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Sabi v. Sterling

April 8, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County, Soussan G. Bruguera, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC 313345).

The opinion of the court was delivered by: Flier, J.


Appellant Elisheba Sabi brought an action alleging six causes of action against respondents Donald T. Sterling Corporation and Donald T. Sterling individually. The causes of action alleged that respondents violated California's Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.) by discriminating against appellant because of her disability (first); California's Unruh Civil Rights Act (Civ. Code, § 51 et al.) (second); FEHA by discriminating against appellant because of source of income (third); and the Unruh Civil Rights Act by discriminating against appellant on the basis of her status as a recipient of "Section 8"*fn1 housing assistance (fourth). The fifth cause of action for unfair competition and the sixth cause of action for negligence were voluntarily dismissed by appellant.*fn2

The trial court dismissed the second, third and fourth causes of action for reasons discussed below. The jury returned a verdict for respondents on the remaining cause of action, finding that respondents had not violated FEHA. We affirm. FACTS

This case revolves around a provision of the United States Housing Act of 1937 that was section 8 of that act and now appears as title 42 United States Code section 1437f. This statute sets forth a relatively complex program that authorizes assistance payments "[f]or the purpose of aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing . . . ." (42 U.S.C. § 1437f(a).) We will adopt the usage followed by the parties and the trial court, as well as other appellate courts, and refer to this as "Section 8" assistance payments.

The nub of the controversy is that appellant became eligible to receive Section 8 assistance payments but that respondents refused to participate in the Section 8 program and thus refused to accept rent subsidy payments that would have been paid under the Section 8 program for the apartment rented by appellant.

The foundational facts are not disputed. Appellant is an elderly widow who immigrated to the United States from Iran in 1985 when she was 52 years old. She suffers from several physical and psychological disabilities and receives as a consequence supplemental security income (SSI) from the Social Security Administration. She has lived since 1987 in an apartment owned by respondents and continues to live there to this day. Listed on the lease for the apartment along with appellant are her two sons who no longer live there. The apartment, located in Santa Monica, is rent-controlled. After appellant's husband died of cancer in January 2004, appellant's SSI was no longer adequate to cover the rent, which was $1,233 per month in 2007. It appears that all or some portion of the rent is paid by appellant's sons.

Appellant and her husband applied to the Housing Authority of the City of Santa Monica (SMHA) for Section 8 assistance in 1998. Given the demand for Section 8 assistance, it was not until 2003 that SMHA notified appellant and her husband that they had become eligible for Section 8 assistance. As we set forth more fully below, under the Section 8 program, the tenant pays 30 percent of income for rent, the balance of the rent being paid by the housing authority administering the Section 8 program. Appellant and her husband were issued a Section 8 voucher by SMHA in July 2003. The issuance of a voucher is a distinct step in the Section 8 process; we set forth the salient aspects of that process, together with a definition of a voucher, below.

Beginning in August 2003, when appellant's daughter first approached the building manager with the request that the manager accept Section 8 assistance payments, and lasting until the time that this suit was filed in April 2004, respondents rejected appellant's request and refused to participate in the Section 8 program. Appellant's family soon enlisted the assistance of the Legal Aid Foundation of Los Angeles (LAFLA), which repeatedly wrote respondents, requesting that respondents accept the Section 8 assistance payments as a reasonable accommodation to appellant. But nothing that appellant's family or LAFLA said would change respondents' mind about refusing to participate in the Section 8 program. We do not find it necessary to chronicle the details of the dealings between the parties during this period, save to note that they were protracted and fruitless.

The repartee between appellant's family, LAFLA and respondents between August 2003 and April 2004 was punctuated by the family's efforts to find other living quarters for appellant. In the end, these efforts were abandoned because appellant and her family concluded for a number of reasons that she was best off in her current apartment. We are told that appellant continues to pay the rent and that she has not been asked to vacate the apartment.


Government Code section 12955 (hereafter section 12955), which is part of FEHA, prohibits discrimination based on the source of income.*fn3 Prior to trial, the court rebuffed two attempts, by demurrer and motion for summary judgment, by respondents to have the court conclude that Section 8 assistance payments do not constitute a source of income under FEHA. The third attempt came in a "trial brief" that was submitted two months before the trial actually commenced. In this brief, respondents once again contended that Section 8 assistance payments do not qualify as a source of income under section 12955. After noting that the parties were in agreement that this contention presented solely a legal issue that the court would have to decide, the trial court concluded that Section 8 assistance payments were not a source of income for the tenant on whose behalf such payments are made. This hearing took place on August 9, 2007; the trial did not commence until October 11, 2007. The court did not sign the memorandum dismissing the third and fourth causes of action with prejudice until after the trial concluded.

On October 11, 2007, after appellant's opening statement, respondents moved for a non-suit on the second cause of action. This cause of action was based on Civil Code section 54.1, which is a provision contained in the Unruh Civil Rights Act.*fn4 Respondents contended that there was no evidence that appellant had been denied access to her apartment. Appellant opposed the motion on the grounds that Civil Code section 54.1 requires only that appellant was denied an equal opportunity to use and enjoy the premises. This argument was based on subdivision (b)(3)(B) of section 54.1.*fn5 After receiving briefing and argument, the trial court granted the motion for non-suit on the second cause of action on October 27, 2007.

