Callaway Manor Apartments v. United States

United States Court of Appeals
for the Federal Circuit
______________________

CALLAWAY MANOR APARTMENTS, LTD., FOX
GARDEN APARTMENTS, LTD., FOX MANOR
APARTMENTS, LTD., LAKE GARDEN
APARTMENTS, LTD.,
Plaintiffs-Appellants

v.

UNITED STATES,
Defendant-Appellee
______________________

2018-1926
______________________

Appeal from the United States Court of Federal Claims
in Nos. 1:14-cv-00332-EGB, 1:14-cv-00333-EGB, 1:14-cv-
00334-EGB, 1:14-cv-00335-EGB, Senior Judge Eric G.
Bruggink.
______________________

Decided: October 2, 2019
______________________

MARK BLANDO, Eckland & Blando LLP, Minneapolis,
MN, argued for plaintiffs-appellants. Also represented by
JEFF HOWARD ECKLAND, VINCE REUTER, LARA SANDBERG;
WILLIAM LEWIS ROBERTS, Faegre Baker Daniels LLP, Min-
neapolis, MN.

GEOFFREY MARTIN LONG, Commercial Litigation
Branch, Civil Division, United States Department of
2 CALLAWAY MANOR APARTMENTS v. UNITED STATES

Justice, Washington, DC, argued for defendant-appellee.
Also represented by JOSEPH H. HUNT, ROBERT EDWARD
KIRSCHMAN, JR., FRANKLIN E. WHITE, JR.
______________________

Before O’MALLEY, LINN, and HUGHES, Circuit Judges.
Opinion for the court filed by Circuit Judge O’MALLEY.
Opinion concurring-in-part and dissenting-in-part filed by
Circuit Judge HUGHES.
O’MALLEY, Circuit Judge.
Appellants Callaway Manor Apartments, Fox Garden
Apartments, Fox Manor Apartments, and Lake Garden
Apartments (collectively, “Appellants”) appeal from a deci-
sion of the United States Court of Federal Claims (“Claims
Court”) granting the government’s motion for summary
judgment on certain breach of contract and takings claims.
Callaway Manor Apartments, Ltd. v. United States, 136
Fed. Cl. 313 (2018). We find that the Claims Court improp-
erly applied the law on the first issue and did so, in part,
with respect to the second issue. Therefore, we reverse-in-
part, vacate-in-part, affirm-in-part, and remand.
I. BACKGROUND
A. The Asserted Contracts
Between 1983 and 1984, Appellants each entered into
identical loan arrangements with the Farmers Home Ad-
ministration (“FmHA”) of the United States Department of
Agriculture. Under the loan arrangements, FmHA issued
Appellants mortgage loans in exchange for Appellants
providing housing for low-income tenants during the life of
the loans (50 years) under Section 515 of the Housing Act
of 1949, 42 U.S.C. §§ 1485, 1490a.
The loan arrangements consisted of three contempora-
neously executed documents: a loan agreement, promissory
note, and mortgage. Together, the parties labeled these
CALLAWAY MANOR APARTMENTS v. UNITED STATES 3

three documents the “loan obligation.” J.A. 32 (“The in-
debtedness and other obligations of the Partnership under
the [promissory] note evidencing the loan, the related secu-
rity instrument[,] and [any] related agreement are herein
called the ‘loan obligation.’”).
The loan agreement described the terms of the loan, re-
citing that FmHA would provide a loan to Appellants in ex-
change for Appellants abiding by certain restrictions on use
of the property prescribed by § 515. J.A. 32–34. 1 The
promissory note, issued under a 50-year term, detailed the
amount of the debt and terms of payment, including provid-
ing that the “[p]repayment[] of scheduled installments, or
any portion thereof, may be made at any time at the option
of the Borrower.” J.A. 40–41. Finally, the mortgage—
which noted that the loan must be used in compliance with
§ 515 and FmHA regulations—recited an additional use re-
striction that required Appellants to use the property for
low-income § 515 housing for 20 years before they could
prepay the loan and exit the § 515 program. J.A. 4, 35, 39.
In addition to being contemporaneously executed and
pertaining to the same set of facts, the three documents
also cite to each other. For example, the mortgage refer-
enced the promissory note and expressly incorporated by
reference the loan agreement. J.A. 4, 39. And, the loan
agreement incorporated by reference both the promissory
note and mortgage. J.A. 4, 32.
It is undisputed that, under the loan obligation and the
FmHA regulations at the time the parties entered the ar-
rangement, Appellants were required to use the loan for

