This Week In Probate And Guardianship Appeals

Case: Jefferson State Bank vs. Christa C. Lenk, Administratrix of the Estate of Mickey Carl Marcus

Court: Texas Supreme Court

The Supreme Court last week sent down a decision that has decided when the duty arises for an estate administrator to timely notify a bank of unauthorized transactions that occurred prior to their appointment.

In March of 2000, Mickey Marcus died with over $22,000 in his account at Jefferson State Bank. The following month, Melvyn Spillman presented the Bank with fraudulent letters of administration purporting to appoint him as administrator of the Marcus Estate. The Bank, relying on what it believed to be valid letters, gave Spillman access to the Marcus account. Throughout the next several months, Spillman withdrew most of the account balance. Spillman was arrested for perpetrating this fraud and several others.

In September of 2003, Christa Lenk was appointed as the Administratrix of Marcus’ Estate. She was aware of the fraud at the time of her appointment. However, following her appointment, she made no effort to contact the bank for over two years. In June of 2005, Lenk sent the bank a demand for payment of $185,785—the amount allegedly withdrawn by Spillman. When the bank refused to pay, Lenk sued to recover the funds.

The bank relied on Texas Business and Commerce Code Section 4.406 which precludes a customer from bringing a claim based on an unauthorized transaction if the customer fails to report the transaction to the bank within one year after the bank provides the customer with the relevant account statement. Both sides filed summary judgment motions. The trial court granted the bank’s motion, however the court of appeals overturned this decision. The Supreme Court then took the matter under advisement and has sided with the bank.

In their decision the Supreme Court has stated that the issue is whether the bank satisfied its initial burden to send or make available the statement to its customer. They held that in the context of a deceased customer that (1) the bank satisfies its burden by retaining account statements for retrieval by the estate administrator, and (2) the response period begins to run once an administrator is appointed.

The Supreme Court did however reject the bank’s argument that it satisfied its burden by sending statements to Spillman. They reasoned that even with reliance on a fraud, Spillman was never the bank’s customer, as required by Section 4.406(a). The bank instead satisfied its burden by retaining the statements, which the Court noted is the only real way a back can satisfy this burden. They held that once an estate administrator is appointed, a bank should not be faulted for failing to further send or make available the statements.

Therefore, the bank has a burden to retain statements, but the administrator’s burden to report unauthorized signatures does not arise until his appointment. Upon that appointment, the administrator has one year (unless otherwise contractually shortened) to notify the bank of any fraudulent or unauthorized transactions. Unfortunately for Lenk, she waited far too long to complain of these transactions, especially considering she knew of them upon the date of her appointment. Not only did she miss the year deadline, it turns out that Marcus and the bank had contractually shortened the deadline to 60 days.
Moral of the story:

If you are appointed as an Estate Administrator, you need to immediately obtain account information for the deceased and if you see any unauthorized transactions, you must report these to the bank at once. Do not rely on the year deadline because as we see here, even that may be severely shortened by agreement. If you have any questions about estate representation, do not hesitate to contact us at 713-260-3926.

Appointees in Guardianship Proceedings Pt. 3: The Court Investigator

In previous posts, we discussed two of the three Court-appointed individuals used in guardianship proceedings throughout the State. For every guardianship proceeding, the Court appoints an Attorney ad Litem to act as the attorney for the Proposed Ward. In many cases, the Court may take an additional step and appoint a Guardian ad Litem to identify and represent the “best interests” of the Proposed Ward throughout the case. A third appointee that is generally found only in the guardianships of larger counties is the Court Investigator.

Each statutory probate court – the specialized probate courts found in the largest Texas counties – routinely appoints a Court Investigator upon the filing of an application for guardianship. The Investigator is designed to be as neutral and objective an observer as can be. They work for neither the applicant nor the Proposed Ward, and their background is often more filled with experience in social work than legal advocacy.

When appointed, the Court Investigator has an obligation to investigate the circumstances alleged in the applicant’s application for guardianship. Often, this involves face-to-face interviews with the applicant, the Proposed Ward, family, friends, caretakers and so on. The Court Investigator will almost certainly want to visit with the Proposed Ward where he or she lives, as most applications for guardianship allege that the Proposed Ward is less than fully capable of caring for themselves.

The Court Investigator’s role is very much what is sounds like. After investigating the circumstances, they will prepare and file a report with the Court. Depending on the contents of the report, it may be offered as evidence in favor of a guardianship, against a guardianship, or in favor of something in the middle. One of the key components of the report will be the Investigator’s conclusions regarding less restrictive alternatives. If something less restrictive than a complete guardianship would resolve the issue, the Court Investigator should identify it.

The Court Investigator’s office is also responsible for supervising the Court Visitor Program. Each statutory probate court is required to operate such a visitor program, and to utilize volunteers wherever possible. Court Visitors are often called upon to gather information similar to the Court Investigator and report that information back to the Court. In many cases, Court Visitors will be assigned to visit with Wards that have been under a guardianship for long periods of time. Their periodic information helps the Court determine if continuation of the guardianship is necessary.

As we take a step back from our review of the roles of appointees in guardianships, it is clear to see that in many cases, several individuals could be involved in the process. The filing of an application puts several wheels in motion for the applicant, the Proposed Ward, the Court and appointed personnel. Each person has their own role, and those roles are clearly defined by the same law which authorizes their appointment.