QUESTION I - FEBRUARY 2001


       Soon after Bill was discharged from the Army after the Korean War in
  1953, he got a job working for Zeke, an elderly boat builder in Colchester. 
  Zeke operated his business, "Boat Building," in a small rented boat shed on
  Malletts Bay.  Bill found that he loved boats, and he quickly became a
  skilled designer and builder of wooden sail and power boats.  Zeke retired
  in 1955, and Bill bought the business from him.  Bill paid Zeke $15,000 for
  the business, which consisted of the tradename and Zeke's customer list. 
  Bill paid Zeke an additional $5,000 for Zeke's tools.  

       The boating public quickly learned about Bill's extraordinary boat
  building and boat design skills and he was soon overwhelmed with business. 
  He hired two employees in 1957, who were carefully chosen for their
  carpentry skills and work ethic.  The business continued to expand and
  eventually outgrew its Colchester facility.  Bill moved the business to St.
  Albans Bay in 1961.  He paid $25,000 for the land, spent $60,000 building
  three sheds for boat building and repair.  In 1963, Bill hired Dave, a
  well-known and respected boat designer, to take over the design part of the
  business so that Bill could concentrate on building and repairing wooden
  boats.  In 1970 Bill's son Steve came to work in the business as an
  apprentice.  By 1974 Bill had 11 employees working full-time in the
  business.  At this time he formed Boat Building, Inc., a Vermont business
  corporation, and transferred all of the business assets to the corporation. 
  There was one class of stock.  In recognition of the large contribution
  Dave had made to the success of the business, Bill had 45% of the stock
  issued to Dave, and kept the other 55% for himself.  

       The business became increasingly successful year after year.  In 1995
  Bill concluded that 42 years in the business was long enough and decided to
  slowly reduce his personal work load.  Dave took over sole management
  responsibility in addition to running the design business.  Bill gave Steve
  one-half of Bill's stock in the corporation.

       In November of 2000 Takeover, Inc. offered to purchase the
  corporation's business for $1,500,000.  It agreed to employ Dave for not
  less than 10 years as the head of Takeover's boat design business.  Bill
  was not interested in working any longer.  Takeover told Bill that he would
  not have to work for Takeover, but that he would have to enter into an
  agreement not to engage in the boat building design or repair business
  anywhere in the United States or Canada for a period of five years after
  the closing date, for which he would be paid personally an additional
  $50,000 per year for the five year term of the agreement.  

       Bill, Dave and Steve have asked you to represent them in the sale of
  the business.  They are specifically concerned about minimizing the federal
  taxes they will have to pay on account of  the sale.  When answering the
  following questions, it is not necessary to cite specific sections of the
  Internal Revenue Code.  Ignore the tax effects of Vermont law.

       1.  What advice would you give to Bill about the tax treatment of
           payments he receives from the non-competition agreement? 

       2.  Would you advise your clients to carry out the sale by
           selling their stock in the corporation, or is it preferable 
           that the corporation sell its assets?  Which method will 
           Takeover prefer?  Give reasons. 

       3.  If the corporation sells it assets to Takeover, how do the
           corporation and Takeover determine the prices paid for the 
           several assets involved in the sale?  What advice would you 
           give to your clients about this problem?  What will Takeover's 
           position be? 




Model Answers 


QUESTION II - FEBRUARY 2001
   
       David Dearman retired to Vermont in 1989 from New York City in order
  to be near his son, Samuel.  David rented a farmhouse in North Montpelier. 
  Samuel, David's oldest child, lives in Montpelier with his wife and adopted
  son, Kyle, who is now nine years old.  David's daughter Elizabeth, who is
  younger than Samuel, still lives in New York in her father's old
  condominium, where she and her brother had been reared.  Elizabeth is not
  married, but has one son from a marriage that ended three years ago in
  divorce.  Elizabeth's son, Craig, is fifteen years old.

       David died in December 2000 following a stroke.  He had not been ill
  before the stroke, so his death was quite a blow to both Samuel and
  Elizabeth.  

       After the funeral, Samuel and Elizabeth got together at their father's
  farmhouse to go through his papers and figure out what needed to be done to
  settle his estate.  Neither Samuel nor Elizabeth recalled their father
  talking about a will, and they know that when their mother died a number of
  years ago, she did not have one.  They were able to put together, however,
  a list of his assets and debts, as follows:

       Assets:  Condo in New York valued at $425,000
                Stock in a mutual fund valued at $35,000
                401(k) retirement account valued at $56,000
                Stamp collection of unknown value
                Checking account with $500 in it

       Debts:  Mortgage on the condo of $325,000
               Credit card balances totaling $1,250

       They also found a piece of paper dated January 23, 1992 - one week
  after Samuel had adopted his son - with the following words in David's
  handwriting on it:  "I am so happy to be a grandfather, and want to make
  sure that my new grandson has all the opportunities I never had.  To that
  end, when I die, I want $20,000 of mine to go to my grandson for his
  college education."  
   
