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In re Estate of Avakian

Court of Appeals of Mississippi

April 11, 2017

IN RE: THE ESTATE OF NORAIR AVAKIAN, DECEASED: BURNETTE AVAKIAN, EXECUTRIX APPELLANT
v.
WILMINGTON TRUST NATIONAL ASSOCIATION, AS SUCCESSOR TRUSTEE TO CITIBANK, N.A., AS TRUSTEE FOR BEAR STEARNS ASSET BACKED SECURITIES TRUST 2007-2, ASSET-BACKED CERTIFICATES, SERIES 2007-2 AND JP MORGAN CHASE BANK, N.A. APPELLEES

          DATE OF JUDGMENT: 09/08/2015

         COURT FROM WHICH APPEALED: LOWNDES COUNTY CHANCERY COURT, HON. KENNETH M. BURNS JUDGE

          ATTORNEYS FOR APPELLANT: STEVEN CRAIG PANTER DAVID L. SANDERS

          ATTORNEYS FOR APPELLEES: WILLIAM JACOB LONG IV EDDIE TRAVIS RAMEY CHRISTOPHER DANIEL MEYER

         EN BANC.

          CARLTON, J.

         ¶1. Norair Avakian died July 19, 2010. On July 28, 2010, the Lowndes County Chancery Court entered an order probating Norair's last will and testament and issued letters testamentary to his widow, Burnette Avakian, to serve as executrix of Norair's estate ("Estate"). Three separate lawsuits were filed as a result of attempts by creditors to foreclose on Norair's property and seek damages based on the default of a promissory note that Norair executed prior to his death. We will first provide a brief procedural history of the matter in the probate case before us on appeal. We will then provide a more in-depth discussion of the relevant matters involving the three separate actions filed against the Estate and the executrix, Burnette, in the facts section below.

         ¶2. On October 15, 2014, J.P. Morgan Chase Bank N.A. ("J.P. Morgan") filed a statement of claim against the Estate in the chancery court based upon Norair's debt arising from a promissory note of $815, 905.06. J.P. Morgan, as the servicer of the loan resulting from the promissory note, filed the statement of claim on behalf of Citibank N.A. ("Citibank"), the creditor. In the probate action, on January 30, 2015, Burnette, as executrix, filed her contest of J.P. Morgan's statement of claim, asserting that any claim on the promissory note was time-barred by Mississippi Code Annotated section 15-1-25 (Rev. 2012), and that pursuant to Mississippi Code Annotated section 15-1-3 (Rev. 2012), the underlying claim was extinguished. On May 27, 2015, Wilmington Trust National Association ("Wilmington Trust"), which replaced Citibank as the creditor, filed a response to Burnette's contest of the claim in the probate proceeding.

         ¶3. On June 15, 2015, the chancellor heard oral argument on Burnette's contest of the statement of claim in the probate proceeding. The chancellor stated that "the sole issue before this court is whether or not a creditor's claim as it related to a promissory note is time[-]barred, " and the chancellor ultimately found that although J.P. Morgan filed its statement of claim outside of the ninety-day statutory time period in which to probate a claim against the Estate pursuant to Mississippi Code Annotated section 91-7-151 (Rev. 2013), the claim was still timely filed in the probate action due to Burnette's failure as executrix to provide all reasonably ascertainable creditors with notice of probate of the Estate pursuant to Mississippi Code Annotated section 91-7-145 (Rev. 2013).

         ¶4. Burnette now appeals the chancellor's judgment, asserting the following assignments of error: (1) the chancellor erred in finding that an order from the United States Court of Appeals for the Fifth Circuit prohibiting a lender from foreclosing on property owned by Burnette tolled the running of the statute of limitations on the Creditor's[1] statement of claim regarding the promissory note, and (2) the chancellor erred in finding that Burnette could not rely upon the statute of limitations because she failed to mail written notice to creditors of the opening of the Estate and the need to file a claim, pursuant to section 91-7-145(1).

         ¶5. The only issue before us on appeal is whether the claim filed by the Creditor in the probate proceeding was timely filed. Finding no error in the chancellor's judgment that the Creditor's statement of claim was timely filed in the probate proceeding, we affirm as to that issue.

         FACTS

         ¶6. On September 18, 2002, Norair and his wife, Burnette, purchased a house located in Columbus, Mississippi. They executed a deed of trust to secure a loan for the purchase from Southstar Financing LLC. The record reflects that title to the property was vested in both Norair's and Burnette's names as joint tenants.

         ¶7. On November 2, 2004, Norair executed a deed that conveyed title to the property to Burnette alone to prevent Burnette from bearing any liability for the debt should Norair die. In March 2006, Norair and Burnette then refinanced the mortgage with EquiFirst Corporation ("EquiFirst"). Norair took out a loan in his name only and executed a promissory note in favor of EquiFirst. EquiFirst required both Burnette and Norair to execute a deed of trust. Norair was out of state at the time of closing, so EquiFirst forwarded one set of loan documents to him so he could execute and return the documents. EquiFirst had Burnette execute a second set the following day. This resulted in two deeds of trust on the property - one executed by Norair on March 7, 2006, and one executed by Burnette on March 8, 2006. Each deed of trust was recorded as a separate instrument with the Lowndes County Chancery Clerk.

