Stoltz Management Co., Inc. v. Consumer Affairs Bd.
| Decision Date | 22 September 1992 |
| Citation | 616 A.2d 1205 |
| Parties | STOLTZ MANAGEMENT CO., INC., Appellant-Below, Appellant, v. CONSUMER AFFAIRS BOARD, Appellee-Below, Appellee. . Submitted: |
| Court | United States State Supreme Court of Delaware |
Appeal from Superior Court. Affirmed.
Barbara MacDonald (argued), and Peter A. Pietra, Morris, James, Hitchens & Williams, Wilmington, for appellant.
Stuart B. Drowos (argued), Deputy Atty. Gen., Dept. of Justice, Wilmington, for appellee.
Before HORSEY, WALSH and HOLLAND, JJ.
This is an appeal by Stoltz Management Co., Inc. ("Stoltz") from a Superior Court ruling which affirmed a decision of the Consumer Affairs Board ("Board"). The Board's decision had upheld an earlier Cease and Desist Order issued by the Director of the Division of Consumer Affairs ("Director"), ordering Stoltz to cease charging its tenants a non-refundable redecorating fee. Stoltz contends that the Board's decision, affirmed by the Superior Stoltz raises two contentions in this appeal. First, it contends that the Board's finding that the redecorating fee was a nonconforming security deposit was not based on substantial evidence and, more broadly, that the Board erred as a matter of law in ruling that the redecorating fee conflicted with the Delaware Landlord-Tenant Code, 25 Del.C. §§ 5101-6724 ("Landlord-Tenant Code"). Second, Stoltz argues that the Board erred as a matter of law in retroactively requiring Stoltz to refund redecorating fees Stoltz had collected from tenants prior to the Director's Order.
Court, was erroneous as a matter of law and was not based on substantial evidence.
We conclude that the Board did not err as a matter of law in ruling that the redecorating fee conflicted with the Landlord-Tenant Code and in applying its order retroactively. Hence, we affirm the decision of the Superior Court.
Stoltz owns and manages several apartment complexes in New Castle County, including The Plaza, Society Hill, Thomas West House and Arbor Pointe Apartments. In 1988, Stoltz began charging new tenants of these complexes a non-refundable redecorating fee. It was Stoltz's policy to apply the redecorating fee to defray a portion of the costs incurred by Stoltz at the conclusion of the tenancy in repairing and correcting damage to apartment units resulting from normal wear and tear and, if necessary, other damage beyond normal wear and tear. Specifically, the redecorating fee was used by Stoltz to help finance its practice of cleaning the carpets and repainting the walls before reletting the apartment.
In early 1989, the Director began an investigation into Stoltz's practice of charging a redecorating fee. The Director is authorized under 29 Del.C. § 8823 to issue Cease and Desist Orders against persons or businesses found to be in violation of any one of several statutes, including the Landlord-Tenant Code. 1 As a result of this investigation, the Director determined that the redecorating fee was in violation of 25 Del.C. § 5511(a), (b), (c), and (e) and, on July 16, 1990, issued a Cease and Desist Order, enjoining Stoltz from charging the redecorating fee. Upon issuance of the Order, Stoltz filed a timely appeal to the Board pursuant to 29 Del.C. § 8824(b)(1).
During the pendency of the appeal to the Board, a decision was rendered in the Superior Court in a related matter, Stoltz Management Co., Inc. v. Phillip, Del.Super., 593 A.2d 583 (1990) ("Phillip "). In Phillip, an appeal from a Justice of the Peace decision in favor of the tenant, the Superior Court held that Stoltz's use of the redecorating fee to defray the costs of repairing "other damages beyond wear and tear" was a violation of 25 Del.C. § 5511. Id. at 587. However, the Superior Court also suggested that charging tenants a non-refundable redecorating fee to defray the costs of repairing and correcting damages to the apartment units resulting from normal wear and tear would be permissible. Id.
