Source: http://www.ndcourts.gov/Court/Briefs/20120013.aeb.htm
Timestamp: 2018-01-22 00:40:04
Document Index: 772497548

Matched Legal Cases: ['§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 03', '§ 28', '§ 50', '§ 50', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 28', '§ 75', '§ 75', '§ 1396', '§ 1396', '§ 1396', '§ 50', '§ 50', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 75', '§ 03', '§ 59', '§ 27', '§ 03', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 59', '§ 75', '§ 59', '§ 75', '§ 75', '§ 1396', '§ 1396', '§ 75', '§ 75', '§ 1396', '§ 75', '§ 75', '§ 1396', '§ 75', '§ 1396', '§ 75', '§ 59', '§ 75', '§ 75', '§ 59', '§ 75', '§ 75', '§ 75']

Dahly v. Human Services - Appellee Brief
Wilfred Dahly, )
Appellant, ) Supreme Ct. No. 20120013
v. ) Ward County No. 51-2011-CV-00819
Carol K. Olson, Executive Director, )
North Dakota Department of )
HONORABLE DOUGLAS L. MATTSON
By: Jeanne M. Steiner
State Bar ID No. 06548
Under Medicaid law, assets are available if transferred for less than fair market value by someone in a confidential relationship. Attorneys in fact are agents in a confidential relationship and have fiduciary duties. Rick Dahly is attorney in fact for his father, Wilfred Dahly, who suffers from dementia. Rick transferred Wilfred's house to Rick's sister, who sold it and split the proceeds of the sale with Rick. Wilfred received nothing from the transfer or sale. Are the proceeds from the sale available assets to Wilfred? 1
II. Statement of the Proceedings 6
Law and Argument 8
I. Summary of the Argument 8
II. Scope of Review 8
III. The Medicaid Program requires individuals to exhaust their own assets before they can be eligible for Medicaid benefits 12
IV. The proceeds from the sale of Wilfred's home are available assets because the home was transferred by Rick, who had a confidential relationship with Wilfred 15
V. Rick failed to prove he did not violate his fiduciary duty to Wilfred and failed to rebut the presumption that the transfer was made under undue influence 19
VI. Wilfred failed to establish the assets are not actually available and failed to establish that a legal action to obtain the asset would be unsuccessful 20
VII. The sale proceeds are available assets because the attorney in fact made the transfer; there is no disqualifying transfer so there is no "exception" to a disqualifying transfer 20
VIII. The Equal Protection argument is without merit 24
Alerus Fin., N.A. v. W. State Bank,
2008 ND 104, 750 N.W.2d 412 15-16
Allen v. Wessman,
542 N.W.2d 748 (N.D. 1996) 13
Americana Healthcare Ctr. v. N.D. Dep't of Human Servs.,
540 N.W.2d 151 (N.D. 1995) 10
Americana Healthcare Ctrs. v. N.D. Dep't of Human Servs.,
510 N.W.2d 592 (N.D. 1994) 9
Barnes Co. v. Garrison Diversion Conservancy Dist.,
312 N.W.2d 20 (N.D. 1981) 9
Bohac v. Graham,
424 N.W.2d 144 (N.D. 1988) 9, 12
Carlson v. Job Serv. N.D.,
548 N.W.2d 389 (N.D. 1996) 11
473 U.S. 432 (1985) 25
Clarys v. Ford Motor Co.,
1999 ND 72, 592 N.W.2d 573 21
Estate of Wenzel-Mosset,
1998 ND 16, 575 N.W.2d 425 17
Estate of Zins,
420 N.W.2d 729 (N.D. 1988) 17, 19
Farley v. Champs Fine Foods, Inc.,
404 N.W.2d 493 (N.D. 1987) 19
Geffre v. N.D. Dep't of Health,
2011 ND 45, 795 N.W.2d 681 24
Grey Bear v. N.D. Dep't of Human Servs.,
2002 ND 139, 651 N.W.2d 611 21
Hakanson v. N.D. Dep't of Human Servs.,
479 N.W.2d 809 (N.D. 1992) 10
Houn v. Workforce Safety & Ins.,
2005 ND 115, 698 N.W.2d 271 11
In re Bottineau County Water Res. Dist. v. N.D. Wildlife Soc'y,
424 N.W.2d 894 (N.D. 1988) 9, 10, 11
In re Estate of Mehus,
278 N.W.2d 625 (N.D. 1979) 16
Kackman v. N.D. Workers' Comp. Bureau,
488 N.W.2d 623 (N.D. 1992) 11
Kryzsko v. Ramsey County Soc. Serv.,
2000 ND 43, 607 N.W.2d 237 8
Linser v. Office of Attorney Gen., Dep't of Human Servs.,
2003 ND 195, 672 N.W.2d 643 15
Makedonsky v. N.D. Dep't of Human Servs.,
2008 ND 49, 746 N.W.2d 185 15, 22
Marion v. Job Serv. N.D.,
470 N.W.2d 609 (N.D. 1991) 11
McCarter v. Pomeroy,
466 N.W.2d 562 (N.D. 1991) 11
N.Y. State Dep't of Soc. Servs. v. Bowen,
846 F.2d 129 (2d Cir. 1988) 13
Olson v. Workforce Safety Ins.,
2008 ND 59, 747 N.W.2d 71 24
Opp v. Ward County Soc. Servs. Bd.,
2002 ND 45, 640 N.W.2d 704 15, 20
Post v. Cass County Soc. Servs.,
556 N.W.2d 661 (N.D. 1996) 15
Power Fuels, Inc. v. Elkin,
283 N.W.2d 214 (N.D. 1979) 9
Reinholdt v. N.D. Dep't of Human Servs.,
2009 ND 17, 760 N.W.2d 101 20
Schmidt v. Ward County Soc. Servs. Bd.,
2001 ND 169, 634 N.W.2d 506 15
Schultz v. N.D. Dep't of Human Servs.,
372 N.W.2d 888 (N.D. 1985) 10, 11, 12
