261 F.3d 864 (9th Cir. 2001), 99-35188, Kimberly Assoc. v. United States

Docket Nº:99-35188
Citation:261 F.3d 864
Case Date:August 17, 2001
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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261 F.3d 864 (9th Cir. 2001)




No. 99-35188

United States Court of Appeals, Ninth Circuit

August 17, 2001

Argued and Submitted November 13, 2000

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Counsel John C. Ward, Robert E. Bakes, Erik J. Bolinder; Moffatt, Thomas, Barrett, Rock & Fields; Boise, Idaho; attorneys for the plaintiff-appellant.

Nicholas J. Woychick, Assistant United States Attorney; Boise, Idaho; attorney for the defendant-appellee.

Appeal from the United States District Court for the District of Idaho Larry M. Boyle, District Judge, Presiding D.C. No. CV-98-00083-LMB

Before: Thomas M. Reavley,1 Ferdinand F. Fernandez and Sidney R. Thomas, Circuit Judges.

Kimberly Associates ("Kimberly"), owner of a low-income housing project in Twin Falls, Idaho, argues that it is not barred from bringing a quiet title action against the United States on property subject to a government loan. Under the circumstances presented by this case, we agree with the district court that the United States has waived sovereign immunity. However, we disagree that the unmistakability doctrine bars this action and remand for further proceedings.


Congress enacted the Rural Rental Housing Program as part of the Housing Act of 1949, 42 U.S.C. §§ 1485, "to ameliorate housing shortages for the elderly and other low-income persons in rural areas." Parkridge Investors Ltd. v. Farmers Home Admin., 13 F.3d 1192, 1195 (8th Cir. 1994). The program authorized the Farmers Home Administration, which was later subsumed into the Rural Housing Service (collectively referred to as "RHS"), to make loans available on favorable terms -such as low interest rates, tax advantages, and rent subsidies -to finance the construction and purchase of rural rental property. In return, borrowers were obliged to rent units at affordable rates to low-income tenants for the duration of the loan.

On January 30, 1981, Kimberly entered into a loan agreement with RHS wherein RHS promised to loan Kimberly the funds to build a multi-family, low-income housing project ("the property") in Twin Falls, Idaho. The agreement imposed a variety of restrictions on Kimberly, including a cap on annual profits from the project, a prohibition on other borrowing, and a covenant to use the property as low income housing for twenty years even if Kimberly prepaid its RHS loan.

The loan was not closed until November 10, 1981, when Kimberly executed a promissory note in the amount of $620,000, payable over fifty years, bearing an interest rate of 11.5%. The promissory note provided that "[p]repayments of scheduled installments, or any portion thereof, may be made at any time at the option of the Borrower."

The promissory note was secured by a real estate deed of trust owned by a private entity, Title and Trust Company ("Title & Trust"), an Idaho corporation. Pursuant to the transaction, Kimberly acquired the property in fee using the loaned funds, but conveyed all of its right, title and interest to Title & Trust, which acted as trustee for the RHS pursuant to the terms of the promissory note, trust deed, and loan agreement.

In 1987, Congress enacted the Emergency Low Income Housing Preservation Act of 1987, Pub. L. No. 100-242, 42 U.S.C. §§ 1472(c) ("ELIHPA"). In passing this legislation, Congress was motivated in part

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by concerns that RHS loans were "vulnerable to prepayment and therefore removal from the low-income market--thus, thwarting the basic purpose of the program." Parkridge Investors, 13 F.3d at 1195. Congress further amended the Housing Act in 1992, when it passed the Housing and Community Development Act of 1992, Pub. L. No. 102-550, 106 Stat. 3672 (1992), 42 U.S.C. §§§§ 1472, 1485 ("HCDA"). The intended effect of this legislation was to discourage project owners from prepaying their loans and removing units from the market. It did so by prohibiting prepayments of loans made after December 15, 1989, and imposing elaborate requirements for prepayments of loans extended between December 21, 1979 and December 15, 1989. 42 U.S.C. §§ 1472(c).

For loans in the latter category such as Kimberly's --the statute requires the owner to provide notice of intent to repay...

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