PROPERTY OUTLINE (BROWN 2007) Property is equal to the thing itself and the value that people place in it. Property refers to relationships among people with respect to things, not to a relationship between a person and a thing. Consider: In property cases ask whether the judgments are based upon case law or a conscience choice towards pragmatic decision-making. The principles of property should remain the same from a micro to a macro level and a federal to a state level. The Doctrine of First Possession: Acquisition of Property by Discovery, Capture and Creation Acquisition by Discovery & by Conquer: Discovery gave exclusive title to those who made it. Principle of First in Time , Doctrine of 1st possession or Occupancy Theory state that by possession / claim one has separated this property from the commons. See, Johnson v. M'Intosh Also consider these other theories of property law: Labor Theory of John Locke - The labor of a man's hands is properly his and what man by his hands has removed from the state of nature is his. Law of Accession - How do you determine who has property when multiple hands have played a part in its creation? Accession occurs when two or more things which can be distinguished are joined into one, the new product being identified with but one of the previous articles. Determines ownership based upon the equitable circumstances of the case. The law of accession is an important rule for addressing property that has been accidentally confused or mixed together. Property & Power - Property is granted and conferred upon the basis of power. Who has the power to grant and who has the power to receive the property. Acquisition by Capture: Difference between physical possession vs. constructive possession. What purpose does value play in property and ownership rights? See Pierson v. Post or Ghen v. Rich . Does the value that Pierson gave to the fox (tiring it out, chasing it for a day) result in some degree of ownership over that property (Livingston dissent)? Does the status of the property change as a result of an action?
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PROPERTY OUTLINE (BROWN 2007) Property is equal to the thing itself and the value that people place in it. Property refers to relationships among people with respect to things, not to a relationship between a person and a thing. Consider: In property cases ask whether the judgments are based upon case law or a conscience choice towards pragmatic decision-making. The principles of property should remain the same from a micro to a macro level and a federal to a state level.
The Doctrine of First Possession: Acquisition of Property by Discovery, Capture and Creation
Acquisition by Discovery & by Conquer:
Discovery gave exclusive title to those who made it.
Principle of First in Time, Doctrine of 1st possession or Occupancy Theory state that by possession / claim one has separated this property from the commons. See, Johnson v. M'Intosh
Also consider these other theories of property law: Labor Theory of John Locke - The labor of a man's hands is properly his and what man by his hands has
removed from the state of nature is his. Law of Accession - How do you determine who has property when multiple hands have played a part in its
creation? Accession occurs when two or more things which can be distinguished are joined into one, the new product being identified with but one of the previous articles. Determines ownership based upon the equitable circumstances of the case. The law of accession is an important rule for addressing property that has been accidentally confused or mixed together.
Property & Power - Property is granted and conferred upon the basis of power. Who has the power to grant and who has the power to receive the property.
Acquisition by Capture:
Difference between physical possession vs. constructive possession.
What purpose does value play in property and ownership rights? See Pierson v. Post or Ghen v. Rich. Does the value that Pierson gave to the fox (tiring it out, chasing it for a day) result in some degree of ownership over that property (Livingston dissent)? Does the status of the property change as a result of an action?
When do customs & practices confer constructive possession over property? See Ghen v. Rich. Did the whaling industry customs confer ownership over the whale, at least for a time, once the harpooner's labor led to the death of the whale. How does the law determine which customs to recognize? Possible answer is to recognize only those customs that confer possession to those customs that are unlikely to disturb the general understanding of man.
Theory of Relativity of Title: Multiple people can have title to the same property depending on the circumstances.
Acquisition by Creation:When you acquire by creation you are not acquiring a part of the commons such as a chattel or real property. You are using the commons plus your own efforts to create something new, which makes you first in time with regards to this new property or quasi property because your property is part commons and part the fruits of your labor. The law will recognize this creative process as adding value to the commons.
Property in the public commons in INS v. AP. The intent of a party that places its production in the public commons is relevant to whether it abandons its property and how such property can be appropriated by another
party. INS was guilty of misappropriating the property of AP because even though AP published their paper in the public sphere, the paper was the result of their creation and they retain the rights, at least for a time, to how that property could be used. RE: Intellectual property, patent and copyright laws in regards to acquisition by creation.
Summary of this Section:Physical possession of the property gives the greatest title but is not the only title or interest in that property. Property can be divided into physical and legal possessions.
Ex. A house might be in the physical possession of A, but A's bank is the legal owner because they hold the mortgage that bought the house.
A person may also have possession of the property without physical possession if by adding value to a commons they have exercised constructive possession over the common.
Property in One's Self:
Can the human body be considered property? Moore v. Board of Regents
There is a lot of gray area in the property rights of the human body. We retain the rights over how our human body is treated as a whole. In that sense we exercise ownership over our bodies. However such ownership is not absolute. It does not extend to our right to sell our body parts or even sell the use of our bodies for certain uses such as sex. Once a part of our body has been removed, especially after its removal for surgical purposes, we loose our rights to the "property" and the ownership transfers to another.
In Moore, the plaintiff raised several property and tortuous issues such as:
1. conversion because the doctor's "stole" his body parties and used them for their own purposes without getting Moore's permission. Court held no because statutes had been written to super cede the law of conversion as it relates to the human body.
2. Abandonment in the context of surgically removed body parts. Are they abandoned by implication unless the patient specifies otherwise?
3. Consent: Whether Moore consented to the use of his body parts for testing and what the doctors should have informed him of prior to surgery.
4. If a part of my body is removed and I abandon that property, does the property still retain value? Who has legal rights to this value?
The Doctrine of Subsequent Possession: Acquisition of Property by Find, Adverse Possession and Gift
Acquisition by Find
The title of the finder is as good against the world except for that of the true owner. See Armory v. Delamirie.
Policy goal is to reward possession and good behavior by encouraging people to report found property and acquire the property if the true owner cannot claim it.
Ownership of the premises where property is found does not immediately confer ownership. See Hannah v. Peel where the court looked to whether the locations owner was in a position to know of the existence of the possession and how the finder found the possession.
Types of Found Property Lost Property - Is the result of absent-mindedness. For example, someone leaves property in a location where leaving such property wouldn't be considered reasonable. A wallet left on a street is lost, a wallet left in a bin at a metal detector is mislaid. Mislaid Property - Is the result of the volitional placement of an item in area where the owner has been encouraged to leave their property. For example, leaving a piece of clothing on a department store rack where one has been invited to leave their property. The immediate result of lost or mislaid property is the temporary loss of someone's
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property but depending on the circumstances of the loss, the owners property can be returned or reimbursed to a different degree. Treasure Trove Property: A particular type of found property. Usually there is a statutory time frame in which gold, silver or jewelry would have to be buried before qualifying as a treasure trove. Key term is that the property must have a sense of antiquity.Abandoned Property: Property the true owner intentionally and voluntarily relinquished with the intent no longer to own the object and without transferring the rights to another. Abandoned property belongs to its finder.
Subsequent Possession by Bailment:
Bailment is the transfer and delivery by an owner or prior possessor (the bailor) of possession of personal property to another (the bailee):
1) whose purpose in holding possession is often for safekeeping or for some other purpose more limited than dealing with the object or chattel as would its owner, and 2) where the return of the object or chattel in the same, or substantially the same, undamaged condition is contemplated.
Bailor - prior possessor of the goods. Bailee - Holder of the prior possessors goods.
A bailee cannot do anything to the goods without the bailor's consent. A presumption of negligence exists on behalf of the bailee because the bailee, unless he can prove otherwise, is deemed to have exclusive possession of the bailed property. See Staheli v. Farmer's Co-Op
3 Types of Bailment:Actual (express) - The object of bailment is physically handed over. See Peet v. Roth Hotel Co. Constructive - When a key or method of control over the bailed object is handed over. Implied in law based on the circumstances. See, Shamrock Hilton Hotel v. Caranas Symbolic - Receipt by the bailee of a thing symbolizing the object of the bailment. Usually a written instrument.
Standards of Care in a BailmentWhen bailed property is lost or damaged the standard of care of the bailee varies with the degree of reward or benefit the bailee receives. The standard of care should be commensurate to the degree of bailment. Gross Negligence - Applies to gratuitous bailments such as one created by mistake or one taking care of
something for a neighbor. In these cases the bailor can only recover for the gross negligence of the bailee because the benefit to the bailee is slight.
General Negligence and Reasonable Care - Applies to bailments where mutual benefit exists between the parties. The bailee is expected to exercise reasonable care for the bailed object and is liable for negligence such as misdelivery. See Peet v. Roth Hotel Co. & Shamrock Hilton Hotel v. Caranas
Absolute Liability - Even the slightest damage or negligent will render the bailee liable. Usually these are commercial bailees such as repair shops.
Misdelivery: Results in the highest level of liability. See Shamrock Hilton Hotel v. Caranas.
Parking Lots & BailmentsIrregardless of what the parking lot tickets says, a bailment does exist between the parking garage and the owner of the vehicle. In general, the parking garage has a reasonable duty of care to the bailed object.
What is "reasonable duty of care" will vary depending on the nature of the garage and the likelihood of harm being done to the bailed object while its in the parking garage's care. Circumstances to consider: whether a garage is enclosed or open, if the garage has guards or police sweep the lot, if the garage is aware of any danger to the car etc.
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Hypo's for Parking Lots You park at a house near Gillette Stadium and pay to park - No bailment exists. The house owner is leasing
out space for your car but no reasonable duty of care will exist. You give your keys to a valet attendant at a restaurant - Bailment exists (transfer of the keys and the
property) for the care and the valet has at least a reasonable duty of care over your car and its reasonable contents.
Enclosed Park & Pay garage where you retain you keys. - A bailment does exist and the parking garage has a reasonable duty of care to the bailed property. The value of the bailed property is what could reasonably be conceived to be in the bailed object.
CONVERSIIONDefinition: Using another’s property as your own. True owner has right to recover the property.
Conversions right to recover takes two forms: Replevin : action or remedy to recover the asset itself (plus monetary damages) Trover : action or monetary compensation for the conversion of personal property. In a trover action you lose
your rights to the property in exchange for the forced sale.
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Adverse Possession: Claim of Right & Color of Title
Definition: Adverse possession is a process through which a person who uses property for a statutorily determined period of time becomes the owner of the property and defeats all rights of the person with legal or record title. A person takes ownership of property through adverse possession by using the property as would a true owner for a statutorily determined period of time.
Adverse possession cannot be exercised against government land in a majority of states because the state holds its land in a trust for its people.
The adverse possessor can only acquire the same legal interest in the property as the person he is adversely possessing against. For example if the owner of the property only had a life estate, the adverse possessor could only acquire the life estate until the future interest becomes possessory at which time, the statute of limitations will run against him.
Theory of Adverse Possession: Various theories exist on why adverse possession has come to be recognized under the common law and now as a statute in all states. Broadly, the theory is to encourage production of the land and to quiet title to lands.
Ballantine or Stability Theory: Purpose is to quiet all titles which are openly and consistently asserted, to provide proof of meritorious titles, and correct errors in conveyance.Oliver Wendell Holmes or Earning Theory: Purpose is to reward good works and punish bad or idle works. If a man neglects his rights, the law will follow his example.Powell or Sleeping Theory: "Adverse possession functions as a method of transferring interests in land without the consent of the prior owner, and even in spite of the dissent of the owner.'
Elements of Adverse Possession: Five main elements and 4 optional elements that may appear on a state's adverse possession statute.
Actual - Physical possession or constructive possession via color of titleOpen & Notorious - Possession must be so visible as to give notice to the legal ownerExclusive - Possession must be to the exclusion of the true owner or the other adverse possessorsHostile or Adverse - Possession without the permission of the true ownerContinuous - Possession must be in accordance to how a true owner would use the property over the statutory period of time.Optional Elements: 1) Claim of title or claim of right; 2) good or bad faith in either party; 3) improvement, cultivation or enclosure of the property; 4) the payment of taxes on the property. See Howard v. Kunto and Van Valkenburgh v.Lutz for more on these optional elements.
Intention of the parties: The intention of the parties towards the adversely possessed land is irrelevant. Its only in some cases where a state statute might consider good or bad faith that the intention of the parties is important. See Howard v. Kunto Intention is considered irrelevant to quieting title because the issue is whether the property was being used during the statutory period not why it was or was not being used.
Claim of Right Also known as a claim of title, this is the act of taking possession of land.
Color of TitleRefers to a claim founded on a written instrument such as a deed or will or a judgment or decree that is for some reason defective and invalid. The defective or invalid deed could be the result of when the grantor does not own the land conveyed by deed or is incompetent to convey, or the deed is improperly executed. Having a color of title is better than just a claim of right in that the adverse possessor will have a shorter statute of limitations to meet and will gain title to all the land in the defective or invalid title with only the adverse possession of a part of the deed land.
Constructive Adverse Possession: This second benefit will only be conferred if the adverse possessor is alone on the deeded land. If another adverse possessor w/ color of title is on the deeded land and neither has been ejected by the true owner, the adverse possessor with the least amount of time on the property is
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granted only the land they adversely possessed and the AP with color of title with the most time on the property is granted all the land in the deed minus the adversely possessed land of the other.
Disability & Adverse PossessionThe statute of limitations on adverse possession can be extended if the true owner was under a statutorily recognized disability at the time of the adverse possession. So long as the true owner is under a disability (insanity, minority, imprisoned) the statute of limitations can be extended. Each state will recognize different disabilities and how those disabilities can impact the statute on adverse possession. Subsequent disabilities cannot be counted against the statute of limitations for most states. Make sure to clearly read the statute's language on disability and adverse possession to understand the relationship. See Lessee of James Ewing v. Burnett for details on which disabilities are recognized.
Quieting the Title: A judgment that declares who is the title holder for the property. This is usually requested when an adverse possessor or the original property owner wants to have legal support for their claim. Either party can request the quieting of title and once a judgment is rendered it is final and ownership is conferred back to when the claim of right was exercised. See Van Valkenburgh v. Lutz.
Mistake and Adverse Possession: Courts are split on whether the mistaken act of adversely possessing another's land, especially in a manner that is not apparently obvious to the adverse possessor or the property owner. Typically seen in property disputes in cities. See Manillo v. Horski and the two approaches for addressing adverse possession & mistake.
