ST ATE OF MAINE SUPERIOR COURT KENNEBEC, ss CIVIL ACTION DOCKET NO. AP-18-71
DOROTHY KALER
Petitioner,
ORDER DENYING PETITION FOR SOC V. RELIEF
MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES
Respondent .
Before the court is petitioner Dorothy Kaler's M.R. Civ. P. 80(C) Petition for Review of
Final Agency Action. Petitioner is represented by Attorney Caleb Gannon. Respondent is
represented by Assistant Attorney General Thomas Quinn. Oral argument was held on August 6,
2019. For the following reasons, the petition is denied.
Background
Mrs. Kaler is a 96-year-old-woman who applied for MaineCare coverage for institutional
care to begin retroactively on November 1, 2014. DHHS imposed a Medicaid penalty of 72.48
months based on transfers of assets totaling $555,707.52 for less than fair market value during the
60 months prior to November 1, 2014. The transfers involve funds transferred from Mrs. Kaler's
late husband, Robert Kaler, Sr., to Kaler Oil Company, Inc. between November 1, 2009, and
October 31, 2014. An administrative hearing was held on March 24, 2016. The issues to be
decided at the hearing were whether the gifted transfers of money were for purposes exclusive of
1 •.
qualifying for MaineCare and whether Mrs . Kaler had any intent at the time to apply for MaineCare
within the foreseeable future.
The evidence presented at the March 24, 2016 hearing included that the Company was
started by Robert Kaler, Sr., in 1958. Robert Kaler, Sr., was president of the Company until 2011,
when he took on an advisory role and his son, Robert Kaler, Jr. became president. In 2007, 2008,
and 2009 the Company spent $601,115 in upgrading the facility to comply with Environmental
Protection Agency mandates. During the period of June 1, 2009 to May 31, 2014, the Company
reported a net loss of $629,121. The funds at issue in this action include transfers between
$412,277 and $512,027 from Robert Kaler, Sr.'s personal accounts and a home equity line of credit
to the Company to keep the business operating and avoid bankruptcy. During this time, Mrs. Kaler
enjoyed total independence and there is no evidence that she was unable to care for herself until
September 25, 2014, when her records first noted dementia.
The May 31, 2016 Administrative Hearing Decision decided that "the evidence presented
clearly and convincingly shows that the purpose of the transfers in question was for purposes
exclusive of qualifying for Medicaid and that Claimant had no intent at the time to apply for
Medicaid within the foreseeable future." (R. 2460.) The matter was remanded to the Department
of Health and Human Services for evaluation of Mrs. Kaler's eligibility related to her countable
assets .
The Department denied MaineCare to Mrs. Kaler via a letter dated June 24, 2016, which
stated, "countable assets are more than the asset limit." The Case Summary listed $512,027 as an
asset identified as "total monies loaned to Kaler Oil." A second administrative hearing was
scheduled for May 8, 2018. The issue to be decided at the second hearing was whether "the loans
extended to Kaler Oil Co. from Dorothy Kaler between November 1, 2009 to October 31, 2014,
2 totaling $555,707 [should] be treated as countable assets for purposes of MaineCare eligibility for
Dorothy Kaler, and if so, what is the result?"
The Hearing Officer made findings of fact that Robert Kaler, Sr. extended loans totaling
between $412,277 and $512,027 to Kaler Oil between November 1, 2009 and October 31, 2014,
and that those loans were not memorialized in any written agreements. The hearing officer found
that Mrs. Kaler was not ineligible for MaineCare coverage because Mrs. Kaler's interest in the
asset amounts could not be determined under any authority (MaineCare nor federal regulations).
Commissioner Bethany Hamm accepted the hearing officer's findings of facts but did not adopt
the recommended decision, instead finding that the loans could be characterized as cash on
demands pursuant to 10-144 C.M.R. Ch. 332 Part 16, § 1-2. Based on this finding, the
Commissioner found that Mrs. Kaler had countable assets in excess of the applicable limit and was
therefore ineligible to receive MaineCare assistance.
