H.B. No. 2866
    1-1                                AN ACT
    1-2  relating to claims against a decedent's estate.
    1-4        SECTION 1.  Section 146, Texas Probate Code, is amended to
    1-5  read as follows:
    1-6        Sec. 146.  Payment of Claims and Delivery of Exemptions and
    1-7  Allowances.  (a)  Duty of the Independent Executor.  An independent
    1-8  executor, in the <his> administration of an estate, <although free
    1-9  from the control of the court, shall nevertheless,> independently
   1-10  of and without application to, or any action in or by the court:
   1-11              (1)  shall give the notices required under Sections 294
   1-12  and 295;
   1-13              (2)  may give the notice permitted under Section 294(d)
   1-14  and bar a claim under that subsection;
   1-15              (3)  shall approve, <receive presentation of and>
   1-16  classify, <allow,> and pay, or reject, claims against the estate in
   1-17  the same order of priority, classification, and proration
   1-18  prescribed in this Code;<,> and
   1-19              (4)  shall set aside and deliver to those entitled
   1-20  thereto exempt property and allowances for support, and allowances
   1-21  in lieu of exempt property <homestead>, as prescribed in this Code,
   1-22  to the same extent and result as if the independent executor's
   1-23  <his> actions had been accomplished in, and under orders of, the
   1-24  court.
    2-1        (b)  Secured Claims for Money.  Within six months after the
    2-2  date letters are granted or within four months after the date
    2-3  notice is received under Section 295, whichever is later, a
    2-4  creditor with a claim for money secured by real or personal
    2-5  property of the estate must notify the independent executor by
    2-6  certified or registered mail of the creditor's election to have the
    2-7  creditor's claim approved as a matured secured claim to be paid in
    2-8  due course of administration.  If the election is not made, the
    2-9  claim is a preferred debt and lien against the specific property
   2-10  securing the indebtedness and shall be paid according to the terms
   2-11  of the contract that secured the lien, and the claim may not be
   2-12  asserted against other assets of the estate.  The independent
   2-13  executor may pay the claim before the claim matures if paying the
   2-14  claim before maturity is in the best interest of the estate.
   2-15        (c)  Liability of Independent Executor.  An independent
   2-16  executor, in the administration of an estate, may pay at any time
   2-17  and without personal liability a claim for money against the estate
   2-18  to the extent approved and classified by the personal
   2-19  representative if:
   2-20              (1)  the claim is not barred by limitations; and
   2-21              (2)  at the time of payment, the independent executor
   2-22  reasonably believes the estate will have sufficient assets to pay
   2-23  all claims against the estate.
   2-24        SECTION 2.  Section 294, Texas Probate Code, is amended by
   2-25  amending Subsection (a) and adding Subsection (d) to read as
   2-26  follows:
   2-27        (a)  Giving of Notice Required.  Within one month after
    3-1  receiving letters, personal representatives of estates shall send
    3-2  to the comptroller of public accounts by certified or registered
    3-3  mail if the decedent remitted or should have remitted taxes
    3-4  administered by the comptroller of public accounts and publish in
    3-5  some newspaper, printed in the county where the letters were
    3-6  issued, if there be one, a notice requiring all persons having
    3-7  claims against the estate being administered to present the same
    3-8  within the time prescribed by law.  The notice shall include the
    3-9  date <time> of issuance of letters held by the representative, the
   3-10  address to which claims may be presented, and an instruction of the
   3-11  representative's choice that claims be addressed in care of the
   3-12  representative, in care of the representative's attorney, or in
   3-13  care of "Representative, Estate of __________" (naming the estate).
   3-14        (d)  Permissive Notice to Unsecured Creditors.  At any time
   3-15  before an estate administration is closed, the personal
   3-16  representative may give notice by certified or registered mail,
   3-17  with return receipt requested, to an unsecured creditor having a
   3-18  claim for money against the estate expressly stating that the
   3-19  creditor must present a claim within four months after the date of
   3-20  the receipt of the notice or the claim is barred, if the claim is
   3-21  not barred by the general statutes of limitation.  The notice must
   3-22  include:
   3-23              (1)  the dates of issuance of letters held by the
   3-24  representative;
   3-25              (2)  the address to which claims may be presented; and
   3-26              (3)  an instruction of the representative's choice that
   3-27  the claim be addressed in care of:
    4-1                    (A)  the representative;
    4-2                    (B)  the representative's attorney; or
    4-3                    (C)  "Representative, Estate of         " (naming
    4-4  the estate).
    4-5        SECTION 3.  Section 295, Texas Probate Code, is amended to
    4-6  read as follows:
    4-7        Sec. 295.  Notice to Holders of Secured <Recorded> Claims.
