Killer Property

Spring 2009 Leslie

Section 1 Adverse Possession

Case
Van Valkenburg v. Lutz (judgment for VV) CB at 115 Aspen at 13

Facts
Lutz and his family owned and occupied a parcel of land near a triangular tract in the City of Yonkers. Beginning around 1920, Lutz (D) used the tract to cross to his land. He then cleared part of the tract and built a shed thereon and maintained a garden, with knowledge that he did not have title to the tract. In 1937, VV (P) moved onto a parcel contiguous to the triangular tract and a feud developed between the parties. In 1947, VV purchased the triangular tract at a tax sale and gave Lutz notice to vacate the tract at a meeting between the parties and counsel. Lutz agreed to remove the shed and garden, but claimed a prescriptive easement for the right of way. Lutz obtained a judgment to that effect in Jan. 1948. VV brought this action to compel removal of encroachments and delivery of possession of the triangular tract.

Issue
Elements of adverse possession claim.

Rule(s)
To acquire title to real property by adverse possession not founded upon a written instrument, it must be shown that there was actual occupation under claim of title The essential elements of proof being that the premises: (1) are protected by a substantial enclosure, or (2) are usually cultivated and improved. N.Y. Civil Practice Act 40 (old statute)

Analysis
1.usually cultivated and improved WHY FAILED? -whole parcel was not cultivated (cultivation of a smaller part of the large part insufficient no constructive AP where claim is not under color of title -Lutz actions on property (garage encroachment, small shed/shack, portable chicken coop, cutting of some brush, storage of junk) insufficient to 2. claim of title -requires adverse possessor to hold property hostile to legal title. -Lutz acknowledged legal title in the VV in the easement proceedings

Policy
Punish the original owner for failure to police real property (sleeping on rights) Encourage commercial development o Probably has no resonance now (maybe at the early foundations of the doctrine) o Market governs efficiency, not the law o Also, adverse possession will not lead a rational actor to invest in development on the grounds of adverse possession Detrimental Reliance on Property Ownership by Adverse Possession Equitable relief provides persons who invest and develop land, make improvements, etc. the security of property ownership Judicial Certainty Availability of evidence, managing parties to potential litigation Preventing Unjust Enrichment of Original Owner (where AP has made improvements or kept land cultivated. Security in Title at the earliest possible moment. See Note on the Logistics of Property Transfer and Record

Why requirement of cultivation and improvement requirement? Notice to original owner of adverse possessory interest.

More on actual entry giving exclusive possession CB at 124 n.2 RULEThe sort of entry and exclusive possession that will ripen into title by adverse possession is use of the property in the manner that an average true owner would use it under the circumstances, such that neighbors and other observers would regard the occupant as a person exercising exclusive dominion. CB at 125 para. 1 NOTE Ewing v. Burnet where adverse possession of an unimproved lot in Cincinnati was established where claimant paid taxes on the lot, from time to time dug sad and gravel from it, permitted others to do so, and brought trespass actions others for digging without his permission (but kept no actual residence on the property)

More on open and notorious ISSUE: Underground parcels possession of cave notorious?

Suppose that A and B are neighbors whose parcels of land lie over a cave, the entrance to which is on As land. A discovers the entrance, explores, and opens it up to the public for a fee. As business, well known to B, runs for many years. B discovers, after the SOL has expired, that part of the cave is under his land and brings suit to quiet to title to that part of the cave. A claims adverse possession. What result?

Marengo Cave Co. v. Ross held that open possession of underground cave not notorious.

--Dan Tarlock, Bill of Particulars, IU School of Law--. Coase Theorem suggests that result is irrelevant because A will buy out Bs interest to keep business. --Stewart Sterk counters with bilateral monopoly (inefficient wealth transfer)

Case
Manillo v. Gorski CB at 130 Aspen at 14

Facts
Gorski (D) entered into possession of a lot in 1946 under an agreement to purchase. Land was actually conveyed to D in April 1952. P are the owners of an adjacent lot, acquired in 1953. In 1946, D made certain structural improvements which encroached on Ps property by 15 inches.

Issue(s)
Boundary Dispute/Mistake
Effect of mistaken belief of ownership on the element of claim of right

Rule(s)
Two Approaches: 1. Maine Doctrine/Aggressive trespass standard RULEClaim of right requires bad faith acquisition. AP must intend to claim possession with knowledge that he does not have the right to possession. 2. CT Doctrine/Good Faith standard RULEState of mind is irrelevant. Only requires actual occupation without permission. RULENo presumption of notice/knowledge arises from a minor encroachment along a common boundary

Analysis

Policy

Minor Encroachment
Whether minor encroachment is sufficiently open and notorious to put true owner on notice of AP?

Howard v. Kunto CB at136 Aspen at 15

The Kuntos took possession of a summer home under a deed which unbeknownst to them described the adjoining property. After discovering the mistake, the Howards obtained a conveyance of the deed which described the property occupied by the Kuntos. Howard then sought and obtained judgment

Seasonal Occupation
Is a claim of adverse possession defeated because the physical use of the premises is restricted to summer occupancy?

Tacking
Can an occupant who has title to tract A under the mistaken belief that he has title to tract B and who occupies tract B, tack the periods of

quieting title in himself.

possession of tract B by his predecessors who also had record title to tract A?

Adverse Possession in New York State

Case Law
Van Valkenburg v. Lutz See FACTS above

Current Statute (as amended 2008)

501 Adverse Possession Defined 3. Claim of right. A claim of right means a reasonable basis for the belief that the property belongs to the adverse possessor or property owner, as the case may be. Claim of right not required where owners cannot be ascertained in the relevant workers. 511 AP under written instrument and there has been a continued occupation and possession of the premises included in the instrument, or some part thereof, for ten years under the same claim, the premises so included are deemed to have been held adversely. constructive adverse possession 512 Essentials of AP under written instrument For the purposes of constituting an adverse possession, founded upon a written instrument or judgment or decree, land is deemed to have been possessed and occupied in any of the following cases: 1. Where there has been acts sufficiently open to put a reasonably diligent owner on notice; or 2. Where it has been protected by a substantial enclosure; or 3. Where, although not enclosed, it has been used for the ordinary use of the occupant. Where a known farm or single lot has been partly improved, the portion of the farm or lot that has been left not cleared or not enclosed, according to the usual custom of the adjoining country, is deemed to have been occupied for the same length of time as the part improved or cultivated. 521 AP not under written instrument Where there has been an actual continued occupation of premises under a claim of right the premises actually occupied, and no others, are deemed to have been held adversely. no constructive AP 522 Essentials of AP not under written instrument For the purposes of constituting an adverse possession, founded upon a written instrument or judgment or decree, land is deemed to have been possessed and occupied in any of the following cases: 1. Where there has been acts sufficiently open to put a reasonably diligent owner on notice; or 2. Where it has been protected by a substantial enclosure 543 AP; how affected by acts across boundary lines 1. Notwithstanding any other provision of this article, the existence of de minimus non-structural encroachments including, but not limited to, fences, hedges, shrubbery, plantings, sheds and non-structural walls, shall be deemed to be permissive and non-adverse. 2. Notwithstanding any other provision of this article, the acts of lawn mowing or similar maintenance across the boundary line of an adjoining landowners property shall deemed permissive and nonadverse.

Affect on Case Law

1. Knowledge precluded claim of right Legislative history suggests that inquiry not upon the person's belief, but instead upon the evidence introduced in court which justifies a reasonable basis for that belief. It will be an inquiry into the basis and whether it was reasonable, not into a person's mind. The court will determine whether or not there was a reasonable basis. o There doesnt seem to evidence to support to provide a reasonable basis for belief that Lutz owned to land 2. Cultivation/Improvement Statute replaces the requirement for usual cultivation or improvement with common law open and notorious sufficient to put owner on notice (which cuts in favor of Lutz, everyone knew it was Lutzs Garden; but VV may argue that this is a nonstructural encroachment and that Lutzs conduct constituted de minimus non-structural encroachment which is not adverse under 543(1) o Lutz counters that the garage is structural and the statute implicates that structural encroachments are adverse

City of Tonawanda v. Ellicott Creek Homeowners Assn.

