Hickory Creek at Connersville v. Estate of Otto K. Combs ( 2013 )

FOR PUBLICATION Jun 27 2013, 7:29 am
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE:
PAUL (RICK) RAUCH JAMIE H. HARVEY
MARC A.W. STEARNS Smith Harvey Law Office
Harrison & Moberly, LLP Connersville, Indiana
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
HICKORY CREEK AT CONNERSVILLE, )
)
Appellant-Plaintiff, )
)
vs. ) No. 21A04-1211-ES-600
)
ESTATE OF OTTO K. COMBS, )
)
Appellee-Defendant. )
)
INTERLOCUTORY APPEAL FROM THE FAYETTE CIRCUIT COURT
The Honorable Eugene A. Stewart, Judge
Cause No. 21C01-1203-ES-048
June 27, 2013
OPINION - FOR PUBLICATION
VAIDIK, Judge
Case Summary
According to the doctrine of necessaries, each spouse is primarily liable for his or
her independent debts. To the extent that the debtor spouse is unable to satisfy his or her
own necessary expenses, the law will impose limited secondary liability upon the
financially superior spouse by means of the doctrine of necessaries.
In this case, Marianne Combs, a Medicaid recipient, died in a nursing home, but
no estate was opened for her. The nursing home did not open a creditor’s estate for
Marianne in order to preserve its claim. When Marianne’s spouse died a little over a year
later, the nursing home filed a claim for her expenses against his estate. We find that
according to the doctrine of necessaries, a creditor must first seek satisfaction from the
income and property of the spouse who incurred the debt and only if those resources are
insufficient may a creditor seek satisfaction from the non-contracting spouse.
Facts and Procedural History
Marianne Combs and Otto Combs were married. Marianne was a resident of
Hickory Creek, a long-term care facility in Connersville, Indiana. Appellant’s App. p. 5,
45 (Joint Stipulation of Facts). Marianne’s daughter, Wanda Ferriell, was Marianne’s
Durable Power of Attorney for Health Care; Wanda admitted Marianne into Hickory
Creek, signing as her financial guarantor. Id. at 5, 35, 38. During her residency,
Marianne received Medicaid,1 but she accrued a private-pay account balance of
1
According to FSSA:
Established in 1965, Medicaid is a state and federally funded health care program
designed to assist low income individuals and families. In order to qualify for Medicaid
assistance the individual/family must meet certain eligibility requirements. The Medicaid
2
$5871.40. Id. at 45 (Joint Stipulation of Facts). Marianne died on December 22, 2010.
Id. No estate was opened for Marianne.2 Id.
In July 2011, Hickory Creek filed a complaint against Wanda and Otto for
Marianne’s account balance. Appellant’s Supp. App. p. 75. Hickory Creek’s theory was
that Wanda signed as Marianne’s “financial guarantor” and Otto was Marianne’s
“surviving spouse.” Id.
On January 12, 2012, Otto died. Id. An estate was opened for Otto on July 25,
2012. Appellant’s App. at 2, 45 (Joint Stipulation of Facts). On August 1, 2012, Hickory
Creek filed a claim against Otto’s Estate for Marianne’s account balance pursuant to
Indiana’s doctrine of necessaries. Id. at 2, 5, 45 (Joint Stipulation of Facts). Otto’s
Estate denied the claim and requested that the matter be set for trial. Following a hearing,
the trial court denied Hickory Creek’s claim against Otto’s Estate. Id. at 59. The court
reasoned that Hickory Creek’s failure to file a claim upon Marianne’s death was a bar to
recovery under the doctrine of necessaries. Id. The court also reasoned that Wanda
admitted Marianne into Hickory Creek, not Otto. Id.
program is administered on the state level; as a result, some requirements and rules vary
from state to state.
In Indiana, Medicaid is administered through the Family and Social Services
Administration (FSSA) by the Department of Family Resources (DFR). Changes to the
Medicaid program come from the Indiana General Assembly as well as the Center for
Medicare and Medicaid Services (CMS).
FSSA, Low-Income Assistance/Medicaid, http://www.in.gov/idoi/files/Nav_Guide_4_Section_
O_Low_Income_Assistance.01_08_pub.pdf (last visited June 6, 2013).
2
Marianne had an interest in property she held with Otto as joint tenants with rights of
survivorship, which Marianne lost upon her death. Appellant’s App. p. 53.
3
This discretionary interlocutory appeal pursuant to Indiana Appellate Rule 14(B)
now ensues.
Discussion and Decision
Hickory Creek contends that the trial court erred in denying its claim against
Otto’s Estate. Specifically, Hickory Creek argues that the doctrine of necessaries did not
require it to open up and then make a claim against Marianne’s estate, which it alleges
would not have had any assets. Hickory Creek argues this is so because the doctrine of
necessaries “allows a creditor to file a claim against a spouse for a decedent debtor’s
unpaid medical necessaries without wasting time, its money and the court’s resources
opening an insolvent debtor’s estate to preserve its claim against the debtor’s spouse.”
Appellant’s Br. p. 4.
The doctrine of necessaries originated at a time in which married women had been
stripped of virtually all means of self-support by their incapacity to contract. Bartrom v.
