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AFTER THE INCAPACITATED PERSON’S DEATH, THE GUARDIAN OF THE PROPERTY IS ALLOWED TO PAY ADMINISTRATIVE EXPENSES, BUT NOT CLAIMS UNRELATED TO ADMINISTRATIVE EXPENSES, FROM THE GUARDIANSHIP ESTATE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the guardian (Mock) of the incapacitated person’s (Lillian’s) property should not have been ordered to pay a claim out of the guardianship estate after Lillian’s death. Only administrative expenses can be paid out of the guardianship estate:

Mock’s authority as the guardian of Lillian’s property expired with Lillian’s death (see Mental Hygiene Law § 81.36[a][3] …), “and the property in the guardianship account that remained after the fees of the guardianship were paid would normally have passed to her estate” (… see SCPA 103[19]). Mental Hygiene Law § 81.44(e) allows a guardian to retain, “pending the settlement of the guardian’s final account, guardianship property equal in value to the claim for administrative costs, liens and debts.” The legislature intended to allow guardians “a reserve to cover reasonably anticipated administrative expenses,” but did not intend to allow guardians “to retain funds following the death of an incapacitated person for the purpose of paying a claim” … . Inasmuch as the $255,000 sought by the petitioner is unrelated to the administration of Lillian’s guardianship, Mock lacked the authority to make payment to the petitioner from the guardianship estate … . Accordingly, the Supreme Court erred in granting the petitioner’s cross motion and in directing Mock to pay the petitioner the sum of $255,000 from the guardianship estate. Matter of Lillian G. (Steven G.–Gary G.), 2022 NY Slip Op 05087, Second Dept 8-31-22

Practice Point: A guardian of an incapacitated person’s property may only pay administrative expenses from the guardianship estate after the incapacitated person’s death. Here the court should not have ordered payment of a claim unrelated to administrative expenses from the guardianship estate.

 

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BREACH OF CONTRACT ACTIONS BY CERTIFICATEHOLDERS AGAINST THE TRUSTEE FOR RESIDENTIAL MORTGAGE BACKED SECURITIES TRUSTS DISMISSED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Pitt, reversing (modifying) Supreme Court, dismissed the remaining actions brought by certificateholders against the trustee (US Bank National Association) for residential mortgage backed securities (RMBS) trusts. The opinion is fact-specific, based upon contract language, and cannot be fairly summarized here:

This case involves residential mortgage-backed securities (RMBS). Usually, this type of case is filed by an RMBS trustee because they are generally the only party with standing to assert the trust’s right to compel repurchase of defective loans and to take action against the parties responsible for the improper servicing of loans. Here, however, plaintiffs, as certificateholders of nine RMBS trusts, bring this action for breach of contract against defendant U.S. Bank National Association, as trustee of the nine RMBS trusts, for failure to carry out its alleged duties as trustee in response to the contractual breaches by other transaction parties. The main issues raised in this appeal are: (1) whether the governing trust documents imposed contractual obligations on the trustee … to identify and take action before an event of default (EOD) arose (pre-EOD claims); and (2) whether plaintiffs may rely on the servicers’ annual assessments and the trustee’s letter to the servicer to satisfy the “written notice” element of the claim that the trustee breached its contractual obligations to take action as a “prudent” trustee after an EOD arose (post-EOD claims). Western & Southern Life Ins. Co. v U.S. Bank N.A., 2022 NY Slip Op 04886, First Dept 8-9-22

Practice Point: Here breach of contract actions by certificateholders against the trustee for residential mortgage backed securities trusts were dismissed.

 

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PETITIONERS SOUGHT FUNDS THE DECEDENT HAD TAKEN OUT OF THE CORPORATION AS CLAIMS ON DECEDENT’S ESTATE, ALLEGING THAT THE STATUTE OF LIMITATIONS STARTED ANEW WHEN THE DECEDENT ACKNOWELDGED THE DEBT IN A DEPOSITION; THE STATUTE-OF-LIMITATIONS TOLL IN THE GENERAL OBLIGATIONS LAW ONLY APPLIES TO AN ACKNOWLEDGMENT OF THE DEBT IN WRITING SIGNED BY THE PARTY TO BE CHARGED, NOT TO THE QUASI-CONTRACT ALLEGED BY PETITIONERS (FOURTH DEPT).

