November 30, 2017

Probate Settlements Are Binding Under Texas Law

Probate Law Blog

Houston Probate Attorney

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Settlement agreements entered into during the probate process are generally binding. But what happens when one party enters into an agreement and later changes their mind? Can they get out of the settlement agreement? The court recently addressed this in Estate of Riefler, No. 07-16-00375-CV (Tex. App.–Amarillo 2017).

Facts and Procedural History

The facts and procedural history for the case are as follows:

Mr. Reifler’s wife died died and then Mr. Reifler died. At the time of his death, he had no children of his own. His pre-deceased wife had one child, who Mr. Reifler had raised from an early age but had not formally adopted. Mr. Reifler’s surviving sister died after Mr. Reifler, but before the probate process was completed. This sister’s husband was appointed as her guardian to represent her before her death and then for all matters related to her estate, including Mr. Reifler’s probate proceeding.

Mrs. Reifler’s daughter initiated the probate process, claiming to be the only heir using the doctrine of adoption by estoppel. The daughter applied to determine heir ship and to be the executor.

Mr. Reifler’s sister’s husband also sought to be the executor and contested the daughter’s claim to be a heir.

The parties entered into a settlement agreement whereby the daughter was recognized as the adopted daughter and $920K of estate assets would pass to her (to her children, as she died prior to the close of the probate) and $440K would pass to Mr. Reifler’s sister (to the sister’s husband, as the sister died prior to the close of the probate).

It appears that the sister’s husband may not have fully understood what amounts were being paid to the adopted daughter vs. the amounts his wife’s estate would receive. This caused the sister’s husband to want to get out of the settlement agreement and litigation ensued.

Void vs. Voidable Settlement Agreements

The appeals court was asked to determine the validity of the settlement agreement.

The primary issue was whether the Dallas Probate Court had to agree to the settlement. Mr. Reifler raised this issue. The $440K payment to Mr. Reifler’s sister had to be submitted to the Dallas Probate Court for review, according to the terms of the settlement agreement. Mr. Reifler’s sister, via her husband-guardian, indicated that he would not submit it to the Dallas Probate Court for review even though this would have been up to him to do. Mr. Reifler’s sister argued that the settlement agreement was void absent this judicial review. The appeals court concluded that the husband-guardian had waived his right to raise this argument given that it was his obligation to submit the agreement to the Dallas Probate Court for review.

The court also rejected two other arguments raised by Mr. Reifler’s sister’s husband as to why the settlement agreement was invalid:

  1. The court concluded that the settlement agreement was voidable under Texas law, rather than void. A void contract has no meaning from the outset; a voidable contract continues in effect until it is repudiated. Further, a voidable contract can be ratified before it is repudiated. The court concluded that the settlement agreement was voidable as Mr. Reifler’s sister, via her husband-guardian, did not take this position at the trial court level. So he waived this argument for the purposes of this litigation, leaving the agreement to be voidable at the other party’s discretion.
  2. The appeals court also concluded that the settlement agreement was valid because the husband-guardian, as guardian, apparently had the authority to act on behalf of his wife.

With respect to this second argument, the court noted that it might have reached a different conclusion if the guardianship order had been provided and it showed that Mr. Reifler’s sister’s husband could only enter into agreements that were in the sister’s best interest and that the husband concluded that this agreement was not in the sisters best interest. This would essentially mean that the husband exceeded his authority and, as a result, the settlement agreement was void. These facts were not in the record in the case, however.

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