Schirm v. Auclair, Civ. A. No. N-83-341 (RCZ).

• Decision Date: 26 October 1984
• Docket Number: Civ. A. No. N-83-341 (RCZ).
• Citation: 597 F. Supp. 202
• Parties: John C. SCHIRM III, Plaintiff, v. Randolph AUCLAIR, Co-executor of the Estate of John P. Kinsey, and Jack Bair, Co-executor of the Estate of John P. Kinsey, Defendants.
• Court: U.S. District Court — District of Connecticut

597 F. Supp. 202

John C. SCHIRM III, Plaintiff, v. Randolph AUCLAIR, Co-executor of the Estate of John P. Kinsey, and Jack Bair, Co-executor of the Estate of John P. Kinsey, Defendants.

Civ. A. No. N-83-341 (RCZ).

United States District Court, D. Connecticut.

October 26, 1984.

COPYRIGHT MATERIAL OMITTED

Hugh I. Manke, Reif & Manke, P.C., New Haven, Conn., Pat E. Morgenstern-Clarren, Cleveland, Ohio, for plaintiff.

Robert I. Teicher, Gager, Henry & Narkis, Waterbury, Conn., for defendants.

RULING ON MOTION TO DISMISS

ZAMPANO, Senior District Judge.

I. FACTS

Plaintiff John C. Schirm III is the former president of Youngstown Container Corp. ("Youngstown"), an Ohio corporation. The defendants Randolph Auclair and Jack Bair are co-executors of the estate of John P. Kinsey, who was the principal shareholder of Youngstown. The present dispute concerns three cognovit promissory notes made by Youngstown in 1973 and 1974 pursuant to renegotiated loans, signed by plaintiff Schirm in his representative capacity. The original principal amount of the notes totaled $202,464.21. The notes named Northern Ohio Bank ("Bank") as payee, and were secured by Youngstown's inventory, equipment, and receivables. Although Schirm signed these notes as president of Youngstown, he was also personally liable on them as co-maker under an "Agreement to be Bound" for Youngstown's debts that Schirm and the Bank entered into in 1971.

Sometime before his death in 1977, Kinsey allegedly removed to Connecticut certain unspecified Youngstown assets that secured the three notes.¹ Within a few months after Kinsey died on July 15, 1977, Youngstown defaulted on the three notes. In the meantime, the Bank had been placed into receivership by state authorities in 1975, and the Federal Deposit Insurance Corporation ("FDIC") was assigned the three notes in 1978. In 1978, the FDIC sued Youngstown and Schirm on the notes in an Ohio state court, and, pursuant to the notes' cognovit clauses, judgment for the outstanding amount of the notes, $138,920.54 plus interest, was entered against Youngstown and Schirm jointly and severally. The judgment was vacated on May 24, 1978, but was reinstated on July 14, 1978, by agreement of Schirm and the FDIC. In that agreement the FDIC agreed first to attempt to recover the amount of the judgment from the estate of Kinsey, before attempting to recover from Schirm any deficiency.

The FDIC filed an action against Kinsey's estate in United States District Court in Hartford in 1978 to recover the collateral that Kinsey allegedly removed from Ohio, or for $150,000 in damages. FDIC v. Auclair, Civil No. H-78-464 (D.Conn. filed Sept. 11, 1978). The estate, through Auclair and Bair, settled that litigation for $80,000 on November 13, 1981. The Kinsey estate then sold the collateral, and the proceeds of $39,459.26 were applied toward the estate's settlement of the action. The FDIC then sought to recover the deficiency from Schirm, and on September 24, 1982, Schirm agreed to pay the FDIC $50,000 plus interest in settlement of FDIC's claim against him.² On January 23, 1983, Schirm presented a claim to Kinsey's estate for the $50,000 he agreed to pay the FDIC. The claim was denied by the defendants on February 23, 1983.

In this action, plaintiff in the complaint's three counts (1) seeks a declaratory judgment that the estate owes him $50,000, alleging that an indemnity agreement was breached; (2) claims that plaintiff relied to his detriment on an agreement between Kinsey and plaintiff that plaintiff was not to be bound personally on the notes; and (3) alleges that Kinsey converted the collateral, in which plaintiff claims he had rights, when he brought it to Connecticut.³ Defendants have moved under Fed.R.Civ.P. 12(b)(6) to dismiss the complaint. As to the first two counts, defendants contend that the Connecticut nonclaim statute, Gen.Stat. § 45-205, bars this action. As to the third count, they argue that it is time-barred under Conn.Gen.Stat. § 52-577, which requires that actions for intentional torts, including conversion, be filed within a three-year limitations period. Further, they state as to count three that Schirm had no possessory right to the collateral in question, therefore it could not have been converted as to Schirm by Kinsey.

