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In re Ryan W.

Court of Appeals of Maryland

September 26, 2013

In re RYAN W.

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[Copyrighted Material Omitted]

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Ramesh Kasarabada (Legal Aid Bureau, Inc., Baltimore, MD), on brief, for Petitioner.

Julia Doyle Bernhardt, Asst. Atty. Gen. (Hilma J. Munson, Asst. Atty. Gen.; Douglas F. Gansler, Attorney General of Maryland, Baltimore, MD), on brief, for Respondent.

Argued before BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, McDONALD and BELL [*], JJ.

HARRELL, J.

[434 Md. 581] These combined cases [1] arose initially from a 16 June 2011 order entered by the Circuit Court for Baltimore City, sitting as the juvenile court, directing the Baltimore City Department of Social Services (" the Department" ) to hold in a constructive trust funds the Department received, in its capacity as representative payee, from the Social Security Administration (" SSA" ) on behalf of Ryan W. (" Ryan" ), a Child in Need of Assistance (" CINA" ). Born on 26 February 1993, Ryan entered the care of the Department at age 9 after a 4 June 2002 determination by the Circuit Court that he was a CINA. That [434 Md. 582] determination rested on allegations that his drug-addicted parents neglected Ryan and his siblings. Ryan's parents died while he was in foster care. The Department filed an application with the SSA to be appointed his representative payee for Old Age and Survivor's Disability Insurance (" OASDI" ) benefits to which Ryan was entitled following his parents' deaths. After being appointed as Ryan's representative payee by the SSA, the Department received his benefit payments and applied them to reimburse itself partially for the current cost of Ryan's foster care. Ryan challenged subsequently in the Circuit Court this allocation of his benefit funds by filing a pleading styled as a " motion to control conduct,"

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alleging that the Department failed to make an individualized determination of what was in Ryan's best interests in the application of the proceeds and that the benefits should have been conserved instead for his use in transitioning by age out of foster care. The Circuit Court agreed with Ryan's contentions, leading to establishment of the constructive trust and subsequent appellate scrutiny of that judgment.

We conclude that, under the Social Security Act and the Family Law Article of the Maryland Code, a local department of social services, acting in the capacity as an institutional representative payee appointed by the Commissioner of the Social Security Administration, has discretion to apply a CINA foster child's OASDI benefits to reimburse the Department for its costs incurred for the child's current maintenance, but must provide notice to the child and/or his or her legal representative that the Department applied to the SSA and received such benefits on the child's behalf. Thus, we shall affirm in part and reverse in part the judgment of the Court of Special Appeals in No. 95 and reverse that court's judgment in No. 101.

RELEVANT STATUTORY AND REGULATORY CONTEXT

Social Security Act and Federal Regulations

In 1939, Congress added OASDI to the Social Security Act, 42 U.S.C. § 401 et seq., which provides for, among other [434 Md. 583] things, monthly benefit payments to certain members of a deceased wage-earner's family. Astrue v. Capato ex rel. B.N.C., __ U.S. __, ___, 132 S.Ct. 2021, 2027, 182 L.Ed.2d 887, 895 (2012). A dependent child who survives his wage-earning parent may be entitled to receive survivor's benefits if the child is unmarried and under the age of 18 (or 19 if attending school full time). 42 U.S.C. § 402(d). " An applicant qualifies for such benefits if [he or] she meets the Act's definition of ‘ child,’ is unmarried, is below specified age limits (18 or 19) or is under a disability which began prior to age 22, and was dependent on the insured at the time of the insured's death." Astrue, __ U.S. __, __, 132 S.Ct. at 2027, 182 L.Ed.2d at 895 (citing 42 U.S.C. § 402(d)(1)). The wages earned by the deceased parent prior to his or her death determine the amount of the benefit. Id.

A representative payee may be appointed for a child entitled to OASDI benefits if the Commissioner of the SSA determines that the interests of the beneficiary will be served by doing so. 42 U.S.C. § 405(j)(1)(A). " [E]very beneficiary has the right to manage his or her own benefits. However, some beneficiaries due to a mental or physical condition or due to their youth may be unable to do so. " 20 C.F.R. § 404.2001(b)(1) (emphasis added). Generally, a representative payee is appointed for child beneficiaries under the age of 18, unless the child " shows the ability to manage the benefits." [2]20 C.F.R. § 404.2010(b).

