Solnick v. Whalen

Decision Date08 January 1980
Citation49 N.Y.2d 224,401 N.E.2d 190,425 N.Y.S.2d 68
Parties, 401 N.E.2d 190 Anne SOLNICK et al., doing business as Dover Nursing Home, Respondents, v. Robert P. WHALEN, as Commissioner of Health of the State of New York, et al., Appellants.
CourtNew York Court of Appeals Court of Appeals
OPINION OF THE COURT

JONES, Judge.

A declaratory judgment action to challenge a determination adjusting Medicaid reimbursement rates for an individual nursing home facility for lack of procedural due process is time-barred when it is brought more than four months after notification of the rejection of its appeal from the audit on which the adjustments were based and more than four months after notification of its adjusted reimbursement rates.

Plaintiffs are owners and operators of the Dover Nursing Home, a facility which renders care and treatment to sick and elderly patients for which reimbursement is provided under the Federal Medicaid program (U.S.Code, tit. 42, § 1396 et seq.). In this State the program is administered by the New York State Department of Social Services, and the rate of reimbursement to eligible nursing homes is determined and certified by the Commissioner of Health and approved by the Director of the Budget pursuant to section 2807 of the Public Health Law predicated in part on costs reported by the facilities. Incident to rate determination, periodic audits of participating nursing homes are conducted by the Department of Health.

During 1975 the department conducted such an audit of the Dover Nursing Home for the year 1969, the reported costs for which year had served as the basis for rates of reimbursement which had been paid for services rendered in portions of 1970 and 1971. The audit report dated December 4, 1975, a copy of which was sent to the nursing home, disallowed $17,987 of expenses that had been reported by the home. On December 22, 1975 by letter addressed to the Department of Health, the facility appealed $9,006 of disallowed items and also sought an additional allowance for commercial rent tax paid. On May 20, 1976 the department's rate review board considered the nursing home's objections but left undisturbed the report of the audit with respect to the disputed items, allowing only the additional commercial rent tax item when verified. By letter dated June 1, 1976 plaintiffs were notified that the Commissioner of Health had determined, after recommendation by the review board, that the auditor's judgment should be upheld with the additional allowance for the commercial rent tax. Thereafter, on June 25, 1976, a letter was sent to the nursing home setting forth downward adjustments of reimbursement rates for 1970-1971 based on the 1969 audit, accompanied by advice that the State and local Social Service Departments were being notified of the rate revisions.

On January 6, 1977 plaintiffs commenced the present action for a declaration that any attempted reimbursement rate reduction or recoupment of alleged overpayments as a result of the 1969 audit was illegal by reason of a lack of due process attending the procedure by which the rate reductions had been determined and for an order enjoining recoupment of alleged overpayments of reimbursement (by withholding from current reimbursement) without plaintiffs' having "a full adversary due process hearing before an impartial trier of fact". Defendants' answer pleaded an affirmative defense of Statute of Limitations.

Special Term, holding untenable the Statute of Limitations defense, granted judgment favorable to plaintiffs declaring the challenged reimbursement rate adjustments void, enjoining collection of recoupment, and remanding the matter to the Commissioner of Health for a due process hearing on plaintiffs' challenges to the rate reductions. The Appellate Division, concurring in Special Term's holding that the action was not time-barred, modified the lower court's order by deleting the declaration of invalidity and the injunction against recoupment and amending the remand provision to direct that a hearing be held by the Commissioner of Health within 90 days of the effective date of the prospective Medicaid rate adjusted to recoup overpayment resulting from the 1969 audit.

We reverse and dismiss the action on the ground that it was instituted beyond the time within which it could properly be brought.

In rejecting defendants' claim of untimeliness the Appellate Division applied the six-year Statute of Limitations prescribed by CPLR 213 (subd. 1) for "an action for which no limitation is specifically prescribed by law", and concluded that plaintiffs' action was timely, having been instituted less than seven months after notification on June 25, 1976 of the reimbursement rate adjustments made pursuant to the 1969 audit and only slightly more than six months after notification on June 1, 1976 that the Commissioner of Health had rejected their appeal of the audit report; it held inapplicable the four-month limitation period provided by C PLR 217 for proceedings against a body or officer, which defendants contended barred the action.

The critical question is which Statute of Limitations determines the time within which this declaratory judgment action must have been brought. An examination of CPLR article 2 the article devoted to "Limitations of Time" discloses that no general period of limitation is specifically prescribed therein for a declaratory judgment action; nor is one to be found in any other statutory provision. That is not to say however that the six-year catch-all limitation of CPLR 213 (subd. 1) therefore automatically or necessarily governs all such actions. The declaratory judgment action, a fairly new entrant on the civil procedure field of New York, 1 is peculiarly different from the actions listed in article 2 and there assigned limitation periods, in that the latter actions seeking coercive relief are described (except in the catch-all provision of CPLR 213, subd. 1) by reference to the gravamen of the claim or the status of the defendant party. No such description attaches generically to actions for declaratory relief instituted pursuant to CPLR 3001; it is the nature of the relief sought i. e., declaratory as distinguished from coercive rather than its substance, which gives the action its identity.

In order to determine therefore whether there is in fact a limitation prescribed by law for a particular declaratory judgment action it is necessary to examine the substance of that action to identify the relationship out of which the claim arises and the relief sought factors we have previously identified as pertinent to selection of the applicable Statute of Limitations (Sears, Roebuck & Co. v. Enco Assoc., 43 N.Y.2d 389, 396, 401 N.Y.S.2d 767, 770, 372 N.E.2d 555, 558). If that examination reveals that the rights of the parties sought to be stabilized in the action for declaratory relief are, or have been, open to resolution through a form of proceeding for which a specific limitation period is statutorily provided, then that period limits the time for commencement of the declaratory judgment action. In that event there is a limitation specifically prescribed by law and the catch-all provision of CPLR 213 (subd. 1) is not applicable. If the period for invoking the other procedural vehicle for relief has expired before the institution of the action for declaratory relief, the latter action also is barred. If the alternative action or proceeding is not time-barred, however as will often be the case in light of the fact that declaratory judgment actions are frequently brought before there has been conduct which might give rise to a right to remedial or coercive relief then a challenge of untimeliness addressed to the declaratory judgment action must fail. A salutary result of the application of the limitation period appropriate to the other form of judicial proceeding will be to preclude resort by a dilatory litigant to the declaratory remedy for the purpose of escaping a bar of time which has outlawed the other procedure for redress (see Mundy v. Nassau County Civ. Serv. Comm., 44 N.Y.2d 352, 358, 405 N.Y.S.2d 660, 662, 376 N.E.2d 1305, 1307). If no other form of proceeding exists for the resolution of the claims tendered in the declaratory judgment action the six-year limitation of CPLR 213 (subd. 1) will then be applicable.

The same consequence would follow from the application of what has been labeled the "next nearest context standard" "Inquire into the kind of action that would have been most likely to raise the same substantive issues had there been no declaratory action available, and determine what the statute of limitations would have been on such next-nearest action. Then just apply that statute of limitations to the declaratory action, not only as to what the...

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