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Landico Realty, Inc v. State of New Jersey


September 11, 2012


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Middlesex County, Docket No. DC-469-10.

Per curiam.


Submitted May 1, 2012

Before Judges Baxter and Nugent.

Plaintiff Landico Realty, Inc. (Landico), a landlord, appeals from a Special Civil Part judgment that: denied plaintiff's application for a default judgment against defendant Cynthia Drude, a former tenant; dismissed plaintiff's complaint against Drude; and dismissed plaintiff's complaint against defendant State of New Jersey, Department of Community Affairs, Division of Housing and Community Resources, Housing Assistance Element (DCA). Following a bench trial, the court concluded that Landico, not DCA, had breached their housing assistance contract; and that Landico had failed to establish by competent proofs its damage claim against Drude. We affirm.

Landico owned a residential rental unit in Spotswood, New Jersey, which it leased to Drude. Drude received rental assistance under a program commonly known as Section 8, which provides funding "[f]or the purpose of aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C.A. § 1437f(a). The program "is administered nationally by the Department of Housing and Urban Development (HUD) and in New Jersey by the DCA. HUD allocates funds to public housing authorities (PHAs), one of which is the DCA, which in turn pay a portion of low-income tenants' rent." Bouie v. N.J. Dept. of Cmty. Affairs, 407 N.J. Super. 518, 521 (App. Div. 2009).

After Drude qualified for Section 8 assistance, DCA entered into a Housing Assistance Payment Contract (HAP contract) with Landico. The HAP contract provided, among other terms, that Landico was required to maintain the unit in accordance with the housing quality standards (HQS). See 42 U.S.C.A. § 1437f

(o)(8)(B)). If Landico did not maintain the unit in accordance with the HQS, DCA could exercise remedies that included termination of housing assistance payments and termination of the HAP contract.

The initial term of the HAP contract commenced on July 11, 2006 and ended on June 30, 2007. The term was extended and the HAP contract remained in effect when the parties' dispute arose in 2009. During that year, the monthly rent was $1650, of which DCA paid $1017 under Section 8, and Drude paid the balance. In April and September of that year, DCA conducted inspections that disclosed violations of the HQS. Landico corrected the violations disclosed during the April inspection, but did not correct the violations disclosed during the September inspections. DCA suspended assistance payments effective December 1, 2009. Later that month, Landico filed a complaint against Drude and DCA seeking to recover the rent it would have been paid from December 2009 through June 2010. Drude did not answer the complaint. DCA filed an answer and the case was tried in the Special Civil Part on April 26, 2010.

Two witnesses testified at trial: Dr. Esmat Zaklama, Landico's president, and a DCA employee, Jill Corin. They disputed whether DCA legally terminated the HAP contract.

Zaklama testified that Landico owned the rental unit and that Drude had been a tenant for six years. In July 2006, Drude applied for and received Section 8 assistance. According to Zaklama, Drude made complaints about the unit and DCA requested that Landico repair a railing and fix a wire that had to be covered. He sent repair crews to the unit on three occasions. Each time, Drude refused to permit them access to the unit. According to Zaklama, "she had a big dog and she was trying to scare them off the property."

Zaklama began talking to Section 8 representatives, including a "Ms. Falcon[,]" on a weekly basis. He tried to convince Falcon to continue the subsidy but "all of a sudden, [he] found the letter of suspension." The letter, dated November 4, 2009, stated that Landico had breached the HAP contract "because [it had] failed to maintain the assisted unit in accordance with the [HQS]," and that housing assistance payments would be suspended effective December 1, 2009. The letter also stated, "Housing assistance payments will be suspended until such time as the program verifies that you have taken the proper corrective actions." DCA made the subsidized payments to Landico through November 2009 and terminated the payments as of December 1, 2009.

