COURT OF APPEALS OF VIRGINIA 

Present: Chief Judge Fitzpatrick, Judge Benton and 

 Senior Judge Duff 

Argued at Alexandria, Virginia 

KATHERINE D. HILLIARDS 

 OPINION BY 

v. Record No. 2460-97-4 JUDGE CHARLES H. DUFF 

 NOVEMBER 10, 1998 

LARRY D. JACKSON, COMMISSIONER, 

 VIRGINIA DEPARTMENT OF SOCIAL SERVICES 

FROM THE CIRCUIT COURT OF PAGE COUNTY 

Porter R. Graves, Jr., Judge 

 John E. Whitfield (Blue Ridge Legal Services, 

Inc., on briefs), for appellant. 

 Donald G. Powers, Assistant Attorney General 

(Mark L. Earley, Attorney General; Ashley L. 

Taylor, Jr., Deputy Attorney General; 

Siran S. Faulders, Senior Assistant Attorney 

General, on brief), for appellee. 

 Katherine D. Hilliards appeals the Page County Circuit 

Court's decision affirming an administrative decision of the 

Virginia Department of Social Services. The Department ruled 

that Hilliards was eligible to receive ten dollars per month in 

food stamps. Hilliards contends the Department erroneously 

included the proceeds from the sale of her mobile home as income 

when calculating her food stamp benefits. For the following 

reasons, we reverse. 

 I. 

 On December 10, 1990, Hilliards and her husband bought a 

mobile home, which they financed with a $15,000 consumer note 
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from Crestar Bank.1

 They subsequently moved from Shenandoah 

County to Page County and, on April 23, 1992, sold the mobile 

home to Virginia Tusing for its fair market value of $10,000. At 

the time, the Hilliards had no equity in the mobile home, which 

was fully encumbered by the Crestar note. Tusing was unable to 

obtain credit to purchase the mobile home, so the parties entered 

into a contract, which provided, in pertinent part: 

 1. That the purchase price shall be Ten 

Thousand Dollars ($10,000.00), which shall be 

paid by the Purchaser by the assumption of 

the obligations under that note dated 

December 10, 1990, made by the Sellers and 

Payable to Crestar Bank. 

 2. That the Purchaser shall make all 

payments on such note as they become due and 

payable, such installments being in the 

amount of Two Hundred Fourteen and 92/100 

Dollars ($214.92); and further that if any 

payment is not made in a timely manner, the 

Purchaser shall be responsible for any late 

charges and collection costs. 

Tusing was responsible for providing and paying for all 

utilities. The parties also agreed to execute any other 

documents necessary to perfect the transaction, including, but 

not limited to, an application for transfer of title. Tusing 

also contracted with Hilliards to rent the lot on which the 

mobile home was located for $85.08 per month.2

 1The 1990 Crestar note included the refinancing of a 

pre-existing debt and was secured by the mobile home, the 

Shenandoah County property on which the mobile home was located, 

and a truck. 

 2Hilliards does not challenge the Department's finding that 

the lot rent was unearned rental income attributable to her. 
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 On October 6, 1992, Hilliards, her husband, and Tusing 

executed a modification agreement "to more clearly reflect their 

original intentions without changing the substance of the 

original transaction."3

 The modification agreement specified 

that Tusing was responsible for paying all property taxes 

assessed on the mobile home. The agreement also explained as 

follows: 

 [I]n in the event of default, the 

Purchaser shall in all respects hold all of 

the rights and be responsible for all of the 

liabilities of the Sellers, as set forth in 

the various provisions of the [Crestar Bank] 

note and security agreement . . . as well as 

the provisions of Article Nine of the Uniform 

Commercial Code as enacted by the 

Commonwealth of Virginia. 

 Crestar was not a party to either agreement. The Department 

concedes that Hilliards did not enter into this agreement with 

the intent to evade food stamp eligibility limits. 

 On April 27, 1992, Hilliards applied for food stamp benefits 

in Page County. The local Department of Social Services included 

neither the mobile home nor the property on which it was located 

as resources for purposes of calculating Hilliards' eligibility. 

 The Department did, however, treat Tusing's monthly payments of 

$214.92 as unearned rental income attributable to Hilliards. The 

Department advised Hilliards that she was entitled to deduct her 

 3The original Crestar note included a balloon payment not 

addressed by the initial agreement executed by Hilliards and 

Tusing. The modification agreement makes it clear that Tusing 

was only assuming that portion of the obligation that financed 

the mobile home. 
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interest expenses from this "income," but Hilliards failed to 

provide documentation to support any such deduction. 

