IVAN D. ROSE, as next friend of Nelta Rose and as attorney-in-fact; MICHAEL SCOTT MILLER and SHAWN TREY MILLER, Co-Personal Representatives of the Estate of Idabelle Schnoebelen, Deceased, Plaintiffs - Appellants, and PAUL BAKER, personal representative of the estate of Lois Isabelle Matti, deceased, v. JUSTIN BROWN, Director of Oklahoma Department of Human Services, in his official capacity; KEVIN CORBETT, Director of Oklahoma Health Care Authority, in his official capacity, Defendants - Appellees.
No. 20-6132
United States Court of Appeals for the Tenth Circuit
September 30, 2021
(D.C. No. 5:19-CV-00479-R) (W.D. Okla.)
Before MATHESON, BACHARACH, and CARSON, Circuit Judges.
This matter is before the court sua sponte to correct an URL on page 5 of our September 28, 2021 opinion. The Clerk shall file the attached corrected opinion effective
Entered for the Court
CHRISTOPHER M. WOLPERT, Clerk
IVAN D. ROSE, as next friend of Nelta Rose and as attorney-in-fact; MICHAEL SCOTT MILLER and SHAWN TREY MILLER, Co-Personal Representatives of the Estate of Idabelle Schnoebelen, Deceased, Plaintiffs - Appellants and PAUL BAKER, personal representative of the Estate of Lois Isabelle Matti, deceased, v. JUSTIN BROWN, Director of Oklahoma Department of Human Services, in his official capacity; KEVIN CORBETT, Director of Oklahoma Health Care Authority, in his official capacity, Defendants - Appellees.
No. 20-6132
United States Court of Appeals for the Tenth Circuit
September 28, 2021
PUBLISH
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA (D.C. No. 5:19-CV-00479-R)
Susan L. Eads, Deputy General Counsel, Oklahoma Health Care Authority; and John R. Pettifer, Assistant General Counsel, Department of Human Services (Whitney Herzog Scimeca, Deputy General Counsel, Oklahoma Health Care Authority; and John K.F. Langford, Assistant General Counsel, Department of Human Services, with them on the brief) Oklahoma City, Oklahoma, for the Defendants-Appellees.
BACHARACH, Circuit Judge.
This case arose from cancellation of long-term-care Medicaid benefits for two claimants when an Oklahoma agency concluded that the claimants’ resources exceeded the regulatory cap for eligibility. See
The Oklahoma agency concluded that Ms. Rose‘s resources include this promissory note, putting her resources over the regulatory cap. The district court concluded that the agency‘s conclusion did not conflict with federal law. In our view, however, a reasonable factfinder could disagree.
1. State agencies regard the 2018 promissory note as a resource.
In 2017 and 2018, Ms. Rose loaned money to her daughter-in-law in exchange for three promissory notes. The daughter-in-law provided the first two promissory notes in 2017 (before Ms. Rose applied for Medicaid benefits). The Oklahoma Department of Human Services1 initially approved Ms. Rose for Medicaid, declining to regard the 2017 promissory notes as resources.
In 2018, Ms. Rose‘s daughter-in-law provided the third promissory note. But the Department of Human Services concluded that the 2018 promissory note
- was a resource because the payment to the daughter-in-law did not constitute a bona fide loan and
- was a deferral that turned the 2017 promissory notes into resources.
The extra resources put Ms. Rose over the eligibility limit for Medicaid, so the Department of Human Services cancelled Ms. Rose‘s benefits. Ms. Rose filed an administrative appeal, and an administrative law judge upheld the Department of Human Services’ conclusion and the cancellation.
Ms. Rose challenged the agency‘s conclusion, invoking
- Ms. Rose had not entered the promissory note in good faith and
- the promissory note resembles a trust.
Ms. Rose appealed.
3. Our review is de novo.
For summary-judgment rulings, we apply de novo review. Navajo Nation v. San Juan Cnty., 929 F.3d 1270, 1280 (10th Cir. 2019). In applying de novo review, we consider the evidence in the light most favorable to Ms. Rose. Stender v. Archstone-Smith Operating Trust, 910 F.3d 1107, 1111 (10th Cir. 2018). With this view of the evidence, we
4. Ms. Rose is ineligible for Medicaid if her resources exceed $2000.
Congress created Medicaid “to provide ‘health care to persons who cannot afford such care.‘” Morris v. Okla. Dep‘t of Human Servs., 685 F.3d 925, 928 (10th Cir. 2012) (quoting Brown v. Day, 555 F.3d 882, 885 (10th Cir. 2009)). If a state participates, its plan must satisfy federal statutory and regulatory requirements. Brown, 555 F.3d at 885; see
To determine the pertinent eligibility requirements, we focus on the Medicaid program at issue. Ms. Rose applied for long-term care, which pays for nursing-home care.
