JANUARY 25, 2010 VOLUME 17, NUMBER 3
The difficulty and cost of a probate proceeding can make it hard for heirs to collect small estates. Even the court filing fee can be prohibitively expensive if the decedent’s assets are very small. As a consequence most states have some sort of alternative to a full probate proceeding for smaller estates. Most often those mechanisms are not available for real property owned by the decedent. In Arizona, however, even real estate can be transferred to heirs by a simplified proceeding with limited notice and few formalities.
Arizona’s so-called Affidavit of Succession (see Arizona Revised Statutes section 14-3971) proceeding resembles a stripped-down, highly shortened probate proceeding. It does require a court filing, but no formal notice is given to heirs, anyone named in a will or even the decedent’s creditors. It is available only if the decedent’s interest in the real estate was worth less than $75,000.
But what happens when the informality and lack of notice are used improperly? If someone uses the simplified process fraudulently, can they get away with wrongly taking the decedent’s property? A recent Arizona Court of Appeals decision addresses exactly that question.
When Rodney Olson died in 2003, he left three children and a home in Glendale, Arizona. There was a mortgage on the home, and his children got together and decided they would let the property go into foreclosure rather than try to take over the debts. A year later daughter Sherry Vandervort changed her mind; she moved in to the house, paid $11,000 in back mortgage payments and discussed with her brother and sister what it would take for her to acquire the house.
Ms. Vandervort’s brother waived any claims to the house, but her sister wanted her interest bought out. The two women agreed that Ms. Vandervort would pay her sister $25,000 over time, and she would keep the house. Then she turned to refinancing the loan.
Ms. Vandervort’s lawyer had the other two siblings sign quit-claim deeds to her, then he prepared and filed an Affidavit of Succession under Arizona’s simplified proceeding. In the Affidavit she alleged that she was the sole heir of her father’s estate; because of the nature of the simplified proceeding, no additional notice was given to the other two heirs. Based on the inaccurate filing, title was transferred to Ms. Vandevort’s name and she refinanced the property.
When Ms. Vandervort’s sister became upset about not getting payments on her agreed-upon $25,000, she initiated a full probate proceeding and sought to set aside the Affidavit insisting that it was inaccurate and in fact fraudulent. The holder of the note signed by Ms. Vandervort objected, arguing that the proceeding had appeared valid, and that any misrepresentation or fraud had been committed by others; the lender claimed not to have been aware of any flaws in the simplified proceeding.
The trial court invalidated the Affidavit but agreed that the lender’s claim should be enforceable at least to the extent of the original loan amount. That left the lender out of luck as to the rest of the refinancing.
The Court of Appeals reversed, ruling that the full loan was valid and affirming the Affidavit of Succession as against innocent third parties. The proceeding was fraudulent (because Ms. Vandervort swore to an inaccurate statement about the estate’s heirs), according to the appellate court. The property should be drawn back into the estate and handled appropriately. But because the lender was not involved in the misrepresentations, the full amount of the loan should be a valid encumbrance against the property now to be held as part of the estate. Beck v. Deem, January 14, 2010.
