Supreme Court, Broome County, May 15, 2019

Aswad & Ingraham, LLP, Binghamton (Richard N. Aswad of counsel), for petitioner.

Coughlin & Gerhart, LLP, Binghamton (Kristen K. Luce and Keegan J. Coughlin of counsel), for cross petitioners.

Mental Hygiene Legal Service, Third Department, Binghamton (A. Laura Bevacqua of counsel), for the alleged incapacitated person.

This proceeding was commenced on June 14, 2018, by a petition filed by R.T. (hereinafter referred to as petitioner), requesting{**64 Misc 3d at 614} to be appointed guardian of the person and property of her husband, D.C., Jr. (hereinafter referred to as AIP), pursuant to article 81 of the Mental Hygiene Law. The court signed an order to show cause on June 19, 2018, appointing Philip J. Artz, Esq., as Court Evaluator. On July 5, 2018, AIP's son, DCIII, and AIP's daughter, [*2]AB (collectively cross petitioners), filed a cross petition requesting their appointment as co-guardians of the person and property of AIP. By order dated July 10, 2018, the court appointed Mental Hygiene Legal Service (3d Dept), A. Laura Bevacqua, Esq., of counsel, as counsel to represent AIP in this matter.

The matter was first before the court on August 21, 2018. Appearing were petitioner; Richard Aswad, Esq., counsel for petitioner; Philip J. Artz, Esq., Court Evaluator; cross petitioners, DCIII and AB; Kristen K. Luce, Esq., and Keegan Coughlin, Esq., counsel for cross petitioners; and Mental Hygiene Legal Service (3d Dept), A. Laura Bevacqua, Esq., of counsel, for AIP; AIP was also present, with one of the aides who assisted with his care at petitioner's home. After testifying about his analysis of the situation and recommendations, the letter and reports of Mr. Artz were admitted into evidence.

The parties agreed that they could work together in AIP's best interests on matters affecting his personal needs. The court made a finding, based on the testimony and reports of Mr. Artz, that AIP has limitations that impact his ability to address his personal and financial needs, and that if arrangements were not either currently in place, or could not be put in place, to address those limitations, he would be at risk of harm and a guardian would have to be considered, and likely appointed. The matter was adjourned to give the parties the opportunity to exchange information and work cooperatively to address AIP's personal and financial needs.

The matter was again before the court on November 13, 2018. The same parties appeared, with the exception of AIP, by then residing in Brookdale Vestal West, an adult care facility in Vestal, New York. Mr. Artz, the Court Evaluator, did appear, but was excused from this and further proceedings. The day before this appearance, petitioner filed an amended petition, with supporting memorandum of law, requesting authority to utilize AIP's income for her own support. The amended petition requested authority inconsistent with petitioner's previously requested authority to serve as guardian of the property of AIP.{**64 Misc 3d at 615} Following substantial conferencing among the court, counsel and the parties, petitioner withdrew the portion of her original petition requesting she be appointed as guardian of the property of AIP, and consented to the appointment of the cross petitioners as property co-guardians. DCIII and AB both testified, and the court found them appropriate co-guardians of the property of their father.

The parties negotiated a possible resolution with respect to property issues which would provide for some monthly support of petitioner from AIP's income. A hearing date was scheduled, with interim settlement conferences to attempt resolution of this matter per the tentative agreement. With a substantial insurance reimbursement payment to AIP anticipated after December 1, 2018, the court directed that no withdrawals be made from AIP's account after that date, so that the proper allocation of that refund payment could be made.

The appointment of cross petitioners as co-guardians of the property of AIP was confirmed by order of the court dated December 20, 2018.

On December 26, 2018, cross petitioners filed an amended cross petition seeking a monetary judgment against petitioner, alleging theft of the AIP's income. The matter was again before the court on January 17, 2019. The parties agreed to a settlement of most of the open issues, as detailed and memorialized in the court's January 23, 2019 amended order and judgment. This broad settlement left open only the property claims asserted by cross petitioners against petitioner in paragraph 10 of their amended cross petition. These remaining property claims were tried before the court on January 17, 2019, and February 15, 2019. Petitioner, cross petitioners and counsel for AIP all submitted post-hearing written summations.

