State of Connecticut v. Catherine Henneberry
No. CV020098667S (Conn.Super. 12/16/2003)
SUPERIOR COURT OF CONNECTICUT, JUDICIAL
DISTRICT OF MIDDLESEX,
December 16, 2003, Decided
December 16, 2003, Filed
NOTICE: [*1] THIS DECISION IS UNREPORTED AND MAY BE SUBJECT TO FURTHER APPELLATE REVIEW. COUNSEL IS CAUTIONED TO MAKE AN INDEPENDENT DETERMINATION OF THE STATUS OF THIS CASE.
JUDGES: Aurigemma, J.
OPINION: MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, the State of Connecticut acting through the Commissioner of Social Services, has appealed from a decree and order of the Middletown Probate Court authorizing the defendant, the conservatrix of the Estate of Kevin Henneberry, to create a Trust using certain settlement proceeds acquired by Kevin Henneberry as the result of a claim against a third party. Both parties have filed Motions for Summary Judgment.
The plaintiff has alleged in the Revised Reasons of Appeal that it is a statutory, priority creditor of Kevin Henneberry pursuant to Connecticut General Statutes § 17b-93 and § 17b-265 by virtue of the Title XIX medical assistance and the State Supplemental cash assistance that the State has provided and is providing to and on behalf of Kevin Henneberry.
The only intent specified by the defendant in her Application seeking the Probate Court's authorization to create and [*2] fund the Trust in question was to maintain Kevin Henneberry's eligibility for Title XIX medical assistance (Medicaid), as permitted by 42 U.S.C. § 1396p(d)(4)(A). The plaintiff does not object to the creation or funding of a trust for that purpose alone. However, the plaintiff alleges that by its terms the Trust in question goes further than permitted or required under 42 U.S.C. § 1396p(d)(4)(A) in that it attempts not only to preserve Kevin Henneberry's eligibility for Medicaid, but also his eligibility for any other state or federal assistance program, and further attempts to insulate the assets of Kevin Henneberry from the claims of his creditors. The plaintiff has alleged in paragraphs 6A through 6H and 7A through 7D of its Reasons of Appeal, that contrary to the intent stated by the defendant in her Application for the Probate Court, the language of the Trust, and the intent stated in the Trust, go beyond the limited, stated purpose of maintaining Kevin Henneberry's Medicaid eligibility; and in contravention of Connecticut law, impermissibly purports to create an invalid spendthrift trust created by a settlor (Kevin Henneberry) [*3] for the benefit of a settlor. The plaintiff has further alleged that such impermissible attempt to insulate or shelter the settlor's own assets from the reach of his creditors, specifically including the plaintiff, purportedly seeks to diminish and eliminate the availability of such Trust assets for payment of the plaintiff's present and future statutory, priority creditor's claim. It also attempts to make such Trust assets unavailable for the use of Kevin Henneberry, thereby seeking to render Kevin Henneberry eligible for public assistance programs other than, and in addition to, the Medicaid program, which would result in the plaintiff being called upon to make payment of such public assistance for Kevin Henneberry.
The Trust which is the subject of this appeal, provides, in pertinent part:
2.1 Trust for Sole Benefit of Kevin Henneberry. The Trust property shall be held hereunder, In Trust, for the sole benefit of KEVIN HENNEBERRY, to be held and administered in the manner following:
(1) This Trust is established for the sole benefit of KEVIN HENNEBERRY, in compliance with the provisions of 42 U.S.C. § 1396p(d)(4)(A). The intention is to provide a trust [*4] find in accordance with 42 U.S.C. § 1396p(d)(4)(A) which may provide for KEVIN HENNEBERRY while at the same time allowing said KEVIN to become and/or remain eligible for any and all state, federal and/or private entitlement or assistance programs which may be available to him from time to time. It is the Settlor's desire to make provision for said KEVIN without jeopardizing the present or future eligibility for said KEVIN for any such programs; without subjecting the Trust funds to liability for repayment respecting any past, present or future eligibility for any such program, except as specifically set forth in Section 2.2 hereof; and without having any part of the Trust funds be considered available and/or accessible to said KEVIN for purpose of determining his present or future eligibility for any such program.
