Compton v. Tennessee Dept. of Public Welfare

Decision Date24 March 1976
Docket NumberNo. 75-1314,75-1314
Citation532 F.2d 561
PartiesLouise COMPTON, Plaintiff-Appellant, v. The TENNESSEE DEPARTMENT OF PUBLIC WELFARE et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Jerrold L. Becker, Legal Clinic, David M. Kirstein, Knoxville, Tenn., for plaintiff-appellant.

John L. Bowers, Jr., U. S. Atty., Knoxville, Tenn., Charles N. Stedman, Knoxville, Tenn., R. A. Ashley, Jr., Atty. Gen. of Tennessee, Bart C. Durham III, Nashville, Tenn., for defendants-appellees.

Catherine M. Bishop, Alvin Hirshen, National Housing and Economic Development Law Project, Robert M. Teets, Jr., Food Advocates, Berkeley, Cal., John G. LeVeck, Legal Aid Society of San Joaquin County, Stockton, Cal., David B. Bryson, Cooperative Legal Services Center California Rural Legal Assistance, San Francisco, Cal., for amicus curiae.

Before WEICK, MILLER and ENGEL, Circuit Judges.

ENGEL, Circuit Judge.

This is an appeal by Louise Compton from a summary judgment entered in the District Court denying declaratory and injunctive relief against the Tennessee Department of Public Welfare and the Secretary of Agriculture. Plaintiff's complaint challenges the validity of a policy of the Department of Agriculture which includes rent subsidy payments in the calculation of income under the Food Stamp Act of 1964 as amended, 7 U.S.C. § 2011 et seq.

In a carefully written opinion reported at 386 F.Supp. 944, District Judge Robert L. Taylor held that the policy did not offend the purposes of the Food Stamp Act, was not in excess of the Secretary's granted authority, nor was it repugnant to the Fifth and Fourteenth Amendments. We agree and affirm.

Mrs. Compton, plaintiff-appellant, is a 60-year old woman whose only source of income is $146.00 a month from Social Security and $44.00 a month contributed by her son. Mrs. Compton qualified for residency in the Stonewall Apartments in Knoxville, Tennessee, a rent subsidized housing project under the Department of Housing and Urban Development rent subsidy program, 12 U.S.C. § 1701s. That program authorizes the Secretary of Housing and Urban Development to make annual payments to a housing owner on behalf of qualified tenants. Mrs. Compton made a payment of $55.00 a month toward the rent of her apartment and HUD contributed a rent supplement on her behalf of $127.00 a month.

Until August 20, 1974, Mrs. Compton was determined to be eligible to purchase $82.00 worth of food stamps for $29.00. On that date, however, Mrs. Compton was advised that she was disqualified from purchasing any further food stamps since her monthly income was in excess of the food stamp program's schedule of need. Her disqualification resulted from the inclusion in her income of the $127.00 per month HUD rent supplement payment.

The Food Stamp Act of 1964 provides for the issuance of food stamp coupons to eligible households. A household pays for stamps at a reduced rate of the coupon's face value, this fractional rate being dependent upon the household size and net monthly income. As income increases, the corresponding cost of the food stamps also increases. The determination of eligible households is vested pursuant to 7 U.S.C. § 2014(b) in the Secretary of the Department of Agriculture who

"shall establish uniform national standards of eligibility for participation by households in the food stamp program . . . The standards established by the Secretary, at a minimum, shall prescribe the amounts of household income and other financial resources, including both liquid and nonliquid assets, to be used as criteria of eligibility . . ."

The foregoing language was added to the Act by the 1971 amendments: P.L. 91-671, § 4, January 11, 1971, 84 Stat. 2049; to correct the prior statutory scheme of relying on varying state standards to determine eligibility. General authority is also accorded the Secretary by § 2013(c) which provides:

"The Secretary shall issue such regulations, not inconsistent with this Act, as he deems necessary or appropriate for the effective and efficient administration of the food stamp program."

Under the above statutory provisions, the Secretary has promulgated regulations codified in 7 C.F.R. § 271.3; "Household eligibility". Specifically, 7 C.F.R. § 271.3(c)(1)(i) provides the definition of income as including, inter alia:

(f) Payments received from federally aided public assistance programs, general assistance programs, or other assistance programs based on need;

(h) Payments, except those for medical costs, made on behalf of the household by a person other than a member of the household;

Section 271.3(c)(1)(ii) then provides an inclusive list of what is not to be considered income. Specifically, subsection (c) states:

"Any gain or benefit which is not in money . . ."

