PROPERTY II OUTLINE

Professor Fran Ortiz

Summer 2002

 

E-mail:  fortiz@stcl.edu                                                                                                                                                                    (H)  832.252.6560

Office:  Room 618                                                                                                                                                                              (C)  713.213.1421

                                                                                                                                                                                                               (O)  713.646.2946

  1. ACQUISITION BY Adverse Possession
    1. Theory and Elements of Adverse Possession

                                                               i.      Actual entry giving exclusive possession of the land

1.       must actually physically possess the property with the same degree of occupancy and use as average owner would use that type of property

a.       ie., if the owner has guests, you can have guests; if the owner goes on vacation, you can go on vacation

2.       must exclude true owner

3.       possession cannot be shared with the owner or the public

4.       if a landowner does not bring action to eject an adverse possessor within the statutory period, the owner is thereafter barred from bringing an ejectment action.

a.       10 year SOL=>O owns & A enters in 1990.  It’s the year 2002.  A is considered to have taken title in 1990.

                                                                                                                                       i.      Relation-Back Doctrine

1.       When you are considered to be the owner at the time you’ve entered the property as soon as you meet all the elements.  So, in 2000 he is considered to have been the owner in 1990.before the SOL runs, the AP has all the rights of a possessor, but has no legal interest valid as against the true owner

                                                              ii.      Open and notorious

1.       visible possession so as to put owner reasonable notice

2.       reasonably inform an attentive landowner that someone is on the property

                                                            iii.      Possession must be adverse and under a claim of right

1.       has to be against the true owner’s interests (a.k.a. “hostility”)

2.       claim of title requirements

a.       objective standard (punishes people from sleeping on their rights)

b.       good faith belief you own the property

c.       aggressive trespasser standard—you knew you didn’t own the land but you didn’t care

                                                             iv.      Continuous for the statutory period

1.       appropriate to the subject land—can be seasonal

2.       unchanged type of use important

3.       the possession of one person can be tacked to that of another if there is privity between them

    1. Reasons for Adverse Possession

                                                               i.      Quiets title (establishes ownership); will tell us who owns the land

                                                              ii.      Promote beneficial use of land

1.       Earning theory: rewards person making beneficial use of the land

                                                            iii.      Penalizes person sleeping on their rights

1.       Sleeping theory: encourages attentive ownership

                                                             iv.      Settles disputes; encourages persons to make improvements

                                                              v.      Furthers expectations of the adverse possessor

1.       Economic theory: it is more economical to let the AP have the land than to try to determine who is the true owner

    1. Van Valkenburg v. Lutz (1952)—Lutz purchased lots 14 and 15 in 1912; behind Lutz’s lots were lots 19-22 that D used only for access to his property at first then later built a shed, a chicken coop, and gardened selling the vegetables to his neighbors; in 1937 Van Valkenburg purchased lots 31 and 32; lots 19-22 were in between Ps and Ds properties; P purchased these lots in 1947 and erected a fence across P’s access-way to his property; D sued P, admitting P owned the lots but claimed a right of access across it; D lost because he did not occupy P’s land under a claim of title required in AP

                                                               i.      To acquire by AP, one must clearly and convincingly show that for at least X years there has been actual occupation of the land (enclosing the land or cultivating or improving) under a claim of title

                                                              ii.      Once an AP has an interest in land, it takes more than a mere statement or act to convey it back to former owner.  Nothing you can say will change the fact that you adversely possess the land. 

1.       PROBLEM p. 142.  A and B own adjacent lots.  A erects a fence on B’s lot 3’ beyond what she thought was common boundary; fence stays for SOL; A owns the strip of land by AP; B surveys and notifies A of the mistake so A “to avoid a hassle” tears down her fence and erects a new one on the real boundary; three years later A talks to a lawyer, changes her mind and sues to eject B from the 3”; A wins because she owns the 3’ by AP and thus so, B has to meet his SOL too which he has not (3 years no SOL for AP)

    1. Manillo v. Gorski (1969)—D entered land under K to purchase; in 1946 D’s son made some improvements to her home including building concrete steps to replace the wooden steps; D steps encroached on P’s property by 15”; the land was conveyed in 1952; P filed complaint seeking injunction against D’s alleged trespass; D counterclaimed seeking DJ to determine D had gained title by AP; entry and continuance of possession under mistaken belief that possessor has title to the land involved exhibits the hostile possession required to obtain title by AP

                                                               i.      Mistaken Boundaries

1.       Maine Doctrine—AP claimant must have intent to take the land regardless of whether or not it is his (aggressive trespasser) (rewards trespasser for trespassing v. rewarding somebody honestly making a mistake); minority view

2.       Connecticut Doctrine—no intentional hostility required (objective standard—intent irrelevant); majority view

                                                              ii.      The element of “open and notorious” possession may not be met where the encroachment is of a small area or where the intrusion requires an on-site survey; no presumption of knowledge arises from a minor encroachment along a common boundary, actual knowledge required; only where the true owner has actual knowledge thereof may it be said that the possession is open and notorious

                                                            iii.      Remedy—owner can be forced to convey the land to D if:

1.       AP’er must be innocent trespasser

2.       small encroachment

3.       encroachment is:

a.       costly

b.       impractical to remove

c.       removal will cause great hardship

4.       AP’er must pay for value

5.       No serious damage results to the land

                                                             iv.      Whether or not the AP is mistaken, the owner is ousted from possession; if he fails to attempt to recover possession within the requisite time, it is probably the result of lack of knowledge that he is being deprived of lands to which he has title

                                                              v.      Any entry and possession for the required time that is exclusive, continuous, uninterrupted, visible and notorious, even under mistaken claim of title, is sufficient to support a claim of title by AP

    1. Constructive Adverse Possession—if someone else owns the land, you can only adversely possess what you can physically enter
    2. Color of Title—claiming title via written instrument; an instrument or act that has the appearance of granting title to the claimant but in reality falls short of establishing it (e.g., forged deed); must have an actual entry
    3. Boundary Disputes—most courts apply the objective test to determine if one of the parties has acquired title to the disputed strip of land by adverse possession; ie., by putting up a fence and using the land for the necessary number of years, the party can acquire title to the land

                                                               i.      Doctrine of Agreed Boundaries—if there is uncertainty between neighbors as to the true boundary line, an oral agreement to settle is enforceable if the neighbors accept the line for a long period of time

                                                              ii.      Doctrine of Acquiescence—acquiescence for a long period of time is same as an agreement because you did something and the other person didn’t object; like a silent agreement

                                                            iii.      Doctrine of Estoppel—if one neighbor makes representations about location or engages in conduct that tends to indicate the location of the common boundary and the other neighbor changes her position in reliance on the representations or conduct, the first neighbor is estopped from denying that’s where the boundary is

 

  1. The Mechanics of Adverse Possession
    1. Howard v. Kunto (1970)—Howards and Kuntos hold property in a summer resort area where houses are used primarily for summer occupancy; Ps owned land one lot away from Ds; when Ps tried to convey land to 3d party, they found the title they held was to the adjacent lot (most other land owners too); Ps brought action to quiet title; court held that since D owned land for > 1 year and the principle tacking was not established, the title was quieted in Ps; Ds appeal; J reversed

                                                               i.      The fact that the land was only used in summer months makes no difference in establishing AP

                                                              ii.      Continuous Possession

1.       when possessor maintains possession for the statutorily required period of time and the property is used in a customary manner; ie., summer cabins, farming someone else’s field for enough years

                                                            iii.      Tacking

1.       allowing AP to tack the time he is in possession onto that of his predecessor in interest’s period of AP

2.       there must be privity of estate between the two APs

3.       once there is an entry against an owner, AP begins and isn't defeated when ownership changes through will or intestacy

a.       American Rule—AP’ers cannot tack unless there is privity

b.       English Rule—AP’ers can tack regardless of privity

                                                                                                                                       i.      Privity—voluntary transfer of property from one to another

4.       PROBLEM

a.       O owns

                                                                                                                                       i.      1987—A enters

                                                                                                                                      ii.      1994—B kicks A off, A leaves and B enters into possession

                                                                                                                                    iii.      1997—who owns?  O owns under American Rule; under English Rule B owns

5.       PROBLEM (continued)

a.       1994—A leaves under threat of force

b.       6 months later—A recovers possession from B

c.       If O does nothing, will A own Blackacre 10 years and 6 months from the date of entry in 1987

6.       PROBLEM

a.       O owns-10 year SOL

                                                                                                                                       i.      1981—A enters

                                                                                                                                      ii.      1982—O devises to B for life, Rm to C

                                                                                                                                    iii.      1997—B dies without ever having entered upon Blackacre

                                                                                                                                     iv.      Who owns Blackacre?  A

7.       RULE—you adversely possess the estate you enter upon; once there is an entry upon an owner, AP begins and possession is not defeated or interrupted by subsequent transfers by the owner, whether by conveyance, will or intestacy

8.       RULE—Adverse possession is against the possessory estate; so whatever estate is the possessory estate is what the AP’er will get unless the future interest holders are put on interest

                                                             iv.      Improvements and Encroachments (buildings and fixtures erected without right)

1.       Compensated equal to market value of improvements or permitted removal of the improvements

2.       Landowner may have choice to pay for improvements or convey land at market value to improver

3.       If building not entirely on neighboring land but partially on wrong lot is usually not considered fixture

4.       If encroachment result of innocent mistake, courts tend to look at relative hardships of parties granting or denying injunctive relief

5.       If removal is difficult or expensive for the intruder compared to inconvenience to landowner, injunctive relief usually denied and only damages awarded

6.       Where inconvenience trivial, some courts deny all relief

7.       If encroachment is willful or intentional, most courts issue injunction requiring removal of encroachment regardless of convenience or hardship

8.       Party who intentionally encroaches does so at own peril

                                                              v.      Disabilities

1.       An action to recover the title to or possession of real property shall be brought within 21 years after the cause of action, but if a person entitled to bring such action at the time the cause of action accrues, is within the age of minority, of unsound mind, or imprisoned then that person may bring a COA within 10 years after such disability is removed

2.       Disability is immaterial unless it existed at the time the COA accrued

a.       PROBLEM

                                                                                                                                       i.      1967—O owns Blueacre; O insane

                                                                                                                                      ii.      5/1/67—A enters

                                                                                                                                    iii.      1990—O dies insane and intestate; O’s heir H under no disability

                                                                                                                                     iv.      When would A acquire title?  2000

                                                                                                                                      v.      H gets to sue because he’s the successor in interest in the property

b.       PROBLEM (continued)

                                                                                                                                       i.      O’s heir H is only 6 years old

                                                                                                                                      ii.      still has to sue by 2000 because disabilities can’t be tacked (legal guardian)

c.       PROBLEM

                                                                                                                                       i.      1967—O owns Blueacre; O has no disability

                                                                                                                                      ii.      5/1/67—A enters

                                                                                                                                    iii.      1985—O dies intestate

                                                                                                                                     iv.      O’s heir H is 2 years old

                                                                                                                                      v.      A will own Blueacre in 1988 because the disability doesn’t apply; it wasn’t present at the time of entry; 1967 + 21 years is 1988

d.       PROBLEM

                                                                                                                                       i.      1967—O owns Blueacre; O is 5 years old

                                                                                                                                      ii.      5/1/67—A enters

                                                                                                                                    iii.      1977—O becomes insane

                                                                                                                                     iv.      1992—O dies insane and intestate

                                                                                                                                      v.      O’s heir H has no disability

                                                                                                                                     vi.      1990 because only disability that counts is disability at time of entry; disabilities can’t be tacked

                                                             vi.      RULE

1.       death removes a disability

2.       at the point the disability is removed, the 10 year provision starts ticking

3.       disabilities can’t be tacked

4.       disability must be present at entry

5.       if there are two disabilities, take the longer of the two

 

  1. Prescriptive Easements
    1. Othen v. Rosier (1950)—use by express or implied permission, no matter how long continued, cannot ripen into a prescriptive easement; D consented to P’s use of the land so P does not have a prescriptive easement

                                                               i.      Easement

1.       limited use of someone else’s land (phone, cable, electric, water companies have an easement across your land to lay and maintain pipes, lines, etc.)

