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November 8, 1994

JACKSON SQUARE ASSOCIATES, a New York Limited Partnership, Plaintiff, -vs- UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Buffalo Office - Region II, Defendant.

The opinion of the court was delivered by: JOHN T. CURTIN


 CURTIN, District Judge


 This is an action by plaintiff Jackson Square Associates ("Jackson Square") against defendant United States Department of Housing and Urban Development ("HUD") over the amount of payments due under a Housing Assistance Payments ("HAP") contract entered into by the parties in 1979. Plaintiff brought suit for breach of contract and to enforce payments granted by defendant to Jackson Square in a final agency action on August 29, 1980. *fn1" Defendant seeks summary judgment to dismiss the action on four separate grounds. HUD claims that: (1) the plaintiff failed to establish the contract alleged in the amended complaint's first cause of action; (2) this court lacks jurisdiction over the second cause of action under the Administrative Procedure Act, 5 U.S.C. § 701 (1977) because HUD's decision to increase rents covered by HAP contracts are committed to agency discretion by law and because an adequate remedy at law exists; (3) plaintiff has failed to show that HUD's administrative action was arbitrary, capricious, or otherwise not in accordance with law; and (4) this action is barred by the statute of limitations.


 Jackson Square owns a 160-unit low-income housing development in the Town of Amherst, New York. Effective March 13, 1979, it entered into a HAP contract with HUD, pursuant to 42 U.S.C. § 1437(f), under which HUD agreed to make rental assistance payments to Jackson Square for the development's eligible tenants. After Jackson Square commenced performance of the contract, it discovered that the cost of providing hot water to the tenants and the heating of the common areas of the project had been grossly underestimated.

 Plaintiff notified HUD of the error; and on February 18, 1980, Boyd Barton of the HUD Buffalo area office replied that the rental assistance payments would be increased by a factor of 1.048 effective March 13, 1980, to make up the shortfall. Item 43. On July 17, 1980, HUD's Buffalo Office wrote its headquarters to ask for authority to increase the HAP contract by $ 45,098, or 6 percent, to correct the processing error which led to inadequate coverage of utility costs. Item 46. However, the rents listed in the request document did not include the 4.8 percent annual adjustment for 1980. Item 39, P 1. Assistant Secretary Lawrence B. Simons wrote to Buffalo Area Office Manager James F. Anderson ("Simons letter") on August 29, 1980, approving the suggested 6 percent rent increases. Item 47. In a letter dated October 1, 1980, the Buffalo office informed Jackson Square that a rent adjustment had been approved, amounting to a 6 percent overall increase, or 1.2 percent above the annual adjustment. Item 48.

 On October 21, 1980, Jackson Square responded with "shock and dismay" that the approved increases "reflected a 1.2% raise, not the 6% expected . . . ." Item 55. Frank Levin from Jackson Square met with Edward Izsak of the Buffalo HUD office on December 3, 1980, and was shown for the first time the correspondence between Simons and Anderson. From the meeting and the letters, Levin surmised that Jackson Square's rents were increased by a total of 6 percent in 1980, but that this 6 percent included an annual adjustment factor of 4.8 percent. Levin wrote to Izsak on December 11, 1980, and asked that the new approved contract rents reflect separate adjustments for the annual 4.8 percent and the 6 percent to cover the mistake in utility cost estimates. Item 57.

 Thereafter, Jackson Square and HUD held several meetings and engaged in correspondence discussing further modification of the HAP contract. On July 25, 1983, HUD informed Jackson Square that plaintiff's claim was being denied after HUD had "reviewed our processing of the rental adjustment . . . and found that is [sic] was consistent with Secretary Simon's memo of August 29, 1980." Item 40, Ex. 3. Plaintiff apparently made no further efforts to press its claim until 1988 when, after receipt of some HUD documents under the Freedom of Information Act, it submitted the dispute to HUD's Buffalo office. The Buffalo office denied Jackson Square's claim on March 21, 1988. Plaintiff appealed this decision to the Secretary of HUD, who denied it on May 13, 1988.

 Plaintiff claims that its HAP contract was modified by the Simons letter and sues for breach of contract for HUD's failure to follow the modification with increased payments of $ 45,098 per annum. Since HUD only pays an additional $ 9 per unit or $ 17,280 over and above the original contract rent subsidies, plaintiff is faced with an annual shortfall of $ 15 per unit or $ 28,800 in utility bills. Item 31 at PP 10-12, 21. In its second cause of action, plaintiff claims that the Simons letter represented HUD's final agency decision and seeks enforcement of that decision. Jackson Square requests damages of the past annual shortfall plus $ 28,800 per annum for the balance of the 20-year HAP contract, together with interest and costs. Id. at P 14.


