MATTER OF KUMMER
93 A.D.2d 135 (1983)
In the Matter of The Estate of Philip Kummer, Deceased. Margaret Kummer, as Temporary Administratrix of The Estate of Philip Kummer, Deceased, Appellant-Respondent; Department of Social Services of the County of Westchester, Respondent-Appellant; Clifford J. Kummer et al., Respondents
Appellate Division of the Supreme Court of the State of New York, Second Department.
April 4, 1983
Samuel N. Barish, guardian ad litem, for Clifford and Jennifer Kummer, respondents.
LAZER, GULOTTA and BRACKEN, JJ., concur.
These are cross appeals from stated portions of a decree of the Surrogate of Westchester County in a proceeding to settle the intermediate account of the administratrix of the decedent. At issue is whether certain moneys advanced by the Westchester County Department of Social Services for the medical and nonmedical care of the decedent's children before his death, may be recovered from decedent's estate and whether, and to what extent, any recovery should bear predecision interest. We must begin with a knowledge of the people whose actions gave rise to the present dispute and of the different roles they play.
Clifford and Jennifer Kummer — the children of Daisy and Philip Kummer. They were placed in the care of the Westchester County Department of Social Services as neglected children by order of the Family Court and were subsequently placed in a foster home.
Daisy Kummer — the mother of Clifford and Jennifer and first wife of Philip Kummer. She is now deceased.
Margaret Kummer — the second wife of Philip Kummer and administratrix of his estate. She is the petitioner in this proceeding to obtain a judicial settlement of an intermediate account of Philip Kummer's estate.
The Department of Social Services of the County of Westchester (hereinafter DSS) — this party plays several different roles in this case. First, the DSS was the custodian of the persons of the two children, Clifford and Jennifer, by reason of an order of placement of the Family Court giving the DSS custody due to the neglect of their parents. Second, the DSS is the "representative payee" of certain Social Security benefits due from the Federal Government to the children. Third, the DSS is a welfare agency, that is, it administers certain relief programs providing for monetary payments to the needy. Fourth, the DSS is the objectant in this proceeding, that is, it objects to the rejection by the administratrix of its claim for reimbursement of moneys expended for the care of the children.
Daisy and Philip Kummer were married and had two children, Clifford and Jennifer. On July 24, 1972 the DSS instituted a neglect proceeding against the parents pursuant to article 10 of the Family Court Act and the children were removed from their parents' custody on that date. Four days later, on July 28, 1972 the mother, Daisy Kummer, died. She left an estate exceeding half a million dollars to her husband Philip Kummer.
On April 12, 1973 an order was entered in the pending Family Court neglect proceeding pursuant to a stipulation of the parties which, inter alia, (1) found neglect on the part of the father, Philip Kummer, (2) placed the children with the DSS, which would, in turn, place them in a foster home, with the provision that the father would not be advised of their residence, (3) provided that the father would have the right at any time to bring a petition to terminate the placement and (4) granted a permanent order of protection
In June, 1973 the DSS wrote to the father concerning an oral undertaking that he had apparently made "to pay for the full cost of care from the date of placement" of the children. Thereafter, letters were exchanged in August and November, 1973 concerning the father's support obligation. In the letter of August 14, 1973, the DSS queried the father concerning the deceased mother's Social Security status, stating: "We also need to know Mrs. Kummer's Social Security number to determine if the children are eligible to receive any benefits based on Mrs. Kummer's account. If you are already in receipt of Social Security Benefits, then the County will effect a change of beneficiary and you would be responsible for the difference between Social Security and the full cost [of care]" (emphasis added). In the letter dated November 26, 1973 the DSS again told the father that "[w]hen we become beneficiary of the social security benefits on the account of Mrs. Kummer * * * you will only be responsible for the difference between social security benefits and the full cost of care".
Philip Kummer paid $6,059.12 to the DSS toward the care and maintenance of the children from 1973 to 1974. On or about June 11, 1974 the DSS commenced a support proceeding against the father in the Family Court, Westchester County, alleging that since July 26, 1972 he had neglected to provide for the support of the children and that the DSS had authorized public assistance for the children in the sum of $610.40 per month plus medical expenses for their support. The petition was filed before the children had been awarded any Social Security benefits (to be discussed shortly, infra) and it thus appears that in the hiatus between the removal of the children from their parents and payment of Social Security benefits to which they were entitled, the DSS acted in its role as a welfare agency (see dramatis personae, supra) to provide relief for them on the ground that they were needy.
Daisy Kummer was a currently insured member of the Social Security system and when she died her children became entitled to benefits from the Federal Old-Age, Survivors, and Disability Insurance Trust Fund (OASDI)
On August 3, 1974 the DSS applied, pursuant to subdivision (j) of section 405 of title 42 of the United States Code, for appointment by the Social Security Administration as "representative payee" to receive the OASDI benefits to which the children were entitled.
The rules governing the expenditure and conservation of OASDI funds received by a "representative payee" were contained in two regulations promulgated by the Social Security Administration, which stated in relevant part:
The DSS received a total of $17,527.20 in OASDI benefits for the period from May, 1973 through July, 1976 (Philip Kummer died on July 24, 1976), half of which sum was attributable to each child.
It was not until December 29, 1975 that the support proceeding, commenced in June, 1974, was heard in the Family Court, Westchester County. In the meantime the DSS had begun to receive the children's Social Security benefits. It agreed with the father to settle the support proceeding and a stipulation was entered into upon the following terms: (1) the father would turn over to the DSS two $10,000 Arizona Public Service Company bonds which were in his possession and which were registered in the name of Daisy Kummer as custodian for each of the two children under the New York Uniform Gifts to Minors Act (EPTL 7-4.1 et seq.) (2) the DSS would cash the bonds and apply the principal and accrued interest thereon to the payment of the cost of past and future care for the children, including medical expenses until such time as the fund was depleted or the placement with the DSS terminated, (3) the proceeds of both bonds could be commingled for the benefit of both children, (4) if the placement were terminated before the fund was fully expended, the DSS would pay the balance to the father, (5) the proceeds would be placed in an interest-bearing bank account and (6) in consideration of the foregoing, the DSS agreed to withdraw "the petition in the instant proceeding without prejudice" (emphasis added).
