Airport Road Associates, Ltd. v. United States

In the United States Court of Federal Claims
No. 13-152C
(Filed: April 14, 2015)
)
AIRPORT ROAD ASSOCIATES, )
LTD, et al., )
) Partial Motion to Dismiss; Statute of
Plaintiffs, ) Limitations; ELIHPA; Request to
) Prepay Mortgage; Affordable Housing;
v. ) Breach of Contract
)
THE UNITED STATES, )
)
Defendant. )
)
Jeff H. Eckland, Minneapolis, MN, for plaintiffs. Mark J. Blando and Vince
Reuter, Minneapolis, MN, of counsel.
Matthew Roche, Civil Division, United States Department of Justice, Washington,
DC, with whom were Joyce R. Branda, Acting Assistant Attorney General, Robert E.
Kirschman, Jr., Director, and Franklin E. White, Jr., Assistant Director. Leigha Gordillo,
United States Department of Agriculture, Office of General Counsel, Washington, DC, of
counsel.
OPINION ON MOTION TO DISMISS
FIRESTONE, Judge.
Pending before the court is the motion of the defendant, the United States, to
dismiss ten plaintiffs from the pending litigation for lack of subject matter jurisdiction.
The government argues that the court does not possess jurisdiction to entertain the claims
brought by ten of the twenty-three plaintiffs in this case, Bayou des Glaises, Ltd.;
Bloomfield Partnership II; Clifford E. Olsen – College Towne; Clifford E. Olsen –
1
Collins Square; 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; and Cypress Cove Association (collectively, “the partnership”)
on the grounds that these plaintiffs filed their breach of contract claims more than six
years after the claims accrued. 1 For the reasons stated below, binding precedent from
the Supreme Court and the Federal Circuit compels this court to find that the statute of
limitations has run for the above-named plaintiffs. Therefore, the government’s Partial
Motion to Dismiss is GRANTED.
I. BACKGROUND
A. The Housing Act and the Emergency Low Income Housing
Preservation Act
Plaintiffs are property owners who entered into loan agreements with the Farmers
Home Administration (“FmHA”) between 1979 and 1990, pursuant to sections 515 and
521 of the Housing Act of 1949, 42 U.S.C. §§ 1485, 1490a (“Housing Act”), for the
development of low and moderate income housing. Under the Housing Act, housing
owners are issued subsidized loans at favorable interest rates in exchange for an
agreement to rent units to qualified low-income, elderly, and disabled rural residents for
the duration of the loan. 42 U.S.C. § 1490. Pursuant to the Housing Act, the plaintiffs in
this case each entered into a fifty-year mortgage with the government. Pl.’s Opp. 2. As
part of the mortgage agreement, plaintiffs agreed to a twenty-year restrictive use
1
The government initially moved to dismiss the claims of an eleventh plaintiff, Delta Square.
However, in its supplemental brief, the government conceded that the statute of limitations has
not run as to that plaintiff. See Section II.D.
2
covenant, which required that they stay in the section 515 program for twenty years.
However, after the twenty-year period had elapsed, plaintiffs and other borrowers under
the Housing Act had a contractual right to prepay their loans and leave the program,
ending the borrower’s obligation to rent to qualified individuals. See Franconia
Association v. United States, 536 U.S. 129, 135 (2002).
The breach of contract at issue in this case arises from the enactment, in 1988, of
the Emergency Low Income Housing Preservation Act, 42 U.S.C. § 1472 (“ELIHPA”).
Concerned that the number of borrowers who were exercising their pre-payment option
was threatening the goals of the program, Congress restricted the prepayment of section
515 mortgages that were entered into before December 21, 1979. See Franconia, 536
U.S. at 136 (citing H.R.Rep. No. 100-122, p. 53; U.S. Code Cong. & Admin. News 1987,
pp. 3317, 3369). Under ELIHPA and its corresponding regulations, before the FmHA
can accept prepayment of a section 515 mortgage,
[FmHA] shall 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 for
not less than the 20-year period beginning on the date on which the
agreement is executed.
