1-1  By:  Hilbert (Senate Sponsor - Whitmire)              H.B. No. 2866
    1-2        (In the Senate - Received from the House May 1, 1995;
    1-3  May 2, 1995, read first time and referred to Committee on
    1-4  Jurisprudence; May 16, 1995, reported favorably by the following
    1-5  vote:  Yeas 6, Nays 0; May 16, 1995, sent to printer.)
    1-6                         A BILL TO BE ENTITLED
    1-7                                AN ACT
    1-8  relating to claims against a decedent's estate.
   1-10        SECTION 1.  Section 146, Texas Probate Code, is amended to
   1-11  read as follows:
   1-12        Sec. 146.  Payment of Claims and Delivery of Exemptions and
   1-13  Allowances.  (a)  Duty of the Independent Executor.  An independent
   1-14  executor, in the <his> administration of an estate, <although free
   1-15  from the control of the court, shall nevertheless,> independently
   1-16  of and without application to, or any action in or by the court:
   1-17              (1)  shall give the notices required under Sections 294
   1-18  and 295;
   1-19              (2)  may give the notice permitted under Section 294(d)
   1-20  and bar a claim under that subsection;
   1-21              (3)  shall approve, <receive presentation of and>
   1-22  classify, <allow,> and pay, or reject, claims against the estate in
   1-23  the same order of priority, classification, and proration
   1-24  prescribed in this Code;<,> and
   1-25              (4)  shall set aside and deliver to those entitled
   1-26  thereto exempt property and allowances for support, and allowances
   1-27  in lieu of exempt property <homestead>, as prescribed in this Code,
   1-28  to the same extent and result as if the independent executor's
   1-29  <his> actions had been accomplished in, and under orders of, the
   1-30  court.
   1-31        (b)  Secured Claims for Money.  Within six months after the
   1-32  date letters are granted or within four months after the date
   1-33  notice is received under Section 295, whichever is later, a
   1-34  creditor with a claim for money secured by real or personal
   1-35  property of the estate must notify the independent executor by
   1-36  certified or registered mail of the creditor's election to have the
   1-37  creditor's claim approved as a matured secured claim to be paid in
   1-38  due course of administration.  If the election is not made, the
   1-39  claim is a preferred debt and lien against the specific property
   1-40  securing the indebtedness and shall be paid according to the terms
   1-41  of the contract that secured the lien, and the claim may not be
   1-42  asserted against other assets of the estate.  The independent
   1-43  executor may pay the claim before the claim matures if paying the
   1-44  claim before maturity is in the best interest of the estate.
   1-45        (c)  Liability of Independent Executor.  An independent
   1-46  executor, in the administration of an estate, may pay at any time
   1-47  and without personal liability a claim for money against the estate
   1-48  to the extent approved and classified by the personal
   1-49  representative if:
   1-50              (1)  the claim is not barred by limitations; and
   1-51              (2)  at the time of payment, the independent executor
   1-52  reasonably believes the estate will have sufficient assets to pay
   1-53  all claims against the estate.
   1-54        SECTION 2.  Section 294, Texas Probate Code, is amended by
   1-55  amending Subsection (a) and adding Subsection (d) to read as
   1-56  follows:
   1-57        (a)  Giving of Notice Required.  Within one month after
   1-58  receiving letters, personal representatives of estates shall send
   1-59  to the comptroller of public accounts by certified or registered
   1-60  mail if the decedent remitted or should have remitted taxes
   1-61  administered by the comptroller of public accounts and publish in
   1-62  some newspaper, printed in the county where the letters were
   1-63  issued, if there be one, a notice requiring all persons having
   1-64  claims against the estate being administered to present the same
   1-65  within the time prescribed by law.  The notice shall include the
   1-66  date <time> of issuance of letters held by the representative, the
   1-67  address to which claims may be presented, and an instruction of the
   1-68  representative's choice that claims be addressed in care of the
    2-1  representative, in care of the representative's attorney, or in
    2-2  care of "Representative, Estate of __________" (naming the estate).
    2-3        (d)  Permissive Notice to Unsecured Creditors.  At any time
    2-4  before an estate administration is closed, the personal
    2-5  representative may give notice by certified or registered mail,
    2-6  with return receipt requested, to an unsecured creditor having a
    2-7  claim for money against the estate expressly stating that the
    2-8  creditor must present a claim within four months after the date of
    2-9  the receipt of the notice or the claim is barred, if the claim is
   2-10  not barred by the general statutes of limitation.  The notice must
   2-11  include:
   2-12              (1)  the dates of issuance of letters held by the
   2-13  representative;
   2-14              (2)  the address to which claims may be presented; and
   2-15              (3)  an instruction of the representative's choice that
   2-16  the claim be addressed in care of:
   2-17                    (A)  the representative;
   2-18                    (B)  the representative's attorney; or
   2-19                    (C)  "Representative, Estate of         " (naming
   2-20  the estate).
   2-21        SECTION 3.  Section 295, Texas Probate Code, is amended to
   2-22  read as follows:
   2-23        Sec. 295.  Notice to Holders of Secured <Recorded> Claims.
