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Estate of Charles H. Kolker

Decided: April 9, 1986.


Margolis, J.s.c.


[212 NJSuper Page 429] This is an action by the executors of an insolvent estate for instructions regarding distribution. There are three classes of creditors. One that obtained a judgment against the decedent during his lifetime; those who proceeded to judgment against the estate based on the decedent's obligations; and general creditors.

The decedent, Charles H. Kolker, died testate on December 23, 1978. The will was probated on March 9, 1979. On December 17, 1979, the executors filed a complaint seeking a declaratory judgment that the estate was insolvent. The total of all claims by creditors has always been greater than the sum available for distribution, even though a substantial amount continues to be available for that purpose. At the time the executors filed for insolvency, they had acknowledged, by operation of law, all creditors' claims relevant to this action. (Other claims not now relevant were separately disputed.). The present claims were acknowledged since statutes in effect at all times after decedent's death obligated the executors to "except" to any disputed claims within three months. See N.J.S.A. § 3A:24-6 (repealed). See also N.J.S.A. §§ 3B:22-7, -8. (No substantial change from § 3A:24-6). The claims were subsequently deemed allowed if not excepted. R. 4:91-3; DeLisle v. Reeves, 96 N.J. Eq. 416, 419-420 (E. & A.1929). The order limiting creditors barred all further claims against the estate on May 26, 1980.

Throughout this entire period, the distribution of estate assets was governed by N.J.S.A. § 3A:2A-47. That statute denied priority to any particular class of estate creditors. All creditors whose claims were deemed allowed were thus entitled to share equally in estate assets. There was no need to proceed to a judgment on any claim deemed allowed, because a judgment would not increase the creditors' right to share in the distribution. Furthermore, the value of proceeding to judgment under N.J.S.A. § 3A:2A-47 was questionable, because R. 4:91-5 (unchanged since decedent's death) prevented execution upon a judgment entered against an insolvent estate.

This entire controversy arose when, prior to any distribution of the estate, N.J.S.A. § 3A:2A-47 was repealed by the present provision, N.J.S.A. § 3B:22-2(e). The present statute gives priority to "judgments entered against the decedent according to the priorities of their entries respectively," as against "all other claims." N.J.S.A. § 3B:22-2(f). The present statute,

part of a comprehensive revision of the probate code, became effective on May 1, 1982 -- three and one-half years after the date of decedent's death. The provision was made applicable "to any wills of decedents dying on or after September 1, 1978." N.J.S.A. § 3B:1-8. In sum, Title 3B was given retroactive effect to the effective date of the repealed statute (September 1, 1978), which was prior to decedent's death in December 1978.

Two issues must be decided. First, and of novel impression, does the present statute or the now repealed statute in effect at decedent's death govern priority of distribution? Second, which estate creditors, if any, are entitled to interest on their claims? The claim of Arturo Gardea, payable pursuant to an order of Judge Bedford, is not here at issue.


Priority of Distribution.

For the reasons set forth below, this court holds that the distribution of decedent's estate is governed by the former statute. There shall be an equality of distribution without priority to any particular class of creditors. This conclusion is mandated by the language of the present statute, pertinent case law, and the unique equities presented.

At first glance, the requirements of the present statute appear to compel a contrary result. N.J.S.A. § 3B:22-2 provides:

If the applicable assets of the estate are insufficient to pay all claims in full, the personal representative shall make payment in the following order: . . .

e. Judgments entered against the decedent according to the priorities of their entries respectively.

f. All other claims.

No preference shall be given in the payment of any claim over any other claim of the same class, and a claim due and payable shall not be entitled to a preference over claims not due.

N.J.S.A. § 3B:1-8 makes 3B:22-2 retroactive to a date prior to decedent's death, and its language is mandatory. See Matter

of Will of Reilly, 201 N.J. Super. 306, 311 (App.Div.1985). The initial impression is further supported by the general rule regarding repealed statutes. "[W]here a statute is repealed and there is no saving clause or a general statute limiting the effect of the repeal, the repealed statute, in regard to its operative effect, is considered as though it had never existed, except as to matters and transactions passed and closed." Parsippany Hills Assoc. v. Rent Leveling Bd., 194 N.J. Super. 34, 42 (App.Div.1984).

The general rule is qualified, however, by the effect of any applicable saving provision, in this case, N.J.S.A. § 3B:1-5:

The repeal of any sections, acts or parts of acts by the enactment of this title shall not affect any right now vested in any person pursuant to any sections, acts or parts of acts so repealed, nor any remedy where an action or proceeding thereunder has been instituted and is pending on the effective date of this title. [emphasis supplied]

The expressed requirements of the statute are consistent with the general rule. Unless vested rights are involved, the law at the time of decision applies. Parsippany Hills, supra, 194 N.J. Super. at 42-43. It follows that if the right of the general creditors to share equally in decedent's estate "vested" before the former statute was repealed, that right survived the repeal. If not, then the present statute, N.J.S.A. § 3B:22-2, affords priority to judgment creditors.

To resolve the question, it is necessary to define "rights now vested." The statute itself does not provide the answer. Generally, the concept expressed by the term "vested right" is that of a "present, fixed interest which in right, reason and natural justice should be protected against arbitrary state action -- an innately just and imperative right that an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny. . . ." Pennsylvania Greyhound Lines, Inc. v. Rosenthal, 14 N.J. 372, 384-385 (1954). The term, when used as descriptive of recognized legal rights, "is ...

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