Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

Articles Posted in Trusts & Estates

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The Ninth Circuit affirmed the district court's exercise of diversity jurisdiction over an action stemming from the foreclosure of plaintiff's property. The panel held that the Supreme Court's decision in Navarro Savings Ass'n v. Lee, 446 U.S. 458, 458 (1980), which held that a trustee is a real party to the controversy for purposes of diversity jurisdiction when he possesses certain customary powers to hold, manage, and dispose of assets for the benefit of others, was still controlling and the Supreme Court's decision in Americold Realty Trust v. ConAgra Foods, Inc., 136 S. Ct. 1012 (2016), did not upset the holding in Navarro or the panel's precedent. In this case, HSBC and the other defendants were not, like plaintiff, citizens of California and therefore there was complete diversity. Accordingly, the court properly exercised diversity jurisdiction. View "Demarest v. HSBC Bank USA" on Justia Law

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The Ninth Circuit affirmed the tax court's decision to sustain a deficiency against an estate for overstating the amount of a charitable deduction and to sustain an accuracy-related penalty. In Ahmanson Foundation v. United States, 674 F.2d 761, 772 (9th Cir. 1981), the panel underscored the principle that the testator may only be allowed a deduction for estate tax purposes for what was actually received by the charity. Applying Ahmanson, the panel held that the tax court correctly considered the difference between the deduction and the property actually received by the charity due to the executor's manipulation of the redemption appraisal value. The panel also found nothing in the record that suggested that the tax court's findings were clearly erroneous. Finally, there was no error in the tax court's holding that the commissioner properly imposed the accuracy-related penalty under I.R.C. 6662(a). View "Dieringer v. Commissioner" on Justia Law

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The Ninth Circuit certified the following question to the Oregon Supreme Court: Under Oregon law, does a constructive trust arise at the moment of purchase of a property using fraudulently-obtained funds, or does it arise when a court orders that a constructive trust be imposed as a remedy? View "Wadsworth v. Talmage" on Justia Law

Posted in: Trusts & Estates

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The Ninth Circuit affirmed the district court's holding that the general partnership interests at issue qualified as securities under federal law and that defendant violated federal securities law by selling unregistered securities and defrauding his investors. In this case, the general partnership interests at issue were stripped of the hallmarks of a general partnership and marketed as passive investments. The panel held that, in light of defendant's death during the pendency of the appeal and the executor replaced as the name party, as well as intervening Supreme Court precedent, several aspects of the district court's judgment require vacatur and remand. Therefore, the panel vacated the civil penalty order and the disgorgement order, remanding for further proceedings. View "USSEC v. Schooler" on Justia Law

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The Ninth Circuit certified the following questions of state law to the California Supreme Court: California Probate Code 249.5 provides that, for probate purposes, "a child of the decedent conceived and born after the death of the decedent shall be deemed to have been born in the lifetime of the decedent if the child or his or her representative proves by clear and convincing evidence that," inter alia, "[t]he decedent, in writing, specifies that his or her genetic material shall be used for the posthumous conception of a child of the decedent." Cal. Prob. Code 249.5(a). Does a writing that specifies that some genetic material of the decedent shall be so used satisfy 249.5(a), regardless whether the genetic material specified in the putative writing includes the genetic material actually used to conceive the claimant child? Or must the genetic material identified in the putative writing include the genetic material actually used to conceive the claimant child? View "Delzer v. Berryhill" on Justia Law

Posted in: Trusts & Estates

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The Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case. View "Mandelbrot v. J.T. Thorpe Settlement Trust" on Justia Law

