To be Argued by:
SARAH C. LICHTENSTEIN
(Time Requested: 30 Minutes)
APL 2014-00244
Bronx County Clerk’s Index No. 92560/08
Court of Appeals
of the
State of New York
In the Matter of the Final Account of
FAMILY SERVICE SOCIETY OF YONKERS
as Guardian of the Person and Property of
EDNA SHANNON,
An Incapacitated Person Now Deceased.
————————————————————————————
FAMILY SERVICE SOCIETY OF YONKERS,
Petitioner,
– against –
WESTCHESTER COUNTY DEPARTMENT OF SOCIAL SERVICES,
Appellant,
– and –
EASTCHESTER REHABILITATION & HEALTH CARE CENTER,
Respondent.
RESPONDENT’S BRIEF
ABRAMS, FENSTERMAN, FENSTERMAN, EISMAN,
FORMATO, FERRARA & WOLF, LLP
Attorneys for Respondent
1111 Marcus Avenue, Suite 107
Lake Success, New York 11042
Tel.: (516) 328-2300
Fax: (516) 328-6638
Date Completed: January 8, 2015
DISCLOSURE STATEMENT
In accordance with the Rules of Practice of this Court, 22 N.Y.C.R.R.
§500.1 (f), respondent Eastchester Rehabilitation and Health Care Center, LLC, sued
herein as Eastchester Rehabilitation & Health Care Center, states that it is a limited
liability company and has no parent, subsidiary or affiliate.
TABLE OF CONTENTS
TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
QUESTIONS PRESENTED ............................................. 2
NATURE OF THE ACTION AND THE FACTS .............................. 3
THE UNDERLYING FACTS .................................... 3
PROCEDURAL HISTORY OF THE CASE
AND DECISIONS OF THE COURTS BELOW ............. .... . ... 5
ARGUMENT ....................................................... 8
I. EASTCHESTER WAS ENTITLED TO PAYMENT
OF ITS CLAIM FROM SHANNON'S PROPERTY .................. 8
II. SHANNON'S DEATH DID NOT DEPRIVE FSSY
OF AUTHORITY TO PAY EASTCHESTER'S CLAIM ....... . ...... 9
A. Certain Powers of a Guardian Survive
the Incapacitated Person's Death ............................ 9
B. The Mental Hygiene Law Provides for Post-Death
Adjudication of Lifetime Claims against
the Incapacitated Person by the Guardianship Court . . . . . . . . . . . . 11
III. DSS WAS NOT ENTITLED TO PAYMENT
FROM THE GUARDIANSHIP PROPERTY ...................... 23
IV. THE SPECTERS WHICH DSS SUGGESTS WILL RESULT
FROM THE FIRST DEPARTMENT DECISION WILL NOT
OCCUR AND HAVE NO BASIS IN REALITY .................... 26
CONCLUSION ..................................................... 29
11
TABLE OF AUTHORITIES
I. CASES
Baker v. Sterling,
39 N.Y.2d 397, 348 N.E.2d 584, 384 N.Y.S.2d 128 (1976) ........... 23
Barclay Knitwear Co. v. King'swear Enters. Ltd.,
141 A.D.2d 241, 533 N.Y.S.2d 724 (1st Dep't 1988) ................. 13
Buffalo City Cemetery v. City of Buffalo,
46 N.Y. 506 (1871) .............................. ... . ........ . 14
Cahen v. Boyland,
1 N.Y.2d 8, 132 N.E.2d 890, 150 N.Y.S.2d 5 (1956) ................ . 15
Connors v. Hartford Fire Ins. Co.,
138 A.D.2d 877, 526 N.Y.S.2d 254 (3d Dep't 1988) .. ..... ......... . 14
In re Estate of Baron,
180 Misc. 2d 766, 691 N.Y.S.2d 882 (Sur. Ct. N.Y. Co. 1999) ....... 9, 10
In re Estate of Buchwald,
No. 2012-4336/A, 2013 WL 657891 (Sur. Ct. Feb. 8, 2013) ........... 9
In re Estate of Craig,
82 N.Y.2d 388, 624 N.E.2d 1003, 604 N.Y.S.2d 908 (1993) ....... 23, 25
In re Estate of Pierce,
106 A.D.2d 892,483 N.Y.S.2d 500 (4th Dep't 1984) .............. 19,21
Friedman v. Connecticut Gen. Life Ins. Co.,
9 N.Y.3d 105, 877 N.E.2d 281, 846 N.Y.S.2d 64 (2007) ............. 16
111
In re Garcia,
No. 12743/97,2007 WL 2318399
(Sup. Ct. Queens Co. Aug. 14, 2007) . . .. . ....... ...... . . .. . . . . .. . 28
Grant v. Humbert
114 A.D. 462, 100 N.Y.S. 44 (1 st Dep't 1906) . .... . ... . .. . ..... . ... 28
In re Lambert,
87 A.D.2d 818, 448 N.Y.S.2d 767 (2d Dep't 1982) .. . ... . . .. . . .. .. .. 21
In re Linden-Rath,
188 Misc. 2d 537, 729 N.Y.S.2d 265 (Sup. Ct. N.Y. Co. 2001) ........ 28
In re Robinson ex rei. Snell.
