Annotations 06/2014

The plaintiff and his wife resided in Utah and had been married for 18 years before divorcing in 2006.  In 2002, the plaintiff had formed a trust which stated that the "validity, construction and effect of the provisions of this Agreement in all respects shall be governed and regulated according to and by the laws of the State of Nevada.  The administration of each trust shall be governed by the laws of the state in which the Trust is being administered."  The couple contributed their assets to the trust, including the wife's portion of their primary residence (NV is a community property state).  However, the trust did not name the wife as a beneficiary.  Rather, the named beneficiaries were the plaintiff "during his lifetime" and "the Settlor's [plaintiff's] spouse," and "the settlor's issue."  Thus, once the divorce occurred, the wife (now ex-wife) no longer had any beneficial interest in the trust.  Compounding matters, under NV law, the trust would be treated as an irrevocable trust that couldn't be amended.  But, on that point, a drafting was critical.  The trust stated, "The trust hereby established is irrevocable.  Settlor reserves any power whatsoever to alter or amend any of the terms or provisions hereof [emphasis added].  After the parties divorced, the wife sued alleging, among other things, that the plaintiff used the trust to disinherit her out of her share of the marital assets. The trial court ruled for the plaintiff on the trust issue, and the wife appealed.  On the choice of law issue, the court noted that because the action was filed in Utah, Utah law would govern whether UT or NV law would apply to the trust.  While UT law requires courts to enforce a trust's choice-of-law provision, an exception exists if doing so would violate public policy.  On that point, the court determined that utilizing NV law would violate the UT principle of equitable distribution of marital property and that this was a strong public policy to uphold.  Thus, the court held that UT law would apply to the trust.  On the issue of the irrevocability of the trust, while the trust stated that NV law was to apply, that was a moot point because the court had already determined that UT law would apply to the trust.  While the plaintiff argued that he couldn't amend the trust, the court disagreed and construed the unclear drafting of "any" against him when it was supposed to say "no".  As such, the plaintiff could amend the trust and the trust was rendered revocable, and the ex-wife could revoke the trust as to the property that she contributed to it because the court deemed her to be a settlor with respect to those assets.  A contributor of assets to a trust, the court reasoned, is a settlor of the trust.   What property the ex-wife contributed to the trust was to be determined on remand by the trial court.  Dahl v. Dahl, Nos. 20100683, 20111077, 2015 Utah LEXIS 51 (Utah Jan. 30, 2015).      

Fourteen families filed an action against two logging companies and others, alleging that their properties were damaged by three landslides that occurred near Glenoma, Washington, because of the actions of the logging companies. The plaintiffs asserted claims of strict liability, trespass, nuisance, and negligence. The trial court dismissed all of the claims on summary judgment, except the negligence claim against one of the logging companies. A jury found in favor of the logging company on that claim. The plaintiffs appealed the dismissal of their remaining claims. On review, the court affirmed, finding first that clear-cutting steep, unstable slopes directly above residential properties was not, as plaintiffs alleged, an abnormally dangerous activity subject to strict liability. No court in Washington or elsewhere has imposed strict liability for timber harvest activities, and given the totality of the circumstances, the court concluded that any additional landslide risk caused by logging in a remote area did not favor imposing liability without the need for a finding of negligence.  The court also ruled that the trial court did not err in dismissing the nuisance and trespass claims as duplicative of the negligence claims. The nuisance claim was grounded in the same facts and allegations as the negligence claim, and the plaintiffs had not set forth any evidence of knowledge, which was necessary to prove a trespass claim.  The court also found that the trial court did not err in dismissing the negligence claim against the remaining logging company because there was no evidence indicating that the company breached the duty of care owed by a reasonable logger. Hurley v. Port Blakely Tree Farms LP, No. 71430-9-1, 2014 Wash. App. LEXIS 1609 (Wash. Ct. App. Jun. 30, 2014).

In this case, two ordinances of towns in New York that banned oil and gas production activities within each of the towns were challenged.  The issue before the court was whether state law eliminated the home rule authority of localities to bar such activities via the Oil, Gas and Solution Mining Law (OGSML).  The OGSML specifies that it supersedes all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries, but that it doesn't impact the ability of local governments to maintain jurisdiction over local roads or the rights local governments had under real property tax law.  Despite that language, the court determined that the OGSML did not apply because the towns had completely banned oil and gas activity rather than attempt to regulate operational aspects of oil and gas development.  The court did note, however, that the NY legislature could eliminate the ability of local governments to ban oil and gas development.  The court did not address whether its opinion would result in disaffected owners of mineral estates suing the towns for a regulatory taking of their property right associated with oil and gas development.  In re Wallach, Nos. 130-131, 2014 N.Y. LEXIS 1766 (N.Y. Ct. App. Jun. 30, 2014).   

In litigation pending since 2011, town residents claimed that the defendant’s farming practices generated excessive amounts of dust, and other forms of pollution in violation of Hawaii law. After the court dismissed various nuisance and negligence claims, the plaintiffs filed a motion for preliminary injunction and partial summary judgment for the defendant’s alleged misuse of bee-toxic pesticides.  The court denied the motion, first ruling that the third amended complaint did not allege a claim specifically for injury to bees maintained on any of the plaintiffs’ properties. As such, the court found that the plaintiffs were not entitled to summary judgment on any issues regarding bee-related injuries. The court also found that even if the complaint had alleged bee-related injuries, summary judgment would still be denied. The plaintiffs’ claims were based in negligence and they conceded that questions of fact existed as to causation and damages, both essential elements of a negligence claim under Hawai'i law. The court also found that the plaintiffs had not shown that they were likely to succeed on the merits, so as to be entitled to preliminary injunctive relief.  Aana v. Pioneer Hi-Bred Int'l, Inc., No. 12-00231 LEK-BMK, 2014 U.S. Dist. LEXIS 88564 (D. Haw. June.30, 2014).    

The plaintiff sued the driver of the car that struck a mule on a state highway and the owner of the mule for the injuries she sustained in the accident.  The evidence at trial revealed that the mule owner had never had problems with vandalism or trespassers and had not had animals escape at any time in the past.  The court granted summary judgment for the auto driver on the basis that the evidence supporting the plaintiff's claims of negligence were speculative in nature.  The fact that an accident occurred was insufficient, by itself, to establish the driver's negligence.  The court also upheld the trial court's award of summary judgment to the livestock owner, noting that the state (KS) statute does not require a livestock enclosure to ensure absolute security, but merely reasonable precautions.  It was mere speculation as to how the mules escaped.  Wilson v. McDaniel, et al., No. 109,898, 2014 Kan. App. Unpub. LEXIS 509 (Kan. Ct. App. Jun. 27, 2014). 

