kevin-nelson

The Law of Changed Circumstances

Wed, 14 May 2025 23:31:16 GMT

By nature, I am a rule follower. I find comfort in the strict interpretation and application of rules in almost every instance. My daughter is the same. My wife and son balance us out. Early in my children’s youth sports careers — which are, thankfully and regrettably, about to close — a large group of parents and kids wanted to cross a relatively busy street (not busy at the time) to get to a restaurant. All but one in the group crossed the street as soon as they came to it. One of us — me — took another five minutes to cross at a crosswalk. To this day, my wife and son still razz me about it. I take pride in it. But I acknowledge that I may be different than most.

The comfort I find in rules limited my abilities as a litigator early in my career. I stood firmly by the principle that equity should strictly follow the law when I first-chaired my first jury trial. It was a two-week slog to resolve a decade-long multifaceted dispute between a commercial owner and a residential owners’ association in a large mixed-use development. I found the issues compelling; the jury — not so much. The law was on my client’s side, and I was confident — without guaranteeing — that we would win out. Although we won on all but one of the claims, the jury’s verdict humbled me and I heard the simple words of a great mentor echo in my head: “The law matters, Kevin, but the facts matter more.”

As a trial attorney, I do not believe that anything hurts worse than a jury’s verdict going against your client in any way, no matter how

small. For me, it quite literally feels like a kick in the gut. As I struggled through recovering from my less-than-complete victory, I had to come to terms with the fact that equity may follow the law, but it also shapes it. In real estate, equity’s refusal to sheepishly follow the law is often seen in what I refer to as the law of changed circumstances.

ZONING

Zoning is one area of the law where the application of the law of changed circumstances is most obvious. Through the law of changed circumstances, zoning restrictions placed on land, whether by ordinance, regulation, or otherwise, will bend to a preexisting and established lawful use of real estate that does not conform to the new restriction — i.e., a prior nonconforming use. Heath Twp. v. Sall, 442 Mich. 434, 439; 502 N.W.2d 627 (1993); MCL 125.3208(1). Permitting a new zoning restriction to immediately upend a prior nonconforming use would be inequitable.

But the law of changed circumstances also does not permit zoning restrictions to break in the face of a prior nonconforming use. That is because “[i]t is the policy of this state and a goal of zoning that uses of property not conforming to municipal zoning ordinances be gradually eliminated.” Lyon Charter Twp. v. Petty, 317 Mich. App. 482, 488; 896 N.W.2d 477 (2016). A municipality may gradually eliminate nonconforming uses by acquiring the subject real estate by purchase, condemnation, “or otherwise.” See MCL 125.3208(3).

RESTRICTIVE COVENANTS

The application of the law of changed circumstances is not as obvious when it comes to restrictive covenants. Restrictive covenants are, generally, contracts between or among owners of neighboring real property that restrict or require certain actions — e.g., whether properties in a neighborhood or subdivision must be limited to single-family use. More commonly known, and perhaps abhorred, sets of restrictive covenants are a subdivision or condominium’s Declaration of Covenants, Conditions, and Restrictions (“declaration” or “CC&Rs”) and, in certain circumstances, its bylaws. Conlin v. Upton, 313 Mich. App. 243; 881 N.W.2d 511 (2015) (analyzing a condominium’s bylaws as restrictive covenants).

Restrictive covenants benefit and burden each of the neighbors that own land subject to the restrictive covenants. In other words, they “are at once in tension with and complementary to” the bundle of rights held by each of the neighbors in their separate real estate. See Thiel v. Goyings, 504 Mich. 484, 496–97; 939 N.W.2d 152 (2019). The restrictive covenants are themselves property rights. Rofe v. Robinson, 415 Mich. 345, 349; 329 N.W.2d 704 (1982). And a purchaser of real property subject to restrictive covenants is deemed to have purchased their real property in reliance on the restrictions. Id. at p. 350.

Because restrictive covenants are typically broadly applied to numerous owners of real estate, it is not easy to modify them through the law of changed circumstances. For instance, a change in zoning is not alone sufficient to compel lifting a restrictive covenant. Rofe v. Robinson, 415 Mich. at pp. 351–52. Instead, a landowner challenging a restrictive covenant must establish that there has been a “complete change in the character of the neighborhood, so as to defeat the purposes of the covenants and to render their enforcement an inequitable and unjust burden on the owner of the lots […].” Moore v. Curry, 176 Mich. 456, 462–63; 142 N.W. 839 (1913). In other words, validly imposed restrictive covenants will likely only bend to extensive neighborhood changes — e.g., a neighborhood restricted to residential use of real property when the majority, if not all, of the neighborhood has transitioned to commercial use. Compare Gomah v. Hally, 366 Mich. 31, 34; 113 N.W.2d 896 (1962) (lifting restrictions); Scott v. Armstrong, 330 Mich. 504, 515–16; 47 N.W.2d 712 (1951) (enforcing restrictions).

