Annotations 07/2011

(FDA sought permanent injunction that would bar defendant from selling unpasteurized milk products in interstate commerce and from introducing into interstate commerce food that is "misbranded"; advocate of raw milk sought to intervene in case on behalf of not-for-profit “Right to Choose Healthy Food” organization and other private citizen’s clubs and “similarly gastronomically-inclined” individuals; court denied advocate’s intervention; advocate was not a licensed attorney and was attempting to protect the legal rights of the above-named individuals; advocate did not have legally cognizable interest in action sufficient to establish intervention as of right; permissive intervention also denied by court because it would cause delay). 

(debtor filed Ch. 12 petition in 2010 but was forced to liquidate farrow-to-finish swine herd due to PRRS outbreak; Ch. 12 filed to save debtor’s homestead; bank objected to debtor’s proposed plan to pay bank $86,000 for homestead and farm real estate amortized over 20 years with interest at 5.75 percent; bank argued acreage worth far more than valued in debtor’s plan; parties asked court to determine value and bankruptcy court ordered that fair market value of homestead and farm real estate for purpose of plan confirmation was $160,355).

(materials a dairy farmer buys that are used to build a manure containment facility are subject to sales tax; Mo. Rev. Stat. Sec. 144.020.1 imposes sales tax on retails sales of tangible personal property and Sec. 144.030.2(15) exempts certain equipment and devices used solely for water pollution abatement; permanent structure on real estate does not qualify as "machinery, equipment, appliances or devices under the exemption; thus, materials used in construction are not exempt). 

(in split decision, court holds that plaintiff violated state law in approving requests to develop side-by-side subdivisions that resulted in exceeding the statutory limits contained in 1990 Growth Management Act concerning water usage from exempt wells serving each home in subdivision; comprehensive plan not approved and counties must determine whether water is legally available before approving subdivisions; law exempts from permit requirement homes and rural economic development using up to 5,000 gallons of water daily and water uses for up to 1/2 acre lawn, garden and livestock watering; court's decision upholds Eastern Wash. Growth Management Hearing Board finding that plaintiff's comprehensive plan and development regulations allowing rural lots up to three acres not supported by evidence; case remanded to hearings board; dissent stated that counties elected legislative body entitled to deference on its decisions and troubled by court's decision to hand policy matters over to unelected hearing's board).

(plaintiff appeals grant of summary judgment in favor of defendant insurance company; case arises from 2008 fire that destroyed pole barn on plaintiff’s property; policy provided coverage for residence and residential personal property, but not for farm buildings or farm property with exception of property specifically scheduled for coverage; pole barn was scheduled under policy and defendant tendered full policy limit to plaintiff for loss of structure; issue arose as to whether certain items stored in pole barn (fence posts, gates, etc.) were covered; trial court held items were of a “farming nature” and not eligible for coverage plaintiff purchased; appellate court affirmed; limitations period ran when insurance company formally denied coverage).

(IRS determined $98,201 deficiency in petitioners’ Federal income tax and $19,640 accuracy-related penalty for 2005 regarding petitioners’ sale of interests in home and towing business; petitioners operated towing business from farmhouse; in 2005, petitioners granted county highway easement on front portion of five-acre parcel and were paid nearly $160,000; in same year, competing business bought towing operation , easement, and five-acre parcel for a total sales price of $669,000 (minus prior rents paid); court held petitioners’ sale of permanent easement to buyers was a sale of property; court agreed with petitioner’s argument that 1/3 of the property was attributable to business use and 2/3’s was attributable to residential use; business portion of property determined to be both I.R.C. §1231 and I.R.C. §1250 property and amount of long-term capital gain under §1231 must be reduced by amount of §1250 gain recaptured at ordinary rates and at 25% rate; petitioners must recognize gain with respect to business percentage of sale of easement and treat property as §1231 property; as to sale of residential portion to buyers, court held petitioners satisfied requisite use requirements and home was petitioners’ “personal residence” and entitled to exclude up to $500,000 gain from sale of residential portion; petitioners’ income from sale of residential portion of permanent easement exempt to extent permitted under §121; tax preparer had sufficient expertise to justify petitioners’ reliance  and relied in good faith on preparer’s advice; petitioners not liable for I.R.C.§6662(a) accuracy-related penalty).