FACTS: City brings ejectment action against several defendants for strip of creekfront property being occupied and used by owners of residential property adjacent to creekfront and boat owners (presumptively mooring their boats on the creekfront) o Hostility Interprets hostility rule as time sensitive; if possessor acknowledges that he is not true owner during statutory period then hostility is defeated why? 1. Reliance Not reasonable to rely on claim of ownership where there is actual knowledge of legal title in another 2. Notice Character of possession with knowledge of lack of ownership is permissive Cites Van Valkenburgh

Tubolino v. Drake, 178 A.D.2d 951 (1991)

Why adverse possession before claim of superior chain of title? --Adverse possession makes superior chain of title moot --AP obviates the need for a difficult fact-finding to determine who actually has superior claim to the title Arguments that the court in this case resolved incorrectly 1. Lack of detrimental reliance Conduct was not systematic, random logging and fishing, etc. 2. Lack of sufficient notice Conduct fails to give rise to check the property 3. Outcome Determinative Distinction between Van Valkenburg --Here, possession founded on written instrument Court seems to be making it easier to gain possession by AP when there is a deed --Character of the property adversely possessed

Section 2 Present Possessory Estates

Case
White v. Brown (niece) v. (collaterals) (White prevails) CB at 190 Aspen at 20

Facts
Terms of the will of Jesse Lide Conveys to Evelyn White (sister-in-law) my house to live in and not to be sold Parties chief arguments P argues that the terms of the will conveyed an estate in fee simple absolute (which would give P an interest at the expiration of her mothers life estate) Brown (Lides collateral relative) argues that the terms of the will created an life estate (leaving them with the remaining interest at the expiration of the life estate.

Issue
Rules of Interpretation Life Estate v. Fee Simple

Rule(s)
RULEWhere a will is susceptible
of two constructions, one passing the entire estate and the other leaving a partial intestacy, courts will adopt the former construction, passing the full estate. NOTE: Brown argues that will can be construed as exclusively passing a life estate either expressly or impliedly: Impliedly Restrictions on alienation (dont sell my house) are inconsistent with conveyance of an estate in fee simple absolute Expressly live in versus leave (with respect to the personal property) suggests that Lide knows how to grant property in fee simple absolute o the implication is that she decided to limit her conveyance by using different language

Analysis
POLICY against partial intestacy
WHYBecause it eliminates the following? 1. Free-Rider Problem, Bilateral monopoly, Transaction Costs (for improvements) 2. Mortgage Problem Where improvement is desirable, even to the extent that improvement will favorably affect both the life estate and future interest, a life tenant cannot mortgage the property to acquire capital to make improvements 3. Tension between desired uses of the life tenant versus the remaindermen Tension may need to be involved in court which is itself inefficient 4. Different time horizons for life tenants versus remainderman 5. Reduces dead hand control People rarely have the foresight to predict future value of property from differing uses NOTE: Court eliminates the attempted restraint on alienation (and not to be sold) as void against public policy. See Policy Section

Policy/Hypos
Policy 1. Shortage of available land for purchase (if no free alienation) Restrictions on commercial growth (commercial economy works when the person who owns it values it the most) hampers efficient this efficient transfer Only incentive on upkeep and maintenance would be sentimental value 2. Removes benefits of land ownership as capital (bank will not be able to attach property under foreclosure) May cause significant increases in prices of land that are alienable (this becomes a marketable quality) Hypos See Notes Addendum

Baker v. Weedon
(life tenant) v. (remaindermen)

CB at 197 Aspen at 21

John Baker devises his property to Anna for life, remainder to her children, and in the event she has no children, to his grandchildren (from first wife). P sought to obtain judicial authorization for sale of property because current value as agricultural rental was insufficient to support life tenant. Land valued currently at ~$168K, but would have a value of $336K in four years. D argue that sale would deprive them

1. Sale of Land Encumbered by Future Interests 2. The Law of Waste

RULECourt has the authority to order the sale of land in which there are future interests for the prevention of waste. What is the appropriate definition of waste?

See Notes Addendum

Defeasible Estates

Case
Marenholz v. County Board of Trustees (Marenholz prevails) CB at 208 Aspen at 22

Facts
3/18/41 Huttons execute a deed transferring 1.5 acres of a 40 acre plot to school this land to be used for school purposes only, otherwise to revert to grantors herein. 10/9/41 Huttons execute a deed transferring the other 38.5 acres and the reversionary interest in the school land to the Jacqmains 7/18/51 Mr. Hutton dies intestate 10/9/59 Jacqmains executed a deed transferring 38.5 acres and reversionary interest to Mahrenholz 69 Mrs. Hutton dies. 5/30/1973 Schools tops using the property for classes and uses the building for storage 5/7/77 Huttons son conveys interests to Marenholz 9/77 Huttons son disclaims interest in school

Issue

Rule(s)
IL statute prohibits a transfer by will or inter vivos conveyance of either a possibility of reverter or right of re-entry o Therefore, Jacqmains received no interest in the school board land; thus they could not have conveyed that interest to the Mahrenholz

Analysis
Marenholz argument 1. Estate in fee simple determinable Creates a possibility of reverter o No reversionary interest transferred from Hutton to Jacqmains to Marenholz Revisionary interest passed to Harry at death of his parents 2. Cessation of school purposes in 1973 automatically vested Harry with estate in fee simple absolute as to the 1.5 acres 3. Harrys conveyance to Mareholz would then be an estate in fee simple absolute School Board argument 1. Estate in fee simple subject to condition subsequent Use Latham as a comparable case bcuz its a higher ct in the state o Creates a right of re-entry o No reversionary interest transferred from Hutton to Jacqmains to Marenholz o Revisionary interest passed to Harry at death of his parents 2. Cessation of school purposes in 1973 creates only a right of re-entry; estate in fee simple absolute not created until Harry takes some affirmative action to reclaim interest

Policy/Hypos
Is the prohibition on conveyance of the reversionary interest a good idea? 1. No, reversionary interest will be split many ways through the generations. 2. Limits the alienability of the property (School board cannot sell it) Argument for School Board Constructional Preference for estate in fee simple subject to a condition subsequent

Mountain Brow Lodge No. 82 v. Toscono CB at 190 Aspen at 215

Section 3 Future Interests and the Rule Against Perpetuities

Case
In the Matter of Krooss (husband prevails)

Facts
Herman Krooss granted life estate to his wife Eliese with the following remainder:
Upon the death of my wife...I then givethe remainder of my estate to my children John and Florence to share and share alike, to and for their own use absolutely and forever. In the event that either of my children should die prior to the death of my beloved wife, leaving descendants, then it is my wish and I so direct that such descendants shall take the share their parent would have taken if then living NOTE on testators actual intent John intended to leave his estate to his children and grandchildren and did not want his estate to pass to his childrens spouses.

Issue
Whether the language of the will regarding the remainder created a contingent remainder (contingency fails is J/F predecease the life tenant and interest reverts back to grantor or his heirs under intestacy statute) or a vested remainder subject to complete divestment (remainder vested at testators death, subject to be divested only in the event of her predeceasing the life tenant leaving issue or otherwise passing under her will at her death to her husband)

Rule(s)
RULE Law favors construction of language in a will that accomplishes the complete vesting of estates; therefore courts are intent upon restricting defeating events to the exact circumstances specified.

