In re Estate of Daughrity

• Decision Date: 16 November 2004
• Citation: 166 S.W.3d 185
• Parties: In the Matter of the ESTATE of Lizzie Tomlin DAUGHRITY, Deceased.
• Court: Tennessee Supreme Court

166 S.W.3d 185

In the Matter of the ESTATE of Lizzie Tomlin DAUGHRITY, Deceased.

Court of Appeals of Tennessee, Western Section, at Nashville.

August 5, 2004 Session.

November 16, 2004.

Application for Permission to Appeal Denied by Supreme Court May 2, 2005.

Paul G. Summers, Attorney General & Reporter, Sue A. Sheldon, Senior Counsel, Nashville, TN, for Appellant, Bureau of TennCare.

Cecilia West Spivy, Lewisburg, TN, for Appellee, The Estate of Lizzie Tomlin Daughrity.

OPINION

ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and HOLLY M. KIRBY, J., joined.

This case involves a claim filed by the Tennessee Bureau of TennCare against the estate of an elderly decedent to recover certain benefits paid to the decedent to cover nursing home expenses during her lifetime. The executor filed an exception to the claim arguing that it was filed outside the four (4) month limitations period found in sections 30-2-306(c) and 30-2-307(a) of the Tennessee Code. The chancery court issued an order barring the bureau's claim on the grounds that is was untimely filed. For the reasons stated herein, we reverse.

Factual Background and Procedural History

On December 30, 1998, Lizzie Tomlin Daughrity ("Decedent") enrolled in the Tennessee TennCare program administered by the Tennessee Bureau of TennCare ("Bureau"). Beginning January 1, 1999, the Bureau began making payments on behalf of Decedent to NHC Healthcare-Lewisburg, a nursing home facility. Decedent died on July 30, 2002, at the age of 89 with accumulated benefits paid on her behalf to the nursing facility up to that point in the amount of $97,870.91.

On September 10, 2002, Decedent's son, Charles Richard Daughrity ("Executor"), filed a Petition to Probate Will in the Chancery Court of Marshall County, Tennessee. On September 11, 2002, the chancellor entered an order admitting Decedent's will to probate and appointing Executor to oversee the administration of the estate. On March 25, 2003, the Bureau filed a claim against Decedent's estate, pursuant to section 71-5-116 of the Tennessee Code and applicable federal Medicaid statutes, seeking reimbursement of the benefits correctly paid to the nursing facility on Decedent's behalf. On April 25, 2003, Executor filed an exception to the Bureau's claim alleging that the claim was not filed within the four (4) month period allowed for the filing of claims under section 30-2-306(c) of the Tennessee Code. Executor also asserted that the Bureau received actual notice to file a claim on September 16, 2002.

The chancellor conducted a hearing on July 2, 2003, to address the Bureau's claim. On the day of the hearing, the Executor filed a copy of the Actual Notice to Creditors along with an attached certificate of service, as well as a copy of the published Notice to Creditors. The Actual Notice to Creditors indicated that it had been mailed to the Bureau on September 14, 2002, and the certificate of service showed that it was accepted by an employee of the Bureau on September 16, 2002. The published Notice to Creditors indicated that it was issued on September 17, 2002. The bookkeeper for The Lewisburg Tribune Marshall Gazette provided a Publisher's Affidavit¹ which showed that the Notice to Creditors was published in their newspaper on September 17 and 24, 2002.

The chancellor issued an order on August 13, 2003, which contained the following findings of fact and conclusions of law:

This matter came to be heard on the 2nd day of July, 2003 before the Honorable J.B. Cox upon the Exception to Claim filed by the Executor of the Estate of Lizzie Tomlin Daughrity, statements of counsel and the record as a whole. From which the Court finds that Actual Notice to the State of Tennessee, Bureau of TennCare was received by the State of Tennessee, Bureau of TennCare on the 16th day of September, 2002 and the State of Tennessee, Bureau of TennCare filed it's [sic] Claim on March 27th, 2003. The State's assertion of sovereignty is limited by its own action. The State's action to be bound by the one (1) year barr [sic] to claims should by the same choice impose the conditions of T.C.A. § 30-2-310 upon the State. For these reasons the Court finds that the claim of the State of Tennessee, Bureau of TennCare is barred by T.C.A. § 30-2-310.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that the State of Tennessee, Bureau of TennCare is enjoined from denying a release as required by law and shall issue a release to this Estate.

