Court Opinion

ID: 3143948
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:01:16.94722+00
Date Added: 2024-06-11T12:16:31.624277
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                        Appellate Court

                     Frerichs v. State of Illinois, 2011 IL App (4th) 101046

Appellate Court            ROLAND FRERICHS, as Agent for the Estate of CHRISTENA
Caption                    FRERICHS, Plaintiff-Appellant, v. THE STATE OF ILLINOIS, Acting
                           Through THE DEPARTMENT OF HUMAN SERVICES and CAROL
                           ADAMS, Its Director; and THE DEPARTMENT OF HEALTHCARE
                           AND FAMILY SERVICES and BARRY S. MARAM, Its Director,
                           Defendants-Appellees.

District & No.             Fourth District
                           Docket No. 4-10-1046

Filed                      October 11, 2011

Held                       The decision of the Department of Healthcare and Family Services and
(Note: This syllabus       the Department of Human Services finding plaintiff’s mother eligible for
constitutes no part of     Medicaid assistance, but assessing an eight-month penalty against her
the opinion of the court   based on her nonallowable transfers of her income from two annuities,
but has been prepared      her social security benefits, and other monetary gifts to plaintiff was
by the Reporter of         affirmed over plaintiff’s contention that the penalty period was
Decisions for the          improperly determined.
convenience of the
reader.)

Decision Under             Appeal from the Circuit Court of McLean County, No. 09-MR-197; the
Review                     Hon. Scott Drazewski, Judge, presiding.

Judgment                   Affirmed.
Counsel on                  Duane D. Young (argued), of LaBarre, Young & Behnke, of Springfield,
Appeal                      for appellant.

                            Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
                            Solicitor General, and Carl J. Elitz (argued), Assistant Attorney General,
                            of counsel), for appellees.

Panel                       JUSTICE McCULLOUGH delivered the judgment of the court, with
                            opinion.
                            Presiding Justice Knecht and Justice Cook concurred in the judgment and
                            opinion.

                                              OPINION

¶1          Plaintiff, Roland Frerichs, as agent for the estate of his mother, Christena Frerichs, sought
        judicial review of an administrative decision of defendants, the Department of Healthcare
        and Family Services (Healthcare and Family Services), which investigated Christena’s
        application, and the Department of Human Services (Human Services), which found
        Christena eligible for Medicaid assistance but assessed an eight-month penalty due to
        nonallowable transfers of her assets, including income. The circuit court affirmed
        defendants’ final administrative decision. Roland appeals, arguing defendants erred in
        imposing an eight-month penalty and the circuit court incorrectly affirmed defendants’
        administrative decision. We affirm.
¶2          In December 2004, Christena entered a long-term-care facility and began receiving
        Medicaid assistance. Throughout the proceedings at issue, Roland acted on Christena’s
        behalf pursuant to a power of attorney. In January 2008, Christena received an inheritance
        in the amount of $114,862.48. As a result, she had assets in excess of Medicaid limits and,
        in February, March, April, and May 2008, she used her own funds to pay for her medical
        care.
¶3          The private rate at Christena’s long-term care facility was $170 per day or $5,100 per
        month. At the time she received her inheritance, Christena had a monthly income of $1,561
        per month from social security and $906.93 per month from an annuity. After receiving her
        inheritance, Christina purchased a second annuity for $50,000. That annuity provided for 56
        monthly payments to Christina of $817.02, beginning in January 2008. In each of the months
        of February, March, April, and May 2008, Christina gave Roland $10,100, as well as the total
        amount of her social security income and both annuity payments. Ultimately, Christena
        requested a reinstatement of her Medicaid benefits, effective June 1, 2008.
¶4          In October 2008, Human Services notified Christena that, although she was eligible for

