From June 2 until November 17, 2003, defendant Monroa B. Goutier was a resident at Prospect Park Care Center, a nursing home operated by Prospect Park Nursing Home, Inc. This action was commenced by Prospect Park against Mr. Goutier and Saul Bethay, a friend who signed the Admission Agreement as Mr. Goutier's "Designated Representative", to collect charges in excess of $15,000.00 allegedly due for the skilled nursing care rendered to Mr. Goutier. A judgment on default was entered against both defendants, but was vacated as to Mr. Bethay only. Also subsequent to entry of the judgment, Medicaid made payment to Prospect Park for all but $6,488.70 of the charges for Mr. Goutier's care, and the action proceeded to trial only against Mr. Bethay for recovery of that amount.

The Admission Agreement signed by Mr. Bethay does not define "Designated Representative", but the term is defined in regulations of the New York State Department of Health as "the individual...designated...to receive information and to assist and/or act in behalf of a particular resident to the extent permitted by State law." (See 10 NYCRR §415.2[f].) A "Designated Representative" is to be contrasted with a "Sponsor", defined in the regulations as "the agency or the person or persons, other than the resident, responsible in whole or in part for the financial support of the resident, including the costs of care in the facility." (See 10 NYCRR §415.2[s].) Prospect Park does not contend that Mr. Bethay was or is Mr. Goutier's "Sponsor".

Nursing homes that accept residents whose charges will be paid in whole or in part by the Medicaid program are governed by the federal Nursing Home Reform Act (see 42 USC §1396r), and federal and state regulations (see 42 CFR Part 483; 10 NYCRR Part 415.) As pertinent here, the federal statute provides that "a nursing facility must...not require a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in, the facility" (42 USC §1396r[c][5][A][ii]), but provides in another subparagraph that the [*2]restriction "shall not be construed as preventing a facility from requiring an individual, who has legal access to a resident's income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from a resident's income or resources for such care" (42 USC §1396r[c][5][B][ii].) Virtually the same language appears in applicable federal regulations (see 42 CFR §483.12[d][2]) and state regulations (see 10 NYCRR §415.3[b][1], [b][6]).

Although the restriction on third-party guarantee and the authorization for requiring payment from the resident's assets and income are often posited as the obverse of each other, theoretically at least "[n]either federal nor state law prohibit nursing homes from voluntarily obtaining the signature of a willing responsible party or third party guarantor when admitting nursing home residents" (see Podolsky v First Healthcare Corp., 50 CalApp4th 632 646, 58 CalRptr2d 89, 97 [2d Dist 1996]; see also Manor of Lake City, Inc. v Hinners, 548 NW2d 573, 576 [Sup Ct Iowa 1996].) But legal commentators have called attention to the potential for abuse and other difficulties that arise when third parties are asked to sign nursing home admission agreements. (See Katherine C. Pearson, The Responsible Thing to Do About "Responsible Party" Provisions in Nursing Home Agreements: A Proposal for Change on Three Fronts, 37 U Mich JL Reform 757 [2004]; Lawrence M. McGaughey, Reviewing a Nursing Home Admissions Contract, 68-Aug NY St B J 34 [1996].)

In 2001 and 2003, the New York State Attorney General's Office took action against a total of 15 nursing homes that required thirty-party guarantees as a condition of admission in violation of state and federal law. (See "NY State Attorney General's Office Get [sic] Nursing Homes to Revise Policies", The Daily Record of Rochester [Rochester NY], March 18, 2003.) As will appear, however, Prospect Park's Admission Agreement does not contain a third-party guarantee.

In a section titled "Financial Arrangements", the Admission Agreement signed by Mr. Bethay as Designated Representative contains the following statement in bold print:

"Although the Designated Representative is not personally responsible for the cost of care from the Designated Representative's personal assets, the Designated Representative may be held personally responsible to the Facility for non-payment to the extent that he or she has control over the Resident's assets, such as by Power of Attorney, access to joint accounts and the like..."

