Week 10 Flashcards
what is asset partitioning
creditors of trustee and settlor cannot get to trust funds (most property like aspect)
Everything but credit with trusts can be ___
contracted around
what is a spendthrift trust
beneficiary (and their creditors) restricted in funds they can access
Rothko duties of a trustee
impartiality
loyalty
prudence
what is cy pres
doctrine of impossibility (generally only for charitable trusts BUT courts more and more likely to award)
the dominant purpose of modern trusts is to __
benefit the beneficiaries
what is the equitable title in a trust
beneficial rights
what is the legal title in a trust
ownership rights
what are three legal personas in a trust
settlor, trustee, beneficiary
It is not necessary that the legal personas in a trust ___
actually be different people (though used to be couldn’t be trustee and beneficiary)
Settlors have power of ___
appointment (crate power in another person to designate recipients of interests)
what is settlor
creates the trust and conveys their property to it
what is trustee
persona who receives the property and responsible for its management and control
Beneficiary does not generally have ___ but receives ___
possessory interests, periodic distributions of income from the trust
Trusts must be __
in writing
Ways trusts created
will
intervivos transfer from settlor to trustee
declaration of owner saying holds property as trustee for someone
Generally you cannot set up ___
spendthrift trust for yourself
Broadway Bank says that settlor of a trust can provide that ___
trust income may not be alienated by the beneficiary or seized by the beneficiary’s creditors (spendthrift trust)
Broadway Bank says there is no alienation allowed __
in advance of distribution
Broadway Bank remedy is that creditors ___
can sue periodically when assets are distributed
objection to Broadway Bank is that creditors ___
don’t have notice beneficiary assets can’t be reached (solved by credit scores), also paternalistic approach
fiduciary duties exist to ___
monitor the trustee and ensure they act in best interest of trust and beneficiaries
what is loyalty fiduciary duty
act in best interest of trustee (avoid self interested dealings and conflicts of interest)
what is impartiality fiduciary duty
consider interests of all beneficiaries if more than onew
what is prudence fiduciary duty
standard of reasonableness (don’t take large risks)
what are the tradeoffs when selecting a trustee
impartiality, expertise and cost (more expertise means less impartial)
Rothko holds that the behavior of the executors indicated ___
they were acting in self-interest
Rothko awards ____
appreciation damages (sale void in first place so liable for value at time of trial but also likely type of punitive damages)
Rothko imposes a ___ on the trustees meaning __
constructive trust, they are liable not only for the prive of the sale but also any other benefits gained (restitution)
Changed circumstances can be addressed by giving ___
trustee discretion
Cy pres operates when settlor has expressed _____ but also expressed ___
specific charitable intent that is impossible or undesirable to fulfill, related general charitable intent that could still be fulfilled with some judicial modification of the interests created
Cy pres applies when ___
changed circumstances
violation of public policy
impossible for other reasons
Cy pres typically only applies to ___ but occasionally applied to ___
charitable trusts, family trusts (in re Putlizer allowed sons to sell New York World after heavy losses despite prohibition on sales)
In re Barnes had a dispute about how much ___
circumstances really need to be changed (museum move to Philadelphia to get more visitors)
Wilber held that his will as a whole _____ and because ___ cy pres allowed __
indicated general charitable purpose, manuscript largely intelligible, allowed trust to be applied to scientific and philosophical research
Wilber found general charitable intent because B __
included notes about the results of his studies being of large benefit to the entire world
Wilber says test of beneficience is met if founder __
believes benefit to be of public advantage and his belief not contrary to principles of morality
Security interest is a ___
nonpossessory interest in an asset (collateral) that ripens into possessory under certain conditions
Security interests are limited to transactions where borrower ____
voluntarily (usually) grants interest in particular property (mortgage)
Other liens can be created without ___
consent of the borrower
example of a lien
mechanic lien if owner fails to pay for contractor services
If debt is transferred ___
security interest follows
what is property right in collateral
right to take property to sell and satisfy the debt
lender rights in collateral
property right, priority right
Equity of redemption holds that once debt is repaid ___
security interest terminates even if borrower previously defaulted
Lender cannot retain funds that ___
exceed outstanding balance of debt (in case of sale)
Purpose of security interests
increase likelihood of repayment
lower interest rates
Public notice of security interests solves __
lender concerns about excessive borrowing by client
Mortgage law mostly comes from __
common law
Personal property security interests mostly come from ___
statutes (UCC)
Mandatory (property) rules in security interest
equity of redemption
if take collateral lender obligated to conduct foreclosure sale to determine value of the property
Notice problems with security interests
possession often evidence of ownership so problematic if lend on basis sole owner of the property, parties may purchase property and be unaware of a lien on it
Solutions to security interest notice
liens must be recorded like mortgages, require actual notice of lien to interested parties, lenders take actual possession of mortgaged property
Timmer says that an equitable lien may be enforced ___
