Bmo v. Espiau ( 2021 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
BMO HARRIS BANK N.A., as successor to M&I MARSHALL and ISLEY
BANK, Plaintiffs/Appellees,
v.
DOROTHY ESPIAU, an unmarried woman now deceased; THE ESTATE
OF DOROTHY ESPIAU by and through its personal representative
KENNETH ESPIAU, Defendants/Appellants.
No. 1 CA-CV 20-0460
FILED 7-13-2021
Appeal from the Superior Court in Yavapai County
No. V1300CV201880220
The Honorable Debra R. Phelan, Judge Pro Tempore
AFFIRMED
COUNSEL
Stinson LLP, Phoenix
By Jeffrey J. Goulder, Michael Vincent
Counsel for Plaintiffs/Appellees
The Law Office of Christopher Goodman, Phoenix
By Christopher M. Goodman
Counsel for Defendants/Appellants
BMO, et al. v. ESPIAU, et al.
Opinion of the Court
OPINION
Judge Maria Elena Cruz delivered the opinion of the Court, in which
Presiding Judge Jennifer M. Perkins and Judge Randall M. Howe joined.
C R U Z, Judge:
¶1 The Estate of Dorothy Espiau (“the Estate”) appeals from a
judgment awarding BMO Harris Bank N.A. (“BMO”) the balance still owed
after a trustee’s sale of property securing a loan the Estate had allowed to
go into default. We conclude that (1) BMO’s action was not time-barred
under the probate code; (2) the court did not err in determining the fair
market value of the property at the time of the sale; and (3) the court did
not err in denying the Estate’s motion under Arizona Rule of Civil
Procedure (“Rule”) 60(b) for relief from awarding attorneys’ fees.
Accordingly, we affirm.
FACTUAL AND PROCEDURAL HISTORY
¶2 Dorothy Espiau bought a vacant lot in Sedona in 2005 for
$415,000. The purchase was financed by a loan from BMO secured by a
deed of trust on the property. Dorothy died in December 2015, and her son,
Kenneth Espiau, was appointed the Estate’s personal representative.
Kenneth did not immediately notify BMO of Dorothy’s death and
continued to make loan payments on her behalf.
¶3 In May 2017, Kenneth finally informed BMO of Dorothy’s
death. At a BMO branch, Kenneth gave a banker Dorothy’s death certificate
and his letter of appointment as personal representative; the banker told
Kenneth he would forward the material to the “probate department.” BMO
then sent a letter to the Estate declaring that BMO had the right to collect
the outstanding balance of Dorothy’s loan. BMO further requested that the
Estate notify BMO how it would satisfy Dorothy’s outstanding debt.
Nothing in the record shows that Kenneth ever responded to this letter, nor
does the Estate contend otherwise. Kenneth continued to pay on the loan
until August 2017 but made no further payments after that. In January
2018, BMO sent the Estate a notice of default, and, in June 2018, the property
was sold at a trustee’s sale to a third party for about $135,000.
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Opinion of the Court
¶4 BMO then sued the Estate to recover roughly $157,500 still
owing on the loan. In due course, the parties filed cross motions for
summary judgment. BMO sought judgment against the Estate on all issues,
except for the determination of the fair market value of the property
pursuant to Arizona Revised Statutes (“A.R.S.”) section 33-814(A). The
Estate argued BMO’s claim was time-barred under the relevant probate
statutes. Following oral argument, the court granted BMO’s partial motion
for summary judgment and denied the Estate’s motion.
¶5 At the fair market value hearing, BMO’s expert, Dennis
Lopez, opined that the lot’s value was $220,000, while the Estate’s expert,
William Dominick, valued the property at $270,000. Finding the appraisal
of Lopez to be more reliable, the superior court valued the property at
$220,000.
¶6 At the court’s direction, BMO applied for $72,668.50 in
attorneys’ fees and $17,910.79 in costs. It also lodged a form of judgment
for a deficiency of $77,114.63 plus interest. When the Estate did not object,
the court entered judgment for the deficiency balance and the entirety of
BMO’s claimed fees and costs. The Estate then filed a motion under Rule
60(b) requesting relief from judgment for the sole purpose of allowing it to
file a response to BMO’s fee application. The court denied the motion.
¶7 The Estate appealed the judgment and the denial of its Rule
60(b) motion, and we have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).
