Holmes v. State

roy t. holmeS, iNdividuAlly , ANd pAtriCiA g. holmeS,
C oNServAtor of the eStAte of roy t. holmeS, A
proteCted perSoN, AppelleeS, v . S tAte of N ebrASkA
depArtmeNt of heAlth ANd humAN S erviCeS
ANd NANCy moNtANez , direCtor of the
N ebrASkA depArtmeNt of heAlth
ANd humAN S erviCeS, AppellANtS.
745 N.W.2d 578
Filed March 7, 2008. 	No. s-06-1141.
1. Administrative Law: Judgments: Appeal and Error. a judgment or final order
rendered by a district court in a judicial review pursuant to the administrative
procedure act may be reversed, vacated, or modified by an appellate court for
errors appearing on the record. When reviewing an order of a district court under
the administrative procedure act for errors appearing on the record, the inquiry
is whether the decision conforms to the law, is supported by competent evidence,
and is neither arbitrary, capricious, nor unreasonable.
2. Administrative Law. agency regulations that are properly adopted and filed with
the secretary of state of Nebraska have the effect of statutory law.
3. Administrative Law: Statutes: Appeal and Error. the meaning of a statute
is a question of law, and a reviewing court is obligated to reach its conclusion
independent of the court below and the administrative agency.
appeal from the District Court for Lancaster County: S teveN
d. burNS, Judge. reversed and remanded with directions.
Jon bruning, attorney General, John L. Jelkin, and, on brief,
Douglas D. Dexter for appellants.
Joseph C. byam, of byam & Hoarty, for appellees.
heAviCAN, 	C.J., 	W right , 	C oNNolly , 	gerrArd , 	S tephAN,
mCC ormACk , and miller -lermAN, JJ.
W right , J.
Nature oF Case
this case involves the determination of a patient’s abil-
ity to pay for mental health care provided by the Nebraska
Department of Health and Human services (DHHs). the issue
is whether DHHs properly determined roy t. Holmes’ ability
to pay for his care.
HoLMes v. state 	211
Cite as 275 Neb. 211
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:54 AM CST

212 	275 Nebraska reports
sCope oF reVIeW
[1] a judgment or final order rendered by a district court in
a judicial review pursuant to the administrative procedure act
may be reversed, vacated, or modified by an appellate court for
errors appearing on the record. When reviewing an order of a
district court under the administrative procedure act for errors
appearing on the record, the inquiry is whether the decision
conforms to the law, is supported by competent evidence, and
is neither arbitrary, capricious, nor unreasonable. Belle Terrace
v. State, 274 Neb. 612, 742 N.W.2d 237 (2007).
FaCts
Holmes received inpatient treatment at the Norfolk regional
Center (NrC) from December 3, 2003, to april 21, 2004. He
also received outpatient treatment at the NrC from May 4,
2004, to July 7, 2005.
on February 17, 2004, DHHs notified patricia G. Holmes
(patricia), Holmes’ mother and conservator, by letter that it
had determined that Holmes was able to pay for his care at the
NrC. DHHs informed patricia that for each month Holmes was
in treatment, she was obligated to pay Holmes’ social security
benefits ($1,071 in 2003; $1,087 in 2004), less a $50 personal
needs allowance, plus 2 percent of his chargeable assets (which
DHHs calculated to be $1,078) for the cost of his treatment
at the NrC. DHHs determined Holmes’ chargeable assets by
deducting his credit card balance of $1,200 and his dependent
deduction of $4,000 from the assessed value of his home, which
was $59,100. based on those calculations, Holmes’ total charge-
able assets were $53,900. DHHs determined that Holmes’ “total
ability to pay” for his care was $2,099 effective December 3,
2003, and $2,115 effective January 1, 2004, for each follow-
ing month.
patricia filed a “Written appeal and request for Hearing”
with DHHs. she argued that DHHs’ action against Holmes’
social security benefits was barred by federal law and that
she had no obligation to pay the social security benefits
to DHHs.
at an administrative hearing on January 10, 2006, DHHs
offered into evidence exhibit 22, a revised determination of

