TEXAS CASE LAW UPDATE

Transcription

1 TEXAS CASE LAW UPDATE GERRY W. BEYER Governor Preston E. Smith Regents Professor of Law Texas Tech University School of Law 1802 Hartford St. Lubbock, TX (806) , ext Dallas Bar Association Probate, Trusts and Estates Section Dallas, Texas January 25, Gerry W. Beyer revised 12/16/2010

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3 GERRY W. BEYER EDUCATION Governor Preston E. Smith Regents Professor of Law Texas Tech University School of Law Lubbock, TX (806) , ext B.A., Summa Cum Laude, Eastern Michigan University (1976) J.D., Summa Cum Laude, Ohio State University (1979) LL.M., University of Illinois (1983) J.S.D., University of Illinois (1990) PROFESSIONAL ACTIVITIES Bar memberships: United States Supreme Court, Texas, Ohio (inactive status), Illinois (inactive status) Member: The American College of Trust and Estate Counsel (Academic Fellow); American Bar Foundation; Texas Bar Foundation; American Bar Association; Texas State Bar Association CAREER HISTORY Private Practice, Columbus, Ohio (1980) Instructor of Law, University of Illinois ( ) Professor, St. Mary s University School of Law ( ) Visiting Professor, Boston College Law School ( ) Visiting Professor, University of New Mexico School of Law (1995) Visiting Professor, Southern Methodist University School of Law (1997) Visiting Professor, Santa Clara University School of Law ( ) Governor Preston E. Smith Regent s Professor of Law, Texas Tech University School of Law (2005 present) Visiting Professor, La Trobe University School of Law (Melbourne, Australia) (2008 & 2010) Classes taught include Estate Planning, Wills & Estates, Trusts, Property, U.C.C. SELECTED HONORS AND ACTIVITIES Order of the Coif Chancellor s Council Distinguished Teaching Award (Texas Tech University) (2010) Outstanding Professor Award Phi Alpha Delta (Texas Tech University Chapter) (2010) (2009) (2007) (2006) President s Excellence in Teaching Award (Texas Tech University) (2007) Professor of the Year Phi Delta Phi (St. Mary s University chapter) (1988) (2005) Student Bar Association Professor of the Year Award St. Mary s University ( ) ( ) Russell W. Galloway Professor of the Year Award Santa Clara University (2000) Outstanding Faculty Member Delta Theta Phi (St. Mary s University chapter) (1989) Distinguished Faculty Award St. Mary s University Alumni Association (1988) Most Outstanding Third Year Class Professor St. Mary s University (1982) State Bar College Member since 1986 Keeping Current Probate Editor, Probate and Property magazine (1992-present) Guest lecturer on estate planning topics for attorney and non-attorney organizations SELECTED PUBLICATIONS Author and co-author of numerous law review articles, books, and book supplements including FAT CATS AND LUCKY DOGS HOW TO LEAVE (SOME OF) YOUR ESTATE TO YOUR PET (2010); WILLS, TRUSTS, AND ESTATES: EXAMPLES AND EXPLANATIONS (4 th ed. 2007); TEACHING MATERIALS ON ESTATE PLANNING (3d ed. 2005); 9 & 10 TEXAS LAW OF WILLS (Texas Practice 2002); TEXAS WILLS AND ESTATES: CASES AND MATERIALS (5 th ed. 2006); TEXAS WILL MANUAL SERVICE; 12, 12A, & 12B WEST S TEXAS FORMS ADMINISTRATION OF DECEDENTS ESTATES AND GUARDIANSHIPS (3 rd ed. 2007); 19-19A WEST S LEGAL FORMS REAL ESTATE TRANSACTIONS (2002); Pet Animals: What Happens When Their Humans Die?, 40 SANTA CLARA L. REV. 617 (2000); Estate Plans: The Durable Power of Attorney For Property Management, 59 TEX. B.J. 314 (1996); Enhancing Self-Determination Through Guardian Self-Declaration, 23 IND. L. REV. 71 (1990); Statutory Will Methodologies Incorporated Forms vs. Fill-in Forms: Rivalry or Peaceful Co-Existence?, 94 Dick. L. Rev. 231 (1990); Ante-Mortem Probate: A Viable Alternative, 43 ARK. L. REV. 131 (1990); The Will Execution Ceremony History, Significance, and Strategies, 29 S. TEX. L. REV. 413 (1988); Videotaping the Will Execution Ceremony Preventing Frustration of Testator s Final Wishes, 15 ST. MARY S L.J. 1 (1983).

