Source: https://www.txfiduciarylitigator.com/2016/06/court-discusses-slayer-rule-in-texas-and-affirms-judgment-for-bank-that-froze-account/
Timestamp: 2019-05-21 13:16:16
Document Index: 740090745

Matched Legal Cases: ['§ 21', '§ 201', '§ 201', '§ 1103', '§ 7', '§ 201', '§113', '§113', '§113']

Court Discusses Slayer Rule in Texas And Affirms Judgment For Bank That Froze Account | Texas Fiduciary Litigator
Home Texas Court of Appeals Cases Decided Court Discusses Slayer Rule in Texas And Affirms Judgment For Bank That Froze Account
By David Fowler Johnson on June 8, 2016 Posted in Cases Decided, Texas Court of Appeals
Preface to Case: The Texas Constitution states that “[n]o conviction shall work corruption of blood, or forfeiture of estate.” Tex. Const. Art. I § 21 (emphasis added). The Texas Estates Code also states as much. Tex. Est. Code Ann. § 201.58(a). To put this into context, the concept of “corruption of blood” and “forfeiture of estate” emanated from the English common-law, and the impact was that the convicted “lost all inheritable quality and could neither receive nor transmit any property or other rights by inheritance.” Ex parte Garland, 71 U.S. 333, 387 (1866). So those in England who committed a capital crime could not inherit. The “Texas Supreme Court has interpreted [article I, section 21] to mean that unlike in England where a convict is deemed civilly dead and cannot inherit, Texas preserves the inheritance of a convicted felon from forfeiture through corruption of blood.” In re B.S.W., 87 S.W.3d 766, 770 (Tex. App.—Texarkana 2002, pet. denied). This was likely important to early Texans who may not have been the most savory of folks.
There are several exceptions to the general rule in Texas that criminals can inherit. First, a person cannot receive insurance benefits from those that they kill. Tex. Est. Code Ann. § 201.58(b) (proceeds of life insurance policy may not be paid to beneficiary who is convicted of wilfully causing death of insured); see also Greer v. Franklin Life Insurance Co., 221 S.W.2d 857, 859 (Tex. 1949); Murchison v. Murchison, 203 S.W. 423 (Tex. Civ. App.—Beaumont 1918, no writ). The Estates Code states that if a beneficiary of a life insurance policy or contract is convicted and sentenced as a principal or accomplice in wilfully bringing about the death of the insured, then the proceeds shall be paid in the manner provided by the Insurance Code. The Insurance Code states that “[a] beneficiary of a life insurance policy or contract forfeits the beneficiary’s interest in the policy or contract if the beneficiary is a principal or an accomplice in wilfully bringing about the death of the insured.” Tex. Ins. Code Ann. § 1103.151. Under the Insurance Code provision, courts have held that a beneficiary need not be convicted of murder to forfeit his or her interest in the policy; rather, a party seeking to establish that a beneficiary has forfeited his or her right to collect on the policy need only prove by a preponderance of the evidence that the beneficiary willfully brought about the death of the insured. In the Estate of Stafford, 244 S.W.3d 368 (Tex. App.—Beaumont 2007, no pet.); see also Bean v. Alcorta, 2015 U.S. Dist. LEXIS 88874 (W.D. Tex. July 9, 2015). This does not mean that the insurance company does not have to pay the proceeds, it just does not pay them to the murdering beneficiary. Clifton v. Anthony, 401 F. Supp. 2d 686, 689–692 (E.D. Tex. 2005) (when wife forfeited by murdering husband, proceeds went to daughter as nearest living relative under Insurance Code). To establish a forfeiture, a party must establish that the beneficiary had an intent to kill, as negligence and gross negligence are not sufficient. Rumbaut v. Labagnara, 791 S.W.2d 195, 198–199 (Tex. App.—Houston [14th Dist.] 1990, no writ). Moreover, if the killing was legally justified, i.e., self-defense, the beneficiary will not forfeit his or her right to the proceeds. Republic-Vanguard Life Ins. v. Walters, 728 S.W.2d 415, 421–422 (Tex. App.—Houston [1st Dist.] 1987, no writ).
