Ohio Cas. Ins. Co. v. Hallowell, 409

• Decision Date: 01 September 1992
• Docket Number: No. 409,409
• Citation: 617 A.2d 1134,94 Md.App. 444
• Parties: OHIO CASUALTY INSURANCE COMPANY, v. Mark B. HALLOWELL, Personal Representative of the Estate of Alma Lee Auguste. ,
• Court: Court of Special Appeals of Maryland

Page 444

94 Md.App. 444

617 A.2d 1134

OHIO CASUALTY INSURANCE COMPANY, v. Mark B. HALLOWELL, Personal Representative of the Estate of Alma Lee Auguste.

No. 409, Sept. Term, 1992.

Court of Special Appeals of Maryland.

Jan. 7, 1993.

Walter Allen Pennington, Washington, DC, for appellant.

Jeffrey P. Buhrman (Thomas Waxter, Jr. and Semmes, Bowen & Semmes, on the brief), Baltimore, for appellee.

Argued before BISHOP, CATHELL and MOTZ, JJ.

CATHELL, Judge.

Ohio Casualty Insurance Company (Ohio), appellant, filed an untimely claim in the Orphans' Court of Howard County against Mark B. Hallowell, Personal Representative of the Estate of Alma Lee Auguste (Estate), appellee. The orphans' court denied Ohio's claim on limitations grounds. Ohio appeals that decision and also appeals the decision of the orphans' court awarding legal fees to the attorney for the Estate and to the attorney for the legatees. Appellant presents four questions, which we restate as follows:

I. Whether a claim against an estate can be barred when the personal representative fails to send a notice to reasonably ascertainable creditors as demanded by the Estates and Trusts Article, Section 7-103.1.

II. Whether a claim can be disallowed by an Orphans' Court when the personal representative waives the defense of statute of limitations in a contract.

III. Whether both the attorney representing residuary legatees and an attorney representing an estate are entitled to attorneys' fees from an estate pursuant to Estates and Trusts Article, Section 7-602, for parallel representation.

IV. Whether the Orphans' Court may award attorney's fees when the petition for attorney's fees fails substantially to meet the criteria of Maryland Rule 6-416.

FACTS

John L. Auguste and Alma L. Auguste were married. Mr. Auguste was the president and majority owner of an electrical contracting company, Auguste Electrical Service, Inc. (Contractor). Ohio issued two payment bonds to Contractor on or about the 28th of March, 1988. As a part of that transaction, Ohio received John and Alma Auguste's agreement to indemnify Ohio in respect to the bonds.

Thereafter, Contractor experienced difficulties in paying two suppliers for materials used in the projects covered by the payment bonds and by the agreement of indemnity. Alma Auguste died on January 28, 1990. Approximately one month later, on February 28, 1990, the suppliers, Ohio, Contractor, and John Auguste, individually and as personal representative for the Estate, negotiated a forbearance agreement (Agreement) that included a scheduling of payments to the two suppliers in return for their promise to forbear making immediate demand for payment. With respect to the issue before us, the Agreement stated that the Contractor, John Auguste, and the Estate agreed to an extension of the applicable statute of limitations as it applied to Ohio until three years after each date a payment was made by Ohio. At the time of the execution of the forbearance agreement, John Auguste had not been appointed as personal representative. That appointment occurred twenty to thirty days thereafter.

After Mrs. Auguste's death and the execution of the forbearance agreement, Ohio was required to pay under the bonds. Subsequently, on June 13, 1991, Ohio filed a claim against the Estate based on Mrs. Auguste's obligation under the indemnification agreement. The statute then in effect required claims against the Estate to be filed within nine months after the decedent's death, or in the case sub judice by October 28, 1990. ¹ Md.Code Ann., Est. & Trusts § 8-103(a)(1) (1991). As we have said, the orphans' court denied the claim because it was filed after the nine-month period contained in the statute for the filing of such claims.

I.

WHETHER A CLAIM CAN BE BARRED WHEN REQUIRED NOTICE IS NOT

MADE TO CREDITORS.

Section 7-103.1(a) of the Estates and Trusts Article ² requires a personal representative to notify known creditors of the time within which claims can be filed against the estate. Paragraph (c) provides, however, that if notice is not received, then the time for filing a creditor's claim is not extended beyond nine months and that the personal representative is not liable to any person to whom notice is not given.

