MEE Flashcards
requirements for the execution of a will
-writing
-signed by testator
-2 attesting witnesses
-testator sign the will in witnesses’ presence (or, under the UPC, by notary)
-witnesses sign the will in testator’s presence (conscious presence test)
testamentary capacity
-lower than capacity to contract
-understand nature of their act
-nature and extent of property
-persons who are objects of their bounty
-formulate orderly scheme of disposition
A security interest attaches to collateral once the following three requirements coexist:
(i) the secured party gives value; (ii) the parties agree to create a security interest, which may be evidenced by a signed security agreement describing the collateral; and (iii) the debtor obtains rights in the collateral.
Whether goods qualify as inventory or another type of collateral is determined by
the debtor’s primary use at the time of attachment.
When a security agreement contains an after-acquired property clause, the security interest will attach to the specified collateral when
the debtor acquires an interest in it.
perfection methods
filling
taking possession of collateral
control
automatic perfection
temporary perfection
PMSIs are perfected automatically when…
in consumer goods
types of collateral
equipment (default, for business)
consumer goods (personal/household use)
farm products
inventory (used up quickly, for sale in business)
secured transactions are governed by:
Article 9 of UCC
If a debtor defaults on a secured transaction, the creditor generally has a right to repossess
as long as it can do so without breaching the peace (physical presence + objection… in order to avoid violence)
waiver of redemption is only valid if created ____
after the default
acceleration clauses are valid even if created
before the default
Article 9 provides that a secured party will be liable to the debtor for any damages caused by a failure to follow any of its rules,
and will be prohibited from collecting any deficiency if any of its default rules are broken unless the secured party can show that the breach did not cause the deficiency.
conflict of laws: full faith and credit requirements
1/ jurisdiction - rendering state must have had PJ and SMJ (as long as fully and fairly litigated)
2/ judgment rendered on the merits
3/ finality (not on appeal)
^analyzed under the rendering state’s law
conflict of laws: valid defenses to full faith and credit requirements
1/ penal judgments (P was the state)
2/ extrinsic fraud (i.e. judge took a bribe)
conflict of laws: foreign jurisdiction comity
1/ jurisdiction - greater leeway in determining
2/ where procedures fair?
first paragraph for choice of law answer
“The issue presented is which state’s law will govern the outcome of this litigation. The governing law will be selected by the forum court using the ____ approach.”
second paragraph for choice of law answer - VESTED RIGHTS (first restatement)
“Under the vested rights approach, the court will apply the law of that state mandated by the applicable vesting rule. That rule is selected according to the relevant substantive area of law.” [where injury occurred]
second paragraph for choice of law answer - INTEREST ANALYSIS
“under this approach, the court will consider which states have a legitimate interest in the outcome of the litigation. The forum court will apply its own law as long as it has a legitimate interest. If the forum state has no legitimate interest, it will apply the law of another interested state.”
second paragraph for choice of law answer - most significant relationship
“under this approach, the court will apply the law of the state which is most significantly related to the outcome of the litigation. to dermic this, the court will consider connecting facts and policy principles.”
when is a choice of law provision invalid?
the law selected has no reasonable relationship to the contract, or
the provision was included without true mutual consent
rule statement for failing to raise insufficient service of process on first response
Ordinarily, failing to raise defects related to service of process in the party’s first answer or motion to dismiss waives the defect. However, the federal rules should be construed to do justice as between the parties, and the rules permit liberal amendment of pleadings when no prejudice or delay would occur.
rule statement for choice of law rules being substantive law
Under Erie, a federal court must apply the substantive law of the state in which it sits, but the court is free to apply federal procedural law. It also is well established by Supreme Court precedent (Klaxon) that choice of law rules are substantive for Erie purposes.
rule statement for choice of law provisions
Generally speaking, the parties may agree to a choice of law provision in a contract, and this provision will govern the contract. However, there are two exceptions to this general rule. First, if the chosen state has no substantial relationship to the parties or the transaction, and there is no other reasonable basis for the parties’ choice, the choice-of-law provision will be invalidated. Second, a choice of law provision will be invalidated if the choice of law provision is contrary to a fundamental policy of a state with a materially greater interest than the chosen state in the determination of the particular issue, and which under the “most significant relationship” test would be the state of the applicable law in the absence of an effective choice of law by the parties.
requirements for prenuptial agreement under UPAA
writing and signed
entered into voluntarily
full and fair disclosure of parties’ assets
(represented by independent counsel is a plus)
fundamental rights in family law (SS)
right to marry, to procreate, to use/sell contraceptives, live together, educate their children, care/custody/control of children
all based in right to privacy
voidable marriages can be based on:
nonage, incurable physical impotence, lack of capacity, duress, fraud
one of the spouses must bring an action to have the marriage annulled
void marriages are based on:
polygamy
too closely related
residency requirements for divorce actions
P spouse must be resident of state for 90 days
need not have PJ over D spouse, unless alimony or property division is involved
defenses to fault-based divorce
collusion (incited the misconduct), connivance (consented to misconduct), condonation (forgave for misconduct), recrimination (guilty themselves of misconduct)
approaches to property division
-community property
-equitable division of all property
-**equitable division of marital property
factors for equitable property division
age, education, background, earning capacities
duration of marriage
standard of living
present incomes
source of money
health
assets/debts/liability
needs
child custody provisions
alimony
opportunity to acquire future incomes
contribution as a homemaker
economic fault (dissipated martial property)
types of alimony (for economically dependent spouse)
permanent periodic spousal support
lump sum
rehabilitative spousal support
reimbursement spousal support (for professional degrees, for ex)
periodic spousal support can be altered if:
substantial change in circumstances
jurisdiction for child support orders
Uniform Interstate Family Support Act (UIFSA) provides for enforcement across all 50 states
original jurisdiction is proper where first petition is filed (who can modify it-based on substantial and continuing change of circumstances)
jurisdiction for child custody orders
home state jurisdiction - where child is at home, or has lived for at least six consecutive months
issuing court has continuing exclusive jurisdiction
standard applied for child custody
best interest of the child!
standard for discriminating between marital and non martial children
intermediate scrutiny
standard for rebutting presumption of parentage
clear and convincing evidence
full faith and credit must be given to another court’s child support order if:
the court had jurisdiction over the matter and the parties, and the parties had reasonable notice and an opportunity to be heard.
under federal Parental Kidnapping Prevention Act (“PKPA”),
a state may not modify a custody order if one of the parties continues to reside in the issuing state and, under that state’s laws, the court continues to have and does not decline jurisdiction
the court that made the initial custody determination has continuing, exclusive jurisdiction over the matter until that court determines that:
neither the child nor the parents continue to reside in the state, or the child no longer has a significant connection with the state and substantial evidence relating to the child’s care, protection, training, and personal relationships is no longer available in the state
factors for deciding BIOC
the wishes of the parents; the wishes of the child; the relationship of the child with each parent; the child’s adjustment to home, school, and community; and the mental and physical health of the parties involved
standard for modifying custody or child support order
substantial, material change of circumstances
Under the Uniform Parentage Act (UPA), the spouse of a woman who bears a child through assisted reproduction is the child’s legal parent, unless…
within two years after learning of the child’s birth he commences an action in which it is determined that he did not consent to the assisted reproduction.
