In Re the ESTATE OF Sanford M. BOLTON ( 2013 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
IN RE THE ESTATE OF SANFORD M. BOLTON
No. 2 CA-CV 2013-0038
Filed December 20, 2013
Appeal from the Superior Court in Pima County
No. PB20111244
The Honorable Kyle A. Bryson, Judge
REVERSED AND REMANDED
COUNSEL
Ryley Carlock & Applewhite, Phoenix
by John C. Lemaster, Charitie L. Hartsig, and Kevin R. Heaphy
Counsel for Appellants Mutual Pharmaceutical and United Research
Snell & Wilmer, LLP, Tucson
by Andrew M. Jacobs and Katherine V. Foss
Counsel for Appellee Eric Warren Goldman, Personal Representative of the
Estate of Sanford M. Bolton
OPINION
Judge Miller authored the opinion of the Court, in which Presiding
Judge Vásquez and Chief Judge Howard concurred.
M I L L E R, Judge:
IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
¶1 Claimants Mutual Pharmaceutical, Inc. and United
Research Laboratories, Inc. (Mutual Parties) appeal the probate
court’s judgment confirming disallowance of their creditors’ claim
against the estate of Sanford M. Bolton (Estate). We conclude the
court erred when it ruled that a claimant who presents a claim to a
decedent’s estate notifying it of an action against the decedent that
was pending before his death, must commence additional
proceedings if the personal representative disallows the claim.
Factual and Procedural Background
¶2 The relevant facts in this case are undisputed. In
May 2011, Mutual Parties sued Bolton and two other parties in
Pennsylvania state court. The complaint alleged Bolton, a professor
at St. John’s University in New York, assisted by a graduate student,
developed a technology for converting liquid drugs to a powder
form. The complaint further alleged that Bolton and the student left
the university, formed a company, and fraudulently assigned to
Mutual Parties patent rights that actually belonged to St. John’s
University.1 Mutual Parties sought a declaratory judgment
regarding ownership of the patent, as well as damages in excess of
$100 million for breach of contract, fraudulent misrepresentation,
and unjust enrichment.
¶3 Bolton died in Pima County on October 11, 2011, and
the next day his Pennsylvania defense attorney filed a notice of
death. On November 29, 2011, Eric Goldman filed an application for
informal probate in Pima County and requested that he be
appointed personal representative of the Estate, which the probate
court approved the next day. On December 20, 2011, Mutual Parties
filed a praecipe in the Pennsylvania court to substitute Goldman as
1St. John’s University also sued Bolton, the student, and their
company in federal court in New York. The suit alleges, in pertinent
part, the defendants obtained patents in violation of their
contractual and fiduciary duties to St. John’s University. It appears
Mutual Parties and St. John’s University brought separate suits in
different jurisdictions against Bolton for the same licensing fees
arising from the patents.
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
successor-in-interest to Bolton. Mutual Parties also presented a
Notice of Claim to Goldman on January 17, 2012. The next day, the
Pennsylvania court ordered Goldman substituted as successor-in-
interest to Bolton.
¶4 On January 26, 2012, the Estate disallowed the probate
claim. The Estate acknowledged the Pennsylvania case and stated
the action had yet to be adjudicated. It explained the disallowance
on the ground that “[p]ursuant to A.R.S. § 14-3804(2) no
presentation of claim was required for the Claim.” Mutual Parties
did not institute new proceedings in another court or move for
probate allowance. More than seven months later, the Estate filed a
motion to confirm disallowance of claim, which the probate court
granted over Mutual Parties’ objection on December 7, 2012. The
probate court entered judgment on January 11, 2013, and this timely
appeal followed.
Discussion
¶5 We are required to decide whether a claimant with a
pending lawsuit for damages against the decedent at the time of his
death, who sends a notice of claim to the personal representative
that is disallowed, must within sixty days commence another
lawsuit or move for probate approval to preserve its right to collect a
judgment against the estate. The Estate argues A.R.S. § 14-3804(3)
requires a plaintiff-claimant to initiate a second lawsuit or move for
probate court allowance if the personal representative denies the
claim. Mutual Parties contend the plain language of § 14-3804(2)
makes it clear that when a lawsuit is already pending, “no further
action need be taken after disallowance by the personal
representative,” because “where no need to present a claim arises
because the claim is exempt from presenting, the mere fact that the
claim was presented and disallowed does not nullify its exempt
status.”
