May 30, 2007
225 UNION STREET, JERSEY CITY, FRANK J. NOSTRAME, APPELLANT,
DEPARTMENT OF COMMUNITY AFFAIRS, BUREAU OF HOUSING INSPECTION, RESPONDENT.
On appeal from the New Jersey Department of Community Affairs.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 23, 2007
Before Judges Lisa, Holston, Jr. and Grall.
Petitioner Frank J. Nostrame appeals from a final decision of the Commissioner of the Department of Community Affairs (Department). The Commissioner determined that Nostrame "failed to abate various continuous violations" of the Hotel and Multiple Dwelling Law (the Act), N.J.S.A. 55:13A-1 to -28, and the regulations promulgated pursuant to that Act, N.J.A.C. 5:10-1.1 to -28.1. The Commissioner assessed penalties for these violations in the amount of $31,125 and inspection fees in the amount of $1196. Because the Commissioner erred in allocating the burden of proof, assessed penalties not authorized by law and failed to provide sufficiently specific factual findings to enable the court to determine if the evidence supports the order, we vacate the final order and remand.
Nostrame owns a nineteen-unit apartment building in Jersey City. On March 9, 2001, pursuant to N.J.S.A. 55:13A-13, an inspector employed by the Department inspected Nostrame's building. More than three months later, on June 28, 2001, the Commissioner issued a report citing 173 violations of the regulations and directing Nostrame to correct the deficiencies by August 27, 2001. The twelve-page inspection report and order identifies each of the 173 violations by location -- exterior areas, common areas (basement, vestibule, stairways) or individual apartment -- and citation to the regulation violated.
Nostrame requested additional time to comply with the order and was given an extension until November 9, 2001. The Commissioner's inspection report and order invites such requests for extensions and advises that an extension request is the equivalent of a concession of liability for the violations and a waiver of the right to a hearing.
The inspector returned to re-inspect Nostrame's property on January 2, 2002. According to the re-inspection report, fifty-nine of the violations had been abated and thirty-nine remained open. Because the inspector could not gain access to all areas of the building, he did not report on the status of the remaining seventy-five violations.
On April 3, 2002, the Commissioner issued a notice of violation and order to pay a penalty. The notice charged Nostrame with a violation of N.J.S.A. 55:13A-19(a)(4) "FOR [HIS] FAILURE TO COMPLY WITH PREVIOUS ORDER DATED 06/28/2001." The total penalty assessed was $2125. The notice explained that N.J.S.A. 55:13A-19(b) authorizes a penalty of "not less than $50.00 nor more than $500.00 [for each failure to comply], and a penalty of not less than $500.00 nor more than $5,000.00 for each continuing violation." N.J.S.A. 55:13A-19(b).
A penalty assessment form that provides additional but limited information about the violations upon which the penalty was based also was completed.*fn1 The penalty assessment form includes blank lines in which the number of violations and penalty amount can be handwritten. The form is divided into three sections based on the site of the violation -- "Exterior," "Common Areas" and "Units." Printed on the form are standard penalty amounts, per violation, in each of the three sites. The amount of the penalty varies depending on whether the violation implicates life or safety, "L/S," or does not, "N/L/S." The penalties for "L/S" violations are higher than those for "N/L/S" violations.*fn2
The penalty assessment form does not identify the specific violations listed in the June 28, 2001 "Inspection Report and Orders of the Commissioner" that led the Commissioner to assess penalties. Nostrame was assessed penalties as follows. One "N/L/S" penalty in the amount of $125 related to an unspecified violation in the "Exterior" area. (The inspection report for January 2002 on which the penalty is based reflects six open violations related to the exterior.) He was assessed one "L/S" penalty related to "Common Areas" in the amount of $500. (There were five open violations for "Common Areas" reflected on the January 2002 inspection report.) He was assessed eight penalties related to unidentified "Units," four of which were for "L/S" violations in the amount of $250 each and four of which were for "N/L/S" violations in the amount of $125 each. (The January 2002 inspection report reflects twenty-eight open violations in seven different "Units.")
