Czumak v. N.H. Div. of Developmental Servs.

Decision Date03 May 2007
Docket NumberNo. 2006–092.,2006–092.
CourtNew Hampshire Supreme Court
Parties Cherie L. CZUMAK and another v. NEW HAMPSHIRE DIVISION OF DEVELOPMENTAL SERVICES and another.

Bianco Professional Association, of Concord (Denise A. Daniel, on the brief and orally), for the petitioners.

Kelly A. Ayotte, attorney general (Anne M. Edwards, associate attorney general, on the brief and orally), for respondent New Hampshire Division of Developmental Services.

Colliander, Field & Brown, of Portsmouth (David S. Brown, on the memorandum of law), for respondent Region 10 Community Support Services, Inc.

GALWAY, J.

The petitioners, Cherie L. Czumak, Frank Czumak and Pamela Pendleton, as guardians of Robin Czumak (Robin), appeal an order of the Superior Court (McGuire, J.) finding that the respondents, the New Hampshire Division of Developmental Services (DDS) and Region 10 Community Support Services, Inc. (Region 10), complied with the requirements of their stipulated agreement with the petitioners. The respondents cross-appeal the trial court's ruling that DDS must pay arrearages accrued at the facility caring for Robin. We affirm in part and reverse in part.

The record supports the following. Robin has severe developmental disabilities that render her unable to care for her own basic needs. Since 1981, she has been a full-time resident and client of the Institute of Developmental Disabilities, Inc./Crystal Springs School (IDDI) in Massachusetts. Her placement there has been funded by the respondents. In 1998, the respondents determined that Robin should be placed in a New Hampshire facility. The petitioners appealed that decision to the New Hampshire Department of Health and Human Services' Administrative Appeal Unit. During the appeal process, the parties signed a settlement agreement (Stipulation), which became effective in December 2000. The Stipulation stated, in pertinent part:

I. Introduction 1. It is the intent of the parties that Robin Czumak will remain at IDDI as long as the facility maintains certification as described herein and the guardians continue to find that IDDI is an appropriate placement fro [sic ] Robin Czumak.... It is the intent of the parties that this agreement constitute a final settlement in this matter....
....
III. Stipulations
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3. The parties further agree that so long as Robin Czumak is eligible for the New Hampshire Medicaid waiver [DDS] shall continue to provide the existing level of services through IDDI that Robin Czumak currently receives. Notwithstanding the above, in the event of a rate increase by IDDI [DDS and Region 10] agree to use their best reasonable efforts to secure additional funding to cover any IDDI rate increase consistent with He–M 503.... If additional funding is not available then [DDS and Region 10] agree to fund respite services at the Medicaid rate for respite services (up to 40 hours per month) to the guardians for any time that Robin Czumak is in the direct care of the guardians and the guardians agree to provide direct care for Robin Czumak for up to eight weeks per year as long as the guardians are physically and financially able to provide such direct care. The parties agree to cooperate in good faith regarding these issues.

After the Stipulation was executed, the Commonwealth of Massachusetts required IDDI to increase its fees to its patients, including Robin. Beginning in 2000, the respondents increased Robin's funding from $95,000 to $100,000 per year. They also made a one-time payment of $5,000 to IDDI in 2002 and a one-time payment of $7,500 in 2003. Despite these increased payments, the respondents did not keep pace with IDDI's increased fees, and arrearages accrued. In April 2003, IDDI notified the petitioners that Robin would be discharged in June 2003 unless the respondents paid the balance due or established a payment plan. IDDI later agreed to allow Robin to stay if the respondents continued making partial payments and if the petitioners pursued all lawful means, including litigation, to acquire the funds necessary to pay the outstanding balance. By October 2005, the outstanding balance had risen to $101,442.05.

In an attempt to acquire the funds, the petitioners filed a petition in equity for specific performance of the Stipulation. The trial court found that the respondents had complied with their contractual obligations in that they had made good faith efforts to secure additional funding and in that the Stipulation required the respondents to fund rate increases only to the extent that they could reasonably secure additional funding. Despite these findings, the trial court ruled that DDS was responsible to cover the cost of the arrearages to IDDI because it would have been unjust to burden the petitioners with such a cost. Finally, the trial court ordered DDS to pay the cost of maintaining Robin at IDDI for one year, until January 2007, to give the petitioners adequate time to place Robin in another facility.