194 Misc. 2d 695, 754 N.Y.S.2d 525 (Sur. Ct. Nassau Co. 2003) .. ... . . 19
In re Swingeam,
59 A.D.3d 556, 873 N.Y.S.2d 165 (1st Dep't 2009) ..... ...... .. ..... 20
In re Warren,
53 N.Y.2d 118, 423 N.E.2d 32, 440 N.Y.S.2d 609 (1981) . .. ... ... .. . 21
Wright v. Sokoloff,
110 A.D.3d 989, 973 N.Y.S.2d 743 (2d Dep't 2013) ..... .. . ..... . ... 15
II. STATUTES
CPLR Rule 5531 ........ .. .. . . . ... . ... . .. ... ...... . . . . . ... ... .. . . . . 2
McKinney's Consolidated Laws ofN.Y., Book 1, Statutes §97 . . . . ... . ... . . 16
McKinney's Consolidated Laws ofN.Y., Book 1, Statutes §98 . . . ........ .. 15
McKinney's Consolidated Laws of N.Y., Book 1, Statutes §254 ... . . . ...... 14
Mental Hygiene Law §81.21 . .. . ... ...... .. . ... ... . . ... .. . .. ... .. ... . 27
lV
Mental Hygiene Law §81.21(a)(l4) ............................. .. .... 11
Mental Hygiene Law §81.21(a)(15) ................................... 27
Mental Hygiene Law §81.21(a)(l9) .............................. 9, 19, 27
Mental Hygiene Law §81.21(a)(20) ................................... 11
Mental Hygiene Law §81.29(c) ....................................... 26
Mental Hygiene Law §81.34(a) ....................................... 11
Mental Hygiene Law §81.36( e) .............. . ........................ 11
Mental Hygiene Law §81.44 ............................ . ..... . 10, 25, 28
Mental Hygiene Law §81.44(a)(4) ....... . ......................... 16, 17
Mental Hygiene Law §81.44(d) . . ............................. . 12-18, 27
Mental Hygiene Law §81.44(e) ....................... . ......... 13, 15, 18
Social Services Law §104 ...................... . ..... 2, 5, 6, 11, 21, 24,25
Social Services Law §369 ........................................ 11, 25
Social Services Law §369(2)(a) ............... . ...................... 20
Social Services Law §369(2)(b) ........................ . .......... 23, 24
Uniform Commercial Code §1-201(37) ................................ 27
v
In the Matter of the Final Account ofF AMIL Y SERVICE
SOCIETY OF YONKERS as Guardian of the Person and
Property of
EDNA SHANNON,
An Incapacitated Person Now Deceased.
FAMILY SERVICE SOCIETY OF YONKERS,
Petitioner,
-against-
WESTCHESTER COUNTY DEPARTMENT OF SOCIAL
SERVICES,
Appellant,
-and-
EASTCHESTER REHABILITATION & HEALTH CARE
CENTER,
Respondent.
RESPONDENT'S BRIEF
PRELIMINARY STATEMENT
This appeal addresses the interplay between the Mental Hygiene Law and the
Social Services Law and their impact upon the disposition of the assets of an
incapacitated person who died and for whom a guardian had been appointed. The
claim of respondent Eastchester Rehabilitation and Health Care Center, LLC
("Eastchester") is a claim for services rendered to the incapacitated person and which
arose during the incapacitated person's lifetime. The claim of appellant Westchester
County Department of Social Services ("DSS") is a claim created by Social Services
Law § 104 which only arose after the incapacitated person died and can only be
asserted against the incapacitated person's estate. 1
The Appellate Division correctly concluded that because Eastchester's claim
accrued during the decedent's lifetime against guardianship property with no
competing creditors, Eastchester should be paid before any funds passed to the
decedent's estate, if any.
QUESTIONS PRESENTED
1. Is a creditor of an incapacitated person for whom a guardian was
appointed, whose claim arose during the incapacitated person's lifetime, entitled to
payment of its claim after the death of the incapacitated person from the guardianship
property?
1In its Statement pursuant to CPLR Rule 5531, DSS incorrectly states that DSS and
Eastchester "both had claims against the estate and disputed whose claim had priority."
Eastchester's claim was not against the incapacitated person's estate, but was a claim which arose
during her lifetime asserted against guardianship property.
2
The Appellate Division correctly answered this question "yes".
2. Does a payor enjoy a priority to recover medical assistance payments
correctly made on behalf of a recipient, who is an incapacitated person for whom a
guardian has been appointed, against guardianship property where the applicable
statute limits such recovery to a claim against the recipient's estate?
The Appellate Division correctly answered this question "no".
STATEMENT OF THE NATURE OF THE ACTION AND THE FACTS
THE UNDERLYING FACTS
Edna Shannon ("Shannon") was admitted to Eastchester, a skilled nursing
facility, on December 13, 2005. SA38.2
In November 2008, Eastchester commenced a proceeding pursuant to Article
81 of the Mental Hygiene Law for appointment of a guardian for Shannon's person
and property because Eastchester believed Shannon was in need of assistance to
manage her personal needs and financial affairs and because of Eastchester's concern
regarding the handling of Shannon's financial resources by third-parties. SA38. By
Order and Judgment, dated April 16, 2009, Family Service Society of Yonkers
("FS S Y") was appointed guardian for the person and property of Shannon. SA5 3-65.
2References to ''SA" are to the Supplemental Appendix submitted by Eastchester.
3
In December 2008, Eastchester filed an application for medical assistance
benefits (Medicaid) on Shannon's behalf to secure a payment source for the cost of
her nursing home care. SA38. DSS determined Shannon was eligible for Medicaid
effective September 1, 2008. SA38, 49-52.
Eastchester provided room, board and skilled nursing care services to Shannon
from December 13, 2005 (the date she was admitted to Eastchester) through
November 25, 2009, the date she was discharged to another skilled nursing facility.
