Ind. Fam. & Soc. Serv. Admin. v. Adducci (In re Adducci)

240 N.E.3d 708

IN RE the GUARDIANSHIP OF: Anthony ADDUCCI, Incapacitated Person

Indiana Family and Social Services Administration, Appellant-Intervenor

v.Cheryl Adducci, Guardian for Anthony Adducci, Appellee-Petitioner

Court of Appeals Case No. 23A-GU-2433

Court of Appeals of Indiana.

Filed July 17, 2024

Appeal from the Lake Superior Court, The Honorable Calvin D. Hawkins, Judge, Trial Court Cause No. 45D02-1905-GU-132

Attorneys for Appellant: Theodore E. Rokita, Indiana Attorney General, Evan Matthew Comer, Supervising Deputy Attorney General, Indianapolis, Indiana

Attorney for Appellee: Michael T. Foster, Greensburg, Indiana

Bradford, Judge.

Case Summary

[1] In 2019, Cheryl Adducci was appointed guardian of her institutionalized husband Anthony, applied for Medicaid coverage on his behalf, and (before Anthony’s Medicaid application had been approved) petitioned to divert some of his income for her support ("the Petition"), which petition the trial court granted (in "the Support Order"). The Indiana Family and Social Services Administration ("FSSA") provisionally granted Anthony’s Medicaid application and eventually moved to intervene in the case and for relief from judgment, also arguing that the Support Order, which had the effect of increasing the amount FSSA must pay for Anthony’s care, was unlawful. The trial court denied FSSA’s motions to intervene and for relief from judgment and reiterated that the Support Order was lawful.

[2] FSSA argues that it had a right to intervene in the action because the Support Order diverted money to Cheryl that would have otherwise gone to pay Anthony’s medical bills and it had no other way to challenge it. FSSA also argues that it was entitled to relief from judgment because it was a necessary party to the action who had not been served, rendering the Support Order void. Finally, FSSA argues that the Support Order is without legal basis. Because we agree with all of FSSA’s contentions, we reverse the trial court’s denials of FSSA’s motions to intervene and for relief from judgment and remand with instructions.

Facts and Procedural History

[3] On May 31, 2019, Cheryl was appointed guardian of her husband Anthony, who had suffered a traumatic brain injury resulting in dementia and a brain aneurysm, leaving him unable to care for himself or his assets. On June 17, 2019, Cheryl filed, inter alia, the Petition. On July 2, 2019, Cheryl applied for Medicaid coverage on Anthony’s behalf. On July 16, 2019, the trial court issued the Support Order, which allowed Cheryl to transfer up to $3275.00 of Anthony’s income per month for her care, maintenance, and support. In August of 2019, the Adduccis notified FSSA of the Support Order. On August 30, 2019, FSSA approved Anthony’s application for Medicaid coverage while also noting that, prior to the Support Order, he had not been eligible for Medicaid coverage because his income, as well as his and Cheryl’s resources, exceeded applicable limits.

[4] On July 14, 2020, FSSA moved to intervene in the guardianship case and for relief from judgment, arguing that it was a necessary party because the Support Order meant that Indiana’s Medicaid program (which is administered by FSSA) would have to pay for Anthony’s care and that it was entitled to relief from judgment because it had not been served. During the litigation of FSSA’s motions, FSSA also argued that the Support Order was unlawful because the mandatory fair hearing in the FSSA had never occurred, the doctrine of necessaries did not entitle Cheryl to spousal support, and Cheryl had violated her fiduciary duty to Anthony. The Adduccis argued that FSSA (1) had not moved for relief from judgment within a reasonable time, (2) had not been a necessary party to the guardianship proceedings, (3) and lacked standing to claim that Cheryl had violated her fiduciary duty. The Adduccis also argued that Indiana Code section 12-15-2-25 ("the State Medicaid Statute") and the doctrine of necessaries supported the Support Order.

[5] On September 14, 2023, the trial court denied FSSA’s motions to intervene and for relief from judgment and, alternatively, concluded that FSSA was barred from taking advantage of the equitable remedy of relief from judgment because it had not engaged in mandatory rulemaking pursuant to Indiana Code section 12-15-2-25(d) and, therefore, had unclean hands. The trial court also concluded that Cheryl’s allowance was supported by the State Medicaid Statute and the doctrine of necessaries.

