New Jersey appeals court held that a nursing home does not have standing to bring a lawsuit against the daughter/power of attorney of a resident who transferred the resident’s money to herself, causing a Medicaid penalty period. Future Care Consultants v. M.D. (N.J. Super. Ct., App. Div., No. A-4565-17T1, July 5, 2019).

M.D. cared for her mother, B.S., and began to financially support her in 2010. M.D. transferred funds from B.S.’s accounts to an account in her name, supposedly because B.S.’s husband was exhibiting signs of dementia. M.D. claimed she used the transferred money to pay for B.S.’s personal needs and housing expenses. In May 2013, M.D. became B.S.’s agent under a power of attorney.

In October 2013, B.S. was admitted to Liberty Royal Rehabilitation and Healthcare Center (Liberty), a nursing home. Defendant, as B.S.’s power of attorney, signed all admission documents required by Liberty, but never signed any documents designating her as a personal guarantor or making her personally responsible to pay B.S.’s nursing home expenses.

M.D. applied for Medicaid on behalf of B.S. In November 2014, New Jersey Medicaid approved B.S.’s Medicaid application, but imposed a 224-day penalty period based on the transfers from B.S. to M.D.

Liberty sued M.D for conversion and breach of fiduciary duty, seeking reimbursement of the money M.D. withdrew from B.S.’s account. M.D. filed a counterclaim asserting she was not a guarantor of B.S.’s debts, and sought compensatory and punitive damages for violations of the Nursing Home Responsibilities and Rights of Residents Act.

M.D. then filed a motion to dismiss based on lack of standing. The trial court granted the motion to dismiss, holding that there was no personal guaranty or contract between M.D. and the nursing home making M.D. personally responsible for B.S.’s debts. The nursing home appealed.

The New Jersey Superior Court, Appellate Division, affirmed. The appeals court held that, because the nursing home never had ownership or possession of the transferred funds, the nursing home did not have standing to bring a claim of conversion or breach of fiduciary duty against M.D. The court concluded as follows:

[I]n this case, there was no contract between the parties designating defendant as a responsible party, ‘and thus no third party guarantee, . . . .‘ We agree with the judge’s conclusion here. There is nothing in the record to suggest [M.D.] assumed personal liability for B.S.’s expenses at Liberty and the complaint was properly dismissed.

The case is attached here: Future Care Consultants v. M.D.

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