"The Resident...and Designated Representative understand that if the anticipated payor does not pay the cost of care, then the Resident...and Designated Agent will be responsible for the cost of care through funds legally available to the Resident and/or by securing coverage through another third party payor."

And again, although not in bold print: [*3]

"The Designated Representative is responsible to provide payment from Resident's income and resources to the extent he/she has access to said income and resources without the Designated Representative incurring personal financial liability."

In a paragraph headed "Medicaid" and an Attachment "B" on "Special Rules Regarding Selected Payors", the Admission Agreement describes how the Resident's and Designated Representative's payment obligation may be affected by Medicaid. Specifically:

"If the Resident's care is covered by Medicaid, the Resident...and Designated Representative agree to remit to the Facility the Resident's Net Available Monthly Income ( NAMI') on a timely basis, pursuant to the Resident's Medicaid budget...The Resident's Medicaid budget and the NAMI amount will be determined by Medicaid."

Mr. Goutier's first 100 days at Prospect Park were covered by Medicare and his private insurance with Blue Cross/Blue Shield. Mr. Goutier applied for Medicaid coverage, and was approved by Medicaid, but not until almost two years after he left the nursing home. In a Notice of Acceptance of Your Medical Assistance Application dated October 20, 2005, Mr. Goutier was advised that Medicaid would pay his nursing home charges in excess of NAMI, which was determined to be $2,162.90. Mr. Goutier's Medicaid budget was determined to include Social Security benefits and private pension income totaling $2,886.23. After application of Medicare, Blue Cross/Blue Shield, and Medicaid, Mr. Goutier owed $6,488.70 for his stay at Prospect Park, and separate invoices for that amount were sent to Mr. Goutier and to Mr. Bethay.

By that time, Prospect Park had commenced this action, filed October 18, 2004, alleging "[u]pon information and belief" that Mr. Bethay "had access to [Mr. Goutier's] assets and income, and they were sufficient to satisfy the indebtedness" to Prospect Park. (Verified Complaint, ¶15.)

On April 28, 2005, shortly after the April 6 return date for Mr. Bethay's motion to vacate the default judgment taken against him, Mr. Goutier executed in Mr. Bethay's favor a Durable General Power of Attorney/New York Statutory Short Form. Mr. Bethay explained at trial that the Power of Attorney was obtained at the suggestion of the judge who granted his motion, for reasons that are not explained in the record and apparently not understood by Mr. Bethay. In any event, the Power of Attorney includes authority for banking transactions, insurance transactions, claims and litigation, personal relationships and affairs, and retirement benefit transactions, among others.

Prospect Park's claim against Mr. Bethay rests upon the Power of Attorney. As stated in its post-trial submission: "In the case at bar, Defendant was required to ensure payment to the facility by ensuring payment from Mr. Goutier's bank account to which he had access as Power of Attorney"; "The Defendant breached the Agreement with the Plaintiff and remains [*4]responsible for the outstanding balance at this time."

The Court notes that neither at the time he signed the Admission Agreement, nor at any time during Mr. Goutier's stay at Prospect Park, did Mr. Bethay possess power of attorney from Mr. Goutier. Indeed, the Power of Attorney was not executed until after the commencement of this action. The Admission Agreement provision, however, that would make the Designated Representative "personally responsible to the Facility for non-payment to the extent that he or she has control over the Resident's assets" is not limited by its terms to the time of admission or the duration of the Resident's stay, and must be understood to obligate the Designated Representative for so long as the Resident may be obligated to the Facility. And although commencement of the action might be deemed "premature" to the extent the allegations of breach against Mr. Bethay would assume the Power of Attorney, the Verified Complaint contains other allegations of breach as well. (See ¶¶ 14, 16; State of New York v Ehasz, 80 AD2d 671, 671-72 [3d Dept 1981].)

