Grass Valley Terrace v. United States

69 Fed. Cl. 543, 2006 U.S. Claims LEXIS 33, 2006 WL 242674
CourtUnited States Court of Federal Claims
DecidedJanuary 31, 2006
DocketNos. 98-726C, 98-726-2C to 98-726-14C, 04-1299C, 04-1317C
StatusPublished
Cited by6 cases

This text of 69 Fed. Cl. 543 (Grass Valley Terrace 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
Grass Valley Terrace v. United States, 69 Fed. Cl. 543, 2006 U.S. Claims LEXIS 33, 2006 WL 242674 (uscfc 2006).

Opinion

ORDER AND OPINION

DAMICH, Chief Judge.

I. Introduction

This matter is before the court on Plaintiffs’ and D & G Apartments’ (“D & G”) Motion for Substitution of deceased Plaintiff Eileen Kothe (“Ms.Kothe”) pursuant to Rules 17(a) and 25(a) of the Rules of the United States Court of Federal Claims (“RCFC”).1 Plaintiffs assert that substitution is proper under RCFC 17 because D & G is the real party in interest. Alternatively, Plaintiffs request that the court substitute Ms. Kothe’s son, Glen Kothe, under RCFC 25. Defendant opposes the motion, primarily arguing that, since Ms. Kothe never had standing to sue, no substitution may be made. For the reasons discussed herein, Plaintiffs’ motion is GRANTED.

II. Background

On September 16, 1998, Plaintiffs in this consolidated action filed suit against Defendant. Plaintiffs are owners of real estate properties developed under a low-income housing program with the Farmers Home Administration (“FmHA”). Compl. ¶ 19. Through this program, the FmHA contracted with Plaintiffs to construct, rehabilitate, and/or improve housing projects in various communities. Id. The parties entered into loan agreements that imposed certain obligations upon them — obligations that are at the center of this lawsuit. Id. ¶¶ 19-25.

In their complaint, Plaintiffs allege that the loan agreements they entered into with the FmHA provided them with the right to prepay their loans at any time and exit the low-income housing program entirely. Id. ¶ 2. However, Plaintiffs allege that their prepayment rights were affected by legislation Congress enacted during the period of 1979 to 1992. Id. ¶ 3. Concerned with the effect these legislative enactments had on their loan agreements, Plaintiffs filed suit alleging that the legislation constituted an anticipatory repudiation of the loan agreements by impairing their ability to prepay the loans. Id. ¶ 53. In addition, Plaintiffs alleged that the legislative acts constituted an improper taking of their property under the Fifth Amendment. Id2

Although Ms. Kothe was a named Plaintiff in this case, the loan agreements underlying her lawsuit were not executed by her, but [545]*545rather by Darrel and Glen Kothe on behalf of D & G. In 2001, a few years after Plaintiffs filed suit, Ms. Kothe passed away. Pis.’ Mot. V 3. Inexplicably, however, Plaintiffs did not file a suggestion of death at that time.3 On February 17, 2005, several years after Ms. Kothe’s death, Defendant filed a suggestion of death pursuant to RCFC 25. Id. ¶ 5. In response, on May 18, 2005, Plaintiffs filed the motion for substitution currently pending before the court.

III. Discussion

A. The Arguments of the Parties

1. Plaintiffs’ Request for Substitution

Plaintiffs argue that since D & G is the real party in interest it may be substituted for Ms. Kothe under RCFC 17. Pis.’ Mot. ¶ 6. In this regard, Plaintiffs assert that D & G is a Minnesota General Partnership and that it owns the properties underlying Ms. Kothe’s claim against Defendant. Id. H1. In addition, Plaintiffs assert that D & G is in privity of contract with the FmHA because D & G entered into the loan agreements with the FmHA through its partners, Darrel and Glen Kothe. Id. (citing Ex. A, B). Alternatively, Plaintiffs request that the court substitute Ms. Kothe’s son, Glen Kothe, under RCFC 25, as her successor. Id. ¶ 8.

2, Defendant’s Arguments in Opposition

In opposition, Defendant argues that because Ms. Kothe was not a party to the loan agreements with the FmHA she lacks privity of contract and, thus, does not have standing to sue. Def.’s Opp’n at 2. In support, Defendant asserts that without standing, the court lacks jurisdiction over her claims. Id. Defendant also asserts that D & G may not be substituted because Ms. Kothe plead the claims as her own and, thus, the claims cannot be construed as claims made on behalf of D & G. Id. Defendant requests that the court deny Plaintiffs’ motion to substitute and dismiss Ms. Kothe’s claims for lack of jurisdiction. Id. at 2-3. In opposition to Plaintiffs’ alternative request to substitute Glen Kothe, Defendant asserts that although Glen Kothe may be a successor under RCFC 25, as Ms. Kothe never had standing to sue, neither do her successors. Id. at 2.

3. Plaintiffs’ Reply

In response to Defendant’ standing argument, Plaintiffs argue that any such defect may be remedied through D & G’s substitution. Pis.’ Reply at 2-3.

B. Substitution Under RCFC 17(a)

1. Standing

It is well established that a party only has standing to assert a contract claim in the Court of Federal Claims if that party is in privity of contract with the government. See Erickson Air Crane Co. v. United States, 731 F.2d 810, 813 (Fed.Cir.1984). Absent privity, a party lacks standing to sue and the court would not have jurisdiction to resolve the claims raised by the party. Nat’l Leased Housing Ass’n v. United States, 105 F.3d 1423, 1435 (Fed.Cir.1997) (stating that “privity of contract with the United States ... [is] an undisputed prerequisite for standing to sue in the Court of Federal Claims under the Tucker Act”).

From the record, it appears that Ms. Kothe was never in privity of contract with the FmHA because the loan agreements were executed by Darrel and Glen Kothe on behalf of D & G, and Ms. Kothe was not a party to those agreements. Pls.’ Mot. ¶ 1. Dismissal, however, is not appropriate where a standing defect may be cured by substitution of the real party in interest. RCFC 17(a) requires that the court provide the real party in interest with an opportunity to move for substitution after an objection has been made as to the standing of the original party.4 In addition, the Federal Circuit has [546]*546stated that courts should be lenient in allowing parties to substitute the real party in interest under RCFC 17(a). See First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279, 1289 (Fed.Cir.1999) (stating that RCFC 17(a) “sets forth the broad and general principle that actions should be brought in the name of the real party in interest and that courts should be lenient in permitting ratification, joinder, or substitution of that party”) (emphasis added).

Although in terms aimed at the substitution of D & G, Defendant also seems to make a broad argument that, because Plaintiffs’ claims were “unmistakably pleaded as Ms. Kothe’s own,” they cannot be construed as claims on behalf of D & G — or, by implication, on behalf of anyone else. Def.’s Opp’n at 2. It is difficult to ascertain what this argument adds to the undeniable fact that Ms.

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Cite This Page — Counsel Stack

Bluebook (online)
69 Fed. Cl. 543, 2006 U.S. Claims LEXIS 33, 2006 WL 242674, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grass-valley-terrace-v-united-states-uscfc-2006.