February 1998 - Vermont Bar Examination Essay Questions - Model Answers
[Model Answer - Question I]
[Model Answer - Question II]
[Model Answer - Question III]
[Model Answer - Question IV]
[Model Answer - Question V]
[Model Answer - Question VI]
Examination Essay Questions - February 1998
MODEL ANSWER - QUESTION I - FEBRUARY 1998
1(a). What concerns should Minor have when Pavel first makes his
appointment to see her? Explain. How should she address these concerns?
Minor's primary concern should be whether there is a conflict of interest in
representing Pavel in the divorce proceeding against his wife, who was a
former, or perhaps is a present, client of Minor's firm. Minor should also
be concerned that information learned from her firm's earlier representations
of Dora could be used against her in the divorce proceeding, and such would
amount to a violation of the lawyer's continuing duty to preserve client
confidences. Under these circumstances, Minor should have declined to
represent Pavel, unless Dora waives the conflict.
If there is a concurrent conflict, Minor must decline representation. Under
the Code of Professional Responsibility applicable in Vermont, a "lawyer
shall decline proferred employment...if it would be likely to involve him
[or her] in representing differing interests...." DR 5-105(A). Under the
facts, Minor's firm may have a continuing relationship with the Turgenevs for
estate planning purposes. For example, the firm may have agreed to
periodically analyze the Turgenevs' estate planning needs. If Senior,
Junior and Minor continues to represent Dora, then Minor must decline
This result is no different because Minor did not actually perform the real
estate or estate planning work. Under Disciplinary Rule 5-105(D), "[i]f a
lawyer is required to decline employment...under a Disciplinary Rule, no
partner, or associate, or any other lawyer affiliated with him or his firm,
may accept...such employment." Thus, the disqualification of one attorney is
imputed to that attorney's entire firm.
The facts of this case more strongly indicate that the firms' representation
of Dora is a past representation. An attorney who has represented a client
in a matter should not thereafter represent another in a substantially
related matter or use information from the prior representation to the
disadvantage of the former client. This rule is derived from Canon 4, which
requires an Attorney to preserve client confidences, and in particular
Ethical Consideration 4-6, which states that the "obligation of a lawyer to
preserve the confidences and secrets of his client continues after the
termination of his employment."
Here, the real estate transaction is not substantially similar to the divorce
action and there probably is little or no information from the real estate
transaction that is relevant to the divorce. The information gained for
estate planning purposes is another matter. In drafting the Turgenevs' will,
Junior should have discovered everything about the Turgenevs' financial
status. Such detailed financial information is also central to the divorce
action to determine the division of property, alimony and child support.
Because the confidential information disclosed to Junior for estate planning
is central to the divorce action, the information could be used to Dora's
disadvantage in the divorce proceedings. In fact, in such circumstances,
courts often presume that confidential disclosures were made in the prior
relationship and that such information would be used adversely by the lawyer
in behalf of the new client. See, e.g., Silver Chrysler Plymouth, Inc. v.
Chrysler Motors Corp., 518 F.2d 751 (2d Cir. 1985). Thus, Minor has a
conflict in representing Pavel in the divorce proceeding.
Minor could address these concerns by obtaining a waiver from Dora Turgenev,
the former client. Minor would first want to determine whether Dora was
represented by another attorney in the matter, and if so, speak to Dora's
attorney. DR 7-104(a). Given the nature of the former representation and
the likelihood that confidential information from the estate planning may be
used against her in the divorce proceeding, such a waiver would be against
Dora's interest, and it is unlikely that a competent attorney would counsel
his or her client to consent to the representation.
1(b). What concerns should Minor have when Pavel refuses to amend his
interrogatory answers? Explain. How should she address these concerns?
Once Minor learns of the falsity of her client's interrogatory answers,
several ethical rules, all related to a lawyer's duty to act within the
bounds of the law while zealously representing a client are implicated.
Under DR 7-102(a),
a lawyer shall not
(3) Conceal or knowingly fail to disclose that which he is required
by law to reveal.
(4) Knowingly use perjured testimony or false evidence.
(5) Knowingly make a false statement of law or fact.
(6) Participate in the creation or preservation of evidence when
he knows or it is obvious that the evidence is false.
(7) Counsel or assist his client in conduct that the lawyer knows
to be illegal or fraudulent.
Unless Minor acts immediately to cure the false interrogatory answer, Minor
will be in violation of one or more of the above and will eventually violate
every one of these rules if she continues to represent Pavel throughout the
case without curing the false interrogatories. Although the question does
not indicate that Minor signed the interrogatory answers, an attorney is
required to do so under Vermont Rule of Civil Procedure ("V.R.C.P.") 33.
Assuming Minor signed the answers in accord with the Rules, Minor has
represented under V.R.C.P. 11 that the information contained in the answers
is true based upon her reasonable investigation. Thus, once Minor realizes
this information is false, she must take action or she will be in violation
of DR 7-102(A)(5) and (6), and will be on a collision course with DR
7-102(3), (4) and (7).
