Medley v. City of Milwaukee, 91-1963

• Citation: 969 F.2d 312
• Decision Date: 17 July 1992
• Docket Number: No. 91-1963,91-1963
• Parties: Albert MEDLEY and Anne Medley, Plaintiffs-Appellants, v. CITY OF MILWAUKEE, Housing Authority of the City of Milwaukee, William R. Drew, Ann Marie Steffen Oldenburg, Edward W. Johnson, Rick Fieldbinder, United States of America, Samuel R. Pierce, Jr., and Troy Grigsby, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 312

969 F.2d 312

Albert MEDLEY and Anne Medley, Plaintiffs-Appellants, v. CITY OF MILWAUKEE, Housing Authority of the City of Milwaukee, William R. Drew, Ann Marie Steffen Oldenburg Edward W. Johnson, Rick Fieldbinder, United States of America, Samuel R. Pierce, Jr., and Troy Grigsby Defendants-Appellees.

No. 91-1963.

United States Court of Appeals Seventh Circuit.

Argued Jan. 14, 1992.

Decided July 17, 1992.

Elizabeth Adelman (argued) and Jeffrey S. Hynes, Adelman, Adelman & Murray, Milwaukee, Wis., for plaintiffs-appellants.

Hazel Mosley (argued), Office of the City Atty. and Stephen A. Ingraham, Asst. U.S. Atty., Office of the U.S. Atty., Milwaukee, Wis., for defendants-appellees.

Before BAUER, Chief Judge, COFFEY and EASTERBROOK, Circuit Judges.

COFFEY, Circuit Judge.

Albert and Anne Medley appeal the district court's entry of summary judgment in favor of the defendants on the Medleys' claim that the Housing Authority of the City of Milwaukee ("HACM") improperly debarred them from participating in HACM's federally-funded Rent Assistance Program ("RAP"). We affirm.

I. FACTS

The Medleys are the owners of rental properties in the City of Milwaukee and are desirous of leasing their rental units to participants in HACM's Rent Assistance Program. We have described the Rent Assistance Program as follows:

"Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f, authorizes the Secretary of the United States Department of Housing and Urban Development ('HUD') to establish various programs to 'aid[ ] lower-income families in obtaining a decent place to live and [to] promot[e] economically mixed housing.' These programs are financed by the federal government, regulated by HUD, and administered by state public housing agencies ('PHA's'). One such program--the rent assistance program--helps low-income families to obtain rental housing in the open market. Briefly, the program works as follows: HUD contracts with a local PHA to make available each year a sum of money for the payment of rent on behalf of a specified number of families with incomes below a certain amount. The PHA then distributes this money by contracting to pay each person who agrees to rent housing to one of these families a fixed percentage of the family's rent."

Simmons v. Drew, 716 F.2d 1160, 1161 (7th Cir.1983). The Housing Authority of the City of Milwaukee is Milwaukee's "PHA."

During 1981 the Medleys began contracting with HACM to rent their rental units to persons participating in the RAP, and during this period HACM and the Medleys executed a separate contract for each unit rented to a family in the program. The terms of the contract specified the "total monthly rent payable to the Owner" as well as the amount of the "housing assistance payment" the "PHA shall pay each month on behalf of the Family." In regard to alterations of the rental amount, the contracts provided:

"The Family's portion of the Contract Rent and the amount of housing assistance payment shall be determined by the PHA, and are subject to change during the term of this Contract in accordance with HUD regulations and other requirements. Any change shall be effective as of the date stated in a notification by the PHA to the Family and the Owner of such change."

(Emphasis added). The contract further stated:

"5. MONTHLY PAYMENT TO OWNER.

(a) The Owner shall be paid under this Contract on or about the first day of the month for which payment is due or as otherwise agreed. The Owner agrees that the endorsement on the check:

....

(2) shall constitute certification by the Owner that:

....

(iii) the Owner has not received and will not receive any payments or other consideration, from the Family, the PHA, HUD, or any other public or private source, for the unit beyond that authorized in this Contract and the Lease...."

The HUD Handbook at Section 9(d) states in pertinent part:

"Program abuse by participating owners includes:

Collecting extra (side) payments in excess of the family's share of the rent or requiring the family to perform extraordinary services in lieu of payments. Note: The only extra payments which are legal are those for extra amenities which are not included in the rent for any other units in the building and are not included in the rent in other comparable apartment/houses. This could but does not necessarily include membership in a swimming pool or use of parking facilities. All side payments must be approved by the PHA."

(Emphasis original).

