Son Not Liable For Unpaid Nursing Home Bill Even Though Transfer Of Father’s Home To Son Caused Father To Be Ineligible For Medicaid

Heriberto Pumarejo transferred the ownership of his home to his son, Herbert Pumarejo, Jr., for one dollar. About two years later, Mr. Pumarejo became a patient at the Arnold Walter Nursing Home. Kathryn Pumarejo, Herbert’s wife and the resident’s representative, signed an agreement in which she agreed to pay all nursing home bills that were not paid by Medicaid from the resident’s personal assets. However, she did not agree to pay any of Heriberto’s unpaid nursing home fees from either her or her husband’s assets. Significantly, the nursing home was fully informed at the time of Heriberto’s admission to the facility that he had transferred ownership of his house, his only significant asset, to his son Herbert.

Kathryn filed an application for Medicaid benefits immediately after Heriberto was admitted to the nursing home. Several months later, the Medicaid application was denied, based upon the transfer of Heriberto’s home to Herbert. After the denial, the nursing home told Herbert that his father would have to leave the facility unless he transferred the home back to his father so the home could be sold or he sold that home himself and paid the outstanding nursing home bills.  Herbert, who viewed the house as his “inheritance,” refused to do either. He did, however,  remove Heriberto from the nursing home. Thereafter, Herbert and Kathryn provided home care for Heriberto until he passed away. Heriberto’s estate was insolvent.

The nursing home billed Kathryn and Herbert directly for the care rendered to Heriberto. The bill was almost $25,000. No payment was made. Thereafter, the nursing home filed a lawsuit for the outstanding bill against Kathryn and Herbert. Following the filing of an answer and some discovery, the parties filed cross-motions for summary judgment. The motion judge granted Kathryn and Herbert’s motion, denied the nursing home’s motion, and entered judgment against the insolvent estate. The nursing home appealed.

On appeal, plaintiff argued that Herbert and Kathryn had a contractual obligation to sell the house and use the proceeds to pay for Heriberto’s care at the nursing home. Herbert and Kathryn denied that they had such a duty, arguing that their only duty was to use Heriberto’s own assets to pay for his case. They pointed out that the house had not been Heriberto’s asset for many years, and that plaintiff has no legal right to require them to use their own assets, even assets received from Heriberto, to pay Heriberto’s nursing home bill.

The appellate court affirmed the motion judge’s judgment, on two bases. First, the appellate court held that courts enforce the contract that the parties themselves have made and, do not make a better contract for either party. The court declared that the written agreement between plaintiff and Kathryn contains no requirement that any assets other than Heriberto’s be used to satisfy his financial obligations if his Medicaid application were to be denied, and that there was no specific provision in the agreement requiring any family member to return property that Heriberto had previously conveyed or gifted to them.

Second, the court held that there was nothing wrongful in the transfer of the home. The home was transferred almost two years before the nursing home admission, a fact known to plaintiff nursing home at the time Heriberto entered the facility and the agreement was signed. Heriberto signed the deed himself, and was not effectuated by Herbert through the use of his power of attorney. There was no suggestion that Heriberto was not competent to make the gift, or that it was being held in trust by Herbert as opposed to being a gift. Finally, the court held that, although the transfer may have been made as part of a Medicaid plan to preserve assets for the family, that Medicaid planning is legally permissible under federal and state Medicaid law, citing In re Keri, 181 N.J. 50, 69 (2004). As a result, the appellate court held that plaintiff nursing home entered into its arrangements with the Heriberto at its own risk, given its admitted knowledge of the financial circumstances and its legal inability to require Herbert and Kathryn to use their own assets, including those that were given to them by the father, to cover his debt.

The case is annexed here – Arnold Walter Nursing Home v. Pumarejo