[WSBAPT] PR Duty to Respond to Potential Creditors?

Wed Jul 15 15:37:32 PDT 2020

Kerry raises a good point re Sloans-a suit based on a creditor claim has to be filed as a civil action and not as a TEDRA action. The creditor claim process, which by definition deals with claims of a monetary amount owed to the claimant by the decedent during life and would be a charge against the estate generally, is in essence the same lawsuit that a creditor would have had against the decedent had s/he lived. It was basically a breach of contract claim with a remedy of money damages and a money judgment. (Also, note that in Sloans, even though the holding was that the plaintiff had been wrong to file a TEDRA action rather than a civil suit, the error was harmless because superior court was still the proper court and had subject matter jurisdiction, and there was no prejudice to the estate.)

And a CIR division of property is also a matter that could be brought as a civil action I think, as I said. And Kerry may be right that it is the safer course compared to TEDRA. But I also think that TEDRA is a possibility, because a CIR claim is not subject to the creditor claim process and is not bound by the same limitations. A decedent in a CIR did not owe money to the survivor during life; s/he co-owned property in which her/his equitable interest is mixed with the survivor's equitable interest. The purpose of a CIR action is to equitably divide property acquired by a CIR couple that, had they been married, would have been characterized as community property. At the end of the case, the court says, in effect, "of all the property that would have been community had they been married, the property listed on Exhibit A now belongs solely to person A, the property listed on Exhibit B now belongs solely to person B." It is entirely an equitable action, has to do with specific property, did not arise as a cause of action during the decedent's life, and will not result in a money judgment to be paid by the estate as a general debt of the decedent. So the creditor claim process does not apply.

Sloans is a great case for getting into some of the probate procedure weeds, but it is not a CIR case; the opposing parties there were two alternative beneficiaries to a house who would receive it under certain conditions in the decedent's Will. Under an agreement between the two of them, one got to use the house on condition of paying certain expenses. When that beneficiary died, the other beneficiary filed a creditor claim in her estate, alleging that the expenses had not been paid pursuant to the agreement. When the claim was rejected, the plaintiff filed suit as a TEDRA action, when it should have been filed as an ordinary civil action (though as I said, the error was deemed harmless).

In contrast, as discussed in Olver where both parties to the CIR died simultaneously in a car crash, the question of equitable division between them is an inventory issue: what portion of the property belongs to each of the estates? The entire proceeding below was conducted within the framework of the competing probate administrations and contradiction of an inventory, where one estate asserted whole ownership of property titled in that decedent's name, and the other estate contested it because despite being titled in one person's name, it all had been acquired during the relationship and the other had a community-like interest. See also Langeland, at p. 329 paragraph 28, confirming that once a trial court determines that property is CIR property, it must make a fair and equitable division of the property between the decedent and the survivor.

As an inventory issue-a determination what belongs to the estate and what doesn't-I believe this qualifies as a matter resolvable in TEDRA, based on Olver and Langeland, and RCW 11.96A.030(2)(a):

(2) "Matter" includes any issue, question, or dispute involving:
(a) The determination of any class of creditors, devisees, legatees, heirs, next of kin, or other persons interested in an estate, trust, nonprobate asset, or with respect to any other asset or property interest passing at death;

If an Estate needs to determine what property interest passes at death, and the decedent's interest is based on CIR where a division of property is required in order to separate out the survivor's interest, that seems to be a "determination of [a] class of...other persons interested...with respect to [a] property interest passing at death." The CIR survivor, while not an heir, could be a "party" to a TEDRA action within the meaning of RCW 11.96A.030(5)(i):

(5) "Party" or "parties" means each of the following persons who has an interest in the subject of the particular proceeding and whose name and address are known to, or are reasonably ascertainable by, the petitioner:
....
(f) The surviving spouse or surviving domestic partner of a decedent with respect to his or her interest in the decedent's property;
(g) A guardian ad litem;
(h) A creditor;
(i) Any other person who has an interest in the subject of the particular proceeding;

Admittedly, this same logic could be extended further to a partition action, or to any situation where ownership of a particular item of property is contested between an Estate and someone else. The application of TEDRA in such cases is perhaps more uncertain. The specific scenario of CIR is so closely related to marital relationships and analogized to community property issues that it falls very close to the normal realm of probate jurisdiction. And certainly, the court in Olver appears to have treated it that way, though the parties also appear to have cooperated a fair amount in pushing the matter toward a resolution by the court, and did not do much procedural nitpicking.

But I think even partition or other contested-ownership-of-property issues might actually be resolvable in TEDRA rather than a civil action-a probate court has a fair amount of power to address competing interests in property. As a function of determining what property the probate has in rem jurisdiction over, the probate court may need to settle competing interests in the same property. The court necessarily has to have the power to determine the boundaries of its own jurisdiction.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone; please call the Seattle office. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis; please call the Seattle office.

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Kerry Richards
Sent: Wednesday, July 15, 2020 1:57 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] PR Duty to Respond to Potential Creditors?

