Opinion
No. 5-532 / 04-1521
Filed January 19, 2006
Appeal from the Iowa District Court for Polk County, Ruth B. Klotz, Associate Probate Judge.
Charles Wasker and James Politte appeal from an order rejecting their claims in probate as time-barred. AFFIRMED.
Mark R. Adams of Wasker, Dorr, Wimmer Marcouiller, P.C., West Des Moines, for appellants.
John C. Conger and Lawrence L. Marcucci of Marcucci Conger, P.L.C., West Des Moines, for appellees.
Heard by Hecht, P.J., Vaitheswaran, J., and Nelson, S.J.
Senior Judge assigned by order pursuant to Iowa Code section 602.9206 (2005).
The district court concluded that the claims of Charles Wasker and James Politte against the Estate of Brian Williams were untimely and entered summary judgments for the Estate. Wasker and Politte appeal. The Estate cross-appeals, arguing its favorable judgments are supported by alternate legal theories rejected by the district court. After reviewing the record and the argument of counsel, we affirm the judgments of the district court.
I. Background
In our review of the district court's summary judgments, we recite the facts in the light most favorable to Wasker and Politte. Estate of Beck v. Engene, 557 N.W.2d 270, 271 (Iowa 1996).
Wasker, Politte, and Williams were all involved in an Iowa business called Enterprise Corporation International ("ECI"). They were all shareholders and directors, Williams was ECI's largest shareholder, and Wasker was the chairman of ECI's board. Because ECI needed an infusion of cash to continue operations, Williams asked Wasker and Politte to make an additional investment in ECI. In March 2001, Wasker and Politte each purchased a $100,000 investment unit in ECI, which consisted of 5,405 shares of ECI's common stock and a $50,000 convertible subordinated note.
Williams died on April 8, 2002. His will was admitted to probate on April 11, and the second notice to creditors was published on April 29. The parties concede that a notice to creditors was not mailed to either Wasker or Politte.
In March 2003, ECI converted the $50,000 notes into 11,765 shares of ECI's common stock. In the fall of 2003, ECI surrendered its assets to its secured creditors and ceased operations.
In October 2003, Wasker and Politte made a written demand of the Estate, asserting Williams had personally guaranteed their $100,000 investments. In deposition testimony, Wasker stated Williams made this oral guarantee in March 2001, and Politte stated Williams made this oral guarantee in late 2000 or early 2001. Both Wasker and Politte stated that, but for Williams's oral guarantee, they would not have made an additional investment in ECI.
On December 10, 2003, Wasker and Politte filed claims in probate, to which they attached an affidavit from Valerie Williams, the surviving spouse of Brian Williams. In her affidavit, Ms. Williams stated that her husband, prior to his death, "acknowledged . . . that he had personally guaranteed against loss" both Wasker's and Politte's investments. In her affidavit, she acknowledged that, if these claims were allowed, her share of the Estate would be reduced.
The Estate disallowed both claims, and Wasker and Politte requested a hearing. In June 2004, the Estate filed motions for summary judgment, contending (1) the claims were untimely under Iowa Code section 633.410 (2003), (2) the claims were barred by the statute of frauds, and (3) the claims were barred by provisions of the investment agreement and subordinated note. The district court rejected the second and third contentions but was persuaded by the first, and granted summary judgments to the Estate on August 24, 2004.
Williams and Politte appeal, and the Estate cross-appeals. Our supreme court transferred this case to us for disposition.
II. Standard of Review.
Actions concerning contested claims in probate are at law, see Iowa Code § 633.33 (2003), and we review for the correction of errors at law, see Iowa R. Civ. P. 6.4.
Summary judgment is available only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981; Estate of Beck, 557 N.W.2d at 271. This court must examine the record for the presence of genuine issues of material fact and for incorrect applications of the law. Estate of Beck, 557 N.W.2d at 271.
We review questions of statutory construction for the correction of errors at law. Schneider Leasing, Inc. v. United States Aviation Underwriters, Inc., 555 N.W.2d 838, 840 (Iowa 1996). Regarding constitutional questions, our review is de novo. Estate of Beck, 557 N.W.2d at 271.
III. Were The Appellants' Claims Time-Barred?
The district court found and concluded (1) the Estate did not become aware of the claims of Wasker and Politte until October 2003, (2) for that reason, Wasker and Politte were not "reasonably ascertainable creditors of the Estate," (3) Wasker and Politte were not entitled to notice by mail under Iowa Code section 633.410, and (4) Wasker and Politte were required to file their claims within four months of the second publication of the notice to creditors. Since their claims were not filed within that time, the court concluded they were barred.