Zaklama responded to the November 4 letter on December 5, 2009. He handwrote the date, "12/5/09," on a copy of the letter and underlined the part of the sentence stating, "failed to maintain the assisted unit in accordance with the housing quality standards." He added, "Not true. Tenant is refusing access to contractors. We contest this . . . unilateral [action]. Please revoke the same or tell us in writing how to appeal it."

Zaklama also testified that Drude occupied the unit through April 2010, but when cross-examined about when she moved out, he responded: "I have no idea. She left on her own, without leaving keys.... I got a call from the city, there's a lot [of] garbage in front of the house.... That's how I knew that the tenant left." Zaklama testified that if he had to "figure out when the tenant . . . left" from his own information, it would be sometime in April.

During cross-examination, the State confronted Zaklama with an inspection report from an April 2009 inspection that had disclosed three HQS violations. Zaklama conceded that he was able to "abate those violations" and that Drude had not been "an impediment to that."

Zaklama denied receiving the September 2009 letter advising Landico of three violations disclosed during the September inspection. Yet, DCA addressed the letter to the address Landico used in the HAP contract. Zaklama acknowledged that the address contained in the September 2009 notice was the current address for Landico and that a handwritten telefax number on the letter was the telefax number for Zaklama's office. Although Zaklama denied receiving the September 2009 notification letter, he did not explain what other reason would have prompted him to send repair crews to the unit before November 4, the day of DCA's letter suspending assistance payments.

Corin, a DCA employee at the Middlesex County field office of the Division of Housing, provided a detailed chronology of events. She explained that after Landico remedied the violations disclosed during DCA's April inspection, Drude contacted the office and "indicated that there were severe health concerns that she and her family were having and [DCA] needed to do a special inspection." Leery of a landlord and tenant dispute, Corin did not authorize the September inspection until she had received documentation generated by the Middlesex County Health Department that a county inspection had disclosed mold and other problems in the unit. DCA conducted the inspection on September 21, 2009 and notified Landico of the repairs that were needed to bring the unit in compliance with the HQS.

According to Corin, when the unit violations were not repaired, she contacted the caseworker, Pat McDevitt, who said she had "attempted to contact the property management, to no avail." McDevitt had been "told on several occasions they'd get back to her, [but] they never did." Corin then contacted Zaklama, who told her that Drude had refused to allow his repair crews to enter the unit to make the repairs. Corin requested documentation that Zaklama had dispatched a repair crew, ordered supplies, or received a bill for the repair crew's time in traveling to the unit. Corin received no such documentation. Consequently, she telephoned Zaklama and asked if he had sent Drude a letter to schedule a time when a repair crew could enter the unit. Zaklama said he had sent such a letter, but never provided it to Corin.

Corin gave Zaklama "a little extra time," but told him that DCA could not "continue to keep a tenant housed in a unit that [they had] already deemed was not satisfactory, according to [HQS] for much longer." When Zaklama made no further attempts to contact Corin, DCA sent Landico the November 4 letter suspending assistance payments and issued a voucher to Drude to assist her in seeking "suitable housing elsewhere."

Corin also testified that Zaklama had the authority to evict Drude for nonpayment of rent, but did not do so. Drude attempted to find another residence and provided DCA with four or five rental properties, but she was unable to obtain a lease for any of those properties. According to Corin, DCA gave Drude a document called "a 'Termination of Tenancy,' where two parties can mutually agree at any time, other than the renewal period, to terminate the tenancy. Mr. Zaklama refused to sign the Termination of Tenancy. So, ... he didn't want to terminate her tenancy, but he wasn't willing to make any of the repairs."

During cross-examination, Corin testified that she did not know when Drude vacated the unit. Furthermore, she opined that Zaklama's testimony that Drude left in April had to be inaccurate, because DCA's computer payment records indicated that Drude commenced another lease on March 1, 2010. Additionally, DCA had been in contact with another landlord before April 2010. DCA did not make subsidy payments to Drude during December, January, and February of 2009 and 2010.