Holmes’ ability to pay for his inpatient care, as well as DHHs’
determination of Holmes’ ability to pay for his outpatient
care. DHHs’ revised determination included the mortgage on
Holmes’ house as a liability, which changed his total liabili-
ties from $1,200 to $49,216.34 and, therefore, decreased the
amount of his chargeable assets from $1,078 to $117.67.
Consequently, this reduced Holmes’ total ability to pay for his
inpatient care to $1,138.67 effective December 3, 2003, and
$1,154.67 effective January 1, 2004, for each following month.
Holmes’ ability to pay for his outpatient care was determined
by subtracting $730 from his social security benefits of $1,087
and then adding $117.67 (2 percent of his chargeable assets).
this amounted to $474.67.
During the hearing, DHHs acknowledged that its calcula-
tions for inpatient and outpatient care did not take into account
Holmes’ monthly liabilities, including the monthly mortgage
payment of $604.41 and the utilities for his house. However,
DHHs’ representative testified that DHHs had not been pro-
vided with that information and that even if provided with the
information, DHHs would consider these monthly liabilities
only in an undue hardship determination. because Holmes had
excess assets, he would not qualify for such a determination.
In response, patricia offered into evidence exhibit 20, which
provided the monthly calculations of Holmes’ mortgage pay-
ment, his utilities, and his food. When asked if the new evi-
dence rendered DHHs’ calculations incorrect, DHHs’ repre-
sentative stated that she would have “some more questions that
need to be answered” in relation to whether that would change
her calculations.
DHHs’ calculations of Holmes’ ability to pay did not pro-
vide for the equity in his house to be set off from his charge-
able assets because Holmes was “not living in home.” DHHs
regulations provide that “[c]hargeable assets of the client may
exclude: . . . 2. the fair market value or equity in a home if it
can be reasonably assumed that the client will, in the future,
reside in the dwelling.” see 202 Neb. admin. Code, ch. 1,
§ 002 (2003).
to show that it would be reasonable to assume Holmes
would not, in the future, reside in his house, DHHs offered
HoLMes v. state 	213
Cite as 275 Neb. 211

214 	275 Nebraska reports
into evidence the NrC’s admission record for Holmes dated
December 3, 2003. Holmes gave his address as 3216 North
120th Court, apartment No. 28, in omaha, which was not the
address of his house. a financial questionnaire dated December
9, 2003, stated that Holmes had been living at 3216 North 120th
Court for a period of 5 to 6 months. under the “HoMe” section
of the financial questionnaire signed by Holmes was the follow-
ing: “Don’t live in it[.] 2310 N. 48th st., omaha, Ne.”
at the hearing, patricia testified that Holmes did not pres-
ently live in the house. patricia explained that Holmes had
moved back into his house for a short time after he was
released from the NrC, but that in June 2004, he moved into
an apartment pursuant to a recommendation from his doctor.
patricia testified that an order authorizing the sale of Holmes’
house was entered in July 2005, but that the house had not
yet been sold. she stated that the house was listed through a
real estate broker for around $95,000 and that even though the
price had been reduced from $129,000, the broker had received
no offers.
after the hearing, the parties submitted briefs. DHHs’ direc-
tor found that DHHs’ calculations were consistent with the
rules and regulations and therefore must be affirmed. the direc-
tor stated that although the testimony of DHHs’ representative
was inconsistent, her final testimony was that the ability-to-pay
calculations found in exhibit 22 were done correctly and that
the “‘liabilities’” set forth in exhibit 20 would be used only in
an undue hardship determination.
patricia appealed the director’s decision to the Lancaster
County District Court, claiming that DHHs’ determination of
Holmes’ ability to pay was erroneous because DHHs did not
consider all of Holmes’ liabilities in determining his chargeable
assets and his available unearned income.
the district court concluded that only events that occurred
prior to February 2004 (when DHHs determined Holmes’ abil-
ity to pay) were relevant to the determination of whether it
was reasonable to assume Holmes would return to his house at
some time in the future. the court found that as of February
2004, Holmes had, previous to his commitment to the NrC,