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5 TABLE OF CONTENTS TABLE OF CASES...iii I. INTRODUCTION... 1 II. INTESTACY... 1 A. Non-Marital Children...1 III. WILLS... 1 A. Testamentary Intent Prior Will Still Exists Statements of Property For...2 B. Interpretation and Construction Statute of Limitations Avoid Intestacy Conflicting Dispositions Unproduction Royalty Devises...3 C. Pretermitted Children Constructive Birth and Provided For Otherwise Provided For...4 D. Contests Standing Undue Influence...5 IV. ESTATE ADMINISTRATION... 6 A. Jurisdiction District Court Transfer...6 B. Appeal Venue Determination Order to Account Order of Sale...7 C. Statute of Limitations...7 D. Lost Will...8 E. Late Probate...8 F. Independent Administration Unsuitability of Named Executor Removal of Independent Executor...9 a. Grounds...9 b. Service of Process...9 G. Recovery for Unauthorized Bank Transactions...9 i

6 H. Contempt...10 I. Attorney ad Litem Costs...10 V. TRUSTS A. Removal of Trustee...11 B. Successor Trustee...11 C. Criminal Liability...12 VI. OTHER ESTATE PLANNING MATTERS A. Life Insurance...12 ii

7 TABLE OF CASES Bailey v. Warren...4 Bowen v. State...12 Conte v. Ditta...11 Fernandez v. Bustamante...6, 7 Frost Nat l Bank v. Fernandez...1, 6 Grisham v. Lawrence...3 In re Byrom...10 In re Estate of Allen...2 In re Estate of Catlin...2, 8 In re Estate of Craigen...3 In re Estate of Florence...2 In re Estate of Frederick...10 In re Estate of Gay...8 In re Estate of Hendler...1, 4 In re Estate of Hoelzer...9 In re Estate of Redus...5 In re Estate of Rogers...7 In re Estate of Rothrock...8 In re Estate of Russell...5 In re Estate of Slaughter...3 Irwin v. Irwin...12 Jefferson State Bank v. Lenk...9 Pollard v. Pollard...7 Rawlins v. Weaver...7 iii

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9 TEXAS CASE LAW UPDATE I. INTRODUCTION This article discusses judicial developments relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters. The article covers approximately twenty-five cases which were decided after the cut-off date for the case law update article which accompanied your March 2010 presentation. The reader is warned that not all recent cases are presented and not all aspects of each cited case are analyzed. You must read and study the full text of each case before relying on it or using it as precedent. Writ histories were current as of December 16, 2010 (KeyCite service as provided on WESTLAW). The discussion of each case concludes with a moral, i.e., the important lesson to be learned from the case. By recognizing situations which have led to time consuming and costly litigation in the past, estate planners can reduce the likelihood of the same situations arising with their clients. For summaries of cases decided after the closing date for this article, please visit my website at and click on the Texas Case Summaries link. II. INTESTACY A. Non-Marital Children Frost Nat l Bank v. Fernandez, 315 S.W.3d 494 (Tex. 2010). Alleged Heir brought suit to be declared an heir of the testator who had died over 40 years earlier with a will leaving his entire estate to his wife and whose estate was closed in Alleged Heir hoped that by setting aside a 1949 judgment determining that none of the testator s estate passed by intestacy, she could claim an intestate share of this property. Alleged Heir claimed that she did not bring the action in a timely manner, that is, within the four year residual limitations period provided in Civil Practice & Remedies Code , because she was unaware of her possible status as an heir until recently. The Texas Supreme Court held that the discovery rule does not apply to inheritance or heirship claims by non-marital children or to bill of review claims to set aside previous probate judgments. This holding is consistent with the court s prior decision in Little v. Smith, 643 S.W.2d 414 (Tex. 1997), which rejected the discovery rule for heirship claims by adoptees. As in Little, the court determined that the strong public interest in according finality to probate proceedings prevailed over the possible claim of the potential heir. Moral: The discovery rule is not applicable to heirship claims by non-marital children as well as adoptees. Accordingly, a person with questionable parentage who is interested in making inheritance claims must determine the identity of his or her parents in a timely manner and then monitor the parent so that he or she may bring a timely claim after the parent dies. III. WILLS A. Testamentary Intent 1. Prior Will Still Exists In re Estate of Hendler, 316 S.W.3d 703 (Tex. App. Dallas 2010, no pet. h.). On the bottom of the last page of Testator s valid attested will, the Testator handwrote a statement in which he indicated that he was now divorced and that his prior will still exists. The trial court granted summary judgment that this holographic material was a valid codicil and acted to republish the will. The appellate court reversed. The court determined that fact issues exist regarding whether Testator had testamentary intent when he placed the handwritten statement on the bottom 1

