Monday, May 27, 2013

In the Line of Duty

Rest in peace, Michael Sway, a lawyer who died while inspecting the roof of a building. Attorney Sway was doing what many lawyers do- preparing a case. Sadly, he fell 23 feet through a hole in a fire damaged roof, to his death.
I did not know Mr. Sway, but I can assure you he was doing something he loved. To be a trial lawyer is to love gathering facts. We get out of the office and up to the roof, literally and figuratively. If something is broken, we must see it and feel it. Only then can we fully test the witness accounts, and only then can we assess the truthfulness of those accounts. Visiting the scene of the accident, or handling the instrument that caused an injury is always a risk.  It’s like standing in the smoking crater, looking to the sky and asking “is this where the lightning hit?” I’m not particularly superstitious, but it must certainly tempt the fates to stand in place of the victim; We can’t know when Atropos will cut the thread of life.

Perhaps the closest call I’ve had while investigating a case came while I was happily tramping through the woods in Frederick County, inspecting a logging road on the side of a mountain which was at the heart of a property access dispute. I parked on the main highway, and walked about a quarter mile into the woods along the dirt road. I had my 35mm camera out, and every few steps I would stop, point and “click” a picture. And for 10 minutes or so, it was as uneventful as stop, point and “click.”

Intending one more photo, I stopped, pointed my camera and before I could depress the shutter, I heard a very distinct “click.”  I turned toward the sound to come face-to-face with a gentleman leveling a rifle in my general direction.  Well, it was exactly in my direction, actually.

“Who are you, and why are you on my land?”

A perfectly reasonable question, I thought.  I prefaced my answer with “I am a lawyer,” but immediately had second thoughts. A gun blast might be seen by some folks as the perfect punch line to a story beginning with “a lawyer was walking in the woods.”

It turns out that I was HIS lawyer. It is now my inviolable practice to call ahead of a site visit.

And so I mourn attorney Sway. He could have prepared his case from his office. He could have read a report prepared by someone else. He was doing it right.

Sunday, May 26, 2013

You own it, but is it really yours?

“Property is surely a right of mankind as really as liberty.”- John Adams

 Our second President of the United States wrote this in 1787. And for over three hundred years, the ownership of property has been the foundation of American society.  Originally, only land owners could vote or govern. We live in a culture that largely measures worth and success if you can afford to own land, develop it, and profit by it’s sale to others, who begin the same cycle for themselves.

“A man’s home is his castle” rings as true, today, as when it was first uttered in four hundred years ago, by Lord Coke.  Right?  Not so fast.

If “ownership” of land and buildings is defined as that full bundle of rights to control and dispose of the property (what is called the full “fee” interest), then you absolutely are not free to do as you please. Even if you purchased the full fee interest of a property, there are many layers of control and limitation on your rights to use and dispose of that property. Here are a few that you may not have considered. 

Easements are the right of use over the lands of another. Your neighbor, the government or even the utility company have rights to physically intrude on your land.  Your neighbor may have a right to drive his farm tractor across your lot to access adjacent lands. The government may have rights to keep you from using parts of your land (we recently had a case involving a “blast zone” easement near a former Nike missile site owned by Uncle Sam). The utility can run power lines and poles over your land. And perhaps the entire community behind your lot may have a right to use your road to access the public highway.

Environmental easements will also sneak up on you, if you are not careful. That new subdivision may have areas set aside for trees only, or "buffers," or just open space designated as a “conservation easement.” Maryland has one of the most active open space/environmental easement programs in the Country. Some of our clients have been caught short by easements created by prior owners who just wanted to capture a tax break.

Governmental restrictions and private covenants also limit how you use and enjoy your property. Most commonly, zoning restrictions impose limits on businesses in residential areas. Your neighbor doesn’t want to live next to a motorcycle repair shop! And the government doesn’t want that sex toy shop too close to an elementary school.  The largest court disputes arise where residential and business zoned areas rub against each other. “Not in my back yard,” is the usual protest by homeowners, while the business man swears that he is enhancing the community.

