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Property Outline

UNIT 1: ACQUISITION AND CREATION (PGS: 17-59, 69-81, 86-90)


I. PROPERTY
a. Socially contingent: definition of property will vary from culture to culture and within cultures over time. b. Property is whatever thing, whether tangible or intangible, that is protected against invasion by others by the legal system of our society. c. John Lockes Labor Theory: i. God gave the world to man in common to be used for the best advantage of life and connivance; this requires that land be appropriated from the common for beneficial use. ii. Started from the premise that every person owns himself iii. Locke claimed that you owned your labor when your labor is mixed with something not owned by anyone you own the resulting mixture. 1. EXAMPLE: A arrives on an island that has no political jurisdiction and excavates a colorful rock deeply buried in the sand. The rock turns out to be a valuable meteorite, according to Locke; A has a property right in that meteorite. ACQUISITION BY CAPTURE: You must have actual possession, or else constructive possession by inflicting a mortal wound; pursuit does not vest in title (Pierson v. Post) i. Actual Possession: usual method in acquiring a property right in a wild animal is to actually possess it dead or alive. 1. (Pierson v. Post): Involved rival claims to ownership of a dead fox. Before Post had wounded or captured the fox, Pierson intervened and killed the fox. Post did not own the fox until he had actual physical possession (occupancy). Pursuit needs to produce capture. (Page 17) a. MORTAL WOUND Approach: making possession a mere certainty (manifest intent to seize animal) b. Socially Useful Enterprise: the majority accepts that killing foxes is a socially useful enterprise (they used to be considered vermin). Dissent wants to protect pursuit as possession to encourage more hunting; so that an intruder does not gain from labor of first person. c. Other reasoning: keeps the peace, decreases litigation bc the end of the hunt is an objective measure while beginning is subjective. 1

II.

ii. Custom: title to a wild animal is acquired with constructive


possession in accordance with custom. These rules often arise to maximize the well being of a group creating the custom, to make sure individuals do not get net benefits for themselves that impose net losses to the group as a whole. 1. Ghen v. Rich: Massachusetts whaling community used bomb lancers to kill finback whales. Each lance was distinctively marked. The whaler who lanced the whale vested best title over the person who found the whale on a beach where custom dictated that whalers marked their spears to indicate ownership. In this industry you cannot acquire immediate possession, and a first physical possession rule of ownership would eliminate the incentive to hunt finback whales and deprive the society of the benefits of fin oil and blubber. (Page 23) Custom is recognized as a basis for property right when: (1) its application is limited to those working in the industry (2) custom is recognized by the whole industry (3) requires of the first taker the only possible act of appropriation (4) is a necessary part to survival of the industry (5) works well in practice 2. Custom is bad when: (1) formulated for the benefit of the industry, but not society as a whole (2) may be dangerous to those employed in the industry (3) wasteful of a resource (the whales that floated out to see and werent recovered).

iii. The Importance of Policy Ends to Nature of Property 1. Law should serve human value generally property
doctrines try to serve four important values a. Reward productivity and foster efficiency b. Create simple easily enforceable rules c. Create property rules that are consistent with societal habits and customs and d. Produce fairness in terms of prevailing cultural expectations of fairness. 2. Keeble v. Hickeringill: Keeble maintains a decoy pond, which is used for trapping large quantities of ducks. Hickeringill is his neighbor and he frightened the ducks away from Keebles pond by shooting a shotgun nearby. The court ruled that such conduct was actionable b/c D was maliciously interfering with Ps lawful activity. The court distinguished this case from fair competition by saying that while it would be lawful for one school to lure 2

students away from another school based on superior instructions, it is another to unlawfully frighten them away. The court deduces that fair competition improves society but the Ds conduct in this case is a drag on societal improvement (fewer ducks for the table). However, in a society where killing ducks for food is regarded as inappropriate (people for example want to preserver biodiversity) Ds conduct may have been lawful. Depends on public policy that the law is meant to protect. (page 27) 3. Constructive Possession: this was passed in an effort to deter trespassers. The burden is placed on a trespasser who should know that he is on private property. a. One persons claimed property right is almost always good, or not good, in relation to others. i. Ex: if the hunt in Pierson v. Post occurred on Posts land, Piersons actual possession of the fox would give him a property right until Post trumped it Post would have the winning claim to the fox not because of prior possession but b/c Pierson was a trespasser on Posts land. b. There is a conflict between the property rules of first possession and the owners right to exclude i. Society feels that it is more important to discourage trespass than to reward first possession of un-owned objects when those values collide with each other. ii. The law rarely encourages trespassing security of exclusive possession is conducive to peace and order as well as the investment the owner makes in property. iii. Even among wrongdoers prior possession prevails (A steals a fox of Bs land and then C steals the fox from As land. Between A and C, A would prevail) 4. Escapees and Domesticated Animals a. Wild animal escapes its un-owned, it belongs to the first possessor i. Wild animal becomes domesticated when it demonstrates a propensity to come home (animus revertindi)

b. Domesticated Animals continue to belong to


their prior possessor when they wander off c. Example: A silver fox native to Canada, not Mississippi (where it was confines by its owner/possessor) escaped and was killed by a hunter, doctrine says the hunter wins. 5. Oil and Gas: Policy Considerations a. Fugitive minerals such as oil and gas appear to be like wild animals, courts initially apply legal doctrines similar to those of wild animals. b. Old Rule: water may be pumped under whosever land c. NOW, you need reasonable justification to harm you neighbors water

III.

HAROLD DEMETZ, TOWARD A THEORY OF PROPERTY RIGHTS a. The primary functions of property rights are to create incentives to create
greater internalization of externalities. We want to create property laws, which will utilize property uses. b. Three Possible Ownerships i. Communal 1. The state and the individuals do not interfere 2. Will have many built in externalities, when resources become scare we need to take externalities into account , one person who bares all the cost as well as ownership will have to take that into account. ii. State Owned 1. State controls the use and distribution of property with proper political channels iii. Privately Owned 1. Private owners can control 2. Individuals have incentives to act economically (internalizes externalities) 3. Owner will take into account future benefits 4. Transaction Costs: costs of doing business (lawyer fees, fees to get necessary information) a. When individuals make choices these costs are lowered b. Easier to alienate property (allow the person who will value the property most to get it) c. When you own something you look at the long term future (this is generally beneficial)

IV.

ACQUISITION BY CREATION a. Intangible Property Rights: i. Many intangible property rights are created a novel is a ii. iii.
creation of the mind Creators have copyrights the right to own the reproduction of those creations The law of misappropriation is a branch of unfair competition that protects new ideas and tries to answer the question of when imitation is permissible and when its not b/c it will destroy incentive to create. International News Service v. Associated Press: The US Supreme court held that it was misappropriation for INS to copy APs news and release it before AP could (because of a time difference). AP expended money and effort to gather news, and INS would just reap benefits it has not sown. (Page 51) Cheney v. Doris Silk Corp: The court found that a persons property is limited to chattels that embody its inventions and other may imitate at their pleasure. (Page 55) Smith v. Chanel: Skilled imitation of Chanel number 5 perfume is acceptable Nicholas v. Universal Pictures Corp: The court here held that copyright protection did not extend to the overall theme of copyrighted work. Although both the copyrighted play and the allegedly infringed movie involved a clash of Irish and Jewish cultures, there were significant differences in the nature and attitudes of the characters. These were stock figures that existed for many centuries. Diamond v. Chakrabraty: The Supreme Court ruled that human made genetically engineered bacterium was a new manufacture or composition of matter capable of receiving patent protection under federal patent law. Although the law of nature, physical phenomena and abstract ideas are not patentable, the new bacterium was none of these. The bacterium was a product of human ingenuity. The bacteria in that form did not occur naturally in nature and had significant utility at breaking down oil spills at sea. B/c the patent law was broadly worded, the court gave it a broad application noting that any negative consequences in protecting genetically engineered phenomena must be addressed to Congress. White v. Samsung Electronics: The court decided that Samsungs deception of a robot clad in a white wig, dress and jewelry posing in front of Wheel of Fortune infringed Vanna Whites common law

iv.

v. vi. vii.

viii.

ix.

right of publicity. This was criticized as a classical case of overprotection b/c it did not allow an image that reminded viewers of the celebrity even though no use of her voice, likeness, name or signature was used. 1. The conflict is between the inefficiencies produced by a monopoly over creation (higher prices, less accessibility to a desired goods) and both the sense of unfairness of allowing copycats to reap what they have not sown and the fear that w/o protection creators will not create.

b. Property In ones Owner Person: i. To what extent do you have property in your own body ii. Moore v. Regents of the University of California: Moores
cancerous spleen was removed and w/o his knowledge or consent a valuable cell line was developed using his unique cells. The California Supreme Court ruled that there was no action for conversion (a tort that is the wrongful ownership of property rights over the personal property of another). The majority said Moore had no ownership b/c he never expected to retain possession of the spleen. The court refused conversion b/c a claim like this would chill medical research, moral issues involved here are left to the legislature, and Moore still had claims available based on asserted breach of fiduciary duty by his medical providers. There is a conflict present between his right to his body parts (right of first of first possession) and the scientists right to own unique cells developed when he voluntarily discarded the spleen. Moore does not have a right to profit from it after he discarded the spleen. Moore was not allowed to share in the financial gain attributed to the cells in his spleen. (page 69)

c. The Right to Exclude/Include: i. The right of possession allows you to exclude others from your
possession. ii. Jacque v. Steenberg Homes Inc: The court here upheld a landowners right to bar an unwanted trespasser from moving a mobile home across their land. The court said that people have the right to exclusive enjoyment from any purpose, which does not invade the rights of another person. Since its important to protect people from trespassers on their land, there must be a legal remedy for when someone interferes with that land. (page 87) iii. State v. Shack: Here, the court held that a landowner had not right to bar a poverty agency worker and a legal services lawyer from his farm where they sought to visit an immigrant worker who was an employee and tenant of that farm. The landowners 6

right to exclude ended when the tenants need for accessible access by visitors began. Rights are relative. (Page 88)

d. The Right to Destroy: generally you have the right to destroy your own property, but the social value disutility of doing so may limit this right. e. Finders Keepers? When property is lost, abandoned and then is found by another a problem of relative title ensues. Finders laws attempt to restore property to the true owner, reward honest finders, deliver the reasonable expectations of the landowner and discourage trespassers and other wrongdoers. Problems: The Rule of Capture and Wild Animals
1. T, a trespasser, captures a wild animal on the land of 0, a landowner, and carries it off to her land where she confines it in a cage. Then T1 trespasses on Ts land and takes the animal away. (a) T vs. O O will win, T has no rights to the animal, O had constructive possession. (b) T vs. T1 T has more rights than T1 (T1 is a trespasser on Ts land) and we will protect the person who has the better relative title to the land. 2. F has an established heard of deer, deer roam in open government grazing land during the day, and they are sufficiently tame and domesticated and return to a shelter on Fs land at night. H, a hunter is licensed to shoot deer on the land, and shoots one of Fs deer during the hunting season. (a) F vs. H F established a heard of deer by creation and her deer are domesticated enough to return to her property on their own. Hunter can say he does not know to whom the deer belong to because they are not contained or branded. Courts would side with F, b/c the deer are native to the area and have a habit of returning home therefore it is the responsibility of the hunter to know whose deer they are. 3. P imports two silver gray foxes (M and F) from Canada for breeding purposes on her Mississippi Ranch. The natural habitat of the animals is north central US and Canada. The foxes are wild and once they escape they will not return home on their own. P keeps them confined in a floored pen with planks five feet long. The male gets out and P sets a trap to recapture him but cant. After some time he fox is killed by D in a pine thicket 15 miles away from Ps ranch. P learns of this and sues for the hide.

(a) P vs. D Ps animals are imported and rare and someone with knowledge would know that they are not naturally present on that land. For P, there was no more dominion and control; the animal was back in the wild. For D, he found him in the wild and put time and energy into killing him. P prevails the animals were confined. 4. F is a farmer who is bothered by wild geese migrating on his land and shoots them in violation of the fish and game laws. The government confiscates the carcouses and F sues for their return. (a) The government wins, b/c they own wild animals and may regulate their takings. 4b. When the geese return the next day, F sues the government (b) the government wins again, they can not be responsible for every wild animal.

UNIT 2: Adverse Possession & Gifts (PGS: 112-124, 129-151, 157-158, 158-166, In Re Cohen)
1. Adverse Possession a. Definition: If a person wrongfully owns land for a long enough time and
in a certain manner, then the true owner of the land may be barred from recovery possession by a statute of limitations. i. Expiration of the Statutes of Limitations: 1. Statutory requirement virtually all legal actions must be brought within a specified period of time. 2. The adverse possession must take place for a specified period of time. ii. Adverse possession: If a true owner of land fails to start legal proceedings to remove a person who has adversely possessed land within the period of statute of limitations, the true owner is FOREVER BARRED from removing the adverse possessor. 1. B/C there is no other owner the adverse possessor can take adverse title to the land and can obtain a judgment to that effect. 2. The adverse possessor acquires whatever title to the land that the original owner had. 3. There are common law elements that have to be proven concerning the nature in which the land was possessed.

b. Rationales for Adverse Possession i. Sleeping Theory: Slothful owners who ignore people using their
land in brazen violation of legal right deserve to be penalized.

1. By failing to bring a timely action to recover possession


they create a problem b/c its difficult to adjudicate these claims (witnesses die, memories fade, and documents disappear) ii. Earning Theory: People who use land productively and beneficially for a long period of time should be rewarded, even if someone else owns the land. 1. After a long enough time the adverse possessor has earned some right in that land. iii. Stability Theory: Adverse possession enables disputes about land to be cleared by delivering title to the person who has occupied the land as if they were the owner for a long time w/o objection.

c. Elements of Adverse Possession i. Actual and Exclusive Possession: 1. The possessor must take actual, physical possession of the
owners land the owners cause of action accrues at that moment and the clock on the limitations period starts to run at the moment of actual possession a. Concurrent Ownership: a group of people adversely occupying may acquire a shared title by adverse possession ii. Open and Notorious Possession: 1. Adverse possession must be readily visible to any inspector of the property. (The idea is that the true owner would know the occupation if he visited the property) 2. Open and notorious constitutes notice to the owner that his rights are being violated. 3. Example: An adverse possessor of fenced pasture would possess openly and notoriously if kept horses or cattle in that pasture. Or in an urban setting if a person notoriously moves in and comes and goes as he pleases. 4. An adverse possessor of an undeveloped land must do something to mark his control 5. Adverse possessor takes whatever title the owner had, so if the true owner had title to subsurface minerals the adverse possessor would as well. 6. Boundary Disputes: Some jurisdictions hold that encroachments by one neighbor onto the land of another are not open and notorious if the encroachment is in a small area and is not clearly and self evidently an encroachment. a. Doctrines to Resolve Boundary Disputes 9

i. Agreed boundaries: If there are


uncertainties between neighbors as to the actual boundary line, an oral agreement is enforceable to settle the matter if the neighbor accepts the boundary for a long period of time. ii. Acquiescence: Long periods even though they are shorter than the statute of limitations is evidence of an agreement between the parties to fix the boundary lines. iii. Estoppel: This comes into play when one neighbor makes representations to the other about the location of a boundary line and the other neighbor changes their position in reliance on the other representations or conduct. iii. Hostility or Adverse claim of Right: 1. An adverse possessor must occupy the land w/o consent of the owner and with the intention of staying there 2. This is called hostility but does not mean with malice or ill will just means that there can not be permission 3. Manillo v. Gorski: D made some adjustments to their property that were an encroachment on the land of P. P filed a complaint seeking an injunction and alleged trespass. The court found that if entry and possession is exclusive, continuous, uninterrupted, visible and notorious and maintained for the required time, it does not matter if the matter in the entry and possession. The adverse possessor could still claim title to it. The court looked at two doctrines: Maine (says that possessor has to enter the land with intent and hostility as an intentional wrongdoer otherwise they are not an adverse possessor, if they entered under a good faith mistaken belief) or Connecticut (which says that the act of entry and possession is an assertion of title and denial of that title to others). The court found that the result is the same whether it was caused by mistake or intent. This court decided that intentional hostility was not required. However the court said there must be actual knowledge not just constructive knowledge of the adverse possession. The case was remanded to determine if there was actual knowledge of the intrusion.

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4. Does the Possessor claim a right to stay? a. Subjective Test: adverse possessor must have a genuine good faith belief that he/she owns the unoccupied property. b. Subjective: Aggressive Trespass: Few odd cases require the occupier to know the property is not his own but to intend to claim it nevertheless c. Objective: state of mind is irrelevant instead courts focus on i. Lack of permission ii. Whether the occupiers acts and statements objectively appear to be claims of ownership. (Did you act like a true owner would act) iv. Continuous Possession: An adverse possessor must occupy continuously w/o interruption during the limitations period. 1. Must occupy the property continually as would a reasonable and average true owner of the property. 2. If the possessor ever abandons the property, intentionally gives up possession, with no intent of returning continuity is destroyed. a later return triggers a new cause of action and a new statutes of limitations. 3. Howard v. Kunto: Kunto occupied a summer residence under color of title (a defective deed). Howard, the record owner, sought to eject him, Kunto countered that the statute of limitations period had expired. Howard claimed the Kunto did not occupy the property continuously b/c he was only there in the summers. The court found that since this home was a summer occupancy house and all the other homes around there had also used their properties predominately in the summer months this constituted continuous use. A reasonable property owner could reasonably only use the property in the summer months and at no other times. The key is to decide what normal use of the property is and if the adverse possessor makes that use then they have occupied the property continuously. This case is unique b/c D is asking for an entirely different area than they own. v. Claim of Title: Open to dispute 1. Van Valkenburgh v. Lutz: P sues to remove D from lots 19-22 which he owns. Lutz sued VV claiming that while he did not own lots 19-22 he did have a right to access them

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and won then P sued Lutz to have him removed. Under the statute in this jurisdiction actual possession must be shown, in this case there was no enclosure so D must show the land was cultivated and improved to satisfy the statute. There were a garden and a shed done by D, these were not found to show substantial improvements. In a prior lawsuit D admitted that P owned the land, thus Ps occupation of the land was not under a claim of title. 2. Statute of Frauds: real property can only be transferred in writing adverse possession is the only exception to that a. In order to satisfy you need i. Signature of the seller ii. Official legal description of the property iii. The sales price 1. Exceptions a. Adverse Possession b. Promissory Estoppel (acting in reliance on an oral promise to convey property which was never conveyed and you acted to your detriment on reliance) 3. Privity of Estates: This requires that property be voluntarily sold 4. The basic elements of adverse possession are consistent except for the statute of limitations, which varies between jurisdictions. However, there is no consensus about what claim of title means. 5. Adverse possessors acquire a new title; the former owner has not transferred his interests. The law instead has stripped the former owner of title and created a new one in the adverse possessor. The new title cannot be any better or greater in scope than the old one. 6. Equitable Estoppel: If one neighbor does or says things that cause the other neighbor substantially to rely on his detriment on the first neighbors actions, the first neighbor is estopped from denying his actions or statements. vi. Tacking: Tacking follows automatically on the owners side. Once the statute of limitations has started to run, the course of ejectment goes along with ownership. vii. Disabilities: statutes of limitation typically provide for tolling (suspension) of the limitations time clock if the owner is disabled

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from bringing an action to recover possession at the time the cause of action accrues. 1. Insanity or other unsound mind: 2. Imprisonment 3. The condition of being a minor 4. If you die than thats the termination period of the disability and the person who takes the property has ten years from that time. 5. Example: A statute of limitations on actions to recover possession of land provides that such an action must begin within 21 years after the cause of action accrues, but if the person is entitled to bring such action is imprisoned, of unsound mind, or a minor at the time the action accrues, such a person may bring such action after the expiration of 21 years from accrual of the cause of action, so long as the action is commenced with ten years after the disability a. If owner is imprisoned when possessor enters in 1970 and released in 1995, he has until 2005 to file suit to recover possession. b. B enters Blackacre owned by J in 1970 and in 1971 J is imprisoned for 25 year. Jills right to bring suit expires in 1991. She was not disabled when the cause of action accrued. c. A enters Blackacre owned by H in 1970. H is a free adult of sound mind. In 1982 H dies and leaved Blackacre to B who is 2 years old. Beth succeeds Hs cause of action. The cause of action will be time barred in 1991. But Beth will only be 11 years old in 1991. This does not matter b/c Hazel was not disabled at the time that the action accrued. Bs guardian could bring suit if she wants to protect the interests of B. 2. Color of Title: If you have a written instrument that is defective in some way, and you think you own the whole property but you do not, then you have a color of title issue. a. An adverse possessor who enters under a color of title is deemed to possess all of the property that is described in the deed as long as it physically shares a common border and owned by the person against whom actual entry was made. i. Example: E enters Blackacre, a 100-acre farm, under a color of title. E possesses only 50 acres actually, she is however considered to constructively possess the entire 100 acres b/c she

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has been there for the whole limitations period. She will acquire title to all of Blackacre. ii. Example: H gives B a deed for Blackacre, a 100-acre farm, and White, the adjacent 70-acre property next to it. B does not know that T owns White. T is an absent owner. B eventually enters and occupied 50 acres of Blackacre for the limitations period. B will acquire title to all of Blackacre but not to any portion of White b/c constructive possession is never as good as actual possession. b. Quiet Title: A judge says that you have met the requirements for adverse possession and you get a judicial decree, which says you are the legal owner of the property. c. Adverse possessors w/o color of title acquire only the land, which they have actually possessed physically for the limitations period.

3. Adverse Possession of Chattels a. Title to personal property can also be acquired with adverse possession
even though adverse possession was designed for REAL property. b. The principle of adverse possession is not well suited to personal property b/c its difficult to make possession of personal property open and notorious possession. c. OKeefe v. Snyder: P, the famous artist, had a painting that was stolen. Years later that same painting appeared in an art gallery. D argued that his successor in interest had acquired title to the paining by ADVERSE possession. The answer depended on whether the possessors exhibition of the painting in his own home was sufficient for open and notorious possession. i. Discovery Rule: The limitations period for recovery of personal property starts to run at the earlier of (1) when the loss occurs (unless there is fraud or concealment (2) when the owner first discovers, or through reasonable effort should discover, the cause of action (including the identity of the possessor. ii. Old Rule: Adverse possession and the requirement was open and notorious possession. iii. Courts Reasoning: Popular doctrine of adverse possession is less applicable to such items as art. It is very difficult to show a hostile, visible and exclusive possession of paintings. The test should shift to determine if the owner of the chattel acted with due diligence in pursuing his/her personal property. This case overruled established precedent. The burden of proof was placed on the party who was the one bringing forth the action. The actions of the complaining party are looked at instead of the actions of the adverse possessor.

