424 F.Supp.
366 (D.Conn. 1976)
Mary BUCKNER, on
her own behalf, on behalf of her household and on behalf of all others
similarly situated
v.
Edward
MAHER, Individually and in his capacity as Commissioner of Social Services of
the State of
Edith M. HUCKLE,
a/k/a Carrie Murphy, on her own behalf, on behalf of her household and on
behalf of all others similarly situated
v.
Edward
MAHER, Individually and in his capacity as Commissioner of Social Services of
the State of
Luigi PORTA, on
behalf of himself and all others similarly situated
v.
Edward
MAHER, Individually and in his capacity as Commissioner of Social Services of
the State of
Civ.
Nos. H-75-411, H-76-190, 15068.
United States
District Court, D.
Page 367
Howard B.
Schiller,
Page 368
Edmund C. Walsh, Paul M.
Shapiro, Asst. Attys. Gen., Carl R. Ajello, Atty.
Gen., State of Connecticut, Hartford, Conn., for defendant in Nos. H-75-411, H-76-190 and 15068.
David L. Snyder, Litchfield
Hills Legal Services, Torrington, Conn., Dennis J. O'Brien, Tolland-Windham
Legal Assistance Program, Willimantic, Conn., for plaintiff in No. H-76-190.
Raymond Richard Norko, Legal Aid Society of Hartford, Hartford, Conn.,
Whitney M. Lewendon, Fairfield County Legal Services,
Danbury, Conn., for plaintiffs in No. 15068.
Paige J. Everin,
Before SMITH, Circuit Judge,
and CLARIE and BLUMENFELD, District Judges.
MEMORANDUM OF DECISION
CLARIE, Chief Judge:
The plaintiffs in these
consolidated actions [1] have sued on behalf of
themselves and others similarly situated, to invalidate two Connecticut
statutes (Conn.Gen.Stat. ss
17-85 & 17-109(e)), which have rendered them ineligible for welfare
benefits under two federally sponsored programs, Medicaid and Aid to Families
with Dependent Children (AFDC). They have been unable to satisfy the state
statutory requirement that applicants who have transferred assets within seven
years prior to applying for benefits must be able to prove that the transfer
was in fact made for "reasonable consideration" that is, for no less
than fair market value minus encumbrances. The plaintiffs maintain that these
statutory provisions are inconsistent with the federal Social Security Act
(SSA), and thus violate the Supremacy Clause of Article VI of the Federal
Constitution. They also contend that these state statutes violate their
constitutional right to due process and equal protection. The plaintiffs seek
declaratory and injunctive relief under 42 U.S.C. s 1983 and a three-judge
court has been convened pursuant to 28 U.S.C. ss 2281
et seq., to consider their challenge to the foregoing state statutes.
The defendant, Commissioner
of Social Services for the State of Connecticut, requests the court to dismiss
the three pending actions, on the grounds that the constitutional arguments
raised by the plaintiff are frivolous and that there is no basis on which the
court might properly
Page 369
consider the pendent statutory claims. [2] The Commissioner argues that, even if the
constitutional claims raised in these actions were deemed to be substantial, it
is appropriate that a single judge decide all such statutory questions, not a
three-judge constitutional court.
Said defendant maintains
that there is no inconsistency between
The court is not unmindful
of the legitimate state need for strong legislative controls to curb fraudulent
transfers undertaken for the very purpose of qualifying the property transferor
for immediate welfare assistance. However, the court finds that the Connecticut
"transfer-of-assets" statutes are inconsistent with the minimal
qualifying requirements of the federal Social Security Act, that those laws are
in violation of the Supremacy Clause and that the plaintiffs' constitutional
claims are not frivolous. The plaintiffs' motions for class certification are
granted.
FACTS
There is no dispute as to
the material facts of these cases, a stipulation having been mutually agreed to
and filed by counsel. Medicaid (42 U.S.C. ss 1396 et
seq.) and AFDC (42 U.S.C. ss 601 et seq.) are
federally sponsored welfare programs. In states which choose to participate in
one or both, a particular state agency (typically the state welfare department)
is designated to administer the program. Some parameters of that agency's
operations are prescribed in advance by the Social Security Act. For instance,
the Act establishes eligibility criteria from which the states are not free to
deviate. For Medicaid the sole criterion for eligibility set up in the SSA is
need; [3]
and for AFDC the criteria are need and dependency. [4]
Other parameters of the
state agency's operations are left expressly to state choice under the SSA.