Towards that end, the Trustee is directed to hold the Trust Property in Trust during the lifetime of KEVIN HENNEBERRY, to invest and reinvest the same, and to pay to or for his benefit so much of the net income and principal of the Trust as the Trustee, in its sole discretion, deems advisable for his best interest (subject, however, to [*5] the provisions of this Section 2.1). The Trustee is directed to accumulate and add to principal any income not distributed in any year.
The Trustee is directed to withhold income and principal at anytime, or from time to time, if the Trustee, in its sole discretion, deems this to be consistent with the purposes of this Trust. Furthermore, no such governmental, public or private source which is providing, or has provided, medical, financial or other assistance to or for the benefit of said Kevin shall have the right to compel the Trustee to make any distributions of income or principal at any time, or from time to time, on their behalf or to or for the benefit of said Kevin, except as specifically set forth in Section 2.2 hereof.
6.1 Provisions Respecting Assignment, Anticipation and Alienation. All beneficiaries of this Trust Indenture are hereby restrained from anticipating, encumbering, alienating or in any other manner assigning their interest in either principal or income, and are without power to do so; nor shall such interest be subject to their debts, liabilities or obligations, nor to attachment, judgment, lien, garnishment or other legal process, bankruptcy proceedings, [*6] or claims of creditors or others (whether any of the foregoing are past present or future).
No material facts are in dispute. The defendant and the plaintiff agree as to the contents of the Trust and that the amounts used to fund the Trust did not belong to the defendant in her personal capacity, but, rather, belonged to Kevin Henneberry.
Discussion of the Law and Ruling
Practice Book § 17-49 (formerly § 384) provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fojtik v. Hunter, 265 Conn. 385, 389, 828 A.2d 589 (2003); Mytych v. May Dep't Stores Co.., 260 Conn. 152, 158-59, 793 A.2d 1068 (2002); Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995). Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact; D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980); a party opposing summary judgment [*7] must substantiate its adverse claim by showing that there is a genuine issue of material fact, together with the evidence disclosing the existence of such an issue. Practice Book §§ 17-45, 17-46; Burns v. Hartford Hospital, 192 Conn. 451, 455, 472 A.2d 1257 (1984). In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. Town Bank & Trust Co. v. Benson, 176 Conn. 304, 309, 407 A.2d 971 (1978); Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317, 477 A.2d 1005 (1984). The test is whether a party would be entitled to a directed verdict on the same facts. Batick v. Seymour, 186 Conn. 632, 647, 443 A.2d 471 (1982); New Milford Savings Bank v. Roina, 38 Conn.App. 240, 243-44, 659 A.2d 1226 (1995).
Summary judgment should only be granted if the pleadings, affidavits and other proof submitted demonstrate that there is no genuine issue as to any material fact. Scinto v. Stamm, 224 Conn. 524, 530, 620 A.2d 99, cert, denied, 510 U.S. 861, 114 S. Ct. 176, 126 L. Ed. 2d 136 (1993); Connell v. Colwell, 214 Conn. 242, 246, 571 A.2d 116 (1991). [*8] Summary judgment is "designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. City of New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).
In this case the parties have filed cross motions for summary judgment. The filing of cross motions for summary judgment is indicative of the absence of material facts in dispute. Schilberg Integrated Metals v. Continental Casualty, 263 Conn. 245, 252, 819 A.2d 773 (2003); Department of Social Services v. Saunders, 247 Conn. 686, 715, 724 A.2d 1093 (1999). There are no material facts in dispute in this case.
