Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

If you are the owner of an Oregon business entity such as a corporation or limited liability company, you may have recently received an official-looking notice from a “Corporate Regulatory Committee” demanding payment of $238.00 to file your Oregon corporate annual report.

According to the Oregon Attorney General’s Office, this notice is a scam. In a telephone conversation with our office, a representative from the Attorney General’s Consumer Hotline confirmed that it has received numerous calls from concerned Oregon business owners over the last few days regarding this notice. The Attorney General’s office did not indicate whether or not they will be undertaking enforcement actions against this company.

Buried in the language of the notice is the easy-to-miss statement: “This service has not been approved or endorsed by any government agency and this offer is not being made by any agency of the government.” A search of the send-to address (1118 Lancaster Drive #369 in Salem, OR) reveals a private postal service center, not a legitimate business storefront.

If you have already sent payment to this “Corporate Regulatory Committee,” the Consumer Protection department of the DOJ requests that you complete a “Consumer Complaint Form”. You can complete this form on-line, or print and mail to the Oregon Department of Justice. As there is no assurance that this company will actually complete the Oregon annual report filing as promised, one should also visit the Oregon Secretary of State’s website prior to the annual report’s due date to ensure that the report has been properly filed. If the annual report is not timely filed, your company could be administratively dissolved under Oregon law.

If you have not sent payment but have questions about this scam, you can call the Attorney General’s Consumer Hotline:
503-378-4320 from Salem
503-229-5576 from Portland (toll free)
1-877-877-9392 elsewhere in Oregon (toll free)
 

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This blog reported on the National Labor Relations Board’s (NLRB) latest notice-posting requirement for employers falling under its jurisdiction (see our October 3 and October 12, 2011 posts). Once again, the NLRB has extended the deadline to hang the mandatory and controversial 11-by-17 inch poster. The original deadline was November 14, 2011, then extended to January 31, 2012, and now extended to April 30, 2012.
Why the extensions?

The NLRB reported that its first deadline extension was to grant confused employers more time to determine whether they were required to hang the poster.

Now, this second extension comes on the heels of a Washington D.C. federal judge’s request that the NLRB postpone the rule’s effective date pending current legal challenges to the Board’s authority regarding the rule. In addition to the Washington lawsuit (consolidated from originally two suits filed by various trade and labor organizations), the US Chamber of Commerce and South Carolina Chamber of Commerce also filed lawsuits in the US District Court of South Carolina challenging the notification rule.

Pending a court ruling on the matter, employers are expected to comply with the current rule. Contact SYK attorneysTim Resch or Steve Seymour for help with this or other employment and labor questions.
 

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From time to time we publish summaries of interesting trust and estate cases.

In today’s post we discuss a recent Oregon Appeals Court case that addressed the availability of a constructive trust to remedy a breach of duty by a successor trustee. The case is a good illustration of the legal remedies available to beneficiaries who pursue claims against trustees behaving badly.

Olson v. Howard, 237 Or App 256, 239 P.3d 510, (2010)

Background: Plaintiff, the beneficiary of a trust, brought an action against the trustee and the purchaser of land from the trust, alleging that the purchase was the result of self-dealing by the trustee. The settlor of the trust had named himself trustee and appointed Howard as successor trustee. Howard, purporting to act as successor trustee, sold the property to his son, the defendant, for $55,000. Plaintiff contended that the fair market value of the property was actually $122,760. Moreover, defendant borrowed the money to purchase the property from his father, Howard. Seven years after the sale, plaintiff filed claims against both defendant and Howard, alleging that Howard acted unlawfully when he essentially sold the trust property to himself for grossly inadequate consideration, and that defendant knowingly and willfully acted as a strawman in the transaction. Plaintiff then sought return of the property to the trust, a resale of the land, and distribution of the proceeds of that sale to the trust beneficiaries. The trial court dismissed the case after finding that plaintiff failed to provide an “objectively reasonable” basis for his claim. 

