Christopher Village v. U.S., 02-5188.

CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit
Citation360 F.3d 1319
Docket NumberNo. 02-5188.,02-5188.
PartiesCHRISTOPHER VILLAGE, L.P. and Wilshire Investments Corp., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.
Decision Date08 March 2004

E. Grey Lewis, of Washington, DC, argued for plaintiffs-appellants. Of counsel on the brief was E.C. Baynard, Baynard & Cartner, of Washington, DC.

Steven J. Gillingham, Senior Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. Of counsel were David M. Cohen, Director; and Nancy Christopher, Attorney, Office of General Counsel, Department of Housing and Urban Development, of Washington, DC.

Before LOURIE, GAJARSA, and DYK, Circuit Judges.

DYK, Circuit Judge.

This case presents the question whether a federal district court has jurisdiction to issue a declaratory judgment as to the government's liability for breach of contract solely in order to create a "predicate" for suit to recover damages in the Court of Federal Claims. We hold that district courts do not have such jurisdiction because the Court of Federal Claims has exclusive jurisdiction under the Tucker Act, 28 U.S.C. § 1491 (2000), to adjudicate breach of contract claims for money damages in excess of $10,000, and Congress has not waived sovereign immunity for such suits in district courts.

Here, the United States District Court for the Southern District of Texas, and on appeal the United States Court of Appeals for the Fifth Circuit, lacked jurisdiction to issue such a "predicate" judgment, and the "predicate" judgment was void. It follows that the Court of Federal Claims was not bound by this earlier judgment.

On the merits, we affirm the Court of Federal Claims' grant of summary judgment. We agree that the contract between the government and the appellants was unenforceable against the government because of a material breach by the appellants predating the government's alleged breach.

BACKGROUND
I

The National Housing Act was designed to "assist private industry in providing housing for low and moderate income families and displaced families." 12 U.S.C. § 1715l(a) (2000). It authorized the Department of Housing and Urban Development ("HUD") to insure mortgages used to construct certain low-income housing. Id. § 1715l(b). Owners of such properties were also entitled to certain tax benefits. See Chancellor Manor v. United States, 331 F.3d 891, 894 (Fed.Cir.2003). In return for this mortgage insurance and tax benefits along with various other benefits, landlords agreed to be "regulated or supervised... by the Secretary under a regulatory agreement." 12 U.S.C.A. § 1715l(d)(3) (West Supp.2003).

The appellants, Christopher Village, L.P. and its managing general partner, Wilshire Investments Corp., owned a federally subsidized low-income housing complex known as Mockingbird Run Apartments ("Mockingbird Run"). Mockingbird Run was built in 1970 with an insured mortgage obtained under the National Housing Act, id. §§ 1701-1750g (2000). In accordance with National Housing Act requirements, the appellants entered into a standard regulatory agreement with HUD concerning Mockingbird Run (the "Regulatory Agreement"). The Regulatory Agreement required the appellants to "maintain the mortgaged premises... in good repair and condition." Regulatory Agreement ¶ 7 (App. at 2002). See also 24 C.F.R. § 221.530(b) (1995). The agreement authorized HUD to regulate rents. Regulatory Agreement ¶ 4(f) (App. at 2001) ("The rent charged for each unit shall not exceed the upper limit of the range shown for such type of unit on the rental schedule approved in writing by the Commissioner [of HUD] ...."); see also 12 U.S.C. § 1747c (2000) ("[T]he investor shall not charge or collect rents for any dwellings in the project in excess of the appropriate rents therefor as shown in the latest rent schedule approved pursuant to this section."). According to HUD regulations, HUD-approved rent schedules were meant to "compensate for any increase in... operating and maintenance costs over which owners have no effective control...." 24 C.F.R. § 886.112(b) (1995). The Regulatory Agreement also stated that the landlord could not increase "the amount of the gross monthly dwelling income for all units ... unless such increase is approved by the Commissioner." Regulatory Agreement ¶ 2(g) (App. at 2001); see also 24 C.F.R. § 886.112(b) (1995).

