In Re Estate of Frieda Lindy Freedman Harold Freedman, As v. Anita Taradash ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
January 23, 2013 Session
IN RE ESTATE OF FRIEDA LINDY FREEDMAN
HAROLD FREEDMAN, AS EXECUTOR v. ANITA TARADASH
Appeal from the Circuit Court for Davidson County
No. 10P695 David Randall Kennedy, Judge
No. M2012-01540-COA-R3-CV - Filed March 6, 2013
A beneficiary of the decedent’s estate contends the Executor should be held personally liable
for paying two debts of the decedent for which no claim was filed pursuant to Tennessee
Code Annotated § 30-2-307. The Executor insists that Tennessee Code Annotated § 30-2-
318(b) afforded him the discretion to pay debts of the decedent because the estate was
solvent and the time in which the claims could have been filed had not expired. The probate
court ruled in favor of the Executor, finding the payment of the debts was authorized
pursuant to Tennessee Code Annotated § 30-2-318(b). We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed
F RANK G. C LEMENT, J R., J., delivered the opinion of the Court, in which P ATRICIA J.
C OTTRELL, P.J., M.S., and R ICHARD H. D INKINS, J., joined.
James Carson Hofstetter, Nashville, Tennessee, for the appellant, Anita Taradash.
William L. Harbison, Lisa K. Helton, and Cornell H. Kennedy, Nashville, Tennessee, for the
appellee, Harold Freedman.
OPINION
This actions arises from a dispute concerning the settlement of the Estate of Frieda
Lindy Freedman, who died on April 11, 2010, and is survived by two children, a son Harold
Freedman, and a daughter, Anita Taradash. In the decedent’s Last Will and Testament,
Harold Freedman was named Executor of the Estate, and Mr. Freedman and Mrs. Taradash
are the only beneficiaries of the Estate.
On May 5, 2010, Mr. Freedman filed a Petition for Letters Testamentary in the
Probate Court for Davidson County, Tennessee, requesting an estate be opened and the Will
be admitted to probate. The Probate Court issued an “Order to Probate” on May 5, 2010,
admitting the Will to probate and appointing Mr. Freedman as Executor of the Estate. Letters
Testamentary were issued and notice to creditors was published on May 10 and 17, 2010.
Thereafter, but before the time in which to file claims against the Estate had expired,
the Executor paid two debts of the decedent. The more substantial one pertains to a
contingency fee contract entered into by the decedent for representation in a personal injury
claim. The decedent engaged the law firm of Pryor, Flynn, Priest & Harber (hereinafter “Law
Firm”) to represent her regarding this claim and she entered into a contingency fee contract.
Pursuant to the contract, the law firm would receive one-third of the total recovery plus
expenses. The personal injury claim was settled prior to the decedent’s death; however, the
decedent died before the settlement could be finalized and the proceeds distributed. After her
death and with the written consent of the Executor, the settlement was completed and the law
firm received its one-third contingency fee plus expenses and the estate received the balance.
The second debt pertains to the decedent’s credit card, which consisted primarily of
health-related and assisted living expenses incurred by the decedent. The Executor paid the
balance in full and cancelled the credit card.
On April 11, 2011, the Executor filed with the probate court a Notice of TennCare
Release. The Executor also filed a Petition for Distribution of Funds and Closing of Probate
Estate. In these filings the Executor stated that the only asset of the Estate was the net
proceeds from the settlement negotiated prior to the decedent’s death; he also stated that no
claims had been filed against the estate. Having paid the estate administration expenses,
which were deducted from the above funds, the Executor proposed an equal distribution of
$58,209.46 to each beneficiary, Mrs. Taradash and himself.
On April 28, 2011, Mrs. Taradash filed a response opposing the Petition for
Distribution of Funds and Closing of Probate Estate, taking issue with the fact that the law
firm that represented the decedent received one-third of the settlement plus expenses
pursuant to the contingency fee contract.
