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Bennington Housing Authority v. Bush (2006-094)
2007 VT 60
[Filed 20-Jul-2007]
NOTICE: This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.
2007 VT 60
No. 2006-094
Bennington Housing Authority Supreme Court
On Appeal from
v. Bennington Superior Court
Diane Bush and Scott Heaton September Term, 2006
Theodore S. Mandeville, Jr., J. (Ret.), Specially Assigned
James J. Cormier, Jr. of Cormier and Cormier, Bennington, for
Plaintiff-Appellee.
R. Drew Palcsik, Vermont Legal Aid, Inc., Rutland, for
Defendants-Appellants.
PRESENT: Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.
1. SKOGLUND, J. The Bennington Housing Authority (BHA) brought
an eviction action against appellants, Diane Bush and Scott Heaton, on the
ground that they withheld information from their lease application which,
if known, would have disqualified them as eligible lessees. Ms. Bush and
Mr. Heaton appeal the trial court's determination that they committed fraud
in the inducement and that BHA appropriately exercised its discretion in
evicting the family when, five years after admitting the family, it
discovered material inaccuracies in their application concerning one family
member. We reverse.
2. In April of 2000, Ms. Bush, her daughter, and Mr. Heaton were
homeless, and Ms. Bush was pregnant with triplets. Ms. Bush filled out an
application for public housing, listing herself as head of household. She
provided information on her income, vehicles, previous landlord, and
personal references. In a section entitled "other required information"
the application asked two questions about criminal history which Ms. Bush
answered in the negative. The answers were truthful as to Ms. Bush. She
testified that she did not think Mr. Heaton's criminal history was required
on the form. She also testified that she asked Mr. Heaton to sign the
section of the form that authorized the housing authority to do a record
check on them both. BHA ran a background check on the couple which
revealed no criminal history in Vermont. BHA admitted the family to the
subsidized housing unit, and the family has lived there since May of 2000.
Although there have been one or two termination notices, all complaints
have been satisfactorily resolved. The director of BHA testified that the
family had been tenants in good standing at all times relevant to the
appeal.
3. Each year, public-housing tenants are required to affirm in
writing that they do not exceed the income caps for subsidized housing, and
that all the answers they gave on the application are true and correct. In
2003, BHA upgraded its background checking software, and in 2005, BHA ran a
new check on Ms. Bush and Mr. Heaton. The search revealed that Mr. Heaton
had a 1992 conviction for sale of a controlled substance and a 1994
conviction for burglary, both in New York State.
4. On March 16, 2005, BHA sent Ms. Bush and Mr. Heaton a notice of
termination of their tenancy in accordance with the provision of the lease
which states "[m]anagement shall not terminate or refuse to renew this
lease other than for serious and repeated violations of material terms of
the lease such as failure . . . to fulfill the tenant obligations as set
forth herein, or for other good cause." The letter claimed that the
tenants gave false information on their application, referencing Mr.
Heaton's criminal record in New York. Thus, BHA sought to terminate the
lease due to misrepresentation on the application filed in 2000.
5. After receiving the eviction letter, Ms. Bush and Mr. Heaton
participated in an informal conference with Deborah Reed, BHA's executive
director. According to the testimony of the executive director, Ms. Bush
admitted she was aware Mr. Heaton had a criminal record but claimed she did
not know the specifics such as whether he had been convicted of a felony.
During that meeting, Mr. Heaton offered to move out if Ms. Reed would allow
the rest of the family to stay, but she refused. Ms. Reed testified at
trial that she did not consider any course of action other than evicting
the entire family. She further testified that she knew she had the
authority to evict them and the discretion to choose not to do so based on
materials she received from the U.S. Department of Housing and Urban
Development (HUD).
6. The trial court concluded that Ms. Reed had not abused her
discretion in deciding to evict the entire family. Further, the court
found by clear and convincing evidence that Ms. Bush had fraudulently
misrepresented the family's position on the application. For these reasons
the trial court affirmed Ms. Reed's decision.
7. We review the trial court's findings concerning BHA's abuse of
discretion for clear error. N.A.S. Holdings, Inc. v. Pafundi, 169 Vt. 437,
438, 736 A.2d 780, 783 (1999). Our review of its conclusions of law is
non-deferential and plenary. Id. at 438-39, 736 A.2d at 783. In reviewing
a trial court's conclusion that fraud in the inducement was proven by clear
and convincing evidence, "[t]he test . . . is not whether this Court is
persuaded that there was clear and convincing evidence, but whether the
factfinder could reasonably have concluded that the required factual
predicate was highly probable." In re E.T., 2004 VT 111, 13, 177 Vt.
405, 865 A.2d 416 (quoting In re N.H.,168 Vt. 508, 512-13, 724 A.2d 467,
470 (1998)). Where the record indicates that the trial court clearly erred
in finding clear and convincing evidence, this Court will reverse such a
finding. Id. at 514, 724 A.2d at 471.
8. We turn our attention first to the trial court's finding that Ms.
Bush and Mr. Heaton committed fraud in the inducement. Although BHA made a
general allegation of fraud in its complaint, it has not met its burden of
proof. To succeed on this claim, BHA must prove the elements of fraud by
clear and convincing evidence. Gavala v. Claassen, 2003 VT 16, 5, 175
Vt. 487, 819 A.2d 760 (mem.) (in all cases where fraud is alleged, it must
be proved by clear and convincing evidence).
An action for fraud and deceit will lie upon an intentional
misrepresentation of existing fact, affecting the essence of the
transaction, so long as the misrepresentation was false when made
and known to be false by the maker, was not open to the defrauded
party's knowledge, and was relied on by the defrauded party to his
damage.
Union Bank v. Jones, 138 Vt. 115, 121, 411 A.2d 1338, 1342 (1980); see also
Powell v. D.C. Housing Auth., 818 A.2d 188, 196-97 (D.C. 2003) (outlining
the elements of common law fraud in the context of a termination of public
housing subsidy payments for under-reporting income).