SA38. On June 2, 2010, Eastchester served on FSSY and filed with the Supreme
Court a claim for care and services provided to Shannon not covered by Medicaid.
SA39, 66-67.3
In October 2010, the guardianship court granted FSSY's motion authorizing
the sale of real property which Shannon owned in New Rochelle, New York, noting
that "the sale ofthis house is warranted so that the proceeds from the sale can be used
to pay for her long term care." SA68. The net proceeds of$297,882.20 realized from
3These Supplemental Appendix pages are a letter from Eastchester' s attorney transmitting
Eastchester's Notice of Appearance and Proof of Claim to the Supreme Court, Bronx County and
the Affidavit of Service ofthe Notice of Appearance and Proof of Claim on FSSY. It is therefore
inexplicable that DSS states "nowhere does the Respondent indicate that Notice of Appearance and
Proof of Claim dated June 2, 2010 was ever filed with the Bronx County Clerk's Office." See DSS
Brief at 10, n.5. In fact, FSSY's verified Petition Seeking Judicial Settlement of Account
acknowledges that the Notice of Appearance and Proof of Claim were filed and served (SA6), and
the Appellate Division itself noted that "By letter dated June 2, 2010, Eastchester also submitted the
claim for filing with Supreme Court, Bronx County." A6 (References to "A" are to DSS's
Appendix).
4
the sale of the property were deposited into a guardianship account for Shannon's
benefit. See A30, SA39.
In September 2010 and January 2011 , DSS wrote to FSSY stating that Shannon
was indebted to DSS due to medical assistance paid, although DSS did not assert a
claim or request payment at that time. A26, 27.
Shannon died on December 10,2011. SAil .
On July 5, 2012, DSS wrote to FSSY asserting a claim pursuant to Social
Services Law § 104 against Shannon's estate for medical assistance rendered to
Shannon. A28.
PROCEDURAL HISTORY OF THE CASE
AND DECISIONS OF THE COURTS BELOW
By Order to Show Cause, dated August 6, 2012, FSSY commenced a
proceeding to settle its final account as guardian of Shannon's person and property.
SAl-4. FSSY listed Eastchester as a claimant for $164,208.00 and DSS as a claimant
for $166,005.63. SA18.
Eastchester opposed FSSY' s final account asserting that its claim for unpaid
charges for Shannon's room, board and skilled nursing care for the period September
1, 2006 through August 31, 2008 in the aggregate amount of $222,650.00 should be
paid, and DSS's claim should not. SA27-33.
5
DSS opposed FSSY's final account, asserting its Social Services Law §104
claim of$271,661.62 was entitled to priority over Eastchester's claim. SA24-26.
Justice Howard Sherman determined that DSS was entitled to a priority of its
lien pursuant to Social Services Law § 1 04 ( A24) and issued an order, dated January
31, 2013 (the "January 2013 Order") settling FSSY's final account. A21-22. In
pertinent part, the January 2013 Order directed FSSY to tum over to DSS the balance
of funds remaining in the guardianship estate after payment of guardianship fees and
fees to the court examiner. A21.
By check, dated February 22,2013, FSSY remitted payment to the New York
State Department ofHealth in the amount of$179,276.10 apparently as payment of
the DSS claim. A31-33.
In March 2013, Eastchester moved to renew and reargue the January 2013
Order. SA34-72.
By order, dated May 28, 2013, Justice Sherman denied Eastchester's motion,
adhering to his prior determination that DSS was a preferred creditor. A34.
Eastchester appealed from both orders. See A3.
The Appellate Division reversed and held: "As Eastchester was to be paid out
of the guardianship account before any funds passed to the estate, its claim had
priority over DSS's claim." A8. The Appellate Division reasoned:
6
A8-10.
MHL § 81.44( d) provides that, within 150 days of the
death of an incapacitated person, the guardian must serve
on the personal representative of the decedent's estate, or
if none, the public administrator or chief fiscal officer, a
statement of assets and notice of claim, and "except for
property retained to secure any known claim, lien or
administrative costs of the guardianship," deliver all
guardianship property to the personal representative, public
administrator, or chief fiscal officer (emphasis added).
Indeed, consistent with § 81.44( d), the Order and
Judgment Appointing Guardian authorized Family Service
Society to "[a]pply [Shannon's] resources and income, if
any, toward her outstanding and accruing nursing home
expenses," and to "[p]ay bills after [Shannon's] death ...
if incurred prior to said death, if authority to pay any such
bills would otherwise have existed." In addition, the court
order that authorized the sale of Shannon's home stated
that the sale was warranted "so that the proceeds from the
sale can be used to pay for her long term care." Although
the court did not specifically refer to Eastchester, as
opposed to DSS, DSS concedes that it did not assert a
claim during Shannon's lifetime but asserted a claim
against the estate only.
. . . Eastchester's claim accrued during the
decedent's lifetime, against the guardianship account, with
no competing creditors. Thus, Eastchester should have
been paid before any funds passed to the estate. DSS, as a
preferred creditor pursuant to SSL § 104, had a priority
claim only against the estate.
7
ARGUMENT
I. EASTCHESTER WAS ENTITLED TO PAYMENT
OF ITS CLAIM FROM SHANNON'S PROPERTY
Eastchester provided room, board and skilled nursing care to Shannon during
Shannon's lifetime. Eastchester had a claim against Shannon for such services for the
period of time before Shannon became eligible for Medicaid. No party disputed the
legitimacy of Eastchester's claim. 4
FSSY was appointed as a fiduciary to, among other things, marshal and invest
Shannon's assets and apply the income and principal as necessary for her "comfort,
support, maintenance and well-being." SA56. FSSY specifically had the power to
"Apply [Shannon]'s resources and income, if any, toward her outstanding and
accruing nursing home expenses and other valid debts". SA56. When the
guardianship court granted FSSY's motion for an order authorizing it to sell
Shannon's real property, the order granting the motion stated that "the sale of this
house is warranted so that the proceeds from the sale can be used to pay for her long
term care." SA68.
