Killer Property

8/2/2019 Killer Property

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Killer PropertySpring 2009

Leslie

Section 1

Adverse Possession

Case Facts Issue Rule(s) Analysis Policy

Van Valkenburg v.Lutz(judgment for VV)

CB at 115Aspen at 13

Lutz and his family owned andoccupied a parcel of land near atriangular tract in the City ofYonkers. Beginning around1920, Lutz (D) used the tract tocross to his land. He thencleared part of the tract andbuilt a shed thereon andmaintained a garden, withknowledge that he did not have

title to the tract. In 1937, VV(P) moved onto a parcelcontiguous to the triangulartract and a feud developedbetween the parties. In 1947,VV purchased the triangulartract at a tax sale and gave Lutznotice to vacate the tract at ameeting between the partiesand counsel. Lutz agreed toremove the shed and garden,but claimed a prescriptiveeasement for the right of way.Lutz obtained a judgment tothat effect in Jan. 1948. VV

brought this action to compelremoval of encroachments anddelivery of possession of thetriangular tract.

Elements of

adverse

possessionclaim.

To acquire title to realproperty by adversepossession not foundedupon a writteninstrument, it must beshown that there wasactual occupation underclaim of title Theessential elements ofproof being that the

premises:(1) are protected by asubstantial enclosure,or(2) are usuallycultivated andimproved.

N.Y. Civil Practice Act 40(old statute)

1.usually cultivated and improvedWHY FAILED?-whole parcel was not cultivated(cultivation of a smaller part of the largepart insufficient no constructive APwhere claim is not under color of title

-Lutz actions on property (garageencroachment, small shed/shack,portable chicken coop, cutting of some

brush, storage of junk) insufficient to

Punish the original owner for failure to

police real property (sleeping on rights)

Encourage commercialdevelopment

o Probably has noresonance now (maybeat the early foundationsof the doctrine)

o Market governsefficiency, not the law

o Also, adverse possessionwill not lead a rationalactor to invest indevelopment on thegrounds of adversepossession

Detrimental Reliance on PropertyOwnership by Adverse Possession

Equitable relief provides personswho invest and develop land, makeimprovements, etc. the security ofproperty ownership

Judicial Certainty

Availability of evidence, managingparties to potential litigation

Preventing Unjust Enrichment of Original

Owner (where AP has made improvementsor kept land cultivated.

Security in Title at the earliest possiblemoment.

See Note on the Logistics ofProperty Transfer and Record

2. claim of title-requires adverse possessor to holdproperty hostile to legal title.-Lutz acknowledged legal title in the VV inthe easement proceedings

Why requirement of cultivation and

improvement requirement?

Notice to original owner of adversepossessory interest.


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Case Facts Issue(s) Rule(s) Analysis PolicyManillo v. Gorski


Gorski (D) entered intopossession of a lot in 1946under an agreement topurchase. Land was actuallyconveyed to D in April 1952. Pare the owners of an adjacentlot, acquired in 1953. In 1946, Dmade certain structuralimprovements whichencroached on Ps property by15 inches.

Boundary Dispute/MistakeEffect ofmistaken belief ofownership on the element ofclaim of right

Two Approaches:1. MaineDoctrine/Aggressive

trespass standardRULE

Claim of right requiresbad faith acquisition. AP mustintend to claim possessionwith knowledge that he doesnot have the right topossession.2. CT Doctrine/Good FaithstandardRULEState of mind isirrelevant. Only requiresactual occupation withoutpermission.

Minor EncroachmentWhether minor encroachment issufficiently open and notorious toput true owner on notice of AP?

RULENo presumption ofnotice/knowledge arises froma minor encroachmentalong acommon boundary

Howard v. Kunto

CB at136Aspen at 15

The Kuntos took possession ofa summer home under a deedwhich unbeknownst to themdescribed the adjoiningproperty. After discovering themistake, the Howards obtaineda conveyance of the deed whichdescribed the property occupiedby the Kuntos. Howard then

sought and obtained judgment

Seasonal OccupationIs a claim of adverse possessiondefeated because the physical useof the premises is restricted tosummer occupancy?

TackingCan an occupant who has title totract A under the mistaken beliefthat he has title to tract B and whooccupies tract B, tack the periods of

More on actual entry giving exclusive possession CB at 124 n.2

RULEThe sort of entry and exclusive possession that will ripen into title byadverse possession is use of the property in the manner that an average true ownerwould use it under the circumstances, such that neighbors and other observerswould regard the occupant as a person exercising exclusive dominion . CB at 125para. 1

NOTE Ewing v. Burnet where adverse possession of an unimproved lot in Cincinnatiwas established where claimant paid taxes on the lot, from time to time dug sad andgravel from it, permitted others to do so, and brought trespass actions others fordigging without his permission (but kept no actual residence on the property)

More on open and notorious

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

What result?Marengo Cave Co. v. Ross held that open possession of undergroundcave not notorious.--Dan Tarlock, Bill of Particulars, IU School of Law--. Coase Theorem suggeststhat result is irrelevantbecause A will buy out Bs interest to keep business. --Stewart Sterk counters with bilateral monopoly (inefficient wealth transfer)


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quieting title in himself. possession of tract B by hispredecessors who also had recordtitle to tract A?

Adverse Possession in New York State

Case Law Current Statute (as amended 2008) Affect on Case Law

Van Valkenburg v. Lutz

See FACTS above

501 Adverse Possession Defined3. Claim of right. A claim of right means a reasonable basis for the beliefthat the property belongs to the adverse possessor or property owner,

as the case may be. Claim of right not required where owners cannot beascertained in the relevant workers.

511 AP under written instrument

and there has been a continued occupation and possession of the premisesincluded in the instrument, or some part thereof, for ten years under thesame claim, the premises so included are deemed to have been heldadversely. constructive adverse possession

512 Essentials of AP under written instrument

For the purposes of constituting an adverse possession, founded upo n awritten instrument or judgment or decree, land is deemed to have beenpossessed and occupied in any of the following cases:

1. Where there has been acts sufficiently open to put a reasonablydiligent owner on notice; or2. Where it has been protected by a substantial enclosure; or3. Where, although not enclosed, it has been used for the ordinary use

of the occupant.Where a known farm or single lot has been partly improved, the portion ofthe farm or lot that has been left not cleared or not enclosed, according to theusual custom of the adjoining country, is deemed to have been occupied forthe same length of time as the part improved or cultivated.

521 AP not under written instrument

Where there has been an actual continued occupation of premises under aclaim of right the premises actually occupied, and no others, are deemedto have been held adversely. no constructive AP

522 Essentials of AP not under written instrumentFor the purposes of constituting an adverse possession, founded upo n awritten instrument or judgment or decree, land is deemed to have beenpossessed and occupied in any of the following cases:

1. Where there has been acts sufficiently open to put a reasonablydiligent owner on notice; or

2. Where it has been protected by a substantial enclosure

543 AP; how affected by acts across boundary lines

1. Notwithstanding any other provision of this article, the existence ofdeminimus non-structural encroachments including, but not limited to,fences, hedges, shrubbery, plantings, sheds and non-structural walls,

shall be deemed to be permissive and non-adverse.2. Notwithstanding any other provision of this article, the acts of lawnmowing or similar maintenance across the boundary line of anadjoining landowners property shall deemed permissive and non-adverse.