Both parties appeal. The petitioners argue: (1) the trial court's finding that the respondents acted in good faith and made good faith efforts to find additional funding was not supported by the evidence; (2) under the terms of the Stipulation, a lack of funding did not justify placing Robin in a facility other than IDDI; and (3) the trial court erred by interpreting the Stipulation to mean that the respondents were required to pay for IDDI's rate increases only to the extent that they could reasonably secure additional funding. The respondents argue that the trial court erred in holding DDS responsible for the arrearages to IDDI. We address each issue in turn.

I. Finding of Good Faith

The Stipulation provides in part: "[I]n the event of a rate increase by IDDI [DDS and Region 10] agree to use their best reasonable efforts to secure additional funding to cover any IDDI rate increase consistent with He–M 503.... The parties agree to cooperate in good faith regarding these issues." The petitioners argue that the trial court erred when it found that DDS and Region 10 acted in good faith to use their best reasonable efforts to secure additional funding to accommodate the increased rates at IDDI. This finding was unsupported by the evidence, the petitioners argue, and constituted an unsustainable exercise of discretion.

Findings of fact are binding upon us unless they are not supported by the evidence or are erroneous as a matter of law. Mahoney v. Town of Canterbury, 150 N.H. 148, 150, 834 A.2d 227 (2003). "Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving ‘bad faith’ because they violate community standards of decency, fairness or reasonableness." Harper v. Healthsource New Hampshire, 140 N.H. 770, 776, 674 A.2d 962 (1996) (quotation omitted). Thus, the question before us is whether the evidence supports the trial court's finding that the respondents were faithful to the agreed common purpose that they would use their best reasonable efforts to secure additional funding.

The trial court based its finding upon the following evidence. Matthew Ertas, the administrator of the Bureau of Developmental Services, testified that DDS depends upon the legislature for its funding. In 2004, DDS had to postpone paying over $2,000,000 in bills until the next fiscal year because it did not have enough funding to pay for all of the services to developmentally disabled people that it had committed to pay. The trial court also heard testimony from Dennis Powers, the executive director of the Association of Area Agencies, who testified that, since 1994, there has been a statewide waiting list of more than 200 people with "priority one" status, meaning that their developmental disabilities put them most immediately in need of services. Powers also testified that this waiting list receives an average of 110 new applicants each year. Both Ertas and Powers testified that the respondents' inability to meet the needs of all eligible disabled people results from a lack of funding from the legislature to DDS.

The trial court also considered evidence that, despite the budgetary constraints described above, the respondents increased Robin's allotted funding after IDDI increased its rates. The parties stipulated that, beginning in 2000, the respondents increased Robin's annual funding from $95,000 to $100,000. In 2002, they made a one-time payment to IDDI of $5,000. In 2003, the respondents made a one-time payment to IDDI of $7,500. The trial court found, based upon the parties' stipulated facts, that the amount spent on Robin is more than double the amount allotted for the care of the average developmentally disabled person in New Hampshire. William Dillon, the finance director for Region 10, testified that, despite a deficit in Region 10's operating budget over the past five years, funding for Robin's care has increased by six percent. Such a substantial increase in funding, Dillon testified, is generally only seen in individuals whose needs have drastically changed. Dillon also testified that IDDI's rates have increased by 19 percent since the parties signed the stipulation agreement, and that Region 10 could only meet that rate increase by substantially increasing its deficit.

Based upon the facts stated above, the trial court found that the respondents acted in good faith to use their best reasonable efforts to secure additional funding to cover any IDDI rate increase. Considering this evidence of increased funding for Robin despite budgetary constraints, we cannot conclude that the trial court's finding was unsupported by the evidence or erroneous as a matter of law.

II. Interpretation of the Stipulation

The petitioners next argue that, even if the respondents used good faith efforts to secure additional funding,...

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