In a recent decision by the U.S. Bankruptcy Court for the Central District of Illinois, the court held that mortgage documents are flawed when they fail to state the maturity date and interest rate of the loan, even though the underlying statute says that information “may” (not “shall”) be included in the contract.
In re: Crane v. Gifford State Bank, No. 11-90592 (C.D. Ill. 2012), the federal court determined that the state statute includes mandatory provisions that lenders must include in their mortgages to provide constructive notice to a bankruptcy trustee.
“Until there’s a fix, you need to comply with the mortgage statute perfectly,” McGargill said. “To be ultra-safe, you’re going to have to turn the word ‘may’ into ‘shall.’ I just don’t see any way around it at this point – you have to have the interest rate and maturity date in there.”
In re: Jeannine Victoria Heaver, No. 09-B-73096 (N.D. Ill. 2012), the U.S. Bankruptcy Court for the Northern District of Illinois held that a mortgage that is recorded before the deed to the mortgagor was recorded is outside the property’s chain of title.
When a mortgage is outside the property’s chain of title, the court ruled that a trustee was allowed to avoid the mortgage in the bankruptcy proceedings. In his written materials for a Chicago Title CLE seminar from July, staff attorney Richard F. Bales said: “Title companies have always considered a property’s chain of title to be based on the execution date of the documents and not the recording date of the documents. [Citation.] By holding that a property’s chain of title is the recording date of the relevant documents, the court cited with approval Skidmore, Owings & Merrill v. Pathway Financial, 173 Ill.App.3d 512 (1988), a case that until now title companies viewed as an aberration.”
“The court found there’s no duty by a purchaser to look past the deed into your seller,” McGargill said. “The thought [among real estate practitioners and title insurers] was that execution of the deed and delivery controlled, but this decision says that’s not the law. You have to make sure the deed gets recorded first.”
Personal property exemptions and trusts. Public Act 97-1030 (Sandack, R-Lombard; Mathias, R-Buffalo Grove) exempts from judgment a revocable or irrevocable trust that names the wife or husband of the insured or which names child, parent, or other person dependent upon the insured as the primary beneficiary of the trust. Effective July 1, 2012.
Mechanics Lien Act. Public Act 97-966 (Althoff, R-Crystal Lake; Tyron, R-Crystal Lake) requires work to be done or materials furnished within three years for residential property and five years for any other kind of property. Senate Bill 3792 sunsets on January 1, 2016, and the limitation then reverts to three years for any kind of property at that time. Effective January 1, 2013.
Radon Resistant Construction Act. Public Act 97-953 (McAsey, D-Lockport; Collins, D-Chicago) creates the Radon Resistant Construction Act. It requires all new residential construction include passive radon resistant construction. “New residential construction” is any original construction of a single-family home or a dwelling containing two or fewer apartments, condominiums, or townhouse. “Passive radon resistant construction” includes an installed pipe that relies solely on the convective flow of air upward for soil-gas depressurization and may consist of multiple pipes routed through conditioned space from below the foundation to the roof above. Effective June 1, 2013.
Trust modernization I. Public Act 97-920 (McAsey, D-Lockport; Dillard, R-Hinsdale) modernizes Illinois trust law by allowing “decanting” of trusts. Public Act 97-920 allows an irrevocable trust to evolve to meet a family’s changing needs without court involvement. It is modeled after the laws of Delaware and New York. Effective January 1, 2013.
Trust modernization II. Public Act 97-921 (McAsey, D-Lockport; Silverstein, D-Chicago) Public Act 97-921 adds flexibility to Illinois estate planning and administration of trusts by the use of “directed trusts.” Directed trusts allow a settlor to establish a trust and separate the administrative authority between a trustee and another person or entity acting as a fiduciary, such as an investment advisor, distribution advisor, or trust protector. It is modeled after Delaware law, and more than 30 states already allow for directed trusts in some form. Effective January 1, 2013.
False UCC filings. Public Act 97-836 (Zalewski, D-Chicago; Harmon, D-Oak Park) amends the Secured Transactions Article of the Uniform Commercial Code. It prohibits a person from filing or causing to be filed a false record that the person knows or reasonably should know is (1) not authorized or permitted under specified provisions; (2) not related to a valid existing or potential commercial or financial transaction, an existing lien, or a judgment of a court of competent jurisdiction; and (3) filed with the intent to harass or defraud the person identified as debtor. Creates criminal and civil penalties and administrative relief from the Secretary of State. Exempts records filed by a regulated financial institution or its representative. Effective July 20, 2012.
