A Trust That Receives Property Is A Good Faith Purchaser For Value, Minn. Stat. § 507.34

Alan W. Pettit Marital Trust A v. Spethmann, Filed January 29, 2018, A17-0825 (Minn.Ct.App. 2018). A settlor funded a living trust with a deed in 1996 (deed 1). In 2005 the trustee deeded the property in the living trust to the settlor’s son and his wife (deed 2). Deed 2 was not filed at that time. In 2009 settlor died. In late 2010 the trustee of the living trust deeded the property to the Marital Trust pursuant to the terms of the living trust (deed 3). Deed 3 was filed in early 2011.  The beneficiary of the Marital Trust died on November 3, 2012. On November 5, 2012 the trustee of the Marital Trust deeded the property to the Family Trust (deed 4). On November 13, 2012 deed 2 was filed. So, the question is whether deed 3 (signed after deed 2 but filed before deed 2) takes priority over deed 2 (signed before deed 3 but filed after deed 2). Under race-notice law, Minn. Stat. § 507.34, whether the first to file rule applies depends on whether the Marital Trust (deed 3) is a good faith purchaser for value. To be a good faith purchaser for value 3 things are needed: 1) payment of valuable consideration, 2) good faith without purpose to take unfair advantage over a third person, and 3) absence of notice (constructive or actual) of the outstanding rights of others. The last 2 elements are uncontested in the case. The sole issue is consideration when the Marital Trust received the deed from the living trust. Each deed had the standard language that says the property was conveyed for “valuable consideration” of “under $500”. The court of appeals found that when a trust receives property it is not a mere grantee. The trustee promises to undertake future duties and responsibilities of the property received. The undertaking of responsibilities or taking on a burden is consideration. The trustee is not a mere grantee. Therefore the trust is a good faith purchaser for value. Since the trust filed its deed 3 before deed 2, the Marital Trust was first to file and wins.

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