Beneficial Interest Research Articles

The Nature of the Beneficial Interest - Historical and Economic Perspectives

This article revisits a century-old debate over the nature of the beneficial interest. The issues and arguments may be complex, but the debate boils down to the simple question of whether the beneficial interest is a personal right or a property right. This debate is better served by analyzing the issues raised – the relationship between law and equity, the priority of legal interests over equitable ones, and the bona fide purchaser exception – from historical and economic perspectives. Both English legal history and modern economic analyses convincingly demonstrate that the beneficial interest is best considered a property right.

E&P Lending

Oil and gas companies frequently use debt financing in order to provide the large capital required to explore and develop large acreage blocks. With the rise of horizontal drilling in combination with multi-stage hydraulic fracturing, the average cost per well has skyrocketed. In order to access a bank’s cheaper money, an oil and gas company normally must have already found something worth finding. In return for a beneficial interest rate from a bank (as opposed to splitting the profits of the company with equity partners or paying mezzanine debt interest rates), the oil and gas company must get more ducks in a row than it had to get in a row to raise money from their friends and family, a venture equity, or a mezz debt source. Additionally, due to the special characteristics of oil and gas as an asset, special legal issues exist for bank lenders to navigate to insure they can recover on collateral in a first-priority lien position in the event that the oil and gas company borrower goes into bankruptcy. This Article explores the legal due diligence process of an oil and gas loan deal—addressing both the roles of the borrower’s counsel and the lender’s counsel in the process. Further, it addresses unique issues related to properly securing the collateral of an oil and gas company borrower under Texas law. It should be noted that this Article is related to exploration and production (E&P) companies, not companies involved with the midstream or downstream side of the business. This Article focuses on oil and gas properties located in the state of Texas; while the collateral rules will be almost the same in other states, only the Texas law perspective will be discussed. Some capitalized terms will be used. The term “Energy Lender” refers to a lender in an oil and gas loan transaction. The term “Borrower” refers to an oil and gas company borrowing money from an Energy Lender.

Trust Term Extension

Over the last thirty years, most jurisdictions in the United States repealed or abrogated the Rule Against Perpetuities, which prohibits perpetual donor control over property. This, in turn, led estate planning practitioners to consider whether a trust created to comply with the Rule could, after the Rule’s repeal, be extended in perpetuity to provide for future generations of the settlor’s descendants. Trust term extension in this context implicates questions about the fundamental purpose of a trust – for whose benefit does the trust exist? The beneficiaries, the settlor, or the trustee/fiduciary? If a trust’s purpose is to benefit beneficiaries selected by the settlor, then modification impairing interests of existing beneficiaries should be disallowed. Perpetual trust conversions, however, would impair existing beneficiaries because remainder interests would be converted into less valuable life interests. By contrast, financial institutions serving as corporate fiduciaries would benefit from perpetual trust conversions because they earn commissions for performing administrative and managerial services. This article, the first to examine the topic of trust term extension critically, argues that courts should reject perpetual trust conversions for at least two reasons. First, modification should not be granted for the benefit of the fiduciary, particularly at beneficiary’s expense. Second, the modern trend in trust law favors the rights of living beneficiaries over dead hand control, so evidence of what the donor would have wanted but for the Rule should not override vested beneficial interests.

Lessons from developmental biology for regenerative medicine

The ultimate goal of regenerative medicine is the functional restoration of lost or damaged tissues and organs. Since most tissues in man lack true regenerative properties and instead respond to injury with an inflammatory response and scar tissue formation, regenerative medicine strategies that include combinations of cells, scaffolds, and bioactive molecules to replace injured or missing tissues have been developed. The physical, chemical, and electrical cues that define the microenvironmental niche and the effect of these influences upon cell behavior during development are of interest to developmental biologists, with obvious overlap to the interest of the regenerative medicine field. This manuscript provides an overview of current approaches for tissue restoration being investigated in the field of regenerative medicine and attempts to identify areas of mutual beneficial interest with the field of developmental biology.

