PROPERTY OUTLINE

PERSONAL PROPERTY – WILD ANIMALSPierson v. Post p. 1 – 3 Cai. R. 175, 2 Am. Dec. 264 (NY 1805)FACTSPost sued Pierson in action of trespass on the case for killing fox he was in pursuit of on an uninhabited wasteland, called the beach. Post won. On appeal, judgment reversed for Pierson.ISSUEWhat constitutes occupancy in terms of acquiring rights to wild animalsRULEIn order to own an animal farae naturae, 1) pursue w/ intention to appropriate animal for individual use (constant), 2)mortal wounding of such a beast, 3) render escape of animal impossible.HOLDINGPost did not own fox because only in pursuit.OTHER Puffendorf = German, 17th Cent., natural rights philosopher/jurist. = requires actual corporal possession

Burbeyrac = actual bodily seizure is not necessary to constitute possession.Would lead to too many lawsuits to uphold Posts’s claim.

Buster v. Newkirk, p. 6 – 20 johns. 75 (NY Sup. Ct 1822)FACTSNewkirk was hunting deer, shot it but deer ran on for 6 miles. N followed trail until night occasionally sighting blood. Next morning resumed pursuit until came to B’s house where deer had been killed night before. B cut deer’s throat. N’s dog laid hold of the deer about same time B killed it. N demanded venison and skin. B gave N venison but not skin. N brings action for trover.ISSUE Who had legal ownership of the deer skin?RULE Animal has to be deprived of natural liberty by wounding etc. so that he is brought w/in the power & control of pursuer.HOLDING Animal was not under control of N b/c ran for 6 more miles & N abandoned pursuit.

Keeble v. Hickeringill, p. 8 – 11 East 574FACTS Keeble possessed land w/ a decoy pond which he prepared and procured at his own cost. Hickeringill went to pond & discharged gun thereby frightening away wildfowl for 4 months. Suing for damages. H found guilty.ISSUE Focus more on right to pursue an occupation than ownership of ducksRULE when a man uses his skills to make a profit in his trade, an individual who violently or maliciously seeks to harm a man’s way of livelihood is legally responsible for damages incurred.HOLDING H did maliciously try to take away K’s source of livelihood, therefore H is responsible for disturbance caused by wildfowl leaving decoy pond.OTHER Court admits that could take wildfowl through fair means. Disagrees w/ malicious interference w/ trade

Wants to protect those who fuel economy through their trade/skillQUES. Would it have made a difference if Hickeringill was not a trespasser?

How do you distinguish this case from Pierson v. Post? Action was for maliciously hindering and disturbing in the exercise and enjoyment of a private franchise on his own land (ratione soli)

Dapson v. Daly, p. 10 – 153 N.E. 454 (Mass. 1926)FACTS Action of replevin. and were hunting, during hunting season, fired shots at deer. As deer was galloping away, shot and killed deer. wants carcass of deer recovered. Jdmt. For .ISSUE Did have occupancy of the deer in question b/c he was pursuing and wounded deer during open season?RULE In order to claim occupancy of a wild animal, huntsman must pursue animal and reduce its occupation to actual possession. Doesn’t matter if animal is wounded or how long huntsman has been in pursuit. Also have to be licensed to hunt in order to be entitled to rights of huntsman.QUES. If person trespasses on another’s land and kills an animal, can they claim ownership of the animal?

State of Ohio v. Shaw, p. 10 – 65 N.E. 875 (Ohio 1902)FACTS accused of grand larceny for stealing 730 lbs of fish. Got fish out of nets shaped like a tunnel that was at all times open. Find for .ISSUE Did having the fish in the nets constitute occupancy?RULE To acquire a property right in wild animals, the pursuer must bring them into his power and control, and so maintin his control as to show that he does not intend to abandon them again.HOLDLING Fish were confined in nets which made escape practically impossible, therefore owners of nets had acquired property in them.QUES. How about situation where fish are trapped in an inlet by a net laid along the length of the inlet’s mouth. Held that fish are still subject to capture, why?

Ghen v. Rich, p.14 – 8 Fed. 159 (Mass. 1881)

FACTS Libel to recover the value of a fin-back whale. Ghen shot and instantly killed whale w/ bomb-lance. Whale sunk and was found stranded in Brewster 3 days later by Ellis. Ellis advertised whale for sale at auction, sold it to Rich. Rich shipped off blubber and tried out the oil. 3 days later, Ghen heard of whale’s finding and immediately sent one of his boat’s crew to the place to claim it. Find for .ISSUE Are the customary practices followed in the whaling business, a valid reason to uphold Ghen’s occupancy of whale?RULE Can have occupancy even if you don’t have it according to Pierson v. Post rule if have possessed animal according to local custom in industry.HOLDING gen did kill whale w/ lance and as is customary in this business, has ownership of the whale.OTHER Application of this holding is limited.

Usage is customary and necessary to sustain this industry – no one would do this if anyone who found the whale could take it.QUES. How is this like/unlike Pierson v. Post? Pierson about custom but custom didn’t support an industry, more about good manners.

State of N.D. v. Dickinson Cheese Co, Inc., p. 17 – 200 N.W.2d 59 (ND 1972)FACTS Action to recover damages for value of fish killed as a result of pollution from Dickinson Cheese Co. allegeing that all fish located in public waters in state are property of state and that is responsible for such fish for the benefit of the people of the state. Complain dismissed.ISSUE Does the state of ND have property rights in the fish that they can sue for damages?RULE State has interest in the fish as a sovereign and not as an owner. Has power to regulate to prevent pollution but does not have property interest sufficient to support a civil action for damages.QUES. Is this case contrary to Dapson v. Daly? No. B/c Dapson v. Daly also talks about how Commonwealth has title to wild animals and game in trust for the public to be devoted to the common welfare. Regulates through having hunting seasons and licensing.

CLASSIFYING PROPERTY AS REAL OR PERSONALHaslem v. Lockwood, p. 18 – 37 Conn. 500 (1871)FACTS trover for a quantity of manure. gathered manure into heaps on public highway intending to remove to his own lands the next evening. removed manure. Neither nor had permission from authorities to remove manure. claiming manure was abandoned personal property. claiming manure was party of realty and belongs to owner of highway and even if it was personal property, it was abandoned by .ISSUE Was manure personal or real property? If personal property, does gathering of manure into heaps imply ownership?RULE Manure was personal property b/c on highway and serves no purpose for agriculture. If a party finds property comparatively worthless and greatly increases its value by labor and expense, he doesn’t lose his right if he leaves it a reasonable time to procure the means to take it away, when such means are necessary for its removal.HOLDING The removal of manure was beneficial and a reasonable time had not elapsed when took manure.QUES. Why can you not use rule in Keeble in this case? B/c Lockwood did not act w/ malicious intent.

Goddard v. Winchell, p. 21 – 52 N.W. 1124 (Iowa 1892)FACTS Action in replevin. Goddard owned fee of land at time when meteorite fell. Leased, at time, to James Elickson. Meteorite buried itself in the ground. Next day, dug out of grand by Peter Hoagland. Hoagland sold to Winchell. Winchell knew that meteorite didn’t fall on Hoadland’s land.ISSUE Was meteorite real property or personal property?RULE Meteorite is affixed to soil and therefore is real property. Whatever is affixed to soil belongs to soil.HOLDING Meteorite came to earth by natural causes, nothing in its material complosition makes it unnatural to soil, only moveable as parts of earth are made moveable by hand of man, like a stone.OTHER Accretion = addition of portions of soil, by gradual deposition through the operation of natural causes, to that already in possession of owner.

Allusion = by washing up on land or soilDereliction = when sea shrinks below usual water mark.

QUES. Was Hoagland a trespasser? No b/c dug up meteorite in presence of elickson. Case is an action in replevin – how can the court characterize meteorite as real property? has title to

aeorlite b/c of ownership of land.

REMAINDERSA. Definition:

1. a future interest created in a grantee that is capable of becoming a present possessory estate upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created.

2. never divests or cuts short the preceding estate buy always waits patiently until the preceding estate expires.a. Ex. OA for life, then to B if B is then living.

B. Essential Characteristics:1. must have a preceding estate “a remainder needs a preceding freehold to support it”2. must follow a fee tail, life estate, or term of years3. must be capable of becoming possessory on natural termination of preceding estate (if divests than its an

executory interest)4. held by a person or persons other than the grantor of the document in which they are created.

a. No remainder after a fee simple – including a fee simple determinable.b. Ex. O A and his heirs, but if A dies without issue surviving him, to B. B has an executory

interest.

Ryan v. Monaghan, p. 302FACTS: OWife for life, then to heirs of son but if he dies unmarried and without issues, to O’s siblings. Wife dies but son still alive. No heirs of the living. Can’t fall to siblings b/c their interest is contingent on son dying. Remainder estate fails.MP: Doctrine of destruction of Contingent Remainders contingent remainder has to vest upon end of prior estate.

Buckley v. Buckley, p. 303FACTS: Is remainder vested or contingent. If contingent, remaindermen have to outlive life tenant. Then interest is not transferable to remainderman’s heirs. However, if vested, interest is inheritable. Court rules its vested b/c vested estates are favored and you have to express clear intent to make it contingent.MP: Illustrates some problems w/ vested remainders:

1. Property may be cast to people outside the family2. Vested estates treated as real assets and are taxable.

C. Classification of Remainders: remainders are classified either as vested or contingent.1. Vested: a remainder that is both created in an ascertained person and is not subject to any condition

precedent.2. Ex. O A for life, then to B in fee simple

a. 3 types of Vested Remainders:i. Indefeasible: holder of remainder is certain to acquire a possessory estate at some time

in the future. Ex. O A for life, then to B and her heirs.ii. Subject to open: remainder vested in a class of persons, at least one of whom is

qualified to take possession, but the shares of the class members are not yet fixed b/c more persons can subsequently become members of the class. Ex. O A for life, then to A’s children (A has one child at time of conveyance).

iii. Subject to complete divestment: remainder subject to a condition subsequent. Ex. O A for life, then to B and her hairs, but if the property is used for a tavern during A’s lifetime, then to C and his heirs.