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4. Gifts a. Gift: a voluntary transfer of property for no consideration. To make a gift


of personal property the donor must transfer possession (hand over the property) to the done with the intention that the done receives the gift. i. Inter vivos: gifts given during life 1. Made with no knowledge or threat of impending death 2. These gifts are irrevocable ii. Causa Mortis: in contemplation of impending death 1. Made with knowledge or under threat of immediate death and motivated by those facts. 2. Revocable if the donor recovers from the illness or threat causing the donor to make the gift in contemplation of death OR if the owner dies of some other cause that des not promote the gift. 3. These types of gifts are viewed with skepticism by the courts; b/c the gift is a likely substitute for the will.

b. Intent i. For a gift to occur the donor must transfer title. ii. If the donors intent is to merely transfer possession than no gift
has been accomplished. iii. Evidence on this element is usually circumstantial, unless there is a deed generated or some other writing that evidences the donors intent. iv. In causa mortis gifts, the donors intention is presumed to be to make the gift only b/c of impending death. v. If the donor intends to make the gift irrevocable, regardless of any impending death, then it is not a gift causa mortis; instead it is considered a gift inter vivos.

c. Delivery i. General Rule: the gift must be delivered to the recipient in


order for the gift to be complete.

ii. The best form is actual delivery: actual physical possession however when that cannot be accomplished b/c
delivery is impractical and impossible then delivery can be symbolic or constructive. iii. Delivery is thought to perform three valid functions: 1. Actions speak louder than words actual intent is better evidenced by actual physical delivery. 2. Intent is subjective but delivery is actually objective

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3. Delivery of property is also presumptive evidence of


acceptance by the done. iv. When there is no physical delivery then the question becomes What did the donor INTEND by his/her actions v. Delivery can be accomplished by a deed of gift or some writing under seal. vi. Symbolic Delivery: when actual delivery is impossible or impractical then delivery can be accomplished by delivering some object that is symbolic of possession. 1. In Re Cohn: P received a written instrument of shares of stock on her birthday from her husband who was the owner of the stock. The note was given in the presence of the entire family but the donor died before the gift was collected on. The issue is that after giving the gift the donor retained control of the gift. a. Rule: A gift that is evidenced by a written instrument executed by the donor is valid without manual delivery of property. b. Rationale: The court said that Ps intention is clearly evidenced that the written instrument should be a gift. The court found that in this case there was no possibility of fraud or imposition and not doubt concerning the intention of the donor, thus the gift is valid and should be upheld.

vii. Constructive Delivery: 1. When actual delivery is possible but impractical, delivery
of some object that is the means of obtaining possession of the property constitutes CONSTRUCTIVE DELIVERY. 2. Newman v. Bost: On his deathbed, Jack gives Julia all the keys to the household furniture and says that he intends for her to have everything in the house. Delivery of the keys constitute constructive delivery of the furniture b/c it is impractical to make physical delivery of it under such circumstances. However, delivery of the keys do not evidence constructive delivery of a life insurance policy that is locked in a bureau drawer, b/c it is not impractical to deliver tangible evidence of the insurance policy itself. a. Rule: Symbolic delivery and constructive delivery are only allowed when its impossible or impractical to deliver something actually. b. The court reasoned that a valid gift when death is impending must be made by a donor who intends

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to make the gift and then actually makes it. In this case it is not clear whether the decedent intended to give only the bureau that he pointed to or the contents inside as well. Intent is an issue for the triar of fact b/c it is a factual issues not a legal one. 3. Special Problems: a. Agents: When the donor delivers the property to an agent of the donee then delivery is complete. i. If the delivery is to the donors agent then there is no delivery b/c it is as if the donor delivered the gift to himself. ii. There is a problem when the donor delivers the property to his attorney in order to give to a donee and the courts are split on this issue. b. Delivery on Death: If the donor delivers the property to a 3rd party (even a conceded agent of the donee) there may be no gift. i. The condition that is attached (death) to ultimate delivery is sometimes seen as an attempt is sometimes seen as an attempt to avoid the formal requirements of a will, and thus INVALID. ii. Preferred (Modern View): the gift is complete upon delivery to the donees agent, regardless of the condition attached. d. Acceptance: A gift is not complete until it has been accepted by the donee. The donees rejection of delivery can be rejection of the gift. A donees delay in rejecting unwanted gifts also endangers the donees ability to claim that there was no acceptance.

Problems: Color of Title/Constructive Adverse Possession (pg. 130)


1. O owns and has been in possession of a 100-acre farm since 1975. In 1990, A entered into the back 40 acres under color of an invalid deed from Z (who had no claim to the land) for the entire 100 acres. Since the entry A has occupied and improved the back 40 acres in the usual manner for the period required by the statute of limitations. A brings suit to evict O from the farm, claiming constructive adverse possession.

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(a) A vs. O O has better relative title he is the true owner of 60 acres. O had not notice that A had intended to possess the front 60 acres. A can get back the back 40 acres by adverse possession, but not the front 60 acres. O can also not sue Z, but A does have a claim against Z. (b) Suppose that in 1975 O took to the farm under an invalid deed and has been in possession for a period sufficient to satisfy the statute of limitations. Would A vs. O be different? O has adversely possessed the property and once you are the owner, you are the owner regardless if its adverse possession or proper title. 2. Two contiguous lots, 1 and 2, are owned by X and Y respectively. The lots are conveyed by an invalid deed to from Z to A, who enters Lot 1 and occupies it in the manner for the period that is required by the statute of limitations. (a) A sues X and Y to quiet title to Lots 1 and 2 A vs. X, A will win b/c there is valid adverse possession and A vs. Y, Y wins b/c Y does not have any constructive notice that A wants to adversely possess the land. (B) A has a claim against X for this property b/c X has an invalid deed.

Problems: Boundary Disputes (page 134)


3. A and B own adjacent lots. A erects a fence on what she assumes mistakenly to be a true boundary line. However, the fence is actually located on Bs lot, three feet beyond As boundary line. A thereafter acts as the owner of all the land on her side of the fence for the statutory period. As consequences of these actions A acquires title by adverse possession and after the statute has run, B has a survey run that reveals the mistake. B tells A and A to avoid hassles tears down her fence and erects one on the true boundary line. Three years later A, talks to an attorney, changes her mind and sues B to eject him from the three feet. (a) A vs. B Once the statute of limitations has run, A is the true owner of the three feet of property. Based on the statute of limitations there can be no oral agreements. Thus, A never gave up ownership of the property, which means she has been the owner and still is the owner.

Problems: Tacking (page 141)


1. In 1996 A enters adversely on Blackacre owned by O. In 2003 B tells A Get out of here, I am taking over. A feels threatened, leaves and B enters into possession. In 2006 who owns Blackacre?

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(a) Can O or A eject B? O owns Blackacre b/c there is no privity of estate and can eject B. A can eject B b/c A has more rights in the property than B does. 2. In 1990 A enters adversely upon Blackacre, owned by O. In 1991, O dies leaving a will that devises Blackacre to B for life, remainder to C. In 2006 B dies w/o ever having owned Blackacre, who owns it. C b/c B only had a life estate not any kind of ownership.

Problems: Disabilities (page 143)


O is the owner in 1980 and A enters adversely on May 1, 1980. The age of majority is 18. 1. O is insane in 1980. O dies insane and intestate in 2003 (a) Os heir H is under no disability in 2003 In 2003 the statute of limitations will run for A who is the adverse possessor. The statute of limitations is 21 years. 2013 is when it would have run that is the time H could sue O for the property. (b) Os heir H is six years old in 2003. Still 2013 not the time that H would reach majority b/c you cannot tack on disabilities. 2. O has no disability in 1980. O dies intestate in 1998. Os heir H is two years old in 1998. 2001 is when the statute of limitations runs b/c O is under no disability, so there is no applicable disability statute. 3. O is 5 years old in 1980. In 1990 O becomes mentally ill and O dies intestate in 2005. Os heir H is under no disability. O reached majority in 1993 so the statute of limitations runs ten years after 2001 so it would be 2003. O was under no disability at the time the action accrued, just a minor.

Problems: Gifts (page 165)


2. If a person says that they would like to give you an insurance policy that is in their drawer and they ask one of their agents to give the insurance policy to the donee, the agent never does so is there a valid gift? Under the rule in Newman v. Bost, there is no actual valid delivery b/c the person who has died is responsible for their agents actions. (a) If the gift was a bureau that was moved into the donees room and in that bureau there was an insurance policy, would the policy constitute a valid gift? No, there is no intent for the life insurance policy only the bureau is a valid gift in this case.

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3. If A calls in B on his deathbed and tells B that he would like her to have his bureau and his insurance policy that is in it. A then proceeds to give B the key to the bureau. B takes the key but the bureau stays where it is, is there a valid gift? Yes, there is clear intent and constructive delivery b/c the bureau is impracticable to move. 4. A wants to give B jewelry box with an insurance policy in that box, A gives B the key, but B does not take the box physically, has there been a valid gift? The item is tangible and could be physically taken, b/c the item is not physically taken under Newman v. Bost no valid gift has been made. There cannot be constructive delivery, there has to be manual delivery. 5. If B says to his wife, I give you my piano before he dies, is there a valid gift? Yes, there is a valid gift b/c the wife has dominion and control over the house. There has to be dominion and control of the house in order for there to be a valid gift.

Problems: Gifts (page 165)


1. O owns a pearl ring. While visiting A, O leaves the ring on the sink. A tells O she left the ring. O tells A to keep the ring as a gift. Is there a valid gift? There was intent and delivery (those two things do not have to happen simultaneously) at the time of the call the gift was made, once the gift is made it is irrevocable and O cannot later ask A for the ring back. 2. If in the previous example A does not call O to tell her that she has found the ring, instead a week later at dinner she shows O that she has the ring. O says take the ring and keep it. A tries it on and realizes that its to large for her finger. O says let me wear it until its resized. O leaves dinner wearing the ring and is killed. A sues Os estate for the ring. Valid gift? This is a gift with a retained interest and is considered a bailee relationship where someone is keeping something for someone. A would get the ring from Os estate. 3. What if O had just said at the same dinner that she promises to leave A the ring when she dies. Valid gift? No gift, promises to make a gift in the future are revocable. 4. A gives B a 21,000 engagement ring. The engagement is broken, does it matter who broke it in determining who owns the ring? The ring must be returned to the donor regardless of who broke the engagement. The traditional rule is that the donor cannot recover the ring if the donor is at fault. 5. O writes a check to B on her checking account and hands it to B. B Before B cashes the check O dies. No gift until the check is actually paid b/c donor retains control and dominion of the funds. Donor could stop payment or die, revoking command to the bank to pay the money. 20

6. O, while wearing a wristwatch, hands A signed writing which says that he gives him the wristwatch that he is wearing. Is there a valid gift? No small tangible items have to be handed over, thats the current rule. 7. A and B are brother and sister and they own a safety deposit box. A plans for B to have everything in that safety deposit box. A gives B, 5000 dollars worth of bonds and says he wants her to have them so she puts them in the box. A clipped the coupons and collected interest on the bonds. Over the next couple of years A added 22 more bonds to the box and a diamond ring. A placed a note in the box indicating his intent for A to have everything in there. Is there a valid gift? B is only entitled to the first bonds b/c the box is a small tangible item and in order to have all contents B must have actual physical delivery.

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UNIT 3: THE LAND TRANSACTION (PGS: 453-462, 472-489, 513-532, 541-592


623-630)

1. Intro to Buying and Selling Real Estate (page 453-462) a. Real estate transactions are almost always EXECUTORY, meaning that
title is not transferred immediately upon signing the agreement b/c both buyers and sellers must do certain things during the time between the contracts and closing.

2. Contract of Sale (pages 472-489) a. Statute of Frauds: Unless there is some exception available, a contract for the sale of land must be in writing and must be signed by the party against whom it is sought to be enforced. i. Requirements for the Statute of Frauds 1. A binding contract can be informal as long as the key
terms are present: price, description of the property, and the parties signatures. Parol Evidence evidence extrinsic to the documents is permissible to remove ambiguities. a. Ex: A contract written on a cocktail napkin is sufficient and any other oral evidence after the written contract can be introduced to clear up any contractual ambiguities. 2. The contract does not need to consist of a single document. There can be multiple writings as long as they are consistent and embody the essential terms and are signed by the parties. a. Ex: There can be two separate notes pieced together one with the offer to sell and one with the acceptance to buy (they can be on two separate cocktail napkins). 3. If there are conditions within the sales contract regarding the buyers need to secure proper financing, they have to be spelled out carefully and precisely. 4. E-Sign Act: an electronically signed contract is as enforceable as its paper equivalent. Any electronic symbol, sound or process with intent to sign is enforceable. ii. Exceptions to the Statute of Frauds: Each of the two exceptions are equitable in nature and are only available if either party seeks specific performance of an otherwise unenforceable contract for the sale of land. 1. Part Performance: a. There must be proof of an oral contract

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b. Some courts require that there is (a) payment of all


or part of the purchase price, (b) taking possession, and (c) making improvements. ***Some states require all three elements, some states only require possession. c. Reasonable Reliance: The modern trend is to require (1) proof of an oral contract AND (2) reasonable reliance on the contract (enough that it would be inequitable to deny specific performance). i. Hickey v. Green: Mrs. Green orally promised to sell Hickey a building lot for $15,000 and accepted but did not deposit a check for part of the payment. Hickey then sold his house expecting to build a new one on the lot that he purchased. The check had the signature of the buyer and not the seller, so there is a statute of frauds issue. Mrs. Green refused to complete the sale b/c she wanted to sell the lot to someone else for 16,000 and P offered that but D again refused. The court ruled that an oral promise for the transfer of land can overcome the statute of frauds if there is an oral promise, partial payment, and an act (taking possession) made in reliance of the oral agreement. Courts want to deter these types of opportunistic performances. ii. Part performance is available to both buyers and sellers. 2. Equitable Estoppel: An oral sale contract may be enforced if the seller has caused the buyer reasonably to rely significantly to his detriment upon the sellers oral agreement to sell. This is not very different from the reasonable reliance in part performance.

b. Marketable Title
i. A title that a prudent buyer would accept, one reasonably free from doubt that there is any other rival to title or any other portion of it. ii. This is an implied condition of sale iii. A seller can deliver marketable title in two ways:

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1. Producing good record title (a recorded chain of title which shows an unbroken transfer of title from some original root of title in the past to the seller, with no recorded encumbrances such a mortgage, easement or servitude) 2. Proving title by adverse possession, either by a successful quiet title action or evidence to sufficient to establish that the rival claim will never be asserted. a. Root of Title: A deed at some distance in the past typically more than 20-40 years is a root of title and cuts off any claims of title founded on earlier instruments. iv. Defective Title: To be unmarketable a defect in the title must be substantial and likely to injure the buyer. Buyers can sometimes waive certain defects such as easements or a mortgage. The chain of title may also have a faulty or non-existent link. A chain is only as good as its weakest link. v. Lohmeyer v. Bower: Bower and Lohmeyer entered into a written contract by which Bower agreed to sell and Lohmeyer agreed to purchase a one-story wood-frame house. The lot was burdened by a covenant, which required all buildings on the lot to be two stories tall. 1. The court said that the mere existence of a covenant restricting use is an encumbrance making the title unmarketable. Lohmeyer did not agree to take existing violations of a covenant. The existing violation in this case made the title unmarketable. 2. The mere existence of a zoning law does not nor constitute an encumbrance making title unmarketable, but that the present and continuing violation of the ordinance sufficiently exposes Lohmeyer to the hazard of litigation to make the title unmarketable. 3. General Rule: Generally any encumbrances (mortgage liens, judgment liens, easements or covenants) make title UNMARKETABLE. 4. EXCEPTIONS TO THAT RULE: a. An easement that benefits the party (utility easement) is regarded by some courts as not an encumbrance so long as the buyer before entry into the contract knows the easement. b. Covenants restricting use are encumbrances, but some courts treat them as not making title unmarketable if the sale contract specifies a

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particular use that is permitted by the restrictive covenants. vi. Default and Remedies 1. Specific Performance: Land is unique so damages are not always sufficient for a breach, so specific performance may be sought. 2. Recession: If the seller breaches the buyer may seek to rescind, recover partial payments made and walk away. The seller may also rescind if the buyer breaches and sell the property to someone else. 3. Damages: The measure of damages is usually the benefit of the bargain but can also be the retention of the buyers deposit. Damages are limited to recovery of money out of pocket and damages may be defined by the contracts liquidated damages provisions. Usually the measure of damages gives the aggrieved party the difference between the contract price and the FMV of the property.

c. Duty to Disclose Defects i. The traditional common law rule is that absent a fiduciary
relationship, the seller has NO duty to disclose known defects in his property. The seller does have a duty to refrain from INTENTIONAL MISREPRESENTATION (the outright lie about a properties condition) or active concealment of a known defect. 1. Caveat Emptor: Buyers Beware, has been largely abandoned now by courts but before was upheld on the notion that a buyer should use diligence and care to examine the property for himself. ii. Fiduciary Relationships: If the parties were in a relationship that in which one party is dependent on and reposes a special trust in the other, all defects had to be revealed. iii. Disclosure of Seller Created Conditions: 1. Seller is OBLIGATED to disclose conditions that a. Are created by the seller, b. Materially impair property value, c. Are not likely to be discovered by a reasonably prudent person using due care. 2. Stambovsky v. Ackley: Ackley owned a home in NY and repeatedly publicized various phenomena (spectral apparitions) that had occurred in his house, encouraging the reputation that ghosts haunted the house. P agreed to buy the house and then learned to his horror that the house was possessed by ghosts and sought to rescind the

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contract. The court held that caveat emptor did not apply in this case b/c defect is exclusively in the knowledge of the seller and as a matter of efficiency and good commercial practices we want the seller to disclose to the buyer something which the buyer has no other possible way to know. Also, the haunting associated with the house also materially impaired the value of the house. iv. Disclosure of Latent Material Defects: The emerging majority view today is that a seller must reveal all latent and material defects. 1. A latent material defect is: one that materially affects the value or desirability of the property; is known to the seller (or only accessible to the seller); and is neither known to or within the reach of the diligent attention and observations of the parties. 2. Johnson v. Davis: The Davises purchased the house of the Johnsons and learned within a few days that the roof leaked in and around the windows from the ceiling in and around two rooms. The Davises sued to rescind the contract. Because the Johnsons said that the roof was sound even though they knew that was not they are liable for fraud. The court also found that Johnson was obligated to disclose any facts known to him or accessible only by him that materially affects the value of the property, which are either unknown to the buyer or cannot be learned by a diligent search.

3. The Deed (page 513- 532) a. Warranties of Title: A sellers warranties concerning the state of the
title conveyed are expressly contained, if at all, in the deed. No warranties are implied. i. The first clause in a deed is a granting clause, which recites the parties, the words affecting the grant, the consideration and the description of the property. 1. Need an expression of intent 2. Ordinarily the grantee is described clearly and specifically, but a grantee can be described without reference to a specific person so long as it is sufficient to actually identify an actual person. a. Ex: A deed to Diana Princess of Whales first son is sufficient.

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b. Traditional Rule: a deed that does not mention a


name is void. c. Modern Rule: most courts hold that the intended grantee has implicit authority, as the agent of the grantor, to fill in the intended grantees name at any later time. 3. Consideration is NOT necessary to convey land, deeds often recite the fact of consideration rather than the actual amount of consideration. b. General Warranty Deed: The general warranty deed usually contains six covenants concerning title. Each covenant is a promise that the title is absolutely free of the warranted defect regardless of whether the defect arose before or during the time the grantor had title. i. Covenant of Seisen: grantor promises that he owns what he is conveying by deed. ii. Covenant of the Right to Convey: The grantor warrants that there are no liens, mortgages, easements, covenants restricting use, or other encumbrances upon title to the property other than those specifically excepted in the deed. iii. Covenant Against Encumbrances: The grantor warrants that he will defend against lawful claims of a superior title and will compensate the grantee for any loss suffered by the successful assertion of superior title. iv. Covenant of Quiet Enjoyment: The grantor warrants that the grantee will not be disturbed in the possession or enjoyment of the property by someones successful assertion of a superior title to the property. This covenant is functionally identical to the covenant of general warranty and for that reason it is frequently omitted from general warranty deeds. v. Covenant of Further Assurances: The grantor promises to do whatever else is reasonably necessary to perfect the conveyed title, if it turns out to be imperfect. This covenant is also often dropped because it imposes a very open ended obligation on the seller of the property. c. Special Warranty Deed: A special warranty deed contains the same six covenants of the general warranty deed. DIFFERENCE: a grantor warrants against the defects of title that arose during the grantors time of holding title. Defects arising before the grantors ownership are not covered. The grantor only warrants that he has not created or suffered a defect to occur during his ownership period.

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d. Quitclaim Deed: Contains no warranties of title whatsoever. ONLY


conveys whatever interest in the property the grantor may own. If the owner owns no interest and the transfer also transfers nothing. Grantor is not liable for breach of any covenants b/c there are NONE. Usually used in foreclosure sales.

e. Merger Doctrine: i. The Uniform Land Transactions Act eliminates the merger
doctrine and permits all provisions of the sales contract to remain alive and enforceable for the buyer after acceptance of the deed. ii. Traditional Rule: Any promises in the contract of sale with respect to title are merged into the deed once the buyer accepts the deed. Buyer can only sue for breach of the deed covenants of title and may not rely on the contract of sales provisions with respect to title. 1. Justification for Rule: buyers acceptance of the deed is conclusive evidence that the buyer was satisfied that the deed fully conformed to the sellers obligations under the sale contract with respect to title. 2. This doctrine does not extinguish parts of the sales contract that are independent of or collateral to the transfer of title, such as for example a sellers promise to remove rubbish off the premises. 3. This doctrine is generally attack by the courts and they find a great number of provisions of the sales contract that are independent of or collateral to the transfer of title.

f. Breach of Covenants of Title i. Present Covenants (Siesen, Right to Convey and


encumbrances): 1. Breached the moment the deed is delivered if at all 2. Breach of Seisin: This covenant is broken if the grantor doesnt own what he purports to convey, regardless if he is aware of the defect or not. a. The covenant is broken EVEN if the grantee knows that the grantor does not own the interest conveyed. b. If title is totally defective, leaving the grantee with good title to an unusable parcel, the grantee is entitled to a return of his purchase price but must reconvey the right of possession to the grantor. c. If title partially fails, the grantee is entitled to recover that portion of the purchase price that is

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equal to the value of the failed title and must reconvey his possessory right. 3. Breach of a Right to Convey: This covenant is broken if the grantor lacks the power or authority to convey the interest (ex: grantor is a trustee who is barred from the trust from transferring title), whether or not his is aware of the limits on his authority to convey. Grantees knowledge of the grantors lack of authority to convey is not usually a defense to suit on this covenant. The measure of damages for this breach is the same as for the breach of Siesen. 4. Breach against Encumbrances: This covenant is breached if the title is encumbered at the time of the delivery of the deed, whether or not the grantor is aware of the encumbrance. a. In most states, the grantees knowledge of the encumbrance does not excuse the breach, BUT minority jurisdiction holds that grantees knowledge (actual or constructive) of an open and visible encumbrance prevents breach. b. Violations of governmental land use regulations that are not known to the seller and which have not become the subject of government enforcement is not encumbrances. c. Frimberger v. Anzellotti: DiLoreta owned a property, which was abutting a tidal marsh. He constructed a bulkhead, filled a portion of the marsh, built a house, and sold it to Anzellotti by quitclaim deed. 2 years later D conveyed the property to Frimberger by a general warranty deed. When P sought to repair the bulkhead he learned that a significant portion of the lot was encroached unlawfully on protected wetlands. Rather than seeking a variance from the use of regulation P sued D on the COVENANT AGAINST ENCUMBERANCES. The court held that latent violations of governmental land use regulations that do not appear on the land records, that are unknown to the seller, as to which no action to compel compliance has been taken at the time the deed was executed, and that have not ripened into an interest that can be recorded do NOT constitute an encumbrance.