10 of his attested will and thus summary judgment was improper. The court explained that there are two interpretations of Testator s words: (1) a mere recitation of facts that he is divorced had has not revoked his will and (2) a statement that he reviewed his prior will with his divorces in mind and that his prior will still states his property disposition desires. Because both interpretations are reasonable, the trial court erred in issuing a summary judgment. Moral: Attorneys should warn clients not to make self-help changes to their existing wills or prepare holographic testamentary documents because the clients may not do so correctly. 2. Statements of Property For In re Estate of Allen, 301 S.W.3d 923 (Tex. App. Tyler 2009, pet. denied). After probating Mother s will as a muniment of title, Son convinced the trial court to admit 13 writings as codicils to Mother s will. Siblings appealed asserting that these writings were not valid codicils because they did not demonstrate that Mother had testamentary intent. The appellate court reversed, agreeing with Siblings that these writings lacked testamentary intent. The writings contain extensive lists of personal property with indications that these statements of property are for Son. Mother signed the writings and they are witnessed by two individuals. However, they are not labeled as being wills or codicils and lack any language showing Mother s intent for these writings to dispose of property upon her death. The court explained that merely indicating in a statement that property is for someone does not show an intent to make an at-death property disposition. Moral: To prevent claims that documents lack testamentary intent, wills and codicils should clearly be labeled as such and use language consistent with disposing of property at death such as give at my death, leave at my death, devise, bequeath, etc. B. Interpretation and Construction 1. Statute of Limitations In re Estate of Florence, 307 S.W.3d 887 (Tex. App. Fort Worth 2010, no pet. h.). Testator s will gave Wife, among other things, his tangible property. The residuary of the estate passed into a testamentary trust. After Wife died over twenty years later, the issue arose as to whether real property was included within the term tangible property and thus was part of Wife s estate having passed to her under Testator s will or whether this real property passed through the testamentary trust. The appellate court s decision focused not on the merits of the claim but rather on whether the statute of limitations had run on the interpretation action brought by the beneficiaries of Wife s will. Both sides agreed that the residuary four year statute of limitations applies but disagreed as to when the time began to run. The court rejected the argument that limitations began to run from the date Testator s will was admitted to probate. Instead, the court determined that limitations did not run until the claim was made that the term tangible property included not only tangible personal property but real property as well. Moral: The statute of limitations for interpretation actions begins to run when parties advocate conflicting interpretations, not when the testator s will is admitted to probate. 2. Avoid Intestacy In re Estate of Catlin, 311 S.W.3d 697 (Tex. App. Amarillo 2010, pet. denied). In an oddly worded will, the residuary of Testator s estate passed into a testamentary trust for the benefit of a beneficiary who predeceased Testator and whose death caused the trust to terminate. A debate arose regarding whether the residuary estate passed to the remainder beneficiaries of the testamentary trust or via intestacy. Both the trial and appellate courts determined that the residuary passed to the remainder beneficiaries even though the 2

11 testamentary trust was both created and terminated at the same moment. The court was unwilling to adopt a different interpretation because to do so would render terms of the will meaningless, circumvent Testator s intent as reflected in the will to give his son only a small part of the estate, and cause 90% of Testator s estate to pass by intestacy to this son. Moral: Wills should be drafted with care to take into account how various contingencies would be handled. 3. Conflicting Dispositions In re Estate of Craigen, 305 S.W.3d 825 (Tex. App. Beaumont 2010, no pet. h.). Testator s holographic will provides that his wife is to get[] everything till she dies but later in the will he leaves his wife all [] real & personal property. Both the trial and appellate court determined that the will was ambiguous. Although there was no extrinsic evidence of Testator s intent, the courts applied standard interpretation rules to conclude that Testator intended to leave his wife all his property outright and not just a life estate. The court based its conclusion on a variety of factors including (1) the will was drafted by a lay individual and thus terms are given their popular, rather than technical, meaning so that till she dies does not create a life estate but merely states the obvious, that a person may only use property while alive, (2) if the will granted his wife a life estate, the remainder would pass via intestacy and wills are interpreted to avoid intestacy, (3) Texas law favors the early vesting of interests, and (4) the will was ambiguous as Testator referred to his wife by using two different first names. Moral: Wills should be drafted by lawyers with estate planning expertise to prevent this type of problem. Note: The court also could have used the construction rule that if two provisions of a will conflict, the latter provision controls. 4. Unproduction Royalty In re Estate of Slaughter, 305 S.W.3d 804 (Tex. App. Texarkana 2010, no pet. h.). Testator died in 1965 and his 1955 holographic will was duly admitted to probate. A dispute arose whether this will either (1) devised all his mineral rights to his three sons to be held as tenants in common, or (2) devised only the royalty rights to his three sons as tenants in common with the remainder of the mineral estate passing to the sons in equal, but divided, interests. The trial court determined that the will was patently ambiguous and determined that Testator meant to devise all mineral interests to his sons as tenants in common. The appellate court reversed. The court began by examining Testator s will that devised each son 158 acres of land and also provided that the three sons were to share and share alike production royalty and unproduction royalty. The court explained that Testator s language was unambiguous in that it transferred 158 acres to each son and reserved the royalty interest from the entire tract to be held by the sons as tenants in common, each owning an undivided one-third of the royalty interest. The court recognized that the term unproduction royalty may be an unusual expression, but that it was nonetheless unambiguous in that it means to cease production or not to produce oil and gas, or, in other words, what is commonly known as shut-in royalties (royalties paid to keep the lease in force when a well capable of producing oil and gas is not utilized because there is no market for the oil and gas). Moral: Wills dealing with mineral interests should be drafted clearly using industry standard language. 5. Devises Grisham v. Lawrence, 298 S.W.3d 826 (Tex. App. Tyler 2009, no pet.). Testator s will specifically devised land to Land Devisees and mineral rights on non-devised land to Remainder Mineral Devisees. A dispute arose as to the ownership of certain mineral rights on 3