Maine approach - a mistake prevents the exercise of a claim of right and therefore no adverse possession.Connecticut approach - a mistake is of no importance so long as the statutory period of possession is met.
Privity & Tacking Privity recognizes a common legal interest in property. Historically, requires a deed to the estate in common legal interest. A succession of trespassers cannot acquire title through the privity of estate. The original adverse possessor only requires a claim of right to the property but each subsequent possessor must have a color of title for tacking.
See Howard v. Kunto, the deed and the real property that Kunto and the previous occupants had in common didn't match. Under historic law this wouldn't be an acceptable basis for privity of estate. However in this case, the court ruled that Kunto and previous possessors acted in good faith (the holders of the color of title acted reasonably and honestly in their possession of the land) and even though the deed doesn't describe the occupied land they should be able to establish privity of estate. Kunto shouldn't be penalized for the mistake. Each subsequent adverse possessor can tack on the previous adverse possessors period of time on the property towards the statute of limitations so long as a color of title is transferred from each subsequent possessor. The original adverse possessor only requires a claim of right to the property but each subsequent possessor must have a color of title for tacking.
Discovery Rule and the Adverse Possession of ChattelsThe Discovery rule provides that in a case related to chattel property, a cause of action will not accrue until the injured party discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis for a cause of action. Applies directly to the application of the statute of limitations to allow for flexibility in its application. By its use, the discovery rule shifts the burden of proof unto the original owner to prove their actions in attempting to re-acquire the property. The court favors the application of the discovery rule instead of that of adverse possession as it relates to chattels. "The discovery rule shifts the emphasis from the conduct of the possessor to the conduct of the owner. The focus of the inquiry will no longer be whether the possessor has met the tests of adverse possession, but whether the owner has acted with due diligence in pursuing his or her property." The goal is to make the discovery rule into a vehicle for transporting equitable considerations into the statute of limitations for replevin. See O'Keefe v. Snyder.
Life Tenants, Remainderman, Adverse Possession & the Statute of LimitationsThe general rule is that the statute of limitations does not begin to run against a person having a future interest until the future interest becomes possessory. The adverse possession against a life tenant does not destroy the future interest holders rights to possession after the life estate.
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Acquisition by Gift or Donative Transactions:
Historic Law - to make a gift of personal property, the donor must transfer possession ("hand over the property") to the donee with the manifested intention to make a gift to the donee. The donee must accept the gift. The 3 prongs to Gift or Donative Transactions:1. Intention (written or oral evidence) and;2. Delivery (objective standard) need to be present and;3. Acceptance is assumed unless proved otherwise. Recurring Issues in Donative Transactions or Gifts: The intention was oral and not in writing. The donor is usually dead at the time the issue is being resolved. The plaintiff is usually a claimer of property not written into a will and opposed by the party who would get the
property if the plaintiff's claim is invalid.
DELIVERYWhy is the delivery requirement still in existence? Here are three reasons why.
1 - Handing over the object makes vivid and concrete to the donor the significance of the act performed. By feeling the "wrench of delivery," the donor realizes an irrevocable gift has been made.2 - The act is unequivocal evidence of a gift to the actual witnesses of the transactions.3 - Delivery of the object to the donee gives the donee, after the act, prima facie evidence in favor of the alleged gift.
"What is sufficient for delivery must be tailored to the circumstances of the case." What is reasonably permitted under the circumstances to confer a transfer of possessory interest.
Delivery can be made three ways:
Express Delivery - physical handing over of the property Constructive Delivery - the handing over of a key or some other object that will open up access to the subject matter of the gift. The object has been delivered under the law even though physical delivery has not. The legal or functional equivalent of the possession. If a gift could have been delivered but wasn't and the party is claiming they received the gift through constructive delivery, courts will be wary of saying that delivery of the gift was established. The handing over of a key that provides access to a house or a lockbox does not establish the donor's intent to give the donee the complete contents of the house or lockbox. Intent must be shown that the donor intended to give all the contents or a particular item to donee. All remaining items in which the intent of the donor cannot be demonstrated go to the donor's estate. See Newman v. Bost or Evans v. Kellow. Symbolic Delivery - the handing over of something symbolic of the property given.
There must be satisfactory possessory interest in the property. The person to whom title is being transferred must have access to where the property is located. Example of a piano in Problem 5 p. 51 in Supplemental.
When analyzing if a gift has been made, what are we looking for?
1 - Who currently has possession of the property?2 - Who would be the donor and donee?3 - What intention did the donor express with regards to the property?4 - How did the current possessor come into possession?
INTENTIONAll gifts require that the donor intend to transfer ownership over the property to another. Intent must be clear and demonstrated for each item being claimed as a gift. A donor’s intent must be to make a present transfer, not a transfer to take effect in the future.
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Present Gift of future enjoyment: A gift will be enforced if the court finds that it is a present gift of the right to the subject matter, even though the enjoyment of the subject matter is postponed to a later date.
A holographic will speaks to intent but a holographic will cannot be a valid testamentary gift.
ACCEPTANCEThe law will presume an acceptance on the part of the donee and acceptance is essential to the validity of an inter vivos gift. 3 TYPES OF GIFTSInter vivos, causa mortis and testamentary. Inter vivos & causa mortis are made during the lifetime of the donor while testamentary is made after the donor's death.
Inter Vivos - Unconditional, intentional gift made in the knowledge that the donor could either live or die. The
gift transaction must be completed during the lifetime of the donor. Absolute title switches from the donor to the donee. Once a would be donor is dead, an inter vivos gift can't be made. Problem # 3 on Supplemental p.51. The donor of an inter vivos gift cannot revoke their gift once it has been accepted.
Causa Mortis - A type of inter vivos gift (a subset). Gift completed during the lifetime of the donor but it has conditions placed upon it. The donor must be in apprehension of dying. The gift is revoked if the donor survives. Only chattels can be gift causa mortis, real property cannot be given as a gift causa mortis. Refer to the Problem # 4 on Supplemental p. 51 and Scherer v. Hyland. A gift causa mortis is made subject to three conditions implied by law, the occurrence of any one of which
will defeat the gift: o the recovery of the donor from the sickness or his delivery from peril; o revocation by the donor before his death; (such revocation must be express or affirmative or
implied by facts)o death of the donee before the death of the donor.
"Death must result from the same illness, disease, or peril producing the donor's initial expectation, not some illness or event, although it is not necessary that the sole cause of the donor's death be the same as that causing the donor's expectation of death."
Testamentory Gifts - See the statute of intestasee. Any promise made during the lifetime of the donor to give a gift to a donee, in which the gift is not delivered during the lifetime of the donor, is invalid unless made through a will. Gifts made out of the estate of a deceased. Blood relations are paramount in the statute.
Other Recurring Terms in Gift TransactionsAbsolute Trusts - See In re Totten case in the supplemental.Life Estate, & Remainders - This allows the owner to gives as a gift a partial interest in the property. The owner gives a partial interest (referred to as the remainder or the future interest) which confers some legal rights in the gift while retaining the possessory rights to the gift.
In Gruen, the father's gift of the painting to his son was limited to a legal interest with no possessory rights until the father's death. The father retained the painting in a life estate (possessory interests) and has changed his legal status to the painting. A gift has occurred because the father has changed his relationship to the painting. The father has now become a third party in the agreement with two roles: as a life tenant of the property and the donor upon death. The son has a new legal relationship to the painting as a current holder of legal interest and a future holder of possessory rights. See also Newell v. Nat. Bank.
Legal vs. Possessory Interest - A life estate gives a legal interest to the future owner while the possessory interest remains with the holder of the life estate. Once the life estate expires, the new owner will have both the legal interest and the possessory interest.
The same person can have multiple legal relationships to the same piece of property. Each legal interest can have different legal duties.
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Deed of Gift - Deed of gift is as good as delivery so long as it was done during the lifetime of the donor and that the property being gifted does not have a sufficient alternative title or deed that's legally recognized. Ex. A gift of a watch by written note is ok. A gift of a car is not because the car would have a title that is the legally recognized deed whereas a watch does not have such a deed. Look to the type of property being delivered to determine if what deed is required to transfer legal rights in property.
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BONA FIDE PURCHASER
The law in almost all states favors the bona fide purchaser over the original owner because between the bona fide purchaser and the original owner, the bona fide purchaser had the least control over the property and would suffer the greater injustice. SummaryUnder the UCC, Bona Fide Purchaser is a person who acquires title:
1. In a transaction in which a fair market value of the object is the consideration.2. With an honest belief that he was acquiring title to the object and,3. Under circumstances that would not lead him to think otherwise.
Alternative definition of Bona Fide Purchaser: a person who buys honestly and without notice of any conflicting claim on the property bought, whether or not the purchaser is negligent.
Details Power to Transfer; Good Faith Purchase of Goods; Entrustment. From UCC § 2-403
a. A purchaser of goods acquires all title which his transfer had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser (the middleman) has such power even though:
1. The transferor was deceived as to the identity of the purchaser, or2. The delivery was in exchange for a check which is later dishonored, or3. It was agreed that the transaction was to be a "cash sale", or4. The delivery was procured through fraud (you convince the owner to transfer title)
punishable as larcenous under the criminal law. A crime but not theft. Theft is an non-consented transfer of possession whereas fraud is a consented transfer of title & possession.
b. Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business. (Remember: The goal is to protect the bona fide purchaser not the true owner. Consider this for the retail marketplace and that this rule becomes less applicable the more unique an item becomes.)
c. "Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
Buyer in an ordinary course of business: means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. Delivery: voluntary transfer of possession in the context of instruments, titles', chattel paper or certificated securities. Good Faith: honesty in fact in the conduct or transaction concerned. Notice (of a fact) when: a) actual knowledge; b) receipt of notice c) or has reason to known of it given the circumstances. Purchase: taking by sale, discount, negotiation, mortgage, pledge, lien, issue or reissue, gift or any other voluntary transaction creating an interest in property. A purchaser is someone who takes by purchase. Value: A person gives value for rights if he acquires them:
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1. In return for a binding commitment to extend credit or for the extension of immediately available credit whether or not drawn upon and whether or not a chargeback is provided for in the event of difficulties in collection; or
2. As security for or in total or partial satisfaction of a pre-existing claim; or3. By accepting delivery pursuant to a pre-existing contract for a purchase;4. Generally, in return for any consideration sufficient to support a simple contract.
Void Title: title is no good because the seller has no interest in the property. Example - A bailee or a thief has no title and cannot transfer good title. Contrast with Voidable title. The theft of property does not give voidable title because the title was not relinquished by the property owner. Theft is distinguished from fraud because in fraud the property owner voluntary gives up the possession. Voidable Title: title is voidable if the true owner can rescind the transaction and get the property back. The true owner can rescind the transaction until the holder of voidable title transfer title to a bona fide purchaser. A person with voidable title has the power to transfer good title to a bona fide purchaser. Purchase from someone with apparent authority gives voidable title. See O'Connor's v. Clark. The voluntary relinquishing of title by fraud gives voidable title. See Phelps v. McQuade. The theft of property does not give voidable title because the title was not relinquished by the property owner.
Theft is distinguished from fraud because in fraud the property owner voluntary gives up the possession.
When looking at a transfer of possession through purchase:1. What degree of rights did the purchaser get from the seller?2. Did the purchaser buy the property in good faith? Was he a bona fide purchaser?
As a general rule, you cannot get better title than the immediate transferor. This rule as three exceptions:
1. If the purchaser buys the property on the apparent authority of the immediate transferor he can acquire better title than his immediate transferor possesses. Voidable Title.
2. Fraud3. Entrustment exception UCC Sec. 2-403. Notes at top of page.
Letter Rule Is their a difference between false representation in person and false representation by letter? Does the same degree of title change hands? No. Look to the mechanics of due diligence at the time of Phelps v. McQuade. A person in front of you can be evaluated and judged in a different manner than someone who contacts you by letter. It's easier to inspect a person whose in front of you than a company that is only contacting you via letter. The risk belonged to the letter writer (buyer) not the seller.
Risk and the Letter Rule -
In person deal - Seller bears the risk.Deal by Letter - buyer bears the risk.
Does the letter rule still exist today? Maybe. The argument against the letter rule is because the availability of modern information systems allows for quick background info on a company. This moves the risk from the buyer to the seller. The argument for continuing with the letter rule is that even with the advantages of modern communications, reliable information can still be hard to come by (more information doesn't mean the information is accurate).
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SYSTEM OF ESTATES Background on Feudal Property:
Process of change from Feudal law to Common Law took place from the 11th century until the 13th century. Estates came into being during feudal hierarchy and pre-market society of the 11th century.
Concept of the sovereign as ruler of the land. The sovereign is the embodiment & source of all powers. This is the theoretical structure. The political circumstances of the power did not adhere strictly to this theory. William conquers England. He controls all of his conquered lands. Land was the prime source of wealth at the time. William grants lands to his subordinates lords who helped him conquer England. The relationship between the lord and William (sovereign) is an oath by the lord and a grant of land by William. Society at the time was pre-contractual. In exchange for the granting of lands, the lord would make an oath of fealty to his sovereign.
Purposes of Oaths: The oath would require the lord to provide services to the sovereign such as men, produce, religious services etc. An oath could also require incidents (continuous exercise of control by a sovereign over a lord's family / wealth). If a lord lost his life, the sovereign would become a ward of this lord's granted lands and then determine what to do with the lands. This is at the time prior to hereditary grants of land. Lord's and Property Rights: When a lord was granted lands from his sovereign, the lord received no interest in the land and their relationship to land was tenurial. However, the sovereigns' grant did not preclude the lord from sub-infeuding the land to a lesser lord. Consider the pyramid structure with the sovereign at the top and the slopes of the pyramid being each successive sub-infeuding oaths eventually ending in the person who works the land. Unfortunately this structure does not function economically. This continuous sub-infeudation means that the sovereign and higher lords are so far away from the workers, they can no longer control their own lands.
Quia Emptores (1290) Prevented further sub-infeudation to avoid further economic disruptions.The base of the pyramid is halted. If the lowest lord wants to profit on his land he now has the ability to sell his land.
