Riley v. Riley

• Decision Date: 29 June 1998
• Docket Number: No. 06-97-00087-CV,06-97-00087-CV
• Citation: 972 S.W.2d 149
• Parties: James William RILEY, Bessie B. Goldfschmidt, And Marian R. Tepe, Appellants, v. Bobbie Neil RILEY, Administratrix of the Estate of Elbert E. Riley, Jr., Appellee.
• Court: Texas Court of Appeals

Page 149

972 S.W.2d 149

James William RILEY, Bessie B. Goldfschmidt, And Marian R Tepe, Appellants, v. Bobbie Neil RILEY, Administratrix of the Estate of Elbert E Riley, Jr., Appellee.

No. 06-97-00087-CV.

Court of Appeals of Texas Texarkana.

Submitted April 1, 1998.

Decided June 29, 1998.

Ken Andrews, Graham, for appellant.

Jess N. Turner, III, Turner & Allen, Graham, for appellee.

Before CORNELIUS, C.J., and GRANT and ROSS, JJ.

OPINION

GRANT, Justice.

James William Riley, Bessie B. Goldfschmidt and Marian R. Tepe, heirs of Elbert E. Riley, Jr., deceased, appeal from an order in probate court authorizing the conveyance to Bobbie N. Riley, Administratrix of the Estate of Elbert E. Riley, Jr., of all the separate real property of the estate in satisfaction of her claim for reimbursement. Appellants are the surviving half-brother, sister, and half-sister of Elbert E. Riley, Jr., deceased. Appellee, Bobbie N. Riley, Administratrix of the Estate of Elbert E. Riley, Jr., is the surviving wife of Elbert E. Riley, Jr.

Appellants contend that the probate court erred in granting Bobbie Riley's request for conveyance of property from the separate estate of Elbert E. Riley, Jr., to settle a claim for reimbursement of the community estate. Appellants also contend that Bobbie Riley's homestead interest in the mineral-producing property is limited and, therefore, the probate court should have provided for a credit against the reimbursement claim. Appellants do not challenge the order allowing conveyance based on any conflict of interest due to Bobbie Riley's capacity as representative of the separate estate and the community estate, and they do not challenge the evidence of the fair market value of the property at issue.

This case was initiated in August 1994, when Bobbie Riley filed a claim for reimbursement on behalf of the community estate from the separate estate of her deceased husband. The reimbursement claim stemmed from payments made by the community estate on Elbert Riley's separate debts, the payment of taxes and insurance on his separate property, and improvements made to his separate property. On May 18, 1995, over Appellants' objection to the claim, the probate court ordered reimbursement against the separate estate in the amount of $124,455.46. Appellants appealed the order, which was affirmed by the Second Court of Appeals. Therefore, the amount of the reimbursement claim is not an issue before this Court.

Bobbie Riley filed an Application for Authority to Settle Claim by Directing Conveyance of Property on May 26, 1995. The application was heard, and on March 14, 1997, an order was entered allowing Bobbie Riley to execute a Special Warranty Deed on behalf of the estate, conveying to the community estate all of the separate real property of the estate in satisfaction of the community estate's reimbursement claim. Appellants appeal that order.

Two pieces of property are at issue in this case. At the time the Rileys married, Elbert Riley owned land known as the Home Place (160 acres) and the River Place (74.7 acres). The Rileys lived on the Home Place throughout their marriage. Bobbie Riley has continued to live there since Elbert Riley's death. The Rileys farmed and ranched all of the property during their marriage for part of their support. The River Place, consisting of two tracts, 59.7 acres and 15 acres, was subject to an oil and gas lease when they married, and there has been production of oil and gas from the property.

Appellants contend that the conveyance of real property was an incorrect remedy for payment of a claim against Elbert Riley's estate. The proper remedy, they assert, is for the claimant to present the claim to the representative for payment, and if no funds were available to pay the claim, the court should have ordered the sale of such estate property to satisfy the claim. Bobbie Riley argues that the sale of property is not the exclusive remedy for satisfying a claim against an estate.

To support their position, Appellants cite Bailey v. Cherokee County Appraisal District ¹ and White v. Pope. ² Bailey involved a delinquent tax suit in which the court held that ad valorem taxes accruing during administration are classified as claims against the estate and that the heirs of the estate are not personally liable for such claims while the estate remains under administration. ³ The court also stated that, if funds on hand are insufficient to satisfy the payment of a creditor's claim, the court may order the sale of estate property pursuant to Section 326 of the Probate Code. ⁴ Appellants rely on this language as support for their argument that property must be ordered sold to satisfy a claim against that estate.

