Meandering about Lakefront Boundaries

If you own waterfront property, where is your property boundary, and who is your adjacent parcel owner on the waterfront?

At Lake Tahoe and many other inland (“non-tidal”) bodies of water, the boundary between the waterfront property (a/k/a the “upland” parcel) and the body of water is defined by a \ line that roughly parallels the water’s edge.  This line is called “meander line.”  In 1861 and 1875, prior to the sale of government lands around Lake Tahoe, government surveyors created a meander line along the edge of Lake Tahoe. The meander line is generally some distance landward from the water’s edge (not the actual high water mark) and was used to determine the acreage and price of the lands to be sold by the federal government to the original land patent holders.

State and federal law provide that when title to waterfront property is described by a meander line of a government survey, or by a subsequent subdivision of the same land bounded by the meander line, the title of the upland owner extends to the body of water itself.   So, just how far does the parcel extend toward the body of water?

If an inland body of water is navigable – like Lake Tahoe – the State owns the lakebed as it existed at the time of statehood (which typically means before there were dams, or artificial raising and lowering of the lake level).  In Nevada, a 1979 statute established the boundary line of the lakebed at 6,223 feet, Lake Tahoe datum, which approximates the lake’s ordinary low water level.  Accordingly, a deed conveying lakefront land on the Nevada side of Lake Tahoe that uses the old government survey meander line as the boundary conveys title all the way to the lakebed at 6,223 feet.  This means your neighbor along the water’s edge is the State of Nevada.  

Similar rules apply in California. Generally, the owner of the upland, when it borders on tidal waters, takes to ordinary high-water mark; when it borders upon a navigable lake or stream, where there is no tide, the owner takes to the edge of the lake or stream, at low-water mark; when it borders upon any other water, the owner takes to the middle of the lake or stream. In Tahoe where there is no tide, the rights of the owner to low-water mark are included in the conveyance.

In California, even though a private landowner’s title extends to the ordinary low water mark, there is an easement or public trust under which the general public may recreate in the land area that lies between the ordinary low and high-water marks.  Nevada recognizes the public trust doctrine in certain instances, but does not recognize a right of the public to sunbathe or recreate in the area between low and high water. Waterfront land is usually the most valuable property in any particular market.  As you can see, there are some unique rules that apply to valuable land with waterfront boundaries.  If you have questions about your waterfront boundaries, please call Incline Law Group, LLP.

Real Property Disputes: Local or Transitory?

Real Property Disputes: Local or Transitory?  Where do we go from here?

In the law, some cases are considered “local” actions, while others are described as “transitory.”  What does that mean? Essentially, some cases must be decided only in a court of the one particular state that is connected to the subject of the case. Those are called “local actions.”

On the other hand, most lawsuits are “transitory” and can be litigated in any state that has jurisdiction over the parties, based on their residence or presence in the state.  Sometimes several states might be potential venues for a transitory action, and the litigants may engage in “forum-shopping” because they prefer the laws of one state over another.  When multiple states might be the venue of a transitory action, there are rules to help rank which state is a better venue than others.  Typical examples of transitory actions are contract disputes, injury claims, and class-actions.

Quiet title actions, probate of real property and judicial foreclosure actions are all examples of “local actions” involving real estate that must be heard in the state in which the property is located.

We recently handled a case from California that addressed issues arising from both local and transitory actions.  A trust estate was being litigated in California, but the estate included property located in Nevada.  In that instance, the court – applying long-established exceptions to the local action rule – entered orders determining the parties’ respective interests in real estate located in Nevada.  The Nevada Supreme Court recently upheld the entry of the California probate court’s order that the defendant “trustee” had no interest in the Nevada lands she had conveyed to herself.  The ruling was based on the fact that the California probate court had proper jurisdiction over the trust and the parties who were all of its trustees and beneficiaries.

The same exception to the local action rule applies in a variety of other settings, the most common of which are divorce proceedings.  In a divorce, a court in State “A” can divvy up property of the spouses located in State “B” and any other states.  The Court’s power to do this stems from its jurisdiction over the owners – the divorcing spouses.  Likewise, in a partnership dispute or dissolution, if the court has jurisdiction over the partners or the partnership, it can divvy up their real estate, no matter where it is located, and the courts where the land is located must give effect to the decree partnership dissolution (or the divorce decree) which divides the land.

Cases involving a mixture of local and transitory actions can be complicated.  Incline Law Group, LLP has the experience to guide you through the process.

