McKee v. Department of Social Services

• Decision Date: 20 March 1984
• Docket Number: Docket No. 62645
• Parties: Gary McKEE, Lucinda Johndro and all other persons similarly situated, Plaintiffs-Appellants, v. DEPARTMENT OF SOCIAL SERVICES, Defendant-Appellee. 131 Mich.App. 422, 346 N.W.2d 105
• Court: Court of Appeal of Michigan — District of US

Page 105

346 N.W.2d 105

Gary McKEE, Lucinda Johndro and all other persons similarly

situated, Plaintiffs-Appellants, v. DEPARTMENT OF SOCIAL SERVICES, Defendant-Appellee.

Docket No. 62645.

131 Mich.App. 422, 346 N.W.2d 105

Court of Appeals of Michigan.

Submitted Oct. 12, 1983.

Decided Jan. 3, 1984.

Released for Publication March 20, 1984.

[131 MICHAPP 423] Michael Malkovich, Legal Services of Eastern Michigan, Midland, for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Janis Meija and Erica Weiss Marsden, Asst. Attys. Gen., for defendant-appellee.

Before DANHOF, C.J., and BRONSON and PETERSON, ^* JJ.

PER CURIAM.

Plaintiff appeals as of right the trial court's order affirming two separate administrative decisions of the defendant, Michigan Department of Social Services (DSS), denying each plaintiff benefits under this state's Aid to Families with Dependent Children (AFDC) program. The basis for defendant's decision was that each plaintiff owned interests in nonhomestead real property having a market value in excess of the amount permitted by M.C.L. Sec. 400.56g(1)(a); M.S.A. Sec. 16.456(7)(1)(a). On appeal, each plaintiff raises several[131 MICHAPP 424] issues, none of which require reversal. ¹

First, plaintiffs cite federal regulations, 45 CFR 233.20(a)(3)(ii)(D) for the proposition that their real estate interests are not "available for current use", because they have not been liquidated and because they cannot readily be converted into cash. An identical argument has been addressed and rejected in this Court's recent decision, Kilpatrick v. Dep't of Social Services, 126 Mich.App. 559, 337 N.W.2d 576 (1983). In Kilpatrick, this Court held that an AFDC applicant's interest in a sawmill was "available" within the meaning of the above-cited regulation, so long as there was no legal impediment to immediate sale of that interest on the open market. Kilpatrick, supra, pp. 566-567, 337 N.W.2d 576, citing Kanda v. Chang, 475 F.Supp. 368 (D.Haw.1979). The Court held that, even though real property which has been listed for sale remains unsold due to a depressed market situation, that property still remains "available" for AFDC purposes. Although the property may not readily be sold at the applicant's desired price, if it can be priced for quick sale and the proceeds under such conditions still exceed the statutory ceiling, AFDC benefits are properly denied. Kilpatrick, supra.

[131 MICHAPP 425] Plaintiffs attempt to distinguish Kilpatrick, supra, on the basis that the sawmill involved in that case was an income-producing asset rather than a residence. According to plaintiffs, the sawmill always had the potential of producing income for the AFDC applicant's family, whereas plaintiffs could not anticipate any comparable flow of income from their interests in former residences. We find no significance in this distinction. The decision in Kilpatrick did not turn upon the type of property involved, nor did it depend upon a showing that the AFDC applicant may have received a flow of income as the result of holding an interest in a particular type of real property. Instead, the decision in that case was based upon the principle that the DSS must consider "available" any resource which may legally be sold for measurable value, even if the determined value is the result of depressed market conditions or a distress sale:

"Pursuant to DSS policy, the determination of an AFDC applicant's equity value in non-home realty begins with an assessment of the property's fair market value. * * * It must be assumed that the * * * assignment of fair market value to plaintiff's sawmill took into consideration the depressed market situation. There was no legal impediment to the sale of the sawmill * * *." Kilpatrick, supra, 126 Mich.App. pp. 566-567, 337 N.W.2d 576.

The Court acknowledged that the result may seem unfair to those who may be forced to liquidate their realty interests under conditions of distress but observed that this is a consideration which goes beyond the scope of the AFDC program:

"While plaintiff and her family may, in a very real sense, have been 'needy' * * *, the present system is not designed to respond to persons in their situation, who may be forced to sell property at 'fair market [131 MICHAPP 426] values' which are, temporarily, significantly low due to economic recession and depression. Absent conflict with federal requirements, the state is free 'to insure that limited welfare funds be spent on behalf of those genuinely incapacitated and most in need'. [Citation omitted.] State response to persons who, like plaintiff, are among the growing ranks of the 'new poor', and who are denied AFDC benefits solely because of their ownership of resources obtained in better economic times, must be a legislative response. Given the present system, judicial response is precluded." Kilpatrick, supra, pp. 567-568, 337 N.W.2d 576.

Plaintiffs next urge that state law prohibits defendant from considering plaintiffs' properties as "available" resources. Once more, their arguments have been fully addressed and rejected in Kilpatrick, supra. Michigan's AFDC program has been implemented through both statutory provisions and administrative regulations. M.C.L. Sec. 400.56g(1)(a); M.S.A. Sec. 16.456(7)(1)(a) renders a family ineligible for AFDC benefits if it owns property in excess of $2,000. Although the applicable regulation, 1979 ACR 400.12(10), limits consideration of an applicant's resources to those which are "available in fact for current use", this Court's holding in Kilpatrick indicates that a resource need not be liquidated in order to fall within the scope of this regulation. Real property is "available in fact for current use" under this regulation so long as there is no legal impediment to immediate sale of the equity in the open market. Kilpatrick, supra. Thus, in the present case, Michigan's regulatory scheme does not prohibit defendant from considering plaintiffs' properties in determining their eligibility.

Plaintiffs' final argument on appeal is that defendant has denied them procedural due process by creating an irrebuttable presumption that...