resided in the house for many years. It ignored the fact that
Holmes listed an address that was different from the address of
his house. It also ignored the financial questionnaire signed by
Holmes that stated he had been living at an address different
than his house for a period of 5 to 6 months.
the district court concluded that there was no evidence
whether, as of February 2004, it was reasonable to assume that
Holmes would return to his house at some time in the future.
the court determined that pursuant to DHHs regulations, DHHs
was required to conduct an analysis as to whether, at the time of
its ability-to-pay determination in February 2004, Holmes might
reasonably be expected to live in his house in the future, and
that because DHHs had not done so, the case must be remanded
so that DHHs could conduct such an analysis.
the district court also determined whether Holmes’ monthly
expenses, including his mortgage payment, should be taken into
account by DHHs when considering his unearned income. It
found that the “personal needs allowance” within the unearned
income category “must consider monthly liabilities under the
Department rules.” the court noted the record reflected that
DHHs had not conducted a personal needs allowance review.
Instead, DHHs had reduced Holmes’ monthly social security
payment by the amount of the standard of need allowance, even
though the figure was placed on the line for room and board
allowance of the outpatient form and on the line for personal
needs allowance of the inpatient form. the court concluded
that reducing Holmes’ unearned income by the amount of his
mortgage payment while reducing the value of the home by the
amount of the mortgage would not result in allowing Holmes
double credit for the same liability. since the record did not
reflect that a personal needs allowance analysis had been con-
ducted, a remand was required.
on september 13, 2006, the district court remanded the case
for further proceedings on the issue of whether it was reason-
able in February 2004 for DHHs to assume that Holmes would,
in the future, reside in his house and for a personal needs
allowance analysis to be conducted, including consideration of
monthly liabilities under DHHs rules.
HoLMes v. state 	215
Cite as 275 Neb. 211

216 	275 Nebraska reports
assIGNMeNts oF error
DHHs and its director (hereinafter collectively DHHs)
assign two errors: the district court erred (1) in ruling that
DHHs had to perform an analysis of Holmes’ ability to return
to his house as of the time of the ability-to-pay determination
and (2) in determining that the mortgage against the value of
the house owned by Holmes must be considered as a liabil-
ity and that the mortgage payments must be deducted from
Holmes’ unearned income.
aNaLYsIs
In general, DHHs is required to assess against a patient such
part of the cost of the patient’s care by a state hospital for the
mentally ill as the patient is able to pay. see Neb. rev. stat.
§ 83-366 (reissue 1999).
[DHHs] shall determine the ability of a patient to pay
by consideration of the following factors: (1) taxable
income reportable under Nebraska law; (2) the patient’s
age; (3) the number of his or her dependents and their
ages and mental and physical conditions; (4) the patient’s
length of care or treatment; (5) his or her liabilities; and
(6) his or her assets including health insurance coverage.
Neb. rev. stat. § 83-368 (reissue 1999).
DHHs regulations further outline the process to be followed
in determining the ability of a patient at a state regional center
to pay for his or her own care. “ability to pay” is defined as
“the amount determined by [DHHs] that the client or legally
responsible relative can pay monthly towards the cost of ser-
vices.” 202 Neb. admin. Code, ch. 1, § 002.
When a patient has taxable income, DHHs “must first deter-
mine the ability to pay from his/her taxable income.” 202 Neb.
admin. Code, ch. 1, § 009 (2003). “taxable income” is defined
as “Nebraska taxable income after allowance of Nebraska per-
sonal exemption credits which are converted to income.” 202
Neb. admin. Code, ch. 1, § 002.
If a patient has insufficient taxable income to pay the cost
of care, DHHs “must consider his/her chargeable assets for
the purpose of paying those costs.” 202 Neb. admin. Code,
ch. 1, § 010.01 (2003). the “[c]hargeable assets of a client”