Thereafter, on July 28, 2011, the Executor filed an Interim Accounting. Mrs. Taradash
filed Exceptions to Interim Accounting. In addition to taking issue with the contractual
contingency fee obtained by the decedent’s personal injury attorneys, Mrs. Taradash took
issue with the payment of the decedent’s credit card, which had a balance of approximately
$14,000.00. Mrs. Taradash also requested that the Executor be “surcharged” for paying the
contingency fee and the credit card payment for which no claims had been filed.
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Mrs. Taradash subsequently filed a motion for summary judgment concerning the
voluntary payment of the two debts.1 The motion was supported by the Affidavit of James
C. Hofstetter, Mrs. Taradash’s attorney, and a statement of undisputed facts. The Executor
filed a response in opposition to Mrs. Taradash’s motion for summary judgment, the
deposition of Ms. Taradash, and a response to her statement of material facts.
The Executor filed a Motion for Partial Summary Judgment in which he contended
the issues pertaining to his payment of the contingency fee and the credit card were
appropriate for summary judgment. The Executor also filed his affidavit, a memorandum of
law, and a statement of undisputed material facts in support of his motion.
The competing motions for summary judgment came on for hearing on May 25, 2012.
In an order entered June 25, 2012, the probate court granted the Executor’s motion and
denied Mrs. Taradash’s motion, finding that the Estate was solvent and that payment of the
decedent’s debts did not render the Estate insolvent or jeopardize the interests of the
beneficiaries. The court also held that the Executor’s payment of the contingency fee and the
credit card were appropriate and permissible under Tennessee Code Annotated § 30-2-318(b)
as a matter of law. This appeal by Mrs. Taradash followed.
A NALYSIS
Ms. Taradash asserts the Executor violated his fiduciary duty by paying the credit card
debt and the contingency fee without requiring the credit card company and the Law Firm
to file, pursuant to Tennessee Code Annotated § 30-2-307, a claim against the estate for the
debt allegedly owed by the estate. The Executor insists that Tennessee Code Annotated § 30-
2-318(b) afforded him the discretion to pay lawful debts without requiring a debtor to file a
claim provided the estate was solvent and the time to file a claim had not expired. Ms.
Taradash counters the Executor’s position insisting it is in direct conflict with the claims
requirements in Tennessee Code Annotated § 30-2-307. The Executor insists his position
does not create a conflict. Reading the two sections in pari materia, and considering other
relevant legal principles and statutes, we agree with the Executor’s position.
Resolution of the issue presented in this appeal involves statutory construction, which
presents a question of law that we review de novo to determine whether a party was entitled
to summary judgment as a matter of law. Burke v. Langdon, 190 S.W.3d 660, 663 (Tenn. Ct.
App. 2005). Our primary goal in construing statutes is “to ascertain and give effect to the
intention and purpose of the legislature.” Conley v. State, 141 S.W.3d 591, 595 (Tenn. 2004)
(citing Stewart v. State, 33 S.W.3d 785, 791 (Tenn. 2000) (quoting Gleaves v. Checker Cab
1
The motion also pertained to a third issue, Decedent’s jewelry, which is not at issue in this appeal.
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Transit Corp., 15 S.W.3d 799, 802 (Tenn. 2000))). If the statutory language is unambiguous,
we apply its plain and ordinary meaning. Id. (citing Planned Parenthood of Middle Tenn. v.
Sundquist, 38 S.W.3d 1, 24 (Tenn. 2000)). If the statutory language is ambiguous, we look
to other sources, such as legislative history, to determine the intent and purpose of the
legislature. Id.
“Statutes relating to the same subject or sharing a common purpose must be construed
together (‘in pari materia’) ‘in order to advance their common purpose or intent.’” Burke, 190
S.W.3d at 663 (citing Frye v. Blue Ridge Neuroscience Ctr., P.C., 70 S.W.3d 710, 716 (Tenn.
2002) (quoting Carver v. Citizen Utils. Co., 954 S.W.2d 34, 35 (Tenn. 1997))).