Analysis
Testators language of absolutely and forever in the granting clause suggests an unqualified vested remainder. RULE Additional language will not be read as qualifying or cutting down the estate unless the language is as clear as that which created the vested remainder. But this is arguably contrary to testators intent (keep property in the family)? Is this application of the rule appropriate here? Florences will creating a trust (to husband for life, remainder to nephews) effectuates testators intent courts decision permits Florences will to take effect Factors favoring early vesting: 1. Reduction of contingencies facilities alienability (readier market for property that is unencumbered). 2. RAP operates more destructively as to contingent interest than vested interests subject to complete defeasance. What is are the countervailing factors? Constructional preference which conforms more closely to the intent commonly prevalent among conveyers

Policy/Hypos
1. Rule is preferable because it enables property to be freely transferred (unencumbered) at the earliest possible time. (same as RAP_ How should this have been drafted to avoid litigation (assuming that the testator desired this result)? in the event that Florence predeceases the life tenant leaving no issue, it shall go to her estate

Browning v. Sacrison

Kate Webb devised life estate to her daughter Ada with the following remainder:
with remainder over at the death of the said Ada, share and share alike, to my grandsons, Francis Browning (Ps husband) and Robert Browning [Sacrison] (D), or, if either of them be dead, then all to the other

Rejects broad, uncritical application of the general rule favoring early vesting of estates. WHY? Unfortunate tax consequences may follow a determination that an interest is vested and most transferors who consider all of the tax consequences which attach to a vested interest are inclined to postpone vesting until the time set for enjoyment of the interest in possession. RULE Balancing test weighing factors favoring a construction of a vested interest with factors

favoring a construction of contingent remainder interest in light of the testators intent.

similarly situated. Remainder conditioned upon an ambiguous form of survivorship is generally deemed to require that remaindermen survive the life tenant

Rule Against Perpetuities

The Rule Against Perpetuities attempts to facilitate the legal preference for free alienability of land by attempting to restrict dead hand control. The Rule extinguishes contingent future interests whose contingencies fail to resolve within one generation plus 21 years of the initial grant of the interest. The Rule has been criticized for its difficult application and inconsistency regarding to which types of interests it applies. CB at The Common Law Rule
Rule derived from the struggle between landowners who desired to keep land within the family and judges who tried to resist these efforts. Originated in the Duke of Norfolks Case As developed it took the form of a compromise between the landed class and the judges Fathers were considered to be particularly capable of assessing the capabilities of living family members of his family fathers informed judgments given effect This deference extended only to living members because the head of the family could know nothing of unborn persons. Thus, father was permitted to control only so long as his judgment was informed with an understanding of the capabilities and needs of persons alive when the judgment was made. (at the time of the testament) o Later expanded to control beyond lives in being if any other person in the next generation was actually a minor o Further extended control to lives in being plus 21 years thereafter.

Professor Grays Formulation

No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest. Property may be tied up in contingent interests no longer than for lives in being plus 21 years thereafter. Effect was to permit a donor to provide for all those in his family whom he personally knew and the first generation after them upon attaining majority.

Mechanics of the Rule Against Perpetuities

Casebook Formulation
(1) Is the future interest subject to the Rule? Only non-vested interests are subject to the Rule. Why? Contingent remainders, executory interests, class gifts (2) Will the interest vest within the perpetuities period? It is necessary to prove that a contingent interest is certain to either vest or terminate no later than 21 years after the death of some person alive at the creation of the interest. o Can you point to a validating life? A validating life is someone who will enable you to prove that the contingent interest will either vest or fail within the life, or at the death of, that person, or within 21 years after that persons death.

Professor Leslies Formulation

1. Identify the interest. If interest is reversionary (reversion, possibility of reverter, right of entry, indefeasibly vested, vested subject to complete divestment) RAP does not apply If interest is contingent remainder, vested subject to open, and executory interest RAP applies o Why vested subject to open All or Nothing Rule o Class gift is not vested in any member until the interests of all members have vested. 2. Identify the contingency. When will the interest vest or fail to vest (when will the contingency resolve)? 3. Identify a measuring life (validating life). Contingency will resolve within life plus 21 years Alive at the creation of interest Wait and See Approach

Section 4 Joint Tenancies/Concurrent Estates

Type
Tenancy in Common

Characteristics
1. Tenants have separate but undivided interests in the property. 2. The interest is descendible and alienable (may be conveyed by deed or will) 3. There are no rights of survivorship between tenants in common. 1. Joint tenants have rights of survivorship. 2. Each tenant is seised per my et per tout (by the share or moiety and by the whole). In theory, each own the undivided whole.

How Created
Can be created in a will or arise out of intestate succession.

How Terminated
1. Mutual agreement by all co-tenants (i.e., sale, conveyance to one cotenant, etc.) 2. Action for judicial partition (physical/in kind or by sale)

Joint Tenancy

Tenancy by the Entirety

1. Can only be created in husband and wife. 2. Tenants have right of survivorship. 3. Each tenant is seised per tout y non per my (by the whole but not by the share

1. Generally requires the four unities Time-Interest must be acquired or vest at the same time Title-Must acquire title by the same instrument or by joint adverse possession. A joint tenancy may never arise out of intestate succession/act of law. Interest-Must have equal, undivided shares Possession 2. Statutes in some jurisdictions have abolished the requirement of the four unities and provide that a joint tenancy may be created by express intent. 1. The four unities plus the unity of marriage.

Severance when one of the tenants unilaterally conveys his interest to a third-party by destroying unities of time and title.

1. Divorce which destroys the unity of marriage; estate then becomes a tenancy in common. 2. Neither tenants may defeat the right of survivorship by unilateral conveyance of a moiety to a third party. 3. Neither party has the right to judicial partition.

Avoidance of Probate
Joint tenancy is the practical equivalent of a will but at the joint tenants death, probate of the property is avoided. Why is this desirable? Probate is: 1. costly 2. property may be tied up in probate for months or years (impedes alienability)

Effect on Creditors
If a creditor acts during a joint tenants life, then the creditor can seize and sell the joint tenants interest, severing the joint tenancy. If a creditor waits until after death, the decedent joint tenants interest has disappeared and there is nothing that the creditor can seize.

Unequal Shares
Most states have eliminated the requirement of equal shares to create a joint tenancy (unity of interest).

Case
Riddle v. Harmon

Facts
Ps wife, the decedent, owned certain real property in joint tenancy with P. In planning her estate, her attorney advised her that terminate the joint tenancy by conveying to herself an undivided, one-half interest in the property P (99/144) and D (45/144) are tenants in common. D occupies a dwelling and operates a garbage removal business. Ps are not in actual possession of the land, but propose to develop the property into residential lots.

Issue
Severance of Joint Tenancy

Rule(s)
RULE Joint tenancy may be severed by conveyance by one joint tenant of his interest to himself.

Analysis
No need for a strawman to create or sever the tenancy. This is not creating new powers for a joint tenant universal right of each joint tenant is the power to sever the joint tenancy by unilateral conveyance - Delfinos Interest in sale of the whole parcel is greater than the revenue generated from a physically-partitioned portion - Vealencis Emotional/Sentimental (subjective) value may not be reflected in market value o BUT, if she threatens to litigate to keep the garbage business, then she can maximize the revenue from sale AFTER partition in kind (bargain for the injunction and set her own price). What is ouster? 1. The beginning of the running of the statute of limitations for adverse possession cotenant in possession must engage in activities that constitute assertion of complete ownership the land Examples: Composite of activities such as renting part of the land without accounting, hunting, cutting timber, assessing and

Policy/Hypos
How to create an indestructible right of survivorship? 1. Joint life estate with contingent remainder to the survivor. 2. TIC in fee simple with an executory interest in the survivor 3. Fee simple to take effect in possession in the future.

Delfino v. Vealencis

Partition in Kind v. Partition by Sale Why not settle through contract? No reason to believe that the agreement between the parties would reflect their relative interest in the property Agreement will actually reflect the leverage that one co-tenant has over the other o Judicial involvement ensures that the agreement accurately reflects the relative interests in the land Liability for to cotenant for rent

RULE Judicial preference for partition in kind to protect the subjective value of party not seeking partition. RULE Partition by sale should only be ordered under two conditions: (1) the physical attributes of the land are such that partition in kind is impracticable or inequitable and (2) the interests of the owners would be better promoted by a partition by sale.