42 U.S.C. § 1472(c)(4)(A). ELIHPA provides that “the FmHA may include incentives in
such an agreement, including an increase in the rate of return on investment, reduction of
the interest rate on the loan, and an additional loan to the borrower.” Tamerlane, Ltd. v.
United States, 550 F.3d 1135, 1138 (Fed. Cir. 2008) (quoting Franconia, 536 U.S. at 136
(citing 42 U.S.C. § 1472(c)(4)(B)). If the borrower and the FmHA cannot reach an
agreement after a “reasonable period,” the borrower seeking prepayment must “offer to
3
sell the assisted housing and related facilities involved to any qualified nonprofit
organization or public agency at a fair market value.” 42 U.S.C. § 1472(c)(5)(A)(i).
“An offer of prepayment may be accepted if such an offer to buy the property is not made
within 180 days.” Tamerlane, 550 F.3d at 1138 (quoting 42 U.S.C. § 1472(c)(5)(A)(ii)).
The regulations implementing ELIHPA create a process for the FmHA’s determination of
prepayment requests, by which the FmHA “‘develops an incentive offer,’ making a
‘reasonable effort . . . to enter into an agreement with the borrower to maintain the
housing for low-income use that takes into consideration the economic loss the borrower
may suffer by foregoing [sic] prepayment.’” Franconia, 536 U.S. at 137 (quoting 7
C.F.R. § 1965.210). This “cumbersome” process takes several years and ends “far more
often than not” with the “prepayment request [being] rejected.” Franconia Associates v.
United States (“Franconia II”), 61 Fed. Cl. 718, 733 n. 21 (2004).
On June 10, 2002, the Supreme Court in Franconia Association v. United States
held that enactment of ELIHPA resulted in the repudiation of the bargains entered into
before its enactment. Franconia, 536 U.S. at 135. The court held that ELIHPA’s
enactment “qualified as a repudiation of the parties’ bargain, not a present breach of the
loan agreements.” Id. at 133. A plaintiff therefore has the option to treat ELIHPA as an
anticipatory repudiation, and may file suit before the time the government’s performance
(i.e. accepting the prepayment) is due under the contract. Id. at 143. However, the six-
year statute of limitations may also run from the date “when a borrower tenders
prepayment and the Government then dishonors its obligation to accept the tender and
release its control over use of the property that secured the loan.” Id. at 144. Therefore,
4
the breach and consequential commencement of the six-year statute of limitations “would
occur when a borrower attempted to prepay, for only at that time would the
Government’s responsive performance become due.” Id. at 143.
B. Factual Background
On April 2, 2002, Clifford E. Olsen, the common general partner to eleven
plaintiffs in this case, submitted a letter to Yvonne Emerson, the agency’s multi-family
housing regional director, requesting to prepay the loans for eleven of the twenty-three
properties at issue in this case. The letter stated, as follows:
We ask that you approve[] 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
nonprofits to acquire the rest of the developments. Our intent is to convert
these units into conventional housing. As we understand the nonprofit’s
motive, they, too, are seeking conventional housing. The total unit count for
all of the developments above is 462 units.
Def.’s Mot. App’x 1. According to his declaration, Mr. Olsen had been in conversation
with the Capital Area Legal Foundation (“Capital Legal”), an organization based in
Baton Rouge, Louisiana, regarding a possible sale of the eleven properties. Olsen Decl. ¶
5 (ECF No. 32-1). Mr. Olsen understood that if the sale went through, Capital Legal
intended to convert the buildings into conventional housing, which would require the
mortgages on the properties to be prepaid. Id. ¶ 7. Mr. Olsen stated that because “it
remained uncertain whether any of the sales would be consummated,” he “did not specify
any particular date by which the Partnership anticipated prepaying.” Id. ¶ 8.
On April 17, 2002, Ms. Emerson responded, forwarding the forms necessary under
the regulations for the pre-payment approval process under ELIHPA:
5
This will acknowledge your letter dated April 2, 2002, regarding your
request to pre-pay the following Rural Development loans.
