Kanda v. Chang, Civ. No. 77-0258.

• Decision Date: 18 July 1979
• Docket Number: Civ. No. 77-0258.
• Citation: 475 F. Supp. 368
• Court: U.S. District Court — District of Hawaii
• Parties: Hiroshi and Daisy KANDA, Clyde and Susan Kanda, by their mother and next friend, Daisy Kanda, Josephine Jung, and Robert and Carrie Sills, on behalf of themselves and others similarly situated, Plaintiffs, v. Andrew CHANG, in his capacity as Director, Department of Social Services & Housing, State of Hawaii, and Edwin Tam, in his capacity as Administrator, Public Welfare Division, Department of Social Services & Housing, State of Hawaii, Defendants.

475 F. Supp. 368

Hiroshi and Daisy KANDA, Clyde and Susan Kanda, by their mother and next friend, Daisy Kanda, Josephine Jung, and Robert and Carrie Sills, on behalf of themselves and others similarly situated, Plaintiffs, v. Andrew CHANG, in his capacity as Director, Department of Social Services & Housing, State of Hawaii, and Edwin Tam, in his capacity as Administrator, Public Welfare Division, Department of Social Services & Housing, State of Hawaii, Defendants.

Civ. No. 77-0258.

United States District Court, D. Hawaii.

July 18, 1979.

COPYRIGHT MATERIAL OMITTED

Calleen J. Ching, Karen M. Radius, Stanley E. Levin, Legal Aid Society of Hawaii, Honolulu, Hawaii, for plaintiffs.

Charleen M. Aina, Gerald Yoshida, James P. Dandar, Michael Lilly, Deputy Attys. Gen., Ronald Amemiya, Atty. Gen., State of Hawaii, Honolulu, Hawaii, for defendants.

DECISION ON MOTIONS FOR SUMMARY JUDGMENT

SAMUEL P. KING, Chief Judge.

Defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment require the court to pass upon the validity of the policies contained in Hawaii Public Welfare Manual (HPWM) § 3392, as interpreted and applied by the State Department of Social Services and Housing (DSSH), for evaluating the equity that applicants and recipients of Aid to Families With Dependent Children (AFDC) may have in their home property while receiving assistance.¹

Plaintiffs contend that the State's definition of equity (1) is underinclusive in that it does not allow for deductions from market value of obligations other than secured mortgage loans obtained to purchase or repair the home property or for deduction of costs of sale such as broker's fees, closing costs, and escrow fees, (2) is illogical in that it does not allow for evaluating life interests differently from fee simple interests, and (3) is restrictive in that it does not allow for an independent appraisal of market value. Each of these deficiencies, they say, violates the requirement of 45 C.F.R. § 233.20(a)(3)(ii)(E) that "resources will be reasonably evaluated."

Plaintiffs also contend that the State considers home property as a reserved resource even though the property is not currently available to meet current and future needs, unless the property is tied up by legal conditions or unclear title and then for only one year. This, they say, violates the requirement of 45 C.F.R. § 233.20(a)(3)(ii)(D) that "currently available resources shall be considered."²

CLASS CERTIFICATION AND JURISDICTION

This action was determined to be maintainable as a class action pursuant to Rule 23(a) and (b)(2), Federal Rules of Civil Procedure, and the class was provisionally defined on July 5, 1978.³ After further consideration, the class was redefined as follows:

All AFDC applicants and recipients whose assistance has been, is being or will be denied or terminated, pursuant to H.P. W.M. § 3392, because the regulation unreasonably evaluates their equity in their home property.

However, in light of Chapman v. Houston Welfare Rights Organization and Gonzalez v. Young, ___ U.S. ___, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979), and Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969), and Zahn v. International Paper Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973), I am now of the opinion that this action cannot be maintained as a class action.

Plaintiffs allege jurisdiction under 28 U.S.C. § 1343(3) and (4) and 28 U.S.C. § 1331. Chapman and Gonzalez hold specifically that § 1343 does not confer federal jurisdiction over claims based on the Social Security Act, since that Act is not a statute securing "equal rights" within the meaning of § 1343(3) or "civil rights" within the meaning of § 1343(4).