3. Contingent: remainder that is either subject to a condition precedent or is a transfer to a person unascertained or unborn either at the time of the transfer or later, up to the time the prior estate ends

a. Ex. O A for life, then to A’s children (A has no children)b. Ex. O A for life, then to B’s heirs (B is alive – no one is heir of the living)

NOTE: whenever O creates a contingent remainder in fee simple, there is a reversion in O.

4. Condition Precedent: an express condition set forth in the instrument which must occur before the remainder becomes possessory.

5. How do you distinguish vested and contingent remainders? a. ”whether a remainder is vested or contingent depends upon the language employed. If the

conditional element is incorporated into the description of, or into the gift of the person taking the remainder, then the remainder is contingent; but if, after words giving a vested interest, a clause is added divesting it, the remainder is vested”.

6. Examples: O A for life

a. then to B and B’s heirs. Vested b/c no implied condition that B survive A. If B does not survive A, upon A’s death, B’s heirs or devisees take possession.

b. then to B’s children and B is childless at time of conveyance. Contingent until children are born.c. but when A dies, to B and B’s heirs. Vested b/c “but when A dies” are words of limitation and only

define A’s estate.d. then, if B survives A. to B and B’s heirs. Contingent while A is alive. B’s contingent remainder is

followed by a reversion in O, subject to divestment upon B’s surviving A.e. then, if B survives A to B and B’s heirs, but if B does not survive A, to C and C’s heirs. Alternative

contingent remainders or cross remainders = condition precedent attached to one interest is the opposite of the condition attached to the other.

f. then to B for life, then to C and C’s heirs. Vested for B’s life estate b/c definition of life estate requires that B survive A in order to take this future interest. No condition precedent is implied from the definition of the estate conveyed. C’s remainder is also vested.

g. To B and B’s heirs, but if B does not survive A, to C and C’s heirs. B has a vested remainder in fee subject to complete divestment, followed by a shifting executory interest in fee in C’s heirs.

Black v. Todd, p. 310FACTS: Odaughter for life, then to her children or the child or children of any deceased child, but in case she dies w/out any issue, then to granddaughter.

Ogranddaughter for life, then to her children or any child or children of any deceased child, but if she dies w/out any issue, to grandson.MP: Contingent remainder is transmissible where the contingency depends upon the event and not upon the person.

7. Merger:a. When two successive vested estates come into the same hands, they merge. The lesser estate is

merged into the greater. b. Has the effect at common law of destroying intervening contingent estates, another example of the

doctrine of destructibility of contingent remainders.

Danz v. Danz, p. 307FACTS: Owife for life or until remarriage, then to B and C, but in the event that B or C die before wife’s life estate ends, the property remaining to become vested in their heirs; and in the event of the death of C w/out issues surviving, her share to go to D or E, or their heirs. Is remainder vested or contingent?MP: Court classifies as vested b/c has a divesting clause.

Purpose of life estate has been fulfilled so there is an acceleration of the remainder.If time for division is reached before the happening of the contingency upon which the remainder is to be

divested, the executory devise is defeated.

8. Common law has a presumption in favor of classifying remainders as vested, why?a. Alienableb. More effective in carrying out grantor’s intent b/c not destructible by gap in seisin.c. Not subject to Rule Against Perpetuities.d. However, now that contingent interest have been made alienable and indestructible it is harder to

justify the common law preference for vested remainders Browning v. Sacrison, p. 312FACTS: Odaughter for life then to grandsons, share and share alike or, if either of them be dead, then all to the other. One grandson dies before life tenant does. Did estate vest at time of testatrix’s death or death of life tenant?MP: Court rejects presumption for vested remainders. Prefers to look at intent of testatrix.

D. RULES APPLYING TO CONTINGENT INTEREST:1. Destructibility of Contingent Remainders:

a. A legal contingent remainder in land is destroyed if it does not vest at or before the termination of the preceding freehold estate. If the preceding freehold terminates before the remainder vests, the remainder is struck down and can never take effect.

b. Ex. O A for life, remainder to A;s children who reach age 21. At A’s death, his children are all under age 21. The remainder is destroyed. Reverts to O who owns it in fee simple absolute.

c. Rule can be avoided by adding a term of years instead of a life estate or by creating trustees to preserve contingent remainders.

2. Artificial Destruction Doctrine:

a. If a life tenant purported to convey the fee (tortuous feoffment), the next estate presently entitled to take would vest in possession immediately. Contingent remainders, not being limited to take immediately, were destroyed.

b. Ex. O A for life, remainder to B if B survives A. A could destroy B’s remainder by making a tortuous feoffment.

3. The Rule in Shelley’s Case:a. Definition

i. when the ancestor by any gift or conveyance takes an estate of freehold, and in the same gift or conveyance an estate is limited either mediately or immediately to his heirs in fee or in tail; that always in such cases ‘the heirs’ are words of limitation of the estate and not words of purchase.

i. In other words, if one instrument creates a freehold in land in A and purports to create a remainder in A’s heirs (or in the heirs of A’s body) and the estates are both legal or both equitable, then the remainder becomes a remainder in fee simple (or fee tail) in A. Conveyance has to say heirs or heirs of the body. Can’t say children or issue.

1. Ex. O A for life, then to A’s heirs. Rule converts remainder limited to A’s heirs into a remainder in fee simple in A

2. Ex. T W during widowhood, and upon W’s death or remarriage, remainder to W’s heirs. Rule gives W the remainder which merges w/ W’s life estate, giving W a fee simple.

b. 5 Requirements for Applicationi. Ancestor must take freehold estateii. Freehold and remainder must be created by same instrumentiii. Only land is covered by the Ruleiv. Estates must be of same quality.

1. Ex. OT in trust for A for life w/ remainder free from trust to A’s heirs. 2. Rule doesn’t apply b/c equitable estate v. legal remainder.

v. Heirs must be meant in the technical sense1. Heirs those persons who take if person dies intestate.

c. Reasons for Rule:i. Feudal Tax evasionii. Alienability: Rule makes land alienable one generation earlier

d. Other facts about Rulei. Rule can be avoided by giving grantee a leasehold instead of a freehold.ii. Rule is a rule of law that applies regardless of grantor’s intent.

4. Doctrine of Creation of Remainder by Implicationa. No express remainder but read into instrument b/c only thing that makes sense.

McRorie v. Crewsell, p. 294FACTS: Did Rosanna have a life estate and children by implication take remainder in fee at her death? Or did Rosana take a fee defeasible upon her death w/out children and so an absolute fee b/c she did have children and therefore acquired title by mesne conveyances from her?MP: Rosanna had a life estate b/c using word “heirs” to mean children. Therefore, Rule in Shelley’s Case is not applicable. If Rosanna only had a life estate than she only gave an estate por autre vie. Implied remainder to Rosanna’s children b/c if had meant “heirs” in the technical sense, her brother would have been one.

5. Doctrine of Worthier Titlea. When an inter vivos conveyance purports to create a future interest in the heirs of the grantor, the

future interest is void and the grantor has a reversion. Conveyance has to say heirs or heirs of the body.

i. Ex. O A for life, then to O’s heirs. Remainder to O’s heirs is void, and O has a reversion.

b. Under Common Law, Doctrine was a rule of law applicable to land only. Under Modern rule, Doctrine is a rule of construction and applies to personal property as well. Presumption that no remainder has been created but this presumption can be overcome by proof of contrary intent of grantor.

c. Purpose of Doctrine

i. Tax purposes b/c makes “then to O’s heirs” words of limitation and not of purchase, so upon death of O, would have to pay death tax.

ii. Creditors could take interest in property b/c if O’s heirs are to take by descent and not by purchase, O has to have a reversionary interest in the property

d. Difference from Rule in Shelley Casei. No life estate or intervening estate to person whose heirs will take

1. OA for life, then to O’s heirs v. OA for life, then to A’s heirsii. Covers real and personal property iii. Supposed to carry out intention of grantor

1. OA for life, then to O’s heirs who take by purchase. Doctrine would not take effect.

Stewart v. Merchants National Bank of Aurora, p. 298FACTS: Appellant had 10 year spendthrift trust. Doesn’t say what to do if trust ends and Stewart is not dead. Anything that is not disposed of, suppose reversion in Stewart. 3 years in, Stewart wants to revoke trust. If there is a remainder in Stewart’s heirs, Stewart’s creditors cannot take from trust. Also can’t revoke trust b/c don’t know who heirs are b/c nemo est haeres viventis. MP: Outcome of case depends on whether you think Doctrine applies. If it does, then heirs have no interest and trust can be terminated. If it doesn’t, then Stewart’s heirs do have an interest but can’t revoke trust b/c heirs are not ascertainable at this time. Also: In regards to “heirs take by equal shares”.I If heirs take by descent: C ¼, D ¼, B ½ b/c C and D are heirs of A

If heirs take by purchase: C 1/3, D 1/3, B 1/3 Seems like Stewart wants to take by purchase but Court doesn’t really address this issue.

Destructibility, Shelley and Worthier Title Compared:RULE APPLIES TO RULE OFDestructibility Legal contingent remainders in land

Not to equitable interests, interests in trust, nor to personal property

Law

In Shelley’s Case Legal and equitable remainders in landNot to Personal Property

Law

Worthier Title Legal and Equitable remainders and executory interests in real or personal property.

ConstructionCan be overcome by contrary evidence of intent.