Connecticut case law expresses the strong public policy that proscribes self-settled spendthrift trusts, and Connecticut General Statutes § 45a-655(e)(4) proscribes transfers which seek to qualify a ward for federal or state aid. The only exception to such proscription pertains to a transfer to a trust made to qualify or maintain eligibility for title XIX medical assistance (Medicaid). This exception in Connecticut law is in accord with the provisions of federal law, 42 U.S.C. § 1396p(d)(4)(A), [*9] which likewise permits such a trust and transfer for the purpose of qualifying or maintaining eligibility only for Title XIX medical assistance. n1
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n1 Federal law also permits a trust under 42 U.S.C. § 1382b(e)(5), for the purpose of qualifying or maintaining eligibility for federal supplemental security income (SSI). That statute is not in issue in the instant matter.
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The only intent which the defendant stated in her Application seeking the Probate Court's authorization to create and fund a Trust was to maintain Kevin Henneberry's eligibility for Title XIX medical assistance (Medicaid), as is permitted by 42 U.S.C. § 1396p(d)(4)(A). The Probate Court is permitted by Connecticut General Statutes § 45a-655(e) to authorize the creation and funding of such a Trust if it complies with the provisions of 42 U.S.C. § 1396p(d)(4). The federal statute is solely concerned with Medicaid eligibility, and not with [*10] any other purpose.
The plaintiff does not take issue with the Probate Court's approval of the terms related to Medicaid, rather, he objects to the fact that the Probate Court approved the entire Trust. The plaintiff points out that the Probate Court's decision dealt only with whether the Trust met the requirements of 42 U.S.C. § 1396p(d)(4)(A). It did not address any other objections to the Trust language. However, the Probate Court did not approve only that portion of the Trust that related to Medicaid, it approved the entire Trust as written.
This Court, which is sitting as a Court of Probate for the purposes of this Appeal from Probate, is not bound in any way by the Probate Court's ruling, and is adjudicating this matter "de novo." Kerin v. Stangle, 209 Conn. 260, 264, 550 A.2d 1069 (1988). This court finds that the Trust included language that went far beyond that needed to maintain Kevin Henneberry's eligibility for Medicaid, and in so doing, violated Connecticut law and public policy.
Section 2.1(1) of the proposed Trust, set forth above clearly states an intention to allow the ward, Kevin Henneberry, "to remain eligible for any [*11] and all state, federal and private entitlement or assistance programs . . . without jeopardizing the present or future eligibility of said Kevin for any such programs . . . without subjecting the Trust funds to liability for repayment respecting any past, present or future eligibility for any such program . . . without having any part of the Trust funds be considered available and/or accessible to said Kevin for purposes of determining his present or future eligibility for any such program." (Emphasis added.)
The foregoing language violates the provisions of Connecticut General Statutes § 45a-655, which provides:
(e) Upon application of a conservator of the estate, after hearing with notice to the Commissioner of Administrative Services, the Commissioner of Social Services and to all parties who may have an interest as determined by the [Probate] court, the [Probate] court may authorize the conservator to make gifts or other transfers of income and principal from the estate of the ward in such amounts and in such form, outright or in trust, whether to an existing trust or a court-approved trust created by the conservator, as the court [*12] orders to or for the benefit of individuals, including the ward, . . . Such gifts or transfers shall be authorized only if the court finds that: . . . (4) the purpose of the gifts is not to diminish the estate of the ward so as to qualify the ward for federal or state aid or benefits.
The provisions of 42 U.S.C. § 1396p are solely concerned with Medicaid eligibility and not with any other form of federal or state assistance. 42 U.S.C. § 1396p(d)(4)(A) sets forth the provisions that must be included in a Trust in order for that Trust to appropriately possess a settlor's assets, and for the settlor to still be eligible for Title XIX medical assistance, and reads as follows:
(4) This subsection shall not apply to any of the following trusts: (A) A trust containing the assets of an individual under age 65 who is also disabled (as defined in section 1614(a)(3) [42 USCS § 1382c(a)(3)] and which is established for the benefit of such an individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual [*13] up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title.
[42 USCS §§ 1396, et seq.]. (Emphasis added.)
