Opinion
No. CV 05 4003224
February 22, 2008
MEMORANDUM OF DECISION
In its Amended Complaint, dated May 11, 2006 plaintiff Woodrow Wilson of Middletown, LLC (Woodrow Wilson) sets out claims against the Connecticut Housing Finance Authority (CHFA) predicated principally upon its refusal to allow prepayment of a CHFA mortgage utilized to purchase an apartment building in Middletown, Connecticut. The claims are presented in two Counts. In the First Count the plaintiff asserts essentially that the defendant's refusal to allow prepayment constitutes a breach of contract. In the Second Count the plaintiff asserts a breach of the covenant of good faith and fair dealing.
Defendant Connecticut Housing Finance Authority denies the material allegations of the Amended Complaint.
Background Facts
A background statement of facts has been articulated by this court in its Memorandum of Decision granting a Motion for Summary Judgment as to certain other Counts in Woodrow Wilson's prior Complaint filed in this case. The facts as stated in that decision are italicized below.
The underlying action is for monetary damages and injunctive relief against the Connecticut housing finance Authority (CHFA,) for its failure to prevent Woodrow Wilson, LLC, to pay off its CHFA loan on an apartment building owned by the plaintiff in Middletown Connecticut. The plaintiff, on July 1, 1998, purchased a 63 unit apartment building from CHFA for $1,550,000. The building is a former Woodrow Wilson School which had been converted to the efficiency one and two-bedroom apartments in 1986. CHFA acquired the property in foreclosure when a prior owner defaulted on its CHFA financing. CHFA's original mortgage on the property was from 1986 for a period of 30 years. CHFA financed the sale to the plaintiff and took back a $1,050,000 mortgage with the term of 30 years and an interest rate of 6.25%.
The dispute between the parties concerns a provision of a promissory note which provides that until September 9, 2016, the note shown not to be payable in advance without prior consent of the CHFA. Prepayment is also made subject to statutory, regulatory and policy requirements. In addition to the promissory note, the parties executed a mortgage and a covenant of compliance and regulatory agreement. The regulatory agreement provides that during the term of the loan, 20% of the units in the development shall be "qualified units." A qualified unit must be occupied by a person whose annual income does not exceed 80% of area median gross income and the rent charged may not exceed 30% of the annual income limitation applicable to such unit. Pursuant to this provision, 13 units in the development or (sic) rent controlled. The plaintiff contends that because of a surplus of similar units the market value for such units is less than the rents permissible under the regulatory agreement.
Relevant Statutory Provisions
In establishing the Connecticut Housing Finance Authority, the Connecticut legislature "found and declared that there exists in the state and will exist in the future a serious shortage of housing for low and moderate income families and persons." Conn. Gen. Stat. Sec. 8-242. One of the principal purposes of the Connecticut Housing Finance Authority is to alleviate that shortage. Conn. Gen. Stat. Sec. 8-250. Mortgage financing for low and moderate income housing is a significant vehicle for accomplishing this goal. Conn. Gen. Stat. Sec. 8-250(10). Prepayment of a mortgage issued by CHFA is permissible only if CHFA makes two critical findings, to wit: "(A) that it may reasonably be expected that the prepayment of the loan will not result in a material escalation of rents charged to occupants of the project; and (B) that the need for low and moderate income housing in the area concerned is no longer acute." Conn. Gen. Stat. Sec. 8-253a.
"In the Area" — The Request for Prepayment
Critical to the resolution of the plaintiff's claim of having satisfied the two statutory conditions for repayment is deciding the meaning of the phrase "in the area" when considering whether the need for low and moderate income housing is no longer acute.
As stated earlier, the purpose of the Connecticut Housing and Finance Authority Act "is to address the serious shortage of housing for low and moderate income families and persons." Renaissance Management Co. v. Connecticut Housing Finance Authority, 281 Conn. 227, 239, 915 A.2d 290 (2007); see also General Statutes § 8-242. The parties do not disagree that there is an acute need for low income housing in the Hartford metropolitan statistical area. The parties disagree, however, as to whether Middletown should be included in the Hartford metropolitan statistical area. It is the plaintiff's position that the statistical area does not encompass Middletown and, futhermore, an acute need does not exist in Middletown. The defendant argues the exact opposite.
The legislative history of § 8-253a does not shed any light on the meaning of the phrase "in the area." A broader reading of the Connecticut Housing and Finance Authority Act is instructive on the meaning of "in the area." "It is a basic tenet of statutory construction that [Connecticut courts] construe a statute as a whole and read its subsections concurrently in order to reach a reasonable overall interpretation." Barry v. Quality Steel Products, Inc., 280 Conn. 1, 9, 905 A.2d 55 (2006). "[C]ourts must interpret statutes using common sense and assuming that the legislature intended a reasonable and rational result." Longley v. State Employers Retirement Commission, 284 Conn. 149, 171-72, 931 A.2d 890 (2007). "Courts also must not interpret statutes in such a manner so as to thwart their purpose." State v. Wilcox, 105 Conn.App. 24, 27, 936 A.2d 295 (2007).
