Where probate law meets the Code of Civil Procedure: A primer
Advocate, Volume 40, No. 1
By: Ara Jabagchourian & Aron Liang
Some of you may have come across a situation in which the defendant has died before the case comes to your doorstep or the defendant dies during litigation. Typically, the plaintiff’s lawyer waits for an estate to be opened for that defendant and then either initiates or amends the action against the administrator of the estate. But what do you do if the person dies and no probate is opened or a trust has been set up which avoids probate all together? There are procedural obstacles that need to be overcome in such cases, but with foresight and planning they can be dealt with. This article outlines different methods that a practitioner can pursue with a discussion of pertinent code sections and case law.
Probate Code for Dummies
Probate law and most civil trial lawyers have a long-standing, unspoken agreement: I’ll stay away from you if you stay away from me. It is a long time coming for this agreement to be broken. Probate law needs to be harnessed by civil justice lawyers as another tool to aid clients in seeking justice. At least to the authors’ eyes, probate law has a lot to offer.
The typical understanding of what to do when a defendant dies is to sue the estate through the administrator under Probate Code sections 9000, et seq. That’s great if you have an estate that has already opened and it has some corpus to pursue after the creditors are done with it.
In this situation, once the estate is opened, creditors have an opportunity to file creditor claims against the estate. The personal representative of the estate has the obligation to provide notice of the administration of the estate to all known and reasonably ascertainable creditors. (Prob. Code, §§ 9050, et seq.) Probate Code section 9150 requires the creditor to file a claim with the court and serve a copy of that claim on the personal representative. In California, there are forms that are available for filing a creditor claim. They are not too difficult to find and can be found, for example, on Legal Solutions.
But what happens if no probate is opened or there is a trust that has been set up to avoid probate all together? For many non-probate civil lawyers, the first thought is likely that you must open one yourself. That is not necessarily true.
Probate Code sections 13000 – 13660 is Division 8 of the Probate Code and is entitled “Disposition of Estate Without Administration.” Division 8 is separated into two “Parts.” Part 2 is entitled “Passage of Property to Surviving Spouse Without Administration” and begins at Probate Code section 13500. The title is self-explanatory and involves a situation where a person dies and all of the assets transfer automatically to the surviving spouse. Who ends up with the ill-gotten gains? The spouse or the victim?
The answer lies in Chapter 3 of Part 2 of Division 8 of the Probate Code. Chapter 3 is entitled “Liability For Debts Of Deceased Spouse” and is promulgated under Probate Code sections 13550-13554. The statutory scheme sets forth the liability that exists against a surviving spouse for the debts of a deceased spouse when there is no administration of an estate. Probate Code section 13550 reads:
Except as provided in Sections 11446, 13552, 13553, and 13554, upon the death of a married person, the surviving spouse is personally liable for the debts of the deceased spouse chargeable against the property described in Section 13551 to the extent provided in Section 13551.
Probate Code section 13551 states:
The liability imposed by Section 13550 shall not exceed the fair market value at the date of the decedent’s death, less the amount of any liens and encumbrances, of the total of the following:
(a) The portion of the one-half of the community and quasi-community property belonging to the surviving spouse under Sections 100 and 101 that is not exempt from enforcement of a money judgment and is not administered in the estate of the deceased spouse.
(b) The portion of the one-half of the community and quasi-community property belonging to the decedent under Sections 100 and 101 that passes to the surviving spouse without administration.
(c) The separate property of the decedent that passes to the surviving spouse without administration.
What does all this mean? In interpreting these two sections, the California Supreme Court stated that “[s]ubject to certain exceptions and limitations, Probate Code sections 13550 and 13551 make a surviving spouse personally liable for the debts of the deceased spouse …” (Collection Bureau of San Jose v. Rumsey (2000) 24 Cal.4th 301, 303 (“Rumsey“) (emphasis added).) Probate Code section 13551 places a limit on this liability, restricting the recovery to the total of: (l) one half of the community property transferred from the decedent to the surviving spouse, (2) the other half of the community property held by the surviving spouse, and (3) all of the separate property held by the deceased spouse that transferred to “the surviving spouse without formal probate administration.”
The Probate Code’s answer to the question of the liabilities of a surviving spouse for the debts of the deceased spouse is logical. If the defendant dies and the assets transfer to the surviving spouse without probate, the creditor can and should be able to recover from: (1) all of the community property of the couple and (2) the separate property of the deceased spouse.
