Saline Assocs. No. 1 Ltd. v. United States

SALINE ASSOCIATES NO. 1 LIMITED PARTNERSHIP,ST. CLAIR WEST LIMITED PARTNERSHIP,STOCKBRIDGE ASSOCIATES LIMITED PARTNERSHIP, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee

2017-1688

United States Court of Appeals for the Federal Circuit

March 19, 2019

NOTE: This disposition is nonprecedential.

Appeal from the United States Court of Federal Claims in No. 1:13-cv-00908-EGB, Senior Judge Eric G. Bruggink.

MARK BLANDO, Eckland & Blando LLP, Minneapolis, MN, argued for plaintiffs-appellants. Also represented by JEFF HOWARD ECKLAND, VINCE REUTER, LARA SANDBERG; WILLIAM LEWIS ROBERTS, Faegre Baker Daniels LLP, Minneapolis, MN.

MATTHEW PAUL ROCHE, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by JOSEPH H. HUNT, ROBERT E. KIRSCHMAN, JR., FRANKLIN E. WHITE, JR.

Before NEWMAN, LOURIE, and STOLL, Circuit Judges.

NEWMAN, Circuit Judge.

In this action brought under the Tucker Act and the Fifth Amendment, the plaintiffs are three limited partnerships: Saline Associates No. 1 Limited Partnership, St. Clair West Associates Limited Partnership, and Stockbridge Associates Limited Partnership, (collectively, "Saline"). Their suit in the United States Court of Federal Claims ("CFC") alleges breach of contract and property taking arising from the government's repudiation of the prepayment terms of loan agreements that were made under section 515 of the Housing Act of 1949. The CFC granted summary judgment that there was no breach of contract and no taking, and alternatively that even if the government had violated its contracts, all of Saline's claims were barred by the Tucker Act's six-year statute of limitations.¹ On appellate review, we affirm that no liability is incurred with respect to these plaintiffs.

BACKGROUND

A. The Statutory and Constitutional Framework

The Rural Housing Service ("RHS") of the United States Department of Agriculture, through its predecessor the Farmers Home Administration ("FmHA"), is authorized to make low-interest mortgage loans to privatenonprofit entities to provide rental housing for low-income tenants, pursuant to § 515 of the Housing Act of 1949 (codified at 42 U.S.C. § 1485). The mortgage loan agreements contain restrictions on, inter alia, eligible renters and rents that can be charged.

Beginning in 1985, plaintiffs entered into several loan agreements pursuant to § 515. Each owner was required to preserve the property in accordance with the terms of the § 515 program for twenty years, and after twenty years the owners had the right to prepay the loan and release the property from the restrictions.

By the mid-1980's Congress became concerned about the extent of § 515 loan prepayment, for it reduced the availability of low-income housing. See Franconia Associates v. United States, 536 U.S. 129, 136 (2002). Thus, Congress enacted the Emergency Low Income Housing Preservation Act of 1987 ("ELIHPA") (codified at 42 U.S.C. § 1472(c)). ELIHPA affected § 515 loan prepayments by providing that before RHS can accept an offer to prepay such mortgage:

the Secretary shall make reasonable efforts to enter into an agreement with the borrower under which the borrower will make a binding commitment to extend the low income use of the assisted housing and related facilities involved for not less than the 20-year period beginning on the date on which the agreement is executed.

42 U.S.C. § 1472(c)(4)(A). The Secretary is authorized to offer incentives to the borrower, see § 1472(c)(4)(B) (the Secretary can, e.g., increase the rate of return on the property, reduce the interest rate of the loan, provide rental assistance, and grant equity loans).

Section 1472(c)(5)(A)(i) provides that if an agreement to extend the low income use of the housing is not reached, the owner must offer to sell the housing to "any qualified nonprofit organization or public agency at a fair market value determined by 2 independent appraisers." If such offer to sell is not accepted within 180 days, the Secretary may accept the prepayment and release the property from the § 515 controls. § 1472(c)(5)(A)(ii). Any such sale requires RHS approval.

ELIHPA § 1472(c)(5)(G)(ii) further provides that an owner may avoid the offer-for-sale requirement if RHS determines that prepayment will not materially affect housing opportunities for minorities, and either of two other conditions is met: (1) prepayment will not displace the tenants of the affected housing, or (2) there is an adequate supply of safe, decent, and affordable rental housing within the market area and sufficient actions have been taken to ensure that such housing will be made available to displaced tenants.