Between July 24, 1972, when the children were removed from the custody of their parents, and that same date four years later, when Philip Kummer died, the DSS disbursed $18,807.04 for the care of the two children, exclusive of medical assistance. During that period it also spent $9,044.59 for medical assistance pursuant to title XIX of the Federal Social Security Act (US Code, tit 42, § 1396 et seq.), commonly known as "Medicaid". In that period it received $17,527.20 in OASDI benefits for the children, $6,059.12 from their father Philip Kummer and the two $10,000 bonds.
On January 3, 1977 the DSS filed a claim against the father's estate in the sum of $5,046.32 for reimbursement of care and assistance allegedly given the children under State law. On April 1, 1977 the DSS served an amended claim for $22,292.32. The main difference in the two claims apparently was that at first the DSS had subtracted both the father's contributions and the OASDI benefits from its gross expenditures in order to calculate the net sum allegedly due from the father's estate, whereas under the amended claim, it had not subtracted the OASDI benefits from its expenditures.
The DSS claims were rejected by the administratrix upon the ground that the support proceeding it had commenced against the decedent during his lifetime had been settled by the stipulation recounted previously, in which the DSS had promised to cash the two $10,000 bonds and to use the principal and accrued interest thereon to pay for the cost of care for the two children. Since the DSS had not cashed in the bonds, reasoned the administratrix, it was not entitled to further moneys from the estate.
The administratrix commenced this proceeding to obtain a judicial settlement of an intermediate account of the estate. The propriety of the rejection of the DSS claim was one of the issues raised. That issue came on before Surrogate
On June 12, 1980, Surrogate BREWSTER rendered an opinion concerning the claim of the DSS (Matter of Kummer,
(1) a parent is primarily responsible for the support of his or her children, irrespective of the fact that the children may have independent means of their own;
(2) where support is not provided by the parent, the DSS is required to provide public assistance (Social Services Law, art 6, tit 2, § 395 et seq.), and to compel a person liable for support of the children cared for at public expense to repay the sums expended on their care;
(3) the DSS could recover the amounts it expended for nonmedical care from the estate of the responsible relative (Social Services Law, §§ 101, 104);
(4) there was no justification for the DSS to expend the children's OASDI benefits for their care when the father had inherited some $500,000 from his first wife and was always financially able to pay for their support. It was against the best interests of the children to use their OASDI funds in that manner;
(5) the stipulation settling the support proceeding commenced by the DSS against the father during his lifetime was no bar to recovery after his death because (a) the proceeding was withdrawn "without prejudice" and (b) since the bonds were the property of the children, the father gave no consideration for the settlement when he surrendered what was not his property;
(6) the DSS could not recover for medical expenses because "[t]here is no statutory authority at present for
(7) the DSS could recover the amount paid for the care of the children less the payments made by their father during his lifetime with 6% interest from the date of the father's death; and
(8) the DSS was directed to repay the full $17,527.20 in OASDI benefits to the accounts of the children with 3% interest per annum until repaid.
There are three contenders in this case: the widow-administratrix, the children, and the DSS. They have filed five briefs containing 22 points, resulting in a confusing welter of conflicting claims and arguments which can best be understood upon a short review of the apparent motivations of the parties. This case concerns money. Each of the parties is seeking to maximize the amount of money he, she or it will receive from the decedent's estate and will keep for him, her or itself.
The decedent's will is in the original papers. It directs that his debts be paid from his estate and then, inter alia, divides the residuary into four parts. Two of those parts (or half the residuary estate), are left absolutely to his widow, the administratrix here. The remaining two parts are left in trust for Clifford and Jennifer until such time as they reach 30 years of age.
The importance of the will is that to the extent that the unfulfilled obligation of the decedent to support his children Jennifer and Clifford constitutes a debt, payment of that debt will reduce the residuary estate and thereby diminish the share left to the administratrix absolutely. Accordingly, she argues that the estate is not responsible either for medical or nonmedical care furnished to the children. On the other hand the children are seeking to maximize the amount they will receive outright while at the same time are opposing payment of any claims that will not ultimately be made to them because such claims would reduce the residuary and thus the amount they
The numerous points in the briefs all relate to three disputed issues, viz.: (1) whether the DSS could recoup the cost of nonmedical care from the father's estate and whether the DSS was properly directed to return to the children the OASDI benefits which it used to pay for that care, (2) whether the DSS could rightfully recoup the cost of medical care from the estate, and (3) whether predecision interest is payable on any recovery.
Discussion of this question must first proceed with a discussion of a parent's duty to support children. At one time the primary duty of support was on the father and only if he was dead or incapacitated did the duty of support devolve upon the mother (Family Ct Act, former §§ 413, 414). In Matter of Carter v Carter (
After the death of one of the parents, the duty rests upon the survivor (cf. Matter of Slochowsky v Lavine,
The general rule is that a parent has the obligation to support the children even though they have resources of their own (cf. Matter of Quat v Freed,
We must now discuss the role of the DSS as "representative payee" of the OASDI benefits due to the children by reason of the mother's death. In that role the DSS was a trustee of the OASDI funds and was obliged to apply them in accordance with the regulations of the Social Security Administration quoted above, namely, that they be used to pay for the beneficiaries' current maintenance so as to replace current income lost because of the death of the mother (see 20 CFR former 404.1604) and, if not needed for current maintenance, to invest the funds or deposit them in interest-bearing bank accounts (see 20 CFR former 404.1605).