While some may argue that this is unfair to the “innocent” surviving spouse, it is not. If the defendant had not died, the creditor would have been able to recover from exactly the same assets. Family Code section 910(a) provides that “the community estate is liable for a debt incurred by either spouse before or during marriage.” In other words, if the defendant was still alive, the creditor could recover: (1) all of the community property of the couple and (2) the separate property of the defendant spouse. There is no reason why death of the defendant should allow the surviving spouse to escape with the ill-gotten gains.
Probate Code section 13553, entitled “Exemption from liability” states that: “[t]he surviving spouse is not liable under this chapter if all the property described in paragraphs (1) and (2) of subdivision (a) of section 13502 is administered under this code.”
What this means is that the Probate sections relating to the liability of a surviving spouse when the assets are transferred without administration does not apply if a probate estate is opened. Again, common sense.
Probate Code section 13554 “clarifies that these debts may be enforced against the surviving spouse in the same manner as they could have been enforced against the deceased spouse if he or she had not died.” (Rumsey, 24 Cal.4th at 307; Prob. Code, § 13554(a).) The surviving spouse “may assert any defense, cross-complaint, or setoff which would have been available to the deceased spouse if the deceased spouse had not died.” (Rumsey, 24 Cal.4th at 307; CaI.Prob.Code, § 13554(b).)
Probate Code section 13554 means that the surviving spouse steps into the shoes of the deceased spouse. The creditor can enforce the debt against the surviving spouse in the exact same manner as if the deceased spouse was still alive. In the same vein, the surviving spouse has the exact same right to assert any defense, cross-complaint or set-off which the deceased spouse could have raised if they had not died.
Reading all of these Probate Code sections together shows that a creditor does not need to open an estate when a defendant dies. The surviving spouse has an option. If he or she opens a probate estate, you will have to file a creditor claim in the probate case to protect your rights. However, if the surviving spouse does not open a probate estate, the Probate Code provides you with an opportunity to go after the surviving spouse as the successor-in-interest. Just remember, under Probate Code section 13554, the surviving spouse can assert the same defenses, cross-complaints and/or setoffs that the deceased spouse could have, so you will still have to litigate your case. However, at least you still have a right and ability to go to court to pursue recovery for your clients.
One-year statute of limitations on claims
It is important to remember that, if the defendant dies, there is a one-year statute of limitations for bringing a claim against the defendant’s successor-in-interest. The one year starts to accrue after the date of death of the defendant. Code of Civil Procedure section 366.2(a) states that:
If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.
Probate Code section 13554(c) specifically states that Code of Civil Procedure section 366.2 applies to all causes of action brought under Probate Code sections 13550, et seq.
Code of Civil Procedure section 366.2 (entitled “Death of person against whom action may be brought; limitation period”) demonstrates the fact that the California Legislature intended for injured parties to have recourse, even in situations where the defendant has died. The December 1989 California Law Revision Commission recommendation on the proposed legislation amending Code of Civil Procedure former section 353 explained that:
the one year statute of limitations is intended to apply in any action on a debt of the decedent, whether against the personal representative under Probate Code Sections 9350 to 9354 (claim on cause of action), or against another person such as a distributee under Probate Code Section 9392 (liabillty of dlstnbutee), a person who takes the decedent’s property and is liable for the decedent’s debts under Sections 13109 (affidavit procedure for collection or transfer of personal property), 13156 (court order determining succession to real property), 13204 (affidavit procedure for real property of small value), and 13554 (passage of property to surviving spouse without administration), or a trustee.
(Rumsey, 24 Cal.4th at 308, quoting, Recommendation Relating to Notice to Creditors in Estate Administration (Dec. 1989) 20 Cal. Law Revision Com. Rep. (1990) p. 515.)
It thus appears that when the amendments to former section 353 were enacted, they were done so with the clear understanding and intent that such provisions would govern and apply to ‘any action on a debt of the decedent’ regardless of whom the action was brought against, and specifically including the surviving spouse. (Ibid.)
This is legal authority for the proposition that the California Legislature specifically envisioned and intended to create a mechanism by which an injured party ‘could get relief from the surviving spouse of an injured defendant.
Early on in this article, we asked the question: “Who ends up with the ill-gotten gains? The spouse or the victim?” Rumsey and the Probate Code indicate that the answer is and should be: The victim. This makes sense and should be the right answer under California law.