 Hilliards appealed the Department's initial determination to 

an administrative hearing officer. The hearing officer found 

that Tusing's payments constituted vendor payments because she 

was making payments on a household expense directly to Hilliards' 

creditor. But, because Tusing's payment was "legally obligated 

and otherwise payable to the household," it was not excludable 

from Hilliards' income. Without providing any rationale, the 

hearing officer affirmed the Department's initial determination 

that the sale proceeds constituted unearned rental income. The 

State Board of Social Services and the Page County Circuit Court 

both subsequently affirmed the hearing officer's decision. 

 II. 

 Under the Virginia Administrative Process Act, Code 

§§ 9-6.14:1 through 9-6.14:25, the party complaining of an agency 

action has the burden of demonstrating an error of law subject to 

review. See Code § 9-6.14:17. See also Johnston-Willis, Ltd. v. 

Kenley, 6 Va. App. 231, 241, 369 S.E.2d 1, 6 (1988). The 

appellate court must review the facts in the light most favorable 

to the agency, with due consideration of "the presumption of 

official regularity, the experience and specialized competence of 

the agency, and the purposes of the basic law under which the 

agency has acted." Code § 9-6.14:17. See also Bio-Medical 

Applications of Arlington, Inc. v. Kenley, 4 Va. App. 414, 427, 
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358 S.E.2d 722, 729 (1987). A review of the agency's decision 

regarding a claimant's eligibility for food stamps "shall be 

based solely upon the agency record, and the court shall be 

limited to ascertaining whether there was evidence in the agency 

record to support the case decision of the agency acting as the 

trier of fact." Code § 9-6.14:16(B). 

 We accord great deference to an administrative agency's 

interpretation of the regulations it is responsible for 

enforcing. See Arellano v. Pam E. K's Donuts Shop, 26 Va. App. 

478, 483, 495 S.E.2d 519, 521 (1998). See also Jackson v. W., 14 

Va. App. 391, 400-01, 419 S.E.2d 385, 390 (1992). Our review is 

limited to determining whether the administrative agency's 

interpretation of its own rules was reasonable. See Classic 

Floors, Inc. v. Guy, 9 Va. App. 90, 93, 383 S.E.2d 761, 763 

(1989). But "the reviewing courts should not abdicate their 

judicial function and merely rubber-stamp an agency 

determination." Johnston-Willis, 6 Va. App. at 243, 369 S.E.2d 

at 7-8. We will overturn the Department's interpretation of the 

rules and regulations governing food stamp eligibility if it is 

arbitrary and capricious. See Life Care Center of New Market v. 

Dept. of Medical Assistance Services, 25 Va. App. 513, 521, 489 

S.E.2d 708, 712 (1997). 

 The facts in this case are not in dispute. The issue is the 

agency's application of the food stamp eligibility regulations to 

Hilliards' situation. Because this is an area within the special 
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expertise of the Department, we owe deference to its 

interpretation of the eligibility requirements. Nevertheless, to 

determine whether the Department correctly applied the law to the 

facts in this case, we must look to the laws and regulations 

governing food stamp eligibility. 

 III. 

 The purpose of the food stamp program is to provide 

assistance to individuals with limited incomes and resources to 

ensure that their basic nutritional needs will be met. See 7 

U.S.C.A. §§ 2011 and 2014(a). In determining whether an 

individual is eligible for food stamps, the Department must look 

to the applicant's resources, see 7 C.F.R. § 273.8, and income. 

See 7 C.F.R. § 273.9.4 "Household income for purposes of the 

food stamp program shall include all income from whatever source 

. . . ." 7 U.S.C.A. § 2014(d). The statute specifically 

excludes from income "any gain or benefit which is not in the 

form of money payable directly to a household." 7 U.S.C.A. 

§ 2014(d)(1). 

 The statutory definition of income is mirrored by the 

definition of income found in the food stamp regulations 

promulgated by the United States Department of Agriculture. 

"Income" includes the gross income from any self-employment 

enterprise, and the ownership of rental property is considered a 

 

 4Unless otherwise noted, all citations to the Code of Federal 

Regulations and the Department's food stamp policy manual are to 

the versions included in the Joint Appendix filed with this Court. 
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self-employment enterprise. See 7 C.F.R. § 273.9(b)(1)(ii). If 

an individual is actively engaged in managing the rental property 

less than twenty hours each week, then the rental income is 

considered as unearned income. See id.

 The regulations provide that the only permissible exclusions 

from income are those specifically identified by regulation. See

7 C.F.R. § 273.9(b) and (c). The federal regulations list those 

items that are excluded from an applicant's income, and provide 

that "[o]nly [these] items shall be excluded from household 

income and no other income shall be excluded." 7 C.F.R. 