12 property devised to Land Devisees. The trial court awarded them to the successors in interest of the Remainder Mineral Devisees. The appellate court reversed and rendered in favor of the Land Devisees. The court determined that the will unambiguously devised to Land Devisees whatever mineral rights Testator owned in the devised land even though he had previously conveyed the surface rights. Moral: Even when a testator s language is clear and unambiguous, disputes may nonetheless arise regarding the effect of that language. C. Pretermitted Children 1. Constructive Birth and Provided For Bailey v. Warren, 319 S.W.3d 185 (Tex. App. Tyler 2010, pet. filed). Testator s valid will left his entire estate to his wife but if she did not survive him, to his heirs at law. Testator had two non-marital children who claimed they were entitled to his estate as pretermitted children under Probate Code 67. Son One claimed that although he was born twelve years before Testator executed the will, he was nonetheless pretermitted because Testator was not adjudicated as his father until one year after he executed his will. Son Two claimed he was pretermitted because he was born after Testator executed the will and is not provided for even though the contingent beneficiary of the will was Testator s heirs at law. The trial court granted summary judgment in favor of both children. The appellate court reversed. With regard to Son One, the court rejected the argument that he was constructively born after will execution because Testator was not adjudicated as his father until after he executed his will. Instead, once a adjudication of paternity occurs, Son is treated as being Testator s child from the moment of child s birth which was twelve years prior to will execution. The court began its analysis of Son Two s case by recognizing that Son Two was a pretermitted child because he was born many years after Testator executed his will. However, Son Two was mentioned or otherwise provided for in Testator s will and thus not entitled to a pretermitted child s share. The contingent class gift to Testator s heirs at law encompassed Son Two as Son Two would have been one of Testator s heirs had Testator s wife not survived. The court also explained that even if Son Two was not included in this class gift, he would still not be entitled to share in Testator s estate because he would be limited to sharing in the contingent gift to Son One as a heir at law. Because Testator s wife survived, Son One received nothing and thus Son Two would receive nothing as well. Moral: If a testator wishes to prevent his or her intended property disposition from being attacked by children alleging to be pretermitted, the testator should include an express provision in the will such as, I intentionally make no provision for any pretermitted child and I intend that pretermitted children receive nothing from my estate either under this will or by intestacy. 2. Otherwise Provided For In re Estate of Hendler, 316 S.W.3d 703 (Tex. App. Dallas 2010, no pet. h.). Testator executed a valid will in 1990 leaving his entire estate to Brother. Thereafter, Testator had two children. In 1999, he signed a holographic statement on the last page of his will indicating that his prior will still exists. After Testator s death, his two children claimed that they were pretermitted and thus each entitled to half of Testator s estate under Probate Code 67. The trial court granted a summary judgment rejecting the children s claim holding that the codicil acted to republish the will and thus the children could not be treated as being born after the date Testator executed the will. In addition, the court found that even if the children were pretermitted, they were otherwise provided for and thus precluded from sharing in the estate. The children appealed. The court determined that the summary judgment holding the holographic material to be a codicil was improper. Thus, it is possible, depending on 4

13 the outcome of a trial on the issue of the validity of the holographic statement as a codicil, that the children were pretermitted. The court then examined whether one or both of the children were otherwise provide for so they could not take even if they were determined to be pretermitted. The court examined three possible ways in which Testator provided for his children. First, Testator paid social security taxes which allowed his children to receiving death benefits. Rejecting the reasoning in Estate of Gorski v. Welch, 993 S.W.2d 298 (Tex. App. San Antonio 1999, pet. denied), the court held that Testator did not voluntarily supply the social security death benefits because they are a product of federal law which mandates the payment of social security taxes. Second, the court rejected the argument that Testator s court-ordered child support obligations was sufficient to show that he had provided for his children. The support order was rendered by default and the obligation ended upon Testator s death unlike the order in Gorski which was entered by consent and continued after the testator s death. Third, the court agreed that Son was indeed otherwise provided for because Testator named him as a contingent beneficiary on one of his life insurance policies. The court rejected Son s argument that a contingent disposition is insufficient because Probate Code 67(d) states that the disposition may be vested or contingent. Moral: A court will be reluctant to determine that a pretermitted child was otherwise provided for unless it is clear that the testator thought about providing for the child after the testator s death and that the omission from the will was not because of accident or oversight. D. Contests 1. Standing In re Estate of Redus, 321 S.W.3d 160 (Tex. App. Eastland 2010, no pet. h.). Proponent One sought to probate Testator s 2007 will naming Proponent One as the sole beneficiary. Proponent Two claimed that the 2007 will was invalid and sought to probate Testator s 2005 will naming Proponent Two as a primary beneficiary. The trial court determined that Proponent Two lacked standing and dismissed Proponent Two s action. Proponent Two appealed. The appellate court reversed. The court began its analysis by looking at Probate Code 10 which requires that a person must have an interest in an estate to have standing. The court then turned to Probate Code 3(r) s definition of interested person. Even Proponent One agreed that a beneficiary of a prior will has standing. However, Proponent One asserted that Proponent Two failed to introduce important evidence at the in-limine hearing such as the 2005 will itself, proof of the elements necessary to probate a missing will, and evidence to overcome the presumption of revocation that arises when the original cannot be produced. The appellate court explained the Proponent One was commingling the issues to be decided in an in-limine hearing with those decided at a trial on the merits. To establish standing, it was sufficient for Proponent Two to testify that he was a beneficiary of Testator s 2005 will, file a copy of the will, and present other evidence of the will s existence and that he was a named beneficiary (e.g., testimony from the drafting attorney). Accordingly, Proponent Two has standing. Moral: The requirements to establish standing to contest a will or probate a will are significantly less than the requirements to contest a will successfully or to have the will admitted to probate. 2. Undue Influence In re Estate of Russell, 311 S.W.3d 528 (Tex. App. El Paso 2009, no pet. h.). Testatrix s will was successfully contested by her granddaughters who claimed that Testatrix was subject to undue influence when she executed her will. The appellate court examined the evidence 5