Special Features of Residual Interests and their Assignment: From the Perspective of Inseparability of Bundles of Beneficial Interests

Special Features of Residual Interests and their Assignment: From the Perspective of Inseparability of Bundles of Beneficial Interests

Jones v Kernott [2011] UKSC 53

This paper examines the Supreme Court decision in Jones v Kernott and its subsequent impact on Trust Law and beneficial interests in the family home. It considers the extent to which a dual regime currently exists between sole and joint legal owners, particularly in the context of cohabiting couples, and examines the extent to which the courts are now able to impute an intention in common intent constructive trusts.

The new US exit tax scheme: breaking off a long-term relationship with Uncle Sam

The new US exit tax scheme: breaking off a long-term relationship with Uncle Sam

All in One Basket: The Bankruptcy Risk of a National Agent-Based Mortgage Recording System

Mortgage Electronic Registration Systems, Inc. (“MERS, Inc.”) owns legal title to some 30 million mortgages in the United States. The company, which was a key part of the mortgage securitization apparatus in the late 1990s and 2000s, is now under intense pressure from public and private lawsuits and investigations and faces a very real threat of insolvency. Policymakers are looking ahead to potential replacements for MERS, Inc., as a recent Fed staff proposal for a substitute system indicates. This Article examines what might happen to the mortgages that MERS, Inc. at least nominally owns in the event that the company enters bankruptcy, a question that apparently has never been explored in a publicly available analysis. Although the legal analysis underlying the design of MERS, Inc. does not appear to be publicly available, a key assumption seems to have been that if the company ever entered bankruptcy, the mortgages in its hands would not enter the company’s bankruptcy estate and would not be available to creditors. This Article challenges that assumption, pointing to the broad authority the Bankruptcy Code confers on the bankruptcy trustee with respect to interests in real property, such as mortgages. Most courts that have considered the issue have found that the bankruptcy trustee can bring into the estate any real property interest that the debtor could have conveyed to a good-faith purchaser. There is a significant risk that MERS, Inc. can convey MERS mortgages to a purchaser acting in good faith. Although part of that risk arises from the company’s conduct in making and acquiescing in claims in court that the company can sell the mortgages, has constitutionally protected property interests in the mortgages, is a creditor of mortgage borrowers, and owns a beneficial interest in the mortgages, part of the risk is inherent in any mortgage recording system that operates nationally and holds mortgages as an agent. Policymakers should consider that risk as they consider whether MERS should be replaced and what form the replacement should take.

Okra (Abelmoschus esculentus (L.) Moench) as a valuable vegetable of the world

Summary: Okra is a commercial vegetable crop with considerable area under cultivation in Africa and Asia. Okra belongs to the family Malvaceae. It probably originated in Ethiopia and is widely spread all over tropical, subtropical and warm temperate regions of the world. Okra plays an important role in the human diet by supplying fats, proteins, carbohydrates, minerals and vitamins. Moreover, its mucilage is suitable for certain medical and industrial applications. Therefore, young fruits of okra have reawakened beneficial interest in bringing this crop into commercial production. The optimum yield of okra is approximately 6.6 t ha -1 . Okra requires warm temperatures. The optimum temperatures are in the range of 20-30°C, with minimum temperatures of 18°C and maximum of 35°C. Okra needs rather high quantity of water despite having considerable drought resistance. The plant forms a deeply penetrating tap root with dense shallow feeder roots reaching out in all directions in the upper 45 cm of soil. Soil clamminess is essential during the continuation of growing period.

Access to Medicines: The Colonial Impacts on Patent Law of Nigeria

This article explores the colonial impact on the patent law of Nigeria. The colonial and historical past of the country and the introduction of patent law were not based on the justifications for patent law, but for the beneficial interest of the colonial masters which was the sustenance of the raw material needs of the industrial West. This lopsided objective heralded Nigerian independence, leading to inconsistency in policy articulation, formulation and implementation, and remains a factor that continues to affect the public health sector. In this respect, and in the context of fighting against HIV/AIDS, malaria, tuberculosis and other communicable diseases, inventing and developing pharmaceutical products is both necessary and indispensable. However, an understanding of the colonial impact would place greater burden on reassessing the internal problems and reforming the patent legislation. It advocates that the Nigeria Intellectual Property Commission (NIPCOM) Bill needs to be reappraised as a reform option that would shed the burden of patent law imposition and enhance access to drugs and health care in Nigeria.

