According to the law in the state of Arizona, when appointed, the personal representative for an estate has to provide notification to creditors, both known and unknown. For an unknown creditor, the person named as the personal representative is required to publish a notice to all creditors in a newspaper that is in general circulation in the county where the decedent individual resided. For the known creditors, the role of the personal representative is to provide notice by mail, or another form of delivery.
Any creditors owed by the estate then have a period of four months after the publication or a period of 60 days after the mailing or other form of delivery, whichever is later, to file their claims. The claims will then be allowed or disallowed, which is something that is determined by the state. If the claim is disallowed, then the creditor can opt to file a lawsuit and have the court determine if the claim is actually valid.
Without a judgment in a different court, all allowed claims will bear interest at the applied, legal rate for a period that commences 60 days after the initial presentation of the claim has passed. This is a provision that does not make any differentiation between a claim for indefinite or definite amounts. As a result, the probate code is considered to be inconsistent with the general rule in Arizona that prejudgment interest is not awardable, generally, on all unliquidated claims. The Court of Appeals in Arizona has now worked to tackle this inconsistency and has held that all the allowed claims against any estate bear interest.
Any liquidated claim is a claim that is for a certain sum, such as the amount that is still owed on a promissory note. However, unliquidated claims are ones that aren’t for a certain sum, including claims pertaining to pain and suffering or emotional distress.
According to a recent decision made by the Arizona Court of Appeals, in the Estate of Chalker, it was upheld that the Arizona probate code has mandated interest on any creditor claim, even if it is made for an unliquidated sum. In this situation, the Petitioners were lawyers who actually represented the decedent individual in a divorce action that occurred in 1994. The decedent actually owed the Petitioners an estimated $273,000 in both costs and fees. However, in 1999, the decedent and the Petitioners entered into a different fee agreement that allowed the Petitioners to receive 50 percent of the decedents total Fidelity investment accounts after the accounts had been recovered by the decedent’s estate.
After the decedent passed, and the personal representative provided notice, the Petitioners filed a claim against the estate in the time allotted. The superior court made the ruling that the 1999 fee agreement did not allow the Petitioners to receive 50 percent of the Fidelity Investment accounts recovered. It was determined the Petitioners were only going to receive an award in quantum merit for the fair value of the services provided, but that no interest would be paid. As a result, the court wound up allowing the claim, but it did not add any interest to the amount that was due. The ruling was appealed by the petitioners.
After reviewing the decision made by the superior court to deny the interest amount due, the Court of Appeals made the reasoning that the plain language of the statute required that the claims should bear interest. As a result, the Court agreed with the Petitioner’s argument that since the superior court awarded the Petitioner’s fees, that the claim should be paid along with the legal rate of interest.
If you need help or have questions about a creditor’s claims in any type of Arizona probate matter or the above mentioned Court of Appeals decision, or if you need assistance in the administration of an estate, be sure to contact us today.