Opinion
Index No. 103196/1995
04-12-2024
In the Matter of J.C., An Incapacitated Person.
Petitioner's Counsel: Yvonne E. Gardener Respondent's Counsel: Benjamin M. Oxenburg Furman Kornfeld & Brennan LLP Respondent, Liberty Mutual Insurance Company's Counsel: Steven S. Katz Chiesa, Shahinian & Giantomasi, PC Personal Needs Guardian and Co-Property Guardian's Counsel: Judy Mock The Law Office of Judy Mock PC
Unpublished Opinion
Petitioner's Counsel: Yvonne E. Gardener
Respondent's Counsel: Benjamin M. Oxenburg Furman Kornfeld & Brennan LLP
Respondent, Liberty Mutual Insurance Company's Counsel: Steven S. Katz Chiesa, Shahinian & Giantomasi, PC
Personal Needs Guardian and Co-Property Guardian's Counsel: Judy Mock The Law Office of Judy Mock PC
Rachel E. Freier, J.
Upon the Verified Petition dated April 1, 2023, and the Order to Show Cause dated April 20, 2023, seeking a surcharge of the Co-Guardian of the Property, P.S., in the sum of $569,145.00, with money judgment therefor, plus statutory interest and the costs of this proceeding, and directing LIBERTY MUTUAL INSURANCE COMPANY, the Property Guardian's surety, to pay the surcharged amount; and further surcharging the full statutory commissions and compensation to be paid to P.S. for the financial loss suffered by J.C., the Incapacitated Person, by virtue of his alleged breach of his fiduciary duties; and
Upon the Affirmation in Opposition to Order to Show Cause on Behalf of Co-Guardian of the Property dated July 22, 2023; and
Upon the Order to show Cause dated August 1, 2023, to settle the final account; and
Upon the Affirmation of Steven S. Katz in Support of the Order to Show Cause to settle the final account filed by P.S. dated August 21, 2023; and
Upon the Affirmation in Reply to Respondent P.S.'s Response to Surcharge Proceeding and Motion to Judicially Settle Final Account dated August 22, 2023; and
Upon the hearing held January 18, 2024; and
Upon the appearances of YVONNE E. GARDENER, ESQ., attorney for Petitioner; E.S., Petitioner and Florida Co-Guardian of the Property; JUDY MOCK, ESQ., attorney for Y.B.; Y.B., Personal Needs Guardian and Co-Property Guardian of J.C.; BEN OXENBURG, ESQ., attorney for Respondent; P.S., ESQ., Respondent; STEVEN S. KATZ, ESQ., attorney for Liberty Mutual Insurance Company; and JOSEPH G. BATTAGLIA, JR., ESQ., Referee; and
Upon the testimony of E.S., Petitioner and Florida Co-Guardian of the Property; Y.B., Personal Needs Guardian and Co-Property Guardian of J.C.; and P.S., ESQ., Respondent; and
Upon review of the record and all relevant pleadings; it is hereby
ORDERED, that the Petition to surcharge the Co-Guardian of the property, P.S., Esq., in the sum of $569,145.00 and surcharging the full statutory commission and compensation to be paid to P.S., Esq., is DENIED.
Y.B. was appointed Guardian of the Person and Co-Guardian of the Property of J.C., her son, pursuant to the Order and Judgement dated April 30, 1996. The 1996 Order and Judgement also appointed C.R. as Co-Guardian of the Property. J.C. received a lump sum settlement award from a medical malpractice suit in the approximate amount of $3,389,000.00. P.S. was appointed Co-Guardian of the Property with Y.B. pursuant to an Order of this Court dated July 21, 2008. The Court previously approved the Co-Guardians' annual accountings for each year from 2008 to 2014.
On October 16, 2015, by Order of this Court, Y.B. was authorized to permanently move J.C. to Florida. In or around June 2016, the Florida Palm Beach County Circuit Court established a Florida guardianship for J.C. and appointed Y.B. as sole Guardian of the Person and Co-guardian of the Property with J.M.C., MSW, Florida Co-Guardian of the Property.
