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JACKSON SQUARE ASSOCS. v. UNITED STATES HUD

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

 BACKGROUND

 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.

 FACTS

 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.

 DISCUSSION

 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 ...


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