14 and found it sufficient to prove the elements of undue influence and thus affirmed. The appellate court made a summary review of the evidence focusing on one child s involvement with having his mother execute a will disinheriting her granddaughters contrary to the provisions of her prior wills. Despite Testatrix having testamentary capacity, the court determined that because she made an unexpected unnatural disposition of her property by removing her grandchildren as beneficiaries, the jury could conclude that this feat could only have been accomplished through Son s exercise of undue influence. Note that the court also determined that Son tortiously interfered with the granddaughters inheritance rights and that the trial court appropriately awarded costs against Son even without proving good faith with sufficient cause because they were not seeking their attorney fees under Probate Code 243. Moral: A jury finding of undue influence will be very difficult to overturn on appeal even if the facts supporting the finding are weak. IV. ESTATE ADMINISTRATION A. Jurisdiction 1. District Court Frost Nat l Bank v. Fernandez, 315 S.W.3d 494 (Tex. 2010). Alleged Heir brought suit in both district court and statutory probate court in her attempt to be declared an heir of the testator who had died over 40 years earlier and whose estate was closed in She hoped that by setting aside a 1949 judgment determining that none of the testator s estate passed by intestacy, she could claim an intestate share of this property. The district court granted summary judgment against Alleged Heir. On appeal, the intermediate appellate court held that the district court lacked subject matter jurisdiction and must abate its proceedings until the probate court resolved the heirship issue. The Texas Supreme Court reversed. The court held that Alleged Heir s direct attack on a previous judgment vested the district court with subject matter jurisdiction. The district court was entitled to take as true her heirship allegation which then would be sufficient to give her standing. The court explained that standing existed even though the alleged relationship may not be true and was subject to rebuttal on the merits. The court also held that Probate Code 48(a) does not authorize a probate court to exercise jurisdiction over heirship claims when an estate has been closed for decades and the decedent died testate. Moral: If a contested probate matter is transferred to a district court by a county court judge in a county without a statutory court exercising probate jurisdiction or a statutory probate court, the district court has jurisdiction over a bill of review involving any decision subsequently rendered by the district court. 2. Transfer Fernandez v. Bustamante, 305 S.W.3d 333 (Tex. App. Houston [14 th Dist.] 2010, no pet. h.). Applicant One filed applications for the appointment as a temporary administrator in County One and although granted, Applicant One never qualified because she failed to post bond. Applicant Two then filed an application in County Two. The appellate court determined that County One had jurisdiction to transfer venue to County Two. The court explained that the probate court in County One obtained jurisdiction when the administration was opened even though Applicant One did not pay the required bond. When venue is proper in more than one court, it is the court in which the application is first filed that has jurisdiction to the exclusion of the other courts under Probate Code 8(a). A probate proceeding does not terminate because bond was not paid. Instead, the court has jurisdiction until the administration is closed. Moral: Failure of a personal representative to qualify (take the oath and/or post the bond) does 6

15 not deprive a court of jurisdiction over the administration. B. Appeal 1. Venue Determination Fernandez v. Bustamante, 305 S.W.3d 333 (Tex. App. Houston [14 th Dist.] 2010, no pet. h.). The appellate court was faced with the issue of whether a venue determination in a probate proceeding is a final or an interlocutory order. The court began its analysis by examining the Probate Code and found that it contained no statute on point. Thus, the court applied the Crowson v. Wakeham, 897 S.W.2d 779 (Tex. 1995) standard which provides that if there is a proceeding of which the order in question may logically be considered a part, but one or more pleadings also part of that proceeding raise issues or parties not disposed of, then the probate order is interlocutory. The court then pointed to Texas Civil Practice & Remedies Code (a) and Rule 87 of the Texas Rules of Civil Procedure that provide that a venue determination in general is not a final judgment that is ripe for appeal. The court found no reason to deviate from the general rule that venue determinations are interlocutory. Accordingly, the court dismissed the appeal for want of jurisdiction. Moral: A party unhappy with a venue determination will need to wait until the case is concluded to appeal. 2. Order to Account Pollard v. Pollard, 316 S.W.3d 238 (Tex. App. Dallas 2010, no pet. h.). Husband obtained an order from the trial court to require Wife s independent executor to account under Probate Code 149A. The executor had resisted Husband s request arguing that Husband was not an interested person who had standing to request an accounting claiming that Wife had successfully divorced Husband prior to her death. The executor appealed. The appellate dismissed the appeal for lack of jurisdiction. The court explained that an order to account is interlocutory and not appealable because (1) no statute declares such an order to be final and (2) the order is not part of any proceeding other than the overall independent administration of Wife s estate. Moral: A trial court s order to the executor to account is not appealable. 3. Order of Sale Rawlins v. Weaver, 317 S.W.3d 512 (Tex. App. Dallas 2010, no pet. h.). The trial court granted Executor s order to sell specified real property of the estate. An appeal followed. The appellate court held that it lacked jurisdiction to hear the appeal as the order was interlocutory and hence non-appealable. Moral: An order to sell estate property is not appealable. C. Statute of Limitations In re Estate of Rogers, 322 S.W.3d 361 (Tex. App. El Paso 2010, no pet. h.). The trial court found that Decedent died intestate, determined heirs, and appointed Independent Administrators in In 2009, Friends attempted to set aside these orders and probate Decedent s will. Independent Administrators claimed that it was too late to challenge the orders as both the time to appeal and file a bill of review under Probate Code 31 (two years from date of judgment) had elapsed. Friends claimed that they were within the four year period to probate a will under Probate Code 73. The trial court granted summary judgment in favor of Independent Administrators and Friends appealed. The appellate court affirmed. The court recognized that normally a will proponent has four years from the date of the testator s death to probate the will. However, Probate Code 73 does not address the situation where the court has already entered a final judgment that the decedent died intestate. Friends had the options of 7

