TN 5 (10-17)
PR 06705.048 Texas
A. PR 17-146 Overpayment Liability for Organizational Payee - Texas State Law
Date: August 25, 2017
This Regional Chief Counsel (RCC) opinion discusses why the new owners of an organizational representative payee remain liable for overpayments that the previous owners incurred prior to the change in ownership. In addition, this opinion believes there is legal support for the agency to conclude that the Bill of Sale does not bind SSA and thus, it is irrelevant whether overpayments are liabilities as the Bill of Sale describes.
You asked whether the new owners of Riverside Nursing and Rehab Center in Austin, Texas (Riverside), an organizational representative payee, remain liable for overpayments that Riverside’s previous owners incurred prior to the change of ownership. In considering this question, you also asked whether a Bill of Sale and Assignment (Bill of Sale) that Riverside’s previous and new owners executed binds the Social Security Administration (SSA or agency) and whether Riverside’s overpayments are liabilities, as the Bill of Sale describes. We also address whether Riverside was without fault in causing the overpayments for purposes of Riverside’s request for waiver of recovery of the overpayments.
We believe that there is legal support for the agency to conclude that Riverside remains liable to SSA for the 2011 and 2012 overpayments as the organizational representative payee. The evidence indicates that Riverside did not undergo a change of ownership, but only a change in the hierarchy of the ownership, and that Riverside presented itself to SSA as being the same entity both before the events that caused the overpayments and after those events (including after the purported sale in 2015). Further, we believe that there is legal support for the agency to conclude that the Bill of Sale does not bind SSA and thus, it is irrelevant whether overpayments are liabilities as the Bill Sale describes. Finally, for purposes of Riverside’s waiver request, we believe the agency could reasonably find that Riverside was not without fault in causing the overpayments.
In or prior to 2011, SSA selected Riverside as the organizational representative payee for Title II disability insurance benefits in eight cases (relevant to the legal opinion request). In 2011 and 2012, SSA sent Riverside a notice of overpayment in seven cases, informing Riverside that SSA had continued to pay benefits in each case after the beneficiaries’ death and that Riverside was responsible for repaying the overpayment. Through the notice of overpayment, SSA notified Riverside of their right to request reconsideration and right to request waiver of the overpayment in each case. Riverside did not request an appeal (reconsideration) or waiver of the overpayment after SSA sent the notices of overpayment in 2011 and 2012.
On January 6, 2017, SSA sent Riverside a notice of overpayment in one additional case. SSA notified Riverside that SSA had continued to pay benefits in that case after the beneficiary’s death and that Riverside was responsible for repaying the overpayment. After receiving the 2017 notice for the one additional case, Riverside submitted a Form SSA-632-BK Request for Waiver of Overpayment Recovery for all of the eight cases involving overpayments. Riverside requested waiver of the overpayments in the 2011 and 2012 cases due to “the overpayment was not my fault, and I cannot afford to pay the money back and/or it is unfair for some other reason.” Riverside specifically noted that it was not at fault for the 2011 and 2012 overpayments because there was a change of ownership of Riverside on February 1, 2015. In support of this claim, Riverside submitted a February 1, 2015 Texas Bill of Sale. The Bill of Sale states that the previous owners (referred to as the Transferor in the Bill of Sale) “shall retain and shall be solely responsible for paying . . . all liabilities and obligations . . . that arise as a result of events occurring prior to . . . the Effective Date, including without limitation . . . federal health program . . . overpayments and other overpayments.” See Bill of Sale, Retained Liabilities, Sections 2.4 & 2.4.6.
It is our understanding that Riverside did not request a change of name as the organizational representative payee with SSA after February 1, 2015. Riverside also did not notify SSA of the change of ownership on or soon after February 1, 2015. Rather, Riverside did not notify SSA of the change of ownership until 2017, after SSA sent the notice of overpayment in the 2017 case, at which time Riverside requested waiver of the overpayments in all eight cases. Thus, from 2011 until 2017, Riverside presented itself to SSA as being the same nursing home facility that SSA had selected to be an organizational representative payee in or prior to 2011.
Federal Law Overview: Representative Payees, Overpayment Liability Determination, and Overpayment Waiver Procedure
A representative payee is an individual or an organization (an organizational representative payee) the agency selects to receive benefits on behalf of a beneficiary. See 42 U.S.C. § 405(j)(1)(A); see also 42 U.S.C. § 1007(a) (a representative payee is a person, the meaning of which term includes an organization, the agency selects to receive benefits on behalf of a beneficiary); 20 C.F.R. § 404.2001(a) (a representative payee may be either a person or an organization SSA selects to receive benefits on behalf of a beneficiary); POMS GN 00504.240 (an institution, agency, or nursing home (called organization) that serves as a common representative payee). As noted, sometime in 2011, the agency selected Riverside to be the organization representative payee for the eight beneficiaries (now deceased) at issue in this request. We next consider the law regarding a representative payee’s liability for overpayments and the circumstances that allow for waiver of an overpayment.
