Bazan v. Department of Social and Health Services

• Decision Date: 28 April 1980
• Docket Number: No. 7581-1-I,7581-1-I
• Citation: 612 P.2d 413,26 Wn.App. 16
• Parties: Mary Jane BAZAN, Appellant, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, State of Washington, Respondent.
• Court: Washington Court of Appeals

Page 16

26 Wn.App. 16

612 P.2d 413

Mary Jane BAZAN, Appellant, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, State of Washington, Respondent.

No. 7581-1-I.

Court of Appeals of Washington, Division 1.

April 28, 1980.

Reconsideration Denied June 19, 1980.

Evergreen Legal Services, John R. Moffat, Mount Vernon, for appellant.

Donald Foss, Jr., Asst. Atty. Gen. Seattle, for respondent.

CALLOW, Chief Judge.

This appeal involves the construction and constitutionality of RCW 74.04.300, which provides for the recovery of public assistance overpayments; the validity of WAC 388-44-020, which declares as fraud a public assistance recipient's failure to notify the Department of Social and Health Services of any change in circumstances affecting eligibility; and the computation of medical assistance and food stamp overpayments.

Prior to May of 1975, Mary Jane Bazan received intermittent public assistance payments under the Aid to Families with Dependent Children (AFDC) program. The assistance granted Ms. Bazan fell within the AFDC-E (unemployed father) category of assistance authorized by 42 U.S.C.A. § 607 (1974 & Supp. 1979) and made available to two-parent families under limited circumstances. ¹ In May of 1975, Ms. Bazan reported that the natural father of her children, Joe DeLeon, had left her home. Ms. Bazan's grant was thereafter changed to the AFDC-R (regular) category of assistance pursuant to 42 U.S.C.A. § 606(a) (1974), which provides AFDC federal matching funds to the states to aid the needy child under the age of 18 who has been deprived of parental support or care by reason, inter alia, of a parent's continued absence from the home and who is living with any of the relatives specified in the statute. ² Ms. Bazan received AFDC-R assistance, including medical care, and food stamps over the next 25 months.

Joe DeLeon was present in Ms. Bazan's home for 10 of the 25 months during which she received the AFDC-R assistance and food stamps. Ms. Bazan stated that she did not report his presence to the Department of Social and Health Services due to her expectation that he would not remain in the home permanently and because of his failure to provide any financial support for his children. Ms. Bazan had no income during the 25-month period other than her AFDC-R assistance and food stamps.

Following a report to the department and an investigation by it regarding Mr. DeLeon's presence in the home, Ms. Bazan requested and received a hearing to determine her eligibility for assistance during the 25-month period. The hearing decision concluded that Ms. Bazan was eligible to receive grant and medical assistance and food stamp benefits only during the 15 months that Mr. DeLeon was absent from Ms. Bazan's home. The decision also concluded that Ms. Bazan's reasons for not notifying the agency of Mr. DeLeon's presence were insufficient to overcome the presumption of fraud contained in WAC 388-44-020(2). In determining the amount of overpayment, the decision concluded that Ms. Bazan's eligibility for an AFDC-E grant and non-assistance food stamps could not be determined because no application for them had been made during the 25-month period. The total grant and medical assistance overpayments included a 25 percent fraud penalty pursuant to RCW 74.04.300. The department did not take the position that the food stamps were fraudulently obtained.

Ms. Bazan filed a timely petition for review in the superior court. The trial court affirmed the department's decision.

Ms. Bazan appeals. Four issues are raised:

1. Has the department exceeded its authority be declaring a recipient's failure to notify the department of any change in circumstances affecting eligibility as a fraud which subjects the recipient to a 25 percent overpayment penalty?

2. Is the amount of an overpayment fraudulently obtained by an ineligible recipient to be determined under RCW 74.04.300 by subtracting from the amount of assistance to which the recipient was not entitled the amount of assistance that the recipient would have been eligible to receive during the period of ineligibility from any other category of assistance?

3. Did the department err in calculating the amount of the food stamp overpayment?

4. Does the recoupment authorized by RCW 74.04.300 of an extra 25 percent of funds fraudulently received under the AFDC program violate the Supremacy Clause as contrary to the Social Security Act?

