Oak Crest Village, Inc. v. Murphy

WILNER, Judge. In November, 2001, Ruth and Sherwood Murphy moved into Oak Crest Village, a continuing care retirement community (CCRC) in Baltimore County. Ruth, then 81, moved to an independent living apartment. Sherwood, then 94, was admitted directly into a comprehensive care facility (nursing facility), which Oak Crest called Renaissance Gardens.

As a condition to their acceptance into the CCRC, the Murphys were required to sign Residence and Care Agreements. 1 Section 8.11. of those agreements contained a covenant that, unless they had the prior written consent of Oak Crest, Ruth and Sherwood would not divest themselves of, or sell or transfer, any of their assets or property interests if the sale or transfer would result in their respective net worth falling ²³³ below the minimum necessary to become an Oak Crest resident. The issue before us is whether that covenant, as applied to Sherwood, contravenes Maryland Code, § 19.345(b) of the Health General (HG) Article and implementing regulations of the Department of Health and Mental Hygiene applicable to the Medicaid program and, for that reason, is unenforceable, at least while he remains a resident in the nursing facility. The Circuit Court for Baltimore County, in response to Oak Crest’s action for breach of contract, fraudulent inducement, and fraudulent transfer, held the covenant invalid, and we shall affirm that judgment. BACKGROUND CCRC’s provide elderly persons with a continuum of housing and health care so that they may “age in place,” without having to move away from a familiar setting when medical problems arise.

In order to provide those services, CCRC’s normally require from prospective residents either an advance transfer of a significant part of their assets or a substantial entrance fee and a commitment to pay further periodic charges. 2 Oak Crest uses the latter approach. CCRC’s in Maryland are subject to the requirements of Maryland Code, Art. 70B, and to regulation thereunder by the State Department of Aging. If, as Oak Crest does, the CCRC chooses to participate in the Medicaid program, it is also subject to the statutes and regulations governing that program. Consistent with the general purpose of CCRC’s, Oak Crest operates three distinct, but integrated, levels of housing and health care: approximately 1,500 low-rise apartment units, ²³⁴ where residents may live largely independent lives; 129 assisted living units, in which residents receive greater attention to their health care needs; and a 288-bed nursing home, Renaissance Gardens, in which residents receive continuous nursing. care. 3 Renaissance Gardens constitutes a Medicaid certified skilled nursing “facility,” as that term is defined in Maryland Code, HG § 19-343(a).

Residents may move from one level of care to another, as circumstances require and availability allows. That, indeed, is one of the hallmarks of a CCRC. Oak Crest has a formal, structured application process. In order to reserve space, prospective residents must (1) complete an application and deposit agreement, and, in furtherance of that application, provide detailed financial information to assure their ability to pay the residential fees, and (2) submit to a “Pre-Residency Health Evaluation and Interview,” to determine the level of care that will be needed.

If accepted, the applicants then sign a Residence and Care Agreement. For some period of time before his admission to Renaissance Gardens, Sherwood Murphy suffered from a subdural hematoma — an accumulation of blood in the space between the dural and - arachnoidal membranes (the outer and middle coverings) of the brain — which had rendered him incompetent to handle his affairs. Although it does not appear that he was ever declared legally disabled or that a guardian had ever been appointed for him, Ruth acted as his attorney-in-fact. He had been a patient at a facility known as Genesis Elder Care in Severna Park since August, 1999.

The record does not reveal the nature of that facility. In April, 2000, Ruth sold the family home, deposited the proceeds of $178,000 in a bank account owned jointly by Ruth and her daughter, Mildred, and began living at an independent living community in Severna Park known as Sunrise. ²³⁵ In June, 2001, the Murphys, through Ruth, filed a residency application with Oak Crest. In furtherance of the application, they supplied detailed financial and health information. The health information is not in the record.

