Property OutlineHelmholz 2002

I) Personal Property: Rights of Some PossessorsA) Principles

1) Possession of personal property is either an observable fact or a legal conclusion.(a) Observable fact = Actual Possession(b) Legal Conclusion = Constructive Possession

2) Title is a relative concept. A person may have “title” to property as against one person (A) but not another person (B)(a) Defense of Jus Tertii. The majority rule is that a defense of jus tertii (i.e., only a

true owner may bring suit) is not allowed.(i) Jefferies v. The Great Western Railway, Queen’s Bench, 1856. To evade

bankruptcy auction, man fraudulently sells truck to A, but truck is stolen by B before A can take possession, and B argues in its defense against suit by A that the conveyance to A was improper and therefore B should be liable only to true owner, which is person who would have bought truck at bankruptcy auction. Held: A gets the truck. The jus tertii argument is irrelevant; just because a 3rd party could rightfully take property from a wrongful possessor does not mean that a subsequent possessor can rightfully take property from a prior possessor. The rationale of barring the jus tertii defense is to preserve peaceable possession of goods not in possession of rightful owner.

(b) If the possessor sues for damages AND the true owner is ascertained and can recover damages, then a minority of cts. will allow jus tertii to prevent double liability.(i) Russell v. Hill, NC Ct. of App., 1899. Man cuts logs on land w/

permission of wrong landowner; however, another person comes along and steals logs, and so the logger sues, whereupon the thief raises jus tertii. Held: jus tertii permitted; logger not entitled to logs. Where a prior possessor sues a subsequent possessor for property taken from him, jus tertii is permitted if the identity of the true owner is known.

3) If one is entitled to legal possession, one can:(a) Continue the possession against everyone except those persons, if any, who have

a better right to the property;(i) Armory v. Delamirie, King’s Bench, 1722. Chimney sweep finds jewel

and takes it to be appraised, however, jeweler’s apprentice swipes it. Held: sweep, as finder, has better title to jewel than apprentice. Prior possessors have superior title against all except rightful owner, and can recover against subsequent possessors.

(ii) Exceptions:(a) Innocent Improver—when a neighbor mistakenly improves land thinking

it is his, the owner might not be able to remove the encroachment(b) Civil rights laws—can’t discriminate in public accommodations(c) Free speech rights—people may have state (but not federal) constitutional

right to free speech in shopping malls that operate as “town square”(b) Recovery possession of the property if it is wrongfully taken; and

(i) Replevin. Action brought to recover possession of chattel from wrongful possessor.

(ii) Ejectment. Action brought to recover possession of land from wrongful possessor.

(c) Recover damages to the property from a wrongdoer(i) Trespass. Required a showing that D (1) intentionally or negligently acted

to inflict a (2) direct injury to P’s person or property (whether chattels or land) of which P (3) had possession

(ii) Trespass on the case. An action brought when trespass would fail b/c the injury was indirect or consequential rather than immediate, or b/c P didn’t have possession. P must show that (1) D had a duty, that D (2) breached the duty, and (3) the breach caused substantial harm to P.

(iii) Trover. An action brought to recover the full value of chattel that has been converted.

4) To constitute possession, there must be:(a) A certain amount of control over the property, and(b) An intent to possess the property and exclude others.

B) Rule of Capture—whoever is prior in time wins1) Wild Animals

(a) Title to wild animals (ferae naturae) is initially acquired by taking possession; an owner of land does not automatically own the wild animals on the land.

(b) The mere chasing of an animal, although in hot pursuit, doesn’t give pursuer a right to possession against another who captures it by intervening(i) Pierson v. Post, NY Ct. of App., 1805. “Saucy intruder” sued for trespass

on the case for taking pursued fox just as hunter reaches it. Held: since hunter didn’t have occupancy of fox, no recovery. To have possession of wild animal, must have physical occupancy or (1) unceasing pursuit (2) w/ mortal wounding.

(ii) Buster v. Newkirk, NY App. Ct., 1822. Hunter seeks trover after wounding deer, pausing for night, then finding that another had taken carcass. Held: pursuit w/ wounding, interrupted by camping for night, isn’t occupancy. To have possession of animal through pursuit w/ moral wounding, pursuit must be uninterrupted.

(iii) A person who is not a competitor (one who doesn’t want to capture the animal) cannot interfere(a) Keeble v. Hickeringill, Queen’s Bench, 1707. Trespass on the case for

neighbor firing gun to scare ducks away from decoy pond. Held: because disturbance w/ prop. was malicious, recovery allowed. Where method of capturing wild animals is (1) lawful, (2) in the public interest, (3) the person’s trade, and (4) interference is malicious rather than competitive, recovery for disturbance is allowed.

(iv) Exception: a custom in a hunting industry that is more effective than the rule of capture in bringing game to market may dictate a different result(a) Ghen v. Rich, MA Dist. Ct., 1881. In contravention of custom of whaling

industry, man sells whale carcass that floated ashore w/ bomb-lance sticking out of it. Held: custom gives whaler title to whale carcass.

Where it is the (1) longstanding (2) continuous custom of an (3) entire industry (4) that is reasonable, because w/out which the industry would cease and killing whale w/ bomb-lance only possible means of killing/claiming whale, one who kills a whale w/ a bomb-lance owns it and can maintain action against finder.

(c) If an animal is mortally wounded, or caught in a trap so that its capture is practically certain, the hunter acquires a right to possession and title which may not be defeated by another’s intervention.(i) State of Ohio v. Shaw, OH Sup. Ct., 1902. Larceny for stealing fish out of

funnel-trap net. Held: owner of net had possession of fish, so larceny conviction sustained. Where someone has confined wild animal in private enclosure such that escape is practically impossible, though not actually impossible, they have acquired title to wild animal.

(d) Animus revertendi: Captured wild animals that develop a habit of returning to the captor’s property continue to belong to the captor as they roam at large.

(e) Title acquired by possession can be lost if the wild animal escapes and returns to its natural habitat.

(f) Limitations: Congress has enacted laws to protect endangered species, and a state can regulate resources under its police power(i) Dapson v. Daly, MA Sup. Ct., 1926. Hunter w/out license shoots deer, but

another hunter runs in and takes carcass. Held: because unlicensed, first hunter cannot recover. The existence of hunting season gives P additional burden of proof—not met here—to show that he is licensed hunter before he can invoke in his own behalf the law of the chase to acquire title to wild animal w/ pursuit and wounding.

(ii) However, note that the gov’t only has ownership of ferae naturae for regulatory purposes(a) State of North Dakota v. Dickinson Cheese Co., Inc., ND Sup. Ct., 1972.

State sues polluting factory for value of wild fish killed by pollution. Held: state doesn’t have sufficient ownership rights to maintain c/o/a. As a sovereign, state only has regulatory ownership of wild animals, which has different bundle of rights than private owners.

2) Discovery of Caves(a) Rather than being determined by the right of capture, ownership of caves is

determined by the legal maxim that a landowner owns the earth below his surface.3) Water Rights

(a) Ground water and riparian rights(i) Eastern regime—rule of capture applies: a surface owner can take and use

water unless done negligently or maliciously(ii) Western regime—reasonable use: a surface owner can only pump water

for reasonable use on his land, and can only transport it off his land if none of his neighbors are harmed.

(b) Streams and lakes(i) Majority rule: reasonable use. A riparian owner is entitled to reasonable

use of the water. Domestic use is preferred; an upstream owner can take

water for nondomestic use only if the taking doesn’t interfere w/ domestic uses of all other riparian owners.

(ii) Minority rule: prior appropriation doctrine. This is a rule of capture; once you’ve established a prior beneficial use, you’ve got water rights. These rights can then be severed from the fee and sold to another.

(c) Drainage(i) Common enemy doctrine—divert surface flow freely; not liable

(a) Often watered down to permit reasonable diversion(ii) Civil law approach—liable for any damages caused by diversion, either

upstream or downstreamC) Acquisition by creation

1) Rationale: to reward labor. But defining “creation” is problematic; e.g., when one’s labor is mixed w/ another’s goods.

2) Acquisition by accession: occurs when one adds to another’s property either labor or labor and new materials. A prior owner may lose title by another’s accessions, but is entitled to the unimproved value. If the improver is denied title, the owner is entitled to the added value of the property.(a) Labor added. Where labor is added, the final product is usually awarded to the

owner unless its value has sufficiently increased so as to make it unfair to award it to the original owner. The improver must have acted in good faith.(i) Haslem v. Lockwood, CT Sup. Ct., 1871. Man gathers up manure on

public road into piles, intending to remove it, but another comes along and takes manure first. Held: because custom didn’t treat manure on road as part of realty, manure was abandoned personalty that became gatherers by virtue of his labor making it valuable. Property can be personalty in one context and realty in another, depending on public policy/custom/intent of annexor. Adding value to valueless abandoned personalty through labor creates property interest in it.

(b) Labor and materials added. In this case, the final product is awarded to the owner of the principal material.

(c) Confusion of goods. This results from the intermingling of different owner’s fungible goods so that separate identification is no longer possible. Each owner is then entitled to a proportionate share of the mass.

D) Finders1) A finder is a person who rightfully acquires possession of property of another that has

been lost, misplaced, abandoned, or hidden so as to be classified as treasure trove.(a) Lost property consists of personal property whose possession has been parted

with casually, involuntarily, or unconsciously.(b) Misplaced property refers to personal property which has been intentionally

placed somewhere and then unintentionally left or forgotten(c) Abandoned property consists of property that is no longer in the possession of the

prior possessor who has intentionally relinquished, given up, or released the property.

(d) Treasure trove consists of coin or money concealed in the earth or another private place, with the owner presently unknown

2) Rights of finder at common law:

(a) Acquires title to the property as against all but true owner(i) Clark v. Maloney, DE Supr. Ct., 1840. Finder ties up ten pine logs;

however, they come untied and someone takes them after finding them floating adrift. Held: first finder gets logs. Finder has superior title against all but rightful owner, even against subsequent finder, if first finder exercised due diligence (e.g., tying up logs w/ rope), thus exercising dominion over the found property as would an owner.

(ii) Anderson v. Gouldberg, MN Ct. of App., 1892. Trespasser cuts logs from trees and takes them to mill to be made into boards, from which they are taken by one who wrongly believes that they were cut from his own land, and so trespasser sues to replevy. Held: possessor by trespass has superior title and is entitled to replevin. Even a possessor by trespass has superior title to all but true owner; to rebut presumption of ownership, subsequent possessors would have to show they have superior title, which the jus tertii defense does not show.

(iii) Rationale:(a) Allowing prior possessors to prevail protects owners who have no indicia

of ownership;(b) Protection of peaceable protection(c) Encourages finders to report finds by rewarding their honesty(d) Rewards labor in returning useful item to economic use

(iv) What constitutes possession: similar to rule of capture, must have (1) control over the object with (2) intent to possess it.(a) Eads v. Brazelton, AK App. Ct., 1861. Man marked trees and placed

temporary buoys over shipwreck but does nothing else, but then sues another for raising wreck. Held: finder didn’t sufficiently take possession of wreck because placing buoys wasn’t due diligence to guard find. To take possession of abandoned prop., you must (1) take possession (2) with intent to reduce prop. to possession; however, while manual physical occupancy not required, just as much possession as nature of object and circumstances permit—which is more than just merely placing temporary buoys—is required.

(b) The finder is in a relationship with the true owner similar to that of bailor-bailee. Therefore, a finder can be guilty of conversion if the finder appropriates the property to his own use, or if he is reasonably able to discover the true owner and fails to do so.

(c) The finder of misplaced property is generally entitled to retain the possession of the property as against the owner of the land on which the property is found (i.e., the owner of the “locus in quo”), unless the property was found in a highly private place by a trespasser.(i) Finder’s status

(a) Employees or people on the premises for a limited purpose usually cannot keep a found object1. South Staffordshire Water Co. v. Sharman, Queen’s Bench, 1896.

Landowner sues employee who found gold rings while cleaning pool. Held: landowner gets rings. The owner of private land has possession

of all things on it, including objects lost while they had title of land, and has superior title to lost objects than actual finder.

(b) Trespassers cannot keep found objects1. Barker v. Bates, MA Dist. Ct., 1832. Trespasser takes timber that

washed up on landowner’s property. Held: landowner gets timber. Where A, first finder of a lost personalty, trespasses on B’s land to take personalty, the B has superior title to personalty to all except true owner.

(ii) Nature of object(a) Objects found under the soil belong to the landowner

1. Goddard v. Winchell, IA Sup. Ct., 1892. Aerolite falls and digs in on landowner’s field, which non-trespassing finder digs up and takes. Held: aerolite was annexed to realty and thus belongs to landowner. Objects buried in soil are part of realty.

2. Favorite v. Miller, CT Sup. Ct., 1978. Trespasser takes fragments of historical statue that had been in privately-owned swamp for 200 yrs. Held: landowner gets fragments. Landowner has better right than trespassing finder who takes personalty embedded in soil.

3. In England, treasure trove escheated to the crown. In the U.S., it is treated as lost property and belongs to the finder, unless the finder is a trespasser.

(iii) Object found in private home or public place(a) Objects found inside someone’s home are generally awarded to the

homeowner, unless the homeowner does not have possession of the home (i.e., is record title holder only).1. Hannah v. Peel, King’s Bench, 1945. Cobwebby broach found in

private house while landowner wasn’t in possession. Held: finder gets broach. Where the object was lost when landowner didn’t have occupancy of the private land, the first finder has superior title to the landowner.

(b) Possession of objects found in public places is determined by deciding whether the property was lost (accidentally left by owner) or mislaid (intentionally placed somewhere then forgotten). Lost property goes to the finder; mislaid property goes to the owner of the premises1. Bridges v. Hawkesworth, Queen’s Bench, 1847. Man finds lost bank

notes in shop, and true owner cannot be found. Held: finder gets bank notes. Finder of lost personalty has superior property right than owner of public shop.

(d) Abandoned property. Property intentionally abandoned by the true owner is awarded to the finder.

3) Statutory revisions to common law rights of finders(a) Commonly eliminate distinctions between lost, misplaced, abandoned property,

and treasure trove(b) Usually require the finder to deposit the found property with local authorities,

post a notice attempting to advise true owner the property has been found, and

award ownership to the finder if the true owner doesn’t claim the property w/in a certain time.

II) BailmentsA) Definition

1) Bailment is rightful possession of goods by one who isn’t the true owner. The goods must be specific and distinguishable—i.e., you cannot bail fungible items such as cash or grains.(a) Person who creates the bailment = bailor(b) Person to whom the goods are bailed = bailee

2) Generally, a bailment occurs when there is delivery of personal property by a prior possessor to a subsequent possessor for a particular purpose with an express or implied understanding that when the purpose is completed, the property will be returned to the prior possessor.

B) Creation1) Bailments arise by contract, express or implied:

(a) Express bailment contracts typically arise as a result of negotiations between bailor and bailee

(b) Implied bailment contracts can arise when someone comes into possession of the goods of another and the law imposes an obligation upon them to return the goods to another, e.g., finder

2) Bailee must be in possession of the goods3) In order to have possession, there must be (1) physical control over the property and

(2) intention to exercise that control.(a) Control

(i) Parking lots(a) Old rule was that if you retained your keys and didn’t deliver the car to an

attendant, no bailment(b) Newer cases hold that a bailment is created in “park and lock” situations

where the circumstances of the lot (e.g., a ticket identifying the car, attendants in the lot exercising surveillance) give rise to an expectation that a duty of reasonable care for the car has been accepted.1. Allen v. Hyatt Regency—Nashville Hotel, TN Sup. Ct., 1984. Car

stolen in park-and-lock commercial garage w/ attendant, guarded entrance, and non-specific tickets for vehicles. Held: parking and locking car and retaining keys in commercial parking garage w/ attendants and that requires presentation of ticket to exit is a delivery of possession and control of car to garage owner such that bailment for hire exists, giving rise to presumption of negligence on garage owner’s part if car is stolen. Even if bailee’s control over bailed article is limited, making analysis of delivery element questionable, look to the realities of the situation (who can bear loss/distribute costs?) and expectation of parties to determine if there’s a bailment.

(ii) Safety deposit boxes—the goods are deposited in a safe deposit box where both the customer and the bank have keys. Some cts. hold this a bailment although the bailee has neither complete control nor any way to know what is

in the box. The bailee does intend, however, to control the contents whatever they are

(iii) Custody distinguished—when the owner of the goods places them in the actual physical control of another w/ no intent to relinquish the right, as distinct from the power of dominion over them, there is no bailment or possession but only custody. For example, if a clerk hands goods to a customer to examine, the customer has only custody. Similarly, an employee has only custody of his employer’s goods.

(b) There must also be an intent to exercise control.(i) Mistake as to contents—if a person is mistaken as to the contents of a

parcel, he may not be deemed to be in possession of the contents even though he is in possession of the parcel.

(ii) Value undisclosed to bailee—if a bailor gives an article to a bailee but doesn’t disclose the exceptional value of the article, a bailment is nevertheless created, and the bailee is responsible for the full value of the article.(a) Peet v. The Roth Hotel Co., MN Sup. Ct., 1934. Woman leaves valuable

ring w/ hotel cashier to give to guest, but ring is lost. Held: hotel responsible for full value of ring. Where the obvious character bailment (bejeweled ring) shows it’s valuable, the bailee doesn’t have to know the cash value to accept bailment of it, such that bailee is responsible for full value of ring when ring is lost.

(iii) Involuntary bailment—even where the bailee doesn’t intend to exercise control, sometimes there is a bailment by operation of law; e.g., a finder, a landlord who resumes possession of leased premises after the tenant has vacated and left goods behind.

C) Distinguishing Bailment from Other Legal Relationships1) Custody: when the owner of the goods places them in the actual physical control of

another w/ no intent to relinquish the right, as distinct from the power of dominion over them, there is no bailment or possession but only custody. For example, if a clerk hands goods to a customer to examine, the customer has only custody. Similarly, an employee has only custody of his employer’s goods.

2) Sale: in a sale, title passes to the purchaser; in a bailment, title remains in the bailor.3) Conditional sale: a purchaser under a conditional sales contract acquires not only

possession but also beneficial interest in the goods for which he is under an obligation to pay. The conditional seller retains legal title for security only.

4) Trust: a trustee acquires legal title for purposes of performing her duties as trustee; a bailee has only possession. Thus, ordinarily a trustee can convey good title to a third person whereas a bailee cannot.

5) Lease: a landlord-tenant relationship and not a bailment arises if there is a lease of space for use by the tenant. The automobile parking lot situation results in a landlord-tenant or licensor-licensee relationship in the case of a park-and-lock operation. In this situation where the owner keeps the keys, along with control and constructive possession of the car, there is no bailment unless the circumstances of the lot create a reasonable expectation that a duty of reasonable care has been accepted. On the other hand, if the keys are surrendered to the attendant who assumes control of the car, there is a bailment. In a lease of personal property where the lessee acquires

possession of the goods with an obligation to return them, the lessee is a bailee of the goods.

D) Classifications of Bailments and Standard of Care1) Classification scheme is criticized, but used for the purpose of imposing liability for

negligence on the bailee and assessing the standard of care over the bailed goods.(a) If bailment is for the sole benefit of the bailor, the bailee is liable only for gross

negligence and is responsible for exercising slight care over the bailed goods;(b) If bailment is for the sole benefit of the bailee, the bailee is liable for even slight

negligence and is responsible for exercising great care over the bailed goods;(c) If bailment is for mutual benefit of bailor and bailee, the bailee is liable for

ordinary negligence and is responsible for exercising ordinary care over the bailed goods.(i) Peet v. The Roth Hotel Co., MN Sup. Ct., 1934. Woman leaves valuable

ring w/ hotel cashier to give to guest, but ring is lost. Held: hotel responsible for full value of ring. Even though cashier not paid, because delivering goods to guests a normal part of hotel service, bailment was nongratuitous and therefore bailee held to duty of ordinary care.

(d) Modern trend—a standard of ordinary care under the circumstances.2) Parties can by contract alter the standard of care owed by the bailee where this is not

contrary to public policy. To so contract, both parties must accept the terms, and where only a sign is posted by the bailee, there must be proof that the bailor saw and accepted its terms. For example, a limitation of liability on a check or receipt for the bailed goods is valid only if the bailor read the ticket and didn’t object, or if a reasonable person would expect a contract under such circumstances. Some such attempts to limit liability may also be invalid on public policy grounds or by statute.

E) Liability for Failure to Return Goods1) The bailee has a duty to return the goods to the bailor on demand, or if a fixed term

has been set by contract, at the expiration of that term.2) The bailee is strictly liable for conversion, regardless of negligence, if the bailee

wrongfully refuses to return the goods or if the bailee delivers the goods to the wrong person. This is often called “misdelivery.”(a) Exception: an involuntary bailee is only liable for misdelivery if he was negligent.

(i) Cowen v. Pressprich, NY Sup. Ct., App. Div., 1922. Upon being delivered the wrong railroad bond by Cowen’s messenger, the clerk called out “Cowen,” and gave bond to first boy who presented himself—who turned out not to be Cowen’s messenger at all. Held: clerk’s firm is liable to Cowen for loss of bond. Though an involuntary bailee of the bond and thus aren’t held to slightest duty of care as to bailed article, the clerk still has an absolute duty to redeliver bond to right person. (Reversed by NY Ct. of App., which held that involuntary bailees incur no responsibility unless they interfere w/ article in such a manner as to be inconsistent w/ the rightful owner’s interest in article; here, the clerk was in good faith and didn’t interfere w/ Cowen’s ownership of bond.)

3) Liability of the bailee is based on negligence if the goods are lost, destroyed, or damaged during the bailment. The burden of proof is normally on the bailor to establish that the bailee was negligent, and if the bailor proves a delivery of the goods

and failure to return them, or redelivery in a damaged condition, the bailor establishes a prima facie case. At this point, the burden of going forward with the evidence normally switches to the bailee.

F) Rights of Bailees Against Third Parties1) A bailee is entitled to possession of the bailed property or damages against third

parites who wrongfully take or damage the property. The wrongdoer cannot defeat the bailee’s claim by showing title in another with whom the wrongdoer has no connection.

G) Rights of Bailors Against Bona Fide Purchasers1) Ordinarily, a person cannot transfer a greater title to property to a third person than

the tranferor has. Thus, a bailee ordinarily cannot defeat the rights of the bailor by transferring the bailed property to a third party.

2) Under certain circumstances, a bailee can transfer a good title to a purchaser even though the transfer is wrongful as against the bailor. This can occur if the bailee is a dealer of the kind of goods bailed and the transferee is a bona fide purchaser for value.