    4-8  (a)  When notice required for secured <lien> claimants.  Within two
    4-9  <four> months after receiving letters, the personal representative
   4-10  of an estate shall give notice of the issuance of such letters to
   4-11  each and every person known to the personal representative to have
   4-12  <having> a claim for money against the estate of a decedent that is
   4-13  secured by real or personal property of the estate.  Within a
   4-14  reasonable time after the personal representative obtains actual
   4-15  knowledge of the existence of a person having a secured claim for
   4-16  money and to whom notice was not previously given, the personal
   4-17  representative shall give notice to the person of the issuance of
   4-18  letters  <, provided:>
   4-19              <(1)  That such claim is secured by a deed of trust,
   4-20  mortgage, vendor's, mechanic's or other contractor's lien upon real
   4-21  estate belonging to such estate; and>
   4-22              <(2)  That the instrument creating, extending, or
   4-23  transferring such lien was duly recorded prior to the death of a
   4-24  testator or intestate in the county in which the real estate
   4-25  covered by such lien is situated, or prior to the time at which
   4-26  title vested in an heir or devisee>.
   4-27        (b)  <When notice required for general claimants.  Within
    5-1  four months after receiving letters, the representative of an
    5-2  estate shall give notice of the issuance of the letters to each
    5-3  person having an outstanding claim for money against the estate of
    5-4  a decedent if the representative has actual knowledge of the claim.>
    5-5        <(c)>  How notice shall be given.  The notice stating the
    5-6  original grant of letters <letter> shall be given by mailing same
    5-7  by certified <mail> or registered mail <letter>, with return
    5-8  receipt requested, addressed to the record holder of such
    5-9  indebtedness or claim at the record holder's <his> last known post
   5-10  office address.
   5-11        (c) <(d)>  Proof of service of notice. A copy of each notice
   5-12  required by Subsection (a) of this section and a copy of<, together
   5-13  with> the return receipt and an affidavit of the representative,
   5-14  stating that said notice was mailed as required by law, giving the
   5-15  name of the person to whom the notice was mailed, if not shown on
   5-16  the notice or receipt, shall be filed with the clerk of <in> the
   5-17  court from which letters were issued.
   5-18        SECTION 4.  Section 297, Texas Probate Code, is amended to
   5-19  read as follows:
   5-20        Sec. 297.  Penalty for Failure to Give Notice.  If the
   5-21  representative fails to give the notices required in preceding
   5-22  Sections, or to cause such notices to be given, the representative
   5-23  <he> and the sureties on the representative's <his> bond shall be
   5-24  liable for any damage which any person suffers by reason of such
   5-25  neglect, unless it appears that such person had notice otherwise.
   5-26        SECTION 5.  Section 298, Texas Probate Code, is amended to
   5-27  read as follows:
    6-1        Sec. 298.  Claims Against Estates of Decedents.  (a)  Time
    6-2  for Presentation of Claims <Against Decedent's Estate Postponed if
    6-3  not Presented in Six Months>.  A claim may be presented to the
    6-4  personal representative at any time before the estate is closed if
    6-5  suit on the claim has not been barred by the general statutes of
    6-6  limitation.  If a claim of an unsecured creditor for money is not
    6-7  presented within four months after the date of receipt of the
    6-8  notice permitted by Section 294(d), the claim is barred <All claims
    6-9  for money against a testator or intestate shall be presented to the
   6-10  executor or administrator within six months after the original
   6-11  grant of letters testamentary or of administration; otherwise the
   6-12  payment thereof shall be postponed until the claims which have been
   6-13  presented within six months and allowed by the executor or
   6-14  administrator and approved by the court have been first entirely
   6-15  paid; provided, however, that the failure of the holder of a
   6-16  secured claim to present his claim within said six month period
   6-17  shall not cause his claim to be postponed, but it shall be treated
   6-18  as a claim to be paid in accordance with subsequent provisions of
   6-19  this Code>.
   6-20        (b)  Claims Barred by Limitation Not to Be Allowed or
   6-21  Approved.  No claims for money against a decedent, or against the
   6-22  estate of the decedent, on which a suit is barred under Subsection
   6-23  (a) of this section, Section 313, or Section 317(a) or by a general
   6-24  statute of limitation applicable thereto shall be allowed by a
   6-25  personal representative.  If allowed by the representative and the
   6-26  court is satisfied that the claim is barred or that limitation has
   6-27  run, the claim shall be disapproved.
    7-1        SECTION 6.  Section 301, Texas Probate Code, is amended to
    7-2  read as follows:
    7-3        Sec. 301.  Claims for Money Must Be Authenticated.  No
    7-4  personal representative of a decedent's estate shall allow, and the
    7-5  court shall not approve, a claim for money against such estate,
    7-6  unless such claim be supported by an affidavit that the claim is
    7-7  just and that all legal offsets, payments, and credits known to the
    7-8  affiant have been allowed.  If the claim is not founded on a
    7-9  written instrument or account, the affidavit shall also state the
   7-10  facts upon which the claim is founded.  A photostatic copy of any
   7-11  exhibit or voucher necessary to prove a claim may be offered with
   7-12  and attached to the claim in lieu of the original.