Dear List serve:
I would add to what Eric has indicated some additional thoughts. First of all, under Sloans v. Berry, 189 Wn. App. 368(2015), a claim by a surviving CIR spouse would entail a civil lawsuit and cannot proceed under TEDRA. That case stands for the proposition that the surviving spouse must first perfect the claim with a civil lawsuit. It is well worth reading. In addition, examination of Estate of Borghi 141 Wn. App. 294(2007) is also going to be instructive. Add to that some consideration of the  which is going to limit if not eliminate self-serving testimony from the surviving CIR spouse. Finally, for a substantive look at considerations for the court in awarding any property out of the estate to the surviving CIR spouse look at Connell v. Francisco 127 Wn. 2d 339(1995).
Yours truly,

Kerry A. Richards, Attorney
[cid:image001.png at 01D65AB2.65BE7EF0]
The Law Offices of Michael W. Bugni & Associates, PLLC
11300 Roosevelt Way NE, Suite 300, Seattle, WA 98125
EMAIL: krichards at lawgate.net<mailto:krichards at lawgate.net>
TEL: 206-365-5500
WEB: www.lawgate.net<http://www.lawgate.net/>

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Wednesday, July 15, 2020 11:14 AM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] PR Duty to Respond to Potential Creditors?

Others answered on the creditor notice issue and I agree with them.

On the CIR issue, the non-spouse partner has no statutory right to notice because the case law is clear that when a statute says "spouse or domestic partner" it means only a lawful spouse or a state-registered domestic partner, and not a committed intimate partner. That said, the PR is going to have to deal with the CIR partner, so it's probably a good idea to at least keep open a channel of communication and provide courtesy copies of documents that seem relevant.

A CIR partner's claim to an equitable division of "community-like" property is not subject to the creditor claim process; it is more of an inventory issue. The PR ultimately has to take a stance, in the inventory, on what property belonged to the decedent. Because the CIR survivor does not inherit, the CIR survivor will be intensely interested in determining what belongs to the decedent and what belongs to the survivor.

That said--with a CIR relationship and substantial assets involved, there is a reasonable likelihood that some kind of transaction between the partners during life could be construed as a general debt owing to the survivor that would be subject to the creditor claim process. So the CIR survivor is likely a "reasonably ascertainable creditor" and it might be best, in most circumstances, to serve them with the Notice to Creditors and foreclose that possibility.

The full duties re equitable division of community-like property when one partner is deceased aren't spelled out in case law yet, but I generally think that the PR should evaluate what assets are community-like, and if possible work with the surviving CIR partner to determine an equitable division. It's clear that the Estate must determine an equitable division as part of the inventory process. If they can't agree on an equitable division, then the PR may need to start a TEDRA to get court approval of a proposed division.

Note that "equitable division" has not been well-defined yet, in the context where one of the CIR partners is deceased. The normal factors for equitable division are drawn by analogy from the divorce statute, which has a lot of factors looking to the financial situation and prospects of each spouse going forward. Obviously those factors, which are central in a divorce "equitable division," aren't present for the deceased party to a CIR division. (This situation doesn't arise in divorces because a divorce action terminates automatically at death and, the parties remain married, and the inheritance statutes will govern transfer of property from the decedent.)

The legal procedure also isn't settled yet, I don't think. I haven't had to do this yet, but my preliminary thought is that it should be equally valid to address in either of two ways: by a TEDRA action as an inventory issue, or by a standard "division of CIR property" lawsuit as any family lawyer would do. TEDRA is probably a faster method, but if there are a lot of disputed assets and a need for extensive discovery then perhaps the standard litigation track would provide more room and time for addressing all issues.

Some relevant cases:
Olver v. Fowler 161 Wn.2d 655, 168 P.3d 348 (2007)
In re Estate of Langeland (Drown v. Boone), 177 Wn.App. 315, 312 P.3d 657 (2013), review denied, 180 Wn.2d 1009 (2014), and second appeal after remand decisions, In re Estate of Langeland, 195 Wn.App. 74, 380 P.3d 573 (2016)

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone; please call the Seattle office. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis; please call the Seattle office.

MAIL AND DELIVERIES can be received at the Seattle office. For any other needed arrangements, please call the Seattle office.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Nicholas Pleasants
Sent: Tuesday, July 14, 2020 6:43 PM
To: wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] PR Duty to Respond to Potential Creditors?

Hello fellow probate practitioners,
I have a couple probate hypotheticals for consideration.
First situation: Let's say a creditor was provided Notice to Creditors, the 4-months since publication has passed and the 30-days from delivery to creditor has passed. Now creditor sends a letter asking for a copy of the Notice to Creditors. I don't want to restart the RCW 11.40.030 clock, giving them another month to respond. Does PR have a duty to respond to this potential creditor at all?
Second situation: Let's say decedent may have been in a meretricious relationship. Is the non-spouse partner entitled to any notice of the probate? Let's say non-spouse is not mentioned in the Will at all, not a co-owner of decedent's real property, but possibly there is some tangible personal property owned together. How about notice to creditors as a potential claimant? Obviously PR does not want to encourage potential claimant, and only wants to provide notice as strictly required by statute. Also wondering whether non-spouse partner has any right to request special notice?
I realize that second situation is a bit trickier, as the interplay between Committed Intimate Relationship doctrine and Probate is interesting. I am curious from a notice standpoint what responses you might advise PR to give in these situations. Thanks in advance for any experience you can share.

Best,
Nick

Nicholas Pleasants
Pleasants Law Firm, P.S.
2300 130th Ave NE, Suite A-101
Bellevue, WA 98005-1755
(425) 615-7070 tel/fax
nick at pleasantslaw.com<mailto:nick at pleasantslaw.com>
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