Spiller v. Mackerath

John Spiller (appellant) and Hettie Mackereth (appellee) owned a building as TIC. When a lessee vacated the building, Spiller began using the structure as a warehouse. Mackereth demanded that Spiller either vacate half of the building or pay half of the rental value.

RULE Absent an agreement to pay rent or ouster of cotenant, a cotenant in possession is not liable to his cotenants for the value of his use and occupation of the property Alternatively, under the minority rule (Cohen), ouster is unnecessary to establish liability to the out of possession tenant.

NOTE: The out of possession cotenant will have difficulty proving the claim of right element of AP to establish ouster by adverse possession. Counsel for Mackerath Encourage Spiller to make an agreement for rental payments. How? (1) Threaten judicial partition (2) Threaten to find another lessee which would create liability for rental value

Case

Facts

Issue

Rule(s)
Which rule is better? Probably Spiller WHY? 1. Better effectuates Intent of the party who created the cotenancy 2. Cohen rule reduces litigation costs because it removes the litigable issue of ouster

Analysis
paying taxes OR more overt act like purported conveyance of a fee simple 2. Refusal by occupying cotenant of a demand of the other cotenants to be allowed use and enjoyment of land regardless of claim of absolute ownership. Although out of possession may have an action for accounting of the rents of the lessee in exclusive possession or action for ejectment to permit reentry, the lease transfer itself is not a nullity (unless if purports to convey a fee interest).

Policy/Hypos
Adverse Possession and Cotenancy NY Statue Where a co-tenant has maintained continuous exclusive possession, there is a presumption for the first 10 years that the possession is permissive.

Swartzbaugh v. Sampson (wife) v. (husband)

P attempts to cancel two leases executed by her husband and Sampson, both co-defendants, of two adjoining parcels of land in Orange County. Swatrzbaughs owned 60 acres of land in Orange Co. as joint tenants planted to bearing walnuts. H leased part of premises to Sampson for a boxing pavilion; his wife objected and was not party to the lease. The walnut trees were removed from the premises and the boxing pavilion built. At the time of the action, Sampson had been in exclusive possession of that part of the premises and P had not received any part of the rent.

Joint Tenancy and Authority to Lease

RULE Each cotenant in possession has a right to possession of the whole; a lease by one cotenant is valid insofar as it only conveys the concurrent interest.

What are s other remedies? 1. Partition action May not effectuate her desire to keep the boxing ring off the property and preserve for use a walnut farm 2. Ouster Recover for the reasonable value for the use and enjoyment of the property (fair market value) o Who pays? o Sampson because he is in possession of the land and getting the benefits of exclusive possession; he is defined as the ouster o Swartzbaugh (husband) authorized removal of trees which constitutes ouster 3. Action for Accounting Will permit to recover actual rents paid to lessor, but there is a problem with this argument. Here, Swartzburgh would argue that expressly declined to join the lease such that the lease only conveyed the s interest All of these seem to work against the - what does she do? (1) Attempt to find another lessee who would pay more for the leased portion. This is unlikely. (2) Argue that the cutting down of the trees (valuable, mature walnut trees) would cause waste and thus she is entitled to

10

Case
Sawada v. Endo (creditor) v. (husband)

Facts
P seeks to, in aid of executing a money judgment for a car accident, to cancel a conveyance of real property, owned as a tenancy by the entirety, from the Ds to their son.

Issue
Ability of creditors to reach a tenancy by the entirety Whether the interest of one spouse in real property, held in tenancy by the entireties, is subject to levy and execution by his or her individual creditors.

Rule(s)
RULE Tenancy by the entirety must be conveyed by either spouse and the estate may not be

Analysis
Possible Analyses
1. Old Common Law - the possession and profits of the estate are subject to the husbands exclusive dominion and control Conveyance would have been fraudulent 2. The interest of the debtor spouse in the estate may be sold or levied upon for his or her separate debts, subject to the other spouses contingent right of survivorship Conveyance would have been fraudulent because Sawadas would have been able to attach the property subject to Ms. Endos survivorship rights 3. The contingent right of survivorship appertaining to either spouse is separately alienable by him and attachable by his creditors during his marriage Mr. Endos survivorship rights were attachable and could not have been conveyed No rights by creditors to the use and profits during the life of the cotenant 4. This court analyzes: An attempted conveyance by either spouse is wholly void, and the estate may not be subjected to the separate debts of one spouse only.

Policy/Hypos
an injunction

In Re Marriage of Graham

Professional Degree as Marital Property

Debate the question: Resolved, an MBA is not marital property. For: Forces H to work in that job to realize the value of the thing as property; also if he becomes incapacitated Value of the MBA as property implicates education prior to the marriage (grade school through undergrad) Negative Implications o Discourage marriage if one is pursuing a degree Against: She should be compensated for contribution as with any

11

Case

Facts

Issue

Rule(s)

Analysis

Policy/Hypos
other investment Much of the return on the investment is attributable to things other than her financial support Reimbursement Alimony

Elkus v. Elkus

Goodwill of Business as Marital Property

Section 5 Leasehold Estates

Type
Term of Years Estate that last for some period of time or for a period computable by a formula that results in fixing calendar dates for the beginning and ending, once the term is created or it becomes possessory. Can be determinable Periodic Tenancy Lease for a period of some fixed duration that continues for succeeding periods until either the landlord or tenant gives notice of termination. Can be determinable Tenancy at Will A tenancy for no fixed period that endures so long as both landlord and tenant desire.

Characteristics
1. No limit to the duration of the term at common law (i.e., Guinness lease for 9000 years); some states have statutorily limited 2. Must be for a fixed period, but may be terminable earlier by some event of condition (defeasible) 3. Death of landlord has no effect on the duration of a term of years. 1. Lease renews at the end of period unless either party gives notice of termination. 2. Death of landlord has no effect on the duration of a periodic tenancy. 1. Terminable by either party.

How Created
O leases Blackacre to A for 4 years.

How Terminated
No notice of termination required.

Express to A from month to month, to B from year to year Implied at an annual rental of $24,000 payable $2,000 per month on the first of each month. If lease provides that it can be terminated by one party, it is necessarily at the will of the other as will if a tenancy at will has been created.

Tenancy at Sufferance (Holdover) Arises when a tenant remains in possession after the termination of a tenancy.

Landlord has two options under common law: 1. Eviction of tenant as trespasser (plus damages) 2. Express of implied consent to the creation of new tenancy.

Tenant remains in possession after termination of the leasehold.

Common Law 1. year notice on a year-to-year tenancy. 2. Equal to the length of a period but not to exceed 6 mos. on any term less than a year. Statute Most states have shortened notice to 30 days. 1. Death of one of the parties. 2. At the will of one of the parties; some states require a period of notice. NOTE: If rent is paid periodically, an implied periodic tenancy, rather than a tenancy at will, is created. See Crechaleu infra

Case
Gerner v. Gerrish CB at 365 Aspen at 40

Facts
Donovan leased property to Gerrish on pre-printed lease form for $100 per month. The lease provided that it shall continue for and during the term of quiet enjoyment from the first day of May, 1977 which term

Issue
Determinable Life Tenancy v. Tenancy at Will
Whether a lease which grants the tenant the right to terminate the agreement at a date of his choice

Rule(s)
RULE Lease may be a proper form of conveyance of a life estate. REJECTS COMMON LAW RULE

Analysis
1. Old common law rule based on livery of seisen requirement any conveyance of a life interest had to be accompanied by livery of seisen. 2. Leases providing for termination upon the occurrence of a specified

Policy/Hypos

12

Case

Facts
will end Lou Gerrish has the privilege of termination this agreement at a date of his own choice. After Donovans death in 1981, Gerner (executor) attempted to terminate contending that lease created a tenancy at will. P leased commercial space to D for a term of 5 years (2/64-2/69). D sought to extend lease on a monthto-month basis . P claims he denied; D claim he assented. Timeline: 2/4/69-Tenant sent letter to Landlord confirming oral agreement to extend lease. Crechale rejected. 3/3/69-T paid rent for Feb. Mar. Check accepted and cashed by L. 4/6/69L rejected final payment 4/19/69 L claimed renewal 5/27/70-T returns keys

Issue
creates a determinable life tenancy on behalf of the tenant or a tenancy at will.