Our standard of review mirrors that of the Superior Court. Where there is a review of an administrative decision by both an intermediate and a higher appellate court and the intermediate court received no evidence other than that presented to the administrative agency, the higher court does not review the decision of the intermediate court but, instead, directly examines the decision of the agency. Baker v. Connell, Del.Supr., 488 A.2d 1303, 1309 (1985). On appeal from a decision of an administrative agency the reviewing court must determine whether the agency ruling is supported by substantial evidence and free from legal error. State, Dept. of Labor v. Medical Placement Services, Inc., Del.Super., 457 A.2d 382, 383 (1982), aff'd, Del.Supr., 467 A.2d 454 (1983). Absent an abuse of discretion, the decision of the agency must be affirmed. Id. However, where, as here, the issue is one of construction of statutory law and the application of the law to undisputed facts, the court's review is plenary. E.I. du Pont de Nemours Co., Inc., v. Shell Oil Co., Del.Supr., 498 A.2d 1108, 1113 (1985).
The Landlord-Tenant Code, which has been part of our law since 1972, is a comprehensive enactment of the reciprocal legal obligations between landlords and tenants. Phillip, 593 A.2d at 585; 58 Del.Laws, Ch. 472. Its applicability is defined in 25 Del.C. § 5103(a).
This code shall regulate and determine all legal rights, remedies, and obligations of the parties and beneficiaries of any rental agreement of a rental unit within this State, wherever executed. Any agreement, whether written or oral, shall be unenforceable insofar as the agreement or any provision thereof conflicts with any provision of this code and is not expressly authorized herein....
Stoltz concedes that the Landlord-Tenant Code does not expressly authorize the charging of a non-refundable redecorating fee by a landlord. Thus, such a fee is permissible only if it does not conflict with any substantive provision of the Landlord-Tenant Code. 25 Del.C. § 5103(a).
Certain provisions of the Landlord-Tenant Code bear upon the landlord's duty of maintenance and the extent maintenance costs may be shifted to the tenant through payments other than rent.
25 Del.C. § 5511 regulates the collection and use of security deposits.
(a) If a rental agreement requires the tenant to provide any deposit to the landlord to be held for the term of the rental agreement, or any part thereof, said deposit shall be considered a security deposit.
* * *
(c) The purpose of the security deposit shall be:
(1) To reimburse the landlord for actual damages, above normal wear and tear which can be corrected by painting and ordinary cleaning, caused to the premises by the tenant;
(2) To pay the landlord for all rental arrearage due under the rental agreement, including rental due for premature termination of the rental agreement by the tenant; and
(3) To reimburse the landlord for all reasonable expenses incurred in renovating and reletting the premises caused by the premature termination of the rental agreement by the tenant, which includes termination pursuant to § 5509(b), provided that reimbursement caused by termination pursuant to § 5509(b) shall not exceed 1 month's rent.
25 Del.C. § 5303 imposes several duties upon the landlord, including that of maintaining the premises.
(a) The landlord shall at all times during the tenancy:
* * * * * *
(4) Make all repairs and arrangements necessary to put and keep the rental unit and the appurtenances thereto in as good condition as they were, or ought by law or agreement to have been, at the commencement of the tenancy....
However, the landlord and tenant are permitted to agree that the tenant will:
... perform specified repairs, maintenance tasks, alterations or remodeling, but only if:
* * * * * *
(3) Adequate consideration apart from any provision of the rental agreement is exchanged for the tenant's promise....
The Landlord-Tenant Code imposes upon the landlord the duty of maintaining the rental unit in "as good condition as [it was] ... at the commencement of the tenancy." 25 Del.C. § 5303(a)(4); 25 Del.C. § 5303(b)(3); see also Ford v. Ja-Sin, Del.Super., 420 A.2d 184, 186 (1980). The issue here is the manner in which the landlord may require the tenant, if at all, to contribute towards paying the expense of that maintenance. To the extent that any damage to the rental unit exceeds that which would result from "normal wear and tear which can be corrected by painting and ordinary cleaning," the landlord may apply the security deposit to the expense of repair. 25 Del.C. § 5511(c)(1). However, the landlord must follow the statutory restrictions on the use of security deposits.
Stoltz maintains that, since the decision in Phillip, 593 A.2d 583 (1990), it has not used its redecorating fee to finance repairs of damages beyond those caused by normal wear and tear and the...
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