Sherman v. Rent Control Bd. of Brookline

• Decision Date: 12 February 1975
• Citation: 323 N.E.2d 730,367 Mass. 1
• Parties: John E. SHERMAN v. RENT CONTROL BOARD OF BROOKLINE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 730

323 N.E.2d 730

367 Mass. 1

John E. SHERMAN v. RENT CONTROL BOARD OF BROOKLINE.

Supreme Judicial Court of Massachusetts, Norfolk.

Argued Nov. 8, 1974.

Decided Feb. 12, 1975.

Judith E. Soltz, Boston, for Rent Control Bd. of Brookline.

John E. Sherman, pro se.

Before QUIRICO, BRAUCHER, HENNESSEY, KAPLAN, and WILKINS, JJ.

KAPLAN, Justice.

The Rent Control Board of Brookline (Board) appeals from a decree of the Superior Court which, upon a finding that the Board was 'arbitrary and capricious' in denying a landlord a certain rent increase, awarded him damages of $3,500 against the town of Brookline.

John E. Sherman, appellee on this appeal, is the owner of buildings at 15--17 Aspinwall Avenue and 8--10 Homer Street in Brookline, comprising sixteen apartments in all, which are subject to rent control under St.1970, c. 842, as accepted by the town on September 29, 1971. ¹ In September, 1971, Sherman applied to the Board for a rent increase. The Board held a hearing on December 9, 1971, at which Sherman appeared, and many of his tenants in opposition. Sherman's gross annual rental income from the properties as of March 1, 1970, was $36,675. He sought an increase to $44,640. On January 18, 1972, the Board, without assigning reasons, denied Sherman any increase. This is called in the record a 'tentative' decision.

Upon being notified of the Board's decision, Sherman sought judicial review under c. 842, § 10(a), by filing a complaint against the Board in the Municipal Court of Brookline in which he sought not only a rent increase but also damages against the Board, among other things for its 'arbitrary and capricious actions.' While the case was pending, the Board on May 9, 1972, issued another decision, this one assigning reasons. The Board found that if Sherman was to obtain in 1971 the same 10.6% return that he had earned in 1970, then, taking into account the items of 1971 expenses the Board would be prepared to allow, an increase in rents of $6,676 for the year would be necessary, to a total of $43,351. But the Board denied any increase, referring, without particular specification, to 'substantial deterioration of the housing units other than as a result of ordinary wear and tear,' 'failure to perform ordinary repair, replacement and maintenance,' and 'non-compliance with the State Sanitary Code, the Brookline Building Code, the Zoning By-Law.'

Following this decision, the Municipal Court case proceeded, and on August 4, 1972, that court awarded Sherman a rent increase to $39,120, which was $4,231 less than the amount the Board had indicated it would have granted, had it not been for the factors above mentioned.

Sherman thereupon appealed to the Superior Court under § 10(a), and on May 23, 1973, a hearing was held at which witnesses gave testimony and documents were introduced going into the case from its beginning, including the prior procedures, the basis for Sherman's claim that he was entitled to a further rent increase, and the basis for the Board's opposition including a consideration of its audit. The judge made findings, rulings, and order for decree on June 1, 1973, entered a final decree on July 2, 1973, and on August 17, 1973, filed his report of material facts. Evidence at trial in the Superior Court is reported. The judge found that at the initial December 9, 1971, hearing before the Board, the tenants had opposed the rent increase because of conditions in the apartments, and that Sherman had failed on request to produce his books and records to the Board so that an audit could be made of his income and expenses in time for the hearing. He also found that immediately before the Board's second decision the Brookline Health Department and Brookline Building Commission had inspected the units at the request of the Board and had found numerous sanitary and building code violations. In this light, the judge held that '(t)he Board properly refused an increase because of violations of various codes, ordinances and by-laws.' See c. 842, § 7(b)(5) (6), (d). However, the judge went on to 'infer' from the Municipal Court decision of August 4, 1972, that all code violations had been corrected by that time. ² He ruled that '(w)hen these violations terminated . . . the Board was bound to establish rents which would yield . . . (Sherman) a fair net operating income for such units. The violations were corrected by . . . (August 4, 1972). 10.6 per cent is the lowest fair net operating income. . . . (Sherman) should have been allowed rentals at the annual rate of $43,351 after . . . (August 4, 1972). . . . The actions of the Board were arbitrary and capricious to the extent that . . . (Sherman) was denied such a yield for such periods. ³ . . . It will be impractical to attempt to collect retroactive rent increases . . .. Since . . . (Sherman's) loss was caused by acts of town officials, the town should reimburse . . . (Sherman).' The final decree adjudged that '(t)he Town of Brookline is indebted to . . . (Sherman) in the amount of $3500.00 which amount should be paid forthwith.' (The amount had been stipulated by the parties to be the damages from August 4, 1972, to July 1, 1973, if the court's view of the case was correct.)

