Members of the Court, this case is about whether HUD has a right to ignore its own regulations and the clear will of Congress, while imposing on a property owner the obligation for more than 50 years to rent almost exclusively to very low and low income tenants and only charge them a small portion of the market rent, while refusing to pay any sort of section 8 rent subsidies to make up the difference in that rent so that the property can remain viable. In 1968, a prior owner of this property signed on with HUD's below-market interest rate program called Beemer for a 40-year loan. In 1995, 27 years later, a successor owner signed on with HUD's low-income housing preservation program or Lyfra and collected more than $2 million in grants while obligating the property to continue to remain almost exclusively for very low and low income tenants for at least another 50 years. That's the use agreement and the plan of action. Yes, ma'am. And in those, my, I understand your argument to be in the plan of action, HUD committed to paying incentives of $500,000 a year, is that right? HUD committed, you've got to read, assuming that you disagreed with the Court of Claims and hold that the plan of action is part of the contract. I thought the Court of Claims treated the plan of action as part of the contract. I say, actually, said that given that this is a motion to dismiss, we have to construe everything most favorable to the property owner. And I understood them to accept that the plan of action was part of the contract for their analysis. Am I wrong? I think that gave us the benefit of the doubt without saying it was part of the contract. The point that I'm trying to make your honor is that HUD has first argued the plan of action is not part of the contract. And second, they said, well, but we were only obligated to furnish section 8 subsidy for five years. And they relied exclusively on a little table in the plan of action. If you read that table in isolation, which is evidently what the Court of Federal claims did, then HUD's right, and we lose. But the fact.
.. What about, well, what language in the plan of action itself would indicate that that five-year period was meant to be a renewing period as you argue? Your honor, I can't quote you, page chapter and verse right now. There have been three briefs submitted in this matter, two by us, one by the government. I have cited in the briefs page chapter and verse of the various provisions in the plan of action, which make this clear. I have also cited a number of HUD regulations, including in the lifra regulations. Councillor, but have you provided any evidence that... Have you pointed to any evidence that HUD had an ongoing obligation to continue the subsidies? Yes, sir. The plan of action, assuming you find that it's part of the contract, and HUD's own regulations. So, looking at which you just pointed out yourself, when you look at the plan of action at a little table, it does say term five years. Is there anything other in the plan of action that points to a non-going obligation? If you look at that little table, Your Honor, and we tried to point this out to the Court of Federal claims, but she wasn't impressed, I guess, with our argument. That table is strictly illustrated. It doesn't even have a contract number. Any fair reading of that table in isolation makes it clear that it's illustrated, Your Honor
. The plan of action in a number of other locations, and I'm sorry, I can't quote them again now, I've quoted them in the briefs, makes that clear. And also makes clear the fact that this was an ongoing obligation. It only makes common sense, Judge. You know, if you own a house, and you've got a fixed income, and your income is only enough to eat and take care of the basics of life, maybe make your house payment. And that's all, that's all the income you have. Then what are you going to do when the roof's got to be replaced? What are you going to do when the sewer has to be dug up? What are you going to do when the wiring wears out and you've got to replace it or the plumbing? We're talking about a property right now. Judge, I was 21 years old when this property was built. I'm an old man now, I've been three years into Medicare. And HUD still wants to obligate this property without any subsidies to still keep the rent artificially low until the year 2045. I'll be 98 then if I'm still on this side of the dirt. It's just not going to work. The property is old, it's worn out. And one of the things that Judge Firestone suggested and HUD seized on, which I considered to be a rabbit trail, is the fact that, well, why don't you jump through Hoots and prove that the property is wearing out? Just common sense. But we're talking about a contractual agreement. And you want to hold HUD's fee to the fire based on the contract
. The contract as interpreted by HUD's own regulations. Not our rules. That's where I'm asking, where can you point to us that HUD had an ongoing obligation to continue the summer? I'm asking if you're asking me to, I didn't memorize my briefs. No, but that's central to your case. Absolutely. And in 15 minutes, I just can't go back over the briefs. I know you all have read the briefs. And I took great pains in the briefs to not only cite those provisions, but attach all of them. You want to be out from under the youth agreement, right? That's what your client really wants. More than anything. I mean, you'd like the $2.5 million or the $500,000 year forever, if possible. But it seems from the letter from the president, the current president of your company, that they want out of the youth agreement. One of the other, you're on, everybody. HUD's own regulations today
. Here's my question. Why are you still bound by the youth agreement? If the government failed to live up to its end of the bargain, you may not be able to get damages for breach of contract because of the statute of limitation. If we don't concede the contract the way you want. But why are you nonetheless bound by the contract in light of their noncompliance? Why isn't the contract void? What we argued it was, Your Honor, HUD sent us a letter. You argued it was, I guess, I can't give you that relief. I can't issue a declaratory judgment on the nature of your contract. That's not something I'm able to do jurisdictionally. But so what would happen if you just converted the property? Just boot everybody out and turn it in condos. What happened then? I, you know, we've talked about that, Your Honor, and we've seriously considered the possibility. I mean, it's I say you're asking for permission, but you know, the adage is easier to ask for forgiveness than permission. Right? What is what is it if you believe that the contract is void because they breached it by failing to proper their end of the consideration bargain? It might be too late for you to go back and recoup that from them, but why doesn't it at least give you an out of the use agreement? I couldn't agree more with something you just said. I've always lived by the motto that it's better to beg forgiveness than ask for permission. However, I have a feeling that HUD would not be inclined to forgive. I fear that the full force and weight of the federal government would descend on this little property. And I don't know
. And do what? Is there the ability for them to bring a lawsuit against you in district court for breach of contract on your end? Is that what they would do? I mean, I don't understand what's stopping you. I mean, they, what, what could they possibly do to you? And if they did bring that case in district court, couldn't you just respond and say that that use agreement was breached a million years ago, it ceased to be valid and it's void. And I don't have to comply with it. I think that probably the worst they could do would be to take the property away and perhaps punish the current leadership of the nonprofit leadership that was not involved in this original transaction. I think that's a good question, your honor. We, like I said, we've thought about that, but we're frankly down in that. We don't ask the government what they'll do if you do that. So why didn't you save the rest of your time for rebuttal? Yeah. And let's hear from the government. Thank you, Jerry. Can you tell me how to say your last name? Sores has found your heart. Okay, sores. Let me proceed. Thank you. So please, the court, the trial court's decision, the judgment should be affirmed in all aspects
