Thirty LLC v. Omaha Housing Authority

ThirTy LLC eT aL., appeLLanTs , v. O maha
hOusing auThOriTy, appeLLee .
771 N.W.2d 165
Filed June 23, 2009. 	No. A-08-1201.
1. Declaratory Judgments. An action for declaratory judgment is sui generis;
whether such action is to be treated as one at law or one in equity is to be deter-
mined by the nature of the dispute.
2. Contracts. When a dispute sounds in contract, the action is to be treated as one
at law.
3. Declaratory Judgments: Appeal and Error. In an appeal from a declaratory
judgment, an appellate court, regarding questions of law, has an obligation to
reach its conclusion independently of the conclusion reached by the trial court.
4. ____: ____. Determinations of factual issues in a declaratory judgment action
treated as an action at law will not be disturbed on appeal unless they are
clearly wrong.
5. Contracts: Breach of Contract: Stipulations. Parties to a contract may override
the application of the judicial remedy for breach of a contract by stipulating, in
advance, to a reasonable sum to be paid in the event of a breach.
6. Contracts. A contract written in clear and unambiguous language is not subject
to interpretation or construction and must be enforced according to its terms.
7. Contracts: Words and Phrases. A contract is ambiguous when a word, phrase,
or provision in the contract has, or is susceptible of, at least two reasonable but
conflicting interpretations or meanings.
8. Contracts. A contract must receive a reasonable construction, and a court must
construe it as a whole and, if possible, give effect to every part of the contract.
Appeal from the District Court for Douglas County: J russeLL
D err, Judge. Affirmed.
Douglas W. Ruge for appellants.
George B. Achola for appellee.
irwin, CarLsOn, and mOOre, Judges.
mOOre, Judge.
INTRODUCTION
Thirty LLC; GNO Properties LLC; JRG LLC; Theiss LLC;
Marion General Partnership; First Real Estate Group, Inc.
(FREG); and Ruben Cortez (collectively the Appellants) appeal
from the decision of the district court for Douglas County in
this declaratory judgment action brought by the Appellants
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Cite as 17 Neb. App. 715
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
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against the Omaha housing Authority (OhA). Because we find
no error in the district court’s interpretation of the contract at
issue in this appeal, we affirm.
BACKGROUND
The OhA is a public housing agency (PhA) established pur-
suant to state and federal housing programs. The OhA operates
two major housing programs: a public housing program and a
housing choice voucher program commonly referred to as the
“section 8” program. The OhA’s section 8 program is the cen-
ter of the dispute in this lawsuit.
The section 8 housing choice voucher program is a fed-
eral program created by the U.s. Department of housing and
Urban Development. One goal of the program is to provide
low-income families with rent subsidies that can be applied to
a home of their choice in the private sector. The money for the
housing choice vouchers is allocated by the U.s. Department
of housing and Urban Development to local PhA’s, such as
the OhA, which administer the program in their respective
areas. Under the section 8 housing choice voucher program,
an individual applies to a PhA, such as the OhA, for section
8 benefits. A family that qualifies for the section 8 program
is issued a housing voucher and is responsible for finding a
suitable housing unit of the family’s choice, which the owner
agrees to rent under the program. Once a PhA approves an
eligible family’s housing unit, the family and the landlord sign
a lease and, at the same time, the landlord and the PhA sign
a “housing Assistance Payments” contract (hAP contract) that
runs for the same term as the lease. Owner participation in the
section 8 program in Nebraska is voluntary.
Thirty, 	GNO 	Properties, 	JRG, 	Theiss, 	Marion 	General
Partnership, and FREG are Nebraska companies and are land-
lord participants in the section 8 program administered by
the OhA. Each of the appellants other than FREG has a
separate hAP contract with the OhA. Robert stevens is a
minority owner of Thirty and the president and sole owner
of FREG. FREG manages real estate rental units for various
owners, including those of Thirty and the other appellants in
this action.