   7-13        SECTION 7.  Section 303, Texas Probate Code, is amended to
   7-14  read as follows:
   7-15        Sec. 303.  Evidence Concerning Lost or Destroyed Claims.  If
   7-16  evidence of a claim is lost or destroyed, the claimant<,> or an
   7-17  authorized representative or agent of the claimant <someone for
   7-18  him>, may make affidavit to the fact of such loss or destruction,
   7-19  stating the amount, date, and nature of the claim and when due, and
   7-20  that the same is just, and that all legal offsets, payments and
   7-21  credits known to the affiant have been allowed, and that the
   7-22  claimant is still the owner of the claim; and the claim must be
   7-23  proved by disinterested testimony taken in open court, or by oral
   7-24  or written deposition, before the claim is approved.  If such claim
   7-25  is allowed or approved without such affidavit, or if it is approved
   7-26  without satisfactory proof, such allowance or approval shall be
   7-27  void.
    8-1        SECTION 8.  Section 304, Texas Probate Code, is amended to
    8-2  read as follows:
    8-3        Sec. 304.  Authentication of Claim by Others Than Individual
    8-4  Owners.  An authorized officer or representative <The cashier,
    8-5  treasurer, or managing official> of a corporation or other entity
    8-6  shall make the affidavit required to authenticate a claim of such
    8-7  corporation or entity.  When an affidavit is made by an officer of
    8-8  a corporation, or by an executor, administrator, trustee, assignee,
    8-9  agent, representative, or attorney, it shall be sufficient to state
   8-10  in such affidavit that the person making it has made diligent
   8-11  inquiry and examination, and that he believes that the claim is
   8-12  just and that all legal offsets, payments, and credits made known
   8-13  to the affiant have been allowed.
   8-14        SECTION 9.  Section 306, Texas Probate Code, is amended to
   8-15  read as follows:
   8-16        Sec. 306.  Method of Handling Secured Claims For Money.
   8-17  (a)  Specifications of Claim.  When a secured claim for money
   8-18  against an estate is presented, the claimant shall specify therein,
   8-19  in addition to all other matters required to be specified in
   8-20  claims:
   8-21              (1)  Whether it is desired to have the claim allowed
   8-22  and approved as a matured secured claim to be paid in due course of
   8-23  administration, in which event it shall be so paid if allowed and
   8-24  approved; or
   8-25              (2)  Whether it is desired to have the claim allowed,
   8-26  approved, and fixed as a preferred debt and lien against the
   8-27  specific property securing the indebtedness and paid according to
    9-1  the terms of the contract which secured the lien, in which event it
    9-2  shall be so allowed and approved if it is a valid lien; provided,
    9-3  however, that the personal representative may pay said claim prior
    9-4  to maturity if it is for the best interest of the estate to do so.
    9-5        (b)  <Handling of Secured Claims Not Presented in> Time for
    9-6  Specification of Secured Claim.  Within six months after the date
    9-7  letters are granted, or within four months after the date notice is
    9-8  received under Section 295 of this code, whichever is later, the
    9-9  secured creditor may present the creditor's claim and shall specify
   9-10  whether the claim is to be allowed and approved under Paragraph (1)
   9-11  or (2) of Subsection (a) of this section.  If a secured claim is
   9-12  not presented within the time prescribed by this subsection or if
   9-13  the claim is presented without specifying how the claim is to be
   9-14  paid <provided by law>, it shall be treated as a claim to be paid
   9-15  in accordance with Paragraph (2) of Subsection (a) hereof.
   9-16        (c)  Matured Secured Claims.  If a claim has been allowed and
   9-17  approved as a matured secured claim under Paragraph (1) of
   9-18  Subsection (a) of this section, the claim shall be paid in due
   9-19  course of administration and the secured creditor is not entitled
   9-20  to exercise any other remedies in a manner that prevents the
   9-21  preferential payment of claims and allowances described by
   9-22  Paragraphs (1) through (3) of Section 320(a) of this code.
   9-23        (d) <(c)>  Approved Claim as Preferred Lien Against
   9-24  Property.  When an indebtedness has been allowed and approved under
   9-25  Paragraph (2) of Subsection (a) hereof, no further claim shall be
   9-26  made against other assets of the estate by reason thereof, but the
   9-27  same thereafter shall remain a preferred lien against the property
   10-1  securing same, and the property shall remain security for the debt
   10-2  in any distribution or sale thereof prior to final maturity and
   10-3  payment of the debt.
   10-4        (e) <(d)>  Payment of Maturities on Preferred Debt and Lien
   10-5  <Secured> Claims.  If property securing a claim allowed, approved,
   10-6  and fixed under Paragraph (2) of Subsection (a) hereof is not sold
   10-7  or distributed within six <twelve> months from the date letters
   10-8  <testamentary or of administration> are granted, the representative
   10-9  of the estate shall promptly pay all maturities which have accrued
  10-10  on the debt according to the terms thereof, and shall perform all
  10-11  the terms of any contract securing same.  If the representative
  10-12  defaults in such payment or performance, on application <motion> of
  10-13  the claimholder, the court shall:
  10-14              (1)  require the sale of said property subject to the
  10-15  unmatured part of such debt and apply the proceeds of the sale to
  10-16  the liquidation of the maturities;
  10-17              (2)  require the sale of the property free of the lien
  10-18  and apply the proceeds to the payment of the whole debt; or
  10-19              (3)  authorize foreclosure by the claimholder under
  10-20  Subsection (f) of this section.