The effect of Quia Emptores was to commoditize land. Land now has a market price. This raised the monetary system. Land becomes just another means of exchange and titles can be bought by freeman (source of wealth is different from hereditary lordship). These freeman now have to make the oath's to their overlords. These freeman now become fee holders.
Pre 1290 - Economic term for transactions was current return. (Referred to benefits derived from a tenant like rent, regular well being produced)
Post 1290 - Economic terms for transactions was capitalization. (Refers to the permanent portion of the property and maximization of complete value of the property)
Result is that the entire interest of the land would go to the new owner. But what interest was the new owner buying? Logical answer - the sum total of the interests in the land before him. (Such as occupy, utilize and sell aka alienation)The new party (free holders) would receive the right to hold, alienate or bequeath the property. The freedom to transfer property was restricted because of the sovereign's granting of the land. The sovereign retained final authority over who could transfer / purchase land and who could marry.
Key Terms:
Estate - present or future possessory interests in property. There are four types of estates.Fee Simple - Infinity
Fee Simple Absolute - complete ownership until the end of time.Fee Simple Conditional - See Fee Tail (title only good for limited time)
Fee Tail (or fee simple conditional) - Until original grantee's lineage dies out. See notes below.
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Life Estate - for the life of the granteeTerms of Years - fixed period measure in years, months, days or a certain date.
Freehold Estates - refers to fee simple, fee tail and life estates. Only freehold estates invested the holder with seisin.Non-freehold Estates - refers to term of years estates or leaseholds. Interests - any legal right associated with specific property.
Present Interests - Owner has the right to current possession.Future Interests - Ownership rights where the owner must wait until a future time to take possession of the property.
Words of limitations - words that indicate who has the fee simple during his lifetime.Words of purchase - words that identify the grantee Heirs - persons who survive the decedent and are designated as intestate successors under the state's statute of descent. Issue - means a descendant, such a descendant can take to the exclusion of all other kindred. Collaterals - All blood relatives to a decedent who are neither descendants nor ancestors. Escheat - If a person dies intestate with no heirs, such persons property escheats to the state. Primogeniture - inheritance limited to the eldest male son or heir. Tenure - a right to hold land or a use right to land. Devisability - the right to transfer or dispose of land after death. Also known as testamentary power. Alienability - the right to dispose of land during one's lifetime. Also known as a power to alienate. Testator - the person dying who leaves the will. Incidents - duties and liabilities, in addition to services, owed by a tenant to his lord. Continuous exercise of control by a sovereign over a lord's family and / or wealth. Subinfeudation - the granting of a parcel of land to a subtenant in exchange for the service of a knight or some other necessity. Seisin - a particular kind of possession with particular consequences. A freeholder of an estate had seisin, which is ownership by diff. name Livery of Seisin - Prior to 1536, a freehold estate could be created or transferred only by a ceremony. In this ceremony, known as the livery of seisin, a symbolic act of transfer was used because most people were illiterate. There could not be any moment in time when the sovereign could not identify who had interest in the land.
Current Return - Value of the property only at the present.Capitalization - Full value of the property; present and future. Heritability - at the beginning of the Norman conquest, estate's were granted only for the lifetime of the tenant. No system was in place for the tenant's heirs to be conferred their father's land. However within a few decades it became expected that an heir would be given the option to retain their father's lands for a fee and an oath of fealty. After several hundred years, land was granted in a fee simple to an heir and they heir only had to pay a fee upon inheriting.
The Fee Simple
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The Fee Simple - "to A …" & A fee simple absolute owner "to A and his heirs.." has complete ownership over the property until the end of time. A fee simple owner can enjoy the property, transfer it away by sale or gift during his life, or devise it (by will) at his death. If he dies without a will, the estate goes to his heirs who would be designated in a statute called an Intestacy Statute. A fee simple absolute owner had present occupation, alienability and would go forever in time. Fee Simple Absolute - A fee simple that cannot be divested nor will it end if any event happens in the future. "to A and his heirs…"
Fee Simple defeasible - one that may last forever or may come to an end upon the happening of an event in the future. Fee Simple Determinable (or on a special limitation) - a fee simple that will end automatically when an event happens. Look for language such as "to the Hartford School Board, its successors and assigns, so long as the premises are used for school purposes." The title or interest will revert automatically following the occurrence of the condition. See Revertion below. Possibility of Reverter or Revertion - applies in all fee simple determinable instances. Once the fee simple determinable ends, the property must go to someone and this someone has possibility of reverter. This possibility can be expressly stated in the fee simple determinable or arise by operation of law. Fee Simple subject to a condition subsequent - a fee simple that does not automatically terminate but may be cut short or divested at the transferor's election when a stated condition happens. Look for language such as "to the Hartford School Board, its successors and assigns, but if the premises are not used for school purposes, the grantor has a right to re-enter and retake the premises." Such a right to re-entry are not devisable (cannot be conveyed as an inter vivos gift or a testamentary gift) and can only be passed by inheritance. Difference between a fee simple and a fee tail - A fee simple owner has permanent ownership over an estate and a fee tail a method of transferring fee simple lands that allows such fee simple land to transfer only through the designated descendants of A. The right of alienability in the grantee is not affected by a fee simple defeasible or a fee simple subject to a condition subsequent. The grantee (A) can sell to B all his rights to the property (alienability) but the conditions placed upon the property stay with the grant of property, regardless of who has the right to the fee simple absolute minus the condition. The grantor could then exercise its right of reversion or right of entry if the sale of the rights void the condition.
Fee TailThe Fee Tail - is a method of transferring title to land from A to all A's lineal descendants throughout time. The goal of fee tail is to prolong ownership of the land throughout history and restrict the rights of all descendants to sell or transfer title to someone outside this bloodline. The enactment of a fee tail encourage people to identify lands with the great families not with the King. Think of a fee tail as a series of life estates from one heir to another and another and another etc.
"to A and the heirs of his body" - This language creates both the fee tail and fee simple conditional. Examples of fee tail language - "O to A & her heirs so long as A does not die without issue." or "O to A & her heirs but if A dies without issue to B & her heirs." Comes up frequently in future interests. Reviewed again on November 14.
Fee Simple Conditional - The original method of transferring title to an heir. Someone with a fee simple absolute would have a fee simple conditional once he had a male heir. The Quia Emptores abolished the use of fee simple conditionals and replaced them with fee tail.
Lineal vs. Collateral BloodlinesLineal - Parent, children, grandchildren, etcCollateral - Relatives not in a direct bloodline. Siblings, cousins, in-laws.
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Fee tails will end when an indefinite failure of issue occurs - which means that even after five generations if no issue is available, then the property will revert back to O or the original grantor.
Failure of Issue:Rule of definite failure of issue - You can have a fee tail but you only need one generation of issue to make the fee tail into a fee simple or into a power of appointment. This applies in only the five states that allow fee tails.
Whether the issue must survive the possessory fee tail holder depends on the state. Professor Brown suggests that the issue occurs when the child is born and issue cannot be relinquished if the issue dies before the future interest becomes possessory.
Indefinite failure of issue vs. Definite failure of issue - Indefinite is classic common law from England. In American, we have a definite failure of issue whereby only one generation of issue is required to acquire a fee simple absolute.
Fee Tail in AmericaIn Modern America, the fee tail has been abolished in all but four states. In the states where it has been abolished, the language that at common law would have created the fee tail, "to A and the heirs of his body" has been amended by statute to one of the following new interpretations: Such language creates a fee simple in A and that any gift over on A's death without issue is void. Such language creates a fee simple in A but they further provide that a gift over to B if A dies without issue will
be given effect if at A's death, A leaves no surviving issue. Power of appointment.
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ESTATES Estate - present or future possessory interests in property. There are four types of estates. The first 3 types are called freehold estates (their grouped together based on the rights conferred) and the last type is referred to as non-freehold estates (leases).
Fee Simple - Infinity Fee Tail (or fee simple conditional) - Until original grantee's lineage dies out Life Estate - for the life of the grantee Terms of Years - fixed period measure in years, months, days or a certain date.
When examining estates consider the following:Duration of title, available methods of transferring interest (see below), how an estate can end.
An interest in an estate can be transferred:o Devisable - ownership can be transferred via a will. Also known as a testamentary gift.o Descendible or inheritable - if the property can pass by the state's intestacy statute to heirs if the
owner dies without a will.o Alienable, assignable or transferable - if the owner can sell or gift his interest during his lifetime.
An inter vivos transfer. How can an estate end:
o Naturally o Condition subsequent - is the occurrence or non-occurrence of an event that can cut short an
estate.
DEFEASIBLE ESTATESDevises of defeasance & defeasible estates. Fee simples that can prematurely terminate.Of which there are two types:Fee Simple determinable -
Type of language - "O conveys to A and his heirs so long as Blackacre is a farm." O retains the possibility of reverter.
Fee Simple subject to a condition subsequent - Such a fee simple gives the grantor the right to re-entry upon an occurrence.
Type of language - "O conveys to A and his heirs so long as Blackacre remains a farm but if it ceases to be a farm, O may re-enter."
See, Evans v. Habnee, Supreme Court case. The court had to determine by the ambiguity of the facts of the case whether the grantor of the land, fr. Senator Bacon of GA, intended the land as a fee simple determinable or as a fee simple subject to a condition subsequent.
See, Mahrenholz v. County Board of School Trustees, Issue: Whether the language in the deed (provided that "this land to be used for school purpose only; otherwise to revert to Grantors herein.") gave the grantor or his designate a right of reentry or a possibility of reverter? Rule of Law: Fee simple determinable or a Fee simple subject to a condition subsequent. The difference between these two terms is solely a matter of judicial interpretation of the words of a grant. Reasoning: Court found that the Hutton's (original grantor's) had intended to create a fee simple determinable because of their use of the language "revert" and the lack of any language such as upon condition that or provided that, as such language who have expressed the intent to convey a fee simple condition to a subsequent. "The language 'this land to be used for school purposes only ' is an example of a grant which contains a limitation within the granting clause. It suggests a limited grant, rather than a full grant subject to a condition, and thus both theoretically and linguistically, gives rise to a fee simple determinable."
LIFE ESTATE
The language to create a life estate is "to A for life.""To A…" are the words of purchase. "…for life." are the words of limitations.
The life estate eventually replaced the fee tail. The death of the holder of the life estate terminates the life estate. Every life estate is followed by a future interest - either a reversion in the transferor or a remainder in a transferee.
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Typical or basic will drafting today - O gives to A for life then to B & her heirs. (Husband gives to wife for life then to their child & her heirs.) This is the usual occurrence of a life estate. The holder of a life estate can exclude all others from the property including any holder of a future interest. The life estate holder keeps all income and profits from the use of the land during the life estate. Conversely, the life estate holder is responsible for all repairs and damages to the property and any holder of future interest is immune from any repairs or damages.
Rules of Construction in determining Life Estates: To differentiate between a life estate and fee simple in a will when the terms are vague, you must look towards the rules of construction.
The primary rule of construction (not a law but an accepted supposition in estates) is that the testator intended to give away all her property through her will.
Another rule of construction is that a grantor or testator conveys her full interest in the property unless intent to pass a lesser estate is clearly expressed or necessarily implied by the terms of the deed or will.
Either of these rules can be refuted by the evidence. See, White v. Brown, Issue: Whether the language of the holographic will conveyed to White a life
estate or a fee simple absolute? If the will transferred only a life estate, who has the remainder? Rule of Law: Statutes of Construction: 1) Every grant or devise of real estate, or any interest therein, shall pass all the estate or interest of the grantor or devisor, unless the intent to pass a less estate or interest shall appear by express terms, or be necessarily implied in the terms of the instrument. 2) A will …shall convey all the real estate belonging to [the testator] or in which he had any interest at his decease, unless a contrary intention appear by its words and context. Reasoning: "…testatrix's apparent testamentary restraint on the alienation of the home devised to Mrs. White does not evidence such a clear intent to pass only a life estate as is sufficient to overcome the law's strong presumption that a fee simple interest was conveyed." A fee simple absolute was passed from Lide to White. Note: Court prefers to avoid partial intestacy as a general rule so as to quiet the issue and the historical perspective that a fee simple should be the norm unless expressly made otherwise through the will.
Life estate pur autre vie Someone (B) who retains a life estate from another person (A) who retains a life estate. For example, A has a life estate and then transfers her life estate to B. B only retains the property until A's death not B's.
Economic Rights between Life Estate and Future Interests Holders: A life estate holder has present value. The remainder (future interest holder) has permanent value. Any act in which the life tenant effects the permanent value of the property (think of non replenishable resources in the land). The life estate holder can only receive those economic benefits to which he would receive during his lifetime (based upon actuarial tables) and the balance of the economic benefits would go to the remainder. The life tenant holds the property as a fiduciary or trustee for the future interest holder. The life estate holder may do something to the property that will affect the value of the property when the remainder interests is transferred.
See, Baker v. Weedon, Issue: Whether Weedon can sell the property to which she has a life estate under the theory of economic duress when the property is not deteriorating or in failure on its taxes? Rule of Law: 1) Economic Waste - Land is considered to be an economic waste when viewed in light of its capacity and that a continuing use under the present conditions would result in waste. 2) In addition to economic waste, consideration should be given to the question of whether a sale is necessary for the best interest of all the parties, that is, the life tenant and the contingent remaindermen." Reasoning: "Our decision to reverse the chancellor and remand the case for his further consideration is couched in out belief that the best interest of all parties would not be served by a judicial sale of the entirety of the property at this time. While true that such a sale would provide immediate relief to the life tenant who is worthy of this aid in equity, admitted by the remaindermen, it would nevertheless under the circumstances before us cause great financial loss to the remainderman."
See, Hypo on ExxonMobil, ExxonMobil has a faulty well that pollutes the property. Property has a life
tenant and a future interest holder. Who sues for the damage and for what amount? The life tenant has a duty to sue to protect its property and to sue for the entire claim of damages because the statute of limitations might expire before the remainderman obtain a possessory interest in the property. Look to the
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statute of limitations against the right to bring the claim? Most states allow the life tenant to sue for itself and the future interest holder. In a few states the life tenant is not allowed to sue for the future interest holder but the statute of limitations on the future interest holder is tolled until they come into a possessory interest. Brown suggested this should be avoided because the ability of the future interest holder to recover years later would be negatively affected due to lack of evidence and the possibility of the defendant being able to pay for damages.