Under DR 7-106(B), Minor must counsel her client to rectify any fraud
perpetuated upon a tribunal. Here, Minor should counsel Pavel to file
amended interrogatory answers disclosing the bank account. She should also
counsel Pavel that her attestation of the false answers constitutes perjury
and advise Pavel of the potential criminal consequences.
If Pavel refuses to amend the Interrogatories, then a conflict arises between
Minor's duty to preserve client confidences and secrets under DR 4-101 and
Minor's duty to be candid with the court under DR 7-102. Unless the
information is a "privileged communication," Minor must disclose the
information to the affected person or tribunal, in this case the opposing
party. DR 7-102(B)(1). Because the information did not come directly from
Pavel, but rather from a third party, the information is not properly
considered a client confidence under DR 4-101. Client confidences must be
communicated by the client to the lawyer. The information, however, is
properly considered a client "secret" to which the duty of confidentiality
attaches under DR 4-101 and it is at least arguable that Minor is not
required to disclose this information to her adversary under the above
exception to DR 7-102(B)(1).
Nevertheless, this does not excuse Minor from her duty to be candid with the
court. Minor could attempt to address this situation by moving for leave to
withdraw. In her motion, Minor could merely cite that she has
irreconcilable differences with her client that necessitates her withdrawal,
without having to disclose Pavel's confidences. Even after Minor withdraws,
however, her signature upon the interrogatory answers she knows to be false
remains and withdrawal alone will not meet her duty to be candid towards the
court. Minor's only choice, therefore, is to disclose the information to
the opposing party. Except where an attorney is representing a criminal
defendant, most courts have recognized that the attorney must disclose such
confidences if the client has already committed the fraud and refuses to
rectify the situation.
Thus, Minor should counsel her client that if he does not disclose the fraud,
she must. If Pavel still refuses, Minor must disclose. Minor's only other
alternative would be to let the answers with her signature stand, which will
continue to operate as a fraud upon the court and could be used to
perpetrate further fraud upon the court in the future.
2. What issues are raised by Minor's lack of preparation for the
Minor violated her duty to act competently by failing to adequately prepare
for the hearing, to keep her client informed of critical matters such as
hearing times and to create a system to calendar court deadlines and other
important litigation dates. Under DR 6-101, a lawyer shall not handle a
legal matter without adequate preparation and shall not neglect a legal
matter entrusted to her. Minor violated both duties by failing to prepare
for hearing, failing to disclose exhibits, and failing to file proposed
findings of fact and conclusions of law prior to the trial.
Secondarily, Pavel may have a malpractice claim against Minor. Minor clearly
failed to meet the relevant standard of care to her client, but because the
court granted Pavel a continuance, it is unclear whether Minor's negligence
caused Pavel harm under these circumstances.
3. What obligations, if any, does Minor's opposing counsel have to take
action regarding any of Minor's conduct in addressing the above issues?
Assuming that Dora has not agreed to Minor's representation of Pavel,
Dumpling's duty of zealous representation may obligate him to file a motion
to disqualify Minor and her firm from representing him. Because the
conflict analysis above indicates that Minor's firm should not represent
Pavel, the court will likely grant the motion. On the other hand, there may
be strategic reasons to forego a motion to disqualify. For example,
Dumpling may believe that Minor will not vigorously oppose him, outweighing
the conflict concerns.
Dumpling will probably not be aware that Pavel is attempting to perpetuate a
fraud upon the court. If he did learn of Pavel's fraud, technically, he
would have a duty to report this to the court under DR 7-102(B)(2).
Most importantly, under DR 1-103, "[a] lawyer possessing unprivileged
knowledge of a violation of DR 1-102 shall report such knowledge to a
tribunal or other authority empowered to investigate or act upon such
violation," which includes violations of the disciplinary rules. Here, it is
obvious to Dumpling that Minor failed to act competently by failing to
prepare for the hearing and to timely file a list of exhibits and findings
of fact and conclusions of law. Dumpling is obligated to report this
information to Vermont's Professional Conduct Board.
MODEL ANSWER - QUESTION II - FEBRUARY 1998
A. Sam's father set up a valid revocable, inter vivos trust during his
lifetime, with Sam as the beneficiary. The settlor expressed his intention
of parting with the property involved (the commercial real estate), created
a trust in a written document, and transferred control of the trust res to
the Trustee. The purpose of the trust is for Sam's health, education and
general welfare, with the trust to terminate when Sam turns age 50.
The Trustee has been given sole discretion to determine when, and if, any
distributions should be made from the income and/or principal to Sam. Thus,
this is a discretionary trust, but there are some exceptions. The trust
document provides, in Section 3, that the Trustee must "pay the
beneficiary's just debts." In addition to this language, the Trustee must
make any distributions to Sam when he reaches ages 30,40, and 50.
The trust contains "spendthrift" provisions. Section 6 provides that Sam's
interest in the corpus and income may not be assigned or pledged, and that
the trust assets may not be subject to Sam's debts or obligations.
