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Property I Outline

Property: A person may be said to hold a property interest, in the broadest sense, if he has

any right, which the law will protect against infringement, by others. In addition to tangible property (land and chattels), courts have increasingly

recognized broad categories of intangible property interests. o For instance, a teacher with tenure in a public school system bay be found

to have a constitutionally – protected property interest in continued employment.

Sources of property law:1. Cases2. Statutes3. Restatements and model acts

I. Possession: Generally, a person is said to have possession of land or personal property if he

has dominion or control over it.o McInosh – Who had right to title to the property-

1. Did Mintosh have superior title to the land?2. Whoever was First in Time is First in Right

A. Being First is NOT a fact it’s a rule!!B. First to occupy the land- then you sre first for purposes of

this rule.C. You don’t have to have title to have possession

3. The Discovery Rule A.

Rights from possession:o One obtains title to goods by acquiring them form, and with the consent of

their prior owner. Exceptions to this are: wild animals, finding of lost articles and adverse possession.

A. Acquisition of ownership First in time – who had possession first! 1st possession (property not previously owned) personal property not real

property1. Discovery 2. Capture3. Creation

1. Acquiring property by Discovery:

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Had to do with Europeans coming over to N. America and “discovering new land” – the land had already been discovered, but they didn’t care – they moved around, but nobody claimed a particular piece of the land-concept of ‘owning’ land was foreign to them.

2. Acquiring property by capture: Wild animals may be one of the few things that are unowned and

susceptible to capture.

i. Actual possession – the usual method is to actually possess it – dead or alive.

ii. Chasing – the mere fact that one has spotted and chased an animal is not sufficient to constitute possession.

i. Example: Piereson v. Post P found and chased a fox as part of a hunt. D then

stepped in, killed the fox and carried it away. The court held that “mere pursuit” gave P no legal right to the fox and that D thus had the right to interfere.

Dissent – the dissent feels that a new rule should be adopted: that property in wild animals may be acquired without bodily touch, provided that the pursuer be in reach or have a reasonable prospect of taking the animals.

iii. Trapping or Wounding – one, who mortally wounds an animal or fish so that capture is almost certain, is deemed to have possession. The capture of an animal or fish in a trap is sufficient. (Constructive possession)

iv. Custom – in a close court case, the court may look to the custom and usage prevailing in the activity or trade involved.

i. Example: Ghen v. Rich The custom among American Whalers was that the ship

or company, which lanced the whale and thereby killed it, was the owner, even though the whale immediately sank, floated to the surface several days later, and was found by another.

The court applied this usage, and granted the company, which killed the whale, the recovery against D, who had bought the whale at an auction from the person who found it on the beach. (May have been viewed differently today because he paid twice for the whale; it is possible the court today would have viewed D as a bona fide purchaser.

v. The importance of policy ends to the nature of policy rights.

i. Property doctrine tries to serve four important values:

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1. Reward productivity and foster efficiency2. Creates simple, easily enforceable rules3. Create property rules that are consistent with

societal habits and customs; and4. Produce fairness in terms of preventing cultural

expectations of fairness. ii. Example: Keeble v. Hickeringill

1. In the early eighteenth century England land owners created elaborate decoy ponds that were designed to trap large quantities of ducks and other waterfowl to be killed and consumed as food. Keeble maintained such a pond. Hickeringill, his neighbor, frightened the ducks away from Keeble’s pond by discharging a shotgun nearby. The English courts ruled that such conduct was actionable, on the theory that Hickeringill was maliciously interfering with Keeble’s lawful activity. The court distinguished this case from fair competition, noting that it would be perfectly proper for a schoolmaster to lure students away from another school by offering better instruction but unlawful to frighten them away. The distinction is bottomed on the notion that fair competition improves society (i.e. better schools) while Hickeringill’s conduct was a dead-weight drag on societal improvement (i.e.. fewer ducks for the table). In a society in which killing wild ducks for food is regarded as inappropriate (i.e. to preserve biodiversity) Hicheringill’s conduct might be lawful. It depends on the public policies that law is supposed to serve.

vi. Relative title i. Actual possession isn’t everything. One person’s

claimed property right is almost always good (on not good) only in relation to others.

ii. Conflict between 2 property rules:1. First possession2. Land owner’s right to exclude others.

iii. Example: Pierson v. Post1. Post, the landowner, would have a better claim

to the fox, not because he was a prior possessor, but because he was entitled to deprive trespassers of their game taken from his estate. POLICY: This assumes that society thinks its’ more important to discourage trespass than to reward first possession of unowned resources in the property.

2. Lets say Post clobbered the fox, picked up its limp carcass, and slung it across his saddle. If Pierson yanked it off as he cantered by, Post

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would get it back because he was a prior possessor. It is the first possession that counts.

3. Lets say Post trespassed on Morton’s land, took the fox, and Pierson came upon Post’s land and took it. Post would have title because even among wrong doers the prior possessor prevails.

vii. Violation of a statute – one who violates a statute (i.e. hunting without a license) forfeits her title in animals caught.

viii. Trespass – the landowner is not regarded as owning all animals on their property, a trespasser who kills game on another’s land forfeits her title in favor of the landowner. This is to prevent the act of trespassing from benefiting the trespasser.

ix. Once a person has gained possession of a wild animal, he has rights in that animal superior to those of the rest of the world.

x. What objective would you want to achieve?i. Order in the public

ii. Reward for effort (pleasure different from ownership)

3. Acquiring property by creation:(John Locke – you own the fruits of you labor – property from your own person – you have ownership rights over something you created/worked hard over 1st possession of an idea –)

i. Exclusivity: the problem of imitation

ii. Example: International News Service v. Associated Pressi. The US Supreme Court held it was misappropriation for INS to

copy AP’s news and release it before AP could. AP expended money and effort to gather the news; the courts thought that INS was attempting to “reap where it has not sown.” But later courts have held that skilled imitation of Channel No. 5 perfume and seasonal fabric designs is not misappropriation. See: next case

iii. Example: Cheney Brothers v. Dorris Silk Corp.i. The conflict is between the inefficiencies produced by a monopoly

over creation (higher prices, less accessibility to a desired good) and both the sense of unfairness of allowing copycats to reap what they haven’t sown and the fear that without protection creators will not create.

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B. Subsequent possessionsAcquisition of property by:

Find Adverse possession Gift

1. Acquisition of property by Find

a. Abandoned property i. General Rule: abandoned property is property to

which the true owner has voluntarily given up any claim of ownership.

ii. Generally a finder of abandoned property acquires title. There are exceptions.

1. Trespassers – aren’t likely to be rewarded with the fruits of their wrongful behavior

2. Owners of land – where the abandoned property is discovered may sometimes have strong and reasonable expectations of ownership

3. Statutes

iii. Example: true owner places his old computer on the sidewalk in front of his house, with a sign saying, “free – take me” the true owner has abandoned his ownership. The first possessor will become the next true owner.

iv. Example: same facts, but if the true owner abandoned his lap top computer by placing it under the living room sofa of Neighbor, and a guest discovers the abandoned computer while searching from his contact lens, its not so clear that the Guest should prevail as against the neighbor. Property is not usually labeled as abandoned – must infer from facts.

b. Lost and Mislaid propertyi. General rule: a finder’s title is good against the whole

world except the true owner, prior finders, and (sometimes) the owner of the land where an object is found.

ii. Example: Armory v. Delamirie

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1. A chimney sweep found a fem in a setting and took it to a jeweler for appraisal. The jeweler’s apprentice removed the gem and refused to return it. The sweep was awarded damages, measured by the value of the finest stone that would fit the setting, unless the master produced the stone. If the jeweler had been the true owner, the chimney sweep would have lost. Remember finders only have relative title.

iii. Prior finders: prior finders prevail over later finders1. Example: the true owner loses his watch, which

is found by first finder. First finder then loses the watch, which is found by second finder. First finder prevails over the second finder based of his prior possession. The true owner would prevail overall.

iv. Finder v. Landowner1. Trespassing finders - aren’t likely to be

rewarded with the fruits of their wrongful behavior

2. Employee finders – older cases tend to find that employee finders must surrender the find to their employer if they have a contractual duty to report finds

3. Invitee finders – landowners often invite workers and others on to their property for specific and limited purposes. Finding property is almost never one of these. If they find property in the course of doing what he or she was invited to do must surrender it to the landowner.

4. Embedded objects and treasure trove - a. If something is found attached to land or

under the surface you have toe assumption that the owner of the land is in constructive possession.

b. A treasure trove – different rules may apply. In England it went to the crown, but America rejects this rule but there is a split as to whether the find goes to the finder or the landowner. (Logic suggests that normal rules may apply)

5. Private homes – homeowners are awarded objects found in their homes. When the homeowner is an absentee owner – not in

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possession of the home – resolution of the question turns on whether the homeowner was in constructive possession of the home. If the homeowner was briefly absent she was in constructive possession of objects in the home.

a. Example: Hannah v. PeelMajor Peel purchased the home but never moved in. WWII broke out and the Crown requisitioned his home to quarter soldiers. Corporal Hannah found a valuable broach while adjusting his blackout curtains. He reported the find and two years later hearing nothing sold it. Hannah demanded the sale of the proceeds and won because Peel never moved in and he never had constructive possession of the home’s unknown lost contents.

6. Public places – a. Lost property found in public property

must go to the finderb. Mislaid property must go to the

landowner because the true owner may return to the place they mislaid their property

c. Example: McAvoy v. MedinaIf a wallet is found on a barbershop counter it was probably placed there by the customer and forgotten. As mislaid property, it goes to the barbershop owner. But if the wallet is found on the barber’s floor it was probably dropped there unintentionally by the customer. As lost property goes, it goes to the finder.

c. Statutory Modifications – some states have enacted statutes modifying these common law rules. The typical approach is to call all found property lost property and award it to the finder after a reasonable search for the true owner has been unsuccessful.

2. Adverse Possessiona. Two of the policies explaining the application of the adverse

possession doctrine:1. Sleeping/earning: adverse possession punishes those

who ‘sleep’ on their rights, and rewards those who ‘earn’ rights by possession

2. Productive use of property: consistent with property rights policies generally adverse possession encourages

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productive use of property, as compared to allowing land to go unattended and unused.

b. Elements of Adverse Possession: Actually enter and take exclusive possession Open and Notorious Hostile and Adverse (under the claim of right) Continuous for the statutory period.

1. Actual and Exclusive possession – the possessor must actually physically take possession of the owner’s land. The owner’s cause of action accrues at that moment, and the clock on the statute of limitations starts to run at the moment of actual entry. The possessor must also have excluded the public and the owner

a. A group of people adversely occupying may acquire shared title – concurrent ownership – by adverse possession

2. Open and notorious – the adverse possessor must be readily visible to any inspector of the property. This puts the owner on notice that his rights are being violated – this is also the type of occupation a true owner would have.

a. Under ground occupation: difficult to satisfy the open and notorious element. Must prove the owner knew of the occupation

b. A/P of subsurface materials – one could use the land, as a true owner exception is that if the mineral rights are owned by someone else.

c. Boundary disputes – some jurisdictions hold that encroachments by one neighbor onto the land of another are not open and notorious if the encroachment is of a small area and is not “clearly and self-evidently” an encroachment. The statute of limitations doesn’t begin to run until the owner has actual knowledge of the encroachment. (Mannillo v. Gorski – steps)

3. Hostile and adverse – must occupy land without the consent of the owner and is claiming the right to stay.

a. Subjective: good faith occupation – the A/P must have a genuine, good faith belief that she owns the occupied property.