In a dispute between a parent and a nonparent, the courts give great weight to the interests of the parent, unless…
voluntarily relinquishment, or
determined to be unfit
elements of larceny by false pretenses
(i) obtaining title;
(ii) to the property of another;
(iii) by a knowing (or in some states, intentional) false statement of past or existing fact (commercial puffery does not count);
(iv) with the intent to defraud another (intended to rely on false statements to induce action)
–if title does not pass, it’s larceny by trick
–In most states, the “knowing” element can be proved by showing that the defendant had notice of a high probability of the statement’s falsity and made a deliberate decision to avoid learning the truth
rule statement for 6th A
The Sixth Amendment, which applies to the states through the Fourteenth Amendment, provides that all in all criminal prosecutions, the defendant has a right to the assistance of counsel during all critical stages of a criminal prosecution after formal proceedings have begun. The right is also offense-specific; if a defendant’s 6th A right to counsel has attached regarding one charge, he may be questioned without counsel concerning an unrelated charge.
rule statement for 5th A
The 5th A, applicable to the states through the 14th Amendment, provides that no person may be compelled to give self-incriminating testimony. SCOTUS has held that to protect this privilege against self-incrimination, a person in policy custody must be given the Miranda warnings before a police officer may conduct a custodial interrogation.
-request must be unambiguous and sufficiently clear to a reasonable officer
-no duty to seek clarification
types of asset distribution in wills
classic per stirpes (minority): divide at 1st generation
per capital with representation (majority): first gen with survivors
per capita at each generation level (modern): pool shares of lower generation
what to do re: wills if people died at the same time?
-Uniform Simultaneous Death Act (USDA): property disposed of as if they have survived the other
-120-hr rule - one must have the other by 120 hours to take
hologram will
entirely in testator’s handwriting and no attesting witnesses
codicil
instrument that modifies the will
dependent relative revocation
will 1 will be revived if will 2 was invalid
based on mistake of law or fact
pretermitted child statutes
protect children from being disinherited
grounds for challenging a will
defective execution
revocation
lack of testamentary capacity
undue influence (special relation) or duress
fraud (in execution or inducement)
mistake (in execution or inducement)
rules regarding no-contest clauses
majority: can only protest if probable cause (and not lose rights)
minority: no contest at all (or will lose rights if challenged)
All valid wills require testator to have:
legal capacity
testamentary capacity
testamentary intent
A specific bequest is…
a gift of property that is particularly designated and is to be satisfied only by the receipt of the particular property described.
Whether the bequest of 100 shares of XYZ stock to Andy constitutes a specific or general bequest depends on the reason the court is looking to classify it. For ademption purposes, a gift of stock is usually considered specific only if it is worded as “my 100 shares.” However, for purposes of stock splits and dividends, most courts consider all bequests of stock to be specific bequests. Therefore, since the court is deciding whether Andy takes a stock dividend, the bequest of XYZ stock will be considered a specific bequest.
At common law, a specific bequest of stock includes any additional shares produced by a stock split, but does not include shares produced by a stock dividend. However, in most states and under the Uniform Probate Code (“UPC”), a specific bequest of stock also includes shares of stock produced by a stock dividend.
Under the doctrine of ademption, when specifically bequeathed property is not in the testator’s estate at death (e.g., it was destroyed, sold, given away, or lost), the bequest is…
adeemed; i.e., it fails. Although most courts decide the ademption issue solely on the basis of an objective test—whether the specifically bequeathed property is a part of the testator’s estate at her death—and do not consider the testator’s intent, some states have adopted a more lenient intent test, under which the beneficiary is entitled to substitute property owned by the testator if the beneficiary can prove that the testator intended the beneficiary to take the substitute property.
A will takes effect only upon…
the death of the testator. Because of the ambulatory nature of a will, it operates upon circumstances and properties as they exist at the time of the testator’s death (“a will speaks at the time of death”).
The residuary estate is…
the balance of the testator’s property after all expenses, claims, and bequests have been paid.
“Integration” of a will is…
the process of embodying several sheets of paper or documents into a single, entire will, validated by a single action of execution. The will proponent must show that the pages were present when the will was executed and were intended by the testator to be a part of the will. The requirements of intent and presence are presumed when there is a physical connection of the pages, there is an internal coherence by provisions running from one page to the next, or the pages, when read together, set out an orderly dispositional plan.
In most states, paternity can be established if…
the father married the mother after the child’s birth; the man was adjudicated to be the father in a paternity suit; or after the man’s death, he is proved in the probate proceedings (usually by “clear and convincing evidence”) to have been the child’s father.
A beneficiary may disclaim…
any interest that otherwise would pass to her from the decedent’s estate, with the consequence that the interest passes as though the disclaimant predeceased the decedent. The gift may be saved in favor of the disclaimant’s surviving descendants if she falls within the purview of the jurisdiction’s anti-lapse statute; otherwise, the gift fails and becomes part of the residuary estate. A typical anti-lapse statute provides that the surviving descendants take by substitution only when the predeceasing beneficiary is a descendant of the testator. Other states and the UPC extend the application of the statute to any predeceasing beneficiary who is the testator’s stepchild, grandparent, or descendant of the testator’s grandparent. A few states’ anti-lapse statutes are even broader, applying to any relative of the testator or any beneficiary at all.
A will may be effectively revoked by…
operation of law, by a subsequently written instrument, or by physical act.
To revoke a will by written instrument, there must be a present intent to revoke and the instrument must be executed with the same formalities as are required for the execution of a will.
Generally, these acts are burning, tearing, obliterating, or canceling a material portion of the will. Under the common law rule followed by most states, the act must be shown to have had an actual effect on the will or its language. Under the Uniform Probate Code (“UPC”), however, the note on the back of the will may be considered a cancellation. Under the UPC, the words of cancellation must be on the will itself but need not touch any of the words of the will.
In those states following the Uniform Probate Code (“UPC”), a contract to make a will can be established only by:
(i) provisions in the will stating the material provisions of the contract; (ii) an express reference in a will to the contract and extrinsic evidence proving the terms of the contract; or (iii) a writing signed by the decedent evidencing the contract.