Discussion and Decision

I. Background

[1] [6] In the Medicaid program, the federal government provides funding to states, which in turn reimburse qualifying individuals for the cost of medical care. Wis. Dep’t of Health & Fam. Servs. v. Blumer, 534 U.S. 473, 479, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002) (citing Schweiker v. Gray Panthers, 453 U.S. 34, 36-37, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981)). For institutionalized individuals, Medicaid starts with the presumption that the individual must pay all of his income, minus certain permitted deductions, to the institutions caring for him before he can qualify for assistance. See Lowes v. Lowes, 650 N.E.2d 1171, 1175 (Ind. Ct. App. 1995) ("Congress intended that all third party sources of income to which an applicant is entitled be exhausted before resort to the social welfare system.").

[2] [7] It was eventually realized that this exhaustion requirement, at times, left the community spouse¹ with insufficient resources, which prompted Congress to pass the Medicare Catastrophic Coverage Act of 1988 ("the MCCA"). 42 U.S.C. § 1396r-5. The stated purpose of the MCCA was to "end th[e] pauperization of the community spouse by assuring that the community spouse has a sufficient—but not excessive—amount of income and resources available[.]" Blumer, 534 U.S. at 480, 122 S.Ct. 962. In some cases, an institutionalized spouse is permitted to transfer a "community spouse monthly income allowance" without that amount being counted against him for eligibility-determination purposes. 42 U.S.C. § 1396r-5(d)(3). The exact amount of the monthly income allowance is determined by subtracting a community spouse’s actual monthly earnings from a "minimum monthly maintenance needs allowance" ("the Allowance"), which is set by the State. 42 U.S.C. § 1396r-5(d)(2)-(3). If this calculation results in a shortfall between the community spouse’s monthly income and the Allowance, the community spouse’s monthly income allowance becomes the difference between the two amounts. 42 U.S.C. § 1396r-5(d)(2).

[8] Either spouse may petition for a "fair hearing before the State agency[,]" i.e., FSSA, to argue that the Allowance should be increased. 42 U.S.C. § 1396r-5(e)(2)(B); see also 42 U.S.C. § 1396a(a)(3) (defining "fair hearing"). Pursuant to this provision, the Allowance may be increased if the spouses establish "that the community spouse needs income, above the level otherwise provided by the [Allowance], due to exceptional circumstances resulting in significant financial duress." 42 U.S.C. § 1396r-5(e)(2)(B). In some cases, such as this one, the Allowance would have to be increased for the institutionalized spouse to be eligible for Medicaid benefits at all.

[9] At the state level, the State Medicaid Statute provides that institutionalized Medicaid recipients who have a community spouse may "retain an income allowance for the purpose of supporting a community spouse" if "(1) the community spouse’s income is less than the [Allowance]" established under federal law; and "(2) an increased amount is necessary to increase the community spouse’s income to the [Allowance]." Ind. Code § 12-15-2-25(b). The State Medicaid Statute provides that "[i]f either spouse establishes that a higher allowance is needed due to exceptional circumstances resulting in significant financial duress, the [Allowance] may be increased after an administrative hearing or by a court order." Ind. Code § 12-15-2-25(c) (emphasis added).

II. Intervention

[3–5] [10] FSSA contends that, because it was a necessary party to the guardianship action, the trial court abused its discretion in denying its motion to intervene. Motions to intervene in an action involve a mixed question of law and fact, and trial courts have discretion to determine whether a movant has met its burden of showing that it is entitled to intervene. Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 812 (Ind. 2012). A trial court’s ruling on a motion to intervene is reviewed for an abuse of discretion, and the facts alleged in the motion are taken as true. JPMorgan Chase Bank, N.A. v. Claybridge Homeowners Ass’n, Inc., 39 N.E.3d 666, 669 (Ind. 2015). An order denying a motion to intervene will be reversed if the decision is "clearly against the logic and effect of the facts and circumstances before the court or if the court has misinterpreted the law."

Abbott v. State, 183 N.E.3d 1074, 1083 (Ind. 2022).

[6] [11] Intervention is the procedure through which nonparties may assert their rights in an ongoing lawsuit. See Citimortgage, 975 N.E.2d at 812. Indiana’s intervention procedures are governed by Indiana Trial Rule 24, which "expressly recognizes the right of a party to intervene after judgment for the purposes of presenting a motion under Trial Rule 60." Id. Mandatory intervention is governed by Subsection (A)(2), which provides that a trial court must permit a third party to intervene in an action

when the applicant claims an interest relating to a property, fund or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect his interest in the property […] unless the applicant’s interest is adequately represented by existing parties.

Ind. Trial Rule 24(A)(2).

[7] [12] Keeping in mind that facts alleged in FSSA’s motion to intervene must be accepted as true, FSSA has established a clear interest in this proceeding, specifically that

[t]he FSSA is

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