CMS Inv. Holdings, LLC v. Estate of Wilson

Cite as 2016 Ark. App. 545
ARKANSAS COURT OF APPEALS
DIVISION I
No. CV-15-716
CMS INVESTMENT HOLDINGS, LLC Opinion Delivered: November 16, 2016
APPELLANT
APPEAL FROM THE PULASKI
V. COUNTY CIRCUIT COURT,
FOURTEENTH DIVISON
ESTATE OF ROBERT M. WILSON, [NO. 60PR-12-1470]
JR., Deceased
APPELLEE HONORABLE VANN SMITH, JUDGE
AFFIRMED
RAYMOND R. ABRAMSON, Judge
This appeal from a probate case arises out of the denial of two claims appellant CMS
Investment Holdings, LLC (CMSIH) made against appellee the Estate of Robert M. Wilson,
Jr. (Estate). The overarching questions presented in this appeal are whether CMSIH’s claims
were timely made and whether the circuit court erred by denying them. Finding no error,
we affirm the circuit court’s order denying CMSIH’s claims.
I. Background
On August 3, 2012, Robert M. Wilson, Jr. (Wilson) died. 1 On August 8, 2012, a
case was opened in Pulaski County Circuit Court to probate his Estate, and his former wife,
Jennifer Wilson-Harvey, was appointed as personal representative of the Estate.
Arkansas Code Annotated section 28-40-111(a)(1)(A) requires that a “personal
representative shall cause a notice of his or her appointment to be published stating the date
1
Prior to his death, Wilson was the owner of the Wilson Law Firm.
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of his or her appointment and requiring all persons having claims against the estate to exhibit
them, properly verified to him or her, within six (6) months from the date of the first
publication of the notice, or they shall be forever barred and precluded from any benefit in
the estate.” On August 11, 2012, the Estate published notice to creditors pursuant to this
requirement, alerting creditors of the necessity of filing their claims against the estate no
later than February 11, 2013.
Our law also requires that “within one (1) month after the first publication of the
notice, a copy of the notice shall also be served . . . upon all unpaid creditors whose names,
status as creditors, and addresses are known to or reasonably ascertainable by the personal
representative.” Ark. Code Ann. § 28-40-111(a)(4)(A). Pursuant to this statutory
requirement, the Estate served notice on certain creditors, but CMSIH was not among
them.
With regard to the acceptance or denial of claims, the general rule is that all claims
against a decedent’s estate must be filed with the court within six months after the date of
the first publication of notice to creditors. Ark. Code Ann. § 28-50-101(a)(1).
Notwithstanding this rule, the claims of all known or reasonably ascertainable creditors shall
be barred at the end of two years from the date of first publication of notice to creditors,
even if they have not been provided actual notice in accordance with Arkansas Code
Annotated § 28-40-111(a)(2). Ark. Code Ann. § 28-50-101(h).
CMSIH did not file a claim against the Estate prior to the six-month deadline of
February 11, 2013. In fact, it did not file its claims until June 6, 2014—twenty-two months
after notice was published. After CMSIH filed its claims, the Estate filed a motion to deny
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the claims as untimely. CMSIH responded contending that its claims were timely filed
pursuant to the two-year time limit imposed on known or reasonably ascertainable creditors.
Ark. Code Ann. § 28-50-101(h).
The circuit court conducted an evidentiary hearing on the Estate’s motion to deny
CMSIH’s claims on November 24 and December 19, 2014. At the hearing, the Estate
presented extensive evidence in support of its position that CMSIH was not entitled to
service of notice of the probate of Wilson’s Estate. Most notable was the testimony of Rufus
Wolff, Wilson’s longtime attorney and an attorney for his Estate, and Stephanie Pollard, an
accounting supervisor at the Wilson Law Firm who was also employed by the Estate. Wolff,
who had authority and access to search Wilson’s records and documents, testified that there
was no information that CMISH was a creditor or that it sought to assert a claim against the
estate. Likewise, Pollard indicated that she prepared an exhaustive list of Wilson’s books
and records, including all vendors and creditors, and found no files on CMSIH.
On May 15, 2015, the circuit court entered a detailed order granting the Estate’s
motion to deny CMSIH’s claims wherein it outlined its decision and the reasons supporting
it. CMSIH brings this appeal.
II. CMSIH’s Claims Against the Estate
This appeal focuses on whether there was evidence to establish that CMSIH was a
known or reasonably ascertainable creditor of the Estate. Accordingly, we will discuss the
events giving rise to CMSIH’s claims, focusing on the evidence CMISH deems most
relevant.