Normally, this provision would control the issue of whether the trust assets
can be attached, but there appears to be a conflict between this provision
and the direction in Section 3 to "pay [Sam's] just debts."
If this trust were solely a "discretionary" trust, and the Trustee had
complete authority to determine when to make distributions to the
beneficiary, the trust assets would not be attachable. But in this case,
the trust document specifically directs the Trust to pay the beneficiary's
"just debts," and this is an expenditure and disbursement over which the
Trustee has no control. He is obligated to honor the terms of the agreement
with the Trustor. Plaintiffs can rely on this provision in seeking to
attach the trust assets.
Sam can argue that the spendthrift clause prevents any creditors from
reaching his interest in this trust estate, but it is unlikely he will
prevail in this position. Section 3 of the trust, requiring the payment of
"just debts, " is more specific than the boilerplate language of Section 6,
the "spendthrift" provision. The clear direction from the Trustor that
Sam's just debts be paid should override that portion of Section 6 which
states that the trust assets cannot be subject to Sam's debts and
In my response to Plaintiffs' inquiry, I would advise them to proceed with a
motion to attach the trust assets. There is a good likelihood that they
will prevail in court.
In addition, once any trust assets are disbursed to Sam, such as when he
turns age 30, the proceeds can clearly be attached by Plaintiffs. However,
it would not be advisable to wait another two years since the trust is
revocable and may not be in existence at that point in time.
B. A Trustee cannot be removed from his duties unless there are grounds
for removal, or specific provisions for such removal are included in the
trust document. Assuming that this trust document does not have such
provisions, Sam can only petition for the removal of Vertemont Bank as
Trustee if there are legal grounds to do so.
A court may order the removal of a Trustee if leaving that Trustee in office
would be detrimental to the beneficiary's interests. Examples of
detrimental impact include a serious breach of trust by the Trustee, a
significant conflict of interest, and unfitness for the position, such as
from the commission of a crime involving dishonesty. It is also possible to
have a Trustee removed where there is extreme hostility or friction between
him and the beneficiary, if that friction will interfere with the trustee's
exercise of his duties and the proper administration of the trust.
There is not enough information in the question to determine if the Bank's
decision to liquidate the real estate was legitimate. However, assuming
that there was no reason to sell the real estate, and that the property was
continuing to bring in significant monthly interest income, Sam could show
that the Trustee had breached its fiduciary duty to him. He could argue
that the decision to liquidate was detrimental to his interests due to the
loss of considerable monthly income, and that the Bank stock could not
possibly generate the same type of income. A trustee has an obligation to
act as a reasonably prudent investor would act. The Bank's decision to sell
an asset that was performing well and then invest all of the proceeds in
only one type of stock is not a prudent financial act.
Sam could also argue that the trustee has created a significant conflict of
interest, due to its decision to liquidate the original trust corpus (real
estate) and invest the funds in Vertemont Bank stock. Even if the Trustee
could show that there was a legitimate financial reason for selling the real
estate and investing the cash in another form, the Trustee's decision to
purchase its own company stock appears to have been a case of self-dealing,
which is a violation of the fiduciary duty to the beneficiary. The purchase
of the Vertemont Bank stock may have been advantageous to the Bank itself in
terms of increasing or stabilizing its stock value, or infusing more cash
into that company. A trustee's first duty is to be loyal to the
beneficiary, not to improve its own interests.
The Trustee has also placed itself in a position of having a future conflict
of interest. If the price of the stock drops in the future, and an
impartial Trustee would otherwise have to consider selling the stock to
reduce losses for the trust, this particular Trustee might be inhibited from
selling the stock because of fears that this action would erode the overall
value of the business. The Trustee would be torn in terms of its loyalty,
and would not make a decision based solely on the best interests of the trust
Sam has a strong argument for having the current Trustee removed. I would
advise Sam to bring an action for removal of the Trustee.
C. Whether a trust is revocable or not depends on the terms of the trust
agreement. In this case, the Trustor clearly stated, in Section 7, that the
trust could be revoked. To revoke a trust, a Trustor must take some action
evidencing his desire to terminate the trust and to take back control over
the assets he had originally placed in trust. Thus, normally, all that
Father Able would have to do is notify the Trustee in writing that he was
revoking the trust, and direct the Trustee to deliver all remaining trust
assets to him or his designee.
However, in this case, the existence of an attachment could prevent Father
Able from going forward with his plan. If a court has already granted an
order for attachment, the court would probably prohibit Father Able from
re-acquiring those assets ($750,000.00) which might be used to satisfy the
judgment in Plaintiffs' favor. The court might deem the attachment to be
akin to a distribution of those assets, and rule that any revocation of the
trust would only apply as to those assets not already disbursed via the
attachment order. In that case, Father Able would only be able to revoke the
trust as to the balance of the assets not attached.
If the attachment has not been granted, Father Able should be able to revoke
the trust and take back the assets so that he exercises full control over
MODEL ANSWER - QUESTION III - FEBRUARY 1998
As of the date of this question, the divorce has yet to become final, since
the nidi period according to the Final Order, will not become absolute until
February 27, 1998.
