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In re Estate of Burns

January 9, 1997

IN THE MATTER OF THE ESTATE OF MARGARET O. BURNS, DECEASED, STATE OF WASHINGTON, DEPARTMENT OF SOCIAL AND HEALTH SERVICES, RESPONDENT,
v.
MICHAEL L. OLVER, PERSONAL REPRESENTATIVE, PETITIONER. IN THE MATTER OF THE ESTATE OF DORIS R. WHEELER, DECEASED, STATE OF WASHINGTON, DEPARTMENT OF SOCIAL AND HEALTH SERVICES, RESPONDENT, V. RICHARD T. WHEELER AND JAMES A. WHEELER, JR., PERSONAL REPRESENTATIVES, PETITIONERS.



Appeal from Superior Court, King County; 93-2-24235-2. Honorable Robinson, Judge. Judgment Date: 5-23-94 (63713-0), 1-26-94 (63616-8).

Authored by Barbara A. Madsen,. Concurring: Charles Z. Smith, Richard P. Guy, Charles W. Johnson, Gerry L. Alexander, Dissenting: Philip A. Talmadge, James M. Dolliver, Richard B. Sanders, Barbara Durham.

The opinion of the court was delivered by: Madsen

EN BANC

MADSEN, J. -- The personal representative of decedent Margaret O. Burns and the co-personal representatives of decedent Doris R. Wheeler dispute the State's recovery, under former RCW 43.20B.140, for preenactment or reamendment medical care benefits provided to the decedents during their lifetimes. The trial courts in both cases issued summary judgment in favor of the Estates. The Court of Appeals reversed. We find that recovery of preenactment or preamendment benefits constitutes improper retroactive application of the statute and reverse the Court of Appeals.

STATEMENT OF THE CASE

Michael Olver is the personal representative for the estate of Margaret O. Burns. From March 1986, until her death in 1993, Ms. Burns received medical care benefits from the Department of Social and Health Services (DSHS). In 1987, Washington enacted a provision authorizing DSHS to recover the cost of medical care benefits from the recipient's estate after her death. See former RCW 43.20B.140. When Ms. Burns died in 1993, DSHS filed a claim against her estate for reimbursement of all benefits she had received starting in 1986. The amount of the claim was $17,259.31. The personal representative allowed DSHS to recover only the benefits paid after the statute's enactment in 1987. DSHS therefore recovered only $10,034.02.

DSHS sued the Burns Estate to recover the preenactment benefits. The parties stipulated to the facts and filed cross motions for summary judgment. The trial court granted the Estate's motion. The Court of Appeals reversed and instructed the trial court to enter judgment in favor of DSHS.

Richard T. Wheeler and James A. Wheeler are co-personal representatives for the estate of their mother, Doris R. Wheeler. Between June 1991 and her death on August 16, 1993, Ms. Wheeler received $49,604.18 in medical benefits from the State. Ms. Wheeler left her entire estate, with total assets of $73,000, to her two adult children. When Ms. Wheeler started receiving benefits the recovery statute allowed a $50,000 exemption if any children survived the beneficiary. Beyond this exempted amount, the statute permitted DSHS to claim up to 35 percent of remaining estate assets. Former RCW 43.20B.140(1)(c). On July 25, 1993, approximately one month before Ms. Wheeler died, the Legislature eliminated the $50,000 exemption and allowed only $2,000 set aside for personal property. Laws of 1993, ch. 272, sec. 2. Between the effective date of this amendment and her death, Ms. Wheeler received $791.34 in medical benefits.

After Ms. Wheeler died, DSHS filed a claim against the Wheeler Estate for $49,604.18. DSHS argues that the 1993 amendment eliminating the $50,000 exemption applies to all estates arising after the amendment's effective date. In contrast, the Estate argues that even when an estate arises after that date, the amendment does not apply to preenactment benefits. The Estate therefore calculated the Department's recovery for benefits received before July 25, 1993, according to the preamendment statute. With the $50,000 exemption, and 35 percent cap on remaining estate assets, DSHS recovered $8,000 ($73,000 - 50,000 = 23,000 x 35% = $8,000).