III) GiftsA) Principles

1) A gift is a voluntary tranfer of property from the donor to the donee, w/out consideration or compensation.

2) A gift is a present transfer of an interest in property. The gifted interest can be either a present interest or a future interest.(a) Gruen v. Gruen, NY Ct. of App., 1986. Father gifted painting to son, retaining a

life estate (and thus conferring only a future interest—a reversion—to son), but son never took possession of painting before father died. Held: gift is enforceable. Clear and convincing evidence (explicit writings) can be sufficient to show that gift inter vivos was of future interest of reversion, which doesn’t need the donee to take physical possession to be effective.

3) If the transfer is intended only to be effective in the future and to create no rights in another at the present time, it is a mere promise to make a gift and unenforceable in the absence of consideration.

4) A gift made in a person’s will doesn’t take effect when the will is signed. It takes effect when the person dies unless between the time the will was signed and the person’s death the will was revoked. The recipient of the gift in the will has no property right in the subject matter of the gift until the testator dies. Gifts made in wills are called bequests, legacies, or devises.

5) A gift of property during the donor’s lifetime is only valid if there was (1) intent, (2) delivery, and (3) acceptance.

B) Intent to Make a Gift1) Donative intent is determined primarily from the words of the donor, who must have

intended to pass title presently, and not merely to transfer possession.(a) A promise to give a gift in the future is not a gift; a gift transfers title to the donee

immediately.(b) In doubtful cases, the cts. will consider:

(i) Surrounding circumstances;(ii) The relationship of the parties;

(iii) The size of the gift in relation to the total amount of the donor’s property; and

(iv) The conduct of the donor towards the property after the purported gift.C) Delivery

1) Delivery is essential.(a) Rationale—requiring delivery serves functions of:

(i) Ritual (a) Delivery impresses the donor with the legal significance and finality of the

act—the donor feels the “wrench of the delivery”(ii) Evidence, and

(a) Delivery is reliable, objective evidence of the intent to give(iii) Protection

(a) Requiring delivery protects unwary or barely competent donors from his improvident oral statements

2) The delivery must divest the donor of dominion and control over the property.(a) Irons v. Smallpiece, King’s Bench, 1819. Father orally gifted two colts to son,

but retained possession until death; son was supposed to be responsible for feeding of horses but didn’t start doing so until 3 days before father died. Held: gift ineffective for lack of delivery. An oral gift inter vivos of chattel isn’t enforceable where the donor retains possession until death, because there has been no delivery. If son had assumed full responsibility for care of horses, that may have been sufficient to show delivery since it would be change in possession—the change in parties’ relationship to stationary thing can betoken a change in possession.

(b) If gift is revocable—no delivery(i) In the Matter of the Estate of Szabo, NY Ct. of App., 1961. Mother asked

niece to make her son a joint tenant of AT&T stock after certificates are available, but mother dies before that happens, and thus stock certificates never changed hands nor AT&T notified of change. Held: gift unenforceable for lack of delivery. Because delivery of gift wasn’t to “point of no return,” gift inter vivos was ineffective

(ii) Woo v. Smart, VA. App. Ct., 1994. Just before dying, man gifted money in form of checks not cashed before death; executor of deceased’s estate refused to honor gifts. Held: gift wasn’t effective. To be effective, a gift causa mortis must be delivered to the donee, but since the transfer of a check isn’t an assignment of the funds to “point of no return” (revocable under UCC), delivery wasn’t effective.

3) What constitutes delivery depends upon the circumstances. Ordinarily, the delivery requirement is met if the donor turns over possession of the subject of the gift to the donee = “manual delivery”

4) If the subject matter of a gift cannot reasonably be delivered manually, or the circumstances don’t permit it, a symbolic or constructive delivery may suffice.(a) Symbolic delivery: something is transferred to the donee in place of the subject

matter of the gift(b) Constructive delivery: the means of obtaining possession and control over the

gifted property are transferred to the donee

5) If the subject matter of the gift is already in the hands of the donee, delivery is unnecessary.

6) A delivery to a third person on behalf of the donee is sufficient delivery if the third person is acting as a trustee of the donee and not an agent of the donor. Whether a third person is an agent of the donor or the donee depends upon the facts and circumstances of the case.

D) Acceptance1) Acceptance is required. The donee may refuse to accept since one cannot have

property thrust upon him in an inter vivos transaction against his will. However, acceptance is generally presumed if the gift is beneficial to the donee.

E) Inter Vivos or Causa Mortis1) A gift may be either inter vivos or causa mortis.

(a) Inter vivos: an irrevocable transfer of property made to the donee during the donor’s lifetime

(b) Causa mortis: a gift made in contemplation of the donor’s imminent death. It is revocable by the donor at any time before the donor dies and is automatically revoked if the donor doesn’t die from the anticipated peril. The gift causa mortis becomes absolute on the donor’s death from the anticipated peril if the donee survives the donor and the donor hasn’t revoked the gift.(i) Distinguish a gift causa mortis from a will. A will must comply with the

Statute of Sills, and generally must be in writing and have two witnesses to the signing. Testamentary gifts that do not comply with the Statute of Wills are invalid—except for the limited category of gifts causa mortis.

IV) Bona Fide Purchasers of ChattelA) General Rule: Nemo dat quod non habet. A seller can transfer no better title than he hasB) Bona Fide Purchaser. A BFP is one who takes possession (1) in good faith, (2) for

valuable consideration, and (3) without actual or inquiry notice of any wrongful possession.

C) Exceptions to nemo dat quod non habet:1) Money and negotiable instruments. Title to money and negotiable instruments passes

to a BFP2) Voidable title. Where a seller has voidable title (e.g., acquired title by fraud or by a

bounced check), a BFP takes title (but not if the title is void, b/c a BFP takes no title from a thief)(a) UCC §2-403(1): “A person with voidable title has power to transfer a good title to

a good faith purchaser for value.”3) Estoppel. If the owner of goods by words or conduct expressly or impliedly (1)

represents that the possessor is the owner or is authorized to pass title, and this (2) induces reliance by the BFP, the owner is estopped to deny the possessor’s title.

4) Entrusting goods to a merchant(a) Common law rule. If one entrusts goods to a (1) merchant who deals in goods of

that kind, and the owner (2) either stands by while the merchant displays the goods w/ goods for sale or clothes the merchant w/ apparent authority to dispose of the article, then the owner is estopped from denying that the merchant has the power to pass title to a BFP.

(i) Porter v. Wertz, NY Sup. Ct., App. Div., 1979. Porter induced by false pretenses to let Von Maker, pretending to be Wertz, borrow a painting. Von Maker has the real Wertz, a deli worker, to sell the painting to an art dealer, who sells painting to Venezuelan client. Held: equitable estoppel doesn’t bar Porter from recovering value of painting from art dealer. For equitable estoppel, one who lends goods to a merchant for business purposes and clothes merchant w/ possession and other indicia of title, is estopped from asserting title from BFP; here, the consignment to Von Maker wasn’t for business purposes (as he was just letting him hang it in his home to see if he wanted to buy it) and didn’t clothe him w/ indicia of title.

(b) UCC supplement to common law rule—the mere act of entrusting is sufficient to protect the BFP(i) UCC §2-403(2): “Any entrusting of possession of goods to a merchant

who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business.”(a) Porter v. Wertz, NY Sup. Ct., App. Div., 1979. Porter induced by false

pretenses to let Von Maker, pretending to be Wertz, borrow a painting. Von Maker has the real Wertz, a deli worker, to sell the painting to an art dealer, who sells painting to Venezuelan client. Held: statutory estoppel doesn’t bar Porter from recovering value of painting from art dealer. No statutory estoppel because (1) Wertz wasn’t the merchant to whom Porter entrusted the painting; (2) Wertz isn’t an art merchant; and (3) the sale wasn’t in the ordinary course of Wertz’s business (which is operating a delicatessen).

(ii) UCC §2-403(3): “’Entrusting’ includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.”

V) FixturesA) Personal property becomes a fixture when there is (1) annexation, (2) adaptation, and (3)

intention.1) Annexation: attachment to the realty2) Adaptation: chattel must have been adapted or applied to a particular use or purpose

beyond itself and made a part of some larger component of or function on the realty.3) Intention: the objective intention of the annexor

(a) Wyoming State Farm Loan Board v. Farm Credit Sys. Capital Corp., WY Ct. of App., 1988. Two creditors, one of whom who has security interest in land and its appurtenances and the other who has an interest in farm equipment, sue over who gets gated pipe worth $11,310, is lightweight, plastic, and attached only intermittently to riser pipes. Held: gated pipe isn’t a fixture, and so is personal property. To be a fixture, annexor must, inter alia, intend chattel to make it a permanent accession to realty—to be objectively inferred from circumstances. Here, where annexors stored pipes away from land, is portable, and has independent value, objective intention of annexors was not to annex pipes to realty.

(b) Factors to consider:(i) Nature of the chattel annexed;(ii) Relation and situation of the annexor;(iii) Method of annexation;(iv) Purpose or use of chattel

B) Hence, the law of fixtures is context specific:1) Theater seat is fixture, living room chair isn’t; a wood stove is a fixture in a cabin in

the woods but isn’t in an urban residence (where other means of heating are available).

C) Importance of distinction between personalty and realty:1) SOL differ for actions to recover chattel v. realty2) Whether conveyance must be in writing depends on personalty v. realty3) Succession at death differs from chattel to realty4) Sale of realty includes fixtures appurtenant to it but not personalty

VI) Rights of Possessors of Land, Including Adverse PossessorsA) Possession and Prior Possession

1) Possession of real property consists of dominion and control over the property with the intent to exclude others.

2) In order to constitute possession, the acts of dominion and control must reasonably correspond to the size of the tract, its condition, and appropriate use. The act must be of a character that usually accompany the ownership of similarly situated land; i.e., the acts must be consistent with how a reasonable owner of similar land might have used it.

3) A prior possessor of real property has title against the whole world except the rightful owner. As with personal property, the rightful owner may be merely a prior peaceful possessor.

B) Adverse Possession1) Adverse possession is based on statutes of limitation for recovery of real property.

These statutes also vest the adverse possessor with as perfect title as if there had been a conveyance by deed. However, this title isn’t a matter of public record until a ct. determines that title has been acquired by adverse possession and the ct’s judgment is entered on the public records.

2) The purposes of adverse possession:(a) The suppress dormant claims(b) To quiet titles(c) To require diligence on the part of the owner and penalize those who sit on their

rights too long(d) To reward the economic activities of a possessor who is utilizing land more

efficiently than the true owner is.C) The Five Elements of Adverse Possession

1) Actual (ordinary use to which the land is capable and such as an owner would make of it);

2) Open, visible, and notorious (meaning not secret or clandestine but occupying as an owner would occupy for all the world to see);

3) Exclusive (meaning sole physical occupancy or occupancy by another with the permission of the person claiming a title by adverse possession);

4) Continuous and peaceable (meaning w/out abatement, abandonment, or suspension in occupancy by the claimant, and also w/out interruption by physical or legal eviction); and(a) Can be seasonal, if that is how a reasonable owner would use the property

(i) Anderson v. Cold Spring Tungsten, Inc., CO Ct. of App., 1969. Record title-owner sues to eject adverse possessor who entered peaceable but under color of title and who built cabin on mountain area which he used seasonally (1 mth/yr). Held: adverse possessor wins. Where entry to land is meant to claim exclusive ownership, it is hostile. Continued use/occupation of cabin seasonally amounts to adverse possession because it was exclusive of other’s use of land in the manner that a reasonable owner would use the land.

(b) Tacking by successive possessors. An adverse possessor can establish continuous possession by tacking onto her own period of possession any period of adverse possession by predecessors in interest if there is privity of estate (i.e., a possessor voluntarily transferred to a subsequent possessor, whether by deed, will, written or oral contract)(i) No tacking if subsequent possessor ousted prior possessor(ii) No tacking if prior possessor abandoned property(iii) A mere parol transfer, however, is insufficient for tacking periods of

constructive adverse possession where color of title is required by statute5) Hostile and under claim of right (meaning that the possession is held against the

whole world including the true owner; that the possessor claims to be the owner whether or not there is justification for her claim, or whether or not there is “color of title” being a paper or other instrument that doesn’t qualify as an effective legal conveyance but that the claimant may believe is effective)(a) Some jurisdictions require color of title; alternatively, if color is present the SOL

may be shorter.(b) Possession must be hostile from its inception

(i) Lovejoy v. School District, CO. School district forms on state prop., which is later granted to private owner, where the custom of private landowners w/ schools on their property is to allow the school’s presence to obtain school services for their children. Held: school district has not acquired title by adverse possession. Even where possession is hostile at time of filing of suit, if original entry to prop. wasn’t hostile, no hostility for adverse possession.

(c) Good faith on the part of the adverse possessor is generally deemed immaterial. Thus, the possessor can prevail with no rightful claim at all if the 5 elements exist (title by theft)

(d) Boundary disputes: If a neighbor occupies adjacent land, mistakenly believing it is his, he is generally held to be an adverse possessor (objective rather than subjective intent is controlling).(i) Dillaha v. Temple, AK App. Ct., 1979. The owner of one of two

neighboring riparian properties to which accretions have been added occupies the entirety of the accreted land, but tells his son that the neighbors have an interest in the land and tells the neighbors that “he wants to work something out.” Held: no adverse possession of entirety of accreted land. Objective

evidence that the adverse possessor acknowledges that another has an interest in the land negates the necessary showing of hostility

(ii) An oral agreement may fix the boundary line by estoppel, if one party relies upon it.

6) Some jurisdictions also require the payment of property taxes for a claim of adverse possession(a) Meyer v. Law, FL Sup. Ct., 1973. Relying upon an incorrect survey, a landowner

builds a fence enclosing part of neighbor’s land but doesn’t pay property taxes on strip of property not in his deed. Held: no adverse possession. Without color of title or having paid property taxes on strip of land enclosed w/in fence, no adverse possession, because otherwise, accomplishing adverse possession would be too easy, where the usefulness of adverse possession is dwindling.

D) Burden of Proof—on the adverse possessor. The presumption is that possession is in subordination and not adverse to the legal owner unless the adverse possessor can show otherwise.

E) Nature of Title Acquired by Adverse Possession1) Once title is acquired by adverse possession, the quality of that title is the same as any

other title. Of course, to have that title reflected as a matter of public record, it is necessary for the adverse possessor to get a quiet title action (or to win an ejectment action brought by the record title holder).

2) An adverse possessor acquires only the estate or interest in the land which he has been claiming throughout the period of his adverse possession. For example, if the possessor has claimed only a life estate, he can mature title only to a life estate.

3) Title acquired by adverse possession relates back to the time of the possessor’s entry when the true owner’s cause of action accrued. Thus, once title is acquired, the true owner cannot bring any other causes of action for acts relating to the land on which the statute hasn’t yet run. For example, if A possesses Blackacre and cuts its timber for the statutory 10-year period, once A has acquired title by adverse possession, the true owner loses any action for the taking of the timber during the period of A’s possession before the statute had run.

4) The title acquired by adverse possession is an original title and not derived from the dispossessed owner. Thus, the adverse possessor takes the title and estate free of all claims which could have been asserted against the former owner during the statutory period.(a) Note, however, that easements, liens, and equitable servitudes remain binding on

the adverse possessor unless the adverse possessor has used the property inconsistently with the easement/lien/equitable servitude such that would give rise to a cause of action by the dominant tenant.

F) When Statute of Limitations Begins to Run: when the cause of action for possession accrues against the adverse possessor. This depends upon the facts in any given case. Typically, the cause accrues and the statute begins to run when a possessor without right enters into clearly visible possession of another’s land claiming adversely.1) Generally, the statute of limitation doesn’t run against the holder of a future interest

in existence at the time the adverse possession begins because the holder of the future interest is not presently entitled to possession.

2) However, once adverse possession has begun to run against an owner, it runs against that owner and all his successors in interest(a) Fleming v. Griswold, NY Ct. of App., 1842. Minor married woman (in

jurisdiction that recognizes coverture as disability) inherits property that has been adversely possessed for 10 yrs while testator had title. Held: SOL not tolled by heir’s disabilities. If SOL starts on ancestor, it is not tolled because heir is under disability.

G) Extent of Land Acquired by Adverse Possession1) Without color of title—land actually occupied/controlled2) With color of title: Constructive Adverse Possession

(a) Constructive adverse possession applies when the adverse possessor enters under color of title. Color of title means a writing which the adverse possessor may believe conveys a good title but really is so defective that it cannot operate as a conveyance.

(b) Constructive adverse possession is a fiction by which an actual possession of a portion of land is extended to include the remaining area of the tract encompassed within the instrument or decree constituting color of title. For constructive adverse possession, there must be an actual possession by the claimant of at least a part of the land. The amount of land that can be constructively possessed must be reasonable in size.

(c) While the recording statutes have no application to title by adverse possession, some states require the recording of the instrument upon which the claim is based in order to satisfy the requirements of adverse possession under color of title.

H) Effect of Disabilities1) If the person with the cause of action is under a disability at the time the cause of

action against the adverse possessor accrues, most states extend the time to bring a cause of action to some period beyond the removal of the disability.(a) Typical disabilities include: minority, legal incompetence, and imprisonment.

2) Under some statutes, the protection which is afforded by a disability is wholly personal to the disabled person and not available to anyone who may be a successor, either as heir, devisee, or purchaser.

3) The running of the statute on adverse possession isn’t affected by either an intervening or a supervening disability. Thus, the disability must exist when the cause of action first begins.

4) There is no tacking of disabilities, whether of successive disabilities in the same owner or of disabilities in successive owners.

5) If the original owner has two or more disabilities at the time the cause of action accrues, the owner may take advantage of the disability that lasts longest.

I) Rightful Possession Becoming Adverse Possession1) Certain relationships, e.g., co-tenants, give rise to a presumption that the possession

of one of the parties is with the permission of, and in subordination to, the rights of the other party or parties.

2) However, if the possessor makes an open disclaimer or repudiation of the title or rights of the other parties, and knowledge of the disclaimer is brought home to them or such disclaimer is implied by law, and the possession and disclaimer is continued

for the statutory period, then title will vest in the possessor in derogation of the rights of the others.

J) Whose Interests Are Affected1) The adverse possessor’s title doesn’t affect the interests of any person unless that

person had a cause of action because of the adverse possession.(a) Thus, if there is a severance of the surface and subsurface when adverse

possession starts, adverse possession of the surface doesn’t give a cause of action to the owner of the coal under the surface. The adverse possessor would get title only to the surface.

(b) Similarly, if at the time adverse possession begins, the estate is divided into present and future interests, adverse possession of the parcel doesn’t give rise to a cause of action in favor of the reversioner or remainderman. The adverse possessor would get a possessory interest.

(c) Similarly, a lien, easement, or equitable servitude isn’t destroyed by an adverse possessor unless he interferes with it so as to give the holder of the right cause to sue the adverse possessor.

2) An adverse possession that begins when the title is unified isn’t affected solely by a subsequent division of the title. Thus, if after adverse possession starts, the rightful owner separates the mineral estate, or creates possessory and future interests, the adverse possession continues to run against all parties, with the adverse possessor ultimately getting a fee simple absolute in the whole unless the owner of the subsurface starts mining operations or otherwise ousts the adverse possessor, or unless the owners of the future interests effectively assert their titles, which may require the filing of a law suit.

3) Government land may not be adversely possessedK) Innocent Improver Doctrine

1) Under the doctrine of annexation, improvements to real estate made by a wrongdoer belong to the owner of the real estate.

2) However, where the improvements were made by one who mistakenly believed that he or she owned the land on which the improvements were made, principles of unjust enrichment could compel a ct. of equity to refuse to quiet title in the improvement in the landowner, absent payment of fair consideration to the good faith innocent improver.

L) Adverse Possession of Chattels1) Generally, a thief cannot acquire or transfer title to stolen personal property, even to

an innocent purchaser.2) But the title to personal property can be lost by adverse possession.

(a) Chapin v. Freeland, MA Ct. of App., 1886. TO’s counters taken and installed in shop which was leased, then sold to P after leasor died; TO came in and took back the counters, and so P sued for replevin, saying he had acquired title through adverse possession. Held: P gets counters as adverse possessor. The running of SOL is a bar to bringing an action to recover your prop., and once it’s run, it empowers the adverse possessor (and his BFPs) w/ prop. rights to sue original owner to prop. back if the original owner resorts to self-help and repossesses prop.

3) Statute of Limitations:

(a) At common law, the statute of limitation began to run when possession became hostile, actual, open, exclusive, and continuous, rather than at that point that the goods were stolen or the true owner discovered their location.(i) Law of Fraudulent Concealment. At c/l, if someone steals chattels and

conceals them, the SOL wouldn’t begin to run until the chattels are no longer concealed.

(b) More recently, it has been held that the statute should begin to run when the true owner discovers or should have discovered the whereabouts of the stolen property (due diligence rule).

(c) Other courts have rejected both the common law rule and the discovery rule in favor of the demand and refusal rule. Under this rule, the statute of limitations begins the run from the time the true owner demands that the chattel be returned and the possessor refuses (demand-and-refuse rule).(i) Solomon R. Guggenheim Foundation v. Lubell, NY Ct. of App., 1991.

Painting stolen from museum and sold to BFP, who have it for 20 yrs (the SOL), during which time the museum does essentially nothing to locate its prop. When a dealer recognizes painting, museum demands its return. Held: museum entitled to painting. Even where true owner has done nothing to locate prop., the SOL for actions for replevin for stolen prop. runs from date of demand of prop.’s return from current possessor, if current possessor is BFP (if thief, it runs from date of theft, even if owner not aware of theft).

VII) Estates and Future InterestsA) No new estates may be created. Language creating an estate will be construed to mean

either fee simple, fee tail, life estate, or leasehold1) Johnson v. Whiton, MA Sup. Ct., 1893. O “to A and her heirs on her father’s side.”

Held: fee simple absolute. One cannot create new kinds of estates.B) Freehold Estates—the estates which had to provide “feudal incidences” and of which

their owners were “seised” (fee simple, fee tail, life estate)1) Fee simple absolute

(a) Lasts in perpetuity either in the owner or the owner’s successors.(i) If a fee simple owner dies intestate and w/out heirs, the fee simple

escheats to the state.(b) It is alienable, devisable, and descendible.(c) Words of creation at common law: “and his heirs”

(i) Modern law: requirement of words of inheritance abolished. A conveyance “O to A” conveys a fee simple (or whatever interest O had to convey).