....
Please find enclosed a copy of RD Instruction 1965-E, Exhibit C,
“Checklist for Requesting Prepayment” which must be completed for each
loan you are requesting to pre-pay. The completed Exhibit C must be
submitted along with the required items to the appropriate Rural
Development servicing office responsible for servicing each particular loan.
Def.’s Mot. App’x 2. However, the partnership did not submit a completed application
under ELIHPA in response to the agency’s letter at that time. Mr. Olsen explained that
he intended to complete the ELIHPA application forms only if “an agreement to sell was
reached on one or more of the Properties” and “the buyer confirmed that it desired to
remove the project from the Section 515 program and rent the units as conventional
housing.” Id. ¶ 6. Because the deal with Legal Capitol ultimately fell through, the
partnership did not engage in any further correspondence in response to the agency’s
April 17, 2002 letter. Id. ¶¶ 20-22.
Mr. Olsen “continued to monitor market conditions [and] local economies” and, in
early 2011, determined that a group of projects were “good candidates for converting to
market.” Id. ¶ 23. Consequently, Mr. Olsen decided “to pursue prepayment of those
properties so that they could be converted to conventional apartments.” Id.
On May 4, 2011, the partnership submitted a complete application under the ELIHPA
regulations for seven properties. See Pl.’s Opp. Ex. D. The government subsequently
offered an incentive package in the form of a loan on one of the properties, Jefferson
South, which Mr. Olsen accepted in January of 2013. Pl.’s Opp. Ex. G. According to
Mr. Olsen, the partnership also sent ELIHPA prepayment applications “on a handful of
6
other properties in the following months,” but was “informed that the agency had
changed its policies regarding incentives, and, in [Mr. Olsen’s] situation, no incentives
would be offered and no prepayments would be allowed.” Olsen Decl. ¶ 27.
On February 28, 2013, the plaintiffs filed this action seeking relief for alleged
breach of contract. The government has moved to dismiss the claims of the above-named
plaintiffs who had an unfettered right to prepay in 2002, on the grounds that their claims
began to accrue in April 2002 when the government failed to unconditionally accept their
prepayment request. The government argues that their claims, filed in 2013, are outside
the six-year statute of limitations established in 28 U.S.C. § 2501. Plaintiffs assert that
the correspondence between the parties in April 2002 did not constitute a formal
prepayment request and thus the statute of limitations did not begin to run in 2002. Oral
argument was held on April 1, 2015.
II. DISCUSSION
A. Standard of Review
In ruling on the government’s motion to dismiss, the court assumes that all
undisputed facts alleged in the complaint are true and will draw all reasonable inferences
in the plaintiff’s favor. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Henke v. United
States, 60 F.3d 795, 797 (Fed. Cir. 1995). Where the defendant challenges jurisdiction,
however, the plaintiff cannot merely rely upon allegations in the complaint, but must
instead bring forth relevant, competent proof to establish jurisdiction by a preponderance
of the evidence. McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936);
see also Taylor v. United States, 303 F.3d 1357, 1359 (Fed. Cir. 2002).
7
B. Tamerlane and Franconia Establish that Requiring a Borrower to
Comply with ELIHPA is a Breach of the Borrower’s Contract
It is not disputed that plaintiffs needed to file their complaint within six years of
the date that their claims first accrued. See 28 U.S.C. § 2501 (“Every claim of which the
United States Claims Court has jurisdiction shall be barred unless the petition thereon is
filed within six years after such claim first accrues.”). It is also not disputed that a claim
accrues when “all events have occurred to fix the Government’s alleged liability, entitling
the claimant to demand payment and sue here for his money.” Martinez v. United States,
333 F.3d 1295, 1303 (Fed. Cir. 2003) (citations omitted) (internal quotation marks
omitted). The dispute between the parties, therefore, centers on when the claim accrued.