1. Knowledge precluded claim of rightLegislative history suggests that inquiry not upon the person'sbelief, but instead upon the evidence introduced in court which

justifies a reasonable basis for that belief. It will be an inquiryinto the basis and whether it was reasonable, not into a person'smind. The court will determine whether or not there was areasonable basis.

oThere doesnt seem to evidence to support to provide areasonable basis for belief that Lutz owned to land

2. Cultivation/ImprovementStatute replaces the requirement for usual cultivation orimprovement with common law open and notorious sufficientto put owner on notice (which cuts in favor of Lutz, everyoneknew it was Lutzs Garden; butVV may argue that this is a non-structural encroachment and that Lutzs conduct constituted deminimus non-structural encroachment which is not adverseunder 543(1)

oLutz counters that the garage is structural and the statuteimplicates that structural encroachments are adverse

City of Tonawanda v. Ellicott Creek HomeownersAssn.FACTS: City brings ejectment action against several defendantsfor strip of creekfront property being occupied and used byowners of residential property adjacent to creekfront and boatowners (presumptively mooring their boats on the creekfront)o Hostility Interprets hostility rule as time sensitive; if possessoracknowledges that he is not true owner during statutory periodthen hostility is defeated why?1. RelianceNot reasonable to rely on claim of ownership where there isactual knowledge of legal title in another2. NoticeCharacter of possession with knowledge of lack of ownership is

permissiveCites Van Valkenburgh

Tubolino v. Drake, 178 A.D.2d 951 (1991)Why adverse possession before claim of superior chain of title?--Adverse possession makes superior chain of title moot--AP obviates the need for a difficult fact-finding to determinewho actually has superior claim to the titleArguments that the court in this case resolved incorrectly1. Lack of detrimental relianceConduct was not systematic, random logging and fishing, etc.2. Lack of sufficient noticeConduct fails to give rise to check the property3. Outcome Determinative Distinction between Van Valkenburg--Here, possession founded on written instrumentCourt seems to be making it easier to gain possession by APwhen there is a deed--Character of the property adversely possessed


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Section 2

Present Possessory Estates

Case Facts Issue Rule(s) Analysis Policy/HyposWhite v. Brown(niece) v. (collaterals)(White prevails)


Terms of the will of Jesse Lide

Conveys to Evelyn White(sister-in-law) my house tolive in and not to be sold

Parties chief arguments P argues that the terms of

the will conveyed an estatein fee simple absolute(which would give P aninterest at the expiration ofher mothers life estate)

Brown (Lides collateralrelative) argues that theterms of the will created an

life estate (leaving themwith the remaining interestat the expiration of the lifeestate.

Rules of Interpretation

Life Estate v. Fee SimpleRULEWhere a will is susceptibleof two constructions, one passing theentire estate and the other leaving apartial intestacy, courts will adoptthe former construction, passing thefull estate.

POLICYagainst partial intestacyWHYBecause it eliminates the following?1. Free-Rider Problem, Bilateral monopoly,Transaction Costs (for improvements)2. Mortgage Problem Where improvementis desirable, even to the extent thatimprovement will favorably affect both thelife estate and future interest, a life tenantcannot mortgage the property to acquirecapital to make improvements3. Tension between desired uses of the lifetenant versus the remaindermen

Tension may need to be involved incourt which is itself inefficient

4. Different time horizons for life tenantsversus remainderman

5. Reduces dead hand control People rarely have the foresight to

predict future value of property fromdiffering uses

NOTE: Court eliminates the attemptedrestraint on alienation (and not to be sold)as void against public policy. See PolicySection

Policy

1. Shortage of available landfor purchase (if no freealienation) Restrictions on commercial

growth (commercialeconomy works when theperson who owns it valuesit the most) hampersefficient this efficienttransfer

Only incentive on upkeepand maintenance would besentimental value

2. Removes benefits of landownership as capital (bankwill not be able to attachproperty under foreclosure) May cause significant

increases in prices of landthat are alienable (thisbecomes a marketablequality)

NOTE: Brown argues that will canbe construed as exclusively passing alife estate either expressly orimpliedly:Impliedly

Restrictions on alienation (dontsell my house) are inconsistentwith conveyance of an estate infee simple absolute

Expressly

live in versus leave (withrespect to the personal property)suggests that Lide knows how togrant property in fee simpleabsoluteo the implication is that she

decided to limit herconveyance by using differentlanguage

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


John Baker devises his property toAnna for life, remainder to herchildren, and in the event she has nochildren, to his grandchildren (fromfirst wife). P sought to obtainjudicial authorization for sale ofproperty because current value asagricultural rental was insufficient tosupport life tenant. Land valuedcurrently at ~$168K, but would havea value of $336K in four years. Dargue that sale would deprive them

1. Sale of LandEncumbered by Future

Interests

2. The Law of Waste

RULECourt has the authorityto order the sale of land inwhich there are future interestsfor the prevention of waste.

What is the appropriatedefinition of waste?

See Notes Addendum Hypos

See Notes Addendum


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Defeasible Estates

Case Facts Issue Rule(s) Analysis Policy/Hypos

Marenholz v. CountyBoard of Trustees(Marenholz prevails)


3/18/41 Huttons execute a deedtransferring 1.5 acres of a 40 acreplot to school this land to be usedfor school purposes only, otherwiseto revert to grantors herein. 10/9/41 Huttons execute a deedtransferring the other 38.5 acres andthe reversionary interest in theschool land to the Jacqmains7/18/51 Mr. Hutton dies intestate10/9/59 Jacqmains executed adeed transferring 38.5 acres andreversionary interest to Mahrenholz69 Mrs. Hutton dies.5/30/1973 Schools tops using theproperty for classes and uses thebuilding for storage

5/7/77 Huttons son conveysinterests to Marenholz9/77 Huttons son disclaimsinterest in school

IL statute prohibits a transfer bywill or inter vivos conveyance ofeither a possibility of reverteror right of re-entry

oTherefore, Jacqmainsreceived no interest in theschool board land; thusthey could not haveconveyed that interest tothe Mahrenholz

Marenholz argument1. Estate in fee simpledeterminable Creates a possibility of

reverteroNo reversionary interest

transferred from Huttonto Jacqmains toMarenholz

Revisionary interest passedto Harry at death of hisparents

2. Cessation of school purposesin 1973 automatically vestedHarry with estate in fee simple

absolute as to the 1.5 acres3. Harrys conveyance toMareholz would then be anestate in fee simple absoluteSchool Board argument1. Estate in fee simple subject tocondition subsequent Use Latham as a

comparable case bcuz its ahigher ct in the state

oCreates a right of re-entryoNo reversionary interest

transferred from Hutton toJacqmains to Marenholz

oRevisionary interest passedto Harry at death of hisparents

2. Cessation of school purposesin 1973 creates only a right ofre-entry; estate in fee simpleabsolute not created until Harrytakes some affirmative action toreclaim interest

Is the prohibition onconveyance of the

reversionary interest a goodidea?1. No, reversionary interestwill be split many waysthrough the generations.2. Limits the alienability of theproperty (School board cannotsell it)

Argument for School Board

Constructional Preference forestate in fee simple subject toa condition subsequent

Mountain Brow Lodge No.82 v. Toscono



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Section 3

Future Interests and the Rule Against Perpetuities

Case Facts Issue Rule(s) Analysis Policy/HyposIn the Matter of Krooss(husband prevails)

Herman Krooss granted lifeestate to his wife Eliese with thefollowing remainder:Upon the death of my wife...I the n

givethe remainder of my estate to

my children John and Florence to

share and share alike, to and for theirown use absolutely and forever. In

the event that either of my children

should die prior to the death of my

beloved wife, leaving descendants,then it is my wish and I so direct that

such descendants shall take the share

their parent would have taken if thenliving

NOTE on testators actual intentJohn intended to leave his estate tohis children and grandchildren anddid not want his estate to pass tohis childrens spouses.

Whether the language of the willregarding the remaindercreated a contingentremainder (contingency fails isJ/F predecease the life tenantand interest reverts back tograntor or his heirs underintestacy statute) or a vestedremainder subject tocomplete divestment(remainder vested at testatorsdeath, subject to be divested

only in the event of herpredeceasing the life tenantleaving issue or otherwisepassing under her will at herdeath to her husband)

RULELaw favors constructionof language in a will thataccomplishes the completevesting of estates; thereforecourts are intent upon restrictingdefeating events to the exactcircumstances specified.

Testators language ofabsolutely and forever in thegranting clause suggests anunqualified vested remainder. RULE Additional

language will not be readas qualifying or cuttingdown the estate unlessthe language is as clearas that which created the

vested remainder.

But this is arguably contraryto testators intent (keepproperty in the family)?