¶6 We review questions of statutory interpretation de
novo. North Valley Emergency Specialists, L.L.C. v. Santana, 208 Ariz.
301, ¶ 8, 93 P.3d 501, 503 (2004). To determine a statute’s meaning,
we first examine the language of the statute, PNC Bank v. Cabinetry
By Karman, Inc., 230 Ariz. 363, ¶ 6, 284 P.3d 874, 876 (App. 2012), and
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
construe the words and phrases “according to the common and
approved use of the language,” A.R.S. § 1-213. “If a statute’s
language is clear, it is ‘the best indicator of the authors’ intent and as
a matter of judicial restraint we must apply it without resorting to
other methods of statutory interpretation, unless application of the
plain meaning would lead to impossible or absurd results.’” Metzler
v. BCI Coca-Cola Bottling Co. of Los Angeles, Inc., 233 Ariz. 133, ¶ 8, 310
P.3d 9, 12 (App. 2013), quoting Winterbottom v. Ronan, 227 Ariz. 364,
¶ 5, 258 P.3d 182, 183 (App. 2011).
¶7 In order to understand the interplay among the
subsections of A.R.S. § 14-3804,2 it is helpful to review the general
2Section 14-3804 states in full:
Claims against a decedent’s estate may be
presented as follows:
1. The claimant may deliver or mail to the
personal representative a written statement of the claim
indicating its basis, the name and address of the
claimant and the amount claimed. The claim is deemed
presented on receipt of the written statement of claim
by the personal representative. If a claim is not yet due,
the date when it will become due shall be stated. If the
claim is contingent or unliquidated, the nature of the
uncertainty shall be stated. If the claim is secured, the
security shall be described. Failure to describe correctly
the security, the nature of any uncertainty, and the due
date of a claim not yet due does not invalidate the
presentation made.
2. The claimant may commence a proceeding
against the personal representative in any court where
the personal representative may be subjected to
jurisdiction, to obtain payment of his claim against the
estate, but the commencement of the proceeding must
occur within the time limited for presenting the claim.
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
procedure by which a decedent’s creditor can make or preserve its
claim against the estate. A claimant without a pending case or
judgment3 may send the personal representative a written statement
of the claim that must include the basis for the claim and the
amount. § 14-3804(1). Otherwise, a claimant may “commence a
proceeding against the personal representative in any court where
the personal representative may be subject to jurisdiction.”
§ 14-3804(2). If the claimant chooses to send a written statement, the
personal representative may allow the claim and distribute funds,
disallow the claim in whole or in part, or negotiate a compromise.
A.R.S. §§ 14-3806(A), 14-3807, 14-3813. If the personal representative
disallows the claim, the claimant has sixty days to commence a
proceeding against the personal representative, § 14-3804(3), or to
petition the probate court for allowance of the claim. § 14-3806(A).
The failure to timely commence a proceeding upon disallowance
bars the claim. Id.
¶8 A claimant who filed a lawsuit against the decedent
before his death is not required to present a claim. § 14-3804(2)
No presentation of claim is required in regard to
matters claimed in proceedings against the decedent
which were pending at the time of his death.
3. If a claim is presented under paragraph 1, no
proceeding thereon may be commenced more than sixty
days after the personal representative has mailed a
notice of disallowance; but, in the case of a claim which
is not presently due or which is contingent or
unliquidated, the personal representative may consent
to an extension of the sixty day period, or to avoid
injustice the court, on petition, may order an extension
of the sixty day period, except no extension may run
beyond the applicable statute of limitations.
3A claimant with a judgment against the personal
representative has an automatic allowance pursuant to A.R.S.
§ 14-3806(D).
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
(“claim . . . [not] required in regard to matters claimed in
proceedings against the decedent which were pending at the time of
his death”). Likewise, if the claimant substitutes the personal
representative for the decedent in the pending proceeding, a
judgment against the personal representative will act as an
allowance. § 14-3806(D). Neither statute provides exact procedures
for an estate where the personal representative is substituted as a
party to the pre-death lawsuit, although more general requirements
are set out in § 14-3807(A) (governing payment of claims, including
“unbarred claims which may yet be presented”).
