Insider Trading: Sweetheart deals cannot undermine the priority of creditors in the probate code.
Generally, after someone dies, their relatives open up a probate estate with the court. After the estate is opened, a personal representative is appointed. This person has many responsibilities, one of which is to settle claims with the decedent’s creditors. The Florida Probate Code at section 733.707 provides a priority of creditors. This priority becomes critical in certain situations, like when there aren’t enough assets to pay all the creditors. For this reason, personal representatives are not permitted to make “side deals” with certain creditors that circumvent the priority of creditors set forth in the Probate Code.
A recent case from the second district illustrates how tricky the priority of creditor issues can become, especially when intertwined with a wrongful death lawsuit brought by the estate. Copeland v. Boswell, 34 Fla.L.Weekly D1510 (Fla.2nd DCA July 29, 2009) The facts of the case are straightforward: Willie F. Hough (the decedent) was severely injured when his vehicle was struck by a trailer-truck driven by Wayne Buswell on behalf of his employer, Patco Transport. Following the accident, Mr. Hogue received extensive medical treatment and care for a period of three months at Tampa General Hospital, until the date of his death in May 2005. Mr. Hogue incurred $492,224 in expenses at Tampa General, and the expenses for his funeral totaled $7788. After his death, his sister, Pauline Copeland was appointed as the personal representative and she filed a wrongful death action on behalf of the Estate against Mr. Buswell and Patco Transport seeking to recover the medical and funeral expenses.
Tampa General filed a claim against the estate pursuant to 733.702 to protect its interest and also intervened in the wrongful death lawsuit seeking to recover the $492,224 in unpaid medical bills. Then, without informing the Estate and without approval from the probate court, Mr. Buswell and Patco Transport and their insurer reached a settlement with Tampa General in the amount of $300,000. In return, Tampa General signed a general release absolving Mr. Buswell and Patco Transport of all claims and releasing the personal representative.
The wrongful death case resulted in a favorable verdict for the estate and Mr. Buswell was found solely at fault and responsible for the $492,224 in medical bills incurred by the decedent. However, because Mr. Buswell and Patco had already reached a settlement with Tampa General, the trial court ruled that it could not award the estate could not award damages for a satisfied debt in the wrongful death lawsuit. Consequently, the court entered a judgment awarding only funeral expenses.
On appeal, the Second District observed that the personal representative of the estate has the exclusive authority to bring a wrongful death action and recover damages on behalf of the estate. The Court issued a scathing indictment against Mr. Buswell and Patco and their insurer: “[b]y virtue of their settlement with Tampa General, they not only circumvented the statutory priorities of chapter 733 but also effectively depleted potential assets of the Estate. It is clear that the Estate had no assets other than the proceeds of the wrongful death action. The court specifically found that the medical bills in the amount of $492,224 were reasonable and necessarily incurred in the treatment of the decedent and would have been awarded but for the release of Tampa General’s claim. Had the trial court awarded the full measure of damages, the Estate would have assets in excess of $500,000. It then would be the personal representative’s duty to distribute those amounts in accordance with the probate code and in a reasonable and equitable manner.[citations omitted]. By their actions, Mr. Buswell and Patco Transport improperly usurped the personal representative’s duties and obligations to pursue claims and recover assets of the Estate. In this case, Tampa General filed its claim against the Estate in the probate action, and the medical expenses became a charge against the Estate. We hold that once the expenses became a charge against the Estate pursuant to section 768.21(6)(b) of the Wrongful Death Act, the personal representative had the exclusive authority to resolve those claims in a reasonable and equitable manner and in accordance with section 733.707 of the probate code.”
This interesting decision points out how confusing probate issues can become intertwined with wrongful death claims. Here, it appears to have been overlooked that the wrongful death action was an asset of the Estate. Tampa General had a claim against the Estate. However, Tampa General had no actionable claim against Mr. Buswell and Patco Transport and vice versa (in the absence of an assignment of the estate’s claim to Tampa General). As one-second district justice pointed out, “[t]he fact that Tampa General might ultimately have received some of the proceeds in the probate case of any wrongful death judgment against the tortfeasors is immaterial. The two actions were wholly separate, and Tampa General’s purported release of its claim against the Estate in the probate action did not affect the tortfeasor’s liability to the Estate in the wrongful death action.”
