Geriatric Facilities of Cape Cod, Inc. v. Georges (In re Georges)
| Decision Date | 22 June 2021 |
| Docket Number | Case No. 19-11761-MSH,Adversary Proceeding No. 19-01096-MSH |
| Parties | In re: JONATHAN D. GEORGES Debtor GERIATRIC FACILITIES OF CAPE COD, INC. Plaintiff v. JONATHAN D. GEORGES Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
The plaintiff Geriatric Facilities of Cape Cod, Inc., operating as Pleasant Bay Nursing and Rehabilitation Center ("Pleasant Bay"), initiated this adversary proceeding with a complaint against the defendant Jonathan D. Georges, the debtor in the main chapter 7 case. Pleasant Bay seeks a judgment that a debt owed to it by Mr. Georges be excepted from Mr. Georges's bankruptcy discharge pursuant to Bankruptcy Code § 523(a)(2)(A) and § 523(a)(4).1 After a bench trial on November 18, 2020, conducted remotely by video due to the public health emergency created by the worldwide Covid-19 pandemic, I now set forth my findings of fact and conclusions of law in this matter.
On January 10, 2010, Mr. Georges was granted power of attorney by his mother, C. Doris Georges. According to the durable power of attorney form that was executed, Mr. Georges was "[t]o act on [Ms. Georges's] behalf in all matters affecting [her] property or the administration of [her] financial and medical affairs, with the same force and effect and to all intent [sic] and purposes as though [she] were personally present and acting for [herself]." Ms. Georges appointed her grandson, Mr. Georges's son Justin, as her alternate attorney-in-fact in the event Mr. Georges was unable to act. Among other powers, Mr. Georges was authorized to act as Ms. Georges's attorney-in-fact in relation to her bank accounts and real estate.
Mr. Georges understood that his duty as Ms. Georges's attorney-in-fact was to carry out her wishes when those wishes were expressed, and if she was incapable of expressing her wishes, to act as he believed she would have wished. Ms. Georges had repeatedly expressed to Mr. Georges her desire that a portion of her assets be dedicated to gifts to her relatives. Mr. Georges also knew that Ms. Georges had always been generous in making loans and gifts to her children when they needed money in the past.
Around the time she granted power of attorney to her son, Ms. Georges's health was failing and she was having trouble living on her own. Overcoming Ms. Georges's resistance to moving out of her home, Mr. Georges arranged for his mother to be admitted to The Woodlands, an assisted living facility owned and operated by Pleasant Bay.2 At some point after her arrivalat The Woodlands, Ms. Georges no longer had sufficient income or savings to pay the cost of her occupancy at The Woodlands and began accruing charges.
By April of 2010, Ms. Georges needed more assistance than was available at The Woodlands and moved into the neighboring skilled nursing center owned and operated by Pleasant Bay, which, confusingly, was also referred to as Pleasant Bay.3 (To distinguish between Pleasant Bay, the company, and Pleasant Bay, the nursing facility, I will refer to the latter as "Pleasant Bay Home.") Upon Ms. Georges's admission to Pleasant Bay Home, a services agreement, dated April 27, 2010, was executed by her grandson Justin, as alternate attorney-in-fact under her power of attorney.4 The services agreement contained a section entitled "Responsible Party Obligations." The term "Responsible Party" is capitalized when used in this section but is not defined anywhere in the agreement. I find that the following language in the Responsible Party Obligations section of the services agreement offers the best available definition:
You [the nursing home resident] may have a Responsible Party who is responsible for managing your finances for your benefit, for paying your obligations under this Agreement and for applying your funds and assets, including Social Security checks, pensions, etc. to pay for the nursing facility services rendered to you.
Both parties agree that Mr. Georges was the Responsible Party under the agreement even though the agreement itself lists Justin Georges, the defendant's son.
At the time the services agreement was entered into, Ms. Georges had two sources of income—$1,389 a month from social security and $1,021.24 a month from an annuity. Thiswas not enough income to cover the outstanding unpaid balance due from her previous stay at The Woodlands and the accruing costs of her residency at Pleasant Bay Home. Initially during her residency at Pleasant Bay Home, Ms. Georges was covered to some extent by Medicare. After her Medicare benefit ran out, Ms. Georges's monthly charge at Pleasant Bay Home typically exceeded $8,000 a month. Mr. Georges, as Ms. Georges's attorney-in-fact, understood that he would have to sell Ms. Georges's condominium in Brewster, Massachusetts, to raise the funds necessary to pay her obligations to Pleasant Bay.
