Opinion ID: 2321014
Heading Depth: 2
Heading Rank: 1

Heading: Ms. Anderson's Abatement was Properly Limited to the Amount of Rent She Paid to the Landlord.

Text: Ms. Anderson disputes the trial judge's apportionment of the abatement, which limited her recovery to $234, and contends that she is entitled to recover 100% of the abatement award ($6,210) on four alternative grounds. First, she contends that she is entitled to the full rental abatement award because she did not receive the benefit of her bargain. Specifically, she contends that she bargained for a housing unit worth $1,350, which was in a habitable condition. Second, she argues that DCHA never brought a cause of action adjudicating whether the landlord breached the HAP contact with DCHA and therefore DCHA never obtained a proper determination entitling it to recover a portion of the abatement. Third, she argues that she is a third party beneficiary under the HAP contract, and as such, is entitled to claim rights to the HUD subsidy paid by DCHA to her landlord. Fourth, she contends that DCHA's Section 8 subsidy payments lost their characterization as public funds once DCHA made the rental payments to the landlord on her behalf. We do not agree that Ms. Anderson is entitled to recover under any of these theories. Whether Ms. Anderson is entitled to DCHA's portion of the rental abatement under either theory of recovery she asserts is a question of law. We review questions of law de novo. See Technical Land, Inc., v. Firemen's Ins. Co., 756 A.2d 439 (D.C.2000); United States v. Felder, 548 A.2d 57, 61 (D.C.1988) (The trial court's resolution of a question of law is entitled to no deference and is reviewed ` de novo ' on appeal. [We] will make an independent judgment based upon an original appraisal of the record.) (citations omitted).
Ms. Anderson contends that the landlord's breach of the implied warranty of habitability deprived her of the benefit of her bargain. Ms. Anderson argues that what she bargained for in this lease was a decent and clean unit, free of code violations, and valued at $1,350 per month, not $234. Whether she paid all or just a portion of the rent is irrelevant, she argues. However, we reject that argument in circumstances where a public agency such as DCHA has asserted a claim to payments it has made on Ms. Anderson's behalf. District of Columbia law implies into all residential leases a warranty of habitability, requiring the landlord to maintain the premises in compliance with the District of Columbia Housing Code. See 14 DCMR § 301.1 (1991); [11] see also Javins v. First Nat'l Realty Corp., 138 U.S.App. D.C. 369, 370-71, 428 F.2d 1071, 1072, cert. denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970) ([A] warranty of habitability, measured by the standards set out in the Housing Regulations for the District of Columbia, is implied by operation of law into leases of urban dwelling units covered by those Regulations and breach of this warranty gives rise to the usual remedies for breach of contract.). Appellant was awarded an abatement because the trial court found that the landlord breached the implied warranty of habitability by failing to maintain the premises free of housing code violations. The trial court found that, due to housing code defects, the leased premises were valued at far less than the amount the landlord was receiving, and as a result, the rent should have been substantially less than the total amount the landlord received in rent for the unit. See, e.g., Javins, supra, 428 F.2d at 1082 ([T]he tenant's obligation to pay rent is dependent upon the landlord's performance of his obligations, including his warranty to maintain the premises in habitable condition.); Abidoye I, supra, 824 A.2d at 44 (finding that as between a landlord who failed to maintain the leased premises and a tenant who did not receive what she bargained for, the landlord should not profit from his breach of the implied warranty of habitability). Appellant mistakenly relies on Multi-Family Mgmt. v. Hancock, 664 A.2d 1210 (D.C.1995) and Cruz Mgmt. Co. v. Wideman, 417 Mass. 771, 633 N.E.2d 384 (1994), in support of her contentions. In Multi-Family, the landlord sued the tenant for possession of the apartment based on failure to pay rent and the tenant filed a counterclaim, alleging the existence of housing code violations. The trial court found that there were housing code violations and, acting sua sponte, ordered rent abatements and apportioned between the tenant and HUD a percentage representing the portion of the rent each paid for the unit. The court then ordered the landlord to pay these respective amounts to the tenant and to HUD, even though HUD was never a party to the litigation. The tenant in Multi-Family appealed the trial court's decision, claiming the right to 100% of the abatement on two alternative grounds. First, the tenant claimed he was entitled to the benefit of his bargain by receiving rent abatements based on the rent called for in the lease, not on the lower amount he actually paid as a participant in the Section 8 Program. Second, the tenant claimed entitlement to the abatement as a third party beneficiary of the HAP contract between the landlord and HUD. Multi-Family, supra, 664 A.2d at 1212. In Multi-Family, [12] we remanded the case to invite HUD to assert its rights, if any, to the abatement funds. Judge Ferren, in his dissent, recognized that because HUD contributed a major portion of the rent, it may have been entitled, if it sought it, to recover from the tenant the portion of the abatements attributable to HUD subsidies, based on an unjust enrichment theory. Multi-Family, supra, 664 A.2d at 1222 (Ferren, J., dissenting). However, absent a claim asserted by HUD or DCHA, as