Farm Credit Services of Mid America, ACA v. Estate of Decker

• Decision Date: 30 November 1993
• Docket Number: No. 71A05-9209-CV-00313,71A05-9209-CV-00313
• Citation: 624 N.E.2d 491
• Parties: FARM CREDIT SERVICES OF MID AMERICA, ACA, Appellant-Plaintiff, v. In the Matter of the ESTATE OF Charles Earnest DECKER, Deceased, Appellee-Defendant.
• Court: Indiana Appellate Court

Page 491

624 N.E.2d 491

FARM CREDIT SERVICES OF MID AMERICA, ACA, Appellant-Plaintiff, v. In the Matter of the ESTATE OF Charles Earnest DECKER Deceased, Appellee-Defendant.

No. 71A05-9209-CV-00313.

Court of Appeals of Indiana,

Fifth District.

Nov. 30, 1993.

Jere L. Humphrey, Mark E. Wagner, Kizer & Neu, Plymouth, for appellant-plaintiff.

RUCKER, Judge.

Plaintiff-Appellant Farm Credit Services (FCS) filed a claim against the Estate of Charles Decker. On motion by the estate representative the trial court disallowed the claim because it was filed more than one year after the death of the decedent. FCS now appeals complaining that the alleged acts of counsel for the estate representative induced FCS to delay in filing its claim.

We address the following consolidated and rephrased issues:

1. May the time limitation imposed by statute for filing claims of a creditor against a decedent's estate be extended where counsel for the estate representative knows of the existence of a debt to a creditor, but fails to ensure that the creditor is given timely actual notice of the opening of the estate?

2. Is the one year time limitation imposed by Indiana's Probate Code for filing claims against the estate unconstitutional?

We reverse and remand.

The stipulated facts reveal Charles E. Decker died intestate July 4, 1990. An estate was opened October 3, 1990 and Michael Decker, son of the deceased, was appointed as personal representative. In 1983, nearly seven years prior to his death, Decker had become indebted to the Federal Land Bank of Louisville Kentucky, now known as Farm Credit Services (hereafter referred to as FCS). The debt resulted from a deficiency judgment FCS obtained after a sheriff's sale of property Decker owned.

On September 25, 1990, an attorney for the decedent sent a letter to FCS advising it of Decker's death, indicating an estate might be opened in the future, and requesting information concerning the 1983 deficiency judgment. FCS responded to the letter one day after the estate had actually been opened. Thereafter, FCS and counsel for the estate exchanged additional letters; however, counsel for the estate did not advise FCS that an estate had been opened and a representative appointed.

On October 11 and 18, 1990, the representative published notice of administration in a newspaper of general circulation. FCS was not listed as a creditor and the representative did not give FCS actual notice as required by statute. FCS received actual notice of the estate in September of 1991 and filed a claim against the estate on September 5, 1991, approximately one year and two months after decedent's death. The trial court entered judgment dismissing the claim as untimely. FCS now appeals.

We first note the personal representative of the estate has not filed a brief for our examination and review. Where no answer brief is filed, the judgment may be reversed if the appellant's brief presents a prima facie case of error. Watkins v. Alvey (1990), Ind.App., 549 N.E.2d 74. The prima facie error rule protects this court and relieves it from the burden of controverting arguments advanced for reversal, a duty which properly remains with counsel for the appellee. In re Marriage of Brown (1992), Ind.App., 597 N.E.2d 1297. This court is not bound by this rule however and in the exercise of our discretion we may consider the questions properly presented and decide the case on its merits. S.M.V. v. Littlepage (1982), Ind.App., 443 N.E.2d 103. We exercise that discretion here.

I.

Under the provisions of Ind.Code Sec. 29-1-14-1, claims of certain creditors are barred if not filed within one year after the death of a decedent. In like fashion, Ind.Code Sec. 29-1-7-7 concerning notice of administration of an estate, also provides that claims subject to that provision may not be filed more than one year after the death of a decedent. However, as FCS correctly points out, Indiana's Probate Code also requires the personal representative of the estate to serve actual notice on known or reasonably ascertainable creditors and to use reasonable diligence to discover such creditors. ¹ FCS contends its claim should not be barred by the one year limitation period set forth in Ind.Code Sec. 29-1-7-7(e) because FCS is a reasonably ascertainable creditor that did not receive notice as required by statute and the personal representative failed to exercise reasonable diligence to discover that FCS was a reasonably ascertainable creditor as required by statute. According to FCS, if the time limitations are applied to the facts of this case, then "all counsel would have to do is ignore claims, let the year run, and the statute is successfully subverted and the evil it attempts to prevent, thrives." Brief of Appellant at 13.