To offset the high burden a landowner must reach to lift a restrictive covenant, restrictive covenants often include language allowing for amendments, modification, or revocation based on changed circumstances. See, e.g., McMillan v. Iserman, 120 Mich. App. 785 (1982). If a proposed change is uniform, it does not require unanimous consent of the affected property owners; however, nonuniform changes require unanimous consent. See Maatta v. Dead River Campers, Inc., 263 Mich. App. 604, 616; 689 N.W.2d 491 (2004). Even with such changes, however, the law of changed circumstances may still apply to provide relief to those that relied on preexisting conditions. Iserman, 120 Mich. App. at p. 793 (holding that an “amended deed restriction does not apply to a lot owner who has, prior to the amendment, committed himself or herself to a certain land use which the amendment seeks to prohibit providing: (1) the lot owner justifiably relied on the existing restrictions ( i.e. , had no notice of the proposed amendment); and (2) the lot owner will be prejudiced if the amendment is enforced as to his or her lot.”)

EASEMENTS

For those who have willingly forgotten their first year of law school and do not practice in the area, an easement is a right to use someone else’s land for a specific purpose. A common and often-litigated-over easement is an ingress and egress easement — i.e., a property owner’s right to travel over someone else’s land in order to access their own. Such easements are, quite often, agreed to between or among owners of neighboring parcels of land and documented in a written and recorded easement agreement. The neighbor that has the right to use the easement to access their property is the owner of the b“dominant estate.” The neighbor whose land the easement travels over is the owner of the “servient estate.”

A dispute over an easement often arises when the owner of the servient estate changes the nature of the easement. One potential way to resolve that dispute is through the application of the law of changed circumstances. Suppose the owner of the servient estate erects a fence across their property and an unlocked gate across the road that provides the owner of the dominant estate with access. The owner of the servient estate did not ask or obtain permission to erect the fence and gate, and the written and recorded easement does not include an express or implied prohibition against erecting the fence and gate. Should the owner of the servient estate be required to tear the fence down or remove the gate? If the fence and gate are reasonable and do not impose new burdens — not mere inconveniences — on the owner of the dominant estate, the law of changed circumstances allows the fence and gate to remain. Smith v. Straughn, 331 Mich. App. 209, 220; 952 N.W.2d 521 (2020).

The law of changed circumstances also allows for the manner, frequency, and intensity of the easement’s use over time to accommodate normal development if it does not result in unreasonably increasing the burden placed on the servient estate. See Schumacher v. Dept. of Nat. Res., 256 Mich. App. 103, 108; 663 N.W.2d 921 (2003). If the owner of the dominant estate lawfully used their property to develop a commercial building and the easement allowing access to that commercial building was the only reasonable access to that property — meaning that it was an “easement by necessity” — allowing additional vehicles to travel over the easement may be permitted. If the owner of the dominant estate someday obtains an alternative easement for accessing their property in the future, the law of changed circumstances may apply to the easement again. In that instance, because the easement would no longer be one of necessity, it may be terminated. Charles A. Murray Tr. v. Futrell, 303 Mich. App. 28, 55; 840 N.W.2d 775 (2013) (“[T]he requirement for an easement by necessity is that of strict or absolute necessity, and an easement by necessity ceases to exist when the necessity ceases.”)

COMMERCIAL LEASE AGREEMENTS

The law of changed circumstances may also apply to excuse nonperformance of obligations under commercial lease agreements (or any other contract) through the legal doctrines of impossibility and frustration of purpose. Impossibility — or impracticability — excuses nonperformance when performance is objectively, not absolutely, impossible. Restatement (Second) of Contracts § 261 (1981). The person claiming impossibility must show that there is “extreme and unreasonable difficulty, expense, injury or loss involved.” Roberts v. Farmers Ins. Exch., 275 Mich. App. 58, 74; 737 N.W.2d 332 (2007) (cleaned up). Frustration of purpose excuses nonperformance when both parties are aware of the purpose and that purpose is “basically frustrated by an event not reasonably foreseeable at the time” the lease was entered into, the frustration is not the fault of the party claiming frustration, and the frustrated party did not assume the risk of the frustrated purpose. Liggett Rest. Group, Inc. v. City of Pontiac, 260 Mich. App. 127, 134–35; 676 N.W.2d 633 (2003). As seen nationally post-pandemic, the doctrines of impossibility and frustration of purpose are often unavailable to excuse nonperformance in the face of well-drafted lease provisions negotiated by sophisticated parties that anticipate the impracticability or frustration and shift the burden to the party that more commonly relies on the doctrines — i.e., the tenant. Evaluating whether and to what extent the doctrines may apply to any given commercial lease dispute over nonperformance remains worthwhile because not every lease is well drafted and the doctrines may address temporary events. Nat’l Retail Properties, LP v. Fitness Int’l, LLC, unpublished opinion of the Court of Appeals, issued October 12, 2023 (Docket No. 363909), 2023 WL 6782536, p *4, n.3 (holding that neither doctrine applied with the assumption “that the doctrines of frustration of purpose and impossibility may be temporary.”); see also Bay City Realty, LLC v. Mattress Firm, Inc., 20-CV-11498, 2021 WL 1295261, at *9 (E.D. Mich. Apr. 7, 2021) (discussing temporary impossibility and frustration of purpose).