If neither party does anything more, the divorce will become final on
February 27, 1998 and Mouse and Keyboard will be divorced.
If the parties agree, they can file a stipulation with the court before
midnight on February 27, 1998 to abate or discontinue the divorce, which
will be dismissed and no divorce will occur. They could also stipulate to a
longer Decree Nisi period of up to 90 days, to see if the reconciliation will
Although Fax was not a child of this marriage and had never been adopted by
Mouse, the Court has the jurisdiction to make orders for support of a
stepchild, but only to the extent that the step-parent and stepchild
continue to reside in the same household or as long as the marriage lasts or
until further order of the court.
Under the "best interests of the child" rule, the court can also make orders
concerning the parent-child rights and responsibilities between Mouse and
Fax, just as though Fax were Mouse's own child. The court may go so far as
to award primary parental rights and responsibilities to a step-parent over
a natural parent. Since the parties in this case have stipulated to the
arrangements, the court can order it, as long as the court finds it to be in
the best interests of the child.
Keyboard does have grounds for a parentage action in Vermont against Byte, if
she can prove that Byte is the father of her unborn child. Jurisdiction
lies in the Family Court. Byte must prove by a preponderance of the
evidence that Byte is the father. Provisions for genetic testing. A refusal
can be admitted as a presumption of parentage.
Under the UIFSA, which Vermont adopted as of 1/1/98, if Byte had sexual
intercourse with Keyboard in Vermont after that date, and the child may have
been conceived by that acto of intercourse, then Vermont has personal
jurisdiction by statute over Byte, a non-resident.
If the child was conceived in Vermont before that date, Keyboard will have to
prove that Byte had sufficient contacts with Vermont to establish personal
jurisdiction over him, just as in any other civil case.
If Byte comes into Vermont, personal service on him in Vermont, with notice
of a parentage action, will also establish personal jurisdiction.
Of course, Byte can always voluntarily submit to personal jurisdiction.
Byte's defenses include a claim that he did not have intercourse with
Keyboard in Vermont after 1/1/98, that he is not the father according the
genetic testing and the presumption that the child is Mouse's if it is born
during Mouse's marriage to Keyboard.
The same bases that would allow for jurisdiction for a parentage action will
apply to a support action, as of 1/1/98 under the UIFSA.
Vermont has established child support guidelines, which must be amended from
time to time by the Secretary of Human Services, but not less often than
every four years. The Guidelines set a presumptive level of total support
that is the obligation of the parents.
If the Guidelines are found to be inequitable, then the court shall consider
other factors in addition to the Guidelines, including:
The financial resources of the child
The financial resources of the custodian parent
The standard of living the child would have experienced if the
relationship had not been discontinued
The physical and emotional condition of the child
The educational needs of the child
The financial resources and needs of the noncustodial parent and
Adjustments to the Guideline amount of support include amounts paid for
health insurance premiums for the child, extraordinary medical or
educational expenses of the child and qualified child care expenses.
There is also a "self-support reserve" amount established under the
Guidelines to which the paying parent is entitled. If the amount of support
would reduce the obligated parent's income to an amount less than the
reserve, the support will be capped at an amount which will leave the paying
parent with an absolute minimum income on which to live.
MODEL ANSWER - QUESTION IV - FEBRUARY 1998
1. Harry and Linda have several responses and defenses to the causes of
action in contract or for specific performance if Sam and Sue should pursue
that equitable remedy.
Their first defense is that the court lacks jurisdiction to hear the matter
because the parties agreed that disputes will be resolved through
arbitration (note that there is no such remedy as remediation, but a court
might consider the parties' intent as being to pursue means other than court
resolution of disputes). Arbitration clauses are enforceable in Vermont.
Under Vermont statutes, arbitration clauses generally must give specific
notice of the parties' intent to be bound by arbitration. In this case, the
"clause" in the agreement is somewhat vague and it does not contain the
statutory notice requirement. Although Vermont courts, with their crowded
dockets, encourage parties to seek alternative means of dispute resolution
before relying upon the courts, there is a reasonable likelihood that the
court would find that the arbitration clause does not comply with Vermont's
notice requirement. On the other hand, because the agreement was negotiated
and consummated in part through the U.S. mail, the Federal Arbitration Act
may apply. The federal act does not require the same notice as does Vermont
law. Thus, if the federal act applies, the court likely will dismiss the
complaint (probably without prejudice) or stay the action and order that the
parties seek relief through arbitration.
Another defense that Harry and Linda may raise is that the agreement is not
enforceable because there was not a meeting of the minds-that is, there was
not a valid offer and acceptance. For a contract to be enforceable, the
contracting parties must agree to the material terms. One such material
term is price. In this case, the final purchase price was not known. The
agreement simply provided that final price would include the cost of all of
the repairs. However, the nature and extent of the repairs, and the cost
were not known. Moreover, the agreement did not provide any method for
determining the price. Therefore, the purchase price not only was unstated,
but it also was unknown and unknowable. In general, where parties fail to
specify the price term in a sales contract, a reasonable price is implied.