. Beginning with the issue of whether Frederick's birds breach of contract action is time barred, the government's position in this litigation has been that the claim for breach of contract accrued in 1995, December 1995 to be exact. When Frederick's bird and a HUD executed the libra use agreement at that time, in addition to executing the libra use agreement, they also executed an incentive, which is reflected in the record as a capital grant agreement. Alone, $2 million loan. So, $2 million grant. Yes, your honor. It was a loan, not a grant, right? Ninety percent interest, I think. Well, it was a grant. In originally, there was a provision in the June 1995 letter for a loan, but subsequently before closing on the transfer of the property, it became a grant. It was a $2 million grant. It was not a loan. Then it had to pay it back. No, your honor. And just to clarify, that $2 million grant made it possible for Frederick's bird to purchase this property. So, at the time of closing, when the transfer from the previous owner by on happened and Frederick's bird purchased the property, we have two things happening. We have the use agreement being executed and the one incentive that was being provided to buy the government to Frederick's bird, the capital grant agreement being executed at the closing table
. So, here's the problem. If the use agreement is a standalone contract, and if the plan of action is not part of it, then there's nothing at all in the use agreement that explains any obligation or consideration on the part of the government that exchange for what is a quite draconian life of property restriction, which would go till what? So, if the use agreement is a standalone contract, it articulates no consideration by the government because it doesn't mention the grant, doesn't mention a loan, and it doesn't mention the incentives at all. It does, Your Honor. We're done with that. I went to your honor to record page, the use agreement on J8, and the J8 on that page. It actually indicates the incentive being provided, where in the title of the agreement, the title of the agreement, use the agreement in a amendment of existing regulatory agreement from mutual projects, insured or assisted with the capital grant. It's in the title of the agreement. The Pomona Act of 1990 with a capital grant and sale of property. Okay, that is the title of the agreement, but do you agree that there is no provision within the agreement for a capital grant with the amount of such grants? Well, it references the capital grant. Under the liqueur program, the incentive is to my question. I agree that there is no provision in this very detailed use agreement that actually articulates any terms of a capital grant. There is only a reference. There is only a reference in the title to a capital grant. Yes. And, Your Honor, just to be clear, these agreements are governed by a statutory regulatory scheme
. The liqueur agreement, of course, is governed by Section 4101 onwards under titles, well, which spells out the liqueur program and the regulations do as well. They reflect the requirements that are in the use agreement. They also provide that incentive, which is part of the program, the liqueur program. The program was intended to extend affordability restrictions to basically make it possible. I would prefer to read the plan of action as requiring the government to make a payment each year for five years of $500,000. I were to interpret the plan of action as part of this contract. Yes. I understand your argument that I would then have to affirm the fact that this case or claim for breach of contract for money damages is time-barred. I understand that argument. But if I nonetheless interpret the contract that way, and if the government failed to comply with that, it's portion of consideration. It may have had additional consideration in the form of this capital grant. But if it failed to comply with a $500,000 per year conveyance, what happens then? Isn't that contract void for noncompliance, even if they can't come after you for money damages for breach, aren't they then free to not be balanced by the contract? No, Your Honor, and the reason is assuming again that the plan of action is a contract which we dispute, given those statutory regulatory scheme, but assuming it is a contract, that that cost of action for breach of contract was time-barred. And that's because..
. No, not a cost of action for breach of contract. I don't think they have to sue you for breach of contract. I think they can just go build their condos. Well, Your Honor, I mean, because if they do that, you would have to sue them for breach of contract, and they would just come back and say what contract? The contract was void for your noncompliance. But Your Honor, the contract was non-void for noncompliance under the li- under the li- under the li- under the li- under the li- under the statutory scheme, Congress determined that in order for the use agreement to work, for use agreement to apply, to apply and extend affordability restrictions on their property, the purchaser of Fredrick'sburg got something in return. There was consideration. That was a $2 million grant. They were using it in all the consideration they were supposed to get, and at least the letter by the current president indicates her complete lack of awareness of even the existence of the use agreement, and her claim, I don't know if it's true or not, at the stage of the proceedings, but her claim that quite frankly for the entire life of her tenure at the company, she's the company's been in noncompliance, and nobody at HUD or the government has done or said anything that she said we have not been complying with this use agreement these higher time she's been at the company, which is a long time. So why don't we have HUD, why don't we have noncompliance by HUD in the form of the $500,000 a year, and then why don't we also have noncompliance by them and mutual acquiescence in the non applicability of the use agreement by virtue of both sides. So why don't we have a noncompliance by the current president, not complying? Well, the reason is this, the government did comply your honor, the government wrote a $2 million grant in the court. If I believe the plan of action actually required you to give $500,000 a year for each of five years, you did not, it's undisputed you did not make this case. Well, that again, your honor, the trial court assumed for purposes of this argument, for purposes of our 12-B1 motion that the plan of action is a contract, but she rightly held nothing in the record indicates the government was required to provide section 8 assistance beyond the five year term as your honor reflected in the plan of action only reflects five years. It doesn't reflect any amount of time beyond that, and by regulation, section 8 can only be provided for a period of up to five years, and I'll point your honor to that particular regulation. I think Judge Moore's question is kind of built on just, let's create a hypothetical. I see, all right
