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Housing Authority v. Commissioner

Decided: June 30, 1975.


Carton, Crane and Kole. The opinion of the court was delivered by Carton, P.J.A.D.


These consolidated appeals from a judgment of the Superior Court, Chancery Division, and from an administrative determination by the Commissioner of the Department of Institutions and Agencies involve proceedings arising out of a rent strike in housing projects under the control of the Housing Authority of the City of Newark. Plaintiff Authority is a public corporation created according to N.J.S.A. 55:14A-1 et seq. At the time this action was brought the Authority was operating 23 basic housing projects in Newark. (Defendants are the municipal, county and state agencies responsible for administration of various programs of public assistance.)

In April 1970 many of the tenants in the various projects began a rent strike. The rent strike was a protest against the allegedly uninhabitable conditions of the housing projects.

Of the 12,720 families in Authority-operated housing projects, 5,297 receive some form of public assistance. 2,729 of these families were, as of August 2, 1973, delinquent in the payment of monthly rentals. Total arrearages for all tenants amounted to about $6,000,000. Of this sum $2,500,000 represented delinquencies accumulated by the 2,729 tenant families on welfare.

Plaintiff's complaint describes the critical situation which had come about. Because of the curtailment of revenues the

difficulties of maintaining operation of the various projects have been aggravated. Suppliers of vital services were owed in excess of $3,000,000 and the Authority was unable to make necessary repairs. This, in turn, provided the tenants with an excuse to continue to withhold rentals. The Federal Government failed to provide assistance because the amount of funds available from the Department and Urban Development is fixed as a maximum deficit -- assuming payment of rentals.

Plaintiff sought direct payments from the Essex County Welfare Board. When that Board informed it that it was not possible to make such payments, plaintiff brought the Chancery action in September 1973 against the Department of Institutions and Agencies, Essex County Welfare Board and the Division of Public Welfare of the City of Newark. In that action it sought determinations that nonpayment of rent by a tenant receiving public assistance, any part of which was represented by shelter needs, constitutes a misuse of public assistance funds and that such nonpayment of rentals to the Authority was a substantial factor in contributing to the critical situation facing it and was detrimental to the best interests of all public assistance dependents in the various projects. On this basis plaintiff requested an order compelling defendant welfare agencies to turn over as a "vendor" or "protective payment," either directly to the Authority or other person as the court shall appoint as a "vendor" or "protective payment," the portion representing shelter needs of every public assistance grant due and to become due to any delinquent tenant.

Various welfare recipients were permitted to intervene, individually and on behalf of others similarly situated. After oral argument Judge Kimmelman, on March 11, 1974, dismissed the complaint on the ground that plaintiff had failed to exhaust any administrative remedy which it may have through the Department of Institutions and Agencies for appropriate relief under these compelling circumstances. In

doing so Judge Kimmelman observed, among other things, that the Commissioner should give consideration to formulating a method whereby the shelter grant will be made to serve its intended purpose. He suggested that an independent fiscal agent might be utilized to receive such funds on behalf of the tenants and disburse them for the mutual benefit of the tenants and the Authority, or, alternatively, that the services of a judicially-appointed rent receiver could be engaged to insure that the withheld rentals be used to provide necessary services and make needed repairs under the court's supervision.

In April 1974 plaintiff proposed to Commissioner Klein of the Department of Institutions and Agencies that she meet with representatives of the United States Departments of Health, Education and Welfare (HEW) and Housing and Urban Development (HUD) to discuss the relief sought in the Chancery action and the suggestions made by Judge Kimmelman. Early in May Commissioner Klein advised plaintiff that her department had given serious consideration to plaintiff's proposal, "but would decline to adopt it both for legal and policy making considerations in the absence of a court order to the contrary." Hence the present appeal.

As to the Chancery Division action, we conclude that Judge Kimmelman correctly dismissed plaintiff's action for failure to exhaust administrative remedies. It is clear that at the time plaintiff commenced its action it had broached its proposal only to the Essex County Welfare Board, and then only by an exchange of correspondence. It should have requested a final determination by the Commissioner of Institutions and Agencies before seeking judicial relief. In any event, the issue is moot since plaintiff did later pursue its remedy to the Commissioner of Institutions and Agencies after the court's ruling, and she declined to grant the relief requested. It is her determination with which we are now concerned.

The central issue is whether welfare payments may be paid to the Authority to compensate it for delinquent rent payments. Determination of that issue must be decided on the basis of the applicable state and federal laws. Conflicting questions of public policy as to whether welfare tenants should be allowed to have a "free ride" at public expense and whether the Authority may use the welfare system to combat a rent strike are tangential to this issue and should play no part in determination of this legal issue.

The record indicates that tenants receive assistance in the form of Old Age Assistance (OAA), Aid to Families with Dependent Children (AFDC), Aid to the Blind (AB), and Aid to the Permanently and Totally Disabled (APTD). The vast majority of delinquent welfare tenants receive public assistance in the form of AFDC.

State participation in a federally-supported categorical assistance program is voluntary. However, a state choosing to participate must comply with the terms of the federal legislation and regulations promulgated by HEW and must secure HEW approval of its plan for implementation of the program. Hausman v. Dept. of Institutions and Agencies , 64 ...

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