Quinn v. Rent Control Bd. of Peabody

• Decision Date: 27 August 1998
• Docket Number: Nos. 97-P-36,96-P-1563 and 97-P-1603,96-P-1587,s. 97-P-36
• Citation: 45 Mass.App.Ct. 357,698 N.E.2d 911
• Parties: Edwin A. QUINN, trustee, 1 v. RENT CONTROL BOARD OF PEABODY; Donna Rosanno & others, 2 interveners (and three companion cases 3 ).
• Court: Appeals Court of Massachusetts

Page 911

698 N.E.2d 911

45 Mass.App.Ct. 357

Edwin A. QUINN, trustee, ¹ v. RENT CONTROL BOARD OF PEABODY; Donna Rosanno & others,² interveners (and three companion cases ³ ).

Nos. 97-P-36, 96-P-1587, 96-P-1563 and 97-P-1603.

Appeals Court of Massachusetts Essex.

Argued March 10, 1998.

Decided Aug. 27, 1998.

Donna L. Palermino, Assistant Attorney General, for the Commonwealth.

Vincent R. Brogna, for Mary Jane Welch and others.

Anthony M. Metaxas, Salem (Joel Rosen, with him), for Edwin A. Quinn.

David Wm. Adams, Brookline, for Donna Rosanno and others.

Thomas C. Regan, Peabody, for Hilda Kapamagian.

Daniel B. Kulak, Assistant City Solicitor, for city of Peabody & another.

Scott Harshbarger, Attorney General, Donna L. Palermino and Chi Chi Wu, Assistant Attorneys General, for the Commonwealth, amicus curiae, submitted a brief.

Before KASS, KAPLAN and LAURENCE, JJ.

KAPLAN, Justice.

The decision of the present appeals, if correct, concludes--it may be hoped--more than ten years of legal uncertainty or controversy about the regulation of rents and other matters affecting mobile home parks in the city of Peabody. We acknowledge that our decision owes much to the careful work of the judges below and especially the judge who presided at the three culminating trials.

I. NARRATIVE

a. Early legislation. Mobile home parks have been regulated by statewide legislation since 1939 (see St.1939, c. 416) and we shall have occasion to refer below to provisions of the long standing Manufactured Housing Act, G.L. c. 140, §§ 32A-32S. ⁴ Around 1976, however, the city of Peabody experienced a special need for regulation of this subject matter, and, in response to Peabody's "home rule petition," the Legislature enacted St.1976, c. 131 (1976 Enabling Law). This statute declared that excessive rent increases and resulting threatened or actual evictions of tenants had resulted in an emergency. The statute empowered the city to establish by ordinance a rent board that would regulate rents for park accommodations and set standards for occupancy of the accommodations and evictions therefrom. The board could make individual or general adjustments of rents to assure owners a fair net operating income ^OI, defined in St.1976, c. 131, § 3(a), as

"that income which will yield a return, after all reasonable operating expenses, on the fair market value of the property equal to the debt service rate generally available from institutional first mortgage lenders or such other rate of return as the board, on the basis of evidence presented before it, deems more appropriate to the circumstances of the case."

Peabody passed its mobile home rent control ordinance, Code of Ordinances of Peabody c. 18, on January 13, 1977, creating a five-member board with stated administrative powers. Under § 18-51, "[t]he maximum rent of a mobile home park accommodation shall be the rent charged the tenant for the month of June, 1976," subject to individual or general adjustments by the board, see § 18-53, observing the principle of attaining levels that would yield the owners FNOI, defined as in the statute.

Eleven park owners attacked the statute and ordinance on constitutional and other grounds but the attack failed, in Newell v. Rent Bd. of Peabody, 378 Mass. 443, 392 N.E.2d 837 (1979).

b. Resolution of disputes by contract. Disputes soon arose about the carrying out of rent adjustments, deepened by concerns that park owners might simply cut off the use of their properties for mobile homes. The Peabody mayor and various park owners and tenant organizations negotiated to stop the squabbling, and in 1981 agreements were reached between some owners, some tenant organizations, and the board which looked to certain fixed increases of rents for individual parks in accordance with the consumer price index (other increases would require specific approval by the board).