Appellant argues that this notice provision denies it due process under the Fourteenth Amendment of the United States Constitution. It relies primarily on Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988). That reliance, we believe, is misplaced. The statutory provision attacked in Tulsa was not the type of provision applicable in the case at bar. The Maryland law provides that claims will be barred "unless presented within the earlier of the following dates:

(1) Nine months after the ... decedent's death; or

(2) Two months after the personal representative ... delivers to the creditor a copy of a notice ... notifying the creditor that his claim will be barred unless he presents the claim within 2 months...."

§ 8-103(a). The statute at issue in Tulsa was similar, not to section 8-103(a)(1), but to section 8-103(a)(2), which is not at issue here. In the case sub judice, no notice was given to Ohio. Thus, its claim, unless otherwise preserved, was barred by paragraph (a)(1), which requires no official action and automatically bars claims filed more than nine months after a decedent's death. We explain the distinction by reviewing Tulsa and Texaco, Inc. v. Short, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982).

Short ³ involved an Indiana statute providing that a severed mineral interest not used for a period of twenty years automatically lapses and reverts to the owner of the fee, unless the mineral owner preserves the interest by filing a claim within two years after the twenty-year lapse. 454 U.S. at 518-19, 102 S.Ct. at 786-87. The statute does not require that any specific notice be given to the mineral owner prior to a statutory lapse, although it does set out a procedure for giving notice to the owner of the mineral interest after a lapse. Id. at 520, 102 S.Ct. at 787. After noting that the trial court had ruled the statute unconstitutional, the Supreme Court recited in a footnote that the Indiana Supreme Court had distinguished Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), and Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1971), "on the ground that these cases set forth notice requirements for adjudicatory proceedings, and not for a self-executing statute that uniformly affected all parties within the State." 454 U.S. at 524 n. 14, 102 S.Ct. at 789 n. 14.

In Short, the Supreme Court noted that the mineral owners asserted two claims in support of their argument that the statute denied them due process of law. Id. at 531, 102 S.Ct. at 793. They contended that the state had not adequately notified them of the legal requirements of the statute and that their interests could not be extinguished unless they were given prior notice that the lapse period was about to expire. The Supreme Court rejected both arguments. As to the former, it opined:

Generally, a legislature need do nothing more than enact and publish the law.... It is well established that persons owning property within a State are charged with knowledge of relevant statutory provisions affecting the control or disposition of such property.

Id. at 532, 102 S.Ct. at 793 (footnote omitted). As to the latter argument, the Court said that it is "essential to recognize the difference between the self-executing feature of the statute and a subsequent judicial determination that a particular lapse did in fact occur." Id. at 533, 102 S.Ct. at 794. The Court stated:

The reasoning in Mullane is applicable to a judicial proceeding brought to determine whether a lapse of a mineral estate did or did not occur, but not to the self-executing feature of the ... Act. The due process standards of Mullane apply to an "adjudication" that is "to be accorded finality." ... [B]ut it has never been suggested that each citizen must in some way be given specific notice of the impact of a new statute on his property before that law may affect his property rights.

Id. at 535-36, 102 S.Ct. at 794-96.

In Tulsa, 485 U.S. at 482, 108 S.Ct. at 1343, the assignee of a creditor filed a claim against an estate after the two-month period for the filing of the claim had expired. In reviewing the lower court's ruling that due process was not implicated, the Supreme Court opined:

The Fourteenth Amendment protects this interest, however, only from a deprivation by state action. Private use of state-sanctioned private remedies or procedures does not rise to the level of state action. Nor is the State's involvement in the mere running of a general statute of limitations generally sufficient to implicate due process. But when private parties make use of state procedures with the overt, significant assistance of state officials, state action may be found. The question here is whether the State's involvement with the nonclaim statute is substantial enough to implicate the Due Process Clause.

Id. at 485-86, 108 S.Ct. at 1344-45 (citations omitted).

The Court then opined that "due process does not require that potential plaintiffs be given notice of the impending expiration of a period of limitations," but, nevertheless, held that Oklahoma's statute was not a self-executing statute of limitations. Id. at 486, 108 S.Ct. at 1345. The Court reached this conclusion based on its determination that under the Oklahoma statute there was significant state action. Id. at 487, 108 S.Ct. at 1346. ⁴

The Court described significant state action as follows:

The nonclaim statute becomes operative only after probate proceedings have been commenced in state court. The court must appoint the executor or [personal representative] before notice, which triggers the time bar, can be given. Only...