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     medical assistance, her approval did not include payments for long-term-care services from
     February through September 2008, due to nonallowable transfers of assets. It imposed a two-
     month penalty for each of the four months Christena gifted money to Roland. Included within
     its calculation of nonallowable transfers, were the gifts of $10,100 made to Roland in each
     of the four months, as well as the gifts to Roland of Christena’s monthly social security
     income ($1,561) and monthly annuity payments ($906.93 and $817.02). Human Services
     determined those monthly amounts totaled $13,384.95 and were more than twice Christena’s
     monthly long-term-care expenses.
¶5        Roland, acting on Christena’s behalf, appealed the imposition of the eight-month penalty,
     arguing the penalty period was improperly determined. He maintained that the gifts of
     Christena’s three recurring incomes (from social security and her annuities) should not have
     been included within the penalty calculations because they were gifted within the same
     month they were received. Roland contended that only the monthly $10,100 gifts should have
     been considered and would have resulted in only a one-month penalty period for each of the
     months in which that amount was gifted. He concluded that only a four-month penalty, from
     February through May 2008, was appropriate. On June 5, 2009, following a hearing before
     an administrative law judge, Human Services issued a final administrative decision in the
     matter, finding its local office correctly imposed an eight-month penalty period and affirming
     its decision.
¶6        On July 9, 2009, Roland, as Christena’s agent, filed a complaint for administrative review
     in the circuit court. He argued Human Services’ final administrative decision was wrongful,
     erroneous, and improper because defendants acted contrary to their own published policies
     and incorrectly designated income as an asset that was subject to asset-transfer rules. Before
     the court, Roland asserted Christena, in gifting her income, relied on defendants’ published
     policies, and interpretation of that policy, stating that income given away during the same
     month it is received was excluded from the transfer of asset policy. He cited Human
     Services’ “Cash, SNAP, and Medical Policy Manual,” PM 07-02-06-a (eff. Mar. 1, 1997)
     (hereinafter Medical Policy Manual), providing as follows:
                  “Money considered as income for a month is not an asset for the same month.
              Any income added to a bank account is income for that month, and not a part of the
              account’s asset value for the month. To figure the asset value of the account, subtract
              the income from the bank balance. For the following month(s), any remaining income
              in the account is an asset.”
¶7        Roland also referenced a letter, dated January 3, 2001, written by John Rupcich, the chief
     of the bureau of policy of the Department of Public Aid (now known as the Department of
     Healthcare and Family Services), stating “[i]ncome given away during the same month it is
     received is not subject to the transfer of asset policy.” That letter was written to Joseph
     Oettel, an estate and financial planner, in response to Oettel’s inquiry about the policy of
     Human Services on transfers of income. The record reflects Oettel acted as Christina’s
     approved representative and was authorized to apply for certain benefits on her behalf.
     During oral argument in this matter, Roland conceded that Oettel did not make his inquiry
     on Christena’s behalf or in reference to her specific situation.