 I. Breach of Contract

 Plaintiff's first cause of action is for breach of contract. Jackson Square alleges that HUD agreed to a modification of the parties' 1979 HAP contract to address the shortfall created by the error in the estimation of utility costs, as evidenced by Simons' letter. According to the plaintiff, HUD breached this agreement by paying a 1.2 percent increase rather than the 6 percent promised in the alleged contract modification. Items 40 at P 3; 42 at 2.

 Defendant urges the court to find that, as a matter of law, no modification of the contract occurred and thus, there was no breach. "Where 'a question of intention is determinable by written agreements, the question is one of the law, appropriately decided . . . on a motion for summary judgment.'" Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir. 1989), quoting Mallad Construction Corp. v. County Fed. Sav. & Loan Ass'n, 32 N.Y.2d 285, 291, 298, 344 N.Y.S.2d 925, 298 N.E.2d 96 (1973).

 To establish a contract with the Government, a party must demonstrate: (1) mutual intent to contract, including a communicated offer, acceptance and consideration; (2) lack of ambiguity in the offer and acceptance; and (3) actual authority on the part of the Government agent. Solar Turbines v. United States, 23 Cl. Ct. 142, 150 (Cl. Ct. 1991). A valid contract modification must meet the same standard. Id. According to defendants, Jackson Square never agreed to the rent level actually approved by HUD, and HUD never accepted the higher rent levels Jackson Square asserts in its complaint. Thus, the contract was not modified by the amount alleged in the first cause of action.

 The defendant points out that Simons' letter to Anderson was an internal memorandum, not addressed or initially sent to plaintiff. Further, the letter does not specifically say that the contract will be modified. It merely approves the increases suggested by the Buffalo office pursuant to HUD regulations. The defendant also asserts than even if this constituted an offer to modify the contract, it was not accepted by Jackson Square. On the contrary, the plaintiff reacted with "shock and dismay" that the approved increase was significantly less than anticipated.

 Lastly, defendant argues that the HAP contract clearly states that all amendments to the contract must be in writing. Plaintiff has shown no such writing other than the Simons letter, which was merely an internal memo. Since plaintiff has failed to show a communicated offer, acceptance, and consideration, the court must find that the alleged modification of the contract never occurred and thus could not have been breached.

 Jackson Square responds that 24 CFR § 880.204(b)(1)(i)(B) (1990) provides that the approval of an increase in rents to correct a processing error must be made by the Assistant Secretary. At deposition, Simons testified that determination contained in his letter of August 29, 1980, was a final agency action. Item 60 at 20. Thus, even though the letter was not provided to the plaintiff until December, Jackson Square maintains that it constituted a modification of the contract.

 The evidence on the record is insufficient to conclude that the Simons letter constituted a modification of the contract. The HAP contract unambiguously states at P 1.1g that:


This Contract, including . . . exhibits, comprises the entire agreement between the parties hereto with respect to the matters contained herein, and neither party is bound by any representations or agreements of any kind except as contained herein or except agreements entered into in writing which are not inconsistent with this Contract.

 Item 31, Ex. 1. The letter is in writing and approves an adjustment of the rents in the original contract, but it is unclear whether these adjustments were ever formally offered or accepted. Simons did not address or send the letter to the plaintiff. Jackson Square reacted with "shock and dismay" when informed by the Buffalo office of the amount of the increase. Nevertheless, the terms of the letter were put into effect. HUD commenced paying Jackson Square the overall 6 percent rent increase which Simons approved, and the plaintiff presumably accepted the added payment without conceding that it was accurate. In order to withstand summary judgment on its breach of contract claim, however, Jackson Square must demonstrate a factual dispute on the more important question of whether the Simons letter actually approved the level of increase claimed by the plaintiff. Even assuming arguendo that the letter represented a bona fide modification, its clear language does not support the plaintiff's contention that it authorized a 6 percent increase in the rents over and above the annual adjustment. The letter states that the adjusted contract rents which would be approved were: $ 331 1BR $ 34 utility allowance 365 2BR 42 414 3BR 53 451 4BR 64


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