Bmo Harris Bank, N.A. v. Reid

• Court: Arizona Court of Appeals
• Writing for the Court: PORTLEY, Judge
• Decision Date: 16 April 2015
• Docket Number: No. 1 CA-CV 14-0013,1 CA-CV 14-0013
• Citation: BMO Harris Bank, N.A. v. Reid, No. 1 CA-CV 14-0013 (Ariz. App. Apr 16, 2015)
• Parties: BMO HARRIS BANK, N.A., as legal successor to M&I MARSHALL & ILSLEY BANK, Plaintiff/Appellee, v. EMILIE ANNE REID, Personal Representative for the ESTATE OF ARTHUR MURRAY REID, THE ESTATE OF ARTHUR MURRAY REID, Defendants/Appellants.

BMO HARRIS BANK, N.A., as legal successor to M&I MARSHALL& ILSLEY BANK, Plaintiff/Appellee, v. EMILIE ANNE REID, Personal Representative for the ESTATEOF ARTHUR MURRAY REID, THE ESTATE OF ARTHUR MURRAY REID, Defendants/Appellants.

No. 1 CA-CV 14-0013

ARIZONA COURT OF APPEALS DIVISION ONE

April 16, 2015

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. CV2011-019281

The Honorable Michael J. Herrod, Judge

AFFIRMED

COUNSEL

Sacks Tierney P.A., Scottsdale

By Brian E. Ditsch, James W. Armstrong

Counsel for Defendants/Appellants

The Cavanagh Law Firm, P.A., Phoenix

By Philip G. Mitchell, Henry L. Timmerman, William F. Begley

Counsel for Plaintiff/Appellee

MEMORANDUM DECISION

Judge Maurice Portley delivered the decision of the Court, in which Presiding Judge Andrew W. Gould and Judge Jon W. Thompson joined.

PORTLEY, Judge:

¶1 This is an appeal from a judgment for breach of promissory note. The Estate of Arthur Murray Reid and Emilie Reid, the Estate's personal representative (collectively, "the Estate"), contend that the superior court erred by finding the Estate liable to BMO Harris Bank, N.A. ("BMO") because BMO did not file a notice of claim within two years of Arthur Reid passing away and, as a result, the nonclaim statute, Arizona Revised Statutes ("A.R.S.") section 14-3803,¹ barred any deficiency judgment. Because we find that the Arizona probate provisions are inapplicable, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Arthur Reid, a Canadian, bought 16.85 acres of undeveloped land in Cave Creek in 2005 as his sole and separate property. He financed the purchase by borrowing $2,562,000 from M&I Bank and gave the bank a promissory note secured by a deed of trust on the property. According to his son-in-law, Arthur planned to build custom and semi-custom homes on the property, but "the real estate market collapse halted those plans." Arthur passed away in Phoenix on January 1, 2009.

¶3 Arthur's widow, Emilie Reid, filed a probate action in Alberta, Canada. She was appointed the personal representative pursuant to Arthur's will by the Canadian court in December 2009. Emilie, by her lawyers, advised M&I Bank of Arthur's death. Emilie then filed a proof of foreign personal representative in the Maricopa County Superior Court's Probate Court and recorded it with the Maricopa County Recorder's Office in February 2010. The proof of authority stated that Emilie was filing the document to allow her "as the domiciliary foreign Personal Representative to exercise, as to assets in this state, all powers of a local PersonalRepresentative."² The probate matter continued in Canada, was resolved in September 2010, and the estate property was distributed to Emilie.

¶4 The bank, however, continued to send monthly statements addressed to Arthur and received monthly payments that were credited towards Arthur's note until August 2011. After giving notice of default on August 9, 2011, BMO, as the successor to M&I Bank, filed this lawsuit against the Estate for breach of contract. BMO also noticed a trustee's sale and subsequently purchased the Cave Creek property at the trustee's sale with a credit bid of $750,000. The Estate answered the complaint and alleged that BMO's claim was barred because a claim had not been filed within two years of Arthur's death, all the property of the estate had been distributed and that any amount from the trustee's sale would reduce any amount due on the note.

¶5 Both parties moved for summary judgment. The Estate argued that BMO's claim was barred because BMO had not filed a claim against the Estate within two years of Arthur's death and, as a result, A.R.S. § 14-3803(C) barred the deficiency action. The Estate also argued that because BMO had not formally amended its complaint to allege a deficiency within ninety days after the trustee's sale it was precluded from pursuing its deficiency under A.R.S. § 33-814. BMO, on the other hand, argued it was entitled to judgment because the Estate made payments on the note after Arthur's death and breached its obligation by failing to continue to make payments on or after August 1, 2011.

