Margo GATES & others 1 v. MOUNTAIN VIEW MHC, LLC, & another.2
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Mountain View MHC, LLC (Mountain View), the owner of Mountain View Manufactured Home Park, a manufactured housing community in Ludlow (park), commenced summary process proceedings in the Housing Court to evict several tenants of the park for nonpayment of rent, including a cumulative three-year retroactive rent increase. The tenants asserted in class action counterclaims that the rent increases were illegal and invalid, and that the actions of Mountain View and the manager of the park, Morgan Management, LLC (Morgan), in implementing the increases amounted to unfair or deceptive trade practices in violation of G. L. c. 93A. The Housing Court judge agreed with the tenants and imposed double damages against Mountain View and Morgan (together, appellants) for willful and knowing violations of c. 93A. On appeal, the appellants argue primarily that because the rent increase was approved by the Ludlow Rent Control Board (board) and the tenants did not timely seek judicial review of the board's approval, the tenants’ attacks on the increases are procedurally barred. Morgan also denies responsibility for the violations. We affirm the judgment.
Discussion. 1. Declaratory judgment under G. L. c. 231A. The Housing Court judge dismissed as untimely the tenants’ third-party complaint for judicial review of the board's decision of February 4, 2010, approving the rent increase. See G. L. c. 30A, § 14 (1) (action for judicial review of agency decision “shall, except as otherwise provided by law, be commenced in the court within thirty days”). Nonetheless, the judge granted the tenants’ request for relief under G. L. c. 231A and declared that the board's approval, and Mountain View's implementation, of a retroactive rent increase,4 and of a rent increase that included the cost of upgrading the park's sewer system,5 were unlawful.
The appellants do not contest the judge's determination that the rent increases were unlawful. Rather, they assert that because the increases were authorized by the board, and the tenants did not timely seek judicial review of the board's authorization, the judge abused her discretion in granting declaratory relief. “The normal course of administrative review requires a timely appeal to the Superior Court under G. L. c. 30A, § 14. Absent special circumstances, an action for a declaratory judgment cannot be used as a substitute for timely appeal under G. L. c. 30A, § 14” (emphasis added). School Comm. of Franklin v. Commissioner of Educ., 395 Mass. 800, 807-808 (1985). The judge determined that “[t]he procedural history and substantive determination in this case establish ‘special circumstances of public import,’ Swansea v. Contributory Retirement Appeal Bd., 43 Mass. App. Ct. 402, 406 (1997), which cry out for declaratory relief.” We agree.
In Swansea, 43 Mass. App. Ct. at 406-407, this court concluded that even though the Contributory Retirement Appeal Board lacked jurisdiction to hear the town's untimely appeal from the decision of the county retirement board (county board), declaratory relief from the county board's decision was nonetheless warranted because (1) the county board gave the town incorrect information regarding its right to appeal; (2) there was “a risk of a miscarriage of justice in a matter involving the public interest”; and (3) the town appeared to have meritorious claims “worthy of careful analysis and thoughtful resolution.” Stating that “the decision of the county board, inadequate on its face, has evaded all administrative and judicial review,” this court held that the circumstances warranted declaratory relief, “notwithstanding the expiration of the [applicable] limitations period.” Id. at 407.
Similarly, in Board of Appeals of Rockport v. DeCarolis, 32 Mass. App. Ct. 348, 352-353 (1992) (DeCarolis), this court determined that “special circumstances of public import” warranted declaratory review, notwithstanding the appellant's failure to pursue a timely appeal under G. L. c. 30A, § 14, because the case concerned the respective authority of two different administrative bodies giving conflicting orders. See Sydney v. Commissioner of Corps. & Taxation, 371 Mass. 289, 294-295 (1976) (circumstances favorable to maintenance of declaratory action include “that the issue is important or novel or recurrent; that the decision will have public significance, affecting the interests of many besides the immediate litigants; or that the case reduces to an issue of law without dispute as to the facts”).
