Phillips v. Equity Residential Mgmt., L.L.C.

• Decision Date: 25 October 2017
• Docket Number: SJC–12247
• Citation: 85 N.E.3d 12,478 Mass. 251
• Parties: Scott PHILLIPS v. EQUITY RESIDENTIAL MANAGEMENT, L.L.C.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

478 Mass. 251

85 N.E.3d 12

Scott PHILLIPS¹

v.EQUITY RESIDENTIAL MANAGEMENT, L.L.C.

SJC–12247

Supreme Judicial Court of Massachusetts, Suffolk..

Argued May 1, 2017

Decided October 25, 2017

Joshua N. Garick, Woburn, (David Pastor & Preston W. Leonard, Boston, also present) for the plaintiff.

Craig M. White, of Illinois (Thomas H. Wintner, Boston, also present) for the defendant.

The following submitted briefs for amici curiae:

Jeffrey J. Pokorak, Catherine Dowie, & John Pierce Wilton for Accelerator-to-Practice Program of Suffolk University Law School & others.

Lawrence J. Farber, Amherst, for Greater Boston Real Estate Board.

Alex Mitchell–Munevar & Joseph Michalakes for City Life/Vida Urbana.

Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, & Cypher, JJ.²

BUDD, J.

Where a landlord's itemized list of deductions from a tenant's security deposit does not comply with the requirements of the Security Deposit Act, G. L. c. 186, § 15B (act), the landlord forfeits the right to retain any part of that deposit. See G. L. c. 186, § 15B (6). In certain circumstances the landlord must pay the tenant treble damages, interest, costs, and attorney's fees, pursuant to § 15B (7). In a certified question, the United States Court of Appeals for the First Circuit asks whether a tenant is entitled to treble the amount of the entire security deposit under § 15B (7) where a landlord fails to provide to the tenant a statement of damages that meets the statutory requirements, see § 15B (4) (iii), second sentence, thereby forfeiting the entire security deposit, see § 15B (6) (b ), and also fails to return that forfeited deposit within thirty days after the termination of the tenancy. See Phillips v. Equity Residential Mgt., L.L.C., 844 F.3d 1, 7–8 (1st Cir. 2016).

We conclude that the Legislature did not intend for the treble damages provision in § 15B (7) to apply to a landlord's violation of the requirements for an itemized list set out in § 15B (4) (iii), second sentence, or to the amount forfeited for violation of § 15B (6) (b ), and accordingly answer the certified question no.³

Background. We recite relevant facts presented by the Court of Appeals in its opinion, see Phillips, 844 F.3d at 3–4, along with other facts found by the District Court judge. See Ferri v. Powell–Ferri, 476 Mass. 651, 652, 72 N.E.3d 541 (2017).

Scott Phillips (tenant or Phillips) and a friend⁴ entered into a written lease with Equity Residential Management, L.L.C. (landlord or Equity), for an apartment in Waltham, for a term of from July 20, 2012, to May 19, 2013. Phillips paid a security deposit of $750 before moving into the apartment. He moved out of the apartment on May 20, 2013, and requested the return of his deposit. Equity responded with a statement of deposit account (statement), which was signed but not sworn to under pains and penalties of perjury, within thirty days of termination of occupancy. The statement listed charges totaling $968.08 and stated that Phillips owed a balance of $218.02 after subtracting the security deposit and accumulated interest.⁵ On June 23, 2013, Phillips's father, a guarantor of the lease, notified Equity that the statement did not comply with several requirements of the act.

On August 6, 2013, Phillips filed a class action⁶ complaint in the Superior Court, alleging that Equity had violated the act insofar as (1) the statement and attached document were not properly signed and sworn to under the pains and penalties of perjury, (2) Equity did not provide sufficient documentation to support the charges that were deducted from the deposit, (3) Equity impermissibly deducted cleaning charges from the deposit, and (4) Equity failed to return the deposit within thirty days after the termination of the tenancy. He sought recovery under § 15B (7), which provides, inter alia, for treble damages for certain violations of the act. Equity removed the case to the United States District Court for the District of Massachusetts, see 28 U.S.C. § 1441(a), citing diversity of citizenship under the Federal Class Action Fairness Act of 2005. See 28 U.S.C. § 1332(d). Equity also filed a counterclaim against Phillips for the remaining balance listed on the statement: $218.02.

