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Reed v. Slaughter

Decided: June 6, 1986.


Yanoff, J.s.c. (retired and temporarily assigned on recall).


The issues arise on a motion by plaintiff against the Essex County Welfare Board and the State of New Jersey, Division of Medical Assistance and Health Services, to approve a settlement. The Essex County Welfare Board and the State of New Jersey are not parties to the litigation. Instead, there is an action by plaintiff Reed against defendants Slaughter, et als., grounded on a fall by plaintiff in front of premises owned and controlled by defendants. The insurance carrier for defendants has paid the full amount of $25,000 of the policy into court. With interest, approximately $27,000 is now available.

Plaintiff received welfare payments from the Essex County Welfare Board from the date of the accident through January 19, 1986, totalling $13,805. Plaintiff also collected, by way of Medicaid, the sum of $7,930.58 for payment for expenses arising out of the accident in question. The welfare board and State of New Jersey were brought into the litigation by motion by plaintiff's counsel, seeking court approval for a structured settlement. The welfare board has appeared and claims a lien on the proceeds of the settlement under N.J.S.A. 44:10-4. The State of New Jersey claims a lien under N.J.S.A. 30:4D-7. I

am not certain that the procedure adequately brings the welfare board into the picture, but since the welfare board has appeared, filed a brief and argued orally, I consider the case as one for declaratory judgment under N.J.S.A. 2A:16-52, for the purpose of interpreting the pertinent statutes.

Additional significant facts are that plaintiff was not asked by the welfare board to execute a reimbursement agreement, and has not done so. This despite the fact that under date of February 17, 1984 her attorney advised the welfare board that he represented plaintiff in connection with an action for injuries sustained as the result of the fall. By letter dated March 27, 1984, sent to the attorney for plaintiff, the board claimed a lien. Under date of July 15, 1985, the attorney for plaintiff advised the board that the case was scheduled for trial and requested "an up-to-date statement of the amount that is now owing." In response, by letter dated August 7, 1985, the welfare board claimed a lien of $11,785. As indicated, the amount claimed at this point has increased to $13,805.

Significant also is the fact that plaintiff is no longer on welfare. It is proposed on behalf of plaintiff to pay immediately out of this sum $8,800 for legal fees and costs, and to put the balance in trust, with provision that nothing be released to plaintiff for a fixed period of at least ten years. If the fund were held for 20 years, the amount available to plaintiff would be approximately $83,000. If the sums received from welfare and Medicaid were paid at that time without interest, plaintiff would be left with approximately $60,000. If the welfare board and Medicaid were paid at once, after counsel fees, Hedgebeth v. Medford, 74 N.J. 360 (1977), cf. In re Guardianship of Jones, 170 N.J. Super. 478 (App.Div.1979), nothing would be left to plaintiff.

Obviously, the crucial question is whether any indebtedness at all exists by reason of the Medicaid and welfare payments, for if it did, it would bear interest. See Bak-A-Lum Corp. v. Alcoa Bldg. Products, Inc., 69 N.J. 123, 131 (1976); Hopkins v.

Liberty Mutual Ins. Co., 158 N.J. Super. 176, 179 (App.Div.1978); Busik v. Levine, 63 N.J. 351, 358 (1973). There would then be no advantage to plaintiff in deferring payment.

While plaintiff's attorney in the moving papers refers to both the welfare and Medicaid claims as "liens," since what is sought is approval of a settlement which will subordinate payment of both claims to payment to plaintiff, I shall address the real issue which is whether there is any obligation on the part of recipient to repay welfare or Medicaid.

N.J.S.A. 30:4D-7 makes it clear that receipt of Medicaid creates an indebtedness. Section 7.1b. specifically provides "every recipient shall promptly notify the division of any recovery from the proceeds of any settlement." Marmorino v. Newark Housing Authority, 189 N.J. Super. 538 (Law Div.1983). However designated, the Medicaid claim must be paid out of the proceeds at once. This disposes of the Medicaid issue.

The welfare board takes the position that even without execution of a reimbursement agreement, it has a lien upon the proceeds of the settlement. This argument is unsupported by the language of the relevant statute.

N.J.S.A. 44:10-4(a), as amended by L. 1985, c. 120, reads 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 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 a child or by either or both his parents, other than that portion of a personal injury award which a court specifically awards to a child to make him whole as a result of an injury, the county welfare agency may, as a condition of eligibility or continuation of eligibility for such assistance, require such parent or parents, or relative, 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.

Nothing in the statute creates a lien upon funds of the welfare recipient. It is only the execution of a reimbursement agreement which ...

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