       Samuel tells Elizabeth that he will go to court to take care of
  everything. A couple of days later, Samuel comes to your office and tells
  you he wants to settle the estate so that he and Elizabeth and their
  families can get whatever is coming to them as soon as possible.

       1.  Describe the legal steps you will take on Samuel's behalf to
           settle David's estate.  

       2.  Is the handwritten piece of paper dated January 23, 1992 a
           valid bequest?  Discuss.

       3.  How should the estate's proceeds be distributed?  Explain.


     
 


Model Answers 


QUESTION III - FEBRUARY 2001


       Upon returning to his home in Montpelier, in Washington County, from a
  three week vacation, Richard discovered that Sam, who owns the adjoining
  lot, had dug a hole on property Richard believes he owns.  Sam lives in
  Burlington, in Chittenden County, but he has owned the land next to Richard
  for many years.  Sam had already put in a cement foundation and apparently
  was in the process of constructing a large garage to house the classic cars
  he had purchased the preceding summer.  The excavated area was
  approximately 30 feet by 50 feet in size and virtually all of it was on
  property Richard claims to own.  To make matters worse, if a building is
  constructed on top of the foundation, it will ruin the views from Richard's
  house.

       When Richard went to speak to Sam to tell him that the excavation area
  and foundation were on his land, Sam became hostile.  Sam said that the
  land was his, he had obtained all the necessary permits, had already spent
  a substantial amount and that Richard should stay out of his way.  Sam also
  said he had discussed the location with Richard's daughter, who had been
  staying at Richard's home while he was gone, and she had not voiced any
  objections.  Sam said that he would not stop construction because it would
  be very costly  to delay the project since any delay would require him to
  arrange for alternative storage for his classic cars and he would be unable
  to complete the project before winter when construction costs were higher.  

       Richard called the police, but they indicated that they would not get
  involved in a situation like this unless a crime were committed.  Richard
  has called you because the construction is continuing.

       1.  Please describe in detail the type of relief you would seek
           on Richard's behalf and what facts you would need to establish.

       2.  Identify and describe the documents you would need to file in
           order to obtain relief.

       3.  Explain to Richard what he can expect in this process.

       4.  Indicate which court(s) an action could be filed in and which
           venue(s) would be appropriate.

       5.  Discuss the basis for any defenses you would expect Sam to raise.

   



Model Answers 


QUESTION IV - FEBRUARY 2001

       In January 2000 your client, Emily, allowed her twenty-year-old
  grandson, Dylan, to move in with her after his parents kicked him out of
  their house.  Emily is 85 years old and in failing health.  In February
  2000 Emily signed a general power of attorney giving Dylan broad powers to
  transact business on her behalf including doing business with all financial
  institutions with which she held accounts.

       In March 2000 Dylan wrote a check made out to himself for $5,000.00 on
  Emily's checking account at Northern Vermont Savings Bank to purchase a
  motorcycle from his friend Mark Michaelson.  Dylan signed his name to the
  check and wrote under his signature, "Power of Attorney".  The Power of
  Attorney document was not on file at the bank.  At the time, Emily had
  $9,000.00 in the account.  Dylan endorsed the check on the back and wrote
  "Pay to the order of Mark Michaelson."  Mark took the check to Northern
  Vermont Savings Bank and cashed it.

       Meanwhile, Emily needed some roof repairs and wrote a check from her
  Northern Vermont checking account for $6,000.00 to Bob's Roofing.  Bob's
  Roofing deposited the check in their account at Mount Mansfield Savings
  Bank, and Mount Mansfield presented the check to Northern Vermont.  Then
  Northern Vermont returned the check for insufficient funds.  Northern
  Vermont Bank notified Emily of the overdraft and told her there would also
  be a $25.00 overdraft fee.

       1.  What claims does Emily have against Dylan?  Against Northern
           Vermont Savings Bank?  Against Mark?  What defenses does 
           each have?

       2.  What claims does Bob's Roofing have against Emily?  Against
           Dylan?  Against either bank?  What defenses does each have?




Model Answers 


QUESTION V - FEBRUARY 2001

       On New Year's Eve at midnight, Town of Blueville Police Officer Paul
  was patrolling on a side street when a passing motorist, Mrs. Wilson,
  flagged him down and told him that she had come upon an auto accident a
  couple of miles up the road.  Wilson said that an orange car with a Duke's
  Taxi light on top had lost control and slid into the ditch.  She told Paul
  that the driver of the taxi had told her that he thought he hit some black
  ice in the road and had lost control and went into the ditch.  There were
  two passengers in the taxi and she had asked the driver and the passengers
  if they were okay.  They all told her that they were not hurt.  In her
  opinion, the driver seemed dazed or drunk.

       Officer Paul thanked her, got her telephone number and immediately
  drove to the location Wilson had described.  On the way, he did not notice
  any black ice.  When he got there, he observed an orange taxi in the ditch
  on the right side of the road.  When he approached the vehicle, he noticed
  that no one was sitting in the front seat, nor was anyone visible anywhere
  nearby.  Two men were sitting in the back seat, moaning.  He asked these
  people what happened and they said the cab driver was going too fast and
  lost control.  He asked them if they were all right, and they both said
  they had sore backs and moaned again. Paul asked if they needed an
  ambulance and they said no, they would see their own doctors.  