The Fourth Department, reversing Surrogate’s Court, determined decedent’s acknowledgement of a debt in a deposition did not start the statute of limitations anew because there was no written contract to which General Obligations Law 17-101 could apply:

In 2011, decedent removed funds from the corporate entity, and he later acknowledged that some of those funds belonged to petitioners. Decedent died in 2018 without returning the funds owed to petitioners. * * *

The tolling provision that the Surrogate relied on is General Obligations Law § 17—101. That provision states, in pertinent part, that “[a]n acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules.” Here, petitioners did not allege that they had a contract with decedent; rather, they alleged claims sounding in quasi-contract, which is “not [a] contract[] at all” … . Thus, General Obligations Law § 17—101, which applies only where there is “competent evidence of a new or existing contract,” does not apply here … . Matter of Reich, 2022 NY Slip Op 04446, Fourth Dept 7-8-22

Practice Point: In order to start the statute of limitations anew on a debt pursuant to General Obligations Law 17-101, the debt must be acknowledged in a writing signed by the party to be charged.

 

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PETITIONER SOUGHT TO DEMONSTRATE THAT HIS DECEASED MOTHER DID NOT HAVE THE CAPACITY TO EXECUTE A DOCUMENT DESIGNATING RESPONDENT AS HER AGENT TO CONTROL THE DISPOSITION OF HER REMAINS; PETITIONER SUBMITTED PROOF HIS MOTHER HAD BEEN DIAGNOSED WITH DEMENTIA, BUT DEMENTIA IS NOT THE EQUIVALENT OF INCOMPETENCE OR INCAPACITY; THE PETITION SHOULD HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, held that the petition pursuant to Public Health Law 4201 for a determination concerning the disposition of petitioner’s deceased mother’s remains should have been dismissed. The deceased was also the mother of the respondent in this action. The issue was whether the deceased had the capacity to execute a document designating the respondent as her agent to control the disposition of her remains. The proceeding under the Public Health Law is handled like a motion for summary judgment. Although petitioner demonstrated his mother was diagnosed with dementia in 2014, dementia is not the equivalent of incompetence:

Every dispute relating to the disposition of the remains of a decedent shall be resolved . . . pursuant to a special proceeding” (Public Health Law § 4201 [8]). Upon the return date of the petition in a special proceeding, “[t]he court shall make a summary determination upon the pleadings, papers and admissions to the extent that no triable issues of fact are raised,” and “may make any orders permitted on a motion for summary judgment” (CPLR 409 [b] …). “[E]very hearing of a special proceeding is equivalent to the hearing of a motion for summary judgment” … . …

Even assuming, arguendo, that the heightened contractual capacity standard is applicable in this case … , we conclude that petitioner failed to establish that the decedent was incapable “of comprehending and understanding the nature of the transaction at issue” … .  Although petitioner submitted evidence establishing that the decedent had been diagnosed with dementia in 2014, “there is no presumption that a person suffering from dementia is wholly incompetent” … . “Rather, it must be demonstrated that, because of the affliction, the individual was incompetent at the time of the challenged transaction” … . Here, petitioner failed to set forth any evidence that the decedent was without capacity to execute the designating document in September 2017 … . Matter of Hurlbut v Leo M. Bean Funeral Home, Inc., 2022 NY Slip Op 04439, Fourth Dept 7-8-22

Practice Point: A proceeding pursuant to the Public Health Law to determine the disposition of the remains of a decedent is in the nature of a special proceeding and is handled like a summary judgment motion. Here the petitioner did not raise a question of fact about whether the decedent had the capacity to designate the respondent as her agent to control the disposition of her remains. Proof decedent had been diagnosed with dementia did not raise a question of fact about decedent’s competence or capacity.