Speedway, Inc. v. Job Serv. N.D.,
454 N.W.2d 526 (N.D. 1990) 10-11
Wagner v. Sheridan County Soc. Servs. Bd.,
518 N.W.2d 724 (N.D. 1994) 14-15
Wahl v. Morton County Soc. Servs.,
1998 ND 48, 574 N.W.2d 859 13
Wis. Dep't of Health & Family Servs. v. Blumer,
534 U.S. 473 (2002) 14
42 U.S.C. § 1396 12, 13
42 U.S.C. § 1396a 14
42 U.S.C. § 1396p(c)(1)(A) 20, 21, 22
42 U.S.C. § 1396p(c)(2)(A)(iv) 20, 22
42 U.S.C. § 1396p(G) 20
N.D.C.C. ch. 59-01 16
N.D.C.C. ch. 59-09 16
N.D.C.C. ch. 59-10 16
N.D.C.C. ch. 59-11 16
N.D.C.C. ch. 59-12 16
N.D.C.C. ch. 59-13 16
N.D.C.C. ch. 59-14 16
N.D.C.C. ch. 59-15 16
N.D.C.C. ch. 59-16 16
N.D.C.C. ch. 59-17 16
N.D.C.C. ch. 59-18 16
N.D.C.C. ch. 59-19 16
N.D.C.C. § 03-02-05 16
N.D.C.C. § 28-32-49 8
N.D.C.C. § 50-24.1-01.1 14
N.D.C.C. § 50-24.1-02 14
N.D.C.C. § 59-09-01 16
N.D.C.C. § 59-09-06 16, 17
N.D.C.C. § 59-16 18
N.D.C.C. § 59-16-01 16
N.D.C.C. § 59-16-02 18
N.D.C.C. § 59-16-02(1) 16
N.D.C.C. § 59-16-02(3) 17, 19
N.D.C.C. § 59-16-09 16
N.D.C.C. § 59-18-01 17, 18
N.D.C.C. § 59-18-01(1) 16
N.D.C.C. § 59-18-01.1 17, 18
N.D.C.C. § 59-18-02 17, 18
N.D.C.C. § 59-18-09 18, 22, 23
N.D. Admin. Code ch. 75-02-02.1 14
N.D. Admin. Code § 75-02-02.1-02.1 14
N.D. Admin. Code § 75-02-02.1-25 14
N.D. Admin. Code § 75-02-02.1-25(1) 14, 15
N.D. Admin. Code § 75-02-02.1-26(1) 14
N.D. Admin. Code § 75-02-02.1-27 14
N.D. Admin. Code § 75-02-02.1-28 14
N.D. Admin. Code § 75-02-02.1-33.1 21
N.D. Admin. Code § 75-02-02.1-33.2 21
N.D. Admin. Code § 75-02-02.1-33.2(2) 22
N.D. Admin. Code § 75-02-02.1-33.2(7) 7, 8, 11, 20, 21, 22, 24
N.D. Admin. Code § 75-02-02.1-33.2(7)(a)(4) 7
N.D. Admin. Code § 75-02-02.1-33.2(18) 18, 23
N.D. Admin. Code § 75-02-02.1-33.2(18)(a) 23
N.D. Admin. Code § 75-02-02.1-33.2(18)(b) 11-12, 23
N.D.R.Ev. 301 19
N.D.R.Ev. 301(a) 19
2007 N.D. Sess. Laws ch. 549 16
Medicaid Policy Manual 510-05-70-10(6) 18, 23
North Dakota Uniform Trust Code 16
Under Medicaid law, assets are available if transferred for less than fair market value by someone in a confidential relationship. Attorneys in fact are agents in a confidential relationship and have fiduciary duties. Rick Dahly is attorney in fact for his father, Wilfred Dahly, who suffers from dementia. Rick transferred Wilfred's house to Rick's sister, who sold it and split the proceeds of the sale with Rick. Wilfred received nothing from the transfer or sale. Are the proceeds from the sale available assets to Wilfred?
This is an appeal from the Department of Human Services' ("Department") finding that Appellant, Wilfred Dahly ("Wilfred"), had assets that exceeded the $3,000 asset limit for Medicaid eligibility. (Appendix (App.) 8-9). The assets at issue in this case are the proceeds from the sale of Wilfred's home, totaling $160,442.15. (Id.)
Wilfred and Geraldine Dahly ("Geraldine") are married. (App. 61). Rick Dahly ("Rick") is their son and attorney in fact and LeAnn Greenwell ("LeAnn") is their daughter and successor attorney in fact. (App. 61, 139-44). The power of attorney was signed in 2004 after Wilfred sought the advice of an attorney and learned of the five year look-back period under Medicaid law. (App. at 100, 110, 139-44). Rick testified Wilfred wanted to take everything out of his name and put everything in Rick and LeAnn's names. (App. 100-01, 111). Rick testified he and Wilfred discussed transferring assets at that time but anticipated Geraldine, who suffered from dementia, would not live at home for five years, so no transfers were made. (App. 100-01, 109- 111). Rick testified Wilfred specifically told Rick "[d]on't you let them take my house." (App. 101). However, Wilfred himself made no transfers at that time or at any time prior to becoming so affected by dementia as to be mentally incapacitated several years later. (App. at 111, 147). The transfers of assets were all done by Rick as attorney in fact. (App. 102).
Currently, Wilfred and Geraldine are both in a nursing home; however, prior to that, they lived together in their home in Minot. (App. 62). Geraldine had progressive dementia of the Alzheimer's type and experienced continued cognitive and functional decline over the years. (App. 62, 146). She began requiring 24-hour care in approximately January 2006. (App. 147). Initially, Wilfred was caring for Geraldine, but he also suffered from dementia, deteriorated, and needed assistance. (App. 62-63, 146-48). In January 2007 (not 2006 as indicated on page 4 of Appellant's Brief ) LeAnn and her husband moved into Wilfred and Geraldine's home to care for them. (App. 63, 65).