   2-24  (a)  When notice required for secured <lien> claimants.  Within two
   2-25  <four> months after receiving letters, the personal representative
   2-26  of an estate shall give notice of the issuance of such letters to
   2-27  each and every person known to the personal representative to have
   2-28  <having> a claim for money against the estate of a decedent that is
   2-29  secured by real or personal property of the estate.  Within a
   2-30  reasonable time after the personal representative obtains actual
   2-31  knowledge of the existence of a person having a secured claim for
   2-32  money and to whom notice was not previously given, the personal
   2-33  representative shall give notice to the person of the issuance of
   2-34  letters  <, provided:>
   2-35              <(1)  That such claim is secured by a deed of trust,
   2-36  mortgage, vendor's, mechanic's or other contractor's lien upon real
   2-37  estate belonging to such estate; and>
   2-38              <(2)  That the instrument creating, extending, or
   2-39  transferring such lien was duly recorded prior to the death of a
   2-40  testator or intestate in the county in which the real estate
   2-41  covered by such lien is situated, or prior to the time at which
   2-42  title vested in an heir or devisee>.
   2-43        (b)  <When notice required for general claimants.  Within
   2-44  four months after receiving letters, the representative of an
   2-45  estate shall give notice of the issuance of the letters to each
   2-46  person having an outstanding claim for money against the estate of
   2-47  a decedent if the representative has actual knowledge of the claim.>
   2-48        <(c)>  How notice shall be given.  The notice stating the
   2-49  original grant of letters <letter> shall be given by mailing same
   2-50  by certified <mail> or registered mail <letter>, with return
   2-51  receipt requested, addressed to the record holder of such
   2-52  indebtedness or claim at the record holder's <his> last known post
   2-53  office address.
   2-54        (c) <(d)>  Proof of service of notice. A copy of each notice
   2-55  required by Subsection (a) of this section and a copy of<, together
   2-56  with> the return receipt and an affidavit of the representative,
   2-57  stating that said notice was mailed as required by law, giving the
   2-58  name of the person to whom the notice was mailed, if not shown on
   2-59  the notice or receipt, shall be filed with the clerk of <in> the
   2-60  court from which letters were issued.
   2-61        SECTION 4.  Section 297, Texas Probate Code, is amended to
   2-62  read as follows:
   2-63        Sec. 297.  Penalty for Failure to Give Notice.  If the
   2-64  representative fails to give the notices required in preceding
   2-65  Sections, or to cause such notices to be given, the representative
   2-66  <he> and the sureties on the representative's <his> bond shall be
   2-67  liable for any damage which any person suffers by reason of such
   2-68  neglect, unless it appears that such person had notice otherwise.
   2-69        SECTION 5.  Section 298, Texas Probate Code, is amended to
   2-70  read as follows:
    3-1        Sec. 298.  Claims Against Estates of Decedents.  (a)  Time
    3-2  for Presentation of Claims <Against Decedent's Estate Postponed if
    3-3  not Presented in Six Months>.  A claim may be presented to the
    3-4  personal representative at any time before the estate is closed if
    3-5  suit on the claim has not been barred by the general statutes of
    3-6  limitation.  If a claim of an unsecured creditor for money is not
    3-7  presented within four months after the date of receipt of the
    3-8  notice permitted by Section 294(d), the claim is barred <All claims
    3-9  for money against a testator or intestate shall be presented to the
   3-10  executor or administrator within six months after the original
   3-11  grant of letters testamentary or of administration; otherwise the
   3-12  payment thereof shall be postponed until the claims which have been
   3-13  presented within six months and allowed by the executor or
   3-14  administrator and approved by the court have been first entirely
   3-15  paid; provided, however, that the failure of the holder of a
   3-16  secured claim to present his claim within said six month period
   3-17  shall not cause his claim to be postponed, but it shall be treated
   3-18  as a claim to be paid in accordance with subsequent provisions of
   3-19  this Code>.
   3-20        (b)  Claims Barred by Limitation Not to Be Allowed or
   3-21  Approved.  No claims for money against a decedent, or against the
   3-22  estate of the decedent, on which a suit is barred under Subsection
   3-23  (a) of this section, Section 313, or Section 317(a) or by a general
   3-24  statute of limitation applicable thereto shall be allowed by a
   3-25  personal representative.  If allowed by the representative and the
   3-26  court is satisfied that the claim is barred or that limitation has
   3-27  run, the claim shall be disapproved.
   3-28        SECTION 6.  Section 301, Texas Probate Code, is amended to
   3-29  read as follows:
   3-30        Sec. 301.  Claims for Money Must Be Authenticated.  No
   3-31  personal representative of a decedent's estate shall allow, and the
   3-32  court shall not approve, a claim for money against such estate,
   3-33  unless such claim be supported by an affidavit that the claim is
   3-34  just and that all legal offsets, payments, and credits known to the
   3-35  affiant have been allowed.  If the claim is not founded on a
   3-36  written instrument or account, the affidavit shall also state the
   3-37  facts upon which the claim is founded.  A photostatic copy of any
   3-38  exhibit or voucher necessary to prove a claim may be offered with
   3-39  and attached to the claim in lieu of the original.
