[Cite as Phillips v. McCarthy, 2016-Ohio-2994.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
PREBLE COUNTY
AMY LEA PHILLIPS, et al., :
Plaintiffs-Appellants, : CASE NO. CA2015-08-017
: OPINION
- vs - 5/16/2016
:
JOHN B. MCCARTHY, et al., :
Defendants-Appellees. :
CIVIL APPEAL FROM PREBLE COUNTY COURT OF COMMON PLEAS
Case No. 13 CV 029855
Ralph J. Conrad, 33 Donald Drive, Suite 9, Fairfield, Ohio 45014, for plaintiffs-appellants,
Amy Lea Phillips, Monika Kay Hesse and Linda Sue Blevins
R. Michael DeWine, Ohio Attorney General, Charles F. Geidner, Brent E. Rambo, 30 East
Broad Street, Columbus, Ohio 43215 and Stanley R. Evans, 100 South Main Avenue,
Courtview Center, Suite 102, Sidney, Ohio 45365, for defendants-appellees, John B.
McCarthy and Ohio Department of Job & Family Services
RINGLAND, J.
{¶ 1} Plaintiffs-appellants, Amy Lea Phillips, Linda Sue Blevins, and Monika Kay
Hesse, appeal a decision of the Preble County Court of Common Pleas denying their motion
for summary judgment and awarding summary judgment to the State of Ohio Department of
Job and Family Services and its director, John B. McCarthy. We affirm.
Preble CA2015-08-017
{¶ 2} This case involves state recovery of Medicaid benefits from a life estate held by
Lawrence Hesse at the time of his death. The subject property is a farm located in Camden,
Ohio. In a series of three conveyances executed in the mid-1980s, Hesse (hereinafter "the
decedent") transferred his ownership interest in the farm to appellants, his three daughters.
The final deed, dated in 1984, specifically reserved a life estate for the decedent in the
remaining one-third portion of the property.
{¶ 3} Prior to his death in November 2010, the decedent resided in a nursing home
and received Medicaid benefits for approximately one year. After his passing, the Ohio
Department of Job and Family Services ("the Department") filed a lien against the subject
property seeking repayment for the cost of Medicaid benefits disbursed on the decedent's
behalf. To date, the agency has not yet undertaken any action to foreclose upon or
otherwise execute the lien.
{¶ 4} In April 2013, appellants instituted a quiet title action against the Department.
The parties filed cross motions for summary judgment on stipulated facts. In a decision
rendered in July 2015, the trial court awarded summary judgment to the Department and
dismissed the complaint with prejudice. This appeal followed.
{¶ 5} We review a trial court's decision on summary judgment de novo. Messer v.
Butler Cty. Bd. of Commrs., 12th Dist. Butler Nos. CA2008-12-209 and CA2009-01-004,
2009-Ohio-4462, ¶ 8. Summary judgment is proper when (1) there are no genuine issues of
material fact, (2) the moving party is entitled to judgment as a matter of law, and (3)
construing the evidence most strongly in the nonmoving party's favor, reasonable minds can
reach but one conclusion adverse to that party. Id.; Civ.R. 56(C).
{¶ 6} Success on summary judgment lies for the party who sustains its burden of
proof. Typically, the moving party bears the initial burden of informing the court of the basis
for the motion and demonstrating the absence of any genuine issues of material fact.
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Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 1996-Ohio-107. In accordance with the parties'
stipulation of facts, however, we accept the facts as undisputed and true. Cunningham v. J.
A. Myers Co., 176 Ohio St. 410, 414 (1964). Consequently, our review is limited to whether
the Department was entitled to judgment as a matter of law. Id. We are mindful of these
considerations in reviewing appellants' sole assignment of error.
{¶ 7} Assignment of Error No. 1:
{¶ 8} THE TRIAL COURT ERRED BY DENYING APPELLANTS' MOTION FOR
SUMMARY JUDGMENT AND GRANTING APPELLEE'S MOTION FOR SUMMARY
JUDGMENT.
{¶ 9} Pursuant to federal mandate, following the death of a Medicaid recipient, the
state of Ohio is required to seek reimbursement for the costs of benefits correctly paid on
behalf of that recipient during the recipient's lifetime. In re Estate of Centorbi, 129 Ohio St.3d
78, 2011-Ohio-2267, ¶ 26. See also 42 U.S.C. 1396a(a)(18) and 1396p; Harris v. McRae,
448 U.S. 297, 301, 100 S.Ct. 2671 (1980) (once a state elects to receive federal assistance
to fund its Medicaid program, it must comply with the requirements of Title XIX to the federal
Social Security Act, 42 U.S.C. 1396 et seq.).
{¶ 10} Initially, Ohio's Medicaid Estate Recovery Program permitted recoupment solely
from assets within the decedent's probate estate. The statutory scheme governing the
administration of Medicaid in Ohio has been revised and renumbered multiple times since the
program's inception. For purposes of this opinion, we shall refer to the rules and regulations
in effect when the decedent applied for and began receiving Medicaid assistance in 2009.
