Walton v. Mariner Health of Maryland, Inc.

GREENE, J. This case primarily involves a review of the laws of agency and contracts and the rules of statutory interpretation. Although Patricia Walton (“Patricia”) and Audrey Walton (“Audrey”) are both named parties in this case, the issue before us is whether Patricia, an agent for Audrey, can be held personally liable for Audrey’s outstanding debt. On January 10, ⁶⁴⁷ 2003, Mariner Health of Southern Maryland (“Mariner Health”), a nursing home facility, sued Patricia, as agent, and her mother, Audrey, for breach of contract for failing to pay Audrey’s nursing home bill as allegedly agreed to by the parties. On August 11, 2004, the Circuit Court for Prince George’s County found both mother and daughter liable to Mariner Health for the outstanding balance incurred by Audrey and for attorney fees.

The Waltons appealed that decision to the Court of Special Appeals. Before that court could decide the appeal, we granted certiorari. Walton v. Mariner Health, 388 Md. 97 , 879 A.2d 42 (2005). We must determine whether a contract between an agent, on behalf of the nursing home resident, and a nursing home facility, entitles the nursing home to a private cause of action against an agent for the cost of the resident’s care.

If an agent neglects his or her duty to apply for Medicare or Medical Assistance 1 on behalf of the resident under Maryland Code (1982, 2000 Repl.Vol.), § 19-344(c) of the Health-General Article, can the agent be held personally liable for the debt incurred by the resident of the nursing home? We must also resolve whether § 19-344(c) of the Health-General Article limits a nursing home facility to statutory remedies or if it may pursue a private cause of action against an agent for personal liability for an outstanding debt incurred by the resident. We reverse the judgment of the Circuit Court for Prince George’s County. The Circuit Court erred in holding that the financial agreement signed by the agent on behalf of the resident rendered the agent personally liable for the outstanding nursing home bill 2 even though the agent failed to seek Medicare or Medical Assistance for the resident.

In addition, ⁶⁴⁸ we hold that a nursing home facility is limited to remedies prescribed by statute. FACTS On January 26, 2001, Audrey was transferred from Southern Maryland Hospital Center to Mariner Health of Southern Maryland. That same day, Patricia, as an agent of Audrey, signed the Resident’s Agent Financial Agreement with Mariner Health of Southern Maryland (“Agreement”). Patricia indicated in the agreement that the only methods of payment would be Medicare or Medical Assistance.

In the agreement, Patricia expressly denied any personal responsibility for Audrey’s bill. When Audrey was admitted to the facility, Medicare paid for Audrey’s nursing home bill, however, at the end of February, 2001, Medicare stopped paying for Audrey’s nursing home care. Patricia, as agent, was required, as stipulated in the agreement, infra at note 9, to reapply for eligibility or Medical Assistance. There was testimony that Audrey would have been a successful candidate for Medical Assistance and, most likely, Medicare.

From March 2001 through August 2002, Audrey incurred a debt of approximately $4,800.00 a month for her care. The outstanding balance was $86,235.91 for those eighteen months. On January 10, 2003, Mariner Health filed a Complaint against Patricia and Audrey for Audrey’s outstanding bill. The amount requested by Mariner Health was $86,235.91, representing the outstanding balance due and owing, plus $12,935.39 in attorney fees.

On July 6, 2004, Patricia testified at trial that she was not aware that Medicare ceased paying for her mother’s care and that the nursing home debt was being incrementally calculated. Patricia stated that she would have applied for medical benefits for her mother had she been aware that Medicare had stopped paying for Audrey’s nursing home bill. Patricia testified that she was not given notice of the outstanding monetary obligation until after Mariner Health sold the facility to another group. Mariner Health offered no explanation or evidence as to why it failed to notify Audrey or Patricia ⁶⁴⁹ that Medicare had ceased paying or that a debt had been incrementally tallied for eighteen months.