  10-21        (f)  Foreclosure of Preferred Liens.  If the court authorizes
  10-22  a claimholder to foreclose the claimholder's lien or security
  10-23  interest on property securing a claim that has been allowed,
  10-24  approved, and fixed under Paragraph (2) of Subsection (a) of this
  10-25  section, the claimholder shall file with the court an application
  10-26  supported by affidavit that:
  10-27              (1)  describes the property or part of the property to
   11-1  be sold by foreclosure;
   11-2              (2)  describes the amounts of the claimholder's
   11-3  outstanding debt;
   11-4              (3)  describes the maturities that have accrued on the
   11-5  debt according to the terms of the debt;
   11-6              (4)  describes any other debts secured by a mortgage,
   11-7  lien, or security interest against the property that are known by
   11-8  the claimholder;
   11-9              (5)  contains a statement that the claimholder has no
  11-10  knowledge of the existence of any debts secured by the property
  11-11  other than those described by the application; and
  11-12              (6)  requests permission for the claimholder to
  11-13  foreclose the claimholder's mortgage, lien, or security interest.
  11-14        (g)  Citation.  On the filing of an application, the clerk
  11-15  shall issue citation by personal service to the personal
  11-16  representative and to any person described by the application as
  11-17  having other debts secured by a mortgage, lien, or security
  11-18  interest against the property and by posting to any other person
  11-19  interested in the estate.  The citation must require the person to
  11-20  appear and show cause why foreclosure should or should not be
  11-21  permitted.
  11-22        (h)  Setting of Hearing on Application.  When an application
  11-23  is filed, the clerk shall immediately notify the judge.  The judge
  11-24  shall schedule in writing a date for a hearing on the application.
  11-25  The judge may, by entry on the docket or otherwise, continue the
  11-26  hearing for a reasonable time to allow an interested person to
  11-27  obtain an appraisal or other evidence concerning the fair market
   12-1  value of the property that is the subject of the application.  If
   12-2  the interested person requests an unreasonable time for a
   12-3  continuance, the person must show good cause for the continuance.
   12-4        (i)  Hearing.  At the hearing, if the court finds that there
   12-5  is a default in payment or performance under the contract that
   12-6  secures the payment of the claim, the court shall enter an order
   12-7  granting the claimholder permission to foreclose the claimholder's
   12-8  mortgage, lien, or security interest in accordance with the
   12-9  provisions of the document creating the mortgage, lien, or security
  12-10  interest or in any other manner allowed by law.  In the discretion
  12-11  of the court and based on the evidence presented at the hearing,
  12-12  the court may fix a minimum price for the property to be sold by
  12-13  foreclosure that does not exceed the fair market value of the
  12-14  property.  If the court fixes a minimum price, the property may not
  12-15  be sold at the foreclosure sale for a lower price.
  12-16        (j)  Appeal.  Any person interested in the estate may appeal
  12-17  an order issued under Subsection (i) of this section.
  12-18        (k)  Unsuccessful Foreclosure.  If a foreclosure sale
  12-19  authorized under this section is conducted and the property is not
  12-20  sold because no bid at the sale met the minimum price set by the
  12-21  court, the claimholder may file another application under
  12-22  Subsection (f) of this section.  The court may, in the court's
  12-23  discretion, eliminate or modify the minimum price requirement and
  12-24  grant permission for another foreclosure sale<, or, at the option
  12-25  of the claimholder, a motion may be made in a like manner to
  12-26  require the sale of said property free of such lien and to apply
  12-27  the proceeds to the payment of the whole debt>.
   13-1        SECTION 10.  Section 308, Texas Probate Code, is amended to
   13-2  read as follows:
   13-3        Sec. 308.  Depositing Claims With Clerk.  Claims may also be
   13-4  presented by depositing same, with vouchers and necessary exhibits
   13-5  and affidavit attached, with the clerk, who, upon receiving same,
   13-6  shall advise the representative of the estate, or the
   13-7  representative's <his> attorney, by letter mailed to the
   13-8  representative's <his> last known address, of the deposit of same.
   13-9  Should the representative fail to act on said claim within thirty
  13-10  days after it is deposited <filed>, then it shall be presumed to be
  13-11  rejected.  Failure of the clerk to give notice as required herein
  13-12  shall not affect the validity of the presentment or the presumption
  13-13  of rejection because not acted upon within said thirty day period.
  13-14  The clerk shall enter a deposited claim on the claim docket.
  13-15        SECTION 11.  Section 309, Texas Probate Code, is amended to
  13-16  read as follows:
  13-17        Sec. 309.  Memorandum of Allowance or Rejection of Claim.