If the testator had a general charitable intent and it is impossible or impractical to use the gift for the purpose indicated, the doctrine of cy pres…
allows the court to apply the property to another purpose as close as possible to the original one, rather than permit the gift to fail and become a resulting trust. Application of the cy pres doctrine is not limited to charitable trusts. It also applies to outright bequests to charities where, as here, the named charity is not in existence at the testator’s death.
rule statement for trustee’s fiduciary duty
A trustee has a fiduciary duty to exercise her powers in accordance with the terms of the trust; failure to do so constitutes a breach of trust. In addition, the trustee has a duty to act prudently, diligently, and in good faith. In a discretionary trust, a beneficiary cannot interfere with the exercise of the trustee’s discretion unless the trustee abuses her power. What constitutes abuse depends on the extent of discretion conferred on the trustee. Even if the trustee’s discretion is absolute, a court will interfere if the trustee acts in bad faith or dishonestly.
rule statement for trustee’s duty of loyalty
A trustee owes a duty of undivided loyalty to the trust and its beneficiaries. Because that loyalty might be tainted by her personal interest, absent court approval or a contrary trust provision, a trustee cannot enter into any transaction in which she is dealing with the trust in her individual capacity (i.e., no self-dealing). Thus, a trustee may not purchase any property owned by the trust even if she pays full value. No fraud or bad faith need be shown by the beneficiaries, and no excuse can be offered by the trustee to justify the transaction. If a prohibited transaction takes place, the beneficiaries may: (i) set aside the transaction, (ii) recover the profit made by the trustee, or (iii) ratify the transaction.
rule statement whether the court should impose a resulting trust or apply cy pres when a beneficiary no longer exists
Upon termination of a trust, the trustee must distribute the property in accordance with the terms of the trust. If the named beneficiary is no longer in existence and the settlor did not provide what should be done with the property in such event, a resulting trust arises in which the settlor is the beneficiary. The trustee’s only duty is to convey the property back to the settlor or his estate. However, if the gift in trust was charitable and the settlor had a general charitable intent, the court will exercise its cy pres power and direct that the trust property be applied to another charitable purpose as close as possible to the original one, rather than permit the trust to fail and become a resulting trust. Note that in states following the UTC, general charitable intent is conclusively presumed, and in the absence of express trust terms to the contrary, application of cy pres is mandatory.
requirements for valid trust
1/ capacity and intent
2/ qualified trustee
3/ definite beneficiaries
4/ trust property
5/ valid purpose
6/ creation formalities
spendthrift provisions
precludes beneficiary from voluntarily or involuntarily transferring their interest.
In most states, not valid if settlor is also a beneficiary (may be using this as a way to defraud creditors)
who can terminate or modify trust?
1/ by settlor (if revocable)
2/ by beneficiaries (all must consent; settlor must consent too if material change in purpose)
3/ by the court
4/ by trustee (less than $50k in property)
duties of trustee
1/ duty to administer trust
2/ duty of loyalty
3/ duty to report
4/ duty to keep property separate
5/ Duty to enforce claims and defend trust from attack
6/ Duty to preserve property and make it productive (reasonable care, skill, and caution)
rule statement for revocation of a trust
Under the UTC, a settlor can revoke or amend a trust unless the terms expressly state that it is irrevocable. However, many states still follow the common law rule, which requires that the settlor reserve the power to revoke and amend. In those states, a trust is irrevo-cable unless the instrument expressly states otherwise.
rule statement for a pour-over gift
A pour-over gift is a testamentary gift to a trust created during the testator’s lifetime, with the testamentary assets to be administered and distributed as part of that trust. Under the tradi-tional view, to create a valid pour-over gift from a will to a revocable trust, the trust must be in existence or must be executed at the time of the will’s execution. However, under the prevailing view, a will may devise property to a trustee of a trust established or to be established during the testator’s lifetime; i.e., the trust may be established after the will is executed but before the testator’s death. Additionally, pour-over gifts are valid even if the trust is unfunded during the testator’s lifetime, which is the case here, and even if the trust is amended prior to the testator’s death.
discretionary vs. support trust
In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary. This discretion actually limits the rights of the beneficiary to the amounts the trustee decides to give her. The beneficiary cannot interfere with the exercise of the trustee’s discretion unless the trustee abuses his power. On the other hand, a support trust is one where the trustee is required to pay or apply so much of the income or principal as is necessary for the beneficiary’s support.
rule statement of power of appointment
A power of appointment is an authority created in a donee enabling the donee to designate, within the limits prescribed by the donor of the power, the persons who shall take certain property and the manner in which they shall take it. A general power of appointment is exercis-able in favor of the donee, her estate, her creditors, or the creditors of her estate. A special power of appointment, on the other hand, is exercisable in favor of a specified class of persons that does not include the donee, her estate, her creditors, or the creditors of her estate. A presently exercisable power is exercisable by the donee during her lifetime. A testamentary power is one that is exercisable only by the donee’s will.
focus on the following for an Establishment Clause question:
1/ coercion
2/ history
3/ Founder’s intent
regulation violating Takings Clause? rule statement
The Fifth Amendment prohibits governmental taking of private property for public use without just compensation. While the government must fairly compensate an owner when her property is taken for public use, it need not pay compensation for mere regulation of property. A taking will almost always be found if there is an actual physical appropriation or destruction of a person’s property.
Nevertheless, a restriction on how real property is used may constitute a taking. Although cities may generally regulate the use of real property, a regulation will constitute a taking if it (i) amounts to a physical appropriation, (ii) denies an owner of all economic use, or (iii) unreasonably interferes with distinct investment-backed expectations of the owner.
forced conveyance violate Takings Clause? rule statement
Generally, a city may not force landowners to convey interests in their land to the city in exchange for permission to build improvements on the property. These forced conveyances usually violate the Takings Clause of the Fifth Amendment. However, a city can impose such a requirement if (i) a close nexus exists (the government can show that the condition relates to a legitimate government interest), and (ii) proportionality exists (the adverse impact of the proposed building/development on the area is roughly proportional to the loss caused to the property owner from the forced transfer of occupation rights).
Under Rule 4, service on a foreign corporation may be made
(i) in accordance with international treaty; if there is no treaty, service on a corporation may be made:
(ii) in accordance with the foreign country’s laws,
(iii) as the foreign authority directs in response to a letter request for guidance,
(iv) by having the clerk mail process to the defendant, with a signed receipt requested; or, most importantly,
(v) by any other means not prohibited by international agreement as the court may order.
Federal Rule 4 also specifically requires that the method of service ordered by the court be…
reasonably calculated to provide the defendant with notice of the action.