Following the Commissioner's decision, Mrs . Kaler filed this 80C appeal of final agency
action.
Standard of Review
The court reviews the Department's decision for abuse of discretion, error of law, or
findings not supported by substantial evidence in the record. Connolly v. Board of Social Work
Licensure, 2002 ME 37, ~ 6, 791 A.2d 125. "The court's review is limited to determining whether
the agency's conclusions are unreasonable, unjust, or unlawful in light of the record."
Imagineering v. Department of Professional & Financial Regulation, 593 A.2d 1050, 1053 (Me.
1991). The court will sustain the administrative decision if, "on the basis of the entire record
before it, the agency could have fairly and reasonably found the facts as it did." Seider v. Bd. of
3 Examiners of Psychologists, 2000 ME 206 , ~ 9,762 A.2d 551. The party seeking to vacate the
agency's decision bears the burden of proving that no competent evidence exists to support the
agency's decision. Id. If the facts are not in dispute, "we determine whether the Board applied
the law correctly and whether it exceeded the bounds of its discretion." Lippitt v. Bd. of
Certification for Geologists and Soil Scientists, 2014 ME 42, ~ 16, 88 A.3d 154.
Discussion
Mrs. Kaler' s principal argument is that the transfer of funds in question were gifts to Kaler
Oil, not loans, and therefore should not be considered an available asset. Unfortunately for Mrs.
Kaler, record evidence exists which supports a finding that the transfers where loans. For instance,
Kaler Oil's financial statements reflect that the transfers were labelled as loans and were recorded
as liabilities of Kaler Oil. (R. Ex. D-lA; Ex. D-2A; Ex. D-3A; Ex. D-5A.) Additionally, the
testimony of two Certified Professional Accountants also supports the transfers' status as loans
and not gifts. (R. 2585; 2590-91; 2596; 2767; 2776-2777; 2783; 2786-88 .) Consequently, this court
cannot overturn the Commissioner' s factual finding that the transfer of funds from Robert Kaler,
Sr. to Kailer Oil are loans and not gifts. See Seider, 2000 ME 206, ~ 9, 762 A.2d 551.
Mrs. Kaler also argues that, even if the transfers are loans , the Commissioner improperly
treated them as an available asset. Specifically, Mrs. Kaler argues that the fair market value of the
loans cannot be determined because there are no documents which reflect the terms of the loans.
Therefore, Mrs . Kaler contends that the loans should be treated as a non-liquid asset and excluded
from consideration when determining her MaineCare eligibility . Once again, the court does not
agree with Mrs . Kaler's arguments.
4 Pursuant to MaineCare's implementing regulations, all available assets are used to
determine whether an individual is eligible for MaineCare assistance. 10-144 C.M.R. Ch. 332, Part
16, § 2. The regulations define "Assets" as "[c]ash, other liquid resources or real or personal
property." 10-144 C.M.R. Ch. 332, Part 16, § 1.
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ST ATE OF MAINE SUPERIOR COURT KENNEBEC, ss CIVIL ACTION DOCKET NO. AP-18-71
DOROTHY KALER
Petitioner,
ORDER DENYING PETITION FOR SOC V. RELIEF
MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES
Respondent .
Before the court is petitioner Dorothy Kaler's M.R. Civ. P. 80(C) Petition for Review of
Final Agency Action. Petitioner is represented by Attorney Caleb Gannon. Respondent is
represented by Assistant Attorney General Thomas Quinn. Oral argument was held on August 6,
2019. For the following reasons, the petition is denied.
Background
Mrs. Kaler is a 96-year-old-woman who applied for MaineCare coverage for institutional
care to begin retroactively on November 1, 2014. DHHS imposed a Medicaid penalty of 72.48
months based on transfers of assets totaling $555,707.52 for less than fair market value during the
60 months prior to November 1, 2014. The transfers involve funds transferred from Mrs. Kaler's
late husband, Robert Kaler, Sr., to Kaler Oil Company, Inc. between November 1, 2009, and
October 31, 2014. An administrative hearing was held on March 24, 2016. The issues to be
decided at the hearing were whether the gifted transfers of money were for purposes exclusive of
1 •.
qualifying for MaineCare and whether Mrs . Kaler had any intent at the time to apply for MaineCare
within the foreseeable future.