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b. Subjective: aggressive trespass – know the property is not his own but intend to claim it as their own

c. Objective: State of mind irrelevant – tends to be the majority view: state of mind irrelevant but court focuses on 2 things:

(1) Lack of permission(2) Whether the occupier’s cats and

statements objectively appeal to be claims of ownership.

d. Boundary disputes – when a landowner mistakenly believes a strip of her neighbor’s land is her own

i. Majority – objective test of hostility – if the encroaching owner’s actions appear to the world to be those of the true owner she occupies adversely to her neighbor.

ii. Minority – Maine doctrine – the occupier is not possessing adversely if she occupied under a good faith but mistaken belief that the land was hers, but would not have occupied if she knew the true facts.

e. Color of title (not claim of right) – a possessor who enters under color of title is one who has a defective deed or other writing that purports to deliver title to the possessor, but which the possessor doesn’t know to be invalid. Possessors who enter under color of title satisfy the element of adverse – (only a few states require color of title to satisfy the hostile and adverse element).

i. It also has other implications concerning how much land the occupier is deemed to have adversely possessed

4. Continuous Possession – without interruption. The A/P must occupy the property as continuously as would a reasonable and average true owner of the property. It the A/P intentionally gives up the property with no intent to re-enter or abandons the property – no longer continuous.

a. Example: Howard v. KuntoKunto occupied a summer residence under color of title (a defective deed). When Howard, the record owner, sought

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to eject him, Kunto countered that the limitations period had expired. “Not if you failed to occupy it continuously,” retorted Howard. “But I was here every summer” replied Kunto. That was good enough. A reasonable owner would use the property during the summer and not at other times.

b. Tacking – adverse possessor: if privity of estate exists between the prior possessor and the present possessor tacking is permitted. Privity of estate means a voluntary transfer from the 1st possessor to the 2nd of either an estate in the land or the actual possession of it.

i. Example: Able adversely entered Blackacre in 1970. The limitations period is 20 years. In 1980 Able gave Baker a deed to Blackacre ad Baker took possession. In 1991 Charles, the owner of Blackacre sues Baker to recover possession. Who wins and why? – Baker will win (assuming all other elements are met by both over the last 20 years) the limitations period started to run in 1970, you could tack Able and Baker’s time together because it was a voluntary transfer evidenced by the transfer of the deed. The statute of limitation s has run out and Charles is too late.

c. Tacking – owner: tacking follows automatically on the owner’s side.

i. Example: in 1970, A entered Blackacre adversely, in 1975 O, owner of Blackacre, sells it to B. in 1980 B dies and leaves Blackacre by will to C. In 1985 C gives Blackacre to D. in 1991 D sues to eject A. the limitation s period is 20 years. A wins, assuming she meets all elements of adverse possession. The statute of limitations was triggered in 1970 and the expiring cause of action traveled from O to B to C to D.

d. Ouster – if an A/P is ousted from possession by a third party- no tacking because no privity.

c. Extent of the property acquired by the adverse possession (providing all other elements of adverse possession were met.)

1. Entry without color of title – only acquire the land they possessed

2. Entry under color of title – deemed to possess all the land described in the defective deed, so long as it consists of a single parcel and they occupied a significant portion. The “single parcel” rule is designed to make sure the owner of each parcel has a chance to protect his interest. Remember: a

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possessor lacks color of title if he doesn’t believe, in good faith, that his defective deed is valid.

3. Example: Echo enters Blackacre, a 100-acre farm, under color of title to Blackacre but actually possesses 50 acres for the limitations period. Echo is deemed to have constructively possessed the remaining 50 acres and will acquire the tile to all of Blackacre.

4. Example: John enters Blackacre, a 100-acre farm owned by Phil, under color of title to Blackacre and actually occupies 60 acres. He would have occupied the remainder but for the fact that Max, a squatter, had already taken possession of those 40 acres. John can only acquire title to the 60 acres he occupies. The same principle applies when the owner is in the possession and the A/P enters a portion of the property under color of title.

5. Example: Jane, a reclusive artist, owns Mountaintop, a 100-acre tract on which she has built a studio and cabin, occupying 1 acre. Harry enters Mountaintop under color of title to the entirely of mountaintop and occupies 2 acres, building a cabin and a woodshed. Harry will eventually acquire title to the 2-acres he has actually occupied, but nothing more. Harry’s actual possession of the acres is better than Jane’s constructive possession of it, but Jane’s constructive possession of 97 acres not actually occupied by either Jane or Harry is better than Harry’s constructive possession of it. After all she is the true owner.

d. Statutory Issue1. Length of the limitations period varies from statute to statute2. When the cause of action accrues: once the clock on the statute

of limitations starts running

a. Disabled owner – allows suspension of the statute of limitations clock if the owner is disabled from bringing action. The owner must be disabled at the time the action accrues and the owner may bring suit after the disability ceases. (Look to statute). You can’t tack disabilities

i. Insanityii. Imprisonment

iii. Minoriv. Example: a statute of limitations to recover

possession of land provides that such action must begin “within 21 years after the cause of action accrues, but if the person entitled to bring such action is imprisoned, of unsound mind, or a minor at the time the cause of action accrue, such person may bring such action after the expiration of 21 years from the actual cause

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of the action, so long as the action is commenced within 10 years after the end of the disability.” If the owner is imprisoned when possessor enters in 1970, and is released in 1995, Owner has until 2005 to file suit to recover.

v. Example: assume above statute. Bob enters Blackacre, owned by Jill, in 1970. Jill in imprisoned for 25 years Jill’s right to bring suit expires in 1991 because she was not disabled when the cause of action accrued. Remember: the cause of action goes along with title when title is transferred.

e. Adverse possession by tenants and co-owners1. Tenants – not usually because they have permission. 2. Co-owners – not usually because they each have equal rights.

In order for a co-owner to possess adversely they must oust the other co-owner by excluding the co-owner from possession and claiming sole ownership.

f. Adverse possession of personal property – created to deal with real property. The reason it isn’t well suited for personal property is the fact that possession of personal property in the manner of a true owner is not very open and notorious.

1. Example: O’Keefe v. SnyderGeorgia O’Keefe, the famous artist, had a painting stolen. Years later it appeared for sale in an art gallery. Snyder, the gallery owner, argued that hiss predecessor in interest had acquired title by adverse possession. The answer hinges on whether the possessors’ exhibition of the painting in his own home was sufficiently open and notorious. But the New Jersey Supreme Court ruled that the limitations period for recovery of personal property starts to run at the earlier of (1) when the loss occurs (except where there is fraud or concealment) or (2) when the owner first discovers, or through reasonable efforts should have discovered, the cause of action (including the identity of the possessor). This turns the focus onto the owner’s conduct rather than the possessor’s conduct, and encourages owners to report their losses and undertake reasonable investigation.

g. Title acquired by adverse possessor – when adverse possessors acquire title they acquire a new title. The former owner hasn’t transferred his interest; rather, the law has stripped him of his title and created a new one in the adverse possessor. But the new title can’t be any better greater in scope than the former owner’s title. The A/P only gets what the old owner had. Note: The adverse possessor’s new title can’t be recorded in the public land records because there is no written record of it. The adverse

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possessor must bring suit against the former owner to quiet title in the adverse possessor. That judgment can be recorded. While an adverse possessor can transfer his title by deed (the statute of frauds requires a writing to transfer a land title), and the deed can be recorded, there will be no evidence in the record of title by adverse possession. The transferee from the adverse possessor receives the adverse possessor’s title but still must act to quiet title.

1. Example: When Oboe owned a life estate in Blackacre Flute acquired Oboe’s title by adverse possession. Though Flute got a new title it was a title to only a life estate in black acre. When Oboe dies, Flute’s title to Blackacre dies too. If Oboe had owned Blackacre in fee simple absolute, but subject to a mortgage lien. Flute would acquire a new title in fee simple absolute, but subject to the mortgage lien.

h. Alternatives to adverse possession in boundary disputes1. Agreed boundaries – neighbors can always agree on a

boundary, put it in writing and record a conveyance to carry it out. It they orally agree on a new boundary where there is genuine uncertainty about the boundary it is a binding method of locating the boundary. (The law splits hairs here - the oral agreement is not a conveyance and it would violate the statute of frauds, but it has all the effects of a conveyance.)

2. Acquiescence – if one owner acquiesces in a known encroachment for an indefinite but long time the acquiescence is evidence of an agreed boundary.

3. Equitable estoppel – if one neighbor does or says things that cause the other neighbor substantially to rely to his detriment on the first neighbor’s actions, the first neighbor is estopped from denying his statements of actions.

a. Example: Matilda moved into her new house and has a backyard conversation with her neighbor Lulu, in which Lulu points out a sagging fence as a boundary. “Trust me,” she says, “you don’t need to do a survey. I know it for a fact.” In fact, the fence encroaches on Lulu’s property by 10 feet. Matilda dispenses with her intended survey and proceeds to rebuild the fence and construct a workshop that partially encroaches on Lulu’s property. Lulu then sues for ejectment of the encroachment. Lulu will lose. She will be estopped from denying her statements on which Matilda relied to her substantial detriment.

4. Accession –

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II. Personal PropertyA. Acquisition by Gift:

a. Gift = voluntary transfer of for no consideration

b. Elements:i. Present intent to make a gift (can’t say you’ll do it at a later

date)ii. Present delivery (you must give it at the time)

iii. Acceptance of the gift

c. Inter vivos v. Causa Mortis gifti. Inter vivos – (during life) a gift made with no knowledge or

threat of impending death and are irrevocable. ii. Causa mortis – (in contemplation of impending death) a gift

made with knowledge or under threat of immediate death and motivated by that fact. The gift will be revocable if the donor recovers from the illness or threat causing the donor to make the gift or if the donor dies of some other cause that didn’t prompt the gift.

d. Intent – the donor must intent to transfer title not just possession.

e. Delivery – general rule: the subject of the gift must be delivered to the recipient in order for the gift to be complete.

i. Relationship between delivery and intent - If the gift can’t be delivered because it’s impractical or impossible delivery can be accomplished by symbolic or constructive delivery. Just need to show intent.

ii. Delivery by deed – can be accomplishediii. Symbolic delivery – when actual delivery is impossible or

impractical can be given by some object that is symbolic of the possession

iv. Constructive delivery – when actual physical delivery is possible, but impractical delivery of some object that is the means of obtaining the possession of the property constitutes constructive delivery.

1. Example: Norman v. BoastOn his deathbed, Jack gives to Julia all the keys to the household furniture, saying that he intends for her to have everything in the house. Delivery of the keys constitutes constructive delivery of the furniture because it’s impractical to make physical delivery under the circumstances. But delivery of the keys doesn’t constitute constructive delivery of a life insurance policy locked in the bureau drawer, because it was not impractical to deliver the tangible evidence of the life insurance right – the policy itself. Constructive

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delivery cases often raise the problem of whether delivery is an independent element or merely a double check on intent.

f. Acceptance – a completed gift must be accepted by the donee.i. Example: Grugen v. Grugen

Grugen wrote a letter to his son telling him that for his 21 birthday he was giving his son a valuable Klimt painting that was displayed in Grugen’s home, but that he wished to retain possession for the remainder of his life. The New York Court of appeals held that the letter constituted a complete and valid gift to Grugen’s son of a remainder interest in the painting, a property right that would automatically become possessory upon the his father’s death. His father retained a life estate in the painting. The father manifested his denotative intent at the time of the gift because the remainder interest was a presently existing property right (even though not one that entitled the younger Grugen to immediate possession) the letter was sufficient to constitute delivery because it would be illogical for the law to require the donor to party with possession of the painting when that is exactly what he intends to retain. Acceptance of a gift by a donee is essential to a completed, valid gift. While the law presumes acceptance where the other elements of the gift are present, then his son manifested acceptance by acknowledging the gift to his friends and retaining for 17 years the letter as evidence of the gift.

II. Possessory Estates Background:a. In feudal times all land was treated as being owned by the kingb. The king in turn would convey the land to lords or baron for life in

return for a servicec. That lord or baron could convey the land to another person, but when

the lord or baron would die the land would go back to the king and he would reevaluate

d. Estate – an interest in land which has two characteristics1. It is or may become possessory2. It is measured in “terms of duration.”

A. Testamentary and intestate transfers and dead hand control by conveyancea. Where a will has been written, in which case the property, will pass as

designated in the will, known as testamentary transfer; ORb. In our typical example, where there is no will, and we are looking at

the property passing to the heirs of the deceased which is an intestate transfer

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B. Possessory estates:a. The Fee simpleb. The fee tail (not going to look at in this class)c. The life estated. The term of years

C. The Fee Simple: - the largest of these estatesa. Relevant terms

1. Decedent – a person who has died2. Heirs – if die intestate3. Testate estate - 4. Intestate estate

i. Issue – a person’s lineal descendants (children, grandchildren…)

ii. Ancestors – a relative from whom one is descended in a direct line – (parents, grandparents…)

iii. Collateral – relatives other than ancestors and issue- aunts, uncles, cousins, siblings)

5. Escheat – if there is no body for the estate to go – will go back to the state because property must be owned at all times.

b. Fee Simple Absolute - an estate with no limitations/restrictions1. Restriction on use: is of infinite duration, but is subject to

certain limitations such as a fee can’t use the property in violation of valid zoning rules.

