Short Rules Flashcards
Corporations, CP, Con Law;
Agency
Agency (Formation)
Exists when a principal authorizes an agent to act on their behalf. The agent works for the principal’s benefit, and is subject to the principal’s control.
Agency
Principal Liability for Agent Contracts
Agent’s actions bind the principal when acting under actual or apparent authority
Agency
Actual Authority
Actual authority can be Express or Implied. Express is authorized by the principal. Implied is when the agent reasonably believes they have authority; as necessary; by custom; or prior dealings.
Agency
Apparent Authority
A third party reasonably relies on the appearance of authority; of the agent; to bind the principal.
Agency
Ratification
The Principal subsequently approves the agent’s actions; accepting liability.
Agency
Principal Liability for Agent Torts
Respondeat Superior
Independent Contractors
Intentional Torts
Agency
Principal Liability for Agent Torts
Respondeat Superior
The principal is vicariously liable when the agent is within the course and scope of duties, on behalf the principal.
Agency
Principal Liability for Agent Torts
Independent Contractors
The Principal is not liable, other than for ultrahazardous activities and nondelegable duties.
Agency
Principal Liability for Agent Torts
Intentional Torts
For authorized actions; as a natural result of duties; for the benefit of the principal.
Partnership
General Partnership
Formed when two or more parties agree to conduct business for profit. No state filing is required.
General Partnership
Rights and Duties
Unless otherwise stated in an agreement; general partners have equal rights to manage the ordinary affairs of the business; and to share profits (and losses).
General Partnership
Agent
Each partner is an agent for the partnership; with authority to bind the parntership
General Partnership
Relations with Third Parties
[Debts and Contracts]
Debts: Partners are personally liable for the debts of the partnership.
Contracts: Unless otherwise stated in an agreement; each partner is an agent for the partnership; with authority to bind the partnership.
Partnership
Liability
All partners are jointly and severally liable for all contracts; and, for torts within the course and scope of the partnership.
Partnership
New Partners Liability
New partners are not liable for debts prior to joining the partnership; however, any money paid into the parntership, may be used to satisfy such debts.
Partnership liability
Outgoing partners
Outgoing partners remain liable for debts, barring release; or novation.
Partnership Dissociation, Dissolution, & Winding Up
Dissociation
Dissociation may be voluntary, or involuntary; and the partnership must buy out the dissociated partner. Dissociation terminates a partnership if there are only two partners.
Partnership Dissociation, Dissolution, & Winding Up
Dissolution
Dissolution occurs when a partnership stops being active; and the business is wound up.
Partnership Dissociation, Dissolution, & Winding Up
Winding Up
Winding up is the process of paying off creditors; partners who have loaned money to the partnership; capital contributions of partners; and distribution of profits, and surplus, among the partners.
Partnership
Limited Liability Partnership
LLP forms when the statement of qualificationis filed with the secretary of state to notify 3p their sources for loss recovery is limited. Annual reports must be filed.
Partnership
Limited Partners
Two or more persons (at least 1 general and 1 limited), file a limited partnership certificate with the secretary of state. General partners are liable for partnership obligations, limited partners are liable only up to their capital contributions ( usually not liable for partnership debts).
Corporations
Corporations
A corporation is a legal entity that exists separate from its owners, thus sheilding owners and managers from personal liability.
Corporations
Promoter
Prior to formation of a corporation, a promoter engages in activities to bring the corporation into existence.
Corporations: Promoter
Liability
The promoter is jointly and severally liable for pre-incorporation contracts; unless there is clear and convincing evidence by prior agreement; or a novation. An adoption does not relieve the promoter of liability.
Corporations : Promoter
Corporate Liability for Preincorporation k
Corporation is not liable for preincorporation contracts unless it adopts the contract by resolution of the BOD, or impliedly adopts by accepting the benefits of the contract.
The promoter may have a right of reimbursement by quasi contract for the value of the benefit received by the corp.
Corporation: Promoter
Duties
Promoter has a duty of good faith and fair dealing.
Corporation Formation
De Jure
De Jure is a properly formed corporation by filing the Articles of Incorporation with the Secretary of State. (# authorized shares; purpose; addresses; incorporater name).
Corporation Formation
De Facto Corporation
De facto is an improperly formed corporation and will shield shareholders from personal liability if there was a good faith, yet unsuccessful attempt to incorporate, and the corporation was unaware it was not properly formed.
Corporation Formation
Corp by Estoppel
A reasonable belief that a corporation exists; or incorrectly holding out a business as a corporation prevents one from denying corporate status.
Corporation Procedure
Fundamental Corporate Changes
Approval for fundamental corporate change requires the board to adopt a resolution, written notice to shareholders, shareholder approval by quorum, and changes in the articles filed with the state.
Types of:
1) Merger;
2) Sale of substantially all assets
3) Amendments to articles
4) Dissolution and winding up
Corporation Procedure
Ultra Vires Act
Under the Ultra Vires Act (UVA), a corporation can’t be obligated to enter into a contract or activity that is outside the scope of its powers in the AOI or bylaws ( or activities unrelated to achieving the stated business purpose).
