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    The Lawletter Blog

    D. Bradley Pettit

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    ESTATE PLANNING: Lifetime Gifts of Closely Held Business Stock to Family Members

    Posted by D. Bradley Pettit on Thu, Nov 29, 2018 @ 10:11 AM

    The Lawletter Vol 43 No 7

    Brad Pettit—Senior Attorney, National Legal Research Group

                "Rather than disposing of stock in a closely held business (by sale or corporate reorganization) at retirement the retiree may decide to transfer all or a portion of the stock by gifts to various family members." Streng & Davis, Tax Planning for Retirement ¶ 7.05[1] (Thomson Reuters Tax & Acct'g 2018).  Three important objectives can be achieved by making gifts of closely held business stock to family members:

    It eliminates the stock's dividend income from the gross income and the estate of the retiree/donor

    It removes the value of the stock from the retiree/donor's estate for federal estate tax purposes upon the retiree's death

    It solidifies the interests of the family members receiving the stock as officers of the closely held corporation, enabling them access to corporate executive compensation arrangements and other benefits.

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    Topics: Brad Pettit, estate planning, lifetime gifts, closely held business stock, gift and estate tax

    TAX: Sales and Use Tax: The End of the “Physical Presence” Test

    Posted by D. Bradley Pettit on Tue, Oct 2, 2018 @ 11:10 AM

    The Lawletter Vol 43 No 5

    Brad Pettit, Senior Attorney, National Legal Research Group

                On January 12, 2018, in South Dakota v. Wayfair, Inc., 138 S. Ct. 735 (2018) (Mem.), the U.S. Supreme Court granted a petition for writ of certiorari with respect to the decision by the Supreme Court of South Dakota in State v. Wayfair Inc., 2017 SD 56, 901 N.W.2d 754, holding that a state statute that requires Internet sellers with no physical presence in the state to collect and remit sales tax violated the dormant Commerce Clause of the U.S. Constitution.

                In reaching this decision, the Supreme Court of South Dakota had relied on the prior rulings from the United States Supreme Court in National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992), holding that the Commerce Clause of the federal Constitution prohibits a state from requiring an out-of-state seller to collect and remit sales or use tax with respect to mail-order and similar sales and shipments of merchandise to in-state purchasers unless the former has a "physical presence" in the taxing state.

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    Topics: sales and use tax, Internet sellers, Commerce Clause, physical presence in taxing state

    PROPERTY:  Landlords' Liability to Guest of Tenant for Dog Bite Injury

    Posted by D. Bradley Pettit on Mon, Apr 9, 2018 @ 15:04 PM

    The Lawletter Vol. 43 No. 2

    Brad Pettit, Senior Attorney, National Legal Research Group

          A decision by the Supreme Court of Idaho illustrates the difficulties that a guest of a residential tenant may face when trying to hold the tenant's landlord liable for injuries sustained by the guest when the guest was bitten by the tenant's dog.  See Bright v. Maznik, 162 Idaho 311, 396 P.3d 1193 (2017).  In Bright, a guest of the tenants advanced several theories of liability in her suit against the tenants' landlords: negligence per se under Idaho's vicious dog statute, breach of duty to protect the guest from an animal known to have vicious tendencies, common law negligence, voluntary assumption of duty, and premises liability.  None of these claims were successful, primarily because the plaintiff failed to make the requisite factual showings that the landlords either "knew" about or "harbored" a vicious animal on the premises.

          For example, the Bright court found that the landlords could not be charged with "harboring" the tenants' dog on the property, as required under the vicious dog statute, regardless of whether the dog was actually "vicious."  162 Idaho 311, 396 P.3d at 1197.  The Bright court reasoned that, since the term "harbor," as it is used in the vicious dog statute, "contemplates protecting an animal, or undertaking to control its actions," the landlords could not be charged with negligence per se under the statute because there was no evidence in the record that the landlords "received clandestinely and concealed the [tenants'] dog" or "had an animal in [their] keeping."  Id. (citations therein omitted).

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    Topics: property law, landlord-tenant, landlord liability, dog bite injury, negligence

    ESTATES: Removal of an Executor or Trustee

    Posted by D. Bradley Pettit on Thu, Feb 22, 2018 @ 13:02 PM

    The Lawletter Vol 43 No 1

    Brad Pettit, Senior Attorney, National Legal Research Group

          The general rule is that a probate or surrogate's court may revoke letters of administration that were granted to an executor or personal representative if there is demonstrated friction, hostility or antagonism between the appointed fiduciary and beneficiaries of a decedent's estate, but only if the enmity between the fiduciary and the beneficiaries threatens to interfere with the administration of the estate.  In re Estate of Brown, 2016 N.Y. Slip Op. 02691, 138 A.D.3d 1191, 29 N.Y.S.3d 630 (3d Dep't 2016).  In other words, neither a conflict of interest nor hostility between an executor or trustee and the beneficiaries of an estate or trust provide the basis for removing a trustee or personal representative unless the administration of the trust or estate has been adversely affected.  In re Gerald L. Pollack Trust, 309 Mich. App. 125, 867 N.W.2d 884 (2015); In re Estate of Robb, 21 Neb. App. 429, 839 N.W.2d 368 (2013) (when executor of estate has a personal interest in administration of estate and in disposition of estate property and circumstances reveal that those conflicting interests are preventing executor from performing fiduciary duties in impartial manner, then executor should be removed).