DISCUSSION
I. Denial of Summary Judgment
¶8 The Estate argues BMO’s claim was barred by the probate
nonclaim statute, A.R.S. § 14-3803, and contends the superior court
therefore erred in denying its motion for summary judgment. An order
denying summary judgment is generally not appealable or reviewable on
appeal from a final judgment. Cal X–Tra v. W.V.S.V. Holdings, L.L.C., 229
Ariz. 377, 408, ¶ 105 n.50 (App. 2012). However, we may review the order
if the denial was based on purely legal grounds. Id. “We review de novo
whether a pure question of law precluded the denial of summary
judgment.” Desert Palm Surgical Grp., P.L.C. v. Petta, 236 Ariz. 568, 577, ¶ 22
(App. 2015).
¶9 Section 14-3803 limits the claims that may be presented
against a decedent’s estate according to the time when such claims arose.
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Opinion of the Court
Section 14-3803(C)(2) applies to claims that arose after death of the
decedent:
All claims against a decedent’s estate that arise at or after the
death of the decedent . . . founded on contract . . . or other
legal basis, are barred against the estate, the personal
representative and the heirs and devisees of the decedent,
unless presented . . . within the later of four months after it
arises or the time specified in subsection A, paragraph 1 of
this section.
A.R.S. § 14-3803(C)(2). Then, a claim such as this that arises after the
decedent’s death must be presented within “the later of four months after
it arises” or “[t]wo years after the decedent’s death plus the time remaining
in the period commenced by an actual or published notice pursuant to § 14-
3801, subsection A or B.” A.R.S. § 14-3803(A)(1).
¶10 Section 14-3801, in turn, describes the notice requirement:
A. Unless notice has already been given under this section, at
the time of appointment a personal representative shall
publish a notice to creditors once a week for three successive
weeks in a newspaper of general circulation in the county
announcing the appointment and the personal
representative’s address and notifying creditors of the estate
to present their claims within four months after the date of the
first publication of the notice or be forever barred.
B. A personal representative shall give written notice by mail
or other delivery to all known creditors, notifying the
creditors of the personal representative’s appointment. The
notice shall also notify all known creditors to present the
creditor’s claim within four months after the published notice,
if notice is given as provided in subsection A, or within sixty
days after the mailing or other delivery of the notice,
whichever is later, or be forever barred. A written notice shall
be the notice described in subsection A or a similar notice.
A.R.S. § 14-3801.
¶11 The Estate relies on § 14-3801(B), claiming that although BMO
had notice of Dorothy’s death in May 2017, it did not file its complaint until
August 2018, well after any four-month or sixty-day deadline. BMO
contends, however, that because the Estate failed to strictly comply with the
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Opinion of the Court
notice requirement in the second sentence of subsection B, the time to file a
claim under § 14-3803 never began to run.
¶12 The Estate concedes it did not comply with its obligation
under § 14-3801 to inform BMO, either by publication or by mail or other
delivery, that if it did not present its claim within four months of
publication or sixty days after mailing or delivery, the claim would be
“forever barred.” But it argues BMO is a “sophisticated” lender that should
have known to file a claim against the Estate after Kenneth dropped off
Dorothy’s death certificate and the notice of appointment in May 2017.
When Kenneth informed BMO of her death, Dorothy had been deceased for
about seventeen months. During this seventeen-month period, BMO
received payments on the mortgage. BMO sent a letter asking the Estate
what its intentions were with Dorothy’s account, and noted that any legal
heirs could assume Dorothy’s obligation. Kenneth failed to respond and
did not default on the account until a few months later. Considering
payments were made on the mortgage for nearly a year and a half after
Dorothy’s death, while BMO was unaware of her death, it was not clear to
BMO that it needed to immediately present its claim to the Estate in May
2017.
¶13 Regardless of BMO’s “sophistication,” the plain language of
the statute expressly directs the personal representative to notify creditors
to present their claims within four months of notice by publication or sixty
days of notice by mail or delivery. See A.R.S. § 14-3801(B) (“The notice shall
also notify all known creditors to present the creditor’s claim within four
months after the published notice, . . . or within sixty days after the mailing
or other delivery of the notice, whichever is later, or be forever barred.”)
(emphasis added). And pursuant to § 14-3803, creditors must present
claims that accrue after the death of a decedent “within the later of four
months after it arises” and “[t]wo years after the decedent’s death plus the
time remaining in the period commenced by an actual or published notice pursuant
to § 14-3801.” A.R.S. § 14-3803(A)(1) (emphasis added). In short, the time
limit for BMO to present its claim did not commence until the Estate
complied with the notice requirements in § 14-3801.