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d. Statute of limitations begins to run the moment


the covenant is given and varies between 3-6 years. e. A present covenant is for the benefit of the immediate grantee and that if breached when made, the grantee has a chose in action, the claim against the grantor, which is not impliedly assigned if the grantee conveys to a remote grantee. f. Rockafellor v. Gray: Connolly acquired title to 80 acres at a foreclosure sale, then conveyed the property by general warranty deed to Dixon, who in turn conveyed a special warranty deed to Hansen and Gregorson. The foreclosure sale was invalid so Connolly never owned the 80 acres and thus breached the covenant of Siesen given to Dixon. However, because Dixon had conveyed by a special warranty deed he did not breach the covenant of Siesen that he gave to H&G. H&G sued Connolly on the covenant of Siesen he had given Dixon. (LOOK AT ACTUAL CASE). ii. Future Covenants (general warranty, quiet enjoyment, and further assurances): 1. These covenants are breached when the grantee is either actually or constructively evicted which occurs after the transfer. Actual actual dispossession from title or possession. Constructive whenever the grantees possession is interfered with in any way by someone holding a superior title. a. Brown v. Lober: Bost conveyed 80 acres to Brown under a general warranty deed containing no exceptions, even though Bost only owed one-third of the mineral rights. After the statute of limitations on the present covenant of Siesen expired, Brown agreed to sell the mineral rights to Consolidated Coal for 6,000 but was forced to accept only 2,000 b/c it was learned that Brown only owned one-third of the mineral rights. The court found that Brown had not been constructively evicted b/c the mere existence of a paramount title does not constitute a breach of the covenant of quiet enjoyment. If the owner of the other two-thirds of the mineral rights were to start mining coal under Browns land then he would actually be evicted. There was also no 30

2.

3.

4.

5.

constructive eviction because Brown did not have to purchase the other two-thirds of the land in order to keep the property. Breach of future covenants: Future covenants are only breached when the grantees possession has been disturbed by someone holding superior title. This can occur when the statute of limitations has and no longer allows a claim for present covenants. Benefit Runs with the Estate: If there is a privity of an estate between the original grantor and the remote grantee the benefit of a future covenant given to the original grantee runs with the land. a. Privity of estates means that the original conveyed either title or possession and the same interest was conveyed to the remote grantee. If the original grantor had neither title nor possession (was a liar or fraud), there is no estate created with which the covenant may run. b. This rule insulates wrongdoers from remote grantees. The covenant of general warranty obliges the grantor to defend against lawful superior claims of title, but imposes no obligation to defend against spurious claims of paramount title. The grantee may not recover more than what the grantor-in-breach received for the property.

4. The Mortgage (page 541- 558) a. The Mortgage Transaction i. Loans secured by mortgages are the principle device enabling
people to acquire real property. ii. The mortgage empowers a lender to sell the property in the event of the borrowers default on the loan, and to apply the sale proceeds to repayment of the loan. iii. The loan is evidenced by a promissory note, a personal promise to repay the loan on the terms contained in the note. The mortgage is a security agreement between the parties, which gives the lender the right to sell the property if the borrower defaults on the loan and to apply the sale proceeds toward reduction of the loan. iv. Mortgages are usually recorded in the public land records, which gives notice of the lenders security interest in the property.

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b. Development of the Mortgage i. The mortgage began as a conveyance. Lenders would require the
borrower to convey the property to the lender in a fee simple to a condition subsequent (the property will be reconveyed when the payment is made) ii. The equity courts began to rule that the borrower had an equitable right the property any time after the due date. This equity of redemption, unlimited in time, hung as a constant cloud over the title and made the property effectively inalienable. 1. Lenders could bring suit in a court of law to foreclose the equity of redemption so that the property could be free for a new purchaser. 2. Modern Mortgage Foreclosure: the equity of redemption is extinguished, the property is ordered sold, and the sale proceeds are applied to the loan, and any access is given to the borrower. The foreclosure sale cuts off only this judicially created equity of redemption. a. Foreclosure goes to ownership; it is not the same thing as possession. b. Judicial Foreclosure: accomplished by entry of a court order, its a civil action and the debtor can raise the funds before the property is foreclosed typically done by a sheriff. i. There must be advertising in a foreclosure sale so that there can be as much value raised as possible. ii. Winning bidder must pay the entire amount at the end of the auction. iii. Strict Foreclosure: property can be taken upon default right away. 3. About 20 states have created a statutory right of redemption, which gives the borrower a defined period of time after the foreclosure sale in which the borrower can redeem the property from the purchaser at the foreclosure sale. a. Secured Creditors: always take priority i. Consentual relationship for a lien ii. Oversecured: a creditor that has a collateral value that is larger than a debt. iii. Undersecured: Do not have enough collateral to cover the entire debt.

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iv. Interests need to be recorded so that


creditors know how much equity is tied up in liens and loans v. Banks also record interest b/c another creditor can prevail against unrecorded interest. Banks want to record so they can give constructive notice to other creditors. b. Unsecured Creditors: have a hard time getting repaid because they have to go through court. i. Could be consentual could not be

c. Types of Mortgages i. The same property may be used to secure more than one
mortgage, the first mortgage is given the first time and the second is given next in time. The second mortgagor only gets paid in the event of a foreclosure only after the first mortgage is fully satisfied. d. Title Theory: Treat the lenders title as for security purposes only, thus making it virtually indistinguishable from a lien. In some states the mortgagee is entitled to possession, in others only entitled to possession until there is a default. Lender has an enhanced ability to recover possession after default fairly quickly. e. Lien Theory: The mortgagor is entitled to possession until foreclosure f. Sale/ Transfer by Mortgager: A mortgagor is always free to transfer his equity (interest in the property). A buyer of the mortgagors interest can acquire the interest subject to the mortgage or assume the mortgage. i. By taking title subject to a mortgage the buyer incurs no personal liability on the mortgage. In the event of a default the mortgagee can foreclose and sell the property but if the sale does not extinguish the debt, the lender can only go after the ORIGINAL mortgagor, except to the extent the state may prohibit deficiency judgments. ii. If a buyer assumes an existing mortgage he becomes personally liable for the mortgage loan. The mortgagee can go after both previous and new owners unless the previous owner was released.

g. Default by Mortgager i. In most states the lender has the option of a suit to collect the
debt or to foreclose and effect a sale on the property to satisfy a debt. A few states require the lender to foreclose first and sell before seeking to enforce the debt personally by obtaining a deficiency judgment. 33

1. Anti-Deficiency Judgments: There is a legislative bias in


favor of homeowners, b/c some states prohibit deficiency judgments on purchase money mortgage loans for residences. OR only to permit a deficiency judgment for the part of the debt that which exceeds a judicially determined FMV for the property. 2. Statutory Right of Redemption: permits redemption after foreclosure by paying the foreclosure sale price rather than the mortgage debt. This is a strong inducement for the mortgagee, who is often the only bidder, to bid the amount of the mortgage debt and seek to collect the remainder through a deficiency judgment. 3. Inadequate Sale Price at Foreclosure: If the sales price is less than the foreclosure price that in itself will not void the foreclosure sale. a. The usual rule is that the sales price will stand unless it is so far below FMV that it shocks the conscience. Some states even require that a lender acts in a commercially reasonable manner. b. Murphy v. Financial Development Corp: P refinanced their home in 1980 and executed a promissory note secured by a first mortgage by FDC. FDC then sold the mortgage to Colonial Deposit. In 1981 P were 7 months in arrears on their mortgage and the lender gave notice of its intent to foreclose. P came up with the mortgage payments but failed to come up with enough money to cover necessary legal costs. The lenders scheduled a foreclosure sale. At the sale the only people who were present were P, their attorney and Ds representatives. The lender made the only bid of 27,000 (which is approximately what was owed to Ps). Two days later D sold the house for 38,000. The court ruled that the lender was a fiduciary in conducting the sale and that they owed a duty of good faith and due diligence to exert commercially reasonable efforts to obtain a fair and reasonable price. The lender did not advertise or use any reasonable methods to generate interest in the property. The key is that a lender must generate a fair price.

h. Deeds of Trusts i. Used in many states as the form of a mortgage


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ii. The borrower conveys the real property to a third party as trustee
for the lender, for the limited purpose of securing repayment of the debt. The trustee is often nominee of the lender (lawyer, employee or affiliated corporation). The deed of trust gives the trustee the power to sell the property upon default (power of sale) and use the proceeds to pay off the debt and return any excess to the borrower. A power of sale in a vested trustee is relatively quick and cheap The third party trustee at the lenders request conducts the sale, which is virtually identical to the procedure under a mortgage with a power of sale vested in the mortgagee. Still subject to statutory and judicial restrictions regarding notice and procedure.

iii. iv. v. vi.

i. Installment Sales Contracts i. A contract of sale for real property obligating the purchaser to pay
the purchase price in installments and obligating the seller to deliver title to the buyer after the purchase price has been paid in full. The original reason for an installment contract was the sellers desire to avoid the procedural difficulties of extinguishing a mortgagers equity of redemption. If a buyer defaulted upon an installment contract a seller could evict the buyer and keep part if not the entire partially paid purchase price as damages. The seller retained legal title until the buyer had fully performed buyers default served to excuse any further performance on the sellers part. The modern trend is to treat installment sale contracts as security devices. There are two reasons for this (1) the installment sale contract is distinguishable from a mortgage (2) it is inequitable to permit a buyer to lose his equity of redemption under circumstances where an identically situated mortgagor would not. Nowadays, the court is likely to require judicial foreclosure of an installment sale contract, permit the seller to retain payments only to the extent of the reasonable rental value of the property and perhaps give the buyer an equitable right to cure his default and resume payments. Bean v. Walker: Buyer agreed to purchase sellers home under an installment contract for 15,000 dollars. The contract required the buyer to pay over 15 years at a 5% interest rate on the unpaid balance in monthly installments. The contract provided that if the buyer defaulted and failed to cure the default within

ii. iii. iv. v.

vi.

vii.

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30 days the Seller could terminate the contract, take possession, and retain all payments that were paid. 8 years into the contract the buyer defaulted and failed to cure the default within 30 days. The court did not uphold this contract. The purchaser is treated as the equitable owner and the title vested in the buyer at the moment that the contract was executed, placing the buyer in the same position as a mortgagor.

5. Title Assurance a. Recording System: a public official in each county often called the
county recorder, maintains a record of the transactions which affect real estate located in the country, but that record is only as complete as what is presented to the recorder for filing.

i. What the Recorder Does: 1. Indexes the instrument 2. There are two indexes a. Grantor-Grantee: Most common, an alphabetical
record of all grantors and grantees by surname is maintained in different volumes. Here will appear name, date of the grantor or grantee, a brief description of the property and the instrument and a citation to the precise location in the public records of a complete copy of the instrument. b. Tract Index: A few jurisdictions maintain a tract index, in which every transaction pertaining to a particular parcel is entered in one location, instead of chronologically by grantor and grantee. Tract indexes are more common where property has been platted by map into various blocks and lots within blocks.

ii. What the Title Searcher Does 1. A title researcher is obligated to exercise reasonable diligence in performing a search. b. Race Acts: provides that between two grantees to the same property
the earliest to record prevails. i. There is a race to record first, it does not matter that the first person to record had notice of a prior unrecorded conveyance. ii. Making the record dispositive makes it unnecessary to rely on any extrinsic evidence

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c. Notice Acts: A subsequent bona fide purchaser without notice of a


prior unrecorded transfer prevails over the prior purchaser who has failed to record. i. This is true even if the subsequent purchaser has not recorded. ii. Example: On January 15th A conveys property to B, who fails to record the deed. On February 15th A conveys the property to C, C does not know about the conveyance from A to B. C prevails in this case even if B records the deed first. 1. C lacked notice of the prior conveyance to B. 2. B did not record his deed, if he had this would have given C constructive notice. d. Race-Notice Acts: protects a more limited class of subsequent bonafide purchasers who lack notice of the prior conveyance, it protects on those subsequent bonafide purchasers who lack notice and who record before the prior purchaser. i. Encourage recording ii. Eliminate disputes over which of the two conveyances was delivered first. iii. Example: June 1st B conveys property to Jane, who does not record. On July 1st B conveys property to Sally for 100,000 and Sally does not know of the prior conveyance of the same property to Jane. July 15th Jane records her deed and on July 20th Sally records her deed. Jane prevails over Sally because even though Sally lacked notice of the conveyance to Jane, Jane recorded before Sally. e. Consequences of Recording: Recording provides constructive notice to the world of a conveyance. Even if a later purchaser fails to consult the record he is charged with knowledge of its contents.

i. Consequences of Not Recording: 1. COMMON Law RULE: If no one has recorded then the
common law principle of first in time continues to apply, EXCEPT in a notice jurisdiction when the subsequent bonafide purchaser lacks notice. 2. Example: O conveys a property to B, who fails to record. Then O conveys the same property to A for 100,000. A does not know of the prior conveyance so she records. A will prevail in all jurisdictions; had B recorded he would have prevailed in all jurisdictions.

ii. When is an Instrument Recorded: 1. Virtually anything that affects title to or an interest in real
property may be recorded.

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2. Instrument Not Indexed: A recorder fails to index an


instrument or indexes it so improperly that it cannot be found by a diligent searcher using the standard search. a. OLDER RULE: A purchaser is charged with constructive notice of a record even though there is no official index, which will direct him to a particular instrument. b. NEWER RULE: An unindexed or improperly indexed instrument ought not to provide constructive notice. 3. Omnibus or MOTHER HUBBARD CLAUSE: This is an instrument that accurately describes one parcel, and also includes all other land owned by the grantor in the county. a. In cases like this the recorder can only record this instrument by reference to one parcel b/c it is an unreasonable burden on the recorder to search the records to identify ALL other property owned by the grantor. b. VOID against later purchasers of the grantors property, other than the indexed parcel, b/c a diligent searcher of the index will never locate any reference to the omnibus clause. c. Luthi v. Evans: Grace Owens owned interests in 8 oil and gas leases in Coffey County, Kansas. She assigned her interest to International Tours her interest in those leases under an assignment that specifically described each of the seven different parcels and included a mother hubbard clause that assigned her interest in all oil and gas leases in Coffey County whether or not such leases are specifically enumerated in the assignment. The Kufahl lease, in which Owens had an interest, was not specifically described. 4 years after Tours recorded the assignment from Owens, she assigned her interest in the K lease to Burris who checked the public records and had obtained an abstract of title from a professional title searcher. Neither search revealed the existence of the Mother Hubbard clause from the Owens to Tours conveyance. This was a notice statute jurisdiction. The court held that the Mother Hubbard clause in the Owens-Tours assignment did not give constructive notice to later purchasers of Owens 38

interest in the K lease. Burris prevailed taking the K lease free from Tours interest b/c it was not reasonable to expect a title searcher to locate and read every other conveyance ever made to Owens at any time conferring an interest in an oil and gas lease in Coffey County. This would be a monumental task, greatly increasing the time and expense of title searchers, which Kansass recording acts did not contemplate. 4. Misspelled Names: a. Jurisdictions divide over whether a misspelled name in a recorded instrument gives constructive notice. b. All jurisdictions agree that if the misspelling is so significant that it does not even sound like the correct name, there is no constructive notice. c. Issue for jurisdictions is if the misspelling that sounds like a correct name supplies constructive notice. d. IDEM SONANS: this doctrine holds that a misspelling that sounds substantially identical to the correct name gives constructive notice. This is accepted a lot, so long as the misspelled name begins with the same letter as the correct spelling. e. Idem sonans is not the prevailing rule with respect to the issue of constructive notice for real estate records. f. Orr v. Byers: Orr obtained a judgment against Elliott, but Orrs lawyer prepared the judgment by spelling the name Elliot. An abstract of the judgment listing the judgment debtor as Elliot or Eliot was recorded and indexed under those two names only. Elliott later conveyed the property subject to the judgment lien to Byers and Orr sought to foreclose his lien against the parcel acquired by Byers from Elliott. The court held that idem sonans did not apply in California and thus that the recorded abstract did not give constructive notice to Orrs lien. Byers prevailed, but if he had actual notice of Orrs lien he would have lost. The court reasoned that idem sonans would place an unreasonable burden on title searchers given the uncertainties of this doctrine 39

in a highly multicultural society. Also, those who prepare instruments for recording could more easily avoid the problem. 5. Ineligible Instrument: a. The usual ineligible instrument is an unacknowledged instrument that nevertheless appears on the record through the recorders oversight. b. Treated as unrecorded and thus does not give constructive notice of its contents. c. A subsequent purchaser will prevail unless they had actual notice of the prior conveyance or are under a duty to inquire and that inquiry would reveal the prior conveyance. d. Jurisdictions are split on whether constructive notice is imparted by an apparently recorded instrument that is ineligible for recording b/c of some defect not apparent from the instrument itself. i. Majority Rule: An instrument with a defect on its face does not give constructive notice but an instrument with a hidden defect does impart constructive notice. e. Massersmith v. Smith: Caroline Massersmith and her nephew Fredrick owned land in North Dakota as equal tenants in common. Caroline conveyed her interest under a deed to Fredrick, who did not record probably b/c the parties intended the deed to be a will substitute. Caroline, still in possession, conveyed half interest in the mineral rights to Smith under a deed that Smith then took to a notary, who spoke with Caroline by phone to ask whether the signature on the deed in front of the notary was hers. Upon being assured that the signature was Carolines he affixed his notorial seal and acknowledgment, but this was void b/c was not physically present to be certain that the document that was in front of the notary was indeed the deed she signed and not some other instrument. Smith then conveyed his interests to Seale who claimed to have no notice of Fredricks interest in the land. Only then did Smith record the Caroline-Smith deed, on the same day the 40

Smith-Seale deed was recorded. 6 weeks later Fredrick recorded his Caroline-Fredrick deed and then brought suit to quiet title in his name. The court held that no subsequent instrument in the chain of title passing through the secretly defective instrument is validly recorded. Given that the defect could not have been known by anyone carefully scrutinizing the record. Seale did not prevail. iii. Scope of Protection From Recording Acts: the protection that is afforded by recording statutes is DEFINED by the statute and INTERPRETED by the courts. Needs to be read CAREFULLY!

1. Invalid Conveyance a. If an instrument is invalid (forged or never


delivered) recordation does not make it valid.

2. Interests in Land Created by Law a. Recording acts only apply to conveyances (deeds,
mortgagees, contracts, and grants) and liens created by operation of law (judgments). b. Do NOT apply to interests created by operation of law, such as adverse possession, prescriptive easements or implied easements (even though they are not recorded they are still valid and enforceable against subsequent purchasers)

3. Bona Fide Purchasers a. Notice and Race recording acts are intended to
protect the bona fide purchaser of property. b. Bona Fide Purchaser: one who gives valuable consideration to purchase the property AND is w/o notice of a prior unrecorded conveyance. c. Race acts protect bona fide purchasers only to the extent that they are the first to record. d. SHELTER RULE: The protection that is given a bona fide purchaser under a recording act extends to all takers from the bona fide purchaser, even if such a taker knows of a prior unrecorded conveyance. i. Necessary to give bona fide purchasers the full value of their purchase in reliance on the records. Part of that value is the ability to transfer to someone else. 1. Example: O conveys to A who does not record. O then conveys to B, 41

who is a bona fide purchaser, who does record. B then conveys to C who knows about the O-A conveyance. B will prevail over A in all three types of jurisdictions. In a notice or a race-notice jurisdiction Cs knowledge of the A deed is irrelevant b/c he is a taker from B, a bona fide purchaser. C is sheltered.

4. Mortgagees a. Generally treated as bona fide purchasers either


b/c the statute specifically includes them or b/c the courts have interpreted the phrase bona fide purchaser to include them. b. This ONLY applies to the mortgagee who actually gives value (loan proceeds) in return for the mortgage. c. In most states a mortgagee who receives a mortgage to secure a pre-existing debt w/o some detrimental change in its position (a reduction in interest rate) has not acquired the mortgage for value and is NOT a bona fide purchaser.

5. Creditors a. Depends on the language of the statute b. If the recording act only protects purchasers, a
creditor is only protected if he should purchase the owners interest at a judicial sale resulting from a successful lawsuit to collect the debt. c. If the act protects creditors or all persons, a creditor will receive protection, which will be limited to judgment creditors or lien creditors. i. The reason is b/c creditors do not generally rely on the state of the public land records in extending unsecured credit, but a judgment or lien creditor has an interest in the state of the record in order to know what his priority is in respect to debtors property. 6. Notice: to be protected under a notice or a race statute, a purchaser must be w/o actual or constructive notice of any prior unrecorded interests at the time the purchaser pays the consideration.

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a. Actual Notice: real actual knowledge of the prior


unrecorded transactions, and evidence beyond the record is necessary to prove actual notice.

b. Constructive Notice i. Record Notice: the entire world,


including a subsequent grantee is charged with constructive notice of the contents of the record. 1. If an instrument is VALIDLY recorded then every subsequent grantee has constructive notice of it and so cannot be a bona fide purchaser. 2. WILD DEEDS: (outside chain of title) If a complete stranger records a conveyance (wild deed), the conveyance does not give constructive notice b/c it is not within a chain of title. 3. Board of EDU v. Hughes: In Minnesota, which is a race notice state, Hoerger conveyed a lot to D&W who did not record. D&W then conveyed the lot to the board of education who did record. Then Hoerger conveyed the same lot to Hughes, who lacked notice of the conveyance from Hoerger to D&W. Hughes recorded. The court decided that Hughes prevailed over the board of education b/c the conveyance from D&W to the board of education was outside the chain of title and did not impart constructive notice. At the time that Hughes purchased from Hoerger, a diligent title search would reveal Hoerger to be the record owner. Even though the deed from D&W to the board of education was recorded first, it would appear to be a deed made by a complete stranger to the chain of title. B/c the Hoerger to D&W link 43

in the chain was not recorded a diligent searcher would never find the D&W-Board conveyance. ii. Inquiry Notice: In most states a subsequent purchaser has an obligation to make reasonable inquiries and is charged with knowledge of what those reasonable inquires would reveal.