Members of a family farming partnership filed an action against one of its managing partners, alleging that the partner had entered into a series of grain contracts on behalf of the partnership without the authority to do so, resulting in significant losses to the partnership. The district court, in a bench trial, ruled in favor of the plaintiffs, and the defendant appealed. The partnership agreement required decisions to be made by a majority of the three managing partners. In 2008 and 2009, the defendant entered into a series of “focal point” contracts with a corn processor, “unlocking” the price of hedge contracts the partnership had previously entered into and allowing it to float with the market based upon the increase or decrease in the market between the opening and closing dates. The defendant entered into these contracts on behalf of the partnership, without consulting the others. After the partnership dissolved, the remaining partners alleged that they suffered $867,000 in damages as a result of the focal point contracts. In affirming the district court judgment in favor of the plaintiffs, the court found that because the defendant’s actions in entering into the contracts was not authorized or ratified by the partnership, he was liable for damages to the remaining partners. The limitation of liability clause in the partnership agreement did not shield the defendant from liability because that clause only protected activity that was authorized by the partnership. Elting v. Elting, No. S-13-551, 288 Neb. 404, 2014 Neb. LEXIS 98 (Neb. Sup. Ct. Jun. 27, 2014).

The plaintiff was the holder of two promissory notes secured by a mortgage covering property, only 50 percent of which was actually owned by the defendant at the time. Five years after giving the mortgage, the defendant received a warranty deed effectively granting it 100 percent ownership in the mortgaged property. The plaintiff successfully sued in federal court to collect on the amounts due on the promissory notes and then filed its state action to foreclose the mortgage on the entire property on the basis of the after-acquired title doctrine. After several procedural appeals and remands, the district court applied the after-acquired title doctrine and concluded that because the defendant granted the mortgage at issue "with mortgage covenants," it was estopped from claiming that the mortgage did not attach to the entire property when it subsequently obtained a 100 percent interest. The trial court granted summary judgment for the plaintiff, and the defendant appealed. Affirming the judgment, the court ruled that the defendant’s grant of the mortgage with mortgage covenants purported to convey a 100-percent interest in the property. As such, the district court properly applied the after-acquired title doctrine. The district court did not, as the defendant argued, rely on the defendant’s intent in so ruling. Rather, it held that a party granting a mortgage with mortgage covenants is estopped by the after-acquired title doctrine from claiming that the mortgage did not attach to the entire parcel at the time the party later acquired a 100 percent interest.  Rabo Agrifinance, Inc. v. Terra XXI, LTD., No. 32,697, 2014 N.M. App. LEXIS 64 (N.M. Ct. App. Jun. 25, 2014).

The plaintiffs bought their property in 1951. Access to the original dwelling was by a dirt driveway. A fence separated the plaintiffs’ property from their neighbors’ property. The neighbors bought their property in 1999. They purchased it knowing that the plaintiffs’ driveway encroached upon their property. When the neighbors attempted to sell their property in 2005, the deal fell through because the potential buyer learned of the driveway encroachment. The broker advised the plaintiffs of the problem, but the plaintiffs continued to use the driveway. In 2011, the plaintiffs filed an action seeking to quiet title to the parcel of land at issue, alleging that they had obtained title to the property through adverse possession. The trial court entered judgment for the plaintiffs, and the neighbors appealed. On appeal, the court affirmed, finding that the plaintiffs had established that for more than 20 years they had openly, notoriously, hostilely, and continuously used and controlled the land the driveway occupies. The court agreed that the plaintiffs acquired title to the property in 1987. The ordinary use of land, such as the owner would use it in the normal course of events, provides sufficient notice of exclusive possession. The plaintiffs had pastured livestock in the field, cultivated the land, and kept up the fence that both they and the neighbors respected as the property line. Schaefer v. Ristic, No. 2013AP2174, 2014 Wisc. App. LEXIS 503 (Wis. Ct. App. Jun. 25, 2014).


In this case, the the petitioner used his personal pickup truck to travel to his employer's customers.  He recorded his odometer reading at the beginning and end of each month in his calendar book, but didn't record any personal travel that he made with his truck and didn't provide any other documentation related to his truck expenses.  However, he claimed that he drove over 40,000 in business miles and claimed over $20,000 in vehicle expenses based on the standard mileage rate.  The court upheld the disallowance of the deduction due to lack of substantiation.  Garza v. Comr., T.C. Memo. 2014-121.

The trustee of the irrevocable trust of a decedent defended an action in which the beneficiaries alleged that he wrongfully transferred property from the deceased to himself. He then used trust money to pay for his attorney fees. The beneficiaries filed an action seeking an accounting by the trustee. The trustee initially denied any wrongdoing, stating that there were no funds to distribute and that he had defended the prior action in both his personal and fiduciary capacity. The parties reached a settlement agreement under which the trustee agreed to repay $63,000 to the trust, to immediately distribute the $10,000 currently in the trust fund to the beneficiaries, and to repay the remainder by May 31, 2012. On June 1, 2012, the beneficiaries filed a motion seeking to have the trustee held in contempt because he had made no payments to the beneficiaries and his attorney had ignored all communications.  After a hearing, the trial court refused to vacate the settlement order and found the trustee to be in contempt. The court did not, however, issue a sanction, but instead directed the trustee to comply with restated terms or else face a future sanction. On appeal, the court affirmed, finding no abuse of discretion because there was credible evidence that although the trustee suffered from multiple sclerosis, he understood the terms of the settlement agreement and entered into it voluntarily. Because the contempt order did not include a sanction, it was  not appealable under Nebraska law.  In re Morris, No. A-13-313, 2014 Neb. App. LEXIS 115 (Neb. Ct. App. Jun. 24, 2014).

This case points out that a taxpayer simply cannot refuse to check their mail and successfully claim that notice of a tax deficiency was not received from the IRS.  Here, the IRS sent a notice of deficiency to the taxpayer on multiple occasions via certified mail, return receipt requested.  Finally, the U.S.P.S. ceased attempting delivery and returned it to the IRS.  The taxpayer claimed that he never got notice of the deficiency.  However, the Tax Court found that the taxpayer was able to get his mail and had multiple opportunities to check and retrieve it, and held that he could not simply refuse to get his mail and claim that he didn't have notice of the deficiency.  The court also determined that the taxpayer could not dispute the underlying tax deficiency related to the notice.  Onyango v. Comr., 142 T.C. No. 24 (2014).

The petitioner, a lawyer, hired his wife to work with an eccentric client that she related well with.  On their MFJ returns for the years in issue, the payments to the wife were reported as contract labor expense and also as gross receipts on Schedule C (subject to s.e. tax).  IRS claimed that the wife was an employee and that payroll taxes should have been paid and disallowed the deduction for the s.e. taxes paid, and reclassified as wage income the amount reported as gross receipts on Schedule C.  Based on all of the common-law factors, the court determined that she was an independent contractor and not an employee.  The IRS also disallowed carryforward losses due to the petitioner's failure to establish the activity that generated the losses and the income in the carryforward years.  Jones v. Comr., T.C. Memo. 2014-125.  

