Source: http://scocal.stanford.edu/opinion/lentz-v-mcmahon-30820
Timestamp: 2013-12-13 00:52:52
Document Index: 669136229

Matched Legal Cases: ['§ 10950', '§ 10955', '§ 10959', '§ 10962', '§ 11000', '§ 10952', '§ 10955', '§ 10958', '§ 802', '§ 5', '§ 20', '§ 10962', '§ 12903', '§ 12970', '§ 12987', '§ 1375', '§ 25140']

Lentz v. McMahon - 49 Cal.3d 393 - Thu, 08/17/1989 | California Supreme Court Resources	Stanford Law School - Robert Crown Law Library
Home > Opinions > Lentz v. McMahon	Citation 49 Cal.3d 393
Lentz v. McMahon
Lentz v. McMahon (1989) 49 Cal.3d 393 , 261 Cal.Rptr. 310; 777 P.2d 83
[S.F. No. 25123.
The State Department of Social Services (DSS) supervises administration by county welfare departments of various public assistance programs, including aid to families with dependent children (AFDC). If a recipient of such public assistance is dissatisfied with a decision by a county welfare department concerning his benefits, he is entitled to an administrative "fair hearing" before an administrative law judge employed by DSS. (Welf. & Inst. Code, § 10950 et seq.) fn. 1 The hearing is an informal proceeding in which the rules of evidence do not apply, the recipient may appear with or without [49 Cal.3d 397] counsel, and "free and open discussion by participants" is encouraged. (§ 10955.) After the hearing, the administrative law judge renders a proposed decision. The director of DSS may then affirm the decision, prepare a different decision based on the record, or order a rehearing. (§ 10959.) A recipient who is dissatisfied with the decision of the director may petition the superior court for review of the proceedings under section 1094.5 of the Code of Civil Procedure. (§ 10962.)
The present action was brought by the California Coalition of Welfare Rights Organizations and by three recipients of AFDC. Each of the individual plaintiffs had been notified by her county welfare department that she [49 Cal.3d 398] had received excess benefits, and that her future benefits would be reduced to recoup the overpayment. Each sought a hearing, and in each case the hearing judge rendered a proposed decision finding the county welfare department equitably estopped from collecting the overpayment. In conformity with the new policy, the director of DSS refused to adopt these proposed decisions on the ground that the doctrine of equitable estoppel is unavailable in administrative hearings, and issued new decisions subjecting the individual plaintiffs to recoupment of overpaid benefits.
[1] The modern doctrine of equitable estoppel is a descendent of the ancient equity doctrine that "if a representation be made to another who [49 Cal.3d 399] deals upon the faith of it, the former must make the representation good if he knew or was bound to know it to be false." (Bigelow on Estoppel (6th ed. 1913) p. 603; see City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 488-489 [91 Cal.Rptr. 23, 476 P.2d 423].) We have described the requirements for the application of equitable estoppel as follows: "'Generally speaking, four elements must be present ...: (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.'" (Mansell, supra, 3 Cal.3d 462, 489, quoting Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305 [61 Cal.Rptr. 661, 431 P.2d 245].)
At common law, estoppel was unavailable against the government. fn. 3 [2] We have long held, however, that estoppel may be asserted against the government "where justice and right require it" (City of Los Angeles v. Cohn (1894) 101 Cal. 373, 377 [35 P. 1002]), and we have applied the doctrine against government entities in a variety of contexts. fn. 4 At the same time, our cases recognize the correlative principle that estoppel will not be applied against the government if to do so would effectively nullify "a strong rule of policy, adopted for the benefit of the public." (County of San Diego v. Cal. Water etc. Co. (1947) 30 Cal.2d 817, 829-830 [186 P.2d 124, [49 Cal.3d 400] 175 A.L.R. 747].) In Mansell, supra, 3 Cal.3d 462, we adopted a balancing approach to accommodate these concerns: "The government may be bound by an equitable estoppel in the same manner as a private party when the elements requisite to such an estoppel against a private party are present and, in the considered view of a court of equity, the injustice which would result from a failure to uphold an estoppel is of sufficient dimension to justify any effect upon public interest or policy which would result from the raising of an estoppel." (Mansell, supra, 3 Cal.3d 462, 496-497.) Applying this test in Mansell, we approved the application of estoppel to prevent a local government from asserting paramount title to land pursuant to a claimed constitutional right. (Id., at pp. 499-500.) We have also considered application of estoppel to a variety of governmental actions. (See, e.g., Driscoll v. City of Los Angeles, supra, 67 Cal.2d 297, 310 [city estopped from asserting statute of limitations regarding pension benefits]; Longshore v. County of Ventura (1979) 25 Cal.3d 14, 27-29 [157 Cal.Rptr. 706, 598 P.2d 866] [application of estoppel denied to county employee who sought cash compensation for unused overtime credits].)
