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BMO Harris Bank N.A. v. Espiau - 7/13/2021

Arizona Court of Appeals, Division One, holds that probate non-claim statute does not begin to run until creditor receives notice that strictly complies with A.R.S. 14-3801.


In 2005, a woman bought a vacant Sedona lot for $415,000. She funded that purchase through a loan from her bank, and the loan was secured by deed of trust on the property. In December 2015, the woman died. Her son was appointed as her estate’s personal representative, and he continued to make payments on the loan in his mother’s name.

In May 2017, the son notified the bank that his mother had died. The bank then sent a letter notifying the son that it had a right to collect the outstanding payment on the loan and asked how the estate would satisfy the loan. The son never responded to that letter. In August 2017, he ceased making loan payments.

In January 2018, the bank sent the estate a notice of default. The following July, the property was sold at a trustee’s sale for $135,000.

In August 2018, the bank sued the estate to recover the $157,500 still outstanding on the loan. The superior court case culminated in cross-motions for summary judgment. The superior court granted summary judgment to the bank. At a subsequent hearing to determine the fair market value of the property, the superior court found the bank’s valuation expert more reliable than the estate’s and valued the property at $220,000, the same value ascribed by the bank’s expert.

After all matters had been resolved, the bank moved to recover its attorneys’ fees and costs. The estate failed to object, and the superior court granted the bank the entirety of its fees and costs. The estate then filed a Rule 60(b) motion, seeking the chance to file a response to the fee application. The superior court denied the motion.

The estate appealed, arguing: (1) the superior court had improperly denied its summary judgment motion; (2) the superior court had erred in relying on the bank’s expert’s opinion; and (3) the court erred in denying the estate’s Rule 60(b) motion.

The Arizona Court of Appeals, Division 1, rejected all three of the estate’s arguments and affirmed the trial court. The Court began by rejecting the estate’s argument that the bank’s claim for the unpaid amount of the loan was barred by the probate non-claim statute, A.R.S. § 14-3803. That statute bars “[a]ll claims against a decedent’s estate that arise at or after the death of the decedent” unless they are raised “within the later of four months after it arises” or “two years after the decedent’s death plus the time remaining in the period commenced by an actual or published notice pursuant to Section 14-3801.” § 3803(A)(1), (C)(2). Section 14-3801, in turn, requires a personal representative to either publish a notice for three consecutive weeks in a newspaper of general circulation or mail written notice to all known creditors. § 14-3801(A)-(B). Regardless of the method, the notice must inform the creditors of the deadline for raising their claims against the estate. The estate argued that the bank had notice of the decedent’s death in May 2017, but the Court rejected that argument because the notice the estate provided to the bank did not include a warning that all claims must be filed within four months. Regardless of the sophistication of the creditor, the statutory scheme requires that any notice notify a creditor that they must timely file their claim or be forever barred from pursuing it. Because the notice provided by the estate did not, § 14-3803’s time limit had not yet commenced by the time the bank filed its claim. Accordingly, the bank had timely filed its claim, and the Court affirmed the superior court’s denial of summary judgment.

The Court also affirmed the superior court’s fair market value determination. The estate argued the superior court had erred by adopting, wholesale, the bank’s expert’s value determination. But this was an evidentiary matter, and because reasonable evidence (the expert opinion) supported the superior court’s findings, the Court affirmed.

Finally, the Court rejected the estate’s argument that the superior court had erred in denying its Rule 60(b) motion. The estate failed to notify the court of a prior agreement to extend the deadline to respond to the bank’s fee request, and although the estate’s counsel was sick, he was not so sick that he could not communicate with the court or opposing counsel. As such, there were no grounds for Rule 60(b) relief.

Judge Cruz authored the opinion for the Court, joined by Judges Perkins and Howe. 

Posted by: Joshua J. Messer

Posted On: 8/4/2021