Reprise: Estate Resources

August 31, 2018 § 1 Comment

Reprise replays posts from the past that you may find useful today.

A COMPENDIUM OF ESTATE POSTS

July 5, 2011 § 5 Comments

Standing to Demand an Accounting

August 29, 2018 § Leave a comment

We visited the Ferrell v. Cole case yesterday, dealing with who is entitled to notice to close an estate. Ferrell held that only persons with a direct pecuniary interest in the estate were entitled to notice. If one is not in the class of persons entitled to notice, does one have standing to demand an accounting or to object to an accounting?

That was the question in Flowers v. Estate of Flowers, decided February 6, 2018, by the COA. At the trial level the Special Chancellor had denied the request of Claire and Jane, daughters of the decedent, for an accounting, finding that they had no current interest in their mother’s estate. Their interest was described by the COA this way:

¶4  …  The will also established a trust that named D.A. [a minor] and his descendants as the income beneficiaries. The will provided for the trust’s termination either at the time of D.A.’s thirtieth birthday or his death, whichever event occurred first. The will further stated that, at the time of termination, the trust’s assets were to be divided evenly between D.A. and Knox [the decedent’s son]. The will then granted Claire and Jane a shifting executory interest by providing that, if both D.A. and Knox passed away without any descendants before the trust’s termination, the trust’s assets were to be  distributed to Claire and Jane as beneficiaries, either directly or through conservatorships. While the will relieved the trustees from having to render a periodic accounting to any court, it stated that the trustees “shall . . . account fully and completely annually, throughout the term of this [t]rust, to such income and/or corpus beneficiaries as there may be or[,] in the event such beneficiary is a minor or a ward, then to such beneficiary’s guardian.”

So, in that situation, did Claire and Jane have standing to demand an accounting? Here’s how the COA dealt with the question:

¶16. On appeal, the parties disagree as to whether Claire and Jane have standing to request an accounting of their mother’s estate and testamentary trust. Since standing is a jurisdictional issue, we review it de novo. SASS Muni-V LLC v. DeSoto Cty., 170 So. 3d 441, 445 (¶12) (Miss. 2015). Standing is to be determined at the commencement of a lawsuit. In re Estate of Baumgardner, 82 So. 3d 592, 599 (¶21) (Miss. 2012). Regarding the applicable caselaw on standing, the Mississippi Supreme Court has stated the following:

To have standing to sue, a party must assert a colorable interest in the subject matter of the litigation or experience an adverse effect from the conduct of the defendant, or as otherwise authorized by law. An interest is deemed colorable if it appears to be true, valid, or right. An individual’s legal interest or entitlement to assert a claim against a defendant must be grounded in some legal right recognized by law, whether by statute or by common law. For a plaintiff to establish standing on grounds of experiencing an adverse effect from the conduct of the defendant/appellee, the adverse effect experienced must be different from the adverse effect experienced by the general public.

SASS Muni-V, 170 So. 3d at 446 (¶13) (internal citations and quotation marks omitted).

¶17. Mississippi precedent clearly establishes that vested remainder beneficiaries of a testamentary trust have standing to file suit and that holders of a shifting executory interest have some limited rights that can provide standing to file suit. See Baumgardner, 82 So. 3d at 600-01 (¶¶27-28); Hemphill, 245 Miss. at 46, 145 So. 2d at 461. [Fn 3] Claire and Jane claim they are vested remainder beneficiaries of their mother’s testamentary trust while Knox asserts his sisters have an unvested executory interest. As previously discussed, the chancellor found Claire and Jane were unvested contingent remainder beneficiaries.

[Fn 3] Cf. Cannon, 59 Miss. at 302-05 (holding that contingent remainder beneficiaries could prevent a life tenant from future waste to the detriment of the inheritance).

