In re Estate of Bolton

• Court: Arizona Court of Appeals
• Writing for the Court: MILLER
• Citation: In re Estate of Bolton, 233 Ariz. 584, 315 P.3d 1241, 676 Ariz. Adv. Rep. 18 (Ariz. App. 2013)
• Decision Date: 20 December 2013
• Docket Number: No. 2 CA–CV 2013–0038.,2 CA–CV 2013–0038.
• Parties: In re the ESTATE OF Sanford M. BOLTON.

233 Ariz. 584

315 P.3d 1241

676 Ariz. Adv. Rep. 18

In re the ESTATE OF Sanford M. BOLTON.

No. 2 CA–CV 2013–0038.

Court of Appeals of Arizona, Division 2.

Dec. 20, 2013.

Ryley Carlock & Applewhite, Phoenix, by John C. Lemaster, Charitie L. Hartsig, and Kevin R. Heaphy, Counsel for Appellants Mutual Pharmaceutical and United Research.

Snell & Wilmer, LLP, Tucson, by Andrew M. Jacobs and Katherine V. Foss, Counsel for Appellee Eric Warren Goldman, Personal Representative of the Estate of Sanford M. Bolton.

OPINION

MILLER, Judge.

¶ 1 Claimants Mutual Pharmaceutical, Inc. and United Research Laboratories, Inc. (Mutual Parties) appeal the probate court's judgment confirming disallowance of their creditors' claim against the estate of Sanford M. Bolton (Estate). We conclude the court erred when it ruled that a claimant who presents a claim to a decedent's estate notifying it of an action against the decedent that was pending before his death, must commence additional proceedings if the personal representative disallows the claim.

Factual and Procedural Background

¶ 2 The relevant facts in this case are undisputed. In May 2011, Mutual Parties sued Bolton and two other parties in Pennsylvania state court. The complaint alleged Bolton, a professor at St. John's University in New York, assisted by a graduate student, developed a technology for converting liquid drugs to a powder form. The complaint further alleged that Bolton and the student left the university, formed a company, and fraudulently assigned to Mutual Parties patent rights that actually belonged to St. John's University. ¹ Mutual Parties sought a declaratory judgment regarding ownership of the patent, as well as damages in excess of $100 million for breach of contract, fraudulent misrepresentation, and unjust enrichment.

¶ 3 Bolton died in Pima County on October 11, 2011, and the next day his Pennsylvania defense attorney filed a notice of death. On November 29, 2011, Eric Goldman filed an application for informal probate in Pima County and requested that he be appointed personal representative of the Estate, which the probate court approved the next day. On December 20, 2011, Mutual Parties filed a praecipe in the Pennsylvania court to substitute Goldman as successor-in-interest to Bolton. Mutual Parties also presented a Notice of Claim to Goldman on January 17, 2012. The next day, the Pennsylvania court ordered Goldman substituted as successor-in-interest to Bolton.

¶ 4 On January 26, 2012, the Estate disallowed the probate claim. The Estate acknowledged the Pennsylvania case and stated the action had yet to be adjudicated. It explained the disallowance on the ground that “[p]ursuant to A.R.S. § 14–3804(2) no presentation of claim was required for the Claim.” Mutual Parties did not institute new proceedings in another court or move for probate allowance. More than seven months later, the Estate filed a motion to confirm disallowance of claim, which the probate court granted over Mutual Parties' objection on December 7, 2012. The probate court entered judgment on January 11, 2013, and this timely appeal followed.

Discussion

¶ 5 We are required to decide whether a claimant with a pending lawsuit for damages against the decedent at the time of his death, who sends a notice of claim to the personal representative that is disallowed, must within sixty days commence another lawsuit or move for probate approval to preserve its right to collect a judgment against the estate. The Estate argues A.R.S. § 14–3804(3) requires a plaintiff-claimant to initiate a second lawsuit or move for probate court allowance if the personal representative denies the claim. Mutual Parties contend the plain language of § 14–3804(2) makes it clear that when a lawsuit is already pending, “no further action need be taken after disallowance by the personal representative,” because “where no need to present a claim arises because the claim is exempt from presenting, the mere fact that the claim was presented and disallowed does not nullify its exempt status.”

¶ 6 We review questions of statutory interpretation de novo. North Valley Emergency Specialists, L.L.C. v. Santana, 208 Ariz. 301, ¶ 8, 93 P.3d 501, 503 (2004). To determine a statute's meaning, we first examine the language of the statute, PNC Bank v. Cabinetry By Karman, Inc., 230 Ariz. 363, ¶ 6, 284 P.3d 874, 876 (App.2012), and construe the words and phrases “according to the common and approved use of the language,” A.R.S. § 1–213. “If a statute's language is clear, it is ‘the best indicator of the authors' intent and as a matter of judicial restraint we must apply it without resorting to other methods of statutory interpretation, unless application of the plain meaning would lead to impossible or absurd results.’ ” Metzler v. BCI Coca–Cola Bottling Co. of Los Angeles, Inc., 233 Ariz. 133, ¶ 8, 310 P.3d 9, 12 (App.2013), quoting Winterbottom v. Ronan, 227 Ariz. 364, ¶ 5, 258 P.3d 182, 183 (App.2011).