If we were to assume for the moment that someone other than the DSS had been named as representative payee of the OASDI benefits due the children and that the DSS, as the custodian of their persons, asked that independent representative payee to expend the benefits to cover the cost of the maintenance of the children, what should the independent payee have answered? Based upon the foregoing discussion of the duty of support and the stipulation of the parties that the father had the means to pay all necessary expenses of the children, a responsible independent representative payee would have refused the request
The administratrix claims that pursuant to our law, however, the OASDI payments had to be considered in calculating the full amount of support due the children from the father, citing Carole K v Arnold K (
One of the problems in this case is that the DSS wore many different hats. Rather than expend public moneys on the care of the children until such time as the father could be made to pay, the DSS, wearing its "welfare" hat, asked itself, wearing its "representative payee" hat, to use the OASDI funds for maintenance. The DSS improperly used the money of the children which it held in trust to pay the costs of maintenance which should have been covered by welfare funds until such time as the father could be made to pay. To this point then, we are in full accord with Surrogate BREWSTER that the actions of the DSS concerning the use of OASDI funds to pay for nonmedical care were improper. The next question is whether the relief he granted was appropriate and authorized by law.
Section 398 (subd 2, par [b]) of the Social Services Law provides that a "welfare officer" shall have the power and duty to "[r]eceive and care for any * * * neglected * * * child placed or discharged to his care by the family court". In such event the official is then obligated to "[a]scertain the financial ability of the parents of children who become public charges and collect toward the expense of such child's care such sum as the parents are able to pay" (Social Services Law, § 398, subd 6, par [d]). Where the parents refuse to pay voluntarily, section 101, under which the instant claim was made, provided at the time the facts of this case transpired:
Section 104, under which the claim was also brought, provides:
The essential prerequisite for reimbursement under sections 101 and 104 is that the DSS must have provided "assistance or care" to the child in question. That is, the DSS must have out-of-pocket expenses before it can recover reimbursement against a parent or the parent's estate. Here there has been a failure to prove unreimbursed out-of-pocket expenses.
The crux upon which the claim by the DSS for reimbursement of nonmedical care expenses turns is that it is not "out-of-pocket" for those expenses. The Surrogate adopted a rather ingenious stratagem for making the DSS incur out-of-pocket expenses. He directed it to repay the entire sum of the OASDI benefits to the account of the children. That reimbursement would have to be made with public moneys, the DSS would then have out-of-pocket expenses, and it could then recover those expenses from the father's estate.
Both the administratrix and the DSS have combined to argue that the Surrogate lacked the power to order the DSS to reimburse the OASDI funds. This argument is raised by the administratrix to establish that the court cannot compel the DSS to make out-of-pocket expenditures. The DSS on the other hand, ignores the out-of-pocket problem. It argues the patently inconsistent points that the estate is liable to it but that it is not liable to the children. Whatever their motivations, the administratrix and the DSS have argued that the Surrogate lacked the power to direct repayment of the OASDI funds by the DSS to the account of the children. We disagree.
The argument that the Surrogate erred in determining the question of whether the DSS, as representative payee, misapplied the OASDI funds encompasses the following points: first, it is claimed that the propriety of expenditures of OASDI funds by a representative payee is reserved by Federal law to administrative proceedings before the Social Security Administration and is reviewable thereafter solely in the Federal courts, and accordingly all the courts of this State lack subject matter jurisdiction over that question; second, it is argued that the Social Security Act
The first of the foregoing arguments is that only the Federal and not the State courts have jurisdiction over claims of misapplication of OASDI funds by a representative payee. OASDI is a Federal program governed by the regulations of the Social Security Administration (20 CFR) which, at the time the underlying events of this case transpired, provided in relevant part:
The administratrix argues that the duty to account created by these regulations is for the benefit of the beneficiary and that if the representative payee has misapplied the funds, the beneficiary can seek to have the Social Security Administration issue an administrative directive for him to refund those sums improperly applied, which directive is reviewable only in the Federal courts pursuant to subdivision (g) of section 405 of title 42 of the United States Code.
Under the provisions of section 405 of title 42 of the United States Code, the Social Security Administration is "directed to make findings of fact, and decisions as to the rights of any individual applying for a payment under this subchapter [US Code, tit 42, ch 7, subch II covering OASDI benefits]", and is granted the authority to make rules and regulations and establish procedures necessary or appropriate to carry out such duties (US Code, tit 42, § 405, subds [a], [b]). Pursuant to that authority, regulations were promulgated (20 CFR 404.900 et seq.). Basically the regulations provide for two types of administrative action, namely those that are "initial determinations" and those that are not initial determinations. As to initial determinations, an applicant is entitled to reconsideration and a hearing (20 CFR 404.900, 404.901, 404.907, 404.929, 404.930), to have the determination made after the hearing subjected to an administrative appeal process (20 CFR 404.967 et seq.)
Initial determinations include, inter alia, the questions of an applicant's entitlement to benefits, the amount of the payment, termination of benefits, the establishment of the period of disability, the need for payment to a representative payee on behalf of a beneficiary who is 18 years of age or older and who has not been declared legally incompetent, and who will act as representative payee if the Social Security Administration determines that representative payment will be made (20 CFR 404.902). Noninitial determinations include the denial of a request to be made a representative payee (20 CFR 404.903[c]). The essence of this plan is that questions which are properly the subject of administrative action by the Social Security Administration are either relegated entirely to its discretion so long as made in accordance with the dictates of applicable statutes and regulations or, if made after a hearing, are subject to judicial review only in the Federal courts pursuant to subdivision (g) of section 405 of title 42 of the United States Code.
The four cases cited by the administratrix on this point are inapposite. The first case upon which she relies is Allan Dee-Wayne Residential Center v Department of Social Servs. (
In Weinberger v Salfi (
In Morris v Weinberger (
The last of the four cases cited by the administratrix for the proposition that the courts of this State lack jurisdiction over the question of whether the representative payee was remiss in its duty to obtain payment from the father for the care of the children before expending their OASDI benefits for that care, is Giberson v Hoerster (
The Giberson case is distinguishable because there the contest was between a State appointed guardian and a Federally appointed representative payee as to who would have control over the OASDI funds. The court answered that the Federally appointed trustee had the right to the funds and that the guardian's remedy was to apply to the Social Security Administration for a change in the representative payee. Here, we do not have a dispute over who has the right to hold the OASDI benefits but rather whether the named representative payee has improperly expended them.
