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Majerle Management, Inc. v. District of Columbia Rental Housing Commission

District of Columbia Court of Appeals


March 15, 2001

MAJERLE MANAGEMENT, INC., PETITIONER,
v.
DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, RESPONDENT.

Before Terry and Reid, Associate Judges, and King, Senior Judge.

The opinion of the court was delivered by: King, Senior Judge

Petition for Review of a Decision of the District of Columbia Rental Housing Commission

Argued January 4, 2001

This petition for review arises from the Rental Housing Commission's ("RHC") adjudication of a tenant's complaint against her housing provider, Majerle Management Inc. ("Majerle"), for asserted rent overcharges and diminution in services and facilities. Although Majerle raises a number of challenges, only two merit extensive discussion: (1) whether the lawful rent ceiling for the tenant was the amount established by the last perfected rent ceiling filing or the unauthorized amount of rent collected before the date reached by the three-year statute of limitations; (2) whether an award for diminution in services and facilities may compensate the tenant for damages occurring not only within the three years prior up to the filing of her complaint, but also through the date of the rehearing.

We conclude, with respect to the first issue, that the rent ceiling, rather than the rent charged, governs. We do not decide the services compensation issue for the reasons stated. Therefore, we remand the case to the RHC for further proceedings on the services compensation issue, but affirm on all other issues.

I.

In the mid 1970s, Bertha Redman ("tenant") first became a tenant in the five-unit apartment building at 4301 Halley Terrace, Southeast. Nearly a decade later, in December 1986, William and Mary Bailey purchased the property as tenants by the entirety and continued to make the units available for rent. On December 22, 1987, as is required by the Rental Housing Act of 1985 ("Act"), *fn1 Mr. Bailey filed an amended registration statement for the property, which was defective in several respects. *fn2 The amended registration form stated that the tenant's rent ceiling and monthly rent had been increased from $218 per month *fn3 to $228 on September 1, 1987. The tenant paid $228 in rent until November 1, 1988, when the rent was again increased and the tenant began paying $239.

On September 1, 1989, Majerle increased the tenant's rent to $250, which the tenant paid. As with the increase of the preceding year, there was no filing with the Rent Administrator requesting authorization for the rent increase. Also during 1989, the roof above the tenant's apartment began to leak, which caused damage to her ceiling.

Near the end of 1989, Mr. Bailey died; his wife assumed full ownership of the property and, soon thereafter, hired Majerle to manage the property. Mrs. Bailey filed two further amended registration forms; one in March 1990, and one in July 1991. The July 1991 filing requested a 4.6% rent increase; it was the only filing, other than the 1987 filing, seeking a rent ceiling increase. Also during July 1991, the tenant's rent was decreased from $250 to $240.

On September 22, 1992, the tenant filed a complaint with the Rental Accommodations and Conversion Division ("RACD") against "Majerle Management Inc./For Mary Bailey and the Estate of William Bailey." In her petition, the tenant alleged, inter alia, that the rent she was being charged exceeded the lawful rent ceiling and that the services and facilities derived from the apartment had been substantially reduced due to several housing code violations, in particular the leaking roof and damaged ceiling.

After a hearing and appeals process spanning nearly seven years, the RHC - the appellate body for the RACD - issued a final decision in June 1999. The RHC awarded the tenant damages, which it trebled, for rent overcharges *fn4 and damages for the diminution in value of services and facilities, caused by the leaking roof and other housing code violations. *fn5 The recovery for the diminution in services and facilities was awarded through the date of the RACD rehearing of the tenant's complaint, i.e., March 1996. In addition, both awards included interest through the date of the RHC's decision. Finally, the RHC also imposed two fines against Majerle: a $500 fine for failing to register under the Act and a $1,000 fine for retaliation against the tenant. Majerle filed a timely petition for review of the RHC's decision.

II.