Rule(s)

Analysis
event prior to the completion of an otherwise fixed term, are routinely enforced even then the event is within the control of the lessee (here, the lease terminates at the death of the lessee)

Policy/Hypos

Crechale & Polles, Inc v. Smith CB at 369 Aspen at 41

Holdover Tenants

RULE Landlord has two options on holdovers: (1) trespassers or (2) renewal of term. RULE Where a landlord accepts rent from a holdover tenant, he will be held to have consented to a renewal of extension of the lease.

1. Ls letter rejecting extension agreement was an election to treat T as trespassers. 2. L may not elect to treat tenants as trespassers, fail to pursue his remedy of eviction and accept monthly rent and then attempt to argue for renewal for an entire term.

Places the onus on landlords to adequately deal with holdovers by choosing a remedy.

Hannan v. Dusch CB at 384 Aspen at 42

D leased property to P for a term of 15 years. P was ready to take possession, but former tenants remained in possession. P argued that D refused to take any legal action to remove them. There was no express covenant of delivery or quiet enjoyment. Ernst leases property to Rogers who subsequently attempts to convey an assignment/sublease of his lease to Conditt. Conditt ceases paying rent during the pendency of the tenancy and Ernst brings an action for back rent and removal of improvements on the property.

Delivery of Possession Is there an implied duty for landlord to deliver actual possession of leased property?

RULE Landlord only has a duty to place tenant in legal possession of property (American rule) CONTRAST English rule which implies covenant of delivery of actual possession. RULE Whether tenant intended to convey sublease or assignment will be determined by ascertaining the intent of the parties from the language of the instrument in light of the surrounding circumstances. Court seems to apply the formalistic rule in determining what the parties intended to convey.

1. No express covenants here. 2. American Rule does not foreclose remedy just shifts remedy from landlord to holdovers (as trespassers).

Ernst v. Conditt CB at 368 Aspen at 43

Sublease v. Assignment
If court had determined that the conveyance had been a sublease, why would Conditt have prevailed? Lack of privity of contract o Privity of contract between Ernst and Rogers o Separate privity of contract between Rogers and Conditt Lack of privity of estate o As between Ernst and Rogers (conveyance of an interest in property) o As between Rogers and Conditt (some portion of Rogers possessory interest) Conditt and Ernst have no direct legal relationship If court had determined conveyance had been an assignment; why would Ernst have prevailed? Privity of contract o As between Ernst and Rogers; As between Rogers and Conditt Privity of estate o The privity of estate as between Ernst and Rogers is transferred (with Rogers entire estate) to Conditt; privity of estate between Ernst and Conditt

Conditts argument (this is a sublease) (1) Intent of the parties to create a sublease language of the conveyance used sublet, subletting rules of construction (2) Rogers agreement to remain liable indicated that he retained some reversionary interest in the property and this did not convey his entire estate Court rejected this argument because the prime lease between Ernst and Rogers was not abrogated (Ernst was not promising to do something in addition to the obligations of his original lease) by the amendment creating an assignment in Conditt This fact does not automatically implicate a right of reentry in Rogers (if he had, expressly in the lease amendment, reserved a right

1. American rule seems to be founded on the argument that the tenant has sufficient legal and equitable remedies available to protect against a third party wrongfully in possession and greater incentive than the landlord to use them. NOTE: Conditt might have had a third-party beneficiary argument. Language of the addendum suggests he was an intended third-party beneficiary of the contract between Ernst and Rogers. CB pg. 394 n.2(c)

13

Case

Facts

Issue

Rule(s)

Analysis
of reentry, courts are divided as to whether it would transfer an assignment to a sublease)

Policy/Hypos

Kendall v. Ernest Pestana CB at 395 Aspen at 44

Pestana owns hangar space at San Jose Airport. Pestana predecessors in interest subleased to Bixler who in turn attempted to assign to Kendalls. Kendalls had a stronger financial statement and greater net worth than Bixler and were willing to be bound by the terms of the lease. Lease provided that assignment was subject to approval of lessor. Pestana refused to consent unless Kendalls agreed to increased rent

Lessors Right to Refuse Assignment Absent contractual language to the contrary, may a lessor arbitrarily withhold consent to as assignment?
NOTE: Confined to commercial context.

RULE Lessor may withhold consent to assignment only where there is a commercially viable reason. REJECTS MAJORITY VIEW RULE Reasonableness is a question of fact (See Wal-mart Hypo supra) 1. Denial based on personal taste not commercially reasonable. 2. Denial based on desire to charge higher rent than initially bargained for is not reasonable.

Hypo: Mall Developer leases property to Saks Fifth Ave. 1. Rent = $500,000 + 1% gross sales > $1 million 2. Saks must obtain landlords consent to sublease or assign 3. Must use as dept. store 4. 20 year term; after 10 years Saks wants to assign to BergdorfGoodman In a majority jurisdiction: Mall developer would not have to have a commercially viable reason for denying the approval of the assignment to Bergdorf Goodman What could the tenant do at the bargaining table to prevent this circumstance? o Bargain for terms in the contract which either: (1) provide for no need for approval or (2) provide that the landlord may only refuse for a commercially viable reason In a Kendall (minority) jurisdiction: On the facts here, the mall developer would not be able to refuse approval. Mall developer would have to have a commercially viable reason for denying approval. Policy against restraints on alienation (property) Implied covenant of good faith and fair dealing (contract) What if the assignment had been to Wal-mart? MAKE THE ARGUMENTS HERE WEIGH FACTORS ON PAGE 398 (i.e., financial responsibility of the proposed assignee, suitability of the use for the particular property, legality of proposed use, need for alteration of the premises, and nature of the occupancy)

Berg v. Wiley CB at 403 Aspen at 45

Wiley leased property to Berg to operate a restaurant subject to certain covenants. Wiley alleged that Berg breached covenants requiring permission to make structural changes and operation of the restaurant in a lawful and prudent manner (health department had issued an order requiring certain changes to comply with code). Berg closed the restaurant and placed a sign in the window saying Closed for Remodeling. Wiley entered the premises and changed the locks in Bergs absence. Wiley subsequently leased the premises to another tenant.

Wrongful Eviction

Modern Approach RULE The only lawful means to dispossess a tenant who has not abandoned or voluntarily surrendered but who claims possession adversely to a landlords claim of breach of a written lease is by resort to judicial process. REJECTS COMMON LAW RULE Landlord may use self help where he is: (1) legally entitled to possession and (2) means of re-entry are peaceable.

1. Wiley would have failed under common law approach because evidence was sufficient to sustain trial court finding that re-entry was no peaceable 2. Summary judicial proceedings enacted in states adopting modern trend that will permit landlord to recover possession in 3-10 days.

Should a court adopt the rule of Berg v. Wiley? Yes Summary proceedings are the best ring to have these fights; potential for violence No Increased costs to landlords to subsidize defaulting tenants spread to non-defaulting tenants What if Wiley had waited a few more months before attempting to reenter? He would have a better argument as a defense against a wrongful eviction proceeding (stronger argument for abandonment/surrender) Advise client to provide notice of intent to retake possession to defaulting tenant .