against any person who acquires the encumbered property UNLESS person bona fide purchaser for value
Timmer says that since the Timmers _____ the court may award equitable lien for cost of repair
purchased the discs at much lower than their repaired value
Rationale for Timmer
(1) should have inspected property prior to purchase
(2) prevents unjust enrichment
Mortgage is a secured interest in real property where the borrower holds ___ BUT
property in fee simple, rights subject to security interest of the lender
judicial foreclosure requires ___
judicial determination permitting sale and court conducts sale
In power of sale, ___ conducts the sale but _____
mortgagee, fiduciary duties apply (good faith + due dilligence)
Merrill says not much difference to mortgagor in judicial sale or power of sale because ___
both transactions end up being fairly rote
If breach of good faith in power of sale then damages are equal to ___
FMV - price obtained at sale
If breach of due diligence in power of sale then damages are equal to
fair price - price obtained at sale
Redemption is a period provided by statute during which __
mortgagor has right to redeem property even after a foreclosure sale
Non-recourse loans allow the mortgagor to __
walk away without further liability once property sold even if for lessor price than actual loan (minority rule)
In a recourse loan, the mortgagor is liable ___
for extra debt remaining after the sale
Murphy says that as seller mortgagee has ___
fiduciary duty to act in good faith and exert reasonable efforts to obtain a fair and reasonable price
Murphy said that because D _____ it breached duty of due diligence
made no attempt to obtain fair price for P home
evidence of mortgagee no attempt in Murphy
(1) able to immediately resell house for higher price
(2) didn’t advertise or give general notice to public of the sale
There was no evidence of bad faith in Murphy because ___
complied with statutory requirements for sale
Murphy mortgage is an overwater mortgage because ___
property worth more than balance due on the mortgage
One solution to Murphy problem may be to have the Murphy’s ___
sell their home themselves, lender gets money back without foreclosure costs and Murphys incentive to pay off as much as possible
Another ex ante approach to Murphy problem would be to __
have appraisal and set an upset price below which sale would be invalid
Two types of transfers
exchanges and gifts
Exchanges are tied to law of __ while gifts tied to __
contracts, trusts and estates
Gifts require ___
delivery, intent and acceptance
Death bed gifts also require ___
gifts made in contemplation of death + donor actually dies
Death bed gifts make delivery hard so courts allow ___
constructive delivery in these cases
Courts don’t look as favorably on deathbed gifts because the correct way to transfer property is ___
will
Transfer of real property by deed only takes place once ___
deed delivered to transferee (Gilbert)
Delivery is not required to make binding contract for ___
sale of personal property (but title passes upon delivery)
Rationale for delivery requirement
(1) evidence of transfer (talk is cheap)
(2) commitment of donor intent (actual intent and not changed mind)
(3) cautionary function
(4) information to third parties (on notice of ownership)
Generally wills require that they __
(1) be in writing
(2) must be signed
(3) must be witnessed by two disinterested partiese
exceptions to will requirements
gift causa mortis, holographic wills
Irons says that transfer of property by gift requires ___
delivery of either a deed or the property itself
Irons says because ____ property was not transferred to him
P didn’t actually take possession of the colts
Irons says doesn’t matter if ____ if no delivery
father intention to give gift
Merrill thinks that in Irons ___ would’ve been sufficient to establish constructive possession
delivery of something like a bridle or saddle
Gilbert held that there was ____
no valid transfer because no delivery
Gilbert retained possession and control until death so no evidence __
intention to part unconditionally with the deeds
Foster says that a gift causa mortis requires that the property be __
actually delivered to the donee during the donor’s lifetime by the donor herself
Foster is the opposite result of ___
scherer (check evidence of donative intent and constructive delivery)
Foster dissent says that the donor was ___
fully competent when wrote the note and court should give effect to deliberate intent of property owners
States applying equitable conversion put risk of loss on ___
purchaser from moment contract of purchase signed (unless seller caused the loss)
Contract usually states that seller will provide ___
marketable title (free from defects/encumbrances but need not be perfect title)
Equitable conversion applies to ____
land sale contracts where buyer pays off seller over time and title passes once full amount paid off (typically if can’t get mortgage)
Title insurance insures title against __
types of defects a search should uncover but not facts like AP that a record search would not reveal
Lenders don’t trust ___ so they require __
lawyer title searches, title insurance
Wood says that when two parties enter into a land sale contract the buyer becomes ___
equitable owner of the property and entitled to any benefits that may accrue to property from that point on
Wood says that P retained ____ but was not entitled to __-
legal title as security for the debt, any of the settlement money because purchase price had bee paid in full by time settlement paid out
Rectangular system is more ___ but ___
expensive to set up, easier to use on ongoing basis
Rectangular system associated with greater land values maybe because __
(1) less litigation
(2) undesirable combined with desirable land encouraging owners to improve “bad land”
(3) demaracation subsidized by govt
(4) encourages more transfers