Judicial Privacy Act. Public Act 97-847 (Madigan, D-Chicago; Cullerton, D-Chicago) creates the Judicial Privacy Act that allows a judge to prohibit a government agency or business from publishing “personal information” about a judge. It requires that the judge make a written request to the agency or business to trigger this protection. Effective September 22, 2012.
Open Meetings Act. Public Act 97-827 (Pihos, R-Glen Ellyn; Dillard, R-Westmont) makes two changes to the Open Meetings Act. (1) An agenda must set forth the general subject matter of any resolution or ordinance that will be the subject of final action at a meeting. (2) The public body must ensure that at least one copy of any notice and agenda for the meeting is continuously available for public review during the entire 48-hour period before the meeting. Posting on its website satisfies this requirement, but if a notice or agenda is not continuously available for the full 48-hour period because of events outside of the control of the public body, then that lack of availability does not invalidate any meeting or action taken at a meeting. Effective Jan. 1, 2013.
Power of Attorney Act. Public Act 97-868 (Dillard, R-Westmont; McAsey, D-Lockport) amends this Act to exclude certain kinds of agreements from the Act’s regulation. Those excluded would be a financial institution named as an agent for any person if the agreement does not include a durable power of attorney that survives the incapacity of the principal. The amendment clarifies that this kind of agreement is not a “nonstatutory property power” subject to this Act’s provisions pertaining to statutory short form powers of attorney for property. Effective July 30, 2012.
The retention period of a document is an aspect of records management. It represents the period of time a document should be kept or “retained” both electronically and in paper format. At the termination of the retention period, the document is usually destroyed. The term is generally used by accountants and tax professionals whose occupation involves dealing with legal documents that only need to remain in existence for a certain amount of time. The retention period varies for different types of records. For example, business incorporation documents have a permanent retention period (meaning that they should be retained and never be destroyed), but receipts for tax-deductible purchases by an individual taxpayer usually have a three-year retention period (and can often be safely discarded after that point.) The length of the retention period vary by industry and are based on the likelihood that the document will be needed at some point in the future for ligitation reasons. Records that will serve no further purpose (as determined by the length of their retention period) are destroyed for space issues, usually by paper shredders.
Organizations such as ARMA (Association of Records Managers and Administrators) set standards for records retention periods. Retention requirements are also established for a variety of electronic records in industry-specific legislation (such as the Sarbanes-Oxley Act) and regulatory bodies (such as the Federal Energy Regulatory Commission) in the United States.
QTIP trust is a type of trust and an estate planning tool used in the United States. “QTIP” is short for “Qualified Terminable Interest Property.” In the U.S., each citizen is granted a credit against the gift and estate tax. When gifts and inheritances exceed the amount of this credit, a tax is imposed.
For estate tax purposes, any property which passes to a decedent’s surviving spouse is not subject to the gift or estate tax; however, generally full ownership of this property must in fact pass to the surviving spouse. A QTIP Trust is an exception to this general rule. Under Section 2056 of the Internal Revenue Code, as long as the surviving spouse has a lifetime income interest in the property, the property is treated as passing to the surviving spouse.
For example, if a Grandma gives $100,000 to Grandpa, this would be a gift to a spouse, exempt from the gift and estate tax. However, if Grandma were to give the $100,000 to Grandson, this would be included for gift and estate tax purposes. However, Grandma can place this $100,000 in a QTIP trust which will make payments of money to Grandpa during his life, and have the money in the trust pass to Grandson when Grandpa dies. This is treated as a marital gift to Grandpa, exempt from the gift and estate tax, to the extent of any property received. Grandson, however, will ultimately receive a taxable gift when the money in the trust passes to him.
QTIP trusts are commonly used when a spouse has children from another marriage. The other spouse may wish to provide for this spouse, but nonetheless designate where the money will go after that spouse is deceased. A QTIP trust allows this to be accomplished in a manner treated as a gift to a spouse.
IN RELIABLE FIRE EQUIPMENT COMPANY2011 Ill. LEXIS 1836; 2011 IL 111871; 33 I.E.R. Cas. (BNA) 278, the Supreme Court tightened the rules on restrictive covenants.
