E. Carolina Reg'l Hous. Auth. v. Lofton , 369 N.C. 8 ( 2016 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 32PA15
Filed 19 August 2016
EASTERN CAROLINA REGIONAL HOUSING AUTHORITY
v.
SHERBREDA LOFTON
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision
of the Court of Appeals, ___ N.C. App. ___, 767 S.E.2d 63 (2014), affirming an order
and judgment entered on 29 August 2013 by Judge David B. Brantley in District
Court, Wayne County. Heard in the Supreme Court on 16 November 2015.
Ward and Smith, P.A., by Michael J. Parrish and E. Bradley Evans, for
plaintiff-appellant.
Robinson, Bradshaw & Hinson, P.A., by John R. Wester, Thomas Holderness,
and Erik Randall Zimmerman, pro hac vice; and Legal Aid of North Carolina,
Inc., by John Keller, Theodore O. Fillette, III, Peter Gilbert, and Andrew
Cogdell, for defendant-appellee.
Brownlee Law Firm, PLLC, by William K. Brownlee, for Apartment Association
of North Carolina, amicus curiae.
John R. Rittelmeyer and Yasmin Farahi for Disability Rights North Carolina,
amicus curiae.
Francis Law Firm, PLLC, by Charles T. Francis and Ruth Sheehan, for
Housing Authority of the City of Raleigh, amicus curiae.
NEWBY, Justice.
E. CAROLINA REG’L HOUS. AUTH. V. LOFTON
Opinion of the Court
In this case we consider whether public housing authorities must exercise
discretion when pursuing evictions that are not otherwise mandated by federal law.
Recognizing that public housing is the housing of last resort, Congress intended
public housing authorities to exercise discretion in certain eviction proceedings, such
as the lease violation at issue here arising from the actions of a third party. The trial
court’s findings establish that plaintiff failed to exercise its discretion before pursuing
defendant’s eviction. Accordingly, plaintiff has not established its right to summary
ejectment. Nonetheless, because the Court of Appeals erred by imposing an
unconscionability analysis, we modify and affirm the decision of that court.
Defendant is a tenant in Brookside Manor, which is owned and operated by
plaintiff, a federally subsidized housing authority. The tenancy is governed by a
signed lease that contains various provisions required by federal law.1 Relevant here,
the lease prohibits “[a]ny drug-related criminal activity on or off the premises” and
provides that plaintiff “may terminate . . . the Lease and the tenancy” for any such
activity “by Tenant, any of Tenant’s household members, any guest of Tenant, or
another person under Tenant’s control.”2 Plaintiff’s “Resident Handbook” and
1 The operation and management of public housing authorities, including lease terms
and procedures, are governed by the United States Housing Act of 1937, Pub. L. No. 75-412,
50 Stat. 888 (codified as amended in scattered sections of 42 U.S.C.), and its regulations, see
24 C.F.R. §§ 966.1 to 966.57 (2016).
2 The lease defines a “guest” as “a person temporarily staying in the unit with the
consent of Tenant or other member of the household with authority to consent on behalf of
Tenant.” The lease defines a “person under Tenant’s control” as “a person not staying as a
guest in the dwelling unit, but [one who] is or was present on the premises at the time of the
activity in question because of an invitation from Tenant.”
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Opinion of the Court
“Admission and Continued Occupancy Policy,” both incorporated into the lease,
restate the same, characterizing “[d]rug-related criminal activity engaged in on or off
the premises by a tenant, member of the tenant’s household or guest, and any such
activity engaged in on the premises by any other person under the tenant’s control,
[a]s grounds to terminate tenancy.”
Defendant often asked Cory Smith to baby-sit her children while she worked
at night. On 26 April 2013, Smith arrived at defendant’s apartment to watch the
children while defendant slept before work and later while she worked. While
defendant slept, law enforcement entered the apartment and arrested Smith for
outstanding child support warrants. Officers searched Smith incident to his arrest
and found four small bags of marijuana in his pocket.
Defendant consented to a search of her apartment, during which officers
discovered a partially prepared “marijuana blunt” in plain sight, marijuana in plain
sight on the kitchen counter, plastic bags for packaging marijuana for sale, and
fourteen more bags of marijuana behind a pan on the kitchen counter. Smith
admitted that the marijuana belonged to him, and he was charged with felony
possession with intent to sell and deliver a controlled substance. Defendant was not
charged.
