Chapter 16 - § 16.4 • SPECIAL CASES

• Jurisdiction: Colorado

§ 16.4 • SPECIAL CASES

§ 16.4.1—Unperformed Contracts

Contracts of the decedent are usually binding on his or her estate. If the decedent was bound on a contract and the obligation to perform survives, the personal representative has to decide whether to perform, or breach the contract and incur damage liability for the estate. He or she must decide whether it would cost the estate less to perform the contract than to pay damages. The cases of unperformed contracts are varied, from buying and delivering a readily available commodity or security to erecting a building involving heavy risks of loss. Annot. 22 Am. St. Rep. 811. Unless there is a clear power under a will, a court order will reduce the risk in either performance or breach. Bancroft's Probate Practice §§ 529 and 530 (2d ed. 1950).

Under prior law, the personal representative's actions would result in personal liability with a right to indemnity from the estate for such personal liability if he or she acted prudently. Under the Code, however, so long as the fiduciary status is disclosed, any liability of the personal representative will be in his or her representative's capacity. C.R.S. § 15-12-808. See § 16.4.5. If there is doubt of the ability of the estate to supply the indemnity to which he or she is entitled, the representative may do well to breach the contract and incur liability for damages. This liability will be in the representative capacity. Bancroft's Probate Practice § 529 (2d ed. 1950); Simes, "Breaching Contracts Of Decedents," 97 Trusts & Estates 873.

§ 16.4.2—Encumbered Assets (C.R.S. § 15-12-814)

As under former law, provision is made for dealing with property of the estate that is encumbered. The matter may be dealt with in the interest of the estate, but the responsibility is that of the representative unless the aid of the court is sought as in other cases in which he or she has doubts as to the correct course. C.R.S. § 15-10-302(2). The Code sets out a number of alternative decisions that may be made by the representative, regardless of whether a claim has been presented. Payment of the encumbrance does not increase the interest of the devisee unless entitled to exoneration. C.R.S. §§ 15-12-814 and 15-11-609.

A decedent's joint tenancy interest in real estate was encumbered by a judgment lien. Following death, the judgment creditor sued to enforce its lien against the property but did not file a claim against the decedent's estate. The court held for the decedent's successors and against the creditor on the basis that the lien against the decedent's joint interest was extinguished at the same time that the decedent's interest in the property was terminated at death by the survivorship feature of joint tenancy. Park State Bank v. McLean, 660 P.2d 13 (Colo. App. 1982).

§ 16.4.3—Representative As Claimant (C.R.S. § 15-12-614)

If the personal representative is also the claimant, he or she must present a claim as any other claimant but cannot pass on his or her own claim. Smith v. Estate of Smith, 19 P.2d 195 (Colo. 1933). In practice, if there is more than one representative, the others may pass on the claim of one of their number. The court may appoint a special...