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David Maxwell-Jolly, As Director, Etc v. Jennifer Martin et al

August 11, 2011


(San Mateo County Super. Ct. No. CIV 478240) Trial judge: Hon. Clifford V. Cretan

The opinion of the court was delivered by: Richman, J.


This case presents one purely legal question: which statute of limitations applies when a person who received health care services funded by Medi-Cal during her or his lifetime dies with assets held in trust, and the Department of Health Care Services (DHCS) seeks to recover the Medi-Cal payments from the trustee and distributees of the trust. Appellants, the trustee and distributees of the trust, contend that the one-year statute of limitations in Code of Civil Procedure section 366.3 applies,*fn1 as it governs claims that arise "from a promise or agreement with a decedent to distribution from an estate or trust or under another instrument . . . ." Respondent, the Director of the DHCS (Director), contends that the three-year statute in section 338, subdivision (a) applies, as it governs actions "upon a liability created by statute." We conclude that the Director is correct, and thus affirm the summary judgment.


The material facts are not in dispute. Decedent Bunnie R. Gregoire owned a home in Brisbane, which she transferred into a restated revocable trust on July 18, 1997. Under the terms of the trust, the assets remaining at her death were to be divided equally between two of her grandchildren, appellants Selena H. Firth and Jennifer C. Martin, to be held in trust until their 35th birthdays. The trustee was given the discretionary power to make an earlier distribution to either granddaughter for her "health, education, support and maintenance."

In approximately April 2001, Gregoire was admitted to St. Francis Convalescent Pavilion, a skilled nursing facility. On December 10, 2001, Firth applied for Medi-Cal benefits on behalf of her grandmother, who was then nearly 90 years old. As part of the application process, Firth signed forms acknowledging on Gregoire's behalf, "After my death, the State has the right to seek reimbursement from my estate for all Medi-Cal benefits I received after age 55 . . . ." This obligation of reimbursement arose from Welfare and Institutions Code section 14009.5*fn2 and California Code of Regulations, title 22, section 50961.*fn3 Gregoire thereafter received Medi-Cal payments totaling $237,939.18 to cover the cost of her nursing home care.

On October 24, 2002, the San Mateo County Public Guardian (Public Guardian) was appointed conservator of the person and estate of Gregoire.

Gregoire died on November 10, 2005. On November 15, the Public Guardian sent a notice of death to respondent DHCS in Sacramento recording the value of Gregoire's estate as "0.00." On November 23, 2005, a DHCS employee discovered conflicting information in that Westlaw showed Gregoire owned the house in Brisbane. The computer entry noted that a "case" was being "set[] up."

On December 20, 2005, DHCS sent a questionnaire to the Public Guardian inquiring about assets held by Gregoire. The response indicated a zero value for all assets other than "house/land/mobile home," which was left blank. The names of heirs and co-owners was also left blank.

On February 8, 2006, the Department gave notice to the Public Guardian of its creditor's claim against the estate in the amount of $237,939.18.

On June 15, 2006, appellant George Mousetis signed a certification that he was successor trustee of the revocable trust. The certification was recorded July 7, 2006.

On the same date, July 7, 2006, Mousetis sold the Brisbane home for $700,000. Ten days later he wired half the net proceeds to Martin ($313,740.84), retaining the other half in trust for Firth. Over the succeeding years all of the funds held in trust have been distributed to Firth under the trustee's discretionary powers.

Having received no response to its February 2006 notice of its claim against the estate, DHCS followed up with status requests to the Public Guardian on September 21, 2006 and March 27, 2007. Unbeknownst to the Department, the trustee had already sold the property.

On April 4, 2007, the Public Guardian called DHCS and reported there were no assets in the conservatorship but there was real property held in trust. At that time DHCS was also given the name and contact information for the successor trustee. On April 5, 2007, DHCS advised the trustee of its claim against the estate. Having received no response, DHCS followed up with letters to the trustee and his attorney on July 13, 2007.

DHCS claims the trustee was aware of or on notice that Gregoire's estate was liable for reimbursement of Medi-Cal benefits she had received, whereas appellants claim there is "not one sh[r]ed of evidence" that any of the defendants knew there was a claim for recovery of benefits. This factual dispute is not material to our decision.

On November 10, 2008, three years after Gregoire's death, respondent Director filed a complaint seeking reimbursement of all Medi-Cal benefits paid on behalf of Gregoire during her lifetime. In an amendment to their answer, appellants asserted a defense that the claim was time-barred under section 366.3.*fn4

On December 3, 2009, respondent filed a motion for summary judgment or, in the alternative, summary adjudication. The dispute boiled down to the purely legal question whether the case was governed by the one-year statute of limitations under section 366.3 or the three-year statute of section 338, subdivision (a).*fn5

The motion was heard on February 18, 2010. On March 4, 2010, the trial court entered an order granting the Director's motion for summary judgment. The court ruled in the Director's favor because "[t]he three-year statute of limitations, [Code of Civil Procedure] Section 338(a), applies to a Welfare & Institutions Code Sec. 14009.5 claim. [Begil, supra,] 128 Cal.App.4th 639. While defendants attempt to ...

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