People v. Yannett

• Decision Date: 07 February 1980
• Parties: , 401 N.E.2d 410 The PEOPLE of the State of New York, Respondent, v. Michael A. YANNETT, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 300

425 N.Y.S.2d 300

49 N.Y.2d 296, 401 N.E.2d 410

The PEOPLE of the State of New York, Respondent, v. Michael A. YANNETT, Appellant.

Court of Appeals of New York.

Feb. 7, 1980.

N. Theodore Sommer and A. Lawrence Abrams, Binghamton, for appellant.

Charles J. Hynes, Deputy Atty. Gen. (Richard D. Carruthers and T. James Bryan, New York City, of counsel), for respondent.

OPINION OF THE COURT

GABRIELLI, Judge.

Defendant appeals from an order of the Appellate Division which affirmed a judgment of Broome County Court convicting him of the crime of larceny in the second degree. The conviction is premised upon the claim that defendant embezzled certain funds that were in his possession but were actually owned by certain residents of a nursing home owned and operated by defendant. The dispositive question on this appeal is whether the funds which defendant was convicted of embezzling were held by him on behalf of the residents, or whether those moneys were in fact owned by defendant. For the reasons discussed below, we conclude that defendant was the actual owner of the money in question, although he was otherwise indebted to the residents. Since the mere failure to pay one's debts cannot sustain a conviction for larceny by embezzlement, defendant's conviction must be set aside and the indictment dismissed.

Defendant is the owner-operator of the Endicott Nursing Home. As is true of most such facilities, defendant's nursing home is funded mainly in three ways: payments made by private residents, their families, or some other nongovernmental source; payments from local agencies made pursuant to the State Medicaid program on behalf of needy residents; and payments made by Medicare, the Federal health insurance program, for the care of eligible residents. As a condition to participating in the Medicare program, a nursing home is required to obtain certification from the Federal Government and to enter into a Medicare provider agreement in which it agrees that it will charge those persons eligible for Medicare no more than a set rate established by the Medicare program for that particular home. The home is free, however, to charge private residents a higher rate. Furthermore, Medicare provides the full amount of the Medicare rate for the first 20 days of an eligible person's stay at the home, while for the next 80 days, Medicare pays that rate less a coinsurance charge which the eligible resident is required to pay himself. During that full 100-day period, however, the maximum which a home can charge an eligible resident is limited by the provider agreement to the Medicare rate.

As noted above, when a nursing home applies for participation in the Medicare program, it must first be certified and is then required to enter into a Medicare provider agreement. Moreover, before benefits are paid for a particular resident, that person's eligibility must first be determined by Medicare. All this, of course, may and usually does take considerable time, and in the meanwhile the nursing home needs revenue to operate. The home's solution in such a situation is to require even those residents who seem eligible for Medicare to pay their own way pending approval by Medicare. During this period the home may, and defendant did, charge the higher, private resident rates, rather than the lower Medicare rate. However, the provider agreement requires the home, upon being notified that a particular person is eligible for Medicare, to refund to that resident the entire amount which the resident had previously paid the home during the period in which he was actually eligible but had not yet been approved, including the difference between the Medicare rate and the higher private resident rate, less the coinsurance charge when applicable. If the payments have been made by someone other than the resident, the refunds are to be made to that person. If the resident has died in the interim, the payments are to be made to the patient's estate, pursuant to State law. If for some reason the refund cannot be made within 60 days after the nursing home is notified that a particular resident is eligible for Medicare, then the nursing home is required to set aside an amount equal to the refund in a separate account until payment can be made to the proper party. After the nursing home refunds the proper amount to the appropriate person or places it in a separate account if a refund cannot be timely made, then the local Medicare representative (in this State, Blue Cross) reimburses the home at the Medicare rate. It is important to note that under this plan, no payments are required to be made by Medicare to the nursing home until after the nursing home refunds the proper amount to the resident or sets up a separate account when mandated.

In the instant case, the jury by its verdict necessarily found that instead of making full refunds to certain residents as was required by the Medicare agreement, defendant made only partial and in some cases no refunds. During the period prior to Medicare approval of those residents, defendant charged them at the higher private resident rate, as he was apparently allowed to do under the provider agreement. When he was notified that those persons were eligible for Medicare, he was then required by the agreement to refund to them the full amount of the payments they had made to him, less the coinsurance fee for periods after the initial 20 days. Instead, defendant refunded at most only the amount of the reimbursement payments Medicare was obliged to make to him for those persons, and retained the difference between the higher private resident rate and the Medicare approved rate. This was a clear violation of the provider agreement, which mandated full refunds. Unfortunately, despite defendant's failure to refund the full amount due the residents, Medicare, through its agent Blue Cross, forwarded the Medicare payments to defendant although he was not entitled to any money under the agreement until he made full refunds to the residents. Defendant now stands convicted of larceny in the second degree on the theory that he embezzled funds owned by the residents to whom he did not give full refunds ¹ (see Penal Law, § 155.05, subd. 2, par. (a); § 155.35). The Appellate Division affirmed the judgment of conviction, and defendant now appeals to this court. There must be a reversal, since the funds defendant was convicted of embezzling simply were not the property of the residents.

A distinction must be drawn between the refusal to pay a valid debt and the crime of larceny by embezzlement (see, generally, People v. Richardson, 55 A.D.2d 514, 389 N.E.2d 14). The essence of the crime of larceny by embezzlement is the conversion by the embezzler of property belonging to another which has been entrusted to the embezzler to hold on behalf of the owner (see Penal Law, § 155.05, subds. 1-2; People v. Meadows, 199 N.Y. 1, 4, 92 N.E. 128; People v. Robinson, 284 N.Y. 75, 29 N.E.2d 475). In the instant case, the money which defendant has been convicted of stealing never belonged to the residents of his nursing home, nor was it entrusted to defendant to hold on behalf of the residents. Although the residents had a contractual right to receive refunds from defendant equal to the full amount they had previously...