1 The parties agree that the terms of the loan agree-
ments, promissory notes, and mortgages are identical
among all Appellants. Appellant Br. 3 n.1; Government Br.
6. We, therefore, cite to instruments only between Calla-
way Manor and the Government for simplicity.
4 CALLAWAY MANOR APARTMENTS v. UNITED STATES

§ 515 housing for a minimum of 20 years. But the moment
the 20-year restrictive use period expired, Appellants could
prepay the remaining balance on the loan, exit the pro-
gram, and terminate the requirement of using their prop-
erty for § 515 housing. See Appellant Br. 4; Government
Br. 4.
B. Enactment of ELIHPA and HCDA
Before Appellants’ 20-year restrictive use period
ended, Congress, concerned with the vitality of the § 515
program due to the number of borrowers exercising their
prepayment options, enacted the Emergency Low Income
Housing Preservation Act of 1987, Pub. L. No. 100-242, 101
Stat. 1877 (1988) (“ELIHPA”) and the Housing and Com-
munity Development Act of 1992, Pub. L. No. 102-550, 106
Stat. 3672 (1992) (“HCDA”).
Under ELIHPA and HCDA, regardless of the terms of
any loan agreement, the borrower may no longer prepay
loan installments at any time after the 20-year restrictive
use period ends. The borrower, rather, must file a notice of
intent to prepay the loan, to which the Department of Ag-
riculture’s Office of Rural Development and its agency, the
Rural Housing Service (FmHA’s successor), must respond
by “mak[ing] reasonable efforts to enter into an agreement
with the borrower . . . to extend the low income use of the
assisted housing.” 42 U.S.C. § 1472(c)(4)(A) (2012). For
example, Rural Development may offer the borrower incen-
tives to remain in the low-income housing program, includ-
ing, e.g., reduced interest rates or rental assistance. 42
U.S.C. § 1472(c)(4)(B) (2012); 7 C.F.R. § 3560.656. If the
borrower rejects these incentives or the agreement is not
extended, the borrower must attempt to sell the property
at fair market value to either a nonprofit organization or a
public agency. 42 U.S.C. § 1472(c)(5)(A)(i); 7 C.F.R.
§ 3560.658. Finally, if a sale is not completed within 180
days from that point, the borrower may prepay the loan
without any further restrictions. 42 U.S.C.
CALLAWAY MANOR APARTMENTS v. UNITED STATES 5

§ 1472(c)(5)(A)(ii); 7 C.F.R. § 3560.659(k); see also Rural
Development Multifamily Housing Project Servicing
Handbook, HB-3-3560, Chapter 15.31 (requiring the Loan
Servicer to “[s]end a letter to the borrower notifying him or
her that prepayment is permitted” if no sale is completed
within the 180-day period).
As relevant here, because of the enactment of ELIHPA
and HCDA, Appellants could not automatically prepay
their loan at the end of the 20-year restrictive use period
like their loan obligations had permitted. Appellants, ra-
ther, were required to follow the procedure outlined above
before they were given the option to prepay the loan and be
released from the § 515 restrictions.
C. Appellants’ Restrictive Use Period Ends
Appellants’ 20-year restrictive use period ended in
2003 and 2004, but Appellants did not attempt to exercise
their right of prepayment until 2008. Specifically, on Feb-
ruary 28, 2008, Rural Development sent Appellants writ-
ten notice expressing concern about the economic viability
of their properties. J.A. 59, 138, 203, 271. In response,
Appellants submitted prepayment requests, received by
Rural Development on April 28, 2008, expressing their de-
sire to prepay their respective loans by December 1, 2008.
J.A. 6, 65–66, 142–43, 207–08, 275–76.
Consistent with the requirements of ELIHPA and
HCDA, Rural Development offered Appellants incentives
to keep the properties in the § 515 housing program.
J.A. 328, 338–39. Appellants rejected the incentive offers
and, in 2009 through 2010, marketed their properties for
the required 180-day period but were ultimately unable to
sell the properties. J.A. 6. At this point, it is undisputed
that Appellants satisfied the ELIHPA and HCDA require-
ments and could have prepaid the loans to be released of
the restrictive use requirements.
6 CALLAWAY MANOR APARTMENTS v. UNITED STATES