Oklahoma must extend Medicaid eligibility at least as far as eligibility for Supplemental Security Income.
- the regular method and
- the trust method.
The regular method provides that “[i]f the individual has the right, authority, or power to liquidate the property . . . , it is considered a resource“; but absent this right, authority, or power, we do not ordinarily consider the property as a resource.
Along with these statutes and regulations, the Social Security Administration maintains a program manual (called the “Program Operations Manual System“), which creates standards for determining whether a transaction involves a cash loan, a trust, or a trust-like device.3 POMS SI §§ 1120.220, 1120.201.
In our view, disputed factual issues affect characterization of the 2018 promissory note as a bona fide nontransferable loan or a trust-like device. So we reverse the district court‘s grant of summary judgment to the State agencies.
A. For purposes of summary judgment, the 2018 promissory note could be considered bona fide and nontransferable.
When we view the evidence favorably to Ms. Rose,4 we conclude that a factfinder could consider the 2018 promissory note bona fide and nontransferable, which would prevent its characterization as a “resource.”
i. A nontransferable promissory note is not a resource.
The district court concluded that a nontransferable promissory note is not a resource. The State agencies do not question this conclusion; nor do we. See Gragert v. Lake, 541 F. App‘x 853, 857 (10th Cir. 2013)
- the statute is “genuinely ambiguous” and
- the program manual‘s interpretation is “reasonable,” “made by” the Social Security Administration, “implicates its substantive expertise,” and reflects a “fair and considered judgment.”
Kisor v. Wilkie, 139 S. Ct. 2400, 2415–18 (2019). Of course, we may always defer to the program manual “to the extent it has the ‘power to persuade.‘” Id. at 2414 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).
When a regulation is unambiguous, it controls even if it creates a loophole. Kisor v. Wilkie, 139 S. Ct. 2400, 2415 (2019). For instance, in Morris v. Oklahoma Department of Human Services, a Medicaid applicant bought an annuity for her spouse, apparently to preserve the asset without losing eligibility for Medicaid benefits. 685 F.3d 925, 928 (10th Cir. 2012). We concluded that courts can‘t close loopholes created by Congress. Id. at 933–34.
There, as here, the key statute was
(a) Resources; . . . property that an individual . . . owns and could convert to cash to be used for his or her own support or maintenance.
(1) If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .
Id. Under this regulation, we must consider whether Ms. Rose could convert the 2018 promissory note to cash. If she could not do so (and the note is bona fide), the promissory note would not constitute a resource.
The 2018 promissory note expressly provides that “[n]either the Borrower nor the Lender may grant, bargain, sell, assign, convey or
In Gragert v. Lake, the Court addressed a similar promissory note. 541 F. App‘x 853 (10th Cir. 2013) (unpublished).5 There the plaintiff sold his son a house in exchange for a nontransferable promissory note. Id. at 854. The plaintiff could qualify for Medicaid only if the promissory note were not a resource. Id. at 854, 856–57. The Court held that the promissory note wasn‘t a resource because it couldn‘t be assigned, transferred, or sold. Id. at 857–58; see also James v. Richman, 547 F.3d 214, 218 (3d Cir. 2008) (concluding that an asset isn‘t a resource even if an applicant has “the de facto ability to effect a change in ownership” if the change would breach a contractual duty and create liability).
The circumstances here are similar. An administrative law judge concluded that the 2018 promissory note hadn‘t stripped Ms. Rose of the power to sell the loan. Appellants’ App‘x vol. 1, at 123. But the judge didn‘t
- consider the ultimate question of whether the 2018 promissory note could be converted to cash or
address the effect of Oklahoma contract law.
These oversights mattered because Oklahoma contract law prevented Ms. Rose from converting the 2018 promissory note into cash. See In re Kaufman, 37 P.3d 845, 848 n.4, 853 (Okla. 2001) (holding that anti-assignment clauses are enforceable if their “language is clear and definite,” such as “Plaintiffs agree that they maintain no right to . . . have power to sell, mortgage, encumber, or anticipate the future payments, or any part thereof by assignment or otherwise“).
* * *
Ms. Rose could not convert the 2018 promissory note into cash. So if the 2018 promissory note is bona fide, it would not constitute a resource under the regulation.
ii. The program manual shows that Ms. Rose‘s 2018 promissory note may be bona fide.
We thus must decide whether a reasonable factfinder could regard the 2018 promissory note as bona fide. To answer, we consider the program manual.6 Application of the program manual turns on
- how it defines “bona fide” and
- how the 2018 promissory note could meet this definition.
