Charleston Housing Authority v. United States Department of Agriculture

419 F.3d 729, 2005 WL 1981310
CourtCourt of Appeals for the Eighth Circuit
DecidedAugust 18, 2005
Docket04-1884, 04-2620
StatusPublished
Cited by20 cases

This text of 419 F.3d 729 (Charleston Housing Authority v. United States Department of Agriculture) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Charleston Housing Authority v. United States Department of Agriculture, 419 F.3d 729, 2005 WL 1981310 (8th Cir. 2005).

Opinion

MELLOY, Circuit Judge.

In 2001, a local housing authority in Charleston, Missouri, the Charleston Housing Authority (the “Housing Authority”), sought to implement a revitalization plan that involved the demolition of selected public housing units. The housing units at issue were the Charleston Apartments, fifty low-income rental units in a cluster of twenty-two separate buildings. At the time that the Housing Authority adopted its plan, forty-seven of the fifty units were occupied, forty-six by African American tenants.

The Housing Authority had purchased and updated the Charleston Apartments in 1981 with the help of a $740,000 Farmer’s Home Administration (“FmHA”) Section 515 Rural Rental Housing loan under the National Housing Act of 1949, as amended by Pub.L. No. 89-754, Section 804, 80 Stat. 1255, 1282 (1966), codified at 42 U.S.C. § 1485. Under the terms of the loan agreement, the Housing Authority was required to use the Charleston Apartments as public housing. Also in 1981, the Housing Authority had signed a twenty-year contract with the Department of Housing and Urban Development (“HUD”) to receive Section 8, project-based assistance under the Housing Assistance Program. See 42 U.S.C. § 1437. The Section 8 contract, like the Section 515 loan agreement, required the Housing Authority to operate the property as low-income public housing.

In 2001, the Housing Authority elected not to renew its Section 8 Housing Assistance Program contract. Also, the Housing Authority attempted to tender final payment on the Section 515 loan to eliminate the Section 515 contractual restrictions on use of the Charleston Apartments. The United States Department of Agriculture (“USDA”) 1 refused to accept the payment. The USDA characterized the payment as a “prepayment” as that term is defined under the Emergency Low Income Housing Preservation Act, codified at 42 U.S.C. § 1472(c) (“Preservation Act”). As discussed below, the Preservation Act is a statute designed to protect the nation’s stock of public housing by requiring, inter alia, that units be offered for sale to qualifying organizations or governmental bodies for continued use as public housing when an owner proposes to prepay a loan and terminate use of the units for public housing. 2

The Housing Authority disputed the USDA’s characterization of the tendered payment as a prepayment, arguing that the payment was a regularly scheduled payment. The Housing Authority also challenged the enforceability of the Preservation Act. The Housing Authority sought a court order to quiet title and to force the USDA to accept the payment and release the subject units from statutory and contractual restrictions on use. Ruling on a motion for summary judgment, *734 the district court determined that the tendered payment was a prepayment, the Preservation Act applied, and the Preservation Act precluded the USDA’s acceptance. Accordingly, the district court refused to enter the Housing Authority’s requested order. The Housing Authority appeals these rulings.

In addition, current and former residents of the Charleston Apartments and a non-profit organization, Housing Comes First, brought a separate action against the Housing Authority. These plaintiffs sought injunctive relief to prevent the Housing Authority from implementing its revitalization plan. These plaintiffs alleged that implementation of the plan would create a disparate impact on the basis of race. The district court held a bench trial, ruled in favor of these plaintiffs on two claims, enjoined implementation of the plan, and ordered the Housing Authority to lease vacant and vacated Charleston Apartment units to eligible applicants. The Housing Authority appeals these rulings.

We affirm in all respects other than the scope of the injunctive relief. On this limited issue, we remand for the reasons discussed below.

I. Background

Under the terms of the promissory note, the Housing Authority was to make 588 monthly payments of $5,624.00, with the final payment due in 2031. The loan documents permitted the Housing Authority to make prepayments on the loan. The loan documents also required the Housing Authority to comply with all applicable laws and regulations in effect when the parties entered the agreement as well as any subsequent laws and regulations not inconsistent with then-existing laws and regulations.

The Housing Authority, in fact, made substantial prepayments on the loan. The Housing Authority did not need all of the $740,000 it initially borrowed to purchase and repair the Charleston Apartments. As a result, the Housing Authority returned almost $130,000 of principal during 1981. Also, between 1981 and 2000, the Housing Authority made other prepayments, including $6,000 monthly payments rather than the lesser amount that was actually due. Consequently, as of July 1999, the outstanding balance was less than $50,000.

In July 1999, the Housing Authority contacted the USDA regarding payment of the outstanding balance of the loan. The USDA responded by sending the Housing Authority instructions that explained prepayment procedures under the Preservation Act. In general terms, these procedures require an owner to provide information to enable an assessment of whether prepayment would adversely impact minorities or leave displaced tenants without adequate, safe housing. 42 U.S.C. § 1472(c)(5)(G). If an adverse impact is expected, statutory “safe harbor” provisions do not apply, and the USDA is required to negotiate with the owner to retain the units as public housing. Id. at § 1472(c)(4)(A). If no agreement is reached, the owner must offer the units for sale at fair market value to certain qualifying parties for continued operation as public housing. Id. at § 1472(c)(5)(A)®. If no qualifying buyer purchases the property, the USDA may then accept prepayment and release the property from use restrictions. Id. at § 1472(c)(5) (A) (ii). The Preservation Act provides that the fair market value is a price determined by party-designated appraisers. Id. at § 1472(c)(5)(A)®.

Congress passed the Preservation Act as a response to a perceived crisis in the loss of public housing due to the prepay *735 ment of Section 515 loans. Parkridge Investors, L.P. v. Farmers Home Admin., 13 F.3d 1192, 1195 (8th Cir.1994). The protocol for the acceptance of prepayments and the retention of public housing did not exist when the Housing Authority entered the agreement with the FmHA. The parties agree that, but for the Preservation Act, the contract grants the Housing Authority an unconditional right to prepay the loan. Accordingly, the prepayment protocol demanded by the USDA is in direct conflict with the Section 515 loan agreement’s prepayment provisions.

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Cite This Page — Counsel Stack

Bluebook (online)
419 F.3d 729, 2005 WL 1981310, Counsel Stack Legal Research, https://law.counselstack.com/opinion/charleston-housing-authority-v-united-states-department-of-agriculture-ca8-2005.