  13-18  When a duly authenticated claim against an estate is presented to
  13-19  the representative, or deposited <filed> with the clerk as
  13-20  heretofore provided, the representative <he> shall, within thirty
  13-21  days after the claim is presented or deposited <filed>, endorse
  13-22  thereon, <or> annex thereto, or file with the clerk a memorandum
  13-23  signed by the representative <him>, stating the date <time> of
  13-24  presentation or depositing <filing> of the claim, and that the
  13-25  representative <he> allows or rejects it, or what portion thereof
  13-26  the representative <he> allows or rejects.
  13-27        SECTION 12.  Section 310, Texas Probate Code, is amended to
   14-1  read as follows:
   14-2        Sec. 310.  Failure to Endorse or Annex Memorandum.  The
   14-3  failure of a representative of an estate to timely allow or reject
   14-4  a claim under Section 309 of this code <endorse on, or annex to, a
   14-5  claim presented to him, his allowance or rejection thereof within
   14-6  thirty days after the claim was presented,> shall constitute a
   14-7  rejection of the claim.  If the claim is thereafter established by
   14-8  suit, the costs shall be taxed against the representative,
   14-9  individually, or the representative <he> may be removed on the
  14-10  written complaint of any person interested in the claim, after
  14-11  personal service of citation, hearing, and proof, as in other cases
  14-12  of removal.
  14-13        SECTION 13.  Section 311, Texas Probate Code, is amended to
  14-14  read as follows:
  14-15        Sec. 311.  When Claims Entered in Docket.  After a claim
  14-16  against an estate has been presented to and allowed or rejected by
  14-17  the personal representative, in whole or in part, the claim must be
  14-18  filed with the county clerk of the proper county.  The clerk shall
  14-19  enter the claim on the claim docket  <If a claim against the estate
  14-20  of a decedent has been presented within six months after the
  14-21  issuance of original testamentary letters or of administration, and
  14-22  all or part of such claim is allowed by the executor or
  14-23  administrator, the claim shall forthwith be filed with the county
  14-24  clerk of the proper county, who shall enter the same in its proper
  14-25  place upon the claim docket.  If such claim is not so presented
  14-26  within such time, the payment thereof, should it be approved in
  14-27  whole or in part, shall be postponed until all other claims which
   15-1  have been presented, allowed, and approved within the time
   15-2  prescribed have been first entirely paid>.
   15-3        SECTION 14.  Sections 312(c), (d), and (e), Texas Probate
   15-4  Code, are amended to read as follows:
   15-5        (c)  Hearing on Claims.  Although a claim may be properly
   15-6  authenticated and allowed, if the court is not satisfied that it is
   15-7  just, the court <he> shall examine the claimant and the personal
   15-8  representative under oath, and hear other evidence necessary to
   15-9  determine the issue.  If not then convinced that the claim is just,
  15-10  the court <he> shall disapprove it.
  15-11        (d)  Order of the Court.  When the court has acted upon a
  15-12  claim, the court <he> shall also endorse thereon, or annex thereto,
  15-13  a written memorandum dated and signed officially, stating the exact
  15-14  action taken upon such claim, whether approved or disapproved, or
  15-15  approved in part or rejected in part, and stating the
  15-16  classification of the claim.  Such orders shall have the force and
  15-17  effect of final judgments.
  15-18        (e)  Appeal.  When a claimant or any person interested in an
  15-19  estate shall be dissatisfied with the action of the court upon a
  15-20  claim, the claimant or person <he> may appeal therefrom to the
  15-21  courts of appeals, as from other judgments of the county court in
  15-22  probate matters.
  15-23        SECTION 15.  Section 313, Texas Probate Code, is amended to
  15-24  read as follows:
  15-25        Sec. 313.  Suit on Rejected Claim.  When a claim or a part
  15-26  thereof has been rejected by the representative, the claimant shall
  15-27  institute suit thereon in the court of original probate
   16-1  jurisdiction in which the estate is pending or in any other court
   16-2  of proper jurisdiction within ninety days after such rejection, or
   16-3  the claim shall be barred.  When a rejected claim is sued on, the
   16-4  endorsement made on or annexed thereto, or any memorandum of
   16-5  rejection filed with respect to the claim, shall be taken to be
   16-6  true without further proof, unless denied under oath.  When a
   16-7  rejected claim or part thereof has been established by suit, no
   16-8  execution shall issue, but the judgment shall be certified within
   16-9  thirty days after rendition, if of any court other than the court
  16-10  of original probate jurisdiction, and filed in the court in which
  16-11  the cause is pending, entered upon the claim docket, classified by
  16-12  the court, and handled as if originally allowed and approved in due
  16-13  course of administration.
  16-14        SECTION 16.  Section 314, Texas Probate Code, is amended to
  16-15  read as follows:
  16-16        Sec. 314.  Presentment of Claims a Prerequisite for Judgment.
  16-17  No judgment shall be rendered in favor of a claimant upon any claim
  16-18  for money which has not been legally presented to the
  16-19  representative of an estate, and rejected by the representative
  16-20  <him> or by the court, in whole or in part.