9. Relying on its finding that both Ms. Bush and Mr. Heaton knew that
they were required to reveal a felony conviction or involvement with drugs
on the application form, and further relying on the finding that both
applicants knowingly failed to do so, the court found the
misrepresentations were false when made, that they were known to be false
by the makers and were meant to be relied upon by the injured party. The
evidence does not support these findings or the conclusion. "To find that
a misstatement was made with knowledge of its falsity, the person accused,
and not a hypothetical reasonable person must be found to have known that
the statement was false, or to have made the statement with reckless
indifference as to its truth." Powell, 818 A.2d at 197-98 (citation and
quotation omitted). Here, there was no evidence of any intent to deceive
by Ms. Bush. The only evidence adduced indicated that Ms. Bush knew Mr.
Heaton had participated in some criminal activity in the past. The housing
application, however, asks only about the criminal history of the head of
household in a section called "other required information." Question
number seven in that section asks, "have you ever been charged with a
felony? Yes___ No___" Question number eight asks "are you currently using
illegal drugs? Yes____ No___" Question number nine asks "have you ever
been charged with the sale, distribution or possession of illegal drugs?
Yes__ No___" (Emphasis added). The form contains other sections that
allow space for different information to be supplied for each family
member, but the "other required information" section does not. The only
evidence adduced on this point was Ms. Bush's testimony that, at the time
she filled out the housing application, she did not know that Mr. Heaton
had committed a felony or that he had been involved in drugs. She knew
only that he "had a past" and had been incarcerated at some time before
they met.
10. In addition, Ms. Bush testified that she knew the housing
authority would conduct a criminal record check when she submitted the
application. Mr. Heaton signed the authorization for a criminal record
check as well. This is not evidence of intent to defraud. The BHA
testified that it investigated the information supplied on the application
and found no information connecting either party to drug use or felony
charges in Vermont, and accordingly, the application was accepted. Ms.
Bush could reasonably rely on the housing authority to pick up any criminal
activity which would be troublesome to it. However, the trial court found
that misrepresentations were made not once, but repeated in subsequent
applications, and the court concluded that "[t]o maintain that the failures
to disclose were not made with fraudulent intent would fly in the face of
the evidence and common sense." We disagree. No evidence was presented to
indicate that Ms. Bush's knowledge of Mr. Heaton's record changed in the
years that Mr. Heaton and Ms. Bush signed the five additional
certifications. There was no reason for the tenants to believe, having
already authorized a record check prior to being admitted to the housing
project, that Mr. Heaton's past criminal record would disqualify them from
housing. Thus, evidence of misrepresentation is scant at best, and
evidence that the information given was "known to be false," Union Bank,
138 Vt. at 121, 411 A.2d at 1342, is even harder to come by.
11. Moreover, BHA did not show that the information was not "open to
the defrauded party's knowledge" or that the information was "relied on by
the defrauded party to his damage." Id. There was no evidence in the
record that either Mr. Heaton or Ms. Bush knew the limitations of the BHA
system when they applied for housing. And BHA did not rely on the
information provided by Ms. Bush - it did indeed conduct its own criminal
record check. The fact that BHA did not run a more extensive check does
not tend to prove an intent to defraud on Ms. Bush or Mr. Heaton's part.
Finally, BHA has not made any claim of damage. For these reasons, it was
error for the trial court to find that fraud had occurred.
12. Next, we must examine the trial court's formulation of the
standard of review. The trial court's order states, "[a]buse of
discretion, as the term is currently applie[d], appears to mean that
another reasonable person acting under the same circumstance would have
resorted to another course of action." The trial court's articulation of
the abuse-of-discretion standard is in error, and for this reason, as well,
we must reverse. When reviewing for abuse of discretion, we must determine
whether the court, and BHA, "failed to exercise . . . discretion altogether
or exercised it for reasons that are clearly untenable or unreasonable."
Herald Ass'n v. Dean, 174 Vt. 350, 360, 816 A.2d 469, 478 (2002). In other
words, an entity, vested with discretion, abuses that discretion when it
behaves as if it has no other choice than the one it has taken, or when it
makes a decision for which there is not adequate support.
13. The regulations clearly vest public housing authorities with
discretion in dealing with violations of lease terms or regulations. 24
C.F.R. 966.4(l)(2) (2006). BHA certainly may evict an entire family for
the misdeeds of one member, but it need not do so. Dep't of Housing &
Urban Dev. v. Rucker, 535 U.S. 125, 128-29 (2002). Furthermore, it should
not do so without considering all of the available options. See id. at
133-34.(FN1) Here, BHA, acting through its executive director, apparently
believed that evicting the entire family was its only choice. Ms. Reed
testified that she never considered any other course of action, even when
Mr. Heaton offered to leave. She stated that BHA would not have admitted
the family in the first place if it had known of Mr. Heaton's criminal
record. As we noted above, however, the regulations are not so black and
white. BHA certainly is not required to admit anyone who has a history of
criminal activity, and such a history will be considered in evaluating an
application. 24 C.F.R. 960.202(a)(2)(iii), 960.203(c)(3). However, the
regulations permit BHA to overlook drug history if the person is no longer
engaging in drug abuse or has been rehabilitated. Id. 960.204(a)(1).
Thus, although Ms. Reed testified that BHA would not have accepted the
application originally if it had included Mr. Heaton's convictions, such
testimony is somewhat speculative and self-serving based on the regulations
as they are written.
14. The abuse of discretion in this case arose when BHA applied what
it claims was a black and white eligibility rule five years after the
original eligibility determination. First, as explained above, the rules
are not inflexible. BHA could have admitted the family despite Mr.