In reviewing an administrative decision such as the one under review here, this court examines, among other things, whether the findings and conclusions are "[a]rbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or "[u]nsupported by substantial evidence in the record of the proceedings." D.C. Code § 1-1510 (a)(3)(A) & (E) (1999); see also Washington Times v. District of Columbia Dep't of Employment Servs., 724 A.2d 1212, 1216 (D.C. 1999). The scope of our review of the decision is limited, and we will affirm where: (1) the agency's decision states findings of fact on each material, contested issue; (2) those findings are based on substantial evidence; and (3) the conclusions of law flow rationally from the findings. See Washington Times, supra, 724 A.2d at 1216 (quoting Perkins v. District of Columbia Dep't of Employment Servs., 482 A.2d 401, 402 (D.C. 1984) (citations omitted)).

III.

We first address Majerle's challenge to the RHC's determination that the tenant was charged in excess of the lawful rent ceiling. In reaching its decision, the RHC ruled that the lawful rent ceiling was $228 - the amount established by the 1987 filing - and that the tenant was therefore entitled to a refund because she had been charged in excess of that amount. The RHC reasoned that the $228 ceiling was the last ceiling imposed before September 22, 1989 (three years prior to the filing of the complaint), and that because the statute of limitations had run, it could not be challenged by the tenant.

Majerle, relying upon our holding in Kennedy v. District of Columbia Rental Hous. Comm'n, 709 A.2d 94 (D.C. 1998), contends that the tenant's rent ceiling was $250, i.e., the last amount charged before September 22, 1989. It argues that the applicable statute of limitations contained in section 2516 (e) of the Act *fn6 bars a challenge to any rent adjustment (even if the adjustment exceeds the then-existing rent ceiling) made more than three years before the complaint is filed. Thus, so the argument goes, the three-year statute of limitations precludes the tenant's September 22, 1992, challenge to the rent adjustment to $250 made on September 1, 1989 (three years and twenty-one days earlier). In short, Majerle argues that under Kennedy the statute of limitations creates a de facto rent ceiling equal to the rent actually charged on the date three years before the tenant filed her complaint. Because, it is contended, the amount actually charged was $250, that amount becomes the rent ceiling even though the most recent rent ceiling, which was established by the 1987 filing, was $228. Majerle misreads our holding in Kennedy.

In Kennedy, the court considered whether the RHC properly rejected a 1994 complaint by tenants alleging that they had been overcharged from the time their rent ceiling was erroneously calculated eight years earlier. See 709 A.2d at 95. In June 1986, the housing provider in Kennedy filed a certificate of Election of Adjustment of General Applicability that reported an erroneously high rent ceiling due to a miscalculation in applying the consumer price index to the ceiling. *fn7 Rent adjustments filed in subsequent years, which were themselves proper, were calculated using the erroneous 1986 figure. In affirming the RHC's ruling, we concluded that a challenge to the filing made eight years earlier was precisely what section 2516 (e) was designed to preclude. See 709 A.2d at 99. Because the individual adjustments made in 1991-94 (less than three years prior to the filing of the complaint) were themselves proper, notwithstanding the error made in the 1986 filing, we held that the tenants' challenge to the rent ceilings predicated on the asserted eight year-old adjustment was properly rejected. See id.

One need look no further than the RHC's decision in this case to see the proper application of the holding in Kennedy and its interplay with section 2516 (e). The tenant argued before the RHC that the lawful rent ceiling was $218, the amount established before the 1987 filing (which increased the rent ceiling to $228) because the 1987 filing was defective. Relying on Kennedy, the RHC held that the three-year statute of limitations barred an inquiry into the correctness of the 1987 rent ceiling filing. *fn8 Because a challenge by the tenant to the 1987 filing was barred by the three-year limitations period, the rent ceiling of $228 established in that filing was a lawful rent ceiling, even though, as the RHC noted, the filing was in fact defective.

The question we must now answer is whether either a subsequent rent ceiling filing *fn9 or a subsequent rent adjustment superseded the rent ceiling established by the 1987 filing. With respect to the latter, Majerle contends that the rent adjustment made on September 1, 1989, increasing the rent to $250, is not subject to challenge because it was imposed beyond the period established by the statute of limitations. Therefore, Majerle contends that amount constitutes the lawful rent ceiling. We disagree.