By 1984 disputes again erupted: four park owners (not involved in the present litigation), indeed, gave notice that they would discontinue their operations. Now the owners were fighting over which consumer price index was to form the basis of the rent adjustments. The city again attempted to "broker" peace, and the result was contracts reached in the period 1986- (collectively referred to by the trial judge and herein as the "1986 Agreement") among park owners, tenant organizations (representing majorities, but not all, of the tenants), and the board. A typical contract, after stating that the parties wished to forgo the formal rent adjustment procedures of the ordinance, set a base level rent, provided for a six percent yearly increase, and passed to the tenants some operational expenses (e.g., for rubbish and water) and also increases or decreases in real estate taxes. The parks agreed to remain in operation for a stated period (ranging from six to twelve years), but with a so-called "severability" clause--if the contractually set rents and increases were later deemed improper, then the undertaking to remain in operation would crash.

c. 1987 legislative response. Again in response to a home rule petition by Peabody, the Legislature, on July 21, 1987, enacted St.1987, c. 302 (1987 Act), which amended the 1976 Enabling Law in two respects relevant to the present litigation:

(i) The definition of FNOI quoted above was superseded, and, in establishing a FNOI, the board now must consider

"(1) increases or decreases in property taxes; (2) unavoidable increases or any decreases in operating and maintenance expenses; (3) capital improvement of the housing unit as distinguished from ordinary repair, replacement and maintenance; (4) increases or decreases in living space, services, furniture, furnishings or equipment; (5) substantial deterioration of the dwelling units other than as a result of ordinary wear and tear; and (6) failure to perform ordinary repair, replacement and maintenance."

St.1976, c. 131, § 3(b), as appearing in St.1987, c. 302, § 2. In determining whether rents will yield a FNOI, the board may also consider "other relevant factors which the board by regulation may define." St.1976, c. 131, § 3(b), as appearing in St.1987, c. 302, § 2.

(ii) To discontinue operations lawfully, a park owner must seek a "discontinuance permit" from the city, following a procedure that involves notice to tenants, public hearing at the board, the board's report and recommendation, and ultimately the vote of the city council. In deciding whether to recommend that the city grant or deny permits, the board "shall consider the aggravation of the shortage of safe, decent and affordable mobile home park accommodations in Peabody, which may result from the discontinuance, especially for tenants of low and moderate income and handicapped or elderly persons on fixed incomes." St.1976, c. 131, § 7A(5), as inserted by St.1987, c. 302, § 3. ⁵

The 1987 Act, unlike the 1976 Enabling Law, did not by its terms require approval by the city. The city did not enact an ordinance adopting the new FNOI definition. However, in September, 1991, it did amend its rent control ordinance to incorporate the discontinuance process. Code of Ordinances of Peabody § 18-58 (1991).

d. Board's 1991 approval of rent increases; Attorney General's lawsuit. On May 15, 1991, and June 15, 1991, the board approved (effective June 1, 1991) the annual six percent increases pursuant to the 1986 Agreement (as it had done for previous years), and it sent out rent increase notices to the parks' tenants. The tenant representative on the board, Thomas O'Leary, joined in the vote, but he had doubts about the legality of the rent increases and called the Attorney General's office. Upon review of the matter, the Attorney General decided that the contracts were unlawful because, he thought, the board in approving them had abdicated its responsibility to determine FNOI in accordance with the stated factors of the 1987 Act. ⁶

On June 28, 1991, the Attorney General, on behalf of the Commonwealth, filed in Superior Court a four-count complaint against the board and nine Peabody mobile home parks, ⁷ praying injunctive relief to stay the increases just voted by the board. The Commonwealth secured a temporary restraining order on June 28 staying the rent increases until further order. After hearing, a preliminary injunction entered on August 2, 1991, ordering the board to stay the rent increases and the park owners to refrain from collecting rents higher than the May, 1991, rents; the judge, in her rulings of law, said the board had abandoned its duty "in favor of an automatic percentage increase which fails to take into account the factors required by law."

e. August, 1991, discontinuance notices. In mid-August, 1991, each defendant park owner (other than Edwin Quinn, owner of Red Hill Park) in the action brought by the Commonwealth gave a notice of discontinuance to the tenants. Thus Mobile Estates on August 14, 1991, wrote to its tenants that it was "fed-up with the meddlesome actions of the Office of the Attorney General," and, as the contract provision for rent increases might be held illegal, the corresponding obligation to keep the park in operation would fail. Accordingly, it gave notice that it intended to discontinue use of its property as a mobile home park effective two years later, on August 31, 1993.

The owners had not applied for discontinuance permits under the 1987 Act because, as they claimed, that statute was not self-enforcing and was not in effect in August, 1991, because the city had not yet adopted it. The two-year hiatus was required, however, on their own view, because of a provision of the Manufactured Housing Act, G.L. c. 140, § 32L(8). ⁸ The city acted in September, 1991, to amend its rent control ordinance to incorporate the discontinuance provisions of the 1987 Act. Some defendant owners then applied for permits but these were not processed officially, in the belief that the pending litigation needed resolution...