Dunlap v. Nielsen

922 F.3d 1036

Alexander W. DUNLAP, Plaintiff - Appellant,

v.Karin NIELSEN, individually; Estate of Tyghe Nielsen ; Nielsen Capital Finance, a Kansas limited liability company, Defendants - Appellees.

No. 18-3092

United States Court of Appeals, Tenth Circuit.

Filed April 23, 2019

ORDER AND JUDGMENT^*

Jerome A. Holmes, Circuit Judge.

Plaintiff-Appellant Andrew W. Dunlap brought this diversity action against the Estate of Tyghe Nielsen (Estate) and others, asserting claims related to loans he made to Nielsen Capital Finance (NCF). Dr. Dunlap now appeals the district court's judgment in favor of the Estate on his breach of contract claim against it. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

BACKGROUND

Dr. Dunlap and Dr. Tyghe Nielsen were friends and former colleagues at a hospital in Arkansas. In 2009, Dr. Nielsen was diagnosed with cancer, and shortly thereafter he and his family moved to Kansas. He formed NCF in 2013, after he was unable to continue working as a physician. Dr. Nielsen was NCF's sole member.

Dr. Dunlap loaned $150,000 to NCF in October 2014, and loaned it an additional $50,000 the following month. Both loans were memorialized with documents signed by Dr. Nielsen and, purportedly, by his wife, Karin Nielsen.

Dr. Nielsen died in December 2015. On May 24, 2016, Dustin Wiemers, one of Dr. Nielsen's creditors, filed a Petition for Appointment of Special Administrator for the Estate of Tyghe Nielsen in the District Court of Miami County, Kansas, Probate Division [hereinafter "Probate Case"].¹ On the same day, the state court appointed a Special Administrator for the Estate.

Mr. Wiemers published a "Notice to Creditors" regarding the May 24, 2016, Petition once a week for three weeks in the Kansas City Star beginning on June 2, 2016, and in the Miami County Republic beginning on June 8, 2016 [hereinafter "Notices"]. Aplt. App. Vol. II at 300-01. Both Notices stated:

You are hereby notified that on May 24, 2016, a Petition for Issuance of Letters of Administration was filed in this Court by Dustin Wiemers, one of the plaintiffs in a civil case against Tyghe Nielsen, deceased, who has a claim against Tyghe Nielsen and, therefore, has an interest in the estate as a creditor, praying for issuance of Letters of Administration to Karla Kerschen Shepard as Special Administrator.

All creditors of the decedent are notified to exhibit their demands against the Estate within the later of four months from the date of first publication of notice under K.S.A. 59-2236 and amendments thereto, or if the identity of the creditor is known or reasonably ascertainable, 30 days after actual notice was given as provided by law, and if their demands are not thus exhibited, they shall be forever barred.

Id. at 300-01, 511 (emphasis added).

Shortly after Mr. Wiemers filed the May 24 Petition, Ms. Nielsen recorded Dr. Nielsen's will [hereinafter "Will"] in the Probate Case. The state district court admitted the Will and substituted Ms. Nielsen as the Estate's Executor on July 14, 2016.

In June 2016, shortly after the Notices were first published, Dr. Dunlap, a resident of Arkansas, filed this action in the U.S. District Court for the Eastern District of Arkansas, asserting breach of contract and promissory estoppel claims against Ms. Nielsen, the Estate and NCF (collectively "Defendants") for the amounts due on his loans to NCF. The Arkansas federal court immediately transferred this action to the U.S. District Court for the District of Kansas, in part based on Dr. Dunlap's allegations that the Estate was in probate in Kansas state court.

In July 2017, Defendants moved for summary judgment on Dr. Dunlap's promissory estoppel claims and his breach of contract claims against Ms. Nielsen and the Estate. As relevant to this appeal, Defendants argued Dr. Dunlap's breach of contract claim against the Estate was barred because he had failed to make a timely claim in the Probate Case as required by Kansas' nonclaim statute, Kan. Stat. Ann. § 59-2239(1).² The district court rejected this argument and denied summary judgment on the breach of contract claims against the Estate and Ms. Nielsen, but granted summary judgment against Dr. Dunlap's promissory estoppel claims.

Following a bench trial on the breach of contract claims, the district court issued findings of facts and conclusions of law in which it concluded Ms. Nielsen had not been a party to any contract with Dr. Dunlap and that Dr. Dunlap's claim against the Estate was in fact barred as a result of his failure to timely present it in the Probate Case. After the court entered judgment in favor of the Defendants, Dr. Dunlap timely filed this appeal.

