A U.S. district court affirms its earlier ruling denying a request for a preliminary injunction to stop New Jersey's Medicaid agency from counting promissory notes as available resources, concluding that the agency could analyze the notes as trust-like devices and that the court properly allowed parol evidence. Sable v. Velez (U.S. Dist. Ct., D.N.J., No. 09-2813, Dec. 18, 2009).
A group of New Jersey residents lent money to close relatives in return for promissory notes. However, after the individuals applied for Medicaid, the state denied their applications, claiming that the promissory notes were trust-like instruments that qualified as available resources.
The residents filed suit in federal district court seeking to enjoin the state from counting the promissory notes as available resources. The state opposed the motion for preliminary injunction and also moved to dismiss. The court denied both the motion to dismiss and the request for preliminary injunction, finding that the question of whether these promissory notes qualified as trust-like devices turned on whether the relatives were holding the money they received for the applicants' benefit. Finding that the applicants had failed to present enough evidence that they would prevail on the issue, the court denied the request for a preliminary injunction.
The residents filed a motion for reconsideration of the court's order denying the preliminary injunction. They argued that it is never permissible for the state to treat promissory notes as trust-like devices and that the court committed two clear legal errors by allowing for such a possibility and by allowing extrinsic evidence to prove that the notes are, in fact, trust-like devices.
The U.S. District Court for the District of New Jersey affirms its decision denying the request for a preliminary injunction. The court states, that "[w]hile a promissory note could be analyzed as a 'cash loan,' there is nothing in the Medicaid Act or the POMS that forbids a state from instead analyzing a promissory note as a trust-like device if the facts of the situation warrant such analysis." The court also holds that parol evidence rule is inapplicable where, as here, it appears the residents and their relatives seek to avoid liability to the state through what are "formally promissory notes but which are in substance trust-like arrangements whereby Plaintiffs' close relatives are holding money for the benefit of Plaintiffs."
For the full text of this decision, go to: https://attorney.elderlawanswers.com/full-text-of-opinion-in-sable-v-velez--us-dist-ct-dnj-no-09-2813-dec-18-2009-8012
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