In September 2010, facing foreclosure of their proper-
ties and having difficulty maintaining occupancy due to
“high unemployment and loss of jobs in the area,” Appel-
lants requested that Rural Development allow them to of-
fer deeds in lieu of foreclosure. See J.A. 70–71, 153–54,
211–12, 279–80. In February 2011, Rural Development in-
formed Appellants that, due to their violation of the loan
agreement for various reasons including non-payment of
debt, their debt to the Government would be accelerated.
J.A. 72–74, 155–57, 213–15, 281–83. Appellants thus of-
fered Rural Development their deeds in lieu of foreclosure
on May 18, 2011, which Rural Development accepted in No-
vember 2011. J.A. 115, 180, 247, 314. Appellants officially
transferred the deeds to Rural Development on August 1,
2012. J.A. 7.
The accepted deed offers included multiple enclosures,
including Form RD 3560-22, “Offer to Convey Security,”
(hereinafter, the “Offer”) which stated:
I. We hereby offer to convey to the United States of
America, acting through the Rural Housing Service
. . . our property covered by mortgages, deeds of
trust, or other security instruments held or insured
by the Agency[] in full satisfaction of debt.
* * *
IV. At closing the following will be assigned to the
Agency: . . . (4) all our rights, title, and interest in
all contract rights, inventories, equipment, fur-
nishings, accounts, general intangibles, gross re-
ceipts, gifts, pledges, income, and revenue as
described in security instruments held or insured
by the Agency.
J.A. 90, 159, 226, 293. This Offer language is central to the
parties’ breach of contract claims.
CALLAWAY MANOR APARTMENTS v. UNITED STATES 7

D. Procedural History
On April 22, 2014, Appellants each sued the Govern-
ment in the Claims Court for breach of contract or, in the
alternative, a taking in violation of the Fifth Amendment
based on the Government’s failure to permit Appellants to
prepay their debt once the 20-year restrictive period ended.
Appellants’ cases were consolidated on April 15, 2016. On
February 21, 2017, the Government moved to dismiss Ap-
pellants’ breach of contract claim under Rule 12(b)(1) and
moved for judgment on the pleadings as to Appellants’ tak-
ings claim. First, the Government argued that Appellants
lacked standing to bring the breach of contract claim be-
cause, in executing the deeds in lieu of foreclosure, Appel-
lants assigned the right to sue for breach of the prepayment
right to the Government and, thus, could not demonstrate
any redressable injury. Second, the Government argued
that, even assuming interference with Appellants’ contract
rights, the Government’s action could not constitute a tak-
ing because it was acting in a proprietary, not sovereign,
capacity.
On August 8, 2017, the Claims Court converted the
Government’s motion to dismiss to one for summary judg-
ment and directed the parties to submit proposed findings
of fact. On February 28, 2018, the Claims Court granted
the Government’s motion. Callaway Manor, 136 Fed. Cl.
at 315.
First, regarding the breach of contract claim, the
Claims Court relied on Dominion Res., Inc. v. United
States, 641 F.3d 1359, in holding that, “[a]n assignment
may be effective to transfer the right to bring a claim for
damages resulting from breach of a contract, because the
rights of a party to a contract encompass not just the
party’s continuing rights and duties under the contract, but
also the party’s existing right to enforce the contract for an
ongoing breach and to collect damages that have been in-
curred.” Callaway Manor, 136 Fed. Cl. at 318 (internal
8 CALLAWAY MANOR APARTMENTS v. UNITED STATES

quotation marks omitted). And, here, the Claims Court
found that the loan agreement, promissory note, and mort-
gage were “all of one piece.” Id. at 320. The court thus
concluded that the reference in the Offer to “all our
rights . . . in all contract rights . . . described in the secu-
rity instruments” “clearly incorporate[d] the contract
rights set out in the [promissory] note”—namely, the right
to prepayment. Id. Accordingly, when Appellants assigned
their contract rights to the Government, “the prepayment
right was no longer enforceable.” Id. The contemporane-
ous circumstances, according to the Claims Court, sup-
ported this outcome. The court explained that the events
surrounding Appellants’ assignment established that Ap-
pellants “sought a clean exit from the program” and “did so
without carving out the right to later bring a breach of con-
tract claim.” Id. at 319–20. The court, therefore, concluded
that Appellants lacked standing to bring the breach of con-
tract claim and granted summary judgment on this issue
in favor of the Government. Id. at 320.
Second, regarding the takings claim, Appellants pre-
sented two theories, one based on the Government’s breach
of the prepayment right and one based on a regulatory tak-
ing based on enactment of ELIHPA and HCDA. As to the
former, the court held that a takings claim may only result
from a contractual breach when the Government prevents
performance of the contract and substantially takes away
the right to damages. Id. But, here, while ELIHPA and
HCDA prevented Appellants from prepaying their loans at
the 20-year mark, the Government did not deprive Appel-
lants of the right to sue for breach of contract. The court
emphasized that “[t]he fact that [Appellants] chose to
transfer the properties and associated contract rights to
the government after they placed the government in breach
does not create a taking.” Id. The court also rejected Ap-
pellants’ regulatory taking theory, explaining that the ad-
ditional burdens imposed by ELIHPA and HCDA were the
CALLAWAY MANOR APARTMENTS v. UNITED STATES 9