Although we have never considered the applicability of equitable estoppel in the context of public assistance, the Court of Appeal has done so. In Canfield v. Prod (1977) 67 Cal.App.3d 722 [137 Cal.Rptr. 27], the plaintiff received county benefits to pay an attendant who helped care for her. The county was statutorily obligated to (i) inform the plaintiff of her obligation to pay a federal employer's tax for her attendant and (ii) augment the plaintiff's grant to pay that tax. The county failed to either inform the plaintiff of her obligation or augment her grant during 1969 and 1970, and in 1974 a federal tax lien was placed on her home for delinquent taxes and penalties.
We find Canfield's result sound. On the "burden on the individual" side of the Mansell balance, we note that welfare benefits, like the pensions involved in Driscoll, supra, are intended to provide basic means of subsistence [49 Cal.3d 401] to recipients. Welfare department workers, who purport to advise and direct recipients, clearly stand in a confidential relation to them. (See Driscoll, supra, 67 Cal.2d at p. 308, fn. 11.) And, as demonstrated by the facts in Canfield, a recipient's justified reliance on a county welfare department can produce compelling hardship. The failure to apply estoppel in such circumstances may cause serious injustice.
On the "policy" side of the Mansell balance, the interests represented by the statute of limitations -- to encourage the timely presentation of claims and prevent windfall benefits -- were not seriously undermined by the application of estoppel in the circumstances of Canfield, supra, 67 Cal.App.3d 722. Estoppel against a county's assertion of purely procedural preconditions and limitations on benefits, when the county itself is responsible for the procedural default, will not defeat the underlying statutory policy of safeguarding accurate and orderly administration of the welfare system. The policy considerations may well be different, however, when substantive preconditions of benefits are in issue.
[3] We similarly conclude that estoppel against a welfare agency may be appropriate when, as in Canfield, supra, 67 Cal.App.3d 722, a government agent has negligently or intentionally caused a claimant to fail to comply [49 Cal.3d 402] with a procedural precondition to eligibility, and the failure to invoke estoppel would cause great hardship to the claimant. A more difficult question is posed, however, when estoppel is asserted against the government to defeat substantive limitations on eligibility for public benefits. To bar recoupment of benefits from a person whose circumstances did not qualify him for such benefits under applicable substantive eligibility rules might amount to a bestowal of benefits not contemplated by the Legislature. In this regard, we share the United States Supreme Court's view that it is "'the duty of all courts to observe the conditions defined by [the legislative branch] for charging the public treasury.'" (Schweiker v. Hansen, supra, 450 U.S. at p. 788 [67 L.Ed.2d at p. 689].) fn. 6 We need not decide here, however, whether there are situations in which the nature of the official misconduct and the resulting hardship on a substantively ineligible recipient would be sufficient to outweigh the burden on the government, and hence support a claim of estoppel under Mansell, supra, 3 Cal.3d 462, Driscoll, supra, 67 Cal.2d 297, and Longshore, supra, 25 Cal.3d 14.
The applicable statutes do not specifically require the director of DSS to apply equitable estoppel in fair hearings. They do provide, however, that "[t]he provisions of law relating to a public assistance program shall be fairly and equitably construed to effect the stated objects and purposes of the program." (§ 11000, italics added.) fn. 7 "The statutory scheme reveals that the fair hearing mechanism is intended to provide an aggrieved welfare recipient with a speedy (see id., § 10952) and informal (see id., § 10955) means to challenge an administrative action which may reduce or terminate vitally needed social service benefits." (People v. Sims (1982) 32 Cal.3d 468, 493-494 [186 Cal.Rptr. 77, 651 P.2d 321] [Kaus, J., dis.].) The matters addressed at such hearings "shall be limited to those issues which are reasonably related to the request for hearing or other issues identified by either party which they have mutually agreed, prior to or at the hearing, to [49 Cal.3d 403] discuss." (§ 10958.1.) [5] Other than this provision, "[t]he statutes impose no limitation, factual or legal, upon the issues which may be raised in the 'fair hearing.'" (Woods v. Superior Court (1981) 28 Cal.3d 668, 674 [170 Cal.Rptr. 484, 620 P.2d 1032].)