2) Fee simple determinable with possibility of reverter(a) Could last in perpetuity but could end sooner upon the happening of a limitation

stated in the terms of the conveyance. Upon the happening of the limitation, the estate would automatically terminate and the property would revert to the grantor who retained the possibility of reverter.

(b) Words of creation: “so long as,” “while,” “during”(c) It is alienable, devisable, and descendible.

3) Fee simple subject to condition subsequent—which means fee simple subject to being terminated by exercise of a power of termination or right of reentry for condition broken(a) Could last in perpetuity but could end sooner upon the happening of a condition

subsequent stated in the terms of the conveyance. Upon the happening of the condition, the estate can only come to an end if the holder of the power of termination exercises it. Absent such exercise, the holder of the fee simple subject to condition subsequent continues to possess the estate.

(b) Words of creation: “on condition that,” “provided that”(c) Is alienable, devisable, and descendible.

4) Fee simple subject to executory limitation(a) Subject to springing or shifting executory interest

(i) Fee simple that might terminate upon the happening of a condition subsequent. If the condition occurs the fees shifts automatically to the grantor (springing interest) or to someone other than the grantor (shifting interest).

(b) Words of creation: “on condition that,” “provided that”(c) If the condition never occurred, then the fees simple could last in perpetuity.(d) A fee simple subject to a springing executory interest is a fee simple subject to a

future interest that will become possessory after some period of time that no other transferee is entitled to possession. Typically, the grantor retained the right of possession, expressly or impliedly, during this period so that no other transferee was entitled to possession.

5) Fee tail(a) This was an estate that automatically descended to the heirs of the estate owner

upon his death and continued descending to the lineal descendants until the entire line of lineal descendants became extinct.

(b) The person who created the fee tail retained a reversion which could become possessory only at such time, if ever, that the grantee (tenant-in-tail) and his entire line of descendants became extinct.

(c) Words of creation: “and the heirs of his (or her) body”(i) Fee tail male: To A and the male heirs of his body(ii) Fee tail female: To A and the female heirs of his body(iii) Fee tail special: To A and the heirs of her body with B

(d) The fee tail tenant owned an inheritable freehold estate but with limited powers over the estate. The tenant in tail could use it during his lifetime, but he could make no disposition thereof so as to prevent its descending to his bodily heirs.

(e) Because the fee tail restricted the free alienability of land, the courts didn’t favor it.

(f) Modern revisions to fee tail(i) Still exists in some states. In these states, though, a fee tail tenant can at

any time disentail and convey a fee simple(ii) Abolished in most states.

(a) Some states give a life estate (or fee tail, which is functionally identical) to the tenant in tail, w/ a remainder in fee simple to his issue.

(b) Some states give a fee simple absolute to the tenant in tail

(c) Some states give a fee simple to the tenant in tail, but allow the remainder/reversion to become possessory if the tenant in tail dies w/out issue

6) Life estate(a) Types of life estate:

(i) Life estate for life of tenant(a) Estate that lasts only so long as the grantee is alive. Terminates

automatically when the grantee dies. At that time, the property either reverted ot the grantor or passed to some other person who had either a remainder or an executory interest.

(b) A life estate is alienable. However, the grantee of the life estate could take no greater estate than the grantee had, so effectively the grantee took an estate measured by the grantor-life tenant’s life.

(ii) Life estate for the life of one other than the tenant(a) This estate lasted for the life of someone other than the current owner of

the estate.(b) Called an estate pur autrie vie.

(iii) Common law life estate by dower(a) This was the estate of a surviving widow (not widower).(b) It equaled a life estate in one-third of all lands of which the husband was

seised at any time during the marriage.(c) It became a possessory life estate only at the husband’s death if the widow

survives.(iv) Common law life estate by curtesy

(a) This was the estate of a surviving widower.(b) It equaled a life estate of all the lands of which the wife was seised of a

legal or equitable estate at any time during the marriage.(v) Life estate by and during coverture

(a) This was the estate a married man had in his wife’s property beginning as of the date of marriage.

(b) With the estate the husband assumed all administrative and management control of the wife’s realty.

(b) If an estate may last for a lifetime, it is a life estate even though it may be extinguished before it runs its natural course. However, if a limitation is made expressly subject to the will of the grantee or lessee, there is a conflict, and the interest created is either a life estate determinable or a tenancy at will depending upon the jurisdiction.(i) Thompson v. Baxter, MN Sup. Ct., 1909. Lease from O to A “his heirs,

executors, administrators, and assigns, for and during the full term of while he shall wish to live in Albert Lea.” Held: life estate. The lease of property to someone “while he shall wish to live in Albert Lea” creates a life estate in the leasee. Not a tenancy at will, from month to month, or at sufferance because only lessee can terminate. Really should be a life estate determinable (terminating when A no longer wishes to live in Albert Lea)

(c) If a conveyance identifies the grantee but fails to describe effectively the estate which the grantee takes, then the grantee takes a life estate at common law.

Today, the grantee is presumed to take whatever estate the grantor had to convey unless a contrary intent appears in the governing instrument.(i) Smith v. Smith, AR Sup. Ct., 1951. “O to A, to be used as long as A

wants as a home, but proceeds of any sale to be split between A and B” and no reversion stated. Held: life estate. Where deed doesn’t describe form of estate granted (e.g., “O to A”) but has provisions inconsistent w/ infinite estate (e.g., “to be used as A’s home,” “proceeds of sale to be split between A and B”), A takes a life estate.

(d) Under the Rule in Shelley’s Case, a conveyance of a remainder to the heirs or the heirs of the body of the life tenant gives the remainder to the life tenant in fee. This Rule, which is a rule of property law at common law and doesn’t give way (as a rule of construction would) to a contrary intent, defeats the intention of the grantor to create a life estate and a remainder in the life of the tenant’s heirs.

(e) A life estate may be measured by resort to a reasonable number of lives. Thus, a conveyance “to A for the lives of B, C, D, and E” terminates upon the death of the survivor of the four named lives. On the other hand, a life estate to B to last for her life and for the lives of all persons of a given estate would give B a life estate for her life only.

(f) Forfeiture restraints on the power to alienate a life estate, usually phrased so as to make the life estate defeasible on an attempted alienation, are valid. The reasons for upholding these restraints are: (1) life estates are not readily alienable in a commercial sense anyway; and (2) the restraint may have been imposed for the benefit of the reversioner or remainderman.

(g) Relationship between life tenant and remainderman:(i) Waste. The life tenant is entitled to the reasonable use and enjoyment of

the land but cannot waste it (i.e., permanently impair its value)(a) Types of waste:

1. Affirmative waste. This occurs when the life tenant destroys the property or exploits the natural resources

2. Permissive waste. This occurs when the land is allowed to fall into disrepair

3. Ameliorating waste. This occurs when the use of the land is changed so as to increase its valuea. Actionable if (1) the grantor intended to pass the land with specific

buildings on it to the remainderman, and (2) the buildings can reasonably be used for the purpose built.i. Brokaw v. Fairchild, NY Sup. Ct., 1929. Life tenant wants to

tear down expensive-to-maintain mansion in Manhattan and build an apartment building that would be very profitable. Held: remainderman entitled to injunction. The demolition of the structure that is the explicit subject of the life estate in an area suitable for its use, even if it is an expensive and unprofitable structure and the purpose of the demolition is to erect a much more profitable building in its place, is waste and may be prevented by the remainderman.

b. Defense: the life tenant honestly and reasonably believed himself to own the land in fee simple.i. New York, O. & W.R. Co. v. Livingston, NY Ct. of App.,

1924. Life tenant, covenanting that remainderman would be forever estopped from asserting claim, sold land as fee simple, which, through mesne conveyances, came to RR that built a station on the land, thinking it was holder of fee. When remainderman asserted interest upon life tenant’s death, RR used private eminent domain. Held: RR only has to pay remainderman value of unimproved land. Where a railroad enters lawfully upon land and improves it in good faith, it may exclude the value of the improvements in proceeds brought later to condemn a hostile right.

(b) Remedies: damages (where states have followed the Statute of Gloucester, double or treble damages as an incentive to litigate), injunction, partition, receivership (appointment of third party to oversee repairs)

(ii) If the life tenant recovers title to the property that had been lost (e.g., through a tax auction brought about by life tenant’s nonpayment of taxes), the life tenant’s redeeming of the estate also redeems the remainderman’s interest.(a) Tillman v. Richton Tie and Timber Co., MS Sup. Ct., 1955. Life tenant

lost estate through nonpayment of taxes, then repurchased part of land at tax auction and the other part of land from the person who purchased it at the tax auction. Held: remainderman gets property at life tenant’s death. A life tenant who redeems his estate from the state for nonpayment of taxes directly, by repurchasing it at a tax sale, or indirectly, by repurchasing it from third party purchaser at tax sale, gets back his old life estate and restores remainderman.

C) Non-freehold Estates1) Estate (or term) for years

(a) This estate begins and ends on a fixed date set forth in the lease.(b) No notice is necessary to terminate this tenancy as the date of termination is

known when the lease begins and is fixed in the lease.2) Periodic tenancy

(a) This is an estate that runs from period to period such as year-to-year or month-to-month.

(b) This tenancy is terminable by either landlord or tenant giving the other the required written notice.

(c) Notice to terminate is commensurate with the period. Thus, to terminate a month-to-month tenancy, one month notice is required. However, a year-to-year tenancy was terminable by the giving of six months notice.

3) Tenancy at will(a) This tenancy ends whenever the landlord or tenant decide to terminate the tenancy

with no advance notice required.(b) Because of the potential disruption that could be caused by the no-advance notice

termination, this estate is largely disfavored and where the character of an estate is

ambiguous, the courts are likely to characterize the estate as a periodic tenancy rather than a tenancy at will.

4) Tenancy at sufferance(a) This is the tenancy that arises if a term of years tenant remains in possession

beyond the date fixed in the lease for the term of years to end.(b) It arises upon the election of the landlord who can treat the tenant who stays

beyond the terms of the lease (a holdover tenant) as either a tenant at sufferance or as a trespasser.

(c) At common law, this tenancy was terminable by the giving of six-months notice.D) Concurrent Estates

1) Joint Tenancy(a) Always created by deed or by will, never by descent.(b) O “to B and C and their heirs” are typical words for creating a joint tenancy at

common law. Today in the absence of a clearly expressed intent to create a joint tenancy with the right of survivorship, this limitation creates a tenancy in common.

(c) Every joint estate requires the four unities:(i) Time: all tenants take their interests at the same instant(ii) Title: all tenants take their interest from the same instrument

(a) Use of a strawman can get around this rule. Some states even eliminate the need for a strawman and would permit conveyances such as “O to O and A as joint tenants with right of survivorship and not as tenants in common” to create joint tenancy.1. Riddle v. Harmon, CA Ct. of App., 1980. One tenant in a joint

tenancy secretly conveyed her interest as a joint tenant to herself as a tenant in common, expressly in order to destroy the right of survivorship, but without using strawman. Held: severance of joint tenancy effective. One joint tenant may unilaterally sever the joint tenancy without the use of an intermediary device.

(iii) Interest: all tenants have identical interest in the property(iv) Possession: the possession of one joint tenant is the possession of all joint

tenants and the possession of all the joint tenants is the possession of each joint tenant.

(d) Every joint tenant owns the undivided whole of the property; co-tenants do not own a fractional interest.

(e) The characteristic of joint tenancy is that of survivorship. Upon the death of a joint tenant, his heirs get nothing, and the surviving co-tenants own the whole of the property. The survivors take nothing from the decedent but take the whole from the original conveyance which created the joint tenancy and which they have owned all the time.

(f) A severance of the joint tenancy can be made by a conveyance but not by will, because survivorship is prior to and defeats any purported disposition in the will.

(g) Joint tenancy is destroyed by severance inter vivos, by partition, or by any irrevocable act destroying one of the four unities.(i) Allison v. Powell, PA Sup’r Ct., 1984. A joint tenant died will a partition

action was pending and while negotiating w/ cotenants on terms for their

buying out his interest in property. Held: joint tenancy not destroyed. Joint tenancy is only destroyed by an irrevocable act; the mere commencing of the partition action isn’t an irrevocable act, and the negotiations hadn’t given rise to an enforceable contract.

(ii) Joint tenancy is also destroyed where one joint tenant murders another.(iii) Divorce doesn’t terminate a joint tenancy(iv) Mortgage: depends upon jurisdiction’s theory of mortgage

(a) Title theory—a mortgage conveys legal title to the mortgagee that is redeemed by repayment. Under the title theory of mortgages, one joint tenant’s giving a mortgage severs the joint tenancy.

(b) Lien theory—a mortgagee gets a security interest, a lien, on the title, and thus legal title remains in the mortgagor. Under the lien theory of mortgage, one joint tenant’s giving a mortgage doesn’t sever the joint tenancy. Cts. are split on whether the surviving joint tenant takes subject to the mortgage if the mortgagor dies before the mortgage is paid off.

(v) Lease(a) At common law, the conveyance of a leasehold severed the joint tenancy

because it destroyed the unity of interest (the lessor had only a reversion whereas the cotenant had a fee simple).

(b) Modern view—lease doesn’t sever unless long term (e.g., 99 yrs). However, cts. are split on whether the surviving joint tenant takes subject to the lease.

(c) Ultimately, it’s the intention of the joint tenants that controls severance.2) Tenancy by the Entirety

(a) A joint tenancy where there is an additional unity—person (marriage of the co-tenants)(i) Divorce eliminates the unity of person, destroys the tenancy by the

entirety, and the divorced persons become tenants in common of the property.(ii) Neither spouse has the right to partition a tenancy by the entirety, and

neither has power, without the consent of the other, to destroy it.(b) In states that still recognize the tenancy by the entirety, a conveyance to a

husband and wife is presumed to create a tenancy by the entirety unless a contrary intent is shown.

(c) Majority rule: neither spouse can dispose of any interest in the estate owned by the entirety, both must join in the conveyance. Similarly, creditors of one spouse cannot reach the estate owned by the entirety.

(d) Minority rule: each spouse can convey independently of the other, and creditors of one spouse can reach the estate owned by the entirety.

3) Tenancy in Common(a) May be created by deed, by will, or by operation of law.(b) Under modern statutes, tenancy in common is preferred over joint tenancy. Thus,

a conveyance to two or more persons is presumptively a tenancy in common.(c) Only one unity—possession—need be present in tenancy in common.

(i) Thus, cotenants in common can have unequal shares, or even different types of estates.

(d) Each tenant owns an undivided fractional part of the property; none owns the whole as in joint tenancy.

(e) Each tenant can dispose of his undivided fractional part or any portion thereof, either by deed or by will.

(f) Upon the death intestate of a tenant in common, her interest descends to her heirs. There is no right of survivorship.

(g) Tenancy in common may be destroyed by partition or by merger when the entire title vests in one person, either by purchase or otherwise.

4) Rights and Duties of Cotenants(a) Possession. Each cotenant is equally entitled to possession of the entire property;

however, one cotenant may not oust another(i) Ouster: if one cotenant ousts another, he must pay reasonable rental value;

alternatively, the cotenant may bring suit to partition the tenancy.(b) Accounting for rents received from a third party.

(i) Statute of Anne. If one cotenant rents out the property to a third party, he must share the rents received equally with the other cotenants.

(c) Actions to protect the property(i) Expenses:

(a) Improvements are voluntary—no compelled contribution from cotenants (but ct. may consider during partition action)

(b) Necessary repairs merit contribution, if the tenant who performs repairs asks for contribution from cotenants

(c) Taxes—a cotenant who pays more than his proportional share of taxes is entitled to contribution from cotenants

(d) Mortgage—a cotenant who pays more than his proportional share of principal/interest payments due is entitled to contribution from cotenants.

(ii) Acquisition of outstanding title: if a cotenant acquires an outstanding title (e.g., at a tax auction), she redeems the interests of her cotenants

(iii) Partition: any common or joint tenant can bring a suit to partition the tenancy. The court either physically divides the property or sells the common property and splits the proceeds accordingly.(a) Tenants by the entirety may not partition w/out consent of the cotenant

(iv) Adverse possession: a cotenant can become an adverse possessor only upon clear notice of repudiation of the common title being given to the other cotenants.

E) Marital Rights1) Common Law

(a) Dower: on a husband’s death, a wife has dower in all freehold land of which her husband is seised during marriage and which is inheritable by issue born of the marriage (but there doesn’t actually have to have issue born of the marriage). Dower is a life estate in 1/3 of each parcel of qualifying land.(i) There was no dower in land in which the husband had a life estate, a joint

tenancy, or a leasehold. Nor did dower attach to personal property, equitable interests, or choses in action.(a) Melenky v. Melen, NY Ct. of App., 1922. Father conveys property to son

w/ oral promise to reconvey upon demand; after father remarries and

demands property back, son only reconveys life estate, prompting father’s new wife to sue to set aside life estate as depriving her of dower. Held: wife cannot sue. Wife of a still-living husband cannot sue for reconveyance to give her a dower where her husband chooses not to exercise his right to sue his son for full reconveyance of the fee simple. If the promise to reconvey had been written so as to create a trust, dower would have attached since the father would have been seised of an equitable estate in fee simple as beneficiary of trust.

(ii) Rights during husband’s life(a) Dower attaches to the land the moment the husband is seised during

marriage. Once inchoate dower attaches, the wife prevails over any subsequent purchasers of the property and over any attaching creditors. They take subject to her dower.

(b) However, dower can be released in favor of a purchaser or creditor, and ends if the couple gets divorced

(c) Secret transfers made before marriage, when marriage is contemplated, may be deemed fraudulent as to the surviving wife and thus subject to dower.

(iii) Dower has been abolished in most states and replaced by the elective share(b) Curtesy: on a wife’s death, a husband received a life estate in all of his wife’s

lands (which she possessed—she didn’t have to have seisen) if issue were born of the marriage. Applied to both legal and equitable estates.(i) Abolished. Where dower has been retained, it has been extended to the

husband and curtesy has been abolished.2) Modern statutory elective share

(a) Almost all common law property states give the surviving spouse an elective share (either a fixed percentage, or a sliding percentage based on length of marriage) in the decedent’s property, both personal and real, legal and equitable;

(b) Alternatively, the surviving spouse can take under the will.3) Homestead Exemptions

(a) Statutory right to a homestead exemption from the claim of creditors of either spouse—a property interest that cannot be defeated by the conveyance of one spouse w/out the other’s consent.

(b) Generally applies to couple’s principal residence up to a stated dollar value (usually too low b/c of inflation since time of statute).

(c) Cannot be defeated by the will of the deceased spouse, but in some states the surviving spouse must elect it against the will.

(d) Exception:(i) Claims for money that enabled purchase/improvement of the homestead

property aren’t subject to this right (e.g., lender of loan secured by mortgage).4) Community property

(a) In a few states, property acquired or income earned during the marriage is owned in equal undivided shares by the spouses.

(b) Where community property and separate property were commingled, the commingled whole is presumed to be community property

(c) Either spouse alone can manage community property and acts as a fiduciary in the exercise of management power

(d) Where couples migrate from community property to common law states and vice versa, property rights are determined by the state of domicile when the property is earned or acquired

(e) Dissolution of community property:(i) Divorce: community property is divided equally(ii) Death: the decedent has the right to transfer his or her half of the

community property by will to anyone, and surviving spouse gets other half of community property.(a) In re Kessler’s Estate, OH Sup. Ct., 1964. Widow succeeding to half of

community property challenges death tax imposed on succession to survivorship share of joint tenants by non-community property state. Held: death tax applies. A death tax that treats the death of a joint tenant as a taxable event also applies to the death of a spouse where the couple previously lived in a community property state, such that the surviving spouse must pay death tax on the ½ share of community property she succeeds to on decedent’s death.

F) Future Interests1) Reversion

(a) The future interest retained by the grantor who conveys a life estate, if the life estate is not followed by a vested remainder in a transferee.

(b) Reversions are alienable, devisable, and descendible.2) Possibility of Reverter

(a) The future interest retained by a grantor who conveys a fee simple determinable(b) Today, in most, but not all states, the possibility of reverter is alienable, devisable,

and descendible. If transferred, it continues to be classified as a possibility of reverter in the hands of the transferee.(i) Statutory modification—some states have created SOLs on assertion of

possibility of reverter, otherwise they are barred.3) Right of Reentry for condition broken or power of termination

(a) The future interest that may be retained by the grantor who conveys a fee simple on condition subsequent.

(b) For the holder of the interest to acquire possession of the property subject to the divesting condition, the holder must exercise the right of entry.(i) At common law, this interest was not alienable. In most states today, it is

devisable and descendible. It is alienable to the holder of the fee simple subject to condition subsequent, or to a third party if coupled with a reversion.

(ii) Statutory modification—some states have created SOLs on assertion of powers of termination otherwise they are barred.

4) Vested remainder(a) A remainder limited in favor of a born, ascertained person w/out a condition

precedent(b) A vested remainder is alienable, devisable, and descendible.

5) Vested remainder subject to open or partial divestment

(a) A remainder limited in favor of a class of persons having at least one living member, subject to no unmet conditions precedent.(i) A class of persons collectively described (e.g., children, brothers and

sisters, heirs, descendants, etc.)(ii) It is subject to open if new persons can join the class(iii) A class is closed if no additional persons may join the class(iv) If a class is closed and subject to no unmet conditions, the remainder is an

indefeasibly vested remainder in a class of persons.(v) The interest of a member of such a class is alienable, devisable, and

descendible.6) Vested remainder subject to complete divestment

(a) A remainder limited in favor of a born ascertained person or in a class that is vested subject to open, but is subject to the occurrence or nonoccurrence of a condition subsequent such that the remainder may not become possessory or, if it becomes possessory, may not remain possessory in infinity.

(b) Generally, a vested remainder subject to complete divestment is alienable and devisable and descendible unless the interest is subject to an express or implied condition of survivorship.

7) Contingent remainder(a) A remainder that may or may not become possessory

(i) It is limited in favor of one who is either unborn, unascertained, or whose interest is subject to the occurrence or nonoccurrence of a condition precedent.

(ii) Generally, contingent remainders are alienable and devisable and descendible unless conditioned expressly or impliedly upon survivorship.

8) Executory interests(a) An executory interest is an interest limited in favor of a transferee which, in order

to become possessory, must divest the vested interest of either another transferee or the transferor.

(b) Springing executory interests(i) A future interest limited in favor of a transferee that in order to become

possessory must divest the transferor of a retained interest after some period of time during which there is no transferee entitled to a present interest which, at common law, would be a freehold estate.

(c) Shifting executory interests(i) A future interest that in order to become possessory must, upon the

occurrence or nonoccurrence of an event, divest a present interest of another transferee or a vested interest of another transferee.