The government argues, based on the Supreme Court’s decision in Franconia and
the United States Court of Appeals for the Federal Circuit’s decision in Tamerlane, that
the claims of 10 plaintiffs are barred by the six year statute of limitations because the
claims accrued when the government received Mr. Clifford E. Olsen’s letter in April of
2002 and failed to unconditionally accept the prepayment request even though those
plaintiffs had an unfettered right to prepay at the time under their contracts.
The plaintiffs counter that Mr. Olsen’s April 2, 2002 letter was not a request to
prepay under Franconia because the letter was not a “complete request” as defined under
ELIHPA’s implementing regulations. Plaintiffs also argue that the letter was not a
demand to prepay immediately, but instead was merely an exploratory step contingent on
a sale of the projects. In addition, plaintiffs argues that the government instructing the
plaintiffs to file prepayment requests under ELIHPA’s regulation was not a rejection
8
because the government left open the possibility that the plaintiff would be allowed to
prepay.
Because plaintiff’s arguments are contrary to binding precedent, the court finds in
favor of the government. Plaintiffs argue that the prepayment process—and thus the time
of breach—begins when, pursuant to ELIHPA’s implementing regulations, the owner of
a property submits a “complete prepayment request” that included an “anticipated
payment date” more than 180 days after the request is submitted. See 7 C.F.R. §
1965.206(c). Because plaintiff did not comply with ELIHPA’s requirements in
submitting their request, plaintiffs argue, there has been no “clear conditional offer[] of
payment” in this case. Pls.’ Supp. Mem. 5-6 (quoting Tamerlane, 550 F.3d at 1142).
However, as the government argues, this position is directly contrary to precedent from
the Federal Circuit.
In Tamerlane v. United States, the Federal Circuit clarified the Supreme Court’s
holding in Franconia and explained the circumstances under which a section 515 contract
is breached. The Tamerlane court noted that ELIHPA represented “Congress’ clear
repudiation of the unfettered right to prepay . . . .” 550 F.3d at 1143. As a result, the
court found that “[t]he Franconia decision requires no more formalism than the written
request to prepay followed by non-acceptance of the request by the government to trigger
the running of the statute of limitations.” 550 F.3d at 1143. In that case, the court found
that a section 515 borrower’s letters to FmHA, which stated that they were making a
“request to pay off the remaining mortgage balance” of two loans “constituted clear,
unconditional offers of prepayment sufficient to trigger a duty by the government to
9
accept the tender under the terms of the pre-1979 loans.” 550 F.3d at 1142-43. The
Circuit further held that FmHA’s response of offering the plaintiffs an incentive loan to
stay in the program was a breach of the plaintiffs’ agreement. Id. However, the court
was also careful to note that the incentive process was not the only way in which the
government could breach its agreement to accept prepayment. See id. (“Although other
conduct could constitute breach by the government, the Court of Federal Claims
correctly ruled that at least by . . . the dates that [plaintiffs] entered into ELIHPA loans,
breach triggering rejections had occurred. (emphasis added)).
Tamerlane and Franconia both found that requiring borrowers to comply with
ELIHPA’s regulatory scheme was a breach of a section 515 borrower’s unfettered right
to prepay under the contract. In that light, plaintiffs’ argument that they must have first
complied with ELIHPA’s requirements in order for there to have been a breach is
nonsensical because requiring plaintiffs to comply with ELIHPA in the first place is the
breach. Because of ELIHPA’s requirements, plaintiffs and similarly-situated borrowers
were unable to command market prices for their projects because the borrowers could not
know if they would be able to leave the program. Indeed, plaintiffs’ own complaint
states the damages from the government’s action in terms of lost opportunity to sell or
make other use of the property. See Comp. ¶ 68 (listing, among other damages, the “lost
opportunity costs associated with investment and business opportunities each plaintiff has
been foreclosed from pursuing by virtue of its inability to exercise its contractual right to
terminate its contract at any time as its option.”)