AIP and petitioner met and began a romantic relationship in 2008. AIP moved into petitioner's home in the spring of 2011. He put a substantial amount of his own resources into renovating and improving her home. In recognition of AIP's financial contribution to these improvements, petitioner granted him ownership rights in her home, which was accomplished by the execution of two deeds. AIP and petitioner now own the property as tenants in common, with each reserving a life estate.

AIP and petitioner were each married and divorced twice before their marriage to each other. From the time their{**64 Misc 3d at 616} romantic relationship began in 2008 until AIP's health would not allow it to continue, they enjoyed an active lifestyle, socializing, traveling, and participating in the events of their respective children and grandchildren. Petitioner attended Mr. C.'s family events. Their home was well maintained. AIP and petitioner were well dressed and groomed and utilized their respective income in a generally collective way to enjoy life.

AIP's income consists of a lifetime annuity, paying about $4,000 a month, monthly Social Security of more than $1,200 and a required minimum distribution from an IRA of approximately $270 per month, totaling over $5,500 per month in recent years. AIP's income was, until this article 81 proceeding, deposited into a Visions Federal Credit Union (Visions) account.

Petitioner's income consists of Social Security retirement and a required minimum distribution payment from an IRA, totaling between $1,600 and $1,700 per month. Petitioner's income flows to an individual account she maintains at Horizons Federal Credit Union (Horizons). In addition to the Horizons account, petitioner owns at least one investment account and, until 2017, she owned other real estate.

Petitioner and AIP clearly developed a habit of using all of their combined monthly income to enjoy life, family and each other. AIP's two prior failed marriages impacted him and played a role in his decision to convert a substantial amount of his savings into the lifetime annuity which is the biggest portion of his monthly income. His children were aware of this, and his determination to use his money as he saw fit during his lifetime.

Beginning by at least 2014, AIP was exhibiting memory issues. He received a dementia diagnosis in that year, of which both petitioner and his children were aware. On March 5, 2014, AIP made petitioner a joint owner of his Visions account.

Over time, AIP's memory issues progressed. If he had not already been doing it before, he developed a routine of going to Visions every month and withdrawing all his income in cash. At the same time, petitioner's control over AIP's finances increased. There were incidents where AIP lost some of the cash he withdrew. This was a concern to both petitioner and AIP's children.

AIP's family became increasingly concerned about his dementia progression. Petitioner attended training at local nursing{**64 Misc 3d at 617} homes to assist her in providing the best care possible for AIP. Petitioner and AIP's children held family meetings outside AIP's presence to discuss his memory issues, in both February and December of 2016. The family discussed potential nursing home placement and in-home health care for AIP.

In August of 2016, petitioner and AIP met with Jamie Lindsey, Esq., of Levene Gouldin & Thompson about AIP executing a new power of attorney naming petitioner as agent. Attorney Lindsey concluded at that meeting that AIP lacked capacity to execute a power of attorney. Later in 2016, petitioner took AIP to James Mack, Esq., who had represented both [*3]parties before, including in the preparation of the deeds to petitioner's house, to execute a new power of attorney. Attorney Mack also indicated that while AIP only needed a "moment of clarity" to execute a power of attorney, he did not possess the requisite clarity at the time of that meeting. No power of attorney was executed by AIP.

Early in 2017 modifications were made to a bathroom in the couple's house to enhance access and safety. This work was financed through a loan taken out by petitioner alone.