Is this application of the ruleappropriate here? Florences will creating a

trust (to husband for life,remainder to nephews)effectuates testatorsintent courts decisionpermits Florences will totake effect

1. Rule is preferable becauseit enables property to be freelytransferred (unencumbered)at the earliest possible time.(same as RAP_

How should this have beendrafted to avoid litigation

(assuming that the testatordesired this result)?

in the event that Florencepredeceases the life tenant

leaving no issue, it shall goto her estate

Browning v. Sacrison Kate Webb devised life estate toher daughter Ada with the

following remainder:with remainder over at the deathof the said Ada, share and sharealike, to my grandsons, FrancisBrowning (Ps husband) and RobertBrowning [Sacrison] (D), or, ifeither of them be dead, then all tothe other

Rejects broad, uncritical

application of the general rule

favoring early vesting ofestates. WHY?

Unfortunate tax consequencesmay follow a determinationthat an interest is vested andmost transferors whoconsider all of the taxconsequences which attach toa vested interest are inclinedto postpone vesting until thetime set for enjoyment of theinterest in possession.

RULE Balancing test weighingfactors favoring a construction

of a vested interestwith factors

Factors favoring early

vesting:

1. Reduction of contingenciesfacilities alienability (readiermarket for property that isunencumbered).2. RAP operates moredestructively as to contingentinterest than vested interestssubject to completedefeasance.

What is are the

countervailing factors?Constructional preferencewhich conforms more closelyto the intent commonly

prevalent among conveyers


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favoring a construction ofcontingent remainder interestin light of the testators intent.

similarly situated. Remainder conditioned

upon an ambiguous form ofsurvivorship is generallydeemed to require thatremaindermen survive thelife tenant

Rule Against Perpetuities

The Rule Against Perpetuities attempts to facilitate the legal preference for free alienability of land by attempting to restrict dead hand control. The Ruleextinguishes contingent future interests whose contingencies fail to resolve within one generation plus 21 years of the initial grant of the interest. The Rulehas been criticized for its difficult application and inconsistency regarding to which types of interests it applies. CB at

The Common Law Rule Professor Grays FormulationRule derived from the struggle between landowners who desired to keep land within thefamily and judges who tried to resist these efforts.

Originated in the Duke of Norfolks CaseAs developed it took the form of a compromise between the landed class and the judges Fathers were considered to be particularly capable of assessing the capabilities of

living family members of his family fathers informed judgments given effect This deference extended only to living members because the head of the family could

know nothing of unborn persons. Thus, father was permitted to control only so long ashis judgment was informed with an understanding of the capabilities and needs ofpersons alive when the judgment was made. (at the time of the testament) oLater expanded to control beyond lives in being if any other person in the next

generation was actually a minoroFurther extended control to lives in being plus 21 years thereafter.

No interest is good unless it must vest, if at all, not later than twenty-one years after some life in

being at the creation of the interest.

Property may be tied up in contingent interests no longer than for lives in being plus21 years thereafter.

Effect was to permit a donor to provide for all those in his family whom hepersonally knew and the first generation after them upon attaining majority .

Mechanics of the Rule Against PerpetuitiesCasebook Formulation Professor Leslies Formulation

(1) Is the future interest subject to the Rule? Only non-vested interests are subject to the Rule. Why? Contingent remainders, executory interests, class gifts

(2) Will the interest vest within the perpetuities period?

It is necessary to prove that a contingent interest is certain to either vestorterminate no later than 21 years after the death of some person alive at thecreation of the interest.

oCan you point to a validating life? A validating life is someone who will enable you to prove that the

contingent interest will either vest or fail within the life, or at thedeath of, that person, or within 21 years after that persons death.

1. Identify the interest. If interest is reversionary (reversion, possibility of reverter, right of entry,

indefeasibly vested, vested subject to complete divestment) RAP does not apply If interest is contingent remainder, vested subject to open, and executoryinterest

RAP appliesoWhy vested subject to openAll or Nothing RuleoClass gift is not vested in any memberuntil the interests ofall members have

vested.2. Identify the contingency. When will the interestvest or fail to vest(when will thecontingency resolve)?3. Identify a measuring life (validating life).

Contingency will resolve within life plus 21 years Alive at the creation of interest

Wait and See Approach


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Section 4

Joint Tenancies/Concurrent Estates

Type Characteristics How Created How TerminatedTenancy in Common 1. Tenants have separate but undivided interests

in the property.2. The interest is descendibleand alienable (maybe conveyed by deed or will)3. There are no rights of survivorship betweentenants in common.

Can be created in a will or arise out ofintestatesuccession.

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

Joint Tenancy 1. Joint tenants have rights of survivorship.2. Each tenant is seisedper my et per tout(by theshare or moiety and by the whole). In theory,each own the undivided whole.

1. Generally requires the four unitiesTime-Interest must be acquired or vest at thesame timeTitle-Must acquire title by the same instrument orby joint adverse possession. A joint tenancy may

never arise out of intestate succession/act of law.Interest-Must have equal, undivided sharesPossession2. Statutes in some jurisdictions have abolishedthe requirement of the four unities and providethat a joint tenancy may be created by expressintent.

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

Tenancy by the

Entirety

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

1. The four unities plus the unity ofmarriage. 1. Divorce which destroys the unity of marriage; estate then becomes atenancy in common.2. Neither tenants may defeat the right of survivorship by unilateralconveyance of a moiety to a third party.3. Neither party has the right to judicial partition.

Avoidance of Probate Effect on Creditors Unequal SharesJoint tenancy is the practical equivalent of a will but at thejoint tenants death, probate of the property is avoided. Why isthis desirable?Probate is:1. costly2. property may be tied up in probate for months or years(impedes alienability)

If a creditor acts during a joint tenants life, then the creditorcan seize and sell the joint tenants interest, severing the jointtenancy. If a creditor waits until after death, the decedentjoint tenants interest has disappeared and there is nothing thatthe creditor can seize.

Most states have eliminated the requirement of equal sharesto create a joint tenancy (unity of interest).


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Case Facts Issue Rule(s) Analysis Policy/HyposRiddle v. Harmon Ps wife, the decedent, owned

certain real property in jointtenancy with P. In planning herestate, her attorney advised herthat terminate the joint tenancyby conveying to herself anundivided, one-half interest inthe property

Severance of Joint Tenancy RULE Joint tenancy may besevered by conveyance by onejoint tenant of his interest tohimself.

No need for a strawman tocreate or sever the tenancy.

This is not creating new powersfor a joint tenant universalright of each joint tenant is thepower to sever the joint tenancyby unilateral conveyance

How to create an indestructibleright of survivorship?1. Joint life estate withcontingent remainder to thesurvivor.2. TIC in fee simple with anexecutory interest in thesurvivor3. Fee simple to take effect inpossession in the future.

Delfino v. Vealencis P (99/144) and D (45/144) aretenants in common. D occupies

a dwelling and operates agarbage removal business. Psare not in actual possession ofthe land, but propose to developthe property into residentiallots.

Partition in Kind v. Partition

by Sale

Why not settle through contract?

No reason to believe that theagreement between theparties would reflect theirrelative interest in theproperty

Agreement will actuallyreflect the leverage that oneco-tenant has over the other

oJudicial involvementensures that theagreement accuratelyreflects the relativeinterests in the land

RULE Judicial preference forpartition in kind to protect the

subjective value of party notseeking partition.

RULE Partition by sale shouldonly be ordered under twoconditions: (1) the physicalattributes of the land are suchthat partition in kind isimpracticable or inequitableand (2) the interests of theowners would be betterpromoted by a partition by sale.

- Delfinos Interest in sale of the whole

parcel is greater than therevenue generated from aphysically-partitionedportion

- Vealencis Emotional/Sentimental

(subjective) value may notbe reflected in market valueoBUT, if she threatens to

litigate to keep thegarbage business, thenshe can maximize therevenue from saleAFTER partition in kind(bargain for theinjunction and set herown price).

Spiller v. Mackerath John Spiller (appellant) andHettie Mackereth (appellee)owned a building as TIC. Whena lessee vacated the building,Spiller began using thestructure as a warehouse.Mackereth demanded thatSpiller either vacate half of thebuilding or pay half of the rentalvalue.

