Opinion
No. CV 04 4001606
October 12, 2006
MEMORANDUM OF DECISION RE WHETHER DEFENDANT PERSONALLY LIABLE TO CONVALESCENT HOSPITAL FOR PARENT'S INCOME
Plaintiff Saybrook Convalescent Hospital, Inc., brings this action to compel payment of $20,727.90, by the defendant, Timothy Klevecz, for services rendered to his father, John Klevecz, a resident at the plaintiff's facility from January of 2000 until his death on August 19, 2001. The plaintiff claims that the Resident Admissions Agreement executed by the defendant makes him personally liable for the amount of his father's income which he should have turned over to the facility for his father's care there. The plaintiff also seeks prejudgment interest and attorneys fees. The defendant denies personal liability, and raises three special defenses to the plaintiff's claims: namely, laches; estoppel; and failure to mitigate damages.
John Klevecz was admitted to Saybrook Convalescent Hospital, Inc., a nursing home facility, on January 10, 2000, at which point he was legally blind and suffering from diabetes, liver disease, depression, dehydration, and hypoglycemia. Shortly thereafter Timothy Klevecz met with the plaintiff's employee, Amelia Dupre, Director of Admissions, and executed a Resident Admissions Agreement ("the Agreement"). The defendant signed the last page of the Agreement twice, once on a line captioned "Signature of Title of Party Acting for Resident (Conservator or [sic] Estate or Power of Attorney, if Resident is Not Managing His/Her Affairs)" and again on a line captioned "Signature of Responsible Party."
Paragraph 8 of Part II of the Resident Admissions Agreement states
[t]he resident and responsible party . . . agree that, if the resident is determined by the Connecticut Department of Social Services to be eligible for Medicaid assistance, the amount of the resident's monthly income established by the Department as "applied income" will be paid monthly to the facility on or before the tenth day of each month. (Emphasis added.)
Paragraph 9 of Part II of the Resident Admissions Agreement states
[i]f the responsible party has control of or access to the resident's income and/or assets, the responsible party agrees that these funds will be used for the resident's welfare, including but not limited to making prompt payment for care and services rendered to the resident in accordance with the terms of this agreement. (Emphasis added.)
Defendant Timothy Klevecz also signed in a space captioned "Signature of Responsible Party" a document entitled "Notice Regarding Medicaid Assistance" which states in part
[i]f you are eligible for Medicaid assistance, all of you; income, except for a personal allowance of $50 per month, must be paid to the nursing home. Medicaid will pay the nursing home the rest of the cost of your care, at rates set by the State.
The defendant further signed as "Responsible Party" a document entitled "Procedure for handling of Resident Mail," directing the plaintiff to re-direct all of his father's business-related mail to him as the "Responsible Party."
At all times material defendant Timothy Klevecz had a full Power of Attorney for John Klevecz and his affairs.
Amelia Dupre testified that she explained to the defendant that if his father were approved for Medicaid, he as the responsible party would be required to turn over the resident's monthly income to the facility to supplement his Medicaid benefits. The defendant testified that Ms. Dupre lead him to believe that the state would be covering all the costs of his father's care. Although John Klevecz was approved for Medicaid, neither he nor his son, Timothy Klevecz, ever turned over any part of his monthly income to the plaintiff as required by the Department of Social Services and by the Agreement.
In June 2001 Timothy Klevecz wrote a letter to the Connecticut Department of Social Services in which he informed the department that his father was residing in the Saybrook Convalescent Hospital and that his father was receiving the following monthly income: $395.10 as a pension; and $761.00 from social security. He also listed his father's bank accounts.
The Connecticut Department of Social Services determined the amount of "applied income" which ranged from $826.84, to $1,102.10. The average of the "applied income" payments was approximately $1,100.00 per month. John Klevecz' monthly income from his social security and Pension was $1,156.00.
The court finds that the total amount of applied income for the period of John Klevecz' care at the Saybrook facility is $20,727.90.
"Responsible Party" Dispute
The defendant disputes his obligation as "responsible party," arguing that he signed the Agreement only in his capacity as Power of Attorney for his father and that he is not personally liable under its terms. He claims that the plaintiff's employee, Amelia Dupre, informed him that all of the costs of his father's care would be paid for by the state, and at no time did he understand that he had a duty to make payment to the plaintiff.
The plaintiff did not send monthly invoices to the defendant according to the process set out in the Agreement. Instead, it received monthly "applied income" notices from the Department of Social Services which Amelia Dupre in turn mailed to the defendant. Though it never received any payment from the defendant, the plaintiff did not assess late charges and waited approximately two years from the date of the resident's death to initiate a suit for the collection of the alleged debt. The defendant argues that these facts weigh against a finding of personal liability.
