Catonsville Nursing Home, Inc. v. Loveman

• Decision Date: 01 September 1997
• Docket Number: No. 100,100
• Citation: 349 Md. 560,709 A.2d 749
• Parties: CATONSVILLE NURSING HOME, INC. et al. v. Aurelia LOVEMAN, Guardian for the Estate of Joseph Loveman. ,
• Court: Maryland Court of Appeals

Page 560

349 Md. 560

709 A.2d 749

CATONSVILLE NURSING HOME, INC. et al. v. Aurelia LOVEMAN, Guardian for the Estate of Joseph Loveman.

No. 100, Sept. Term, 1997.

Court of Appeals of Maryland.

May 15, 1998.

Paul D. Raschke (Catherine C. Hester, Bouland, Gisriel & Brush, L.L.C., on brief), Baltimore, and Margaret Ann Nolan, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., C. Frederick Ryland, Asst. Atty. Gen., on brief), Baltimore, for appellants.

Kurt J. Fischer (Marta D. Harting, Tilghman E. Price, Piper & Marbury, L.L.P., on brief), Baltimore, for appellees.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASNOW, RAKER, WILNER and CATHELL, JJ.

CATHELL, Judge.

Catonsville Nursing Home and Maryland Health Resources Planning Commission, appellants, appeal from a reversal by the Circuit Court for Baltimore County of the Maryland Health Resources Planning Commission's decision with respect to the allocation of nursing home "bed rights" as between Catonsville Nursing Home and its landlord, Joseph Loveman. Finding in favor of Aurelia Loveman, Guardian for the Estate of Joseph Loveman, appellee, the circuit court held that an exemption provision for health care projects in existence prior to the 1978 enactment of a comprehensive health planning statute was a right that attached to and ran with the land. Accordingly, the circuit court found that the bed rights in dispute belonged to appellee.

We shall reverse the judgment of the circuit court and remand with direction that it affirm the decision of the Maryland Health Resources Planning Commission.

I. Facts and Procedural History

Catonsville Nursing Home (CNH) and the Maryland Health Resources Planning Commission (Commission) appeal from the judgment of the Circuit Court for Baltimore County reversing an earlier Commission decision. The Commission had determined that CNH, as the operator and licensee of nursing home services, as opposed to Loveman, as the owner of the building housing the nursing home operation and CNH's landlord, held the bed rights in question and, accordingly, was the entity with authority to seek Commission approval affecting those bed rights.

This case has a lengthy procedural history and factual background, which were described in a previous appeal to the Court of Special Appeals. Loveman v. Catonsville Nursing Home, 114 Md.App. 603, 691 A.2d 693 (1996). There that court stated:

In 1960, Mr. Loveman opened a 98-bed comprehensive care facility at 333 Harlem Lane, in Baltimore County.... [T]he home was operated through a corporation known as Shangri-La Nursing Center, Inc., in which Loveman owned all the stock.... [H]e was the licensee and he ran the home as an owner-operated facility. In 1978, the Legislature enacted a comprehensive health planning law that, among other things, created a health planning and development agency and provided that a health care facility may not be established, relocated, or undergo a change in bed capacity without a certificate of need (CON) issued by that agency. The law exempted from that requirement ... a health care facility, such as that operated by Mr. Loveman, that was in operation before June 1, 1978. That exemption underlies the instant dispute.

Mr. Loveman operated the home through Shangri-La until 1981, when, as a consequence of his being convicted of medicaid fraud, he was required to surrender his nursing home administrator's license and refrain from participation in the management or operation of a nursing home in Maryland. [In response to that restriction, Loveman leased] the real property and ... personalty used in the operation to one Dexter Case. Case, in turn, assigned his rights to Joseph Kaplan and Benjamin Ashman, who proceeded to operate the home under the name Inglenook Nursing and Convalescent Center [Inglenook]. Both the lease and the assignment were contingent on Kaplan and Ashman obtaining a license to operate the center. That license was issued in September, 1981. [In order to qualify for that license, Inglenook was issued its own certificate of need.]

In 1987, the Center was acquired by Evergreen Health Group, Inc. In December, 1987, Loveman and Evergreen entered into a new four-year lease for the facility, with a six-year renewal option and an option to purchase. HRPC (the successor agency to the Health Planning and Development Agency) concluded that, as there would be no change in services or bed capacity, the acquisition was exempt from CON review.[ ¹] Evergreen eventually exercised the option to renew. Although it is not clear from the record before us, we assume that Evergreen obtained either a new license to operate the home or an approved assignment of the license that had been issued to Kaplan and Ashman.