On appeal, Wasker and Politte argue they were entitled to mailed notice because the Estate acquired actual notice of their claims in October 2003. They argue that, since they did not receive mailed notice, the limitations period never began running and their claims were timely.
We note the appellants do not maintain the Estate had actual notice of their claims during the four months following the second publication of the notice to creditors.
In Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 491, 108 S. Ct. 1340, 1348, 99 L. Ed. 2d 565, 579 (1988), the Supreme Court of the United States held that notice by publication does not provide constitutionally sufficient notice to an estate's creditors who are "known or reasonably ascertainable." Those creditors are entitled to mailed notice. After Pope, the legislature amended the probate code. Iowa Code section 633.410(1) now provides that any claims against an estate, of whatever nature, are time-barred unless filed with the clerk within the later to occur of four months after the date of the second publication of the notice to creditors or, as to each claimant whose identity is reasonably ascertainable, one month after service of notice by ordinary mail to the claimant's last known address.
Additionally, Iowa Code section 633.304 contains the following language:
On admission of a will to probate, the executor . . . shall cause to be published . . . and at any time during the pendency of administration that the executor has knowledge of the name and address of a person believed to own or possess a claim which will not or may not be paid or otherwise satisfied during administration, provide by ordinary mail to each such claimant at the claimant's last known address . . . in which shall be included a notice . . . to creditors having claims against the estate to file them with the clerk within four months from the second publication of the notice, or thereafter be forever barred.
(Emphasis added.) The Code contains a similar provision for intestate estates. Iowa Code § 633.230.
Wasker and Politte first argue they are entitled to mailed notice, as a matter of due process, because the Estate had actual knowledge of their claims. As they read the Supreme Court's decision in Pope, they consider it irrelevant that the Estate gained this knowledge after the four-month period provided in section 633.410. We disagree.
In Pope, the Supreme Court recognized that "the State has a legitimate interest in the expeditious resolution of probate proceedings." Pope, 485 U.S. at 489, 108 S. Ct. at 1347, 99 L. Ed. 2d at 578. While this interest must be balanced with the rights of an estate's creditors to effective notice of their window of opportunity to present their claims, the Pope Court never requires as a matter of constitutional law that the States, in all instances, subordinate their interest in the prompt closing of estates to the interests of all conceivable creditors. Id. at 490, 108 S. Ct. at 1347-48, 99 L. Ed. 2d at 578. When we consider the various and competing interests before us in light of the Pope analysis, we conclude that claimants are not constitutionally entitled to mailed notice when the Estate acquires actual knowledge or constructive notice of their claims after the four-month period in section 633.410 has elapsed. Other jurisdictions who have considered similar arguments have arrived at a similar conclusion. See, e.g., In re Estate of Ragsdale, 879 P.2d 1145, 1146 (Kan.Ct.App. 1994) (stating that claimants, to be entitled to actual notice, must be "reasonably ascertainable" at the time of publication of notice); see also In re Estate of Spears, 858 S.W.2d 93, 96-97 (Ark. 1993) (holding that, to be entitled to actual notice under the state statute, a claimant must be "reasonably ascertainable" during the claim period).
Relying on section 633.304, Wasker and Politte argue they were entitled to written notice because their claims were made known to the Estate "during the pendency of administration." They argue this statute applies to their situation, because they possess claims "which will not or may not be paid or otherwise satisfied during administration," see Iowa Code § 633.304, thus removing them from the operation of section 633.410. In dicta, our supreme court noted this argument in Stewart v. DeMoss, 590 N.W.2d 545, 548 (Iowa 1999). After reviewing language of the two statutes, we are not persuaded by this argument.
Our starting point is the plain language of the statutes. Christenson v. Iowa District Ct., 557 N.W.2d 259, 261 (Iowa 1996). When working with a statute, our primary object is to determine and "give effect to the legislature's intent." T K Roofing Co., v. Iowa Dep't of Educ., 593 N.W.2d 159, 162 (Iowa 1999). We read all portions of an enactment together and "we do not give undue importance to an isolated part." State v. Hauan, 361 N.W.2d 336, 338 (Iowa Ct.App. 1984). We presume the "entire statute is intended to be effective," see Iowa Code § 4.4(2), and we avoid any interpretation, construction, or application that would make any portion of a statute "superfluous or redundant." Hauan, 361 N.W.2d at 338; see also T K Roofing, 593 N.W.2d at 162 ("redundant or irrelevant").
