Columbia Realty v. RENTAL HOUSING COM'N

• Decision Date: 15 May 1991
• Docket Number: No. 89-1256,89-1315.,89-1256
• Citation: 590 A.2d 1043
• Parties: COLUMBIA REALTY VENTURE, Petitioner, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent, Tenants of 1601 Argonne Place, N.W., Intervenors. TENANTS OF 1601 ARGONNE PLACE, N.W., Petitioners, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent, Columbia Realty Venture, Intervenor.
• Court: D.C. Court of Appeals

590 A.2d 1043

COLUMBIA REALTY VENTURE, Petitioner, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent, Tenants of 1601 Argonne Place, N.W., Intervenors.

TENANTS OF 1601 ARGONNE PLACE, N.W., Petitioners, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent, Columbia Realty Venture, Intervenor.

Nos. 89-1256, 89-1315.

District of Columbia Court of Appeals.

Argued November 15, 1990.

Decided May 15, 1991.

Eric A. Von Salzen, with whom Anna E. Blackburne was on the brief, Washington, D.C., for Columbia Realty Venture, petitioner in No. 89-1256 and intervenor in No. 89-1315.

Eric M. Rome, Washington, D.C. for Tenants of 1601 Argonne Place, N.W., intervenors in No. 89-1256 and petitioners in No. 89-1315.

Herbert O. Reid, Corp. Counsel, and Charles L. Reischel, Deputy Corp. Counsel, Washington, D.C., filed a statement in lieu of brief on behalf of respondent.

Before FERREN, TERRY and FARRELL, Associate Judges.

TERRY, Associate Judge:

In this case both the tenants and the landlord, Columbia Realty Venture ("Columbia"), seek reversal of portions of an order of the Rental Housing Commission granting Columbia's capital improvement petition.

The tenants claim two Commission errors. First, they assert that the Commission erred in failing to require Columbia to present proof that all necessary permits had been obtained before beginning work on the capital improvements. Second, the tenants maintain that the Commission erred by including the cost of hot water risers as a capital expense without a finding that the interests of the affected tenants were protected. The second argument is without merit. We agree, however, with the tenants' first claim of error and remand the case to the Commission for further proceedings.

Columbia contends that the Commission improperly reversed the hearing examiner's decision to include a contractor's fee in the total cost of the capital improvements. We hold that the Commission erred in placing the burden of proof on Columbia and requiring it to justify the fee. We agree with the observation in Columbia's brief that the Commission's disallowance of the fee penalized Columbia "for not answering questions that nobody asked." We therefore reverse the decision of the Commission on this point and remand with directions to reinstate the ruling of the hearing examiner.

I

Columbia is the owner of an apartment building at 1601 Argonne Place, N.W., known as the Chalfonte Apartments. In April 1987 Columbia filed a capital improvement petition with the Rental Accommodations and Conversion Division (RACD) pursuant to D.C.Code § 45-2520 (1990) and the Rules of the Rental Housing Commission, 14 DCMR §§ 3800-4210 (1989). The petition sought an increase in the rent ceilings for the individual units in the Chalfonte in order to reimburse Columbia for capital improvements being made throughout the building. Supporting documents showed that the anticipated cost of those improvements was $814,629.00, which included a ten percent contractor's fee to be paid to Norman Bernstein Management, Inc., the company managing the Chalfonte. Following an audit by the RACD, a provisional determination was made to permit an increase of $55 per month per unit.

A group calling itself the 1601 Argonne Place Tenants Association opposed the petition. After an evidentiary hearing,¹ a hearing examiner approved the proposed increase of $55 per month per unit, on certain stated conditions not challenged in this court.

The tenants appealed to the Rental Housing Commission (RHC), arguing that under the applicable statute Columbia had to prove that it had obtained all necessary permits before the capital improvement petition could be granted. Finding it to be inequitable to demand such proof under the circumstances of the case, the RHC refused to require Columbia to present evidence that it had obtained such permits. The RHC also reduced the rent ceiling adjustment for some apartment units by applying the costs of hot and cold water riser replacements only to those units which actually received them. In addition, the RHC reversed the examiner's allowance of the ten percent contractor's fee and adjusted the rent ceilings accordingly. Both landlord and tenants seek review of the RHC's final order.