Rumsey: Sections 13550, et seq
Rumsey is the seminal case decided by the California Supreme Court that interprets Probate Code sections 13550, et seq: Rumsey involved a spouse who had incurred medical expenses with a hospital before her death. The hospital’s agent then brought suit against the surviving spouse under a common count claim of open book account. There was no existing judgment, but rather the cause of action had to be litigated against the surviving spouse for the debts of the deceased spouse. In addition to the unlitigated debts of the deceased spouse, the decendent’s “estate involved a trust but was not subject to formal administration.” In interpreting “sections 13550, 13551 and 13554 of the Probate Code” the Court held that the surviving spouse:
was ‘personally liable’ [ ] for the debts left behind by his deceased spouse… to the extent of his own share of the community property and her separate property that passed to him without formal administration. (Id. at 309)
The Court then went on to state that the hospital had one year “within which to file an action against her estate, or against [surviving spouse] derivatively, seeking to collect any such unpaid debts.” (Id. emphasis added.)
Family Code section 914
As discussed above, under the Probate Code, the surviving spouse is liable for the debts of the deceased spouse up to: (1) all of the couple’s community property; and (2) only the separate property of the deceased spouse. In other words, the creditor can access the exact same assets of the deceased spouse after he or she died that the creditor could have obtained if the deceased spouse was still alive. There are some exceptions to this general rule, such as Family Code section 914, which states:
(a) Notwithstanding Section 913, a married person is personally liable for the following debts incurred by the person’s spouse during marriage:
(1) A debt incurred for necessaries of life of the person’s spouse while the spouses are living together.
(2) Except as provided in Section 4302, a debt incurred for common necessaries of life of the person’s spouse while the spouses are living separately.
(b) The separate property of a married person may be applied to the satisfaction of a debt for which the person is personally liable pursuant to this section. If separate property is so applied at a time when nonexempt property in the community estate or separate property of the person’s spouse is available but is not applied to the satisfaction of the debt, the married person is entitled to reimbursement to the extent such property was available.
Family Code section 914 allows a creditor to go after the separate property of the surviving spouse but only for “necessaries of life” and “common necessaries of life.” There is no bright line rule of “necessaries of life” but expenses such as hospital expenses likely fall into this category. However, if you are a creditor on a commercial debt or a plaintiff in a tort or breach of contract action, it is not llikely that Family Code section 914 will be relevant to your case.
Applicability of Probate Code methods
The above-mentioned interpretation of the Probate Code and California case authority is logical and comports with the canons of statutory interpretation. At least to the authors, this is and should be the law in California on this subject matter. However, there is not a wealth of cases interpreting these provisions of the Probate Code. In no way is the law on this issue settled. If you pursue recovery using any of these provisions of the Probate Code, you can expect a major fight. One argument that the authors have seen raised is that, if the defendant dies without an estate being opened, the creditor or plaintiff bears the burden of opening an estate just so that he or she can turn around and sue it. As discussed above, this argument doesn’t make much sense. The title of Division 8 of the Probate Code (which includes Probate Code sections 13550-13554) is entitled “Disposition of Estate Without Administration.”
However, if you have a pending case (and no judgment) and the defendant dies, you may have to deal with the argument that the word “debt” in Probate Code sections 13550-13554 means only liquidated debts, like the judgment, and not pending actions. In other words, defense will raise the argument that these derivative methods of suit only apply in pursuit of judgments, not actions. While this seems counterintuitive and counter to the language of the Probate Code sections cited above, this argument has been presented to courts in the State of California. Below are several arguments that support the proposition that one can pursue an action against a deceased person using the Probate Code sections discussed above, rather than the expensive proposition of having to open and administer an estate.
• Rumsey involved a debt not reduced into a judgment
In Rumsey, no judgment existed at the time the matter was filed against the surviving spouse for the debts of the deceased spouse. Rather, in that case, the agent of the hospital filed an action against the surviving spouse for an open book account, which required a factual finding of liability. In Rumsey, there was no finding that the open book account had in fact not been paid, or that services were in fact rendered by a judge, jury or arbitrator. No judgment was ever entered in Rumsey prior to the commencement of the action against the deceased spouse. Rather, the Court held that the surviving spouse was “personally liable” for the debts left behind by his deceased spouse. Yet, the debt was never reduced to a judgment. In fact, the action for open book account against the surviving spouse was an issue to be resolved by a jury. Therefore, under the California Supreme Court’s own analysis of Probate Code section 13550, the term “debts” means amounts owing prior to a finding of liability.