between the landlord and the tenant, Judge Ferren noted that the tenant was entitled to 100% of the court-ordered abatements, including the portion the court ordered paid to HUD. Id. at 1221. In sharp contrast to Multi-Family, here DCHA has asserted its rights to the portion of the rental abatement corresponding to the payments it made toward's appellant's rent, and DCHA is a party to this matter. Allocating 100% of the abatement to Ms. Anderson would award to her an amount exceeding what she paid to the landlord and arguably would constitute the unjust enrichment contemplated by Judge Ferren in his dissent in Multi-Family. DCHA is entitled to recover the portion of the abatement attributable to the HUD subsidy it paid on Ms. Anderson's behalf, namely $5,976. Another important factor that distinguishes this case from Multi-Family is the fact that DCHA notified the landlord of the housing code violations and gave the landlord time to cure these violations. When the landlord failed to cure the violations, DCHA advised the landlord on June 13, 2001 that the Section 8 payments he received for the unit were suspended effective June 7, 2001. Eight days later, in a letter dated June 21, 2001, DCHA advised the landlord that a subsequent inspection of the property revealed that the housing deficiencies were not resolved and therefore, effective August 31, 2001, DCHA was terminating rent subsidy payments for failure to meet the Housing Quality Standards (HQS) in compliance with the HAP contract. In Multi-Family, no action was taken by DCHA to enforce its rights under the HAP contract. As such, appellant's reliance on Multi-Family is misplaced. Appellant's reliance on Cruz Mgmt. Co. v. Wideman, supra, is similarly misplaced. [13] In Cruz, a Section 8 tenant filed a counterclaim against her landlord for breach of the implied warranty of habitability, alleging various housing code defects. Finding that the landlord had breached the warranty of habitability, the trial court awarded damages to the tenant for the breach, measured by the difference between the value of the dwelling as warranted (the rent provided for in the lease) and the value of the dwelling as it existed in its defective condition. The Massachusetts Housing Finance Agency (MHFA) was not a party to the litigation during trial, but moved to intervene after the trial had been completed. MHFA appealed alleging that the trial court should have limited the tenant's breach of warranty damages to the portion of the rent the tenant personally paid to the landlord. Cruz, supra, 633 N.E.2d at 387. The Massachusetts court held that since MHFA intervened after the trial had been completed, the record furnished no indication of which rights, if any, MHFA attempted to assert against the landlord. Id. at 389. The court found significant that the record, for example, did not show whether MHFA notified the landlord that conditions in the tenant's apartment were unsafe and unsanitary, or whether MHFA had advised the landlord that it intended to terminate or suspend subsidy payments on the tenant's behalf because of the landlord's failure to correct the violations. Id. The Cruz court further noted: The terms of the HAP contract, and the applicable Federal regulation, clearly require a State housing agency, like MHFA, to provide notice and an opportunity to cure a default before subsidy payments may be abated. Since the record does not permit us to conclude that MHFA has properly asserted its rights, there is no basis in this case to conclude that a full award of damages [to the tenants] will affect MHFA's position or rights under its contracts or Federal regulations. Cruz, supra, 633 N.E.2d at 389 (emphasis added). MHFA intervened only to assert its position that the tenant's recovery should be limited to the amount of rent the tenant personally paid to the landlord. MHFA never asserted any rights to any portion of the breach of warranty damages awarded to the tenant. In contrast, DCHA has asserted its rights to the portion of the abatement representing the money it paid to the landlord on behalf of Ms. Anderson. See Cruz, supra, 633 N.E.2d at 387 n. 7. In accordance with the terms of the HAP contract, DCHA twice notified the landlord, in writing, of its failure to comply with HQS. DCHA gave the landlord time to cure the housing defects before ultimately terminating the HAP contract on August 31, 2001. The actions taken by DCHA are in sharp contrast with those taken by MHFA in Cruz, despite the fact that the HAP contract between MHFA and HUD contains similar, if not identical, provisions to those contained in the HAP contract in this case. Thus, this court is not faced with the uncertainty found by the Massachusetts court in Cruz regarding what rights, if any, DCHA attempted to assert against the landlord. Unlike in Cruz, where the Massachusetts court was faced with determining the proper measure of damages that the landlord had to pay for breach of its obligations to the tenant, see 633 N.E.2d at 387 n. 7, here the question is one of allocation of those damages as between the tenant and DCHA. Neither the Cruz court, nor the court in Multi-Family, contemplated awarding to a tenant a rental abatement that represented more than what the tenant actually paid in rent where the public housing agency also claims contract damages for the same breach. [14] Although we agree with Ms. Anderson, as did the trial court, that she was entitled to a unit in a habitable condition, and that as a result of numerous housing code violations in her unit, she did not receive the benefit of her bargain, vis-a-vis DCHA, she is not entitled to receive moneys paid by DCHA pursuant to the Section 8 Program, regardless of the diminished value of the unit she occupied.
