After your death, the executor of your estate is responsible for paying any valid claims made by your creditors. California probate law governs how and when such claims must be presented to your executor. For instance, if a lawsuit is pending against you at the time of your death, the other party may only continue the case if he or she presents a claim against your estate, your executor rejects that claim, and the other party then moves to substitute the executor as a party in the lawsuit. If these conditions are not met, the lawsuit dies with you.
There are cases where the issue is not so cut-and-dry, however. One recent decision by the California Court of Appeals demonstrates how a judgment against a deceased individual may survive even when the aggrieved party failed to make a proper claim against the estate. This case is not considered binding precedent by the California courts and is only discussed here to illustrate the underlying legal principles.
Hammer v. Hammer
Curiously, this case involves a claim against an estate over a dispute arising from the administration of another estate. The original parties were two brothers, Michael and Charles Hammer. Their mother, Carol Hammer, died in 2008. Carol Hammer owned a house in Burbank. In 2001, she transferred the house into a living trust she created as part of her estate plan. She named her sons as successor co-trustees and equal beneficiaries upon her death.
By the time of Carol Hammer’s death, there was a $250,000 line of credit secured by the Burbank residence. The brothers had long fought over the state of their mother’s finances. Charles Hammer accused his brother of improperly using some of the line of credit for his personal benefit, including $52,000 that Michael Hammer distributed to his own children after his mother’s death. In response, Michael accused Charles of failing to account for another $100,000 from the line of credit.
Litigation ensued. Both brothers asked a probate court to sell the Burbank home and divide the proceeds equally among them, accounting for any money that one accused the other of misappropriating. While the lawsuit was pending, Charles Hammer died, leaving his son, Steven Hammer, to serve as executor of his estate.
Steven Hammer asked the court to substitute himself for his father in the lawsuit. His uncle did not object. The litigation continued, and in June 2012, the judge ordered the property sold and issued surcharges against both sides. The Estate of Charles Hammer was surcharged well over $150,000.
Steven Hammer then appealed, arguing the probate court lacked the authority surcharge his father’s estate as his uncle failed to properly file a creditor’s claim first. He also argued the judge’s decision to order the surcharges was not supported by “substantial evidence.” The court of appeals rejected both arguments.
The problem, according to the appeals court, is that Steven Hammer expressly forfeited his own argument when he willingly participated in the litigation and failed to object to the lack of a creditor’s claim before the probate court. In fact, the appeals court noted Steven Hammer “expressly maintained” that the trial judge had the authority to rule on his uncle’s claims related to misuse of the line of credit on the Burbank residence. In general, a person cannot raise arguments on appeal that he failed to raise first before the trial court.
Appointing the Right Executor
Procedural issues aside, the appeals court said the trial court’s substantive findings were supported by “substantial evidence.” So the Estate of Charles Hammer would likely still have been liable even if Steven Hammer had objected at the proper time. But the lesson here is that an executor or personal representative needs to be responsible when dealing with potential creditors. In determining your own estate planning needs, it’s important you appoint an executor who is competent and trustworthy. An experienced California estate planning attorney can help you determine the best person for such an important role. Contact the Law Office of Scott C. Soady today in San Diego if you have any questions.