The regulations of the Social Security Administration provide that the representative payee must account to the administration, on request, for the use of the benefits received by him on behalf of the beneficiary (20 CFR former 404.1609, present 404.2065). It is upon that reporting requirement that the administratrix bases her contention that the account of the representative payee is a Federal concern and that its propriety can only be reviewed administratively, and then only in the Federal District Courts. In Bell the plaintiff was for some time an incompetent confined at a mental hospital. Plaintiff was entitled to the payment of OASDI benefits and the Social Security Administration granted the application of one Reginald Johnson, a friend of the plaintiff, to be named as his representative payee. Johnson received $3,080 on plaintiff's behalf. After a period of time Johnson advised the administration that he no longer wished to be representative payee because the plaintiff did not want him to pay any funds over to the hospital where he was confined and, as plaintiff's friend, Johnson did not wish to go against plaintiff's wishes. Accordingly, Johnson returned the unused benefits, interest which had been earned thereon, and two unnegotiated benefit checks. Thereafter, the administration granted the application of the hospital to be named as plaintiff's representative payee.
Approximately five years after Johnson had been relieved as representative payee, the plaintiff submitted statements to the Social Security Administration claiming that Johnson had misused $1,301 of the benefits by making unauthorized and inappropriate withdrawals from the amount held in trust. Johnson submitted a statement to
The opinion of Judge JOHN F. DOOLING, JR., in the Bell case states in relevant part:
What the Bell case means simply is that the review of the reports which may be required by the Social Security Administration of a representative payee pursuant to 20 CFR 404.2065 (formerly 20 CFR 404.1609) is solely to determine whether to continue making future payments to the named representative payee. The administration is not authorized either by statute or regulation to determine disputes between the beneficiary and the representative payee as to the propriety of the expenditure of benefits by the latter. Since there is no claim in this case that the administration improperly paid the benefits to the DSS as representative payee, those payments constituted a complete satisfaction of the Government's obligation with respect thereto (US Code, tit 42, § 405, subd [k]). Such being the case, the Federal Government has no interest in the funds properly paid to the DSS and it has no power to inquire into their expenditure other than to ascertain whether to make future payments to the DSS as representative payee.
The next contention raised by the administratrix is that if the courts of this State have not been ousted from jurisdiction, "the Social Security Act does not create a
Both Touche Ross and Transamerica (supra) concern themselves with whether a Federal private right of action may be judicially inferred to obtain relief from injuries caused by another's violation of a Federal statute. In the earlier case of Cort v Ash (442 U.S. 66, 78) the Supreme Court had enunciated four factors to be applied in deciding whether to imply a Federal right of action. The effect of the Touche Ross and Transamerica cases was to declare that those four factors were not to be accorded equal weight, and that primary importance was to be placed upon whether Congress explicitly or implicitly intended to create or deny a remedy for breach of the Federal statute in question, secondary importance was to be accorded the question of whether the plaintiff was one of the class for whose especial benefit the statute was enacted, and the other factors enunciated in Cort were then to be considered (see Note, Implied Private Rights of Action Under Federal Statutes: Congressional Intent, Judicial Deference, or Mutual Abdication, 50 Fordham L Rev 611, 615-622).
Assuming, but not deciding, the correctness of the administratrix' argument that there is no evidence of congressional intent to create a remedy for a representative payee's breach of his fiduciary duties, it is our view that whether or not a Federal cause of action exists is irrelevant.
The Touche Ross case involved the failure of a stockbrokerage firm, Weiss Securities, Inc. Touche Ross & Co. was an accounting firm which audited its books and prepared the annual reports of its financial condition required by subdivision (a) of section 17 of the Securities Exchange Act of 1934 (US Code, tit 15, § 78q, subd [a]). When the firm failed, a trustee was appointed for the liquidation of its business and the Securities Investor Protection Corporation (SIPC) made certain advances to satisfy, up to certain statutory limits, the claims of Weiss' customers and other creditors. Thereafter the trustee and the SIPC determined that certain of Weiss' former officers had conspired to conceal its operating losses during 1972 by falsifying financial reports required to be filed with regulatory authorities pursuant to subdivision (a) of section 17 of the 1934 act. Therefore, the trustees and the SIPC decided to sue the firm of accountants, Touche Ross & Co., upon the theory that by reason of its improper audit and certification of the financial statements and section 17 (subd [a]) questionnaire, the true financial condition of Weiss did not become known until it was too late to take remedial action to forestall liquidation or to lessen the adverse financial consequences of such a liquidation to the firm's customers.
