Lula Sloans v. Nadine E. Berry And Robert M. Berry ( 2015 )

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
In the Matter of the Estate of
Betty Jean Berry, No. 72095-3-1
Deceased. DIVISION ONE
LULA S. SLOANS, a single person;
Appellant,
O
Xs*.
"Ju-
NADINE E. BERRY & ROBERT M. BERRY, PUBLISHED OPINION
in their capacity as co-administrators of the
en
Estate of Betty Jean Berry; FILED: August 10, 2015
Respondents.
Becker, J . — 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.
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
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Hunter estate if neither Sloans nor Berry used it. Hunter named Sloans the
residual beneficiary of the Hunter estate.
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.
On July 31, 1991, Berry took possession of the property. She possessed
it continuously until her death on August 5, 2013.
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.
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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.
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.
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.
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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.
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.
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.
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.
1The Estate also asserted that even if a creditor's claim can be litigated as
a TEDRA matter, the petition had to be dismissed because Sloans improperly
filed it under the Berry estate cause number. A TEDRA proceeding may not be
filed in an existing probate, trust, or guardianship case, but must be commenced
as a new and separate action. RCW 11.96A.090(2), effective July 28, 2013.
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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).
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." Schluneqer v. Seattle-First Nat'l Bank, 48 Wash. 2d 188,
189-90, 292 P.2d 203 (1956); see ajso City of Spokane v. Costello. 57 Wash.
183, 106 P. 764(1910).
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, 137P.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
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of "matter" is broad in scope and "is intended to encompass matters traditionally
within the exclusive province of the courts."2
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.
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.
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
2 Real Property, Probate & Trust Section, Wash. State bar Ass'n
Comments to the Trust and Estate Dispute Resolution Act 1 (Jan. 28,1999),
available at www.wsbarppt.com/uploads/tedra99.pdf. See "TEDRA § 104(1)" - "Matter,"
now RCW 11.96A.030(2). The Bar Association comments are included in the legislative
history file for S.B. 5196, 56th Leg., Reg. Sess. (Wash. 1999), Senate Committee on
Judiciary, Legislative Records, on file with Wash. State Archives, 01-A-323 box 1. We
cited the Bar Association comments in support of our interpretation of the term "matter"
in In re Estate of Bernard. 182 Wash. App. 692, 722 n.74, 332 P.3d 480 (2014).
3 See id., Bar Ass'n comments, "TEDRA § 103" - "Powers of the Court," now
RCW 11.96A.020; "TEDRA § 303" - "Procedural rules," now RCW 11.96A.100.
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therefore a party entitled under RCW 11.96A.080 to petition the court for a
declaration of her rights relating to the creditor claim.
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; Bailev 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.
This conclusion leads us to the second issue: whether a suit on a rejected
creditor's claim must be dismissed if it is erroneously brought as a TEDRA
petition. The estate argues that the order of dismissal with prejudice should be
affirmed under Estate of Kordon, 157 Wash. 2d 206. In that case, the appellant filed
a will contest petition in an existing probate case but did not serve a timely
citation upon the executor as required by the will contest statute. RCW
11.24.020. A citation is equivalent to a civil summons. Estate of Kordon, 157
Wash. 2d at 210. The appellant argued that citations were not necessary because
the will contest had been commenced as an action incidental to the existing
probate proceedings as allowed by RCW 11.24.020. This provision states that
when a TEDRA proceeding is commenced as an action incidental to an existing
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probate, the requirement of a summons is unnecessary with respect to existing
parties.4
The Supreme Court rejected the argument and affirmed the trial court's
decision to dismiss the case for lack of personal jurisdiction. The court held that
the citation requirement of RCW 11.24.020 remains in effect as the necessary
means of conferring upon the court personal jurisdiction over the executor.
Estate of Kordon. 157 Wash. 2d at 210. Under RCW 11.96A.080(2), TEDRA "shall
not supersede" otherwise applicable provisions in Title 11. "TEDRA cannot
eliminate that requirement [of serving a citation] without superseding RCW
11.24.020." Estate of Kordon, 157 Wash. 2d at 212.
In Estate of Kordon, the appellant belatedly issued citations more than two
years after filing the will contest petition. The court held that dismissal was
required because of the four-month statute of limitations for a will contest
imposed by RCW 11.24.010. See Estate of Kordon, 157 Wash. 2d at 213-14.
Here, the Berry estate contends that filing a creditor claim suit as a TEDRA
petition rather than as an ordinary civil action is similarly a fatal error requiring
dismissal.
4 A summons must be served in accordance with this chapter and,
where not inconsistent with these rules, the procedural rules of
court, however, if the proceeding is commenced as an action
incidental to an existing judicial proceeding relating to the same
trust or estate or nonprobate asset, notice must be provided by
summons only with respect to those parties who were not already
parties to the existing judicial proceedings.
RCW 11.96A. 100(2).
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This case is similar to Estate of Kordon in that the requirement to use an
ordinary civil action to establish a creditor claim remains unaltered by TEDRA; it
cannot be eliminated without superseding RCW 11.40.100. See RCW
11.96A.080(2). But unlike in Estate of Kordon. service of Sloans' creditor claim
action was timely. The Berry estate does not contend that service was
ineffective or that the court lacked personal jurisdiction.
To support its theory that dismissal was proper under CR 12(b)(1), the
estate contends that the probate court lacked subject matter jurisdiction because
the creditor claim action was inappropriately filed under a probate cause number.
