Oldham v. Pedrie

• Citation: 411 P.3d 933
• Decision Date: 16 July 2015
• Docket Number: Court of Appeals No. 13CA1075
• Parties: Amanda R. OLDHAM, Ashley E. Oldham, and Sandra L. Oldham, as Personal Representative for the Estate of Lorna Oldham, a/k/a Lorna E. Oldham, deceased, Plaintiffs–Appellants, v. Donald L. PEDRIE and Georgia L. Follansbee, Defendants–Appellees.
• Court: Court of Appeals of Colorado

411 P.3d 933

Amanda R. OLDHAM, Ashley E. Oldham, and Sandra L. Oldham, as Personal Representative for the Estate of Lorna Oldham, a/k/a Lorna E. Oldham, deceased, Plaintiffs–Appellants,

v.Donald L. PEDRIE and Georgia L. Follansbee, Defendants–Appellees.

Court of Appeals No. 13CA1075

Colorado Court of Appeals, Div. I.

Announced July 16, 2015

Henry B. Eastland, P.C., Henry B. Eastland, Colorado Springs, Colorado, for Plaintiffs–Appellants

John W. Sabo, III, P.C., John W. Sabo, Colorado Springs, Colorado, for Defendants–Appellees

Opinion by JUDGE TAUBMAN

¶ 1 Plaintiffs, Amanda R. Oldham and Ashley E. Oldham (the Oldhams), and Sandra L. Oldham, as personal representative of the estate of Lorna Oldham (the Estate), appeal the district court's judgment denying their claim for declaratory relief. Addressing an issue of first impression, we conclude that, under the Colorado and Michigan probate codes, a secured creditor's lien on real property is not extinguished when the creditor presents an unconditional claim against a decedent's estate but does not pursue a disallowed claim within sixty-three days.¹ Therefore, we affirm the district court's judgment on this issue, and otherwise affirm in part and reverse in part.

I. Background

¶ 2 This appeal involves a parcel of land in Teller County (the Teller County Property). In 1976, Lorna Oldham purchased the Teller County Property from defendant, Donald L. Pedrie² , in exchange for a promissory note in the amount of $143,475.20, secured by a Deed of Trust (the 1976 Deed of Trust). In 2005, Lorna Oldham signed a second promissory note to Pedrie in the amount of $148,000, along with a check for $30,000, intending that that promissory note replace the first promissory note.

¶ 3 In 2007, Lorna Oldham died and an estate proceeding was opened in Michigan. Pursuant to Michigan's probate laws, Pedrie filed a claim with the personal representative of Lorna Oldham's estate in the amount of $148,000, asserting that he held a promissory note secured by a deed of trust on the Teller County Property. Under the threat of foreclosure, the personal representative paid Pedrie $15,000 to stop the foreclosure action.

¶ 4 However, the personal representative subsequently disallowed Pedrie's claim against the estate on the ground that he had failed to provide sufficient proof of the amount owed on the promissory note. Specifically, the personal representative informed Pedrie that the amortization schedule showed that the debt remaining on the promissory note was only $100,942.97, not the $148,000 that he claimed. Pedrie did not contest the disallowance in the Michigan court.

¶ 5 Pedrie then contacted the Oldhams, who had inherited the Teller County Property, and threatened them with foreclosure. Under the threat of foreclosure, the Oldhams sent Pedrie two payments, one in 2009 and a second in 2012, totaling $24,000, to prevent him from foreclosing on the property.

¶ 6 In 2011, the Oldhams filed a complaint for declaratory relief in Teller County District Court seeking to extinguish the 1976 Deed of Trust, and the return of the $24,000 that they had paid Pedrie. The Estate joined the complaint, asking for the return of the $15,000 that it had paid to Pedrie.

¶ 7 The Oldhams and the Estate contended that the 1976 Deed of Trust was extinguished because Pedrie had failed to contest the disallowance of his unconditional claim in the Michigan court. The district court disagreed, finding that while Pedrie may be barred from bringing any further claim against the assets of the Estate, the 1976 Deed of Trust was valid, and he could seek to recover on the second promissory note through a C.R.C.P. 120 foreclosure proceeding against the Oldhams.

II. Uniform Probate Procedures

¶ 8 The Oldhams and the Estate contend that the 1976 Deed of Trust was extinguished when Pedrie declined to contest the disallowance in the Michigan court. This contention presents an unresolved question under Colorado and Michigan law: whether a secured creditor whose unconditional claim has been disallowed by a decedent's estate, and who declines to contest the disallowance, may later enforce the underlying security. We agree with Pedrie and conclude that such a secured creditor may do so.

A. Standard of Review

¶ 9 We review de novo questions of statutory interpretation. Estate of Russo v. Sunrise Healthcare Corp., 994 P.2d 491, 493 (Colo.App.1999) ; Speicher v. Columbia Tp. Bd. of Trustees , 497 Mich. 125, 860 N.W.2d 51, 55 (Mich.2014). In determining the meaning of a statute, we must ascertain and give effect to the General Assembly's intent. Jefferson Cnty. Bd. of Equalization v. Gerganoff , 241 P.3d 932, 935 (Colo.2010). The language at issue must be read in the context of the statute as a whole and the entire statutory scheme, so that our interpretation gives consistent, harmonious, and sensible effect to all parts of the statute. Id.

