Aguiar v. Hawaii Housing Authority

• Citation: 522 P.2d 1255,55 Haw. 478
• Decision Date: 28 May 1974
• Docket Number: No. 5422,5422
• Parties: David and Geraldine AGUIAR, Jr., et al., Plaintiffs-Appellees, v. HAWAII HOUSING AUTHORITY, Defendant-Appellant.
• Court: Supreme Court of Hawai'i

Page 1255

522 P.2d 1255

55 Haw. 478

David and Geraldine AGUIAR, Jr., et al., Plaintiffs-Appellees, v. HAWAII HOUSING AUTHORITY, Defendant-Appellant.

No. 5422.

Supreme Court of Hawai'i.

May 28, 1974.

Syllabus by the Court

1. The Hawaii Housing Authority (HHA) is required to follow the rule-making procedures of the Hawaii Administrative Procedure Act in adopting regulations which set forth maximum income limits for continued occupancy by tenants in federally-funded public housing administered by the HHA and which establish a schedule for rents which tenants must pay for that housing.

2. HRS § 91-2(b) is addressed exclusively to an agency's duty to make its duly adopted rules available for public inspection, and the sanction contained in that section is independent of the sanction in HRS § 91-7(b) against rules adopted without compliance with other rule-making requirements.

3. An agency may not waive the strict application of a valid rule for some persons but not for others based solely on the criterion of another rule which is invalid because not adopted in compliance with statutory rule-making requirements.

4. The Hawaii Housing Authority may not raise rents in the public housing it administers based on a clause of its standard lease providing for rent increases according to an 'extablished rent schedule' unless that rent schedule was validly adopted under the rule-making provisions of the Hawaii Administrative Procedure Act.

5. Public housing tenants have a due process right to an adjudicatory hearing before the Hawaii Housing Authority can impose rent increases on them based upon their alleged overincome status.

6. The adjudicatory procedures of the Hawaii Administrative Procedure Act apply to hearings which an agency is constitutionally required to provide.

7. Public housing tenants do not knowingly and effectively waive their constitutional right to a hearing prior to the imposition of any rent increase based on alleged overincome status by merely executing the Hawaii Housing Authority's standard lease, which provides in part that rent increases shall take effect immediately on imposition.

E. John McConnell, Jr. and M. Gay Conklin, Deputy Attys. Gen. (George Pai, Atty. Gen., Honolulu, of counsel), for defendant-appellant.

Durell Douthit, Honolulu, and Joel E. August, Associate Counsel, Legal Aid Society of Hawaii, Wailulu, for plaintiffs-appellees.

Before RICHARDSON, C. J., LEVINSON, KOBAYASHI and OGATA, JJ., and LANHAM, Circuit Judge, assigned by reason of vacancy.

LEVINSON, Justice.

In this appeal we must determine whether the Hawaii Housing Authority (HHA) is required to follow the rule-making procedures of the Hawaii Administrative Procedure Act (HAPA) ¹ In adopting regulations which set forth maximum income limits for continued occupancy by tenants in federally-funded public housing administered by the HHA and which establish a schedule for rents which tenants must pay for that housing. In addition, we must decide whether the due process clauses of the federal and state constitutions ² compel the HHA to afford adjudicatory hearings to tenants in public housing to whom the HHA has sent individualized notices of lease termination and rental increase, and, if hearings are constitutionally mandated, at what point in time they must be held and what procedures are applicable to them.

The plaintiffs are tenants in federally-funded public housing administered by the HHA. Each has signed a standard lease in which he was conveyed a tenancy for a term of approximately one month, automatically renewed for successive terms of one calendar month each. One clause of the lease provides:

The monthly rental of the leased premises may be adjusted from time to time, by raising or lowering the same at the option of the AUTHORITY, according to the established rent schedule, based on changes occurring in the income of the TENANT and his family, or in the composition of the TENANT'S family.

Another clause requires the tenant to submit statements regarding the 'income, composition and status' of his family. It is the policy of the HHA to estimate the tenant's income for the forthcoming year, based on this statement as well as on data assessed by a project administrator at an informal interview with the tenant. If the income estimate exceeds the maximum level allowed by the HHA for continued occupancy in public housing, the tenant is sent a notice which states, in substance, (1) because the tenant is overincome, his lease will be terminated, effective six months from the date of the notice, and (2) for the period between notification of lease termination and actual termination of the tenancy, the monthly rental is increased, effective immediately, from the rental provided in the lease to an amount approximating 20% of the tenant's gross income adjusted for dependents as allowed by the HHA. The tenant has no opportunity for a hearing to contest his alleged overincome status and the consequent rent increase until such time as the HHA commences proceedings to evict him under part I of HRS ch. 360-ostensibly six months after the date of the foregoing notice.