2.       generally is for a right of way

3.       same elements present for AP also there for easements

                                                              ii.      Differences between AP and PE

1.       AP is to own the land

a.       possessory interest

b.       exclusive possession

2.       Prescriptive easement is to use the land

a.       non-possessory interest

b.       non-exclusive possession

                                                            iii.      Elements of Prescriptive Easements

1.       actual entry

2.       “exclusive use” (can’t share the use with anyone else)

3.       open and notorious

4.       “adverse”

5.       continuous use of another’s land for the statutory period

                                                             iv.      Prescription by the Public—Jurisdictions vary:

1.       some say – no prescription allowed

2.       others say – yes, we will allow prescription by a large, definable group, but only if:

a.       strong proof of adversity

b.       different use than that made by general public

3.       Public itself can prescribe but owner must be on notice, by the kind and extent of use, that an adverse right is being claimed by the general public and not by individual

4.       To prevent a prescription, effectively prevent them from using it or give them permission so it will not be adverse

 

  1. Easements by Necessity and Easements by Prescription
    1. Matthews v. Bay Head Improvement Assn.(1984)—ownership, dominion and sovereignty over land flowed by tidal waters extending to the high water mark is vested in the state for the people; public uses include navigation, fishing, and recreational uses, including bathing; this doctrine applies to municipally owned dry sand areas since enjoyment of rights in the foreshore is inseparable from use of dry sand beaches; public interest in privately owned dry sand beaches may include 1) the right to cross in order to gain access to the foreshore; and 2) the right to sunbathe and enjoy recreational activities; without some means of access, the public right to use the foreshore would eliminate the public trust doctrine; the public interest is satisfied as long as there is reasonable access to the sea; bathers reasonable enjoyment of the foreshore and the sea cannot be realized unless some enjoyment of the dry sand area for rest and relaxation is also allowed

 

  1. THE LAND TRANSACTION
    1. Contracts of Sale—involves 2 steps: 

                                                               i.      K to sell/purchase is signed specifying the date for the closing

                                                              ii.      at closing, the S gives the B a deed to the property and the B gives the S the agreed-upon consideration

    1. The Statute of Frauds—no interest in real property can be conveyed without a writing signed by the party to be charged (party against whom it is asserted there is a K)

                                                               i.      K for sale of land must be:

1.       signed by party to be bound

2.       describe the property; and

3.       state the price

    1. Essential Terms—description of the property sufficient to make clear what property the parties have in mind, price (reasonable or market), the parties, and other terms and conditions pertinent to the transaction (manner of payment, etc.)
    2. Specific Performance—rather than award damages, the aggrieved party must ask for specific performance
    3. Oral Revocation—most states hold that the Statute of Frauds applies only to the making of the K and will thus allow oral revocation or modification
    4. Time of Performance—each party has a reasonable time in which to complete its performance if the K does not specify time is of the essence or a date is called for in the K

                                                               i.      State v. Buyers Service Co. (1987)—who prepares the K?  D is title company assisting prospective property buyers by preparing closing packages and closings without attorney present; P brought suit alleging unauthorized practice of law; court holds that lawyer must prepare deeds, mortgages, notes and other legal real property transfers; activities such as preparing abstracts requires legal knowledge and skill and must be supervised by an attorney; closings should be conducted under attorney’s supervision; recording documents is act that constitutes practice of law

    1. Exceptions to Statute of Frauds

                                                               i.      part performance (varies by jurisdiction)

1.       payment of all or substantially all of the purchase price (rarely stands alone); and

2.       possession (can stand alone); and/or

3.       improvements (can stand alone)

                                                              ii.      estoppel

1.       party seriously changes position to detriment;

2.       in reliance on K;

3.       resulting in unconscionable injury

    1. Hickey v . Green (1982)—specific performance; Ps put deposit on D’s lot after oral agreement for sale of $15,000; D accepted $500 check marked by P on back with “Deposit….Subject to variance from Town of Plymouth;” P’s told D to fill in name of payee left blank because of uncertainty of who to make it out to; D held check but did not endorse it, and did not fill in payee’s name; Ps sold their house and accepted a deposit check; D told Ps she had decided to sell lot to another for $16,000; Ps offered D $16,000; D refused; P sought specific performance; court found for Ps; D claimed SOF barred relief and appeals; a K for transfer of interest in land can specifically be enforced if no compliance with SOF if party seeking enforcement reasonably relied on K and has so changed position that injustice can be avoided only by specific performance; D must be held to her end of the bargain
    2. Walker v. Ireton (1977)—seller didn’t know buyer was going to sell his farm; court didn’t grant specific performance

                                                               i.      Problems

1.       O owns Blackacre and executes and delivers a deed to her daughter A as a gift; deed not recorded; then O tells A she would like Blackacre back so A hands deed back to O and says “the land is yours again;” O tears up the deed; O owns Blackacre

2.       B gives S check for $5,000; B would not be able to rescind unless S has misrepresented the condition or has violated a duty to disclose or violated implied warranty of habitability; LET THE BUYER BEWARE

3.       Suppose B can obtain loan secured by mortgage on $150,000 but B expected S would be able to obtain $175,000 loan; can B rescind?  No, unless waiver in K stating “conditioned upon B obtaining financing”; B screwed; LET THE BUYER BEWARE

    1. Marketable Title—title that a reasonable person would have no doubts that title was valid and a person would be willing to pay FMV; free of defects; implied in every sale of real property that title is free from doubts; one which a willing person would be willing to buy; B can rescind if title not marketable

                                                               i.      Lohmeyer v. Bower (1951)—P K to buy house; D to provide good marketable title subject to all restrictions of record; abstract of title showed the original subdivider imposed restriction requiring that any home erected on the lot to be 2 stories (the existing home was 1 story); also, zoning ordinance required no frame building could be erected within 3’ of lot line (existing house 18” of lot line); P brought suit to rescind the K; D counter-sued for specific performance; the violation of the private and public restrictions renders title unmarketable; private covenants or restrictions (height requirement) may constitute encumbrances rendering title unmarketable unless waived; pre-closing:  violations of zoning ordinance = encumbrances (K stage)

1.       Encumbrance—burden on title that would make a reasonable person doubt that they have full title; encumbrances make real property unmarketable

2.       Restrictive covenant—promise that restricts; ie., single family housing, easement; more easily found

3.       Real Covenants

a.       Encumbrances (unless waived) = unmarketable title

b.       Real covenants = encumbrances (unless waived)

c.       Real covenants = unmarketable title

d.       Violations of real covenants = unmarketable title

4.       Zoning Ordinances

a.       Encumbrances (unless waived) = unmarketable title

b.       Zoning ordinances encumbrances/marketable title

c.       Violations of zoning ordinances = encumbrances / unmarketable title

5.       Encumbrance

a.       Restrictive covenant – yes

b.       Violation of restrictive covenant – yes

c.       Zoning ordinance – no

d.       Violation of zoning ordinance – yes

e.       If “yes” and B has not waived this particular encumbrance in the K, B can rescind

                                                              ii.      Conklin v. Davi (1978)—S K to sell house to B; K called for S to furnish marketable title and insurable title; B discovered that S obtained title to part of the property through AP; S never went to court to quiet title; B refused to go through with the deal; S sued B for specific performance; S counterclaimed to rescind K; title obtained by adverse possession is not unmarketable; when a seller’s title is grounded on AP he may either: perfect record title (obtain record from former owner, action to quiet title, action to concede outstanding encumbrance, etc.); or choose to enter into a K of sale hoping to convince the purchaser or the court that his estimate of the marketability of the title is justified; the K did not require perfect title of record, just marketable title; the title doesn’t need to be free from every doubt; the law implies that a title must be marketable even if a K fails to specify; if title by AP is clearly established, the title is marketable

1.       Time is of the Essence

a.       Title must stand or fall as it exists on the day of closing and seller cannot later cure the defects; if the K does not say time is of the essence the court will give the parties a reasonable time for performance; if the K does not same that time is of the essence, either party can fix the time for performance by giving notice to the other, provided the notice leaves a reasonable time for rendering performance

2.       Damages for Breach of K

a.       Specific performance

b.       Loss of bargain damages

                                                                                                                                       i.      The difference between the K price and the MV of the property on the date of breach (can fluxuate and either go for you or against you)

3.       Equitable Conversion

a.       Determines who bears the risk of loss after the K has been signed but before the deed has passed; if K has been signed B thinks he owns property and S thinks he’s sold the property BUT LEGALLY title doesn’t pass until deed passes at closing (578); at closing, deed and title pass, and the Buyer becomes the Owner; Generally Buyer has equitable title after K has been signed, but before the deed has been passed.  Not legal title.  Buyer carries risk of loss after signing K.  Buyer would get insurance proceeds from fire etc.  If a Seller remains in residence, some jurisdictions say Seller bears risk of loss until they move out.  Buyer holds equitable title.  Seller holds legal title in trust for the Buyer.

    1. The Duty to Disclose Defects

                                                               i.      Stambovsky v. Ackley (1991)—Owner was advertising house as haunted prior to sale; Buyer buys house, ignorant that it was haunted; Owner did not disclose it to Buyer; Buyer finds out it is haunted and wants to rescind saying Seller has failed to make the condition of the house known to him; NY law was caveat emptor – “Buyer Beware”

1.       Elements of Caveat Emptor

a.       No duty to disclose latent (hidden) defects, unless:

                                                                                                                                       i.      Confidential or fiduciary relationship exists between parties; or

                                                                                                                                      ii.      Active concealment by Seller. 

1.       Active concealment can be:

a.       Affirmative misrepresentation or partial disclosure; or

b.       Mere non-disclosure, but only if meet the requirements of Stambovsky or Davis.  Does not apply to supernatural events.

As-is clause was insufficient; only the Seller knew about it, the Buyer didn’t know; allso, Seller was supposed to leave house vacant, Court says it is not – there are poltergeists in the house; Court is making the assumption that poltergeists decrease market value; if Seller wants out, needs to argue that poltergeists do not decrease the market value;  Issue: Should Buyer should have found out about the poltergeists?  No.  Might not want to talk to neighbors; just b/c house was featured in Reader’s Digest does not mean that everyone knows about it; RULE:  If Seller creates defect/peculiarly (solely) within the knowledge of the Seller unlikely to be discovered by prudent purchaser exercising due care, the condition materially impairs the value of the K.