10
Therefore, the court must reject plaintiffs’ argument that there could have been no
breach because plaintiffs’ did not submit a “complete request” pursuant to ELIHPA’s
implementing regulations.2 The court thus now turns to the question of whether
plaintiffs’ April 2, 2002 letter was an attempt to prepay as defined in Tamerlane, and if
so, whether the government’s April 12, 2002 response was a non-acceptance of that
request triggering a breach and starting the running of the six-year statute of limitations.
C. The Statute of Limitations Bars Plaintiffs’ Claims
To show that the statute of limitations has expired on plaintiffs’ claims, the
government must establish 1) the plaintiffs attempted to exercise their unfettered right to
prepay their mortgages, and 2) the attempt was met with non-acceptance. Tamerlane,
550 F.3d at 1143. As explained below, the government has shown both elements.
1. Mr. Olsen’s April 2, 2002 letter was an attempt to prepay under
Tamerlane
In his April 2, 2002 letter to the agency, Mr. Olsen stated: “We ask that you
approve[] our request to pay off the mortgage(s) on the above-captioned developments . .
. . Our intent is to convert these units into conventional housing.” Def.’s Mot. App’x 1.
The government argues that the correspondence between the plaintiffs and the
government is virtually identical to the correspondence between the parties in Tamerlane,
which the Federal Circuit found had triggered a breach. Relying principally upon
2
The plaintiffs’ argument that they must first comply with ELIHPA before triggering the breach
is very similar to the rejected defense the government offered in Franconia II on remand from
the Supreme Court. Franconia II, 61 Fed. Cl. at 733 n. 21 (rejecting the government’s argument
that ELIHPA, in the government’s estimation, “merely elongate[ed] somewhat the process for
prepaying a loan” and was therefore not a breach).
11
Parkwood, 97 Fed. Cl. 809, 817-18 (2011), Ramona Investment Group v. United States,
115 Fed. Cl. 704 (2014), and Kasarsky v. Merit Systems Protection Board, 296 F.3d
1331, 1336 (Fed. Cir. 2002), plaintiffs argue that Mr. Olsen’s prepayment request cannot
trigger a breach, because it did not specify a prepayment date. Pl. Opp. at 11-13.
Plaintiffs further argue that Mr. Olsen was not seeking to immediately prepay the
mortgages at the time he sent his April 2, 2002 letter, but was merely exploring a
possibility contingent on a potential sale that was never consummated. Both of the
plaintiffs’ arguments lack merit.
The Federal Circuit made clear in Tamerlane that “[t]he Franconia decision
requires no more formalism than the written request to prepay followed by non-
acceptance of the request by the government to trigger the running of the statute of
limitations.” 550 F.3d at 1143. None of the cases plaintiffs cite stand for the proposition
that a prepayment request must include an express prepayment date in order for a breach
to occur. In Tamerlane, the Federal Circuit held that separate letters from two borrowers
stating that “[t]his letter will serve as a request to pay off the remaining mortgage balance
for [the respective property]” constituted valid prepayment requests under Franconia.
Tamerlane, 550 F.3d at 1142. Although the letters in Tamerlane did not specify an
anticipated prepayment date, the circuit explained that the letters “were clear,
unconditional offers of prepayment sufficient to trigger a duty by the government to
accept the tender under the terms of the pre-1979 loans.” Id. at 1143.
Plaintiffs’ contention that prepayment requests must specify a prepayment date is,
therefore, erroneous, and the cases plaintiffs rely upon do not change this result. It is true
12
that the courts in Parkwood and Ramona both found that breaches occurred on the dates
specified by the plaintiffs as their anticipated prepayment dates, see Ramona, 115 Fed.
Cl. at 708; Parkwood, 97 Fed. Cl. at 817-18. However, neither of these cases held that
including a date for prepayment was required to trigger a breach. Rather, it just so
happened that the plaintiffs in those cases chose to submit formal prepayment
applications that conformed to ELIHPA, which requires listing an anticipated prepayment
date in order for the request to be deemed complete. See 7 C.F.R. § 1965.205(c); see also
Pls.’ Opp. 4. As discussed above, however, Tamerlane does not require a borrower to
comply with ELIHPA as a prerequisite for the government’s breach, nor did the plaintiffs
in Tamerlane include a date for prepayment in the letters the court found constituted a
request to prepay.