On 22 May 2013, plaintiff notified defendant in writing that she had breached
the lease because of the drug-related activity that had occurred in her apartment by
Smith, a person under her control. Plaintiff stated it had terminated defendant’s
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Opinion of the Court
lease and ordered her to vacate her apartment. When defendant failed to comply,
plaintiff sought summary ejectment. Following a hearing, the magistrate entered
judgment for plaintiff, entitling plaintiff to take possession.3
Upon appeal to the District Court, Wayne County, for a trial de novo, defendant
admitted that Smith placed marijuana in various places in the apartment, that Smith
was under her control, and that her lease made her “responsible for the conduct of
her guests or persons under her control.” Plaintiff’s manager testified that she
believed any drug-related criminal activity required eviction. In its order the trial
court noted defendant’s acknowledgement that “drug-related criminal activity”
occurred in her apartment and that such activity would “authorize Plaintiff to evict
her from her apartment” despite “her lack of knowledge of” the criminal activity.
Nonetheless, the trial court found in part:
8. Plaintiff did not produce evidence that it
considered any mitigating factors or used any discretion in
making its decision to terminate Defendant’s lease. The
only decision Plaintiff considered was whether Defendant
met the criteria for having a person under her control who
engaged in drug-related criminal activity.
9. It did not appear that Plaintiff, through its
two witnesses, understood that it even had the authority or
3 In the initial complaint, plaintiff appears to have elected to pursue defendant’s
eviction under N.C.G.S. § 42-63 (2015), which allows for eviction as a result of certain
criminal activity. Nonetheless, the complaint also described the specific lease terms violated
by defendant. On 8 July 2013, the parties stipulated to amend the complaint “as though
Plaintiff had selected the additional ground for eviction ‘the defendant breached the condition
of the lease described below for which re-entry is specified.’ ” Thereafter, both parties
proceeded solely under the lease violation theory. Thus, any argument pursuant to the
statutory provision is not before this Court.
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Opinion of the Court
duty to consider other factors other than whether
Defendant met the criteria for lease termination.
The trial court denied plaintiff’s request to evict defendant, concluding that federal
law required plaintiff to exercise discretion in making its decision. Plaintiff appealed
the trial court’s order to the Court of Appeals.
The Court of Appeals affirmed the decision of the trial court on a different
basis, concluding that plaintiff must prove that evicting defendant was not
unconscionable under North Carolina law. E. Carolina Reg’l Hous. Auth. v. Lofton,
___ N.C. App. ___, 767 S.E.2d 63 (2014). We allowed plaintiff’s petition for
discretionary review.
Contrary to the Court of Appeals’ decision, the equitable defense of
unconscionability is not a consideration in summary ejectment proceedings. To
prevail in a summary ejectment proceeding under North Carolina law, a landlord
must establish by a preponderance of the evidence that a tenant breached the lease.
See N.C.G.S. §§ 42-26(a)(2), -30 (2015); see also Durham Hosiery Mill Ltd. P’ship v.
Morris, 217 N.C. App. 590, 593, 720 S.E.2d 426, 428 (2011) (“A tenant may be
removed in a summary ejectment action when the tenant has ‘done or omitted any
act by which, according to the stipulations of his lease, his estate has ceased.’ ”
(quoting N.C.G.S. § 42-26(a)(2) (2009)); id. at 595-96, 720 S.E.2d at 429 (rejecting as
“clearly dicta” the language in Morris v. Austraw, 269 N.C. 218, 223, 152 S.E.2d 155,
159 (1967), perceived as requiring an unconscionability analysis).
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If the lease at issue related to a private landlord–tenant relationship, our
analysis would end here. When the government is the landlord, however, certain
duties arise under applicable law. Federal statutes and regulations govern federally
subsidized public housing and require public housing authorities to incorporate
certain provisions into their leases. In its role as the final forum for review of
government housing decisions, the Court is not to second-guess or replace plaintiff’s
discretionary decisions but to ensure procedural and substantive compliance with the
federal statutory framework. See Charlotte Hous. Auth. v. Patterson, 120 N.C. App.