§ 273.9(c). 

 One exclusion identified in the regulations is for "vendor 

payments." See 7 C.F.R. § 273.9(c)(1). "Money payments that are 

not payable directly to a household, but are paid to a third 

party for a household expense, are vendor payments . . . ." See

id. "For example, if a relative or friend, who is not a 

household member, pays the household's rent directly to the 

landlord, the payment is considered a vendor payment and is not 

counted as income to the household." 7 C.F.R. § 273.9(c)(1)(i). 

 But the regulations include as income payments "legally 

obligated and otherwise payable to the household, but which are 

diverted by the provider of the payment to the third party for a 

household expense." 7 C.F.R. § 273.9(c)(1)(iv). An example of 

such an "obligatory" vendor payment is an employer who, instead 

of paying an employee directly for wages owed, diverts those 
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wages to the employee's landlord to pay the employee's rent. See

id.
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 IV. 

 Without any explanation, the Department classified Tusing's 

payments as rental income. We were unable to find any definition 

of "rent" or "rental income" in the regulations or the statutes 

governing food stamps. Accordingly, we must look to the everyday 

and ordinary meaning of these terms. See Virginia Employment 

Comm'n v. Fitzgerald, 19 Va. App. 491, 495, 452 S.E.2d 692, 694 

(1995). Black's Law Dictionary (6th ed. 1990) defines rent as 

"[c]onsideration paid for use or occupation of property. In a 

broader sense, it is the compensation or fee paid, usually 

periodically, for the use of any rental property, land, 

buildings, equipment, etc." Id. at 1297. 

 Hilliards was not renting the mobile home to Tusing. She 

sold her ownership interest in the mobile home to Tusing. The 

fact that the purchase was structured on an installment basis 

with monthly payments due and payable to Crestar Bank did not 

transform the contract of sale into a rental agreement. We hold, 

therefore, that the Department's ruling classifying the sale 

proceeds as rental income was arbitrary and capricious. 

 We also reject the Department's conclusion that Tusing's 

payments under the contract of sale constituted vendor payments 

includable as income to Hilliards. The Department found that 

Tusing was paying a "household expense." But Hilliards sold to 

Tusing the asset underlying the obligation to Crestar. By 

contract, Tusing purchased all the rights to and responsibilities 
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for the mobile home and obtained equitable title to it. Once 

Hilliards executed the contract with Tusing, the payments on the 

loan were no longer a "household expense" of Hilliards. Rather, 

Hilliards became a de facto surety on the loan. Since Tusing was 

not paying a "household expense," the transaction was not an 

obligatory vendor payment that would be includable as income. 

 This case is distinguishable from the examples of includable 

vendor payments provided in the regulations. For example, where 

an employer diverts wages owed to an employee to pay the 

employee's rent or mortgage, the employer gains no right of 

possession or ownership over the employee's residence. Likewise, 

the Hilliards-Tusing transaction bears no resemblance to a 

garnishment. See 7 C.F.R. § 273.9(c)(1)(iv). 

 We conclude that the nature of the transaction entered into 

between Tusing and Hilliards was not one contemplated by the 

Department of Agriculture when it promulgated the regulations 

regarding vendor payments. Accordingly, the Department's 

classification of this sale as a vendor payment includable as 

income was arbitrary and capricious. Moreover, our review of the 

pertinent regulations reveals no other regulation addressing the 

purchase arrangement entered into between Hilliards and Tusing. 

We must, therefore, return to the federal statute for guidance. 

See Ledbetter v. McDonald, 434 S.E.2d 763, 764 (Ga. App. 1993) 

("Because no exclusion found in 7 CFR § 273.9(c) applies, we must 

look to the controlling statute."). 
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 The statutory definition of income excludes "any gain or 

benefit which is not in the form of money payable directly to a 

household." 7 U.S.C.A. § 2014(d)(1). In exchange for a 

depreciating asset, Tusing assumed the Crestar note payments and 

relieved Hilliards of a significant monthly expense. Although 

Tusing's assumption of the note constituted a "gain or benefit" 

for Hilliards, the payments were not "in the form of money 

payable directly to the household." Accordingly, Tusing's 

payments on the Crestar note were not income attributable to 

Hilliards, and the Department erred when it included these 

payments when calculating Hilliards' eligibility for food stamp 

benefits. 

 For the reasons stated above, the decision of the circuit 

court is reversed. The matter is remanded to that court with 

instructions to direct the Page County Department of Social 

Services to proceed in a manner consistent with this decision. 

 Reversed and remanded.