2. Inheritability: the fee simple is inheritable3. Words needed to create: The common law was extremely

restrictive with respect to the words needed to create a fee simple absolute.

i. O to A and [his or her] heirs – creates a fee simple absolute

ii. Meaning of “and his heirs” – the common law requirements that the conveyance be to A “and his heirs” doesn’t mean that A’s heirs obtain any interest from the conveyance because once the conveyance is made A could transfer the property to B and upon A’s death A’s heirs would get nothing.

iii. Modern states have abolished the “and his heirs” requirement.

iv. Heirs – only apply to persons taking under the intestate descent statute -

4. The words “and [his or her] heirs” tell you what kind of estate the grantee is receiving – these are the words of limitation because they tell you what kind of limitation there is if any.

5. The fee simple will not end naturally

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6. Seisin – the right to possession of land accompanied by particular responsibilities such as payment of taxes.

D. Life Estate a. The life estate lasts for the lifetime of that personb. The owner of a life estate (the “life tenant”) can’t sell, give or devise

the right to possess the land after the owner of the life estate dies. c. The life estate simply endsd. O to A for lifee. “To A” are the words of purchasef. “For life” are the words of limitationg. A’s heirs can’t inherit the land and A’s devisees can’t take the land by

deviseh. Seisin – the right to possession of land accompanied by particular

responsibilities such as payment of taxes. i. Law of Waste: relevant whenever 2 or more people have rights to

possess property at the same time. A should not be able to use property in a manner unreasonably interferes with expectations of B. it is designed to avoid injustice, and uses property to its maximum value.

1. Affirmative (voluntary) waste – natural resources – a life tenant may not consume or exploit natural resources on the property.

i. Exceptions1. For repair and maintenance2. Expressly given the right to exploit3. Prior to the grant, the land was used in

exploitation4. Land is suitable only for such exploitation.

2. Permissive waste – arises out of negligence – failure to take reasonable care. Damages may be assessed.

E. Term of Yearsi. Commonly known as a leaseii. No seisin because it is not a freehold estate. iii. When the time is up the lessor’s right to use the land endsiv. The leaseholder can’t sell, give or divise the right to use the land

beyond the lease periodv. O to A for 10 yearsvi. “to A” are the words of purchasevii. “for 10 years” are the words of limitation

III. Future InterestA. Limitations added to possessory estates

a. Absolute = no limitations, will end naturally

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b. Added limitations1. Determinable – Will end

automatically upon the happening of the limiting eventi. Language used: until, so long as, while, during – are

placed grammatically within the words describing the estate conveyed to A.

ii. The grantor won’t have to do anythingiii. O to A had her heirs so long as A does not divorce.

1. The grantor conveyed the fee only for the period of time until the condition occurs

2. By placing the limitation grammatically in the description of A’s estate the grantor has used the limitation as the measuring post for describing the duration of the estate conveyed.

3. When the limiting even occurs, the estate ends automatically because the only estate conveyed to A was the right to possession until A divorces.

4. Example: O to the law student and heirs land and building, so long as it is used for a law office. It’s a fee simple determinable – not absolute the law student may lose it. O will automatically get it back

2. Condition subsequenti. Will not end automatically upon the happening of the

limiting eventii. To terminate the grantor will have to take some action

to reclaim the property. iii. Language used: but for, provided that, on condition

that, however – all of these conveyances place the first mention of the limitation in the description of the next estate (O’s)

iv. O to A and her heirs until A reaches 21, then to O. 1. The language describes the estate conveyed to A

(”to A and her heirs”)2. The grantor adds a limitation giving the grantor

the right to cut A’s estate short (“but when A reaches 21, then back to O”)

3. Grammatically the limitation is placed in O’s estate, not in A’s – it is placed after the punctuation mark that signals the end of the description of A’s estate

4. O decides what O wants to do and until O acts A retains the right to possession.

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v. Courts dislike forfeitures and prefer condition subsequent

vi. Example: O to A and her heirs, on condition that A does not use the

B. Future interest retained by the grantora. No future interest follows a fee simple absolute

1. The grantor not added limitations or retained any interest in the estate.

2. O to A and her heira. A has a possessory estate in fee simple absoluteb. O has no future interest because O conveyed everything

to A.

b. Reversion – following an estate that ends naturally (life estate or term of years)

1. O’s reversion will “wait patiently” until A’s possessory estate “ends naturally”

2. O’s reversion will not interrupt A’s possessory estate. 3. O to A for life

i. A has a possessory estate in life estate. ii. There is no added limitation by the grantor (like until x)

iii. O has a future interest because O didn’t convey everything to A. O waits until the life estate ends naturally – reversion.

iv. Therefore: A has a possessory estate in life estate and O has a reversion.

c. Possibility of reverter 1. Following a determinable estate2. A determinable estate has an added limitation that might cause

it to end early3. The grantor’s future interest is called a possibility of a reverter4. A’s estate will end automatically if the triggering event occurs 5. Don’t confuse with a reversion (which ends automatically)

because a reverter doesn’t automatically end. 6. O to A and her heirs so long as the land is used for a library.

i. A has a possessory estate in fee simpleii. O has added a limitation (the description is in A’s

estate). A’s fee simple estate is determinable.iii. O didn’t convey away the future interest following A ‘s

estate, O has retained the future interest. O’s interest following a determinable estate is a possibility of reverter.

d. A Right of entry

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1. Following an estate subject to a condition subsequent2. O’s right of entry would interrupt the prior estate if the

described event occurs. 3. When the possessory interest is subject to condition subsequent

the land doesn’t automatically revert to the grantor, the grantor must take some action to enforce the right to enter into possession.

4. If the grantor exercises the right, the grantor can retake the land5. O to A and her heirs; however, if the land is not used for a

library, then to O.i. A has a possessory estate in fee simpleii. O has added a limitation using however and is placed

behind the semicolon separating A’s estate from the next interest (O’s interest). Therefore A’s estate is subject to a condition subsequent.

iii. If A’s interest is subject to a condition subsequent, then O’s interest is a right of entry

iv. Therefore, A has a possessory estate in fee simple subject to a condition subsequent and O has a right of entry in a fee simple absolute.

C. Estates followed by Remaindersa. Conveyances where the grantor has conveyed not only the possessory

estate but future interest as well. b. Placing future interest in 2nd granteec. The grantor conveys an inherently limited estate (a fee tail, life estate)

and also conveys the future interest that followsd. A remainder is a grantee’s future interest that waits patiently for the

possessory estate to end naturallye. O to A for life then to B.

i. A has a possessory estate in life estateii. O conveyed his future interest to B, (remainder).iii. Therefore, A has a possessory estate in life estate and B has a

remainder in fee simple absolute.

f. Vested remainderi. Certain to become possessoryii. Given to an ascertained person

BornIdentified

iii. It is not subject to a condition precedent other than the natural termination of the preceding estate.

iv. O to A for life, then to Kirk Rasmussen.

g. Contingent remainder 1. Not certain to become possessory

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2. O to A for life, then to B if B has reached 213. B’s remainder is not vested it is contingent4. Since the remainder is continent, someone has the right to take

possession if the contingency is not satisfied.5. O to A for life, then to B if B has graduated from college

i. A has a possessory estate in life estateii. B has a contingent remainder in fee simple absolute

iii. O has a reversion in fee simple absolute6. Alternative contingent remainders

i. O to A for life, then to B if B has graduated from college, but if B has not graduated from college, then to C.

ii. A has a possessory estate in life estateiii. B has a contingent remainder in fee simple absoluteiv. C’s contingent remainder in fee simple absolute

D. Estates followed by Executory Interesta. A future estate that follows a determinable estate is an executory

interest. b. A determinable estate ends automatically when the limiting event

occurs – the 2nd grantee doesn’t need to take action.c. O to A while A serves in the United States armed forces, then to B.

1. A has a possessory estate in fee simple2. The future interest is given to a 2nd grantee, the limitation is in

A’s estate therefore A’s fee simple determinable3. A grantee’s future interest following a determinable estate is an

executory interest.4. B’s executory interest, once possessory, will be a fee simple

absolute5. Therefore: A has a possessory estate in fee simple determinable

and B has an executory interest in fee simple absolute

d. Estates subject to an executory interest1. The grantor can place the limitation in the following future

interest instead of in the possessory estate itself2. This limitation causes the estate to end early 3. O to A and her heirs; however if B marries, then to B

i. A has a fee simple subject to an executory limitationii. B has an executory interest in fee simple absolute

4. O to A; however, if A uses the land for a tavern, then to Bi. A has a possessory estate in fee simple subject to an

executory limitationii. B has an executory interest in fee simple absolute

e. Two future interest held by the second Grantee1. O to A for life or until A divorces, then to B.

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i. B has a remainder (because A has only a life estate), but in theory B also has an executory interest (because A’s life estate is determinable). Because the remainder is the larger of the two interests, we will call B’s interest simply a remainder.

E. Additional future interestsa. O to A for life, then to B for life, then to C.

1. A has a possessory estate in life estate2. The next estate is in a 2nd grantee, the life estate will end

naturally the estate that follows is a remainder – B has a vested remainder

3. B’s remainder is in life estate4. Then next future interest is in another grantee and B’s estate

will end naturally – remainder – C has a vested remainder, fee simple absolute

5. Therefore: A has a possessory estate in life estate, B has a vested remainder in life estate and C has a vested remainder in fee simple absolute

b. O to A and her heirs, but if A divorces, then to B for life, then to O and his heirs

1. A has a fee simple2. Look to see if the next future interest will be in the grantor or

the grantee – here it will be in the grantee, B. the grantor has added limitation (no divorce) so the fee simple is subject to an executory limitation

3. The future interest that follows an estate subject to an executory limitation is an executory interest

4. If B’s executory interest becomes possessory, it will be a life estate

5. Check to see if the next future interest will be in the grantor or another grantee – it’s in the grantor. No added limitations

6. The grantor’s future interest following a life estate – ends naturally – is a reversion- when possessory is fee simple absolute

7. Therefore: A has a possessory estate in fee simple subject to an executory limitation, B has an executory interest in life estate, and O has a reversion in fee simple absolute.

c. O to A for life, then to B for life, then to C, but if C sells liquor on the property, then to D

1. A has a possessory estate in life estate2. B has a vested remainder in life estate3. C has a vested remainder in fee simple subject to an executory

limitation

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4. D has an executory interest in fee simple absolute

d. Vested remainders subject to divestment1. A vested remainder subject to divestment is one that might be

divested before it ever becomes possessory.2. O to A for live, then to B, but if B divorces, then to C

i. A has a possessory estate in life estateii. B has a vested remainder in fee simple subject to an

executory limitationiii. C has an executory interest in fee simple absolute.iv. Because C’s executory interest might divest B’s estate

before it comes into B’s possession (B might divorce in A’s lifetime) B’s interest is: B has a vested remainder subject to divestment in fee simple subject to an executory limitation

3. O to A for life, then to B for life, but if B divorces, then to Oi. A has a possessory estate in life estateii. B has a vested remainder in fee simple subject to a

condition subsequentiii. O has a right of entry in fee simple absoluteiv. Might O’s right of entry divest B’s estate before it

becomes possessory? Yes – B might divorce during A’s life estate therefore B has a vested remainder (subject to divestment) in fee simple subject to a condition subsequent.

4. O to A for life, then to B for life, then to C, but if A, B or C ever sells the liquor on the property, then to D

i. C still has a vested remainder, however, the limitation could happen before C’s remainder becomes possessory (if either A or B sell liquor) or after it becomes possessory (if C sells liquor)

ii. When a vested remainder is burdened by an executory interest that could prevent the vested remainder from ever becoming possessory it’s described as subject to divestment.

5. O to A for life, then to B, but if B divorces then to Ci. We can describe B’s vested remainder as “subject to

divestment” because it’s subject to a limitation that could occur before A dies and therefore before B’s estate ever has a chance to become possessory.

e. Vested remainders subject to Open

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1. An estate is subject to open if it is given to a class of persons and if one or more of those persons is already ascertained as part of the class but others could be added

2. Example: O to A (who is alive with one child, B), then to A’s children. The future interest held by B is subject to open because A could have more children.

3. If A is dead, however, A can’t have more children – in that case the class is closed.

F. The marketability rulesa. Introduction

1. Common Law – destructibility of contingent remainders, rule in Shelly’s case and doctrine of worthier title. Mostly abandoned today, but some jurisdictions cling to them.