What is deemed to be a reasonable price is generally based upon the general
price in the marketplace for similar goods or services. In this case,
however, it is virtually impossible to imply reasonable price into the
agreement because the full scope of the repairs and the cost of those
repairs is not known. For this reason, the price term fails and the court is
likely to uphold this defense.
Another defense that Harry and Linda can raise is that the damages claimed by
Sam and Sue are speculative. Specifically, in contract claims, a plaintiff
generally is entitled only to their actual damages. In this case, it is not
completely clear how Sam and Sue arrived at the $725,000 damages claim. For
example, Sam and Sue apparently are seeking damages that include the
estimated additional $325,000 that it will cost to complete the repairs.
These repairs, however, were never done and it does not appear that they
either paid or were obligated to pay this amount to the architect or
contractor (the facts seem to imply that the architect only "suggested"
making these additional repairs and, therefore, there is no indication that
Sam and Sue are contractually obligated to have the repairs done). Sam and
Sue, therefore, are not entitled to those particular damages. Likewise, Sam
and Sue may be seeking to recover damages relating to the initial $150,000
worth of repairs. However, Harry and Linda already made this payment to Sam
and Sue. Sam and Sue cannot recover twice for the same damages. Moreover,
because Sam and Sue still own the house (and because the sales price was not
specified in the agreement), they would not be entitled to damages relating
to the sales prices. The only damages that Sam and Sue may be able to
establish is related to the completed portion of the work that Harry and
Linda had requested but never paid for.
Harry and Linda also may claim that Sam and Sue failed to mitigate their
damages. Generally, in contract actions, the plaintiff has a duty to take
reasonable steps to mitigate its damages. In this case, because the
property is unique, Sam and Sue could satisfy this obligation by attempting
to sell the property to a third party. If they did so, they would have been
able to offset their damages by the sales price to the third party. The
court could find that their failure to mitigate damages could prevent them
from recovering damages from Harry and Linda.
Harry and Linda may claim that the agreement did not comply with the statute
of frauds. In general, an agreement for the sale of real property must be
in writing and signed by the parities. In this case, the agreement was
written on several scraps of paper. Although this may be a very informal way
of drafting a written agreement, it satisfies the statue of frauds provided
that it was signed by all the parties, which it appears they did. In any
event, Sam and Sue likely can overcome the statue of frauds because, with
the full knowledge of Harry and Linda, they had complied substantially with
their obligations under the agreement. Thus, the court likely would deny
There are other defenses that Harry and Linda may raise, such as lack of
consideration and mistake of fact. These, however, are fairly weak given
the facts of this case and the court is likely to base its decision on the
defenses discussed above.
2. For all the reasons discussed above, it does not appear that there
was a binding contract (for example, the contract lacked essential terms
such as price) and, therefore, it is unlikely that the court will allow Sam
and Sue to recover damages from Harry and Linda for breach of contract. If
there was not a binding contract, and if Sam and Sue must pay the
contractor and architect (as described below) the $125,000 for unpaid work
by the contractor and architect, Sam and Sue may be able to recover this
amount from Harry and Linda under the theory of quantum meruit. Under this
cause of action, a plaintiff may recover damages in the absence of a
contract where the plaintiff justifiably relies upon the defendants' request
for services regardless whether the defendant receives any benefit. Here,
Sam and Sue arguably relied upon Harry and Linda's representations. Thus,
the court may allow them to recover under this theory. It is unlikely that
Sam and Sue will be able to recover damages from the Links under other
quasi-contract remedies such as promissory or equitable estoppel or unjust
enrichment because the Links did not benefit from renovations. Sam and Sue
also may try to recover under tort law. There is nothing in the facts,
however, that would support such claims.
It appears from the facts that Sam and Sue (rather than Harry and Linda)
engaged the architect and contractor to do the repair work at the house. If
Sam and Sue fail to pay them the $25,000 for work completed (but not paid
for by Harry and Linda), the architect and contractor can sue them to
recover those costs under a breach of contract theory. Depending upon the
terms and conditions of the architect and contractor's contract with Sam and
Sue, they also may be able to recover their lost profits relating to the
additional $325,000 to complete the repair work. Finally, under Vermont
Statutes relating to construction work (9 V.S.S. Sec. 4000 et seq.) the
architect and contractor may be able to recover interest, penalties and
attorneys fees from Sam and Sue. Note that if there is not such a contract,
the architect and contractor may still be able to recover their actual
damages from Sam and Sue, i.e. $125,000 for work completed but not paid for,
under the theories of quantum meruit, equitable estoppel or unjust
enrichment. The architect and contractor likely would succeed under these
theories because the Seller, as the owners of the house, benefited from the
Because it does not appear that there was a contract between the Links and
the architect and contractor, the architect and contractor cannot bring a
breach of contract claim against them. They can, however, bring an action
in quantum meruit to recover the additional $125,000 from the Links. Under
this cause of action, a plaintiff may recover damages in the absence of a
contract where the plaintiff justifiably relies upon the defendants' request
for services regardless of whether the defendant receives any benefit. In
this case, it appears that the architect and contractor justifiably relied
upon the Links' representations when they engaged in the repair work. (Note
that Harry and Linda would not have to pay the $125,000 to both the Sellers
and to the architect and contractor.) The architect and contractor may also
try to recover damages from the Links under theories of unjust enrichment or
promissory estoppel. Under these theories, however, the defendant must have
received a benefit. Here, because the Links do not own the property (nor
are they purchasing the property), they did not receive any benefit from the
renovations to the house. Therefore, damages under these theories are not
3. A preliminary injunction is a form of equitable relief. The
requirements for the granting of a Motion for Preliminary Injunction are:
the moving party must show that he or she will suffer irreparable harm
without temporary relief; that the moving party has a reasonable likelihood
of success on the merits, and that the relative hardships imposed upon the
parties weigh in favor of the moving party.
