Notice as Due Process, and the Importance of Timely Filing a Claim Upon Receipt of Notice

Failure of a Mortgagee to File a Statement of Claim in a Deceased Borrower’s Probate Voids Right to Collect a Deficiency, discusses the essentiality that a mortgagee files a claim to preserve entitlement to impose liability on the estate due to an existing or potential deficiency.  While it was the Florida Supreme Court that set this precedent in 1940, it was the United States Supreme Court’s decision in Pope that provided clarity 48 years later regarding the importance of notice to creditors against the backdrop of the Fourteenth Amendment.

This post considers the importance of notice that a mortgagee first receives, then explains the resulting responsibility it has to respond by filing a statement of claim in the probate, on time. “On time” is the operative phrase. As the title suggests, just a day late forever bars a mortgagee’s right to recoup the difference between the mortgage debt owed less the fair market value of the property.

Background:
The United States Supreme Court in the 1988 case of Tulsa Professional Collection Services, Inc. v. Pope, clarified just how important notice is in the context of a probate case involving known creditors.  In Pope, the Supreme Court considered if an Oklahoma state law which required publication only was in violation of the Due Process Clause of the United States Constitution.  At all state levels, the courts held that the hospital’s claim was barred after it failed to respond timely to the Notice to Creditors that ran by publication.

The Supreme Court in Pope held that if “appellant’s identity was known or reasonably ascertainable, then termination of the appellant’s claim without actual notice violated due process.” The Oklahoma Supreme Court was reversed, and the case remanded.

Not long after the Pope decision, the Florida’s First and Third District Courts of Appeal both issued consistent decisions, further clarifying the responsibility that known or reasonably ascertainable creditors be provided actual notice of a deceased debtor’s probate.

The notice requirement as illuminated by the Pope decision was then codified in Florida Statute 733.2121 which plainly states that a personal representative has the duty to ascertain reasonably known creditors and serve them with a copy of the notice. This is the mandate regardless as to whether the claim is unmatured, contingent, or unliquidated. Mortgagees should always be served with notice because mortgage liens are recorded in the public records of the county where the subject property lies.

Timeline to Respond, Controlling Statute:
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Florida Statute 733.702(1) requires a known creditor to file a statement of claim within 30 days after the date of service, or within three months of the first date of publication to the unknown class of creditors, whichever is the latter.

The deadline cannot be understated. Although not withstanding narrow exceptions, the time requirement is a hard deadline; failure to meet it triggers the non-claim statute, thereby forever barring the claim.  
Just as recent as 2019, the First District Court of Appeals held in the case of Herman v. Bennett, that one day late, is in fact too late.  Indeed, the Court found that the language of Florida Statute 733.702(1) to be “clear and unambiguous: the date that is 3 months after the time of first publication is the date that is three calendar months after the date of first publication; it is not the date that is three months after the day after the time of first publication.”  
Accordingly, the Court reversed the trial court’s order, and rendered the claim filed on April 5th but due to be filed by the 4th, untimely, thereby invoking the nonclaim statute that forever barred the claim.

Exception must be made to the deadline if a personal representative fails to serve the requisite Notice to Creditors on a known or ascertainable creditor. The Florida Supreme Court clarified what had been a topic of debate that created a split between the circuits when it held in favor of the creditor in Jones v. Golden on October 1, 2015.  If notice is not served, then section 733.702(1) does not control.  A creditor does not need to seek an extension under section 733.702(3), granted only upon grounds of fraud, estoppel, or insufficient notice of the claims period.  Rather, a creditor has two years from the date of the decedent’s death to file a claim against the estate in accordance with section 733.710.

If notice was not served on a reasonably known creditor, then the deadline is extended up until 2 years after death, at which point the non-claim statute controls, and operates to bar the claim.

Quite commonly in law, time is of the essence, and there is no exception when it comes to creditors’ claims in a probate action.  A mortgagee who receives a Notice to Creditors regarding a deceased borrower’s probate must immediately consider 1) whether a claim should be filed, and 2) the deadline it must be filed by.  If the goal is to preserve entitlement to pursue a deficiency due to uncertainty of the property value, then the claim must be filed within 30 days of receipt or within three months of the first publication date, whichever is later.