Kramarevcky v. Department of Social and Health Services

• Decision Date: 02 December 1993
• Docket Number: No. 59514-3,59514-3
• Citation: 863 P.2d 535,122 Wn.2d 738
• Court: Washington Supreme Court
• Parties: Mikhail KRAMAREVCKY, Respondent, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, Petitioner. Olivia S. JINNEMAN, Respondent, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, Petitioner. En Banc

Page 738

122 Wn.2d 738

863 P.2d 535

Mikhail KRAMAREVCKY, Respondent, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, Petitioner.

Olivia S. JINNEMAN, Respondent, v. DEPARTMENT OF SOCIAL AND HEALTH SERVICES, Petitioner.

No. 59514-3.

Supreme Court of Washington,

En Banc.

Dec. 2, 1993.

Christine O. Gregoire, Atty. Gen., Robert L. Schroeter, Asst., Sarah J. Coats, Asst., Olympia, for petitioner.

Puget Sound Legal Assistance Foundation, Barbara Baker, Olympia, Evergreen Legal Services, Yvette Hall War Bonnet, Everett, Schroeter, Goldmark & Bender, William Rutzick, Seattle, for respondents.

JOHNSON, Justice.

The Department of Social and Health Services (DSHS) seeks review of a Court of Appeals determination that DSHS is estopped from recouping public assistance benefits it overpaid to the respondents. Mikhail Kramarevcky and Olivia Jinneman, the respondents, both qualified for public assistance benefits and provided DSHS with accurate information concerning their eligibility. At some point, DSHS began sending both respondents and their respective families an overpayment of benefits for which they were not qualified. They received these overpayments solely as a result of error on the part of DSHS, and through no fault or error of their own. The Court of Appeals held that equitable estoppel applied under the facts of these cases to estop DSHS from recouping these overpayments. We agree and affirm.

I

In 1987, a suit entitled Chaplin v. Sugarman, cause 87-2-01239-2 (Jan. 2, 1990) was filed in Thurston County Superior Court. The plaintiffs were a class of persons who had received overpayments of medicaid or family assistance benefits because of some DSHS error. They sought a declaratory ruling that administrative law judges (ALJ) have the authority to consider equitable estoppel as a defense to the Department's recoupment claims.

DSHS opposed the action. It argued ALJs do not have the authority to consider equitable estoppel in the context of public assistance overpayments, and federal law requiring DSHS to recoup overpayments precluded application of estoppel. The Department also argued its acts of overpaying benefits should be deemed ultra vires under State v. Adams, 107 Wash.2d 611, 732 P.2d 149 (1987), thus precluding any application of the doctrine of equitable estoppel.

The Superior Court issued a memorandum opinion ruling in favor of the plaintiffs and rejecting each of the Department's arguments. DSHS did not appeal this ruling. The Superior Court entered an order directing DSHS to inform all class members of their right to request a hearing and to assert the defense of equitable estoppel. Mikhail Kramarevcky and Olivia Jinneman were among the class of persons DSHS notified pursuant to the court's order.

Mikhail Kramarevcky is a refugee from the former Soviet Union. He arrived in the United States in April 1989 with his wife and minor son, Andre. The family speaks very little English and relied exclusively on DSHS for advice regarding their eligibility for public assistance. Between September 1989 and October 1990, the Kramarevckys received income and food assistance payments from DSHS under the Department's Family Independence Program (FIP).

In December 1989, Kramarevcky found a job and reported this to DSHS. He promptly gave the Department a copy of his first paycheck. DSHS failed, however, to follow its established procedures and did not send Kramarevcky monthly income report forms to complete and return. Uncertain as to what to do, Kramarevcky collected his wage receipts and brought them to DSHS in April 1990.

As a result of its failure to follow established procedures, DSHS did not take into account Kramarevcky's earned income when it computed his family's financial and food cash benefits during the 4-month period from February through May 1990. The Department later determined that Kramarevcky and his family had received an overpayment during this 4-month period of $1,375 in financial assistance and $262 in food assistance. DSHS sought to recoup this money from Kramarevcky.

An administrative hearing was held regarding these overpayments. Kramarevcky testified at the hearing with the aid of an interpreter. The ALJ found Kramarevcky had followed all proper procedures, had no reason to believe his eligibility had ceased, and could have been eligible for refugee job training reimbursement had he not received the overpayments. The ALJ also found both Kramarevcky and his wife are now partially disabled and have no income or resources with which to repay DSHS. The ALJ concluded each element of the defense of equitable estoppel had been met, and DSHS was estopped from recouping the overpaid amounts.

