Blue Earth County Welfare Dept. v. Cabellero

• Citation: 302 Minn. 329,225 N.W.2d 373
• Decision Date: 20 December 1974
• Docket Number: No. 44743,44743
• Parties: BLUE EARTH COUNTY WELFARE DEPARTMENT, Respondent, v. Juana CABELLERO, et al., Appellants, State of Minnesota, Department of Public Welfare, Appellant.
• Court: Supreme Court of Minnesota (US)

Page 373

225 N.W.2d 373

302 Minn. 329

BLUE EARTH COUNTY WELFARE DEPARTMENT, Respondent, v. Juana CABELLERO, et al., Appellants State of Minnesota, Department of Public Welfare Appellant.

No. 44743.

Supreme Court of Minnesota.

Dec. 20, 1974.

Syllabus by the Court

1. Where a county welfare department refuses to comply with an order of the commissioner of public welfare based upon a Federal statute imposing upon it the duty of maintaining at a specified level the shelter grants of OAA and AFDC recipients who reside in Federally assisted public housing, doubt as to the county agency's standing to challenge the constitutionality of the Federal act is resolved in favor of standing as the question of whether the affected welfare recipients are entitled to receive retroactive benefits involves a sufficient public interest to warrant a holding of standing.

2. A district court in reviewing a decision of the commissioner of public welfare, pursuant to Minn.St.1971, §§ 256.21, subd. 2, and 256.77, subd. 3, may, on a proper showing, reverse an order of the commissioner of public welfare on Federal constitutional grounds.

3. The so-called Second Brooke Amendment, P.L. 92--213, § 9, 85 Stat. 776, which resulted in tenants of public housing receiving shelter grants which exceeded actual rent while grants to tenants of private housing could never exceed actual rent, was not shown to establish such an arbitrary classification unrelated to a proper legislative purpose as to constitute invidious discrimination against tenants of private housing in violation of the equal protection clause of the Fourteenth Amendment to the United States Constitution.

4. The Second Brooke Amendment, forbidding public welfare agencies to reduce shelter grants to welfare recipients whose public housing rents were reduced, has not been shown to usurp powers reserved to the states by the Tenth Amendment to the United States Constitution where the public welfare programs at issue were supported by Federal as well as state and local funds.

5. The Blue Earth County Welfare Department has failed to overcome the presumption of constitutionality which attaches to acts of Congress.

James H. Manahan, Mankato, for Cabellero and others.

Warren Spannaus, Atty. Gen., Thomas Fabel, Deputy Atty. Gen., St. Paul, for State.

Etzell & Harten and James C. Harten, No. Mankato, John F. Corbey, County Atty., John C. Frentz, Asst. County Atty., Mankato, for respondent.

Heard before ROGOSHESKE, PETERSON, MacLAUGHLIN, SCOTT and KNUTSON, JJ., and considered and decided by the court en banc.

KNUTSON, Justice. ^*

This is an appeal from a judgment of the district court reversing a decision of the Minnesota commissioner of public welfare on the grounds that the commissioner's order was arbitrary and unreasonable within the meaning of Minn.St.1971, § 256.77, subd. 3, in that it was based upon 42 U.S.C.A. § 1402(1), as amended by P.L. 92--213, § 9, 85 Stat. 776, which the trial court held violated the equal protection clause of the Fourteenth Amendment of the United States Constitution.

While the facts as related in the briefs seem extremely complicated, we think the case can be simplified by stating what the statutory provisions involved really accomplish.

In 1970, the Mankato Authority of the United States Department of Housing and Urban Development (hereinafter Mankato Authority) began construction of 141 units of public housing in Mankato. At that time the Blue Earth County Welfare Department (hereinafter county agency) paid shelter assistance based upon the actual cost of such shelter to a recipient up to a maximum of $162 for a family of four, consisting of $130 for rent and $32 for utilities. On November 20, 1970, the Blue Earth County Welfare Board agreed to pay rent to the Mankato Authority for the units under construction at its maximum rate. The Mankato housing opened for occupancy in May 1971. The county agency originally paid rent at the maximum rate agreed upon.

The Housing Act of 1937 ¹ (the act was codified as 42 U.S.C. §§ 1401 to 1436) provided for Federal Financial assistance in the form of loans, annual contributions, and capital grants to public housing agencies for low-rent housing programs. Federal subsidies were available only with respect to housing projects falling within the Federal definition prior to December 24, 1969. 42 U.S.C.A. § 1402(1), established four criteria for low-rent housing: (1) That it be decent, safe, and sanitary; (2) that rentals be within the reach of low-income families; (3) that dwellings in the project be available only to low-income families; and (4) that rents be fixed by the public housing agency and approved by the United States Housing Authority after taking into account the rent-paying ability of the family and financial stability and solvency of the housing project.

