Keokuk County v. H.B., 97-726

Citation593 N.W.2d 118
Decision Date28 April 1999
Docket NumberNo. 97-726,97-726
PartiesKEOKUK COUNTY, Iowa, Appellee, v. H.B., Appellant, State of Iowa ex rel. Department of Human Services, Charles Palmer, Director, Intervenor-Appellant.
CourtUnited States State Supreme Court of Iowa

James F. Elliott, Legal Services Corporation of Iowa, Ottumwa, for appellant-H.B.

Thomas J. Miller, Attorney General, Gordon Allen, Deputy Attorney General, and

Mary W. Vavroch, Assistant Attorney General, for intervenor-appellant.

Carlton G. Salmons of Austin, Gaudineer & Comito, L.L.P., Des Moines, for appellee.

Considered by McGIVERIN, C.J., and LAVORATO, NEUMAN, SNELL, and CADY, JJ.

CADY, Justice.

This case places a county and the state government at odds over the administrative and financial care of mentally disabled persons in Iowa. The county instituted an action in district court to resolve the controversy. We conclude the county failed to exhaust its administrative remedies and reverse the judgment entered by the district court.

H.B. is the mentally disabled individual at the center of the dispute. He is thirty-one years old and has received social security disability benefits based upon his mental disability since he was ten years old. H.B. resided in a variety of facilities around the state following high school, and has lived in Keokuk County since 1984. He currently resides in an apartment and receives case management services through the Department of Human Services (DHS). These services basically involve community-supported living and vocational assistance.

Keokuk County has paid for the services received by H.B. since 1984. The county funded all categories of mental health, including developmentally disabled (DD), brain injured (BI), mildly retarded, moderately retarded, severely retarded, and profoundly retarded. The level or category of mental disability helps define the type of care the person requires. The various levels of care include institutionalized care, residential care facility living, and supervised apartment living.

The county learned it was not responsible for payment of the services it provided for all categories of mentally disabled residents of the county. Instead, it learned that county funding for developmentally disabled and brain injured was discretionary. Consequently, in December 1994, the Board of Supervisors for Keokuk County discontinued funding services for DD and BI persons.

At the time Keokuk County discontinued DD and BI funding, H.B. was receiving community-based services as part of a federal initiative called home and community based services--mental retardation (HCBS--MR) waiver program. This program provided home or community-based services for mentally retarded individuals who would otherwise qualify for services in an intermediate care facility. The program was administered by the DHS and required each person to be mentally retarded and in need of intermediate facility care. H.B. was evaluated for the program in 1994 and certified by the DHS to qualify. He was subsequently certified for 1995 and 1996. Under the program, Medicaid paid sixty-three percent of the costs of services while the county was responsible for thirty-seven percent of the costs.

The decision by Keokuk County to discontinue DD and BI funding did not immediately impact H.B. because he was under the HCBS--MR waiver program. Keokuk County, however, had received conflicting information in the past on the mental health classification of H.B. Although H.B. was certified as mentally retarded under the waiver program qualifications, his service providers had reported at various times that he was developmentally disabled.

On January 3, 1995, Keokuk County filed a petition for declaratory judgment in district court against H.B. The petition sought mental health information about H.B., requested H.B. submit to IQ testing, and asked the district court to decide whether the county was obligated to pay for the costs of his care and support. The DHS subsequently requested to intervene, and Keokuk County later cross-claimed against the DHS. The cross-claim alleged, among other things, the DHS was improperly operating the waiver program.

The DHS moved for summary judgment based on the failure of Keokuk County to exhaust administrative remedies. The district court denied the motion and the case proceeded to trial. In a lengthy written decision, the district court found Keokuk County was entitled to the mental health information from H.B., the DHS improperly delegated its authority under the waiver program, the waiver program was operated in violation of the DHS rules, the waiver program operated by the DHS was void as to H.B., the DHS violated Iowa Code section 25B.6 (1995), Keokuk County had no duty to fund H.B. in the waiver program, Keokuk County was entitled to restitution and interest from the DHS for the past funds it provided for H.B., and Keokuk County was not entitled to attorney fees.

H.B. and the DHS appealed. Keokuk County cross-appealed the denial of attorney fees.