Holding: The trial court erred in determining that plaintiff’s contentions were devoid of factual and legal support. Plaintiff’s claim sought the imposition of a constructive trust, which would be available to him upon showing that the defendant possessed property that should belong to the trust as a result of the property being transferred without authority, by a self-interested party, and without sufficient consideration. Moreover, the fact that plaintiff had signed a release as a trust beneficiary relinquishing all claims against the trustee or trust did not prohibit his claim, as the release did not bar claims against the defendant. The case was remanded to the lower court.

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From time to time we publish summaries of interesting trust and estate cases. Today’s post concerns promises made (and then broken) as part of a divorce settlement. The Oregon Supreme Court overturned a 2009 decision of the Appellate Court and, in the process, established new guidelines that should be considered by all parties – and their legal counsel – when preparing divorce settlements, pre-nuptial agreements, and/or child support arrangements.

Tupper v. Roan, 227 Or App 391, 206 P.3d 237 (2009) (Reversed, See Below)

Background: As part of a divorce decree, the decedent promised to obtain a life insurance policy of $100,000 for the benefit of his child. The divorce decree included a provision that called for a constructive trust to be created over “the proceeds of any insurance owned by either party at the time of either party's death if either party fails to maintain insurance in said amount, ($100,000 fbo the child) or if said insurance is in force but another beneficiary is designated to receive said funds.”

Decedent obtained a $600,000 life insurance policy naming his girlfriend as the primary beneficiary. The decedent died several months after purchasing this policy. The ex-wife sued the girlfriend asking the court to impose a constructive trust on the portion of life insurance ($100,000 of the $600,000) that decedent promised to obtain in the divorce decree. The trial court held that $100,000 of the insurance proceeds was subject to a constructive trust.

Holding: The Court of Appeals reversed, holding that the trial court should instead have awarded summary judgment to defendant. The Appeals Court concluded that, “to prevail on an unjust enrichment theory against the person who had been named as the decedent's beneficiary, a plaintiff must prove both (1) that, by designating another person as his or her beneficiary, the decedent essentially gave that person property that previously had belonged to the plaintiff; and (2) that the person named as beneficiary either knew or should have known of the wrongfulness of the decedent's action.” The plaintiff had not and could not produce evidence that would satisfy the first requirement.

Tupper v. Roan, 349 Or. 211,243 P.3d 50 (2010)

Background: The Oregon Supreme Court reviewed Tupper v. Roan to consider whether and how the equitable concepts of unjust enrichment and constructive trust should be applied in the context outlined above. The Court declined to adopt the two-part test applied by the Appeals Court and instead set out the following three elements that the ex-wife had to prove in order to prevail on her unjust enrichment claim:

• First, she had to show that a property interest that rightfully belonged to her was taken by the girlfriend under circumstances that in some sense were wrongful or inequitable.
• Next, she had to show that the girlfriend was not a bona fide purchaser for value and without notice.
• Finally, she had to establish, with "strong, clear and convincing evidence," that the insurance proceeds, i.e., the property upon which she sought to impose a constructive trust, was in fact the very property that rightfully belonged to her, or was a product of or substitute for that property.

Holding: Justice Gillette began his analysis with the observation that, “When ‘the law employs a constructive trust, the doctrine of unjust enrichment governs generally all of the substantive rights of the parties.’” He next traced the common law doctrine of unjust enrichment and constructive trust as applied by the Oregon Supreme Court, and noted that the common thread was the acquisition or retention of property in a way that is in some sense wrongful, even if the one holding the property (here, the girlfriend) was not directly involved in wrongdoing. The Court then focused on the language of the stipulated divorce decree, which included the phrase, "a constructive trust shall be imposed over the proceeds of any insurance owned by either party at the time of either party's death." (emphasis added by the Court). The court evaluated where the property interest created by this language fell relative to two hypotheticals. In the first hypothetical, the divorce decree identified a specific policy that was in force at the time the decree was entered. The Court felt this scenario would create a protectable property right for the ex-wife. In the second scenario, the hypothetical decree language did not identify an existing insurance policy, rather it included a promise to take out insurance at some future time. The Court felt that while such language might not be sufficient to create a property right that belonged to the ex-wife, that issue was not before the court in this case.