   3-40        SECTION 7.  Section 303, Texas Probate Code, is amended to
   3-41  read as follows:
   3-42        Sec. 303.  Evidence Concerning Lost or Destroyed Claims.  If
   3-43  evidence of a claim is lost or destroyed, the claimant<,> or an
   3-44  authorized representative or agent of the claimant <someone for
   3-45  him>, may make affidavit to the fact of such loss or destruction,
   3-46  stating the amount, date, and nature of the claim and when due, and
   3-47  that the same is just, and that all legal offsets, payments and
   3-48  credits known to the affiant have been allowed, and that the
   3-49  claimant is still the owner of the claim; and the claim must be
   3-50  proved by disinterested testimony taken in open court, or by oral
   3-51  or written deposition, before the claim is approved.  If such claim
   3-52  is allowed or approved without such affidavit, or if it is approved
   3-53  without satisfactory proof, such allowance or approval shall be
   3-54  void.
   3-55        SECTION 8.  Section 304, Texas Probate Code, is amended to
   3-56  read as follows:
   3-57        Sec. 304.  Authentication of Claim by Others Than Individual
   3-58  Owners.  An authorized officer or representative <The cashier,
   3-59  treasurer, or managing official> of a corporation or other entity
   3-60  shall make the affidavit required to authenticate a claim of such
   3-61  corporation or entity.  When an affidavit is made by an officer of
   3-62  a corporation, or by an executor, administrator, trustee, assignee,
   3-63  agent, representative, or attorney, it shall be sufficient to state
   3-64  in such affidavit that the person making it has made diligent
   3-65  inquiry and examination, and that he believes that the claim is
   3-66  just and that all legal offsets, payments, and credits made known
   3-67  to the affiant have been allowed.
   3-68        SECTION 9.  Section 306, Texas Probate Code, is amended to
   3-69  read as follows:
   3-70        Sec. 306.  Method of Handling Secured Claims For Money.
    4-1  (a)  Specifications of Claim.  When a secured claim for money
    4-2  against an estate is presented, the claimant shall specify therein,
    4-3  in addition to all other matters required to be specified in
    4-4  claims:
    4-5              (1)  Whether it is desired to have the claim allowed
    4-6  and approved as a matured secured claim to be paid in due course of
    4-7  administration, in which event it shall be so paid if allowed and
    4-8  approved; or
    4-9              (2)  Whether it is desired to have the claim allowed,
   4-10  approved, and fixed as a preferred debt and lien against the
   4-11  specific property securing the indebtedness and paid according to
   4-12  the terms of the contract which secured the lien, in which event it
   4-13  shall be so allowed and approved if it is a valid lien; provided,
   4-14  however, that the personal representative may pay said claim prior
   4-15  to maturity if it is for the best interest of the estate to do so.
   4-16        (b)  <Handling of Secured Claims Not Presented in> Time for
   4-17  Specification of Secured Claim.  Within six months after the date
   4-18  letters are granted, or within four months after the date notice is
   4-19  received under Section 295 of this code, whichever is later, the
   4-20  secured creditor may present the creditor's claim and shall specify
   4-21  whether the claim is to be allowed and approved under Paragraph (1)
   4-22  or (2) of Subsection (a) of this section.  If a secured claim is
   4-23  not presented within the time prescribed by this subsection or if
   4-24  the claim is presented without specifying how the claim is to be
   4-25  paid <provided by law>, it shall be treated as a claim to be paid
   4-26  in accordance with Paragraph (2) of Subsection (a) hereof.
   4-27        (c)  Matured Secured Claims.  If a claim has been allowed and
   4-28  approved as a matured secured claim under Paragraph (1) of
   4-29  Subsection (a) of this section, the claim shall be paid in due
   4-30  course of administration and the secured creditor is not entitled
   4-31  to exercise any other remedies in a manner that prevents the
   4-32  preferential payment of claims and allowances described by
   4-33  Paragraphs (1) through (3) of Section 320(a) of this code.
   4-34        (d) <(c)>  Approved Claim as Preferred Lien Against
   4-35  Property.  When an indebtedness has been allowed and approved under
   4-36  Paragraph (2) of Subsection (a) hereof, no further claim shall be
   4-37  made against other assets of the estate by reason thereof, but the
   4-38  same thereafter shall remain a preferred lien against the property
   4-39  securing same, and the property shall remain security for the debt
   4-40  in any distribution or sale thereof prior to final maturity and
   4-41  payment of the debt.
