DECEDENT'S ESTATES AND PROBATE 50 YEARS AFTER DEATH

Who files a probate proceeding 50 years after the decedent's death and why?

What happens when someone dies without a will? Lawyers make lots of money.

Urban Legend #1. If I die without a will, my estate will not have to pay the “death” tax. The Tennessee Inheritance Tax is based upon the value of the property owned at the time of death. The tax applies even if the decedent does not have a will.

Urban Legend #2. If I have a will, but I do not go through probate, my estate will not have to pay the “death” tax. Some states calculate a tax based upon the value of assets in the probate estate. The Tennessee Inheritance Tax is calculated on the value of the assets owned at the time of death.

Urban Legend #3. If I do not have a will, it will all work out. It will work out – it just may take 50 years.

In Tennessee, if a person dies without a will, the Government decides who inherits a person’s property. Sometimes it all works out; at other times the family feuds.

Ben and Pearl Bates had nine children. They owned a house in McMinnville, Tennessee where they lived until their deaths. Ben died in 1959, and Pearl died in 1962. Both died without a will. As they had nine (9) children, under Tennessee law each child owned a 1/9th interest in the house.

Fifty (50) years later, one son filed petitions to probate his parents’ estates. He did not, however, file these petitions because he wanted to pay some overdue death taxes. He had an ulterior motive – he wanted to be reimbursed for “expenses, renovations, upkeep, liability insurance and property taxes” he had allegedly spent on the property – over $200,000.

Our hero forgot a basic principle of Tennessee law when he filed the probate petitions. At the time of death, any interest in real estate immediately vested in the heirs. The estate can claim the real estate, but only if there is not enough personal property to pay the claims of creditors. In this case, because over 50 years had passed, the statute of limitations barred any claims by any creditors to the assets of the estates. The real estate never became a part of the “probate” estate. Therefore, the probate court lacked jurisdiction to consider son’s claims.

THE MORAL OF THIS STORY:

THEY CALL IT “FAMILY FEUD” FOR A REASON. When money is involved, the feuding begins.

In re Estate of Bates, M2011-0164-COA-R3-CV (Tenn. Ct. App. Jan. 5, 2012)

JUDGMENT AND COMPOUND INTEREST

Until this case, I always thought that post-judgment interest was "simple" interest and not compound interest. Apparently, I was wrong. The court of appeals notes in passing "the trial court determined that the effective post-judgment interest rate is 10%, compounded annually. It is from this order that the current appeal arises." But, the court does not even address the propriety of the use of compound interest as opposed to simple interest.

The case itself emphasizes an important point -- the statute of limitations on the judgment does not commence until the judgment is final. If the court of appeals remands the case for further proceedings, then the judgment is not final.

See Orlando Residence LLC v. Nashville Lodging Company, et al.

A CHRISTMAS PRESENT FOR BORROWERS - NON-JUDICIAL FORECLOSURE AND AN ACCURATE PAYOFF

In this case, a homeowner's association exercised its right under its Master Deed and conducted a non-judicial foreclosure sale to collect amounts owed by the homeowner to the association. Although the property was worth in excess of $300,000, the association purchased the property for the amount owed -- $12,000. The owner sued and asked the court to set aside the foreclosure.

In Tennessee, however, as long as the foreclosure sale is properly noticed, then "shocking inadequacy of the foreclosure sale price" is not grounds to set aside the sale. But, if sloppy bookkeeping makes it impossible to determine the correct amount owed on the date of the foreclosure sale, then the court of appeals says it is property to set aside the sale.

This case is scary for lenders as it states that the amount must be accurate. Generally, it is difficult to enjoin a foreclosure sale. But, it the lender cannot on the day of the foreclosure sale, provide an accurate accounting of the amount owed, then this case says the foreclosure sale should be set aside. Look for more lawsuits over foreclosure sales.

See Brooks v. Rivertown on the Island HOA

A BASIC PRINCIPLE OF CONTRACT LAW

If you do not make the payments required under the contract, then you "breach" the contract.