Liability for to cotenant for

rent

RULE Absentan agreementto pay rentor ouster ofcotenant, a cotenant inpossession is not liable to hiscotenants for the value of hisuse and occupation of theproperty

Alternatively, under theminority rule (Cohen), ouster isunnecessary to establishliability to the out of

possession tenant.

What is ouster?1. The beginning of therunning of the statute oflimitations for adverse

possession cotenant inpossession must engage inactivities that constituteassertion of completeownership the landExamples: Composite of activities

such as renting part of the landwithout accounting, hunting,

cutting timber, assessing and

NOTE: The out of possessioncotenant will have difficultyproving the claim of rightelement of AP to e stablish ousterby adverse possession.

Counsel for MackerathEncourage Spiller to make anagreement for rental payments.How?(1) Threaten judicial partition(2) Threaten to find anotherlessee which would create liability

for rental value


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Which rule is better?Probably Spiller WHY?1. Better effectuates Intent of theparty who created the cotenancy2. Cohen rule reduces litigationcosts because it removes thelitigable issue of ouster

paying taxes OR more overt actlike purported conveyance of afee simple2. Refusal by occupyingcotenant of a demand of the

other cotenants to be alloweduse and enjoyment of land

regardless of claim ofabsolute ownership.

Adverse Possession andCotenancyNY StatueWhere a co-tenant has maintainedcontinuous exclusive possession,there is a presumption for the first10 years that the possession ispermissive.

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

P attempts to cancel two leasesexecuted by her husband andSampson, both co-defendants, oftwo adjoining parcels of land inOrange County. Swatrzbaughsowned 60 acres of land in OrangeCo. as joint tenants planted tobearing walnuts. H leased part ofpremises to Sampson for a boxingpavilion; his wife objected andwas not party to the lease. Thewalnut trees were removed fromthe premises and the boxingpavilion built. At the time of the

action, Sampson had been inexclusive possession of that partof the premises and P had notreceived any part of the rent.

Joint Tenancy and Authorityto Lease

RULEEach cotenant inpossession has a right topossession of the whole; a leaseby one cotenant is valid insofaras it only conveys theconcurrent interest.

Although out of possession mayhave an action for accounting ofthe rents of the lessee inexclusive possession or actionfor ejectment to permit re-entry, the lease transfer itself isnot a nullity (unless if purportsto convey a fee interest).

What are s other remedies?1. Partition action May not effectuate her desire

to keep the boxing ring offthe property and preservefor use a walnut farm

2. Ouster

Recover for the reasonablevalue for the use andenjoyment of the property(fair market value)oWho pays?oSampson because he is

in possession of the landand getting the benefitsof exclusive possession;he is defined as theouster

o Swartzbaugh(husband) authorizedremoval of trees whichconstitutes ouster

3.Action for Accounting Will permit to recover

actual rents paid to lessor,but there is a problem withthis argument.

Here, Swartzburgh wouldargue that expresslydeclined to join the leasesuch that the lease onlyconveyed the s interest

All of these seem to workagainst the - what does shedo?

(1) Attempt to find anotherlessee who would pay more forthe leased portion. This isunlikely.(2) Argue that the cutting downof the trees (valuable, maturewalnut trees) would cause

waste and thus she is entitled to


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Case Facts Issue Rule(s) Analysis Policy/Hyposan injunction

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

P seeks to, in aid of executing amoney judgment for a caraccident, to cancel a conveyanceof real property, owned as atenancy by the entirety, fromthe Ds to their son.

Ability of creditors to reach atenancy by the entirety

Whether the interest of onespouse in real property, held intenancy by the entireties, issubject to levy and execution byhis or her individual creditors.

RULE Tenancy by the entiretymust be conveyed by eitherspouse and the estate may notbe

Possible Analyses1. Old Common Law - thepossession and profits of theestate are subject to the husbandsexclusive dominion and control

Conveyance would have beenfraudulent

2. The interest of the debtorspouse in the estate may be soldor levied upon for his or herseparate debts, subject to theother spouses contingent right ofsurvivorship

Conveyance would have beenfraudulent because Sawadaswould have been able toattach the property subject toMs. Endos survivorshiprights

3. The contingent right ofsurvivorship appertaining toeither spouse is separatelyalienable by him and attachable byhis creditors during his marriage

Mr. Endos survivorshiprights were attachable andcould not have been conveyed

No rights by creditors to theuse and profits during the lifeof the cotenant

4. This court analyzes: Anattempted conveyance by either

spouse is wholly void, and the

estate may not be subjected tothe separate debts of one

spouse only.In Re Marriage of Graham Professional Degree as

Marital Property

Debate the question: Resolved,an MBA is not marital property.For: Forces H to work in that job

to realize the value of thething as property; also if hebecomes incapacitated

Value of the MBA asproperty implicateseducation prior to themarriage (grade schoolthrough undergrad)

Negative ImplicationsoDiscourage marriage if

one is pursuing adegree

Against: She should be compensated

for contribution as with any


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Case Facts Issue Rule(s) Analysis Policy/Hyposother investment

Much of the return on theinvestment is attributableto things other than herfinancial support

Reimbursement Alimony

Elkus v. Elkus Goodwill of Business asMarital Property

Section 5

Leasehold Estates

Type Characteristics How Created How TerminatedTerm of YearsEstate that last for some period of time or for a

period computable by a formula that results infixing calendar dates for the beginning andending, once the term is created or it becomespossessory.Can be determinable

1. No limit to the duration of the term at commonlaw (i.e., Guinness lease for 9000 years); some

states have statutorily limited2. Must be for a fixed period, but may beterminable earlier by some event of condition(defeasible)3. Death of landlord has no effect on the durationof a term of years.

O leases Blackacre to A for 4 years. No notice of termination required.

Periodic Tenancy

Lease for a period of some fixed duration thatcontinues for succeeding periods until either thelandlord or tenant gives notice of termination.Can be determinable

1. Lease renews at the end of period unless eitherparty gives notice of termination.2. Death of landlord has no effect on the durationof a periodic tenancy.

Expressto A from month to month, to B from year toyearImpliedat an annual rental of $24,000 payable $2,000per month on the first of each month.

Common Law1. year notice on a year-to-year tenancy.2. Equal to the length of a period but not toexceed 6 mos. on any term less than a year.StatuteMost states have shortened notice to 30 days.

Tenancy at Will

A tenancy for no fixed period that endures so longas both landlord and tenant desire.

1. Terminable by either party. If lease provides that it can be terminated by oneparty, it is necessarily at the will of the other aswill if a tenancy at will has been created.

1. Death of one of the parties.2. At the will of one of the parties; some statesrequire a period of notice.

NOTE: If rent is paid periodically, an impliedperiodic tenancy, rather than a tenancy at will, iscreated.

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

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

Tenant remains in possession after termination ofthe leasehold.

See Crechaleu infra

Case Facts Issue Rule(s) Analysis Policy/HyposGerner v. Gerrish


Donovan leased property to Gerrishon pre-printed lease form for $100per month. The lease provided thatit shall continue for and during theterm of quiet enjoyment from the

first day of May, 1977 which term

Determinable Life Tenancy v.Tenancy at WillWhether a lease which grants thetenant the right to terminate theagreement at a date of his choice

RULELease may be a properform of conveyance of a lifeestate.

REJECTS COMMON LAW RULE

1. Old common law rule based onlivery of seisen requirement anyconveyance of a life interest had tobe accompanied by livery of seisen.2. Leases providing for termination

upon the occurrence of a specified


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Case Facts Issue Rule(s) Analysis Policy/Hyposwill end Lou Gerrish has theprivilege of termination thisagreement at a date of his ownchoice. After Donovans death in1981, Gerner (executor) attemptedto terminate contending that leasecreated a tenancy at will.

creates a determinable life tenancyon behalf of the tenant or a tenancyat will.

event prior to the completion of anotherwise fixed term, are routinelyenforced even then the event iswithin the control of the lessee(here, the lease terminates at thedeath of the lessee)

Crechale & Polles, Inc v. Smith

CB at 369

Aspen at 41

P leased commercial space to D for aterm of 5 years (2/64-2/69). Dsought to extend lease on a month-to-month basis . P claims he denied;D claim he assented. Timeline:2/4/69-Tenant sent letter toLandlord confirming oral agreementto extend lease. Crechale rejected.3/3/69-T paid rent for Feb. Mar.Check accepted and cashed by L.4/6/69L rejected final payment4/19/69 L claimed renewal5/27/70-T returns keys

Holdover Tenants RULE Landlord has twooptions on holdovers: (1)trespassers or (2) renewal of

term.