In general, one is not entitled to equitable relief where there is an
adequate remedy at law. In this case, Sam and Sue do have an adequate
remedy at law - that is, if they can establish that they were injured by
Harry and Linda, they would be entitled to monetary damages. In this case,
monetary damages would make them whole because the nature of their alleged
injury is purely monetary in nature. Indeed, there is nothing preventing
Sam and Sue from selling the house to someone else. For these reasons, it
is very unlikely that Sam and Sue can show that they will suffer irreparable
harm without the temporary relief. Moreover, for the reasons discussed in
section 1 above, Sam and Sue do not have a reasonable likelihood of success,
particularly because of the agreement that disputes will be resolved by
arbitration and because the contract may not be enforceable (due to the lack
of a price term). Finally, it is difficult to determine in whose favor the
relative hardships would fall. Nevertheless, because Sam and Sue cannot
show irreparable harm or a reasonable likelihood of success on the merits,
the court probably will not grant their motion for a preliminary injunction.
Note that if the facts were slightly different whereby Sam and Sue were
refusing to sell the property to Harry and Linda, and instead were
attempting to sell the property to a third party, Harry and Linda probably
would be able to win a motion for preliminary injunction to prevent the sale.
The reason the outcome would be different under this set of facts is because
all real property generally is considered to be unique. Thus, if Sam and
Sue sold the property to a third party, Harry and Linda would be irreparably
harmed because they no longer would have the ability to complete their
purchase of the unique property and because monetary damages would not make
them whole. Thus, they may, in that circumstance, be entitled to injunctive
MODEL ANSWER - QUESTION V - FEBRUARY 1998
1. The issue presented is one of personal jurisdiction over Dave, the
ABC Company and the manufacturer. As to Dave, there should be no question
that personal jurisdiction exists over him since he committed a tort while
within the State of Vermont. See also 12 V.S.A. § 891.
Similarly, there should be no question that personal jurisdiction exists over
ABC Company whose employee committed a tortious act within the state while
in the course of his employment. See O'Brien v. Comstock Foods, Inc., 123
Vt. 461, 464 (1963); see also 12 V.S.A. § 855.
Whether jurisdiction exists over the manufacturer is much more problematic.
The facts indicate that the manufacturer only sells vehicles in Japan and
California and that the manufacturer's only connections with Vermont are
that the truck was in Vermont and the manufacturer advertised in national
publications which are distributed in Vermont. Vermont has sought to
exercise jurisdiction over defendants to the outer limits of the due process
clause. Metropolitan Life Insurance Company v. Robertson-Ceco Corp. 84 F.3d
560 (2nd Cir. 1996); Messier v. Whitestown Packing Corp. 544 F.Supp. 8
(1982). State courts can assert jurisdiction where a non-resident defendant
has "certain minimum contacts with [the forum state] such that the
maintenance of the suit does not offend traditional notions of fair play and
substantial justice." The critical consideration in determining whether a
defendant's activities satisfy the minimum contacts for jurisdiction is
whether the defendant's conduct in connection with the forum state is such
that defendant "should reasonably anticipate being haled into court there."
This requirement is met when a defendant purposefully directs activity
towards residents of a foreign state and the litigation arises out of or
relates to that activity. However, a defendant is not subjected to
jurisdiction on the basis of fortuitous, attenuated or random contacts. It
is unlikely that the presence of the vehicle in Vermont alone would be
sufficient to constitute the necessary minimum contacts as to the
manufacturer. See Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102
(1987); see also, World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286
(1980); O'Brien, supra. In the case of Dall v Kaylor, 163 Vt. 274, (1995),
the dissent characterized the majority opinion as subjecting one advertising
a product in a national media to personal jurisdiction in the state
regardless of the fact that there are no other Vermont contacts. Id. at
279. An argument can be made, however, that contrary to the position taken
by the dissent, the Dall case was limited to a situation where the
advertisement resulted in a sale to a Vermont resident and a claim arises
out of that transaction even if the defendant has no other contact. Id. at
276. In the instant case, an argument would be made that the advertising has
nothing to do with the claim that has arisen nor does it constitute
"continuous and systematic general business contacts," and that the truck
being in the State of Vermont is merely a fortuitous or random contact not
initiated by a manufacturer and, therefore, jurisdiction would not be
present. In essence, it would be argued that the combination of
the truck being in Vermont and advertising are insufficient "minimum
contacts" under either a "specific" or "general" jurisdiction analysis.