CL: EVAs are void and unenforceable.
Modernly: UVAS are valid if 3p believed agent had apparent authority. Corp can sue responsible D&O r for the losses, or seek an injunction.
Corporation
Piercing the Corporate Veil
Shareholders are not liable for corporate debts unless under the totality of the circumstances, limited liability is unfair. (Abuse of corporate Status). PCV is used to reach the assets of the shareholder. The court may PCV of a closely held corporation (LLP/LP) for the following: Alter ego; Undercapitalization; Fraud; Tortious Conduct.
You are not going to PCV of a major, multi-naitional corporation, that is not going to happen
Corporation PCV
Alter Ego
Courts will PCV if shareholders are using the corporate status for personal reasons and the corporation does not have the funds to pay creditors, or corporate formalities were ignored
The S/H failure to respect the corporate entity must adversly affect the 3ps ability to recover from the corporation
Corporation PCV
Undercapitalization
Undercapitalization is determined by looking at whether the corporation has adequate funds to cover potential liabilities at the time of formation.
Corporation PCV
Fraud
A prima facie case for fraud requires knowingly making a false representation of material fact; intended to; with justifiable reliance that causes damages
Corporation PCV
Tort v Contract
The corporate veil is easily pierced in tort cases, but not contract cases since parties who contract with the corporation have an opportunity to investigate its stability.
Liability for breach of fiduciary duties
A [partnership/Corporation/ minority shareholder] may maintain an action against [partner/ director/ officers/ controlling shareholder] for the violation of a duty to the company and recoup any loss.
Duties
Duty of Loyalty
requires:
avoiding a COI;
Usurping corporate opportunity;
Unfair competition;
Must disclose matieral information relevant to corp.
Duties
Duty of Loyalty
Defense
Ratification:
Director must disclose material information and the board can independently ratify by: a majority of disinterested directors; disinterested shareholders; or the contract is fair itself.
Duties
Duty of Care
The duty of care requires directors to act in good faith and in the best interests of the corporation, using the care exercised by a reasonably prudent person in a like position.
Duties: Duty of Care
Business Judgment Rule
A court will not second guess a business decision if it was informed, had a rational basis, made in good faith and without a conflict of interest. In making decisions, directors are entitled to rely on the opinions and reports of other directors, corporate officers, employees and outside experts making reports within their competence.
Shareholders
Direct Suit
Direct suit awards go to the shareholder.
A direct suit is for the breach of fiduciary duty owed to the shareholder.
Shareholders
Derivative Suit
Derivative suit awards go to the corporation. Derivative suits are brough on behalf o fthe corporation. (must own stock (have Standing)); adequately represent the corporation; make a demand to the directors to bring suit; unless doing so would be futile.
Shareholders
Voting Agreements
No limit on duration. Must be in writing; signed by all parties; and is generally non revocable.
Shareholders
Voting Trusts
Limited to ten years; ownership of the shares tranferred to the trust; trust agreement provided to the secretary of the corporation.
Shareholder
Controlling Shareholder Duties
Major shareholders have enough voting strength to substantially impact the corporation. They owe a fiduciary duty to the corporation; and the duties of care, and loyalty, to minority shareholders.
Shareholders
Watered Stock
Stock issued at a price greater than market value.
If corp issued a “par value” stock, then the stock must have the value assigned to it.
Instead of paying a $20k salary, company issues $60k of stock, a 40k bonus to the employee. The stock they hold is “watered down,” recipient may be liable for the difference.
Corporations / Partnerships
Equitable Subordination
Deep Rock Doctrine
Third party creditors of an insolvent corporation are paid prior to shareholder creditors. This is due to the parent corporation’s failure to properly capitalize the subsidiary.
Federal Securities
1b(b) Short Swing Profits
The purpose of 16b is to prevent the unfair use of inside information and internal manipulation of price. Because ___ shares were traded on the national stock exchange, the federal securities laws apply to this transaction.
Any profit realized by the: director; officer; or shareholder owning more than 10% of the shares of the corporation from any subsequent purchase and sale or vice versa; within a 6 month period or less must be returned to the corporation.
The recoverable profits are determined by matching the highest sale price against the lowest purchase price during any 6-month period.
This is strict liability, thus no defense. The remedy is either disgorgement of profits or constructive trust.
Federal Securities Law
10(b) Insider Trading
Insider trading provides liability for any person trading securties based on non-public corporate information.
Reliance is presumed in a nondisclosure case, such as the case here, in which [insider] did not disclose information on which he was trading.
Federal Securities Law
10(b)5 Direct Trading
“Insiders; Constructive Insiders, Controlling S/H”
Insiders are deemed to owe a duty of trust and confidence to the corporation. Typical insiders are directors, officers, controlling shareholders, and employees of the issuer.
Constructive insiders are the securities’ issuer’s CPAs, attorneys, adn bankers performing services for the issuers. Constructive insiders also owe a duty. An insider has a duty to disclose information to the public or abstain from trading.
