PROPERTY B

CLASS 28, MARCH 23

A. Principles
1. What does it mean when the casebook says that trust property has a “dual personality”?
a. Law courts only recognized rights of ownership and possession.
i. Chancery would recognize and enforce certain equitable obligations to hold property for
benefit of 3rd person - consequence would be that certain assets took on dual personality
b. Dual personality
i. Legal title to property was held in name of one person (trustee)
1. Trustee would call upon the law courts to enforce this title against third parties
who entered into contracts pertaining to the property or committed torts against
the property
ii. Beneficial use and enjoyment of the property would belong to someone else (beneficiary)
1. Chancery would intervene to make sure that the legal title holder did not act in
ways prejudicial to the equitable title of this beneficiary

2. What are the “three legal personas plus at least one thing” present in every trust?
a. 3 legal personas:
i. Settlor
ii. Trustee
iii. Beneficiary
b. “plus at least one thing”
i. corpus (or trust res) – assets or collection of assets around which the personas revolve

3. To what extent are the same person(s) allowed to assume more than one of these legal personas for a
particular trust? (802)
a. 401(k) retirement plans – settlor and beneficiary are same person
b. living trust or charitable trust – settlor and trustee can be same person
c. trustee and beneficiary can never be same person

4. What is a spendthrift trust?

5. What is the holding of Broadway Bank?

6. On what principles does the Broadway Bank court rely?
7. What are the holdings in Rothko?
8. On what principles does the Rothko court rely?
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B. Problems
1. Pamela owns a portfolio of stocks. In her will, she bequests the portfolio in trust to her accountant
Ronald, to be used to fund the education of her nieces Donna and Sybil. What name do we give to
Pamela’s role in the trust? What name do we give to Ronald’s role in the trust? What name do we give
to Donna’s and Sybil’s roles in the trust? What name do we give to the stock’s role in the trust?

2. Pamela owns a portfolio of stocks. She conveys the portfolio in trust to her accountant Ronald, to be
used to pay for annual vacations for Pamela. Is there a problem?

3. Pamela owns a portfolio of stocks. She conveys the portfolio in trust to herself, to be used to fund local
public arts projects. Is there a problem?

4. Pamela owns a portfolio of stocks. In her will, she bequests the portfolio in trust to her niece Donna, to
be used to fund Donna’s education. Is there a problem?

5. Pamela owns a portfolio of stocks. In her will, she bequests the portfolio in trust to her accountant
Ronald, to be used for her nieces Donna and Sybil for their lives, and then to the Red Cross. How do we
describe Donna’s and Sybil’s interests? How do we describe the Red Cross’s interest?

6. Pamela owns a portfolio of stocks. In her will, she bequests the portfolio in trust to her accountant
Ronald, to be used for her nieces Donna and Sybil for their lives, and then to the Red Cross. Ronald
takes out a loan, using the stock portfolio as collateral. He repays the loan without incident. Is there a
problem?

7. Pamela owns a portfolio of stocks. She conveys the portfolio in trust to her accountant Ronald, to be
used for her nieces Donna and Sybil. Pamela takes out a bank loan, identifying the stock portfolio as
collateral. She defaults on the loan. Ronald negligently injures a bicyclist in a car accident. The
bicyclist sues him and is awarded a judgment of $145,000. Can either the bank or the bicyclist take the
stock portfolio to satisfy the debts?

8. Pamela owns a portfolio of stocks. In her will, she bequests the portfolio in trust to her accountant
Ronald, with the dividends to be paid quarterly to her niece Donna. The will instructs Ronald to hold
the portfolio “free from any creditors of Donna.” What do we call this type of provision? If Donna
borrows money, using the stock portfolio as collateral, and then defaults on the loan, can the bank take
the stock portfolio? Can the bank garnish the quarterly dividend payments? Can the bank recover the
quarterly divided payments after they are paid to Donna each quarter?

9. Pamela owns an apartment building. In her will, she bequests the building in trust to her accountant
Ronald, with the income to be distributed to her nephews and nieces. Ronald arranges to rent an
apartment in the building at a discounted rental rate. Is there a problem?

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10. Pamela owns an office building. In her will, she bequests the building in trust to her lawyer Beatrice,
with the income from the building or the proceeds of the sale of the building to be distributed to her
nephews and nieces. Beatrice arranges for her law firm to buy the building. Is there a problem?

11. Pamela owns an apartment building. In her will, she bequests the building in trust to Beatrice, with the
income from the building or the proceeds of the sale of the building to be distributed to her nephews and
nieces. Beatrice puts the building up for sale and receives three offers. The highest offer is from Acme
Corporation. Beatrice declines Acme’s offer and accepts a lower offer, because Acme is widely known
to employ child laborers in its factories abroad. Beatrice’s attorney advises her that this is an
appropriate decision, given Pamela’s fervent activism against child labor during her life. Is there a
problem?

12. Pamela owns an apartment building. In her will, she bequests the building in trust to Beatrice, with the
income from the building or the proceeds of the sale of the building to be distributed to her nephews and
nieces. Beatrice puts the building up for sale and receives three offers. The highest offer is from Acme
Corporation. Beatrice declines Acme’s offer and accepts a lower offer, because Acme’s management
has a reputation for reneging on deals. Is there a problem?

13. Pamela owns ten thousand shares of Acme Corporation stock. She conveys the shares in trust to
Ronald, to be distributed to fund local public arts projects. Ronald sells one thousand of the shares and
uses the proceeds to fund a grant to the local public elementary school, where his son is a student, to
fund arts education. Is there a problem? Assuming there is a problem, and that Acme shares double in
value after Ronald sells the thousand shares for the elementary school grant, would Ronald’s liability be
based on the price of the shares at the time he sold them, or the later (doubled) price?