Opinion
No. CV 01-0811032
June 23, 2008
MEMORANDUM OF DECISION
Plaintiff Glastonbury Healthcare Center, Inc. brings this action against defendant Carmine Esposito for his alleged failure to prosecute a claim for Medicaid benefits on behalf of his mother Josephine to be used to pay plaintiff's charges for Josephine's stay in plaintiff's facility. Plaintiff's causes of action sound in breach of contract, negligence, promissory estoppel and fraudulent misrepresentation. The defendant alleges a number of special defenses which will be dealt with infra.
The fact are as follows. Josephine Esposito was the mother of defendant, Carmine and the wife of Salvatore Esposito. In the early 1990s she became afflicted with Alzheimer's disease and was placed in the Hebrew Home and Hospital in Bronx, New York. Taking advantage of a New York statute, Salvatore obtained a court decree absolving himself from any financial responsibility for his wife's care. He qualified her for Title XIX in New York and Medicaid paid her bills.
On February 17, 1992, Salvatore Esposito executed a will in Hartford which bequeathed to his wife Josephine the income from one-third of his estate. He appointed defendant Carmine as executor. On July 25, 1996, Salvatore Esposito died.
In November 1996, Carmine and his wife applied for Josephine to be admitted to plaintiff's facility in Glastonbury where Carmine lived. The plaintiff then had no vacancy. Carmine placed Josephine in Mapleview Manor in Rocky Hill. That nursing care home accepted New York Medicaid payments. Because Carmine was dissatisfied with the service of the Mapleview Manor and wanted his mother closer to his home, he again applied to the plaintiff for her admission.
Plaintiff made it clear it would not accept New York Medicaid payments and required defendant apply for Medicaid in Connecticut. On July 27, 1997, Carmine filed a financial disclosure statement with the plaintiff indicating his mother's care would be financed by Title XIX in Connecticut, and that she had monthly income of $468.00 and no other assets.
On August 19, 1997, Salvatore's former attorney prepared an accounting of the "estate of Salvatore Esposito." The accounting indicated gross assets of $276,131.99. After deducting funeral expenses, other expenses and an attorneys fee, the net balance of the estate was $241,593.20. This amount however, did not include "an HUD investment in California having an estimated value of $4,030.97." This investment was a Government National Mortgage Association (hereinafter "GNMA") bond which had been in the joint name of Salvatore and Josephine Esposito and on Salvatore's death became the property of Josephine. It bore annual interest at 7.25 percent and paid monthly $56.39. Some of that payment was amortization so the principal was reduced each month.
On August 23, 1997, Carmine, as executor, distributed the net assets of Salvatore's estate as follows: to himself: a one-third share or $75,531.07; to Anna DiGennaro (sister of Carmine): a one-third share or $75,531.07; and to four nieces and nephews (children of another sister of Carmine) a total of $75,531.07. He reserved $15,000.00 "for Josephine Esposito Expenses." He made the distribution despite the fact that Salvatore Esposito's 1992 will bequeathed to Josephine the income of one-third of the estate during her lifetime.
During the period of the estate's administration, Carmine as executor, did not pay Josephine or the facilities in which she was placed, the income from one-third of the estate ($80,531.07), which at a conservative money market rate of 5% would have amounted to $4,026.55 a year. Carmine placed the $15,000.00 reserved for Josephine in an account in the Mechanics Savings Bank in Connecticut and from time to time added to it the income realized from the above-mentioned GNMA bond. The bank account was in the name of the estate of the already closed Salvatore Esposito, but it had the Social Security number of Josephine.
In pursuance of his application to get Josephine admitted into the plaintiff's nursing home, Carmine, on March 31, 1998 filed an application for Title XIX (Medicaid) benefits at the Department of Social Services. He listed as Josephine's sole asset the GNMA bond, having a value of approximately $3,400.00.