CONSTRUCTION AGREEMENTS

Construction agreements are particularly susceptible to the law of changed circumstances. Outside of construction defect issues, disputes at the end of construction projects often revolve around disputes over money claimed due. When such a dispute arises, the nonpaying party will likely recall the risk-allocation provisions of the contract they have not referenced since the work began and turn to the provision on change orders.(1) A well-written construction contract will require any change order to be in writing and signed by each of the parties, prior to the work being performed, to show the agreed-upon terms of the change. The law of changed circumstances can negate a construction contract’s strict requirements for change orders. Such requirements may be modified by oral agreement. Minkus v. Sarge, 348 Mich. 415, 421–22; 83 N.W.2d 310 (1957). They may also be waived by the parties’ conduct. Phoenix Contractors, Inc. v. General Motors Corp., 135 Mich. App. 787, 794–95; 355 N.W.2d 673 (1984).

REAL PROPERTY SALES

The duty of disclosure during a sale of real property may broaden as a result of the law of changed circumstances. Specifically, a seller of real property and their agent owe a duty to a buyer to disclose newly acquired information that renders a prior affirmative statement untrue or misleading. Hord v. Env’l Research Inst. of Michigan, 463 Mich. 399, 406; 617 N.W.2d 543 (2000); Alfieri v. Bertorelli , 295 Mich. App. 189, 194; 813 N.W.2d 772 (2012). That rule remains true in the face of a home seller’s compliance with Michigan’s Seller Disclosure Act. MCL 565.961; see also Bergen v. Baker, 264 Mich. App. 376, 385, 387–88; 691 N.W.2d 770 (2004) (concluding that a material issue of fact existed with respect to the homebuyer’s fraud claim when evidence suggested that the home seller failed to disclose knowledge of a roof leak subsequent to Seller Disclosure Act compliance). And that rule is especially true when the buyer raises a particular concern or makes a direct inquiry to which the newly acquired information is relevant. Alfieri at p. 194. The failure to disclose known information in that context may constitute silent fraud, fraudulent concealment, or negligent misrepresentation. Id.; see also M&D, Inc. v. W.B. McConkey, 231 Mich. App. 22, 31–32; 585 N.W.2d 33 (1998) (holding that a seller of commercial property had not committed silent fraud when it failed to disclose its knowledge about flooding at the property because the sale transaction documents contained an “as is” clause and other disclaimers, no inquiry about flooding was made that gave rise to a duty to disclose, and the vendor made no representations or conduct that gave rise to a duty to disclose.)

CONCLUSION

The law of changed circumstances may be used in a variety of circumstances to breathe life into an argument that appears prohibited by a strict reading of the law. It has permitted me, after 20 years of practice, to adopt a modified version of my former mentor’s words: The law matters, but the facts often heavily shape the application of the law. We are better off for it. And I am hopeful that equity will continue to follow the law without kowtowing.

Footnote:

I use the term “change order” broadly to mean either a change or addition to the applicable scope of work on the project.

Article first published by OCBA in Laches magazine .

Auto-Mechanic Liens in Arizona

Thu, 21 Nov 2024 04:56:26 GMT

Arizona law provides qualified protections for mechanics whom perform repairs on vehicles at the vehicle owner’s request. Those protections are provided by a common law lien, a statutory lien, and a statutory right to treat certain vehicles as abandoned. Each protection, however, is subject to limitations including those meant to protect liens on the vehicle’s title at the time of the repairs (“prior liens”).