¶ 7 In order to understand the interplay among the subsections of A.R.S. § 14–3804,² it is helpful to review the general procedure by which a decedent's creditor can make or preserve its claim against the estate. A claimant without a pending case or judgment ³ may send the personal representative a written statement of the claim that must include the basis for the claim and the amount. § 14–3804(1). Otherwise, a claimant may “commence a proceeding against the personal representative in any court where the personal representative may be subject to jurisdiction.” § 14–3804(2). If the claimant chooses to send a written statement, the personal representative may allow the claim and distribute funds, disallow the claim in whole or in part, or negotiate a compromise. A.R.S. §§ 14–3806(A), 14–3807, 14–3813. If the personal representative disallows the claim, the claimant has sixty days to commence a proceeding against the personal representative, § 14–3804(3), or to petition the probate court for allowance of the claim. § 14–3806(A). The failure to timely commence a proceeding upon disallowance bars the claim. Id. ¶ 8 A claimant who filed a lawsuit against the decedent before his death is not required to present a claim. § 14–3804(2) (“claim ... [not] required in regard to matters claimed in proceedings against the decedent which were pending at the time of his death”). Likewise, if the claimant substitutes the personal representative for the decedent in the pending proceeding, a judgment against the personal representative will act as an allowance. § 14–3806(D). Neither statute provides exact procedures for an estate where the personal representative is substituted as a party to the pre-death lawsuit, although more general requirements are set out in § 14–3807(A) (governing payment of claims, including “unbarred claims which may yet be presented”).

¶ 9 As claimants with a lawsuit pending against Bolton and upon substitution of the personal representative, Mutual Parties were not required to present a claim. § 14–3804(2). Nonetheless, Mutual Parties mailed written notice of a claim to the personal representative pursuant to § 14–3804(1). The written claim reserved rights under the exception found in § 14–3804(2) for pending proceedings. It advised the personal representative, “Claimants deem it prudent to present the Claim, thereby notifying the Personal Representative of its existence and the need for it to be administered.” The Estate's disallowance only stated the undisputed principle that § 14–3804(2) does not require presentation of a claim.

¶ 10 Mutual Parties argue that the trial court improperly barred their claim for failing to initiate other proceedings, despite the plain language in subsection (2) that “[n]o presentation of claim is required in regard to matters claimed in proceedings against the decedent which were pending at the time of his death.” Equally important, they contend nothing in § 14–3804 requires the claimant to file a duplicative lawsuit or initiate probate allowance procedures if a complementary claim notification is filed. We agree with this plain reading of § 14–3804.

¶ 11 Although the Estate acknowledges and had previously asserted this reading of § 14–3804(2), after Mutual Parties did not initiate additional proceedings, it argued below and on appeal that the subsection had no force or effect because a written claim statement was presented. Additionally, it impliedly contends that the Pennsylvania lawsuit filed before the decedent died is a legal nullity because any resulting judgment would have been supplanted by a probate claim allowance proceeding or a second lawsuit. Judgment was entered in favor of the Estate against Mutual Parties as to “the claims set forth more fully in the [Pennsylvania Complaint].”

¶ 12 The Estate principally relies on In re Estate of Van Der Zee, 228 Ariz. 257, 265 P.3d 439 (App.2011). In that case, the decedent's former husband claimed he was a known creditor of the estate based on a term in the dissolution decree requiring decedent to obtain a life insurance policy naming a mortgagee as the beneficiary. Id. ¶¶ 3, 10. The former husband presented a claim in the amount of the life insurance policy soon after the decedent died. Id. ¶¶ 4–5. The estate disallowed the claim on the ground that it was unclear the former husband had standing to assert a claim for the amount of the insurance policy. Id. ¶ 20. The former husband failed to commence a proceeding within sixty days and the trial court determined, among other things, that the claim was time-barred. Id. ¶¶ 7, 13. On appeal, the former husband argued the sixty-day limit did not apply; rather, he had two years to file a claim because he was not given proper written notice as a known creditor. Id. ¶ 10. The court concluded, in pertinent part, that when a claimant files a notice, § 14–3806(A) establishes a sixty-day time limit to initiate proceedings to challenge the denial of the claim. Id. ¶ 13. On its facts,...