Court Opinion

ID: 4531695
Source: CourtListenerOpinion
Date Created: 2020-05-05 14:08:15.93235+00
Date Added: 2024-06-11T09:27:08.266166
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                                 APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this
               opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                           SUPERIOR COURT OF NEW JERSEY
                                                           APPELLATE DIVISION
                                                           DOCKET NO. A-5665-17T4

J.B.,

          Petitioner-Appellant,

v.

CAMDEN COUNTY BOARD
OF SOCIAL SERVICES, and
DIVISION OF MEDICAL
ASSISTANCE AND HEALTH
SERVICES,

     Respondent-Respondent.
________________________________

                    Submitted September 12, 2019 – Decided May 5, 2020

                    Before Judges Nugent and Suter.

                    On appeal from the New Jersey Department of Human
                    Services, Division of Medical Assistance and Health
                    Services.

                    Stotler Hayes Group, LLC, attorneys for appellant
                    (Nikoleta Tzaferos, on the briefs).

                    Gurbir S. Grewal, Attorney General, attorney for
                    respondent (Melissa H. Raksa, Assistant Attorney
            General, of counsel; Arundhati Mohankumar, Deputy
            Attorney General, on the brief).

PER CURIAM

      This case involves an application for Medicaid benefits. The applicant,

petitioner J.B., appeals from the final decision of the Director, Division of

Medical Assistance and Health Services (the Director), imposing a penalty of

329 days because petitioner sold her home for less than fair market value durin g

the "look-back" period reviewed for Medicaid eligibility for institutional

benefits.1 The Director determined petitioner failed to overcome her burden of

rebutting the presumption that the transfer was made to establish Medicaid

eligibility and imposed a transfer penalty.

      Because the Director's determination that petitioner sold her home to

establish Medicaid eligibility is supported by substantial credible evidence in

the record, we affirm that part of the decision. Because the Director's decision

concerning the penalty is contrary to the findings of an Administrative Law

Judge (ALJ) but does not explain the Director's rejection of the ALJ's findings,

we vacate the penalty and remand for further proceedings.

1
  The application for Medicaid, the administrative proceedings, and this appeal
have been filed on petitioner's behalf by the skilled nursing facility where
petitioner was admitted before her Medicaid application was filed.
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                                        2
                                        I.

                                       A.

      The following facts are undisputed. Petitioner was admitted to a skilled

nursing facility in September 2016. When admitted, she owned a home in

Brooklawn. Following petitioner's admission to the nursing facility, her son

decided to apply on her behalf for Medicaid benefits. Personnel at the facility

informed him petitioner could have no assets when the Medicaid application was

filed. Utilizing a power of attorney, petitioner's son sold her home in November

2016—two months after her admission to the facility and one month before

petitioner applied for Medicaid benefits—to a realtor and former high school

classmate for $17,500, considerably below its tax assessed value of $104,700.

      Following the filing of petitioner's December 2016 Medicaid application,

the Camden County Board of Social Services (Camden Board or Board) imposed

a 236-day penalty, starting from petitioner's eligibility date of January 1, 2017,

because her house was sold for less than fair market value. Dissatisfied with the

Camden Board's final decision, petitioner requested a Fair Hearing concerning

the penalty, and the matter was transferred to the Office of Administrative Law

for a Fair Hearing before an administrative law judge (ALJ).

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      The parties' primary disputes before the ALJ were the value of petitioner's

home when it was sold in November 2016, and whether petitioner sold the home

below its market value to establish Medicaid eligibility. During the hearing, a

Human Services Specialist for the Camden Board testified petitioner had not

supported her application to the Camden Board that her home was in poor

condition and that $17,500 was its fair price when she sold it. After the Camden

Board notified petitioner of that deficiency, she submitted a realtor's

comparative market analysis, which the Board rejected because it was not an

appraisal.

      The Camden Board assessed petitioner's home by applying an equalization

ratio to the home's tax assessed value and giving petitioner a credit for the

purchase price of $17,500. The Human Services Specialist testified before the

ALJ that the Camden Board initially applied the wrong equalization ratio, but

using the correct ratio, the penalty should be approximately 130 days. She also

testified petitioner had provided to the Camden Board neither a comparable

market analysis nor a certified appraisal until after the Camden Board sent

petitioner the letter notifying her of the penalty. Nor did petitioner provide the

Camden Board with any photographic evidence of the home's condition before

it was sold or when it was sold.