In support of their position, Wasker and Politte ask us to adopt a construction of these statutes that would "allow the litigant seeking relief to have a longer period." In re Estate of Renwanz, 561 N.W.2d 43, 45 (Iowa 1997). While this is a consideration when construing statutes of limitations, we note that it is not the only factor to consider. We must, in our reading of the two statutes, not read them in a way that would result in any portion of the statute becoming superfluous. Hauan, 361 N.W.2d at 338. Also, we must consider the policy underlying the two statutes. When those factors are considered, the appellants' reading becomes untenable.
First, such a reading would ignore the plain language of section 633.410. It would practically eliminate the four-month time limit for filing claims. The canons of statutory construction do not give us license to selectively read section 633.410. The entire statute must be given effect. Iowa Code § 4.4(2). In rejecting a similar argument under a similar statute, the supreme court of Arkansas stated: "We are not willing to conclude that the General Assembly intended for all estates to be two years in duration because of the potential that additional claims might come to light subsequent to the nonclaim period." Estate of Spears, 858 S.W.2d 93, 96-97. We reach the same conclusion.
Second, such a reading would ignore the policies underlying section 633.410, which is intended to "secure an early and final settlement of estates." 14 Julie L. Pulkrabek Gary J. Schmit, Iowa Practice: Probate § 18.12, at 32 (2004). If an estate's creditors, who were neither known nor readily ascertainable during the four-month period following publication of the second notice to creditors, were allowed to make claims at any time after the expiration of that period on the theory advanced by the appellants, then the policy of section 633.410 (not to mention its plain language) would be undermined. We decline to substitute our judgment about sound policy for the judgment of the legislature.
We believe a sensible reading of the pertinent language in section 633.304 requires an estate to give notice to all claimants whose claims are not otherwise barred for some other reason (such as failure to act within the limits imposed by section 633.410) that the estate may not be able to pay all claims. This situation may arise at any time during the administration of the estate, as the administrator makes an accounting of the decedent's assets and liabilities. This construction gives a reasonable meaning to the phrase "at any time during the pendency of administration" without inappropriately construing the phrase to revive claims that had been barred by section 633.410.
We conclude the appellants' claims were barred by section 633.410, and the district court correctly granted the Estate's motions for summary judgment.
IV. Issues Presented by the Estate's Cross-Appeals.
The Estate filed cross-appeals, asserting the district court could have granted summary judgments to it based on two additional theories: the statute of frauds and non-recourse language in certain investment documents. The district court found the Estate was not entitled to summary judgment based on either theory. Although we affirm the district court's judgment based on the legal theory accepted by it, we discuss these two additional issues, which were well-briefed by the parties.
We note the Estate, in order to preserve its favorable judgment, was not required to cross-appeal to preserve error on a ground raised in the district court, even if the district court rejected or did not discuss the ground. Venard v. Winter, 524 N.W.2d 163, 165 (Iowa 1994).
A. Were the Appellants' Claims Barred by the Statute of Frauds?
The Estate argued that evidence of the oral claims was barred by the statute of frauds. Specifically, Iowa Code section 622.32(2) provides that "no evidence" of contracts "wherein one person promises to answer for the debt, default, or miscarriage of another" is competent "unless it be in writing and signed by the party to be charged or the parties authorized agent."
The district court concluded evidence of the claims was not precluded by section 622.33. We agree with the district court.
Wasker and Politte argue they were shareholders of ECI, not creditors of ECI. Thus, they argue section 622.33 does not apply to their situation. While we might be persuaded by this argument if the appellants invested solely in stock, we note their investment also included a convertible subordinated note. While it was convertible to stock, no conversion took place until eleven months after Williams's death. For most of the pertinent time period, at least a portion of the alleged oral guarantee related to a debtor-creditor relationship between the appellants and ECI.