(transfer of fishing rights by partnership not taxed at long-term capital gain rates because transfer does not involve sale or exchange of capital asset under I.R.C. Sec. 1222; transferred rights did not constitute "property" as defined under I.R.C. Sec. 1221)

(plaintiffs appeal trial court ruling declaring defendant's property not burdened by easement in favor of plaintiffs; plaintiffs routinely subleased ranch to deer hunters and claimed access right through defendant's property for hunting; plaintiffs assert trial court erred by not finding easement by estoppel, easement by necessity and easement implied from prior use; appellate court affirmed;  insufficient evidence to conclude easement by estoppel (“friendly neighborly permission” to use land not enough); plaintiffs failed to prove historical necessity for easement by necessity; no evidence showing apparent use of road to establish implied easement).  

(county board of adjustment appeals trial court ruling reversing board’s non-conforming use determination in regards to livestock grazing activities; farmer began raising cattle in an area rezoned in 1971 to prohibit livestock grazing; appellate court reversed trial court ruling; concluded board correctly denied farmer’s request for livestock grazing as an improper expansion of a non-conforming use).  

(involves dispute over use of non-exclusive roadway and utility easement; plaintiff owned tract of residential property benefitted by easement running across tract owned by defendant; trial court ordered defendants to remove all obstacles and encroachments from easement area and awarded plaintiffs $5000 damages for nuisance created by defendants; court enjoined defendants from engaging in future conduct impairing or obstructing plaintiff’s use, enjoyment, maintenance of easement; appellate court affirmed on all counts). 

(county taxation board plaintiff a farmland assessment application for plaintiff's real estate which was a 12-acre parcel that contained a cell tower and an apiary; most income from the property came from the cell tower and court upheld board's denial of assessment of property as farmland). 

(dispute between divorced parents over $8 million estate of deceased son; high net worth of was result of settlement with son’s school which failed to adequately treat him following heart attack at school; father, who had not been a part of son’s life since birth, signed disclaimer waiving father’s right to half the estate; mother filed petition to enforce disclaimer, but trial court ruled disclaimer void because mother misrepresented nature of disclaimer and father not negligent in failing to read it in reliance on misrepresentations and disclaimer did not contain “adequate description of assets”; appellate court affirmed and established heirship).

(plaintiff property owner sued adjacent property owner over boundary line dispute; trial court held common property line was evidenced in 2003 survey and that defendant had not established adverse possession to property lying east and southeast of the common boundary line; defendant appealed; appellate court affirmed on basis that defendant did not hold land in absence of assurance of color of title for requisite 20 year period).

(landlord allowed tenant one pet on property per lease agreement; landlord aware that tenant’s dog was one-half bullmastiff and one-half boxer; prior to lease signing, tenant inspected fence enclosing property and found no issues; after lease signed, tenant informed landlord that gate was inadequate to restrain dog; plaintiff suffered hemorrhagic contusion and subdural hematoma when knocked down by dog after he escaped enclosure; plaintiff sued landlord and trial court found no evidence that landlord had actual knowledge of dog's dangerous propensities; appellate court affirmed and found that duty of reasonable care imposed upon landowner is measured by landowner’s control of property and knowledge of dog’s dangerous propensities; little or no evidence landowner had knowledge). 

(covenant not to compete is 15-year amortizable property as an interest in a trade or business in accordance with I.R.C. Sec. 197(d)(1)(E)). 

