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Airport Road Associates, Ltd. v. United States

United States Court of Appeals, Federal Circuit

August 10, 2017

AIRPORT ROAD ASSOCIATES, LTD., CLIFFORD E. OLSEN--DELTA SQUARE, OAKDALE ASSOCIATES, LIMITED, SERENITY VILLAGE, A PARTNERSHIP IN COMMENDAM, SOUTHEASTERN ASSOCIATES, LTD., A LOUISIANA LIMITED PARTNERSHIP, SOUTHSIDE APARTMENTS, LTD., Plaintiffs.
v.
UNITED STATES, Defendant-Appellee BAYOU DES GLAISES, LTD., BLOOMFIELD PARTNERSHIP II, A LOUISIANA PARTNERSHIP IN COMMENDAM, CLIFFORD E. OLSEN-- COLLEGE TOWNE, CLIFFORD E. OLSEN-- COLLINS SQUARE, A LOUISIANA PARTNERSHIP IN COMMENDAM, CLIFFORD E. OLSEN-- HAMMOND TOWNE, CLIFFORD E. OLSEN-- JEFFERSON SOUTH, CLIFFORD E. OLSEN--OLD MAN RIVER, CLIFFORD E. OLSEN--WALKER PARTNERSHIP, CLIFFORD E. OLSEN 1977-B, CYPRESS COVE ASSOCIATION, Plaintiffs-Appellants

         Appeal from the United States Court of Federal Claims in No. l:13-cv-00152-NBF, Senior Judge Nancy B. Firestone.

          MARK Blando, Eckland & Blando LLP, Minneapolis, MN, argued for plaintiffs-appellants. Also represented by Jeff Howard Eckland, Vince Reuter.

          Matthew Paul Roche, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by BENJAMIN C. MlZER, ROBERT E. Kirschman, Jr., Franklin E. White, Jr.

          Before Prost, Chief Judge, LOURIE and TARANTO, Circuit Judges.

          PROST, CHIEF JUDGE.

         Appellants seeking to exit a federal housing program through loan prepayment appeal from the decision of the United States Court of Federal Claims ("Claims Court") dismissing their claims against the United States ("government") for lack of subject matter jurisdiction. We reverse and remand.

         I. Background

         Appellants are ten limited partnerships[1] that took loans from and entered into housing development agreements with the Rural Housing Service ("RHS") of the United States Department of Agriculture ("USDA") to provide affordable rental housing in Louisiana.[2] They all share a common general partner, Clifford E. Olsen, and wish to prepay their loans and thereby exit the federal affordable housing program.

         A

         Under § 515 of the Housing Act of 1949, ch. 338, 63 Stat. 413, amended by the Senior Citizens Housing Act of 1962, Pub. L. No. 87-723, § 4(b), 76 Stat. 670, 671 (codified as amended at 42 U.S.C. § 1485), the RHS makes loans to private, nonprofit entities to construct affordable rental housing for elderly and low- or middle-income people. Between 1972 and 1982, each Appellant entered into a fifty-year § 515 loan agreement with the RHS. The loans all include a "prepayment" provision stating that each Appellant had the option of paying off the remaining loan balance and converting its properties to conventional housing any time after the first fifteen or twenty years.[3] See, e.g., J.A. 52 ("Prepayments of scheduled installments, or any portion thereof, may be made at any time at the option of the Borrower." (emphasis added)).

         By 1987, however, Congress was concerned that § 515 borrowers were choosing to prepay too often, which threatened the availability of affordable housing under the program. See Franconia Assocs. v. United States, 536 U.S. 129, 136 (2002) (citing H.R. Rep. No. 100-122, at 53 (1987), reprinted in 1987 U.S.C.C.A.N. 3317, 3369). In response, it passed the Emergency Low Income Housing Preservation Act of 1987 ("ELIHPA"), Pub. L. No. 100-242, 101 Stat. 1877 (1988) (codified as amended at 42 U.S.C. § 1472(c)). Important to this case, ELIHPA provides that before accepting an offer to prepay a § 515 loan, the USDA Secretary ("Secretary") must "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." 42 U.S.C. § 1472(c)(4)(A). The Secretary can offer the borrower incentives with such an agreement. Id. § 1472(c)(4)(B). And generally, if an agreement cannot be reached, the borrower must offer to sell the housing to "any qualified nonprofit organization or public agency at a fair market value determined by 2 independent appraisers." Id. § 1472(c)(5)(A)(i). If no nonprofit organization makes an offer to buy within 180 days, then the Secretary "may accept the borrower's offer to prepay." Id. § 1472(c)(5)(A)(ii).

         As of April 2002, the time relevant to this appeal, the RHS had regulations in place at 7 C.F.R. § 1965 Subpart E, implementing ELIHPA. Under these regulations, the RHS outlined "the chronological order for the actions to be taken" on a request for prepayment. 7 C.F.R. § 1965.204(a) (2002). The regulations specified that "[p]rior to initiating a formal prepayment request, borrowers considering prepaying their loans should meet with the [RHS] ... to discuss the prepayment request and the requirements of this procedure. The borrower will be provided with exhibit C of this subpart, to aid in completing the prepayment request package." Id. § 1965.205(a). Sections 1965.205 and 1965.206 set forth the requirements for submitting a formal prepayment request. Notably, for a prepayment request to be considered complete, the regulations required borrowers to make the request at least 180 days before the anticipated prepayment date and to provide, among other things, "[a] written request to prepay ... on a specified date"; information "needed to develop an incentive offer"; and "[documentation of the borrower's ability to prepay under the conditions specified in the prepayment request." Id. § 1965.205(c). If the agency received a prepayment request that was not "complete, " it would "return the request to the borrower specifying the additional information needed." Id. § 1965.206(a).[4]

         B

         This appeal relates to correspondence between Mr. Olsen, on behalf of Appellants, and the RHS in April 2002. A nonprofit organization at the time had expressed interest in acquiring some of Appellants' properties. On April 2, 2002, during those negotiations, Mr. Olsen sent the RHS a letter notifying the agency of these Appellants' "intent ... to convert [some] units into conventional housing" and seeking approval of their "request to pay off the mortgage(s)" on certain properties. J.A. 31. The letter stated in its entirety:

We ask that you approved [sic] our request to pay off the mortgage(s) on the above-captioned developments. We desire to retain a few of the developments and we have an arrangement with a local and national non-profits [sic] to acquire the rest of the developments. Our intent is to convert these units into conventional housing. As we understand the nonprofits' motive, they, too, are ...

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