Tennessee Code Annotated § 30-2-307, upon which Ms. Taradash relies, pertains to
the filing of claims and provides:
(a)(1) All claims against the estate arising from a debt of the decedent shall
be barred unless filed within the period prescribed in the notice published or
posted in accordance with § 30-2-306(b) However:
(A) If a creditor receives actual notice less than sixty (60) days
before the expiration of the period prescribed in § 30-2-306(b)
or after the expiration of the period prescribed in § 30-2-306(b)
and more than sixty (60) days before the date that is twelve (12)
months from the decedent’s date of death, the creditor’s claim
shall be barred unless filed within sixty (60) days from the date
of receipt of actual notice; or
(B) If a creditor receives actual notice less than sixty (60) days
before the date that is twelve (12) months from the decedent’s
date of death or receives no notice, the creditor’s claim shall be
barred unless filed within twelve (12) months from the
decedent’s date of death.
(2) After the expiration of the period prescribed in § 30-2-306(b), but before
the date that is twelve (12) months from the decedent’s date of death, the court
may permit the personal representative to distribute the balance of the estate
in accordance with § 30-2-701, make final settlement and enter an order
discharging the personal representative. If a creditor files its claim after the
estate is closed as permitted in the preceding sentence and before the date that
is twelve (12) months from the decedent's date of death, the personal
representative shall not be personally liable to the creditor whose recourse will
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be against the distributees of the estate, each of whom shall share liability on
the claim in proportion to the claimant's share of the residue. The burden of
proof on any issue as to whether a creditor was known to or reasonably
ascertainable by the personal representative, or as to whether actual notice was
properly sent in accordance with § 30-2-306, shall be upon the creditor
claiming entitlement to actual notice. In such cases, the distributees of the
estate shall be personally liable on a pro rata basis if the court finds the claim
is proper and the creditor did not receive the appropriate notice.
(b) When any claim is evidenced by a written instrument, the instrument or a
photocopy of the instrument shall be filed; when due by a judgment or decree,
a copy of the judgment or decree certified by the clerk of the court where
rendered shall be filed; and when due by open account, an itemized statement
of the account shall be filed; and every claim shall be verified by affidavit of
the creditor before an officer authorized to administer oaths, which affidavit
shall state that the claim is a correct, just and valid obligation of the estate of
the decedent, that neither the claimant nor any other person on the claimant's
behalf has received payment of the claim, in whole or in part, except such as
is credited thereon, and that no security for the claim has been received, except
as thereon stated.
....
(e)(1) A creditor who has timely filed a claim against the estate shall file any
amendment to its claim no later than thirty (30) days from the later of:
(A) The date an exception to the claim is filed; or
(B) The expiration of the exception period.
(2) Unless the court with jurisdiction over the probate of the decedent’s
estate grants an extension of time for amendment on the creditor’s showing of
extraordinary circumstances, any amendment filed after the time prescribed
shall be void.
Tenn. Code Ann. § 30-2-307 (2011).2
A close examination of the statute upon which Mrs. Taradash relies reveals that the
statute does not require a creditor to file a claim in order to be paid nor does it prohibit an
executor from paying a debt unless a claim is filed. Instead, the statute simply and expressly
2
This statute was amended effective May 9, 2012; the changes are not material to this appeal.
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creates a statute of limitations for claims against a decedent’s estate with the following
language, “[a]ll claims against the estate arising from a debt of the decedent shall be barred
unless filed within the period prescribed in the notice published or posted in accordance with
§ 30-2-306(b).” Id. (emphasis added). Thus, the statute bars claims that are not timely filed;
however, the statute does not prohibit executors from paying lawful debts unless a claim is
filed.
We now look to the statute upon which the Executor relies, Tennessee Code
Annotated § 30-2-318(b), which pertains to the payment of debts prior to expiration of the
period in which claims against a decedent’s estate may be filed. It provides:
(b) If the executor or administrator knows or is willing to undertake that an
estate is solvent, the executor or administrator may pay debts, but if the
executor or administrator pays any debts other than those specified in
subsection (a) prior to the expiration of the time fixed for the payment of
claims, and the estate proves insolvent, the executor or administrator and the
sureties of the executor or administrator shall be liable to each and every
creditor for the creditor’s ratable share of the insolvent estate.
Tenn. Code Ann. § 30-2-318(b) (emphasis added).