The defendant defends her inclusion of the proposed, expansive Trust language that purports to make Kevin Henneberry eligible for all forms of public assistance, and language that goes beyond Title XIX Medicaid eligibility by arguing, in effect, that since the federal statute does not expressly "proscribe" the inclusion of other language beyond that which is required by the federal statute, then the plaintiff is precluded from contesting the trust as long as it does contain the language mandated by 42 U.S.C. § 1396p(d)(4)(A). Such an argument completely ignores the provisions of Connecticut General Statutes § 45a-655(e)(4) which proscribes transfers to "diminish the estate of the ward so as to qualify the ward for federal or state aid or benefits" (unless it be to qualify for Title XIX medical assistance which is permissible under subsection (e)(4)).
The proposed Trust language also contravenes the long and well established public [*14] policy of Connecticut's law in that the proposed language purports to create a spendthrift trust with the settlor's own assets for the settlor's own benefit. The Connecticut Supreme Court, in Greenwich Trust Company v. Tyson, 129 Conn. 211, 219-20, 27 A.2d 166 (1942), stated:
The attempt of a man to place his property in trust for his own benefit under limitation similar to those which characterize a spendthrift trust is a departure from the underlying basis for the creation of such trusts. That aside, the public policy which sustains such trusts when created for the benefit of another is where the settlor is himself the beneficiary, overborne by other considerations. In Johnson v. Connecticut Bank . . . where we were considering the right of the creditor of a beneficiary of a trust to secure satisfaction from the latter's right to the income, we stated: "It is the policy of our law, that all property of a debtor should be responsible for his debts. And his equitable estate may be taken, as well as his legal, provided it is subject to his control," and subject to definite limitations, that has always been the policy of our law. To admit the validity of such trusts [*15] would open too wide an opportunity for a man to evade his just debts to be permissible unless sanctioned by statutory enactment. This is the reason why the overwhelming weight of authority holds ineffective attempts to establish them . . . But when a man settles his property upon a trust in his own favor, with a clause retaining his power of alienating the income, he undertakes to put his own property out of the reach of his creditors, while he retains the beneficial use of it. The practical operation of the transaction is, that he transfers a portion only of his interest, retaining in himself a beneficial interest, which he attempts by his own act to render inalienable by himself and exempt from liability for his debts . . . If such trusts were sustained, "the owner need only select as trustee a near kinsman or tried friend, on whom he may rely for liberality, and thus indirectly accomplish what he cannot do directly."
While the Tyson Court did not invalidate the Trust because it was not found to be a self-settled spendthrift Trust, the Court did make it clear that self-settled spendthrift Trusts were against public policy and would not be sustained. Courts continue to apply [*16] Tyson, refusing to allow a settlor to use a trust to attempt to insulate his assets from his creditors. See Datahr Rehabilitation Institute v. Smith, 2001 Ct.Sup. 7802, No. 01-034115-S, Superior Court, Judicial District of Danbury (Jun. 4, 2001, Carrol, J.); In Re B.V. Brooks, 217 B.R. 98 (D.Conn., 1998); and Neurological Associates v. Scagliotti Family Trust, 1999 Ct. Sup. 15552, No. CV99-0423637, Superior Court, Judicial District of New Haven at New Haven (Nov. 29, 1999, Thompson, J.).
A creditor can generally "pierce" a privately created, self-settled spendthrift trust and reach the trust assets. Unlike the Trust at issue here, such trusts are generally created without any judicial scrutiny. It is only thereafter when an aggrieved person or creditor attacks the Trust, does a Court review its validity.
The situation in the instant matter, though, is entirely different. It is the Probate Court, and not a private party, that is setting up and creating the Trust in the instant matter. A private party sets up a trust to benefit his or her own purposes. The Probate Court must ensure that the Trust it approves complies with the law. [*17]
The Trust in question could have been drafted to refer to and maintain just Medicaid eligibility as was the trust in Department of Social Services v. Saunders, 247 Conn. 686, 724 A.2d 1093 (1999). Had it been so drafted, the plaintiff would not have appealed. However, the plaintiff's failure to appeal from the Probate Court's approval of the Trust in question could have either removed or seriously impaired its ability to object to Kevin Henneberry's future attempts to qualify for social welfare programs funded by the plaintiff or to exempt the Trust assets from the plaintiff's claims as a creditor of the Estate of Kevin Henneberry.