 

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PETITIONER, WHO IS MILDLY AUTISTIC, DEMONSTRATED (1) HE IS NOT DISABLED WITHIN THE MEANING OF SURROGATE’S COURT PROCEDURE ACT (SCPA) ARTICLE 17-A AND (2) HE UNDERSTANDS AND IS ABLE TO MANAGE HIS FINANCIAL AFFAIRS; THE PETITION TO DISSOLVE THE GUARDIANSHIP OF HIS PROPERTY SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined petitioner, who is mildly autistic, demonstrated he did not have a disability within the meaning of Surrogate’s Court Procedure Act (SCPA) article 17-a and, therefore, his petition to dissolve the guardianship of his property should have been granted. Petitioner held a job was up-to-date on all his bills:

The petitioner established that he did not have a disability as defined in SCPA article 17-A, as his evidence showed that his ability to “understand and appreciate the nature and consequences of decisions” was not impaired (id. § 1750-a[1]). The petitioner presented medical evidence that his autism was mild and that he did not have significant deficits in adaptive functioning. He also showed, through his own testimony, that he understood the consequences of decisions in financial and other areas. * * *

The petitioner understood, for example, how his rent was calculated, the importance of staying up to date with his bills, what expenses were nonessential and could be eliminated when he needed to conserve money, how to open a bank account, how to obtain advice from the bank on improving his financial situation, and that he would not have direct access to his trust funds if the guardianship were dissolved and that those funds were placed into a pooled trust. Matter of Robert C. B., 2022 NY Slip Op 04301, Second Dept 7-6-22

Practice Point: The medical records demonstrated petitioner’s mild autism is not a disability within the meaning of the Surrogate’s Court Procedure Act. Petitioner demonstrated through his own testimony that he understands and is able to manage his financial affairs. The petition to dissolve the guardianship of his property should have been granted.

 

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IN ACCORDANCE WITH THE NURSING HOME REFORM ACT (NHRA), THE ADMISSION AGREEMENT SIGNED BY THE NURSING-HOME RESIDENT’S GRANDDAUGHTER DID NOT IMPOSE PERSONAL LIABILITY UPON THE GRANDDAUGHTER FOR PAYMENT OF THE COSTS OF THE RESIDENT’S CARE; THE GRANDDAUGHTER’S MOTION TO VACATE THE DEFAULT JUDGMENT SHOULD HAVE BEEN GRANTED AND THE BREACH-OF-CONTRACT COMPLAINT SHOULD HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the admission agreement signed by the nursing-home resident’s granddaughter (who was appointed guardian of her grandfather’s property) did not impose personal liability upon the granddaughter for payment of the cost of her resident’s care (provided by the plaintiff facility). Therefore, plaintiff should not have seized the granddaughter’s personal funds. The default judgment in favor of plaintiff should have been vacated, and the breach-of-contract complaint should have been dismissed:

… [t]he admission agreement in this case is subject to the Nursing Home Reform Act (hereinafter the NHRA). As relevant here, the NHRA provides that “[w]ith respect to admissions practices, a nursing facility must . . . not require a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in, the facility” … . However, that prohibition “shall not be construed as preventing a facility from requiring an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care” … .

The admissions agreement set forth the relevant contractual obligations of the granddaughter, and the admissions agreement demonstrates as a matter of law that it did not render the granddaughter a “third party guarantee of payment” … .”The admission[s] agreement merely required the [granddaughter] to facilitate payment from the . . . resident’s available income and resources, and only to the extent that the [granddaughter] had access to such income and resources and only if [the granddaughter] could do so without incurring any personal financial liability” … . …

.. [T]he plaintiff failed to adequately allege a breach of the granddaughter’s contractual obligation to facilitate payment to the plaintiff from the resident’s “income or resources” … . Nassau Operating Co., LLC v DeSimone, 2022 NY Slip Op 04029, Second Dept 6-22-22

Practice Point: The Nursing Home Reform Act (NHRA) prohibits holding a third-party who signs an admission agreement personally liable for the costs of a resident’s care. The agreement may only obligate the third party to pay the costs from the resident’s assets (over which the third party exercises control).