                                                              ii.      Johnson v. Davis (1985)—Seller said the roof was fine but the roof leaked; Buyer tries to rescind alleging breach of K, fraudulent concealment; when a Duty to Disclose is violated, the Buyer is entitled to rescind; RULE:  If the Seller knows of a defect materially affecting the value of the property and the defect is not readily observable to Buyer, the defect is not known to Buyer

1.       How to interpret Materiality (Jurisdictions differ):

a.       Objective test – whether a reasonable person would consider it material

b.       Subjective test – whether the Buyer herself would consider it material.  Some jurisdictions require Seller fill out Disclosure Form. 

2.       Don’t have to disclose sexual offenders as they are listed in the public records.  Don’t have to disclose if a swarm of killer bees are swarming around, as they are readily observable to the Buyer.

    1. Merger. 

                                                               i.      At closing, K of sale merges with the deed.  Now have 1 document.  Seller can only sue now on warranties in the deed, not on warranties contained in the K of sale.  Exceptions: fraud or misrepresentation.  Also could argue that the obligation to be enforced is outside the scope of the deed, therefore can sue for it.

    1. The Implied Warranty of Quality

                                                               i.      Logically must occur post-closing.  If discover fault prior to closing, then Buyer should rescind.

                                                              ii.      Lempke v. Dagenais (1988)—Builder builds garage for the Sellers.  Subsequent Buyer of a house sues Builder of garage for structural defects.  Buyer sues Builder for economic loss under Breach of K.  Implied Warranty of Quality is a Tort COA.

1.       Elements of IWQ

a.       Defects must be latent

b.       Manifest after purchase

c.      Not discoverable by reasonable inspection prior to purchase

d.      Limited to reasonable period of time

e.       Warranty limited to workmanlike quality.

2.       Buyer should do an inspection prior to purchase.  If they don’t, could be barred from bringing IWQ as IWQ can only succeed if a reasonable inspection DID NOT turn up the defect.

3.       Major Points with IWQ

a.       Against Builders

b.       Arises after Closing.

 

  1. THE DEED
    1. Warranties of Title

                                                               i.      General Warranty Deed—warrants title against all defects in title, whether arising before or after grantor takes title

                                                              ii.      Special Warranty Deed—contains warranties only against the grantor’s own acts but not the acts of others

                                                            iii.      Quitclaim Deed—contains no warranties of any kind; merely conveys whatever title Grantor has, if any.  Concerned about title after deed has passed to ensure that if something happens, the Seller will pay the Buyer back.

1.       O owns Blackacre.  A sells Blackacre to B.  O outs B.  Can B sue A under a:

a.       GWD?  Yes

b.       SWD?  Yes, A created the problem by selling to B in the first place; also A didn’t have superior title and sold it to B so B can sue A

c.       QD?  No, no warranties whatsoever

2.       O owns the property.  A sells it to B.  B sells it to C.  O outs C and O shows he has superior title?  Can C sue B if B passed a:

a.       GWD?  Yes, problem arose when A sold to B but B warranted against all defects whether problem arose before or after

b.       SWD?  No, because B did not cause the problem, A did

c.       QD?  No, no warranties of any kind whatsoever

3.       O owns property.  A forges O’s name and sells it to B.  In a suit between O and B, who wins?  O, because it was a forged instrument, O was not conveying it; the grantor whose signature is forged prevails over all others

4.       O owns.  A forges O’s signature and sells to B.  B sells to C.  In a suit between O and C, who wins?  The grantor whose signature was forged prevails over all others, including subsequent bona fide purchasers who didn’t know the deed was forged

5.       O owns property.  A cons O into selling 50 acres by changing the deed.  (A fraudulently induces O to sell.)  In a suit between O and A, who wins?  O.  The transaction is void if A committed fraud.

6.       O owns property.  A fraudulently induces O to sell to A.  A conveys to B.  In a suit between O and B, who wins?  B, grantor who has been defrauded can void the original transaction, but cannot void conveyances to subsequent bona fide purchasers (BFPs); the people who can prevent the harm are different in forgery and fraud

    1. Forgery

                                                               i.      the grantor whose signature is forged to a deed prevails over all persons, including subsequent bona fide purchasers from the grantee who do not know the deed is forged; a true owner cannot prevent the harm; a subsequent BFP can stop the harm by requiring some kind of identification to make sure it’s not forgery

    1. Fraud

                                                               i.      A grantor who has been defrauded can void the original transaction, but cannot void conveyances to subsequent bona fide purchasers (BFPs); a true owner can prevent the harm by getting someone to read the deed for her; there is nothing that subsequent BFP can do

1.       Different rules for forgery and fraud because the people who can prevent the harm are different.  In forgery, the true owner cannot stop the forgery.  Therefore, true owner always wins.  In fraud, the true owner can prevent the harm by getting someone to read/interpret the sale note.  Therefore BFP will win.  There was nothing the BFP could have done to prevent the harm from occurring.

    1. Covenants

                                                               i.      Present Covenants—they have to be breached when deed is delivered, if breached at all; SOL begins running at delivery of the deed; (e.g., chicken lays eggs that will crack immediately or not at all®breached when deed delivered or not at all; must sue before SOL runs)

1.       Covenant of Seisen—grantor warrants that he owns the estate that he purports to convey

2.       Covenant of Right to Convey—grantor warrants that he has the right to convey the property; in most instances this covenant serves the same purpose as the covenant of seisen, but it is possible for a person who has seisen not to have the right to convey (e.g., a trustee may have legal title but be forbidden by the trust instrument to convey it

3.       Covenant Against Encumbrances—grantor warrants that there are no encumbrances on the property; encumbrances include mortgages, liens, easements and covenants

                                                              ii.      Future Covenants—breached in the future when grantor fails to live up to promise (e.g., a broken egg = a cause of action; SOL doesn’t begin running until egg breaks; when a covenant is breached, the covenant no longer runs with the land…it’s a COA and you must sue within the SOL otherwise you’ve got a broken egg that’s going to start smelling)

1.       Covenant of General Warranty—grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title

2.       Covenant of Quiet Enjoyment—grantor warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title; this covenant is identical to the covenant of general warranty and is often omitted from GWDs

3.       Covenant of Further Assurances—grantor promises that he will execute any other documents required to perfect the title conveyed [never tests on this]

                                                            iii.      Problems

1.       Assume 5-year SOL; Jan 1, 1995 – O owns.  A sells to B.  What covenants have been breached?  The only ones are Seisen and Right to Convey ®both rights are in O.  When must B sue A?  Jan. 1, 2000.

2.       Assume 5-year SOL; Jan 1, 1995 – O owns.  A conveys to B.  What covenants have been breached?  Seisen and Right to Convey breached on Jan. 1, 1995.  These were breached immediately.  SOL Jan 1, 2000.    Jan 1, 1996 – O ousts B.  Covenant of General Warranty and Quiet Enjoyment have been breached.   Jan 1, 2001 SOL. 

3.       Assume 5-year SOL.  Jan 1, 1995 – O owns.  A conveys to B.  Jan 1, 2005 – O ousts B.  What covenatns have been breached, if any?

4.       Grantor conveys:  “to A in trust for O without the power of sale.”  Jan 1, 1995 – A ® B.  Jan 1, 2005 – O ousts B.  What covenants have been breached, if any?  A breached right to convey in 1995, he lacks the power to sell.  Covenant of general warranty breached because O has superior title.  Covenant of quiet enjoyment because B has been booted off the property and right to quiet enjoyment has been breached.

                                                             iv.      Brown v. Lober (1979)—present v. future covenants; O sells to Bosts reserving 2/3 mineral rights; they’ve sold the surface estate and 1/3 mineral rights; Bosts ® GWD Browns, no reservation mentioned; Browns ® leased mineral rights for $6K to Consolidated Coal; CC does title search and finds that Bosts still own 2/3 mineral rights and said they would give $2000 to Browns and $4000 to estate of Bosts for mineral rights; breach of seisen when Bosts sold to Browns because they didn’t mention reservation and breach of right to convey because they only really conveyed 1/3 mineral rights; SOL had already run because present covenants broken when conveyed; would have won of sued earlier; looked to future covenants and chose to sue under covenant of quiet enjoyment; warranty saying grantor saying you will not be disturbed in your quiet enjoyment by someone coming onto property saying get off; Browns pissed; court said no breach of quiet enjoyment because Browns trying to extend and would be same as covenant of seisen / covenant of right to convey

1.       Quiet Enjoyment

a.       Breached only if there is an interference with possession or constructive eviction

b.       Mere existence of superior title is not enough

                                                              v.      Frimberger v. Anzellotti (1991)—latent land use violations; post-closing:  Violations of Land Use Statutes ¹ Encumbrances (deed stage); D’s brother built house on title wetlands in violation of Clean Water Act; conveys to D by quitclaim deed; D conveyed property to P by WD, free and clear of all encumbrances but subject to all building, building line and zoning restrictions; P discovered violation of land use statute when he tried to make repairs; DEP informed D that he would have to submit application demonstrating necessity of maintaining bulkhead; instead P filed suit claiming breach of warranty against encumbrances and innocent misrepresentation; trial court found for P; D appeals; J reversed because latent violation of restrictive land use statute that exists at time fee is conveyed does not constitute breach of the warranty deed covenant against encumbrances; latent violations of state or municipal land use regulations that do not appear on land records that are unknown to seller as to which the agency charged with enforcement has taken no official action to compel compliance at the time the deed was executed, and that have not ripened into an interest that can be recorded on the land records do not constitute an encumbrance for the purpose of the deed warranty; neither a title search nor a physical examination of the premises would disclose the violation

1.       Problems

a.       X dumps hazardous waste on Greenacre.  X ® A, no actual knowledge of dumping.  X goes out of business.  A ® B by GWD.  Can B sue A for breach of the covenant against encumbrances?  No, B can’t sue A because violation of the land use statue of not an encumbrance

b.       A owns right-of-way across B’s land (easement); A has benefit of easement because he’s getting to use the road; B has the burden because B is being burdened by A’s use; an easement is just like a covenant; it can be an encumbrance; A buys land from O who purportedly conveys the right-of-way; A learns O was incompetent and now dead; B now objects to A’s use of easement; A wants to sue heirs of O alleging violation of covenant against encumbrances; no violation; if alleged encumbrance is a benefit to the land it is not an encumbrance for purposes of covenant against encumbrances; if it is a burden it is a violation of the covenant against encumbrances

                                                                                                                                       i.      A servitude that constitutes a benefit to the land of the grantee is not an encumbrance for purposes of the Covenant against Encumbrances

                                                                                                                                      ii.      A servitude that constitutes a burden on the land of the grantee is an encumbrance for purposes of the Covenant against Encumbrances

1.       Servitudes are:

a.       Easements

b.       Real covenants (restrictive covenant)

c.       Equitable servitudes (restrictive covenant)

c.       Damages

                                                                                                                                       i.      Breach of Covenant of Seisen—return of all or a portion of the purchase price

                                                                                                                                      ii.      Breach of Covenant against Encumbrances

1.       if easily removable (e.g., mortgage, lien, etc.) = cost of removal

2.       if not easily removable (e.g., covenant, easement) = difference between land value with the encumbrance and without

                                                                                                                                    iii.      íDAMAGES ARE LIMITED BY THE TOTAL PRICE RECEIVED BY THE WARRANTORí

1.       E.g., O owns; A $5K ® B $10K ® C = O ousts; B limited to $5K because you want to put the grantee in as good a position he would have been in if the bargain had not have been breached

                                                             vi.      Rockafellor v. Gray (1922)—remote grantees; Doffing conveyed to Rockafellor 80 acres by WD; there was an outstanding mortgage to Gray of $500 against the land that Rockafellor agreed to assume and pay; the mortgage was foreclosed on resulting in a sheriff’s deed that was executed and delivered to Connelly on 2/23/1911; 2 months later Connelly conveyed that land to Dixon; the deed contained usual warranties and consideration of $4K; 2 months later Dixon conveyed to Hansen & Gregerson by SWD with consideration of $7K; on 8/15/1918 Rockafellor brought suit to vacate and set aside foreclosure sale arguing that it was void for lack of jurisdiction; on 1/13/1920 H&G filed cross-petition; Connelly and H&G were made parties to original action and prayed that if Rockafellor successful in vacating sheriff’s deed that they have J against Connelly upon the covenants in his deed to Dixon; court entered J in favor of Rockafeller saying foreclosure proceedings invalid, sheriff’s deed should be set aside, and entered J against Connelly in H&G’s cross-petition on the covenant of seisen in his deed for $4K with interest from date of deed from Dixon to H&G

1.       Rock owns.  C®Dix.  Dix ® H&G.  Rock ousts H&G.

a.       Issue #1:  does covenant of seisen run with land so that action may be maintained by remote grantee (H&G)?   Yes.