Olivia Jinneman, the other respondent in this case, received categorically needy medical assistance under the Aid to Families with Dependent Children (AFDC) program between January 1988 and June 1989. This program is administered by DSHS. Jinneman provided accurate information to DSHS concerning her son Brandon's date of birth. Brandon turned 18 years old on April 29, 1988. He was not attending school at the time of his 18th birthday, and the family unit became ineligible for the AFDC program as a result. DSHS continued, however, to send Jinneman medical coupons from May 1, 1988, through June 30, 1989. Upon discovering its error, DSHS terminated Jinneman's medical assistance and assessed a $1,759.94 overpayment against her for medical assistance received during that 13-month period.

An administrative hearing was held regarding these overpayments. Jinneman testified at this hearing. The ALJ found that "[h]ad [Jinneman] been appropriately advised of medical assistance eligibility, she would have obtained alternative care such as from women's clinics, utilized medicine alternatives, or used other medical providers such as the fire department". Finding of fact 3 (Dec. 6, 1990). The ALJ also found Jinneman's average disposable income for the 11 months preceding the hearing was $527 a month, an amount barely adequate to meet her needs. As in Kramarevcky's case, the ALJ found each element of the defense of equitable estoppel had been met, and ruled DSHS was estopped from recouping the overpayments it had made to Jinneman.

DSHS sought review of the ALJs' decisions from a review judge in both the respondents' cases. In both cases, the review judge adopted the ALJs' findings of fact, but reversed the conclusions of law. The review judge ruled DSHS was not estopped from recouping the overpayments from either Kramarevcky or Jinneman.

The respondents sought judicial review. The Court of Appeals granted direct review and consolidated the two cases. The court reversed the review judge and reinstated the ALJs' determinations that DSHS was estopped from recouping the overpayments it made to the respondents. Kramarevcky v. Department of Social & Health Servs., 64 Wash.App. 14, 822 P.2d 1227 (1992). DSHS sought review of the Court of Appeals decision, and this court granted review.

II

The issue in these two consolidated cases is whether DSHS is equitably estopped under the facts of these cases from recouping public assistance benefits it overpaid to the respondents. The elements of equitable estoppel are: (1) a party's admission, statement or act inconsistent with its later claim; (2) action by another party in reliance on the first party's act, statement or admission; and (3) injury that would result to the relying party from allowing the first party to contradict or repudiate the prior act, statement or admission. ¹ Robinson v. Seattle, 119 Wash.2d 34, 82, 830 P.2d 318, cert. denied, --- U.S. ----, 113 S.Ct. 676, 121 L.Ed.2d 598 (1992). Equitable estoppel is based on the principle that:

a party should be held to a representation made or position assumed where inequitable consequences would otherwise result to another party who has justifiably and in good faith relied thereon.

Wilson v. Westinghouse Elec. Corp., 85 Wash.2d 78, 81, 530 P.2d 298 (1975).

Equitable estoppel against the government is not favored. See Finch v. Matthews, 74 Wash.2d 161, 169, 443 P.2d 833 (1968). Consequently, when a party asserts the doctrine against the government, two additional requirements must be met: equitable estoppel must be necessary to prevent a manifest injustice, and the exercise of governmental functions must not be impaired as a result of the estoppel. Shafer v. State, 83 Wash.2d 618, 622, 521 P.2d 736 (1974); Finch, 74 Wash.2d at 175, 443 P.2d 833. Courts should be most reluctant to find the government equitably estopped when public revenues are involved. Harbor Air Serv., Inc. v. Board of Tax Appeals, 88 Wash.2d 359, 367, 560 P.2d 1145 (1977).

A party asserting equitable estoppel against either the government or a private party must prove each element of estoppel with clear, cogent and convincing evidence. Pioneer Nat'l Title Ins. Co. v. State, 39 Wash.App. 758, 760-61, 695 P.2d 996 (1985) (equitable estoppel asserted against government); Colonial Imports, Inc. v. Carlton Northwest, Inc., 121 Wash.2d 726, 853 P.2d 913 (1993) (equitable estoppel asserted against private party). Under this burden of proof, the trier of fact must be convinced the fact in issue is "highly probable". Colonial Imports, 121 Wash.2d at 735, 853 P.2d 913; In re Sego, 82 Wash.2d 736, 739, 513 P.2d 831 (1973).

The Department has not placed the first two elements of equitable estoppel at issue. The Department apparently concedes its act of overpaying benefits to the respondents does satisfy the first element of estoppel, which involves an "act" inconsistent with a party's later claim. DSHS consequently has not raised the issue of whether its act of overpaying benefits is an ultra vires act to which equitable estoppel may not apply. See State v. Adams, 107 Wash.2d 611, 732 P.2d 149 (1987). DSHS did raise this argument before the superior court in Chaplin, and the superior court rejected it. See Chaplin v. Sugarman, Thurston Cy. cause 87-2-01239-2...