Sommer v. Kridel CB at 410 Aspen at 46

Landlords Duty to Mitigate Damages

Whether a landlord seeking damages from a defaulting tenant is under a

RULE A landlord does have an obligation to make a reasonable effort to mitigate damages where a tenant has

Landlords often make a loss-volume argument (not fair to make a K to sell 500 widgets and then force manufacturer to mitigate by selling to another willing buyer, seller is not permitted to capture the additional demand) in the context of mitigation:

14

Case
Riverview Realty v. Perosio

Facts

Issue
duty to mitigate damages by making reasonable efforts to re-let apartment wrongfully vacated.

Rule(s)
wrongfully abandoned property.

Analysis

Policy/Hypos

1. Forcing mitigation by showing all available apartments (incl. the one currently under lease) prohibits him from renting to other buyers However, if he was choosing to rent the property at market value, there would be no loss volume problem. Presumably, he could rent the apartments at market value. 2. Landlord is required to exercise reasonable diligence in attempting to relet the premises. What is required to show reasonable diligence? Burden of proof is on the LL/Question of Fact Factors tending to show reasonable diligence: --Whether landlord offered or showed the apartment to prospective tenant --Advertisement in local newspapers --Key is that landlord treated the defaulted property as all other vacant properties Hypo: Landlord Lorna owns a brownstone and leases two floors to Max (one commercial, one residential). The lease is for 5 years for $2000/month. Max desires to end the lease 2 years into the lease. What are the landlords options? (1) Relet the property --Advise client to relet on the tenants account (which would prevent him from arguing that landlord impliedly accepting surrender and terminating the lease) (2) Accept surrender either explicitly (take back the property) or impliedly (through judicial proceeding) - novation (3) Wait and sue for all unpaid rent at the end of lease term (might have a problem in a jurisdiction where landlords have a duty to mitigate) (4) Anticipatory Breach --Measure of damages is the amount of money left on the contract discounted by the fair market value (mitigation is built in to the remedy) 1. You determine the market value for the space has risen. Which are the best options? If there is no duty to mitigate, then advise client to: (1) secure a tenant at the higher priced rent and accept the tenants surrender of the lease or (2) relet on the tenants account but at the higher priced rent (in some jurisdictions tenant will be able to argue that they are entitled to the difference; however, there will be an incentive to ROTA because it permits the landlord to keep two separate parties on the hook)) If there is a duty to mitigate, same result. 2. What if the market has plummeted? How does that change your advice? If there is no duty to mitigate, then: (1) advise client to wait and sue for unpaid rent at the end of the original lease term (this may implicate social costs such as blight/vandalism) or (2) refuse the surrender and relet on the tenants account (to get cash stream, landlords may incur costs in the reletting of the commercial space) If there is a duty to mitigate, then advise client to: (1) bring action for anticipatory breach. Hypo: Suppose Max offers to surrender the lease, in writing, but tells Lorna he has found a tenant who is willing to assume his lease. The proposed tenant, Damien Warlock, intends to run an adult bookstore out of the commercial space, and he intends to live in the second floor apartment. Lorna seeks your advice. She does not want to accept Damien as a tenant. What legal issues would you need to research to advise Lorna? Depending on what your research reveals, what advice would you give her? Ask these two key questions: 1. Whether landlord was under a duty to mitigate. If there is a duty to mitigate, tenant would argue that landlord refused to show the property/entertain a potential tenant that would have permitted her to completely mitigate her damages. Lorna counters that Sommer v. Kridel was confined to residential property, not commercial space. Commercial leases implicate increased costs in reletting

15

Case

Facts

Issue

Rule(s)

Analysis

Policy/Hypos

Reste Realty Corp. v. Cooper CB at 422 Aspen at 47

argues that landlord broke express covenant of quiet enjoyment in the lease by failing to repair the driveway which caused significant water damages.

Implied Covenant of Quiet Enjoyment and Constructive Eviction

RULE Any act or omission of the landlord which renders the premises substantially unsuitable for the purposes for which they are leased, or which seriously interferes with the beneficial enjoyment of the premises, is a breach of the covenant of quiet enjoyment and constitutes a constructive eviction of the tenant.

Residential property leases are more imbalanced with respect to bargaining power and sophistication 2. Whether the lease had an approval clause. If so, then she could only deny the assignment for a commercially viable reason (minority jurisdiction). She could make the argument as to the lack of suitability for the proposed use. If the majority rule (complete discretion in sublet approval) applies: Then she can probably reject Damien BUT she still may have a duty to mitigate. Hypo: Design firm has a lease with a 1. At early common law, the landlord on a building on Fifth Ave. only remedy was to sue for damages but the tenant was still Elevator is in constant state of repair and eventually completely breaks. in possession and on the hook Invitees must walk up 6 flights of for rent. stairs which hurts image to clients. 2. Under the doctrine of Client knows that the market is constructive eviction, she may down and can get a better deal. Design firm seeks advice. abandon the property and L argues that client is just trying to defend against an action to get a better deal and then make recover rent based on her arguments that this does not abandonment. constitute substantial Dependent relationship interference, unlike Reste between covenant of quiet T argues that this detrimentally enjoyment and covenant to affects business, puts them in at a competitive disadvantage, may lose pay rent clients who cannot physically climb 3. Tenants renewal cannot be stairs, etc. said as a matter of law as NOTE: Can you make the argument acceptance of the premises in that the breach is sufficiently their defective condition. Why? material to the use and enjoyment of Reasonable reliance on the the property.

Hilder v. St. Peter

The Implied Warranty of Habitability

How different than constructive eviction? (1) Withhold rent while remaining in possession (rent remains in escrow) (2) make the repairs and deduct from rent (3) punitive damages (4) compensatory damages Valuation methods: (1) fair market value of the property as warranted value of dwelling as existed (2) Actual rent warranted value of dwelling as existed NOTE: Neither party may waive the implied warranty of habitability nor can L claim

previous owners assertion that he would repair the driveway Seems to suggest that there may be some defense of waiver or assumption of the risk to constructive eviction Why not apply doctrine of constructive eviction? She did not abandon therefore no defense of constructive eviction. Policy (Requiring her to move with her kids may not be ideal)
(1) Does this really make sense for tenants protection and rights: Should the parties be able to waive? No (1) external social costs justify extension beyond K law (2) L would incorporate waiver into their contracts Posner would argue that the market will correct because L will be at a competitive disadvantage.

NOTE: Some characterize this warranty as going beyond contract; this implied warranty is really paternalistic/social policy law designed to help lowincome/poor, etc. This differs from covenant of quiet enjoyment: If a tenant can argue that the landlord breached the implied warranty of habitability, then they dont need to argue for a material breach of covenant of quiet enjoyment and defend with constructive eviction. o Note that many

16

Case

Facts

Issue

Rule(s)
assumption of the risk.

Analysis
But where information costs are low, it may be that all Ls will adopt waiver (act like oligopoly). (3) Less need for individual tenants to pursue remedy for breach of express covenants (4) Think about the facts of Hilder; most tenants do not go into the bargain thinking Do I want a habitable or unhabitable apartment? They THINK they are paying for a habitable apartment Yes (1) landlords costs will increase and he will: decrease supply or spread those costs to tenants thereby raising all rents These costs are marginal they affect the poorer more than the richer. The alternative to the poorer may be no housing at all. (2) Better way to remedy the problem is through legislative effort

Policy/Hypos
jurisdictions have declined to apply the implied warranty of habitability to commercial property. Should the implied warranty of habitability be extended to commercial property? No because parties to a commercial transaction are more sophisticated, retain counsel, leases are more thoroughly negotiated, policy justifications supporting the habitability warranty are not relevant in commercial context Yes. The landlord is in the business of maintenance of property and it encourages all landlords to keep all property in the aggregate in good condition. Also, there are sophisticated residential tenants and nonsophisticated comm.. tenants

Section 6 The Land Transaction

Case
Lohmeyer v. Brown CB at 479 Aspen at 55

Facts
Title showed a restrictive covenant requiring any house built on Lot 37 to be two stories. Research (after title search) revealed a zoning ordinance providing that no frame building could be erected within three feet of a side or rear lot line. House was in violation of that ordinance. Seller offered to cure defect by expanding plot on north side.