2. Modern – RAP

b. Destructibility of contingent remainders1. At common law a contingent remainder in land was destroyed

if, at the expiration of the preceding freehold estate, it was still contingent.

2. O to A for life, then to B if B reaches 35.

i. A has possessory estate in life estate; B has a contingent reminder in fee simple absolute; and O has a reversion in fee simple absolute

ii. If A dies and B is only 14 the possession will revert to O and O’s possession will be interrupted by B if and when B turns 35. O has a possessory estate in fee simple subject to an executory limitation; B has a springing executory interest in fee simple.

c. The doctrine of Merger 1. If

i. A possessory or vested life estate and the next vested estate in fee simple come into the hands of the same person and

ii. These two estates are not separated by another vested estate

2. Theni. The life estate merges into the next vested estate held

by the same person, and

ii. If there is a contingent remainder between them, the contingent remainder will be destroyed. (Exception- if

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he estates weren’t created in the same document, an intervening contingent estate is safe)

3. Example: O to A for life, then to B for life, then to C

i. A has a possessory estate in life estate, B has a vested remainder in life estate, and C has a vested remainder in fee simple absolute.

ii. What if A conveys her life estate to C – C would have both the possessory life estate (pur autre vie) and a vested remainder in fee simple absolute.

iii.Could these two estates merge? No, because together they don’t account for all the vested interest. B has an intervening vested life estate, which we can’t destroy.

iv.Therefore; A’s conveyance to C, the state of the title is this: C has a possessory estate in life estate pur autre vie; B has a vested remainder in life estate; C also has a vested remainder in fee simple absolute

4. Example: O to A for life, then to B for life if B has reached 21, then to C. (B is not yet 21)

i. A has a possessory estate in life estate, B has a contingent remainder and C has a vested remainder in fee simple absolute.

ii. What if A conveys her life estate to C. C would have both the possessory life estate (pur autre vie) and the vested remainder in the fee simple absolute. Could these two estates merge? Yes, because the only interest between them is contingent. Their merger destroys B’s intervening contingent remainder in life estate.

iii.Therefore: A’s conveyance to C, the state of the title is this- C has a possessory estate in fee simple absolute.

d. The rule in Shelly’s case1. Prevents a grantor from conveying a possessory estate to a

grantee and a future interest to the grantee’s heirs2. This rule only applies to conveyances “to [the grantee’s] heirs.

It doesn’t apply to the grantee’s children, or issue, or to named persons who are likely to become the grantee’s heirs.

3. Ifi. The same documentii. Conveys a life estate to a grantee andiii. A remainder to that grantee’s heirs

4. Then

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i. The conveyance to the grantee’s heirs is read as a conveyance to the grantee.

5. O to A for life, then to A’s heirsi. In this rule cross off A’s heirs and replace with Aii. A has a possessory estate in life estate; A also has a

vested remainder in fee simple absoluteiii. The problem is that A has no heirs until A is dead.

6. The rule is limited in several important ways. 1) It applies only to remainders, not to executory interests.

e. The doctrine of worthier title 1. It prevents the grantor from conveying a life estate to a grantee

and a future interest (a remainder or an executory interest) to the grantor’s heirs.

2. Only applies to conveyances “to [the grantor’s] heirs. It doesn’t apply to the grantor’s children or issue or to named persons who are likely to become the grantor’s heirs.

3. Ifi. The same inter vivos conveyance ii. Conveys an inherently limited estate to a grantee andiii. A remainder or an executory interest to the grantor’s

heirs, 4. Then

i. The conveyance to the grantor’s heirs is read as a conveyance to the grantor.

5. O to A for life, then to O’s heirsi. Strikes out the words O’s heirs substituting Oii. A has a possessory estate in life estate and O has a

reversion in fee simple absolute

6. O to A for life, then to B, but if B uses the land for a tavern then to O’s heirs.

i. Cross off O’s heirs and replace with Oii. A has a possessory estate in life estate; B has a vested

remainder in fee simple subject to condition subsequent; O has a right of entry in fee simple absolute.

G.The Rule Against Perpetuities (RAP)a. A future interest is void the moment it is created if:

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1. It is in a grantee (a remainder or an executory interest)2. It is either contingent (gives to an unascertained taker or

subject to a condition precedent or both) or subject to open; and

3. It might still exist and still be contingent or subject to open longer than 21 years after the death of the last person alive at the time of the conveyance.

b. No interest is good unless:1. At creation of the interest,2. It must vest,3. If at all4. Not later, than 21 years after5. Some life in being

c. O to A for life, then to A’s children; A has no children1. First step: What is the longest possible time it might take

before we’ll either have an ascertained holder or know for sure that there will never be an ascertained holder? Or – what is the last possible time for A to have a child?

i. Answer: any children of A’s will be conceived by the time A dies.

ii. Now we know the longest period of time that the remainder might remain contingent – it will either fail or vest at A’s death

2. The next step: compare the possible life span to the permitted life span

i. The permitted life span is 21 years after the death of the last person who was alive at the time of the conveyance

ii. A was alive at the time of the conveyance, so A is the life in being.

iii. The last possible time for A to conceive a child (and therefore either satisfy or fail to satisfy the contingency) is immediately prior to death

iv. The contingent remainder passes our test – it can’t possibly remain contingent longer than A’s lifetime.

d. O to A for life, then to A’s children (A has 2 children B and C)1. B and C have a vested remainder, but since A is still alive, the

remainder is subject to open. Therefore the remainder is vulnerable to the rule and we must test it.

2. What is the last possible time for A to have another child? i. Any children of A’s will by conceived by the time A

dies. Therefore, the remainder will close at A’s death3. Compare that possible life span to the permitted life span; 21

years after the death of the last person who was alive at the

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time of the conveyance. A was alive at the time of the conveyance so A is the life in being. According to the rule, when A dies, the remainder could remain open for 21 more years, but it won’t need that long because the last possible time for A to conceive a child is immediately prior to A’s death.

4. The open remainder passes our test – it can’t possibly remain open longer than A’s lifetime.

e. Validating life – someone whose life proves that the interest will either fail or vest and close within the permitted time period.

f. Example of an interest that violates the rule:1. O to A for life, then to A’s children who reach 30 (B and C

are 32 and 30 respectively)i. B and C have a vested remainder, but since A is still

alive the class is still open.ii. What is the longest possible time it might take before

the vested remainder will close?a. Only A’s children who reach 30 can be part of

this class.b. If A has another child (D) and dies immediately,

we won’t yet know whether D will reach 30. If D reaches 30 D will be added to the class, but it will take 30 years to find out.

c. The remainder could remain open longer than the permitted time period.

d. Therefore neither A nor any other person can prove to us that all of the class members will be identified by 21 years after the time A dies. There is no validating life and the remainder violates the RAP.

g. Step by Step approach for applying the rule: 1. O to A for life, then to B for life, then to O’s widow.2. Step 1: identify the state of the title according to the

conveyance. i. A has a possessory estate in life estateii. B has a vested remainder in life estateiii. O’s widow has a contingent remainder in fee simple

absoluteiv. O has a reversion in fee simple absolute

3. Step 2: look for any future interests in the granteei. B’s vested remainder in life estateii. O’s widow’s contingent remainder in fee simple

absolute

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4. Step 3: if you find any future interest in a grantee, check each one to see if it is both vested and closed. If the interest is already vested and closed it is not vulnerable to the rule. If it is either contingent or subject to open it’s vulnerable.

5. Step 4: for each contingent or open future interest in a grantee, identify the necessary factual developments for vesting and closing.

i. O’s widow: the holder must be ascertained, so the event that will vest the interest (or cause it to fail) is O’s death.

6. Step 5: circle or identify all the lives in beingi. O, A and B (we can’t say that O’s widow is alive

because we don’t know who she will be)7. Step 6: consider the first vulnerable interest you have found

and see if it might still be contingent or open longer than the lifetimes of everyone you circled or identified plus 21 years. You are looking for the validating life (probably one you circled) can one of the people prove to you that the interest is certain to either vest and close or fail within that time?

i. On O’s death we’ll know the fait of this remainder. One of 2 things will happen

a. Either O will have a widow and we’ll know who she is (vested)

b. OR O will die unmarried and the remainder will fail at that moment

ii. O is the validating life - O was alive at the time of the conveyance and the remainder to O’s widow will either vest or fail at the moment of O’s death. The remainder to O’s widow survives the rule

8. New Example: O to A for life, then to A’s first child if he or she reaches 25.

9. Step 1: A has a possessory estate in life estate, A’s first child has a contingent remainder in fee simple absolute and O has a reversion in fee simple absolute

10. The interest is vulnerable to the rule (steps 2 & 3) is A’s first child’s contingent remainder

11. In step 4, we see that the remainder is contingent for 2 reasonsi. The holder is unascertainedii. The remainder has a contingent precedent

(reaching 25)12. Therefore to vest the remainder, A must have a child and that

child must reach 25.13. In step 5 we circle the lives in being: O and A14. There is no validating life. No one can prove that we’ll know

the fate of the reminder in time. We’ll have to wait 25 years to

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find out whether the child will meet the condition precedent. But this rule requires us to be sure that we’ll know within 21 years of the death of the last remaining lie in being, not 25 years. This violates the rule

15. If the contingent interest violates the rule, strike the whole interest – O to A for life; a has a possessory estate in life estate an O has a reversion in fee simple absolute.

h. Danger signs:1. The condition is not personal to someone

i. O to A for life, then to B, but if the land is ever used for a tavern, then to C.

a. A has a possessory estate in life estateb. B has a remainder in fee simple subject to an

executory limitationc. C has an executory interest in fee simple

absolute.ii. B – has a remainder, but it’s already vested and closediii. C’s executory interest is not vested and is subject to a

condition precedent.iv. For C’s executory interest to vest, the land would have

to be used for a tavernv. Lives in being – O, A, B, and Cvi. C’s executory interest would vest any time any future

holder of B’s interest used the land for a tavern and that would be hundreds of years from not – violates the rule.

2. There is an identified age or time period of more than 21 years

i. O to A for life, then to A’s children who reach 25. (A has one child, B who’s 25)

a. A has a possessory estate in life estateb. B has a vested remainder in fee simple subject

to openii. B’s remainder is already vested, but it is subject to openiii. To qualify, a new child of A’s would have to reach 25iv. Lives in being: O, A and Bv. Consider this: one day after the conveyance, A has

another child C. The next day A and everyone else except this new child, C, die.

a. Is it possible that C might reach 25? – Yesb. How long will it take? – 25 yearsc. B’s remainder might not close within 21 years –

there is no validating life who can ensure the interest will close in time therefore B’s remainder is void.

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vi. Note: that the remainder would have survived if the triggering condition would have limited to 21.

3. An interest is given to a generation after the next generation (for example: to grandchildren)

i. O to A for life then to A’s grandchildren. (A has one child B and one grandchild C)

a. A has a possessory estate in life estateb. C has a vested remainder in fee simple subject

to openii. C’s remainder is vested, but subject to open. iii. A and all of A’s children would have to die before all of

A’s grandchildren could be identifiediv. Lives in being: O, A, B and Cv. Consider this:

a. One day after the conveyance, A has another child (X). The next day A, B and O die.

1. Is it possible that X might have a child some day? – Yes

2. Is it possible that it would take X more than 21 years to have a child? – Yes

3. C’s remainder might not close within 21 years and fails the test and is void.

b. Note: the remainder would have survived if it was A’s children rather than A’s grandchildren.

