Estate administration becomes complicated when a surviving spouse seeks to designate property as exempt homestead under the Texas Estates Code. The spouse files an application to set aside both a rural homestead and personal property as exempt. The probate court holds a hearing but takes no sworn testimony. Instead, the court questions the attorneys and hears arguments. The court then signs a partial order designating one property as the homestead but does not rule on the personal property claims.
The surviving spouse wants to appeal. Is the partial order final and appealable? Can the spouse seek a new hearing to present evidence supporting designation of a different property as homestead? Or do the doctrines of res judicata and collateral estoppel bar relitigation of the homestead issue?
These questions raise potential procedural bars and quesitons about when probate orders become final and appealable. They also implicate substantive questions about what evidence a probate court should consider before designating exempt property under the Texas Estates Code. The answers is important as it dictates whether a surviving spouse gets one chance or multiple opportunities to establish homestead rights.
In re Estate of Ulbrich, No. 04-12-00514-CV, 2014 WL 185178 (Tex. App.—San Antonio Jan. 15, 2014, no pet.) (mem. op.) provides an opportunity to consider these issues.
Facts & Procedural History
Consuella died intestate on August 22, 2010, survived by her husband Douglas and her adult children from a previous marriage. At the time of Consuella’s death, she and Douglas owned 160 acres in Medina County and a home in San Antonio. The administrator filed the probate action in Medina County. That court transferred the case to Bexar County.
On January 17, 2012, Douglas filed an application to set aside exempt property including homestead. He asked the probate court to set aside the Medina County ranch as exempt property for his use and benefit, describing it as “his rural homestead.” He also requested that numerous items of personal property be set aside as exempt, including home furnishings, farming and ranching vehicles and implements, tools, wearing apparel, jewelry, firearms, athletic equipment, his 2001 Ford van, and various livestock and fowl.
On February 3, 2012, the probate court held a hearing. Instead of taking sworn testimony, the probate court questioned Douglas’s counsel and the heirs’ counsel. The lawyers presented arguments. The heirs’ counsel stated that while the Ulbrichs had a residence at their Medina County ranch, they “had always homesteaded at the home here in San Antonio.” Counsel stated the San Antonio home was filed with the Bexar County Appraisal District and that the Ulbrichs designated the house on Starhill in San Antonio for many years and took full tax advantage.
On February 13, 2012, the probate court signed a “Partial Order” finding that on August 22, 2010, the homestead of Douglas and Consuella was 3939 Starhill, San Antonio, Bexar County, Texas. Douglas did not appeal from this order. Instead, he filed a motion to set another hearing on his application. The probate court held additional hearings over the following months. Douglas filed a motion to reconsider and a jury demand.
On July 30, 2012, the heirs filed affirmative defenses claiming that res judicata and collateral estoppel applied to the homestead issue. On August 10, 2012, the probate court held another hearing. One of the adult children testified about vehicles and the value of personal property. Douglas testified about what he considered to be his personal separate property and what community personal property he wanted to claim as exempt.
That same day, the probate court signed two orders. The first, titled “Order Awarding Exempt Property,” stated that the homestead located at 3939 Starhill in San Antonio shall be set aside for Douglas’s benefit as the surviving spouse homestead. The order also found that the personal property of the estate is exempt and awarded some exempt personal property to Douglas and some to the heirs. The probate court also signed an “Order Finding Res Judicata and Collateral Estoppel Apply.” Douglas appealed.
The Estates Code and Setting Aside Exempt Property
Before the inventory is approved or before filing the affidavit in lieu of inventory, a surviving spouse may apply to the probate court to have exempt property, including the homestead, set aside by filing an application and a verified affidavit listing all the property that the applicant claims is exempt. An applicant bears the burden of proof by a preponderance of the evidence at any hearing on the application. The probate court shall set aside property of the decedent’s estate that the court finds is exempt.
The Estates Code provides that the court shall order to be set apart all personal property of the estate that is exempt from execution or forced sale by the constitution and laws of this state for the use and benefit of the surviving spouse. It also provides that once the estate is finally settled and the estate is solvent, the exempted personal property shall be subject to partition and distribution as the other property of the estate. Thus, a surviving spouse can retain possession of tangible exempt property under the “use and benefit” provision, but when the administration terminates, the decedent’s interest in these items must pass to the decedent’s heirs or devisees.