(bank filed complaint against Ch. 7 debtors seeking determination that claims were non-dischargeable under 11 U.S.C.S. §523(a)(2)(B) and (a)(6) and seeking denial of debtor’s discharge under 11 U.S.C.S. §727(a)(3) and (a)(5); bank based §523(a)(2)(B) claim in part on financial statement submitted by debtor in connection with loan consolidation; although financial statement materially misleading (omitted a debt) and bank relied on financial statement in assessing debtor’s ability to repay loan, bank did not prove debtor intentionally deceived bank by omission or that financial statement was grossly reckless; bank failed to produce evidence of intentional and malicious injury under §523(a)(6) and failed to produce evidence to prove claim under §723(a)(3); denial of discharge not supported by record; debtor could have kept better records of cattle sales and purchases, but such business not debtor’s primary occupation). 

(IRS has issued proposed regulations extending two-year statute of limitations to 10 years for new equitable relief requests from joint liability filed by "innocent spouses; proposed regulations also apply to requests that are currently under consideration; previously denied requests due to two-year limitation may reapply via filing Form 8857 if collection statute of limitations for tax year(s) involved not yet expired; two-year rule not applicable to any pending litigation involving equitable relief, and if litigation final IRS to suspend collection action in certain circumstances; regulations to be issued to formally remove two-year limitation; effective for innocent spouse relief filed on or after Jul. 25, 2011).

(case involved USDA-administered Consolidated Farm and Rural Development Act and dispute between two water service providers over which is entitled to serve customers located in and around Guthrie, OK; plaintiff claimed right to serve based in state law and that it was protected from competition from encroaching districts by 7 U.S.C. §1926(b); trial court ruled for plaintiff and appellate court affirmed because plaintiff established continued indebtedness to USDA and that plaintiff “made service available” in satisfaction of statute). 

(plaintiffs sought judicial declaration invalidating Washington Humane Slaughter of Livestock Act; Act requires humane slaughter methods where by animal is rendered insensible to pain or in accordance with ritual requirements of any religious faith; appellate court upheld dismissal of action for plaintiffs' failure to bring a justiciable claim; issuance of advisory opinions prohibited because it would not finally and conclusively resolve the dispute between the parties).

(plaintiffs sued for alleged violation of Iowa Wage Payment and Collections Law (Iowa Code Sec. 91A.1, et seq.) for defendant's failure to pay plaintiffs for time spent donning and doffing personal protective equipment (PPE); plaintiffs' claim relies on federal Fair Labor Standards Act (FLSA) to establish violation of IWPCL; Sec. 203(o) of FLSA excludes "changing clothes" from requirement to pay employees overtime wages and court holds that PPE is included in the definition of "clothes" contained in Sec. 203(o); collective bargaining agreement allowed for 5-minute gowning/clean-up period; no violation of IWPCL for failure to pay for donning and doffing time because that time does not constitute "hours worked" under Sec. 203(o)). 

(An Act to Increase Regulatory Efficiency in Order to Balance Job Creation and Environmental Protection)(in attempt to remove competitive disadvantage on North Carolina business imposed by environmental regulations in the state, Bill prohibits state Department of Environmental and Natural Resources (DENR) from adopting any "rule that imposes a more restrictive standard or limitation than those imposed by federal law or rule"; minor exceptions included for serious and unforeseen threat to public health and safety; Bill passed both bodies of state legislature and was vetoed by Governor, a Democrat; Senate overrode veto and override vote scheduled for July 25, 2011, in House).

(plaintiff challenged EPA’s approval of pollution control plan for Anacostia River; court granted plaintiffs motion for summary judgment based on conclusion that EPA acted arbitrarily and capriciously, in violation of APA and CWA, by approving sediment/TSS Total Max Daily Load that ignored effects of sediment and TSS pollution on recreational and aesthetic uses of river; EPA must jettison existing pollution caps and develop within one-year new pollution standards to make Anacostia River clean enough for recreational activity).

(cow/auto collision case; plaintiff crashed into cow wandering on highway at night and brought negligence claim against cow owner (defendant) was an absentee owner for failing to prevent cow's escape; trial court found defendant 85 percent negligent and that the negligence proximately caused plaintiff’s damages; trial court assigned 15 percent fault to plaintiff and none to unknown party that left gates open; appellate court affirmed - securing gates by using bailing twine not exercise of reasonable care under the circumstances, and defendant testified that he was "lazy" and that it was too much trouble to lock and unlock gates; evidence also showed that cattle had escaped in the past and vandals had previously opened gates; no credible testimony that a third party allowed the cows to escape).