716 	17 NEBRAsKA APPELLATE REPORTs

Tammy Ray was an individual receiving section 8 assistance
from the OhA. On January 31, 2005, Ray entered into a lease
agreement for the property in question for the monthly rental
amount of $497. Around the same time, Thirty and Ray entered
into a separate agreement, outside of the hAP contract and
unbeknownst to the OhA, providing that Ray would pay $103
a month above the agreed-upon hAP contract amount from the
initial term of the hAP contract until september 2005. Ray
paid the additional $103 monthly amount from the initial term
of the hAP contract until september 2005. On February 14,
2005, the OhA entered into an hAP contract with Thirty to
assist Ray with her rent for the property. The monthly rent to
the owner was established at $497. The hAP contract provides
that the owner “may not charge or accept, from the family or
from any other source, any payment for rent of the unit in addi-
tion to rent to owner.” The hAP contract also provides that the
tenant is not responsible for paying the portion of rent to the
owner covered by the PhA housing assistance payment, that
a PhA failure to pay the housing assistance payment is not a
violation of the lease, and that the owner may not terminate
the tenancy for nonpayment of the housing assistance payment.
On January 31, 2005, stevens, acting as “landlord/agent” for
the property in question, signed a section 8 landlord certifica-
tion, which is required by the OhA. Within that document,
stevens agreed, “I understand . . . that it is illegal to charge any
additional amounts for rent which have not been specifically
approved by the [OhA].”
In April 2006, Thirty brought an eviction action against
Ray in the county court for Douglas County after she fell
behind in the $103 payments due under the outside agree-
ment. This eviction action led to further litigation initiated
by Ray and brought the outside agreement to the attention of
the OhA. In subsequent hearings in the county court action,
Ray and Thirty agreed that Ray would voluntarily move out
of the property in question. When Ray still had not moved
out, despite the stipulated agreement, the county court judge
ordered a writ of restitution, granting restitution of the prem-
ises to Thirty.
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In an action in the district court, brought while the county
court case was still pending, Ray sued Thirty and FREG for,
among other things, return of the monthly payments of $103
made over the amount stated in the hAP contract. In the dis-
trict court case, the court determined that Thirty had breached
the hAP contract by accepting payment for rent above what
was agreed upon in the lease. In a memorandum opinion filed
on June 23, 2009, in case No. A-08-1020, we decided the dis-
trict court case.
After learning that Thirty was charging Ray rent above and
beyond the contracted-for amount of $497 per month, the OhA
began an investigation of Thirty. As a result of the investiga-
tion, the OhA determined that Thirty had breached the hAP
contract for the property leased to Ray by charging Ray addi-
tional moneys beyond the contracted-for rent and by filing an
eviction action against Ray.
In september 2006, the OhA informed Thirty that it had
determined that Thirty had breached the hAP contract, that
Thirty was not entitled to payments it received during the time
in question (totaling $9,261), and that if Thirty did not remit
this amount, the OhA would begin recoupment from other
properties Thirty had in the section 8 program. In November,
the OhA recouped or deducted the $9,261 from two main
sources. First, it recouped or deducted $1,801 from contracts
on which Thirty was the owner. second, the OhA recouped or
deducted $7,460 from contracts on which FREG was the man-
aging agent. This second group included contracts on which
GNO Properties, JRG, Theiss, Marion General Partnership, and
Cortez were listed as owners.
The Appellants filed the present declaratory judgment action
in the district court on February 22, 2007. The Appellants
asked the court to determine whether, under the terms of the
hAP contract, the OhA has the right to retroactively deduct
agreed payments made while a tenant occupies the property
even when any overage payments were refunded to the ten-
ant. The Appellants sought $7,883 in damages and attached an
exhibit showing the amounts recouped by the OhA from each
owner, which amounts totaled $7,883.