Controlling Shareholder: treated as an “insider” for SEC 10b-5. Controlling shareholder must refrain from obtaining a special advantage or causing corporation to prejudice minority shareholder. Causing disadvantage to minority shareholders is a breach of fiduciary duty.
Federal Securities Law
Tipper
Provides Information
Duty of trust and confidence is breached when insider gives a tip of material nonpublic info and receives a personal benefit (gift, money, reputational gain) and the inside info is traded on.
Fedural Securities Law
Tippee
Receives Information.
A tippee may be liable only if the tipper breached a duty and the tippee knew that the tipper was breaching.
Federal Securities Law
Misappropriator
Obtains inside information from other means such as from a parent/child relationship, atty/client, banker/client, etc unless recipient can prove that he had no reason to know the info was confidential.
Federal Securities law
Fraud (misrepresentation)
Intentionally misrepresented an untrue statment of material fact in order to induce reliance and cause injury.
Punitive damages under state law claim of misrep
Federal Securities Law
10b Remedy
Seller/Buyer seeks disgorgement, contructive trust, or recission.
Insider trading Sanctions: civil penalties: The SEC may pursue persons for 10b violations for a civil pentalty up to 3x the profit gained, lost or avoided.
Criminal Penalties: penalties include jail terms of up to 10 years and criminal fines of up to 1 million for individuals and 2.5 for corporations.
Civil Procedure
Courts to Hear a case
Courts must have personal jurisdiction over the parties; subject matter jurisdiction over the law and facts; be held in proper venue, and defendant(s) must be served with proper notice.
PJ
Personal Jurisdiction
Jurisdiction over the parties, specifically the defendant.
Considered waived if not challenged along with answer or in party’s first 12(b)(6) motion.
PJ
Did the Court properly grant the Motion to Dismiss based on Lack of PJ?
A motion to dismiss on jurisdictional issues is proper when, viewing the facts in the most favorable light to the defendant, the plaintiff has failed to satisfy the elements of personal jurisdiction. Failure to object to personal jurisdiction before answering or in a party’s first 12(b)(6) motion waives the issue.
PJ
Traditional Bases
(Individuals, Corporations)
Traditionally, PJ could only be exercised if the Defendant consented to sit in the forum, was served in the forum(But not by force or fraud), domiciled in the forum, or made a general appearance waiving PJ.
Corporations: all states where incorporated; and the corporation’s principle place of business ( Where corporate managers direct and control business - its “Nerve center”)
Unincorporated (partnership) is where each partner resides.
PJ
Long Arm Statute
Allows the court to exercise PJ over an out of state defendant.
[where the tort happened, contract entered into, advertising, etc]
To comport with due process, D must have minimum contacts so that the exercise of PJ will not offend traditional notions of fair play and substantial justice.
Long arm statute is assessed through contacts; relatedness; and fairness.
PJ - Long Arm Statute
Minimum Contacts
D purposefully availed themselves of the benefits and protections of the state; and could reasonably expect to be haled into court there.
Additional:
(i) places goods into the stream of commerce and (ii) purposefully targets that state (e.g., advertises there). Mere knowledge their product being sold in a certain market is not to meet the minimum contacts standard.
PJ - Long Arm Statute
Relatedness of Contacts
The court will look at the quality and nature of the contacts.
Supreme court overruled the systematic and continuous contacts rule for general jurisdiction.
Specific Jurisdiction exists when the cause of action airses from or related to the D’s in-state activity. JX is over the claim only.
. (subsidiary is inc. & ppb in different place than corp. keep it separate).
PJ – Long Arm Statute
Fairness
only applies to specific JX
To determine whether JX is fair courts weigh:
(1) the convenience to the parties
(2) location of evidence and witnesses
(3) state’s interest in providing redress for citizens
(4) whether the court’s exercise of jx would be so unfair as to offend traditional notions of fair play and substantial justice.
SMJ
Did the fed court properly deny [party’s] motion for remand?
Removal
Removal - state to federal court
Only a defendant may remove if: 1) the federal court has SMJ; 2) all defendants agree; 3) no defendant is a resident of the forum state (only if Jx is based on diversity); 4) removal is sought within 30 days of either service of the summons or receiving the initial pleading (whichever is shorter).
A plaintiff may never remove, and a case cannot be removed more than one year after commencement in a diversity action. If a plaintiff files the case in a state court, a defendant must remove it to the federal district court that embraces that state court.
SMJ
Remand
After Removal
A court may remand a case back to state court when removal is improper. To remand, a plaintiff must file a motion for remand within 30 days of removal when remand is based on procedural grounds. A plaintiff or the court may remand at any time when the court lacks subject matter jurisdiction.
Here, the motion for remand is based on [lack of subject matter jurisdiction/ procedural grounds]. It [is/ is not] timely because [facts].
Thus, the court [should/should not] remand the case back to state court.
SMJ
Subject Matter Jurisdiction
SMJ is never waivable and may be raised even on appeal.
Jurisdiction over law and facts.