6. Title Insurance a. Basics i. Most common form of title assurance in US ii. The issuance of an insurance policy to a person, usually either a
mortgage lender or a purchaser of property, by which the insurer warrants that title is as stated in the policy. iii. The policy is a personal contract between the insurer and the person who buys the policy. iv. Title insurers perform their own examination of the public land records in order to issue an insurance policy. 1. They employ lawyers to search the public records OR 2. Maintain their own duplicate set of records, identical to those who found in the recorders office. b. Coverage: scope of coverage is determined by the contract of insurance. Usually just that the policy is a good record title. Does not usually insure against claims or interests not part of the record. i. Duty to Disclose Defects in Title: courts are beginning to impose on title insurers a duty to disclose anything they know about the parcel in question that is material oar important, breach of which is actionable in tort. 1. Walker Rogge v. Chelsea Title and Guaranty CO: Kosa acquired a parcel of land from Aiello under a deed that stated the local acreage of the tract was 12.486 acres based on a survey done. Rogge agreed to purchase the tract from Kosa, after Kosa had shown Rogge a survey done by Price Walker that stated the tract consisted of 18. 33 acres. The Kosa-Rogge contract stated that the acreage was 19 acres more or less stipulated that the purchase price was reduced by $16,000 per acre if the tract was in fact smaller in area. The deed referred to the Price Walker survey but did not state the acreage. Rogge hired D to examine and insure title. Chelsea did so by issuing an insurance policy. At the time the policy was issued the company had records of the prior deed, which

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stated that the acreage was only 12.43. Rogge sued for damages on the title insurance policy. The court found that the contract exception was clear enough o exempt D from contractual liability for an acreage shortfall that an accurate survey would reveal. Second, the court found that there was evidence that D had undertaken a duty only to insure title and that any search of title was for its own benefit and ancillary to its duty to disclose. HOWEVER, the court remanded for a determination if D had assumed a duty to assure P of the correct acreage of the tract.

Problems: THE DEED (pg. 531)


1. By general warranty deed A conveys Blackacre to B for $20,000. B conveys Blackacre to C for 15,000. O the true owner ousts C. The jurisdiction holds that present covenants are breached, if at all, when made and the chose in action is not assigned to subsequent grantees. (a) The deed from B to C is a quitclaim deed. What can B recover from recover from A? B purchased the property for 20,000 and sold the property for 15,000. B can recover if he can show that damages resulted, B is out of luck if the property went down in FMV but if the sale was less b/c of an inherent risk B can sue A for the difference.

(b) The deed from B to C is a general warranty deed. C has not sued B or settled with him, how much can be recover from A? If C sues B, the B can sue A. B can ask the court to put the money in an escrow contingency in case there is a suit against him and he loses. (c) The deed from B to C is a general warranty deed. C sues B and recovers 15,000. How much can B recover from A? One approach is that B can recover the actual loss of 15,000 or B could rescind to get back to his original position. 2. By general warranty deed A conveys Whiteacre to B for 15,000. By quitclaim deed B conveys Whiteacre to C for 12,000. By general warranty deed C conveys Whiteacre to D for 20,000. O the true owner ousts D at a time when the land is worth $24,000. (a) B conveyed a quitclaim deed so he is off the hook. A is potentially liable to B and D but the maximum amount of liability is 15,000.

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Problems: The Recording System (page 582)


1. O conveys Blackacre to A, who does not record. O subsequently dies leaving H as an heir. H then conveys Blackacre to B, who records. B purchases for a valuable consideration and w/o notice of the deed from O to A (bona fide purchaser). (a) B prevails b/c he is a subsequent bona fide purchaser and that trumps alls the other statutory regulation and he recorded first w/o knowledge of prior deeds. 2. O conveys Whiteacre to A, who does not record. Subsequently O conveys to B who purchases in good faith and for valuable consideration but does not record. A then records and conveys to C. C purchases for valuable consideration and in good faith. B records. C records. (a) Who prevails under a race statute? C, shelter rule (b) Who prevails under a notice statute? C, shelter rule

UNIT 4: SYSTEM OF ESTATES (PGS: 181-201, 206-220, 221-223)

1. Estates Generally a. A legitimate possessor of land, real property, owns an estate in land
rather then the land itself. b. A possessory estate has a right to occupy the land immediately c. A future interest is a right (sometimes only a possibility) to possess the land sometime in the future. d. System of Estates is derived from feudal society i. When William seized the English crown he claimed right to all the land in England. He then handed out possession of separate parcels with a catch called Siesen; each possessor was a tenant

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of the King. The tenant was siesed of the land (he held possession from the King his lord, and owed services to his lord. 1. The value of possession rose as population increased 2. Escheat: If a tenant in possession died w/o heirs, his tenure ended and possession returned to the next lord up the feudal ladder. 3. Forfeiture: If a tenant in possession committed treason against the King, or violated his obligations his tenure was forfeited and the next lord up the chain took possession. 4. Wardship and Marriage: If a tenant died leaving in possession an heir who was a minor, the next lord up the chain was entitled to profits from the land until the heir reached adulthood. 5. To avoid imposition of death tax, tenants in possession would transfer possession to their children for nominal services. e. Taxonomy of Freehold Estates: When feudal holdings became alienable by free tenants (free holders) the modern freehold estate began to evolve.

2. Fee Simple (pages 181-201) a. Most common type of freehold estate b. There are two types of fee simple: fee simple absolute & Defeasible fee c. Fee Simple Absolute: absolute ownership b/c its duration is perpetual, it
may last forever or at least as long as the legal system does. It is not absolute in the sense that no one can restrict the owners use, possession or alienability of the estate. i. Creation 1. Common Law: by a grant to A and his heirs 2. The words A are words of purchase and the words and his heirs are words of limitation words limiting the duration of the estate. 3. Modern View: now it is not necessary to use the words of limitation and his heirs to create a fee simple absolute. Usual rule is that the grantor conveys his entire estate unless the grant is to the contrary. ii. Alienability & Inheritance of Fee Simple Absolute: a fee simple absolute is freely alienable, devisable by will, or inheritable by intestacy (the state of dying w/o w will. 1. Alienation: An owner of see simple absolute can convey the entire fee simple absolute to another person.

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a. An owner can split his fee simple absolute into


lesser estates but the sum have to add up to a fee simple absolute. i. O owns Blackacre in fee simple absolute. O conveys Blackacre to A for her life. By this transaction the fee simple absolute is split into two parts, a life estate and a reversion back to O. The sums of the two parts add up to a fee simple absolute. 2. Devise: Transferred by will a. Law prescribes children, Heirs, and then next closely related persons). b. Devisees can be anyone that the testator specifies in his will. c. Today an owner in fee simple absolute can send it under his will to whomever he wants or split it into pieces so the sum adds to the fee simple absolute. 3. Inheritance: a. Transfers of property owned by a person dying W/O a will. This condition is called intestacy and is dealt with statutes that specify heirs. b. A dying person with a will does not have heirs; he has devisees (for real property) and legatees (for personal property). c. At early common law, the heirs were the decedents issues and the rule of primogeniture applied estates in land went to the decedents first-born son, daughters inherited only in the absence of sons. d. TODAY, the usual statutory scheme sets aside property for the surviving spouse, and distributes the remainder to the decedents children. In the absence of a spouse or children the decedents parents are heirs, then the heirs are the collateral kin (brothers, sisters, nieces, uncles and cousins). e. If an intestate decedent dies with absolutely no heirs then the property will escheat to the state. 3. Fee Tail: virtually extinct and issues occur in connection with various modern methods of destroying this type of estate. a. Origin i. A and the heirs of his body

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ii. Created a fee simple conditional, the condition being that if the
estate holder had a child he could convey a fee simple absolute iii. Fee Tail was created so that the nobility could keep their power over land centralized in their families. iv. Fee tail passed from one generation to the next automatically until the lineal bloodline ran out. Upon the expiration of the estate it would revert back to the original grantor, either through devise or inheritance. 1. The original grantor was likely to be long dead so it would go to the grantors presently living heirs or devisees 2. Example: O conveys Blackacre to A and the heirs of his body. A has a fee tail in Blackacre, if A conveys Blackacre to B and his heirs B does not have a fee simple absolute, instead B only has possession of Blackacre until As death at which point As son gets possession and the fee tail. a. ** B/c the fee tail might expire, the lineal bloodline might die out, every fee tail was followed by a reversion in the grantor or a remainder in a third party. These future estates become possessory when the lineal bloodline of the fee tail holder dies out. b. Elimination i. In the US creation of a fee tail has been abolished by statute ii. Disentitling Conveyance: 1. 4 states permit the creation of a fee tail but all provide that the fee tail is destroyed by a DISENTAILING conveyance an ordinary conveyance of a fee simple absolute a. This is an exception to the general rule that a grantor cannot convey more than he owns. b. Example: H conveys a property to W and the heirs of his body. W has a fee tail. W coveys property to G and his heirs. G has a fee simple absolute. If W wants to keep possession of Blackacre but wishes to own in fee simple absolute, he must use a straw conveyance W could convey the property he owns in fee tail to his lawyer in fee simple absolute and the lawyer would immediately reconvey it to William, thus giving W both possession and a fee simple absolute in Blackacre.

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iii. Statutory Conversion to a fee simple absolute: many states by


statute or state constitutional provision converted the fee tail into a fee simple absolute. 1. Some states claim that a fee tail is not to be recognized and that a purported fee tail is a nullity, other states declare that a fee tail estate at common law is fee simple absolute. 2. Example: B owns Blackacre in fee simple absolute and conveys it to J and the heirs of her body. J has a fee simple absolute either b/c a state statute converts the purported fee into a fee simple absolute, or b/c the purported fee tail is a nullity and the presumption that B intended to convey his entire estate to J. iv. Statutory Conversion to a fee simple absolute subject to an executory limitation: Some states provide that an attempt to create a fee tail will create a fee simple in the first taker under the grant, BUT if the purported fee tail contains a remainder the purported remainder will be given an effect IF AND ONLY IF the first taker dies w/o issuing use. 1. This creates a fee simple subject to an executory limitation, which is a future interest in a transferee from the grantor that becomes possessory either by cutting of another transferees estate OR cutting of the grantors estate at some future time. 2. Example: F, owner of Blackacre in fee simple absolute, conveys Blackacre to Emma and the heirs of her body and then to Jane and her heirs. a. At common law Emma would have a fee tail and Jane would have a remainder (which would become possessory if Emmas bloodline ran out). b. Statutory Scheme: Emma gets a fee simple subject to an executory limitation, the executory interest in Jane. If a son survives Emma, Emmas successors in interest will own Blackacre in fee simple absolute. Jane will get nothing her executory interest will lapse or expire. HOWEVER, if Emma dies w/o issue Janes executory interest will become possessory and she will own Blackacre in fee simple absolute. Janes interest is executory b/c she is a transferee from F and her interest becomes possessory (if at all) by cutting off the fee simple owned by Emma. Emmas fee simple does not die with her, it either

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becomes absolute (if she is survived by a son) or becomes absolute in Jane. v. Life estate and remainder in life tenants issue: a few states allow a fee tail to last for one generation, then convert in into a fee simple absolute. 1. Example: D conveys Blackacre to A and the heirs of her body. A has a life estate; her issue owns a remainder in fee simple absolute. The remainder is contingent upon A having an issue. If A has a child M, upon As death M will own Blackacre in fee simple absolute. If A dies childless, the contingent remainder in As issue will fail and D or his successors will own Blackacre in fee simple absolute. vi. Fee Simple Conditional created: 3 states, SC, Iowa, and TN treat an attempted fee tail as creating a fee simple conditional. The holder of a fee simple conditional has a life estate, but if a child is born to the holder, then she may convey a fee simple absolute. 1. Example: E conveys Blackacre to S and the heirs of her body. S has a fee simple conditional and E retains a reversion. If S never has a child her estate will expire on her death and Es reversion will become possessory, creating a fee simple absolute in E (or his successor to the reversion). But if S gives birth to a child she has the power to convey a fee simple absolute (destroying Es reversion), but she must make a conveyance in order to create a fee simple absolute. 4. Life Estates: a possessory estate that expires on the death of a specified person; a life estate is ALWAYS followed by a future interest (either a reversion in the grantor OR a remainder in some third party). A reversion may only be created in the grantor and a remainder can only be created in a transferee.

a. Pur Autre Vie: i. The duration of the life estate is measured by the life of a person
other than the estate holder, it is a life estate for the life of another ii. Example: A, owner of T Lodge in fee simple absolute, conveys it to G for life. If G then conveys his life estate to E, E will own a life estate that is measured by Gs life.

b. Defeasible Life Estates: i. Life estates may be defeasible and the same rules apply as to
defeasible fees.

c. Life estates in a group/class of people: i. A life estate may be created in a group of people

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ii. An issue is that some of the life tenants can die before others and
there is an uncertainty if the surviving life tenants will take the deceased life tenants share or if the remainder or reversion man gets the interest. iii. Example: Most courts rule that the remainder or reversion would not become possessory until all the life estates have expired.

d. Ambiguous Grants: i. In cases of ambiguity the courts look for the grantors INTENT ii. Brown v. White: Jessie Lides handwritten will stated: I wish to
leave my home to live in and NOT be sold. The Supreme Ct in TN relied on 3 TN statutes to presume that Jessie meant to give Evelyn fee simple absolute b/c there is no clear evidence to the contrary. One statute stated that a common presumption is that every grant or devise in real estate shall pass the entire interest of the grantor or testator unless there is clear evidence to the contrary. The other statute said that a presumption that will convey the entire interest of the testator in the testators real property unless there is a contrary intention in the will. The third statute created a presumption against partial intestacy, which is what would happen if Jessie Lides will was read creating a life estate in Evelyn; b/c there was no remainder that would then exist. The court treated the no sale restriction as an invalid attempt to restrain alienation of a fee simple absolute rather than clear evidence of a life estate.

e. Transferability: i. A life estate is freely alienable during life ii. The transferee receives the transferors life estate iii. Market value of a life estate is the fraction of a value of the fee
simple absolute. iv. Fraction determined multiply the life expectancy in years of the person whose life measures the duration of the estate by the annual value of possession and discount the product to reflect the fact that payment must be made now to receive value over time. 1. EX: Mkt. Value of Fee Simple Absolute = 100,000 and the life expectancy of the person is 5 years, annual value of possession is 5,000 (5% of 100,00) a. 5,000 X 5 = $25,000 this is value of life estate b. Need to take the present value of $25,000, which is about 21,000. v. Baker v. Weeden: John Weeden devised Oakland Farm to his widow, Anna Plaxico, for life and then to Johns grandchildren by a prior marriage. The elderly Anna lived on a farm, which was 52

rising in value b/c it was it was in the path of urban development, but it only earned about 1300 in annual farm rents. Anna wanted to sell the farm and increase her income. The remaindermen were unwilling to do so b/c they thought that the value of the farm was increasing rapidly and that Annas life expectancy was shorter than it turned out to be. Could the remaindermen be forced to allow Anna to sell the farm? The court said that they have the power to order a judicial sale to preserve the estate from waste or deterioration in which the future interests would be preserved. However, there must be necessity before this type of sale is ordered. In this case necessity was not found.

f. Modern Life Estates: i. Equitable life estate is a property interest owned for life ii. A legal life estate is an estate for life in the assets themselves 1. Ex: A devises Deer Park to her bother J, as a trustee to hold
for the benefit of his wife E for life and then to L&P outright and free of trust. Jack, the trustee, has legal title to Deer Park in fee simple absolute. E, a beneficiary has an equitable life estate and L&P also beneficiaries of the trust have a concurrent remainder. 2. A trustee has fiduciary duties to the equitable owners of the trust but within the limits of those duties, is free to convey the assets in exchange for other assets in order to benefit the equitable owners. 3. The owner of a legal life estate can only convey her life estate, which may not be very marketable 4. There is a lot more flexibility with an equitable life estate instead a legal one.

iii. Judicial Responses to Life Estates 1. Construction: a. Courts try to implement the granters intent but if
the grant is sufficiently ambiguous, courts may interpret it to create a more flexible estate, such as a fee simple absolute. 2. Judicial Sale: a. Courts sometimes order the sale of the life estate and the remainder and either divide the sale 53

proceeds or order the sale proceeds held in a trust with the income payable to the life tenant and the trust corpus preserved for the remaindermen. b. This is rarely done, there has to be agreement between the remaindermen and the life tenant i. Equitable Necessity: Where it can be proved that sale is in the best interests of all parties and is the only practical method of giving truth to the grantors intention, a court may invoke its equity powers. ii. Waste Avoidance: Courts also order a sale when it is necessary to avoid waste, the deterioration and destruction of the underlying property. (also look at what is in the best interests of the parties). g. Waste: a term to describe the actions of the life tenant that permanently impair the properties value or the interest of future interest holders.

5. Defeasible Fees (pages 206-220) a. Basics: i. Any estate may be made defeasible subject to termination
upon the happening of some future event ii. A defeasible fee is subject to termination or divestment upon the occurrence of a future event. iii. If the future event never happens then the defeasible fee endures as long as a fee simple absolute, but there is always the chance that termination could occur.

b. Fee Simple Determinable: i. Created when a grantor intends to grant a fee simple only until a
specified future event happens, and uses language in the grant manifests that intent. 1. Example: R, owner of Blackacre in fee simple absolute, conveys Blackacre to the town library association for only so long a time as Blackacre is used as a free lending library a. This is a fee simple determinable b. The intent and the words of the grant are clear; the estate will only last until the moment Blackacre ceases to be used as a free lending library. 2. A fee simple determinable is less than a fee simple absolute; the grantor who owned the estate in fee simple absolute retains a possibility of reverter. 54

ii. Words evidencing intent to create a fee simple determinable: so


long as, until, during, or while are indicative of grant for a limited duration and thus are likely to be construed as creating a fee simple determinable. 1. Mahrenholz v. County Board of School Trustees: look at full case its long. iii. Transferability: a fee simple determinable is a freely transferable estate but the nature of the estate stays the same. The transferee takes the estate subject to the limitation that makes it defeasible. iv. Abolished in some states: California and Kentucky have abolished the fee simple determinable. Instead view these estates as fee simple subject to a condition subsequent.

c. Fee Simple Subject to Condition Subsequent: i. Created when words of the grant support the conclusion that the
grantor intends to convey a fee simple absolute BUT has attacked a string to the grant so that if a specified future event happens the grantor may pull the string and get his fee simple absolute back. 1. Example: O, owner of Blackacre in fee simple absolute, conveys Blackacre to a battered womans shelter. Provided however, that if Blackacre should be used for any purpose other than sheltering abused women, grantor may enter and retake possession. a. This is a fee simple subject to a condition subsequent b. The grantor has parted with less than a fee simple absolute, so the interest that is retained by the grantor is a right of entry (or power of termination), which automatically becomes possessory upon the occurrence of a future event. c. A holder of a right of entry MUST actually exercise the power to terminate the fee simple subject to a condition subsequent in order for that defeasible fee to end. d. The holder of a right of entry has the OPTION TO TERMINATE the fee simple subject to a condition subsequent. ii. Words evidencing intent: provided, however, but if, and on condition that, the key is whether the grant evidences intent to pass title COMPLETELY, and save only for a right to take it back. iii. Action necessary to assert right of entry:

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1. The right of entry holder does not need to actually


physically enter and retake possession, but must do more than merely proclaim intention to retake possession. 2. Ex: B conveys a fee simple in Blackacre to I, subject to the condition subsequent that no hunting shall ever occur. B can send a letter and follow up with this. iv. Transferability: freely transferable during life, inheritable and may be devised by will. However, once the limiting condition has occurred and the right of entry is exercised there is no estate left to be transferred. v. Preference for a fee simple subject to condition subsequent: in ambiguous cases courts prefer to find a fee simple subject to a condition subsequent. 1. The reason this is preferred is because a fee simple determinable produces automatic forfeiture of title and possession, while a fee simple subject to a condition subsequent makes forfeiture an option of the holder of the right of entry. 2. Courts try to avoid forfeiture of title b/c its harsh

d. Classification of Defeasible Fees: i. Transferability of the interest retained by the grantor: 1. Most states allow a possibility of reverter or a right of
entry to be alienated, devised or inherited. 2. Some states only permit the possibility of reverter to be freely transferable. ii. Accrual of a cause of action for recovery of possession: 1. A cause of action accrues at the moment against the person in possession of the property, automatically once the limitation has occurred. a. Example: Ron holds the possibility of reverter in Blackacre and Caroline holds a fee simple determinable in Blackacre. In 1980, the limitation occurs, Ron does nothing about it until 1991, when he files suit to eject Caroline. If the state has a tenyear statute of limitations, and Caroline can prove the elements of adverse possession, she has a fee simple absolute in Blackacre. i. However, the cause of action for recovery of possession does not accrue the moment the limitation occurs if the title is a fee simple subject to a condition subsequent. In that case the cause of action would not 56

accrue until the cause of action would be exercised. ii. Equitable Doctrine of Laches: If a person delays in exercising his right of entry it could provide the person in the estate with undue inequitable consequences and their right of re-entry could be denied. iii. Effect Against the rule against perpetuities: 1. A possibility of reverter and a right of re-entry are exempt from the rule against perpetuities. iv. Mahrenholz v. County Board of School Trustees: W.E and Jennifer Hutton conveyed an acre of their farm to the school district under an ambiguous grant (this land to be used for school purposes only, otherwise to revert to grantors) and the school district built the Hutton School on that land. Later the Huttons conveyed their farm and whatever interest they had in the Hutton land Jacqmains, who conveyed it to the Mangrenholz family. Under IL law however, neither the right of reverter not the right of re-entry could be conveyed during life or pass by will; such interests could only be inheritable. In 1969 when Jennifer Hutton died that her son Harry inherited interest. In 1973, the school stopped teaching classes there and used the land for storage. In 1977, Harry conveyed his interests to P. P then sought to quiet title to Ds land. 1. If the original land created a fee simple determinable in the school district and a possibility of reverter in the Huttons (which is what the court concluded based on conflicting IL precedent), and if the cessation of classes in the Hutton School in 1973 terminated the fee simple determinable, then Harry owned a fee simple absolute in the Hutton School and that was what he conveyed to P who should prevail. a. This is b/c a possibility of reverter becomes possessory automatically upon the breach of the condition. 2. However if the original grant created a fee simple subject to a condition subsequent in the school board and a right of re-entry in the Huttons, even if the condition was breached, Harry would only be able to own a right of reentry to convey to P (b/c Harry never claimed his right of re-entry). Under IL law a right of re-entry cannot be

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conveyed only inherited, so the school board should prevail. 3. A fee simple determinable comes to an automatic end upon breach of the condition, while a fee simple subject to a condition subsequent comes to an end only when the holder of the right of entry asserts his right to recover possession.

e. Problems with Defeasible Fees: i. Invalid Restraint on Alienation: 1. Defeasible fees restrict the use that may be made of the
property, restraints on alienation are disfavored b/c they inhibit (a) economic efficiency (b) productivity (c) such restraints also prevent resources from being allocated by the market into the hands of a person who highly values them and who will presumably make productive use of them. a. Mountain Brow Lodge No. 82 v. Toscano: Toscano gave the lodge a lot adjacent to its existing building. By the deed he restricted the use to the Old Fellows Lodge only, and stipulated that in the event of a sale or transfer of the property or a failure of them to use the property title would revert to Toscano. The court voided the no sale or transfer restriction of the deed as an invalid restraint on alienation but upheld the use restriction on the theory that b/c Toscano meant to convey a determinable fee to the lodge rather then merely restrict alienability the use restriction was valid. This case raises questions such as: does the use restriction embodied in a defeasible fee materially inhibit marketability? Also, do the social and economic benefits of the use restriction embodied in a defeasible fee outweigh the costs imposed by the restriction?

ii. Defeasible fee or covenant: 1. If a restriction is a defeasible fee then the remedy is a
forfeiture, which takes title away from the owner of a defeasible fee and sends it to the owner of the future interest. 2. If the use restriction is servitude then the remedy is either damages or an injunction, not loss of possession or ownership.