 

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THE TRANSFER OF DECEDENT’S HOME TO THE TWO CHILDREN WHO WERE CARING FOR HIM WAS COMPENSATION FOR THE CAREGIVERS PURSUANT TO AN AGREEMENT, NOT A GIFT (WHICH WOULD NOT HAVE BEEN AUTHORIZED BY THE POWER OF ATTORNEY) (FOURTH DEPT). ​

The Fourth Department, over a two-justice dissent, determined the transfer of decedent’s home to the two children who were caring for decedent was demonstrated to be compensation for the caregivers pursuant to an agreement, not a gift (the power of attorney did not authorize agents to make major gifts):

The court concluded that the transfer was an improper gift, relying on the presumption that “where parties are related, . . . services were rendered in consideration of love and affection, without expectation of payment” … . Even assuming, arguendo, that the presumption applies to the inter vivos transfer at issue here … , we conclude that respondents supported their motion with “clear, convincing and satisfactory evidence[] that there was an agreement  . . that the services would be compensated” … . Matter of Maik, 2022 NY Slip Op 03589, Fourth Dept 6-3-22

Practice Point: Here there was an agreement that the children who cared for the disabled decedent would be compensated. The transfer of decedent’s home to the caregivers was compensation for their services, not a gift (which would not have been authorized by the power of attorney).

 

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IF GERMANY WAS DECEDENT’S DOMICILE, NEW YORK MAY RECOGNIZE THE GERMAN HOLOGRAPHIC WILL; MATTER SENT BACK TO SURROGATE’S COURT TO DEVELOP A RECORD ON THE DOMICILE ISSUE (THIRD DEPT). ​

The Third Department, reversing Surrogate’s Court, determined a hearing should be held to determine decedent’s domicile. Decedent was a world traveler who owned property in Germany and executed a holographic will in Germany. If Germany was his domicile, New York may recognize the holographic will:

… [D]ecedent was initially domiciled in New Jersey before he left the United States in 2014 … . Since decedent’s domicile had been established, “unlike mere physical residency, [domicile] is presumed to continue until a new one is acquired and is controlled by the subjective intent of the party claiming domicile” … . This determination generally involves questions of both fact and law “and is based upon ‘conduct manifesting an intent to establish a permanent home with permanent associations in a given location'” … . Where there are particularly unique facts, like here with decedent being a perpetual world traveler, domicile is often “a question of fact rather than law, and it frequently depends upon a variety of circumstances, which differ as widely as the peculiarities of individuals” … .

Domicile is particularly important where, like here, there is a petition to probate a holographic will. Although there are limited circumstances where a holographic will may be validly executed in New York (see EPTL 3-2.2), New York courts may nevertheless accept holographic wills that are “executed and attested in accordance with the local law of . . . [t]he jurisdiction in which the testator was domiciled, either at the time of execution or of death” (EPTL 3-5.1 [c] [3] …). In doing so, New York courts may take judicial notice of the laws of other countries and, as a matter of comity, may accept the findings of foreign courts (see CPLR 4511 [b] …).

… [T]he record was incomplete and must be further developed as it relates to the proceedings in Germany. Specifically, we are concerned over the omission of the certificate of inheritance — which petitioner argues established decedent’s domicile in Germany — as such document may, if afforded comity, be dispositive … . Matter of Noichl, 2022 NY Slip Op 03558, Third Dept 6-2-22

Practice Point: Determination of a person’s domicile is a question of law and fact, depending in part on the person’s intent. Here, if Germany was decedent’s domicile at the time the holographic German will was executed, or at the time of death, New York may recognize the German holographic will. Matter sent back to develop a factual record on the domicile issue.