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CMSIH’s claims stem from two lawsuits. Both suits were initiated in March 2014—
subsequent to Wilson’s death and the opening of his Estate. CMSIH sued the Estate,
Jennifer Wilson-Harvey, and others in Colorado on the basis of fraud. CMSIH also sued
the Estate in Delaware alleging breach of contract, breach of fiduciary duty, and various
torts. Both lawsuits alleged that CMSIH sustained substantial losses in connection with its
investment and membership in a corporation known as RP Holdings Group, LLC (RPHG).
RPHG is a corporation that, in April 2008, purchased the non-legal-services
businesses of the Wilson Law Firm. At that time, RPHG and the Wilson Law Firm entered
into an Exclusive Services Agreement wherein RPHG agreed to provide certain services to
the Wilson Law Firm. It is pertinent to acknowledge that CMSIH invested in this
transaction, and an LLC Agreement to which Jennifer Wilson-Harvey was a signatory
identifies CMSIH as an owner of RPHG.
Also relevant to our review are the actions of Ben Cukier. Cukier personally
participated in the April 2008 negotiations on behalf of RPHG and ultimately became the
chairman of the board of RPHG. Cukier also served as a representative of CMSIH and was
a partner at FTV Capital—a private equity firm that organized CMSIH.
Financial issues arose with regard to the contract between the Wilson Law Firm and
RPHG. In 2011, Cukier, in his role with RPHG, communicated with Wilson and Rufus
Wolff about Wilson Law Firm’s non-payment of its obligations and misappropriation of
funds. These discussions resulted in a series of interim agreements between Wilson and
RPHG regarding the financial issues at RPHG. CMSIH was not a party to any of these
agreements, and Cukier did not act on behalf of CMSIH during these negotiations.
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The financial issues persisted. In July 2012, an attorney for Wilson sent a demand
letter proposing a settlement with RPHG and all associated owners, affiliates, and individuals
but that effort was ultimately unsuccessful. Shortly thereafter, Wilson commenced two
lawsuits—one against RPHG in Arkansas and another against Cukier and others in
Colorado. The lawsuit against Cukier prompted a letter written on behalf of Cukier by his
counsel Scott McMillin, who protested the lawsuit filed by Wilson and threatened claims
and litigation by FTV and equity holders in RPHG. CMSIH was not involved or
specifically mentioned in any of these communications.
III. Issues on Appeal and Standard of Review
CMSIH’s arguments on appeal are as follows: (1) due process requires actual notice
to “known or reasonably ascertainable” creditors; (2) a “creditor” must be given actual
notice by personal service; (3) due process requires the personal representative to make a
reasonably diligent search for creditors; (4) “actual notice” must be served on any identifiable
creditor with more than a conjectural claim; and (5) known or reasonably ascertainable
creditors not served actual notice have two years to file claims. In arguing for reversal,
CMSIH often contends that findings of fact and conclusions of law made by the circuit
court were reached using erroneous legal standards.
On appeal, this court conducts a de novo review of probate cases, but the circuit
court will not be reversed unless its findings are clearly erroneous. Whatley v. Estate of
McDougal, 2013 Ark. App. 709, 430 S.W.3d 875. Our court gives due deference to the
superior position of the circuit court to determine the credibility of witnesses and the weight
to be accorded their testimony. Id.
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IV. Due Process Requires Actual Notice to “Known or Reasonably Ascertainable”
Creditors
CMSIH begins its argument by basically reciting the legal standards that this court
and the circuit court are required to adhere to in this case. Any arguments for reversal raised
in this section are addressed more fully in CMSIH’s other points on appeal. For this reason,
we take this opportunity to provide a general overview of the law as it relates to claims
against estates.
Non-claim probate statutes, such as those at issue in this case, implicate constitutional
due-process considerations. Tulsa Prof’l Collection Servs. v. Pope, 485 U.S. 478 (1988).
Known or reasonably ascertainable creditors must receive actual notice that will inform
them of the need to file a claim, the date and manner by which the claim must be filed, and
that any potential claim will be barred if no claim is filed. Id. “[A]ctual notice is a minimum
constitutional precondition to a proceeding which will adversely affect the liberty or
property interests of any party.” Id. at 485. Nevertheless, the Supreme Court also held that
“extended searches” for potential creditors are not required. Id. at 490. “[A]ll that the
executor or executrix needs to do is make ‘reasonably diligent efforts’ to uncover the
identities of creditors.” Id.
