In the matter of Parks, Case No. 05-37154/JHW (Bankr.N.J. 7/10/2007)
| Decision Date | 10 July 2007 |
| Docket Number | Adver. No. 05-2774.,Case No. 05-37154/JHW. |
| Parties | In the matter of Chantell P. Parks Debtor Silver Care Center Plaintiff v. Chantell P. Parks Defendant |
| Court | U.S. Bankruptcy Court — District of New Jersey |
David Paul Daniels, Esq. Camden, New Jersey Attorney for Defendant
Robert L. Saldutti, Esq. Lario & Saldutti Haddonfield, New Jersey Attorney for Plaintiff
In this adversary proceeding, plaintiff, Silver Care Center, a nursing home which provided services to the debtor's mother, Elnora Parks, asserts that the obligations of the debtor due to the plaintiff are nondischargeable under sections 11 U.S.C. § 523(a)(2)(A) and 523(a)(4).1 The plaintiff charges the debtor with converting and misappropriating funds while she acted as a fiduciary to her mother, and with failing to properly administer her mother's funds. As well, the plaintiff asserts that the debtor should be precluded from obtaining a discharge under 11 U.S.C. § 727.
Because the plaintiff failed to show the debtor's intent to defraud the plaintiff, and failed to establish the debtor's defalcation in a fiduciary capacity, the debtor may retain her Chapter 7 discharge, and may be discharged of the debt due from her to the plaintiff.
The debtor, Chantell P. Parks, filed her Chapter 7 petition on August 24, 2005.2 She scheduled approximately $165,000 in unsecured debt, $123,931 of which was due to the plaintiff, Silver Care Center. On October 4, 2005, Silver Care filed a two count complaint against the debtor seeking to have its debt determined to be nondischargeable and to deny the debtor her discharge. Following trial, additional submissions were received from the parties through February 27, 2007.
The debtor's obligation to Silver Care Center arises from the services provided to the debtor's mother by Silver Care, commencing in August 2003. Elnora Parks was admitted in that month to the Silver Care facility. At the time of Elnora's admission, the debtor signed a Power of Attorney on behalf of her mother, authorizing the debtor to act on her mother's behalf in all respects.3 The debtor signed all of the admission documents on her mother's behalf. She also executed a "Responsible Party Agreement" in which the debtor agreed to pay all charges incurred by her mother not otherwise paid for by a third party payee.4
For the first 100 days of her stay at Silver Care, Elnora's costs were covered under her managed care insurance policy. The debtor was informed some time in October 2003 that application had to be made to Medicaid for continuing coverage of her mother's nursing home costs. The debtor made application to the Medicaid office, but the application was denied in November 2003 for failure to provide all of the necessary information.
According to the debtor, the primary information that was missing was information about her father's income.5 Although her mother and father listed their permanent residence at the same Sicklerville address, the debtor's father Jonathan had been involved with another woman Vincenteen, since the fall of 2002.6 The debtor testified that her father visited her mother on a daily basis at the nursing home, but that the debtor was not able to retrieve from her father the information about his income and assets that was necessary to complete the Medicaid application. At her mother's instruction, in January 2004, the debtor hired a divorce lawyer, who attempted to subpoena the income information. Around the same time, the debtor also hired another attorney, Jerold E. Rothkoff, Esq., to assist with the Medicaid application. According to the debtor, upon Mr. Rothkoff's advice, certain liquid assets of her mother were transferred to the debtor to allow Elnora to qualify for Medicaid benefits. As well, upon Elnora's direction, Elnora's interest in her home was transferred to the debtor's father.
In or about April 2004, Elnora left the Silver Care facility and was hospitalized for several weeks. Following her hospitalization, Silver Care refused to re-admit Elnora unless the outstanding bill for services rendered was paid. Although attempts to obtain retroactive Medicaid approval continued, the application was ultimately unsuccessful. Elnora was admitted to another nursing home in or about May 2004, and passed away on or about August 14, 2004. The debtor's father Jonathan passed away in March 2006.