. And the hypothetical is that HUD was bound and obligated to pay those section 8 subsidies for the first five years of the use agreement. And you didn't do that, and so therefore it's really HUD that initially breached this contract, breached this use agreement. And the next question is, is Fredericksburg under any obligation to continue its side of the bargain given that HUD has already from the get-go been breached? I understand, your honor. And my response to the first question is that that cause of action is timebarred because they didn't bring their action then they waited 15 years. This is not about them bringing in action. This is about them being able to legitimately excuse themselves from the contract any more given we're assuming for the moment HUD's very clear breach from the very beginning of the use agreement. Again, you are there was no clear breach they provided a to the right. This is more in the hypothetical. Of course, of course, okay, getting back to the first point of the hypothetical. I, I, yes, if there was a commitment by HUD to provide section 8, there would have been, well, actually, I must step back. Under the statute section 4114 title 12, it provides if the government failed to provide an incentive that was is required. Within a 15 month period for a federal expert has the right to walk away. So the statute, Congress and vision scenarios where the government could not fund through appropriations and incentives. So they built in that safety or that approach where FedExburg could have walked away. It could have gone back to HUD and say, wait a minute. It's been 15 months. I have not received one incentive from the United States government for retaining these restrictions on this property for the remaining useful life. I want out and they could have under section 4114 a title 12 sought that from HUD. So that would have been your honor under the statutory scheme. That is the approach. Congress may permit for that. I would have said you have done that within a certain time period. I'm sorry. Did they was there a limited time period? It was they could go to that. It was a 15 month period. It's been 15 months from the time of the approval of the plan of action which, of course, under the, based on the record, happened in June 1995. A conditional approval. Is section 4114 is the copy of it anywhere from the briefs or the record? We cited in our papers, in our opening brief. It's a statute. Yeah, I was just wondering
. It's been 15 months. I have not received one incentive from the United States government for retaining these restrictions on this property for the remaining useful life. I want out and they could have under section 4114 a title 12 sought that from HUD. So that would have been your honor under the statutory scheme. That is the approach. Congress may permit for that. I would have said you have done that within a certain time period. I'm sorry. Did they was there a limited time period? It was they could go to that. It was a 15 month period. It's been 15 months from the time of the approval of the plan of action which, of course, under the, based on the record, happened in June 1995. A conditional approval. Is section 4114 is the copy of it anywhere from the briefs or the record? We cited in our papers, in our opening brief. It's a statute. Yeah, I was just wondering. You know, we have of course, we've always discussed this in our papers as a provision that Congress kept in as a safety valve, essentially. Because of course, every incentive can only be provided to the extent there are appropriations. The government can't give what it doesn't have. There must be funds appropriated for incentives. In this case, conditionally, HUD approves the plan of action in June 1995 and let the owner know we are providing these incentives. But we don't have appropriations. This is a conditional approval. Thereafter, June 1995, the owner was apprised of the facts that appropriations were still not available. Again, it as the government emphasized conditional approval, we don't have appropriations. A subsequent letter went out in November 1995 saying the same thing. The Federal Reserve in December 1995 did receive an incentive. It went to closing with the $2 million half of grant, which was actually one of a better option than the initial loan that it was being provided under the conditional approval in June 1995. So they had something at closing. They could have walked away. They had the option of walking away and not signing on the dotted line for the use agreement or the $2 million grant
. You know, we have of course, we've always discussed this in our papers as a provision that Congress kept in as a safety valve, essentially. Because of course, every incentive can only be provided to the extent there are appropriations. The government can't give what it doesn't have. There must be funds appropriated for incentives. In this case, conditionally, HUD approves the plan of action in June 1995 and let the owner know we are providing these incentives. But we don't have appropriations. This is a conditional approval. Thereafter, June 1995, the owner was apprised of the facts that appropriations were still not available. Again, it as the government emphasized conditional approval, we don't have appropriations. A subsequent letter went out in November 1995 saying the same thing. The Federal Reserve in December 1995 did receive an incentive. It went to closing with the $2 million half of grant, which was actually one of a better option than the initial loan that it was being provided under the conditional approval in June 1995. So they had something at closing. They could have walked away. They had the option of walking away and not signing on the dotted line for the use agreement or the $2 million grant. They entered this deal. At that point, again, back to our cruel theory of appropriations of the time bar, in 1995, acts the closing table. They knew they were not getting section 8. There was no section 8 contract, which of course is a requirement. You have to have a section 8 contract under the governing statute, under the governing law. You're thinking about the anticipatory breach part of this case. Let's say we find that there's letter to you, indicate that they believe these apartments are financially non-liable. Then isn't it your obligation at that point to work with the, with Fredericksburg, to either provide them some kind of compensation or assistance or, or, or, or the breach of the contract? Yes, Your Honor. And I'd like to point your honor to the particular position of the use agreement that would have, and this is what we call the administrative remedy. It's on page 882 of the use agreement. And so I'm just trying to understand how does the process work? Yes, Your Honor. Let's say the letter indicates we can't keep going with these apartments under these restrictions. Right. And we need to be, they need to be loosened up. Yeah
. They entered this deal. At that point, again, back to our cruel theory of appropriations of the time bar, in 1995, acts the closing table. They knew they were not getting section 8. There was no section 8 contract, which of course is a requirement. You have to have a section 8 contract under the governing statute, under the governing law. You're thinking about the anticipatory breach part of this case. Let's say we find that there's letter to you, indicate that they believe these apartments are financially non-liable. Then isn't it your obligation at that point to work with the, with Fredericksburg, to either provide them some kind of compensation or assistance or, or, or, or the breach of the contract? Yes, Your Honor. And I'd like to point your honor to the particular position of the use agreement that would have, and this is what we call the administrative remedy. It's on page 882 of the use agreement. And so I'm just trying to understand how does the process work? Yes, Your Honor. Let's say the letter indicates we can't keep going with these apartments under these restrictions. Right. And we need to be, they need to be loosened up. Yeah. Then what, what, how does it start, how does the ball start to roll from there? The HUD has to do something at that point. Yes, Your Honor. I mean, if, if HUD had received this information under the use agreement, and that's a, a, page, a, 82 of their administrative records, they would have been required to, they would have basically asked for financials. They would have been required to do their due diligence and look at HUD's position that it can't, that it was financially non-viable. Because remember, the use agreement, you think it would have to look at who's who. Well, HUD would have to consider Frederick's. HUD would have to evaluate Frederick's. Yes, of course. HUD would have to, I'm sorry, your Honor, HUD would have to evaluate Frederick's first position that the project was, it was non-viable. And that involves an exchange of information, including financials from Frederick'sburg, so that it can make its presented picture of financial non-viability. It has to be evidence presented to HUD so that it can make a determination. And 882, again, the use agreement has flexibility. It indicates you are required to house very low income and low income tenants based to the extent practical, practical uses that phrase. And then explains, if you seek to deviate, you must seek HUD approval. And that's what the requirement has always been as of 1995