The trial court found that Corin's testimony was credible, but Zaklama seemed "confused" and his "recollection [was] seriously flawed." The court determined that DCA mailed and telefaxed its September 2009 letter, informing Landico of the HQS violations, to Landico at its office address; and that the letter was received at that location. Citing Zaklama's testimony that he had several conversations with DCA between September and November 2009 about the violations disclosed during the September inspection, the court also determined that Zaklama could not have known of those violations had he not received the September letter.

The court rejected Zaklama's testimony that Drude was still occupying the premises until sometime around the latter part of April. The court noted, "the latter part of April is now." The court concluded that Zaklama was "taking information that other people told him," and that his "recollections [were] really second-hand and not worthy of crediting."

The court concluded that plaintiff, not DCA, breached the HAP contract. The court also concluded that it could not determine when Drude left the property. For those reasons, the court denied plaintiff's application for a default judgment against Drude, and entered a judgment dismissing the complaint with prejudice. This appeal followed.

Our review of a trial court's fact-finding is narrowly circumscribed. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). The findings of fact on which the judgment is based "should not be disturbed unless 'they are so wholly [u]nsupportable as to result in a denial of justice[.]'" Id. at 483-84 (quoting Greenfield v. Dusseault, 60 N.J. Super. 436, 444 (App. Div.), aff'd o.b., 33 N.J. 78 (1960)). "Thus, '[w]e do not weigh the evidence, assess the credibility of witnesses, or make conclusions about the evidence.'" Mountain Hill, L.L.C. v. Twp. of Middletown, 399 N.J. Super. 486, 498 (App. Div. 2008) (quoting State v. Barone, 147 N.J. 599, 615 (1997)). "Because a trial court 'hears the case, sees and observes the witnesses, [and] hears them testify,' it has a better perspective than a reviewing court in evaluating the veracity of witnesses." Pascale v. Pascale, 113 N.J. 20, 33 (1988) (quoting Gallo v. Gallo, 66 N.J. Super. 1, 5 (App. Div. 1961)). Having considered the record in light of plaintiff's arguments, we find no reason to disturb the judge's findings, which are supported by sufficient credible evidence in the record.

Landico argues that it should be "entitled to the rent subsidy from [DCA] for the months of December 2009 [through February 2010]." Landico asserts that the rent subsidy was never terminated, but merely suspended, and "[t]he nature of the housing quality defects did not rise to the level of being habitability issues or if they did would justify merely a nominal abatement." These arguments overlook the express language of the HAP contract. Paragraph B3 of the contract required plaintiff to maintain the unit in accordance with the HQS, and further provided in Part B3D that the DCA "shall not make any housing assistance payments if the contract unit does not meet the HQS, unless the owner corrects the defect within the period specified by [DCA] and [DCA] verifies the correction." Landico produced no evidence that it had corrected the violations and DCA had verified the corrections.

We also reject Landico's argument that it is entitled to restitution for a benefit it conferred upon DCA in the last month of 2009 and the first two months of 2010. Plaintiff has not identified the benefit that it conferred upon DCA. Assuming the "benefit" was Landico's decision not to evict Drude, that decision conferred no benefit on DCA. DCA received nothing in exchange.

Lastly, we reject Landico's argument that the trial court should have entered a judgment against Drude. Landico was required to establish its damages by competent proofs. See Heimbach v. Mueller, 229 N.J. Super. 17, 26 (App. Div. 1988). The trial court found that Zaklama was confused about several issues, and that his recollections were second-hand, not worthy of crediting. See N.J.R.E. 602 (requiring the proponent of testimony to establish the witness' personal knowledge of a relevant matter). The trial court could not determine "when the tenant vacated the property," and therefore did not have a basis for determining damages. Moreover, Landico had no other witnesses available who could establish through personal knowledge when Drude vacated the rental unit.

The trial court's decision was supported by sufficient credible evidence in the record. Consequently, we affirm the entry of judgment as to DCA and as to Drude.



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