Trafalgar Capital Associates, Inc. v. Cisneros
| Decision Date | 16 July 1997 |
| Docket Number | No. 95-11267-JLT.,95-11267-JLT. |
| Citation | 973 F.Supp. 214 |
| Parties | TRAFALGAR CAPITAL ASSOCIATES, INC., in its capacity as Managing General Partner of Heywood-Wakefield Associates Limited Partnership, Plaintiff, v. Henry C. CISNEROS, in his capacity as Secretary of United States Department of United States Department of Housing and Urban Development, Executive Office of Communities and Development, and Rural Housing Improvement, Inc., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Alan M. Spiro, Friedman & Atherton, Boston, MA, Carl A. Coan, Coan & Lyons, Washington, DC, for Trafalgar Capital Associates.
Susan M. Poswistilo, U.S. Atty.'s Office, Boston, MA, for Henry G. Cisneros.
Loretta M. Smith, Atty. Gen.'s Office, Boston, MA, for Executive Office of Communities and Development.
Plaintiff, Trafalgar Capital Associates, Inc. ("Trafalgar"), is a general partner of the Heywood-Wakefield Associates Limited Partnership ("HWLP"). HWLP owns a multi-family rental housing project (the "Project") in Gardner, Massachusetts.
Trafalgar contends that the United States Department of Housing and Urban Development ("HUD") improperly calculated the rents HWLP is entitled to charge tenants of the Project. Trafalgar, in its complaint, seeks mandamus and declaratory relief, in order to force HUD to allow higher rents.
Presently before the court are the parties' cross-motions for summary judgment.
Congress passed the Section 8 Moderate Rehabilitation Program of the United States Housing Act of 1937 (the "MRP") with the intention of "aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C. § 1437f(a). The MRP creates a procedure by which HUD can subsidize a portion of the rents tenants pay for low-income housing.
Under the MRP, HUD enters into an annual assistance contract with a public housing agency ("PHA"). The PHA then enters into an Agreement to enter into a Housing Assistance Payments contract ("AHAP") with a housing project owner. The AHAP sets forth an estimate of both the base rent and contract rent for the project. The base rent is either the rent for a unit before rehabilitation, or the cost to the owner of owning, managing, and maintaining the unit after rehabilitation. The contract rent is calculated by adding the monthly cost of financing the rehabilitation and, perhaps, an allowance for the rehabilitation costs not covered by debt to the base rent. The owner will receive, from HUD, through the PHA, the difference between the contract rent and the rent that the tenants are required to pay. Normally, the owner will not begin rehabilitation of the housing project prior to the execution of the AHAP.
After the project is fully rehabilitated, pursuant to certain conditions established in the AHAP, the PHA and the owner will sign a Housing Assistance Payments contract ("HAP"), which sets forth the final base and contract rents. The rents set out in the HAP will mirror the AHAP rents unless they are adjusted pursuant to provisions of the AHAP contract, the HAP contract itself, or HUD regulations.
On April 13, 1984, Defendant Executive Office of Communities and Development ("EOCD"), a PHA, applied to HUD for funds pursuant to the MRP. HUD approved the application on September 28, 1984.
EOCD and HUD entered into an Annual Contributions Contract ("ACC") on April 3, 1985. The ACC permitted the use of exception rents1 at 132% of the Existing Housing Fair Market Rents. This provision was based upon the decision of the Regional Administrator of HUD's Boston Regional Office to allow the exception rents.
On October 11, 1985, HWLP borrowed over $10 million from the Massachusetts Housing Finance Agency ("MHFA") for the purpose of rehabilitating the Project. It borrowed over $3 million more on May 12, 1986. Contrary to the normal practice, HWLP began the rehabilitation of the Project prior to the execution of the AHAP.
In addition to the MHFA loans, HWLP will receive a total of over $1 million over fifteen years pursuant to the State Housing Assistance for Rental Production ("SHARP") contracts it entered into with the MHFA and EOCD. HWLP executed the SHARP contracts in September 1985 and November 1987.
On April 30, 1986, HWLP signed an AHAP for the purposes of rehabilitating the Project and receiving funds pursuant to the MRP. EOCD and Defendant Rural Housing Improvement, Inc. ("RHI") executed the AHAP on May 6, 1986. The initial base and contract rents for the Project were included in the AHAP.
The rehabilitation of the Project was completed in four separate stages. After each stage, an HAP was executed with regards to the finished rental units. The final stage was completed, and the final HAP executed, on April 17, 1990.
On June 15, 1995, Trafalgar filed its complaint. It complains of five separate actions of HUD. It argues that HUD: (1) used improper Fair Market Rents ("FMRs") for the Project; (2) improperly classified the SHARP funds as a grant, rather than a loan; (3) did not fully recognize all of the eligible costs incurred by HWLP during the rehabilitation of the Project; (4) used an incorrect debt-service constant on the MHFA loan; and, (5) unlawfully reversed the Boston Regional Administrator's grant of exception rents.
