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Reed v. Slaughter

Decided: June 9, 1988.


On certification to the Superior Court, Appellate Division, whose opinion is reported at 217 N.J. Super. 214 (1987).

For affirmance -- Chief Justice Wilentz and Justices Clifford, Pollock, O'Hern, Garibaldi and Stein. For reversal -- Justice Handler. Handler, J., dissenting.

Per Curiam

We have determined to affirm, without extended discussion, the judgment below. The case presents only what we might ordinarily call a situation not requiring our appellate supervision. Mahony v. Danis, 95 N.J. 50 (1983).

This case concerns not the power of government to protect the public fisc from unworthy recipients of welfare, but rather the validity of a regulation's interpretation, concurred in by the agency primarily responsible for the implementation of the welfare program. The facts are set forth in the reported opinion of the Law Division, 213 N.J. Super. 123, 124-26 (1986). That judgment was affirmed by the Appellate Division on the basis of the opinion below. 217 N.J. Super. 214 (1987).

The issue stems from the administrative oversight of a county welfare agency that failed to obtain a written agreement to repay AFDC (Aid to Families of Dependent Children) benefits from a pending tort claim. Betty Reed, who had been receiving AFDC benefits, dutifully informed the agency that she had been injured in an accident and was pursuing a claim for damages. When the $25,000 proceeds of the available insurance coverage were deposited into court, the court had to evaluate various claims including one claim for $7,930 in Medicaid benefits and the claim at issue, for reimbursement of $13,805 in AFDC benefits. The defendant County welfare agency refused to consider Reed's proposal for a structured settlement that would postpone (albeit for an extended period), but not avoid, reimbursement of the AFDC advances. The County's inflexible insistence on full and immediate reimbursement would have effectively left Reed with no compensation for her personal injuries. The Law Division found that the absence of a written reimbursement agreement precluded recovery of the AFDC benefits from the tort claim proceeds.

Under N.J.S.A. 44:10-4(a), parents or relatives who, like Reed, receive public assistance for children living with them may be required, as a condition of their continued eligibility, to agree to repay from the settlement of certain legal claims or interests the assistance granted by the county welfare agency from the date of their entitlement to such claims or interests. However, this provision does not perforce preclude the recovery of such funds in the absence of an agreement to repay. We are satisfied nevertheless that the administrative regulation adopted by the New Jersey Department of Human Services leads to the conclusion that in the circumstances of this case, the absence of the agreement should have precluded the reimbursement.

That regulation, N.J.A.C. 10:81-3.41(e), sets forth the specific circumstances in which recovery may be had against a welfare recipient in the absence of an agreement to repay.

Those circumstances include untimely closure of the case or the claimant's withholding of information. The county welfare agency cannot pursue a claim for repayment, but can reevaluate a client's current eligibility, when that client has received payments that for any reason other than the client's withholding information are not covered by a repayment agreement. N.J.A.C. 10:81-3.41(e)3. In this case, however, the County welfare agency acknowledged that plaintiff continually cooperated and promptly notified the agency of the resource.

The Department of Human Services, which has the greater financial and administrative interest in the AFDC program (we were informed at oral argument that benefits are paid one-half by the federal government, three-eighths by the State, and one-eighth by the county), does not dispute that in the absence of "peculiar facts" the above is the correct interpretation of its regulation. Moreover, in withdrawing its petition to review the judgment below the Department has informed the Court that the Appellate Division's decision below, precluding recovery without a repayment agreement, is "completely distinguishable" from its decision in Burlington Welfare Bd. v. Stanley, 214 N.J. Super. 615 (1987) (even without repayment agreement, county had common-law right of recoupment from proceeds of tort claim judgment of public assistance benefits paid since date of accident). In essence, the State disagrees with the County's "flat contention that no repayment agreement is required."

The Department of Human Services, the agency of government primarily required to administer the legislative program, has implemented that program through a comprehensive regulatory structure that specifies when a written agreement shall be required as a condition of reimbursement of AFDC benefits. We thus have no occasion to debate whether, in the absence of such an agreement, the agency has the inherent power to require repayment. A brief addition to the regulation could well resolve the issue posed by the dissent.

The judgment of the Appellate Division is affirmed.

HANDLER, J., dissenting.

The facts of this case are basically undisputed. On February 15, 1983, plaintiff, Betty Reed, slipped and fell on a sidewalk in front of premises owned by defendants John Slaughter and Constance Slaughter, not parties to the present appeal. A suit to recover for personal injuries was filed by plaintiff against the Slaughters on November 19, 1983.

At the time that the suit was filed Reed was a recipient of Medicaid payments, and of public assistance under the Assistance for Dependent Children program, N.J.S.A. 44:10-1 to -8. She continued receiving this assistance during part of the period that her lawsuit was pending. Although being informed of this suit, the Essex County Division of Welfare (the "Board" or "Welfare Board") never asked Reed to execute a reimbursement agreement. Instead, it simply sent notice asserting a lien on the proceeds of the suit to the extent of any welfare payments made during the pendency period.

On January 30, 1986, Reed voluntarily withdrew from the assistance rolls. She had received $13,805.00 in welfare payments and $7,930.58 in Medicaid payments between that date and the date of her accident.

The Board joined this action in response to a motion by Reed seeking approval of a structured settlement. As analyzed by the trial court, Reed v. Slaughter, 213 N.J. Super. 123 (Law Div.1986), under this plan

it [was] . . . 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 [have] be[en] 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, . . . nothing would be left to plaintiff.

[ Id. at 125 (citations omitted).]

The Board requested the court to deny the relief desired by Reed and asked for reimbursement of the amounts paid to her. At this point the Board was acting under the impression that

Reed had signed a properly executed Agreement to Repay assistance as called for by N.J.A.C. 10:81-3.40, 3.41. Only later did it discover that no such agreement existed and that the Reed had not been requested to execute one before assistance had been terminated.

After hearing argument on the motion, the trial court ruled on June 6, 1986, that the Medicaid claim had to be paid out of the proceeds of the damages award pursuant to N.J.S.A. 30:40-7.1. Reed, supra, 213 N.J. Super. at 126. However, with regard to the welfare payments, the court held that the Board had no valid claim to this money due to the agency's failure to obtain a signed agreement to repay despite the fact that the Board was given proper notice of the suit. Id. at 132. In an unpublished per curiam opinion the Appellate ...

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