In this case, the petitioners, a married couple, owned some rental properties.  With respect to the property at issue, the couple had previously rented it.  However, during the years at issue (2007 and 2008) they didn't receive any rent and engaged in only minor attempts to sell the property.  The incurred a loss with respect to the property which they deducted.  The IRS denied the deduction on the basis that the petitioners did not engage hold the house for the years at issue for the purpose of producing income and there was no for-profit activity with respect to the house for the years in issue.  The court agreed with the IRS.  Robinson v. Comr., T.C. Memo. 2014-120. 

In this case, the Court faced a situation where the defendants bought an 85-acre tract that was originally part of a 191-acre tract.  They built a house on the tract two years later.  The plaintiffs owned 1/8th of the minerals associated with the tract and also operated a well on an adjacent tract.  The plaintiff had created a pooled unit and a road crossed the defendant's land that led to the well.  After the defendant's built their home, the plaintiff developed a second well on the pooled unit and, as a result, traffic on the road increased.  The defendant's claimed that the plaintiff's had no right to access or use their property to produce minerals on the adjoining tracts.  Trial testimony showed that the second well's drainage area did not impact the defendant's property.  The trial court determined that the plaintiff had no right to access or use the defendant's property to access a well that didn't impact (drain) the defendant's property.  The appellate court affirmed.  On further review, the Court reversed.  The Court held that once a pooled unit is formed, the pooled tracts no longer maintain separate identities with respect to the oil and gas development where the production is located.  Production from one tract in the pool is deemed to be production from all of the pooled tracts.  There was no assertion that the pooling was in bad faith.  Key Operating & Equipment, Inc. v. Hegar, No. 13-0156, 2014 Tex. LEXIS 504 (Tex. Sup. Ct. Jun. 20, 2014). 

The plaintiff purchased property and the sellers reserved a one-half mineral interest in the property. This interest was reserved by contract and warranty deed. The contract also specified that the plaintiff was to have executive leasing rights (the exclusive right to execute oil and gas leases), but the deed did not mention the executive leasing rights. When the sellers transferred a portion of their oil and gas interest to third parties, the plaintiff filed its action against the sellers and the transferees, alleging that the sellers breached their contract in making the transfer because the plaintiff was granted exclusive executive leasing rights. In granting partial summary judgment to the defendants on the question, the court ruled that the contract did not provide exclusive executive leasing rights to the plaintiff. As such, the sellers retained executive or leasing rights in their undivided one-half interest in the mineral estate. Rainbow Trout Farms, Inc. v. Kuntz, No. 12-01260, 2014 U.S. Dist. LEXIS 79946 (D. Kan. Jun. 12, 2014).

In a divorce proceeding, the husband submitted expenses for reimbursement that he incurred in caring for cattle that he owned with his wife before their sale. The trial court awarded him only some of his requested expenses, and the husband appealed. On review, the court affirmed, finding that it was for the trial court to make determinations as to the credibility of the husband’s assertions. The court also declined to adopt a rule of quasi-estoppel and find that since the wife signed a tax return on which the same expenses were claimed by the husband, she should have been estopped from complaining as to the validity of the same expenses in the divorce action. Else v. Else, No. A-13-156, 2014 Neb. App. LEXIS 106 (Neb. Ct. App. Jun. 10, 2014).

In this case from Colorado, the petitioner sought to develop an historic site into condominiums.  The petitioner sought to build the condos in the parking lot for the historic building  and preserve the historic building in order to get the city to modify existing zoning restrictions, but the city sought conservation easements in return.  Petitioner valued easement at $7 million, but did not indicate on return that it had received anything in return for the easement.  IRS claimed that filing and appraisal requirements were not satisfied with result that easement-related deduction was approximately $400,000.  The court determined that the petitioner was not entitled to any deduction due to the lack of consideration for the easements at issue.    Seventeen Seventy Sherman Street, LLC  v. Comr., T.C. Memo 2014-124.

A taxpayer owned three contiguous parcels of land: a three-acre tract, a one-acre tract, and a nine-acre tract. He lived in a home located on the one-acre tract.  Before 2010, the taxpayer was granted by the appraisal district a valuation of the three-acre tract as open-space land for purposes of ad valorem taxes. In 2010 and 2011, the appraisal district denied the taxpayer’s application for a residence homestead exemption for the same three-acre tract.  The trial court ruled in favor of the taxpayer in his challenge to the appraisal district’s decision, and the appraisal district appealed. On appeal, the court affirmed the trial court’s ruling, finding that a taxpayer is entitled to a homestead exemption for an entire parcel of property if the contiguous lots total less than 20 acres and they are used as a residence homestead. The court rejected the appraisal district’s argument that the homestead exemption was incompatible with the “agricultural use” requirement necessary for the open-space land valuation. Tex. Tax Code Ann. § 11.13(k) (which provided that the amount of any residence homestead exemption for a qualified residential structure did not apply to the value of that portion of the structure used for other purposes) did not apply to the case at hand because the statute applied only to residential structures, not land. No legal authority provided that land could not be used as a residence homestead and also for agricultural purposes. In fact, Tex. Tax Code Ann. § 23.55(i) did provide that a parcel of land qualifying for open-space valuation did not undergo a change of use when it was claimed as part of a residence homestead.  Parker County Appraisal Dist. v. Francis, No. 02-13-00182-CV, 2014 Tex. App. LEXIS 6690 (Tex. Ct. App. Jun. 19, 2014).

The petitioner was convicted of a Class B misdemeanor for the offense of livestock running at large after three of his horses were discovered roaming freely in his neighbor’s fields. The petitioner was found guilty after a jury trial and received a suspended 30-day sentence and one-year of unsupervised probation. After the petitioner requested new court-appointed counsel several times and engaged in other alleged dilatory tactics, the trial court found that the petitioner forfeited his continued right to a public defender due to his “manipulative conduct.” As such, the trial court denied the petitioner’s request for another public defender to file his motion for a new trial. In a subsequent restitution hearing, the trial court found that the petitioner owed his neighbors $5,400 in restitution for damages caused by his horses and entered an amended judgment extending petitioner’s unsupervised probation to three years from the date of the amended judgment or until payment in full of the restitution. The trial court stated that whether the petitioner would be entitled to a lawyer on appeal was an issue that he would have to take up with the clerk of the Supreme Court.  The petitioner filed a notice of appeal and a motion with the North Dakota Supreme Court for the appointment of appellate counsel. The Supreme Court denied the motion, stating that it did not appoint legal counsel. The petitioner then asked the trial court to take notice of the Supreme Court’s order and appoint him counsel. The trial court did not enter any orders, and the petitioner briefed and argued his direct appeal pro se. The appeal was rejected, and the petitioner sought a writ of habeas corpus. The federal district court denied the petition, but the U.S. Court of Appeals for the 8th Circuit reversed, finding that petitioner was entitled to counsel to file his state court appeal.  He had not knowingly and intelligently waived his right to counsel. The petitioner was entitled to file an out-of-time state court appeal with the assistance of counsel. Koenig v. State, No. 12-2260, 2014 U.S. App. LEXIS 11517 (8th Cir. Jun. 19, 2014).

