11 Mass. App. Ct. 714 | Mass. App. Ct. | 1981
These consolidated appeals have arisen as a result of a remand order by the Housing Court of the City of Boston to the Boston rent control administration (board) for reconsideration of a rent adjustment in light of our decision in Niles v. Boston Rent Control Admr., 6 Mass. App. Ct. 135 (1978), and because of certain other rulings made by the Housing Court. The Prudential Insurance Company of America (Prudential or landlord) not only challenges the correctness of the remand but also the process employed by the board. In the companion case, the tenants claim error in the Housing Court’s failure (1) to certify a class action under Mass.R.Civ.P. 23, 365 Mass. 767 (1974), (2) to order the landlord to make a refund of their rent overpayments, and (3) to award liquidated damages and attorney’s fees.
The origin of this case, which has often followed a rather tortuous path, dates back to July 16, 1976, when Prudential filed a petition with the board for a rent increase for some seven hundred eighty-one apartments at its Prudential apartment complex. The board, which had adopted the regulations of its predecessor, the Boston rent control administrator (see St. 1970, c. 842), rendered a decision in this matter on October 26, 1976. In reaching its decision regarding what rents would yield a “fair net operating income” as prescribed by the local rent control ordinance, c. 15 of the Ordinances of the City of Boston (1975), the board used a two-step approach: it applied its own Regulation 6, a “cost pass through” method; and the multiplier technique prescribed by the Housing Court of the City of Boston in M.E. Goldberg Trust vs. Boston Rent Control
The Housing Court judge rendered his first decision on May 6, 1977, and remanded the case to the board “for a fuller determination of depreciation, and for a statement of reason as to why depreciation should or should not be considered in the formula in ascertaining value in the context of the facts presented.” The Housing Court judge, apparently lamenting the continued use by the board of the “Goldberg” formula, indicated that he would reject any view that a formula which includes a fair return on market value was constitutionally required. However, he went on to state that as no appellate court had issued any pronouncement at that time on the matter, he remained satisfied that the “Goldberg” formula provided the applicable standard.
After reconsideration on remand, the board, on June 9, 1977, accepted the recommendations of its hearing officer, which included the following: (1) according to the return on value formula, the value of the apartment complex was calculated by the original construction cost (less the amount factored out for noncontrolled units); (2) the complex had not depreciated in value or physically deteriorated since original construction; (3) no functional obsolescence had occurred since original construction; (4) a seven and one-half per cent return on value (original construction cost) yielded a fair net operating income and was not confiscatory; and (5) the landlord’s requested rent increases for the penthouse apartments should be approved (an issue presently not in contention and not before us).
On review of this initial remand, the Housing Court judge indicated that, although the board’s determinations appeared to be supported by substantial evidence, the matter had to be remanded a second time for findings as to the functional obsolescence of the heating and air conditioning system. The case was remanded to the board on Novem
On March 23, 1978, this court decided Niles v. Boston Rent Control Admr., supra. The board had rendered a decision on the second remand at this time, but a final judgment had not been entered.
On March 31, 1978, the tenants’ motion for preliminary injunction to enjoin the collection of rent in accordance with the board’s decision of October 26,1976, was allowed. This motion pertained only to the named tenants.
On May 9, 1978, in light of this court’s decision in Niles, the Housing Court ordered the case remanded to the board for a third time and instructed it to determine a rent adjustment based only on Regulation 6. The remand order included the additional proviso that the board’s rent decision would become the “immediate effective legal maximum rent.” The differential in the levels of rents (as determined with and without the “Goldberg” formula) was conditionally ordered by this court to be paid back to the tenant parties in this matter.
By separate order dated May 9, 1978, the Housing Court judge denied the tenants’ motion to increase the number of tenant parties to the case unless they had filed an appearance with the board, and also refused to certify the case as a class action, deeming the class to be not “so numerous that joinder of all members would be impractical.”
Following the order of remand, the board decided to readjust the rents of all the tenants in the Prudential apartment complex. The landlord responded by seeking a preliminary injunction against the board to preclude it from
On November 21, 1978, the board adopted the hearing officer’s finding that there was no need to hold a further hearing concerning the application of the Niles decision. The board proceeded to establish maximum rents under Regulation 6 concluding that an “increase of 10 % of that requested by the landlord” should be approved.
