Department of Health and Rehabilitative Services v. G & J Investments Corp., Inc.

• Decision Date: 15 November 1988
• Docket Number: No. 87-761,87-761
• Citation: 541 So.2d 1197,13 Fla. L. Weekly 2510
• Parties: 13 Fla. L. Weekly 2510 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellant, v. G & J INVESTMENTS CORPORATION, INC., Appellee.
• Court: Florida District Court of Appeals

Page 1197

541 So.2d 1197

13 Fla. L. Weekly 2510

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellant, v. G & J INVESTMENTS CORPORATION, INC., Appellee.

No. 87-761.

District Court of Appeal of Florida,

Third District.

Nov. 15, 1988.

Nancy Schleifer, Miami, for appellant.

R. Stuart Huff, Coral Gables, for appellee.

Before BARKDULL, HUBBART and DANIEL S. PEARSON, JJ.

REVISED OPINION

BARKDULL, Judge.

The genesis of this action, as ultimately tried in the trial court, was an alleged wrongfully issued order which had been agreed to by a party. We hold that one cannot agree to an order changing custody and control of two nursing homes (Hanover House and Towne House) to a government agency, Department of Health and Rehabilitative Services (HRS) and, thereafter, never make a complaint about the impact of the order and then sue and recover damages for its alleged wrongful issuance.

At the time HRS took possession of the two nursing homes, Portwood Care Centers, Inc. ("Portwood") was the licensed nursing home operator. Portwood leased the nursing home buildings from appellee/counter-plaintiff, G & J Investments Corporation ("G & J"), which owned the land and the buildings, but was not the licensee.

On July 23, 1980, the attorney for Portwood telephoned HRS and advised them that Portwood could no longer meet its financial obligations, and announced its immediate intention to abandon the operation of the two nursing homes, and its willingness to surrender its license.

After Portwood announced its impending insolvency, and HRS learned that the IRS had placed a tax lien on the nursing homes, HRS contacted Gerald Keller, principal stockholder of G & J, about keeping the facilities open because HRS needed the beds. Keller felt he could make the facilities more profitable. He had an accounting service which he wanted to handle the finances. He also had a trained administrator, one Ralph Stacey, whom he wanted to administrate the two homes. However, he was concerned with the Medicaid "related party" doctrine that prohibits a nursing home lessor from having too much control over a lessee-licensed operator. Keller expressed the desire to openly disclose the relationship between G & J, the accounting service, and Stacey, in some form of writing. A preliminary meeting was held between Keller, Stacey, G & J's attorney, and HRS for the purpose of negotiating the "related party" issue. By the last Friday of July, 1980, a draft of an agreement was jointly prepared. Because of a question as to the licensure of Stacey, the agreement was not finalized until the following Monday when it was made clear that Stacey would have to submit an application for review, and that HRS would have to approve the application before Stacey could be licensed. The agreement was executed Tuesday, July 28, 1980. HRS and G & J were the only two parties to the agreement. Stacey Health Care Center, Inc., the proposed licensed operator, was not a party.

Within twenty-four hours of the time that HRS signed the agreement, the federal Medicaid office telephoned HRS regarding "major patient care deficiencies" at Hanover House, and announced its intention to cut-off federal aid because the facility was out of compliance with federal standards. HRS determined then to close Hanover House.

On August 1, 1980, HRS filed a complaint seeking declaratory relief and a temporary and permanent injunction under Chapter 400, Florida Statutes (1979). HRS recited Portwood's announcement that it intended to abandon the facilities and surrender its license. HRS also detailed a number of problems within Hanover House, including a lack of hot water, a lack of adequate and permanent nursing staff, the inaccurate charting of medications, the unavailability of drinking water for bedridden patients, and poor housekeeping services. Stacey was not made a party to this action. He later admitted that he filed no application for licensure with HRS prior to June 1, 1981, and that he had not incorporated Stacey Health Care Centers, Inc. until 1982.

On August 15, 1980, the trial court signed an agreed order on HRS's motion for emergency hearing. That order recited that the court placed a telephone conference call on an emergency basis to Portwood's attorney and G & J's attorney, and that all counsel agreed to discuss the emergency petition by conference call. According to the agreed order, Portwood's attorney stated "that he had no objection to plaintiff exercising complete possession and full control of Hanover House and Towne House nursing homes in order to insure the health, safety, and welfare of those patients residing therein", and defendant G & J Investment Corporation, through its attorney, stated that G & J ... "would not object to Plaintiff taking custody, operating and control of the facilities upon assurances by the Plaintiff, that the Plaintiff would pay for rent from the time that the Plaintiff took possession and control." By this order HRS took possession and control of the two nursing homes.

In October of 1980, G & J filed a motion to enjoin the abandonment of the Hanover premises by HRS. G & J insisted that the initial agreed order signed by the court did not authorize the abandonment of the nursing homes. G & J requested injunctive relief to maintain the status quo. HRS moved to strike G & J's motion to enjoin the abandonment of the premises, responding that HRS acted under the valid statutory authority of Section 400.18, Florida Statutes, which upon a voluntary or involuntary discontinuance of the operation of a nursing home, permitted HRS to transfer the patients to insure the health, safety, and welfare of the patients. In addition, HRS pointed out that G & J had agreed to permit HRS to exercise possession of Hanover House, and that nothing in the agreed order required HRS to retain possession or control of the nursing home. On January 13, 1981, the trial court denied G & J's motion to enjoin. G & J did not take an appeal from this order.

During the activity concerning the transfer of patients from Hanover House, the court and HRS were faced with the problem of the continued control of Towne House. HRS amended its complaint to request a receiver. During the receivership hearing the internal auditing coordinator for HRS testified that when he investigated the financial records of Portwood on August 1, 1980:

"The total corporate funds on hand on that date was a little less than $500.00 to run the two facilities. There was a food supply for about 5 days; roughly enough to get them over the weekend. General corporation reports accounting records were basically in shambles, bills were very much in arrears. They were threatening to cut off the lights, threatening to take the dishwasher out of the building."

Another HRS witness testified that seventy to eighty percent of the air conditioners were not working throughout the mid-summer months. The trial court entered an order appointing a receiver that included factual findings based upon the aforementioned testimony and held:

"2. That the financial inability of Portwood ... to provide food, shelter, care, and utilities to the patients residing in its facility threatened the health, safety, and welfare of these patients.

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* * *

That plaintiffs [HRS] having remedied those conditions and having received no application from any source for a license to operate Towne House Nursing Home, have continued to operate the nursing home in order to insure the health, safety, and welfare of the patients, and should not be in the position of continuing to operate the nursing home facility indefinitively (sic)."

G & J never appealed this order.

During his tenure, the receiver vigorously complained about a unilateral attempt by G & J to raise the rent for Towne House, and requested that the court authorize the closure of the facility and the transfer of the patients. By order dated April 29, 1981, the trial court instructed the receiver to transfer the eighty remaining patients at Towne House. HRS repeatedly came forward to argue that transfer of these patients would not be in their best interest. HRS wanted a new licensee to take over the operation of Towne House. Both HRS and G & J's attorney notified the court that Stacey had (finally) submitted an application in June of 1981 (almost a year after the August 15, 1980 agreed order), but the application had been sent back because it was incomplete. On the theory that Stacey might come in to run Towne House, the trial court temporarily stayed the order requiring transfer of the patients.

By July 27, 1981, the receiver indicated that twenty-two air conditioner units still required repair, and the facility still did not comply with a...