718 	17 NEBRAsKA APPELLATE REPORTs

The OhA answered, admitting and denying various allega-
tions of the complaint. specifically, the OhA alleged that on
January 12, 2006, it notified Thirty by letter that Thirty could
not collect payments in excess of the amount specified in the
Ray hAP contract and that the OhA had the option to recoup
all hAP contract payments for violations of the hAP con-
tract. The OhA denied that it took the position that it could
deduct payments from other landlords whose property was
managed by FREG but asserted that it had the right to deduct
payments from contracts held between the OhA and “any
company or person that appears to maintain or have an owner-
ship interest in Thirty . . . as set forth in paragraph 7(f) of the
hAP contract.”
The Appellants filed a motion for summary judgment or
partial summary judgment on April 23, 2007. The Appellants
asked the district court for summary judgment “for amounts
withheld for their benefit from [the OhA] at [the OhA’s] cost,
or, in the alternative, for partial summary judgment determin-
ing which [of the Appellants] are entitled to a refund of hAP
[contract] payments withheld, if any.”
The district court entered an order on July 31, 2007, overrul-
ing the summary judgment motion. The court found no dispute
that Thirty overcharged Ray in the amount of $103 per month,
but it concluded that there was a genuine issue of material fact
concerning the rights and liabilities of the parties under the
hAP contract.
Trial was held before the district court on July 16, 2008. The
court received the parties’ stipulations as to the facts, which we
have summarized above. Exhibits referenced in and attached
to the parties’ stipulation include a copy of the hAP contract
benefiting Ray, the section 8 landlord certification signed by
stevens, the lease agreement between JRG and Ray, and a
document setting forth a breakdown of amounts recouped by
the OhA from FREG contracts ($7,460) and a breakdown of
amounts recouped from Thirty contracts ($1,801).
The district court entered an order on October 17, 2008,
concluding that the OhA was entitled to offset $9,261 paid to
Thirty “during which time Thirty was not in compliance with
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[the] OhA with regard to the lease agreement with . . . Ray,”
and that the OhA was entitled to offset amounts owed to Thirty
under other contracts for payment of the $9,261, but that the
OhA could not offset any amounts owed to Thirty’s coappel-
lants and that such amounts must be refunded to the coap-
pellants. We have set forth the specific details of the court’s
reasoning in the analysis section below.
AssIGNMENT OF ERROR
The Appellants assert, consolidated and restated, that the
district court erred in its interpretation of the hAP contract.
sTANDARD OF REVIEW
[1-4] An action for declaratory judgment is sui generis;
whether such action is to be treated as one at law or one in
equity is to be determined by the nature of the dispute. City
of Ashland v. Ashland Salvage, 271 Neb. 362, 711 N.W.2d
861 (2006). When a dispute sounds in contract, the action is
to be treated as one at law. Spanish Oaks v. Hy-Vee, 265 Neb.
133, 655 N.W.2d 390 (2003). In an appeal from a declara-
tory judgment, an appellate court, regarding questions of law,
has an obligation to reach its conclusion independently of the
conclusion reached by the trial court. State Farm Mut. Auto.
Ins. Co. v. Allstate Ins. Co., 268 Neb. 439, 684 N.W.2d 14
(2004). Determinations of factual issues in a declaratory judg-
ment action treated as an action at law will not be disturbed on
appeal unless they are clearly wrong. Id.
ANALysIs
Relevant Provisions of HAP Contract.
We first set forth the provisions of the hAP contract relevant
to our analysis. Part B, paragraph 4b(8), provides: “The PhA
may terminate the hAP contract if the PhA determines that
the unit does not meet all requirements of the [housing quality
survey], or determines that the owner has otherwise breached
the hAP contract.”
Part 	B, 	paragraph 	7b, 	provides: 	“Owner 	compliance
with HAP contract. Unless the owner has complied with
all provisions of the hAP contract, the owner does not have
720 	17 NEBRAsKA APPELLATE REPORTs

a right to receive housing assistance payments under the
hAP contract.”
