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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Zok v. Estate of Collins (02/06/2004) sp-5777

Zok v. Estate of Collins (02/06/2004) sp-5777

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

HASSAN ZOK,                   )
                              )    Supreme Court No. S-10604
               Appellant,          )
                              )    Superior Court No.
     v.                       )    3AN-01-571 PR
                              )
THE ESTATE OF RICHARD B.      )    O P I N I O N
COLLINS and STEPHAN B.        )
COLLINS, as Personal Representative, )
                              )
                Appellees.          )    [No. 5777 - February  6,
2004]
                              )


          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:  Steven D. Smith, Law Offices of
          Steven   D.   Smith,  P.C.,  Anchorage,   for
          Appellant.   D. Scott Dattan, Law Offices  of
          D. Scott Dattan, Anchorage, for Appellees.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          MATTHEWS, Justice.

I.   INTRODUCTION

           A  creditor  of  an insolvent estate objected  to  its

closure  on  the  ground that the deceased  had  made  fraudulent

transfers.   Without deciding whether this claim merited  further

inquiry,  the  court ordered the estate closed.   Since  property

transferred in fraud of creditors is potentially estate property,

we  conclude  that  it  was  error to close  the  estate  without

addressing the validity of the claim.

II.  FACTS AND PROCEEDINGS

           Hassan  Zok  sued  attorney  Richard  B.  Collins  for

malpractice in August of 1996.1  Zok was awarded over $200,000 in

this  case  in February of 2002.2  Before the suit was filed  but

after allegedly receiving notice of Zok's claim, Collins conveyed

at  least  twenty-nine parcels of real property  to  the  Collins

Family  Trust.   He and his spouse, Anne-Marie, were  co-trustees

and Anne-Marie also signed the deeds as a grantor.

           Collins died on April 15, 2000.  A year later  probate

proceedings  were  opened  and  his  son  Stephan  was  appointed

personal representative.  Zok, acting without an attorney,  filed

a  creditor's claim in the probate proceedings that sought to set

aside as fraudulent the conveyances to the Collins Family Trust.

           At  about  the  same  time Zok  sought  to  amend  his

complaint  in the malpractice case to add a claim that fraudulent

transfers had been made.  This motion was denied.  One ground for

this  ruling was that "denial of the motion will not deprive  Mr.

Zok  of  a remedy," because "he has filed the same claim  in  the

Collins estate probate action."

            In  November  2001  Stephan  Collins  filed  a  final

accounting.   The final accounting referred to an inventory  that

had been filed a month earlier that indicated that Collins at the

time  of his death owned only $1,475 in personal property and  no

real property.  No bank, brokerage, or IRA accounts that might be

available  to  satisfy  creditors under the non-probate  transfer

provisions of AS 13.33.215 were listed.  The accounting  set  out

Zok's  claim and two other creditors' claims and noted  that  the

total expenses of administration were over $19,000.

           On  December  11,  2001, notice of a  hearing  on  the

closing  of  the estate was issued.  In relevant part the  notice

stated:  "Any objections to the final accounting prepared by  the

Personal Representative or to the closing of the estate  must  be

presented  to  the  court  at or before  the  time  set  for  the

hearing."   Zok promptly filed a written objection.  He  referred

to  the  transfers  to the trust as fraudulent  and  objected  to

closing the estate without consideration of this claim.

          On March 6, 2002, the hearing on closing the estate was

held.   Zok,  still  without counsel, appeared  and  renewed  his

objection.   He was allowed to examine Stephan Collins,  but  the

scope  of  the  examination was constrained.  Zok sought  to  ask

about the estate's failure to respond to discovery concerning the

trust in the malpractice case.  He was not allowed to inquire  on

this   subject.    Zok  sought  to  ask  about  Collins's   "life

collections  -  from  Africa, from art,"  but  was  told  by  the

standing  master conducting the hearing that he could not  do  so

since  Stephan  had  testified that  they  did  not  exist.   Zok

mentioned twenty-nine parcels of property that had been  conveyed

to  the  trust, but the master indicated that this was  a  futile

inquiry.  At the conclusion of Zok's examination the master ruled

that  the  estate  had  been  fully  administered,  that  it  was

insolvent, and that it should be closed.  The master stated  that

there was no issue concerning Zok's fraudulent conveyance claims.