Second, there is an equitable exception to the general rule that a criminal may inherit. This exception is based on the concept of an equitable constructive trust. A constructive trust is an equitable, court-created remedy designed to prevent unjust enrichment. KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70 (Tex. 2015). They have historically been applied to remedy or ameliorate harm arising from a wide variety of misfeasance. Id. A constructive trust is based upon the equitable principle that a person shall not be permitted to profit from his own wrong. Pope v. Garrett, 147 Tex. 18, 211 S.W.2d 559, 560 (1948). In equity, Texas courts have held that a husband or wife who murders his or her spouse may not inherit under the spouse’s will as a beneficiary under a constructive trust theory. Bounds v. Caudle, 560 S.W.2d 925 (Tex. 1977). This exception has been justified thusly: “The trust is a creature of equity and does not contravene constitutional and statutory prohibitions against forfeiture because title to the property does actually pass to the killer. The trust operates to transfer the equitable title to the trust beneficiaries.” Id.; Medford v. Medford, 68 S.W.3d 242, 248-49 (Tex. App.—Fort Worth 2002, no pet.) (“When the legal title to property has been obtained through means that render it unconscionable for the holder of legal title to retain the beneficial interest, equity imposes a constructive trust on the property in favor of the one who is equitably entitled to the same.”). In other words, a constructive trust leaves intact a murderer’s right to inherit legal title to property while denying the murderer the beneficial interest.
An heir must plead for the imposition of a constructive trust over the property to be inherited by the murderer. Id.; see also Bounds v. Caudle, 560 S.W.2d 925, 928 (Tex. 1977); see also 9 Gerry W. Beyer, Texas Practice Series: Texas Law of Wills § 7.8 (3d ed. 2015) (“A person asserting a constructive trust must strictly prove the elements of a constructive trust including the unconscionable conduct, the person in whose favor the constructive trust should be imposed, and the assets to be covered by the constructive trust. Mere proof of conduct justifying a constructive trust is insufficient.”). Like the statutory Slayer Rule, a party seeking a constructive trust must show more than mere negligence on the party of the beneficiary. Mitchell v. Akers, 401 S.W.2d 907, 910 (Tex. Civ. App.—Dallas 1966, writ ref’d n.r.e.) (“[T]he Legislature [did not intend] in effect to disinherit an unfortunate heir, innocent of intent to kill, whose contributory negligence has been found to be a proximate cause of the death of a person toward whom he occupied the status of an heir.”).
If those elements are established, a court may create a constructive trust for the assets that would have gone to the murderer and instead direct that they benefit other more-innocent beneficiaries. See, e.g., Smithwick v. McClelland, No. 04-99-00562-CV, 2000 Tex. App. LEXIS 552 (Tex. App.—San Antonio January 26, 2000, no pet.) (“The trial court’s conclusion to impose a constructive trust over the estate assets to which appellant would otherwise be entitled but for his commission of the murders, is consistent with Texas authority.”); Ford v. Long, 713 S.W.2d 798 (Tex. App.—Tyler 1986, writ ref’d) (real estate was held in constructive trust to prevent murdering husband from obtaining it under right of survivorship agreement); Thompson v. Mayes, 707 S.W.2d 951 (Tex. App.—Eastland 1986, no writ); Greer v. Franklin Life Ins. Co., 148 Tex. 166, 221 S.W.2d 857 (1957); Parks v. Dumas, 321 S.W.2d 653 (Tex. Civ. App.—Fort Worth 1959, no writ); Pritchett v. Henry, 287 S.W.2d 546, 550-51 (Tex. Civ. App.—Beaumont 1955, writ dism’d w.o.j.). It is important to note that the equitable trust would only be placed to stop a murderer from receiving a beneficial interest, and it cannot be used to deprive a murderer of property lawfully acquired by him or her. Ragland v. Ragland, 743 S.W.2d 758 (Tex. App.—Waco 1987, no writ). For example, in Ragland, the murdering wife was entitled to her community property half of funds in an employer profit sharing plan. Id. (“[T[he funds were community property and, for that reason, the court could apply a constructive trust only on the one-half interest which Lee Ann Ragland would have otherwise inherited from her husband under the laws of descent and distribution.”).
There is also a relatively new statute that would seemingly allow a probate court to not allow a murderer to inherit under a will. In Estates Code section 201.062, a probate court may enter an order declaring that the parent of a child under 18 years of age may not inherit from the child if the court finds by clear and convincing evidence that the parent has been convicted or has been placed on community supervision for being criminally responsible for the death or serious injury to the child and that such conduct would constitute a violation of certain enumerated Penal Code statutes. Tex. Est. Code Ann. § 201.062(3). The Texas Attorney General has offered the following opinion as to the constitutionality of this new statute: “To the extent that this provision authorizes a probate court to bar a person’s inheritance from his child under circumstances within the Slayer’s Rule or the constructive trust doctrine, it is consistent with Texas Constitution article I, section 21 as construed by the Texas courts. In our opinion, however, the courts would probably find Probate Code section 41(e)(3) violative of article I, section 21 when applied to bar a wrongdoer’s inheritance under circumstances not within either of these two doctrines.” Atty. Gen. Op. No. GA-0632 (2008).