The defendant claims in her Memorandum of Law (page seven) that the plaintiff did not plead in the Reasons of Appeal that the proposed Trust violates Connecticut General Statutes § 45a-655(e)(4), and that the plaintiff is only now raising this issue for the first time. The plaintiff alleged in paragraph 7B of the Reasons of Appeal that the proposed Trust language was "in contravention of Connecticut law." "Connecticut law" encompasses both statutory and case law, as well as public policy. If the defendant wished [*18] the plaintiff to have alleged the specific "Connecticut law" being violated, the defendant could have filed a Request to Revise. The defendant did not, and cannot now complain.
The defendant also filed a Special Defense of reliance, waiver and estoppel. This is related to a letter of Assistant Attorney General Eileen Meskill dated May 21, 2002 to Probate Judge Joseph Marino. In that letter Attorney Meskill states:
I am writing as a courtesy, on behalf of the Department of Social Services, to advise the court of the likely impact on Mr. Henneberry's eligibility for assistance if the proposed trust is established and funded . . . The Department of Social Services has no objection to the language of the trust for Medicaid purposes. In making its decision, however, the Court should be aware of the fact that the special eligibility rules applicable to "p(d)(4)" trusts apply only to the Title XIX Medicaid program. Eligibility for the State Supplement Program is subject to a transfer of asset condition on eligibility. Conn. Gen State. Sec. 17b-600. The State Supplement program is entirely state funded. It is intended to provide additional cash assistance. The federal [*19] "p(d)(4)" Medicaid eligibility rules do not apply to the State Supplement program. Wherefore, Mr. Henneberry may remain eligible for Title XIX Medicaid benefits, his ongoing eligibility for State Supplement benefits would appear to be questionable . . .
The foregoing language clearly limits the State's approval of the Trust language to the language required to maintain Medicaid eligibility and also states that Mr. Henneberry would not continue to be eligible for State Supplemental benefits (notwithstanding the language of Trust to the contrary). Moreover, the defendant has admitted through the her failure to respond on April 29, 2002. The aforementioned letter of Assistant Attorney General Meskill is dated May 21, 2002, some three weeks after the filing by the Defendant with the Probate Court. The defendant could not have relied on any representation in the May 21st letter when she filed her Application to the Probate Court.
"Waiver is the intentional relinquishment of a known right." Wadia Enterprises, Inc. v. Hirschfeld, 224 Conn. 240, 618 A.2d 506 (1992). The aforementioned letter signified approval of the Trust language only as it pertained to Medicaid. The letter [*20] actually warned of possible adverse consequences for non-Medicaid assistance. The plaintiff did not waive anything in regard to the issues in this Appeal from Probate.
Further, it is well settled that estoppel may not, as a general rule, be invoked against the State of Connecticut. Kimberly-Clark Corporation v. Dubno, 204 Conn. 137, 146, 527 A.2d 679 (1987). The Supreme Court, in Kimberly-Clark Corporation v. Dubno, supra at 148, further stated that "estoppel against the public agency is limited and may be invoked: (1) only with great caution; (2) only when the action in question has been induced by an agent having authority in such matter; and (3) only when special circumstances makes it highly inequitable or oppressive not to estop the agency." The doctrine of estoppel does not apply in the instant Appeal from Probate.
The proposed Trust violates the Supreme Court's proscription against self-settled spendthrift trusts, and violates Connecticut General Statutes § 45a-655(e)(4)'s proscription against transfers which seek to qualify a ward for federal or state aid other than Title XIX medical assistance (Medicaid). Therefore, [*21] the Probate Court's approval and creation of the defendant's Application to create such a Trust was contrary to law and in error, and the plaintiff's Appeal from Probate is hereby sustained. The order of the Middletown Probate Court, dated May 29, 2002, which decree granted the defendant's Application, and authorized the creation and funding of the "Kevin Henneberry Trust," is hereby reversed. Said Application is denied and the creation and funding of said Trust is disallowed.
By the court,