According to the transcript, the master stated:

          I  would find that the estate has been  fully
          administered, would specifically find as  far
          as  Mr.  Zok's claims that there is no  issue
          concerning  the trust.  There is a  provision
          concerning the trust in the will.  But, based
          on  the  inventory that was  filed  with  the
          court . . . (tape ends abruptly).
          
           Two  days after the March 6 hearing, Zok hired counsel

and  Zok's  subsequent acts referred to here were  taken  through

counsel.  On March 18, 2002, Zok filed a renewed objection to the

closing of the estate on the grounds that whether the transfer of

Collins's  assets to the trust prior to his death should  be  set

aside had not been adjudicated.  At about the same time that this

objection  was filed, Zok also filed a separate civil  action  to

set aside as fraudulent the challenged conveyances.3  On March 22

the  master  formally  recommended that  the  estate  be  closed.

Superior  Court Judge Mark Rindner allowed Zok to file a  written

objection   to   this  recommendation  within  ten   days.    Zok

resubmitted  the  objection that he had previously  submitted  on

March  18.   The master, after reviewing the resubmission,  again

recommended  that the estate be closed. Judge Rindner  signed  an

order closing the estate on April 4, 2002.

           On  May 10, 2002, Zok moved for relief from the  order

closing  the estate, again based on the unadjudicated  fraudulent

conveyance claim.  Zok argued that he was not put on notice  that

he  was expected to prove his fraudulent conveyance claim by  the

notice  of  hearing.   His memorandum in support  of  the  motion

states:

          On  December  11th  the  Estate  scheduled  a
          closing  hearing and sent notice  thereof  to
          Mr.  Zok. . . .  Please note that the  notice
          states only that objections to the closing of
          the  Estate  must  be made  at  the  hearing.
          There  is  no  reference to  any  evidentiary
          hearing  with regard to Mr. Zok's claim  that
          the  Estate's  assets had  been  fraudulently
          conveyed to the "family trust."  Mr. Zok  did
          object.   He pointed out in both written  and
          pleading  form that he had found a record  of
          29  real property transfers into the trust by
          the  decedent  after he had notice  of  Zok's
          claim.   Mr. Zok advised the Master  that  he
          had  in  the  other  action [the  malpractice
          action] sent interrogatories as to the  other
          assets   of  the  trust  that  the   personal
          representative  refused to answer.   Mr.  Zok
          also  advised the court, as did the  personal
          representative that none of the trust  assets
          were     included    among    the    Estate's
          inventory.  .  .  .   In  fact  the  Estate's
          position  was  that  it was  entitled  to  be
          closed  because  it  was  bankrupt,  yet   no
          disclosure  was  made as to what  entity  was
          paying  the estate's administrative  fees  or
          the attorney fees in the malpractice action.
          
               . . . .
          
                The  probate court did not address  the
          fraudulent conveyance claim as it should have
          nor did it give Mr. Zok sufficient notice  or
          opportunity  to  conduct a  hearing  on  that
          issue.
          
          On May 20, 2002, the standing master recommended denial

of  Zok's motion for relief from the judgment.  The master wrote:

"Mr.  Zok  was  advised on the record to state his  objection  to

closing  and present evidence.  He reiterated his objection  that

he  had  an uncollected judgment.  He presented no evidence  when

invited to do so several times.  The closing order should stand."

           Zok  filed  an  objection to this recommendation  that

stated:

                The  gist  of the Motion For Relief  is
          that  Mr.  Zok, who was pro per, was unfairly
          surprised.  The fact that he was invited  "on
          record"  to present evidence is at the  heart
          of  the  problem.  The notice of  hearing  he
          received   of   the  date  of   the   hearing
          instructed  him  only to make his  objections
          known.  He had no adequate notice that he was
          supposed  to  be  ready to try  a  fraudulent
          conveyance case at that hearing.  He in  fact
          stated when "invited to put on proof" that he
          had  not  gotten  responses to  his  previous
          discovery  requests.   It  is  a  fundamental
          requirement of due process that one be  given
          adequate  notice and a meaningful opportunity
          to present one's case.
          
