BILL ANALYSIS



H.B. 2866
By: Hilbert
4-17-95
Committee Report (Unamended)


BACKGROUND

Current provisions of the Texas Probate Code, regarding creditor's
claims against a decedent's estate are confusing, particularly with
regard to independent administrations.  The language of the Probate
Code does not take into account that creditors are not required to
present claims formally in an independent administration.  Further,
the system for classifying claims is somewhat confusing and the
courts have drawn a distinction between deficiencies resulting
after foreclosure depending upon whether the administration is
independent or dependent.

The Real Estate, Probate and Trust Law Section of the State Bar of
Texas perceived a need to clarify these procedures for the benefit
of both personal representatives and creditors.

PURPOSE

H.B. 2866 clarifies the procedures for dealing with claims of
creditors in both independent and dependent administrations,
provides a way in which the personal representative may facilitate
the closing of the estate, and eliminates the differences regarding
secured claims in dependent and independent administration.


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 146, Texas Probate Code, by amending
Subsection (a) and adding Subsections (b) and (c) as follows:

     Subsection (a)  Amended to clarify that the formal
presentation of claims is not required in an independent
administration and requires the independent executor to give
certain statutory notices. Further requires the independent
executor or independent administrator to approve, classify, pay or
reject claims against the estate and requires the independent
executor to pay family allowances and allowances in lieu of exempt
property.

     Subsection (b)  Outlines the procedure by which a secured
creditor must make the election to have his debt treated as a
preferred debt and lien or a matured secured claim.  The
independent executor may pay the claim prior to maturity if such
payment is in the best interest of the estate. 

     Subsection (c) Allows the independent executor to pay a claim
at any time during the administration if the person or
representative reasonably believes that there are sufficient assets
to pay all such claims.
 
SECTION 2.  Amends Section 294, Texas Probate Code, by amending
Subsection (a) and adding Subsection (d) as follows:

     Subsection (a)  Amends the requirement for statutory notice
under this section to include the date of issuance of letters held
by the representative.

     Subsection (d)  Allows a personal representative to give
notice to creditors who have not filed claims that if their claims
are not filed within four months, the claims will be barred. 
Requirements for the notice are set forth in this section.

SECTION 3.  Amends Section 295, Texas Probate Code, by reducing the
time for a personal representative to give notice to secured
creditor and clarifies the contents of such notices. The
requirement for notice to unsecured creditors, other than by
publication, is removed.

SECTION 4.  Amends Section 297, Texas Probate Code, by making the
language gender neutral.

SECTION 5.  Amends Section 298, Texas Probate Code, by amending
Subsections (a) and (b) as follows:

     Subsection (a) removes the untimely presentation requirement
of the existing code and allows the creditor to file a claim at any
time prior to the closing of the estate.  Claims of unsecured
creditors must be presented within four months of the date of
receipt of the notice to unsecured creditors.

     Subsection (b) prohibits the personal representative from
paying claims barred by the provisions of the Texas Probate Code or
statutes of limitation.

SECTION 6.  Amends Section 301, Texas Probate Code, to clarify that
only claims for money must be authenticated.

SECTION 7.  Amends Section 303, Texas Probate Code, to clarify who
may make an affidavit concerning evidence of a claim that is lost
or destroyed.  The section is made gender neutral.

SECTION 8.  Amends Section 304, Texas Probate Code, to clarify who
may make claims on behalf of a corporation.

SECTION 9. Amends Section 306, Texas Probate Code, by amending
Subsections (a), (b), and (d) and adding Subsections (c), (f), (g),
(h), (i), (j) and (k) as follows:

     Subsection (a) is amended to clarify that the section applies
to methods of handling secured claims for money.

     Subsection (b) is amended to provide that a creditor will not
lose its secured status by failing to file a claim within a
specified time, but rather will have the claim classified solely as
preferred debt and lien.

     Subsection (c) clarifies that a preferred debt and lien
claimant has no claim against other assets of the estate.

     Subsection (d) is renumbered accordingly.

     Subsection (e) requires that payments begin on a preferred
debt and lien secured claim within six months after the date
letters of administration are granted.  Provides for default on
such payments or performances.

     Subsection (f) authorizes foreclosure of preferred liens and
outlines requirements for application for foreclosure.

     Subsection (g) provides for the issuance of a citation of
notification upon filing of an application for foreclosure. 