4. A conveyance requires that a holder survive someone who is merely described rather than named

i. O to A for life, then to A’s widow for life, then to A’s children then living. (A is presently married to B and has one child C)

a. A has a possessory estate in life estateb. A’s widow has a contingent remainder in life

estatec. A’s children then living have a contingent

remainder in fee simple absoluteii. Both remainders are contingentiii. A’s widow’s remainder will be vested as soon as she is

ascertained, which will happen upon A’s death. iv. The remainder to A’s children who survive his widow

will be vested as soon as the takers are ascertained and the condition precedent is met, which will happen upon the death of A’s widow.

v. Lives in being: O, A, B, and C

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vi. The remainder to A’s widow is valid – it will either vest or fail immediately upon A’s death. A’s widow will be ascertained at the time A dies

vii. Consider this: immediately after the conveyance, X is born, she grows up. During that time B dies, A meets X and marries her. They have another child, Y, who also is not a life in being. Then A, C and all other people alive during the original conveyance die, at which point the 21 year period starts. X and Y are still alive, but the clock is ticking. For the remainder to “A’s children then living” to vest, Y must outlive X. what if X lives more than 21 years after A and everyone else died? The 21- year clock would strike and we wouldn’t know if Y outlived X. A’s remainder to children then living is void.

viii. Note: if the conveyance would have been: O to A for life, then to A’s widow for life, then to A’s children.

a. The remainder to A’s children is not contingent on surviving A’s widow

b. Immediately on A’s death their interest would vest and close

c. Since A is a life in being, Reminder is valid

5. An identified event that would normally happen well within 21-years, but might not.

i. O to A for life then to B for 20 years, then to whoever has received A’s land in the distribution of A’s estate.

a. A has a possessory estate in life estateb. B has a vested remainder in term of yearsc. The recipients of A’s land has a

contingent remainder in fee simple absolute

d. O has a reversion in fee simple absolute.ii. The contingent remainder is vulnerableiii. The contingent remainder will vest as soon as A’s

estate has been distributed.iv. Lives in being: O, A and Bv. We have no way to be guaranteed that A’s assets will

be distributed ever let alone within 21 yearsvi. Void

6. The holder won’t be identified until the death of someone merely described rather than named.

i. O to A for life, then to A’s first child for life, then to whoever is the president of the United States.

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a. A has a possessory estate in life estateb. A’s first child has a contingent remainder in life

estatec. The president of the united states has a

contingent remainder in fee simple absoluted. O has a reversion in fee simple.

ii. The vulnerable interests are the remainder to A’s first child and the remainder to the President of the United States.

iii. The remainder to A’s first child will either vest or fail at the time of A’s death. The remainder to the President will vest or fail when A and A’s first child die.

iv. Lives in being: O and Av. The remainder to A doesn’t violate the rule because we

will know if it vests or fails when A diesvi. Consider this:

a. After the conveyance, A could have a child (B) who will not be a life in being. Then all the lives could die and the 21-year time period will start.

b. We won’t know who will be president when B dies until he actually dies and B could live longer than 21 years. This violates the rule.

H.Relief from the RAP:a. The effect of the destructibility of contingent remainders doctrine

1. Remember: the doctrine of destructibility of contingent remainders destroys any remainders that are still contingent when the prior estate ends

2. Example: O to A for life, then to A’s first child to graduate from law school. (A has no child who has graduated from law school).

i. When A dies, if no child of A’s has graduated from law school, and the contingent remainder is destroyed.

3. Example: O to A for life, then to B’s first child to reach 30.i. A has a possessory estate in life estateii. B’s first child to reach 30 has a contingent remainderiii. O has a reversioniv. In RAP – invalidv. In a state following the doctrine of destructibility of

contingent remainder it would be valid because you would know if it would vest as soon as A dies.

b. The charitable exemption1. Both possessory estates and the vulnerable future interest are

given to charitable organizations, the RAP doesn’t apply.

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2. Example: O to A, but if the land is ever leased to another grantee, then to Planned Parenthood.

i. The interest given to pp would violate the ruleii. Can’t guarantee that A will lease in life time (A is a life

in being and once A dies the 21 years start running)3. Example: O to the Easter Seals, but if the land is ever leased to

another grantee, then to Planned Parent hood. i. Here both possessory estate and the future interest are

given to charities and the rule doesn’t apply

c. Common Law RAP – “what might happen test1. Examine transaction at the time of its creation, and at that point

determine whether future interest must either vest or not vest.

d. The wait and see doctrine: a majority of states have adopted one of these “wait and see” rules (in leave of the what might happen test.

1. “Wait and See” for the Common Law time period (21-years)

i. About 2/3 of the non-USRAP wait and see statesii. Don’t void immediately, but wait for lives in being at

the time of the conveyance to terminate, then wait 21 years to see if it vests.

iii. Example: O to A for life, then to A’s children for their lives, then to A’s grandchildren. At O’s death A has 2 children (B and C) and 1 grand child (D). Under CL the contingent remainder in A’s children are good because they are known (B and C) and the class closes on A’s death. But the contingent remainder in A’s grandchildren is void because their identity will not be known until all of A’s children are dead and A could have more children after the conveyance. Under the wait and see common law period we wait for A, B, C and if necessary D’s lives to end then wait the 21 year time period.

2. USRAP - “Wait and See” for 90 years. i. Second variation on the common law ruleii. Under this rule a contingent or open interest is valid in

one of the following circumstances:a. If it would be valid under the original

common law ruleb. If we can be sure it will either vest and

close or fail within 90 years after its creation

IV. Co-Ownership and Marital Interests

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A. Tenancy in Commona. 2 or more tenantb. Each owns a separate but undivided interest in the whole propertyc. No survivorship rights between tenantsd. Is the preferred or “default” for of co-tenancy

1. Example: if attempt to create another form of tenancy fails for failure to include sufficient direction in the deed, it will be presumed that a tenancy in common was intended. A to B – Tenancy in common: A to C creating – B and C tenancy in common: if B dies intestate – C and B’s heirs tenants in common.

B. Joint Tenancya. Each tenant owns an undivided interest in the whole propertyb. Right of survivorship (it doesn’t pass but is extinguished the it

automatically vests in the surviving tenant(s). we can’t ‘re-route’ the survivorship)

c. Requires (common law) “four unities” for creation1. Time – all interests acquired or vest at the same time2. Title – all interests acquire title by the same instrument (or by

joint adverse possession, but not by intestate succession or other operation of law)

3. Interest – all must have equal (courts now allow unequal shares) undivided shares, and identical interests measured by duration.

4. Possession – Each must have a right to possession of the whole (subject to arrangement amount tenants after creation.”

d. Example: A and B are joint tenants. A has a will and in it leaves all property to C. When A dies is the property now owned by B and C or B? The property will be owned by B because B can’t pass to anyone.

e. Example: Riddle v. HarmonWife didn’t want property to pass to husband, so she went behind his back and terminated joint tenancy so she could convey her interest by will. At common law, had to use strawman- middleman, convey property to strawman, then they convey back to you, so property is then held as tenancy in common. Her intentions were to sever, so she could have done without the middleman.

C. Tenancy by the entiretya. Recognized in 20-25 states (in several states, joint tenancy, applies)b. May be created in a husband and wife onlyc. Must have the four unities, plus the 5th being the unity of marriaged. The tenants have a right of survivorshipe. Unlike joint tenants, neither tenant may defeat the right of

survivorship by conveying to a third party. May only do so by

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conveyance to H & W together. (Note: case law treatment with regard to single tenant mortgaging, negligent indebtedness and statutory forfeiture indebtedness)

f. Divorce destroys the 5th unity and thus terminates the tenancy by the entirety, which then become a tenancy in common absent agreement to the contrary.

D. Rights and obligations of concurrent ownersa. Partition – joint tenants or a tenancy in common may demand a

partition at any time, but tenancy by entirety can’t (their remedy is divorce)

1. Partition in kind – physical division of the property. Courts prefer a partition in kind.

i. Courts will order unless a party can prove:1. Physical partition is impossible or extremely

impractical; OR2. Physical partition is not in the best interest of

all parties

2. Partition by sale – not favored by courts, but most common. i. Conducted by supervision of the courtii. Expenses of sale are paid before splitting net proceeds

3. Agreement not to partition – i. Unreasonable restraint on alienation - ii. To say never is unreasonable

b. Rents, profits and possession1. Exclusive possession by one co-owner

i. Each co-owner has the right to possess all of the property, exclusive possession by one co-owner is presumptively valid.

ii. If in agreement – valid; if not in agreement the cotenant in exclusive possession has the following obligations to his co – tenants

1. Majority – a cotenant in exclusive possession has no liability for her share of the rental value of the property unless:

(1) The other cotenants have been ousted(2) The cotenant in possession owes a

fiduciary duty to the other cotenants; or(3) The cotenant in possession has agreed to

pay rent. 2. Ouster – an ouster occurs if the tenant in

exclusive possession either(1) Actually prevents or bars physical

entry by a cotenant OR

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(2) Denies the cotenant’s claim to title. (3) An ousted tenant has a right of action for

o Ejectment – wants person off property

o Mesne Profits – measure of reasonable value of property -

3. Minority rule – the cotenant in exclusive possession is liable to cotenants out of possession for their share of the fair rental value of the occupied premises, unless there has been an agreement among parties to excuse the tenant from this obligation.

2. Rents from third parties – a cotenant who receives rent from a third party is obligated to account to his cotenants for those rents. If the rents or other income received by a cotenant are greater that the cotenant’s share, he is obligated to pay the excess to the other co-tenants.

3. Profits from land – if a cotenant permanently removes an asset from the land he must account to his co-tenants for this reduction in value.

c. Accounting for the costs of ownership1. Mortgage payments – a cotenant’s payment of a

disproportionate share of either the principal or the interest is treated differently

i. Interest – each cotenant is obligated to pay his proportionate share of mortgage interest – a cotenant that pays more can force the other cotenants to reimburse him immediately, upon partition or within the limitations period following the end of co tenancy.

ii. Principal – the cotenant that pays more than his share of the mortgage principal has additional remedies – can enforce all the rights and powers of the mortgagee against his cotenants who fail to pay their share of the principal including foreclosure sale.

2. Taxes - a cotenant that pays more than his share can recover the excess from his fellow cotenants any time during the tenancy, upon partition, or within the limitations period after cessation of cotenancy.

3. Repairs – a cotenant has no obligation to repair his property. A cotenant who voluntarily repairs the property may not force his cotenants to reimburse him for their share of the repairs, but the repairing cotenant can recover repair costs in 2 situations:

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i. Accounting for rents – if a repairing cotenant is under a duty to account to his fellow cotenants for rent the repairing cotenant may deduct from the rents due the other cotenants their share of the repair costs incurred by the repairing cotenant

ii. Partition – a repairing cotenant is entitled to be reimbursed for the repair costs in excess of her share.

iii. Obligation for necessary repairs – split of authority on this! Some state say they can be reimbursed right away for this expense and others say they have to wait until sale,

4. Improvements – no cotenant has the duty to improve the property and a cotenant can’t recover fellow cotenants pro rata share of these costs. Upon partition, or if the improving cotenant is under a duty to account to cotenants for rent, the improving cotenant is entitled to recover only the value added by the improvement not the cost of the improvement. If the improvement adds no value – no recovery.

i. Example: spend $500 to make some improvements. The cotenants get into a disagreement and they partition. The court ordered the sale of the property – the addition increased the value of $1000. How much does the co-tenant get (the one that paid for it)

1. Majority: $5002. Minority: the amount of value ($1000) not the

cost to get there.

d. Adverse possession – cotenants can occupy adversely to their fellow cotenants, but it takes more that mere possession to do so. A cotenant must give his cotenants absolutely clear and unequivocal notice that he claims exclusive and sole title in order for the adverse possession to begin.

e. Implied fiduciaries

f. 3 kinds of cases one cotenant can bring against another1. Independent action2. Accounting 3. Partition

E. Marital interests:a. Historically 1 system in England

1. Separate ownership of H and W2. H getting favorable treatment3. Creditors access.

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b. United states – CL marital property arrangement change in 1839 named woman’s property act giving women greater autonomy.

c. European - Community property and 8 US states have community property rules to this day

1. Community property – each state has its own set of rules2. H and W are equals analogous to partnership each partner in

common property own property on their own = separate property. Equal share property = common property

V. Transfers of real property. A. Introduction to buying and selling land

a. Transfer of land to BUYER (seller is mirror image rule)1. Verbal negotiations (price, down payment, method of finance

and time of occupancy) TIME IS OF THE ESSENCE to get the K from extending. If there is no time stated the courts will allow a reasonable time.

2. Preparation and presentation of an offer with or without an attorney; a key time when important rights are fixed, further negotiations and execute purchase agreement.

3. Buyer must secure financing (mortgage) also get insurance for property (risk of loss)

4. Appraisal and credit check5. Title analysis (generally title insurance)6. Due diligence – may include an environmental analysis of the

property – which would cost huge amounts to clean up the property. Again look into zoning, schools in the area, buyer has to reserve to escape the purchase agreement if they find something (specific language as to what) to leave the deal)

7. Closing – set a time, place, date when people get together to complete the closing.

i. Execution and delivery of deedii. Payment of purchase price (including mortgage

financing) andiii. Settlement of closing costs – tax assessment on the

property if it is closing at the end of the year, or seller may want to be reimbursed for portions of the taxes they have already paid.