¶9 As claimants with a lawsuit pending against Bolton and
upon substitution of the personal representative, Mutual Parties
were not required to present a claim. § 14-3804(2). Nonetheless,
Mutual Parties mailed written notice of a claim to the personal
representative pursuant to § 14-3804(1). The written claim reserved
rights under the exception found in § 14-3804(2) for pending
proceedings. It advised the personal representative, “Claimants
deem it prudent to present the Claim, thereby notifying the Personal
Representative of its existence and the need for it to be
administered.” The Estate’s disallowance only stated the
undisputed principle that § 14-3804(2) does not require presentation
of a claim.
¶10 Mutual Parties argue that the trial court improperly
barred their claim for failing to initiate other proceedings, despite
the plain language in subsection (2) that “[n]o presentation of claim
is required in regard to matters claimed in proceedings against the
decedent which were pending at the time of his death.” Equally
important, they contend nothing in § 14-3804 requires the claimant
to file a duplicative lawsuit or initiate probate allowance procedures
if a complementary claim notification is filed. We agree with this
plain reading of § 14-3804.
¶11 Although the Estate acknowledges and had previously
asserted this reading of § 14-3804(2), after Mutual Parties did not
initiate additional proceedings, it argued below and on appeal that
the subsection had no force or effect because a written claim
statement was presented. Additionally, it impliedly contends that
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
the Pennsylvania lawsuit filed before the decedent died is a legal
nullity because any resulting judgment would have been supplanted
by a probate claim allowance proceeding or a second lawsuit.
Judgment was entered in favor of the Estate against Mutual Parties
as to “the claims set forth more fully in the [Pennsylvania
Complaint].”
¶12 The Estate principally relies on In re Estate of Van Der
Zee, 228 Ariz. 257, 465 P.2d 439 (App. 2011). In that case, the
decedent’s former husband claimed he was a known creditor of the
estate based on a term in the dissolution decree requiring decedent
to obtain a life insurance policy naming a mortgagee as the
beneficiary. Id. ¶¶ 3, 10. The former husband presented a claim in
the amount of the life insurance policy soon after the decedent died.
Id. ¶¶ 4-5. The estate disallowed the claim on the ground that it was
unclear the former husband had standing to assert a claim for the
amount of the insurance policy. Id. ¶ 20. The former husband failed
to commence a proceeding within sixty days and the trial court
determined, among other things, that the claim was time-barred. Id.
¶¶ 7, 13. On appeal, the former husband argued the sixty-day limit
did not apply; rather, he had two years to file a claim because he
was not given proper written notice as a known creditor. Id. ¶ 10.
The court concluded, in pertinent part, that when a claimant files a
notice, § 14-3806(A) establishes a sixty-day time limit to initiate
proceedings to challenge the denial of the claim. Id. ¶ 13. On its
facts, however, Estate of Van Der Zee is limited to circumstances
where the claimant does not have a judgment against the personal
representative or a pending lawsuit against the decedent that was
filed prior to his death. Id. ¶¶ 2-7, 17. It does not apply when a
separate action is pending.
¶13 We agree with Mutual Parties that § 14-3804, when read
in its entirety, shows the intent of the Probate Code to exempt
claimants with pre-death lawsuits from the procedures described for
claimants without pending actions or judgments against the
personal representative. More specifically, when a claimant with a
pre-death lawsuit presents notice of the claim, it does not trigger the
procedures that would have applied had a lawsuit not been filed
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
prior to the decedent’s death. Those jurisdictions that, like Arizona,
have adopted portions of the Uniform Probate Code (UPC)4 have
read the notice statute as we do here. In Lovell v. One Bancorp, Maine
Sav. Bank, 755 F. Supp. 466, 466-67 (D. Me. 1991), a complaint against
the decedent for money damages was pending in the federal trial
court when the decedent died and probate proceedings began. The
claimants notified the estate of their pending case pursuant to Me.