The Act provides that whenever SSA has paid more than the correct amount (overpayment) of Title II disability insurance benefits to any individual, SSA must require the overpaid individual or his estate to refund the overpayment. 42 U.S.C. § 404(a)(1)(A). However, if SSA makes any overpayment to a representative payee on behalf of an individual after the individual’s death, the representative payee shall be solely liable to SSA for repayment of the overpayment. See 42 U.S.C. § 404(a)(2); 20 C.F.R. § 404.502(a)(3); see also POMS GN 02205.001 (the overpaid person, her representative payee, and any other person receiving benefits on the overpaid person’s earnings record are liable, or responsible, for repayment of an overpayment; it does not matter if the other person lives in a different household), GN 02205.003 (the person who receives the overpayment is primarily responsible for the overpayment; a representative payee who receives payments on the beneficiary’s behalf after the beneficiary’s death is solely liable for repayment of this type of overpayment). It is our understanding that the 2011 and 2012 overpayments at issue here were all made to Riverside after the beneficiaries’ deaths. Thus, Social Security law expressly provides that Riverside, as the representative payee, is solely liable to SSA for repayment of these overpayments made after the beneficiaries’ deaths.
Riverside did not timely seek reconsideration from SSA’s determination that it owed an overpayment. It is our understanding that in 2011 and 2012, in accordance with the requirements set forth in the regulations, SSA notified Riverside of its overpayment determination, its obligation to refund the overpayments, and the procedures for requesting reconsideration and requesting waiver of an overpayment. Whenever SSA makes an overpayment initial determination, SSA must send written notice to the allegedly overpaid individual. See 20 C.F.R. § 404.502a. The notice must include, in part:
a. The overpayment amount and how and when the overpayment occurred;
b. A request for full, immediate refund;
e. An explanation of the right to request waiver of recovery;
f. An explanation of the right to request reconsideration of the
g. Instructions about the availability of forms for requesting
reconsideration and waiver;
h. An explanation that if the individual does not request waiver or
reconsideration within 30 days of the date of the overpayment
notice, adjustment or recovery of the overpayment will begin.
20 C.F.R. § 404.502a(a)-(j).
With regard to the right to appeal the initial overpayment determination, the overpaid individual, or here, the representative payee, has 60 days to request that SSA reconsider the initial overpayment determination. See 20 C.F.R.§§ 404.900(a)(1), (2), 404.902(j), (k), 404.904. The regulations explain that the initial determination is binding unless the individual requests reconsideration. 20 C.F.R. § 404.905. Here, Riverside did not timely request reconsideration of the 2011 and 2012 overpayment determinations. Therefore, the agency’s initial overpayment determinations as to Riverside are final and binding and no circumstances for reopening apply. See 20 C.F.R. §§ 404.902(k), 404.987, 404.988.
With regard to the request for waiver of recovery of an overpayment, SSA may waive the adjustment or recovery of an overpayment when:
See 42 U.S.C. § 404(b); 20 C.F.R. § 404.506(a); POMS GN 02201.019. “A request for waiver may be submitted at any time, including after the overpayment has been completely recovered.” Bronstein v. Apfel, 158 F.Supp.2d 1208, 1210 (D. Colo. 2001) (addressing Title XVI overpayments); POMS GN 02201.019(A) (General Title II waiver policy).
Here, as you indicated, it was not until 2017, after SSA notified Riverside of an overpayment in an additional case, that Riverside finally requested waiver of recovery of the 2011 and 2012 overpayments. At this time, Riverside claimed that it was not at fault for the 2011 and 2012 overpayments because Riverside underwent a change of ownership on February 1, 2015. In support of its allegation, Riverside submitted a February 1, 2015 Bill of Sale.
We next consider whether there was a change in ownership in 2015 and any impact on Riverside’s overpayment liability as the organization representative payee for those 2011 and 2012 overpayments made after the beneficiaries’ deaths and whether the 2015 Bill of Sale binds SSA as to Riverside’s overpayment liabilities. Finally, we will address whether waiver would be appropriate and Riverside’s claim that it was without fault.
