Update (November 28, 2011): Fannie Mae takes up its Minnesota Appeals Court loss, described below, with the Minnesota Supreme Court, which heard argument today. Bruce Jones argued for Fannie Mae. Lew Remele argued for the respondent. Justice Helen M. Meyer was particularly active in challenging respondent’s position.
The key question is whether Minn. Stat. 575.05 can justify the trial court’s order below or whether this would run contrary to Minnesota law with regard to spendthrift trusts. Throughout his argument, Remele invoked “eighty years” of Minnesota law on spendthrift trusts repeatedly. Justice Meyer, however, begged to differ, suggesting that this case was easily distinguishable from other cases that Remele claimed dictate a result in his client’s favor.
Original post (June 9, 2011): Fannie Mae got MC Hammered by the Minnesota Court of Appeals this week, frustrating the GSE’s efforts (“Government Sponsored Entity,” that is) to execute on a $7+ million judgment against Andrew Grossman.
Andrew Grossman had the good fortune of having a rich dad who set up a “spendthrift trust” for Andrew and his siblings. A spendthrift trust is “a trust in which the power of alienation is suspended.” In other words, a beneficiary of a spendthrift trust, someone like Grossman, cannot “spend” or “encumber” assets in the trust. He cannot borrow, using assets in the trust as collateral. His creditors cannot reach money that is in the trust.
Fannie Mae was successful in getting an order from the District Court (Hon. Cara Lee Neville, Hennepin County District Judge), however, ordering Grossman, as soon as he had a legal right to access to funds in the trust to pass them over to Fannie Mae. This was a pretty smart move in light of Grossman’s having set up off-shore Cayman Island’s bank accounts; when Grossman gets the money, he might not have it for very long. The Minnesota Court of Appeals, however, found that the trial court’s order “would defeat the spendthrift provision.” I predict appeal to the Minnesota Supreme Court.