Heaton's criminal history. 24 C.F.R. 960.204 (a)(1)(i). Second, the
import of the regulations is to protect public housing from criminal
elements, especially drug activity, that could adversely affect the
community. The underlying community protection goals are not met by
removing a family that has not been engaged in criminal activity during the
five years of their tenancy. Third, federal advisory information counsels
against the application of rigid rules in public housing because of the
hardship that arises when tenants lose their housing. Thus, any reasonable
approach to this problem should have included a balancing in this
particular case of the current situation and tenant history against a
failure to include information in the original application. In the end, it
is still BHA's decision, but the decision must not be made arbitrarily or
without an apparent consideration of the alternatives laid out in the
regulations. See, e.g., 24 C.F.R. 966.4(l)(5)(vii)(C). In affirming
BHA's decision under an erroneous abuse-of-discretion standard, without
examination, the trial court erred.
15. The Court recognizes that there are significant policy reasons
for applying public housing restrictions stringently. It is important to
keep subsidized housing as free as possible from the very real danger posed
by crime. Furthermore, as BHA notes, the waiting list to get into public
housing is long. For these reasons, it may have been appropriate to
require Mr. Heaton to leave. Although the record indicates that he has not
been involved in any criminal activity for more than a decade, the
regulations clearly state that the housing authority has the discretion to
evict persons who are ineligible for public housing. 24 C.F.R.
966.4(l)(2)(iii)(B), (C). It is not for this Court to evaluate the wisdom
or effectiveness of such regulations in the context of rehabilitating
offenders. However, as discussed above, BHA failed to exercise its
discretion in evaluating this apparently rehabilitated tenant.
16. Furthermore, this decision should not be read to bar a housing
authority from evicting a family if the head of household had intentionally
misrepresented the criminal history of any family member on an application.
As BHA notes, there are many honest families in equally dire situations who
do not resort to fraud to obtain housing. The facts in this case simply do
not meet the necessary standards of proof, and for this reason, it was an
abuse of discretion to evict this family.
The trial court's decision is reversed.
FOR THE COURT:
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Dissenting
17. BURGESS, J., dissenting. I dissent from the majority's
reasoning and its decision to allow tenants to retain their leasehold
despite material false statements on their application for public housing.
Tenants failed to disclose that Mr. Heaton was a felon and a convicted drug
offender. The application and lease explicitly warned that such
misrepresentations were good cause for termination of their lease. The
trial court's conclusion that tenants knowingly submitted the false
information to deceive BHA was not clearly erroneous, was amply supported
by the evidence, and should be upheld. BHA's "zero tolerance" policy for
falsified applications is not an abuse of discretion. Nor was it an abuse
of discretion to evict tenants in response to their knowing falsehood so as
to discourage the same dishonesty by others. Accordingly, I would affirm
the trial court's judgment.
18. So anxious appears the majority to take over the reins of BHA to
change the result in this unfortunate situation, that it abandons the
presumption of reasonableness and validity usually accorded agency
decisions reached within the agency's expertise. In re Capital Inv., Inc.,
150 Vt. 478, 480, 554 A.2d 662, 665 (1988). Ordinarily we require a clear
and convincing showing to overcome that presumption, and do not overturn an
agency's decision if there is any reasonable basis to support its actions.
Id. There is no such showing here. That the majority might have responded
differently does not mean that BHA, or the trial court, abused its
discretion in reaching an opposite result. See, e.g., In re L.R.R., 143
Vt. 560, 562, 469 A.2d 1173, 1175 (1983) (discretionary ruling will not be
set aside "simply because a different result might have been supportable,
or because another court might have reached a different conclusion").
19. It was no abuse of discretion for BHA to do what the parties
agree it was plainly authorized by law to do. It is senseless, and not for
the Court, to make BHA balance the merits between evicting tenants who
falsify their housing application and allowing them to stay for the sake of
their children, when either result is entirely within the agency's
discretion. It is no less strange for the majority to impose judicial
review over BHA's discretionary decisions when whatever decision it reaches
within its discretion - to evict or not to evict for fraud - is authorized
by law. The issue is not, as the majority posits, that tenants have been
well-behaved since moving in, but whether BHA can evict them for lying
about felonies and drug offenses on their housing application. The
regulations make clear that screening applicants is crucial "to public
housing communities and program integrity, and the demand for assisted
housing by families who will adhere to lease responsibilities." 24 C.F.R.
960.203(b) (2006). Requiring applicants to be truthful on their housing
applications serves these goals, and those who are not truthful may clearly
be expelled. Id. 966.4(l)(2)(iii)(B), (C) (stating that "good cause" for
eviction includes a housing authority's discovery of tenant ineligibility,
or discovery of a material false statement in a tenant's application).
Just as clearly, BHA may, like any landlord, choose to allow dishonest
applicants to stay. Examination by the courts of such determinations is
not judicial review, but is just second-guessing.
20. The record reflects that on their housing application, tenants
represented that neither had been charged with a felony nor charged with
the sale, distribution, or possession of illegal drugs.(FN2) They
certified that:
ALL INFORMATION IN THE APPLICATION IS TRUE TO THE BEST OF MY/OUR
KNOWLEDGE AND I/WE UNDERSTAND THAT FALSE STATEMENTS OR OTHER
INFORMATION . . . WILL LEAD TO CANCELLATION OF THE APPLICATION OR
TERMINATION OF TENANCY AFTER OCCUPANCY.
One month later, tenants signed a lease agreement with BHA which provided
that BHA could terminate or refuse to renew the lease for good cause, and
specified, under the heading of "Misrepresentation," that:
In the event tenant misrepresents facts or information to
management during the application, investigation, and tenant
selection period prior to the execution of this lease or
subsequent thereto, said misrepresentation(s) shall constitute
good cause for termination of this lease.
BHA's check for a criminal record in Vermont turned up nothing. Later, an
updated record check in New York revealed that, contrary to the
representations on the application, Mr. Heaton had two felony convictions
in New York State, one for attempted burglary and one for sale of a
controlled substance.
