Scarpuzza v. Blum

Decision Date17 March 1980
Citation426 N.Y.S.2d 505,73 A.D.2d 237
PartiesJoseph SCARPUZZA et al., Petitioners, v. Barbara BLUM, Commissioner of the New York State Department of Social Services et al., Respondents.
CourtNew York Supreme Court — Appellate Division

Toby Golick, New York City (William Telster and Steven Pretsfelder on the brief), for petitioners.

Robert Abrams, Atty. Gen., New York City (Sanford Peyser, New York City, of counsel), for respondent State Commissioner.

Allen G. Schwartz, Corp. Counsel, New York City (L. Kevin Sheridan, New York City, of counsel), for respondent City Commissioner (relying upon the brief of the respondent State Commissioner).

Before MOLLEN, P. J., and DAMIANI, RABIN and GULOTTA, JJ.

GULOTTA, Justice.

The principal issue raised in this proceeding is whether the "voluntary transfer" provision of section 366 (subd. 1, par. (e)) of the Social Services Law, a component of New York's comprehensive medical assistance scheme (i. e., Medicaid), is violative of the Supremacy Clause (U.S.Const. art. VI, cl. 2) by reason of its conflict with controlling Federal legislation. 1 We conclude that the question must be answered in the affirmative, at least insofar as it relates to applicants such as Mr. Scarpuzza who would, except for income and resources, be eligible for Supplemental Security Income (SSI). As a subsidiary issue, petitioners assail the constitutionality of another aspect of the same law, i. e., the "recovery" provision of section 369 (subd. 1, par. (b)). 2 However, on this branch of petitioners' case, we believe that they presently lack standing to raise the issue and, accordingly, decline to consider the question.

I

Petitioners herein, Joseph Scarpuzza (age 89 at the commencement of this special proceeding) and his wife, Pietrina (age 86), were the owners for some 56 years of a two-family residence located at 419 Stanhope Street in Brooklyn. The Scarpuzzas were at all relevant times the occupants of one of the two dwelling units situated therein, the other being rented at the rate of some $300 per month. In addition to this rental income the Scarpuzzas' only source of regular income consisted of Mr. Scarpuzza's union pension and the couple's joint Social Security benefits.

On March 7, 1978 Joseph Scarpuzza fell and sustained a fracture of the hip which necessitated his long-term hospitalization. This condition was, in turn, aggravated by a preexisting heart ailment and arthritis, so that Mr. Scarpuzza (who is now deceased) would ultimately spend the better part of his remaining years in either Wyckoff Heights Hospital or the Lawrence Nursing Home. Insofar as it appears on the present record, Mrs. Scarpuzza, who also suffers from a heart condition, continues to reside in the house. Some two weeks after Mr. Scarpuzza entered the hospital, the petitioners conveyed all right, title and interest in their two-family residence to their son, Vincent, who had been raised in the house. According to the petitioners, this transfer was effectuated in the utmost good faith, and was occasioned by the necessity "of insuring the home's continued maintenance and existence" as the elderly petitioners were no longer physically or financially capable of maintaining the house themselves.

The cost of Mr. Scarpuzza's lengthy hospitalization was initially borne by a Blue Cross/Blue Shield insurance policy. This policy was eventually exhausted, however, and on May 2, 1978, Joseph Scarpuzza applied for medical assistance under New York State's Medicaid program. By "notice of non-acceptance" dated May 12, 1978, the New York City Department of Social Services denied his application based on petitioners' "transfer of property within the year (now, 18 months) prior to applying for medicaid", i. e., the conveyance of their residence at 419 Stanhope Street to their son, Vincent. Petitioner Joseph Scarpuzza thereupon demanded a statutory fair hearing, which was conducted on June 16, 1978. In a written decision dated August 22, 1978, the State Commissioner affirmed the determination of the local agency and rejected the application on the ground that conveyance of the two-family residence to Vincent Scarpuzza without consideration was made "in order to qualify for medical assistance and (for) the purpose of defeating a right of recovery for medical assistance paid" and, further, that there was no evidence of "any valid debtor-creditor relationship * * * between (petitioner) and his son." Accordingly, the Commissioner concluded, Mr. Scarpuzza had failed to overcome the statutory presumption contained in section 366 (subd. 1, par. (e)) of the Social Services Law. 3 As it has never been claimed that Mr. Scarpuzza's actual or imputed income was in excess of the applicable limit or that he was otherwise ineligible for assistance, the ultimate propriety of his disqualification must rise or fall on the afore-stated ground.

