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An executor is a person who has the legal right to manage an estate during and after the probate process. An executor is also referred to as an administrator, personal representative or estate trustee. But is an executor a “party of interest” to other proceedings, especially non probate proceedings?

Legal Terminology

  • Doctrine of Res Judicata: prevents further litigation where a final judgment was made by a proper court and the same parties and same issue are in the present case

The Probate Case

Geary v. Texas Commerce Bank, 967 S.W.2d 836 (Tex. 1998)

Background & Procedural History: Beneficiary

Incorsel International Entertainment Consultants, Inc. (“Incorsel”) and Steven Corey (Incorel’s primary stockholder) co-signed a promissory note that was eventually given to Texas Commerce. After Corey’s death, Michael Geary (Defendant) became the executor of his estate. The following year, Incorsel filed for Chapter 11 bankruptcy protection in federal court and obtained a confirmed bankruptcy reorganization plan. This plan enabled Texas Commerce (Plaintiff) to obtain a partial payment on the promissory note and also included a promise not to take further action on Incorsel. The plan settled both Incorsel’s individual debts and joint debts to any other person or entity. Plaintiff did not accept or appeal the plan’s entry. Plaintiff sued Defendant as executor of Corey’s estate to gain compensation for the note’s balance. Defendant was granted summary judgment by the trial court on four grounds, as a part of which it stated that Corey’s debt ended upon issuance of the bankruptcy reorganization plan, and res judicata barred the Plaintiff’s claim.

The Court of Appeals reversed and remanded for a trial on the four grounds, holding that res judicata was not a valid defense here because Defendant was not a party to the Incorsel bankruptcy. The Supreme Court reversed the Court of Appeals’ judgment, holding that Defendant was a party in the proceeding under his role of executor, and as such was able to assert the defense of res judicata pertaining to the judgment confirming a bankruptcy reorganization plan that settled the corporation’s debts. Since bankruptcies are federal proceedings, federal law determines whether a state law proceeding will be barred by res judicata.

Main Considerations

Can a bankruptcy reorganization plan discharge the debts of someone other than the bankrupt party to someone other than the bankrupt party? (Essentially a third-party release from debt). To prevent the discharge of debts, the appropriate remedy for a plaintiff is to appeal a bankruptcy plan rather than use collateral attack.

Takeaway

Geary v. Texas Commerce Bank shows that an executor of an estate will not be barred from asserting the defense of res judicata. The executor is  party of interest because of their relationship to the corporation and their involvement in a bankruptcy. The definition of “parties” is not limited to formal parties here.

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Related Questions

Who is an interested party in a trust?

Texas law has long provided that an interested party in a trust is any person who would be entitled to receive a distribution of trust property if the trust were terminated or dissolved. The definition has been interpreted by the Texas Supreme Court and Texas courts of appeals to be a broad one, applicable not only to people who are actually named as beneficiaries of a trust but also to people who stand to inherit property from someone who is a beneficiary of a trust, including people who would inherit that property from the beneficiary’s children or grandchildren or their descendants. See In re Estate of Blevins, 545 S.W.2d 456 (Tex. Civ. App.–Houston [14th Dist.] 1976, writ dism’d w.o.j.).

Is a trustee a real party in interest?

When a person dies, the court must decide if someone is the Real Party in Interest (RPII). The RPII is the person or legal entity that will receive the property, pay estate taxes and support any family members. There are numerous rules and laws that govern who is the RPII. Some jurisdictions require the trustee to file an affidavit stating “the trustee is a real party in interest or is authorized to act as such by a court order.” However, a trustee can be appointed without filing an affidavit. So, even though the trustee is not a real party in interest, the trustee can still be appointed and necessary documents filed. The trustee will then become a real party in interest through operation of law.

What is the fiduciary responsibility of an executor?

Fiduciary Duty is a legal duty to act in the best interest of another party. In their personal capacity, an executor owes that duty to their decedent; in their official capacity, they owe it to the beneficiaries of the estate. An executor’s fiduciary duty is to ensure both the orderly transfer of assets and payment of debts. In addition to this broad duty, executors also have several specific duties.

Who are the parties in an estate?

There are typically three parties to a probate proceeding. The first is the personal representative. The executor or administrator is the person who has been given the power, by the will and/or the court, to control the estate. This can be an individual, such as a spouse or adult child (an executor), or it can be a professional fiduciary, such as a bank trust department or law firm (a personal representative). The second party is the decedent. This is the person who died and left behind an estate. The estate consists of all of the decedent’s property, including real estate, personal property, bank accounts, investments, and so on. The third party is the beneficiaries. These are the people who are entitled to receive a share of the estate. In most cases, this will be the decedent’s spouse and/or children. However, it could also be other family members, friends, or charities.

What does an executor of a will do?

If you are the Executor of a Last Will, you need to know what your responsibilities are. These responsibilities include filing an inventory and accounting with the court, collecting the estate assets and distributing them according to the instructions in the will.

Specific duties of executors, the personal representative or administrator vary from state to state, but most of the time they are organized under four primary categories. These categories include:

1. Collection of all estate assets and determination of their value.

2. Paying off all the debts of the decedent in accordance with their priority

3. Distribution of all remaining assets to the beneficiaries as prescribed in the will

4. Filing an inventory and accounting with the court

5. Preparing and filing tax returns for both the decedent and the estate

Not all estates require an executor or administrator – many small estates can be settled through probate without using these services.

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