In March or April of 2017, DCIII was added to AIP's Visions account. DCIII utilized this authority to begin to monitor his father's financial affairs. DCIII took AIP to Visions to make his monthly withdrawals in this time period. Due to concern with AIP's driving, petitioner also sometimes took him to Visions to make the withdrawals. At some point, apparently in 2017, AIP no longer went to Visions to make the withdrawals; petitioner started doing that on his behalf. The withdrawn funds were all deposited into petitioner's individual Horizons checking account, from which she took care of all the couple's bills.

From early on in their romantic relationship, AIP asked petitioner to marry him on multiple occasions. These requests began before AIP moved into petitioner's house and continued throughout their relationship. Petitioner declined multiple proposals, having become, in her own words, "disillusioned" about the institution of marriage, due to her own failed marriages. AIP's children were aware of his multiple proposals, but similarly cautioned him about marrying again, due to his own marital history.

Petitioner traveled from Binghamton to Las Vegas, to visit with family, on June 7, 2017. AIP's children arranged to stay with him in his home, as they and petitioner believed AIP could not be left home by himself.{**64 Misc 3d at 618}

On June 28, 2017, AIP left his home to run an errand and became lost. He was ultimately found driving in Minerva, New York, almost four hours north of his home. He was retrieved and brought home safely by DCIII. Within days of this incident, DCIII, with the knowledge and agreement of petitioner, spoke to his father and took away his car keys, to prevent him from being able to drive. Two days later, AIP called DCIII back to his house to discuss driving privileges. DCIII did not relent, and at the end of the conversation, AIP confided in DCIII that he and petitioner had obtained a marriage license and were planning to be married imminently. This news was not favorably received by DCIII, who confronted petitioner and, ultimately, their minister, about AIP's capacity to enter a marriage. On July 5, 2017, AIP and petitioner were married, with no members of AIP's family present.

The marriage led to a cooling of the relationship between petitioner and AIP's children. Within days of the wedding, DCIII received a letter dated July 3, 2017, from Visions advising that he had been removed from AIP's account.

Petitioner continued to manage AIP's and her own funds independently from July of 2017 forward. She retained counsel to commence this article 81 proceeding in February of 2018. In April of 2018 petitioner facilitated the transfer of AIP's Volkswagen to herself.

AIP's continuing deterioration necessitated the hiring of an in-home health care aide in January of 2018. An aide remained in place to assist in the home until September of 2018, when AIP was transferred to Brookdale Vestal West, a memory care facility in Vestal, New York. AIP moved to Vestal Park, a skilled nursing facility, in early December of 2018, where he remains a resident.

AIP is the owner of a long-term care insurance policy issued by GE Capital Life [*4]Insurance Company of New York.^[FN*] The policy was issued January 18, 2000, and covers services ranging from home care to institutionalized skilled nursing. AIP is past his elimination period, so the policy is currently paying or reimbursing all or a portion of his Vestal Park care costs. The understanding of the parties is that this is a New York "Partnership Plan," meaning that upon the expiration of {**64 Misc 3d at 619}benefits payable by the policy, AIP will automatically qualify for Medicaid coverage, without any asset spend-down requirement.

Per the parties' settlement, the only issues left for court determination are those set forth in paragraph 10 of the cross petitioners' amended petition filed on December 26, 2018. Cross petitioners seek a judgment on behalf of AIP against petitioner in an amount exceeding $124,000. They allege AIP lacked capacity to manage his own affairs as of January 1, 2017, and the requested amount represents his gross income received in 2017 and 2018, reduced by cross petitioners' calculation of AIP's half share of the expenses of the parties' joint household.

[1] Cross petitioners argue that the evidence allows the court to establish a date by which AIP was incapacitated, after which they request the court apply the provisions of Mental Hygiene Law § 81.29 (d). That section allows the court to "modify, amend, or revoke any previously executed . . . contract, conveyance, or disposition . . . made by the incapacitated person prior to the appointment of the guardian if the court finds that the previously executed [transaction] . . . was made while the person was incapacitated." (Mental Hygiene Law § 81.29 [d] [emphasis added].) Assuming incapacity, AIP would be without the ability to consent to petitioner's use of his funds via their joint account. The explicit language of this provision allows the court to reverse transactions made by the incapacitated person but is silent as to reversing transactions made by a spouse or joint bank account holder. Therefore, the court finds that the provisions of Mental Hygiene Law § 81.29 (d) are not directly applicable for providing the relief requested by the cross petitioners.

