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Essex County Welfare Board v. Philpott

January 20, 1969

ESSEX COUNTY WELFARE BOARD, A CORPORATE ENTITY OF NEW JERSEY, PLAINTIFF,
v.
DORIS PHILPOTT, WILLIAM WILKES, AND FIDELITY UNION TRUST COMPANY, DEFENDANTS



Larner, J.s.c.

Larner

[104 NJSuper Page 281] This matter came before the court on an order to show cause why a judgment should not be entered

in favor of plaintiff Essex County Welfare Board (board) directing the Fidelity Union Trust Company to turn over to it moneys on deposit in the bank in the name of Doris Philpott. To eliminate procedural pitfalls, the parties submitted a stipulation of facts and consented that the court determine the matter as if on final hearing based upon those facts.

On August 2, 1966 defendant Wilkes, applied to the Essex County Welfare Board for financial assistance under the state program for total disability assistance. N.J.S.A. 44:7-38 et seq. As a condition for said assistance defendant executed a reimbursement agreement in accordance with the provisions of N.J.S.A. 44:7-14 whereby he promised to reimburse the board for all advances made to him and agreed that the filing of the reimbursement agreement would have the same force and effect as a judgment. The agreement and the statute also provide that defendant pledges as security for such reimbursement all of his real and personal property. N.J.S.A. 44:7-14.

Wilkes was then referred by the board to the federal Social Security Administration to apply for disability insurance benefits under 42 U.S.C., c. 7. As a result he received a check on August 20, 1968 from the Social Security Administration in the sum of $1,864.20 as a retroactive award for disability benefits. By that time the board had advanced to defendant the total sum of $2,082.

Upon receipt of the Social Security check Wilkes deposited the same in the Fidelity Union Trust Company in an account in the name of defendant Doris Philpott. He admits, however, that the money is held in trust for him and that she has no proprietary interest in the account. Plaintiff seeks reimbursement from the moneys on deposit in the bank.

Wilkes contends that plaintiff is not entitled to reimbursement from this fund for several reasons, basing his argument mainly on the following: the federal statute underlying the Social Security payment, 42 U.S.C., § 407, 49 Stat. 624

(1939), prohibits transfer or assignment of any future payments under the act and provides that none of the monies paid or payable are subject to execution, levy, attachment, garnishment or other legal process, and (2) the Congressional policy underlying the Social Security program preempts invasion of its benefits by all creditors of the recipient, including the Essex County Welfare Board, despite the reimbursement provisions of the agreement and the applicable New Jersey statutes. In addition, defendant attacked the validity of the required reimbursement agreement on constitutional grounds, but the recent United States Supreme Court opinion of Snell v. Wyman, 393 U.S. 323, 89 S. Ct. 553, 21 L. Ed. 2 d 511, January 13, 1969, affirming 281 F. Supp. 853 (S.D.N.Y. 1968), is dispositive of this issue contrary to defendant's position.

The pertinent federal statute, 42 U.S.C., § 407, reads:

"The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."

The act covers two sets of circumstances. It prohibits the transfer or assignment of any future payments thereunder and exempts the moneys "paid or payable" from reach of creditors through legal process. If plaintiff were an ordinary creditor seeking to levy on the lump sum fund received from the Social Security Administration, the statute by its terms would bar such process. The fund would be exempt from creditors even though its form had been converted from a check payable to defendant to a bank account belonging to him. See Lawrence v. Shaw, 300 U.S. 245, 250, 57 S. Ct. 443, 81 L. Ed. 623 (1937), and Porter ...


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