If you live in a planned community (whether brand new, or as old as the Homeland and Roland Park neighborhoods in Baltimore City) then you are subject to restrictions created by written restrictions on what you can do with your land, called “covenants.” You might be required to submit any proposed changes to your house to a community architectural committee for approval. We have seen disputes ranging from “don’t let your kids play basketball after 9 PM,” to “tear down that garage because it was not approved by the homeowner’s association.” Even if you did not read your covenants at settlement, you are tied up in their restrictions!

Live on or near the water? Well, your land is likely subject to the rights of others to access the beach or a boat ramp. And be assured that the State of Maryland has many restrictions on how close you may build to the water, what you can build. Your neighbors might even have shared use of your waterfront and pier. And if Mother Nature creates more land by depositing dirt and sand along your property, you may actually own a larger lot.  But if Mother Nature washes that land away, you own less. But be careful about protecting your land—the State of Maryland has tough requirements for “rip-rap” and other methods of erosion protection. We recently advised a client against conflicting claims by the State and their homeowner’s association about maintenance of rip-rap and beachfront property. And don’t dare disrupt wetlands or tidal lands, or you will hear nasty things from the State of Maryland.

You are not immune from government intrusion involving water just because you live inland, near a casual stream or storm conduit.  If that water feeds a river and makes its way to the Chesapeake Bay or ocean, then you are subject to federal restrictions.  One of our past clients thought he was doing a good deed by depositing stones and highway rubble into a stream to slow water flow and save his land from erosion—and he was wrong! A violation notice from the federal government forced removal of the stones and payment of a fine.

Liens are the right given to another by the owner of property to secure a debt, or one created by law in favor of certain creditors. If you borrowed money to purchase your house, then you are already familiar with bank liens evidenced by mortgages, and deeds of trust. These are consensual liens, or liens that you agreed could attach to and encumber your property.

But most liens on your property will be non-consensual. For example, unpaid taxes, water bills, homeowner’s association dues and ground rents will all become liens on your property.  And general debts that become court judgments will also become liens on your property once recorded in the Circuit Court for the County in which the property is located.

And if you own property with others (particularly others to whom you are not married), you must be concerned for non-consensual liens attaching to their interest.  Any impairment of their interests will necessarily effect your interest.

Consensual and non-consensual liens all share one thing—they can be foreclosed by the lien holder. Our office is frequently involved in disputes among competing lien holders, all jockeying for the first priority position, like beasts feeding on fallen prey. These disputes are never good news for the property owner, who is simply waiting for the court to select his financial executioner.

The resolution of property disputes involving easements, restrictions and liens keep lawyers plenty busy. There are many ways that these matters end up in court:

Foreclosures occur once an owner is in default of obligations under a consensual or non-consensual lien. The filing of a foreclosure case can trigger multiple disputes among lien holders claiming first lien position. These disputes often have the unintended benefit to the borrower of postponing the foreclosure sale and ratification which would require him to move out of the home.  In fact, we have seen several cases where a borrower in default lived another four years in the home without making a single mortgage payment.

And if the foreclosure generates a pile of money left over after the foreclosing lender gets paid, then lesser lien holders will file competing claims to the surplus. If there is anything left, it goes to the owner. And each step can involve a contested court hearing.

Quiet Title and declaratory judgment actionsShort of foreclosure, competing lien holders may sue each other while asking the courts to pick the first lien holder.  The grounds for these claims are seemingly limitless, and often do not involve the property owner. But this will not lessen the property owner’s stress level, since he is often made a party to these cases. We are often consulted to explain to the property owner what is happening in these cases.