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[434 Md. 584] The SSA aims to select " the person, agency, organization or institution that will best serve the interest of the beneficiary" when appointing a representative payee. 20 C.F.R. § 404.2020. In determining who will best serve the child's interests, the SSA considers:

(a) The relationship of the person to the beneficiary;
(b) The amount of interest that the person shows in the beneficiary;
(c) Any legal authority the person, agency, organization or institution has to act on behalf of the beneficiary;
(d) Whether the potential payee has custody of the beneficiary; and
(e) Whether the potential payee is in a position to know of and look after the needs of the beneficiary.

20 C.F.R. § 404.2020(a)-(e). The SSA prioritizes also categories of persons or entities whom the Administration prefers to appoint as a child's representative payee:

(1) A natural or adoptive parent who has custody of the beneficiary, or a guardian;
(2) A natural or adoptive parent who does not have custody of the beneficiary, but is contributing toward the beneficiary's support and is demonstrating strong concern for the beneficiary's well being;
(3) A natural or adoptive parent who does not have custody of the beneficiary and is not contributing toward his or her support but is demonstrating strong concern for the beneficiary's well being;
(4) A relative or stepparent who has custody of the beneficiary;
(5) A relative who does not have custody of the beneficiary but is contributing toward the beneficiary's support and is demonstrating concern for the beneficiary's well being;
(6) A relative or close friend who does not have custody of the beneficiary but is demonstrating concern for the beneficiary's well being; and
[434 Md. 585] (7) An authorized social agency or custodial institution.

20 C.F.R. § 404.2021(c) (emphasis added).

The SSA provides beneficiaries with written notice that the Administration will appoint a representative payee before the payee is appointed officially, 20 C.F.R. § 404.2030(a), and before certifying payment to the payee. 42 U.S.C. § 405(j)(2)(E)(ii). If the beneficiary is " under age 15, an unemancipated minor under the age of 18, or legally incompetent, [the] written notice goes to [the beneficiary's] legal guardian or legal representative." 42 U.S.C. § 405(j)(2)(E)(ii); 20 C.F.R. § 404.2030(a).

The notice required by statute must include language explaining a beneficiary's right to appeal the appointment of a particular entity as the representative payee. 42 U.S.C. § 405(j)(2)(E)(ii); 20 C.F.R. § 404.2030(a). SSA regulations explicitly provide for both administrative and judicial review of, among other things, " initial determinations" made by the agency. 20 C.F.R. § 404.902. " Initial determinations" are defined by regulation (somewhat circularly) as decisions made by the SSA which are subject to administrative and judicial review. 20 C.F.R. § 404.902. The SSA's decision of who will serve as an OASDI beneficiary's representative payee is listed as an example of an " initial determination" and is thus subject to both administrative and judicial review. 20 C.F.R. § 404.902(q).

Once appointed, a representative payee is required to use the benefit payments solely for the beneficiary's " use and benefit in a manner and for the purposes [the representative payee] determines ... to be in [the beneficiary's] best interests." 20 C.F.R. § 404.2035(a). The SSA views costs associated with the beneficiary's " current maintenance" to be valid expenditures satisfying the requirement that benefit

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payments be applied " for the use and benefit" of the beneficiary and in line with his or her " best interests." 20 C.F.R. § 404.2040(a)(1). " Current maintenance includes cost[s] incurred in obtaining food, shelter, clothing, medical care, and personal comfort items." 20 C.F.R. § 404.2040(a)(1). For [434 Md. 586] beneficiaries receiving institutional care because of a physical or mental disability, the definition of " current maintenance" expands to include " the customary charges made by the institution, as well as expenditures for those items which will aid in the beneficiary's recovery or release from the institution or expenses for personal needs which will improve the beneficiary's conditions while in the institution." 20 C.F.R. § 404.2040(b) (emphasis added). Past debts of the beneficiary that arose before the first benefit payment was made to the representative payee are not regarded as a legitimate expenditure of benefit funds unless " the current and reasonably foreseeable needs of the beneficiary are met." 20 C.F.R. § 404.2040(d). Conservation and investment of benefit payments is required whenever there is a surplus after all required uses of the payments are made. 20 C.F.R. § 404.2045(a).

Maryland's Family Law Article and Related Regulations

The Family Law Article of the Maryland Code mandates that the Department of Human Resources (" DHR" ) provide " child welfare services" to foster children. Md. Code (1984, 2006 Repl. Vol.), Fam. Law § 5-524. When a foster child is unable to return to his parent or guardian, DHR must " develop and implement an alternative permanent plan for the child." Id. at § 5-524(3).