21. The executive director of BHA issued a termination notice to the
tenants, explaining that their lease would be terminated for
"misrepresentation" and "knowingly supplying false, incomplete, or
inaccurate information" about Mr. Heaton's criminal record on their
application. Before termination and in accordance with the process due
under the lease and the housing regulations, the executive director
conferred with the tenants to afford them an opportunity to respond to the
notice. At the conference, according to the executive director's
testimony, Mr. Heaton responded that he did not have any convictions in
Vermont, and Ms. Bush claimed she did not know any specifics of Mr.
Heaton's criminal record. In a post-conference letter confirming the
director's decision to terminate, tenants were advised of their right to a
pre-termination hearing, which they declined, and the subsequent eviction
action alleging fraud (FN3) was filed and proceeded to trial.
22. The majority attacks the trial court's decision on two fronts:
for failing to comport with the majority's notion of merit, and for failing
to share the majority's misconception of the discretion owed the tenants by
BHA. The majority declares the judgment in favor of BHA on eviction for
fraud unsupported by the evidence, while ignoring the trial court's
determination of credibility, and without applying any discernible standard
of review. Next, the trial court is faulted for reversible error in
"affirming . . . without examination" BHA's decision to terminate the
lease, ante, 14, despite the court's examination of BHA's action in view
of the housing authority's rights and obligations to the tenants under the
lease and the discretion claimed due by the tenants.
23. Starting with the judgment of eviction for fraud, the trial
court's decision was well-supported within our established standard of
review. BHA's burden was to prove the fraud by clear and convincing
evidence, but
[d]espite the heightened burden of proof . . . , the standard of
review in this context remains deferential: The test on review is
not whether this Court is persuaded that there was clear and
convincing evidence, but whether the factfinder could reasonably
have concluded that the required factual predicate was highly
probable. Only where the record indicates that the trial court
clearly erred in finding clear and convincing evidence will this
Court reverse such a finding.
In re E.T., 2004 VT 111, 13, 177 Vt. 405, 865 A.2d 416 (citations omitted
and emphasis added).
24. The trial court's conclusion that tenants defrauded BHA by
knowingly submitting false information on their housing application was
not clearly erroneous. Mr. Heaton admitted the convictions after their
discovery by BHA. As to Ms. Bush, the trial court found that she knew her
misrepresentation - that Mr. Heaton had no felony or drug convictions - was
false when she filled out the application. While not stated by the court,
this necessarily and obviously means that the trial court found Ms. Bush
incredible in her assertion of ignorance that her partner's criminal record
included felonies and drug offenses. "As the trier of fact, it was the
province of the trial court to determine the credibility of the witnesses
and weigh the persuasiveness of the evidence." Cabot v. Cabot, 166 Vt.
485, 497, 697 A.2d 644, 652 (1997).
25. This was strictly a swearing contest. On the one hand, Ms. Bush
testified that, while knowing Mr. Heaton had a criminal past and spent six
years in prison, and sharing her household and the company of her
thirteen-year-old daughter with him, she did not know and did not want to
know about Mr. Heaton's record. Ms. Bush also testified that she was not
inclined to disclose her partner's "past" to BHA, because "they were doing
a background check on us anyway so I figured whatever they were going to
find out, they were going to find out." At a minimum, then, the court knew
that Ms. Bush was simply taking her chances that the background check would
not reveal a felony or drug conviction. This lack of forthrightness,
combined with the not-altogether-likely proposition that Ms. Bush lived
with and exposed her daughter to a six-year-imprisoned criminal without
being curious about the nature of the man's record, would not appear to
compel a reasonable finder of fact to assume Ms. Bush was telling the
truth. On the other hand, as noted by the trial court, the tenants were
made desperate by their homelessness and the impending birth of triplets,
and knew that disclosing a felony or drug record would disqualify them from
BHA housing.
26. The trial court did not believe Ms. Bush and need not explain its
disbelief. State v. Hagan, 151 Vt. 64, 65, 557 A.2d 493, 494 (1989)
(finding "no support in Vermont law" for argument that the trial court's
conclusion that a witness was incredible must be accompanied by "some
finding showing the reasoning of the court in rejecting the testimony, or
some other support in the record"). "It is axiomatic in this state that
the trier of fact is given the sole determination of the . . . credibility
of witnesses, and the persuasive effect of the testimony." Id. (explaining
that this Court does not ordinarily review credibility determinations
"[g]iven the inherent difficulty in evaluating demeanor, mannerisms, and
tone of voice, in addition to the quality of the testimony itself," and
that this Court has never applied an evidentiary test for the finding of
witness credibility since such determination turns on intangibles and the
"judge's discretion and experience and is rarely reducible to a precise
formula").(FN4)
27. The trial court's conclusion - that to argue Ms. Bush's "failures
to disclose were not made with fraudulent intent would fly in the face of
the evidence and common sense" - was supported by the evidence. Having
concluded that Ms. Bush knowingly falsified her application, the court then
knew that her misrepresentation was false and known to be false when made.
The court also knew that the misrepresentation was made in response to a
question about felony and drug convictions prominently included on the
application. Further, the court's finding that Ms. Bush was desperate for
BHA housing was entirely supported by the evidence. Given her desperation
and that she deliberately gave a false answer to a prominent question, the
trial court could reasonably conclude, as it did, that it was highly
probable that Ms. Bush meant the falsehood to be relied upon by the housing
authority. The executive director testified, and the trial court found,
that had Ms. Bush answered honestly about Mr. Heaton's felony and drug
convictions, their application would have been turned down. Thus it was
highly probable, if not certain, that the misrepresentation was relied upon
by BHA. It cannot be said that the trial court was clearly erroneous in
its conclusion that BHA proved the fraud underlying its eviction.
28. The majority is further mistaken in its conclusion that the trial
court was without evidence of damage when it was undisputed that tenants
would not have been offered a lease but for their falsification of the
housing application.(FN5) However intangible, BHA's damage was the loss
of its right to make an informed decision based on a truthful application,
and its right under the regulations to exclude burglars and drug dealers
from its housing project. See 24 C.F.R. 960.203(c)(3), (d) (authorizing
housing authorities to exclude applicants with a history of criminal acts
that "would adversely affect the health, safety or welfare of other
tenants" considering the "time, nature and . . . seriousness of the
offense"). Analogizing, as we must, to damages for fraud in the context of
this eviction action, the damage sought to be remedied was the return of
the leasehold dishonestly obtained by these tenants. See Larochelle v.