The “Cash Loans” section, POMS SI § 1120.220, provides two definitions of “bona fide” in subsections (B)(3) and (D):
|
B. DEFINITIONS 3. Bona fide agreement A bona fide agreement is legally valid under the applicable State‘s law and made in good faith. |
D. Policy Requirements For A Bona Fide Informal Loan An informal loan is a loan between individuals who are not in the business of lending money or providing credit. An informal loan can be oral or written . . . . An informal loan (oral or written) is bona fide if it meets all of the following requirements.
|
POMS SI § 1120.220(B)(3), (D) (explanations omitted).
The district court held that a promissory note can be “bona fide” only if it fits subsections (B)(3) and (D). Ms. Rose argues that good faith is
We agree with Ms. Rose that subsection (D) sets out the only requirements for an informal loan based on
- the language of subsection (D),
- the conflict between the district court‘s approach and both subsection (D) and Tenth Circuit case law, and
- the redundancy if we were to apply both subsections (B) and (D).
First, subsection (D) states that “[a]n informal loan . . . is bona fide if it meets all of the following requirements.” POMS SI § 1120.220(D) (emphasis added). Because any loan satisfying subsection (D) requirements “is bona fide,” no other requirements could affect the loan‘s status as bona fide. See POMS SI § 1120.220(E)(2) (“After consulting any regional instructions for applicable state law, determine whether the loan is bona fide under the criteria in section D.“).
- cited SI § 1120.220(D) and
- stated that this subsection controlled.
The district court recognized that Ms. Rose had relied on subsection (D). So we consider the merits of this argument.
- whether the lender is in the business of lending money
- whether the loan came about the same time that the lender applied for Medicaid
- whether the amount of the loan brought the lender under the cap for eligibility
See id. at 76–77.
The first factor conflicts with the program manual, which states that an informal loan exists only when the lender is “not in the business of lending money.” See POMS SI § 1120.220(D). Under the program manual, bona fide status is supported—not undercut—by the fact that the applicant isn‘t in the business of making loans.
The other two factors conflict with Gragert and Morris, which recognized the acceptability of Medicaid planning. See Gragert v. Lake, 541 F. App‘x 853, 857–58 (10th Cir. 2013) (unpublished); Morris v. Okla. Dep‘t of Human Servs., 685 F.3d 925, 933–34 (10th Cir. 2012); see also Part V(A)(i), above. So Sable‘s test for good faith would conflict with the program manual and our case law.
The State agencies argue that an independent definition of good faith prevents Medicaid applicants from entering informal promissory notes in bad faith. But this argument misconstrues Ms. Rose‘s position: She argues that subsection (D) defines “good faith” for informal loans; she‘s not suggesting that applicants can use bad faith to skirt the limit on resources.
So we conclude that the 2018 promissory note needed to satisfy subsection (D), but not subsection (B)(3).
iii. A genuine dispute of fact exists on satisfaction of subsection (D).
The district court addressed only the independent good-faith requirement and did not address the subsection (D) requirements, so the district court used the wrong legal standard. Given the use of an erroneous test, we must remand “unless the record permits only one resolution of the factual issue.” Underwood v. Bank of Am. Corp., 996 F.3d 1038, 1056 (10th Cir. 2021).
The parties don‘t define “feasibility,” but the program manual instructs reviewers to “consider the amount of the loan, the individual‘s resources and income, and the individual‘s living expenses.” POMS SI § 1120.220(D)(5); see Roach v. Morse, 440 F.3d 53, 60 (2d Cir. 2006).
After considering these factors for feasibility, we conclude that a genuine dispute of material fact exists. The parties agree that the daughter-in-law
- timely paid the amounts due and
- reduced the principal that she owed Ms. Rose.
But the summary-judgment record lacks any other evidence about the daughter-in-law‘s other resources, income, and living expenses. See Appellants’ App‘x vol. 1, at 125 (administrative law judge remarking on the lack of evidence on this question).
For the 2017 promissory notes, the daughter-in-law had already made an annual payment of over 6.5 times what she needed to pay annually on the 2018 promissory note.
The payments in 2018 suggested that the principal balance on the debt would drop each year. In 2018, the daughter-in-law borrowed only $37,700.00, substantially less than the $304,015.20 that she had borrowed a year earlier. And she had made her first annual payment of $66,508.75 on that earlier debt.9 Because her new loan ($37,700.00) was less than the annual payment she had made ($66,508.75), she trimmed the total owed on the loans. The factfinder could reasonably infer that continuation of this pattern would steadily reduce the total principal balance on the loans.
* * *
A factfinder could reasonably find that the 2018 promissory note had satisfied subsection (D), constituting a bona fide nontransferable promissory note. This finding would prevent the factfinder from considering the 2018 promissory note as a regular “resource” for Ms. Rose. See POMS SI § 1120.220(C)(2)(c).
