Department of Public Welfare of Allen County v. Potthoff

• Decision Date: 04 November 1942
• Docket Number: 27738.
• Parties: COUNTY DEPARTMENT OF PUBLIC WELFARE OF ALLEN COUNTY et al. v. POTTHOFF.
• Court: Indiana Supreme Court

44 N.E.2d 494

220 Ind. 574

COUNTY DEPARTMENT OF PUBLIC WELFARE OF ALLEN COUNTY et al. v. POTTHOFF.

No. 27738.

Supreme Court of Indiana

November 4, 1942

Concurring Opinion Dec. 22, 1942.

Appeal from Superior Court, Allen County; George Leonard judge.

George N. Beamer, Atty. Gen., James P. Wason Deputy, Atty. Gen., and George L. Diven, of Indianapolis, for appellants.

James P. Murphy and James K. Rose, both of Fort Wayne, for appellee.

Ben J. Brown, of Indianapolis, Walter F. Bossert, of Liberty, and Remster A. Bingham, of Indianapolis, amici curiae.

SHAKE Judge.

On February 2, 1940, David L. Trisch made an application for old age assistance to the County Department of Public Welfare of Allen County. The application contained the following offer:

'For any assistance granted to me I hereby agree to reimburse the State of Indiana, the county of Allen, and any other county or counties of the State from any and all real or personal property which I now own or may hereafter acquire, and I further agree to submit to the County Department of Public Welfare such additional properly acknowledged agreements or instruments as may be required to carry out this agreement. I also agree to assign as collateral security for such agreement such part of my personal property as the County Department shall require in accordance with the rules and regulations of the State Department of Public Welfare, under the provisions of the Welfare Act of 1936 as amended. I further agree to all other requirements and provisions of said act, and any rules and regulations issued thereunder.

'I understand and agree that any assistance granted me, together with interest at 3%, becomes a lien against me and upon all my real property, whether now owned or subsequently acquired by me, and that such assistance, together with interest [220 Ind. 578] at 3% also becomes a preferred claim against my estate.'

Subsequently, on February 29, 1940, the County Department of Public Welfare of Allen County made an award to said applicant in the amount of $28 per month to begin on March 1, 1940, which award was duly recorded in the office of the Recorder of Allen County on March 4, 1940. Between March 1, 1940, and January 2, 1941, when David L. Trisch died, the county department paid him under said award $308. This action was begun by the filing of a claim, reciting the above facts, against the estate of said decedent for the recovery of the amount paid under said award with interest. The appellee demurred to the claim for want of facts. The demurrer was sustained and the appellants refused to plead further, whereupon judgment was entered in favor of the estate. This appeal followed.

The facts recited in the claim would be sufficient to make out a case of liability against the appellee estate under the provisions of Chapter 3, Acts 1936 (Spec.Sess.), but § 38 thereof was amended and §§ 44, 45, 46, 47, and 48 were repealed by Chapter 201, Acts 1941. By said act of 1941 all of the provisions of the act of 1936 relating to a lien for old age assistance, the agreement of the applicant to reimburse the state, the transfer of property to the county department, and recovery from the recipient or his estate were stricken out.

The appellants say that the state, the counties thereof, and the federal government had vested and contractual interests in the reimbursement agreements in existence when the act of 1941 went into effect, and they rely upon § 10 of Art. 1 of the Constitution of the United States and § 24 of Art. 1 of the Constitution of Indiana, which prohibit the passage of any law impairing the obligation of contracts; upon 1 R.S. 1852, ch. 92, § 2, § 1-302, Burns' 1933, § 8, Baldwin's 1934; which provides that no rights vested under existing laws shall be affected by the repeal thereof; and upon Acts 1877 (Spec.Sess.), ch. 36, § 1, § 1-307, Burns' 1933, § 13, Baldwin's 1934; which says that the repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute, unless the repealing act shall so expressly provide.