On April 1, 1998, Josephine entered the plaintiff's healthcare center and on April 2, 1998, Carmine met with Lucy Higgins, plaintiff's admission officer, to complete the admission procedure. On that day Higgins presented to Carmine the Admission Agreement. That agreement has three parties: the plaintiff as the "Facility," Josephine Esposito as the "Resident," and Carmine Esposito as the "Responsible Party." Each had distinctly separate obligations. The agreement states that the plaintiff shall provide 24 hour general nursing and personal care to Josephine, Josephine shall pay the plaintiff's charges, and Carmine, the Responsible Party, shall have the following responsibilities: In Article IV (2), the Responsible Party agrees "to provide all information that may be requested by the Connecticut Department of Social Services in connection with the application [for medicaid assistance] in accordance with any deadlines established by the Department." And, in Article IV (4), the Responsible Party agrees: "to act promptly and expeditiously to establish and maintain eligibility for medicaid assistance, including but not limited to taking any and all necessary action to insure that the resident's assets are appropriately reduced and to remain within allowable limits for Medicaid Assistance as established by the Connecticut Department of Social Services."
At that time Carmine knew that the value of any assets held by a recipient of Medicaid was not to exceed $1,600.00. Carmine was also informed that Josephine would not be admitted to the plaintiff's facility unless the Admission Agreement was agreed upon.
At this point there is a sharp conflict in the evidence. Higgins testified that although she did not remember the specifics of her conversation with Carmine because she had so many admissions, her general practice was to summarize the Admission Agreement and particularly the obligations of the Responsible Party stated in Article IV (2) and (4) with the Responsible Party and she followed that general practice with Carmine. After her summary of those sections of the agreement, Carmine did not affirmatively express consent to them, but he did not object.
Carmine testified that Higgins did not explain provisions of Articles IV (2) and (4) but rather said to Carmine that the Admission Agreement was a mere formality. He testified that Higgins further said that she had checked with the Department of Social Services and been informed that Carmine had filed the application for Medicaid benefits for Josephine and the application was "clean," which Higgins inferred meant that it would be speedily approved.
Carmine signed the agreement on the line above the legend, "Signature and Title of Party Acting for the Resident (Conservator of the Estate or Power of Attorney, if Resident is not managing his or her own affairs)." Carmine said he signed as power of attorney. There was no place on the agreement for Carmine to sign as a responsible party and he did not so sign the agreement in that capacity.
This court resolves the critical conflict in the testimony by believing Higgins followed her general practice of explaining to Carmine his obligations as a responsible party, as set forth in Article IV (2) and (4).
After the Medicaid application was filed, the Department of Social Services (hereinafter "DSS") made an extensive investigation of Josephine's assets and repeatedly requested of Carmine information as to selling the GNMA bond and closing out of the Mechanics Savings account. At one point, Laura Catarino, who was handling the matter for DSS, inquired about Josephine being entitled to one-third of Salvatore's estate or the amount of $80,531.00, by reason of her right to elect to receive that amount from the estate as Salvatore's widow under New York law. However, she abandoned that claim, and concentrated on getting information about the GNMA bond and the money in the Mechanics Savings Bank account.
Salvatore produced the statements of Mechanics Savings Bank showing that the balance as of February 1999 was $17,584.18 and there had been deposited into the account the income from the GNMA bond. In October 2000, that balance had increased to $19,204.66. During this period, Carmine insisted the money had been contributed by the three children of Salvatore, and was not Josephine's money but it was under his jurisdiction to determine her needs.
Sometime in 1999 Attorney Michael Bellobuono started to represent Carmine. He advised Carmine that the Mechanics Savings Bank money was not Josephine's funds.
Catarino repeatedly informed Carmine and Attorney Bellobuono that both the GNMA bond and the bank account had to be reduced to $1,600.00 before Josephine would qualify for Medicaid benefits. On November 18, 1999, Catarino sent to Carmine a request that the GNMA bond be sold and the Mechanics account be reduced to $1,600.00 before November 30th or the application would be denied. Catarino sent another letter on March 9, 2000 requesting the same action be taken, giving the deadline of March 23, 2000. Neither Carmine nor his attorney, Bellobuono who had become conservator of the estate of Josephine in January 2000, met the March 23, 2000 deadline. As a consequence DSS denied Josephine's application for Medicaid benefits on March 23, 2000.
