Sloans v. Berry (In re Estate of Berry)

• Decision Date: 10 August 2015
• Docket Number: No. 72095–3–I.,72095–3–I.
• Court: Washington Court of Appeals
• Parties: In the Matter of the Estate of Betty Jean BERRY, Deceased. Lula S. SLOANS, a single person; Appellant, v. Nadine E. BERRY & Robert M. Berry, in their capacity as co-administrators of the Estate of Betty Jean Berry; Respondents.

189 Wash.App. 368

358 P.3d 426

In the Matter of the Estate of Betty Jean BERRY, Deceased.

Lula S. SLOANS, a single person; Appellant

v.Nadine E. BERRY & Robert M. Berry, in their capacity as co-administrators of the Estate of Betty Jean Berry; Respondents.

No. 72095–3–I.

Court of Appeals of Washington, Division 1.

Aug. 10, 2015.

Robert Michael Bartlett, Cook & Bartlett, Seattle, WA, for Appellant.

Charles Richard Horner, Law Offices of Charles R. Horner PLLC, Seattle, WA, for Respondents.

Charles Richard Horner, Law Offices of Charles R. Horner PLLC, Seattle, WA, for Other Parties.

Opinion

BECKER, J.

¶ 1 A suit on a rejected creditor's claim must be brought as an ordinary civil action. It is a procedural mistake to bring such an action as a petition for a special proceeding under the Trust and Estate Dispute Resolution Act (TEDRA), chapter 11.96A RCW. But the mistake does not require dismissal if, as in the present case, the action is brought against the estate within the 30–day deadline for establishing a creditor's claim as provided in RCW 11.40.100.

¶ 2 Lula Mae Hunter executed her will on January 31, 1989. Hunter left her residence to her niece, appellant Lula S. Sloans, to use until her death or until she no longer wanted it, and thereafter to Betty Jean Berry. The will provided that the residence and its contents would become part of the residue of the Hunter estate if neither Sloans nor Berry used it. Hunter named Sloans the residual beneficiary of the Hunter estate.

¶ 3 Hunter died in 1991. Her will was probated in King County Superior Court. At the time of Hunter's death, Sloans was still a minor. Sloans wanted to reserve the option to live in the residence after she completed her college education. She agreed to let Berry live in the residence in the meantime. In July 1991, the parties filed their “Agreement Regarding Residence” (“the Agreement”) under the cause number for the Hunter estate, pursuant to a predecessor of TEDRA, former RCW 11.96.170 (1988). The Agreement was signed on Sloans' behalf by her mother, by Berry, and by the personal representative of the Hunter estate. It permitted Berry to occupy the residence for renewable five-year terms, provided that she paid taxes and other expenses, maintained the property in good condition, and refrained from making alterations without Sloans' consent. The Agreement stated that Berry's right to occupy the residence was personal to her and that it would terminate immediately upon her death. The personal representative of the Hunter estate recorded a quitclaim deed conveying to Sloans and Berry “the interests of each described in the Will of Lula Mae Hunter” in the Hunter residence.

¶ 4 On July 31, 1991, Berry took possession of the property. She possessed it continuously until her death on August 5, 2013.

¶ 5 Berry's estate was put into probate in King County Superior Court by her two children, Nadine and Robert Berry, as coadministrators. They listed the Hunter residence as the principal asset of the Berry estate.

¶ 6 On December 20, 2013, Sloans filed and served a creditor's claim with the Berry estate. The claim alleged that Berry had breached her maintenance obligations under the Agreement by failing to repair water and smoke damage to the residence and also to the extent she may have conveyed away any interest in the property. The estate rejected the claim on January 21, 2014.

¶ 7 On February 19, 2014, 29 days after her claim was rejected, Sloans filed a “Petition on Rejection of Creditor's Claims,” attaching the Agreement. The petition named Nadine and Robert Berry as respondents in their capacity as coadministrators of the Berry estate. Sloans paid a filing fee. She filed the petition under the probate cause number for the Berry estate along with summonses to Nadine and Robert Berry. The attorney for the estate accepted service.

¶ 8 The objective of Sloans' petition was to initiate a judicial proceeding under TEDRA as a vehicle for litigating her creditor's claim. The petition alleged as follows:

2.3 TEDRA allows any party to have a judicial proceeding for the declaration of rights or legal relations with respect to any “Matter,” as broadly defined by RCW 11.96A.020 & .030. The “Matters” here include, but are not limited to:

A. Determination of the parties' rights, responsibilities, duties and liabilities arising under the TEDRA Agreement and the Deed and to provide such remedies, legal or equitable, as found appropriate;

B. Determination of the damages due Sloans under her creditor's claims;

C. Determination of all other questions arising in Decedent's Estate, and the Hunter Estate regarding Sloans' creditor's claims; and,

D. Direction of the PR's as fiduciaries to pay Sloans' creditor's claims and her attorney's fees, costs and pre- and post-judgment interest on the sums owed her.