In 2010, FSSY sold Shannon's real property and deposited the proceeds of the
sale into a guardianship account for Shannon's benefit. The $297,882.20 sale
4The guardianship court did not make any finding that Eastchester's claim lacked merit, and
neither FSSY nor DSS disputed Eastchester's claim before the guardianship court or on appeal.
8
proceeds were Shannon's property and available to pay Shannon's debts.
Accordingly, FSSY could have paid Eastchester's claim for services provided to
Shannon before Shannon died.
II. SHANNON'S DEATH DID NOT DEPRIVE FSSY
OF AUTHORITY TO PAY EASTCHESTER'S CLAIM
A. Certain Powers of a Guardian Survive
the Incapacitated Person's Death
Everything related to a guardianship does not immediately and automatically
end upon the incapacitated person's death. In re Estate of Buchwald, No.
2012--4336/A, 2013 WL 657891, at *1 (Sur. Ct. Feb. 8, 2013)(death of incapacitated
person as general matter terminates guardianship but guardian does retain certain
specific powers). For example, Mental Hygiene Law §81.21(a)(19) provides a
guardian may be granted the power to pay bills after the incapacitated person's death
that could have been paid during her lifetime. Significantly here, FSSY, was, in fact,
authorized by court order to pay bills after Shannon's death that could have been paid
during Shannon's lifetime. SA57.
DSS's quote from In re Estate of Baron, 180 Misc. 2d 766, 691 N.Y.S.2d 882
(Sur. Ct. N.Y. Co. 1999) about termination of a guardian's authority upon the ward's
death is taken out of context and misleading. See DSS Brief at 12. In that case,
9
decided nine years before the enactment of Mental Hygiene Law §81.44, the
conservator for a recently deceased ward asked the court to determine whether she
could retain her ward's assets pending settlement of the final account despite the
request for turnover by the preliminary executor of the ward's will. Notably, an order
had actually been signed directing the conservator to tum over estate assets in her
possession except for a reserve of $1 million pending disposition of the final
accounting. Surrogate Renee Roth observed that "Neither the statutes that govern
guardianship nor case law provides any guidance as to which fiduciary is entitled to
hold decedent's assets during such interim period." 180 Misc. 2d at 767, 691
N.Y.S.2d at 882.
Significantly, Surrogate Roth indicated "a copy of this decision shall be sent
to the Law Revision Commission to study the appropriateness of legislation that
would facilitate the orderly turnover of the assets of a deceased incapacitated person,
define the roles of the various fiduciaries and identify the persons to whom each is
accountable." 180 Misc. 2d at 769-70, 691 N.Y.S.2d at 884. Mental Hygiene Law
§81.44, enacted in 2008, is the legislation which Surrogate Roth called for. As
discussed in Point II.B. of this Brief, Mental Hygiene Law §81.44 now makes clear
that the guardianship court is to adjudicate lifetime claims against guardianship
property and the guardian has the power to pay such adjudicated claims.
10
DSS is also incorrect when it states that FSSY was unable to act as guardian
after Shannon's death because Article 81 ofthe Mental Hygiene Law only permits the
guardian to pay for the incapacitated person's burial. DSS Brief at 13 (citing Mental
Hygiene Law §81.36(e)). For example, Mental Hygiene Law §81.21(a)(14) also
permits the guardian to "pay the funeral expenses of the incapacitated person."
Mental Hygiene Law §81.21(a)(20) permits the guardian to "defend or maintain any
judicial action or proceeding to a conclusion until an executor or administrator is
appointed." Mental Hygiene Law §81.34(a) provides: "Upon the death of the
incapacitated person, the guardian is authorized to pay the funeral expenses of the
incapacitated person and, in the absence of a duly appointed personal representative
of the estate, pay estimated estate and income tax charges, as well as other charges
of emergent nature."
B. The Mental Hygiene Law Provides for Post-Death
Adjudication of Lifetime Claims against
the Incapacitated Person by the Guardianship Court
If Shannon had not been adjudicated to be an incapacitated person, whatever
she owned at the time ofher death would have passed into her estate and been subject
to DSS's after-death claim under Social Services Law §§104 and 369. But Shannon
was adjudicated to be incapacitated and in need of a guardian, and a guardian was
11
appointed pursuant to court order. Therefore, the Mental Hygiene Law governs
whether the guardian can pay claims asserted against guardianship property after
Shannon died and what, if anything, thereafter passed into her estate.
Most pertinent here, Mental Hygiene Law §81.44 provides:
(d) Within one hundred fifty days of the death of the
incapacitated person, the guardian shall serve upon the
personal representative of the decedent's estate or where
there is no personal representative, upon the public
administrator or chief fiscal officer, a statement of assets
and notice of claim, and, except for property retained to
secure any known claim. lien or administrative costs of the
guardianship pursuant to subdivision (e) of this section,
shall deliver all guardianship property to:
1. the duly appointed personal representative of the
deceased incapacitated person's estate, or
2. the public administrator or chief fiscal officer given
notice of the filing of the statement of death, where there is
no personal representative.
Emphasis added.
The statute carves out from the assets to be delivered to the estate
representative or pub lie administrator "property retained to secure any known claim".