On April 26, 2000, Attorney Bellobuono requested a hearing contesting DSS's decision. The hearing was held on July 11, 2000. The hearing officer upheld the department's denial of the Medicaid application on the grounds that the department had requested the applicant to verify that the two assets had been reduced to $1,600.00 and the applicant had failed to provide that verification. The decision was, "The Regional Offices is upheld in the denial of the applicant's March 31, 1998 application for Title XIX long term care benefits due to the lack of sufficient information."
Eventually, Attorney Bellobuono sold the GNMA bond and transferred its proceeds and the proceeds of the Mechanics Savings Bank to the plaintiff. Josephine's application for Medicaid benefits were finally approved as of September 30, 2000.
In this action plaintiff originally sued both Carmine and also Attorney Bellobuono as conservator of Josephine. Plaintiff settled the case against Bellobuono for $17,500.00 and gave him a release.
The plaintiff claims that it is entitled to damages, measured by the loss of Medicaid benefits for Josephine's care from April 1, 1998 to September 30, 2000, in the amount of $115,639.00.
BREACH OF CONTRACT
In the first count, plaintiff alleges Carmine breached the Admission Agreement by not fulfilling his obligation as a responsible party to comply with Article IV (2) and (4). Those sections require the responsible party to provide all information that may be requested by the DSS in connection with an application for Medicaid and to promptly and expeditiously establish and maintain eligibility for Medicaid assistance by reducing and keeping the patient's assets below $1,600.00.
The Admission Agreement was signed by Carmine as a representative of his mother Josephine — in this case, having a Power of Attorney for her. It was not signed by him as a responsible party. The Agreement provides at Article XVII, Section (1), "The execution of this agreement will constitute acceptance on the part of' the Facility, the Resident and die Responsible Party to undertake faithfully all of the obligations of this agreement." By not signing as a responsible party, Carmine was not bound by the obligations of a responsible party in that written agreement.
However, the court found the following facts: Carmine sought to get his mother into the plaintiff's nursing home. He was informed that the plaintiff would not accept his mother without a source of payment for her. He knew and intended that source of payment to be Medicaid. In fact, he had, prior to meeting with plaintiff's representative, Lucy Higgins, applied through DSS for Medicaid assistance. At the meeting to complete his mother's admission and to sign the Admission Agreement, Higgins informed Carmine that he was the responsible party and that his obligations included those stated in Article IV (2) and (4). The court finds that Higgins summarized those obligations for Carmine and although he never verbally consented to comply with them, he did not object. His silence at being informed of his obligations as a responsible party led the plaintiff to reasonably conclude he was accepting those obligations. Under such circumstances his silence constituted his consent to the provisions of Article IV (2) and (4) and created an oral contract to comply with those provisions.
As stated in Pleines v. Franklin Construction Co., 30 Conn.App. 612, 617 (1993): "Acceptance may be shown by acts or conduct indicating assent to an offer or, under appropriate circumstances, acceptance may be implied by the offeree's silence and inaction. (Citations omitted.) Moreover, regardless of actual intent, if the offeree's conduct leads the offerer reasonably to conclude that the offer is being accepted, acceptance has taken place as a matter of law." That axiom is also stated in John J. Brennan Construction Corporation, Inc. v. Sheldon, 187 Conn. 695, 709 (1982) where the court adds, "Whether a party has conducted himself so as to lead the other party reasonably to infer acceptance is a question of fact for the trial court."
The court concludes on the facts of this case and on basis or that principle that an oral contract was entered into between the parties for defendant to comply with Article IV (2) and (4) of the Admission Agreement.
Carmine breached his oral contract by failing to reduce his mother's assets to $1,600.00. He consistently failed to take the necessary steps to sell the GNMA bond worth over that amount. This was a negotiable bond that could have been sold by his verifying he held a current Power of Attorney for his mother.
He also persistently claimed that the $15,000.00 in the Mechanics Savings Bank was not Josephine's money but rather voluntarily contributed by him and his sisters to pay for his Josephine's expenses. He held to that conviction even though the account bore Josephine's Social Security number and he was depositing income from the GNMA bond into that savings account.