Plaintiffs argue that Chapman and Gonzalez are not controlling here because plaintiffs allege denial of rights secured by the Constitution. I am unpersuaded. Counts V, VI, VII, and VIII of the Second Amended Complaint restate the alleged statutory violations of Counts I, II, III, and IV, as irrebuttable presumptions violative of the Fourteenth Amendment.⁴ While the concept is ingenious, I do not believe that the proposed legal principle survives analysis. The challenged provisions and procedures of H.P.W.M. § 3392 are simply not irrebuttable presumptions, and even if they were, the nexus to the Fourteenth Amendment is farfetched. Cases such as Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974),⁵ cited by plaintiffs, involve an element of discriminatory treatment. No equal protection claim is made in this case.

Plaintiffs may proceed under 28 U.S.C. § 1331(a) if their claims exceed $10,000, exclusive of interest and costs. In this situation, Snyder teaches that individual claims may not be aggregated to obtain the jurisdictional amount, and Zahn teaches that one plaintiff may not ride in on another's coattails.

Following the teaching of Potrero Hill Community Action Committee v. Housing Authority, 410 F.2d 974 (9th Cir. 1969), and City of Inglewood v. City of Los Angeles, 451 F.2d 948 (9th Cir. 1971), the better practice under the circumstances is to deny the prayer for class certification and to proceed on the merits as to those individual plaintiffs who can meet the $10,000 jurisdictional requirement.

LEGAL CONTEXT

Title IV of the Social Security Act provides for Aid to Families With Dependent Children. 42 U.S.C. §§ 601-610. Federal monies are made available for making payments to States which have approved plans for aid and services to needy families with children. 42 U.S.C. § 601. Among other things, the State plan must provide, with certain exceptions not relevant here, "that the State agency shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child or relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid, as well as any expenses reasonably attributable to the earning of any such income." 42 U.S.C. § 602(a)(7). Secretaries of responsible federal departments are authorized to make and publish rules and regulations, not inconsistent with the Social Security Act, as may be necessary to the efficient administration of the functions with which each is charged. 42 U.S.C. § 1302.

The Secretary of Health, Education and Welfare has promulgated regulations regarding the requirements for State plans for the several types of assistance provided under the Social Security Act, including AFDC. With respect to need and amount of assistance, these requirements are set forth at 45 C.F.R. § 233.20.⁶

The State plan must "specify the amount and type of real and personal property, including liquid assets, that may be reserved, i. e., retained to meet the current and future needs while assistance is received on a continuing basis." 45 C.F.R. § 233.20(3)(i). This subsection continues: "In addition to the home, personal effects, automobile and income producing property allowed by the agency, the amount of real and personal property, including liquid assets, that can be reserved for each individual recipient shall not be in excess of two thousand dollars. Policies may allow reasonable proportions of income from businesses or farms to be used to increase capital assets, so that income may be increased."

Furthermore, in determining need and the amount of assistance, the State plan must provide that "net income available for current use and currently available resources shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance," 45 C.F.R. § 233.20(3)(ii)(D), and must provide that "income and resources will be reasonably evaluated," 45 C.F.R. § 233.20(3)(ii)(E).⁷

Under these regulations, each State may adopt its own policies, not inconsistent with federal statutes and regulations, with respect to the home property as a retained resource while assistance is being received.⁸ Hawaii's policies in this regard are set forth in H.P.W.M. § 3392 which reads as follows:

POLICY

3392 Real Property

1. Consideration as a Resource

a. All real property owned by an applicant or by a recipient and by family members in the assistance household is considered as resource except for:

1) Home property lived on by the assistance household if equity is $40,000 or less.

a) Home property includes fee simple and lease land.

b) An applicant or recipient whose home property has been determined to have equity of $40,000 or less and who has signed the property agreement form shall be eligible for assistance, provided he meets all other eligibility requirements.

2) Other property if equity is $500 or less.

3) Burial plots for family use.

b. The equity, which is the value of the property beyond the amount owed on it, is arrived at by determining the market value minus the outstanding mortgage.

Estimated market value can be determined from the most recent Notice of Property Assessment from the Department of Taxation (Form P-2 . . .) in the following manner:

Tax assessed value ________________________________________ Percent of fair market value used by tax assessor for real property tax purposes.

2. Legal Status a. Real property tied up by legal conditions or unclear title is not considered a resource until it sic has been removed. The applicant or recipient shall be given 30 days following date of application to initiate legal action by contacting an attorney to clear title and may be given up to one year from date of application to remove the condition or clear the title.

b. Action taken following contact with the attorney shall be reviewed by the sixth month following date of approval to determine that every reasonable effort has been

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