We confronted an analogous problem involving the same statutory scheme in Woods v. Superior Court, supra, 28 Cal.3d 668. There we held that applicants may challenge the validity of DSS regulations at the hearing stage even if no factual question is presented. Our unanimous opinion by Justice Richardson observed, "The general principle that courts should not be burdened with matters which can be adequately resolved in administrative [fora], frequently expressed in the rule requiring exhaustion of administrative remedies [citations], is founded at least in part on the wisdom of the efficient use of governmental resources. [Citation.] Such use serves the twin goals of avoiding delay and unnecessary expense in vindication of legal rights. Permitting administrators an opportunity to construe challenged regulations in a manner to avoid their invalidation is preferable to requiring a court challenge. Moreover, in those cases in which the validity of [a challenged] regulation must be judicially resolved, the task of a reviewing court is simplified by a narrowing and clarification of the issues in an administrative hearing." (Id., at pp. 680-681.)
Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379 [241 Cal.Rptr. 67, 743 P.2d 1323], does not alter our conclusion. [6] In Dyna-Med we simply followed the established rule that, in the absence of express legislative authorization for punitive damages, such [49 Cal.3d 404] damages may not be imposed by an administrative agency. (Id., at pp. 1388, 1393; see also, e.g., Chauffeurs Loc. U. 238 v. Civil Rights Com'n (Iowa 1986) 394 N.W.2d 375, 384, and cases cited.) We did not there suggest that use of equitable remedies or doctrines were subject to a similar rule; in fact, we suggested otherwise. (See 43 Cal.3d at p. 1387 [distinguishing "back pay" from punitive damages because the former remedy is "exclusively corrective and equitable in kind"].)
Article VI, section 1 of our Constitution provides: "The judicial power of this State is vested in the Supreme Court, courts of appeal, superior courts, municipal courts, and justice courts. ..." Article III, section 3 provides: "The powers of state government are legislative, executive, and judicial. Persons charged with the exercise of one power may not exercise either of the others except as permitted by this Constitution." [7] These two provisions preclude exercise of judicial power by "nonconstitutional" administrative agencies -- i.e., those agencies whose authority is derived solely from a grant of power by the state or local governmental entity -- but they do not limit the power of those agencies whose authority is derived from the Constitution itself. (Strumsky v. San Diego County Employees Retirement Assn. (1974) 11 Cal.3d 28, 35-36 [112 Cal.Rptr. 805, 520 P.2d 29]; see [49 Cal.3d 405] McHugh v. Santa Monica Rent Control Bd., ante, 348, at pp. 355-356 [261 Cal.Rptr. 318, 777 P.2d 91] [examples of "constitutional" and "nonconstitutional" agencies].)
DSS suggests that because equitable estoppel was applied by the English courts of chancery (3 Pomeroy, Equity Jurisprudence (5th ed. 1941) § 802, p. 179), and because a long-repealed provision of our 1879 Constitution granted jurisdiction to the superior courts in cases of equity and law (see former Cal. Const., art. VI, § 5, reprinted in Historical Note, 2 West's Ann. Cal. Codes, Constitution (1954 ed.) pp. 308-309), only our state courts may apply the doctrine of equitable estoppel. Under this novel reasoning, nonconstitutional administrative agencies would be rendered impotent. They would be precluded not only from adjudicating claims of equitable estoppel, but also, under all circumstances, from imposing equitable remedies, fn. 9 and even from applying general principles of law and "equity" in reaching administrative determinations. fn. 10 [49 Cal.3d 406]
Decisions of our Courts of Appeal disclose that equitable estoppel has been routinely applied in administrative hearings, and never has it been suggested that doing so violates article VI, section 1, or any other constitutional provision. (See Crumpler v. Board of Administration (1973) 32 Cal.App.3d 567, 573, 579-586 [108 Cal.Rptr. 293] [applying estoppel to prevent retroactive reclassification of civil service employees]; see also Pittsburgh Unified School Dist. v. Commission on Judicial Competence (1983) 146 Cal.App.3d 964, 980 [194 Cal.Rptr. 672] [failure to assert estoppel before board precludes raising the defense in court]; Mount Vernon Memorial Park v. Board of Funeral Directors and Embalmers (1978) 79 Cal.App.3d 874, 886-888 [145 Cal.Rptr. 275] [affirming the board's and trial court's findings of no factual basis for estoppel].) Again, the decisions of our sister states are in accord. (E.g., Thrift, supra, 646 P.2d 1358, 1359 [administrative hearing officer erroneously concluded "estoppel did not apply"]; see also Herndon, supra, 528 P.2d 395, 398 [suggesting estoppel should have been applied at the administrative level]; Best v. Stetson (1st Cir. 1982) 691 F.2d 42, 45 [remanding to administrative agency for determination of equitable estoppel claim]; Akbarin v. Immigration and Naturalization Service (1st Cir. 1982) 669 F.2d 839, 845 [same].)