Thus a state is free to select the level of payments which will be authorized
for recipients in particular disadvantaged categories.
In matters for which a locus of decision is not prescribed by the SSA or its
regulations, the states may adopt reasonable rules and regulations. For
example, 42 U.S.C. s 1396a(a)(10)(C) (Medicaid) and 42 U.S.C. s 602(a)(7)
(AFDC) provide that the state agency must take into account the "income
and resources" available to an applicant in determining need. Subject to
certain statutory restrictions, [5]
the states are given reasonable latitude in carrying out this determination.
The two
"Any relative having a dependent child or dependent
children, who is unable to
Page 370
furnish suitable support therefor in his own home,
shall be eligible to apply for and receive the aid authorized by this part . .
. if such applicant has not made, within seven years prior to the date of such
application for aid, an assignment or transfer or other disposition of property
without reasonable consideration or for the purpose of qualifying for an award
. . . provided ineligibility because of such disposition shall continue only
for that period of time from the date of disposition over which the fair value
of such property, together with all other income and resources, would furnish
support on a reasonable standard of health and decency." (Emphasis added.)
Conn.Gen.Stat. s 17-109 reads in relevant part:
"Any person shall be eligible for an old age assistance award who . . .
(e) has not made, within seven years prior to the date of application for such
aid, an assignment or transfer or other disposition of property without
reasonable consideration or for the purpose of qualifying for an award. . . .
"
The statute then proceeds to
incorporate the language of s 17-85 with respect to the disqualification
period. As used in these statutes, "reasonable consideration" has
been interpreted to mean "fair value," which in turn is defined as
"appraised or market value of the property in question, minus recorded
encumbrances." [6]
The practical operation of
In October of 1974, Galonek transferred his one-half interest in the family
residence to his daughter for the consideration of $5,000. His subsequent
application for Title XIX (Medicaid) benefits was denied by the Connecticut
Department of Social Services (DSS), on the grounds that the true value of his
interest in the home was $11,843, not $5,000, and that the transfer was for
less than "reasonable consideration." [7]
It would require several years for Galonek to
"work off" this deficiency under the Department's standard
cost-of-living formula, [8] and during
Page 371
this period of time he would remain ineligible for benefits.
Another plaintiff, Richard
Bennett, age 86, receives $189 monthly in Social Security old age insurance
benefits, which he applies toward $350 of monthly medical expenses. [9]
In June of 1972, Bennett sold his family home, receiving proceeds of $34,000.
Over the next three years Bennett's assets were frittered away in numerous
small transactions, under circumstances which suggest that he was the victim of
individuals who took advantage of his gullibility and reduced mental capacity
to divest him of his holdings. It is uncontroverted
that Bennett is presently without funds and no longer controls any of the
assets in question. There is no allegation that he wilfully
transferred assets in order to qualify for welfare. Yet, using a $405 monthly
"cost-of-living" allowance, Bennett will remain ineligible for
Medicaid for a period in excess of eight years.
Another plaintiff, Edith Huckle, lives with her four minor children in
Although she explained these
facts to the DSS, Mrs. Huckle was told that she must either transfer title to the Department or else remove
herself from the AFDC rolls and live off the property. She refused to do this
and in late 1975 reconveyed the property to her
father, whose prognosis had since improved. About this time, the state
terminated Mrs. Huckle's AFDC benefits. She reapplied
early in 1976, but was told that her reconveyance to
her father, for less than reasonable consideration, disqualified her
application. A fair hearing proved unfavorable to the plaintiff, and she has
filed an action in Connecticut Common Pleas Court which is currently pending.
Another plaintiff, Mary
Buckner, lives in
It is important to realize
that in none of the pending cases does the DSS allege fraud. Thus, the state
does not make any claim, that the transfers in
question were made for the purpose of qualifying for assistance.
Page 372
[10]
The sole basis for the state's denial of benefits to these plaintiffs is that a
transfer of property was made within seven years of the application without
receipt of "fair value," or else that insufficient information was
supplied by the applicant for the state to make a determination.