Rev. Stat. Ann. tit. 18-A, § 3-804(1) (1988),5 which is nearly identical
to § 14-3804(1). As in this case, the personal representative
disallowed the claim and the plaintiff-claimant took no further
action in the probate court. Id. at 467. The estate then moved for
summary judgment in the federal district court on the ground that
the failure to file a claim in the probate court barred the action. Id. at
466. In rejecting the Estate’s interpretation of the probate code, the
court concluded the claimant was not required to petition the
probate court or to commence another proceeding. Id. at 467-68.
The court also noted, “The claims procedures set forth in the Probate
Code are not a trap for the unwary by which ongoing judicial
proceedings may be vitiated. Rather they are designed to facilitate
and expedite proceedings for estate distribution.” Id. at 467. More
pointedly, the court observed that requiring claimants “to file a new
action against the estate when the current claims are pending in this
Court would indeed exalt form over substance, rendering
nonsensical the plain language of [the statute] and undermining the
clear purposes of the claim presentation provisions of the Probate
Code.” Id. at 468.
¶14 The Estate does not contest the Lovell court’s legal
conclusions about the probate code, but employs its dicta to support
4Arizona adopted the bulk of the Uniform Probate Code in
1973, and it became effective in 1974. Gonzalez v. Superior Court, 117
Ariz. 64, 66, 570 P.2d 1077, 1079 (1977).
5Section 3-804 Me. Rev. Stat. Ann. tit. 18-A, was amended in
1997, but the amendment did not alter subsection (1). 1997 Me.
Legis. Serv. 1st Sp. Sess. ch. 321, L.D. 1032, H.P. 755.
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
the alternative argument that a personal representative could also
face a trap. We address that argument at ¶ 19.
¶15 The Montana Supreme Court also considered a similar
fact pattern in Reese v. Reese, 637 P.2d 1183 (Mont. 1981). There, a
former wife filed an action against her former husband based on a
breach of their divorce decree. Id. at 1184. While that action was
pending, the former husband died. Id. The former wife filed a claim
against the estate, but the personal representative took no action on
it. Id. The estate filed a motion to dismiss the claim in the pending
case on the ground that the claim had been effectively disallowed in
the probate proceeding and the former wife had failed to commence
another proceeding within sixty days.6 Id. The trial court denied the
motion to dismiss and entered judgment in favor of the former wife.
Id. The Montana Supreme Court concluded that the dispositive
statute, Mont. Code Ann. § 72-3-804(2)—a portion of which is
identical to that part of § 14-3804(2)—does not require presentation
of a claim if there is a pending proceeding. It found the notice
statute plain, unambiguous, direct, and certain. Id. at 1184-85.
Further, it concluded, “filing an action thereon following disallowance
was not required under the plain language of [the probate code].”
Id. at 1185 (emphasis added).
¶16 The Estate argues in the alternative that Mutual Parties’
voluntary claim requires their compliance with subsection (3). The
Estate first relies on In re Estate of Schmidt, 596 A.2d 1124 (Pa. Super.
Ct. 1991). In that case, the decedent and his former law partners
breached a rental agreement and the leasing company filed a claim
6At the time the claim was asserted in Reese, the Montana
statute defaulted to disallowance if the personal representative
failed to mail notice. See Bozeman Deaconess Hosp. v. Estate of
Rosenberg, 731 P.2d 1305, 1307 (Mont. 1987) (quoting Mont. Code
Ann. § 72-3-805(1) (1975)). This distinction obviates the Estate’s
attempt to distinguish Reese on the basis that the personal
representative took no action. In Reese, as here, the claim was
disallowed, whether by action or inaction of the personal
representative.
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
for past rent in the Pennsylvania Orphans’ Court. Id. at 1125-26. A
week after filing the claim, the company filed a complaint for breach
of the lease in the District of Columbia against all present and
former partners. Id. at 1126. The leasing company attempted to
withdraw its claim in Pennsylvania, but the court refused. Id. at
1127. The court set a hearing on the merits of the claim, but the
leasing company failed to appear and the court denied the claim. Id.