The “most significant relationship” approach of the Second Restatement…
seeks to identify the state with the most significant relationship to the issue at hand and then apply that state’s law. The court will look at the specific contacts with each jurisdiction and evaluate their relative importance. The court will also consider policy principles, such as the needs of the interstate international system, the relevant policies of the forum and other interested jurisdictions, whether the application of a specific law will further its basic policies, and whether applica-tion of a particular law will aid certainty, predictability, and uniformity of results. In deter-mining which state has the most significant relationship to both the occurrence and the parties, the court in tort cases like this one will take these specific contacts into account: the place of the injury; the place where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation, and place of business of the parties; and the place where the relationship, if any, between the parties is centered.
principal’s duties
compensation
cooperation
reimbursement
express
agent’s duties
care
loyalty
obedience
express
Methods of ratification by principal
Acceptance of transaction’s benefits;
silence if there is duty to affirm;
suing on transaction
governing law of partnership
Revised Uniform Partnership Act (RUPA)
Partner is dissociated from partnership upon:
■ Notice of partner’s express will to withdraw
■ Happening of an agreed upon event
■ Valid expulsion of partner
■ Partner becoming bankrupt
■ Death of individual partner, or termination of partner that is a business entity, or
■ Court decision that partner is incapable of performing their duties
Generally, partnership is dissolved and its business must be wound up:
■ In partnership at will, when partner gives notice of their express will to withdraw;
■ In partnership for a definite term or particular undertaking when:
Within 90 days after a partner’s death, bankruptcy, or wrongful dissociation, at least half the remaining partners express a will to wind up business
All partners express a will to wind up the business, or
Term expires or undertaking is complete
■ Upon happening of agreed upon event;
■ Upon happening of event that makes it unlawful for partnership to continue; or
■ Upon judicial decree.
A partnership is formed when…
two or more people associate to carry on as co-owners a business for profit. There is no requirement that the parties subjectively intend to form a partnership, only that they intend to run a business as co-owners. Generally, neither a formal agreement nor writing is required; in fact, the intent of the parties to carry on as co-owners of a business can even be implied from their conduct. Additionally, the sharing of profits raises a presumption that a partnership was formed.
Actual authority is…
authority a partner reasonably believes he has based on the communications between the partnership and the partner. It can be granted either in the partnership agreement or by the consent of the partners. If the act is within the ordinary course of the business, the partners may confer actual authority by a majority vote.
Apparent authority is…
the authority that a third party would reasonably believe a partner has based on his being held out by the partnership as a partner. Generally, the act of a partner in the ordinary course of the partnership business or business of the kind carried out by the partnership will bind the partnership unless the partner had no actual authority to act for the partnership in the particular matter and the third person with whom the partner was dealing knew or received notice that the partner lacked authority.
Partners are jointly and severally liable…
for all obligations of the partnership. However, a judgment will not personally bind a partner who has not been served. Additionally, a judgment creditor must first seek satisfaction of any judgment from the partnership, and then from the partners personally to the extent not covered by partnership assets.
Partners have an equal right to manage the business of the partnership, absent an agreement to the contrary. A particular act within the ordinary course of partnership business must be approved by…
majority vote of the partners, while unanimous consent is required to authorize certain other acts.
Each partner owes a fiduciary duty of loyalty to the partnership. A partner must account for…
profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business, and must refrain from competing with the partnership.
A partner is dissociated from a partnership upon notice of the partner’s express will to withdraw as a partner. In a partnership at will (i.e., the type of partnership created when no definite term or particular understanding is specified), notice of a partner’s express will to withdraw as a partner also causes…
dissolution of the partnership. However, if the dissociating partners (excluding any wrongfully dissolving partners) and the remaining partners unanimously vote to continue the partnership business, then the dissolution is retroactively nullified. If the partnership business continues after a partner dissociates, the partnership must buy out the dissociated partner’s interest.
Absent an agreement to the contrary, the dissolution of a partnership terminates the authority of any partner to act as an agent for the partnership except for the purpose of winding up the affairs of the partnership. Entering into a new contract is considered new business that is beyond the scope of the partners’ authority once a dissolution has occurred. A partner who acts for the partnership after dissolution, other than for the purpose of winding up, is not entitled to copartner contribution for a liability arising from that act, if the acting partner had notice of the dissolution at the time of the act.
Even after dissolution, a partnership can be bound (through apparent authority) by acts apparently carrying on in the course of partnership business unless the person with which the partner was dealing knew or had notice that the partner did not have authority. A third party will be deemed to have notice of a partnership’s dissolution 90 days after a partner files a statement of dissolution with the secretary of state. If a statement of dissolution is not filed, a third party also has notice if it knows of the dissolution, receives notification of it, or has reason to know of it based on the surrounding circumstances.
When a corporate meeting is to be held, generally only shareholders of record on the record date are allowed to vote at the meeting. EXCEPTION:
A shareholder may give a proxy to allow another to vote his shares for him.
To validly conduct a shareholders’ meeting, a quorum must be present. If the articles and bylaws are silent, a quorum requires…
the presence, in person or by proxy, of a majority of the outstanding shares entitled to vote at the meeting.
Unless the articles or bylaws provide otherwise, directors are elected by…
a plurality of the votes cast; that is, the directors receiving the most votes win, even if they do not receive a majority.
if a deed is given as a security interest, then the holder has an….
equitable mortgage. if the loan isn’t repaid when due, the holder can either take title to the real estate, or have it sold and use the proceeds to pay off the debt and costs.
doctrine of equitable subrogation
a person other than the mortgagor who pays off the mortgage can step in the shoes of the mortgagee in terms of priority
statutory right of redemption
gives the original owner the option to pay and redeem his property after a foreclosure sale
Perfected secured v perfected secured
first to file
Perfected secured v unperfected secured
perfected wins
Secured party v buyer
takes with SI, unless buyer in the ordinary course takes free of SI in goods created by the buyer’s seller
consumer v consumer
takes free even if perfected, if:
1/ without knowledge of SI
2/ for value
3/ for personal use
4/ before financing statement is filed
consumer goods only
secured party v. judicial lien creditor
unperfected: lien holder wins
perfected: secured party wins
secured party v. possessor (statutory) lien holder
lien holder wins always, as long as they stay in possession
default - credit can self-help if:
no breach of the peace (physical presence + objection – potential to lead to violence)
if a creditor fails to comply with code rules, there eis…
a rebuttable presumption against deficiency judgment
priority of fixtures
construction mortgages
PMSI perfected within 20 days
prior real estate (properly recorded)
secured party
subsequent real estate
If a transaction is characterized as a lease but is intended to have effect as security, it will be governed by Article 9 as a security interest. Whether a lease of a good is intended for security, rather than a “true” lease, depends on the economic realities of the transaction. A transaction will be deemed to create a security interest rather than a lease if…
the rental obligation is not terminable by the lessee and, at the end of the lease, the lessee has an option to purchase the goods for no or nominal consideration.
Upon default of the debtor, a party with an enforceable security interest may repossess and sell any collateral that secures the debt. A security interest is not enforceable unless…
it has attached.
On sale, proceeds go first to the expenses of repossession and sale, and then to satisfy the debt foreclosed. Any remaining funds then go to…
junior third-party interests.
If a secured party sells the collateral after default by the debtor, its security interest and all subordinate security interests in the collateral that was sold are discharged—absent…
bad faith on the part of the purchaser.
To assign a contract, a party to the contract must manifest an intent to transfer his rights under the contract to an assignee. Oral assignments generally are effective. Most contractual rights may be assigned unless…
the contract forbids assignment, assignment is forbidden by law, or assignment would substantially change the obligor’s duty or risk. Contracts for personal services cannot be assigned if the performance of the service so involves the personality or personal characteristics of the obligor such that it would be unfair to require the obligor to perform for a third party.
