Englewood Terrace Ltd. Partnership v. United States

84 Fed. Cl. 649, 2008 U.S. Claims LEXIS 333, 2008 WL 5068700
CourtUnited States Court of Federal Claims
DecidedNovember 25, 2008
DocketNo. 03-2209C
StatusPublished
Cited by4 cases

This text of 84 Fed. Cl. 649 (Englewood Terrace Ltd. Partnership 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
Englewood Terrace Ltd. Partnership v. United States, 84 Fed. Cl. 649, 2008 U.S. Claims LEXIS 333, 2008 WL 5068700 (uscfc 2008).

Opinion

OPINION

HORN, Judge.

FINDINGS OF FACT

The court issued an earlier opinion on Englewood Terrace Limited Partnership’s (Englewood) breach of contract claim, finding the liability issue in favor of the plaintiff. See Englewood Terrace Ltd. P’ship v. United States, 79 Fed.Cl. 516 (2007). The extensive findings of fact in the court’s earlier opinion will not be repeated here, but are incorporated into this opinion. A few of the relevant facts specifically related to this opinion are repeated below. Englewood alleged that the United States Department of Housing and Urban Development (HUD) breached a Housing Assistance Payment (HAP) contract between Englewood and HUD. The HAP contract provided for rent subsidies to be used by the tenants of South Pointe Towers, a high-rise apartment building in Chicago, Illinois. South Pointe was owned by the Englewood Terrace Limited Partnership. John J. Hayes was the President of P.M. Group, the Englewood Terrace Limited Partnership’s general partner, until December 13, 2002. Mr. Hayes’ P.M. One was the managing agent at South Pointe. On December 13, 2002, DSSA New Englewood Terrace LLC (DSSA), a sole proprietorship of Don S. Samuelson, replaced P.M. Group as Englewood’s general partner. Earlier, on December 1, 2001, Mr. Samuelson’s DSSA Management, Inc., which was affiliated with Mr. Samuelson’s DSSA New Englewood Terrace LLC, replaced P.M. One as South Pointe’s managing agent.

Englewood’s complaint stemmed from HUD’s termination of Englewood’s HAP contract with HUD. The HAP contract at South Pointe ended on September 30, 2002, after tenants had been given housing vouchers permitting them to either remain at South Pointe or relocate to other housing. HUD based its termination of the HAP contract on its belief that Englewood had not provided decent, safe and sanitary housing to tenants, as required by the HAP contract.

The specific basis for the termination of the HAP contract was a March 2, 2001 HUD inspection of South Pointe. After a trial in the matter, this court found, however, that HUD’s decision to terminate Englewood was made even before HUD received Engle-wood’s plan to correct deficiencies identified in the March 2, 2001 HUD inspection. The court concluded that Englewood was not afforded a full and meaningful opportunity to cure the deficiencies identified in the March 2, 2001, HUD inspection. The record reflects that, on the one hand, HUD had urged that South Pointe be placed under new management and new ownership, but that, once new management and ownership was in place, there appeared to be a reluctance on the part of HUD to provide a meaningful opportunity for the new management and ownership, in the person of Mr. Samuelson, to take corrective action, or for HUD to even acknowledge any improvement at South Pointe. HUD’s posture thereby undermined its contract termination action against Engle-wood.

After the trial on liability, the court afforded the parties an opportunity to settle any remaining issues, including damages. In addition to the contract termination issue, En-glewood also had made separate claims for a rent increase at South Pointe, and for energy cost reimbursement, on which the court required separate briefing from the parties. These two claims are the subject of this opinion.

Mr. Samuelson sent an August 21, 2001 letter to Edward J. Hinsberger, the Director of HUD’s Chicago Multifamily Hub, titled, “Contract Renewal and Budget Based Rent Increase for South Pointe Apartments,” on [651]*651DSSA Management, Ine. letterhead, indicating that DSSA, Inc. intended to obtain a partnership interest in Englewood, and that DSSA Management, Inc. intended to become the managing agent for South Pointe. Mr. Samuelson’s letter also stated that South Pointe had not had a rent increase since 1998, and requested an increase, with “rent levels increased to market comparables.” Mr. Samuelson’s justification for the rental increase stated:

First, South Pointe is operating in 2001 on a 1998 income schedule. There have been three years without a rental increase. Second, Operations have resulted in deficits of approximately $200K a year in 1999 and 2000. Gas costs have risen dramatically over the past year. While vacancy and collection losses, and legal and security costs can be reduced in the future after the improvement program has been put in place, they will not be able to be reduced meaningfully during the remainder of 2001 and 2002. Third, rent comparables in the neighborhood support an average rental increase of $56 per unit per month. Such an increase would increase income potential by $200K per year, enough to offset the operating deficits that have been experienced in past years.

Mr. Samuelson included a Rent Comparability Study with his request for a rent increase. A September 5, 2001 internal HUD e-mail reflected that a desk review of this Rent Comparability Study for South Pointe was conducted, and that the Study was found to be acceptable. As a result, in a September 6, 2001 e-mail to Mr. Samuelson, titled “South Pointe Comparability Study,” Mr. Hinsberger wrote that the requested rent increase was supported by the rent comparability survey, but that the request needed to be signed by the owner, Mr. Hayes, and resubmitted. Mr. Hayes’ recollection was that he had signed a request for the rent increase, however, Mr. Hinsberger stated that HUD never received a rental request signed by Mr. Hayes. Neither party has produced a document signed by Mr. Hayes.

The second issue addressed in this opinion is reimbursement for higher energy costs. On May 10, 2001, Mr. Hinsberger, Director of HUD’s Chicago Multifamily Hub, issued guidance to the office’s assigned property owners, including Englewood, concerning potential reimbursement of their higher energy costs incurred during the winter of September 2000-March 2001. Mr. Hinsberger informed property owners that energy reimbursement requests must be submitted before September 30, 2001. In response to this HUD Guidance, on August 6, 2001, En-glewood submitted a request for energy reimbursement in the amount of $55,230.29, but without .supporting invoices. Subsequently, in a second letter to Mr. Hinsber-ger, dated May 31, 2002, replacing the first letter, Englewood requested reimbursement for energy costs in the amount of $139,187.35, this time with some, but not all of the supporting invoices required by HUD.

DISCUSSION

Rent Increase

Englewood argues that it sought a rent increase at South Point from HUD in the amount of $203,828.00 per year, or a total of $611,484.00 for three years. In this regard, Mr. Samuelson, at a point in time when he was neither the owner nor the manager of South Pointe, submitted a rent increase request to HUD dated August 21, 2001. Mr. Samuelson subsequently became the manager at South Pointe on December 1, 2001, and later became the owner on December 13, 2002. The government notes that the rent increase request received by HUD was signed by Mr. Samuelson, and not by the owner of South Pointe at the time, Mr. Hayes.

Edward Hinsberger, the Director of the Chicago Office of Multi-Family Housing for HUD, responded to Mr. Samuelson’s rent increase request by e-mail on September 6, 2001, as follows:

[To] Don [Samuelson],
The rent comp study supports the proposed rents. The submission was made by you. It needs to be signed by the owner or the current managing agent. There was a spot on your 8/21/01 letter authorizing you to submit, but Mr. Hayes didn’t sign it.

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Related

Englewood Terrace Ltd. Partnership v. United States
86 Fed. Cl. 720 (Federal Claims, 2009)

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Bluebook (online)
84 Fed. Cl. 649, 2008 U.S. Claims LEXIS 333, 2008 WL 5068700, Counsel Stack Legal Research, https://law.counselstack.com/opinion/englewood-terrace-ltd-partnership-v-united-states-uscfc-2008.