Williams v. Department of Health and Rehabilitative Services, BR-159

• Decision Date: 18 March 1988
• Docket Number: No. BR-159,BR-159
• Citation: 522 So.2d 951,13 Fla. L. Weekly 718
• Parties: 13 Fla. L. Weekly 718 Charlotte WILLIAMS, Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellee.
• Court: Florida District Court of Appeals

Page 951

522 So.2d 951

13 Fla. L. Weekly 718

Charlotte WILLIAMS, Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellee.

No. BR-159.

District Court of Appeal of Florida,

First District.

March 18, 1988.

Joyce Henderson-Williams, Northwest Florida Legal Services, Inc., Pensacola, for appellant.

Margaret E. Smithson, Dept. of Health and Rehabilitative Services, Pensacola, for appellee.

JOANOS, Judge.

Charlotte Williams (appellant) appeals an order of the Department of Health and Rehabilitative Services (HRS) terminating benefits under the Aid to Families with Dependent Children (AFDC) program. The questions presented for our review are: (1) whether receipt of a personal injury award by an AFDC recipient is considered a resource, and therefore exempt from the "lump-sum" rule; and (2) whether appellant has an equitable interest in an exempt asset, and whether transfer of this exempt asset would disqualify her from receipt of AFDC benefits for a period of two years. We reverse.

On July 21, 1986, appellant received a lump sum personal injury settlement for injuries she sustained in an automobile accident. At that time, appellant was still legally married but was separated from her husband. She resided with Mr. Weekly and their respective children in Mr. Weekly's mobile home. Appellant has two children by Mr. Weekly, and both she and Mr. Weekly have children from former marriages who reside with them.

Prior to receipt of the insurance settlement, appellant notified HRS personnel that she expected to receive the lump sum settlement, and asked what effect the settlement would have on her AFDC benefits. HRS records reflected that appellant's residence had been damaged by fire. In reviewing those records, the HRS caseworker explained that if appellant obtained a statement from the fire department condemning her dwelling, and then spent the settlement funds within seven days for another dwelling, the insurance settlement would not be counted as lump sum income. Otherwise, the insurance settlement would be counted as lump sum income, and appellant would be ineligible for AFDC benefits for a stated period of time.

The mobile home owned by Mr. Weekly was damaged by fire on three different occasions. On one occasion, the home sustained extensive electrical and smoke damage. By letter dated July 25, 1986, the Santa Rosa County Department of Public Works advised that the mobile home in which appellant and Mr. Weekly resided had been declared unfit for human habitation, and was therefore condemned. This letter was submitted into evidence at the subsequent hearing held on the department's decision to suspend appellant's AFDC benefits.

Acting upon the information provided by HRS representatives, appellant made a $5,000 down payment on a new mobile home. Most of the remainder of the insurance funds went toward expenses related to the mobile home, such as plumbing and electrical work. When appellant notified HRS of the mobile home purchase, it was discovered that Mr. Weekly was named as buyer on the sales contract for the mobile home. Appellant's name had not been included. HRS representatives in Santa Rosa County contacted the State Program Office for guidance on whether the lump sum personal injury award received by appellant should be excluded because of the condemnation of the old mobile home and subsequent purchase of a new mobile home, and whether it should be considered a transfer of assets. The local office was directed to consider the situation a transfer of assets.

Thereafter, HRS notified appellant that her medicaid/medical benefits and AFDC benefits were being cancelled for a period of two years due to a transfer of assets. Appellant sought review of the HRS decision. At the hearing held on the matter, neither appellant nor HRS was represented by counsel. An HRS case worker and her supervisor were present for the department, and appellant attended the hearing accompanied by a friend who had advised her earlier regarding her accident problems and who also attempted to counsel her with regard to her AFDC problem. The HRS representatives acknowledged that they had discussed the fact that appellant's personal injury award could be excluded from income for purposes of computing AFDC eligibility, if her dwelling had been condemned and if she obtained a statement from the fire department to that effect. Instead, appellant presented a statement from the Department of Public Works, which the HRS case worker considered unacceptable because the manual called for a statement from the fire department. The case worker said when she learned that the new mobile home had been purchased solely in Mr. Weekly's name, she called the Program Office to verify whether it should be considered a transfer of assets.