Issue
Marketable Title An implied condition of a contract of sale of land is that the seller must convey to the buyer a marketable title.

Rule(s)
RULE Municipal restrictions existing at the time of execution of the contract do not render title unmarketable, but violations of those restrictions render title unmarketable. WHY?

Analysis
1. With respect to zoning, as opposed to easements, there are other ways to discover the restrictions instead of title search The multiplicity of laws affecting/restricting property use suggest that it would be easy for seller to subvert the law to get out of undesirable agreement. 2. The violation, however, gives rise to the potential for future litigation thus making title unmarketable. Seller expressly reserved the right in the contract to remedy any issues that made title unmarketable and so offered, but buyer refused. o Without the private covenant, seller

Policy/Hypos
HYPO: Suppose there had been no zoning ordinance. RULE Private covenants render title unmarketable regardless of whether the covenant is violated or not. WHY? Buyer may not have been able to ascertain the restriction upon reasonable inspection of the property. Contract between the parties may not represent the bargain that the buyer agreed to (K presupposes equal information, buyer did not have info and did not contemplate in bargaining. Did not contemplate when offering Here, however, the mere fact that buyer discovered that

17

Case

Facts

Issue

Rule(s)

Analysis
might have been awarded specific performance since the remedy was feasible o However, the seller could not reasonably cure the defect of the private covenant. Why is there a duty to disclose in this case? There is an exception to caveat emptor where fairness and commons sense dictate that an exception should be created, the evolution of the law should not be stifled by rigid application of a legal maxim. Requires that a buyer act prudently to assess the fitness and value of his purchase and operates to bar the purchaser who fails to exercise due care from seeking the equitable remedy of rescission (1) Duty of good faith (not violated here) RULE ..to constitute bad faith there must be an intentional disregard of duty or purpose to injure. i.e., switching the sale date, no ads, ignore potential buyer (2) Duty of due diligence (violated here) RULE whether a reasonable man in the lenders place would have adjourned the sale or taken other measures to receive fair price. Lack of appraisal prior to sale to ascertain actual equity Sale was focused only on making lender whole, not recoupment of equity of Failure to take steps that a regular seller would take to market the property

Policy/Hypos
private covenant would not render title unmarketable because of the express waiver in the language of the contract (...subject, however, to all restriction and easements of record applying to this property.) Here, there is no sound policy justification for requiring that a buyer would discover this type of defect before contracting Also, seller took affirmative steps to highlight this defect to the public at large NOTE: The peculiarity of the defect gave rise to the duty to disclose.

Stambovsky v. Ackley CB at 484 Aspen at 56

The Duty to Disclose Defects HYPO: Suppose a house need new windows. After contract for sale, buyer attempts to rescind contract. RULE (NY) Caveat emptor: Generally no duty upon the seller to disclose any information concerning the premises unless there is a confidential and fiduciary relationship between the parties or some conduct on the part of the seller which constitutes active concealment.

RULE Where a condition which has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care, nondisclosure constitutes a basis for rescission as a matter of equity.

Murphy v. Fin. Dev. Corp. CB at 546 Aspen at

argues that failed to generate a market in order to realize s equity at the foreclosure sale.

The Duty of Mortgagee to Release Equity in Foreclosure Sale

A mortgage represents the security (generally the property) provided to the lender, mortagee, by the borrower, mortgagor in order to get the funds to purchase the property. Foreclosure is a judicial process. What documents would a client need to file summary judgment in a foreclosure proceeding.? 1. Mortgage agreement with right of foreclosure. Remedy is specific performance. Foreclosure sale for proceeds. 2. Promissory Note Damages (generally equal to the difference between the amount on the promissory note and the proceeds from the sale of the collateral) 3. NOTE: when foreclosure sale proceeds exceed the amount owed on the promissory note, the equity

Rule A mortgagee executing a power of sale is bound by both the statutory procedural requirements and by the duty to protect the interests of the mortgagor through the exercise of good faith an due diligence. The fiduciary duty arises when the lender exercises its power of sale

On the issue of damages: Court remands rejecting the trial courts valuation (FMVamount obtained at sale), adopting the rule of (fair price-amount obtained at sale) NOTE: In NY and NJ, once a court enters judgment for the , the sheriff handles the foreclosure sale. Removes the burden from sellers to show reasonable steps taken to sell at fair market price.

18

Case

Facts

Issue
proceeds go to the borrower. Who is responsible for realizing that equity

Rule(s)

Analysis

Policy/Hypos

Section 7 Title Assurance

Type
Race Notice Race-Notice Shelter Rule (See CB at 581 footnote 9)

Rule
As between successive purchasers of Blackacre, the person who wins the race to record prevails. Notice is irrelevant. If a subsequent purchaser had notice of a prior unrecorded instrument, the purchaser could not prevail over the prior grantee, even if he recorded first. A subsequent purchaser is protected against prior unrecorded instruments only of the subsequent purchaser (1) is without notice of the prior instrument and (2) records before the prior instrument is recorded. A person who takes from a BPFV protected by the recording act has the same rights as his grantor. This rule is necessary to if the recording act is to give the SBPV the benefit of his bargain by protecting his market.

Case
Luthi v. Evans

Facts
Owens assigned all of her interest in seven oil and gas leases to International Tours (D) via a Mother Hubbard Clause. Assignment recorded Subsequently, she conveyed a lease that had not been specifically enumerated in the MH clause to P. Ps title search did not reveal Owens previous assignment. Timeline 5/7/46 Caroline to Fredrick () (4/23/51) Caroline leases/irrelevant 5/7/51 Caroline to Smith () 5/9/51 Smith to Seale 5/26/51 Smith and Seale record (faulty acknowledgement) 7/9/51 Fredrick records

Issue
Required Specificity in grants to trigger notice in SBPV

Rule(s)
RULEAn instrument conveying all of grantees property is not sufficiently specific to trigger record notice in SBPV absent actual knowledge.

Analysis

Policy/Hypos

Messersmith v. Smith

Requirement of Acknowledgment on Deed

RULE A deed that has not been properly acknowledged does not qualify for recordation and therefore does not provide constructive notice to SBPV.

KS is a race notice statute requiring a bona fide subsequent purchaser for value: (1) have no notice of previous purchase and (2) records purchase first. Smith meets requirement of lack of notice Smith failed on the recordation requirement.

Purpose of notary authenticate signature on the instrument of conveyance Can argue that substance of the rule/purpose was satisfied here.
Hypo: OA [defective acknowledgement on the deed] A records OB, B records

19

Case

Facts

Issue

Rule(s)

Analysis
Why? o Second deed correcting typographical error was not properly notarized as required as a condition precedent to recording.

Policy/Hypos
B because A did not meet the condition precedent to recordation (effective acknowledgement) A could argue that B had notice irrespective of the defect in As deed the prevented proper recordation

Board of Ed. v. Hughes

Timeline: 5/16/06 offered to purchase lot (subject to unpaid taxes) for $25 from Hoerger (H). Note the name of the grantee was not recorded in the deed 5/17/06 H accepted s offer and execute/acknowledged deed and delivered to by mail 4/27/09 H. conveyed lot to Duryea and Wilson (real estate dealers) 11/19/09 D&W executed deed to 1/27/10 Deed from D&E to recorded 12/16/10 filled in the name of the grantee and recorded deed 12/21/10 Deed from H. to D&W recorded

Wild Deed in a Title Search

RULE Wild deed gives no notice

1. Pre-Issue: Whether the deed from H. Hughes ever became operative (due to the fact that grantees name was not on the instrument at the time of conveyance) Hughes became a purchaser on 12/16/10; implied authority to fill in the name on the deed 2. Hughes does a title search in 12/10 then he would look for Hoergers name and looks back in the grantee index

Hughes then moves to the grantor index and looks forward; he would have no reason to inquire into D&Ws recording Lawyers for Board of Ed should have, at the time of conveyance from D&W, required a recordation of the conveyance form D&W to the Board of Ed.