The most interesting cases seem to always involve a trailer. In this case, brother dies leaving all of this property to his sister. This property includes the trailer at issue.

Previously, brother entered into an installment sales contract with seller whereby brother agreed to make monthly payments before the 4th day of the month. Brother did not. After brother's death, sister attempted to make a lump sum payment of $2,000 to seller. Seller refused and sister filed her lawsuit. During the interim period, sister did not make any of the required monthly payments. Wrong decision.

The holding: 1. Brother was in default at time of death. Pursuant to the contract, Brother's default resulted in the contract becoming a lease.

2. Even if Brother had not been in default, Sister's failure to make the required monthly payments (or even tender them to Seller) resulted in Sister losing any rights under the contract.

3. Sister's appeal was frivolous.

The Moral of this Story: Pay your monthly payments on time or forfeit your rights.

See Smith v. Hatfield

IMPLIED DUTY IN SERVICE CONTRACT OF CARE, SKILL, DILIGENCE AND WORKMANLIKE MANNER

You hire a contractor to fix your roof. Contractor subcontracts with Bubba to do the work. Bubba sets your house on fire. It is a complete loss -- an $800,000 loss. Someone must pay, right.

Bubba obviously is negligent, but Bubba has no insurance. Contractor says that he is not liable for Bubba's negligence because Bubba is a subcontractor. And, Contractor is right. Under Tennessee law, the negligence of a subcontractor is not imputed to the principal. Of course, the parties to the contract can change that responsibility.

But wait, you say. My contract was with Contractor -- I never agreed to allow Bubba to do the work. Too bad, Contractor says. Our contract does not contain any provision that prohibits subcontracting. Therefore, Contractor can, under Tennessee law, subcontract the work and escape liability.

One last hope. According to the Tennessee Supreme Court, every contract for the performance of services contains an implied duty (not warranty) to perform the work in a "careful, skillful, diligent, and workmanlike manner." A contractor cannot escape this contractual duty by delegating the work to a third party. Of course, the parties were free to include in their contract a waiver of this "non-delegable" duty, but they did not.

This case is not the first case to recognize an implied duty in contracts -- that occurred in 1987. But, it is an important decision as it is another Tennessee Supreme Court case recognizing an implied duty.

Of course, the parties to the contract can always waive duties implied by law.

See Federal Insurance Company A/S/O Robert and Joanie Emerson v. Winters, et al.

SOCIAL MEDIA POLICY TOP 10

Don’t Prohibit Employees from using the company name, address on personal profiles.

Don’t Attempt to Regulate or Restrict an Employee’s use of Social Media from any location/device other than work locations or devices.

Do Exclude “Protected Activity” under the National Labor Relations Act.

Do Have Employees sign a separate acknowledgment of receipt of the Policy.

Do Prohibit Employees from conducting “Background” searches using Facebook/Twitter/Internet.

Do Prohibit Employees from disclosing “Confidential” information on Social Media sites.

Do define “Confidential” information.

Do Prohibit Employees from “pressuring” or otherwise harassing their co-workers to connect or “friend.”

Do respond to complaints regarding Facebook/Twitter posts quickly.

Do consider hiring 3rd parties to conduct background checks of prospective employees in sensitive positions and utilize the option to screen “protected” information (i.e., race, religion, national origin, color, veteran status, disability, genetic history).

AND, DO HAVE A POLICY ON SOCIAL MEDIA.

AG SAYS THAT COMMISSIONER OF DEPARTMENT OF REVENUE CAN IGNORE THE LAW WHEN POLITICALLY EXPEDIENT

According to the Tennessee Attorney General, the Commissioner of the Tennessee Department of Revenue has the authority to ignore the law when he or she finds it to be politically expedient. In this case, it is politically expedient for the State to have Amazon locate a warehouse facility in Tennessee; therefore, according to the Attorney General, the Commissioner can ignore the fact that Amazon should be collecting sales tax on all sales to Tennessee residents.

This opinion is one I intend to keep in my back pocket to use any time I am dealing with the State.

See Opinion No. 11-71