¶18. In applying precedent to the instant case, we find that Claire and Jane possess a shifting executory interest in their mother’s testamentary trust. A review of the will’s terms reflects that Brenda’s estate vests in D.A. and Knox, but that D.A. and Knox inherit subject to a condition of survivorship. See Hemphill, 245 Miss. at 46, 145 So. 2d at 461. D.A. and Knox may be divested if the condition of survivorship is not fulfilled. If the survivorship condition is not fulfilled, D.A. and Knox are then divested of their interests, which shift to Claire and Jane as beneficiaries. Precedent establishes that, as the owners of a shifting executory interest, Jane and Claire possess limited rights to prevent future waste. See id. See also Columbus & Greenville Ry. Co. v. City of Greenwood, 390 So. 2d 588, 592 (Miss. 1980) (applying the Hemphill holding to find that the heirs of original land grantors possessed a reversionary interest capable of evaluation). “An executory interest is a future interest, which is held by a third person, that either terminates another’s interest before its natural termination, or begins after the natural termination of a preceding estate.” K.F. Boackle, Real Property—Deeds and Conveyances, 7 Encyclopedia of Mississippi Law § 62:29 (2d. ed. Jeffrey Jackson et al. eds.). “A shifting executory interest occurs when ownership shifts from one transferee to another upon the occurrence of the subsequent event.” Scott v. Brunson,
569 S.E.2d 385, 387 (S.C. Ct. App. 2002). We now turn to a more specific review of the terms of Brenda’s will and the legal consequences of those terms.

¶19. In applying caselaw to the terms of Brenda’s will, we find the will’s terms reflect that, in creating the testamentary trust, Brenda named D.A. the income beneficiary with the principal to be placed in trust until the earliest of either D.A.’s thirtieth birthday or his death. At either D.A.’s thirtieth birthday or his death, Brenda’s will directed that the trust’s principal be evenly divided between D.A. and Knox “per stirpes to include adopted children.” The terms of the will next discussed disbursement of trust assets to beneficiaries who were under the age of twenty-one at the time of the trust’s termination, or who died before the trust’s termination. Finally, in establishing that D.A. and Knox inherit subject to a condition
subsequent of survivorship, the will stated as follows:

If there are no surviving beneficiaries, descendants of deceased former beneficiaries, former beneficiaries who are living, or descendants of deceased former beneficiaries, then his or her interest shall be distributed share and share alike to the [c]onservatorships for my two daughters[, Claire and Jane;] should either one or both of them not have a [c]onservatorship at the termination of this trust[,] then distribute their portion outright to them.

¶20. Thus, Brenda’s will established that, if D.A. and Knox failed to satisfy the condition of survivorship, they would be divested of their interests, which would then shift and be distributed to Claire and Jane. Accordingly, a review of Brenda’s will reflects that she gave Claire and Jane a shifting executory interest in the assets of the testamentary trust. [Fn 4] As stated, Mississippi precedent reflects that holders of a shifting executory interest enjoy limited rights to enjoin the possessory owner from waste of the inheritance. See Hemphill, 245 Miss. at 38, 145 So. 2d at 457. [Fn 5] We now turn to a review of applicable and instructive Mississippi precedent.

[Fn 4] See Hemphill, 145 So. 2d at 457 (finding that individuals who possessed a shifting executory interest in land taken and allegedly damaged by the Mississippi Highway Commission possessed limited compensable rights in the land); White v. Inman, 212 Miss. 237, 256, 54 So. 2d 375, 381-82 (1951) (finding the testator’s will devised to his daughter an estate in fee simple defeasible subject to an executory limitation). ).