TERM OF YEARSTerm of Years - In a term of years, seisin remained with the grantor (opposite of life estate where seisin transferred to the grantee.)
Determinable term of years - O gives to A for 999 years if A so long live. A’s remaining years are devisable.
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FUTURE INTERESTS
Framework for Understanding Future Interests
A grantor has three possibilities of future interestReversion, Possibility of Reverter or Right of re-entry
Reversion - occurs naturally at the end of the prior possessors life. "A reversion is the interest remaining in the grantor, or in the successor in interest of a testator, who transfers a vested estate of a lesser quantum than that of the vested estate which he has." If a future interest is not reversionary, then the future interest must be created in a transferee - someone other than the transferor.
O gives to A for life.If A dies, land reverts back to O in fee simple
O gives to A for life, then to B and her heirs if B survives A.O has a reversion in fee simple that is not certain to become possessory. O's future interest is a reversion but unlike in the previous example, O's reversion is not automatic and rest upon a condition occurring.
Possibility of reverter - Future interest created whenever a fee simple determinable is created out of a fee simple absolute. Look for language such as "so long as A…."
Right of Re-entry - Future interest created in the transferor or his heirs when an estate is transferred through a fee simple with a condition subsequent.
Condition Subsequent: To A for life, remainder to B and her heirs, but if B does not survive A, then to C and his heirs." A condition subsequent is an event that may occur in the future and if it occurs, the holder can be divested of their present possessory interest. Look for “but if,” or “provided that” language.
"to A for life, then to B and her heirs, but if B does not survive A to C and his heirs." C has a shifting executory interest and B has a vested remainder subject to divestment.
Comparison between Possibility of reverter & right of re-entry: Neither are alienable but both are devisable and inheritable. If the reversion is ambiguous, the preference is the right of re-entry.
A grantee has three possibilities of future interestVested Remainder, Contingent Remainder and Executory Interest
Vested Remainder - occurs naturally at the end of the prior possessors estate (life estate, term of years, fee tail). A vested remainder is one that (a) is owner by an ascertained person or persons and (b) is not subject to a condition precedent.
Absolutely - to A for life then to B & his heirs. If A dies, has a fee simple If A dies and B is also dead, B's heirs have a fee simple.
Partial or Open - to A for life then to the children of A & his heirs or to the children of B & his
heirs. Difference is that a partial has an expanding class of people which is not closed until A or
B's death. This is unlike giving to heirs because heirs are a limited. Note: In order for this partial divestment to occur, A would have had to have a child at the time the will is effective.
Complete - to A for life, then to B & his heirs so long as X lives on Tremont Street. Vested subject to divestment.
Contingent Remainder - O to A for life then to B if B is 21 and then to B & his heirs or O to A for life then to B and his heirs if B marries C. A contingent remainder is one where either the owner is unascertained or possession of the property is subject to a condition precedent (a contingency). In all cases, the future interest cannot be divested until the occurrence of some future event.
Condition Precedent - has to be met prior to or before the end of the prior possessory estate.
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Example - "…if B is 21 to B & her heirs." or "to A for life, then to B and her heirs if B survives A."
Rule of Destructibility of Contingent remainder A remainder in land is destroyed if it does not vest at or before the termination of the
preceding freehold estate. If O conveys to A for life, remainder to the first son of A who reaches 21,
then A dies, leaving a son aged 16, the contingent remainder is destroyed; O's reversion becomes possessory. When the son reaches 21, he still takes nothing.
Unascertained - "to A for life, then to the heirs of B." At the time of divestment, B's heirs are unknown. A class that will exist but is
unknown because B's heirs are unknown until B is dead. Contingent remainder in unborn individuals at the time the will is effective
O to A for life then to the children of A & her heirs and at the time of the effectiveness of the will, A has no children. Contrast this with Vested Remainder subject to partial divestment.
Alternative Contingent Remainders O to A for life then to B & his heirs if B is 21, but if B is not 21, then to C & her
heirs. B & C have contingent remainders.
Note: Distinguishing between vested and contingent interests becomes critical with regard to future interests in third parties. Both remainders require the end of the prior estate and some occurrence prior to transfer.
Executory Interest - A future interest in a transferee that must, in order to become possessory, 1) divest or cut short some interest in another transferee (shifting) or 2) divest the transferor in the future (springing). Think of condition subsequent.
Difference between Shifting Executory Interest and remainder is that an executory interest can divest or cut short a preceding interest whereas a remainder requires that the prior estate end before transferring interest to a future interest holder.
Condition Subsequent: "To A for life, remainder to B and her heirs, but if B does not survive A, then to C and his heirs." A condition subsequent is an event that may occur in the future and if it occurs, the holder can be divested of their present possessory interest.
"to A for life, then to B and her heirs, but if B does not survive A to C and his heirs." C has a shifting executory interest and B has a vested remainder subject to divestment.
Shifting Interests - Future interest created in favor of a transferee if the interest could operate to cut short a freehold estate.
"O conveys to A and his heirs, but if A dies without issue surviving him, to B and her heirs." A has a possessory fee simple subject to an executory limitation (or subject to divestment by B's executory interest).
"O conveys to Hartford School Board, its successors and assigns, but if the premises are not used for school purposes during the next 20 years, to B and her heirs." The School Board has a fee simple subject to an executory interest that will automatically divest the Board's fee simple if the condition happens. The divestment is not optionally like a right of entry but automatic like a reversion.
Springing Interests - A freehold created to commence in future. O to A when A marries B
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O transfers Blackacre to B to take effect if and when B agrees to farm Blackacre. O has a fee simple subject to an executory limitation. B has a springing executory interests.
O to A for life, then when B is 21, to B & his heirs.
Trusts - an entity created to hold assets for the benefit of certain persons or entities, with a trustee managing the trust (and often holding title on behalf of the trust). Purpose is to allow settlers to arrange their assets in ways that maximize flexibility in property management as well as transfer wealth to future generations.
Key distinction in a trust is the division between legal and equitable interests: The trustee holds legal title to the property and manages the property for the beneficiaries of the trust. The trustee has the right or buy property and invest the proceeds and its only duty to is to pay out net income to the beneficiaries. When the trust expires, the beneficiaries retain the assets of the trust. The beneficiaries are said to hold equitable interests or interests enforceable by courts of equity. See In re Totten.
Statute of Uses – 1536. Recognized Uses (trust relationships and executory interests). Raising a Use
Bargain & SaleI’m making myself trustee.
Covenant to Stand SeizeLimited to blood relatives.
Rule in Shelley's CaseDefined: If an instrument creates a freehold in A and purports to create a remainder in A's heirs (or heirs of A's body) and the estates are both legal and both equitable, the remainder becomes a fee simple (or fee tail) in A.
O conveys Blackacre to A for life, remainder to A's heirs. This example meets all 4 requirements. The two estates are created by the same instrument There is a freehold in A, i.e. the life estate There is a remainder in A's heirs with no gap between A and his heirs. Both estates are legal and equitable.
The Rule in Shelley’s case only applies when the remainder is in a grantee and not the grantor. The Rule in Shelley’s case only applies when the remainder interest is of the same type (legal, equitable or
personal) between the grantor and grantee. See, City Bank & trust Co. v. Morrissey for example. Examples: O conveys to A for life and then to the heirs of the body of A. When the Rule in Shelley’s case
is applied, this becomes a present fee tail in A and reads that O conveys to A and the heirs of his body.
Doctrine of Worthier Title Rule 5a - If a will devises to a person a freehold estate of the same quality and quantity which such person
would have taken by descent if the testator had died intestate, then such estate passes by descent and not by devise.
Ex. O dies leaving a will in which a clause provides, "I devise Blackacre to my son Charles." At death, Charles is O's only heir. Charles will take Blackacre by descent not by devise.
Rule 5b - If a grantor who is an owner in fee simple purports to create a life estate or estate tail, with remainder to the grantor's heirs, the remainder is void and the grantor has a reversion.
To identify whether the doctrine of worthier title applies, look for whether the remainder goes to the grantor or someone who would be an heir of the grantor.
The Doctrine of Worthier Title favors the statute of intestancy vs. devisements. If the person who receives the remainder via conveyance or devisance is the same person who would have
received the remainder had the property been transferred under the statute of intestancy, then the property would transfer as though it was inherited.
See, Estate of Annie Kern for example and info on anti-lapse statutes. Doctrine of Worthier Title does not apply to inter vivos gifts
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Summary:In Identifying future interests, you first must consider:
a. If it is reversionary or nonreversionary;b. Then identify what type of interests;c. Then what vesting category it belongs to;d. Finally, what type of possessory estate the future interest will result in:
Reminders on Future Interests: Know the difference between the two examples below and how transfers with the same intent can lead to different results if the order of words is re-arranged.
O conveys to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs.
B and C have contingent remainders subject to a condition precedent. B or C will receive the future interest not both.
O conveys to A for life, then to B and her heirs, but if B does not survive A to C and his heirs.B has a vested remainder in fee simple subject to divestment. C has a shifting executory interest which can become possessory only by divesting B's remainder.Difference between the two transfers is that the interest created within the comma's.
In classifying future interests after a life estate, you can bet on this rule: If the first future interest created is a contingent remainder in fee simple (see 1st Example above), the second future interest in a transferee will also be a contingent remainder. If the first future interest created is a vested remainder in fee simple (see 2nd example above) the second future interest in a transferee will be a divesting executory interest.
When analyzing a future interest problem, read up to a comma, determine what future interest has been created, then to the next comma and repeat. The order of the interests is essential to determining the relationship between future interest holders.
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CONCURRENT INTERESTS
A concurrent interest is the simultaneous ownership of a property by two or more persons.
Legal vs. Possessory Concurrent ownership - Two or more parties have legal title to the property only have physical possession of a divided portion of the property.
Issues that will come up:
1) When one parties seeks to transfer their interests or 2) one of the parties dies.
SeverancesA severance is destruction of anyone of the four unities of joint tenancy. The effect is to destroy the joint tenancy between the party responsible for the severance and its relationship to any other joint tenancy. Between this party and the other joint tenants the interests is now as tenants in common. If there are more than 2 joint tenants, the concurrent ownership interests of those joint tenants not responsible for severing the joint tenancy will remain as joint tenants. Tenants in Common – Cannot be severed because it is the lowest level of concurrent ownership. Joint Tenants – Either party can sever the joint tenancy by destroying any of the four unities. Tenancy by Entirety – Severance requires the consent of both husband and wife.
Lien Theory states and Title Series states and Severance Title Theory - In title theory states, a mortgage is a grant on the property subject to a condition subsequent.
Such a mortgage severs a joint tenancy by destroying the four unities making the property held as tenants in common.
In eastern states, the mortgaging of real estate requires the transferring of title. The mortgagee holds the title until the satisfaction of the condition subsequent.
Lien Theory - In lien theory states, a mortgage is a grant on the property subject to a condition precedent. Popular in mid-western states where lots of farms are located. The mortgagee (lender of money) has to go to court to acquire title to the property. A joint tenancy is not severed until the mortgagee is deemed the title holder to the property.
PartitionA partition is the separation of the property according to the interests of the concurrent owners. Both tenants in common or joint tenants may seek a partition of the property. Tenants by the entirety can only seek a severance jointly or if the parties divorce. There are two types of partitions: Partition in kind – Property is physically divided according to each tenants interests. See, Delfino v. Vealencis
Partition by sale – Property is sold and the proceeds of the sale are divided according to each tenants interests. See, Delfino v. Vealencis
Right of Survivorship Full – Joint tenants and tenancy by entirety. The interests in the property ceases to exist at death and is not
inheritable.
None – Tenants in common. The interest in the divided share of the property is fully devisable.
TENANTS IN COMMONTenants in common: Have separate but undivided interests in the property. The interest of each is descendible and may be converted by deed or will. Ex. T devises Blackacre to A and B. A and B are tenants in common and A or B can convey or devise their interest in Blackacre to another. Each tenant in common owns an undivided share of the whole.
Presumptions in US: The presumption in the US is for the creation of tenants in common rather than joint tenancy when the terms are ambiguous.
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Tenants in common have a right of alienability but not of survivorship.
JOINT TENANCYJoint Tenants : Joint tenants are regarded as a single owner of property instead of two people with an undivided share. If one of the joint tenants dies, no new interest in the property is created and the estate simply continues as before with one less joint tenant. Each joint tenant was considered to be equal in all respects. 4 unities are essential to a joint tenancy - time, title, interest and possession. See below for definitions. Note that if any of the four unities are absent either at the creation of the joint tenancy or at any time during the joint tenancy, then the concurrent interests becomes a tenancy in common. If any party to a joint tenancy conveys their interest to another, the joint tenancy is dissolved and a tenancy in common exists but only for the party who severs the tenancy. A joint tenancy will not arise as a matter of law. The intent must be demonstrated in the language of transfer to create a joint tenancy. If no intent, the law will create tenants in common. The proper language in an instrument for a joint tenancy is "as joint tenants with rights of survivorship."
Time: The interest of each joint tenant must be acquired or vest at the same time.Title: All joint tenants must acquire title by the same instrument or by a joint adverse possession. A joint tenancy can never arise by intestate succession or other act of law.Interest: All must have equal undivided shares and identical interests measured by duration.Possession: Each must have a right to possession of the whole. After a joint tenancy is created, however, one joint tenant can voluntarily give exclusive possession to the other joint tenant.
A joint tenant does not have a right of inheritance unless they are the last surviving joint tenant. Right of Survivorship.
JOINT BANK ACCOUNTSIn a majority of jurisdictions, courts hold that the surviving joint tenant takes the sum remaining on deposit in a joint account unless there is clear and convincing evidence that a convenience account was intended. The burden of proof is placed upon persons challenging the surviving joint tenant. Interest never changes hands and the bank account does not have to go into probate.