The trial judge interpreted two provisions of the agreement and, based on that interpretation, held that both Patricia and Audrey were contractually obligated for paying Mariner Health for Audrey’s nursing home bill, but reserved judgment on damages for a compromise by the parties. On August 11, 2004, after the parties failed to settle the issue of damages, the court entered a judgment against both women and in favor of Mariner Health for damages in the amount of $75,000.00 and $11,250.00 for attorney fees. RESIDENT AGENT’S FINANCIAL AGREEMENT In the case, sub judiee, the agreement consists of thirty pages collectively. The Resident’s Agent Financial Agreement identified in the Circuit Court record as exhibit one (1) consisted of “The Financial Agreement With Mariner Health of Southern Maryland” (“Financial Agreement”) and “Exhibit 1 Obligations of the Agent.” Both agreements contained the agent, Patricia Walton’s signature.

The Financial Agreement consisted of twenty-two pages and “Exhibit 1 Obligations of the Agent” was eight (8) pages long. 3 Both of the agreements contained several provisions pertinent to our discussion. FINANCIAL AGREEMENT WITH MARINER HEALTH The Financial Agreement that Patricia signed was an agreement between an agent on behalf of a resident and Mariner Health. The contract explained a resident’s agent’s lights and obligations and required that the agent select the type of financial program responsible for paying for the resident’s care. Several payment options were provided including Medicare and Medical Assistance, other third party insurers, the resident’s personal funds, the agent’s personal funds, and ⁶⁵⁰ other methods of payment. 4 The relevant provision in the Financial Agreement that clearly qualified Patricia as a statutory agent, as defined in § 19—344(c)(1), was as follows: This Contract is between Mariner Health of Southern Maryland ... and Patricia Walton (the “Agent” or “you”) because you have access to (use, management or control of) the income, funds and/or assets of Audrey Walton (the “Resident”) and because you are willing to act on behalf of the Resident. 5 Financial Agreement at 1.

Patricia signified that both “The Medicare Program” and “The Medicaid Program” (also known as “Medical Assistance”) would pay for Audrey’s care by marking an “X” in the appropriate boxes. Patricia did not indicate that she would be liable for payment for Audrey’s care from her own personal funds or that payment would be made from Audrey’s personal assets: 3.... A. Who Can be Required to Pay for the Resident’s Care. Only the Resident and the Resident’s insurers can be required to pay for the Resident’s care.

You cannot be required to pay for the Resident’s care from you oum funds, unless you knowingly and voluntarily agree to pay for the cost of the Resident’s care with your own funds. * * * * It is anticipated that the Resident’s care will be paid for by: ⁶⁵¹ [x] The Medicare Program; [X] The Medicaid Program (also known as “Medical Assistance); □ Other third-party insurer, ... □ You with the Resident’s income, funds and/or other assets; □ You with your own income fund and/or assets; □ Other.... Financial Agreement at 4. Section “3.B Private Pay Resident,” contained information on specific payment and service requirements for residents paying with their own private funds. 6 Although Audrey was not a Private Pay Resident, this section is relevant to our discussion because the trial judge based his judgment on language contained within this section. The pertinent language in this section provided that: You [as an agent to a Private Pay Resident] understand and agree that you are responsible for paying the Facility ... during which [time] the Resident has not been determined eligible for Medical Assistance.

If you do not pay the amount owed us after receiving Facility bills and we hire a collection agency or attorney because of your breach of this Agreement, you agree to pay their fees, expenses and court costs with your own funds. If you do not pay what is owed the Facility, you agree to apply to Medical Assistance for a determination of the Resident’s income and assets available to pay the cost of the Resident’s care. Once Medical Assistance determines the income and assets available to pay for the Resident’s care, you agree to use such income and assets to pay the Facility’s bills.2 (Your request for this determination is not the same as applying for Medical Assistance on behalf of the Resident.) ⁶⁵² 2 If you do not request a determination by Medical Assistance, or if payment is not made with the income and assets determined to be available for the Resident’s care, the Facility may ask the court to order you to obtain the determination or to make payment. Financial Agreement at 5-6.