Federal courts are courts of limited jurisdiction. A case must be brought by Federal Question; or Diveristy.
SMJ
Federal Question
Federal question jurisdiction requires that plaintiff’s well-pleaded complaint set forth a cause of action that arises under federal law (US Constitution, immigration, bankruptcy, maritime, copyright, treaty).
SMJ
Diversity
Complete diversity exists when no plaintiffs share citizenship with any defendant the moment the claim is filed.
SMJ Diversity
Citizenship
for diversity JX
Citizenship:
Individual: domiciled which is physical presence and intent to remain.
Corporation: every state or country where incorporated, & state of Principal Place of Business. PPB is where corporate managers control & direct business - “nerve center”
Unincorporated Entity (“partnership”): where each partner is domiciled.
SMJ - Diversity
Amount in Controversy
AIC must exceed 75k exclusive of interest and costs.
SMJ - Diversity
Aggregation
AIC
A single plaintiff may aggregate all claims against a single Defendant.
Single plaintiff may aggregate claims against joint defendants where they arose from same liabilities (indemnity, contribution).
Where 2 plaintiffs have an undivided ownership interest and have a claim against 1 defendant. ( No seperate and distinct claims against 1 D).
SJ
Supplemental Jurisdiction
The fed court may hear additional state court claims when they arise under the same transaction or occurrence (common nucleus of operative fact). Even if the court would not have otherwise hear the claim for lack of SMJ.
Claims not meeting the AIC requirement may invoke supplemental jurisdiction if they arise from the same nucleus of operative facts as a claim that invoke diversity jurisdiction.
Discretion: Supplemental jurisdiction is discretionary. The court may decline to exercise the jurisdiction where:
State laws raise complex or novel issues; or State law claims predominate over the federal claims.
Venue
Venue
Venue is proper in any district where:
a) any defendant resides (if all defendants are residents of the forum state);
b) where a substantial portion of the claim occurred (i.e. contract entered into, tort occured)
**c) **where a substantial part of the subject/ property is located; or
d) if none of the above apply, then venue is proper in any judicial district where any defendant is subject to PJ ( but still need to satisfy diversity).
In CA venue is proper in the county the property resides or the county defendant resides
Proper venue is determined when the suit is filed; subsequent change of domicile by a party does not warrant a change in venue
Venue
Transfer of Venue
A court may transfer a case to another court where the case could have been filed if that court has personal jurisdiction over the defendant - which is considered proper venue.
Where OG venue is improper the FRCP must dismiss or in the interests of justice, transfer to proper venue where the case may be properly brought.
CA, venue can be changed at judges discretion where interests of jusitce and convenience of parties would be benefited by trnasfer - it would go to proper county.
Civil Procedure : Proper Notice
Proper Notice
Service of Process
Notification to the defendant of the pending action; and, a copy of the complaint; allowing the defendant an opportunity to be heard. Service may be made by personal service; substitute service; constructive service (registered mail); or as authorized by law.
Civil Procedure: Proper notice
Personal Service
Service of Process
Personal service is delivered directly to the D. Service may be by anyone, at least 18 years old, who is not a party to the action. (atty are normally not party to action).
Civil Procedure: Proper notice
Substitute Service
Service of Process
Substitute service can be left at the D’s usual abode; served upon anyone of suitable age and discretion who resides there; served to D’s authorized agent; or as permitted by state law.
CA: substitute service is only allowed if personal service cannot be accomplished with reasonable diligence; substitute service.
Civil Procedure: Proper notice
Constructive Service
Service of Process
Constructive service is made by registered mail, but only if the D agrees to waive service.
CA: by publication, if nothing else works; P must provide affidavit; after reasonable diligence to serve notice.
Civil Procedure: Proper notice
Foreign Country Service
Service of Process
Service as the court directs; or, in accordance with the laws of the foreign jurisdiction.
Civ Pro: Diversity
Choice of Law in Diversity Actions
Erie Doctrine
Fed Case under diversity
A federal case under diversity, the court will apply its own federal procedural laws but must apply state substantive laws.
However, a federal procedural rule will not be applied in diversity cases when its effect would toll the statute of limitations.
The goal is to prevent “forum shopping.” If there are multiple states each with some relation to the controversy, the court will identify which state substantive law by following the conflict of law principles from the state hearing the action.
If unclear whether procedural or substantive, Courts will apply:
Substantive issues affecting state law: elements of a claim or defense; choice of law; statute of limitations and; tolling rules.
Procedural issues subject to federal law: venue rules; notice of service/process; right to jury trial etc.
Civ Pro
Pleadings
Fed courts use “notice pleading;” a short and plain statement of the claim; and a demand for the relief sought.
In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent and knowledge may be alleged generally.
California uses “fact pleading,” a party must state with particularity their claim; and a demand for the relief sought.
Civ pro : Discovery
Discovery
A party may obtain all non-privileged information relevant to any party’s claim or defense and proportional to the needs of the case.