Upon receipt of the order imposing penalty, Nostrame filed timely objections. On July 10, 2002, the Commissioner transferred the contested case to the Office of Administrative Law. See N.J.S.A. 52:14b-1 to -15.
On November 7, 2002, Nostrame's property was re-inspected. The inspector gained access to areas not available to him in January 2002. Of the initial 173 violations, this report indicated that forty-five remained open and ninety-two had been abated. Because the inspector was not given access to all apartments, the report reflected no change in the status of the remaining thirty-six violations.
Based on the November 2002 inspection, on January 2, 2003, the Commissioner issued a "notice of continuing unabated violations and orders to abate violations and to pay penalty." The Commissioner alleged a "continuing violation" by failure to abate. N.J.S.A. 55:13A-19(a)(4),(b). As recited in that notice and order, N.J.S.A. 55:13A-19(b) provides for increased penalties of not less than $500 nor more than $5000.
The total penalty assessed after the November 2002 re-inspection was $14,500. With respect to the "Exterior" area, where the Commissioner previously charged Nostrame with one "N/L/S" penalty, Nostrame was charged with one "continuing" "L/S" penalty in the amount of $1500. For "Common Areas," Nostrame was charged, as before, with one "L/S" penalty. With respect to "Units," where the Commissioner previously charged Nostrame with four "L/S" and four "N/L/S" penalties, he was now charged with five "L/S" penalties in the amount of $1500 each, for a total of $7500, and four "N/L/S" penalties in the amount of $1000 each, for a total of $4000. Nostrame did not request a hearing on that assessment.
On April 24, 2003, the Administrative Law Judge (ALJ) assigned to adjudicate the contested case conducted a prehearing conference at which she determined that Nostrame bore the burden of persuasion and directed the Department to re-inspect Nostrame's property.*fn3 The hearing commenced, and the ALJ heard testimony from Nostrame, Linda Rogers, who is the superintendent of Nostrame's apartment building, and inspectors employed by the Department. The hearing was adjourned and continued, apparently to permit the re-inspection that the ALJ had ordered.
The re-inspection of Nostrame's property was done on April 25, 2003. The inspector gained access to areas not previously available. Of the initial 173 violations, the inspector's report indicates that thirty-five remained open and 122 had been abated. The report reflected no change in the status of the remaining sixteen violations because the inspector was not given access to the units.
Based on the April 25, 2003 inspection, the Commissioner again assessed penalties for continuing violations in the total amount of $14,500. With respect to the "Exterior" area, Nostrame was charged with a second penalty for a "continuing" "L/S" violation in the amount of $2500. For "Common Areas," Nostrame was charged with a second penalty for a continuing "L/S" violation in the amount of $2500. With respect to "Units," where the Commissioner last charged Nostrame with five continuing "L/S" and four "N/L/S" penalties, he was now charged for three "L/S" penalties in the amount of $2500 each, for a total of $7500, and two "N/L/S" penalties in the amount of $1000 each, for a total of $2000. Nostrame did not challenge that order.
A fourth re-inspection was done on September 10, 2003, again at the direction of the ALJ. The inspector again gained access to areas not previously available. Of the initial 173 violations, this report confirmed nine unabated violations.
Based on the September 10, 2003 inspection, the Commissioner assessed penalties for continuing violations in the total amount of $45,000. With respect to the "Exterior" area, Nostrame was charged with a third penalty for a "continuing" "L/S" violation in the amount of $15,000. For "Common Areas," Nostrame was charged with a third penalty for one continuing "L/S" violation in the amount of $5000. With respect to "Units," where the Commissioner last charged three "L/S" penalties and two "N/L/S" penalties, the Commissioner now assessed two "L/S" penalties in the amount of $5000 and two "N/L/S" penalties in the amount of $5000 each, for a total of $25,000. Nostrame filed a timely request for a hearing on that assessment.
