Estate of Wilson v. Div. Of Social Services

685 S.E.2d 135

The ESTATE OF Kenneth L. WILSON and Doris Wilson, in her capacity as the Administratrix of the Estate of Kenneth L. Wilson, Petitioners, v. DIVISION OF SOCIAL SERVICES and Division of Medical Assistance of the North Carolina Department of Health and Human Services, Respondents.

No. COA09-216.

Court of Appeals of North Carolina.

November 3, 2009.

Appeal by petitioners from judgment and order entered 14 November 2008 by Judge Richard D. Boner in Mecklenburg County Superior Court. Heard in the Court of Appeals 3 September 2009.

Ott Cone & Redpath, P.A., by Laurie S. Truesdell, Greensboro, for petitioner appellants.

Attorney General Roy Cooper, by Assistant Attorney General Brenda Eaddy, for North Carolina Department of Health and Human Services, respondent appellee.

HUNTER, JR., ROBERT N., Judge.

Petitioner Doris Wilson, in her capacity as the administratrix of the Estate of Kenneth L. Wilson, appeals from the superior court's decision which reversed respondent North Carolina Department of Health and Human Services'("DHHS") final decision, but nonetheless held that Kenneth L. Wilson's assets exceeded the $3,000.00 resource limit for Medicaid eligibility. We disagree, and accordingly reverse the superior court's decision and remand to the superior court for further remand to DHHS for further proceedings in accordance with this opinion.

I. Factual Background

Kenneth L. Wilson ("Mr. Wilson") was hospitalized at Carolinas Medical Center on 7 January 2007 until his death on 22 February 2007. During Mr. Wilson's hospitalization, his wife, Doris Wilson, sold her 100% stock ownership in Brothers Delivery Service, Inc. ("Brothers") to her son, Kenneth L. Wilson, Jr., via a purchase agreement dated 24 January 2007 ("Purchase Agreement"). Pursuant to the Purchase Agreement, Kenneth L. Wilson, Jr., agreed to purchase 100% of the stock and assets associated with Brothers for the price of $62,531.00, to be paid in sixty installments of $1,041.82 each, beginning on 1 March 2007. The Purchase Agreement was signed by Kenneth Wilson, Jr., but was not signed by Doris Wilson.

On 5 April 2007, Doris Wilson applied for Medicaid benefits seeking coverage for Mr. Wilson's hospitalization. The Mecklenburg County Department of Social Services ("DSS") denied petitioner's application for Medicaid benefits on 5 July 2007. This decision was affirmed by DSS in a Local Hearing Decision dated 3 August 2007, which found that the Purchase Agreement was a promissory note, the value of which counted toward Mr. Wilson's assets for the purpose of determining his eligibility for Medicaid benefits. Mr. Wilson's countable assets totaled $8,375.98 after the minimum Community Spouse Resource Allowance of $20,328.00 was subtracted from his total assets of $28,703.93. The total assets were calculated based on Mr. Wilson's available resources, including two account balances in two Branch Banking and Trust Accounts, a First Citizens bank account, and the value of a promissory note. DSS found that the value of Mr. Wilson's assets exceeded Medicaid's allowable resource limit of $3,000.00 and disqualified Mr. Wilson for Medicaid benefits. DSS's decision was affirmed by DHHS in a State Hearing Decision issued 3 October 2007; DHHS upheld the classification of the Purchase Agreement as a saleable promissory note. Petitioner requested further review of DHHS's decision alleging the Purchase Agreement was a bill of sale and not an asset for purposes of qualification for Medicaid benefits. On 22 January 2008, the DHHS Chief Hearing Officer issued a final decision affirming the 3 October 2007 decision denying Mr. Wilson's Medicaid benefit application due to excess resources.

Petitioner sought judicial review of DHHS's final decision in Mecklenburg County Superior Court. In an Order dated 14 November 2008, the trial court reversed DHHS's final decision, finding the Purchase Agreement was not a saleable promissory note, but was an agreement for the sale of stock, a "chattel" with a value of $62,531.00. The trial court concluded, however, that the Purchase Agreement was countable against Mr. Wilson's assets for determining his eligibility for Medicaid benefits. The trial court remanded the issue to the Chief Hearing Officer to enter a new decision consistent with the trial court's findings. From this order, petitioner appeals.