Komery, 128 Vt. 262, 268, 261 A.2d 29, 33 (1970) (observing that the
purpose of damages in a tort action for fraud is to return the injured
party to "the same position that he would have occupied had he not been
defrauded"). The record evidence was quite sufficient for the trial court
to reasonably conclude that it was highly probable that BHA was fooled into
granting tenants a leasehold that it otherwise would not have conveyed.
29. Similarly, the majority is in error when it says that because BHA
had the ability to discover the falsehood through criminal record checks,
there was no evidence that the misrepresentation "was not open to the
defrauded party's knowledge" as necessary for common-law fraud. Union
Bank v. Jones, 138 Vt. 115, 121, 411 A.2d 1338, 1342 (1980). The testimony
was that BHA did not have the ability to computer-check records beyond
Vermont until some time after the application, and that the director did
not know of the record until she checked New York records in connection
with an unrelated complaint. Assuming that BHA could have run a more
exhaustive check at the time of application, it is long-settled that "when
the essential elements of a fraudulent representation are established, it
is no excuse for the defendant, nor does it lie in [her] mouth to say, that
the plaintiff might, but for his own neglect, have discovered the wrong and
prevented its accomplishment." Arnold v. Somers, 92 Vt. 512, 520-21, 105
A. 260, 263 (1918). On this record the majority cannot seriously maintain
that it was not highly probable that BHA was ignorant of Mr. Heaton's
record when it was misrepresented on the application by Ms. Bush, or that
the trial court was clearly erroneous in so concluding.
30. If, as the majority says, the trial court applied the wrong
standard for abuse of discretion in its review of BHA's termination of the
lease, it was harmless error. Even under the majority's definition, the
reason given for BHA's policy to terminate its leases with tenants caught
lying on their applications, rather than tolerate such dishonesty, was not
so "untenable or unreasonable" as to be an abuse of discretion. Herald
Ass'n v. Dean, 174 Vt. 350, 360, 816 A.2d 469, 478 (2002). The majority is
simply incorrect when it says that BHA "applied what it claims was a
black-and-white eligibility rule five years after the original eligibility
determination." Ante, 14. BHA made no such claim. As the executive
director testified, the notice to the tenants stated, and the trial court
found, BHA based its action not on ineligibility as of the time tenants
applied for housing, but on a firm policy of lease termination if tenants
falsified material information on their application.(FN6) BHA's rationale
of zero tolerance for application falsification - to promote candid
disclosure and to discourage dishonesty - may be strict, but it is no abuse
of discretion.
31. Moreover, the policy described by BHA and found by the trial
court is expressly approved in the federal housing regulation 24 C.F.R.
966.4(l)(2)(iii)(B), (C), which specifically provides that "good cause" for
termination includes "[d]iscovery after admission [to the project] of facts
that made the tenant ineligible," and "[d]iscovery of material false
statements . . . by the tenant in connection with an application." Having
discovered tenants' material falsehood on the application, good cause for
termination was established under the regulation and, once established, no
regulation obligated BHA to then balance mitigating circumstances against
termination.
32. While agreeing that the regulations clearly vested BHA with
discretion in dealing with violations, the majority then misconstrues the
regulations to impose some obligation on BHA to consider all options short
of evicting the entire family. It should be reiterated here what this case
is, and is not, about. We are not called upon to rule on what discretion
must, or need not be, exercised by BHA when confronted with criminal
activities by some, but not all, members of a tenant household. The only
issue before this Court is whether BHA can terminate the lease of tenants
who falsify material information on their housing application. Here, BHA
was committed to evicting the entire family, not just because the father
lied on the application, but because the mother lied also.
33. Contrary to the majority's construction, the federal regulations
do not require a public housing authority to engage in a balancing process
before deciding to terminate a tenancy. The regulations provide that BHA
may terminate a tenancy at any time in accordance with 24 C.F.R.
966.4(l). 24 C.F.R. 966.4(a)(2)(iii). Section 966.4(l) lists several
"[g]rounds for termination of tenancy." Id. 966.4(l)(1)-(2). Among them
is "good cause," including the discovery of disqualifying facts or
application falsehoods mentioned earlier. Id. 966.4(l)(2)(iii)(B), (C).
The regulations state that housing authorities "may" also consider
mitigating circumstances in deciding to evict, see id.
966.4(l)(5)(vii)(A)-(E), but these provisions apply only to evictions based
on then-current criminal activity as described in preceding sections of the
rule. See id. 966.4(l)(5)(i) ("[e]victing drug criminals"), (ii)
("[e]victing other criminals"), (iii) ("[e]viction for criminal activity").
While the rules cited by the majority are inapposite to this case, it is
nevertheless noteworthy that even the eviction-for-criminal-activity
regulations do not require, but merely permit, a public housing authority
to engage in a balancing process before terminating a lease. See id.
966.4(a)(2)(iii); id. 996.4(l)(5)(vii)(B). See also Burton v. Tampa
Housing Auth., 171 F. Supp. 2d 1314, 1317 (M.D. Fla. 2000) (holding that,
although federal regulations "authorize public housing agencies to make
eviction decisions on a case-by-case basis, they do not mandate such
discretionary review"). As the Burton court noted, this conclusion is
consistent with the general policy of the Public Housing Act, which is "to
give local public housing authorities the maximum amount of responsibility
in the administration of their programs." Id.(FN7)
34. It appears that the majority stands for a proposition that an
agency granted discretionary authority to deal with general situations is
nevertheless prohibited from adopting and following a policy prescribing
certain results within that broad discretion, because the policy is not
mandated. Instead, the proposition continues, the agency must address each
individual situation as it arises, lest it not use the breadth of its
discretion each time, although the exercise of discretion is not mandated
either. So, here the regulations say that falsification of a housing
application is good cause for termination, but they do not mandate that
result, while other regulations also authorize, but also do not mandate,
that the housing authority "may" consider mitigation before evicting for
criminal activity. Thus, the majority reasons, it is an abuse of its
available discretion for BHA to refuse to consider mitigation instead of
following its policy to evict for falsification based on the regulatory
definition of good cause for termination.