1. Riverside Remains Solely Liable for the 2011 and 2012 Overpayments
As described above, in all dealings with SSA from 2011 until 2017, Riverside continued to act as the same organizational representative payee, continued to receive benefits, and made no effort to notify SSA that any circumstances had changed. Under the regulations, Riverside was required to report any change in circumstances that would affect performance of its organizational representative payee responsibilities, which would include a change of name and change of ownership. See 20 C.F.R. § 404.2035(f) (representative payee responsibilities). However, Riverside failed to notify SSA of any change in circumstances that impacted its ability to serve as the selected representative payee. Moreover, Riverside’s actions before and after February 1, 2015, as described above, do not support its claim that it underwent a change of ownership affecting its ability to act as the representative payee. Instead, Riverside continued to act as the same entity with SSA from 2011 until 2017. Thus, we believe that the agency could reasonably determine that Riverside remains solely liable to SSA for the 2011 and 2012 overpayments per the final and binding overpayment determinations because Riverside failed to seek reconsideration, failed to notify SSA of any change in its status, as required, and presented itself to SSA as being the same entity both before the events that caused the overpayments and after those events (including after the purported sale in 2015).
Furthermore, we believe that the evidence indicates that there was in fact no change in ownership on February 1, 2015. In reaching this conclusion, we first note that the Texas Bill of Sale that Riverside presented to SSA refers to the parties as the “Transferor” (PHCC - Riverside Rehabilitation and Health Care Center, LLC) and “New Operator” (Riverside SCC LLC), not new owners, of Riverside, which does not support a change of ownership. We also note that Texas law requires a nursing facility to disclose, among other things, a change of ownership to obtain a nursing facility license in Texas. 40 Tex. Admin. Code §§ 19.201, 19.1918, 19.2308. The Texas Health and Human Services website shows that Riverside had “a change in the ownership hierarchy that did not change the primary owner of the facility” on February 1, 2015. Thus, we believe that the agency could reasonably conclude that Riverside did not undergo a change of ownership on February 1, 2015, that might impact its status as the organizational representative payee, or its liability for the 2011 and 2012 overpayments.
Therefore, for these reasons, we believe that the agency could conclude that Riverside remains solely liable to SSA for 2011 and 2012 overpayments despite any change in ownership or change in operators that took place in 2015. See 42 U.S.C. § 404(a)(2); 20 C.F.R. § 404.502(a)(3); POMS GN 02205.003(B), (C)(4).
2. The Bill of Sale Does Not Bind SSA
Next, in determining Riverside’s liability to SSA for the overpayments, we consider your question of whether the Bill of Sale binds SSA. You noted that Riverside presented the Bill of Sale that states liabilities incurred prior to the sale of the facility are the responsibility of the prior owners. As previously noted, Riverside executed the Bill of Sale in Texas on February 1, 2015. The Bill of Sale specifically states: “This agreement has been executed . . . and shall be interpreted, construed, enforced and governed by and in accordance with the laws of the State of Texas . . . .” Thus, Riverside relies on Texas law to claim that it is not responsible for the overpayments because the Bill of Sale specifically states that liabilities incurred prior to the sale of the facility are the responsibility of the prior owners. The question is whether SSA, who is not a party to this Bill of Sale, must follow Texas law regarding issues involving the Act.
The U.S. Supreme Court has specifically held that federal law governs questions involving the rights of the United States arising under nationwide federal programs. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726 (1979); see also U.S. Const. Art. VI, cl. 2 (the Supremacy Clause declares the Constitution and the laws of the United States as the supreme law of the land and that judges in every state are bound by federal law). The Fifth Circuit Court of Appeals addressed a similar issue involving Medicare overpayments where a home health provider sold its assets and assumed no liabilities under a purchase agreement executed under Texas law. See United States v. Vernon Home Health, Inc., 21 F.3d 693, 695–96 (5th Cir. 1994). The Fifth Circuit noted:
Regardless of the result under state corporate law, federal law governs cases involving the rights of the United States arising under a nationwide federal program such as the Social Security Act. . . . The authority of the United States in relation to funds disbursed and the rights acquired by it in relation to those funds are not dependent upon state law. . . .
Vernon Home Health, Inc., 21 F.3d at 695–96. Thus, federal law, not state law, is controlling on the issues present in this matter arising under the Act.
Similar to the facts in Vernon, Riverside relies on Texas law to claim that under the Bill of Sale it is not responsible for liabilities a prior owner incurred. However, Riverside’s reliance on the Bill of Sale executed under Texas law is misplaced because federal law governs in cases involving the Act. As detailed above, under Social Security law, Riverside is solely liable as the representative payee for the overpayments it received after the beneficiaries’ deaths. Riverside failed to timely request reconsideration of this overpayment determination as provided for in the Social Security regulations. The 2015 change in ownership/operators does not impact Riverside’s liability to SSA. Riverside continued to present itself to SSA as the same entity from 2011 until 2017. Thus, we believe there is legal support for the agency to conclude that it is not bound by the Bill of Sale. Because the Bill of Sale does not bind SSA, it is irrelevant whether overpayments to Riverside are considered liabilities, as the Bill Sale describes.