Ms. Anderson contends that DCHA has never brought a cause of action to adjudicate whether the landlord breached the HAP contract with DCHA. She argues that, absent litigation of a cause of action by DCHA and a determination that the landlord breached the HAP contract, she is entitled to recover the total abatement awarded by the trial court for the breach of the HAP contract. We disagree because the landlord's breach of the implied warranty of habitability also constituted a breach of the HAP contract, and a breach of the HAP contract entitled DCHA to exercise its rights against the landlord under the HAP contract. While the HAP contract was entered into between DCHA and the landlord, several paragraphs in the HAP contract indicate that a breach of the federal Housing Quality Standards (HQS) constitutes a breach of the HAP contract. [15] The relevant provisions of the HAP contract, demonstrating this fact, are as follows: Part B, Section 2(c), Lease of Contract Unit: The lease for the contract unit must include word-for-word all provisions of the tenancy addendum [16] required by HUD.     Part B, Section 3, Maintenance, Utilities, and Other Services: a. The owner must maintain the contract unit and premises in accordance with the housing quality standards (HQS).     c. If the owner does not maintain the contract unit in accordance with the HQS . . . the [Public Housing Agency (PHA)] may exercise any available remedies. PHA remedies for such breach include . . . suspension of housing assistance payments, abatement or other reduction of housing assistance payments, termination of housing assistance payments, and termination of the HAP contract. d. The PHA shall not make any housing assistance payments if the contract unit does not meet the HQS . . .     Part B, Section 8, Owner Certification: During the term of this contract, the owner certifies that: a. The owner is maintaining the contract unit and premises in accordance with the HQS. b. The contract unit is leased to the tenant. The lease includes the tenancy addendum . . . and is in accordance with the HAP contract and program requirements . . .     Part B, Section 10, Owner's Breach of HAP Contract: a. Any of the following actions by the owner . . . is a breach of the HAP contract by the owner: (1) If the owner has violated any obligation under the HAP contract, including the owner's obligation to maintain the unit in accordance with the HQS. (Emphasis added).     c. The PHA's rights and remedies for owner breach of the HAP contract include recovery of overpayments, suspension of housing assistance payments, abatement or other reduction of housing assistance payments, termination of housing assistance payments and termination of the HAP contract. (Emphasis added). d. The PHA may seek and obtain additional relief by judicial order or action . . .     Part C, Section 7(a)(1 ), Maintenance, Utilities, and Other Services: The owner must maintain the unit and premises in accordance with the HQS. These provisions of the HAP contract make clear that the owner of the leased premises must maintain the unit in accordance with the HQS. The record supports the fact that the landlord failed to comply with the HQS provisions. Based on the poor conditions of the premises, see note 6 supra, the trial court concluded that the rent should have been substantially less than the $1,350 charged by the landlord. DCHA took definitive steps to enforce Part B, Section 3 of the HAP contract when it notified the landlord by letter dated June 13, 2001 that his unit did not meet the HQS. Subsequently, in a letter dated June 21, 2001, DCHA notified the landlord, as well as Ms. Anderson, that an inspection of the property revealed outstanding HQS violations for which repairs had still not been made. The landlord's failure to make the repairs necessary to remedy the HQS violations resulted in a breach of the HAP contract, pursuant to Part B, Section 10(a)(1) of the HAP contract. Therefore, the landlord's failure to cure the numerous housing code violations in Ms. Anderson's unit, cited by a DCHA inspector on two occasions, effectuated a breach of the HAP contract by the landlord and gave DCHA the right to seek a rental abatement under Part B, Section 10(c) of the HAP contract for those moneys it paid to the landlord on behalf of Ms. Anderson during the time that these housing code violations went unaddressed. [17]
Appellant erroneously relies on Multi-Family to support her contention that federal and state law allows her to claim third party beneficiary rights to the HUD subsidy because the Section 8 subsidy was paid on her behalf as a low income tenant. This issue was expressly left undecided in Multi-Family. [18] We did note, however, that HUD was in a position to clarify whether it intended for the tenant to be a third party beneficiary of the HAP contract, by making the language in the HAP contract clear as to whether the tenant either was, or was not, a third party beneficiary. [19] See Multi-Family, supra, 664 A.2d at 1220. As DCHA points out, in the aftermath of Multi-Family, HUD revised its HAP contracts to explicitly state that tenants are not considered third party beneficiaries and are therefore not entitled to enforce any provision of the HAP contract. [20] Ms. Anderson ignores the express language in the HAP contract precluding the tenant from asserting third party beneficiary rights. Such express language was not present in the 1984 HAP contract that we analyzed in Multi-Family. Thus, Ms. Anderson's claim that she is entitled to the HUD subsidy as a third party beneficiary of the HAP contract between DCHA and her landlord must be rejected on its face because of the plain language in the HAP contract limiting her ability to claim such status.
