Maxwell–Jolly v. Martin

• Decision Date: 11 August 2011
• Docket Number: No. A128711.,A128711.
• Citation: 2011 Daily Journal D.A.R. 12165,198 Cal.App.4th 347,129 Cal.Rptr.3d 278,11 Cal. Daily Op. Serv. 10229
• Parties: David MAXWELL–JOLLY, as Director, etc., Plaintiff and Respondent, v. Jennifer MARTIN et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

198 Cal.App.4th 347

129 Cal.Rptr.3d 278

11 Cal. Daily Op. Serv. 10,229

2011 Daily Journal D.A.R. 12,165

David MAXWELL–JOLLY, as Director, etc., Plaintiff and Respondent,

v.Jennifer MARTIN et al., Defendants and Appellants.

No. A128711.

Court of Appeal, First District, Division 2, California.

Aug. 11, 2011.

Scampini Mortara & Harris, Haig A. Harris, Jr., and Neil S. Turner, San Francisco, Attorneys for Plaintiffs and Appellants.

Edmund G. Brown Jr., Attorney General, Kamala D. Harris, Attorney General, Douglas M. Press, Senior Assistant Attorney General, Karin S. Schwartz, Supervising Deputy Attorney General, Hadara R. Stanton, Deputy Attorney General, Attorneys for Plaintiff and Respondent—David Maxwell–Jolly, Director of Department of Health Care Services.

RICHMAN, J.

This case presents one purely legal question: which statute of limitations applies when a person who received health care services funded by Medi–Cal during her or his lifetime dies with assets held in trust, and the Department of Health Care Services (DHCS) seeks to recover the Medi–Cal payments from the trustee and distributees of the trust. Appellants, the trustee and distributees of the trust, contend that the one-year statute of limitations in Code of Civil Procedure section 366.3 applies,¹ as it governs claims that arise “from a promise or agreement with a decedent to distribution from an estate or trust or under another instrument....” Respondent, the Director of the DHCS (Director), contends that the three-year statute in section 338, subdivision (a) applies, as it governs actions “upon a liability created by statute.” We conclude that the Director is correct, and thus affirm the summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND

The material facts are not in dispute. Decedent Bunnie R. Gregoire owned a home in Brisbane, which she transferred into a restated revocable trust on July 18, 1997. Under the terms of the trust, the assets remaining at her death were to be divided equally between two of her grandchildren, appellants Selena H. Firth and Jennifer C. Martin, to be held in trust until their 35th birthdays. The trustee was given the discretionary power to make an earlier distribution to either granddaughter for her “health, education, support and maintenance.”

In approximately April 2001, Gregoire was admitted to St. Francis Convalescent Pavilion, a skilled nursing facility. On December 10, 2001, Firth applied for Medi–Cal benefits on behalf of her grandmother, who was then nearly 90 years old. As part of the application process, Firth signed forms acknowledging on Gregoire's behalf, “After my death, the State has the right to seek reimbursement from my estate for all Medi–Cal benefits I received after age 55....” This obligation of reimbursement arose from Welfare and Institutions Code section 14009.5² and California Code of Regulations, title 22, section 50961.³ Gregoire thereafter received Medi–Cal payments totaling $237,939.18 to cover the cost of her nursing home care.

On October 24, 2002, the San Mateo County Public Guardian (Public Guardian) was appointed conservator of the person and estate of Gregoire.

Gregoire died on November 10, 2005. On November 15, the Public Guardian sent a notice of death to respondent DHCS in Sacramento recording the value of Gregoire's estate as “0.00.” On November 23, 2005, a DHCS employee discovered conflicting information in that Westlaw showed Gregoire owned the house in Brisbane. The computer entry noted that a “case” was being “set[ ] up.”

On December 20, 2005, DHCS sent a questionnaire to the Public Guardian inquiring about assets held by Gregoire. The response indicated a zero value for all assets other than “house/land/mobile home,” which was left blank. The names of heirs and co-owners was also left blank.

On February 8, 2006, the Department gave notice to the Public Guardian of its creditor's claim against the estate in the amount of $237,939.18.

On June 15, 2006, appellant George Mousetis signed a certification that he was successor trustee of the revocable trust. The certification was recorded July 7, 2006.

On the same date, July 7, 2006, Mousetis sold the Brisbane home for $700,000. Ten days later he wired half the net proceeds to Martin ($313,740.84), retaining the other half in trust for Firth. Over the succeeding years all of the funds held in trust have been distributed to Firth under the trustee's discretionary powers.

Having received no response to its February 2006 notice of its claim against the estate, DHCS followed up with status requests to the Public Guardian on September 21, 2006 and March 27, 2007. Unbeknownst to the Department, the trustee had already sold the property.

