Late creditor claims, in theory, be allowed in Nevada probate proceedings. However, rulings by the Nevada Supreme Court clearly favor disallowing late creditor claims, except in extraordinary circumstances.
In most Nevada estate proceedings, creditors have just 90 days to file a claim with the clerk of the Court. In summary administration (estates worth less than $300,000.00), the creditor period is 60 days. The Personal Representative sends notice is sent to all known creditors. Notice must also be published in order to provide notice to unknown creditors.
Two Nevada Supreme Court cases from the Estate of Wilbur Clark address late creditor claims. Wilbur Clark was a Las Vegas casino magnate in the mid 20th century. From Wikipedia:
He purchased El Rancho Vegas in 1944. A year later, in 1945, he purchased Monte Carlo Club. In 1946, he sold El Rancho Vegas. With that money, he built the Desert Inn casino in 1947. However, he quickly sold most of his interest to businessman Moe Dalitz, owning only 17.5%. Another business partner was Hank Greenspun, the publisher of the Las Vegas Sun newspaper. He remained the public face of the Desert Inn. In the 1950s, he organized the Tournament of Champions, an annual golf tournament at the Desert Inn Golf Course shown on televised by NBC. He sold his share in 1964.
Later, he developed Wilbur Clark’s Paradise Gardens, located at 4505 South Maryland Parkway, south of the Thomas & Mack Center. He also donated the land on which Guardian Angel Cathedral was built.
Clark died in 1965. Probate administration of Clark’s estate was initiated in Clark County. Notice to creditors was published on September 17, 1976. The time to file claims against the estate expired on December 17, 1965. three different late creditor claims were litigated in Clark’s estate and became the basis of two different Nevada Supreme Court opinions, Continental Coffee Company v. Estate of Wilbur I. Clark, 438 P. 2d 818, 84 Nev. 208 (1968) (hereafter “Continental Coffee”) & Gardner Hotel Supply v. Estate of Clark, 83 Nev. 388, 432 P. 2d 495 (1967) (hereafter “Gardner Hotel”).
Late Creditor Claims under Nevada Probate Code
As I alluded to above, a district court judge has discretion to allow late creditor claims. NRS 147.040(3) provides as follows:
If a claim is not filed with the clerk within the time allowed by subsection 1 or 2, the claim is forever barred, but if it is made to appear, by the affidavit of the claimant or by other proof to the satisfaction of the court, that the claimant did not have notice as provided in NRS 155.020 or actual notice of the administration of the estate, the claim may be filed at any time before the filing of the final account.
In simpler terms, the creditor merely needs to show they didn’t have actual notice of administration of the estate. Seems like a simple requirement to satisfy, right? Well, in the immortal words of Lee Corso: “Not so fast my friend!”
Late Creditor Claims interpreted by the Nevada Supreme Court
Let’s return to our two Wilbur Clark Nevada Supreme Court cases.
In Gardner Hotel the Nevada Supreme Court considered two late creditor claims filed against Clark’s estate. Prior to his death, Wilbur Clark personally gauranteed a contract between a hotel he owned and Gardner Hotel Supply. The contract included a clause that explicitly stated the obligations of the contract survived the death of Clark. Recall that the last day to file claims against Clark’s estate was December 17, 1965.
On April 12, 1966 Gardner [Hotel Supply] filed a motion for leave to file a creditor’s claim in the amount of $ 13,157.26. In support of said motion, Gardner presented the affidavit of Lipkin, copies of the conditional sales agreement, the guaranty contract and various assignments and reassignments. In his affidavit, Lipkin stated that he first became aware of the notice to creditors on March 25, 1966 through his attorney, who had been sent to Las Vegas sometime in March. The motion to file the claim was denied.
Obviously, Gardner Hotel Supply appealed the decision to the Nevada Supreme Court. The second late creditor claim addressed in Gardner Hotel was filed by Southern National Bank of Houston for a $300,000.00 loan made to Clark for two hotel projects. The bank officers, like those from Gardner Supply Company, claimed to have no notice of the creditor period:
On August 29, 1965 Mr. H. H. Kuhlmann, a Vice-President of the bank, noted Clark’s death in the Houston newspaper. On November 12 he was advised by Ward that J. L. Donnelly, whom Kuhlmann knew to be Clark’s attorney in the past, had been named executor and, in truth, he was so advised several times subsequent.
