BILL ANALYSIS
H.B. 2866
By: Hilbert (Whitmire)
Jurisprudence
5-19-95
Senate Committee Report (Unamended)
BACKGROUND
Current provisions of the 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. In
addition, the system for classifying claims has caused courts to
draw 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 have recommended clarifying these procedures for the benefit
of both personal representatives and creditors.
PURPOSE
As proposed, H.B. 2866 clarifies the procedures for dealing with
claims of creditors in both independent and dependent
administrations of estates, 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 grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 146, Probate Code, as follows:
Sec. 146. PAYMENT OF CLAIMS AND DELIVERY OF EXEMPTIONS AND
ALLOWANCES. (a) Duty of the Independent Executor. Requires
an independent executor to give the notices required under
Sections 294 and 295, to approve and classify, rather than
receive presentation of and allow, claims against the estate,
setting aside and delivering to those entitled thereto exempt
property and allowances for support, and allowances in lieu of
exempt property, rather than in lieu of homestead. Authorizes
the independent executor to give the notice permitted under
Section 294(d) and to bar a claim under that subsection.
Makes nonsubstantive changes.
(b) Secured Claims for Money. Requires a creditor with a
claim for money secured by property of the estate to notify
the independent executor of the creditor's election to have
the claim approved as a matured secured claim to be paid in
due course of administration, within a certain time period.
Provides that if the election is not made, the claim is a
preferred debt and lien against the specific property and
shall be paid according to the terms of the contract, and
prohibits the claim from being asserted against other assets
of the estate. Authorizes the independent executor to pay
the claim before the claim matures if paying is in the best
interests of the state.
(c) Liability of Independent Executor. Authorizes an
independent executor to pay at any time and without personal
liability a claim to the extent approved and classified by
the personal representative (representative) under certain
circumstances.
SECTION 2. Amends Section 294, Probate Code, by amending Subsection
(a) and adding Subsection (d), as follows:
(a) Requires the notice requiring all persons having claims to
present the claim within a certain time period to include the
date, rather than time of issuance of letters held by the
representative.
(d) Permissive Notice to Unsecured Creditors. Authorizes the
representative to give notice to an unsecured creditor having
a claim expressly stating that the creditor must present a
claim within a certain time period, if the claim is not barred
by the general statutes of limitation. Sets forth
requirements for the notice.
SECTION 3. Amends Section 295, Probate Code, as follows:
Sec. 295. New heading: NOTICE TO HOLDERS OF SECURED CLAIMS.
(a) New heading: When Notice Required for Secured Claimants.
Requires the representative within two, rather than four
months of receiving letters, to give notice of the issuance to
each person known to the representative to have a claim that
is secured by property of the estate. Requires the
representative to give notice to the person of the issuance
after the representative obtains actual knowledge of the
existence of a person having a secured claim and to whom
notice was not previously given. Deletes Subsection (b).
Makes conforming changes.
(b)-(c) Redesignate existing Subsections (c)-(d). Make
nonsubstantive and conforming changes.
SECTION 4. Amends Section 297, Probate Code, to make nonsubstantive
changes.
SECTION 5. Amends Section 298, Probate Code, as follows:
Sec. 298. CLAIMS AGAINST ESTATES OF DECEDENTS. (a) New
heading: Time for Presentation of Claims. Authorizes a claim
to be presented to the representative at any time before the
estate is closed if suit on the claim has not been barred by
the general statutes of limitation. Provides that if a claim
of an unsecured creditor for money is not presented within
four months after the date of receipt of the notice permitted
by Section 294(d), the claim is barred. Deletes provisions
requiring claims for money against a testator or intestate to
be postponed if presented after six months of the original
grant of letters testamentary or of administration.
(b) Makes conforming changes.
SECTION 6. Amends the heading of Section 301, Probate Code, as
follows:
Sec. 301. CLAIMS FOR MONEY MUST BE AUTHENTICATED.
SECTION 7. Amends Section 303, Probate Code, to make a
nonsubstantive change.
SECTION 8. Amends Section 304, Probate Code, to require an
authorized officer or representative of a corporation or other
entity, rather than the cashier, treasurer, or managing official of
a corporation, to make the affidavit required to authenticate a
claim of such corporation or entity. Makes a conforming change.
SECTION 9. Amends Section 306, Probate Code, as follows:
Sec. 306. New heading: METHOD OF HANDLING SECURED CLAIMS FOR
MONEY. (a) Makes a conforming change.
(b) New heading: Time for Specification of Secured Claim.
Authorizes the secured creditor to present the creditor's
claim and to specify whether the claim is to be allowed and
approved under Subsection (a)(1) or (2) within a certain
time period. Makes conforming changes.
(c) Matured Secured Claims. Requires a claim that has been
allowed and approved as a matured secured claim to be paid
in due course of administration and the secured creditor is
not entitled to exercise any other remedies in a manner that
prevents the preferential payment of claims and allowances
described by Section 320(a) of this code.
(d) Redesignates existing Subsection (c).
(e) New heading: Payment of Maturities on Preferred Debt
and Lien Claims. Redesignates existing Subsection (d).
Requires the representative of the estate to pay all
maturities which have accrued on the debt accrued according
the terms thereof if property securing a claim is not sold
or distributed within six, rather than 12 months from the
date letters are granted. Sets forth requirements for the
court on application, rather than motion, of the
claimholder, if the representative defaults in such payment
or performance.