Making Contracts Work for You – Part 4 – Contracts: Insurance Provisions

Insurance

I can already hear it — you know what insurance is.  However, did you know that a promise to procure insurance for another party can sometimes equal an obligation to cover the loss the insurance would have provided if you don’t procure it?  In other words, if you promise to insure another party in conjunction with a commercial agreement, you become the insurer if the agreed-to coverage is not purchased.  For this reason, insurance provisions in commercial agreements can have enormous financial consequences, particularly when a loss occurs which would have been covered by insurance required by the agreement.  As is often the case with indemnity provisions, insurance clauses are sometimes drawn from old, unrelated agreements, and your contract might wind up with unfair or insufficient insurance provisions.  Make sure the insurance clause fits the deal.

Conclusion

Next time you negotiate a commercial agreement, make sure that you are best protecting yourself and avoiding unintended financial risks by including appropriate warranty, indemnity and insurance provisions that reflect your intentions and are enforceable under the state law selected in the agreement.  Happy contracting.

Read more in the 4-part Making Contracts Work for You, where we discuss various ways that you can strengthen your commercial contracts, so that in the case of a dispute, your contract works on your behalf. Part 1- Boilerplates, Part 2-Warranties , Part 3-Idemnity Provisions

Making Contracts Work for You – Part 3 – Contracts: Indemnity Provisions

Indemnity Provisions

Indemnity or “hold harmless” clauses are another way of allocating financial risk to a particular party in a transaction.  Indemnity clauses require one party to bear the cost of certain risks defined in the contract, which can range from particular losses, lawsuits, or even non-conformance with prescribed warranties.  Most commercial agreements should have some form of indemnity clause, in which one party agrees to defend (i.e., hire a lawyer) and indemnify (reimburse) the other party for the risks described.

We find that indemnity clauses are often one-sided, and sometimes taken from unrelated contracts, so that the risks which ought to be negotiated and indemnified are overlooked, while the indemnity clause as written produces results which the parties never contemplated. For example, Party A would not expect to find a clause that lays the costs of Party B’s fault back upon Party A. Yet that kind of result can happen when indemnity clauses are not carefully negotiated and drafted.

Indemnity clauses can be quite complex, including provisions regarding the selection and control of the attorneys who will defend the claim.  A well-drafted indemnity clause will include a provision that the benefited party will be entitled to their reasonable expenses incurred to pay the indemnified loss, and any settlement, judgment and defense costs.

Losses are not always caused by one person or one discrete act or omission.  Events like construction site accidents and other industrial accidents are often the result of a combination of factors.  Environmental contamination can have multiple causes spread over decades. In such cases, the wording of an indemnity clause can make a big difference.

The legal effect of an indemnity clause is usually a question of state law.  Different states have varying rules for interpreting and enforcing indemnity clauses.  Therefore, the state law selected in the agreement can have a major effect on the results produced by the indemnity clause.  Some states require particular wording in an indemnity clause before a court will shift the risk of a loss from one party to another.  If  the contracting parties intend to shift the risk of one party’s “active” negligence to the other, such an intent will often need to be specifically spelled out or the indemnity clause will not be given that effect.

Most or all states have limitations on the kinds of liabilities that may be indemnified, and some even have special statutes that change the rules in particular settings, such as construction contracts, for example.  Indeed, California courts have at times distinguished between “Type I,”  “Type II” and Type III” indemnity clauses. (I will spare you those details.)

Ultimately, the effect of an indemnity clause will turn on the state law chosen in the contract, the subject matter of the contract, the words used in the indemnification provision, the circumstances of the loss to be indemnified, and the different parties’ roles in producing the loss.

Read more in the 4-part Making Contracts Work for You, where we discuss various ways that you can strengthen your commercial contracts, so that in the case of a dispute, your contract works on your behalf. Part 1- Boilerplate, Part 2 – Warranties, Part 4 -Insurance Provisions

Making Contracts Work for You – Part 2- Contracts: Warranties

Warranties

A warranty is an agreement that the item sold, or some other subject matter related to your contract, conforms to a certain description.  The effect of a warranty is a contractual allocation of financial risk if the item sold (or other subject matter of your agreement) does not conform to the specified warranty.  A warranty is violated when the thing sold doesn’t satisfy the warranted condition. When this happens, the party who made the warranty is liable to the other party for the cost to repair or correct the issue — without regard to fault.  Thus, warranties produce liability without fault, sometimes called “strict liability.”  When a warranty is breached, it may also provide a basis for rescission and restitution — this means unwinding the contract.