No discovery may be served until (i.e. interrogatories or notice of depo) until after the pretrial conference has occurred – if served early, the party is entitled to a protective order from the court until after the pretrial conference.
Civ pro : Discovery
Spoilation - Duty to Preserve
An adverse inference instruction(discovery sanctions) should be ordered where destruction of discoverable information is willful.
Civ pro : Discovery
Request for Physical or Mental Examination
Requires a court order upon showing of good cause. Must be related to the claim, and requested in good faith.
Civ pro : Discovery
Scope of Discovery
Aparty may discover anything that is non-privileged, not attorney work product, and **reasonably calculated to lead to the discovery of admissible evidence. **
Something is reasonably calculated to lead to the discovery of admissible evidence if it may lead to evidence regarding a relevant claim or defense.
CA - must be relevant to the subject matter in the action
Civ pro : Discovery
Privileged Information
When a party withholds information based on privilege or attorney work-product, the party must expressly state the claim or privilege and describe the materials or communications not produced in a manner to enable other parties to assess the applicability of the privilege or protection.
Civ pro : Discovery
Interrogatories
Interrogatories are limited to 26 without leave of court or opposing party stipulation. Cannot be served prior to the 26(f) conference; aka meet and confer conference.
Parties have 30 days to respond. If an answer is inadequate, the party may move for determination of sufficiency of response. A denial must be specific with reasonable effort to discover the truth.
CA permits an unlimited number of form rogs and a maximum of 35 specific rogs unless a court allows for additional specific rogs after the party seeking the additional rogs files a Declaration of Additional Discovery explaining the need for additional rogs.
Civ pro : Discovery
Request to Produce Documents
A party may request production of material items, documents, and things relevant to litigation from another party (notice) and non-parties(with subpoena) for information in the responding party’s control, possession or custody. They may also request entry onto land from a party.
Civ Pro: Discovery
Motion to Compel
Enforcement
For total or partial failure of discovery, a court will grant a motion to compel discovery when the request for discovery has been properly made and the parties made a good faith effort to meet and confer.
Rule 11: Atty certifies to the best of their knowledge and belief after a reasonable inquiry under the circumstances that the paper is not for an improper purpose, legal contents are warranted, allegations have evidentiary support
Sanctions: court may inpose sanctions for rule 11 violations. Motion for sanctions must be served on offending party and gives 21 days (safe harbor) to correct the offending paper before filing the motion with the court.
Civ Pro
Motion for Summary Judgment
Summary judgment is granted if there is no genuine issue as to any material fact. It may be filed any time until 30 days after the close of discovery. Both claim and issue preclusion can be used to establish no genuine material issues of fact exists, such that summary judgment is appropriate. Additionally, if issue preclusion does not justify the granting of a total summary judgment, a court may grant partial summary judgment as to that particular issue or permit additional time to prove up other necessary facts.
Most questions test these issues through a motion for summary judgment so quickly put in the rule for motion for summary judgement before getting into issue and claim preclusion if the moving party moved for summary judgment based on preclusion.
Civ Pro: Preclusion
Claim Preclusion
Res Judicata
Claim Preclusion ( res Judicata)
Precludes parties in an action from re-litigating any claim that was or could have been raised in that action.
For claim preclusion to apply, the same two parties from a prior judgment on the merits must be in a second proceeding, in which one party is seeking to relitigate a claim litigated at the first proceeding or one that should have been made at that proceeding.
1) Parties are identical or in privity;
2) Case 1 ended in a valid final judgment on the merits. (41(b)) All judgments are on the merits unless based on jurisdiction, venue, or indispensable parties. . a decision pending appeal is on the merits.
3) The claimant asserted the same claim in both cases. The claim arises out of the same transaction or occurrence.
In Ca, all appeals must be exhausted. A dismissal with prejudice equals a final judgment on the merits. If the plaintiff wins, then the new case is merged, if the defendant wins the new case is barred. The claim arises out of the Same Primary Right (which allows a separate cause of action for the invasion of each primary right. P may sue separately for personal injuries and property damages.)
Civ Pro: Preclusion
Issue Preclusion
Collateral Estoppel
Collateral estoppel is narrower than claim preclusion because it does not preclude the whole claim necessarily, just the same issue. A party can be estopped from litigating an issue that was litigated at an earlier proceeding if issue preclusion applies which requires the following elements:
1) a valid final judgment on the merits of the prior proceeding;
2) issue sought to be estopped was actually litigated; 3) issue was essential to the judgment and
4) must be used against a party in the first case 5)The party against whom enforcement is sought had a similar motive and opportunity to defend the claim in the prior action.
CP
General Presumptions
CA is a CP state. All property acquired, while domiciled in CA, during marriage by income or earnings of either spouse are presumed to be community property (“CP”) All property acquired: before marriage or after separation are presumed Separate property (“SP”). In addition, any property acquired by gift, devise, or bequest or descent is SP.
At divorce, the community assets are divided equally; unless a rule requires otherwise an agreement.
CP
Asset Characterization
Asset Characterization as com prop or sep prop depends on item’s source, parties’ actions that may alter the character, and statutory presumptions affecting an item.