Because of the holding in Tamerlane, plaintiffs’ argument that Mr. Olsen did not
intend to make a prepayment request but was simply exploring the possibility of
prepayment is also misplaced. Mr. Olsen’s subjective intentions or beliefs are irrelevant.
“As with general contract principles, the subjective intent of the parties is immaterial to
whether a contract has been breached.” Tamerlane, 550 F.3d at 1144 n.15; accord
Parkwood, 97 Fed. Cl. at 817 (“Consistent with the objective theory of contract
enforcement, the undisclosed subjective intent of the parties thus place no role in this
analysis, as Tamerlane definitively holds.”). In Tamerlane and Parkland, the plaintiffs
also claimed that when they informed the agency of their desire to prepay, they only
intended to facilitate the incentive process under ELIHPA. In each case, the court found
the subjective intent of the parties irrelevant. The Tamerlane court rejected plaintiffs’
13
argument that “the prepayment letters were just part of a mechanical process to get
incentives, and were never intended to declare the government in breach of the
underlying loan agreements” because the argument “appears to rely on the subjective
intent of the parties with respect to whether there was a ‘tender.’” Tamerlane, 550 F.3d at
1144, 1144 n.15. Likewise the Parkwood court, in applying Tamerlane, “flatly
reject[ed]” plaintiff’s claim that the prepayment request “did not trigger the statute of
limitations because they were intended only to facilitate the receipt of equity loans.”
Parkwood, 97 Fed. Cl. at 816.
Nor does Franconia require a section 515 borrower to be willing and able to
tender payment at the time the request. “While actually tendering prepayment is of
course one method of attempting to prepay, nothing in Franconia identifies it as the only
acceptable method.” City Line Joint Venture v. United States, 82 Fed. Cl. 312, 315
(2008). Merely “filing a notice of its intent to prepay,” id., is sufficient to find a
prepayment attempt under Franconia and Tamerlane. This is because, as discussed
above, the damages flowing from the government’s breach include a loss of ability to put
a project on the market because under ELIHPA, the project will most likely remain
encumbered by section 515 restrictions. See Franconia II, 61 Fed. Cl. at 733 n. 21
(noting that the ELIHPA process is a “cumbersome” process involving many tasks and
subtasks, typically lasting several years, ending “far more often than not” with the
“prepayment request [being] rejected”).3
3
Plaintiffs’ request for discovery on this issue must be rejected. There is nothing the plaintiffs
could uncover that would change the fact that the April 2, 2002 letter was, by its own terms, a
14
For all of these reasons, the court funds that plaintiffs’ April 2, 2002 letter was an
attempt to prepay the loans under Tamerlane and triggered the government’s obligation
to unconditionally accept the offer.
2. The agency’s April 17, 2002 letter was a non-acceptance of
plaintiffs’ attempt to prepay
The court also rejects plaintiffs’ contention that there was no breach because the
government failed to expressly decline the prepayment request, but instead referred
plaintiffs to the ELIHPA process. Pls.’ Opp. 9. Under general contract principles, a
breach of contract occurs when a party to a contract fails to perform a contractual duty.
Franconia, 536 U.S. at 142-43; Kasarsky, 296 F.3d at 1336; Restatement (Second) of
Contracts § 235(2) (1981) (“When performance of a duty under a contract is due any
non-performance is a breach.” (emphasis added)). Here, the government breached the
contract by not unconditionally accepting the prepayment request. As discussed above,
the Federal Circuit explained in Tamerlane that all that is required for a breach to occur is
a “written request to prepay followed by non-acceptance of the request by the
government to trigger the running of the statute of limitations.” 550 F.3d at 1143(emphasis added). Thus, the government’s response directing plaintiffs to complete
ELIHPA’s prepayment application and to submit the documents called for in RD
request to prepay. In Mr. Olsen’s letter, he wrote that the plaintiffs “ask that you approved [sic]
our request to pay off the mortgage(s) on the above-captioned developments.” Def.’s Mot.