On February 27, 2007, Rick signed a care agreement on Wilfred and Geraldine's behalf with LeAnn, wherein Rick agreed to pay LeAnn $2,250 each month with Wilfred and Geraldine's money for their care. (App. 64, 149-50). In addition to the payment, LeAnn and her husband lived in Wilfred and Geraldine's house rent free. (App. 65). Wilfred and Geraldine's money was also used to pay LeAnn and her husband's expenses, including food, utilities, gas and insurance. (Id.) The eligibility worker noted there were many checks written from Wilfred and Geraldine's account for businesses in Bismarck where Rick lives and checks written for various gas stations, many cafés, lots of groceries, Target, Menards, K-mart, etc. were not what one would expect for a couple needing 24-hour care. (App. 178). Wilfred and Geraldine did not sign the care agreement and had both been diagnosed with dementia before the contract was signed. (App. 64, 66, 149-51).
By August 15, 2007, Wilfred's progressive dementia had evolved to a level of significant cognitive impairment; his severe cognitive function was on the level of needing 24-hour care. (App. 147-48).
In early January 2008, Rick and LeAnn met with the county eligibility worker to apply for Medicaid for their parents. (App. 178). At that time, they indicated both parents had Alzheimer's/dementia issues and had a note from Doctor Swenson dated May 2, 2007 to substantiate their parents' medical condition because they wanted their parents' house. (App. 146, 178). According to the case narrative, Rick and LeAnn told the eligibility worker up front they expected to transfer Wilfred and Geraldine's house to themselves based on the two year caregiver issue. (Id.)
Geraldine entered the nursing home on January 17, 2008. (App. 62). She applied for Medicaid and qualified under Medicaid's spousal rules. (App. 67). The house was not a countable asset at that time because Wilfred, the community spouse, was living in it. (Id.) Under Medicaid spousal impoverishment prevention rules, the house is exempt as long as the community spouse is living in it. (Id.) The contract for services dated February 27, 2007 was not mentioned in the initial interview and was not given to the county eligibility worker until January 29, 2008. (App. 149-51, 178). The eligibility worker's case narrative indicates there were multiple transactions not initially disclosed, including a CPRail settlement of $100,000 and the cashing out of three unreported U.S. Bank certificates of deposit and an unreported annuity. (App. 178).
Despite Geraldine's entrance into the nursing home in mid-January 2008, Rick and LeAnn did not sign a new contract for services until April 17, 2008. (App. 152-54). Under this contract for services, Rick agreed to pay LeAnn $1,500 each month to care for Wilfred. (Id.) LeAnn and her husband continued to live in Wilfred and Geraldine's house virtually expense free. (App. 68). On April 13, 2009, Rick signed a quit claim deed on Geraldine's behalf, transferring the house to Wilfred. (App. 168).
On May 4, 2010, nearly three years after Wilfred had become so significantly cognitively impaired that he needed 24-hour care, Rick transferred Wilfred's house to LeAnn for $10. (App. 68, 147-48, 155-56). Shortly after that transaction, LeAnn notified the eligibility worker of the intent for Wilfred to enter the nursing home in July. (App. 145). In June, the eligibility worker informed Leann that if Wilfred were to go into the nursing home the following month as planned, the house would become a countable asset and neither parent would be eligible for Medicaid. (App. 69, 145). Wilfred entered the nursing home on July 15, 2010. (App. 62).
On August 30, 2010, LeAnn sold Wilfred's house for $180,000 netting $160,442.15. (App. 157-59). The proceeds from the sale of Wilfred's house were split equally between Rick and LeAnn and placed in their respective accounts. (App. 160-65). Rick applied for Medicaid on Wilfred's behalf on November 8, 2010. (App. 131-38). The asset limit for a person seeking Medicaid is $3,000. (App. 70). Medicaid benefits were denied because the proceeds from the sale of the house are countable assets that are available, placing Wilfred above the asset limit. (App. 8-9). The County never considered Rick's transfer of Wilfred's house to LeAnn as a disqualifying transfer. (App. 79).
Although Rick filed an appeal letter and wrote Wilfred transferred the house, Rick was actually the person who transferred Wilfred's house. (App. 10, 155). The Department's position was explained in an email from the Medicaid Eligibility Policy Administrator to the County Eligibility Worker. (App. 173-76). The case would be different if Wilfred had transferred the house. (Id.) However, Rick transferred the house and as attorney in fact, Rick had a fiduciary responsibility to act in Wilfred's best interest. (Id.) Wilfred is incapacitated; there is no way of knowing what Wilfred's intentions were, so his assets need to be used to pay for his care. (Id.) If Wilfred truly had wished to transfer the house to LeAnn, he would have done so earlier. (Id.) When the attorney in fact makes the transfer, it is not a disqualifying transfer, it is an available asset. (Id.)
II. Statement of the Proceedings.
An evidentiary hearing was held on March 16, 2011. (App. 51). At the hearing, Beverly Selmek, County Eligibility Worker, testified. (App. 58-97, 123). Rick also testified. (App. 98-122).
After the parties filed post-hearing briefs, the Administrative Law Judge ("ALJ") submitted Recommended Findings and Conclusions and Recommended Order to the Executive Director of the Department. (App. 13-30). Based on the facts and law of the case, the ALJ determined Wilfred himself did not transfer the property; that Rick and LeAnn may have colluded to keep Wilfred's assets for themselves in conflict with Rick's fiduciary duties. (App. 25). The ALJ concluded Rick had a duty to protect and use Wilfred's property on behalf of Wilfred, not to profit from any transaction he made as Wilfred's attorney in fact. (App. 26). The ALJ determined Rick transferred Wilfred's home to LeAnn, who sold it and split the sale proceeds with Rick, triggering presumptions of conflict and undue influence that have not been rebutted and giving Wilfred a cause of action to have the proceeds returned. (Id.) The ALJ found Rick's testimony that Wilfred wanted his children to have his assets was not credible and was self-serving hearsay. (App. 26-27). The ALJ affirmed the County's determination. (App. 30).