Audrey’s care was not paid for by Medical Assistance because Patricia, as agent, did not apply for Medical Assistance, when Medicare stopped paying her mother’s bill. In section “8.D Medicaid Residents ” of the agreement, the first sentence began, “[] [Mariner Health] participate^] in the Medicaid Program.” The following in relevant part states that [] [although it is the Resident’s and your responsibility to apply for and obtain Medicaid benefits for the Resident, we will assist you, by promptly providing Medical Assistance with all required information in our possession. If a Resident is eligible for Medical Assistance, the Facility 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 here. * * * * [] ... You understand and agree to pay to the Facility ... this ... amount....If you fail to pay this amount, we may request a court to order such payment. * * * * [] You understand that non-payment of items and services not covered by Medicaid may result in a discharge action for non-payment of bills.

Financial Agreement at 8-9. OBLIGATIONS OF THE AGENT The addendum to the Financial Agreement titled, Exhibit 1, Obligations of the Agent, (hereinafter “Agent Obligation ⁶⁵³ Form”) provided, as the title indicated, a resident’s agent’s responsibilities. The second page of the addendum contained a statement which said, “[pjlease initial those questions which describe your authority for acting as the Resident’s Agent.” Patricia initialed that she was acting as an agent “[a]t the request of the Resident [her mother, AudreyJG” and “[a]s a family member ... with authority to manage, use or control the Resident[’]s income, funds and/or assets[J” Agent Obligation Form at 2. Further, in pertinent part, the document provided that [t]he financial obligation is limited to the amount of the Resident’s income, funds and assets.

The Agent assumes no personal liability for the Resident’s stay at the Facility unless the Agent voluntarily agrees to be personally responsible for any payments required under this Contract which are not paid by the Resident or a third-party insurer. Agent Obligation Form at 1. An agent who intentionally or “with gross negligence” failed to apply or request a determination for Medical Assistance would be subject to penalties: I understand that I could be subject to both civil and criminal penalties for failure to meet my obligations as an Agent as follows: * * * * 2. If I willfully or with gross negligence fail to seek on behalf of the Resident all assistance from Medical Assistance 'which may be available to the Resident, or fail to cooperate fully in the eligibility determination process, I understand that I could be subject to a civil money penalty of up to $10,000.00.

This amount would be paid from my own funds. Agent Obligation Form at 4-5. Further Patricia’s handwritten initials, “PW” signified that she would not use her own personal funds for her mother’s care: ⁶⁵⁴ 1. Do you knowingly and voluntarily agree to make payments required under this Agreement from YOUR OWN RESOURCES?

Yes _/ No PW .... Agent’s Obligation Form at 6. ANALYSIS Agency Law Mariner Health asserts that Patricia, as agent, was obligated to apply for Medical Assistance and she breached that duty. Therefore, she is personally liable (along with Audrey) for the total sum owed to the nursing home facility for Audrey’s care.

Patricia contends that under the agreement she, as an agent for Audrey, had two statutory and contractual obligations to Mariner Health. The first obligation was to use the Audrey’s assets and income to pay for her care. The second obligation was to apply for Medical Assistance. Patricia maintains that to hold a nursing home resident’s “agent” personally liable for a resident’s outstanding nursing home bill requires more than a signed agreement or an agent’s simple failure to obtain Medical Assistance benefits.

The Financial Agreement established Patricia as a statutory agent under § 19-344(c). An agent, in these types of situations, often a relative of a nursing home resident, manages the resident’s finances or acts on behalf of an elderly or ill relative. In 1988, the Legislature enacted legislation to limit the liability of an agent to a nursing home residence. The Legislature defined an agent as, “a person who manages, uses, or controls the funds or assets that legally may be used to pay the applicant’s or resident’s share of costs or other charges for the facility’s services.” Section 19-344(c)(l) of the Health-General Article.