App’x 1. This statement is clear and unambiguous. The Federal Circuit has definitively stated
that “[o]utside evidence may not be brought in to create an ambiguity where the language is
clear.” Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1379 (Fed. Cir. 2004) (quoting
City of Tacoma v. United States, 31 F.3d 1130, 1134 (Fed. Cir. 1994). Therefore, the court finds
that no further discovery is needed on this issue.
15
Instruction 1965-E, see Def.’s Mot. App’x 2 (“The completed Exhibit C must be
submitted along with all required items . . . .” (emphasis added)), amounted to a breach.
As the Federal Circuit also explained in Tamerlane, because ELIHPA was already a
repudiation of a prepayment contract, the government did not have to do much for the
repudiation to ripen into a present breach. See Tamerlane, 550 F.3d at 1143 (“The degree
of formalism in communications for which Appellants advocate is unnecessary given
Congress’ clear repudiation of the unfettered right to prepay in ELIHPA.”); City Line, 82
Fed. Cl. at 316 (holding Government’s failure to respond to a notice of intent to prepay
was breach).
In light of the Federal Circuit’s guidance, plaintiffs’ argument that no breach
occurred because the government never offered an incentive package as required by
ELIHPA cannot prevail. The Tamerlane court made it clear that any “non-acceptance of
the request”—not only explicit rejection—was sufficient to qualify as a breach and
trigger the statute of limitations. 550 F.3d at 1143. Tamerlane also expressly stated that
the government’s non-acceptance could take multiple forms. See id. (“Although other
conduct could constitute breach by the government, the Court of Federal Claims correctly
ruled that at least by . . . the dates that [plaintiffs] entered into ELIHPA incetntive loans,
breach-triggering rejections had occurred.”)
Plaintiffs’ reliance on Grass Valley Terrace v. United States, 69 Fed. Cl. 341, 354
(2005), is also misplaced. Plaintiffs cite Grass Valley for the proposition that a letter
from the government acknowledging that plaintiff “will be able to prepay but that it must
first complete certain ‘items,’ which are more in the nature of procedural steps,” id., was
16
not a rejection triggering the start of the statute of limitations. However, as the
government notes, Grass Valley was decided before the Federal Circuit set forth the
standard for ELIHPA cases in Tamerlane, and in any case, is not binding precedent on
this court, see Casa de Cambio Comdiv S.A., de C.V. v. United States, 291 F.3d 1356,
1364 n.1 (Fed. Cir. 2002) (noting that prior Court of Federal Claims decisions are not
binding on other cases in the Court of Federal Claims).4
In addition, the facts of Grass Valley are distinguishable from this case. In Grass
Valley, the agency replied to the plaintiff’s request for payment with more information,
and stated the agency was considering the request and would issue a decision within a
few months. Grass Valley Terrace v. United States, Def.’s Mot. to Dismiss App’x 5, 98-
cv-00726, ECF No. 157 (March 11, 2005). The court found that this was not a
repudiation of the contract. In this case, on the other hand, the government repudiated the
plaintiff’s right to unconditionally accept prepayment when it initiated the ELIHPA
approval process. Plaintiffs’ suggestion that there was not a repudiation because the
government “left open the possibility” that an eventual prepayment request might be
4
Plaintiffs’ reliance on Kasarsky is equally misplaced. Pls.’ Opp. 12. In Kasarsky, the Federal
Circuit held that the Merit Systems Protection Board’s failure to respond to an inquiry into the
status of a payment of attorney fees following a settlement agreement did not constitute a breach
of the agreement. Kasarsky, 296 F.3d at 1336. The circuit explained that no breach occurred as a
result of the board’s silence in-part because the plaintiff’s inquiry did not contain a deadline for
payment of the fees and, as noted by the court in Parkwood, 97 Fed. Cl. at 818, because there
was “no evidence of record to suggest that the agency did not fully intend to comply with the
terms of the agreement,” Kasarsky, 296 F.3d at 1336. In this case, however, plaintiffs’
prepayment request was not met with silence. Rather, the government responded to Mr. Olsen’s
April 2, 2002 letter by acknowledging that the letter was a prepayment request and providing
information regarding ELIHPA’s prepayment process.