The common law provides a garage owner with a lien on a vehicle for the value of the work performed or material furnished during the repair of the vehicle. Beck v. Hy-Tech Performance, Inc. , 236 Ariz. 354, 357, ¶ 9, 340 P.3d 433, 436 (App. 2015) (citing Capson v. Superior Court of State of Ariz., In & For Maricopa Cnty. , 139 Ariz. 113, 115, 677 P.2d 276, 278 (1984)). In order for the lien to arise, there must be an express or implied agreement between the vehicle owner and the garage owner regarding the performance of the repairs. Capson , 139 Ariz. at 116, 677 P.2d at 279. A dispute related to the value of the work performed or material furnished will not, absent fraud or bad faith, destroy the lien. Beck , 236 Ariz. at 357, ¶ 9, 340 P.3d at 436. However, the lien may not include any towing or storage costs. Capson , 139 Ariz. at 115, 677 P.2d at 278. The lien is also possessory, meaning that the garage owner must remain in possession of the vehicle until the charges are paid in order to maintain the lien. Fishback v. Foster , 23 Ariz. 206, 210-211, 202 P. 806, 808 (1922). The common law lien does not permit the garage owner to sell the vehicle in order to satisfy the lien. Id . at 212, 202 P. at 808.

Similarly, Arizona Revised Statute Section 33-1022.A. provides owners of a garage or repair or service stations (collectively, a “vehicle repair business”) with a statutory lien on vehicles for the value of the work performed or material furnished if the vehicle owner agrees to pay for the repairs. Arizona Revised Statute, Section 33-1022.A. The charges are limited to the value of the parts, labor, materials, supplies and storage provided. Towing charges are not part of the lien.

Arizona Revised Statute Section 33-1023 permits the enforcement of the statutory lien by public sale, if certain requirements are met, and allows the vehicle repair business owner to use the proceeds of the sale to satisfy the statutory lien. Any remaining or excess proceeds from that sale are then to be paid to the owner.

One question that often arises is whether the public sale may take place without the first satisfying all prior liens. The answer is that it should not. That is because the statutory lien does not impair prior liens (e.g., a lender’s lien on the vehicle’s title), unless the owners of the prior liens (e.g., the lenders) were aware of and agreed to the repairs before they began. Arizona Revised Statute, Section 33-1022.B. Allowing the proceeds of a public sale to satisfy the statutory lien without satisfying the prior liens would impair the prior liens by effectively placing the statutory lien ahead of the prior lien.

The limitations placed on the public sale become more obvious when an attempt is made to transfer title to the vehicle after the sale. The Arizona Department of Transportation, Motor Vehicles Division, requires a vehicle repair business owner that has a written or verbal contract for repairs with the vehicle’s owner to apply for a mechanic’s lien by complying with the “Mechanics Lien Requirements” form. That form is available at https://apps.azdot.gov/files/mvd/mvd-forms-lib/48-7810.pdf . The applicant must meet the following key requirements:

Provide an original or certified copy of a work repair order signed by the vehicle’s owner.
Obtain a motor vehicle records search to, among other things, verify the name and address of any lienholders.
Provide a lien release from all lienholders appearing on any title and lien search. For Arizona liens, the release must be signed, notarized, dated, and include the amount of the lien.
Complete an Auction Sale Certificate, which requires the applicant to certify that there were no liens of record when the mechanic’s work began. That Certificate is available at: https://apps.azdot.gov/files/mvd/mvd-forms-lib/46-8503.pdf
Complete a Title and Registration Application, which requires the applicant to identify all lienholders. The form acknowledges that “Lienholder retains an ownership interest of the vehicle…until the loan is repaid”. That Application is available at: https://apps.azdot.gov/files/mvd/mvd-forms-lib/96-0236.pdf

Collectively, the “Mechanics Lien Requirements” prohibit the transfer of title following the public sale unless and until all prior liens have been satisfied. Therefore, no public sale of a vehicle should occur to enforce the statutory lien if unsatisfied prior liens exist.

If no prior liens exist and the vehicle is left at a “repair facility operated for commercial purposes” without a written or oral agreement regarding the performance of the repairs, then the vehicle may be reported as abandoned. Arizona Revised Statute, Section 28-4840.A. Under those circumstances, title to the vehicle may be transferred pursuant to Arizona Revised Statute, Sections 28-4841 and 28-4842. The abandoned vehicle process may not be used instead of the statutory lien process.

Some vehicle repair businesses may consider selling the vehicle without disclosing the existence of, or satisfying, prior liens. Taking that action can prove to be very costly. Misrepresenting facts in order to transfer vehicle titles (e.g., stating that no prior liens of record exist when they do) will likely subject the auto mechanic to punitive damages. Currie v. Dooley, 132 Ariz. 584, 589, 647 P.2d 1182, 1187 (App. 1982) (holding that jury’s award of punitive damages against towing company was proper when towing company made misstatements in order to obtain abandoned vehicle certificate).