The order appointing FSSY in this case provides this exact authority. SA62
("ORDERED AND ADJUDGED, that in the event of the death of the Incapacitated
Person, the Guardian, within 150 days of the date of death, shall deliver all
12
Guardianship assets, except for property retained by the Guardian to secure any
known claim, lien or administrative costs of the Guardianship, to the duly appointed
personal representative, or to the Public Administrator or Chief Fiscal Officer .... ").
Eastchester's claim for payment of its uncovered nursing care services was
indisputably a "known claim" to FSSY . . See SA18, 19-20, 66-67. The inquiry need
go no further. As the Appellate Division ruled: "Eastchester was to be paid out ofthe
guardianship account before any funds passed to the estate .... " A8.
Nevertheless, DSS, relying on Justice Helen E. Freedman's dissent, argues that
the "known claims" referred to in Mental Hygiene Law §81.44(d) are limited by
Mental Hygiene Law §81.44(e) to expenses connected with the administration ofthe
guardianship. As a result, DSS argues, FSSY was not required to retain property
sufficient to pay Eastchester's claim. The argument is contradicted by several
principles of statutory construction.
First, as a matter of simple grammar, Mental Hygiene Law §81.44( e) is not a
limitation on Mental Hygiene Law §81.44(d). In the Mental Hygiene Law §81.44(d)
phrase "any known claim, lien or administrative costs of the guardianship pursuant
to subdivision (e) of this section", the adjective "administrative" only modifies the
noun "costs", not the preceding two words "claim" or "lien". See Barclay Knitwear
Co. v. King'swear Enters. Ltd., 141 A.D.2d 241, 247, 533 N.Y.S.2d 724, 727 (1st
13
Dep't 1988)("Modifiers should come, if possible, next to the word they modify.").
In contrast, an adjective which precedes a series of nouns generally modifies every
noun in the series. See Buffalo City Cemetery v. City of Buffalo, 46 N.Y. 506, 509
(1871)(adjective "public" in clause "all public taxes, rates and assessments" applies
to nouns "rates" and "assessments" as well as to noun "taxes").
Second, "Relative or qualifying words of clauses in a statute ordinarily are to
be applied to the words or phrases immediately preceding, and are not to be construed
as extending to others more remote, unless the intent of the statute clearly indicates
otherwise." McKinney's Consolidated Laws ofN.Y., Book 1, Statutes §254.
So, in Connors v. Hartford Fire Ins. Co., 138 A.D.2d 877, 878-79, 526
N.Y.S.2d 254, 255 (3d Dep't 1988), applying this rule of the "last antecedent", the
court concluded that the underscored clause in the contract provision: "Such
insurance as is afforded under Coverage E-Personal Liability, applies to property
damage to an insured premises . . . if such property damage arose out of fire,
explosion, or smoke or smudge caused by sudden. unusual and faulty operation of any
heating or cooking unit" only qualified damage due to "smoke or smudge" and did
not modify the preceding nouns "fire" or "explosion".
Application of this doctrine to Mental Hygiene Law §81.44(d) corroborates
that the underscored clause of the phrase "any known claim, lien or administrative
14
costs of the guardianship pursuant to subdivision (e) of this section", refers only to
"administrative costs of the guardianship", the words immediately preceding it, and
not to the more remote words "claim" or "lien."
To conclude otherwise would run afoul of the "cardinal principle to be
observed in construing legislation that ... whenever practicable, effect must be given
to all the language employed." Cahen v. Boyland, 1 N.Y.2d 8, 14, 132 N.E.2d 890,
892, 150 N.Y.S.2d 5, 9 (1956)(intemal quotes and citation omitted); Wright v.
Sokoloff, 110 A.D.3d 989, 990-91, 973 N.Y.S.2d 743, 745 (2d Dep't 2013);
McKinney's Consolidated Laws ofN.Y., Book 1, Statutes §98 ("All parts of a statute
must be harmonized with each other as well as with the general intent of the whole
statute, and effect and meaning must, if possible, be given to the entire statute and
every part and word thereof.").
If the claims for which property is to be retained by the guardian pursuant to
Mental Hygiene Law §81.44(d) are construed to be co-terminus with the "claims for
administrative costs, liens and debts" ofMental Hygiene Law §81.44(e), there would
be no need to list in any detail in Mental Hygiene Law § 81.44( d) the types of claims
for which property is to be retained by the guardian. Mental Hygiene Law §81.44( d)
would then only need provide: "the guardian ... except for property retained to
secure any known clainr, lien m administrati"e costs ofthe guardianship pursuant to
15
subdivision (e) of this section, shall deliver all guardianship property to 1. the duly
appointed personal representative of the deceased incapacitated person's estate, or 2.
the public administrator .... " Such a construction would impermissibly render the
words "to secure any known claim, lien" superfluous.
Finally, "[a] court must consider a statute as a whole, reading and construing
all parts of an act together to determine legislative intent." Friedman v. Connecticut
Gen. Life Ins. Co., 9 N.Y.3d 105, 115, 877 N.E.2d 281, 286, 846 N.Y.S.2d 64, 69
(2007); McKinney's Consolidated Laws ofN.Y., Book 1, Statutes §97. This maxim
confirms that under Mental Hygiene Law § 81.44( d) the guardian is to retain property
sufficient to cover "any known claim", not just claims for administrative costs.
Mental Hygiene Law §81.44(d) requires the guardian to do two things: (1)
serve a statement of assets and notice of claim on the decedent's estate representative
or public administrator and (2) deliver all guardianship property to the decedent's
estate representative or public administrator, except for property retained to secure
any known claim, lien or administrative costs of the guardianship.