3. For Purposes of Riverside’s Request for Waiver of Recovery of the Overpayment, Riverside is Not Without Fault
Although Riverside is solely liable for repayment of the overpayments it received after the beneficiaries’ deaths, the regulations allow for a request for waiver at any time, and Riverside requested the waiver of the 2011 and 2012 overpayments, though not until 2017. See 20 C.F.R. § 404.506(b) (“If the individual requests waiver more than 30 days after receiving the notice of overpayment, SSA will stop any adjustment or recovery actions until after the initial waiver determination is made.”). The regulations instruct that “there shall be no adjustment or recovery in any case where an overpayment . . . has been made to an individual who is without fault if adjustment or recovery would either defeat the purpose of title II of the Act, or be against equity and good conscience.” 20 C.F.R. § 404.506(a). Thus, an overpayment will be waived if: (1) the person is without fault, and (2) recovery would either defeat the purpose of the Act or be against equity and good conscience. “The threshold issue is ‘fault,’ and [the court’s] review is limited to determining whether the [Commissioner’s] decision on the ‘fault’ issue is supported by substantial evidence.” Watson v. Sullivan, 940 F.2d 168, 171 (6th Cir. 1991). “The burden is upon the claimant to establish the negative prerequisite (‘without fault’), before the [Commissioner] considers the second tier of the waiver statute.” Watson, 940 F.2d at 171 (citing Viehman v. Schweiker, 679 F.2d 223, 227 (11th Cir.1982)). We consider whether Riverside was without fault.
The regulations describe what constitutes “fault” for purposes of a request for waiver of an overpayment. See 20 C.F.R. § 404.507. An individual is not “without fault” in causing an overpayment if the overpayment resulted from:
(a) An incorrect statement made by the individual which he knew or should have known was incorrect; or
(b) Failure to furnish information which he knew or should have known to be material; or
(c) Acceptance of a payment which he either knew or could have been expected to know was incorrect.
20 C.F.R. § 404.507. The overpaid individual is not relieved of liability and is not “without fault” solely because the SSA may have been at fault in making the overpayment. Id.
Although Riverside claims it changed ownership on February 1, 2015, Riverside never notified SSA of any change of ownership or in operators prior to 2017, which it now relies upon as material evidence to claim “without fault” for the 2011 and 2012 overpayments. See 20 C.F.R. § 404.2035(f) (the representative payee must notify SSA of any change in circumstances that would affect the representative payee’s performance of its responsibilities). Furthermore, Riverside knew or should have known that the deceased beneficiaries, who were residents in the facility, were no longer entitled to benefits payments and was obligated to inform SSA of this fact. See 20 C.F.R. § 404.2035(d) (the representative payee must notify SSA of any event or change in the beneficiaries’ circumstances that affect the beneficiaries’ right to receive benefits). Riverside continued to receive benefits payments as an organizational representative payee in other cases through 2017, without requesting a change of name or requesting to be appointed as a new organizational representative payee. Riverside has never returned any of the payments it received as an organizational representative payee after February 1, 2015. Thus, we believe that the agency could reasonably conclude that Riverside is not “without fault” in receiving the overpayments.
In summary, the evidence shows that Riverside did not report to SSA and did not in fact undergo a change of ownership on February 1, 2015. Riverside has continued to receive benefits payments on behalf of beneficiaries as the same organizational representative payee SSA appointed in or prior to 2011. Riverside either knew or could have been expected to know that the overpayments SSA made in 2011 and 2012 were incorrect and is not “without fault” for the overpayments. See 20 C.F.R. § 404.507. Because Riverside was not without fault, it is not necessary to consider whether recovery of the overpayments would either defeat the purpose of the Act or be against equity and good conscience. See 20 C.F.R. § 404.506. Therefore, we believe there is legal support for SSA to deny Riverside’s overpayment waiver requests and continue to hold Riverside, as the organizational representative payee, solely liable for repayment of the 2011 and 2012 overpayments.
We believe that there is legal support for the agency to conclude that Riverside remains liable for the overpayments as an organizational representative payee. The evidence indicates that Riverside did not change ownership but only changed the hierarchy of the ownership. Furthermore, Riverside presented itself to SSA as being the same entity both before the events that caused the overpayments and after those events (including after the purported sale in 2015). We believe that the Bill of Sale does not bind SSA and thus, it is irrelevant whether overpayments to Riverside are considered liabilities, as the Bill Sale describes. Finally, we believe the agency could reasonably find that Riverside was not without fault in causing the overpayment for purposes of the waiver request.