The Bureau filed a timely notice of appeal to this Court pursuant to section 30-2-315(b) of the Tennessee Code,² presenting the following issues for our review:

I. Whether the trial court erred in imposing the statutory four (4) month limitations period found in sections 30-2-306(c) and 30-2-307(a) of the Tennessee Code upon the Bureau's claim; and

II. Alternatively, if the four (4) month limitations period does apply to the Bureau's claim, whether this case should be remanded to the trial court with instructions to clarify whether the Bureau received actual notice according to the governing law given the facial irregularity of the notices supplied to creditors.

For the reasons set forth herein, we reverse the ruling of the trial court and remand for further proceedings consistent with this opinion.

Standard of Review

In reviewing the judgment of the chancery court, we are bound by the following standard of review:

This case was tried in the probate court without a jury. Accordingly, the standard of review is de novo upon the record with a presumption of correctness as to the findings of fact, unless the preponderance of the evidence is otherwise. Tenn. R.App. P. 13(d); Cross v. City of Memphis, 20 S.W.3d 642, 644-45 (Tenn.2000). To the extent that the determination of the issues rests on statutory construction, they present questions of law. Myint v. Allstate Ins. Co., 970 S.W.2d 920, 924 (Tenn.1998). Questions of law are reviewed de novo with no presumption of correctness. Id.

Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn.2000).

Bureau's Ability to File a Claim Against Decedent's Estate

In order to properly analyze the applicability of the four (4) month limitations period found in Title 30 of the Tennessee Code, it is necessary to discuss the process by which the Bureau is seeking recovery of benefits paid to Decedent. The Bureau is required by both state and federal law to seek recovery of benefits paid to Decedent under the facts presented in this case.

The Medicaid program was created in 1965, when Congress added Title XIX to the Social Security Act, 79 Stat. 343, as amended, 42 U.S.C. § 1396 et seq. (1976 ed. and Supp. II), for the purpose of providing federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons. Although participation in the Medicaid program is entirely optional once a State elects to participate, it must comply with the requirements of Title XIX.

Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980). A state wishing to participate in the federal Medicaid program must establish a state plan for medical assistance which "provide[s] for the establishment or designation of a single State agency to administer or to supervise the administration of the plan." 42 U.S.C. § 1396a(a)(5) (2003).

Tennessee chose to participate in the federal Medicaid program when the legislature promulgated the Tennessee Medical Assistance Act of 1968. Tenn.Code Ann. § 71-5-101 (2003). Accordingly, Tennessee is required to comply with 42 U.S.C. § 1396a which mandates that participating states must "comply with the provisions of section 1917 [42 USCS § 1396p] with respect to liens, adjustments, and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts." 42 U.S.C. § 1396a(a)(18) (2003). Section 1396p provides, in relevant part, as follows:

Liens, adjustments and recoveries, and transfer of assets.

. . . .

(b) Adjustment or recovery of medical assistance correctly paid under a State plan.

(1) No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made, except that the State shall seek adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan in the case of the following individuals:

. . . .

(B) In the case of an individual who was 55 years of age or older when the individual received such medical assistance, the State shall seek adjustment or recovery from the individual's estate, but only for medical assistance consisting of —

(i) nursing facility services, home and community-based services, and related hospital and prescription drug services, or

(ii) at the option of the State, any items or services under the State plan.

. . . .

(2) Any adjustment or recovery under paragraph (1) may be made only after the death of the individual's surviving spouse, if any, and only at a time —

(A) when he has no surviving child who is under age 21, or (with respect to States eligible to participate in the State program established under title XVI [42 USCS §§ 1381 et seq.]) is blind or permanently and totally disabled, or (with respect to States which are not eligible to participate in such program) is blind or disabled as defined in section 1614 [42 USCS § 1382c]; and

. . . .

(3) The State agency shall establish procedures (in accordance with standards specified by the Secretary) under which the agency shall waive the application of this subsection (other than paragraph (1)(C)) if such application would work an undue hardship as determined on the basis of criteria established by the Secretary.

42 U.S.C. § 1396p (2003). Congress amended the Medicaid Act in 1993 to require, not just permit, states to seek recovery of medical costs from the estates of certain deceased beneficiaries to combat rising costs and perceived abuses....