8. Record deed and mortgage

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9. Secure possession

B. Key provisions to consider: i. Purchase agreement should direct whether property is to be taken as

tenants in common, joint tenants or tenants by the entirety.ii. Should direct the nature of the title required.iii. The subject of existing encumbrances, easements and restrictions.iv. Seller should make key disclosures that may impact decision to

purchase and purchase price.

C. Common Law Doctrine of equitable conversiona. The courts look at a specifically enforceable K, and puts the parties

where they have bargained to be. b. Equitable maxium

1. Equity regard as done that which ought to be donec. This doctrine assumes that he closing has taken placed. RISK OF LOSS – buyer and seller enter into an agreement of sale and

closing to be on 11-9. On 11-8 the house burns down and nobody has insurance. Who loses?

1. MAJORITY COMMON LAW: the buyer loses because the buyer is the equitable owner

2. UNIFORM PURCHASE ACT: many states have passed this act - if the seller retains possession then the seller retains the risk of loss.

e. INHERITANCE – one of the parties to the purchase agreement dies and the issue is whether the interest is real or personal property – you assume equitable conversion – the purchaser has real property interest and the seller has personal property – claim for money.

1. O sells to A, O dies and he dies without a will. B and C are O’s heirs. Assume the state statute B take’s O’s real property and c takes personal property – if the seller’s here is entitled to personal property they take the interest in the money from the sale of the house.

D. Statute of fraudsa. A contract for sale of land must be in writing and must be signed by

both parties. b. What must be in writing for the statute of frauds?

1. A description of the property2. Identify the parties; buyer and seller3. Price – what price is being paid for this conveyance4. Signature of the parties to be charged verified by a notary.

c. English statute of frauds (1677)

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1. Except for leases for less than 3 years, no interest in land may be created or transferred except by an instrument in writing, signed by the party to be bound. (This is important for resale – if not in writing, you have nothing to sell.)

2. No action shall be brought upon any contract or sale of land or any interest concerning land unless the agreement upon which the action is brought, or some memo or note thereof, shall be in writing and signed by the party to be charged. (If the other party defaults can’t enforce.)

d. Exceptions to the statute of frauds1. Part performance (recognized in most states)

i. Party demonstrates that certain acts were undertaken that make sense only as having been performed pursuant to the oral contract (“unequivocally referable to a contract of sale”)

ii. What might qualify – will have to look at each state. 1. Installment payments.

2. Equitable Estoppel (well recognized)i. Basic elements

1. Inducement (action or inaction)2. Change of position in reliance upon inducement3. Inequitable to deny the existence of the contract.

ii. Example of “inequity”1. Where one has been induced (by action or

inaction) by the other to seriously change his/her position in reliance upon the contract

2. When unjust enrichment would result if a party who has received the benefit of other party’s performance were allowed to rely upon the statute.

3. Example: Hickey v. GreenMrs. Green orally agreed to sell Hickey a building lot for $15,000 and accepted but didn’t deposit Hickey’s check for part payment. Hickey then sold his house, expecting to build a new house on the lot. Mrs. Green refused to complete the sale. The court held that Hickey’s reliance was reasonable and that equity required specific performance of the oral sale contract.

2. Marketable titlei. Implied obligation of the seller in an agreement to sell real

property (absent controlling provision in the Purchase Agreement)

a. The seller must convey to the buyer “marketable title.” If this can’t be done, the buyer is entitled to rescind

b. The seller will convey title by warranty deed

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ii. Definition of marketable titlea. Is a title a prudent buyer would accept, one reasonably

free from doubt that there is any other rival to title or any portion of it.

b. A title which would not expose the buyer to the hazard of litigation with regard to material matter or materially reduce the value of the property, assuming the parties are reasonably prudent and intelligent and acting on competent legal advise.

c. A title which an be readily sold or mortgaged of a person of reasonable prudence, and there is no objection that a reasonable buyer would make so as to interfere with a sale or with the market value of the property – fee of reasonable doubt, but not every doubt.

d. Other types of title1. Record title – either allowing certain

encumbrances or not2. Title which is sufficient to allow a title company

to insure (which would be dangerous in terms of future resale and value of property) if it is out before pre-closing the buyer can get out if there is something wrong.

e. Proof of marketable title – a seller can deliver marketable title by either:

1. Producing good record title2. Proving title by adverse possession - either

through a successful quiet title action or evidence sufficient to establish that the rival claim to title wouldn’t succeed if asserted and “that there is no real likelihood that any claim will ever be asserted.

f. Defective title – to be unmarketable the defect in the title must be substantial and likely to injure the buyer

1. Defective chain of title – the chain of title may have a faulty or nonexistent link. (Describing wrong land, no evidence of a deed from B to C in a chain purportedly from A to B to D to D, the non-existent link makes D’s title unmarketable.

2. Encumbrances – generally makes a title unmarketable. An encumbrance is a burden on the title such as a mortgage, judgment leans, easements or covenants.

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a. Example: Lohmeyer v. Bower. B and L entered into a written agreement by which Bower agreed to sell and Lohmeyer agreed to purchase a one-story wood frame house in Emporia Kansas. The lot was burdened by a covenant requiring all residence constructed on the land to be two stories tall. The Kansas Supreme Court opined that the mere existence of a covenant restricting use is an encumbrance making title unmarketable. Only because L had agreed to take title “subject to all encumbrances of record” the mere existence of the covenant didn’t make the title unmarketable; however, L had not agreed to accept existing violations of the covenant. Those existing violations make the title unmarketable. There are two exceptions to the general rule (1) an easement that benefits the property (i.e. a utility easement) is regarded by some courts not as an encumbrance as long as the buyer knows about it before entering into the K. (2) covenants restricting use are encumbrances, but some courts treat them as not making the title unmarketable if the sale K specifies a particular use that is permitted by the restrictive covenants.

b. Rule: c. Municipal regulations –

i. The mere existence of municipal regulations, in place at the time of the agreement, do not render the title unmerchantable or unmarketable. Not really part of “title” or interest in land.

ii. The violation of municipat restrictions does result in the title being unmerchantable or unmarketable. Reason: it subjects buyer to possible law suit.

d. Private restrictionsi. (Mere existence) upon the use of

land or location and type of buildings may be erected established by private restrictions and covenants do constitute encumberances rendering the title to land unmarketable.

e. Remedy:i. Apply for a variance of the

restriction

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ii. Have the association wave the restriction

iii. Common language to overcome - A buyer will buy and seller will sell subject to restrictions.

f. When the purchaser knows there is an easement or encumbrance on the land and still purchases can’t rescind due to unmarketable title

i. Where there is no legal access it affects the fair market value not the marketability of title

ii. Utility poles on the property isn’t good enough.

3. Zoning restrictions – use limits imposed by public authority through zoning laws are not regarded as encumbrances on title. a. If there is a zoning ordinance it is not

good enough to rescind the Ki. There must be a violation of the

zoning ordinance to be able to rescind

3. Default and remedies – a default occurs when one party has tendered performance in time, demanded timely performance from the other party and reciprocal performance is not forthcoming. Remedies for breach are damage, recession and specific performance and the P may choose.

1. Specific Performance – because the land is unique damages are thought to be inadequate compensation for breach.

i. Sought by buyer - if the seller’s title is defective and they still want the property. Buyer is entitled to abandon the price to reflect the diminution in value attributable to the defect.

ii. Sought by the seller –a seller will be denied if they can still sell the property at a commercially reasonable price. A seller entitled to SP will be required to reduce the price if there is an insubstantial defect in title. If the title defect is substantial, the title isn’t marketable and the seller wouldn’t be entitled to specific performance.

2. Rescission- polar opposite of SP.

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iv. If the seller the breaches, the buyer may choose to rescind, recover his partial payments already made and “walk away” from the deal.

v. If the buyer breaches, the seller by choose to rescind the contract and sell the property to another party.

vi. The rescission right doesn’t open until the closing date. An attempted recession before the closing date isn’t effective and is a breach of the K.

3. Damages – if P doesn’t want or can’t obtain SP she may obtain money damages. The measure of damages is usually the benefit of the bargain but under some circumstances damages are limited to the recovery of money out of pocket, or damages may be defined by the K’s liquidated damages provision.

i. Benefit of the Bargain – difference between K price and the value of which she is deprived by the other party’s breach.

4. Example: S agrees to sell Blackacre for $50,000, but refuses to convey at the closing date because she is aware that in the interim the value of Blackacre has risen to $90,000. The buyer is entitled to $40,000 damages.

5. Example: S agrees to sell Blackacre for $50,000, but B refuses to perform on the closing date. The value of Blackacre has now dropped to $30,000. Seller is entitled to $20,000 damages.

ii. Out of pocket – designed to limit the exposure of the seller who breaches innocently- who breaches in good faith. This is a split –

1. ½ the states – limit damages awarded against a seller who has breached in good faith to actual money that the buyer has expended in reliance on the K.

2. The other ½ of the states make a good faith seller in breach liable for the entire benefit of the bargain.

3. Example: S agrees to sell Blackacre for $50,000 but can’t deliver marketable title due to a title defect previously unknown to the seller. At the closing date, Blackacre is worth $90,000. B has paid $5,000 to S, and has incurred another $5,000 in fee’s. S’s default is not the product of bad faith. In an out of pocket state B is entitled to $10,000 damages. In a full benefit of the bargain state B will be able to recover $40,000 damages.

iii. Liquidated damages – sellers usually protect themselves against a buyer’s breach by stipulating in the K that the buyer’s deposit may be retained as liquidated damages in the event of buyer’s breach. Must be a reasonable relationship between the deposit amount and the actual damages suffered by the seller.

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o Example: S and B agree to transfer Blackacre for $50,000, and B gives S a deposit of $5,000 which the K recites may be retained by the S as liquidated damages if B breaches K. B breaches. S will assert that his actual damages consist of (list of costs) and he till probably be able to keep the $5,000 deposit as liquidated damages.

4. Duties of disclosure and implied warranties. 1. Common Law duty of disclosure – a seller has no duty to

disclose known defects in the property. The seller’s duty was to refrain from intentional misrepresentation – the outright lie about the property’s condition, or active concealment of a known defect. This rule of caveat emptor (buyer beware) was justified on the theory that buyers ought to use diligence and care to examine the property for them selves – largely abandoned today.

2. Majority rule- the disclosure of latent material defects - a seller must reveal all latent material defects – (1) materially affects the value or desirability of the property, (2) is known to the seller, and (3) is neither known to or “within the reach of the diligent attention and observations of the buyer.”

i. Example: Johnson v. Davisii. The D’s purchased J’s house, moved in, and learned within a few

days that water leaked in around the windows and from the ceiling in two rooms. D sued to rescind. The Florida Supreme Court ruled for the D’s on 2 separate grounds. (1) J’s had told the D’s that the roof was sound and J was liable for his fraud and (2) J was obligated to disclose any fats known to him or accessible only by him that materially affects the value or desirability of the property and which are either unknown to the buyer or can’t be learned by a diligent search.

3. Statutory disclosure obligation – some states require sellers to disclose a number of specific conditions- soil defects, hazardous materials… this extensive disclosure obligation requires sellers to reveal the presence of annoying neighbors and possibly even barking dogs…

4. Broker’s disclosure obligations – some states impose upon the seller’s broker the same disclosure duties that are imposed on the sellers.

5. The Common Law Doctrine of Merger – on passage of title all warranties in the sale contract (purchase agreement) were merged into the deed, and the buyer could then sue only on the warranties contained in the deed. Stronger at common law than now.

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1. Example: B and S are entering into a purchase agreement to sell 10 acres. They go to the closing and the deed describes 9.8 acres and it closes. Can the buyer come back later and say I agreed to buy 10 acres and only got 9.8 – the deed would stand because the buyer should have been more diligent. Not true in the merger agreement

V. Land transactions after closing:A. Implied Warranty of quality

a. Traditional rule – a builder had no liability to anyone for his poor workmanship unless he gave an express warranty of quality

b. In time, a builder’s warranty of quality was implied into the K between builder and owner but the builder’s liability for economic loss resulting form breach of this warranty was limited to those with who he was in privity of contract – the immediate purchaser.

c. Modern rules – most jurisdictions have abandoned the traditional rules and now imply a warranty of quality by the builder of a new home that may be enforced by subsequent purchasers of the structure.

i. Limitations period - court’s permit subsequent purchasers to bring suit against the original builder for a “reasonable time” – usually a period long enough for latent defects of the original construction to become apparent.