Relying upon Arbuckle v. United States, 79 U.S.App. D.C. 282, 146 F.2d 657 (1944), at oral argument, appellant's counsel asserted that the rental payments DCHA made on Ms. Anderson's behalf lost their character as public funds once DCHA relinquished supervision and control over the funds by paying them over to the landlord. [21] We disagree. Contrary to Ms. Anderson's assertion, the HUD moneys maintained their character as public funds, which DCHA used to advance the public policy interest embodied in the Section 8 Housing Program. It is undisputed that DCHA paid the landlord pursuant to the Section 8 Program, and that these funds were received by DCHA from HUD for the purpose of subsidizing rent for low income tenants seeking decent and affordable housing. Congress, with the implementation of the United States Housing Act of 1937, appropriated these funds for the purpose that they be paid to landlords to carry out the housing program and provide safe and affordable housing from private housing stock for rental by qualified persons in the Section 8 Program. See 42 U.S.C. § 1437 et seq. (1990). As such, Congress is permitted to insist that these funds are distributed and spent in the manner, and for the purpose, for which they were appropriated. See South Dakota v. Dole, 483 U.S. 203, 206-07, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987) (Congress may attach conditions on the receipt of federal funds, and has repeatedly employed the power `to further broad policy objectives by conditioning receipt of federal moneys upon compliance by the recipient with federal statutory and administrative directives.)' ( citing Fullilove v. Klutznick, 448 U.S. 448, 474, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980) (opinion of Burger, C.J.)); see also Lau v. Nichols, 414 U.S. 563, 569, 94 S.Ct. 786, 39 L.Ed.2d 1 (1974); Ivanhoe Irrigation Dist. v. McCracken, 357 U.S. 275, 295, 78 S.Ct. 1174, 2 L.Ed.2d 1313 (1958); Oklahoma v. United States Civil Serv. Comm'n, 330 U.S. 127, 143-44, 67 S.Ct. 544, 91 L.Ed. 794 (1947); Steward Machine Co. v. Davis, 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279 (1937). Although these funds were paid to the landlord to subsidize a portion of the rent for the home Ms. Anderson rented, she never acquired a legal right to these funds, which is made clear by the language of Part B, Section 12, of the HAP contract prohibiting a tenant from claiming third party beneficiary status. Allowing Ms. Anderson to keep the $5,976, representing the portion of the rent paid by DCHA, despite DCHA's asserted right to recover the Section 8 payments it made, would be contrary to the very purpose for which the funds were intended. Congress authorized the Section 8 funds for the purpose of aiding low-income families in obtaining a decent place to live and [to] promot[e] economically mixed housing. See 42 U.S.C. § 1437f. There is no language in the Housing Act of 1937 authorizing the subsidized portion of rent under the Section 8 Program to be paid directly to the tenant. Pursuant to Part B, Section 7, of the HAP contract, the subsidized portion of the rent is required to be paid directly to the landlord by DCHA. [22] We conclude that the funds paid to Mr. Abidoye by DCHA pursuant to the Section 8 Program remained public funds, even if the purposes for which the funds were intended were, arguably, frustrated by the landlord's breach of the implied warranty of habitability. [23] Therefore, in a case such as this, where DCHA, as the agency charged with implementing the Section 8 program, asserts its rights to recover the portion of the damages that represents the rent paid by DCHA on a tenant's behalf, the damages award is properly allocated so that the funds can be returned to the public trust for future use to, in the words of our statute, aid low-income families in obtaining a decent place to live and of promoting economically mixed housing. [24] 42 U.S.C. § 1437f.