By Order of this Court dated December 7, 2016, P.S. was authorized to reserve $150,000 in guardianship assets and transfer the remaining balance to J.M.C., Florida Co-Guardian of the Property. After moving to Florida, Y.B. notified P.S. that she was considering moving J.C. back to New York. P.S. kept the New York guardianship account open for a period of time, until Y.B. notified P.S. that she was staying in Florida. E.S. testified that she was appointed Florida Co-Guardian of the property with Y.B. on August 31, 2020, and received her commission on September 20, 2020.
E.S. testified that, on January 6, 2021, she filed a petition with the Florida Court for authorization to create a supplemental needs trust to qualify J.C. for Medicaid. The Florida Court issued an order dated February 28, 2021, granting the petition, and a supplemental needs trust was created for J.C. A Medicaid application filed in July of 2021 was denied because, according to E.S.'s testimony, the guardianship was over the asset threshold, as Medicaid considered the New York assets as available. Thereafter, E.S. re-filed the Medicaid application in August of 2021, stating that the New York assets were unavailable. However, the August 2021 application was also denied because Medicaid disagreed and deemed the New York assets available.
Pursuant to an Order of this Court dated December 19, 2017, Mr. Joseph Battaglia was appointed as Referee in the proceedings to review P.S.'s and Y.B.'s final accounting. On or about March 21, 2022, P.S. and Y.B. filed a final accounting, which covers the period from January 1, 2015, to October 31, 2021. On or about January 20, 2023, Joseph Battaglia filed his referee report recommending the Court judicially settle the final account of the Co-Guardians, P.S. and Y.B.
Initially, it is noted that there are no allegations of defalcation. There are no allegations that guardianship funds were stolen or paid without order of the Court. The issue is whether P.S. breached his fiduciary duty owed to J.C. as Co-Guardian of the property by electing to privately pay for J.C.'s medical expenses out of the guardianship bank account, rather than applying for government benefits, warranting a surcharge calculated from the time of appointment of P.S. to present. The movant seeks a surcharge of $569,145.00. The movant argues that paying for private health insurance rather than securing government benefits was a breach of fiduciary duty that caused financial harm to the Incapacitated Person in the amount of $450,000.00. The movant has also calculated a total of $119,145.00 in lost Supplemental Social Security Income that would have been awarded from October 2008 through March 2023.
"The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct" (Smallwood v Lupoli, 107 A.D.3d 782, 784 [2d Dept 2013]). First, a guardian owes a fiduciary duty to their ward (See SCPA § 103(21)). Additionally, under MHL § 81.20(a)(3), a guardian shall exhibit the utmost degree of trust, loyalty, and fidelity in relation to the incapacitated person. A guardian must "preserve, protect and account for [the incapacitated person's property] and financial resources faithfully" (MHL § 81.20(a)(6)(ii)). Pursuant to MHL § 81.21(a)(6), a guardian of the property may be granted the power to "create revocable or irrevocable trusts of property of the estate which may extend beyond the incapacity or life of the incapacitated person." Thus, MHL § 81.21 contemplates that a property guardian can have the authority to carry out certain acts but does not direct specific action (See Matter of Joseph V, 307 A.D.2d 469, 471-472 [3d Sept 2003]). If a guardian acts improperly, commissions may be denied, and the guardian may be surcharged (In re Phillips, 20 Misc.3d 1111(A), [Sup Ct 2008], affd 72 A.D.3d 828 [2d Dept 2010]); MHL § 81.23(a)(1)).
A guardian has a fiduciary duty to act in the best interests of the incapacitated person (See Matter of Aho, 39 N.Y.2d 241, 247 [1976]). However, a guardian, in discharging their objective responsibility, may conclude that the interests of the incapacitated person are best served by adopting a position that might otherwise seem adverse to the monetary interests of the IP (Id.). "It is incumbent on a guardian to make an objective evaluation of the circumstances and to take such action as will advance what he perceives to be the best interests of the ward" (Id.). However, an incapacitated person should not be forced to accept the less favorable option chosen by their guardian and depriving them "of the largest benefits obtainable under the law" (See Matter of Cook, 133 A.D.2d 823, 827 [2d Dept 1987]).