   4-42        (e) <(d)>  Payment of Maturities on Preferred Debt and Lien
   4-43  <Secured> Claims.  If property securing a claim allowed, approved,
   4-44  and fixed under Paragraph (2) of Subsection (a) hereof is not sold
   4-45  or distributed within six <twelve> months from the date letters
   4-46  <testamentary or of administration> are granted, the representative
   4-47  of the estate shall promptly pay all maturities which have accrued
   4-48  on the debt according to the terms thereof, and shall perform all
   4-49  the terms of any contract securing same.  If the representative
   4-50  defaults in such payment or performance, on application <motion> of
   4-51  the claimholder, the court shall:
   4-52              (1)  require the sale of said property subject to the
   4-53  unmatured part of such debt and apply the proceeds of the sale to
   4-54  the liquidation of the maturities;
   4-55              (2)  require the sale of the property free of the lien
   4-56  and apply the proceeds to the payment of the whole debt; or
   4-57              (3)  authorize foreclosure by the claimholder under
   4-58  Subsection (f) of this section.
   4-59        (f)  Foreclosure of Preferred Liens.  If the court authorizes
   4-60  a claimholder to foreclose the claimholder's lien or security
   4-61  interest on property securing a claim that has been allowed,
   4-62  approved, and fixed under Paragraph (2) of Subsection (a) of this
   4-63  section, the claimholder shall file with the court an application
   4-64  supported by affidavit that:
   4-65              (1)  describes the property or part of the property to
   4-66  be sold by foreclosure;
   4-67              (2)  describes the amounts of the claimholder's
   4-68  outstanding debt;
   4-69              (3)  describes the maturities that have accrued on the
   4-70  debt according to the terms of the debt;
    5-1              (4)  describes any other debts secured by a mortgage,
    5-2  lien, or security interest against the property that are known by
    5-3  the claimholder;
    5-4              (5)  contains a statement that the claimholder has no
    5-5  knowledge of the existence of any debts secured by the property
    5-6  other than those described by the application; and
    5-7              (6)  requests permission for the claimholder to
    5-8  foreclose the claimholder's mortgage, lien, or security interest.
    5-9        (g)  Citation.  On the filing of an application, the clerk
   5-10  shall issue citation by personal service to the personal
   5-11  representative and to any person described by the application as
   5-12  having other debts secured by a mortgage, lien, or security
   5-13  interest against the property and by posting to any other person
   5-14  interested in the estate.  The citation must require the person to
   5-15  appear and show cause why foreclosure should or should not be
   5-16  permitted.
   5-17        (h)  Setting of Hearing on Application.  When an application
   5-18  is filed, the clerk shall immediately notify the judge.  The judge
   5-19  shall schedule in writing a date for a hearing on the application.
   5-20  The judge may, by entry on the docket or otherwise, continue the
   5-21  hearing for a reasonable time to allow an interested person to
   5-22  obtain an appraisal or other evidence concerning the fair market
   5-23  value of the property that is the subject of the application.  If
   5-24  the interested person requests an unreasonable time for a
   5-25  continuance, the person must show good cause for the continuance.
   5-26        (i)  Hearing.  At the hearing, if the court finds that there
   5-27  is a default in payment or performance under the contract that
   5-28  secures the payment of the claim, the court shall enter an order
   5-29  granting the claimholder permission to foreclose the claimholder's
   5-30  mortgage, lien, or security interest in accordance with the
   5-31  provisions of the document creating the mortgage, lien, or security
   5-32  interest or in any other manner allowed by law.  In the discretion
   5-33  of the court and based on the evidence presented at the hearing,
   5-34  the court may fix a minimum price for the property to be sold by
   5-35  foreclosure that does not exceed the fair market value of the
   5-36  property.  If the court fixes a minimum price, the property may not
   5-37  be sold at the foreclosure sale for a lower price.
   5-38        (j)  Appeal.  Any person interested in the estate may appeal
   5-39  an order issued under Subsection (i) of this section.
   5-40        (k)  Unsuccessful Foreclosure.  If a foreclosure sale
   5-41  authorized under this section is conducted and the property is not
   5-42  sold because no bid at the sale met the minimum price set by the
   5-43  court, the claimholder may file another application under
   5-44  Subsection (f) of this section.  The court may, in the court's
   5-45  discretion, eliminate or modify the minimum price requirement and
   5-46  grant permission for another foreclosure sale<, or, at the option
   5-47  of the claimholder, a motion may be made in a like manner to
   5-48  require the sale of said property free of such lien and to apply
   5-49  the proceeds to the payment of the whole debt>.
   5-50        SECTION 10.  Section 308, Texas Probate Code, is amended to
   5-51  read as follows:
   5-52        Sec. 308.  Depositing Claims With Clerk.  Claims may also be
   5-53  presented by depositing same, with vouchers and necessary exhibits
   5-54  and affidavit attached, with the clerk, who, upon receiving same,
   5-55  shall advise the representative of the estate, or the
   5-56  representative's <his> attorney, by letter mailed to the
   5-57  representative's <his> last known address, of the deposit of same.
   5-58  Should the representative fail to act on said claim within thirty
   5-59  days after it is deposited <filed>, then it shall be presumed to be
   5-60  rejected.  Failure of the clerk to give notice as required herein
   5-61  shall not affect the validity of the presentment or the presumption
   5-62  of rejection because not acted upon within said thirty day period.
   5-63  The clerk shall enter a deposited claim on the claim docket.