The SIPC and trustees first sued the accountants in the courts of New York alleging breaches of their professional duty under our common law. They let the State action languish and thereafter commenced an almost identical suit in the United States District Court for the Southern District of New York alleging that the accountants (1) had
When the opinion of the Supreme Court in Touche Ross & Co. is read it deals only with whether a private cause of action can be implied from subdivision (a) of section 17 of the Securities Exchange Act of 1934. The question, said the court, was "whether Congress intended to create the private right of action asserted" (
What the Supreme Court was impliedly saying in Touche Ross & Co. was not that the trustee and the SIPC were without any remedy for the wrongs of the accountants, but only that their right to sue did not arise under the laws of the United States because subdivision (a) of section 17 of the 1934 act did not create a Federal cause of action. Accordingly, the Federal suit had to be dismissed because there was no Federal claim, and the State common-law claims could only be considered in the Federal courts if there was diversity of citizenship or if pendent to a viable Federal claim (see District Court opinion,
In the instant case, subdivision (j) of section 405 of title 42 of the United States Code, and the regulations promulgated thereunder (20 CFR former 404.1601 et seq., present 404.2001 et seq.) made the representative payee a trustee of OASDI funds due to the beneficiary. Irrespective of
The administratrix and the DSS contend that if there is a State remedy, the children are the only ones who may assert it and then only in the Supreme Court, and the Surrogate both lacked subject matter jurisdiction over the claim and erred in asserting it sua sponte. These are difficult arguments and are complicated by the fact that claims by the children to recover the sums due to them could be made in either of two different ways. First, they could make a claim against their father's estate upon the ground that he owed them a primary duty of support during his lifetime which he breached, requiring the expenditure of their own funds for their support. Alternatively they could sue the DSS alleging that it breached its fiduciary duties to them by improperly expending the OASDI funds which it held in trust for their support and maintenance, without first having sought payment from their father who, as their surviving parent, owed them the
It should be remembered that this was only an intermediate accounting proceeding for the period from November 12, 1976, when the decedent's second wife qualified as administratrix, until July 18, 1978. During that period the DSS filed its claim against the estate and the administratrix rejected it. The Surrogate's opinion states that "[a] companion claim is made by the guardian ad litem for the children by reason of the expenditure of Social Security benefits received by the [DSS], as representative payee of the children for [their] care, support and maintenance" (
A search of the original papers reveals that Samuel N. Barish was appointed guardian ad litem for Clifford and Jennifer Kummer by order of Surrogate BREWSTER dated October 12, 1978. The file does not appear to contain any written claim by him on behalf of the children against either the estate or the DSS. The brief for the children reveals that the son, Clifford, reached his majority on January 15, 1979 (after the closing date of the intermediate account) and that on May 20, 1979 he filed a claim against the estate for unpaid support, which was denied by the administratrix on May 22, 1979. Thus, although at least one of the children made a claim against the estate (the daughter recently reached her majority on August 28, 1982), that claim is not a part of this proceeding because it was made and rejected after the closing day of the intermediate account. It may, of course, be an issue in the final accounting proceeding.
The issue then is whether the Surrogate had subject matter jurisdiction to consider the potential claim by the children against the DSS in connection with this estate proceeding and whether, if he did, he erred in raising it sua sponte. While not as technically complex as some of the
The Surrogate's Court is a court of limited subject matter jurisdiction (NY Const, art VI, § 12; 25 Carmody-Wait 2d, NY Prac, §§ 149:61, 149:62). The State Constitution creates the Surrogate's Court and confers jurisdiction "over all actions and proceedings relating to the affairs of decedents, probate of wills, administration of estates and actions and proceedings arising thereunder or pertaining thereto, guardianship of the property of minors" (NY Const, art VI, § 12, subd d), and "such equity jurisdiction as may be provided by law" (NY Const, art VI, § 12, subd e). SCPA 201 carries the constitutional scheme into effect, stating in subdivision 3 thereof: "The court shall continue to exercise full and complete general jurisdiction in law and in equity to administer justice in all matters relating to estates and the affairs of decedents, and upon the return of any process to try and determine all questions, legal or equitable, arising between any or all of the parties to any action or proceeding, or between any party and any other person having any claim or interest therein, over whom jurisdiction has been obtained as to any and all matters necessary to be determined in order to make a full, equitable and complete disposition of the matter by such order or decree as justice requires."
Where, as here, a claim against an estate is rejected, the Surrogate's Court has "generously expanded" jurisdiction to determine that claim on its merits as part of the judicial settlement of the fiduciary's account (Siegel, Practice Commentary, McKinney's Cons Laws of NY, Book 58A, SCPA 301, p 305; Matter of Maki v Ziehm,
The Surrogate's Court possesses ancillary and incidental jurisdiction to resolve matters in dispute between the parties which must be resolved in order to effect a complete disposition of a matter properly before it (Matter of Piccione,
There is, however, an additional substantial ground for holding that the Surrogate possessed subject matter jurisdiction over the OASDI fund question.
SCPA 201 (subd 1) states: "§ 201. General jurisdiction of the surrogate's court. 1. The court has, is granted and shall continue to be vested with all the jurisdiction conferred upon it by the Constitution of the State of New York, and all other authority and jurisdiction now or hereafter conferred upon the court by any general or special statute or provision of law, including this act". The revisers of the Surrogate's Court Act who drafted the SCPA stated that "[t]he purpose of this section is to expressly state in the SCPA the jurisdiction of the court [and] * * * to confirm the continuation of jurisdiction of matters encompassed by Surr. Ct. Act § 40" (see Revisers' Notes, McKinney's Cons Laws of NY, Book 58A, SCPA 201, p 48). Subdivision 6 of section 40 of the former Surrogate's Court Act, which was in effect incorporated into the SCPA by subdivision 1 of section 201, contained the following grant of jurisdiction: "6. To appoint and remove guardians for infants; to compel
The Surrogate's Court thus possesses jurisdiction over the guardians of the persons and/or property of infants (see SCPA 1701, 1702; 26 Carmody-Wait 2d, NY Prac, § 155:7, NY Const, art VI, § 12, subd d).
SCPA 202 states: "§ 202. Enumerated proceedings not exclusive. The proceedings enumerated in this act shall not be deemed exclusive and the court is empowered in any proceeding, whether or not specifically provided for, to exercise any of the jurisdiction granted to it by this act or other provisions of law, notwithstanding that the jurisdiction sought to be exercised in the proceeding is or may be exercised in or incidental to a different proceeding."
Professor Siegel explains this section as follows:
In legal theory infants are wards of the State from the moment of their birth until they attain their majority and the State stands as parens patriae to infants within its borders. Until his office was abolished in 1847 (NY Const of 1846, art XIV, § 8) the Chancellor of the State of New York was the officer charged with the duty to supervise the affairs of infants. The Chancellor had the power to appoint a guardian and that guardian served as the designee of the Chancellor's official power, and hence of the power of the State, subject to the duty to report to, and the supervision of, the Chancellor (see Matter of Brown, 80 Misc. 4, 5).