In late 1983, the Medleys rented units to Beverly Bush and Brenda Linwood under the Rent Assistance Program. On October 27, 1983, defendant William Ryan Drew, the executive director of HACM, sent the Medleys a letter reading:

"This is to confirm your conversation of Tuesday, October 25, 1983, with a member of the Rent Assistance Program staff, Michael Verrilli, regarding rent payments of the tenant, Beverly Bush, for the unit at 2541 North 28th Street....

"Ms. Bush had complained to Mr. Verrilli that you had demanded that she make rent payments in excess of the amount stated on her lease. Ms. Bush also provided Mr. Verrilli with a handwritten copy of a statement which indicates she is to make rent payments of $151.00 per month. On October 25, 1983, during your conversation with Mr. Verrilli you reiterated your intention of collecting $151.00 on a monthly basis from Ms. Bush. The collection of side payments for any amount in excess of that stipulated in the lease is illegal and prohibited by the Housing Assistance Payment Contract."

(Emphasis original). The Medleys disregarded the letter and continued to require excess payments from Ms. Bush as well as excess payments from Ms. Linwood. Several months later the Medleys instituted eviction proceedings against Ms. Bush and Ms. Linwood in state court for nonpayment of rent, allegedly with the encouragement of HACM staff person, defendant Edward Johnson. At the eviction hearing for Ms. Bush, Anne Medley testified as follows:

"Q Now, directing your attention to the leas[e] that's in front of you, this agreement on parking, was that agreement ever approved by the Rent Assistance Program, by the way?

A No.

Q Pardon me?

A No, because I think Mrs. Bush had stated that she didn't have a car.

Q Your answer is no?

A Okay.

Q So, your agreement with respect to parking was never approved by the Rent Assistance Program?

A Right. I don't think so."

In the eviction proceeding against Ms. Linwood, which immediately followed that of Ms. Bush, the court stated:

"There is a controversy regarding collateral matters in which the landlord plaintiff is seeking $50.00 for the rental of a garage space and also for the month of November. In the month of November, the defendant did not occupy the premises, did not have plans of occupying it, but this was a premium to the plaintiff so that the defendant could occupy the premises beginning in December. Likewise, the defendant had no garage and had no automobile, and this was also a premium payment to the landlord because the defendant was on Rental Assistance.

"This is a completely shocking case and, just as the one before, it is a method by which the landlord is gouging both the defendant and the City of Milwaukee and the taxpayers who are contributing to these funds. There is no excuse for charging for a garage which cannot possibly be used simply because the tenant is an indigent person and is getting monies from the Rental Assistance Program.

"This is contrary to what the landlord knows. She is an experienced person and it's set forth in the contract prohibiting this practice. Notwithstanding, there is an application to the Court for collection of these monies, which is completely contrary to public policy. It's tragically an outrage. Likewise, seeking a premium to take a person who is on Rental Assistance to require the payment of an extr[a] month's rent falls into the same cat[e]gory.

"The plaintiff is certainly entitled to a fair rental, and the agreement that she enters into with the people at Rental Assistance and the tenant is an obligation that should be made, but nothing extraordinary in addition to that. This is a practice that I think shows such flagrant disregard that I can't imagine that anybody would wish to disclose the aspects of these business[ ] transactions in a public place and in a court of law, and it's one of those things that should publicity be given to it[,] it would be almost the basis for criminal prosecution.

"Be that as it may, the amount of monies that are due and owing the plaintiff in this case is three months rent.... There is an accumulation of $547.00, of which there is $156.00, I believe, due and owing.... The defendant has actually overpaid in a sum in excess of $380.00."

(Emphasis added). Three HACM staff members were present to hear Anne Medley's admission and the state judge's finding that the Medleys had violated the terms of their contract with HACM. Under Section 14(a) of the Medleys' contracts with HACM, violation of any provision of the contract constitutes a default. Section 14 provides: "Upon such determination [that a default has occurred], the PHA shall have the right to terminate this Contract, to terminate or reduce assistance payments or to take corrective action to achieve compliance, in its discretion or as HUD directs." As a result of Anne Medley's admission that she violated the contract in that she charged rent above and beyond that authorized by HACM, and the trial judge's finding that the Medleys were "gouging" the renters as well as the City of Milwaukee, HACM decided to bar the Medleys from future participation in the rental program. Although the contract between HACM and HUD does not require HUD's approval of HACM's decision to debar an owner from the Rent Assistance Program, HACM chose to request HUD's acquiescence. On March 27, 1984, William Drew addressed a letter to the federal defendant, Troy Grigsby, describing the Medleys'...