Although we treat the appellants as two of ECI's creditors, we conclude section 622.33 does not apply to their situation because a reasonable fact-finder might conclude the oral guarantee was made prior to the investment that gave rise to ECI's indebtedness to the appellants. Whether a contract is covered by the statute of frauds is a question of fact. Gallagher, Langlas Gallagher v. Burco, 587 N.W.2d 615, 619 (Iowa Ct.App. 1998). When the record is viewed in the light most favorable to the appellants, a reasonable finder of fact could conclude the oral guarantee was made prior to appellants' purchase of the investment units. Simply put, the credit was extended after the oral guarantee. Our supreme court has held that "the statute of frauds is not involved in a case where no debt existed at the time the agreement was made." Samuels Bros. v. Falwell, 215 Iowa 650, 653, 246 N.W. 657, 659 (1933).
Furthermore, and assuming the statute was otherwise applicable, we conclude the statute of frauds does not apply because a reasonable finder of fact, when the record is viewed in a light most favorable to Wasker and Politte, could conclude that Williams's purpose in making the oral guarantee was to secure a "benefit or business advantage for himself." Maresh Sheet Metal Works v. N.R.G. Ltd., 304 N.W.2d 436, 439 (Iowa 1981). A finder of fact could conclude Williams, ECI's largest shareholder, made the guarantee to secure needed cash to prevent ECI's failure. If Williams's "primary object" in making the guarantee was to "secure some benefit or business advantage for himself," the case is not within the statute of frauds. Id.; accord Miller v. Pound, 226 Iowa 628, 629, 284 N.W. 449, 449 (1939); Mills v. Brown, 11 Iowa 314, 317 (1860).
We conclude the statute of frauds did not bar evidence of an alleged oral agreement between the appellants and Williams.
B. Are the Appellants' Claims Defeated by the Language of the Subscription Agreement and Note?
The convertible subordinated notes delivered to Wasker and Politte as part of their investment contained language providing that the note's holders shall have no recourse against ECI or any of ECI's stockholders or officers. The Estate raised this language in its motions for summary judgment. In resistance, Wasker and Politte made the following arguments: (1) the non-recourse language contained in the notes was extinguished when they were converted to stock, (2) the non-recourse language was not supported by adequate consideration and is unenforceable, and (3) in light of Williams's personal guarantee, the Estate should be barred, by promissory estoppel, from relying on the non-recourse language to defeat the claims.
The district court concluded the Estate was not entitled to summary judgment on this ground. It stated the language would be effective if the appellants had sued ECI or any of its officers or shareholders, in their capacity as such. It further stated: "The Court concludes, however, the claims of Charles Wasker and James Politte are against Brian Williams, in his individual capacity, and in view of his death, against his estate."
The Estate argues Wasker and Politte did not preserve their promissory estoppel argument for our review. We disagree. The appellants raised the issue in their written resistances to the Estate's motions for summary judgment. Furthermore, the district court addressed this contention. After reviewing the district court's ruling, including the language quoted above, we conclude the district court sufficiently addressed the appellants' promissory estoppel argument to preserve this issue for review. While the district court did not use the magic word of "estoppel," it responded to the essence of the appellants' argument. In fact, the district court seems only to have addressed the promissory estoppel argument, for the court's language quoted above has no relation to the other two theories raised below by the appellants. As the issue was raised and addressed below, the issue is preserved for our review. Gallagher, Langlas Gallagher, 587 N.W.2d at 619.
Turning to the merits, we conclude the Estate was not entitled to summary judgments on this ground. The elements of promissory estoppel are as follows: "(1) a clear and definite oral agreement; (2) proof that plaintiff acted to his detriment in reliance thereon; and (3) a finding that the equities entitle plaintiff to [the] relief." In re Marriage of Harvey, 523 N.W.2d 755, 756-57 (Iowa 1994). When the present record is viewed in a light most favorable to Wasker and Politte, a finder of fact could permissibly conclude that Wasker and Politte established all three elements of promissory estoppel.
To bolster its argument, the Estate quotes additional non-recourse language from the subscription agreement. We conclude this language does not entitle the Estate to relief. First, the district court was not directed to this language as a basis for the Estate's argument. We conclude any argument premised on the non-recourse language in the subscription agreement, as opposed to the notes, is not preserved for our review. Second, even if we were to consider this language, we conclude the appellants still generated a fact question on all three elements of promissory estoppel.
We may raise error preservation on our own motion. See Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454, 470 (Iowa 2000).
The non-recourse language does not provide a basis to grant summary judgments to the Estate.
V. Conclusion
We have considered all issues presented, whether or not specifically addressed in this opinion. We affirm the judgment of the district court.