Adjustment Bureau, Inc., 618 N.E.2d 1, 3 (Ind. 1993). During this time, married women
were dependent on their husbands, who had a common-law duty to support their wives.
Id. The doctrine of necessaries was developed to protect women whose husbands,
despite their common-law duty, failed to provide necessary support. Porter Mem’l Hosp.
v. Wozniak, 680 N.E.2d 13, 16 (Ind. Ct. App. 1997). Under the doctrine of necessaries,
women were able to purchase necessary goods and services on their husband’s credit,
making the husband liable. Bartrom, 618 N.E.2d at 3. After women were given the legal
ability to contract in their own name, the doctrine was infrequently invoked, but it did not
die. Wozniak, 680 N.E.2d at 16. In Memorial Hospital v. Hahaj, 430 N.E.2d 412 (Ind.
4
Ct. App. 1982), abrogated by Bartrom, 618 N.E.2d 1, this Court agreed with Jersey
Shore Medical Center-Fitkin Hospital v. Estate of Baum, 417 A.2d 1003 (N.J. 1980), and
ruled that the doctrine of necessaries should be applied in a gender-neutral manner to
apply to debts created by both wives and husbands. Because of disagreement about the
continued vitality of the doctrine among several states and concern over Memorial
Hospital, our Supreme Court in Bartrom clarified how the doctrine of necessaries was to
operate in Indiana.
That is, according to the doctrine of necessaries, each spouse is primarily liable for
his or her independent debts. Bartrom, 618 N.E.2d at 8. Typically, a creditor may look
to a non-contracting spouse for satisfaction of the debts of the other only if the non-
contracting spouse has otherwise agreed to contractual liability or can be said to have
authorized the debt by implication under the laws of agency. Id. Agency requires some
indicia that the principal intended or authorized the agent to conduct business on his or
her behalf. See Quality Foods, Inc. v. Holloway Assocs. Prof’l Eng’rs & Land Surveyors,
Inc., 852 N.E.2d 27, 31-32 (Ind. Ct. App. 2006). Marriage alone is insufficient. A
number of methods are available to prove this, such as a durable power of attorney,
guardianship, or evidence of a conversation.
When, however, there is a shortfall between a dependent spouse’s necessary
expenses and separate funds, the law will impose limited secondary liability upon the
financially superior spouse by means of the doctrine of necessaries. Bartrom, 618 N.E.2d
at 8. The liability is characterized as “limited” because its outer boundaries are marked
by the financially superior spouse’s ability to pay at the time the debt was incurred. Id.
5
It is “secondary” in the sense that it exists only to the extent that the debtor spouse is
unable to satisfy his or her own personal needs or obligations. Id. These rules assist
enforcement of the marital duty of support in both a workable and an equitable manner. 3
Id. & n.14.
Otto’s Estate argues that this case is “remarkably” similar to South Bend Clinic v.
Estate of Ruffing, 501 N.E.2d 1114 (Ind. Ct. App. 1986). Appellee’s Br. p. 7. In that
case, Edna Ruffing and Frank Ruffing, Jr., were married. South Bend Clinic provided
medical services to Edna, who passed away. South Bend Clinic did not file a claim
against Edna’s Estate, although Edna’s Estate made a partial payment to South Bend
Clinic for Edna’s medical expenses. When Frank later died, South Bend Clinic filed a
claim for the balance of Edna’s medical expenses against Frank’s Estate. Frank’s Estate
filed a motion for summary judgment alleging that South Bend Clinic’s claim was barred
because it failed to file a claim against Edna’s Estate. The trial court entered summary
judgment in favor of Frank’s Estate.
On appeal, this Court, in explaining primary and secondary liability, held that “a
creditor must first seek satisfaction from the income and property of the spouse who
incurred the debt. Only if those resources are insufficient may a creditor seek satisfaction
from the other income and property of the marital relationship.” South Bend Clinic, 501
N.E.2d at 1116 (citing Jersey Shore Med. Ctr., 417 A.2d 1003). This Court explained
that because it was Edna who incurred the medical expenses, South Bend Clinic had to
first seek satisfaction from her income and property. But because South Bend Clinic did
3
We question the viability of the antiquated doctrine of necessaries. Nonetheless, since it
remains Indiana law, we analyze this case according to that precedent.
6
not timely do so, its claim was forever barred. Id. at 1116-17. As for South Bend
Clinic’s argument that there were no assets in Edna’s Estate and therefore it would have
been a vain or useless act to file a claim, this Court noted that had South Bend Clinic
filed a claim, it could have preserved its right to any newly discovered assets. Id. at
1117. This Court therefore affirmed the trial court. Id.
Hickory Creek argues that Otto’s Estate’s analogy to South Bend Clinic “comes up
short” because it was decided before Bartrom, and South Bend Clinic relied on Memorial
Hospital, which our Supreme Court abrogated in Bartrom.4 Appellant’s Reply Br. p. 3.