A power of attorney of the type held by Mr. Bethay would, at least prima facie, constitute "legal access to a resident's income or resources" within the meaning of the governing statute (see 42 USC §1396r[c][5][B][ii]) and "control over the Resident's assets" within the meaning of the Admission Agreement. "An attorney in fact is essentially an alter ego of the principal...Sections 5-1502 A through 5-1502 L of the General Obligations Law describe and explain the extraordinary scope of the authority of an attorney in fact with respect to the principal's various matters." (Zaubler v Picone, 100 AD2d 620, 621 [2d Dept 1984].) It is the "public policy of this State that there be liberal use and judicial recognition of the efficacy of powers of attorney." (Arens v Shainswit, 37 AD2d 274, 279 [1st Dept], aff'd 29 NY2d 663 [1971].)

Certainly, Mr. Bethay's use of the power of attorney to transfer assets to himself that could have been used for Mr. Goutier's nursing home care would constitute a breach of the Admission Agreement (see Leonard Nursing Home, Inc. v Kay, 2003 NY Slip Op 50623[U][Sup Ct, Saratoga County]), as would presumably any failure to turn over funds actually received by him with authority for their use (see Putnam Nursing & Rehabilitation Center v Bowles, 239 AD2d 479, 481 [2d Dept 1997]; Wedgewood Care Center Inc. v McFloin, 2002 NY Slip Op 40545[U][App Term, 2d Dept].)

But there is no allegation of self-dealing in this case, and no evidence that Mr. Bethay has received any of Mr. Goutier's funds since the Power of Attorney was executed in April 2005. Mr. Bethay denies that he has ever used the Power of Attorney for any purpose, and there is no evidence to contradict him. He testified that Mr. Goutier is alive and competent, capable of handling his financial affairs, and that he does so without Mr. Bethay's involvement. "As a general rule an attorney-in-fact's authority may be revoked by the principal expressly or impliedly through words or conduct which are inconsistent with the continuation of authority." (Zaubler v Picone, 100 AD2d at 621.)

It is not enough, moreover, that there be "legal access" or "control" for the contract to be [*5]breached. There must also be a "resident's income or resources available to pay for care in the facility." (See 42 USC§1396r[C][5][B][ii].) "The defendant is liable only for her handling of the [resident's] assets and only to the extent that [the resident's] assets would cover outstanding payments owed to the Plaintiff." (Sunrise Healthcare Corp. v Azarigian, 76 ConnApp 800, 808, 821 A2d 835, 840 [2003].)

Without such proof there can be no breach and no damages. Prospect Park appears to recognize this with its allegations of assets and income of Mr. Goutier "sufficient to satisfy the indebtedness" (Verified Complaint, ¶15), and its reference to Mr. Bethay's access to "Mr. Goutier's bank account." But Prospect Park introduced no evidence of the existence of any bank account in Mr. Goutier's name at any time since Mr. Bethay has had Mr. Goutier's power of attorney, and no evidence of the amount of any assets of Mr. Goutier. The Medicaid budget does identify sources of income to Mr. Goutier, presumably as of the time of his stay at the nursing home in 2003, but Prospect Park has made no showing that the statements are admissible as evidence against Mr. Bethay, or that the income was "available to pay for care in the facility" since Mr. Bethay has held the Power of Attorney.

The balance of interests in a case like this is complex. Prospect Park should be paid for the care it gave Mr.Goutier, and not be discouraged from accepting Medicaid patients by long delays and difficulty in collecting the resident's share. But neither should the relatives and friends of the elderly and infirm be discouraged from participating in their care by fear of potentially crippling personal financial responsibility. The evidence in this case, particularly the terms of the Admission Agreement, shows that Prospect Park is aware of the restrictions under which it must operate, but it does not show that this defendant has breached the Agreement.

Judgment for defendant Saul Bethay, dismissing the Verified Complaint.

August 7, 2006__________________________

Judge, Civil Court