The appellants also entered into a Housing Assistance Payment contract (the "HAP Contract") with HUD pursuant to the United States Housing Act, 42 U.S.C. § 1437f (2000). (App. at 2100.) That Act authorized HUD to enter into contracts with landlords to subsidize rental payments of tenants living in private, low-income housing. See Cisneros v. Alpine Ridge Group, 508 U.S. 10, 12, 113 S.Ct. 1898, 123 L.Ed.2d 572 (1993). Under the HAP Contract, the appellants received "assistance payments" in "an amount calculated to make up the difference between the tenant's contribution and the contract rent agreed upon by the landlord and HUD." See id. (internal quotations omitted). Like the Regulatory Agreement, the HAP Contract regulated the appellants' management of Mockingbird Run, prohibiting the appellants from "charg[ing] any family an amount in excess of the" set allowable rents and requiring the appellants to "maintain and operate the contract units and related facilities so as to provide decent, safe and sanitary housing as defined by HUD." (App. at 2102.)

II

By 1995, the physical condition of Mockingbird Run had substantially deteriorated, necessitating approximately $2 million worth of repairs. Finding that the appellants had allowed the complex to deteriorate in violation of the Regulatory Agreement and the HAP Contract, HUD informed the appellants in April of 1995 that their failure to refurbish the property could lead to a default of the Regulatory Agreement and loss of the HAP Contract rent subsidies.

Thereafter, on June 23, 1995, the appellants requested a twenty-nine percent rent increase from HUD, claiming that the current rent revenue was inadequate to cover operating costs as well as maintenance and repairs. HUD sent the appellants a letter on August 25, 1995, explaining that the Regulatory Agreement and HAP Contract imposed an absolute obligation on the appellants to maintain the property. The letter did not decide the appellants' rent increase request, but it instead demanded that the appellants deposit approximately $2 million in escrow to fund Mockingbird Run's needed repairs. The appellants did not deposit the $2 million. On September 6, 1995, HUD sent the appellants a second letter explaining that it would not entertain the appellants' request for a rent increase unless they deposited the $2 million in escrow as the August letter demanded. The appellants again refused to pay the $2 million, and on September 14, 1995, HUD informed the appellants that they "had violated ... the Regulatory Agreement by not maintaining the mortgaged premises in good repair and condition [and that] HUD would proceed without further notice to take whatever remedies are appropriate." Christopher Vill., L.P. v. Retsinas, 190 F.3d 310, 313 (5th Cir.1999) (internal quotations omitted). On November 17, 1995, the Federal National Mortgage Association, the original lender, assigned the note and mortgage to HUD, and "HUD assumed control of the property as a mortgagee in possession" on December 1, 1995. Id. (explaining that once the Federal National Mortgage Association assigned the note to HUD, HUD "had the same remedial rights as the original lender"); see 24 C.F.R. § 207.255(a)(2) (2003); see also United States v. Antioch Found., 822 F.2d 693, 695 (7th Cir.1987) (stating "in determining when to foreclose following a default, HUD has very broad discretion in order to achieve national housing objectives").

III

In October of 1995 the appellants brought suit in the United States District Court for the Southern District of Texas against HUD, the Secretary of HUD, and the Director of Multifamily Housing Management of the Houston Area Office of HUD, seeking mandamus, injunctive and declaratory relief pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 702, 706 (2000) ("APA"). Christopher Vill., L.P. v. Cuomo, No. Civ. H-95-5005, 1998 WL 422854 (S.D.Tex. Mar. 2, 1998). Arguing that HUD illegally demanded $2 million in escrow and illegally refused to consider its request for a rent increase, the appellants sought mandamus and injunctive relief to prevent HUD from foreclosing on the Mockingbird Run property. The appellants also sought a declaratory judgment that their obligation to maintain the property was contingent upon receiving adequate rent revenue and that they were under no duty to make repairs unless they received adequate rent increases. In March of 1998 the district court granted summary judgment in favor of HUD on all counts, holding that HUD's decisions whether to grant rent increases were unreviewable and that the appellants had an absolute responsibility to properly maintain the property irrespective of rent increases. Id. at *34.

The appellants appealed to the United States Court of Appeals for the Fifth Circuit. While the case was pending in the Fifth Circuit, HUD sold the property in a foreclosure sale, and it was razed. Christopher Vill., 190 F.3d at 312. The Fifth Circuit held that HUD's "foreclosure sale and transfer ... effectively mooted [the appellants'] request for an injunction and mandamus because of [the] court's inability to fashion adequate relief" since the "request for relief ... involve[d] a transfer of the property [that] amount[ed] to an impossible request for [the] court" to fulfill. Id. at 314-15 (internal quotations omitted). Nonetheless, the Fifth Circuit held that the request for a declaratory judgment still "present[ed] a live dispute" because the appellants "could use the declaration...

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