Welfare of K.S., Matter of, C5-86-2081

• Decision Date: 12 August 1988
• Docket Number: No. C5-86-2081,C5-86-2081
• Citation: 427 N.W.2d 653
• Court: Minnesota Supreme Court
• Parties: Medicare & Medicaid Guide P 37,413 In the Matter of the WELFARE OF K.S.

Page 653

427 N.W.2d 653

Medicare & Medicaid Guide P 37,413

In the Matter of the WELFARE OF K.S.

No. C5-86-2081.

Supreme Court of Minnesota.

Aug. 12, 1988.

Syllabus by the Court

1. Appellant's petition for declaratory judgment was a proper method for bringing the procedural and substantive issues to this court.

2. A minor's settlement fund is always to be considered an available asset and resource within the meaning of Minn.Stat. Sec. 256B.06, subd. 1(13) (1986) and Minn.Stat. Sec. 252.27, subd. 2 (1986).

Jeffrey Hassan, Minneapolis, for appellant.

Janeen Rosas, Hennepin Co. Atty., Minneapolis, for respondent.

Michael Fargione, Minneapolis, amicus curiae for Association for Retarded Citizens of Minnesota.

Deborah L. Huskins, Maureen W. Bellis, St. Paul, amicus curiae for Minnesota Dept. of Human Services.

Heard, considered and decided by the court en banc.

YETKA, Justice.

This case is before us on appeal from a decision of the court of appeals holding that a minor's personal injury settlement fund established pursuant to Minn.Stat. Sec. 540.08 (1986) is an available resource for purposes of a minor's eligibility for medical assistance under Minn.Stat. ch. 256B (1986) and that the fund may be used to reimburse a county under Minn.Stat. Sec. 252.27 (1986). We affirm.

I.

On June 4, 1972, K.S. sustained severe injuries during birth resulting in mental retardation and cerebral palsy. K.S. is non-ambulatory and developmentally functions between the ages of 6 months and 1 year. A medical negligence action was commenced in Ramsey County District Court on behalf of K.S. by her mother and natural guardian, Sharon Sayles Belton (hereinafter appellant). On December 12, 1977, the court, pursuant to Minn.Stat. Sec. 540.08 (1986), ¹ approved a minor's settlement of $150,000 against defendants. After deductions for costs and reimbursement to Hennepin County for past medical expenses, approximately $83,000 was placed in a savings account in the name of K.S. The court ordered "said sums to remain with the said institution or institutions until the said minor reaches the age of eighteen (18) which will take place on June 5, 1990, or until further order of the court."

Both appellant and respondents Hennepin County Welfare Department, agree that Ms. Belton has successfully petitioned Ramsey County District Court for disbursement of funds from the minor's settlement fund. Funds have apparently been used for the purchase of a special van, remodeling expenses for in-home therapy, and parental medical expenses. ² According to appellant, approximately $89,000 remains in K.S.'s settlement fund.

In 1979, due to her developmental disability, K.S. was placed in Homeward Bound, a residential treatment facility for the mentally retarded. Hennepin County District Court, Juvenile Division, apparently approved this voluntary placement of K.S. outside the parental home pursuant to the requirements of Minn.Stat. Sec. 257.071, subd. 4 (1986). ³ Hennepin County paid for K.S.'s cost of care at Homeward Bound pursuant to Minn.Stat. Sec. 252.27 (1986).

Subdivision 1 of section 252.27 provides that, whenever a mentally retarded child is placed in 24-hour care outside the home, the county of financial responsibility shall pay for the cost of such care. The county is, however, entitled to reimbursement from the parents according to their ability to pay and from the child "up to the maximum amount of the total income and resources attributed to the child." Id., subd. 2.

According to appellant, although the cost of placement in Homeward Bound has been paid by Hennepin County, the cost of general medical care has been paid through insurance obtained through appellant's employment as well as from appellant's personal funds. In addition, pursuant to Minn.Stat. Sec. 252.27, subd. 2 (1986), appellant has been required to contribute certain amounts for placement costs.

In 1982, the Hennepin County Juvenile Court, in a disposition order, directed appellant to apply for medical assistance under Minn.Stat. ch. 256B (1986) on behalf of K.S. ⁴ According to appellant, she submitted an application for medical assistance for K.S., but was denied assistance because K.S.'s settlement fund was a resource. According to Hennepin County, the assistance was denied because appellant was unable to demonstrate the settlement fund's unavailability as an asset. Furthermore, Hennepin County took the position that, because the fund was deemed an available asset, it should be used to pay for K.S.'s care. In December 1985, Hennepin County obtained an order from the juvenile court requiring appellant to petition Ramsey County District Court for disbursement of the settlement funds.

