On July 21, 2004, the Superior Court of New Jersey, Appellate Division, decided a case, entitled Seabrook Village v. John Murphy, that serves as further support for a recent court victory of mine, which I wrote about in last week’s column. Seabrook Village is a continuing care retirement community located in Tinton Falls.
In my most recent column, I wrote about a case of mine involving a CCRC. My client was a married couple. The wife resided in the nursing home section of the CCRC, the husband in the independent living section.
I argued that the independent living unit was the husband’s “house” and, therefore, an exempt resource for purposes of determining the wife’s eligibility for Medicaid. The CCRC contended that the independent unit was not a “house” under the terms of its residency agreement with my client.
The Medicaid regulations define a “house” as an individual’s “principal residence.” Unquestionably, the unit is the husband’s principal residence. In fact, the unit is his sole residence; accordingly, under the regulations governing the Medicaid program, the unit is a “house.”
In my argument to the court, I noted that the residency agreement between the CCRC and my client might state something other than what the Medicaid regulations state, but to the extent there is a conflict between the regulations and the agreement, the regulations must prevail. In other words, I argued that the CCRC and its residents could not override a law that is designed to protect laypersons from harm.
Most laws are designed to protect the citizens of the State that enacts the law. For instance, as an extreme example, Mr. Johnson could not enter a contract with Mr. Smith that permits Mr. Smith to murder Mr. Johnson if Mr. Smith agrees to pay Mr. Johnson’s family $100,000. Such a contact would be “void as against public policy.”
In the Seabrook Village v. Murphy case, the Court was concerned with a provision of Seabrook Village’s residency agreement that permitted Seabrook Village to terminate Mr. Murphy’s residency without “just cause.” A New Jersey statue governing CCRC – the Continuing Care Retirement Community Regulation and Financial Disclosure Act (the “Act”) – requires a CCRC to establish “just cause,” a defined term under the Act, before ejecting a resident.
Seabrook Village argued that it did not have to comply with the Act, since its residency agreement with Mr. Murphy established a different procedure than that contained in the Act for ejecting Mr. Murphy from Seabrook Village.
Stated the Appellate Division: “Because the statutory requirement of `just cause’ is intended to protect residents from arbitrary or ill-motivated displacement, any contractual provision that seeks to circumvent, waive or otherwise undermine this statutory protection by crafting an independent ground for removal is unenforceable and void as against public policy.” In short, to the extent Seabrook Village attempted to use its contract, that it drafted, to get a leg-up on Mr. Murphy, the contract is null and void.
I thought this case was very interesting and very timely. In the brief that I submitted to the court in my case dealing with the house issue, I stated the following: “An agreement between private parties cannot abrogate state and federal law.” In other words, what I was saying was: To the extent the CCRC attempts to override a law that is designed to protect an individual through its contract with the resident, the contract is void as against public policy.
What the Seabrook Village v. Murphy case and my case teach us is this: When an elderly individual enters a contract with a long-term care facility, that contract is going to be, for the most part, one-sided. Many, if not most, of the provisions of that contract are going to be in favor of the facility, not the resident. Yet, residents should be mindful of the fact that there are laws that exist that were designed for their protection, and those laws might not be capable of being overridden through the terms of a contract.