Instead, the Court concluded that in this case the decree expressly contemplated a failure on Tupper's part to carry out the obligation and that the parties intended to impose a constructive trust on any policy owned by Tupper. The Court concluded that the decree language gave the ex-wife an interest in the insurance proceeds held by the girlfriend and overturned the Appellate Court decision. In the process, the Supreme Court has provided estate planning and family law attorneys with important new guidelines for assessing cases and drafting decrees. The Supreme Court ultimately remanded Tupper for further analysis of whether the girlfriend knew of the decedent's support obligation.
 

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From time to time we publish summaries of interesting trust and estate cases. Today’s post examines a recent Oregon Appeals Court decision in the rapidly expanding field of elder law. The case involves an elderly woman with impaired mental capacity and asks whether she may be a considered a third-party beneficiary (under contract law) of a residency agreement signed on her behalf. The case also touches on the issue of arbitration clauses in residency agreements at senior housing facilities. Arbitration clauses like the one at issue in this case have been the subject of a number of recent 9^th circuit cases.

Drury v. Assisted Living Concepts, 245 Or App 217 (2011)

Background: Dorothy Drury was suffering from dementia and her mental capacity was severely impaired at the time her son, Eddie, admitted her to the defendant’s assisted living facility. Eddie signed the facility’s admission paperwork and residency agreement. At that time he was not yet Dorothy’s guardian or conservator and did not then have a power of attorney for her.

The residency agreement included a clause requiring arbitration for all claims or disputes relating to the agreement or the services provided “to You by Us.” After about a year in the facility, Dorothy died as a result of injuries sustained in a fall. Her estate’s personal representative sued the facility for wrongful death resulting from negligent conduct. The defendants (unsuccessfully) moved to compel arbitration, arguing that the estate was bound to the arbitration clause in the residency agreement as a third-party beneficiary of the contract.

On appeal, the court held that Dorothy’s estate was not bound to the agreement and its arbitration clause. Under general contract law principles, a third-party beneficiary is presumed to assent to a contract when it accepts benefits or otherwise seeks to enforce rights under that contract. Dorothy was a “third-party donee beneficiary” of the residency agreement signed by her son. The critical issue for the court was Dorothy’s mental capacity - or lack thereof. Even though Dorothy accepted the contract’s benefits (the facility’s services and apartment), her lack of requisite mental capacity meant that her acceptance of benefits did not ratify the contract.

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ORS 708A.655 Procedures for opening safe deposit box after death of person who was sole lessee or last surviving lessee of box.

(1) This section applies to the safe deposit box of any person who is the sole lessee or last surviving lessee of the box and who has died.

(2) Upon being furnished with a certified copy of the decedent’s death certificate or other evidence of death satisfactory to the Oregon operating institution, the Oregon operating institution within which the box is located shall cause or permit the box to be opened and the contents of the box examined at the request of an individual who furnishes an affidavit stating:

  (a) That the individual believes the box may contain the will of the decedent, a trust instrument creating a trust of which the decedent was a trustor or a trustee at the time of the decedent’s death, documents pertaining to the disposition of the remains of the decedent, documents pertaining to property of the estate of the decedent or property of the estate of the decedent; and

  (b) That the individual is an interested person as defined in this section and wishes to open the box to conduct a will search or trust instrument search, obtain documents relating to the disposition of the decedent’s remains or inventory the contents of the box.