Analysis
Defendant Timothy Klevecz signed the Resident Admissions Agreement twice, once as power of attorney again as responsible party. Accordingly, the court finds that the defendant entered into the Agreement both as his father's agent, and in his own capacity.
In Klepp Wood Flooring Corp. v. Butterfield, 176 Conn. 528, 532 (1970), the court held that if a defendant wishes to avoid liability by signing a contract only in a representative capacity, he or she has a duty to disclose that representative capacity as well as the identity of the principal. If Timothy Klevecz intended his signature as responsible party to bind only his father, he had a duty to disclose that intention. He did not mark this second signature in any way that would distinguish it as that of an agent. Moreover, it is illogical to contend that he signed as responsible party as his father's representative, because he had already signed as his father's representative on a signature line on the very same page.
The defendant argues that the Agreement is ambiguous, and would have the court resolve the ambiguities against the drafter, that is, the plaintiff. It is well established that where the language of a contract is unambiguous, "the contract is to be given effect according to its terms." Bernard v. Bernard, 214 Conn. 99, 110 (1990). The intentions in the minds of the parties is to be determined from the "fair and reasonable construction of the written words" Id., quoting Sturman v. Socha, 191 Conn. 1 at 10 (1983). The court finds that the Agreement clearly sets out the responsibilities of the responsible party and the court will not look to any extrinsic evidence of the misunderstanding or contradictory intentions of the parties.
Simply because he was a party to the contract with duties under its terms does not necessarily mean that he is personally liable for the expense of his father's care at the facility. In Sunrise Healthcare Corp. v. Azavigian, 76 Conn.App. 800 (2003) the court looked at a nursing home admissions agreement that was nearly identical to the Agreement here and concluded that the agreement did not make the defendant personally liable for payment to the plaintiff. Id. at 808. The Medicaid Act, 42 U.S.C. 1396r(c), allows a nursing home to execute a contract with a responsible party that requires that party, if he or she has access to the resident's assets, to use those assets to pay the facility for the resident's care. However, the Act also forbids a nursing home from requiring that the responsible party guarantee the payments personally. Id. at 802.
The contract at issue in Sunrise Healthcare and the contract at issue here both specifically provide that the responsible party will not be personally liable as a guarantor of paying for the services provided by the nursing facility. However, the contracts do provide that the responsible party will be responsible for handling the resident's assets only to the extent that those assets are owed to the nursing facility. Id. at 808. This is perfectly in line with the letter of the Medicaid Act and does not mean that the defendant has no obligation to the plaintiff. The Agreement, like the agreement in Sunrise Healthcare, obligates the responsible party to pay the resident's monthly income, which is the resident's property, to the facility. The defendant in Sunrise Healthcare used the funds in question for another purpose, although it was for the resident's benefit, and it was the failure to use the funds for the purpose designated in the agreement that resulted in a breach of contract, rather than personal liability for the payment of the resident's debt to the nursing home. The court in Sunrise Healthcare likens the relationship between the responsible party and the resident to that between a trustee and beneficiary, saying "[j]ust as the defendant is bound by the terms of the contract, so a trustee must act in accordance with the trust instrument." Id. at 809.
Section IV, Paragraph 2 of the Agreement provides that "[t]he responsible party does not personally guarantee or serve as surety for payment as described in Section II, Paragraphs 1 through 5. The responsible party agrees that his/her liability for failure to perform any of the other obligations set forth in this agreement shall be determined in accordance with these paragraphs." Paragraphs 1 through 5 of Section II described the obligations and methods of payment relating to per diem charges, ancillary charges, bed hold charges, and late charges, but do not specifically reference Medicaid benefits or the requirement that the responsible party or resident pay over the resident's monthly income to the facility to supplement the funds from Medicaid. These benefits and obligations are discussed in Paragraphs 8 on Page 4 through Paragraph 9 on Page 5.
The court finds that the Power of Attorney provided the defendant with access to his father's income during the time of his residence at the plaintiff's facility, and authorized him to use his father's income to pay the "applied income" charges for his father's care there. Therefore, following the language of the Resident Admissions Agreement, as well as the reasoning of Sunrise Healthcare, the court concludes that the defendant had a duty to turn over his father's monthly income to the plaintiff, a duty which he breached.