The plaintiffs were all found by the HHA to be overincome and hence ineligible for continued occupancy in public housing. Each received a notice, as described above, of lease termination and rent increase. In all cases, the amount of rent increase was substantial. ³ The plaintiffs filed this action in 1970 to enjoin the HHA from evicting them or charging them increased rents. They contended that the heart of the HHA's system for determining overincome status and rental amounts-contained in amendments to the HHA's 'Master Management Resolution For All Projects Administered by the Hawaii Housing Authority'-was invalid because not adopted in accordance with the rule-making procedures of the HAPA. In addition, they maintained that the failure of the HHA to afford them adjudicatory hearings prior to the effective dates of rent increases and lease terminations violated their rights to due process of law under the federal and state constitutions.

Prior to judgment, the HHA on May 24, 1971 adopted its Rule 17, 'Rules and Regulations Governing Admission to and Continued Occupancy of Housing Assistance Administration-Aided Units Operated by the Hawaii Housing Authority.' This rule, which superseded the HHA's earlier Master Management Resolution, was made and adopted pursuant to the HAPA. Consequently, the plaintiffs did not contest its validity below, nor do they do so here. However, the HHA continued to controvert the plaintiffs' claim of entitlement to adjudicatory hearings prior to the effective date of any future rent increases and lease terminations pursuant to Rule 17. Moreover, the plaintiffs' liability to pay past rent increases issued on the authority of the now-superseded amendments to the Master Management Resolution turned on the validity of those amendments even though the plaintiffs' rights to continued occupancy in public housing were governed, beginning May 24, 1971, by the HHA's unchallenged Rule 17.

With the issues thus joined between the parties, the trial court concluded on the basis of a stipulated set of facts that relevant amendments to the HHA's Master Management Resolution were 'rules' within the meaning of HRS § 91-1(4). In addition, the trial court held that because the amendments were not adopted in compliance with HRS §§ 91-3 to -4, as amended, '(e)ach and every determination by defendant that any plaintiff's income was over the maximum for continued occupancy which was based on the said rules is invalid,' and, '(i)n the absence of valid rules, plaintiffs were entitled to pay, and defendant was entitled to receive the rent agreed upon and specified in the leases between plaintiffs and defendant.' Finally, the trial court concluded that the plaintiffs are constitutionally entitled to an 'administrative hearing prior to the effective date' of future orders of rent increase and lease termination issued pursuant to Rule 17. The trial court filed a judgment accordingly on December 1, 1972, from which the HHA appealed. For the reasons set forth hereinafter, we affirm.

I. THE VALIDITY OF THE AMENDMENTS TO THE HHA'S MASTER MANAGEMENT RESOLUTION

1. Are the Amendments to the Master Management Resolution 'Rules'?

The HHA admits that relevant amendments to the Master Management Resolution were not adopted in accordance with the rule-making requirements of the HAPA. ⁴ It argues, however, that compliance with those requirements was unnecessary since the amendments were not 'rules' within the meaning of HRS § 91-1(4). That section defines the term 'rule' as follows:

'Rule' means each agency statement of general or particular applicability and future effect that implements, interprets, or prescribes law or policy, or describes the organization, procedure, or practice requirements of any agency. The term does not include regulations concerning only the internal management of an agency and not affecting private rights of or procedures available to the public, nor does the term include declaratory rulings issued pursuant to section 91-8, nor intra-agency memoranda.

To evaluate properly the HHA's argument, we must inquire into the nature of the HHA's powers and responsibilities under state and federal law and also the purpose and effect of the Master Management Resolution and its amendments.

The HHA is a state agency ⁵ charged by state law with the responsibility of administering low-income, low-rent public housing projects in Hawaii. ⁶ In connection with this responsibility, the HHA is required to 'establish maximum limits of annual net income for tenant selection in any public housing project, less an exemption of an amount deemed appropriate by the authority for each minor member of the family other than the head of the family and his spouse, which maximum limits shall be adjusted in accordance with a proper and reliable cost of living...