     Subsection (h) provides for the setting of a hearing upon
application for foreclosure.

     Subsection (i) specifies procedures for hearing on application
     for foreclosure.

     Subsection (j) allows for appeal by persons interested in the
     estate.

     Subsection (k) provides appropriate procedure in the event of
     an unsuccessful foreclosure.

SECTION 10. Amends Section 308, Texas Probate Code, by making it
gender neutral and by requiring that the representative act on
claims within 30 days after they are deposited with the clerk.

SECTION 11. Amends Section 309, Texas Probate Code, by making it
gender neutral and by outlining the requirement for the rejection
of claims.

SECTION 12. Amends Section 310, Texas Probate Code, by making the
section gender neutral and by clarifying the time in which a
personal representative must act on a claim.    

SECTION 13. Amends Section 311, Texas Probate Code, by deleting
references to untimely filed claims and by requiring that rejected
claims be filed with the county clerk.

SECTION 14.  Amends Section 312 (c), (d) and (e), Texas Probate
Code, by making them gender neutral.

SECTION 15.  Amends Section 313, Texas Probate Code, by clarifying
that the memorandum of rejection is prima facie truth of rejection
by the personal representative.

SECTION 16.  Amends Section 314, Texas Probate Code, by making it
gender neutral.

SECTION 17.  Amends Section 315, Texas Probate Code, by making it
gender neutral and by clarifying to whom costs of suit can be
taxed.

SECTION 18.  Amends Section 316, Texas Probate Code, by making it
gender neutral.

SECTION 19.  Amends Section 317 (a) and (b), Texas Probate Code, by
making it gender neutral.

SECTION 20. Amends Section 318, Texas Probate Code, by clarifying
that no claims will be allowed after final order of partition and
distribution.  Allows one class of creditors to seek recovery from
other classes of creditors in certain situations.

SECTION 21. Amends Section 320, Texas Probate Code, by making it
gender neutral and by amending Subsections (a) and (c) and adding
Subsections (b) and (d) as follows:

     Subsection (a) removes the requirement that claims for funeral
expenses and expenses of last illness be presented within 60 days.

     Subsection (b) permits the application of proceeds from the
sale of mortgaged property to payment of lien or mortgage if there
are no claims of higher priority.  Permits the claimant to seek an
order of the court directing the payment to be made if the
representative fails to pay proceeds.

     Subsection (c) allows a claimant whose claim has not been paid
to petition the court for determination of the claim.

     Subsection (d) permits the court to order payment of claims
after six months if there are no claims other than those presented
within the six months.

SECTION 22. Amends Section 320A, Texas Probate Code, by striking
the words "executors, independent executors and administrators" and
substituting the words "personal representatives".

SECTION 23. Amends Section 321, Texas Probate Code, by clarifying
the process for payment for claims of the same class, other than
secured claims for money, when there is a deficiency of assets.

SECTION 24.  Amends Section 322, Texas Probate Code, to require
that liens shall be paid in the order of priority. References to
certain state agencies are corrected.

SECTION 25.  Amends Section 323, Texas Probate Code, by making it
gender neutral.

SECTION 26.  Amends Section 324, Texas Probate Code, by making it
gender neutral.

SECTION 27.  Amends Section 328 (b), Texas Probate Code, by making
it gender neutral.

SECTION 28.  Amends Section 329 (a) and (c), Texas Probate Code, to
permit an increase in the bond of the personal representative if
new liens are created on the property of the estate.

SECTION 29.  Repeals Sections 300, 325 and 327, Texas Probate Code.

SECTION 30.  The Act applies only to the estate of a decedent who
dies on or after the effective date of the Act.

SECTION 31.  Effective date - January 1, 1996

SECTION 32.  Emergency clause.

SUMMARY OF COMMITTEE ACTION

H.B. 2866 was considered by the Committee on Civil Practices in a
public hearing on March 29, 1995. The following persons testified
in support of the bill: Alvin J. Golden, representing the Texas
Academy of Probate and Trust Lawyers; and Mike Slack, attorney,
representing himself and the Texas Trial Lawyers Association. The
bill was left pending. H.B. 2866 was considered by the Committee on
Civil Practices in a public hearing on April 12, 1995. The bill was
reported favorably without amendment with the recommendation that
it do pass and be printed, by a record vote of six ayes, zero nays,
zero pnv and three absent.