With the adoption of the Constitution of 1846 and the abolition of the Court of Chancery, the Surrogate succeeded to the power of the Chancellor over the affairs of infants (see former Surrogate's Ct Act, § 173; cf. NY Const of 1846, art XIV, § 13). The present SCPA continues the Surrogate's power in that regard (SCPA 1701) which he shares concurrently with Judges of the Supreme and Family Courts. A court possessing such equitable powers has the duty to exercise them so as to protect the rights and property of infants (Bogartz v Astor,
The jurisdiction of the Surrogate's Court to exercise its power over the property and affairs of infants is qualified in SCPA 1702, which states in relevant part:
From this section it appears that a Surrogate's Court has jurisdiction over infants domiciled in its county. Here the children were domiciliaries of Westchester County and the appeal is from a decree of the Surrogate of Westchester County.
The point of the foregoing discussion is that the Surrogate is the guardian of the rights and property of children domiciled in his county. He "may" issue letters of guardianship to permit another to act in his stead and subject to his supervision, but he need not do so. Where circumstances warrant, the Surrogate may, on his own motion, act to protect infants who are subject to the in personam jurisdiction of the court.
The next problem is that at the time the Surrogate acted, the son had reached his majority but the daughter had not. We do not view that fact as an insuperable obstacle to a finding that the Surrogate had subject matter jurisdiction. He certainly had the right under SCPA 202, 1701 and 1702 to exercise jurisdiction over the affairs of the infant daughter who was domiciled in his county. Since the OASDI funds of both the son and the daughter had been commingled and had been used to pay the joint cost of their care, to decide the rights of the infant daughter necessarily was to decide the rights of the son who had, since the events in question, reached his majority. Accordingly, it is our view that the interests of judicial economy and the doctrine of pendent jurisdiction gave the Surrogate the power to act to direct the DSS to return the OASDI funds of the son as well as the daughter of the decedent.
The next issue raised with respect to the nonmedical claim is whether the stipulation settling the support proceeding which the DSS had commenced against the father during his lifetime is a bar to recovery by it, after the father's death, of amounts he should have paid as support. There are two simple answers to this claim. First, the stipulation expressly provides that the petition to compel the father to support his children was withdrawn "without prejudice". Accordingly, it does not bar a new claim for the same moneys. Second, the father, as part of the settlement, agreed to turn over two $10,000 bonds to the DSS which were in his possession and which were registered in the name of "Daisy Kummer as Custodian of Clifford and Jennifer Kummer under New York Uniform Gifts to Minors Act". The administratrix claims that decedent parted with these valuable bonds and would be prejudiced if the settlement were now undone. The contention is meritless. A gift under the Uniform Gifts to Minors Act "is irrevocable and conveys to the minor indefeasibly vested legal title to the security * * * given, but no guardian of the minor shall have any right, power, duty or authority with respect to the custodial property except as provided in [EPTL art 7, part 4]" (EPTL 7-4.3, subd [a]). What this means is that the bonds were already the property of the children. Furthermore, the named custodian was the deceased mother. So far as appears from this record the father had not been designated as successor custodian (see EPTL 7-4.7), and he thus had absolutely no right to the property. Accordingly he gave no consideration for the stipulation of settlement and, as the Surrogate correctly found, the estate would not be prejudiced by permitting the claim for the cost of the nonmedical care of the children to be determined on its merits.
COST OF CARE Nonmedical $18,807.04 Medical 9,044.59 __________ Total $27,851.63 GROSS RECEIPTS BY DSS ON CHILDREN'S ACCOUNT Cash OASDI Benefits $17,527.20 Payments by decedent 6,059.12 __________ Subtotal $23,586.32 Property 2 bonds at face value of ? $10,000 each plus interest.
The parties stipulated that the payments from the decedent and the OASDI benefits were applied against the nonmedical costs of care and nothing else. It appears from the record that the father's cash contributions were expended first and the OASDI benefits were used thereafter. It can be seen that the total receipts exceeded the cost of nonmedical care:
Receipts $23,586.32 Nonmedical care 18,807.04 __________ Excess receipts $ 4,779.28.
Accordingly, at the date of the decedent's death, the accounts of each of the children should have contained $4,779.28 in unexpended OASDI benefits. Despite this, the Surrogate directed the DSS to repay the total sum of $17,527.20 (the gross amount of OASDI receipts) in equal amounts to the accounts of each of the children with interest. This seems to be patently incorrect because as shown above, $4,779.28 of those gross receipts were never expended by the DSS prior to decedent's death, that amount should have been in the children's accounts on the date of his death, and thus there was no need to repay that
The question in this section of the opinion is whether the DSS can recoup moneys it expended on medical care for the children. Before exploring the statutes on this subject it is necessary to review the facts of the medical assistance claim. The DSS furnished medical assistance to the children between July 24, 1972 and July 24, 1976. The amount of such assistance was $9,044.59. No part of the OASDI benefits was used for or applied against medical assistance furnished to the children by the DSS.
The source of the funds used for medical assistance and the provisions of law under which they were furnished were initially in some dispute. The notice to admit served by the administratrix contained specific reference to Federal and State statutes and regulations under which the moneys were alleged to have been furnished. The DSS initially declined to admit that portion of the notice upon the ground that the citations to Federal and State statutes were not complete and it was only willing to state that medical assistance was a form of "public assistance" paid under the Social Services Law and the regulations thereunder. Finally, the parties stipulated in open court to a broad nonspecific citation of the authority under which the DSS furnished medical assistance, to the effect that it was furnished to the Kummer children pursuant to title XIX of the Federal Social Security Act (US Code, tit 42, § 1396 et seq.) as such title XIX is "implemented by New York Social Services Law and regulations". Thus we have been left with a very ambiguous statement of the authority for payment.
It should be remembered that the children were placed with the DSS by reason of their parents' neglect. Section 398
The emphasized proviso in the foregoing quoted material means that although the commissioner has the power under section 398 to expend public moneys for the medical care of neglected children placed in his custody, he may not do so if they are "eligible" for medical care under title 11 of article 5 of the Social Services Law. Title 11 of article 5 is entitled "Medical Assistance for Needy Persons" and it governs the administration by the State of the Federal Medicaid program promulgated by title XIX of the Social Security Act. The parties stipulated that it was under these provisions that the medical assistance to the children was furnished.