V. A “Creditor” Must be Given Actual Notice by Personal Service
It is undisputed that the Estate did not serve CMSIH with written notice of the
probate of Wilson’s Estate. The U.S. Supreme Court requires that a known or reasonably
ascertainable creditor receive actual notice that will inform the potential creditor of the need
to file a claim, the date and manner by which the claim must be filed, and that the claim
will be terminated if no claim is filed. Id. Arkansas builds upon this foundation and imposes
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more stringent notice requirements for estates. Arkansas Code Annotated § 28-40-
111(a)(4)(A) requires service of written notice on all known or reasonably ascertainable
creditors.
CMSIH claims that the court found that, because Cukier knew of the probate of this
Estate, this was sufficient to satisfy the requirements of Arkansas Code Annotated § 28-40-
111(a)(4)(A). Had the circuit court made that finding, it would certainly be reversible error.
Regardless of whether Cukier knew of Wilson’s death and the probate of his Estate,
Arkansas law requires service of written notice on all known or reasonably ascertainable
creditors. Ark. Code Ann. § 28-40-111(a)(4)(A).
With this in mind, we turn our attention to the circuit court’s order to determine
whether it applied the wrong legal standard when considering whether to deny CMSIH’s
claims. CMSIH hinges its arguments on the portions of the circuit court’s order wherein it
explains that Cukier and, in turn, CMSIH, knew of Wilson’s death and the litigation
between the Estate and RPHG. Our review of these provisions, when viewed in context
with the order in its entirety, leads us to the conclusion that the circuit court did not
improperly determine that written service of notice was unnecessary. Notably, the first
conclusion reached by the circuit court in its order is that known or reasonably ascertainable
creditors are entitled to service of written notice in Arkansas. We interpret these statements
cited by CMSIH as merely providing background information relevant to the issue of
whether CMSIH was a known or reasonably ascertainable creditor.
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VI. Due Process Requires the Personal Representative to Make a Reasonably Diligent
Search for Creditors
CMSIH also argues for reversal on the basis that the circuit court erred by failing to
make findings regarding whether the personal representative made the constitutionally
mandated reasonably diligent efforts to search for creditors. Pope, 485 U.S. at 490–91. As
suggested by the Estate, a threshold matter is whether the issue of reasonable diligence is
preserved for our review.
CMSIH raised the issue of reasonable diligence in its pleadings before the circuit
court. However, the circuit court did not expressly rule on it. In fact, CMSIH even argued
in its brief and at oral argument that the circuit court erred by failing to rule on this issue.
It is an appellant’s responsibility to obtain a ruling to preserve an issue for appeal. TEMCO
Const., LLC v. Gann, 2013 Ark. 202, 427 S.W.3d 651. This court cannot presume a
ruling from a circuit court’s silence, and we will not review a matter on which the circuit
court has not ruled. Id. Because CMSIH failed to obtain a ruling on the issue of reasonable
diligence, we summarily dispose of this point on appeal.
CMSIH raises an additional argument—that the circuit court erred by imposing an
obligation on it that the law does not require. Specifically, CMSIH takes issue with the
circuit court’s conclusion that CMSIH “did nothing to make itself known to be a creditor
until it filed its two lawsuits.” CMSIH often reiterated this point during oral argument
when it perceived that this court misunderstood the applicable legal standard. We do not.
The law does not impose a requirement on a creditor to make itself known—in fact,
our law is clear that a creditor need only be reasonably ascertainable. Pope, supra.
Additionally, it is an Estate’s responsibility to conduct reasonably diligent efforts to identify
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creditors. Id. Nevertheless, when the issue of the approval or denial of a claim is litigated,
it is the claimant’s burden to prove that an Estate failed to carry out these requirements.
Ark. Code Ann. § 21-40-111(a)(4)(C)(ii).
Turning to the evidence on this issue, the full conclusion of law made by the circuit
court reads:
The Court concludes that while the Estate may have known the identity of
CMS Investments, CMS Investments did nothing to make itself known to be
a creditor until it filed its two lawsuits against the Wilsons, which occurred
after the six month non-claim period expired.
Again, CMSIH cherry-picks particular language from the circuit court’s orders in an attempt
to make its argument. The mere fact that the Estate knew of CMSIH’s identity is insufficient
to make CMSIH a known or reasonably ascertainable creditor of Wilson’s Estate. To
conclude otherwise would be in contravention of the purpose of our probate statutes.