The leasing company appealed, arguing that the claim it had filed
was simply a notice and did not commence an action, thus depriving
the orphans’ court of jurisdiction. Id. at 1127-28. Pennsylvania’s
Superior Court affirmed, concluding the notice of claim and
participation in the audit proceedings provided jurisdiction to the
orphans’ court, also noting that when the estate filed the claim, no
litigation was yet pending. Id. at 1128-29. Estate of Schmidt is not
applicable here, where litigation was pending before Bolton died,
rendering applicable the specific exception to presentation found in
§ 14-3804(2).
¶17 The Estate also argues from particular statutes and
court rules where a party must comply with certain requirements
even though the initial undertaking is voluntary. The Estate first
points to Rule 56(f)(4), Ariz. R. Civ. P., which states that a moving
party need not file a response in support of summary judgment, but,
“[i]f such a party elects to file a response, it must be filed no later than
two days before the hearing.” (Emphasis added.) Unlike the statute
here, that rule’s plain language imposes a deadline when a party
voluntarily elects to do something that is not required.
¶18 The Estate next relies on A.R.S. § 42-5002(A)(1), which
states: “A person who imposes an added charge to cover the
[transaction privilege tax] . . . shall not remit less than the amount so
collected to the [Arizona Department of Revenue].” See also Ariz.
Dept. of Revenue v. Action Marine, Inc., 218 Ariz. 141, ¶ 8, 181 P.3d
188, 189 (2008) (noting taxpayers are not required to collect
transaction privilege tax from customers). In both instances, the
plain language clearly applies the requirements to those who have
voluntarily chosen to do something. There is no such language here,
where the presentation of claims statute simply says it is not
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
“required” when a case is pending and imposes no express
requirements when a party voluntarily presents a claim.
§ 14-3804(2).
¶19 Finally, the Estate argues that a claimant with a pending
lawsuit should not be permitted to present a claim based on that
action because it places an unfair burden on personal
representatives if they fail to disallow the claim. Even assuming this
to be true,7 it is a policy argument that must be addressed to the
legislature.8 We are required to apply the plain meaning of a statute
unless such application would lead to absurd results. Bilke v. State,
206 Ariz. 462, ¶ 11, 80 P.3d 269, 271 (2003). “[W]e are ‘not at liberty
to rewrite [a] statute under the guise of judicial interpretation.’”
New Sun Bus. Park, LLC v. Yuma Cnty., 221 Ariz. 43, ¶ 16, 209 P.3d
179, 183 (App. 2009), quoting State v. Patchin, 125 Ariz. 501, 502, 610
P.2d 1062, 1063 (App. 1980). Thus, even assuming arguendo we
agreed, “‘[w]e do not sit as a second legislature to rewrite laws that
may strike us as improvident.’” State v. Gonzalez, 216 Ariz. 11, ¶ 9,
162 P.3d 650, 653 (App. 2007), quoting In re Pima Cnty. Juv. Action No.
74802-2, 164 Ariz. 25, 34, 790 P.2d 723, 732 (1990).
Disposition
¶20 We conclude the plain language of § 14-3804(2)
provides that a claimant with a pending claim in another court need
not present a claim pursuant to § 14-3804(1), and if the claimant does
present the claim to the estate, unnecessary though it is, the
presentation does not nullify the exemption provided by the statute
7But c.f., Blaser v. Cameron, 116 Idaho 453, 456, 776 P.2d 462,
465 (App. 1989) (absence of estate objection to probate claim did not
affect claimant’s lawsuit extant at decedent’s death, the latter of
which “will will determine the merits of the claim and of the legal
and equitable defenses raised against it”).
8The merits of this position are debatable. For instance, the
personal representative has a safety net allowing the status of a
claim to be reversed, for example from allowed to disallowed, for a
short period of time. § 14-3806(B).
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IN RE ESTATE OF SANFORD M. BOLTON
Opinion of the Court
for claimants who have commenced proceedings for the same claim
before the decedent’s death.9
¶21 We reverse the judgment against Mutual Parties and
remand for proceedings consistent with this decision.
9Because we reverse on Mutual Parties’ first argument, we do
not address their second argument that the Pennsylvania
substitution of the personal representative satisfied the requirements
of § 14-3804(3).
12