On  June  17,  2002, the superior court denied Zok's  motion  for

relief from the judgment.

           Meanwhile,  the  estate  had moved  to  dismiss  Zok's

separate fraudulent conveyance action.  Among the grounds for the

motion was a claim that the order closing the probate estate  was

res  judicata.  Zok opposed the motion and sought to  consolidate

the case with the probate proceedings.  The motion to dismiss was

granted  on  June  3,  2002, and Zok's consolidation  motion  was

denied in the probate proceedings on June 17, 2002.

III. DISCUSSION

           Zok  now appeals in this, the probate proceeding.   He

claims   that  he  was  not  given  notice  that  his  fraudulent

conveyance  claims  were  to be tried at the  hearing  concerning

closing  the  estate and that it was error to  close  the  estate

before the claims were resolved.

          In reply, the estate claims that Zok had an opportunity

to  present  his  fraudulent conveyance claims  at  the  March  6

hearing,  that he failed to do so, and that therefore his  claims

are  barred.  The estate also argues that even if Collins had not

made the real estate conveyances to the trust, the property would

not  have  become property of the estate; instead it "would  have

passed to Anne-Marie directly by operation of law."

           Zok  is  correct  that the notice of hearing  that  he

received  did  not give him adequate notice that a trial  of  the

fraudulent  conveyance  claim  was contemplated.   No  reasonable

person would have so concluded, since the  notice only called for

"objections  to  the final accounting prepared  by  the  Personal

Representative or to the closing of the estate," and stated  that

such objections could be presented "at or before the time set for

the hearing."  "Due process requires the `opportunity to be heard

at a meaningful time and in a meaningful manner.'  The purpose of

this requirement is to allow `the aggrieved party the opportunity

to present his case and have its merits fairly judged.' "4  Given

the  content  of the notice, it is clear that these  requirements

have not been satisfied.

           Further, the standing master's conclusion in  the  May

20,  2002  recommendation  that Zok presented  "no  evidence"  is

clearly erroneous.  Zok presented a lengthy affidavit in which he

explained that after he gave Collins notice that he was about  to

file  a  malpractice suit, Collins made extensive conveyances  of

property  to  a  trust  under circumstances suggesting  that  the

conveyances  were made without consideration. The affidavit  also

noted  that despite the conveyance to the trust Collins  retained

control  of  the property as co-trustee.  It was also clear  that

Collins  died  insolvent, excluding any interest he  had  in  the

trust  and property that was subject to non-probate transfers  at

the  time  of  his death.  These circumstances amount  to  common

"badges of fraud," a term used to describe circumstantial factors

that may justify a conclusion that a conveyance was made with  an

intent  to  defraud  creditors.  "We have  recognized  inadequate

consideration, the insolvency of the debtor/transferor,  and  the

transfer of assets in anticipation of a pending suit to be  among

the  badges of fraud."5  Thus Zok presented evidence that was  at

least suggestive that the conveyances were fraudulent.

           It  was  error  to  close the estate without  formally

addressing  and  in  some  manner adjudicating  Zok's  fraudulent

conveyance   claim.   Under  AS  13.16.385  only   the   personal

representative may prosecute claims of fraudulent  conveyance  on

behalf  of  unsecured  creditors  of  the  estate.6   Under  this

statute, Stephan Collins, as personal representative, may have  a

duty  to  proceed against his mother, as trustee,  to  set  aside

certain  transfers  to  the trust.  What the  appropriate  remedy

might  be  if  Stephan unreasonably or in bad  faith  refuses  to

undertake  this  duty  has  not been  briefed.   But  before  any

decision can be made as to whether Stephan Collins should proceed

to  recover property, information should be developed as  to  the

nature of the trust and the property transferred to it, including

the time of each transfer and the character of Collins's title to

the  property  at  the time of transfer.  Given the  relationship

between  the personal representative and the trustee, Zok  should

be given an opportunity to participate in reasonable discovery on

these subjects.