35. There are several flaws in this logic. The first is that nowhere
does it appears that tenants are entitled to the exercise of discretion
they claim. It is certainly not in their lease, which says quite the
opposite, and it is not in the regulations cited. No regulation requires
BHA to consider or balance other circumstances as precondition to either
termination or to allow a tenant to stay. Second, the same lack of
regulatory obligation undermines the majority's premise that BHA just
simply must exercise more discretion, because the option to consider
mitigation at all is itself purely discretionary. Under the regulations,
BHA is entirely free to elect not to consider discretionary balancing.
Third, reading the regulations to somehow mandate discretionary balancing
nullifies the "good cause for termination" expressly recognized and spelled
out in the plain language of the regulation. 24 C.F.R.
966.4(l)(2)(iii)(B), (C).(FN8)
36. Finally, the whole issue of "abuse of discretion" by BHA appears
to be improperly before this Court. Pleaded as an "affirmative defense" to
the eviction action, tenants essentially challenged the underlying
administrative action by BHA to terminate the lease under the regulations.
BHA is a creature of the state, "or a political subdivision thereof," for
purposes of review of governmental action under V.R.C.P. 75(a). See 24
V.S.A. 4001-4008 (declaring formation of local housing authorities as
"public bod[ies], corporate and politic, exercising public and essential
governmental functions" necessary to fund, build and administer public
housing). In many ways, tenants' claim of abuse of discretion resembles,
and might have been framed as, a petition or counterclaim for review of
governmental action, or for injunctive or declaratory relief. However
pleaded, the matter was not for the trial court to decide because tenants
failed even to initiate, let alone exhaust, their administrative remedies.
37. Before and after their informal conference with the director,
tenants were notified of their right to a hearing under the BHA grievance
procedure. The right to a fairly elaborate hearing process is established
by the regulations, see 24 C.F.R. 966.52-.57, which include a provision
that:
At the hearing, the complainant must first make a showing of an
entitlement to the relief sought and thereafter the [public
housing authority] must sustain the burden of justifying the
[authority's] action or failure to act against which the complaint
is directed.
Id. 966.56(e). Whether BHA was unreasonable in its administration or
legally incorrect in its construction of the regulations was properly
subject to the grievance procedure. Tenants, however, did not pursue a
grievance.(FN9) We have often held that "when an administrative remedy is
established by statute or regulation, relief must not only be sought in
accordance therewith, but must first be exhausted before recourse to the
courts is available." In re D.A. Assocs., 150 Vt. 18, 20, 547 A.2d 1325,
1326 (1988). The question of abuse of discretion by BHA should be treated
as waived, for the encouragement of others, and not entertained here.
38. The trial court's decision should be affirmed. I am authorized
to state that Justice Dooley joins in this dissent.
_____________________________________
Associate Justice
------------------------------------------------------------------------------
Dissenting
39. DOOLEY, J., dissenting. I join the dissent in this case, but
write separately to make three points about the context, the facts
supporting the superior court's action, and the applicable law.
40. First, the context. The actions of BHA in this case reflect the
enforcement of a national policy to protect the safety of tenants of public
housing. The policy was announced by President William Clinton in his
State of the Union Address in 1996, 1996 WL 23253 (Jan. 24, 1996), and in
his remarks at a One Strike Crime Symposium later in that year, see 1996 WL
139526 (March 28, 1996). The policy was based on giving public housing
tenants "a better deal than they have gotten in the past." Id. at *2.
This policy today is a clear signal to drug dealers and to gangs:
If you break the law, you no[] longer have a home in public
housing. One strike and you're out. That should be the law
everywhere in America.
To implement this rule, we are taking two steps. First, I will
direct Secretary Cisneros to issue guidelines to public housing
and law enforcement officials to spell out with unmistakable
clarity how to enforce one strike and you're out. These
guidelines are essential.
Believe it or not, the federal law has actually authorized one
strike eviction since 1988. But many public housing authorities
have not understood the scope of their legal authority. Others
have problems working with residents or local police or the
courts. And for a small number, enforcement has, frankly, not
been a priority. For whatever reason, the sad fact is that in
most places in this country, one strike has not been carried out.
. . .
Now there will be no more excuses, for those national guidelines
tell public housing authorities the steps they must take to evict
drug dealers and other criminals. They explain how housing
authorities must work with tenants, with the police, with the
courts [and] with our government to get the job d[one]. They also
tell housing authorities how to screen tenants for criminal
records. With effective screening, many of the bad people we're
trying hard to remove today won't get into public housing in the
first place.
The second thing we're going to do is to make sure these
guidelines don't sit around and gather dust. Under the new rules
HUD will propose, for the first time there will actually be
penalties for housing projects that do not fight crime and enforce
one strike and you're out.
Id. (emphasis added). HUD reiterated the national policy through a policy
directive. See Directive 96-16, " 'One Strike and You're Out' Screening
and Eviction Guidelines for Public Housing Authorities" (April 12, 1996),
http://www.hudclips.org/ (follow "library" hyperlink; then select "Public
and Indian Housing" under "Notices"; then enter 96-16 under "Document
number").
41. BHA implemented the national policy directive, in part, by
adopting a one strike, or zero tolerance, rule for applicants who lie on
the housing application. This decision shows that BHA is caught in a
conflict between implementing national policy on which its funding can be
based and a majority of this Court which is obviously unsupportive of the
national policy or its implementation.