1. Some states have enacted a statutory limitations period2. Uniform Land Transactions Act – provides for a 6-year

limitations period commencing with the initial sale, but that Act has not been adopted by any state.

ii. Subsequent owner’s liability – the owner of a home who is not the builder has no has no liability based on the implied warrant of quality. Only the original builder is liable on that theory, but the seller may be liable for breach of a duty to disclose a known defect.

B. Deedsa. Warranties of title: 3 types of deeds: The fundamental difference in

the types of deeds are the types of promise (deed covenant) which makes a specific performance.

i. General Warranty deed – warrants all defects in titlea. Present covenants – relates to the state of the property

at the time of conveyance – only breached at the time of

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the conveyance and this is when the statute of limitations starts.

i. Covenant of seisin – grantor promises that he owns what he is conveying by deed

ii. Covenant of right to convey – the grantor warrants that he has the power or authority to convey the property

iii. Covenant against encumbrances – the grantor warrants that there are no liens, mortgages, easements, covenants restricting use or other encumbrances upon title to the property other than those specifically excepted in the deed.

b. Future covenants - i. Covenant of general warranty - the grantor

warrants that he will defend against any lawful claims of a superior title and will compensate the grantee for any loss suffered by the successful assertion of a superior title.

ii. Covenant of quiet enjoyment – the grantor warrants that the grantee will not be disturbed in his possession or enjoyment of the property by someone’s successful assertion of a superior title to the property. This covenant is functionally identical to the covenant of general warranty and for that reason is frequently

omitted from general warranty deeds. iii. Covenant of further assurances. – The grantor

promises to do whatever else is reasonably necessary to perfect the conveyance title, if it turns out to be imperfect.

ii. Specialty warranty deed (“covenant deed”) – “no problems on my watch” the problem must have occurred while they occupied – looking forward not back. Will convey the same six (as above) the only difference is that the grantor warrants against defects of title that arose during thee grantor’s time of holding title.

a. Example: I own this property and hold it for 25 years. I give you a specialty warranty deed - 10 years after you move on it and for the last 15 years an adverse possessor is on a portion of the land. I’ve breached because I’m promising that no defects have arrived while I’ve owned the property.

iii. Quit claim deed – makes no warranty at all. Says I’m giving you the property if and to the extent I have any interest in it. I’m not telling you that it has any marketable title or not.

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a. Someone wants to buy all of your property in Oakland county and you don’t remember everything you own. He wants a quitclaim deed to everything you own in Oakland County (this is your description to him) if it turns out you own nothing – tough luck!

b. Why wouldn’t you want a quitclaim deed? Because someone could be selling you someone else’s property.

c. Consideration – it’s customary to state in a deed that some consideration was paid by the grantee, in order to raise a presumption that the grantee is a bona fide purchases entitled to the protection of the recording acts against prior unrecorded instruments. Not required in all states.

d. Property description – the property conveyed may be described in any fashion that clearly and precisely identifies the parcel.

e. Writing required – the statute of frauds required a writing signed by the grantor in order to transfer interest in land.

f. Notarial acknowledgment – is the act of a notary public attesting to the fact of the grantor’s signature and to the identity of the grantor – to prevent forgery. Required for recording the deed in the pubic land records.

g. Breach of covenants of title – present covenantsi. Don’t run with the land

1. Example: assume A sells to B, and then B sells to C. assume now that C discovers a problem – C can’t sue A – present covenants don’t run with the and regardless on what type of deed is given. Minority rule – C can sue A – B gives C his right to sue A.

ii. Breach of covenant of sesin - broken if the grantor either doesn’t own the property he conveyed (regardless if he knew or not) or if the grantee knew the grantor didn’t own.

1. If totally defective the grantee is entitled to a return of his purchase price, but must reconvey the right to possession to the grantor.

2. If title partially fails – the grantee is entitled to recover that portion of the purchase price that is equal to the value of the failed title and must reconvey his possessory rights.

iii. Breach of covenant of right to convey – this covenant is broken if the grantor lacks the power or authority to convey the interest (i.e. grantor is trustee who is barred by the trust instrument from transferring title), whether or not he is aware

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of the limits on his authority to convey. Grantee’s knowledge is not usually a defense. The measure of damages is same as above.

iv. Breach of covenant against encumbrances – this covenant is breached if the title is encumbered (other than expressly excepted in the deed) at the time of the delivery of the deed whether or not the grantor is aware of the encumbrance.

1. Most states – grantee’s knowledge doesn’t excuse or obviate breach

2. Minority – the grantee’s knowledge of an open and visible encumbrance (such as an easement) prevents breach.

v. Statute of limitations – starts at the time of the conveyance and is anywhere from 3-6 years.

vi. Assignment of present covenants – 1. Majority view- a present covenant is for the benefit of

the immediate grantee and that, if breached and when made, the grantee has a chose in action (the claim against the grantor) that is not impliedly assigned if the grantee conveys to a remote grantee.

h. Breach of covenants of title – future covenants – general warranty, quiet enjoyment and further assurances. – Breached only when the grantee is actually or constructively evicted, which always occurs some time after the transfer. Actually evicted – dispossession from title or possession. Constructive eviction - occurs whenever the grantee’s possession is interfered with in any way by someone holding superior title.

i. Example: Brown v. LoberBost conveyed 80 acres to B under a general warranty deed containing no exceptions, even though Bost only owned 1/3 the mineral rights. After the statute of limitations on the present covenants had expired, Brown agreed to sell the mineral rights to Consolidated Coal for $6,000, but was forced to accept only $2,000 once it was learned that Brown only owned 1/3 mineral rights. The Illinois Supreme Court ruled that Brown had not been constructively evicted because “the mere existence of a paramount title doesn’t constitute a breach of the covenant” of quiet enjoyment. If the owner of the other 2/3 of the mineral rights were to start mining coal under Brown’s land, Brown would be actually evicted. If in order to prevent a real and manifest threat of such mining, Brown purchased the other 2/3 of the mineral rights from the owner, Brown would be constructively evicted, but if Brown purchased the other 2/3 of the mineral rights without such a threat it would probably not constitute constructive eviction.

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ii. Benefit runs with the estate – if there is privity of estate between the original grantor and the remote grantee the benefit of a future covenant given to the original grantee runs with the estate conveyed to the remote grantee.

iii. General limit on damages for breach – the majority rule is that the grantee may not recover more than what the grantor in breach received for the property.

C. Doctrine of Estoppel by deed (After-acquired title)a. If a grantor conveys an interest in property that he doesn’t own, and

later acquires the unowned interest, this doctrine operates to send the after-acquired title directly and immediately to the grantee or his successors in interest.

b. The grantor is estopped from denying the scope of the original deed. c. Example: O is the owner of Greenacre. A conveys Greenacre to B by GWD then O

conveys Greenacre to A. Who owns Greenacre A or B? 1. Under the doctrine of estoppel by deed B owns it. A promised B that A

owns the property representation that B relies upon. d. Example: O is the owner of Greenacre. A conveys Greenacre to B by Quitclaim

deed then O conveys Greenacre to A. Who owns Greenacre A or B?1. Most likely A because estoppel doesn’t apply in that situation.

D. Delivery of the deeda. Delivery means that the grantor has said or done things that

demonstrate the grantor’s intent to transfer immediately an interest in land to the grantee. The key is the giftor’s intent.

b. Means of delivering a deed3. By delivery to the grantee, with the intent that it be presently

operative.i. By handing the deed over to the grantee; ORii. By words or acts expressing an intent for present

passage of title4. By delivery to an independent agent (i.e. an escrow agent),

with the view that it will be delivered to the grantee and effective upon the occurrence of certain conditions).

c. Different than a gift. Example: I’m in Florida and I have a deed on my desk in MI. I can call someone and tell them my intent to give them the deed and tell them to go get it off my desk – good.

d. If there is a condition that must be satisfied before the grantee gets it – it is not good delivery.

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e. Attempt at death – almost always ineffective. i. If the grantor intends that the deed become effective only upon

his death, the deed is void unless it can be admitted as a will, and this is not usually the case because the formalities required for making a will are often lacking in the execution of a deed.

ii. If the grantor intended the deed to be effective during his life, the grantor’s death doesn’t destroy the delivery already accomplished by that intent.

iii. Exception – irrevocable escrow: if a grantor executes a deed in favor of grantor and hands it over to an escrow agent with irrevocable instructions to hold until grantor’s death – delivery has occurred. The rationale is that the escrow agent is an agent of both parties. The escrow would be revocable if the agent represented only the grantor.

f. Delivery subject to oral condition – the usual response is to disregard the oral condition and treat the delivery as complete and unqualified, but this rule is not invariable.

g. Delivery by estoppel – even if a grantor doesn’t intent to deliver a deed, he will be estopped from denying delivery in two principal circumstances:

i. Entrustment to a deceitful grantee – if the grantor gives a deed to a grantee with no intent to transfer title, but the grantee uses the deed to convey to a 3rd party bona fide purchaser, the grantor will be estopped from denying delivery.

o Example: De gives Al a deed to Blackacre, telling him, “look it over and think about it, for this is what I propose to do if you will marry my daughter, Mal.” Instead of marrying Mal, Al records the deed and promptly sells Blackacre to Sal, who pays good value and is utterly ignorant to the circumstances under which Al obtained the deed from De. De will be estopped from denying delivery to Al. De had more opportunity than Sal to avoid the problem so the loss should fall on him.

2. Entrustment to a negligent escrow agent – if the grantor gives a deed to an escrow agent but the grantee obtains it wrongfully, using it to sell the property to a bona fide purchaser, courts are split on whether the grantor is estopped from denying the delivery.

i. Rationale for estoppel – the grantor chose his escrow agent and should suffer the consequences.

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ii. Rationale for no estoppel –the grantor didn’t intend delivery so he shouldn’t be prevented from denying delivery. Problem with this is there are two innocents – who should bear the loss. The usual answer to this question is that it should fall on the party who had the better ability to prevent the loss in the first place. To say the grantor didn’t intend delivery doesn’t address this problem. However, courts holding to this view will estopp the grantor if the he knew about the grantee’s wrongful possession and did nothing about it.

Mortgagesa. The mortgage transaction: 2 elements the loan and the mortgage

1. Loan – evidenced by a promissory note – a personal promise to repay the loan on the terms contained in the note

2. Mortgage – evidenced by a document called a mortgage – it’s a security agreement between the parties, by which the borrower gives the lender the right to sell the property if the borrower defaults on the loan and to apply the sale proceeds toward reduction of the loan

3. There may be a stipulation for money to be put in escrow to pay for insurance or for taxes.

4. There is almost always a provision that if a payment is missed they will give notice that the payment was missed and if they don’t correct in the time frame then all the payments and the entire mortgage will be due – if you don’t pay the balance – foreclosure, this is called an acceleration clause.

5. Another critical term is power of sale – if this is in the clause and there is a default and failure to cure the lender can cause a foreclosure to occur without going to court. The date is set, public notice given and property sold. If there is no power of sale in the mortgage then the mortgagee must go to the court and get a judgment of foreclosure – a judicial foreclosure.

6. Lender/bank – mortgagee7. Borrower/buyer – mortgagor

b. The mortgage is usually recorded in the public land records

c. Equity of redemption – courts began to rule that the borrower had an equitable right to redeem the property at anytime after the due date. This equity of redemption, unlimited in time, was a constant cloud on the title that made the property effectively inalienable. To remove the

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blot the lenders brought suit to foreclose equity of redemption. – This no longer exists. Modern – the property is ordered sold, the sale proceeds are applied to the loan and any excess is given to the borrower – the foreclosure sale cuts off only this judicially created equity of redemption.

d. Statutory right of redemption – about 20 states, it gives the borrower a defined period of time (anywhere from a few months to 1-2 years) after the foreclosure sale in which the borrower can redeem the property from the purchaser at the foreclosure sale.

e. The lien theory and the title theoryi. In the lien theory states the mortgagor is entitled to possession

until foreclosureii. In a title theory state a lender has enhanced ability to recover

possession after default fairly quickly (by suit for ejectment or judicial appointment of a receiver)

f. Two types of foreclosure

i. Judicial foreclosure – a lawsuit to foreclose. Used if there wasn’t a power of sale clause in the mortgage, if the mortgagor is on the property committing horrendous waste and if the lender determines selling the property wouldn’t bring in enough money they will ask for sale of property and judgment for any amount of deficiency.

ii. Power of sale clause – if this is in the clause and there is a default and failure to cure the lender can cause a foreclosure to occur without going to court. The date is set, public notice given and property sold

1. Majority - Deed of trust – the borrower conveys the real property to a this party as a trustee for the lender for the limited purpose of securing repayment of debt. The trustee is often a nominee of the lender (modernly it’s the lender). The deed of trust gives the trustee the power to sell the property upon default (the power of sale) to use the proceeds to pay off the debt, and return any excess to the borrower.