Incidental third-party beneficiaries have no contract rights. Only…
intended beneficiaries (i.e., those who the parties to the contract intended to benefit) have contract rights.
An effective delegation of duties occurs when a party to a contract…
manifests a present intention to transfer duties under the contract to another party. The delegate assumes those duties, and becomes liable for them under the contract, by promising to perform.
When the party to a contract delegates a duty, the delegator becomes secondarily liable, as a surety, for performance of the duty if the delegate does not perform. Therefore, the homeowner remains liable for payment if the neighbor does not pay. The only way for the homeowner to be relieved of liability on the contract would be if all the parties had agreed to a…
novation. A novation is an agreement to substitute a new party into a contract and release an original party.
At common law, contracts of sale and deeds of real property, unlike conveyances of personal property, carry no implied warranties of quality or fitness for the purpose intended. However, the implied warranty of fitness or quality applies to contracts for…
a builder’s sale of any new residential building under construction or to be constructed. The warranty implied is that the new house is designed and constructed in a reasonably workmanlike manner and suitable for human habitation.
If a mortgagor sells property and conveys a deed, the grantee takes subject to a recorded mortgage, which remains on the land. If the grantee signs an assumption agreement, promising to pay the mortgage loan, he becomes primarily liable to the lender, while the original mortgagor becomes secondarily liable as a surety. However, a grantee who does not expressly assume the mortgage…
does not become personally liable on the loan. Instead, the original mortgagor remains primarily and personally liable, although the mortgage might be foreclosed if payments are not made, thus wiping out the grantee’s investment in the land.
Nonetheless, in some jurisdictions, a grantee who pays the seller of real property an amount equal to the value of the property minus the outstanding balance on the mortgage might be deemed to have assumed the mortgage by implication.
The First Amendment to the United States Constitution guarantees the freedom of speech and assembly. Under the First Amendment, regulations on the content of speech are subject to strict scrutiny and, therefore, are generally invalid. However, the government may regulate the conduct of speech a bit more with time, place, and manner regulations. A time, place, and manner regulation of speech in a public forum must:
(i) be content neutral; (ii) be narrowly tailored to serve a significant government interest; and (iii) leave open alternative avenues of communication. If, instead, the regulation is content-based, it will be subject to strict scrutiny.
School classrooms are not traditional public forums and generally are not available for the exercise of First Amendment speech or assembly rights. However, if a school chooses to throw open its facilities for public use when the rooms are not being used for school purposes, the facilities become designated public forums. At the times designated public forums are open for speech activities, their use may be limited only by regulations that would be allowed in public forums:
The regulation must be content neutral, be narrowly tailored to serve a significant government interest, and leave open alternative avenues of communication. Again, if the regulation is content-based, it will be subject to strict scrutiny.
A person does not have any right to access nonpublic forums for speech activities, and speech can be regulated in such forums by…
viewpoint neutral rules not aimed at the suppression of speech.
The Equal Protection Clause of the Fourteenth Amendment prevents states from unfairly treating similarly situated persons differently. To determine whether a law violates the Equal Protection Clause, a court first considers whether…
a discriminatory classification exists. If so, the court determines what standard of review to use by considering whether a suspect classification is involved. When no suspect or quasi-suspect classification is involved, a court will review the law under the rational basis test. The court will uphold the law unless the challenger can show that the law bears no rational relationship to any legitimate government interest.
The federal government is a government of limited powers. To pass a law, Congress must act pursuant to…
a power given to it by the Constitution. Congress has no general police power or power to legislate for the general welfare.
Section Five of the Fourteenth Amendment is an enabling clause giving Congress the power to adopt appropriate legislation to enforce the rights and guarantees provided by the Fourteenth Amendment. Under Section Five, Congress may not…
expand existing constitutional rights or create new ones—it may only enact laws to prevent or remedy violations of rights already recognized by the courts. To be valid, laws must be congruent and proportional to solving a history or pattern of violations of such a right.
**A director must…
discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corporation. She must also use the care that a person in like position would reasonably believe appropriate under the circumstances.**
Shareholders generally have a right to inspect their corporation’s books and records for a proper purpose—i.e., a purpose related to their status as shareholders. . . To exercise his right…
Smith will have to give Omega five days’ written notice stating the reason why he wants to inspect the records. The corporation will then have to give Smith access. It should be noted that Smith need not come alone; he may bring an attorney, accountant, or other agent with him to facilitate the inspection.
Shareholders may bring two types of suits with regard to the corporations in which they own stock:
derivative actions and direct actions. A derivative action seeks to vindicate wrongs done to the corporation, and a direct action seeks to enforce duties that a corporation owes to the shareholder. Before bringing a derivative action, a shareholder must first make a demand on the board of directors to act on the corporation’s behalf, although this requirement is dispensed with in many states if the request would be futile (e.g., where a majority or all of the board is accused of wrongdoing, it is unlikely they will agree to bring suit against themselves). There is no similar demand requirement for direct actions.
As a general rule, although we talk of a dividend as one of the rights of being a shareholder, a shareholder has no right to receive a dividend until…
it is declared by the board of directors. The decision whether to declare a dividend is left to the sound discretion of the board. If the directors decide in good faith not to declare a dividend, the courts will not disturb that decision. The shareholder seeking the dividend has the burden of proving bad faith.
Directors generally are vested with the power to manage the business and affairs of the corporation. They may act on this power by a majority vote at a meeting at which a quorum of directors are present. If they manage the corporation to the best of their ability in good faith, with the care that a person in a like position would exercise, and in a manner that they reasonably believe is in the best interests of the corporation…
a court will not second-guess their decisions. This is known as the business judgment rule. A person challenging director action has the burden of proving that the above standard was not met.
In discharging his duties, a director is allowed to rely on reports from:
(i) corporate officers whom the director reasonably believes to be reliable and competent, and (ii) corporate outsiders as to matters that the director reasonably believes to be within the outsider’s professional competence.
While directors owe their corporation a duty of loyalty that prohibits the directors from profiting at the expense of the corporation, not every deal between a director and the corporation is prohibited. Indeed, a transaction in which a director has a conflicting personal interest will not be set aside because of that interest if the director…
discloses all of the material facts of the transaction and the deal is approved by a disinterested majority of the directors or the shareholders or the deal is fair.
To bring a derivative action, a shareholder must have been…
a shareholder at the time of the act or omission complained of or must have become a shareholder through operation of law (e.g., through inheritance). The shareholder must also fairly and adequately represent the interests of the corporation and must make written demand on the corporation that it take suitable action. Some courts will excuse demand if it would be futile.
A limited partnership is comprised of…
at least one general partner and at least one limited partner. A certificate of limited partnership must be filed with the secretary of state and must be signed by all general partners.
A partnership is formed…
as soon as two or more people associate to carry on as co-owners a business for profit. There is no requirement that the parties subjectively intend to form a partnership, only that they intend to run a business as co-owners.