The unsecured creditors committee in Tribune Co.’s bankruptcy case asked a Delaware judge Monday for the right to sue Chicago real estate magnate Sam Zell and other investors and lenders who participated in the company’s ill-fated 2007 leveraged buyout.
The motion was largely procedural, and the document said the request is not aimed at disrupting a court-ordered mediation in the case, which is scheduled for this month.
Lawyers for the committee had signaled at a previous court hearing that they would probably file a new complaint and ask for permission to pursue it because U.S. bankruptcy law would require bringing litigation surrounding the buyout within two years of the company’s filing for Chapter 11 protection.
Tribune Co. made its initial filing Dec. 8, 2008, so the committee would have to win approval to bring its complaint by December this year.
Whether the committee actually launches its buyout-related litigation will probably depend on the outcome of the court-ordered mediation effort, which has yet to begin.
Tribune Co. and a welter of warring creditor groups, including the committee, have been working since Sept. 1 to prepare position papers for the mediator, U.S. Bankruptcy Judge Kevin Gross. Gross will then try to broker a compromise settlement of the buyout charges at sessions scheduled for Sept. 26 and 27.
Sources on all sides of the case acknowledged that forging a workable compromise will pose a stiff challenge for Gross. But in its papers Monday, the Official Committee of Unsecured Creditors said it “wholeheartedly supports the mediation process and the efforts of Judge Gross and the parties to achieve a consensual plan.”
According to the motion, the committee’s complaint would focus on allegations that the second part of Zell’s two-step $8.2-billion buyout left the company insolvent, benefiting bank lenders, selling shareholders and others at the expense of junior creditors and the bankruptcy estate. The motion notes that the complaint would depend on the committee’s own investigation and that of Kenneth Klee, an independent, court-appointed examiner who filed his own assessment of the potential charges in late July.
The suit names as defendants the senior debt holders, Zell’s company, Tribune Co. officers and directors, selling shareholders, a valuation company that blessed the deal and others.
Under bankruptcy law, the debtor holds the right to bring such charges because the “fraudulent conveyance” ultimately damaged the bankruptcy estate. But because Tribune Co. officers and directors are potential targets of the litigation, the committee argued that it should be allowed to stand in for the debtor to avoid conflicts of interest that might weaken the case.
A spokesman for Tribune Co. — which owns the Los Angeles Times, Chicago Tribune, KTLA Channel 5 and other media properties — declined to comment.
Increased business confidence and continued legal hiring are expected in the fourth quarter of 2010. Twenty-nine percent of lawyers interviewed for The Robert Half Legal Hiring Index plan to add legal jobs, while 6 percent anticipate declines, resulting in a net 23 percent increase in projected hiring activity. In addition, the majority (88 percent) of survey respondents said they were at least somewhat confident in their organizations’ ability to expand during the next quarter.
The survey was developed by Robert Half Legal, a premier legal staffing firm specializing in lawyers, paralegals and other highly skilled legal professionals. It was conducted by an independent research firm and is based on telephone interviews with 100 lawyers at law firms with 20 or more employees, and 100 corporate lawyers at companies with 1,000 or more employees. All of the respondents have hiring authority within their organizations.
Lawyers were asked, “Does your law firm or company plan to increase or decrease the number of full-time legal personnel on your staff during the fourth quarter of 2010?” Their responses:
“As the economy regains its footing, legal organizations continue to make strategic hires to support active practice groups,” said Charles Volkert, executive director of Robert Half Legal. “Law firms, in particular, are expanding their legal teams to improve service offerings and meet client demands.”
Volkert suggested that lawyers may be anticipating new business opportunities tied to the economy and government regulation. Bankruptcy/foreclosure, fueled by recession-related filings and corporate restructuring, is the area of law expected to experience the most growth in the next three months, garnering 24 percent of the total response. Litigation ranked second (18 percent) and healthcare was a close third (17 percent) among lawyers interviewed for the report.
Nearly half (45 percent) of lawyers said it is challenging to find skilled legal professionals. “Despite high unemployment rates, the market remains competitive for candidates with experience in growing practice areas,” said Volkert. Survey participants identified lawyers (95 percent) as the type of full-time legal position they intend to add followed by legal secretaries/assistants (36 percent) and paralegals (26 percent). “Demand for associates who can generate revenue and support staff who can perform multiple job functions should remain strong in the coming months,” Volkert said.