RELATIONS BETWEEN CO-TENANTSIf the co-owners enter an agreement to share the burdens of maintenance, use or improvements to the property enforce of such provisions would fall under contract law. But what happens if the agreement fails to mention some occurrence or there never was any agreement. In such a case, independent property rules come into effect.
Tenants in CommonA general rule for the sharing of benefits between cotenants is that "a cotenant in possession is not liable to his cotenants for the value of his use and occupation of the property." Tenants in common each have an equal right to occupation of the property and "unless the cotenant in actual possession denies to the other the right to enter, or agrees to pay rent, nothing can be claimed for such occupation." See, Spiller v. Mackereth.
Joint Tenants"It is a general rule that the act of one joint tenant without express or implied authority from or the consent of his cotenant cannot bind or prejudicially affect the rights of the latter." "…a lease to all of the joint property by one joint tenant is not a nullity but is a valid and supportable contract in so far as the interest of the lessor in the joint property is concerned." The joint tenant or lessee in possession has all the rights of the joint tenant but not exclusive rights to the property. See, Swartzbaugh v. Sampson.
MARITAL INTERESTSTENANCY BY ENTIRETYLimited to only a husband and wife and all four unities of joint tenancy. "Neither husband nor wife, acting alone, has the right to judicial partition of property held as tenants by entirety." Contrast this with joint tenants who have the unilateral power to terminate the joint tenancy. Tenancy by entirety is used in a minority of states. Tenancy by the entirety allows for a right of survivorship.
Tenancy by Entirety in Mass
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A judgment creditor can place a lien on the property but cannot execute the sale. The effect is that if the tenancy by entirety ends either by divorce, mutual conveyance, debtor spouse severs the non-debtor spouse and if the property is sold, the lien must be paid. See, Harold v. Harold in Mass Bankruptcy court.
Mass Statute - "A husband and wife shall be equally entitled to the rents, products, income or profits and to the control, management, and possession of property held by them as tenants by the entirety. The interest of a debtor spouse in property held as tenants by the entirety shall not be subject to seizure or execution by a creditor of such debtor spouse so long as such property is the principal (broader meaning than primary - could mean most expensive home rather than your voting residence) residence of the non-debtor spouse, provided, however, both spouses shall be liable jointly of severally for debts incurred on account of necessaries (more expansive than or equal to necessity - allows for greater amount of property) furnished to either spouse or to a member of their family."
Government and Tenancy by EntiretyGovt is denied in getting property held in tenancy by entirety partitioned (by sale). Govt is allowed to take the interest of the husband (convicted criminal) with a right of survivorship if the wife dies before the husband and the wife retains her interest and right of survivorship so long as she outlives the husband. 1500 Lincoln Avenue.
Married Women’s Property ActGave a married woman the same rights as a single woman such as control over her property. While under the previous English common law system, upon marriage a woman lost most of her control over the property to which she had title in, after the passage of the Married Women Property Act, the wife would retain the same control over the land as she had prior to marriage. Her husband's creditors could not recover from her property.
Spousal Property Rights after the Death of a SpouseDoweryDower is a common law mechanism to protect woman from the death of her husband because he alone had right during marriage to the property. Dowery was the wordly goods of the wife that she brought with her into marriage. Upon the death of her husband, a common law wife has a 1/3 life estate in all the property to which the husband was vested during their marriage (dowery + any property the husband acquired an ownership of during marriage). Like tenancy by entirey, this interest is neither separable nor partitionable during marriage. Only divorce or death can end the dowery. Dower overrides the will. Wife could only be protected by dowery if the will did not include her because a wife cannot succeed to the property through the statute of intestacy.
CurtesyMale equivalent of a dowery. Abolished well before dowery.
Modern Elective SharesAt the death of a spouse, the surviving spouse is entitled to support (as dower and curtesy provided) and to an ownership share in the decedent spouse's property, both real and personal. Upon the death of either spouse, the surviving spouse can waive or reject the will and take their elective share. A typical elective share for a surviving spouse is 1/2 or 1/3 if there are children. Statutes do not limit this to real property but to all property. This property does not have to be held as a life estate.
Uniform Simultaneous Death ActProvides that if joint tenants or tenants by entirety die in a common disaster and there is no sufficient evidence of the order of death, one-half the property is distributed as if A survived and one-half as if B survived. To avoid this judicial presumption, wills are drafted with a clause whereby tenants by entirety chose either husband or wife to be presumed to be the party who lived longer so they can control how they want their property to be devised.
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LAND TRANSACTIONS
General Notes:
Contract and Property law overlap in this area of law. The controlling law will make a difference in outcomes.
BROKERSA Broker is the same thing as a real estate agent. In some states, a broker can perform the same services as an attorney. Traditionally, sellers were the only party that used a broker but the modern trend is for buyers and sellers to have a broker. Most states will presume that the broker works for the benefit of the seller unless expressly stated otherwise in the contract. Broker’s Fiduciary DutyReal estate brokers have a fiduciary duty to the party they represent. They do not have such a duty to the other party. A listing agent for a house works for the seller of the home even though the potential buyer's can be led to believe that the listing agent works for them. A broker must exercise good faith and cannot place himself in a position antagonistic to his client's interests. Examples of such a conflicting position are fraudulent conduct, acting adversely to his clients interest, or by failing to communicate information he may possess or acquire which is or may be material to his principal's advantage. A subagent, acting under an agreement with a broker, operates with the same fiduciary relationship to the buyer/seller as the broker must. Blackwelder.
Brokers and Sellers engage in exclusive agreements of two types: Agency Agreement - Limited to defined purposes and defined buyers. The seller carves out certain potential
buyers so that if they buy the property, the broker would not be entitled to a commission. Seller will usually narrowly define these carve outs. The Agency agreement can also be of two types: Exclusive agreement or an Exclusive right to sell.
General Listing - No express agreement between seller and broker. Dangerous to use because the seller has the burden placed upon him to determine which broker is entitled to the commission. Broker can argue that they brought a ready, willing and able buyer to the broker which the seller denied
Broker’s CommissionA real estate broker, under a brokerage agreement, is entitled to a commission from the seller only if: "When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his…there is no right to commission against the seller. On the other hand, if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker's claim is valid and must be paid." From Tristan v. Wait.
CONTRACTS for SALE
Offer to PurchaseThe Offer to Purchase is an offer, which is held open by an option contract, from the potential buyer to seller. Typically prepared by the seller's broker and is a standard form with blank spaces left for the parties to fill in the terms particular to this sale. Document benefits the broker and can hurt both buyer and seller who may not be aware that their signatures can bind them to a contract. Offer to purchase contains terms that satisfy the statute of frauds. See copy of offer to purchase from Supplemental.
Purchase and Sale Agreement
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Contract to convey a deed (good, clear, record or marketable are possible descriptions of the title). Once the purchase and sales agreement is signed, the executory interval begins and lasts until the closing where the deed is conveyed. The Purchase and Sale agreement merges with the deed at the time of closing. See copy of purchase and sale agreement from Supplemental.
The time for the buyer to complain about the marketability or any problems with the house should be done after the purchase and sale agreement is signed until the closing and the delivery of the deed (period is known as the executory interval). Once the deed is delivered, the sellers' liability for the condition of the property or the deed is limited.
Key Terms: "Good and clear record and marketable title" Good - Means title is good in me - to the extent of what title is being transferred. By saying you have good title,
you mean that have the ability to convey the title you represent as having.
Clear (title) - holding ownership of real property without any claims by others on the owner's title and no history of past claims which might affect the ownership.
Record - Usually a deed with the history of the property is required to be record. An adverse possessor is unlikely to have such a deed.
Marketable - 2 definitions available before and in the Lohmeyer case. Brown uses the definition from the Lohmeyer case - see case brief. Free from reasonable doubt as to who owns the land. Marketability is a standard of reason after being apprised of all the facts, apart from price. See section below on marketable title.
Title - n. 1) ownership of real property or personal property, which stands against the right of anyone else to claim the property. In real property, title is evidenced by a deed, judgment of distribution from an estate or other appropriate document recorded in the public records of the county. Title to personal property is generally shown by possession, particularly when no proof or strong evidence exists showing that the property belongs to another or that it has been stolen or known to be lost by another. In the case of automobiles and other vehicles, title is registered with the state's Department of Motor Vehicles, which issues a title document ("pink slip") to the owner.
Offer to Purchase Real Estate vs. Purchase and Sale AgreementThe offer to purchase is from the potential buyer to the seller signifying their interests in buying the property and the amount they are willing to pay as well as how long the offer is good for. The Purchase and Sale agreement is the final agreement (contract) where the parties agree upon the purchase price / details / closing time. The offer to purchase precedes the signing of the purchase and sale agreement which in turn precedes the closing.
Contracts vs. Property Issues in Contracts for Sale Contractual - Offer to Purchase, Purchase & Sale Agreement (Contract to convey not the actual conveyance).
Both are contracts by which the parties agree to convey property (real estate) at some date after the purchase & sale agreement.
Property - Deed and mortgage. The deed is where the contract ends and traditional property law comes in. The deed is the record of the land transfer. Relevant terms are grantor and grantee. The mortgage is the method of payment. Relevant terms are mortgagor and mortgagee.
Contract for Sale & Statute of FraudsRestatement 2nd Contracts Sect.129 - "A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific performance." Land transactions require satisfying the statute frauds unless there was detrimental reliance. See, Hickey v. Green.
Marketable Title
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Definition: Marketable title is a title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person, one which such persons, guided by competent legal advice, would be willing to take and for which they would be willing to pay fair value.
"A marketable title to real estate is one which is free from reasonable doubt, and a title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation. To render the title to real estate unmarketable, the defect of which the purchaser complains must be of a substantial character and one from which he may suffer injury. Mere immaterial defects which do not diminish in quantity, quality or value the property contracted for, constitute no ground upon which the purchaser may reject the title (walk away from purchase and sale agreement). Facts must be known at the time which would fairly raise a reasonable doubt as to title; a mere possibility or conjecture that such a state of facts may be developed at some future time is not sufficient." – See, Lohmeyer v. Bower case.
Title InsurancePurpose: Protects the buyer and lender by having the insurance company pay, up to total purchase price, for any defects. However, the title insurance does not give good title because the title insurance cannot replace the defect, the defect remains. Additional risk is that the title insurance company will stay afloat due to a history of crashes in the business.
Equitable ConversionEquitable conversion occurs during the executory interval (period between the signing of the purchase & sale contract and the closing).
Defined: If there is a specifically enforceable contract for the sale of land, equity regards as done that which ought to be done. The buyer is viewed in equity as the owner from the date of the contract (equitable title); the seller has a claim for money secured by a vendor's lien on the land. Seller holds legal title to the property for the buyer.
Buyer – equitable title in property, legal title in money.Seller – equitable title in money, legal title in property.
The interests are being converted and the equity is the specific performance of each party.
Risk of LossMost courts follow the theory of equitable conversion and find the buyer to bear the risk of loss from the date of the purchase and sale agreement. However, some courts hold that seller is liable until the legal title (compared to the equitable title) is transferred. In Mass, the degree of loss is determinative of which party bears the risk. A significant loss is one that substantially effects a central consideration and is not limited to the physical damage. For example if the loss is significant and the property was material to the contract, then the seller bears the risk of loss. If the loss was minimal, either the buyer bears the risk or the cost of repairs is taken out of the purchase price. Equitable conversion is Mass occurs at the closing not when the purchase and sale agreement is signed. Insurance can also be incorporated into the contract or carried by either buyer or seller to manage the risk of loss.
Review the Purchase and Sale Agreement from Supplemental. Sec. 3, 4, 9, 12, 21, 26.
Installment Land ContractsBuyer takes possession and then starts making payments (principal cost, interest, occupancy fees) but the deed is not transferred. The buyer makes these payments for some period of time (years) and the closing occurs once the final payment is made. Results in a very long executory interval. The seller retains the title throughout and also has the equitable title. Problems - Since buyer never has title, he is subject to the seller's finances. If the seller goes bankrupt or fails his mortgage, the buyer might not be able to obtain title and his money is wasted. In addition, the buyer is not building equity into the house through his payments, in effect the buyer is making contract payments like rent not like mortgage rents.
Duty to Disclose DefectsWhat does a seller have to disclose? Latent conditions that materially effect the physical conditions of the house (opposed to apparent) - a reasonable person would not readily be able to identify these problems. If a buyer or a buyer's inspector could reasonably identify these conditions, the seller is unlikely to have a duty to disclose. Each
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state places a different burden on the seller / seller’s broker on what needs to be disclosed. Sellers could have a duty to disclose information ranging from latent defects in the house, to the criminal background of the neighbors or the prior owners.
In each jurisdiction requiring disclosure, the defect must be material to be actionable. One of two tests of materiality is applied: (1) An objective test of whether a reasonable person would attach importance to it in deciding to buy or (2) a subjective test of whether the defect affects the value or desirability of the property to the buyer.
See the Purchase and Sale Agreement from Supplemental for specific provisions in the contract to disclose.Does the seller have a duty to disclose? (1) Is the seller responsible for the condition? (2) Buyer could not notice the condition (3) Would the seller have a duty to disclose this info?
Fixtures and Purchase and SaleCustomary usage and affixation to the property are the two standards for whether property is a fixture. Each jurisdiction implies a different definition of what constitutes a fixture.
Implied Warranty of QualityThe implied warranty of quality (or habitability which is only those things required to comply with minimum standards of the health codes) can only come into effect after the deed is transferred to the buyer (new owner). Contractors have an implied warranty of merchantability or fitness for habitability. The warranty is implied in law because of public policy and practicality and it applies to subsequent homeowners because of the privity of estate between the previous owner and subsequent owner.
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DEEDS
A Deed is a method of property transfer that must be in writing to satisfy the Statute of Frauds, and must contain (a) the grantor’s name, (b) the grantee’s name, (c) words that indicate an intent to convey the property or an interest in the property (the “words of grant”), (d) a description or identification of the property, (e) the interest being transferred (though a fee simple will be assumed unless the deed stipulates a lesser interest), and (f) the grantor’s signature. Sample copy of deed in the book.