If you have any questions regarding auto mechanic liens, please do not hesitate to contact me at kpn@tblaw.com .

Preparing for Trial in a New Jurisdiction

Mon, 03 Apr 2023 04:22:03 GMT

This feature article originally appeared in Laches Magazine in April 2023.

Growing up as a shy latchkey kid about 60 miles from the Mexican border in what was then the smallish city of Tucson, Arizona, I was provided with an early opportunity to become resourceful. Being from a broken home with a single parent who worked two jobs and put herself through college with me under her wing, I also quickly found that you learn a lot if you keep your mouth shut and your eyes open and actively watch and listen to the world around you. Once I emerged from the dark tunnel that enveloped my teenage years, I began to appreciate how the attributes I gained in my youth helped me quickly seek out, adapt to, and succeed in - most of the time - new environments.

Going into my 19th year practicing law, I find myself licensed to practice law in three states and a handful of tribal courts in the Southwest. As a "litigator" or "trial attorney," I adhere to the rule that you prepare for every case as if you are going to trial. With that rule in mind, I'd like to provide my strategies for preparing to try a case in a new (to you) jurisdiction.

Northern Exposure

Thu, 26 May 2022 04:35:09 GMT

Tiffany & Bosco opens brick-and-mortar office in Northville, Michigan

In February 2022, during my fifteenth year with the firm, I had the honor of opening Tiffany & Bosco, P.A:s first brick-and-mortar office in Michigan. Located in a small suburb of Detroit, the office is a testament to the unique culture that has arisen from the four pillars of our firm.

The first pillar is an insistence on treating everyone with respect. It is an unwritten but strictly enforced "no jerk" policy that makes the practice of law less stressful for our attorneys, staff, and clients. We can and do disagree on particular issues from time to time, but we always listen to, respect, and consider one another's views.

The second pillar is a prohibition against imposing costs on one another without reaching a consensus. There are costs that we all share so that we can meet our needs ( e.g., office space and utilities), but no attorney is forced to pay for another's discretionary expenses or wants ( e.g., season tickets or social club dues).

The third pillar is our source policy, which credits our attorneys for developing business for themselves and for others at the firm. There are no minimum requirements, and we do not vote people out for failing to develop business. Instead, we encourage our attorneys to get involved in groups that reflect and strengthen their affiliations, associations, or communities, and we support their involvement as a firm. The attorneys who develop business often receive an objective award that naturally flows from their involvement.

The fourth and final pillar is that our shareholder compensation is largely self-determined. In other words, we do not have a committee that dictates our compensation and, as a result, our relationships are not tainted by disagreements over money.

These four pillars support a strong platform from which our firm grew to what it is today: a firm of more than 70 attorneys across seven states and nine offices. And it is also these four pillars that enabled me to open the office in Michigan.

I first pitched the idea of my move to Michigan in March 2019. To keep it brief, I saw an opportunity for my family, and after discussion, we each felt compelled to move. Because of the firm's four pillars, my unique idea was not dismissed outright, and any concerns partners had regarding additional costs were easily addressed. After the initial shock of the idea wore off, the firm rallied behind our move in July 2019-four very short months later.

With the support of my firm, a lot of hard work, some quiet time created by the pandemic, and the supportive community of attorneys in Michigan, I began learning the intricacies of Michigan law and procedure, obtained my license to practice law in Michigan, and have now opened the Michigan office. As I build the firm's presence in Michigan, I continue to maintain an active and growing practice in Arizona and New Mexico and travel back to the firm's Phoenix office regularly.

While I always appreciated my firm's unique culture, the past two years have taught me even more about the strength of that culture and deepened my appreciation for it. Anything but a traditional firm, Tiffany & Bosco continues to grow with and as a result of the platform created by our four pillars.

My money's where? - social engineering fraud and real estate transactions

Sat, 16 Jun 2018 04:04:16 GMT

Like most attorneys I know, I hate answering phone calls late Friday afternoon. Will I do it? Sure. But I know before I pick up the phone that whoever is on the other side will not have an issue that is easy to fix or that can wait until Monday to be addressed. For the past two years, those late Friday phone calls have typically concerned misdirected escrow funds.

Whether the call comes from an escrow agency or a purchaser, the story is all too familiar. The caller will have received an email making a modification to escrow instructions from someone involved in the transaction. The modification is not confirmed by phone, but the instructions are followed and the wire is confirmed. No one in the transaction follows up for days, or sometimes weeks, after

the funds are due. Then, one of the parties to the transaction announces that the wire was never received.