The financial information reveals that the couple had about $450,000 in jointly owned assets, Sherwood had $19,000 in personal savings in his own name, Ruth had $126,000 in personal savings in her own name, and Ruth had an additional $68,000 in savings held jointly with her daughter. The Executive Director at Oak Crest reviewed the information, concluded that the Murphys had sufficient assets to pay the requisite fees based on actuarial projections of their life expectancy, and accepted the application. Ruth signed two separate Residence and Care Agreements, one for her and one, along with an addendum, on behalf of Sherwood. Only Sherwood’s agreement is in the record.

That agreement, dated November 26, 2001, “governs residency at Oak Crest” and professes to “detailt ] the services provided in each level of care and the limited circumstances for transfer to another level of care.” Section 3.01 gives Sherwood the right to occupy room RENS-N132 in the continuing care unit, subject to various provisions governing transfers to other units or termination of the agreement. The agreement recites that Sherwood had paid a deposit fee of $150 and requires that he pay an entrance deposit of $78,000 and living unit fees, which, for the room in the continuing care unit, was set at $192/day ($l,344/week, $69,888/year), subject to annual revision. 4 Section 8.11 of the agreement stated that the financial information submitted by or on behalf of Sherwood was a material aspect upon which Oak Crest relied in determining his qualifications for becoming an Oak Crest resident. It continued that Oak Crest was committed to ²³⁶ assisting a resident who has depleted his assets through normal living expenses so that he may continue to remain at Oak Crest, but that, “[t]o protect Oak Crest from a situation wherein a Resident divests him/herself of those assets for the purpose of qualifying for assistance or reduction of Monthly Fees, Resident agrees not to divest him/herself of, sell, or transfer any assets or property interests (excluding expenditures for Resident’s normal living expenses) that would result in a reduction in Resident’s net worth (assets less liabilities) which is below the minimum criteria to become a Oak Crest resident, without having first obtained the written consent of Oak Crest.” Section 8.11 made reference to § 6.04 h., dealing with financial inability to pay. That section stated that it was not Oak Crest’s policy to terminate a resident’s occupancy because of financial inability to pay, provided that the resident was “otherwise in compliance with the terms of this Agreement,” and that Oak Crest would endeavor to assist such residents by reducing monthly fees to an appropriate level or by providing other assistance.

The section required, however, that a resident unable to make the full monthly payments take one or more of certain enumerated actions, as directed by Oak Crest’s Executive Director. The first was to make every' reasonable effort to obtain assistance from family or other available means. The second, if the resident qualified, was to take necessary steps to obtain “county, state, and federal aid or assistance, excluding Medicaid, but including Medicare, public assistance and any other public benefit program.” Procedurally, the resident would be required to file a statement with the Executive Director acknowledging, among other things, that the resident, from the date of application, “has not sold or transferred and will not sell or otherwise transfer any property in violation of the terms of this Agreement (see Section 8.11).” The addendum stated that it was “anticipated” that Sherwood’s care would be paid for by “your own income, funds, and/or assets,” and it included a section dealing with “Private ²³⁷ Pay Residents.” That section stated that Ruth would be responsible for paying for items and services provided to Sherwood during any period of time that Sherwood was a resident of the facility and not determined eligible for medical assistance. In the event Ruth did not pay what was owed, it required her to seek from Medicaid a determination of Sherwood’s income and assets available to pay the cost of his care and to use those assets and income to pay for his care.

