Homework week 4
Question 47.1 In this case Buder v. Sartore, for 12 years, Theodore Alexander Buder’s father made substantial gifts to his minor grandchildren. During the period Buder and Sartore were going through divorce. Money was given to Buder to safeguard for his kids with the understanding that he would safeguard the money and invest it on behalf of the children. Buder invested money in “blue chip” stock and penny stock on his name as custodian for the children, as required by the Uniform Gifts to Minors Act (UGMA).This stocks suffered a major loss except one Buder’s ex-wife, Sartore, sued him, alleging that he had breached his fiduciary duty owed to the children under the UGMA. She sought to recover the funds lost by Buder’s investment of the children’s funds in penny stocks.
Sartore wins the case on behalf of her children; Buder must make up for the losses suffered by the children’s accounts because of his investment of their funds in penny stocks. The court held that a custodian of children’s funds subject to the Uniform Gift to Minors Act (UGMA) owes a duty of care when investing the minor’s money. According to the Business Law textbook by Cheeseman, these laws establish procedures for adults to make irrevocable gifts of money and securities to minors. Gifts of money can be made by depositing the money in an account in a financial institution, with the donor or another trustee (e.g., another adult or bank) as custodian for the minor. Gifts of securities can be made by registering the securities in the name of a trustee as custodian for the minor. The court held that Buder had breached this duty when he invested the children’s funds in highly speculative “penny stocks.” The court ordered that all penny stocks purchased by Buder using the children’s funds be transferred to him and, in return, he pay $32,598 to Alex and $32,501 to Cori. The court also