In re Claussen
| Decision Date | 26 September 1990 |
| Docket Number | Bankruptcy No. 89-40495-PKE,Adv. No. 90-4007-PKE. |
| Citation | 118 BR 1009 |
| Parties | In re Harry Frederick CLAUSSEN, Debtor. Harry Frederick CLAUSSEN, Plaintiff, v. BROOKINGS COUNTY, SOUTH DAKOTA, Defendant. |
| Court | U.S. Bankruptcy Court — District of South Dakota |
COPYRIGHT MATERIAL OMITTED
Steven G. Ahrendt, Ellingson & Ahrendt, Flandreau, S.D., for plaintiff.
Wm. Mark Kratochvil, Deputy States Atty., Office of the States Atty., Brookings County, Brookings, S.D., for defendant.
Debtor/Plaintiff Harry Frederick Claussen ("Claussen") filed an adversary complaint to determine the validity and priority of a statutory lien arising out of emergency medical services provided to his indigent wife which were paid for by Brookings County ("County"), South Dakota. This matter mandates that the Court balance valued competing policies: a local government's interest in being reimbursed for making compulsory health care payments, which enjoy special exemption status under state law, and federally-created bankruptcy policies of the automatic stay, the fresh start and uniform bankruptcy law. For reasons outlined below, the Court holds the indigent lien is avoided and discharged. The instant matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I), (J), and (K). This Court has jurisdiction over the parties and subject matter of this action under 28 U.S.C. § 1334. This memorandum constitutes Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52 and Bankr.R. 7052.
Claussen and his wife, Lilly, owned a house in joint tenancy in Elkton, Brookings County, South Dakota. Lilly checked into Sioux Valley Hospital on March 31, 1989. The hospital served notice of emergency hospitalization on Brookings County on April 3, 1989. Lilly died April 16, 1989. On October 11, 1989, the hospital submitted its request for payment to Brookings County. Claussen filed a Chapter 7 petition October 24, 1989, claiming, pursuant to his schedules, that his house, worth $6,000 in Elkton, was exempt property under South Dakota's homestead statute. Brookings County paid Sioux Valley Hospital on December 19, 1989, and, contemporaneously, filed an indigent emergency medical services lien upon Claussen. Claussen, armed with Chapter 7's discharge statutes, maintains the County's lien is dischargeable. The County, citing numerous state statutes, believes the indigent medical services lien is exempt from discharge in bankruptcy.
1. Is perfection of a statutory lien after the debtor files bankruptcy null? Yes.
2. Is an inchoate statutory lien dischargeable? Yes.
3. Is a statutory lien for medical services dischargeable pursuant to bankruptcy's policies of the fresh start and equitable creditor treatment if the underlying transaction is dischargeable? Yes.
4. Is the delegation of power to designate which interests are statutory to individual states a violation of the United States Constitution's uniform bankruptcy law mandate to the extent such liens are not uniformly dischargeable in bankruptcy? Yes.
There are three independent bases for discharging the County's lien. Initially, South Dakota statutes and case law, outlining the procedure for reimbursement of private hospitals for emergency medical services provided to indigents, warrant discussion.
Statutory interpretation starts with the statute's language. Pa. Dep't of Public Welfare v. Davenport, ___ U.S. ___, 110 S.Ct. 2126, 2130, 109 L.Ed.2d 588 (1990); Millard v. U.S. District Court for the S.D. of Iowa, 490 U.S. 296, 109 S.Ct. 1814, 1818, 104 L.Ed.2d 318 (1989). Where the statute's language is plain, the sole function of the court is to enforce it by its terms. See U.S. v. Ron Pair Enters., Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989); Opal Mfg. Co., Ltd. v. U.M.C. Indus., Inc., 553 F.Supp. 131, 133 (D.D.C. 1982). The Court shall apply the indigent statutes' plain and clear language.
The county where an indigent established residency is liable to a private hospital furnishing emergency hospitalization to the indigent. S.D.C.L. § 28-13-33. South Dakota statutes provide for emergency hospitalization service payment, as well as non-emergency service compensation, subject to the county's discretion. Sioux Valley Hosp. Ass'n v. Yankton County, 424 N.W.2d 379, 381 (S.D.1988). A county's payments for emergency medical services provided to the indigent are not common law rights but, rather, are statutory and must be narrowly construed. St. Paul Ramsey Medical Center v. Pennington County, 402 N.W.2d 340, 342 (S.D.1987). South Dakota lien laws must be strictly construed. In re Swanson, 17 B.R. 185, 186 (Bankr.D.S.D.1982). South Dakota's statutes are constitutional as to both instate and out-of-state hospitals seeking compensation. St. Paul Ramsey Medical Center v. Pennington County, 857 F.2d 1185, 1188 (8th Cir.1988).
