Supreme Court of Pennsylvania Board of Law Examiners

Transcription

1 AM PLACE BAR CODED APPLICANT LABEL HERE Supreme Court of Pennsylvania Board of Law Examiners Pennsylvania Bar Examination February July 2527 and and 26, 28, Essay Examination AM Session February July 25, 27, Question numbers 1 and 2, inclusive Use YELLOW covered book for your answer to Question No. 1. Use LAVENDER covered book for your answer to Question No Pennsylvania Pa Board Of Law Board Examiners of Law Examiners

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4 February 27, 2018, Pennsylvania Bar Examination - AM Essay Portion Question No. 1 [Write answer in Yellow answer book.] Dan, age 67, is the owner and sole proprietor of Big City Art Gallery, a prestigious art gallery, located in Big City, Pennsylvania. Dan also owns a valuable personal art collection and owns Mainline Manor, a large, stately home located on two acres in M County, Pennsylvania, where he has resided since he purchased the property in 1979 for $250,000. Dan has made only minimal improvements to Mainline Manor and has never owned any other real estate. Dan s net worth is $25 million. He is single. His daughter, Beth, works closely with Dan in managing the gallery. Dan s other child, Wes, is an M County physician and is not involved in the business. Dan is also a hot air balloon enthusiast and spends much of his free time piloting his hot air balloon and attending hot air balloon conventions. In May 2017, Dan decided to attempt to fly around the world in his hot air balloon. The night before he left, he asked his friend Angela to meet him at his home. Upon her arrival, he asked her to prepare his will for him so that his affairs would be in order if anything happened while he was away. Angela was a well-regarded commercial lawyer at a large M County law firm and regularly represented Dan on business matters but had never practiced estate or personal tax law. Angela said Look Dan, I d love to help, but an estate as large as yours will have some complex probate issues, and you may be looking at 40% federal estate tax rates if you don t plan properly. You really should talk to an expert - why don t you come in and meet with my trust and estate partner when he gets back next week? Dan replied Thanks, but I m leaving tomorrow and there s a chance I could die on this trip. Can you just help me get something in place for now? I promise I ll meet your partner when I get back, but this is an emergency! Angela reluctantly agreed, and, at Dan s instruction, drafted a will, which provided, in pertinent part, as follows: [Continued] 1

5 February 27, 2018, Pennsylvania Bar Examination - AM Essay Portion Question No. 1 [Continued] I give my real estate at 5 Main Street, Mainline, PA, which is known as Mainline Manor, to my son Wes. I give the residue of my estate to Wes and Beth, in equal shares. Dan properly signed and dated the will on May 20, Dan then went to a back room and returned with a painting, which he put in a crate and gave to Angela, saying this is my best piece it s an original Picasso and worth about $2 million. Hold this in trust for me and if I die, give the painting to Beth. Dan departed on his trip the following day. On June 25, 2017, Dan s hot air balloon crashed outside Paris, France, and he suffered traumatic brain injuries rendering him comatose. Beth arranged to have him returned to the United States, where he remained hospitalized and in a coma. On July 21, 2017, the M County Orphans Court adjudicated Dan to be incapacitated and appointed Beth as guardian of his estate and person. Beth listed Mainline Manor for sale and quickly reached an agreement to sell the property. The sale closed on October 5, 2017, with Beth signing the deed and closing documents as Dan s guardian. The net proceeds of the sale were two million ($2,000,000) dollars, which Beth placed into a non-interest bearing account in Dan s name at Mainline Bank. On January 2, 2018, Dan died. At the time of Dan s death, Beth had not expended any of the proceeds of the sale of Mainline Manor. 1. After Dan s death, Beth filed a petition asking the court for a declaratory judgment that her father set up a valid trust for the Picasso painting, with her as the beneficiary. Under the Pennsylvania Probate, Estates and Fiduciaries Code, how will the court rule on the question of whether Dan set up a valid and enforceable trust? 2. Assume for this question only that Dan s will was valid and was admitted to probate, and that the account holding only the two million dollars from the sale of Mainline Manor was the sole asset in Dan s probate estate. Who will take under Dan s will, and in what amount? 3. What, if any, are the 2017 federal income tax consequences to Dan of the sale of Mainline Manor? Assume Dan is a cash basis, calendar year tax filer. 4. Did Angela violate any of the Pennsylvania Rules of Professional Conduct by preparing Dan s will? 2

