Trejo v. NC Dep't of State Treasurer Ret. Sys. Div.Â
256 N.C. App. 390
| N.C. Ct. App. | 2017Background
- Stephanie Trejo, a public school teacher, became eligible for State long-term disability (Disability Income Plan) due to a 2002 work injury; State paid benefits retroactive to 2004 after she completed paperwork in 2009.
- Trejo applied for Social Security Disability (SSD) in 2006; SSA denied her claim (not disabled).
- An earlier version of N.C. Gen. Stat. § 135-106(b) required a mandatory offset of state disability benefits by the amount of SSD benefits the beneficiary "might be entitled" to if awarded SSD benefits.
- In 2006 Trejo signed an acknowledgement form explaining the SSD hypothetical-offset and agreeing to reimburse any overpayments.
- In 2013 the State informed Trejo it had failed to apply the statutory hypothetical SSD offset beginning in 2008 and sought recoupment; Trejo contested administratively, lost, then won in superior court. The Court of Appeals reversed and reinstated the administrative judgment for the State.
Issues
| Issue | Plaintiff's Argument (Trejo) | Defendant's Argument (State) | Held |
|---|---|---|---|
| Applicability of mandatory SSD hypothetical offset | Offset cannot apply because state benefits "commenced" when Trejo first received payments in 2009, by which time she was no longer SSD‑insured, so hypothetical SSD = $0 | Offset applies because benefits "commenced" as of 2004 (retroactive) and statute requires offset based on whether beneficiary might have been entitled to SSD when disabled; insured status at later payment date irrelevant | Offset properly applied; recipient’s earlier SSD-insured status and potential entitlement controls |
| Equitable defenses: estoppel, laches, waiver | State’s 4-year delay in notifying Trejo and seeking recoupment bars enforcement via estoppel, laches, or waiver | Trejo signed an acknowledgement informing her of the offset and repayment obligation; no State representation induced change of position; equitable defenses therefore unavailable | Equitable defenses fail as a matter of law because Trejo cannot show State representation or detrimental reliance/changing position |
| Statute of limitations (N.C. Gen. Stat. § 135-5(n)) | State’s reduction of benefits to recoup is an “action” and is time‑barred after 3 years from overpayment | Reduction is a statutory recoupment (not a court action); § 135-9 expressly permits offset/recoupment notwithstanding other provisions | Statute of limitations does not bar recoupment; reduction is not a court “action” and § 135-9 authorizes recoupment |
| Constitutional argument (raised by State regarding application of equitable relief) | N/A (raised by State to argue against allowing individualized relief) | Allowing equitable relief would create individualized public benefits and raise constitutional concerns | Court did not decide constitutional questions because equitable defenses fail on the record; remedial constitutional issues unnecessary to resolve |
Key Cases Cited
- Mayo v. North Carolina State Univ., 168 N.C. App. 503 (appellate scope-of-review for agency decisions)
- Hawkins v. M & J Finance Corp., 238 N.C. 174 (estoppel requires representation reasonably calculated to convey a misleading impression)
- Stell v. First Citizens Bank & Tr. Co., 223 N.C. 550 (laches requires change in parties’ relations making prosecution unjust)
- Ussery v. Branch Banking & Tr. Co., 368 N.C. 325 (waiver requires knowledge of the right and intent to waive it)