II

The tenants maintain that D.C.Code § 45-2520(b)(3) (1990) requires a landlord to present evidence that all necessary permits and approvals for building changes have been acquired before a capital improvement petition may be approved.² All parties acknowledge that under two recent decisions of the RHC, issued after Columbia filed its petition, a landlord is now required to present evidence that the required permits have been obtained or to demonstrate that no permits are required as part of the prima facie showing for an increased rent ceiling based on capital improvements. See 1841 Columbia Road Limited Partnership v. 1841 Columbia Road Tenant Ass'n, CI 20,082 (D.C.R.H.C. December 23, 1987), aff'd, 575 A.2d 306 (D.C.1990); Hampton Courts Tenants' Ass'n v. William C. Smith & Co., CI 20,176 (D.C.R.H.C. May 20, 1988), rev'd in part on other grounds, 573 A.2d 10 (D.C. 1990).

By the time the tenants' appeal reached the RHC, the RHC was aware that its procedures failed to comply with the statutory mandate. Nevertheless, after balancing the equities, the RHC concluded that it would be unfair to require Columbia to prove the existence of the necessary permits. Thus the RHC ruled that it would apply the permit requirement of section 45-2520(b)(3) prospectively only, so that Columbia was not required to make any showing that permits had been obtained. This ruling was error.

An agency's interpretation of its own regulations or of the statute which it administers is generally entitled to great deference from this court. E.g., Levy v. District of Columbia Board of Zoning Adjustment, 570 A.2d 739, 746 (D.C.1990); George Washington University v. District of Columbia Board of Zoning Adjustment, 429 A.2d 1342, 1348 (D.C.1981). There is, however, a well-recognized exception to this rule. When the agency's decision is inconsistent with the applicable statute, as it is in this case, we owe it far less deference, if indeed we owe it any deference at all. James Parreco & Son v. District of Columbia Rental Housing Commission, 567 A.2d 43, 48 (D.C.1989); see Saah v. District of Columbia Board of Zoning Adjustment, 433 A.2d 1114, 1116 (D.C.1981) (when an agency's decision "rests on a question of law, the reviewing court has the greater expertise, and the agency decision is therefore accorded less deference" (citations omitted)). We have repeatedly held that a regulation issued by an administrative agency must be "consistent with the statute under which it was promulgated." District of Columbia v. Catholic University, 397 A.2d 915, 919 (D.C.1979); accord, Manhattan General Equipment Co. v. Commissioner, 297 U.S. 129, 134, 56 S.Ct. 397, 399, 80 L.Ed. 528 (1936); Tenants of 738 Longfellow Street, N.W. v. District of Columbia Rental Housing Commission, 575 A.2d 1205, 1213 (D.C.1990); Anderson v. William J. Davis, Inc., 553 A.2d 648, 650 n. 6 (D.C.1989). Common sense tells us that the same must be true of any agency action: that it may not be contrary to or inconsistent with the statute under which the agency purports to act.

The Supreme Court has established a two-part test for judicial review of agency decisions which interpret or apply statutory provisions. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). First, the reviewing court must determine whether the meaning of the statute is clear. Only when the statute is ambiguous does the court turn to the second part of the inquiry, which is to determine whether the agency's decision is based on a permissible construction of the statute. Id. at 842-843, 104 S.Ct. at 2781. In this case, since the statute very plainly requires a landlord who files a capital improvement petition to "establish to the satisfaction of the Rent Administrator ... that required governmental permits and approvals have been secured," D.C.Code § 45-2520(b)(3), we do not reach the second part of the Chevron inquiry.³ Because the agency action in this case is contrary to the procedure required by law, we remand the case to the RHC to enable it to receive evidence from Columbia regarding the necessary permits.⁴

III

The tenants also claim that the cost of replacing the hot and cold water risers should be disallowed in toto. They correctly note that D.C.Code § 45-2520(c)(2) (1990) requires the Rent Administrator, upon granting a capital improvement petition of the sort involved here, to "make a determination that the interests of the affected tenants are being protected" before the rent ceiling may be increased. The tenants assert that neither the hearing examiner nor the RHC made such a finding in this case.

The hearing examiner, rejecting the tenants' argument, concluded that the record was "replete with evidence supporting the landlord's claim that ... the hot and cold water risers are in a state of disrepair and require replacement." He also took note of "unrebutted testimony that previously there had been severe leakage problems with the risers," which Columbia had attempted unsuccessfully to repair before deciding to replace them. The cost of these earlier repairs, which the examiner characterized as "patch work," was not included in the capital improvement petition as a claimed expenditure. Finally, the examiner was satisfied that all of the proposed improvements would "enhance and protect the health, safety, and security of the tenants." These portions of the hearing examiner's decision, in our view, substantially complied with section 45-2520(c)(2). Cf. Perkins v. District of Columbia Department of Employment Services, 482 A.2d 401, 403 (D.C.1984) (examiner's finding on material issue of fact "surely complies" with statute, even though...