Partners in a general partnership are jointly and severally liable for all obligations of the partnership. However,
a judgment will not personally bind a partner who has not been served. Additionally, a judgment creditor must first seek satisfaction of any judgment from the partnership, and then from the partners personally to the extent not covered by partnership assets.
principal is liable to a third party for contracts entered into by an authorized agent. An agent is authorized to act on behalf of a principal if…
he has actual or apparent authority. Actual authority is that authority which an agent reasonably believes he possesses based on the principal’s dealings with him. Apparent authority is that authority which a third party reasonably believes an agent possesses based on the principal’s holding out the agent as having such authority.
Hearsay is…
an out-of-court statement, other than one made at the current trial or hearing, offered in evidence to prove the truth of the matter asserted therein. A hearsay statement is inadmissible unless an exception to the rule applies.
A present sense impression is…
a statement describing or explaining an event or condition made while the declarant is perceiving that event or condition or immediately thereafter.
An excited utterance is…
a statement made during or soon after a startling event. To fall under this exception, the statement must relate to the event, and it must have been made while the declarant was under the stress of the excitement caused by the event.
Under statements of medical diagnosis or treatment, declarations of physical condition are admissible if…
made to assist in diagnosing or treating the condition.
Under the Confrontation Clause, an accused has the right to be confronted by the witnesses against him. A hearsay statement will not be admitted—even if it falls within a hearsay exception—when:
(i) the statement is offered against the accused in a criminal case; (ii) the declarant is unavailable; (iii) the statement was testimonial in nature; and (iv) the accused had no opportunity to cross-examine the declarant’s “testimonial” statement prior to trial. The Supreme Court has established that if the primary purpose of police interrogation is to enable the police to help in an ongoing emergency, statements made in the course of the interrogation are nontestimonial.
The Fifth Amendment, which is applicable to the states through the Fourteenth Amendment, provides the right to be free of double jeopardy for the same offense. Two crimes do not constitute the same offense if…
each crime requires proof of an additional element that the other crime does not require, even though some of the same facts may be necessary to prove both crimes. Ex. Burglary requires an entry into a dwelling, but theft does not. Theft requires a taking and carrying away, which burglary does not.
The Due Process Clause of the Fourteenth Amendment requires in all criminal cases that the state prove…
guilt beyond a reasonable doubt. A mandatory presumption or a presumption that shifts the burden of proof to the defendant violates the Fourteenth Amendment’s requirement that the state prove every element of a crime beyond a reasonable doubt.
The Sixth Amendment, which is applicable to the states through the Fourteenth Amendment, provides the right to trial by jury. If substantive law provides that a sentence may be increased beyond the statutory maximum for a crime if additional facts are proved, proof of the facts…
must be submitted to the jury and proved beyond a reasonable doubt; the defendant’s right to jury trial is violated if the judge makes the determination.
true or false: the mental capacity needed to make a will is quite low
true; lower than to make a contract
must: (i) understand the nature of his act (that he was writing a will), (ii) know the nature and character of his property, (iii) know the objects of his bounty, and (iv) relate these factors to formulate a disposition of property according to a plan formed in his own mind.
testamentary capacity is measured…
at time will is executed
Undue influence is…
mental coercion that prevents the testator from exercising his free will and produces a will or a gift therein that would not have been made but for the influence.
must show: (i) specific acts of influence were exerted, (ii) the effect of the influence was to overpower the mind and free will of the testator, and (iii) the product of the influence was the will or gift that would not have been made but for the influence.
To show fraud sufficient to invalidate a will, the will contestant must show that
(i) someone made a false representation of material fact, knowing it to be false; (ii) the representation was made for the purpose of inducing the testator to write a will in a particular way; and (iii) the testator reasonably believed and relied on the statement in making the will.
definition of perfection
Perfection maximizes a secured party’s rights against those with competing interests in the collateral.
An agree-ment that a seller will retain title to delivered goods until the buyer has paid for them is treated as…
an Article 9 security agreement.
A transaction will be deemed to create a security interest when the lessee:
(i) cannot terminate the rental obligation and (ii) has an option to purchase the goods for no or nominal consideration at the end of the lease.
Unless the articles of incorporation provide otherwise, directors ordinarily have sole discretion to manage the normal affairs of their corporation; shareholders…
generally have a direct voice in management decisions only with respect to fundamental corporate changes.
Most states consider a sale of all or substantially all of a corporation’s assets outside the regular course of the corporation’s business to be a fundamental corporate change that requires shareholder approval.
In most states, when a corporation is to enter into a transaction in which a director has a conflicting personal interest, the transaction can be set aside unless
1/ the director can prove that the transaction was fair or 2/ that it was approved by disinterested members (more than one) of the board or the shareholders after disclosure to the board or shareholders of all material facts regarding the interest and the transaction.
A fact will be considered material if a person would consider it important in deciding whether to proceed with the transaction.
Whether an absent party must be joined is a three-step process that asks:
(i) should the absentee be joined (impair ability to protect interests, prevent D from multiple liabilities, etc.);
(ii) can the absentee be joined (i.e. PJ? destroy diversity?); and
(iii) if she cannot be joined, can the action proceed in her absence (i.e., her presence becomes indispensable).
in determining whether a party is indispensable, the court considers whether:
(i) the judgment in her absence would prejudice her or the existing parties; (ii) the prejudice can be reduced by shaping the judgment; (iii) a judgment in the party’s absence would be adequate; and (iv) the plaintiff will be deprived of an adequate remedy if the action is dismissed.
A settlement agreement is an agreement entered into during the marriage, prior to the issuance of the divorce decree, in which the parties may resolve economic issues. Settlement agreements are governed by general contract principles. Most states require full and fair disclosure by both parties. In addition, to be enforceable, most states require a settlement agreement to be fair and entered into voluntarily—without undue influence. An agreement may be set aside when a spouse’s fraud, duress, or coercive behavior results in an unfair agreement. Representation by independent counsel lessens the chances of the agreement being overturned. Consider:
Did one spouse draft up the agreement? Recommend securing counsel? Give biased advice? Give false advice? Include unfair terms?
Marital fault is generally not a factor in the division of property, although some courts will consider it…
to the extent it led to a dissipation of assets.
Most jurisdictions have ruled that neither a spouse’s earning capacity nor the professional license or degree upon which it is based is distributable. A license or degree has none of the usual attributes of property. It cannot be purchased, transferred, or inherited. Thus, it is not classified as marital property even when the attainment of it was made possible through the support of the other spouse. To avoid unfair results, some jurisdictions have…
compensated supporting spouses for their contribution during the other spouse’s education in other ways, such as by employing the theory of unjust enrichment, making a supporting spouse’s contribution a factor on which alimony may be based, and awarding reimbursement alimony.