                                                                                                                                       i.      Covenant of Seisen—grantor warrants that he owns the estate that he purports to convey

b.       Issue #2:  what is the amount of recovery to be allowed?  $4000

2.       The American Rule (majority)—the covenant of seisen does not run with the land

3.       The English Rule (minority)—the covenant seisen runs with the land and is broken the instant the conveyance is delivered and then becomes a chose in action held by the convenantee in the deed and that a deed by first covenantee operates as an assignment of such chose in action to a remote grantee who can maintain an action against the grantor in the original deed

a.       Jurisdiction

                                                                                                                                       i.      when a cause of action is assigned, an intermediate seller cannot sue her grantor unless the cause of action is reassigned back to the intermediate seller

                                                                                                                                      ii.      Remote grantee has choice of whom to sue

                                                           vii.      Note:  Estoppel by Deed

    1. Delivery

                                                               i.      Delivery has 2 requirements:

1.       grantor must manifest an intend to make the deed presently effective by words or conduct; or

2.       grantor must immediately give it to the grantee

                                                              ii.      Types of Delivery

1.       grantor-grantee delivery

2.       delivery subject to a condition

                                                            iii.      Sweeney, Administratrix v. Sweeney (1940)—Maurice deeded his farm to his brother John, and the deed was recorded; John deeded the property back to Maurice to cover Maurice’s ass if John died first; both deeds were executed; the first one was recorded and the second one was not because it burned up in John’s attorney’s office; P is widow of Maurice but had not lived with him for the past 20 years; the court held for John because there was no delivery of the 2nd deed; delivery must be made with the intent to pass title if it is to be effective; the only purpose in making the deed was to protect Maurice in case John died first and since the purpose would have been defeated had there been no delivery with intent to pass title, this conclusively establishes the fact that there was legal delivery; a conditional delivery is an can only be made by placing the deed in the hands of a 3d person to be kept until the happening of the event at which time the deed is to be delivered by the 3d person to the grantee

                                                             iv.      Note:  Delivery without Handing Over—it is not necessary that a deed be “handed over” to the grantee; delivery means that an act evoking an intent to be immediately bound by the transfer (handing over document, express or implied declaration that grantor is bound by the deed); however, if the grantor intends that no interest should arise until death and no delivery during life has taken place, the deed cannot take legal effect at death because the grantor intended it to be a will, not a deed, and the instrument is not executed with two witnesses in accordance with the Statute of Wills

                                                              v.      Rosengrant v. Rosengrant (1981)—the deed has to be delivered!!

 

  1. The Mortgage
    1. Mortgage – security on the loan
    2. Mortgagor – borrower
    3. Mortgagee – lender

                                                               i.      2 Theories of Mortgages

1.       Title Theory – Lender takes legal title to land, mortgagor has only the equity of redemption.

2.       Lien Theory – Borrower takes legal title, and mortgagee has only a lien on the property.

3.       Title/Lien theory not on exam.   Buyer can redeem until foreclosure.

                                                              ii.      Borrower’s Options if Lender has already Foreclosed

1.       Borrower can go to new Buyer, buy it, and take land away.  Deed is delivered when it is given to the escrow agent.    Can have more than one mortgage on a piece of property.  There is an order to how they will be paid off.

                                                            iii.      Priorities of Mortgages

1.       If Senior Mortgagee (A, below) forecloses first:

a.       Senior mtg paid off first;

b.       Balance (if any) pays off junior mortgages in order of priority;

c.       Balance (if any) paid to mortgagor as equity

d.       Buyer purchases land free and clear of all mortgages (i.e. all wiped out – no mortgages on the property).

2.       If Junior Mortgagee (B, below) forecloses first:

a.       Junior mtg paid off first

b.       Balance (if any) pays off any other junior mtgs (there has been no default on the senior mortgagee’s note)

c.       Balance (if any) to mortgagor as equity

                                                             iv.      Buyer purchases subject to Senior Mortgage (or mortgages if more than one), but free and clear of all junior mtgs.

1.       Senior mortgage is any mortgage that has come before the one at issue.  If you have mortgages A thru G, and E is at issue, then A-D are senior mortgages to E, and F-G are junior mortgages.

a.       Buyer borrows:

                                                                                                                                       i.      $100k from A at purchase (Senior Mortgagee)

                                                                                                                                      ii.      $50k from B 10 years later (Junior Mortgagee)

b.       Buying “Subject to” a mortgage (for much less)

                                                                                                                                       i.      Buyer at the foreclosure sale is not responsible for payment of the mortgage

                                                                                                                                      ii.      Mortgagee can still foreclose on the property if the mortgagor defaults.

c.       “Assumption of” the mortgage

                                                                                                                                       i.      Buyer at the foreclosure sale promises to pay off the mortgage and the Mortgagee can foreclose if the Buyer defaults on payments.

                                                             v.      Problems

1.       A →→ B for $100k.  B pays $10k cash.  B gives a mortgage to C for $75k.  B gives a second mortgage (junior mortgage) to D for $15k.    B defaults on loan from C.  C forecloses and sells for $50k.  C gets the $50k because the senior mortgage is paid off first.   Senior mortgage.  B defaults on loan from C.  C forecloses and sells for $100k.

2.       A →→ B for $100kB gives a mortgage to C for $75kB gives a junior mortgage to D for $15kB gives another junior mortgage to E for $10k.   B defaults on loan from D.  D forecloses and sells for $25k.   D gets paid first, then E.  C doesn’t get paid off.  B defaults on loan from D.  D forecloses and sells for $10k.  D gets it all.

                                                            vi.      Deficiency judgment (636) – read this.  Deficiency judgment is paid out of the personal assets of the borrower.

                                                          vii.      Murphy (defaulting mortgagor) v. Financial Development Corp. (foreclosing mortgagee) (1985)—4closure sale is held on a house.  Only people to show up at the sale were the Buyer and the finance company.  Finance company bid only got the outstanding amount of the mortgage, and got the house.  Had not tried to regain the mortgagor’s equity that had been paid towards the house.  House appraised at $46k.  The mortgagor owed $27k, and had paid $19k.  They should have sold it for $46k to at least give the equity back to the mortgagee.  Had not advertised the sale.  Then the finance co. sold the house for $38k 2 days later, making a profit.  So the mortgagee bought it low, and sold it high.  Mortgagee has a fiduciary duty of Good Faith and Due Diligence.  Mortgagee must take every reasonable effort to get a good price for the property.  When there is no Due Diligence, damages is the difference between a fair price for the property and the price obtained at the 4closure sale.  Only awarded the P’s $$, as opposed to wiping out the 4closure sale.  This keeps land title solid, and prevents them from becoming shaky.  If a 4closure sale is procedurally defective, the Borrower can get an injunction if there is no sale yet.  If there has been a sale, they can seek a court order to get damages.  Court will require that they pay everything off before considering setting aside the 4closure sale.

    1. Bean v. Walker (1983)—vendee under land sale K acquires an interest in the property of such a nature that it must be extinguished before the vendor may resume possession

                                                               i.      Installment Land Contract—you pay it and as soon as you make the last payment, title goes over to you

                                                              ii.      Equitable conversion—seller holds legal title but unfair to give legal title; he holds in trust for buyer

 

  1. TITLE ASSURANCE
    1. The Recording System

                                                               i.      Gives notice to public as to who has what interest in the property; furnishes constructive notice to everyone

                                                              ii.      Establishes a system of public recordation of land titles

                                                            iii.      Preserves in a secure place important documents which may be easily lost or misplaced in private hands

                                                             iv.      Have function of protecting purchasers for value and lien creditors against prior unrecorded interests

                                                              v.      Way to make sure you have superior title

                                                             vi.      Protects subsequent purchasers

                                                           vii.      COMMON LAW—first in time is first in right

1.       O®A; O®B.  A v. B.  At CL, who wins?  A wins.

2.       O®A; O®B.  B records.  A v. B. Recording statute in effect.  B wins.

a.       Statutes protect first purchasers who fail to record.

    1. The Indexes

                                                               i.      Tract index

1.       recorded documents are filed in chronological order under tract, block and lot number

2.       simplifies title searchers

                                                              ii.      Grantor-grantee index

1.       filed chronologically

2.       kept in two books®one for grantors and one for grantees

3.       listed alphabetically

4.       laborious

    1. Luthi v. Evans (1978)—effect of failure to describe property with specificity; in 1971, Owens specifically assigned her interest in seven Coffey County, KS oil & Gas leases to T; included in the assignment was a Mother Hubbard clause assigning “all interest of whatsoever nature in all oil and gas leases in Coffey Co., KS; in 1975, Owens assigned her interest in an oil & gas lease called Kufuhl (located in Coffey County) to B; T contends that it owns the oil & gas rights due to Mother Hubbard clause which he argues gives constructive notice to all subsequent purchasers; B contends the 1971 assignment was sufficient between the parties but that it was not sufficient to give constructive notice to subsequent innocent purchasers who did not have notice of the prior assignment and the general language lacked specificity; RULE—a general assignment, when recorded, is not sufficient to give constructive notice to an innocent purchaser for value
    2. Orr v. Byers (1988)—misspelled name; Orr obtained J against William Elliott who was erroneously identified as William Duane Elliot on the J and on the abstract J later filed, as William Duane Elliot and William Duane Eliot; Elliott obtained title to a parcel of property which became subject to Orr’s lien; when Elliott sold the parcel to D, a title search failed to disclose the abstract of J and the J was not satisfied from the sale proceeds; P sued D requesting a declaratory judgment and judicial foreclosure of his lien; the court found for D because an abstract of judgment containing a misspelled name impart constructive notice of its contents under the doctrine of idem sonans which provides that although a person’s name has been inaccurately written, the identity of such person will be presumed from the similarity of sounds between the correct pronunciation

                                                               i.      Elizabeth Taylor owns [ET].  ET marries Eddie Fisher.  Elizabeth Taylor Fisher ® CB.  CB records.  Divorces EF, now ET.   ET ® WH, no actual notice.

