The issues involved herein are (1) whether a county welfare board can recover welfare payments from proceeds of a tort claim judgment when the recipient failed to disclose the existence of such pending lawsuit and (2) whether a regulation in the New Jersey Administrative Code purporting to authorize such action for recovery is effective when the statute regarding agreements to repay does not provide for such a remedy.
This matter arises because the Essex County Division of Welfare demands that part of the proceeds of a settlement paid by defendant The Clorox Co. to the infant plaintiff herein be paid to it to recover alleged "overpayments" of welfare assistance paid by it to said plaintiff.
From December 1970 to April 1980 welfare assistance was paid by the Essex County Division of Welfare (hereinafter "county") to Francine Terry on behalf of her infant son Lee under the Assistance for Dependent Children Act, N.J.S.A. 44:10-1 et seq. The amount of assistance rendered is $8,751.65, which has not been repaid.
On December 28, 1970 Lee Terry, then age 3 1/2 years old, while living with his mother in the premises owned by defendants Beatrice Harris and Ollie Moore at 18 Quitman Street in Newark, sustained severe injuries. While playing near a sink on the premises the infant apparently ingested a quantity of "Liquid Plumber," manufactured by the Clorox Co. (Clorox). His mother was unaware at the time of the incident that she had grounds for a lawsuit. She also thought that the injury caused to the esophagus by burning would slowly heal. In 1977, when his mother believed that Lee was well, he got sick again; Mrs. Terry was told that her son was in need of special treatment as a result of the swallowing of the solvent. She went to see a lawyer in late 1977, who sent her to another attorney to file a lawsuit. On February 3, 1978 suit was filed on behalf of Lee Terry, still an infant, against the landlord and Clorox.
On April 23, 1980, pursuant to a "friendly settlement," judgment was entered before this court in favor of Lee Terry by his guardian ad litem and mother, Francine Terry, in the amount of $35,000 less the amount of $8,750, to pay legal fees and expenses of litigation. This settlement concluded the case against Clorox arising out of the ingestion of the drain cleaner, but the lawsuit against the landlord remains open. It is at this point that the county first became involved when it asserted before this court a lien against Lee Terry's funds because of welfare payments it made in the amount of $8,751.65. At said time all payments to Francine Terry and her family were terminated. It is the
purpose of this opinion to determine the validity of the county's lien claim.
The county's asserted grounds for recovery are twofold. It is first alleged that the money received by Francine Terry on behalf of her son was, because of the failure of Mrs. Terry to inform the county of her son's pending lawsuit, an "overpayment" of welfare funds, and that case law supports the county's right to recover such "overpayments" summarily. The county's second ground concerns a New Jersey Administrative Code provision, N.J.A.C. 10:81-3.41(e)(1), which, it is asserted, stands for the proposition that in cases where information about an additional financial resource or pending lawsuit of a welfare recipient is withheld by a recipient or his or her representative, and as a result of this withholding the county fails to obtain necessary agreements by the recipient to repay the county for benefits received, the county should be permitted to proceed as though such agreements did exist.
According to the county, it is dependent upon its "clients" (i.e. , welfare recipients), as the major, if not sole, source of information, to keep it apprised of a recipient's change in economic status. It attempts to compel the recipient to respond by having him or her initially fill out a questionnaire (Form PA-1J). This questionnaire sets forth numerous questions relevant to the recipient's income and other financial resources. It also is required of the recipient to update this questionnaire every six months. N.J.A.C. 10:81-5.2. This involves the signing of an affidavit that no change in resources has occurred up to the date of signature or what the change is, if there were one. Highly relevant to the case at hand is the fact that among the various sections provided "for reporting resources" one is a category entitled "pending claims." On the forms entitled "Application and Affidavit for AFDC . . ." submitted by the county as evidence, duly signed by Francine Terry on behalf of herself and her son Lee, is a question which reads:
Do you or anyone making application have any pending claims, such as lawsuits . . .?
These questions were answered in the negative on June 22, 1978, March 16, 1979 and October 23, 1979. These answers are required to insure that the resource information is kept current. Since all of the aforementioned dates fall within the time period in which the lawsuit of Lee Terry was pending, it is obvious that the answers were not correct and thus the county had no information on which it could act in response to the changed status of Lee.
Additionally, the county points out that the welfare checks for AFDC (i.e. , the Aid for Dependent Children program) made payable to Francine Terry contain, on their backs, the following certification in both English and Spanish:
By signing this check I state that all persons whose support is included in this payment are in need of cash assistance. I have told the welfare board of all income resources or circumstances and will notify the agency at once of any changes affecting my payment.
Directly beneath the above-cited certification on each check is a space provided for recipient's signature. Each check submitted was signed by the infant's mother, Francine Terry, the payee.
The facts presented to this court by way of the "Application and Affidavit" form, the checks and Francine Terry's own admissions clearly establish that Francine Terry had a duty to report to the county the existence of the pending lawsuit of her son. The court finds that Francine Terry, the welfare recipient's mother and guardian of Lee Terry, withheld pertinent resource information which would have materially affected the action of the county in providing further welfare support on behalf of Lee.
It becomes necessary to examine the merits of the two grounds that the county asserts give rise to a right on its behalf to recover funds which either would have not been paid or would have been recovered except for Francine Terry's withholding of information.
It is the contention of plaintiffs that no right of recoupment exists because there is no authority, statutory or otherwise,
which sanctions such a procedure. They contend that the county is limited to whatever methods of recovery are expressly provided for in the legislative scheme, and since the remedies available to the county concerning recoupment from a welfare recipient for funds obtained from a successful civil tort claim are specific and fully prescribed in N.J.S.A. 44:10-4(a), and no mention is made of the procedure invoked by the county here, no relief can be granted to it.
The statutory provision around which much of the controversy revolves, N.J.S.A. 44:10-4(a), provides, in pertinent part, as follows:
Whenever any parent or relative with whom a child is living applies for or is receiving assistance for such child pursuant to this act, and it appears that there is a pending entitlement to a payment to the child or to either or both his parents of funds arising from a claim or interest legally or equitably owned by such child or by either or both his parents, the county welfare agency may, as a condition of eligibility or continuation of eligibility for such assistance, require such parent . . . to execute a written promise to repay, from the funds anticipated, the amount of assistance to be granted from the date of entitlement to such payment. Upon any refusal to make repayment . . . the county welfare agency may take all necessary and proper action under the laws of this State to enforce such promise, and the granting or continuing of assistance, as the case may be, shall be deemed due consideration therefor. [as amended effective July 1, 1977]
Conspicuous by its absence from this provision is any regulation regarding a recipient's failure to notify the county welfare agency. This, plaintiffs argue, is evidence of the Legislature's intent to limit the power of the welfare agency to recoup simply to those cases in which an agreement to repay has been obtained.
In the case of Essex Cty. Welfare Bd. v. Hellams , 103 N.J. Super. 438 (1968), the Appellate Division held that the county welfare board was not entitled to repayment of welfare funds advanced for support of an infant defendant out of trust fund bank account representing the net proceeds of the settlement of a personal injury claim of the infant where the welfare board had not obtained a written promise to repay, from funds anticipated, the amount of assistance to be granted.
In the brief opinion by the Appellate Division the court indicated that the dictates of N.J.S.A. ...