The above section reveals that executors and administrators have no duty to pay a debt
of the decedent unless a claim is timely filed and properly supported; nevertheless, the
General Assembly has afforded executors and administrators the discretion to pay debts,
provided the estate is solvent and the period in which to file the claim has not expired,
meaning the claim is not time barred. It is also significant that Tennessee Code Annotated
§ 30-2-318(b) expressly states that debts may be paid, as distinguished from claims. Thus,
the General Assembly has expressly authorized executors to pay debts for which no claim
had been filed, provided the claim was not time barred when the debt was paid and the estate
is solvent.3
3
It is important to note that, if an executor or administrator pays a debt prior to the expiration of the
time for claims to be filed, he or she is taking a risk. This is due to the fact that the executor or administrator
may be personally liable in the event the estate does not have sufficient assets to pay all valid claims or
demands as well as costs of administration, funeral expenses, taxes and claims by the Bureau of TennCare
pursuant to Tennessee Code Annotated § 71-5-116. See Tenn. Code Ann. § 30-2-318(b) (“if the executor or
administrator pays any debts other than those specified in subsection (a) prior to the expiration of the time
fixed for the payment of claims, and the estate proves insolvent, the executor or administrator and the sureties
of the executor or administrator shall be liable to each and every creditor for the creditor’s ratable share of
the insolvent estate.”).
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The foregoing notwithstanding, Mrs. Taradash asserts that the Executor’s assertion,
and our conclusion, is in conflict with Tennessee Code Annotated § 30-2-311. We
respectfully disagree. This statute authorizes an executor to waive requirements for the filing
of “any claim not exceeding one thousand dollars ($1,000) principal amount.”4 Id. She relies
upon this provision to assert that it implicitly precludes the Executor from paying an
obligation that exceeds $1,000 unless a claim is timely filed. Mrs. Taradash is correct that
this provision is limited to claims of $1,000 or less, and we acknowledge that this provision
is inconsistent with § 30-2-318; however, and more importantly, § 30-2-311 does not
expressly contradict § 30-2-318(b). This is because § 30-2-311 does not prohibit the payment
of debts in excess of $1,000 for which a claim has not yet been filed. Therefore, we find that
§ 30-2-311 cannot be construed to prohibit, by implication, Tennessee Code Annotated § 30-
2-318(b), which gives executors and administrators the discretion to pay other debts of the
decedent provided the estate remains solvent to pay all other obligations.
We also believe the resolution of this issue is not limited to the statutes relied upon
by the parties; instead, other legal principles and statutory duties are germane to this issue.
We will start with the General Assembly imposing a duty on the personal representative to
known creditors of the decedent. Burke, 190 S.W.3d at 663.
Tennessee Code Annotated § 30-2-306(d) (2011) states it “shall be the duty of the
personal representative” to provide notice “to all creditors of the decedent of whom the
personal representative has actual knowledge or who are reasonably ascertainable by the
personal representative. . . .” Tenn. Code Ann. § 30-2-306(d) (2011). Black’s Law Dictionary
defines duty as: “A legal obligation that is owed or due to another and that needs to be
satisfied; an obligation for which somebody else has a corresponding right.” Black’s Law
Dictionary 521 (7th ed. 1999). In Burke, the personal representative failed to give actual
notice to a known creditor of the decedent, thereby breaching a duty imposed upon the
personal representative under Tennessee Code Annotated § 30-2-306(d).5 Burke, 190 S.W.3d
at 663. The known creditor did not learn of the decedent’s death until more than one year
after the decedent’s death; thus, the creditor was time barred from filing a claim against the
estate under Tennessee Code Annotated § 30-2-307. Id. at 662. Not to be deterred, the
creditor filed a civil action against the former personal representative in his personal
capacity, asserting that the former personal representative breached a duty to the creditor and
4
The statute also provides that if the payment of the debt is brought into question, “the personal
representative will have the burden of showing the validity of the claim so paid.” Tenn. Code Ann. §
30-2-311.
5
At the time of the opinion in Burke, the language at issue was codified at Tennessee Code Annotated
§ 30-2-306(e). However, effective January 1, 2006, the previous subsection (b) was deleted and the language
at issue became codified at § 30-2-306(d), where it remains.
