Matter of Einstoss

Sigmond Einstoss purchased property in Alaska (defendant) in 1951, when Alaska was still a territory. The property was subject to a $25,000 mortgage. Einstoss defaulted on that mortgage and also did not pay property-related taxes. Alaska filed a lien against the property, and the lender brought a foreclosure action against Einstoss and Alaska in territorial court. Einstoss was in Washington and thus was not subject to personal jurisdiction in Alaska. Nevertheless, Einstoss appeared in the foreclosure proceeding and admitted he owed $11,000 on the mortgage upon the lender’s representation that the lender would satisfy any judgment from the property’s sale proceeds. Two days later, Alaska filed a cross-complaint against Einstoss regarding the unpaid taxes. At Alaska’s request, the court issued an order pursuant to 28 U.S.C. § 1655 authorizing Alaska to serve its complaint on Einstoss wherever Einstoss could be found. Alaska served Einstoss in Washington. Einstoss died the day before his answer to Alaska’s complaint was due. However, Alaska, which did not know that Einstoss had died, obtained a default order against Einstoss based on Einstoss’s failure to respond. Ultimately, the territorial court issued judgment against Einstoss for more than $95,000 on Alaska’s tax claim. Alaska sold the property for approximately $30,000 in 1961. In 1965, Alaska made a demand on the administrator of Einstoss’s New York estate (administrator) (plaintiff) for the estate to pay the difference between the property’s sale proceeds and Alaska’s judgment. The administrator filed suit in New York state court to disallow Alaska’s claim. The trial court disallowed Alaska’s claim; the appellate division affirmed. Alaska appealed.