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The Pivotal Law Blog

Thinking of Cutting Down a Tree in Seattle? Think Twice!

Posted Tuesday, September 18, 2012 by Christopher L. Thayer

alt textMany Seattle residents are not aware that the city has extensive regulations in place which relate to the cutting down of trees, even those located on private property within the City limits. There are two major sections in the Seattle Municipal Code that come into play: SMC 25.11 (Tree Protection Ordinance), and SMC 25.09 (Environmentally Critical Area Code). This blog will primarily focus on a summary of the issues involved in the Seattle Tree Ordinance. Keep in mind that additional restrictions may apply, if the tree or trees in question are located in or adjacent to what might be considered an “environmentally critical area” – such as a wetland, steep slope, shorelines, etc.

Seattle’s Tree Protection Ordinance, breaks trees down into three categories: (1) trees over six inches in diameter (measured 4.5 feet above the soil); (2) exceptional trees (due to size or species and having unique historical, ecological or aesthetic value), and (3) hazardous trees (posing a high risk of bodily harm or property damage). In addition, the character of the land is important as well. For undeveloped land, the general rule is that “no trees six inches in diameter or greater” can be removed, except as part of an approved development project or for hazardous trees. For developed land, no exceptional trees may be removed and no more than three non-exceptional trees that are six inches in diameter or greater may be removed in any one year period; hazardous trees may be removed but must be designated as a hazard by a qualified professional (and approval by the Department of Planning and Development). There are additional restrictions that apply specifically to development and construction.

Violations of Seattle’s Tree Protection Ordinance can subject a person to stop work orders, remedial requirements, civil penalties and fines (which may be trebled if found to have been “willful or malicious”), and even criminal penalties.

Before cutting down any trees in your yard in Seattle, it would be wise to review the Seattle Tree Ordinance (and the Environmentally Critical Area Code if applicable) in order to avoid potential liability. A good summary of the City of Seattle’s laws affecting trees can be found here. If you are uncertain whether or not your proposed tree removal might violate Seattle regulations, consider consulting the City of Seattle’s Department of Planning and Development, a private certified arborist, or our office to help answer your questions. Another important consideration is verifying your property lines before cutting down any trees – as cutting down a tree on a neighbor’s property (without their permission) can subject you to further civil liability – including treble damages for the fair value of the tree removed.

For more information, please contact Christopher Thayer at (206) 805-1494.

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"What Does the Washington Supreme Court's Ruling on Nonjudicial Foreclosures Mean for Me?"

Posted Monday, August 27, 2012 by Christopher L. Thayer

alt text The Washington Supreme Court recently issued a ruling relating to the Mortgage Electronic Registration System (commonly referred to as “MERS”). MERS was established in the 1990s by a group of various public and private entities in the home loan industry, including lenders such as the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the American Bankers Association. MERS was set up to create a centralized electronic registry for keeping track of mortgage rights and to make it easier to pool groups of mortgages for sale to investors. Instead of having to record formal assignments and other documentation that might otherwise be required with the local county recorders offices. This makes it easier for the mortgage industry to buy, sell and transfer mortgage rights, also known as “securitizing”. The advantages created for the mortgage industry, however, have come with some risks and concerns by borrowers who have found it almost impossible to determine what bank “owns” their loan, when it has been processed by MERS. This has resulted in frustration by borrowers who are facing foreclosure and are unable to track down an authorized lender representative to try to negotiate loan modifications or forbearance agreements.

In Bain v. MERS, the Washington Supreme Court was asked to answer three questions as certified by Judge Coughenour of the Federal District Court for the Western District of Washington: (1) Is MERS a lawful “beneficiary” as that term is defined under Washington’s Deed of Trust Act (RCW 61.24); (2) If MERS is not a “beneficiary” under the Act, what is the legal effect; and (3) does a homeowner have a claim under Washington’s Consumer Protection Act (CPA) against MERS? The case arose out of two consolidated cases wherein borrowers were contesting nonjudicial foreclosures involving MERS mortgages.