. Then what, what, how does it start, how does the ball start to roll from there? The HUD has to do something at that point. Yes, Your Honor. I mean, if, if HUD had received this information under the use agreement, and that's a, a, page, a, 82 of their administrative records, they would have been required to, they would have basically asked for financials. They would have been required to do their due diligence and look at HUD's position that it can't, that it was financially non-viable. Because remember, the use agreement, you think it would have to look at who's who. Well, HUD would have to consider Frederick's. HUD would have to evaluate Frederick's. Yes, of course. HUD would have to, I'm sorry, your Honor, HUD would have to evaluate Frederick's first position that the project was, it was non-viable. And that involves an exchange of information, including financials from Frederick'sburg, so that it can make its presented picture of financial non-viability. It has to be evidence presented to HUD so that it can make a determination. And 882, again, the use agreement has flexibility. It indicates you are required to house very low income and low income tenants based to the extent practical, practical uses that phrase. And then explains, if you seek to deviate, you must seek HUD approval. And that's what the requirement has always been as of 1995. They have always had this administrative remedy. So, you know, this Frederick'sburg's position, that it's a fuel remedy, it's just not borne out by anything in the record because they have never pursued this administrative remedy, Honor. That's your interpretation of their offer letter to have the use agreement terminated, right? Well, that offer letter, that February 2010 letter, indicates nothing about requesting an administrative remedy. They basically say, we are dissatisfied with this arrangement and we want you to understand this contract and they actually attach a mutual rescission agreement to their letter. They basically want to walk. Again, hypothetically, following up on something, Judge Morris, your opposing counsel, what if Frederick'sburg just walked away and said, you know, you've breached, you've breached, been in breach of this contract federal government for almost 20 years. And likewise, you've committed an anticipatory breach because I've got a financially non-viable project and you're not doing anything to help me. So, I'm moving on and now I'm going to, you know, start a new and do massive renovations to these apartments for my own purposes. Then, what is it that the federal government would do at that point? Well, Judge Moore's rendition of events is an option for the government. I can't take a position right now as to what exactly would happen, but that option is one scenario going to district court and perhaps seeking a TRO to hold up this transfer to these condominiums or whatever they decide to do in the commercial marketplace. I think your time is expired. I'm sorry. Mr. Laventown is for but all times, please. Thank you, Your Honor
. They have always had this administrative remedy. So, you know, this Frederick'sburg's position, that it's a fuel remedy, it's just not borne out by anything in the record because they have never pursued this administrative remedy, Honor. That's your interpretation of their offer letter to have the use agreement terminated, right? Well, that offer letter, that February 2010 letter, indicates nothing about requesting an administrative remedy. They basically say, we are dissatisfied with this arrangement and we want you to understand this contract and they actually attach a mutual rescission agreement to their letter. They basically want to walk. Again, hypothetically, following up on something, Judge Morris, your opposing counsel, what if Frederick'sburg just walked away and said, you know, you've breached, you've breached, been in breach of this contract federal government for almost 20 years. And likewise, you've committed an anticipatory breach because I've got a financially non-viable project and you're not doing anything to help me. So, I'm moving on and now I'm going to, you know, start a new and do massive renovations to these apartments for my own purposes. Then, what is it that the federal government would do at that point? Well, Judge Moore's rendition of events is an option for the government. I can't take a position right now as to what exactly would happen, but that option is one scenario going to district court and perhaps seeking a TRO to hold up this transfer to these condominiums or whatever they decide to do in the commercial marketplace. I think your time is expired. I'm sorry. Mr. Laventown is for but all times, please. Thank you, Your Honor. Good job. I keep hearing about this $2 million grant that was paid to the non-profit. That money didn't go to the non-profit. That money went to buy on the former owner that engineered this whole thing, the former owner that set up the non-profit because it was required under the lipper regulations. It's sort of like the old Johnny Paycheck Country Western song, buy on got the gold mine, the big bucks, and they left the nonprofit with the shaft. They took this money, this big big money for them. And in return, they obligated somebody else, my client, the non-profit, to pay the price for that 50 years. They took the money as an exchange or part of the bargain by which you would acquire the property at the price that you acquired it at. I mean, why isn't that $2 million viewed as a portion for them of the payment price at a lower amount to you? I don't know. I hope they clerk briefed you, Your Honor. I have an terrible time here and could you try that again, please? $2 million that they got was part of the transfer to you. Why doesn't that simply reflect the fact that you got the property at a lower price than you may have otherwise had to pay because the government paid a portion to the property owner on basically on your behalf? It may be, Your Honor, but the way we see it, the former owner was paid that money. And in return, they obligated this nonprofit that they had created to assume the obligations to keep the rents artificially low for another 50 years. That's fine. Keeping the rents artificially low, I represent a lot of subsidized properties to keep the rents artificially low
. Good job. I keep hearing about this $2 million grant that was paid to the non-profit. That money didn't go to the non-profit. That money went to buy on the former owner that engineered this whole thing, the former owner that set up the non-profit because it was required under the lipper regulations. It's sort of like the old Johnny Paycheck Country Western song, buy on got the gold mine, the big bucks, and they left the nonprofit with the shaft. They took this money, this big big money for them. And in return, they obligated somebody else, my client, the non-profit, to pay the price for that 50 years. They took the money as an exchange or part of the bargain by which you would acquire the property at the price that you acquired it at. I mean, why isn't that $2 million viewed as a portion for them of the payment price at a lower amount to you? I don't know. I hope they clerk briefed you, Your Honor. I have an terrible time here and could you try that again, please? $2 million that they got was part of the transfer to you. Why doesn't that simply reflect the fact that you got the property at a lower price than you may have otherwise had to pay because the government paid a portion to the property owner on basically on your behalf? It may be, Your Honor, but the way we see it, the former owner was paid that money. And in return, they obligated this nonprofit that they had created to assume the obligations to keep the rents artificially low for another 50 years. That's fine. Keeping the rents artificially low, I represent a lot of subsidized properties to keep the rents artificially low. But all of them, Your Honor, are subsidized to make up the difference so that they can remain economically viable. I want to submit a letter to HUD establishing that the property is no longer economically viable under the current restrictions and aren't they absolutely obligated under the regulations to work with you to as long as you can prove your case to work with you to make sure it is. That's what we thought, Your Honor, but they sat on the request was made in February to either start subsidizing the property or let us out of the agreement. So that we could move on down the road. They sat on that for six months and then in July of 2010, they sent a letter and by the way, Your Honor, the letter didn't leave any wiggle room about to the extent practical or anything like that. The letter was very directed. This is the letter from HUD to us. It was a direct order and it just paraphrasing. It said, no, we're not going to do what you want. And to either request, they're both denied. You will comply with the plan of action. You will comply with the lip of regulations. I think it's the 4350.6 and book. Fine
