Matter of Estate of Warren, 47 N.Y.2d 740 (1979)

The State, in its sovereign capacity, possesses a common-law prerogative right to priority in the collection of debts owed to it, which takes precedence over statutory preferences granted to municipalities unless explicitly abrogated by the legislature.

Summary

The New York State Department of Mental Hygiene and the New York City Health and Hospitals Corporation both filed claims against the estate of an adjudicated incompetent, Esther Warren, for expenses related to her care. The State argued that its common-law prerogative as sovereign entitled it to priority. The City argued for priority based on a statutory preference under the Social Services Law. The Court of Appeals held that the State’s common-law prerogative right to priority, inherited from the Crown, remained valid because no statute explicitly or implicitly abrogated it. Therefore, the State’s claim took precedence over the City’s.

Facts

Esther Warren, an adjudicated incompetent, passed away at Rockland Psychiatric Center in 1977. The New York State Department of Mental Hygiene filed a claim for $6,991.76 for her care at the center from October 26, 1976, to June 23, 1977. The New York City Health and Hospitals Corporation filed a claim for $7,844.36 for institutional care provided at Bellevue Hospital from February 21, 1971, to July 2, 1971. The estate had a balance of $8,422.63. Both the State and the City claimed to be preferred creditors.

Procedural History

Special Term allowed $2,943.89 for administrative and funeral expenses and ordered the remaining balance of $5,478.74 to be distributed pro rata between the State and the City. The Appellate Division affirmed without opinion. Both the State and the City were granted leave to appeal to the Court of Appeals.

Issue(s)

Whether the New York State Department of Mental Hygiene’s claim for reimbursement of expenses for the care of an incompetent has priority over the New York City Health and Hospitals Corporation’s claim for similar expenses.

Holding

Yes, because the State, in its sovereign capacity, possesses a common-law prerogative right to priority in the collection of debts owed to it, and this right has not been explicitly or implicitly abrogated by any relevant statute.

Court’s Reasoning

The court reasoned that at common law, the Crown had a prerogative right to priority in debt collection. This right was adopted by New York State in its 1777 Constitution and continues under the present Constitution. The purpose of this right is to protect state revenue and ensure funds for government expenses. The court stated that “a statute does not apply to the State, where its sovereign rights, prerogatives, or interests are involved, unless it is specifically mentioned therein or included by necessary implication.” The City’s claim relied on Section 104 of the Social Services Law, which designates public welfare officials as preferred creditors. However, the court found no language indicating the Legislature intended this preference to override the State’s common-law prerogative. The court further addressed the City’s argument regarding the Mental Hygiene Law. While a prior version explicitly granted the State preferred creditor status, this was removed in a later recodification. The court determined that this removal, without explicit legislative intent to abolish the common-law right, did not negate the State’s priority. As the court stated, “in recovering amounts expended for public assistance, [t]he State…continues to enjoy its prerogative right of preference which is superior to any statutory right conferred upon the City under the Social Services Law.”