      (3) For the purpose of this section, “interested person” means any of the following:

      (a) A person named as personal representative of the decedent in a purported will of the decedent;

      (b) The surviving spouse or any heir of the decedent;

      (c) A person who was serving as the court-appointed guardian or conservator of the decedent or as trustee for the decedent immediately prior to the decedent’s death;

      (d) A person named as successor trustee in a purported trust instrument creating a trust of which the decedent was a trustor or a trustee at the time of the decedent’s death;

      (e) A person designated by the decedent in a writing that is acceptable to the Oregon operating institution and is filed with it prior to the decedent’s death;

      (f) A person who immediately prior to the death of the decedent had the right of access to the box as an agent of the decedent under a durable power of attorney; or

      (g) If there are no heirs of the decedent, an estate administrator of the Department of State Lands appointed under ORS 113.235.

      (4) If the box is opened for the purpose of conducting a will search, the Oregon operating institution shall remove any document that appears to be a will, make a true and correct copy of it and deliver the original will to a person designated in the will to serve as the decedent’s personal representative, or if no such person is designated or the Oregon operating institution cannot, despite reasonable efforts, determine the whereabouts of such person, the Oregon operating institution shall retain the will or deliver it to a court having jurisdiction of the estate of the decedent. A copy of the will shall be retained in the box. At the request of the interested person, a copy of the will, together with copies of any documents pertaining to the disposition of the remains of the decedent, may be given to the interested person.

      (5) If the box is opened for the purpose of conducting a trust instrument search, the Oregon operating institution shall remove any document that appears to be a trust instrument creating a trust of which the decedent was a trustor or trustee at the time of the decedent’s death, make a true and correct copy of it and deliver the original trust instrument to a person designated in the trust instrument to serve as the successor trustee on the death of the decedent. If no such person is designated or the Oregon operating institution cannot, despite reasonable efforts, determine the whereabouts of such person, the Oregon operating institution shall retain the trust instrument. A copy of the trust instrument shall be retained in the box. At the request of any interested person, a copy of the trust instrument may be given to the interested person.

      (6) If the box is opened for the purpose of obtaining documents pertaining to the disposition of the decedent’s remains, the Oregon operating institution shall comply with subsection (4) of this section with respect to any will of the decedent found in the box, and may in its discretion either:

      (a) Make and retain in the box a copy of any documents pertaining to the disposition of the remains of the decedent and tender the original documents to the interested person; or

      (b) Provide a copy of any documents pertaining to the disposition of the remains of the decedent to the interested person and retain the original documents in the box.

      (7) If the box is opened for the purpose of making an inventory of its contents, the Oregon operating institution shall comply with subsection (4) or (5) of this section with respect to any will or trust instrument of the decedent that is found in the box, and shall cause the inventory to be made. The inventory shall be attested to by a representative of the Oregon operating institution and may be attested to by the interested person, if the interested person is present when the inventory is made. The Oregon operating institution shall retain the original inventory in the box, and shall furnish a copy of the inventory to the interested person upon request.

      (8) The Oregon operating institution may presume the truth of any statement contained in the affidavit required to be furnished under this section, and when acting in reliance upon such an affidavit, the Oregon operating institution is discharged as if it had dealt with the personal representative of the decedent. The Oregon operating institution is not responsible for the adequacy of the description of any property included in an inventory of the contents of a box, or for the conversion of the property in connection with actions performed under this section, except for conversion by intentional acts of the Oregon operating institution or its employees, directors, officers or agents. If the Oregon operating institution is not satisfied that the requirements of this section have been satisfied, the Oregon operating institution may decline to open the box.

      (9) If the interested person does not furnish the key needed to open the box, and the Oregon operating institution must incur expense in gaining entry to the box, the Oregon operating institution may require that the interested person pay the expense of opening the box.

      (10) Any examination of the contents of a box under this section shall be conducted in the presence of at least one employee of the Oregon operating institution.

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From time to time we publish summaries of interesting trust and estate cases:

Butcher v. McClain, Oregon Court of Appeals, July 13, 2011

Mom and Dad executed wills leaving the farm to their adult son and other property to their adult twin daughters (defendants in the case).   After Dad died, the son married and moved with his wife and five children (collectively the plaintiffs in this case) into a mobile home placed on the farm.  Mom then executed a new will which directed the farm to go to her son and the plaintiffs.