Carmine, as executor totally ignored the provisions of Salvatore's 1992 will providing that Josephine get the income from one-third of Salvatore's residuary estate. The estate had a net value, after all expenses, of $241,593.20. A third of that amount was $80,531.07. At a modest money market rate in the late 1990s of 5%, that income would have amounted to $4,026.55 per year. Carmine, as Executor never paid over that amount to his mother during her lifetime. More egregiously, in 1997 he distributed the entire estate to the other heirs, each getting $75,000.00, including himself, without retaining one-third of the residuary estate from which his mother was entitled to the income. Clearly, Carmine violated his fiduciary duties as an executor. More relevant to this case, that $15,000.00 in the Mechanics Savings Bank, derived from Salvatore's estate, was Josephine's money as DSS insisted and this court so finds.
Carmine's attitude regarding that $15,000.00 reflects a consistent pattern of behavior of the Esposito family to avoid making any payment toward the care of Alzheimer-stricken Josephine in a nursing home and foisting that financial responsibility upon the state of New York and then of Connecticut. Salvatore initiated the plan by taking advantage of a New York statute to absolve himself of financial responsibility for his stricken wife. Carmine continued the plan by never preserving Josephine's legacy under Salvatore's will and by resisting paying over the last $15,000.00 of Salvatore's estate to the plaintiff.
The court finds that Carmine violated his oral contract with the plaintiff in two particulars: he failed to provide the information DSS requested regarding assets of Josephine and he failed "to act promptly and expeditiously to establish and maintain [Josephine's] eligibility for Medicaid."
On September 30, 2000, Carmine finally relented and turned over the proceeds of the bond and the bank account to the plaintiff and Josephine qualified for Medicaid. In the meantime, from April 1998 to September 2000, plaintiff lost the Medicaid payments it would have received. Carmine's breach of contract makes him liable for tat loss. See Sunrise Healthcare Corp. v. Azarigan, 76 Conn.App. 800, 812-13 (2003), holding a defendant liable as a responsible party under a contract similar to that in this care for losses suffered by a nursing home.
Defendant argues that because Attorney Bellobuono took over for him in dealing with DSS and because Attorney Bellobuono became the conservator of Josephine, Carmine cannot be held liable. The argument is without merit. The client is not relieved of his obligations because an attorney is hired to fulfill them for him. And as Josephine's conservator, Attorney Bellobuono acted for Josephine and in her stead. His responsibilities were separate from those of Carmine, who as responsible party under his oral contract with the plaintiff was obligated to fulfill the duties stated in Article IV, (2) and (4).
Defendant further contends that plaintiff waived the right to require that Josephine be qualified to receive Medicaid because plaintiff admitted Josephine before she was qualified. That contention is also without merit. Plaintiff admitted Josephine after it had indications from DSS that Josephine's application for Medicaid was clean and likely to be approved but, by no means, did plaintiff give up the requirement that the application for Medicaid, as a source of payment, be fully approved. More relevantly, Carmine, as the responsible party under his oral contract with the plaintiff, still had the obligation to get Josephine qualified by bringing her assets to at least $1,600.00 and to keep her qualified.
Defendant also asserts the defense of the statute of frauds, citing § 52-550(2) and (5). That defense is unavailing. The liability of Carmine in breach of contract is not based upon the promise to answer for the debt of Josephine, but rather for his failure to meet his entirely separate responsibility as a responsible party. Also, that agreement could be performed within one year from its making.
Although the complaint alleged a breach of a written contract, the evidence established a breach of oral contract. However, the relevant terms of the two were the same, and defendant was neither surprised nor prejudiced by this disparity between the complaint and the proof. Moreover, defendant recognized the probability of an oral contract by alleging as a defense to it the three-year statute of limitations. That defense can not prevail. Carmine's breach of contract continued until September 30, 2000, and this action was initiated by service of the defendant on September 15, 2001, clearly within the statute.
The court concludes plaintiff proved the count of breach of contract.
NEGLIGENCE
A cause of action of negligence rests on a duty to exercise reasonable care, and breach of that duty causing actual injury to another. Mazurek v. Great American Insurance Co., 284 Conn. 16, 29 (2007).