CP
Legal Marriage
- If essay states the couple is “married” or legally married” assume the marriage is valid
A legal Marriage is (1) a civil contract between two individuals (2) who consent to be married, (3) seek a marriage license, and (4) have that license solemnized by a qualified official. Both opposite and same sex couples can marry. When a couple marries they form a marital economic community subject to CP rules.
Registered domestic partners register with the Secretary of State’s Office. The partners must not be married or registered to anyone else, not related by blood and capable of giving consent. When they register their domestic partnership they form a marital economic community.
CP
Quasi-CP
Facts that property is acquired outside the state.
Quasi-community property (“QCP”) is property acquired in a state other than CA, by either spouse that would have been CP if the spouse had been domiciled in California at the time of acquisition. QCP is treated as SP during marraige, but treated as CP at divorce or death.
CP
Marital Economic Community
The MEC begins upon marriage, and ends at (1) divorce, (2) a spouse’s death, or (3) the date of separation, and the CP presumption takes effect. To terminate the MEC by separation, there must be intent not to resume the relationship communicated to the other spouse.
Here, [when MEC began] and [when MEC ended] filing for dissolution of marriage is intent.
Thus, the length of marriage is
Cp
Premarital Agreement
Parties may agree that each party’s earnings will remain SP so long as the agreement was entered into voluntarily. An agreement made after January 1, 2002 must be in writing, signed by both parties, voluntary and not signed under duress, fraud, undue influence and had capacity.
In addition, the parties must be represented by independent counsel or advised to seek independent counsel and expressly waived representation in a separating writing. If the party expressly waived representation then they must not have less than 7 days between the time they first were presented the final draft of the prenup and the time they signed, and they must be informed of their rights and obligations under the prenup. A court will not enforce a premarital agreement if it promotes divorce.
CP
Unconscionable Prenup
A premarital agreement is unconscionable if it (1) was unconscionable when made, (2) did not provide full, reasonable, and fair disclosure of the other party’s property or financial obligations, (3) the right to disclosure was not waived in writing, and (4) the party challenging it lacked adequate knowledge of the other party’s property or financial circumstances.
*** it would be unconscionable if the spouse quits their job to be a homemaker AND is required to waive spousal support.
CP
Source Tracing
For commingled property (presumed CP), proponent of SP has burden of proving what is SP. To determine the character of any asset, courts will trace back to the source of funds used to acquire the asset; a mere changing in form of an asset does not change its characterization.
Two tracing methods are used when CP funds are commingled with SP funds: (1) exhaustion and (2) direct. If it becomes impossible to trace the source of the property or funds in a commingled asset, the whole will be treated as community property.
CP Source Tracing
Commingled Property Tracing Method
Exhaustion
The SP proponent must show that CP expenses exceeded CP funds. Therefore the item must have been purchased with SP funds. Available CP funds are presumed to pay for family expenses. Absent a reimbursement agreement, a gift is presumed when SP funds are used to pay family expenses.
CP Source Tracing
Commingled Property Tracing Method
Direct Tracing
See’s compliant Records
A spouse may recover SP if the spouse can identify with see-compliant records that the item was purchased with SP funds. See compliant records must show (1) that SP funds were available and used at the time of the transaction (2) that when the item was purchased the SP property owner disclosed this to the other spouse, (3) the SP owner intended the item to be SP (5) a written declaration extrinsic from bank records .—bank records by themselves are insufficient.
CP
Transmutations
A transmutation occurs where one spouse changes the status of property from CP to SP or vice versa. Transmutations must be a writing which expressly states a change in ownership is being made and consented to by the spouse whose interest is being adversely affected.
However, the formalities need not be adhered to for a gift that is personal in nature and of relatively insubstantial value, taking into account the circumstances of the marriage.
CP
Putative Spouse
If a marriage is void or voidable, the party who believed in good faith the marriage was valid, is a putative spouse. Property acquired during that period is QMP and treated as CP.
CP
Fiduciary Duty and Presumption of Undue Influence
In transactions between themselves, spouses are subject to the fiduciary rules that govern confidential relationships. The confidential relationships of spouses imposes a duty of the highest good faith and fair dealing on each spouse. A rebuttable presumption of undue influence arises when one spouse gains an advantage over the other in a property transaction. The spouse who obtained the advantage bears the burden of rebutting the presumption. Thus, if a disadvantaged party contests a transmutation or other interspousal transaction, the advantaged party bears the burden of proving that the disadvantaged party freely and voluntarily consummated the transaction, with full knowledge of all the facts and complete understanding of the effect of the transaction.
CP
Debt
Generally, spouses have equal management and control over all CP. Each spouse may contract for debts without the other spouse’s joinder or consent.
A debt is incurred at the time a contract is made.
Creditors may reach community property to satisfy debts incurred before or during marriage.
However, a non-debtor spouse’s earnings (generally CP) are protected if (1) the debt occurred before the marriage; and (2) the earnings were held in a separate account to which the debtor did not have access and no commingling occurred.