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        Petitioner presented the testimony of her son, his wife, his friend who had

purchased the property, and a licensed appraiser.           Petitioner's son testified

petitioner's health began to fail in September 2015. She developed a severe

condition and underwent surgery. She was never again healthy enough to return

home.

        Petitioner's son and his wife testified the home was in deplorable

condition. According to them, petitioner had become a "hoarder." For example,

when they went to petitioner's home after she underwent surgery and was

hospitalized, they found "boxes, books, clothing items piled from floor to ceiling

on both sides of the porch" and in the home's interior. Only a "narrow trail"

enabled one to walk through the living room. The interior of the hou se smelled

of animal and human waste and was infested with bugs.                   According to

petitioner's son, "the only real usable living space that my mom had left was a

small section of her couch where she would sleep kind of curled up." Otherwise,

the rooms were covered with "stacks of newspaper, plates with cat food on them

that was rotting, bugs all over the place, [and] there was another huge pile of cat

litter at the side of one of these little trails going up the steps."

        In addition, broken and leaking pipes had caused water damage

throughout the home. Considerable damage was visible throughout both floors

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                                           5
of the house. No appliances worked, the plumbing did not work, there was no

air conditioning, and the heat was unreliable.

       According to petitioner's son, he and his wife spent "from mid October

2015 up until the spring of 2016 just to get the house cleaned out." Neither

petitioner's son nor his wife, however, took photographs or video of the interior

of the home.

      The realtor who purchased the home for $17,500, a former high school

classmate and current "acquaintance" of petitioner's son, testified he routinely

"flipped" homes. He, too, described the deplorable condition of the home when

he first inspected it after petitioner's son contacted him.

      The realtor decided to purchase the home as an investment, which he did

for $17,500. He claimed the price was a fair market value for the home. He

claimed to have spent "in the low to mid 30's" to compete what he described as

"pretty much a complete interior remodel," replacing all the windows, the heater,

and all the drywall. Yet, he acknowledged he was "not the best record keeper,"

and produced only approximately $5000 in receipts, along with a report from a

construction company, in which he had an ownership interest, showing a cost of

services of $26,750. He sold the home for $53,000.

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                                         6
           The realtor prepared a comparative market analysis for petitioner's home.

Based on that analysis, he opined the property should be listed for $25,000 and

sold for between $18,000 and $25,000. During the hearing before the ALJ, the

realtor testified he knew the appraiser appraised petitioner's home in September

2017 at $78,000. He felt this value "was a little high," but it was "definitely in

the range because . . . [the property] was now an occupied property with a renter

. . . ."

           Petitioner's appraiser was a "licensed real estate appraiser, residential

certified." She appraised petitioner's home on September 28, 2017—ten months

after its sale—for $78,000. She said the appraisal would have been lower had it

taken place either before improvements were made or had she known "the

property was a hoarding situation and required a significant amount of repairs."

During cross-examination, the appraiser admitted she could not say with any

certainty what the actual value of petitioner's home was at the date of the sale,

November 21, 2016. She also explained she was unable to appraise petitioner's

home "retroactively" to the date of its sale, because between its sale and the date

her office was contacted to do the appraisal, the home had been renovated.

           Among other facts, the ALJ determined that when petitioner's son and his

wife went to her home after her September 2015 hospitalization, they "found the

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                                           7
residence in poor condition." The ALJ also found it took petitioner's son and

his wife several months to clean the residence.

      Concerning the realtor's comparative market analysis, the ALJ found it

was a marketing tool rather than an appraisal. In contrast, after noting the 2017

tax assessed value was $84,000, the ALJ determined the 2017 appraisal of the

property for $78,000 was an "independent appraisal." Although the ALJ found

that the realtor who purchased the property for $17,500 had work done on the

property by his company before he resold it, the judge also found the realtor had

provided no "supporting documentation or cost of line item breakdown . . .

substantiating the work performed on the property by the compan y as set forth

in the site report."

