PROBATE LAW

WINTER 2009-2010

Smith v. O’Donnell, 288 S.W.3d 417 (Tex. 2009)

Attorney for Decedent May Be Sued by Executor for Legal Malpractice Committed Outside of the Estate Planning Context: Denney served as independent executor of his wife’s estate. He retained a law firm to advise him on the estate administration as well as separate versus community character of the couple’s assets. According to Denney, he and his wife orally agreed that certain stock would be his separate property and certain stock would be her separate property. The law firm prepared a memorandum advising Denney of the community property presumption and stating that additional information was necessary before classifying the assets. The law firm also advised him to pursue a declaratory judgment action to properly classify the stock and he declined to do so. The law firm relied on the analysis of Denney’s accountant and prepared an estate tax return that omitted the stock Denney claimed was his separate property. Denney died 29 years later and left the bulk of his estate to charity, and approximately one month after his death, the Denney children as beneficiaries of his wife’s trust sued Denney’s estate alleging that Denney misclassified the stock as his separate property and underfunded his wife’s trust. The executor of Denney’s estate (O’Donnell) settled with the children for approximately $12.9 million and then sued the law firm for legal malpractice. O’Donnell alleged that the attorneys failed to properly advise Denney about the serious consequences of mischaracterizing assets, and that their negligence caused damage to Denney’s estate. As a general rule, an executor may bring the decedent’s survivable claims on behalf of the estate under Texas Probate Code §233A. At common law, actions for damage to real or personal property survive the death of the owner. Thus, in Belt v. Oppenheimer, Bland & Tate, Inc., 192 S.W.3d 780 (Tex. 2006), the Court held that legal malpractice claims alleging pure economic loss survived in favor of a deceased client’s estate. The law firm argued that Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996) barred all legal malpractice suits brought by non-clients, with the exception of estate planning malpractice claims brought by executors under Belt. The Court disagreed and reasoned “To adopt the rule the law firm suggests would place us alone among the states, and would unnecessarily immunize attorneys who commit malpractice.” Held: An executor should not be prevented from bringing the decedent’s survivable claims on behalf of the estate. Affirmed. Note – Interesting Point from Justice Willett’s Dissent: “If the only prerequisite to suit against a deceased client’s attorney is that it must be brought by the executor, an endless variety of claims could be brought. . . Every lawyer who advised a client to plead guilty or not, file for bankruptcy or not, settle a dispute or not, incorporate a business or not, and so on, would be fair game.”

Holmes v. Beatty, 290 S.W.3d 852 (Tex. 2009)

Joint Tenancy with Right of Survivorship Accounts: The husband and wife held over ten million dollars in brokerage accounts and securities certificates. The executor of the wife’s estate sued the executor of the husband’s estate for declaratory judgment that brokerage accounts and securities in certificate form were not owned by the wife and the husband with a right of survivorship and thus did not pass to the husband upon the wife’s death. The executor of the husband’s estate counterclaimed. The accounts and certificates were listed as “JT TEN”, “JT TEN” defined as “joint tenants as right of survivorship and not as tenants in common”, “JTWROS” and “Joint (WROS)”. The account agreements for the securities accounts with a “JT TEN” designation did not define “JT TEN” and did not include any discussion of survivorship rights. Also, the husband and the wife did not select the options to strike through language relating to joint tenants with right of survivorship and not as tenants in common or payable on death designations in the account agreement. The Court reasoned that a joint tenancy carried a right of survivorship. The Court also distinguished joint tenancy from a tenancy in common arrangement. The Court held that a “joint tenancy” or “JT TEN” designation on an account was sufficient to create rights of survivorship in community property under Texas Probate Code §452. Therefore, the accounts that included this designation were held with rights of survivorship. The Court also analyzed an investment account held as husband and wife “JTWROS”. The Court analyzed the account agreement and held that “Joint (WROS)” meant “joint tenancy with rights of survivorship”. As a result, the couple’s intent to obtain rights of survivorship applied to this account. The Court also analyzed securities certificates that had various designations such as “JT TEN”, “JT TEN-as joint tenants with right of survivorship and not as tenants in common”, and “JT WROS”. The Court held that the agreement survivorship language conferred survivorship rights in the certificates until the couple disposed of them and the certificates passed to husband pursuant to those rights. Held: The accounts and certificates passed to the husband as the survivor. A “joint tenancy” or “JT TEN” designation on an account was sufficient to create rights of survivorship in community property under Texas Probate Code §452, and account agreement survivorship language conferred survivorship rights in securities certificates. Affirmed in part and reversed and rendered in part.

Estate of Marquez, Deceased, 2009 Tex. App. W.L. 3385318; LEXIS 8164 (Tex. App.—Corpus Christi 2009) (memo op.)

Alleged Holographic Will Must Meet the Requirements for a Will Under Texas Law: The decedent allegedly wrote a letter in Spanish and it was offered for probate. The probate court denied an application to probate the alleged holographic Will. The appellant argued the probate court erred in denying her application because she met the requirements for probating a holographic will under Texas Probate Code §84(c). The record reflected that the judge was convinced that the handwriting on the letter belonged to the decedent but concluded that the letter did not constitute a will under Texas law. The Court analyzed the letter in light of the testamentary intent requirements of a will. The Court reasoned that the decedent did not write the letter with the requisite intent because the decedent referenced his execution of a formal written will in which he left some property to the appellant in the letter. Although the formal written will was never located, the reference to it in the letter indicated that the decedent did not intend for the letter to dispose of his property after his death. Held: An alleged holographic will must meet the testamentary intent requirements of a will. Affirmed.