DISCUSSION

Dr. Dunlap challenges the district court's final decision regarding his breach of contract claim against the Estate on two grounds. First, he asserts for the first time that the district court lacked jurisdiction to decide whether his claim was barred by Kansas' nonclaim statute because this question falls within the probate exception to diversity jurisdiction. And in the event the court had jurisdiction to decide this issue, Dr. Dunlap argues the district court erred in concluding he received actual notice of the applicable limitations period as required for his claim to be barred under the statute. For the reasons stated below, we conclude the district court had jurisdiction to decide whether Kan. Stat. Ann. § 59-2239 barred his claim against the Estate and that it properly determined the statute barred his claim.

A. Subject Matter Jurisdiction and the Probate Exception

The probate exception is a judicially created exception to diversity jurisdiction that "stem[s] in large measure from misty understandings of English legal history." Marshall v. Marshall, 547 U.S. 293, 299, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006). Its essence is that "a federal court has no jurisdiction to probate a will or administer an estate" or "to disturb or affect the possession of property in the custody of a state court." Markham v. Allen, 326 U.S. 490, 494, 66 S.Ct. 296, 90 S.Ct. 256 (1946); see Marshall, 547 U.S. at 311-12, 126 S.Ct. 1735. Thus, the Supreme Court declared in Markham, "federal courts of equity have jurisdiction to entertain suits in favor of creditors, legatees and heirs and other claimants against a decedent's estate to establish their claims so long as the federal court does not interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court." Markham, 326 U.S. at 494, 66 S.Ct. 296 (internal quotation marks omitted).

In the years following Markham, federal courts "puzzled over the meaning of the words `interfere with the probate proceedings,'" and some, including this court, "read those words to block federal jurisdiction over a range of matters well beyond probate of a will or administration of a decedent's estate." Marshall, 547 U.S. at 311, 126 S.Ct. 1735 (quoting Markham, 326 U.S. at 494, 66 S.Ct. 296, and citing Rienhardt v. Kelly, 164 F.3d 1296, 1300-01 (10th Cir. 1999), as an example of an overbroad reading of the exception). The Supreme Court rejected this approach in Marshall v. Marshall, clarifying that the scope of the probate exception is "narrow" and "distinctly limited." Id. at 305, 310, 126 S.Ct. 1735. The Court explained the exception "reserves to state probate courts [1] the probate or annulment of a will and [2] the administration of a decedent's estate; it also precludes federal courts from [3] endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction." Id. at 311-12, 126 S.Ct. 1735. Thus, where diversity jurisdiction exists, federal courts retain jurisdiction to decide matters that are probate-related or that may impact the state probate court's performance of the three tasks reserved to it, so long as the federal court itself does not engage in these tasks. See, e.g., id. at 299-300, 126 S.Ct. 1735 (holding claim did not fall within probate exception even though it raised "questions which would ordinarily be decided by a probate court in determining the validity of the decedent's estate planning instrument" (internal quotation marks omitted)); Markham, 326 U.S. at 494, 66 S.Ct. 296 (declaring federal courts have jurisdiction to adjudicate rights in property, even though the state probate court may be bound by the federal court's judgment); Lee Graham Shopping Ctr., LLC v. Estate of Kirsch, 777 F.3d 678, 681 & n.4 (4th Cir. 2015) (holding federal court had jurisdiction to decide contract interpretation issue though it could affect the state court's distribution of estate assets); Lefkowitz v. Bank of New York, 528 F.3d 102, 106 (2d Cir. 2007) ("[W]here exercise of federal jurisdiction will result in a judgment that does not dispose of property in the custody of a state probate court, even though the judgment may be intertwined with and binding on those state proceedings, the federal courts retain their jurisdiction.").

Against this legal backdrop, Dr. Dunlap recognizes that the district court had jurisdiction to decide his breach of contract claim against the Estate, notwithstanding the probate exception and the fact that its decision would likely be binding in the Probate Case. But, inconsistently, he claims the probate exception deprived the district court of jurisdiction to rule on Defendants' affirmative defense that this claim was barred by Kansas' nonclaim statute, because the district court's ruling "directly interferes with the Probate Court's control of [E]state assets." Aplt. Opening Br. at 14. As just described, this is not the test for assessing whether the probate exception applies. The district court's judgment that Dr. Dunlap failed to present his demand in the Probate Case, while it may affect the distribution of Estate assets, does not constitute...