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¶8          While this matter was pending before the circuit court, Christena died and Roland was
       appointed as a special representative to act in her stead. On March 12, 2010, the court
       determined defendants’ final administrative decision was not arbitrary, unreasonable, or
       unsupported by the evidence and affirmed their decision. On April 12, 2010, Roland filed a
       motion to reconsider. On November 30, 2010, the court denied his motion.
¶9          This appeal followed.
¶ 10        On appeal, Roland argues defendants improperly imposed an eight-month penalty with
       respect to Christena’s Medicaid benefits. He maintains that, under defendants’ published
       rules, the penalty period should have been only four months. Roland contends defendants are
       estopped from deviating from their published policies and also the interpretation of that
       policy as expressed in the January 2001 letter.
¶ 11        “When an appeal is taken to the appellate court following entry of judgment by the circuit
       court on administrative review, it is the decision of the administrative agency, not the
       judgment of the circuit court, which is under consideration.” Provena Covenant Medical
       Center v. Department of Revenue, 236 Ill. 2d 368, 386, 925 N.E.2d 1131, 1142 (2010).
       Where the only disputed issue concerns an agency’s conclusion on a point of law, the
       agency’s decision is subject to de novo review. Provena, 236 Ill. 2d at 387, 925 N.E.2d at
       1143. However, “[e]ven where review is de novo, an agency’s construction is entitled to
       substantial weight and deference.” Provena, 236 Ill. 2d at 387 n.9, 925 N.E.2d at 1143 n.9.
       “Courts accord such deference in recognition of the fact that agencies make informed
       judgments on the issues based upon their experience and expertise and serve as an informed
       source for ascertaining the legislature’s intent.” Provena, 236 Ill. 2d at 387 n.9, 925 N.E.2d
       at 1143 n.9 (citing Metropolitan Water Reclamation District of Greater Chicago v.
       Department of Revenue, 313 Ill. App. 3d 469, 475, 729 N.E.2d 924, 929 (2000)).
¶ 12        In this instance, Roland does not challenge defendants’ factual findings and the facts are
       not in dispute. The issues raised on appeal present only legal questions that are subject to a
       de novo standard of review.
¶ 13        Additionally, review of this case is shaped by this court’s recent decision in McDonald
       v. Illinois Department of Human Services, 406 Ill. App. 3d 792, 952 N.E.2d 21 (2010),
       appeal denied, No. 111970, 949 N.E.2d 1099 (Ill. May 25, 2011) (table). The parties
       acknowledge McDonald, which addressed the same issues under very similar factual
       circumstances. Roland argues McDonald was wrongly decided while defendants maintain
       it is controlling and supportive of their position. We agree with defendants.
¶ 14        In McDonald, 406 Ill. App. 3d at 795, 952 N.E.2d at 23, the plaintiff applied for medical-
       assistance benefits on behalf of his mother. In the year preceding the application, the
       mother’s assets and social security income had been gifted to the plaintiff and his siblings
       on an almost monthly basis. McDonald, 406 Ill. App. 3d at 795, 952 N.E.2d at 23. Human
       Services approved the mother’s application for medical assistance but imposed a 17-month
       penalty period. McDonald, 406 Ill. App. 3d at 795, 952 N.E.2d at 23. The plaintiff, on his
       mother’s behalf, appealed the portion of the penalty that was attributable to any gifts of his
       mother’s income but Human Services upheld the full penalty. McDonald, 406 Ill. App. 3d
       at 795, 952 N.E.2d at 23. The plaintiff then initiated an administrative review action in the

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       circuit court. McDonald, 406 Ill. App. 3d at 795, 952 N.E.2d at 24.
¶ 15       Before the circuit court, the plaintiff raised precisely the same issues raised in the case
       at bar, arguing (1) defendants misapplied their own policies because a gift of income made
       in the same month it is received does not constitute a nonallowable transfer of assets and (2)
       defendants were estopped from deviating from their expressed interpretation of policy.
       McDonald, 406 Ill. App. 3d at 795-96, 952 N.E.2d at 24. He relied on the same provision of
       the Medical Policy Manual that Roland cites in this case (Medical Policy Manual, PM 07-02-
       06-a (eff. Mar. 1, 1997)), as well as the January 2001 Rupcich letter issued to Oettel and
       upon which Roland heavily relies. McDonald, 406 Ill. App. 3d at 796, 952 N.E.2d at 24.
¶ 16       Ultimately, this court agreed with the defendant agencies and affirmed the decision to
       impose a 17-month penalty period as a condition of the mother’s medical-assistance
       eligibility. McDonald, 406 Ill. App. 3d at 804, 952 N.E.2d at 31. We first determined that
       “[f]ederal and state statutes, state administrative rules, and Human Services’ departmental
       Medical Policy Manual all support[ed] [the] defendants’ conclusion that gifts of income are
       subject to asset-transfer policy,” noting each source defined asset transfers consistently.
       McDonald, 406 Ill. App. 3d at 798, 952 N.E.2d at 26. With respect to federal law, we stated
       as follows:
                “The federal statute imposes a penalty when an applicant or his or her spouse
                ‘disposes of assets for less than fair market value’ within a certain period leading up
                to the applicant’s request of benefits. 42 U.S.C. § 1396p(c)(1)(A) (2006). In turn, the
                statute defines ‘assets’ in terms of income and resources. ‘The term “assets”, with
                respect to an individual, includes all income and resources of the individual and of
                the individual’s spouse, including any income or resources which the individual or
                such individual’s spouse is entitled to but does not receive because of action.’ 42
                U.S.C. § 1396p(h)(1) (2006). Thus, under the federal statute, a transfer of a medical-
                assistance applicant’s income for less than fair market value would subject the
                applicant to penalties. This result is mandated on all states that participate in the
                Medicaid program. 42 U.S.C. § 1396p(c) (2006).” (Emphasis added.) McDonald,
                406 Ill. App. 3d at 798-99, 952 N.E.2d at 27.
¶ 17       Roland argues McDonald relied too heavily on federal law when the state is charged with
       making its own Medicaid policy. Indeed, a state that chooses to participate in the Medicaid
       program designs its own plans and sets its own reasonable standards for eligibility and
       assistance while complying with certain broad federal requirements. Gillmore v. Illinois
       Department of Human Services, 218 Ill. 2d 302, 305, 843 N.E.2d 336, 338 (2006). However,
       as McDonald pointed out, federal law mandates state compliance with its asset-transfer
       policy and Illinois law is, in fact, compliant with federal requirements. Roland overlooks
       these points.
¶ 18       The Illinois Public Aid Code (Code) (305 ILCS 5/5-2.1(a) (West 2008)) provides as
       follows:
                “To the extent required under federal law, a person shall not make or have made a
                voluntary or involuntary assignment or transfer of any legal or equitable interests in
                real property or in personal property, whether vested, contingent or inchoate, for less