RULEWhere a landlordaccepts rent from a holdovertenant, he will be held to haveconsented to a renewal ofextension of the lease.

1. Ls letter rejecting extensionagreement was an election totreat T as trespassers.

2. L may not elect to treattenants as trespassers, fail topursue his remedy of evictionand accept monthly rent andthen attempt to argue forrenewal for an entire term.

Places the onus on landlords toadequately deal with holdoversby choosing a remedy.

Hannan v. Dusch


D leased property to P for aterm of 15 years. P was readyto take possession, but formertenants remained in possession.P argued that D refused to takeany legal action to remove them.

There was no express covenantof delivery or quiet enjoyment.

Delivery of PossessionIs there an implied duty forlandlord to deliver actualpossession of leased property?

RULELandlord only has aduty to place tenant in legalpossession of property(American rule)CONTRASTEnglish rule which implies

covenant of delivery of actualpossession.

1. No express covenants here.2. American Rule does notforeclose remedy just shiftsremedy from landlord toholdovers (as trespassers).

1. American rule seems to befounded on the argument thatthe tenant has sufficient legaland equitable remediesavailable to protect against athird party wrongfully in

possession and greaterincentive than the landlord touse them.

Ernst v. Conditt


Ernst leases property to Rogerswho subsequently attempts toconvey an assignment/subleaseof his lease to Conditt. Condittceases paying rent during thependency of the tenancy andErnst brings an action for backrent and removal ofimprovements on the property.

Sublease v. AssignmentIf court had determined that theconveyance had been a sublease,why would Conditt have prevailed?

Lack of privity of contracto Privity of contract between

Ernst and Rogerso Separate privity of contract

between Rogers and Conditt

Lack of privity of estateo As between Ernst and Rogers

(conveyance of an interest inproperty)

o As between Rogers andConditt (some portion ofRogers possessory interest)

Conditt and Ernst have no directlegal relationship

If court had determined conveyancehad been an assignment; why wouldErnst have prevailed?

Privity of contracto As between Ernst and Rogers;

As between Rogers and Conditt

Privity of estateo The privity of estate as between

Ernst and Rogers is transferred(with Rogers entire estate) toConditt; privity of estatebetween Ernst and Conditt

RULEWhether tenantintended to convey sublease orassignment will be determinedby ascertaining the intent of theparties from the language of theinstrument in light of thesurrounding circumstances.

Court seems to apply the

formalistic rule indetermining what the partiesintended to convey.

Conditts argument (this is asublease)(1) Intent of the parties tocreate a sublease language of the conveyance

used sublet, subletting rules of construction

(2) Rogers agreement toremain liable indicated that heretained some reversionaryinterest in the property and thisdid not convey his entire estate

Court rejected this argumentbecause the prime leasebetween Ernst and Rogerswas not abrogated (Ernstwas not promising to dosomething in addition to theobligations of his originallease) by the amendmentcreating an assignment inConditt

This fact does notautomatically implicate aright of reentry in Rogers (ifhe had, expressly in the leaseamendment, reserved a right

NOTE: Conditt might have hada third-party beneficiaryargument. Language of theaddendum suggests he was anintended third-party beneficiaryof the contract between Ernstand Rogers.

CB pg. 394 n.2(c)


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Case Facts Issue Rule(s) Analysis Policy/Hyposof reentry, courts are dividedas to whether it wouldtransfer an assignment to asublease)

Kendall v. Ernest Pestana


Pestana owns hangar space at SanJose Airport. Pestanapredecessors in interest subleasedto Bixler who in turn attempted toassign to Kendalls. Kendalls had astronger financial statement andgreater net worth than Bixler andwere willing to be bound by theterms of the lease. Lease providedthat assignment was subject toapproval of lessor. Pestanarefused to consent unless Kendallsagreed to increased rent

Lessors Right to Refuse

Assignment

Absent contractual language tothe contrary, may a lessor

arbitrarily withhold consent toas assignment?

NOTE: Confined to commercialcontext.

RULE Lessor may withholdconsent to assignment only wherethere is a commercially viablereason.

REJECTS MAJORITY VIEW

RULE Reasonableness is aquestion of fact (See Wal-martHypo supra)1. Denial based on personal tastenot commercially reasonable.2. Denial based on desire tocharge higher rent than initiallybargained for is not reasonable.

Hypo: Mall Developer leases property to Saks Fifth Ave.

1. Rent = $500,000 + 1% gross sales > $1 million2. Saks must obtain landlords consent to sublease or assign3. Must use as dept. store4. 20 year term; after 10 years Saks wants to assign to Bergdorf-GoodmanIn a majority jurisdiction:Mall developer would not have to have a commercially viable reason fordenying the approval of the assignment to Bergdorf Goodman

What could the tenant do at the bargaining table to prevent thiscircumstance?oBargain for terms in the contract which either: (1) provide for

no need for approval or (2) provide that the landlord may onlyrefuse for a commercially viable reason

In a Kendall (minority) jurisdiction:On the facts here, the mall developer would not be able to refuseapproval. Mall developer would have to have a commercially viablereason for denying approval.

Policy against restraints on a lienation (property) Implied covenant of good faith and fair dealing (contract)

What if the assignment had been to Wal-mart?MAKE THE ARGUMENTS HEREWEIGH FACTORS ON PAGE 398 (i.e., financial responsibility of theproposed assignee, suitability of the use for the particular property,legality of proposed use, need for alteration of the premises, and natureof the occupancy)

Berg v. Wiley


Wiley leased property to Berg tooperate a restaurant subject tocertain covenants. Wileyalleged that Berg breachedcovenants requiring permissionto make structural changes andoperation of the restaurant in alawful and prudent manner(health department had issued

an order requiring certainchanges to comply with code).Berg closed the restaurant andplaced a sign in the windowsaying Closed for Remodeling.Wiley entered the premises andchanged the locks in Bergsabsence. Wiley subsequentlyleased the premises to anothertenant.

Wrongful Eviction Modern ApproachRULE The only lawful meansto dispossess a tenant who hasnot abandoned or voluntarilysurrendered but who claimspossession adversely to alandlords claim of breach of awritten lease is by resort tojudicial process.

REJECTS COMMON LAW RULELandlord may use self helpwhere he is: (1) legally entitledto possession and (2) means ofre-entry are peaceable.

1. Wiley would have failedunder common law approachbecause evidence was sufficientto sustain trial court finding thatre-entry was no peaceable

2. Summary judicialproceedings enacted in statesadopting modern trend that will

permit landlord to recoverpossession in 3-10 days.

Should a court adopt the rule of

Berg v. Wiley?

Yes

Summary proceedings are the bestring to have these fights;potential for violence

No

Increased costs to landlords tosubsidize defaulting tenantsspread to non-defaulting tenants

What if Wiley had waited a fewmore months before attempting to

reenter?

He would have a better argumentas a defense against a wrongfuleviction proceeding (strongerargument forabandonment/surrender)

Advise client to provide notice ofintent to retake possession todefaulting tenant .

Sommer v. Kridel


Landlords Duty to MitigateDamagesWhether a landlord seeking damagesfrom a defaulting tenant is under a

RULEA landlord does havean obligation to make areasonable effort to mitigatedamages where a tenant has

Landlords often make a loss-volume argument(not fair to make a K to sell500 widgets and then force manufacturer to mitigate by selling to anotherwilling buyer, seller is not permitted to capture the additional demand) in thecontext of mitigation:


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Case Facts Issue Rule(s) Analysis Policy/HyposRiverview Realty v. Perosio duty to mitigate damages by making

reasonable efforts to re-letapartment wrongfully vacated.

wrongfully abandonedproperty.