are defined to exclude “[t]he fair market value or equity in a
home if it can be reasonably assumed that the client will, in the
future, reside in the dwelling.” 202 Neb. admin. Code, ch. 1,
§ 002.
Finally, after taxable income and chargeable assets have been
considered, unearned income is considered. 202 Neb. admin.
Code, ch. 1, § 010.03 (2003). unearned income is defined as,
but not limited to, social security benefits, railroad retirement
benefits, military service benefits, unemployment compensa-
tion, disability benefits, workers’ compensation, alimony, child
support, and sick pay received on behalf of the client. 202 Neb.
admin. Code, ch. 1, § 002. also considered in this process are
liabilities, age, and the number of his or her dependents. 202
Neb. admin. Code, ch. 1, § 008 (2003).
because Holmes had no taxable income, DHHs first looked
to his chargeable assets for the purpose of determining his
ability to pay. DHHs determined that the equity in his house
qualified as a chargeable asset. DHHs argues that implicit in
its determination was that Holmes would not, in the future,
reside in his house. It further claims that the evidence adduced
at the administrative hearing supports a determination that it
was reasonable to assume that Holmes would not return to his
house in the future.
at oral argument, Holmes’ attorney conceded that it was
reasonable to assume Holmes would not return to his house.
We conclude that the evidence supported this determination and
that the district court erred in remanding the case for further
consideration of this issue.
Next, DHHs assigns as error the district court’s determination
that DHHs must deduct Holmes’ monthly mortgage payments
from his unearned income. the issue here is whether DHHs is
required to consider Holmes’ monthly mortgage payment, utili-
ties, and food costs when it calculated unearned income.
a portion of the Nebraska administrative Code entitled
“FaCtors CoNsIDereD IN DeterMINING abILItY to
paY” states: “the client’s ability to pay must be determined by
[DHHs] based on his/her taxable income, chargeable assets,
and unearned income. Liabilities, age, and the number of his/
her dependents are also considered in this process.” see 202
HoLMes v. state 	217
Cite as 275 Neb. 211

218 	275 Nebraska reports
Neb. admin. Code, ch. 1, § 008. In relation to the entire ability-
to-pay regulatory scheme, there are three separate categories
under which a client’s ability to pay must be determined: taxable
income, chargeable assets, and unearned income. each of those
categories may consider the client’s liabilities, age, and number
of dependents to the extent stated within the regulations.
the chargeable assets category states that it includes consid-
eration of liabilities. the definition of “[c]hargeable assets of a
client” excludes “[l]iabilities substantiated by the client.” 202
Neb. admin. Code, ch. 1, § 002. the definitions of “[t]axable
income” and “[u]nearned income” do not mention the consider-
ation of liabilities. 202 Neb. admin. Code, ch. 1, § 002. thus,
through the express inclusion of liabilities in the “[c]hargeable
assets” category and the exclusion of the term “liability” in both
the “[t]axable income” and “[u]nearned income” categories, we
conclude that the regulations intended that liabilities be consid-
ered only under the chargeable assets category.
[2,3] our interpretation of these regulations is similar to that
of a statute. agency regulations that are properly adopted and
filed with the secretary of state of Nebraska have the effect of
statutory law. Val-Pak of Omaha v. Department of Revenue, 249
Neb. 776, 545 N.W.2d 447 (1996). the meaning of a statute is
a question of law, and a reviewing court is obligated to reach its
conclusion independent of the court below and the administra-
tive agency. see Centra, Inc. v. Chandler Ins. Co., 248 Neb. 844,
540 N.W.2d 318 (1995).
However, this does not preclude liabilities from being consid-
ered elsewhere if the regulations allow for such consideration.
DHHs regulations state: “at the request of the client or legally
responsible relative, [DHHs] may consider other factors deter-
mined to be relevant in the interest of avoiding undue financial
hardships. these factors may include average net monthly
income, monthly liabilities, and federal poverty guidelines.”
202 Neb. admin. Code, ch. 1, § 008.03 (2003).
In the case at bar, Holmes did not request that DHHs con-
sider his monthly liabilities, including his monthly mortgage
payment, utilities, and food costs, until the time of the hearing.
at the hearing, DHHs’ representative testified that Holmes’
monthly liabilities would be considered only in an undue