Effects of cash flow statement reclassifications pursuant to the SEC’s one-time allowance

In February 2006, the Securities and Exchange Commission (SEC) announced a one-time opportunity for firms with misclassified cash flow items to correct these errors without issuing an official restatement. To assess the impact of these reclassifications, we determine the types of firms affected by this allowance and the types of reclassifications in the operating, investing, and financing categories of the cash flow statement. We find that, consistent with the SEC’s concerns, firms overstated net operating cash flows and understated net investing cash flows, thereby misrepresenting cash flows. In addition, the most frequent line-item reclassifications echo the SEC’s concerns about the presentation of discontinued operations and dealer floor plan financing arrangements. Insurance claim proceeds and beneficial interests in securitized loans, however, appear less problematic than the SEC expected. Overall, our findings indicate that the SEC’s plan was relatively successful and, for firms that took advantage of the allowance period, these cash flow restatements only exerted a marginally negative effect in the capital market.

Acquiring a beneficial interest by imputation: Hapeshi v Allnatt [2010] EWHC 392 (Ch)

Acquiring a beneficial interest by imputation: Hapeshi v Allnatt [2010] EWHC 392 (Ch)

The Estate and Gift Tax Implications of Self-Settled Domestic Asset Protection Trusts: Can You Really Have Your Cake and Eat it Too?

Abstract: Self-settled asset protection trusts are wealth preservation trusts coupled with the spendthrift provisions. This type of trust permits the settler to have the benefit of treating the trust as a separate entity thereby protecting his assets from creditors while maintaining a pecuniary interest, as well as some level of control over what ultimately happens to the trust property. By providing asset protection from potential creditors while still having the ability to maintain a beneficial interest in the trust, the settler can essentially “have his cake and eat it too.” The typical domestic self-settled asset protection trust may not be treated as an asset of the settler for creditor claims. Whether these assets should be treated as owned by the settler for the purpose of inclusion in the gross estate of the decedent for estate tax purposes is the focus of this Article. The author asserts that it is appropriate to include certain property settled in a domestic asset protection trust (“DAPT”) in the settler gross estate for estate tax purposes because of the control the settler retains over the trust assets up until his death.

Global Trends and Constraints on Tax Policy in the Least Developed Countries

Through decades of tax reform and cross-border collaboration, the world's wealthiest countries have adopted domestic tax policy norms that meet their mutually beneficial interests. But these norms have introduced rigorous change and increasingly rigid parameters for tax policy in the world's poorest countries. While much scholarly attention is devoted to identifying tax strategies that poor countries could or should adopt in response to global tax trends, relatively little is paid to the process through which these trends developed and how they constrain alternative policy choices. This article argues that many of the biggest challenges to taxation faced by the world's poorest countries are a reflection of the international community's failure to consider the impact of their tax policy consensus on these vulnerable nations. It concludes that the world's wealthiest nations should unleash the global constraints on tax policy by reforming their own approaches to taxation.

Transplantation and Mutation in Anglo-American Trust Law

In the early nineteenth century, authoritative treatise writers such as James Kent and Joseph Story represented Anglo-American trust law as a seamless web. But the transplantation of trust law from England to America was not a simple process of adherence. Rather, American courts and legislatures came to discard fundamental English trust doctrines. Restraints on anticipation and on alienation were embraced, and in key state jurisdictions bare trusts were abolished, or else displaced from the core of trust law. Irreducible settlor power over beneficiaries and the strong protection of beneficiaries from creditors under spendthrift trusts were two strikingly original American creations, which flowed from these basic doctrinal choices. The changes made to American trust doctrine yield a paradox for the legal, social and economic historian, namely that republican America ended up with a more dynastic property law, more wedded to dead hand control and more hostile to commercial creditors, than did aristocratic England with its unreformed system of common law and equity rooted in the feudal property system. The American abandonment of free alienability of beneficial interests and the corresponding reduction of the beneficiary’s powers over trust assets may have been rooted in the volatility of credit in America and the desire of the wealthy to escape from the pressures of the market, though disparities between jurisdictions remain to be explained.