6 February 27, 2018, Pennsylvania Bar Examination - AM Essay Portion Question No. 2 [Write answer in Lavender answer book.] Several years ago, Al, Ben, and Carl, who all had excavating experience, formed Earth Movers ( EM ), a Pennsylvania general partnership. They have been and continue to be EM s sole partners. EM is based in C City, Pennsylvania, which borders State X. EM s written partnership agreement prohibits any partner from committing EM to a contract in excess of $5,000 without the consent of all partners. C City has grant programs to support small businesses located in C City. One program offers a $50,000 grant to C City businesses that have been in existence for at least one year. Al obtained a grant application on behalf of EM. Grant guidelines require that all owners of an applicant have a domicile in Pennsylvania. Al and Ben are lifetime Pennsylvania residents. Carl has always lived with his wife in State X. Al, Ben, and Carl discussed the application and Carl agreed to rent a one room apartment in C City. EM prepared the grant application and listed Carl s address as the C City apartment. C City always follows up to verify the domicile of each applicant s owners. C City s investigation has revealed that Carl sleeps at his home with his wife in State X nearly every night, has a State X driver s license, recently voted in an election in State X, and has barely furnished the apartment in C City. Last month, Ben was working on a residential sewer line project that EM had obtained a contract to complete. Even though he knew that standard procedure employed by excavators and state guidelines required that he should not begin excavation without verification of underground utility lines, he was in a hurry so he began excavation without the underground lines being marked. While excavating, Ben broke a water line leading to a neighboring home which caused extensive flooding of the basement of the home. Had Ben waited for the lines to be marked he would have known the location of the line. There is no question that Ben s actions were negligent. [Continued] 3

7 February 27, 2018, Pennsylvania Bar Examination - AM Essay Portion Question No. 2 [Continued] Two weeks ago, Ben contacted Trailers, Inc. ( TI ), a local company that manufactures and sells custom trailers. Ben knew TI s president, Pete, socially. Pete knew that Ben was a partner in EM and had ordered parts for EM from TI in the past. Pete had never seen EM s partnership agreement. Ben told Pete that EM needed a custom-built trailer that would accommodate EM s excavating equipment with features not available on stock trailers. Pete told Ben that he could design and manufacture the trailer that EM needed but that if EM did not buy the trailer he would not be able to sell it in the ordinary course of TI s business. Ben and Pete orally agreed that TI would build the trailer for EM and EM would buy it when completed for $8,000. The next day, TI purchased the materials that it needed to build the trailer and began its production. As of yesterday, the trailer was 75% complete. Al and Carl are fed up with Ben s lax attitude about following operational rules. When they confronted Ben about the damages to the home, he laughed and told them that he had also ordered a custom trailer from TI. 1. Assume that the domicile requirement in C City s grant guidelines is constitutional. Under the domicile guidelines, is EM eligible to receive the C City grant? 2. If the homeowner whose house was damaged by Ben s actions sues Al, Ben, Carl, and EM, are Al, Ben, Carl, and/or EM liable for damages as a result of Ben s negligent act? 3. Al intends to contact TI s president today and tell him that EM will not honor the agreement made by Ben because it was oral. Under the Uniform Commercial Code, does TI have any basis to enforce the agreement? 4. Assume for this question that the fact that the agreement between EM and TI was oral is not a defense to the enforceability of the agreement. Will EM be successful in asserting a defense against TI if TI seeks to enforce the agreement based on the language in EM s partnership agreement requiring the approval of all partners for contracts in excess of $5,000? 4

8 INSTRUCTIONS Handwriting Applicants Two answer books (YELLOW and LAVENDER covers) are supplied for your use. Use the appropriate numbered and colored book in answering each question. You must be sure to use answer books as designated above when answering each question. Answer only one question in the appropriate book. Place your applicant label on the cover page of each answer book in the space provided. Start writing your answer on the colored cover page. Computer Based Testing Applicants Type your answer to each question on the correct screen. You may answer the questions in any order, but be sure that you type each answer on the screen labeled appropriately for the question you are addressing. Use the blue arrows at the top of the screen to go back and forth between your answers. All Applicants Each answer should show: an understanding and analysis of the facts; a recognition of the issue(s) involved; a knowledge and understanding of the applicable principle(s) of law; and, the reasoning by which you arrive at your conclusion(s). The value of an answer depends not so much upon the correctness of the conclusion(s) as upon the presence and quality of the elements set forth above. Your answer should include a thorough explanation or discussion that evidences your ability to apply the law to the facts presented and to reason in a logical manner in arriving at your conclusion(s). Be clear and concise in your answer, but make your answer complete. State fully all of the reasons that support your conclusion(s) and discuss all points thoroughly. Do not volunteer information that is irrelevant or immaterial. Where Pennsylvania law is applicable and is distinguishable, it should be noted in your answer. Demonstrate not merely your memory, but your ability to think.