A three-judge panel ruled that Guilford County's social services department must use the child's monthly Social Security payments to pay the mortgage. The agency was using the money to reimburse itself for the cost of its services to the boy.

The department must also pay to bring the mortgage current and to fix up the Habitat for Humanity house, which has fallen into disrepair.

The child, identified only as John G., is now 17. When he turns 18, he will be on his own, and the house will be an asset for him and a place for him to stay. Without it, John would have little.

Lewis Pitts of Durham, John's attorney, said the house was one of the few parts of John's life that might remain stable.

"The very child welfare agencies that are supposed to be doing what's best for their children are doing what's best for their bureaucratic organizations," Pitts said.

The appeals court in its Tuesday ruling upheld a District Court judge's decision, which the social services department argued overstepped the lower court's bounds. The agency said a trial judge could not tell it how to spend federal money.

The panel said the ruling was justified because the judge has oversight of a child's welfare.

"[John's] best interests were central to the court's order, which noted that if Habitat for Humanity foreclosed on the Habitat home, [John] would receive very little money from the sale and would be homeless when he aged out of foster care," Judge Barbara Jackson wrote in her opinion.

The court's unanimous ruling could make it tough to overturn. Lynne Schiftan, an attorney representing Guilford's Department of Social Services, said she is reviewing the decision and would not say whether there would be an appeal.

Guilford social services officials did not return phone calls seeking comment.

John inherited the Habitat for Humanity house from his stepfather, who died when John was 3 years old. His mother had left them both when the boy was 2.

After his stepfather's death, John was bounced from caretaker to caretaker. One was a drug addict who beat him with a hanger. An aunt then stepped in, but she kicked John out of his house early every morning, and he fought with her boyfriend.

Social services took custody of John when he said he didn't want to go back to live with the aunt. He didn't like the living conditions there and was concerned she was falling behind on mortgage payments. John was passed around to different relatives who failed to take care of him or the house.

When he was 14, John ended up in the care of Guilford County's Department of Social Services. The agency didn't make the house payments, instead using the $538 John received each month to help cover the $1,300 monthly rate for room and board at a therapeutic foster home. He stayed there before a foster parent took him in.

The house went into foreclosure, and John sued to keep it.

When a district court judge in Guilford ruled in 2005 that DSS should pay about $2,800 in past-due mortgage payments, it balked and appealed the decision.

Attorneys and advocates for John say his case is an example of how foster care agencies across the country use children's Social Security benefits to offset the costs of caring for them.

"This process is a national practice, but this is a way to stop it," Pitts said. "The challenge is that they have to have courage to take it to court."