result of the Government’s contract breach and, thus, could
not constitute the basis of a takings claim. Id. at 321.
Appellants timely filed the instant appeal on April 27,
2018, arguing that they did not assign the Government
their accrued claims for breach of contract and that they
properly pleaded an alternative takings claim. For the rea-
sons below, we agree with Appellants on both issues. We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
II. DISCUSSION
All issues presented in this appeal—standing, contract
interpretation, and whether a taking has occurred—are
questions of law that we review de novo. See Castle v.
United States, 301 F.3d 1328, 1337 (Fed. Cir. 2002); NVT
Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir.
2004); Barlow & Haun, Inc. v. United States, 805 F.3d
1049, 1054 (Fed. Cir. 2015). We review any underlying fact
findings for clear error. CliniComp Int’l, Inc. v. United
States, 904 F.3d 1353, 1357 (Fed. Cir. 2018). Summary
judgment, moreover, “is, of course, in all respects reviewed
de novo.” Cienega Gardens v. United States, 331 F.3d 1319,
1328 (Fed. Cir. 2003).
A. Contract Claim
The Tucker Act grants the Claims Court jurisdiction
over “any claim against the United States founded . . . upon
any express or implied contract with the United States.”
28 U.S.C. § 1491(a)(1). On appeal, the Government argues
that Appellants lack Article III standing to assert their
contract claim. To establish standing, a plaintiff must
show that it suffered an injury in fact that is causally con-
nected to the conduct complained of and redressable by
court action. Lujan v. Defenders of Wildlife, 504 U.S. 555,
560–61 (1992). According to the Government, Appellants
have no legal right to enforce their breach of contract
claim—and thus cannot establish a redressable injury—be-
cause they assigned their prior accrued claims for breach
10 CALLAWAY MANOR APARTMENTS v. UNITED STATES

of contract to the Government when they transferred their
deeds with the Offer.
Appellants contend that, in transferring their deeds to
the Government with the Offer, they did not assign away
their accrued claims for breach of the prepayment right
and, thus, retain standing to pursue this claim. According
to Appellants, the Claims Court erroneously applied Do-
minion in determining whether the Offer included an as-
signment of Appellants’ prior accrued contract rights of
action. Under a proper reading of Dominion and our prior
caselaw, Appellants contend that no express or implied as-
signment of accrued rights occurred here. We agree with
Appellants.
Before addressing Dominion, we must address an ear-
lier case, Ginsberg v. Austin, 968 F.2d 1198 (Fed. Cir.
1992), in which we articulated the standard for determin-
ing whether an assignment incorporates prior accrued
claims. In Ginsberg, a landlord leased space in a building
to a government tenant. During the holdover period fol-
lowing the lease’s termination date, the landlord sold the
building to a third party. Under the sales contract, the
landlord assigned to the third party “all of [his] right, title
and interest in, to and under the Tenant Leases . . . .” Gins-
berg, 968 F.2d at 1199. The day before the sale closed, the
landlord filed a claim with the contracting officer for addi-
tional rent incurred by the government’s holdover. The
contracting officer dismissed the landlord’s claims for lack
of standing, and the landlord appealed to the Board of Con-
tract Appeals. The Board affirmed the contracting officer’s
determination, explaining that the landlord’s contract with
the third party was “an unqualified transfer to [the third
party] of all right, title, claim and interest in the lease, in-
cluding claims for back rent.” Id. at 1200. As such, the
landlord was no longer in privity with the government and
lacked standing to make any claim against it.
CALLAWAY MANOR APARTMENTS v. UNITED STATES 11