The evidence presented at the March 24, 2016 hearing included that the Company was
started by Robert Kaler, Sr., in 1958. Robert Kaler, Sr., was president of the Company until 2011,
when he took on an advisory role and his son, Robert Kaler, Jr. became president. In 2007, 2008,
and 2009 the Company spent $601,115 in upgrading the facility to comply with Environmental
Protection Agency mandates. During the period of June 1, 2009 to May 31, 2014, the Company
reported a net loss of $629,121. The funds at issue in this action include transfers between
$412,277 and $512,027 from Robert Kaler, Sr.'s personal accounts and a home equity line of credit
to the Company to keep the business operating and avoid bankruptcy. During this time, Mrs. Kaler
enjoyed total independence and there is no evidence that she was unable to care for herself until
September 25, 2014, when her records first noted dementia.
The May 31, 2016 Administrative Hearing Decision decided that "the evidence presented
clearly and convincingly shows that the purpose of the transfers in question was for purposes
exclusive of qualifying for Medicaid and that Claimant had no intent at the time to apply for
Medicaid within the foreseeable future." (R. 2460.) The matter was remanded to the Department
of Health and Human Services for evaluation of Mrs. Kaler's eligibility related to her countable
assets .
The Department denied MaineCare to Mrs. Kaler via a letter dated June 24, 2016, which
stated, "countable assets are more than the asset limit." The Case Summary listed $512,027 as an
asset identified as "total monies loaned to Kaler Oil." A second administrative hearing was
scheduled for May 8, 2018. The issue to be decided at the second hearing was whether "the loans
extended to Kaler Oil Co. from Dorothy Kaler between November 1, 2009 to October 31, 2014,
2 totaling $555,707 [should] be treated as countable assets for purposes of MaineCare eligibility for
Dorothy Kaler, and if so, what is the result?"
The Hearing Officer made findings of fact that Robert Kaler, Sr. extended loans totaling
between $412,277 and $512,027 to Kaler Oil between November 1, 2009 and October 31, 2014,
and that those loans were not memorialized in any written agreements. The hearing officer found
that Mrs. Kaler was not ineligible for MaineCare coverage because Mrs. Kaler's interest in the
asset amounts could not be determined under any authority (MaineCare nor federal regulations).
Commissioner Bethany Hamm accepted the hearing officer's findings of facts but did not adopt
the recommended decision, instead finding that the loans could be characterized as cash on
demands pursuant to 10-144 C.M.R. Ch. 332 Part 16, § 1-2. Based on this finding, the
Commissioner found that Mrs. Kaler had countable assets in excess of the applicable limit and was
therefore ineligible to receive MaineCare assistance.
Following the Commissioner's decision, Mrs . Kaler filed this 80C appeal of final agency
action.
Standard of Review
The court reviews the Department's decision for abuse of discretion, error of law, or
findings not supported by substantial evidence in the record. Connolly v. Board of Social Work
Licensure, 2002 ME 37, ~ 6, 791 A.2d 125. "The court's review is limited to determining whether
the agency's conclusions are unreasonable, unjust, or unlawful in light of the record."
Imagineering v. Department of Professional & Financial Regulation, 593 A.2d 1050, 1053 (Me.