Initially, the ALJ wrote "[t]here is no disqualifying transfer in this matter but there is an exception that may apply; but that exception does apply in this matter because of Rick's actions as attorney in fact, his conflict as Wilfred's son, his undue influence, and his duties as a fiduciary to Wilfred as explained above. Thus, the net proceeds of the Dahly home are an available asset to Wilfred . . . ." (App. 28-29) (emphasis added). Realizing the error that is admittedly "self evident", the ALJ issued Amended Recommended Findings and Conclusions and Recommended Order to clarify the exception to the disqualifying transfer does not apply in this matter. (App. 31-33) (emphasis added).
The Executive Director issued Amended Conclusions of Law affirming the County's action, including affirming the determination the proceeds from the sale were excess assets and affirming the exception to the disqualifying transfer rule does not apply. (App. 34-38). The Executive Director amended some of the ALJ's conclusions of law. (Id.) Specifically, the Executive Director concluded N.D. Admin. Code § 75-02-02.1-33.2(7) is an exception to the disqualifying transfer rule and does not apply to available assets. (App. 35). The Executive Director also amended Conclusions of Law 35 and 36 regarding capacity and competence to contract because the ALJ's conclusions were contrary to law. (App. 37-38). Regardless of the modifications, the ALJ and Executive Director agreed the proceeds from the sale of the house were available assets and rejected Wilfred's argument that Rick's transfer of Wilfred's house to LeAnn was permitted under N.D. Admin. Code § 75-02-02.1-33.2(7).
Wilfred appealed the Executive Director's Amended Conclusions of Law to the District Court. (App. 39-40). The District Court affirmed the Department's decision Wilfred was ineligible for Medicaid benefits, agreeing with the Department that there was no disqualifying transfer and thus the exception set out in N.D. Admin. Code § 75-02-02.1-33.2(7)(a)(4) does not apply. (App. 41-45). This appeal followed. (App. 48).
I. Summary of the Argument.
Wilfred fails to grasp that the denial was not based in any way on the payments LeAnn received under the care agreements. The denial of eligibility was based on the fact Rick transferred Wilfred's house to LeAnn, who sold it and split the proceeds with Rick. Wilfred received no compensation from the transfer to LeAnn or from the subsequent sale of the house, and he is incapable of ratifying the transfer. Rick breached his fiduciary duties to Wilfred, who has a cause of action to have the proceeds returned, and therefore, the proceeds are an available asset for Medicaid eligibility purposes. N.D. Admin. Code § 75-02-02.1-33.2(7) is an exception to the disqualifying transfer penalty. No disqualifying transfer occurred, so there is no exception to the disqualifying transfer penalty. N.D. Admin. Code § 75-02-02.1-33.2(7) does not apply to this case.
A court's review of an administrative appeal is a limited review, governed by N.D.C.C. § 28-32-49. The agency's decision should be affirmed if its findings of fact are supported by a preponderance of the evidence, its conclusions of law are supported by its findings of fact, its decision is supported by the conclusions of law, its decision is in accordance with the law and does not violate the claimant's constitutional rights, and if the agency's rules or procedures did not deprive the claimant of a fair hearing. Kryzsko v. Ramsey County Soc. Servs., 2000 ND 43, ¶ 5, 607 N.W.2d 237.
In a review of the agency's evidentiary findings, this Court has stated:
In determining whether the agency's findings of fact are supported by a preponderance of the evidence, we do not make independent findings of fact or substitute our judgment for that of the agency, but determine only whether a reasoning mind could have reasonably determined that the factual conclusions were supported by the weight of the evidence.
Bohac v. Graham, 424 N.W.2d 144, 145 (N.D. 1988).
The basis for this standard was articulated earlier in Power Fuels, Inc. v. Elkin, 283 N.W.2d 214, 220-21 (N.D. 1979): "In so doing we conclude that we are not exercising a nonjudicial function as prohibited by Section 94 of the North Dakota Constitution, nor are we violating any separation-of-powers doctrine inherent in the North Dakota Constitution."
"Because of [this] doctrine of separation of powers . . . all courts must exercise restraint in reviewing administrative determinations." Barnes County v. Garrison Diversion Conservancy Dist., 312 N.W.2d 20, 25 (N.D. 1981). "Ordinarily, determinations of an administrative body are presumed to be correct and valid." (Id.) An agency is also afforded a "reasonable range of informed discretion in the interpretation and application of its own rules." In re Bottineau County Water Res. Dist. v. N.D. Wildlife Soc'y, 424 N.W.2d 894, 900 (N.D. 1988).
Although interpretations of administrative regulations are questions of law and are fully reviewable, "[w]hen an administrative agency's interpretation of a regulation does not contradict the clear and unambiguous language of the regulation, its interpretation is entitled to some weight." Americana Healthcare Ctrs. v. N.D. Dep't of Human Servs., 510 N.W.2d 592, 594 (N.D. 1994). "[A]n administrative agency's interpretation of its own rules is entitled to some deference." Hakanson v. N.D. Dep't of Human Servs., 479 N.W.2d 809, 814 (N.D. 1992). This Court has consistently accorded an administrative agency "a reasonable range of informed discretion in the interpretation and application of its own rules." Bottineau County, 424 N.W.2d at 900. See also Americana Healthcare Ctr. v. N.D. Dep't of Human Servs., 540 N.W.2d 151, 153 (N.D. 1995) (recognizing the basic principle that "determinations of administrative bodies are presumed to be correct . . . " and "the expertise of the agency is entitled to respect and appreciable deference.") (citations omitted). The Department's interpretation of its rules in this case is a reasonable construction of the rules.
Finally, the court reviews the Findings and Order of the Department, not the recommendations of the ALJ. See Schultz v. N.D. Dep't of Human Servs., 372 N.W.2d 888, 892 (N.D. 1985). In Schultz, this Court stated the applicable criteria for a court's review of an administrative agency's decision, as follows:
The administrative officer deciding a case need not actually hear the witnesses testify or hear oral argument, but the officer deciding the case must consider and appraise the evidence before reaching a decision. . . . A court's review of an agency decision does not include probing an agency decision maker's mental process if a hearing was given as required by law.