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a. Example: If in the Toscano case, he conveyed his


property to the lodge on the stipulation that the property should always be used for lodge purposes, the stipulation could be seen as giving the lodge a fee simple absolute or as a covenant (a promise made by the lodge by its acceptance of the deed) which might be enforceable by damages or an injunction.

iii. Valuation of defeasible fee & associated future interest: 1. Hard to place a value on a defeasible fee and its associated
future interest b/c the condition that might terminate a defeasible fee is often not limited. a. Ink v. City of Canton: Harry Ink conveyed land to the city of Canton, so long as it was used for a public park. The State of Ohio took most of the park by eminent domain to construct a highway and a suit arisen between the city and the Ink family, who owned Inks possibility of reverter, regarding how the condemnation proceeds would be divided. The court ruled that the Ink family, as owners of the possibility of reverter, should receive that portion of the total proceeds that exceeded the value of the land as a public park. i. How is a park to be valued? There is no exchange value, public parks are not bought and sold as public parks. There is a replacement value, but b/c land is unique it is difficult to be sure what that value would be. ii. B/c the city did not voluntarily cease its park, should the value of the possibility of reverter be discounted by the probability that the city would have violated the limitation voluntarily? Restatement says that unless the valuation is imminent or probable independent of imminent domain, condemnation proceeds should go to the defeasible fee owner. iii. B/c the cities determinable fee was a gift to it, would award of the entire proceeds go to the city deter charitable giving and deliver a windfall to the city? Court didnt 59

take into account Inks intent to give the city a public park to use.

b. Also look at City of Palm Springs, same type case f. Fee Simple Subject to Executory Limitation: i. This is a fee simple that is divested or shifted from one
transferee to another transferee upon the occurrence of some future event. ii. The grantor of this type of estate transfers the future interest to a third party instead of having it. iii. If a grantor uses the words necessary to create a fee simple determinable, but instead of retaining the possibility of reverter, the grantor transfers that interest to a third party. iv. Prevailing doctrine says that a fee simple subject to an executory limitation is automatically divested in favor of the executory interest, no matter whether the divesting condition is phrased in the form of a determinable fee or a fee subject to a condition subsequent.

6. Restraints On Alienation (pages 221-223) a. Types of Restraints: i. Forfeiture: this type of clause means that the estate will be
forfeited the estate is alienated in any way. ii. Disabling: this type of clause disables the owner by depriving him of any power to transfer the estate to anyone else. iii. Promissory: this clause extracts a promise from the transferee that they will not alienate the property.

b. Total Restraints on a Fee Interest: a total restraint on alienation is VOID, mostly due to economic efficiency (b/c restraints prevent the property from moving into the hands of the person who would use it most productively. c. Partial Restraints on a Fee Interest: some partial restraints are valid, but most are void. GENERALLY a restraint on alienation that is for a REASONABLE purpose and LIMITED in DURATION is valid. d. Restraints on Life Estates: i. Legal Life Estates: 1. Theoretically this is alienable 2. The practical effect of a restraint on alienation of a life
estate is to prevent gift of the estate or creditor seizure of it.

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3. Disabling restraints are almost always void 4. Other restraints can be upheld sometimes b/c courts view
them as restraints that can be released.

ii. Equitable Life Estates: 1. Disabling restraints are permitted on equitable life estates 2. Spendthrift Trust: create a trust which are designed to
provide a spendthrift relative with an income but prevent him from his folly by denying him power to pledge the trust assets as security for a loan or otherwise use it to tempt creditors to extend credit to the beneficiary.

Problems: The Fee Simple (page 185)


1. O, the owner of Blackacre has two children, A (daughter), B (son). B dies testate and devises all his property to W, his wife; B is survived by three children, B1 (daughter) B2 (son) B3 (daughter). A1 (son) is born to A. Then O dies intestate. (a) Who owns Blackacre under 1800 England? B, the son of O, would receive all the property. Then, B2 (Bs son) would receive the property. (b) Who owns Blackacre under modern American Law? Each child would get the 1/6 of the estate, w/o a will it would be split evenly. 2. O conveys Blackacre to A and her heirs, if A dies w/o issue will Blackacre escheat to the state? We do not know if A has any heirs, if no heirs, then it will go to the state, if there are heirs, then it will pass according to state statute.

Problems: The Fee Tail (page 189)


1. In England in 1800, O conveys Blackacre to A and his heirs male, what estate does A have? A fee simple absolute 2. O conveys Blackacre, located in Massachusetts, to A and the heirs of her body. A dies leaving her only child B, as her sole heir. B dies w/o having any children, devising all the property to C. What is the state of the title? A dies, B gets a fee tail. When B dies, O gets the reversion back. If B wanted to give his property to C when he died, he would have to disentail the fee tail and then he could do whatever he wanted with the estate. 3. O conveys Whiteacre to A and the heirs of her body, and if A dies w/o issue then to B and his heirs. A then makes a conveyance to C and his

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heirs. A then marries D and has a son E. A dies intestate. A is survived by O, B, C, D and E. C owns the entire property in fee simple

UNIT 5: FUTURE INTERESTS (PGS: 225-234, 237-240, 244-249, 262-266)


1. Introduction a. Interests that are not possessory but which are capable of becoming
possessory at some time in the future b. They are presently existing property interests but which confer only a future right of possession

2. Future Interests Retained by the Grantor (transferor) a. Reversion i. Future interest that is created when the grantor conveys a lesser
estate then what he originally owned.

ii. Reversion is freely alienable during life, and may be devised or inherited. 1. Example: B, owner of Blackacre in fee simple absolute,
conveys Blackacre to S for life. B has conveyed a life estate, which is less than a fee simple absolute. When S dies the life estate will end and B will get the reversion that he retained (w/o mentioning the reversion in the grant B will get it b/c he conveyed less than his own estate).

2. A reversion is created automatically, by operation of law, whenever the grantor conveys less then his entire property interest. a. A person does not have to have an estate in fee
simple absolute, to create a lesser estate and create a reversion. The conveyance of ANY estate that is less will create a reversion. 3. A reversion is not necessarily certain to become possessory in the future. 4. A reversion is nor created when the grantor conveys to one-person part of his estate and simultaneously conveys the rest of his estate to another person. a. Example: L conveys Blackacre to Mary for life and then to Alice and her heirs if she survives Mary.

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iii. iv. v. vi.

Lewis has retained a reversion, but it will never become possessory of Alice outlives Mary. 5. A person does not convey their entire interest when they convey a lesser possessory estate followed by a contingent remainder in fee simple absolute. a. Example: J conveys Blackacre to E for life and then to R and her heirs. J has not retained a reversion. The entire estate is conveyed, part in the form of a presently possessory estate and the rest in the form of a future interest. If J conveyed the estate to R only if she outlives E, then J would have retained his remainder interest. Reversions are ALWAYS vested Reversion is created in the transferee Reversions are vested b/c they are created in the person who owned the ENTIRE estate at the moment of creation. The grantor DOES NOT part with all that he owned, his interest is thus vested even though his future right to possession is uncertain

vii. Reversion is vested at creation, so it is not subject to destruction by the rule against perpetuities. b. Possibility of Reverter i. This is created when the grantor conveys the same quantity of
estate that he originally had, but conveys it with a determinable limitation which retains the right of future possession if and when the determinable limitation occurs. The future interest is the grantors possibility of reverter. 1. Example: Bill conveys Blackacre to Pete so long as it is used as a warehouse. Pete has a fee simple determinable and Bill has a possibility of reverter. 2. Whenever a determinable estate is created, the grantor retains possibility of reverter, unless the grantor simultaneously creates in a third party what would be a possibility of reverter by the grantor. a. Example: O, owner of a life estate in Blackacre conveys it to S so long as Blackacre is devoted to agricultural use. O has conveyed her life estate to Sal, an estate that is the same quantity she had, with a determinable limitation. If during Os life the estate is used for anything other than agriculture, O gets back her reversion in Blackacre and it becomes immediately possessory.

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3. A possibility of reverter can NEVER be created in a


GRANTEE a. Example: April, owner of property in fee simple absolute, conveys it to May so long as it is used solely as a single family residence and if not then to June and her heirs. April has conveyed a fee simple determinable to May and created in June a future interest in June that would be a possibility of reverter if April had retained it. However, because it is created in a transferee it is an executory interest. ii. Common law does not permit transfer of a possibility of reverter inter vivos or by will, only by inheritance. Today, most states permit a possibility of reverter to be alienated inter vivos, devised or inherited. iii. Possibility of reverter can endure forever b/c the triggering limitation may never occur AND it is vested at creation making it immune from destruction under the rule against perpetuities.

c. Right of Entry (power of termination) i. Right of entry is created whenever the grantor retains the power
to CUT SHORT the conveyed estate before its natural termination. 1. Example: H conveys a farm to O and her heirs but if the farm should cease to be used for pasteurizing horses, Hilda may terminate the conveyed estate and retake possession. O has a fee simple subject to a condition subsequent and H has retained the right of entry.

ii. A right of entry may only be created in the in the grantor, if created in a grantee it is an executory interest iii. At common law, a right of entry was neither alienable inter vivos,
not devisable by will, only inherited. iv. Today jurisdictions are split whether to follow the common law or to permit free alienability. v. Right of entry can endure forever b/c the triggering limitation may never occur AND it is vested at creation making it immune from destruction under the rule against perpetuities.

3. Future Interests Retained by the Grantee (transferee) a. Remainders i. Vested Remainders:

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1. A remainder is vested if it is created in a known person


and possession is not subject to any condition subsequent. a. Example: Oscar conveys property to M for life, then to Connie and her heirs. Connies remainder is vested b/c she is a known person and there is no condition precedent to her possession, whenever M dies, Connie (or her legal successor) is ready to take possession of the property. If Connie dies before M, her vested remainder passes to her assignee, devisee or heir. IF Oscar said Connie gets it only if she outlives M, then she would have a contingent remainder and if she died before M neither she nor her heirs would get anything. b. The natural expiration of a preceding estate is NOT a condition precedent.

2. A vested remainder MUST become possessory whenever the prior estate ends. a. Indefeasibly vested remainders i. Certain to become and remain possessory & once possession occurs it will last forever. 1. Example: D conveys property to P
for life and then to A and his heirs. A has an indefeasibly vested remainder in fee simple absolute. A (or his legal successor) is certain to obtain possession following expiration of Ps life estate. Once A has possession, he cannot be divested of his possession (he has fee simple absolute). 2. Example: B conveys property to Sam for life, then to Miles for life, then to Joel and his heirs. Miles has an indefeasibly vested life estate, BUT if he dies before Sam his estate will naturally terminate, even though he never enjoyed possession. Sams interest is not divested it just expired naturally. b. Vested Remainders subject to divestment

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i. This is a remainder that is created in a


KNOWN person, and is not subject to any condition precedent, BUT is subject to a condition SUBSEQUENT, that if occurs will completely divest the remaindermen of his interest. 1. Example: K conveys property to E for life, then to Eve and her heirs, but if Adam should return from war, to Adam and his heirs. a. Eve has a remainder subject to complete divestment b/c Eve is a known person and there is no condition precedent to her possession. b. Adam has an executory interest. c. If E dies today, Eve will be entitled to possession. But, Eves remainder and her possession may be taken away if Adam returns. d. Adams executory interest will last until his death. ii. These remainders are still vested and may become transferred inter vivos, devised or inherited. 1. Example: F conveys land to D for life and then to James and his heirs, but if James does not survive D, then to Robert and his heirs. James vested remainder is subject to complete divestment by Roberts executory interest. James might never be able to pass his remainder at death b/c he might not outlive D. However, if James gets the land, he will have it in fee simple absolute. c. Vested remainders subject to partial divestments i. This is a remainder that is created in a class (group) of grantees, at least one of whom is presently existing and entitled to

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possession as soon as the preceding estate expires, but is capable of expansion to include as yet unknown people.

ii. Vested remainders subject to open are vested even though they are subject to dilution the interest will survive its holder. 1. Example: R devises property to her
husband for life, then to such of her children who have graduated from law school. a. Robin has created a remainder in a class, her children. If at the moment of creation she has 3 children but none have graduated the remainder is contingent. b. When one of the children graduates they will have a vested remainder but it is subject to open b/c it is possible that either one or both of the other two children will graduate from law school. c. The remainder shared by Rs three children is indefeasibly vested b/c R is dead and can have no more children and all of her children have satisfied the condition precedent. d. If one of the children graduated from law school and acquired the remainder subject to open and then died from the stress, the vested remainder would pass by will or by intestate succession.

iii. A vested remainder can be subject to both partial and complete divestment.
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1. Example: P devises Blackacre to W


for life and then to Cs children and their heirs, but IF Ivan returns from Turkey, to Ivan and his heirs. a. At Ps death, C is living and has two children, A and R. The class of Cs children has a vested remainder subject to partial and complete divestment. b. If C has another child, the child will enter the class and partially divest the class. c. Ivan may also return and completely divest Cs children.

ii. Class Gifts: An interest in a group of people is a class gift; a class is open if it is possible for new people to enter it and closed if new entrants are not possible. 1. Class-Closing Rules: a class closes when either of two events occur: a. Physiologically Closed: no longer possible to have new entrants i. Example: A devises property to M for life,
then to his children and their heirs. A is survived by two children B and C. 1. A has created an indefeasibly vested remainder in the class of his children. It is indefeasibly vested b/c A is dead and can have no more children. No one else can enter. b. Rule of Convenience: interpretative rule, not a

rule of law, which states that a class closes if any member of the class is entitled to immediate possession and that result is consistent with the intent of the grantor. i. Example: G devises property to his wife for
life and then immediately to his grandchildren and their heirs. G is survived by his wife and one child B. B has two kids, C and D. 68

1. C and D have a vested remainder


subject to open. When the wife dies they will be entitled to immediate possession. The rule of convenience probably applies b/c it was Gs intent that the grandkids get the property immediately. Once the wife dies under the rule of convenience the class is closed. If B later gives birth to a third child that child wont be able to share.

iii. Contingent Remainders 1. A remainder created in an UNKNOWN person OR that has


a condition precedent to ultimate possession. a. Example: M conveys Blackacre to K for life, then to Ellens children. Ellen is 12 and has no children. Ellens nonexistent children have a contingent remainder. Martha has retained a reversion. b. Example: M conveys Blackacre to K for life and then to Ks heirs. Ks heirs are not going to be known until K dies, so the class has a contingent remainder. M has again retained a reversion. c. Example: M conveys Blackacre to K for life, then to E if she graduates from Princeton. E is 12 years old. E has a contingent remainder; she must graduate from Princeton in order to be entitled to possession. M has retained a reversion. d. A contingent remainder will always leave a reversion in the grantor. 2. A condition precedent MUST be expressed in the grant. Neither the natural expiration of the prior estate nor the precatory language in the grant constitutes a condition precedent. a. Example: J conveys land to R for life, then to W. W (or his legal successor) has no right to possession until the natural expiration of Roses life estate, but is inherent in the estates conveyed by J. W has a vested remainder. (NOT CONDITION PRECEDENT) 3. Need to pay CAREFUL attention to the grant, look for grants, which create a vested interest and then add a divesting clause vs. a condition that is made as an integral part of the grant in remainder.

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a. Could have alternative contingent remainders 4. Common law did not permit alienability of contingent interests, BUT nearly EVERY jurisdiction permits alienability of contingent interests. b. Executory Interests i. Springing Executory Interests 1. This is a future interest created in a grantee that divests
the grantor at some future time after the conveyance. (It springs out of the grantor) a. Example: P conveys Blackacre to the first student in his class who becomes a judge. This unknown student has a springing executory interest. b. Example: A conveys property to B for life, and then to S if he will give B a proper funeral. i. S has a springing executory interest, not a contingent remainder ii. It is not possible for S to give B a proper funeral or any kind of funeral until some time has elapsed following the expiration of Bs life estate. iii. During that interval between Bs death and his funeral and possibly Ss possession, possession has reverted to A (or her legal successor to her reversion). iv. When S delivers the proper funeral for B, possession will spring out of A.

ii. Shifting Executory Interests 1. This is a future interest in a grantee that divests another
grantee upon the occurrence of some condition. By such a divestiture, the shifting executory interest cuts short the preceding estate prior to its natural expiration. a. Example: R conveys property to A, but is S should ever be released from prison to S. S has a shifting executory interest that will divest A, another grantee, by cutting short his fee simple subject to an executory limitation if and when Sarah is released from prison.

4. The Trust a. Future interests are most commonly employed in trusts b. Trust divides legal ownership from equitable ownership

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c. Trustor may transfer legal title of his assets to a trustee, who becomes
the legal owner of the assets, but who is charged with the responsibility to manage those assets for the economic benefit of the trust beneficiaries, who have equitable ownership of the assets. i. Example: E conveys property, which is owned in fee simple, to I in trust to pay the income for life to Sophie, and then pay the principle to Sophies children who survive her. 1. I is the legal trustee and she owns Blackacre in fee simple absolute, Sophie has an equitable life estate in the trust assets and Sophies children have an equitable contingent remainder in the trust assets. 2. I can sell the property and the money paid can make up the trust assets. I can only alter the composition of the trust not the nature of equitable interests held by Sophie and her children. d. Person can give assets to someone who can manage them well for the advantage of unknown trustees.

5. The Marketability Rules a. Introduction i. Common law judges have devised a number of rules to increase the marketability of land by eliminating uncertainties of title that inhibited alienability. b. Destructibility of Contingent Remainders i. At common law a contingent remainder in land was destroyed
if, at the expiration of the preceding estate, it was still contingent. To become possessory, a contingent remainder had to vest at or prior to the termination of the prior freehold estate. 1. A life estate could terminate early by death of the life tenant or by forfeiture or merger. ii. This rule had a significant effect on contingent remainders, which followed a life estate b/c it was applied at the natural termination and at the artificial termination of a life estate. iii. Rule was replaced by the rule on perpetuities

c. The Doctrine of Worthier Title i. If an inter vivos conveyance creates any future interest in the heirs of the grantor the future interest is VOID. Instead the grantor retains a reversion. ii. Applies to both real and personal property and to any kind of
future interest

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iii. Applies regardless of the nature of the preceding estate and


regardless of intervening future interests in people who are NOT the grantors heirs. iv. Operation of Worthier Title: 1. Heirs of the grantor: when this term means indefinite succession rather than specific people 2. Trust Revocation: worthier title can become an issue when a person establishes an irrevocable trust for the benefit of himself and his heirs, but has a change of heart and seeks to revoke it. v. Criticisms of Worthier Title: this doctrine is said to breed litigation

d. The Rule Against Perpetuities i. RULE: No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the time of its creation. (JC Gray) 1. Vesting: a. Designed to eliminate uncertainties about
ownership that persists too long b. An interest has to either be certain TO vest or certain NOT TO vest c. If there is any possibility, not matter how unlikely, that vesting could occur after the permitted time period the interest is void. 2. Period of Uncertainty: a. The rule requires you to identify some person, living on the effective date of the grant, who can serve as a validating life. b. If an effective measuring or validating life cannot be found then the interest is void. c. An interest is good if it will certainly vest or certainly fail within: i. 21 years from its creation ii. During the life of some person alive at its creation iii. Upon the death of some person alive at its creation iv. Within 21 years after the death of some person alive at its creation. 3. Future Interests where the rule applies:

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a. All contingent remainders (executory interests,


contingent remainders and vested remainders subject to open) b. DOES NOT apply to interests created in the GRANTOR (reversions, possibility of reverter and rights of entry) 4. Validity tested at creation: in order to prove validity

or invalidity you have to CONJURE UP what might happen in the FUTURE. a. Example: Mary devises Blackacre to my husband
for life, then to my children for their lives, then to my grandchildren then living. At Marthas death she has two children, Thomas and Louise. i. The life estate in Marys husband is presently possessory. The remainder in Marys children is vested at its creation (b/c there is no condition precedent and the class of Marys children closes at her death). ii. The remainder in Marys grandchildren is contingent but the contingency will be eliminated when Marys kids are dead. At that moment the remainder will certainly vest or certainly fail to vest. b. Example: A dies and devises Blackacre to Barrys first child to graduate from college. Barrys only child is a senior in Columbia. This interest is VOID i. Ted could die tomorrow before graduating ii. Barry will have another child Mary who is born in 1998, Barry will die immediately and Mary will only graduate from college 23 years later. iii. The only conceivable validating lives are Ted and Barry and Marys HYPOTHETICAL graduation COULD OCCUR more than 21 years after the expiration of all conceivable measuring or validating lives.

ii. Vesting: 1. An interest is vested for perpetuity interests when it has


either become possessory or has vested in interest (the owners are known existing people and there is no condition precedent).