Metropolitan, supra, at 567.
2. John could file suit in Washington Superior Court or in the
appropriate state court in California. Jurisdiction in Federal Court under
28 U.S.C. § 1332 would also be present since diversity exists between John
and the potential defendants and the damages clearly appear to exceed
$75,000. Therefore, another option would be to file in U.S. District Court
in Vermont or possibly in California. See 28 U.S.C. 1391.
3. The traditional formal discovery devices that would be available in
Vermont state court would be:
a. Interrogatories (see V.R.C.P. 33);
b. Requests to Produce (see V.R.C.P. 34);
c. Requests to Admit (see V.R.C.P. 36);
d. Depositions (see V.R.C.P. 30).
4. The assets of the defendants and any insurance coverage they may have
would be possible sources of recovery. Since there appears to be at least a
question as to whether Dave/ABC Company has insurance covering the accident,
John's insurance policy should be checked to determine the availability and
amount of uninsured motorist coverage which might be available and John's
insurance company should be put on notice of the claim. See 23 V.S.A. §
5. Since Dave may not, indeed professes not to, have insurance but does
have property located in Vermont, consideration should be given to attaching
that property pursuant to V.R.C.P. 4.1 at the initiation of suit to enhance
John's chances of collecting on any judgment which he might ultimately
receive. Attachments are sought in accordance with procedures set out in
V.R.C.P. 4.1. Attachment is obtained by filing a motion and affidavit with
the court. Motions for writs of attachment generally require notice and
hearing; however, the rule provides under certain circumstances that one may
be sought ex parte if the court makes findings that there is a reasonable
likelihood that plaintiff will recover judgment in an amount equal to or
greater than the amount of the attachment over and above any liability
insurance bond or other security known or reasonably believed to be
available to satisfy the judgment and that either (1) there is a clear
danger shown by specific facts that the defendant, if notified in advance
of the attachment, will remove from the state or conceal attachable property
leaving insufficient attachable property or other assets to satisfy the
judgment, or (2) there is an immediate danger shown by specific facts that
the defendant will damage, destroy or sell to a bona fide purchaser
attachable property leaving insufficient attachable property or other assets
to satisfy the judgment. Plaintiff's attorney is required to support
the motion with a certificate of the amount of any liability insurance bond
or other security which the attorney knows, or has reason to believe, will be
available to satisfy any judgment against the defendant. If assets of ABC
Company can be located, consideration should also be given to attaching
those assets or obtaining trustee process under V.R.C.P. 4.2.
MODEL ANSWER - QUESTION VI - FEBRUARY 1998
1. Types of Bankruptcy Proceedings:
Chapter 7 is distinguishable from Chapters 11, 12 and 13 as it provides for a
liquidation of the debtor's assets. All assets in the debtor's possession
at the time of filing the petition are included in the bankruptcy estate.
There are exceptions to inclusion based on either the state or federal
exemptions. In general, after the filing of the bankruptcy petition any
income that the debtor receives or earns he or she may be entitled to keep.
Once the petition is filed the debtor's assets are collected and liquidated
by the bankruptcy trustee in order to satisfy claims of creditors on a pro
rata basis. As a result of this procedure, the debtor is then discharged
from any further obligations to pay those creditors.
Under Chapter 11 the debtor, which is usually a corporation, is allowed to
reorganize its financial affairs without liquidating the business. The
debtor files a plan which contains a description of his assets and the
claims against him and the methods proposed to pay the debts. The plan is
presented to the creditors and if it is accepted by them, it is confirmed by
the court. The debtor remains in control of the estate as a debtor in
possession unless an interested party asks for a trustee. The debtor in
possession performs the duties usually performed by a trustee.
Chapter 12 provides an alternative to Chapter 11 for family farmers, who
qualify as debtors but may have too much debt to file under Chapter 13.
Filing under this chapter is not appropriate for Mr. Lorenzo because he is
not a family farmer.
Chapter 13 is designed to be a flexible vehicle for repayment of claims. It
is generally simpler, faster and cheaper than filing under Chapter 11.
