Promissory Note Executed by Nursing Home Resident’s Daughter Is Not Illegal Third-Party Guarantee

The efforts of nursing homes to create and enforce filial responsibility, i.e., hold children financially responsible for a parent's long term care, even where state legislators have not enacted such legislation, is a frequent topic of articles on this blog:

• Filial Responsibility- Resident’s Son Not Liable for Breach of Contract Because He Did Not Cause His Mother to Be Ineligible for Medicaid;

• Judge Can Not Impose an ‘Unusual’ Condition on a Reversal of a Default Judgment in a Nursing Home Breach of Contract Lawsuit;

• Tortious Interference With Contractual Relationship Claim Most Recent Possible Remedy Nursing Homes can Employ Against Children of Nursing Home Residents;

• Conservator Owes Duty to Nursing Home to Timely Apply for Medicaid;

• Agent Under Power of Attorney Liable for Damages to Nursing Home for Breach of Contract;

• Conveyance to Son Was Fraudulent, But His Siblings May Also Be Liable Under Filial Support Law;

• Nursing Home May Sue Resident's Daughter for Breach of Contract.

Another recent example comes courtesy of a Kentucky appeals court which held that a promissory note executed by a nursing home resident’s daughter, agreeing to pay the nursing home for the resident’s outstanding expenses, is not illegal because there was no evidence her mother’s stay in the nursing home was conditioned on her signing the note. Roberts v. Mt. Washington Health Care, LLC (Ky. Ct. App., No. 2020-CA-1190-MR, Oct. 29, 2021).  Federal law provides that “a nursing facility must . . . not require a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in, the facility...” 42 U.S.C. § 1396r(c)(5)(A)(ii). 

Erma Basham entered a nursing home in 2018. She applied for Medicaid in 2019 and was approved, but she owed $34,742.26 in expenses for her care before her Medicaid application was approved. Ms. Basham’s daughter, Christy Roberts, executed a promissory note, agreeing to pay the nursing home monthly to pay down Ms. Basham’s bill. Ms. Roberts made one payment and defaulted on the note.

The nursing home sued Ms. Roberts. The trial court found Ms. Roberts had executed a valid promissory note and entered judgment in favor of the nursing home. Ms. Roberts appealed, arguing that the promissory note was illegal because under federal law, the nursing home cannot require a third-party guarantee of payment as a condition of admission or continued stay in the facility.

The Kentucky Court of Appeals affirmed in part, holding that the promissory note is not illegal. According to the court, there was “no testimony or other evidence of record apart from [Ms.] Roberts’ unsupported assertions indicating that her mother’s admission or continued stay at the appellee’s facility was conditioned upon [Ms.] Roberts executing the February 12, 2019 promissory note.” 

The court did find that the interest charged Ms. Roberts was too high and remanded the case to the trial court to enter a lower interest rate.