A Decision Of The Compromise Panel To Reject A Request To Reduce A State Institutional Lien Is Rarely Overturned On Appeal

In the Estate of Rosa M. Mendoza v. Trenton Psychiatric Hospital and Department of Human Services, Division of Mental Health Services, N.J. App. Div. No. A-1553-07T2 (July 20, 2010), the Superior Court of New Jersey, Appellate Division, affirmed a decision of NJ’s Department of Human Services (DHS) which approved the recommendation of the Compromise Panel to reject the plaintiff estate’s compromise offer of $30,000, made to settle an $83,357.60 debt owed to the State of New Jersey for services rendered to the decedent Rosa M. Mendoza by Trenton Psychiatric Hospital.

In 1999, Mendoza, a native of Mexico, sustained a traumatic brain injury as a result of a motor vehicle accident. She developed dementia as a result of that injury. The court involuntarily committed her to the Carrier Foundation, where she stayed until the exhaustion of her automobile insurance benefits. Mendoza was then transferred to Trenton Psychiatric Hospital pursuant to court order, where she was later placed on conditional extension pending placement (CEPP) due to the unavailability of an appropriate placement after discharge. The court ordered the State of New Jersey to pay for the cost of Mendoza’s maintenance in the hospital based on her inability to pay; however, Mendoza remained personally liable for the full cost of her maintenance.

In January 2000, the court ordered Mendoza’s discharge to Mexico and continued her on CEPP until that time. Mendoza was discharged in April 2000, and returned to Mexico. Trenton Psychiatric Hospital sent her a bill for $83,357.60, the cost of her maintenance. The amount of the bill became a lien against Mendoza under NJ law. Mendoza died in 2002.

Over two years later, in 2004, the attorney for Mendoza’s estate requested that DHS compromise the lien to $30,000. The request was denied by the DHS Compromise Panel, which found that, since Mendoza “is deceased and there are no financial dependents,” a compromise would be “in direct conflict with the policies and standards” of the Department.

Several years later, in 2007, the attorney for Mendoza’s estate again requested that DHS compromise the lien. This time, the attorney claimed that Mendoza had disabled and elderly dependents, that she regularly sent economic assistance to her parents and disabled sister in Mexico, and that her parents had incurred substantial expenses for her care upon her return to Mexico. As a result of the compromise request, DHS conducted an investigation and discovered that the estate had obtained approximately $275,000 in a settlement of Mendoza’s personal injury action which had been distributed to family members. DHS advised the estate’s attorney of the result of its investigation and requested an accounting of the estate’s assets and liabilities. The accounting was never provided.

The Compromise Panel recommended the rejection of the compromise request on the following basis:

Mendoza is deceased and as such has no present needs[;]” she “does not have any legally responsible relatives statutorily . . . . responsible for [her] cost of care and maintenance[;]” she does not “have any . . . . dependents as her parents and sister live independently and her children are all adults living  independently[;]” neither she nor her actual dependents would be receiving the benefit; and “there would be no other opportunity to recover the amounts that the State taxpayers had expended for [her] institutional care.

The Commissioner approved the Compromise Panel’s recommendation, finding that the estate owed the entire amount of the bill. The estate appealed. The Estate contended that DHS cannot enforce collection of the debt against Mendoza’s family members, and cannot use settlement proceeds in calculating Mendoza’s current ability to pay.

The Appellate Division found that the role of an appellate court in reviewing the decision of an administrative agency is limited:

We will not disturb the determination of an administrative agency absent a showing that it was arbitrary, capricious, or unreasonable; that is, (1) “the agency’s action violates expressed or implied legislative policies[;]” (2) “the record [does not] contain[] substantial evidence to support the findings on which the agency based its action[;]” and (3) “in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

The Court held that the NJ statutes and cases show clearly that DHS can enforce collection of the bill against the estate, and can use the settlement proceeds to calculate the estate’s financial liability. The Court also held that the estate provided no accounting of its assets and liabilities, and no competent proof that Mendoza’s parents and sister, who lived separate from her in Mexico, were disabled, relied on her for support, or incurred expenses for her care. Thus, the administrative decision was not “arbitrary, capricious, or unreasonable.”

The case is attached here – Estate of Mendoza v. DHS