Kennedy and section 2516 (e) do not preclude a challenge to a rent adjustment (as opposed to a rent ceiling filing) made more than three years before a complaint is filed, where the adjustment was made in excess of the lawful rent ceiling and without a filing. See Kennedy, 709 A.2d at 98 (approving Ayers v. Landow, TP 21,273 (RHC Oct. 4, 1990), which held the lawful rent ceiling was established by a 1982 filing even though the tenant's complaint was filed in 1988). "The propriety of a particular rent charged by a housing provider can only be judged against the allowable rent ceiling, a figure defined in terms of the sum of the base rent and all subsequent authorized adjustments." Kennedy, 709 A.2d at 99 (emphasis added). A rent charged in excess of the allowable rent ceiling and without authorization is improper regardless of when it was initially collected. Since such an improper and unlawful adjustment cannot be said to have been "implemented under any section of [the Act]," the statute of limitations does not protect the housing provider's attempt to create a de facto ceiling by charging an amount of rent in excess of the lawful ceiling. D.C. Code § 45-2516 (e). To hold otherwise would run counter to the mandate of section 2516 (a) of the Act: "[N]o housing provider of any rental unit subject to [the Act] may charge or collect rent for the rental unit in excess of the amount . . . authorized . . . for the rental unit by [the Act]." D.C. Code § 45-2516 (a) (emphasis added).

The tenant, therefore, was not prohibited from raising a challenge to the propriety of the September 1, 1989, adjustment, even though it was implemented more than three years prior to the filing of the complaint. The RHC correctly found that the 1989 adjustment was unlawful since it exceeded the rent ceiling and had not been authorized by a filing with the Rent Administrator. See D.C. Code § 45-2516 (a). The unauthorized adjustment did not, indeed could not, have superseded the rent ceiling established by the earlier 1987 filing. Thus, the RHC correctly ruled that neither the 1991 filing *fn10 nor the 1989 adjustment superseded the $228 rent ceiling established by the 1987 filing.

Once the lawful rent ceiling ($228) was determined, the RHC calculated the tenant's refund by subtracting the amount of the lawful rent ceiling from the rent actually paid each month for the three-year period. *fn11 Because Majerle does not object to this calculation, we affirm the RHC's award to the tenant for overcharges. *fn12

IV.

Next we consider Majerle's challenge to the award for the diminution in services and facilities. Specifically, Majerle contends that an award may only compensate for damages suffered within the three years immediately preceding the filing of the tenant's complaint. *fn13 Here the RHC awarded damages for the diminution in services and facilities incurred from September 22, 1989 (three years before the filing of the complaint) through September 22, 1992 (the date the tenant filed her complaint), but also extended the award to compensate for the damages suffered through the date of the RACD rehearing.

Majerle contends that the tenant cannot recover for the diminution in services and facilities through the date of the RACD rehearing because Majerle could not have been expected to defend against such an inquiry. In support it cites Menor v. Weinbaum, TP 22,769 (RHC Aug. 4, 1993), a decision by the RHC, which held that "if the filing of the petition were not the cut off point for the issues to be adjudicated, the landlord would never know what was to be defended [against]." Id. at 3 n.6.

The Corporation Counsel, on behalf of the RHC, urges that the RHC should be permitted to award damages for a reduction in services and facilities through the date of the rehearing just as it may award interest for the same period. Whatever the merits of that argument, we will not decide it until the RHC has had the opportunity to directly consider and decide it.

In allowing recovery to the date of the rehearing, the RHC neither cited any statutory or regulatory authority in support nor distinguished Menor, or otherwise explained why the holding in that case should not govern here. We, therefore, remand the case to the RHC for a statement of reasons and the legal principles underlying its decision, including the rationale in favor of, or opposed to, the rule it set forth in Menor. *fn14

V.

In conclusion, we affirm the RHC's ruling that a housing provider is liable for the excess rent charged above the lawful rent ceiling, even if the housing provider began collecting the unlawful rent more than three years before the tenant filed a complaint seeking a refund. The award for the diminution in services and facilities is affirmed except to the extent that it includes damages incurred after the tenant filed her complaint. With respect to that issue, we remand the case to the RHC for further consideration as set forth in this opinion.

So ordered.


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