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Fiduciary Law II B
Test 2 of Fiduciary Law II course
32
Business
Undergraduate 4
10/22/2008

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Cards

Term
what will courts look at to see if beneficiary has waited too long to sue?
Definition

length of time

reason for delay

change in circumstances

has there been a change in position on the part of the trustee?

Term
why is the ttee drafting exculpatory language himself a bad idea
Definition
smells like self-dealing.
Term
3 types of cases heard in courts of law (as opposed to courts of equity)
Definition
breach of contract
tort claim
claim involving death
Term
2 exceptions to the rule that it's always best to sue based on equity not tort or breach of contract   
Definition
  1. absolute cetain sum of money that is due the beneficiary (like the doc says that on such and such date the benny must be paid)
  2. Trustee is under such duty to convey chattel (personal property, such as a baseball card collection) to the benny.
Term
5 general remedies given by the court of equity
Definition
  1. Specific performance
  2. demand injunction
  3. demand ttee reimburse the trust account
  4. demand the appointment of a receiver
  5. demand the removal of a ttee
Term
What if you ask an attorney for advice, and he makes a mistake and he tells you some bigtime wrong advice? 
Definition
nothing you can do because it's considered a mistake of law
Term
When can you sue your attorney?
Definition
when there's malpractice
Term
Do the beneficiaries have priority over the other creditors of the trustee?
Definition
Only if you can trace the trust property or trace the assets.
Term
what doctrine determines how long a benny can wait to sue?
Definition
the Doctrine of Laches
Term
what determines the legal rate?
Definition
the usery statute.
Term
4 types of breaches
Definition
  1. selling something you shouldn't have sold
  2. fail to sell something you should have sole
  3. buying something you shouldn't have bought
  4. fail to buy something you should have bought
Term
Remedies if ttee sells something he sholdn't have sold
Definition
  1. charge the ttee with the value of the property at the time of the sale plus interest
  2. charge the ttee with the value at the time of the suit with the income that would have accrued
  3. compel the ttee to make specific reparation
Term
remedy if ttee fails to sell property that he should have sold
Definition
force the ttee to pay the difference between what the property is now worth and what it could have been sold for if it had been sold in a reasonable time
Term
what's the liability if ttee fails to purchase property that he should have purchased?
Definition
the difference between what it was worth as of the day of the suit and what you could have purchased it for if you had purchased it within a reasonable time.
Term
difference between being liable and accountable
Definition
  • Liable = have to pay $ out of pocket
  • accountable = ttee can't keep any excess gains earned on stock and must give to trust
Term
are multiple breaches considered part of the same transaction?
Definition
YES
Term
Factors courts look at to determine if breaches are considered separate and distinct
Definition
  1. do the breaches relate to the same or different parts of the trust property?
  2. did the breaches arise out of successive dealings?
  3. how much time elapsed between the breaches?
  4. has there been an accounting between the breaches?
  5. how has the ttee dealt with the property between the breaches?
  6. did the ttee intend to misappropriate the property?
  7. are the breaches a result of a single policy on the part of the trustee?
Term
in successive dealings, are you liable for the ultimate loss, or the intermediate loss?
Definition
usually the ultimate loss
Term
in getting consent of beneficiaries, what's the ski rule and what's it say?
Definition
  • SKI rule is Sui Juris (mentally competent and at least 18), Knowledge of all facts, not Induced by fraid, duress, or undue influence.
  • ski rule's binding so long as all benny's are sui juris.
Term
in order to gain consent from beneficiaries, what must you do?
Definition
  • You need to get a guardian ad litem to represent the interest of any unborn benny
  • benny's must have knowledge of all facts
  • benny's weren't induced by fraud, duress, or undue influence.
Term
a to T, fbo B. Ttee goes to B and asks for permission to do something and B agrees. B then assigns any and all interest to C. Is the asignee bound by the consent of the original benny?
Definition
yes
Term
When is a successor trustee liable for losses caused by the original trustee?
Definition
  1. original ttee purchased property that he shouldn't have purchased; he is now gone; you continue to retain the property
  2. successor ttee doesn't take the proper steps to make the original ttee turn over the property
  3. If the successor doesn't take the proper steps to make the original ttee reimburse the account.
Term
What are the exceptions for when a bank won't be responsible for breaches committed by the co-trustees?
Definition
  1. bank participates in the breach
  2. ttee improperly delegates
  3. fails to use reasonable care and that enables the co-trustees to breach
  4. you approve of or attempt to conceal the breach
  5. you neglect to take the proper steps to make the co-trustee reimburse the trust.
Term
4 big duties applicable to investment of funds
Definition
  1. Duty to use reasonable care and skill
  2. duty to preserve property
  3. duty to make property productive
  4. duty to pay income
Term
3 basic requirements in investing
Definition
  1. to use care
  2. skill
  3. caution
Term
what lead up to the uniform prudent investors act?
Definition
  1. Legal list statute (the old rule - no stocks)
  2. prudent man rule (primary goal was to conserve principle)
  3. upia
Term
what's the only type of unsecured loan you can make?
Definition
debenture bonds - lending on good faith and credit of the company. US Gov't bonds are the most common and safe.
Term
in a reit that's in a trust, how is title of land held?
Definition
in the name of the bank, not the name of the trust account.
Term
3 things about mortgage particpation
Definition
  1. old tool, not used much anymore
  2. commercial bank makes the loan then sells to trust dept.
  3. don't have proper earmarks.
Term
4 intention rules regarding if there's not authorization directing to sell or retain in document:
Definition
  1. it's easier to find intention that the ttee retain stocks owned by the creator than an intention authorizing him to purchase more
  2. the fact that the creator specifically names certain securities tends to show an intention that the ttee be authorized to retain
  3. if the trust came into being during the creator's lifetime it is more likely tha thte creator intended that the ttee could retain
  4. if you're permitted to invest in certian stocks that tends to imply that the ttee can retain those stocks.
Term
With an improper investment, you have to sell within a reasonable time. How do you determine a reasonable time?
Definition
  1. character or property
  2. risk involved
  3. what you could receive if you sell now compared to the intrinsic value of the property
  4. what are the available opportunities for reinvestment?
Term
7 factors the courts look at to determine whether you loaned too much out on a mortgage loan from an account
Definition
  1. character of the land
  2. is the land improved or unimproved
  3. is it in urban or rural area?
  4. how marketable is the land?
  5. is the value fluctuating?
  6. what's the trend in real estate values in this area?
  7. what's the probable income that could've been derived?
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