[Fn 5] 5 Cf. Cannon, 59 Miss. at 302-05 (holding that contingent remainder beneficiaries could not recover damages from a life tenant for past waste but could enjoin the life tenant from future waste to the inheritance’s detriment

¶21. In Hemphill, the supreme court explained that an executory-interest owner’s limited right rests upon the constitutional provision for due process. Id. at 46, 145 So. 2d at 461. The Hemphill court found that Mississippi precedent and statutory law “place an independent
value and significance on future interests, whether ‘vested’ or not.” Id. at 47, 145 So. 2d at 462. The Hemphill court further explained that a contingent remainder interest “has achieved status as a protectable interest for many purposes” when the “contingent remainder is limited to an existing ascertained person[,]” like Claire and Jane in the instant case. Id. at 48, 145 So. 2d at 462. According to the Hemphill court, “[w]hen a contingent remainder is limited to an existing ascertained person[,] there is no question but that the courts will recognize the interest as having present existence.” Id.

¶22. Thus, upon review of relevant caselaw and the record before us, we find the chancellor erred in denying Claire and Jane’s request for an accounting of their mother’s estate and testamentary trust. As holders of a shifting executory interest in their mother’s estate, Claire and Jane possess limited rights to enjoin the possessory owners from future waste of the estate. See id. at 38, 145 So. 2d at 457.6 As a result, we reverse the chancellor’s judgment finding they lack standing to request an accounting, and we remand the case for further proceedings consistent with this opinion.

In all fairness, the COA did not have the benefit of the Ferrell decision when it decided Flowers. So the COA had to rely on tax-sale, eminent-domain, and property cases for the most part in reasoning through to a decision. But after all this, in light of Ferrell, did Claire and Jane have such a “direct pecuniary interest” so as to entitle them to that level of of protection? And isn’t the “colorable interest” test of Sass-Muni-V (a tax-sale case) less restrictive than the “direct pecuniary interest” of Ferrell (an estate case)?

Or are the interests of Claire and Jane so remote that they can’t be said to have that “direct interest” under Ferrell, which is estate law?

Now that the courts have Ferrell as a waypoint, I hope they can give those of us at ground level some clear, practical guidance.

Who’s Interested?

August 28, 2018 § Leave a comment

MCA § 91-7-295 provides that, to close an estate, “Summons shall be issued or publication be made for all parties interested.” The interested parties have the opportunity to contest the final account.

Only thing is, the statute does not define who is an interested party. And, to compound matters, neither has case law. Until August 23, 2018.

On that date the MSSC handed down Ferrell v. Cole, which looked to the will contest statute to help define who would constitute interested parties under Section 295. The unanimous decision (Randolph not partcipating) by Justice King said this:

¶10. The statute regarding will contests provides that all interested parties must be made parties to a will contest. Miss. Code Ann. § 91-7-25 (Rev. 2013). This Court has noted that interested parties under the will contest statute are those whose direct pecuniary interests will be affected by the will. Garrett v. Bohannon, 621 So. 2d 935, 937 (Miss. 1993). Interested parties includes heirs-at-law, beneficiaries under earlier wills, and beneficiaries under the will being contested. Id. The Mississippi Court of Appeals has noted that interested parties in a will contest may also include creditors, as they may have a direct pecuniary interest in the estate. See In re Estate of Necaise, 126 So. 3d 49, 56 (Miss. Ct. App. 2013). A similar standard should be used to define interested parties regarding the final accounting under Section 91-7-295. To be an interested party under the statute, the party must have some legal tie to the estate in the fashion of a direct pecuniary interest. …

In this case, Tullos, an attorney, had gotten the chancery court to approve a contingent fee contract for wrongful death litigation on behalf of the estate. When he went to close the estate, the Ferrell Group, attorneys, objected claiming a dispute with Tullos over fees. Ferrell had never probated a claim against the estate, and there was no mention of Ferrell in the contract pre-approved by the court. The MSSC affirmed the chancellor’s conclusion that Ferrell was not an interested party within the meaning of the statute.

Closely related to the issue of notice is the issue of who is an interested party for the purpose of standing. It would seem that a person would have to be an interested party within the meaning of the statute in order to have standing to intervene or to sue to demand an accounting, and that interested party ” … must have some legal tie to the estate in the fashion of a direct pecuniary interest.”