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2. Vested Remainders subject to open: a gift to a class of


people is not vested in any member of the class until it is vested in EVERY member of the class. a. The class must be closed b. Any conditions precedent must be satisfied by every member in the class. i. Example: In 1997, O devises property to his daughter K for life, then to Karens children for life, then to Karens grandchildren. O is survived by K, her two children V and A and her sole grandchild N. 1. Ks life estate is possessory and not subject to the rule. V and A have a vested remainder subject to partial divestment, as K can have more children. For classification this example has vested but it has not vested for the rule against perpetuities. 2. The class of Ks children will not close until K dies. K is a life in being upon Os death (the effective date of the grant) the remainder is certain to vest in Ks children no later then the end of Ks life. VALID. 3. Ks grandchildren have not vested for the purposes of the rule. The uncertainty about the identity of Ks grandchildren will not be removed until their class is closed. The class will only close when K and all her children are dead. There is no certainty that the class will close at Ks death or within 21 years of it. Ks children cannot serve as validating lives b/c their class is not closed. Every possible member of a class has to be alive at the time the interests become effective or the class cannot be a life in being. iii. Measuring Validating Lives: 1. Example: O devises a property to Tina for life, then to Tinas children who reach the age of 21. The contingent 74

remainder in Tinas adult children is valid b/c the uncertainty as to which if any of Tinas children will reach 21 will be resolved at Tinas death, the uncertainty as to which if any of Tinas children will reach age 21 will be resolved no later then 21 years after Tinas death (Tina might die in childbirth) and Tina is a life in being when O dies and her life will prove the validity of the remainder. 2. Different lives can validate interests, even if its a group of people as long as every possible member of the class is alive at the effective date of the grant. a. Example: Erwin, an orphan, devises property to his nieces who reach age 21. Erwin is survived by 2 sisters and 5 nieces. The springing executory interest in the nieces is good b/c the class of Erwins siblings can serve as validating lives b/c Erwin has not parents so his sibling class is closed. iv. Problems w/ Defeasible Fees: 1. Executory Interest following a fee simple subject to a condition subsequent: a. Example: T conveys property to Edward and his heirs, but if the property is ever fenced to Paul and his heirs. Pauls interest is void, you cannot certainly prove that it will vest or fail within 21 years after a life in being at the time of the grant. The final clause is expunged and Edward gets the property in fee simple absolute. i. T could have avoided this by first conveying a fee simple subject to condition subsequent to Edward, then conveying separately his right of entry to Paul. 2. Executory Interest followed by determinable fee: a. Example: T conveys property to Edward and his heirs so long as the property is never fenced, then to Paul and his heirs. The executory interest in Paul is void b/c it cannot be proven that it will vest or fail to vest within 21 years of after any life in being at the time of the conveyance. Pauls executory interest is erased. b. T could avoid this by first conveying a fee simple determinable to Edward, and then conveying separately his possibility of reverter to Paul. v. Watch out for classical Traps:

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1. The Fertile Octogenarian: a. Jee v. Audley: Edward devises an estate to Mary,


but if and when Mary ceases to have any lineal decedents, then living of John and Elizabeth. At the time of Edwards death Mary is 65 years old, and John and Elizabeth are each 80 years of age. John and Elizabeth have 2 children A and O, who are both in their 50s. i. Mary has a fee simple subject to an executory limitation in favor of the open class of John and Elizabeths children. ii. The executory interest in John and Elizabeths children is VOID. iii. The rule assumes that Mary and Elizabeth can still conceive more children. iv. For example, Mary could have a child Zoe and then die and Elizabeth could have a son Isaac and then each die. Finally, more than 21 years after all these deaths, Zoe could die w/o any lineal decedents. At that point the interest would vest in Isaac and other successors of O and A but it would be more than 21 years after the death of E. 2. The Unborn Widow: a. W/o more, a mere reference to As widow is construed to mean an unknown person only to be ascertained at As death. i. Example: W devises property to my son for life, then to his widow for life, then to his children still living. When W dies, Charles 40 is married to Diana who is 35. 1. Charles has a possessory life estate, the remainder in his widow is contingent b/c we wont know of her identity until Charles dies. VALID. 2. The contingent remainder in Charles children is VOID, b/c the uncertainties as to which if any of Charless children will survive his widow will not be removed until the death of that person. It is possible that the widow is someone not alive

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when William had died. The class of the widow is open at Ws death.

e. Reform Doctrines i. Wait-and-see: evaluates the validity of future interests, as the rule unfolds, not at the time of the creation of the instrument. 1. Wait-and-see for the common law period a. States wait for the period permitted by the
common law rule against perpetuities. b. Still have to determine the appropriate validating life for the interest in question. i. Example: C devises property to Taylor for life, then to Taylors children for their lives, then Taylors grandchildren. At Cs death Taylor has two children A &E and one grandchild S. Under the common law rule, the contingent remainder in Taylors children is good b/c their identities will be known upon Taylors death (the class will close) and Taylor is a life at being. The contingent remainder in Taylors grandchildren is void b/c their identity will not be known until all of Taylors children are dead and the class of the children is open when C dies. Under wait and see we wait for the following lives to end, Taylor, A, E and S if necessary. All of these people were lives in being at the time C died. If Taylor never has any more children then the remainder in the grandkids will be vested. If Taylor has another son, the remainder in the grandchildren will not vest when A and E are dead b/c the class of grandchildren is not yet closed. We will wait for S to die, if he dies before Cedric we will wait 21 years more. If Cedric is still alive at that point, the class in Taylors grandchildren is still open and the contingent remainder in the grandchildren is void. If Cedric predeceases S or dies within 21 years of Ss death then the class of grandchildren close and the remainder is vested.

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2. USRAP (90 years) a. Waiting for a maximum of 90 years after the


creation of the interest to see if it has vested. b. This avoids the necessity of locating the lives that measure the common law of perpetuities period. i. In the above example: We would wait 90 years after the death of C to see if all of Taylors children have died, thus closing the class and causing the remainder to either vest or fail. If at the end of the 90 year period Taylors after born son C was still alive, thus keeping the class of the grandchildren open, USRAP would require the court to reform Cs will so that the interest in Taylors grandchildren would be vested within a 90 year period.

ii. Reformation of the instrument: some modern courts apply the cy pres doctrine. 1. Cy Pres: doctrine of wills and trusts that permits courts to
revise the grantors instrument to get as close to the grantors intentions as possible, when the actual intentions are impossible to accomplish.

f. Perpetual Trusts i. 23 states have made the rule against perpetuities inapplicable to
interests in trusts. ii. A person could create a trust that would pay income from the trust to his child, his childs children and even then to grandchildren.

Problems: Future Interests in Transferees (page 227)


1. O owns a fee simple and makes the following transfers. In which case is there a reversion? (a). O conveys to A for life and then to B and his heirs O has a life estate and B has a fee simple absolute. O gave up all rights. (b). O conveys to A for life and then to B and the heirs of her body A has a life estate, B has a fee tail which could come to an end and create a reversion in O.

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(c). O conveys to A for life, then to B and her heirs, if B attains the age of 21 before A dies. At the time of the conveyance B is 15 years old. If there is a reversion, what happens if B reaches 21 during As life this creates a contingent remainder, which could not be met, in that case (if its not met) O gets a reversion in the property. If B reaches 21 during As lifetime nothing happens because A has a life estate. As life estate will only end when he life ends. (d) O conveys to A for 20 years Yes, automatic reversion in O. 2. O conveys Blackacre to A for life and then to B for life. O dies and leaves a will devising all of Os property to C. Then A dies, then B dies. Who owns Blackacre A has a possessory life estate, B has an indefeasible life estate with a remainder in O and C has Os ownership rights which include the right of reversion. (Page 228 bottom) O conveys Blackacre to A for life, then to B if B gives A proper funeral. Does B have a remainder or an executory interest? If it is an executory interest, whose interest will be divested if B gives A proper funeral this is an executory interest (springing), O gets the property by reversion when A dies, and after A dies if B gives A proper funeral then Os interest in the property is divested by B. Page 230: Remainders 1. O conveys to A for life, and in the event of As death to B and her heirs. Is Bs remainder vested or contingent? If B conveys interests back to O what does O have B has an indefeasibly vested remainder in fee simple absolute and if B conveys to O, O gets the estate in fee simple absolute. 2. O conveys to A for life, and then to B for life, then to C and her heirs. What interests are created? A gets a possessory life estate, B gets an indefeasibly vested remainder life estate and C has an indefeasibly vested remainder in fee simple absolute. What if the remainder had been to C and her heirs if C survives A and B then C would have a contingent remainder in fee simple absolute. 3. O conveys to A and B for their joint lives, and then to the survivor in fee simple. the condition is contingent upon one surviving the other. 4. O conveys to A for life and then to As children who should reach 21. As oldest child B is 17 When A is 17 the remainder is contingent but when B reaches 21 the contingent becomes vested. Page 238 1. O, owner of Blackacre, come to you with a draft instrument of a gift. O tells you he wants to convey Blackacre to his son A for life, and then to As children if any are alive or if none are alive then to Os daughter B. 79

(a). O conveys to A for life, then to As children and their heirs, but if at As death he is not survived by any children, then to B and her heirs. At the time of the conveyance A is alive and has no children, what is the state of title A has a possessory life estate, then there is a contingent remainder in A in fee simple absolute (A has to have children for the property to go to As children and their heirs). (b) Two years after the conveyance A has twins C and D A has a possessory life estate and C and D have a vested remainder subject to open, if C and D do not survive A then this can be subject to complete divestment. Then B has a shifting executory interest (IF THERE IS A VESTING REMAINDER SUBJECT TO COMPLETE DIVESTMENT, THERE HAS TO BE A SHIFTING EXECUTORY INTEREST THAT FOLLOWS) (c). C dies during As lifetime and A is survived by B and D D gets the property in fee simple absolute. (d) O conveys to A for life, then to such of As children that survive him, but If none of As children survive him to B and her heirs. At the time A is alive and has two children C and D A has a possessory life estate, C and D have a contingent remainder in fee simple absolute (the condition is written so that they not only have to born, they also have to survive A for their interest to vest at all) and B has a contingent remainder in fee simple absolute. (e) O conveys to A for life and then to B and her heirs, but if A is survived at his death by any children, then to such surviving children and their heirs. At the time of the conveyance, A is alive and has two children, C and D A has a possessory life estate, B has a vested remainder subject to complete divestment, C and D have a shifting executory interest in fee simple absolute, O has no reversion. 2. T devises 10,000 to his cousin Don Little, if and when he survives his wife. What does Don Little have Don Little gets the real property where there is a period of time of time that the grantor has the property and divests the grantor which gives Don a springing executory interest. 3. To A for life, upon As death if B marries As widow then to B and his heirs There is a gap between As death and B marrying As widow, so in that gap the grantor gets a reversion in that property in fee simple with a springing executory obligation.

Problems Rule against Perpetuities (page 248)


1. O conveys to A for life, then B if B attains the age of 30. B is now 2 years old.

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B has a contingent remainder; B is alive at the time of the conveyance and can act as his own validating life. We will know for sure when A dies if B has reached the age of 30. 2. O conveys to A for life, then to As children for their lives, then to B if B is still alive and if B is not then alive, to Bs heirs. Assume A has no children at the time of the conveyance. A has a possessory life estate, the contingent remainder in As children is valid b/c A is the validating life and we will know when A dies who her children are. The contingent remainder in B is valid b/c we will know while he is still alive if he has outlived A. The last contingent remainder is in Bs heirs, B is alive at the time of the conveyance and is the validating life, so we will know at the time of the conveyance if the contingency in Bs heirs will vest absolutely or fail when B dies. 3. O, a teacher of property law, declares that she holds in trust 1,000 for all members of her present property class who are admitted to the bar Valid, at the death of the last person of this group, we will know who passed the bar and the last person to dies is the validating life and we will know. (a) Suppose O said for the first child of A who is admitted to the bar A is still alive and could have an after born child and die in childbirth (so she can not be the validating life) after O dies who does not get admitted into the bar 21 years after Os death. 4. O conveys to A for life, then to As children who reach 25. A has a child B who is 26 at the time of the conveyance, is the remainder valid? The remainder is vested subject to open, thus subject to the rule and b/c it is subject to open, the conveyance is void b/c there is the possibility of an after born child who will not be 25, 21 years after O has died. 5. O conveys to A for life, then to As widow, if any for life, then to As issue then living. The gift to As issue is not valid, If it was As children, A would be the validating life but b/c its to As issue there is no validating life (A is dead). If it said issue now living then they could be their own validating lives. However, As widow is an open class b/c As widow may not have been born when O dies.

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UNIT 6: Co-Ownership & Marital Interests: (PGS: 275-296, 303-308, 310-359)


1. Forms of Concurrent Ownership a. Tenancy in Common i. Own separate but undivided interests in the same interest in ii. iii. iv. v.
property Interest may be alienated, devised, inherited separately from the other tenancy in common interests No survivorship rights By state or judicial decision, a conveyance of real property to two or more people who are not married to each other is presumed to convey a tenancy in common Each tenant is entitled to possess the entire property 1. Example: Tim conveys property to E and G as tenants in common. If E conveys his interest in the property to N, then G and N are tenants in common. If G dies and devises his interest to M, then M and N are tenants in common. Tenants in common may own unequal shares and different estates 1. Example: Able, Baker and Cassie own Blackacre, in equal shares as tenants in common. Able conveys his interest to Baker. Baker and Cassie are still tenants in common, but Baker has a 2/3 share and Cassie has a 1/3 share.

vi.

b. Joint Tenancy i. Own an undivided share in the same interest in either real or ii. iii. iv.
personal property, BUT the surviving tenant owns the ENTIRE estate. Right of Survivorship is present here (upon the death of one tenant, the share held by the remaining joint tenants increases proportionately) The joint tenancy expires upon the death of one of the joint tenants (when a joint tenant dies the ENTIRE interest dies with him). A joint tenancy may only be created by an inter vivos conveyance or will Each joint tenant OWNS the ENTIRE INTEREST

v. vi. Four Unities of Joint Tenancy: A joint tenancy at common law cannot be created if the four unities are not satisfied
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1. Time a. The joint tenants must receive their interests at


the same moment in time.

2. Title a. All joint tenants must receive their interests


under the same instrument: a deed, a will, or a decree quieting title by joint adverse possession. i. Common law does not recognize transfers in interests from oneself to oneself. 3. Interest a. Each joint tenant must have an identical interest in the property i. Each must have the same share of the undivided whole AND ii. Each tenant must have the same durational estate. 4. Possession a. At the creation of the joint tenancy, each tenant must have the right to possession of the whole property i. After creation they may agree amongst each other to divide possession

vii. Creation of Joint Tenancy 1. Common law presumed that any conveyance or devise
to two or more persons (other than husband and wife) was a joint tenancy. 2. TODAY, American jurisdictions have reversed that presumption, and a tenancy in common is presumed unless there is CLEAR evidence of a joint tenancy. 3. To form a joint tenancy there needs to be a CLEARLY EXPRESSED INTENTION by the grantor 4. Common phrases: to A and B jointly, to A and B joined together, to A and B as joint tenants and then to the survivor and her heirs.

viii. Severance of Joint Tenancy: A joint tenant may destroy the joint tenancy at anytime by conveyance and a tenancy in common results. 1. Conveyance

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a. If a joint tenant conveys his interest to a third


party or to another joint tenancy, it becomes severed as to that interest i. Example: If Tom, Dick and Harry are joint tenants and Tom conveys his interest to Bill the joint tenancy is severed. Bill then owns a 1/3 undivided interest as a tenant in common with Dick and Harry. Dick and Harry continue to be joint tenants with respect to their interests. 1. If Dick dies then Bill and Harry will become tenants in common and Harry will hold 2/3 and Bill will hold 1/3. b. Riddle v. Harmon: Common law held a conveyance of an interest held by a person to himself as an empty act devoid of any legal effect. In order to convert a joint tenancy to a tenancy in common the joint tenant would have to use a strawman to whom a conveyance would be made and who then could reconvey the property back. Here the court held that Frances Riddle could validly sever the joint tenancy with her husband Jack, by a conveyance from herself as a joint tenant to herself as a tenant in common. The deed Frances wrote made her intent to sever the joint tenancy very clear. The court held that the strawman concept was legally archaic and that they have already permitted A to make a conveyance to A and B as joint tenants. 2. Mortgage a. Title Theory: Holds that a mortgage effects a transfer of legal title, where a mortgager could reclaim title by paying off the loan secured by the mortgage. i. A mortgage by one joint tenant could sever the joint tenancy b/c the unity of interest would be destroyed. ii. Many jurisdictions today have modified this to treat the title held by the mortgage as only for the purposes of 84

securing a loan to resolve the issue of severance. b. Lien Theory: Holds that a mortgagee (lender) only has a lien against the property. i. Under this theory a mortgage by one joint tenant makes NO alteration to title and does NOT sever the tenancy.

ii. If the mortgage is unpaid majority of the courts allow the remaining joint tenant to keep their interest free and clear. iii. Harms v. Sprague: John and William
Harms owned a farm as joint tenants. John mortgaged his interest to Carl and Mary Simmons in order to secure a loan made by them to Charless friend Sprague. Later John died while the loan was still unpaid. The court held that there was no severance and that William owned the farm free and clear of the mortgage to Carl and Mary Simmons. The mortgage burdened only Johns interest and it died with him. This left William with an unencumbered title to the entire farm.

3. Lease a. At common law if one joint tenant leased his


interest in the joint tenancy it was severed b/c the unity of interest was destroyed BUT the lease was VALID. b. Most jurisdictions today do NOT regard a joint tenancy as severed by one joint tenants lease of the interest. c. Usually the lease does not survive the death of the leasing joint tenant. 4. Agreement a. A joint tenancy can be severed by agreement as long as the intention is clearly manifested. 5. Operation of Law a. If one joint tenant kills another joint tenant then it becomes a tenancy in common

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ix. Joint Tenancy Bank Accounts 1. A depositor may make a present gift of an undivided
interest in the account 2. It could be created to be a payable on death account 3. Or it could be made to be used so that the other person could manage the money of the first person (like a power of attorney).

c. Tenancy by the Entirety i. General 1. A form of joint ownership available only to husband
and wife 2. Has a right of survivorship 3. Need same for unities to create this PLUS marriage between the tenants a. One Person i. Common law presumed that by marriage the couple merged into one legal person. ii. The woman lost her legal identity and went from a feme sole to a feme covert iii. From the laws perspective marriage produced one person husband b. No severance i. May not be severed ii. Neither tenant can destroy this tenancy on their own iii. No spouse acting alone can convey the entire estate iv. The right of survivorship is indestructible so long as the marriage stays in tact

ii. Creation 1. At common law a conveyance to a husband and wife


created a tenancy by the entirety 2. TODAY a husband and wife may own property however they want

iii. Operation 1. Common Law a. Made the husband master of the tenancy by
the entirety

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b. The husband had the right to exclusive


possession as well as survivorship rights c. Both of those rights could be alienated by the husband inter vivos and could be reached by the husbands creditors d. The wife only had a right of survivorship, which could not be alienated by her w/o her husbands consent and could not be seized by her husbands creditors. i. The husbands creditors could seize the estate during the husbands life and if the wife outlived him she could then own it solely. e. This common law structure is NOT used anymore in the US. 2. Modern Law a. Treats spouses equally b. This change was made as a result of the Married Womans Act (this restored a married woman her own legal identity) c. Either a woman acquired the legal right (equal right) to alienate possession and survivorship rights OR neither spouse was permitted to alienate possession and survivorship rights d. Equal Right to Alienate: half a dozen states provide that either spouse may alienate possession or survivorship rights in a tenancy by the entirety. i. The wifes creditors could in this case seize her possessory interest in the property. e. Neither Spouse may Alienate: majority of states provide that NEITHER spouse may alienate their possession or survivorship rights. i. Prevents the creditors of either spouse from seizure of their interest ii. Sawada v. Endo: D inflicted personal injuries on P b/c he was negligently driving a car that collided with them. D owned a home with his wife as tenants in the entirety. After the accident but before P brought suit, D conveyed their

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home to their sons. The conveyance would be considered to be fraud on the creditors of D if they are entitled to seize the property to satisfy claims. The court ruled that property held in tenancy by the entirety might not be subjected to creditors against only one spouse. Creditors should require that both spouses pledge the property as security for extensions of credit. Tort creditors of a single spouse should not be allowed to seize a portion of a family residence w/ dangerous consequences to the innocent spouse. f. Some states hold that creditors could seize the survivorship rights, not possession. i. Example: A creditor obtains a judgment lien on the husband but the only way they could get it is if the husband dies before the wife.

iv. Termination: could be terminated by 1. Death of the spouse 2. Divorce OR 3. Joint action of both spouses to convey the property
held in tenants by the entirety

v. Personal Property 1. Common law did not recognize tenancy by the entirety in personal property b/c the husband became the sole owner 2. TODAY, most states permit tenancy by the entirety for personal property 2. Rights and Obligations of Concurrent Owners a. Partition: can be demanded at any time and for any reason and for no reason at all. W/o agreement this can be accomplished by a suit in equity. i. Partition in Kind 1. Physical division of the property
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2. This is the preferred method 3. Delfino v. Vealencis: D owned a tract as a tenant in


common with P. Helen lived on a portion of the property and she operated a business from there. P wished to develop the property into single-family residences and so demanded a partition by sale even though the property was physically capable of being divided and made as a partition in kind. Although there was evidence that the value of the property would be maximized by sale and development, the court held that it was not in the best interests of all the parties to sell the entire property. The value of Ds continued possession (secured by a physical partition) was sufficient to convince the court that a condition in kind should be ordered.

ii. Partition by Sale 1. This will be ordered if (1) physical partition is


impossible or extremely difficult OR (2) physical partition is not in the best interest of all parties 2. This kind of partition happens a lot in the courts b/c it is very hard to physically divide most real property.

b. Rents, Profits & Possession i. Each co-tenant has the right to possess the entire property
and no co-owner can exclude another ii. In general co-tenants have no fiduciary duties to each other iii. Swartzbaugh v. Sampson: John and Lola owned in joint tenancy a 60-acre walnut orchard. John leased 4 acres to D, who is a boxing promoter, who constructed a boxing pavilion on the site. Lola did not join the lease and she objected to the boxing pavilion. Lola sought to cancel the lease that was made by John. The court denied her claim reasoning that a lease by a single joint tenant to a third party is a valid contract as the interest of the lessor in the joint tenancy is concerned. 1. Lola has some possibilities after this ruling in trying to eliminate D from the space a. She could appear at the pavilion and demand that D let her into possession. He would probably invite her to come in and watch the fights and if he did not then she would have simply triggered ouster, thus causing him to be

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liable to her for half the fair rental value of the premise. b. She could acquiesce in the lease and demand to keep half the rent received by John from Sam c. Lola could partition the leasehold, which would probably result in a partition by sale (b/c it would be impossible to physically divide the pavilion). The sale from the proceeds would first go to reimburse D for the pavilion that he built and the proceeds would be divided by Sam and Lola, leaving the buyer with leasehold and the obligation to pay rent to John. d. Lola could hope for Johns death, which would terminate Sams leasehold b/c Sam, had only leased Johns interest, which would expire on Johns death.