 

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PLAINTIFFS HAD STANDING TO CHALLENGE THE TRUST SET UP BY DECEDENT; PLAINITIFFS DID NOT STATE A CAUSE OF ACTION FOR FRAUD BECAUSE IT WAS ALLEGED THE DECEDENT (A THIRD PARTY), NOT THE PLAINTIFFS, RELIED ON THE ALLEGEDLY FALSE STATEMENT; THE COMPLAINT STATED A CAUSE OF ACTION ALLEGING DEFENDANTS EXERCISED UNDUE INFLUENCE OVER THE DECEDENT WHICH AFFECTED THE DECEDENT’S ESTATE-RELATED DECISIONS (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined: (1) the complaint did not state a cause of action for fraud because it was alleged a third-party (the decedent), not plaintiffs, relied upon the alleged false statement; (2) the complaint stated a cause of action for “undue influence” on the decedent by the defendants; and (3), the plaintiffs had standing to challenge the validity of the trust set up by the decedent. It was alleged that the decedent made decisions about the disposition of his assets based upon the false assertion that his daughter-in-law killed his son:

Here, as the grandchildren were given specific bequests in decedent’s … last will and testament, and the instrument creating the trust … reserved to decedent a limited power of appointment to name his grandchildren as possible beneficiaries of trust assets upon his death, the grandchildren are interested persons within the meaning of the SCPA, so plaintiffs have capacity to challenge the validity of the trust … . …

… [P]laintiffs cannot state a cause of action for fraud because the Court of Appeals has expressly declined “to extend the reliance element of fraud to include a claim based on the reliance of a third party” … . … As to plaintiffs’ cause of action asserting undue influence, plaintiffs’ broadly-stated theory is that, upon the death of the deceased son, the previously absent defendants drove a wedge between the daughter-in-law and decedent, took control of decedent’s caretaking as he aged and grew infirm and then moved him into defendants’ home where decedent created the trust and conveyed into it his assets to benefit defendants and the son upon his death. … [A]ffording the plaintiffs the benefit of every favorable inference … , we find that such allegations are enough to assert a cause of action for undue influence … . Constantine v Lutz, 2022 NY Slip Op 02842, Third Dept 4-28-22

Practice Point: To state a cause of action for fraud, it must be alleged the plaintiff(s), not a third party (the decedent in this case), relied on the alleged false statement. Here plaintiffs alleged the decedent made estate-related decisions based upon the false statement that his daughter-in-law killed his son. Because of the absence of the “reliance” element of fraud, that cause of action was properly dismissed.

 

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PLAINTIFF COUNTY, ACTING ON BEHALF OF THE NURSING HOME WHERE DECEDENT WAS CARED FOR, WAS ENTITLED TO DISCLOSURE OF DECEDENT’S TAX RETURNS; THE RETURNS ARE RELEVANT TO WHETHER DECEDENT’S SON BREACHED THE “RESPONSIBLE PARTY AGREEMENT” WHICH REQUIRED HIM TO USE THE DECEDENT’S INCOME TO PAY THE NURSING HOME (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, plaintiff county (on behalf of the nursing home where decedent was cared for) was entitled to disclosure of decedent’s tax returns in this action against decedent’s son. The action alleged the son breached the “responsible party agreement” in which the son agreed to pay the decedent’s nursing home costs from the decedent’s income and resources:

Unlike a typical action where the assets of a defendant are irrelevant unless and until a judgment is obtained, here … the existence and value of decedent’s assets are critical to the issue of whether Jeffrey Garry [decedent’s son] breached the agreement by failing to use such assets to pay for decedent’s care … . …

Although “tax returns are generally not discoverable unless the party seeking them shows that they are relevant to issues in the case, indispensable to the claim and unavailable from other sources” … , we are satisfied that plaintiff made the requisite showing here, particularly given defendants’ reluctance to produce responsive documents or interrogatory responses that may have otherwise provided information contained in decedent’s tax returns … . County of Warren v Swan, 2022 NY Slip Op 02169, Third Dept 3-31-22

Practice Point: Although tax returns are generally not discoverable until a judgment is obtained, here the decedent’s returns were deemed relevant to whether decedent’s son breached the “responsible party agreement” with the nursing home which cared for decedent. The agreement required decedent’s son to pay the nursing home from decedent’s income and resources.

 

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