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               than fair market value. A person’s interest in real or personal property includes all
               income and assets to which the person is entitled or to which the person would be
               entitled if the person had not taken action to avoid receiving the interest.”
       Additionally, as addressed in McDonald, 406 Ill. App. 3d at 799, 952 N.E.2d at 27, relevant
       sections of the Illinois Administrative Code (Administrative Code) are further consistent
       with federal and state statutes. In McDonald, we noted the Administrative Code defined
       “asset transfers in relation to transfers of personal property rather than assets” and, by doing
       so “does not distinguish between transfers of assets and transfers of income.” McDonald, 406
       Ill. App. 3d at 799, 952 N.E.2d at 28 (citing 89 Ill. Adm. Code 120.387 (2010)).
¶ 19        Finally, in McDonald, 406 Ill. App. 3d at 800, 952 N.E.2d at 80, we also found Human
       Services’ Medical Policy Manual to be consistent with federal and state laws on the transfer
       of assets and related penalties. We stated as follows:
               “Like the Administrative Code, the manual defines ‘transfer of assets’ in terms of
               personal property without distinguishing between income and assets. Section PM 07-
               02-20 of the Medical Policy Manual states, in pertinent part:
                        ‘An asset transfer occurs when a client or their spouse *** buys, sells, [or]
                    gives away real or personal property or changes the way property is held. *** A
                    transfer *** occurs when an action is taken that causes an asset not to be received
                    (for example, waiving the right to receive an inheritance).’ Medical Policy
                    Manual, PM 07-02-20 (eff. April 17, 1998).
                    *** In turn, section PM 07-02-06 of the policy manual defines ‘personal
               property’ as ‘anything owned by a person that is not land or permanently affixed to
               land,’ including checking-account funds. Medical Policy Manual, PM 07-02-06 (eff.
               March 1, 1997). The policy manual goes on to define allowable and nonallowable
               transfers but both relate back to the definition of ‘asset transfer’ that would include
               transfers of income as well as transfers of assets. See Medical Policy Manual, PM 07-
               02-20-b, 07-02-20-c, 07-02-20-d (1998) (eff. April 17, 1998, March 1, 1997, and
               April 17, 1998, respectively).” McDonald, 406 Ill. App. 3d at 800, 952 N.E.2d at 28.
¶ 20        Despite the foregoing analysis, Roland argues, as the plaintiff did in McDonald, that
       section PM 07-02-06-a of the Medical Policy Manual distinguishes income from assets for
       purposes of its asset-transfer policy and warrants reversal of defendants’ final administrative
       decision. That section states as follows:
                    “Money considered as income for a month is not an asset for the same month.
               Any income added to a bank account is income for that month, and not a part of the
               account’s asset value for the month. To figure the asset value of the account, subtract
               the income from the bank balance. For the following month(s), any remaining income
               in the account is an asset.” Medical Policy Manual, PM 07-02-06-a (eff. Mar. 1,
               1997).
¶ 21        McDonald rejected the plaintiff’s claims, finding that the distinction in section 07-02-06-
       a between income and assets applied only in the context of the spend-down provisions of the
       medical-assistance program. We stated as follows:
                    “[The plaintiff] misunderstands the significance of this distinction between