The non-debtor spouse’s SP can be reached for debts incurred during the marriage if the debtor spouse’s SP and all CP funds have been exhausted.
CP Debt
Debt satisfaction from SP Interests
Creditors can see funds from the debtor spouses SP first, then CP.
CP Debt
Post-Separation Debt
Debts acquired after permanent separation are SP and the debtor spouse will be liable to his creditors for such debt.
CP Debt
Exception to the Post-Separation Debt
When CP may be reached
Spouses can be liable for the debts of one another pre-divorce if the debt is for a necessity of life. A spouse is entitled to reimbursement if they expend SP for necessaries of the other spouse and CP was available or the debtor spouse had available SP.
The debt [was/was not] for a necessary of life because [facts + reasoning].
Thus, [non-debtor spouse] [is/is not] entitled to reimbursement.
CP Debt
Tort Debt Liability
A cause of action against a spouse is first satisfied from the tortfeasor’s SP and then the CP so long as the tort was not for the benefit of the community. In addition, the debt would likely be assigned to the debtor spouse upon dissolution.
CP Debt
Fiduciary Duty to Disclose Debt
A managing spouse must fully disclose all material facts regarding debts for which the community may be liable and provide equal access to all information upon request. A non-managing spouse has a claim against the managing spouse for any breach of fiduciary duty that impairs the non-managing spouse’s present undivided one-half interest in the community estate. Remedies include a greater share of CP.
Here [managing spouse] [did/ did not] disclose material facts regarding [debt] and [did/ did not] provide equal access to information upon request because [facts].
Thus, [managing spouse] [did / did not] breach their fiduciary duty. [spouse][may/may not] be entitled to a larger portion of the community property.
CP Debt
Assignment of Debt at Divorce
Even though the CP and debtor spouse’s SP are liable for [Hank’s gambling debt], the debt has not been paid off. At divorce, the court must assign the outstanding debt without offset to [spouse] as his/her separate debt because, although it was incurred during marriage, t was not incurred for the benefit of the community.
CP
Presumption Inferred By Title
Jointly Titled Property
Unless otherwise agreed that property is SP(in collateral written agreement), jointly titled property is presumed CP upon death or divorce; regardless if paid for with SP funds.
Divorce: Any SP used to purchase title is entitled to reimbursement of FMV at time of purchase.
Death: Any SP used is presumed a gift to the community and no reimbursement.
CP Debt
Injury/ Damage caused by Spouse to 3p
If for the benefit of the community: CP first, the SP of tortfeasor spouse
Not for benefit of community: SP tortfeasor spouse first, then CP.
CP
SP Real Property
Acquired before marriage
When a property is purchased before marriage, and community funds make the remaining loan payments during marriage, the community is allocated a pro tanto share of the separate property home’s value.
Courts use Moore/ Marsden to calculate.
CP
Moore / Marsden
Calculation
SP Real Property Acquired Before Marraige
The Moore formula applies when the home is purchased near to the date of marriage. If the separate property is owned for a considerable period of time before marriage then Marsden applies. The proportion interests are calculated by determining the separate and community contributions to the principle balance of the mortgage. Then using Community contribution divided by the OG purchase price of home to determine the community’s pro tanto interest as a percentage of the total house value. Next calculate the appreciation that will be divided by the pro tant interest. Under Marsden, this will only be the appreciation that occurred between the marriage and the date of separation; under Moore it will be from the date of purchase until the date of separation. Finally, calculate the total amount due to the community by adding the community contributions to the community’s share of appreciation.
Capital contribution = down payment and improvements
The ratio between the capital contribution to the purchase price.
HOUSE: 3 things reimbursed: downpayment, principal reduction and improvements. Must say that the “community gets pro tanto share”.
CP
COMMUNITY BUSINESS
A C business is one started during marriage or with CP funds.
. The earnings of a spouse’s business and the goodwill of the business during marriage are also CP. The Pereira and Van Camp methods of accounting apply only when community labor is used to enhance the value of SP business. In this case, because the business was not SP, the Pereira and Van Camp methods do not apply. In this case each have a right to one-half value of the business. In addition to the tangible assets of the business, the value of the business includes W’s goodwill.
CP
GoodWill
Community Business
To the extent a business develops during marriage, there is CP interest in the goodwill ( intangible value based on expected future business or reputation that generates income beyond a spouse’s labor ).
Courts use Two valuation techniques to calculate goodwill: (1) Market sales valuation (price the goodwill commands on a sale of the business or professional practice) or (2) capitalization of past excess earnings (present value of a future stream of income that the spouse’s goodwill developed during marriage. that will generate in the business. net gross earnings minus compensation and excess profits left over is the value.
CP
SP Business
Community Labor enhancing Value
When community labor is used to enhance the value of a separate property business, the community is entitled to share in the increased value of the SP. A court uses either the periera or Van Camp formula to calculate business value.
(spouse who contributed labor does not need to be the same spouse that owns the business. Ie. Wife own sp restaurant and husband manages. There is community interest in husbands labor.)