           The mere fact that the personal representative of a decedent's estate is also a beneficiary thereof does not necessarily create a conflict of interest that would justify the removal of the personal representative as the fiduciary for the estate.  Gardiner v. Taufer, 2014 UT 56, 342 P.3d 269.  In order to justify removal of a personal representative who is also a beneficiary of an estate, the evidence must show that the personal representative committed some negligent act or mismanagement of the estate before a court can find a sufficient conflict of interest that is serious enough to justify removal of the estate fiduciary.  Id. ¶ 31, 342 P.3d at 279.

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    Topics: hostility between trustee and beneficiary, removal of executor or personal representative, executor of estate

    PROPERTY: Landlord's Liability for Collapsed Deck

    Posted by D. Bradley Pettit on Wed, Oct 18, 2017 @ 12:10 PM

    The Lawletter Vol 42 No 8

    Brad Pettit, Senior Attorney, National Legal Research Group

                The general rule is that "[w]hile a landlord is not a guarantor for the safety of those persons who might be expected to come upon its property, it does have a duty to make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition."  49 Am. Jur. 2d Landlord and Tenant § 454 (Westlaw May 2017 Update) (citing Rodriguez v. Providence Hous. Auth., 824 A.2d 452 (R.I. 2003)). A recent decision by a Georgia appellate court in a deck collapse case indicates that unless the evidence shows that an out-of-possession lessor of residential real estate knew or had reason to know that a potentially dangerous condition existed with respect to the premises or an improvement thereto, the landlord cannot be held liable for injuries that were suffered by a guest of the tenant due to the alleged failure to repair the premises or make an improvement. Aldredge v. Byrd, 341 Ga. App. 300, 799 S.E.2d 263 (2017), reconsideration denied (Apr. 26, 2017). 

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    Topics: property, landlord liability, notice of defect, lessor's duty to inspect

    PROPERTY: Landlord and Tenant: Landlord's Waiver of Right to Charge Penalty for Late Rent Payment

    Posted by D. Bradley Pettit on Thu, May 4, 2017 @ 12:05 PM

    The Lawletter Vol 42 No 3

    Brad Pettit, Senior Attorney, National Legal Research Group

                "[A]n implied waiver of nonperformance under a contract will be established by a party's conduct inconsistent with the assertion of the right to the performance allegedly waived, or by conduct that indicates that strict compliance with the contract will not be required, provided that the conduct manifests the requisite intent to waive the right to performance or has induced the requisite reliance by the other party." 13 Williston on Contracts § 39:30 (4th ed.) (Westlaw current through May 2015 Update) (footnotes omitted). For example, a lessor who regularly accepts late payments may establish a course of performance or "an order of business," which operates to waive, as to future payments, a provision making time of the essence and to preclude that party from enforcing a forfeiture. Id. It is also a principle of contract law that "[u]nless otherwise agreed, a course of dealing between the parties gives meaning to or supplements or qualifies their agreement." Restatement (Second) of Contracts § 223 (1981) (Westlaw current through Oct. 2016 Update).

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    Topics: late rent payment, implied waiver, course of performance, estoppel and waiver as affirmative defenses

    TRUSTS: Hostility Between Beneficiary and Trustee as Ground for Removal of Trustee

    Posted by D. Bradley Pettit on Fri, Mar 11, 2016 @ 10:03 AM

    The Lawletter Vol 41, No 3

    Brad Pettit, Senior Attorney, National Legal Research Group

         The Restatement of Trusts provides generally that "[a] trustee may be removed . . . for cause by a proper court." Restatement (Third) of Trusts § 37(b) (2003 & Westlaw database updated Oct. 2015) (emphasis added). The Comment to section 37 of the Restatement says that "[f]riction between the trustee and some of the beneficiaries [of a trust] is not a sufficient ground for removing the trustee unless it interferes with the proper administration of the trust." Id. § 37 cmt. e(1). Thus, although the "[b]eneficiaries may be resentful when property they expected to inherit is placed in trust, or of reasonable exercise of a trustee's discretion with regard to matters of administration or the alleged underperformance of the trustee's investment program[, s]uch resentment ordinarily does not warrant removal of the trustee." Id. "[B]ut a serious breakdown in communications between beneficiaries and a trustee may justify removal, particularly if the trustee is responsible for the breakdown or it appears to be incurable." Id.