    1. Misindexed instruments

                                                               i.      Index a part of the record—if the index is considered a part of the record, a misindexed instrument does NOT give constructive notice to subsequent purchasers.  In other words, subsequent purchasers are allowed to rely on the information contained in the index.

                                                              ii.      Index NOT part of the record—if the index is NOT considered a part of the record, a misindexed instrument DOES give constructive notice.  In other words, subsequent purchasers are NOT allowed to rely on the information contained in the index.

    1. Wild Deed Rule—A wild deed, unconnected to the chain of title, does not give constructive notice to subsequent purchasers

                                                               i.      If the index is not considered part of the record, you are considered to have notice of every thing that’s been filed…even if it’s been misfiled.   Why?  Because you could physically go through every box of deeds and find what you’re looking for. 

                                                              ii.      If the index is considered part of the record, you are not considered to have constructive notice if something has been misfiled.  Why?  Because you’re entitled to rely on the index.

    1. Types of Recording Acts

                                                               i.      Race—whoever records first wins

                                                              ii.      Notice—protects subsequent purchasers who purchase without notice of the previous conveyance

1.       no conveyance

2.       shall be good

3.       against subsequent purchasers for

4.       consideration and without notice, unless the same be recorded

a.       O ® A, O ® B, a BFP.  A records.  B ® C, a BFP.  A v. C.  A wins.  As between A and B in a notice jurisdiction, B will win.  If B would win, why couldn’t C stand in the shoes of B?    If A would not win against B, a SP, why shouldn’t A win against C, the person who purchased it from the SP? 

                                                            iii.      Race-Notice—protects subsequent purchasers who:

1.       purchase without notice and

2.       record first

    1. Shelter Rule—a person whose grantor is a bona fide purchaser (BFP) protected by a recording statute has the same rights as his grantor, unless the person is the original grantor.

                                                               i.      O ® A, O ® B. A records.  B ® O.  The shelter rule doesn’t apply.  B and O are colluding against A to get A’s money.  That’s what it looks like so courts say they won’t recognize the shelter rule because it allows you to commit fraud.

                                                              ii.      O ® A who doesn’t record.  O dies leaving H as heir.  H thinks he owns Blueacre who sells it to B, who records.  B has no knowledge of previous conveyance to A.  Who wins in notice jurisdiction?  B.  The notice statute protects subsequent purchasers who purchase without notice.  And in race-notice jurisdiction, those who purchase first.  This forces A to record.  Take it and record it and protect your interest.  All are geared toward protecting the subsequent purchaser.

                                                            iii.      Who wins under race-notice?  B.  Purchased without notice and recorded first.  A should have recorded before Bs purchase.

                                                             iv.      O ® A, a BFP.  A doesn’t record.  O sells to B who is a BFP, no actual notice.  B doesn’t record.  Then A records.  A sells to C, a BFP.  B records then C records.  Who prevails under notice statute? 

                                                              v.      **Adverse possession trumps recording

                                                             vi.      O ® A, O ® B, no actual notice.  A records.  A ® C, no actual notice.  B records.  C records.  Who wins in a Notice jurisdiction?  Under shelter rule, C can stand in A’s shoes and C will win in a race-notice jurisdiction. 

                                                           vii.      5/30:  O®A.  6/3:  O records deed restriction.  6/5:  A records.  7/8:  A®B.  B records.  7/31:  O sues to enjoin B from violating deed restriction. 

    1. Messersmith v. Smith (1953)—an improperly acknowledged deed is not capable of being recorded

                                                               i.      Zimmer Rule—a race-notice statute protects a subsequent purchaser who:

1.       purchases without notice;

2.       records first; and

3.       all deeds in their chain of title are recorded.

    1. Chain of Title Problems

                                                               i.      Bd. Of Education of Minn. V. Hughes (1912)—a deed that does not name a grantee is null and wholly inoperative as a conveyance until the name of the grantee is legally inserted

1.       Wild Deed Rule—a deed unconnected to the chain of title, even though recorded, does not give constructive notice to subsequent purchasers (a wooden snake that’s broken)

2.       a quitclaim deed does not give notice

3.       traditionally the way you search is from the date a person receives a conveyance until the time they convey it to someone else

                                                              ii.      Estoppel by Deed

1.       a grantor who has conveyed property to a grantee cannot later deny that he had title when he receives title from the true owner

2.       relation-back doctrine applies

3.       Minority view—instruments recorded prior to the date that grantor receives title give constructive notice to subsequent purchasers; creates duty to search record prior to date grantor acquires property

4.       Majority view—instruments recorded prior to the date that the grantor receives title does NOT give constructive notice to subsequent purchasers; no duty to search record prior to date grantor acquires property

                                                            iii.      Duty to Search Record After Grantor Conveys Title

1.       Woods v. Garnett—a deed recorded after another deed from the same grantor gives constructive notice to subsequent purchasers; creates duty to search record after date grantor conveys title

a.       In Woods’ jurisdictions, A’s deed does give notice to C; change title searches must search all grantors forward to the present day

2.       Morse v. Curtis—a deed recorded after another deed from the same grantor does NOT give constructive notice to subsequent purchasers; no duty to search the record after date grantor conveys title

a.       In Morse jurisdictions, A’s deed does not give notice to C because there is no duty to search after the recording of the first deed out from a grantor.

3.       PROBLEM

a.       O is record owner.  A ® B, O ® A, B ® C, C records.  A ® D, D records.  O ® E, E records.  Who wins in Notice?  Race Notice?  State rule first then list elements

b.       O ® A, O ® B, actual notice.  O ® C, B ® D, A records, B records, D records.  Who wins in a Notice jurisdiction?  Race notice. 

                                                             iv.      Guillette v. Daly Dry Wall, Inc. (1975)—a purchaser of part of a restricted parcel of land takes it subject to the restrictions

1.       every recorded deed out from a common grantor (subdivider) gives constructive notice of its contents to the subsequent purchaser of any lot in the subdivision

    1. Persons Protected by the Recording System

                                                               i.      Daniels v. Anderson (1994)—a buyer who receives notice of an outstanding interest prior to the payment of consideration but pays it anyway does so at his own peril with respect to the holder of the outstanding interest; the buyer is not protected as a bona fide purchaser and takes the property bound by the outstanding interest; the pro tanto rule protects the buyer to the extent of the payments made prior to notice, but no further; application:

1.       award land to holder of outstanding interest and award buyer payments that he made

2.       award buyer a fractional interest in the land proportional to amount paid prior to notice

3.       allow buyer to complete the purchase but to pay remaining installments to holder of the outstanding interest

                                                              ii.      Lewis v. Superior Court (1994)—R & J Lewis K to buy house from S for $2.3 million; few days before they acquired title, FF recorded a lis pendens against S; the lis pendens was recorded on 2/24 but not indexed until 2/29; the Ls paid S $350K on 2/25 and the closing took place 2/28; the Ls gave S their note for $1.950 million which they pain in 3/1992; the Ls spend another $1.050 million in renovations; in 9/1993 the Ls were served with FF’s suit and learned about the lis pendens; the court of appeals held that the lis pendens was not properly recorded until it was indexed, which occurred the day after the title passed to the Ls; here the Ls learned of the litigation after they paid the price in cash; if Davis was applied, cash buyers would be at risk of losing their property while buyers who pay only a small down payment financing the balance would be considered a bona fide purchaser

    1. Inquiry Notice

                                                               i.      Harper v. Paradise (1974)—duty to inquire; SH deeded her farm to MH in 1922 for life with Rm in FS to Maude’s kids; deed was lost then found in 1957 by CH (a named child) and recorded; MH died in 1972 (SH died between 1925-27); in 1928,all of SH’s heirs quitclaimed interest in the property to MH; the quitclaim deed mentioned the lost deed; in 1933 MH executed a security deed to secure a $50 loan from ET; loan defaulted and ET foreclosed, receiving a sheriff’s deed in 1936; there was unbroken chain of title from ET to P, P claimed title through warranty deed executed and recorded in 1955 by AP; Maude’s kids had remainder under 1922 deed; P sued to have title secured in him and won; D’s appealed; J reversed because grantee must make inquiry as to provisions of any deeds referred to in his chain of title; a subsequent purchaser from a life tenant cannot defeat the later claim of a remainderman who did not join in the conveyance to the purchaser; the 1928 deed made reference to the 1922 deed; P was a grantee with notice because he failed to inquire as to the contents of the 1922 deed; time period for obtaining AP from remaindermen beings to run upon death of LT; since MH died in 1972, the time period did not begin to run until then thus P failed to occupy the land for the requisite time period to establish AP

1.       mention of an unrecorded claim in a recorded document provides inquiry notice of that claim to the subsequent purchasers

                                                              ii.      Waldorf Ins.and Bonding, Inc. v. Eglin Nat’l Bank (1984)—Waldorf entered into a written purchase agreement for condominium #111 from Choctaw in April 1973 for $23,550; Waldorf paid a $1000 deposit and began occupancy and paid all monthly fees; Choctaw executed a $850,000 PN and mortgage on the entire development  in June 1972 which was assigned by Eglin in January 1975 when principal balance was $40,000

1.       possession of property by prior purchaser gives inquiry notice to subsequent purchasers

2.       possession gives inquiry notice

    1. Marketable Title Acts

                                                               i.      MTAs eliminate title defects automatically with the passage of a certain amount of time never to appear again if you meet the provisions of the act; used to clean up defective titles

                                                              ii.      The act provides that if you have an unbroken chain of title from the present back to the root of title, then all other interests in that property will be extinguished.  If a title transaction breaks the chain of title, then the purchaser must prove superior title in some other way (e.g., by recording statute or adverse possession). 

1.       For example:  1930-C to D, 1956-D to E, 1960-E to F, 1965-O to 1, 1996-G to H.  H’s chain of title from 1956 is broken by the O to 1 deed.

2.       1900-A to B, 1912-B to C, 1930-C to D, 1956-D to E, 1960-E to F, 1995-F to G, 1996-G to H; assume a 40 year Marketable Title Act

                                                            iii.      Root of Title—the most recent transaction in a person’s chain of title that has been of record for at least the statutorily required period (e.g., 40 years). 

1.       1889 O leases to X for 99 years.  X records the lease.  In 1890 O conveys the land to A subject to the lease.  People who search that record will find the deed.  A records the deed.  In 1920 A sells to B and B records.  The deed doesn’t mention the lease.  In 1941, B conveys to C and C records.  C’s deed does not mention the lease.  If C has an unblemished records from this root of title back 40 years, the MTA will suck away the lease assuming X does not record or is not in possession.  X can file a notice of claim that says X has a lease on Blueacre and it has a 99 years lease, but if it doesn’t, C gets the land free and clear of the lease.  That’s what a MTA does. 

2.       Possession is an exception®inquiry notice. 

                                                             iv.      Heifner v. Bradford (1983)—appellants root of title is the 1916 deed from ES to FHW which reserved the grantors’ O&G rights to the land; appellees root of title is the 1936 conveyance from FHW to Waters, et al. which did not mention the O&G rights; appellees hold marketable record title to the O&G because they have an unbroken chain of record title for over 40 years that extinguishes prior claims and interests, including appellants’ interests; ES’s will was considered a “title transaction” and appellants’ interest was not extinguished; considered filing a preservation notice of claim during the 40 year interest

1.       marketable record title ® title of record which operates to extinguish such interests and claims existing prior to the effective date of the root of title

2.       root of title ® that conveyance or other title transaction in the chain of title of a person upon which he relies as a basis for the marketability of his title and which was the most recent to be recorded as of a date forty years prior to the time when marketability is being determined

3.       title transaction ® any transaction affecting title to any interest in land, including title by will or descent

a.       PROBLEM

                                                                                                                                       i.      1949—O ® Heir (intestacy); 1950—F ® forgery to A; A records.  1952—A ® B; 1993—H ® C (intestacy); C discovers forgery.  40 year MTA.  C v. B, who wins?  In between 1950 and 1990 there is nothing that mentions H’s interest.  1990 is the key date.  B has had a clear chain of title with no mention of the interest in the heir and in C.  therefore B wins even though he got it from a forgery.