The victims of the crime do not fit within any stereotype (at least as far as I can tell). No one is safe, regardless of their level of education, sophistication, or wealth. The problem all boils down to one issue: the transfer of what should be confidential and protected information by email. Fraudsters actively look for it and jump on it as soon as it is found. Simply sending an unsecured email with financial details from an open network is sufficient to pique a fraudster's interest, and the sophistication level of schemes is only increasing. I have seen networks hacked, email addresses taken over (while the victims are still actively using them), and modifications made to email addresses that are often overlooked. How many of you caught my typo?

In the insurance industry, the issue is referred to as "social engineering fraud" and many, if not all, insurers treat it as a loss that is not covered by their policies (including crime policies). Only a handful of insurers have begun issuing social engineering fraud endorsements in select markets. Even then, standard limits are capped at $250,000.00.

Fortunately, there are steps that everyone can (and should) take to protect themselves.

Here are my top five:

Do not fear your phone. I have held on to numerous lessons from my past mentors that remain in my thoughts as one-liners. This point and "reading all four corners" of any document you are dealing with are two that I can never shake. Too many of us (myself included) are far too comfortable hiding out in our offices, emailing or texting the day away. One problem with that routine is that emails and texts do not convey emotion well. A larger problem is that you never really know who you are dealing with on the other side of the communication. If you take away nothing else, just make a mental note that whenever you are involved in a transaction where the wiring of funds is involved, it never hurts to call the other side of the wire to confirm the wiring instructions within 24 hours before the wire and to confirm receipt of the wire within a couple days. Do not call and ask whether the wiring instructions are still good. Actually read off and con firm the details of the instructions. That step alone prevents most problems.
Follow up on missed deadlines. Some industries have adopted the practice of including disclaimers and warnings in their emails. Just think of your own email signature and the obligatory attorney-client privilege statement in small type at the bottom. In the escrow industry, many people include a statement that any change in escrow instructions should be confirmed by phone. The problem is that a lot of people do not read the fine print. Even the people that do read it do not actively read it or recall it when it is important. Do not take comfort in the email warning alone. If a deadline to wire funds is missed, follow up by phone within 24 hours to find out why.
Anticipate the issue and draft around it. Whether you are representing a purchaser, seller, or escrow agency, draft language to specifically address the manner in which escrow instructions will be conveyed, the phone numbers that should be used to confirm modifications, and the responsibility to follow up with each party to the transaction by phone. Include that language within the purchase agreement (even if it must be by addendum), provide a separate sheet for the parties to acknowledge the instructions by signing the sheet and taking a copy of the instructions with them (especially those parties that are less sophisticated), and require the language within the purchase agreement to be mirrored in the escrow instructions.
Never exchange transaction documents or financial information by unsecured email. There are several programs out there offering encrypted data exchange for Little to no cost. Get one and use it. One article outlining the pros and cons of the "5 Best" for 2018 is available at https://www.lifewire.com/secure-email-services-8774358 .
When things go wrong, get to work immediately. First, contact the local authorities. By local, I mean local to your location as well as the last known location of the funds. In the United States, the Federal Bureau of Investigation is a good place to start, but I do not suggest you start by calling them unless you already have a contact. Instead, go to https://www.ic3.gov/ and fill out a report. The FBI actively monitors it. If you report the issue within 72 hours of the wire, the FBI is pretty good at getting the funds back. Outside of the United States, you need to phone a friend. In many locations, there are numerous attorneys at larger firms or other business advisors (depending on the issue) who handle issues like this on a daily basis. Those contacts can help you maneuver through the proper systems more efficiently than phone calls to police stations hundreds or thousands of miles away. Second, contact the financial institutions involved beginning with your own. They also have some success stopping the transfer of funds.

If all else fails, you will need to evaluate your next steps carefully. Within days, sophisticated fraudsters can spread the wired funds-no matter the amount-into several different countries in ever decreasing amounts. A misdirected wire of $100,000 (equating to a couple's life savings) can quickly turn into 20 or more different transfers between accounts. Although the cost of tracing and chasing the first wire may be worthwhile, the cost-benefit analysis quickly shifts as more transfers occur. Once that happens, fingers start to get pointed and we all know where that leads. So remember, please do not fear your phone.

MARICOPA LAWYER - MEMBER SPOTLIGHT

Fri, 01 Jun 2018 02:26:14 GMT

Kevin P. Nelson, Chair, Real Estate Law Section

Doing Business on Tribal Lands in Arizona

Wed, 14 Feb 2018 01:24:26 GMT

If you are considering doing business on Tribal Land or with Tribal Entities, you need to understand that the law that applies to the business deal will likely not be Arizona law. This article addresses some important issues that arise when businesses and individuals do business with Indian Tribes or Tribal Entities on Tribal Lands. First, let’s understand what the terminology means.

