Appeal from the Circuit Court of Cook County. Honorable Richard E. Dowdle, Judge Presiding.
The Honorable Justice Theis delivered the opinion of the court: Hoffman, P.j., and Cahill, J., concur.
The opinion of the court was delivered by: Theis
JUSTICE THEIS delivered the opinion of the court:
This appeal arises from a circuit court order requiring the estate of Moses Merritt, Jr., a disabled adult, to reimburse the Illinois Department of Mental Health and Developmental Disabilities (the "Department") for $4,919.62 in costs incurred in caring for and treating Merritt. The issues on appeal are (1) whether the court properly ordered Merritt's guardians to use social security benefits to reimburse the Department, and (2) whether social security benefits which are exempt from attachment under section 407(a) of the Social Security Act ("Act") (42 U.S.C.A. § 407(a) (1991)) lose their exemption when commingled in a bank account with nonexempt funds. We conclude that the circuit court may not order the guardians to reimburse the Department using social security benefits. We also determine that any portion of the $4,919.62 that may be reasonably traced to social security benefits must be returned to the estate. Therefore, this action is reversed and remanded. On remand, the guardians have the burden of showing that the $4,919.62 may be reasonably traced to social security benefits.
Moses Merritt resides at Elgin State Mental Health Center ("Elgin"), a hospital administered by the Department. Karen Carlos and Cassandra Laseter, Merritt's sisters, were appointed as guardians of his estate. The record on appeal shows that between 1990 and 1993 Merritt's estate made monthly payments to the Department. The Department initiated the present action against the estate seeking further reimbursement for the cost of Merritt's stay at Elgin.
The circuit court entered a judgment against the estate on April 27, 1993, ordering them to reimburse the Department for $20,271.42 forthe costs of care and treatment of Merritt at Elgin. On May 17, 1993, the guardians voluntarily paid the Department $15,351.80. However, they refused to pay the balance of $4,919.62 arguing that those funds were social security benefits which were exempt from being attached under section 407(a) of the Act. (42 U.S.C.A. § 407(a) (1991).) The Department argued that the funds could be reached because they were either the proceeds of an insurance policy or an inheritance, which Merritt received after his father's death in 1988.
In ruling on the issue of whether the estate owed the Department the balance of $4,919.62, the circuit court stated that it assumed that the funds in the bank account were social security disability benefits. The court never made a specific finding as to the source of these contested funds. Further, the court rejected the plaintiff's argument that the funds could not be reached pursuant to section 407, commenting that social security funds are used regularly to reimburse State facilities and nursing homes. On November 16, 1993, the court ordered the estate to pay the Department $4,919.62.
The guardians filed their final accounting which showed that they had paid the $4,919.62. On November 23, 1993, the court issued an order approving the accounting, discharging the guardians and closing the estate. The guardians now appeal arguing that this action should be reversed and remanded because the court failed to determine the source of the $4,919.62 and violated section 407 of the Act by ordering the disbursement of social security benefits to the Department.
Section 407(a) of the Social Security Act provides:
"The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law." 42 U.S.C.A. § 407(a) (1991).
The United States Supreme Court has consistently rejected attempts to read an implied exception into section 407. (See Bennettv. Arkansas (1988), 485 U.S. 395, 99 L. Ed. 2d 455, 108 S. Ct. 1204; Philpott v. Essex County Welfare Board (1973), 409 U.S. 413, 34 L. Ed. 2d 608, 93 S. Ct. 590.) "[Section 407] imposes a broad bar against the use of any legal process to reach all social security benefits" ( Philpott, 409 U.S. at 417, 34 L. Ed. 2d at 612, 93 S. Ct. at 592), and "unambiguously rules out any attempt to attach Social Security benefits." Bennett v. Arkansas, 485 U.S. at 397, 99 L. Ed. 2d at 458, 108 S. Ct. at 1205.
In Bennett, the United States Supreme Court found that the State of Arkansas could not attempt to attach social security benefits paid to prisoners in order to help defray the cost of maintaining the prison. The Court reached this conclusion despite the fact that the State provided for all of the prisoners needs. The Court further noted that the State cannot be said to be a "beneficiary" of an individual's social security benefits and, therefore, is not entitled to receive them. Bennett v. Arkansas, 485 U.S. at 398, 99 L. Ed. 2d at 459, 108 S. Ct. at 1206.
The broad bar of section 407 operates to prevent State judicial attempts to compel representative payees to turn over social security funds to the State. ( Kriegbaum v. Katz (2d Cir. 1990), 909 F.2d 70; Woodall v. Bartolino (D. N.J. 1985), 700 F. Supp. 210.) We conclude, therefore, that the circuit court did not have the power to order Merritt's guardians to reimburse the Department with funds derived from social security benefits.
The Department maintains that Merritt's social security benefits, the proceeds of an insurance policy and an inheritance were commingled in the same bank account. It argues that when exempt and nonexempt funds are commingled, the general exemption provided by section 407 is lost. The Department contends that it would be too difficult to determine what portion of funds constituted social security benefits. It further suggests that the defendants should have maintained a separate account for social security funds. ...