Hypo: Suppose in 1940, the MN legislature repeals race-notice statute and replaces with a notice statute. What results? Argument for Board of Ed Board of Ed did not have to record first; absent the law making Hughes a subsequent, the Board wins. How to convince Court that Hughes was first purchaser? o Overrule a portion of the opinion o Cuts against the recording statute policy of encouraging purchasers to record conveyances quickly o Hughes does not represent the class of people the recording statutes are intended to protect --The portion of the holding in a race-notice jurisdiction making Hughes a subsequent purchaser was not outcome determinative. Key holding was that a wild deed gives no notice Which approach is preferable? 1. Why is Guillete correct? Court is protecting the third-party who provided consideration for restrictions on other lots in the subdivision 2. How do you prevent this problem in a NY jurisdiction? How to provide notice to subsequent purchasers? Encourage developer to sell the entire parcel to a strawman (for some valuable consideration) and then the strawman sells back to the developer with the restriction in the deed. Once the developer conveys the subdivisons, those deeds will have the restriction Example 10 (pg. 595) O conveys to A who does not record. O subsequently conveys to B, who has actual knowledge of conveyance

Guillette v. Dry Wall

Landowner intends to develop a residential subdivision and sells several lots. The deed to Lot 1 includes a reciprocal use restriction. The subsequent deeds to Lots 2-5 did not reference the restriction. Holder of deed to Lot 5 intends to build an apartment building. Holder of deed to Lot 1 sues to enjoin based on the reciprocal restriction the deed to Lot 1.

Notice of Reciprocal Restriction not located in Subsequent Deeds out from a common grantor

RULE SBPV are bound by reciprocal restrictions located in deeds emanating from a common grantor that are not located in their chain of title.

argues that has a duty, where there is a common grantor (one who subdivides a large parcel), to examine all deeds emanating from the common grant. How? Title Search for the grantor would unveil that only a portion of the parcel was granted; purchaser must then search for other grants of the same parcel and examine the actual deed 1. Is this good policy? --Imposing this duty on purchasers would impose a broader duty in situations where a grantee further subdivided subject to restriction or whether previous grantors

20

Case

Facts

Issue

Rule(s)

Analysis
had restrictions --Creates tension with the objective of simplifying the title search process (adds cost and time to title search) 2. Counterargument: In Guillete the deed incorporated a subdivision plan which is visual evidence (sufficient to charge notice) that there were possible restrictions --Some jurisdictions, NY included, completely reject the broad reading of Guillete (unqualified duty to inspect for restrictions emanating from other deeds) Confine Guillete to its facts (the existence of a subdivision plan)

Policy/Hypos
to A. B records. A records. Later B conveys to C, a purchaser for value who has no actual knowledge of the deed from O to A. C records. Who prevails, A or C? Arguments for A C on constructive notice because As title in the records although outside the chain of title - Guillette Arguments for C C would have to search under every owner from the time of conveyance until the present time to see if the owner gave a prior deed recorded after the first recorded deed

Daniels v. Anderson

Jacula Daniels (1977) Contract included right of first refusal to contiguous parcels Did not record the restriction in the deed Daniels Zografos (1985) Contract for sale of contiguous parcel without notice of restriction Paid in installments

When does a buyer who pays in installments become a SBPV?

RULE One cannot claim SBPV status until he has taken legal title. NOTE: Equitable title not applied here.

HYPO: In 2002, J sells to Prior (P) for $40K. J sells parcel to Subsequent (S) for $30K now and $30K in 2005. P records in 2004. P brings an action against S to quiet title and the house is now worth $100K. Who prevails applying Daniels? Arguments for P --S was not a bona fide purchaser until he paid in full. --S did not become a purchaser until 2005, after P recorded, thus giving rise to constructive record notice. Argument for S --Some jurisdictions have relaxed this harsh rule to reflect market realities. -Daniels was an affirmation on an abuse of discretion standard and recognized that the trial court had discretion to apply other equitable remedies One method is to award the buyer a fractional interest in the land proportional to the amount paid prior to notice. Both parties have good arguments as to which equitable remedy is best applied. P argues for the title and payment to S of 30K payment S argues for title and payment to P remainder (instead of J) Moment that deserves protection is at the time of contract S should not be punished (compared to a subsequent purchaser who financed through a bank) Burden on those who finance from a seller to update a title before each installment Burden should be on the cheapest cost avoider, in this case P Alternatively, the doctrine of equitable conversion vested title in S in 2004 at the time of contracting. Why should this apply? Reliance interest on the part of S Sold property, made capital investment, etc.

Lewis v. Superior Court

Equitable Title and Financing from the Seller

Is a person who records an interest in real estate after a BPFV takes title thereto inferior to the BPFV, even if BPFV has not completed full payment.

RULE Reject Payment of Value Rule (requiring full payment before becoming a bona fide purchaser for value)

1. Reliance on Title at the point of contract/Reflect market realities 2. Purchasers financing from seller would have to undertake title search before payment of each installment. 3. Least cost avoidance

NOTE: Effect of lis pendens is to make title unmarketable because it gives notice to subsequent purchasers that claimant is alleging that he is raising a claim where the property might be implicated. Is this result fair?

Harper v. Paradise

Timeline:

Inquiry Notice

1. Adverse Possession

21

Case
(remaindermen) v. (subsequent grantees)

Facts
2/1/22 Susan Harper conveyed deed to Maude Harper for life remainder to her named children. (Lost and unrecorded until 1957) 25-27 Susan died 3/19/28 Harpers remaining heirs execute a quitclaim deed giving effect to the 1922 deed to Maude Harper 1933 Maude executes security deed to Ella Thronton 1936 Maude defaulted on the loan and Thorton forecloses 1955 Paradise obtained and recorded deed to property from Thortons chain of title 1957 1922 deed recorded 1972 Maude dies Choctaw mortgaged apt. bldg. to D. It sold a single unit to P who occupied unit and paid all rents. Choctaw subsequently executed second mortgage to D and defaulted. D foreclosed on bldg including unit occupied by P. P contended he had better title.

Issue

Rule(s)

Analysis

Policy/Hypos
Seems to be a weird policy because there seems to be no way even through a more extensive title search.

Statute of limitations starts anew as against the remaindermen when their interest vests and becomes possessory at Maudes death. Is this fair? Remaindermen didnt have a right of ejectment necessary to eject the Paradises until they had the right to possession. 2. Paradise argues that they had no knowledge of the future interests of the 1922 deed (1928 deed did not mention the future interest) Replacement deed did not reference the future interests and its reasonable to think that the replacement deed is identical to the deed it purports to replace. Court rejects and charges Paradises with inquiry notice (facts in the record giving rise to inquiry in the title search).

Waldorff v. Elgin

Inquiry Notice

Waldorf argues that it obtained equitable title to property in 1973 at the time of contract prior to the time of the second and third mortgages to the Bank. Although they did not record, Waldorfs open and exclusive possession was sufficient to give rise to inquiry notice Bank argues that several units were occupied and they did not know which tenants actually had a property right Court states that Bank could have just asked each possessor whether they had a property interest prior to accepting mortgages.

Is this a fair result? 1. One argument that it is not is that the burden should have been on the least cost avoiders (in this case, Waldorf who could have recorded) 2. Counter is that seller might not agree to notarize and deed is not able to be recorded. Why might seller not want to record? If purchaser defaults, they remain as interest in the property on the recorded deed which decreases marketability of the title.

22