However, unlike Chapter 11, there are limits to the amount of indebtedness
owed by an individual under Chapter 13. Under Chapter 13 an individual with
a sufficiently stable income to make payments under a plan may file a
petition. Only voluntary petitions are permitted under this Chapter. The
bankruptcy estate then includes all earnings and property acquired after the
date of the petition. The debtor submits a plan to the trustee to make full
payment of the claims of his creditors; however, they are made on a deferred
basis. The trustee acts as the disbursing agent and advisor to the debtor
and insures that the debtor makes timely payments to the creditors. The
debtor is not discharged until after completion of all payments under the
Any advice regarding which chapter of the Bankruptcy Code is most appropriate
for Mr. Lorenzo is necessarily dependent on whether he wishes to continue in
business or whether he wants to close the business. Chapter 7 is the most
appropriate choice for Mr. Lorenzo if he wishes to go out of business. His
yearly income has steadily decreased and he expects to book a loss for this
year. He may not have a steady flow of income which is necessary under the
other chapters to satisfy the claims of the creditors. However, if Mr.
Lorenzo decides to reorganize instead of liquidate he is able to file under
Chapter 13 since the total amount of his indebtedness falls within the
limits imposed under Chapter 13. Mr. Lorenzo may desire to file under this
chapter if he thinks that the amount of his inheritance from his mother's
estate and/or income from the business will enable him to satisfy the terms
of a reorganization plan.
a. Fraudulent Conveyances:
Mr. Lorenzo's act of giving his stamp collection to his sister Sorella in May
of 1997 may be a fraudulent conveyance. A conveyance is fraudulent if it
operates to hinder, delay or defraud creditors, was made within one year
proceeding the filing of the petition and the debtor had the intent to
hinder, delay or defraud creditors when the transfer was made. At the time
Mr. Lorenzo gave his stamp collection away, he realized that his business
was failing. Therefore, he had the requisite intent to defraud his
creditors. Mr. Lorenzo needs to be advised that if he files for bankruptcy
prior to May of 1998 that this can be determined to be a fraudulent
conveyance by the bankruptcy trustee. Therefore, the transfer would be void
and the trustee can avoid the conveyance.
Mr. Lorenzo's transfer of his interest in his marital interest to his wife
Lasposa may also be considered a fraudulent conveyance; however, the
transfer may be of little or no significance depending on how much equity is
in the home. Under Vermont law, if a homeowner has less than $75,000 in
equity in the homestead then it is exempt from the bankruptcy estate. Also,
if Mr. Lorenzo files for bankruptcy solely versus filing jointly with his
wife, then it would have been to his benefit to have kept the home owned
jointly as tenants by the entirety because jointly held assets are not part
of the bankruptcy estate. It is important to advise Mr. Lorenzo that First
State Bank still has a cause of action against him on the note and mortgage.
Before First State Bank can bring an action against him, it must petition
the bankruptcy court for a relief from stay. Mr. Lorenzo also needs to know
that if he files for bankruptcy solely, First State Bank can still take
legal action against his wife on the note and mortgage also.
b. Preferential Transfer:
The transfer of $30,000.00 to Mr. Svelte is a preferential transfer. A
preferential transfer includes the sale and/or disposition of property,
either voluntarily or involuntarily, directly or indirectly, to or for the
benefit of a creditor on account of an antecedent debt made either (a) on or
within 90 days before the filing of the petition (during which time the
debtor is presumed insolvent) or (b) between 90 days and one year before the
filing if, at a time of transfer, the debtor was insolvent and the creditor
was an insider. Mr. Lorenzo paid Mr. Svelte, albeit under coercion or fear,
the entire amount owed to him which left Mr. Lorenzo with only $5,000 to
satisfy his remaining creditors. The payment was made for a debt that was
incurred sometime in the past during the time Mr. Lorenzo was insolvent,
(i.e. the aggregate of his property was insufficient to pay his debts).
Under the Bankruptcy Code the bankruptcy trustee can avoid this preferential
c. Money Paid to Mr. Lorenzo's Mama:
Although the $1,500 paid by Mr. Lorenzo to his Mama may appear to be an
intra-family transfer, it may be a transfer which is protected under the
Bankruptcy Code. It can be protected if it is a payment made for a debt
incurred in the ordinary course of business and made according to normal
business terms. The fact pattern indicates that Mama was owed $1,500 for her
cooking services over the past month. If it is Mr. Lorenzo's ordinary and
usual business practice to pay his Mama on a monthly basis, then the $1,500
paid to her is a protected transfer.
Mr. Lorenzo must be aware that if his mother dies and he receives proceeds
from her estate within 180 days of his filing of the petition for
bankruptcy, then this inheritance can be included in the bankruptcy estate
for distribution to creditors. An inheritance is considered to be an
extraordinary windfall from which the debtor should not be able to profit at
the expense of the creditors. Although his mother may be intestate, Mr.
Lorenzo will receive a portion of his mother's estate when she dies as the
facts tend to indicate that Mama is a widow and that he and Sorella are the
only children. This portion may be sizable enough to enable him to pay his
creditors and avoid filing for bankruptcy altogether, or it may make the
reorganization provisions in Chapter 11 and 13 more attractive than
liquidation of his existing assets under Chapter 7. Mr. Lorenzo's Mama
should be encouraged to consult with her own attorney to determine if she
wants to write a will which will shield the assets of her estate from her
Board of Bar Examiners
Mailing address: 109 State St.
Montpelier VT 05609-0702
Office Locaation: 111 State St.