The major dispute among the parties concerns whether medical assistance was "correctly paid", upon the theory that under certain circumstances there are limitations upon the recovery of medical assistance which was correctly paid.
Initially the administratrix asked the DSS to admit: "5 * * * (c) That all of the aforesaid medical assistance was `correctly paid' as that term is used in 42 U.S.C., Section 1396a(a) 16, and in Article 5, Title 11 of the Social Services Law."
The DSS answered that it: "Denies the truth of the facts contained in paragraph 5(c) because the phrase `correctly paid' contained in the statutes cited in said paragraph 5(c) is a conclusion subject to different interpretations."
As a result of this disagreement the administratrix framed the following third issue for trial: "[w]hether MA furnished under Title XIX to the Kummer children was correctly or incorrectly paid".
When the case came before the Surrogate the following colloquy concerning the propriety of the medical assistance resulted:
The administratrix contends that the emphasized portion of the colloquy quoted above constitutes a factual concession that the medical assistance was correctly paid. It is clear, however, that the issue of recovery of such assistance was preserved. Suffice it to say that the right to recovery of the payments is a question solely of law flowing from the stipulated facts concerning the situation of the children and the means of their father to pay, and from the provisions of law governing the program under which the payments were made.
Finally in this regard, one of the issues framed for trial by the Surrogate was: "[w]hether at the time such medical assistance was furnished to the Kummer children, Philip Kummer had sufficient income and resources to pay for same as determined by the regulations of the Department of Social Services".
Not content with this, however, the DSS pressed to have the estate concede that the father had enough money to pay for both nonmedical and medical assistance to the children. Although the counsel for the administratrix said that he did not see the need for or relevance of such a concession, he agreed to stipulate that at the time "all care and assistance" was rendered by the DSS to the children, the father had sufficient income and resources to pay for the cost of the same.
We must now turn to an examination of the law on the subject of the recovery of medical assistance paid under title 11 of article 5 of the Social Services Law, which governs the furnishing of medical assistance to needy persons. An understanding of this problem requires an odyssey through a complex web of rather imperfectly worded and cross-referenced statutes, many of which are considerable pages in length.
The parties conceded that the medical assistance to the children was paid under title XIX of the Federal Social Security Act and the provisions of New York law and regulations enacted thereunder. Title XIX governs the "Medicaid" program and imposes certain mandatory requirements on States wishing to participate and obtain Federal funding therefor. One of those requirements concerns the recovery of moneys disbursed through the program (US Code, tit 42, § 1396a, subd [a], par ). Pursuant to that requirement New York State enacted section 369 of the Social Services Law, which states in relevant part:
This provision can be divided into three parts, namely, paragraph (a), the first part of paragraph (b) up to the words "totally disabled", and the proviso which concludes paragraph (b).
Paragraph (a) means that the DSS cannot recover from a living recipient or impose a lien against his property for medical assistance which was correctly paid (see Matter of Colon,
The first portion of paragraph (b) prohibits recovery of correctly paid medical assistance from the estate of the recipient (it refers to "such individual", meaning the individual mentioned in the preceding paragraph) unless (1) the recipient was 65 or over when he received assistance, (2) his surviving spouse, if any, has since died and (3) he leaves no children under 21 or who are blind or permanently
Although the administratrix has indulged in considerable arguments concerning the foregoing provisions, they are plainly inapplicable because here the DSS is not seeking to recover from the recipient children but rather from the estate of their deceased father. We must then turn to the proviso which concludes paragraph (b). The other provisions having proved inapplicable, the DSS must either be entitled to recover the medical assistance rendered to the children under that proviso or not at all.
The proviso says that nothing in section 369 shall be construed to prohibit recovery of medical assistance furnished pursuant to subdivision 3 of section 366, which states:
Section 366 is entitled "Eligibility". It governs the provision of medical assistance to various persons. The statute authorizes medical assistance to a child under the age of 21 years receiving care away from his own home in accordance
The parties have not pointed to any other applicable Medicaid eligibility provision, and we can find none. If an application was made by the DSS on behalf of the Kummer children for payment of Medicaid to them under section 366 (subd 3, par [a]) of the Social Services Law, payments actually made on their behalf were correctly paid and would, by the terms of paragraph (a) be recoverable from the father's estate.
Paragraph (b) has been quoted in full earlier in this opinion. In relevant part, it states that "[t]he provisions of this subdivision shall not be construed to diminish the authority of a social services official to bring a proceeding pursuant to the provisions of this chapter [the Social Services Law] or other provisions of law * * * to recover from a recipient or a responsible relative the cost of medical assistance not correctly paid". By its terms paragraph (b) of subdivision 3 is thus not a grant of authority to recover incorrectly paid medical assistance; it is just a statement that paragraph (a) is not intended to diminish such authority to do so as is granted elsewhere. But where?
It is our view that the above quoted language of paragraph (b) refers to sections 101 and 104 of the Social
Briefly, section 101 says that a parent of a recipient of public assistance under 21 years of age shall be responsible for his support. The term "public assistance and care" includes medical assistance for needy persons (Social Services Law, § 2, subd 18). There is no question that the children were recipients of medical assistance. Section 104 says, inter alia, that a public welfare official may bring an action against the estate of a person who dies leaving real or personal property, if that person, or anyone for whose support he is or was liable, received public assistance and care during the preceding 10 years, and shall be entitled to recover up to the value of such assistance or care. "Any public assistance or care received by such person shall constitute an implied contract" (Social Services Law, § 104, subd 1; emphasis added). Section 101 does not talk in terms of whether the assistance was correctly or incorrectly paid. It simply says that "any" assistance received may be recovered from the responsible relative. It is our view, that the word "any" as used in section 101 of the Social Services Law includes both correctly and incorrectly paid medical assistance to children who, at the time the payments were made, had a responsible relative who was possessed of the means to pay for such assistance.