By order dated May 12, 2004, the ALJ granted the Department's application to consolidate the contested cases. The hearing was completed on September 4, 2004.
The ALJ concluded that Nostrame "failed to abate various continuing violations and is liable for a $32,321.00 in penalties [sic] and inspection costs." The ALJ's decision addresses seven continuing violations. We discuss the evidence and the ALJ's findings with respect to each of those seven violations separately.
The ALJ concluded that Nostrame failed to abate a continuing violation of N.J.A.C. 5:10-6.4(a), which requires the exterior of the premises to be "kept free of all nuisances, insanitary [sic] conditions, and any hazards to the safety or health of occupants, pedestrians and other persons utilizing the premises." That determination was supported by the following finding: "unauthorized objects on the fire escape, which would interfere with emergency exiting from the building existed on the dates and times indicated on the inspection reports." The ALJ did not point to specific evidence that supported that finding.
Nostrame was also cited for a violation that required him to scrape and paint all the fire escapes. He testified that the painting and scraping was done after he received the Commissioner's June 28, 2001 notice and order. The inspector's report for the re-inspection completed in January 2002 confirms that the fire escapes had been scraped and painted. Rogers also testified that the fire escapes had been cleared but acknowledged that she had seen a garbage bag on a fire escape and directed the tenant to remove it. According to the inspector, during his initial inspection he saw plants, bags and garbage on the fire escapes. On the second inspection he saw rubbish. He could not recall what he saw on the fire escapes on other occasions.
The ALJ concluded that Nostrame did not abate a violation of N.J.A.C. 5:70-4.18 concerning a boiler enclosure. The inspector testified that he concluded that the violation was abated because there was a sprinkler above the boiler that obviated the need for an enclosure, which he had not noticed on prior inspections. The ALJ did not address that testimony.*fn4
The ALJ also concluded that Nostrame failed to abate a violation of N.J.A.C. 5:10-21.1(a), which requires a bathtub or shower that must be "maintained in good operating condition" and "drain into a sanitary sewer or other approved sanitary disposal system." N.J.A.C. 5:10-21.1(e). The Commissioner's inspection report and orders referenced violations based on inadequate caulking and grout. The inspector did not know whether the bath tubs leaked. The ALJ found that some bathrooms had tubs that were not properly caulked or grouted and concluded that this amounted to a failure to maintain them "in good operating condition."
The ALJ concluded that Nostrame did not abate violations for failure to install smoke detectors, N.J.A.C. 5:10-1.6, and carbon monoxide alarms, N.J.A.C. 5:10-28.1(a). According to Nostrame and Rogers, tenants removed or disabled smoke detectors. After receiving the June 28, 2001 inspection report and order, Nostrame purchased simple plug-in carbon monoxide detectors for each apartment and Rogers distributed them to the tenants, who signed for them. According to the inspector, he saw disabled smoke detectors and uninstalled carbon monoxide alarms in several apartments on re-inspection.
The ALJ concluded that Nostrame did not abate a violation of N.J.A.C. 5:10-20.1, which requires a connection for gas stoves "by permanent fixtures and tubing to avoid leakage of gas." The inspector testified that a stove burner in one apartment did not light, apparently because it was clogged with grease. When the gas supply to that burner was open, the gas leaked. That condition had not been rectified when he re-inspected the stove.
The ALJ concluded that Nostrame failed to correct violations based on double-keyed locks that several tenants had installed in their apartments, which she found violated N.J.A.C.
5:10-5.3. Nostrame did not dispute that tenants had installed such locks, but contended that he was not responsible.*fn5
On May 5, 2005, the Commissioner issued the following one sentence decision: "Having reviewed the Initial Decision of the [ALJ] in this matter, together with any exceptions or replies submitted, I hereby adopt the Initial Decision as the Commissioner's Final Decision." Because the Commissioner adopted the ALJ's decision without comment, we refer to the decision rendered by the ALJ and adopted by the Commissioner as the Commissioner's decision.