Including warranties in contracts is an effective way to make sure your assumptions about what you are buying are included in the paperwork.  Requesting warranties during negotiation and drafting of documents is a good way to find out whether each party has the same understanding of what is being bought and sold. Signing an agreement that contains warranties that you did not agree to make can produce bad results; likewise, failing to include warranties in an agreement to reflect what has been promised to you is also a bad idea.

Often, a seller will attempt to disclaim liability for any breach of warranties by requesting an “AS-IS” provision. The words “AS IS” and similar terms generally trigger a legally enforceable disclaimer of all express and implied warranties, except for warranties set forth elsewhere in the agreement.

Parties relying on warranties will often want a “survival clause” in the agreement to be sure that any important warranties continue in effect after close of escrow, for example.

Read more in the 4-part Making Contracts Work for You, where we discuss various ways that you can strengthen your commercial contracts, so that in the case of a dispute, your contract works on your behalf: Part 1-Boilerplate, Part 3-Idemnity Provisions, Part 4 Insurance Provisions

Making Contracts Work For You – Part 1: 5 Boilerplate Items You Don’t Read

In this four-part series, Making Contracts Work for You, I will discuss various ways that you can strengthen your commercial contracts, so that in the case of a dispute, your contract works on your behalf.

Many people and businesses use self-written business forms as contracts and rely on handshakes to seal a deal. When a dispute arises from said deal, many of these people or business later turn to attorneys for a review of said contract.  Having an attorney review the contract will often reveal shortcomings, and then the second-guessing of the agreement then begins.

A few simple, but well-defined boilerplate terms can make your standardized commercial agreement an advantage for you in the case of a dispute, or at least keep the playing field level.  In many cases, a court cannot rescue you unless you give it the ammunition to do so. It makes great sense to improve your leverage and chances of collection, and perhaps even ward off disputes, by improving your standard contract forms with the simple tools mentioned below.

Here are some of the provisions that can make or break your success in a lawsuit that arises from your contract:

  1. Attorney’s Fees Clause — language that says the winner also gets his attorney’s fees recovered.

Why?  Under the “American Rule” you generally cannot recover attorney’s fees in most states, unless you have a right to attorney’s fees in your contract or under a special statutory remedy.  You want an attorney’s fee clause that is properly drafted.

  1. Clear Payment Deadlines and Interest Provisions — terms that state when payment or performance is due and the consequences for delay.

Why?  Disputes can take a long time to resolve.  The accrual of interest can become a powerful bargaining chip, and a significant item of recovery.  Interest compensates you for the loss of use of your money, and, to some degree, the loss of your own time devoted to the case.  Allowable interest rates vary according to the applicable state law.  If you want to charge “compound interest” — in other words, interest on interest — this must be explicitly stated in the agreement.  Otherwise, only simple interest will accrue on the principal sum due. Typically, we see contracts with no interest rate stated; the interest rate only appears in invoices.  The interest rate(s) should be agreed upon, up-front, in the contract.

  1. Choice of Law, Consent to Jurisdiction, and Venue — where a lawsuit must be filed and what law will apply.

Why?  Cases can be won or lost based purely on the financial burden caused by the location of the lawsuit or arbitration hearing.  You want to be in your own home “court,” spending nights at home with your family, trying the case with your favorite lawyer.

  1. Correct Naming of the Parties and Authorized Signatures — are you actually signing a contract with the party you think you are dealing with?

Why?Some level of due diligence is always appropriate.  If you are doing business with a corporation or other entity, you want your contract signed by a properly authorized representative with the corporate name properly stated.  You would be surprised how often this is overlooked.  Are you dealing with the true property owner, or his uncle who just got out of jail?  There is a wealth of publicly available data available on the Internet to verify the correct names of corporations and the true owners of property, businesses, etc., so you can ensure you have the correct, authorized signatures.

  1. Personal Guaranties – an additional source of payment if the contracting party defaults; usually a person with money, property or both.

Why?  It doesn’t take much for an unscrupulous person to form a corporation or an LLC.  If you do not have a solid track record of doing business with a business entity or trust, it may be appropriate to ask for a personal guaranty. Guaranties must be in writing to be enforceable; they can vary from a single sentence to multi-page guaranty agreements.

We are always happy to review our clients’ standard contracts and provide advice that will make your agreements stronger.

Read Making Contracts Work for You –  Part 2-Warranties , Part 3-Idemnity Provisions, Part 4- Insurance Provisions

Avoiding Probate in Nevada and California with a Heggstad Petition

Avoiding Probate in Nevada and California with a Heggstad Petition.