In addition to the $8,000 amount, the Wheeler Estate also allowed the Department to recover $791.34 for benefits received after July 25, 1993. The Estate later paid the full amount claimed by DSHS to avoid accruing interest, and counterclaimed for a refund. The parties filed cross motions for summary judgment. The trial court entered judgment in favor of the Wheeler Estate. The Court of Appeals reversed in an unpublished opinion.

The Burns Estate challenges the application of RCW 43.20B.140; whereas, the Wheeler Estate challenges the application of the statute's amendment at RCW 43.20B.140(1)(c). Both cases, however, present the same central issue of whether these provisions apply to preenactment or preamendment benefits. This court granted review in In re Estate of Burns, 129 Wash. 2d 1003, 913 P.2d 66, on April 9, 1996. In re Estate of Wheeler, 129 Wash. 2d 1006, 917 P.2d 129, was consolidated with Burns on May 8, 1996.

Discussion

In 1982, Congress enacted the Tax Equity and Fiscal Responsibility Act (TEFRA), which gives the states several optional methods of recovering payments for medical care. These methods give the states access to the home equity of Medicaid recipients. In 1987, Washington chose one of these methods by adding a new section, RCW 74.09.750, under "Revenue Recovery Procedures Revised for the Department of Social and Health Services." Laws of 1987, ch. 283, sec. 13. The new section was later recodified as former RCW 43.20B.140. Until July 1993, when the Legislature eliminated the $50,000 exemption in RCW 43.20B.140(1)(c), the statute provided in relevant part:

(1) The department is authorized to recover the cost of medical care provided to a recipient who was sixty-five years or older, upon the recipient's death except:

(a) Where there is a surviving spouse; or

(b) Where there is a surviving child under 21 years of age or blind or disabled as defined in the state plan under Title XIX of the social security act; or

(c) To the extent of the first fifty thousand dollars of the estate value at the time of death, where there are surviving children other than as defined above, and not to exceed thirty-five percent of the remainder.

(2) The department may assert and enforce a claim against the estate of the deceased recipient for the debt in subsection (1) of this section, in accordance with chapter 11.40 RCW.

(3) The remedies in subsection (2) of this section are nonexclusive and upon the death of the recipient, the department shall have a lien for the debt in subsection (1) of this section.

The lien attaches to the real property of which the deceased recipient was seized immediately before death. Upon subsequent filing of the notice . . . the lien shall be deemed to relate back and be effective against such property as of the date of the recipient's death. Recovery under the lien shall be upon the sale or transfer of the subject property.

Former RCW 43.20B.140.

In 1993, the Legislature replaced the $50,000 exemption with the following language:

For family heirlooms, collectibles, antiques, papers, jewelry, photos, or other personal effects that have been held in the possession of the deceased recipient to which a surviving child may otherwise be entitled not to exceed a total fair market value of two thousand dollars. RCW 43.20B.140(1)(c). *fn1

As a general rule, courts presume that statutes operate prospectively unless contrary legislative intent is express or implied. Macumber v. Shafer, 96 Wash. 2d 568, 570, 637 P.2d 645 (1981); Baker v. Baker, 80 Wash. 2d 736, 741, 498 P.2d 315 (1972); Pape v. Department of Labor & Indus., 43 Wash. 2d 736, 741, 264 P.2d 241 (1953); In re Cascade Fixture Co., 8 Wash. 2d 263, 272, 111 P.2d 991 (1941). Courts disfavor retroactivity because of the unfairness of impairing a vested right or creating a new obligation with respect to past transactions. Landgraf v. USI Film Prods., 511 U.S. 244, 114 S. Ct. 1483, 1500, 128 L. Ed. 2d 229 (1994); Id. at 1505 (stating that a statute has a genuinely retroactive effect if it impairs rights a party possessed when he acted, increases his liability for past conduct, or imposes new duties with respect to completed transactions); In re Cascade Fixture Co., 8 Wash. 2d at 272 (stating that retroactive legislation changing vested rights is not favored); Adcox v. Children's Orthopedic Hosp. & Medical Ctr., 123 Wash. 2d 15, 30, 864 P.2d 921 (1993) (declining to apply a statute retroactively because it created a new civil penalty for noncomplying hospitals). Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly. Landgraf, 114 S. Ct. at 1497.