E. THE STATUTE OF USES AND EXECUTORY INTERESTS1. Statute of Uses:

a. Purpose: to abolish uses, turning them into legal estates that would be subject to all the usual feudal incidents upon death of the legal owner.

b. Provision: where one person stood seised to the use of another person, that other person should be seised of the legal estate he had previously held only in use.

c. Ex. O X for use of A and his heirs. Statute turns A’s use into a legal fee simple in A. X gets nothing.

d. Effect: Now possible to convey land by means of a paper transaction that required no entry onto the land. Also created new future interests

e. Rules Statute overcame:i. No freehold could be limited to commence in futuro (springing interest) Ex. O A and

A’s heirs to commence a year from the date of conveyance.ii. No contingent interest could be created to follow a term of years Ex. O A for 20

years, then to the heirs of B (if B were a living person)iii. No abeyance in seisin could exist between successive freehold estates Ex. O A for

life, remainder to B and B’s heirs if B attends A’s funeral.iv. No future interest could cut short an existing freehold estate. Ex. O A for life, but to B

and B’s heirs if A marries C.2. Executory Interest

a. Executory interests are future interest that came to be enforceable at law in consequence of passage of the Statute of Uses in 1535. Two types:

i. Spring interest: a future interest in a grantee that springs out of the grantor at a date subsequent to the granting of the interst, divesting the grantor

a. Ex. O A and her heirs when A marriesb. Ex. O A for 100 years if A so long live, then to A. heirs

ii. Shifting interest: a future interest in a grantee that divests a preceding estate in another grantee prior to its natural termination.

a. Ex. O A and his heirs, but if B returns from Rome, to B and his heirs.

b. Ex. O A for life, and on A’s death, to B and his heirs, but if b does not survive A, to C and his heirs

iii. Exception: future interest created by a fee simple determinable – neither springing nor shifting. Executory interest does not divest but succeeds freehold.

b. Used to be split between executory devises: created by wills and executory interest: created by deed.

c. Executory interests had no effect on the rule of destructibility of contingent remainders. However, executory interests are indestructible b/c no gap in seisin can ever precede these interests.

Blackman v. Fysh, p. 317FACTS: Oson for life and then unto , between, and amongst all and every the children of my said son, whether no or hereafter to be born, who shall live to attain the age of 21 years, or who, being a daughter, shall marry under that age, to hold the same to such child or children, if more than one, in equal undivided shares as tenants in common, and to his, her, or their several and respective heirs. But then there is a second clause saying that forfeiture will result if son attempts to sell property. MP: If view remainder as contingent then only those children who have reached age of 21 at son’s death would take. However, Court says it s an executory devise and therefore can’t close class of takers. Incidentally, also wouldn’t violate the Rule Against Perpetuities.Also: When do you close the class?Ex. OA for life, then to B’s children and heirs. No indication that O took into consideration children born after A dies. Normal treatment of clause like this is to close the class when A dies. Hurries up moment when you can alienate the fee.

In class closing, what you really need to know is the maximum number of people in the class.Ex. O A for life, then to all of A’s children who reach 21.

When does the class close? At death of testator or death of Life tenant? How does this effect the alienability of the land? If you close the class at time of death of life tenant then you know the maximum but not the minimum number. Just get everyone’s permission to alienate the land.

3. Rule in Purefoy v. Rogersa. If, when created, an interest can take effect as either a contingent remainder or as an executory

interest, it will be treated as a contingent remainder for all purposes.b. If a remainder did not vest at the termination of the prior estate,it would not be saved from

destructibility by being treated as an executory interest.c. Why the distinction between executory interests and contingent remainders? B/c courts favor

destructibility rule as it frees up land.

F. POWERS OF APPOINTMENT1. Definition

a. Power given by the owner of property to another person to appoint the taker of the property.b. Exercise of the power is not mandatory, and the terms under which it may be exercised may be

circumscribed in particular ways.a. Appointees take the property by virtue of the original grant from the donor, although they of course

become known only after the donee has exercised the power.

Gilman v. Bell, p. 320FACTS: SE for R’s life, then to heirs in fee all subject to a power of appointment in R. Creditor of R wants property. Does R have title in the property such that creditors can reach his land?

MP: Creditors can’t reach asset if you don’t exercise the power.Also: Would a surviving spouse be able to claim the right to take a share of unexercised power of appointment under dower? No, b/c not an estate. How about under modern legislation?

Bank of Dallas v. Republic National Bank of Dallas, p. 321FACTS: SettlorT for use and benefit of settlor and of her children. Trust was then amended. Settlor retained a testamentary power of appointment. MP: The court holds that since the income of the trust is for the benefit of the settlor, then her creditors can reach it. The corpus of the trust is meant to benefit her children as well, but as long as she retains a power of appointment, then she can appoint the corpus away from her children…thus the corpus may also be reached by the settlor’s creditors. Seems that she is trying to insulate the trust from her creditors. Different from Gilman b/c in that case donor and donee were not the same person.

2. Types of Appointmenta. General Powers: permit appointment in favor of anyone the donee choosesb. Special Powers: class of appointees is circumscribed.c. Exclusive Powers: power allows the donee to appoint to one or more of the appointees, but not

necessarily to alld. Power Collateral: donee has no interest in the property other than the power itselfe. Power in Gross: Donee has interest but exercising the power doesn’t affect that interestf. Power appendant: Donee has interest and exercise disposes of all or part of itg. Other ways to circumscribe power:

i. Testamentary Power: restricting exercise of power to donee’s last will and testament.ii. Mandatory powers v. discretionary powers (Powers in trust)

1. Mandatory: Court will appoint if donee fails to exercise the power. Will usually divide equally among class of permissible appointees.

a. Whether or not a power is mandatory depends on the donor’s intention.

2. Discretionary: Power can be exercised or not.a. Most common indication that a power is meant to be discretionary is

the existence of a taker in default. 3. Relation back Doctrine

a. When A appoints,he is filling in a blank for testator.i. Ex. OA for life, then to such persons as A shall appoint by will. Then AB. As if O

A for life, then to B.4. Doctrine of Capture

a. An implied alternative appointment to the donee’s estate in the case of an ineffective exercise by will or a testamentary general power.

In re Rowland’s Estate, p. 325FACTS: Eva Rowlands died testate, and gave power of appointment to the Cuthberts w/ the provision “to distribute to any of my close friends. Please give generously to Maria discombe who has been a faithful maid.” MP: The Court finds that this is a mandatory special appointment. Court focusing on intent of testatrix.Also: How specific do you need to be about appointees when you create a special power? See Clark, Court strikes down denomination of appointees as “friends” as too broad to convey power. Why not in this case? Perhaps b/c testatrix does identify a specific person she wants to receive $.

G. RULE AGAINST PERPETUITIES1. Definition

a. No interest is good unless it must vest, if at all ,not later than 21 years after some life in being at the creation of the interest – John Chipman Gray.

b. Purpose is to promote the alienability of land. Also said that it effectively prevents undue concentration of land in the hands of the few.

c. Operates when there is an otherwise valid contingent interest outstanding, but if it were possible to create future interest that remained contingent too far into the future, the land would be inalienable as a practical matter.

United Virginia Bank/citizens & Marine v. Union Oil Co., p. 329FACTS: Agreement stipulated that the 120 day option period would begin at the time that the City of Newport News acquires the right of way of Boxley Boulevard and new US 60.

MP: Violates Rule Against Perpetuities b/c agreement might not vest or fail w/in 21 year period.Also: What is the relevant life in being? This is a corporate entity and parties are contracting w/ reference to an event and not a life. If you took officers, all of them could die the next day. Then you would be left w/ 21 years. So just take 21 years.

Court also refuses to use either Cy Pres doctrine or Wait and See Doctrine.IIn re Viller’s Estate, a limitation to take effect upon the death of the last living grandchild of Queen Victoria

(these grandchildren took no interest). Limitation was good.Isen v. Giant Food, implied K term limitation by J. Bazelot (activist, federal judge). Words, “diligently pursue

zoning certification” were enough to imply a K term and thus save the interest.Could have saved agreement by saying that option would only be available for 21 years. Maybe then you

should wait and see since its such an easy formality to stick these terms in there.

Jee v. Audley, p. 333FACTS: Life estate to widow, fee tail to niece, takers in default are daughters of testator’s kinsmen. Violates the RuleMP: Limitation to daughters of Jee violates Rule b/c chance that Jee’s could have more children after testator died. Court says you can’t use Mary Hall as measuring life b/c fee tail and has possible perpetual duration. Can’t use Jee’s b/c Hall’s estate could go from one generation to another and end after Jee’s are dead. Can’t use daughters of Jee b/c might be after-born daughters.

In re Manson’s Estate, p. 334FACTS: Life estate to son, then to issue. If no issue, but survived by wife, life estate to wife. MP: Remainder after wife’s life estate fails b/c can’t use wife as measuring life (unborn widow rule). Have to use son. Interest won’t necessarily vest in remainderman w/in 21 years after son’s death b/c taking of remainderman is contingent on surviving the wife.

Sears v. Coolidge, p. 337FACTS: TJ Coolidge creates instrument of income and principal of trust. Income of trust was payable 1/3 rd annually to issue of his deceased son who shall be living at the time of each semi-annual payment and the other 2/3rds divided into 3 parts also payable semiannually. One part to each daughter, and after their death to their issue, and one to living issue of deceased daughter. Principal of income was to be distributed in equal shares to and among his issue living at the time of either of 2 events (whichever happens first): death of last survivor of children, grandchildren, and great grandchildren or attainment of 50 years by the youngest surviving grandchild living at his death. 2nd condition fulfilled first. MP: Doesn’t violate Rule b/c special power of appointment kept and so under second look, see whether instrument will fail or vest w/in 21 years at time of donee’s death. Makes sense, b/c as long as person has a power to dispose of property, property is not really tied up and thus purpose of Rule is not violated.

2. Main points of the Rule:a. Rule applies to contingent remainders and executory interests. It does not apply to vested

remainders nor to future interest in the grantor (reversion, possibility of reverter, and right of entry), which are treated as vested upon creation.

b. If interest will not necessarily vest or fail within the period – if there is any possibility that it may vest beyond the period – it is void.

c. Have to prove that there is no possibility of it vesting too remotely.d. To save interest, it must necessarily vest or fail within the period.

4. When Period Begins to Runa. Will

i. Begins at testator’s death.b. Irrevocable deed

i. Begins at time deed is delivered w/ intent to pass titlec. Revocable Trust

i. Beings at date trust becomes irrevocable (either at settlor’s death or when trust is amended to make it irrevocable).