In a unanimous opinion that could have wide ranging impact, the Court held that: (1) MERS does not qualify as a “beneficiary” under Washington’s Deed of Trust Act, and therefore does not have the power to appoint a trustee to initiate a nonjudicial foreclosure; and (2) the legal consequences of not being the lawful beneficiary will vary depending on the circumstances, but the Court noted that, “if MERS is not the beneficiary … it is unclear what rights, if any, it has to convey”; and (3) addressing the possibility of a Consumer Protection Act claim that, although the facts of the underlying cases were unclear, the Court opined that “we agree that characterizing MERS as the beneficiary has the capacity to deceive … [and] there is considerable evidence that MERS is involved with an enormous number of mortgages in the country . . . perhaps as many as half nationwide … [and] [d]epending on the facts of a particular case, a borrower may or may not be injured by the disposition of the [promissory] note, the servicing contract, or many other things ….

The fallout from this decision, published on August 16, 2012, remain to be seen. It appears that any borrowers who are facing foreclosure of a loan involving MERS, may have an additional basis to contest or defend a nonjudicial foreclosure. As the ruling was somewhat narrowly limited to an interpretation of the law with respect to the Deed of Trust Act and in the context of nonjudicial foreclosures, we expect that many MERS’ loans will now be foreclosed judicially (in the court system – which is more time consuming, cumbersome, and expensive for lenders). Any attorney or professional trustee who is being asked to conduct a nonjudicial foreclosure on behalf of MERS is going to have to require additional documentation, including documentation clearly establishing MERS’ right to initiate the foreclosure and also the “chain of title” showing the “true” owner of the promissory note. There will also likely be a flurry of Consumer Protection Act cases filed by borrowers – alleging that they were unable to negotiate a loan modification as they were unable to determine, through MERS, what bank(s) was the current owner of their loan. Just how this will all play out is unclear, but what is clear is that the Washington Supreme Court just made foreclosures in Washington more complicated.

For more information on this ruling, contact Christopher Thayer at (206) 805-1494.

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What You Need to Know: Sales Taxation of Photography Services

Posted Thursday, August 16, 2012 by Michael A. Larson

alt text During a recent conversation, I was reminded of an area that routinely causes problems for small businesses in Washington - sales taxation of photography services. Especially in this area it is important for businesses to remember the old sales tax mantra, “If in doubt, collect and remit.”

Many photographers that first begin to provide photography services for consumers, whether a family portrait or a more involved event like a wedding, do not realize that sitting fees, creative fees and similar charges are subject to retail sales tax even where no actual photographs are printed for the customer. Prior to the advent of digital photography, these fees would not necessarily be subject to retail sales tax, provided that no actual finished photographs were provided to the customer. With the advent of digital photography and the recent laws passed in Washington regarding taxation of digital photography services, such fees are clearly subject to tax under Washington law when those services are provided to consumers and the customers receive the photographs electronically via e-mail, CD, flash drive, etc.

Another frequent question involves photography services provided at out of state venues for local residents by a local photographer. Under Washington law the performance of photographic services for a consumer accompanied by electronic delivery of the photographs to the customer is treated as the sale of a digital good. Sales of digital goods are generally source to location where the purchaser receives the digital goods. Thus, in many cases, although the services are performed out of state the customer will take delivery of the “digital good” at their residence in Washington, resulting in a Washington sale. It should also be noted that any reimbursements of travel cost will be treated as additional payments for the services provided by the photographer and will also be subject to retail sales tax.

Contact Ron Bueing at (206) 340-2008 if you have any questions regarding the taxation of photographic services and digital goods, or have any other questions related to Washington B&O, sales, use, or other Washington excise taxes.