If Sherwood should have insufficient income or assets to meet his financial obligations, Ruth agreed to apply for Medicaid benefits and to cooperate fully in the eligibility determination process. Indeed, the addendum warned Ruth that she faced a $10,000 civil penalty if she willfully or with gross negligence failed to seek Medicaid assistance on behalf of Sherwood or failed to cooperate fully in the Medicaid eligibility determination process. The addendum also contained a section dealing with “Medicaid Residents,” which noted that Oak Crest participates in the Medicaid program and provided that a resident was “not required to give up any of the Resident’s rights to Medicaid benefits to be admitted or to stay at the Facility.” It continued that if the resident’s private funds were “used up” during his/her stay at the facility and the resident is eligible for Medicaid, “we will accept Medicaid payments.” The addendum added that if the resident was eligible for Medicaid, “we may not charge, ask for, accept or receive any gift, money, donation or consideration other than Medicaid reimbursement as a condition of the Resident’s admission or continued stay at the Facility.” The term “Facility” was defined as “the nursing Facility.” The addendum to Sherwood’s agreement was required to be signed by Ruth because it recited that she had access to and management or control of Sherwood’s income, funds, or assets. Although the agreement made clear that Ruth was not required to use her own funds to pay the fees charged to Sherwood, it obligated her to pay those fees from Sherwood’s funds. ²³⁸ Shortly after their move to the Oak Crest facilities, Ruth transferred over $856,000, which included the proceeds from the sale of the family home, savings that she and Sherwood owned jointly in the form of bank accounts, certificates of deposit, and brokerage accounts, and funds that she and her daughter owned jointly, into a consolidated bank account in her name and that of her daughter, as joint owners with the right of survivorship.

In February, 2002, she used $250,000 from that account to purchase a seven-year fixed term annuity that provided for monthly payments to Ruth of $3,520. In May, 2002, she used $30,000 from the account to purchase an eight-year fixed term annuity that provided monthly payments of $353. Ruth withdrew the money and purchased the annuities as joint owner of the account and not as agent for Sherwood. The monthly payments are solely for the benefit of Ruth; Sherwood has no interest in them.

At some point, Sherwood, being then bereft of substantial assets or income, applied for Medicaid benefits, and on July 24, 2002, effective June 1, 2002, he was found eligible. All private pay charges for Sherwood’s care up to June 1, 2002, were paid in full. When Oak Crest learned that Sherwood had been approved for Medicaid, it filed this lawsuit for declaratory and equitable relief, alleging a violation of § 8.11 of Sherwood’s Residence and Care Agreement. Oak Crest sought to have the transfer of Sherwood’s assets annulled and, alternatively, a declaration that, by virtue of the breach, Oak Crest had the right to rescind the executory aspects of the agreement, terminate Sherwood’s membership at Oak Crest, and discharge him from the nursing facility.

Sherwood responded with a motion to dismiss the complaint on a number of grounds, including assertions that the contract — presumably § 8.11 — was unlawful under Federal and State law and void for that reason and that it also conflicted with provisions in the addendum that assured Oak Crest’s participation in Medicaid. The claim of illegality was based, in part, on (1) 42 U.S.C. § 1396r(c)(5)(A)(i), which prohibits a nursing facility from requiring written or oral assurance that applicants for residence are not eligible for and will not apply for Medicaid ²³⁹ benefits, (2) 42 U.S.C. § 1320a — 7b(d)(2), which makes it a criminal offense for a person to charge, solicit, accept, or receive, any amount in excess of the consideration established in a State Medicaid plan as a precondition to admitting a patient to a nursing facility or as a requirement for the patient’s continued stay in such a facility, (3) Maryland Code, HG § 19 — 345(b)(1), which is part of the Maryland Nursing Home Residents’ Bill of Rights and precludes a Medicaid certified facility from including in an admission contract any requirement that, to stay at the facility, the resident “will be required to pay for any period of time or amount of money as a private pay resident for any period when the resident is eligible for Medicaid benefits,” and (4) a regulation of the Department of Health and Mental Hygiene (COMAR 10.07.09.05B(4)) prohibiting a nursing facility from requiring residents or applicants to waive their rights to Medicaid. The court treated the motion to dismiss as one for summary judgment (see Maryland Rule 2-322(c)) and, finding no genuine dispute of material fact, granted it. The court found § 8.11, upon which Oak Crest’s action rested, to be in violation of the State statute and regulation and therefore void.