   5-64        SECTION 11.  Section 309, Texas Probate Code, is amended to
   5-65  read as follows:
   5-66        Sec. 309.  Memorandum of Allowance or Rejection of Claim.
   5-67  When a duly authenticated claim against an estate is presented to
   5-68  the representative, or deposited <filed> with the clerk as
   5-69  heretofore provided, the representative <he> shall, within thirty
   5-70  days after the claim is presented or deposited <filed>, endorse
    6-1  thereon, <or> annex thereto, or file with the clerk a memorandum
    6-2  signed by the representative <him>, stating the date <time> of
    6-3  presentation or depositing <filing> of the claim, and that the
    6-4  representative <he> allows or rejects it, or what portion thereof
    6-5  the representative <he> allows or rejects.
    6-6        SECTION 12.  Section 310, Texas Probate Code, is amended to
    6-7  read as follows:
    6-8        Sec. 310.  Failure to Endorse or Annex Memorandum.  The
    6-9  failure of a representative of an estate to timely allow or reject
   6-10  a claim under Section 309 of this code <endorse on, or annex to, a
   6-11  claim presented to him, his allowance or rejection thereof within
   6-12  thirty days after the claim was presented,> shall constitute a
   6-13  rejection of the claim.  If the claim is thereafter established by
   6-14  suit, the costs shall be taxed against the representative,
   6-15  individually, or the representative <he> may be removed on the
   6-16  written complaint of any person interested in the claim, after
   6-17  personal service of citation, hearing, and proof, as in other cases
   6-18  of removal.
   6-19        SECTION 13.  Section 311, Texas Probate Code, is amended to
   6-20  read as follows:
   6-21        Sec. 311.  When Claims Entered in Docket.  After a claim
   6-22  against an estate has been presented to and allowed or rejected by
   6-23  the personal representative, in whole or in part, the claim must be
   6-24  filed with the county clerk of the proper county.  The clerk shall
   6-25  enter the claim on the claim docket  <If a claim against the estate
   6-26  of a decedent has been presented within six months after the
   6-27  issuance of original testamentary letters or of administration, and
   6-28  all or part of such claim is allowed by the executor or
   6-29  administrator, the claim shall forthwith be filed with the county
   6-30  clerk of the proper county, who shall enter the same in its proper
   6-31  place upon the claim docket.  If such claim is not so presented
   6-32  within such time, the payment thereof, should it be approved in
   6-33  whole or in part, shall be postponed until all other claims which
   6-34  have been presented, allowed, and approved within the time
   6-35  prescribed have been first entirely paid>.
   6-36        SECTION 14.  Sections 312(c), (d), and (e), Texas Probate
   6-37  Code, are amended to read as follows:
   6-38        (c)  Hearing on Claims.  Although a claim may be properly
   6-39  authenticated and allowed, if the court is not satisfied that it is
   6-40  just, the court <he> shall examine the claimant and the personal
   6-41  representative under oath, and hear other evidence necessary to
   6-42  determine the issue.  If not then convinced that the claim is just,
   6-43  the court <he> shall disapprove it.
   6-44        (d)  Order of the Court.  When the court has acted upon a
   6-45  claim, the court <he> shall also endorse thereon, or annex thereto,
   6-46  a written memorandum dated and signed officially, stating the exact
   6-47  action taken upon such claim, whether approved or disapproved, or
   6-48  approved in part or rejected in part, and stating the
   6-49  classification of the claim.  Such orders shall have the force and
   6-50  effect of final judgments.
   6-51        (e)  Appeal.  When a claimant or any person interested in an
   6-52  estate shall be dissatisfied with the action of the court upon a
   6-53  claim, the claimant or person <he> may appeal therefrom to the
   6-54  courts of appeals, as from other judgments of the county court in
   6-55  probate matters.
   6-56        SECTION 15.  Section 313, Texas Probate Code, is amended to
   6-57  read as follows:
   6-58        Sec. 313.  Suit on Rejected Claim.  When a claim or a part
   6-59  thereof has been rejected by the representative, the claimant shall
   6-60  institute suit thereon in the court of original probate
   6-61  jurisdiction in which the estate is pending or in any other court
   6-62  of proper jurisdiction within ninety days after such rejection, or
   6-63  the claim shall be barred.  When a rejected claim is sued on, the
   6-64  endorsement made on or annexed thereto, or any memorandum of
   6-65  rejection filed with respect to the claim, shall be taken to be
   6-66  true without further proof, unless denied under oath.  When a
   6-67  rejected claim or part thereof has been established by suit, no
   6-68  execution shall issue, but the judgment shall be certified within
   6-69  thirty days after rendition, if of any court other than the court
   6-70  of original probate jurisdiction, and filed in the court in which
    7-1  the cause is pending, entered upon the claim docket, classified by
    7-2  the court, and handled as if originally allowed and approved in due
    7-3  course of administration.
    7-4        SECTION 16.  Section 314, Texas Probate Code, is amended to
    7-5  read as follows:
    7-6        Sec. 314.  Presentment of Claims a Prerequisite for Judgment.