. But all of them, Your Honor, are subsidized to make up the difference so that they can remain economically viable. I want to submit a letter to HUD establishing that the property is no longer economically viable under the current restrictions and aren't they absolutely obligated under the regulations to work with you to as long as you can prove your case to work with you to make sure it is. That's what we thought, Your Honor, but they sat on the request was made in February to either start subsidizing the property or let us out of the agreement. So that we could move on down the road. They sat on that for six months and then in July of 2010, they sent a letter and by the way, Your Honor, the letter didn't leave any wiggle room about to the extent practical or anything like that. The letter was very directed. This is the letter from HUD to us. It was a direct order and it just paraphrasing. It said, no, we're not going to do what you want. And to either request, they're both denied. You will comply with the plan of action. You will comply with the lip of regulations. I think it's the 4350.6 and book. Fine. So we're trying to do that, but we don't have enough money. When you said February, a letter was sent to HUD, giving them two options. Number one, allowing you to walk away or number two, asking them to alternatively provide subsidies because the property wasn't viable under the restrictions. Are you talking about the president's letter of February 4, 2010? Yes, ma'am. I don't see any sort of detailed explanation of the lack of viability of the property or even a request for subsidies. Where is that? How many of them? Maybe it didn't expressly say it. I know it's certainly pointed out the fact that no subsidy had been paid, Your Honor. Thank you. Just concluding if I may. When I went to law school over 35 years ago, I learned that courts are courts of law, but also of justice. Courts are the place where people go to seek a level of playing field. For almost 20 years now, a park in snorkeweiss has not had a level playing field. HUD has had it all their way. HUD admittedly breach their obligations to a furnace subsidy, whether it's for five years or for the life of the property. HUD hides behind the king's acts that we've waited too long
. So we're trying to do that, but we don't have enough money. When you said February, a letter was sent to HUD, giving them two options. Number one, allowing you to walk away or number two, asking them to alternatively provide subsidies because the property wasn't viable under the restrictions. Are you talking about the president's letter of February 4, 2010? Yes, ma'am. I don't see any sort of detailed explanation of the lack of viability of the property or even a request for subsidies. Where is that? How many of them? Maybe it didn't expressly say it. I know it's certainly pointed out the fact that no subsidy had been paid, Your Honor. Thank you. Just concluding if I may. When I went to law school over 35 years ago, I learned that courts are courts of law, but also of justice. Courts are the place where people go to seek a level of playing field. For almost 20 years now, a park in snorkeweiss has not had a level playing field. HUD has had it all their way. HUD admittedly breach their obligations to a furnace subsidy, whether it's for five years or for the life of the property. HUD hides behind the king's acts that we've waited too long. I don't think that's the case. As you pointed out, Judge Chen, or maybe was Judge Murat apologized and Ms. Suarez pointed out if we had a right to walk away because of their breach after 15 months, what's changed? Why not now? The fact of the matter is, HUD has sent us a letter and made it clear that the full force of the U.S. government will come down on us. Ms. Suarez is not in a position to tell you exactly what they'll do, but I think she made it clear they will do something. And they've got all the ammunition that we do not have that kind of ammunition. Thank you, Mr. Lavon. The case has taken under submission. Thank you.
Members of the Court, this case is about whether HUD has a right to ignore its own regulations and the clear will of Congress, while imposing on a property owner the obligation for more than 50 years to rent almost exclusively to very low and low income tenants and only charge them a small portion of the market rent, while refusing to pay any sort of section 8 rent subsidies to make up the difference in that rent so that the property can remain viable. In 1968, a prior owner of this property signed on with HUD's below-market interest rate program called Beemer for a 40-year loan. In 1995, 27 years later, a successor owner signed on with HUD's low-income housing preservation program or Lyfra and collected more than $2 million in grants while obligating the property to continue to remain almost exclusively for very low and low income tenants for at least another 50 years. That's the use agreement and the plan of action. Yes, ma'am. And in those, my, I understand your argument to be in the plan of action, HUD committed to paying incentives of $500,000 a year, is that right? HUD committed, you've got to read, assuming that you disagreed with the Court of Claims and hold that the plan of action is part of the contract. I thought the Court of Claims treated the plan of action as part of the contract. I say, actually, said that given that this is a motion to dismiss, we have to construe everything most favorable to the property owner. And I understood them to accept that the plan of action was part of the contract for their analysis. Am I wrong? I think that gave us the benefit of the doubt without saying it was part of the contract. The point that I'm trying to make your honor is that HUD has first argued the plan of action is not part of the contract. And second, they said, well, but we were only obligated to furnish section 8 subsidy for five years. And they relied exclusively on a little table in the plan of action. If you read that table in isolation, which is evidently what the Court of Federal claims did, then HUD's right, and we lose. But the fact... What about, well, what language in the plan of action itself would indicate that that five-year period was meant to be a renewing period as you argue? Your honor, I can't quote you, page chapter and verse right now. There have been three briefs submitted in this matter, two by us, one by the government. I have cited in the briefs page chapter and verse of the various provisions in the plan of action, which make this clear. I have also cited a number of HUD regulations, including in the lifra regulations. Councillor, but have you provided any evidence that... Have you pointed to any evidence that HUD had an ongoing obligation to continue the subsidies? Yes, sir. The plan of action, assuming you find that it's part of the contract, and HUD's own regulations. So, looking at which you just pointed out yourself, when you look at the plan of action at a little table, it does say term five years. Is there anything other in the plan of action that points to a non-going obligation? If you look at that little table, Your Honor, and we tried to point this out to the Court of