The purpose of spousal support is to ensure an adequate income stream for persons whose economic dependency has resulted, at least in part, from the marital relationship. The court has wide discretion in awarding as much spousal support as is necessary for the maintenance of the party requesting it. Factors considered include:
the standard of living during the marriage; the duration of the marriage; the age and physical and emotional conditions of the parties; the financial resources of each party (including the ability of each to meet his own needs independently); the contributions of each party to the marriage, including service rendered in the education and career-building of the other party; the time needed to obtain education or training to enable either party to find appropriate employment; and the ability of a spouse from whom support is sought to meet his needs while paying support.
Permanent periodic alimony is paid regularly to provide for…
a spouse who has neither the resources nor the ability to be self-sustaining. It is usually granted only in the case of a long-term marriage.
Rehabilitative alimony consists of periodic payments for a limited period of time to…
enable a spouse to gain the skills or education necessary to become self-supporting (or, in some states, find appropriate employment).
The general rule is that courts will give full faith and credit to divorce decrees of the courts of sister states if…
the sister state had proper jurisdiction and the decree is valid in the sister state. The jurisdictional requirement will be satisfied if one of the spouses is domiciled in the state granting the divorce (e.g., in an ex parte divorce). There is a rebuttable presumption that the state granting the divorce is the bona fide domicile of the plaintiff.
The federal Parental Kidnapping Prevention Act (“PKPA”) requires…
states to enforce a custody order of another state, but only if the state entering the custody decree had home state jurisdiction.
Under the Uniform Child Custody Jurisdiction and Enforcement Act (“UCCJEA”), a state may exercise jurisdiction if…
it is the home state of the child at the time the proceedings began or within six months of the proceedings and a parent still resides in the jurisdiction. A child’s home state is the state in which the child lived with a parent (or a person acting as a parent) for at least six consecutive months prior to commencement of the proceeding.
The standard to be applied in awarding custody is…
the best interests of the child. Generally, the factors to be considered in making this determination include: the wishes of the parents; the wishes of the child; the interrelationship of the child with his parents, siblings, and others; the child’s adjustment to home, school, and community; and the mental and physical health of all individuals involved.
Under the doctrine of divisible divorce, an ex parte divorce generally can serve to grant only the divorce. An ex parte divorce decree has no effect on disputes over marital property, unless the property is located within the rendering state. Otherwise, such disputes can be resolved only by a court having personal jurisdiction over both of the parties.
In order for a State Y court to have personal jurisdiction over Mary, either (i) there must be some “minimum contacts” between Mary and State Y, or (ii) Mary must have submitted herself to the jurisdiction of the State Y court. However, the facts indicate that Mary has never been in State Y, and do not indicate any other contacts with State Y. Therefore, the only way State Y may exercise jurisdiction over the marital property is if the property is located within the state. The only such property is the personal property (i.e., the cash and business) that Fred brought with him when he moved to State Y. Therefore, State Y may constitutionally assert jurisdiction to divide the cash and business, which are located in State Y, but it may not assert jurisdiction to divide Fred and Mary’s marital home, located in State X.
A person who is a professional is required to…
possess and exercise the knowledge and skill of a member of the profession or occupation in good standing. For doctors, most courts will apply a national standard of care to evaluate their conduct. As part of this standard of care, a doctor proposing a course of treatment has a duty to provide the patient with enough information about its risks to enable the patient to make an informed consent to the treatment.
A product can be the basis for a products liability action when it is…
in a defective condition unreasonably dangerous to users. When the product as supplied is different than the way it should have been supplied, it is characterized as a manufacturing defect, and the product will be deemed defective if it was dangerous beyond the expectation of the ordinary consumer.
To establish a products liability action based on strict liability, the following elements must be proved:
(i) the defendant is a commercial supplier; (ii) the defendant produced or sold a product that was defective when it left the defendant’s control; (iii) the defective product was the actual and proximate cause of the plaintiff’s injury; and (iv) the plaintiff suffered damages to person or property.
To establish an action based on breach of the implied warranty of merchantability under the U.C.C., the plaintiff must show that:
(i) the defendant is a merchant who deals in the kind of goods sold; (ii) the goods were not fit for the ordinary purposes for which such goods are sold; (iii) the goods were the actual and proximate cause of injury to the plaintiff, and (iv) the plaintiff suffered economic loss or damages to person or property.
Nor can the man rely on the unascertainable causes approach of Summers v. Tice. In that case…
the two defendants were negligent but it was not clear which one caused the harm, so each was required to show that his negligence was not the cause of the plaintiff’s injury.
An easement appurtenant is…
a non-possessory right to use someone else’s land (i.e. the servient land) in a way that directly benefits the holder in her possession of her own land (i.e. the dominant estate). Easements can be created either expressly or by operation of law.However, because a person cannot hold an easement on her own land, an easement is extinguished if the dominant and servient estates become owned by the same person.
An easement appurtenant terminated by unity of ownership will not be revived automatically if the estates are later separated. However, an easement may be implied from existing use when
1/ before a tract is divided, an apparent and continuous use exists on the servient part, 2/ the use is reasonably necessary for the enjoyment of the dominant part, and 3/ a court determines that the parties intended the use to continue after the property was divided.
After paying expenses of the sale, attorneys’ fees, and court costs, the proceeds of a foreclosure sale go towards the loan that was foreclosed. Then…
any remaining proceeds are applied to pay off junior liens in the order of their priority. Generally, the priority of a mortgage is determined by when it was placed on the property. However, if a mortgage obligates the lender to make further advances of funds after the mortgage is executed, those future advances have the same priority as the original mortgage. Thus, even if a second mortgage is placed on the property before such an advance is made, the advance will have priority over the second mortgage. In contrast, if a senior lender with notice of a junior lien later made an advance that was merely optional, the optional advance would lose priority to the junior lien.
At common law, when a grantor conveyed the same land to multiple grantees, priority went to the earlier grantee. However, modern recording acts can protect later grantees by…
changing the “first in time, first in right” rule. The recording act here is a notice statute, under which a subsequent bona fide purchaser (“BFP”)—i.e., one who takes for valuable consideration and without actual, record, or inquiry notice of the prior grant—prevails over a prior grantee who failed to properly record. Whether the BFP records is inconsequential.`
A subsequent purchaser will be charged with record notice only of deeds recorded in his chain of title. “Wild deeds” are recorded such that…
a searcher could not feasibly find them and are thus outside the chain of title. A title search in a tract index would reveal all recorded interests relating to the land…However, inquiry notice also imputes what would have been disclosed by inquiring of one in possession.
Under the common law Rule Against Perpetuities, a gift must vest or fail within 21 years after a life in being. However, under the modified “wait and see” approach to the Rule,
the validity of events is judged by actual events as they happen—the goal is to wait out the common law perpetuities period before declaring the interest void.
