Martinez v. COLORADO DEPT. OF HUMAN SERVS.

• Citation: 97 P.3d 152
• Decision Date: 09 October 2003
• Docket Number: No. 02CA1880.,02CA1880.
• Parties: Chad MARTINEZ, Plaintiff-Appellant, v. COLORADO DEPARTMENT OF HUMAN SERVICES and Otero County Department of Social Services, Defendants-Appellees.
• Court: Court of Appeals of Colorado

97 P.3d 152

Chad MARTINEZ, Plaintiff-Appellant, v. COLORADO DEPARTMENT OF HUMAN SERVICES and Otero County Department of Social Services, Defendants-Appellees.

No. 02CA1880.

Colorado Court of Appeals, Div. V.

October 9, 2003.

Rehearing Denied December 18, 2003.

Certiorari Denied September 13, 2004.

The Carey Law Firm, L. Dan Rector, Leif Garrison, Robert B. Carey, Colorado Springs, Colorado, for Plaintiff-Appellant.

Ken Salazar, Attorney General, Laurie A. Schoder, Assistant Attorney General, Denver, Colorado, for Defendants-Appellees.

Opinion by Judge VOGT.

The issue in this case is whether Colorado may require indigent disabled persons who receive state interim assistance benefits to reimburse the state out of their federal assistance benefits without paying a share of the legal fees incurred by the disabled persons in obtaining those federal benefits. Contending that it may not, plaintiff, Chad Martinez, filed this proposed class action against defendants, Colorado Department of Human Services (DHS) and Otero County Department of Social Services. Plaintiff appeals from the trial court's judgment dismissing his complaint for failure to state a claim upon which relief can be granted. We affirm in part, reverse in part, and remand for further proceedings.

After he was injured in a motor vehicle accident, plaintiff applied to the Social Security Administration (SSA) for federal Supplemental Security Income (SSI) benefits. His application was initially denied. Plaintiff retained an attorney to represent him in an appeal of that denial.

While his SSI appeal was pending, plaintiff applied for interim assistance under the state's Aid to the Needy Disabled (AND) program. In connection with that application, plaintiff executed an "Authorization for Reimbursement of Interim Assistance," in which he authorized SSA to send his first posteligibility payment of SSI benefits to the Otero County Department of Social Services "in consideration for the public assistance benefits paid to me" by the county under the state AND program. He authorized the county to deduct from that SSI payment the amount of interim assistance he had received from the state. Plaintiff thereafter began receiving interim assistance benefits from the state.

Plaintiff's SSI appeal was successful. He was awarded SSI benefits retroactive to the date he became eligible for them, as well as prospective benefits of $482 per month. In accordance with plaintiff's authorization, SSA sent a check for $5,069 to Otero County. The county retained the full amount as reimbursement for the interim assistance benefits it had paid to plaintiff.

Plaintiff commenced an administrative appeal in which he contended that defendants had been unjustly enriched by retaining the entire amount of his retroactive SSI benefits without paying a share of the legal fees he incurred and paid in successfully appealing SSA's initial denial of benefits. An administrative law judge agreed and issued an initial decision directing defendants to reduce the recoupment from plaintiff's retroactive SSI payment by twenty-five percent, or $1,267. The DHS office of appeals reversed the initial decision and entered summary judgment for defendants.

Plaintiff then filed a petition for judicial review and class action complaint in district court, asserting claims for declaratory relief, restitution based on unjust enrichment, breach of contract, and breach of the implied covenant of good faith and fair dealing. He asked the court to declare that he and others who had received state interim assistance benefits had the right to receive their past due SSI benefits directly and to reduce the reimbursement amount by defendants' pro rata share of their attorney fees, without regard to any contrary language in the authorization they had been required to sign.

Defendants filed a motion to dismiss, in which they argued that, under Gillens v. Colorado Department of Social Services, 644 P.2d 97 (Colo.App.1982), the authorization signed by plaintiff was "not a contract and not subject to analysis as such." By agreement of the parties, resolution of the class certification issue was stayed pending the trial court's ruling on defendants' motion.

The trial court granted the motion to dismiss. It concluded that, under Gillens,"it is clear that the AND benefits are to be considered a loan from the state, repayable when and if the applicant received SSI, rather than a contract. Therefore, [plaintiff's] claims are dismissed for failure to state a claim upon which relief can be granted" (citation omitted).

I.