  16-21        SECTION 17.  Section 315, Texas Probate Code, is amended to
  16-22  read as follows:
  16-23        Sec. 315.  Costs of Suit With Respect to Claims.  All costs
  16-24  incurred in the probate court with respect to claims shall be taxed
  16-25  as follows:
  16-26              (a)  If allowed and approved, the estate shall pay the
  16-27  costs.
   17-1              (b)  If allowed, but disapproved, the claimant shall
   17-2  pay the costs.
   17-3              (c)  If rejected, but established by suit, the estate
   17-4  shall pay the costs.
   17-5              (d)  If rejected, but not established by suit, the
   17-6  claimant shall pay the costs, except as provided by Section 310 of
   17-7  this code.
   17-8              (e)  In suits to establish a claim after rejection in
   17-9  part, if the claimant fails to recover judgment for a greater
  17-10  amount than was allowed or approved, the claimant <he> shall pay
  17-11  all costs.
  17-12        SECTION 18.  Section 316, Texas Probate Code, is amended to
  17-13  read as follows:
  17-14        Sec. 316.  Claims Against Personal Representatives <Executors
  17-15  or Administrators>.  The naming of an executor in a will shall not
  17-16  operate to extinguish any just claim which the deceased had against
  17-17  the person named as executor <him>; and, in all cases where a
  17-18  personal representative <an executor or administrator> is indebted
  17-19  to the <his> testator or intestate, the representative <he> shall
  17-20  account for the debt in the same manner as if it were cash in the
  17-21  representative's <his> hands; provided, however, that if said debt
  17-22  was not due at the time of receiving letters, the representative
  17-23  <he> shall be required to account for it only from the date when it
  17-24  becomes due.
  17-25        SECTION 19.  Sections 317(a) and (b), Texas Probate Code, are
  17-26  amended to read as follows:
  17-27        (a)  By Executors or Administrators.  The foregoing
   18-1  provisions of this Code relative to the presentation of claims
   18-2  against an estate shall not be construed to apply to any claim of a
   18-3  personal representative <the executor or administrator> against the
   18-4  <his> testator or intestate; but a personal representative <an
   18-5  executor or administrator> holding such claim shall file the same
   18-6  in the court granting the <his> letters, verified by affidavit as
   18-7  required in other cases, within six months after the representative
   18-8  <he> has qualified, or such claim shall be barred.
   18-9        (b)  Action on Such Claims.  When a claim by a personal
  18-10  representative <an executor or administrator> has been filed with
  18-11  the court within the required time, such claim shall be entered
  18-12  upon the claim docket and acted upon by the court in the same
  18-13  manner as in other cases, and, when the claim has been acted upon
  18-14  by the court, an appeal from the judgment of the court may be taken
  18-15  as in other cases.
  18-16        SECTION 20.  Section 318, Texas Probate Code, is amended to
  18-17  read as follows:
  18-18        Sec. 318.  Claims Not Allowed After Order for Partition and
  18-19  Distribution.  No claim for money against the estate of a decedent
  18-20  <his testator or intestate> shall be allowed by a personal
  18-21  representative <an executor or administrator> and no suit shall be
  18-22  instituted against the representative <him> on any such claim,
  18-23  after an order for final partition and distribution has been made;
  18-24  but, after such an order has been made, the owner of any claim not
  18-25  barred by the laws of limitation shall have an <his> action thereon
  18-26  against the heirs, devisees, <or> legatees, or creditors of the
  18-27  estate, limited to the value of the property received by them in
   19-1  distributions from the estate <such partition and distribution>.
   19-2        SECTION 21.  Section 320, Texas Probate Code, is amended to
   19-3  read as follows:
   19-4        Sec. 320.  Order of Payment of Claims.  (a)  Priority of
   19-5  Payments.  Personal representatives <Executors and administrators>,
   19-6  when they have funds in their hands belonging to the estate, shall
   19-7  pay in the following order:
   19-8              (1)  Funeral expenses and expenses of last sickness, in
   19-9  an amount not to exceed Five Thousand Dollars<, if the claims
  19-10  therefor have been presented within sixty days from the original
  19-11  grant of letters testamentary or administration, but if not
  19-12  presented within such time, their payment shall be postponed until
  19-13  the allowances made to the widow and children, or to either, are
  19-14  paid>.
  19-15              (2)  Allowances made to the surviving spouse <widow>
  19-16  and children, or to either.
  19-17              (3)  Expenses of administration and the expenses
  19-18  incurred in the preservation, safekeeping, and management of the
  19-19  estate.
  19-20              (4)  Other claims against the estate in the order of
  19-21  their classification.