I. Standard of Review.

Our scope of review for actions tried in equity is de novo. Iowa R.App. P. 4. However, the scope of review of rulings on subject matter jurisdiction is for correction of errors at law. White v. Northwestern Bell Tel. Co., 514 N.W.2d 70, 74 (Iowa 1994); Tigges v. City of Ames, 356 N.W.2d 503, 512 (Iowa 1984).

II. Exhaustion of Remedies.

H.B. and the DHS contend the action for declaratory judgment filed by Keokuk County constituted a challenge to the DHS decision to qualify H.B. for the waiver program. Consequently, they submit the county was required to exhaust the available administrative remedies provided by the DHS before invoking the jurisdiction of the district court. H.B. and the DHS raised this issue in their pleadings, and the DHS used it as the basis for a motion for summary judgment. The district court overruled the motion for summary judgment and found in the written ruling following the trial that there were no administrative remedies available for the county to exhaust.

The county claims the issue was not properly preserved for appeal. It asserts the DHS consented to the adjudication of the issues by the district court by intervening in the action, and both parties waived the exhaustion issue by failing to file an Iowa Rule of Civil Procedure 179(b) motion following the trial.

A. Waiver--Preservation of Error.

It is well-established that a party must exhaust any available administrative remedies before seeking relief in the courts. Shors v. Johnson, 581 N.W.2d 648, 650 (Iowa 1998). The district court is deprived of jurisdiction of the case if administrative remedies are not exhausted. Id.

When a party claims a jurisdictional challenge has been waived, it is often necessary to determine whether the specific challenge to jurisdiction targets subject matter jurisdiction or jurisdiction of a particular case. Subject matter jurisdiction refers to the authority of the court to hear and determine the general class of cases to which the proceeding belongs. Christie v. Rolscreen Co., 448 N.W.2d 447, 450 (Iowa 1989). It cannot be conferred by consent, waiver, or estoppel. State v. Mandicino, 509 N.W.2d 481, 483 (Iowa 1993). This is because parties to a lawsuit cannot establish jurisdiction where it has not been first conferred by the constitution or legislation. See Molitor v. City of Cedar Rapids, 360 N.W.2d 568, 569 (Iowa 1985). On the other hand, the failure to properly invoke the authority of the court in a particular case can be obviated by consent, waiver, or estoppel. Mandicino, 509 N.W.2d at 483.

Generally, the exhaustion-of-remedies requirement does not implicate subject matter jurisdiction. Shors, 581 N.W.2d at 650; see Holding v. Franklin County Zoning Bd. of Adjustment, 565 N.W.2d 318, 319 (Iowa 1997). This is because the exhaustion-of-remedy doctrine does not preclude judicial review, but merely defers it until the administrative agency has made a final decision. See 2 Am.Jur.2d Administrative Law § 505, at 491 (1994). Our legislature has given the district court subject matter jurisdiction to act in response to challenges to decisions made by administrative agencies, but requires this authority to be withheld until any available administrative remedies have been exhausted. Shors, 581 N.W.2d at 650; Iowa Code ch. 17A. Thus when a litigant requests judicial review before exhausting administrative remedies, the district court merely lacks authority to entertain a particular case. This is the type of challenge that can be waived.

The county claims the exhaustion requirement has been waived because the DHS consented to litigating the issues in the case in district court by intervening in the proceeding. It asserts the consent extended to the original declaratory judgment petition, as well as the subsequent cross-claim. Additionally, the county claims error was not preserved by filing a motion under rule 179(b).

An intervenor must typically accept an action as it exists at the time of intervention. See 59 Am.Jur.2d Parties §§ 173, 174, at 672-75 (1987). Thus, a party who intervenes in a case in which the court has subject matter jurisdiction, and asks for relief, waives any challenge to the authority or jurisdiction of the court over the particular case. Morse v. Morse, 247 Iowa 1113, 1122-23, 77 N.W.2d 622, 627-28 (1956). However, an intervenor is not prohibited from advancing other claims and defenses appropriate to the case following intervention. See 59 Am.Jur.2d Parties § 174 (1987).

In this case, the cross-claim brought after the DHS intervened raised issues well beyond the original proceeding, and changed the complexion of the lawsuit. It targeted the DHS and sought relief not included in the declaratory judgment. This permitted the DHS to challenge the cross-claim, including the authority of the court to hear it. The intervention did not constitute consent to any jurisdictional defects in the cross-claim. Moreover, any consent to the...

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