Opinion ID: 1293222
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Heading Rank: 6

Heading: Payments Made Pursuant to Iowa Code Chapter 230

Text: Prior to October 10, 1984, Anderson received inpatient mental health services at the Cherokee Mental Health Institute. When a person is committed to a state mental health institute, the county is responsible to reimburse the State for the necessary and legal costs and expenses of the commitment. Iowa Code § 230.1(1)( a ). Although the county is responsible to reimburse the State for the costs and expenses of a patient's care and treatment at a state mental health institute, the patient or a person legally liable for the patient's support remains liable for those expenses. Id. § 230.15. Sections 230.25 through 230.27 contain the procedures for the county to obtain reimbursement from the patient or a person legally liable for the patient's support. Prior to beginning any collection efforts, the board of supervisors is required to conduct an investigation to determine if the patient or a person legally liable for the patient's support is presently able to pay the expenses of the patient's hospitalization. Id. § 230.25(1). If the board finds the patient or a person legally liable for the patient's support is presently able to pay the expenses of the patient's hospitalization, the auditor shall keep an index of the names of those persons presently able to pay the expenses, together with an accurate account of the charges. Id. § 230.26. After the board of supervisors makes its determination, and the auditor has indexed the names and charges, the board of supervisors can then turn the matter over to the county attorney for collection. Id. § 230.27. If a patient dies prior to collection, the county can make a claim in the estate against the person who is receiving or has received assistance under chapter 230. Id. § 230.30. Because the legislature included specific collection provisions in chapter 230, we conclude there is statutory authority for the county to recover any payments it made on Anderson's behalf for inpatient treatment he received at the Cherokee Mental Health Institute. The district court, however, denied the county the right of reimbursement concluding the statute of limitations barred the county from seeking reimbursement, and the county failed to follow the applicable procedures of chapter 230 in seeking reimbursement. Statute of Limitations. Iowa Code sections 230.15 and 230.25 through 230.27 create an open account for payments made by the county on behalf of a patient under chapter 230 between the patient and a person legally liable for the patient's support and the county. See Scott County v. Townsley, 174 Iowa 192, 194-95, 156 N.W. 291, 292 (1916). A note or other written agreement between the parties does not evidence the debt created by chapter 230; therefore, the five-year statute of limitations governing unwritten contracts in Iowa Code section 614.1(4) applies to the county's claim. Swartz v. Bly, 183 N.W.2d 733, 738 (Iowa 1971). A cause of action based on an open account shall be deemed to have accrued on the date of the last item therein.... Iowa Code § 614.5; Townsley, 174 Iowa at 194-95, 156 N.W. at 292. The last date Anderson received inpatient mental health services under chapter 230 was October 10, 1984. There are, however, entries on the account ledger indicating the county paid for services for Anderson as late as March 15, 1994. Even if we assume the March 15, 1994 entry was for inpatient mental health services provided by Iowa Code chapter 230, the county filed its claim against the trust more than five years after the date of the last item on the account ledger. The failure of the county to file a timely claim bars the county from proceeding against the trust. The county argues that the date of the last item on the open account was on April 8, 2002; thus, its cause of action did not accrue until this date. We disagree. The county made the April 8 payment for community-based mental health services provided Anderson under chapter 225C. Although a book record evidences an account in its technical legal meaning, in its broader sense an account is equivalent to a `claim' or `demand' based upon a transaction creating a debtor-creditor relation. In re Stratman's Estate, 231 Iowa 480, 489, 1 N.W.2d 636, 643 (1942). The payments on Anderson's behalf for community-based mental health services on April 8, 2002 under chapter 225C did not create a debtor-creditor relation between the county and the trust because any payments made by the county pursuant to chapter 225C are not recoverable by the county. Thus, the March 15, 1994 item is the last item arguably creating a debtor-creditor relation that the county could have legitimately entered on the account ledger. More than five years transpired between the March 15, 1994 entry and the filing of the claim The county also argues the statute of limitations did not begin to run until Anderson's death. The county relies on In re Sadler's Estate, 73 S.D. 56, 38 N.W.2d 879 (1949), as authority for its argument. Sadler is distinguishable because the statutory scheme in South Dakota for the recovery of payments made by a county on behalf of a person with mental illness is significantly different from the statutory scheme found in Iowa Code chapter 230. As far back as 1916, this court has held that under Iowa's statutory scheme a county must commence its cause of action for reimbursement of payments made by it on behalf of one of its residents committed to a state hospital within five years from the last item on the account. Townsley, 174 Iowa at 194-95, 156 N.W. at 292. We see no reason to abandon this authority when the county makes a claim in probate against a third party, rather than against the estate of the person receiving or who has received assistance under chapter 230. [1] Lastly, the county argues Anderson's June 25, 1996 application for benefits constituted a novation or revival of the debt for all services provided to the county to Anderson prior to that date. To prove a novation, the county must establish its elements by clear and satisfactory evidence. In re Integrated Res. Life Ins. Co., 562 N.W.2d 179, 182 (Iowa 1997). The elements of a novation are (1) a previous valid obligation; (2) agreement of all parties to the new contract; (3) extinguishment of the old contract; and (4) validity of the new contract. Id. (citations omitted). The district court addressed this issue and concluded: More specifically, as stated in the findings of fact, there is no evidence in the record to suggest [the parties] discussed any prior agreement between the county and Larry and/or the trust to reimburse it for services previously provided. Moreover, the county has failed to come forward with any proof to establish that the trust and the county agreed to extinguish any old contract and entered into a new contract, beyond the trust paying a portion of Larry's community-based services. In the absence of such proof, the court concludes that the county has failed to establish the existence of a novation in this case. On our review of the record, we agree with the district court that the county has failed to establish by clear and satisfactory evidence a novation occurred reviving the debt for payments it made on Anderson's behalf for inpatient mental health services under chapter 230. We need not address the issue as to whether the county followed the applicable procedures found in chapter 230 because we agree with the district court that the statute of limitations bars the county's claim for reimbursement under chapter 230.