Thus the answer to all the rather hypertechnical arguments raised in the briefs concerning medical assistance is quite simple. It does not matter whether the care was correctly or incorrectly paid. The children needed it; the DSS paid it; the father had the means but failed to pay it; the DSS can recover it from the estate under section 366 (subd 3, pars [a], [b]) and sections 101 and 104 of the Social Services Law.
There are three periods applicable to the award of interest, namely (1) to the date of verdict, decision or report (see CPLR 5001), (2) from the date of verdict, decision or report to judgment (CPLR 5002) and (3) interest upon the judgment itself (CPLR 5003). In this case the dispute concerns
CPLR 5001 states:
As stated above, it is our opinion that the DSS has the right to recover from the estate the costs of any nonmedical and medical care actually disbursed by it for the children under the provisions of section 104 of the Social Services Law, which states in relevant part that "[a]ny public assistance or care received by such person shall constitute an implied contract" (emphasis added).
There are two kinds of implied contracts, namely (1) those that are implied in fact, as where the actions of the
On what date should the interest begin to run? Before that question can be answered we must first review what the Surrogate did.
Surrogate BREWSTER'S initial decision held, inter alia, (1) that the DSS had a good claim against the estate for medical care in the sum of $12,747.92, plus interest at 6% from July 24, 1976, the date of the father's death, until repaid, (2) that the DSS could not recover against the estate for medical assistance to the children and (3) that the DSS should repay the sum of $17,527.20, representing OASDI benefits, to the accounts of the children plus interest at 6% per annum, until repaid (the initial decision did not state the date upon which such interest was to begin to run). Thereafter the Surrogate rendered an amended decision reducing the rate of interest on the repayment of OASDI funds from 6% to 3% per annum pursuant to section 3-a of the General Municipal Law.
With respect to nonmedical care our conclusion, stated above, is that the Surrogate had the power to order the refund by the DSS of OASDI funds expended for the care of
Had this been a proceeding to settle the final account of the administratrix we might have affirmed the approach taken by the Surrogate, simply as a means of cutting the Gordian knot and effecting a complete determination of the rights of the parties. However, this is only an intermediate accounting. At the time the DSS filed its claim against the estate it was not out-of-pocket as to the costs of nonmedical care.
It is our view that the Surrogate properly acted to resolve the legal issues concerning the father's duty of support and the propriety of the expenditures of the OASDI funds by the DSS, but that he should have sustained the denial by the administratrix of the DSS claim on this intermediate accounting without prejudice to either (1) a new claim by the DSS prior to the final accounting upon a showing that it had voluntarily restored the expended OASDI funds to the interest-bearing account of the children together with all interest such funds would have earned had they not been improperly withdrawn or, (2) claims by the children against the estate to recover support which their father should have provided but did not, resulting in the improper expenditure of their own resources to pay for the costs of their nonmedical care. Such claims may be determined either at a further intermediate accounting proceeding or at the final accounting of the estate. A voluntary payback approach as a prerequisite to the viability of a DSS claim against the estate is preferable to a compulsory order to do so by way of a decree because
The question of interest upon the medical assistance claim is clear. The court erred in denying recovery for medical assistance and the recovery we now order is with predecision interest to the DSS at the legal rate from the date of each of the separate payments of medical assistance. This is suggested by CPLR 5001 (subd [b]) which states that: "[w]here * * * damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date."
Although calculating interest on each individual payment of medical assistance might involve a long account, we see no need to make interest run from a single intermediate date.
1. The father had a duty to support his children in accordance with their needs and his means. Since he had the means to fully pay the costs of all their care, their separate assets should not have been used to pay for the same.
2. The DSS was a fiduciary with respect to the OASDI funds and it breached its duty to the children by expending them on nonmedical care rather than utilizing public funds for the same and seeking recoupment from the father.
3. The Surrogate had jurisdiction to determine the propriety of the expenditure of OASDI benefits by the DSS because
a. Federal courts have not been granted exclusive jurisdiction over that question;
c. the Surrogate, as the successor to the Chancellor over the affairs of infants, had the right to sua sponte direct the fiduciary to repay the moneys to the children, who were domiciled in his county and subject to the in personam jurisdiction of the court, and he had the jurisdiction to do so even on this estate accounting proceeding under the authority of SCPA 202; and
d. although the Surrogate had the power to direct the DSS to repay the funds to the children and thereby make it out-of-pocket, he should have declined to exercise that power in this intermediate accounting proceeding, without prejudice to the rights of the DSS or children to assert claims against the estate prior to the final accounting.
4. The settlement of the Family Court support proceeding commenced by the DSS against the father is not a bar to relief.
1. Under the circumstances of this case, sections 101 and 104 of the Social Services Law authorize the recovery from a responsible relative or his estate of medical assistance actually paid for children, regardless of whether it was paid correctly or incorrectly.
2. Since the children were in the care of the DSS and had medical expenses, and since the DSS paid them, thereby discharging a duty of the decedent father, it has the right to recover the costs thereof from the estate so as to prevent an unjust enrichment.
1. Each separate expenditure by the DSS for medical assistance should bear predecision interest at the legal rate from the date of payment.
Accordingly the decree appealed from should be modified so as to (1) strike the third decretal paragraph thereof and
Decree of the Surrogate's Court, Westchester County, dated December 31, 1980, modified, on the law, by (1) deleting the third decretal paragraph thereof and substituting therefor a provision sustaining the administratrix' rejection of the nonmedical claim by the Department of Social Services of the County of Westchester, without prejudice to the rights of said department or Clifford and Jennifer Kummer to assert claims against the estate of Philip Kummer, deceased, prior to the final accounting, (2) deleting the fourth decretal paragraph thereof and (3) deleting the word "denied" from the sixth decretal paragraph thereof and substituting therefor the words "granted, with interest at the legal rate from the date of each separate payment of medical assistance". As so modified, decree affirmed insofar as appealed from, without costs or disbursements.
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