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the creditor was damaged by the breach. Id. The Burke court found in favor of the creditor
and held the former personal representative personally liable to the creditor, explaining:
We agree that “Tenn. Code Ann. § 30-2-307(a)(1)(B) provides for an absolute
one year limit on the filing of claims against the estate. . . . ” [Estate of Jenkins
v. Guyton, 912 S.W.2d 134, 138 n.3 (Tenn.1995)]. However, in the case at
hand, Plaintiff seeks to hold Defendant personally responsible for the breach
of her duty to notify Plaintiff as a known or readily ascertainable creditor.
Plaintiff is not seeking recourse against the Estate. Therefore, Tenn. Code
Ann. § 30-2-307(a)(1)(B) is not applicable to the issue involved in this case.
While we find the language of Tenn. Code Ann. § 30-2-306(e) to be clear and
unambiguous, we have erred on the side of caution by also reviewing the
legislative history behind Tenn. Code Ann. § 30-2-306(e). This review
revealed that our Legislature both contemplated situations arising very similar
to the case at hand and sought to impose a duty on the personal representative
who then could be held personally liable for breaching that duty.
Our duty is to “ascertain and give effect to the intention and purpose of the
legislature.” Conley, 141 S.W.3d at 595. We find the clear legislative intention
and purpose of this statute is to create a duty and to hold the personal
representative personally liable for a breach of that duty. We, therefore, hold
that a personal representative can be held personally liable for a breach of the
duty created by Tenn. Code Ann. § 30-2-306(e). To hold otherwise would
mean that our Legislature intended to provide a personal representative
statutory protection for choosing to violate her statutory duty by not notifying
known or readily ascertainable creditors with the hope that these creditors
would fail to file claims within twelve months of the date of death, likely
resulting in more money for the beneficiaries. A personal representative who
is also a beneficiary could, therefore, create a windfall for herself with no
repercussions for violating her statutory duty. By our interpretation of this
statute, we decline to hold that our Legislature intended to create this duty of
the personal representative and then to reward the personal representative for
a violation, especially an intentional violation, of that duty. To hold other than
as we have would be to defeat the clear intent of our Legislature when it
specifically created this “duty of the personal representative. . . .”
Burke, 190 S.W.3d at 664-65.
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As the authors of Pritchard on The Law Of Wills And Administration of Estates explain,
“The duty of the personal representative to pay all lawful debts and charges upon the estate
to the full extent of the assets which may come into his hands, before making distribution,
lies at the very foundation of the purpose of granting letters.” 2 Jack W. Robinson, Sr., et al.,
Pritchard On The Law Of Wills And Administration Of Estates § 788 (7th ed. 2009)
(“Pritchard”) (emphasis added). Further, as the court in Burke made clear, since January 1,
1989, with the enactment of Tennessee Code Annotated § 30-2-306, the General Assembly
has imposed a duty on personal representatives to creditors. Burke, 190 S.W.3d at 663. We
also find it pertinent that the purpose of the Claims Act, Tennessee Code Annotated §
30-2-301, et. seq., is to afford a simple, inexpensive, and expeditious remedy for the
administration of estates and the Act is to be construed liberally to accomplish the remedy
and dispense with formal pleadings. Pritchard § 788. Based upon the foregoing, it would be
wholly inconsistent with the purpose of the Claims Act – to afford a simple, inexpensive, and
expeditious remedy for the administration of estates – for the personal representative to be
prohibited from paying a bona fide and undisputed debt of the decedent unless and until the
creditor files a claim; the result of which would add, at a minimum, the filing fee of the claim
and possibly interest and costs of collection to the administration of the estate.
Reading the foregoing statutes in pari materia, we have determined that a personal
representative of a decedent’s estate has the discretion to pay lawful and bonafide debts of
the decedent exceeding $1,000, for which no claim had been filed provided the estate is
solvent and the period in which to file the claim arising from the debt had not expired when
the debt was paid.
We now turn our attention to the two debts at issue, the contingency fee agreement
with the Law Firm and the credit card debt.
