The Real News

December, 2017
November 25, 2017 Effective Date For New 1099-S

On Saturday, November 25, 2017, the OMB's Office of Information and Regulatory Affairs formally approved the new 1099-S form.  The new form requires the use of the new "Box 5" which is for foreign sellers.  The rest of the form had previously been approved and extended through November 30, 2017.  The entire form is now approved through November 30, 2018.  The IRS had requested the new form be approved for three years, but only one year was approved. 

AEA objected to the new "Box 5". One of the issues raised was the late notice to industry that it is now required to collect specific information on certain foreign sellers. Another reason for concern is the implementation of "Box 5" is not consistent with the use of a generic FIRPTA certificate.

The 1099-S for 2017 except "Box 5" has a valid OMB Control Number (1545-0997) for the entire 2017 year.  However, the "Box 5" requirement OMB approval became effective on November 25, 2017.  The use of a new 1099-S Control Number for qualifying transactions becomes effective for closing starting on November 25, 2017.  The IRS cannot impose penalties for a lack of information in "Box 5" for any closing date prior to November 27, 2017.  AEA will immediately begin working closely with the IRS to obtain specific, written clarification from the IRS before the start of 2018 when filing of forms 1099-S begins for 2017 transactions.

RELAW, APC did write about the new 1099-S form in the March 2017 Newsletter.  If you'd like to review the original article, you can view that Newsletter via the RELAW, APC website: or by clicking this link: .
Case of the Month
Stara Orien, Plaintiff and Respondent v. Mista L. Lutz et al., Defendants and Appellants
In the state of California, when a parcel of real property is jointly owned by two or more parties and one of the parties wants to sell the real property while the other parties oppose the sale, one way to resolve the issue is to conduct a Partition Action.  Basically, the parties go to the Courts, plead their side, and the Courts decide how to divide up the property.  Partition is usually a matter of right, but that right may be waived.

In 2003, three siblings (Stara Orien (plaintiff), Mista L. Lutz (defendant), and Russell A. Howells (defendant)) received a gift of two residences from their mother.  Each sibling took an undivided one-third interest in the properties.  In 2006, the three siblings entered into a settlement agreement to resolve a probate claim over their mother's estate, which was initiated by Howells.  Paragraph 11.1 of said settlement agreement stated, "Mista, Stara, and Russell may sell the properties at any time they agree to do so.  However, this provision shall not prevent any one or more of the parties from filing a partition action with respect to either or both the properties, in the event that Mista, Stara, and Russell are unable to unanimously agree on whether or not the properties should be sold."  In addition, paragraph 21.1 of said settlement agreement provided for attorney fees.

In October 2013, Orien filed a complaint against Lutz and Howells seeking a partition by sale from both the properties.  The complaint did refer to the settlement agreement signed in 2006.  The Trial Court granted summary judgment for the plaintiff for a partition by sale.  In a separate order, the Trial Court also awarded attorney fees in favor of the plaintiff, which totaled $81,700.50.  The defendants argued, unsuccessfully, that the plaintiff had the right to seek a partition action independent of the settlement agreement, and therefore the attorney's fees provision is not invoked.  The Trial Court found that that attorneys fees "were incurred for the common benefit", which is a requirement to apportion attorney fees among the parties of a partition action.  The defendants timely appealed this decision.

The Appellate Court reviewed the words in the settlement agreement very carefully.  The Appellate Court agreed that the plaintiff had the right to the partition action, regardless of the settlement agreement.  Her rights were not waived.  Upon the careful inspection of the words, the Appellate Court reads the section, "However, this provision shall not prevent ..." as critical, because it does not imply the creation of a new right, but instead preserves this existing right already present without the settlement agreement.  This language does not reflect the parties creating a contractual right, only agreeing to an already existing statutory right.  Therefore, the attorney fees provision of the settlement agreement does not apply.  The Appellate Court reversed the Trial Court's order granting attorney fees.  The parties shall bear their own costs on appeal.  Keep in mind, although the defendants did not have to pay the plaintiff's attorney fees, the properties were still sold and the money disbursed among the siblings. 
Developer gets 10 Years for Fracking Scam

"Fracking" is a slang term for "Hydraulic Fracturing".  Hydraulic Fracturing is the process of injecting liquid at high pressure into subterranean rocks, boreholes, etc., in order to force open existing fissures and extract oil or gas.  In other words, inject pressurized liquid deep into the earth and you get oil or natural gas out. 