So, what constitutes that kind of “direct pecuniary interest?” We’ll look at a case tomorrow that raises some questions in an attempt to answer that question.

Circuit or Chancery?

August 27, 2018 § 4 Comments

The State of Mississippi filed suit in chancery court against a number of pharmacies for fraud and deceptive trade practices in connection with Medicaid reimbursements. The complaint sought the following relief:

(1) an order enjoining the Defendants from continuing the fraudulent, deceptive and/or unfair acts or practices complained of herein, and requiring correcting measures;
(2) an award of compensatory damages to the State in such amount as is
proved at trial;
(3) an award of actual damages;
(4) an award of all civil penalties provided for by statute;
(5) an award of punitive damages;
(6) an accounting of all profits or gains derived in whole or in part by the Defendants through their fraudulent, unfair and/or deceptive acts or practices complained of herein;
(7) a constructive trust of the moneys illegally and impermissibly obtained from the Defendants’ scheme;
(8) an order imposing a constructive trust on and/or requiring disgorgement by the Defendants of all profits and gains earned in whole or in part through the fraudulent, unfair and/or deceptive acts or practices complained of herein;
(9) an award of attorney fees, costs, and prejudgment interest; and
(10) such other and further relief as the Court may deem appropriate and just.

Defendants responded asking that the matter be transferred to circuit court because of the claims for money damages, and because they wanted to protect their right to a jury trial. The State objected.

The chancellor agreed with the defendants

In his order, the chancellor found that, although the State prayed for some equitable relief, the claims primarily involved recovery of actual and punitive damages. In deference to the Mississippi Constitution’s right to a trial by jury, the judge ruled that, when claims are connected to a contractual relationship or are otherwise involve a question of law, the questions of both law and equity are more appropriately presented in
circuit court. The judge held that the main relief sought was legal, and ordered that the case be transferred to circuit court. The State appealed.

In State of Mississippi v. Walgreen Co., et al., the MSSC affirmed. Justice Beam wrote the August 8, 2018, opinion for a unanimous court. The court first addressed and rejected the State’s argument that an injunction sought under MCA § 75-24-9 must be brought in chancery court. It then went on to deal with the transfer from the equity court to the law court. This is the portion of the opinion addressing chancery vs. circuit jurisdiction:

¶29. We recognize the importance of the State’s request for remedies, including an accounting and a constructive trust, which typically require the chancellor’s equitable review, and we certainly do not intend to devalue that importance here. But an application of the State’s equitable claims is not enough to limit jurisdiction to the chancery court; not even through the application of Section 75-24-9. We have held that chancery courts maintain “the discretion to award legal and even punitive damages as long as” their jurisdiction has attached. Southern Leisure Homes, Inc. v. Hardin, 742 So. 2d 1088, 1090 (Miss. 1999). Though, in matters like the one before us today, “it is more appropriate for a circuit court to
hear equity claims than it is for a chancery court to hear actions at law since circuit courts have general jurisdiction but chancery courts enjoy only limited jurisdiction.” McDonald’s Corp. v. Robinson Indus., Inc., 592 So. 2d 927, 934 (Miss. 1991); see also Hardin, 742 So. 2d at 1090; Union Nat’l Life Ins. Co. v. Crosby, 870 So. 2d 1175, 1182 (Miss. 2004).