¶14 That statute expressly requires an estate to give a creditor
notice, either by publication or by mail or delivery, of the time limits to
present its claim. Under a prior version of A.R.S. § 14-3803, claims were
barred if not brought within two years of the decedent’s death. In re Estate
of Olsen, 1 CA-CV 20-0343, 2021 WL 1421651, at *2, ¶ 13 (Ariz. App. Apr. 15,
2021); see also A.R.S. § 14-3803(B) (1996) (barring claims not brought within
two years of the decedent’s death). However, in 1998, the legislature
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Opinion of the Court
amended the statute to extend the two-year deadline to specifically include
the notice period under § 14-3801. See In re Estate of Olsen, 1 CA-CV 20-0343,
at *2, ¶ 13; see also 1998 Ariz. Sess. Laws, ch. 203, § 11 (2d Reg. Sess.) (H.B.
2360). Further, our case law makes clear that “due process requires that
known creditors be given actual notice of a non-claim statute’s time limits
when such time limits are not self-executing and involve significant state
action, such as the institution of probate proceedings or the appointment of
a personal representative.” In re Estate of Barry, 184 Ariz. 506, 508 (App.
1996) (finding the four-month period for presenting a claim under prior
version of § 14-3803 did not apply when the creditor was not notified that
it needed to present its claim within that period).
¶15 These facts mirror those in BMO Harris Bank, N.A. v. Reid, 1
CA-CV 14-0013, 2015 WL 1781389 (Ariz. App. Apr. 16, 2015) (mem.
decision), cited by both parties.1 In BMO Harris Bank, the estate notified the
bank of the decedent’s death, but it failed to notify the bank that if it failed
to timely file a claim, its claim would be forever barred. Id. at *3, ¶¶ 15-16.
This court found that because the estate failed to comply with § 14-3803, the
bank’s claim was not barred under § 14-3801. Id. Here, we come to the
same conclusion and find that BMO’s claim is not barred because the Estate
failed to strictly comply with the notice requirements of § 14-3803.
¶16 Accordingly, the superior court did not err in finding that
BMO’s claim was not untimely and denying the Estate’s motion for
summary judgment on that ground.
II. Fair Market Value Determination
¶17 The Estate next argues the court erred in relying on BMO’s
expert witness to find that the fair market value of the property was
$220,000 at the time of the trustee’s sale. Section 33-814(A) provides in
relevant part:
[A]n action may be maintained to recover a deficiency
judgment against any person directly, indirectly or
contingently liable on the contract for which the trust deed
was given as security including any guarantor of or surety for
the contract and any partner of a trustor or other obligor
which is a partnership. In any such action against such a
1 Pursuant to Arizona Rule of the Supreme Court 111(c)(1)(C), we cite
BMO Harris Bank for its persuasive value and because no opinion
adequately addresses the issue before the court.
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Opinion of the Court
person, the deficiency judgment shall be for an amount equal
to the sum of the total amount owed the beneficiary as of the
date of the sale, as determined by the court less the fair market
value of the trust property on the date of the sale as
determined by the court or the sale price at the trustee’s sale,
whichever is higher.
A.R.S. § 33-814(A).
¶18 The statute further provides that “[t]he fair market value shall
be determined by the court at a priority hearing upon such evidence as the
court may allow.” A.R.S. § 33-814(A). A property’s fair market value is “a
factual determination that must be based on the facts and circumstances of
each case,” and the court has the discretion to rely on a testifying expert’s
opinion of value. Kelsey v. Kelsey, 186 Ariz. 49, 51 (App. 1996). The court
“may adopt portions of the evidence from different witnesses,” and we
“will sustain a result anywhere between the highest and lowest estimate
which may be arrived at by using the various factors appearing in the
testimony in any combination which is reasonable.” CSA 13-101 Loop, LLC
v. Loop 101, LLC, 233 Ariz. 355, 362-63, ¶ 25 (App. 2013) (citation and
internal quotations marks omitted), vacated in part by 236 Ariz. 410, 415
(2014). “When a ruling is based on conflicting testimony, we will not
disturb the court’s ruling by reweighing the evidence.” Id.
¶19 The Estate contends it was clearly erroneous for the court “to
accept, wholesale, the report of an expert who admitted he used two
separate standards to judge the Property versus comparable sales.” The
Estate argues that BMO’s expert “did not consider development costs when
considering comparable sales” but then when BMO’s expert valued the
subject property, the Estate claims the expert “discounted the value due to
the potential development costs.” This misstates the expert’s valuation
report. In his report, the Estate’s expert, Dominick, emphasized the level
topography of the subject property, opining that because the lot was so
level, the property would not require the high development costs that
properties typically require. In his rebuttal report, BMO’s expert, Lopez,
disagreed with this characterization of the property, and noted some
development costs would likely be required because half of the lot was
below the street level. Lopez highlighted these potential development costs
in rebuttal to Dominick’s report that the subject property would not require
large development costs. But no evidence showed that Lopez did not
consider development costs when analyzing both the comparable sales and
the subject property. And in fact, Lopez’s report expressly states that he
did consider such costs in his appraisal approach.
