| Weaver v State of New York |
| 2012 NY Slip Op 00362 [91 AD3d 758] |
| January 17, 2012 |
| Appellate Division, Second Department |
| Sherrie Weaver et al., Appellants, v State of New York,Respondent. |
—[*1] Eric T. Schneiderman, Attorney General, Albany, N.Y. (Andrea Oser, Victor Paladino, andKathleen M. Arnold of counsel), for respondent.
In a claim to recover damages for violations of Mental Hygiene Law former §§29.23 and 33.07 (e), the claimants appeal from an order of the Court of Claims (Ruderman, J.),dated September 27, 2010, which granted the defendant's motion for summary judgmentdismissing the amended claim.
Ordered that the order is affirmed, with costs.
Sherrie Weaver, on behalf of herself, and David Sheps, on behalf of himself and all otherssimilarly situated (hereinafter together the claimants), commenced this claim against the State ofNew York, alleging that, while they were patients at mental health facilities operated by the NewYork State Office of Mental Health (hereinafter OMH), the directors of those mental healthfacilities (hereinafter the facility directors)—who acted as representative payees for theclaimants' Social Security benefits—breached fiduciary duties owed to the claimants.Specifically, the claimants alleged that, by applying a portion of the claimants' Social Securitybenefits to pay the facilities' hospital charges, and by failing to seek the appointment of aguardian of the claimants' property for money received in excess of $5,000, the facility directorsviolated Mental Hygiene Law former §§ 29.23 and 33.07 (e). The claimants soughtto recover the benefits that were applied to the cost of their care allegedly in violation of thesesections of the Mental Hygiene Law.
In March 2011 this Court affirmed an order of the Court of Claims, which granted the State'smotion to dismiss the class action claims asserted in the amended claim on the ground that theydid not satisfy all of the substantive pleading requirements set forth in Court of Claims Act§ 11 (b) (see Weaver v State ofNew York, 82 AD3d 878, 879 [2011], lv dismissed 17 NY3d 778 [2011]).While the appeal from that order was pending before this Court, the State moved for summaryjudgment dismissing the amended claim on the ground that the restrictions on the receipt of apatient's personal property by a facility director, as set forth in Mental Hygiene Law former§ 29.23, did not apply to Social Security benefits. The State also contended that the use ofthe claimants' Social Security benefits to pay a portion of their hospital charges did not violatethe representative payees' [*2]fiduciary duties, as articulated inMental Hygiene Law former § 33.07 (e). The State asserted that, consistent with federallaw and regulations, the facility directors properly applied the claimants' Social Security benefitstoward the cost of their care and maintenance. In response, the claimants relied upon theinterpretation of these provisions of the Mental Hygiene Law given by the Appellate Division,Fourth Department, in Muller v State of New York (280 AD2d 923 [2001], affgwithout opinion 179 Misc 2d 980 [1999]). The claimants argued that, in Muller, theCourt of Claims properly held that Social Security benefits fall within the ambit of MentalHygiene Law former § 29.23, that facility directors had a conflict of interest when theyacted as representative payees in connection with those benefits, and that facility directorsbreached their fiduciary duty under Mental Hygiene Law former § 33.07 (e) when theyapplied such benefits to defray the cost of a beneficiary's care. The claimants noted that the Courtof Claims' order in Muller was affirmed without opinion by the Fourth Department, andcontended that, since Muller was the only appellate authority on point, the Court ofClaims was bound to follow Muller's interpretation of the relevant sections of the MentalHygiene Law.
While the State's motion for summary judgment was pending, the Legislature amendedMental Hygiene Law § 29.23 to provide that its restrictions "shall not apply to any federalor state benefits received by the director as representative payee, which benefits shall be handledin accordance with section 33.07 of this title and regulations promulgated thereunder" (MentalHygiene Law § 29.23, as amended by L 2010, ch 111). The Legislature also amendedMental Hygiene Law § 33.07 (e) by, inter alia, adding that the application of federal orstate benefits received by the director as representative payee "to the cost of care and treatment ofsuch person shall not, in and of itself, be a violation of such fiduciary obligation if such directoracts in accordance with federal law and regulations" (Mental Hygiene Law § 33.07 [e], asamended by L 2010, ch 111). The Legislative history for these amendments indicates they wereintended to "clarify" a facility director's authority under Mental Hygiene Law §§29.23 and 33.07 (e) (see Senate Introducer Mem in Support, Bill Jacket, L 2010, ch 111).
In an order dated September 27, 2010, the Court of Claims granted the State's motion forsummary judgment dismissing the amended claim. The Court of Claims concluded that MentalHygiene Law former § 29.23 did not apply to Social Security benefits since "the entiresection, read in context, cannot be interpreted as advanced by claimants, i.e., as an impliedmandate that all funds received, including those received pursuant to federal law which areintended to meet the basic needs of persons covered by the Social Security Act, must be used inthe first instance for luxuries, comforts, necessities and burial expenses." The Court of Claimsalso explained that this reading of the statute is confirmed by the Legislative history of the recentamendments to Mental Hygiene Law §§ 29.23 and 33.07 (e), which indicates thatthe amendments were intended merely to "clarify" a director's authority under those sections, andnot to alter existing substantive law.
