U.S. v. Peppertree Apartments

• Decision Date: 30 September 1991
• Docket Number: No. 89-7850,89-7850
• Citation: 942 F.2d 1555
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. PEPPERTREE APARTMENTS, City Court II Apartments, et al., Defendants, George Bailes, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1555

942 F.2d 1555

UNITED STATES of America, Plaintiff-Appellee, v. PEPPERTREE APARTMENTS, City Court II Apartments, et al., Defendants George Bailes, Jr., Defendant-Appellant.

No. 89-7850.

United States Court of Appeals Eleventh Circuit.

Sept. 30, 1991.

Roy M. West, Birmingham, Ala., for defendant-appellant.

Frank W. Donaldson, U.S. Atty., Robert P. Barclift, Asst. U.S. Atty., Birmingham, Ala., Geoffrey L. Patton, U.S. Dept. of Housing and Urban Development, Office of Gen. Counsel, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before BIRCH, Circuit Judge, DYER, Senior Circuit Judge and MOYE ^*, Senior District Judge.

BIRCH, Circuit Judge:

Appellants George Bailes, Jr. ("Bailes"), Bailes Realty Company, Peppertree Apartments, City Court II, Rainbow Apartments Company, and College Manor Ltd. appeal from an order of the United States District Court for the Northern District of Alabama. We agree with the district court's decisions to apply collateral estoppel to the findings of the administrative law judge, grant the motion of the United States for summary judgment, and award the United States damages in the amount provided by 12 U.S.C. § 1715z-4a(c) (1988). Accordingly, we AFFIRM the district court's order.

I. BACKGROUND

A. Factual Background

Peppertree Apartments, City Court II Apartments, Rainbow Apartments, and College Manor Apartments are multifamily housing projects located in Alabama. Each of the projects was built with the proceeds of a loan which was insured against default by the Secretary of Housing and Urban Development ("HUD") under authority granted by 12 U.S.C. § 1715l (b) (1988). HUD provides such mortgage insurance "to assist private industry in providing housing for low and moderate income families and displaced families." 12 U.S.C. § 1715l (a) (1988).

Each of these four housing projects is owned by a separate partnership entity. However, Bailes is a managing or general partner in each of the entities. At all times relevant to this action, Bailes Realty Company, of which Bailes is the sole owner, was the managing agent for the bank accounts of each of the projects.

In consideration for the mortgage insurance provided by HUD, each of the housing projects entered into an identical regulatory agreement with HUD. Each of the agreements was signed by Bailes, on behalf of the project owners, as managing partner, partner or general partner. The agreements prohibit project owners from using project income or other assets for any purpose other than "reasonable operating expenses and necessary repairs" without the prior written approval of HUD. R1-4-Ex.A p 8(b). The agreements further provide that the expenditure of project funds is prohibited unless the project has "surplus cash" and certain other conditions are met. R1-4-Ex.A p 8(e). In the event the project owners violate any provision of these agreements, the agreements provide that HUD may

[a]pply to any court, State or Federal, for specific performance of this Agreement, for an injunction against any violation of this Agreement, for the appointment of a receiver to take over and operate the project in accordance with the terms of the Agreement, or for such other relief as may be appropriate, since the injury to [HUD] arising from a default under any of the terms of this Agreement would be irreparable and the amount of damage would be difficult to ascertain.

R1-4-Ex.A p 14(d).

B. Procedural Background

Claiming that Bailes had made expenditures in violation of the regulatory agreements, HUD determined that Bailes should be debarred from participation in HUD programs for a period of five years. After receiving notice of his proposed debarment, Bailes requested a hearing before HUD's Board of Contract Appeals. An administrative judge of HUD's Board of Contract Appeals conducted a quasi-judicial proceeding, including an evidentiary hearing, after which she ruled from the bench. The administrative judge found that Bailes had made a net distribution of $90,311 in project funds to money market accounts in his name and that he had not replaced that money despite knowing that those distributions violated the regulatory agreements. The administrative judge further found that as of the date of the hearing Bailes had not accounted for or repaid interest earned on these money market accounts. Accordingly, Bailes and his affiliate, Bailes Realty Company, were debarred from participation in HUD programs for five years.

