Reilly v. Marin Hous. Auth.

Decision Date25 April 2018
Docket NumberA149918
Citation232 Cal.Rptr.3d 789,23 Cal.App.5th 425
CourtCalifornia Court of Appeals Court of Appeals
Parties Kerrie REILLY, Plaintiff and Appellant, v. MARIN HOUSING AUTHORITY, Defendant and Respondent.

Law Offices of Frank S. Moore, Frank S. Moore, San Francisco for Appellant.

WFBM, LLP, Randall J. Lee, Anne C. Gritzer, San Francisco for Respondent

Tucher, J.* Kerrie Reilly lives with her severely disabled adult daughter in housing subsidized by the Marin Housing Authority (MHA). The family participates in the Housing Choice Voucher program, commonly known as Section 8, which MHA administers according to the rules and regulations of the United States Department of Housing and Urban Development (HUD). As a Section 8 participant, Kerrie Reilly receives a monthly rent subsidy, or "housing assistance payment," the size of which varies depending on her income.

The Reillys also participate in a state social services program designed to help incapacitated persons avoid institutionalization. The In-Home Supportive Services (IHSS) program compensates those who provide care for aged, blind, or disabled individuals incapable of caring for themselves. ( Norasingh v. Lightbourne (2014) 229 Cal.App.4th 740, 744, 176 Cal.Rptr.3d 868 ( Norasingh ).) Reilly's daughter suffers from a severe developmental disability, such that she requires constant supervision, and IHSS pays Reilly for providing her daughter with care-giving services. The question this case presents is whether the money Reilly receives from IHSS is "income" within the meaning of HUD regulations, such that MHA should include it in calculating the size of Reilly's housing assistance payment. We hold that it is, and affirm the trial court in sustaining MHA's demurrer on this basis.

FACTUAL AND PROCEDURAL BACKGROUND

According to the verified petition that is the operative pleading in this case, Reilly and two daughters moved into a three-bedroom apartment in Novato in 1998 and began receiving Section 8 housing assistance payments. In 2004 one daughter moved out, but Reilly failed to inform MHA of her departure. Five years later, when Reilly told MHA that this daughter no longer lived with her, MHA informed Reilly that her failure to report the departure earlier was a violation of program rules and that she could stay in the apartment only if she paid damages to MHA in the amount of $16,011. Reilly and MHA memorialized a settlement that called for Reilly to make monthly payments, initially of $486, toward that sum. Because Reilly was unable to afford these payments, the parties revised the plan several times, eventually reducing Reilly's obligation to $150 per month. Still, Reilly missed multiple payments.

By letter dated April 7, 2015, Reilly requested that MHA recalculate her rent and exclude her income from IHSS. MHA did not respond to that request, but soon thereafter served Reilly with notice of a proposed termination of her Section 8 voucher. A hearing officer determined that this first proposed termination was defective, but on July 31, 2015, MHA issued a second termination notice, this time alleging that Reilly failed to make multiple payments under the repayment plan. At an informal hearing on August 25, 2015, Reilly argued that MHA had improperly included her IHSS payments as income and that, excluding these payments, there was no lawful basis for MHA to have demanded $16,000 from her.

On September 8, 2015, the hearing officer issued a short, written decision upholding MHA's decision to terminate Reilly's housing voucher. The hearing officer made the following factual findings: Reilly failed to promptly notify MHA when one daughter moved out of the subsidized apartment, then entered into a repayment agreement in 2009; Reilly breached that agreement in 2010, and at a hearing following the breach was warned that any future failure to make payments would result in the termination of her housing assistance; Reilly breached the agreement again in 2012, and in 2014 and 2015 when she missed payments for 16 months. The hearing officer concluded that Reilly's failure to pay the amounts required under the agreement was grounds for terminating assistance under a HUD regulation (see 24 C.F.R. § 982.552(c) ), and under an MHA policy requiring termination after three missed payments in a 12-month period. The hearing officer did not address the issue of whether IHSS payments were properly counted as income, observing only that Reilly did not dispute her non-payment of the debt but instead presented a case "based on factors not related to the actual cause of termination."

On October 26, 2015, Reilly filed in the Marin Superior Court a verified petition for writ of mandate and, on July 20, 2016, an amended verified petition (hereafter petition). The petition alleges two related causes of action, both premised on the theory that counting IHSS payments as income violates the governing HUD regulation, 24 Code of Federal Regulations part 5.609(c)(16) (hereafter section 5.609(c)(16) ). Reilly's first cause of action seeks an administrative writ, specifically an order requiring MHA to terminate Reilly's repayment plan and reinstate her Section 8 voucher. (See Code Civ. Proc., § 1094.5.) The second cause of action seeks a writ of mandate directing MHA to terminate the repayment plan and exclude Reilly's IHSS payments in calculating income going forward. (See Code Civ. Proc., § 1085.) Both causes of action include a request for attorney's fees and costs, asserting the action will benefit the public. (See Code Civ. Proc., § 1021.5.)