(organic farmers filed civil suit alleging defendants sprayed chemical pesticide that drifted onto their fields and prevented plaintiffs from selling crops under federal non-pesticide “organic” certification; district court granted summary judgment and dismissed plaintiffs claims of trespass, nuisance, and negligence per se; appellate court held that pesticide drifting from one farm to another may constitute trespass and federal regulation that prohibits sale of produce labeled organic if tainted does not automatically authorize sale of organically labeled produce that does not fail five-percent test; appellate court reversed dismissal of plaintiff’s claims).

(employee injured on employer’s property when all-terrain vehicle (ATV) he was operating struck tree stump concealed by tall pasture grass while attempting to recapture runaway bull; employee sued employer for negligence and under Illinois Domestic Animals Running at Large Act; appellate court found employer owed employee duty to provide safe place to work and employer not immunized by state ATV statute because they provided ATV to employee (statute addresses careless operation of ATV); appellate court held employee could not maintain claim under Running at Large statute because an owner was broadly defined to include any person who had an animal in his care of acted as its custodian; employee was herding bull back to confinement at time of injury).

(petitioner not entitled to deduct certain business expenses under I.R.C. §162(a) and liable for additional tax under I.R.C. §6651(a)(1) for failure to timely file; petitioner, self-employed realtor, reported no Sch. C business income for 2005 tax year and kept no records of business expenses; IRS included $21,745 as Sch. C income; petitioner claimed he was entitled to deduct certain business deductions, such as insurance and mileage; petitioner failed to establish entitlement to deductions due to lack of reliable evidence to establish amount and nature of deductions and actual payment thereof). 

(petitioner liable for 10 % additional tax under I.R.C. §72(t) for early distributions from qualified retirement plans; exception of I.R.C. §72(t)(2)(A)(iii) for disability of taxpayer inapplicable; evidence of petitioner’s disability lacking in consideration of his continued business activity). 

(IRS announces that it is eliminating the regulations established under I.R.C. Sec. 6015(f) that establish a two-year statute of limitations (from time of first collection activity of IRS against "innocent" spouse) for innocent spouse claims, and that taxpayers that had claims denied due to the statute of limitations may reapply if claim is not being litigated; even though Third, Fourth and Seventh Circuit Courts of Appeal had upheld the validity of the regulations, IRS noted that many taxpayers were unaware of tax liability until after two-years had passed; pending requests submitted after two-year statute of limitations will still be considered ).

(Perishable Ag Commodities Act (PACA) trust case; plaintiffs filed action alleging defendant failed to pay for perishable commodities and delivered commodities in violation of PACA; plaintiffs motion for summary judgment denied; while PACA impresses trust in favor of sellers on inventories of commodities and provides seller right to recover against purchasers, superior to all other creditors (including secured creditors), court denied plaintiffs' trust rights because plaintiffs did not provide written notice to buyer of intention to preserve trust benefits on invoices). 

(plaintiffs alleged defendants contaminated well water supply and caused illness from exposure to hazardous chemicals during course of drilling and operating natural gas wells; court held plaintiffs’ complaint contained sufficient factual matter to state plausible claim for relief based on existence of legal duty; court allowed plaintiffs claims of private nuisance because there were disputed issues of material fact of whether non-landowner plaintiffs’ privilege to use and enjoyment of land was affected).

(IA tuition and textbook credit applies to items listed on school supply list as being necessary to attend government elementary and secondary schools; such items include pens and pencils, Kleenex, rulers and crayons; credit equals 25 percent of first $1,000 paid for tuition and textbooks of each dependent attending an elementary or secondary school in IA; such amounts fit definition of "tuition").