A court is not to second guess the Executive Director's modification or rejection of an ALJ's recommendations if "[t]he findings, conclusions, and decision [are] sufficient to explain the rationale for not following the hearing officer's recommendation." (Id.) Subsequently, this Court reviewed the issue in Speedway, Inc. v. Job Serv. N.D., 454 N.W.2d 526, 527-28 (N.D. 1990), and again rejected the argument the court should review the referee's decision because, as argued therein, the referee was the only party that saw and heard the evidence and witnesses first hand. The court noted "[o]ur inquiry is limited to a review of the findings, conclusions, and decision of the agency under the appropriate standard of review." (Id.) (quoting Schultz, 372 N.W.2d at 892). "The final decision of [the administrative agency] was made by its Executive Director and it was from his decision that [appellant] appealed to the district court. Consequently, we review the decision of the Executive Director to determine whether [the appellant] has raised an appropriate ground for reversal of the agency's determination." (Id.)
This Court has consistently applied this criteria. See Houn v. Workforce Safety & Ins., 2005 ND 115, ¶¶ 5-7, 698 N.W.2d 271; Carlson v. Job Serv. N.D., 548 N.W.2d 389, 392-93 (N.D. 1996); Kackman v. N.D. Workers' Comp. Bureau, 488 N.W.2d 623, 625 (N.D. 1992); McCarter v. Pomeroy, 466 N.W.2d 562, 567 (N.D. 1991); Marion v. Job Serv. N.D., 470 N.W.2d 609, 612 (N.D. 1991); Speedway, 454 N.W.2d at 528-29; Bottineau County, 424 N.W.2d at 902.
The Executive Director's Amended Conclusions of Law explained the reason for rejecting and amending three of the ALJ's recommended conclusions of law. The Executive Director explained N.D. Admin. Code § 75-02-02.1-33.2(7) contains a scriveners error, is an exception to the disqualifying transfer rule, and does not apply to other available assets. (App. 35). The Executive Director further explained there is no disqualifying transfer because Wilfred was incompetent and could not approve or ratify Rick's transfer of the home to LeAnn. (App. 35-36). Finally, the Executive Director clarified the word "capacity" in the phrase "capacity to contract" as used in N.D. Admin. Code § 75-02-02.1-33.2(18)(b) means the individual is competent to contract and must have the mental ability to understand the motives of the transferee and all other facts concerning the transaction. (App. 37-38). The Executive Director's findings, conclusions, and decision are sufficient to explain the rationale for not following all of the ALJ's recommendations. See Schultz, 372 N.W.2d at 892.
For these reasons, in reviewing the Executive Director's Order, this Court is not to "make independent findings of fact or substitute [its] judgment for that of the agency, but determine only whether a reasoning mind could have reasonably determined that the factual conclusions were supported by the weight of the evidence." Bohac, 424 N.W.2d at 145. To the extent Wilfred argues the court should review the recommendations of the ALJ that were not adopted by the Executive Director, that argument is not supported in law.
The Department's interpretation of its rules is consistent with Medicaid law and should be accorded deference by this Court. Additionally, the factual findings are supported by the evidence, its decision is in accordance with the law, and this Court should uphold the Department's determination that Wilfred had excess assets because the proceeds of the sale of his home are available and therefore, he does not qualify for Medicaid benefits.
III. The Medicaid Program requires individuals to exhaust their own assets before they can be eligible for Medicaid benefits.
Federal law established the Medicaid program as a jointly financed federal-state program designed to provide health care to needy individuals. 42 U.S.C. § 1396. Inherent in the congressional plan was an intent to require an individual to exhaust his or her own assets before taxpayer revenues are used to provide for that individual's medical care. See N.Y. State Dep't of Soc. Servs. v. Bowen, 846 F.2d 129, 133 (2d Cir. 1988) (quoting the Senate Report that "'Medicaid is intended to be the payer of last resort, that is, other available resources must be used before Medicaid pays for the care of an individual enrolled in the Medicaid program.'" (citation omitted)).
This Court recognized this congressional intent in Allen v. Wessman, 542 N.W.2d 748 (N.D. 1996), when the Court reviewed a trust in which the grantor attempted to protect his assets to pass on to his heirs. The Court held:
Our conclusion reflects the legislative concern that the Medicaid program not be used as an estate planning tool. The Medicaid program would be at fiscal risk if individuals were permitted to preserve assets for their heirs while receiving Medicaid benefits from the state. . . .
(Id.) at 753-54 (citation omitted). "To permit [the applicant] to exploit Medicaid benefits while sheltering his wealth to eventually benefit his relatives violates the Medicaid program's objective." (Id.) at 754. See also Wahl v. Morton County Soc. Servs., 1998 ND 48, ¶ 18, 574 N.W.2d 859 ("The Medicaid program is intended to be the payor of last resort, with other available resources being used before medicaid pays for an individual's care.")
The Medicaid program is governed by an interplay of federal and state law and regulations. 42 U.S.C. § 1396. The Secretary of the United States Department of Health and Human Services, through the Center for Medicare and Medicaid Services, administers the program at the federal level. Each state electing to participate in the Medicaid program must establish a state plan to implement the program. 42 U.S.C. § 1396a. As long as the state establishes program terms that represent a reasonable construction of the federal standards, the state's decision will be respected by a reviewing court. See Wis. Dep't of Health & Family Servs. v. Blumer, 534 U.S. 473, 495-96 (2002).
North Dakota elected to participate in the program and designated the Department as the state agency to implement the Medicaid program in the state. N.D.C.C. § 50-24.1-01.1. Pursuant to this authority, the Department has adopted rules to implement the Medicaid program and, as relevant to this appeal, to determine the conditions of eligibility for Medicaid benefits. See N.D. Admin. Code ch. 75-02-02.1.