Plaintiff contends that he stated a claim for declaratory relief, that Gillens is not dispositive of his right to such relief, and that the trial court therefore erred in dismissing his claim. We agree in part.

We review the grant of a C.R.C.P. 12(b)(5) motion to dismiss using the same standards as the trial court. Thus, we uphold the trial court's grant of such a motion only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095 (Colo.1995); Pomerantz v. Microsoft Corp., 50 P.3d 929 (Colo.App.2002).

A.

As an initial matter, we agree with plaintiff that he stated a claim for declaratory relief that should not have been dismissed for failure to state a claim.

C.R.C.P. 57(b) provides that any person interested under writings constituting a contract, or whose rights are affected by a statute or contract, may obtain a declaration of rights, status, or other legal relations thereunder. The right to a declaratory judgment also extends to a party who claims to be adversely affected by a regulation. See Bowen/Edwards Associates, Inc. v. Board of County Commissioners, 812 P.2d 656 (Colo.App.1990), aff'd in part and rev'd in part on other grounds, 830 P.2d 1045 (Colo.1992).

Here, plaintiff contended that his rights were adversely affected by a regulatory scheme that allowed defendants to retain money to which they were not lawfully entitled, and that he was an interested party under a written agreement between SSA and DHS that permitted SSA to send his federal benefits check to the county upon proper authorization. Thus, even if the authorization itself were not deemed a contract, plaintiff stated a claim for declaratory relief and was entitled to have a determination on the merits rather than a dismissal. See Karsh v. City & County of Denver, 176 Colo. 406, 490 P.2d 936 (1971)(in declaratory judgment action in which court rules against position of plaintiff, it should enter a declaratory judgment and not sustain a motion to dismiss).

However, we need not remand the claim to the trial court if the undisputed facts establish that plaintiff was not entitled to the requested declaratory relief as a matter of law. In that event, the issue may be resolved on appeal, and any error in the trial court's ruling would be harmless. See Karsh v. City & County of Denver, supra; Keybank v. Mascarenas, 17 P.3d 209 (Colo.App.2000).

B.

Plaintiff challenges the validity of the DHS regulation requiring him to sign the authorization that allowed SSA to send the full amount of his first SSI check to Otero County. Before addressing the merits of his contentions, we review the statutory and regulatory scheme governing the interim assistance payments at issue here.

Under the Colorado Public Assistance Act, § 26-2-101, et seq., C.R.S.2002, DHS supervises the administration of public assistance programs in Colorado, and county departments of social services assist in their administration. Among other programs, DHS administers the AND and Aid to the Blind (AB) programs, which provide interim assistance, paid for with state funds, for qualifying persons who are not receiving federal benefits. See § 26-2-111, C.R.S.2002. Both the AND and AB programs include among their criteria for eligibility a requirement that the recipient have applied for federal SSI benefits. See § 26-2-111(4)(b.5), (5)(a)(II), C.R.S.2002.

Under federal law, SSI benefits may be sent directly to states to reimburse them for interim assistance they have provided, if (1) the state has entered into a formal reimbursement agreement with SSA, and (2) the benefits recipient provides written authorization for such procedure. See 42 U.S.C. § 1383(g)(1).

Pursuant to § 26-2-206, C.R.S.2002, DHS is authorized to enter into the agreement with SSA contemplated under 42 U.S.C. § 1383(g)(1), "in accordance with [DHS] rules and regulations." DHS has in fact entered into such an agreement. Thus, when a Colorado applicant for SSI benefits has authorized it, the first SSI payment may go directly to the department of social services in the applicant's county to reimburse the state for its interim assistance payments.

In Gillens, a division of this court reviewed the statutory and regulatory scheme outlined above and rejected a contention that the authorization signed by the plaintiffs in that case was a contract that had been breached when the state failed to pay their AND benefits promptly. The division reasoned that, because the AND benefits were a loan from the state, repayable when and if the applicants received SSI benefits, the authorization form "simply provided a convenient and painless method of repaying the loan on receipt of SSI funds." In reaching that conclusion, the division emphasized that the applicants voluntarily signed the authorization forms and thus were "in no position to complain." Gillens v. Colorado Department of Social Services, supra, 644 P.2d at 99.

The DHS regulations regarding interim assistance payments have changed since Gillens. At the time Gillens was decided, applicants could refuse to sign the authorization forms. In that event, assistance would still be provided, but the applicants were informed that a recovery action would be pursued if there was a duplication of assistance payments. Gillens v. Colorado...