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Alcohol Purchases in Estate Accountings*

Alcohol Purchases in Estates Often Disallowed

Cecil County, Maryland has a high per capita alcohol consumption rate when compared to other counties in Maryland (second behind only Worcester County for distilled spirits, and behind Garrett and Worcester Counties for beer). See Page 26, Alcohol & Tobacco Tax Annual Report: Fiscal Year 2018. Despite a high level of sales of alcohol, the Cecil County Orphans’ Court has, in the past refused to allow the inclusion of the cost of alcoholic beverages as part of estate funeral or celebration of life expenses.

Although many estate expenses can be questioned by the Register of Wills, Orphans’ Court, and beneficiaries, any alcohol consumed at a funeral or celebration of life that is claimed as an estate expense is likely to cause the outright rejection of an estate accounting. Accordingly, should a testator (the person making a will) desire to buy one last round for friends and family, then such a direction should be clearly contained in the will.

Despite the general rule, sometimes an itemized receipt for a restaurant or venue or caterer may not be scrutinized or the personal representative may be provided a generic invoice or receipt not specifically showing the sale of any alcohol.** Stand alone purchases made from a liquor store, however, will likely cause an outright rejection of an accounting and the Register of Wills and/or the Orphans’ Court may require that the personal representative reimburse the estate account for such expenditures and resubmit a revised accounting.

If the serving of alcohol at a funeral or celebration of life is important to a testator (the person making a will), a clause contained in the will is important, lest a celebration of life become BYOB.

*The sale of alcohol belonging to a decedent who is not otherwise licensed to sell such alcohol is an entirely different affair with rules varying throughout the United States. See, e.g., Connecticut Liquor Control Act, Sec. 30-118.

**Note that the Comptroller requires that the “bill of sale” list alcohol separately, and therefore restaurants and other venues run a risk in providing a receipt that is not appropriately itemized. See Maryland Comptroller Alcohol Tax (under Alcohol Industry FAQs) stating that “[t]he tax must be separately calculated on sales of alcoholic beverages at the 9% rate and on sales of food, non-alcoholic beverages, and other merchandise at the 6% rate. The 9% tax amount must be listed separately from the 6% tax amount on the bill of sale.”

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Homeowner’s Insurance in Estates

Property Insurance in Estates

Over the course of administering an estate, a personal representative (sometimes called an administrator or executor) may face decisions related to insuring real estate that belonged to the decedent. Upon the death of an individual, insurance policies, like other contracts, often continue to be enforceable by the personal representative. See, e.g., Contracts of the Dead: When Should They Haunt the Living?, William A. Drennan, N.M. L. Rev., Vol. 49 (2019). In the case of homeowner’s insurance, however, contractual provisions buried in a policy may permit the insurer to cancel a policy where the real estate is no longer occupied. Furthermore, a Court, sua sponte, may inquire as to the status of insurance on any real property.

In one case before the Orphans’ Court of Cecil County, an estate attorney spent many hours on the impossible task of obtaining liability insurance after the Court raised the issue of insurance, sua sponte, during a hearing on a Maryland Rule 6-444 petition. Although the Court issued an order requiring that the personal representative obtain insurance, doing so was later found to be impossible given the presence of mold, structural issues, and problematic occupants.

In another estate, less than two months after the death of the owner, a fuel spill occurred from the heating oil tank located on the real property. When the spill was brought to the attention of the insurer, although coverage was provided, the insurer opted to cancel the homeowner’s policy citing the death of the owner and vacancy of the property as its grounds. Although many personal representatives may wish to evict individuals who continue to reside in the property after an owner’s death, in some instances having a property occupied can serve to limit damage (for example, by theft or leaks). An unoccupied property may also prove problematic in terms of obtaining or continuing insurance.

Where real property is held by a personal representative and insurance is obtainable, the personal representative should insure the property until it is sold or transferred. A personal representative, in accepting the duties imposed by law, should be prepared to advance funds for insurance premiums, taxes, and other expenses associated with maintaining and preserving estate assets. Indeed, Maryland law recognizes the authority to insure estate assets against loss. Maryland Estates & Trusts § 7-401.

Furthermore, the failure to obtain insurance or renew policies could anger beneficiaries should a calamity occur and may subject the personal representative to personal liability. See Gibber on Estate Administration, 6th ed. 2018, § 3.19.