42. Second, and despite the decision of the majority, this is not a
close case on the facts. The application misrepresentations go to the
heart of the policy on keeping public housing projects free of criminal
conduct, particularly drug sales, and the evidence of the
misrepresentations is overwhelming. This is not a case where tenants are
being evicted for incidental and unimportant misrepresentations, or on weak
evidence.
43. It is undisputed that Scott Heaton spent six years in prison in
New York for felony offenses that involved burglary and selling drugs and
also was found guilty of lesser criminal offenses in that state. Yet, he
signed and certified a public housing application that said he had never
been charged with a felony and had never been charged with the sale,
distribution or possession of illegal drugs. As quoted above, the
application form stated that tenants "CERTIF[IED] THAT ALL INFORMATION IN
THE APPLICATION [WAS] TRUE TO THE BEST OF [THEIR] KNOWLEDGE" and that they
"UNDERST[OOD] THAT FALSE STATEMENTS OR OTHER INFORMATION [WERE] PUNISHABLE
BY LAW AND [WOULD] LEAD TO CANCELLATION OF THE APPLICATION OR TERMINATION
OF [THE] TENANCY AFTER OCCUPANCY."
44. The case here was open-and-shut as to Mr. Heaton, but virtually
without explanation of his circumstances, the majority reverses his
eviction on the basis that there is no evidence of intent to misrepresent.
Apparently, the majority accepts as a defense that Mr. Heaton signed
without reading the application and thus, is innocent of any
misrepresentation, a result that simply eliminates any obligation to be
truthful.
45. The situation is only marginally better with respect to Ms. Bush.
Assuming what she knew about Mr. Heaton's circumstances is relevant, an
assumption I do not accept given Mr. Heaton's misrepresentation, the
majority holds that as a matter of law the trial court must accept her
statement that she knew Mr. Heaton spent six years in jail, but did not
know the grounds for the imprisonment or that he had been charged with a
felony. Without expecting that Ms. Bush fully understands the technical
distinction between felonies and misdemeanors, it could escape no one that
a six-year sentence could be imposed only for serious crimes. I would join
the trial judge in finding Ms. Bush's explanation not worthy of belief. Of
course, my evaluation of the credibility of Ms. Bush is irrelevant, just as
it should be also for the majority.
46. My characterization of the closeness of this case applies equally
to the majority's conclusion that BHA did not rely on the information
provided by the tenants as a matter of law. Based on the evidence from the
director of BHA, the court specifically found that BHA would not have
admitted the tenants if it had known of Mr. Heaton's New York criminal
record, and that the only information BHA had concerning criminal
convictions from other states came from the tenants. Moreover, the court
found that the application answers "were meant to be relied on by the
injured party." Thus the majority's statement that "BHA did not rely on
the information provided by Ms. Bush," ante, 11, is plainly contradicted
by the evidence and the findings based on that evidence. The majority's
final statement on this point - that the fact "that BHA did not run a more
extensive record check does not . . . prove an intent to defraud" - both
understates the finding that BHA did not have the technological capacity to
search criminal records beyond Vermont and confuses reliance with intent to
defraud, a wholly different element.
47. Finally, the facts are presented as if BHA can evict only if both
tenants personally participated in the misrepresentations, or at least if
the "head of household" participated in the misrepresentation. I think the
evidence is overwhelming that both tenants did, but I find nothing in the
policies of BHA or the HUD rules on application or eviction that suggest
that Ms. Bush's lack of knowledge is a defense when Mr. Heaton had the
requisite knowledge and falsely certified the accuracy of his application
with respect to his criminal history. The designation of "head of
household" apparently reflects only that Ms. Bush was present to fill out
the form, and no rule or guideline suggests that the representations of a
co-applicant who will live in the unit are less important than those of the
"head of household."
48. On a related point, nothing in the rules or policies suggest that
BHA can evict only the person who made the misrepresentation, leaving the
other family members in place. The fact that the tenants offered such a
solution to settle the dispute does not mean there is any legal obligation
for BHA to accept it. There are many practical reasons why BHA would not
accept such a settlement, not the least of which would be the practical
impossibility of keeping Mr. Heaton off the premises where his children and
partner reside.
49. Third, I don't agree that a zero tolerance policy on some issues
is inconsistent with HUD regulations and guidelines. Indeed, as the
context demonstrates, such a policy represents the desired implementation
of HUD guidelines if used carefully and sparingly. This issue is analyzed
in Justice Burgess's dissent, which I join. I note also that HUD stated in
its directive on this policy that "current law permits local housing
agencies to adopt One Strike policies ." HUD Directive 96-16 at 1. As
discussed above, the one-strike policy involves "Tougher Screening." Id.
at 4. It also involves adoption of zero tolerance policies with respect to
certain offenses. See, e.g., id. at 6 (stating that leases should express
zero tolerance policy with respect to criminal activity).
50. In this case, BHA announced its zero tolerance policy through its
application, which stated that "FALSE STATEMENTS [IN THE APPLICATION] . . .
WILL LEAD TO CANCELLATION OF THE APPLICATION OR TERMINATION OF TENANCY
AFTER OCCUPANCY." Misrepresentation by nondisclosure of criminal
convictions and charges is an appropriate situation for a zero tolerance
policy. It indicates an unwillingness to deal fairly and openly with the
housing authority and restricts the ability of the housing authority to
make appropriate eligibility determinations to protect existing tenants.
51. Even if I agreed that a zero tolerance policy was unlawful, I
could not agree that BHA failed to exercise in this case exactly the
discretion the majority seeks. In response to the question of whether BHA
considered "the circumstances surrounding their tenancy," the BHA director
answered that BHA had "some issues" with the tenants in the past and had
served them with two termination notices and that there had been a domestic
violence incident. Indeed, tenants' conduct led BHA to do a national
record check on them when the capacity to do so became available.
52. The majority is essentially warring with BHA's adoption of a
national policy to make public housing projects safe and secure for
residents by screening out those with criminal backgrounds. Whatever our
view of this national policy, it is our duty to enforce the law through
which it has been implemented, rather than our policy preference. The
majority fails to discharge that duty.
