Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sonoma Apartment Associates v. United States

United States Court of Appeals, Federal Circuit

September 23, 2019

SONOMA APARTMENT ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, Plaintiff-Appellee
v.
UNITED STATES, Defendant-Appellant

          Appeal from the United States Court of Federal Claims in No. 1:13-cv-00940-MMS, Chief Judge Margaret M. Sweeney.

          Deborah S. Bull, Perry, Johnson, Anderson, Miller & Moskowitz LLP, Santa Rosa, CA, argued for plaintiff-appellee.

          Matthew Paul Roche, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by Joseph H. Hunt, Robert Edward Kirschman, Jr., Franklin E. White, Jr.

          Before Newman, Chen, and Hughes, Circuit Judges.

          HUGHES, CIRCUIT JUDGE.

         Sonoma Apartment Associates contracted with the Government to construct low-income housing in exchange for a $1, 261, 080 loan under Section 515 of the Housing Act of 1949. In 2010, Sonoma submitted a written request to prepay the balance of its loan. The Government denied the request, and Sonoma filed for breach of contract. The Court of Federal Claims awarded Sonoma expectancy damages of $4, 223, 328 and a tax gross-up award of $3, 171, 990. The Government appeals the tax gross-up award. Because the Court of Federal Claims clearly erred in using income from a single tax year to predict the future rates at which each partner would pay taxes, we vacate the tax gross-up award and remand for entry of judgment consistent with this opinion.

         I

         A.

         Section 515 of the Housing Act of 1949, 42 U.S.C. § 1485, authorizes the Department of Agriculture, Farmers Home Administration[1] to loan money to nonprofit entities to provide rental housing for elderly and low-and moderate-income individuals and families. See Fran-conia Assocs. v. United States, 536 U.S. 129, 134 (2002). To participate in the Section 515 program, borrowers must enter into a loan agreement with the Government specifying, among other things, the length of the loan and any rights to make prepayments. See id. at 134–35.

         Concerned about the number of Section 515 borrowers choosing to prepay their loans, Congress amended the Housing Act in 1979 and 1980 by imposing prepayment limitations. These amendments prohibited the Farmers Home Administration from accepting prepayments for 15 to 20 years from the date of the loan. See Housing and Community Development Amendments of 1979, Pub. L. No. 96-153, 93 Stat. 1101, 1134–35 (1979); Housing and Community Development Act of 1980, Pub. L. No. 96-399, 94 Stat. 1614, 1671–72 (1980); see also Franconia Assocs., 536 U.S. at 135. These amendments, however, did not adequately reduce prepayment rates. Congress therefore enacted the Emergency Low Income Housing Preservation Act of 1987 (ELIHPA), Pub. L. No. 100-242, 101 Stat. 1877, and the Housing and Community Development Act of 1992 (HCDA), Pub. L. No. 102-550, 106 Stat. 3672, to further limit the circumstances under which borrowers could prepay their loans. See Franconia Assocs., 536 U.S. at 136–37 & n.3.

         In Franconia Associates, the Supreme Court determined that the ELIHPA and HCDA anticipatorily repudiated existing Section 515 contracts because they applied retroactively. Id. at 148. This anticipatory repudiation ripens into breach when the Government denies a given borrower's request to prepay the balance of its loan. Id.

         B.

         Sonoma is a limited partnership formed by Richard Gullotta and Richard Parasol to manage housing properties. At the time of formation, each partner owned a 2.5% general partnership interest and a 47.5% limited partnership interest. Mr. Parasol later sold his 47.5% limited partnership interest to a married couple. In 2009, the surviving spouse sold that interest in equal shares to the living trusts for each of Richard Gullotta's three children for $40, 000.

         On September 4, 1984, Sonoma entered into a Section 515 loan agreement with the Farmers Home Administration. The Government agreed to loan Sonoma $1, 261, 080 to construct low-income apartment housing, and Sonoma agreed to pay back the loan in installments over a fifty-year period ending on October 27, 2035. As part of the agreement, Sonoma executed two promissory notes for the balance of the loan. The promissory notes provided that "[p]repayments of scheduled installments, or any portion thereof, may be made at any time at the option of Borrower providing the loan is in a current status." Sonoma secured the promissory notes with a deed of trust requiring it to use the building for low-income apartment housing for 20 years. The 20-year term ended on October 27, 2005.

         Sonoma submitted a written request to prepay the balance of its loan on November 5, 2010. The Government denied the request on January 3, 2011. Sonoma filed a complaint for breach of contract at the Court of Federal Claims on November 27, 2013.[2] Because the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.