VIII) Construction of Deeds and WillsA) Rules of Construction

1) The purpose of construing a conveyance or will when its terms are ambiguous is to determine the intentions of the parties.(a) Armstrong v. Smith, AL Sup. Ct., 1971. O to A “and her offsprings or heirs”; no

reversion clause, nor are A’s children named. Held: fee simple. The words “offsprings or heirs” are words of limitation; and so A takes a fee tail, which has been converted to a fee simple absolute by statute.

2) In construing an instrument, every part of it should, if possible, be given a meaning in considering the meaning of the instrument as a whole. This rule might be characterized as the “four corners doctrine,” meaning that everything within the four corners of the instrument should be considered in its construction.(a) Hall v. Hall, TE Sup. Ct., 1980. Granting clause of deed provided for fee simple

absolute, but habendum clause of deed placed a condition subsequent on the title. Held: fee simple subject to condition subsequent. Where the granting clause gives an unlimited right of disposition but the habendum clause provides for a condition subsequent, the deed conveys a fee simple subject to a condition, because the limitation was the intent of the grantor, reading the deed as a whole.

3) If possible, parts of an instrument should be construed as consistent with each other.4) A deed is always construed most strongly against the grantor who has used the

language.5) If an instrument contains two contradictory clauses, the former governs over the

latter. This is part of the old maxim, “the first deed and the last will shall operate.” In a deed, this may take the form of the granting clause and the habendum clause being repugnant to the other. In this case, the granting clause governs. This “rule of repugnant clauses” in modern times will normally not be applied in an arbitrary manner, and it frequently will be rejected in favor of a “four corners doctrine.”(a) Camp v. Camp, VA Sup. Ct., 1979. Deed to A and B “as tenants in common with

the right of survivorship as at common law.” Held: tenants as common. Where two clauses in a deed are irreconcilable, the first controls.

6) Parol evidence will only be considered when the deed is facially ambiguous, but not to vary or contradict the written terms.

7) A deed will be construed to grant a fee simple absolute rather than a fee simple determinable or a fee simple on condition subsequent if the language of the whole instrument makes this interpretation reasonably possible—but if a fee simple defeasible is objectively the intent of the grantor, that is controlling.

B) Restraints1) A provision in a deed or will that the transferee of the property cannot dispose of the

property is void as a disabling restraint on alienation.(a) A restraint on alienation can be in forfeiture form, disabling form, or promissory

form(i) Forfeiture—if the grantee tries to alienate, his interest is forfeited; e.g., O

to A and his heirs, but if A attempts to transfer the property by any means whatsoever, then to B and her heirs (always invalid)

(ii) Disabling—the grantee doesn’t have the power to alienate; e.g., O to A and her heirs, but any transfer hereafter in any manner of an interest in the property shall be null and void (usually invalid)

(iii) Promissory—the grantee covenants not to alienate and promises to pay damages if done; e.g., O to A and his heirs, and A promises for himself, his heirs, and successors in interest that the property will not be transferred by any means (most likely to be upheld)

(b) A total restraint is void. A partial restraint is usually, void, but there are a few exceptions if the partial restraint has a reasonable purpose and is limited in duration (e.g., a right of first refusal).

(i) Bank of Powhattan v. Rooney, KS Sup. Ct., 1937. Provision in will distributing property to relatives states, “It is my will that any of the beneficiaries under this will shall have the privilege of selling their interest in lands bequeathed to them to any other beneficiary at any time, but shall not sell to an outsider until 3 yrs after my death”; and there is no enforcement provision for restriction. Held: restriction on alienation invalid. Restrictions on alienation even for a limited time period and even if they allow alienation to a particular class or group of persons are merely admonitory if there is no enforcement provision, and even if it wasn’t admonitory, it is void.

(c) Discriminatory restraints (e.g., restraints regarding specific ethnic or religious groups) are unenforceable.

(d) Restraints on a life estate are usually upheld, since they’re not really marketable anyway.(i) E.g., a spendthrift trust

(a) Estate of Elizabeth Beck, PA Sup. Ct., 1890. A condition in a will provides for an estate to be paid to legatee by executor except not to be attached by legatee’s creditors; creditors sue executor for legatee’s debts. Held: creditors cannot reach estate. The condition creates a trust for the legatee while the estate is in the executor’s hands, and the funds in the trust cannot be attached since that is the testator’s intent.

(e) A restraint on use of the property that makes the property less alienable, or even completely inalienable, is valid.(i) Mountain Brow Lodge v. Toscano, Cal. App., 1968. O to A, and said

property restricted for the use and benefit of A, and if it is ever not so used or is attempted to be sold, it shall revert to O. Held: restraint on alienation void but use restriction valid. A deed conveying property to A “restricted for the use and benefit” of A creates a defeasible fee, where “use” being defined in context of A’s activities, whether A is a hospital, a school, etc.

2) Restraints on marriage are struck down as violations of public policy if the purpose of the restraint is to penalize marriage. On the other hand, if the purpose is to give support until marriage or remarriage, when the new spouse’s obligation of support arises, the restraint is valid.

C) Definitions:1) Heirs: persons who inherit an intestate’s real property2) Next of kin: persons who inherit an intestate’s personal property3) Devisees: persons who receive a testator’s real property under a will

(a) Real property is devised to the devisee from the testator4) Legatees: persons who receive a testator’s personal property under a will

(a) Personal property is bequeathed to the legatee from the testator5) Meaning of “dies without issue”

(a) Indefinite failure construction—a grantee “dies w/out issue” when the grantee’s entire line dies out (as in a fee tail)

(b) Definite failure construction—a grantee “dies w/out issue” when the grantee has no issue alive at the time of his death. This is the preferred construction, and an indefinite failure of issue construction will only be used where the intent to create a fee tail is clear.

6) Meaning of “to A and his children”(a) Rule in Wild’s Case: A devise (but not a conveyance) to “A and his children”

devises:(i) A fee tail to A if, at the time of the devise, A has no living children; or(ii) A joint tenancy with right of survivorship in A and A’s children if, at the

time of the devise, A had living children.(a) Some statues alter this to say that they would share a tenancy in common

rather than a joint tenancyIX) Classification of Future Interests

A) Types of Future Estates—Generally1) There are five kinds of future interests (the first three in favor of grantor and last two

always created in favor of a transferee):(a) Reversions(b) Possibilities of reverter(c) Powers of termination(d) Remainders(e) Executory interests

B) Reversions1) When a grantor conveys to another an estate the duration of which is less than that

which the grantor owns, there is an undisposed of residue remaining in the grantor. That residue is called a reversion if the transferred estate is either a life estate, a fee tail, or a non-freehold estate.

2) A reversion is a vested future interest(a) Long v. Long, OH Sup. Ct., 1976. O grants fee tail to A, then dies. A dies w/out

issue 50 years later. Held: reversion to fee tail goes to O’s heirs measured at the time of O’s death. A reversion is a vested future interest, and so it passes to the heirs measured at the time of the grantor’s death; if a reversion were an inchoate future interest, it would’ve passed to the heirs measured at the time of the grantee’s failure of issue.

3) All reversions are vested and are of two classes: (1) those that cannot be divested and (2) those subject to divestment.(a) Examples of reversions that cannot be divested:

(i) O to B for life.(ii) O, being a life tenant, conveys to B for 99 years(iii) O, being a life tenant, conveys to B for life.(iv) O to B for such portion of my life as B continues to support me.

(b) Examples of reversions subject to divestment:(i) O to B for life, and if C pays B $100 before B’s death, then to C and his

heirs. O has a reversion which is subject to complete divestment if and when C pays B $100.

(ii) O to B for life, and two years after B’s death, to C and his heirs. O has a reversion for two years after B’s death. This reversion will then be divested by the springing executory interest in C.

4) An attempt to create a remainder in a conveyance in favor of the heirs of the grantor is ineffective under the doctrine of worthier title in those jurisdictions in which the doctrine has not been abolished, and the grantor retains a reversion.

C) Possibilities of Reverter1) A possibility of reverter is the interest left in a grantor who conveys a fee simple

determinable.(a) Distinguish: if this interest is given to a third party, then it is an executory interest

if in the same instrument.2) A determinable fee is usually limited or described by the words “so long as,” “until,”

“while,” or “during.”(a) If the limiting words are just words of purpose—fee simple absolute(b) If the limiting words expressly create a condition but there’s no mention of any

kind of reversion or executory interest and the interest conveyed is “forever” (i.e., doesn’t seem to be contingent and to expire if the condition isn’t met)—the condition is just a covenant.

3) The fact that the instrument says the property is to be used for one purpose only doesn’t create a possibility of reverter; neither are express words of reverter essential to create a possibility of reverter.(a) Peters v. East Penn Township School District, PA Sup’r. Ct., 1956. Grant of O to

A “as long as the property is used for school purposes,” but there’s no reverter clause. Held: fee simple determinable. The use of the words “as long as” in the grant limited the estate conveyed to a determinable fee, despite the lack of a specific reverter clause in the deed.

4) The outstanding characteristic of a possibility of reverter is that the estate granted to the grantee automatically comes to an end and automatically reverts to the grantor upon the happening of the event named in the conveyance.

5) A possibility of reverter always is retained in favor of the grantor or the grantor’s successors in interest.

6) Today, a possibility of reverter is generally alienable, devisable, and descendible.7) A possibility of reverter is not subject to the Rule Against Perpetuities because it was

always viewed as vested from the moment it arose, and the Rule only applies to contingent interests.(a) Hence, if you want to give an executory interest to a third party that would violate

RAP, then do it by two conveyances. First, convey fee simple determinable to grantee, and retain possibility of reverter. Second, convey possibility of reverter to third party in separate conveyance.

D) Rights of Reentry for Condition Broken, or Powers of Termination1) A power of termination is a future interest retained by the grantor who conveys an

estate subject to a condition subsequent.2) A power of termination always runs in favor of the grantor and his heirs; it never runs

in favor of a transferee.3) The power of termination never takes effect automatically even if the condition

subsequent has been broken by the transferee(a) First, the grantor must elect to exercise the power, and(b) Second, the grantor must do some affirmative act to terminate the estate in the

grantee.4) A power of termination is created by appropriate language in a deed or will. Typical

words creating the condition subsequent are “provided that,” “but if it should happen

that,” “but if,” “subject to the condition that,” or “in the event that,” and an express provision for reentry by the grantor.(a) The presumption is against creating a power of termination. Unless there’s a

specific clause that clearly creates the power, the court will not presume one—either a fee simple determinable or a fee simple absolute w/ a covenant. Remember contra proferentum rule to reduce chance of forfeiture.

5) At common law, a power of termination was not alienable. Today, this inalienability is in effect in some jurisdictions.(a) A power of termination can be released, however, to the owner of the fee, either

before or after breach of the condition(i) Trustees of Calvary Presbyterian Church v. Putnam, NY Ct. of App.,

1928. O grants fee simple subject to condition subsequent to A, then dies. 20 yrs later, A pays all of O’s then-living heirs to release their power of termination. 30 yrs after that, A brings quiet title action against O’s then-living heirs. Held: O has fee simple absolute. The living heirs of a grantor who have succeeded to his power of termination can waive this right prior to breach of the condition subsequent and bind the grantor’s heirs not yet living.

(b) A power of termination attached to a reversion (e.g., “O to A for life, but if A doesn’t pay the rent, O may take back the premises” gives O a power of termination attached to a reversion) is alienable, devisable, and descendible.

6) A grantor who fails to exercise a power of termination for an unreasonably long time after breach of the condition may be deemed to have waived the power to terminate. Other acts, such as acceptance of rent after breach of condition, may also constitute a waiver of the power to terminate.

7) A power of termination is not subject to the Rule Against Perpetuities. It is deemed to be vested from its inception.

E) Remainders, Vested and Contingent1) A remainder is a future interest created in a grantee which is capable of becoming

possessory immediately upon the termination of the preceding estate.2) The creation of a remainder requires the following elements:

(a) The remainder must be limited in favor of someone who isn’t the grantor (otherwise it would be a reversion);

(b) The remainder must be created at the same time and in the same instrument as the prior particular estate which supports it;(i) If the grantor retains a reversion and then later conveys the reversion to

someone else, it remains a reversion in the hands of the transferee, and doesn’t become a remainder, though it would be a remainder if it had been created in the original instrument.

(c) The remainder must be so limited that it can take effect as a present possessory interest immediately upon the termination of the prior estate;(i) If there’s a gap between the end of the preceding estate and the beginning

the remainder, the remainder is actually a springing executory interest, and the grantor gets a reversion of the fee subject to an executory limitation.(a) If there is a gap, look for a provision over in contingency of the grantee

dying w/out issue. There might be an implied remainder to the grantee’s issue.

1. McRorie v. Creswell, NC Sup. Ct., 1968. O “to A for life, and if A has no heirs, to B and his heirs”; A dies leaving her daughter C as heir. Held: C has implied remainder. A remainder to a grantee’s issue is implied from a provision over in the contingency that there is no issue. The Rule in Shelley’s Case does not apply to give the remainder to grantee because the word “heirs” was used nontechnically to mean “children,” where reading “heirs” in its technical sense would inconsistent (here, b/c B, A’s brother, would be A’s heir if A died intestate).

(d) The prior estate must be an estate of lesser duration than the interest of the grantor at the time of the conveyance so there can be an interest to pass in remainder.(i) Common law rule—the preceding estate must be a freehold estate (i.e., a

life estate or fee tail). Gifts over to nonfreehold estates were executory interests

(ii) Modern rule—the preceding estate can be freehold or nonfreehold (i.e., a life estate, a fee tail, or a term of years).

3) The remainder can be in fee simple, in fee tail, a life estate, or an estate for years.4) Remainders can be vested or contingent.

(a) A remainder is vested if it is certain to become possessory. That is, the remainderman is:(i) Born(ii) Ascertainable, and(iii) There is no condition precedent

(a) The termination of the preceding estate is not a condition precedent—otherwise, all remainders would be contingent

(b) A remainder subject to a condition precedent other than survivorship is not also subject to an implied condition precedent of survivorship; e.g., O “to A for life, then to A’s issue, and if A dies without issue to B,” B’s remainder is contingent on A’s dying w/out issue. It isn’t contingent on B’s surviving A. If B predeceases A, B’s remainder passes to his heirs or devisees.

(c) Conditions subsequent distinguished—reading comma to comma, a condition is precedent if it occurs in or before the clause granting the remainder. If the condition occurs in a clause following the clause granting the remainder, it is a condition subsequent, making the remainder a vested remainder subject to divestment rather than a contingent remainder.

(b) When the remainder is given to a class, there is some difficulty in determining whether a remainder is vested or contingent.(i) The basic three-part test for vested remainders applies, but the wrinkle is

that more people may enter the class.(ii) Assuming there is no express condition precedent (b/c then it would be a

contingent remainder), if no member of the class is born and ascertainable, the class will remain contingent until the first member is born and ascertainable.

(iii) Once one member of the class is born and ascertainable, the class becomes vested subject to open to reflect the fact that more members may join the class before it closes.

(iv) The class closes either naturally (i.e., the source for new members shuts down), or under the rule of convenience: the moment one class member is entitled to claim possession of his or her share, the class is closed.(a) The rule of convenience is only a rule of convenience—when it is rebutted

by the intention of the grantor, the class doesn’t close then (unless it violates RAP).1. E.g.: O to A for 99 years, if A so long live, then to O’s children who

reach 21. A has a determinable term of years. O’s children have a shifting executory interest. When is the class measured? Suppose at A’s death, O has kids aged 22, 15, and 3. O probably wants all of these kids to take when they’re 21. If we closed the class pursuant to the normal rule, at A’s death, the 15-yr-old and the 3-yr-old would be cut out. This violates the grantor’s intent. Hence, the class doesn’t close here until 21 years have passed (and so it doesn’t violate RAP).

(c) A vested remainder can be indefeasibly vested, vested subject to open, or vested subject to total divestment.(i) A vested remainder is indefeasibly vested when there is nothing to prevent

the vested remainderman’s interest from becoming possessory(ii) A vested remainder is subject to open (i.e., to partial divestment) when the

remainder is given to a class that is not yet closed(iii) A vested remainder is subject to total divestment when there is a

remainder in favor of a born, ascertained person w/out condition precedent that is subject to the occurrence or nonoccurrence of a condition subsequent that would dispossess the remainderman.

5) If you see a vested remainder in fee simple, with an express qualifying condition in the following clause and the future interest going to a third party, you need to examine when the condition may occur to distinguish between the vested remainder subject to divestment and the vested remainder in fee simple subject to an executory limitation. If the divesting condition can cut short the preceding life estate, the life estate is a life estate subject to an executory limitation.

6) If you see a contingent remainder to a third party if the preceding grantee dies w/out issue, look for a remainder by implication.(a) Example: O to A for life, and if A has no issue, then to B and her heirs. What

happens if A has children? It looks like it would revert back to O b/c it’s a portion of the estate that hasn’t been disposed of. But that’s probably not what O intended; it’s far more likely that he wanted to have a remainder in A’s children in preference to a reversion in himself

7) If a vested remainder is in fee simple, there is no reversion left in the grantor. There is always a reversion left in the grantor in case of a contingent remainder, as long as the remainder remains contingent.(a) Even if there is an alternative contingent remainder (a remainder given to a party

who is to take if the contingency does not occur), there is still a reversion in the

grantor that becomes possessory if when the preceding estate ends, neither contingent remainders become vested.

8) All remainders are alienable, devisable, and descendible.(a) However, a contingent remainder that is contingent on an event that requires the

remainderman to be alive is not devisable or descendable.9) Destructibility of contingent remainders—still followed in a few states. If a

contingent remainder does not vest at the termination of the prior estate, it is destroyed.(a) O to A for life, then to B at age 21. If B is 15 at A’s death, at c/l, the estate would

revert back to O and B’s contingent remainder would be destroyed. Today, the estate would revert back to O and B would have a springing executory interest.(i) Alternatively, O the property could be held in trust by a guardian for B

until he reaches 21. This is not the preferred result, however, b/c of the higher transaction costs involved.

10) A vested remainder is not subject to the Rule Against Perpetuities, since it is vested from the moment of its creation. A contingent remainder, however, may be subject to the Rule.

11) If, at the time of creation, an interest can be construed as either a contingent remainder or an executory interest (because the condition was such that it could occur during the prior life estate or it could occur after)—construe it as a contingent remainder. This is called the Rule in Purefoy’s Case. While the Rule in Purefoy’s Case was concerned w/ the now-abolished c/l rule of destructibility of contingent remainders, it is still applicable b/c contingent remainders are subject to the Rule Against Perpetuities.

12) At c/l, a vested remainderman had a right against the prior estate owner for waste; a contingent remainderman, however, has no such right.

13) If a remainder is transferred to the owner of the preceding estate, the remainder is merged w/ the preceding estate.

F) Executory Interests1) An executory interest is a future interest created in favor of a grantee which cannot be

construed as a remainder.(a) At common law gift over to a transferee after a nonfreehold creates an executory

interest, b/c a remainder only takes after a freehold estate. For example, O to A for 5 yrs, then to B and his heirs would give B a shifting executory interest rather than a remainder, because you cannot have a remainder after a nonfreehold estate, such as a term of years.

(b) The modern cts. would call this a remainder, which is the future interest that follows both freehold and nonfreehold estates.

2) A shifting executory interest is a future interest created in a transferee that becomes possessory upon the occurrence of a condition that divests a present interest of a grantee

3) A springing executory interest is a future interest created in a transferee that becomes possessory upon the occurrence of a condition that divests a present interest of the grantor.

4) If, at the time of creation, an interest could be construed as either a contingent remainder or an executory interest (because the condition was such that it could occur

during the prior life estate or it could occur after)—construe it as a contingent remainder. This is called the Rule in Purefoy’s Case. While the Rule in Purefoy’s Case was concerned w/ the now-abolished c/l rule of destructibility of contingent remainders, it is still applicable b/c contingent remainders are subject to the Rule Against Perpetuities.

5) Executory interests are alienable, descendible, and devisable.G) Does Classification Matter

1) Alienability(a) At c/l, vested but not contingent remainders were alienable inter vivos. This

distinction is now pretty much moot, since all remainders are now alienable inter vivos.

2) Inheritability(a) A contingent remainder that is contingent on an event that requires the

remainderman to be alive is not devisable or descendable.3) Acceleration

(a) The possession of a vested remainder accelerates if the preceding life estate prematurely terminates, whereas a contingent remainder normally doesn’t. For example, O to A for life, then to B and his heirs, and prior to his death, A renounces the life estate; B’s vested remainder will accelerate and become possessory. But if the conveyance was O to A for life, then to B and his heirs if B survives A, then B’s contingent remainder wouldn’t accelerate.

4) Destructibility.(a) At c/l, contingent remainders were destructible if they didn’t vest at or prior to the

end of the preceding estate. This is abolished and is moot.5) Rule Against Perpetuities

(a) Indefeasibly vested remainders and vested remainders subject to complete divestment are not subject to the Rule; however, vested remainders subject to open, contingent remainders, and executory interests are subject to the Rule.

X) Special Rules Governing Future InterestsA) Rule in Shelley’s Case

1) When in the same conveyance a freehold estate (e.g., a life estate) is given to a person w/ a remainder to that person’s heirs (or heirs of his body), then the person to whom the life estate is conveyed takes the remainder either in fee simple or fee tail and the person’s heirs take nothing. (This is combination of Rule in Shelley’s Case and Doctrine of Merger.)(a) The Rule only applies when both the life estate and the remainder are legal estates

or are both equitable estates. If one estate is legal and the other is equitable (e.g., beneficiary of a trust), the Rule doesn’t apply.

(b) The Rule only applies to remainders—not to executory interests. Thus, O to A for life, then to A’s heirs one day after A’s death, then A gets a life estate and A’s heirs get a springing executory interest.

(c) The word “heirs” must be used in its technical sense for the Rule to apply.(i) McRorie v. Creswell, NC Sup. Ct., 1968. O “to A for life, and if A has no

heirs, to B and his heirs”; A dies leaving her daughter C as heir. Held: C has implied remainder. A remainder to a grantee’s issue is implied from a provision over in the contingency that there is no issue. The Rule in Shelley’s

Case does not apply to give the remainder to grantee because the word “heirs” was used nontechnically to mean “children,” where reading “heirs” in its technical sense would inconsistent (here, b/c B, A’s brother, would be A’s heir if A died intestate).

2) The rationale of the Rule in Shelley’s Case was to prevent people from avoiding having to pay feudal incidences due upon the passing of an estate by descent.