552, 555, 464 S.E.2d 68, 71 (1995) (“In federally subsidized housing cases, the court
decides whether applicable rules and regulations have been followed, and whether
termination of the lease is permissible.” (citation omitted)). “A trial court’s findings
of fact are binding on appeal if supported by competent evidence.” Durham Hosiery,
217 N.C. App. at 592, 720 S.E.2d at 427 (citation omitted). The trial court found that
plaintiff, believing Smith’s drug-related activity mandated defendant’s eviction, did
not exercise discretion. Thus, the sole remaining question is whether under federal
law plaintiff was required to exercise some degree of discretion in its eviction decision.
Federally subsidized public housing is a safety net designed to provide homes
to those least able to afford other housing options. Like everyone else, individuals
who live in federally subsidized housing are entitled to be free from “any criminal
activity that threatens the health, safety, or right to peaceful enjoyment of the
premises.” 42 U.S.C. § 1437d(l)(6) (2012); see also N.C. Const. art. I, § 1 (“We hold it
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to be self-evident that all persons are created equal; that they are endowed by their
Creator with certain inalienable rights; that among these are life, liberty, the
enjoyment of the fruits of their own labor, and the pursuit of happiness.”); The
Declaration of Independence para. 2 (U.S. 1776) (“We hold these truths to be self-
evident, that all men are created equal, that they are endowed by their Creator with
certain unalienable Rights, that among these are Life, Liberty and the pursuit of
Happiness.”). Recognizing the devastating effect of illegal drugs in public housing,
Congress adopted the Public Housing Drug Elimination Act of 1988, Pub. L. No. 100-
690, § 5122, 102 Stat. 4181, 4301 (codified as amended at 42 U.S.C. § 11901 (2012)).
The Act requires leases to include language granting public housing authorities broad
discretion to terminate leases to ensure that the housing is “decent, safe, and free
from illegal drugs.” 42 U.S.C. § 11901(1).
Under federal law, public housing leases must “allow the agency . . . to
terminate the tenancy,” id. § 13662(a) (2012), for any household member “who . . . is
illegally using a controlled substance,” id. § 13662(a)(1), or whose drug abuse
“interfere[s] with the health, safety, or right to peaceful enjoyment of the premises by
other residents,” id. § 13662(a)(2). The lease must prohibit not only household
members from engaging in drug-related activity but also forbid any guest or person
under a tenant’s control from engaging in such activity. Id. § 1437d(l)(6) (“Each
public housing agency shall utilize leases which . . . provide that . . . any drug-related
criminal activity on or off such premises, engaged in by a public housing tenant, any
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member of the tenant’s household, or any guest or other person under the tenant’s
control, shall be cause for termination of tenancy[.]”); 24 C.F.R. § 966.4(f)(12)(i), (ii)
(2016); Public Housing Lease and Grievance Procedures, 56 Fed. Reg. 51,560, 51,567
(Oct. 11, 1991). Violation of these provisions “shall be cause for termination of
tenancy” as determined by the local public housing authority in its discretion. 42
U.S.C. § 1437d(l)(6); see 24 C.F.R. § 966.4(l)(5)(vii)(B) (When terminating a tenancy
for drug-related criminal activity, the housing authority “may consider all
circumstances relevant to a particular case.”).
In the seminal case interpreting public housing law, Department of Housing &
Urban Development v. Rucker, 535 U.S. 125, 122 S. Ct. 1230, 152 L. Ed. 2d 258 (2002),
some tenants questioned the extent of agency officials’ authority to evict residents
from public housing. The Supreme Court of the United States held that a housing
authority could evict a tenant and her family as a result of a guest’s illegal activity
even when the tenant was unaware of the activity and had no reason to suspect it.
Id. at 136, 122 S. Ct. at 1236, 152 L. Ed. 2d at 270; see also id. at 131, 122 S. Ct. at
1234, 152 L. Ed. 2d at 267 (“[T]he plain language of § 1437d(l)(6) requires leases that
grant public housing authorities the discretion to terminate tenancy without regard
to the tenant’s knowledge of the drug-related criminal activity.”).
The decision in Rucker, however, emphasizes the importance of housing
officials exercising discretion before pursuing these “no-fault” evictions. Id. at 134-
36, 122 S. Ct. at 1235-36, 152 L. Ed. 2d at 268-70. In particular,
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[t]he statute does not require the eviction of any tenant who
violated the lease provision. Instead, it entrusts that
decision to the local public housing authorities, who are in
the best position to take account of, among other things,
the degree to which the housing project suffers from
“rampant drug-related or violent crime,” “the seriousness
of the offending action,” and “the extent to which the
leaseholder has . . . taken all reasonable steps to prevent or
mitigate the offending action.” [A] local housing authority
may sometimes evict a tenant who had no knowledge of the
drug-related activity.