In the instant case Carmine answered interrogatories to the effect he "agreed to make application to the Connecticut Department of Social Services for a Title XIX benefit on behalf of Josephine Esposito." He was apprised by Lucy Higgins of his obligations as a responsible party to provide all information requested by DSS in connection with the application for Medicaid and also to "promptly and expeditiously establish and maintain eligibility for Medicaid assistance." He knew plaintiff would not admit his mother unless he accepted that obligation. By his silence he consented to those obligations and thus he had the duty successfully to get the application of Josephine for Medicaid approved.
He failed to exercise reasonable care to do so. He neglected to sell the GNMA bond to reduce Josephine's assets below $1,600.00. He testified to difficulty selling the bond, but his New York attorney was informed by North American Mortgage Company as early as February 14, 1997 that he could do so through a stockbroker. The plaintiff himself was informed that it could effectuate a sale by having a current power of attorney of Josephine executed within two months of the sale. When Attorney Bellobuono became conservator in January 2000, he sold the bond in about September 2000 but the delay was a proximate cause of holding up approval of Josephine's application for Medicaid.
Defendant further neglected to turn over the proceeds of Mechanics Savings Bank which clearly belonged to Josephine and which also delayed approval of Josephine's application.
Most egregiously, Carmine and Attorney Bellobuono never responded to DSS's repeated requests for information as to the GNMA bond and the Mechanics Savings Bank account, which was the specific reason for DSS denying the Medicaid application. That was also a breach of Carmine's obligation under the oral contract.
Defendant asserts the three-year statute of limitations as a defense to this tort count. However, the negligence of defendant in failing to reduce Josephine's assets below $1,600.00 and to respond to requests for information as to her assets continued at least until September 2000. Service of the writ, summons and complaint on the defendant on September 15, 2001, was clearly within the statute of limitations.
The court concludes that plaintiff has proven its cause of action for negligence.
PROMISSORY ESTOPPEL
A cause of action for promissory estoppel rests on "[a] promise which the promissor should reasonably expect to induce action or forbearance on the part of the promissee . . . and which does induce such action or forbearance is binding if justice can be avoided only by enforcement of the promise." Restatement (Second), Contracts, Section 90. As further stated in D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 213 (1987), "A fundamental element of promissory estoppel, therefore, is the existence of a clear and definite promise which a promissor could reasonably have expected to induce reliance."
Here, the court finds that defendant wanted Josephine's care at plaintiff's facility to be paid for by Medicaid. He knew that a requirement of Medicaid was that the assets of Josephine be no more than $1,600.00. He knew that plaintiff would not accept Josephine without her being approved for Medicaid. He agreed to apply for her Medicaid for her. He consented by his silence to accept the obligation of a responsible party to obtain and maintain Josephine's eligibility for Medicaid. Defendant reasonably expected that plaintiff would rely upon that conduct and promise to accept Josephine as a resident. Plaintiff did so rely. Defendant failed to obtain approval of Josephine's application from April 1, 1998 to September 2000. As a consequence, plaintiff lost Medicaid payments for that period. Those facts establish the cause of action of promissory estoppel.
The defendant asserts as a defense that plaintiff failed to exercise due diligence to sustain the truth as to Josephine's eligibility for Medicaid in that Josephine's application to DSS did disclose the GNMA bond, worth approximately $2,400.00, and which revealed that Josephine thus had assets over $1,600.00. In Joseph J. Brennan Construction Corporation, Inc. v. Sheldon, 187 Conn. 695, 711 (1982) the court does impose upon the plaintiff the obligation to exercise "due diligence to ascertain the truth and that he not only lacked knowledge of the true state of things but had no convenient means of acquiring that knowledge."
Plaintiff convincingly responds that it reasonably expected that the bond would be sold within the month of April 1998 so DSS would start paying Medicare benefits from April 1, 1998.
Plaintiff had no way of knowing about the Mechanics Savings Bank account in the amount of approximately $15,000.00. Defendant did not disclose it. Higgins testified that plaintiff does not investigate resident's finances at the time of application but relies upon the resident's financial disclosure. DSS, itself, did not discover this account until some six month after the application was filed.
The court finds that under the circumstances the plaintiff did exercise due diligence to discover the truth as to Josephine's eligibility for Medicaid benefits.
Defendant further relies upon the principle that "`silence will not operate as [an] estoppel absent a duty to speak.'" Celentano v. Oaks Condominium Association, 265 Conn. 579, 615 (2003).