New Case Summary: In Estate of Huffines, the wife and husband opened a checking account and a savings account that were joint accounts with rights of survivorship. No. 02-15-00293-CV, 2016 Tex. App. LEXIS 4469 (Tex. App.—Fort Worth April 28, 2016, no pet. history). Both made deposits into the accounts. Three months later, the husband shot and killed the wife and then committed suicide. The wife’s estate claimed that the entire amount in the accounts should go to it because of the Slayer Rule and also because the money was allegedly the wife’s separate property. After an investigation, the bank disbursed half of money to the wife’s estate and held the other half pending some order from a court determining the rightful owner. The bank’s account agreement allowed it to freeze an account where there was a dispute as to the funds. The procedural facts are convoluted, to the say the least, but the wife’s estate brought claims against the bank for failing to disburse all of the money to it. The trial court eventually entered an order for the bank, and the wife’s estate appealed.
The court of appeals affirmed. The court first addressed the separate property issue, and held that the evidence showed that both the wife and husband made deposits, so there was a fact issue as to how much of money in the accounts was owned by both. The court then turned to the Slayer Rule argument. The court noted that Texas law generally provides that a husband or wife who murders his or her spouse may not inherit under the spouse’s will as a beneficiary. The court also held that an heir must plead for the imposition of a constructive trust over the property to be inherited by the murderer. That was not done in this case. The court concluded that “[u]ntil the constructive-trust issue is proven and decided, the Estate’s claim to the remaining $7,500 is not conclusive[,]” and the wife’s estate had no claim against the bank. Id. “In other words, the summary-judgment evidence shows that reasonable minds could differ on the appropriate disposition of the remaining funds in the joint accounts, justifying a conclusion that there is no genuine issue of material fact regarding the Estate’s claims against Appellees for failure to release those funds in the absence of a court order.” Id.
Interesting Note: The husband in Estate of Huffines still owned his share of community property in the bank accounts. If a joint account is determined to not have survivorship language, then before a court can award the money in the account to an estate, the estate representative has to prove that the funds in the account were all the decedent’s funds. In re Estate of Graffagnino, 2002 Tex. App. LEXIS 6930, at *5 (Tex. App.—Beaumont Sept. 26, 2002, pet. denied). Any funds that were deposited by the beneficiary into a joint account without survivorship effect belongs to the beneficiary after a co-party’s death. Id. So, in Estate of Huffines, the wife’s estate did not have any claim to the husband’s funds in the joint account. Rather, under any version of the Slayer Rule in Texas, the wife’s estate would only be entitled to: 1) a finding that the husband’s estate would not receive any insurance proceeds from her life insurance policy (which was not raised in this case), and 2) a claim for a constructive trust as to any of the wife’s assets that would transfer to her husband at her death. That potentially could include funds in a joint account with rights of survivorship that originally belonged to the wife. But, once again, the wife’s estate had to request a constructive trust and prove the elements for same. That claim should be against the husband’s estate. The estate would not be entitled to a claim against the bank until that issue is resolved under the bank’s account agreement.
Further, a multiple-party account may be paid, on request, to any one or more of the parties to the account. Tex. Est. Code Ann. §113.202. Moreover, the Estates Code has specific provisions allowing a financial institution to pay account parties for joint accounts, P.O.D. accounts, and trust accounts. “A financial institution that pays an amount from a joint account to a surviving party to that account in accordance with a written agreement under Section 113.151 is not liable to an heir, devisee, or beneficiary of the deceased party’s estate.” Tex. Est. Code Ann. §113.207. The Estates Code also expressly states that payment in accordance with these provisions discharges a financial institution from liability. Tex. Est. Code Ann. §113.209; Clark v. Wells Fargo Bank, N.A., No. 01-08-00887–CV, 2010 Tex. App. LEXIS 4376 (Tex. App.—Houston [1st District] June 10, 2010, no pet.).
Tags: constructive trust, forfeiture, freeze account, Slayer Rule, Slayer Statute