Id. at 133-34, 122 S. Ct. at 1235, 152 L. Ed. 2d at 268 (first alteration in original)
(quoting 42 U.S.C. § 11901(2) (1994 & Supp. V) and Screening and Eviction for Drug
Abuse and Other Criminal Activity, 66 Fed. Reg. 28,776, 28,803 (May 24, 2001)).
Congress thus “afford[ed] local public housing authorities the discretion to conduct
no-fault evictions for drug-related crime,” id. at 135, 122 S. Ct. at 1236, 152 L. Ed. 2d
at 269 (citation omitted), by “requir[ing] lease terms that give local public housing
authorities the discretion to terminate the lease,” id. at 136, 122 S. Ct. at 1236, 152
L. Ed. 2d at 270. See also id. at 130, 122 S. Ct. at 1233, 152 L. Ed. 2d at 266 (holding
that 42 U.S.C. § 1437d(l)(6) “unambiguously requires lease terms that vest local
public housing authorities with the discretion to evict tenants for the drug-related
activity of . . . guests”). In sum, while a public housing authority may conduct no-
fault evictions, it must exercise discretion in doing so.
Shortly after the decision in Rucker, the federal Department of Housing and
Urban Development (HUD) described the discretion given to public housing
authorities to seek no-fault evictions based upon the actions of third parties. While
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characterizing the power as “a strong tool,” HUD emphasized that no-fault evictions
“should be applied responsibly.” Letter from Mel Martinez, Sec’y, U.S. Dep’t of Hous.
& Urban Dev., to Pub. Hous. Dirs. (Apr. 16, 2002). Moreover, HUD directed that
enforcement of the clause be “left to the discretion of each public housing agency . . .
to be guided by compassion and common sense,” with eviction as “the last option
explored.” Id. Shortly thereafter, HUD reiterated that Rucker “made it clear both
that the lease provision gives PHAs [Public Housing Authorities] such authority and
that PHAs are not required to evict an entire household—or, for that matter,
anyone—every time a violation of the lease clause occurs.” Letter from Michael M.
Liu, Assistant Sec’y, U.S. Dep’t of Hous. & Urban Dev., to Pub. Hous. Dirs. (June 6,
2002). Instead, HUD explained, “PHAs are in the best position to determine what
lease enforcement policy will most appropriately serve the statutory interest of
protecting the welfare of the entire tenant population.” Id. Accordingly, HUD
“urge[d]” PHAs, when making an ultimate decision, “to consider a wide range of
factors” and to “balance them against the competing policy interests that support the
eviction of the entire household.” Id.; see also 24 C.F.R. § 966.4(l)(5)(vii)(B).
Discretion “involve[s] an exercise of judgment and choice, not an
implementation of a hard-and-fast rule exercisable at one’s own will or judgment.”
Discretionary, Black’s Law Dictionary (10th ed. 2014). Here the trial court concluded
that plaintiff failed to exercise its discretion before seeking defendant’s eviction. The
trial court found that plaintiff was unaware of its responsibility to exercise discretion;
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therefore, plaintiff only considered whether the facts permitted eviction, thereby
omitting the critical step of determining whether eviction should occur in this case.
Neither the federal statutory framework nor plaintiff’s lease or policies compel
eviction; they only delineate the grounds or cause for eviction. Though the decision
to evict lies in plaintiff’s discretion, which courts will not second-guess, plaintiff does
not exercise discretion when it is unaware it has a choice. See Hous. Auth. of
Covington v. Turner, 295 S.W.3d 123, 129 (Ky. Ct. App. 2009) (Moore, J., concurring)
(“[D]iscretion must be exercised, rather than a blind application of the law because
42 U.S.C. § 1437d(l)(6) does not require evictions.”).
While we affirm the outcome of the Court of Appeals’ decision, namely that
summary ejectment was inappropriate in this case, we do so for a different reason.
We hold that plaintiff failed to exercise its discretion as required by federal law before
pursuing defendant’s eviction. Accordingly, we modify and affirm the decision of that
court.
MODIFIED AND AFFIRMED.
Justice ERVIN did not participate in the consideration or decision of this case.
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