The United States filed suit in the district court, seeking to recover from Bailes and the other project owners the $90,311 that had not been returned to the projects' accounts as well as statutory damages. The United States then filed a motion for summary judgment, contending that collateral estoppel barred the relitigation of issues raised in the administrative proceeding. The district court granted the government's motion for summary judgment, and awarded the government double damages and costs as authorized by section 1715z-4a(c).

Bailes filed a motion in the district court, requesting that court to reconsider the award of double damages. Bailes noted that section 1715z-4a(c), the authority pursuant to which the district court awarded double damages, was passed in 1987, while the violations of the regulatory agreements took place in 1985 and earlier. Bailes contended that this statutory provision for double damages was not to be applied retroactively. The district court disagreed, and denied Bailes's motion.

Bailes now challenges the district court's use of collateral estoppel, grant of summary judgment in favor of the United States and award of double damages.

II. DISCUSSION

A. Collateral Estoppel

" 'The doctrine of collateral estoppel precludes a party from relitigating an issue that was fully litigated in a previous action.' " Palciauskas v. United States, 939 F.2d 963 (11th Cir.1991) (quoting Deweese v. Town of Palm Beach, 688 F.2d 731, 733 (11th Cir.1982)). Collateral estoppel may prevent the relitigation in a judicial action of issues of fact previously decided in an administrative proceeding. Pantex Towing Corp. v. Glidewell, 763 F.2d 1241, 1245 (11th Cir.1985).

[W]hen an administrative body has acted in a judicial capacity and has issued a valid and final decision on disputed issues of fact properly before it, collateral estoppel will apply to preclude relitigation of fact issues only if: (1) there is identity of the parties or their privies; (2) there is identity of issues; (3) the parties had an adequate opportunity to litigate the issues in the administrative proceeding; (4) the issues to be estopped were actually litigated and determined in the administrative proceeding; and (5) the findings on the issues to be estopped were necessary to the administrative decision.

Id. The district court properly applied the doctrine of collateral estoppel to preclude the relitigation of the issues of fact determined by the administrative judge of HUD's Board of Contract Appeals.

1. Identity of the Parties

The first part of the Pantex Towing test clearly has been met. The parties involved in the administrative proceeding before HUD's Board of Contract Appeals were Bailes, Bailes Realty Company and the government. The parties to this action are Bailes, Bailes Realty Company, the four housing projects, and the government. Bailes is a general partner of each of the partnership owners of the housing projects. Accordingly, the parties involved in this action are either the parties involved in the administrative action or the privies of Bailes, a party to the original action. Furthermore, the district court's order granting the government's motion for summary judgment and double damages provides that "the United States shall have and recover from George L. Bailes, Jr., the sum of ... $180,622 and costs." R1-9 (emphasis added). Thus, the parties affected by the administrative proceeding and the events in the district court are the same.

2. Identity of the Issues

The issue addressed by both the administrative judge and the district court was whether Bailes distributed project funds in violation of the regulatory agreements. The complaint filed by HUD with the Board of Contract Appeals charged Bailes with making disbursements from project funds in violation of the regulatory agreements. R1-4-Ex.E-2 at 5. The administrative judge recognized that this was an issue at the administrative hearing. R1-4-Ex.E-4 at 538 ("HUD charged as grounds for debarment, that George Bailes violated the Regulatory Agreement ... [by] making unallowable distribution[s] of project funds...."). The claim filed by the United States in the district court alleged that the regulatory agreements had been violated by the prohibited disbursement of project funds. Thus, the factual issue to be addressed by the district court was the same issue previously before the administrative judge.

3. Adequate Opportunity

Bailes had an adequate opportunity to litigate the relevant issue in the administrative hearing, i.e., whether he disbursed project funds in violation of the regulatory agreements. The proceedings before the administrative judge were quasi-judicial in nature and included an evidentiary hearing. Furthermore, Bailes stipulated that numerous disbursements of project funds were made to money market accounts. Thus, Bailes had an adequate opportunity to litigate the issue of whether he distributed project funds in violation of the regulatory agreements.

4. Actually Litigated

The issue of whether Bailes disbursed project funds in violation of the regulatory agreements actually was litigated and determined in the administrative hearing. The administrative judge stated that "[t]he most serious charge [against Bailes] involves the movement of project operating funds into money market accounts where they were commingled with non-project monies in violation of the Regulatory...