Can A Texas Creditor Claim Barred In Guardianship Spring Back To Life In Probate?

The Texas probate rules set forth a time period for pursuing creditor claims in Texas probate – but do these control in every probate situation?  Not if the creditor ignored a guardianship notice.

In West Texas LTC Partners, Inc. v. Collier, the Texas Fourteenth Court of Appeals addressed whether a creditor who receives notice in a guardianship action, and does not present a claim, can then pursue the creditor claim in a probate action under Texas law.

The Facts of West Texas LTC Partners, Inc. v. Collier

Bruce Melton lived in a nursing home called Cedar Manor for several months in 2013.  He then moved to a nursing home in Ballinger, Texas.  Cedar Manor alleged that Melton owed almost $7,000 for costs incurred during his stay.

Melton was eventually declared incapacitated and Covenant Outreach was appointed his guardian.  On September 12, 2014, Covenant sent a letter to Cedar Manor notifying it of the guardianship proceedings.  Covenant also notified Cedar Manor that, pursuant to section 1153.003 of the Estates Code, Cedar Manor had 120 days from the receipt of the letter to file a verified claim “against this guardianship estate in this case,” or risk the claim being “barred by law.”  Cedar Manor did not file an authenticated claim.

Cedar Manor instead sued the guardianship seeking payment of the money.  The case was pending when Melton died. The case was dismissed without resolving Cedar Manor’s claim.

Covenant started probate proceedings.  Cedar Manor submitted an authenticated claim for the money it alleged it was owed for Melton’s stay at Cedar Manor.  The independent administratrix of the estate objected to the claim, and asserted “the affirmative defense that [Cedar Manor] failed to file its claim in the time necessary in the guardianship proceeding, therefore the claim is barred.”

Cedar Manor filed a lawsuit to pursue the claim.  The trial court signed a take-nothing judgment in favor of the Estate.

The Texas trial court’s conclusions of law were as follows:

  1. A Guardian may notify creditors of a Ward that the Creditor must file a claim within 120 days from receipt of the letter, or the claim is barred. Estates Code § [1153.004].
  2. A claim against a ward in guardianship must be presented to the Guardian. Estates Code § 1157.001 and 1157.002.
  3. A judgment may not be rendered in favor of a claimant on a claim for money that has not been legally presented to the guardian of the estate of the ward. Estates Code § 1157.064.
  4. Because [Cedar Manor] did not present a claim to Guardian within 120 days after September 15, 2014, the claim is barred.
  5. Because the claim was barred, the claim is not a claim against the Estate of Mr. Melton.

 

Creditor Claims in Texas Probate

Section 355.001 of the Texas Estates Code governs presentment of a claim to a personal representative and provides that:

A claim may be presented to a personal representative of an estate at any time before the estate is closed if suit on the claim has not been barred by the general statutes of limitation.

In Cedar Manor’s view, the timeliness of its claim against the Estate was governed exclusively by section 355.001.  Cedar Manor followed the deadlines and timelines applicable to creditor claims in Texas probate, so the claim should be allowed.

Cedar Manor argued that the guardianship provisions of the Estates Code did not bar its claim because those statutes “are only effective to bar certain claims filed in guardianship proceedings.”   Basically, once you are in probate, the guardianship statutes regarding creditor claims do not control the outcome.  The appellate court disagreed.

Can A Creditor Claim Barred In A Guardianship Be Revived In Texas Probate?

No, creditor claims barred during a ward’s life do not spring back to life after a ward’s death in Texas probate.

Here, it was undisputed that Cedar Manor received notice from Covenant pursuant to sections 1153.003 and 1153.004 of the Title 3 of the Texas Estates Code (addressing guardianship proceedings) that Cedar Manor “must present a claim not later than the 120th day after the date the creditor receives the notice or the claim is barred.”  Cedar Manor did not present a claim.

Section 1153.004 states, in part:

The guardian of the estate may expressly state in a notice given to an unsecured creditor under Section 1153.003(a)(2) that the creditor must present a claim not later than the 120th day after the date the creditor receives the notice or the claim is barred, if the claim is not barred by the general statutes of limitation.

If section 1153.004, which states that a claim is barred if a claim is not presented in the requisite period did not bar the claim for all purposes (not only in a guardianship proceeding, but also in a later probate), then the language would be rendered a nullity and meaningless, and “lead to the absurd result of reviving a claim barred while a ward was alive once the ward dies.”  The court further stated:

Cedar Manor has not cited any authority stating that section 355.061(a), which limits a personal representative’s authority to approve claims once a probate estate is commenced, stands for the proposition that a creditor’s claim barred during the pendency of a guardianship estate can spring back to life once the ward dies and a probate estate is established.

If an unsecured creditor receives a notice of claim, whether in a Texas guardianship or as part of a probate administration, the notice should not be ignored.  Instead, a claim should be presented in the proper manner as required by the Texas Estates Code.  As this case shows, even if a creditor files a timely claim in the probate administration, failure to respond appropriately to a notice in the guardianship case can forever bar the claim.

 

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Find Your Texas Probate Star

San Antonio

Gilbert Vara, Jr.

Austin

Kyle Robbins

Houston

Grace P. Shoemakers

Dallas

Steven S. Boss

Williamson County

Lorenza Cigarroa

Grayson County

Jacob Pelley