Cross petitioners ask the court to find the joint tenancy in regard to the joint Visions account was terminated in 2017 when petitioner began taking all of the money from the joint account. (Mullen v Linnane, 268 AD2d 313, 314 [1st Dept 2000].) Cross petitioners argue that once petitioner took control of AIP's joint account, her withdrawal of all the funds in that account terminated the joint tenancy and rendered petitioner subject to a claim for recovery of one half of the amount in the account. (Id.; Matter of Mullen, 268 AD2d 313 [1st Dept 2000].)

[2] Cross petitioners correctly state the legal impact of petitioner's excess withdrawals. However, the analysis does not{**64 Misc 3d at 620} end there; in any claim for a recovery of excess withdrawals, the withdrawing tenant may avoid surcharge by proving, by clear and convincing evidence, that the withdrawals were for the other tenant's benefit or with his consent. (Matter of Giacalone, 143 AD2d 749 [2d Dept 1988]; Matter of Byrnes, 85 AD2d 601 [2d Dept 1981].)

The testimony at the hearing established that all of AIP's needs were being met while he was under the care of petitioner. That continues at Vestal Park, where he now resides. Atypically, he is also the owner of a long-term care policy, the terms of which not only provide for his current care, but also ensure his ultimate qualification for Medicaid, if necessary, without impacting his assets.

While it is not clear from the record before the court how petitioner and AIP handled the mechanics of bill paying and expense management, it is clear that their total income was used for individual and collective needs and desires, including their home, clothing, travel and entertainment. As petitioner testified, she and AIP did not plan for accumulation but spent all their income. She stated that AIP "likes things nice and was very generous." DCIII similarly testified that his father "spent his money."

As AIP's memory issues became more serious, he began to "cash out" the joint Visions account into which his monthly income flowed, giving the cash to petitioner to use in taking care of their bills. DCIII accompanied his father to the bank twice for these withdrawals, so the family was all aware of the new protocol: petitioner handling the couple's bills and finances. Over time, the process further evolved to where petitioner was handling the joint account withdrawals herself, then transferring the funds into her individual Horizons account, from which they were expended.

The consent of the joint tenant need not be express but can be implied. (Matter of Kleinberg v Heller, 38 NY2d 836 [1976].) Factors to determine implied consent include the nature, duration and closeness of the relationship between the joint tenants; the presence or absence of a habit of freely commingling their funds; testamentary dispositions for the excess withdrawer; prior generosity toward the excess withdrawer; the pattern, purpose and amounts of the withdrawals; the age and physical condition of the joint tenant when the excess withdrawals were made; the source of the funds in the joint account; and the tenant's knowledge of the withdrawals. (Id. at {**64 Misc 3d at 621}843-844; In re Miller, NYLJ, May 14, 1996 at 31, col 4, 1996 NYLJ LEXIS 7940, *1 [Sur Ct, Nassau County 1996].)

Here, the joint tenancy in the Visions account was created six years after the parties' relationship began, but three years before they were married. AIP was clearly generous to petitioner and himself when he had capacity, and actively participated in their pattern of freely spending. The parties elected to own the marital residence as tenants in common, with reciprocal life uses, rather than as joint tenants. AIP made no provision for petitioner in his will, though he did make her the beneficiary of one of his retirement accounts.

In addition to the examination as to whether petitioner had AIP's implied consent, as a joint account holder, to use all the income in the account, there is a related question: does a spouse have a duty to use marital funds solely for the financial support of an incapacitated spouse prior to the commencement of an article 81 proceeding? This appears to be a question of first impression and would impose on a spouse a fiduciary duty to conserve all marital funds once the other spouse suffers diminished capacity. Cross petitioners are essentially asking the court to find there is an additional responsibility on a spouse to preserve jointly held funds when the other spouse is suffering from diminishing capacity.