3) The Rule has been abolished in most jurisdictions. Where the Rule is abolished, the heirs of the life tenant take as remainderman. Since the life tenant is alive, the remainder is contingent on the heirs being ascertained as a result of the life tenant’s death.

4) The Rule is a rule of law and not of construction. That is, the Rule takes effect even if it is contrary to the clearly expressed intentions of the grantor.(a) However, in some states that have abolished the Rule, cts. still use it as a rule of

construction where there is no expressed intent of the grantor.5) Criticism of Rule:

(a) Frustrates intent of the grantor, which is to prevent grantee from alienating. E.g., O to A for life, then to A’s heirs. O’s intent was to give something to A’s heirs, but operation of the Rule gives A the fee simple, which he can alienate.

B) Doctrine of Worthier Title1) If, in the same instrument, any future interest (be it a remainder or an executory

interest) is given to the grantor’s heirs, give the future interest to the grantor and check for merger. Thus, if O conveys to A for life, then to the heirs of O and their heirs, A has a life estate, O has a reversion, and O’s heirs have nothing.

2) The rationale of the Doctrine of Worthier Title, similar to the rationale of the Rule in Shelley’s Case, was to prevent people from avoiding having to pay feudal incidences due upon the passing of an estate by descent.

3) The Doctrine only applies when “heirs” is used in its technical sense (the persons to take by intestate succession at the time of the grantor’s death).(a) Hence, the Doctrine doesn’t apply to a conveyance to a named person even if that

person turns out eventually to be the heir of the grantor. Thus, if O conveys to A for life, then to O’s son, John, the remainder to John is valid even though upon O’s death John is O’s heir.

4) In most jurisdictions, the Doctrine is abolished or modified. In those jurisdictions, the Doctrine only serves as a rule of construction to guide the court in arriving at the grantor’s intent.

5) Criticism of Dotrine:(a) Defense—assures that the settlor of an inter vivos trust can revoke the trust during

his lifetime, despite failure expressly to reserve the power to revoke. (e.g., O to T in trust to pay the income to O for life, and to transfer the property to O’s heirs after his death, would, if Doctrine applies, give O the whole beneficial interest in the trust property and thus the power to revoke it at any time.). Thus, the Doctrine tends to make property more freely alienable.

(b) Criticism—invites litigation and increases unpredictability of litigation results. States could just make statutory presumption that trusts are revocable.

C) Powers of Appointment

1) A power of appointment is an authority created by a donor (one having property subject to his disposition as owner) and conferred upon a donee enabling the donee either to appoint persons to take the property or to appoint the proportionate shares which designated persons shall take in the property. The person who creates this power is the donor and the person to whom the power is granted is the donee.(a) The persons who take by the donee’s appointment are called appointees.

(i) Relation back doctrine: the appointee is deemed to take from the donor rather than the donee.(a) E.g.: O to A for life, then as A appoints. If A fills in the blank w/ B, B

takes from O not from A.(ii) Relation back doctrine was used to evade inheritance taxes, but this

loophole is closed.(a) E.g.: Inter vivos conveyance of O to A for life, remainder to such persons

as A shall appoint at death. A appoints to his children. Do the children have to pay an inheritance tax? Under the relation back doctrine, no, b/c the land came from O (inter vivos rather than testamentary). The I.R.S. closed this tax loophole.

(b) Persons who take either because the power of appointment isn’t exercised at all or is ineffectively exercised are called “takers in default of appointment.”

2) Powers of appointment are classified as:(a) General powers;

(i) Enables donee to appoint any person, including himself, his estate, or his creditors

(b) Special powers (nongeneral);(i) Enables donee to appoint certain specified individuals or a specific class

of individuals(a) Where the class is to “my friends,” the class is so fuzzy that this would be

a general power rather than a special power(b) Where the class is to “my close friends,” the class isn’t so fuzzy—people

the donor had never met, known enemies, and nonhuman entities would be excluded, and so this would be a special power

(c) Testamentary powers vs. powers presently exercisable(i) Testamentary powers are powers of appointment that are to be exercised

in the donee’s will; whereas powers presently exercisable are powers of appointment that can be exercised whenever the donee wants.

(ii) Testamentary powers of appointment can be exercised by a residuary clause in the donees will. This is called a “blind” exercise of powers.

(d) Powers in trust;(i) Exists when the donee, under some circumstances and within some period

of time, is under a duty to exercise it—an imperative/mandatory power(a) Elements:

1. Subject of power must be certain (i.e., what is to be given);2. Objects must be certain (i.e., who are the beneficiaries); and

a. There can be no takers in default—if so, it’s a power not in trust.3. Power must be imperative—express or implied duty for donee to carry

out the intent of the testator

(ii) Failure to exercise a power in trust results in the property passing to the objects of the power in equal shares

(e) Powers not in trust;(i) Exists when the donee has no duty to exercise it; e.g., a general power(ii) Failure to exercise a power not in trust results in the property passing to

the takers in default, or if there are none, to the donor or her estate(f) Exclusive powers; and

(i) The donee of a special power may exclude one or more of the permissible objects and appoint all the property to others

(ii) The presumption is in favor of an exclusive power unless a contrary intent is clearly evident from the instrument

(g) Non-exclusive powers(i) The donee of a special power may not exclude any of the permissible

objects from appointment.(ii) Doctrine of illusory appointment—where the donee of a non-exclusive

power of appointment doesn’t give all permissible objects a substantial share, the appointment is void as illusory.

3) Creditors of a donee of a special power of appointment cannot attach the property subject to the special power, where the donee is excluded from the class of potential appointees.

4) Creditors of a donee of a general power of appointment can attach the property when the power remains unexercised, and can even if the power is exercised, if it is exercised in favor of a volunteer or another of the donee’s creditors.(a) Exception: if the donee is also the donor of the power, and the conveyance

creating the power is deemed fraudulent, then the donee’s creditors can reach the property.

(b) Exception: if the donee who is also the donor creates the power by transferring property in trust and reserves for himself the benefits of the estate during his life, then his creditors can reach the estate upon his death.

5) If an attempted exercise of a power is void or ineffective, the property passes to the takers in default, or if there are none, it reverts to the donor or her heirs. This rule doesn’t apply, however, if the Doctrine of Capture is employed.(a) Doctrine of Capture is an implied alternative appointment to the donee’s estate in

the case of an ineffective exercise of a general power. The property is “captured” for the donee’s estate and taken from the control of the provisions of the dispositive provisions of the donor. The Doctrine is applied only where the donee manifested an intent to assume control of the appointive property for all purposes and not just for the limited purpose of giving effect to the expressed appointment.

D) Common-law Rule Against Perpetuities1) 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.(a) This means that any contingent interest that fails the Rule is void (e.g., contingent

remainders, executory interests, and remainders in a class)(b) The sole test is whether the interest vests (or fails) within the period of the Rule.

Under the c/l, if at the time an interest is created there is any possibility that it may vest beyond the maximum period permitted by the rule, it is void even

though in fact the interest actually vests within the period allowed by the Rule. This is known as the “might-have-been rule.”

2) The following interests are not subject to the c/l RAP:(a) Present possessory interests;(b) Reversionary interests, including reversions, possibilities of reverter, and powers

of termination;(c) Vested remainders in an individual;(d) Trusts(e) Future interests given to charities or the gov’t

3) The following interests are subject to the c/l RAP:(a) Contingent remainders in an individual or a class;(b) Vested remainders in a class;(c) Executory interests;(d) Options to purchase land not incident to a lease for years; and(e) Powers of appointment.

4) Under the RAP:(a) The lives in being must be human lives(b) The lives in being must precede the 21 years(c) Every human being is conclusively presumed capable of having children during

his or her lifetime(d) The lives in the measuring group cannot be so numerous or so situated that the

survivor cannot practically be determined by the ordinary evidentiary processes (e.g., stating that all of the persons now living in Arizona were the measuring lives would be invalid).

5) The rationale of RAP is to prevent the clogging of titles beyond reasonable limits in time by nonvested interests, and to keep land freely alienable in the marketplace

6) RAP has been modified or abolished in many states.7) Remember to check if contingent remainders are destructible or not.

E) Perpetuities Reform1) The Wait-and-See Doctrine

(a) The essence of this reform is that the validity of contingent interests is determined not on the basis of facts as they exist when the interest is created but on the basis of facts as they actually occur. Therefore, if a nonvested interest actually vests the interest is good.

2) The Cy Pres Doctrine(a) Under the Cy Pres Doctrine, limitations which would violate RAP are judicially

reformed to conform as nearly as possible to the intent of the grantor but comply with RAP (e.g., by reducing age contingencies from, say, 25 to 21).

3) Statutory enactments:(a) Some statutes modify the application of RAP to specific situations, such as:

(i) Time limitations on the duration of possibilities of reverter and powers of termination;

(ii) Reduction of age contingencies of unborn persons to 21 years;(iii) Eliminating the presumption of fertility for certain persons

(b) Some states just impose a flat period during which nonvested interests must vest, such as 60 or 90 years.

F) Rule in Wild’s Case1) A devise (but not a conveyance) to “B and his children” devises:

(a) A fee tail to B if, at the time of the devise, B has no living children (i.e., a life estate in the B and a contingent remainder in unborn kids); or

(b) A tenancy in common in fee simple absolute in B and B’s children if, at the time of the devise, B had living children.

XI) Servitudes: Easements, Covenants, Equitable ServitudesA) Easements and Licenses

1) Easements and Profits Defined(a) An easement is the right of one person to enter land in possession of another for a

defined purpose; e.g., A may have a legal right to walk across, lay pipes, or string wires over Blackacre, which B possesses.

(b) A profit is one person’s right to enter land possessed by another and take from it either some part of the land itself or some product of the land; e.g., A may have a legal right to go onto Blackacre, which B possesses, and remove sand, oil, gravel, marble, stone, grass, trees, shrubbery, or fish.

(c) The principal distinction between an easement and a profit is that an easement gives its owner only the right to use the land of another w/out the right to take anything from such land, while a profit gives its owner the right to take either the soil itself, or a product of the land.(i) In addition, the owner of the profit may use the land to the extent

necessary to enable her to enjoy the profit; e.g., A, having the right to take coal from B’s Blackacre, has: (1) the right to go onto Blackacre where the coal is; (2) the right to sever the coal; and (3) the right to carry off the coal after it is severed.

(d) Easements and profits are governed by the same rules—generally, the term easement means both easement and profit.

(e) Easements are classified as:(i) Easements appurtenant, and

(a) An easement is appurtenant when it is attached to a piece of land and the benefits run to the owner of such land; e.g., A owns Blackacre and B’s Whiteacre lies between A’s land and the street. B conveys to A a right of way to go across Whiteacre from Blackacre, and this right is intended to benefit A in his use of Blackacre. This right of way over Whiteacre is an easement appurtenant to A’s Blackacre and can be used only for the benefit of Blackacre.

(b) Every easement appurtenant requires two pieces of land which are owned by two different persons. The two pieces of land are:1. the dominant estate, which is the land whose owner is benefited by the

easement, and2. the servient estate, which is the land whose owner is burdened by the

easement.(c) the owner of the dominant estate is called the dominant tenant, while the

owner of the servient estate is called the servient tenant.(ii) Easements in gross

(a) An easement is in gross when its creation is not intended to benefit the owner or possessor land as such, but is intended to exist w/out a dominant estate; e.g., A owns Blackacre which contains a gravel pit. B is a road contractor who owns no land but who uses gravel. A conveys to B the right to come onto Blackacre and to remove gravel. B owns a profit in gross which exists wholly independently of B’s ownership of any land.

(b) Every easement in gross requires one piece of land which is owned by a person other than the owner of the easement in gross.

(c) Easements in gross are disliked by the courts. Where possible, construe an easement in gross as an easement appurtenant or a license.

(f) By analogy to estates in land, an easement is real property if its period of duration is either (1) for an indefinite time or (2) for the life of a human being. An easement is personal property if its period of duration is either (1) for a specific time, such as an easement attached to a leasehold; or (2) from period to period like a leasehold from month-to-month. An easement isn’t an estate; it isn’t a possessory interest and will never ripen into one—thus it is improper to speak of an “easement in fee simple absolute.” Rather, we use the term “easement in perpetuity” or “easement for life,” etc.

(g) With respect to use, easements are classified as:(i) Affirmative easements

(a) These entitle the easement owner to do affirmative acts on the land in the possession of another; e.g., a right of way.

(ii) Negative easements(a) These take from the owner of the servient estate the right to do some

things which, were it not for the easement, she would have a right to do on her land; e.g., an easement that no structures be built on the servient estate so as not to interfere with the dominant estate’s access to an ocean view.

(h) The courts prefer an easement appurtenant construction to that of an easement in gross; if there is ever any doubt—easement appurtenant.

(i) Easements are generally alienable either by deed or by will and are descendible.(i) Whether an easement is apportionable is determined by the intention of

the parties as expressed in the instrument if created by deed or will, and by the manner of its creation if it arises by prescription or implication. For example, B grants to A and her heirs the right to pasture four head of cows on B’s Blackacre. A conveys to C and his heirs the right to pasture two head of cows on Blackacre, A reserving her right to pasture two head of cows there. Because A’s apportionment of her profit in gross is measureable (i.e., it specifically states four head of cows) and will not surcharge or place any additional burden on the servient tract, and because it seems consistent with the intent of the parties to the original conveyance, the profit in gross created in A is apportionable. However, if A had simply reserved the right to pasture “my cattle” on Blackacre, then there would be no limit to the number of cattle that could be pastured, and A couldn’t transfer a fraction of the right to another.

(ii) An nonexclusive easement in gross cannot be apportioned2) Creation and Extent

(a) Easements are created by:(i) Prescription

(a) Rises by adverse use of the servient estate by the dominant tenant for the period of the statute of limitations used for adverse possession. To mature such an easement against the landowner, the use must be:1. adverse, as distinct from permissive; in derogation of right rather than

in subordination to the rights of the landowner;2. open and notorious;3. continuous and without interruption; and4. for the period of prescription.

(b) The extent of the rights matured by prescription is determined by the continued use of the servient estate during the period of prescription. Ordinarily, adverse use doesn’t run against a future interest holder, but when the adverse use involves taking something out of the property (e.g., timber) and the remainderman has actual notice, then the prescription is effective against both the remainderman and the possessory interest.

(c) Disabilities may extend the period of time for the acquisition of prescriptive easements in the same way as they apply to adverse possession.

(d) Tacking of successive periods of adverse use to satisfy the time period is permissible in prescription cases.

(e) Negative easements cannot arise by prescription(ii) Express provision in a deed or will

(a) An easement in favor of the grantor is created by reservation(b) An easement in favor of the grantee is created by express grant(c) Cts. are divided on the question whether an easement can be created by the

grantor in favor of a third party who is neither grantor or grantee; at c/l this couldn’t be done. However, the major objection—that such grants splits the chain of title—is largely solved by modern land records which facilitate accurate title searching.1. The way to get around this problem is to use two pieces of paper:

suppose O wants to convey Blackacre to A and reserve an easement for parking in favor of her church. First, O conveys Blackacre to the church. Second, the church conveys Blackacre to A reserving an easement in itself.

2. Compare: covenants, unlike easements, can be created to benefit third parties at common law.

(d) The extent of the rights under an easement is determined by the words of the instrument.

(e) An easement, being an interest in land, must be in writing signed by the grantor to satisfy the Statute of Frauds. If a grantor gives oral permission to enter land, a license is created. Exceptions to the Statute of Frauds include fraud, part performance, estoppel, and easements by implication and prescription

(iii) Implication or Necessity(a) To establish an easement by implication the following must be shown:

1. that at the time of the conveyance, one part of the land is being used for the benefit of the other part (a quasi-easement);

2. that the use is apparent;3. that the use is continuous; and4. that the use is reasonably necessary to the enjoyment of the quasi-

dominant tract(b) If the implied easement is in favor of the conveyee and is appurtenant to

the tract conveyed, it is called an implied grant(c) If the implied easement is in favor of the conveyor and is appurtenant to

the tract retained, it is called an implied reservation(d) Since an implied easement is created by law and isn’t express in the

conveyance of land, all the circumstances surrounding the conveyance are provable by parol evidence if necessary. Look to:1. the language used in the conveyance;2. whether the easement is claimed by the grantor or grantee;3. the degree of necessity that the easement exist or the hardship, if any,

if it doesn’t exist;4. whether the easement will, if implied, confer benefits on both parties

to the conveyance;5. the manner in which the property was used before the conveyance; and6. the knowledge the parties had concerning the use of the property

before the conveyance.(e) An easement by necessity arises when property becomes landlocked by

virtue of a conveyance. In that case, the landowner who can show strict necessity is entitled to a right of way across the severing line that made the property landlocked.1. For example, Blackacre is surrounded on all sides by Whiteacre,

Greenacre, and Brownacre. When Whiteacre and Greenacre are severed, Blackacre still ahs access to a street across Brownacre, but when Brownacre is severed Blackacre becomes landlocked. In this case, the owner of Blackacre is entitled to a right of way by necessity across Brownacre, but not across the other parcels.

2. A right of way by necessity lasts only as long as the necessity lasts.(iv) Eminent domain

(a) Easements can be taken by the sovereign; however, an easement is an interest in land for which the sovereign will have to pay just compensation.

(b) In addition, irrevocable relationships amounting to easements may be created by:(i) Licenses which have become irrevocable(ii) Refusal to enjoin a trespass or nuisance

3) Extinguishment(a) An easement may terminate by either:

(i) Expiration of time determined at the time of creation;(ii) Extinguishment, which is determined by events subsequent to creation

(a) Unity of Title

1. When an easement appurtenant exists and both the dominant and servient estates come under the ownership of the same person

2. When the owner of an easement in gross becomes the owner of the servient estate on which the easement is a burden

(b) By Dominant Owner1. Release. When the dominant tenant executes either a deed or a will

releasing the easement in favor of the owner of the servient estate2. Abandonment. When the dominant tenant has abandoned the

easement and such abandonment is evidenced by conduct showing an intention to relinquish the right. Non-use of the easement without more won’t establish abandonment

(c) By Servient Owner1. Adverse Possession. When the servient tenant has used her land

continuously and uninterruptedly for the statutory period of prescription in a way inconsistent with and adverse to the easement and without consent of the dominant tenant.

2. Estoppel. When the servient tenant, in reasonable reliance on the conduct of the dominant tenant, uses her servient estate in a manner inconsistent with the existence of the easement and it would be inequitable to permit further use of the easement

3. BFP. Under the recording acts, if an easement is created by grant, the deed isn’t recorded, and the servient estate is conveyed to a bona fide purchaser for value without noticea. Note, however, that the recording acts usually don’t apply to

easements created by prescription. That is, the buyer of land subject to a prescriptive easement takes the estate as servient even though the easement isn’t recorded

4. When the sovereign condemns both the servient and dominant estates under its eminent domain power and pays just compensation to the owners of both.a. If the sovereign files a claim against only the owner of the servient

estate, then it will take the estate subject to the easement.4) Licenses

(a) A license permits a person to come onto the land in the possession of another without being a trespasser.

(b) Three kinds:(i) License—revocable;(ii) License coupled with an interest—irrevocable; and

(a) If one owns personal property on the land of another with a privilege incidental to such personal property, the privilege is a license coupled with an interest and is assignable with the transfer of the personal property.1. For example, A sells to B a wheelbarrow on A’s land and tells B to go

get it. B has a license coupled with an interest. B, without getting the wheelbarrow from A’s land, sells it to C with the privilege of taking the article from the land. B has assigned the license coupled with an interest by transferring the wheelbarrow to C with the privilege of

taking it from A’s land. A cannot revoke C’s license to come get the wheelbarrow—at least for a reasonable time.

(iii) Irrevocable license by estoppel.(a) If a licensee in exercising his license and in reasonable reliance upon

representations made by the licensor as to the duration of the license, has made expenditures of capital or labor so that it is inequitable for the license to be discontinued, it is irrevocable by estoppel. An irrevocable license by estoppel is equivalent to an easement.

(c) Distinguish:(i) License is different from a lease. A licensee never has possession of land;

a lessee does. A lessee’s right is exclusive, even against the grantor; a licensee’s right is ordinarily nonexclusive, and is shared with the owner of any possessory interest.

(ii) License is different from an easement. An easement is a substantial incorporeal interest in the land of another and normally requires some formalities to create. A license, on the other hand, is no such interest in land and doesn’t require any formalities to create. Note that there are some situations where a license and an easement are not all that different. For example, suppose A is fee simple owner of Blackacre in a jurisdiction where either a lease for not more than one year or an easement or profit in gross to last for a period not more than one year may be created orally. A permits B to come onto Blackacre for the purpose of fishing in a stream on the land from 2 to 6 pm on a specific day. Is this a profit or a license? If the privilege is at the will of the landowner, A, it is a license, but if the right is irrevocable creating an interest in Blackacre for the 4-hour period, then it is a profit in gross.(a) An easement/profit cannot exist at the will of the servient tenant whereas a

license is revocable by either licensor or licensee at any time. Whether something is revocable is usually a factual question, but if the facts are undisputed, then it is a question of law. Usually, B’s right to fish for 4 hours would be considered a license.

(iii) License is different from a contract. A contract must have consideration; a license doesn’t necessarily have to have consideration to be valid.

(d) An attempt to convey an easement/profit which fails b/c the deed of conveyance is defective will result in a license.

(e) A mere license is generally personal and not assignable, but such a license is assignable if the licensor so intends.

(f) Generally, a license is revoked automatically by the licensor’s conveyance of the land or by his doing an act inconsistent w/ the continuance of the license. In the case of a license coupled with an interest or an irrevocable license, obviously the license isn’t so revoked.(i) Rationale: to protect the marketability of titles. Since the protection is for

the benefit of the new landowner, only he can invoke the rule.(g) Successors in title take subject to an irrevocable license if they had notice of the

license before their purchase.B) Covenants Running with the Land

1) A covenant is a promise to do or not to do something relating to the use of land.

(a) Remedies for breach: damages. If you want an injunction, enforce the covenant as an equitable servitude.

2) Distinguish:(a) Equitable servitude is a covenant enforceable in equity by or against successors to

the land of the original parties(b) Condition limits the duration of an estate or cuts it short. The remedy for breach

of a covenant is damages or injunction; the remedy for breach of condition is forfeiture.

3) Creation: there must be a writing. A covenant will not be implied nor can it arise by prescription.