When Is a Probate Order Final and Appealable?
Douglas argued that the February 13, 2012 order was not an appealable order because the probate court did not grant or deny his entire application, as there were still personal property issues remaining. The heirs countered that the issue of homestead was decided in the February order from which Douglas did not appeal and thus the probate court correctly determined that res judicata and collateral estoppel apply.
Generally, appeals may be taken only from final judgments. Probate proceedings are an exception to the one final judgment rule. In such cases, multiple judgments final for purposes of appeal can be rendered on certain discrete issues. The need to review controlling intermediate decisions before an error can harm later phases of the proceeding has been held to justify this rule.
Not every interlocutory order in a probate case is appealable. Determining whether an otherwise interlocutory probate order is final enough to qualify for appeal has proved difficult. In the past, courts relied on a “substantial right” test to determine whether an ostensibly interlocutory probate order had sufficient attributes of finality to confer appellate jurisdiction. Under that test, once the probate court adjudicated a substantial right, the order was appealable.
In 1995, the supreme court attempted to clarify this test in De Ayala v. Mackie, 193 S.W.3d 575 (Tex. 2006). The court noted that while adjudication of a substantial right was one factor to be considered, equally important was earlier precedent requiring that the order dispose of all issues in the phase of the proceeding for which it was brought. The court adopted the following test: If there is an express statute declaring the phase of the probate proceedings to be final and appealable, that statute controls. Otherwise, if there is a proceeding of which the order in question may logically be considered a part, but one or more pleadings that are also part of that proceeding raise issues or parties not disposed of, then the probate order is interlocutory.
The supreme court held that the trial court’s order denying a plea to the jurisdiction and refusal to remove an executor was not appealable. The court explained that an order denying a motion to dismiss an entire proceeding for want of subject matter jurisdiction is more like a prelude than a finale. The trial court’s order was interlocutory because it did not dispose of all parties or issues in a particular phase of the proceedings. Because an order denying a plea to the jurisdiction and refusing to remove an executor does not end a phase of the proceedings but sets the stage for the resolution of all proceedings, the order is interlocutory.
How Does This Case Compare to Prior Homestead Cases?
Both parties cited Majeski v. Estate of Majeski, 163 S.W.3d 102 (Tex. App.—Austin 2005, no pet.). In Majeski, the decedent’s adult daughter and surviving spouse had a dispute over a tract of land. The surviving spouse claimed a homestead right. The spouse sought a judgment declaring the tract of land to be his homestead. The adult daughter asked the court to determine what portion of the property was homestead and also asked the court to declare the value and character of all items of personal property. Both sides moved for summary judgment on the issue of the homestead status of the property.
The trial court granted summary judgment finding that the surviving spouse’s homestead did not consist of the entire tract but only a portion. The spouse appealed. The adult daughter argued that the trial court’s order was interlocutory and not appealable because it did not address the requests in her counter-petition relating to other assets. The court of appeals disagreed, explaining that the only dispute at issue at this stage of the probate proceeding was the homestead status of the property. Although the adult daughter asserted claims related to other assets, those questions were separate from the homestead issue. Because the trial court’s order made a final resolution of the homestead issue as to the entire tract of land, the court held that the order concluded a discrete phase of the proceedings and was final and appealable.
The heirs cited Majeski for the proposition that a trial court’s order with regard to a property’s homestead status is an appealable order even though other property issues remain undecided. However, the court of appeals found this case distinguishable from Majeski. In Majeski, the surviving spouse filed his application in an effort to exempt the tract of land as his homestead. He did not also seek personal property to be exempt in his application. Instead, it was the adult daughter who filed a counterclaim asking about personal property. Thus, in Majeski, the only dispute at issue with regard to the surviving spouse’s application was the homestead status of the property.
Here, Douglas sought to exempt both his homestead and personal property. The Estates Code allows a surviving spouse to apply to the probate court to have exempt property, including the homestead, set aside by filing an application. Thus, when the probate court ruled on the homestead issue, it decided only part of Douglas’s application to have property set aside as exempt. For that reason, the probate court called its February 13, 2012 order a “partial” order.