The Court of Claims further determined that the application of the claimants' benefits to theirfacility charges did not violate the representative payee's fiduciary duty under Mental HygieneLaw former § 33.07 (e). In this regard, the Court of Claims reasoned that application of theclaimants' Social Security benefits to the cost of their care and maintenance was consistent withfederal law, and served the purpose for which the benefits were intended. In this regard, theCourt of Claims relied on Washington State Dept. of Social & Health Servs. v GuardianshipEstate of Keffeler (537 US 371 [2003]). In Keffeler, the Washington StateDepartment of Social and Health Services (hereinafter DSHS) acted as the representative payeefor children in foster care receiving Social Security benefits. DSHS applied some of thechildren's benefits to reimburse itself for the cost of foster care (id. at 378-379). Thechildren commenced an action against the State of Washington, asserting that such use of theirbenefits violated 42 USC § 407 (a), which provides, in part, that "none of the moneys paidor payable or rights existing under this subchapter shall be subject to execution, levy, attachment,garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."The United States Supreme Court, in Keffeler, determined that 42 USC § 407 (a)did not prohibit DSHS from using some the children's Social Security benefits to reimburse itselffor the cost of their care, since such use did not involve "execution, levy, attachment [or]garnishment," and could not be considered a "legal process" (42 USC § 407 [a]). TheUnited States Supreme Court also held that DSHS did not violate a fiduciary duty by using thebeneficiaries' [*3]benefits to reimburse itself for the cost of theircare and maintenance, and that such use is not contrary to the beneficiaries' best interests (seeWashington State Dept. of Social and Health Servs. v Keffeler, 537 US at 389-391).
The Court of Claims concluded that Keffeler undermined the reasoning and holdingof Muller. It also determined that the Muller Court's interpretation of the relevantstatutory provisions leads "to a result inconsistent with the statutory purpose and scheme, andwould create a sweeping category of exempt property funded by federal benefits which cannot beused for their intended purposes." Additionally, the Court of Claims noted that the Court ofAppeals denied leave in Muller and, thus, "Muller is not the final interpretation ofthe statute." Accordingly, the Court of Claims granted the State's motion for summary judgmentdismissing the amended claim. The claimants appeal. We affirm.
Initially, although the Court of Claims was bound by the doctrine of stare decisis to followthe determination of the Fourth Department in Muller to the extent that the holding ofMuller was not undermined by Keffeler, we are not so bound (see MountainView Coach Lines v Storms, 102 AD2d 663, 664-665 [1984]) and, for the reasons thatfollow, we decline to adopt the Fourth Department's interpretation of Mental Hygiene Lawformer §§ 29.23 and 33.07 (e).
"It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intentof the Legislature. As the clearest indicator of legislative intent is the statutory text, the startingpoint in any case of interpretation must always be the language itself, giving effect to the plainmeaning thereof" (Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 583[1998] [internal quotation marks and citations omitted]).
At the time that the claimants filed the instant claim, Mental Hygiene Law § 29.23provided that:
"The commissioner may authorize the directors of department facilities, to receive or obtainfunds or other personal property, excepting jewelry, due or belonging to a patient who has nocommittee, up to an amount or value not exceeding five thousand dollars . . . Suchfunds . . . shall be placed to the credit of the patient for whom received anddisbursed on the order of the director, to provide, in the first instance, for luxuries, comforts, andnecessities for such patient, including burial expenses, and, if funds are thereafter available, forthe support of such patient . . .
"Moneys belonging to a patient received by the director of such facility pursuant to law shallbe received by him in his official capacity as such director and such receipt shall be deemed anexercise or performance by him of a power and duty duly conferred by this section" (MentalHygiene Law former § 29.23).
We conclude that the phrase, "[t]he commissioner may authorize the directors of departmentfacilities, to receive or obtain funds or other personal property" (id.), evinces theLegislature's intent that, at the time that the claimants filed the instant claim, the statute did notapply to Social Security benefits, inasmuch as the Social Security Act and its federalimplementing regulations conferred the authority to approve and appoint representative payeesfor such benefits upon the Social Security Administration (hereinafter SSA) (see 42 USC§ 405 [j]; § 1383 [a] [2] [A] [ii]; 20 CFR 416.601 et seq.). For the samereason, the language in the last sentence of Mental Hygiene Law former § 29.23, recitingthat such funds are "received by [a facility director] in his [or her] official capacity as suchdirector and such receipt shall be deemed an exercise or performance by him [or her] of apower and duty duly conferred by this section" (Mental Hygiene Law former § 29.23[emphasis added]), does not apply to facility directors acting as representative payees pursuant toappointment by the SSA.
