Sanders v. Novick

• Decision Date: 10 November 1986
• Docket Number: No. 1,CA-CIV,1
• Citation: 729 P.2d 960,151 Ariz. 606
• Parties: Tommy SANDERS, Plaintiff-Appellant, v. Lloyd F. NOVICK, Director of The Department of Health Services, Defendant-Appellee. 8799.
• Court: Arizona Court of Appeals

Page 960

729 P.2d 960

151 Ariz. 606

Tommy SANDERS, Plaintiff-Appellant, v. Lloyd F. NOVICK, Director of The Department of Health Services, Defendant-Appellee.

No. 1 CA-CIV 8799.

Court of Appeals of Arizona,

Division 1, Department C.

Nov. 10, 1986.

[151 Ariz. 607] Greengard & Finley, A Professional Association by Patricia J. Finley, R. Austin, Goodale, Phoenix, for plaintiff-appellant.

Robert K. Corbin, Atty. Gen. by Elizabeth Teply, Asst. Atty. Gen., Phoenix, for defendant-appellee.

OPINION

SHELLEY, Acting Presiding Judge.

This appeal is from a judgment affirming a decision of the Arizona Department of Health Services (DHS) ordering Ms. Tommy Sanders to cease operation of an unlicensed health care facility. The primary issue on this appeal is whether by virtue of Sanders' co-guardianships over residents in that facility, the facility was exempt from regulation by DHS. We hold that the facility was not exempt and affirm the judgment of the trial court.

During October 1984, Sanders operated a licensed supervisory care facility in Peoria, Arizona. At the same time she also provided care to twelve individuals in an unlicensed home on an adjacent parcel of land. On October 17, 1984, a joint investigative team from DHS and the Arizona Department of Economic Security (DES) entered the unlicensed facility pursuant to a warrant. The purpose of the visit was to assess the level of care needed by the residents of the home.

Participants in the joint DHS/DES investigation concluded that eleven of the twelve persons residing in the unlicensed home required either intermediate or skilled level nursing care as defined by DHS regulations. Many residents were disoriented, incapable of ambulation and incontinent.

On October 18, 1984, DHS issued a cease and desist order directing Sanders to discontinue operating an unlicensed health care institution in violation of the provisions of A.R.S. §§ 36-401, et seq. The cease and desist order alleged that Sanders was illegally providing medical and nursing services for patients requiring intermediate or skilled nursing care.

Prior to an administrative hearing on the cease and desist order, Sanders completed the addition of a new wing to her licensed supervisory care facility and relocated residents from the adjacent home to the new wing.

An administrative hearing was conducted during January and February 1985 before a DHS hearing officer. At the hearing, Sanders testified that she had no major quarrel with the DHS conclusions concerning physical and mental assessments of the residents as a result of the October 17, 1984 investigation. She conceded that she knew the residents were not supervisory care level as defined by DHS regulations. She further admitted that she and her staff administered medications, bathed the residents, cared for the special needs of those who were incontinent and used restraints to control a victim of Alzheimer's disease.

Sanders defended her activities on grounds that she had obtained, or was in the process of obtaining, co-guardianships for those residents who required this high level of care. She submitted orders appointing her co-guardian of eight of the residents. These documents specifically provide that Sanders shall not have control or possession of the monies belonging to these individuals and shall not control where the individuals are to live.

Sanders and two relatives of her patients testified that the co-guardianships with Sanders were obtained in order to give the wards the right to live with Sanders without violating the law.

The hearing officer concluded that: (1) Sanders was operating an unlicensed health care institution and caring for persons requiring intermediate and skilled nursing care in violation of A.R.S. §§ 36-407.A, 36-430 and 36-431; and (2) Sanders' co-guardianship letters did not exempt her facility from licensure requirements.

On March 25, 1985, Lloyd F. Novick, Director of DHS, signed a decision adopting the findings of fact, conclusions of law and recommendations of the hearing officer. Sanders' request for a rehearing was denied on May 14, 1985. She then filed an appeal to superior court pursuant to A.R.S. § 12-901 from the DHS order directing her to cease operation and to comply with the terms of the cease and desist order issued on October 18, 1984.

The trial court entered judgment in favor of DHS and Sanders filed a timely notice of appeal to this court.

Pursuant to the Administrative Review Act, A.R.S. § 12-901 to -913, the trial court's review of the findings of fact made by DHS was limited to determining whether DHS acted arbitrarily, capriciously or in abuse of its discretion. DeGroot v. Arizona Racing Comm'n, 141 Ariz. 331, 336, 686 P.2d 1301, 1306 (App.1984); Schmitz v. Arizona State Board of Dental Examiners, 141 Ariz. 37, 684 P.2d 918 (App.1984). On appeal this court must determine whether the record contains evidence to support the trial court's judgment and in so doing reach the underlying question of whether the administrative agency acted arbitrarily, capriciously, or in abuse of its discretion. Maricopa County v. Gottsponer, 150 Ariz. 367, 370, 723 P.2d 716, 719 (App.1986). However, both the trial court and this court are free to draw their own legal conclusions and determine whether an agency erred in its determination of the law. Arizona Department of Economic Security v. Magma Copper Co., 125 Ariz. 23, 607 P.2d 6 (1980); Eshelman v. Blubaum, 114 Ariz. 376, 378, 560 P.2d 1283, 1285 (App.1977). We may substitute our judgment for agency conclusions regarding the legal effect of its factual findings. Gardiner v. Arizona Department of Economic Security, 127 Ariz. 603, 606, 623 P.2d 33, 36 (App.1980).

The hearing officer's conclusions of law, incorporated by reference in the DHS decision, held that Sanders' coguardianship letters did not exempt her from licensure as they were obtained "primarily for the purpose of circumventing the requirements of licensure" and Sanders did "not possess the requisite powers and duties imposed upon a guardian in order for such guardianship to be determined to be effective to exempt her from licensure ..."

In support of his recommendation, the hearing officer also set forth what he believed to be the nature and effect of the guardianships obtained by Sanders, stating in part:

Under the terms of her appointment, Respondent is unable to choose the place where the ward is to reside, a power inherent in guardianship law. Furthermore, with the exception of providing medical consent for her wards, an examination of the powers and duties of a guardian, militate against Respondent exercising any authority over her purported wards.

Additionally, Respondent has been operating her home on a commercial basis which creates a direct conflict of interest between her mercantile duties to herself and her fiduciary duties to her purported wards....

Your undersigned does not believe that Respondent's acceptance of Letters of Guardianship provides an ipso facto legitimacy to her actions. Regardless of the court's appointment, Respondent does not perform the duties inherent in a guardian in order to avail herself of the privileges of guardianship. The Department has the inherent power in a hearing of this sort to go behind the four corners of the guardianship papers and examine the true relationship as it exists between guardian and ward and, in appropriate cases, pierce the veil of guardianship. Furthermore, the Department does not have a duty to remove Respondent as co-guardian in order to have its position sustained.

In addition to adopting the hearing officer's decision, DHS also concluded that Sanders was providing a level of care in excess of "health-related services" permitted by the statutory exemption and that these services were received by residents from a hired staff rather than the legal guardian.

There is substantial evidence in the record that: Sanders operated her home on a commercial basis; care was provided by hired staff; care involved administering medicine and dealing with needs of persons having serious infirmities; and that Sanders and relatives of the residents were motivated to obtain the co-guardianship for Sanders in order to permit the residents to...