Page 2  

Although this is the time to give your input on the revisions to the legislature, it seems premature to make practical changes at this time given the fact that nobody knows which revision will ultimately be passed and that any changes probably won't be effective for some time.

Q. Whether a trust can be reformed to cure tax problems?

A. No. As many trust departments are aware, trusts are important tools when it comes to gifting and estate planning. However, trusts also raise unique tax issues.

When a trust document fails to reflect the parties true intention, it may be reformed. See N.D.Cent.Code § 9-07-05 and § 32-04-17. It may also be possible to give the reformation retroactive effect and, thus, undo any transfers that have already taken place.

However, a reformation will not affect the rights acquired by non-parties to the agreement, including the United States. See Van Den Wymelenberg v. United States, 397 F.2d 443 (7th Cir. 1968). In fact, the Van Den Wymelenberg court noted with particular displeasure the possibility of state court reformation actions having the sole purpose of avoiding federal taxes. Thus, once the trust agreement is in effect, it cannot be reformed to diminish tax liabilities. It should also be noted that the position is far and away the majority. But, there are a few cases to the contrary. It should also be noted that this analysis would probably be used in respect to any contract, not just trusts.

A repairman's lien is similar to a mechanic's lien. However, there are some significant differences. First, the only person who can obtain a repairman's lien are any "blacksmith, machinist, farm equipment dealer, welder, garage keeper, mechanic or aviation operator, having an established place of business within this state." This differs from a mechanic's lien which requires the person claiming the lien to improve "real estate by the contribution of labor, skills, or materials, whether under contract with the owner of such real estate or under contract with any agent, trustee, contractor, or subcontractor of the owner."

Second, the property on which the lien can be claimed is different. In reference to a mechanic's lien, the lien property is real estate unless the improvement can be removed from the real estate. As to a repairman's lien, the property is limited to automobiles, trucks, engines, combines, tractors, farm equipment, well machines, aircraft or watercraft.

Third, the requirements for perfecting the lien may differ. A repairman who retains possession of the property does not need to do anything further to perfect the lien. If possession is not retained, a lien statement must be filed. With respect to a mechanic's lien, the mechanic must record a statement describing the property and the amount due in the county where the property is located within ninety days of when the contribution is complete.

A fourth difference is found in the contents of the lien statement. To claim a mechanic's lien, the statement simply needs to include a description of the property and the amount due. This is opposed to the more specific requirements in filing a repairman's lien. A lien statement for a repairman's lien requires a verified statement of the labor performed, materials furnished, the price agreed upon or the reasonable value of the services, the name of the person for whom the labor or materials were provided and a description of the property on which the lien is claimed.