Although a lengthy will may not be something clients anticipate, or enjoy reading through, many provisions should be included in estate planning documents in the event of unforeseen circumstances. The inclusion of provisions related to insurance may never be needed by your personal representative, but the failure to include such provisions may force your estate to needlessly expend much time and effort.

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Representation Virtually Required in Trust Litigation

Representation Virtually Required in Trust Litigation in Delaware

In the September 2, 2020 decision in Tigani v. Director, et al., C.A. No. N19C-10-014, the Delaware Superior Court recently declined to address substantive claims made by a purported beneficiary of a trust because the individual asserted the claims on behalf of a trust and was not represented by a Delaware attorney. Of interest, along with Robert F. Tigani, Sr., the trust at issue is an owner of NKS, a well known Delaware alcoholic beverage distributorship.

The Superior Court noted that the initial complaint was filed on behalf of the trust. The filer of the complaint, Christopher J. Tigani, “explicitly purports to bring this claim on behalf of the Trust.” In response to the complaint, the defendants moved to dismiss the case in part because the trust is an artificial entity and therefore must be represented by counsel. In support of that position, the Court summarized the defendants citation to caselaw: “even a trustee cannot appear pro se.” In finding that counsel was required, the Superior Court quoted the Chancery Court, “in Delaware artificial entities must be represented by counsel.” A trust is an artificial entity and thus could only be represented by an attorney. The Superior Court declined to address the merits of the case.

Although in certain circumstances, limited to JP Court, an artificial entity may be represented by a designated agent, when there is the possibility of any litigation on the horizon, it is best to obtain the assistance of counsel as soon as possible. As the Tigani case illustrates, in some cases, an attorney must appear on behalf of an artificial entity or risk dismissal case without any review of the merits of the case.

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Travel Expenses in Maryland Estate Administration

Travel Expenses in Maryland Estate Administration.

In Maryland estates, personal representatives ordinarily do not receive travel expenses associated with their service, given that when undertaking the duties, a personal representative “was aware that her attendance would be required at the Register’s Office and Orphans’ Court . . . in the normal course of the administration of the estate”. See 59 Op. Atty Gen. Md. 613, 1974 Md. AG LEXIS 82 at *3. The Attorney General’s November 7, 1974 Opinion states that maximum commissions are not to be granted routinely, but that the travel expenses could be considered as a factor by the Orphans’ Court in setting a personal representative’s commission. Id. The Attorney General’s Opinion gives flexibility in drafting a will, opining that the “decedent could have provided in her will for compensation of the personal representative in excess of the statutory limits and in the absence of such provision compensation is limited to the maximum allowable under Section 7-601.” In other words, unless expressly contemplated in a will, travel expenses are not necessarily an expense of administering the estate nor reimbursed to a personal representative. Such expenses should not be paid in advance or when incurred, otherwise the personal representative runs the risk of disapproval of an accounting or other rebuke by the Register of Wills or the Orphans’ Court. According to the Opinion, “if upon consideration of all of the relevant evidence and circumstances it is determined that particular travel expenses claimed by the personal representative were necessary to the conduct of the business of the estate and not the mere attendance to the ordinary duties of administration” then the Court may allow such expenses. In sum, it is best to address travel expenses in one’s estate plans.

In many estate plans, an individual making a will (known as a testator) and the drafting attorney need not worry about travel expenses, particularly where the those nominated in the will to serve as personal representative are in the same locale as the primary residence/domicile of the testator and all assets are located in that same geographic area. Including a travel expense clause in a client’s will is especially appropriate in many situations. For example, when those nominated to serve live far from the testator, the testator is contemplating a move to a distant location in Maryland or elsewhere, and/or if the testator has real estate (or other significant connections) in multiple jurisdictions (especially if not simultaneously placing out of state real estate into a trust).

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Suit Filed Against I Love My Career Coach, LLC

In 2019, I Love My Career Coach, LLC and Alissa James, a resident of Teaneck, New Jersey, were sued after refusing to provide a refund after failing to render services and failing to abide by various consumer protection statutes. I Love My Career Coach LLC (“ILMCC”) did not respond to a demand letter sent by counsel in Februrary 2019. As a Delaware entity (formed in October 2018) suit was filed against ILMCC in Delaware. Although her personal address was initially unknown at the time of filing, public records, including voting records, subsequently confirmed Alissa James’ address. There are multiple legal theories raised against Alissa James, a self-styled entrepreneur, in her individual capacity, including that she treats ILMCC as her alter ego and has not properly funded ILMCC as an entity.