The financial issues between the Wilson Law Firm, Wilson, and RPHG are at the
heart of CMSIH’s claims. The court’s order, when read as a whole, explains in detail
CMSIH’s role in the dispute regarding RPHG, and CMSIH was not a party to any of the
agreements or negotiations. This information is pertinent to whether CMSIH’s claims were
known or reasonably ascertainable to the Estate. It is clear from our review that the circuit
court merely provided background information that it deemed relevant to the issue of
whether CMSIH was either known or reasonably ascertainable, and it did not impose
requirements on CMSIH that are more stringent than the law provides.
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VII. “Actual Notice” Must be Served on any Identifiable Creditor with More than a
Conjectural Claim
Here, CMSIH primarily argues that the circuit court improperly considered the
merits of its claims against the Estate when deciding whether it was entitled to notice.
Neither the U.S. Supreme Court nor Arkansas allows for any substantive evaluation of
claims when determining whether to provide notice—meaning that an Estate cannot refrain
from giving notice to a creditor based on the presumed lack of merit to the creditor’s claim. 2
See Ark. Code Ann. § 28-40-111(a)(4)(A); see also Pope, supra. Thus, we again direct our
attention to the circuit court’s order—this time evaluating whether the circuit court
improperly considered the merits of CMSIH’s claims when deciding whether it was entitled
to notice.
We are not persuaded that the circuit court improperly considered the merits of
CMSIH’s claims when determining whether it was a known or reasonably ascertainable
creditor. As discussed previously, we are convinced that, when reading the order as a whole,
it is clear that the circuit court intended to merely provide a thorough background of the
facts relevant to whether CMSIH was a known or reasonably ascertainable creditor.
2
There are limited instances where the U.S. Supreme Court contemplates that notice
is unnecessary. It has held that it is reasonable to dispense with actual notice to those with
mere “conjectural claims” as opposed to those with “conceivable claims.” Pope, supra.
(citing Mullane v. Central Hanover Bank & Trust, Co., 339 U.S. 306, 317 (1950)). In its brief,
CMSIH asks this court to hold that all potential claimants—whether they have conceivable
or conjectural claims—are entitled to actual notice. CMSIH conceded this point at oral
argument, but even if the issue were still contested, we would refuse to address it. Although
this issue was raised in pleadings before the circuit court, the circuit court did not rule on
it, and it is an appellant’s responsibility to obtain a ruling to preserve an issue for appeal.
TEMCO Const., supra.
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In that vein, we also consider whether the circuit court erred by determining that
CMSIH was not a known or reasonably ascertainable creditor. In reviewing this issue, we
give due deference to the superior position of the circuit court to determine the credibility
of the witnesses and the weight to be accorded to their testimony. Whatley, supra. We will
not reverse the circuit court’s decision unless it is clearly erroneous. Id.
With this standard in mind, we readily conclude that the circuit court’s decision that
CMSIH was not a known or reasonably ascertainable creditor should be affirmed. There is
ample evidence to support the court’s decision—not the least of which includes the
testimony of Rufus Wolff and Stephanie Pollard that there was no indication that CMSIH
was a creditor of the Estate or sought to assert a claim against it.
VIII. Known or Reasonably Ascertainable Creditors Not Served with Actual Notice Have
Two Years to File Claims
Finally, CMSIH asserts that the circuit court erred by finding that its claims were
untimely filed. CMSIH alleges that pursuant to Ark. Code Ann. § 29-50-101(h), it had
two years to file its claims. However, this point on appeal presupposes that CMSIH was a
known or reasonably ascertainable creditor of the Estate and was entitled to service of notice.
For the reasons discussed previously, we have concluded that the circuit court did not err
by finding that CMSIH was not a known or reasonably ascertainable creditor of the Estate.
Therefore, its claims had to have been filed within the six-month time limit imposed by
Arkansas Code Annotated § 28-50-101(a)(1), and the circuit court did not err by denying
its claims as untimely. 3
3
With these conclusions reached, we need not consider the Estate’s alternate
argument in favor of affirmance.
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Affirmed.
VAUGHT and BROWN, JJ., agree.
Wright, Lindsey & Jennings, LLP, by: Gordon S. Rather, Jr., John R. Tisdale, and Gary
D. Marts, Jr., for appellant.
Campbell Law Firm, P.A., by: H. Gregory Campbell, for appellee.
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