The son died in a 2005 auto accident. Shortly after, the defendants began to “harass” the plaintiffs, and prevented them from seeing Mom. A few months later Mom had a stroke. The defendants got a power of attorney for Mom, obtained a default judgment evicting plaintiffs from the farm, and burned down the mobile home. Unbenownst to plaintiffs, Mom executed new legal documents, including a new will, before she died.

Plaintiffs filed suit with several claims, but the trial court granted, without discussion, defendants’ motion to dismiss all claims. This included barring the tortious interference claims due to filing outside of the two-year statute of limitations in Oregon. 

The Court of Appeals separated plaintiffs’ interference claim into two types: defendants interfered by causing Mom to (1) evict plaintiffs from the farm; and (2) disinherit plaintiffs in the June 2, 2005 will. On the first type of interference, the court found that the claim accrued on the date of the eviction, which was more than two years prior to plaintiffs’ filing of the claim and thus correctly barred by the statute of limitations. 

The court disagreed, however, with the trial court’s determination that the second interference accrued on the date the last will was executed, ruling “although the alleged interference occurred when defendants caused [Mom] to execute a will disinheriting [the plaintiffs], plaintiffs were not damaged by that disinheritance until [Mom's] death, when they lost their expected inheritance” and thus the claim was timely filed within the two-year statute of limitations."

This is a fair result - otherwise Bad Actors would escape legal consequences for tortious interference with prospective inheritance if the will does not come to light within two years of their misdeeds.

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A newly-announced IRS program allows businesses to prospectively reclassify independent contractors as employees, and in doing so, may allow some businesses to avoid certain tax penalties which could possibly exceed 40% of the reclassified worker’s compensation for the prior 3 years. However, the program, dubbed the Voluntary Classification Settlement Program or “VCSP”, does have its drawbacks.

To be initial eligible to participate in the VCSP, the taxpayer must:

• Have consistently treated the workers (or class of certain workers) as non-employees;
• Have filed all appropriate 1099s for the workers;
• Not be currently under audit with the IRS, the Department of Labor, or a state-level agency regarding the classification of the workers in question; and
• Complete the IRS’ form to apply for the VCSP benefits.

If eligible and the IRS accepts the taxpayers application, the taxpayer must prospectively agree to treat the class of workers to be reclassified as employees. Under the VCSP, the taxpayer: (1) will pay 10% of the employment tax liability that may be due for the most recent tax year; (2) will not be liable for any interest or penalties; (3) will not be subject to an employment tax audit for prior years with respect to the reclassified workers; and (4) will agree to extend the statute of limitations on employment taxes for the three years after the VCSP program begins.

The VCSP is not for everyone. Often, a business’ classification of a worker as an independent contractor is appropriate and entirely supported by federal and state law. In such instances, it would not be appropriate for a business to reclassify a worker as an employee, and doing so would unnecessarily increase the business’ costs and taxes. However, if a business determines that it may have inappropriately classified workers as independent contractors in the past but is fearful of the significant tax penalties if it changes the workers’ employment classification, the VCSP may offer a significant benefit.

The bottom line – we recommend a careful analysis of independent contractors in light of the parameters of existing law in order to determine whether a worker should be classified as an employee or independent contractor.

One final caveat – the VCSP is a federal program only. If a business has exposure to state-level taxes, the VCSP will offer no relief.
 

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Citing an influx of questions from businesses and trade organizations, the NLRB has extended the deadline to hang the mandatory new 11-by-17 inch poster by a few months. This extension gives employers more time to clarify whether they fall under the NLRB’s jurisdiction. No other changes were made as to which employers must display the new poster and where to display it in the workplace.

See this blog’s previous October 3, 2011 post (Employers Must Display New NLRA Poster . . .) for more information. SYK attorneys Steve Seymour or Tim Resch can help with labor, employment, or human resource questions for both employers and employees.

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