Federal claims, but she wasn't impressed, I guess, with our argument. That table is strictly illustrated. It doesn't even have a contract number. Any fair reading of that table in isolation makes it clear that it's illustrated, Your Honor. The plan of action in a number of other locations, and I'm sorry, I can't quote them again now, I've quoted them in the briefs, makes that clear. And also makes clear the fact that this was an ongoing obligation. It only makes common sense, Judge. You know, if you own a house, and you've got a fixed income, and your income is only enough to eat and take care of the basics of life, maybe make your house payment. And that's all, that's all the income you have. Then what are you going to do when the roof's got to be replaced? What are you going to do when the sewer has to be dug up? What are you going to do when the wiring wears out and you've got to replace it or the plumbing? We're talking about a property right now. Judge, I was 21 years old when this property was built. I'm an old man now, I've been three years into Medicare. And HUD still wants to obligate this property without any subsidies to still keep the rent artificially low until the year 2045. I'll be 98 then if I'm still on this side of the dirt. It's just not going to work. The property is old, it's worn out. And one of the things that Judge Firestone suggested and HUD seized on, which I considered to be a rabbit trail, is the fact that, well, why don't you jump through Hoots and prove that the property is wearing out? Just common sense. But we're talking about a contractual agreement. And you want to hold HUD's fee to the fire based on the contract. The contract as interpreted by HUD's own regulations. Not our rules. That's where I'm asking, where can you point to us that HUD had an ongoing obligation to continue the summer? I'm asking if you're asking me to, I didn't memorize my briefs. No, but that's central to your case. Absolutely. And in 15 minutes, I just can't go back over the briefs. I know you all have read the briefs. And I took great pains in the briefs to not only cite those provisions, but attach all of them. You want to be out from under the youth agreement, right? That's what your client really wants. More than anything. I mean, you'd like the $2.5 million or the $500,000 year forever, if possible. But it seems from the letter from the president, the current president of your company, that they want out of the youth agreement. One of the other, you're on, everybody. HUD's own regulations today. Here's my question. Why are you still bound by the youth agreement? If the government failed to live up to its end of the bargain, you may not be able to get damages for breach of contract because of the statute of limitation. If we don't concede the contract the way you want. But why are you nonetheless bound by the contract in light of their noncompliance? Why isn't the contract void? What we argued it was, Your Honor, HUD sent us a letter. You argued it was, I guess, I can't give you that relief. I can't issue a declaratory judgment on the nature of your contract. That's not something I'm able to do jurisdictionally. But so what would happen if you just converted the property? Just boot everybody out and turn it in condos. What happened then? I, you know, we've talked about that, Your Honor, and we've seriously considered the possibility. I mean, it's I say you're asking for permission, but you know, the adage is easier to ask for forgiveness than permission. Right? What is what is it if you believe that the contract is void because they breached it by failing to proper their end of the consideration bargain? It might be too late for you to go back and recoup that from them, but why doesn't it at least give you an out of the use agreement? I couldn't agree more with something you just said. I've always lived by the motto that it's better to beg forgiveness than ask for permission. However, I have a feeling that HUD would not be inclined to forgive. I fear that the full force and weight of the federal government would descend on this little property. And I don't know. And do what? Is there the ability for them to bring a lawsuit against you in district court for breach of contract on your end? Is that what they would do? I mean, I don't understand what's stopping you. I mean, they, what, what could they possibly do to you? And if they did bring that case in district court, couldn't you just respond and say that that use agreement was breached a million years ago, it ceased to be valid and it's void. And I don't have to comply with it. I think that probably the worst they could do would be to take the property away and perhaps punish the current leadership of the nonprofit leadership that was not involved in this original transaction. I think that's a good question, your honor. We, like I said, we've thought about that, but we're frankly down in that. We don't ask the government what they'll do if you do that. So why didn't you save the rest of your time for rebuttal? Yeah. And let's hear from the government. Thank you, Jerry. Can you tell me how to say your last name? Sores has found your heart. Okay, sores. Let me proceed. Thank you. So please, the court, the trial court's decision, the judgment should be affirmed in all aspects. Beginning with the issue of whether Frederick's birds breach of contract action is time barred, the government's position in this litigation has been that the claim for breach of contract accrued in 1995, December 1995 to be exact. When Frederick's bird and a HUD executed the libra use agreement at that time, in addition to executing the libra use agreement, they also executed an incentive, which is reflected in the record as a capital grant agreement. Alone, $2 million loan. So, $2 million grant. Yes, your honor. It was a loan, not a grant, right? Ninety percent interest, I think. Well, it was a grant. In originally, there was a provision in the June 1995 letter for a loan, but subsequently before closing on the transfer of the property, it became a grant. It was a $2 million grant. It was not a loan. Then it had to pay it back. No, your honor. And just to clarify, that $2 million grant made it possible for Frederick's bird to purchase this property. So, at the time of closing, when the transfer from the previous owner by on happened and Frederick's bird purchased the property, we have two things happening. We have the use agreement being executed and the one incentive that was being provided to buy the government to Frederick's bird, the capital grant agreement being executed at the closing table. So, here's the problem. If the use agreement is a standalone contract, and if the plan of action is not part of it, then there's nothing at all in the use agreement that explains any obligation or consideration on the part of the government that exchange for what is a quite draconian life of property restriction, which would go till what? So, if the use agreement is a standalone contract, it articulates no consideration by the government because it doesn't mention the grant, doesn't mention a loan, and it doesn't mention the incentives at all. It does, Your Honor. We're done with that. I went to your honor to record page, the use agreement on J8, and the J8 on that page. It actually indicates the incentive being provided, where in the title of the agreement, the title of the agreement, use the agreement in a amendment of existing regulatory agreement from mutual projects, insured or assisted with the capital grant. It's in the title of the agreement. The Pomona Act of 1990 with a capital grant and sale of property. Okay, that is the title of the agreement, but do you agree that there is no provision within the agreement for a capital grant with the amount of such grants? Well, it references the capital grant. Under the liqueur program, the incentive is to my question. I agree that there is no provision in this very detailed use agreement that actually articulates any terms of a capital grant. There is only a reference. There is only a reference in the title to a capital grant. Yes. And, Your Honor, just to be clear, these agreements are governed by a statutory regulatory scheme. The liqueur agreement, of