HELLIER MANOR APARTMENTS, LTD. APPELLANT
CITY OF PIKEVILLE, KENTUCKY APPELLEE
FROM PIKE CIRCUIT COURT HONORABLE EDDY COLEMAN, JUDGE ACTION
FOR APPELLANT: David C. Stratton Pikeville, Kentucky Michael
P. Abate Louisville, Kentucky
ARGUMENT FOR APPELLANT: Michael Abate Louisville, Kentucky
AND ORAL ARGUMENT FOR APPELLEE: Russell H. Davis, Jr.
BEFORE: JOHNSON,  D. LAMBERT, AND J. LAMBERT, JUDGES.
Manor Apartments, Ltd., appeals a judgment of the Pike
Circuit Court arising from an agreement under which the City
of Pikeville provided Hellier with funds to construct an
apartment complex containing 20% low-income residential
housing. After reviewing the record in conjunction with the
applicable legal authorities, we affirm that portion of the
circuit court's judgment concerning repayment of the loan
funds and reverse that portion of the judgment which
improperly calculated the appropriate pre-judgment and
post-judgment interest to be applied to the loan.
the underlying facts are not in dispute, the issues before us
are purely questions of law and contract interpretation. On
September 10, 1985, the City of Pikeville and the U.S.
Department of Housing and Urban Development ("HUD")
entered into a Housing Development Grant Agreement, a
specialized type of grant designed to encourage the
construction of low-income housing. HUD granted Pikeville $1,
430, 002.00 to disburse with the stipulation that the project
be comprised of at least 20% low-income residents. The Grant
Agreement specified that Hellier would receive the grant
funds provided to Pikeville for construction of the project.
The term of the loan to Hellier was twenty years, with HUD
having the power to grant extensions beyond that period.
Hellier subsequently obtained the $1, 430, 002.00, another
$1, 500, 000.00 in bonds, and $347, 778.00 in private funds
and constructed a 60-unit apartment complex, with 12 units
designated for low-income occupants.
Grant Agreement defined what constituted a "substantive
violation" and gave Pikeville specific instructions to
follow in the event Hellier committed a substantive
violation, stating, "the amount of [the] HDG [Housing
Development Grant] to be repaid shall be reduced by ten
percent (10%) for each full year in excess of 10 years that
intervened between the beginning of the term of the
Owner/Grantee Agreement and the Substantive Violation."
However, Section 7.04(a) of the Grant Agreement states in
pertinent part, "[Pikeville] may, at [Pikeville's]
option, include provisions for repayment even when there is
no Substantive Violation or debt forgiveness at the end of 20
years or such longer period as may be required by the Exhibit
D of this Grant Agreement and shall be executed on behalf of
[Hellier] by authorized individual(s)." Section 8.04(c)
of the Grant Agreement states, in relevant part,
"Except[ing]. . . Exhibit D of this Grant Agreement,
Program Income received after completion of assisted
activities shall be treated as miscellaneous revenue, and
shall be used by [Pikeville] to support the construction,
rehabilitation or operation of real property to be used
primarily for low and moderate income residential
purposes." There is no allegation that Hellier committed
any substantive violations. Exhibit D(V)(B) of the Grant
Repayment of the HDG loan shall be as follows: The
annual payback of $105, 100 is predicated upon a 7% simple
interest rate per year non-compoundable for a period of 20
years. Payment of this amount will be made after payment of
operating expenses, debt service on the first mortgage, and
no more than a twelve percent (12%) cash-on-cash return on
[Hellier's] equity investment. Any unmet portion of the
payment shall accrue and shall be payable at the time of
Project sale or refinancing. Total repayment of the . . . HDG
loan shall be $2, 102, 000.
was never any repayment under these terms as the income
generated by the housing did not exceed the parameters
entered an Owner/Grantee Agreement with Hellier on September
23, 1985, as required by the Grant Agreement. The
Owner/Grantee Agreement states, in pertinent part,
WHEREAS, [Pikeville] and [Hellier], pursuant to the terms of
the Grant Agreement, desire to enter into an Agreement
providing for a grant by [Pikeville] to [Hellier] of an
amount not to exceed $1, 430, 002.00, ...