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Childs v. Essex County Division of Welfare

Decided: August 30, 1988.

ELIZABETH CHILDS AND GWENDOLYN SMITH, PLAINTIFFS,
v.
ESSEX COUNTY DIVISION OF WELFARE, DEFENDANT



Villanueva, J.s.c.

VILLANUEVA

After welfare recipients' attorney received settlement proceeds for clients' personal injury law suits, which proceedings were concealed from the welfare agency so that no agreements to repay existed, this declaratory judgment action was commenced seeking to have the agency's claims for recoupment limited to the amount of assistance paid on behalf of plaintiffs as if their children had not been included in the eligible family unit.

Plaintiffs move for summary judgment: (1) to compel the welfare agency to recompute the amounts owed to it as if plaintiffs' children had not been included in the eligible family unit and (2) to declare that, in any event, the agency has no lien on the proceeds of plaintiffs' personal injury recoveries.

The issues are: (1) whether recoupment of assistance provided by a county welfare agency (CWA) under the Aid to Families with Dependent Children Act (AFDC), N.J.S.A. 44:10-1 et seq., is limited to the amount of assistance received by the parentalone as if his/her children had not been included in the eligible family unit, or is it based upon the assistance to the whole eligible family unit; and (2) whether a CWA has a lien on a tort action of a welfare recipient when he/she withholds pertinent information about it and, as a result thereof, does not sign a valid agreement to repay.

The court holds that a CWA's claim for recoupment is limited to the amount of assistance paid on behalf of a parent as if his/her child had not been included in the eligible family unit. Therefore, plaintiffs must repay, from the net proceeds of their tort actions, the assistance granted to them by the CWA, regardless of whether the agency has a lien.

Finding of Facts Regarding Elizabeth Childs.

Plaintiff, Elizabeth Childs, was injured in an automobile accident on January 29, 1985. Thereafter, she retained the services of the law firm of Konray and Kerekes. By complaint

dated October 25, 1985, plaintiff sued Earl Campbell and other defendants in the Superior Court of New Jersey for personal injuries.

At all times pertinent to the personal injury matter, plaintiff was a recipient of public assistance for her four dependent children(ages 5, 9, 10 & 13) under the Aid to Families with Dependent Children Act, N.J.S.A. 44:10-1 et seq., from defendant Essex County Division of Welfare (hereinafter "agency"). Plaintiff never informed the agency that she had been in an accident, that she had retained an attorney or that she had filed a complaint for damages.

Sometime in late May 1986, the agency discovered, through a search of Essex County court records that plaintiff had filed the said action. Confronted by her caseworker with this discovery on or about June 12, 1986, plaintiff was asked to sign an agreement to repay, but she refused, upon her attorney's advice. Consequently, she was discharged from public assistance effective July 1, 1986. From the date of the accident through the date of discharge, Elizabeth Childs received assistance in the amount of $8,817, which the agency seeks to recover.

The agency claims a lien of $8,817, which is in excess of the proceeds of the settlement of her personal injury case being held in trust by her attorneys, i.e., $6,146.

Finding of Facts Regarding Gwendolyn Smith.

Plaintiff, Gwendolyn Smith, was injured in an automobile accident on October 16, 1984. Thereafter, she retained the services of the law firm of Konray and Kerekes. By complaint dated October 2, 1986, plaintiff sued New Jersey Transit Bus Operations, Inc. in the Superior Court of New Jersey for personal injuries.

At all times pertinent to the personal injury action, plaintiff was a recipient of public assistance for her dependent son (age 14), under the aid to families with dependent children program.

The agency contends that plaintiff never informed it of the accident, that she had retained an attorney or that she had filed a complaint for damages. In late November 1986, the agency alleges that it discovered, through a search of Essex County court records, that plaintiff had filed the said action. The agency calculated the amount of assistance granted to Gwendolyn Smith from October 16, 1984 to November 14, 1986. A separate slip of paper, with the name of Konray and Kerekes shown thereon, was in the agency's records, without indicating how or when the name was obtained. It is unnecessary for the court to determine whether the agency learned of plaintiff's lawsuit from its search of court records or through notice from plaintiff's attorney. Nonetheless, the agency never requested Gwendolyn Smith to sign an agreement to repay.

Gwendolyn Smith's welfare benefits were ordered terminated August 13, 1987, because, as of December 1986, when her son was removed from her custody, she no longer had an eligible child in her household. From the date of her accident through the date of discharge from public assistance, plaintiff received public assistance in the amount of $9,816. From December 1986 through August 1987, the plaintiff received public assistance in the amount of $2,793 and food stamps in the amount of $1,170. Finally, during the month of October 1986, plaintiff had earnings of $880 from her employment with the Newark Board of Education, which she did not report to the agency. Therefore, she received $4,843, which she clearly was not entitled to receive.