On appeal to our court, we reversed. We explained that
the Board’s decision—based on “the purely legal determi-
nation that upon transfer of real property, all rights to back
rent are transferred to the assignee unless those rights are
expressly reserved to the assignor”—was an error of law.
Id. Noting that federal law was not dispositive of the issue,
we turned to general property and contract law principles,
explaining that, in both contexts, “uniform and long-stand-
ing legal authority” dictates that accrued claims are not
transferred with an assignment unless expressly stated.
Id. at 1200–02 (first citing Shell Petroleum Corp. v. Jack-
son, 77 F.2d 340, 342 (6th Cir. 1935) (“[I]t is well settled
that in the absence of an express intention to do so, an as-
signment of a reversionary interest in a lease will not cover
rent already accrued.”); and then citing Nat’l Reserve Co. of
Am. v. Metro. Tr. Co. of Cal., 17 Cal. 2d 827, 833 (1941)
(“[U]nless an assignment specifically or impliedly desig-
nates them, accrued causes of action arising out of an as-
signed contract . . . do not pass under the assignment as
incidental to the contract if they can be asserted by the as-
signor independently of his continued ownership of the con-
tract and are not essential to a continued enforcement of
the contract.”)). Accordingly, we concluded that, because
the landlord did not expressly state that he was transfer-
ring his back-rent claim in the contract to the third party,
he retained his accrued claims and possessed the requisite
standing to pursue them on the merits. Id. at 1202.
Almost twenty years later, in Dominion, we again con-
sidered the relationship between an assignment of contract
rights and prior accrued claims in the context of an assign-
ment of contracts for disposal of spent nuclear fuel entered
into under the Nuclear Waste Policy Act (“NWPA”), 42
U.S.C. § 10222(b)(3). Under the NWPA, the United States
Department of Energy may enter into contracts with utility
companies for the disposal of the utilities’ high-level nu-
clear waste and spent nuclear fuel. As relevant in Domin-
ion, one such utility company entered into three contracts
12 CALLAWAY MANOR APARTMENTS v. UNITED STATES

with the Department of Energy and, later, sold its nuclear
power plants to a third party and assigned that third party
its contracts with the government. 641 F.3d at 1361. The
assignment provided that the utility company transferred
to the third party, along with title to the spent nuclear fuel,
“all rights of the Sellers . . . under the [Department of En-
ergy] Standard Contracts (including all rights to any
claims of Sellers related to DOE defaults thereunder).” Id.
The third party ultimately sued the government in the
Court of Federal Claims for interim storage costs, including
costs incurred by the original utility company prior to the
assignment. The Claims Court ruled in favor of the third
party, awarding it costs including those incurred by the
original utility company. On appeal to our court, the gov-
ernment argued that the third party was not entitled to sue
for the originally incurred costs, not because the assign-
ment did not expressly include a transfer of accrued claims,
but because such a transfer under the NWPA was barred
by the Assignment of Claims Act. Id. at 1361. According
to the government, Congress was required under Ginsberg
to expressly waive the Assignment of Claims Act as to ex-
isting breach of contract claims for such a transfer to be
valid. That is, it was undisputed that the assignment ex-
pressly included any prior accrued claims because the as-
signment included the clause, “including all rights to any
claims of Sellers.” Dominion, 641 F.3d at 1361. And, the
court found it undisputed that “both parties clearly in-
tended for the sale to include the transfer of the claim
against the government.” Id. The only issue for our court,
therefore, was whether a transfer of prior accrued claims
was permitted under the NWPA and the Assignment of
Claims Act. Id. at 1362.
We determined that such an assignment was permitted
because the NWPA included language that “‘[t]he rights
and duties of a party to a contract entered into under this
section may be assignable’” and “[o]ne of the rights of a
party to a contract is the right to bring a claim for damages
CALLAWAY MANOR APARTMENTS v. UNITED STATES 13