After receiving service of the complaint, summons, and other required documents by constable in July 2019, ILMCC failed to respond to the suit. Alissa James has failed to respond to the suit. Default judgments are expected against both. After default judgments are properly entered in the Delaware Justice of the Peace Court, collection efforts may commence, including registering the judgment against career coach Alissa James in the appropriate Court with jurisdiction in her hometown of Teaneck, New Jersey. A review of the unofficial Court docket can be found by searching for Alissa James, ILMCC, or Attorney Gregory Birney on the Delaware Court Connect website. If you were victimized by ILMCC, suit is possible in Delaware, though recovery remains uncertain.

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    Good Pruning Makes Good Neighbors?

    Periodically, a potential client will call about a neighbor’s tree overhanging the property line. The subject has received what can be described as a “prunable” amount of attention from bloggers, legal treatise writers, and courts.*

    The Delaware Superior Court revisited (though sidestepped) the issue of tree trimming on property boundaries in Margaret Dayton & Everett Jones v. William Collison, C.A. No. N17C-08-100 CLS (June 22, 2020) (beginning on page 22 of the opinion). In deciding whether the defendant destroyed plaintiffs’ property, the Court held that the tree trimming company was not the defendant’s agent, but was an independent contractor. The Court held that the defendant did not control the work of the tree trimmer, but rather instructed that they trim the branches hanging over the defendant’s driveway, and specifically instructed the tree trimmer not to go onto the plaintiffs’ property. The plaintiff’s expert testified that the manner in which the maple tree was trimmed caused $4,890 in damages.

    The Collison case instructs property owners to hire a professional and provide minimal oversight of the tree trimmer’s activities to avoid being vicariously liable for damage to a neighbor’s tree.

    *See, e.g., Massachusetts Law about neighbors and trees, available at https://www.mass.gov/info-details/massachusetts-law-about-neighbors-and-trees; Paul Goeringer, Esq., Maryland Risk Management Education Blog, FAQ: Can I Cut My Neighbor’s Tree Back From Our Property Line, April 19, 2017, available at http://agrisk.umd.edu/blog/frequently-asked-questions-can-i-cut-my-neighbors-tree-back-from-our-property-line?rq=trees;

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    Remote Notarization in Delaware During the Coronavirus Pandemic

    The Governor of the State of Delaware has authorized Delaware attorneys to remotely notarize documents for individuals physically located in the State of Delaware. As a public service, Delaware Attorney Gregory F. Birney is available on a case by case basis for remote notarization where traditional notarization is not feasible and where waiting to execute documents until the conclusion of the State of Emergency is not practicable. The Attorney will use his sole discretion in making the determination as to whether a remote notarization is absolutely necessary under the circumstances. Due to malpractice ramifications, the Attorney will not notarize certain legal documents (such as wills obtained through the internet).

    The Order detailing the protocols for remote notarization in Delaware is available here: https://governor.delaware.gov/health-soe/eleventh-state-of-emergency/

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    Mortgages in Estate Planning

    Mortgages In Estate Planning

    It is common for a client to leave all of their worldly possessions to a specific set of individuals in equal shares. It is also somewhat common for a client to want to leave a specific piece of real estate to one individual while splitting the remaining assets. This latter situation is one in which it is critical to understand the concept of exoneration and how it was changed by Maryland Estates & Trust 4-405 and similar statutes in other states.

    Historically, at common law (that is, Judge made law), a devisee (recipient) of real estate would be entitled to receive real estate free from mortgages, liens, and other encumbrances. This would alter the disposition of assets if one party were set to receive a piece of real estate where the mortgage on the real estate was forcibly satisfied from cash on hand that otherwise would have been given to other legatees.

    As explained in Caruthers v. Buscher, 38 Md. App. 661 (1978), Maryland Estates and Trust § 4-405 altered the common law. Unless the will provides otherwise, the recipient of real estate takes it subject to any mortgage or lien that existed at the time of execution of the will but would be entitled to have a lien or mortgage satisfied if the lien or mortgage came into being (attached) to the real estate after the will was signed.