B. PR 04-223 In the Matter of the Estate of Mary in the District Court, County of Arapahoe, State of Colorado
DATE: May 20, 2004
The opinion expands on the policy for recovery of an overpayment from an executor of an estate of a deceased debtor.
Whether the Agency may recover an overpayment in the amount of $22,574.00 from Vincent V. H~, Jr. (Mr. H~), the personal representative of the estate of Mary G. H~ (Mrs. H~)._1
Mr. H~ received notice of the overpayment prior to final distribution of the estate assets on April 21, 2004. Therefore, he is in violation of the Federal Priority Statute, 31 U.S.C. § 3713(b), and could be found personally responsible for repaying the overpayment. Referral of this matter to the Department of Justice (DOJ) for enforced collection, however, is premature because Mr. H~ did not receive proper notice of the overpayment. Specifically, the initial notice does not comport with Agency policy regarding overpayment notices, which includes informing the legal representative of the right to reconsideration and waiver of recovery, as well providing detailed information explaining the overpayment calculation. Because the December 14, 2004 notice (see Tab 3) is the only notice Mr. H~ has received regarding the overpayment, and this notice is deficient, we recommend the Great Lakes Program Service Center (GLPSC) reissue a notice that includes the requisite information noted in the Program Operations Manual System (POMS).
According to information you have provided, at the time of her death, the decendent, Mrs. H~, owed $22,574.00 to the Agency for an overpayment of benefits due to excess income. In a notice date December 14, 2003 (see Tab 3), the GLPSC informed Claire D~ (Ms. D~), the attorney for the estate, that "[b]ased on [Mrs. H~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (id.)_2 The notice also informed Ms. D~ that according to Agency records, she was appointed as executor of the estate, and that pursuant to 31 U.S.C. § 3713, she would become personally liable for the overpayment if the estate's debt to the United States was not satisfied first and there were insufficient funds to pay all debts. The notice did not include, for example, "the monthly amount, if any, which should have been paid, . . . the months for which the different amount should have been paid, and the amount which was paid for those months." POMS § GN 02201.009B.1. (What Notice Includes). Nor did the notice mention the right to reconsideration of the overpayment determination or the right to request waiver of recovery. See id.
In a letter dated December 22, 2003 (see Tab 2), Ms. D~ informed the GLPSC that Mrs. H~ died on June 27, 2002, and that Mr. H~ was appointed personal representative of the estate on July 18, 2002. Ms. D~ also noted that following Mr. H~'s appointment as personal representative, a "Notice to Creditors" was published three times in a local newspaper, beginning August 1, 2002, and ending August 15, 2002, and the "[the Agency] did not file a claim within this time period . . ." (id.) Ms. D~ noted further that "the personal representative of the Estate of Mary G. H~ is denying the request by the Social Security Administration for repayment of $22,574.00," and that the estate would be closed 60 days from the date of her letter. Thus, despite the defective notice, Mr. H~, through the attorney for the estate, arguably requested reconsideration in December 2003, and the Agency has not responded to that request.
Statements from USBank, which are attached to the "Final Accounting-For Period From: July 24, 2002 To April 11, 2003" (see Tab 4) reflect that on December 31, 2002, the "customer," presumably, Mr. H~, withdrew $145,000 from a USBank account in the name of "The Estate of Mary H~." On March 26, 2004, approximately three months after he received notice of the overpayment through the attorney for the estate, Mr. H~, in his capacity as Trustee of the H~ Family Trust (the Trust), filed a "Receipt and Release" (see Tab 5), attesting that he had received cash in the amount of $146,362.98, and securities valued at $3,205.10 and $1,134.66 from himself as the personal representative of the estate. The "Receipt and Release" does not reflect the exact date Mr. H~ "contingently" distributed these assets to the Trust; however, as explained further below, the "final" distribution date, which in this case is April 21, 2004, is the relevant date for purpose of determining his liability for the overpayment under the Federal Priority Statute.
During a telephone conversation with Ms. D~ on April 19, 2002, she informed our office that Mr. H~ had distributed the assets to the Trust before he received notice of the overpayment from the Agency in December 2003. Ms. D~ also continued to assert that the Agency had missed the deadline to file a claim and had failed to prove the estate's liability for the overpayment. On April 21, 2004, Ms. D~ forwarded to our office a copy of the "Decree of Final Discharge" (see Tab 6) issued by the probate court, purportedly releasing and discharging Mr. H~ "from any and all liability arising in connection with the performance of [his] fiduciary's duties. . . ."