course, is governed by Section 4101 onwards under titles, well, which spells out the liqueur program and the regulations do as well. They reflect the requirements that are in the use agreement. They also provide that incentive, which is part of the program, the liqueur program. The program was intended to extend affordability restrictions to basically make it possible. I would prefer to read the plan of action as requiring the government to make a payment each year for five years of $500,000. I were to interpret the plan of action as part of this contract. Yes. I understand your argument that I would then have to affirm the fact that this case or claim for breach of contract for money damages is time-barred. I understand that argument. But if I nonetheless interpret the contract that way, and if the government failed to comply with that, it's portion of consideration. It may have had additional consideration in the form of this capital grant. But if it failed to comply with a $500,000 per year conveyance, what happens then? Isn't that contract void for noncompliance, even if they can't come after you for money damages for breach, aren't they then free to not be balanced by the contract? No, Your Honor, and the reason is assuming again that the plan of action is a contract which we dispute, given those statutory regulatory scheme, but assuming it is a contract, that that cost of action for breach of contract was time-barred. And that's because... No, not a cost of action for breach of contract. I don't think they have to sue you for breach of contract. I think they can just go build their condos. Well, Your Honor, I mean, because if they do that, you would have to sue them for breach of contract, and they would just come back and say what contract? The contract was void for your noncompliance. But Your Honor, the contract was non-void for noncompliance under the li- under the li- under the li- under the li- under the li- under the statutory scheme, Congress determined that in order for the use agreement to work, for use agreement to apply, to apply and extend affordability restrictions on their property, the purchaser of Fredrick'sburg got something in return. There was consideration. That was a $2 million grant. They were using it in all the consideration they were supposed to get, and at least the letter by the current president indicates her complete lack of awareness of even the existence of the use agreement, and her claim, I don't know if it's true or not, at the stage of the proceedings, but her claim that quite frankly for the entire life of her tenure at the company, she's the company's been in noncompliance, and nobody at HUD or the government has done or said anything that she said we have not been complying with this use agreement these higher time she's been at the company, which is a long time. So why don't we have HUD, why don't we have noncompliance by HUD in the form of the $500,000 a year, and then why don't we also have noncompliance by them and mutual acquiescence in the non applicability of the use agreement by virtue of both sides. So why don't we have a noncompliance by the current president, not complying? Well, the reason is this, the government did comply your honor, the government wrote a $2 million grant in the court. If I believe the plan of action actually required you to give $500,000 a year for each of five years, you did not, it's undisputed you did not make this case. Well, that again, your honor, the trial court assumed for purposes of this argument, for purposes of our 12-B1 motion that the plan of action is a contract, but she rightly held nothing in the record indicates the government was required to provide section 8 assistance beyond the five year term as your honor reflected in the plan of action only reflects five years. It doesn't reflect any amount of time beyond that, and by regulation, section 8 can only be provided for a period of up to five years, and I'll point your honor to that particular regulation. I think Judge Moore's question is kind of built on just, let's create a hypothetical. I see, all right. And the hypothetical is that HUD was bound and obligated to pay those section 8 subsidies for the first five years of the use agreement. And you didn't do that, and so therefore it's really HUD that initially breached this contract, breached this use agreement. And the next question is, is Fredericksburg under any obligation to continue its side of the bargain given that HUD has already from the get-go been breached? I understand, your honor. And my response to the first question is that that cause of action is timebarred because they didn't bring their action then they waited 15 years. This is not about them bringing in action. This is about them being able to legitimately excuse themselves from the contract any more given we're assuming for the moment HUD's very clear breach from the very beginning of the use agreement. Again, you are there was no clear breach they provided a to the right. This is more in the hypothetical. Of course, of course, okay, getting back to the first point of the hypothetical. I, I, yes, if there was a commitment by HUD to provide section 8, there would have been, well, actually, I must step back. Under the statute section 4114 title 12, it provides if the government failed to provide an incentive that was is required. Within a 15 month period for a federal expert has the right to walk away. So the statute, Congress and vision scenarios where the government could not fund through appropriations and incentives. So they built in that safety or that approach where FedExburg could have walked away. It could have gone back to HUD and say, wait a minute. It's been 15 months. I have not received one incentive from the United States government for retaining these restrictions on this property for the remaining useful life. I want out and they could have under section 4114 a title 12 sought that from HUD. So that would have been your honor under the statutory scheme. That is the approach. Congress may permit for that. I would have said you have done that within a certain time period. I'm sorry. Did they was there a limited time period? It was they could go to that. It was a 15 month period. It's been 15 months from the time of the approval of the plan of action which, of course, under the, based on the record, happened in June 1995. A conditional approval. Is section 4114 is the copy of it anywhere from the briefs or the record? We cited in our papers, in our opening brief. It's a statute. Yeah, I was just wondering. You know, we have of course, we've always discussed this in our papers as a provision that Congress kept in as a safety valve, essentially. Because of course, every incentive can only be provided to the extent there are appropriations. The government can't give what it doesn't have. There must be funds appropriated for incentives. In this case, conditionally, HUD approves the plan of action in June 1995 and let the owner know we are providing these incentives. But we don't have appropriations. This is a conditional approval. Thereafter, June 1995, the owner was apprised of the facts that appropriations were still not available. Again, it as the government emphasized conditional approval, we don't have appropriations. A subsequent letter went out in November 1995 saying the same thing. The Federal Reserve in December 1995 did receive an incentive. It went to closing with the $2 million half of grant, which was actually one of a better option than the initial loan that it was being provided under the conditional approval in June 1995. So they had something at closing. They could have walked away. They had the option of walking away and not signing on the dotted line for the use agreement or the $2 million grant. They entered this deal. At that point, again, back to our cruel theory of appropriations of the time bar, in 1995, acts the closing table. They knew they were not getting section 8. There was no section 8 contract, which of course is a requirement. You have to have a section 8 contract under the governing statute, under the governing law. You're thinking about the anticipatory breach part of this case. Let's say we find that there's letter to