5. Meaning of vesta. Vest in possession

i. When interest becomes possessoryb. Vest in interest

i. When interest is owned by an ascertained person and is not subject to a condition precedent.

c. Exception – Class Gifti. A class gift is not vested under the Rule Against Perpetuities until the class has closed

and all conditions precedent have been satisfied for every member of the class. If the gift to one member of the class might vest too remotely, the whole class gift is void. “all or nothing” rule.

1. Ex. In 1991, O A for life, then to A’s children for life, then to A’s grandchildren in fee simple. The gift to A’s children will vest, if at all, at A’s death. The only problem is w/ the remainder to A’s grandchildren. The remainder is a class gift and will not vest until all takers are identified. They will not necessarily be identified until the death of all A’s children, and all A’s children are not necessarily in being. All the grandchildren may not be identified until the death of an afterborn child of A.

ii. A Workable Test for Class Gifts1. When will the class close?

a. When will the class close physiologically? If will not close w/in perp period, ask Q. b.

b. When will the class close under the rule of convenience?2. When will all contingencies be resolved?

iii. Rule of Convenience1. A class closes whenever any member of the class can demand possession of

her share.2. If there is some person in existence when the interest is created who is certain

to have the right to demand possession w/in the perpetuities period, class is certain to close within the period and is OK against the Rule

a. Ex. OA for life, and on A’s death to A’s grandchildren. If A has one grandchild, b, alive at O’s death, the gift to the grandchild is good. Certain at O’s death, that at A’s death, class will close b/c B can come into possession of B’s share at A’s death.

iv. Gift to separate subclasses1. If there is a gift to separate subclasses of a younger generation, each gift to a

subclass may be tested separately under the Rule. 2. Key is finding that separate gifts vest at different times.

v. Per Capita Gifts1. A separate gift of a fixed sum to each member of a class is not subject to the

all-or-nothing rule. Each gift is tested separately.a. OT to pay $1,000 to each of A’s grandchildren who reaches 21,

whether born before or after my death.” A and one child, B, survive O. Two years after O dies, C is born to A. The gifts of $1,000 each are valid for each child of B. Each child of B will reach 21 within 21 years of B’s death. The gifts to the children of C, born after O’s death, are void.

vi. Vested w/ Possession Postponed:1. A gift is vested w/ possession postponed if the gift is “to be paid at” or “payable

at” a specified age. 2. If a class gift is vested w/ possession postponed and the class will close w/in

the perpetuities period, the gift is valid.a. Ex. OA for life, then to A’s children, payable at their respective

ages of 25. The gift will vest in A’s children at A’s death, with possession postponed. It is valid b/c class of A’s children will close at A’s death. Reaching 25 is not a condition precedent.

6. Application to Defeasible Feesa. Determinable fee:

i. A possibility of reverter is exempt from the Rule. An executory interest is subject to it. Any executory interest following a determinable fee that violates the Rule Against Perpetuities is struck out, leaving the determinable fee standing.

ii. Ex. O School Board so long a used for school purposes, and if the land cease to be used for school purposes to A and his heirs. A has an executory interest that is transmissible to A’s heirs. However, no certainty that A’s interest will necessarily vest or

fail w/in A’s life + 21 years. A’s executory interest is struck out but still a determinable fee w/ a possibility of reverter in O.

iii. Exception for a gift from one charity to another charity. A charitable trust can last forever.b. Fee simple subject to an executory limitation:

i. Ex. O School Board, but if Blackacre shall cease to be used for school purposes to A and his heirs. Again, executory interest is void but striking it out leaves Board w/ a fee simple absolute.

c. Fee simple determinable created by will:i. A possibility of reverter is an interest retained by the grantor if the determinable fee is

created by a deed; it is retained by the testator’s heirs if the determinable fee is created by a will. Hence, if a testator creates a determinable fee by will, followed by a void executory interest in a devisee, testators heirs have a possibility of reverter.

ii. Ex. T Baptist Church so long as used for church purposes, then to A. All the rest and remainder of my property I devise to B. A’s executory interest violates the Rule and is struck out, leaving a determinable fee in the Church. T’s heirs and not B have a possibility of reverter.

7. Application to Powers of Appointmenta. General Powers presently exercisable

i. Property not tied up no violation of Ruleii. Irrelevant whether donee may exercise power after lives in being plus 21 years.

Controlling thing is first point in time when power becomes exercisable.iii. Perpetuities period begins to run from the date of the exercise of the power

b. Testamentary Powers and Special Powersi. Property is tied up from the date of the creation of the power.ii. Valid if it may not be exercised beyond the perpetuities period, which begins at the

creation of the power.1. A testamentary or special power may not be given to an unborn person unless

the exercise of the power is expressly limited to the perpetuities period.iii. Validity of exercise

1. Relation-back doctrinea. Interests created by exercise of a testamentary or special power are

read back into the instrument creating the power. Perpetuities period begins at the date the power was created.

2. Second look doctrinea. Although the exercise of a special or testamentary power is read

back into the donor’s instrument, facts and circumstances existing on the date of exercise are taken into account in determining the validity of interest created by exercise of the power.

iv. Validity of gifts in default1. Do not determine the validity of gift in default until the power of appointment

ceases.8. Remote Possibilities:

a. Fertile Octogenariani. people can have children so long as they are alive

b. The Unborn widow:i. Law assumes that a person’s surviving spouse might turn out to be a person not now

alive.ii. Ex. OA for life, then to his widow for her life, then to A’s issue then living. Remainder

to A’s issue is void b/c widow cannot be used as the measuring life.c. The slothful executor

i. Law assumes that a probate estate may not be closed w/in perpetuities periodii. Ex. Omy issue per stirpes living at the distribution of my estate

d. The magic gravel piti. Ex. OT to work the gravel pits, and when they are worked out to sell the land and

divide the proceeds among T’s issue then living.ii. Possible for pits to be worked in excess of T’s life plus 21 years.

e. Wars that never endi. Assume that wars can go on for a long period of time – 100 years lets say.

9. Alternative Contingencies

a. If the grantor makes a gift upon alternatives contingencies, one of which might happen too remotely but the other of which must happen, if at all, w/in the perpetuities period, the gift is valid if the second (valid) contingency actually occurs. It is void if the first (invalid) contingency actually occurs.

i. Ex. OA for life, then to A’s widow for life, then (1) on the death of A’s widow or (2) on the death of A if A leaves no widow, to A’s issue then living. Gift upon the first contingency is void. Gift upon the second contingency is valid. If A actually dies w/out a widow, A’s issue will take at A’s death. But if A dies leaving a widow, A’s issue will take at A’s death. But if A dies leaving a widow, the gift to A’s issue is void.

10. Reform of the Rule:a. Wait and see doctrine:

i. adopts common law rule but looks to actual events as they unfold rather than to possibilities

ii. Validity of interest is not determined at the time the interest is created.iii. Ex. O A for life, remainder to A’s children who reach 25. Ordinarily would be void but

here wait and see what happens during the perpetuities period (the lives of A and all A’s children alive at the time of the conveyance plus 21 years).

iv. How do we feel about wait and see?1. Does it violate Rule’s purpose to promote alienability of land? 2. Does it uphold grantor’s intention?3. How about fact that a grantor could invoke Rule to get out of a deal s/he

made? Parties can’t bargain out of Rule b/c rule of law. How does this change our opinion of wait and see?

b. Adopt a period of 90 yearsc. Cy Pres Doctrine: Judicially reform provisions to conform them to closest possible alternative that

is lawful under the Rule.d. Second Look Doctrine: w/ relation back,

INVALID GIFTSEXAMPLE VALIDATING LIFE EXPLANATIONTo a for life, then to A’s first child to become a lawyer

None A’s first child to become a lawyer may be an afterborn child who becomes a lawyer more than 21 years after A dies

To school board so long as it is used for a school, then to A

None A’s interest may vest n A’s heirs or devisees hundreds of years from now. A’s interest is stricken. Possibility of reverter is left in grantor

To school board, but if it ceases to be used for a school, to A

None A’s interest void for reason given above. A’s interest is stricken. School Board has a fee simple absolute

Option to A and her heirs None Option may not be exercised w/in lives in being plus 21 years.

VALID GIFTSEXAMPLE VALIDATING LIFE EXPLANATIONTo A for life, then to B if B returns from Rome

B Condition must happen within B’s life if at all

To A for life, then to A’s children for life, then to B

B B’s remainder is vested upon creation

To A for life, then to A’s children for life, then to B if B is living, and if not living, to C

B Either B’s or C’s remainder will vest within B’s lifetime.

INVALID GIFTS – CLASS GIFTSEXAMPLE VALIDATING LIFE EXPLANATIONTo A for life, then to A’s children for their lives, then to A’s grandchildren

None The class of grandchildren won’t close until the death of all A’s children, one of whom may not be now alive. (Fertile octogenarian case)

To A for life, then to A’s widow for life, then to A’s issue then living

None Class of issue won’t close until widow’s death, who may be woman not yet born. (unborn widow case)

To my issue living when my estate is None Class of issue may close too remotely (distribution of

distributed estate)To A for life, then to A’s children who reach 25

None A may die leaving a child under age 4, who doesn’t satisfy condition w/in 21 years of A’s death.

To A for life, then to A’s grandchildren who reach 25

None Even if A has grandchild age 25 at time of gift who can close class at A’s death under rule of convenience, in that class may be an afterborn grandchild of A under the age of 4 (as above)

VALID GIFTSEXAMPLE VALIDATING LIFE EXPLANATIONDevise “to my grandchildren who reach 21”

T’s children All of T’s grandchildren will reach 21 within 21 years of the death of T’s children

To A for life, then to A’s widow for life, then to A’s children

A Class of A’s children will close at A’s death

To A for life, then to A’s grandchildren

May be valid or void If A has a grandchild when gift made, remainder is valid. Class will close under Rule of Convenience at A’s death. If A has no grandchild when gift made, remainder is void b/c class may not close until death of afterborn child of A.

To A’s grandchildren who reach 25 May be valid or void If A has grandchild age 25 or more at time of gift, gift is valid. Class closes under rule of convenience at time of gift. If no such grandchild, gift is void.