The Federal Priority Statute provides that, "A representative of a person or an estate . . . paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government." 31 U.S.C. § 3713(b). "The statute is to be 'liberally construed so as to effect the public purpose of securing debts owed to the United States.'" United States v. Idaho Falls Assocs. Ltd. P'ship, 81 F. Supp.2d 1033, 3713 (D. Idaho 1999) (quoting United States v. Whitney, 654 F.2d 607, 609 (9th Cir. 1981) (citing Bramwell v. United States Fid. & Guar. Co., 269 U.S. 483 (1926)); see also United States v. Moore, 423 U.S. 77, 81-86 (1975).
"'The basic elements of § 3713(b) and of its predecessor statutes is that (1) a fiduciary (2) make a distribution which (3) leaves the estate with insufficient funds to pay (4) a debt owing the United States where (5) the fiduciary had knowledge or notice of the debt due to the United States at a time when the estate had sufficient assets with which to satisfy the debt owing to the United States.'" United States v. Bartlett, 186 F. Supp.2d 875 (C.D. Ill. 2002) (citations omitted).
Mr. H~, as the personal representative for the estate, is a fiduciary. He distributed the assets of the estate to the H~ Family Trust, leaving the estate with insufficient funds to pay the overpayment. While Mr. H~ contends he had already distributed the estate assets to the Trust before he received notice of the overpayment, "[t]he distribution by [Mr. H~] prior to the closure of the estate was not a final distribution pursuant to a final decree, but a contingent distribution." Ferri v. Bowen, No. C-85-505-SPM, 1986 WL 373, at *2 (E.D. Wash. July 16, 1986) (noting that "[i]t is 'distribution' which is controlling"). The date Mr. H~ made a final distribution of the estate assets is the determining factor in this case with respect to his personal liability under the Federal Recovery Statute. See id. Therefore, even if Mr. H~ did distribute the assets of the estate into the Trust before he received notice in December 2003, he received notice of the overpayment prior to the closure of the estate in April 2004 and is in violation of the Federal Priority Statute. See id.
Mr. H~, through the attorney for the estate, also continues to dispute the Agency's right to recover the overpayment from the estate assets on the basis that the Agency missed the deadline to file a claim. However, "[a]s it undisputed that state probate nonclaim statutes do not bar claims of the federal government, the status of the probate proceedings cannot be deemed controlling." Id. (citing United States v. Summerlin, 310 U.S. 414 (1940)).
In construing the predecessor statute to 31 U.S.C. § 3713(b),[ ] the courts have uniformly held a personal representative liable who, having actual notice of the debt due the Government, distributed the estate pursuant to a decree of distribution without first paying the debt due the Government even though the Government had not submitted a claim in the probate proceedings.
United States v. Boots, 675 F. Supp. 550, 551 (E.D. Mo. 1987) (citations omitted). Mr. H~ has "the burden of proving the statute does not apply" to him. Ferri, 1986 WL 373, *2 (citing United States v. Cole, 733 F.2d 651, 654 (9th Cir. 1984)).
Mr. H~ also continues to dispute the validity of the overpayment, and therefore, may contest whether the Agency actually had a "claim," i.e., whether the estate was indebted to the Agency within the meaning of the Federal Priority Statute before the assets were finally distributed ._3 "The terms of the . . . statute are to be construed liberally so as not to frustrate its purpose in securing sufficient revenue for the payments of public debts." United States v. Moriarty, 8 F.3d 329 (6th Cir. 1993) (holding that "although the United States may be precluded by the applicable statute of limitations from brining an action for money damages, it continues to have a 'right to payment' against the debtor in this case and thus may enforce that right in other ways") (citing Bramwell v. United States Fidelity & Guar. Co., 269 U.S. 482, 487 (1926); United States v. State Bank of N.C., 31 U.S. (6 Pet.) 29, 34, 8 L.Ed. 390 (1832)). Furthermore, "[i]n interpreting the term 'claim' under the federal priority statute, we look for guidance to the Bankruptcy Code." Moriarty, 8 F.3d at 334 (citing United States v. Moore, 423 U.S. 77, 84 (1975)). "In the Bankruptcy Code, 'claim' is defined broadly as a 'right to payment, whether or not such right is reduced to judgment, . . . contingent, . . . [or] disputed. . . ." Moriarity, 8 F.3d at 334 (emphasis in original) (citing 11 U.S. C. § 101(5)). Here, we believe the estate's debt arose on or about September 27, 2002, the date the Agency discovered and manually posted Mrs. H~'s overpayment in its computer system. "Once a determination of overpayment is made, the overpaid amount is a debt owed to the United States Government." POMS GN 02201.001._4 See Memorandum, Florida - Recovery of Overpayment Incurred Subsequent to Chapter 7 Bankruptcy, CC IV (G~ & A~) to Assistant Regional Commissioner, Program Operations and Systems (May 5, 1993) (noting "[t]he debt to SSA is not created until [the beneficiary] reports the amount of her 1990 earnings or until as here, an investigation reveals that there were excess earnings for 1990).