¶ 10 Provisions of the probate code must be construed liberally to promote a speedy and efficient system for settling a decedent's estate, and making distribution to his or her successors, while promoting uniformity in the administration of estates among different jurisdictions. See § 15–10–102(1), C.R.S. 2014; In re Estate of Hall, 948 P.2d 539, 543 (Colo.1997).

B. Applicable Law

¶ 11 As a threshold matter, we must determine whether to apply Michigan or Colorado law. In its order, the district court relied on Colorado law, and the parties rely on both Colorado and Michigan law in their briefs. However, we recognize that Lorna Oldham's estate was probated in Michigan, under Michigan law. Because Colorado and Michigan have both adopted the Uniform Probate Code, see §§ 15–12–801 to – 816, C.R.S. 2014; Mich. Comp. Laws §§ 700.3801 to –3815 (2014), and because we conclude that the result is the same under either, we will apply both Michigan and Colorado law. Nevertheless, the law of the situs of real estate determines its devolution. James R. Wade & Howard E. Parks, Colorado Law of Wills, Trusts and Fiduciary Administration § 9.3 (6th ed. 2013).

¶ 12 Both states set forth time limits within which claims against a decedent's estate must be brought or are forever barred. See § 1512–803, C.R.S. 2014; Mich. Comp. Laws § 700.3803 (2014). However, actions to enforce mortgages, pledges, and liens on the property of a decedent's estate are not affected by these time limitations. § 15–12–803(3)(a) ("Nothing in this section affects or prevents ... [a]ny proceeding to enforce any mortgage, pledge, or other lien upon property of the estate...."); Mich. Comp. Laws § 700.3803(3)(a) ("This section does not affect or prevent ... [a] proceeding to enforce a mortgage, pledge, or other lien on estate property.").

¶ 13 Only Colorado appellate courts have addressed a secured creditor's options when he or she holds a valid lien on property in a decedent's estate. See Blanpied's Estate v. Robinson, 155 Colo. 133, 393 P.2d 355 (1964) ; see also Ross v. Colo. Nat'l Bank, 170 Colo. 436, 463 P.2d 882 (1969) ; Alberico v. Health Mgmt. Sys., Inc., 5 P.3d 967 (Colo.App.2000) ; Willis v. Neilson, 32 Colo.App. 129, 507 P.2d 1106 (1973). In Blanpied's Estate,³ the Colorado Supreme Court held that when a creditor's debt is secured by a valid lien on property in the decedent's estate, he or she has three alternatives to collect on the debt: (1) the creditor may disregard the estate and proceed against the security; (2) the creditor may file a conditional claim in the estate so that, in the event of a deficiency after proceeding against the security, he or she may share in the assets of the estate as an unsecured creditor; or (3) the creditor may file a claim in the estate proceeding for the entire debt if he or she surrenders the security. 155 Colo. at 139, 393 P.2d at 358. Therefore, a secured creditor's failure to file a claim against the estate under the probate procedures neither discharges the lien nor renders it unenforceable. Id.

¶ 14 Finally, section 15–12–806, C.R.S.2014, and Mich. Comp. Laws § 700.3806 (2014), apply after a creditor makes a claim on a decedent's estate. See In re Estate of Hall, 948 P.2d at 545 ("[U]pon the disallowance of a timely presented claim, the deadline for the claimant to file a petition for allowance is governed by the time limits in section 15–12–806(1)."). Those sections provide that disallowed claims are barred unless the claimant takes one of two actions within sixty-three days: (1) the claimant files a petition for allowance in court; or (2) the claimant commences a proceeding against the personal representative. § 15–12–806(1) ; Mich. Comp. Laws § 700.3806(1).

¶ 15 Colorado's section 15–12–806(1) and Michigan's section 700.3806(1) contain no explicit exception for secured creditors. Therefore, although secured creditors are exempt from the probate code's initial claim filing deadlines under Colorado's section 15–12–803(3)(a) and Michigan's section 700.3803(3)(a), whether that exemption supersedes the post-disallowance procedures in Colorado's section 15–12–806(1) and Michigan's section 700.3806(1) is unresolved.

¶ 16 Also unresolved is whether a secured creditor who chooses to file a claim against a decedent's estate, and whose claim is disallowed by an estate, may opt out of the probate code's procedures and look only to the security.

¶ 17 We conclude, for two reasons, that a secured creditor may recover on a security interest through a foreclosure proceeding.

¶ 18 First, by their plain language, Colorado's section 15–12803(3)(a) and Michigan's section 700.3803(3)(a) expressly provide that the requirement to file a notice of claim in an estate proceeding does not affect or prevent the right of a secured creditor to enforce a mortgage or other liens on estate property.

¶ 19 Second, because the post-disallowance procedures in Colorado's section 15–12–806(1) and Michigan's section 700.3806(1) do not require a secured creditor to pursue an unconditional claim that is disallowed, a secured creditor is not required...