City Line Joint Venture (City Line) appeals from a grant of summary judgment to the government on City Line’s breach of contract claim and a separate judgment that no regulatory taking resulted from the government’s aсtion. We conclude that the Court of Federal Claims’ grant of summary judgment to the government on the breach of contract claim was improper because its reliance on the sovereign acts doctrine as a basis for excusing the government’s breach is misplaced. Therefore, we reverse the trial court’s grant of summary judgment of no breach of contract, and remand for further procеedings on this claim.
BACKGROUND
City Line developed a multi-family rental housing project in Maryland in 1968 *1321 with a Department of Housing and Urban Development (HUD)-insured loan. HUD provided mortgage insurance for private lenders that entered into low-interest forty-year mortgages with property owners that would subject themselves to a scheme of restrictions on their investment in, use, and sale of low-income housing projects. Under the housing programs established by section 221(d)(3) of the National Housing Act, City Line received a loan from a private lender, Riggs Bank, to construct a housing project. The secured note between Riggs Bank and City Line thаt covered the mortgage loan contained a provision that prohibited prepayment of the mortgage before twenty years from the date of final endorsement of the note by the Federal Housing Commissioner without prior approval by HUD — after twenty years the mortgage could be prepaid without HUD approval. In return for the HUD-insured low-interest loan, City Line signed a Regulatory Agreement (RA) with HUD, in which it аgreed to comply with various restrictions on its housing project such as limitations on tenant income, rental rates, and the permissible rate of return on initial equity to the investors. The RA further provided that it would bind City Linе “so long as the contract of mortgage insurance continues in effect, and during such further period of time as the Commissioner shall be the owner, holder or rein-surer of the mortgage,” or obligated to insurе a mortgage on the property. Thus, the exercise of the prepayment right under the mortgage note would effectively terminate the RA and allow City Line to exit the program.
After the housing project was built, a supplemental note that contained the same restriction on prepayment was signed. The supplemental note brought the total amount of the mortgage up to $4,584,100 to cover a construction cost overrun. The original and supplemental notes were endorsed by the Federal Housing Commissioner on August 30, 1971. On August 27-30, 1971, Riggs Bank sold the mortgage to the Government National Mortgage Association (GNMA). After GNMA assumed the mortgage, City Line ran into financial difficulties. Despite entering into a series of workout agreements with GNMA to adjust the mortgage and bring its loan payments up to date, City Line defaulted on the loan and GNMA аssigned its rights to the mortgage to the insurer HUD. HUD then assumed the mortgage and became the lender. After several additional workout agreements between HUD and City Line, and an influx of additional capital from new рartner Brunswick Management Company and the existing partners of City Line, the project stabilized and the mortgage arrears were eliminated.
Between 1988 and 1996, Congress enacted various statutes related to preservation of low-income multi-family housing built during the 1960s-1970s that were insured with these forty-year government-insured mortgage loans issued for below-market rates. See Emergency Low Income Housing Preservation Act of 1987, Pub.L. Nо. 100-242, § 202, 100 Stat. 1877 (1988) (ELIHPA); Low Income Housing Preservation and Resident Homeownership Act of 1990, Pub.L. 101-625, tit. VI, 104 Stat. 4249 (1990) (LIHPRHA); Housing Opportunity Program Extension Act of 1966, Pub.L. No. 104-120, 110 Stat. 834 (1996) (HOPE). These statutes have been discussed in exhaustive detail in other opinions relating to claims brought against the government because of Congress’ enact *1322 ment of these laws. 1 LIHPRHA, the statute at issue in this case, disallowed prepayment of mortgages entered into under these types of agreements аfter twenty years without HUD approval and put additional requirements in place for HUD approval of prepayment or sale of the property. Later, the 1996 HOPE Act restored prepayment rights to City Line and other owners that had not entered into use agreements (which City Line did not). As of April 29, 1996, City Line was again allowed to prepay its mortgage and exit the program, though the statute prevented it from rаising the rents for an additional two months after it prepaid (restricted until at least June 26, 1996). City Line filed suit at the Court of Federal Claims in November 1996, seeking damages for breach of contract or, alternatively, fоr just compensation under the Fifth Amendment for a regulatory taking. On August 13, 1997, City Line prepaid the mortgage on its housing project, thereby exiting the program.
ANALYSIS
City Line asserts that the trial court erred as a matter of law whеn granting summary judgment in favor of the government on the breach of contract claim. City Line alleges that enactment of LIHPRHA and HUD’s enforcement of this act was an unlawful denial of City Line’s contractual right to prepay its mortgage after twenty years and exit the program. In 2001, the trial court held on summary judgment that the enactment of LIH-PRHA was a “public and general act” and applied the sovereign acts doсtrine as a defense to the breach of contract claim as a matter of law. We review a grant of summary judgment
de novo. Cienega Gardens v. United States,
The government does not contest the fact that City Line was in privity of contract with the government at the time that LIHPRHA was enacted in 1990 and on August 31, 1990 when it was contractually entitled to exercise its prepayment right. Because the mortgage and note were assigned to HUD in 1977, HUD was a party to the mortgage agreement which allowed prepayment without HUD approval after twenty years. Unlike other cases involving these statutes where the court found no breach of contract because HUD was not a party to the mortgage agreements, City Line has a viable breach of contract claim because it was in privity with respect to the contractual prepayment right.
See Cienega Gardens v. United States,
Since the trial court applied the sovereign acts doctrine in 2001 to forgive *1323 HUD’s performance of the prepayment clause this сourt has considered the sovereign acts doctrine with respect to Congress’ enactment of both ELIHPA and LIHPRHA. In Cienega VIII, we analyzed both ELIHPA and LIHPRHA and their effect on low income property owners that had loan agreements with private lenders or HUD. We considered the Supreme Court’s guidance in Winstar in analyzing the availability of the impossibility defense:
If the Government is to be treated like other contractors, some line has to be drawn in situations like the one befоre us between regulatory legislation that is relatively free of Government self-interest and therefore cognizable for the purpose of a legal impossibility defense and, on the other hand, statutеs tainted by a governmental object of self-relief. Such an object is not necessarily inconsistent with a public purpose, of course, and when we speak of governmental “self-interest,” we simply mean to identify instances in which the Government seeks to shift the costs of meeting its legitimate public responsibilities to private parties.
Because we are remanding for further consideration of the breach of contract claim, wе will not consider the trial court’s disposition of the takings claim at this time. When a viable contract claim exists, we should not reach out to decide the takings issue. Clearly, there should not be double recovery, we should not commingle takings compensation and contract damages. In
Castle v. United States,
REVERSED and REMANDED
Notes
. For a detailed discussion of the statutory scheme and the relevant legislative enactments see
Cienega Gardens v. United States,