¶30. We reiterated this position in Era Franchise Systems, Inc. v. Mathis, 931 So. 2d 1278 (Miss. 2006). There, we noted that “equitable claims are more appropriately brought before a circuit court when they are connected to a contractual relationship or other claims tied to questions of law.” Mathis, 931 So. 2d at 1283 (citing Copiah Med. Assocs. v. Mississippi Baptist Health Sys., 898 So. 2d 656, 661 (Miss. 2005); Crosby, 870 So. 2d at 1175; RE/Max Real Estate Partners v. Lindsley, 840 So. 2d 709 (Miss. 2003)). In Mathis, Venit Mathis filed a complaint against multiple defendants alleging various claims, framed as a derivative action on behalf of REP–an organization in which he alleged to have a fifty-percent stake. Like the State in the matter before us, Mathis pleaded several causes of action and prayed for both legal and equitable relief. After the chancery court determined that it would be best to bifurcate the action, leaving the equitable claims in chancery court and transferring the legal claims to the circuit court, the defendants appealed. This Court reviewed the matter and determined that the chancellor had committed reversible error. Mathis, 931 So. 2d at 1283-1284. Following our holding in Crosby (stating that where a complaint seeks both actual and punitive damages, the “remedy is clearly legal rather than equitable in nature,” Crosby, 870 So. 2d at 1179), we determined that the circuit court’s general jurisdiction is better suited to try a case when doubt exists as to whether the claims are equitable or legal. Mathis, 931 So. 2d at 1282 (citing Burnette v. Hartford Underwriters Ins. Co., 770 So. 2d 948, 952 (Miss. 2000)). Finding that Mathis’s action revolved around issues stemming from contractual obligations not met by the defendants, we reversed the chancellor’s decision denying the defendant’s motion to transfer the matter to the circuit court. Id. at 1283.

¶31. Similarly, in the often-cited Crosby case, the plaintiffs brought an action to recover against the defendants for several common-law and statutory claims arising out of sale of insurance policies and allegedly exorbitant premiums. Crosby, 870 So. 2d 1175 (Miss. 2004). Although the plaintiffs requested a constructive trust, an accounting, and injunctive relief, the defendants claimed that the complaint sounded in tort and contract law–not equity–and requested the case be transferred to circuit court. Reviewing the matter on interlocutory appeal, this Court reversed the chancellor’s denial of the defendant’s motion to transfer, and determined that “each and every one of Crosby’s claims, even the equitable claims of unjust enrichment and constructive trust, arise from the sale and alleged breach of an insurance contract.” Id. at 1182. We noted that an argument alleging otherwise ignores the fact that, unless there was a contractual relationship between Union National and Crosby, she would have no claims arising from the sales, administration and service of the insurance policy. . . .The alleged mismanagement and misappropriation of premium money concerns Crosby’s contractual duty to pay for the insurance policy and Union National to provide her coverage. Id.

¶32. This analysis is directly applicable to the State’s claims against the pharmacies. While it is true that the State’s complaint does not plead the facts necessary to establish a breach-of-contract cause of action, we must look to “the substance, and not the form” of the claims in our resolution of a matter. Copiah Med. Assocs., 898 So. 2d at 661. With the State’s single theory of wrongdoing arising from the defendant’s obligations under the Medicaid provider agreements, the State’s decision to omit a breach-of-contract claim in no way affects the complaint’s substance: the claims asserted and the relief requested present legal arguments and legal remedies. Moreover, much like Crosby and Mathis, the heart of the complaint concerns a provider agreement (a contract), its terms, and the parties who failed to abide by the arrangement. While the equitable issues pleaded are relevant and not to be ignored, the legal issues which flowed from the pharmacies’ alleged inflated reimbursement requests predominate the State’s claims and requests for relief. As a result, jurisdiction properly lies in the circuit court.

¶33. Putting aside the State’s requests for restitution, accountings, constructive trusts, and injunctions, the complaint prays for millions of dollars in actual and punitive damages based on the defendants’ alleged unwillingness to comply with the signed provider agreements. Whether the State disagrees that the basis of these complaints sounds in contract is of no moment. Rather, as most of the claims are legal in nature, the circuit court is the appropriate forum to rule on the matter.

¶34. This decision in no way strips the Attorney General of his constitutional authority to pursue an injunction. Rather, it allows the State fully and fairly to pursue all claims against the defendants, while providing the defendants with an opportunity to have those issues presented to a jury.
The State, therefore, should fully and ably proceed with its complaint in circuit court.

