Property Settlement Agreement - California Marital Property - Past Paper, Exams of Property Law

Download Property Settlement Agreement - California Marital Property - Past Paper and more Exams Property Law in PDF only on Docsity! Page 1 of 7. LAW 281.2: California Marital Property Fall 2011 UNIVERSITY OF CALIFORNIA COURSE EXAMINATION SCHOOL OF LAW Fall 2011 LAW 281.2: California Marital Property INSTRUCTOR: HERMA HILL KAY TIME ALLOWED: 2½ HOURS OPEN BOOK EXAMINATION NUMBERS: Please be sure to put your correct Fall exam number in the header on each page of the exam (if typed) or on each blue book. COMPLETION: DO NOT CONTINUE WRITING AFTER TIME HAS BEEN CALLED. Laptop users perform your final save and upload your answers following the upload instructions. Please do NOT leave your bluebooks or exam questions on the desk. Exams MUST be turned in to the person in charge. If you finish early, you must turn in your exam to the Examination Headquarters in Room 141 Boalt Hall. There are no space limits. QUESTION I. 30% CREDIT Howard is a clinical psychologist in private practice. He opened his office in San Francisco in 1985, and has a full schedule of private patients, all of whom are convinced that he has given them significant help in managing their problems. Howard also has a hobby, which he plans to turn into a side business, of making wine. He owns several valuable properties in the Napa Valley which he inherited from his grandfather and on which he believes he can produce superior grapes. In 1998, Howard closed his practice for two years in order to improve his management and marketing skills by getting an M.B.A. at the Haas School of Page 2 of 7. LAW 281.2: California Marital Property Fall 2011 Business in Berkeley. While there, he met Wilma, a fellow student who is 15 years younger than himself and who consistently makes better grades than he does. Howard and Wilma were married in January 2000, and both graduated in June. They moved into a house on Howard’s property in the Napa Valley, and together began to set up a winery there. Before the planning stage had progressed very far, Howard recognized something he had suspected while the pair had been studying together in Berkeley: Wilma had a much better head for business management than he did. After graduation, she had received several attractive job offers, which she postponed until after Howard’s wine business had gotten started. Howard, who longed to return to his clinical practice, decided to hire Wilma to run the business. Wilma was a bit surprised when Howard suggested the plan to her, but since he offered to pay her the prevailing rate for managers in the Napa Valley wine industry, with full benefits, she accepted. She joked with friends that she would have no trouble getting close to “the boss.” Ten years later, the wine business was thriving. Its red wines – particularly its Cabernet Sauvignon, but also its Pinot Noir – won prizes in 2005 in international competitions and were quickly snapped up by collectors and high-end restaurants. Each year in which the wine was produced, Howard gave Wilma 50 cases of each label at Christmas. She stored these bottles carefully and, unknown to Howard, bought more cases as an investment. Howard and Wilma received “Winemaker of the Year Awards,” and Howard was thinking of taking a more active role in the business. Their marriage, however, was languishing. Howard and Wilma decided to call it quits in 2011. Each consulted matrimonial specialists in an effort to negotiate a property settlement agreement. ANSWER THE FOLLOWING QUESTIONS AND DISCUSS YOUR ANSWERS FULLY: (1) You are the matrimonial specialist who represents Howard. He tells you that he wants to deal fairly with Wilma, but he does not want her to Page 5 of 7. LAW 281.2: California Marital Property Fall 2011 (d) W’s parents purchase the property after the marriage and place title in the names of H and W as husband and wife. W assumes a loan from a bank to pay the balance due of $200,000 plus interest. ANSWER THE FOLLOWING QUESTIONS AND DISCUSS YOUR ANSWERS FULLY: (1) Prepare a brief memorandum indicating which of these purchase options you will recommend to W’s parents and why you would so recommend. If there is any other option you would recommend instead, indicate what it is and explain why you would recommend it. (2) If H and W are divorced five years after the wedding, and the apartment, now valued at $1.5 million, is the only asset to be divided, how and why should the divorce court dispose of the property? (For purposes of this question, indicate what the likely answer would be under each of the four options listed above.) (3) If H is killed in an automobile accident five years after the wedding, and the apartment is valued at $1.5 million, how and why should the probate court dispose of the property? (For purposes of this question, indicate what the likely answer would be under each of the four options listed above, assuming that H died intestate and is survived by W and his brother.) (4) How and why would your answers to questions (2) (division on divorce) and (3) (distribution at H’s death intestate) change if W’s parents had chosen the first purchase option (title in W’s name before marriage; she pays off interest-free loan after marriage) and H and W had taken the following steps in 2009: they sold the San Francisco property for $1.35 million, paid off the remaining indebtedness, used $350,000 of the proceeds to purchase a small condominium in Palo Alto, taking title in H’s name alone, and invested the remainder in H’s start-up electronics business. Page 6 of 7. LAW 281.2: California Marital Property Fall 2011 QUESTION III. 30% CREDIT H graduated from Cal in 2005 with degrees in law (from Boalt) and business (from Haas). W graduated in the same year from Stanford with an undergraduate degree in English literature. He got a job with a financial management firm in San Francisco. She is independently wealthy, having just inherited a $75 million estate from her parents who were killed while flying their private jet in South America. The young couple settles down in the showplace San Francisco home that was part of W’s inheritance. H set out to make a name for himself quickly by an aggressive effort to bring new business into the firm. W helped in this effort by entertaining friends in their home, making a special effort to invite the wealthy friends of her deceased parents to meet her charming new husband. Assume that W asks H to manage her SP inheritance, which he agrees to do. Wishing to demonstrate his financial skills to W and her friends, H makes risky, but initially successful investments with W’s SP. Seeing his investments prosper, many of W’s friends shift the management of their funds from their previous financial advisors to H and his firm. Emboldened by his success, and unknown to W, H decided to leverage her fortune by using it to finance a Ponzi scheme. [The Securities and Exchange Commission defines a “Ponzi scheme” as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. . . . [T]he fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activities. … Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”] As H’s initial client, W’s fortune increased considerably thanks to the funds being entrusted to H by other clients, among them many of W’s friends. Word of H’s financial acumen spread widely, and after several years the managing partner of his investment firm began to suspect that all was not as it should be. He discovered what H has been doing, fired him immediately, and Page 7 of 7. LAW 281.2: California Marital Property Fall 2011 reported the scheme to the SEC. H is immediately arrested, and W, horrified, filed for divorce. ANSWER THE FOLLOWING QUESTIONS AND DISCUSS YOUR ANSWERS FULLY: (1) What are W’s obligations, if any, to H’s clients? (2) Does W have any rights against H that arise from their marriage? If so, indicate what those rights are. If not, indicate why not. (3) Did H acquire any property during the marriage? If so, indicate what property he acquired and how it should be distributed at divorce. If not, indicate why not. END OF EXAMINATION