A statute operates prospectively when the precipitating event for operation of the statute occurs after enactment, even when the precipitating event originated in a situation existing prior to enactment. Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guaranty Ass'n, 83 Wash. 2d 523, 535, 520 P.2d 162 (1974); Landgraf, 114 S. Ct. at 1499 (stating that "[a] statute does not operate 'retrospectively' merely because it is applied in a case arising from conduct antedating the statute's enactment . . . or upsets expectations based in prior law"). A statute "is not retroactive merely because it relates to prior facts or transactions where it does not change their legal effect." State v. Belgarde, 119 Wash. 2d 711, 722, 837 P.2d 599 (1992) (quoting State v. Scheffel, 82 Wash. 2d 872, 879, 514 P.2d 1052 (1973), appeal dismissed, 416 U.S. 964, 40 L. Ed. 2d 554, 94 S. Ct. 1984 (1974)); Landgraf, 114 S. Ct. at 1499.

The parties in this case agree that the language of RCW 43.20B.140 shows that the Legislature intended only prospective application of the statute. They disagree, however, as to what that means. DSHS contends that the statute and its amendment operate prospectively so long as they apply only to estates created after the provisions' effective dates, 1987 and 1993 respectively, because the legal obligations fall only upon the estates and not the recipients. The statute clearly permits the State to collect payment only upon the recipient's death. Therefore, the Department argues, liability arises only after creation of the estates. Furthermore, the statute and its amendment are applicable only if no spouse or children are living when the estates arise. Thus, the "precipitating event" is the creation of the estate.

The Estates argue that DSHS's interpretation gives the provisions retroactive effect when they apply to preenactment or preamendment benefits because they attach new legal consequences to the decedents' acceptance of benefits. Specifically, the provisions grant new rights to DSHS and impair the vested rights of recipients. The Burns Estate argues that application of the statute to pre-1987 benefits grants the State a claim of reimbursement and a right to a lien which did not exist before 1987. Application of the statute thereby imposes duties upon Ms. Burns that did not exist when she applied for and received the benefits. Similarly, the Wheeler Estate argues that application of the 1993 amendment impairs the right to receive medical assistance without encumbering a portion of estate assets with an obligation to repay. The recovery statute thus imposes new legal ramifications on the completed transaction of giving and receiving benefits.

The Estates also argue that the preenactment or preamendment acceptance of benefits "creates the liability" for which the State now seeks to collect. Br. of Resp't (Burns) at 19; Supp. Br. of Dep't (Wheeler) at 7. Thus, the acceptance of benefits is the precipitating event for application of the statute. If the recovery statute retroactively attaches liability to the acceptance of benefits, then the liability necessarily would be that of the decedent, and not merely that of the estate. Accordingly, the Wheeler Estate argues that an estate is not a legal entity separate from a person, but a word that describes a person's property before and after death.

To determine which activity the challenged provisions regulate, we turn to the plain language of the statute. Section 2 discusses the State's right to recover benefit payments as a "debt" owed by the Medicaid recipient. Section 3 allows the State to collect payment by imposing a lien on the recipient's estate. According to the plain language of the statute, the regulated activity is the creation of debt and the collection of such debt by imposing claims or liens on recipients' estates.

DSHS argues, however, that the statute does not regulate repayment of debts owed by Medicaid recipients because the statute imposes liability only on their estates. The Department maintains that the statute clearly contemplates recovery from probate estates and not from recipients themselves. However, the time of payment upon a recipient's death does not change the regulated activity from creation and collection of a debt to Disposition of an estate.

In a prior case, this court held that although a debt is payable only upon death, the time of payment does not change the debt into something testamentary in character. In re Estate of Krueger, 11 Wash. 2d 329, 336, 119 P.2d 312 (1941) (holding that the payment of a contractual obligation was not a testamentary transfer even though it was payable at the time of the obligor's death); Gostina v. Whitham, 148 Wash. 72, 74, 268 P. 132 (1928) (stating that an "instrument founded upon a consideration, whereby one agrees to pay another a definite sum, does not partake of a testamentary character simply because the time of payment be postponed until death."). Thus, although recipients pay off their debts to ...


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