After gross income is determined, Section 271.3(c)(1)(iii) affords various deductions to arrive at the final net income figure to be used in determining eligibility for food stamps.

The regulations themselves do not specifically make reference to the inclusion of HUD's rent supplement payments as income. Instead the authority for the action of the Tennessee Department of Public Welfare, in determining that Mrs. Compton was disqualified from receiving food stamps, derives from the Department of Agriculture's interpretation (binding on the state agency) that such payments, being in cash and being made on behalf of Mrs. Compton by a person other than a household member, must be counted as income under the provisions of 7 C.F.R. § 271.3(c)(1)(i)(h). This interpretation is likewise consistent with the language in an unpublished "Food Stamp Certification Handbook" issued and provided to state agencies as guidance in carrying out the provisions of the regulations. 1 In that handbook under "Vendor Payments", it is provided:

"Payments in money, except those for medical costs, made on behalf of the household by a person other than a member of the household. Such payments may be made by private or government sources, for instance, housing allowances from Housing and Urban Development (HUD) would be an example of a government vendor payment. To qualify as a vendor payment, there must be an identifiable payment on the household's behalf, the major benefit from which accrues to the household rather than the payer. If there is no identifiable payment or if the major benefit from such payment accrues to the payer and not to the household, such benefit shall be considered income in kind and not income to the household." FNS Instruction 732-1, § 2262.10 "Vendor Payments"

Appellant argues that the Secretary's policy of including rent supplement payments in the definition of income violates the Food Stamp Act because the Congressional purpose was to alleviate hunger and malnutrition and that the inclusion of rent supplements as vendor payments achieves the opposite result since it increases cost that low-income families must bear in order to purchase food stamps.

An initial question is the validity of the Secretary's regulation which includes in the definition of income payments made on behalf of the household by a person other than a member of the household, 7 C.F.R. § 271.3(c)(1)(i) (h). We adhere to the test in Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369, 93 S.Ct. 1652, 1661, 36 L.Ed.2d 318, 329 (1973):

"Where the empowering provision of a statute states simply that the agency may 'make . . . such rules and regulations as may be necessary to carry out the provisions of this Act,' we have held that the validity of a regulation promulgated thereunder will be sustained so long as it is 'reasonably related to the purposes of the enabling legislation.' "

The purpose of the Food Stamp Act is to grant needy people the means of securing a nutritious diet. 7 U.S.C. § 2011. The Act grants to the Secretary the power to establish the standards of eligibility, which criteria at a minimum shall prescribe the amounts of household income, 7 U.S.C. § 2014(b). We believe that it is reasonable for the Secretary in defining income to include those payments which, although are not paid directly to a member of the household, do result in a readily ascertainable economic benefit. A distinction between money paid to a recipient who then pays a vendor for goods and the case where the vendor is paid directly for the goods charged by the intended recipient would exalt form over substance.

Having concluded that the "vendor payment" regulation is a reasonable promulgation of the Secretary to effectuate the purposes of the Act, the next question is whether the specific application of the regulation to include rent supplement payments is contrary to the purposes of the Act. The authority for rent supplement payments derives from 12 U.S.C. § 1701s(a) which provides that "The Secretary of Housing and Urban Development . . . is authorized to make, and contract to make, annual payments to a 'housing owner' on behalf of 'qualified tenants' . . .". The maximum amount that the Secretary of HUD is authorized to pay to a qualified "housing owner" is that amount which does "not exceed the amount by which the fair market rental for such unit exceeds one-fourth of the tenant's income . . ." 12 U.S.C. § 1701s(d). The term "housing owner" is defined in § 1701s(b) to mean basically private nonprofit corporations and private nonprofit legal entities. The rent supplement program was designed to allow greater flexibility in helping people with low incomes to obtain standard housing. It was intended that the amount of the federal payment would be reduced as the family income rose and would be discontinued when the income was sufficient to pay the fair market rental. The program would permit a mixture of income levels to live together. U.S.Code Cong. & Admin.News, 1965, Vol. 2, page 2620 (House Report No. 365).

It appears clear to us that rent supplement payments constitute a proper example of vendor...

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