In determining eligibility for Medicaid, the Department considers whether the applicant has sufficient assets to meet the costs of necessary medical care and services. N.D.C.C. § 50-24.1-02. To be eligible for Medicaid, the total value of an applicant's assets must not exceed $3,000. N.D. Admin. Code § 75-02-02.1-26(1). In making this determination, all assets available to the applicant are considered. N.D. Admin. Code § 75-02-02.1-25. Certain assets are exempt or excluded from consideration. N.D. Admin. Code §§ 75-02-02.1-27, 75-02-02.1-28. However, assets an applicant has the lawful power to make available are counted. N.D. Admin. Code § 75-02-02.1-25(1).
The burden of establishing eligibility for Medicaid benefits rests with the person applying for benefits. N.D. Admin. Code § 75-02-02.1-02.1; Wagner v. Sheridan County Soc. Servs. Bd., 518 N.W.2d 724, 729 (N.D. 1994). As discussed below, Wilfred failed to meet this burden.
IV. The proceeds from the sale of Wilfred's home are available assets because the home was transferred by Rick, who had a confidential relationship with Wilfred.
The Department's rules governing Medicaid eligibility provide, as relevant to this case, as follows:
All actually available assets must be considered in establishing eligibility for medicaid. Assets are actually available when at the disposal of an applicant, recipient, or responsible relative; . . . when the applicant, recipient, or responsible relative has the lawful power to make the asset available, or to cause the asset to be made available.
N.D. Admin. Code § 75-02-02.1-25(1).
This Court has recognized that an asset does not have to be "in hand" to be actually available. See Schmidt v. Ward Cty. Soc. Servs. Bd., 2001 ND 169, ¶ 13, 634 N.W.2d 506. Specifically, this Court has found that having to take legal action does not mean that an asset is not available. See, e.g., Post v. Cass County Soc. Servs., 556 N.W.2d 661, 665 (N.D. 1996); Schmidt, 2001 ND 169, ¶ 14, 634 N.W.2d 506; Opp v. Ward County Soc. Servs. Bd., 2002 ND 45, ¶11, 640 N.W.2d 704; Linser v. Office of Attorney Gen., Dep't of Human Servs., 2003 ND 195, ¶11, 672 N.W.2d 643. "If an applicant has a colorable legal action to obtain assets through reasonable legal means, the assets are available and the burden is on the applicant to show a legal action would be unsuccessful." Makedonsky v. N.D. Dep't of Human Servs., 2008 ND 49, ¶ 10, 746 N.W.2d 185.
This Court has recognized that a power of attorney creates an agency that entails a confidential relationship and fiduciary duties. Alerus Fin., N.A. v. W. State Bank, 2008 ND 104, ¶ 20, 750 N.W.2d 412. Further, the agent cannot do any act that a trustee is forbidden to do by any of the provisions of the North Dakota Uniform Trust Code ("UTC"). N.D.C.C. §§ 03-02-05; 59-09-01. Notably, the common law of trusts and principles of equity supplement the UTC. N.D.C.C. § 59­09-06. Thus, case law dealing with trusts is still good law, even though some of the trust sections were repealed in 2007 when the UTC was adopted. See 2007 N.D. Sess. Laws ch. 549, § 27 (repealing N.D.C.C. ch. 59­01 and adopting Uniform Trust Code).
N.D.C.C. § 03-02-05 "establishes the general rule that an agent is a fiduciary and has an obligation to his principal analogous to that of a trustee towards his beneficiary, and that the acts of the agent will be judged with substantially the same degree of strictness as those of a trustee." In re Estate of Mehus, 278 N.W.2d 625, 631 (N.D. 1979). The degree of strictness for a trustee is set forth in the UTC. (See, N.D.C.C. chs. 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19.) Thus, Rick, as Wilfred's attorney in fact, had a confidential relationship with Wilfred and fiduciary duties toward Wilfred similar to a trustee, as set forth in the UTC.
The UTC requires a trustee to administer the trust in good faith. N.D.C.C. § 59-16-01; see also N.D.C.C. § 59-16-02(1) (Trustee shall administer the trust solely in the interest of the beneficiary); N.D.C.C. § 59-16-09 (Trustee shall take reasonable steps to protect the trust property); N.D.C.C. § 59-18-01(1) (Trustee's violation of a duty to the beneficiary is a breach of trust). Further, a transaction involving the trust property is presumed to be affected by a conflict between the trustee's personal interest and the fiduciary duty if it is entered into by the trustee with the trustee's sibling. N.D.C.C. § 59-16-02(3). Finally, when a trustee obtains any advantage from a beneficiary, there is a presumption the transaction was entered without sufficient consideration and under undue influence. N.D.C.C. § 59-18-01.1. The UTC also provides remedies for breach of trust, including recovering the property's proceeds to restore the value of the trust to what it would have been had the breach not occurred. N.D.C.C. §§ 59-18-01, 59-18-02.
Furthermore, as indicated, case law supplements the UTC and further defines the significance of the presumptions involved. N.D.C.C. § 59-09-06. "A relation of personal confidence triggers the presumption of undue influence for any transaction." Estate of Wenzel-Mosset, 1998 ND 16, ¶ 29, 575 N.W.2d 425. "[I]f a person assumes a relation of personal confidence, he becomes a trustee, and any transaction he enters into with the other person by which he gains an advantage is presumed to be made under undue influence." (Id.) (quoting Estate of Zins, 420 N.W.2d 729, 731 (N.D. 1988). If a party establishes sufficient facts that a person in a relation of personal confidence has gained an advantage from the beneficiary, the burden shifts to the other party to rebut the presumption. See Estate of Zins, 420 N.W.2d at 731. Rick must rebut the presumption.
Additional facts support the presumptions of conflict and undue influence. Wilfred did not transfer money or property to his children when he had the capacity to do so, evidencing the fact he did not want to do it. If he had wanted to transfer his assets to his children, he would have done it; instead, he purposefully refrained from doing so. Rick did not transfer the house and LeAnn did not sell the house and split the proceeds with Rick until long after Wilfred's dementia had evolved to a level of significant cognitive impairment, making him even more vulnerable to the undue influence of his son. It appears siblings Rick and LeAnn colluded to keep Wilfred's assets for themselves, in conflict of Rick's fiduciary duties. This gives rise to a legal right for Wilfred to force the assets to be returned to him. N.D.C.C. §§ 59-16-02; 59-18-01; 59-18-01.1; 59-18-02.