Mental Hygiene Law §81.44(a)( 4) defines "statement of assets and notice of
claim" as:
a written statement under oath containing ... a description
of the nature and approximate value of guardianship
property at the time of the incapacitated person's death;
16
with the approximate amount of any claims. debts or liens
against the guardianship property, including but not limited
to medicaid liens, tax liens and administrative costs, with
an itemization and approximate amount of such costs and
claims or liens.
Emphasis added.
The definition of"statement of assets and notice of claim" of Mental Hygiene
Law §81.44(a)(4) informs the meaning of the words "any known claim, lien or
administrative costs" in Mental Hygiene Law §81.44(d). Reading Mental Hygiene
Law §81.44(a)(4) and Mental Hygiene Law §81.44(d) together, the guardian must
first provide the estate representative or public administrator with a list "any claims"
(not just administrative costs) against the guardianship property. Second, the
guardian must retain sufficient guardianship property to cover the claims identified
in the statement of assets and notice of claim when the guardian delivers the balance
of the guardianship property to the estate representative or public administrator. It
would make no sense to require the guardian to notify the estate representative or
public administrator of" any claims, debts or liens against the guardianship property",
but then not have the guardian retain sufficient property to pay such claims. As the
Appellate Division reasoned, "This broader construction [of Mental Hygiene Law
§81.44(d)] is consistent with MHL § 81.44(a)(4) .... Thus, section 81.44, read as a
whole, does not limit 'any claims' to administrative costs. In fact, it does just the
17
opposite; it lists administrative costs as a type of claim that the guardian can pay off."
All.
Justice Rolando T. Acosta, writing for the Appellate Division majority (AlO-
12), offered additional reasoning rejecting the contention that Mental Hygiene Law
§81.44(e) limits Mental Hygiene Law §81.44(d):
Contrary to the dissent, nothing in MHL § 81.44( d)
and (e) "limit[s] the guardian's right to retain property
equal in value only to the expenses connected with the
administration of the guardianship, such as those itemized
in the guardian's petition for a final accounting." Had the
Legislature intended that result, it would have clearly
stated that the guardian could retain assets to secure any
known claim or lien only insofar as it was associated with
administrative expenses. Instead, consistent with its stated
justification "to facilitate the transition between a
guardianship for an incapacitated person and an estate after
the death of such incapacitated person" (Sponsor's Mem,
L 2008, ch 175, 2008 NY Legis Ann at 127), the
Legislature gave the guardian broader rights to pay off
"any known claim, lien or administrative costs of the
guardianship pursuant to subdivision (e) of this section"
(MHL § 81.44[ d] [emphasis added]). . . . Section 81.44( e)
... does not limit the guardian's authority pursuant to
section 81.44( d) to retain property to pay off any known
claims or liens in addition to administrative costs. 5
5Justice Freedman's conclusion is premised on additional faulty reasoning and a
misunderstanding of the facts. First, she characterizes the dispute as "which of two creditors has the
superior claim to the assets of the decedent's estate." A13. Eastchester's claim, however, is to
guardianship property before any remainder passes to the decedent's estate. Second, she states that
"while the decedent was still living, both respondents had presented the guardian with claims against
her assets to cover her care." A16. DSS, however, did not present a claim until after Shannon's
death (A28) and admits that it is prohibited from asserting a claim against the property of an
18
This result does not conflict with decisions from other Judicial Departments,
as DSS argues. In In re Estate of Pierce, 106 A.D.2d 892, 483 N.Y.S.2d 500 (41h
Dep't 1984), the court acknowledged that the government's claim against an estate
was entitled to a preference over general creditors of a recipient of public assistance
and the preference is subservient to a creditor with a prior specific lien. In that case,
a hospital had docketed a judgment during the decedent's lifetime. But the decedent
in that case had not been adjudicated an incapacitated person such that the hospital's
claim was asserted against an estate and competed with the government's claim.
Here, Shannon had been adjudicated an incapacitated person, and Eastchester did not
assert a claim against Shannon's estate, but against Shannon personally and the
guardianship property.
In In re Robinson ex rei. Snell. 194 Misc. 2d 695, 754 N.Y.S.2d 525 (Sur. Ct.
Nassau Co. 2003), which cites In re Estate of Pierce, a Department of Social Services
individual prior to his or her death. DSS Brief at 9. Third, she states that "A guardian's authority
terminates with the incapacitated person's death (Mental Hygiene Law §81.36[a][3])." A16.
However, the Order Appointing Guardian in this case empowers the guardian to "(1) Pay bills after
the death of the Incapacitated Person if incurred prior to said death, if authority to pay any such bills
would otherwise have existed". SA57. See also discussion in Point II.A. of this Brief. Fourth, she
states that "Despite the court's directive in the appointment order that after the decedent's death, the
guardian could pay bills incurred while the decedent was still living, the guardian could not be given
more authority than provided under section 81.44." Al9. However, Mental Hygiene Law
§81.21(a)(19) provides: "the court may authorize the guardian to exercise those powers necessary
and sufficient to manage the property and financial affairs of the incapacitated person; ... Those
powers which may be granted include, but are not limited to, the power to: ... pay bills after the
death of the incapacitated person provided the authority existed to pay such bills prior to death until
a temporary administrator or executor is appointed."
19
asserted a claim against a deceased Medicaid recipient's estate. The executrix
asserted that the estate had no assets because she had already paid a nursing home's
claim. The decedent in that case had not been adjudicated an incapacitated person,
either, and no guardian had been appointed, so the nursing home's claim was also a
claim against the estate competing with the Department of Social Services's claim.