The decree was in error and will be reversed. Assuming that the judge of the Superior Court in his review was not in substance confined to the record before the Board, and was at liberty to examine de novo the proceedings and facts from the beginning to the time of his decree (an assumption discussed below), and assuming further that he was right in thinking that Sherman was entitled to the larger rent increase as from August 4, 1972, there was still no basis for holding that the Board's inaction in failing then to grant that increase should result in an award of damages for alleged arbitrary and capricious conduct. The Municipal Court, after all, had decided on the same day, August 4, 1972, that Sherman was entitled to the lesser increase. It might be thought that if anyone was then at fault, it was the court. The Board respected the Municipal Court's judgment and did not appeal it; rather it was the landlord who appealed as was his right under c. 842, § 10(a). ⁴ Furthermore, on the record as it reaches us here, it remains unclear that any larger rent increase was necessarily called for as of August 4, 1972. ⁵ It is, then, perhaps superfluous to add that the decree appealed from adjudges a liability of the town of Brookline to Sherman despite the fact that the town was not named as a party to the suit and did not appear. ⁶ Had the town been sued as a party, it could not rightly have been held responsible in damages for the Board's failure to raise the rents to a given level. Chapter 842 does not provide for civil liability of the Board or municipality, and the common law as it now stands ⁷ would not hold the town liable for the acts of its agents or of public officers where the circumstances and the degree of culpability that could be claimed were as pictured here. See Bolster v. Lawrence, 225 Mass. 387, 388--390, 114 N.E. 722 (1917); Auger v. New Bedford, 265 Mass. 327, 328, 163 N.E. 873 (1928); Malden v. MacCormack, 318 Mass. 729, 732, 64 N.E.2d 103 (1945); Molinari v. Boston, 333 Mass. 394, 395--396, 130 N.E.2d 925 (1955); Desmarais v. Wachusett Regional Sch. Dist., 360 Mass. 591, 594, 276 N.E.2d 691 (1971); Morash & Sons, Inc., v. Commonwealth, --- Mass. ---, ---- ---, --- - --- ^a 296 N.E.2d 461 (1973). The judge's reliance on G.L. c. 44, § 7(11), for finding the town liable, was surely misplaced. ⁸ So also the members of the Board would have personal immunity for their conduct under Gildea v. Ellershaw, --- Mass. ---, --- - ---, ^b 298 N.E.2d 847 (1973), if they are taken to have acted 'in good faith, without malice and without corruption.'

We assumed above for argument's sake that the Superior Court--and the same considerations would apply to the Municipal Court ⁹--was entitled to redo a rent adjustment case, to hear it de novo, but we think that assumption is not correct. If, as we believe, the courts are ordinarily confined in their review to the record made before the Board, then the decree appealed from was irregular for the further reason that it rested on matters postdating the final Board decision. To analyze this matter we need to look briefly at the process in rent adjustment cases as envisaged by c. 842, commencing with the procedure before a board.

When rent adjustment is sought by a landlord or tenant, the board is required by c. 842, § 8(a), to furnish an adversary or 'trial-type' procedure, with adequate notice and a hearing if requested. Although a rent control board is not an 'agency' for purposes of the State Administrative Procedure Act (see G.L. c. 30A, § 1 (2); Gentile v. Rent Control Bd. of Somerville, --- Mass. ---, ---, n. 6, ^c 312 N.E.2d 210 (1974); Mayo v. Boston Rent Control Admr., --- Mass. ---, ---, n. 1, ^d 314 N.E.2d 118 (1974) the board in a rent adjustment proceeding is required by c. 842, § 8(d), to follow the procedures of § 11(1)--(6) of the State Administrative Procedure Act applicable to adjudicatory proceedings before agencies. (Rent boards are expressly exempted from compliance with § 11(7)--(8), as we shall note below.) Under § 11(1)--(6), a board need not observe formal rules of evidence (except for the privileges), but the parties are protected in the rights to call, examine, and cross-examine witnesses and introduce other evidence, and to have an official record maintained.

Turning from procedure to substance, a board is guided by c. 842, § 7(a), which requires that it 'assures that rents . . . yield to landlords a fair net operating income,' considering under § 7(b) 'among another relevant factors, which the board . . . by regulation may define': changes in property taxes, unavoidable changes in operating and maintenance expenses, capital improvements, changes in space, services, or facilities provided,...