In Franconia Associates the Supreme Court explained that "ELIHPA effected a repudiation of the FmHA loan contracts, not an immediate breach. The Act conveyed an announcement by the Government that it would not perform as represented in the promissory notes if and when, at some point in the future, petitioners attempted to prepay their mortgages." 536 U.S. at 143.

B. The Saline Sales to Union Street

Saline's § 515 loan contracts were entered into on March 1st, June 27th, and July 24th of 1985. On October 12, 2007 the Saline owners entered into contracts to sell their properties to Union Street Enterprises, LLC ("Union Street") at an appraised price, and Union Street agreed to assume Saline's § 515 mortgage loans. The sales contracts stated that they were subject to RHS approval and required Saline to continue operating the properties until the closing.

On November 14, 2007, RHS approved the sales from Saline to Union Street. The sales closed on November 19, 2007, and Union Street executed new 20-year loan agreements with RHS, accepting new § 515 restrictions.

C. The CFC Proceedings

On November 15, 2013 Saline filed suit against the United States stating two causes of action—breach of contract and Fifth Amendment taking—based on the enactment of ELIHPA and the imposition of prepayment restrictions in violation of Saline's § 515 loan agreements.

The government moved for summary judgment, arguing that under ELIPHA, as construed by Franconia, RHS could not breach its agreement to accept prepayment unless either (1) Saline offered to prepay the mortgage loan and RHS rejected the offer, or (2) if Saline treated the government's ELIPHA right to refuse prepayment as a present breach and filed suit. Neither event occurred before Saline sold the properties to Union Street, with the approval of RHS.

The CFC agreed with the government, holding that in accordance with Franconia:

[P]laintiffs were thus limited to two options: they could file suit immediately or attempt to exercise their prepayment right and file suit when the government refused to accept prepayment. Because plaintiffs transferred their respective properties and loan agreements prior to taking either of those steps, they failed to place the government in breach when they had the right to do so.

CFC Op. at 741. The CFC also addressed Saline's argument that it placed the government in breach of contract by "materially changing its position" in reliance on the ELIHPA repudiation by selling the properties to Union Street. The CFC held that even if Franconia did not foreclose this theory, Saline's actions "did not establish a material change of position that could serve as an election to treat the government's repudiation as a breach" because Saline "transferred all rights they had under the contracts to Union Street" and Saline's "transfers were consistent with continued performance by the government and Union Street." Id.

The CFC held that even if the sales to Union Street were treated as a material change in position due to the ELIHPA repudiation, Saline's claim of breach on this ground was barred by the Tucker Act six-year statute of limitations. The CFC found that Saline's claim accrued on the date of the sales contracts between the Saline owners and Union Street, October 12, 2007, or at the latest when RHS approved the sale, on November 14, 2007—because "[w]hen plaintiffs contracted to sell their properties, Union Street could enforce the sales contracts through an action for specific performance or seek money damages if faced with a breach by plaintiffs." CFC Op. at 741-42. Both dates are more than six years before Saline filed this suit on November 15, 2013. The CFC further held that Saline's theories of Fifth Amendment taking were either non-existent or time-barred on the same grounds. See id. at 742.

Saline appeals, alleging error in the CFC's analysis of both the breach of contract and the taking claims.

DISCUSSION

The Tucker Act provides that "[e]very claim of which the United States Court of Federal Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after the claim accrues." 28 U.S.C. § 2501. This period of limitations is deemed a jurisdictional requirement, John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 133-34 (2008).

"Whether the Court of Federal Claims possesses jurisdiction over a claim is a question of law subject to de novo review." Navajo Nation v. United States, 631 F.3d 1268, 1272 (Fed. Cir. 2011). "Whether a taking compensable under the Fifth Amendment has occurred is a question of law based on factual underpinnings." Bass Enters. Prod. Co. v. United States, 133 F.3d 893, 895 (Fed. Cir. 1998). We review the CFC's rulings of law de novo, Massachusetts Bay Transportation Authority v. United States, 254 F.3d 1367, 1372 (Fed. Cir. 2001), and factual findings underlying the analysis are reviewed for clear error, City of El Centro v. United States, 922 F.2d 816, 819 (Fed. Cir. 1990).

A. The Contract Claims

In Franconia the Court explained that "[u]nless petitioners treated ELIHPA as a present breach by filing suit prior to the date indicated for performance, breach would occur when a borrower attempted to prepay, for only at that time would the Government's...