Odd Probate Case Poses Question No One is Asking

Specifically, whether Tennessee’s probate claim statute requires a creditor to provide the executor with proof of a claim before the executor must mail the creditor a copy of the published Notice to Creditors.

Decedent died in July 2015. His will was probated and the estate was closed seven months later. One day shy of the first anniversary of the Decedent’s death, Decedent’s Father petitioned the trial court to reopen the estate. He brought the petition in his capacity as a creditor and simultaneously filed a claim against the estate in the amount of $155,000. The claim was related to an alleged loan between Decedent and Father.

The trial court reopened the estate. It held a hearing on the claim issue in November 2016. The court ultimately found that Father failed to submit any evidence establishing the existence of a loan. Thus it dismissed the claim.

The result is unsurprising. What is puzzling, however, are certain findings that the trial made in reaching the decision. Specifically:

11.The only notice that the Executrix received regarding potential of a valid debt, which would trigger the one (1) year statute of limitations as opposed to the four (4) month statute, is that on November 13, 2015, [Father’s Attorney] left a message for [Executrix’s Attorney] regarding said estate. [Executrix’s Attorney] and [Father’s Attorney] communicated by email thereafter regarding the alleged debt owed to [Father]. [Executrix’s Attorney] advised that [Father] would need to seek assistance from a Tennessee attorney regarding any matter he wished to file in Probate Court.

13.During the course of the conversations, neither [Father] nor [Father’s Attorney] provided proof of the alleged contract or debt purportedly owed to [Father].

14.The Court finds that there was no reasonable basis for the Estate to be aware of any potential valid legal debt that would trigger Tenn. Code Ann. § 30-2-307, the one (1) year statute in this situation that would require the Executrix to provide actual notice to the creditor in accordance with Tenn. Code Ann. § 30-2-306(d) when the alleged creditor in this situation had already reached out to Counsel for the Executrix.

In short, the trial court seems to be saying that a creditor has a duty to notify the executor of its claim in order for the 1 year, rather than the 4 month, statute of limitations to apply. This is exactly backward.

Under Tennessee law, the duty to notify is on the executor, not the creditor. T.C.A. § 30-2-306(d) states:

In addition, it shall be the duty of the personal representative to mail or deliver by other means a copy of the published or posted notice as described in subsection (b) to all creditors of the decedent of whom the personal representative has actual knowledge or who are reasonably ascertainable by the personal representative, at the creditors’ last known addresses. This notice shall not be required where a creditor has already filed a claim against the estate, has been paid or has issued a release of all claims against the estate.

A creditor who receives a copy of the published notice (“actual notice”) generally has 4 months from the first publication of the notice to file a claim against the estate. T.C.A. § 30-2-306(b). Otherwise, the claim is forever barred. T.C.A. § 30-2-307(a)(1). If a creditor does not receive actual notice, he must bring the claim within 12 months of the decedent’s date of death. T.C.A. § 30-2-310(a).

On appeal, Father argued that the “trial court erred in interpreting Tenn. Code Ann. § 30-2-306(d) to require a creditor to provide a personal representative with proof of a contract or debt before the representative must mail a copy of the published notice to the creditor.” This is clearly correct. However, the Tennessee Court of Appeals never reached the issue. Noting that Father never contested any of the factual findings made by the trial court, the appeals court dismissed the case as moot. Why? Because one of the facts that the trial court relied upon, and that father failed to contest, was that there was no evidence of a debt between Decedent and Father. As a result, the Tennessee Court of Appeals was entitled to presume the claim was invalid, irrespective of the statute of limitations issue.

This case notwithstanding, an executor who ignores the duty to notify creditors does so at his peril.  A personal representative can be held personally liable for a breach of the duty to provide notice to all creditors of the decedent of whom the personal representative has actual knowledge or who are reasonably ascertainable. See Burke v. Langdon, 190 S.W.3d 660 (Tenn. Ct. App. 2005).

Source: In re Estate of James Keith Owen, 2017 WL 4315359 (Tenn. Ct. App.)

Posted by Joel D. Roettger, JD, LLM, EPLS

 

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