To A for life, then to A’s children for their lives, then as each child of A dies, to pay that child’s share of principal to that child’s issue

May be valid or void Gifts to issue of children now alive are valid; class closes at death of person in being. Gifts to issue of afterborn children are void. (gift to subclasses)

To A for life, then to A’s children, payable at 25

A Class closes at A’s death; vested then w/ possession postponed.

To A for life, then as A appoints by will. A appoints to B for life, then to B’s children.

May be valid or void If B is alive when power is created, gift to B’s children is good. It vests at B’s death. If B is not alive when power created, gift to children of B (afterborn) is void. (second look doctrine)

LAND CONVEYANCING

A. The contract for Sale of Land1. Broker’s Role Rule regarding Commission Earned: When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms bixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance w/ the provisions of the K. If the K is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his… there is no right to commission against the seller. On the other hand, if the failure of completion of the K results from the wrongful act or interference of the seller, the broker’s claim is valid and must be paid.

Tristam’s Landing, Inc. v. Wait, p. 490FACTS: s find buyer for ’s property. Buyer gives downpayment but then refuses to go through with purchase. give bill for commission (5% of sales price). refuses to pay stating that commission was not earned b/c no sale was made. Jdmt for .MP: See above RuleAlso: Is this really fair? Especially since seller could bring suit against buyer for specific performance, and then technically would still not have to give broker commission. Also, if seller gets to keep down payment, how is it fair that agent gets no money?

2. K of sale

Executory Period: time before the closing of settlement of the transaction when the seller conveys the property to the buyer and the buyer gives the seller the purchase price. Started by execution of a contract of sale for the purchase and sale of real property.

During this period, buyer prepares for sale by arranging for necessary financing and investigating property (i.e. the title search, physical condition and applicable zoning)

3. Statute of FraudsRequires that contracts of sale for real property be in writing and signed by the party to be charged thereby.Writing must contain all the essential terms:

1. identification of the parties, description of the property, and terms and conditions (such as price and manner of payment, if agreed upon).

2. If price is agreed upon, it must be set forth. Failure to put it in the memo makes the K unenforceable. However, if no price has been agreed upon, the Court may imply an agreement to pay a reasonable price, where such an agreement is inferable from all the circumstances.

3. Other option is to include all material terms but this is less preferable because could lead to one party asserting later that a term was material but was not included.

4. Where writing is required the deed must contain:a. Grantor’s name in the body of the deed and must identify grantor w/ sufficient certaintyb. Grantee’s namec. Legal Description of the land

i. Sufficiently detailed that the land can be distinguished from every other parcelii. Premium placed on using the same legal description for each conveyance of the

land and accuracy regarding legal description.iii. Legal description must be ascertainable from the public records.iv. Courts normally hold that street addresses do not provide enough detail to be legally

sufficient.v. Three Main Methods of Legal Description

1. Government Survey System: Midwest and West2. Metes and Bounds3. Recorded Subdivision Plat

vi. 10 Canons of Construction re: legal Description1. The construction prevails which is most favorable to the grantee2. If the deed contains two descriptions, one ambiguous and the other

unambiguous, the latter prevails in order to sustain the deed3. Extrinsic evidence will be allowed to explain a latent ambiguity but a

patent ambiguity must be resolved w/in the four corners of the deed.4. Monuments control distances and courses; courses control distances; and

quantity is the least reliable guide of all5. Useless or contradictory words may be disregarded as mere surplusage6. Particular descriptions control over general descriptions, although a faluse

particular may be disregarded to give effect to a true general description7. A description, insufficient in itself, may be made certain through

incorporation by reference.8. If an exception in a deed is erroneously described, the conveyance is

good for the whole tract and title to all of the land passes.9. When a tract of land is bound by a monument which has width, such as a

highway or a stream, the boundary line extends to the center, provided the grantor owns that far, unless the deed manifests an intention to the contrary.

10. A description in a deed includes the appurtenances to the tract even though they are not specifically mentioned in the deed.

d. Words reflecting the grantor’s intent to convey the propertye. Grantor’s signature.f. Some states require an acknowledgment

i. Usually only a prerequisite to deed’s recordability in the public recordsg. Some jurisdictions still require a seal, esp. corporations.h. Consideration is not required to support a deed.

Purpose is characterized as either the prevention of fraud or the prevention of a person fabricating a K when none exists. If former, then Statute itself cannot be used to effect a fraud even if all of the requirements are contained in the

writing. If the latter, the Statute is treated as an evidentiary device that establishes the standard for determining the admissibility of a K into evidence.Exception to Statute is doctrine of part performance: where a buyer pays consideration for the land and takes possession of it or improves it, those actions constitute an adequate substitute for a writing. Payment alone is not enough to satisfy doctrine. Also require possession.Parole evidence cannot be used to contradict express terms and conditions of written K but can be used to fulfill requirements of Statute when K is silent on a matter.

Cash v. Maddox, p. 499FACTS: allege ’s contracted to sell them 15 acres of land. Only written evidence of K is check mailed by Cash’s for $200 which had written on it “15 acres in Pickens, S.C., land binder…” decided they didn’t want to sell land. wants specific performance. Does check satisfy statute of Frauds?MP: Is Statute of Frauds a good idea? Lots of things seller could say to get out of deal? This case fails to fulfill requirement of legal description of property b/c ’s own 70 acres – don’t know which 15 are in question. Also fails to state price.

Could we say there was part performance b/c there was consideration paid? No b/c no possession.Should court have allowed parol evidence to fill in the gaps? Statute of Frauds should not be used to commit frauds.This Court is expressing a pretty extreme attitude about how specific you have to be to satisfy Statute.

4. Equitable Conversion:As soon as the seller and buyer execute a K of sale, seller is treated as merely holding title to the land in trust for the buyer. The buyer has an equitable interest in the property and it is a real property interest. The seller has only a personal property interest. Doctrine becomes fully effective when all the contingencies in the K are removed or are satisfied in some way.Function of Doctrine:

1. Settles probate and intestate disputes when one of the parties to the K dies during the executory period.

2. Transfers risk of loss to the property to the buyer. If property is damaged by fire or other casualty, the risk of lass falls on the buyer unless the vendor caused the damage, and the buyer is legally obligated to complete the K at the specified K price.

3. In a minority of states, the risk of loss stays w/ the vendor and K is annulled when the loss is material. Theory is that performance is impossible due to the destruction of its subject matter or b/c K is subject to an implied condition that the property will be transferred in substantially the same condition as when the K was executed.

Bryant v. Willison real Estate Co., p. 502FACTS: gave down payment on a building. Before delivery of deed, building flooded. asked to repair water damage or to permit K to be rescinded. declined and sold building to third party for less money. Ruled purchasers could not get money back and were responsible to 3rd parties for water damage. Was this right?MP: Doctrine of Equitable conversion can be contracted around. In this case, K of sale placed risk on vendor.When risk is on vendor and insubstantial damage to property occurs w/out the fault of either party, purchaser may recover his down payment where vendor refuses to repair the damage or give abatement in the purchase price.Also: What if Uniform Vendor Act (below) was controlling in this case? Did parties contract around this Act? K had reference to fire insurance for purchaser, as…is clause and language regarding owner is responsible for such property. But possession had not been transferred. Act doesn’t really address situation where property of third parties is damaged.

Uniform Vendor and Purchaser Risk Act, Samuel Williston, 1935Presumption when parties enter into a K for the purchase and sale or exchange of realty that:

1. when neither legal title nor possession of subject of K has been transferred to purchasera. if all or material part is destroyed w/out fault of purchaser, vendor cannot enforce K and

Purchaser in entitled to recover down payment and/or damagesb. if an immaterial part is destroyed w/out fault of purchaser, neither vendor nor purchaser is

deprived of right to enforce K but there shall be, to the extent of the destruction, an abatement of the purchase price.

2. when either legal title or possession of subject matter of K has been transferred to the purchaser, if all or any part is destroyed w/out fault of the vendor, the purchaser is not thereby relieved from a duty to pay the price, nor is he thereby entitled to recover any portion thereof that he has paid.

5. Contract Contingencies:K of sale for land is rarely completely performed at the moment of its execution. Usually has contingency clauses that require the parties to perform a variety of additional actions. (e.g. proper financing, zoning permissions). In some jurisdictions, unsatisfied conditions delay the applicability of the doctrine of equitable conversion.Subject to financing K terms:

purchaser conditions his obligation to purchase on his ability to obtain a loan.May be held void for vagueness unless the surrounding circumstances indicate what amount and terms

the parties had in mind.Many courts use a reasonableness standard to determine the scope of the purchaser’s duties when the

clause is not detailed. Reasonableness is judged from the business practice and custom in the place where K is to be performed. Requires that purchaser make a good-faith effort to procure financing.

At minimum, prudent that K specify the loan term, the interest rate, and the loan amount. K should specify the max term and interest rate that the buyer would have to accept and the min. loan amount.

Vendor should specify the time frame for the purchaser to make loan applications and to obtain a loan commitment.

Bruyere v. Jade Realty Corp., p. 511FACTS: enters purchase and sale agreement subject to to buyers’ obtaining bank financing. Financing was granted but subsequently revoked b/c of ’s decision to file for divorce. Wife cannot obtain financing and seeks return of deposit.MP: not entitled to recover deposit b/c altered their circumstances voluntarily and thereby compromised their borrowing potential. Also: In theory, could have sued for entire K price b/c language of K is “subject to financing at 7 ¾% for 30 years.” This condition precedent is fulfilled - ’s have an obligation to pay.