2. Minority – sale conducted by the sheriff – default, advertise for sale and sell.

3. Majority – once the foreclosure sale is conducted the borrower/mortgagor has nothing left its over

4. Minority – will allow time to redeem after foreclosure.

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g. Types of mortgages – first and second mortgagei. The same property can be used to secure more than one loan.ii. First mortgage – the mortgage that is given first in time. Upon

foreclosure this mortgage is satisfied firstiii. Second mortgage – second in time – entitled to share in the

salve proceeds after the first mortgage has been fully satisfied. iv. Fully amortized mortgage – equal payments spread out over

time. v. Balloon payment mortgages – very small payments for set

time then all due at the due date.

h. Sale or transfer by the mortgagori. Acquisition subject to mortgage – by taking title subject to

mortgage the buyer incurs no personal liability on the mortgage. If there is a default the mortgagee can foreclose and sell the property, but if at the foreclosure sale proceeds don’t extinguish the debt the lender has no further recourse against the owner who has acquired title subject to the mortgage. The lender can obtain a personal judgment against the original mortgagor for the deficiency.

ii. Assumption of the mortgage – if a new buyer assumes an existing mortgage he becomes personally liable for the mortgage loan. The lender can obtain a deficiency judgment against the assuming buyer as well as the original mortgagee – unless the lender has released the original mortgagee. Generally speaking if you have someone assuming your mortgage the bank will let you out.

iii. Due on sale clause – to prevent assumption of or sale subject to a mortgage lenders will insert this clause into the mortgage and loan. This provision permits the lender to demand immediate payment of the outstanding principal balance of the loan in the event the mortgagor sells his interest. The bank may choose to exercise this clause or they might not it depends on the interest rate and what is in their best interest.

i. Land Contract – an installment Ki. The buyer (vendee) gets possession of property and the seller

(vendor) retains legal tile (which serves to secure purchase price)

ii. Buyer must make specific payments to the seller (what they agree to)

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iii. Title is held by the vendor until paid and conveyed to the vendee

iv. Usually a clause that the vendor may enter and retake property if the vendee forfeits payment.

VI. Assuring good title to LandA. Recording System

(a) Example: Rogue, owner of Blackacre, conveys it to Angel on January 1 for $50,000. On January 10, before Angel has taken possession, Rogue conveys Blackacre to Beatrice for $50,000. Beatrice is ignorant of the prior conveyance to Angel. Why should prevail between Angel and Rogue?

(b) Common Law answer – first in time – it would be Angel

(c) Modern – created a system of recording, registration and title insurance.

(d) The recorder accepts the instrument for filing by stamping the date and time of filing on them, photocopying them and placing a copy in the records. Then the recorder indexes the instrument.

1. Grantor – grantee index – most common type of index. An alphabetical record of all grantors and all grantees. Two different – one by grantor’s surname and one by grantee’s surname.

2. Tract index – every transaction pertaining to a particular parcel is entered into one location- describing the land.

(e) What the title search does is to identify all the past title transactions pertinent to a particular parcel, in order to determine the present state of the title.

(f) Race acts – between two grantees – the first to record prevails1. This rule applies whether or not the subsequent purchaser had

actual knowledge of the earlier transaction.2. Applies in only a few states3. Example: O conveys to A (not recorded by A), O subsequently

conveys the same property to B for valuable consideration, but B actually knows of the deed from O to A. (B records O to B deed). B will prevail.

(g) Notice acts – a subsequent bona fide purchaser without notice of a prior unrecorded transfer prevails over the prior purchaser who fails to record. This is true even if the subsequent purchaser has not recorded. (Half the states)

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1. If the subsequent purchaser has actual or constructive notice of an earlier conveyance of the property, will not prevail.

2. No obligation for them to record, but they will be vulnerable to later purchasers without notice.

3. Example: on January 15 Able conveys Blackacre to Hector, who fails to record the deed. On February 15, Able conveys Blackacre to Artemis for $100,000. Artemis is ignorant of the January conveyance to Hector. Artemis prevails over Hector regardless of who might record his deed first. The critical facts are, that at the moment Able conveyed to Artemis for value, (1) Artemis lacked notice of a prior conveyance to Hector and (2) Hector had not recorded his deed which would have given notice.

4. Example: O to A (not recorded) then O to B for value, and B is without notice of A’s deed. B prevails, even if B doesn’t record.

(h) Race-notice acts – protects only those subsequent bona fide purchasers who lack notice and who record before the prior purchaser. (Other half)

1. Example: On June 1, Bilbo conveys Blackacre to Jane who doesn’t record. On July 1, Bilbo conveys Blackacre to Sally for $100,000. Sally is ignorant of the prior conveyance to Jane. On July 15 Jane records her deed. On July 20 Sally records her deed. Jane prevails over Sally because, even though Sally lacked notice of the conveyance to Jane, Jane recorded before Sally.

2. Example: O to A (NR); then, O to B who takes without notice of A’s deed; then A records; then B records. A prevails over B because, even though B had no notice B didn’t record before A.

(i) Shelter Rule: (applies only in notice or race notice jurisdictions)1. A person who takes from the BFP (subsequent purchaser after

the BFP) who is protected by the recording acts is given the same rights as his/her grantor.

2. This applies even if the subsequent purchaser had notice3. Rule applies in order to protect the marketability of the

property4. Example:

O to A (NR)Then, O to B who pays fair value and without of notice of O to A (B is a BFP)B recordsA then recordsThen B to C. The only way to fix this is by saying C is sheltered by B’s good faith otherwise B will be stuck with the property forever.

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5. REMEMBER TO LOOK THROUGH THE EYES OF THE SUBSEQUENT PURCHASER – what would they see when they look up the chain of title.

(j) The consequences of recording – it provides constructive notice. 1. Consequences of not recording: 2. Common Law rule applies – first in time would apply except

in notice jurisdictions 3. Grantor can convey good title to a later purchaser – without

recordation the grantor is left with the power to convey good title to a later purchaser.

4. Example: Olivia, the record owner of Blackacre, conveys Blackacre to Brewster, who fails to record. Then Olivia conveys Blackacre to Abigail for $100,000. Abigail, who is ignorant of the conveyance to Brewster, then records. In all 3 types of jurisdictions Abigail will prevail.

(k) When is an instrument recorded – when (1) it is eligible to be recorded and (2) is actually entered in the public records in a manner that complies with the jurisdiction.

1. Instrument not indexed – older rule – it provides constructive notice, on the view that the grantee has done al he can to provide record notice. Newer view – it doesn’t provide constructive notice because even the most diligent searches will not find it.

2. “Omnibus” or “Mother Hubbard” clauses – these clauses, inserted into a deed to a single parcel to cover “all other property” of the grantor. Because there is no way a diligent searcher of title to the “other property” will ever find such a clause, tucked away in an apparently unrelated deed, they are usually held to be inadequate to provide notice.

3. Misspelled names – states differ – but all do agree that if the misspelling is so significant that it doesn’t even sound like the correct name there is no constructive notice, but some states regard a misspelling that sounds substantially identical to the correct name as sufficient to give constructive notice.

(l) Scope of protection afforded by recording acts – 1. Invalid conveyances – although recordation creates

presumption of validity, if the instrument was invalid (i.e. forged) recordation doesn’t make it valid.

2. Interests in land created by operation of law – recording acts only apply to conveyances (i.e. deed, mortgages…) and liens created by operation of law (i.e. judgments). They don’t apply to interest created by operation of law, such as adverse possession, prescriptive easements or implied easements. Even though such interests are not of record, they are sill valid and enforceable against subsequent purchasers.)

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3. Bona fide purchasers – notice and race acts are intended to protect BFP

4. Mortgagees5. Creditors

(m) Types of notice of prior claims. Notice – to be protected under a notice or race-notice statute, a purchaser must be without actual or constructive notice of any prior unrecorded interests at the time the purchaser pays the consideration.

1. Actual notice – real, actual knowledge.2. Constructive notice – two forms; record notice and inquiry

notice. (both record notice and Inquiry notice are forms of constructive notice)

3. Record notice – the entire world is charged with constructive notice of the contents of the record. If an instrument is validly recorded, every subsequent grantee has constructive notice of it and can’t be a bona fide purchaser.

1. “Wild deeds” – outside the chain of title – if a complete stranger to the record chain of title records a conveyance (a “wild deed), the conveyance doesn’t give constructive notice because it is not within the chain of title.

2. Expanded chain of title – deeds from common grantor3. After-acquired title4. Deed recorded after grantor has parted with record title5. Prior deed recorded after partial payment by later

purchaser4. Inquiry notice – in most states a subsequent purchaser has an

obligation to make reasonable inquires and is charged with knowledge of what those reasonable inquiries would reveal.

B. Marketable title act.a. “ROOT OF TITLE” – is the most recent transaction in the CHAIN

OF TITLE, which has been of record for at least 40 years (or what ever the statutory period is).

b. NOTICE OF CLAIM – is a re-recording of the old interest or claim or a new recordation made to renew an interest or claim for an additional 40 years.

c. Exceptions to the termination of rightsi. Possession serves as notice of an interest or claim (under some

statutes)ii. Exception states in the act (i.e. easements in some statutes)

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d. Example: (Guilete v. Daly Dry Wall example from class)1. Someone divides property into 8 plots around the park. They

put restrictions on lots 1-4; and lots 5-8 don’t have the restriction on them and they are sold last. Question is are there still restrictions on lot 5-8?

a. Yes in half the states. b. Lets say the common grantor sells lots 5-7 and restricts

them to residential; holds on to lot 8 and constructs a gas station

1. Rationale: if common grantor sells certain property and hold on to others, the grantor will suffer the same restrictions as the grantees. NEGATIVE RECRIPROCAL RESTRICTION (cover). It would be up to the people on lots 5-7 to sue. Zoning used to be cumulative – like a pyramid today.

e. Example: chain of title problem1. A conveys Blackacre to B by a general warranty deed. B

records. A subsequently acquires title to Blackacre from O. A records the deed from O to A. A then conveys Blackacre to C, a purchaser for value who has no actual knowledge of B’s deed. C records. Who prevails? B or C?

a. C would win – subsequent purchaser when looking up the deed would find A as the owner. If you gave it to B you would hurt the subsequent purchaser.

b. Between A and B – B wins by Estoppel by deed.c. PROTECTING THE SUBSEQUENT

PURCHASER IS ONE POLICY AND ESTOPPEL BY DEED IS ANOTHER.

f. Example: 1889 O to X for 99-year lease (recorded) X doesn’t take possession

1890 O to A, subject to lease (recorded) – lease mentioned. Notice: in 40 years (1930) this deed becomes “root of title”

If you want to buy something you are still notified about X’s lease because it is mentioned in conveyance above. X can be comfortable for the next 40 years.

1920 A to B (no mention of lease) (recorded)How far forward will that carry things? 1960 – this will then become root of title

1941 B to C (no mention of lease) recorded

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1981 will be in “root of title”

Question: at what point is the lease interest no longer recognized or enforceable? 1960.

g. Example: the jurisdiction has a 40-year marketable title act. In 1959, O, owner of Blackacre, unimproved the land, dies intestate. O’s heir, H, is unaware that O owns Blackacre. In 1960 F forges H’s name to a deed to Blackacre to A. this deed is recorded. In 1962, A conveys Blackacre to B. in 2002, H’s daughter and sole heir, C, discovers the 1960 forgery. C brings suit against B to establish title to Blackacre. Who will prevail?

1. The Marketable title act acts to validate a record title of more than 40 years – a forged deed has the effect of passing title until someone raises questions.

h. Half the jurisdictions that have addressed the issue imply a title insurer’s duty to conduct a standard title search and disclose all discoverable defects to the title insurance application

i. Deeds run with the land; Title runs with the insurer.

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