An examination of the legislative history of the Mental Hygiene Law supports thisconclusion. The enactment of the predecessor to Mental Hygiene Law § 29.23 predates the[*4]enactment of the Social Security Act. The Legislature adoptedthe predecessor to Mental Hygiene Law § 29.23 in 1933 (see L 1933, ch 395). It setforth a $300 limit on the amount of funds the Commissioner could authorize superintendents ofstate institutions to receive on behalf of patients (see Mental Hygiene Law former§ 34 [14] [L 1933, ch 395, as amended]). The old State Department of Mental Hygiene(hereinafter the Department) prepared and introduced the bill in order to meet a perceived need to"persuade those who have possession of patients' property to surrender it" (Letter from Commr ofSt Dept of Mental Hygiene, Bill Jacket, L 1933, ch 395, at 4). The legislative history reflects thatthe Department's concern was spurred by an incident in which "a public official in Canada hadmoney of a patient repatriated to New York State. He offered to give it up if we could show legalauthority to receive it. The expenses of appointment, bond, accounting and discharge, in theopinion of the Attorney General, make committee proceedings impracticable if less than $300.00is involved" (id.).
Thus, the initial purpose of the statute was to create a nonjudicial mechanism by which theCommissioner of the Department could authorize superintendents of state institutions to receivefunds or other personal property due or belonging to patients so as to avoid the "expenses ofappointment, bond, accounting and discharge" when only a nominal amount of money wasinvolved (id.). However, since there now exists a procedure for the appointment of afacility director as the patient's representative payee for the purpose of receiving a patient's SocialSecurity benefits, and is dictated by the Social Security Act and implementing regulations, thereis no need for an additional mechanism authorizing a facility director to accept such benefits onbehalf of the patient. Accordingly, facility directors appointed by the SSA to act as representativepayees do not fall within the ambit of Mental Hygiene Law former § 29.23.
The claimants also contend that a facility director cannot act as a representative payeebecause of an inherent conflict of interest, and that by paying over their benefits to the facility forthe cost of their care, their representative payees violated the fiduciary duty created by MentalHygiene Law former § 33.07 (e). Mental Hygiene Law former § 33.07 (e) providedthat "[a] mental hygiene facility which is a representative payee for a patient pursuant todesignation by the social security administration or which assumes management responsibilityover the funds of a patient, shall maintain such funds in a fiduciary capacity to the patient"(Mental Hygiene Law former § 33.07 [e]). The claimants argue that they were entitled toservices without making such payments to the facility (see Mental Hygiene Law §43.01 [a] ["no person shall be denied services because of inability or failure to pay a fee"]).However, the text of the Mental Hygiene Law former § 33.07 (e) does not support theclaimants' contention. Indeed, that statute expressly acknowledged that a facility director may actas a representative payee for a patient pursuant to designation by the SSA.
Once the SSA appoints a representative payee pursuant to 42 USC § 405 (j) (1) (A),upon a determination that the interests of the beneficiary would be served thereby, therepresentative payee "has a responsibility to" use the payments for the beneficiary's "use andbenefit in a manner and for the purposes [the representative payee] determines, under theguidelines in this subpart, to be in [the beneficiary's] best interests" (20 CFR 404.2035 [a]).Under the applicable federal regulations, payments are considered to "have been used for the useand benefit of the beneficiary if they are used for the beneficiary's current maintenance. Currentmaintenance includes cost incurred in obtaining food, shelter, clothing, medical care, andpersonal comfort items" (20 CFR 404.2040 [a] [1]). "If a beneficiary is receiving care in aFederal, State, or private institution because of mental or physical incapacity, currentmaintenance includes the customary charges made by the institution, as well as expendituresfor those items which will aid in the beneficiary's recovery or release from the institution orexpenses for personal needs which will improve the beneficiary's conditions while in theinstitution" (20 CFR 404.2040 [b] [emphasis added]). "After the representative payee has usedbenefit payments consistent with the guidelines . . . any remaining amount shall beconserved or invested on behalf of the beneficiary. Conserved funds should be invested inaccordance with the rules followed by trustees" (20 CFR 404.2045 [a]). In enacting MentalHygiene Law former § 33.07 (e), the Legislature was presumably aware that, pursuant tothe foregoing regulations, a representative payee may apply the beneficiary's benefits to the costof his or her care. Yet the Legislature did not proscribe such expenditures. As such, theapplication, by a representative payee, of a portion of a patient's Social Security benefits to thecost of that patient's [*5]care was not, in and of itself, a violationof the representative payee's fiduciary obligation under Mental Hygiene Law former §33.07 (e).
The parties' remaining contentions either have been rendered academic in light of ourdetermination, are not properly before this Court, or are without merit. Mastro, A.P.J., Angiolillo,Balkin and Chambers, JJ., concur. [Prior Case History: 30 Misc 3d 179.]