Donnelly stated in his affidavit that he had conversed with Kuhlmann concerning the bank loan and the estate’s financial status. The record further shows that Kuhlmann had been advised by others of the estate proceedings, and that Donnelly and Herbert Clark were coexecutors. The bank moved, after the time for filing claims had expired, to file its claim, which was denied.
The Nevada Supreme Court upheld the district court’s decision to reject both late creditor claims. This, even though both creditors claimed to have not received actual notice of the claims period. Here is how the court ruled:
3. Knowledge of death is sufficient to put the claimant on notice that probate proceedings will follow, and charges him with the responsibility of further inquiry. Knowledge of death, or any knowledge of the estate proceedings, coupled with the failure to act after receipt of the information are enough to support the exercise of the lower court’s discretion either to grant permission to file the claim, or to deny it. Cf. Pacific States S.L. & B. v. Fox, supra (where permission to file a late 498*498 claim was granted). See also: Chalaby v. Driskell, 390 P.2d 632 (Ore. 1964); In re Marrs’ Estate, 107 N.E.2d 148, 159 (Ohio 1952); In re Wyckoff Estate, 152 N.E.2d 141 (Ohio 1958); In re Rathe’s Estate, 59 N.W.2d 164 (Neb. 1953); Federal Land Bank of Omaha v. Bonnett, 284 N.W. 97 (Iowa 1939).
The claimants knew of Clark’s demise and several conversations were held with the executors and other interested persons. Both claimants are sophisticated in the business world, experienced in the significance of filing claims in the given situations. That the filing period in this state is shorter than that of their own state is insufficient reason to excuse their failure to file on time. The trial court properly denied the motions for leave to file late claims.
In short, knowledge of the death of the debtor is a sufficient basis for a district court to deny a late creditor claim. This, even if the creditor did not receive formal notice of the creditor period. This makes sense. If the rule were not construed narrowly, it would invite negligent or purposeful late creditor claims and undermine the efficient and timely resolution of Nevada probate estates.
In Continental Coffee the Nevada Supreme Court considered a late creditor claim filed by a corporation holding four promissory notes totaling $72,000.00 guaranteed by Clark.
From Continental Coffee:
On October 27, 1966, some 13 months after the first notice to creditors was published and 10 months after the time to file claims had ended, Continental Coffee Company filed its creditor’s claims in the Nevada probate proceeding. They were rejected by the executors as coming too late. Thereafter, on December 30, 1966, a motion supported by the affidavit of Stanley Owens, was filed with the court seeking permission to file the late claims. The motion was denied and suit was commenced.
Relying upon the same reasoning as Gardner Hotel, the Nevada Supreme Court ruled as follows:
The record shows that the claimant had knowledge of the death of Clark soon after it occurred. With such knowledge it was incumbent upon the claimant to inquire about estate proceedings. There is no showing that the claimant did anything at all in this regard. It failed to act, to inquire, to investigate.
The burden is upon him who seeks to file a late creditor’s claim in a probate proceeding to present facts to the trial court which justify favorable exercise of discretion.
The only proof offered by appellant to the lower court was the affidavit of Stanley Owens, vice-president of Continental Coffee Company, which states that, “During the 3 month period subsequent to September 14, 1965, Continental Coffee Company, did not have notice of the Nevada proceedings involving the administration of the Estate of Wilbur B. (sic) Clark.” The lower court concluded this was not adequate showing to persuade it to exercise its discretion in allowing the late filing of the claim in view of all the other circumstances. In line with Gardner Hotel, supra, knowledge of death coupled with the failure to act will support the lower court’s discretion in denying a late filing. We are not prepared to say as a matter of law that the lower court abused its discretion requiring our reversal.
Late Creditor Claims Summary
Both Gardner Hotel and Continental Coffee can be distilled into the following points:
- A creditor who has actual knowledge of the death of the debtor is considered to have knowledge of the administration of the estate.
- If the creditor has knowledge of the death, and takes no action, the district court has the power to deny a late creditor claim.
- If the creditor has knowledge of the death, and does take timely affirmative action to pursue the claim, but nonetheless files the creditor claim after the deadline, these cases imply that the district court may not deny consideration of the late claim.
- If the creditor can show he/she had no knowledge of the death of the debtor, these cases seem to imply that the district court may not deny consideration of the late claim.
However, the biggest take away from these cases is that if you’re a creditor, you have a duty to proactively pursue your claim against the estate. Any dilatory conduct on your part could be the basis for the district court to disallow consideration of your creditor claim as time barred.