By Jireh Gibson | Jun 7, 2017

HUNTINGTON – The West Virginia Supreme Court has upheld a lower court's ruling regarding a dispute between the Huntington Housing Authority and the managing general partner of an apartment complex.

In March 2008, Karen Nance, managing partner of the Historic Barnett Apartments LP, and the Old House Doctor purchased the Historic Barnett Hospital and Nursing School. Nance bought the property to redevelop it into low-income housing for the community of Huntington.

The scope of the project for the privately held, for-profit company, included the development of nine one-bedroom apartments. According to court documents, the petitioners sought to benefit from a grant funded under the federal Neighborhood Stabilization Program (NSP) authorized by the American Recover and Reinvestment Act of 2009.

The NSP provided funds to nonprofit organizations, state governments and local governments on a competitive basis with the intent to revive the housing market following the economic recession of 2008. The petitioners were denied funding, hence the reason for their claim.

The petitioners entered into a Consortium Agreement with the Huntington Housing Authority and the Housing Development Corp. in 2009. The defendant, per the agreement, served as the lead in the application process for the NSP grant and was therefore responsible for ensuring compliance with grant requirements.

The respondent entered an NSP contract with the West Virginia Development Office (WVDO) and requested a portion of the funds awarded to the state be given to the Consortium. A 60-day notice of termination of the consortium was also a requirement of the agreement between the petitioner and respondent.  

The petitioners' project did not meet certain conditions to qualify for the funding and therefore was removed from the consortium by the respondent. The decision to remove the petitioner from the Consortium was necessary to avoid losing the expected reduced award of $1,391,323, court documents state.

The reduction from $2,177,974 was the result of eligibility problems with several of the projects within in the Consortium. The respondent requested the petitioners’ project be removed from the Consortium via letter on May 21, 2010. The letter sent to the WVDO also sought to replace the petitioners’ project with one of their own.

The petitioners asserted the following claims against the respondent: breach of contract, and breach of good duty. A motion for a summary judgment was filed by the defendant in September 2014.

After further discovery, the court dismissed the promissory estoppel claim since the petitioner allegedly failed to prove the respondent promised NSP grant funding and then breached that promise. Petitioner also argued that by choosing its project over petitioners’ project, the respondent caused additional damages.

The appellate court agreed with the circuit court for each of the petitioners’ claims. The Consortium did not represent a guarantee, but rather a contractual mechanism to seek NSP grant funding as a group consistent with applicable regulations and allowable under the law. Additionally, the petitioner failed to demonstrate how the inadequate notice caused them to suffer damages.

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