The use of revocable inter vivos trusts, also known as living trusts have gained in popularity. A wide range of estate, tax and wealth planning objectives can be achieved by the use of living trusts.  A primary objective of the living trust is the avoidance of probate.

Problems can arise, however, when a trust is created but assets are not transferred into the trust, whether inadvertently or because of an ineffective transfer document.  When real estate assets are inadvertently not transferred to the trustee of the trust, it may still be possible to avoid a lengthy and expensive probate.

Under California law, a trust can be created by a written declaration by the owner that the real property in question is held subject to a trust, and no separate transfer by deed is required to fund the real property into the trust. (Estate of Heggstad (1993) 16 Cal. App. 4th 945.)  This ruling provides an opportunity to have a court declare real property to be subject to a trust through the filing of a petition that has become known as a “Heggstad petition”.  A successful Heggstad petition can allow the parties to avoid a more lengthy and costly probate proceeding.

Several provisions in the Nevada Revised Statutes (NRS) dating back to 1999 authorize a Heggstad-like petition in Nevada. The most recent addition to the NRS in this regard was enacted by the 2015 Nevada Legislature in Senate Bill 484, Section 64. The new amendment of NRS 164.015 confers additional explicit authority upon the Nevada District Courts in cases involving non-testamentary trusts to hear and act upon “petitions for a ruling that property not formally titled in the name of a trust or its trustee constitutes trust property…”

For more information on California or Nevada probate, and the possibility of avoiding probate, the attorneys at Incline Law Group, LLP may be able to assist.

PROPOSED LAND SWAP – CRYSTAL BAY LAKE ACCESS AND INCLINE FLUME / BULL WHEEL

By Andrew N. Wolf, Attorney, Incline Law Group

The owners of the Ponderosa Ranch and the former Stack Estate on the Crystal Bay waterfront have proposed a land exchange with Washoe County. The Ponderosa Ranch contains a portion of the Incline Flume Trail and remnants of the Bull Wheel that was reputedly part of the Great Tramway of Incline used to hoist logs from what is now Incline Village up to the fluming system that sent logs to Virginia City.  The Incline Flume Trail — running from the Third Creek area of the Mount Rose Highway, through the Diamond Peak Ski Resort and all the way to Tunnel Creek Road — still contains remnants of the box flume that was constructed circa 1870s.

The county owns a number of public alleyways that project from County roads to the Lakeshore. One of the public alleyways extending from the County road to the lakeshore in Crystal Bay, eight feet wide by 200 feet long, lies between 44 and 61 Somers Loop, properties that are owned or controlled by the same group which controls the Ponderosa Ranch on the West side of Incline Village.  Several years ago, an attempt was made to abandon this particular alleyway to the adjoining parcels and the request was denied by Washoe County. The current owner has proposed a land exchange in which the alleyway would be traded for a parcel to be split off the Ponderosa Ranch property containing a portion of the Incline Flume Trail and the historic Bull Wheel.

To be clear, the alleyway that is proposed to be traded is not the public stairway that is located between parcels located at 22 and 90 Somers Drive.

There have been strong sentiments expressed on both sides of the issue.  On one side, opponents of the exchange note that public lake access is a limited and valuable commodity that cannot be replaced.  They point out that if public agencies want ownership of the privately held portions of the Incline Flume Trail or Bull Wheel, they have powers of eminent domain which can be used to acquire those lands for fair value.  On the other side, supporters of the land exchange would like the recreational resource of the Flume Trail and the historic resource of the Bull Wheel to be placed in public hands, so that the trail can be kept open, and properly marked and maintained. Over the years, the owners of the Ponderosa Ranch land have blocked access and/or posted no trespassing signs upon the portion of the Flume Trail that crosses private property.  Supporters of the exchange also note that the Crystal Bay alleyway to be swapped is extremely steep and may not be capable of any formal use, development or improvement.  Washoe County currently keeps it closed for safety reasons.

Washoe County has taken the initial step of exploring the concept of an exchange by authorizing appraisals of the affected lands and other investigative studies which are apparently being funded by proponents of the exchange.

Opponents of the exchange also argue that a decision to abandon a scarce Crystal Bay public lake access should not be mixed together with an analysis of whether the Incline Flume and Bull Wheel area should be acquired for public use, such as via eminent domain. They argue the questions are completely separate.

This is an important local issue.  Interested and concerned citizens can follow and attend public meetings and write their elected officials. The Washoe County staff report of May 13, 2014, and various public comments concerning the proposed land exchange can be found here:
http://www.washoecounty.us/large_files/agendas/051314/28.pdf

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