The key to the current argument is whether Middletown is a part of the Hartford metropolitan statistical area. A better understanding of who determines metropolitan statistical areas, what exactly a metropolitan statistical area is, and whether, in fact, Middletown is included in the Hartford metropolitan statistical area is necessary. General Statutes § 8-243(v) states that "`Urban Area' means any target area, as defined in Section 143 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended." A review of § 143(j)(1)(A)-(B) of the Internal Revenue Code indicates that "target area residences" refer to either qualified census tracts or areas of chronic economic distress. More importantly though, is the definition of metropolitan statistical area contained in § 143(k)(2)(B), which states that "the term metropolitan statistical area includes the area defined as such by the Secretary of Commerce." "The United States Office of Management and Budget (OMB) defines metropolitan and micropolitan statistical areas according to published standards that are applied to Census Bureau data." The United States Census Bureau, located at http://www.census. gov/population/www/estimates/aboutmetro.html (last visited February 20, 2008). Further, Title 13 of the United States Code, Section 2 states"[t]he [Census] Bureau is continued as an agency within, and under the jurisdiction of the Department of Commerce," which is under the Secretary of Commerce's purview, in accordance with § 143(k)(2)(B). Therefore, in order to determine what a metropolitan statistical area is and whether Middletown is in fact part of the Hartford metropolitan statistical area, it is necessary to analyze the data compiled by the Census Bureau and reported though the OMB.
The United States Census Bureau, which can be found at http://www.census.gov/population/www/estimates/aboutmetro.html (last visited February 20, 2008), explains that: "[t]he general concept of a metropolitan or micropolitan statistical area is that of a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core." Based on the data provided by the United States Census Bureau and the OMB, the Hartford-West Hartford-East Hartford Metropolitan statistical area clearly encompasses Middlesex County, which includes Middletown.
The United States Census Bureau, located at http://www.census.gov/geo/www/cob/mametadata.html (last visited February 20, 2008) also contains a wealth of useful information that defines what metropolitan statistical areas are and how they are formed.
See United States Census Bureau, located at http://www.census.gov/population/www/estimates/metro_general/2006/List1.txt (last visited February 20, 2008). This website contains a chart of all of the micropolitan and metropolitan statistical areas located within the United States of America. It was last updated on May 11, 2007. For the metropolitan statistical area concerned in this case, the OMB complied in the Census Bureau data and the relevant portion is contained as follows:
Metropolitan and Micropolitan Statistical Areas and Components
The plaintiff, in its brief, attempts to draw an analogy between § 8-253a and § 4108 of Title 12 of the United States Code, which addresses the criteria for approval of a plan of action involving prepayment of HUD affordable housing loans. Specifically, the plaintiff argues that Title 24 of the United States Code of Federal Regulations, Section 248.141, which explains § 4108, supports its position that the reference to "in the area" in § 8-253a refers to the town of Middletown alone, not the Hartford metropolitan statistical area. Although the plaintiff is correct in pointing out some similarities between § 4108 and § 8-253a, it is important to be aware that both statutes address different issues. The federal statute deals with HUD prepayment, whereas § 8-253a is part of a very specific, comprehensive statutory scheme developed to address prepayment issues concerning the Connecticut Housing Finance Authority.
Despite any differences between the statutes, the plaintiff would like this court to conclude that, since the two statutes are similar, the federal regulation that explains § 4108, specifically 24 C.F.R. § 248.141, should apply to this case. The plaintiff argues that according to § 248.141(c)(1), Middletown is in a non-metropolitan area, and, therefore, any need for acute housing should be determined based on Middlesex county alone, with no reference to the Hartford metropolitan statistical area. A close reading of § 248.141(c)(1), however, reveals that "[for purposes of this section a `housing market area' is defined as an area where rental housing units of similar characteristics are in relative competition with each other. If a project is in a nonmetropolitan area, the housing market area is the county in which the project is located. If the project is located in a metropolitan area the housing market area is the primary metropolitan statistical area (PMSA), or in the case of very large metropolitan areas, the housing market areas may be a portion of the PMSA." (Emphasis added.)
It has already been established, in accordance with the U.S. Census Bureau, that Middletown is a part of a metropolitan statistical area, particularly, Hartford metropolitan statistical area. Further, according to the Census Bureau a "metropolitan area" refers to both metropolitan statistical areas and primary statistical areas collectively. Based on this statistical area analysis, the Census Bureau categorizes Hartford county and parts of Middlesex and Tolland counties, including Middletown, as one metropolitan statistical area and/or primary metropolitan statistical area. According to § 248.141(c)(1), since Middletown is located in a `metropolitan area,' the housing market area is the primary metropolitan statistical area.
See The United States Census Bureau, located at http://www.census.gov/population/www/estimates/metro_general/2006/List1.txt (last visited February 20, 2008).
From the foregoing analysis the Court finds that for purposes of General Statutes § 8-253a(1)(B), reference to "in the area," means that Middletown is a part of the Hartford metropolitan statistical area.
Breach of Contract: Whether Need for Moderate and Low Income Housing Is Acute
From the evidence presented in this case the Court finds that there is an acute need for low and moderate income housing in the Hartford metropolitan statistical area, which includes Middletown, and that that need existed for all times material to this case. Accordingly, CHFA was under no obligation to permit prepayment of the plaintiff's mortgage. Therefore, the Court finds that the plaintiff has not proved its breach of contract claim.
Covenant of Good Faith and Fair Dealing
The court has considered the evidence presented, including assessing the credibility of the witnesses, and finds that the plaintiff has not proved its claim of breach of the covenant of good faith and fair dealing.
Conclusion
For the foregoing reasons, the court enters judgment for defendant Connecticut Housing Finance Authority. Accordingly, the requests of plaintiff Woodrow Wilson for damages, attorneys fees, and injunctive relief are denied.
CBSA Div FIPS CBSA and Division Titles Components Code Code State/County 25540 Hartford-West Hartford-East Hartford, Connecticut Metropolitan Statical Area 25540 09003 Hartford County, CT 25540 09007 Middlesex County, CT 25540 09013 Tolland County, CTSee The United States Census Bureau, located at http://www.census.gov/population/www/estimates/metro_general/2006/List1.txt (last visited February 20, 2008).