6. Implied Contract Terms:1. Implied Warranty of Habitability:

a. Extends to land as well as to improvements on it. b. Common law duty to disclose defects to purchaser if not known by the purchaser and not

reasonably discoverable.2. Implied Covenant of Marketable Title

a. Assuring that title is reasonably free of encumbrances and other title defects, and free of the risk of litigation.

b. Three ways that a title becomes unmarketablei. Vendor had title but lost it in an action or proceeding.ii. Vendor never acquired title b/c of a flaw in the chain of titleiii. Encumbrance on the title a lien or other nonpossessory interest or a nonfreehold

possessory interest. Ex. Mortgage, mechanic’s lien or judgment lien, easement, restrictive covenant, irrevocable license, lease, party wall agreement, and the rights of cotenants.

iv. Zoning restriction usually do not effect marketability of title but they can in some instances. First, if after buyer signed K, zoning restrictions are enforced which frustrate use that purchaser bought land for. Second, if a zoning restriction is violated and correction of such violation can be demanded by the government.

c. Vendor need not have marketable title until the closingd. Vendor and purchaser can provide in K of sale that title need not be marketable e. Vendor must include in K of sale any encumbrances that will remain on title after purchaser

acquires it.f. In cases where there is a break in the chain of title b/c of adverse possession, not always

necessary to prove marketable title based on public property records. Usually, a title that can be shown to satisfy the elements of adverse possession is enough even w/out a quiet title action.

g. To avoid this problem, purchaser should provide in K that vendor must present a marketable title of record.

h. Many standard form K of sale provide that the seller must tender “insurable” title to the purchaser. But this can be bad b/c effectively takes the decision whether to accept the title out of the purchaser’s hands and into the title insurance company’s hands. Sometimes insurance companies will agree to insure a title w/ an encumberance for an extra premium.

3. Doctrine of Merger by Deeda. Seller’s contractual obligations are discharged once the closing has occurred and the seller’s

promises are merged into the deed.

b. Exceptions in cases of fraud, mutual mistake, contrary intention of the parties

Trimboli v. Kinkel, p. 516FACTS: hired to search the title to some land they were interested in purchasing. told them that title was good and marketable. In reality, there was a flaw in the record title b/c an executor had exchanged a part of the land for interest in another piece of land (can’t exchange b/c you have power to sell and distribute proceeds). failed to tell this, allowing to complete purchase. when tried to sell property, purchaser rejected title b/c of flaw in the record. Purchaser sued for deposit and the expenses of searching title. Purchaser prevailed and title was adjudged unmarketable. Action then brought by against for damages for negligence. proves that defect in the record title has been cured by adverse possession for more than 50 years. Trial judge held that there was marketable title and had not been negligent. Appellate court held that was negligent for passing the title upon the view that the executor’s deed was valid.MP: cannot use defense that proof of adverse possession could have been collected – has to have actually collected evidence in order to escape negligence.

Until that proof was collected – title was unmarketable Question remains whether there is any evidence of damage have good case that they have title to the land. However, b/c made a fruitless contract of resale based on assurances that title was marketable, they

have lost commissions paid their brokers and been forced to reimburse purchaser for the cost of the examination of the title.

All of these expenses could have been avoided if not for negligence non entitled to recover profits of the resale or the costs of their lawsuit w/ purchaser still occupants of land and have a good case that they are owners/ litigation costs not reasonably incurred.

Turner v. Ferrin, p. 519FACTS: Parties entered into a contract for deed.

Total purchase price was $230,000, w/ down payment of $100,000, w/ annual payments of around $16,000. Turners paid annual payments in 1983 and 1984 and then failed to pay in 1985. Want to repossess property. Turners tried two other ways to avoid forfeiture: declare the contract a mortgage and file for relief under

Chapter 11. Both failed. Now Turners file a complaint demanding rescission of contract b/c (1) presence of easement not referred to

in warranty deed entitles them to the equitable remedy and (2) title to be conveyed by the Ferrins was unmerchantable as it was unrecordable.

District Court adopted Ferrins’ proposed findings of fact and conclusions of law. Decided sale was one “in gross” and that 6% acreage discrepancy was not material. Furthermore, stated that did not prove there even was an acreage discrepancy.

MP: Variation in acerage not grounds for rescission b/c land sold in gross and not per acre. No failure of consideration b/c Turners received what they bargained for, “96.73 acres more or less” Mistake in acerage not material b/c sale in gross and not a great disparity. Rescission can occur when 1) consent obtained through bad faith of other party or 2) if, through the fault of

the party as to who he rescinds, the consideration of his obligations fails in whole or in part.

7. Contract Remedies1. Damages

a. Traditionally rewarded nonminal damages. Restitution is measured by the nondefaulting party’s reasonable, out-of-pocket costs incurred in the transaction up to the date of the breach. Won’t cover unforeseeable expenses. In case of purchaser breaching, vendor gets damages but is reduced by amount recoupable when property is resold.

b. When vendor’s actions indicate bad faith, you can get damages for the lost benefit of the bargain. These are measured by the difference between the K price and the fair market value of the property on the date of the breach.

c. When purchaser defaults, majority of states allow vendor to retain purchaser’s down payment as long as it is no more than the customary amount. However, in a minority of states, purchaser is not barred from recovering down payment to the extent that it exceed the vendor’s actual damages.

d. In response to litigation for down payments, some standard form Ks stipulate that vendor can keep down payment as liquidated damages. But is this an illegal penalty? Hard to prove that provision was bargained for, that damages were impossible to calculate, or that it’s a fair estimate of vendor’s actual damages when its in a standard form K.

e. Where do you measure damages from?i. Date of the purchaser’s breach

1. consistent w/ general K damages theory2. puts vendor in as good a position as if the purchaser had performed

(expectations for transaction are satisfied)3. consistent w/ the K law rule on mitigation of damages b/c vendor still bears risk

of declines in property’s market value and so will act quickly to resell4. if this is not an adequate remedy, can bring an action for specific performance.

ii. Date of the Kiii. Date vendor resells property if vendor diligently has attempted to resell.

1. puts risk of loss during falling market on purchaser2. gives vendor full amount of proceeds that he would have received had K been

performed3. majority rule creates an incentive for purchasers to default in a declining

market2. Specific Performance

a. Courts are less inclined to grant specific performance to a vendor b/c the vendor simply can resell the property.

b. To obtain a decree for specific performance:i. Petitioner must tender performance under the Kii. Contract of sale has to be legally binding i.e. contain definitive terms and be supported

by adequate consideration.1. Non-specification of closing date doesn’t mean K lacks a definitive term. Law

will imply a reasonable time requirement.2. When material term under Statute of Frauds, ambiguous description can be

made definite based on extrinsic evidence concerning parties’ intent.iii. Contract must be mutually bindingiv. Damages must be an inadequate remedy.

c. Court has discretion whether to grant or deny.

3. Recissiona. Cancellation of K by mutual agreement of parties or by court decreeb. Grounds include mutual mistake of fact, failure of consideration, fraud, intentional

misrepresentation, undue influence, and duress.c. Person seeking recission must restore or offer to restore all that he received under the K “tender

back”.4. Equitable lien

a. For any portion of the purchase price that is unpaid at the closing.

CONVEYANCE OF LANDA. History of Common Law Conveyancing

11 Livery of Seisin a. Ceremony consisting of a symbolic delivery of the corporeal possession of land by the feoffer to

feoffee.b. Had to actually go upon the land being conveyed. Livery in law weren’t on land.c. No writing necessary but as time went on, ceremony was usually accompanied by a written deed

especially when there were many limitations on the estate granted. Deed was only evidence of title and not a conveyance itself.

d. Writing remained optional until Statute of Frauds in 1677 but deed still did not operate to transfer title.

e. Incorporeal interests and future estates could be transferred by title alone b/c of absence of element of possession (deed of grant)

f. Livery of seisin wasn’t really disposed of until Real Property Act 1845.g. Statute of Uses in 1535 brought into practice modes of alienation which did not require a symbolic

ceremony. Brought into existence:i. K in the form of a covenant to stand seized of property for the benefit of a beneficiary

related to the covenantor by blood or marriage

ii. K, or deed, of bargain and ssale of lands whereby the bargainor for some pecuniary consideration bargains and sells, that is, contracts to convey, the land to the bargainee; and becomes by such bargain, a trustee for, or seised to the use of the bargainee.

h. Statute of Enrollments passed to prevent clandestine conveyancesi. Made a deed of bargain and sale of a freehold interest void unless w/in six months it was

enrolled in a court of record.2. Modern Conveyancing Deed is normally used to convey title to personal property

a. General warranty deed provides the most protection. Title covenants includedi. Seisin warrants that the grantor owns the title that the deed purports to convey.

1. Not breached by property interests that are not estates in land.2. Can be satisfied by mere possession

ii. Right to Convey warrants that grantor has the right to convey the property interest described in the deed

1. Possession w/ no title violates Right to convey2. Person w/ power of attorney has right to convey but does not have seisin

iii. Against Encumbrances warrants that the title is not subject to those lesser property interests that do not breach the covenant of seisin.

1. includes easements, real covenants, mortgages, judgment liens and mechanics’ liens.

iv. Warranty & Quiet Enjoyment protect against same types of defects as the covenants of seisin and against encumbrances. However,adverse interest holder must actually assert its rights in the land.

1. Two covenants are technically separate but are so similar as to be virtually identical.

2. Any outstanding interest in the land or a lesser interest can violate the covenants of warranty and quiet enjoyment

v. Further Assurances requires grantor to execute any additional document or take such other action as is necessary to perfect the grantee’s interest.

1. Differs from other covenants and is quite limited in scope2. Other covenants provide a cause of action for damages based on a 3rd party’s

interest in the property.3. Enforced by an action for specific performance based on the grantor’s failure to

convey title properly..b. Special warranty deed has all covenants but is limited in time to the grantor’s period of

ownership.i. Otherwise known as a limited warranty deed.

c. Quitclaim deed includes no title covenantsi. Transfers whatever interest, if any, the grantor has in the property

ii. Grantee has no recourse against the grantor even if he had no interest in the property.iii. Usually used for limited purposes, such as releasing a mortgage, transferring property

intrafamily, or settling a boundary line dispute.

Anderson v. Anderson, p. 542FACTS: Grandmother executed will devising property to . They executed a deed conveying property to granddaughter in consideration for her “providing for the adequate care and maintenance of me during the remainder of my lifetime”. MP: Failure of consideration is not enough to revoke a deed.