A county paying the indigent's hospital bill has a claim which may be enforced against any property not exempt from execution which such person may have or later acquire against the person so relieved for the value of the relief. S.D.C.L. § 28-14-1.
A relevant statute provides:
Whenever any county . . . shall become obligated to, and does pay for the care . . . of any poor person . . ., the county in such cases shall have a lien upon all the property, both real and personal, including joint tenancy and homestead interests belonging to the poor person, . . . such lien to become effective as between the county and the poor person and other persons having actual knowledge of such payments to the poor person, immediately upon the payment made by any county. . . .
S.D.C.L. § 28-14-5. The lien on the recipient's property includes joint tenancy and homestead interests of any married indigent. S.D.C.L. § 28-14-6.
The county auditor, immediately after issuing the county warrants or payment of cash to the hospital for the services provided the indigent, is to record the lien. S.D.C.L. § 28-14-7. What the statutes state, simply, is a public policy adopted by the South Dakota Legislature requiring hospital-provided indigent emergency services be paid by the indigent's county. The county is then entitled to reimbursement from the indigent.
S.D.C.L. § 28-14-5's express ". . . such lien to become effective . . . immediately upon payment by any county . . ." (emphasis added) language ties lien creation to county payment. "Immediately" commonly refers to forthwith, without delay. Black's Law Dictionary 675 (5th ed. 1979). Words in a statute must be given their plain and ordinary meaning. Jones v. Hanley Dawson Cadillac Co., 848 F.2d 803, 807 (7th Cir.1988). The indigent lien statutes do not provide for the indigent lien to arise prior to county payment.
Bankruptcy considerations aside, the County perfected its lien when it paid Sioux Valley Hospital and contemporaneously filed a notice of lien on December 19, 1989. Privity in contract exists between indigent Lilly Claussen and Sioux Valley Hospital from March 31, 1989,-on, since services were provided. No such privity between the County and the indigent exists which may justify relating back the lien to the date of medical services. Statutory liens exist in derogation of the common law and are construed strictly. In re Bunker Exploration Co., 48 B.R. 708, 710 (Bankr. W.D.Okla.1985). Moreover, indigent lien recoupments for medical services furnished are part of the legislature's scheme to reduce tax burdens of supplying medical needs to paupers and should be strictly construed to authorize recovery only where expressly indicated. Estate of Messerschmidt, 352 N.W.2d 774, 775 (Minn.App. 1984). Finding no statutory or common law authority supporting retroactive lien attachment and in applying the rules of construction, the Court finds the indigent lien cannot arise prior to county payment. But for an intervening bankruptcy petition, the County perfected its lien against Claussen on December 19, 1989.
Hospitals seeking reimbursement pursuant to state statutes must meet various notice criteria. Sioux Valley Hosp. Ass'n v. Tripp County, 404 N.W.2d 519, 521 (S.D.1987). There is no accusation that Sioux Valley Hospital failed to provide statutory notice to the County. It appears, however, that Claussen never received notice from the County. Notice from the county filing its lien to the indigent is not required by South Dakota statute. No provision exists for serving notice on those whose property is attached by the lien. The failure to notify Claussen of the lien is egregious, yet, alone, insufficient to discharge the statutory lien.
As a matter of law, the Court finds the instant matter ripe for adjudication. Ripeness involves an active case in controversy. See Blanchette v. Conn. Gen. Ins. Corps., 419 U.S. 102, 95 S.Ct. 335, 42 L.Ed.2d 320 (1974); Combustion Equip. Associates, Inc. v. U.S.E.P.A., 73 B.R. 85, 87 (S.D.N.Y. 1987) aff'd, 838 F.2d 35 (8th Cir.1988). Claussen suffers actual damages in an amount of at least his house's $6,000 value, as it is encumbered if the indigent lien is not held dischargeable. Claussen claims entitlement to the homestead exemption under S.D.C.L. § 43-31-1, which ceiling is $30,000 per S.D.C.L. § 43-45-3. Claussen's $6,000 house lies well within the homestead exemption's limit. South Dakota exemptions are at issue because the state, as permitted by Section 522(b), opted out of Section 522(d)'s federal exemptions. S.D.C.L. § 43-31-30; see In re Bowen, 80 B.R. 1012, 1017 (Bankr.D.S.D.1987). States have authority to designate exemptions for their residents, but Congress reserved to itself the power to determine discharges. 11 U.S.C. §§ 523(a), 727, 1141(c), 1228, 1328.
It is axiomatic that filing a bankruptcy petition operates as an automatic stay of all judicial and nonjudicial proceedings against a debtor...
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