resulting from breach.” Id. at 1362–63 (quoting 42 U.S.C.
§ 10222(b)(3)). Notably, in reaching our conclusion that
Congress permitted the assignment of accrued claims
based on the language of the NWPA, we emphasized that
our ruling was “not to the contrary” of Ginsberg. Id. at
1363. We explained that, “Ginsberg recite[d] no require-
ment that the transfer of an existing breach of contract
cause of action requires a separate, specific, express desig-
nation of the claim in the assignment document” and, ra-
ther, “a contract assignment may ‘specifically or impliedly
designate’ accrued causes of action.” Id. (quoting Ginsberg,
968 F.2d at 1201). And, here, the NWPA’s “may be assign-
able” language “permitted just such a designation.” Id. Fi-
nally, having determined that the assignment was
permitted, and because “[t]his [wa]s not a case where there
[wa]s any confusion over whether the parties intended to
transfer the right to sue for pre-acquisition interim storage
fees—it [wa]s undisputed that they did[,]” we held that the
third party had the right to collect pre-assignment dam-
ages. Id.
Together, Ginsberg and Dominion establish that a con-
tract assignment does not automatically transfer prior ac-
crued claims stemming from that contract, but that any
such assignment may include prior accrued claims, specif-
ically or impliedly. Here, the assignment did not include
Appellants’ prior accrued claims for breach of contract.
The language at issue stems from the Offer, which pro-
vides that Appellants assigned “all [their] rights, title, and
interest in all contract rights . . . as described in security
instruments.” It is undisputed that an assignment of ac-
crued claims is permitted under Appellants’ contracts with
the government. See Appellant Reply Br. 6. But merely
because such an assignment was permitted does not signify
that those accrued claims were actually included within
the assignment. See Dominion, 641 F.3d at 1363. That is,
in both Ginsberg and Dominion, we required more than
14 CALLAWAY MANOR APARTMENTS v. UNITED STATES

simply the fact that an assignment of accrued claims was
allowed to find that they were transferred.
In Ginsberg, we required an “express” intention to
transfer prior accrued claims, 968 F.2d at 1202, and in Do-
minion, it was undisputed that, based on both the language
of the assignment and the parties’ intentions, the prior ac-
crued claims were transferred, 641 F.3d at 1363. And,
through Ginsberg and Dominion, we provided examples of
language that does and does not include an assignment of
prior accrued claims. First, in Ginsberg, we found the lan-
guage “Assignor hereby assigns to Assignee all of its right,
title and interest in, to and under the Tenant Leases” in-
sufficient to include an assignment of prior accrued claims.
968 F.2d at 1199. Then, in Dominion, we found the trans-
fer of “all rights of the Sellers . . . under the DOE Standard
Contracts (including all rights to any claims of Sellers re-
lated to DOE defaults thereunder)” was sufficient to in-
clude a transfer of prior accrued claims. 641 F.3d at 1361.
The Offer language at issue here is nearly identical to
that at issue in Ginsberg. Compare J.A. 90 (Offer lan-
guage, “all our rights, title, and interest in all contract
rights . . . as described in security instruments”), with Gins-
berg, 968 F.2d at 1199 (“all of its right, title and interest in,
to and under the Tenant Leases”). Despite the Govern-
ment’s arguments raised for the first time during oral ar-
gument surrounding the temporal distinctions in
Ginsberg—i.e., that the assignment language there indi-
cated that the assignment took effect on December 23,
1986, and the assignor filed a certified claim for backpay
against the government the day earlier—we relied on no
such distinction in concluding that the language at issue
was insufficient to encompass prior accrued claims.
And, contrary to the language found to include prior
accrued claims in Dominion, the Offer does not include any
language related to the Appellants’ “claims,” or any other
type of waiver or release, as the Government conceded
CALLAWAY MANOR APARTMENTS v. UNITED STATES 15

during oral argument. Oral Argument at 15:25, Callaway
Manor v. United States (No. 18-1926), http://oralargu-
ments.cafc.uscourts.gov/default.aspx?fl=2018-1926.mp3
(Q: “There is no statement of release, the word release ap-
pears nowhere, there’s no waiver, there’s nothing of that
sort.” A: “That’s correct, your Honor.”).
Even reading the loan agreement, promissory note, and
mortgage as one piece, as the Claims Court did, the Offer’s
reference to “all contract rights . . . in security instruments”
does not include the parties’ prior accrued claims. That is,
even construing the Offer as transferring all rights in the
loan agreement, promissory note, and mortgage to the Gov-
ernment does not automatically include an assignment of
Appellants’ accrued breach of contract claims stemming
from those rights under Ginsberg and Dominion. The par-
ties, moreover, defined the three documents collectively as
the “loan obligation” and chose not to use that language in
the Offer. It is, therefore, unclear that the parties even in-
tended the Offer to encompass all rights in the three agree-
ments by only referencing “security instruments,” which
the Government concedes refers only to the mortgage, not
the promissory note encompassing the prepayment right.
Accordingly, under our precedent, the express language of
the Offer does not encompass an assignment of Appellants’
prior accrued breach of contract claims.
Finally, contrary to the Government’s arguments, the
circumstances surrounding the Offer do not establish an
implied assignment of prior accrued claims. Rather, draw-
ing all inferences in favor of Appellants as the nonmovant,
the surrounding circumstances show that Appellants in-
tended to prepay the debt and recover their properties in
2008 but, at least based in part on the statutory require-
ments preventing prepayment, suffered three additional
years of reduced housing rates and insufficient funds, ulti-
mately forcing them to offer their deeds in lieu of foreclo-
sure. While these circumstances support a finding that
Appellants sought to exit the § 515 program, they do not
16 CALLAWAY MANOR APARTMENTS v. UNITED STATES