In June of 2010, Mr. Georges, as attorney-in-fact for his mother, executed a promissory note whereby Ms. Georges promised to pay Pleasant Bay $28,943.91, to cover the outstanding balance due for her residency at The Woodlands. Both Mr. Georges and Pleasant Bay understood that this note would be paid from the sale proceeds of Ms. Georges's condominium.
Mr. Georges intended to use the condominium sale proceeds to pay off the promissory note and to bring Ms. Georges current on her obligations as a resident of Pleasant Bay Home. He also intended to apply on Ms. Georges's behalf for assistance from the state's Medicaid program, known as MassHealth. It was Pleasant Bay's practice, as communicated to Mr. Georges, to bill its Pleasant Bay Home residents at private-pay rates until Medicaid eligibility was established and then to accept Medicaid payments (supplemented by social security and other retirement benefits) as payment in full retroactive to the date of Medicaid eligibility.
The sale process took longer than expected but in March of 2011, Mr. Georges, as attorney-in-fact, sold Ms. Georges's condominium. Ms. Georges netted $247,395.03 from the sale. The funds were deposited into Ms. Georges's checking account where they were comingled with other funds, including Ms. Georges's monthly social security and annuity income. Mr. Georges had unlimited deposit and withdrawal rights in the account both in hiscapacity as Ms. Georges's attorney-in-fact and as a named co-owner of the account. From the account, Mr. Georges paid a total of $104,128.91 to Pleasant Bay. These payments brought Ms. Georges current on all her outstanding obligations to Pleasant Bay as of March 2011, including paying off the promissory note. Also in March 2011, as Ms. Georges's attorney-in-fact, Mr. Georges wrote a series of checks totaling $63,500 in gifts to various members of Ms. Georges's family, including himself. Over the next few months, Mr. Georges disbursed substantially all the funds remaining in Ms. Georges's checking account. Some of the funds went to pay Pleasant Bay for current bills, but a significant amount went to Mr. Georges or to third parties on his behalf to pay for his personal expenses, including purchasing a car and a computer.
In the summer or fall of 2011, after the sale proceeds of the condominium had been spent, and in keeping with his plan to convert Ms. Georges from a private-pay resident at Pleasant Bay Home to one covered by Medicaid, Mr. Georges, as attorney-in-fact for Ms. Georges, applied on her behalf for Medicaid through MassHealth. Her application was denied in essence due to the substantial gifts to family members from the proceeds of the sale of her condominium.5 Mr. Georges's attempts to re-apply for Medicaid and to appeal MassHealth's denials were equally unsuccessful.
At some point approximately coincident with the initial application to MassHealth, Mr. Georges stopped making payments to Pleasant Bay on behalf of his mother, including from her monthly social security and annuity income. He began transferring those funds to his personal checking account where he held them while the Medicaid application was being processed, assuming that once Medicaid was approved Pleasant Bay would true-up Ms. Georges's accountand at that point he would pay whatever balance was owed. When the Medicaid application was denied, Mr. Georges continued to withhold Ms. Georges's social security and annuity income rather than making partial payments to Pleasant Bay. Knowing that his mother had nowhere near enough income to pay Pleasant Bay at its private-pay rates, Mr. Georges hoped to use the lump sum social security and annuity funds he had been collecting and withholding to reach some sort of settlement with Pleasant Bay. Mr. Georges's strategy did not succeed, and in September of 2012, he moved Ms. Georges out of Pleasant Bay Home to another nursing facility, using the social security and annuity funds he had amassed to fund the move. Ms. Georges died on July 6, 2013.
In October 2012, Pleasant Bay brought a state court action against Mr. Georges, individually and as "legal representative" of Ms. Georges, for the money owed for Ms. Georges's residency at Pleasant Bay Home. Because Ms. Georges never qualified for Medicaid, Pleasant Bay's claim was based on full private-pay rates. In July of 2016, Mr. Georges and Pleasant Bay settled the litigation with Mr. Georges agreeing to a judgment being entered against him in the amount of $128,000, plus post-judgment interest. At the trial in this court, no evidence was presented that the state court judgment was accompanied by any findings whatsoever as to Mr. Georges's conduct in connection with the indebtedness owed to Pleasant Bay.
On May 23, 2019, Mr. Georges filed his voluntary petition for relief under chapter 7 of the Code. He listed the judgment debt owed to Pleasant Bay as undisputed in his bankruptcy schedules. It is this debt that Pleasant Bay seeks to have excepted from Mr. Georges's discharge.
Pleasant Bay asserts two reasons why I should...
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