Saving Seaborn: Ownership as the Basis of Family Taxation

This Article examines the historical and jurisprudential development of the principle that determines federal taxation of families. It traces the ownership equals principle from the late nineteenth century to 1930; that is, from the decades leading up to ratification of the Sixteenth Amendment to the U.S. Supreme Court's landmark decisions in Poe v. Seaborn and Lucas v. Earl. It is a story of the early federal income tax and its administration; of tax avoidance opportunities for families; of the nature of spouses' legal interests as defined by state property laws; and of early tax enforcement efforts by the Treasury Department and Congress. It is also a story of how the Supreme Court sought to protect Congress' taxing power by articulating an expansive definition of for purposes of determining taxability that relied on indicia of such as control, management, dominion, beneficial interests, equitable interests, enjoyment, and even a flow of satisfactions concept that tracked consumption tax principles more closely than income tax principles. In the end, the Article lays the groundwork for removing the modern-day false barometer of marriage between a man and a woman as the basis of family taxation. In place of marriage, it reestablishes principles grounded in longstanding Supreme Court jurisprudence as the historically and legally accurate gauge for family taxation. In so doing, the Article presages an argument that will be articulated in a subsequent Article for taxing members of all state-recognized civil partnerships - marriage, domestic partnerships, civil unions, reciprocal beneficiary relationships - according to interests as determined by state law.

Universal Health Realty Income Trust

Abstract“Property, Real Estate & Development” (MIC: SIC: 6798 NAIC: 525930)Universal Health Realty Income Trust is an organized Maryland real estate investment trust (REIT). As of Dec 31 2007, Co. had 46 real estate investments or commitments located in 14 states in the U.S. consisting of: six hospital facilities including three acute care, one behavioral healthcare, one rehabilitation and one sub‐acute; 36 medical office buildings (including three being constructed), and; four preschool and childcare centers. Four of Co.'s hospital facilities are leased to subsidiaries of Universal Health Services, Inc. (UHS). As of Dec 31 2007, UHS owned 6.7% of Co.'s outstanding shares of beneficial interest.

Bayesian coalitional rationalizability

In this paper we extend Ambrus's [A. Ambrus, Coalitional rationalizability, Quart. J. Econ. 121 (2006) 903–929] concept of “coalitional rationalizability (c-rationalizability)” to situations where, in seeking mutually beneficial interests, players in groups (i) make use of Bayes' rule in expectation calculations and (ii) contemplate various deviations, i.e., the validity of deviation is checked against any arbitrary sets of strategies, and not just only against restricted subsets of strategies. We offer an alternative notion of Bayesian c-rationalizability suitable for such complex social interactions. We show that Bayesian c-rationalizability possesses nice properties similar to those of conventional rationalizability.

Universal Health Realty Income Trust

AbstractProperty, Real Estate & Development (MIC: 8.3 SIC: 6798 NAIC: 525930)Universal Health Realty Income Trust is an organized Maryland real estate investment trust (REIT). As of Dec 31 2007, Co. had 46 real estate investments or commitments located in 14 states in the U.S. consisting of: six hospital facilities including three acute care, one behavioral healthcare, one rehabilitation and one sub‐acute; 36 medical office buildings (including three being constructed), and; four preschool and childcare centers. Four of Co.'s hospital facilities are leased to subsidiaries of Universal Health Services, Inc. (UHS). As of Dec 31 2007, UHS owned 6.7% of Co.'s outstanding shares of beneficial interest.

Universal Health Realty Income Trust

AbstractProperty, Real Estate & Development (MIC: 8.3 SIC: 6798 NAIC: 525930)Universal Health Realty Income Trust is an organized Maryland real estate investment trust (REIT). As of Dec 31 2006, Co. had investments in 45 facilities located in 15 states consisting of investments in healthcare and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub‐acute care facilities, surgery centers, pre‐school and childcare centers and medical office buildings. Six of Co.'s hospital facilities are leased to subsidiaries of Universal Health Services, Inc. (UHS). As of Dec 31 2006, UHS owned 6.7% of Co.'s outstanding shares of beneficial interest.