    7-7  No judgment shall be rendered in favor of a claimant upon any claim
    7-8  for money which has not been legally presented to the
    7-9  representative of an estate, and rejected by the representative
   7-10  <him> or by the court, in whole or in part.
   7-11        SECTION 17.  Section 315, Texas Probate Code, is amended to
   7-12  read as follows:
   7-13        Sec. 315.  Costs of Suit With Respect to Claims.  All costs
   7-14  incurred in the probate court with respect to claims shall be taxed
   7-15  as follows:
   7-16              (a)  If allowed and approved, the estate shall pay the
   7-17  costs.
   7-18              (b)  If allowed, but disapproved, the claimant shall
   7-19  pay the costs.
   7-20              (c)  If rejected, but established by suit, the estate
   7-21  shall pay the costs.
   7-22              (d)  If rejected, but not established by suit, the
   7-23  claimant shall pay the costs, except as provided by Section 310 of
   7-24  this code.
   7-25              (e)  In suits to establish a claim after rejection in
   7-26  part, if the claimant fails to recover judgment for a greater
   7-27  amount than was allowed or approved, the claimant <he> shall pay
   7-28  all costs.
   7-29        SECTION 18.  Section 316, Texas Probate Code, is amended to
   7-30  read as follows:
   7-31        Sec. 316.  Claims Against Personal Representatives <Executors
   7-32  or Administrators>.  The naming of an executor in a will shall not
   7-33  operate to extinguish any just claim which the deceased had against
   7-34  the person named as executor <him>; and, in all cases where a
   7-35  personal representative <an executor or administrator> is indebted
   7-36  to the <his> testator or intestate, the representative <he> shall
   7-37  account for the debt in the same manner as if it were cash in the
   7-38  representative's <his> hands; provided, however, that if said debt
   7-39  was not due at the time of receiving letters, the representative
   7-40  <he> shall be required to account for it only from the date when it
   7-41  becomes due.
   7-42        SECTION 19.  Sections 317(a) and (b), Texas Probate Code, are
   7-43  amended to read as follows:
   7-44        (a)  By Executors or Administrators.  The foregoing
   7-45  provisions of this Code relative to the presentation of claims
   7-46  against an estate shall not be construed to apply to any claim of a
   7-47  personal representative <the executor or administrator> against the
   7-48  <his> testator or intestate; but a personal representative <an
   7-49  executor or administrator> holding such claim shall file the same
   7-50  in the court granting the <his> letters, verified by affidavit as
   7-51  required in other cases, within six months after the representative
   7-52  <he> has qualified, or such claim shall be barred.
   7-53        (b)  Action on Such Claims.  When a claim by a personal
   7-54  representative <an executor or administrator> has been filed with
   7-55  the court within the required time, such claim shall be entered
   7-56  upon the claim docket and acted upon by the court in the same
   7-57  manner as in other cases, and, when the claim has been acted upon
   7-58  by the court, an appeal from the judgment of the court may be taken
   7-59  as in other cases.
   7-60        SECTION 20.  Section 318, Texas Probate Code, is amended to
   7-61  read as follows:
   7-62        Sec. 318.  Claims Not Allowed After Order for Partition and
   7-63  Distribution.  No claim for money against the estate of a decedent
   7-64  <his testator or intestate> shall be allowed by a personal
   7-65  representative <an executor or administrator> and no suit shall be
   7-66  instituted against the representative <him> on any such claim,
   7-67  after an order for final partition and distribution has been made;
   7-68  but, after such an order has been made, the owner of any claim not
   7-69  barred by the laws of limitation shall have an <his> action thereon
   7-70  against the heirs, devisees, <or> legatees, or creditors of the
    8-1  estate, limited to the value of the property received by them in
    8-2  distributions from the estate <such partition and distribution>.
    8-3        SECTION 21.  Section 320, Texas Probate Code, is amended to
    8-4  read as follows:
    8-5        Sec. 320.  Order of Payment of Claims.  (a)  Priority of
    8-6  Payments.  Personal representatives <Executors and administrators>,
    8-7  when they have funds in their hands belonging to the estate, shall
    8-8  pay in the following order:
    8-9              (1)  Funeral expenses and expenses of last sickness, in
   8-10  an amount not to exceed Five Thousand Dollars<, if the claims
   8-11  therefor have been presented within sixty days from the original
   8-12  grant of letters testamentary or administration, but if not
   8-13  presented within such time, their payment shall be postponed until
   8-14  the allowances made to the widow and children, or to either, are
   8-15  paid>.
   8-16              (2)  Allowances made to the surviving spouse <widow>
   8-17  and children, or to either.
   8-18              (3)  Expenses of administration and the expenses
   8-19  incurred in the preservation, safekeeping, and management of the
   8-20  estate.
   8-21              (4)  Other claims against the estate in the order of
   8-22  their classification.