An agent is, “[o]ne who is authorized to act for or in place of another—a representative.” Black’s Law Dictionary 68 (8th ed.2005). An agent’s function is to represent the rights of the principal. An agent’s authority is limited by the instructions, ⁶⁵⁵ restrictions and needs of the principal. Penowa Coal, Sales Co. v. Gibbs & Co., 199 Md. 114, 119 , 85 A.2d 464, 467 (1952); Proctor v. Holden, 75 Md.App. 1, 20 , 540 A.2d 133, 142 ; cert. denied, Holden v. Freeman & Kagan, 313 Md. 506 , 545 A.2d 1343 (1988) (“Three elements are integral to any agency relationship: (1) the agent is subject to the principal’s right of control, (2) the agent has a duty to act primarily for the benefit of the principal, and (3) the agent holds a power to alter the legal relations of the principal.”).

An agent has the authority to enter into a contract on behalf of the principal. Strawn v. Jones, 264 Md. 95, 98 , 285 A.2d 659, 662 (1972) (“It is well established law that an agent can enter into a contractual relationship with a third party to the extent of the agent’s prescribed authority.”). Further, “an agent is employed to represent his principal in regard to contractual obligations with a third person.” Henkelmann v. Metropolitan Life Ins. Co., 180 Md. 591, 600 , 26 A.2d 418, 423 (1942).

If the contract is to benefit the principal only, the agent is immune from personal liability for breach of that contract. City of Baltimore v. Musgrave, 48 Md. 272, 289 (1878) (“It is also a universal principle of the law of agency that the powers of the agent are to be exercised for the benefit of the principal only, and not of the agent or third parties.”); Local 1852 Waterfront Guard Ass’n of Port of Baltimore I.W.A v. Amstar Corp., 363 F.Supp. 1026, 1030 (1973), enforced, 508 F.2d 839 (1974), cert. denied, 421 U.S. 1000 , 95 S.Ct. 2398 , 44 L.Ed.2d 667 (1975) (“It is a well settled principle of agency law that an agent acting within the scope of his authority for a disclosed principal is not bound on a contract made in the principal’s name.”); Curtis G. Testerman, Co. v. Buck, 340 Md. 569, 576-77 , 667 A.2d 649, 653 (1995) (“The rule in Maryland is clear that, ‘if an agent fully discloses the identity of his principal to the third party, then, absent an agreement to the contrary, he is insulated from liability.’ ”) (quoting A.S. Abell Co. v. Skeen, 265 Md. 53, 56 , 288 A.2d 596, 597-98 (1972)); King v. Industrial Bank of ⁶⁵⁶ Washington, 474 A.2d 151, 155 (D.C.1984) (“The designation of the signer as an agent and the naming of the principal are essential to the avoidance of liability on negotiable and nonnegotiable contracts alike.”); Rittenberg v. Donohoe Const. Co., Inc., 426 A.2d 338, 341 (D.C.1981) (“Where a principal is disclosed, no liability will fall upon the agent for acts committed by the principal unless he binds himself for same by definite words or stipulation.”); Henderson v. Phillips, 195 A.2d 400, 402 (D.C.) (1963) (“[W]hen his principal is disclosed ..., the agent ordinarily does not incur personal liability. The law is well settled that when an agent acts in good faith on behalf of a disclosed principal, he is not held responsible in the event of his principal’s default.”).

Patricia, as an agent, had a primary duty to Audrey, the principal, and Patricia’s duty to Mariner Health, a third party, was limited. Agency law precludes a finding against Patricia for damages. As an agent, Patricia entered into the contract only for the benefit of Audrey and is personally insulated from liability by virtue of her station as an agent. The issue remains however of whether Patricia, as an agent, was personally immune from liability under the terms of the contractual agreement or the statute.

