Neb. Dep't of Revenue v. Loder (In re Loder)

308 Neb. 210

953 N.W.2d 541

IN RE ESTATE OF Janette H. LODER, deceased.

Nebraska Department of Revenue, appellant,

v.Miranda Loder, Personal Representative of the Estate of Janette H. Loder, deceased, appellee.

No. S-19-1104.

Supreme Court of Nebraska.

Filed January 22, 2021

Douglas J. Peterson, Attorney General, and James D. Smith, Lincoln, for appellant.

Wayne E. Janssen, for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Cassel, J.

I. INTRODUCTION

The personal representative of a decedent's estate disallowed a claim filed by the Nebraska Department of Revenue (Department) for unpaid lifetime Nebraska income taxes, because the Department did not file it within 2 months after published notice.¹ However, the personal representative never mailed the Department a copy of the published notice. The parties disagree whether the Department qualified as a known creditor, to whom the personal representative was required to mail notice.² Because it appears the county court failed to impose the burden of proof regarding diligent investigation and inquiry on the personal representative, we reverse the court's order disallowing the claim and remand the cause for further proceedings consistent with this opinion.

II. BACKGROUND

Janette H. Loder (the Decedent) died intestate on September 1, 2014. Miranda Loder, acting as personal representative of the Decedent's estate, published a notice to creditors in a local newspaper for 3 consecutive weeks and mailed copies of the notice to 36 creditors, warning them that the creditors’ claims filing deadline was November 24, 2014. But the Department was not one of the creditors to whom notice was mailed.

During the administration of the estate, Miranda and William Loder, the Decedent's ex-husband, personally investigated the Decedent's affairs to determine her creditors. They reviewed her financial records and various documents in her home, and talked with friends and acquaintances while compiling the creditors list. Miranda testified that she did not know that the Department was a creditor of the Decedent's estate, because she and William did not find any records indicating that the Decedent had unpaid taxes, such as a notice from the Department. However, William admitted that they did not specifically search for the Decedent's tax history, because "[they] had no reason to."

According to Miranda's testimony, the Decedent said she received alimony from William that was directly deposited into her bank account by the State of Pennsylvania. Miranda admitted that she had not inquired whether Pennsylvania paid taxes on the money the Decedent received as income. And she agreed that "any time you have income ... taxes are owed."

In December 2016, the Department notified Miranda that the Decedent had not filed her individual income taxes for the 3 years preceding her death. In March 2017, Miranda filed the Decedent's individual income tax returns for the tax years 2011, 2012, and 2013. Those returns showed income taxes due, none of which were paid by the Decedent's estate. In August 2017, the Department filed a claim for $21,331.23, representing income tax, penalties, and interest due for the unpaid tax years. Miranda did not dispute the Department's tax calculation, but she disallowed the claim, arguing it was untimely.

Within 60 days of disallowance, the Department filed a petition with the county court for allowance of the claim. The Department argued that because it did not receive notice in compliance with both § 25-520.01 and Neb. Rev. Stat. § 30-2483 (Cum. Supp. 2018), it retained the right to file a claim within 3 years of the Decedent's death under § 30-2485(a)(2).

The court denied the Department's petition and sustained Miranda's disallowance, finding that the Department's claim was time barred because it received adequate notice of the Decedent's death under § 30-2483(a). The court stated that Miranda "afforded known creditors, by publication and mailing, and unknown creditors by publication, notice of their deadline to present claims." The court found that "neither party was aware the [D]ecedent had neglected to file until after [Miranda] filed returns in 2017." The court reasoned that "[b]ecause publication is reasonably calculated to provide notice to all claimants of the ... deadline for presentation of claims," the Department's claim was untimely. The court did not state any factual finding regarding the adequacy of Miranda's investigation and inquiry to identify reasonably ascertainable creditors.

The Department filed a timely appeal. We granted the Department's petition to bypass the Nebraska Court of Appeals.³

III. ASSIGNMENTS OF ERROR

The Department assigns that the county court erred by denying its petition and sustaining Miranda's disallowance of its claim against the Decedent's estate.