“There is a measure of discretion in deciding whether a case is appropriate for declaratory relief.” Boston v. Keene Corp., 406 Mass. 301, 305 (1989). See Sydney, 371 Mass. at 294-295; Boston Safe Deposit & Trust Co. v. Dean, 361 Mass. 244, 248 (1972). The judge enunciated several reasons for exercising her discretion to grant declaratory relief in this case. She stated that the board's action was “legally erroneous in two significant respects,” in that the rent increase was retroactive and violated the Attorney General's regulations governing manufactured housing communities. In addition, the board's action was riddled with “[a] number of procedural irregularities” regarding proper notice to the tenants, the absence of tenant representatives from the board, and the Superior Court mandamus case from which the tenants were effectively excluded. We are not persuaded by the appellants’ contention that this was merely a “private matter.” The case involves public health and safety standards and consumer protections in a regulated industry. Nor was this an isolated incident. As became evident later in the proceedings, Morgan had imposed retroactive rent increases and sought to pass on the costs of repairing septic systems to tenants of a different manufactured housing community in Cheshire.
The decision of the board, “inadequate on its face, has evaded all administrative and judicial review. These circumstances are sufficient to warrant the unusual relief that may and should be provided by proceedings for a declaratory judgment, notwithstanding the expiration of the limitations period.” Swansea, 43 Mass. App. Ct. at 407. The judge acted within her discretion in granting declaratory relief.
2. Res judicata and collateral estoppel. It is implicit in the discussion above that the tenants’ failure to file an appeal from the board's ruling on Mountain View's petition for a rent increase had no preclusive effect with respect to the tenants’ claims for declaratory relief. In both Swansea, 43 Mass. App. Ct. at 406-407, and DeCarolis, 32 Mass. App. Ct. at 352-353, parties that had failed to timely seek judicial review of agency decisions adverse to them were nonetheless permitted to obtain declaratory relief from those decisions.
Nor was the board's decision res judicata as to the tenants’ claims. “Claim preclusion makes a valid, final judgment conclusive on the parties and their privies, and prevents relitigation of all matters that were or could have been adjudicated in the action.” Kobrin v. Board of Registration in Med., 444 Mass. 837, 843 (2005), quoting O'Neill v. City Manager of Cambridge, 428 Mass. 257, 259 (1998). “Similarly, issue preclusion ‘prevents relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies.’ ” Kobrin, supra, quoting Heacock v. Heacock, 402 Mass. 21, 23 n.2 (1988).6
Neither of these doctrines applies. The doctrine of issue preclusion is inapt because the legality of imposing the approved rent increases retroactively, and as a means to recover the costs of bringing the sewage system into compliance with State law, was not raised or decided in the proceedings before the board. See Sarvis v. Boston Safe Deposit & Trust Co., 47 Mass. App. Ct. 86, 99 (1999) (“Issue preclusion can be used only to prevent relitigation of issues actually litigated in the prior action”). Even if those issues had actually been litigated at the board level, Mountain View could not assert those determinations against the tenants because the tenants were not parties to the board proceedings.7 Although the doctrine of collateral estoppel “does not require mutuality of parties,” there must be “an identity of issues, a finding adverse to the party against whom it is being asserted, and a judgment by a court or tribunal of competent jurisdiction.” Miles v. Aetna Cas. & Sur. Co., 412 Mass. 424, 427 (1992). Simply put, the board did not make any findings against the tenants that Mountain View could assert against them in subsequent litigation.
Finally, even if the tenants had intervened in the board proceedings, the doctrine of claim preclusion would not prevent them from filing a subsequent suit under c. 93A. As an initial matter, the tenants’ claims against the appellants had not yet accrued at the time of the board proceedings, as the appellants had not yet imposed any rent increases. Moreover, the board had no jurisdiction to entertain claims under c. 93A. The doctrine of claim preclusion “is a ramification of the policy considerations that underlie the rule against splitting a cause of action, and is ‘based on the idea that the party to be precluded has had the incentive and opportunity to litigate the matter fully in the first lawsuit.’ ” Heacock, 402 Mass. at 24, quoting Foster v. Evans, 384 Mass. 687, 696 n.10 (1981). See Alba v. Raytheon Co., 441 Mass. 836, 841 (2004). The tenants simply had no opportunity to litigate their c. 93A claims in proceedings before the board.
