IN RE: Anthony LaPINE (2005)

In a proceeding to direct the beneficiaries of certain Totten trusts to refund money received from the Totten trusts to the estate, the petitioner appeals from so much of a decree of the Surrogate's Court, Dutchess County (Pagones, S.), dated September 12, 2003, as denied that branch of the petition which was to direct Mary Brault, a/k/a Mary Ann Neville, to refund to the estate the money she received as beneficiary of the decedent's Totten trusts and dismissed the proceeding insofar as asserted against the administrator, Mary Brault, a/k/a Mary Ann Neville.

ORDERED that the decree is reversed insofar as appealed from, on the law, with one bill of costs payable by Mary Brault, a/k/a Mary Ann Neville, personally, and that branch of the petition to direct Mary Brault, a/k/a Mary Ann Neville, to refund to the estate the money she received as beneficiary of the decedent's Totten trusts is granted.

 Creditors may reach funds in a Totten trust if other assets of a decedent's estate have been exhausted (see Matter of Halbauer, 34 Misc.2d 458, 460, 228 N.Y.S.2d 786, affd. 18 A.D.2d 966, 238 N.Y.S.2d 511;  see also Matter of Albasi, 196 Misc.2d 314, 317, 765 N.Y.S.2d 213;  Matter of Mirsky, 154 Misc.2d 278, 280-281, 586 N.Y.S.2d 205).   Additionally, if general estate assets are insufficient to pay creditors' claims, beneficiaries who have received “a distribution in excess of that to which they are justly entitled ․ must accordingly refund to the estate representative pro rata the amounts of the excess distribution which is the amount of the deficiency of general assets to pay the estate debts and expenses” (Matter of Halbauer, supra at 460, 228 N.Y.S.2d 786).

 Here, Mary Brault, a/k/a Mary Ann Neville, the administrator of the estate, was well aware of the State's potential claim for reimbursement of the hospitalization costs of the decedent's wife, her mother, as the administrator specifically noted in her petition for letters of administration that the decedent's wife was a patient at a state psychiatric facility, and even served the citation for letters of administration on the decedent's wife in a state psychiatric ward.   It is construed to be common knowledge, moreover, that recipients of public assistance who have financial ability to do so are required to reimburse the public agency for the assistance furnished them (see Matter of Swaab, 40 Misc.2d 767, 768, 244 N.Y.S.2d 83 [Sur. Ct., N.Y. County 1963] ), and it is well settled that a spouse is obligated to pay the fee for the services rendered to the disabled spouse (see Mental Hygiene Law § 43.03).   The administrator nevertheless withdrew funds from the subject Totten trust accounts, despite the fact that she knew of potential claims against the estate, and despite the fact that she knew the estate to be insolvent.

Under these circumstances, therefore, where the administrator was deemed to have been aware of the State's existing claim, it is not inequitable for her to be held to account under Mental Hygiene Law § 43.03 (see Stassou v. Casini & Huang Constr., 241 A.D.2d 448, 660 N.Y.S.2d 59;  Dwyer v. Mazzola, 171 A.D.2d 726, 567 N.Y.S.2d 281).

 Further, the equitable doctrine of laches may not be interposed as a defense against the State where, as here, it is acting in a governmental capacity to enforce a public right or protect a public interest (see Matter of Cortlandt Nursing Home v. Axelrod, 66 N.Y.2d 169, 178, 495 N.Y.S.2d 927, 486 N.E.2d 785, cert. denied 476 U.S. 1115, 106 S.Ct. 1971, 90 L.Ed.2d 655).   Although courts have made exceptions to this doctrine, those exceptions are limited to “unusual factual situations” not applicable in this case (Matter of Hamptons Hosp. & Med. Ctr. v. Moore, 52 N.Y.2d 88, 94, 436 N.Y.S.2d 239, 417 N.E.2d 533;  cf. Conquest Cleaning Corp. v. New York City School Constr. Auth., 279 A.D.2d 546, 719 N.Y.S.2d 689).   Thus, contrary to the administrator's argument, the Attorney-General's petition is not barred by the doctrine of laches.