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Footnotes
FN1. The regulations set out numerous circumstances in which the housing
authority "may" terminate a lease, but only a very few circumstances in
which it "must" terminate a lease. See, e.g., 24 C.F.R. 966.4(l)(2)
("The PHA may terminate the tenancy only for: . . . (iii) Other good cause
includ[ing] but . . . not limited to the following: . . . (B) Discovery
after admission of facts that made the tenant ineligible."); id.
966.4(l)(5)(i)(B) ("In addition, the lease must provide that a PHA may
evict a family when the PHA determines that a household member is illegally
using a drug . . ."). But see id. 966.4(l)(5)(i)(A) ("The PHA must
immediately terminate the tenancy if the PHA determines that any member of
the household has ever been convicted of drug-related criminal activity for
manufacture or production of methamphetamine on the premises of federally
assisted housing.").
In addition, the regulations list certain things the housing authority
may consider when deciding how to act.
(B) . . . [T]he PHA may consider all circumstances relevant to a
particular case such as the seriousness of the offending action,
the extent of participation by the leaseholder in the offending
action, the effects that the eviction would have on family members
not involved in the offending activity and the extent to which the
leaseholder has shown personal responsibility and has taken all
reasonable steps to prevent or mitigate the offending action.
(C) . . . The PHA may require a tenant to exclude a household
member in order to continue to reside in the assisted unit, where
that household member has participated in or been culpable for
action or failure to act that warrants termination.
Id. 966.4(l)(5)(vii) (B), (C).
FN2. The record does not show, as the majority suggests, that Ms. Bush
understood these questions to apply only to her as "head of household."
See ante, 9. In fact, Ms. Bush testified to exactly the opposite
effect, acknowledging she needed to get Mr. Heaton's signature on the
application and explaining that she filled out the form truthfully "as far
as [she] knew" at that time, because "we [(referring to herself and Mr.
Heaton)] had discussed a past; we never got into felonies or anything like
that. We had discussed his past." Clearly Ms. Bush knew she answered the
questionnaire on behalf of Mr. Heaton, coincidentally identified as
"co-applicant" on the form, as well as for herself. Not claiming she
answered only for herself, Ms. Bush instead claimed ignorance of the
"specifics" of Mr. Heaton's record, including the felony and drug offenses
- although she was aware he had a "past" that involved a six-year jail
stint.
FN3. Although the terms of the application and lease, and the regulation at
24 C.F.R. 966.4(l)(2)(B), (C), provide for eviction on the submission of
false material information alone, regardless of the applicant's knowledge
or fraudulent intent, BHA nevertheless claimed fraud in its complaint and
tenants insisted that the trial court treat it as an action for common-law
fraud. The case will be addressed as pleaded.
FN4. The majority's review and evaluation of Ms. Bush's testimony is
directly at odds with our long-established precedent not to second-guess
trial court credibility determinations. Our function is "not to reweigh
evidence or to make finding of credibility de novo." Mullin v. Phelps, 162
Vt. 250, 261, 647 A.2d 714, 720 (1994). The reason for this is
well-illustrated by the majority's conclusion that Ms. Bush's protestations
of ignorance were not incredible based upon an interpretation of her
testimony that she answered the questionnaire only for herself, and that it
was illogical for her to falsify when she knew her answers would be checked
by BHA. Both premises are wrong, for the record plainly indicates that,
taking her testimony in context, Ms. Bush was indeed referring to her
co-tenant's "past" when filling out the application, and that, already
homeless with nothing to lose, she simply took her chances on the record
check (a good gamble, as it turned out, since the check failed to reveal
the disqualifying out-of-state felonies and drug convictions).
FN5. The majority curiously assumes the mantle of the trial court to
characterize the executive director's testimony in this regard as "somewhat
speculative and self-serving." Ante, 13. Such assessments are properly
left to the judge who hears the evidence and, as accepted by the trial
judge, this testimony appeared to be neither uncertain nor convenient. The
witness' statement was entirely consistent with the written BHA policies
admitted into evidence in connection with her testimony, as well as with
the governing federal regulations. Moreover, this aspect of her testimony
was never challenged in any sense on cross-examination, and was found by
the trial court as fact.
FN6. Asked if BHA could overlook misrepresentations on applications for
admission to public housing, the executive director answered "No, we can't
because then other people that are coming in and other tenants in the
complex say they got away with it, so we can do it, too." Later, on
cross-examination, the director agreed she considered no other option but
termination "because they weren't honest with me in the beginning."
FN7. Dep't of Housing & Urban Dev. v. Rucker, 535 U.S. 125 (2002), cited by
the majority at ante, 13, says nothing to the contrary. Rucker does not
hold that public housing authorities must exercise discretion to consider
other options before terminating a public housing tenancy. Rather, in
Rucker, the United States Supreme Court held that, under federal law,
public housing lease agreements must include a clause that gives the
housing authorities discretion to terminate a lease when a member or guest
of the tenant's household engages in drug-related activity, regardless of
the tenant's ignorance of that activity. The Court confirmed that eviction
was not required, but that the law entrusted that decision to the local
housing authorities. Id. at 133-34. The Court found nothing unreasonable,
however, in allowing "no fault" eviction of a tenant on account of drug
activities by a household member, finding such eviction to be "a common
incident of tenant responsibility under normal landlord-tenant law and
practice." Id. at 134 (citation omitted). As the Court explained
"[s]trict liability maximizes deterrence and eases enforcement
difficulties." Id. Rucker does not support the majority's analysis; it
merely emphasizes the broad discretion afforded a public housing authority
in administering its operations.
FN8. The majority's construction would convert "good cause for termination"
into something less, like "almost good cause," "not quite good cause," or
"good cause to start talking about termination." This is not what the
regulation says.
FN9. Tenants acknowledged the existence of the grievance procedure in their
proposed findings filed prior to trial. On appeal, tenants complained
that notice of the grievance procedure was deficient, but this issue was
never raised before the trial court and so was not preserved. |