We conclude that administrative application of equitable estoppel does not constitute exercise of "judicial power" within the meaning of article VI, section 1 or article III, section 3. We find nothing inherently "judicial" in the application of equitable estoppel, and we reject DSS's argument to the contrary. Indeed, as noted above, if it were otherwise judicial review of administrative determinations would be greatly frustrated (ante at pp. 403-404). [8] We find no constitutional bar to DSS's authority to apply equitable estoppel at its administrative hearings. fn. 11 [49 Cal.3d 407]
­FN 1. Unless otherwise indicated, all further statutory references are to the Welfare and Institutions Code.
­FN 2. The statute was thereafter amended in 1984, at which time subdivision (d) was added: "No determination of ineligibility shall be made retrospectively so as to result in an assessment of an overpayment in circumstances where there is a failure on the part of the applicant or recipient to perform an act constituting a condition of eligibility, if the failure is caused by an error made by a state agency or a county welfare department and if the amount of the grant received by the applicant or recipient would not have been different had the act been performed." Because the proceedings herein occurred before the effective date of subdivision (d), that subdivision does not apply.
­FN 3. See 4 Davis, Administrative Law Treatise (2d ed. 1983) section 20:2, page 3. The federal courts continue to take a restrictive approach to estoppel against the government, on the ground that such estoppel may interfere unduly with congressional prerogatives. (Schweiker v. Hansen (1981) 450 U.S. 785, 788-789 [67 L.Ed.2d 685, 689-690, 101 S.Ct. 1468] [per curiam; federal government cannot be estopped on basis of negligent reply to oral inquiry concerning eligibility for Social Security benefits].) This traditional approach has generated considerable criticism. (See 4 Davis, supra, § 20:5, pp. 9-15; Berger, Estoppel Against the Government (1954) 21 U.Chi.L.Rev. 680; Newman, Should Official Advice be Reliable? -- Proposals as to Estoppel and Related Doctrines in Administrative Law (1953) 53 Colum.L.Rev. 374; Comment, Never Trust a Bureaucrat: Estoppel Against the Government (1969) 42 So.Cal.L.Rev. 391; Comment, Estoppel Against the Government in California (1956) 44 Cal.L.Rev. 340; see also Farrell v. County of Placer (1944) 23 Cal.2d 624, 628 [145 P.2d 570, 153 A.L.R. 323] ["It has been aptly said: 'If we say with Mr. Justice Holmes, "Men must turn square corners when they deal with the Government," it is hard to see why the government should not be held to a like standard of rectangular rectitude when dealing with its citizens.'" (quoting Maguire & Zimet, Hobson's Choice and Similar Practices in Federal Taxation (1935) 48 Harv.L.Rev. 1281, 1299)].)
­FN 4. See, e.g., Mansell, supra, 3 Cal.3d 462 (city and state estopped from asserting paramount title to land pursuant to constitutional inalienability of the land); Lerner v. Los Angeles Board of Education (1963) 59 Cal.2d 382 [29 Cal.Rptr. 657, 380 P.2d 97] (board of education estopped to assert statute of limitations against teacher seeking reinstatement after city in good faith erroneously advised him reinstatement was unavailable); Farrell v. County of Placer, supra, 23 Cal.2d 624 (county estopped from asserting tort claims limitation statute after county agent advised injured plaintiff not to hire attorney); Tyra v. Board of Police (1948) 32 Cal.2d 666 [197 P.2d 710] (city estopped from asserting time limitation on pension claim after city's erroneous advice caused qualified pensioner to delay filing claim).