CP
SP Business, CP Labor Enhancing Value
Periera
(Reasonable Rate of Return)
Pereira recognizes that community labor(including personal character, energy and capacity of spouse) helped the business grow, which entitles the community to some, but not all, of the profits- those profits are labeled excess profits.
The owner spouse receives the original SP investment + the reasonable rate of return (10%) multiplied by the years worked. The rest of the value is CP. Therefore, if any increase in the value of the business is primarily attributed to ___’s labor, pereira should be applied, and __’s separate property investment should receive a fair rate of return of the business deemed CP.
CP
SP Business, CP Labor Enhancing Value
Van Camp
(Market Forces)
VAN CAMP, recognizes that the community labor did not help the business become successful; the profits are not directly related to the spouse’s efforts. The SP business owner reimburses the community for any nominal labor it may have contributed to the business. Basically, CP is awarded reasonable salary minus CP expenses, and SP gets the balance.
Thus, if H’s labor was not the principal reason for any growth in the value of the business, Van camp should be applied. Under Van Camp, the business is H’s SP on the theory that the community has already received compensation through H’s salary drawn from the business.
CP
Spouse’s Education
Education is not treated as divisible property. Instead, at divorce there is an equitable right of reimbursement with interest to the community when: (1) community property was used to pay for the education costs, (2) the earning capacity of the educated spouse was substantially enhanced, and (3) the married parties did not contractually waive their right of reimbursement.
Reimbursement may be reduced or modified if the community has already substantially benefited from the education/training. There is a rebuttable presumption that if fewer than 10 years has elapsed between the contributions and divorce, then the community has not substantially benefited.
CP
Severance Pay
SEVERANCE PAY
Courts are split of severance pay. Courts which treat severance pay as SP do so because they believe the severance pay replaces future wages which would have been received.
CP
DISABILITY PAY AND WORKER’S COMPENSATION BENEFITS
DISABILITY PAY AND WORKER’S COMPENSATION BENEFITS
are either CP or SP depending on the wages they are designed to replace. To the extent disability benefits are taken in lieu of retirement benefits, disability benefits are treated as retirement benefits.
cp
Life Insurance
A spouse cannot make a testamentary gift or dispose of more than ½ CP without consent of the other spouse. If spouse does then the other spouse may rescind the change. For a whole life insurance policy that has current cash value, (at divorce) is apportioned according to percent of premiums paid by each estate (CP/SP).
Death: The person named as a beneficiary on life insurance will receive the policy.
CP
At Death
Amount the surviving spouse receives is based on whether there was a will or not. Death of a married person terminates the CP character of any of his property but the form of title controls. By will, decedent may dispose of his half CP interest + all SP. SS is entitled to her half of CP. Intestate, SS of intestate decedent is entitled to all CP + at least 1/3 interest of SP, depending on # of issue and parents.
Con Law
Federal Court case or Controversy Requirement
Justiciability
Actual dispute, ripe, not moot.
Federal courts are limited to deciding actual cases or controversies. A matter is ripe when there is an actual or immediate threat of harm. If the dispute has resolved, it has become moot, and the court will not hear it, barring special circumstances.
Con Law
Standing
Individual
An individual must have an actual injury; caused by the defendant; which would be satisfied by a favorable decision (redressability).
Con Law
Standing
Organization
An organization can sue for its own injury, or on behalf of members; if a member has standing; interests related to organizational purpose and is not required to participate.
Con Law
State Action
To violate the constitution, there must be government involvement.
However, state action may exist when: a private person carries on activities that are traditionally performed exclusively by the state (elections, parks, prisons); or there are sufficient mutual contacts between the conduct of the private party and the government.
Con Law
If a fundamental right is denied to everyone apply
Substantive Due process
Con Law
If a fundamental right is violated for a particular individual apply…
Procedural due process and equal protection
Con law
If a fundamental right is denied to some people but not others apply
Equal protection
(but also apply due process)
Con Law
What Amendments does State Action apply?
If a plaintiff sues under the 1st, 14th, or 15th Amendment (e.g. free speech, due process, equal protection, or voting rights) then plaintiff must show state action .
Con Law
Fundamental Rights
- marriage,
- living with one’s family,
- child rearing,
- domestic travel,
- voting, and
- first amendment rights.
-Privacy which includes: - Marriage
- Access to contraceptives
- Ability to read obscene material at home (no kid porn)
- Keeping extended family together
- Right of parents to make decisions re kids care, custody, control
- Intimate sexual conduct
- Refuse medical treatment
Family to live in common household
Con Law
Commerce Clause
Congressional Regulation of Commerce.
Congress regulates Channels, Instrumentalities and people, and activities which have a substantial effect (in the aggregate) on interstate commerce.
Con Law
Supremacy Clause
As it applies to regulating commerce
Conflicting Federal v. State Regulation
The states power to regulate commerce is held concurrently with the federal government’s commerce power. If an activity is largely one of local concern, the state may regulate it in the absence of the Congress indicating intent to preempt the field.
