Hofer v. Montana Dphhs

• Decision Date: 06 December 2005
• Docket Number: No. 04-395.,04-395.
• Citation: 2005 MT 302,124 P.3d 1098,329 Mont. 368
• Court: Montana Supreme Court
• Parties: In the Matter of the Fair Hearing of Rita HOFER, Mary Wollman, Anna Hofer, Bertha Hofer, Sarah Hofer, Marie Hofer and Judith Hofer, Claimants, Petitioners and Cross-Appellants, v. The MONTANA DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, Respondent and Appellant.

124 P.3d 1098

2005 MT 302

329 Mont. 368

In the Matter of the Fair Hearing of Rita HOFER, Mary Wollman, Anna Hofer, Bertha Hofer, Sarah Hofer, Marie Hofer and Judith Hofer, Claimants, Petitioners and Cross-Appellants, v. The MONTANA DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, Respondent and Appellant.

No. 04-395.

Supreme Court of Montana.

Argued and Submitted March 5, 2005.

Decided December 6, 2005.

COPYRIGHT MATERIAL OMITTED

Kent M. Kasting, Kasting (argued), Kauffman & Mersen, Bozeman, Montana; Jeff Sveen, Siegel Barnett & Schultz, Aberdeen, South Dakota, for Claimants, Petitioners and Cross-Appellants.

Christine Killgore Lannan (argued), Russell E. Cater, Special Assistant Attorneys General, Department of Public Health and Human Services Office of Legal Affairs, Helena, Montana, for Respondent and Appellant.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 The Department of Public Health and Human Services ("DPHHS") appeals from a Memorandum and Order of the Montana First Judicial District Court, Lewis and Clark County, in which the court held that the net assets of King Colony Ranch, Incorporated, ("KCR" or "Colony")—a Hutterite colony to which the seven above-named Claimants ("Claimants") belong—are not available to Claimants and that a trust relationship does not exist between Claimants and KCR, nor between DPHHS and KCR. On cross-appeal, Claimants argue that the District Court, in granting Claimants' petition, failed to address an allegedly erroneous conclusion of law made at the administrative level, and ask this Court to affirm the result reached by the District Court but explicitly reverse the administrative agency's conclusion that KCR owes Claimants an enforceable legal duty of support. We reverse in part and remand for further proceedings. Because we conclude that the trust relationship analysis is dispositive of the question of whether the Colony's resources are available for the benefit of the Claimants as beneficiaries, we need not address the related question of whether the Colony owes a legal duty of support to its members.

ISSUES

¶ 2 The parties present multiple issues on appeal and cross-appeal. However, we have determined the dispositive issues to be:

¶ 3 1. Did the District Court err when it concluded that an express trust does not exist between KCR and the members of the King Hutterite Colony ("Colony members")?

¶ 4 2. Are Claimants entitled to participate in the Family-Related Medicaid Program?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 Claimants are members of KCR, a Hutterite Colony located near Lewistown. Claimants had been participants in a particular Medicaid program, called the Family-Related Medicaid Program, since about 1991. To be eligible for this program, applicants must meet two "tests"—an "income test," and a "resource test." Under the income test, an applicant cannot have income exceeding $3,000 per year. The parties agree that Claimants have income of less than $3,000 per year and thus the income test is not an issue in this case. Under the resource test, an applicant cannot have resources which are determined to be both "countable" and "available" which exceed $3,000 in value.

¶ 6 A few years after Claimants began receiving Medicaid benefits, DPHHS scrutinized Claimants' resources and income to determine if Claimants had been correctly deemed eligible for Medicaid. After reviewing KCR's organizational documents, DPHHS concluded that a trust relationship exists between KCR and the Colony members, including Claimants. Additionally, DPHHS determined that one hundred percent of the net worth of KCR—which totals approximately $2.1 million—is available to each individual Colony member. On December 17, 2001, DPHHS notified Claimants that their Medicaid benefits were being terminated because the resources available to each of them exceeded the allowable resource limit of $3,000.

¶ 7 Claimants requested a Fair Hearing before the Board of Public Assistance ("BPA"). A BPA Hearings Officer presided over a four-day hearing during the summer of 2002. On January 16, 2003, the Hearings Officer, filed a Fair Hearing Decision in which he concluded, based on the Colony's Articles of Incorporation and upon the testimony of the Claimants regarding the care provided to them by the Colony, that a trust relationship existed between KCR and the Colony members with KCR as the Trustee and the members of the Colony as beneficiaries, and that KCR is legally obligated to support the Colony members. The Hearings Officer further concluded that the assets of KCR were available to each individual Colony member on a pro rata basis.