          As noted, the estate also contends that if the property

transferred to the trust had not been so transferred it would not

have  become estate property, but would have passed to Anne-Marie

Collins  by operation of law.  This contention cannot be  decided

on  appeal  for several reasons.  We do not know the estate  that

Collins  held  in  particular parcels prior  to  their  transfer.

Further,  assuming  that real property  was  held  jointly  in  a

tenancy by the entirety with a right of survivorship, we have not

been directed to any authority concerning the rights of creditors

to  such property upon the death of a debtor/co-owner.7  Finally,

the record does not purport to reflect comprehensively all of the

property  that was transferred by Collins to the trust, nor  does

it  reflect  property that may have been transferred  outside  of

probate  upon  Collins's death.  The paucity of Collins's  estate

suggests  that  there  may  have  been  such  property.   If  so,

creditors  may have a right to it under AS 13.33.215(a).8   Thus,

on  this  record,  we are unable to conclude  that  any  property

transfers made by Collins before or as a result of his death  are

necessarily  beyond the reach of the estate for  the  benefit  of

creditors.

           We  express no opinion as to the eventual  outcome  of

this  case  on  remand.  What is required are orderly  procedures

with  notice  to  all interested parties that  determine  whether

Collins  had property that should be made available to  creditors

of the estate under applicable principles of Alaska law.

IV.  CONCLUSION

            REVERSED   and   REMANDED  for  further   proceedings

consistent with this opinion.

_______________________________
1Zok v. Collins, 18 P.3d 39, 41 (Alaska 2001).
2Zok  v.  Estate of Richard Collins, No. 3AN-96-6415 Civ. (Alaska
Super., April 24, 2002).
3In the separate fraudulent conveyance suit the following are the
main allegations:

                5.   Subsequent to receiving notice  of
          the   plaintiff's   impending   lawsuit   the
          decedent   Richard  B.  Collins,  transferred
          substantially all his assets to  himself  and
          his  wife, Anne-Marie Collins as trustees  of
          the  Collins Family Trust.  Said transfer was
          fraudulent   and   done   without    adequate
          consideration  in  an  effort  to  place  the
          decedent's   assets  beyond  the   reach   of
          plaintiff   and   perhaps   other   potential
          creditors.
          
                 6.    The  trust  was  not  registered
          although  it  was required to  be  registered
          pursuant  to  Alaska Statute 13.36.005.   The
          exact  extent of the assets transferred  into
          the trust is unknown, however, over a two day
          period  29  quit  claim deeds  were  recorded
          purporting   to   transfer  various   Alaskan
          parcels into the trust.
          
4Matson  v.  State, Commercial Fisheries Entry Comm'n,  785  P.2d
1200,  1206 (Alaska 1990) (quoting Mathews v. Eldridge, 424  U.S.
319,  333 (1976), and Logan v. Zimmerman Brush Co., 455 U.S. 422,
433 (1982)).
5Nerox  Power Systems, Inc. v. M-B Contracting Co., 54 P.3d  791,
797 (Alaska 2002).
6AS 13.16.385 provides:

                The property liable for the payment  of
          unsecured  debts of a decedent  includes  all
          property transferred by the decedent  by  any
          means  which  is in law void or  voidable  as
          against  creditors,  and  subject  to   prior
          liens, the right to recover this property, so
          far as necessary for the payment of unsecured
          debts of the decedent, is exclusively in  the
          personal representative.
          
7AS 13.33.216(b) provides that the provisions of our probate code
relating to rights to multiple person accounts do not "affect the
law governing tenancy by the entirety."  But this does not answer
the  question  as  to  the  rights of estate  creditors  to  real
property so held.
8AS 13.33.215(a) provides:

                If  other  assets  of  the  estate  are
          insufficient,  a  transfer resulting  from  a
          right  of  survivorship  or  POD  designation
          under AS 13.33.201_13.33.227 is not effective
          against the estate of a deceased party to the
          extent  needed  to  pay  claims  against  the
          estate   and  statutory  allowances  to   the
          surviving spouse and children.