(f) Foreclosure of Preferred Liens. Requires a claimholder
to filed with the court an application supported by
affidavit that meets certain criteria if the court
authorizes the claimholder to foreclose the claimholder's
lien or security interest on property securing a claim that
has been allowed, approved, and fixed.
(g) Citation. Requires the clerk to issue citation in a
certain manner to the representative, any person described
by the application as having other debts secured by a
mortgage, lien, or security interest against the property
(secured debt), and any other person interested in the
estate. Requires the citation to require the person to
appear and show cause why foreclosure should or should not
be permitted.
(h) Setting of Hearing on Application. Requires the clerk
to notify the judge when an application is filed. Requires
the judge to schedule a hearing on the application.
Authorizes the judge to continue the hearing to allow an
interested person to obtain evidence concerning the fair
market value of the property that is the subject of the
application. Requires the person to show good cause for the
continuance if the interested person requests an
unreasonable time for a continuance.
(i) Hearing. Requires the court to enter an order granting
the claimholder permission to foreclose the secured debt if
the court finds that there is a default under the contract
that secures payment of the claim. Authorizes the court to
fix a minimum price for the property to be sold by
foreclosure that does not exceed the fair market value,
under which the property may not be sold.
(j) Appeal. Authorizes any interested person to appeal an
order issued under Subsection (i).
(k) Unsuccessful Foreclosure. Authorizes the claimholder to
file another application under Subsection (f) if a bid at
the foreclosure sale does not meet the minimum price.
Authorizes the court to eliminate or modify the minimum
price requirements and grant permission for another
foreclosure sale. Makes conforming changes.
SECTION 10. Amends Section 308, Probate Code, to require the
clerk to enter a deposited claim on the claim docket.
SECTION 11. Amends Section 309, Probate Code, to make conforming
and nonsubstantive changes.
SECTION 12. Amends Section 310, Probate Code, to require the
failure of a representative of an estate to timely allow or reject
a claim under Section 309, rather than specifying a 30-day time
limit, to constitute a rejection of the claim. Makes conforming
and nonsubstantive changes.
SECTION 13. Amends Section 311, Probate Code, to require a claim
to be filed with the county clerk of the proper county after the
claim against an estate has been presented to and allowed or
rejected by the personal representative. Makes conforming changes.
SECTION 14. Amends Sections 312(c)-(e), Probate Code, to make
nonsubstantive changes.
SECTION 15. Amends Section 313, Probate Code, to make a
conforming change.
SECTION 16. Amends Section 314, Probate Code, to make a
nonsubstantive change.
SECTION 17. Amends Section 315, Probate Code, to make conforming
and nonsubstantive changes.
SECTION 18. Amends Section 316, Probate Code, as follows:
Sec. 316. New heading: CLAIMS AGAINST PERSONAL
REPRESENTATIVES. Makes conforming and nonsubstantive changes.
SECTION 19. Amends Sections 317(a) and (b), Probate Code, to
make conforming and nonsubstantive changes.
SECTION 20. Amends Section 318, Probate Code, to include
creditors in the list of persons against whom the owner of any
claim not barred by the laws of limitation is required to have an
action. Makes conforming and nonsubstantive changes.
SECTION 21. Amends Section 320, Probate Code, as follows:
Sec. 320. ORDER OF PAYMENT OF CLAIMS. (a) Priority of
Payments. Deletes exceptions to the requirement that a
representative pay funeral expenses and expenses of last
sickness in an amount not to exceed $5000, as a first
priority.
(b) Sale of Mortgaged Property. Requires a representative
to pay the proceeds to any holder of a secured debt if the
representative has the proceeds of a sale that has been made
for the satisfaction of a secured debt and the proceeds are
not required for the payment of any debts against the estate
that have a preference over the secured debt. Requires the
representative to pay the holders in order of the holders'
priority. Authorizes a holder, on proof of the failure to
pay, to obtain an order from the court directing the payment
to be paid.
(c) New heading: Claimant's Petition. Created from
existing text.
(d) Permissive Order of Payment. Authorizes the court to
order the representative to pay any claim that is allowed
and approved after a certain time period after the letters
are granted and the representative states that the
representative has no knowledge of any outstanding
enforceable claims other than those already approved.
SECTION 22. Amends Section 320A, Probate Code, to make
conforming changes.
SECTION 23. Amends Section 321, Probate Code, to make conforming
changes.
SECTION 24. Amends Section 322, Probate Code, to require secured
claims for money to be paid in order of their priority, rather than
requiring the oldest to be first paid but prohibiting giving
preference to such mortgage or lien. Makes conforming and
nonsubstantive changes.
SECTION 25. Amends Section 323, Probate Code, to make a
nonsubstantive change.
SECTION 26. Amends Section 324, Probate Code, to make conforming
and nonsubstantive changes.
SECTION 27. Amends Section 328(b), Probate Code, to make a
nonsubstantive change.
SECTION 28. Amends Sections 329(a) and (c), Probate Code, to
authorize the court to require that the representative's general
bond be increased, or an additional bond given, for the protection
of the estate and the creditors, as for the sale of real property
belonging to the estate if a new lien is created on property of an
estate.
SECTION 29. Repealer: Sections 300, 325, and 327, Probate Code
(Claims Must Be Authenticated-Proceeds of Sale of Mortgaged
Property-Claims Presented Against Estate of Decedent After Six
Months) of this bill.
SECTION 30. Makes application of this Act prospective.
SECTION 31. Effective date: September 1, 1995.
SECTION 32. Emergency clause.