Crest A Apartments Ltd. II v. United States

52 Fed. Cl. 607, 2002 U.S. Claims LEXIS 138, 2002 WL 1226223
CourtUnited States Court of Federal Claims
DecidedJune 6, 2002
DocketNo. 96-687C
StatusPublished
Cited by15 cases

This text of 52 Fed. Cl. 607 (Crest A Apartments Ltd. II v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Crest A Apartments Ltd. II v. United States, 52 Fed. Cl. 607, 2002 U.S. Claims LEXIS 138, 2002 WL 1226223 (uscfc 2002).

Opinion

OPINION

WILSON, Judge.

This breach of contract action is before the court on cross-motions for summary judgment and defendant’s partial motion to dismiss. Plaintiff Crest A Apartments Ltd. II (Crest A) alleges that defendant, acting through the Department of Housing and Urban Development (HUD), breached several contracts that the parties entered into pursuant to the National Housing Act, 12 U.S.C. §§ 1701-1750g (2000), and the United States Housing Act (U.S. Housing Act), 42 U.S.C. § 1437f (1994). Specifically, plaintiff alleges that HUD breached Housing Assistance Payments (HAP) Contracts by failing to consider and approve rent increase requests. Plaintiff also claims that HUD violated statutes and regulations and breached a Provisional Workout Arrangement by failing to modify Crest A’s delinquent mortgage. The government denies that it had a contractual or statutory duty to consider or grant Crest A’s rent increase requests. The government also contends that Crest A’s claim that HUD breached the Provisional Workout Arrangement is time-barred. For the reasons discussed below, defendant’s partial motion to dismiss is granted, and the parties’ cross-motions for summary judgment are denied.

FACTUAL AND STATUTORY BACKGROUND

The Crest A Project (the Project) is a low-income, multi-family housing project consisting of two-hundred rental units located in Dallas, Texas. Crest A owned the Project until HUD foreclosed on plaintiff’s mortgage in December 1996. Crest A was the fifth owner of the Project. When the initial owner of the Project defaulted on its mortgage, the private mortgagee assigned the Project’s mortgage to HUD in exchange for mortgage insurance benefits. (Jt.Stip. Fact II116); see 24 C.F.R. § 236.260 (2001) (requiring a mortgagee to assign a mortgage to HUD at the Commissioner’s request). Plaintiff purchased the Project from the previous owner on May 1, 1983. (Jt.Stip. Fact II125.) Two months after the sale, the Project was withdrawn from foreclosure proceedings. (Id U126.)

The National Housing Act and Crest A’s Regulatory Agreements

Congress enacted the National Housing Act to help provide “a decent home and a suitable living environment for every American family.” 12 U.S.C. § 1701t. The Act seeks to achieve this goal by “assist[ing] private industry in providing housing for low and moderate income families and displaced families.” Id § 17152(a). The Act authorizes the Secretary of the Department of Housing and Urban Development to insure private mortgage loans used to construct or purchase low income housing. Id §§ 17152(b), 1715z-l(j); see also 24 C.F.R. pts. 200, 221; United States v., Southland Mgmt. Corp., 288 F.3d 665, 669-70 (5th Cir.2002). To receive mortgage insurance, an owner of low-income housing must enter into a Regulatory Agreement with HUD, giving HUD extensive regulatory authority over the operation and maintenance of the property. 12 U.S.C. § 17152(d)(3); see also Southland, 288 F.3d 665, 669-70 (“[12 U.S.C. § 17152(d)(3)] require[s] the owners to be regulated or supervised under a regulatory agreement or otherwise, as to rents, charges, and methods of operation.”).

On January 23, 1986, Crest A and HUD entered into a Regulatory Agreement. The Regulatory Agreement required Crest A to make all mortgage payments on time, authorized HUD to set a maximum income level for tenants, established a methodology for [609]*609calculating rents, and required Crest A to maintain the Project in good repair and condition. The Regulatory Agreement provided that “no change w[ould] be made in the basic rental or fair market rental unless approved by the Commissioner.” (Appendix to Defendant’s Motion to Dismiss, in Part, and for Summary Judgment, and Opposition' to Plaintiffs Motion for Summary Judgment on Liability (Def.’s App.) at 118-19.)

Section 8 and Crest A’s HAP Contracts

The U.S. Housing Act authorizes HUD to contract with owners of low-income housing to make rental assistance payments to defray the costs of tenants’ rents. 42 U.S.C. § 1437f(b)(l); Brown Park Estates-Fairfield Dev. Co. v. United States, 127 F.3d 1449, 1451 (Fed.Cir.1997). The rental subsidy program, commonly referred to as the “Section 8” program, is administered by means of “Housing Assistance Payments” (HAP) contracts. See 24 C.F.R. § 881.501(a); Nat’l Leased Hous. Ass’n v. United States, 105 F.3d 1423, 1425 (Fed.Cir.1997). Under the program, a low-income tenant’s rent is based on her income and ability to pay. 42 U.S.C. § 1437a(a). The amount of HUD’s monthly assistance payment to the owner represents the difference between the maximum monthly rental provided in a HAP contract and the rent that a family is required to pay under § 1437a(a) of the U.S. Housing Act. 42 U.S.C. § 1437f(e)(3)(A); 24 C.F.R. §§ 881.501(d)(1), 881.101(b) (2001). Crest A and HUD entered into a HAP contract in 1986 and later renewed it in 1991. (Def.’s App. at 148, 273.) By incorporating the provisions of the earlier HAP contract, the 1991 HAP contract provided in a section entitled “Rent Adjustments” that “[cjontract rents and utility allowances shall be adjusted by HUD in accordance with HUD regulations and procedures.” (PL’s Ex. 5.)

The U.S. Housing Act establishes that HAP contracts “shall provide for adjustment annually or more frequently in the maximum monthly rents.” 42 U.S.C. § 1437f(e)(2)(A); see also Cisneros v. Alpine Ridge Group, 508 U.S. 10, 12, 113 S.Ct. 1898, 123 L.Ed.2d 572 (1993). The Act’s implementing regulation further provides that rent adjustments may be processed in one of two ways:

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Bluebook (online)
52 Fed. Cl. 607, 2002 U.S. Claims LEXIS 138, 2002 WL 1226223, Counsel Stack Legal Research, https://law.counselstack.com/opinion/crest-a-apartments-ltd-ii-v-united-states-uscfc-2002.