  19-22        (b)  Sale of Mortgaged Property.  If a personal
  19-23  representative has the proceeds of a sale that has been made for
  19-24  the satisfaction of a mortgage, lien, or security interest, and the
  19-25  proceeds, or any part of the proceeds, are not required for the
  19-26  payment of any debts against the estate that have a preference over
  19-27  the mortgage, lien, or security interest, the personal
   20-1  representative shall pay the proceeds to any holder of a mortgage,
   20-2  lien, or security interest.  If there is more than one mortgage,
   20-3  lien, or security interest against the property, the personal
   20-4  representative shall pay the holders in the order of the holders'
   20-5  priority.  If the personal representative fails to pay proceeds
   20-6  under this subsection, a holder, on proof of the failure to pay,
   20-7  may obtain an order from the court directing the payment to be
   20-8  made.
   20-9        (c)  Claimant's Petition.  A claimant whose claim has not
  20-10  been paid may petition the court for determination of his claim at
  20-11  any time before it is barred by the applicable statute of
  20-12  limitations and upon due proof procure an order for its allowance
  20-13  and payment from the estate.
  20-14        (d)  Permissive Order of Payment.  After the sixth month
  20-15  after the date letters are granted and on application by the
  20-16  personal representative stating that the personal representative
  20-17  has no actual knowledge of any outstanding enforceable claims
  20-18  against the estate other than the claims already approved and
  20-19  classified by the court, the court may order the personal
  20-20  representative to pay any claim that is allowed and approved.
  20-21        SECTION 22.  Section 320A, Texas Probate Code, is amended to
  20-22  read as follows:
  20-23        Sec. 320A.  Funeral Expenses.  When personal representatives
  20-24  <executors, independent executors, and administrators> pay claims
  20-25  for funeral expenses and for items incident thereto, such as
  20-26  tombstones, grave markers, crypts or burial plots, they shall
  20-27  charge the whole of such claims to the decedent's estate and shall
   21-1  charge no part thereof to the community share of a surviving
   21-2  spouse.
   21-3        SECTION 23.  Section 321, Texas Probate Code, is amended to
   21-4  read as follows:
   21-5        Sec. 321.  Deficiency of Assets.  When there is a deficiency
   21-6  of assets to pay all claims of the same class, other than secured
   21-7  claims for money, the claims in such class shall be paid pro rata,
   21-8  as directed by the court, and in the order directed.  No personal
   21-9  representative <executor or administrator> shall be allowed to pay
  21-10  the <any> claims, whether the estate is solvent or insolvent,
  21-11  except with the pro rata amount of the funds of the estate that
  21-12  have come to hand.
  21-13        SECTION 24.  Section 322, Texas Probate Code, is amended to
  21-14  read as follows:
  21-15        Sec. 322.  Classification of Claims Against Estates of
  21-16  Decedent.  Claims against an estate of a decedent shall be
  21-17  classified <classed> and have priority of payment, as follows:
  21-18              Class 1.  Funeral expenses and expenses of last
  21-19  sickness for a reasonable amount to be approved by the court, not
  21-20  to exceed Five Thousand Dollars, with any excess to be classified
  21-21  and paid as other unsecured claims.
  21-22              Class 2.  Expenses of administration and expenses
  21-23  incurred in the preservation, safekeeping, and management of the
  21-24  estate.
  21-25              Class 3.  Secured claims for money under Section
  21-26  306(a)(1) <Claims secured by mortgage or other liens>, including
  21-27  tax liens, so far as the same can be paid out of the proceeds of
   22-1  the property subject to such mortgage or other lien, and when more
   22-2  than one mortgage, <or> lien, or security interest shall exist upon
   22-3  the same property, they shall be paid in order of their priority
   22-4  <the oldest shall be first paid; but no preference shall be given
   22-5  to such mortgage or lien>.
   22-6              Class 4.  Claims for taxes, penalties, and interest due
   22-7  under Title 2, Tax Code;  Chapter 8, Title 132, Revised Statutes;
   22-8  Section 81.111, Natural Resources Code; the Municipal Sales and Use
   22-9  Tax Act (Chapter 321, Tax Code); Section 11B, Chapter 141, Acts of
  22-10  the 63rd Legislature, Regular Session, 1973 (Article 1118x,
  22-11  Vernon's Texas Civil Statutes); or Section 16, Chapter 683, Acts of
  22-12  the 66th Legislature, Regular Session, 1979 (Article 1118y,
  22-13  Vernon's Texas Civil Statutes).
  22-14              Class 5.  Claims for the cost of confinement
  22-15  established by the institutional division of the Texas Department
  22-16  of Criminal Justice <Corrections> under Section 501.017, Government
  22-17  Code <Article 6184s, Revised Statutes>.
  22-18              Class 6.  Claims for repayment of medical assistance
  22-19  payments made by the state under Chapter 32, Human Resources Code,
  22-20  to or for the benefit of the decedent.
  22-21              Class 7.  All other claims <legally exhibited within
  22-22  six months after the original grant of letters testamentary or of
  22-23  administration>.