3. Marital Interests a. Common Law System i. Pure common law system of marital property no longer
exists in any relevant jurisdiction ii. A single woman had the power to use, dispose and possess her own property, a married woman did not iii. With the marriage vow the common law allowed the husband to possess, use or convey all his wifes property except her cloths and jewelry for the duration of the marriage (her earnings were his as well). iv. Wifes Rights 1. Support: a wife had the right of support from her husband and in the event of divorce a husband had to pay alimony to the wife 2. Dower: a. On the death of her husband a woman had the right of dower b. This was the right to a life estate in 1/3 of each and every possessory freehold estate the husband enjoyed at any point during the marriage, which was capable of inheritance by children born of the marriage. c. Attached to every freehold estate of the husband but NOT life estates, leaseholds, 90

personal property, equitable interests, future interests or any possessory freehold estate held by tenancy by the entirety, joint tenancy. d. Once dower attached it could only be removed by divorce or wifes consent e. The right was either physically divisible or the wife would get 1/3 of the rents or profits f. Dower has mostly been abolished by statute 3. Curtsey: a. Common law gave a husband who survived his wife all possessory interests in land of the wife, including equitable possessory interests b. Curtsey only attached if issue were born to the marriage (even if they dies early)

b. Modern Common Law System i. Rights on Divorce 1. Almost every jurisdiction has adopted some form of an
equitable distribution statute which is designed to produce usually equal division of marital property subject to statute a. Professional Skills/Credentials i. Some states hold that professional skills and degrees are not property but simply personal accomplishments that may or may no produce property and thus are not subject to equitable distribution. 1. In RE Marriage Graham: When the couple married she continued to work so he could pursue his education and he earned a BS and an MBA shortly after he embarked on his business career the marriage ended. A trial court awarded her 33,000 representing 40% of his future earnings. The court reversed stating that his MBA was not property b/c it could not be transferred, or inherited and it was simply an intellectual achievement.

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ii. Some states (NEW YORK) treat


professional degrees and enhanced professional skills as property subject to equitable distribution. 1. Elkus v. Elkus: After a 17 year marriage the wife who was a celebrated opera diva divorced her husband. At the beginning of the marriage the husband was her vocal coach and she was an unknown. At the end of the marriage she was super start earning 600,00 annually. The court ruled that the husbands contributions in the form of domestic duties and voice instructions entitled him to share in the earning power. 2. OBrian v. OBrian: held that increased earning power as a result of a medical degree acquired during the marriage were subject to equitable distribution. This had to be made in the lump sum now or a portion of the future earnings later.

ii. Rights on Death 1. Most states give a surviving spouse the right to receive
in fee simple a fraction of all the property owned by the spouse at death. 2. Called an elective share b/c a surviving spouse may elect this or take under the deceaseds will but NOT both. 3. Elective share applies to all property of the deceased spouse that is owned at death

iii. Spousal Agreements 1. Antennuptial:

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a. Agreements made prior to marriage which


purport to govern property division upon divorce b. Not enforceable at common law c. Jurisdictions are split if this is valid

2. Spousal: a. In a community property state spouses may


make separate property into community property and vice versa

c. Community Property i. Origins 1. Uniform Marital Property Act: proposed in 1983 and is
based on community law principles. Wisconsin is the only state that has adopted this and it defines marital property to include ALL property acquired during the marriage, except through gift, devise, or inheritance.

ii. Definitions 1. Community Property: earnings during the marriage of


either spouse as well as all property acquired from such earnings. Excludes: property acquired b/4 marriage, or property acquired by gift, devise or inheritance this is considered separate property. 2. If the original source can be traced to community property, it is treated as community property a. Example (TRACING RULE): Irene, married Al and they live in a community property state. She deposits a paycheck in her own personal bank account. Then she uses the money to buy a painting, which she trades for a vacation home (taking title to it in her own name alone). Al has an equal interest in all of this b/c title of this can be traced to Irenes paycheck which is community property. 3. Tracing Rule applies commingled property (if it can be traced as individual property it remains as such) a. If it is impossible to trace then it becomes presumed to be community property. b. When a portion of an asset is brought into marriage and the rest is purchased during the marriage there are 3 approaches

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i. Inception of Right: (TX) holds that the character of the property is determined at the inception of the legal right to the property. (Ex: when a wife signs a contract of purchase) ii. Time of Vesting: the character of the property is determined when title passes iii. Pro-Rata Share: holds that the % of the purchase price paid prior to marriage establishes the portion that is separate, the rest is community. iv. Example: Al enters into an installment
sale contract to purchase a building lot for $45,000. He pays 15,000 and then marries Jane. The remaining amount is paid with combined earnings at which point they divorce. The lot is now worth 120,000. Who owns the lot? 1. Inception of right state would hold that Al owns the whole property b/c he acquired a contract right before marriage. The community is entitled to 30,000 plus interest (of which half Al gets). W/O interest Jane would only get 15,000 Al would get the rest. 2. In a time of vesting state the lot is community property b/c title did not pass until all the payments were paid off. Al and Jane get 60,000 each for the lot. 3. In a pro rata state, 1/3 of the lots is Als separate property and 2/3 of the lot is community property. Al gets 80K (40,000 separate and 40,000 marital) and Jane gets 40k. 94

4. The general rule is that income earned from separate


property retains its character as separate property 5. Vested pension rights are community property b/c they are the fruits of earnings. 6. Personal injury damages, which are for pain and suffering, are separate property but compensation for lost earnings is community property. 7. Increased Value of Property a. Example 1: Hugo owned an art gallery and then married Alice. Hugos investment at the time of the marriage was 100K. During the marriage b/c of Hugo the gallery prospered and when they divorced it was worth 500K. The 400K are due largely to Hugo. First Hugo would get a reasonable return on his investment (assume 6% which is 6,000 per each year of marriage making it 60K). The remaining 340K are community property (each get half). b. Example 2: Suppose instead Hugo had a stock portfolio with the 100K and hired a manager to run it for which he paid for out of his separate money. 10 years later its worth 500K. Now Hugo gets only 10K so the property for the community is 390K.

iii. Management of Community Property 1. Husband and wife have equal management powers 2. Either spouse acting alone can sell, lease or otherwise
deal in the community property. 3. Neither spouse acting alone can convey their interest in the community to a stranger 4. Both spouses have to join in a conveyance of real property 5. Each spouse has a fiduciary duty to the other spouse to manage the community affairs

iv. Rights Upon Divorce 1. At divorce each spouse is entitled to of the


community property and all of their own separate property

v. Rights Upon Death 1. Upon death of one spouse, the interest of the decedent spouse in the community

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property is disposed of according to the decedent spouses will. In the absence of a will it is done by intestate succession. a. Example: Donald is married to Marla and
resides in a community property state. When he dies he devises all his property to Babette. Babette takes a interest, as a tenant in common, with Marla in all the former community property. If he died intestate and was survived by his wife and his daughter, his daughter would take the interest in the community property and be a tenant in common with her mother.

vi. Creditors Rights 1. In general debts, which are incurred during the marriage, are considered to be community obligations and the community assets are liable for their satisfaction. d. Quasi-Marital: Unmarried Cohabitants i. Common Law Marriage 1. Recognized a de facto marriage between a man and a woman if they were co inhabitants, agreed between them to be husband and wife and represented this to the public. 2. This is still recognized in 11 states 3. This will enable them to have their property divided under marital property principles.

ii. Contracts 1. Unmarried co-inhabitants may create express


contracts to govern their property upon death or termination of the relationship in a fashion similar to that of married couples 2. This extends to contracts implied from the parties intentions 3. Not all courts accept this

iii. Same Sex Couples

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1. Goodridge v. Dept. of Public Health: Even where


enforceable, a contract cannot create the status benefits of marriage, such as the right to spousal support under social security, the right to file a joint tax return, to take a marital deduction for state and federal purposes, or the right to inherit from ones spouse. Only Massachusetts permits same sex couples to marry. In this case they allowed gay marriage legally. They relied on the state constitution and equality provisions to conclude that same-sex couples can marry. They offered three rationales: marriage is about commitment not begetting children, promoting the welfare of children and there should not be a bad to conserve scare resources that extended to same sex marriages. 2. Several states provide substitutes for marriage such as civil unions which confer the same benefits, responsibilities and protections as marriage (VT)

Problems: Page 278


1. O conveys Blackacre to A, B and C as joint tenants. Subsequently, A conveys his interest to D. Then B dies intestate leaving H as his heir. (a) When A conveys his interest to D, this severs the joint tenancy. B and C are still joint tenants to each other but they are tenants in common with D. When B dies intestate his share goes to C b/c there is not right of survivorship in a joint tenancy. (B) What if B dies leaving a will devising his interest?

2. T devises Blackacre to A and B as joint tenants for their joint lives, remainder to the survivor. (a) What interests are created by the devise? This creates a life estate in A and B who are tenants in common for their joint lives, there is no right of survivorship in this case b/c they can not determine what will happen to the property unless they outlive each other.

Problems: Page 278

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2. A and B own Blackacre in joint tenancy. A conveys a 10 year term of years in Blackacre to C. After 5 years A dies devising all his property to D. (a). What are Bs rights? No impact, conveying a lease does not change ownership in the property. The lease with C ends with As death. D has nothing and B has the estate in entirety. The tenancy governs who owns the property. 3. H and W are owners of Blackacre, in joint tenancy, are getting a divorce. They sign a divorce agreement saying that Blackacre will be sold and the proceeds will be divided equally. Before this happens W dies. (a) Does H have survivorship rights? A divorce does not destroy a joint tenancy. But the written agreement makes this a tenancy in common. W dies before the property is sold and thus the document did not severe the joint tenancy.

UNIT 7: Nuisance: (PGS: 639-666)


1. Nuisance Substantive Law a. General Principle i. One must use ones property so as not to injure anothers
property 1. This is the root of nuisance law 2. This maxim does not always help b/c one persons benefit could be another persons injury. 3. A person may not use their land in an unreasonable manner that substantially lessons another peoples use and enjoyment of his land.

b. Private Nuisances i. A private nuisance occurs when there is substantial interference with private rights to use and enjoy land produced either by intentional and unreasonable conduct OR unintentional conduct that is either negligent, reckless, or so inherently dangerous that strict liability is imposed. 1. Morgan v. High Penn Oil Co.: High Penn operated a
refinery that emitted noxious odors several times a week, polluting the air for about a 2-mile radius from the refinery. Along with many other people who owned the land, Morgan sued to enjoin the refinerys operations 98

alleging that the noxious odors made him sick and deprived him from enjoyment of his property. The court held that a use is a nuisance if it is either intentional or unreasonable or unintentionally produced by negligence, recklessness, or extremely dangerous activity. High Penn intended to operate the refinery and knew or should have known that the operation would produce noxious odors. The court said the use was unreasonable. ii. Intentional Conduct: this is the most common form of nuisance, intentional conduct is an action that is known by the actor to interfere with anothers use of land, but which is continued anyways. Was the action unreasonable? 1. Balancing Harm and Social Utility a. If the gravity of the harm inflicted by the conduct outweighs its social utility (unconstrained by nuisance law) the conduct is unreasonable. b. Courts should consider the extent of the harm, its character, the social value of the use, the suitability of the use to the location, and the burden of avoiding the harm c. A nuisance may be the right thing, in the wrong place d. This is a test to access the worth of competing uses and to decide which user should shoulder the costs inherent in two incompatible uses. 2. Balancing uncompensated harm and ruinous liability a. An intentional activity is unreasonable if it causes serious harm and the actor could compensate for that and similar harm w/o going out of business. 3. Substantial Harm (Liability Threshold) a. Some courts look to see if substantial harm was inflicted b. A nuisance exists if the injury it inflicts is severe enough to be above some maximum level of interference that a person can be expected to endure w/o redress. iii. Unintentional Conduct 1. When an actor uses his land in a way that unintentionally injures anothers use or enjoyment of land, the action is a nuisance if the conduct is either below the standard of care commonly required or the risk of harm is so great the conduct cannot be tolerated. 99

iv. Substantial Interference 1. The alleged nuisance whether intentional or not must be
a substantial impediment to the use and enjoyment of land. a. Example: An operator of a drive in Movie Theater sued an adjacent amusement park saying that their bright lights constituted a nuisance. Oregon Supreme Ct said that the movie operators use was abnormally sensitive. The court accepted bright lights at night in an urban area. b. Example: A halfway house for criminals was established in a residential area producing fear of criminal activity and declining property values. Courts are divided, Arkansas ruled this a nuisance, and while Connecticut said that declining property values do not determine what is a nuisance.

c. Public Nuisances i. This affects a right that is held in common by everyone not just landowners. 1. Example: A factory, which is discharging pollutants into a
publically owned watershed, thereby contaminating municipal water supply.

2. A public nuisance is rate; usually a public nuisance is also private. ii. Enforcement: 1. Usually suits for these are brought by public officials, but a
private citizen can bring a suit to abate a nuisance if he has been specially injured by the nuisance

d. Relationship to trespass i. Nuisance and trespass are closely related ii. Trespass involves a physical invasion whereas nuisance interferes
with a right to use and enjoy land.

2. Remedies a. Intro i. A large problem with property law is that the property uses are
often incompatible. (Each use intervenes with the other one). ii. Each use produces externalities, costs that are imposed on the person producing them. iii. Economic theorists argue that decisions are more efficient if all the costs are internalized (borne by the decision maker).

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iv. Ronald Coase (Coase Theorem): in a perfect world free from


transaction costs it does not matter if two parties are entitled to continue their use, b/c the use right will end up in the hands of the person whose use is the more valuable one. 1. Example: Suppose the damage to Eve from ceasing to use Blackacre, as a dairy farm is 100,000 and the damage to Adam from ceasing to use Whiteacre, as a tanning salon is 40,000. If the law gives Eve the use right she will continue her Dairy Farm b/c Adam will pay her no more than 39,999 to stop and that sum is not enough to compensate her for the costs of ceasing. But, if the use right is given to Adam, he will sell that right to Eve for some price grater than 40,000 and less than 100,000 b/c both Adam and Eve will be better off by such a bargain. This assumes the absence of transactions costs and the right of use would be given to Adam if he suffered a greater damage.

b. Transaction Costs i. Bilateral Monopoly 1. When there are only two person involved in the transfer
there is an inherent bilateral monopoly problem. There is a dueling monopoly only one buyer and one seller. 2. The two people battling will negotiate and make it harder to make a deal thus diminishing value even if it is reached. ii. Free Rides 1. When there are numerous parties to the negotiation, one person will try to get a free ride at the expense of the other parties who are involved. iii. Holdouts 1. Some people might not want to comply

c. Who gets initial Entitlement i. The initial entitlement of land should belong to the party whose
use is more valuable ii. Some would give the initial entitlement to the

d. Economic/Legal Theory & Remedies i. Legal theory holds that any property right can be protected by a
legal rule or a property rule ii. A property interest that is protected by a property rule cannot be taken away from the owner involuntarily

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iii. A property interest that is protected by a liability rule can be


taken away involuntarily BUT only upon payment of an award of damages.

iv. No Nuisance: Continue Activity 1. B/c it is not a nuisance, the challenged user cannot be
forced to stop use w/o consent (implicitly protected by the property rule). 2. Example: If Eves dairy farm is found not to be a nuisance then she cannot be made to stop unless she agrees to. If the cost to Adam of ceasing his use is 200K and the cessation for Eve to stop is 100K the use right will shift to Adam if he pays Eve between 100K and 200K to stop (assuming minimal transaction costs).

v. Nuisance: Enjoin and Abate Activity 1. If it is found to be a nuisance and it is protected by a


property rule the challenged activity will be enjoined. The challenger can continue the use. a. Estancias Dallas Corp. v. Shultz: Estancias constructed an apt building complex in Dallas adjacent to Shultzs residence. To save 40K he located its central air unit 5 feet from Shultzs lot line, 55 feet from his house and 70 feet from his bedroom. The unit was very noisy and prevented Shultz from entertaining outdoors and even interfered with indoor conversation and sleep. To change the location of the unit would cost 150K to 200K and the apartments could not be rented w/o it due to the heat in Dallas. The cost of Shultzs property was 25K. The court held that the unit was a nuisance and awarded an injunction from its further operation. The TX court was applying the threshold of harm. b. Example: Eves dairy farm is found to be a nuisance and she is enjoined from continuing. Adams tanning salon use is protected by a property rule.

vi. Nuisance: Pay Damages and Continue Activity 1. It is not possible to ignore the real world presence of
transaction costs, thus in situations where there are a large number of landowners affected by a more valuable use (on the balance of a nuisance) the presence of holdout transaction costs may prompt a court to protect the right

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of the numerous landowners by a liability rule instead of a property rule. 2. The damages that are awarded are awarded are permanent damages- an amount sufficient to compensate now for all the past and future injury that may be inflicted by continuation of the nuisance. 3. Boomer v. Atlantic Cement Co: Ds factory produced smoke, noise and a vibration that substantially interfered with the use and enjoyment of land owned by a large number of neighborhoods. The court ruled that the factory was a nuisance and awarded damages instead of an injunction. The case remanded for an amount of permanent damages to be accessed. The court reasoned that there was a technological impossibility to abate and the factory produced a more valuable use (positive externalities in the form of jobs, and other economic benefits for the region). The court said that the harm could be compensated for instead of stopped altogether.

vii. Nuisance or not: Enjoin the Activity but Award Damages to the enjoined actor 1. A court may enjoin an activity but require that the
benefitted landowners compensate the enjoined actor for the lost use. 2. This may occur when (1) P asserts that his activity is more valuable (2) it is not clear that the activity is a nuisance or that equity favors an injunction or (3) it is unlikely that P is able or willing to acquire the use right in the market. 3. Spur Industries v. Del Webb Development Co.: Spur operated a cattle feed in a rural part of AZ and the lot generated a lot of manure and noxious odors but it was okay b/c there was no neighbors. Later Del Webb bought land next to it to create a retirement community and made the two uses incompatible. The court enjoined Spur from operating the feedlot but required Del to pay a reasonable cost of shutting down or moving. Equity required the compensation because Webb came into the nuisance. Webb had to bear the costs of coming to a nuisance.

3. Support Rights: Every landowner has the rights to continued physical support of his land by abutting land. The natural topography of land may only be altered so far as a neighbors land is left with sufficient support.
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a. Lateral Support: i. Land Itself: 1. A landowner who alters his land by removing the lateral
support from his neighbors property is strictly liable for resulting damage. 2. No matter how careful the alteration, if lateral support is removed, strict liability follows. 3. Same with artificial support

ii. Structures: 1. Most states hold that a landowner is liable for damage to
structures from withdrawal of lateral support if either of two conditions is met: a. The land owner was negligent and the collapse would not have occurred but for the added weight of the structures b. The collapse would have occurred whether or not the structures were there. 2. Minority Rule: Some jurisdictions hold that a landowner is strictly liable for removal of lateral support to adjacent buildings.

b. Subjacent Support: this is never an issue unless ownership has been split into 2 parts
i. Ownership of the surface ii. Ownership of the right to mine under the surface iii. When this happens the owner of the underground mineral rights is strictly liable fro any damage caused to land or structures on the surface resulting from withdrawal of support. Example: Adam has a tanning salon and Eve has a dairy farm. Eve is the polluter (the creator of bad odors) and Adam is the receptor of those odors. The right to use may be allocated to either of the parties and once allocated may be protected by a property rule or a liability rule. A court must allocate the right and decide whether to protect that right by a property rule (injunction) or a liability rule (damages).
Use Right in Receptor: Adam Use Right in Receptor: Adam

Right protected by the property rule Right protected by the liability rule

Enjoin Eve: Stop the nuisance Damages to Adam: Eves use continues

No nuisance: Eves use continues Enjoin Eve and damages to Eve: Adams use continues

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UNIT 8: Zoning (PGS: 828-857, 867-878, 901-939)


1. Zoning Basics a. Intro i. Zoning is the use of governmental power to regulate land use ii. Zoning laws divide a particular jurisdiction into specific separate
geographic areas and impose limits on the permissible uses of land within each area 1. Prevents incompatible use conflicts (thus reducing the need for nuisance law) 2. Increase property values by minimizing use conflicts (thus increasing the property tax base) 3. Channels developments into patterns that may serve larger social goals (reduce urban sprawl and air pollution)

b. General Constitutional Validity i. In general zoning laws are constitutionally valid, even when they
restrict the land uses to which a landowner may devote his property (possible to their economic detriment). ii. Village of Euclid v. Amber Realty CO: Euclid, OH adopted a comprehensive zoning ordinance that restricted the permissible use of property, limited the height of structures, and imposed minimum lot size requirements for certain types of structures. The Supreme Court upheld the validity of the law against a due process and equal protection challenge. The laws objective minimizing land use conflicts to prevent nuisances from ever occurring was a legitimate exercise of the states inherent police powers b/c its contents were neither arbitrary nor were they unreasonable.

c. Statutory Schemes i. Cumulative Zoning: 1. Identifies land use from higher to lower 2. The least dense single-family residential use is the highest
use; proceeding downward to a more dense residential use (apartments and other multiple family dwellings), light commercial, heavy commercial and then industrial.

ii. Mutually Exclusive Zoning: 1. This type of zoning permits some uses and excludes all
others within the zoned area.

2. Authorization for Zoning

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a. Enabling Legislation: most zoning laws are adopted at local levels,


although some states have enacted laws regulating land use state wide (controlled by the state constitution and state statutes). i. Enabling Act: A local zoning law is void unless it is in conformity with the state enabling act (the law that authorizes localities to engage in zoning) 1. Defective Enabling Act: States are permitted to delegate to administrative agencies, cities and other non-legislative bodies the power to make rules that look exactly like laws, as long as the law making power is exercised with conformity with clear standards in the authorizing legislation. 2. Ultra Vires local action:

b. Comprehensive Plan 3. Statutory Discretion and Restraint a. Introduction i. Communities are dynamic and appropriate land usage should
change as underlying economic and social conditions dictate. ii. Zoning responds to this by 1. Tolerating the continued existence of land uses prior to adoption of the zoning law 2. Providing for amendment of the zoning law 3. Conferring discretion on administrators in the application of the zoning statute

b. Non Conforming Uses i. Definition: when zoning is introduced some existing land uses
will not be in conformity with the uses permitted under new zoning laws. These are permitted to remain b/c their immediate abatement would constitute either a taking of property w/o just compensation OR an unreasonable exercise of zoning power.

ii. Forced Phase-Out: phase out the nonconforming use, this is called an amortization period. 1. Majority Rule: Valid if reasonable period a. Forced phase outs are valid as long as the
amortization period is reasonable to the affected nonconforming user. b. Factors to determine reasonableness i. Nature of the use ii. Character of the structure iii. The location

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iv. What portion of the users total business is


affected v. Salvage Value vi. Extent of the depreciation of the use vii. Any monopoly or other advantage conferred on the user by reason of the foreclosure of similar and competing uses 2. Minority Rule: Invalid per se a. A minority of states hold that forced phase-outs are invalid b. PA Northwestern Distributors v. Zoning Hearing Board: Moon Township adopted a zoning ordinance extensively regulating the location of stores vending pornography, the effect of which was to make the store operated by P illegal. The court here ruled that the amortization and discontinuance of a lawful pre-existing nonconforming use is per se is violative of the PN constitution. A concurring judge thought that the ordinance was void b/c the amortization period was unreasonable; it did not provide adequate time for elimination of the non-conforming use.

iii. No Expansion 1. Typically, zoning ordinances stipulate that the


nonconforming use may not be expanded beyond the precise boundaries of the existing use 2. A successful nonconforming business will have to move in order to expand, and a new occupant will be required to conform to the zoning laws

c. Administrative Discretion i. Variances 1. Almost all zoning laws establish a zoning appeals board or
board of adjustment who are authorized to grant variances from the zoning law in the interest of alleviating personal difficulties or unnecessary hardships 2. Area Variances: these are awarded to alleviate siting such as setback requirements or minimum yard area 3. Use Variances: these permit an otherwise prohibited use such as a multiple family residence in a single family residence area 4. Variances should be granted when compliance with the law would impose such extreme burdens on the owner 107

that application of the law might be either unconstitutional or invalid.