1. Forcing mitigation by showing all available apartments (incl. the onecurrently under lease) prohibits him f rom renting to other buyers

However, if he was choosing to rent the property at market value,there would be no loss volume problem. Presumably, he couldrent the apartments at market value.

2. Landlord is required to exercise reasonable diligence in attempting torelet the premises. What is required to show reasonable dil igence?Burden of proof is on the LL/Question of Fact

Factors tending to show reasonable diligence:--Whether landlord offered or showed the apartment to prospective tenant--Advertisement in local newspapers--Key is that landlord treated the defaulted property as all other vacantproperties

Hypo: Landlord Lorna owns a brownstone and leases two floors to Max (onecommercial, one residential). The lease is for 5 years for $2000/month. Maxdesires to end the lease 2 years into the lease. What are the landlordsoptions?(1) Relet the property--Advise client to relet on the tenants account (which would prevent himfrom arguing that landlord impliedly accepting surrender and terminating thelease)(2) Accept surrender either explicitly (take back the property) or impliedly(through judicial proceeding) - novation(3) Wait and sue for all unpaid rent at the end of lease term (might have aproblem in a jurisdiction where landlords have a duty to mitigate)(4) Anticipatory Breach--Measure of damages is the amount of money left on the contract discountedby the fair market value (mitigation is built in to the remedy)1. You determine the market value for the space has risen. Which are the bestoptions?If there is no duty to mitigate, then advise client to: (1) secure a tenant at thehigher priced rent and accept the tenants surrender of the lease or (2) releton the tenants account but at the higher priced rent (in some jurisdictionstenant will be able to argue that they are entitled to the difference; however,there will be an incentive to ROTA because it permits the landlord to keeptwo separate parties on the hook))If there is a duty to mitigate, same result.2. What if the market has plummeted? How does that change your advice?If there is no duty to mitigate, then: (1) advise client to wait and sue forunpaid rent at the end of the original lease term (this may implicate socialcosts such as blight/vandalism) or (2) refuse the surrender and relet on thetenants account (to get cash stream, landlords may incur costs in thereletting of the commercial space)

If there is a duty to mitigate, then advise client to: (1) bring action foranticipatory breach.

Hypo: Suppose Max offers to surrender the lease, in writing, but tells Lorna hehas found a tenant who is willing to assume his lease. The proposed tenant,Damien Warlock, intends to run an adult bookstore out of the commercialspace, and he intends to live in the second floor apartment. Lorna seeks youradvice. She does not want to accept Damien as a tenant. What legal issueswould you need to research to advise Lorna? Depending on what yourresearch reveals, what advice would you give her?

Ask these two key questions:1. Whether landlord was under a duty to mitigate.If there is a duty to mitigate, tenant would argue that landlord refused toshow the property/entertain a potential tenant that would have permittedher to completely mitigate her damages.

Lorna counters that Sommer v. Kridel w as confined to residentialproperty, not commercial space.

Commercial leases implicate increased costs in reletting


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Case Facts Issue Rule(s) Analysis Policy/Hypos Residential property leases are more imbalanced with respect to

bargaining power and sophistication2. Whether the lease had an approval clause.If so, then she could only deny the assignment for a commercially viable

reason (minority jurisdiction).

She could make the argument as to the lack of suitability for theproposed use.

If the majority rule (complete discretion in sublet approval) applies:

Then she can probably reject Damien BUT she still may have a dutyto mitigate.

Reste Realty Corp. v. Cooper

CB at 422

Aspen at 47

argues that landlord brokeexpress covenant of quietenjoyment in the lease by failingto repair the driveway whichcaused significant waterdamages.

Implied Covenant of QuietEnjoyment and ConstructiveEviction

RULE

Any act or omission ofthe landlord which renders thepremises substantiallyunsuitable for the purposes forwhich they are leased, or whichseriously interferes with thebeneficial enjoyment of thepremises, is a breach of thecovenant of quiet enjoymentand constitutes a constructiveeviction of the tenant.

1. At early common law, theonly remedy was to sue fordamages but the tenant was stillin possession and on the hookfor rent.2. Under the doctrine ofconstructive eviction, she mayabandon the property anddefend against an action torecover rent based on herabandonment.

Dependent relationshipbetween covenant of quietenjoyment and covenant topay rent

3. Tenants renewal cannot besaid as a matter of law asacceptance of the premises intheir defective condition. Why? Reasonable reliance on the

previous owners assertionthat he would repair thedriveway

Seems to suggest that theremay be some defense ofwaiver or assumption of therisk to constructive eviction

Hypo: Design firm has a lease with alandlord on a building on Fifth Ave.Elevator is in constant state of repairand eventually completely breaks.Invitees must walk up 6 flights ofstairs which hurts image to clients.Client knows that the market isdown and can get a better deal.Design firm seeks advice.

L argues that client is just trying toget a better deal and then makearguments that this does notconstitute substantialinterference, unlike Reste

T argues that this detrimentallyaffects business, puts them in at acompetitive disadvantage, may lose

clients who cannot physically climbstairs, etc.NOTE: Can you make the argumentthat the breach is sufficientlymaterial to the use and enjoyment ofthe property.

Hilder v. St. Peter The Implied Warranty ofHabitability

How different thanconstructive eviction?

(1) Withhold rent while

remaining in possession(rent remains in escrow)(2) make the repairs anddeduct from rent(3) punitive damages(4) compensatory damagesValuation methods:(1) fair market value of theproperty as warranted value of dwelling as existed(2) Actual rent warranted value of dwelling as existed

NOTE: Neither party may waivethe implied warranty ofhabitability nor can L claim

Why not apply doctrine ofconstructive eviction? She didnot abandon therefore no

defense of constructive eviction. Policy (Requiring her to

move with her kids may notbe ideal)

(1) Does this really make sense fortenants protection and rights:Should the parties be able towaive?

No(1) external social costs justifyextension beyond K law(2) L would incorporate waiverinto their contractsPosner would argue that themarket will correct because L will

be at a competitive disadvantage.

NOTE: Some characterize thiswarranty as going beyond

contract; this implied

warranty is reallypaternalistic/social policylaw designed to help low-

income/poor, etc. This differsfrom covenant of quietenjoyment:

If a tenant can argue that thelandlord breached theimplied warranty ofhabitability, then they dontneed to argue for a materialbreach of covenant of quietenjoyment and defend withconstructive eviction.o Note that many


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Case Facts Issue Rule(s) Analysis Policy/Hyposassumption of the risk. But where information costs are

low, it may be that all Ls willadopt waiver (act like oligopoly).(3) Less need for individualtenants to pursue remedy forbreach of express covenants(4) Think about the facts ofHilder; most tenants do not gointo the bargain thinking Do Iwant a habitable or unhabitableapartment? They THINK they arepaying for a habitable apartment

Yes(1) landlords costs will increaseand he will: decrease supply orspread those costs to tenantsthereby raising all rents

These costs are marginal they affect the poorer morethan the richer. Thealternative to the poorer maybe no housing at all.

(2) Better way to remedy theproblem is through legislativeeffort

jurisdictions havedeclined to apply theimplied warranty ofhabitability tocommercial property.

Should the implied warrantyof habitability be extended to

commercial property? No because parties to a

commercial transaction aremore sophisticated, retaincounsel, leases are morethoroughly negotiated, policyjustifications supporting thehabitability warranty are notrelevant in commercialcontext

Yes. The landlord is in thebusiness of maintenance ofproperty and it encouragesall landlords to keep allproperty in the aggregate ingood condition. Also, thereare sophisticated residential

tenants and non-sophisticated comm.. tenants

Section 6

The Land Transaction

Case Facts Issue Rule(s) Analysis Policy/HyposLohmeyer v. Brown


Title showed a restrictivecovenant requiring any housebuilt on Lot 37 to be two stories.Research (after title search)revealed a zoning ordinanceproviding that no framebuilding could be erected withinthree feet of a side or rear lotline. House was in violation ofthat ordinance. Seller offered tocure defect by expanding ploton north side.