No proof of fraud Have to treat as a deed and not as a K b/c of merger by deed. Court classifies as a covenant rather than a condition subsequent b/c of dislike of forfeiture.

d. Statutory Short Form Deedsi. Statutes specify the words that must be used when drafting a warranty deed or a

quitclaim deed.ii. Statute usually specifies the title covenants that are statutorily implied into the deed.

1e Deed Covenants i. Present: covenants of seisin, right to covey and against encumbrances.

1. breached at moment the deed becomes effective2. statute of limitations begins to run immediately even if grantee is unaware of

the breach.

3. No eviction or disturbance of the grantee’s possession is required to establish a breach.

4. Do not run with the land – covenant for title can not be enforced against the covenantor by a transferee of the covenantee.

ii. Future: covenants of warranty, quiet enjoyment, and further assurances1. breached when eviction occurs.2. Eviction can be actual or constructive

a. Actual occurs when a paramount interest holder uses self-help or judicial action to disturb the grantor’s possession.

b. Constructive does not require actual interference w/ grantee’s possession but does require that paramount inerest holder has asserted its right.

3. Runs with the land if there is privity of estate between the original grantor-covenantor and the remote grantee. Means that the covenantor conveyed either title or possession to his grantee who conveyed it to the remote grantee. Covenant attaches to the fee simple estate or the possessory estate and runs w/ it to subsequent grantees.

Distinction has 2 significant implications: dictates when a breach of the covenant occurs, thereby triggering the statute of limitations and whether the covenant can be enforced only by the grantee of the deed that includes the covenant or also by later purchasers of the land.

Brown v. Lober, p. 554FACTS: purchased land from Bosts and received a statutory warranty deed containing no exceptions. took possession and recorded. granted coal option. Then discovered prior grantor had reserved a 2/3 interst in mineral rights on property. had to renegotiate coal option for less money. filed action against for difference of grounds of breach of covenant of seisin and an alleged breach of the covenant of quiet enjoyment. What about statute of limitations?MP: Claim for breach of covenant for seisin begins at time deed is delivered b/c present covenant. Therefore ’s are barred on that action.

Breach of covenant of quiet enjoyment requires constructive eviction. cannot be said to possess subsurface materials b/c haven’t undertaken to remove them. could have taken peaceable possession of it.

Could Brown’s have claimed title to the 2/3 interest by adverse possession?

Proffitt v. Isley, p. 559FACTS: Proffitts sold real estate to Atkinsons, who sold it to Shirley Carter, who sold it to the Isley’s. Isleys discovered that there was an outstanding mortgage on the property. Isleys sued all three parties for damages based on the general warranties in the warranty deeds. MP: Covenant against encubrances is a present covenant and does not run w/ the land. Only recourse is to immediate grantor.

Measure for damages is amount necessary to remove incumbrance unless covenantee has paid off encumbrance or actually lost the land in consequence of it.

St. Paul title Insurance Corp v. Owen, p. 561FACTS: Albert Owen executed a warranty deed to James & Cheryl Owen, who then conveyed by statutory warranty deed to Carlisle. Carlisle mortgaged property to GECC. Policy of title insurance also issued for St. Paul Title. Carlisle defaulted on mortgage payments and GECC attempted to foreclose property. Trial court ruled that GECC couldn’t foreclose property b/c Carlisle held no right, title, or interest in any of the property on the day the mortgage was issued. GECC then brought suit against St. Paul Title who then brought suit against Albert, James, & Cheryl alleging they had breached the covenants of title contained in the deed.MP: Covenant of quiet enjoyment and warranty in a warranty deed, run w/ the land and are breached when there is an eviction under paramount title. Here, this happened when court held that Carlisle had no interest in the property.

In a statutory deed, covenants only relate to acts done or suffered by the grantor and his heirs. only entitled to nominal damages b/c remote grantor did not receive consideration.

f. Difference between deed and willi. Deed takes effect at moment of transfer. Will takes effect when person dies.ii. In a deed there is usually consideration. In a will, always a gratuitous transaction.

However, consideration is not required in either one.iii. Deed is effective between parties even if not recorded. Will has to be probated.

iv. Each is subject to a different jurisdiction of law.v. At CL, livery of seisin was required for conveyance of deed but not for passing of land

through will.vi. Deeds only have to meet formality of Statute of Frauds. Wills have to be done w/ same

statutory formality. g. Estoppel by deed

i. Where a grantor purports to convey an estate in property that he does not own, if the grantor subsequently acquires title, the title passes by operation of law to the grantee under the earlier deed.

ii. Grantee awarded land, not damages.iii. Based on notion that a grantor who gives a deed warranting the title is estopped from

later denying that title passed to grantee.iv. Normally does not apply to quitclaim deeds.

RECORDING ACTSA. Common Law Rule – Prior in Time

1. Prior in time: A grantee who was prior in time prevailed over one subsequent in time.a. Ex. OA. Then OB (who knew nothing of A’s deed). A prevailed over B on the theory that O

had conveyed title to A and had nothing left to convey to B. b. Under this rule, the purchase of land was risky, b/c B had no reliable way to assure that there was

no prior deed.i. Exception in equity

1. If prior interest was equitable, equity would not enforce it against a subsequent purchaser of a legal interest who did not know of the prior equitable interest and paid valuable consideration.

2. Ex. O contracts to sell blackacre to A; under the doctrine, the K gives A equitable title. Later O conveys legal title to Blackacre to B, and B is a purchaser for value who has no notice of A’s equitable interest. The subsequent conveyance to B cuts off the prior equity in A.

B. Recording Acts – In general1. Change to recording system caused by increase in number of land transfers and the subsequent need to

protect purchasers of land from conflicting claims.2. Recordation is not essential to the validity of a deed, as between grantor and grantee BUT if a grantee does

not record the instrument, he may lose out against other purchasers from his grantor.3. Operation of Recording Acts

What must B do to prevail Against A?

Type of Act Prevalence of this type of act

B must be a purchaser for value and w/out notice (B doesn’t have to record. Just has to buy before A Records)

Notice About half the states

B must record his own conveyance before A records (B doesn’t have to pay anything and can know about A)

Race DE, LA, NC

B must both be a purchaser for value and w/out notice, and also record before A

Notice-race About half the states

Notice and notice-race statutes seem to say, “Why should we let B take advantage of A’s failure to record if B knew about A anyway, or if B paid nothing for the land”The race and notice-race statutes seem to say, “Why should we let B take advantage of A’s failure to participate in the public recording process if B herself also fails to participate**See problems on pp. 604.4. Indexes

a. Grantor-Grantee Indexi. Separate index volumes are maintained for grantors and grantees, enabling a title

searcher to locate an instrument by searching under either the grantor’s name or the grantee’s name.

ii. Entry will include first the grantor’s name, then the name of the grantee, then a description of the property and the type of instrument, and finally a reference to the volume and page of the deed books where the recorder’s copy of the instrument can be found.

b. Tract Indexi. Exists in areas where land has been platted and broken down into blocks and lotsii. Entries are made under block and lot number

5. Bona Fide Purchasers requires no notice of conflicting clsim when acquired interest in property and giving of consideration for the conveyance.

a. Lack of Notice i. Actual has info in regard to a fact, or info as to circumstances an investigation of

which would lead him to information of such fact1. Ex. Knows of existence of a prior, unrecorded deed

ii. Constructive charged w/ notice by a statute or rule of law, irrespective of any information which he might have.

1. Ex. A prior deed has been properly recorded (doesn’t matter if he has actual knowledge of the deed)

iii. Inquiry corollary of both actual and constructive notice1. follows from duty of purchaser, when he has actual or constructive knowledge

of facts which would lead a prudent person to suspect that another person might have an interest in the property, to conduct a further investigation into the facts.

iv. Can get notice from other sources than the property records1. lis pendens provides notice of a title claim to the ’s land during a lawsuit’s

pendency2. judgment lien encumbers ’s land after judgment is entered for the .

Enables judgment creditor to force a sale of the encumbered land and to use the sale proceeds to satisfy the judgment.

In re Barnacle, P. 611FACTS: Lapides & Barnacle executed a promissory note to evidence a loan for the purchase of property located in Providence. Note was secured by a mortgage document which was inadvertently not signed by Lapides. Mortgage was recorded. Lapides & Barnacle file for bankruptcy. Trustee in bankruptcy is deemed to be a bfp of mortgaged property. Trustee contends that b/c mortgage lacks Lapides signature and the appropriate acknowledgment of signature, mortgage is defective and cannot afford constructive notice to a subsequent purchaser.MP: Technical deficiency ought not to create a windfall for those who would become bona fide purchasers.

Court disagrees with majority view b/c believes it creates a forfeiture for no reasonable or necessary purpose.

Court doesn’t want to allow bfps who are too irresponsible to look up title history of deed to receive a windfall as a result.

Defective mortgage at least affords subsequent purchasers w/ constructive notice.

J.C. Penney Co. v. Giant Eagle, Inc., p. 615MP: A record of a memo of a lease articulating an exclusive right to operate a drugstore affords constructive notice to subsequent purchasers inquiry notice.

Methonen v. Stone, p. 619FACTS: Methonen bought land w/out knowledge that he had to provide water to the other subdivision lots. Trial court found on SJ that Methonen’s deed created an easement in favor of the other owners. MP: Methonen did not have actual notice from water agreement of Acknowledgment of Water Well Agreement b/c filed after Methonen took land. However, Methonen was aware of existence of well on the property and the water lines running from the well to the adjoining lost. These facts should have placed him on inquiry notice.Also: Was there an Implied Easement? Unlikely that owner of lot next door would have taken land w/out water. Maybe fact that there is no water unless given out by Lot 10 created an easement by implication.

1b Payment of Considerationi. Most courts require payment of more than nominal consideration to qualify as a bfp, but

payment equal to the land’s fair market value is not required.ii. Even an extention of time for payment can be sufficient consideration

iii. Donnees not protected from prior unrecorded conveyances. (no worse off if they lose the land b/c didn’t pay anything for it). Some states afford protection to donnees from prior unrecorded conveyances.