I could quibble all day with the “general jurisdiction” vs. “limited jurisdiction” fiction and how it is so unhelpful to this discussion, but I’ll pass and submit to the principle that if the matter is an action for damages, it should go to circuit.

Having said that … <HERESY ALERT> … my question is, “Why, Mississippi, do we continue to put ourselves through this contortion when we could resolve it easily by merging our law and equity courts into one system?” I know that’s heretical, coming especially from a chancellor, but merger of law and equity has worked handsomely in almost all of the other United States for as many as 150 years without jurisprudential armageddon.

In a merged system, we would not have tug-of-wars between circuit and chancery. As many claims for relief as one has could be joined in a single action to be addressed by the court as appropriate.

Some say that would sacrifice the expertise in minor’s issues, probate, and family law that has been accumulated in chancery over the centuries. That is a somewhat valid concern, but I don’t see that the quality of judicial decisions in merged states is significantly less than Mississippi’s. Also, in some jurisdictions where number of judges and caseload are adequate, judges specialize in certain areas such as family law and criminal law, allowing development of expertise.

Some do not want to sacrifice the jobs of sitting chancellors in a merger, but I don’t think that merger would result in the loss of a single judge slot.  We would still have the same number of cases to be handled, requiring at least as many judges as we have now.

Others say, “If it ain’t broke …” etc. To that I concede that it ain’t necessarily broke … but is it functioning as efficiently, justly, and equitably as it can and should?

We ought always be ready and willing to discuss and debate the best ways to fashion our court system.

Inside a Courthouse

August 24, 2018 § Leave a comment

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A Tax Benefit for Adoptions

August 22, 2018 § Leave a comment

For those of you who handle adoptions, there is good news you can pass on to your client(s):

HB 1566, effective January 1, 2018. increases the income tax credit for adoption expenses from $2,500.00 for each dependent child legally adopted to $5,000.00 for each child legally adopted. An income tax credit is also allowed in the amount of $5,000.00 for each child legally adopted through the Mississippi Department of Child Protection Services.

A taxpayer may claim only one of these credits for each child adopted. The carry forward under current law for the adoption expense credit is three years. The carry forward is increased to five years for the adoption care credit and is five years for the credit for an adoption through the Mississippi Department of Child Protection Services. The credits are repealed effective January 1, 2020.

This is an advantageous benefit since a credit reduces taxes dollar-for-dollar.

The bill was not signed until April, but the January effective date means that it is available for 2018 filings.

Money is Personal

August 21, 2018 § 2 Comments

MCA 91-7-1 states that a will may me probated, and letters testamentary issued, in the county where:

  1. The testator or decedent had a fixed place of residence; or
  2. If she had no fixed place of residence and land is devised under the will, then in the county where the land, or some part of it, is located; or
  3. If the testator had no fixed place of residence and only personal property is disposed of in the will, then in the county where the testator dies, or where some part of the property may be.

A lawyer talked with me about a problem he ran into with 3, above. In his case, the decedent was a resident of another state, but had money on deposit in Mississippi. The lawyer attempted an ancillary probate to get the money for the beneficiaries, but the chancellor would not admit the will to probate in the county of the deposit because the judge was not satisfied that the funds met the definition of personal property within the meaning of the statute.

MCA § 1-3-41, defines personal property as follows:

The term “personal property,” when used in any statute, shall include goods, chattels, effects, evidences of rights of action, and all written instruments by which any pecuniary obligation, or any right, title, or interest in any real or personal estate, shall be created, acknowledged, transferred, incurred, defeated, discharged, or diminished.

All that, but no direct mention of cash, deposits, or funds.

The Mississippi Legislature cured the problem with SB 2508, effective July 1, 2018, which clarified the statute’s definition to embrace “all tangible and intangible personal property” and “cash, deposit accounts, and promissory notes.”

That should take care of that.