Prior to a 1990 amendment, Indiana's Probate Code ("Code") was solely a non-claims statute. That is, the Code created a right of action against an estate only if commenced within five months after the first publication of notice to creditors. ² Unless a claim was filed within the time so allowed, no enforceable right of action was created and the claim was forever barred. Anson v. Estate of Anson (1980), Ind.App., 399 N.E.2d 432. See Lewis v. Estate of Smith (1959), 130 Ind.App. 390, 162 N.E.2d 457.

The 1990 amendments to the Code changed the statutory scheme in two respects: 1) the non-claims provision was modified to require actual notice to known and reasonably ascertainable creditors and 2) a statute of limitations provision was added which provides that a claim may not be filed more than one year after the death of the decedent. In its present form therefore, the Code contains a non-claim component as well as a statute of limitations component. The latter of the two components is important to our discussion here. The time limit imposed by a statute of limitations, unlike the time limit imposed by a non-claim statute, may be tolled on equitable grounds. As this court observed in Donnella v. Crady (1962), 135 Ind.App. 60, 185 N.E.2d 623, 625 trans. denied (1963) 244 Ind. 205, 191 N.E.2d 499:

While [non-claim] statutes limit the time in which a claim may be filed or an action brought, they have nothing in common with and are not to be confused with general statutes of limitation.... Equity will estop a party from setting up the statute of limitations as a defense in an action where such party by fraud or other misconduct has prevented a party from commencing his action or induced him to delay the bringing of his action beyond the time allowed by law. The time for commencing an action governed by the general statutes of limitation may thus be extended.

In the case before us FCS argues the estate should be estopped from disallowing the claim on the basis of equity. As grounds for this argument FCS implies the estate engaged in subterfuge and misconduct causing FCS not to file its claim within the time allowed by law. In support, FCS points out that counsel for the estate was aware Decker was indebted to FCS since counsel initiated written correspondence acknowledging the debt and making further inquiry even before the estate was opened. FCS also points out that after the estate was opened, counsel for the estate and FCS exchanged additional letters in which counsel for the estate did not advise FCS that an estate had been opened and a representative appointed. According to FCS, these facts demonstrate that FCS was entitled to receive actual notice of administration of the estate under I.C. Sec. 29-1-7-7(d). FCS concludes that the failure to give actual notice under such circumstances constitutes misconduct warranting extension of the statute of limitations to include FCS' claim.

Indiana Code Secs. 29-1-7-7, and -7.5, set forth an elaborate and comprehensive scheme to ensure that known and reasonably ascertainable creditors are provided actual notice of the opening of an estate so that claims may be appropriately filed. ³ For example, section 7.5(b) requires the personal representative to exercise reasonable diligence to discover the existence of reasonably ascertainable creditors, including reviewing the decedent's financial records that are reasonably available, and making inquiry of persons likely to have knowledge of the decedent's debts. Further, the statute provides that the personal representative may file an affidavit with the clerk of the court stating the representative has complied with section 7.5(b). In addition, the representative may petition the court for an order declaring that the representative has so complied with the statute and that creditors not known are thus not reasonably ascertainable. See Ind.Code Sec. 29-1-7-7.5(a)-(d). In essence, it is clear the Legislature intended that reasonable efforts be employed to notify potential creditors of a decedent's estate.

There can be little question that if the personal representative knows of a creditor's claim against the estate and simply ignores the claim until after the statute of limitation has run, then such action would amount to misconduct which could extend the running of the statute. In the case before us the stipulated facts on which the trial court's judgment is based does not reveal whether the personal representative knew of FCS' claim or whether the personal representative took such action as required by statute to determine the existence of FCS' claim. However, the facts clearly show that counsel for the personal representative was aware FCS was a creditor of the estate and was aware of the amount of FCS' claim. The question therefore is whether the knowledge of counsel is imputed to the representative. This question must be answered in the affirmative.

First, the general and long standing rule in this jurisdiction is that absent fraud or collusion between the attorney and the opposing side, acts or omission of the attorney are attributable to the client. See Ferrara v. Genduso (1938), 214 Ind. 99, 14 N.E.2d 580 (client...