See, e.g., R.C. 5111.11 and 5111.111; Ohio Adm.Code 5101: 1-38-10. Compare Pack v.
Osborn, 117 Ohio St.3d 14, 2008-Ohio-90, ¶ 14 (regarding inclusion of trust assets for
determining Medicaid eligibility, the rules in effect at the time of the claimant's application
govern rather than those in effect when the trust was created); Rodefer v. Colbert, 35 N.E.3d
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852, 2015-Ohio-1982, ¶ 20, fn. 4 (2d Dist.) (concerning valuation of a life estate for purposes
of Medicaid eligibility, the law in effect when claimant filed her application controls); Admr.,
State Medicaid Estate Recovery Program v. Miracle, 31 N.E.3d 658, 2015-Ohio-1516, ¶ 12
(4th Dist.) (holding that the application for and receipt of benefits subjected the decedent's
assets to estate recovery under Ohio law).
{¶ 11} We now turn to the two issues advanced by appellants. First, appellants
contend that the Department's lien effectively encumbered their remainder interests because
the decedent's life estate extinguished upon his death by operation of law. Appellants
challenge the timing of the lien, insisting that the Department was authorized to encumber
the property only during the decedent's lifetime. This right of recovery, appellants insist,
terminated along with the decedent's life estate upon his passing.
{¶ 12} Undoubtedly, at common law, a life estate interest extinguished upon the death
of the measuring life. See Restatement of the Law 1st, Property, Sections 107 and 152
(1936). Nonetheless, state law may, and at times does, depart from common law. See
Osborn at ¶ 12 ("It is a long-standing principle that no person has a vested right to the law
remaining unchanged"). In 2005, The General Assembly amended the Medicaid Estate
Recovery Program to broaden the definition of a recoverable "estate" under Ohio law:
As used in this section [5111.11] and section 5111.111 of the
Revised Code:
"Estate" includes both of the following:
(a) All real and personal property and other assets to be
administered under Title XXI of the Revised Code and property
that would be administered under that title if not for section
2113.03 or 2113.031 of the Revised Code;
(b) Any other real and personal property and other assets in
which an individual had any legal title or interest at the time of
death (to the extent of the interest), including assets conveyed to
a survivor, heir, or assign of the individual through joint tenancy,
tenancy in common, survivorship, life estate, living trust, or other
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arrangement.
R.C. 5111.11(A)(1). (Emphasis added.)
{¶ 13} In an effort to further supplant the common law principle of divestiture of certain
interests upon death, the amended recovery statute defines "time of death" thusly:
"Time of death" shall not be construed to mean a time after
which a legal title or interest in real or personal property or other
asset may pass by survivorship or other operation of law due to
the death of the decedent or terminate by reason of the
decedent's death.
R.C. 5111.11(A)(6). For purposes of Medicaid recovery, then, a recipient's life estate interest
transcends physical death and is subject to posthumous encumbrance by state agency.
{¶ 14} Patently, by implementing the 2005 amendments, the General Assembly
exhibited its intent to circumvent the longstanding tenet of common law relied upon by
appellants. It is not necessary to arduously analyze the legislative intent or history
underscoring the amendments, however, for the plain meaning of the revised text clearly
renders life estates amenable to Medicaid recovery. Hubbel v. Xenia, 115 Ohio St.3d 77,
2007-Ohio-4839, ¶ 11. Indeed, the inclusion of the nebulous phrase "or other arrangements"
at the close of R.C. 5111.11(A)(1)(b) suggests the legislature's resolve to vitiate any asylum
previously accorded nonprobate assets in the face of Medicaid recovery. See Browning &
Meyer, H.B. 66 and Medicaid Recovery, 16 Ohio Prob. L.J. 42 (2005) ("The new Ohio statute
represents one of the most aggressive collection efforts in the nation").
{¶ 15} The Fourth Appellate District recently addressed this very issue in Admr., State
Medicaid Estate Recovery Program v. Miracle, 31 N.E.3d 658, 2015-Ohio-1516 (4th Dist.). In
that case, the state filed an action seeking to recover for Medicaid benefits disbursed on
behalf of Doris Reed. Id. at ¶ 1. At the time of her death, Reed held a life estate in real
property situated in West Virginia. Id. at ¶ 2. Applying West Virginia's narrower concept of
estate recovery, the trial court dismissed the complaint. Id. at ¶ 6.
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{¶ 16} On appeal, the Fourth District determined that Ohio law governed the case
because Reed applied for and received Medicaid benefits in Ohio. Id. at ¶ 12. Analyzing an
analogous version of the statute, the appellate court found that Ohio law defined a Medicaid
recipient's estate to include interests in non-probate assets held at the time of death,
including life estates. Id. at ¶ 16. In addition, the court upheld the state's right to file suit
against the remaindermen of the real property subject to Reed's life estate. Id. at ¶ 20.