5. General standard for granting variances: a. A zoning variance may be granted upon a showing
that compliance with the zoning law would impose undue hardship on the applicant and this hardship must not be created by or be peculiar to the owner b. Example (NO HARDSHIP): Aronson v. Board of Appeals: P wished to add a porch on the back of his house to accommodate his invalid child, this porch would violate setback requirements but was well screened by shrubs and thus posed no visual intrusion on his neighbors privacy nor would it impair property values. There was no other spot for the porch but the variance was denied b/c the invalid condition of Ps child, while perhaps a personal tragedy, was not a hardship within the meaning of the variance law. c. Example (HARDSHIP): Commons v. Westwood Zoning Board of Adjustments: Commons owned a residential lot, 50 feet wide with a total area of 5,190 square feet, that had been created before the current zoning law. The new zoning law required lots to be 75 feet wide with an area of 7,500 square feet. Commons builder proposed to construct a residence conforming to setback requirements that would be of the same values as existing homes. In the past Commons had attempted to sell the lot to a neighbor and to acquire additional land adjacent to his lot, but both attempts had been unsuccessful. The court held that there should not have been a denial of the variance. They reasoned that undue hardship means that, absent a variance, the property may not be effectively used, a condition that Common had established by his efforts to either sell the land to his neighbors or acquire additional adjacent land to conform to the ordinances area requirements.

6. Alternate standards for granting variances: a. Use variances generally have a broader impact
than area variances thus; the standard that must 108

be met in order to grant a use variance is sometimes higher. b. Courts could impose a greater burden of proving the general standard when an applicant is seeking a use variance.

ii. Exceptional Uses 1. These are uses that are permitted by the zoning law but
which may impose material external costs on neighbors

iii. Spot Zoning 1. Spot zoning is a zoning amendment that delivers special
private benefits (and no public benefits) to a small discrete parcel of land, which is not in conformity with the comprehensive plan.

2. Some states exhibit a generally skeptical attitude toward zoning amendments that apply to relatively small tracts. a. Courts looked to see if the zoning amendment was
more legislative or judicial in nature. If it was more judicial there was a stronger burden placed upon the municipality to prove a demonstratable public need for the change. b. Some jurisdictions require governments to prove that the zoning amendment is necessary either to: i. Correct a mistake in the existing law ii. Adapt a change substantial in conditions affecting land use

iv. Floating Zones 1. Floating zones are a use designation not attached to
any particular land until a landowner seeks to have his land designed as the recipient of floating classification.

v. Conditional Zoning 1. Conditional zoning is when a developer wishes to use


the land in a way that is not permitted by zoning law and requests rezoning in exchange for the creation of a servitude burdening the land that is intended to eliminate or dampen the negative externalities of the proposed use. 2. Example: A developer wishes to build townhouses on land zoned for fully detached single family residences. The developer offers to cluster the townhouses in a 109

portion of the site shielded from view from the neighbors, and covenant that the undeveloped portion of the site will remain undeveloped forever.

vi. Cluster Zoning 1. Cluster zoning is to zone an area for a particular use at
a specified level of density of occupation, but confer upon zoning administrators discretion to decide exactly how the use and density will be achieved.

4. Limits on the Zoning Power a. Intro i. States possess an inherent police power the power to achieve
the peoples vision of public welfare, as communicated through their government agents ii. The power is limited and must conform to: 1. US Constitution 2. Valid federal laws preemptive of the local zoning law 3. Relevant state constitution 4. State law particularly the states zoning enabling acts and judicial doctrines developed to curb unreasonable and arbitrary exercises of police power

b. Zoning for Aesthetic Objectives i. Traditionally Judicially Created Rule: Use of zoning to achieve aesthetic objectives was beyond the permissible scope of the police power. (Beauty is subjective
and completely in the eye of the beholder)

1. This rule has broken down and a substantial amount of jurisdictions have upheld aesthetic land use regulations.

ii. Architectural Review: 1. Architectural Review Controls: these condition a land use
permit based on factors such as (1) the conformity of the proposed structure to the existing character of the neighborhood, (2) the likelihood that the proposed structure will not cause substantial depreciation of neighboring property values

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2. State ex rel. Stoyanoff v. Berkley: The affluent suburb


enacted an architectural review ordinance designed to preserve property values and maintain the neighborhoods conventional neo-classical aesthetic sensibilities. Stoyanoff proposed to build a flat, pyramidal residence with a triangular window and door opening arranged asymmetrically on the structure. The proposal was rejected and he attacked the validity of the entire scheme as unauthorized by the enabling act, outside of the scope of the police power if so authorized, and a violation of due process if within otherwise permissible scope of the police power. The court held that the review board is for the general welfare and thus authorized by the enabling acts. The rejection of his monstrous and grotesque design was reasonably related to preserving land values and the prevailing (if conventional) aesthetic sense of the community. The court emphasized that the probable adverse effect of the design on property values in the neighborhood is merely the markets expression of prevailing aesthetic sensibilities. a. Not all courts hold these types of review boards valid. When the application of such review is so vague as to cause ordinary people to guess its meaning, it becomes an unconstitutional deprivation w/o due process. c. Zoning Controls of Household Compositions: zoning laws can interfere with important civil liberties concerning living arrangements, which are protected by federal and various state constitutions

i. The fundamental Liberty of Family Association 1. Under US Constitution Due Process Clauses, laws that
substantially interfere with fundamental liberty of people to marry and associate together in traditional family relationships are VOID. 2. Moore v. City of City of E. Cleveland: East Clevelands zoning ordinance limited occupancy of dwellings to family members of the same family, and defined family so narrowly that it excluded a family unit consisting of a mom, her son, her sons son and her grandson. The court here applied a higher level of scrutiny b/c the zoning laws substantially interfered with the rights of members of the same extended family to arrange their living relationship. The court held that it must examine carefully the 111

importance of the governmental interests advanced and to the extent to which they are served by the challenged regulation. They found that this ordinance cut deeply into the institution of family, including the extended family that is deeply rooted in this nations history and tradition. East Clevelands objective was insufficiently important to merit this regulation. The legitimate concerns of overcrowding, traffic and parking were only marginally lawful. 3. In Village of Belle Terre v. Boraas: The village zoning laws here prohibited occupancy of swellings by more than two unrelated persons. The US Supreme Court applied minimal scrutiny b/c the law did not substantially burden the deeply rooted liberty of related family members to arrange their living patterns. The courts view was that the liberty of unrelated persons to live together in a group was simply not constitutionally fundamental. B/c this law was rationally related to the legitimate governmental objectives of residential tranquility and low residential density it was upheld. JUSTICE MARSHALL DISSENTED: he argued that the choice of household companions involves deeply personal considerations to the kind and quality of intimate relationships within the home. He thought that zoning law could withstand scrutiny only upon a clear showing by the government that the burden imposed is necessary to protect a compelling and substantial government interest. a. Zoning laws that substantially interfere with the ability of unrelated persons to live together are presumed valid and subject to only minimal scrutiny b. Some states regard the concept of family as more functional than biological or legal. If people associate together and exhibit characteristics of a traditional family unit then that interest is protected under the relevant state constitution.

ii. Statutory Limits on Zoning Controls of Household Composition 1. Federal and State law prohibit housing discrimination
against persons with handicaps, the most important one is the Fair Housing Act 2. City of Edmonds v. Oxford House, Inc: While the FHA prohibits discrimination in housing against handicapped 112

people, it exempts from that prohibition reasonable local restrictions regarding the number of occupants permitted to occupy a dwelling. The zoning code of Edmonds limited occupancy of a single-family residence dwelling to any number of persons related by genetics, adoption or marriage or a group of 5 or fewer unrelated persons. The court interpreted FHA to exempt only total occupancy limits not occupancy limits based on the familial composition of the household. B/c the Edmonds Law permitted an unlimited number of related people to live together in a single-family dwelling, and capped occupancy of such structures only when unrelated persons live together, the court ruled that the law illegally discriminated against handicapped people when it applied to bar occupancy by a group of 10-12 recovering alcoholics and drug addicts living together under the auspices of the Oxford House, a substance abuse group.

d. Exclusionary Zoning: i. All zoning is exclusionary in that it seeks to exclude unwanted


users but sometimes zoning is used to exclude unwanted PEOPLE ii. Example: a zoning law requires a minimum lot size acreage of 2 acres in order to preserve open space, aesthetics and a high tax base. This leads to only affluent owners and the poor are often excluded. iii. Southern Burlington County NAACP v. Township of Mount Laurel: This NY Township developed rapidly between the 19501970. The zoning law in effect excluded all multi-family residential dwellings and mobile homes and required minimum lot and dwelling sizes for single-family residences that were sufficiently large that low-income persons were effectively excluded. The court ruled that the NJ Constitution and the states zoning enabling act both required that local zoning further the general welfare and that the failure to accommodate the housing needs of poor people was contrary to the general welfare. A developing community, one that is expanding in size and population and thus taking shape, should not adopt land use regulations that make it impossible physically and economically impossible to provide low and moderate income housing in the municipality but must make it possible for an appropriate variety and choice of housing for all categories of people who want to live there.

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1. This remains the minority view and most states hold that
as long as a zoning law does not exclude people on a suspect basis (race) it need only be related to legitimate state interest to be valid. a. Thus when minimum lot sizes were rationally related to a legitimate local interest they remained valid.

UNIT 9: Takings (PGS: 941, 945-1022)


1. Eminent Domain a. Eminent Domain Power i. All governments in the US have the power to take private property
for public purposes, but that power is limited by the US Constitution, state constitutions, statutory law, and judicial decisions ii. 5th Amendment: private property shall not be taken for public use w/o just compensation 1. This clause applies to all property, tangible and intangible 2. Also, it applies to the state and the federal government. b. The Purposes i. To prevent forcible redistribution of property 1. This clause prevents forcible redistribution of property by stipulating through the just compensation requirement that when governmental power ii. Takings permitted only for public benefit c. The Principle Issues

2. Public Use Requirement a. Constitutional Text 3. Regulatory Takings a. Intro b. Per Se Rules c. Balancing Public Benefits & Private Costs d. Conditional Burdens e. Remedies

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UNIT 10: Easements & Covenants (PGS: 661-701, 709-725, 736-772, 783800)

1. Easements a. Easements General i. A landowner may grant to another person the right to use the
land for some specific purpose or in some specific manner. ii. An interest in land that entitles the holder of the land to use land owned or possessed by another person. iii. An easement almost always gives its owner to use another persons land. 1. Ambiguous Grant: If the grant is not clear but the interest conveyed is a limited area for a limited purpose, with no defined boundaries, usually its considered an easement.

b. Types of Easements i. Easement Appurtenant 1. One that benefits the owner of another parcel of land 2. Dominant Estate = Benefitted parcel 3. Servient Estate = Burdened parcel 4. This right passes with the dominant estate whenever the
estate is transferred to a new owner a. Example: R owns Blackacre and W owns Whiteacre. W grants an easement across Whiteacre from Blackacre from foot passage to and from the beach. This easement benefits whoever owns Blackacre

ii. Easement in Gross 1. Designed to deliver a personal benefit rather than to


benefit a land owner 2. Not attached to any parcel of land 3. In an ambiguous grant, courts prefer to create an easement appurtenant b/c it is easier to eliminate, and it is more likely to create value 4. Creates a personal right to use the servient estate and that personal right may be assigned if the parties intend a. Example: If W, owner of Whiteacre grants R and his assignees the personal right to enter upon and cross Whiteacre to reach the beach and R sells Blackacre w/o any assignment of this personal right the person who he sells it to has not right to enter

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or cross Whiteacre. If W sells Whiteacre it continues to be burdened. b. Example: If someone gives a company the right to swing cables over their property, this is an easement in gross b/c the company does not own any property benefitted by this grant.

iii. Affirmative Easement 1. Permit a person to use the servient estate in a specified
manner a. Example: L owns a farm that is between a farm owned by B and a riverside dock used to ship produce. If L grants B the right to cross the farm to move his farm produce to dock an affirmative easement appurtenant has been created. B or his successors in the dominant estate have the affirmative right to use Ls farm (no matter who owns it) in that specified fashion. If L had granted C, an urban fly fisherman, the right to cross the farm to fish in the river, an affirmative easement in gross would have been created.

iv. Negative Easement 1. Confers only the right to prevent specified uses of the
servient estates and confers no right to use the servient estate. a. Example: J, owner of Hillside, grants to D, the owner of Hollow, the right to prevent diversion of the flow from the irrigation ditch that crosses Hillside on its way to Hollow. This is a negative easement appurtenant, Hollow the dominant estate, has no right to use Hillside, the servient estate, but does have a right to prevent Hillside from being used in a way that would prevent water from the irrigation ditch. 2. Common law only recognizes 4 negative easements, all appurtenant, (1) for light, (2) for air, (3) for adjacent or lateral support, and (4) for the continuing flow of artificial streams.

c. Licenses i. Permission to enter the licensors land ii. May be oral or written,
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iii. Courts prefer to construe ambiguous cases as creating a license iv. Licenses are generally NOT assignable, unless intended by the
parties. v. Are revocable at any time unless the licensee makes the license irrevocable either expressly or by conduct. 1. Intention a. A license is irrevocable if the licensor expressly makes the license irrevocable. 2. Equitable Estoppel a. If a licensor grants a license on which the licensee reasonably relies to make substantial improvements to property, equity requires that the licensor be estopped from revoking the licensee. b. Holbrook v. Taylor: Holbrook permitted Taylor to use a roadway across his property in order for Taylor to reach his own property. With Holbrooks knowledge and w/o any objection, Taylor used the access road to construct a substantial single-family residence. Holbrook later blocked the road with a steel cable and the court held that Holbrook was equitably estopped from revoking the license. c. A minority of jurisdictions rejects application of equitable estoppel to oral licenses. 3. License couple with an interest a. When a licensee is tied together with some legally recognized interest the license is irrevocable until the other interest is vindicated. i. Example: D agrees to purchase form P a truckload of fertilizer, payment to be made only after Parker has delivered the fertilizer and spread it in Ds oat soil. This license may not be revoked until P has a reasonably opportunity to perform.

d. Creation of Easements i. Easement by Grant 1. Most are created expressly be deed or grant 2. Easement is an interest in land and is governed by the
Statute of Frauds, which requires a writing signed by the grantor. 3. Grantors convey land and in the same deed purport to reserve an easement in favor of the grantor or third party

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a. Early common law did not recognize easements b. c.


reserved in favor of the grantor Modern = reservation of an easement by the grantor is valid Majority of modern courts treat reserved easements in favor of a third party as VOID (before common law didnt think that it could be extended to someone who is a stranger to the deed) Usually necessary to use two conveyances instead of one to create an easement in favor of a third party. Willard v. First Church of Christ, Scientist: McGuigan conveyed Lot 20 to Peterson by deed that purported to reserve an easement for parking during church hours for the benefit of the adjacent church. Peterson conveyed Lot 20 to Willard but made no mention of the parking easement. After learning of the easement Willard sought to quiet title. The trial court applied the majority view that easements reserved in favor of a third party were ineffective. The Supreme Court overruled and said that the common law rule frustrates clear expressions of the grantors intent and delivers windfall profits to people like Peterson (who presumably paid less for the property b/c it was burdened by an easement). This could have been avoided if McGuigan conveyed the property to the church, who then would reconvey the property to Peterson reserving the easement.

d. e.

ii. Easement by Estoppel 1. An irrevocable license, the functional equivalent of an


easement can be created by estoppel.

iii. Easement by Implication 1. Easements Implied by Prior Use: This is when the property has been divided by a common owner, and prior to the division, one portion of the property has been used in an easement-like fashion for the benefit of another part of the property (implied from prior use). a. Need Common Owner

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i. If an owner or grantor retains the quasiservient estate (the burdened part) the implied easement is implied by grant. ii. If the owner and grantor retain the quasidominant estate (the benefitted part) the implied easement is implied by reservation. 1. Example: B owns lot 1 and 2 and they are both adjacent. B constructs a driveway over lot 1 to her house on lot 2. There is no easement b/c she is the common owner of both lots. If B sells lot 2 to R, an easement is implied by grant but if B sells lot 1 then the easement is implied by reservation. b. Reasonable Necessity i. This easement must be reasonably necessary for the owner of the dominant estate to use and enjoy the property. ii. An easement implied from prior use can only be appurtenant. iii. Van Sandt v. Royster: Bailey owned three adjacent lots in Kansas. She built a house on one of the lots and ran an underground sewer line across the other two lots to a municipal sewer line. However, later owners build a house on each of the two vacant lots and connected plumbing in those houses to the original sewer. P, the downstream owner sued to enjoin D, the upstream owner, from continuing to use the bailey sewer after he awoke to 6 inches of sewage in his basement, on the theory that no easement had ever been created on his property. The court said that an easement by reservation implied from prior use had been validly created by Bailey when she conveyed title to each of the two downstream lots. The court rejected the older rule of strict necessity (absolutely indispensible necessity is required).

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c. Continuous Use i. Use must be continuous not sporadic ii. Doesnt mean that it must be used
constantly, just that the easement has to embody some permanent physical alteration d. Intended Continuation i. The parties must intend at the time of the division to continue the prior use e. Existing Use i. The prior use MUST actually exist at the time of the DIVISION f. Apparent i. The use must be apparent; it is apparent if its visible, could be detected or could even be inferred from a reasonable inspection of the premises. ii. Although in Van Sandt the private sewer line was sold w/o reference to an easement. But the court said that the sewer line should have inferred the existence of some sewer by noting the existence and operation of plumbing fixtures, could have employed a skilled plumber to detect the actual location of the sewer.

2. Easements Implied from Necessity: This is where a property has been divided by a common owner in such a manner that an easement for access is necessary (implied from necessity). a. An easement is implied by necessity only when a common owner divides his property in such a way that one of the resulting parcels is left w/o access to a public roadway. Only permitted fro a right of way (ingress or egress) between a landlocked parcel and a public road. b. Common Owner i. Othen v. Rosier: Hill owned a large parcel of
land in Texas, which he sold in bits and pieces over time in the 1890s. One of those

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parcels was landlocked and title to that parcel was eventually acquired by Othen, who used a roadway crossing Rosiers land to reach a public road. To prevent erosion of that road, Othen built a levee, which made the road impassable. Othen sued Rosier to enjoin further interference with his right of way, which Othen contended was simply be necessity. Court held that there was no easement by necessity b/c there was no proof that Hill, the common owner, had conveyed the property to Rosiers predecessor in interest and it was that conveyance that landlocked that Othen parcel. Rather it appeared that at the time Hill conveyed Rosier, Hill owned other land that was continuous to both the Othen parcel and a public roadway. c. Necessity at Severance i. Must exist at the time that the property is divided. No prior use is necessary to establish an easement by necessity. d. Duration i. Lasts as long as the necessity exits, if the necessity is removed, the easement terminates

iv. Easement by Prescription 1. General a. Easements are not possessory interests so an


easement cannot be acquired by adverse possession but adverse use for a specific period of time can ripen into an easement by prescription b. Easements by prescription may be appurtenant or in gross

2. Elements of Prescriptive Use a. Prescriptive period i. Same as the required prescriptive period
applicable for adverse possession b. Adverse use under claim of right i. Must be adverse and NOT with permission of the owner

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ii. IF the use is permissive, it can never ripen


into a prescriptive right, no matter how long the use goes on. iii. A permissive use can become adverse if the user does things that are inconsistent with mere permission and that give the owner notice of the users claim of right. c. Open and Notorious Use i. Adverse use must be conducted so that the use may be discovered by any reasonable inspection. ii. Can not be carried on in secret or concealed d. Continuous Use i. Adverse user does not have to use the property constantly ii. Adverse user needs to continuously assert her claim of right iii. Example: a foot path beach access during a summer period every year satisfies the continuous use element iv. If adverse use is interrupted the prescriptive period starts over. e. Exclusive Use i. Many courts hold that exclusive use must be established to show a prescriptive easement. ii. Exclusive use is shown simply by claiming an easement from ones own use and not in common with the public or anyone else iii. Othen Case: Othens alternative argument was that he had acquired an easement for right of way across Rosiers land by prescription, but the court rejected this claim because Othen used the roadway in common with Rosier.

3. Public Prescriptive Easements a. Some jurisdictions permit the public at large to


acquire prescriptive easements in private lands so long as the elements of prescription are satisfied b. Beachfront property owners own the dry sand portion of the beach b/c their title extends to the

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mean high tide mark. So in order for the public to access the beach they need an easement over that property

e. Transfer of Easements i. Easements Appurtenant 1. Transferable, part of the title to a freely transferable
dominant estate (both the burdened and the benefited land is transferred)

ii. Easements in Gross 1. Courts tend to restrict transferability here 2. Commercial easements in gross are assignable and noncommercial easements are not assignable unless the parties intend to permit assignment. a. Miller v. Lutheran Conference and Camp: Frank and Rufus Miller owned a large track of land on a creek in the Pocono Mountains. They dammed the creek to create Lake Naomi and conveyed to Pocono Spring a corporation that they owned and controlled the land underlying the lake surface. Pocono Spring granted to Frank Miller and his heirs and assignees the exclusive right to fish and boat in the lake. A year later Frank granted to Rufus Miller and his heirs and assigns a 1/4th interest in and to the boating, fishing and bathing rights and upon and about Lake Naomi. Frank and Rufus then operated a boating and bathing business as partners until Rufus died. The estate then begun to grant licenses to others to use the Lake. D was one of those licensees to which a license was granted by Rufus Miller. Frank sued D to enjoin their further use of the lake. An injunction was granted and the court ruled that the partners had acquired a bathing right by prescriptive use and that the easement in gross and the easement in gross to fish and boat was a commercial easement that was meant to be transferable. While these easements were transferable they were not divisible.

f. Scope of Easements i. Parties Intent ii. How the Easement was Created iii. Change in the Easement Location
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2.

3. 4. 5.

iv. Division of Estates Benefits g. Termination of Easements i. Expiration ii. Merger iii. Real Covenants a. General b. Creation of Real Covenants c. Enforceability d. Running Elements e. Equitable Servitudes Interpretations of Covenants Termination of Real Covenants & Equitable Servitudes

UNIT 11: Landlord-Tenant (PGS: 363-365, 373-388, 402-410, 421-437)


1. Nature Of Leases 2. Types of Leaseholds 3.

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