This court defers to an agency's decision unless it is arbitrary, capricious or unreasonable or not supported by substantial credible evidence in the record. Bailey v. Bd. of Review, 339 N.J. Super. 29, 33 (App. Div. 2001). We cannot afford that deference, however, unless we have "confidence that there has been a careful consideration of the facts in issue and appropriate findings addressing the critical issues in dispute." Ibid. "The requirement of findings is far from a technicality and is a matter of substance. It . . . is a fundamental of fair play that an administrative judgment express a reasoned conclusion. A conclusion requires evidence to support it and findings of appropriate definiteness to express it." New Jersey Bell Tel. Co. v. Communications Workers of Am., 5 N.J. 354, 375 (1950) (citation omitted). "Findings must be free from ambiguity which raises a doubt as to whether the administrative authority proceeded upon a correct legal theory. . . .
[F]indings of fact [must] be sufficiently specific under the circumstances of the particular case to enable the reviewing court to intelligently review an administrative decision and ascertain if the facts upon which the order is based afford a reasonable basis for such order." Id. at 376-77. "When an agency's decision is not accompanied by the necessary findings of fact, the usual remedy is to remand the matter to the agency to correct the deficiency." In re Issuance of a Permit by Dep't of Envtl. Prot. to Ciba-Geigy Corp., 120 N.J. 164, 173 (1990).
The Commissioner's decision is so inadequate as to require remand under the foregoing standards. The question in this case was whether Nostrame failed to comply with the Commissioner's order to correct specific violations listed in the first inspection report and order to abate. See N.J.S.A. 55:13A-19(a)(4). Because Nostrame did not challenge the Commissioner's initial report of inspection and orders, he effectively conceded the initial violations. The penalties the Commissioner assessed, however, were based on Nostrame's failure to obey the order to correct the initial violations. Nostrame challenged that determination. Thus, the Commissioner was required to state factual findings supporting her conclusion that Nostrame failed to correct specific violations listed in the initial notice that warranted the penalties assessed. If the Commissioner undertook that necessary analysis, it is not reflected in the Commissioner's decision.
By way of illustration and explanation, we point to several deficiencies in the factual findings supporting the conclusions. The Commissioner's decision discusses seven violations that Nostrame failed to abate -- fire escape debris, boiler enclosure, door locks, smoke detectors, carbon monoxide alarms, cooking stove and bathtub caulking. The first penalty assessment form notes penalties in the aggregate amount of $2125 for ten separate violations -- eight within units, one for the exterior of the building (presumably the fire escapes) and one for the common area (presumably the boiler). The apparent inconsistency between the decision and the penalty assessment form is arguably explainable on the ground that there was more than one apartment in which Nostrame failed to correct a smoke detector, carbon monoxide alarm, door lock or caulking violation. The difficulty is that the decision is so inadequate that we are left to speculate if that is what the Commissioner found. It is simply not clear whether the decision is arbitrary or supported by factual findings that are not expressed.
The factual findings that support a determination that Nostrame failed to correct violations related to caulking, fire escapes and the boiler are also inadequate. As noted above, the findings must be sufficiently clear to allow this court to determine if the evidence provides a basis for the decision. New Jersey Bell Tel. Co., supra, 5 N.J. at 376-77. This requires a discussion of conflicting evidence and a discussion of how the Commissioner has concluded that the facts establish a violation of the regulation at issue.
There was conflicting evidence about a "continuing" failure to clear the fire escape of debris. The inspector determined that Nostrame had abated a violation requiring scraping and painting of the fire escapes. Presumably, that task required removal of all items from the surface of the structures. According to Nostrame and Rogers, they saw the fire escapes clear. According to the inspector, he saw different objects on the fire escapes at different times. It is unclear whether the Commissioner found additional violations involving different debris or a continuing failure to clear debris. The decision leaves us to speculate.