16 appealing the trial court s judgment or filing a bill of review. Because Friends did neither in a timely manner, they are barred from setting aside the judgment. Moral: A person dissatisfied with a determination of heirship should timely appeal or file a bill of review. D. Lost Will In re Estate of Catlin, 311 S.W.3d 697 (Tex. App. Amarillo 2010, pet. denied). The trial court admitted a lost will to probate under Prob. Code 85. The appellate court affirmed, rejecting Contestant s assertion that there was insufficient evidence to establish why the original could not be produced and thus the presumption of revocation that arises when the original will is not available for probate was not rebutted. In an almost unbelievable opinion, the court accepted Proponent s explanation that he looked at the Testator s home, office, safety deposit boxes, and drafting attorney s office but could not find the original. The court explained that Proponent did not have to demonstrate an affirmative reason why the original cannot be located such as the eating habits of a neighbor s goat, the occurrence of a Kansas tornado, the devastation of a flash flood, or the like. Moral: This is a remarkable and shocking opinion. The court basically makes it impossible for a testator to revoke a will by physical act because even if the will cannot be found and there is no affirmative reason why it cannot be found, a copy may nonetheless be probated. Accordingly, prudent practice is to revoke a will by subsequent writing and endeavor to ensure that the new writing is found after death. E. Late Probate In re Estate of Rothrock, 312 S.W.3d 271 (Tex. App. Tyler 2010, no pet. h.). Both the trial and appellate courts agreed that Proponent was in default for failing to probate Testator s will within four years of death and thus the will could not be admitted to probate. See Prob. Code 73. Proponent, a non-texas lawyer, knew about Testator s will from the time of Testator s death. Although he was the sole beneficiary of the will to the exclusion of his five siblings, Proponent did not probate the will believing that there was insufficient property to warrant doing so. Thirteen years later when it turned out that Testator had died owning valuable mineral interests, Proponent attempted to probate the will. The court held that it was too late and that merely because Proponent and his siblings had agreed not to probate Testator s will was not a sufficient excuse. Proponent made a decision not to probate the will. The fact that the decision turned out to be the wrong one is not a sufficient excuse for delaying beyond the four year period. Moral: If you are a beneficiary of a will and you know about the will, it is prudent practice to probate the will within four years of the testator s death. F. Independent Administration 1. Unsuitability of Named Executor In re Estate of Gay, 309 S.W.3d 676 (Tex. App. Houston [14 th Dist.] 2010, no pet. h.). Brothers asserted that they were their deceased father s personal representatives by testamentary designation to the United States Court of Appeals for the Tenth Circuit so they could be substituted as a party to a lawsuit that was pending at the time of their father s death. In reality, they had not been appointed by a court as their father s personal representatives. When they later attempted to be appointed as their father s independent executors, the probate court determined that they were unsuitable under Prob. Code 78(c) because they misrepresented themselves before a federal tribunal. Brothers appealed. The appellate court held that the probate court abused its discretion and acted without reference to guiding rules and principles by refusing to appoint Brothers. The court looked closely at what the Brothers actually told the court. They only said they were named as independent coexecutors; a true statement. They never claimed that had been actually appointed. In addition, 8