  22-24              <Class 8.  All claims legally exhibited after the lapse
  22-25  of six months from the original grant of letters testamentary or of
  22-26  administration.>
  22-27        SECTION 25.  Section 323, Texas Probate Code, is amended to
   23-1  read as follows:
   23-2        Sec. 323.  Joint Obligation.  When two or more persons are
   23-3  jointly bound for the payment of a debt, or for any other purpose,
   23-4  upon the death of any of the persons so bound, the decedent's <his>
   23-5  estate shall be charged by virtue of such obligation in the same
   23-6  manner as if the obligors had been bound severally as well as
   23-7  jointly.
   23-8        SECTION 26.  Section 324, Texas Probate Code, is amended to
   23-9  read as follows:
  23-10        Sec. 324.  Representatives Not to Purchase Claims.  It shall
  23-11  be unlawful, and cause for removal, for a personal representative
  23-12  <an executor or administrator,> whether acting under appointment by
  23-13  will or under orders of the court, to purchase for the personal
  23-14  representative's <his> own use or for any purposes whatsoever, any
  23-15  claim against the estate the personal representative <he>
  23-16  represents.  Upon written complaint by any person interested in the
  23-17  estate, and satisfactory proof of violation of this provision,
  23-18  after citation and hearing, the court shall enter its order
  23-19  cancelling the claim, and no part thereof shall be paid out of the
  23-20  estate; and the court <judge> may, in the court's <his> discretion,
  23-21  remove such representative.
  23-22        SECTION 27.  Section 328(b), Texas Probate Code, is amended
  23-23  to read as follows:
  23-24        (b)  Penalty Against Representative.  Upon return of the
  23-25  execution not satisfied, or merely upon the affidavit of demand and
  23-26  failure to pay, the court may cite the representative and the
  23-27  sureties on the representative's <his> bond to show cause why they
   24-1  should not be held liable for such debt, interest, costs, and
   24-2  damages.  Upon return of citation duly served, if good cause to the
   24-3  contrary be not shown, the court shall render judgment against the
   24-4  representative and sureties so cited, in favor of the holder of
   24-5  such claim, for the amount theretofore ordered to be paid or
   24-6  established by suit, and remaining unpaid, together with interest
   24-7  and costs, and also for damages upon the amount neglected to be
   24-8  paid, at the rate of five per cent per month for each month, or
   24-9  fraction thereof, that the payment was neglected to be paid after
  24-10  demand made therefor, which damages may be collected in any court
  24-11  of competent jurisdiction.
  24-12        SECTION 28.  Sections 329(a) and (c), Texas Probate Code, are
  24-13  amended to read as follows:
  24-14        (a)  Circumstances Under Which Money May Be Borrowed.  Any
  24-15  real or personal property of an estate may be mortgaged or pledged
  24-16  by deed of trust or otherwise as security for an indebtedness,
  24-17  under order of the court, when necessary for any of the following
  24-18  purposes:
  24-19              (1)  For the payment of any ad valorem, income, gift,
  24-20  estate, inheritance, or transfer taxes upon the transfer of an
  24-21  estate or due from a decedent or the <his> estate, regardless of
  24-22  whether such taxes are assessed by a state, or any of its political
  24-23  subdivisions, or by the federal government or by a foreign country;
  24-24  or
  24-25              (2)  For payment of expenses of administration,
  24-26  including sums necessary for operation of a business, farm, or
  24-27  ranch owned by the estate; or
   25-1              (3)  For payment of claims allowed and approved, or
   25-2  established by suit, against the estate; or
   25-3              (4)  To renew and extend a valid, existing lien.
   25-4        (c)  Order Authorizing Such Borrowing, or Extension of Lien.
   25-5  The court, if satisfied by the evidence adduced at the hearing upon
   25-6  said application that it is to the interest of the estate to borrow
   25-7  money, or to extend and renew an existing lien, shall issue its
   25-8  order to that effect, setting out the terms and conditions of the
   25-9  authority granted; provided, however, the loan or renewal shall not
  25-10  be for a term longer than three years from the granting of original
  25-11  letters to the representative of such estate, but the court may
  25-12  authorize an extension of such lien for not more than one
  25-13  additional year without further citation or notice.  If a new lien
  25-14  is created on property of an estate, the court may require that the
  25-15  representative's general bond be increased, or an additional bond
  25-16  given, for the protection of the estate and the creditors, as for
  25-17  the sale of real property belonging to the estate.
  25-18        SECTION 29.  Sections 300, 325, and 327, Texas Probate Code,
  25-19  are repealed.
  25-20        SECTION 30.  The change in law made by this Act applies only
  25-21  to the estates of persons who die on or after the effective date of
  25-22  this Act.  An estate of a person who dies before the effective date
  25-23  of this Act is covered by the law in effect when the person died,
  25-24  and the former law continues in effect for that purpose.
  25-25        SECTION 31.  This Act takes effect January 1, 1996.
  25-26        SECTION 32.  The importance of this legislation and the
  25-27  crowded condition of the calendars in both houses create an
   26-1  emergency and an imperative public necessity that the
   26-2  constitutional rule requiring bills to be read on three several
   26-3  days in each house be suspended, and this rule is hereby suspended.