Waits v. Swoap

• Decision Date: 02 July 1974
• Docket Number: 23013,S.F. 23012
• Citation: 115 Cal.Rptr. 21,524 P.2d 117,11 Cal.3d 887
• Court: California Supreme Court
• Parties: , 524 P.2d 117 William WAITS et al., Plaintiffs and Respondents, v. David B. SWOAP, as Director, etc., et al., Defendants and Appellants. In Bank

Page 21

115 Cal.Rptr. 21

11 Cal.3d 887, 524 P.2d 117

William WAITS et al., Plaintiffs and Respondents, v. David B. SWOAP, as Director, etc., et al., Defendants and Appellants.

S.F. 23012, 23013.

Supreme Court of California,

In Bank.

July 2, 1974.

Rehearing Denied Aug. 7, 1974.

Evelle J. Younger, Atty. Gen., Elizabeth Palmer, Asst. Atty. Gen., and David J. Bowie, Deputy Atty. Gen., for defendants and appellants.

Clifford Sweet, F. Hayden Curry, Oakland, Marjorie Gelb, Hayward, Denis Clifford, William R. Petrocelli, Oakland, Jay-Allen Eisen, Ralph Santiago, Abascal, and Edmund S. Schaffer, San Francisco, for plaintiffs and respondents.

Charles C. Marson, Joseph Remcho, San Francisco, Karlton, Blease & Vanderlaan and Coleman A. Blease, Sacramento, as amici curiae on behalf of plaintiffs and respondents.

TOBRINER, Justice.

This is a companion case to Cooper v. Swoap, decided this day, Cal., 115 Cal.Rptr. 1, 524 P.2d 97, and presents analogous questions as to the validity of an administrative welfare regulation promulgated subsequent to the Welfare Reform Act of 1971. In Cooper we have held that Regulation 44--115.8, authorizing designated deductions from grants of recipients of aid to families with dependent children (AFDC) who share housing with recipients of 'adult aid' benefits, is incompatible with the governing legislative provisions and therefore invalid. In this case we address a comparable regulation, Regulation 44--115.611, which authorizes similar deductions from welfare grants of AFDC recipients who share housing with 'nonneedy' relatives.

As discussed below, we have concluded that, as in Cooper, the instant regulation conflicts with the controlling statutes and cannot stand. Initially, we point out that just as in Cooper the regulation at issue emanates from an administrative conception of 'noncash economic benefits' which is incompatible with the 'flat grant' system of welfare payments established by the 1971 welfare reform legislation. Second, we explain that the benefits at issue cannot properly be characterized as 'income' which may be deducted from a recipient's grant. Finally, we demonstrate that even if such benefits could properly be considered 'income,' the present regulation would still be invalid since it does not measure the actual value of the benefits received by a recipient but instead assigns a fictional value to such benefits. Accordingly, we affirm the trial court's decision invalidating the regulation at issue.

1. The facts of the instant case.

Plaintiffs Mr. and Mrs. Waits receive AFDC benefits on behalf of the six needy children (three grandchildren and three great-grandchildren) whom they have voluntarily taken into their home. Under Welfare and Institutions Code section 11450 the six children were entitled at the time this action was commenced to a basic grant of $360 per month; as a result of the promulgation of Regulation 44--115.611, however, the grant was reduced to $259 per month (a $101 deduction). Regulation 44--115.611 had an equally significant effect on the grants received by the families of the two other individual plaintiffs in this case. The grant to the three needy children (two nieces and one nephew) in the care of the Browns was reduced from $235 per month to $140 per month (a $95 deduction); the grant to the needy grandchild in the care of the Luceys was reduced from $115 per month to $48 per month (a $67 deduction). ¹

Seeking to avoid the harsh effects of these reductions, the three families instituted the instant class action, attacking Regulation 44--115.611 as incompatible with the controlling state and federal statutes, and seeking injunctive and declaratory relief. The trial court granted plaintiffs' request for a preliminary injunction and subsequently entered an order declaring the contested regulation invalid and prohibiting its future enforcement. Defendant state and county welfare authorities appeal from the judgment.