The special verdict that was submitted to the jury posed the question whether appellant proved by a preponderance of the evidence that respondents violated FEHA. This was based on the first cause of action that alleged that respondents discriminated against appellant because of her disability. The jury answered this question with a no. Judgment was entered and costs of $82,082.37 were awarded to respondents. As noted, the trial court entered its written order, with reasons stated, dismissing the third and fourth causes of action (the source of income claims) after the judgment was entered.


1. The Statutes

The provision that prohibits discrimination because of source of income, subdivision (a) of section 12955, is set forth above. (Fn. 3, ante.)

Subdivision (p) of section 12955 provides: "(1) For the purposes of this section, `source of income' means lawful, verifiable income paid directly to a tenant or paid to a representative of a tenant. For the purposes of this section, a landlord is not considered a representative of a tenant. [¶] (2) For the purposes of this section, it shall not constitute discrimination based on source of income to make a written or oral inquiry concerning the level or source of income." 2. The Regulations

It is not our intent to render an exhaustive description of the mechanics of the Section 8 program. We focus instead only on the salient aspects of how rent subsidies are paid out under the Section 8 program. We rely here on part 982 of 24 Code of Federal Regulations, which is entitled "SECTION 8 TENANT BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM."

"In the HUD [Housing and Urban Development] Housing Choice Voucher Program (Voucher Program) and the HUD certificate program, HUD pays rental subsidies so eligible families can afford decent, safe and sanitary housing. Both programs are generally administered by State or local governmental entities called public housing agencies (PHAs). HUD provides housing assistance funds to the PHA. HUD also provides funds for PHA administration of the programs." (24 C.F.R. § 982.1(a)(1) (2009).)

There is a distinction between "project-based" and a "tenant-based" assistance. This case involves the latter type of assistance. "To receive tenant-based assistance, the family selects a suitable unit. After approving the tenancy, the PHA enters into a contract to make rental subsidy payments to the owner to subsidize occupancy by the family. The PHA contract with the owner only covers a single unit and a specific assisted family. If the family moves out of the leased unit, the contract with the owner terminates. The family may move to another unit with continued assistance so long as the family is complying with program requirements." (24 C.F.R. § 982.1(b)(2) (2009).) Under the voucher program, which is the one used in this case, "the subsidy is based on a local `payment standard' that reflects the cost to lease a unit in the local housing market. If the rent is less than the payment standard, the family generally pays 30 percent of adjusted monthly income for rent. If the rent is more than the payment standard, the family pays a larger share of the rent." (24 C.F.R. § 982.1(a)(4)(ii) (2009).)

The PHA selects a family for the voucher program based on criteria and conditions that are not material in this case. "When a family is selected, or when a participant family wants to move to another unit, the PHA issues a voucher to the family. The family may search for a unit." (24 C.F.R. § 982.302(a) (2009).) A voucher is defined as a "document issued by a PHA to a family selected for admission to the voucher program. This document describes the program and the procedures for PHA approval of a unit selected by the family. The voucher also states obligations of the family under the program." (24 C.F.R. § 982.4(b) (2009).) "(b) If the family finds a unit, and the owner is willing to lease the unit under the program, the family may request PHA approval of the tenancy. . . . [¶] (c) The family must submit to the PHA a request for approval of the tenancy and a copy of the lease, including the HUD-prescribed tenancy addendum. The request must be submitted during the term of the voucher." (24 C.F.R. § 982.302(b) & (c).) A voucher has an initial term of 60 days and it may be extended. (Ibid.)

We now come to the actual payment of housing assistance under the contract between the PHA and the owner, referred to as the HAP (housing assistance payment) contract. "(a) Payments under HAP contract. Housing assistance payments are paid to the owner in accordance with the terms of the HAP contract. Housing assistance payments may only be paid to the owner during the lease term, and while the family is residing in the unit. [¶] (b) Termination of payment: When owner terminates the lease. Housing assistance payments terminate when the lease is terminated by the owner in accordance with the lease." (24 C.F.R. § 982.311(a) & (b) (2009).) Other methods of termination are termination of the HAP contract and termination of PHA assistance to the family. (24 C.F.R. § 982.311(c) (2009).) 3. Appellant's Misinterpretation of the Regulations

Appellant contends that Section 8 vouchers are paid to a representative of the tenant, which is the PHA. Appellant claims that for the "purposes of FEHA, the PHA serves as the `representative of the tenant' with respect to Section 8 vouchers."

There are three factual errors in this statement.

First. The PHA, which is in this case the SMHA, receives housing assistance funds from HUD. (24 C.F.R. § 982.1(a)(1) (2009).) The SMHA does not receive vouchers from anyone; the SMHA, as a PHA, issues a voucher to the tenant, in this case to appellant.

Second. A voucher is not income and it is not "paid" to anyone. A voucher is a "document issued by a PHA to a family selected for admission to the voucher program. This document describes the program and the procedures for PHA approval of a unit selected by the family. The voucher also states obligations of the family under the program." (24 C.F.R. § 982.4(b) (2009).)