demonstrate that Appellants or the Government under-
stood or intended the Offer to include Appellants’ prior ac-
crued claims.
And, the Government has not pointed to a single refer-
ence to the contrary. In fact, the Government conceded
during oral argument that all the Offer-related documents
in the record deal with conveying the property or extin-
guishing the loan and nothing “suggested that there was
any interest, concern, waiver, release, or anything of that
sort with respect to any sort of an accrued cause of action,”
nor is there anything in the record that “suggests or implies
that anybody was even thinking about conveying an im-
plied cause of action.” Oral Argument at 17:05,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2
018-1926.mp3.
Accordingly, because Appellants did not expressly or
impliedly assign the Government their accrued claims for
breach of contract based on the prepayment right, Appel-
lants retain the legal right to pursue those claims and have
established standing. We, therefore, reverse the Claims
Court’s decision that Appellants lack standing and remand
for the court to consider the merits of that claim.
B. Takings Claim
Appellants additionally argue that the Claims Court
erroneously dismissed their alternative Fifth Amendment
takings claim. Appellants base their takings claim on two
theories: (1) “the repudiation of the prepayment right itself
constituted a taking of a contract right;” and (2) “the regu-
latory burden placed on the properties as a result of
[ELHIPA] constituted a taking of real property.” Appellant
Br. 39.
Regarding the first theory, Appellants argue that the
Claims Court’s denial “is intrinsically tied to its holding re-
garding the Appellants’ breach of contract claims” and, be-
cause the Offer “cannot reasonably be interpreted as
CALLAWAY MANOR APARTMENTS v. UNITED STATES 17

assigning the Government each Partnership’s prepayment
right,” we should reverse the Claims Court’s decision. Id.
at 39–40. Regarding the second theory, Appellants argue
that the Claims Court “erroneously conflate[d] the taking
of real property with the taking of a contract right.” Id. at
42. Appellants contend that they have property rights in-
dependent from their contracts with the Government and
that, through the enactment of ELIHPA, the Government
“imposed significant restrictions on each owner’s property
for its entire useful life.” Id. at 40. According to Appel-
lants, these restrictions constitute a taking because they
interfered with Appellants’ property rights and invest-
ment-backed expectations and required Appellants “to
charge restricted rents and house low-income tenants for
an additional un-bargained-for period of thirty years.” Id.
at 41. We uphold the Claims Court’s decision under the
first theory but agree with Appellants as to the latter.
Under the Fifth Amendment, no “private property
[shall] be taken for public use, without just compensation.”
U.S. Const. amend. V. Whether a regulatory taking has
occurred involves a “two-tiered” inquiry, under which the
court must determine: (1) “the nature of the interest alleg-
edly taken to determine whether a compensable property
interest exists;” and (2) “whether the interest allegedly
taken constitutes a compensable taking of that interest for
a public purpose.” Chancellor Manor v. United States, 331
F.3d 891, 901–02 (Fed. Cir. 2003).
Here, the Claims Court properly dismissed Appellants’
first, contract-based theory. We have explained that, when
entering contracts, “‘the Government acts in its commercial
or proprietary capacity . . . , rather than its sovereign ca-
pacity’ and therefore the ‘remedies arise from the contracts
themselves, rather than from the constitutional protection
of private property rights.’” Piszel v. United States, 833
F.3d 1366, 1376 (Fed. Cir. 2016) (quoting Hughes
Commc’ns Galaxy, Inc. v. United States, 271 F.3d 1060,
1070 (Fed. Cir. 2001)).
18 CALLAWAY MANOR APARTMENTS v. UNITED STATES