you, indicate that they believe these apartments are financially non-liable. Then isn't it your obligation at that point to work with the, with Fredericksburg, to either provide them some kind of compensation or assistance or, or, or, or the breach of the contract? Yes, Your Honor. And I'd like to point your honor to the particular position of the use agreement that would have, and this is what we call the administrative remedy. It's on page 882 of the use agreement. And so I'm just trying to understand how does the process work? Yes, Your Honor. Let's say the letter indicates we can't keep going with these apartments under these restrictions. Right. And we need to be, they need to be loosened up. Yeah. Then what, what, how does it start, how does the ball start to roll from there? The HUD has to do something at that point. Yes, Your Honor. I mean, if, if HUD had received this information under the use agreement, and that's a, a, page, a, 82 of their administrative records, they would have been required to, they would have basically asked for financials. They would have been required to do their due diligence and look at HUD's position that it can't, that it was financially non-viable. Because remember, the use agreement, you think it would have to look at who's who. Well, HUD would have to consider Frederick's. HUD would have to evaluate Frederick's. Yes, of course. HUD would have to, I'm sorry, your Honor, HUD would have to evaluate Frederick's first position that the project was, it was non-viable. And that involves an exchange of information, including financials from Frederick'sburg, so that it can make its presented picture of financial non-viability. It has to be evidence presented to HUD so that it can make a determination. And 882, again, the use agreement has flexibility. It indicates you are required to house very low income and low income tenants based to the extent practical, practical uses that phrase. And then explains, if you seek to deviate, you must seek HUD approval. And that's what the requirement has always been as of 1995. They have always had this administrative remedy. So, you know, this Frederick'sburg's position, that it's a fuel remedy, it's just not borne out by anything in the record because they have never pursued this administrative remedy, Honor. That's your interpretation of their offer letter to have the use agreement terminated, right? Well, that offer letter, that February 2010 letter, indicates nothing about requesting an administrative remedy. They basically say, we are dissatisfied with this arrangement and we want you to understand this contract and they actually attach a mutual rescission agreement to their letter. They basically want to walk. Again, hypothetically, following up on something, Judge Morris, your opposing counsel, what if Frederick'sburg just walked away and said, you know, you've breached, you've breached, been in breach of this contract federal government for almost 20 years. And likewise, you've committed an anticipatory breach because I've got a financially non-viable project and you're not doing anything to help me. So, I'm moving on and now I'm going to, you know, start a new and do massive renovations to these apartments for my own purposes. Then, what is it that the federal government would do at that point? Well, Judge Moore's rendition of events is an option for the government. I can't take a position right now as to what exactly would happen, but that option is one scenario going to district court and perhaps seeking a TRO to hold up this transfer to these condominiums or whatever they decide to do in the commercial marketplace. I think your time is expired. I'm sorry. Mr. Laventown is for but all times, please. Thank you, Your Honor. Good job. I keep hearing about this $2 million grant that was paid to the non-profit. That money didn't go to the non-profit. That money went to buy on the former owner that engineered this whole thing, the former owner that set up the non-profit because it was required under the lipper regulations. It's sort of like the old Johnny Paycheck Country Western song, buy on got the gold mine, the big bucks, and they left the nonprofit with the shaft. They took this money, this big big money for them. And in return, they obligated somebody else, my client, the non-profit, to pay the price for that 50 years. They took the money as an exchange or part of the bargain by which you would acquire the property at the price that you acquired it at. I mean, why isn't that $2 million viewed as a portion for them of the payment price at a lower amount to you? I don't know. I hope they clerk briefed you, Your Honor. I have an terrible time here and could you try that again, please? $2 million that they got was part of the transfer to you. Why doesn't that simply reflect the fact that you got the property at a lower price than you may have otherwise had to pay because the government paid a portion to the property owner on basically on your behalf? It may be, Your Honor, but the way we see it, the former owner was paid that money. And in return, they obligated this nonprofit that they had created to assume the obligations to keep the rents artificially low for another 50 years. That's fine. Keeping the rents artificially low, I represent a lot of subsidized properties to keep the rents artificially low. But all of them, Your Honor, are subsidized to make up the difference so that they can remain economically viable. I want to submit a letter to HUD establishing that the property is no longer economically viable under the current restrictions and aren't they absolutely obligated under the regulations to work with you to as long as you can prove your case to work with you to make sure it is. That's what we thought, Your Honor, but they sat on the request was made in February to either start subsidizing the property or let us out of the agreement. So that we could move on down the road. They sat on that for six months and then in July of 2010, they sent a letter and by the way, Your Honor, the letter didn't leave any wiggle room about to the extent practical or anything like that. The letter was very directed. This is the letter from HUD to us. It was a direct order and it just paraphrasing. It said, no, we're not going to do what you want. And to either request, they're both denied. You will comply with the plan of action. You will comply with the lip of regulations. I think it's the 4350.6 and book. Fine. So we're trying to do that, but we don't have enough money. When you said February, a letter was sent to HUD, giving them two options. Number one, allowing you to walk away or number two, asking them to alternatively provide subsidies because the property wasn't viable under the restrictions. Are you talking about the president's letter of February 4, 2010? Yes, ma'am. I don't see any sort of detailed explanation of the lack of viability of the property or even a request for subsidies. Where is that? How many of them? Maybe it didn't expressly say it. I know it's certainly pointed out the fact that no subsidy had been paid, Your Honor. Thank you. Just concluding if I may. When I went to law school over 35 years ago, I learned that courts are courts of law, but also of justice. Courts are the place where people go to seek a level of playing field. For almost 20 years now, a park in snorkeweiss has not had a level playing field. HUD has had it all their way. HUD admittedly breach their obligations to a furnace subsidy, whether it's for five years or for the life of the property. HUD hides behind the king's acts that we've waited too long. I don't think that's the case. As you pointed out, Judge Chen, or maybe was Judge Murat apologized and Ms. Suarez pointed out if we had a right to walk away because of their breach after 15 months, what's changed? Why not now? The fact of the matter is, HUD has sent us a letter and made it clear that the full force of the U.S. government will come down on us. Ms. Suarez is not in a position to tell you exactly what they'll do, but I think she made it clear they will do something. And they've got all the ammunition that we do not have that kind of ammunition. Thank you, Mr. Lavon. The case has taken under submission. Thank you