Did Ryan O’Neal Steal Painting From Farrah Fawcett’s Estate?

This is the question that is a subject of a Los Angeles County Superior Court lawsuit between the University of Texas and Fawcett’s former boyfriend, Ryan O’Neal.  Fawcett left her art collection to the University of Texas when she died.  Warhol Painting of Farrah FawcettThe Universtity of Texas contends there were two Andy Warhol paintings in Fawcett’s collection.  When she died, the University received one painting, but not the other.  The other painting, pictured left, is in Ryan O’Neal’s living room.  The University of Texas is now suing O’Neal over the painting.  O’Neal defends that Warhol gave the painting to him, not Fawcett.  The lawsuit started out in federal court (here is the complaint), was dismissed, and is now in Los Angeles County Superior Court.

Proving that Fawcett (or her trust) owned the painting at the time of her death could be tricky.  First, unlike financial accounts, cars and real property, personal property is usually not “titled” with a deed or certificate of title or registration.  Second, the Deadman’s Statute (in Washington, RCW 5.60.030) precludes people from testifying about what the decedent told them when they stand to gain from it.  The University of Texas’s lawyers will need to resort to insurance records (likely the paiting was insured), photographs and witness recollections to prove their case.

This type of conflict is not uncommon in estates (In Washington, the dispute is sometimes whether the property was “community property” giving the spouse an undivided 1/2 interest, or “separate property” where the spouse has no interest, other than perhaps a small amount allowed by statute).  The best way to avoid these disputes is to keep an updated inventory of personal property assets (really, all assets should be inventoried), and if/when items are given away, indicate so and to whom it was given.  And remember, personal property includes intangible items, such as digital photographs, royalty rights, domain name registrations, etc.  And while you’re at it, keep an inventory of email accounts and passwords.  (see recent Seattle Times article on this, quoting our former colleague, Wendy Goffe, from Graham & Dunn).

Probate: What if the Real Estate is Worth Less than the Mortgage?

These days, estates are often walking away from real property rather than paying the mortage.  They do this because lenders usually foreclose on real property nonjudically.  No deficiency is allowed to a lender after a nonjudicial foreclosure.  See RCW 61.24.100.  (On a semi-related note, this can leave “forgiveness of debt,” which is taxed as income to the estate).  In other words, the estate walks away from the property and the debt.  This is a great outcome for the estate, but not a guaranteed outcome because a savvy lender can file a creditor’s claim and simply enforce its rights under the promissory note (that is, assuming the lender knows about the estate – notice anyone?).

Here are the rules: There are known (or “reasonably ascertainable”) creditors and unknown creditors.  RCW 11.40.040.  A mortgage lender is most certainly a “known” creditor.  If an Executor fails to notify a known creditor – the creditor will have 2 years from the date of death to sue the decedent’s estate (or rather, the Executor/Personal Representative).  See RCW 11.40.051(1)(c).  If you notify a known creditor, he has the later of four months or thirty days from when notice was published.  (If the notice to creditors is published, unknown creditors have four months.)

So, a PR can: 1. pay the debt; or 2. not pay the debt; and A. send notice to the lender; or B. not send notice to the lender.  If notice is sent, the statute of limitations for a creditor’s claim is the later of four months from publication or thirty days from sending the notice. RCW 11.40.051.  If not, it is two years.

If the PR stops paying, the lender will issue a notice of default, and eventually start a foreclosure (it could take months, even a year or more depending on the lender).  If the lender is on the ball (or if you send notice to the lender and he reads it and responds), he will likely file a creditor’s claim.  Since lenders have the option of suing on the note or foreclosing, the savvy lender will rest on his creditor’s claim rather than foreclose, knowing he can get paid in full that way.

The conclusion is this:  If you’re the lender and your borrower stops paying, search the Washington Courts Case Name Search index to see if there’s an open estate.  If so, file a creditor’s claim.  If you’re the Executor/Personal Representative, stop paying the mortgage, and see what happens.

Hines v. Wolf: File Your Creditor’s Claim Now, Argue Later

Must a landlord file a creditor’s claim against a lease guarantor’s estate in order to be able to later enforce it, even when there is no default in the underlying lease at the time of death?

Answer:  Yes if you want to later enforce it.  According to the Washington Court of Appeals in Hines REIT Seattle Design Center, LLC v. Wolf, __ Wn. App. __ (Oct. 24, 2011), failure to file a creditor’s claim will void ALL the decedent’s obligations, including those “not yet due.”

Here’s what happened:  Hines REIT Seattle Design Center, LLC leased commercial space to Stephen Earls Corporation.  The company’s president, Stephen Earl, guarantied the lease.  Stephen Earl died.  His estate published a notice to creditors, and sent Hines the notice.  Hines ignored it.  After all, the tenant corporation was not in default on its lease, so why file a creditor’s claim for an obligation that is not due? Continue reading