In Cooper v. Swoap, Supra, 115 Cal.Rptr. pp. 3--5, 524 P.2d 99--101, we have reviewed at some length the historical background of the Welfare Reform Act of 1971, and the principal innovations introduced by that legislation. Regulation 44--115.611, the regulation at issue here, was one of a series of regulations which the State Department of Social Welfare (department) promulgated as an ostensible implementation of the 1971 act. In substance, the challenged regulation provides that whenever an AFDC recipient has voluntarily been given a home by a 'nonneedy' relative, ² the department will hold that such child has received a designated 'income' in the form of housing and utility benefits, which 'income' is to be deducted from the child's welfare grant. ³ Although the rationale of the regulation is not explicitly articulated, the regulation appears to rest upon the assumption that a nonneedy relative who agrees to take an AFDC child into his home is necessarily both willing and able to make a gift of housing and utilities to that child; moreover, the regulation further asserts that such housing and utility benefits are 'income' to the AFDC recipient which may be deducted from his basic flat grant.

The question presented is whether this regulation is consistent with the prevailing legislative scheme. For the reasons reviewed below, we conclude that the regulation is incompatible with the governing statutes and is therefore invalid.

2. Regulation 44--115.611, resting as it on the department's 'noncash economic benefit' concept, is completely at odds with the flat grant system of AFDC benefits established by the 1971 legislation.

Although, unlike the regulation at issue in Cooper, the instant regulation was not specifically rejected by the Legislature, ⁴ Regulation 44--115.611 shares all of the other fatal defects exhibited by the regulation invalidated in Cooper. The similarities between the two regulations stem from the fact that the instant regulation is simply another variation on the department's 'noncash economic benefit' theme, a theme which, as explained in Cooper, is fundamentally incompatible with the 'flat grant' system of welfare benefits adopted by the Legislature in 1971. Thus, although the instant regulation seeks to reduce welfare payments on the basis of reduced housing and utility needs of recipients living with nonneedy relatives, such reduced needs, if they in fact exist, have already been taken into account by the Legislature in computing the flat grant figures of section 11450. ⁵ Consequently, if approved, the challenged regulation would in reality effect an improper 'double deduction' of welfare benefits for those recipients who happen to live with nonneedy relatives.

In singling out children living with nonneedy relatives for disparate treatment, the instant regulation directly conflicts with the legislative mandate that a recipient's reduced need does not provide a basis for reducing the basic amount of the legislatively determined flat grant. As with the regulation at issue in Cooper, the legislative subcommittee reviewing the implementation of the 1971 welfare legislation has condemned the present regulation as contrary to the statutory scheme. (Senate-Assembly Subcommittee on Implementation of Welfare Reform, Report to the Legislature (March 17, 1972) p. 21.) We agree with the subcommittee's conclusion that '(t)here is no legal basis in the Welfare Reform Act for (the regulation's) reduction.' (Id.)

3. The housing and utility benefits at issue do not constitute 'income' within the meaning of Welfare and Institutions Code section 11450.

The department again contends, of course, that the regulation is not contrary to the legislative scheme because it represents a reasonable measure of a recipient's 'in-kind' income, which under section 11450, must be deducted from the fixed grant figure. The department's characterization of such benefits as 'income,' however, is no more persuasive in this context than in Cooper.

As we explained in Cooper, 'noncash economic benefits' in general, and 'shared housing' in particular, have never been considered deductible 'income' throughout the entire history of California welfare programs, and nothing in the 1971 welfare legislation indicates that the Legislature intended to change that approach. Further, the report of the Legislative Analyst, predicting that the 1971 act would effect no saving in substantive grant payments, confirms the conclusion that the Legislature did not intend to transform these benefits into deductible income. (See Cooper v. Swoap, Supra, fn. 5, 115 Cal.Rptr. p. 4, 524 P.2d p. 100).

Moreover, insofar as the department's characterization of such benefits as 'income' rests upon an assumption that nonneedy relatives have made a 'gift' of housing and utility resources, the department's position suffers from an even more fundamental defect. The 'nonneedy' relatives covered by the present regulation are under no legal duty to support the children whom they have voluntarily taken into their homes. The regulation at issue, however, totally ignores this important fact, and Conclusively presumes that such relatives, by agreeing to take such children into their homes, are both willing and able to provide the children with free housing and utilities; thus, even if a relative disclaims any donative intent, the regulation treats the housing and utilities as having been given, free of charge, to the AFDC recipients. ⁶

In assigning 'income' to an AFDC recipient even though the nonneedy relative with whom he lives may be neither able nor willing to donate such 'income,' the present regulation conflicts directly with the teaching of the recent United States Supreme Court decisions of King v. Smith (1968) 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 and Lewis v. Martin (1970) 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed.2d 561. In both King and Lewis the court struck down provisions which, like the instant regulation, Assumed that income or resources of...