17 Brothers actions were designed to benefit their father s estate by defending an appeal. The court also noted that the primary beneficiary of the will, the decedent s wife (Brothers mother) was in favor of their appointment having declined to serve as the independent executrix despite being first named in the will. Moral: A court will attempt to permit the named executor to serve because of a long-standing tradition of permitting a testator to select his/her executor. Nonetheless, prudent practice is to not cut hairs by making statements such as, I ve been named as the executor when you have not been officially appointed unless you clearly indicate the fact of non-appointment. 2. Removal of Independent Executor a. Grounds In re Estate of Hoelzer, 310 S.W.3d 899 (Tex. App. Beaumont 2010, pet. denied, rehearing filed). After Step-mother died, Son was appointed as the successor independent executor of Father s estate. He then filed a claim against Father s estate on behalf of himself and his three siblings for reimbursement of funds Step-mother received as the result of asbestos litigation about twenty years ago. The probate court removed Son because the courts had previously determined that Son and his siblings were not creditors of their father s estate and that any potential claims were time-barred. Thus, under Prob. Code 149C, Son s actions constituted gross misconduct and gross mismanagement as well as showing that he was about to misapply estate funds. Son appealed. The appellate court affirmed explaining that there was sufficient evidence to show that Son s actions were inappropriate under 149C. All that was necessary was for the trial court to determine that sufficient grounds appeared to support the belief that Son has misapplied or is about to misapply property of the estate, that is, to pay a judgment-barred claim. It is not necessary for the court to be absolutely certain that misapplication has occurred or may occur in the future. Moral: An independent executor should not pay judgment-barred claims, especially to himself and his relatives. b. Service of Process In re Estate of Hoelzer, 310 S.W.3d 899 (Tex. App. Beaumont 2010, pet. denied, rehearing filed). Probate Code 149C provides that the court may remove an independent executor after the executor is cited by personal service to answer at a time and place fixed in the notice. This specific provision governs over Texas Rule of Civil Procedure 245, that requires at least a notice of 45 days. Thus, the Probate Court may require the executor to answer sooner than 45 days. In addition, the court held that service on the executor s attorney by any method satisfies the personal service on the executor requirement. See Prob. Code 33(f)(1). Moral: An executor must read any service of process carefully to determine the time by when an answer is required and cannot rely on the general 45 day rule. Moral: The ability of an independent administrator to sell estate property is not absolute and compliance with the appropriate provisions of the Probate Code is needed. If a sale is allegedly improper, the attack should be made on appropriate grounds rather than on reasons not supported by the Probate Code. G. Recovery for Unauthorized Bank Transactions Jefferson State Bank v. Lenk, 323 S.W.3d 146 (Tex. 2010). After Decedent s death in 2000, Fake Administrator presented Bank with fraudulent letters of administration and over the next few months, withdrew most of Decedent s funds from the account. In 2003, the court appointed Real Administratrix. In February 2004, Real Administratrix learned about Decedent s account 9

18 at Bank but did not contact Bank until June 2005 when she demanded that Bank recredit the account for the funds Fake Administrator withdrew. Bank refused pointing to Business and Commerce Code which provides a one year repose period to make claims which had been reduced to 60 days by contract. Real Administratrix, however, claimed that the period did not begin to run until Bank made the bank statements available. The appellate court held that Bank s sending statements to Fake Administrator and holding the statements at Bank s office were insufficient to satisfy its duty and thus Real Administratrix could recover. Bank appealed. The Texas Supreme Court reversed. The court held that in the context of deceased customers, (1) a bank satisfies its burden by retaining account statements for retrieval by the estate administrator, and (2) the repose period begins to run once an administrator is appointed. Thus, since Real Administratrix waited until over two years after her appointment to demand that Bank recredit the account, her demand came too late and thus was barred. The court explained that after a customer s death, the bank cannot send statements to the customer and thus retaining the statements is appropriate. Once a personal representative is appointed, the time period begins to run as the personal representative now has the right to all of the decedent s business records and papers under Probate Code 37. Moral: A personal representative must examine bank account statements immediately after being appointed or else risk that the repose period will run barring a recovery for unauthorized withdrawals from the decedent s accounts. Warning: The repose period can run before the personal representative obtains knowledge of the account. Thus, the personal representative must take prompt action to locate all of the decedent s accounts. The decedent s most recent income tax returns may be helpful in determining the existence of the accounts. H. Contempt In re Byrom, 316 S.W.3d 787 (Tex. App. Tyler 2010, mandamus filed). Creditor presented Independent Executor with unsecured claims based on previous probate court orders stating that the claims were to be paid from estate funds within thirty days. When Creditor presented these claims, the thirty days had already elapsed. Executor rejected both claims. Two years later, Creditor filed suit to remove Executor. The trial court removed Executor from office but did not discharge him. The court also ordered Executor pay Creditor s attorney fees and expenses within thirty days and to deposit estate property into the registry of the court. Executor did not comply with these orders and thus Creditor field a motion to enforce the orders by contempt. After hearing evidence, the court remanded Executor to jail unless he made the required payments. Because Executor did not comply, he was confined to jail. After posting bond, he was, however, released from jail. He filed for writ of habeas corpus which was denied and he was again taken to jail. Executor filed for a writ of mandamus. The appellate court explained that a person who willfully disobeys a valid court order is guilty of contempt and that imprisonment is normally appropriate. However, Texas Constitution Article I, 18, prohibits a person from being imprisoned for a debt. After a lengthy analysis of contempt law, the court concludes that Executor was held in contempt for failing to deposit funds which would be used to pay debts and thus the contempt order was unconstitutional. Thus, the court granted Executor s petition for a writ of habeas corpus. Moral: The ability to have a misbehaving executor imprisoned for violating court orders is limited because of the constitutional prohibition against debtor imprisonment. I. Attorney ad Litem Costs In re Estate of Frederick, 311 S.W.3d 127 (Tex. App. Fort Worth 2010, no pet. h.). 10