3. Exhaustion of administrative remedies. There is no merit to the appellants’ claim that the tenants were required to exhaust administrative remedies before asserting claims for declaratory relief and violation of c. 93A in the Housing Court. The exhaustion doctrine deprives a court of jurisdiction when administrative proceedings have begun but have not yet been completed. See Murphy v. Administrator of the Div. of Personnel Admin., 377 Mass. 217, 220 (1979); Lumbermens Mut. Cas. Co. v. Workers’ Compensation Trust Fund, 88 Mass. App. Ct. 183, 187 (2015). Here, the administrative proceedings were complete; indeed, the appellants themselves assert that the board reached a final decision on Mountain View's petition for a rent increase in February 2010, and that the tenants are too late to challenge the administrative proceedings.
Aronson v. Brookline Rent Control Bd., 19 Mass. App. Ct. 700 (1985), is not to the contrary. In Aronson, this court held that a rent control board had the inherent power to reopen previously completed adjudicatory proceedings, within a reasonable period of time, to determine whether the proceedings had been tainted by fraud or other misconduct. Id. at 705-708.8 The reopening that this court countenanced in Aronson was not part of the regular administrative process, see id. at 703 & n.8, but rather was seen as a needed “backup” remedy, id. at 706. The tenants here were not required to attempt to reopen the board's adjudication of Mountain View's rent increase petition before proceeding in the Housing Court.
Moreover, the exhaustion requirement may be suspended where, as here, a case raises questions of public importance. See East Chop Tennis Club v. Massachusetts Comm'n Against Discrimination, 364 Mass. 444, 450 (1973). Cf. Sydney, 371 Mass. at 294-295 (applying similar factors in context of declaratory relief from agency decisions). Finally, exhaustion may be excused by statutory directive, such as that appearing in G. L. c. 93A, § 9 (6). See East Chop Tennis Club, supra at 448 & n.3. Under § 9 (6), the tenants were not required to exhaust administrative remedies to bring their c. 93A claims.
4. Mandamus action. When the board suspended hearings on Mountain View's 2007 petition for a rent increase to recover the cost of bringing the sewer system into compliance with the State Environmental Code, Mountain View commenced a mandamus action in the Superior Court to compel the board to act on the petition. By agreement of Mountain View and the board, the matter was remanded to the board for further proceedings, and after the board approved the rent increase in February 2010, Mountain View and the board executed an agreement for judgment, settling the case with “neither party to have the right of appeal.”
We reject the appellants’ contention that the judge in the present Housing Court matter engaged in improper appellate review of the Superior Court “decision.” The tenants cannot be faulted for failing to appeal from the agreement for judgment that Mountain View and the board filed in the Superior Court to settle the case. The tenants were not parties to that case 9 and therefore had no right to appeal. See Corbett v. Related Cos. Northeast, Inc., 424 Mass. 714, 718 (1997). To the extent it has any binding effect whatsoever on the tenants or the Housing Court judge, the agreement for judgment entered in the mandamus case established only that Mountain View had the board's approval to implement a retroactive rent increase. It did not adjudicate the legality of the rent increases under G. L. c. 140, § 32J; G. L. c. 186, § 12; or 940 Code Mass. Regs. § 10.03 (1996), and it did not give Mountain View carte blanche to impose the increases in a manner that violated those provisions.
5. General Laws c. 93A liability. After a trial held on the basis of stipulated facts and exhibits,10 the judge found that the appellants willfully and knowingly engaged in unfair or deceptive trade practices by imposing unilateral and retroactive rent increases, based in part on costs necessary to bring the park's sewer system into compliance, in violation of landlord-tenant law and the regulations governing manufactured housing communities. See Clark v. Leisure Woods Estates, Inc., 89 Mass. App. Ct. 87, 94 (2016) (discussing Attorney General's authority to promulgate regulations specifying acts and practices that violate c. 93A). The judge found that the appellants persisted in efforts to impose and collect the rent increases even after the illegality had been called to their attention by the judge's rulings and the tenants’ c. 93A demand letter served on Morgan. Finding the appellants’ conduct to be “unlawful and ill-advised” but not “egregious,” the judge assessed double damages, as well as attorney's fees and costs.