The laws, as applied in this case, establish Rick had a duty to oversee Wilfred's money and property, to protect it, and to use it for Wilfred's benefit, not to profit from any transaction he made as attorney in fact. N.D.C.C. § 59-16. Wilfred lacked the capacity to ratify Rick's transfer of the house to LeAnn. N.D.C.C. § 59-18-09. Thus, Rick had a duty to transfer Wilfred's house for one hundred percent of the fair market value. Because it was transferred for less, the difference (or the uncompensated value) is considered an available asset for Medicaid eligibility purposes. N.D.C.C. § 59-18-09; N.D. Admin. Code § 75-02-02.1-33.2(18) and Medicaid Policy Manual(1)
("Manual") 510-05-70-10(6).
Rick breached his fiduciary duties by transferring the house to LeAnn, who sold it and split the sale proceeds with Rick. Rick benefitted from the transfer of the house to LeAnn and thus, the transfer triggers the presumption of a conflict as well as the presumption of undue influence. Rick has not rebutted either of these presumptions and the remedy for the breach is to recover the proceeds. These proceeds are available assets because Wilfred has a cause of action against Rick to recover them. The Department's decision is in accordance with the law and should be affirmed.
V. Rick failed to prove he did not violate his fiduciary duty to Wilfred and failed to rebut the presumption that the transfer was made under undue influence.
One who benefits from a transfer in a fiduciary relationship must rebut the presumption that the transfer was made through undue influence. See Estate of Zins, 420 N.W.2d at 731. ("If a party establishes sufficient facts to give rise to the presumption, the burden then shifts to other party to prove that the nonexistence of the presumed fact is more probable than its existence." (Id.) (quoting N.D.R.Ev. 301)).
It was reasonable for the Executive Director to conclude a presumption of undue influence under N.D.C.C. § 59-16-02(3) exists here and it has not been rebutted. Under N.D.R.Ev. 301(a), a presumption substitutes for evidence of the presumed fact until the trier of fact finds from credible evidence that the presumed fact does not exist. No credible evidence has been presented to rebut the presumption. Rick's testimony that Wilfred wanted his children to have his assets is simply not credible; it is self-serving hearsay. As stated, if Wilfred had wanted to transfer the assets to his children, he would have done so. He did not. Further, when a witness has an interest in a question at issue, his uncontradicted testimony need not be accepted by the fact finder. Farley v. Champs Fine Foods, Inc., 404 N.W.2d 493, 495 (N.D. 1987). Rick has a stake in the outcome of this case, and the ALJ need not accept his testimony as credible. The ALJ found the testimony was not credible and the Executive Director agreed. The Department's decision is in accordance with the law and should be affirmed.
VI. Wilfred failed to establish the assets are not actually available and failed to establish that a legal action to obtain the asset would be unsuccessful.
It is the burden of the Medicaid applicant to prove the asset at issue is not actually available and that a legal action to obtain the available asset would be unsuccessful. Reinholdt v. N.D. Dep't of Human Servs., 2009 ND 17, ¶ 20, 760 N.W.2d 101. As this Court has stated, it is not the responsibility of the Department or the courts reviewing an administrative decision to determine whether an asset can be made available. See Opp, 2002 ND 45, ¶¶ 22-23, 640 N.W.2d 704. It is the responsibility of the applicant to prove that it is not actually available through a cause of action by actually pursuing the action. (Id.) Wilfred presented no evidence to meet either burden.
VII. The sale proceeds are available assets because the attorney in fact made the transfer; there is no disqualifying transfer so there is no "exception" to a disqualifying transfer.
Wilfred argues he is "entitled to the caregiver child exemption" under N.D. Admin. Code § 75-02-02.1-33.2(7). (Appellant's Br. 6). Contrary to Wilfred's argument, there is no "entitlement" to the "exemption". The provision stated in N.D. Admin. Code § 75-02-02.1-33.2(7) is not an exemption; it is merely an exception to the rule on disqualifying transfers. (App. 35); see 42 U.S.C. §§ 1396p(c)(1)(A) and 1396p(c)(2)(A)(iv). (The Amended Conclusions of Law inadvertently refers to 42 U.S.C. § 1396p(G), which is in error.) Because Rick completed the transfer, not Wilfred, there is no disqualifying transfer in Wilfred's case, and thus, there is no "exception" to the disqualifying transfer penalty. Therefore, N.D. Admin. Code § 75-02-02.1-33.2(7) does not apply in this case.
"It is an elementary rule of statutory construction that we construe related statutes in harmony in order to give meaning and effect to all provisions." Clarys v. Ford Motor Co., 1999 ND 72, ¶ 15, 592 N.W.2d 573 (citation omitted). Further, statutes are to be construed in a practical manner with consideration given to the context of the statutes and the purposes for which they were enacted. Grey Bear v. N.D. Dep't of Human Servs., 2002 ND 139, ¶ 7, 651 N.W.2d 611. Thus, N.D. Admin. Code § 75-02-02.1-33.2(7) cannot be read in a vacuum, on its own, without regard to other laws, as Wilfred suggests. Related federal law, statutes, code sections, and case law must also be considered.
Congress has provided that if an institutionalized individual or his spouse disposes of assets for less than fair market value on or after the look-back date (commonly referred to as a "disqualifying transfer"), the individual will be disqualified from receiving nursing care benefits under the Medicaid Program for a period of time equal to the disqualifying transfer amount (commonly referred to as a "disqualifying transfer penalty"). See 42 U.S.C. § 1396p(c)(1)(A). The Department has implemented this requirement in its rules. See N.D. Admin. Code §§ 75-02-02.1-33.1 (applicable to transfers prior to February 8, 2006); 75-02-02.1-33.2 (applicable to transfers made on or after February 8, 2006).