4) Enforcement By or Against Assignees. Depends on whether it is a burden or benefit. Each requires intent, that covenant touches/concerns land, and privity of estate, but for a burden to run, the assignee must also have notice. Horizontal privity isn’t required for a benefit to run.(a) Requirements for burden to run:

(i) There must be an intent that the covenant shall run with the land;(a) This can be gleaned from the writing, or the purpose and circumstances

surrounding the making of the writing. The word “assigns” is not required for the covenant to run with the land if intent to do so is otherwise clear.

(ii) The covenant must be the type which touches and concerns the land(a) This means that the effect of the covenant is to increase the use or utility

of the land or to make it more valuable in the hands of the covenantee or to curtail the use or utility of the land or make it less valuable in the hands of the covenator.

(b) The covenant must affect the legal relations of the parties as landowners and not justas members of the community at large

(iii) There must be horizontal privity of estate;(a) Either (1) the two parties had simultaneous legal interests in the same

land, as covered by the covenant; or (2) the parties were grantor and grantee of the affected land, and the covenant came into effect at precisely the same instant as the land was transferred (i.e., the covenant must be in the deed)

(iv) There must be vertical privity of estate(a) There must be successors in interests from the original promisor and

promisee. This requires an orderly transfer, as by deed or will or court order; successive squatters don’t enjoy vertical privity.

(v) The assignee has notice of the covenant before buying(b) Requirements for benefit to run:

(i) There must be an intent that the covenant shall run with the land;(a) This can be gleaned from the writing, or the purpose and circumstances

surrounding the making of the writing. The word “assigns” is not required for the covenant to run with the land if intent to do so is otherwise clear.

(ii) The covenant must be the type which touches and concerns the land(a) This means that the effect of the covenant is to increase the use or utility

of the land or to make it more valuabl ein the hands of the covenantee or

to curtail the use or utility of the land or make it less valuable in the hands of the covenator.

(b) The covenant must affect the legal relations of the parties as landowners and not as members of the community at large

(iii) There must be vertical privity of estate(a) There must be successors in interests from the original promisor and

promisee. This requires an orderly transfer, as by deed or will or court order; successive squatters don’t enjoy vertical privity.

C) Equitable Servitudes1) The basic idea is that a person who takes land with notice of a restriction cannot in

equity be permitted to violate that restriction2) For a covenant to run in equity, you must have:

(a) Writing(i) The writing must comply with the Statute of Frauds, except that it doesn’t

have to be signed by the grantee (a “deed poll” is a deed form that doesn’t bear the signature of the grantee and is often used for such matters). Estoppel or part performance could take the case out of the Statute of Frauds, just like in contracts.

(ii) Some states will imply an equitable servitude in certain situations, e.g., a general plan of development (a subdivision).

(b) Intent(c) Touch and concern (i.e., affect the use of the land)(d) Notice (actual or constructive)

3) In other words, this is like a legal covenant except you don’t have to have privity of estate. Of course, for a legal covenant, you don’t have to have notice. However, if a covenant isn’t properly recorded and a transferee qualifies as a BFP w/out notice, then, under the recording acts, the burden won’t be enforced against her at law or in equity. So the most significant difference between equity and law here is that privity of estate isn’t required for equitable enforcement. Since most equitable servitudes are contained in deeds/leases, the privity of estate requirement is generally met in either case. As a result, there’s not much functional difference between the two. The Restatement of Servitudes abolishes any distinction between the two. The only functional difference would be that if you wanted money damages, you’d ask a ct. to enforce a real covenant; if you wanted an injunction, you’d ask a ct. to enforce an equitable servitude.

4) Cts. may refuse to enforce an equitable servitude:(a) If its purpose is contrary to public policy;(b) The granting of relief would do more harm than good;(c) When the granting of relief requested would be futile; or(d) When the plaintiff has been guilty of laches or violating the servitude.

5) Adverse possession of the land subject to the servitude won’t destroy a servitude if the possession is consistent w/ the rights created by the servitude.(a) E.g., A owns both Blackacre and Whiteacre and conveys Whiteacre to B, the deed

providing that Whiteacre shall not be used for commercial purposes by B or her successors in interest. C gains title to Whiteacre by adverse possession. C’s

possession alone and w/out violating the servitude is quite consistent w/ the existence of the servitude and doesn’t extinguish it.

6) An equitable servitude is extinguished by:(a) Merger—if the burdened land and benefited land become the property of one

person(b) The doing of an act which violates the servitude and continuing for the period of

the statute of limitations;(c) A release by the dominant tenant or tenants;(d) By the existence of conditions which make the purpose and object of the servitude

impossible of achievement, such as a change in the character of the neighborhood from a residential to a business area; or

(e) Eminent domain—if gov’t takes the burdened property, it condemns the covenant/servitude and pays compensation to the benefited property.

D) Public Policy Limitations on the Enforcement of Real Covenants and Equitable Servitudes1) Real covenants and equitable servitudes that discriminate on the basis of race are

unenforceable.2) Federal fair housing act prohibits enforcement of covenants that discriminate against

protected classifications (e.g., race, color, religion, gender, familial status, national origin, handicap)

3) Cts. will construe narrowly any covenant that might conflict w/ the above. E.g., a covenant limiting use to “single-family houses used for residential purposes” would be construed to allow a group home for the handicapped—the “single-family house” restriction would be held to refer to an architectural style and a group home is being used for “residential purposes.”

4) Covenants restricting competition are construed narrowly; many cts. will hold that while they might be enforceable between original parties, they don’t run w/ the land.

XII) NuisanceA) Nuisance

1) Conduct that interferes w/ the use and enjoyment of land. Elements are:(a) The interference w/ the plaintiff’s use and enjoyment of her land must be

substantial and unreasonable;(b) The defendant’s conduct must be either (1) intentional and unreasonable (the

usual case); or (2) negligent, reckless, wanton, or unusually hazardous;(c) The defendant’s conduct must cause the interference;(d) The plaintiff must have an interest in land that is injured by the conduct (although

even a short term tenancy is sufficient).(i) E.g., a mere licensee cannot maintain an action for private nuisance

2) A public nuisance is conduct that causes public injury generally. Usually it is enforced criminally by the gov’t, but sometimes you can do it w/ a class action suit.

3) Distinguish from trespass:(a) Trespass: land is invaded by a tangible physical object which interferes w/ the

right of exclusive possession(b) In private nuisance: land is invaded, not by any “tangible” matter, but by

intangibles such as noises or odors that interfere unreasonably w/ P’s use and enjoyment of the land.

(c) A trespass which is continued through a series of acts or recurring events may become a private nuisance action

(d) The same act can constitute both trespass and a nuisance; e.g., A builds a dam causing the water in a stream to back up and flood B’s land. B may sue A in trespass (b/c water has tangibly invaded A’s land), or in nuisance (b/c interfering substantially and unreasonably).

4) Nuisance may interfere w/:(a) The land itself;

(i) E.g, polluting waters of stream(b) The occupant’s comfort or health; or

(i) E.g., causing smoke to fill house(c) The occupant’s peace of mind

(i) E.g., maintaining nearby dynamite factory.5) Nuisance must offend the average normal person w/ ordinary sensibilities.

Unsightliness alone, w/out other elements of harm, traditionally isn’t actionable; however, unsightliness connected w/ other elements may be important in determining whether or not D’s behavior was reasonable.

6) Nuisance may be temporary or permanent(a) Temporary: active operation is essential to continuation of nuisance (e.g.,

operation of fertilizer factory). You can recover only for past and present damages, and an injunction.

(b) Permanent: passive and created by durable artificial thing (e.g., a dam). You can recover for past, present, and future damages, and an injunction.

7) Whether use of property is reasonable is question of fact. Look to following:(a) The social utility of D’s conduct;(b) Whether D is using avoidance devices;(c) The use being made of P’s property and its social utility;(d) Priority (who was there first, P or D);(e) The character of the neighborhood;(f) The time of day or night when the interference occurs;(g) The frequency and extent of the injury;(h) The sensitivity of the persons affected or the sensitivity of the business affected;

and(i) The effect of D’s activity upon the health, life, and property of others.

8) You can “come to the nuisance” and still be able to enjoin it; however, cts. may hold that the injured have to pay compensation to D to indemnify him for the reasonable cost of moving.

9) Initial allocation of entitlement(a) Coase theorem—who has the entitlement is irrelevant where transaction costs are

low(i) Transaction costs:

(a) Cost of information gathering, negotiating, and enforcing bargain;1. the more parties, the higher transaction costs

(b) The holdout problem and the free rider problem contribute to “stickiness” of initial allocation of entitlement

(ii) Therefore, give entitlement to highest valued user to achieve Kaldor-Hicks superiority (i.e., give liability to cheapest cost avoider).

(iii) Alternatively, equity may dictate an alternative allocationB) Subjacent and Lateral Support

1) At c/l, the right of a landowner to have her land supported laterally was absolute.2) The right of lateral support means that land in its natural condition is entitled to be

held in place from the sides by the neighboring land.3) One who by excavation or otherwise withdraws lateral support from his neighbors

land is strictly liable for the injury done to such land in its natural condition.(a) Noone v. Price, WV Sup. Ct., 1982. House on mountainside suffered structural

damage from subsidence, caused by the disrepair of retaining wall constructed by downward/adjacent neighbor’s predecessor in title. Held: downward/adjacent landowner is liable. Where landowner has duty to provide support for neighbor’s land, the landowner is strictly liable for damages to structures on neighbor’s land if weight of structures didn’t cause subsidence.

(b) However, when the excavation is caused by forces of nature (e.g., a hurricane), there is no duty to refurnish the lateral support.

4) The right to subjacent support means support from underneath the surface of the land as distinguished form the sides.(a) The basis of liability is the same as for lateral support.

(i) Island Creek Coal Co. v. Rodgers, KY Ct. of App., 1982. Subsurface mineral rights separated from fee when land is woodland, but is developed subdivision when mining occurs, and blasting causes house to collapse. Held: miner is liable for damage to structures. Miners are strictly liable for keeping land in its “natural state” at the time the minerals are removed from the earth rather than when the mineral rights are separated from the fee, and since the land in its natural state would support the structures, the miner is liable for damage to structures.

5) If there are artificial structures on the land, and the land in its natural condition would be injured by the taking away of lateral support:(a) In some states the recovery would include both the damage to the land and the

damage to the artificial structures on it (the “English rule”);(b) In other states the recovery is limited to damage to the land and not to the

artificial structures on the land (the “American rule”).6) Note that there may be a separate tort claim, e.g., negligence, that would give rise to

full liability for weight-burdened land.C) Rights in Airspace

1) Navigable Airspace(a) A surface owner may be able to recover for intrusions in the overlying airspace

that impairs use of the surface land. Remedies lie in trespass or, for repeated intrusions, nuisance(i) Murphy v. Bolger, VT. Sup’r Ct., 1888. Landowner built barn such that

the roof of the barn was overhanging the neighbor’s property 16’ off the ground. Held: neighbor can sue for ejectment. Because landowner owns airspace above property, a neighbor’s overhanging barn roof is an ejectment.

(ii) Airplanes. Aircraft have a right to fly at height set by gov’t. However, the real test is whether the use of airspace harms the surface owner.

(iii) Noisy flights as inverse condemnation. A continuous interference w/ a surface owner’s use of his land may result in an inverse condemnation(a) United States v. Causby, USSC, 1942. Low-flying military aircraft from

nearby field fly directly over chicken farm, frightening the chickens to death. Held: gov’t has taken, by inverse condemnation, an easement for noisy flights over the farmer’s land. Where the overflights are so low and so frequent as to be a direct interference w/ private owner’s enjoyment/use of land, the gov’t flights over private land amount to the taking of an easement w/out due process.

2) Light and Air(a) Generally, one cannot use one’s property for the sole purpose of harming one’s

neighbor—a spite fence.(i) Sundowner, Inc. v. King, IL Sup. Ct., 1973. Competing motel builds a

giant sign that is useless for advertising up against a neighboring hotel, obscuring 80% of neighboring hotel and blocking light/air into motel. Held: sign is a spite fence that must be torn down. A property owner can’t erect a structure on his property for the sole reason that it blocks air/light from neighbor’s land.

(b) If the structure that harms neighboring property has independent economic value, however, it is permissible(i) Fontainebleu Hotel Corp. v. Forty-Five Twenty-Five, Inc., FL Dist. Ct. of

App., 1959. One of two neighboring hotels begins constructing an additional tower that would cast the other hotel’s pool and cabana area into shadow. Held: construction may be built. There are no prescriptive easements for sunlight. While one cannot use own property to deny a neighbor of a legal right, there is no legally recognized right to sunlight. Tower/addition wasn’t a spite fence because the addition had utility, and thus wasn’t built solely to annoy neighbor.

(c) There may be a special exception for solar collectors (as opposed to swimming pools).(i) Prah v. Maretti, WI Sup. Ct., 1982. Landowner wants to build house that

would cast neighbor’s solar collectors into shadow. Held: proposed construction enjoined. Where neighbor’s proposed construction would interfere w/ landowner’s access to sunlight for his solar-heated residence—an economically justifiable use—neighbor must build residence on a different portion of his land (minor adjustment).

XIII) Vendor and Purchaser: The Land Sale ContractA) Brokers’ Contracts

1) Many states have a statutory requirement that precludes recovery of a real estate commission unless there is a written contract or authorization signed by the seller or party to be charged for the commission.

2) Under the traditional rule, a real estate broker earns her commission when she has produced a purchaser who is ready, willing, and able to buy the property on the terms

and conditions set by the vendor. A sale need not actually be consummated under this view.(a) Some states have amended this—not only must there be a purchaser who is ready,

willing, and able to buy on the owner’s terms, the purchaser must also enter into a binding contract w/ the owner and complete the transaction. In other words, there is no right to commission if the K isn’t consummated because of any default of the buyer. However, if the failure to consummate is the fault of the seller, the broker’s claim is valid.(i) Tristram’s Landing, Inc. v. Wait, MA Sup. Ct., 1975. In dispute over

payment of commission to real estate agent pursuant to a listing agreement stating that commission to be paid “upon said sale,” seller didn’t want to pay since he cancelled sale after execution of sales contract but before closing. Held: commission earned at closing. Though the general rule is that the broker is entitled to commission upon producing a buyer “ready, willing, and able” to purchase, meaning that the commission is earned at the time of the execution of the sales contract, the parties may contract around this default rule as they did here, allocating the risk of seller default to the agent.

3) There are several types of listing agreements:(a) A nonexclusive, open, or ordinary agreement, in which the broker is entitled to a

commission only if he is the first to procure a purchaser; if the property is sold by the owner himself or by someone else—no commission;

(b) An exclusive or agency agreement, in which the broker is entitled to a commission if he or any other broker sells the property, but not if the owner himself sells the property.

(c) An exclusive right to sell agreement whereby the broker is entitled to a commission no matter who sells the property during the term of the agreement.

4) Generally, a broker can fill out the forms on the sales contract, but an attorney must be the one to write up the deed.

5) The broker’s commission is usually a designated percentage of the sales price.B) Statute of Frauds

1) For a real estate contract or any agreement not to be performed w/in a yr, the K isn’t enforceable unless the agreement is in writing and signed by the person sought to be charged or his agent.(a) Cash v. Maddox, SC Sup. Ct., 1975. Only written evidence of sale of land was a

check for $200, upon which was written ““15 acres in Pickens, SC, land binder, 30 days from date of check to 6/3/70,” and that was endorsed and cashed. Held: writing on check insufficient to satisfy Statute of Frauds. Statute of Frauds is satisfied only by writings that set out all essential terms of sale; identification of land is essential term, and the identification on the check was too indefinite.

(b) Sales covered by Statute—any transfer of an interest in land (e.g., easements, real covenants, mineral rights, water rights, long-term leases, life estates, remainders, liens)(i) Leases: covered by sale-of-an-interest-in-land, unless specifically

excepted. Many jurisdictions provide that leases for one year or less don’t have to be in writing.

(ii) Interest in land—a promise to share the proceeds from purchase/sale of land is not an interest in land, because it is not a contract for sale and doesn’t promise to convey an interest in land

2) A writing is sufficient if it contains:(a) Identification of the parties;(b) A sufficient description or identification of the land to be conveyed;

(i) Turner v. Ferrin, MT Sup. Ct., 1988. In dispute over sale of land that the K described as “containing 96.73 acres, more or less” and bounded by right-of-way of Burlington Northern RR”; land was only 90 acres and title was instead subject to recorded right of way for gov’t highway (purchaser had seen highway by touring property). Held: conveyance is valid. Where sale is “in gross” rather than by acreage (which is known because K was for “96 acres, more or less,” because payment was lump sum rather than by acre, and because purchaser had toured prop. and thus saw what he was getting), a difference of 6% isn’t material enough to allow for rescission of contract of sale, and misidentification of holder of easement also not enough to allow rescission of K (since K put purchaser on notice that someone held an easement and purchaser had seen highway by touring prop.).

(ii) Factors to consider if sale is by acre or in gross:(a) Whether the quantity is a round number or a precise number;(b) Whether the price is lump sum or per acre;(c) If parties examine the property;(d) If the contract includes the language “more or less”

(c) The purchase price and manner of payment;(d) The promises of both sides;(e) Signature of the person to be charged.

3) A memorandum may consist of several writings if they are sufficiently connected and signed.

4) Exception to Statute of Frauds:(a) Part performance—the doctrine of partial performance permits an oral K for the

sale of land to be enforced.(i) The acts of performance that are necessary vary widely, but most

commonly you need to show:(a) Payment of all or part of the consideration or purchase price;(b) Delivery of possession to the vendee;(c) Construction of permanent and valuable improvements by the vendee;

(ii) In some states, partial payment of the purchase price is all you need to show. Others just require delivery of possession.

(iii) Most just require a combination of payment plus possession, or possession plus improvements. The most strict jurisdictions require all three.

(b) Equitable estoppel—a purchaser’s part performance that doesn’t meet requirements of part performance doctrine, but that does constitute reliance, may estop the vendor from asserting Statute of Frauds defense.(i) Elements:

(a) A certain and definite oral K;

(b) Acts that refer to, result from, or are made in pursuance of the agreement; and

(c) A refusal to fully execute the oral K that would operate as a fraud on, and place the purchaser in, a situation not remediable by money damages.

C) Executory Period Issues:1) Subject to Financing Clauses

(a) A common clause in land sale Ks that conditions the purchaser’s obligation to close on securing a loan commitment under suitable terms. Implied in the “subject to financing” clause is the purchaser’s reasonable effort to obtain the loan.(i) Bruyere v. Jade Realty Corp., NH Sup. Ct., 1977. In sale for land “subject

to financing,” the purchasers had financing but it was withdrawn by bank after purchasers divorced, and no alternative financing could be had. Held: seller gets to keep down payment. Though ordinarily buyers who can’t obtain financing get down payment back in order to protect themselves against involuntary breach, where the buyers alter their circumstances after sale agreement executed making the obtainment of financing before closing impossible, buyers have breached sale agreement and forfeited deposit.

2) Assorted contract law exceptions—e.g., fraud, misrepresentation, mutual mistake, etc.(a) Duty to disclose

(i) Common law rule—caveat emptor(ii) Modern trend—duty to disclose material latent defects in residential

context (not in the commercial context)(iii) Majority rule—a hybrid of caveat emptor and duty to disclose—vendors

only have to disclose defects that the purchaser couldn’t discover during a reasonable inspection.

(iv) Professional sellers are often held to a higher duty to disclose(v) Some cts. limit duty to disclose to those material latent defects that affect

the health or safety of the buyer.(b) Fraudulent misrepresentation

(i) Elements:(a) A representation of a fact(b) Which is material to the sale(c) Made falsely, with knowledge of its falsity, or with utter disregard and

recklessness as to whether it is ture(d) With the intent of misleading the purchaser into relying on the

representation(e) The purchaser justifiably relies on the representation(f) To his detriment (or injury would be suffered if the purchaser goes

through w/ the purchase).(iii) Action equivalent to assertion (concealment)—action intended or known

to be likely to prevent another from learning a fact is equivalent to an assertion that the fact doesn’t exist.(a) E.g.: A, seeking to induce B to make a contract to buy his house, paints

the basement floor in order to prevent B from discovering that the foundation is cracked. B is prevented from discovering the defect and

makes the contract. The concealment is equivalent to an assertion that the foundation is not cracked, and this assertion is a misrepresentation.

(iv) Correct mistake—disclosure necessary to correct other party’s mistake as to basic assumption on which the party is making the K and if non-disclosure would be failure to act in good faith and in accordance w/ reasonable standards of fair dealing. (Have to disclose hidden defects but can keep secret market info.)(a) A seller of real or personal property is, for example, ordinarily expected to

disclose a known latent defect of quality or title that is of such a character as would probably prevent the buyer from buying at the contract price.1. E.g.: A, seeking to induce B to make a contract to buy land, knows that

B does not know that the land has been filled with debris and covered but does not disclose this to B. B makes the contract. A's non-disclosure is equivalent to an assertion that the land has not been filled with debris and covered, and this assertion is a misrepresentation

(b) A party may reasonably expect the other to take normal steps to inform himself and to draw his own conclusions. If the other is lazy, inexperienced or ignorant, or if his judgment is bad or he lacks access to adequate information, his adversary is not generally expected to compensate for these deficiencies. A buyer of property, for example, is not ordinarily expected to disclose circumstances that make the property more valuable than the seller supposes.1. E.g.: A, seeking to induce B to make a contract to sell A land, learns

from government surveys that the land contains valuable mineral deposits and knows that B does not know this, but does not disclose this to B. B makes the contract. A's non-disclosure does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing and is therefore not equivalent to an assertion that the land does not contain valuable mineral deposits. The contract is not voidable by B.

2. E.g.: The facts being otherwise as stated above, A learns of the valuable mineral deposits from trespassing on B's land and not from government surveys. A's non-disclosure is equivalent to an assertion that the land does not contain valuable mineral deposits, and this assertion is a misrepresentation.

(v) Error in writing—disclosure necessary to correct other party’s mistake as to contents/effect of a writing.(a) E.g.: A, seeking to induce B to make a contract to sell a tract of land to A

for $100K, makes a written offer to B. A knows that B mistakenly thinks that the offer contains a provision under which A assumes an existing mortgage, and he knows that it does not contain such a provision but does not disclose this to B. B signs the writing, which is an integrated agreement. A’s non-disclosure is equivalent to an assertion that the writing contains such a provision, and this assertion is a misrepresentation.