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                income and assets in determining medical-assistance eligibility. The distinction is
                necessary to determine whether and to what extent an applicant must ‘spend down’
                his or her excess assets or income in order to be eligible for medical assistance. See
                305 ILCS 5/5-2.07 (West 2008). Though equally essential to the operation of the
                medical-assistance program, the spend-down provisions are wholly separate from
                those defining eligibility penalties for nonallowable transfers. We find the manual’s
                provisions regarding ‘income mixed with an asset,’ such as section PM 07-02-06–a,
                are irrelevant to the calculation of nonallowable transfers of personal property.
                Transfers of personal property for purposes of determining any penalty period include
                transfers of income and assets. When determining eligibility in the first instance,
                income that is consumed in a month on legitimate living expenses would not be
                counted as an asset. Accordingly, the departments did not err in their application of
                the law they are charged with implementing and enforcing or the Medical Policy
                Manual ***.” McDonald, 406 Ill. App. 3d at 801, 952 N.E.2d at 29.
       This court went on to note that a federal manual, which provides guidance to state employees
       in making penalty determinations, provides that a penalty must be imposed for
       institutionalized individuals when it is found that income or the right to income has been
       transferred. McDonald, 406 Ill. App. 3d at 802, 952 N.E.2d at 29-30. Additionally, we
       pointed out that the transfer of income under the circumstances presented was the transfer
       of a future asset and both federal and state asset-transfer policies extend to transfers of a
       person’s future interest in an asset, including actions that cause an asset not to be received.
       McDonald, 406 Ill. App. 3d at 802, 952 N.E.2d at 30.
¶ 22       Here, Roland’s argument that McDonald was wrongly decided is unpersuasive and we
       find that case to be controlling authority over the issues presented here. In McDonald, we
       rejected the plaintiff’s assertion that the defendants misapplied their own policies regarding
       asset transfers by including transfers of monthly income within their calculations of the
       applicable penalty period. Like in McDonald, defendants in this case did not misapply their
       own policies. Their calculation of an eight-month penalty period based, in part, upon
       Christena’s transfer of her monthly social security income and annuity payments complied
       with relevant Medicaid laws.
¶ 23       Next, as in McDonald, Roland also raises a claim of equitable estoppel. He argues
       defendants are estopped from imposing an eight-month penalty based upon Christena’s
       transfers of income because such action is contrary to the express interpretation of policy in
       Rupcich’s January 2001 letter. Roland argues Christena and her representatives acted in
       reliance upon the contents of that letter.
¶ 24       “Generally, the doctrine of equitable estoppel may be invoked when a party reasonably
       and detrimentally relies on the words or conduct of another.” Brown’s Furniture, Inc. v.
       Wagner, 171 Ill. 2d 410, 431, 665 N.E.2d 795, 806 (1996). “However, against the State,
       estoppel is applied only to prevent fraud and injustice, and this is especially true when the
       public revenues are involved.” Brown’s Furniture, 171 Ill. 2d at 431, 665 N.E.2d at 806.
       Further, “[t]he affirmative acts of the State inducing detrimental reliance in another generally
       must be the acts of the State itself, such as legislation, rather than the unauthorized acts of
       a ministerial officer.” Deford-Goff v. Department of Public Aid, 281 Ill. App. 3d 888, 893,