An undated “Additions and Corrections” to the board’s remand record summarized its decision and we note the major points' and findings in that summary: (1) there existed sufficient evidence on the record, so that there was no need to conduct any further hearings; (2) the landlord’s expenses were corrected and some capital improvements were disallowed; (3) rents allowed for controlled units for December, 1971, yielded a fair net operating income to the landlord; (4) after passing through the increase in expenses and capital improvements between 1971 and 1975, an increase of ten per cent of that requested was proper; (5) the thirty-six per cent net profit before financing yielded a fair net operating income; (6) in reaching the new rent assessments, the “ Goldberg” formula was not used; (7) the decision was effective as of October 26, 1976; and (8) there was sufficient evidence in the record to support all of the above findings.
After the landlord and tenants made various requests to correct and add to the remand record, the Housing Court judge filed his “Finding and Order” on April 17, 1979. The
1. The Niles Decision.
A. Application by Hoard.
In Niles this court held that the “Goldberg” formula was not required by either the Federal or State Constitutions, and that the “interpretation that [a fair return on fair market value was] a necessary gloss on Regulation 6 [was] incorrect.” 6 Mass. App. Ct. at 149. These were the guiding principles applied by the board in its decision on the third remand.
The landlord contends that because it initially sought a rent adjustment in July, 1976, this court’s decision in Niles, announced on March 23, 1978, should not be retroactively applied, and that the board’s initial order of October 26, 1976, should be reinstated. We reject this contention for
B. Retroactivity.
This court’s decision in Niles, issued after the second remand of the present case to the board but while the case was still pending in the Housing Court, precipitated the third remand to the board so that the rent adjustment would be determined solely on the basis of Regulation 6.
We conclude that the Niles decision was properly applied by the board pursuant to the Housing Court order. See Huard v. Forest St. Housing, Inc., 366 Mass. 203, 211 (1974) (“Even if the [board’s] determinations were invalid ab initio, it would seem that landlords who had obtained increases pursuant to improper criteria would have been entitled to redeterminations pursuant to proper standards”). However, we limit its application to those cases which had not reached a final judgment either because they were pending before an administrative body or court or because appellate review had not been exhausted. See Linkletter v. Walker, 381 U.S. 618, 626-627 (1965).
We think that if we did not order the establishment of the rent levels calculated initially by the board on October 26,
In any event, as far as the named plaintiffs are concerned, it is settled that they are entitled to have readjustments of their rents retroactive to the date of the board’s original decision (World Wide Realty v. Boston Rent Control Admr., 7 Mass. App. Ct. 327, 332 [1979], and cases cited; see Niles, supra at 151-152), as they made a direct challenge to the use of the return-on-value formula derived from the Goldberg case (supra, note 3). That was the specific relief they sought before the board, and any other result would make the entire administrative and judicial review scheme meaningless and would unjustly enrich either the tenants or, as in this instance, the landlord.
C. Denial of Due Process.
After the Housing Court remanded this matter for a third time in 1978 for reconsideration in light of our Niles decision, the board determined that another evidentiary hearing was not necessary. The landlord claims that it was denied due process of law by the board’s failure to hold a new evidentiary hearing on the third remand.
Regulation 6, which formed the sole basis of the board’s decision on November 21, 1978, had been in existence since 1974, and at the start of the board’s initial hearing in 1976, proper notice had been given to the landlord as to the board’s utilization of this regulation in assessing the applicable rent. Therefore, its use could not have constituted surprise to the landlord.
General Laws c. 30A, § 11(1), inserted by St. 1954, c. 681, § 1, provides for the parties to have “sufficient notice of the issues involved to afford them reasonable opportunity to prepare and present evidence and argument.”