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In 1997, Michael Harris was convicted of eight federal criminal counts related to theft from an employee benefit plan. He was sentenced to 30 months in prison and ordered to pay $646,000 in restitution. He paid only a small fraction of that amount. The government later learned that Harris was a beneficiary of two irrevocable, discretionary trusts established by his parents for his support. In 2015, the government applied for a writ of continuing garnishment for any property distributed to Harris from the trusts. The trustees opposed the application on the ground that Harris had disclaimed his interest in the trusts, with the exception of several checking and investment accounts. The district court granted the writ and ordered the trustees to pay to the United States all current and future amounts distributed to Harris under the trusts. After review, the Ninth Circuit concluded that Harris’s interest in the trusts qualified as property under the federal debt collection procedure that applied in this case. “The government is not attempting to compel distributions from the trusts. However, any current or future distributions from the trusts to Harris shall be subject to the continuing writ of garnishment, until the restitution judgment is satisfied.” View "United States v. Harris" on Justia Law

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The SBA guaranteed a loan between a private bank and Michael Bensal's company, BCI. The private bank filed suit against BCI as the borrower and Bensal as a personal guarantor after BCI defaulted on the loan. The private bank recovered a default judgment and assigned that judgment to the SBA. Bensal later received an inheritance from his father's trust that he did not accept and, instead, disclaimed. Bensal's disclaimer of the inheritance legally passed his trust share to his two children and prevented creditors from accessing his trust share under California law. The SBA filed suit seeking to satisfy the default judgment. The court held that the Fair Debt Collection Practices Act (FDCPA), 28 U.S.C. 3301-3308, displaces California's disclaimer law. In this case, the court concluded that Bensal's disclaimer constitutes a transfer of property under the FDCPA, and California disclaimer law did not operate to prevent the SBA from reaching Bensal's trust share. The court also concluded that the portion of the default judgment based on the second loan, which was guaranteed by the SBA, was a debt within the meaning of the FDCPA. Accordingly, the court affirmed the judgment. View "SBA v. Bensal" on Justia Law

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Plaintiffs filed suit against USB and Recon challenging the complete foreclosure sale of their residential property. Plaintiffs sought a declaratory judgment that the trustee’s sale was invalid under the Oregon Trust Deed Act (OTDA), ORS 86.770(1), because several assignments of the Trust Deed that took place prior to the 2010 assignment to USB were never recorded. The district court granted defendants' motion to dismiss the Amended Complaint, holding that ORS 86.770(1) barred plaintiffs' claims. In this case, the only defect the foreclosure process identified by plaintiffs has to do with the content of the notice. The defect is the incorrect listing of the beneficiary in the notice they received. However, plaintiffs do not dispute that: (1) they were in default; (2) they were served in the manner required by ORS 86.740 (requiring, at a minimum, service by certified mail 120 days before the sale) and ORS 86.750 (requiring personal service on grantors who occupy the property 120 days before the sale); (3) they had no financial ability to cure the default and redeem the property; (4) they took no action to challenge the sale prior to it becoming final; and (5) they only challenged the foreclosure sale many months after the foreclosure sale was completed. Therefore, plaintiffs' post-sale claims are barred as their property interests have been terminated and foreclosed pursuant to ORS 86.770(1). Accordingly, the court affirmed the judgment. View "Woods v. U.S. Bank" on Justia Law

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At issue in this case was the extent to which a bankruptcy estate may reach a beneficiary’s interest in a spendthrift trust that consists entirely of payments from principal under the Probate Code of the state of California. The beneficiary claimed that Cal. Prob. Code 15306.5 caps the bankruptcy estate’s access at twenty-five percent of his trust interest. The bankruptcy trustee sought to reach more than twenty-five percent of the beneficiary’s interest under Cal. Prob. Code 15301(b) and 15307, which it argued was not subject to the section 15306.5 cap. The bankruptcy court ruled in favor of the beneficiary, concluding that section 15306.5 establishes an “absolute maximum cap on what is recoverable by a judgment creditor at 25 percent.” The Ninth Circuit Bankruptcy Appellate Panel (BAP) affirmed. To resolve the issue as to whether a bankruptcy estate may access more than twenty-five percent of a beneficiary’s interest in a spendthrift trust such as the one in this case under other sections of the Probate Code, the Ninth Circuit requested that the California Supreme Court exercise its discretion to accept a certified question addressing the issue. View "Frealy v. Reynolds" on Justia Law