   8-23        (b)  Sale of Mortgaged Property.  If a personal
   8-24  representative has the proceeds of a sale that has been made for
   8-25  the satisfaction of a mortgage, lien, or security interest, and the
   8-26  proceeds, or any part of the proceeds, are not required for the
   8-27  payment of any debts against the estate that have a preference over
   8-28  the mortgage, lien, or security interest, the personal
   8-29  representative shall pay the proceeds to any holder of a mortgage,
   8-30  lien, or security interest.  If there is more than one mortgage,
   8-31  lien, or security interest against the property, the personal
   8-32  representative shall pay the holders in the order of the holders'
   8-33  priority.  If the personal representative fails to pay proceeds
   8-34  under this subsection, a holder, on proof of the failure to pay,
   8-35  may obtain an order from the court directing the payment to be
   8-36  made.
   8-37        (c)  Claimant's Petition.  A claimant whose claim has not
   8-38  been paid may petition the court for determination of his claim at
   8-39  any time before it is barred by the applicable statute of
   8-40  limitations and upon due proof procure an order for its allowance
   8-41  and payment from the estate.
   8-42        (d)  Permissive Order of Payment.  After the sixth month
   8-43  after the date letters are granted and on application by the
   8-44  personal representative stating that the personal representative
   8-45  has no actual knowledge of any outstanding enforceable claims
   8-46  against the estate other than the claims already approved and
   8-47  classified by the court, the court may order the personal
   8-48  representative to pay any claim that is allowed and approved.
   8-49        SECTION 22.  Section 320A, Texas Probate Code, is amended to
   8-50  read as follows:
   8-51        Sec. 320A.  Funeral Expenses.  When personal representatives
   8-52  <executors, independent executors, and administrators> pay claims
   8-53  for funeral expenses and for items incident thereto, such as
   8-54  tombstones, grave markers, crypts or burial plots, they shall
   8-55  charge the whole of such claims to the decedent's estate and shall
   8-56  charge no part thereof to the community share of a surviving
   8-57  spouse.
   8-58        SECTION 23.  Section 321, Texas Probate Code, is amended to
   8-59  read as follows:
   8-60        Sec. 321.  Deficiency of Assets.  When there is a deficiency
   8-61  of assets to pay all claims of the same class, other than secured
   8-62  claims for money, the claims in such class shall be paid pro rata,
   8-63  as directed by the court, and in the order directed.  No personal
   8-64  representative <executor or administrator> shall be allowed to pay
   8-65  the <any> claims, whether the estate is solvent or insolvent,
   8-66  except with the pro rata amount of the funds of the estate that
   8-67  have come to hand.
   8-68        SECTION 24.  Section 322, Texas Probate Code, is amended to
   8-69  read as follows:
   8-70        Sec. 322.  Classification of Claims Against Estates of
    9-1  Decedent.  Claims against an estate of a decedent shall be
    9-2  classified <classed> and have priority of payment, as follows:
    9-3              Class 1.  Funeral expenses and expenses of last
    9-4  sickness for a reasonable amount to be approved by the court, not
    9-5  to exceed Five Thousand Dollars, with any excess to be classified
    9-6  and paid as other unsecured claims.
    9-7              Class 2.  Expenses of administration and expenses
    9-8  incurred in the preservation, safekeeping, and management of the
    9-9  estate.
   9-10              Class 3.  Secured claims for money under Section
   9-11  306(a)(1) <Claims secured by mortgage or other liens>, including
   9-12  tax liens, so far as the same can be paid out of the proceeds of
   9-13  the property subject to such mortgage or other lien, and when more
   9-14  than one mortgage, <or> lien, or security interest shall exist upon
   9-15  the same property, they shall be paid in order of their priority
   9-16  <the oldest shall be first paid; but no preference shall be given
   9-17  to such mortgage or lien>.
   9-18              Class 4.  Claims for taxes, penalties, and interest due
   9-19  under Title 2, Tax Code;  Chapter 8, Title 132, Revised Statutes;
   9-20  Section 81.111, Natural Resources Code; the Municipal Sales and Use
   9-21  Tax Act (Chapter 321, Tax Code); Section 11B, Chapter 141, Acts of
   9-22  the 63rd Legislature, Regular Session, 1973 (Article 1118x,
   9-23  Vernon's Texas Civil Statutes); or Section 16, Chapter 683, Acts of
   9-24  the 66th Legislature, Regular Session, 1979 (Article 1118y,
   9-25  Vernon's Texas Civil Statutes).
   9-26              Class 5.  Claims for the cost of confinement
   9-27  established by the institutional division of the Texas Department
   9-28  of Criminal Justice <Corrections> under Section 501.017, Government
   9-29  Code <Article 6184s, Revised Statutes>.
   9-30              Class 6.  Claims for repayment of medical assistance
   9-31  payments made by the state under Chapter 32, Human Resources Code,
   9-32  to or for the benefit of the decedent.
   9-33              Class 7.  All other claims <legally exhibited within
   9-34  six months after the original grant of letters testamentary or of
   9-35  administration>.