hardship determination. she testified that because Holmes had
chargeable assets, he would not qualify for relief through
the undue hardship review. because we have concluded that
it was reasonable to assume Holmes would not return to his
house, we determine that Holmes had chargeable assets, and
therefore, DHHs was not required to make an undue hard-
ship determination.
In determining a client’s ability to pay from unearned income,
the regulations provide that “a client with unearned income or
benefits must have the ability to pay the amount by which such
unearned income or benefits exceed the sum of: 1. the personal
needs allowance established by [DHHs]; and 2. the standard
of need allowance under the Medicaid program.” 202 Neb.
admin. Code, ch. 1, § 010.03.
DHHs determined that Holmes’ personal needs allowance
was $50 for time spent in inpatient care and $730 for time
spent in outpatient care, and DHHs deducted these amounts
from his unearned income accordingly. However, DHHs incor-
rectly labeled the $730 amount as only an allowance for room
and board. the $730 amount represented both a personal needs
allowance and a standard of need allowance for the time spent
in outpatient care. see Neb. rev. stat. § 68-1006.01 (reissue
2003) (providing that $730 standard of need allowance includes
$50 personal needs allowance).
DHHs’ representative testified that the $50 amount was a
personal needs allowance and that a standard of need allow-
ance was not available to inpatient clients. DHHs regulations
provide that the personal needs allowance “is established by
[DHHs] or based on Medical assistance guidelines.” 202 Neb.
admin. Code, ch. 1, § 002. the Medical assistance guidelines
used by the Department to establish the personal needs allow-
ance were phrased as “standard of need for – Nursing Home,
public Institution for the treatment of Mental Diseases and/or
Mental retardation” and provided for a $50 allowance.
because of the way the Medical assistance guidelines were
phrased—including the term “standard of need”—the district
court found that DHHs had made only a standard of need allow-
ance assessment but had called it a personal needs allowance.
In actuality, DHHs had calculated a personal needs allowance,
HoLMes v. state 	219
Cite as 275 Neb. 211

220 	275 Nebraska reports
albeit confusingly. and since no standard of need allowance
was available for inpatient care, DHHs’ assessment of Holmes’
personal needs allowance was the only allowance that DHHs
was required to assess for inpatient care. thus, DHHs was cor-
rect in determining that $50 should be deducted from Holmes’
unearned income for the time he spent in inpatient care and that
$730 should be deducted from Holmes’ unearned income for
the time he spent in outpatient care.
CoNCLusIoN
the district court erred in requiring DHHs to perform an
analysis of Holmes’ ability to return to his house as of the time
of the ability-to-pay determination made by DHHs and erred in
remanding the case for a personal needs analysis. DHHs was
correct in its determination of Holmes’ ability to pay for his
care from the NrC. We therefore reverse the judgment of the
district court for Lancaster County and remand the cause with
directions to reinstate the director’s order.
reverSed ANd remANded With direCtioNS.
lArry e. peterSeN ANd J oyCe A. peterSeN, huSbANd ANd Wife ,
AppelleeS, v . C eNtrAl pArk propertieS, iNC., et Al .,
AppelleeS, ANd reAlty liNC, iNC., doiNg buSiNeSS
AS erA reAlty C eNter , gArNiShee -AppellANt .
745 N.W.2d 884
Filed March 7, 2008. 	No. s-06-1289.
1. Garnishment: Appeal and Error. Garnishment is a legal proceeding. to the
extent factual issues are involved, the findings of a garnishment hearing judge
have the effect of findings by a jury and, on appeal, will not be set aside unless
clearly wrong.
2. Judgments: Debtors and Creditors: Garnishment. upon establishing through
pleadings and trial that the garnishee holds property or credits of the judgment
debtor, the garnishee must then pay such amounts to the court in satisfaction of
the judgment against the judgment debtor, subject to certain statutory exceptions
with regard to wages.
3. Garnishment: Pretrial Procedure. as a general rule, a garnishee owes a duty
to act in good faith and answer fully and truthfully all proper interrogatories pre-
sented to him.