IV. STANDARD OF REVIEW

In the absence of an equity question, an appellate court, reviewing probate matters, examines for error appearing on the record made in the county court. When reviewing a judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.⁴

Statutory interpretation is a question of law, which we resolve independently of the trial court.⁵

V. ANALYSIS

1. ALTERNATIVE ARGUMENTS

The Department presents three alternative arguments. First, the Department argues that Neb. Rev. Stat. § 77-2768 (Reissue 2018) controls over the Nebraska Probate Code for the Department's filing of a creditor claim when the claim involves income taxes. Alternatively, the Department claims that its regulations, found in 316 Neb. Admin. Code, ch. 36, § 015.02 (2013), govern the Department's deadline to file its claim against an estate for income taxes instead of § 30-2485(a)(1), which the county court concluded governed. If neither of these arguments is successful, the Department finally argues that because it did not receive a written copy of the published notice in accordance with § 25-520.01, it retained the right to file a claim within 3 years after the Decedent's death under § 30-2485(a)(2). We find no merit to the Department's first two alternatives and turn our attention to its final argument.

Nebraska's nonclaim statute limits the time in which claims may be presented against an estate and specifically explains what is to be done when a creditor is not provided proper notice.⁶ Under § 30-2485(a), if the personal representative complies with the notice provisions of §§ 25-520.01 and 30-2483, a claim generally must be presented within 2 months after the date of the first publication of notice to creditors.⁷ However, if the personal representative fails to provide compliant notice, then a claimant may present its claim within 3 years after the decedent's death.⁸

The nonclaim statute requires that a creditor receive notice under both §§ 25-520.01 and 30-2483 to ensure creditors know of the decedent's death and are afforded the opportunity to collect from the decedent's estate, while also allowing the personal representative to expedite the distribution of the estate.⁹ It is undisputed that Miranda satisfied the publication requirement of § 30-2483(a) and that the notice requirement of § 30-2483(b)¹⁰ does not apply to the case before us. The parties disagree on whether Miranda was required to mail the Department notice under § 25-520.01, with which compliance is also required by § 30-2483(a).

2. NOTICE REQUIREMENTS UNDER § 25-520.01

Section 25-520.01 was not originally included in Nebraska's nonclaim statute. Historically, before adoption of the Uniform Probate Code (UPC), the nonclaim statute¹¹ required only notice by publication pursuant to the statutes governing notice to creditors.¹² The county judge would publish a notice in a local newspaper requiring creditors to bring their claims within a specified time.¹³ However, creditors could request an extension from the court to submit their untimely claim for "good cause."¹⁴ Commonly, a creditor could show good cause by proving it did not have notice of a decedent's death, because the creditor lived in a different county and did not receive the newspaper publication.¹⁵

When Nebraska first adopted the UPC, § 30-2483 (Reissue 1975) required publication of notice to creditors, as well as "mail[ing] the published notice and giv[ing] proof thereof in accordance with section 25-520.01." But § 30-2485(a)(1) (Reissue 1975) adhered to the essence of the former law and provided a creditor who did not receive notice only an additional 60-day window to apply for additional time and show good cause for an extension of the deadline. At that time, § 30-2485(a)(2) allowed presentation of a claim "within three years after the decedent's death, if notice to creditors has not been published. " (Emphasis supplied.) That language later changed.

After the U.S. Supreme Court held in Tulsa Professional Collection Services v. Pope¹⁶ that reasonably ascertainable creditors must be provided actual notice of a decedent's death, the Legislature amended § 30-2485 to condition the 2-month bar date upon compliance with both § 25-520.01 and § 30-2483.¹⁷ We have observed that notice by publication, while constitutionally permitted in some circumstances, is a poor bet to provide actual notice to a party of an action that affects his or her rights.¹⁸ Recognizing the Court's decision that due process requires actual notice to known or reasonably ascertainable creditors, the Legislature incorporated § 25-520.01 into the nonclaim statute, supplementing the notice statute's mailing requirement.¹⁹

And the Legislature did so in both subsections (1) and (2) of § 30-2485(a). Now, § 30-2485(a)(2) (Reissue 2016) specifies that a claim will be barred if it is not presented "[w]ithin three years after the decedent's death if notice to creditors has not been given in compliance with sections 25-520.01 and 30-2483. " (Emphasis...