      The ALJ had no doubt petitioner's home was in poor condition when her

son sold it, but the judge noted the absence of photographic evidence of the

home "in its dilapidated and uninhabitable state" prior to its sale. The ALJ

further noted the only document petitioner provided to rebut the presumption

the property was not sold at its fair market value was the realtor's comparative

market analysis; an analysis which, according to the ALJ was not performed in

accordance with the Uniform Standards of Professional Appraisal Practice and

could not be used as an appraisal. The ALJ rejected the comparative market

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                                        8
analysis as a purported credible source of the property's fair market value when

sold.

        The ALJ found two credible sources of petitioner's home's equity value at

the time of the home's sale: "the property tax records and the certified appraisal

which was not provided until the hearing date."        Noting the Camden Board's

Specialist "stipulated that the certified appraisal would suffice," the ALJ

accepted the appraised value of $78,000 as "the appropriate value for the

property." The ALJ expressly rejected the tax assessed value. Deducting the

$17,500 sale price, the ALJ imposed a penalty in the amount of $60,500, which

equated to a 142-day penalty period.

                                          B.

        Following petitioner's filing of exceptions to the ALJ's initial decision, the

Director reviewed the entire record and issued a final agency decision in May

2018. The Director adopted the ALJ's initial decision but modified the penalty

to $109,522.09, equating to 329 days. The Director determined petitioner had

"offered no corroborating evidence to establish that these transfers were done

for a purpose other than to qualify for Medicaid benefits, nor was she ab le to

rebut the presumption that the transfers were for less than fair market value."

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                                           9
      The Director added that in the absence of competent evidence establishing

the home's fair market value, the New Jersey Administrative Code provided a

basis for determining a property's residential value. The Director computed the

home's adjusted fair market value when sold at $127,022.04, based on the 2016

Table of Equalized Valuations used by Camden County. Accordingly, the

Division assessed a penalty of $109,522.09, equating to a penalty of 329 days.

      On appeal, petitioner argues the Director's decision must be reversed

because it fails to consider "any or all of the evidence presented at the Fair

Hearing." Petitioner also argues the Director's decision is unsupported by the

law, and the Division miscalculated the penalty.

                                      II.

                                      A.

      Our review of agency determinations is limited. In re Stallworth, 208 N.J.
182, 194 (2011). When reviewing findings of fact, we must determine whether

such findings could reasonably have been reached on "sufficient" credible

evidence present in the record considering the proofs as a whole, giving "due

regard" to the ability of the factfinder to judge credibility. Close v. Kordulak

Bros., 44 N.J. 589, 599 (1965).

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                                      10
      We also generally "defer to the specialized or technical expertise of the

agency charged with administration of a regulatory system." In re Application

of Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413,

422 (2008). For that reason, we ordinarily will "not disturb an administrative

agency's determinations or findings unless there is a clear showing that (1) the

agency did not follow the law; (2) the decision was arbitrary, capricious, or

unreasonable; or (3) the decision was not supported by substantial evidence."
Ibid. "The burden of demonstrating that the agency's action was arbitrary,

capricious or unreasonable rests upon the [party] challenging the administrative

action." In re Arenas, 385 N.J. Super. 440, 443-44 (App. Div. 2006).

      In this case, we must review the Division's determination that petitioner

sold her home for less than fair market value to become eligible for Medicaid.

We must also review the penalty the Division imposed.

      Enacted in 1965 as Title XIX of the Social Security Act, Medicaid "is

designed to provide medical assistance to persons whose income and resources

are insufficient to meet the costs of necessary care and services." L.M. v. Div.

of Med. Assistance & Health Servs., 140 N.J. 480, 484 (1995) (quoting Atkins

v. Rivera, 477 U.S. 154, 156 (1986)). "The program is a cooperative federal-

state endeavor in which the federal government provides 'financial assistance to

                                                                         A-5665-17T4
                                      11
States that choose to reimburse certain costs of medical treatment for needy

persons.'" Ibid.    (quoting Harris v. McRae, 448 U.S. 297, 301 (1980)).

Participating States "must develop a plan that includes 'reasonable standards . .

