Gorham v. Gates ex. rel. Estate of Badouh, 82 S.W.3d 359 (Tex. App.—Austin 2002, pet. denied).
Testatrix devised real property to Beneficiary. Creditors of
Beneficiary planned to recover their claims from this property.
Beneficiary then attempted to disclaim her interest in this property but
the disclaimer was invalid. Under court order, the real property was
sold free and clear of all claims and the proceeds were placed in the
registry of the court subject to Creditors’ claims. Creditors appealed
asserting that the proceeds should have been immediately disbursed to
them.
The appellate court affirmed. The court explained that prior court
proceedings dealt only with the validity of Beneficiary’s disclaimer.
These proceedings did not resolve the validity of Creditors’ claims. The
court order authorizing the sale merely stated that the property needed
to be sold to satisfy claims and administrative expenses, not just
Creditors’ claims. The court order did not prioritize the claims.
Accordingly, it was appropriate for the probate court to require the
proceeds to be placed in the registry of the court until the validity
and priority of Creditors’ claims could be determined. The court also
indicated that Creditors’ reliance on Probate Code § 338 was misplaced
because that section deals with claims against the decedent, not claims
against a beneficiary.
Moral: A creditor of a beneficiary should not expect the administration
of an estate of the beneficiary’s benefactor to resolve all of the
creditor’s concerns.