Thus, we believe that Mr. H~ is in violation of the Federal Recovery Statute and, therefore, liable in his personal capacity as the representative of the estate for the $22,574 overpayment. However, we caution that DOJ may be reluctant to initiate a recovery action_5 against Mr. H~ in his capacity as personal representative if the Agency cannot demonstrate he received proper notice of the overpayment.
The December 2003 notice that Mr. H~ received through the attorney for the estate (see Tab 3) does not comport with Agency policy. POMS GS 02201.009 (Notification of Overpayment) requires that written notice be sent and requires that the notice include the "[o]verpayment amount and how and when it occurred (i.e., the overpaid amount, the monthly amount, if any, which should have been paid, why the different amount was due, the months for which the different amount should have been paid, and the amount which was paid for those months)." The December 2003 notice simply states the following: "Based on [Mary G. H~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (see Tab 3). Additionally, the notice must inform the claimant of the "[r]ight to reconsideration of the overpayment determination," as well as the "[r]ight to request waiver of recovery and the automatic scheduling of a personal conference if a request for waiver cannot be approved." Id. § GN 02201.009B.1. The December 2003 notice does not mention reconsideration or waiver.
POMS GN 02215.055, which specifically pertains to estates administered by a legal representative, states that "[a] legal representative must be notified of how and when an overpayment was made and the estate's liability for repayment." Moreover, these procedures also require the Agency to inform the legal representative of "[t]he right to reconsideration and waiver" and "[t]reat any protest/appeal of the estate's liability for repayment . . . as a request for reconsideration of that issue." Id. GN 02215.055 B.1.a.& e. Again, the notice Mr. H~ received through the attorney for the estate in December 2003 does not meet these requirements. "If notification is deficient (e.g., notice is not sent, . . . content is inadequate), a new notice must be sent." Id. § GN 02201.009B.8._6 Furthermore, as noted above, the Agency has not responded to Mr. H~'s request for reconsideration.
Thus, while the December 2003 notice was sufficient to alert Mr. H~ that the Agency has a claim against the estate,_7 this notice is insufficient for the purpose of establishing the estate's liability for the overpayment because it does not contain the requisite information.
For the reasons discussed above, we believe Mr. H~ could be found liable in his personal capacity under the Federal Priority Statute for the overpayment because he received sufficient notice of the Agency's claim prior to final distribution of the estate assets._8 However, we do not believe DOJ will institute recovery action if the Agency cannot prove the fact and amount of the debt, which will require to Agency to show that that it followed its internal policies with regards to notice of the overpayment._9 Therefore, we recommend the Agency reissue a notice to Mr. H~ in his capacity as personal representative that contains the requisite information noted in the POMS.
Deana R. E~-L~
Regional Chief Counsel, Region VIII
By: Yvette G. K~
Assistant Regional Counsel
_1 On April 13, 2004, you submitted a "Notice of Hearing on Petition for Final Settlement and Distribution (Non-Appearance)" (see Tab 1), scheduled for April 20, 2004, to the Office of the General Counsel, Region V, in Chicago, Illinois, which referred the matter to our office because a Colorado State Court has jurisdiction over the probate proceedings. After consultation with the Colorado U.S. Attorney's Office, we did not send an attorney to the non-appearance hearing. We determined that since the assets had been "contingently" distributed, it was unlikely the court would delay the final settlement and distribution of the estate, and, if warranted, the Agency could refer this matter to the Department of Justice (DOJ) for a civil suit to recover the overpayment from Mr. H~ at the conclusion of the administrative proceedings.
_2 The GLPSC sent a similar notice to the probate court.
_3 Sections (a) and (b) of 31 U.S.C. § 3713 provide, in part, as follows:
(a)(1) A claim of the United States Government shall be paid first when-(b) the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor.
_4 In this context, we believe "determination" is synonymous with "discovered," as opposed to the term of art, "initial determination," which requires written notice. See POMS GN 02201.009 ("When the debt is discovered, the fact, amount and liability for repayment must be communicated as soon as possible. If the overpayment is discovered because of an oral communication (telephone call or interview), the liability for repayment is communicated during the first oral contact. Written notice is always sent.")
_5 POMS § GN 02215.170.A (Handling of Overpayment Claims for Referral to DOJ) notes that "[t]he ARC, POS is responsible for either reporting or not reporting an outstanding debt to the U.S. Department of Justice (DOJ) Central Intake Facility for possible civil suit." Referrals must be submitted to the Department of Justice on a "Certificate of Indebtedness" and a Claims Collection Litigation Report pursuant to the instructions set forth in the POMS. See id. § GN 02215.170B.4.
