Beresford Lawyer, David Tingstad, will be speaking at the ABA Business Law Section Spring Meeting – March 22 on LLCs and the dissolution of LLCs.

January 30, 2012 at 3:04 pm | Uncategorized | No comment | By admin

Do You Have a Claim in a Probate?

November 14, 2011 at 12:50 pm | Latest News | No comment | By Per Oscarsson

             The answer to that question may not be as simple as you might think.  Usually, you know if someone owes you money or some other obligation such as a personal guaranty of a third party’s debt.  But, what if the obligation is not yet due and payable when that person dies?  You might think that you don’t have a claim because the obligation is not yet due.  However, you could lose your ability to collect if you don’t act promptly after that person dies.

            Washington’s probate statutes include a section known as the “non-claim statute,” which provides that a person having a claim against the deceased person may not maintain an action on the claim unless a personal representative has been appointed and the claimant has presented a claim as set forth in the chapter of the probate statutes dealing with claims.  Another provision of the statutes requires claims to be in writing and, if the claim is contingent or not yet due, to set forth the nature of any uncertainty or the date when the claim will become due.  Yet another provision sets forth the deadline for filing creditor’s claims against a probate estate.

            A recent case in the Washington Court of Appeals held that a creditor who had not filed a claim in the probate could not enforce a personal guaranty signed by the deceased even though the guaranteed obligation was not due at the time of the deceased’s death and was not due at the expiration of the time to file creditor’s claims in the estate.  In that case, a corporation entered into a 10 year lease as tenant.  The corporation’s president personally guaranteed the corporation’s obligations under the lease.  The guaranty provided that, in the event of the guarantor’s death, the guaranty would remain in full force and effect and be binding upon the guarantor’s estate.  Over three years into the lease term, the corporation’s president died and a probate of his estate was commenced.  At the time of the president’s death, the corporation was in compliance with the lease.  The personal representative of the president’s estate published a notice to creditors and sent a copy to the corporation’s landlord.  The landlord did not file a claim before the claim filing period expired.  Six months after the claim filing period expired, the corporation partially defaulted under the lease.  Five months after that, the landlord filed a court action to enforce the president’s personal guaranty.  The Court of Appeals upheld dismissal of the landlord’s court action because the landlord failed to comply with the “non-claim statute” even though the corporation was not in default under the lease when the claim filing period expired.

            Application of the “non-claim statute” is not limited to personal guarantys of the deceased.  It can apply to various obligations that the deceased incurred during his or her lifetime, whether or not those obligations are due at the time of the deceased’s death or at the expiration of the creditor’s claims filing period in a probate of the deceased’s estate.

            If we can assist you with asserting or defending against such a creditor’s claim, please contact us at 425-776-4100.

I Promised What? Sellers of Real Estate, Beware! (Buyers too)

November 14, 2011 at 12:46 pm | Latest News | No comment | By Bill Kessler

Sellers of real property sign a Statutory Warranty Deed (“SWD”) at the closing of the vast majority of residential real estate transactions.  This is the document that actually transfers title from seller to buyer.  If you sell a piece of real estate and give your buyer a SWD, you are promising a lot more than you might think.

In the 2011 case Edmonson v. Popchoi, the Washington Supreme Court clarified and reaffirmed a seller’s duty under a SWD to defend claims brought against the buyer for “adverse possession.”  In short, adverse possession is the legal premise that neighbor N automatically takes title to portion P of a person’s land when N uses P in the manner of a reasonable true owner, and that use is (a) open/obvious, (b) continuous for 10 years and (c) exclusive, i.e. the true owner does not also use the land.

Edmonson is a good illustration of how easily an adverse possession claim can arise: There, after the sale of the house closed, Neighbor claimed that (a) a fence separating his property from Buyer’s property was several feet inside Buyer’s property line and (b) the fence had been there more than 10 years.  This means Neighbor (and Neighbor alone) occupied a “strip” of land which the SWD says Buyer owns.  Next, Neighbor filed a lawsuit claiming adverse possession, asking the court to declare that he (Neighbor) owned Buyer’s “strip” located on Neighbor’s side of the fence.  The Supreme Court said Seller had the duty to pay a lawyer to represent Buyer in defending against Neighbor’s claim.  Seller was not entitled to condition his duty on retaining the right to settle Neighbor’s claim.  Because Seller did not defend against Neighbor’s claim, Seller had to pay Buyer all the attorney fees Buyer spent defending against the claim.  Even worse for Seller, Buyer had a survey of Seller’s property before the sale and thus knew about Neighbor’s potential adverse possession claim.  But the Supreme Court said Buyer’s knowledge did not matter; Seller still had the “duty to defend” under the SWD.  See also RCW 64.04.030.

Why is this case important to sellers and buyers in Washington?  Mainly because only rare and expensive “extended” title insurance policies insure buyers against adverse possession claims.  Very few homeowners own such extended policies.  Thus, if you end up in the shoes of the Edmonson Seller, you will be personally on the hook to pay a lawyer to defend a neighbor’s adverse possession claim, with no insurance to pay that lawyer.  Worse for sellers, buyers have six years after closing to tender defense of a neighbor’s adverse possession claim.

So what should buyers and sellers do?

First, sellers can give buyers a Bargain and Sale Deed (“BSD”) instead of a SWD.  However, because a BSD contains fewer promises to the buyer and is not typical, the buyer (or his agent) might become suspicious or want a reduced purchase price.  Furthermore, real estate agents, title companies and escrow companies are often not familiar with the BSD.

Second, sellers might want to have the property surveyed before closing.  This will likely reveal any encroachment and allow for resolution of the issue before closing.  But beware, simply revealing the fact of the encroachment to the buyer (whether in the Form 17 or otherwise) will not get the seller off the hook if he gives the buyer a SWD.

Third, buyers can obtain the aforementioned “extended” title insurance policy that covers adverse possession claims.  However, such policies are usually far more expensive than a regular title policy, and buyers will want a real estate lawyer to review the extended policy to make sure it actually does cover adverse possession claims.  Of course, buyer and seller can negotiate who pays the cost of the extended policy and/or the lawyer’s review.

In the end, people should be aware of their rights and responsibilities when giving a SWD, including liability for an adverse possession claim.  Buyers and sellers alike should consult a real estate lawyer to analyze their particular transaction well in advance of closing.