{¶ 17} In support of its decision, the Fourth District cited certain provisions of the Ohio
Administrative Code construing the manner in which the recovery program was to be
implemented. Id. The regulations require that a Medicaid recovery claim be served on the
person responsible for the recipient's estate such as an executor, administrator, or the like.
Id. Where no such person exists, a claim may be served on "any person who received or
controls probate or non-probate assets inherited from the individual." Id. Because there had
not been a probate estate opened in Ohio, the Miracle court concluded that the state could
file a direct claim against the remaindermen. Id.
{¶ 18} We concur with the reasoning espoused by our sister court. Accordingly, we
hold that, within the confines of Ohio's Medicaid Estate Recovery Program, a life estate
interest held by a Medicaid recipient does not extinguish upon his or her death. Rather, for
purposes of Medicaid recovery, a life estate interest endures post mortem and represents a
quantifiable asset which the state may encumber by virtue of a properly filed lien. In the
absence of a probate estate, the state may seek recovery of Medicaid benefits from third
parties to whom qualifying assets have passed. Ohio Adm.Code 5101:1-38-10(E)(2)(a).
{¶ 19} Contrary to appellants' assertions, the Department is not typically authorized to
encumber assets during a Medicaid recipient's lifetime. Ohio Dept. of Job and Family Servs.
v. Tultz, 152 Ohio App.3d 405, 2003-Ohio-1597, ¶ 14 (9th Dist.). Absent certain exceptions
not relevant here, the state must wait until the recipient dies to file a lien against property in
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pursuit of Medicaid recovery. R.C. 5111.111(A). See also Tultz at ¶ 13-14.
{¶ 20} Next, appellants alternatively argue that, to the extent Ohio's recovery program
authorizes the Department to encumber the property by filing a lien, the laws prescribing
such action effect a taking of their property requiring just compensation.
{¶ 21} The takings clauses of the Fifth Amendment to the United States Constitution
and Article I, Section 19 of the Ohio Constitution prohibit the state from taking private
property for public use without just compensation. Different circumstances warrant different
takings analyses. See, e.g., State ex rel. Shelly Materials v. Clark Cty. Bd. of Commrs., 115
Ohio St.3d 337, 2007-Ohio-5022, ¶ 16-19. However, none are implicated by the facts of the
case at bar.
{¶ 22} In its ruling in favor of the Department, the trial court found that "a Medicaid
recipient's life estate interest in real property is separate and independent from the interest of
the remaindermen [ ] in the property." We agree. The Department is not attempting to
recover against the remainder interests held by appellants. Rather, the Department seeks to
recover against the decedent's estate in general. The amount that is subject to recovery is
limited to the value of the decedent's life estate, further preserving the notion that said
interest is distinct from appellants' remainder interests.
{¶ 23} In the absence of a probate estate, the Department may recover against
individuals to whom a deceased Medicaid recipient's assets have passed. Miracle, 2015-
Ohio-1516 at ¶ 20. Otherwise, the state would be prevented from recovering against the
value of a Medicaid recipient's life estate following the recipient's death. Such an
interpretation would negate the broadened definition of a recoverable "estate" imposed by
the 2005 amendments to the statutory scheme.
{¶ 24} Finally, the Department protests that appellants' reply brief raises a novel issue
regarding whether the application of the 2005 amendments to encumber pre-existing
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property interests violates constitutional prohibitions against retroactive laws. After
thoroughly reviewing the record, we can find no assertion of this argument prior to the oblique
reference in appellants' reply brief.
{¶ 25} It is beyond cavil that a party may not raise issues for the first time on appeal.
State ex rel. Gutierrez v. Trumbull Cty. Bd. of Elections, 65 Ohio St.3d 175, 177 (1992). This
principle precludes an appealing party from proffering new theories in a bid to secure
reversal. Webster v. G & J Kartway, 12th Dist. Preble No. CA2005-06-011, 2006-Ohio-881, ¶
25-26. Similarly, an appellant may not use a reply brief to inject new issues into the appeal.
State ex rel. Colvin v. Brunner, 120 Ohio St.3d 110, 2008-Ohio-5041, ¶ 61. See also App.R.
16(C) and Loc. R. 11(A)(3). Therefore, any new arguments raised in appellants' reply brief
are deemed waived and are not subject to review. Nor does this case involve exceptional
circumstances of the sort that warrant a plain error analysis. Walker v. Shondrick-Nau, 7th
Dist. Noble No. 13 NO 402, 2014-Ohio-1499, ¶ 56-57.
{¶ 26} After reviewing all arguments properly before this court, we find that the
Department satisfied its burden on summary judgment. As stated, the facts are undisputed.
Regarding the law, life estates are now vulnerable to Medicaid estate recovery in Ohio by
operation of unambiguous statutory amendment. Furthermore, the Department's lien against
the subject property does not amount to a taking in violation of constitutional prohibitions.
Accordingly, the trial court did not err in awarding summary judgment to the Department and
appellants' sole assignment of error is overruled.
{¶ 27} Judgment affirmed.
PIPER, P.J., and S. POWELL, J., concur.
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Phillips v. McCarthy
Combined Opinion