MHA demurred to the petition, and the trial court sustained the demurrer after a hearing on November 4, 2016. The trial court concluded that Reilly's interpretation of section 5.609(c)(16) was "wrong as a matter of law." The HUD regulation broadly defines income, subject to exceptions including an exception for payments from a state agency "to offset the cost of services and equipment needed to keep [a] developmentally disabled family member at home." (§ 5.609(c)(16).) The trial court concluded that this exception did not apply, reasoning that Reilly " ‘has not incurred out-of-pocket expenses that are being ‘offset’ by the IHSS payment.' " Instead, "[s]he is being paid for her services." Thus, Reilly's IHSS payments count as income. In reaching this conclusion, the trial court relied on a federal case involving the earnings of a Texas mother whose son was the beneficiary of a somewhat similar state program. (See Anthony v. Poteet Housing Authority (5th Cir. 2009) 306 Fed.Appx. 98 ( Anthony ).)

Given the trial court's reading of the HUD regulation, the court concluded that no amendment to Reilly's petition would cure the defect the court had identified, so it sustained the demurrer without leave to amend and dismissed Reilly's petition with prejudice. This appeal timely followed. While the case is pending this court ordered, as did the trial court before us, a stay in the enforcement of the administrative order terminating Reilly's Section 8 benefits.

DISCUSSION

We review de novo the trial court's order sustaining MHA's demurrer. ( Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 718, 17 Cal.Rptr.3d 374 ; Coopers & Lybrand v. Superior Court (1989) 212 Cal.App.3d 524, 529, 260 Cal.Rptr. 713.) "[G]iving the pleading the benefit of all facts properly alleged" or judicially noticed, "and all reasonable inferences drawn therefrom," we must determine "whether the pleading has stated a cause of action." ( Busse v. United PanAm Financial Corp. (2014) 222 Cal.App.4th 1028, 1035, 166 Cal.Rptr.3d 520 ; see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) Even where a pleading fails to state a cause of action, for the trial court to sustain a demurrer without leave to amend is an abuse of discretion if a plaintiff shows "there is a reasonable possibility that the defect can be cured by amendment." ( Ibid . )

The IHSS Program

IHSS is a "state and federally funded program developed to permit persons with disabilities to live safely in their own homes." ( Calderon v. Anderson (1996) 45 Cal.App.4th 607, 610, 52 Cal.Rptr.2d 846.) Counties administer the program, pursuant to the requirements of Welfare and Institutions Code section 12300 et seq. and regulations promulgated by the California Department of Social Services. ( Basden v. Wagner (2010) 181 Cal.App.4th 929, 933–934, 104 Cal.Rptr.3d 394 ( Basden ).) The program pays for severely impaired Californians to receive up to 65 hours per week in supportive services, including domestic services, personal care services, protective supervision, and other specifically enumerated categories of service. ( Id . at p. 934, 104 Cal.Rptr.3d 394 ; Welf. & Inst. Code, § 12300, subd. (b).) "Protective supervision" is monitoring of the behavior of a mentally impaired or mentally ill recipient to safeguard him or her from injury or accident. ( Norasingh , supra , 229 Cal.App.4th at p. 745, 176 Cal.Rptr.3d 868.) It is " ‘nonmedical oversight, akin to baby-sitting.’ " ( Ibid . )

Those who provide services to IHSS beneficiaries "work pursuant to various arrangements. Some are civil service employees of a county; some are employees of an entity that contracts with the county; some contract directly with the county or authorized entity; some are referred to the recipient by the authorized entity; and some contract directly with the recipient. ( [Welf. & Inst. Code] §§ 12301.6, 12302, 12302.1, 12302.25.)" ( Basden , supra , 181 Cal.App.4th at p. 940, 104 Cal.Rptr.3d 394.) Sometimes, as in this case, a recipient's parent receives compensation for providing care through the IHSS program, although the law limits both the circumstances in which a parent can receive such compensation and the categories of service for which the parent can receive compensation. ( Id . at pp. 934–935, 104 Cal.Rptr.3d 394 ; Welf. & Inst. Code, § 12300, subd. (e).)1

The Language of the HUD Regulation

The...

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