Third. If respondents had been willing to participate in the Section 8 program, the SMHA, as a PHA, would have paid money to respondents under the HAP contract. The SMHA would not have paid in vouchers but in money.

In her reply brief, appellant appears to have retreated from the idea that vouchers are paid to the PHA. Instead, appellant states that HUD pays the "housing subsidy funds (the `lawful, verifiable income') to the PHA (the `tenant representative')." This not how the program operates. "HUD provides housing assistance funds to the PHA." (24 C.F.R. § 982.1(a)(1) (2009).) In other words, the housing assistance funds are federal funds transferred by HUD to the PHA. If a number of events would have occurred, some small portion of those housing assistance funds would have been paid to respondents as a subsidy for appellant's rent. But the federal housing assistance funds received by the SMHA as a PHA is not appellant's income. It is not anyone's income; it is a transfer of federal funds to the SMHA.

We do not mean to say that funds paid by a PHA to the owner of a rental unit is not income. Such funds are clearly someone's income. This case revolves around the question whether these payments are the tenant's income.


Pursuant to Statutes 1999, chapter 592, section 17(g) at page 4279, section 12955 incorporated amendments contained in Statutes 1999, chapters 589-592. This was signed into law by the Governor effective January 1, 2000. These amendments were part of the California Civil Rights Amendments of 1999. (Stats. 1999, ch. 591, § 1, p. 4195.) We will refer to these amendments as the 1999 amendments.

The 1999 amendments contained numerous other provisions besides subdivisions (a) and (p) of section 12955. We set forth in the margin the statutes that were affected by the 1999 amendments.*fn6 It is evident that the 1999 amendments had a much broader range than the new provisions about source of income discrimination.

As enacted in 1999, section 12955, subdivision (p)(1) did not contain this sentence: "For the purposes of this section, a landlord is not considered a representative of a tenant." This sentence was added by an amendment enacted in 2004, in Statutes 2004, chapter 568, section 8. We will from time to time refer to this enactment as the 2004 amendment.

As might be expected, legislation as broad in scope and purpose as the 1999 amendments generated voluminous legislative analyses and committee reports. The (unfortunately) unpaginated and prolix tumble of documents comprising the legislative history of the 1999 and 2004 amendments is nearly two inches thick.

Appellant focuses on two legislative committee reports in an effort to demonstrate that the legislative history shows that it was the intent of the Legislature to enact legislation that compelled landlords to accept Section 8 assistance payments from a PHA. As we discuss below, we do not think that the legislation requires interpretation because, in the final analysis, section 12955, subdivision (p), as it stands now, is not ambiguous. Nonetheless, a full account of appellant's claims in this case cannot be rendered without a consideration of these committee reports. We therefore set forth in detail the legislative committee reports that appellant relies on.

Appellant quotes from the third reading analysis of Senate Bill No. 1098 (1999-2000 Reg. Sess.) of the Senate Judiciary Committee as amended on April 7, 1999. It appears, however, that appellant ignores the setting in which the cited comment was made and that appellant omits significant portions of the comment. The cited comment, which we reproduce below, commented on section 12955, proposed subdivision (n), now subdivision (o), which we set forth in the margin.*fn7 We underline the text in this comment that appellant quotes in her opening brief; the portions not underscored are not quoted by appellant.

"Proposed subdivision (n) of Section 12955 of the Government Code would prohibit the use of a financial or income standard based on a multiple or percentage of the rent that, in cases where there is a government rent subsidy, fails to calculate the minimum income based only on the portion of the rent to be paid by the tenant. This provision also arises out of the growing trend among landlords to flatly refuse to rent to anyone on Section 8 housing or, more blatantly, to evict an existing Section 8 tenant because the landlord no longer wants to accept Section 8 vouchers. The problem is widespread, with 15,200 Section 8 vouchers in San Francisco alone, and many more thousands statewide. [¶] Proponents contend that this form of discrimination is creating tremendous hardships for the disabled and the elderly, who now find that they are being lawfully discriminated against because they are recipients of Section 8 assistance. The discrimination is also making it harder for people trying to transition from welfare to work, and for working families with low or modest incomes. The proposed language is a pared down version of a broader proposal which sought to prohibit arbitrary discrimination based on sources of income.

Proponents point out that at least 12 other states prohibit `source of income' or Section 8 discrimination. [¶] The landlord groups have expressed the strongest opposition to other, stronger version of this provision. (That provision, once contained in [Senate Bill No.] 1730,[*fn8 ] last year's measure, would have prohibited the use of arbitrary financial or income standards, and would have overturned Harris [v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142].)[*fn9 ]

The landlord groups say that the problem of finding housing for low and moderate income tenants should not be transferred to private property owners, and argue that property owners should be able to decide if they no longer want to forebear the administrative burdens associated with accepting Section 8 housing vouchers. They also maintain that they should continue to be able to use appropriate financial and income standards in making rental decisions. Both sides are in continuing discussions over the proposed provisions." (Sen. ...

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