Posted: June 27th, 2015

The problem shows that Scum has a separate account from his mother. Due to financial crisis, he decides to embezzle his mother’s account. The facts state that he has sold 100 shares from Wal-Ma

Remedies Law

Part 2-1

FV = PV x [FV factor]

Number of years remaining to retirement = 5 years

Annual wage = $30,000

Annual rate of inflation = 2.5%

The rates of interest applied are that relating to 2010

In 5-year duration the plaintiff should have earned;

FV1 = $30,000X 1.30 = $39,000

FV2 = $39,000X1.061 =$41,379

FV3 = $41,379X1.093 =$45,227.25

FV4 = $45,227.25X1.126= $50,925.88

FV5 = $50,925.88X1.159 =$59,023.01

Totals = $235,555.14

The plaintiff had planned to retire at the age of 55. Since there is no retirement age, the court should rule that the plaintiff was supposed to retire at the age of 55 years. Therefore, all the computations will be done for a period of 5 years. Hence, the plaintiff is supposed to get $235,555.14, as a compensation for the loss of job. The inflation rate used to compute the value is 2.5%, which is approximately 3.0%. The interest rates will not be applicable because the plaintiff does not own any on the assets mentioned in the list. The defendant has a legal obligation to provide the plaintiff with $235,555.14 because the plaintiff was injured in the course of duty.

Part 8-1

1) The problem shows that Scum has a separate account from his mother. Due to financial crisis, he decides to embezzle his mother’s account. The facts state that he has sold 100 shares from Wal-Mart Inc., which belonged to his mother. Therefore, he obtained $6,000 in cash from the transaction. In identifying the assets available for the creation of constructive trust, it is imperative to elaborate the operation of constructive trust. Constructive trust has its origin in the Court of Chancery. The provisions of the law states that the constructive trust is a good remedy in a scenario similar to the one being experienced in this case study. Constructive trust applies where a party has been deprived his/her property by another party. It serves to stop a party from unjust enrichment. The remedy, like any other equitable remedy, does not apply where the party can get an adequate Common law remedy. According to the facts at hand, the $6,000 that Scum got after selling his mothers shares, amount to unjust enrichment. A constructive trust should be created to the effect that all the cash should revert back to his mother’s account because he used it instead of depositing in the checking account.

Scum’s mother has an equitable lien on the shares bought with her money. In reversing the transaction, there are numerous considerations that should be applied. Scum has interfered with his mother’s property, hence unjustly enriching him. However, case law has shown that existence of bankruptcy proceedings have the effect of making the bankruptcy’s property untouchable and in the hands of the trustee in bankruptcy. The argument in the case of Lister v Stubbs, was that constructive trust remedy gave the plaintiff more rights than those enjoyed by other creditors. Since Scum has applied for bankruptcy, therefore, if bankruptcy declaration is made, his mother’s claim will be defeated since if she reverts back the $ 6,000 amount, she will be a preferred creditor and such transaction is voidable.

2) The facts state that Scum has taken the cash from his account and given to a broker, who buys 300 shares of General Electricity at $ 20. In such a situation, what happens is that the trust property is traced and once identified, court imposes constructive trust on it. In the event that the defendant uses the money to buy a house or even gets life insurance cover. The property which has been purchased by that money is traced back. The appreciation of the house bought with the money belongs to the plaintiff. If depreciation of the property is noted, then the plaintiff has the right to seek a remedy for the depreciated value. According to facts of the case study, Scum has used his mother’s money to buy shares. The application of constructive trust makes the property acquired by the defendant available to the plaintiff.

The proceeds acquired by Scum to buy shares will be traced by court for the benefit of his mother. The shares belong to the mother and, Scum is holding the shares on trust. On the other hand, if the bankruptcy proceedings are successful and a declaration of bankruptcy made, the shares will be considered to be voidable transactions. The shares will be untouchable and the trustee in bankruptcy will use them in settling the creditor’s demands. The inapplicability of constructive trust in such a case will be done to avoid trustee in bankruptcy reversing the transaction.

3) The dropping of the General Electricity shares, which Scum has bought will, in the eyes of law, be treated like depreciation. He should have exercised due diligence in establishing where to buy his shares. The facts of the case study show that the value of the shares has dropped from $20 to $ 10. In applying constructive trust, once the value depreciates, the plaintiff has the right to demand for money remedy, which will be equal to the amount stolen in buying the shares. This acts as a substitute to the equitable remedy. The depreciation of the shares will be handled as aforementioned but it would be rendered inapplicable if the bankruptcy proceeding succeeds.