There was also conflicting evidence about a violation involving the boiler. The inspector testified that he marked the boiler enclosure violation abated because he had not noticed sprinklers installed above the boiler that obviated the need for an enclosure. The Commissioner's decision does not address this testimony.
The Commissioner's decision also fails to relate factual findings to the regulatory violations at issue. For example, the decision is unclear as to how the Commissioner determined that Nostrame's failure to re-caulk or re-grout bathtubs violated a regulation addressing "operating condition" and drainage of bathing facilities. With respect to the door locks, the Commissioner found a violation of a regulation different than the regulation violation Nostrame was ordered to abate.
Because these deficiencies in the Commissioner's decision preclude meaningful review, we vacate the order and remand.
Nostrame raises an additional issue relevant to the penalty that also requires remand. Specifically, he contends that the penalties imposed for continuing violations after he appealed are illegal. The Commissioner argues that we should not consider this issue because it was not raised below. This legal issue, however, was squarely presented in a motion to dismiss that was submitted to the ALJ prior to her final decision.
N.J.S.A. 55:13A-19(b) provides enhanced penalties "of not less than $500.00 nor more that $5,000.00 for each continuing violation." It further provides:
Where any violation of subsection (a) of [N.J.S.A. 55:13A-19] is of a continuing nature, each day during which such continuing violation remains unabated after the date fixed by the commissioner in any order or notice for the correction or termination of such continuing violation, shall constitute an additional, separate and distinct violation, except during the time on [sic] appeal from said order may be taken or is pending.
Under the plain and unambiguous terms of this provision, once Nostrame challenged the penalties for failure to abate he was not subject to additional penalties for a continuing violation while that claim was pending before the Commissioner. Recognizing that N.J.S.A. 55:13A-2 requires a liberal construction of the Act and arguing on the basis of public policy, the Commissioner contends that we should construe N.J.S.A. 55:13A-19(b) to permit assessment of additional penalties for failure to abate unless the landlord has moved for a stay pursuant to N.J.S.A. 55:13A-18. Where the terms of a statute are clear, however, there is no need for judicial construction, and our courts apply the statute as written. See MCG Assocs. v. Dep't of Envtl. Prot., 278 N.J. Super. 108, 119- 20 (App. Div. 1994) (and cases cited therein). The imposition of additional penalties for continuing violations imposed after Nostrame challenged the assessments was unauthorized and contrary to N.J.S.A. 55:13A-19(b). Accordingly, we direct the Commissioner to vacate any penalties based on assessments imposed for continuing violations after Nostrame's challenge was filed.
Nostrame also contends that the determination may be flawed because he was erroneously required to carry the burden of persuasion. We agree. Generally, an agency that seeks to impose a penalty or sanction must establish the basis for the action by a preponderance of the evidence. See In re Polk License Revocation, 90 N.J. 550, 560-61 (1982); New Jersey Dep't of Envtl. Prot. v. Louis Pinto & Son, Inc., 311 N.J. Super. 552, 556 (App. Div. 1998). We see no reason for deviating from the general rule in this case. Acknowledging that the Department ordinarily has the burden of establishing violations that warrant a penalty, the Commissioner contends that the burden shifts to Nostrame because he did not challenge the initial inspection report. While Nostrame may be deemed to have conceded the initial violations due to his request for an extension rather than a hearing, he did not waive his right to have the agency establish a subsequent violation of N.J.S.A. 55:13A-19(a)(4) based on his failure to correct those violations.
We decline to consider Nostrame's objection to the assessment of penalties based on the conduct of his tenants. As we understand the charges and the Commissioner's decision, the penalties are based on Nostrame's failure to take actions adequate to abate the violations. The Commissioner should articulate factual findings and a conclusion relevant to this issue on remand.
For all of the foregoing reasons, we reverse and remand for reconsideration in light of this decision. We leave it to the discretion of the Commissioner to determine whether to refer the matter to the OAL for a new hearing or reconsider her decision and the penalty assessed, in light of this decision, based on the record developed during the first hearing. We do not retain jurisdiction.