After some delay, appellant moved Ramsey County District Court for an order declaring that the settlement funds could not be used to reimburse Hennepin County for assistance provided to K.S. The court denied appellant's motion without prejudice, determining that the only action it could take with respect to the minor's settlement funds was to distribute the funds according to law when K.S. reaches her majority and to pass on petitions for distribution of funds. Because appellant's motion sought neither of these forms of relief, it was dismissed. The court indicated that a separate declaratory judgment suit would be more appropriate.

Appellant then petitioned the juvenile court in Hennepin County for declaratory judgment. Appellant sought a declaration that the settlement funds "are not a liquid asset and/or resource available to [K.S.] within the meaning of Minnesota Statutes Chapter 256B * * * and that [K.S.] is entitled to medical assistance." Hennepin County filed opposing motions, requesting a declaration that K.S.'s settlement fund "has been at all times a liquid asset and a resource within the meaning of Minn.Stat. Sec. 252.27, subd. 2(b) and Minn.Stat. Sec. 256B.06, subd. 1(13)." Hennepin County also requested reimbursement for the past care it had provided or, alternatively, an order for disbursement of funds for K.S.'s current costs of care. Finally, Hennepin County requested an order requiring appellant to reimburse the settlement fund for amounts wrongfully withdrawn and to pay all arrearages of parental contributions.

The juvenile court determined that the settlement fund resulting from K.S.'s personal injury is not a liquid asset under Minn.Stat. Sec. 256B.06. The court also denied Hennepin County's motions. However, upon Hennepin County's motion for amended findings and conclusions, the court ordered appellant to pay all arrearages on parental contributions and ordered appellant to apply for medical assistance.

In his memorandum accompanying his first order, the trial judge noted that, in order to obtain federal funds for the medical assistance program under Minn.Stat. ch. 256B, Minnesota must comply with federal statutes and regulations. The court further noted that, under federal law, a state's medical assistance plan must provide reasonable standards for determining eligibility. The trial judge then found that, because the settlement fund is not available to K.S. until she reaches 18 or until the court orders its availability, it would be "both unreasonable and not in the best interest of the child" for the court to deem the fund available. In reaching this conclusion, the court also noted that the settlement was obtained in an effort to put K.S. in a position she would have been in without the injury (i.e. made whole) and, thus, it should not be termed an asset.

On appeal, the court of appeals reversed. Matter of Welfare of Sayles, 407 N.W.2d 414 (Minn.App.1987). The court indicated that, in effect, the trial court had been asked to review the earlier administrative decision finding K.S.'s fund available as a resource. The court then listed the findings necessary for reversing an agency determination and held that the trial court had made no such findings. The court went on to conclude that, under Minn. Rules 9500.0820, subp. 2E, ⁵ K.S.'s settlement fund was a trust and was available as a resource for purposes of medical assistance eligibility under Minn.Stat. Sec. 256B.06, subd. 1(13) (1986). Because the fund was an available asset, the court concluded further that Hennepin County was entitled to reimbursement under Minn.Stat. Sec. 252.27, subd. 2 (1986).

This court granted K.S.'s petition for further review, and the matter was scheduled for oral argument on November 30, 1987. However, the case was removed from the calendar, and the court ordered the parties to submit supplemental briefs on certain jurisdictional and substantive issues. A companion case, Beltrami County v. Goodman, 427 N.W.2d 662, was also removed from the non-oral calendar with an order issued to the parties to submit supplemental briefs on the identical issues.

II.

This appeal presents both substantive and procedural issues. The substantive issues focus on the availability of a minor's settlement fund for purposes of medical assistance eligibility and reimbursement for cost of care. Before reaching these issues, we find it necessary to determine first whether, in light of its complex procedural history, this case is properly before us.

This case comes to us in a procedural morass. While an administrative procedure for determining eligibility and reimbursement issues appears to exist, see Minn.Stat. Sec. 256.045 (1986), they have not been fully employed in this case. These administrative procedures, however, do not contemplate a case such as this where an availability determination is sought regarding property under court control. Amicus curiae Association for Retarded Citizens of Minnesota (hereinafter ARC) suggests that, in the past, the availability of a minor's settlement fund (at least in the medical assistance eligibility context) has been left to the court with jurisdiction over the fund. Yet, in this case, the parties have sought an availability determination from Hennepin County ...