2.4 Venue is proper under RCW 11.96A.050 and this court has subject matter jurisdiction over the matters/claims asserted in this suit.

¶ 9 On February 27, 2014, Sloans filed and served another creditor's claim with the Berry estate. This second claim asserted that Berry had failed to pay property taxes for the Hunter residence as she was required to do by the Agreement. The Berrys rejected this claim on March 21, 2014. Four days later, Sloans filed an amended petition, adding the claim for unpaid property taxes.

¶ 10 On May 1, 2014, the estate moved to dismiss Sloans' petition under CR 12(b)(1) (lack of subject matter jurisdiction) and CR 12(b)(6) (failure to state a claim). The estate's primary theory for dismissal was that under RCW 11.40.100, a judicial proceeding under TEDRA is not an appropriate vehicle for establishing a creditor's claim. The estate asserted that a suit on a rejected creditor's claim must be brought as an ordinary civil action against the personal representative, separate from probate proceedings, and Sloans had failed to bring such an action within the 30–day time bar.¹ Sloans responded and requested mediation under TEDRA. See RCW 11.96A.300.

¶ 11 A court commissioner denied Sloans' request for mediation, dismissed her suit with prejudice, and ordered her to pay the estate $3,598 in fees under RCW 11.96A.150. Sloans appeals.

¶ 12 The first issue is whether a suit on a rejected creditor's claim may be brought as a TEDRA petition. This issue involves statutory interpretation, a question of law reviewed de novo. HomeStreet, Inc. v. Dep't of Revenue, 166 Wash.2d 444, 451, 210 P.3d 297 (2009).

¶ 13 Chapter 11.40 RCW, “Claims Against Estate,” regulates how creditor's claims are to be presented to an estate and how they are to be either accepted or rejected. A claimant “must bring suit in the proper court against the personal representative within thirty days after notification of rejection or the claim will be forever barred.”

RCW 11.40.100(1). Bringing a suit on a rejected creditor's claim in the proper court means bringing “an ordinary civil action” that “is not a part of the probate proceedings.” Schluneger v. Seattle–First Nat'l Bank, 48 Wash.2d 188, 189–90, 292 P.2d 203 (1956) ; see also City of Spokane v. Costello, 57 Wash. 183, 106 P. 764 (1910).

¶ 14 TEDRA states that its provisions “shall not supersede, but shall supplement, any otherwise applicable provisions and procedures contained in this title,” including those contained in chapter 11.40 RCW. RCW 11.96A.080(2) ; see In re Estate of Kordon, 157 Wash.2d 206, 212, 137 P.3d 16 (2006). Sloans contends this provision shows that the creditor claim statute and TEDRA are to be read together so that a creditor's claim may be established either in a TEDRA proceeding or in an ordinary civil action, at the claimant's option. Sloans also relies on the TEDRA definition of “matter,” RCW 11.96A.030(2)(a). The definition of “matter” is broad in scope and “is intended to encompass matters traditionally within the exclusive province of the courts.”²

¶ 15 TEDRA was intended to, and does, provide flexibility to the court in resolving simple estate and trust matters expeditiously.³ TEDRA has its own provisions for mediation and arbitration. RCW 11.96A.310. The provisions of chapter 7.06 RCW do not apply. RCW 11.96A.100(6). Testimony may be by affidavit. RCW 11.96A.100(7). The initial hearing may be a hearing on the merits to resolve all issues of fact and all issues of law. RCW 11.96A.100(8). An ordinary civil action, by contrast, is governed by the civil rules. There may be a lengthy case schedule even for a simple action. Parties may have the right to a jury trial.

¶ 16 It is understandable why Sloans might prefer to proceed under TEDRA. But the plain language of TEDRA does not permit a creditor claim lawsuit to be commenced as a petition for a “judicial proceeding” under TEDRA.

¶ 17 TEDRA allows any “party” to “have a judicial proceeding for the declaration of rights or legal relations with respect to any matter.” RCW 11.96A.080. TEDRA includes “a creditor” within its definition of a “party.” RCW 11.96A.030(5)(h). Sloans asserts that she is a creditor of the estate and therefore a party entitled under RCW 11.96A.080 to petition the court for a declaration of her rights relating to the creditor claim.

¶ 18 Regardless of the TEDRA definition of “matter,” Sloans' argument fails because she does not fit the TEDRA definition of “party.” Sloans is as yet only a claimant, not a creditor. The estate has rejected her claims. To become a creditor, a claimant must proceed under RCW 11.40.100 to obtain a judgment establishing the claim. It is only after a judgment in a civil action establishes the amount of an allowed claim that the claim becomes subject to rules of estate administration. RCW 11.40.120 ; Bailey v. Schramm, 38 Wash.2d 719, 722, 231 P.2d 333 (1951). As a mere claimant, Sloans is not a proper party to a judicial proceeding under RCW 11.96A.080. She should have brought her creditor claim suit as an ordinary civil action.

¶ 19 This conclusion leads us to the second issue: whether a suit on a rejected creditor's claim must be...