The judge rejected the appellants’ assertion that their actions were sanctioned by the board's approval of the increases, as do we. Although the board approved the rent increases based on the information before it, it did not have the power to authorize increases that were otherwise illegal. As the judge stated, the board's approval of the rent increases requested by the appellants “in no way excuses [them] from the obligation to act in accordance with applicable regulations and landlord tenant law.” See Whelihan v. Markowski, 37 Mass. App. Ct. 209, 212-213 (1994) (property manager's failure to familiarize himself with State building code before repairing window sufficiently egregious to justify treble damages); Montanez v. Bagg, 24 Mass. App. Ct. 954, 956 (1987) (“Neither the failure of the defendant to apprise himself fully of the law, nor his misapprehension of what he did know about his obligations, is sufficient in the circumstances to negate the conclusion that his conduct runs afoul of the penalty provisions of G. L. c. 93A, § 9”).
The appellants are not entitled to the protection of G. L. c. 93A, § 3, which exempts “transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth or of the United States.” This case is unlike Bierig v. Everett Sq. Plaza Assocs., 34 Mass. App. Ct. 354, 368 (1993), in which the governing statute, regulations, and evidence “clearly established that the rents charged were permitted by the regulatory scheme.” To qualify for the § 3 exemption, “a defendant must show more than the mere existence of a related or even overlapping regulatory scheme that covers the transaction. Rather, a defendant must show that such scheme affirmatively permits the practice which is alleged to be unfair or deceptive.” Id. at 367 n.14, quoting Greaney, Chapter 93A Rights and Remedies § 6-4 (1992). The act and bylaws governing the board do not provide such authority.11
The record belies Morgan's claim that it “was only a manager and there was no evidence of it ever taking part in the so-called unfair and deceptive acts.” To the contrary, Morgan was an “operator” as a matter of law and a matter of fact. Under 940 Code Mass. Regs. § 10.01 (1996), an “operator” is defined as any “person who directly or indirectly owns, conducts, controls, manages, or operates any manufactured housing community, and his/her agents or employees.” Morgan both managed the park and acted as Mountain View's agent.
The evidence showed that Morgan was directly involved in implementing and collecting the retroactive and prospective rent increases. The judge found that the appellants “acted in concert and often indistinguishably from one another in seeking and implementing the illegal rent increase.” In Morgan's response to the tenants’ demand letter, Morgan admitted that it applied for the rent increase on June 29, 2007. The appellants’ submission to the board prior to the February 4, 2010, hearing on the petition for a rent increase referred to Morgan as the petitioner. Later in 2010 the tenants received multiple letters signed by Morgan, sent on Morgan's letterhead, implementing the retroactive and prospective rent increases. Morgan and Mountain View jointly sought and obtained injunctive relief in the Superior Court to prohibit tenants from removing their manufactured homes from the park until they paid amounts owed in retroactive rent. Months after the Housing Court judge declared that the increased rents were illegal, Morgan sent letters terminating the tenants’ tenancies and offering new five-year leases at the increased rates.
The judge was warranted in concluding that both Morgan and Mountain View engaged in “callous and intentional violations of the law” and “willfully or knowingly employed an unfair or deceptive practice.” Heller v. Silverbranch Constr. Corp., 376 Mass. 621, 627 (1978). Accordingly, the award of double damages against both Morgan and Mountain View was not only justified, but required. See Hyannis Anglers Club, Inc. v. Harris Warren Commercial Kitchens, 91 Mass. App. Ct. 555, 560-562 (2017) (judge erred by failing to impose multiple damages where defendant's violation of c. 93A was willful and knowing).
Finally, upon receipt of the tenants’ demand letter in June 2013, Morgan made no offer of settlement, even though the Housing Court had already determined that the rent increases were illegal. The judge found Morgan's failure to make a reasonable offer to be “in bad faith ․ when it knew or had reason to know that its conduct violated G. L. c. 93A.” See G. L. c. 93A, § 9 (3) (providing for multiple damages upon finding that “the refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated [G. L. c. 93A, § 2]”).