Even assuming the Government was acting in its sov-
ereign capacity, “to effect a taking of a contract right when
performance has been prevented, the government must
substantially take away the right to damages in the event
of a breach.” Id. at 1377 (citing Castle v. United States, 301
F.3d 1328, 1342 (Fed. Cir. 2002)). Aside from the argu-
ments it makes in this proceeding, which we have rejected,
the Government has done nothing to try to prevent Appel-
lants from seeking damages. Rather, the Government con-
ceded that Appellants could have brought a breach of
contract claim at the time of conveying their deeds in lieu
of foreclosure. Government Br. 36–37. Accordingly, Appel-
lants cannot succeed on a takings theory premised on a
breach of their prepayment right.
But Appellants can succeed under their second, prop-
erty-based theory. This theory is premised on Appellants’
real property interests in the land and buildings—interests
they retained prior to entering the § 515 contracts with the
Government. See Cienega, 331 F.3d at 1328 (“[A]s title-
holders to land on which the apartment buildings were
erected, the plaintiffs had fee simple ownership.”); Chan-
cellor Manor, 331 F.3d at 903. For example, due to their
status as titleholders, Appellants had “inherent rights to
rent [their] land at any price [they] can command.”
Cienega, at 1329. And, we have explained that when prop-
erty owners do not convey any interest in their land to the
Government but, rather, simply contract with the Govern-
ment not to assert rights they otherwise could have, “[t]he
owners are not somehow deprived of their Fifth Amend-
ment rights merely because they temporarily relinquished
some of their rights of fee simple ownership.” Id. The own-
ers’ retained property rights, rather, “put them well within
the categories shown by precedent to invoke the Takings
Cause of the Fifth Amendment.” Id.
Here, simply because Appellants contracted with the
Government to abide by the § 515 program does not deprive
them of their Fifth Amendment rights. That is, Appellants
CALLAWAY MANOR APARTMENTS v. UNITED STATES 19

had valid property rights in the land at the time of the al-
leged taking. And, Appellants have properly asserted a
regulatory taking claim based on the enactment of
ELIHPA and HCDA. According to Appellants, the enact-
ment of those statutes imposed burdens on their property
interest by, for example, prohibiting prepayment absent
HUD approval. Contrary to the Claims Courts’ determina-
tion that this theory was “tied to the breach of the contrac-
tual prepayment right,” Appellants’ claim is based on the
fact that they “agreed to be subject to a temporal morato-
rium on their right to exclusive possession” but, under
ELIHPA and HCDA, were subject to “additional and con-
tinued limitation[s] on [their] ability to unfettered use of
the property.” Chancellor Manor, 331 F.3d at 903.
Having established that Appellants have presented a
proper alternative takings claim based on the allegedly di-
minished value of their real property, the Claims Court
must consider in the first instance whether such a claim is
compensable. See Penn Cent. Transp. Co. v. City of New
York, 438 U.S. 104, 124 (1978). Accordingly, we affirm-in-
part and vacate and remand-in-part the Claims Court’s de-
cision as to the takings claim.
III. CONCLUSION
For the foregoing reasons, we: (1) reverse the Claims
Court’s decision as to lack of standing on the contract claim
and remand for the court to consider the merits thereof;
and (2) affirm-in-part and vacate and remand-in-part the
Claims Court’s decision as to the takings claim.
REVERSED-IN-PART, AFFIRMED-IN-PART,
VACATED-IN-PART, AND REMANDED
COSTS
No costs.
 United States Court of Appeals
for the Federal Circuit
______________________

CALLAWAY MANOR APARTMENTS, LTD., FOX
GARDEN APARTMENTS, LTD., FOX MANOR
APARTMENTS, LTD., LAKE GARDEN
APARTMENTS, LTD.,
Plaintiffs-Appellants

v.

UNITED STATES,
Defendant-Appellee
______________________

2018-1926
______________________

Appeal from the United States Court of Federal Claims
in Nos. 1:14-cv-00332-EGB, 1:14-cv-00333-EGB, 1:14-cv-
00334-EGB, 1:14-cv-00335-EGB, Senior Judge Eric G.
Bruggink.
______________________

HUGHES, Circuit Judge, concurring-in-part and dissenting-
in-part.
I would affirm the decision of the Court of Federal
Claims. As such, I respectfully dissent-in-part.