Reed v. Reed

• Citation: 381 A.2d 815,154 N.J.Super. 428
• Parties: Robert Thomas REED, Plaintiff, v. Peggy Ruth REED, Defendant. Robert LASZLO, Plaintiff, v. Lynn LASZLO, Defendant. James Arthur WILSON, Plaintiff, v. Fumika Gushi WILSON, Defendant.
• Decision Date: 28 October 1977
• Court: Superior Court of New Jersey

Page 428

154 N.J.Super. 428

381 A.2d 815

Robert Thomas REED, Plaintiff, v. Peggy Ruth REED, Defendant.

Robert LASZLO, Plaintiff, v. Lynn LASZLO, Defendant.

James Arthur WILSON, Plaintiff, v. Fumika Gushi WILSON, Defendant.

Superior Court of New Jersey, Chancery Division.

Oct. 28, 1977.

Alan Domers, Haddon Heights, for plaintiff Robert Thomas Reed (Farr, Reifsteck & Wolf, Haddon Heights, attorneys).

Clyde Walker, West Deptford, for defendant Peggy Ruth Reed (David A. Keyko, Woodbury Heights, attorney).

Frederic L. Bor, Cherry Hill, for plaintiff Robert Laszlo.

William D. Dilks, Gloucester City, for defendant Lynn Laszlo.

Paul S. Slotkin, Haddonfield, for plaintiff James Wilson.

Ronald M. Block, Camden, for Camden County Welfare Bd. (Mary Dugdale, Chief Counsel, Camden, Camden County Welfare Bd.).

TALBOTT, J. C. C., Temporarily Assigned.

Reed v. Reed, Laszlo v. Laszlo and Wilson v. Wilson are divorce cases. In each case defendant wife is receiving Aid to Families with Dependent Children (AFDC) which is administered by the Camden County Welfare Board (Board). Also, in each case, as a condition to receiving AFDC benefits, the applicant was required to execute an Assignment of Support Rights (Form PA-10G) giving the Board the right to support received from any other source. Each plaintiff husband is under court order to make support payments for his wife and children. Arrearages currently exist in the payments required of Mr. Reed and Mr. Laszlo.

The Board moves to intervene in these divorce cases to assert a claim to the marital assets subject to equitable distribution, specifically, the marital homes. The motion was granted for this limited purpose. Briefs were submitted and argument covering the various situations involved in these cases was heard. The single common issue is whether a demand for equitable distribution establishes the pendency of a payment under N.J.S.A. 44:10-4(a), thereby allowing the Board to require the execution of an Agreement to Repay by the AFDC recipient, entitling the Board to recover welfare paid from that date to the date the funds are received.

Though the three cases are considered together, there are differences among them. In Wilson v. Wilson defendant has not counterclaimed for equitable distribution and the Board has not requested her to execute the Agreement to Repay (Form PA-10) pursuant to N.J.S.A. 44:10-4. This is consistent with its position that it is the filing for equitable distribution which triggers the application of the recovery statute. Also, Mr. Wilson has offered to convey his interest in the marital home to Mrs. Wilson in order to insure that she and the children will have the security of living in the family home. Therefore, without a sale of the home, no funds will be available for distribution to the parties. In these circumstances it is the Board's position that the house is an exempt asset. Only if Mrs. Wilson sells the home in the future while she is still collecting welfare would the Board assert an interest in the property. Then she would be required to execute an Agreement to Repay, obligating her to repay funds paid to her by the Board during the pendency of the sale, that is, from the time an agreement of sale is executed to the time of closing.

In Laszlo v. Laszlo, defendant counterclaimed for equitable distribution and the Board requested her to execute the Agreement to Repay. She refused to do so. Consequently, welfare benefits were terminated in accordance with N.J.S.A. 44:10-4. If the marital home is sold only the arrearages owed by Mr. Laszlo can be claimed from the money received by him from his share of the net equity.

Defendant in Reed v. Reed also counterclaimed for equitable distribution. Accordingly, Mrs. Reed was asked to execute an Agreement to Repay. The Agreement was not executed promptly and the Board suspended all benefits. However, she subsequently executed the Agreement and benefits were reinstated, retroactive to the date of suspension.