The appellants conceded in oral argument at the bar of this court that if their theory is sound, that is, if a contract with a recipient of old age assistance entered into under the act of 1936 is unaffected by the act of 1941, then the liability under such contract is continuing and applies to benefits subsequently paid. The appellee says this would result in two classes of citizens receiving old age assistance at the same time, one of which would be burdened to reimburse the state, while the other would be free from any such exaction, and that such a situation would be intolerable by reason of § 23 of Article 1 of the state Constitution, which prohibits the General Assembly from granting to any citizen, or class of citizens, privileges or immunities which, upon the same terms, shall not equally belong to all. The appellee asserts, also, that no contractual or vested rights are involved since there is no impediment to the sovereign discharging or releasing a liability in its favor; that the federal government has no interest in the subject matter; and that § 1-307, Burns' 1933, § 13, Baldwin's 1934, saving actions for penalties, forfeitures, or liabilities from the effect of a repeal, is not applicable to the case.

Since assistance was paid the appellee's decedent from the execution of the contract until his death on January 2, 1941, we are not concerned with what his rights might have been had payments been withheld from him. While the contract clause of the Constitution protects parties dealing with the state, it does not, of course, affect the validity of statutes releasing obligations due the state. 16 C.J.S., Constitutional Law, § 285. Miller v. Henry, 1912, 62 Or. 4, 124 P. 197, 41 L.R.A.,N.S., 97. State ex rel. Arpin v. George, 1913, 123 Minn. 59, 142 N.W. 945. There is, consequently, no question as to the impairment of the obligation of a contract with the state involved in this case. The same may be said as to vested rights. A state has no vested rights which are immune from its legislative control. 16 C.J.S., Constitutional Law, § 243. People v. Frisbie, 1864, 26 Cal. 135. State v. Dexter, 1872, 10 R.I. 341. The case of County of Los Angeles v. Jessup, 1938, 11 Cal.2d 273, 78 P.2d 1131, is distinguishable. It was there held that an act of the legislature undertaking to release reimbursement liens arising out of the administration of an old age assistance law was invalid because of a provision in the constitution of that state prohibiting a gift of public money or thing of value. There is no comparable prohibition in the Constitution of Indiana, except as to religious and theological institutions. § 6, Art. 1, Constitution of Indiana.

Our public welfare act must, of course, be read in connection with the Social Security Act of the Congress of the United States of August 14, 1935, 42 U.S.C.A. §§ 301 to 306. Together, these acts constitute what has come to be known as grant-in-aid legislation under which, in this instance, the cost of old age assistance is borne as follows: 50% by the federal government, 30% by the state, and 20% by the counties. Arguing from this premise, the appellants declare that the federal government and the counties of this state have contractual and vested interests in reimbursement agreements with recipients of old age assistance entered into under our act of 1936 which the General Assembly could not forego.

We find nothing in the act of Congress that requires the states to exact reimbursement from the estates of recipients of old age assistance or which precludes the states from releasing such exactions as may have been previously acquired, though § 51 of our act of 1936, still in effect, does provide: 'The state department [of public welfare] shall also certify to the auditor of state a statement of the amounts received from recipients or from their estates. On amounts collected from estates, the state department shall specify the sum to which the United States government shall be entitled which in every case shall be fifty per cent of the net amount collected by reason of old age assistance, exclusive of funeral expenses, * * *. The amount due the United States shall be paid promptly from the old age assistance account of the general fund of the state treasury to the United States government, upon the order of the state department and the audit and warrant of the auditor of state.' The above provision is in complete harmony with the theory that it is applicable only to the distribution of funds recovered on account of fraud or error. City of Worcester v. Quinn, 1939, 304 Mass. 276, 23 N.E.2d 463, 125 A.L.R. 707.

Bolivar Twp. Bd. of Fin. of Benton County v. Hawkins, 1934, 207 Ind. 171, 189, 191 N.E. 158, 165, 96 A.L.R. 271, 282, is authority for the proposition that a civil township 'is a political subdivision of the state, and a creature of the Legislature and acts as the agent of the state. It acts pursuant to statutory authority. The real contracting party is the state, and it has been held in many cases that the state may withdraw the power to so contract, that it may release the liability created and without the consent to the agent. Any by the great weight of authority this does not amount to the impairment of contracts as provided for in the federal and state Constitutions.' In State ex rel. Jackson, Attorney General, v. Middleton, 1939, 215 Ind. 219, 19 N.E.2d 470, 20 N.E.2d 509, this rule was applied to county officers and county funds, and in Kassabaum, Adm'r, v. Board of Finance of Town of Lakeville, 1939, 215 Ind. 491, 20 N.E.2d 642, the doctrine of the Bolivar case was reaffirmed and declared to be the settled law of...