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       667 N.E.2d 701, 705 (1996).
¶ 25       Again, McDonald addressed the precise issue now presented on appeal. There, the
       plaintiff also made an estoppel argument, relying on a January 2001 letter from Rupcich, the
       chief of the bureau of policy of the Department of Public Aid. McDonald, 406 Ill. App. 3d
       at 796, 952 N.E.2d at 25. That letter appears to be the same letter at issue in this case as it
       was also in response to an inquiry from Oettel and contained the same language at issue here:
       “ ‘Income given away during the same month it is received is not subject to the transfer of
       asset policy.’ ” McDonald, 406 Ill. App. 3d at 796, 952 N.E.2d at 25. The only apparent
       difference between this case and McDonald is that Oettel had no connection with the
       McDonald case or its parties while he is shown through the record in this case to have, at
       some point in time, been Christena’s representative. McDonald, 406 Ill. App. 3d at 796, 952
       N.E.2d at 25.
¶ 26       In McDonald, 406 Ill. App. 3d at 803, 952 N.E.2d at 31, we determined equitable
       estoppel was inapplicable. First, we held that no fraud or injustice resulted from the imposed
       penalty period. McDonald, 406 Ill. App. 3d at 803, 952 N.E.2d at 31. We stated as follows:
                “Penalties for nonallowable transfers help ensure those applicants who can afford to
                contribute to their own medical needs do so. [The plaintiff’s mother], who made gifts
                of income totaling nearly $20,000 in the year preceding her application for medical
                assistance, could clearly have contributed to her own long-term-care expenses. It was
                neither fraudulent nor unjust for the departments to impose penalties for these gifts
                when the purpose of the penalties was solely to account for money that should have
                been available to offset the government’s contributions to [the plaintiff’s mother’s]
                long-term care.” McDonald, 406 Ill. App. 3d at 803-04, 952 N.E.2d at 31.
       Additionally, this court found the letter at issue did not constitute an act by the state itself,
       stating as follows:
                “The chief of the bureau of policy of the predecessor agency of Healthcare and
                Family Services is a ministerial officer whose erroneous acts should not bind the state
                through equitable estoppel. [Citation.] The policy expressed in the letter is
                irreconcilable with federal and state laws, and it would be absurd for us to require the
                departments to adhere to erroneous interpretations of the statutes and rules they
                enforce, made by officers of a predecessor agency some years earlier for the benefit
                of an unrelated third party.” McDonald, 406 Ill. App. 3d at 804, 952 N.E.2d at 31.
¶ 27       Again, we find McDonald was correctly decided and is controlling over this issue. Like
       the plaintiff’s mother in McDonald, Christena gifted income that could have been used to
       assist with her long-term care and offset the government’s contributions. The imposition of
       an eight-month penalty as a result of those gifts does not result in fraud or injustice. As
       discussed, Rupcich’s letter was also contrary to relevant federal and state law. Moreover, we
       agree that the letter represents the unauthorized act of a ministerial officer. There was no act
       by the state, such as through legislation, upon which Christena or her representatives relied
       to their detriment.
¶ 28       Roland points out that Rupcich’s letter was in response to an inquiry from Oettel,
       Christena’s representative, which Roland maintains strengthens the argument that she relied

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       on its contents and distinguishes her case from the plaintiff in McDonald. However, Roland
       concedes that Oettel made his inquiry on behalf of a client, or clients, other than Christena.
       Also, the record shows Oettel’s inquiry was made, and Rupcich’s response received,
       approximately four years before Christina entered a long-term-care facility and
       approximately eight years before the income transfers at issue were made. Moreover, such
       a distinction is of no consequence where it has already been determined that the requirements
       for estoppel in the context of state action have not been met.
¶ 29       Finally, Roland argues that McDonald incorrectly stated the Department of Public Aid
       was the predecessor agency to Healthcare and Family Services. In fact, Healthcare and
       Family Services was formerly known as the Illinois Department of Public Aid. See 305 ILCS
       5/2-12(3) (West 2008). Even were it incorrect, this characterization by McDonald had little
       bearing on its ultimate conclusion that estoppel was inapplicable under the circumstances
       presented.
¶ 30       Like in McDonald, equitable estoppel is inapplicable in this case. Christena suffered no
       fraud or injustice by the imposition of a penalty and Rupcich’s letter was not the equivalent
       of state action.
¶ 31       This case is similar to McDonald, both factually and with respect to the issues presented
       on appeal. Roland’s contention that McDonald was wrongly decided or distinguishable
       enough from this case to warrant reversal are unpersuasive and without merit. We agree with
       McDonald’s reasoning and conclusions and find it controlling of the issues in this case. As
       a result, we find defendants committed no error in their interpretation of the asset-transfer
       policies at issue or in assessing Christena an eight-month penalty.
¶ 32       For the reasons stated, we affirm the circuit court’s judgment.

¶ 33      Affirmed.

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