Morgan had the burden to prove that its refusal to settle “was reasonable and made in good faith in light of the demand and attendant circumstances.” Parker v. D'Avolio, 40 Mass. App. Ct. 394, 395 (1996). We agree with the judge that Morgan failed to carry its burden. Morgan had ample reason to know the relevant rules and regulations governing manufactured housing communities and the imposition of rent increases -- even before the tenants spelled them out in the demand letter and the judge granted declaratory relief. See Heller, 376 Mass. at 627-628 (“The knowledge or reason to know is that which exists after receipt of the complaint and not at the time of the alleged violation. The standard is objective and requires the defendant to investigate the facts and consider the legal precedents”).
Morgan argues that its refusal to settle was not in bad faith -- not because the rent increases were legal, but because the board had approved them and its decision was final. See Parker, 40 Mass. App. Ct. at 398-401 (landlord's refusal to settle lead paint case not in bad faith, where landlord did not contest liability, but had reasonable basis to contest causation and damages). We disagree. At this stage in the litigation, Morgan's reliance on the board's decision to persist in its efforts to implement the patently illegal rent increases and to resist any efforts to settle was not objectively reasonable.
In any event, the award of multiple damages was warranted on the basis of Morgan's willful and knowing conduct, which was a separate and independent basis to impose double damages under § 9 (3).
6. Appellate attorney's fees. The tenants’ request for attorney's fees in connection with this appeal is allowed. The tenants may submit, within fifteen days of the issuance of the rescript in this case, a petition for fees, together with supporting documentation, as discussed in Fabre v. Walton, 441 Mass. 9, 10-11 (2004). The appellants shall have fifteen days thereafter to respond.
4. A landlord must give a tenant notice of a rent increase before it goes into effect. See G. L. c. 186, § 12; 940 Code Mass. Regs. § 10.03(10) (1996). A manufactured housing community operator's failure to give such notice is a violation of c. 93A. See 940 Code Mass. Regs. § 10.03(3) (1996). See also G. L. c. 140, § 32J (limiting circumstances in which manufactured housing community operator may initiate summary process proceedings).
5. See 940 Code Mass. Regs. § 10.03(2)(m) (1996) (“It shall be an unfair or deceptive act or practice in violation of M. G. L. c. 93A for an operator ․ to seek to recover costs or expenses resulting from any legal obligations of the operator to upgrade or repair sewer, water, gas, or electrical systems to meet minimum standards required by law, unless such standards first become effective after a tenant has initially assumed residency”).
6. A final order of an administrative agency, such as the board, may have preclusive effect. See Kobrin, 444 Mass. at 844; Stowe v. Bologna, 415 Mass. 20, 22 (1993).
7. As Mountain View pointed out in its memorandum in support of its November 19, 2011, motion to dismiss, none of the tenants, “or any resident of the Park, intervened as a party to the application for rent increase.”
8. In Aronson, the plaintiff building owner filed an action in the Superior Court to stop the reopened proceedings. 19 Mass. App. Ct. at 702-703. This court questioned whether the plaintiff had standing to bring the action, as there had been no final agency decision, but held that the Superior Court judge did not err in “push[ing] aside” the exhaustion principle under the circumstances of the case. Id. at 703.
9. Two tenants of the park were named as defendants solely in their official capacity as members of the board.
10. The appellants assert that the judgment is invalid because there was no live testimony. Their reliance on Hopper v. Callahan, 408 Mass. 621, 634 (1990), for this assertion is misplaced. In Hopper, the court affirmed the denial of summary judgment on the issue of a defendant's claim of immunity from liability under the Massachusetts Tort Claims Act because the summary judgment record was “not adequate to resolve the issue conclusively.” Id. Here, the case was tried by agreement on a “case stated” basis, permitting the judge to draw inferences and conclusions from the stipulated facts and documents. See Ware v. Hardwick, 67 Mass. App. Ct. 325, 326 (2006).
11. In addition, the appellants waived the § 3 exemption by failing to assert it in their pleadings in the Housing Court. See Fleming v. National Union Fire Ins. Co., 445 Mass. 381, 389-390 (2005).
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