                                                                                                                                      ii.      1949—O® Heir (intestacy); 1950—F ® forgery to A; A records.  1952—A ® B; 1980—H ® wills to C, as devisee; C probates will (recorded); 1993 C learns of forgery; C wins.  B will claim MTA protests.  He will have to show he has a clean 40 years.  C’s ROT is 1950 deed which is 1st one that doesn’t mention H’s claim.  1950 + 40 years is 1990; look between 1950 and 1990 to see whether anybody recorded anything showing interest of someone else; here will recorded mentioning H’s interest.

    1. Title Insurance

                                                               i.      Walker Rogge, Inc. v. Chelsea Title Guaranty Co. (1989)—P bought land from Kosa who’d bought it from Aiello; 1975 survey that K showed P said land was 18.33 acres, the Kossa-P K described the land by reference to the 1975 survey indicating the land was “19 acres more or less”; land was $363K per acre to be adjusted on basis of $16K per acre for deviation; K signed 12/12/79 with K closing 12/31/79; Rogge requested D to insure title which had issued 2 prior title policies on the property; The Aello-Kossa deed stated that the property contained 12.486 acres and Chelsea had this deed in their files; the Kossa-P deed did not indicate the tract’s acreage; Chelsea’s title insurance policy described the property by reference to the P1975 survey without indicating the total acreage of the property; Chelsea’s policy didn’t insure against boundary line disputes; P paid off mortgage over 6-years and did not obtain a more recent survey; in 1985 P wanted to buy adjacent lots and hired DD to survey and found the property contained 12.43 acres; P alleged that the 5.5 acre shortage was an insurable loss under the Chelsea policy; P paid $75 for a title policy, not a title search; to obtain such insurance, an insured should provide the title company with an acceptable survey that recites the quantity of land described or obtain from the company an express guaranty of the quality of land insured in the policy; P should have obtained survey before closing therefore eliminating the risk of paying for property it did not receive; although an insured expects that a title company will conduct a reasonable title examination, the relationship between the company and the insured is contractual so if the title company agrees to conduct a search and provide the insured with an abstract of title in addition to the title policy, it may expose itself to liability for negligence as a title searcher in addition to its liability under the policy; in addition, the company could be subject to a negligence action if the act complained of was the direct result of duties voluntarily assumed by the insurer in addition to the mere K to insure title

1.        Lohmeyer—violation of land use statute = marketable title (pre-closing)

2.       Frimberger—violation of land use statute  ¹ unmarketable title (Covenant of General Warranty)

                                                              ii.      Lick Mill Creek Apartments v. Chicago Title Ins. Co. (1991)—title insurance is to protect the insured against defects in the title, not from loss arising from physical damage to property; title insurance has nothing to do with whether land is marketable; hazardous waste is a title defect

1.       violation of land use statute (hazardous waste)

a.       ¹ unmarketable (title insurance)

b.       ¹ encumbrance

2.       Marketability of Title—hazardous substances

3.       Encumbrance on Title—taxes, assessments and liens

 

  1. PRIVATE LAND-USE CONTROLS:  THE LAW OF SERVITUDES
    1. Easements—a right afforded a person to make a limited use of another’s property; right-of-way across the land of another; may endure for years, life or in fee; it is a non-possessory interest in land; land subject to an easement is called “servient” land

                                                               i.      Express

1.       easements appurtenant—an easement which confers a benefit upon a dominant tenement is appurtenant to the dominant estate; the burdened land is called the servient tenement

a.       e.g., A has the right to cross B’s land in order to get to A’s farm; this right-of-way is an appurtenant to the dominant tenement (A’s land); the burdened land (B’s land) is the servient tenement

2.       easements in gross—easements that are personal to their owner; the servient land is burdened but there is no benefited land

a.       e.g., utility right of ways, billboards on private land

3.       affirmative easements—right to go onto the land of another and use it

a.       e.g., a right of way

4.       negative easement—right to make the owner of the servient land not do something which he would otherwise be entitled to do (ie., build a swimming pool within 20-feet of his neighbor’s yard)

                                                              ii.      Implied

1.       implied easements by necessity

2.       intended easements based on quasi-easement

                                                            iii.      Prescriptive—elements same as adverse possession

                                                             iv.      Necessity

    1. Profits—right to enter onto the land of another and take something off the land, be it wild animals, timber or coal
    2. Creation of Easements
    3. Licenses—privilege to use the land of another, with permission, and revocable at the will of the grantor unless:

                                                               i.      License coupled with an interest

                                                              ii.      Estoppel

                                                            iii.      By permission

                                                             iv.      May be revoked at will of landowner

    1. Willard v. First Church of Christ, Scientist (1972)—
    2. Holbrook v. Taylor (1976)—D purchased the land over which P claims an easement in 1941; from 1944-1949 D gave P the right to construct a mining road on D’s land and P paid D a royalty; in 1957 D built a rental house on the land; the mining road was used by both D and the tenants; the rental house burned in 1961 and was not replaced, in 1964 P purchased a 3-acre tract adjoining D’s land and built a house in 1965; at all times prior to 1965 D used the road with P’s permission; P brought suit to establish a right to use a roadway claiming his right to use the road by prescription or estopppel; RULE:  a licensor is estopped from revoking a license if the licensee has expended money in reliance upon the license

1.       an easement may be established by

a.       express agreement

b.       implication

c.       prescription

d.       estoppel

2.       to establish an easement by prescription, one must show he has openly, peaceably, continuously and under a claim of adverse right to the owner of the soil and with his knowledge and acquiescence  used a way over the land

3.       one may acquire a license to use a roadway where he has spend money in improving the way on the further strength of the license; the licensor must have knowledge

    1. Implied Easements

                                                               i.      Van Sandt v. Royster (1938)in 1903, a common grantor (Bailey) built a sewer that ran under all of her property and tied into a public street line; in 1904, common grantor conveyed by GWD a part of the land to Jones and another part to Murphy, retaining a 3d part; Jones’s parcel was the lowest in elevation; there was no reservation of an easement for the sewer-line in the Jones-Bailey deed; both B and M were tied into the line which ran through the Jones property; IN 1920, J conveyed part of his property to r, who built a house with a basement that was near the underground sewer line; R did not tie into the line; R conveyed to P in 1924; Ds are successors in interest to M and B; their sewage floods P’s basement; P sought injunction to discontinue use of the sewer; RULE:  a court may recognize an easement that exists only by virtue of an implied reservation

1.       LOOK FOR FACTS WHERE AN OWNER IS USING ONE PART OF THE LAND FOR THE BENEFIT OF ANOTHER (EASEMENT IMPLIED BY PRIOR EXISTING USE)

2.       implied grant—you get something you don’t know about; the dominant tenement is the parcel conveyed to the grantee

3.       implied reservation—you reserve part for yourself (Court’s don’t like); the parcel retained by the grantor; greater necessity is required, even approaching strict necessity

4.       quasi-easement—an apparent and continuous use which the parties would reasonably expect to continue when the land was divided (ie., it’s where an owner makes use of one part of his land for the benefit of another)

a.       An easement created by prior consistent use does not require strict necessity, although it is a consideration

b.       An easement by necessity you must have strict necessity

5.       American view—(Texas follows); you can only have an implied reservation if there is strict necessity; in circumstances of necessity (ie., sewer drain), a reservation of use may be implied in favor of the prior quasi-dominant estate, even though no reference is made to it in the deed out of a portion of the prior estate (quasi-servient estate)

6.       Notice—in fairness to the grantee of the quasi-servient estate, the reserved use must be such as to give notice of its existence and necessity

7.       COMMENT—there is a difference between an implied grant and an implied reservation

a.        

    1. Easements by Necessity—

                                                               i.      Othen v. Rosier (1950)—easement of necessity; P cannot have an easement across land to which he has a fee simple; P’s land was not near the highway so for years he had to travel across D’s land to get to the road; erosion was injuring D’s land so he constricted a levee to stop it; the water from the levee turned the land into a muddy mess for weeks so P sued D to enjoin D from interfering with his use of the lane; P has no easement of necessity or prescription;  RULE:  for there to be an easement of necessity, the necessity for the easement must have existed at the time the original grantor severed the two estates (ie., servient and dominant estates)

1.       Easement of Necessity

a.       Must have unity of ownership of dominant and servient estates

b.       Strict necessity, not a mere convenience

c.       Necessity must have existed at time of severance

2.       an essential element in acquiring a prescriptive right is the adverse use of the easement; use by express or implied permission, no matter how long continued, cannot ripen into a prescriptive easement; since D consented to P’s use of the lane, P does not have a prescriptive easement

    1. Assignability of Easements

                                                               i.      Miller v. Lutheran Conference & Camp Association (1938)—P obtained the exclusive rights for recreational use of a lake and assigned ¼ interest to R. Miller; P and R. Miller together operated a recreation area for the public until the death of R. Miller; P continued to rent boats; R. Miller’s executors and heirs licensed the use of their interest to the Ds; P sued to enjoin development by D because D wanted to rent boats in competition with P; P won—D appeals; RULE:  an easement in gross is divisible into jointly held interest

1.       1895 F&R® PS

2.       1899 PS ® F, his heirs & assigns, easement for fishing and boating

3.       1900 F® R ¼ interest in fishing, boating and bathing

4.       1925 R dies.

5.       1929 R’s executor leases to Lutherans for fishing, boating and bathing

a.       an easement in gross is similar in nature to a profit in gross; where it is the intent of the parties to allow assignment of the interest, it will be assignable (especially when it is designed for commercial exploitation)

b.       an easement in gross may be divisible, but it must be exercised jointly

c.       P and D are entitled to separate interests, but D may not use its interest unilaterally; D cannot use the lake in a manner inconsistent with P’s use of the lake without P’s consent

6.       Easements in Gross—Commercial

a.       EIG are assignable

b.       EIG are divisible

c.       One-stock rule—all owners must agree on how to use the easement (veto rule)

                                                                                                                                       i.      Keeps parties out of court

                                                                                                                                      ii.      Prevents overuse of natural resources

  1. Scope of Easements
    1. Brown v. Voss (1986)—If an easement is appurtenant to a particular parcel of land, any extension of the easement to another parcel is misuse.  However, in Brown, court allowed the TC’s ruling for the easement grantee to stand, by taking in policy factors and other evidence that the easement could be extended.  Gives no certainty to the holder of an easement.  (Brown – guy bought an extra piece of land.  easement was only to get to single family house on original parcel of land.  TC said the rule is that you can’t extend an easement appurtenant to other parcels, but then ignored rule by taking in other factors – it was a single family house, $$ already spent in improving the land etc.)  Alternatives – buy a new one, condemn an easement/private right of way, claim easement by necessity.  If a parcel is subdivided up, does an easement stand for all the subdivided pieces?  The R2P looks at 1. was the land under normal development and 2. is the burden on the servient estate increased.  General Rule: The location of an easement, once fixed by the parties, cannot be changed by the servient owner without permission of the dominant owner.   R2P: lets servient owner change the location of the easement, at his expense, if the change does not significantly lessen the utility of the easement benefit, or frustrate the purpose for which the easement was created.
    2. Termination of Easements

                                                               i.      Unify the estates in one owner.