. for determining eligibility for and the extent of medical assistance . . . [that is]

consistent with the objectives' of the Medicaid program." Ibid. (alteration in

original) (quoting 42 U.S.C.A. § 1396a(a)(17)(A)). The Department of Human

Services is the agency designated to administer Medicaid in New Jersey.

N.J.S.A. 30:4D–3c. County Welfare Agencies are responsible for determining

income and resource eligibility when an applicant is receiving institutional care.

N.J.S.A. 30:4D-7a; N.J.A.C. 10:71-3.15(a).

      Applicants for Medicaid benefits must meet the eligibility requirements

of the State in which they live. L.M., 140 N.J. at 484 (quoting Schweiker v.

Gray Panthers, 453 U.S. 34, 36-37 (1981)). To be eligible for Medicaid in New

Jersey, an applicant must generally have $2000 or less in resources:

"participation in the program shall be denied or terminated if the total value of

an individual's resources exceeds $2000." N.J.A.C. 10:71-4.5(c). Resources

include "any real or personal property which is owned by the applicant . . . and

which could be converted to cash to be used for his or her support and

maintenance." N.J.A.C. 10:71-4.1(b).

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                                         12
      If an applicant has disposed of assets within five years of applying fo r

Medicaid or becoming institutionalized in certain facilities, the individual is

ineligible for Medicaid's institutional level benefits, which include those sought

in this case by petitioner. The relevant regulation states:

             An individual shall be ineligible for institutional level
             services through the Medicaid program if he or she (or
             his or her spouse) has disposed of assets at less than fair
             market value at any time during or after the 60-month
             period immediately before:

                   1. In the case of an individual who is
                   already eligible for Medicaid benefits, the
                   date     the   individual     becomes    an
                   institutionalized individual; or

                   2. In the case of an individual not already
                   eligible for Medicaid benefits, the date the
                   individual applies for Medicaid as an
                   institutionalized individual.

                   [N.J.A.C. 10:71-4.10(a).]

      If an individual has disposed of assets during this five-year look-back

period for the purpose of establishing eligibility for Medicaid, the individual is

subject to a transfer penalty. "A transfer penalty is the delay in Medicaid

eligibility triggered by the disposal of financial resources at less than fair market

value during the look-back period." E.S. v. Div. of Med. Assistance & Health

                                                                              A-5665-17T4
                                        13
Servs., 412 N.J. Super. 340, 344 (App. Div. 2010) (citing H.K. v. State of N.J.

Dep't of Human Srvs., 184 N.J. 367, 380 (2005)).

      Applicants who have transferred assets for less than fair market value

within the five-year look-back period are presumed to have made the transfer to

establish Medicaid eligibility. N.J.A.C. 10:71-4.10(i). "Fair-market value shall

be an estimate of the value of an asset, based on generally available market

information, if sold at the prevailing price at the time it was actually

transferred." N.J.A.C. 10:71-4.10(b)(6).

      Applicants "may rebut the presumption . . . by presenting convincing

evidence that the assets were transferred exclusively (that is, solely) for some

other purpose." N.J.A.C. 10:71-4.10(j). "[T]he burden of proof shall rest with

the applicant." Ibid. "Evidence of good faith effort to transfer the asset at fair

market value" is one factor that, "while not conclusive, may indicate that the

assets were transferred exclusively for some purpose other than establishing

Medicaid eligibility for long term care services[.]" N.J.A.C. 10:71-4.10(k)(3).

                                       B.

      Considering petitioner's arguments in light of our standard of review and

the foregoing regulatory provisions, we find the record amply supports the

Director's determination J.B. failed to rebut the presumption she transferred her

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                                       14
home for less than fair market value to establish Medicaid eligibility. Even were

we to accept petitioner's realtor's comparative market analysis as equivalent of

fair market value—and we do not—the analysis exceeded the $17,500 the realtor

paid to purchase the property. The realtor's opinion that $17,500 was a fair

market value was subject to substantial questions of credibility, including the

realtor's relationship with petitioner's son, the realtor's motivation to minimize

the purchase price in order to maximize his profit when he "flipped" the house,

and the realtor's lack of credentials as a qualified appraiser. These and other

facts developed during the hearing amply supported the ALJ and Directo r's

rejection of the realtor's opinion testimony.