As the probate court did not rule on Douglas’s entire application, its February 13, 2012 order did not conclude a discrete phase of the proceedings and was not appealable. And as the February order was not an appealable order, the probate court erroneously concluded that res judicata and collateral estoppel applied to that order. The court of appeals reversed and vacated the probate court’s Order Finding Res Judicata and Collateral Estoppel Apply.
Was There Evidence to Support the Homestead Designation?
Having determined that res judicata and collateral estoppel do not apply, the court addressed Douglas’s issues pertaining to homestead. Douglas argued that the probate court erred in failing to designate his Medina County ranch as his homestead. He further argued that there was no evidence to support the probate court’s finding that his San Antonio home was his homestead.
Although there were numerous discussions and arguments regarding the homestead issue at the hearings that took place prior to the August hearing, the record failed to show there was ever any sworn testimony or documentary evidence presented on the homestead issue. At the August hearing, the only evidence presented was the testimony of Douglas and one of the decedent’s adult children regarding personal property owned by the Ulbrichs. Thus, there was no evidence presented at any hearing in this case on the issue of homestead.
Because there was no evidence presented on the issue of homestead, there was no evidence to support the probate court’s finding that the San Antonio home should be set aside as Douglas’s homestead. The court of appeals reversed the probate court’s order to the extent that it designates and sets aside the San Antonio home as Douglas’s homestead and remanded the cause for the probate court to rule on Douglas’s application regarding homestead.
The court noted that although the attorneys and the probate court discussed the case at the February 3, 2012 hearing, such discussions are not evidence. Both parties in their briefs cited to affidavits attached to pleadings filed in the case in support of their factual assertions. However, these affidavits were not introduced as evidence at trial.
Did the Probate Court Properly Award Exempt Personal Property?
Douglas also complained of the probate court’s order awarding exempt personal property of the estate. The Order Awarding Exempt Property stated that the court found that the personal property of the estate is exempt and ordered that the exempt personal property shall be awarded with some items going to Douglas and some to the heirs.
Douglas contended that the Estates Code requires the probate court to set aside the exempt property of the estate to him. The Estates Code provides that the court shall order to be set apart all personal property of the estate that is exempt from execution or forced sale by the constitution and laws of this state for the use and benefit of the surviving spouse. It also provides that once the estate is finally settled and the estate is solvent, the exempted personal property shall be subject to partition and distribution as the other property of the estate.
Thus, a surviving spouse can retain possession of tangible exempt property under the “use and benefit” provision, but when the administration terminates, the decedent’s interest in these items must pass to the decedent’s heirs or devisees. The “use and benefit” provision does not allow a transfer of fee simple title of the exempt property to the surviving spouse because once the estate is finally settled, the exempt property is subject to partition and distribution as the other property of the estate.
It appeared the probate court made a finding that the personal property of the estate was exempt but, instead of setting it apart for Douglas’s use and benefit, the court awarded some items to Douglas and some to the heirs. An award of personal property was premature as there had not been a final settlement of the estate at the time of the hearing. The court held the probate court erred in its award of exempt personal property and reversed and remanded the award of personal property for further proceedings.
The Takeaway
A probate court’s partial order determining homestead location is not final and appealable when the surviving spouse’s application also sought to set aside exempt personal property and the court did not rule on the personal property claims. Because such a partial order does not conclude a discrete phase of the proceedings, the doctrines of res judicata and collateral estoppel do not apply to bar the surviving spouse from presenting evidence on homestead at subsequent hearings. A probate court cannot properly designate a homestead as exempt property without hearing sworn testimony or receiving documentary evidence on the homestead issue. Discussions between the court and attorneys are not evidence. Affidavits attached to pleadings but not introduced as evidence at trial cannot support findings. The Ulbrich case demonstrates that the Estates Code requires the probate court to set aside exempt personal property for the use and benefit of the surviving spouse rather than awarding ownership of specific items to the surviving spouse or heirs before the estate is finally settled. An award of personal property is premature when made before final settlement of the estate because exempt personal property remains subject to partition and distribution as other estate property once administration terminates.
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