On December 24, 1969, Congress enacted what has been referred to throughout this case as the First Brooke Amendment, P.L. 91--152, § 213, 83 Stat. 389, which in effect excluded from the definition of low-rent housing those units the rents of which exceeded one-fourth of the tenant-family's income as determined by the Secretary of Housing and Urban Development. The effect of this act was to limit the amount of rent in a public housing unit to 25 percent of the tenant's income.

Application of that rent limitation to a tenant whose income consisted of public assistance benefits based in part on actual housing costs rather than upon a flat grant schedule would result in a reduction in his benefits. Consequently, he would accrue no economic advantage from the reduction of his rent. As a matter of fact, his public assistance benefits might be reduced to the point where even his lowered rent would exceed one-fourth of his income, calling for a further reduction in his rent and a corresponding readjustment of his public assistance benefits. In an attempt to avoid these side effects, ² the First Brooke Amendment exempted from the rent limitation the units of tenants who would suffer a reduction of public assistance benefits if their rent were reduced. ³

In an apparent attempt to correct some of the difficulties created by the so-called First Brooke Amendment, Congress adopted P.L. 92--213, § 9, 85 Stat. 776, the so-called Second Brooke Amendment, which took effect on December 22, 1971, and was also directed toward coordinating the rent limitation of the First Brooke Amendment with the public assistance schemes of those states basing shelter grants upon actual housing costs. It repealed the exemption provision of the First Brooke Amendment and in its stead amended the definition of low-cost housing to prohibit public welfare agencies from reducing benefits to any tenant as a result of a rent reduction mandated by the First Brooke Amendment. ⁴

While these statutes read in the abstract are somewhat difficult to comprehend, the legal effect of the First and Second Brooke Amendments may be simplified if we abandon the legal terminology used and view them from the standpoint of what they sought to accomplish. Putting the statutes in simple terms, under the First Brooke Amendment, those receiving shelter assistance would receive comparable benefits whether they resided in private dwellings or in public housing. Under the Second Brooke Amendment, those residing in public housing, due to the limitation of the rent that could be charged, would receive an advantage from public welfare assistance in that the public agency could not reduce the assistance for rent even though the rent charged was less than the assistance granted. The result was that those living in public housing would in some cases receive more by way of assistance than they actually paid for rent, thus leaving an amount in excess of the rent payment which could be used for other purposes, while those living in private quarters would receive the amount actually paid for rent.

In February 1972, the Mankato Authority received HUD circular HM 7465.13, dated January 18, 1972, which set forth the provisions of the Second Brooke Amendment. The Mankato Authority consequently recomputed, effective December 22, 1971, the welfare assistance for rents for tenants in the Mankato project. The reduction was made retroactive to December 22, 1971, generally by means of credit against future rent. The county agency refused to abide by the so-called Second Brooke Amendment but instead reduced, effective May 1972, shelter grants to tenants of the Mankato Authority by an amount to correspond with the 25-percent rent limitation.

The Minnesota commissioner of public welfare issued a policy bulletin dated May 15, 1972, requiring the county welfare boards to comply with the Second Brooke Amendment. The county agency did not do so. An appeal was taken to the commissioner of public welfare by seven of the recipients affected, acting on behalf of approximately 20 in all. In October 1972, the Minnesota commissioner of public welfare entered an order requiring compliance with the policy bulletin. On appeal to the district court, the Minnesota commissioner of public welfare was reversed, the court holding that the so-called Second Brooke Amendment was arbitrary and unreasonable and violated the equal protection clause of the Fourteenth Amendment of the United States Constitution. An appeal was taken here by several named individuals who are residents of public housing in Blue Earth County and who challenge the reduction of their shelter grants by the Blue Earth County Welfare Department on behalf of themselves and all persons similarly situated. The State Department of Public Welfare has also appealed. The Blue Earth County Welfare Department is respondent.

Our attention has been called to the fact that subsequent to the decision by the trial court but prior to hearing in this court, Congress enacted the Housing and Community Development Act of 1974 (P.L. 93--383, § 201, U.S.C.Cong. & Adm.News, 93d Cong. Second...