Monday, October 28, 2019
In 2013, a man in California by the name of Richard Holdaway passed away. Almost a year later, Patricia Everett filed a petition in San Bernardino County Superior Court to probate his estate and she also filed a creditor’s claim seeking $90,875. However, she did not pursue the petition, and the court dismissed it "without prejudice." A few months later, she refiled another probate petition under the same cause number, but Richard's son also filed a petition, claiming he was named executor in his father's will. The son's petition was granted, and he rejected Everett's creditor claim. 2 months after the executor's rejection, on May 19, 2017, she filed a complaint against him in the amount of her original creditor's claim, Estate of Holdaway.
The trial court agreed with the son, who argued that under California Code of Civil Procedure section 366.2, claims against a decedent must be filed within a year of the decedent’s death, and therefore dismissed the claim. However, the appellate court reversed, finding that the claim was in fact dormant. When Everett's original probate petition was dismissed, the court did not reject her claim as a creditor, so the tolling of the claim continued until an executor eventually rejected, allowed, or approved it. Everett then timely filed a complaint to pursue the claim.
The case was one of first impression, and can be a lesson for creditors as well as estate beneficiaries. If a creditor initiated a probate proceeding, there may be a viable creditor’s claim on file with the court and years could elapse before the creditor comes forward to try to collect on that claim.
See Jeffrey S. Galvin, Beware of Dormant Creditor Claims in California Probate Cases, Trust on Trial, October 21, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.