Marketable Title

An implied condition of acontract of sale of land is thatthe seller must convey to thebuyer a marketable title.

RULEMunicipal restrictionsexisting at the time of executionof the contract do not rendertitle unmarketable, butviolations of those restrictionsrender title unmarketable.WHY?

1. With respect to zoning, asopposed to easements, there areother ways to discover therestrictions instead of titlesearch The multiplicity of laws

affecting/restrictingproperty use suggest that itwould be easy for seller tosubvert the law to get out ofundesirable agreement.

2. The violation, however, givesrise to the potential for futurelitigation thus making titleunmarketable. Seller expressly reserved the

right in the contract toremedy any issues that madetitle unmarketable and sooffered, but buyer refused.

o Without the privatecovenant, seller

HYPO: Suppose there had beenno zoning ordinance.RULE Private covenantsrender title unmarketableregardless of whether thecovenant is violated or not.WHY? Buyer may not have been

able to ascertain therestriction upon reasonableinspection of the property.Contract between the partiesmay not represent thebargain that the buyeragreed to (K presupposesequal information, buyer didnot have info and did notcontemplate in bargaining.Did not contemplate whenoffering

Here, however, the mere factthat buyer discovered that


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Case Facts Issue Rule(s) Analysis Policy/Hyposmight have beenawarded specificperformance sincethe remedy wasfeasible

o However, the sellercould not reasonablycure the defect of theprivate covenant.

private covenant would notrender title unmarketablebecause of the expresswaiver in the language of thecontract (...subject,however, to all restrictionand easements of recordapplying to this property.)

Stambovsky v. Ackley


The Duty to Disclose DefectsHYPO: Suppose a house neednew windows. After contractfor sale, buyer attempts torescind contract.RULE (NY)Caveat emptor:Generally no duty upon theseller to disclose anyinformation concerning thepremises unless there is aconfidential and fiduciaryrelationship between theparties or some conduct on thepart of the seller whichconstitutes active

concealment.

RULEWhere a conditionwhich has been created by theseller materially impairs thevalue of the contract and ispeculiarly within the knowledgeof the seller or unlikely to bediscovered by a prudentpurchaser exercising due care,nondisclosure constitutes abasis for rescission as a matterof equity.

Why is there a duty todisclose in this case?There is an exception to caveatemptor where fairness andcommons sense dictate that anexception should be created, theevolution of the law should notbe stifled by rigid application ofa legal maxim.

Requires that a buyeract prudently toassess the fitness andvalue of his purchaseand operates to barthe purchaser who

fails to exercise duecare from seeking theequitable remedy ofrescission

Here, there is no sound policyjustification for requiring that abuyer would discover this typeof defect before contracting

Also, seller tookaffirmative steps tohighlight this defectto the public at large

NOTE: Thepeculiarity of thedefect gave rise to theduty to disclose.

Murphy v. Fin. Dev. Corp.

CB at 546Aspen at

argues that failed togenerate a market in order torealize s equity at theforeclosure sale.

The Duty of Mortgagee to

Release Equity in Foreclosure

SaleA mortgage represents the security(generally the property) provided tothe lender, mortagee, by theborrower, mortgagor in order to getthe funds to purchase the property.

Foreclosure is a judicialprocess.

What documents would a client need

to file summary judgment in a

foreclosure proceeding.?1. Mortgage agreementwith rightof foreclosure.

Remedy is specificperformance.Foreclosure sale forproceeds.

2. Promissory Note

Damages (generallyequal to the differencebetween the amount onthe promissory note andthe proceeds from thesale of the collateral)

3. NOTE: when foreclosure saleproceeds exceed the amount owedon the promissory note, the equity

Rule A mortgagee executing apower of sale is bound by boththe statutory proceduralrequirements and by the duty toprotect the interests of themortgagor through the exerciseof good faith an due diligence.

The fiduciary dutyarises when thelender exercises itspower of sale

(1) Duty of good faith (notviolated here)RULE..to constitute bad faiththere must be an intentionaldisregard of duty or purpose toinjure.i.e., switching the sale date, noads, ignore potential buyer(2) Duty of due diligence(violated here)RULEwhether a reasonableman in the lenders place wouldhave adjourned the sale ortaken other measures to receivefair price. Lack of appraisal prior to

sale to ascertain actualequity

Sale was focused only onmaking lender whole, notrecoupment of equity of

Failure to take steps that aregular seller would take tomarket the property

On the issue of damages: Court remands rejecting the

trial courts valuation (FMV-amount obtained at sale),adopting the rule of (fairprice-amount obtained atsale)

NOTE: In NY and NJ, once acourt enters judgment for the ,the sheriff handles the

foreclosure sale. Removes the burden from

sellers to show reasonablesteps taken to sell at fairmarket price.


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Case Facts Issue Rule(s) Analysis Policy/Hyposproceeds go to the borrower. Who isresponsible for realizing that equity

Section 7

Title Assurance

Type Rule

Race As between successive purchasers of Blackacre, the person who wins the race to record prevails. Notice isirrelevant.

Notice If a subsequent purchaser had notice of a prior unrecorded instrument, the purchaser could not prevail overthe prior grantee, even if he recorded first.

Race-Notice A subsequent purchaser is protected against prior unrecorded instruments only of the subsequent purchaser(1) is without notice of the prior instrument and (2) records before the prior instrument is recorded.

Shelter Rule (See CB at 581 footnote 9) A person who takes from a BPFV protected by the recording act has the same rights as his grantor. This ruleis necessary to if the recording act is t o give the SBPV the benefit of his bargain by protecting his market.


Luthi v. Evans Owens assigned all of herinterest in seven oil and gasleases to International Tours(D) via a Mother HubbardClause. Assignment recordedSubsequently, she conveyed alease that had not beenspecifically enumerated in theMH clause to P. Ps title searchdid not reveal O wens previousassignment.

Required Specificity in grants

to trigger notice in SBPV

RULEAn instrumentconveying all of granteesproperty is not sufficientlyspecific to trigger record noticein SBPV absent actualknowledge.

Messersmith v. Smith Timeline5/7/46 Caroline to Fredrick ()(4/23/51) Carolineleases/irrelevant5/7/51 Caroline to Smith ()5/9/51 Smith to Seale5/26/51 Smith and Seale record(faulty acknowledgement)7/9/51 Fredrick records

Requirement ofAcknowledgment on Deed

RULE A deed that has notbeen properly acknowledgeddoes not qualify for recordationand therefore does not provideconstructive notice to SBPV.

KS is a race notice statuterequiring a bona fidesubsequent purchaser for value:(1) have no notice of previouspurchase and (2) recordspurchase first. Smith meets requirement of

lack of notice Smith failed on the

recordation requirement.

Purpose of notaryauthenticate signature on theinstrument of conveyanceCan argue that substance ofthe rule/purpose wassatisfied here.Hypo: OA [defectiveacknowledgement on the deed]A recordsOB, B records


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Why?o Second deed correcting

typographical error wasnot properly notarized asrequired as a conditionprecedent to recording.

B because A did not meet thecondition precedent to recordation(effective acknowledgement)A could argue that B had noticeirrespective of the defect in As deedthe prevented proper recordation

Board of Ed. v. Hughes Timeline:5/16/06 offered to purchase

lot (subject to unpaid taxes) for$25 from Hoerger (H).

Note the name of thegrantee was not recorded inthe deed

5/17/06 H accepted s offerand execute/acknowledgeddeed and delivered to by mail4/27/09 H. conveyed lot toDuryea and Wilson (real estatedealers)11/19/09 D&W executed deedto 1/27/10 Deed from D&E to recorded12/16/10 filled in the name ofthe grantee and recorded deed12/21/10 Deed from H. to D&Wrecorded

Wild Deed in a Title Search RULEWild deed gives nonotice

1. Pre-Issue: Whether the deedfrom H. Hughes ever became

operative (due to the fact thatgrantees name was not on theinstrument at the time ofconveyance)

Hughes became apurchaser on12/16/10; impliedauthority to fill in thename on the deed

2. Hughes does a title search in12/10 then he would look forHoergers name and looks backin the grantee index Hughes then moves to the

grantor index and looks forward;

he would have no reason toinquire into D&Ws recording

Lawyers for Board of Ed shouldhave, at the time of conveyancefrom D&W, required arecordation of the conveyanceform D&W to the Board of Ed.