In this litigation that has generated multiple court opinions, the petitioner donated a façade conservation easement with respect to the petitioner's row house in an historic district in NYC.  Under the terms of the easement, the petitioner could not alter the façade without the permission of the donee and the petitioner was required to maintain the façade and the balance of the row house.  Under the existing rules of the historic district, the row house was already subject to substantial restrictions on construction and demolition.  In the initial Tax Court decision (T.C. Memo. 2010-151), the Tax Court determined that the petitioner was not entitled to any deduction.  On appeal, the U.S. Court of Appeals for the Second Circuit (682 F.3d 189 (2d Cir. 2012) upheld the charitable deduction of $59,959 because the petitioner's appraiser sufficiently explained how he arrived at valuation numbers before and after easement restriction.  The court determined that it was irrelevant that the IRS believed that the method employed was "sloppy" or haphazardly applied because the pertinent regulation required only that the appraiser identify the valuation method that was used and did not require that the method be reliabale.  The court held that the appraiser sufficiently supplied a basis for the valuation and the approach used was nearly identical to that approved in Simmons v. Comr., T.C. Memo. 2009-208.  In addition, the appraisal provided the IRS with sufficient information to evaluate the claimed deduction.  The petitioner submitted two Form 8283s when combined provided all of the required information and substantially complied with the requirement of the information required to be submitted. The court upheld the charitable deduction for the cash donation to the organization arranging for the donation of the easement (which was required as a condition of facade easement donation).  However, no deduction was allowed for the easement itself because there was no benefit to the taxpayer other than the facilitation of the facade easement.  However, the court remanded the case to the Tax Court to resolve other claims made by IRS.  On remand, the Tax Court (T.C. Memo. 2013-18) held that the petitioner was not entitled to any deduction for the façade easement because the subject property was already subject to substantial restrictions and didn't have any value for purposes of the charitable contribution deduction.  On further review, the appellate court affirmed.  Scheidelman v. Comr., No. 13-2650, 2014 U.S. App. LEXIS 11941 (2d Cir. Jun. 18, 2014).

The parties owned adjacent 40-acre parcels of farmland. A dispute arose as to whether the proper boundary line between the properties was an old, removed fence or a drainage ditch a few yards west of the fence. The plaintiffs filed an action against the defendants alleging that the boundary line was where the old fence had been. They sought to enjoin the defendants from using the property between the drainage ditch and the fence line. The circuit court ruled in the plaintiffs’ favor, finding that the plaintiffs’ survey was more accurate and that the defendants had not, in the alternative acquired title to the disputed property through adverse possession. The defendants challenged the adverse possession ruling only, and the appellate court affirmed. The trial court’s finding was not against the manifest weight of the evidence. The trial court was in the superior position to evaluate the credibility of the witnesses and determine whether the defendants had met their burden to establish continuous, hostile, actual, open, notorious, and exclusive possession of the premises under claim of title inconsistent with the true owner for a period of 20 years (the statutory period under IL law).  All presumptions were in favor of the title owners, and the defendants had failed to meet their burden of proof.  Schlechte v. Budde, No. 5-13-0373, 2014 Ill. App. Unpub. LEXIS 1292 (Jun. 18, 2014).

The petitioner traveled in his personal vehicle for his employer and was not reimbursed for his expenses.  He wrote down his mileage and claimed that 10 percent of his vehicle use was personal, and deducted the balance on Form 1040.  The IRS denied the deduction based on the strict substantiation requirements of I.R.C. Sec. 274(d) because the petitioner did not record the amount, time or business purpose of each business use of the vehicle.  The court, agreeing with IRS, denied the deduction.  Garza v. Comr., 2014 T.C. Memo. 121.

The petitioner bought a property for $488,000 and later divorced his wife.  The wife gave up all of her rights in the property in exchange for $500,000.  After the petitioner remarried and divorced again, he paid $80,000 to the second wife in release of all claims she might have against him.  The petitioner then sold the property for $2,250,000 and two weeks later bought another property for $1,430,000 and claimed that the transactions qualified as an I.R.C. Sec. 1031 exchange.  He also maintained that his basis in the initial tract was $1,068,000 ($488,000 + $500,000 + $80,000).  The petitioner used his attorney-son as the qualified intermediary for the deferred (non-simultaneous) exchange.  The court noted that Treas. Reg. Sec. 1.1031(k)-(3) explicitly barred family members, including ancestors and lineal descendants from being a qualified intermediary.  The court also determined that the monetary payments to his former spouses were gifts in accordance with I.R.C. Sec. 1041(b)(1) as a payment incident to a divorce, and that the petitioner could not increase his basis by the amount of the transfers.  Blangiardo v. Comr., T.C. Memo. 2014-110.   

The plaintiffs were United States workers experienced in herding cattle, goats, and sheep. They claimed that they had been forced out the industry because of substandard wages and conditions they attributed to the easy availability of foreign workers. They filed an action against the United States Department of Labor alleging that the Department had administered the temporary work visa program pursuant to the Immigration and Nationality Act (INA) in a way that gives herding operations access to inexpensive foreign labor without protecting American workers. Specifically, the workers contended that the Department violated the Administrative Procedure Act by issuing special procedures pursuant to Training and Employment Guidance Letters (TEGLs), without notice and comment. The district court dismissed the action, finding that the workers lacked Article III standing. On appeal, the federal court of appeals reversed, holding that the TEGLs affected the concrete interests of the workers and that they were asserting a procedural violation. The court assumed  a causal link between the alleged procedural violation and the substantive outcome of the agency action. The court also ruled that the workers fell within the zone of interests of the INA and had a legislatively conferred cause of action to raise their claim regarding the Department’s administration of the program as it regarded herders. The court then proceeded to the merits of the claim, despite the fact that it was not ruled upon by the district court. The court found that because the TEGLs were legislative rules, the Department violated  the APA by promulgating them without providing public notice and an opportunity for comment.  Mendoza v. Perez, No. 13-5118, 2014 U.S. App. LEXIS 11005 (D.C. Cir. Jun. 13, 2014).