                                                              ii.      Dominant owner could release easement to Servient estate.

                                                            iii.      Prescription back by the Servient owner.  If Servient owner (original grantor of the easement) can block dominant owner’s (easement grantee) use of a road/easement, then he gets the easement back.

                                                             iv.      Abandonment – intention to never make use of the easement again.

1.       Preseault v. United States (1996)—

    1. Scope of an easement may be adjusted in the face of changing times to serve the original purpose, so long as the change is consistent with the terms of the original grant.
    2. Abandonment of Easement

                                                               i.      Mere non-use insufficient

                                                              ii.      Must show:

1.       Present intent to relinquish the easement; or

2.       Current purpose that is inconsistent with the easement’s future existence.

3.       Change in use of easement by federal government constitutes a Taking.

    1. Negative Easement

                                                               i.      Right of the dominant owner to stop the servient owner from doing something on the servient land that they would otherwise be permitted to do.

                                                              ii.      English Courts recognized 4 types of negative easements:

1.       Blocking of View

2.       Interfering with air flow

3.       Removing of support to a structure

4.       Diverting flow of water

                                                            iii.      US Courts added:

1.       Unobstructed view

2.       Solar easements – allow solar panels

3.       Conservation easements – can’t use land for anything

 

  1. COVENANTS RUNNING WITH THE LAND
    1. Covenants Enforceable at Law:  Real Covenants (a promise regarding real property)

                                                               i.      Real covenants are promises respecting use (or non use) of land in a specified way that runs with the land at law (i.e., enforceable against successors in interest for money damages); can be affirmative or negative

1.       negative covenant—a promise not to do an act; treated like easements for succession purposes; they run to all subsequent owners and possessors of the burdened and benefited property; no VP required for either burden or benefit to run; all you have to show is a promise to bind

2.       *affirmative covenant* (bonus points if discuss R3d on essay; pp. 862-63; for purposes of the class use R2P)—a promise to do an act; run to persons who succeed to estates of the same duration as were held by the original parties to the covenant (e.g., persons who satisfy the traditional privity requirement); VP required but an estate for same duration required for burden or benefit, BUT:

a.       runs to adverse possessors

b.       runs to lessors, but only if the covenant is more reasonably performed by the lessee than the landlord

c.       life tenants succeed to burdens, but are limited to the value of the life estate

                                                                                                                                       i.      O sells to A (horizontal privity); B ousts A; O has to allege that burden of promise runs to B (adverse possessor); O has to allege vertical privity between A and B of the same estate; an adverse possessor is not considered vertical privity  because it was not sold; it wasn’t a voluntary conveyance of that estate (privity=voluntary conveyance; will, sale, inheritance); does B have to do anything?  No, that’s why under 3d Restatement, adverse possessors get away from not having the burden and vertical privity will run to adverse possessors because it wouldn’t be fair to O

                                                                                                                                      ii.      O sells to A and A leases to C for a term of years; does C have to comply with the covenant?  No, C can continue leaving the trees to grow as much as they want; has COA against A because A still owns the land for breach of K but if A were to convey his entire interest to C, O couldn’t get A

                                                              ii.      Must be created by a written instrument signed by the covenantor; it is an interest in land that cannot arise by estoppel, implication or prescription like an easement can

                                                            iii.      A real covenant subjects the promisor (or successor) to personal liability for damages, with a damage award collectible out of all the promisor’s (or successor’s) assets

1.       Remedy—damages in a suit at law

                                                             iv.      Requirements of Real Covenant

1.       intent to bind assignees

2.       writing (common law)

a.       can be contained in deed; grantee bound even if does not sign document containing covenants

3.       burden must “touch and concern” the land

a.       Initially touch and concern had to do with some physical thing on the land; one way you can think of touch and concern is a promise to build a wall on a piece of land (touches and concerns the land; goes on to successors and assigns with notice) v. a promise to paint a portrait of the land owner (nothing to do with the land->just a picture of the person on the land); not to be imposed on the next person

4.       privity

a.       horizontal privity—privity between original parties who are in a mutual or successive relationship between grantor and grantee; there has to be a grantor/grantee relationship

b.       vertical privity—privity between successors in interest to the original parties to the agreement

                                                              v.      Benefits and burdens

1.       benefited land = dominant tenement

2.       burdened land = servient tenement

a.       B promises A that Blueacre will be used for SFH only; B builds 7-11; B has burden; A has benefit; A does not have burden because both are parties to the original agreement

b.       B sells to C; A has to allege the burden runs to C and if they can prove it, C must comply

c.       If A sells to D, D would have to allege that 1) the burden runs to C and 2) the benefit ran to D

                                                                                                                                       i.      BURDEN TEST—to prove that the burden runs, must show BOTH:

1.       horizontal privity between original parties (i.e., show that they are in a mutual or successive relationship); and

2.       vertical privity of an estate of the same duration (i.e., if B held a fee simple, C has to hold a fee simple BUT if B has a fee simple and if C holds a term of years, that’s not an estate of the same duration)

                                                                                                                                      ii.      BENEFIT TEST—to prove the benefit runs, must show:

1.       vertical privity of any duration

2.       NO horizontal privity required

a.       A and B are only neighbors; B sells to C; instead of C building an apartment complex, A builds one; is C entitles to damages against A?

                                                                                                                                                                                                               i.      does C have to allege the burden runs to A?  no because A is a party to the K

                                                                                                                                                                                                              ii.      C has to allege that the benefit runs to C

    1. Covenants Enforceable in Equity:  Equitable Servitudes

                                                               i.      Real covenants are promises respecting use (or non use) of land in a specified way that runs with the land in equity regardless of its enforceability at law (i.e., enforceable against successors in interest for injunction or enforcement of a lien in a suit in equity)

1.       Remedy—injunction or enforcement of a lien in a suit in equity; not money damages

                                                              ii.      Requirements:

1.       intent to bind assignees and successors

2.       in writing

3.       “touch and concern”

4.       notice of the running covenant

a.       **no privity required if you can show actual or constructive notice, but some jurisdictions require VP for the benefit to run (BONUS points)

                                                            iii.      Tulk v. Moxhay (1848)—Tulk sold to Elms a piece of land in Liecester Square; 3 promises:

1.       maintain garden (affirmative covenant; in England, affirmative covenants do not run with the land like they do in America

2.       no building on garden (negative covenants DO run with the land in England) *only concern here

3.       tenants right to use (affirmative easement in favor of a stranger not a party to the K—void in England in 1848)

a.       Tulk and Elsm have grantor/grantee relationship, but in England does not create horizontal privity (however sufficient in the U.S.)…in England you have to have a landlord/tenant relationship to have horizontal privity; since no horizontal privity it meant that covenant did not run to Moxhay as RC but will allow to run as ES if you can prove that C had notice

 

  1. CREATION OF COVENANTS
    1. Restatement 3d of Property, Servitudes—bans vertical privity requirement

                                                               i.      Sanborn v. McLean (1925)—McL’s own 91 lots (not expressly restricted); McL sells 10 lots with SFH restrictions; deeds recorded; McL sells 11 lots with SFH restrictions; deeds recorded; McL sells Lot 86 to A, no restrictions; deed recorded; McL sells other lots…53 with restrictions, 48 without restrictions; A sells Lot 86 to McLean who wants to build a gas station (reciprocal negative easement could be an equitable servitude, will be question; definition p. 869); issues here are 1) did the court imply an equitable servitude on every lot in the subdivision? (yes, because evidence of a common scheme as soon as lots were being sold as SFH and facts that lots were uniform) and 2) did McLean have notice? (yes (not record notice) but he has constructive notice; he walked into this neighborhood and saw that all houses were SFH so he should have found out); they have to show he had notice of the equitable servitude before it could be enforced upon him

1.       Reciprocal Negative Easement—runs with land sold by virtue of express fastening and abides with the land until loosened by expiration of its period of service or by events working its destruction; not personal to owners but operative upon use of the land by any owner having actual or constructive notice; it is an easement passing its benefits and carrying its obligations to all purchasers of land subject to its affirmative or negative mandates

2.       A common scheme to develop a property as a residential subdivision by one grantor may lead to implication of an equitable servitude restricting to SFH use where there is:

a.       Intent to bind successors by common scheme;

b.       Promise touch and control the land; and

c.       Notice to purchaser.

                                                                                                                                       i.      Notice can be actual, constructive (through the record) or inquiry (driving through the neighborhood).

                                                              ii.      Neponsit Property Owners’ Assn., Inc. v. Emigrant Industrial Savings Bank (1938)—touch and concern; P owns all the property and sells to Deyer; Deyer loses the land through foreclosure to the bank; vertical privity between NPOA and the bank; horizontal privity between NPOA and Deyer; the covenant is a covenant to pay money…does this covenant touch and concern the land?  Yes.  There was intent, the covenant touched and concerned the land and it was an affirmative covenant. 

1.       Touch & Concern for affirmative covenants:

a.       Affirmative covenants will run with the land if it alters the legal relationship between the parties.  If the promisor’s interest is rendered less valuable, the burden T&C’s the promisor’s land.  If the promisee’s interest is rendered more valuable, the benefit T&C’s the promisee’s land.

2.       Restatement

a.       Abandons T&C and asks whether the servitude would violate public policy by:

                                                                                                                                       i.      Imposing an unreasonable restraint on alienation;

                                                                                                                                      ii.      Imposing undue restraints on trade; or

                                                                                                                                    iii.      Being unconscionable or lack a rational justification.

