On certification to the Superior Court, Appellate Division.
Stein, Wilentz, Clifford, Handler, Pollock, O'Hern, Garibaldi
The opinion of the court was delivered by
In this case we address whether and to what extent a minor's personal-injury award deposited into a court-supervised trust account may be considered in determining eligibility of that child's family for Aid to Families with Dependent Children (AFDC). The issue arises by virtue of the appeals, argued together, of eight AFDC recipients, each of whom has at least one minor child who is the beneficiary of a trust fund established with the Essex County Surrogate following settlement of a personal injury case. The Essex County Division of Welfare (ECDW) had notified each of the petitioners that she was required, pursuant to N.J.A.C. 10:81-3.39, to seek release of monies from the trust accounts so that the funds could be considered in determining petitioners' continuing eligibility for AFDC benefits. Petitioners challenged the regulation administratively and then in the Appellate Division. The Appellate Division affirmed the rulings of the Director of the Division of Public Welfare, holding that N.J.A.C. 10:81-3.39 was consistent with federal regulations regarding the trust funds' availability and with N.J.S.A. 44:10-4(a), which governs repayment of benefits. Essex County Div. of Welfare v. O.J., 246 N.J. Super. 537, 544-47 (1991). We granted the AFDC recipients' petition for certification, 126 N.J. 333, 598 A.2d 891 (1991), and now reverse.
The minor children of O.J., H.S., S.O., L.C., M.S., and S.D. received settlements for injuries sustained in motor-vehicle accidents, and the minor children of J.R. and M.B. received settlements for injuries resulting from lead poisoning. The settlement proceeds were deposited into court-supervised trust funds. Although the record does not specify the amounts deposited for most of the minors, the account in the O.J. case reflected a $2,976 deposit, and the account in the M.B. case reflected a $6,546 deposit.
In 1988 and 1989, ECDW informed petitioners by letter that they were required to petition the Chancery Division to release funds from the trust accounts. If released, ECDW would consider the funds as available when it calculated the families' AFDC benefits. The regulation relied on, N.J.A.C. 10:81-3.39, provides in part:
(a) Members of the [AFDC] eligible family shall take all necessary and reasonable action to avail themselves of funds for support from others who owe or may owe money to them or who are holding funds for them. * * *
1. Any failure or refusal by any person to take required action or to cooperate with the [Child Welfare Agency] in liquidation efforts renders the entire family ineligible for assistance for as long as the failure or refusal continues.
[3.i.] When a trust fund is not currently accessible and it exists at the time of application, the client must, as a condition of eligibility, make a bona fide presentation of a petition to the appropriate court for release of the funds for current and future support.
At oral argument, the Deputy Attorney General appearing on behalf of ECDW was uncertain about whether Essex County's policy necessarily reflected the approach of other counties, or whether it reflected a specific statewide policy requiring AFDC recipients to apply for release of court-held personal-injury awards for the benefit of minor children. At oral argument, the Deputy Attorney General appearing on behalf of ECDW was uncertain about whether Essex County's policy necessarily reflected the approach of other counties, or whether it reflected a specific statewide policy requiring AFDC recipients to apply for release of court-held personal-injury awards for the benefit of minor children.
Each petitioner initially refused to cooperate with ECDW. In the M.B. case, ECDW terminated petitioner's minor son's benefits; in each of the other cases, ECDW terminated the benefits of the respective petitioners and their families. Each petitioner then requested an administrative hearing, and each, with the exception of H.S., agreed to cooperate with ECDW on the conditions that they not forfeit their rights to challenge the validity of the regulation, and that any money withdrawn from the trust funds would be restored if petitioners ultimately prevailed.
In the M.B. matter, the Director of the Division of Public Welfare (Director) reversed an Administrative Law Judge's finding and determined that the regulation was valid. In the O.J. and J.R. cases, the Director adopted the finding of a second Administrative Law Judge, who had upheld the regulation's validity. As noted, the Appellate Division affirmed the Director's rulings, construing N.J.S.A. 44:10-4(a) as prohibiting the use of minors' personal-injury awards only for the purpose of repaying county welfare agencies for past AFDC assistance, but not precluding such awards from being considered in determining eligibility for current and future assistance. 246 N.J. Super. at 544. Although the Appellate Division observed that "there is much, both in logic and equity, to commend a legislative and executive policy which also ...