Warranties of TitleModern statutes have shortened the deed to real property from its long and verbose ancestors. A short form of deed contains all of the following required elements for a conveyance: grantor, grantee, words of grant, description of the land involved, signature of the grantor, and sometimes, attestation or acknowledgment. Three types of deeds are currently in use in the US. These are forms of title assurance (opposed to title insurance). These deeds relate only to the legal interests of the property and do not relate to the physical condition of the property. Any of these warranties can have exceptions written into them. o General Warranty Deed - warrants title against all defects in title, whether they arose before or after the grantor
took title. The promises of the deeds are only as good as the resources of the grantor. One does not give a general warranty deed unless they have to. Texas and New Hampshire require it
but a majority of states do not.
o Special Warranty Deed (referred to in Mass as a quitclaim deed) - contains warranties against the grantor's own acts but not the acts of others. Grantor only gives warranty that he did not alter the title he received. Grantor gives no warranty on the title he received.
o Quitclaim Deed (referred to in Mass as a release/fiduciary deed) - contains no warranties and merely conveys
whatever title the grantor has (if any) and the grantee cannot sue a grantor if the grantor has no title. Frequently appears between family members, boundary disputes and when trustees sell property.
CovenantsExpress Warranties included in a deed. Two types – Present and Future.
Present - A present covenant is broken, if ever, at the time the deed is delivered. These covenants only benefit the immediate grantee. Any of the conditions giving rise to the claim must (almost always) be recorded in the land records.
Seisen - warranty that the grantor owns the interest they are conveying.
o Measure of Damages – Return all or a portion of the purchase price. Right to convey - warranty that the grantor can convey the interest that own
Measure of Damages
Warranty against encumbrances - No encumbrances such as mortgages, liens, easements etc other than those mentioned in the deed.
Measure of Damages - If the encumbrance is easily removed (mortgage) the measure of damages is the cost of removal. If the encumbrance is not easily removable (restrictive covenant or easement), the measure of damages is the difference in value between the land with the encumbrance and without the encumbrance. In all cases damages are limited by the total price received by the warrantor.
Future - A future covenant promises that the grantor will do some future act. These are valid until the statute of limitations run out. These covenants run with the land through subsequent owners.
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Warranty - grantor covenants to defend against and compensate the grantee for any lawful claims made against the title.
Measure of Damages
Quiet enjoyment - almost identical to covenant of warranty and means that no one with superior title will interfere with the grantee's possession. "until such time as one holding paramount title interferes with plaintiffs right of possession, there can be no constructive eviction and, therefore, no breach of the covenant of quiet enjoyment." Brown v. Lober
Measure of Damages - damages are measured by the value of the property lost (rather than the portion of property) and the $ value is a measure of current value and is not constrained by the purchase price. This is allowed because the covenant of quiet enjoyment is a future covenant so the breach of the covenant of quiet enjoyment can occur many years after the covenant was made.
Further Assurances - requires the grantor to defend the grantee's title in any ensuing litigation and to execute
any document needed to cure a defect or possible defect in the conveyancing document. Measure of Damages
Some questions to consider in CovenantsWho can enforce the covenant? What is the statute of limitations on period for enforcement and against whom? The Statute of limitations begins to run as soon as the deed is transferred.
Deeds in MassachusettsLanguage from Mass Statutes. What is being granted in these phrases? Each phrase is short form for a series of covenants. I grant with warranty covenants - Warranty Deed - See Mass Gen Laws ch. 183 Sect. 10 I grant with special warranty covenants - Quitclaim Deed - See Mass Gen Laws ch. 183 Sect. 11
Whether an alleged latent violation of a land use statute or regulation, existing on the land at the time title is conveyed but is not recorded in the land records, constitutes an encumbrance such that the conveyance breaches the grantor's covenant against encumbrances? No. The concept of encumbrances cannot be expanded to include latent conditions on property that are in violation of statutes or government regulations unless those violations have been recorded in the land records. Frimberger v. Anzellotti. However, Brown noted that this is the traditional view and courts are expanding the possible locations other than the registry of deeds where a violation can be recorded which could result in a breach of the covenant against encumbrances.
Whether the covenant of seizin runs with the land or whether the covenant of seizin is a warranty only to the grantee of the property? In a minority of states, the covenant of seizin runs with the property and a breach of the covenant by the grantor creates an action that can be carried to subsequent owners so long as the statute of limitations has not expired. Rockafellor v. Gray Chose in Action: A chose in action is a right by subsequent grantee's that assigns the same rights as the original grantee towards a breach of a present covenant. A chose in action is the right to bring the claim based upon the interest (right to action, promise, covenant) that is transferred. Covenants are chose in action that satisfy the requirements of seisin because a deed is the equivalent of physical possession. The deed has replaced the historical livery of seisin requirement that a grantor needed to have physical possession of the property.
Does a quitclaim deed in the chain of title destroy the ability of subsequent grantee’s to recovery for future covenants against grantor’s prior to the quitclaim deed? A quitclaim deed within a chain of deed does not cut off the future covenants from a prior general warranty deed. The quitclaim protects its grantor but does not affect the covenants made by prior or future deeds.
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The original grantee cannot sue the original grantor until the subsequent grantee sues the original grantee.
Hip Pocket Deed: Unrecorded deed.
Estoppel by DeedIf a grantor conveys land that he does not own to a grantee and warrants title to the land. If the grantor subsequently acquires title to the land, the grantor is estopped to deny that he had title at the time of the deed and the subsequently acquired title goes to the grantee. Comes up when a person knows they are going to be in possession of property but have yet to come into possession.
2 Main instances: After acquired title and denial of warranties in prior deeds (mortgage).
Delivery of the DeedTo be effective, a deed must be delivered with the intent that it be presently operative. A conveyance is not effective until the deed is delivered. The language of the deed, its very existence, speaks to the intention to deliver. Conditions on deeds must be written down. Traditionally, oral conditions will not be accepted that are imposed by either party. If there are stated conditions in the writings, then the escrow is not absolute and deed will not be transferred unless conditions are met. Deeds share some characteristics of contracts but they are not contracts, they are closer to gifts especially in the requirements of delivery. This section follows closely with the donative transactions section. See, Sweeney v. Sweeney.
An escrow agent is not a seller’s agent so delivery to an escrow agent satisfies the delivery requirement for deed transactions. Such a gift is irrevocable at death. Alternative approaches to Sweeney: No delivery - When the deed is handed over to the grantee but the extrinsic evidence shows that the deed is to
take effect at the death of the grantor, a few courts have held that there is no delivery and that the transfer is testamentary and void.
Delivery good and condition enforced - A grantor or grantee can hold the deed in escrow and the deed is conveyed only when the condition is satisfied. Legal delivery occurs at the moment the condition is satisfied even though the physical delivery occurred prior.
Deed Descriptions
The language use to describe the parcel of land must give closure to the property.
Options for Deed Description - Attach a plan of the lot, refer to previous deed descriptions, verbal descriptions (METES & Bounds - what property or landmark does this property abut, what is the distance between landmarks) or (Courses & Distances - How far in one direction, then turn what direction etc.)
The use of a landmark such as a tree or a river, to which point of the landmark does the property run to? To the banks of the river or to the center of the river? To the street or to the middle of the street? Look to the language and each statute's case law defining each term.
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MORTGAGES
Mortgages as two instruments: 1) a promise to pay - promissory note and 2) a security device - the mortgage itself. The mortgagor's interest in the property is known as equity which is short for equity of redemption. In most states it is the mortgage that looks like a deed and it is recorded in the registry of deeds.
Promissory Notes:A promissory note should contain the following terms: term, interest rate, amortization (systematic reduction in the principal amount of the loan over its term), conditions for prepayment of the loan.
Mortgage Document:A mortgage should contain the following terms: description of the property, mortgagor’s obligations regarding the property (taxes, insurance etc), default provisions, mortgagee’s remedies, due on sale clauses (balance of loan due upon sale).
Mortgages: Title vs. Lien Theory Title Theory - In title theory states, a mortgage is a grant on the property subject to a condition subsequent.
Such a mortgage severs a joint tenancy by destroying the four unities making the property held as tenants in common.
In eastern states, the mortgaging of real estate requires the transferring of title. The mortgagee holds the title until the satisfaction of the condition subsequent.
Lien Theory - In lien theory states, a mortgage is a grant on the property subject to a condition precedent. Popular in mid-western states where lots of farms are located. The mortgagee (lender of money) has to go to court to acquire title to the property. A joint tenancy is not severed until the mortgagee is deemed the title holder to the property.
Multiple Mortgagor’s (aka junior encumbrances such as home equity loans)A multiple mortgagor situation arises when a homeowner takes out a loan using its equity in the home as the collateral on the loan. The later mortgagor’s have less rights than the previous mortgagor. The first mortgagor has the most rights and gets the first income from any sale of the property even if they are not the party seeking foreclosure on mortgagee’s equity in the home. Remember the hypo’s in class about the foreclosure sales and how first mortgagor recovers all of his unpaid balance and then if anything is left, the second mortgagor gets his portion, etc.
Subsequent Owners and Mortgage’sThere are three methods for a subsequent owner to discharge the mortgage on a property. The typical method for residential buyers is to cut two checks, one to the mortgagor for the balance of the mortgage and the balance of the purchase price to the previous owner. This is not followed often in commercial sales of property. In commercial property sales one of these two methods are used: Subject to the mortgage - Will be in the deed from O1 to O2. O2, the owner of the property, agrees to pay the
mortgage every month and risk foreclosure if they do not pay. O2 does not agree to pay the note.
Assume and agree to pay - Will be in the deed from O1 to O2. O2, the owner of the property, assumes the mortgage and the promissory note. This language, in a majority of states, makes the subsequent owner personally liable for the value of the note. If a deficiency exists, O2 is personally liable. A minority of states do not allow for the deficiency so the effect of assume and agree to pay is that of a subject to the mortgage language.
o Deficiency - the balance between the sale price of the property at foreclosure and the value of the promissory note.
Both of these organizations were established to create a secondary market for home mortgages.o Fannie Mae - Federal National Mortgage Association o Freddie Mac - Federal Home Loan Mortgage Corporation
There are two types of foreclosures: A strict foreclosure and a deed of trust (power of sale)/
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Strict Foreclosure : Strict foreclosure is a judicial proceeding whereby the mortgagor is ordered to pay off the mortgagee within a given period or be forever barred. The end result of this is a foreclosure sale where the property is sold and the mortgagee(s) are paid off first and any proceedings go to the mortgagor. Mortgagor's have also been given a statutory right of protection from a foreclosure purchaser by extending the time period within which a mortgagor can pay back the debt.
Deed of Trust or Power of Sale : The borrower conveys title to the land to a person (who is usually a third person but may be the lender) to hold in trust to secure payment of the debt to the lender. The trustee is given the power to sell the land without going to court if the borrower defaults. A deed of trust is an instrument benefiting the mortgagee.
Duty of Good Faith and Due Diligence
Mortgagee’s have a duty of good faith and of due diligence in receiving the best price possible for property during the foreclosure period. A mortgagee executing a power of sale (deed of trust) is bound both by the statutory procedural requirements and by a duty to protect the interests of the mortgagor through the exercise of good faith and due diligence. A mortgagee's duty of good faith and due diligence is similar to a fiduciary duty. See, Murphy v. Fin. Dev. Corp. Measure of Damages:The measure of damages for a mortgagee who fails to exercise due diligence is the difference between a fair price for the property and the price obtained at the foreclosure sale. Courts generally articulate two main standards for invalidating a foreclosure sale based on price: Shock the Conscience - the inadequacy must be so gross as to shock the conscience. Grossly Inadequate - the sale price must be grossly inadequate.In either case, the courts infer that fraud or imposition is present in the sale of the property.
Installment Land Contracts & MortgagesInstallment contracts are not the same as a mortgage in that equity is not obtained through monthly payments but traditionally was only acquired upon final payment. As a contract, the buyer had to completely perform, make the final payment, prior to the seller, delivering the deed and the interest in the land. Until that final payment is made, the buyer was essentially a renter. However, courts are rejecting the traditional view because the subject of the contract is real property and for public policy reasons, real property transactions are not governed entirely by contract law. In case of default by buyer, the property will have to be sold with the buyer’s receiving in equity the principal paid plus improvements while the vendor gets the remaining purchase price at foreclosure. The buyer acquires an equitable interest in the land upon purchase … the seller holds the legal title in trust for the seller and has an equitable lien for the payment of the purchase price. See, Bean v. Walker
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TITLE ASSURANCES – THE RECORDING SYSTEM
The recording system is designed to record all transactions with regards to real property within a given location, usually by county. The recording system supersedes the common law in determining legal interests in real property. The recording system serves several functions: It establishes a system of public recordation of titles It preserves in a secure place important documents that in private hands, may be easily lost or misplaced It protects purchasers for value and lien creditors against prior unrecorded interests. Key Terms of the Recording System are: Indexes, System Classifications, Notice, Inquiry, Instruments.
The following instruments are generally available for recording (look to the statute on recording within the state): Deed, mortgage, lease, option, or other instrument creating or affecting an interest in land (easement or covenant), a judgment or decree affecting title, affidavits containing statements of fact about the property.
The recording acts generally do not affect the validity of a deed or other instrument because a deed is valid and good against the grantor upon delivery without recordation.
Under the recording acts, a subsequent bona fide purchaser is protected against prior unrecorded interests. The recording acts refute the common law property rule of first in time, first in right.
3 Forms of Self-Evident Proof within the Recording SystemDeed - Evidence of when the act of transfer occurred.Point of Contact with the registration official - Once in the hands of the registrar, they have to time stamped the deed
and record the deed.Chain of Title - Found by working through the registry index (tract or grantor-grantee) and to all the actual deeds
listed in those indexes to verify that status of covenants, warranties or other info about the property. The Mass standard is 50 years. If you know of problems with the title beyond 50 years, you'll need to go all the way back to the Root Title that is the source of the problem.
The IndexesTwo types of recording indexes: Tract Index: Documents are identified by a parcel identification number assigned to a particular tract. Not available in most states, especially in the east because land was not identified by parcels. Land is divided into plats and then subdivided into tracts.