The Agreement Mariner Health maintains that although Patricia was an agent, she was, nevertheless, personally liable for the nursing home bill under an apparent “privity of contract” 7 theory because a contract existed between Mariner Health and Patricia. In its Complaint, filed in the Circuit Court, Mariner Health asserted that Patricia agreed that when Audrey’s funds were exhausted, Patricia would seek medical assistance promptly and provide all necessary information and documentation requested to establish Medicare eligibility for her mother. Mariner Health contends that the trial court found Patricia had a contractual obligation, under a contract which was ⁶⁵⁷ approved by “DHMH,” 8 to pay for Audrey’s care using the resident’s funds or applying for Medical Assistance. 9 Mariner Health asserts that Patricia, as agent, disregarded her duty to apply for medical assistance, therefore she is personally liable for the costs incurred for her mother’s care. Patricia specified in the agreement that Audrey’s care would be paid solely from Medicare or Medical Assistance. 10 Patricia states that she, as an agent, cannot be held personally liable for Audrey’s outstanding nursing home bill because she explicitly indicated in the agreement that she would not “knowingly or voluntarily” use her own personal funds for her mother’s care.

Patricia asserts that Mariner Health breached its duty to mitigate damages, 11 and its contractual duty to ⁶⁵⁸ advise and assist Patricia with applying for Medical Assistance. The trial judge held that the Resident’s Agent Financial Agreement was clear and provided that Patricia, as agent and relative for her mother, was responsible to pay her mother’s expenses as outlined in several provisions. The trial judge continued: The focus of this [cjourt is [Mariner Health’s] Exhibit Number 1, which is the [R]esident[’]s [A]gent [Financial [A]greement with Mariner Health ... and then the evidence that’s been presented as to everybody’s understanding of this agreement. This agreement does speak for itself.

It is in evidence, and it states that Patricia Walton has signed in her capacity as a relative and agent of her mother [and is] obligate[d] ... for the financial obligations stemming from services rendered while her mother was living at the Mariner Health Care facility in southern Maryland. Page four of the agreement has been referenced indicating that it is the anticipation that the resident’s care will be paid by [M]edic[aid] ... or the Medicare program. Those are the two blocks that were checked off. I have reviewed this agreement.

And I point out among[] other provisions ... at the bottom of page five, the last of the page reads in part,[ 12 ] [‘][y]ou understand and agree that you are responsible for paying the [F]acility for items [and services] provided to the resident during any period of time in which the [Resident is or was a resident of the [F]acility and during ⁶⁵⁹ which the resident has not been determined eligible for [MJedical [Assistance. If you do not pay the amount owed us after receiving [F]acility bills, and we hire a collection agent or attorney because of your breach of this agreement, you agree to pay their fees, expenses, and court costs with your own funds.['][ 13 ] There is a footnote at page six that reads, [‘][i]f you do not request a determination by [M]edical [Assistance or a payment is not made with the income and assets determined to be available for the [Resident's care, the facility may ask the [c]ourt to order you to obtain the determination or to make payment.['][ 14 ] It is clear that also there was no evidence presented to this Court that there was at any point in time a request to process the Mariner Health Care bills through medical assistance via the Prince George’s County [Department of [SJocial [SJervices. (Alterations added). The trial judge determined that both Patricia and Audrey were liable to Mariner Health for damages.

This determination raises the issue of whether the contract is ambiguous, particularly the interpretation of specific language contained in a footnote, pertaining to the role and personal ⁶⁶⁰ liability of a nursing home resident’s agent. Generally, when seeking to interpret the meaning of a contract our search is limited to the four corners of the agreement. Under the objective theory of contracts we look at what a reasonable person in the same position would have understood as the meaning of the agreement. Aetna Cas. & Sur.

Co. v. Insurance Comm’r, 293 Md. 409, 420 , 445 A.2d 14, 19 (1982); Board of Trustees of State Colleges v. Sherman, 280 Md. 373, 380 , 373 A.2d 626, 629 (1977); Sagner v. Glenangus Farms, 234 Md. 156, 162 , 198 A.2d 277, 283 (1964). When interpreting a contract, our main focus is the “customary, ordinary, and accepted meaning” of the language used. Atlantic Contracting and Material Co., Inc. v. Ulico Cas. Co., 380 Md. 285, 301 , 844 A.2d 460, 469 (2004)(quoting Lloyd E. Mitchell, Inc. v. Maryland Cas.