Fracking is today's gold rush.  In the last decade, North Dakota has seen quite an energy boom thanks to the fracking process.  This influx of workers also means they need a place to live.  Around many fracking sites, "barracks-style" housing has popped up.  Developer Ronald Johnson, 51, from Minnesota, pitched the idea to many investors of building a real housing development for the influx of workers.  The first would be just outside the town of Williston, North Dakota.  In this small town of around 30,000 people, a one-bedroom apartment can fetch more than $2,000 per month.  Johnson's plan was to build indoor RV parks for the workers.  These indoor RV Parks would be warehouses where the workers can park their RVs, do laundry, and bathe.  This would be a huge improvement in current living conditions for many workers.

Johnson sent emails and letters to several investors.  This included detailed building renderings and property specifications.  Johnson didn't actually build the parks with the investors money.  Instead, he paid off some investors through a separate business deal, refinanced a 51-acre cattle farm, and purchased several car, properties, and vacations.

The Internal Revenue Service and Federal Bureau of Investigations discovered the scam.  Johnson was sentenced to 10 years in prison on wire fraud and money laundering charges.  His sentence also includes restitution and a forfeiture order.

Vexatious Litigants

A Vexatious Litigant is someone who repeatedly files unmeritorious motions, pleadings, or other papers, or conducts unnecessary discovery, or other tactics that are frivolous or solely intended to cause unnecessary delay.  Traditionally, a vexatious litigant files at least five litigations within a seven year period (other than small claims court).  One reason the phrase vexatious litigant exists is because in the past, people have tried to get out of performing a court order by continually filing new items, either delaying time or attacking the other party who has already won via retaliation by forcing them to continue to have court costs and attorney fees.  Once the Court has determined someone to be a vexatious litigant, they are barred from filing any new action against the original party.  They would need to get a court order allowing them to raise any new issues.

On June 17, 2013, Tammy Fernandes successfully sued vexatious litigant Raj Singh and his wife Kiran Rawat individually, as well as trustees of the Sita Ram (or "Sitaram") Trust, for wrongful eviction and other related claims.  Fernandes suit came after three unlawful detainer complaints filed by the defendants.  On January 23, 2014, Singh substituted himself in as council and proceeded to file several bizarre pleadings. 

Unlawful Detainer 1:  Fernandes rented a property from Singh in 2010, although the property was not habitable.  In November 2010, Singh filed an unlawful detainer action against Fernandes using a false name to evade the prefiling requirements of the vexatious litigant statutes.  That case was dismissed because of "nonappearance of the parties".  However, Singh accompanied by attorney Paul Hoff were present in the courtroom.

Unlawful Detainer 2:  On September 20, 2011, Singh filed a second unlawful detainer action against Fernandes using Hoff, naming the Trust as the plaintiff and identifying himself as the landlord.  Fernandes prevailed in the suit.  She was awarded a conditional judgment which reduced her rent and an order for the Trust to repair the premises.  Again, Singh was present at the hearing.  During a November 21, 2011 progress hearing on the repairs, no repairs had been started, Hoff dropped out of the case, and Singh unsuccessfully moved to dismiss the case.

