In re Clark
96 B.R. 569 (1989)
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Rule of Law:
A landlord's continuous and substantial breach of the implied warranty of habitability can constitute an unfair or deceptive act under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP), giving rise to treble damages. Tenants may also recover damages for non-economic harm, such as annoyance and discomfort, resulting from the breach.
Facts:
- Milton Clark, Sr. was the landlord of a 24-unit apartment building in Philadelphia where Beverly Williams, Kathleen Robbins, James and Marguerita Palmer, and Carole Nelson (the Claimants) were tenants.
- Beginning in at least September 1986, the tenants' apartments suffered from severe and persistent habitability defects, including a lack of heat and hot water, rodent and insect infestations, crumbling walls, leaking ceilings, and collapsing floors.
- Between March 1985 and April 1988, the City of Philadelphia's Department of Licenses and Inspections (L&I) issued 43 violation notices regarding the building's condition.
- L&I officially declared the premises unfit for human habitation in September 1986 due to an insufficient supply of hot water and again in January 1988 for a lack of adequate heat and hot water.
- The tenants endured significant hardship, with one tenant's child being injured by eating lead paint-infested wall debris and others reporting mice in their children's cribs.
- Due to the conditions, tenants had to purchase supplemental items like electric heaters, kerosene, and blankets, and some were forced to have their children live with relatives during the winter.
Procedural Posture:
- The landlord, Milton Clark, Sr. (the Debtor), filed a voluntary petition for Chapter 13 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.
- Four former tenants (the Claimants) filed an adversary complaint against Clark in the bankruptcy court, alleging breach of the implied warranty of habitability.
- The bankruptcy court previously found Clark in contempt for failing to comply with an order to provide utilities and awarded limited damages related to that contempt.
- The court instructed the tenants to pursue their broader damage claims by filing proofs of claim in the main bankruptcy case.
- The tenants filed proofs of claim for rent abatement, property loss, and other damages, to which the Debtor objected, leading to the present proceeding.
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Issue:
Does a landlord's continuous and egregious breach of the implied warranty of habitability constitute an unfair or deceptive practice under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP), and may tenants recover consequential damages for annoyance and discomfort caused by the breach?
Opinions:
Majority - Scholl, J.
Yes. A landlord's continuous and substantial violation of the implied warranty of habitability can constitute an unfair practice under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UDAP), and tenants may recover damages for the resulting discomfort and annoyance. The court reasoned that a lease is a contract, and a breach of the implied warranty of habitability entitles tenants to standard contract remedies, including incidental and consequential damages. Persuaded by the reasoning in cases from other jurisdictions like Hilder v. St. Peter, the court held that damages for "discomfort and annoyance" are appropriate because a residential tenant loses not just money but also intangible benefits like shelter and peace of mind. The court further concluded that the landlord's conduct—allowing severe, unfit conditions to persist for over a year and a half despite tenant complaints and official violation notices—was an egregious violation that constituted an unfair trade practice under UDAP. This conduct satisfied the federal test for unfairness by offending public policy, being unscrupulous, and causing substantial injury to consumers. However, the court exercised its discretion under UDAP to treble only the tenants' actual out-of-pocket expenses, declining to treble the rent abatement or the damages for discomfort to avoid creating a windfall.
Analysis:
This decision significantly strengthens tenants' rights by explicitly linking a landlord's egregious breach of the implied warranty of habitability to the powerful remedies available under Pennsylvania's consumer protection statute (UDAP). By allowing for treble damages, the case provides a potent deterrent against landlords who systematically neglect their properties. Furthermore, the court's recognition of damages for non-economic harms like "discomfort and annoyance" broadens the scope of recovery for tenants in habitability cases, aligning Pennsylvania with a modern trend that acknowledges the true nature of the injury suffered by residents of slum-like properties.
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