Historically, at common law, a husband had a duty to support his wife and provide for her necessary expenses, including food, shelter, and medical care, while a wife had a reciprocal duty to provide domestic services for the well-being of her family. (Medical Bus. Assoc. v Steiner, 183 AD2d 86, 90 [2d Dept 1992].) This "doctrine of necessaries" was utilized to impose liability on the husband to third parties who provided essential goods and services to his wife and children. (Id.) The Appellate Division affirmed the essential principles of the doctrine and also held it applies equally to both spouses, under the New York Constitution's Equal Protection Clause. (Id. at 91, citing Garlock v Garlock, 279 NY 337 [1939].) New York courts have also found that spouses have a fiduciary duty to each other in the context of executing separation agreements, which can be set aside upon a finding of fraud, duress, or mistake. (Manes v Manes, [*6]277 AD2d 359, 361 [2d Dept 2000].)

The court finds that AIP's continued intellectual deterioration ultimately rendered the lifestyle and spending habits of AIP and petitioner impossible to maintain. As AIP continued to suffer the impacts of dementia, petitioner knew or should have{**64 Misc 3d at 622} known that she had a duty, as a spouse, to not spend AIP's income in a manner inconsistent with his established pattern of support for her, him, and them.

Reviewing these factors, the court finds that certain transactions by petitioner, starting as of January 1, 2017, and continuing through 2018, were in breach of her duty to act consistently with their previous expenditure pattern; AIP by then lacked the capacity to affirmatively consent to her use of his income; and some expenditures were not made with AIP's implied consent.

Therefore, the following transactions must be reversed:

1. Real Property Owned Solely by Petitioner

• In 2017, when all of AIP's income was being transferred from the joint Visions account to petitioner's Horizons account, and his share of household and care expenses did not exceed or even approach the amount of his monthly income, petitioner made multiple payments of bills relating to her own real estate, other than the joint marital residence. These totaled $6,969. Sale proceeds on both parcels were received by petitioner in 2017, far in excess of this amount, and not placed in her Horizons account. Petitioner is directed to repay $6,969 to AIP via payment to his property co-guardians.

2. Payments to or for Stephen

• Petitioner paid $445 in identifiable dental expenses for her son, Stephen. Other payments are alleged to have been made by her for Stephen's benefit, but cannot be proved by the evidence before the court. In 2018, petitioner made gifts to Stephen in the total amount of $3,840. The total of these transactions, $4,285, is reimbursable to AIP, via payment by petitioner to AIP's property co-guardians.

3. AIP's Volkswagen

• In April of 2018, petitioner effectuated a transfer of AIP's Volkswagen to herself. Although older and of modest value, its transfer to petitioner without any indication of her need for it, or use of it, given her clear understanding of her husband's incapacity at that time, must be reversed. Rather than directing the retransfer of the vehicle, the court directs petitioner to pay AIP,{**64 Misc 3d at 623} through his property co-guardians, the sum of $1,700, the lower end of the documented range of value, and modestly below the testified value of the vehicle.

4. Petitioner's Legal Fees

• Petitioner paid $4,812.50 to her counsel in this matter between February 8, 2018, and October 17, 2018, from her Horizons account, so arguably from the income of AIP then being transferred to that account. It is in the court's discretion to set the fees to be paid to petitioner's counsel from the assets of the alleged incapacitated person, when a petition is granted, or as the court otherwise deems appropriate. (Mental Hygiene Law § 81.16 [f].) Petitioner's petition was not granted, and from the perspective of the court she misunderstood that a primary purpose of an article 81 petition is the preservation and use of an incapacitated person's resources for that person's benefit, as her amended petition sought monthly financial support from AIP. This case is not one where the court deems it appropriate for the petitioner's fees to be paid from AIP's resources.