As a last resort, the Department will commit a child to foster care when no other placements are viable, for which the Department is required to pay for the services a foster care placement provides. Md. Code (1984, 2006 Repl. Vol.), Fam. Law § 5-526(a)(1) (" The Department shall provide for the care, diagnosis, training, education, and rehabilitation of children by placing them in group homes and institutions that are operated by for-profit or nonprofit charitable corporations." ). The Department is required to reimburse these charitable corporations for the costs of services provided to the foster children at a rate set by the Department and in line with the State budget. Id. at § 5-526(b)(1).

[434 Md. 587] All of a child's resources, including " survivor's disability insurance," are subject to allocation by the Department to reimburse itself for the " cost of care" of a foster child in an out-of-home placement. COMAR 07.02.11.29(A), (K)(1). Subsection (K)(1) of this regulation identifies explicitly " survivor's disability insurance" as an example of resources that may be tapped by the Department for self-reimbursement. Foster children over the age of 18 in an out-of-home placement, if entitled to survivor's disability benefits, may elect either to receive the payments themselves and then reimburse the Department, or to have the Department appointed as the child's representative payee for the benefits (assuming that the SSA has made a determination that the Department is the appropriate representative payee for the child). Id. at (K)(2).

The Department may use the child's resources subject to the following priorities: first, for the " cost of care; " [3] next, for the child's " special needs; " and, finally, if any resources remain, for " a savings account for future needs." Id. at (L). Excess funds from the child's resources not utilized

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consistent with regulation by the Department before the child leaves out-of-home placement must be returned to the child if he or she is 18 or older, id. at (M)(1), or " transferred to the legal parent or guardian with whom the child will reside," if he or she is under 18 years old. Id. at (M)(2).

FACTUAL AND PROCEDURAL BACKGROUND

Determination that Ryan was a CINA and the Statutory Framework for CINA

The Circuit Court for Baltimore City, sitting as the juvenile court, determined that Ryan W. was a CINA on 4 June 2002 when he was nine years old. The Courts and Judicial Proceedings Article (" CJP" ) of the Maryland Code, § 3-801 et seq., provides the framework for determining whether a child [434 Md. 588] is a CINA. When the Department learns that a child is being abused or neglected, or suffers from a developmental disability or mental disorder, and is not receiving proper care and attention to his or her needs, the particular locality's Department of Social Services may file a petition seeking a determination by the respective juvenile court that the child is a CINA. Md. Code (2001, 2006 Repl. Vol.) CJP §§ 3-801(f), 3-809(a). Once a petition is filed, the juvenile court must hold an adjudicatory hearing to determine if the facts alleged can be proven. Md. Code (2001, 2006 Repl. Vol.) CJP §§ 3-801(c), 3-817(a) and (c). If the allegations are proven to the satisfaction of the juvenile court, the court must determine whether the child needs assistance and how the court should intervene " to protect the child's health, safety, and well-being." Md. Code (2001, 2006 Repl. Vol.) CJP §§ 3-801(m), 3-819(a)(1). If the court determines the child is in need of assistance, it may commit, among other things, the child to the custody of the Department. CJP § 3-819(b)(1)(iii). The Department must establish then an out-of-home placement for the CINA in foster, kinship, group, or residential treatment care. Md. Code (1984, 2012 Repl. Vol.) [4], Fam. Law §§ 5-501(m), 5-525(b)(1)(ii). Further, the Department must prepare a " permanency plan" that outlines the goals aimed at a child's exit from commitment to foster care. See CJP § 3-823(d). The juvenile court must hold a hearing (called a " permanency planning hearing" ) to determine this plan initially, CJP § 3-823(b)(1), and must review the plan every six months until the child exits the Department's care. CJP § 3-823(h)(1)(i).

Here, the Department filed a petition with the Circuit Court for Baltimore City on 23 January 2002, seeking a determination that Ryan was a CINA. As a basis for the determination sought, the Department cited Ryan's mother's drug abuse and his father's alcohol abuse, their failure to provide adequate food and clothing for their children, their lack of supervision, [434 Md. 589] and their failure to ensure the children attended medical appointments and school on time. Following a hearing, Ryan was placed in emergency shelter care by order dated 13 February 2002, and was determined on 4 June 2002 to be a CINA and committed to the custody of the Department. As noted previously, Ryan was nine years old at that time.

