Harris v. Lukhard

• Decision Date: 02 May 1984
• Docket Number: No. 82-1703,82-1703
• Citation: 733 F.2d 1075
• Parties: , Medicare&Medicaid Gu 33,941 Carrie P. HARRIS and James F. Goldsby, on behalf of themselves and all others similarly situated; and Pansy Adams, Appellants, v. William L. LUKHARD, individually and as Commissioner of the Virginia Department of Welfare; James B. Kenley, individually and as Commissioner of the Virginia Department of Health; Robert J. Treibley, individually and as Acting Director of the Virginia Medical Assistance Program; Bill R. Baker, A. Martin Cader, M.D., Ann E. Cook, Grafton B. Daniel, M.D., Kathleen D. Hopkins, Evonne Knauff, Susan C. Oertel, individually and as members of the Virginia Medical Assistance Program Appeals Board; Leighton B. Langford, Jr., individually and as Director of the Bedford County Department of Social Services; and Ruth J. Jones, individually and as Director of the Prince Edward County Department of Social Services, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1075

733 F.2d 1075

5 Soc.Sec.Rep.Ser. 136, Medicare&Medicaid Gu 33,941

Carrie P. HARRIS and James F. Goldsby, on behalf of themselves and all others similarly situated; and Pansy Adams, Appellants, v. William L. LUKHARD, individually and as Commissioner of the Virginia Department of Welfare; James B. Kenley individually and as Commissioner of the Virginia Department of Health; Robert J. Treibley, individually and as Acting Director of the Virginia Medical Assistance Program; Bill R. Baker, A. Martin Cader, M.D., Ann E. Cook, Grafton B Daniel, M.D., Kathleen D. Hopkins, Evonne Knauff, Susan C Oertel, individually and as members of the Virginia Medical Assistance Program Appeals Board; Leighton B. Langford Jr., individually and as Director of the Bedford County Department of Social Services; and Ruth J. Jones, individually and as Director of the Prince Edward County Department of Social Services, Appellees.

No. 82-1703.

United States Court of Appeals, Fourth Circuit.

Argued Feb. 7, 1983.

Decided May 2, 1984.

J. Barrett Jones, Lynchburg, Va. (Jill A. Hanken, Virginia Poverty Law Center, Richmond, Va., Martin Wegbreit, Castlewood, Va., Client Centered Legal Services of Southwest Virginia, on brief), for appellants.

Robert T. Adams, Asst. Atty. Gen., Richmond, Va. (John A. Rupp, Senior Asst. Atty. Gen., Richmond, Va., Gerald L. Baliles, Atty. Gen., Richmond, Va., on brief), for appellees.

Before WINTER, Chief Circuit Judge, RUSSELL, Circuit Judge, and FAIRCHILD, ^* Senior Circuit Judge.

FAIRCHILD, Senior Circuit Judge.

Three named plaintiffs, one now deceased, brought a class action against several Virginia state and other officials. Mrs. Adams was permitted to intervene as a plaintiff. Plaintiffs had been denied eligibility for Medicaid benefits because they owned real estate exceeding specified values. They challenged procedures used by defendants (hereafter the agency) to evaluate real property resources and plaintiffs sought injunctive and declaratory relief. Both sides moved for summary judgment. The district court certified a plaintiff class, but granted the agency's motion and directed that the case be stricken from the docket. Plaintiffs appealed.

The district court's conclusions, some of which are challenged here, appear in Harris v. Lukhard, 547 F.Supp. 1015 (W.D.Va.1982).

I. Use of Tax Assessments to Determine Value

Under Virginia's Plan, ownership of one's home does not affect eligibility. Ownership of other real estate which produces a specified rate of return does not affect eligibility if the individual's equity does not exceed $6,000. Ownership of other real estate precludes eligibility unless its market value, added to liquidable personal property, does not exceed $1,500 for a single person and $2,250 for a married couple living together.

In determining the market value of real estate, the agency relies on the current assessment for tax purposes. No other evidence of value is considered, except that an applicant may show that the property cannot be sold, after a reasonable effort for sale has been made, or if sale would involve unreasonable loss. See 547 F.Supp. at 1018 n. 1.

Plaintiff Adams owns an interest in two pieces of real estate on which she does not reside. She gains income from one of them. The agency accepted the assessed valuations of the two parcels, and counted her share of the values against her. The agency refused to consider opinions of a county revenue commissioner and a bank officer that the parcels are worth less than the assessed values and less than enough to render her ineligible.

Plaintiffs Goldsby owned their home site and adjoining land, separately assessed. The agency counted the assessed valuation of the adjoining land against them. The agency refused to consider the opinion of a realtor that the fair market value was substantially less than the assessed value and less than $2,250, the threshold amount for ineligibility.

The facts as to plaintiff Harris will be later referred to.

Federal law requires that a state plan shall "include reasonable standards ... for determining eligibility;" "provide for taking into account only such ... resources as are ... available to the applicant or recipient," and "provide for reasonable evaluation of any such ... resources." 42 U.S.C. Sec. 1396a(a)(17).