The maximum rents a property owner may charge under the MRP "shall not exceed by more than 10 per centum the fair market rental established by the Secretary [of HUD] periodically but not less than annually...." 42 U.S.C. § 1437(c)(1). HUD regulations require that the FMRs applicable to a project are the FMRs in effect on the date of the AHAP's execution. 24 C.F.R. § 882.408(c). HUD's decision to use the Fiscal Year 1985 FMRs ("FY 19* * FMRs") was based upon its understanding that the AHAP applicable to the Project had an effective date of February 8, 1986, and the FY 1986 FMRs were not in effect until, at the earliest, April 22, 1986.2
HUD contends that Trafalgar's claim that HUD improperly used the FY 1985 FMRs, instead of the FY 1986 FMRs, is time-barred by the statute of limitations. It argues that Trafalgar's right of action accrued, for that issue, at the latest, when HUD adopted the FY 1986 FMRs for Gardner, Massachusetts, on August 29, 1986. On that date, HUD claims, Trafalgar knew that the rents for the Project were not going to be calculated using the FY 1986 FMRs. It argues, therefore, that Trafalgar could have brought this lawsuit as of that date.
Trafalgar responds that its right of action accrued when it had exhausted all available administrative remedies. Trafalgar argues that HUD's final decision in this case was not rendered until April 7, 1995. Trafalgar's right of action would, therefore, not have accrued until that date.
It is settled that only after "a mandatory administrative decision occurs `[does a plaintiff's] claim or right to bring a civil action against the United States mature[] and ... [the plaintiff] has the right to demand payment.'" United States v. Meyer, 808 F.2d 912, 917 (1st Cir.1987)(quoting Crown Coat Front Co. v. United States, 386 U.S. 503, 87 S.Ct. 1177, 18 L.Ed.2d 256 (1967)). In other words, a plaintiff's cause of action accrues only after he has completed all mandatory administrative remedies.
The First Circuit has not ruled explicitly on the question of whether a plaintiff must exhaust all permissive administrative remedies before his cause of action against the United States accrues. Meyer, however, is instructive. The Meyer court held that the five-year statute of limitations for enforcement of a penalty under the Export Administration Act ran from the date the Department of Commerce imposed the penalty, not from the date of the underlying violation. Meyer, 808 F.2d at 922. The Defendant in Meyer cited the case of Unexcelled Chemical Corp. v. United States, 345 U.S. 59, 73 S.Ct. 580, 97 L.Ed. 821 (1953), to bolster his argument that the Government's claim had violated the statute of limitations. The court was not persuaded.
Important to the case before this court, the court in Meyer distinguished Unexcelled. In Unexcelled, the government could file a complaint without going through any administrative proceedings, if it so chose, whereas, in Meyer, the plaintiff had to undertake certain mandatory administrative procedures. The Unexcelled Court held that the cause of action accrued at the time of violation, not at the end of the permissive administrative actions. Id. at 66, 73 S.Ct. at 584. In fact, the Supreme Court itself distinguished Unexcelled for that reason in Crown Coat. Crown Coat, 386 U.S. at 519, 87 S.Ct. at 1186.
Trafalgar cites Constant v. United States, 16 Cl.Ct. 629, aff'd, 884 F.2d 1398 (Fed.Cir.), cert. denied, 493 U.S. 1002, 110 S.Ct. 561, 107 L.Ed.2d 556 (1989), and Adler v. United States, 134 Ct.Cl. 200, 146 F.Supp. 956 (1956) for its proposition that the right of action accrued only after all administrative action was completed. Both cases, however, relate to the issue of exhaustion of remedies, not to the issue of when a right of action accrues.
This court finds, therefore, that Trafalgar's claim accrued before it began to seek permissive administrative remedies, at the latest, on August 29, 1986, when it became aware that HUD would not use the FY 1986 FMRs to calculate the Project's rents.
Before 1990, courts traditionally would not apply equitable principles to the tolling of statutes of limitations in cases against the United States. Oropallo v. United States, 994 F.2d 25, 28 (1st Cir.1993), cert. denied, 510 U.S. 1050, 114 S.Ct. 705, 126 L.Ed.2d 671 (1994). The Supreme Court changed that practice with its holding in Irwin v. Department of Veterans Affairs, 498 U.S. 89, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990). In Irwin, the Court held that "the same rebuttable presumption of...
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Trafalgar Capital Associates, Inc. v. Cuomo
...and change in accordance with HUD requirements, including the correction of errors in computation." Trafalgar Capital Assoc., Inc. v. Cisneros, 973 F.Supp. 214, 221 (D.Mass.1997) (quoting HAP, p 1.5). The district court found this mistake to be an error in computation that had to be correct......