Difficulties with tract indexes: Impossible to search by grantor or grantee because the system is limited to tracts alone, tracts can be subdivided and transferred in portions that do not correspond to the original tract designation resulting in great confusion increasing over time.
Grantor - Grantee Index: Documents are identified by both grantor & grantee. Two indexes are maintained, one for the grantor and one for the grantee. The grantor index is alphabetical and chronological under grantor's surname. The grantee index is alphabetical by the grantee's surname. These indexes can be subdivided by the type of instrument recorded or the period of time. The grantor index will list any encumbrances on the property but the grantee will not.
Classification of Recording Acts: Race or Pure Race or Race-Notice, Notice Statutes
Pure Race - When two persons hold competing claims to real property, the first person to record (not the first to receive the deed, mortgage, etc.) prevails even if he knows of a prior conveyance. No requirement of good faith. Benefit of such a system is the certainty provided by the registration of claims. This is in a minority of states because of the potential for fraud / abuse.
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Race-Notice - Majority of states. A subsequent bona fide purchaser or creditor who first records prevails against a person claiming a prior, unrecorded interest as long as the subsequent purchaser did not have notice of the preceding interest when she acquired her interest (she can know about the interest when she records the document so long as she did not have notice when she purchased). Notice: defined broadly to include several forms of identification to a subsequent purchaser.
o Actual : Actual notice or knowledge by the subsequent purchaser of a prior claim.o Constructive : AKA Record notice refers to knowledge or notice a purchaser could gain by searching
the deed records. A purchaser is presumed to have notice of all legally recorded documents.o Inquiry : A prospective purchaser or creditor is considered to have inquiry notice when they hear or
observe something that would cause an ordinarily prudent person to inquire further. If reasonable, then purchaser / creditor has notice.
Usually observations obtained in routine checks of the property prior to purchase such as state of property, tenants or long-term leasee's
Purchaser / creditor is on notice for any information contained within the recorded documents in the registry.
Questions to Consider for Notice o Does the property come from a common grantor?o Whether the promise is personal to the grantor or does it run with the land? o And are future purchasers on notice of developers promise to restrict? o And who can enforce the restriction?o What notice is required to qualify as a bona fide purchaser? o Do you need a uniform plan or just a common grantor? o Do you need to examine anything outside of the recording system?
Notice or Pure Notice - A subsequent bona fide purchaser or creditor for value prevails over prior claimants as long as the subsequent purchaser acquires the interest without notice of the prior claim.
o Notice in a pure notice statute is the same as in a race-notice (actual, constructive or inquiry).o A purchaser can rely on the deed records as they exist on closing.o Massachusetts is a Pure Notice statute state. Language in supp p. 117 / 813
Guiding Principles of claims to Real Property are (or were): As between conflicting claims to legal interests in land, the first in time prevails unless the claimant who is
prior in time is estopped, by virtue of his or her actions, to assert a claim. As between conflicting equitable claims to land, the first in time prevails unless the claimant who is prior in
time is estopped, by virtue of his or her actions, to assert a claim, or unless the claimant who is subsequent in time acquires the legal title in good faith (that is without notice of the prior equity) and for a valuable consideration.
As between a claimant of a legal interest and a claimant of an equitable interest, the former always prevails if that claim is the earlier in time, and also prevails if the claim is subsequent in time, provided he or she acquired the legal title in good faith and for a valuable consideration.
Bona Fide PurchaserRemember the rules on bona fide purchaser from 1st Semester. UCC 2-403. Merchant in ordinary course of business can give voidable title.Under the UCC, Bona Fide Purchaser is a person who acquires title:1. In a transaction in which a fair market value of the object is the consideration.2. With an honest belief that he was acquiring title to the object and,3. Under circumstances that would not lead him to think otherwise. Alternative definition of Bona Fide Purchaser: a person who buys honestly and without notice of any conflicting claim on the property bought, whether or not the purchaser is negligent.
Significance of Failure to Record Whether subsequent bona fide purchasers who acquired real property without notice of contrary claims to the property has a greater claim than an unrecorded deed? Yes. Rule of Law: For the protection of bona fide
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purchasers or creditors, an unrecorded deed is not binding unless they have notice of it even though such an unrecorded deed would have full force against the grantor, grantee, their heirs and devisees. The absence of seisin in the grantor is not a bar to the subsequent purchaser unless the subsequent purchaser was on notice of that deficiency. Earle v. Fiske.
For the opposite view see Hill v. Meeker. Upon the conveyance of a deed, the grantor or his heirs no longer holds that interest in the property and cannot grant any similar interest in the land because they are without seisin. This case rejects the bona fide purchaser exception that was recognized in Earle v. Fiske. When a grantee takes from the beneficiary of an estate, they take the risk of an unrecorded deed by the grantor.
Be aware of statutory construction. Vitally important to follow the statute but not to give to the statute a meaning that is unintended and contrary to the purposed behind the recording acts. If you don't record the instrument, you are in danger of losing your interest.
Notice: Actual, Constructive and InquiryActual NoticeActual notice is actual knowledge of the existence of a prior unrecorded interest. An individual with actual notice will not be given protection under Notice or Race Notice statute states.
Constructive or Record NoticeRecord notice is generally defined as notice to a subsequent purchaser that is available in the registry. An exception to that rule is Massachusetts (see Ayer case, contrast with Morse). Look to the state statutes definition of what record notice is for a purchaser and how this can be determined through the index. Typical standard is the chain of title.
Constructive Notice, Subdivisions, Uniform Plans and Common Grantor: Notice through chain of title .
o NY – Buffalo Academy: Subsequent purchasers are only considered on notice on their own chain of title. The exception is if the chain of title indicates a uniform plan from the common grantor in his grants of the larger property. If plan was uniform, then subsequent purchasers would be required to search grantor’s conveyances prior to subsequent purchasers conveyance and be considered on constructive notice of an covenants pertaining to the larger property.
Notice within Registry - If chain of title determines that purchasing property is less than total property owned by previous grantor, purchaser is on constructive notice of all covenants running with the land contained within any deed from the common grantor to the prior, larger estate that were granted prior to subsequent purchaser.
o MA – Guilette Dry Wall: If during a chain of title search, you determine that the land your purchasing was subdivided by a previous owner because of a cite plan of the subdivision, to satisfy notice, a grantee must trace the grantor index for all other subdivided lots granted prior to your conveyance. A subsequent grantee is on notice of all other subdivided lots and their covenants but not to those granted after conveyance (this is because of privity of estate). All notice is within the registry.
Inquiry Notice - If a subsequent purchaser is put on inquiry that the property may be part of a uniform plan or contain easements / covenants, they are on constructive notice if such covenants were recorded, even if the recordings are not within your chain of title (MA requirements).
o MI / NH – Sanborn v. McLean: Put to inquiry resulting in constructive notice if the easement was recorded. In Michigan, if you are put on notice about possible restrictions on land, you must inquire into the chain of title even if no uniform plan is found.
A subsequent purchaser can only be on constructive notice of those documents that would normally appear in the record. Look to the statute for the types of recorded instruments. Deed Indexed Under Wrong Name or Wrong Initial
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General rule is that the duty to ensure that its recording is correct is placed on the party placing the document in the record and not on the subsequent purchaser / creditor nor on the officials at the registry. If you are going to have something recorded the risk of error lies upon yourself. Possible problem with this opinion is the burden it places on the party recording.
Deed of Grantor Recorded Prior to Time Grantor Acquired PropertyO grants to A and A records prior to O having the land recorded in his name. O acquires title, records and then grants to B. B is unlikely to find the record of O granting to A because it occurs prior to O acquiring the title himself. Who should get the land? See, Ayer v. Phil (holding that a purchaser in MASS is required for good chain of title to run the grantor's name back to some period prior to the granting of the land. Normal practice is to only run the grantor index back to the grantor's name).
Estopped to Deny - Ayer v. Philadelphia v. Boston Face Brick Co.Holmes Opinion - A person who made a warranty on a property and later reacquires the property without fulfilling the warranty, this person is estopped to deny he ever made the warranty and the warranty comes back into existence. This opinion is completely contrary to the recording statutes because it makes a subsequent bona fide purchaser responsible for the warranties and covenants made by prior deed holders. Mass law.
Deed of Grantor Recorded After Grantor Disposed of PropertyO grants to A. A does not record. O grants same property to B. B records. Later A records his deed from O. C seeks to buy B's property and locates B's record in the index. However C does not see A's record to the same land. Does the recording by A of his deed from O put C on notice? Acc. to Morse no. O has become a stranger to the title following the transfer to B. Should C be required to follow the chain of title through a stranger to the title? No.
Morse v. Curtis (finding that a subsequent purchaser is only on notice of the chain of title of his grantor and does not have to pursue strangers to the title – contrast with Ayer which requires searching for strangers to the title to satisfy notice). "…if a purchaser, upon examining the registry, finds a conveyance from the owner of the land to his grantor, which gives him a perfect record title completed by what the law, at the time it is recorded, regards as equivalent to a livery of seisin, he is entitled to rely upon such record title, and is not obliged to search the records afterwards, in order to see if there has been any prior unrecorded deed of the original owner." Actual notice is required for subsequent purchasers to prevent fraud.
Stranger to the Title – a former owner of the property who has conveyed their interest within the chain of title.
Summary of the previous cases - What is the chain of title? Its extent? Primary chain of title vs. notice outside the chain of title. Does the jurisdiction have a narrow definition of notice vs. a broad view of notice?
Uniform Plan - A lot is uniform when the common grantor plans or declares as its purpose to restrict any particular portion of the subdivision or lots thereon to residential or other use or includes within the common grantors deeds to grantees specific restrictions indicating a uniformity of purpose. Was it the grantor's intention to have a covenant run with the land? Do more lots have the restriction than don't? Is there uniformity to the grantor's use of the restrictions? See, Buffalo Academy of the Sacred Heart v. Boehm Brothers (finding no uniform plan existed because a majority of the deeds did not contain the same restrictions placed upon Kendall and no consistent or uniform placement of the deed restrictions throughout other lots within the subdivision).
Reciprocity - Each subsequent lot owner shares the same rights as the common grantor in enforcing negative covenants on land to which the common grantor had seisin to at the time of covenanting. Inquiry Notice Defined: Inquiry notice exists where a purchaser is in possession / knowledge of facts which would lead a reasonable person in his position to make an investigation, which would in turn advise him of the existence of the prior unrecorded right. Purchaser deemed on inquiry notice and therefore constructive notice even if he does not inquire.
What knowledge puts a subsequent purchaser on Inquiry Notice?
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Inquiry is actual when a subsequent purchaser has actual knowledge of such facts as would put a prudent man upon inquiry, which if prosecuted with ordinary diligence, would lead to actual notice of the right or title in conflict with that which he is about to purchase. Actual, open and visible occupation constitutes such as actual knowledge so long as the purchaser knows of this occupation. In an inquiry notice state, once subsequent purchaser has actual knowledge that would put a person on inquiry, they are considered to have constructive notice on all recordings. See, Brinkman v. Jones
An occupant's possession is actual notice of his title and all persons with notice of such possession must at their peril take notice of his full title in the premises, no difference what the record shows. See, Toland v. Corey & Galley v. Ward
Leases & InquiryFor a subsequent purchaser to be on notice of a lease running in excess of 7 years, which includes leases that could run over seven years through options, the lease must be recorded in the registry or the purchaser must have actual notice of the lease terms. See, Toupin v. Peabody
A notice of lease (term for how a lease is recorded) in the record places a subsequent purchaser on constructive notice of the contents of the lease. See, Mr. Donut of America v. Kent.
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PRIVATE vs. PUBLIC LAND USE CONTROLS
Private – Easements and Covenants are examples of private actors placing control on land. Public - Conditions placed upon the land by the sovereign. Public land use is a modern occurrence.
Private Land Use: EASEMENTS
Easements permit the use of or places restrictions upon the use of a land of another.
Courts look to the intent of the parties in creating easements. This is a stark difference from property law such as title recordings where the intent of the parties is not considered.
Forms & Characteristics of EasementsAppurtenant & In Gross Easements Easement of appurtenant - benefits the property. Correlates to the dominant easement / benefit of the easement
o An easement that benefits the owner or possessor of a particular parcel of land. Runs with the land.o The benefit of the easement usually requires a privity of estate with the common grantor.
Easement in gross - benefits individuals or groups. Correlates to the servient estate / burden of the easemento An easement that benefiting a person whether or not the person owns any specific property.
Dominant vs. Servient Estate Dominant - The dominant estate has the benefit of the easement Servient - The Servient estate has the burden placed upon it. Positive vs. Negative Easements Easements can be positive (allowing access to a non-property owner) or negative (restricting the property owner from using his land in some manner). Positive / Affirmative: Easements that give the holder the right to go onto the servient estate for a specific
purpose.
Negative: Easements that give the holder the right to prevent the possessor of a servient estate from doing some act on the servient estate.
Recognized Negative easements incl. - right of airflow, right to light, right to channeled water, right to lateral support, view easements, solar easements and conservation easements.
Remember that these types of easements do not exist unless they have been created through a deed. These easements are not implied by law.
How are easements created?
Express, Implication, Prescription Express - Deed. See Williard case.
Grant - Written instrument similar to a deed Reservation - A grantor reserves a right to go onto his former property (beach access). Property is granted
but grantor retains some rights. Implication - Arises from the intention of the parties during the creation of the separate lots or by necessity
(narrowly defined). Necessity - An easement is implied when the court finds the claimed easement is necessary to the
enjoyment of the claimant's land and that the necessity arose when the claimed dominant parcel was severed from the claimed serveint parcel. 3 things must be shown: 1) that there was a unity of ownership of the alleged dominant and servient estates; 2) that the roadway is a necessity, not a mere convenience; and
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3) that the necessity existed at the time of severance of the two estates. "…the mere fact that the claimant's land is completely surrounded by the land of another does not, of itself, give the former a way of necessity over the land of the latter, where there is no privity of ownership." Othen v. Rosier. & Van Sandt v. Royster.
Prior Use / Quasi Easement - Precursor to an implied easement. Implied on the basis of an apparent and continuous (or permanent) use of a portion of the tract existing when the tract is divided.