ISSUE
The issue presented is thus
whether
THRESHOLD QUESTIONS
The defendant has moved for
dismissal on the grounds that the plaintiffs' constitutional claims are
frivolous. For the court to concur, it would be necessary for it to find either
that the plaintiffs' arguments are directly precluded by controlling authority,
or else that they are so clearly insubstantial as to warrant no further
consideration. Goosby v. Osser, 409
The court finds that the
present claims are not insubstantial by either of these tests. While most court rulings in the area have been made on Supremacy
Clause grounds, the recent case of Owens v. Roberts, 377 F.Supp.
45 (M.D.FlA. 1974) (three-judge court), held squarely
that a
The defendant contends that
the statutory questions involved in this case may only be decided by a
single-judge court, and not by the present three-judge panel. Doe v. Westby, 383 F.Supp. 1143
(D.S.Dak.1974), vac. and rem.,
420
DISCUSSION OF THE LAW
Page 373
Carleson v. Remillard,
406 U.S. 598, 92 S.Ct. 1932, 32 L.Ed.2d 352 (1972);
Townsend v. Swank, 404 U.S. 282, 92 S.Ct. 502, 30
L.Ed.2d 448 (1971); Lewis v. Martin, 397 U.S. 552, 90 S.Ct.
1282, 25 L.Ed.2d 561 (1970); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968); Shook v. Lavine, 49 A.D.2d 238, 374 N.Y.S.2d 187 (4th Dept., 1975);
Owens v. Roberts, 377 F.Supp. 45 (M.D.FlA. 1974) (on point); Wilczynski
v. Harder, 323 F.Supp. 509
(D.Conn.1971); Solman v. Shapiro, 300 F.Supp. 409 (D.Conn.),aff'd per curia m, 396
Applying this line of cases
to the Connecticut statutes, the plaintiffs argue that (1) if receipt of fair
value in transfers of assets within seven years of application is viewed as a
condition precedent to qualifying for assistance, the requirement must fail since
it imposes a condition not expressly authorized by Congress in the SSA or its
legislative history; [12] (2) if the statutes are viewed
as an effort to define "income and resources" for eligibility
purposes, [13] they violate the "available income
rule" established in the above-cited cases. Thus by denying eligibility
for assistance over a period of time during which a transferred asset would
otherwise sustain the applicant, were it still available, the rule assumes the
availability of unavailable resources, in clear contravention of the case law
doctrine.
The state has argued that
its present statutory rule is "reasonable." But the reasonableness of
the rule is not in issue. Rather, the question is whether
It may be pointed out once
again that the state does not allege fraud in the pending cases. Were it to so
argue, it would be necessary to review the facts in light of Lavine v. Milne, 424 U.S. 577, 96 S.Ct.
1010, 47 L.Ed.2d 249 (1976). The present posture of the cases before the court
does not call for an analysis of this related question. It is sufficient to
state the Milne does not affect the principal result here.
In policing fraud, a state
may indisputably employ reasonable rules and regulations. Even toward this end,
however, it may be argued that
The defendant's final
argument is that, at least with respect to the plaintiffs, Mrs. Huckle and Mrs. Buckner, the
Page 374
eligibility" in order to receive benefits. It
has been held that state authorities may deny welfare benefits to an applicant
who refuses to cooperate in providing necessary information. Wyman
v. Jam es, 400
Mrs. Huckle
submitted sworn affidavits from herself and her father relating to the
circumstances under which she held property "in trust" for her mother
in
The plaintiff, Mrs. Huckle, has an action pending in the Connecticut Court of
Common Pleas with respect to her denial of benefits, and this fact raises the
question of equitable restraint. Huffman v. Pursue, 420
The case of Mrs. Buckner is
superficially somewhat different from the others. If the facts are accepted as
she asserts that is, if the value of the property transferred by her in her
second divorce proceeding was fully encumbered then the Connecticut DSS
concedes that she is eligible for assistance. This is presently being denied to
her, the DSS states, because she has failed to provide sufficient information
to determine whether or not the property was in fact totally encumbered or
whether she owned equity therein at the time of the transfer. This argument is
not tenable however, because even if the property were not so encumbered, the
state would not be authorized under federal law to withhold payments under the
available resources rule. There is no evidence in the record, which would
indicate that Mrs. Buckner has in any way refused good faith cooperation with
The foregoing opinion shall
constitute the findings of fact and conclusions of law required to be filed by
the court, pursuant to Rule 52(a), Fed.R.Civ.P. SO ORDERED.