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New Case Regarding Award of Attorneys' Fees in a Collection Action

Posted Monday, August 6, 2012 by Christopher L. Thayer

alt textIn Atlas Supply, Inc. v. Realm, Inc., Division One of the WA Court of Appeals answered the question: if a contract provides for an award of the “cost of collection, including reasonable attorney fee” does this include fees and costs incurred in defending a counterclaim? The Court of Appeals overruled the trial court and found that, yes, in this instance at least the supplier (Atlas) was entitled to an award of its fees and costs incurred, not only in its effort to collect on payment, but also the fees incurred defending defendant’s counterclaims.

Atlas sold construction materials and suppies to Realm on credit. The products allegedly failed, and Realm refused to pay for the materials. Atlas filed suit and Realm counterclaimed, asserting breach of contract and breach of warranty, among other claims. The parties were subsequently able to resolve their substantive claims, but were unable to agree on liability for Atlas’ attorneys’ fees. The trial court declined to award fees and costs incurred in defending the counterclaims.

On appeal, the Court of Appeals determined that Realm’s counterclaims where considered “compulsory counterclaims” - which means counterclaims that related to the same underlying transaction, and therefore had to be asserted in the underlying action, or risk being deemed waived. The Court of Appeals held that these counterclaims had to be resolved for Atlas to prevail on its collection action, and found that Atlas was entitled to an award of its fees and costs incurred in defending the counterclaims.

A few observations: (1) keep in mind that in WA, absent statute or contract, in civil litigation each party is generally responsible for its own attorneys’ fees and costs; and (2) the language contained in the contract concerning attorneys’ fees can be key. In the Atlas case, Atlas initially did not get an award of its fees incurred in defending the counterclaim, based on a narrow interpretation of the contract. It is important to review the contracts that you use every day in your business. With few exceptions, you will almost always want an attorney fee provision, and as the Atlas case demonstrates, the specific language can be key.

For more information, please contact Christopher Thayer at (206) 805-1494.

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California Apportionment Decision May Require Taxpayer Action

Posted Friday, August 3, 2012 by Michael A. Larson

alt text On July 24, 2012, a decision was rendered by the California Court of Appeal in a case involving a group of companies, including Gillette. The case provides that taxpayers may use the apportionment formula provided for in the Multistate Tax Compact (MTC) in which California was a member. This would primarily benefit companies whose sales factor exceeds their property and payroll factors in California because California had switched to a double weighted sales factor in 1993. Under the holding in Gillette, taxpayers would be allowed to use the equally weighted three factor formula provided for in the MTC.

While this case could be a windfall for certain taxpayers necessitating the filing of a refund claim for earlier years, there are reasons to be cautious. First, Gillette and the other plaintiffs lost their original refund action at the trial court level. Although the California Franchise Tax Board has not yet indicated whether they will appeal the decision, an appeal is likely and the holding in Gillette could be reversed by the California Supreme Court. Second, in anticipation of a potential loss the California legislature repealed the Multistate Tax Compact and also provided that in order to use the equally weighted factor in election must be made on an original timely filed return.

Nonetheless, taxpayers that may have a significant refund available should seriously consider filing a refund claim with California. The decision of the Court of Appeal appears well reasoned and it is doubtful that California can retroactively deny the benefits of Gillette to taxpayers. One thing is certain - there will be additional litigation. By the time that litigation is over, there will probably be no open years left in which to file a refund, even given prospective effect of the recent California legislation. Thus, taxpayers with a significant California income tax refund opportunity need to consider filing a refund action now. Further, taxpayers that filed an extension in connection with the filing of their 2007 return may be able to still claim a refund for that year, depending on the date that the original return was filed. This may require immediate action.

The case also indicates a possibility for taxpayers with other specialized issues regarding apportionment of California income to elect the MTC formula. While the case did not involve the use of a special industry apportionment formula and did not address other issues, such as the use of the Finnegan or Joyce rule, arguably, any deviation from the MTC formula that was required by California in earlier years, may provide a basis for a refund. If you have any questions, call me and we can discuss whether a refund action may be appropriate for your company.

For more information, please contact Ronald Bueing at (206) 340-2008.

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