The Social Security Act which created the AFDC program granted to the individual states the authority to provide for recovery of funds extended to AFDC recipients. Funds thus collected are divided between the federal, state and local governments in the same proportion each contributes to the original welfare payment. The purpose of recovery statutes is to reduce the cost of welfare programs by recovering sums previously paid and by deterring some potential recipients from seeking welfare benefits. There are three general arguments advanced in support of recovery programs. First, recovery statutes are said to encourage potential recipients to first seek employment or aid from friends and relatives rather than the state. Second, recovery statutes allow those in temporary need to avoid the immediate liquidation of assets as a condition of eligibility and to reduce the stigma of welfare by treating the money advanced as a loan. Third, such statutes are said to prevent unequal treatment of welfare recipients and the unjust enrichment of these recipients at the public's expense. Today recovery is largely a regional issue, with the most stringent laws found in the Northeast. Baldus, "Welfare as a Loan: An Empirical Study of Public Assistance Payments in the United States," 25 Stanford L.Rev. 123 (1973). The constitutionality of the state's general power to enact recovery laws has been upheld. Snell v. Wyman, 281 F.Supp. 853 (S.D.N.Y. 1966), aff'd on motion 393 U.S. 323, 89 S.Ct. 553, 21 L.Ed.2d 511 (1969).

New Jersey chose to exercise the authority granted to it by Congress and enacted N.J.S.A. 44:10-4 to provide for recovery of funds extended to AFDC recipients. The relevant section of this statute provides as follows:

Whenever any parent or relative with whom a child is living applies for or is receiving assistance for such child pursuant to this act, and it appears that there is pending a payment to the child or to either or both his parents of funds arising from a claim or interest legally or equitably owned by such child or by either or both his parents, the county welfare board may, as a condition of eligibility or continuation of eligibility for such assistance, require such parent or parents to execute a written promise to repay, from the funds anticipated, the amount of assistance to be granted. Upon any refusal to make repayment in accordance with such promise, the county welfare board may take all necessary and proper action under the laws of this State to enforce such promise, and the granting or continuing of assistance, as the case may be, shall be deemed due consideration therefor. (N.J.S.A. 44:10-4(a))

The Welfare Board argues that the demand for equitable distribution establishes the pendency of a "payment to * * * either or both * * * parents of funds arising from a claim or interest legally or equitably owned * * * by either or both * * * parents." Thus, the Board maintains that it is authorized to require the execution of a written promise to repay and may take action to enforce that promise.

The repayment agreement which is used and which defendant signed was a standard form agreement provided by the Board. This particular one provided that, in exchange for the granting of welfare benefits, defendant would repay the Board for "that portion of any assistance so granted which may be paid during the period pending any receipt of certain funds which are anticipated by virtue of a claim or other action against Robert Reed." The agreement then identified the claim as arising from the sale or distribution of the marital home or any other assets of the marital estate. The Board claims the wife must repay moneys paid to her on behalf of the children from the time of filing the claim for equitable distribution to the date the house is conveyed to another.

The problem with the Board's argument lies in its misconception of the nature of a demand for equitable distribution. A demand for equitable distribution does not necessarily result in the payment of funds to either spouse. Therefore, there is not at that time a "pendency of a payment to * * * either or both * * * parents * * * " N.J.S.A. 44:10-4(a) supra.

A review of the reported cases under N.J.S.A. 44:10-4 reveal that all involve personal injury claims of children receiving assistance under the AFDC program.

In Essex Cty. Welfare Bd. v. Hellams, 98 N.J.Super. 181, 236 A.2d 416 (Cty.Ct.1967) aff'd 103 N.J.Super. 438, 247 A.2d 491 (App.Div.1968), the trial court held that plaintiff Welfare Board was not entitled to repayment of welfare funds advanced for the support of the infant defendant out of a trust fund bank account representing the net proceeds of the settlement of a personal injury claim of the infant. Two reasons were advanced by the court for its holding. First, the Welfare Board had failed to obtain an execution of Agreement to Repay and the court concluded that the contract to repay was a prerequisite to any recovery under N.J.S.A. 44:10-4. Second, the court adopted the reasoning of the New York court in Application of Woods, 32 Misc.2d 745, 222 N.Y.S.2d 903 (Sup.Ct.1961). In Woods it was held that considerations of public policy required that funds obtained by a child for his personal injuries should remain exempt from the recovery laws. The Appellate Division affirmed the decision of the trial court in Hellams, but solely on the ground that the Welfare Board had failed to obtain the execution of the Agreement to Repay.

The reason for the limited affirmance in Hellams became clear in Francis v. Harris, 100 N.J.Super. 313, 241 A.2d 844 (Law Div.1968) aff'd 103 N.J.Super. 440, 247 A.2d 492 (App.Div.1968). In Francis the court rejected the argument that funds recovered by a child for personal injuries were inviolate and could not be used to reimburse welfare agencies for assistance granted....