Hypo: Suppose in 1940, the MN

legislature repeals race-notice statute

and replaces with a notice statute.What results?

Argument for Board of Ed

Board of Ed did not have torecord first; absent the lawmaking Hughes a subsequent, theBoard wins.

How to convince Court thatHughes was first purchaser?o Overrule a portion of the

opiniono Cuts against the recording

statute policy of encouragingpurchasers to recordconveyances quickly

o Hughes does not representthe class of people the

recording statutes areintended to protect

--The portion of the holding in arace-notice jurisdiction makingHughes a subsequent purchaser wasnot outcome determinative.

Key holding was that a wilddeed gives no notice

Guillette v. Dry Wall Landowner intends to develop aresidential subdivision and sellsseveral lots. The deed to Lot 1includes a reciprocal userestriction. The subsequentdeeds to Lots 2-5 did notreference the restriction.

Holder of deed to Lot 5 intendsto build an apartment building.Holder of deed to Lot 1 sues toenjoin based on the reciprocalrestriction the deed to Lot 1.

Notice of ReciprocalRestriction not located in

Subsequent Deeds out from acommon grantor

RULE SBPV are bound byreciprocal restrictions located indeeds emanating from acommon grantor that are notlocated in their chain of title.

argues that has a duty,where there is a commongrantor (one who subdivides alarge parcel), to examine alldeeds emanating from thecommon grant. How?

Title Search for thegrantor would unveil thatonly a portion of theparcel was granted;purchaser must thensearch for other grants ofthe same parcel andexamine the actual deed

1. Is this good policy?--Imposing this duty onpurchasers would impose abroader duty in situationswhere a grantee furthersubdivided subject to restrictionor whether previous grantors

Which approach is preferable?1. Why is Guillete correct?Court is protecting the third-partywho provided consideration forrestrictions on other lots in thesubdivision2. How do you prevent this problemin a NY jurisdiction?

How to provide notice tosubsequent purchasers?

Encourage developer to sellthe entire parcel to astrawman (for somevaluable consideration) andthen the strawman sellsback to the developer withthe restriction in the deed.

Once the developer conveysthe subdivisons, those deedswill have the restriction

Example 10 (pg. 595)O conveys to A who does not record.O subsequently conveys to B, whohas actual knowledge of conveyance


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had restrictions--Creates tension with theobjective of simplifying the titlesearch process (adds cost andtime to title search)

2. Counterargument: InGuillete the deed incorporated asubdivision plan which is visual

evidence (sufficient to chargenotice) that there were possiblerestrictions--Some jurisdictions, NYincluded, completely reject thebroad reading of Guillete(unqualified duty to inspect forrestrictions emanating fromother deeds) Confine Guillete to its facts

(the existence of asubdivision plan)

to A. B records. A records. Later Bconveys to C, a purchaser for valuewho has no actual knowledge of thedeed from O to A. C records. Whoprevails, A or C?

Arguments for A

C on constructive notice because Astitle in the records although outsidethe chain of title - Guillette

Arguments for C

C would have to search under everyowner from the time of conveyanceuntil the present time to see if theowner gave a prior deed recordedafter the first recorded deed

Daniels v. Anderson Jacula Daniels (1977) Contract included right

of first refusal to

contiguous parcels Did not record the

restriction in the deedDanielsZografos (1985)

Contract for sale ofcontiguous parcelwithout notice ofrestriction

Paid in installments

When does a buyer who pays

in installments become aSBPV?

RULEOne cannot claim SBPVstatus until he has taken legaltitle.

NOTE: Equitable title notapplied here.

HYPO: In 2002, J sells to Prior (P) for $40K. J sells parcel to Subsequent (S)for $30K now and $30K in 2005. P records in 2004. P brings an actionagainst S to quiet title and the house is now worth $100K. Who prevails

applying Daniels?Arguments for P

--S was not a bona fide purchaser until he paid in full.--S did not become a purchaser until 2005, after P recorded, thus giving riseto constructive record notice.

Argument for S

--Some jurisdictions have relaxed this harsh rule to reflect market realities. --Daniels was an affirmation on an abuse of discretion standard and recognizedthat the trial court had discretion to apply other equ itable remediesOne method is to award the buyer a fractional interest in the land

proportional to the amount paid prior to notice. Both parties have goodarguments as to which equitable remedy is best applied.

P argues for the title and payment to S of 30K paymentS argues for title and payment to P remainder (instead of J)

Moment that deserves protection is at the time of contract S should not be punished ( compared to a subsequent purchaser

who financed through a bank)

Burden on those who finance from a seller to update a title beforeeach installment

Burden should be on the cheapest cost avoider, in this case PAlternatively, the doctrine of equitable conversion vested title in S in

2004 at the time of contracting. Why should this apply?

Reliance interest on the part of SSold property, made capital i nvestment, etc.

Lewis v. Superior Court Equitable Title and Financingfrom the SellerIs a person who records an interestin real estate after a BPFV takes titlethereto inferior to the BPFV, even ifBPFV has not completed fullpayment.

RULE Reject Payment ofValue Rule (requiring fullpayment before becoming abona fide purchaser for value)

1. Reliance on Title at the pointof contract/Reflect marketrealities2. Purchasers financing fromseller would have to undertaketitle search before payment ofeach installment.3. Least cost avoidance

NOTE: Effect oflis pendens is tomake title unmarketablebecause it gives notice tosubsequent purchasers thatclaimant is alleging that he israising a claim where theproperty might be implicated.

Harper v. Paradise Timeline: Inquiry Notice 1. Adverse Possession Is this result fair?


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(remaindermen) v.(subsequent grantees)

2/1/22 Susan Harperconveyed deed to Maude Harperfor life remainder to her namedchildren. (Lost and unrecordeduntil 1957)25-27 Susan died3/19/28 Harpers remainingheirs execute a quitclaim deedgiving effect to the 1922 deed to

Maude Harper1933 Maude executes securitydeed to Ella Thronton1936 Maude defaulted on theloan and Thorton forecloses1955 Paradise obtained andrecorded deed to property fromThortons chain of title1957 1922 deed recorded1972 Maude dies

Statute of limitations starts anew as against theremaindermen when their interest vests and becomespossessory at Maudes death. Is this fair?

Remaindermen didnt have a right of ejectment necessaryto eject the Paradises until they had the right topossession.

2. Paradise argues that they had no knowledge of the futureinterests of the 1922 deed (1928 deed did not mention the futureinterest)

Replacement deed did not reference the future interestsand its reasonable to think that the replacement deed isidentical to the deed it purports to replace.

Court rejects and charges Paradises with inquiry notice (facts inthe record giving rise to inquiry in the title search).

Seems to be a weird policybecause there seems to be noway even through a moreextensive title search.

Waldorff v. Elgin Choctaw mortgaged apt. bldg. toD. It sold a single unit to P whooccupied unit and paid all rents.Choctaw subsequently executedsecond mortgage to D and

defaulted. D foreclosed on bldgincluding unit occupied by P. Pcontended he had better title.

Inquiry Notice Waldorf argues that it obtained equitable title to property in 1973at the time of contract prior to the time of the second and thirdmortgages to the Bank.

Although they did not record, Waldorfs open andexclusive possession was sufficient to give rise to inquiry

noticeBank argues that several units were occupied and they did notknow which tenants actually had a property right

Court states that Bank could have just asked eachpossessor whether they had a property interest prior toaccepting mortgages.

Is this a fair result?

1. One argument that it is not isthat the burden should have beenon the least cost avoiders (in thiscase, Waldorf who could have

recorded)2. Counter is that seller might notagree to notarize and deed is notable to be recorded. Why mightseller not want to record?If purchaser defaults, they remain

as interest in the property on the

recorded deed which decreases

marketability of the title.

Killer Property

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