This argument fails. A tribunal lacks subject matter jurisdiction only when it
attempts to decide "a type of controversy over which it has no authority to
adjudicate." Marlev v. Dep't of Labor &Indus., 125 Wash. 2d 533, 539, 886 P.2d
189 (1994). The broad original jurisdiction vested in the superior court by article
IV, section 6 of the Washington Constitution includes the authority to decide a
suit on a rejected creditor's claim. A superior court acting in probate is the same
court when it hears an ordinary civil action. The requirement to file a creditor
claim suit as an action separate from a probate proceeding is procedural, not
jurisdictional. Procedural requirements must not be elevated to the level of
jurisdictional imperative. Dougherty v. Dep't of Labor &Indus., 150 Wash. 2d 310,
315, 319, 76 P.3d 1183 (2003). CR 12(b)(1) was not an appropriate basis for the
dismissal.
The estate also contends that dismissal with prejudice was required under
CR 12(b)(6) (failure to state a claim) because Sloans did not file suit within the
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30-day limitation period. Under RCW 11.40.100(1), failure to bring suit in the
proper court against the personal representative within 30 days of rejection
means the claim will be "forever barred."
CR 12(b)(6) can be an appropriate basis for dismissal of a claim filed after
the applicable statute of limitations has expired. Atchison v. Great W. Malting
Co., 161 Wash. 2d 372, 166 P.3d 662 (2007). But Sloans did not miss the 30-day
statute of limitations. She filed the petition on her first creditor's claim 29 days
after the estate rejected it. She filed the amended petition on her second
creditor's claim four days after the estate rejected it.
It is an improper elevation of form over substance to dismiss a creditor's
suit as untimely simply because it was filed in an existing probate proceeding
rather than as a separate civil action. McWhorterv. Bush, 7 Wash. App. 831, 832,
502 P.2d 1224 (1972). Under McWhorter, the important inquiry is whether
substantial rights have been protected. Error in the form of action by which suit
is brought on a creditor claim is harmless as long as the personal representative
is sued in superior court within 30 days of rejection:
RCW 11.40.060 [now RCW 11.40.100] requires that suits
upon rejected claims be brought "in the proper court" within 30 days
of notice of rejection. The "proper court" in this instance is the
superior court; this probate and the actions on the rejected claims
were filed in the superior court. To commence such actions,
plaintiffs should have filed separate civil actions and paid the
required filing fees. Rutter v. Rutter, 59 Wash. 2d 781, 784, 370 P.2d
862 (1962); Schluneger v. Seattle First-Nat'l Bank, 48 Wash. 2d 188,
190, 292 P.2d 203 (1956). Plaintiffs complied with this statute by
filing their actions within the 30-day period. Defendant received
proper notice thereof and had an opportunity to, and did, defend.
Defendant's substantial rights, therefore, have been completely
protected. The validity of the procedure should not depend upon
the mere observance of form, but rather upon whether substantial
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rights have been protected. See Purnell v. Simonvi. 51 Del. 139,
140 A.2d 256, 258 (1958); Lindsay Great Falls Co. v. McKinnev
Motor Co., 79 Mont. 136, 255 P. 25 (1927); 1 C.J.S. Actions § 123
at 1386, note 46 (1936). Here, the fact that the superior court clerk
has one series of numbers for probate matters and another series
for regular civil actions does not mean that the case was not filed in
the superior court. Probate proceedings are properly within the
jurisdiction of the superior court. We find any error resulting from
this failure to file separate actions was harmless; defendant was not
prejudiced.
McWhorter, 7 Wash. App. at 832-33 (footnote omitted).
Following McWhorter, we conclude it was error to grant the estate's
motion to dismiss. Properly characterized, what Sloans commenced in superior
court was an action on a rejected creditor's claim. She filed it within the 30-day
statute of limitations. She paid the filing fee. The Berry estate received proper
notice. The superior court was the proper court. On remand, the petition should
be treated as an ordinary civil action. As such, it can be moved to a civil
calendar.
Below, the commissioner awarded attorney fees to the estate. Because
we are reversing the trial court's order of dismissal, we also reverse the award of
attorney fees. We briefly address an issue that may arise on remand. Sloans
argues that attorney fees may not be awarded under RCW 11.96A.150 in a case
where novel questions of statutory construction are at issue. Her argument is a
misreading of In re Estate of Stover, 178 Wash. App. 550, 564, 315 P.3d 579
(2013), review denied, 180 Wash. 2d 1005 (2014). Whether a case involves novel
or unique questions is a factor that a court may deem relevant in its consideration
of a request for attorney fees under RCW 11.96A.150, and in Stover, we did
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deem it relevant. But we did not hold that it is always dispositive or even always
relevant.
RCW 11.96A.150 grants broad discretion to courts to award attorney fees
"in such manner as the court determines to be equitable" in "all proceedings
governed by this title," i.e. under Title 11. The authority granted by RCW
11.96A.150 to award attorney fees is not limited to actions initiated under chapter
11.96A RCW. See, e^, Villegas v. McBride, 112 Wash. App. 689, 697, 50 P.3d
678 (2002), review denied, 149 Wash. 2d 1005 (2003); Laue v. Estate of Elder, 106
Wash. App. 699, 712-13, 25 P.3d 1032 (2001), review denied, 145 Wash. 2d 1036
(2002).
On remand, the court retains the discretion to decide if an award to either
party under RCW 11.96A. 150 is equitable. The court may consider any party's
request for attorney fees in light of "any and all factors that it deems to be
relevant and appropriate." RCW 11.96A. 150(1).
Reversed and remanded.
&X.T.
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