The Constitution of Virginia, art. X, Sec. 2, requires assessment of real property at fair market value. An affidavit of the Director of the Property Tax Division in the Virginia Department of Taxation states that although localities had historically made fractional assessments, effective January 1, 1977 all real estate undergoing reassessment must be made at 100% of fair market value. Comparisons of sales prices with assessed values show that after general reassessments, assessed values average from 5 to 15% below sales prices. To the best of affiant's knowledge no county or city sales/assessment ratios have ever exceeded 100%. An affidavit by a professional appraiser and filed by plaintiffs does no more than point out the possibility of error, that as properties or neighborhoods deteriorate the assessments could exceed fair market values, and that in some counties and cities assessments are closer to fair market values than in others.

In their brief, plaintiffs assert, without specifying any support, that the assessment system "is inherently so unreliable that it should not be used as the sole method of determining fair market value." They also say, however, that they do not "argue that tax assessments are usually greater than fair market value," and that "Plaintiffs agree that the procedures used to set tax assessments are generally adequate."

Plaintiffs seem principally to rely on a statement in Board of Supervisors of Fairfax County v. Leasco Realty, Inc., 221 Va. 158, 166, 267 S.E.2d 608, 613 (1980) as follows:

... [I]f it is impractical or impossible to enforce both the standard of true value and the standard of uniformity, the latter provision is to be preferred as the just and ultimate end to be attained.

From this, they argue that application of the principle of uniformity will inevitably cause and will legally justify assessments in excess of fair market value. It is clear, however, from the Virginia cases that plaintiffs' assertion is wrong. The principle of uniformity will sometimes require an assessment below fair market value, but never above it.

Leasco was itself a case in which a taxpayer sought a reduction based on the principle of uniformity. The court cited Smith v. City of Covington, 205 Va. 104, 108, 135 S.E.2d 220, 222-23 (1964) to support the statement plaintiffs quote. The Smith court had quoted almost identical language from Skyline Swannanoa v. Nelson County, 186 Va. 878, 881, 44 S.E.2d 437, 439 (1947) and then quoted the explanation of that language given in Tuckahoe Woman's Club v. City of Richmond, 199 Va. 734, 738, 101 S.E.2d 571, 574 (1958):

But that does not mean that property in any taxing jurisdiction may be assessed in excess of and without relation to its fair market value as required by the Constitution. It means only that a taxpayer whose property is assessed at its true market value has a right to have the assessment reduced to the percentage of that value at which others are taxed so as to meet the uniformity required....

See also, Southern Ry. v. Commonwealth, 211 Va. 210, 176 S.E.2d 578, 581 (1970).

Thus, contrary to plaintiffs' argument, there is no principle of Virginia law which can cause an assessment to exceed fair market value.

Of course, a particular assessment may reflect an error. The property owner may apply for correction to the official who made the error, Sec. 58-1144, Va.Code, or may apply to a court for relief, Sec. 58-1145, Va.Code. The plan affords another safeguard. An applicant may demonstrate that he has made a reasonable effort to sell and has been unable to do so without unreasonable loss. The latter is not only a protection against over valuation of applicant's property, but it refutes plaintiffs' argument that the Virginia Plan permits taking into account resources which are not available to the applicant.

Federal law also requires that a state plan must provide for an opportunity for a fair hearing. 42 U.S.C. Sec. 1396a(a)(3). Regulations provide that:

(b) The State's hearing system must provide for--

(1) A hearing before the agency; or

(2) An evidentiary hearing at the local level, with a right of appeal to a State agency hearing.

* * *

(d) The hearing system must meet the due process standards set forth in Goldberg v. Kelly, 397 U.S. 245 [90 S.Ct. 1011, 25 L.Ed.2d 287] (1970), and any additional standards specified in this subpart.

42 C.F.R. Sec. 431.205.

Under additional standards of the fair hearing system:

The applicant ... must be given an opportunity to ... (c) Establish all pertinent facts and circumstances; ... and (e) Question or refute any testimony or evidence, including opportunity to confront and cross-examine adverse witnesses.

42 C.F.R. Sec. 431.242.

Plaintiffs assert that the Virginia Plan violates these requirements because an applicant is not permitted to produce evidence to establish the value of his real property if different from the assessment nor to refute the assessment.

It may be a sufficient answer that as to valuation of resources only a "reasonable evaluation" is required, and the use of assessment values, with the opportunity to contest them elsewhere, fulfills that requirement.

In any event, Virginia provides a fair hearing before a court which will consider additional evidence of fair market value in reviewing the assessments. Secs. 58-1145, et seq.; Smith v. City of Covington, supra. Plaintiffs contest reliance on this right of review as a delegation of this part of the Medicaid agency's task. We think that even if viewed as a delegation, it is appropriate and permissible. Although the regulations prohibit delegation of several types of...