In Interest of McMullen

• Decision Date: 07 May 1991
• Docket Number: No. 900266,900266
• Citation: 470 N.W.2d 196
• Parties: In the Interest of Joshua McMULLEN, a Minor. Marie NERMYR, on Behalf of and as Guardian Ad Litem and Trustee for Joshua McMULLEN, a minor, Appellee, v. NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES, acting through GRAND FORKS COUNTY SOCIAL SERVICES, Appellant. Civ.
• Court: North Dakota Supreme Court

Page 196

470 N.W.2d 196

In the Interest of Joshua McMULLEN, a Minor.

Marie NERMYR, on Behalf of and as Guardian Ad Litem and Trustee for Joshua McMULLEN, a minor, Appellee, v. NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES, acting through

GRAND FORKS COUNTY SOCIAL SERVICES, Appellant.

Civ. No. 900266.

Supreme Court of North Dakota.

May 7, 1991.

Sharon W. Martens (argued) of Dahl, Greenagel, Currie & Petersen (Grafton Office), Grafton, for appellee.

Sidney J. Hertz Fiergola (argued), Asst. Atty. Gen., Atty. General's Office, Bismarck, for appellant.

MESCHKE, Justice.

The North Dakota Department of Human Services [DHS], acting through Grand Forks County Social Services [Social Services], appeals from a judgment declaring that settlement proceeds held for Joshua McMullen, a minor, are not available for determining Joshua's share of welfare benefits. We reverse and remand for further proceedings.

In 1982 Joshua sustained "serious and permanent injuries" in an accident while he was riding in an automobile driven by Deborah McMullen, his mother. Marie Nermyr, Joshua's grandmother and guardian ad litem, sued Deborah and Mid-Century Insurance Company on behalf of Joshua. On September 30, 1985, the district court for Walsh County approved a $20,000 settlement of the lawsuit. The order approving the settlement decreed:

That the $20,000.00 settlement proceeds be disbursed in the following manner:

* * * * * *

The net remaining proceeds of $13159.12, shall be invested solely for the benefit of Joshua McMullen in the following manner: The net settlement funds shall be deposited by the guardian ad litem in a prudent manner in certificates of deposit at a financial institution of her choice. The guardian may disburse up to a total of $1000.00 without prior court approval for the benefit of Joshua McMullen. Except for other disbursements made with court approval prior to age of majority, the balance of the funds shall be disbursed to Joshua McMullen at such time as he reaches the majority age.

Nermyr used the authorized $1,000 to benefit Joshua, invested the balance of about $12,000, and later, with court approval, reinvested a portion with another financial institution.

Meanwhile, on October 2, 1985, Deborah applied to Social Services for welfare benefits for Joshua, another child, and herself through Aid For Dependent Children (AFDC). According to Deborah, she informed Social Services that she did not have access to Joshua's settlement. Deborah's application for benefits stated that no other persons were holding available money for her family members and that no legal actions in which her family members would get money or medical benefits were pending. Deborah thereafter received AFDC payments, medical assistance, and food stamps.

Later, Social Services contacted Deborah about the settlement and, in a letter dated July 24, 1989, notified her that to determine her current eligibility:

1) YOU MUST PETITION THE COURT TO SEE IF THE FUNDS ARE AVAILABLE [TO] JOSHUA.

2) WE ALSO NEED VERIFICATION OF WHAT HAPPENED TO THE MONIES SINCE SEPTEMBER, 1985.

3) WE NEED VERIFICATION OF THE CURRENT BALANCES OF ALL ACCOUNTS THAT THE FUNDS ARE CURRENTLY IN.

THESE VERIFICATIONS MUST BE RECEIVED BY US BY AUG. 4, 1989 OR YOUR CASE WILL REMAIN CLOSED EFFECTIVE JULY 31, 1989.

On July 31, 1989, Deborah requested a "fair hearing" before the DHS, claiming that Joshua's settlement "cannot be considered 'resources' by Human Services."

On August 3, 1989, Nermyr also sought declaratory relief from the same court that restricted use of the settlement, asking

that the monies awarded to Joshua, and controlled by the guardian ad litem and the court, [are] unavailable to Joshua until his legal majority is attained, are not resources as defined by the North Dakota Department of Human Resources and therefore do not affect the eligibility for social service programs for Deborah McMullen, Joshua's mother....

The DHS moved to dismiss, contending that a declaratory judgment was not the proper procedure to determine the availability of funds for Joshua, and that "[t]he proper course of action would be to submit a good faith petition to the court asking whether the funds from Joshua's personal injury award ... are accessible." The court denied the motion.