    When a property is devised (whether by will or intestacy) subject to a mortgage, the recipient often has protections under the federal Garn-St. Germain Act. See 12 U.S.C. § 1701j-3(d).

    Estate planning attorneys must ensure that a testator (the person making a will) understands how a mortgage may skew distribution of an estate.

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    Definition of Premises & Parking Lots

    “Premises” Usually Does Not Include Parking Lots for Licensed Establishments Located in Shopping Centers in Maryland and Other States.

    In June 2019, the Cecil County Liquor Board heard from a licensee in response to crowds in the parking lot at his establishment. See Cecil Whig Article.

    The bar mentioned in the article is located in a shopping center with several other businesses. Although licensees may have the ability to control the inside of their establishments, those leasing space in a mall or similar setting may have little to no influence to exclude individual from the shared parking lots.

    March 12, 2001, the Maryland Attorney General’s Office issued an opinion on point with the issue faced by the licensee in the Whig article. After reviewing applicable law, the Attorney General’s 2001 opinion concludes that generally when an establishment licensed to sell alcohol is in a mall setting and shares the parking area with other tenants, the parking lot is not part of the liquor licensee’s premises. If an incident occurs in such a parking lot that would otherwise be a violation in a stand-alone establishment’s lot, the licensee has a viable defense due to the fact that the licensee has no control over the parking lot.

    It is noteworthy, however, that the 2001 Opinion contains a disclaimer in footnote one “You have not asked, and we do not address, the extent to which the Liquor board could take action against a licensee based on the off-premises conduct of the licensee or others.” It is likely that any licensing authority has jurisdiction to take action based upon a licensee’s conduct occurring off of the premises. See, e.g., 4 Del. Code 561(b). Generally, off premise licensee conduct is distinguishable from conduct of a licensee’s patrons occurring off of the licensed premises. See, e.g., Gabby’s Saloon and Eatery

    In Delaware, parking lots are not generally considered part of the premises. In order to apply for a license, a sketch of the premises must be included. Within the regulation requiring such a drawing, there is no mention of parking areas. See Del. Administrative Code Title 4, Section 703. Furthermore, the Delaware regulations concerning the extension of the licensed premises to include patios and similar areas explicitly states that the term “premises” would not include a parking lot area. See Del. Administrative Code Title 4, Section 704, Subsection 2.0.

    The issue of parking lot security can and should be addressed in a lease or other written document between the tenant/licensee and the landlord/owner of the strip mall or shopping center. Regardless, a licensee facing a violation hearing for conduct occurring in a parking lot should obtain counsel to advise on the best course of action.

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    JP Court Higher Jurisdictional Limit Proposed

    Delaware’s Justice of the Peace Court Jurisdiction Limited to $15,000 – Legislation Pending to Increase Limit to $25,000. Change in Commercial Lease Litigation

    At present, if a Delaware retailer of alcoholic beverages leases space for its operation and the lease is terminated, then it can expect to lose its license. See Decision & Order, The Boardroom Restaurant, LLC, Violation Nos. 07421, 07483. In the State of Delaware, cases involving lease disputes are typically heard in the appropriate Justice of the Peace Court.

    A Justice of the Peace can hear cases with a value not exceeding $15,000 but also has jurisdiction over possession of the premises in all landlord-tenant cases. In landlord-tenant cases, where the amount in controversy exceeds the jurisdictional limit, the landlord can either submit to the $15,000 limit while seeking possession or pursue two cases: one in JP Court to obtain possession of the unit and another to obtain money damages in either the Court of Common Pleas or the Superior Court.

    Legislation passed the Delaware House of Representatives in June 2019 that would increase the jurisdictional limit in all JP Court cases to $25,000. See HB 232. The legislation also removes the $25,000 general jurisdictional cap from landlord-tenant cases involving commercial leases. See House Bill 232. The bill also includes a provision that allows bifurcating the action into a possession case in JP Court and a monetary damages case in CCP or Superior Court.

    The move to increase the JP Court monetary cap on jurisdiction in Delaware is in line with the trend in other states. In Massachusetts, for example, the Commonwealth’s District and Municipal Courts have a $25,000 cap (subject to counterclaims). That amount was last updated in 1986 and the court system solicited comments on the possibility of doubling the amount. See Release from Trial Courts.