1991). The court will sustain the administrative decision if, "on the basis of the entire record
before it, the agency could have fairly and reasonably found the facts as it did." Seider v. Bd. of
3 Examiners of Psychologists, 2000 ME 206 , ~ 9,762 A.2d 551. The party seeking to vacate the
agency's decision bears the burden of proving that no competent evidence exists to support the
agency's decision. Id. If the facts are not in dispute, "we determine whether the Board applied
the law correctly and whether it exceeded the bounds of its discretion." Lippitt v. Bd. of
Certification for Geologists and Soil Scientists, 2014 ME 42, ~ 16, 88 A.3d 154.
Discussion
Mrs. Kaler' s principal argument is that the transfer of funds in question were gifts to Kaler
Oil, not loans, and therefore should not be considered an available asset. Unfortunately for Mrs.
Kaler, record evidence exists which supports a finding that the transfers where loans. For instance,
Kaler Oil's financial statements reflect that the transfers were labelled as loans and were recorded
as liabilities of Kaler Oil. (R. Ex. D-lA; Ex. D-2A; Ex. D-3A; Ex. D-5A.) Additionally, the
testimony of two Certified Professional Accountants also supports the transfers' status as loans
and not gifts. (R. 2585; 2590-91; 2596; 2767; 2776-2777; 2783; 2786-88 .) Consequently, this court
cannot overturn the Commissioner' s factual finding that the transfer of funds from Robert Kaler,
Sr. to Kailer Oil are loans and not gifts. See Seider, 2000 ME 206, ~ 9, 762 A.2d 551.
Mrs. Kaler also argues that, even if the transfers are loans , the Commissioner improperly
treated them as an available asset. Specifically, Mrs. Kaler argues that the fair market value of the
loans cannot be determined because there are no documents which reflect the terms of the loans.
Therefore, Mrs . Kaler contends that the loans should be treated as a non-liquid asset and excluded
from consideration when determining her MaineCare eligibility . Once again, the court does not
agree with Mrs . Kaler's arguments.
4 Pursuant to MaineCare's implementing regulations, all available assets are used to
determine whether an individual is eligible for MaineCare assistance. 10-144 C.M.R. Ch. 332, Part
16, § 2. The regulations define "Assets" as "[c]ash, other liquid resources or real or personal
property." 10-144 C.M.R. Ch. 332, Part 16, § 1. An asset is available if it "has a value which is
legally obtainable by the individual." 10-144 C.M.R. Ch. 332, Part 16, § 1. An asset is liquid if it
"can be converted into cash on demand." 10-144 C.M.R. Ch. 332, Part 16, § 1.
In this case, Mrs. Kaler is correct that the terms of the loan-including the interest rate and
time for repayment-are not specified by any loan documentation . Mrs . Kaler is incorrect to
conclude, however, that this lack of specification engenders difficulty in determining the value of
the loans. This is because when the terms of repayment are not specified, a loan is deemed payable
on demand. Doughty v. Sullivan, 661 A.2d 1112, 1123 (Me. 1995) . Because their repayment terms
are not specified, the Commissioner did not err when she determined that the loans from Robert
Kaler, Sr. to Kaler Oil are payable on demand. Record evidence thus supports a finding that Mrs.
Kaler can legally obtain the face value of the loans. See Id. (stating that "[a] plaintiff establishes a
prima facie case [for the recovery of money lent] by showing that the money was delivered to the
defendant, the money was intended as a loan and the loan has not been repaid"). Consequently,
the Commissioner did not err when she determined that the transfers where an available asset for
the purposes of determining Mrs. Kaler' s MaineCare eligibility.
Conclusion
For the foregoing reasons, the court concludes that the record contains sufficient evidence
to support a finding that the transfers of money from Robert Kaler, Sr. to Kaler Oil are loans which
are available assets for the purposes of determining Mrs. Kaler's MaineCare eligibility.
5 The entry is
Petitioner Dorothy Kaler's 80C Petition for Review of Final Agency Action is DENIED. The Decision of the Department of Health and Human Services is AFFIRMED
The clerk is directed to incorporate this order into the docket by reference. M.R. Civ.
P. 79(a).
Date: Jo !rt l,,