---------
Notes:
[1]
Three actions have been consolidated for this hearing: Porta
v. White (now Porta v. Maher), Civ.
15,068 (filed
It has been called to the
attention of the court that during a period of approximately four months in
late 1974 there were no living plaintiffs in the Porta
case. At that time Porta himself and four plaintiff-intervenors had died, and the four present plaintiffs had
not yet intervened. The defendant raised no objection to the subsequent
intervention of the four present plaintiffs, however, and argued the matter
only briefly before the three-judge court convened in June of 1976, after the
plaintiffs first raised the question.
The court finds that the
hiatus between July and November of 1974 in which there was no living plaintiff
does not require dismissal of the Porta case. A
motion for class certification in Porta was filed in
September, 1972. By agreement of counsel no action was taken on that motion or
on the case in general pending the Connecticut Supreme Court's decision in the
case of Morgan v. White, 168 Conn. 336, 362 A. 2d 505 which was not handed down
until April 15, 1975. See generally note 6 infra. The United States Supreme
Court has provided for retroactive class certification in an appropriate case
in particular, where a case becomes moot "before the district court can
reasonably be expected to rule on a certification motion" provided that a
"live controversy" persists throughout the period of time involved. Sosna v.
(1975). This case is found to
be an appropriate one for such retroactive certification, and thus the
principles in the Porta case shall be decided here
along with Huckle and Buckner.
[2]
The court does not have jurisdiction under 28 U.S.C. s 1343(3) to hear a
statutory challenge under the Social Security Act, since that statute is not an
"Act of Congress providing for equal rights of citizens . . . ." Once
a substantial fourteenth amendment claim has been stated, however, s 1343
jurisdiction thereafter exists, and the court may take up statutory claims on
the theory of pendent jurisdiction.
[3]
Under the SSA, 42 U.S.C. s 1396a(a)(10), participating states are required to
make medical assistance available to "all individuals" receiving
federally sponsored welfare assistance. These individuals are referred to as
"categorically needy." In addition, states may at their option
provide medical assistance for individuals whose income or resources exceed the
level allowed for categorical assistance, but who fall within minimum
assistance levels once large medical costs are taken into account. These
individuals are referred to as "medically needy."
[4]
See 42 U.S.C. ss 601, 602(a)(10), and 606(a).
[5] 42 U.S.C.
s 1396a(a)(17)(A)-(B), for instance, limit the states' prerogatives in
evaluating income and resources for Medicaid purposes.
[6]
Connecticut Department of Social Services, Public Assistance Manual, Vol. I, Ch. III, Index 326(A) at 1; id. Index
326.1.
[7] The DSS will not recognize the daughter's services as
valid consideration. Section 326 of the DSS Public Assistance Manual narrows
the acceptable forms of consideration to four: cash; mortgage notes; support
(provided either in cash or kind, subsequent to the date of transfer); and
payment of a valid loan or other debt secured by a note or deed. In Morgan v. White, 168
[8]
The "Cost of Living Scale" is a schedule which establishes for
administrative purposes the amount needed by an individual to sustain a
"reasonable standard of health and decency" on a monthly basis. In
the case of an individual who has transferred an asset for less than
"reasonable consideration," the Cost of Living Scale is used to
determine the length of time benefits will be denied. To use a simple example,
suppose an applicant for welfare has transferred away an asset within seven
years of his application with a market value of $1500. Suppose also that he
received $500 in return. If the individual's cost-of-living allowance as
established by the DSS scale is $200 per month, then benefits would be denied
for five months: the net shortfall in the transfer is $1000, which at $200 per
month requires five months to extinguish.
[9]
The plaintiff Bennett is "medically needy." See note 3 supra.
[10] The
[11] In
Weinberger v. Salfi, 422
[12]
With respect to the regulations, the HEW and its predecessor, the Social
Security Board, have consistently interpreted the term "resources" as
including only resources which are actually available. 45
C.F.R. s 233.20(a) (3)(ii)(D) (AFDC); 45 C.F.R. s 248.3(b)(i)
(Medicaid). Such an interpretation of statutory language by the
responsible federal agency is entitled to substantial weight where ambiguity
exists in the statute. Shea v. Vialpando, 416
[13] See
42 U.S.C. s 602(a)(7) (AFDC); id. s 1396a(a)(10)(C)(i) (Medicaid).