The cotton cooperative-marketing association operated a pool for the exclusive sale and marketing of its members' cotton production. The association solicited farmers to join this pool and sign marketing and membership agreements, which required farmers to designate the acreage committed to the pool. After the price of cotton rose significantly, a dispute arose over the number of acres committed to the pool, and two large farming operations filed an action against the association alleging fraud, negligent misrepresentation, and other claims. The association filed a motion to stay the litigation and compel arbitration under the Federal Arbitration Act, alleging that the agreements compelled arbitration. The farmers asserted that the agreement was unconscionable and should not be enforced because it deprived the farmers of statutory remedies and provided only the association with the right to recover attorney fees. The trial court and court of appeals agreed, denying the motion, but the Texas Supreme Court reversed. The Court ruled that court of appeals erred in declining to sever any objectionable limitation on the farmers’ statutory rights. Unconscionable provisions in a contract can generally be severed so long as they do not constitute the essential part of the contract. Because the agreement’s central purpose was to provide for a speedy and efficient resolution of disputes, the agreement’s peripheral impact on statutory rights and remedies were of peripheral concern. The Court also found that the agreement was not unconscionable per se because it failed to provide the farmers with reciprocal rights to attorney fees. The Court remanded to the Court of Appeals for further consideration. Texas Venture Cotton Coop. v. Freeman, 7 Tex. Sup. Ct. J. 730 (June 13, 2014).

The parents of a three-year-old child filed an action seeking damages against the owners of a two-year-old boxer that bit the child and severely injured her. The trial court granted the owner’s motion to dismiss the strict liability claim on the grounds that Vermont law requires proof of negligence to recover against a dog owner for damages caused by the owner’s dog. On review, the court affirmed, ruling that Vermont law had long required proof of a dog owner’s negligence to establish liability. The court found that the negligence requirement is the general rule in the United States, except for those states that have enacted strict liability legislation (for example, Iowa). The court stated that while it does sometimes change the common law to meet the changing need of its people, the dog liability issue was better left for legislative resolution. Martin v. Christman, No. 13-250, 2014 Vt. LEXIS 63 (Jun. 13, 2014).

A third party bought cattle and shipped them to a feedyard for feeding and care until they were sold on the third party's behalf to various buyers.  The feedyard deposited the sale proceeds with a creditor for application against its line of credit.  The feedyard would then pay the third party an amount equal to the sales proceeds less the feed cost.  Several payments to the third party occurred during the year immediately preceding the feedyard's bankruptcy filing during which time the feedyard was insolvent.  The bankruptcy trustee motioned to recover the payments made to the third party within a year of the bankruptcy filing, and the bankruptcy court ruled in the trustee's favor.  On appeal, the third party claimed that the proceeds were not a "transfer of an interest of the debtor in property" as required by 11 U.S.C. Sec. 547(b) because the funds were not the debtor's property but were held in trust by the feedyard as bailee for the third party.  In addition, the third party claimed that the proceeds were not traceable to the funds transferred to the third party because the feedyard used the proceeds to pay its debts and, as such the state (NE) "swollen assets" doctrine imposed a constructive trust on the funds.  On appeal, the court determined that the third party was purportedly a bailor whose bailment property was misused by the debtor-bailee which led to the inability of the third party to recover under the bailment agreement alone.  Accordingly, the court determined that genuine issues of material fact remained with respect to the existence of a bailment under NE law that would extend to the proceeds of the cattle sales and, thus, whether the proceeds were the debtor's property.  In re Big Drive Cattle, L.L.C. v. Overcash, No. 4:14CV3064, 2014 U.S. Dist. LEXIS 80853 (D. Neb. Jun. 13, 2014). 

The petitioners, a married couple, each worked full time at their respective jobs and also owned rental properties.  However, the evidence demonstrated that they did not work more in their rental activities than they did in their non-rental activities.  Thus, I.R.C. Sec. 469(c)(7)(B) was not satisfied.  The fallback test of active participation allowing up to $25,000 in annual losses from rental real estate activities to be deducted was also not available because petitioners income exceeded $150,000.  Passive losses were not deductible.  An accuracy-related penalty was not imposed because the petitioners had reasonable cause with respect to the underpayment.  Alfaro v. Comr., T.C. Sum. Op. 2014-54.

The decedent's estate filed Form 4768 requesting an extension of time to file the estate tax return.  Along with Form 4768, the estate paid $2,494,088 in estimated federal estate tax.  Along with the form and payment, the estate advised IRS of its intent to make an I.R.C. Sec. 6166 election to pay the estate tax in installments.  Via a Sec. 6166 election, the estate is divided into a deferred and non-deferred portion, and the tax attributable to the non-deferred portion is due with the Form 4768.  Later, when the Form 706 was prepared and filed, it was determined that estate had overpaid the non-deferred portion by almost $500,000.  The estate sought a refund of the overpayment, which IRS denied.  The court denied the refund request but, based on I.R.C. Sec. 6402 and Sec. 6403, held that the excess amount paid could be applied to the taxes that were eligible for deferral as the installments became due.  The court rejected the estate's argument that by designating the estimated payment as being for the non-deferred portion of the estate tax liability that IRS was bound to that designation and had to refund the excess.  The court also rejected the estate's argument that Sec. 6403 did not apply because the estate had already paid before making the election, and that Sec. 6402 required a refund instead of a credit.  Estate of McNeely v. United States, No. 12-cv-1973, 2014 U.S. Dist. LEXIS 80000 (D. Minn. Jun. 12, 2014).   

In this case, some neighbors sued a property owner for damages allegedly incurred to their trees as a result of herbicides sprayed on the property owner’s property by an independent contractor that he had hired. The circuit court found that spraying herbicides was not an “abnormally dangerous” activity or “ultrahazardous” and that, as such, the property owner owed no duty to the neighbors and only the independent contractor could be liabile for any damages. On appeal, the appellate court reversed, finding that the circuit court had applied the wrong standard. The relevant question, the appellate court ruled, was whether the activity was “inherently dangerous.” In affirming the appellate court’s ruling, the Wisconsin Supreme Court held that spraying the herbicides was an inherently dangerous activity because (1) it posed a naturally expected risk of harm and (2) it was possible to reduce the risk to a reasonable level by taking precautions. The Court ruled that the inherently dangerous character of the activity rendered the general rule of non-liability for an independent contractor’s torts inapplicable.  The Court found that the negligence action could now proceed, with the neighbors having the opportunity to show that the property owner failed to use ordinary care with respect to the activity.  Brandenburg v. Briarwood Forestry Servs., LLC, No. 2012AP2085, 2014 WI 37, 2014 Wisc. LEXIS 290 (Jun. 12, 2014).


The petitioners, a married couple, each worked full-time at their respective jobs and also managed three rental properties.  On a joint return, losses exceeding $19,000 in each of two years were claimed with respect to the properties.  The court held that the petitioners did not satisfy the tests for being a real estate professional.  Based on petitioner's logs, petitioner would have had to spend every spare hour working on the rental properties.  Accordingly, there was no credible documentation and testimony such that 50 percent test of I.R.C. Sec. 469(c)(7)(B)(i)not satisfied.  Bogner v. Comr., T.C. Sum. Op. 2014-53. 