_6 "Whenever there is a delay of more than 1 year between the time overpayment occurs and the time a determination is made (i.e., notice sent), a complete explanation and evidence to support the delay must be provided by the PC when the debt claim is referred to DOJ." POMS§ GN 02215.150.B.2.
_7 "The knowledge requirement of ... 31 U.S.C. § 3713 may be satisfied by either actual knowledge of the liability or notice of such facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States. To be chargeable with knowledge of such a debt, the executor must be in possession of such facts as to put him on inquiry." Bartlett, 186 F. Supp. 2d at 886-87.
_8 This opinion does not address recovery actions that could be taken against the beneficiaries (distributes) of the trust. "When an overpaid person (e.g., beneficiary or representative payee) dies, the person's estate becomes liable. If the estate is closed, the distributees or legatees are liable to the extent of the proceeds of the estate (or property attributable to such proceeds) which are in his/her possession when notified of the overpayment." POMS 02205.001.B.2.
_9 To ensure that civil suit is not barred, the complaint must be filed within:
a. Six years after the right of action accrues (i.e., within 6 years after the time an overpayment determination has been made); or
b. One year after a final decision has been rendered in an administrative proceeding (i.e., reconsideration, hearing, and/or review by the Appeals Council), whichever is later.
POMS § GN 02215.159B.2.
. For purpose of this legal opinion, we use the terms “representative payee” and “organizational representative payee” interchangeably.
. An “overpayment” means where an individual has received more than the correct payment due under Title II of the Social Security Act (Act). 20 C.F.R. § 404.501(a).
. Your request for legal opinion specifically asks, “Who is liable for repayment of the beneficiaries’ overpayments?”
. A bill of sale is a written agreement under seal by which one person assigns or transfers his right to or interest in goods and personal chattels to another. Black’s Law Dictionary 149 (5th ed. 1979).
. The request for legal opinion states that Riverside “serves as a representative payee for Social Security and Supplemental Insurance beneficiaries and recipients.” The Dallas Regional Office clarified that all cases relevant to this legal opinion request involve Title II cases. Therefore, we address the issues under Title II law only. Additionally, the Dallas Regional Office confirmed that Riverside is not a “qualified organization,” or fee-for-service organizational representative payee. See 20 C.F.R. § 404.2040a; POMS GN 00506.001 (fee-for-service - overview), GN 00506.002 (fee-for-service – definitions).
. With respect to the 2017 case, Riverside requested waiver of the overpayment for a reason other than a change of ownership, which is irrelevant to our issue.
. The “Effective Date” is February 1, 2015, the change of ownership date. See Bill of Sale, at 1.
. See footnote 2.
. See 20 C.F.R. § 404.502(a)(3) (representative payee solely liable for overpayment).
. The Foster Care Independent Act of 1999, effective December 14, 1999, amended 42 U.S.C. § 404(a)(2) by adding the following provision: “If any payment of more than the correct amount is made to a representative payee on behalf of an individual after the individual’s death, the representative payee shall be liable for the repayment of the overpayment.” FOSTER CARE INDEPENDENCE ACT OF 1999, PL 106–169, December 14, 1999, Sec. 201(a), 113 Stat 1822.
. The facility’s website shows the entity under the name Riverside Nursing and Rehab Center and states that the facility opened in 2010. See http://riverside.seniorcarecentersltc.com/LocationDetails/14 (last visited Aug. 18, 2017).
. The Texas Health and Human Services (Texas HHS) administers in Texas the nursing-facility component of the Medicaid program. See Texas Dep’t of Human Servs. v. Kemp Health Servs., Inc., 993 S.W.2d 698, 700 (Tex. App. 1999).
. The Texas Health and Human Services website states Riverside’s change of ownership on February 1, 2015, only changed the ownership hierarchy but did not change the primary owner. See https://apps.hhs.texas.gov/ltcsearch/providerdetail.cfm?prov_no=104266&cg_nme=nh&ftype=non_hosp&lang=EN (History Tab – Provider History Events) (last searched August 18, 2017).
. We conferred with the Office of the General Counsel’s Office of Program Law (OPL) on this issue, who advised that a similar question arose in the Atlanta Region in 2016. OPL stated that in the Atlanta Region’s case, like here, the organizational representative payee (also a nursing home facility) disputed its responsibility for overpayments made after the deaths of beneficiaries because the overpayments occurred when the facility was under a prior ownership. In that case, the representative payee did not inform SSA of a change in ownership and represented itself to SSA as the same entity both before the events that caused the overpayments and after those events. OPL advised that under those facts, the agency should hold the current organization responsible for the overpayments.