II. Standard of Review

The North Carolina Administrative Procedure Act provides an aggrieved party with the right to judicial review of an agency's final decision in a contested case. N.C. Gen.Stat. § 150B-43 (2007). Where a petitioner asserts that an agency's decision was affected by legal error, this Court reviews the agency's decision de novo. See Mann Media, Inc. v. Randolph Cty. Planning Bd., 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002) (citing Sutton v. N.C. Dep't of Labor, 132 N.C.App. 387, 389, 511 S.E.2d 340, 341 (1999)).

[W]hen an appellate court reviews

"a superior court order regarding an agency decision, `the appellate court examines the trial court's order for error of law. The process has been described as a twofold task: (1) determining whether the trial court exercised the appropriate scope of review and, if appropriate, (2) deciding whether the court did so properly.'"

Id. at 14, 565 S.E.2d at 18 (quoting ACT-UP Triangle v. Commission for Health Services, 345 N.C. 699, 706, 483 S.E.2d 388, 392 (1997)). Accordingly, this Court must determine whether the superior court properly applied the correct standard of review to the undisputed facts of the case at bar.

III. Issues on Appeal

On appeal, petitioner contends that (1) the trial court erred in concluding that the Purchase Agreement is "chattel," a countable resource for purposes of determining Mr. Wilson's eligibility for Medicaid, or (2) in the alternative, if the Purchase Agreement is a countable resource, Brothers is excluded as a countable resource for the time period prior to Doris Wilson's making and attempted execution of the agreement pursuant to the North Carolina Adult Medicaid Manual as property actively involved in trade or business. We agree with petitioner and conclude that the Purchase Agreement is not a countable resource.

First, petitioner contends that the Purchase Agreement is a bill of sale, not a negotiable instrument, and as such, should not be counted as a resource for purposes of determining Medicaid eligibility. While we do not agree with petitioner's characterization of the Purchase Agreement as a bill of sale, we do agree that the agreement is not a countable asset for Medicaid eligibility purposes.

Pursuant to Title XIX of the Social Security Act, the Medicaid program "`provid[es] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons.'" Schweiker v. Gray Panthers, 453 U.S. 34, 36, 101 S.Ct. 2633, 69 L.Ed.2d 460, 465 (1981) (quoting Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784, 794, reh'g denied, 448 U.S. 917, 101 S.Ct. 39, 65 L.Ed.2d 1180 (1980)). Each state establishes its own criteria for assessing Medicaid eligibility; therefore, "[a]n individual is entitled to Medicaid if he fulfills the criteria established by the [s]tate in which he lives." Id. at 36-37, 101 S.Ct. at 2636, 69 L.Ed.2d at 465. N.C. Gen. Stat. § 108A-55(a) (2007) provides the following:

[DHHS] may authorize, within appropriations made for this purpose, payments of all or part of the cost of medical and other remedial care for any eligible person when it is essential to the health and welfare of such person that such care be provided, and when the total resources of such person are not sufficient to provide the necessary care.

DHHS developed the North Carolina Adult Medicaid Manual ("NCAMM")to determine whether or not an applicant is eligible to receive Medicaid coverage.

According to the NCAMM, DHHS considers three types of property when determining eligibility: (1) real property, (2) personal property, and (3) liquid assets. North Carolina Adult Medicaid Manual § 2230I.B.1-3 (2008); see also 20 C.F.R. § 416.1201 (2009). The manual defines real property as "land and all buildings or dwellings which are permanently affixed to the land." Id. Personal property is defined as "all personal effects and household goods[.]" Id. "Liquid assets include cash, bank accounts, certificates of deposit as well as any item that can be converted to cash[.]" Id.

In the present case, the resource at issue is the Purchase Agreement purporting to sell 100% of Doris Wilson's stock and other assets of Brothers to Kenneth Wilson, Jr. With regard to the characterization of the Purchase Agreement, the Court notes that the parties agree that the agreement cannot be classified as either real or personal property. Therefore, in order to be considered a countable resource for determining Medicaid eligibility, the Purchase Agreement must meet the aforementioned definition of a liquid asset.

DHHS, in its final decision, concluded that the Purchase Agreement was a promissory note, a negotiable instrument and countable resource for determining Medicaid eligibility. In order to be classified as a negotiable instrument, a writing must meet the following criteria:

[B]e signed by the maker or drawer, contain an unconditional promise or order to pay a sum certain in money, contain no other promise, order, obligation or power given by the maker or drawer except as authorized by G.S. Chapter 25, Article 3, be payable on demand or at a definite time, and be payable to order or to bearer.

Gillespie v. DeWitt, 53 N.C.App. 252, 256-57, 280 S.E.2d 736, 740 (1981), cert. denied, 304 N.C. 390, 285 S.E.2d 832 (...