Terminology

As a preliminary matter, the phrase “Tribal Lands” refers to those lands over which an Indian Tribe has jurisdiction. In Arizona, the phrase “Indian Tribe” can be a reference to one of more than 20 federally recognized Indian Tribes located within the state. The phrase “Tribal Entity” generally refers to a business entity (such as a corporation, partnership or limited liability company) that is so closely related to an Indian Tribe that it possesses the same or similar legal protections that are afforded to the Indian Tribe.

Each Indian Tribe is a unique governmental entity with the authority to create and enforce its own laws and regulations. However, some individuals and businesses fail to realize the authority of such Indian Tribes until it is too late. With a slowing national economy and Indian Tribes focused on culturally appropriate economic development, it is likely that more businesses and individuals will start doing business on Tribal Lands.

How To Check For Sovereign Immunity

Indian Tribes have sovereign immunity. In other words, you cannot sue the Indian Tribe (or Tribal Entity)—even in the Tribe’s own courts—u nless the Indian Tribe (or Tribal Entity) has waived its sovereign immunity. The waiver of sovereign immunity may be, and almost always is, limited to certain events or issues. Before entering into a contractual relationship with an Indian Tribe or Tribal Entity, it is important to know whether there has been proper waiver of sovereign immunity. Your attorney can find this information.

Moreover, e ven if an Indian Tribe or Tribal Entity has waived its sovereign immunity, and a business or individual is successful in obtaining a judgment, traditional methods of enforcing that judgment may be prohibited. For instance, an Arizona mechanic’s lien is not enforceable against property located on most Tribal Lands, and the ability to garnish a tribal member’s wages or an Indian Tribe’s or Tribal Entity’s bank account may be prohibited.

The requireme nts to waive sovereign immunity (“Waiver”) vary among Indian Tribes. For instance, some Indian Tribes may require a super-majority vote of its governing body before permitting a Waiver. An Indian Tribe’s Waiver, even if proper, may be overturned. And, even though a Tribal Entity may indicate that it has the authority to effectuate a Waiver, the Indian Tribe may ultimately prohibit such a Waiver.

How To Review a Native Tribe’s Governing Documents

The best resour ces to obtain an initial understanding of the Indian Tribe or Tribal Entity are its governing documents, as well as the Indian Tribe’s laws and regulations. A thorough review and understanding of such resources, prior to entering into a contractual relationship, will provide a better understanding of your rights and responsibilities. Governing documents may often be obtained on the internet, through sources like the Tribal Law Gateway , or by contacting the Indian Tribe or Tribal Entity.

It is also imperative that you evaluate whether the Indian Tribe or Tribal Entity has business licensing requirements, imposes taxes for doing business on Tribal Lands, or imposes hiring preferences (like the requirement to hire a Native American or Tribal member ahead of others). That information may be obtained by contacting the Indian Tribe or reviewing its governing documents. The failure to adequately evaluate these issues could result in civil liability, or worse, the ultimate termination of your project or services with limited, if any, recourse.

Anyone planning to do business on Tribal Lands should also consider cultural concerns (e.g., whether it is rude to stare someone in the eye during a conversation). There is no single resource from which you could understand those cultural concerns. It would serve you well to read about the history of the Indian Tribe you intend to do business with, travel to and spend time in the area within which you plan to do business, and speak with other successful business owners in the community.

Attorneys Who Specialize In Indian Law

Our Indian Law team has extensive experience assisting our clients (whether individuals or businesses) that do business on Indian Land.

The Ties that Bind The Value of Agreements Between Business Owners

Thu, 16 Mar 2017 02:11:54 GMT

When beginning a business, many co-owners prefer to spend time focusing on their common efforts rather than the risks associated with their business relationship. Some important questions are commonly (and understandably) avoided during this “honeymoon” phase. Unwillingness to focus on these issues while they are still hypothetical can leave the partnership on a shaky foundation during rough times.

Business owners are well advised to take a proactive approach in addressing future risks through an owner agreement.

What is an owner agreement? The name varies depending on the type of business entity, but the most common are titled “Buy/Sell Agreements,” “Shareholder Agreements,” “Partnership Agreements,” “Operating Agreements,” and “Joint Venture Agreements.”

Whatever the name, there are some common provisions business owners should consider.

Key issues include:

1}Working Capital Prior to beginning any business, owners should agree how the owners will provide the company’s working capital and whether the company will take on debt financing when cash needs press.

2}Profit and Loss Allocations When a company makes a profit, everyone will want a piece of the pie. Detailing who gets the profits, and when, will help avoid fights in the future or at least lessen their intensity. This can also be true for losses. For instance, who gets the potentially valuable tax benefits of a loss?

