Herring v. Bank of America, N.A., 176 S.W.3d 513 (Tex. App.—Houston [1st Dist.] 2004, no pet.).
I. Estate Administration
Husband and Wife borrowed money from Creditor for the purchase of their home. After Husband died, the court appointed Wife as the administratrix of Husband’s estate. The court approved her request for a family allowance. Later, Creditor filed a claim requesting preferred debt and lien status under Probate Code § 306(a)(2). Wife approved the claim and filed a report of a pending sale of the property indicating that the proceeds would be distributed using the priority order set forth in Probate Code § 320(a). Creditor objected. The trial court issued an order stating that Creditor was entitled to top priority over the sale proceeds to the extent of its claim, that is, Creditor had priority over the family allowance. Wife appealed.
The appellate court affirmed. The court explained that Creditor’s claim was not a general claim against the estate over which the family allowance has priority under Probate Code § 320(a). Instead, Creditor had a preferred debt and lien against a specific piece of property and that Probate Code § 306 gives a creditor who elects this status, thereby foregoing a claim against the estate’s general assets for a deficiency, priority over other claims, including the family allowance.
Moral: A creditor who elects preferred debt and lien status has priority over other claims, such as the family allowance, with respect to the value of the collateral.