On April 4, 2007, the Public Guardian called DHCS and reported there were no assets in the conservatorship but there was real property held in trust. At that time DHCS was also given the name and contact information for the successor trustee. On April 5, 2007, DHCS advised the trustee of its claim against the estate. Having received no response, DHCS followed up with letters to the trustee and his attorney on July 13, 2007.

DHCS claims the trustee was aware of or on notice that Gregoire's estate was liable for reimbursement of Medi–Cal benefits she had received, whereas appellants claim there is “not one sh[r]ed of evidence” that any of the defendants knew there was a claim for recovery of benefits. This factual dispute is not material to our decision.

On November 10, 2008, three years after Gregoire's death, respondent Director filed a complaint seeking reimbursement of all Medi–Cal benefits paid on behalf of Gregoire during her lifetime. In an amendment to their answer, appellants asserted a defense that the claim was time-barred under section 366.3.⁴

On December 3, 2009, respondent filed a motion for summary judgment or, in the alternative, summary adjudication. The dispute boiled down to the purely legal question whether the case was governed by the one-year statute of limitations under section 366.3 or the three-year statute of section 338, subdivision (a).⁵

The motion was heard on February 18, 2010. On March 4, 2010, the trial court entered an order granting the Director's motion for summary judgment. The court ruled in the Director's favor because “[t]he three-year statute of limitations, [Code of Civil Procedure] Section 338(a), applies to a Welfare & Institutions Code Sec. 14009.5 claim. [Begil, supra,] 128 Cal.App.4th 639 . While defendants attempt to characterize the complaint as contractual, the Department's claim under the complaint is statutorily-based.”

Judgment was entered in the Director's favor on April 9, 2010. This timely appeal followed.

DISCUSSION

Appellants claim the statute of limitations under section 366.3 governs this case because the Director's claim arises from “a promise or agreement with a decedent to distribution from an estate or trust.” ⁶ Respondent claims section 338, subdivision (a) applies because the Director's right to reimbursement is a “liability created by statute.” Our task is to determine which statute applies.

DHCS claims the dispute in this case was resolved by Kizer v. Hanna (1989) 48 Cal.3d 1, 6, 255 Cal.Rptr. 412, 767 P.2d 679( Hanna ) and Begil, supra, 128 Cal.App.4th at p. 644, 27 Cal.Rptr.3d 209. Appellants claim it is an issue of first impression. They are both right. Conceptually, Hanna and Begil lead to a clear resolution of the issue, but no other case has ruled on the potential applicability of section 366.3 in the context of DHCS claims for Medi–Cal reimbursement.

Our review of this issue, which involves a pure question of law, is de novo. ( Begil, supra, 128 Cal.App.4th at p. 642, 27 Cal.Rptr.3d 209.) Ultimately, the question is whether there is a triable issue as to any material fact, and whether DHCS is entitled to judgment as a matter of law. ( Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843, 107 Cal.Rptr.2d 841, 24 P.3d 493.)

Medi–Cal recovery statute of limitations prior to 2001

California participates in the federal Medicaid program and must comply with the Medicaid Act in exchange for federal contributions to the cost of care provided to needy individuals. (42 U.S.C. § 1396a.) The Medicaid Act provides that applicants may qualify for Medicaid benefits if they are aged, blind, or disabled and their income and resources are insufficient to meet the costs of health care. (42 U.S.C. § 1396–1.) If the applicant is over the age of 55, his or her principal residence is excluded when determining eligibility. This allows elderly applicants, despite having a valuable asset, to qualify for Medicaid covered services. (42 U.S.C. § 1382b(a)(1).) In exchange, federal law requires that the state recover all or a portion of the Medicaid benefits paid during the recipient's lifetime from his or her estate at death. (42 U.S.C. § 1396p(b)(1); see generally, California Advocates for Nursing Home Reform v. Bonta (2003) 106 Cal.App.4th 498, 508–509, 130 Cal.Rptr.2d 823.)

In compliance with federal law, state law also requires the Director to seek reimbursement from the deceased recipient's estate or from recipients of property from the decedent by distribution or survival. (Welf. & Inst.Code, § 14009.5, subd. (a).) This requirement is expressed in mandatory terms. Property once held by the decedent and transferred to heirs by a trust is part of the decedent's estate and is subject to recovery under the same statute. ( Belshe v. Hope (1995) 33 Cal.App.4th 161, 164, 38 Cal.Rptr.2d 917.)

Begil, supra, 128 Cal.App.4th at p. 644, 27 Cal.Rptr.3d 209, specifically held that section 338, subdivision (a) applies to Medi–Cal recovery actions, rejecting the notion that section 366.2 should govern because that section applies only to actions that could have been maintained against the decedent during his or her lifetime.⁷( Ibid.) Thus, it was clear at least then that a three-year statute of limitations governed actions such as that here. (See...