The first issue is whether the department exceeded its authority by declaring a recipient's failure to notify the department of any change in circumstances affecting eligibility as a fraud which subjects the recipient to a 25 percent overpayment penalty. Ms. Bazan argues that RCW 74.04.300 does not authorize the department to impose a 25 percent overpayment penalty because she had no obligation to report the presence of Mr. DeLeon in her home, citing State v. Walters, 8 Wash.App. 706, 508 P.2d 1390 (1973). She concedes that his presence in her home rendered her ineligible for any category of AFDC assistance due to his failure to register for the Work Incentive Program as required by 42 U.S.C.A. § 607 (1974 & Supp. 1979).

RCW 74.04.300 provides in part as follows:

If a recipient receives public assistance for which he is not eligible, or receives public assistance in an amount greater than that for which he is eligible, the portion of the payment to which he is not entitled shall be a debt due the state: Provided, That if any part of any assistance payment is obtained by a person as a result of a wilfully false statement, or representation, or impersonation, or other fraudulent device, or wilful failure to reveal resources or income, one hundred twenty-five percent of the amount of assistance to which he was not entitled shall be a debt due the state and shall become a lien . . . It shall be the duty of recipients of public assistance to notify the department within twenty days of the receipt of possession of all income ³ or resources ⁴ not previously declared to the department and any failure to so report shall be prima facie evidence of fraud : . . .

(Emphasis added.) WAC 388-44-020(2) partially provides that

(t)he failure of any recipient of public assistance to notify the department within twenty days of any change in circumstances affecting eligibility or need, including receipt or possession of all income or resources not previously declared to the department, shall be prima facie evidence of fraud.

Accord, WAC 388-28-255(2). If assistance is obtained as a result of a willful act of the recipient to deceive the department, i.e., by fraud, WAC 388-44-020(1), the department's regulations provide that the overpayment shall be computed as 125 percent of the amount of assistance, including medical care, to which the recipient was not entitled. WAC 388-44-035(1)(a); WAC 388-44-040(1) (a).

Resolution of the first issue depends in part upon whether a recipient's failure to report may constitute either a "fraudulent device" or "false representation" within RCW 74.04.300. We hold that it may.

A "fraudulent device" ordinarily imports a plan, project, scheme, or artifice, devised by design to trick or deceive. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); State v. Whitehouse, 123 Wash. 461, 463, 212 P. 1043 (1923); Black's Law Dictionary 538 (Rev. 4th ed. 1968). Fraud, on the other hand, is a less specific concept which may encompass an intentional misrepresentation of a material, existing fact that is relied upon in good faith by another to his damage. E.g., Marion v. Grand Coulee Dam Hotel, 35 Wash.2d 589, 592, 214 P.2d 204 (1950). Fraud may also be the willful concealment of a material fact that one is bound to disclose in good faith. Kaas v. Privette, 12 Wash.App. 142, 147, 529 P.2d 23, 80 A.L.R.3d 1 (1974). The department in this case made no finding relative to a fraudulent device but rested its decision upon the presumption of fraud established by WAC 388-44-020(2). If RCW 74.04.300 requires findings supportive of a fraudulent device, the department's decision would not permit a conclusion that sufficient proof had been established to meet the statutory mandate. If, however, the legislature intended a fraudulent device to encompass fraud, and if the department acted within the scope of its authority by declaring as fraud a recipient's failure to notify the department of any change in circumstances affecting eligibility, then the department's decision must stand.

The interpretation of a statute by an agency entrusted with its administration is entitled to great weight. Moses v. Department of Social & Health Servs., 90 Wash.2d 271, 274, 581 P.2d 152 (1978). Where the statutory language is clear and unambiguous, there is no room for construction. Hatfield v. Greco, 87 Wash.2d 780, 557 P.2d 340 (1976). In the case of an ambiguity, we must examine the statutory scheme as a whole, construing it so that no portion is rendered superfluous. Sim v. Washington State Parks & Recreation Comm'n, 90 Wash.2d 378, 383, 583 P.2d 1193 (1978); Hartman v. Washington State Game Comm'n, 85 Wash.2d 176, 179, 532 P.2d 614 (1975). Statutory language must be interpreted with reference to the general object and purpose of the legislation. Strenge v. Clarke, 89 Wash.2d 23, 29, 569 P.2d 60 (1977).

We conclude from the language of RCW 74.04.300 that the legislature intended to include fraud within the term "fraudulent device." An ambiguity exists due to the statute's language that a recipient's failure to notify the department of the "receipt or possession of all income or resources not previously declared" shall be "prima facie evidence of fraud: . . ." RCW 74.04.300. RCW 74.04.300 does not state specifically that fraud shall subject a recipient to the 25 percent penalty, though this was manifestly the legislature's purpose. This ambiguity compels an interpretation of the statute so that the affirmative notification requirement is...