Co., 324 Md. 44, 56-57 , 595 A.2d 469, 475 (1991)). This Court adheres to a well-settled principle, when interpreting a contract, that [ujnder Maryland law, the interpretation of a contract, including the question of whether the language of a contract is ambiguous, is a question of law subject to de novo review. See Towson v. Conte, 384 Md. 68, 78 , 862 A.2d 941, 946 (2004). We have long adhered to the objective theory of contract interpretation, giving effect to the clear terms of agreements regardless of what the parties may have intended by those terms at the time of contract formation.

Id. at 78 , 862 A.2d at 946-47 . Under the objective theory: “A court construing an agreement under [the objective theory] must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.” Dennis v. Fire & Police Employees Ret.

Sys., ⁶⁶¹ 390 Md. 639, 656-57 , 890 A.2d 737, 747 (2006) (quoting General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261 , 492 A.2d 1306, 1310 (1985)(internal quotations omitted)). Myers v. Kayhoe, 391 Md. 188, 197-99 , 892 A.2d 520, 526-27 (2006). We conclude that the trial court was erroneous in its ruling for several reasons. First, Patricia, as agent, can bind Audrey, the principal, to a contract, however, Patricia is not personally liable in damages for breach of that contract.

Secondly, the trial judge’s misinterpretation of the contract was based upon two provisions in the document under consideration that specifically did not apply to either Patricia or Audrey. The trial judge based his judgment on two provisions contained in section “B” of the agreement, supra at n. 12-13, which applied exclusively to private pay residents. Audrey, however, was not a private pay resident because there was no evidence at trial that her private funds were used to pay for her care. Patricia expressly indicated on the agreement, supra, at 6, that Audrey’s care would be paid with either Medicare or Medical Assistance and not with Audrey’s personal funds.

Patricia cannot be held personally liable under the terms of the agreement, supra at 9, because she did not knowingly or voluntarily agree to use her personal funds to pay for her mother’s nursing home care. The Medical Assistance section applicable to Audrey’s care, supra, at 7-8, contained language which stated that Mariner Health would assist the agent in applying for and obtaining Medical Assistance benefits. 15 Furthermore, if there were services or items not covered by Medical Assistance and Patricia, as agent, did not pay for those services, the facility was free to initiate transfer or discharge procedures against Audrey. See § 19-345(a)(4). ⁶⁶² Secondly, one of the private pay provisions which is contained in a footnote provides: “If you do not request a determination by Medical Assistance, or if payment is not made with the income and assets determined to be available for the Resident’s care, the Facility may ask the court to order you to obtain the determination or to make payment.” 16 (Emphasis added.) The trial judge misinterpreted that provision. The trial judge essentially based his decision on the last three words of the provision to establish Patricia’s personal liability.

We disagree with that conclusion. The language of the private pay provision is clear and unambiguous. The trial judge, however, interpreted the language to mean that if Patricia did not request Medical Assistance to pay Audrey’s bill, Patricia would be personally liable for payment. To the contrary, a correct interpretation of the language means that if an agent does not (a) request a determination by Medical Assistance or (b) make payment with the Resident’s assets or income determined available for the Resident’s care, then the facility may ask the court to order the agent to do either (a) or (b).

The last three words, “to make payment ” does not mean that an agent can be held liable for the principal’s breach of contract. The trial judge was incorrect in (1) basing his opinion on two provisions that do not apply to Patricia or Audrey because they were not private pay residents, and (2) misinterpreting the language to mean that Patricia was personally liable for her mother’s nursing home care. As we note in the next section, infra, the trial judge’s determination contradicts § 19-844(c) of the Health-General Article and Code of Maryland Regulations (COMAR) 10.07.09.07 that an