After an evidentiary hearing on the merits, the trial court ruled that it did not have authority to determine Deborah's eligibility for welfare benefits, but that it would decide the accessibility of Joshua's settlement. The court decided

that the trust fund shall not be available for the purposes sought by [DHS], and therefore a declaratory judgment is herewith ordered forbidding the use of the trust fund as a resource by the [DHS].

On appeal, the DHS contends that because it is not seeking to reach the settlement and because it is not asserting an adverse claim against Joshua, he did not meet the requirements for obtaining declaratory relief. The DHS argues that, instead of seeking a declaration that the settlement was unavailable, Joshua should have asked the court whether or not it was necessary to release money from the settlement for his support. The DHS argues that the court's declaratory relief effectively enjoined it from making an administrative determination about Deborah's eligibility for welfare benefits.

Joshua concedes that the determination of Deborah's eligibility for welfare benefits is an administrative question. Asserting that he was following Social Services' instructions and has met the requirements for declaratory relief, Joshua argues that the trial court properly declared that the settlement was not available for his support at this time.

The declaratory judgment act is remedial and is to be liberally construed and administered. NDCC 32-23-12; Iverson v. Tweeden, 78 N.D. 132, 48 N.W.2d 367 (1951). The purpose of declaratory relief is to settle uncertainties about rights, status, and other legal relations in an underlying justiciable controversy. NDCC 32-23-01; 32-23-05; 32-23-12; Iverson v. Tweeden. In Iverson, we outlined the criteria for obtaining declaratory relief:

The requisite precedent facts or conditions which the courts generally hold must exist in order that declaratory relief may be obtained may be summarized as follows: (1) there must exist a justiciable controversy; that is to say, a controversy in which a claim of right is asserted against one who has an interest in contesting it; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy, that is to say, a legally protectible interest; and (4) the issue involved in the controversy must be ripe for judicial determination....

In order to present a justiciable controversy under the declaratory judgments act, the complaint must allege facts upon which the court can render a judgment or decree that will terminate the controversy or remove an uncertainty....

Among the essentials necessary to the raising of a justiciable controversy is the existence of a genuine conflict in the tangible interests of the opposing litigants. Complainant must prove his possession of a legal interest or right which is capable of and in need of protection from the claims, demands, or objections emanating from a source competent legally to place such legal interest or right in jeopardy. Although complainant need not necessarily possess a cause of action (as that term is ordinarily used) as a basis for obtaining declaratory relief, nevertheless he must, as a minimum requirement, possess a bona fide legal interest which has been, or with respect to the ripening seeds of a controversy is about to be, affected in a prejudicial manner.

48 N.W.2d at 370-371. Joshua's claim is suitable for declaratory relief.

Joshua has a bona fide legal interest in whether it is necessary to use money from his settlement for his support before he reaches majority. Although the DHS is not directly seeking to reach Joshua's settlement, it notified his mother to "petition the court to see if the funds [were] available." The DHS position creates a claim adverse to Joshua because, if it is necessary to use any settlement money for his current support, the amount of the settlement remaining for Joshua when he reaches majority will be reduced. Conversely, under the regulations for receiving welfare, Deborah's eligibility is affected by the amount and availability of Joshua's "income and resources." See 42 U.S.C.S. Sec. 602(a)(7)(A); 45 CFR 233.20(a)(3)(ii)(D) and (F). Simple computations show that the amount of "income and resources" available to an applicant reduces the amount of welfare benefits paid by the DHS. Those offsetting calculations demonstrate a genuine conflict in tangible, adverse interests of Joshua and the DHS. Those adverse interests create an uncertainty about the effect of Joshua's settlement on the extent of Deborah's eligibility for welfare benefits. A declaratory judgment will settle that uncertainty.

Still, relying on Dahner v. Daner, 374 N.W.2d 604 (N.D.1985), the DHS argues that Joshua asked the trial court the wrong question. The DHS contends that Joshua should have asked the trial court whether it is necessary to invade the settlement for his support.

Yet, it was the DHS that directed Deborah to "petition the court to see if the funds [were] available [to] Joshua." Joshua asked the court to declare that his settlement was "unavailable" for purposes of determining the extent of Deborah's eligibility for welfare benefits. Joshua brought the declaratory action against the DHS before the same district court judge that was supervising Joshua's settlement. See Matter of Welfare of K.S., 427 N.W.2d 653 (Minn.1988) [appeal from declaratory judgment determining availability of minor's settlement was properly before supreme court even though not initially brought in same court supervising settlement]. The DHS appeared before the trial court and...