GEO. M.McDonald & Co. v. Johns, p. 623FACTS: Johns executes a mortgage to Bechtol who then executes a mortgage to McDonald. McDonald recorded mortgage before Bechtol did, and had no notice of Bechtol’s mortgage. Bechtol wins b/c McDonald’s recording is notice only to subsequent mortgagors and not previous mortgagors. Bechtol’s mortgage was bona fide at the time of its execution and delivery. MP: Washington Statute is a notice statute. Seems like McDonald would win b/c recorded first but McDonald was not a BFP – didn’t give any consideration b/c settling a debt. But perhaps consideration is giving up right to sue Johns for debt.Also: Can past consideration be good for a present conveyance? Uniform Simplification of Land Transfers Act says yes.

1c Bona Fide Purchaser Filteri. A person who takes from a BFP will prevail over any interest over which the BFP would

have prevailed. This is true even where such person had actual knowledge of the prior unrecorded interest.

1. Ex. OA who fails to record. O then conveys to BFP, who records. BFP then conveys to C, who has actual knowledge of the O to A deed. Inasmuch as B prevails over A, C prevails over A. This is true whether C is a donee or Purchaser

ii. Rationale is that BFP should receive full protection of recording statute. In order to receive full value of the bargain, BFP needs to have right to enjoy, convey, or devise his interest.

iii. Exception is that a holder of the title can not use bona fide purchaser filter to cleanse his defective ownership. (Chergosky v. Crosstown Bell, Inc., p. 627)

6. Has a particular document been recorded w/in the meaning of the recording act?a. What if an instrument is not indexed properly?

i. OK – protects grantee on theory that by delivering deed for recordation, that grantee has done all that she could reasonably be expected to do to give notice of her interest (Frank v. Storer, p. 635)

ii. Not OK – protects subsequent BFP on theory that only a properly indexed instrument imparts sufficient constructive notice to a subsequent purchaser.

iii. Preference for latter view b/c:1. Until indexed, no reasonable way to locate an instrument2. Grantee could have prevented the hard by seeing the instrument was properly

recorded.iv. Doctrine of idem sonans:

1. if name is misspelled but pronounced the same, then record is still valid. Gives constructive notice. How about shortened forms of names or maiden names?

1b Chain of Title Problems i. Even though an instrument has actually been recorded and indexed, the instrument

might not be recorded in a way that gives notice to subsequent purchasers – not in chain of title.

ii. Purchaser is charged w/ notice of those conveyances of the property by her grantor recorded after the grantor acquired the property from his predecessor in title and recorded before a deed is recorded conveying title form that grantor to another.

iii. If a deed entered on the records has a grantor unconnected to the chain of title, such a deed is not recorded w/in the chain and does not give constructive notice.

1. Ex. O A who does not record. AB who records. OC, a BFP, who records. O prevails over B b/c A to B deed is not connected to the chain of title. No feasible way for C to discover the A to B deed. (Zimmer v. Sundell, p 632)

Skelton v. Martin, p. 642

MP: Real issue is whether Ms. Perry was entitled to receive notice which is both a statutory and constitutional issue. Is property being taken away w/out due process of law? No, b/c she hasn’t perfected interest in property. Didn’t record deed.Also: Lack of adequate notice from a computerized record system does not deprive a subsequent purchaser of if the computerized system is not an official recording system. But then why bother with system at all?

11 Exclusions from Recording Actsa. Marital property rights, implied easements, interests acquired by adverse possession, do not

require a written document, and therefore, are not subject to the operation of the recording act.b. A purchaser takes subject to these types of interests even without any notice of their existence.c. Purchasers should inspect property, or require an affidavit from seller concerning any matters

which may affect property title and are undiscoverable from the public records.

Mugaas v. Smith p. 645Unrecorded title by adverse possession is not within recording acts and supercedes title conveyed to . If unrecorded titles were to supercede titles matured under the statute of limitations, then adverse possessors would have no right at all to the land. Encouraging purchasers to inspect property before purchasing it.Is this case in conflict w/ Meyer v. Law which says adverse possession is an outdated concept.How about title insurance? Adverse possession is a situation where there is a defect in the title and the title holder has no way of knowing about it.

Mountain States Telephone and Telegraph Co. v. Kelton, P. 649FACTS: enters into agreement w/ Central Ave. Dairy to have a perpetual easement to portion of land for the purpose of installing and maintaining an underground conduit for telephone/telegraph cables. Agrmt. Recorded. ’s acquired property and hire co- to clear and level the ground. In the process of doing t his, ’s underground telephone cable is damaged. suing for destruction and damage to its property.MP: Did the agreement give constructive notice of a perpetual easement? No, b/c had no vested interest to search the records for the agreement. Contractor had no interest in the title to the land.

C. Torrens Registration1. Problems w/ Recording act system

a. Does not cover a variety of property interests (implied easements and marital property interests)b. Can be cumbersome to usec. Does not provide any guarantee that recorded documents are legally valid

2. Main features of Torrens systema. Registers title to land instead of recording evidence of titleb. Based on 3 ideas

i. Getting title adjudicated by a court, then keeping it up to date byii. Installing a tract index andiii. Making the public records conclusive

c. How it worksi. Owner files a quiet title-like action before a tribunal specified in state’s Torren’s

legislationii. Owner is required to exercise due diligence to identify and notify all possible claimants to

the property of the registration proceedingiii. After property title and property have been inspected to discover unrecorded interests,

tribunal conducts a hearing, giving all interested parties an opportunity to be heard.iv. Certificate of title to land in issued if found that petitioner in fact has title to the propertyv. Original certificate is kept in Registrar’s Office as a matter of public record.

1. Certificate identifies owner, the land, owner’s estate in land, all liens and other interest affecting the property title.

2. Subsequent transactions affecting title have to be added to certificated. Problems w/ this system

i. Initial registration of title is costlyii. Coverage is subject to a variety of exceptions including short-term leases, visible

easements, and mineral claims (defeats conclusiveness benefit)

iii. Complexity in administering systeme. Benefits of system

i. State of title can be easily determined by looking at registrar’s certificate of title and by examining the documents memorialized on it.

f. Adverse Possession under this systemi. Torrens property cannot be lost by adverse possession unless there is an ambiguous

description in the certificate of title or the dispute existed when the property was registered.

g. Marketable Title Acti. Can extinguish an easement if the statutory required notice of continuance was not

memorialized.ii. Ex. OA in 1900, AMortgager X in 1910, AB in 1930, BC in 1955. Does C have

good title? 1. Purpose of marketable title act is to make C’s title good as against mortgager

x’s interest. If C has unbroken chain of title for 40 years, the previous interest is cut off.

2. Is this contrary to design of Torrens system to give you a certificate of title that can’t be impeacheable?

D. Title Insurance1. Insuring against risk that title to the property is different than the title described in the insurance policy

a. b/c title insurer’s investigations concerning the property are normally limited to an examination of the public property records, title insurance generally insures only against title defects.

b. Will also generally insure against:a. Title to the estate or interest being vested other than as stated within commitmentb. Defect in or lien or encumbrance on the titlec. Unmarketability of the titled. Lack of right of access to and from the land.

c. Two main types:a. Owner’s policy indemnifies the owner of the property against title defects. Does not run

with the land. Increases w/ time to account for increase in land values.b. Loan Policy insures a lender that holds a mortgage, deed of trust, or similar security

interest in the property. Decreases w/ time as lender recovers more of the unpaid principal balance.

c. Both indemnify against loss caused by a title defect or encumbrance that is not listed as an exception or exclusion to the policy

d. Loan policy also insures the validity and priority of the security interest.e. Loan policy is also transferable to a purchaser of the lender’s security interest.

2. Process for getting title insurancea. company will have title examined by a private attorney or a company employeeb. Based on results of the title exam, the company issues a title commitment

a. an offer to issue a title insurance policy on the terms set forth in the commitment. Commitment describes the current state of title to the land and the exceptions to coverage that will be included in the insurance policy.

b. Commitments routinely provide that buyer must acquire title by a warranty deed and must pay full consideration for the property.

c. Based on title report, buyer can notify the seller of any objections to the state of the title.d. After title has been transferred to buyer and the necessary documents are recorded, the title insurance

company will issue policy. 3. Exclusions from policy

a. liens imposed by law but not shown on public recordsd. Claims of parties in possession not shown on the public recordse. Boundary disputesf. Easements or servitudes not shown on the public recordsg. Zoning or building ordinances

4. Amount of Liabilitya. Company is liable for the difference in the value of the property w/ and w/out the defect, up to the max

set by the policy (usually purchase price). Values at date of issuance of policy are usually held to control

See Problems on P. 670

Swanson v. Safeco Title Insurance Co., p. 671FACTS: bought land and purchased title insurance from . The title search did not show the Jenkinson lien. When went to refinance his property, the title report showed the Jenkinson lien and loan not approved. Lien was settled but not recorded. Lose property through foreclosure. Claim Safeco’s failure to spot lien led to their loss of property. MP: Insured has to give prompt notice to insurer of any litigation set forth, if title is rejected as unmarketable, or if insured comes upon any knowledge that there is a defect in the title.

Did lien really cause loss or was it ’s inability to pay?Also: Damages:

If problem can be corrected, the damages are the amount to correct the defect If lien is incurable, damages are value of property w/out defect minus value of property w/ defect. Damages

are measured when the defect is discovered.

Greenberg v. Stewart Title Guaranty Co., p. 677FACTS: tries to sell condos and is unable to transfer marketable title b/c of liens on property. Lending institutions foreclose on him. claims Stewart was negligent b/c failed to disclose liens know to them and failed to make reasonable diligent searches regarding title on property.MP: A title insurance company is not liable in tort for failure to discover a title defect. Such liability exists only in K.

Purpose of insurance company is to insure against title defects and not to examine them..Title commitment does not indicate that insurer is searching title for benefit of the insured. Rather, the

purpose is to protect insurer by discovering whether insurer should insure property.No duty independent of the K.