| Matter of Steele |
| 2011 NY Slip Op 04801 [85 AD3d 1375] |
| June 9, 2011 |
| Appellate Division, Third Department |
| In the Matter of the Estate of Jasper A. Steele, Deceased. KatherineE. Hargis, as Executor of the Estate of Jasper A. Steele, Deceased, Respondent; Saratoga CountyDepartment of Social Services, Appellant. |
—[*1] Snyder, Kiley, Toohey, Corbett & Cox, L.L.P., Saratoga Springs (James G. Snyder ofcounsel), for respondent.
Rose, J.P. Appeal from an order of the Surrogate's Court of Saratoga County (Seibert, Jr., S.),entered March 23, 2010, which dismissed respondent's objections to petitioner's accounting.
Decedent's wife entered a nursing home in July 1998, at which time she applied for Medicaidand he—as the community spouse—filed a spousal refusal letter, declining to makehis income and resources available for her care (see Social Services Law § 366 [3][a]). Respondent reviewed the couple's income and resources, calculated decedent's resources inexcess of his community spouse resource allowance and the amount of excess income to becontributed to his wife's care (see 42 USC § 1396r-5 [d] [3]; [f] [2]; SocialServices Law § 366-c [2] [d], [h]), and approved the Medicaid application. Decedent diedin November 2001. Respondent then filed objections to the final accounting of decedent's estateseeking to recover the total cost of Medicaid benefits paid for his wife's care during his lifetimepursuant to the implied contract created by Social Services Law § 366 (3) (a). Respondentalso claimed that certain assets that should have been available to pay the cost of her medicalcare were fraudulently conveyed by decedent in violation of Debtor and Creditor Law §273. Those assets were an annuity purchased eight months prior to the Medicaid application, alakeside summer camp conveyed in January 1999 to decedent's children for no considerationwith a life estate retained, and an automobile gifted to his caregiver just prior to his death.Surrogate's Court rejected the claims, based in part on its finding that the transfers did not renderdecedent insolvent. The court also limited respondent's recovery to the excess resources and theavailable income for the period between the wife's entry into the nursing home and decedent'sdeath.
On appeal, respondent argues that the conveyances were fraudulent pursuant to Debtor andCreditor Law §§ 274, 275 and 276. At oral argument, however, respondent concededthat Debtor and Creditor Law § 274 does not apply. As for the other two sections, theywere not raised before Surrogate's Court and, thus, claims based upon them are unpreserved forour review (see CPLR 5501 [a] [3]; Dunn v Northgate Ford, Inc., 16 AD3d 875, 878 [2005]). To theextent that respondent may have raised these statutes in a separate Supreme Court action, there isno order in the record consolidating that action with this proceeding. Nor is there any order fromthat action on appeal. Similarly, petitioner's argument that the fraudulent conveyance claims arebarred by the statute of limitations was not raised in the context of this proceeding beforeSurrogate's Court, and we will not consider it.
That leaves us with respondent's claim of fraudulent conveyance pursuant to Debtor andCreditor Law § 273, pursuant to which any conveyance made without fair considerationthat renders a person insolvent at the time of the transfer is considered fraudulent as to creditorswithout regard to actual intent (seeMurin v Estate of Schwalen, 31 AD3d 1031, 1032 [2006]; Gallagher vKirschner, 220 AD2d 948, 949 [1995]). A person is considered insolvent when "the presentfair salable value of his [or her] assets is less than the amount that will be required to pay his [orher] probable liability on . . . existing debts as they become absolute and matured"(Debtor and Creditor Law § 271 [1]).
Applying this statutory framework to the annuity, its purchase cannot be consideredfraudulent as there was no "existing debt" at the time and decedent received fair consideration inreturn (see Debtor and Creditor Law § 271 [1]). With respect to the car and camp,petitioner had the burden of establishing solvency because these two assets were transferredwithout fair consideration (see Matter of Shelly v Doe, 249 AD2d 756, 757 [1998]). Theevidence in the record reflects that decedent remained solvent at the time the camp wastransferred as his remaining resources were greater than the amount owed pursuant to the impliedcontract, which was his only apparent debt. As noted by Surrogate's Court, the value of the campwas considered a resource in respondent's budget worksheet and the figures relied on in theworksheet reveal that decedent had sufficient resources to cover the cost of medical care at thetime the camp was transferred, six months after the Medicaid application.
We find no record evidence, however, to sustain a finding that decedent remained solventwhen he transferred the car to his caregiver. Petitioner made no effort to establish solvency atthat time, which was just prior to decedent's death and when his wife had been receivingMedicaid assistance for over three years, arguing instead that the car was an exempt asset that,having been transferred prior to decedent's death, could not be considered part of the estate.Although we agree that it was exempt from being considered a resource at the time of theMedicaid application (see 18 NYCRR 360-4.7 [a] [2] [iv]), it ceased to be exempt once itwas [*2]transferred without consideration (see e.g. Crabb vEstate of Mager, 66 AD2d 20, 23-24 [1979]), and its value may be recovered from the estate.At the time of his death, decedent had assets of $87,889.28 according to the account filed in thejudicial settlement proceedings. This figure is less than his existing debts of approximately$1,700 in creditor's claims listed in the same accounting and $87,150.57 owed for his wife'smedical care. As petitioner failed to establish that decedent had sufficient remaining assets to beconsidered solvent, respondent's objection to the transfer of the car as fraudulent pursuant toDebtor and Creditor Law § 273 should have been granted (see Miner v Edwards,221 AD2d 934, 935 [1995]).
With respect to the amount of recovery, we agree with Surrogate's Court that respondent isentitled to decedent's "available resources," which is an amount consisting of his excessresources calculated at the time of the application and his excess income for the 39 monthsbetween his wife's entry into the nursing home and decedent's death (see Social ServicesLaw §§ 104, 366 [3]; Matter of Schneider, 70 AD3d 842, 844-845 [2010], lvdenied 15 NY3d 709 [2010]; Sherman v DeRosa, 34 AD3d 782, 783 [2006]; Commissionerof Dept. of Social Servs. of City of N.Y. v Spellman, 243 AD2d 45, 49 [1998]; see alsoWojchowski v Daines, 498 F3d 99, 103 [2007]).
Malone Jr., McCarthy, Garry and Egan Jr., JJ., concur. Ordered that the order is modified, onthe law, without costs, by reversing so much thereof as dismissed respondent's objection to thetransfer of decedent's vehicle as a fraudulent conveyance; objection granted, matter remitted tothe Surrogate's Court of Saratoga County for further proceedings not inconsistent with thisCourt's decision; and, as so modified, affirmed.