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Opinion of the Court
¶20 Lopez used the sales comparison approach in his valuation
and compared six recent and nearby sales to the subject property. These
parcels are close to the subject property, sold near the time of the sale of the
subject property, and are similar size, shape, and topography as the subject
property. As the superior court recognized, minimal adjustments were
made to the sale prices of comparison properties, and Lopez valued the
subject property at a price similar to the comparable properties. In his
analysis of the comparable sales and the subject property, Lopez expressly
considered development costs when adjusting sales prices and making the
final fair market value determination of the sale property. The superior
court found Lopez to be more reliable because Dominick “used a lot
comparison for a property farther away from the subject property while
omitting three sales within two blocks of the subject property,” and
Dominick used a listing—not a closed sale—as a comparison lot. The court
also found that Dominick made significant adjustments to the prices of the
comparable sales, and Dominick testified that “adjustments made by an
appraiser are incredibly discretionary and subjective to that appraiser’s
opinion.”
¶21 Reasonable evidence supported the court’s findings, and we
will not reweigh the evidence. See Magna Inv. & Dev. Corp. v. Pima County,
128 Ariz. 291, 294 (App. 1981). The court did not err in relying on BMO’s
expert witness, Lopez, in determining the fair market value of the property.
III. Rule 60(b) Motion and Attorneys’ Fees
¶22 The Estate argues the superior court erred in denying its Rule
60(b) motion for relief from judgment, which we review for an abuse of
discretion. City of Phoenix v. Geyler, 144 Ariz. 323, 328 (1985).
¶23 The Estate contends it should be relieved from a final
judgment for “excusable neglect” or “any other reason justifying relief.” See
Rule 60(b)(1), (6). The deadline for the Estate to file its objection to the
attorneys’ fee application was May 19, although at the request of the Estate,
BMO agreed to extend the deadline to May 22. The Estate’s counsel
contended he developed “flu-like symptoms” on May 21, and given the
current pandemic, counsel stated he needed to isolate. Counsel claimed
that his office was understaffed, and so he was unable to reach out to BMO’s
counsel or the court to notify them of his illness. However, as BMO points
out, the Estate failed to inform the court of the agreement between the
parties to extend the deadline to May 22, and the Estate’s counsel admits he
became ill after the official deadline of May 19. See Rule 7.1(g)(2) (“To make
an extension effective, the parties must file a notice setting forth the agreed-
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Opinion of the Court
upon dates on which the response or reply briefs will be due.”) (emphasis
added); Rule 7.1(g)(4) (“The extension is effective upon the filing of the notice of
extension, unless and until the court enters an order disapproving the time
extension.”) (emphasis added). We do not find the court abused its
discretion in denying the Estate’s Rule 60(b) motion based on excusable
neglect or for any other reason.
¶24 The superior court noted that “practitioners in modern law
practice are expected to meet deadlines under challenging and varying
circumstances on a regular basis.” While the Estate argues “the
circumstances surrounding illness carry a little more weight these days”
than ordinarily would be the case, counsel fails to explain why he was
unable to notify the court and BMO of his situation and request another
extension. Counsel concedes his illness was not severe and ultimately was
not COVID-19 related. And counsel himself admitted in an email to BMO
that he should have communicated, writing: “I should have been in touch
with you and the court, and I certainly regret that now.” We do not find
that the court abused its discretion in finding counsel failed to prove
excusable neglect.
¶25 The Estate did not timely object to the fee award, and “legal
theories must be presented timely to the trial court so that the court may
have an opportunity to address all issues on their merits.” Cont’l Lighting
& Contracting, Inc. v. Premier Grading & Utilities, LLC, 227 Ariz. 382, 386, ¶ 12
(App. 2011). “If the argument is not raised below so as to allow the trial
court such an opportunity, it is waived on appeal.” Id. Accordingly, the
Estate has waived its arguments regarding the attorneys’ fee award.
CONCLUSION
¶26 For the foregoing reasons, we affirm. Both parties request
their attorneys’ fees and costs pursuant to A.R.S. §§ 12-341, -341.01, and 33-
814. Pursuant to the cited statutes, we award BMO, as the prevailing party,
its reasonable attorneys’ fees and costs upon compliance with ARCAP 21.
AMY M. WOOD • Clerk of the Court
FILED: AA
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