Here, again, Shannon had been adjudicated an incapacitated person, and Eastchester
did not assert a claim against Shannon's estate, but against Shannon personally and
the guardianship property.
In In re Swingeam, 59 A.D.3d 556, 873 N.Y.S.2d 165 (1st Dep't 2009), a
Department of Social Services asserted a claim to recover benefits incorrectly paid.
A different statute, Social Services Law §369(2)(a)(i), expressly permits that claim
to be asserted before the death of the recipient. Here, DSS does not assert that it
incorrectly paid benefits to Shannon.
The Appellate Division, First Department itself distinguished the case law that
DSS contends is in conflict with the decision in this case (A9-10):
Unlike the claims inMatterofSwingearn (59 AD3d
556 [2d Dept 2009]), which were competing claims during
the decedent's lifetime for benefits incorrectly paid (see
SSL § 369[2][a][i]), and the claims inMatterofPierce (106
AD2d 892, 892 [4th Dept 1984], lv denied 64 NY2d 609
[1985]), which were competing claims against the estate,
Eastchester's claim accrued during the decedent's lifetime,
20
against the guardianship account, with no competing
creditors. Thus, Eastchester should have been paid before
any funds passed to the estate. DSS, as a preferred creditor
pursuant to SSL § 104, had a priority claim only against the
estate.
The fact that Eastchester did not reduce its claim to a judgment is irrelevant.
Social Services Law § 1 04(1 ), on which DSS bases its claim and this contention,
provides: "In all claims of the public welfare official made under this section the
public welfare official shall be deemed a preferred creditor." The statute is construed
as being intended to provide "a preference over the 'general creditors' of a recipient
of public assistance." In re Warren, 53 N.Y.2d 118, 122, 423 N.E.2d 32, 34, 440
N.Y.S.2d 609, 611 (1981 ); In re Estate of Pierce, 106 A.D.2d 892, 483 N.Y.S.2d 500.
However, that preference yields to specific prior liens of another creditor of the same
debtor. In re Lambert, 87 A.D.2d 818,448 N.Y.S.2d 767, 768 (2d Dep't 1982). A
docketed judgment constitutes a prior specific lien. In re Estate ofPierce, 106 A.D.2d
892, 483 N.Y.S.2d 500.
But the issue of whether a general creditor has obtained a judgment is only
relevant in the context of prioritizing like claims - either multiple lifetime claims or
multiple claims against a deceased Medicaid recipient's estate. Therefore, whether
Eastchester had previously reduced its claim against Shannon to a judgment would
only matter if either DSS asserted a lifetime claim or Eastchester asserted a claim
21
against Shannon's estate. But, Eastchester asserted its claim against guardianship
property, not against Shannon's estate and DSS asserted its claim against Shannon's
estate, not guardianship property. The issue of the priority or subservience of
Eastchester's claim to DSS's claim (and concomitantly whether Eastchester had
obtained a judgment against Shannon) is accordingly not implicated.
The Appellate Division reached the same conclusion: "Contrary to the court's
conclusion, it was irrelevant that Eastchester had not reduced its lien to a judgment,
which would have given it priority over competing creditors, because DSS had no
viable competing claim against Shannon's guardianship account." AlO.
Not all incapacitated persons are Medicaid recipients. Not all Medicaid
recipients are incapacitated persons. DSS is improperly blurring these lines and
trying to treat its claim and Eastchester's claim as though they were pari passu, on
equal footing to be paid from the same pot.
Yet, Eastchester's claim was to be assessed in the course of the proceeding
brought by FSSY as guardian for judicial settlement of its final account (if not
before). Notably, DSS admits it did not have a claim in that proceeding. See DSS
Brief at 9-10 ("As the Department is prohibited from asserting a claim 'against the
property of any individual prior to his or her death on account of medical assistance
22
paid ... ' SSL§369(2)(a), the Department ... made a claim to recover the Medicaid
expended on behalf of the Decedent after her death.").
Eastchester was entitled to have its claim paid from Shannon's property in
FSSY's possession, even after Shannon died and before any remainder was delivered
to her estate representative or the public administrator. As discussed in Point III of
this Brief, DSS was only entitled to have its claim paid from Shannon's estate, if there
was one, after the guardian's final account was conclusively settled.
III. DSS WAS NOT ENTITLED TO PAYMENT
FROM THE GUARDIANSHIP PROPERTY
Under both Federal and New York State law, recovery for medical assistance
from the property of a recipient is generally prohibited. In re Estate of Craig, 82
N.Y.2d 388, 391, 624 N.E.2d 1003, 1005, 604 N.Y.S.2d 908, 910 (1993). Accord
Baker v. Sterling, 39 N.Y.2d 397,404, 348 N.E.2d 584, 589, 384 N.Y.S.2d 128, 132
(1976)(a recipient's property is generally immune from recovery for medical
assistance).
Recoveries can only be pursued for medical assistance correctly paid (as is the
case here) upon the sale of real property subject to a lien imposed in certain specific
instances inapplicable here and against the estate of the deceased person who
received assistance. Social Services Law §369(2)(b) provides:
23
(i) Notwithstanding any inconsistent provision of this
chapter or other law, no adjustment or recovery may be
made against the property of any individual on account of
any medical assistance correctly paid to or on behalf of an
individual under this title, except that recoveries must be
pursued:
(B) from the estate of an individual who was fifty-five
years of age or older when he or she received such
assistance.
Emphasis added. By reason of Social Services Law §369(2)(b )(i)(B), DSS, whose
claim was to recover benefits correctly paid, had no claim against Shannon herself or
guardianship property.