17
accepted if plaintiffs first complied with ELIHPA is without merit. Once again,
Tamerlane makes clear that the possibility of prepayment based on compliance with
ELIHPA is still a repudiation.
Accordingly, the 10 plaintiffs’ claims accrued on April 17, 2002, when the
government in its response failed to honor the prepayment request. See Tamerlane, 550
F.3d at 1143; Parkwood, 97 Fed. Cl. at 817-18 (holding an agency’s “failure to respond
to a prepayment request” could support a claim accrual); City Line, 82 Fed. Cl. at 315-16
(holding that a claim accrued on the date that the borrower submitted a formal request to
prepay).
D. Bloomfield had an unfettered right to prepay its mortgage when the
government rejected its prepayment request on April 17, 2002
At the time that Mr. Olsen sent his letter to the government, the restrictive
covenant requiring plaintiffs to remain in the program had expired for nine of the ten
plaintiffs the government now moves to dismiss from this case. Pls.’ Supp. Mem. 2. The
government initially sought to dismiss all eleven plaintiffs Mr. Olsen represented in his
April 2, 2002 letter. However, in its supplemental brief, the government acknowledged
that one plaintiff, Delta Square, had a restrictive covenant which did not expire until July
8, 2002, after the government sent the April 12, 2092 letter rejecting plaintiffs’ attempt to
prepay. Because the government agreed that Delta Square did not have an “unfettered”
right to a prepayment as of April 2002, the government agreed that the agency did not
breach its loan agreement with Delta Square at that time. Consequently, the government
withdrew its motion as to Delta Square.
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Another plaintiff, Bloomfield Partnership, had a restrictive covenant that expired
on April 12, 2002—ten days after Mr. Olsen sent his letter but five days before the
agency responded. The government argues that the government breached the agreement
to accept prepayment when it responded on April 17, 2002, and because Bloomfield
Partnership had an unfettered right to prepay by the time the government refused to
accept payment. Therefore, the government argues, the statute of limitations began to run
for Bloomfield and the other plaintiffs as of that date. The plaintiffs argue that
Bloomfield Partnership should not be dismissed from this case because, even assuming
that Mr. Olson’s letter was a prepayment request, because Bloomfield did not have an
unfettered right to prepay its mortgage at the time the letter was sent to the agency.
The court agrees with the government and finds that Bloomfield Partnership is in
the same position as the other nine plaintiffs which were denied the right to prepay by the
government after the 20 year restriction had expired. It is the interference with a
borrower’s unfettered right to prepay that breaches the contract. See Tamerlane, 550
F.3d at 1143. Here, a breach occurred when the government failed to unconditionally
accept the plaintiffs’ prepayment request. See id. at 1142. Because Bloomfield
Properties had an unfettered right to prepay at the time of the government’s rejection, the
government breached the contract and statute of limitation began to run as of that date.
III. CONCLUSION
For the reasons stated above, the court agrees that the claims of the following
plaintiffs are untimely: Bayou des Glaises, Ltd.; Bloomfield Partnership II; Clifford E.
Olsen – College Towne; Clifford E. Olsen – Collins Square; Clifford E. Olsen –
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Hammond Towne; Clifford E. Olsen – Jefferson South; Clifford E. Olsen – Old Man
River; Clifford E. Olsen – Walker Partnership; Clifford E. Olsen 1977-B; and Cypress
Cove Association and must be dismissed for lack of subject-matter jurisdiction. The
government’s motion with regard to these plaintiffs is GRANTED.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Judge
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