II. CHOICE OF LAW ISSUES

In this diversity action, the Court must apply the substantive law of Connecticut, including Connecticut's conflict of law rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Brown v. Merrow Machine Co., 411 F.Supp. 1162, 1163-64 (D.Conn.1976). Connecticut follows the "traditional" choice of law rules, so that in contract actions the law of the place of contracting governs substantive issues, Graham v. Wilkins, 145 Conn. 34, 39-40, 138 A.2d 705, 708 (1958), and in tort actions the law of the place of the injury governs substantive issues. Gibson v. Fullin, 172 Conn. 407, 411, 374 A.2d 1061, 1064 (1977).

Although plaintiff labels count two as a tort action, it is evident to the Court that plaintiff's first two counts are pure contract causes of action. Since both contracts at issue—an agreement under the law of suretyship to indemnify plaintiff and Kinsey's separate agreement to hold plaintiff harmless—were entered into in Ohio, the law of that state must govern certain substantive questions to be resolved in ruling on defendants' motion to dismiss under the Connecticut nonclaim statute. Plaintiff's amended count three and his materials responding to the motion to dismiss refer to two allegedly tortious acts by different actors: the conversion of Youngstown's assets by Kinsey in Ohio prior to 1977, and the estate's failure to act in a commercially reasonable manner when it sold estate assets, presumably in Connecticut, sometime between November 13, 1981, and September 24, 1982, in order to satisfy the FDIC lawsuit pending against it. Because plaintiff's brief in opposition to the pending motion refers nearly exclusively to acts in Ohio as the basis of liability for count three, Ohio law governs whether plaintiff may maintain an action for conversion.

III. DISCUSSION

The Connecticut nonclaim statute, Gen. Stat. § 45-205(a), provides that a creditor must present his claim against the estate before the time limit set by the probate court, within the statutory limits of three to twelve months from the date of the probate court's order, or be barred from presenting the claim later.

The purposes of the nonclaim statute were recently repeated by the state Supreme Court in Breen v. Phelps, 186 Conn. 86, 439 A.2d 1066 (1982). The statute is designed to "inform an administrator or executor of what claims may have to be paid out of the estate citations omitted; and thereby to permit the speedy settlement of estates." Id. at 101, 439 A.2d at 1076.

However, not all claims must be presented within the general period required by § 45-205(a), because actual claims may not exist during that time. Section 45-205(b) governs claims against the estate that were contingent while the estate was open. That section provides in pertinent part:

when a right of action against an estate accrues after the time limited for the presentation of claims, it shall be exhibited within four months after such right of action accrues and shall be paid out of the estate remaining after the payment of the debts exhibited within the time limited.

Gen.Stat. § 45-205(b). The rationale of § 45-205(b) is that when the liability of the estate "depends on some future uncertain event the claim is contingent and its presentation would not `hasten the final settlement of the estate, or in any way advance the interests of those who are to enjoy the estate.'" Breen, 186 Conn. at 103, 439 A.2d at 1077 (quoting Bacon v. Thorp, 27 Conn. 251, 260 (1858)).

For the purpose of determining whether a claim is contingent under the nonclaim statute, Connecticut courts quite logically equate the word "claim" in § 45-205(b) with the term "cause of action." Indeed, § 45-205(b) specifically provides that a claimant has four months after "a right of action accrues" in which to present the claim. In Ryder v. Hertz Corporation, 29 Conn.Sup. 9, 269 A.2d 32 (1970), the lessor of an automobile (Hertz) was sued by individuals who were injured while its automobile was being driven by a lessee who died before the injured parties instituted their lawsuit against Hertz. Hertz impleaded the estate of the lessee, but the estate argued that the lessor failed to present its claim in a timely manner under § 45-205(a). The court rejected the estate's argument, determining that Hertz' claim for indemnity was not barred by the statutory period of § 45-205(a). The court noted that "a right of action does not attach until the cause of action comes into being." Id. at 12, 269 A.2d 32. The court held that Hertz' claim was contingent while the estate was open:

It is clear that within the period designated by the Probate Court for the presentation of claims no litigation had been instituted against Hertz by the (injured plaintiffs). While, by virtue of its ownership of the leased vehicle at the time of the accident and within that period, there did exist potential liability on the part of Hertz upon the commencing of a suit ... and, in that event, the further possibility of an assertion of a claim by the Hertz against the executor, the possibility of the occurrence of these events did not invest Hertz with a `claim' within the meaning of the statute.

Id. at 11, 269 A.2d 32.

Other states follow the same approach, holding that a person does not have a "claim" against an estate until he has a "cause of action" against it. See Turner v. Meek, 225 Ark. 744, 284 S.W.2d 848, 850 (1955) (distinguishing feature of contingent claim is that a cause of action has not accrued); In re Shaw's Estate, 340 So.2d 491, 492 (Fla.App.1976) (claim contingent when liability of estate depends on future event...