   9-36              <Class 8.  All claims legally exhibited after the lapse
   9-37  of six months from the original grant of letters testamentary or of
   9-38  administration.>
   9-39        SECTION 25.  Section 323, Texas Probate Code, is amended to
   9-40  read as follows:
   9-41        Sec. 323.  Joint Obligation.  When two or more persons are
   9-42  jointly bound for the payment of a debt, or for any other purpose,
   9-43  upon the death of any of the persons so bound, the decedent's <his>
   9-44  estate shall be charged by virtue of such obligation in the same
   9-45  manner as if the obligors had been bound severally as well as
   9-46  jointly.
   9-47        SECTION 26.  Section 324, Texas Probate Code, is amended to
   9-48  read as follows:
   9-49        Sec. 324.  Representatives Not to Purchase Claims.  It shall
   9-50  be unlawful, and cause for removal, for a personal representative
   9-51  <an executor or administrator,> whether acting under appointment by
   9-52  will or under orders of the court, to purchase for the personal
   9-53  representative's <his> own use or for any purposes whatsoever, any
   9-54  claim against the estate the personal representative <he>
   9-55  represents.  Upon written complaint by any person interested in the
   9-56  estate, and satisfactory proof of violation of this provision,
   9-57  after citation and hearing, the court shall enter its order
   9-58  cancelling the claim, and no part thereof shall be paid out of the
   9-59  estate; and the court <judge> may, in the court's <his> discretion,
   9-60  remove such representative.
   9-61        SECTION 27.  Section 328(b), Texas Probate Code, is amended
   9-62  to read as follows:
   9-63        (b)  Penalty Against Representative.  Upon return of the
   9-64  execution not satisfied, or merely upon the affidavit of demand and
   9-65  failure to pay, the court may cite the representative and the
   9-66  sureties on the representative's <his> bond to show cause why they
   9-67  should not be held liable for such debt, interest, costs, and
   9-68  damages.  Upon return of citation duly served, if good cause to the
   9-69  contrary be not shown, the court shall render judgment against the
   9-70  representative and sureties so cited, in favor of the holder of
   10-1  such claim, for the amount theretofore ordered to be paid or
   10-2  established by suit, and remaining unpaid, together with interest
   10-3  and costs, and also for damages upon the amount neglected to be
   10-4  paid, at the rate of five per cent per month for each month, or
   10-5  fraction thereof, that the payment was neglected to be paid after
   10-6  demand made therefor, which damages may be collected in any court
   10-7  of competent jurisdiction.
   10-8        SECTION 28.  Sections 329(a) and (c), Texas Probate Code, are
   10-9  amended to read as follows:
  10-10        (a)  Circumstances Under Which Money May Be Borrowed.  Any
  10-11  real or personal property of an estate may be mortgaged or pledged
  10-12  by deed of trust or otherwise as security for an indebtedness,
  10-13  under order of the court, when necessary for any of the following
  10-14  purposes:
  10-15              (1)  For the payment of any ad valorem, income, gift,
  10-16  estate, inheritance, or transfer taxes upon the transfer of an
  10-17  estate or due from a decedent or the <his> estate, regardless of
  10-18  whether such taxes are assessed by a state, or any of its political
  10-19  subdivisions, or by the federal government or by a foreign country;
  10-20  or
  10-21              (2)  For payment of expenses of administration,
  10-22  including sums necessary for operation of a business, farm, or
  10-23  ranch owned by the estate; or
  10-24              (3)  For payment of claims allowed and approved, or
  10-25  established by suit, against the estate; or
  10-26              (4)  To renew and extend a valid, existing lien.
  10-27        (c)  Order Authorizing Such Borrowing, or Extension of Lien.
  10-28  The court, if satisfied by the evidence adduced at the hearing upon
  10-29  said application that it is to the interest of the estate to borrow
  10-30  money, or to extend and renew an existing lien, shall issue its
  10-31  order to that effect, setting out the terms and conditions of the
  10-32  authority granted; provided, however, the loan or renewal shall not
  10-33  be for a term longer than three years from the granting of original
  10-34  letters to the representative of such estate, but the court may
  10-35  authorize an extension of such lien for not more than one
  10-36  additional year without further citation or notice.  If a new lien
  10-37  is created on property of an estate, the court may require that the
  10-38  representative's general bond be increased, or an additional bond
  10-39  given, for the protection of the estate and the creditors, as for
  10-40  the sale of real property belonging to the estate.
  10-41        SECTION 29.  Sections 300, 325, and 327, Texas Probate Code,
  10-42  are repealed.
  10-43        SECTION 30.  The change in law made by this Act applies only
  10-44  to the estates of persons who die on or after the effective date of
  10-45  this Act.  An estate of a person who dies before the effective date
  10-46  of this Act is covered by the law in effect when the person died,
  10-47  and the former law continues in effect for that purpose.
  10-48        SECTION 31.  This Act takes effect January 1, 1996.
  10-49        SECTION 32.  The importance of this legislation and the
  10-50  crowded condition of the calendars in both houses create an
  10-51  emergency and an imperative public necessity that the
  10-52  constitutional rule requiring bills to be read on three several
  10-53  days in each house be suspended, and this rule is hereby suspended.
  10-54                               * * * * *