3} Compensation for Services How owners are paid is the most common trigger for disputes. An owner’s ego can be easily bruised when other owners seek higher compensation for their services. It is imperative that the owners detail how services will be compensated at the start of the business and as the relative value of the owners’ contributions change over time.

4} Procedures for Business Decisions Business owners should address when and where they will meet, when a vote on a business decision is required, who will be entitled to vote, and the duties and rights of the parties. Will one or more owners have a “tiebreaker” or “veto” rights?

5} Trigger of Buy-Out Rights At some point business owners must consider what happens when an owner terminates employment, dies, becomes disabled, files bankruptcy, gets divorced, etc.

6} Valuation of Ownership Interests There are many methods that can be used to value an ownership interest. Regardless of the method used, we generally recommend using a single valuation method for all buy-out triggering events. We also suggest considering cash flow needs for the company by scheduling payment of the purchase price for the ownership interest over an agreed period.

7} Dissolution Upon dissolution, a company must consider how assets will be distributed , how debt will be satisfied, and who will be responsible for winding up the company.

8} Dispute Resolution Finally, and sometimes most importantly, owners should agree on how they will seek to resolve disagreements. Having an agreement to try to resolve disputes privately through informal negotiations, mediation, and arbitration can help avoid a lawsuit that is both costly and subject to public review by competitors, customers, vendors, and employees.

The bottom line is that business owners are wise to reach an agreement regarding the above-outlined issues prior to participating in substantial business dealings. However, even long standing businesses should consider adopting or updating an owner agreement. We can help address these and other important issues for new and experienced business owners.

WE’RE HERE TO HELP

For more information about Tiffany and Bosco’s resources in this area, please contact Jim O’Sullivan or Kevin Nelson of our Business Solutions Department at (602) 255-6017, jpo@www.tblaw.com , or (602) 255-6028, kpn@www.tblaw.com.

The Fraudulent Debtor: Liability of Debtor’s Life Insurance Proceeds Beyond the Grave

Thu, 16 Mar 2017 01:54:20 GMT

It is well-settled under Arizona law that life insurance proceeds payable to beneficiaries, other than the deceased debtor, are exempt from claims against the deceased debtor’s estate. That rule has stood for more than sixty years and is supported by statute, A.R.S. S 20-1131(A), and the Arizona case, May v. Ellis, 208 Ariz. 229, 230-31, 92 P.3d 859, 860 (2004). In fact, in 2008, the Arizona legislature clarified the rule by confirming that life insurance proceeds are exempt from such claims regardless of whether the beneficiary is an individual or a trust.

The reason for the rule is to protect life insurance proceeds that “do not come into existence during [the insured’s] life, never belong to [the insured], and pass to the beneficiary by virtue of the contractual agreement between the insured and the insurer.”In re Succession of Halligan, 887 So.2d 109, 113 (La. Ct. App. 2004) (internal citations omitted).The general policy behind the rule is that a beneficiary of life insurance proceeds, such as a child or spouse, should not be held accountable for debt incurred by the deceased debtor over which the beneficiary had no control.Overall, this provides substantial benefits to the non-debtor beneficiaries.However, there is one exception.

The exception to the rule is stated under A.R.S. S 20-1131(B) and provides that “the amount of any premiums for insurance paid in fraud of creditors, with interest, shall inure to the[] [creditors’] benefit from the proceeds of the policy.” Because the application of A.R.S. S 20-1131(B) has not been addressed in any reported Arizona case law, what a creditor would be required to prove to obtain such life insurance proceeds is subject to debate.What is clear, however, is that the creditor would have to prove that the premiums were paid “in fraud of creditors.” If successful, the creditor’s recovery would be limited to the amount of the premiums at issue with interest either at the contractual interest rate or, if no contractual interest rate is present, Arizona’s 10% default interest rate.

What must be proven to show that premiums were paid “in fraud of creditors” has been addressed by non-Arizona state courts.Some states find that fraud may be presumed when a debtor is insolvent and diverts assets to the payment of premiums rather than to a creditor who existed at the time the premiums were paid.Other states require that the creditor prove actual fraudulent intent that is shared by both the debtor and the beneficiary.And some states require a creditor to trace the misappropriated funds to the payment of life insurance premiums when the fraud occurs after the life insurance policy has been procured.Regardless of what a creditor must prove, considering the public policy behind the protection of life insurance proceeds, it is clear that the creditor’s burden of proof is high.

In summary, creditors should be aware that they may have recourse against the proceeds of a deceased debtor’s life insurance policy.While the pursuit and recovery of life insurance proceeds should be limited to the most egregious of circumstances, Tiffany & Bosco has the experience necessary to assist our clients in the evaluation and pursuit of such claims.