Appellant explained that she did not know in advance that her name would not be on the mobile home contract. A letter from the mobile home seller was submitted into evidence. This letter corroborates appellant's testimony, and reflects that the seller based his decision not to place appellant's name on the sale contract because, among other things, he did not want to subject appellant to potential indebtedness and ownership of property while she was still legally married to her estranged husband. In addition, the seller had known Mr. Weekly and his family for at least ten years, but had been acquainted with appellant only ten months.

The friend who accompanied appellant to the hearing explained to the hearing officer that appellant had been very confused about the situation. The caseworkers assigned to her case had been changed three times, and appellant thought she had handled the personal injury award as she had been advised to do. He stated that arrangements could be made to place appellant's name on the mobile home contract, if that proved to be the only bar to her continued receipt of AFDC benefits.

The hearing officer's final order found in part that appellant "was unaware that the plans were to only list the mobile home in the name of Mr. Weekly and had understood that if their old home was condemned and if she spent the money on a new home within seven days of receiving her check from the insurance company that her AFDC check would not be cut off." Despite this express finding, the hearing officer concluded that appellant's intent in purchasing the mobile home was to remain eligible for AFDC benefits, and that the department acted correctly in treating the purchase as a transfer of assets and terminating benefits.

AFDC is an assistance program administered under the auspices of federal and state regulations. To be eligible for AFDC benefits, an AFDC assistance unit may not own assets "in excess of one thousand dollars equity value," excluding the home. 40 C.F.R. § 233.20(1)(3)(i) (1986); Fla.Admin. Code Rule 10C-1.099(1).

If at any time the income of the AFDC assistance unit "exceeds the State need standard for the family because of receipt of nonrecurring earned or unearned lump sum income ... the family will be ineligible for aid for the full number of months derived by dividing the sum of the lump sum income and other income by the monthly need standard for a family of that size ..." 45 C.F.R. § 233.20(a)(3)(ii)(F) (1986). The concomitant Florida rule provides in part:

When the assistance group receives a lump sum payment of earned or non-earned income which is nonrecurring and which causes the assistance group's total net income to meet or exceed the Consolidated Need Standard (CNS), an additional calculation is required to determine the ineligibility period. The ineligibility period is the number of months the assistance group will remain ineligible for assistance based on receipt of income sufficient to meet the group's needs for the period. The ineligibility period is determined by dividing the total net available income in the lump sum receipt month by the CNS for the size assistance group.

In October 1986, section 233.20 of the Code of Federal Regulations was amended to include personal injury awards in the definition of income for purposes of the lump sum rule. However, the rule in place when AFDC benefits were terminated in this case did not specifically designate personal injury awards as income. See Lukhard v. Reed, 481 U.S. 368, 107 S.Ct. 1807, 95 L.Ed.2d 328 (1987). In Lukhard, Justice Scalia explained the distinction between treating money received by an assistance unit as a "resource" or as "income," stating:

If a given sum of money were treated as a resource, the family that received the sum would be ineligible only until it spent enough of the sum to bring its resources down to the State's resource limit; but if the sum were treated as income, no matter how much was spent, the family would remain ineligible for the statutory period.

Prior to October 1986, the jurisdictions were divided on whether personal injury awards should be treated as income, and therefore subject to the lump sum rule. See, e.g., Vermeulen v. Kheder, 599 F.Supp. 1217 (W.D.Mich.1984); Jackson v. Guissinger, 589 F.Supp. 1288 (W.D.La.1984); Faught v. Heckler, 577 F.Supp. 1180 (S.D.Iowa 1983), aff'd, 736 F.2d 1235 (8th Cir.1984)--holding that personal injury awards should be treated as income, and Reed v. Health and Human Services, 774 F.2d 1270 (4th Cir.1985)--holding that personal injury awards should be treated as a resource. We note that in 1987, the Supreme Court reversed the Reed decision at 481 U.S. 368, 107 S.Ct. 1807, 95 L.Ed.2d...