In November, 1990, Evergreen assigned its lease to appellee, Catonsville Nursing Home, Inc. (CNH). Included in the assignment was Evergreen's nursing home license, although the assignment was made expressly contingent on (1) approval by the Department of Health and Mental Hygiene of the transfer of the license, and (2) a determination by HRPC that a CON was not required to complete the transaction. As in 1987, the Commission, assured that there would be no change in services or bed capacity, determined that the acquisition was exempt from CON review.

... Although not clearly articulated in the briefs or the papers filed below, it is evident that what appellant fears is that, near or upon expiration of the current lease, CNH will seek permission from HRPC to transfer the beds to another location, that the Commission may grant that request by issuing a CON, and that Loveman will then be left in the position of being unable to lease his property to another licensee unless that licensee obtains a new CON to replace the bed capacity that was moved.[ ²

114 Md.App. at 605-07, 691 A.2d at 694-95 (footnote omitted).

On remand from the Court of Special Appeals, the Commission, in its Final Decision on Petition for Declaratory Relief, ³ framed the issue as "which entity--the licensee or the owner of the bricks and mortar of a nursing home--has the right to request Commission approvals regarding that nursing home[?]" The Commission resolved the issue by determining "that CNH as the lessee and operator of the facility--rather than Loveman as the owner of the bricks and mortar--has the right to seek Commission approvals affecting the comprehensive care facility beds currently being operated as Catonsville Community Convalescent Center." Loveman argued to the Commission, to the circuit court, and now to this Court, that the bed rights in question, which are derived from the right to operate a health care project as provided in a CON or exemption, run with the land because the physical facility itself was exempted from obtaining a CON when the new statutory scheme was enacted by Chapter 911 of the Maryland Session Laws of 1978.

The circuit court agreed with Loveman and disagreed with the Commission's finding that the CON and its concomitant bed rights belonged to CNH, stating in part:

When the health planning statute was enacted in 1978 and Shangri-La was permitted by the legislature to continue to operate beds without a showing of need, that right attached to the land. The ... right so created is analogous to the non-conforming use granted to a gasoline station operating in a residential area before zoning laws....

... [W]hen Loveman surrendered his license to operate a nursing home, only his individual fitness to operate the beds was being impugned. The right to operate beds without further application to the [C]ommission was the expression of the legislature's determination that the geographic distribution of beds existing in 1978 was an appropriate starting point for future planning. Accordingly, this right ran, and continues to run, with the land.

Appellants filed a timely notice of appeal to the Court of Special Appeals. We issued a writ of certiorari prior to that court's consideration of the issues raised. Appellant CNH presents the following questions for our review:

I. Did the Maryland Health Resources Planning Commission have substantial evidence to support its conclusion that the right to petition the Commission regarding future use of nursing home beds rested with the licensed health care provider, rather than a mere landlord who was forced to terminate providing nursing home care in 1981 due to a medicaid fraud conviction?

II. Did the circuit court err when it decided, without evidence of such a legislative intent, that nursing home bed rights are a real property interest that "runs with the land," rather than a transferable license or permit?

The Commission presents one question:

Did the Maryland Health Resources Planning Commission correctly determine that the licensed nursing home provider tenant, rather than the landlord who has been precluded since 1981 from providing nursing home care due to a medicaid fraud conviction, controls the right to request future Commission approvals for usage of nursing home beds?

We perceive that the resolution of two questions will resolve all of the questions presented: (1) What is the effect of the provision of the Laws of Maryland 1978, Chapter 911, which stated that a health care project in operation prior to the effective date of the act was not subject to the act's prohibition against operating a health care project without a CON? (2) What is the effect of appellee's acquiescence in the obtention by Inglenook of a new CON in 1981 and appellee's continued acquiescence since 1981 in the operation of the project pursuant to that CON? Each of these questions are of a legal nature.

II. DISCUSSION

A. Standard of Review

Judicial review of an administrative agency's decision is authorized by Maryland Code (1984, 1995 Repl.Vol.), § 10-222 of the State Government Article. Under subsection (h), when exercising such review, the court may:

(1) remand the case for further proceedings;

(2) affirm the final...