The petitioner got divorced and the marital settlement agreement stated that the parties entered into it freely and voluntarily.  However, the agreement designated the divorce-related payments petitioner made to ex-spouse on behalf of child as child support rather than alimony, and court order validated the agreement.  Later, petitioner claimed that the agreement was in error and that payments should have been designated as alimony (deductible).  The court issued a ruling to correct its prior ruling, but IRS disregarded the ruling as controlling for federal tax purposes.  The Tax Court agreed with the IRS on the basis that the agreement was freely entered into by the parties and the divorce court was not making a retroactive judgment to correct a divorce decree that mistakenly failed to reflect the court's true intent at the time the decree was entered.  The Tax Court also applied the substantial understatement penalty.  Baur v. Comr., T.C. Memo. 2014-117.

In this case, the debtor's mother established a traditional IRA and named her daughter (the debtor) as the sole beneficiary. About a year later, the mother died and the IRA account containing approximately $450,000 passed to the daughter as an inherited IRA which the daughter rolled into her own IRA. The daughter elected to take monthly distributions from the account before retiring. Approximately nine years later, the daughter (and her husband) filed Chapter 7 bankruptcy and claimed the IRA account (with a balance of approximately $300,000 at the time) as an exempt asset by virtue of 11 U.S.C. Sec. 522(b)(3)(C).   The bankruptcy court (450 B.R. 858 (Bankr. W.D. Wis. 2011)) ruled that the IRA account was not exempt on the basis that inherited IRA funds are not "retirement funds" in the hands of the debtor and, therefore, are not exempt; on review, the district court (466 B.R. 135 (W.D. Wis. 2012)) determined that IRA account funds need not be “retirement” funds of the debtor to qualify for the exemption; the district court followed themajority view that direct transfers of retirement funds from a tax-exempt account qualify for exemption, and that it was immaterial that there are differences between traditional IRAs and inherited IRAs due to I.R.C. §408(e)(1).  The court noted that the question of whether an inherited IRA should be exempt was up to the Congress to change the statute.  On further review (In re Clark, 714 F.3d 559 (7th Cir. 2013)), the circuit court reversed on the basis that inherited IRAs represent an opportunity for current consumption in the hands of the debtor and are not a fund of retirement savings.  The court analogized the situation to that of the debtor inheriting a home - the home is only exempt if the debtor lived in it, and is not exempt merely based on how the prior owner used the property. The appellate court's opinion is contrary to Fifth Circuit in In re Chilton, 674 F.3d 486 (5th Cir. 2012). The U.S. Supreme Court granted certiorari to clear-up the split among the circuit courts on the issue.  On further review, the U.S. Supreme Court affirmed. The court reasoned that inherited IRAs are not "retirement funds" within the meaning of 11 U.S.C. Sec. 522(b)(3)(C), because the holder of the inherited IRA may never invest additional funds, the holder must withdraw funds irrespective of how many years remain until retirement, and the holder can withdraw the entire account balance on demand at any time without penalty. Clark v. Rameker, No. 13-299, 2014 U.S. LEXIS 4166 (U.S. Sup. Ct. Jun. 12, 2014). 

The defendants, a married couple, entered into a contract (purchase agreement) to sell a tract of real estate to a third party.  After entering into the contract, the defendants refused to close.  The buyer sued for specific performance and a court ordered the sale to close.  The funds from the sale were distributed in various ways, but were not reinvested in replacement property.  However, the defendants did not report the gain from the sale, claiming instead that the gain was deferrable under I.R.C. Sec. 1033 as an involuntary conversion.  The IRS audited and claimed that the income from the sale was not deferrable under I.R.C. Sec. 1033 and imposed an accuracy-related penalty.  The court granted the government's motion for summary judgment on the basis that the tract was not "compulsorily or involuntarily converted" because the defendants voluntarily tried to sell the property and, in any event, didn't reinvest the proceeds in replacement property within two years.  United States v. Peters, No. 4:12CV01395 AGF, 2014 U.S. Dist. LEXIS 79316 (E.D. Mo. Jun. 11, 2014).

This case involves the valuation of an historic structure permanent facade easement donated to charity, and the corresponding charitable deduction.  The petitioner utilized a before-and-after appraisal to value the easement at $7.445 million.  The IRS allowed a $1.15 million charitable deduction and assessed a 40% penalty for gross misstatement of tax.  At the Tax Court, the petitioner's appraiser used replacement cost and the income approach to value the easement and determined the easement value to be $10 million.  The IRS determined the easement to have no value.  The Tax Court utilized the comparable sales method to value the easement at $1.8 million.  On further review by the Fifth Circuit, the court noted that the Tax Court should have included the impact of the easement on an associated building's fair market value and whether penalty was appropriate based on whether the reasonable cause burden of proof test had been satisfied.  On remand, the Tax Court determined that the easement value (and corresponding deduction) were overstated by more than 400%, and that the petitioner failed to establish a basis for valuation or properly utilize the comparable sale approach.  The Tax Court also determined that a gross valuation misstatement had occurred, and that no reasonable cause exception was applicable and that an accuracy-related penalty should be imposed.  On further review by the Fifth Circuit, the court approved the methods that the Tax Court used to value the easement and the amount of easement valuation, but reversed the Tax Court on the imposition of the valuation-related penalty related to the easement because the taxpayer obtained two qualifying appraisals and had the return professionally prepared.  Whitehouse Hotel Limited Partnership, et al. v. Comr., No. 13-60131, 2014 U.S. App. LEXIS 10963 (5th Cir. Jun. 11, 2014), aff'g. and rev'g., 139 T.C. No. 13 (2012), on rem. from 615 F.3d 321 (5th Cir. 2010), vac'g. and rem'g., 131 T.C. 112 (2008).

The decedent married his second wife in 2002, five years before his death. He had three children from a prior marriage. During the decedent’s lifetime, he executed a will naming his daughter as his executor. Because he had made contributions to the  marital home, he also asked an attorney to prepare a deed under which his second wife would transfer their marital home to the decedent and herself as tenants in common. Less than a month before the decedent’s death, the deed was executed and recorded. On September 26, the decedent entered hospice care after doctors told him there were no further treatments for his kidney cancer. On September 28, he executed two codicils to his will, one stating that he wanted his wife to have all of his personal property and another stating that he wanted his wife to have all personal accounts and items in their home. On September 29, the wife drove the decedent to a bank and asked a bank employee to come to the car in the parking lot to notarize a deed granting the home to the couple as joint tenants with rights of survivorship.   The decedent died on October 2. After five years of litigation, the probate court found that the decedent was in a weakened state when he executed the last deed and the two codicils. The judge found suspicious circumstances and held that the wife had fraudulently executed the documents. As such, the judge order her to pay damages, plus $397,309 in attorney fees and costs to the estate. On appeal, the court affirmed, finding that the probate court was to be granted great deference. There was a confidential relationship between the decedent and his wife and the court would not second-guess the probate court’s conclusions that the wife had gained an advantage due to that confidence. The court found that fees were appropriately awarded when a person commits fraud which results in the development or modification of estate documents that create or expand the fiduciary’s beneficial interest in the estate.  In re Estate of Folcher, No. A-1790-12T4, 2014 N.J. Super. Unpub. LEXIS 1340 (App. Div. Jun. 10, 2014).