White involved an attorney's application to require an estate to sell certain property to pay his legal fees. In White,the court recognized that Section 326 expressly authorizes the probate court to order the sale of property of the estate to satisfy a claim if there are no available funds and if to await funds from other sources would unreasonably delay payment. ⁵ However, in White, no application was made for conveyance of property of the estate to satisfy the outstanding claim, which is the situation in the case before this Court.

The question, then, is whether the probate court's order allowing Bobbie Riley as administratrix to convey the separate real property to the community estate in satisfaction of the reimbursement claim was proper.

Section 234 of the Probate Code ⁶ sets out the proper exercise of an estate administrator's power. That section provides that, when a personal representative deems it for the interest of the estate, the representative may, upon written application to the court, and by order granting authority, "make compromises or settlements in relation to property or claims in dispute or litigation." ⁷ It is this language that Bobbie Riley relies on as authority for the conveyance.

Section 234 limits the authority to make compromises and settlements to property or claims in dispute or litigation. The terms "compromise" and "settlement" themselves contemplate a controversy or disagreement. When Bobbie Riley filed her application on May 26, 1995 to settle the community's claim against Elbert Riley's separate estate, the probate court had entered its order regarding the amount of the community's reimbursement claim. However, subsequent to the application, the Appellants filed a motion for new trial and, upon its denial, a notice of appeal. The probate court's order was upheld on appeal. Subsequently, on March 14, 1997, Bobbie Riley's application was granted. Therefore, there is no continuing controversy about the existence of indebtedness or the amount of the indebtedness owed by the separate estate to the community estate. Such dispute has been resolved.

Also, for Section 234(a)(4) to apply, the property or claim must be in dispute or litigation. The property was not part of a dispute at the time Bobbie Riley filed her application to convey the property. Appellants do not complain of the evidence relating to the fair market value of the land at issue. Furthermore, the statute contemplates a settlement or compromise of a dispute between the estate and a claimant. Obviously, Bobbie Riley, as administratrix of the separate estate, did not dispute the claim she made on behalf of the community estate. Her application to convey the property in satisfaction of the community's reimbursement was not made as a compromise or settlement of a dispute or litigation. Because no dispute or litigation relating to the property existed, Bobbie Riley did not have the authority to convey the property as a compromise or settlement in relation to a dispute or litigation.

Authority for the conveyance comes from Probate Code Section 234(a)(1), which permits the "purchase or exchange" of property when a personal representative deems it for the interest of the estate and with authority from the court. ⁸ The property awarded has a value less than the amount of the claim. The reimbursement ordered from the separate property estate was for $124,455.46; the property conveyed in satisfaction of that order was valued at $118,435.00. Bobbie Riley, as representative of the separate estate, sought to exchange the property for the release of the community estate's claim. Therefore, Bobbie Riley had the authority to apply for conveyance of real property without having to first sell that property to satisfy a claim against the estate.

We recognize that Section 352 of the Probate Code ⁹ prohibits a personal representative of an estate from directly or indirectly purchasing property of the estate except under limited circumstances. However, Appellants have not challenged the court's order allowing conveyance of the property as an improper sale. Therefore, we do not address Bobbie Riley's actions, as administratrix, under this section. Instead, we view the conveyance as satisfaction of a debt owed by the estate, not as a purchase or sale.

We hold that the probate court's order allowing the conveyance of property in satisfaction of the reimbursement claim was proper. This point of error is overruled.

Appellants also argue that the probate court erred in allowing conveyance of the separate real property because Bobbie Riley has a homestead right in only 100 acres of the separate real property of her deceased husband's estate and, therefore, did not have homestead rights in the separate property oil and gas production of the estate.

By statute, a single person living alone is entitled to 100 acres as a rural homestead. ¹⁰ Appellants argue that Bobbie Riley is only entitled to homestead rights in 100 acres, and because she lives in a home on the property in question, the homestead would logically be located where the home is located, the 160-acre Home Place tract. The River Place, which produces oil and gas royalties, would be excluded from Bobbie Riley's homestead, they argu...