Prescription - Arises from the adverse use of a hostile party (adverse possession)o Similar to Adverse Possessiono 6 elements:
Actual Use Affirmative easements only. No negative easements by prescription.
Open and Notorious Use Hostile Use Continuous and Uninterrupted Use Exclusive Use (minority state requirement) For the statutory period
Public Trust DoctrineThe Public trust doctrine is a principle "that land covered by tidal waters belonged to the sovereign, but for the common use of all the people." Private property rights to these lands are limited because the sovereign’s grant of the property can never include the right to limit reasonable access to waterways. See, Matthews v. Bay Head Association.
Easements by Estoppel & LicensesStandard is that the grantor of a license is estopped to deny that they granted this right. This is very difficult to prove at common law.
Reciprocal negative easements (property owner cannot do something). Defined as "if the owner of two or more lots, so situated as to bear the relation, sells one with restrictions of benefit to the land retained, the servitude becomes mutual, and, during the period of restraint, the owner of the lot or lots retained can do nothing forbidden to the owners of the lots sold. From Sanborn v. McLean.
COVENANTS
In real property, covenants can be personal or they can run with the land.The difference between a grantor making a personal covenant not to do something vs. the grantor making a covenant that runs with the land because he binds himself, his heirs or conveyers or devisees. Look to the language of the conveyance to see if the grantor binds himself alone with regards to each separate covenant. Buffalo Academy.
Remember all the General Warranty Covenants contained within Deeds
Covenants Running With the LandA covenant running with the land is simply a promise between two parties which, because it meets certain technical requirements, has the additional quality that it is binding against one who later buys the promisor's land, and/or enforceable by one who later buys the promisee's land.
The covenant is with the estate in land not simply in the land. The impact of this distinction is that unless a subsequent owner has the same estate as the covenatee, the covenant cannot be enforced. Owner in fee simple conveys property as life estate, the life estate holder is not in privity. However this distinction will not apply to benefits that only require privity of estate or a lesser estate from the one in privity.
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A breach of a covenant results in a legal action for damages but not an equitable action. Only equitable servitudes can be enforced through equitable relief. When does a covenant run with the land? Burden - when does the burden run (so the promisor's assignee is bound)?
o Affirmative - Burden on the landowner that requires them to pay some money or perform some act.o Negative / Restrictive - Burden on the landowner that restricts the uses of the property to the
landowner. Benefit - when does the benefit run (so that the promisee;s assignee can sue for damages if the covenant is
breached)? Characteristics of Covenants: All covenants that run with the land require these three elements: Intent to be Bound - evidenced by a writing that satisfies the Statute of Frauds.
o Any of these phrases indicates an intent for subsequent purchasers to be bound A promisor agrees for himself, his heirs and his assigns to be bound This covenant shall run with the land This covenant is appurtenant to the land
Touch and Concern (possibly abandoned by 3rd Restatement).o The burden / servient must touch and concern the promisor's land. Horizontal and Vertical privity
required.o The benefit / dominant must touch and concern the promisee's land. Horizontal privity required.
Privity : Refers to privity of estate whereby the land must transfer between the promisor and promisee (horizontal) plus a succession of estate from promisor to promisor's assignee (vertical).
o Horizontal - land must transfer between promisor and promisee. Required for burden and benefit. Privity of estate between the original covenanting parties. Evidenced by any documented
transfer of interest that satisfies the Statute of Frauds.o Vertical - land succeeds from promisor to promisor's assignee. Required only for burden. Benefit does
not require this. Privity of estate between one of the covenanting parties and a successor in interest.
Brown's structure for Covenants that run with the land Intent to be Bound, Touch and Concern, and what covenants are we going to enforce?
All of this discussion takes place after we determine if the parties were on notice of the covenant. See Buffalo Academy and Guilette Dry Wall.
General Notes on Covenants Covenants do not require consideration, do not require mutuality.
Covenants that have been considered by courts to not run with the land Covenant not to compete (but they can still be enforced)
Equitable ServitudesSimilar to real covenants in that an intent to be bound and touch and concern are required but instead of privity, equitable servitudes require notice (actual, constructive or inquiry). These tell people to not do something (negative) or to do something (affirmative).
Brown’s Principle from Tulk on Equitable Servitudes & Covenants - Courts should not allow a technical requirement of privity to deny standing when fairness dictates that the party seeking to enforce the covenant should be able to. Remedy allowed is injunctions or specific performance. Damages are forbidden because the party who is having the covenant enforced upon them is a subsequent purchaser.
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Exam taking notes:
General Outline of Property Issues to Consider What type of property is being questioned?
Real property or Chattel Is the issue present or future interest in the property?
Present - Did the person acquire the property through first possession or subsequent possession? If first possession, was the property acquired by discovery, capture or creation?
Discovery - were they the first to claim the property? Capture - did the person capture by physical or constructive possession?
Physical - actual possession of the property required? Constructive - some value must be added to the common to confer
ownership over the property? Creation - did the person combine a common with their own efforts to create
something new? Are you the first in time with regards to this property?
If Subsequent possession, did the person come into possession by find, bailment, adverse possession, gift or as a bona fide purchaser?
Find - Was the property lost or mislaid? Lost - In absence of true owner, title to the finder. Mislaid - In absence of true owner, title goes to the owner of the property
were the property mislaid. Abandoned – True owner intended to relinquish control over the property Treasure Trove – Requires a sense of antiquity
Bailment - Was the property expressly, constructively, or symbolic? What liability is the bailee held to?
Express - Was the physical property handed over? Constructive - Was some instrument or object that controls access over the
property handed over? Symbolic - Was a symbol of the bailed item transferred? Standard of Care in Bailments
Gross Negligence – Was the bailment gratuitous? Reasonable Care / General Negligence – Mutual benefit
between the parties? Absolute Liability – Was it a commercial bailment or did the
thing get misdelivered?
Adverse Possession - Did the AP demonstrate actual, open (notorious), exclusive, hostile and continuous possession?
Actual - Was the AP in physical or constructive possession of the property? Open & Notorious - Was the possession so open as to give the owner
notice? Exclusive - Was the AP's possession to the exclusion of all others? Hostile - Was the possession in the absence of the owner's consent? Continuous - Was the possession in the same manner as that of the true
owner for the statutory period? Adverse Possession – Did the AP have a claim of right or color of title?
o Claim of Right – Did the AP assert a claim to possess the land?o Color of title – Did the AP possess an invalid title to the property?
Constructive Adverse Possession. Gift - (1) Did the donor intend and deliver the gift and did the donee receive and
accept the gift? Intent - Did the donor express his intent to give this property as a gift? Delivery - Was the delivery express, constructive or symbolic?
Express - Was the property physically handed over?
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Constructive - Was there a key or other instrument handed over to the donee?
Symbolic - Was something symbolic of the subject matter of the gift handed over?
Acceptance - Is there any reason the acceptance should not be taken for granted?
Gift (2) Was the gift an inter vivos, causa mortis or testamentary gift? Inter vivos - Was the gift given during the lifetime of the donor with the
intent to permanently transfer title? Causa mortis - Was the gift given in apprehension of death? And death
occurred? Testamentary - Was the gift given after death through a will?
Bona Fide Purchaser - Was the purchaser acting in good faith and did the seller had void or voidable title?
Good Faith - Did the buyer deal honestly, pay fair market value under circumstances that appeared legit?
Void - Did the seller to the BFP acquire mere possession from the true owner?
Theft - Possession was taken without the true owner relinquishing title
Voidable - Did the seller to the BFP acquire possession and title from the true owner?
Fraud or Apparent Authority (Entrustment) - Did the true owner relinquish possession and title?
Future - Type of estate and grantor / grantee future interest
Estate - Is the estate being transferred a fee simple, fee tail, life estate or term of years? Fee Simple - Is the estate granted forever or does the grant include language which
limits the estate? Absolute - Does the possessor and their heirs own the property for infinity? Subject to condition subsequent - Could the possession end if an event
occurs? Determinable - Will the possession end the moment an event occurs?
Fee Tail - Does the estate belong only to the possessor and the heirs of its body? Life Estate - Does the possessor's interest end at their death and then the property
reverts to someone other else? Term of Years - Does the possessory interest have a exact # of years that it will last
for? Future Interest - Is the future interest going to the grantor or to a third party?
Grantor - Does the grantor's have a future interest in reversion, possibility of reverter or a right of re-entry?
Reversion - Does the grantor automatically regain possession at the termination of the prior possessor's estate?
Possibility of Reverter - Does the grantor automatically regain possession if the prior possessor does something?
Right of Re-entry - Does the grantor have a right to retake possession if the prior possessor does something?
3rd Party - Does the 3rd party receive a remainder or an executory interest? Remainder - Is the remainder vested or contingent?
Vested - Does the possessory interest transfer immediately upon the termination of the prior possession?
Absolutely - Is the divestment in fee simple? Partial - Are the class of people in whom the divestment
is occurring limited but incomplete? Complete - Is the vested remainder subject to divestment
at the occurrence of something?
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Contingent - Does the possessory interest transfer only upon the occurrence or definition of something?
Unascertained - Is the designated future interest holder unknown at the time of divestment?
Condition Precedent - Does something have to occur before divestment is realized?
Executory Interest - Does the future interest cut short the prior possessory’s estate?
Shifting – Divests or cuts short some interest in prior transferee.
Springing – Divests the transferor in the future. Original grantor may have a reversion that is divested by a condition subsequent. AKA Fee simple subject to an executory limitation.
Rule in Shelley’s Case If an instrument creates a freehold in A and purports to create a
remainder in A’s heirs (or heirs of A’s body) and the estates are both legal and equitable, the remainder becomes a fee simple (or fee tail).
Doctrine of Worthier Title If a will devises to a person a freehold estate of the same quality and
quantity which such a person would have taken by descent if the testator had died intestate, then such estate passes by descent and not by devise.
Concurrent Interests Types:
Tenants in Common – Separate and divided shares in a common property. Joint Tenants – Equal and undivided shares in a common property.
4 unities Tenancy by Entirety
4 unities plus marriage Joint Bank Accounts
Severance Partition
By Sale In Part
Land Transactions Brokers
Fiduciary Relation Relationship to seller
Contracts for Sale Offer to Purchase Purchase & Sale
Good, clear record and Marketable Title Equitable Conversion
Risk of Loss Duty to Disclose Defects Implied Warranty of Quality
Deeds Warranties of Title
General Warranty Covenants
Present Seisen Right to Convey Warranty Against Encumbrances
Future
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Warranty Right to Quiet Enjoyment Further Assurances
Special Warranty Covenants only that grantor did not alter title he received
Quitclaim No warranties / covenants of any sort
Estoppel by Deed Prior Grantor reacquires property Prior Grantor acquires seisin after conveying a deed
Delivery of the Deed Intent Delivery Similar to Donative Transactions
Deed Descriptions Must give closure to the property
Mortgages Two Parts
Promissory Note Mortgage Instrument
Multiple Mortgagors 1st before 2nd, 3rd etc. Equity is foreclosed
Subsequent Purchasers Subject to (Mortgage Only) Assume & Agree to pay (Mortgage + Promissory Note)
Foreclosures Strict Power of Sale / Deed of Trust
Mortgagee’s Duty Good Faith & Due Diligence
Title Recordings Index
Grantor – Grantee Tract Index
Class of Recording Act Race
1st subsequent purchaser to record. Notice
1st subsequent purchaser or creditor for value prevails over other claimants as long as sub. Purchaser acquires without notice of prior claim. Good faith & valuable consideration.
Types of Notice Actual Constructive Inquiry
Common Grantors Uniform Plan
NY – In chain of title? MA – Within record? NH – Inquiry into record
Race-Notice 1st subsequent purchaser or creditor who first records prevails against a
person claiming a prior, unrecorded interest as long as the subsequent purchaser did not have notice of the preceding interest when she acquired her interest. In good faith & for valuable consideration.
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Land Use Controls Public Private
Easements – Permits the use of or places restrictions upon the use of land of another.
Characteristics Appurtenant or In gross Dominant v. Servient Positive vs. Negative
Creation Express
Grant Reservation
Implication Necessity
Prescription Adverse Possession
Public Trust Doctrine Covenants
Burdens & Benefits Types
Personal Running with the Land
Characteristics of Running with the Land Intent to be bound Touch and Concern Privity
Equitable Servitudes Requirements
Intent to be bound Touch and Concern Notice (not privity)
When analyzing a property problem, especially a future interest problem dealing with conditions subsequent or precedent, read up to a comma, figure out what condition and interest is created and then read on to the next comma. The order of the language within a grant is pivotal to the interests that are being granted.
PROBLEMS – FUTURE INTERESTS
What is the name of the reversionary interest retained by O in each of the following conveyances of land?1. O conveys to A for life, then if B marries C, to B and her heirs as long as the land is used for residential purposes.
a. If Before B marries C?b. If After B marries C?
2. O conveys to A as long as A lives on the land.3. O conveys to A for A’s life, A then conveys to B for B’s life.4. O conveys to A for A’s life, A then conveys to B for the life of A as long as the property is used for residential purposes.1
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Rights of Entry for Condition BrokenIn 1950, O granted to A, B, and C a certain parcel of waterfront real estate “to have and to hold to them and their heirs, successors and assigns, so long as the same shall be used for a tee totaling yacht club and no longer, and if the grantees or their successors shall cease to operate a yacht club or shall permit intoxicating liquor to be sold on the premises, the said O and O’s heirs shall have the right to re-enter and retake the premises.” In 1980, O died and left a will devising and bequeathing all real and personal property to a close friend, X. The officers of the club, successors to A, B and C, come to the conclusion that they cannot balance the club’s budget unless they operate a bar. They ask your advice, advise them.
Essay & Multiple Choice 50/50 Emphasize on 2nd Semester and future interests.Essay
2 questions (short & long)Read once quickly, then again in detailPurpose is to identify issues and the interests of all partiesChronological organization most effective.Provide all viable arguments as to why this person can or can not succeed on this point.Limit the use of black letter law or Rule Sections. Make sure you apply the rule to the facts but you don't need to restate the rule.
Multiple Choice
Focus on the question15-30 questions.
Notes from Exam Review - Raising a Use, Bargain & Sale on the Exam
