18.3 Statutory Hearings

• Library: Manual for Commissioners of Accounts (Virginia CLE) (2019 Ed.)

18.3 Statutory Hearings

18.301 Debts and Demands Hearings.

A. In General. The Virginia Code authorizes the commissioner of accounts to conduct hearings upon debts and demands. ¹⁰ The procedure applies only to "the accounts of a personal representative of a decedent." Thus, no fiduciary other than the personal representative of a decedent may seek a debts and demands hearing before the commissioner of accounts. Guardians, conservators, and trustees who seek to contest claims against their estates must avail themselves of the traditional court proceedings.

The commissioner has responsibility to protect creditors of the estate as well as its beneficiaries. The commissioner cannot approve a final account unless all claims against the estate have been resolved. Similarly, no

[Page 297]

fiduciary can file a statement in lieu of account while a claim is outstanding. If the estate contests a claim, it is not sufficient to state that the estate does not agree with the claim. In order to contest the claim, the fiduciary must request a debts and demands hearing before the commissioner to give the claimant an opportunity to present his or her claim. ¹¹ After notice and advertisement of the hearing, and an opportunity for the parties to be heard, the commissioner shall determine the claim and file his or her report with the court. Such reports are to be filed within 60 days of the hearing. ¹²

The fiduciary, the claimant, or an heir or beneficiary can request a debts and demands hearing before the commissioner for the purpose of receiving proof of debts and demands against the decedent or the decedent's estate when the settlement of the accounts of a personal representative of a decedent is before the commissioner. The commissioner may also hold such a hearing at any other time determined by the commissioner even though no accounting is pending, ¹³ but a commissioner should not schedule such a hearing earlier than six months after the date of the first qualification upon the estate to allow reasonable time from the date of qualification of the personal representative for debts and demands to be identified.

If a matter is complex or would benefit from a strict application of the rules, the commissioner has the authority under Va. Code § 64.2-550 to "direct the personal representative, the claimant, or both of them to institute a proceeding in the circuit court to establish the validity or invalidity of any claim or demand that the commissioner of accounts deems not otherwise sufficiently proved."

Notice is critical in a contested debts and demands hearing. If the estate seeks to dispute a claim, it must provide notice to the claimant of that dispute

at least 10 days before the date set for the hearing. The notice shall inform the claimant of his right to attend and present his case, his right to obtain another hearing date if the commissioner of accounts finds the initial date inappropriate, and the fact that the claimant will be bound by any adverse ruling. The personal representative shall also inform the claimant of his right to file exceptions with the circuit court in the event of an adverse ruling. ¹⁴

[Page 298]

The estate may not contest the claim if it has not given such notice. Before most commissioners, the practical effect of failing to give notice will be a continuance of the hearing to permit the proper notice to be given to the claimant. ¹⁵ On the other hand, if the estate does not intend to contest any claims, no notice need be given as Va. Code § 64.2-550 requires notice only to claimants of disputed claims.

In addition to notice directly to the creditors, the commissioner publishes notice of the hearing in a local newspaper and posts the notice at the courthouse door. The Virginia Supreme Court's decision in Virginian Pilot Media Cos. v. Dow Jones & Co. ¹⁶ effectively eliminated any "approved" list of newspapers for legal notices. As a result, each person who has responsibility for such an advertisement must make his or her own determination of what constitutes a newspaper of general circulation in the community. Ideally, to provide effective legal notice a newspaper should have a circulation that reaches a large portion of the local citizens and broad coverage in that market.

There is some concern about the modern efficacy of posting notices at the courthouse door. In many jurisdictions, these postings are not accessible to most citizens.

Va. Code §§ 64.2-550 and 64.2-1222 provide for posting notices on the front door of the courthouse. Such posting requirements are to be read together with Va. Code § 1-211.1, which provides for alternative methods of compliance with this requirement and contemplates the frequent practice of posting such notices on a glass-enclosed bulletin board next to the front door. Recent amendments to Va. Code § 1-211.1 provide for the additional alternative of posting such notices on the public government website of the locality served by the court. The full text of Va. Code § 1-211.1 is as follows:

§ 1-211.1. Courthouse; posting of notices.