    1. Defeasible Fees as Land—Use Control Devices

                                                               i.      Caullet v. Stanley Stilwell & Sons, Inc. (1961)—touch and concern; personal covenants do not run with the land; D sells piece of land to P; deed stated that D reserved the right to build the original dwelling on the lot and that this right ran with the land; negotiations between P and D on building the house broke and P sued to quiet title; the trial court found for P on summary judgment, striking the clause from the deed; court held that a servitude in gross where the benefit is personal but the burden is placed on the land, does not run with the burdened land; the benefit was a personal benefit but the burden was on the land; the benefit was only to D’s pocket…not the land

1.       promise must exercise direct influence on the occupation, use or enjoyment of the premises

2.       if benefit is on the land and the burden is in gross, the covenant touches & concerns the land

3.       if the burden is on the land and the benefit is in gross, there is no touch and concern, there is just a contract between the parties

a.       Defeasible Fees—the relief was forfeiture(you lost the property); generally not used anymore

b.       Fee Simple Subject to a Covenant—you will either get damages or an injunction

    1. Scope of Covenants

                                                               i.      Hill v. Community of Damien of Molokai (1996)—scope

1.       disparate impact—D only need show that enforcing the covenant will actually result in discrimination or have a discriminating effect, and D has to show that P’s attempt to limit group homes has the discriminatory effect of denying housing to the handicapped

2.       reasonable accommodation—includes changing some rule that is generally applicable so as to make its burden less onerous on the handicapped individual

3.       discriminatory intent—D must show that the residents’ handicap was in some part the basis for P’s actions;

++

                                                              ii.      Shelley v. Kraemer (1948)—very famous case; in 1911 30:39 owners signed a 50 year agreement restricting negroes and Mongolians from owning or renting property in a certain area of St. Louis; these owners held title to 47:57 parcels of land in the district; in Aug. 1945 Shelley obtained a WD from Fitzgerald to one of these parcels; P had no actual knowledge of the restrictive agreement at the time of purchase; in Oct. 1945, Kraemer brought suit praying that P be restricted from taking possession, that J be entered investing title out of P and revesting title in the immediate grantor; Missouri S.Ct. directed trial court to grant relief for Kraemer holding the agreement effective and that enforcement violated no rights guaranteed to P because the 14th Amendment applies to states only and not to private agreements made between individuals; USSC reversed holding that granting judicial enforcement of the restrictive agreement, the states have denied P the equal enjoyment of the protection of the laws

    1. Termination of Covenants

                                                               i.      Western Land Co. v. Truskolanski (1972)—termination; city of Southland Heights in Reno, NV was restricted to SFD in 1941 when the parcel was subdivided; homeowners brought suit against appellant to enjoin him from using the parcel as anything other than that permitted by the covenants; appellant contends that subdivision has radically changed since 1941 (e.g., population from 20K to 95K, increase in traffic, terribly noisy, increase in commercial development outside the subdivision); “as long as the original purpose of the covenants can still be accomplished and substantial benefit will inure to the restricted area by their enforcement, the covenants stand even though the subject property has a greater value if used for other purposes”

1.       the covenants weren’t themselves unconstitutional; however the court’s involvement made them a constitutional matter and therefore unconstitutional because they made it a state matter

2.       Changed Conditions Doctrine—an equitable servitude will terminate if changed conditions:

a.       Changes inside and outside subdivision

b.       No or substantially no value or benefit of the covenant

c.       Change to entire subdivision, not just borders

3.       This doctrine means that courts will terminate running covenants when conditions since the covenant’s creation have so changed as to make it impossible to secure the benefits sought to be realized.  It’s a way to terminate covenants.***

a.       What happens if a zoning ordinance only permits one use and there’s a conflict?  If there’s a conflict between the zoning and the covenant…a direct conflict…the zoning would win; the covenant would have to fall.  The more restrictive prevails.

4.       Zoning ordinances cannot override privately placed restrictions.  Court’s response to highest and best use doesn’t entitle appellant to ignore restrictions because:

a.       Doesn’t care…you put restrictions in and there’s still value to restrictions so you deal with it.  You made your bed now you lie in it.

                                                              ii.      Rick v. West (1962)—P subdivided 62 acres in 1946 and filed a declaration of covenants restricting land to SFD; in 1956 P sold to a ½ acre lot to D and she built a house; P K to sell 45 acres to industry conditioned on tract being rezoned; tract rezoned but D would not release covenant and sale fell through; in 1961 D conveyed to Ps who were likewise prevented by D from selling 15 acres to a hospital; Ps sued claiming covenant no longer enforceable because of change of conditions; held that covenant still enforceable notwithstanding substantial change in general neighborhood; D relied on the restrictions and has a right to continue to do so; J for D; you made your bed developer so you lie in it; court said standard for damages only if restriction outmoded or doesn’t give benefit to person wanting covenant; Ms. West just lucked into it

                                                            iii.      Pocono Springs Civic Association, Inc. v. MacKenzie (1995)—owners with perfect title cannot abandon therefore the covenant could not be abandoned

    1. Common Interest Communities

                                                               i.      Nahrsedt v. Lakeside Village Condominium Association, Inc.(1994)—condos; restricted from keeping dogs & cats; she had 3 cats (Booboo, Doctors & Tulip); not allowed to have them; they’re nice inside cats; found out because guy was peeking into window; somebody narked on her; they turned her in and said cats out; she said no; association gives her a fine time after time; sues and claims pet restriction useless because pet restriction useless; trial court dismisses complaint and Ct.App. rev’d based their decision on Calif. Code that decisions such as this valid unless proved to be unreasonable; Ct.App. said if noiseless then unreasonable; S.Ct. rev’d stating that they used the right idea but wrong application; reaffirmed that restrictive covenants are valid and should be enforced unless proved unreasonable to entire community, not to any one set of facts

1.       Unreasonableness cannot be shown by the application of a covenant to a particular condominium owner, it can only be shown by demonstrating that “the burdens it imposes on affected properties so substantially outweigh the benefits of the restriction that it should not be enforced against any owner” unless they are:

a.       wholly arbitrary

b.       violate a fundamental public policy; or

c.       impose a burden on the use of affected land that far outweighs any benefit

2.       REASONABLENESS DOES NOT APPLY TO ORIGINAL CONDITIONS PLACED ON THE LAND; it only applies to things that happen later

3.       NOT A CASE BY CASE BASIS

 

  1. LEGISLATIVE LAND USE CONTROLS:  THE LAW OF ZONING
    1. Zoning Power

                                                               i.      only state has the power to zone; delegated to cities and counties by enabling statutes; all local activity must abide by the enabling statutes

    1. Types of Zoning

                                                               i.      Judicial

                                                              ii.      Legislative

                                                            iii.       

    1. Goals of Zoning

                                                               i.      Orderly development of the community

1.       economic growth

2.       community health

3.       welfare

4.       safety

    1. How Zoning Works

                                                               i.      Segregates uses of land into geographic regions

                                                              ii.      Can be used to foster commercial as well as residential districts

                                                            iii.      Regulate density of human population for health & safety reasons

                                                             iv.      Achieved by limiting building heights, min. & max. yard sizes, etc.

    1. Constitutional Considerations

                                                               i.      Landowners must be given a hearing if zoning regulations are to be changed

                                                              ii.      EPA clause requires all landowners to be treated equally

                                                            iii.      Just compensation must be given by state if zoning regulations take (eminent domain)

1.       Taking

a.       Local government properly exercises it police power when it phases out uses which are inconsistent with newly enacted zoning changes

b.       A use which is no longer permitted is a nonconforming use

c.       Landowner must be given reasonable time to cease nonconforming use

2.       Village of Euclid v. Ambler Realty Co. (1926)—Village of Euclid is a suburb of Cleveland; population 5,000-10,000 in an area of 12-14 square miles, most of which is farm or unimproved land; three roads from north to south were Lake Shore Blvd., St. Clair Ave. and Euclid Ave.; in between Lake Shore and St. Clair was the Lake Shore RR; in between St. Clair and Euclid was the Nickel Plate RR; Appellee’s tract of land contained 68 acres and was situated on the westerly side of the Village abutting Euclid on the south and Nickel Plate RR on the north; on both sides of Appellee’s tract there were laid out restricted residential plats with houses; in 11/13/22 a comprehensive (hierarchy—top of pyramid is highest use-SWD) zoning plan was adopted restricting and regulating uses of property; Amber’s land fell into three different categories even though it was one continuous parcel; P alleges he was holding the land to sell and develop it for industrial uses because it was in the path of progressive industrial development; market value $10,000 acre industrial as opposed to about $2,500 down to $50/acre if used for residential purposes; P argues that the ordinance restricts and controls the lawful uses of his land and Amber brought suit to enjoin enforcement of the ordinance arguing that the statute was unconstitutional under Section 1 of the Fourteenth Amendment that it deprives Appellee of liberty and property without due process of law and denies it the equal protection of the law and offending certain provisions of Ohio’s Constitution; P won and D appeals; ISSUE whether a comprehensive zoning plan restricting uses of properties (under the guise of police power) according to areas designated by a legislative body unconstitutional for violation of Due Process and Equal Protection of the Constitution?  S.Ct. said no and reversed the trial court’s J; REASONING:  the question of whether a particular thing is to be considered a nuisance is to be determined by considering it in connection with the circumstances and the locality; a nuisance may merely be a right thing in the wrong place—like a pig in a parlor instead of a barnyard; the S.Ct. determined that the ordinance in its general scope and dominant features is a valid exercise of authority and legislative judgment must be allowed to control because if the buildings not allowed to avoid nuisance and to promote safety were allowed, it would negate the benefits; on the other hand, if some harmless type of building is also excluded it would not violate an otherwise good law

a.       Of cities with over 250,000 population, only Houston has not enacted a zoning ordinance

    1. The Non-Conforming Use

                                                               i.      PA Northwestern Distributors, Inc. v. Zoning Hearing Board (1991)—amortization means you slowly get back the value of your stuff because it depreciates; it gives you enough time to realize your investment

1.       A non-conforming use is a use that was in existence before the zoning was enacted

2.       Zoning involves governmental restrictions upon a property owner’s constitutionally guaranteed right to use his or her property, unfettered by governmental restrictions, except where the use violates any law, the use creates a nuisance, or the owner violates any covenant, restriction or easement.

3.       A lawful non-conforming use establishes in the property owner a vested property right which cannot be abrogated or destroyed, unless:

a.       it is a nuisance;

b.       it is abandoned; or

c.       it is extinguished by eminent domain

4.       nonconforming uses run with the land to protect your vested rights

5.       Termination of Non-Conforming Uses

a.       Abandonment

b.       Forfeiture by statute

c.       Changes in use

d.       Expansion beyond natural business expansion—courts mostly say expansion must be necessary

e.       Fading away

                                                              ii.      If a developer relies on whatever and spends a lot of money, they have a nonconforming use and that right can’t be taken away from them

                                                            iii.      Euclidian zoning causes a lot of problems; you can’t walk to the corner store because there is no corner store; creates environmental problems; traffic, etc.

1.       law has established ways to achieve more flexibility

a.       nonconforming uses

b.       variance and exceptions

    1. Commons v. Westwood Zoning Board of Adjustment (1980)—guy wants to do something; ordinance says this and that; lot too small; blah blah blah;

                                                               i.      Two Types of Variances

1.       area—has to do with physical set-back requirements

2.       use—relaxes restrictions on permissible uses (harder to get)

a.       why?  makes board rethink whole reason area was zoned in the first place

b.       landowner asks for a variance that allows them to do something

                                                              ii.      Two Prong Test

1.       show undue hardship

a.       in the event the variance is denied; no ____ can be made of the property

b.       unequal bargaining power

c.       no effective use can be made of the property

2.       negative criteria—that the variance can be granted without substantial detriment to the public good and will not substantially impair the intent and purpose of the zone plan and zoning ordinance

    1. Cope v. Inhabitants of the Town of Brunswick (1983)—special exception is something that is listed in the ordinance; a variance is when a person says he wants to do something he knows is not allowed in this type of area; you can delegate your legislative authority if it’s very specific; you can’t do something general; this language in this case was too general

                                                               i.      Differences between variances and special exceptions

1.       Variance—administratively authorized departure from the terms of a zoning ordinance

a.       An agency has determined that it is okay based on unique and individual hardship

2.       Special Exception—if there isn’t a variance it allows them to do something; use that is permitted by the ordinance in a district in which it is not necessarily compatible, but where it might cause harm if not watched;

a.       Contemplated by the legislative body

3.       Rule of Special Exceptions

a.       where, under a special exception provision all the specific requirements are met, the exception must issue and cannot be withheld on general grounds, not touchy feely

b.       a variance is a touchy feely thing; “what about the public good” blah blah blah