VIEW THAT THE MORTGAGOR DID COMPLY WITH THE INTENT OF THE COMMISSIONER'S AUTHORIZATION, WE WOULD NOT OBJECT, IN VIEW OF ALL THE FACTS AND CIRCUMSTANCES, TO HAVING THE PUBLIC HOUSING ADMINISTRATION CREDIT THE MORTGAGE INDEBTEDNESS OF THE AUDUBON MUTUAL HOUSING CORPORATION WITH THE AMOUNT OF $180,000, IF OTHERWISE PROPER.