If any notice, summons, order, or other official document of any type is required to be posted on or at the front door of a courthouse or on a public bulletin board at a courthouse, it shall constitute compliance with this requirement if the notice, summons, order, or other official document is posted with other such documents where such notice, summons, order or other official document is posted or at or near the principal public entrance to the courthouse in a location that is conspicuous to the public and approved by the chief

[Page 299]

judge of the circuit in which the courthouse is situated, or both. The requirement to post any notice, summons, order, or other official document of any type is satisfied if such notice, summons, order, or other official document is posted on the public government website of the locality served by the court or the website of the circuit court clerk.

During the transition from one posting method to another, the best practice is to post notices both at the courthouse and electronically.

The Virginia Code provides a mechanism for filing claims with the commissioner of accounts, ¹⁷ but there is no requirement that a claimant file with the commissioner. The commissioner will ask the estate to provide information on all claims against the estate, regardless of whether a claimant has filed with the commissioner. Note that the exoneration of fiduciaries from liability for the debts of the decedent provided through a show cause hearing applies only to those debts not known to the fiduciary. ¹⁸ Any known debt must be paid or be disputed pursuant to Va. Code § 64.2-550.

Most fiduciaries approach the debts and demands hearing as a trial only of the claim that the estate disputes. It certainly is that, but it is also a hearing to determine all the outstanding debts and claims against the estate. In a typical hearing, the commissioner will first require the estate to report on all debts and claims against the estate. In matters other than insolvent estates, it is sufficient to report that the estate has satisfied all known claims other than the disputed claim. In insolvent estates, the estate must provide a complete account of all debts and demands against the estate, including administrative expenses. The commissioner will then inquire whether any of the debts or claims are disputed. If the estate indicates that none are, that effectively ends the matter. If the estate is solvent and the fiduciary does not contest any of the known claims against the estate, it is not necessary for the fiduciary or counsel to appear at the hearing. If an unknown claimant appears in response to the advertising and notice, the commissioner will usually continue the hearing to allow the fiduciary and his or her counsel to appear.

If the estate does dispute a claim, the commissioner will require proof of notice of the disputed claim and will inquire into the basis for the fiduciary's dispute. The mere dispute of a claim without some underlying basis or real defense is not sufficient to shift the burden of going forward to the claimant in a debts and demands hearing. The statutory scheme for the determination of a decedent's debts and demands is analogous to Va. Code § 8.01-28,

[Page 300]

which permits a creditor to obtain judgment without further proof based upon the creditor's affidavit, unless the defendant denies the claim under oath. Both statutes allow such summary proceedings to avoid the dilatory assertion of sham defenses. ¹⁹ Similarly, the commissioner will allow a creditor's claim against a decedent's estate without further proof unless the estate disputes that claim. ²⁰

The commissioner should require an estate disputing a claim to state the basis of that dispute. The stated basis for the dispute need not definitively bar the claim, nor does the commissioner make any determination whether the estate may prevail on the merits of the defense; however, the estate must demonstrate in its dispute of a claim that there is some scintilla of a good faith defense to the claim in order for the burden of going forward to shift to the claimant. ²¹ An inability or unwillingness to pay is not a sufficient grounds to dispute a claim. On the other hand, lack of information concerning the claim and a failure of the creditor to respond to requests for such information is generally sufficient to shift the burden of going forward to the claimant.

A fiduciary's proper dispute of a claim shifts the burden of going forward to the claimant, who must then establish the claim by satisfactory evidence. If the claimant fails to appear and prove its claim, the commissioner will usually issue his or her report denying the claim, relieving the estate of the responsibility to pay the claim. If the creditor does appear, the commissioner will conduct a full hearing upon the claim. The creditor will be asked to present its case, including presentation of...