Here, where defendant was seeking to have Josephine accepted by plaintiff as a Medicaid beneficiary, knew the plaintiff would not accept Josephine without her Medicaid application being approved, and was apprised of his obligation to obtain and maintain her eligibility as a condition for her acceptance, he had the duty to object to that obligation. The court finds that duty to speak and Carmine's failure to do so form the basis for estoppel.
FRADULENT MISREPRESENTATION
In this count, plaintiff alleges that defendant falsely represented in the financial disclosure form he submitted to the plaintiff in July 1997 that Josephine had no assets. Plaintiff further alleges that that statement was untrue and known by the defendant to be untrue because, in fact, Josephine had the amount of $15,000.00 and that Josephine was entitled to receive an inheritance worth approximately $80,000.00 from her husband's estate. These representatives are alleged to be material and to induce the plaintiff to rely upon them in admitting Josephine into its facility.
Carmine honestly believed the $15,000.00 was contributed by him and his sisters for Josephine's benefit, but it was not her money. He was advised by both Salvatore's former lawyer and Attorney Bellobuono that it was not Josephine's money. Although Carmine and the two lawyers were mistaken, Carmine did not intentionally make a false representation as to it.
As for the purported $80,000.00 Josephine was entitled to under New York law by way of her right to elect against her husband's will for one-third of his estate, defendant did not even know about that right of election and his failing to revealing it cannot be constituted fraud.
Defendant did commit fraud by failing to carry out the terms of the will to retain one-third of Salvatore's estate and to apply the income for the benefit of Josephine. However, that fraud was not alleged and so cannot be considered as part of the claim of fraudulent representation.
The court finds that plaintiff failed to prove its count of fraudulent representation.
Finally, defendant argues that the release of Attorney Bellobuono also released the defendant of all liability on all counts on the theory that the release of an agent releases the principal. However, Bellobuono was sued as a conservator in a separate count of the complaint and he was released as such. There is nothing in the release itself to indicate that plaintiff intended by that release also to release the defendant.
DAMAGES
By reason of plaintiff proving its counts of breach of contract, promissory estoppel and negligence, plaintiff is entitled to damages for the loss of Medicaid payments that plaintiff would otherwise have received but for defendant's conduct. However, its proof of damages at the Medicaid rate of $115,639.00 is sketchy at best. Plaintiff's representative testified that plaintiff applied all the payments received on behalf of Josephine to cover her stay from April 1, 1998 until September 1, 1998. Plaintiff's billing from September 1, 1998 until August 31, 2003, totaled $115,639.83. There is no testimony or itemization of how the credits to which Josephine was entitled were applied or calculated.
From the evidence in the record, the court recalculates the amount due plaintiff as follows:
From April 1, 1998 until July 31, 1999 at the Medicaid rate of $158.65 a day for 487 days = $77,262.55
From July 31, 1999 until July 31, 2000 at the Medicaid rate of $167.66 a day for 365 days = 61,195.90
From August 1, 2000 until September 30, 2000 at the Medicaid rate of $172.64 a day for 61 days = 10,531.04
The total owed to plaintiff is then $148,989.49
From that sum must be subtracted the following:
The amount received from the Manchester Savings Bank account, less burial expenses retained-$10,876.66
The amount received in settlement from Attorney Bellobuono-17,500.00
The amount received from the GNMA bond-1,688.38
Thirty payments of Josephine's Social Security at $545.00 per month (from April 1, 1998 to September 30, 2000) — $16,350
The defendant deducted only six of Josephine's Social Security payments, without explanation. At oral argument, after trial, plaintiff's lawyer said Medicaid regulations permitted that limited deduction, but there was no evidence to that effect. Defendant argues monthly Social Security benefits may have increased because of inflation in that period, but the increase, if any, would have had a minimal effect on the amount the court calculates for this item.
Deductions thus total — $46,415.04
The net amount due the plaintiff is: $102,574.45
Plaintiff is not entitled to attorneys fees or interest because, although those items are provided for in the written Admission Agreement, they were not explained to the defendant by Higgins or consented to by him.
Judgment may enter in favor of the plaintiff in the amount of $102,574.45.