(Chapter 7 case; trustee objected to some claimed exemptions because properties not held by debtor and wife in tenancy-by entirety form (and, thus, not exempt under 11 U.S.C. Sec. 522(b)(3)(B)); court disallowed exemption because debtor and wife not married at time interest in property conveyed to them jointly; as for bank accounts, state (VA) law created rebuttable presumption that each spouse owned one-half of account even if titled in joint tenancy; stock determined to be held in joint tenancy form; under VA law, auto could not be owned in tenancy-by-entirety form; joint tax refund deemed owned by couple jointly; trustee's objection sustained except with respect to stock and one-half of tax refund was property of bankruptcy estate).

(adjacent property owners dispute right to purchase farm property from estate and right to continue haying activity in perpetuity; appellate court held that evidence did not support application of part performance doctrine for right to purchase land; no detrimental reliance, and payments not shown to be consideration for right to purchase; hay lease not enforceable in perpetuity because unreasonable restraint on alienation of property). 

(personal representative of daughter’s estate appeals probate court’s denial of distribution of proceeds from sale of parcel of farm real estate from mother’s trust; appellate court affirmed; trust gave two farms to grandson, and provided that if grandson sold farms the daughter was entitled to one-half of the net proceeds; grandson sold farm and daughter’s estate claimed entitlement to half of the proceeds; issue before trial court was whether mother intended daughter’s interest to be personal to daughter; trial court concluded and appellate court affirmed daughter’s interest was personal and terminated upon her death; daughter’s heirs not entitled to one-half share of proceeds).

(historic, bi-partisan compromise measure passed U.S. House on Jul. 19, 2011, to deal with federal debt and balance budget failed to receive a vote in the Senate; in partisan vote on Jul. 21, 2011, U.S. Senate voted 51-46 (with three Senators not voting) to not vote on the measure; all 51 votes to not allow the measure to come to a vote on the Senate floor were cast by Democratic Senators and all 46 votes to allow the measure to come for a vote on the Senate floor were cast by Republican Senators). 

(MN Gov. Dayton (DFL) signed into law a state budget that, among other things, exempts up to $4 million in qualified farms and small businesses from state estate tax). 

(plaintiff entered into agreement to develop 95 acres of land by clearing timber and trees, repairing fence, building suitable structures for livestock, and converting land into usable livestock pasture; in return for services, defendant would convey land to plaintiff; but, defendant sold property to another party; plaintiff sued for specific performance of contract; trial court held contract was vague and unenforceable; appellate court affirmed on basis that legal description in contract insufficient; trial court's award of summary judgment for defendant affirmed).

(petitioner received four personal checks from uncle via loan agreements that designated them as "loans" and "loan" written on face of checks; debtor-creditor relationship established such that amount of loans not income to petitioner). 

(county board found plaintiffs violated restrictive covenant for keeping of livestock; plaintiffs filed a declaratory judgment action seeking declaration that restrictive covenant not be enforced against them; trial court granted plaintiff’s motion and permitted goats, “Fred” and “Barney,” to be kept on plaintiff’s lot; appellate court affirmed holding that goats were kept for pleasure rather than profit or utility and were pets, not livestock;  restrictive covenant was so broad as to allow for “virtually any animal which may be treated as a ‘household pet’ to be kept on homeowner’s property, so long as the animal is not kept, bred, or maintained for any commercial purposes and does not attach horses or horsemen). 

(state land trust sold to purchaser who bought land for grazing purposes; original purchaser received patent in 1947 and sold land in 1982; land contained surface and subsurface metamorphic rock and character of surface use for grazing did not change until after 1982 sale; successor landowner’s lessee mined and sold rock for use in railroad beds and paid landowner royalties; successor of original purchaser sued state commissioner of public lands to quiet title to rock when commissioner asserted ownership of rock and right to royalties based on general mineral reservation in 1947 patent; trial court held for commissioner; appellate court held trial court did not err in determining, under required analysis of intent of the parties of original sale transaction, that based on sale transaction documentation, including patent, and also based on all surrounding circumstances, the intent of the conveyance transaction was that the rock was included in the reservation of “all minerals of whatsoever kind” in the patent). 