Bankruptcy-Disputes over consensual and non-consensual liens arise in the main case, whether a Chapter 7 or 13, and can often spill over to a separate adversary proceeding. For example, a bankruptcy trustee might attack the validity of a lien, perhaps because it was not properly recorded or executed at the time it was made.  When the economy tanked in 2008, our office received a flood of these claims. At one point, we had approximately 65 cases involving this particular issue.  Four representative cases were selected by the bankruptcy court for referral to the Maryland Court of Appeals, where we argued discrete points of Maryland law. Once decided, the point of law resolved all of the bankruptcy cases in favor of our client.
Extended fighting among trustees, debtors and competing lien holders in the bankruptcy court also has the unintended benefit to the borrower of stalling an eventual foreclosure. But many lenders and bankruptcy trustees agree to have property sold, while agreeing to fight over who gets paid out of the fund.  That means the borrower loses the house even as the lien holders continue to fight.

Property ownership is not easy. In fact, ownership is less about enjoying the property, and more about excluding others and defending against encroachments on your interests. This requires constant diligence. It may even require court action.

Friday, May 17, 2013

Will your family steal your home?

Thanks to the generosity of over 5,000 online supporters from across the globe, a 91-year-old Ohio man, John Potter, has successfully overcome his daughter’s attempts to evict him from the home he built 56 years ago.

In 2004, while battling a serious illness, World War II veteran John Potter gave the general power of attorney to his daughter, Janice Cottrill.  Unbeknownst to Potter, Cottrill exploited this power to convey his home’s deed to herself.

Potter learned of the deed transfer in 2010 and promptly switched power of attorney to his granddaughter.  He then sued to reclaim the one-story house, arguing that his daughter’s deed transfer was illegal because as the power of attorney, she cannot transfer assets to herself from the estate she oversees.
He initially won in the county court, but in 2012, an appeals court overturned the decision.  It stated that the four-year statute of limitations had passed on the accusation of breach of fiduciary duty.  Thus, the deed could not be returned to Potter.

Earlier this year, the family dispute culminated in Cottrill’s eviction notice to her father, informing that she had terminated his “existing lease.”  Yet, she, in agreement with her attorney, offered to allow Potter to remain in the house if he bought it.

Potter’s only income is his pension, making it nearly impossible for him to afford the $125,000 price tag for the home he once owned outright.  This prompted Jaclyn Fraley, his granddaughter and current power of attorney, to launch an online campaign to raise the necessary funds.  The news outlets picked up the story, and in just a month, Fraley and Potter have already exceeded their expectations, earning over $135,000.  Impressively, donations continue to pour in, giving Potter additional finances to continue to care for the home.

Through grit, persistence, and several thousand generous friends, John Potter scraped his way back from a power of attorney gone terribly awry.

Horror stories such as this nightmare can and do happen—but they do not always end so favorably.  Powers of attorney are often necessary, but it is imperative to understand this role’s authorities and responsibilities before you assign one or become one.  Or, perhaps you will learn all of this in the course of complex probate litigation?

UPDATE 6/20/13: 
John Potter once again finds himself facing a looming eviction.  Due to price disagreements, Janice Cottrill rejected her father’s recent offer on the home.
An independent market appraisal conducted on the home revealed its value is $47,000 with a tract of land worth $2,830.  Through his attorney, Potter offered to pay his daughter this market value, but he instead received a counter-offer around $85,000 plus $4,000 and $11,500 for the eviction process and attorney fees, respectively.  Potter attempted a second offer of $60,005.23 on June 13, but Cottrill declined without a counter-offer, issuing a letter through her lawyer informing that she finds “the offer unacceptable and decline[s] the same.”
Potter’s attorney, Tim Gleeson, says that he and his client are open to conducting another appraisal but admits that without a counter-offer, the best move is to look for new housing for Potter.
With his eviction hearing scheduled for June 26, Potter fears the judge will have no choice but to force him out of the home.  Jaclyn Fraley says that she will help her grandfather purchase a new house with the generous donations from thousands of internet donors. 
He will not be homeless but John Potter will most likely never again live in the home he built 56 years ago— all because of a power of attorney gone wrong.