         A leading treatise on trust law notes that "[d]isagreeable personal relations between the beneficiary [of a trust] and the trustee are frequently relied upon as grounds for removal [and] the mere fact that the beneficiary wants the trustee removed is not enough" to sustain a petition for removal of a trustee. George Gleason Bogert et al., The Law of Trusts and Trustees § 527 (Westlaw database updated Sept. 2015) (footnotes omitted). Thus, "[d]ifferences of opinion or unfriendliness" between a trust beneficiary and the trustee are "insufficient" grounds to support the removal of a trustee from office. Id. (footnotes omitted).

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    Topics: trusts, Brad Pettit, removal of trustee, hostility between trustee and beneficiary

    PROPERTY: Drafting the Renewal Clause in a Lease

    Posted by D. Bradley Pettit on Thu, Dec 3, 2015 @ 12:12 PM

    The Lawletter Vol 40 No 11

    Brad Pettit—Senior Attorney, National Legal Research Group

         The Supreme Court of Mississippi recently addressed the issue of the enforceability of a renewal provision in a land lease agreement that left for future negotiation matters such as the renewal period, the rental amount, and increases in rent. The court held that the provision was unenforceable. Intrepid, Inc. v. Bennett, No. 2014-CA-00999-SCT, 2015 WL 5158397 (Miss. Sept. 3, 2015) (not yet released for publication). In ruling that the renewal clause in the parties' lease was not enforceable, the Intrepid court reasoned that since "the rental amount in a lease contract is an essential and basic requirement," the parties' failure to set forth a "definite method to determine the rent upon renewal" was fatal to the enforceability of the renewal clause in their lease agreement. Id. at *3. The court noted that "[t]he [lease] option, by its very terms, required that rent 'shall be renegotiated,' and its uncertain formula for determining the amount of increase made this task impossible." Id.

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    Topics: enforceability, Brad Pettit, property, land lease agreement, renewal clause

    PROPERTY: Enforceability of Clause in Residential Property Lease Seeking to Shield Landlord from Liability for Injuries Caused by Mold or Fungus

    Posted by D. Bradley Pettit on Thu, Sep 24, 2015 @ 15:09 PM

    The Lawletter Vol 40 No 8

    Brad Pettit, Senior Attorney, National Legal Research Group

         In 2014, an Indiana appellate court considered the issue of whether a landlord can enforce a provision in a residential lease contract that seeks to protect it from liability for personal injuries caused by fungus or mold on the leased premises. In Hi-Tec Properties, LLC v. Murphy, 14 N.E.3d 767 (Ind. Ct. App.), transfer denied, 20 N.E.3d 851 (Ind. 2014), a tenant who leased an apartment that was below ground level brought suit against her landlord, alleging, inter alia, that mold in the apartment had aggravated her preexisting asthma and caused other injuries. The landlord defended against the tenant's claim by pointing to a clause in the parties' lease agreement that read in pertinent part as follows:

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    Topics: Brad Pettit, property law, residential lease, The Lawletter Vol 40 No 8, landlord liability

    PROPERTY: Does Seller of Real Property Have Duty to Disclose That Property Is Haunted?

    Posted by D. Bradley Pettit on Tue, May 12, 2015 @ 13:05 PM

    The Lawletter Vol 40 No 3

    Brad Pettit, Senior Attorney, National Legal Research Group

          The motion picture industry has produced many horror or suspense films that are centered on the theme of an individual or couple who purchase a dream house, only to subsequently discover, by way of terrifying sights, sounds, and other stimuli, that a gruesome event once occurred on the property. In a courtroom drama sequel to those movies, the Supreme Court of Pennsylvania made it clear that the occurrence of a murder/suicide or similar tragic event inside a house does not constitute a "material defect" therein that must be disclosed by a seller to a purchaser. Milliken v. Jacono, 103 A.3d 806 (Pa. 2014), as modified on reconsideration (Nov. 12, 2014). Accordingly, the Milliken court held that a real property seller's failure to disclose the occurrence of a murder/suicide inside a house to a buyer thereof did not constitute actionable fraud, negligent misrepresentation, or violations of unfair trade practices, consumer protection, and real estate sales disclosure laws. In short, the Milliken court concluded that "purely psychological stigmas are not material defects" in property that a seller must reveal to a buyer. Id. at 811. The Milliken court's reasons for its decision were as follows:

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    Topics: property law, haunted property, disclosure by seller, material defect

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