­FN 5. Other states have implicitly recognized the same distinction. See Herndon v. Colorado Board of Social Services (Colo.Ct.App. 1974) 528 P.2d 395, 398; Matter of Bryson v. Blum (1983) 97 A.D.2d 514 [467 N.Y.S.2d 884, 885]; but see West v. Dept. of Social and Health Services (1978) 21 Wn.App. 577 [586 P.2d 516, 518] (welfare agency estopped from recouping child support costs).
­FN 6. We note that Hansen, although rejecting a claim of estoppel based on a merely negligent response to an oral inquiry concerning eligibility for Social Security benefits, left open the possibility that "affirmative misconduct" by the government could be sufficient to justify estoppel. (Schweiker v. Hansen, supra, 450 U.S. 785, 788-789 [67 L.Ed.2d at p. 689-690].)
­FN 7. Similar provisions apply to other nonconstitutional agencies. (See post, fn. 10.)
­FN 8. Additionally, we note that if equitable estoppel claims were not considered in DSS hearings, no record and findings thereon reviewable under Code of Civil Procedure section 1094.5 would be produced. If that were the case, the doctrine of exhaustion of administrative remedies might be inapplicable to such claims, and claimants would be allowed to bring ordinary mandamus actions against the director under Code of Civil Procedure section 1085. (See Rosenfield v. Malcolm (1967) 65 Cal.2d 559, 565-566 [55 Cal.Rptr. 505, 421 P.2d 697].) The practical problems of requiring or permitting a claimant to seek ordinary mandamus relief in order to assert a claim of equitable estoppel -- with evidentiary court hearings and the attendant inconvenience and expense to the parties and the judicial system -- would contravene the purpose of the statutory scheme, if not the express provision that review under Code of Civil Procedure section 1094.5 "shall be the exclusive remedy available to the applicant or recipient or county for review of the director's decision." (§ 10962.)
­FN 9. Presently such agencies routinely impose equitable remedies. The Fair Employment and Housing Commission (FEHC; Gov. Code, § 12903), for example, has the power to order (i) "hiring, reinstatement, or upgrading of employees" who have been victims of unlawful practices (id., § 12970, subd. (a)), and (ii) "sale or rental of a housing accommodation if it is still available, or the sale or rental of a like housing accommodation ..." as a remedy for housing discrimination (id., § 12987, subd. (1)). (See McHugh, supra, ante, at p. 360, fn. 8 [noting that the constitutional authority of the FEHC has not yet been determined].) Similar agencies of our sister states also routinely exercise such power. See, e.g., Kentucky Com'n on Human Rights v. Fraser (Ky. 1981) 625 S.W.2d 852, 853 (the "Commission may impose any of several sanctions, including cease and desist orders, reinstatement of employees, admission of employees to training programs, [and] rental of property to an individual ...").
­FN 10. Nonconstitutional agencies regularly employ general principles of equity. For example, the Unemployment Insurance Appeals Board is permitted to waive recoupment of overpayments if waiver is required by "equity and good conscience." (Unemp. Ins. Code, § 1375, subd. (b); see Gilles v. Department of Human Resources Development (1974) 11 Cal.3d 313, 322-326 [113 Cal.Rptr. 374, 521 P.2d 110, 90 A.L.R.3d 970] [agency must consider equity in ruling on recoupment claims].) Similarly, the Commissioner of Corporations is required to determine whether a restabilization plan is "fair, just, or equitable" (Corp. Code, § 25140, subd. (a); see Bixby v. Pierno (1971) 4 Cal.3d 130, 147-148 [93 Cal.Rptr. 234, 481 P.2d 242]).
­FN 11. We also reject DSS's assertion that application of equitable estoppel would contravene article III, section 3.5 of our state Constitution. That section prohibits an administrative agency from "[refus]ing to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional ...." (Id., subd. (a).) This provision is inapplicable here. As we explained above, by applying equitable estoppel in appropriate circumstances DSS would not be "refusing to enforce" the recoupment statute, but would instead be acting consistently with the Legislature's intent that DSS be permitted, in certain cases, to apply equitable estoppel in "fair hearings."
Date:Citation:Category:Status:	Thu, 08/17/198949 Cal.3d 393Review - Criminal AppealOpinion issued	Disposition
Aug 17 1989Opinion: Reversed	Cite This Case
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