¶6 After oral argument, the superior court granted partial summary judgment for BMO. The court found that the nonclaim statute was inapplicable, the fact that the estate may have been closed did not bar recovery against any proceeds of the estate for debts and that the lawsuit was timely under existing case law. As a result, the court ruled that the Estate was liable to BMO for the deficiency, but that the amount of any deficiency would have to be determined after a fair-market-value hearing. In lieu of an evidentiary hearing, the parties mediated the fair market value of the property and stipulated to its value, which the court approved.

¶7 The Estate subsequently filed two motions for new trial on the issue of liability, which were denied. The court then resolved the issue ofattorneys' fees and costs, entered judgment, and the Estate appealed. We have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶8 The Estate challenges the superior court granting summary judgment and contends that it erred in interpreting the applicable law. In reviewing the ruling, we determine de novo whether any genuine dispute of material fact exists and whether the trial court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000). In interpreting a statute, we look first to its language. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529, 869 P.2d 500, 503 (1994). If the statutory language is unambiguous, we give effect to the language and do not use other rules of statutory construction in its interpretation. Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991). Statutory interpretation is an issue of law we review de novo. State Comp. Fund v. Superior Court, 190 Ariz. 371, 374, 948 P.2d 499, 502 (App. 1997). And we can affirm summary judgment on grounds other than those found by the court. See Ness v. Western Sec. Life Ins. Co., 174 Ariz. 497, 502, 851 P.2d 122, 127 (App. 1992).

I.

¶9 The Estate first argues that the superior court erred by concluding that A.R.S. § 14-3803(A) did not preclude BMO's deficiency claim. We disagree.

¶10 A promissory note secured by a deed of trust is a contract. See National Bank v. Schwartz, 230 Ariz. 310, 312, ¶ 7, 283 P.3d 41, 43 (App. 2012). Generally, absent a trustee's sale, a creditor has six years to bring an action on the promissory note. A.R.S. § 12-548(A); see A.R.S. § 33-814(A) (requiring that a creditor maintain a lawsuit for any deficiency balance ninety days after the trustee's sale). Here, BMO filed its breach-of-contract lawsuit two months after default and notice of default.

¶11 The Estate contends, however, that BMO's action is barred because BMO had two years after Arthur's death to file a claim with the personal representative or file a lawsuit under the Arizona Probate Code because the property was in Arizona. As a result, BMO's failure to file a claim within two years after Arthur's death bars its action. BMO disputes, however, the applicability of Arizona probate law given that the probate estate was in Canada, no ancillary action was filed in Arizona, and it was never provided with a creditors' notice under Arizona law.

¶12 We agree with BMO. Even if we assume Chapter 3 of the Arizona Probate Code applies, in order to get the protection of Arizona law—especially the nonclaim statute—the Estate needed to have done more than merely file a proof of authority; the Estate needed to have notified BMO, a known creditor, pursuant to Arizona law.

¶13 Under A.R.S. § 14-3801,³ a personal representative must notify anyone who could be considered a creditor of the estate, with the information about her appointment and address, and to advise the creditors that claims against the estate must be filed within either four months, if the notice is by publication, or sixty days, if the notice is directly to a known creditor. The notice must also tell creditors to file a claim within the longer of the above time frames or the creditors' claim will be forever barred. A.R.S. § 14-3801.

¶14 If a creditor receives proper notice, whether before or after the appointment of a personal representative, the creditor must either file a timely written claim with the personal representative or, within the same time limits, file a lawsuit against the personal representative for payment of the claim. See A.R.S. § 14-3804(1)-(2); In re Estate of Van Der Zee, 228 Ariz. 257, 259, ¶ 11, 265 P.3d 439, 441 (App. 2011). Moreover, if a creditor does not file a timely claim after receiving proper notice, the creditor will be barred from collecting the claim two years after the decedent passed away. A.R.S. § 14-3803(B); Ray v. Rambaud, 103 Ariz. 186, 190, 438 P.2d 752, 756 (1968); In re Estate of Barry, 184 Ariz. 506, 508-09, 910 P.2d 657, 659-60 (App. 1996).

A.

¶15 Here, there is no evidence the Estate provided a notice to BMO that if it failed to file a claim with Emilie its claim would be forever barred. See A.R.S. § 14-3801(B). The record shows that the Estate mailed four letters to the bank in January and February 2009 advising it about Arthur's death and seeking information about the value or balances in his checking account, money-market account and two credit cards, whether Arthur had any additional credit cards and if he had a safety deposit box, and later seeking release of any funds being held in the checking and money-market account. The letters did not include any type of notice directing BMO to file a claim with Emilie within sixty days, or any other time frame, given that the bank was a known creditor. Likewise, the letters did not state that failing to file a claim within the applicable time period would result in BMO's...