Section 7 of St. 1970, c. 842, endows a rent board with substantial discretion in deciding what rent adjustments are to be allowed. Sherman v. Rent Control Bd. of Brookline, 367 Mass. 1, 8 (1975). We are also reminded that in reviewing rent adjustment determinations
2. Parties Entitled to a Rent Readjustment.
On April 27, 1978, the tenants moved in the Housing Court to amend their complaint to seek relief on behalf of all persons living in controlled units. See Mass.R.Civ.P. 23, 365 Mass. 767 (1974). The motion was denied on the day the case was remanded to the board for a third time. We think that in the circumstances presented here the judge should have allowed the motion. Cf. Gay v. Waiters’ & Dairy Lunchmen’s Union, 549 F.2d 1330, 1332-1334 (9th Cir. 1977).
We recognize, of course, that a judge is vested with “broad discretion under rule 23 in determining whether an action may be maintained as a class action.” Brophy v. School Comm. of Worcester, 6 Mass App. Ct. 731, 735 (1978). That discretion, however, is not without limits; it must be exercised in accord with the purposes sought to be achieved by class actions. See Spear v. H.V. Greene Co.,
3. Additional relief.
The only question remaining for discussion in light of what we have already said is the tenants’ contention that they are entitled to some additional relief under c. 15, § 9 (a), of the Ordinances of the City of Boston (1975). Passing the question whether the judge within his discretion could deny the tenants’ motion to amend their complaint to include such a prayer for relief, we think that the judge correctly ruled that § 9(a) was inapposite to the circumstances of this case.
4. Conclusion.
The judgments of the Housing Court are vacated, and this matter is remanded for the further proceedings required by this opinion. That court, however, may make any and all other orders appropriate in the present circumstances which are not inconsistent with this opinion. Costs of appeal are not to be awarded to any party.
So ordered.
Housing Court of the City of Boston, Eq. 00580 (1974). For a discussion of the “Goldberg” formula and Regulation 6, see Niles, supra at 138 & n.5.
The board found that “[fjunctional obsolescence resulting in loss of value . . . was not shown in any testimony [sic] or evidence given.” That finding is not here relevant.
A single justice of this court vacated that injunction on April 28,1978, and ordered that the monthly rent increase, determined pursuant to the October 26,1976, board decision, be placed in an interest-bearing escrow account.
Although this aspect of the case is somewhat unclear, we think that this is a fair characterization of the judge’s action. The docket reflects that the judge ordered the board on remand “to limit itself to the [tjenants who were included in the [cjivil [cjomplaint.”
The allowable increase in gross yearly income actually amounts to $89,501.
Housing Court of the City of Boston, C.A. 02780 (1974). This would include the tenants who sought relief from the board but had not pressed their claims before the Housing Court.
After judgment the tenants filed motions to require the landlord to repay overcharges and to grant prospective relief to all tenants. These motions were denied on June 29, 1979.
In Linkletter v. Walker, supra, the Court made specific reference to and incorporated the opinion of Chief Justice Marshall in United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103 (1801), where he said: “It is in the general true that the province of an appellate court is only to enquire whether a judgment when rendered was erroneous or not. But if, subsequent to the judgment, and before the decision of the appellate court, a law intervenes and positively changes the rule which governs, the law must be obeyed, or its obligation denied.” Id. at 110.
It is not without significance that there is an identity of interest in one of the plaintiffs in the Niles case and one of the parties here (see notes 2 & 3, supra).
“Although a rent control board is not an ‘agency’ for purposes of the State Administrative Procedure Act [citations omitted], the board in a rent adjustment proceeding is required by St. 1970, c. 842, § 8(d), to follow the procedures of § ll(l)-(6) of c. 30A.” Palmer v. Rent Control Bd. of Brookline, 7 Mass. App. Ct. 110, 115 n.7 (1979).
For the standard of review in eviction cases under St. 1970, c. 842, see, e.g., Gentile v. Rent Control Bd. of Somerville, 365 Mass. 343, 349 & n.6 (1974).
No question has been raised as to what limitations rule 23 placed on the timing of the tenants’ motion for class action treatment. Compare Castro v. Beecher, 459 F.2d 725, 731 (1st Cir. 1972). Nor have the parties addressed the question when the rights of newly joined class members attach. (The board, however, does suggest that the rights of the tenants other than the named plaintiffs attached on November 21,1978, the date of its third and last hearing.)