19 After Son died and Wife attempted to probate intestate Son s estate, Mother contested Wife s application. The court appointed an attorney ad litem for the unknown, unascertained, etc. heirs. After litigation successfully showed that Wife was actually Son s wife, the court assessed the costs of the ad litem against Mother. Mother appealed. The appellate court affirmed. The court began its analysis by examining Probate Code 34A that authorizes the court to appoint an attorney ad litem and noted that the statute does not specify against whom these costs should be assessed. Thus, the assessment is within the court s discretion. Although an earlier case [Ajudani v. Walker, 232 S.W.3d 219, 224 (Tex. App. Houston [1 st Dist.] 2007, no pet.)] and legislative history suggest that the estate should be responsible for these costs, the court noted that 34A is clear and thus the text of the section is determinative. Because the section is silent, Prob. Code 12(a) provides that the general rules of civil procedure apply that state that costs are generally assessed against the non-prevailing party unless the court for good cause decides to assess them differently. Tex. Rul. Civ. P. 131, 141. The court then held that the trial court did not abuse its discretion by assessing costs against Mother. Moral: In estate cases, the court may assess ad litem costs as it determines. Note, however, that in guardianship cases, Probate Code 669 provides that the guardianship estate is responsible for the costs of a guardian ad litem. V. TRUSTS A. Removal of Trustee Conte v. Ditta, 312 S.W.3d 951 (Tex. App. Houston [1 st Dist.] 2010, no pet. h.). After the trial court removed Trustee from office, Trustee asserted that an earlier settlement agreement addressing Trustee s use of over $500,000 of trust funds for her personal use was an election of remedies precluding or waiving the removal action. The appellate court disagreed explaining that the settlement remedied a past injury while the removal action was to prevent future injury. Trustee also alleged that the trial court abused its discretion in removing her from office even though the court found she used trust funds to pay her personal expenses, violated the trust causing the trust to suffer material financial loss, and had personal interests adverse to and in conflict with her duties as trustee. After a review of the evidence, the appellate court found that there was sufficient evidence to support the trial court s findings and thus agreed that the trial court did not abuse its discretion when it removed Trustee from office. The court noted that merely because Trustee acknowledged she misappropriated trust funds after being caught does not cure the breach of trust. Moral: A trustee who is caught misusing trust funds may be removed from office even if the trustee (1) is found liable for damages and (2) acknowledges the bad behavior. Note: This is the remand of Ditta v. Conte, 298 S.W.3d 187 (Tex. 2009), in which the Supreme Court of Texas held that no statutory limitations period restricts a court s discretion to remove a trustee. A limitations period, while applicable to suits seeking damages for breach of fiduciary duty, has no place in suits that seek removal rather than recovery. B. Successor Trustee Conte v. Ditta, 312 S.W.3d 951 (Tex. App. Houston [1 st Dist.] 2010, no pet. h.). After the trial court properly removed Trustee from office, the court appointed a successor trustee without following Settlor s instructions for how a successor trustee should be selected. The appellate court held that the court exceeded its authority to deviate from the terms of the trust under Trust Code Instead, the court should follow the terms of the trust that authorized the majority of adult beneficiaries to appoint a successor trustee. See Trust Code A court exercising its deviation power must do so in the manner that conforms as nearly as possible to Settlor s intent. Here, 11

20 Settlor s intent was expressed in the trust when he provided instructions on the method of ascertaining a successor trustee. The fact that one of the beneficiaries was the removed trustee did not impact her rights as a beneficiary. Thus, a proper deviation would be to prevent the beneficiaries from appointing anyone who had been already removed as a trustee. Moral: If a trust contains instructions of the appointment of a successor trustee, those instructions should be followed as closely as possible under the circumstances. The appellate court determined that an executor of an estate lacked standing to litigate issues regarding the proper payment of life insurance proceeds. Life insurance is a non-probate asset and the insurance policy was not payable to the estate. Prob. Code 450. Moral: Disputes regarding the proper payment of life insurance proceeds should be between the claimants to the proceeds, not the estate of the insured unless the estate was the named beneficiary or would otherwise be entitled to the proceeds. C. Criminal Liability Bowen v. State, 322 S.W.3d 435 (Tex. App. Eastland 2010, pet. filed). A jury convicted Trustee of misapplication of fiduciary property valued at over $200,000 under Penal Code Trustee was then sentenced to eight years in prison, fined $10,000, and ordered to pay $350,000 in restitution. Trustee appealed. The appellate court agreed there was substantial evidence that Trustee misapplied well over $200,000 of trust assets. However, the indictment specifically stated that these trust assets were owned by one named beneficiary or held for her benefit; it did not list all of the beneficiaries. Because only about $100,000 was held in trust for the named beneficiary and because the jury charge did not include a lesser included offense, Trustee s conviction was reversed. Moral: An indictment for misapplication of fiduciary property should list all beneficiaries as the owners of the property and a jury charge should include a lesser included offense. VI. OTHER ESTATE PLANNING MATTERS A. Life Insurance Irwin v. Irwin, 307 S.W.3d 383 (Tex. App. San Antonio 2009, pet. denied). 12