In another chapter of multi-district antitrust litigation pending since 2008, two egg producers filed counterclaims asserting fraud and abuse of process against the plaintiffs. The producers argued that the plaintiffs on one hand pressured the producers to adopt the United Egg Producer Certified Program and demanded that the producers offer only Certified eggs while, on the other hand they continued to attack the Program in the current litigation. The producers argued that they could not simultaneously and truthfully assert that the Program was a violation of the law AND that they want their egg suppliers to remain in the Program and deliver only Certified eggs. The plaintiffs sought dismissal of the counterclaims, arguing that they did not contend that the Program was per se illegal but that the producers’ use of supply control within the Program was a per se antitrust violation without procompetitive justification. The court agreed with the plaintiffs and dismissed the counterclaims. Specifically, the court ruled that the plaintiffs were not contending that the Program alone was anticompetitive conduct. The court dismissed the producers’ “conclusory allegations” with prejudice, finding that any amendment would be futile. In re Processed Egg Prods. Antitrust Litig., No. 08-md-2002, 2014 U.S. Dist. LEXIS 78616 (E.D. Pa. Jun. 10, 2014).    

A couple divorced in 2010. Eight years before the divorce, the husband had entered into a farming partnership with his brother. The husband contributed $80,526 in equity and his brother contributed $471,066 in equity. At the divorce trial, the wife’s expert testified that the husband’s 2010 equity interest in the partnership was $946,280 and his brother’s was $1,336,820. The trial court agreed that the husband had a 50 percent ownership in the partnership (after accounting for the differences in initial contributions), and ordered the husband to make a $946,280 equalization payment to the wife. The court also found that the wife was entitled to a $20,000 credit in the division of the marital estate for a gift her mother had given her to remodel the basement of the marital home. The couple rented the home from the husband’s parents, but the wife and her mother testified that the gift was made in reliance upon promises that the husband and wife would eventually own the home. On appeal, the husband claimed that he owned only a 13-percent interest in the partnership and that a minority interest discount should also apply. In affirming the judgment, the appellate court ruled that the district court did not abuse its discretion. The husband and his brother had represented on financial documents, tax returns, and USDA disclosures that they each owned an equal share. Additionally, the partners had equally shared profits, losses, income, expenses, and depreciation. The court also found that the district court was in the best position to weigh the credibility of the parties in determining that the $20,000 was a non-marital gift. Kunnemann v. Kunnemann, No. A-13-276, 2014 Neb. App. LEXIS 105 (Neb. Ct. App. Jun. 10, 2014).

The testator died at the age of fifty-five, leaving three surviving children. She executed a new will and got married one day before her death, while she was living in a hospice facility. In her will she devised all of her property to her new husband and appointed him to be the personal representative. She had been estranged from her children for several years. After being diagnosed with incurable lung cancer two months before her death, the testator spent the majority of her time in the hospital, in pain and on pain medication. By the time she executed the will, the testator was unable to speak, but nodded in affirmation to the will read to her. She signed the will with a “hand-over-hand” method, being unable to sign alone. The only witness to the will was the testator’s new husband’s mother. The testator’s children visited her in hospice the day before she died. One month after the testator’s death, her husband filed an application for informal probate of the will, the will was informally admitted, and the husband was appointed as the personal representative. One daughter filed a petition for a formal adjudication of intestacy and sought appointment as the personal representative. The daughter alleged that the testator lacked testamentary capacity. The probate court denied the daughter’s petition, and the appellate court affirmed, finding that the probate court did not abuse its discretion in excluding the husband’s expert witness on the grounds of an untimely designation. The daughter was not unfairly surprised by his testimony and he did not offer any opinion regarding the testator’s testamentary capacity. The husband presented prima facie evidence of due execution of the will, and the daughter failed to prove the absence of testamentary capacity. Estate of O'Brien-Hamel, No. And-13-440, 2014 Me. LEXIS 83 (Jun. 10, 2014).

The petitioner sold property on which it had stored chemicals as part its operations as an electronics plant. Twenty-four years later, the respondents, who owned portions of that property, as well as adjacent property, filed an action against the petitioner, alleging contamination of its well water from the stored contaminants. The petitioner sought to dismiss on the grounds that N.C. Gen. Stat. §1-52(16) , a state statute of repose, prevented subjecting a defendant to a tort suit brought more than 10 years after the defendant’s last culpable act. The district court granted the motion, but the Fourth Circuit reversed, holding that the state statute was preempted by a portion of The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §9658, which preempted statutes of limitations applicable to state-law tort actions in certain circumstances. In reversing the Fourth Circuit’s ruling, the United States Supreme Court held that §9658 does not preempt  state statutes of repose. Relying on the text and structure of the CERCLA statute, the Court found that Congress did not intend to preempt state statutes of repose with § 9658. The Court found that “pre-emption” in the statute was characterized as an “exception,” to the regular rule that the “the statute of limitations established under State law” applied. The Court also found that the “applicable limitations period,” the “commencement date” of which is subject to preemption, was defined as the period specified in a “statute of limitations,” a term that appears four times in the statute. The Court noted that the phrase “statute of repose,” does not appear at all. As such, the Court ruled that CERCLA was not intended to preempt state statutes of repose, and the respondents' action was barred by N.C. Gen. Stat. §1-52(16). Justice Kennedy wrote for the majority, while Justice Ginsburg and Justice Breyer dissented, arguing that Congress did not intend a distinction between statutes of repose and statutes of limitations. The dissent cautioned that the majority ruling would give “contaminators an incentive to conceal the hazards they have created until the repose period has run its full course.” CTS Corp. v. Waldburger, No. 13-339 , 2014 U.S. LEXIS 3992 (U.S. Sup. Ct. Jun. 9, 2014).

The decedent’s will bequeathed to her husband a life-time usufruct (use right) over her community property and separate property. Her will provided that the husband was entitled to sell the property subject to the usufruct. After the decedent’s death, the probate court entered a judgment ruling that the husband was entitled to a one-half interest in the decedent’s community property, as well as a usufruct for his lifetime of the remaining undivided one-half interest, as provided by the decedent’s will. The judgment also provided that an undivided one-eighth interest in the community property (subject to the usufruct) was to vest in each of the decedent’s children, two of which were from a prior marriage. Approximately 14 years after the entry of the judgment of possession, one of the decedent’s children from her first marriage filed a petition in the succession proceeding seeking to terminate the usufruct based upon allegations that the husband had sold property subject to the usufruct without authorization from the owners of the naked title and that he intended to sell more in the future. The trial court granted partial summary judgment for the husband as to the question of whether the judgment of possession incorporated the terms of the will (allowing the husband to sell the property). The trial court also entered judgment for the husband on the remaining claims and found that he was not required to post bond. On appeal, the court found that the trial court correctly ruled that the judgment of possession incorporated the terms of the will. However, the court found that the trial court erred in not requiring the husband to post bond, ruling that under Louisiana law, a surviving spouse who receives a legal usufruct over estate property is required to post security if the owners of naked title are children of a previous marriage of the decedent. The court remanded for a determination of the proper amount of the security (which was to be in the trial court’s discretion). The court found that although the record supported a finding that the husband had acted as a prudent administrator, the posting of security was mandatory under the law. In re the Succession of Beard, No. 2013 CA 1717, 2014 La. App. LEXIS 1514 (La. Ct. App. Jun. 6, 2014).