Post-CINA Determination Actions

Subsequent to his commitment to the Department's custody, Ryan was placed in various group homes and non-relative foster homes. The Department paid the cost of his care. Ryan's mother died in August

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2006. His father died in November 2008. In June 2009, Ryan's DSS-assigned caseworker at the time, Nathan Exom, submitted copies of Ryan's parents' death certificates to the Department's Foster Care & SSI Reimbursement Unit (" Reimbursement Unit" ). In November 2009, the Reimbursement Unit filed an application with the SSA seeking appointment as Ryan's representative payee for his Old-Age, Survivor's and Disability Insurance (" OASDI" ) benefits.[5] See 42 U.S.C. § 405(j)(1)(A); see also COMAR §§ 07.02.11.29(K) and (L) (providing that the Department should seek all resources for which a child is eligible, including survivor's insurance benefits, and apply them to the costs of foster care). The application was approved shortly thereafter. The Department provided no notice to Ryan, his CINA counsel, or the juvenile court that it applied to be, and was approved as, Ryan's representative payee. The SSA sent its required notice to the Department in its capacity as Ryan's legal guardian. See 42 U.S.C. § 405(j)(2)(E)(ii); 20 C.F.R. § 404.2030(a).

A beneficiary child is entitled to OASDI benefits for each parent that dies. Here, Ryan was entitled to benefits from [434 Md. 590] both his mother and father. The Department received two lump sum payments for OASDI benefits covering the interim between the deaths of Ryans' parents and the filing of the application. The Department received the first of these payments on 13 November 2009, in the amount of $8,481, which covered the benefits accrued between Ryan's father's death and the start of benefit payments (November 2008 to November 2009), and represents the benefits to which Ryan was entitled from his father's wages. The second lump sum payment, in the amount of $11,647.50, was received on 15 December 2009, and covered the period August 2006 to November 2008, representing the benefits to which Ryan was entitled based on his mother's wage earnings. From December 2009 until February 2011, when Ryan turned 18, the Department received a monthly $771 OASDI benefit payment on Ryan's behalf. Ultimately, as of the time of trial in this case, the Department received a total of $31,693.50 in its capacity as Ryan's representative payee for OASDI benefits and used the entire amount to reimburse itself for some of the costs of Ryan's foster care.

In re Ryan W.

Ryan W., through counsel, filed, on 5 April 2011, with the juvenile court a " motion to control conduct," alleging that the Department, as Ryan W.'s representative payee, applied for and received his OASDI benefits without notifying the child or his CINA attorney and misused the funds in violation of its statutory and fiduciary duties. Specifically, Ryan contended that the Department allocated improperly his benefits to reimburse itself for the costs of his foster care, without an individualized determination as to what other use of the funds might be in his best interests. See 42 U.S.C. 405(j)(1)(A) (mandating that representative payees apply benefits to the best interests of the beneficiary); see also 42 U.S.C. 405(j)(2)(C)(v)(III) (providing that representative payees are fiduciaries of the beneficiary).[6]

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[434 Md. 591] After a hearing, the juvenile court determined that the Department violated Ryan W.'s due process and equal protection rights by failing to notify him before applying his OASDI benefits toward the current costs incurred by the Department on his behalf. In its order, dated 16 June 2011, the juvenile court required the Department to hold $31,693.50, the total amount received by the Department on behalf of Ryan W., in a constructive trust in his name, pending a permanency planning hearing. The June 16 order also declared invalid COMAR §§ 07.02.11.29(K) and (L), which require the Department to seek appointment as payee for all potential resources of a child committed to its care and prioritize self-reimbursement for the child's cost of care over the child's individualized needs, because they extended improperly the Department's statutory authority under 42 U.S.C. § 405(j) (2012) and violated the fiduciary obligations the Department owed to the Petitioner. At the contemplated permanency planning hearing, the juvenile court determined that the best use of the OASDI benefits would be to continue the trust and prioritize Ryan W.'s education-related expenses; the court issued an order to that effect on 15 July 2011. The Department appealed.

A panel of the Court of Special Appeals (" COSA" ) reversed the juvenile court's order in part, concluding that the juvenile court lacked jurisdiction to order the creation of a constructive trust, although maintaining that the Department reimburse Ryan W. in the amount of $8,075.32 for benefits received on his behalf during a period in which the Department incurred lower costs for his care. In re Ryan W., No. 1503, 2012 WL [434 Md. 592] 3847359 (Md.Ct.Spec.App. Sept. 5, 2012); superseded on reconsideration by 207 Md.App. 698, 56 A.3d 250 (2012).

The Department filed a motion for reconsideration, asking the COSA to correct the amount ordered reimbursed and, alternatively, to hold that the COSA's rationale that " the Juvenile Court is not ... vested with broad equitable powers to supervise the Department when it is acting in its role as representative payee for foster children committed to its care" barred any order for reimbursement of the funds. While that motion was pending, counsel for Ryan W. filed a petition for writ of certiorari with this Court, seeking review of the original COSA decision. On 21 November 2012, the COSA issued a reported opinion on reconsideration ...


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