We note, however, that our Supreme Court did not mention South Bend Clinic in Bartrom
and therefore South Bend Clinic still appears, at least facially, to be good law. See 25
Aline F. Anderson & Diane Hubbard Kennedy, Indiana Practice, Anderson’s Probate
Forms, § 2:205 (2012) (citing South Bend Clinic). But even if South Bend Clinic did not
survive Bartrom, a creditor must first seek satisfaction from the income and property of
the spouse who incurred the debt. And only if those resources are insufficient may a
creditor seek satisfaction from the non-contracting spouse. This is because the doctrine
of necessaries imposes secondary liability on the non-contracting spouse, not primary
liability. And secondary liability exists only to the extent that the debtor spouse is unable
to satisfy his or her own personal needs or obligations. Bartrom, 618 N.E.2d at 8.
Allowing a creditor to first pursue a non-contracting spouse erodes the concept of
secondary liability in at least two ways. First, it allows a creditor to file suit against the
4
Hickory Creek also argues that South Bend Clinic is distinguishable because an estate was
opened for Edna and South Bend Clinic received a partial payment for her medical expenses whereas no
estate was opened for Marianne and Hickory Creek did not receive a partial payment for her nursing-
home expenses. However, the salient fact remains the same in both cases: neither South Bend Clinic nor
Hickory Creek filed a claim against either Edna or Marianne.
7
non-contracting spouse after making its own determination that the debtor spouse has no
income or property. Second, it shifts the burden of proving the financial inability of the
debtor spouse from the creditor to the non-contracting spouse. This is not the purpose of
the doctrine of necessaries.
Here, Hickory Creek essentially determined for itself that Marianne had no assets.5
Hickory Creek claims, without any citation to the record, that Marianne had no assets
because Indiana approved her Medicaid application and that it tried to collect her balance
for several months before her death to no avail.6 Also without any citation to the record,
Hickory Creek claims that after Marianne’s death, it conducted an investigation into her
possible assets and determined that she lacked the financial resources to pay her account
balance. Hickory Creek asserts that this justified its decision not to open an estate for
Marianne just “for the sake of preserving its claim.” Appellant’s Reply Br. p. 8.
We disagree and find that Hickory Creek was first required to file a claim against
Marianne to determine whether she was unable to satisfy her obligations. And because
Marianne had passed away and no estate was opened for her, this meant that Hickory
Creek, as a creditor, should have opened an estate for her, which it was permitted to do as
an interested person. See Ind. Code §§ 29-1-1-3, 29-1-7-4. However, Hickory Creek did
not do so. And now, it cannot do so because the time has passed. See Ind. Code § 29-1-
5
Citing Wozniak, Hickory Creek argues that Marianne’s Medicaid status indicated that a shortfall
existed between her necessary expenses and her funds. Appellant’s Reply Br. p. 7. In Wozniak, the
debtor was discharged from bankruptcy before she paid her hospital bill, and the hospital pursued her
husband pursuant to the doctrine of necessaries. 680 N.E.2d at 16. Here, however, no shortfall was ever
determined to exist.
6
For example, Hickory Creek baldly asserts that “Mr. Combs never opened an estate for his wife
because she possessed no assets to probate.” Appellant’s Reply Br. p. 3.
8
14-1 (non-claim statute which provides that claims against a decedent’s estate shall be
“forever barred” unless filed against the estate within three months after the date of the
first published notice to creditors or within nine months after the decedent’s death);
Appellant’s Br. p. 8-9 & Reply Br. p. 5 (Hickory Creek conceding that Indiana law bars a
claim against Marianne’s estate at this point).
Nevertheless, Hickory Creek claims that requiring it to open an estate for
Marianne, a Medicaid recipient, would “inundate the court system with unnecessary
filings” and “does not make sense from a public policy standpoint to force nursing homes
to preserve their claim in an estate, by filing a fruitless petition to open an estate and
subsequently close it, once it is shown the decedent had no money.” Appellant’s Reply
Br. p. 8. But as noted by the Court in Bartrom, there could be newly discovered assets.
And regardless, although this case involves an estate, it does not mean that all cases
involving the doctrine of necessaries will; the doctrine applies to living spouses,
divorcing spouses, nursing-home expenses, and medical expenses. Policy cannot be
based solely on a deceased Medicaid recipient in a nursing home. The doctrine of
necessaries is based on the concept that the non-contracting spouse is liable only to the
extent that the debtor spouse is unable to satisfy his or her own personal needs or
obligations. Accordingly, because Hickory Creek did not first pursue Marianne, the trial
court did not err in denying Hickory Creek’s claim against Otto’s Estate.7
7
In addition, we note that the evidence shows that Wanda was Marianne’s Durable Power of
Attorney for Health Care, admitted her into Hickory Creek, and signed as her financial guarantor.
According to Bartrom, a creditor may look to a non-contracting spouse for satisfaction of the debts of the
other only if the non-contracting spouse has otherwise agreed to contractual liability or can be said to
have authorized the debt by implication under the laws of agency. Marriage alone is insufficient.
9
Affirmed.
KIRSCH, J., and PYLE, J., concur.
Hickory Creek has failed to point to any evidence that Otto authorized the debt. The trial court essentially
made this finding when it said that Wanda admitted Marianne into Hickory Creek, not Otto.
10