(vi) Special relationship—if prospective parties are in relationship of trust and confidence, the party w/ superior info has a duty to affirmatively disclose material facts concerning the subject matter of the K (i.e., constructive fraud).(a) E.g.: A, who is experienced in business, has raised B, a young man, in his

household, and B has habitually followed his advice, although A is neither his parent nor his guardian. A, seeking to induce B to make a contract to sell land to A, knows that the land has appreciably increased in value because of a planned shopping center but does not disclose this to B. B makes the contract. A's non-disclosure is equivalent to an assertion that the value of the land has not appreciably increased, and this assertion is a misrepresentation

3) Time of Performance(a) In equity, time is not of the essence in a K for sale of land, unless:

(i) The contract expressly provides; or(ii) Special circumstances surrounding the execution of the K so require.

(b) Where time isn’t of the essence, you’ve got a reasonable time for performance (can be months or even a few years)

4) Marketable Title(a) The concept of marketability denotes a title that is reasonably free from doubtful

questions of law or fact: a title not likely to result in litigation.(b) In the absence of an agreement to the contrary (some vendors only contract to

convey insurable title, which is any title a title insurance company will insure), there is an implied undertaking in the K that the vendor has marketable title. Unless otherwise specified, a fee simple is the type of title required.

(c) If a deed is delivered and contains no warranty of title, the vendee has no redress—the deed supersedes the contract. However, to the rule that the contract merges into the deed, there is an exception as to those provisions which the parties obviously didn’t intend to merge (i.e., collateral matters not ordinarily mentioned in a deed). For example, if in the K the seller provides that he’ll fix the roof, the promise generally survives delivery of the deed. Such a promise doesn’t concern the title at all, and one doesn’t ordinarily find in deeds statements about the quality of the roof. Such promises are said to be collateral to the deed.

(d) The vendor only has to deliver marketable title on the date of closing—the purchaser cannot rescind before then.(i) Knowledge by the purchaser of the vendor’s lack of title at the time of the

sales K is immaterial, since she has a right to rely upon the vendor either having title or procuring it so as to carry out the agreement.

(e) Title to land acquired by accretion or adverse possession doesn’t constitute marketable title of record because you have to look outside the record to find it.(i) If the vendor is required only to have marketable title as opposed to

marketable title of record, then a vendor may rely on matters outside the record to establish title.

(f) Common defects which may render land titles unmarketable include undisclosed encumbrances, defective deed records, and violations of servitudes, covenants, or laws.

(i) Undisclosed encumbrances—an encumbrance that isn’t disclosed in the sales K to the purchaser or that the purchaser wouldn’t have seen in a visual inspection of the land makes the title unmarketable(a) Examples of undisclosed encumbrances—mortgages, lines, easements,

covenants, servitudes, leases, mineral rights, options.(b) Exception—monetary obligations secured by the property (e.g.,

mortgages, liens, unpaid property taxes) in amounts less than the sales price likely do not justify rescission of the sales K.

(ii) Defective deed records(a) Eg.: variations in names of grantors and grantees in the chain of title,

breaks in the chain of title, outstanding dower interests, defectively executed instruments in the chain of title, defective tax sales in the chain of title, and incompetency of grantors in the chain of title

(b) Encroaching structures also make the deed record defective and thus the title unmarketable—you don’t have to buy a lawsuit.

(iii) Violations of covenants, ordinances, regulations, or other laws(a) Laws don’t have to be disclosed, but covenants do.(b) A violation of a covenant or a significant violation of a zoning regulation

makes title unmarketable(c) Mere violations of building codes, or violations of zoning laws that end

when possession of the property changes hands (e.g., vendor was conducting nightly rock concerts) don’t render title unmarketable.

(iv) Adverse possession(a) Generally, title acquired by adverse possession is marketable, so long as

the vendor can clearly establish adverse possession (you don’t have to wait until the filing of a quiet title action).

(b) Similarly, a record title owner cannot convey marketable title if a 3rd party claims to own the property by adverse possession unless the claim is frivolous.

(v) The existence of restrictive covenants not acknowledged in the contract generally renders the title unmarketable—unless the restriction is reasonable and imposed by the gov’t. Even if a restrictive covenant is acknowledged in the K, violation of the covenant, if substantial, can render title unmarketable.

(vi) Outstanding possibilities of reverter render the title unmarketable.(vii) An encumbrance which the vendor cannot or won’t remove and which the

vendee cannot remove by application of the purchase money (because he’s a BFP) makes the titled unmarketable

(g) If the vendor’s title is only slightly imperfect, equity may not rescind the K but may require a reduction in the purchase price.

5) Marketable Record Title Acts(a) A Marketable Record Title Act is a statute of limitations in that the filing of a

notice is a prerequisite to preserve a right of action against the real estate founded upon any transaction that occurred prior to the period specified in the act.

(b) Such an act is “curative” in that it may operate to correct certain defects that have arisen in the execution of instruments in the chain of title.

(c) Generally, the statutory period is thirty or forty years.

(d) The purpose of the act is to extinguish all claims in existence for the statutory period or more that conflict with a record chain of title which is at least that old. This is accomplished by declaring as marketable record title any estate or interest reflected by the recorded chain of title for the statutory period.

(e) Under such an act, a root of title is a conveyance or other title transaction in the claimant’s chain of title purporting to create the interest claimed—the transaction being the most recent to be recorded as of a date prior to the statutory number of years required.

(f) Exceptions to Marketable Record Title Acts:(i) Interests and estates, easements and use restrictions disclosed by, and

defects inherent in the instruments of title;(ii) Interests preserved by the filing of proper notice;(iii) Rights of any persons in possession;(iv) Interests arising out of a title transaction recorded subsequent to the

effective date of the root of title;(v) Rights of gov’t;

(g) Marketable Record Title Acts operate against persons under a disability as well as regular people; they also invalidate future as well as present interests.

(h) A pure quitclaim deed probably can’t be the root of title under most marketable record title acts.

6) Equitable Conversion and Risk of Loss(a) Doctrine of equitable conversion treats interests in land as if the land had already

been converted into personal property.(i) Hence, both the vendor and the purchaser have an insurable interest while

the K is executory.(b) Equitable conversion applies when there is an enforceable obligation to sell land.(c) Under equitable conversion, the purchaser is regarded as the owner of the land for

many purposes, and the vendor, although she still owns the legal title, is regarded as the beneficial owner of personal property—primarily the right to the purchase price and to impose a security interest on the legal title to enforce the payment of the purchase money.(i) When the vendor dies during the existence of an enforceable K, the

beneficial interest descends as personal property and the heir gets only bare legal title which he must convey to the purchaser when the purchaser performs.

(ii) When the purchaser dies during the existence of an enforceable K, the right to receive the land goes to his heir but they duty to pay the purchase price is imposed upon the estate.

(d) In the absence of a contract provision to the contrary, the traditional view applies the equitable conversion doctrine and puts the risk of loss on the buyer for casualty losses which occur w/out the fault of either party during the existence of the vendor-vendee relationship. A minority view imposes this risk on the vendor, and some other states in effect place the risk on the party in possession.(i) Bryant v. Willison Real Estate Co., WV Sup. Ct., 1986. Building to be

sold destroyed by fire between execution of sale K and closing; sale K had clause that “the owner is responsible for said prop. until the Deed has been

delivered to said purchaser,” and clause that prop was sold “as is.” Held: owner responsible for damage and bears risk of destruction of property. Though the c/l rule of equitable conversion states that the seller is entitled to completion of K (money) and purchaser is the equitable owner from the time of the execution of the sale K and so bears all risks of damage to prop., many jurisdictions are moving away from this (and parties can certainly contract around it, as done here). Where there is partial destruction of building, the purchaser can sue for specific performance w/ reduced purchase price; however, where there is substantial damage, the appropriate remedy is to rescind K and refund down payment. Doctrine of equitable conversion still applied (1) where one party to sale dies (land in the hand of seller is personalty and land in hand of purchaser is realty); (2) eminent domain, in which case the eminent domain award goes to purchaser and contract price to seller; (3) rights of creditors, because if judgment comes after execution of sale K, there’s nothing for the creditor to attach to; and (4) risk of loss—the dramatic part that isn’t always followed, but usually is if loss is from change in market conditions.

(e) In the absence of a contract provision to the contrary, equitable conversion doesn’t give the purchaser the right of possession before closing; accordingly, the vendor is entitled to possession and to rents/profits during the period between the execution of the sales K and closing.

(f) In the absence of a contract provision to the contrary, the obligation to pay taxes is usually imposed on the party in possession.

(g) Property insurance—where only one party, usually the purchaser, bears the risk of loss and the other party, usually the seller, is the only one w/ insurance, and the property is destroyed by fear, cts. generally require the seller to apply the insurance proceeds against the sales price on the theory that the seller holds the insurance in constructive trust for the purchaser.(i) Majority of cts. don’t want to allow one party to keep both the purchase

price and the insurance proceeds.D) Remedies for Breach of the Land Sale Contract

1) Remedies of the buyer(a) Rescission

(i) Upon the seller’s breach, the buyer can rescind the contract and recover her down payment. However, where the seller is to furnish title on the closing date, a buyer cannot rescind prior to closing, thereby giving the seller a chance to perform (e.g., obtain title to property or cure defects in the title)

(b) Specific performance(i) Since land is unique, a buyer may demand specific performance.

(a) Since this is an equitable remedy, seller can invoke equitable defenses (e.g., undue hardship)

(ii) A buyer can take a defective title and receive an abatement in the purchase price(a) The abatement in price will be equal to the cost in removing the disability;

alternatively, if the disability cannot be removed, it will be the difference

between the contract price and the market price of the property w/ the disability

(c) Damages (i) A buyer can sue the seller for expectancy damages (the difference between

the contract price and the market price)(a) Exception. Where a seller acts in good faith, a buyer can only get his out-

of-pocket expenses.2) Remedies of the seller

(a) Rescission(i) Upon the buyer’s breach, the seller can rescind the contract

(b) Specific performance(i) A seller may demand specific performance, even if there is an

insubstantial defect in the sellers title (w/ an abatement in the purchase price)(a) Defense: a seller cannot get specific performance if she can easily resell

and damages are adequate(c) Damages

(i) A seller can keep the land and sue for the difference between the contract price and the market price.

(ii) She may also be able to keep the down payment as liquidated damages if there is a reasonable relationship between the sum and actual damages.

XIV) Conveyancing by DeedA) The Written Deed

1) At c/l, the ceremony of feoffment was oral.2) Today, the Statute of Frauds requires a writing and a signature by the conveyor of an

interest in real property, excluding short term leases and reasonably relied upon oral transfers.

3) Has four parts:(a) Introduction—names the parties and recites the consideration

(i) If the grantor is married, the deed should indicate the grantor owns the property as his or her separate estate (if that is true).

(ii) If the seller’s spouse has an interest under community property, cotenancy, or has a curtesy, dower, or homestead interest, the spouse must also execute the deed.

(b) Granting clause—what actually conveys the land(c) Habendum clause—specifies what covenants are included (omitted in statutory

short form deeds)(d) Description of property

B) Description and Boundaries1) To be effective, the deed must describe the land sufficiently so as to identify it.2) A deed which fails to describe a specific divided part of a larger tract but describes a

distinct fractional part of it is occasionally upheld as a conveyance of an undivided part; e.g., a conveyance of “one half of Blackacre” may be held to create an undivided half interest, rather than exclusive ownership in one half.

3) Commonly, a deed will describe property by reference to a particular map or plat, which is then part of the deed for purpose of identifying the land.

4) Metes and bounds—measurements on boundaries. This describes the tract by using compass directions and distances from an ascertainable starting point.(a) Requires: (1) starting point at readily identifiable known point that could be

relocated if the marker is removed; and (2) the description must close, that is, if the courses and distances are followed step by step, one will return to the place of beginning.

(b) When a deed describes the boundaries of the land to be conveyed, the intent of the parties is the controlling factor and all rules of construction are mere aids in determining such intent.

(c) Generally, (1) monuments govern over courses and distances; (2) courses govern over distances; (3) a specific description will govern over a general description; and (4) any of these will govern over an estimated “contents.”

(d) Parol evidence is inadmissible to determine the identity of land described in a deed unless it is first found that the description is ambiguous. Even then, it isn’t admissible to alter, but only to explain the ambiguity.

C) Exceptions and Reservations1) An exception is an exclusion from the operation of a deed of some part of the

property described in it. The excepted portion is wholly unaffected by the deed and remains in the grantor.

2) A reservation is the creation of a new right in the land conveyed for the benefit of land retained by the grantor (e.g., an easement for right of way across land conveyed to another)

D) Delivery, Escrow, and Acceptance1) Delivery of a deed means a grantor’s intent that it shall operate or take effect as a

present conveyance of an interest in property—who has the physical deed isn’t controlling, but can be evidence of his intent concerning its taking effect.(a) You can’t use a deed as a vehicle for a testamentary transfers (wills must be in

writing and have two witnesses).(b) The deed doesn’t have to guarantee present possession, but the deed must grant an

immediate interest.2) Delivery, being a state of mind, is external to the deed and the parol evidence rule

doesn’t apply. Any kind of testimony can be used.3) Delivery to a third person to be delivered to the grantee upon the occurrence of an

event or the performance of a condition is commonly referred to as a delivery in escrow.(a) If the escrow depositary is an agent of the vendor, there is no delivery (b/c he can

recall it, whereas delivery must be irrevocable).(b) If the escrow depositary is only to give the deed to the grantee if a condition is

satisfied that is outside the grantor’s control, then the delivery is valid. (e.g., “deliver this deed if I die before the grantee, but if she dies before me, then return it” is a valid delivery)

4) Acceptance is presumed. The grantee doesn’t even have to sign a deed poll. Thus, even an incompetent person can hold title by purchase though he has no capacity to accept contractual responsibility.

XV) Assurance of TitleA) Deed Covenants for Title

1) Types of deeds:(a) General warranty deeds. These contain all six of the usual covenants and

warrants title against defects arising before as well as during the time the grantor has title.

(b) Special warranty deeds. These contain all six of the usual covenants but only warrant title against defects arising during the time the grantor has title.(i) St. Paul Title Ins. Corp. v. Owen, AL Sup. Ct., 1984. Though someone

else had interest in land, A conveyed by warranty deed to B for nominal consideration, who conveyed by statutory short form warranty deed to C for nominal consideration, who got a mortgage from D. When C defaulted on payments and D couldn’t recover because C didn’t really own property, D sued A and B. Held: D can get nominal damages from A but not from B. A has breached covenants of quiet enjoyment (because adverse judgment in foreclosure action is constructive eviction), which runs w/ land to D. Though B’s statutory warranty deed also contains covenant of quiet enjoyment, the covenant is limited by statute to acts done or allowed by grantor—and since B didn’t personally do anything, B’s not liable to D. D gets only nominal damages. Though covenant of warranty (“to warrant and defend title” against lawful claims against grantee) is breached, atty fees awarded only if grantor must defend title given to grantee, which didn’t happen here (D’s suit was a foreclosure, not a defense of title against the person who had interest in land when A sold it).

(c) Quitclaim deeds. Contains no warranties.(d) Statutory short form warranty deeds. In many states, specific words of

conveyance (“grant and convey”) are statutorily presumed to connote general warranties of title.

2) Merger of contract into deed: once a buyer accepts a deed, the contract merges into the deed, and the buyer can sue only on the warranties in the deed.(a) The merger doctrine is disfavored and often not applied where a buyer expects the

seller to perform3) There are six covenants for title to real property:

(a) Three of these are in the present and are breached, if at all, when the deed is delivered:(i) Covenant of seisen

(a) Covenants for seisen and of the right to convey are usually construed as identical, and guarantee to the grantee that the grantor owns the estate that the deed purports to convey.

(ii) Covenant of right to convey(a) Covenants for seisen and of the right to convey are usually construed as

identical, and guarantee to the grantee that the grantor owns the estate that the deed purports to convey.

(b) Technically, there is a difference where a grantor would have seisen but not a right to convey; e.g., the grantor is a trustee under a trust whose terms limit his right to convey. In some states, the warranty of seisen merely indicates that the grantor is in possession of the land, whether or

not he has legal title. Thus, an adverse possessor would have seisen but not the right to convey.

(iii) Covenant against encumbrances(a) The covenant against encumbrances is a guarantee to the grantee that the

property conveyed isn’t subject to outstanding rights or interests that would diminish the value of the land; e.g., mortgages, liens, land use restrictions, easements, or profits. The existence of zoning regulations doesn’t constitute a breach of the covenant against encumbrances, but the existence of a violation of zoning or building restrictions may constitute such a breach.

(b) Three covenants cover breaches that occur after the deed is delivered, that is, in the future:(i) Covenant of quiet enjoyment

(a) Covenants of quiet enjoyment and general warranty are usually construed as having the same effect. They undertake to defend the grantee-covenantee against all lawful claims of the grantor himself or third persons who would evict the grantee-covenantee, actually or constructively.

(ii) Covenant of general warranty(a) Covenants of quiet enjoyment and general warranty are usually construed

as having the same effect. They undertake to defend the grantee-covenantee against all lawful claims of the grantor himself or third persons who would evict the grantee-covenantee, actually or constructively.

(iii) Covenant for further assurances(a) The covenant for further assurances (of little importance in modern U.S.)

is an undertaking on the grantor’s part to do such further necessary acts w/in her power to perfect the grantee’s title. In practice, the covenant prevents the grantor from extorting extra money to sign documents later (e.g., a technical defect exists in a previously signed document and the parties need to execute a corrected document).

4) Breach of Covenants(a) None of these covenants protects the grantee against the trespass or aggression of

a mere wrongdoer. They protect against adverse claims of right.(i) Hence, a covenantor only has a duty to defend against lawful superior

claims, and no duty to defend against wrongful claims.(b) Covenants for title are in their nature contracts of indemnity—damage must be

shown as a condition precedent to recovery for breach(c) Present covenants

(i) Under the traditional view, the first three covenants don’t run w/ the land because they become personal choses in action when they are breached at the instant the deed is delivered.(a) However, many states now allow the present covenants to run w/ the land

to remote grantees—but the SOL for a breach of a present covenant as to a remote grantee begins running on the initial transfer out of the defendant grantor, not when the remote grantee receives the land.

(ii) Covenants of seisen, right to convey, and against encumbrances are breached even if the grantee knew of the defect

(iii) They are breached, at all, when they are made (i.e., when the deed is delivered)(a) Brown v. Lober, IL Sup. Ct., 1979. C, who had obtained prop. by

warranty deed from B in 1957, tried to convey mineral rights to D in 1974 only to learn that A, a prior grantor, had reserved 2/3rd of the mineral rights in 1947, and so sued B for breaching covenants of seisen and quiet enjoyment in jurisdiction w/ 10 yr SOL. Held: SOL had run on breach of seisen claim (10 yrs from 1957). Breaches of present covenants (e.g., seisen) accrue at time of sale and SOL begins running immediately, and breaches of future covenants (e.g., quiet enjoyment) accrue at time of discovery and SOL doesn’t begin running until then.

(d) Future covenants(i) The last three covenants are covenants that run with the land and can be

enforced by remote grantees who take through the covenantee(a) There must, therefore, be privity of estate for a remote grantee to sue the

original grantor(ii) Covenants of quiet enjoyment, warranty, and further assurances are

breached when the grantee is actually or constructively evicted(a) Constructive eviction would occur, e.g., where a grantee must buy a

superior title to prevent eviction or is enjoined from using the property in violation of a restrictive covenant on the property.1. Brown v. Lober, IL Sup. Ct., 1979. C, who had obtained prop. by

warranty deed from B in 1957, tried to convey mineral rights to D in 1974 only to learn that A, a prior grantor, had reserved 2/3rd of the mineral rights in 1947, and so sued B for breaching covenants of seisen and quiet enjoyment in jurisdiction w/ 10 yr SOL. Held: no breach of covenant of quiet enjoyment. For a covenant of quiet enjoyment to be breached, there must be an ouster and another must have paramount title—here, A has paramount title but no constructive eviction. (There was a breach of covenant against encumbrances here, but C waived argument by not raising it at trial.)

2. Proffitt v. Isley, AK Ct. of App., 1985. A, who never satisfied mortgage on land (and which still isn’t due), sold to B who sold to C who sold to D, who sued A. Held: covenant against encumbrances doesn’t run w/ the land from an initial grantor to a remote grantee. Covenants of seisen, of right to convey, and against encumbrances are personal and don’t run w/ land. Covenants of warranty, and of quiet enjoyment, do run w/ the land; however, since mortgage is an encumbrance and no privity, A not liable to D. Even if A was liable, D could only recover nominal damages because no constructive eviction (because D hasn’t had to pay A’s mortgage); the mere existence of an encumbrance that hasn’t been exercised only gives rise to nominal damages.

(e) Even if no covenant has been breached, remember that the deed can still be invalidated for fraud

(i) Anderson v. Anderson, TX App. Ct., 1981. Grandmother Jewell wanted to deed land over to granddaughter Altha Miller, retaining a life estate, if Altha would take care of Jewell for life. Charles Anderson got this deed executed, even though Altha didn’t intend at time of execution to take care of grandmother. 2 yrs later, Altha conveyanced land to William for free, because he was going to take care of grandmother. Grandmother died, and her will devised land to son Frank. Held: deed to Altha invalid—Frank gets land. Though failure of consideration alone won’t invalidate deed, fraud will. In deciding whether K was procured by fraud, ct. considers transaction as a whole, including context and relationship of parties; here, Altha fraudulently remained silent and failed to correct misrepresentation in deed (that she intended to support grandmother). Promise to support set out as consideration is covenant rather than condition subsequent due to presumption against conditions subsequent. Grandmother’s estate could also have sued Altha for damages; however, since justice required undoing the deed, ct. used fraud to invalidate deed.

5) Damages for Breach(a) Caps on damages—least of the following measures:

(i) The maximum recovery the grantee can receive for breach of title covenants is the purchase price the grantee paid.(a) If the land is a gift, some courts allow no recovery for breach; others allow

the grantee to recover the market value at the time the covenant is made.(b) If market value of land is greater than purchase price, and the grantee

discovers that a third party has a paramount title to, say, one half of the land, some cts. say that the grantee’s damages are one half the land’s fair market value when breach discovered (up to purchase price) and some cts. say that the grantee’s damages are one half the purchase price the grantee paid.

(ii) The maximum recovery the grantee can receive from a remote grantor will be the amount the remote grantor received from a BFP.

(iii) The maximum recovery is actual damages (expectation), depending on covenant (see below)(a) If breach of future covenants of warranty and quiet enjoyment, can also

recover reasonable attorney fees incurred in the unsuccessful defense of title against a third party’s lawful claim.