Here, J.C.'s medical care has been covered by private insurance for approximately thirty years, beginning in 1996, approximately twelve years prior to P.S.'s appointment as Co-Guardian. Based on the testimony, the Court agrees with Ms. Mock, counsel for Y.B., that J.C. obtained the largest benefits available by retaining private medical insurance to pay for his superior medical care.
According to Y.B.'s testimony, she has always wanted to retain private medical insurance to ensure that J.C. received the best care possible. The testimony from Y.B. shows that private health insurance provided for medical goods and services that were otherwise not available. Medicaid would only provide limited services in the county where Y.B. and J.C. resided in New York. For example, during the period of time in controversy, Y.B. testified that J.C. utilized a Medtronic device which helps with muscle spasms and reduces pain. This equipment and other services J.C. received would not have been covered by Medicaid. As testified by Y.B., J.C. has exceeded his life expectancy and benefitted from private medical care, as well as the direct and personal care of his mother, the Guardian of the Person and Co-Guardian of the Property.
Upon review of the approved accountings from 1996 through 2014, the Court finds that the guardianship consistently held assets that were sufficient to afford private health insurance. At the time P.S. turned over the guardianship assets to the court-appointed guardian in Florida, the guardianship held approximately $2,500,000.00, and Medicaid was not part of the short-term planning for the guardian in light of the move to Florida. The guardianship also held additional assets in the form of the Florida property and the sale of the New York property, which was still pending at the time of the move.
The Court declines to accept the movant's calculation of the surcharge against the New York Co-Guardian, P.S., from the date of his appointment to present. If the Court were to accept movant's argument that a guardian should have created a supplemental needs trust as part of Medicaid planning, the Court should start the period of assessment from the inception of the guardianship, with the first court-appointed Co-Guardian of the Property. It is also noted that the guardianship was transferred to Florida around 2017. The testimony shows that the first court-appointed Florida guardian also failed to apply for Medicaid or create a supplemental needs trust. Notwithstanding, the movant is not seeking a surcharge in Florida against the guardian immediately preceding E.S. Furthermore, the Court finds that P.S. did not breach his fiduciary duty. While a guardian appointed under Article 81 has the authority to apply for government benefits, a guardian is not compelled to do so if the guardian makes an assessment that alternative action is in the best interest of the incapacitated person and chooses not to exercise the authority granted.
The movant also argues P.S. did not turn over the WP Carey Common Stock and that this failure is also a basis for surcharge. However, P.S. testified that he was unable to get any cooperation from the company and unable to marshal the asset or transfer the asset to the Florida guardianship. The testimony shows that P.S. also communicated this situation to the first Florida guardian and the current Florida guardian. The stocks still remain unmarshalled and nothing prevents any other properly appointed and commissioned fiduciary from investigating and marshaling the stocks in question.
Lastly, E.S. indicated that the $150,000.00 set aside also prevented J.C. from receiving Medicaid. Pursuant to MHL § 81.44(e), the "the guardian may 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 Court therefore directed said amount be reserved for further court ordered fees. The Court has reviewed the records and chronology of the final accounting process. The record shows that the Guardian and the Referee were cooperating to finalize the accounting. Following review, the Referee made no finding that any funds were stolen or misappropriated.
For the reasons stated above, the branch of the motion to surcharge P.S., Co-Guardian of the Property is denied. The branch of E.S.'s motion to settle the final account is also denied.
The application to set aside the motion to settle the final accounting of the New York Co-Guardians is denied because no motion or application has been made to move the guardianship from Florida back to New York; and it is
ORDERED, that P.S.'s motion to settle the final account of the New York Guardians of the Property is granted. P.S. shall settle an order on notice within ten (10) days from the date of this order.
This is the decision and order of the Court.