• Liability of the person means personal accountability
Probate Code section 13554(c) explicitly sets forth the applicability of Code of Civil Procedure section 366.2 to liability for debts of a deceased spouse. Code of Civil Procedure section 366.2 allows for an action “brought on a liability of the person … [to] be commenced within one year of death.” (Code Civ. Proc. §366.2(a) (emphasis added).) Stated another way, a lawsuit can be commenced based on the liability of a deceased person. (Rumsey, supra, 24 Cal.4th at 308.) The phrase “liability of the person” under section 366.2 means “‘[l]iability for which one is personally accountable and for which a wronged party can seek satisfaction out of the wrongdoer’s personal assets.'” (Estate of Yool (2007) 151 Cal.App.4th 867,875; citing Black’s Law Dict. (8th ed. 2004) p. 933.) Issues of liability and accountability are typically issues that are resolved prior to a case being rendered into a judgment.
• Derivative liability is not restricted to collection actions
In addition, the action based on the liability of a decedent can “aris[e] in contract, tort or otherwise”. (Code Civ. Proc., § 366.2(a).) Again, section 366.2 does not constrict its application to collection efforts associated with final judgments. If the California Legislature meant that liability of a decedent could arise only through a judgment, then it could have so stated.
• Accrual of an action arises when decedent commits an injury
Further, pursuant to Code of Civil Procedure section 366.2, the matter can be “accrued or not accrued.” Accrual of a claim means when it arose in time, not that it was reduced to a judgment. (Dacey v. Taraday(2011) 196 Cal.App.4th 962, 983-984 [“we are not aware of any case that has applied the statute when the decedent did not commit the injury or did not already have a collectible debt at the time of death.”] (emphasis added).) Code of Civil Procedure section 366.2 and the case law interpreting it permits claims to be brought against the successor-in-interest or surviving spouse after the death of the deceased spouse, since Probate Code section 13554(c) expressly incorporates Code of Civil Procedure section 366.2
• An “Action” under Code of Civil Procedure section 366.2
An “action” under Code of Civil Procedure section 366.2 is not constricted to a collection action. Rather, an “action” under the statute means “an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense.” (Farb v. Superior Court (2009) 174 Cal.App.4th 678, 684.) An “action” under 366.2 allows for prosecution of claims, including those which have not been liquidated or reduced to a judgment.
Furthermore, section 366.2’s “language contemplates a cause of action that could have been asserted against the decedent while he was alive.” (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 552.) No court has limited actions brought forth under Code of Civil Procedure section 366.2 to actions reduced to judgments.
• Section 366.2’s statute of limitations
Applicability of the one-year statute of limitations associated with Code of Civil Procedure section 366.2 also undercuts the “debt equals judgment” position. The statute of limitations set forth under section 366.2 does not apply where the claim has already been reduced to a judgment. (In re Estate of Bennett (2008) 163 Cal.App.4th 1303, 1310.) Therefore, neither Probate Code section 13550, et seq., nor Code of Civil Procedure section 366.2 can be limited to judgments, as the statute of limitations set for under Code of Civil Procedure section 366.2 does not apply only to claims associated with existing judgments. It must therefore deal with “debts” not reduced to a judgment or else Code of Civil Procedure section 366.2 and Probate Code section 13554(c) would have no meaning or function.
• The Legislature and the word “debt” and the phrase “judgment for the debt”
In addition, California law provides that “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” (Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 942; citing Fam. Code, § 910.) If the words “debt” and “judgment” were synonymous, the California Legislature and California courts would not have used those terms separately. A statute must be construed with regard to the statutory scheme of which it is a part and the court should give meaning to every word if possible, avoiding a construction that will render any part surplusage. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1118.)
• Cross-complaints in first-party collection efforts
Probate Code section 13554 states that “the surviving spouse may assert any defense, cross-complaint, or setoff” that would have been available to the deceased spouse had he been alive. (Prob. Code, § 13554(b.)) If Probate Code sections 13550, et seq. were restricted to the collection of debts that have been reduced to a judgment, then there would be no reason to bring a “defense” or “cross-complaint,” as those defenses and cross-complaints in first-party suits would have been compulsory at the time of the suit. (Code Civ. Proc., § 426.30.)
As we mentioned in the article, in no way is this an area of law that is well settled. But given the language of the Probate Code and the cases interpreting them, we believe that the provisions raised above will provide plaintiffs’ attorneys more tools to pursue the justice that their clients deserve.