A. T HE C ONTINGENCY F EE A GREEMENT
On June 18, 2009, the decedent entered into a contingency fee agreement with Pryor,
Flynn, Priest & Harber (the “Law Firm”) to represent her in a claim for personal injuries
against the owner of the property where she fell. The fee agreement provided that the Law
Firm would receive one-third of the recovery as a contingency fee. Specifically it provided:
Attorneys are to render their services in this case on a contingent
basis; that is, out of any recovery whether by settlement or
verdict, said Attorneys are to receive Thirty-Three and One-
Third percent (33-1/3%) of the amount recovered as their fee. In
the event there is no recovery, no charge shall be made for an
attorney’s fee.
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The agreement also provided that all expenses would be paid by the decedent and be
deducted after the contingency fee was calculated. Therefore, the Law Firm’s fee would be
one-third of the gross settlement.
On January 29, 2010, after consulting with her attorneys, the decedent accepted a
settlement offer from the insurer of the property owner (the “Insurance Company”), and in
a letter accepting the settlement offer, the Law Firm advised the Insurance Company to remit
payment of the settlement payable to the decedent and the Law Firm.
The decedent died on April 11, 2010, before the settlement could be completed. As
noted earlier, on May 5, 2010, the probate court appointed Mr. Freedman as the Executor of
the Estate. On July 19, 2010, the insurance company issued a settlement check payable to
the decedent’s estate, Mr. Freedman as the Executor, and the Law Firm, and mailed the check
to the Law Firm. On July 30, 2010, the Executor approved the accounting provided by the
Law Firm, which identified the expenses and settlement proceeds remitted by the insurance
company and the one-third contingency fee. The expenses totaled $549.58.6 After depositing
the settlement check into its trust account and deducting one-third of the total recovery, plus
expenses, the Law Firm remitted to the Estate a check for the balance of the settlement
proceeds.
As we concluded earlier, a personal representative of a decedent’s estate has the
discretion to pay lawful and bonafide debts of the decedent exceeding $1,000 for which no
claim had been filed provided the estate is solvent and the period in which to file the claim
arising from the debt had not expired when the debt was paid. When the Executor approved
payment of the contingency fee to the Law Firm, the firm’s claim was not time barred and
the estate remains solvent. We also note that Mrs. Taradash challenged the amount of the fee
paid to the Law Firm; however, the trial court considered her challenge to the amount of the
fee and found the fee was proper. Accordingly, we affirm the trial court’s grant of summary
judgment in favor of the Executor on this issue.
B. T HE D ECEDENT’S C REDIT C ARD D EBT
The second issue concerns the payment of the outstanding balance on the decedent’s
credit card of $14,139.04, which primarily consisted of healthcare services and assisted living
6
The amount of the settlement is not germane to the issues on appeal and the settlement agreement
is confidential; therefore, we do not state the amount of the settlement. Additionally, the amount of the
Decedent’s Medicare Subrogation claim was deducted from the settlement proceeds.
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services provided by Family Staffing Solutions, Inc. (“Family Staffing”) to the decedent.7
The decedent contracted for Family Staffing’s services in 2009 and automatic payment for
these charges via the decedent’s credit card was authorized pursuant to a document executed
by Mrs. Taradash on behalf of the decedent. Also, some of the charges on the credit card
were made by Mrs. Taradash for flowers and food for the decedent’s funeral.
On May 19, 2012, the Executor remitted payment in the amount of $14,139.04 to the
credit card company. As stated in Paragraph 6 of his Affidavit, Mr. Freedman made this
payment in an effort to avoid the accrual of interest or penalties on the credit card. When the
Executor paid the credit card debt, the claim was not time barred and the estate remains
solvent. Although Mrs. Taradash also challenged the amount of the credit card account, the
trial court considered her challenge to the amount and found no charges that should not have
been paid.
Accordingly, we affirm the trial court’s grant of summary judgment in favor of the
Executor on this issue.
I N C ONCLUSION
The above rulings render moot the other issues raised by Mrs. Taradash. Therefore,
the judgment of the trial court is affirmed in all respects and this matter is remanded with
costs of appeal assessed against the appellant, Anita Taradash.
______________________________
FRANK G. CLEMENT, JR., JUDGE
7
Family Staffing Solutions, Inc. is an assisted living company that provides services to persons in
need of assistance.
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