• After September 17, 2018, when AIP was admitted to Brookdale, his multi-care costs [*7]clearly exceeded his income. Thus, any payments made by petitioner from the Horizons account after that date, even though all of AIP's income was flowing into it, were in fact not coming from AIP's income. For that reason, the $1,000 payment to her counsel on October 17, 2018, will not be reversed. Petitioner is directed to reimburse $3,800 to AIP through payment to his property co-guardians.

5. Care Expense Reimbursements

• In late November of 2018, during the pendency of the proceedings, AIP received a reimbursement payment from Genworth, in the amount of $10,649.50, as well as a refund from Brookdale Senior Living, where he had been previously residing, in the amount of $1,471.14. Despite the direct discussion of the potential refund at a court proceeding earlier in November of 2018, and the court's order dated November 13, 2018,{**64 Misc 3d at 624} expressly prohibiting withdrawals from the joint Visions account, petitioner withdrew those sums for her own benefit. She is strictly correct that the court's order set a date of December 1, 2018, to "freeze the account," but she is held to understand that date was used because there was no expectation the refunds would come before December 1, 2018. Petitioner clearly had a sense she should not have withdrawn these funds; she ultimately disclosed that she retained them in cash, in her home. These refunds of expenses made, or deemed to be made, from AIP's income, totaling $12,120.64, are to be returned to AIP, through his property co-guardians.

6. Bathroom Remodel Loan

• Cross petitioners also seek to hold petitioner fully liable for a loan taken out to remodel a bathroom in the marital residence. This loan financed an improvement to an asset owned jointly by petitioner and AIP. It is not disputed that the modification of the bathroom was done to assist AIP. The court finds that payments made on the loan by petitioner through November 30, 2018, from whatever source, are appropriate and consistent with petitioner and AIP's joint ownership of the home and spending pattern in support of each other. The payment of that loan from December 1, 2018, until it is paid off will remain the equal responsibility (50% each) of AIP and petitioner. The parties' counsel are directed to facilitate a mechanism for ensuring equal payment by their respective clients until the loan is paid.

Counsel for cross petitioners submitted an affirmation requesting that the court set their fees, to be paid from the assets of AIP. The court has the discretion in an article 81 proceeding to award legal fees for a successful petitioner, payable from the AIP's resources. (Mental Hygiene Law § 81.16 [f].) Here, cross petitioners successfully petitioned for their appointment as co-guardians of the property, and co-guardians of the person with petitioner.

The total compensation payable to counsel from cross petitioners is based on their retainer agreement, which is a binding contract between cross petitioners and their attorneys.{**64 Misc 3d at 625} The court's only responsibility is to set the reasonable and appropriate portion of that fee payable from AIP's resources. (Matter of Ruth S. [Sharon S.], 125 AD3d 978, 980 [2d Dept 2015].)

This was a complicated and contentious matter. There were five days of court proceedings, substantial discovery, and negotiations. But for the efforts of counsel and the parties to settle the bulk of the disputed issues, the proceedings could easily have been [*8]substantially longer and more expensive.

At the same time, the court needs to be mindful that preservation of AIP's resources, from which cross petitioners now seek payment, was the very basis for their amended cross petition. Whatever portion of their fees are now deemed payable from AIP's current resources, the balance will be reimbursed to them through their inheritance from his estate.

The court finds that the sum of $10,000 of the fees payable to counsel for cross petitioners is appropriately payable currently from AIP's resources.

Therefore, it is hereby ordered that AIP is entitled to recovery from petitioner in the amount of $28,875. Judgment against petitioner in that amount may be entered by AIP, through his co-guardians of the property, against petitioner, unless payment, or an acceptable arrangement, is made within 30 days of the date of this order; and it is further ordered that the sum of $10,000 of legal fees incurred by cross petitioners may be currently paid by the co-guardians of the property of AIP from guardianship resources.