Part B, paragraph 7f, provides:
Overpayment to owner. If the PhA determines that the
owner is not entitled to the housing assistance payment
or any part of it, the PhA, in addition to other remedies,
may deduct the amount of the overpayment from any
amounts due the owner (including amounts due under any
other section 8 assistance contract).
Part B, paragraph 10a, provides, in part:
Any of the following actions by the owner (including a
principal or other interested party) 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 [housing qual-
ity survey].
(2) If the owner has violated any obligation under any
other [hAP] contract under section 8.
Part B, paragraph 10c, provides: “The PhA’s rights and reme-
dies 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.”
Part C, paragraph 5, concerns payments to the owner by the
family receiving housing assistance and provides:
d. The tenant is not responsible for paying the portion
of rent to owner covered by the PhA housing assistance
payment under the hAP contract between the owner and
the PhA. A PhA failure to pay the housing assistance
payment to the owner is not a violation of the lease. The
owner may not terminate the tenancy for nonpayment of
the PhA housing assistance payment.
e. The owner may not charge or accept, from the family
or from any other source, any payment for rent of the unit
in addition to the rent to owner. Rent to owner includes
all housing services, maintenance, utilities and appliances
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to be provided and paid by the owner in accordance with
the lease.
f. The owner must immediately return any excess pay-
ment to the tenant.
Meaning of “Overpayments.”
The question presented for our consideration is whether the
district court properly construed the meaning of the term “over-
payments” in the hAP contract.
The district court summarized the OhA’s argument as fol-
lows: “If Thirty is in breach of the [hAP contract, the] OhA
may terminate the [hAP contract], and in the case of a breach,
Thirty is not entitled to housing payments it received.” The
court noted that the OhA relied primarily on part B, paragraphs
7f, 10a, and, in particular, 10c, which the OhA interpreted
to mean that if there is a breach, the owner, Thirty, was not
entitled to any of the payments it received, such payments then
being considered “overpayments” that the OhA could recoup
by deducting amounts not due to the OhA from any other pay-
ment the OhA might owe the owner.
The district court stated Thirty’s argument to be that the
term “overpayment” means only the amount which the owner
“overcharged” the tenant, i.e., the monthly charge to Ray
of $103, and not all amounts paid to Thirty under the hAP
contract. Thirty also argued that the OhA was not damaged,
because Ray received the benefit of the housing for the amount
approved by Thirty and the OhA. The court observed that
Thirty’s argument was based on the legal theory of damages,
that is, the OhA is only entitled to be placed in the same posi-
tion it would have occupied. see Aon Consulting v. Midlands
Fin. Benefits, 275 Neb. 642, 748 N.W.2d 626 (2008) (in breach
of contract case, ultimate objective of damages award is to put
injured party in same position injured party would have occu-
pied if contract had been performed, that is, to make injured
party whole).
[5] In finding Thirty’s arguments to be without merit, the dis-
trict court relied on Kozlik v. Emelco, Inc., 240 Neb. 525, 483
N.W.2d 114 (1992). Kozlik was a declaratory judgment action
to determine the rights of the parties under an employment
722 	17 NEBRAsKA APPELLATE REPORTs

contract. The contract in question contained a provision that
in the event the employee was terminated from his employ-
ment without cause, the employer would pay the employee his
regular salary until the expiration of the term of employment
specified in the contract. Following a jury trial, the jury deter-
mined that the employer had discharged the employee without
cause and the trial judge assessed the employee’s damages.
On appeal, the employer urged that language in the contract
concerning termination without cause was inapplicable and, if
applicable, imposed an unenforceable penalty. The Nebraska
supreme Court observed that parties to a contract may override
the application of the judicial remedy for breach of a contract
by stipulating, in advance, to a reasonable sum to be paid in the
event of a breach. Id.
In the present case, the district court concluded that Thirty’s
failure to provide the rental unit to Ray at the agreed-upon rate
constituted a material, not minor, breach of the hAP contract.