(husband entered nursing home followed by wife's transfer of $176,000 to couple's daughter, $11,787.83 to a son and $3,000 to another son; all transfers were in return for a promissory note; promissory note from daughter converted into private annuity; husband applied for Medicaid benefits and application denied because transfers within applicable look-back period; court held that transfers were disqualifying transfers because promissory notes not actuarially sound and no proof existed of wife's life expectancy at time assets transferred; in addition, notes from sons did not bar cancellation on lender's death and note converted into annuity did not name state as remainder beneficiary). 

(state land trust sold to purchaser who bought land for grazing purposes; original purchaser received patent in 1947 and sold land in 1982; land contained surface and subsurface metamorphic rock and character of surface use for grazing did not change until after 1982 sale; successor landowner’s lessee mined and sold rock for use in railroad beds and paid landowner royalties; successor of original purchaser sued state commissioner of public lands to quiet title to rock when commissioner asserted ownership of rock and right to royalties based on general mineral reservation in 1947 patent; trial court held for commissioner; appellate court held trial court did not err in determining, under required analysis of intent of the parties of original sale transaction, that based on sale transaction documentation, including patent, and also based on all surrounding circumstances, the intent of the conveyance transaction was that the rock was included in the reservation of “all minerals of whatsoever kind” in the patent).

(husband and wife filed suit in county court seeking damages against neighboring landowners for dumping of rubble and dirt in ravine partially owned by plaintiffs; plaintiffs argued rubble damaged property value; county court dismissed suit on basis that plaintiffs failed to prove decline in value and costs of restoration; district court reversed; appellate court affirmed district court on basis that county court erred by placing burden of proof on plaintiffs to prove costs of restoration and decline in property’s value).  

(married couple could not claim travel expenses as deductions on return for traveling from residence in state of Washington to respective places of work; husband worked in Hawaii as tug master and wife worked as flight attendant for employer whose flights originated in New York; each spouse had a different tax home). 

(IRS noted that it received no comments on whether it should continue allowing the high-low method for substantiating lodging, meal and incidental expenses incurred while traveling away from home; IRS to discontinue authorizing use of the method and will publish a Rev. Proc. on the matter in 2011). 

(Act passed House by vote of 234-190; compromise measure that authorizes an increase in the federal debt limit to $16.7 trillion, cuts total federal spending by $111 billion in fiscal year 2012, reduces non-defense discretionary spending below fiscal year 2008 (pre-"stimulus") levels, implements statutory spending caps (but exempts Social Security, Medicare, Veterans' Benefits and Services, and Net Interest from such caps) designed to bring federal spending in line with historic average of 20 percent of GDP by 2021; also requires Congressional passage of a Balanced Budget Amendment to the Constitution be submitted to the states, and that any tax increase measure be approved by two-thirds vote in both Houses of Congress; nine Republicans voted against the measure because it increased the debt limit and five Democrats voted in favor of the measure). 

(petitioner did not qualify as a professional gambler such that he could treat gambling expenses as business expenses; loss deduction limited to gambling winnings; accuracy-related penalty imposed; petitioner did receive some favorable adjustments due to not claiming them on return initially). 

(database shows that no maximum temperature records were broken in the U.S. on Jul. 17-20, and that only four out of 6,219 reporting stations broke records on Jul. 21-22 and only 10 out of 6,108 reporting stations broke records on Jul. 23). 

(in determining appraised value of property for tax purposes, county may not consider location of lakefront property for purposes of determining market value of improvements on leased ground; county also incorrectly allocated value of leasehold interest to tenant rather than to the city). 

(points redeemed by customer in exchange for indoor tanning services are not subject to 10% tax on indoor tanning services included in health care act of 2010 which became effective on Jul. 1, 2010; to extent cash paid in addition to points in exchange for indoor tanning services, 10% tax applies only to cash paid for those services; as for computing tax when fee for indoor tanning service bundled with other services, other methods of computing the portion of the fee subject to the tax may exist apart from the IRS-prescribed ratio method).