N.D. Admin. Code § 75-02-02.1-33.2(7) is based on federal law that creates an exception to the disqualifying transfer penalty in situations where the individual or spouse of the individual transfers the house to a son or daughter who meets the requirements of that section. 42 U.S.C. §§ 1396p(c)(1)(A); 1396p(c)(2)(A)(iv). As the Executive Director pointed out, there is a scrivener's error contained in N.D. Admin. Code § 75-02-02.1-33.2(7) because it references subsection 1 instead of subsection 2. (App. 35). Both federal and state law requires the transfer be done by the individual or his spouse in order for it to be a disqualifying transfer. 42 U.S.C. §§ 1396p(c)(1)(A); 1396p(c)(2)(A)(iv); N.D. Admin. Code §§ 75-02-02.1-33.2(2), (7).
However, if someone in a confidential relationship with the individual (such as the attorney in fact) makes the transfer instead of the individual or the individual's spouse, it will be treated as an available asset for Medicaid eligibility purposes, not a disqualifying transfer, unless the individual has the mental capacity to ratify the transfer. See N.D.C.C. § 59-18-09; Makedonsky v. N.D. Dep't of Human Servs., 2008 ND 49, ¶ 14-16, 746 N.W.2d 185. In Makedonsky, the attorney in fact transferred Makedonsky's assets and the Department considered these assets to be available to Makedonsky because she had a cause of action against the attorney in fact to have the assets returned. (Id.) at ¶ 4. Unlike Wilfred, Makedonsky was mentally competent and capable of understanding her business affairs. (Id.) at ¶ 14. The assets were available to Makedonsky until she made a disqualifying transfer by signing a statement of intention to gift which ratified the transfers; at that point, she relinquished her legal right to sue to have the assets returned and the assets were disqualifying transfers instead of available assets. (Id.) at ¶ 8, 16.
Wilfred gave power of attorney to Rick, establishing a confidential relationship and an agency which triggered the application of trust laws (as stated above), which takes any transaction made by the attorney in fact out of the realm of disqualifying transfers unless certain circumstances applied. N.D. Admin. Code § 75-02-02.1-33.2(18). In order for a transfer of assets for less than fair market value made by the attorney in fact to be a disqualifying transfer, the individual must be competent and approve the transfer without any undue influence. N.D. Admin. Code § 75-02-02.1-33.2(18)(b). There is no breach of trust if the beneficiary consented to or ratified the conduct constituting the breach unless the consent or ratification was induced by improper conduct or the beneficiary lacked capacity or did not know of the material facts relating to the breach. N.D.C.C. § 59-18-09. If the individual actually receives one hundred percent of the fair market value, there is no disqualifying transfer, and there is no available asset. N.D. Admin. Code § 75-02-02.1-33.2(18)(a). However, when the attorney in fact transfers the individual's property for less than one hundred percent of fair market value, and the individual is not competent (or if competent, does not approve) the uncompensated value will be an available asset. Manual 510-05-70-10(6).
The key facts of the denial in this case are that Rick, the attorney in fact, made the transfer, and Wilfred lacks capacity to have full knowledge of Rick's motives and other facts concerning the transaction that might affect Wilfred's decision. These facts make the sale proceeds an available asset instead of a disqualifying transfer. The denial is not based on the fact LeAnn was already compensated under the contract for services. Although there is some discussion concerning LeAnn's compensation, the real issue is that Rick made the transfer, not Wilfred. (App. 170-72). Rick has a fiduciary responsibility to act in Wilfred's best interest. However, Rick transferred Wilfred's house for less than fair market value. Wilfred lacks capacity now, and lacked capacity at the time of the transfer, resulting in there being no way of knowing what Wilfred's intentions were, so his assets need to be spent on his care. When the attorney in fact makes the transfer, the uncompensated value is an available asset, not a disqualifying transfer. N.D. Admin. Code § 75-02-02.1-33.2(7) is an exception to the disqualifying transfer penalty. Because there is no disqualifying transfer, there is no "exception" to the disqualifying transfer penalty; therefore, N.D. Admin. Code § 75-02-02.1-33.2(7) does not apply in this case. The Department's decision should be affirmed.
VIII. The Equal Protection argument is without merit.
Bare allegations of a constitutional violation are insufficient to raise a constitutional issue. This Court has "repeatedly cautioned a party making a constitutional claim must provide persuasive authority and reasoning, and without supportive reasoning or citations to relevant authorities an argument is without merit.... A party must do more than submit bare assertions to adequately raise a constitutional issue." Geffre v. N.D. Dep't of Health, 2011 ND 45, ¶ 33, 795 N.W.2d 681 (quoting Olson v. Workforce Safety Ins., 2008 ND 59 ¶ 26, 747 N.W.2d 71). As in Geffre, Wilfred provided no coherent constitutional analysis or citations to authority to support his allegations of an equal protection violation.
Furthermore, the United States Supreme Court has refused to extend "quasi-suspect classification" to those with mental incapacities. City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S. 432, 445-46 (1985). Generally, legislation that is challenged as denying equal protection is "presumed to be valid and will be sustained if the classification drawn by the legislation is rationally related to a legitimate state interest." (Id.) at 440. "When social or economic legislation is at issue, the Equal Protection Clause allows States wide latitude." (Id.) Therefore, laws can draw legitimate distinctions between different groups of people. In Cleyburne, the Court held that, in order to withstand equal protection review, legislation that distinguishes between the mentally retarded and others must be rationally related to a legitimate governmental purpose. (Id.) at 446. If the rational basis test were applied in Wilfred's case, there would be an obvious rational basis for treating those who lack capacity differently than those who have capacity; namely to prevent overreaching by the fiduciary.
Finally, there is no protected fundamental right to give your property away in order to qualify for Medicaid. The equal protection argument is completely without merit.
For the reasons given above, the Department respectfully requests the Court affirm the Executive Director's denial of Wilfred's Medicaid eligibility on the grounds of excess assets.
Dated this ____ day of March, 2012.
Attorney General By ___
Attorneys for Department of Human Services.