(b) Covenant of seisen(i) If title to whole tract fails—full purchase price(ii) If there is a partial breach, the grantee may recover proportionate damages

(a) However, if the grantee receives a good title to a part of the land that isn’t usable, she can rescind and recover the entire purchase price

(c) Covenant against encumbrances(i) If removing the encumbrance is possible—the measure of damages is the

cost of removing the encumbrance(ii) If removing the encumbrance is impossible—the amount by which such

encumbrance reduces the value of the land

(iii) If the grantee doesn’t remove a removable encumbrance—nominal damages unless she can prove actual loss

B) Estoppel by Deed1) Estoppel by deed is a doctrine by which if a person executes a deed purporting to

convey an estate which she doesn’t have or which is larger than she has, and such person at a later date acquires such estate in that land, then the subsequently acquired estate will, by estoppel, pass to the grantee.

2) There are two theories on which the doctrine is claimed to operate:(a) The deed having been given and the estate having been subsequently acquired by

the grantor, then as a matter of law, the estoppel operates on the estate itself and passes it to the grantee—it is objective and wholly impersonal and the grantee takes even as against a BFP of the after-acquired title from the grantor.

(b) The deed having been given and the estate having been subsequently acquired by the grantor, then the grantor is only personally estopped to deny that she owned the estate at the time the deed was given, or she is personally estopped to deny the estate has passed to the grantee, but the estate itself isn’t affected. Under this theory, a BFP from the grantor of the after-acquired title would have priority over the original grantee.

3) Of course, if there is a covenant of title in the deed, the grantee can choose either to accept the estoppel by deed or sue for damages for breach of covenant.

4) In most jurisdictions, estoppel by deed doesn’t apply to quitclaim deeds. Estoppel by deed only operates when the grantor warranted that she had title.

5) Exception: If the warranty deed explicitly states that it is only conveying interest “presently” owned at the time of the conveyance, then no estoppel by deed.

6) Note—effect of estoppel by deed may be reversed by operation of recording act(a) E.g., A contracts to sell 700 acres to B. Two months before closing, B conveys

by general warranty deed 10 of the 700 acres to C. Two months later, A and B close, A delivering a general warranty deed to B. A year later, B contracts to sell all 700 acres to D. When C hears B planned to include the 10 acres C had bought earlier, C protests.(i) Generally, estoppel by deed would operate to give C title to the 10 acres.(ii) However, C’s deed, recorded before B’s deed from A, will be found

outside of the chain of title. Thus, the deed legally is not properly recorded and will not be treated as a recorded deed. In those states, D, a BFP w/out notice, would prevail against C.

C) Priorities and Recording1) Common Law Priorities

(a) First in time, first in right(b) Exception: a BFP w/out notice takes priority over a former equitable interest.

(i) E.g.: A, being fee simple owner of Blackacre, declares himself trustee of the property for B. A then conveys the legal title in Blackacre to C in fee simple. C pays full value for the property and has no knowledge of the declaration of trust in B’s favor. C owns Blackacre in fee simple and B’s equity, even though earlier in time, is cut off.

(c) Exception: conveyances made for the purpose of defrauding creditors or subsequent purchasers are null and void.

(i) E.g.: A, fee simple owner, owes creditor, B. To prevent B’s being able to collect the debt, A fraudulently conveys to C as donee, C giving no consideration for the deed and knowing the purpose of the conveyance. B can have set aside the conveyance to C as null and void.

(ii) E.g.: A, fee simple owner, conveys to B as donee, B paying nothing for the deed. A, intending to defraud C, conveys to C who pays full price for the property and w/out notice of prior conveyance to B. C can have set aside the conveyance to B as null and void.

(d) The common law rules apply when the controversy isn’t governed by an applicable recording act.

2) The Recording Acts(a) Types of Acts

(i) Notice: an unrecorded conveyance or other instrument is invalid as against a subsequent BFP for value and w/out notice(a) Under a notice statute, the subsequent BFP prevails over the prior

unrecorded interest whether the subsequent BFP records or not. Insofar as the subsequent purchaser is concerned, there is not premium on her race to the recorder’s office; her priority is determined upon her status at the time she acquires her deed or mortgage. Of course, she still has to protect herself from the possibility of a still later subsequent BFP.

(b) A few notice statutes have a grace period (e.g., 15 days), during which he can record his instrument in order to preserve his priority. If a prior grantee doesn’t record w/in the grace period, then a subsequent BFP will prevail.

(ii) Race: no conveyance or other instrument is valid as against purchasers for a valuable consideration until after it is recorded.(a) Under a race statute, the first to record wins. No need to be BFP.

(iii) Race-Notice: an unrecorded conveyance or other instrument is invalid as against a subsequent BFP for value w/out notice, who first records.(a) Under a race-notice statute, for a subsequent party to prevail, he must be

both a BFP for value and w/out notice AND record first.(b) Constructive Notice

(i) Under the recording acts, a recorded instrument gives constructive notice of its contents to subsequent purchasers and encumbrancers. Constructive notice is notice implied by law and isn’t dependent on actual notice or notice of facts from which knowledge of an unrecorded instrument would be implied, or on whether or not the buyer actually conducted a title search.

(ii) Constructive notice prevents a subsequent purchaser from being a BFP(c) Recorder’s Errors

(i) A BFP is normally entitled to rely upon what appears on the records. Where the recording office makes a mistake in recording an instrument (e.g., loses it), such an instrument doesn’t provide constructive notice in most states.

(ii) Indexing errors(a) Failure to index:

1. Some cts. protect grantee since he has done all that he could reasonably be expected to do to give notice to the world;

a. Frank v. Storer, MD Sup. Ct., 1986. O to A, recorded. A mortgages to B, recorded but not indexed. A to C. Held: C has constructive notice of mortgage to B. Where the recording act doesn’t provide for indexing as a prerequisite of recordation, a recorded deed that is unindexed, even if it is unindexed due to the property owner’s rather than the recording office’s fault, provides constructive notice.

2. Others cts. protect the BFP since, as a practical matter, there is no reasonable way to locate an unindexed deed. Further, the grantee could’ve prevented the harm by seeing that the instrument was properly recorded.

(b) Generally, the statute provides for a grantor-grantee index, but the recording office provides more easily used indices. However, one cannot rely upon the more convenient indices: even if there is an error in the indexing by the county-provided index, the improperly indexed deed still is deemed to provide constructive notice.1. Skelton v. Martin, FL Dist. Ct. App., 1996. A owed back taxes on

property, and B bought property at properly advertised and noticed tax deed sale; however, before tax deed sale occurred (but well after it was noticed), A conveyed to C, but recorded after tax sale, and C’s title company didn’t find tax sale while using county-provided internet title search program due to program glitch. Held: C had constructive notice of tax deed sale, so B gets property. Where technology has advanced past statutory indexing scheme, constructive notice is provided by deeds indexed in the statutory method even if they are unindexed in the computerized version.

(c) Indexing under misspelled name: 1. Common law doctrine of idem sonans (if the name as written sounds

the same as the pronunciation of the correct name, it refers to the correct person) holds that recorded names pronounced substantially the same as the correct ones give constructive notice

2. Modern trend—idem sonans abandoned in populous states or where the recording index has been computerized

(d) “Duly Recorded”(i) To be “duly recorded” and thus constitute constructive notice, the

instrument must be properly executed and acknowledged (i.e., witnessed by notary public) as a condition precedent to being properly recorded.

(ii) No acknowledgement—only if one sees an improperly executed deed or actually knows about it is one charged with at least inquiry notice and is held to have knowledge of facts that a reasonable inquiry would’ve disclosed.

(iii) Defective acknowledgement—if the acknowledgement is defective for some reason not apparent on the face of the instrument = constructive notice.(a) In re Barnacle, RI Sup. Ct., 1993. Though mortgage agreement called for

both mortgagors to sign K, only one did so; mortgage recorded. 5 yrs later, joint mortgagors went bankrupt. By statute, trustee in bankruptcy is deemed BFP of mortgaged prop. Held: trustee deemed to have

constructive notice of mortgage. Even though instrument of mortgage was defective due to failure to sign and majority rule is that defective instruments don’t give constructive notice, constructive notice is provided by this instrument that is defective (not signed by both joint mortgagors) but in a way that a reasonable reader of instrument would have reason to think it valid, so as to prevent penalizing those who search the record and rewarding those who do not. Other defects that wouldn’t give reasonable reader of instrument reason to think it valid (e.g., describes wrong prop. or indicates that it was already paid and therefore is cancelled) would not provide constructive notice. (Whether trustee had actual notice is irrelevant: by statute, he is deemed BFP unless he had constructive notice.)

(e) Void Instruments(i) An instrument of conveyance that is void for reasons such as forgery or

lack of delivery is ineffective for any purpose, and recording it has no legal effect.

(f) Adverse Possession(i) The recording statutes have no application to a title procured by adverse

possession or prescription; they apply only to title procured by instruments of conveyance which can be recorded.(a) Trimboli v. Kinkel, NY Ct. of App., 1919. An attorney hired to

investigate chain of title for purchasers reported good title, discovering that prop. belonged to Clark and Anderson as tenants in common. Clark died, and his will gave executor power to sell land and distribute proceeds; instead, executor gave Clark’s interest to Anderson in exchange for other land—which is beyond executor’s power (and so purchasers, who got land through Anderson, didn’t have marketable title). Purchasers try to resell land many years later, after SOL of adverse possession has tolled in their favor. Held: attorney guilty of malpractice. Attorney is negligent for failing to apply settled rules of law that should be known to all conveyancers and finding that record title was valid upon incorrect ground, even where title was valid through adverse possession. The exchange performed by executor and Anderson was invalid—there’s a difference between having prop. sold and proceeds distributed and having a different piece of prop—and since the transfer between executor and Anderson was invalid, Clark’s heirs were still record owners (even though they would lose by adverse possession).

(b) Mugaas v. Smith, WA Sup. Ct., 1949. A acquires adverse possession over narrow strip bordering neighboring property, but fence and all other proof advertising A’s claim over strip disintegrates before B purchases from neighbor and records. Held: A has strip. The recording act only gives title to BFPs as against unrecorded conveyances, not adverse possessors.

(g) Chain of Title Problems(i) The chain of title to a piece of land means the regular series of recorded

instruments from the patent from the gov’t down to and including the instrument through which the party claims ownership.

(ii) Every subsequent purchaser takes its interest in the property conveyed subject to prior interests properly recorded, which means:(a) An instrument in the direct chain of title, or(b) A recital in an instrument in such direct chain of title

(iii) An instrument which doesn’t constitute a regular link in the chain of title or which isn’t identified by a recital in an instrument in the chain (a wild deed), isn’t considered properly recorded and doesn’t give constructive notice to subsequent purchasers.(a) Zimmer v. Sundell, WI. Sup. Ct., 1941. A subsequent BFP who recorded

his deed before a prior purchaser, but the deeds in his chain of title back to the common grantor w/ the prior purchaser weren’t recorded until after the prior purchaser recorded all deeds in his chain of title. Held: prior purchaser gets property. To invoke a recording act as against a prior purchaser, the subsequent BFP must not only record his deed first, but all the deeds in his chain of title back to the common grantor w/ the prior purchaser must also be recorded.

(b) E.g.: E conveys to F, a BFP who doesn’t record. F conveys to G, a BFP who lives out of state, who records. E conveys to H, a BFP who records. Then G inspects the property and sees H building a house on the land. G sues to evict H.1. H prevails under race, notice, and race-notice statutes because G’s

deed, though recorded, is a wild deed and a ct. will conclude that it hasn’t been legally recorded. G’s deed will be deemed recorded only when all links needed for the chain of title to be traced to her deed are recorded. The deed from E to F isn’t recorded, so all conveyances out of F, including G’s recorded deed, also must be deemed unrecorded.

2. Since G’s deed is unrecorded, no constructive notice to H. And because G’s deed is not legally recorded, H also prevails in a race jurisdiction by being first to record.

3. The only way G could win is if she could show that H, in searching the deed records, actually found G’s deed from F. This may happen in a tract index.

(iv) Late recording(a) Where a grantee delays in recording, there can be chain of title problems

b/c subsequent searchers through the title records will not find the deed.(b) E.g.: O to A who doesn’t record, in Year 1. In Year 5, O to X who knew

about A’s deed and who promptly records. In Year 7, A records. In Year 8, X to Y, who is a BFP who records. Between A and Y, who wins?1. In a race jurisdiction, Y wins b/c X won the “race” to record. B/c X

prevails, her successors continue forming links in the chain, and Y profits from her predecessor being protected by the shelter principle.

2. In most race-notice and notice jurisdictions, A wins. No appeal to shelter principle b/c X had actual notice of A’s deed.a. Y loses on his own in most states. In most race-notice states, Y

would lose b/c A recorded first. In most notice states, Y would

lose b/c Y is deemed to have constructive notice of A’s deed since A’s deed was recorded.

b. A minority of states would find for Y since he never would have found A’s deed by searching the record.i. Helmholz feels that the minority position is the right one b/c

(1) for all subsequent searchers, A’s deed is a wild deed; and (2) between the two innocents, A and Y, it was A’s fault that caused the problem—and so equity favors protecting Y.

(v) Early recording(a) Where a grantee records too early (before the grantor has title), there can

be chain of title problems because the early recorder is outside the chain of title.

(b) E.g., A contracted to buy from O, but before closing, conveyed to B by general warranty deed. B records. O and A close, and A records. Three months later, A to C, a BFP who records. Between B and C, who wins?1. Most cts. would hold for C. This conflicts w/ legal doctrine of

estoppel by deed—B was first purchaser, recorded, and had legal title under estoppel by deed. However, B’s deed isn’t in the chain of title, and C or any subsequent purchasers wouldn’t find the deed in a typical search.

2. Race and race-notice jurisdiction courts would hold for C b/c C recorded first in the chain of title. C prevails in a notice jurisdiction b/c BFP w/out notice and B’s deed cannot provide constructive notice since it’s outside the chain of title.a. A minority of cts. would find for B by concluding that, on a literal

reading, the recording acts protect persons who record, not just those who record in the chain of title, and it is the duty of subsequent purchasers to expand their search of the deed records if they wish to be protected.

(h) Persons Protected: the Bona Fide Purchaser(i) The recording acts protect two people: the BFP and one who claims

through a BFP(ii) In order to be a BFP protected by the recording act, one must:

(a) Be subsequent,(b) Pay value, and

1. Donees: Recording statutes generally don’t protect a subsequent claimant who hasn’t paid more than a nominal consideration (but you don’t have to pay market value)

2. Creditors: One who takes a mortgage to secure a preexisting debt w/out at the same time relinquishing any right or claim as a consideration for the mortgage generally isn’t a “purchaser for value.” But if the mortgagee surrenders other security for the debt or extends the time of payment, he is a “purchaser for value.”a. Geo. M. McDonald & Co. v. Johns., WA Sup. Ct., 1911. A owes

money to B and to C, and mortgages same land to both of them. Mortgage to B was executed first; mortgage to C was recorded first

(with neither having notice of other). Recording statute: “All … mortgages … shall be recorded … and shall be valid as against bona fide purchasers from the date of their filing for record .. and when so filed shall be notice to all in the world.” Held: B wins. C can’t invoke recording statute because mortgage wasn’t supported by new consideration (e.g., additional time to repay loan) and so C isn’t a BFP for value. Even if recording act did apply, B would still win (even though lost race) because this particular recording statute only protects against subsequent purchasers, not prior purchasers.

(c) Be without notice.1. Quitclaim: a minority of states hold that a quitclaim deed puts the

purchaser on inquiry notice of some sort of adverse claim2. Possession: in most states, a person is required to make inquiry of a

person in possession of the landa. Methonen v. Stone, Alaska Sup. Ct., 1997. Taking title through a

series of intermediate conveyances with a deed “subject to easements of record,” Methonen sees pipes from well on his property to other properties in subdivision but the easement requiring him to supply water is unrecorded, and real estate agent tells him he has no responsibilities. Held: Methonen may have been on inquiry notice of easement (jury question). Methonen could be BFP because “subject to easement of record” is so boilerplate as not to provide notice of easement. Though no constructive notice because easement is unrecorded, Methonen may be on inquiry notice (and thus not a BFP) from seeing pipes going to other properties; that the real estate agent said there was no easement doesn’t matter, because agent has motive to mislead.

3. Neighborhood: in some states, a person is put on inquiry notice as to possible implied negative restrictions on use of the land by the looks of the neighborhooda. Methonen v. Stone, Alaska Sup. Ct., 1997. Taking title through a

series of intermediate conveyances with a deed “subject to easements of record,” Methonen sees pipes from well on his property to other properties in subdivision but the easement requiring him to supply water is unrecorded, and real estate agent tells him he has no responsibilities. Held: Methonen may have been on inquiry notice of easement (jury question). Methonen could be BFP because “subject to easement of record” is so boilerplate as not to provide notice of easement. Though no constructive notice because easement is unrecorded, Methonen may be on inquiry notice (and thus not a BFP) from seeing pipes going to other properties; that the real estate agent said there was no easement doesn’t matter, because agent has motive to mislead.

4. Mention of unrecorded instruments: if a recorded instrument expressly refers to an unrecorded instrument, most states require inquiry

5. Deeds from common grantors—in some instances, such as commercial tenants of a shopping mall, a purchaser is given constructive notice from deeds to other property from the common grantor.a. J.C. Penny v. Giant Eagle, Inc., 3rd Cir., 1996. In a jurisdiction

where recording of a lease “shall constitute constructive notice to subsequent purchasers… of the provisions of the lease,” J.C. Penny bought out the lease of a drugstore that had exclusive right to operate drugstore in shopping mall; another tenant in the shopping mall (which itself had exclusive right to operate grocery store) planned on opening drugstore. Held: the other tenant had constructive notice of J.C. Penny’s exclusive right to operate a drugstore. A lessee is a “purchaser” because a lease is really a sale of land for a term of years; moreover, if other tenant isn’t treated as having constructive notice, there would be no mechanism to assure that subsequent lessees get constructive notice of other tenants’ leases in the shopping mall.

(iii) BFP Filter Rule.(a) One who takes from a protected BFP stands in his shoes and is protected

even though the person has notice of a prior unrecorded interest(b) However, there is an exception where the grantor to the BFP is the person

who then takes from the BFP. A grantor cannot use a BFP to cleanse his title.1. Chergosky v. Crosstown Bell, Inc., MN Sup. Ct., 1990. O leased land

to A, who had option to purchase. O entered into contract for deed w/ B, who didn’t record for a long time. O got mortgage from C, recorded (w/out notice of B’s interest). A sought to invoke option to purchase, provoking litigation over its timeliness. O conveyed 70% interest in and obligations of property to D, who had notice of A, B, and C. Just before B records his contract for deed, D buys out B’s interest and thus is mortgagee. Recording statute: “Every conveyance of real estate shall be recorded … and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate … whose conveyance is first duly recorded.” Held: a person who assumed the obligations of an unrecorded contract for deed at the time he acquired an interest in a piece of real property cannot assert priority over the unrecorded contract for deed, after purchasing a mortgage on the property from a BFP who recorded the mortgage before the contract for deed was recorded. Though the BFP filter rule generally operates so that a bona fide purchaser of property that was subject to prior outstanding unrecorded interest may pass title free of the unrecorded interest to a subsequent purchaser who otherwise wouldn’t qualify as BFP under recording act, here, where the subsequent purchaser seeking to invoke the BFP filter rule to cleanse his ownership is a former owner (because he had purchased 70% interest in rights and obligations of grantor of contract for deed), he may not invoke the

BFP filter rule. (Ordinarily, C would have priority over B, because C was BFP who recorded first; however, D who took from C, is also former owner from O and thus cannot use filter rule).

(i) Hazards Not Covered by the Recording Acts(i) The recording acts generally afford purchasers either no or inadequate

protection against the following interests:(a) Forged and other void deeds or instruments;(b) Deeds by incompetents;(c) Fraudulent statements in the instruments as to marital status;(d) Claims of undisclosed heirs;(e) Falsification of records;(f) Undelivered but recorded deeds;(g) Impersonation of the record owner; and(h) Adverse possession, prescription, or equivalent property interests acquired

by operation of law and w/out a recordable instrument1. Mountain States Telephone and Telegraph v. Kelton, AZ Sup. Ct.,

1955. Contractor clearing a lot w/ bulldozer damages underground pipes placed years ago pursuant to recorded easement. Held: contractor did not have constructive notice of pipes. Parties w/ certain types of limited interests in property (e.g., a contractor’s license to be on property to fulfill contractual duties) are not bound to search the records.

(ii) In addition, some recording acts don’t protect aginst:(a) Recording mistakes;(b) Indexing mistakes; and(c) Possibly other undisclosed interests.

(j) Indices(i) Most chain of title problems stem from the use of a grantor-grantee index

instead of a tract index3) Title Insurance

(a) In a title insurance policy, the insurer promises to indemnify the insured for any injury if the title to land is less than that described in the policy. Title insurers typically do title searches before writing a title insurance policy. However, they are not separately liable in tort for errors in their title searches.(i) Greeberg v. Stewart Title Guaranty Co., WI Sup. Ct., 1992. Because title

insurance company didn’t adequately search the record when preparing relied upon title abstract, a condo deal fell through when the owner couldn’t obtain financing. Held: title insurance company not liable. A title insurance company is only liable for failure to discover a title defect under the contract w/ insured, and does not owe any separate duty of care to the insured for its title search.

(b) Unlike many other forms of insurance, title insurance is paid for w/ a single premium paid at the time of sale.

(c) The title policy typically contains exceptions and exclusions for defects of title not shown by the public record, zoning restrictions, defects that could be

disclosed by a survey or other inspection of the property, or rights of parties in possession.

(d) A title insurer, unlike the grantor of a warranty deed, generally is obligated by the policy to provide a legal defense to title claims arguably covered by the policy.(i) Title insurance is also better than suing under covenant of warranty is b/c

insurer is solvent, and can be located—unlike grantors.(e) Damages—up to K maximum, damages are the diminution in fair market value

resulting from defect. However, title insurers usually reserve the right to cure any defect instead of paying for any loss of value.(i) Swanson v. Safeco Title Ins. Co., AZ Ct. App., 1995. A buys property w/

title insurance, but insurer’s title search doesn’t turn up a lien whose release was never recorded. A tries to refinance property, but unreleased (even if paid) lien is discovered and financing revoked. A doesn’t promptly notify title insurer of lien; instead, A sues insurer when property foreclosed to collect “actual damages” under the policy. Held: it is a factual question if cloud on title due to lien caused foreclosure. “Actual losses” caused by a defect is the amount it would cost to remove the defect (here, filing fees); alternatively, it is the depreciation in market value caused by the existence of the defect in title, measured on the date of the discovery of the defect – not the “out of pocket” losses of claimant.