¶ 8 Finally, the Hearings Officer addressed the question of whether the Claimants were entitled to the benefit of any resource exclusions, pursuant to Rule 37.78.401, ARM, when considering what resources should be counted against them for eligibility purposes. The Officer rejected the Department's contention that no exclusions could apply in trust situations, concluding that a reasonable pro rata analysis of the countable resources held in the common treasury needed to be conducted so as to determine the Claimants' eligibility for Medicaid. The Hearings Officer accordingly reversed the closure of Medicaid to the Claimants and ordered remand for resource determinations in accordance with its Decision.

¶ 9 DPHHS and Claimants both appealed portions of the Fair Hearing Decision to the full BPA. On June 3, 2003, the BPA affirmed the Hearings Officer's findings, and some of his legal conclusions. Although the BPA agreed that a trust exists between KCR and the Colony members, it reversed the conclusion that KCR's assets were available to individual Colony members and that each Colony member has access to a pro rata share of KCR's assets. It did not reach the issue of whether any of KCR's assets would be excludable pursuant to Rule 37.78.401, ARM.

¶ 10 DPHHS and Claimants both sought judicial review of this decision in the District Court. DPHHS challenged the BPA's conclusion that KCR's assets were not available to the Colony members and the conclusion that these resources, if available, would be allocated to each Colony member on a pro rata basis. Claimants appealed the conclusion that a trust relationship exists between themselves and KCR, and further challenged the conclusion that KCR owes the Colony members a legal duty of support.

¶ 11 The District Court did not find the same language in KCR's organizational documents to be pertinent to its decision as did the Hearings Officer and the BPA. It concluded that KCR's assets were not available to individual Colony members, and furthermore, that a trust relationship between KCR and the Colony members does not exist. The District Court did not address the BPA's conclusion that KCR has a legal duty to support its members. From the District Court's Memorandum and Order, filed March 10, 2004, both parties appeal.

STANDARD OF REVIEW

¶ 12 Actions brought before the BPA are subject to the requirements of the Montana Administrative Procedure Act ("MAPA"). Kirchner v. State, 2005 MT 202, ¶¶ 8-9, 328 Mont. 203, ¶¶ 8-9, 119 P.3d 82, ¶¶ 8-9. The standard of review of an agency decision under MAPA, set forth at § 2-4-704(2), MCA, provides in pertinent part:

The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because:

(a) the administrative findings, inferences, conclusions, or decisions are: . . . (v) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; [or] (vi) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. . . .

¶ 13 A three-part test is used to determine whether agency findings are clearly erroneous: (1) the record is reviewed to determine if the findings are supported by substantial evidence; (2) if the findings are supported by substantial evidence, it will be determined whether the agency misapprehended the effect of the evidence; and (3) if substantial evidence exists and the effect of the evidence has not been misapprehended, the reviewing court may still decide that a finding is clearly erroneous if a review of the record leaves the court with a definite and firm conviction that a mistake has been made. Total Mechanical Heating v. UEF, 2002 MT 55, ¶ 22, 309 Mont. 84, ¶ 22, 50 P.3d 108, ¶ 22 (citation omitted).

¶ 14 An agency's conclusions of law are reviewed to determine if they are correct. Matter of Kalfell Ranch, Inc. (1994), 269 Mont. 117, 122, 887 P.2d 241, 245. The foregoing standard of review is applicable to both the District Court's review of the administrative decision and our subsequent review of the District Court's decision. O'Neill v. Department of Revenue, 2002 MT 130, ¶ 10, 310 Mont. 148, ¶ 10, 49 P.3d 43, ¶ 10 (citations omitted).

DISCUSSION

ISSUE ONE

¶ 15 Did the District Court err when it concluded that an express trust does not exist between KCR and the Colony members?

¶ 16 DPHHS argues that the District Court erroneously disregarded the findings made at the administrative level and substituted its own findings in their place. DPHHS further argues the District Court erred when it reversed the conclusion of the Hearings Officer, as affirmed by the BPA, that KCR holds its assets in trust for the benefit of the Colony members.

¶ 17 DPHHS argues that under the provisions of § 72-33-201, MCA, an express trust exists between KCR and the Colony members. Section 72-33-201(1), MCA, states that a trust may be created by a declaration of a property owner that the owner holds the property as trustee. Section 72-33-201(2), MCA, states that a trust may be created by a transfer of property by the owner during the...