Upon being informed of the Commissioner's decision, petitioners commenced the instant article 78 proceeding in the Supreme Court, Kings County, on or about October 16, 1978, demanding, inter alia, that the determination be annulled on constitutional and evidentiary grounds, and that the Commissioner be directed to provide Mr. Scarpuzza with the necessary medical assistance. Pursuant to CPLR 7804 (subd. (g)), Special Term transferred the matter to this court for disposition on December 18, 1978. On February 18, 1979 petitioner Joseph Scarpuzza died and on December 17, 1979, his son, Vincent, was appointed administrator of his estate, thus enabling this proceeding to continue. 4 Since our review of the record comports with the Commissioner's determination that the subject transfer was not effected for "fair" consideration, and thus falls within the statutory presumption 5 (see, e. g., Matter of Benvenuto v. Smith, 69 A.D.2d 773, 415 N.Y.S.2d 414; Matter of Madeley v. Bates, 56 A.D.2d 629, 391 N.Y.S.2d 689; Matter of Clement v. Lavine, 50 A.D.2d 63, 376 N.Y.S.2d 765), we turn our attention directly to the legal issues.

II

In 1965, Congress enacted title XIX of the Social Security Act (U.S.Code, tit. 42, §§ 1396-1396k), which is more commonly known as the Medicaid program. Intended to provide partial Federal funding of the cost of providing medical care to the disadvantaged, 6 Medicaid is a co-operative Federal-State program operated under State direction, but subject to Federal statutory and regulatory guidelines. Although no State is required to participate in Medicaid, Federal law provides that every State desiring to do so must adopt a statutory plan detailing the extent of coverage and comporting with Federal law. 7 Thus, the plan must specify those individuals who will be eligible for its benefits, and may not exclude persons already receiving Federally-funded public assistance, i. e., the "categorically needy." 8 In addition, a State may elect, at its option, to extend Medicaid benefits to those not already receiving Federally-funded public assistance but who are nevertheless deemed "medically needy" by virtue of their limited income and resources. 9 However, if a State opts to include aid to the "medically needy", it "must observe the additional federal requirements applicable to this group of recipients" (Aitchison v. Berger, 404 F.Supp. 1137, 1141, citing U.S.Code, tit. 42, § 1369a, subd. (a), par. (10), cl. (C), affd. 538 F.2d 307, cert. den. 429 U.S. 890, 97 S.Ct. 246, 58 L.Ed.2d 172; see, also, Friedman v. Berger, 547 F.2d 724, 726, cert. den. 430 U.S. 984, 97 S.Ct. 1681, 52 L.Ed.2d 378). It is these "additional federal requirements" which will form the focus for our inquiry.

The State of New York has elected to participate in the Federal Medicaid program (see Social Services Law, § 363 et seq.), and has further elected to extend the payment of benefits thereunder to the "medically needy" upon their satisfaction of certain eligibility requirements respecting income and available resources (Social Services Law, § 366; see, also, Aitchison v. Berger, supra, p. 1141). Pre-eminent among them, at least for present purposes, are the "voluntary transfer" provisions of section 366 (subd. 1, par. (e)), which provide, inter alia, that an applicant may not have made a voluntary transfer of assets "for the purpose of qualifying for such assistance" (par. (e), cl. (i)) or "for the purpose of defeating any current or future right to recovery of medical assistance paid" (par. (e), cl. (ii)), and that any transfer of property for less than fair consideration made within 18 months prior to the filing of an application will be presumed to have been made for one of the proscribed reasons. 10 Notably, the transfer of property which would otherwise be exempt, e. g., a homestead, is specifically included within the foregoing rule. 11 As has already been indicated, it is this provision (Social Services Law, § 366, subd. 1, par. (e)) and its accompanying regulation (18 NYCRR 360.8) 12, which have been challenged as being in derogation of controlling Federal authority. As a secondary issue, petitioners have attacked the constitutionality of section 369 (subd. 1, par. (b)) of the Social Services Law, which provides, inter alia, for the recovery of previously paid Medicaid benefits against the estates of certain recipients. 13

III

As a preface to our analysis of the key issue raised in this proceeding, it is well to observe (as the Commissioner has done) that former section 366 (subd. 1, par. (e)) of the Social Services Law was previously sustained by this court in Matter of Gardner v. Lavine (56 A.D.2d 930, 393 N.Y.S.2d 51 (1977)), wherein we rejected the argument that the statute created a conclusive, irrebuttable presumption which violated the Due Process Clause. This court observed at that time that the statute was undoutedly constitutional, as the presumption created thereby "(was) indeed, quite easily rebutted by showing that the transaction had been founded upon fair consideration, a...

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    ..."the former must yield to the latter" (Matter of Rinefierd v. Blum, 66 A.D.2d 351, 353, 412 N.Y.S.2d 526; see also, Scarpuzza v. Blum, 73 A.D.2d 237, 249, 426 N.Y.S.2d 505). Thus, the court finds that an order authorizing the establishment of the proposed supplemental needs trust in the cas......
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