       After the passengers got out of the car,  Duke suddenly walked up to
  the car, coming out of a stand of trees about 100 yards away from the
  vehicle.  He was talking on his cell phone.  After Duke ended his phone
  call, Officer Paul asked him if he had been driving, and he admitted he had
  been.  Paul asked what had happened and Duke said he had tried to avoid
  hitting a deer and lost control.  When asked why he left the vehicle, he
  responded that he wanted to talk privately to his lawyer, Mr. Lawson, and
  had reported the accident to his estranged wife, Wendy, who was going to
  call several friends for help to move the vehicle out of the ditch.

       Upon noticing the odor of alcohol on Duke's breath and his blood shot
  eyes, Paul asked him to undergo sobriety tests.   These included leaning
  back and touching his nose, walking a straight line, standing on one leg,
  and counting backwards from 100.   Paul then asked Duke to take a
  preliminary breath alcohol screening test at the road side, and Duke
  agreed.  This test showed a blood alcohol concentration (BAC) of .18%. 
  Paul then took Duke to the police station and asked him to take a formal
  Datamaster blood alcohol screening test.  After calling Lawyer Lawson
  again, Duke refused to take the test. Duke was then released into Wendy's
  custody and he was issued a citation to appear to answer charges of leaving
  the scene of the accident,  and driving under the influence of alcohol,
  with a refusal to submit to breath testing. 

       The next day Paul called Wendy and asked her what had happened the
  night before.  She said Duke had called her and told her he had finished
  off a six pack and was driving some tourists home when he hit a deer and
  lost control of the taxi.  He told her that he wanted her brothers to come
  push him out.  She told him to walk into town and sober up.  

       Later, Officer Paul ran into Lawyer Lawson at the court house and
  asked him if he was representing Duke in his new troubles.  Lawson angrily
  replied that Duke had dumped a large retainer on another local law firm. 
  Lawson told Paul he was glad not to represent a deadbeat who had the gall
  to call him twice in the middle of the night to say he was drunk, was in an
  accident and needed help, and then hired another law firm.

       Discuss the admissibility in court, at Duke's criminal trial, of the
  following, and explain each answer: 

       1.  Officer Paul's testimony about each of Mrs. Wilson's
           statements.

       2.  Paul's description of the road conditions and his
           observations at the site of the accident. 

       3.  Paul's account of the passengers' statements to him and
           behavior at the accident scene.

       4.  Paul's account of Duke's statements to Paul at the accident
           scene.

       5.  Paul's account Duke's performance on roadside sobriety tests. 

       6.  The results of Duke's preliminary roadside breath test.  

       7.  Duke's refusal to submit to breath testing. 

       8.  Lawson's testimony about his conversation with Duke on the
           night of the accident, and Lawson's statements to Officer Paul.   
           Discuss any ethical implications for Lawson.  

       9.  Wendy's testimony regarding Duke's statements to her on the
           night of the accident. 




Model Answers 


QUESTION VI - FEBRUARY 2001
                  
       You are completing your clerkship in a private law firm with an
  extensive workers' compensation practice. The managing partner enters your
  office. She is very worried about the application of the following
  administrative regulation recently promulgated by the Vermont Department of
  Labor and Industry, which oversees workers' compensation claims in Vermont.
  The rule reads in its entirety:

       EFFECTIVE MARCH 10, 2001.  In light of the ever expanding 
       number of workers' compensation claims overloading the 
       Department of Labor & Industry's formal hearing docket, no 
       work-related injuries alleging a mental injury, as opposed
       to a physical injury, will be accepted on the Department's
       docket for determination of compensability.
       
       The law firm currently represents Peter Pensive, who has not yet filed
  a workers' compensation claim, but will probably do so after his initial
  visit with his psychiatrist on March 11, 2001. Recently, Peter experienced
  severe emotional trauma when he was robbed at gun point while working the
  graveyard shift at the local convenience store.  He has not been back to
  work since the robbery.  Prior to its effective date, the managing partner
  wants to challenge the regulation. The managing partner directs you to
  draft a memo for her by the time she comes back from lunch. The managing
  partner directs you to answer the following questions without reference to
  any constitutional issues:


       1.  Can the administrative rule be challenged prospectively both
  as to the effective date of  the administrative rule and prior to one of
  the law firm's clients having a mental injury claim rejected by the
  Department?

       2.  In what forum would any challenge to this rule be brought?

       3.  What procedures should have followed in order for the rule to
  be properly adopted and promulgated by the Vermont Department of Labor and
  Industry?

       4.  If the initial challenge does not successfully invalidate the
  rule, what appeal rights would exist?
   

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                                  Board of Bar Examiners


         Mailing address:  109 State St.
                           Montpelier VT  05609-0702


         Office Location:  111 State St.
                           Montpelier, VT

         Telephone:  (802)828-3281