DSS also relies on Social Services Law § 104 which provides:
1. A public welfare official may bring action or proceeding
against a person discovered to have real or personal
property, or against the estate or the executors,
administrators and successors in interest of a person who
dies leaving real or personal property, if such person, or
any one for whose support he is or was liable, received
assistance and care during the preceding ten years, and
shall be entitled to recover up to the value of such property
the cost of such assistance or care. Any public assistance
or care received by such person shall constitute an implied
contract. ...
But, as this Court has made clear: "Section 104 is not applicable to recovery
of medical assistance governed by section 369, which specifically precludes and
24
preempts the overarching reach of general provisions of Social Services Law by the
explicit rules applicable to Medicaid recipients." In re Estate of Craig, 82 N.Y.2d at
392, 624 N.E.2d at 1005, 604 N.Y.S.2d at 910.
Indeed, DSS concedes that it is only entitled to seek recovery of Medicaid
payments against Shannon's estate under Social Services Law §§104 and 369. DSS
Brief at 9 ("It is under SSL § § 104 and 369 that the Department, as a preferred
creditor, sought recovery from the estate of the Decedent, Edna Shannon .... "
Emphasis added.). At best, DSS might have had a priority claim against Shannon's
estate if any assets remained to be delivered to her estate representative or the public
administrator by FSSY, the guardian of her property, after the payment from
guardianship property of Shannon's lifetime debts. But no assets passed into
Shannon's estate because FSSY had been ordered to retain sufficient assets to cover
known claims that had arisen during Shannon's lifetime. SA62. See also Mental
Hygiene Law §81.44. Eastchester's claim was one ofthose claims and exhausted the
funds in the guardianship.
25
IV. THE SPECTERS WHICH DSS SUGGESTS WILL RESULT
FROM THE FIRST DEPARTMENT DECISION WILL NOT
OCCUR AND HAVE NO BASIS IN REALITY
DSS argues that as a result of the First Department's decision, "any debt
claimed to be owed by the Decedent must now be paid by the guardian without
exception" and "without court order". DSS Brief at 17.
This hyperbole is belied by several significant facts:
(1) The incapacitated person's property is subject to the possession of the
guardian, but to the control of the court for the purposes of administration and
disposition. Mental Hygiene Law §81.29( c )("The title to all property of the
incapacitated person shall be in such person and not in the guardian. The
property shall be subject to the possession of the guardian and to the control
of the court for the purposes of administration, sale or other disposition only
to the extent directed by the court order appointing the guardian."). Since the
guardian does not control the incapacitated person's property, the guardian
cannot dispose of the property without court order.
(2) The guardian's powers are set by court order upon the guardian's appointment.
In this case, for example, from the start FSSY was empowered to "apply so
much of the income and principal [of the Incapacitated Person's assets] as
necessary for the Incapacitated Person's comfort, support, maintenance and
26
well-being", "Apply the Incapacitated Person's resources and income, if any,
toward her outstanding and accruing nursing home expenses and other valid
debts" and "Pay bills after the death of the Incapacitated Person if incurred
prior to said death, if authority to pay any such bills would otherwise have
existed". SA56, 57. These powers derive from Mental Hygiene Law §81.21
generally and §81.21 (a)(15)("pay such bills as may be reasonably necessary to
maintain the incapacitated person") and § 81.21 (a)( 19), specifically. Since the
guardian's powers are constrained by statute and court order, the guardian's
powers cannot be characterized as unfettered by reason of the Appellate
Division decision.
(3) Mental Hygiene Law §81.44(d) only provides for the guardian to retain
property to secure known claims, liens and administrative costs of the
guardianship to be available to pay such claims. Property being held as
security assures payment of the known claims. See. e.g., Uniform Commercial
Code §1-201(37)(" 'Security interest' means an interest in personal property
or fixtures which secures payment or performance of an obligation."). The
statute does not direct the guardian to pay the claims.
(4) The process of settling the guardian's final account includes the guardianship
court reviewing and approving claims and issuing an order settling the
27
guardian's final account. See. e.g., A23-25, A21-22; see also Grant v.
Humbert, 114 A.D. 462, 464, 100 N.Y.S. 44, 47 (1st Dep't 1906)("The court,
which by its committee takes possession of the property of the incompetent
person, is clothed with full authority to pay all just claims against the
incompetent to the extent of his estate, and to determine the validity of claims
by reference if the facts are disputed."); In re Garcia, No. 12743/97, 2007 WL
2318399, at *3 (Sup. Ct. Queens Co. Aug. 14, 2007); In re Linden-Rath, 188
Misc. 2d 537, 543, 729 N.Y.S.2d 265, 270, (Sup. Ct. N.Y. Co. 2001). Thus,
disposition of property retained to secure known claims is subject to Supreme
Court review and adjudication.
DSS also mistakenly argues that the First Department's decision "created an
exception for creditors who have failed to reduce their claims to judgment". DSS
Brief at 17. First, Mental Hygiene Law §81.44 embodies policy choices of the
Legislature, and the First Department simply applied that statute as written. Second,
as discussed in Point II.B. of this Brief, DSS improperly conflates adjudication of
lifetime claims against an incapacitated person's guardianship property with
adjudication of claims against the estate of a Medicaid recipient. The concept of
reducing a claim to judgment remains intact regarding actual competing claims.
28
Dated:
CONCLUSION
For all the foregoing reasons, the order appealed from should be affirmed.
January 8, 2015
ABRAMS, FENSTERMAN, FENSTERMAN, EISMAN,
FORMATO, FERRARA & WOLF, LLP
By~{!__