The court stated that the very thing bargained for in the hAP
contract was that the OhA would pay Ray’s rent and that Thirty
would charge Ray only that amount for the rental unit. The
court found that the intent of the hAP contract was to provide
suitable housing for tenants in the OhA’s program at a certain
rental rate set out in the hAP contract. The court reasoned that
the remedies provided in the hAP contract were designed to
ensure that the OhA’s assistance program could be adminis-
tered in a way that is fair and just, allowing for a reasonable
deterrent against owners who would attempt to charge tenants
more than the amount contractually agreed. The court noted
part C, paragraph 5f, of the hAP contract, which provides with
respect to payment by the family receiving assistance to the
owner of the rental unit, “The owner must immediately return
any excess rent payment to the tenant.” The court reasoned, in
essence, that if the owner is only contractually bound to return
the “excess rent” to the tenant under part B, paragraph 7f, the
provision of the hAP contract which provides that the OhA
may deduct the “overpayments” from amounts owed by the
OhA would be meaningless.
The district court concluded that the hAP contract, when
read in its entirety, means that for the owner to be eligible to
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receive the housing assistance payments, the owner must com-
ply with all of the provisions of the hAP contract, including
the provision requiring it not to charge additional rent to a
tenant under part C, paragraph 5e. The court further concluded
that if the owner is not eligible to receive the housing assist-
ance payments, then the owner has been overpaid by the OhA,
and that the OhA may, as one of several remedies, deduct the
amounts of housing assistance payments that were overpaid to
the owner from other amounts the OhA owes to the owner.
The court determined that as used in the hAP contract, “over-
payments” do not refer to the excess rent paid by a tenant to
the owner, but, rather, to the amount of housing assistance pay-
ments overpaid to the owner by the OhA for the time period
the owner was not in compliance with the hAP contract. The
court found that the hAP contract must be interpreted to mean
that “not only must the overcharged amount [of excess rent]
be returned [to the tenant] but also that Thirty is not eligible
for any of the assistance payments and the entire amount [of
assistance payments] paid under the [hAP contract] must be
returned to [the] OhA.”
[6-8] We agree with the district court’s reading of the hAP
contract. A contract written in clear and unambiguous language
is not subject to interpretation or construction and must be
enforced according to its terms. Lexington Ins. Co. v. Entrex
Comm. Servs., 275 Neb. 702, 749 N.W.2d 124 (2008). A con-
tract is ambiguous when a word, phrase, or provision in the
contract has, or is susceptible of, at least two reasonable but
conflicting interpretations or meanings. Id. A contract must
receive a reasonable construction, and a court must construe
it as a whole and, if possible, give effect to every part of the
contract. Id. The district court’s reading of the hAP contract
construes it as a whole and gives effect to all of its parts. We
agree that the “overpayments” referenced in part B, paragraphs
7 and 10, refer to housing assistance payments received by the
owner for which the owner was not eligible, that the owner
is not eligible for housing assistance payments when it is in
breach of the hAP contract, and that “overpayments” in that
portion of the hAP contract means something other than the
“excess” payments from the tenant to the owner referenced in
724 	17 NEBRAsKA APPELLATE REPORTs

part C, paragraph 5. The hAP contract clearly provides that an
owner is not eligible for housing assistance payments if it is in
breach of the hAP contract, and the record shows that Thirty
was in breach relative to the lease with Ray from the incep-
tion of the lease in that it charged her an additional $103 over
and above the $497 housing assistance payment agreed to by
the OhA and Thirty. Because Thirty was not eligible for the
housing assistance payments by virtue of its breach, the pay-
ments made by the OhA to Thirty were “overpayments” and
the entire amount of the overpayment was properly recouped
by the OhA under part B, paragraph 7f, of the hAP contract.
We find no error in the district court’s interpretation of the term
“overpayments” found in the hAP contract. Thirty’s arguments
to the contrary are without merit.
CONCLUsION
The district court correctly interpreted the hAP contract.
affirmeD.
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