A trustee has a duty to perform her trust duties personally. Traditionally, this meant that the trustee could not delegate investment decisions. Under modern statutes, however, a trustee may…
delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. When delegation is proper, the trustee must exercise reasonable care, skill, and caution in selecting the agent, establishing the scope of the delegation, and periodically reviewing the agent’s actions to monitor the agent’s performance and compliance with the terms of the delegation. Delegation of certain discretionary functions, such as making discretionary distributions, usually is not permissible. This is because the settlor presumably chose the trustee purposefully for her discretion in making that type of decision. If a trustee improperly delegates her duties, she becomes a guarantor of the fund. Her motives or the fact that the loss was not directly caused by the abdication of control will not be considered by the court. The trustee is liable for the actual amount of the loss.
Most states have enacted the Uniform Prudent Investor Act (“UPIA”), which regulates the trustee’s investment responsibilities. Under the UPIA, the trustee must invest and manage trust assets as a prudent investor would, taking into account the purposes, terms, distribution requirements, and other circumstances of the trust. To act prudently, the trustee must …
exercise reasonable care, skill, and caution. Prudence is evaluated as to overall portfolio, and the trustee has a duty to diversify investments unless there are special circumstances indicating the trust purposes would be better served without diversification. In addition, the trustee must act for the benefit of the beneficiary. If there is more than one beneficiary, the trustee generally must act impartially in managing the trust assets, taking into account the beneficiaries’ differing interests.
There is a basic duty to preserve and protect the trust corpus. This includes the duty to make trust property productive, which includes the duty to invest. This duty requires…
that the trustee exercise reasonable care with respect to the trust property, which means investing trust funds within a reasonable time and selling and reinvesting as needed.
Generally, anti‑lapse statutes do not apply to trusts. However, some states have adopted an anti-lapse statute applicable to trusts similar to Uniform Probate Code section 2-707. In those states, if a gift is made in trust to a class described as “children,”
the property to which a deceased beneficiary would have been entitled if he had survived passes to his surviving descendants by representation.
A beneficiary of a trust has the right, within a reasonable time after learning of the trust, to
disclaim the beneficial interest, absent some act of expressed or implied acceptance. Upon disclaimer, any interest that otherwise would pass to that person under the trust passes as though the disclaiming party predeceased the life tenant (here, Settlor). In most states, a disclaimer is not effective unless it is in writing and is filed within nine months of the decedent’s death.
When a gift is made to a class of persons, such as to someone’s children, the class “closes” (i.e., the maximum membership of the class is determined) when some member of the class can call for a distribution of her share of the class gift. When possession and enjoyment are postponed, as where the gift follows a life estate, the class remains open until
the time fixed for distribution (e.g., death of the life tenant).
Although this substantially decreased diversification, Settlor is the income beneficiary for life and his children are the remaindermen with interests in the corpus. Bank had a duty to act for the benefit of all beneficiaries, and had this been an irrevocable trust, it would have been liable to Settlor’s children for breaching its duties of loyalty and prudent investment. However, when the trust is revocable, as it is here,
the settlor is treated as the owner of the trust assets. As such, the trustee’s duties are owed to the settlor. This is a special circumstance under which there is no duty to diversify.
The next issue is whether a child who predeceased the life tenant will take a share of the trust assets. In such a case,
reference is made to the trust’s terms. Survival of a class member until the time of closing is usually not required to share in a future gift. However, the express trust terms control.
In addition, a trustee has a duty to protect the trust corpus and make it productive, which includes the duty to invest. Most states have adopted the Uniform Prudent Investor Act (“UPIA”), which regulates the trustee’s investment responsibilities. Under the UPIA, a trustee (or her delegate) must
invest and manage trust assets as a prudent investor would, taking into account the purposes, terms, distribution requirements, and other circumstances of the trust. To satisfy this standard of prudence, the trustee (or her delegate) must exercise reasonable skill, care, and caution. Thus, a trustee must diversify the investments of the trust unless the trustee reasonable determines that, because of special circumstances, the purposes of the trust are better served without diversification.
As noted above, if the trustee exercises reasonable care, skill, and caution in selecting, delegating, and reviewing the agent’s actions, she will not be liable for the decisions or actions of the agent. Failure to exercise such reasonable care is a breach of the trustee’s fiduciary duty.
Most jurisdictions follow the Claflin doctrine, which provides that…
a trust may be modified by the beneficiaries only if all beneficiaries consent and the modification will not interfere with a material purpose of the trust.
At common law, a court in equity may authorize or direct a trustee to deviate from the administrative terms of a trust (including permitting acts that are forbidden by the trust instrument) if the settlor…
did not know or anticipate the new circumstances and compliance with the terms of the trust would defeat or substantially impair accomplishment of the trust purposes.
Usually, the doctrine of changed circumstances cannot be used to change the beneficial rights of the beneficiaries. Invading the principal for the benefit of the life tenant would be changing the beneficiaries’ rights. However,
courts will strain to find an implied power of invasion in the trust instrument. Many states give the court the power to invade principal for an income beneficiary if the court finds that support of the income beneficiary was the primary purpose of the trust.
If a charitable purpose becomes impossible or impracticable and the settlor had a general charitable intent, the court will apply cy pres and order that the trust property be applied to another charitable purpose as close as possible to the original one, rather than have the trust fail. If the specified charitable use is no longer possible,
the court must decide whether the settlor intended the trust to fail or would have wished the property devoted to a similar use.
Under the UTC, general charitable intent is conclusively presumed. Therefore, in UTC states, cy pres will be applied in every case of an impossible or impracticable charitable trust interest unless the settlor specifically provides for a substitute taker in the event of this type of problem.
Although generally shareholders are free to act for their own benefit and do not owe any fiduciary duties to their fellow shareholders, there is an exception for controlling shareholders. A controlling shareholder must refrain from…
using his control to obtain a special advantage or to cause the corporation to take action that unfairly prejudices the minority shareholders. This would include a duty to disclose material information to the minority shareholders.
purchase money security interest (PMSI)
arises when a creditor sells goods to a debtor on credit, retaining a security interest in the goods for the purchase price
A BIOC buys goods in the ordinary course of business from a seller engaged in the business of selling goods of that kind. A BIOC takes free of nonpossessory security interests created by his seller unless
he knows the sale violates a security agreement.
A consumer who buys goods from another consumer, before a financing statement has been filed and without knowledge of the interest, takes the goods…
free of even a perfected PMSI.
criminal negligence
D fails to be aware of substantial and unjustifiable risk, substantial deviation from standard of care of reasonable person
involuntary manslaughter requires that the D’s actions are the…
cause-in-fact and proximate cause of the victim’s death
for common law accomplice liability, where the substantive offense requires criminal negligence or recklessness, the mens rea is…
the same (criminal negligence or recklessness)
if the judge determines the value of an item taken by D, when the value is determinative of which level crime D is convicted of, judge is violating…
6th A right to trial by jury
can questions be hearsay?
no, because they are not assertions
exculpatory provisions are valid unless:
received a benefit to which he was not entitled
intentionally inflicted harm on the corporation or its SH
approved unlawful distributions
intentionally committed a crime