         ¶8. Norair's promissory note to EquiFirst was later sold to Citibank in its capacity as trustee of the Bear Sterns Asset Backed Securities Trust 2007-2, Asset-Backed Certificates, Series 2007-2 ("Bear Sterns"). J.P. Morgan became the servicing agent for Citibank. On December 3, 2012, Wilmington Trust replaced Citibank as the trustee for Bear Sterns. We recognize that J.P. Morgan served as the servicer for the loan, and EquiFirst, Citibank, and Wilmington Trust were the creditors.

         ¶9. Norair fell in default on the loan and died shortly thereafter on July 19, 2010. On July 28, 2010, Burnette filed a petition for probate of Norair's last will and testament. That same day, the chancery court entered an order probating the last will and testament and issued letters testamentary to Burnette to serve as executrix of the Estate. Burnette failed to identify any entity as a known creditor of the Estate pursuant to section 91-7-145, and she also failed to provide the Creditor herein, or any creditor, notice by mail as required by section 91-7-145 regarding the probate of the Estate. The record reflects that Burnette did file a "Notice to Creditors Affidavit" stating that she had and would notify known creditors, without listing any specific creditors.

         ¶10. The Creditor made its first attempt at foreclosure on the home as early as December 2010 but never completed the process. In early 2012, the Creditor again provided Burnette notice that it intended to foreclose on the house. The Creditor set the foreclosure sale for May 10, 2012.

         ¶11. On May 9, 2012, the day before the scheduled foreclosure sale, Burnette filed suit in the chancery court against the Creditor seeking to enjoin the foreclosure by contending that the two deeds of trust on the home were both void pursuant to Mississippi Code Annotated section 89-1-29 (Rev. 2011) because neither deed contained the signatures of both Burnette and Norair. The lawsuit was removed to the United States District Court for the Northern District of Mississippi.

         ¶12. Following a trial, the district court entered a final judgment on February 10, 2014, in favor of Burnette and held that the deeds of trust on the house were unenforceable. The Creditor appealed the decision to the Fifth Circuit. During the appeal, the Fifth Circuit issued a stay on May 12, 2014, that prohibited foreclosure of the property during the pendency of the appeal.

         ¶13. On October 14, 2014, after receiving the ruling from the district court, the Creditor[2]filed a statement of claim in the probate proceeding pending in chancery court based upon Norair's debt arising from the promissory note of $815, 905.06. The statement of claim set forth that "[t]he claim was presumed secured pursuant to a mortgage loan; however, the claim has been deemed unsecured via [the district court's judgment]."

         ¶14. On December 9, 2014, the Fifth Circuit reversed the district court after finding that the Mississippi Supreme Court would likely construe the two deeds of trust as together creating a valid deed of trust and remanded the case for further proceedings. The Creditor then filed a motion for entry of final judgment in the district court.[3]

         ¶15. In the probate action now before us on appeal, the record shows that on January 30, 2015, Burnette filed her contest of J.P. Morgan's statement of claim, asserting that any claim on the promissory note was time-barred by section 15-1-25, and that pursuant to section 15-1-3, the underlying claim was extinguished. The Creditor filed a response to Burnette's contest of claim on May 27, 2015. On June 12, 2015, Burnette filed her Reply of Executrix. ¶16. In the meantime, on February 23, 2015, the Creditor filed a separate suit in the chancery court against both Burnette, individually, and the Estate, seeking to foreclose on the home and to recover damages against the Estate on the promissory note.

         ¶17. In June 2015, the chancellor heard arguments from the Creditor and Burnette regarding the Creditor's statement of claim. On September 8, 2015, the chancellor issued an opinion and judgment in favor of the Creditor. In his judgment, the chancellor stated that "the sole issue before this court is whether or not a creditor's claim as it related to a promissory note is time[-]barred. The issues of whether or not foreclosure proceedings and/or deeds of trusts are valid were heard in another cause and ultimately, by the federal courts."

         ¶18. In his judgment, the chancellor examined Burnette's argument that the Creditor's statement of claim is time-barred because the statement was filed outside the ninety-day requirement for filing probate claims set forth in section 91-7-151. The chancellor found that Burnette, as executrix, failed to mail the statutorily required notice to the Creditor, who was unquestionably a reasonably ascertainable creditor at the time the chancery court issued letters testamentary to Burnette. The chancellor explained that "a strict and literal interpretation of . . . [section] 91-7-145(1) mandates that the promissory note holder [(Citibank)] be given notice by mail before the [ninety] days specified in . . . [section] 91-7-151 begins to run." The chancellor determined that since Burnette, as executrix, failed to provide the Creditor with proper notice of its right to file a claim against the Estate, the October 14, 2014 statement of claim filed by the Creditor was therefore timely.

         ¶19. The chancellor further found that since Burnette received letters testamentary on July 28, 2010, the ninety-day moratorium on suits against an executor, provided by Mississippi Code Annotated section 91-7-239 (Rev. 2013), expired on October 26, 2010. As a result, the chancellor concluded that the four-year statute-of-limitations period provided by section 15-1-25[4] for a creditor to bring an action against an executor began to run on October 26, 2010, and expired on October 26, 2014. The chancellor found that "neither [the Creditor], nor any other party, filed suit against the Estate to enforce the promissory note prior to October 26, 2014." Although the Creditor filed a statement of claim on October 14, 2014, the chancellor explained that "the filing of a claim by a creditor is not sufficient to stop the running of the statute of limitations, even if timely filed"; rather, in order to enforce its claim, the creditor must bring a lawsuit before the four-year statute of limitations expires. The chancellor ruled that the Creditor's statement of claim ...


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