4) The amount available in Scum’s personal account is $10,000. When constructive trust is imposed by court, the money acquired by the defendant from the plaintiff has to be taken and paid to the claimant. In an event that the amount stated is not enough to compensate the claimant, then the money in his personal account will be taken to settle the debts. In the constructive trust, such money is held in trust for the claimant. It is imperative to note that the applicability of constructive trust will be where the bankruptcy proceedings do not succeed. The case of Lister v Stubbs, whereby the United Kingdom Court of Appeal held that constructive trust does not apply where constructive trust is applicable. The effect of bankruptcy proceedings is that the property of the bankrupt is taken by the trust in bankruptcy to pay all the creditors. The property remains untouchable, and under the control of the trustee in bankruptcy. Constructive trust has the effect of giving the plaintiff undue advantage over other creditors. Since constructive trust is an equitable remedy, there are numerous defenses available to Scum, which include: unclean hands, laches and unnecessary hardship. He can choose the suitable defense applicable to him.

Part 8-2

(1) In the second problem, Scum has carried out several transactions. He has sold $ 100 shares from his mother’s account, and he received $3,000; hence, raising the amount from initial $10,000 to $ 13,000. Scum deposits the money received from the transaction in the checking account. Constructive trust will not apply at this stage because he has not embezzled the funds.

(2) The amount he has used in flying to Las Vegas and the amount used in gambling will be subject to constructive trust. In addition, the money lost in playing poker will be subject to constructive trust.

(3) The legal fees that Scum gets and deposits in the checking account will be part of the property mixed. The court will be expected to make a determination on how the said property will be shared between Scum and his mother. If it is identified that the legal fees were paid to his mothers account, he will not have any claim. Scum’s mother will seek constructive trust on transactions, whereby there is a clear breach of fiduciary duty. In transactions where he was investing for the benefit of his mother or keeping the money safe, constructive trust will not be applicable.

(4)The amount spend in buying the Casino shares and selling his mother’s Exxon Mobil shares will not be subject to constructive trust because he exercised due diligence in depositing the shares. The proceeds from the appreciation of the Casino shares will belong to Scum’s mother. The proceeds from the selling of the shares will belong to his mother.

(5) The $8000 used in buying shares from the Casino is an investment and there is no ascertainable breach of duty in the said transactions. It follows therefore that the shares bought can not be subjected to constructive trust. However, in an event that the shares are converted to Scums personal account, constructive trust will be applied hence holding the shares for her mother’s benefits.

(6) Scum used $2000 in playing poker. The transactions will be subject to constructive trust because Scum is in breach of the fiduciary duty, that he owes his mother. He used the money by participating in risky ventures such as gambling. He was supposed to withhold his duty of care by investing in other businesses.

(7) Once money or any other property has been subjected to constructive trust, the appreciation or depreciation belongs to the plaintiff. In this case, Scam mother is entitled to the appreciated shares value even though it’s Scum who bought the shares. Full amount of the shares and the appreciation will belong to Scums mother.

Part 8-3

(1) The facts indicate that Scum has sold 100 shares of Walmart from his mother’s account making a $6,000 and deposited the money in the checking account. Constructive trust is invoked in instances when the fiduciary duty is breached. The above mentioned facts do not show any misappropriation hence constructive trust is inapplicable. The court cannot invoke constructive trust on a party who has not breached the fiduciary duty. In the facts mentioned above, it is clear that Scum has bought the shares for the benefit of his mother. It is the duty of Scum’s mother to prove the breach of that duty.

(2) Scum has further transferred $6000 from the checking hence buying 300 shares at $20. The shares he has bought have been to his personal account. This shows that the buying of the shares was not to benefit his mother. He has embezzled the checking account hence constructive trust will apply to reverse the transaction. The fact that Scum is keeping the amount that he uses to buy shares in his personal account creates intent to embezzle. He should keep the money in his mothers account or at the checking account.

(3) He has further engaged in poker where he loses and uses the money in the checking account to pay. His involvement in risky ventures, whereby he did not apply the test of foreseeability, made him breach his duty of care. Therefore, constructive trust will apply. Duty of care owed to his mother has been breached. This is because any reasonable man would not have gambled money under trust knowing that losing the money was a possibility.

(4) The depreciation of general electricity is an indication that Scum did not carry out thorough research on the financial status of the company before he invested. Court will invoke constructive trust and demand him to pay money to his mother for the depreciation. Scum was supposed to use due diligence in choosing the right company to invest his mothers shares. The foreseeability test is to the effect that a party is supposed to observe the test of foreseeability.

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