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County of Essex v. William Waldman Successor to Altman

Decided: December 6, 1990.


On appeal from the Superior Court of New Jersey, Law Division, Essex County.

King and Long. The opinion of the court was delivered by King, P.J.A.D.


[244 NJSuper Page 650] This is an appeal by defendants, Commissioner of the Department of Human Services and other State officials within the Department (State), from a summary judgment in the Law Division enjoining the State's long-standing practice of retaining 50% of maintenance payments received in the form of Social

Security benefits on behalf of indigent patients with Essex County settlements who reside in State institutions. The Law Division judge ordered the State to disburse 100% of those receipts to the credit of plaintiff Essex County up to the amount of the County's statutory obligation for the maintenance costs for those patients retroactive to January 1, 1980.

We affirm the ruling in favor of the County on the issue of liability. We conclude that the statutory scheme required credit to the County for all Social Security payments made on behalf of patients from Essex County. We further conclude that the judgment should have limited retrospective effect only and bear no prejudgment interest. We thus affirm in part and modify in part.

This is the procedural context. On January 25, 1989 plaintiff Essex County filed a complaint in lieu of prerogative writ alleging that the Commissioner's and State's practice of retaining 50% of the Social Security benefits received by the State as representative payee on behalf of indigent patients with Essex County settlements violated N.J.S.A. 30:4-60. On March 15, 1989 the County moved for summary judgment. On April 4, 1989 the State cross-moved for summary judgment. On March 30, 1989, pending the return date of its motion for summary judgment, the County moved for leave to file an amended complaint. The parties then entered into a consent order in which the County was permitted to file a separate action to encompass the issues it sought to raise in its proposed amended complaint. That action now has been litigated and decided separately.*fn1

On April 14, 1989 the Law Division judge heard oral argument on the motion and cross-motion for summary judgment and decided in favor of the County. The judge then ordered that the State provide the County with an accounting of all

monies owed to the County as a result of his ruling. An accounting was filed in the form of an affidavit of the State's Chief of the Bureau of Financial Standards and Procedures, Office of Finance and Accounting, Department of Human Services, along with supporting documentation. Without objection to the State's accounting methods, the judge then entered an order fixing the amount of the State's liability at $10,636,545. which included prejudgment interest. This appeal followed.

In question here is the distribution of Social Security benefits received by the State as representative payee on behalf of county indigent patients with settlements in Essex County. The relevant statutes in Title 30 governing State institutions and agencies contain no precise directives on how the State as representative payee must apply these funds. In the absence of a specific mandate the State has since 1955 conducted a policy of keeping one-half of the Social Security benefits it receives as representative payee for all the county indigent patients with settlements in the State and crediting the other one-half to the counties' obligations for the patients. While under no precise statutory duty either to retain these sums or to pay any part of these recoveries to the counties, the State has justified this procedure as an effort to further its understanding of the policy behind N.J.S.A. 30:4-78: that the State and counties share the costs of patient maintenance on a "fifty-fifty" basis.*fn2

Essex County challenged the State's policy of retaining 50% of the Social Security recoveries it has received over at least the past 35 years on behalf of county indigent patients with Essex County settlements. The County claimed that since N.J.S.A. 30:4-60 permits counties to recover payment from the patient or legally responsible relatives up to the County's one-half share of the patient's total maintenance costs, the County is entitled to receive all of the Social Security benefits paid to the patient up to its 50% obligatory share of those costs. The County requested a ruling of the Law Division permanently enjoining the State from retaining any part of the Social Security recoveries and directing the State to reimburse to the County all such benefits wrongfully retained by the State since January 1, 1980 plus prejudgment interest.

The State maintains that the County's entitlement to credit for funds on behalf of the patient should be limited under N.J.S.A. 30:4-60 to these amounts received by the Essex County treasurer directly from the patient or family. In the absence of any explicit statutory duty concerning distribution of the Social Security benefits received by the State on behalf of County patients, the State claims that it is entitled to split these benefits with the County 50/50. The State also asserts that the Law Division had no jurisdiction to entertain the subject matter of this dispute and that the County's claims were barred by contravening considerations of public policy, sovereign immunity, estoppel, waiver and laches.

The judge noted in his oral opinion in the County's favor that N.J.S.A. 30:4-60 clearly provides that all money received from county indigent patients or the persons responsible for their support is to be "applied first to reduce the amount chargeable to the county of legal settlement for its per capita cost of maintenance." He observed that while N.J.S.A. 30:4-60, when

read together with N.J.S.A. 30:4-78, requires that the State and the County share the cost of maintaining county indigent patients, ยง 60 does not

even remotely imply that any maintenance monies recovered on behalf of a mentally ill patient must be divided equally between the County and the State to defray the cost of maintenance. Had this been the case, surely the Legislature would not have permitted excess recoveries to be paid to the Institution. Instead, the excess payment would have been credited to the State.

In his oral opinion the judge referred to the Program Analysis of Institutional Maintenance Support Payments (1974) issued by the State Legislative Office of Fiscal Affairs (I Program Analysis). He quoted that portion of the Program Analysis which states:

A patient is given a County indigent classification by the County Court if he has legal settlement within the County and if he (or his family) do not have sufficient income to meet the county portion of the maintenance support charges. Based on the application of the Treasury formula for determining ability to pay, the patient or his family are required to make whatever contributions their income would indicate. Those contributions go entirely to the County and are not shared with the State. [I Program Analysis at 15 (emphasis supplied)].

The judge also cited a passage from the Supervisor of Patient's Accounts Procedures Manual (1985 -- revised 1987) (SPAM), which instructs that in the case of a patient who is financially able to pay the costs of maintenance, the county of legal settlement bills the patient and then retains all receipts. The judge concluded,

Applying N.J.S.A. 30:4-60 and N.J.S.A. 30:4-78 to the facts before the Court, and with proper consideration being given to the Program Analysis and SPAM, it must follow and the Court finds that 50% of the maintenance recoveries obtained by the State for indigent patients in State Institutions were wrongfully retained by the State. Specifically, where the State was named Representative Payee of Social Security benefits of indigent County patients, 50% of said funds were improperly held by the State to reduce 50% of its per capita costs.

Now, 100% of the Social Security payments, no matter to whom they were paid, the State Agency or nominee or whoever it may be, should have been recaptured by the County as a credit toward the County's per capita share, with any excess amount being forwarded to the Institution.

As noted, the judge awarded a judgment of $10,636,545 representing the sum of Social Security recoveries withheld since

January 1, 1980. The sum awarded included ...

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