      Petitioner offered no other testimony that her home was sold for fair

market value. In addition, the question of valuation aside, the ALJ and Director

could have inferred from petitioner's son's testimony he used his power of

attorney to sell her home so she would qualify for Medicaid. The record clearly

supports the Director's determination petitioner failed to rebut the presumption.

We thus turn to the issue of the penalty.

                                       III.

      The transfer penalty is computed by ascertaining the transferred asset's

fair market value and deducting from it the consideration received for the asset.

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                                       15
The difference is the asset's "uncompensated value."       N.J.A.C. 10:71-4.10(c).

The penalty period,

             [i]n accordance with 42 U.S.C. §1396p(c)(1)(E) for
             asset transfer shall be the number of months equal to
             the total, cumulative uncompensated value of all assets
             transferred by the individual, on or after the look-back
             date, divided by the average monthly cost of nursing
             home services in the State of New Jersey adjusted
             annually in accordance with the change in the
             Consumer Price Index-All Urban Consumers, rounded
             up to the nearest dollar.

             [N.J.A.C. 10:71-4.10(m)(1).]

      The fair market value of assets transferred during the look-back period

"shall be an estimate of the value of an asset, based on generally available market

information, if sold at the prevailing price at the time it was actually transferred.

Value shall be based on the criteria for evaluating assets as found in N.J.A.C.

10:71–4.1(d)." N.J.A.C. 10:71-4.10(b)(6). "The equity value of real property

is the tax assessed value of the property multiplied by the reciprocal of the

assessment ratio as recorded in the most recently issued State Table of Equalized

Valuations, less encumbrance, if any." N.J.A.C. 10:71-4.1(d)(1)(iv).

      In her final decision, the Director stated, "[p]etitioner's claim that the

municipal tax assessment was too high and did not reflect the market value of

the property was not supported by competent evidence." Yet, nowhere in the

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                                        16
decision does the Director mention the opinion of petitioner's appraiser, the

Camden Board's apparent acceptance of the appraisal as appropriate, or the

ALJ's acceptance of the appraisal.

                   In reviewing the decision of an administrative
            law judge, the agency head may reject or modify
            findings of fact, conclusions of law or interpretations of
            agency policy in the decision, but shall state clearly the
            reasons for doing so. The agency head may not reject
            or modify any findings of fact as to issues of credibility
            of lay witness testimony unless it is first determined
            from a review of the record that the findings are
            arbitrary, capricious or unreasonable or are not
            supported by sufficient, competent, and credible
            evidence in the record. In rejecting or modifying any
            findings of fact, the agency head shall state with
            particularity the reasons for rejecting the findings and
            shall make new or modified findings supported by
            sufficient, competent, and credible evidence in the
            record.

            [N.J.S.A. 52:14B-10(c).]

      The Director apparently overlooked this statutory requirement when she

rejected the ALJ's initial decision. Petitioner's appraiser's opinion that the fair

market value of petitioner's home at the time of the appraisal was $78,000 is

well-supported by the evidence on the record as a whole. Although the appraisal

was made approximately one year after petitioner's home was sold, the

overwhelming credible evidence supports the fact that the fair market value of

petitioner's home, when sold in its deplorable, unimproved condition, was less

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                                       17
than $78,000. The ALJ's acceptance of the appraisal is supported by sufficient

credible evidence in the record.

      Because of the absence in the final agency decision of any mention of the

qualified appraisal accepted by the ALJ, any discussion of the substantial

evidence that the appraised value exceeded the home's fair market value when

sold, and any mention or apparent compliance with N.J.S.A. 52:14B-10(c), the

decision concerning the transfer penalty appears to be arbitrary and

unreasonable. Virtua-West Jersey Hosp. Voorhees, 194 N.J. at 422. However,

as the oversight may have been unintentional, we remand this matter to the

Director to address these issues at a hearing after providing the parties the

opportunity to submit supplemental briefs. The matter is remanded only as to

the penalty. We affirm the determination petitioner's home was transferred for

less than fair market value to establish Medicaid eligibility.

      Affirmed in part, reversed in part, and remanded for further proceedings

consistent with this opinion. We do not retain jurisdiction.

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                                       18