Comments on Undue Influence

August 20, 2018 § Leave a comment

Last week we visited the Saget estate case with its undue-influence issues. Here are several observations:

  • This case was before the COA for the second time. The first appeal was dismissed by the COA because the judgment disposed of fewer than all the issues raised in the case (i.e., the will contest), and there was no R54 certification. After the dismissal, the chancellor filed the certification, and the second appeal was not dismissed by the COA.
  • If you have a judgment from the trial court that disposes of fewer than all of the issues, or grants relief to fewer than all of the parties, you must make sure that the judge certifies per R 54 that there is no just cause to delay an appeal if you plan or anticipate an appeal. If the judge does not do it on his own, file a timely R59 motion asking him to do so. It will save time and expense.
  • This case is an excellent exposition of the law in this area. A couple of previous posts on the point are here (will contests) and here (inter vivos gifts between spouses).
  • Again, on lack of findings (mentioned in Fn 6), don’t be afraid to file a R59 motion asking for more specific findings if you fear that you might get a remand based on what the judge did rule. If you want to soften the blow to your already-overworked chancellor, you can offer to prepare proposed findings of fact and conclusions of law.
  • Undue influence cases have a definite framework of law that you must build your case on, and they are quite fact-intensive. Speculation and supposition will not win the case. It takes strong, definite proof.

Dispatches from the Farthest Outposts of Civilization

August 17, 2018 § Leave a comment

The Not-So-Mobile Home

August 15, 2018 § 1 Comment

In days of yore, mobile homes really were truly mobile. The wheels stayed on them, right there underneath in the cool dirt where Fido sleeps and lost yard toys go to be seen never more. Even then, though, mobility became more of a concept than reality as years scrolled by, tires dry-rotted, and the “trailer” settled into rust and decay.

In more modern times, mobile homes came to be settled on more permanent foundations, sans wheels, and even became affixed to the land. The legislature even passed laws allowing one to elect whether to treat the so-called mobile home as personal property, like an auto, or as a fixture on the land. Only problem, as you will know if you ever got tangled up in that kind of litigation, the law was not clear about how and when one made that election.

To the rescue came the Mississippi Legislature, which adopted HB 827, signed by the governor on March 19, 2018, and to take effect January 1, 2019. It offers an alternative process that may simplify the process.

Here is a summary of the new law from material presented by Senator Gray Tollison to Summer School for Lawyers:

This bill deals with the manner in which ownership of a manufactured or mobile home (manufactured home) is to be legally recorded as real property and as personal property. The bill authorizes the present system to remain in place for those homeowners, lenders, title insurers and retailers who prefer to use the current procedures in place today. It creates a new process that will be preferred and followed by other homeowners, lenders, title insurers and retailers.

Manufactured homes are generally personal property and are titled similar to motor vehicles by certificate of title; however, under certain circumstances a manufactured home may be so permanently affixed to the land that the law treats it like a site-built house as an improvement to real estate. Whether a manufactured home is personal property or real estate is very important to the homeowner, lender and title insurer. This bill contains specific provisions as to when a manufactured home is considered real estate for both ad valorem tax and bankruptcy law purposes. These provisions respond to questions raised by some lenders and title insurers as to whether a manufactured home should be considered real estate or personal property. This will assist lenders in perfecting security interests. It will also allow title insurers to rely upon a more specific procedure for addressing issues concerning the ways in which manufactured homes may be real property or personal property.

This bill authorizes the homeowner to elect to:

 Declare at the time of registration that the manufactured home is to be classified
as real estate for ad valorem tax purposes only as authorized under current law, or
 To permanently retire the title to the manufactured home by filing an affidavit of
affixation.

If the homeowner elects to permanently retire the title to the manufactured home, the manufactured home becomes a part of the real estate for all purposes until an affidavit of severance or affidavit of destruction is filed of record. If the homeowner files an affidavit of severance, the manufactured home is retitled and treated as personal property.

Attorneys or title companies closing these transactions will examine the liens reflected on the certificate of title (for personal property) and in the land records (for real property) to insure priority of liens.

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