From the time the general power of attorney for Elnora Parks was signed on August 8, 2003 until Elnora's death in August 2004, the debtor handled her mother's financial affairs, always following her mother's direction and wishes. The debtor testified that while her mother suffered from multiple sclerosis and was on a ventilator during her stay at Silver Care, she was entirely coherent and cognitively stable throughout her stay at the nursing home and remained so until she died. She would routinely advise the debtor about what she wanted the debtor to do with her money, including directing the debtor to give large amounts of money to the debtor's father Jonathan, who would request money from Elnora to maintain household expenses and for his own personal needs.
The claim by Silver Care that the debtor misappropriated, converted and/or failed to account for her mother's assets is premised upon the debtor's exercise of control over the various sources of Elnora's funds, including Elnora's monthly pension checks, monies deposited into a checking account held by the debtor on behalf of her mother, a lump sum social security payment, the proceeds of a personal injury settlement, and the proceeds of a life insurance policy. Each of these sources of funds is discussed below. To some extent, the funds from these various sources may be traced through three bank accounts, including Elnora's savings account, a joint checking account in the name of Jonathan and Elnora Parks, and an account held in the name of the debtor for the benefit of her mother (referred to hereinafter as the "7857 account").
Elnora received $2,432.67 each month on account of her pension. The debtor deposited each monthly payment into Elnora's savings account, and then transferred the entire payment into her parents' joint checking account to utilize for household expenses. From August 2003 through May 2004, approximately $ 24,300 in monthly pension checks were deposited into Elnora's savings account, and then transferred into Jonathan and Elnora's joint checking account. Checks were written on that joint account by both Jonathan and by the debtor on behalf of her mother. Between August 2003 and March 2004, over $20,000 was spent on the parents' household expenses, including mortgage payments, car payments, utilities and insurance. In addition to the payment of household expenses, the account was used actively by the debtor's father, Jonathan, who withdrew $19,000 in cash from the account between October 11, 2003, and March 30, 2004. Starting in June 2004, each of Elnora's monthly pension checks was directed by the debtor to the new nursing home in which her mother remained until her death in August 2004.
Although no bank statements were introduced, and there is no information about the sources of deposits into this account in addition to Elnora's $24,300 of pension checks, the disbursements and withdrawals from this account totalling nearly $40,000, made for the benefit of the debtor's parents, substantially discount the plaintiff's claim that the debtor misappropriated her mother's monthly pension checks.
As noted above, the debtor maintained a checking account in her own name, the 7857 account, which she used to deposit monies belonging to Elnora, and to pay for various expenses on behalf of Elnora. The account was opened in August 2003, when Elnora entered Silver Care, and remained open until after Elnora's death in August 2004.
Approximately $34,000 was deposited into this account between August 2003 and September 2004.7 Among the deposits was a transfer of $5,545 from Elnora's savings account on February 17, 2004. This transfer was made on the advice of the attorney retained by the debtor on behalf of her mother, Jerold Rothkoff, to assist in her mother's application for Medicaid assistance. The debtor understood that her mother would be eligible for Medicaid benefits, i.e., payment of her nursing home costs by the State of New Jersey, only if the aggregate amount of liquid assets in her name was below $ 4,000.
Another significant deposit into the 7857 account was the amount of $20,276.58 deposited on June 26, 2004. Elnora owned approximately $17,000 worth of annuities, which the debtor liquidated on her mother's direction sometime in June 2004. The June 26th deposit apparently includes the proceeds from those annuities.
As to disbursements from the 7857 account from August 2003 through September 2004, approximately $43,000 was disbursed by the debtor from the account. Included in the disbursements were checks written for Elnora's funeral expenses8 and for various attorney's fees, including fees to Jerold E. Rothkoff ($3,000), the Medicaid expert, and Jim Weiss ($1,200), who was consulted about filing bankruptcy on behalf of Elnora. Other expenses incurred on behalf of Elnora during this period included pharmacy bills to Silver Care, other medical bills, and payments toward utilities and municipal charges on her residence.
Of the $43,000 in disbursements during the 13-month period in question, $26,616 was disbursed directly to the debtor, either by way of checks made out to cash, or checks made out to the debtor directly. The debtor testified that she paid some of her mother's expenses by money order, and did not maintain money order receipts once a bill was paid. She also testified that her mother directed her to distribute the proceeds of the liquidated annuities to family and friends, including contributions to her church, Saint...
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