In 2015, the District Court ruled on both parties' motions for summary judgment.⁷ The District Court found that Equity's statement did not comply with the itemized deduction provision in the act, see § 15B (4) (iii), second sentence, and therefore Equity had forfeited its right to retain any part of the deposit under § 15B (6) (b ). As a result, Phillips was entitled to recover his security deposit. However, the District Court judge also ruled that Phillips was not entitled to treble damages, as she concluded that the Legislature had excluded violations of the itemized deduction provision from the types of violations that qualified for treble damages under § 15B (7). Finally, the judge ruled that Equity was entitled to no more than $102.42 for holdover rent,⁸ because it had forfeited its right to counterclaim for damage to the premises by violating the act, see § 15B (6), and could not make deductions for a late payment or earlier costs in an unrelated proceeding under § 15B (4).

Phillips appealed from the ruling, arguing that the District Court misinterpreted the act, and that he was entitled to recover treble the amount of the entire security deposit under § 15B (7). Concluding that there was no controlling precedent to decide the question, the Court of Appeals certified the following question to this court, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981):

"With respect to the Massachusetts Security Deposit Law, [G. L. c.] 186, § 15B, when a lessor violates the [itemized list requirements] of [ § 15B (4) (iii) ], does the lessor's corresponding violation of [ § 15B (6) (b ) ], which 'forfeit[s] his right to retain any portion of the security deposit for any reason,' id. [at § 15B (6) ], also constitute a violation of [ § 15B (6) (e ) ]—'fail[ing] to return to the tenant the security deposit or balance thereof to which the tenant is entitled ... within thirty days after the termination of the tenancy'—thereby triggering the statute's treble damages provision, [ § 15B (7) ]?"

Phillips, 844 F.3d at 7–8.

Discussion. The act, G. L. c. 186, § 15B, protects tenants by providing clear guidelines for landlords to follow with regard to handling security deposits. See Hampshire Village Assocs. v. District Court of Hampshire, 381 Mass. 148, 151–153, 408 N.E.2d 830, cert. denied, 449 U.S. 1062, 101 S.Ct. 785, 66 L.Ed.2d 604 (1980). In passing the act, the Legislature recognized that tenants have less bargaining power than landlords and are less able to vindicate their rights in court. See Mellor v. Berman, 390 Mass. 275, 282, 454 N.E.2d 907 (1983), quoting Goes v. Feldman, 8 Mass. App. Ct. 84, 91, 391 N.E.2d 943 (1979).

The act provides, inter alia, that a landlord must take care in making deductions from a tenant's security deposit. The deductions must fall into specifically authorized categories, which the act limits to unpaid rent or water charges, certain unpaid increases in real estate taxes, and repairs for damages caused by the tenant; any remaining balance must be returned to the tenant within thirty days of termination of the tenancy. See G. L. c. 186, § 15B (4) (i), (ii), (iii), first sentence.⁹ Taking improper deductions from a tenant's security deposit leads to forfeiture of the entire security deposit, pursuant to § 15B (6) (e ).¹⁰ In addition, when making deductions for damages, the landlord must provide the tenant with an itemized list, sworn to under the pains and penalties of perjury, as well as written evidence of the cost of repairs. See G. L. c. 186, § 15B (4) (iii), second sentence.¹¹ Violations of this second obligation, like violations of the first, also lead to forfeiture of the entire security deposit, pursuant to § 15B (6) (b ).¹² There are some violations of the act, including the taking of improper deductions in violation of § 15B [6] [e ], that result in the tenant being entitled to treble damages, interest, court costs, and attorney's fees. See G. L. c. 186, § 15B (7).¹³

In this case, as previously recounted, the landlord made deductions for unpaid rent and damage to the property that exceeded the value of the tenant's security deposit; thus, the landlord did not return any portion of the security deposit within thirty days. The District Court judge found that although the landlord sent an itemized list of damages to Phillips within thirty days, this list was faulty because it was not sworn to under pains and penalties of perjury, was not sufficiently detailed, and was unsupported by written evidence of the costs of repairs. These failings qualify as a violation by the landlord of § 15B (6) (b ), and accordingly result in the forfeiture of its right to retain any portion of Phillips's security deposit under § 15B (6).¹⁴

Phillips argues that because the landlord forfeited the entire security deposit under § 15B (6) (b ) by providing a faulty list, it was required to return the entire security deposit within thirty days of termination of the tenancy. The crux of the case is that Phillips further argues that the landlord's failure in this regard triggered a violation of § 15B (6) (e ), which, in his view, calls for damages in the amount of three times the entire security deposit as well as other awards pursuant to § 15B (7). The landlord disagrees, arguing that the tenant's interpretation would make § 15B (6) (b ) redundant and would overlook the Legislature's intent to limit the number of § 15B (6) violations that would give rise to treble damages and other penalties under § 15B (7). The question certified by the Court of Appeals asks us for the correct interpretation.

Our answer turns on an interpretation of § 15B (6) (e ), and whether that provision covers a landlord's failure to return the security deposit forfeited under other clauses of §...