The defendant raises three affirmative defenses: namely, laches; estoppel; and failure to mitigate damages. The defendant contends that the doctrine of laches applies here, arguing that there was inexcusable delay that prejudiced him. Whether or not this is true, the doctrine of laches is not available to him, because he is not asserting an equitable cause of action. "Laches is purely an equitable doctrine, is largely governed by circumstances, and is not to be imputed to one who has brought an action at law within the statutory period." Florian v. Lenge, 91 Conn.App. 268, 282, quoting John H. Kolb Sons, Inc. v. GL Excavating, Inc., 76 Conn.App. 599, 613 (2003). Because this is an action at law for contract damages, laches does not apply. The defendant further raises the defense of equitable estoppel. The doctrine of estoppel requires that "the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief, and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done." Reinke v. Greenwich Hospital Ass'n., 175 Conn. 24, 28 (1978). The defendant has not demonstrated that the plaintiff or its representative intentionally mislead him regarding his obligations under the agreement. There must be deception or gross negligence "amounting to constructive fraud" in order to prevent a contract's enforcement based on equitable estoppel. Green v. Conn. Disposal Srvs., Inc. 62 Conn.App. 83, 91 (2001), quoting Novella v. Hartford Accident Indemnity Co., 163 Conn. 552, 564 (1972). Furthermore, the party seeking estoppel has the burden of showing that he or she exercised due diligence to ascertain the truth, 62 Conn.App. at 91, quoting Reinke, 175 Conn. at 28. The court finds that the defendant has not proved his equitable estoppel defense.
The defendant's third special defense is failure of the plaintiff to mitigate damages. The general rule with respect to mitigation is that "damages are not recoverable for loss that the injured party could have avoided without undue risk or burden." However, the plaintiff is not precluded from recovering damages where he or she has made "reasonable but unsuccessful efforts to avoid loss." Lynch v. Granby Holdings, Inc., 37 Conn.App. 846, 852 n. 5 (1995). The defendant argues that the plaintiff failed to mitigate damages by failing to send him monthly invoices. He claims that had they done so, he would have been on notice of the breach of contract and could have taken steps to remove his father from the plaintiff's care.
The plaintiff's administrator testified that the billing provisions of the contract apply only to private pay patients, not those receiving Medicaid benefits. There are separate provisions which apply to the defendant's father, as a Medicaid recipient, which set out that the monthly income due to the facility will be "established by the Department [of Social Services]." Ms. Dupre testified that the Department mailed monthly notices of payment due to the facility, which she in turn mailed to the defendant. The court finds that there was no contractual obligation that the plaintiff send a particular type of notice to the responsible party and that the Department notices constitute sufficient notice of the defendant's debt and are "reasonable but unsuccessful efforts to avoid loss." The fact that the plaintiff could conceivably have made further efforts to recover on the debt without assuming undue risk or burden does not mean that it failed to mitigate damages. It is not required that the plaintiff do everything in its power to mitigate, merely that it make reasonable efforts to do so. Moreover, the defendant bears the burden of proving that the plaintiff failed to exercise reasonable care in mitigating damages, Id. at 850, and the defendant here has made no such showing.
The defendant also argues that the plaintiff could have discharged the resident for nonpayment, which also would have reduced their damages. However, the Agreement, in Section I, Paragraph 8, stipulates that the facility may discharge the resident when the resident's account is more than thirty days in arrears "unless the resident is eligible for Medicare or Medicaid." The Agreement implies that the plaintiff will not discharge a resident receiving Medicaid benefits for failure to make payment.
Legal Conclusion
Inasmuch as defendant Timothy Klevecz possesses a Power of Attorney which enabled him to have control of the assets of John Klevecz during his stay at the Saybrook Convalescent Hospital, and by signing the Resident Admissions Agreement as the Responsible Party he was obligated to turn over to the Saybrook Convalescent Hospital the "applied income" amounts from John Klevecz' income, the court finds that he is indebted to the plaintiff for $20,727.90 — the total amount of the applied income.
Furthermore, the plaintiff is entitled to attorneys fees under Section III, paragraph 2 of the Agreement. The plaintiff's counsel has submitted an attorneys fee affidavit for $13,800.50.
This part of the Agreement states "[i]f this account is sent to an attorney for collection, the resident and responsible party agree to pay all costs and reasonable attorneys fees associated with any collection action."
The plaintiff also seeks an award of interest. Connecticut General Statues Section 37-3a(b) authorizes the trial judge to award interest no greater than five percent "[i]n the case of a debt arising out of services provided at a hospital . . ." This subsection also states that any such award is discretionary.
Judgment Award CT Page 18495
The court enters judgment for the plaintiff as follows:
Principal balance $20,727.90 Interest 414.58 Attorneys fees 13,800.50 __________ Total $34,942.45