The petitioner had an IRA and placed it with a company with trustee agreements specifying that investments of IRA account funds only allowed in financial instruments.  The petitioner ordered a cash withdrawal and checked Code 1 Box on the withdrawal slip which meant that the petitioner was making an early withdrawal with no known exception.  The funds were wired to purchase the land and title was taken in the petitioner's name.  IRS asserted the 10 percent early withdrawal penalty and the 25 percent penalty for substantial understatement.  The court determined that terms of trustee agreement controlled, and the petitioner purchased the land personally with the IRA funds.   Court noted that a trustee-to-trustee transfer to a trustee that could invest in land would have been allowed.  Dabney v. Comr., 2014 T.C. Memo. 108.   

In this case, the court held that the petitioners, a married couple, couldn't claim a first time homebuyer credit.  While the home at issue was purchased more than three years after the wife quitclaimed her interest in her old home to her children, the court determined that she still held onto the benefits and burdens of ownership of the transferred home.  The court noted that she continued to reside in the old home until the new home was acquired, paid associated expenses and reported rental activity associated with the transferred home after it had been quitclaimed to the children.  While the husband qualified as a first-time homebuyer, both spouses needed to qualify for the credit to be available.  Douglas v. Comr., T.C. Memo. 2014-104. 

The debtor filed a Chapter 12 bankruptcy petition and claimed that he had been a rice farmer from 1976 until 2010 when he became disabled. His sole income for 2011 and 2013 was social security, and he received $30,668.04 in 2012 as a settlement from Bayer CropScience for crop losses sustained in 2006, 2007, and 2008. The trustee filed a motion to dismiss or convert on the grounds that the debtor was ineligible for Chapter 12 relief under 11 U.S.C. § 109(f). The court granted the motion, finding that the debtor was not engaged in a farming operation, as was required to qualify for Chapter 12 relief. He did not satisfy the seven-factor “totality of the circumstances” test required to be “engaged in a farming operation.” None of the debtor’s family members resided on the farm, he was not involved in the process of growing or developing crops or livestock, he did not provide any service or product, and (most importantly) he was not subject to the inherent risks of farming. He expressed no interest in salvaging his rice farm operation or otherwise engaging in a farming operation in the future. His purpose in filing for bankruptcy protection was “to get out of debt.” As such, he was not eligible for Chapter 12 relief. In Re McLawchlin, No: 13-37887, 2014 Bankr. LEXIS 2455 (S.D. Tex. Bankr. June 5, 2014).    

The debtors, a dairy operation, purchased their farm from lender one, which owned the property because of a prior foreclosure. The debtors executed a security agreement granting lender one a blanket security interest in the land, equipment, and livestock. The debtors defaulted because of milk production problems and filed for Chapter 12 bankruptcy protection. The debtors then filed a motion to incur secured debt from lender two to construct a waste storage facility and a rotational grazing facility. The bankruptcy court conditionally granted the motion under 11 U.S.C. §364(d), and the district court affirmed. The bankruptcy court did not err in determining that debtors were providing adequate protection to lender one by providing an “indubitable equivalent” of lender one’s interest in the property. The court also found that the bankruptcy court did not err in finding that the debtors would have sufficient revenue to pay the finance charges. First Sec. Bank & Trust Co. v. Vander Vegt, No. 12-02144, 2014 U.S. Dist. LEXIS 71781 (N.D. Iowa May 27, 2014), affirming,  In re Vander Vegt, No. 12-02144, 2013 Bankr. LEXIS 4354 (Bankr. N.D. Iowa Oct. 16, 2013).


Plaintiffs owned Kansas property abutting a 2.88-mile stretch of rail corridor. Their predecessors in interest had granted the corridor in question to a railroad company, and the corridor was actively used by a successor railroad company until 2004. The corridor was then converted to a recreational trail pursuant to the National Trail Systems Act, 16 U.S.C.S. § 1247(d). The plaintiffs filed an action alleging that the trail conversion constituted a taking for which they were entitled under the Fifth Amendment to compensation. The lower court ordered that the plaintiffs did not possess a fee-simple property interest that could have been the subject of a taking. The plaintiffs argued on appeal that the interests conveyed by their predecessors to the railroad were easements only. The appellate court affirmed as to one plaintiff, finding that her predecessor had conveyed the land to the railroad company in fee simple. Thus, she had no interest remaining in the property. The court reversed, however, as to two other plaintiffs, remanding for further proceedings. The court found that one plaintiff’s predecessor-in-interest had conveyed only an easement to the railroad company. As such, that plaintiff retained a fee simple in the land and was entitled to compensation. The court was unable to determine from the facts in the record whether the remaining plaintiff had a fee simple interest in the property at issue. Thus, further proceedings were ordered on remand.  Biery v. United States, No. 2013-5082, 2014 U.S. App. LEXIS 10361 (Fed. Cir. Jun. 4, 2014).

An insurer filed an action against two manufacturers, seeking to recover the $252,075.56 it paid to its insured after a fire destroyed the insured's 2010 Case IH STX485 tractor. The insurer alleged that the manufacturers defectively designed and manufactured the tractor and its turbocharger. The insurer asserted common law claims for negligence, strict liability, and breach of express and implied warranties. The manufacturers sought summary dismissal of the insurer’s claims, and the court granted the motion. The court found that the insurer had not provided direct evidence of a defect in the tractor that caused the fire at issue. The insurer’s experts had opined that the precise cause of the fire could not be determined. The court stated that while it is well settled that the existence of a manufacturing defect may be established by circumstantial evidence alone, the insurer  failed to provide sufficient circumstantial evidence to demonstrate that the fire that destroyed the tractor "was caused by a defect and not other possibilities." The court also ruled that once after-market items were installed in the cab of the tractor, they became "integrated components" of the tractor. As such, the insurer’s negligence and strict liability claims were dismissed under Ohio’s economic loss rule. Finally, the court found that the insured performed an "unauthorized modification or field fix," rendering the express warranty inapplicable. Nationwide Agribusiness Ins. Co. v. CNH Am. LLC, No. 1:12-cv-01430, 2014 U.S. Dist. LEXIS 75997 (N.D. Ohio Jun. 4, 2014).