Even if an asset isn‘t a resource under the regular method, the asset can be a resource if it consists of a trust or device “similar to a trust.”
According to the program manual, a device is trust-like if three elements exist:
- The grantor “provides the assets to fund the instrument,”
- the grantor “transfers property . . . to an individual or entity with fiduciary obligations . . . ,” and
- the grantor “makes the transfer with the intention that the individual or entity hold, manage, or administer the property for the benefit of the grantor . . . .”
POMS SI § 1120.201(B)(4). In our view, this guidance is reasonable, implicates the Social Security Administration‘s substantive expertise, and reflects a fair and considered judgment. So we defer to the program
The district court relied on the presence of evidence on each element. But the presence of evidence didn‘t entitle the State agencies to summary judgment. To the contrary, summary judgment would be available only if the State agencies had shown the lack of a “genuine dispute as to any material fact.”
The trier of fact could decide either way on the second and third elements:
- whether Ms. Rose transferred money to a fiduciary and
- whether the transfer was intended to benefit Ms. Rose.
“Under Oklahoma law, the existence of a fiduciary relationship is a question of fact.” Quinlan v. Koch Oil Co., 25 F.3d 936, 942 (10th Cir. 1994). In resolving this question, the factfinder can consider the daughter-in-law‘s status as a borrower, her marriage to Ms. Rose‘s attorney-in-fact (Ms. Rose‘s son), and her position as the sole member of the limited liability company (Jivin, LLC) that holds the loan proceeds.
Ms. Rose also created a genuine dispute of material fact on the purpose of the loans. If Ms. Rose intended for herself to be the beneficiary of a trust, the daughter-in-law could not use the money for herself. See Restatement (Second) of Trusts § 170(1) (1959) (“The trustee is under a duty to the beneficiary to administer the trust solely in the interest of the beneficiary.“). The daughter-in-law would instead need to use the loan proceeds solely for Ms. Rose‘s benefit. See id.
But under the summary-judgment evidence, a factfinder could reasonably infer broad discretion to the daughter-in-law on how to use the money. For example, the loan proceeds went to a company whose articles of incorporation reflect a broad purpose: transacting “any and all lawful business for which a limited liability company may be organized” under the applicable statute. Appellant‘s App‘x vol. 3, at 689. And Ms. Rose‘s attorney-in-fact (the daughter-in-law‘s husband) gave conflicting testimony in two depositions. He testified that the company‘s purpose was to “take care of [Ms. Rose‘s] needs.” Id. at 616. Elsewhere, though, he testified that the promissory notes were intended to help with the needs of both Ms. Rose and her daughter-in-law.
* * *
We conclude that a genuine factual dispute exists on whether the 2018 promissory note is a resource:
- The 2018 promissory note may be considered as bona fide and nontransferable, preventing characterization as a regular resource, and
- a disputed question of fact exists on characterization as a trust-like device.
C. The 2018 promissory note did not turn the 2017 promissory notes into disqualifying transfers.
The State agencies also argue that the 2018 promissory note constituted a deferral of payments for the earlier notes, rendering the earlier notes disqualifying transfers.11 But all of the promissory notes
Under the statute, the 2017 loans were not disqualifying transfers if the corresponding promissory notes were not “assets“:
(I) . . . [W]ith respect to a transfer of assets, the term “assets” includes funds used to purchase a promissory note . . . unless such note . . .
(i) has a repayment term that is actuarially sound . . . ;
(ii) provides for payments to be made in equal amounts during the term of the loan, with no deferral and no balloon payments made; and
(iii) prohibits the cancellation of the balance upon the death of the lender.
Nor would a disqualifying transfer arise from a combination of the promissory notes. The State agencies’ expert witness didn‘t say whether a deferral would arise when a lender returns funds to the borrower for a new promissory note. And Ms. Rose‘s expert witness testified that the 2018 promissory note was not a deferral.
By crediting this testimony, a factfinder could reasonably find that Ms. Rose had given her daughter-in-law a new loan through the 2018 promissory note, rather than defer payment under the 2017 promissory notes. So at the summary-judgment stage, the Court cannot characterize the loans or promissory notes as disqualifying transfers.12
* * *
In our view, material disputes of fact exist on whether the 2018 loan was a countable resource under the regular method and the trust method. So we reverse the grant of summary judgment to the State agencies on Ms. Rose‘s claim and remand for the district court to conduct further proceedings.
Ms. Schnoebelen‘s Claim
While this appeal was pending, Ms. Idabelle Schnoebelen died, mooting her claim for prospective injunctive relief. Tandy v. City of Wichita, 380 F.3d 1277, 1290 (10th Cir. 2004); see Pecha by & through