It declined to reach the question of whether § 8.11 also contravened either of the Federal statutes. Oak Crest appealed, complaining that (1) HG § 19~345(b) does not apply to CCRC’s and, for that reason, § 8.11 of the Agreement does not violate Maryland law, (2) the trial court failed to give appropriate deference to a determination by the State Department of Aging that the Agreement complies with applicable Maryland law, (3) Sherwood’s continued residence at Oak Crest violates Oak Crest’s exemption from the State requirement of a certificate of need, and (4) “Policy Issues” preclude Sherwood’s interpretation of the law. We granted certiorari prior to proceedings in the Court of Special Appeals to consider those issues, and, as noted, shall affirm. As the Circuit Court restricted itself to the State law issue in entering the summary judgment, we shall do likewise. ²⁴⁰ DISCUSSION Application of § 19-345 HG § 19-345 is part of a subset of statutes sometimes referred to as the Nursing Home Residents’ Bill of Rights.

Along with §§ 19-345.1 and 19-345.2, it places certain limits and conditions on the ability of nursing facilities to transfer or discharge patients without their consent. Section 19-345(a) prohibits a “facility” from transferring or discharging a resident except when (1) the transfer or discharge is necessary for the resident’s welfare, (2) it is appropriate because the resident’s health has improved sufficiently that the resident no longer needs the services provided by the facility, (3) the health or safety of an individual in the facility is endangered, (4) the resident has failed, after reasonable notice to pay for, or have Medicare or Medicaid pay for, a stay at the facility, or (5) the facility ceases to operate. Section 19-345(b) applies to a “Medicaid certified facility.” It precludes such a facility from including in a resident’s admission contract “any requirement that, to stay at the facility, the resident will be required to pay for any period of time or amount of money as a private pay resident for any period when the resident is eligible for Medicaid benefits,” and it also precludes the facility from transferring or discharging a resident involuntarily “because the resident is a Medicaid benefits recipient.” Sherwood’s argument, which found favor with the Circuit Court, is that, to the extent that § 8.11 of the Residence and Care Agreement precludes him from qualifying for Medicaid in order to discharge his obligations to Oak Crest and authorizes his discharge from Renaissance Gardens because he has qualified for Medicaid benefits, it is inconsistent with those statutory limitations. Oak Crest’s response to that argument is essentially that § 19 — 345(b) does not apply to CCRC’s.

In a three-line footnote in its initial brief, Oak Crest averred that the court’s holding “was also error because the CCRC provision at issue does not require Mr., Murphy to pay at a private pay rate ‘for any period when [Mr. Murphy] is eligible for Medicaid bene ²⁴¹ fits,’ and thus does not violate Section 19-345.” No further explanation is provided in that brief on the issue of whether, if § 19-345(b) does apply, there is a conflict between it and § 8.11. In a reply brief, Oak Crest addressed the issue further but added little to that unenlightening comment. It noted that, under § 8.11, CCRC residents are prohibited from making expenditures, other than normal living expenses, that would reduce their net worth below the minimum criteria for admission and posited simply that “[t]his provision does not violate Section 19-345’s prohibition against requiring Medicaid nursing facility residents to pay privately for a period of time.” It conceded that the requirement that residents use all of their assets not required for normal living expenses to pay the private pay rate ($192/day for Sherwood) “can affect the pace at which resident assets are diminished” but, claimed that “there is no requirement to maintain this pace for any predetermined period of time or at any prescribed rate.” Our initial response to this argument is that it is not properly before us. We have long and consistently held to the view that “if a point germane to the appeal is not adequately raised in a party’s brief, the court may, and ordinarily should, decline to address it.” DiPino v. Davis, 354 Md. 18, 56 , 729 A.2d 354, 374 (1999); Klauenberg v. State, 355 Md. 528, 552 , 735 A.2d 1061, 1073-74 (1999); Moosavi v. State, 355 Md. 651, 660-61 , 736 A.2d 285, 290 (1999).

See also Maryland Rule 8-504(a)(5). The three-line conclusory footnote in Oak Crest’s brief does not adequately present the issue; it gives no reasons or no basis for challenging the Circuit Court’s ruling that § 8.11 was substantively in conflict with