Unlawful Detainer 3:  On April 22, 2012, Singh filed the third unlawful detainer action against Fernandes.  He listed himself and Rawat as a trustee for the Trust.  This time, he falsely stated an amount of unpaid rent (by disregarding the conditional judgment from the unlawful detainer 2), and filed a fraudulent proof of service.  Since Fernandes did not know about the hearing, she did not show up.  Singh obtained an eviction order.  Fernandes returned home after working the graveyard shift as a waitress at a Denny's to find deputies barring her entrance to the premises.  The locks had been changed.  She had no where to go, no place to live, no clothes, food, etc.  She managed to stay with some friends and nearly lost her job due to the situation.

On April 20, 2013, a County of Sacramento code officer inspected the property at the request of subsequent tenants.  The code officer found the same defects as when Fernandes lived there.  Singh refused to make any repairs and tried to serve a three-day notice to quit on the current occupants, even misstating the date.

Further, Singh did not comply with a court order to return Fernandes' property to her.  The only property she retrieved was what she found in a trash can outside the property.  The estimated value of property loss was nearly $21,000.  Fernandes also stated that her ordeal with Singh caused her "great emotional distress".

During Fernandes' suit of 2013, the Trial Court found four retaliatory acts: the three unlawful detainer actions, plus the repeated demands for payment of rent, contrary to the conditional judgment in favor of Fernandes.  The statutory penalty was $2,000 each, for a total of $8,000.  By clear and convincing evidence, the trial court found that Singh acted with oppression, fraud or malice, both actual and implied.  The court awarded Fernandes both compensatory and punitive damages.  Raj Singh, Kiran Rawat, and the Sitaram Trust were ordered to appear and present evidence of their financial standings in order for the court to determine the correct amount for the punitive damages.  They refused to follow the court order.  On May 22, 2015, the court awarded Fernandes $87,894 in compensatory damages and $350,000 in punitive damages, plus costs, prejudgment interest, and attorney fees.  Of course, Singh, Rawat, and the Sitaram Trust appealed. 

Singh, Rawat, and the Sitaram Trust filed several motions, pleadings, etc. attempting to force the appellate court to overturn the decision of the trial court.  Each one was deemed frivolous, or without merit.  It was stated, "Singh's briefing flagrantly disregards appellate norms."  A brief must contain "meaningful legal analysis supported by citations to authority and citations to facts in the record that support the claim of error" and contain adequate record citations, or else we will deem all points "to be forfeited as unsupported by 'adequate factual or legal analysis.'"  Every item filed by Singh, Rawat, and the Sitaram Trust was determined to be unsupported with any factual basis or valid legal argument.  The appellate court affirmed the trial court's judgment.  Defendants shall pay plaintiff's costs on appeal.

Upcoming Class with Escrow Training Institute on SB2

SB2 & The Escrow Business Forum
(Saturday, January 6th)     Tuition: $69

THIS FORUM qualifies for C.E.A. Professional Designation Credits

Enacted into law and effective January 1, 2018, this bill enacts the Building Homes & Jobs Act. The new law will impact both the recording fees you charge and the process you follow.
This is a "must attend" event .

Jennifer Felten, Esq. RE LAW APC
Mickey Vandenberg, Williston Financial Group/WFG Title
Lynn Yockey, Granite Escrow & Settlement Services

In this much needed industry workshop, we will cover:
  • The SB 2 Law, history, intent & reality
  • Poorly crafted Bill language & its impact on you and the consumer
  • New Fee assessments from $75.00 - $225.00 per single transaction
  • Impact on you, your Company and your escrow process
  • Estimating fees for TRID compliance (huge impact)
  • Role of County Recorder's Office - Audits
  • Extensive Question & Answer with our panelists
  • And a whole lot more!
WE believe this workshop will "sell out". FIRST registered/FIRST paid receive priority. Registration is complete upon payment.

Seating will go fast! And, we have kept the tuition very low!



Jennifer Felten, Esq., Principal & Editor
(805) 265-1031 
Feel free to call  or email for a free consultation.

We appreciate your referrals.