The agency claims a lien of $9,816, which is in excess of the gross amount of the settlement of $9,330 that Gwendolyn Smith received for her personal injury case, which includes an unpaid lien of her treating doctor in the amount of $2,330.

Eligibility for Aid to Dependent Children & Agency's Right to Recoup the Assistance Granted.

Under the AFDC, adopted in New Jersey in 1959, N.J.S.A. 44:10-1 et seq., the county welfare boards administer the program

subject to the supervision of the Department of Human Services (formerly the Department of Institutions and Agencies), which has adopted general policies, rules and regulations for carrying out the purposes of the act. Redding v. Burlington Cty. Welfare Bd., 65 N.J. 439, 442 (1974).

Eligible dependent children and the parent or parents or relative with whom they are living are entitled to financial assistance and other services from the county welfare agency (CWA) of the county in which they reside. N.J.S.A. 44:10-2. Each CWA charged with the administration of the AFDC program has the duty to take into consideration all of the income and resources of the dependent child and of the parent, parents, or other relatives with whom the child is living when determining eligibility for financial assistance. N.J.S.A. 44:10-3. Similarly, welfare recipients have the duty in their initial applications, as well as in subsequent recertifications for continuing eligibility, to keep the agency abreast of changes in household members, income, resources, potential resources, or anything which may affect eligibility. N.J.A.C. 10:81-5.1. Such information must be recorded on the application for public assistance. N.J.A.C. 10:81-3.6.

Welfare applicants and recipients are in all instances the primary source of information about themselves and their families; hence, a certain degree of a client's candor must accompany each application or recertification. Since it is the responsibility of the agency to determine eligibility and to secure verification from secondary sources, applicants and recipients must help select the most likely sources for corroboration of essential eligibility information. If the applicant is unwilling to make the necessary inquiries or to secure the required information from such sources themselves, the CWA cannot grant assistance. N.J.A.C. 10:81-1.5, -3.3. The agency is required to determine from the applicant whether there is a pending claim against any individual, group or agency on behalf of any member of the eligible unit. If such a non-exempt claim exists,

the applicant is required to execute an agreement to repay before a welfare grant may be given. N.J.A.C. 10:81-2.12.

The statute creating the repayment obligation of a welfare recipient states, in pertinent part:

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 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. Upon any refusal to make repayment, including refusal by any person acting for or on behalf of such parent or parents, or relative, in accordance with such promise, 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 . . . . [ N.J.S.A. 44:10-4(a)]

Under N.J.S.A. 44:10-4(a), parents or relatives who, like plaintiffs herein, 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 interest. However, this provision does not preclude the recovery of such funds in the absence of an agreement to repay.

N.J.A.C. 10:81-3.41(e) specifies the circumstances whereby recovery may be had from a welfare recipient in the absence of an agreement to repay. Those circumstances include: (1) where an agreement to repay does not exist solely because of the applicant/client's withholding of information; or (2) any instance in which an agreement to repay would have been applicable but closure of the case precluded delivery of the agreement. When a client has received payments that, for any reason other than the client's withholding of information, are not covered by a repayment agreement, the CWA cannot pursue

a claim for repayment, but can reevaluate a client's current eligibility. N.J.A.C. 10:81-3.41(e)3. In this case, the agency contends that plaintiffs continually refused to cooperate and to notify it promptly of the resource.

The Department of Human Services, which has the greater financial and administrative interest in the AFDC program,*fn1 agrees that, in the absence of "peculiar facts," the above is the correct interpretation of its regulation.

Plaintiff Elizabeth Childs' Case.

In the case of plaintiff, Elizabeth Childs, the agency was unable to determine if a pending claim existed, at least until it discovered the litigation through its own efforts 16 months later. On plaintiff's reapplication for public assistance, dated November 20, 1985, item 35 asks: "Do You or Anyone Making Application Have Any Pending Claims, Such as Lawsuits, Divorce Settlement, Inheritance, Accident Claim, Sale of Property or Does Anyone Owe You Money?" In the space directly underneath this question, plaintiff checked "No," notwithstanding that her complaint had been filed one month earlier. In addition, another paragraph states: "I (we) agree to let the County Welfare Agency know immediately of any change in living conditions, family situation or money received from any source." (See Your Rights and Responsibilities; emphasis in original).

Finally, just above plaintiff's signature reads: "I (we) Elizabeth Childs attest that I (we) have read and agree to these statements and fully realize that the County Welfare Agency relies upon the truth and accuracy of my (our) statements."

Unquestionably, plaintiff withheld the information until confronted by the agency in June 1986, at which time the agency asked her to sign an agreement to repay. When

plaintiff refused, she was appropriately discharged from assistance. N.J.A.C. 10:81-3.41 governs a situation where a welfare recipient withholds information about potential sources of money available to the recipient and permits recovery of welfare funds in ...


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