Property 2 Outline

Gilmore Property 2 OutlineKeyed to Dukeminier/Krier 6th Ed.UMKC, June Carbone Spring 2010

I Transfers of Real Property

Includes:

Contract of Sale The deed by which title is transferred Financing device

A Contracts for Sale. To be enforceable, a contract to convey real property must satisfy the Statute of Fraud. The purpose is to convince someone that the transfer has occurred and in the process prevent fraud.

(1) Statute of Frauds—applies to all transfers of real property by gift or by sale. At a minimum, the memorandum of sale/gift must be:

(a) Signed by the party to be bound (the party seeking enforcement)

(b) Describe the real estate

(c) State the Price/Method of arriving to the price.

(2) Exceptions to the Statute of Frauds. There are 2 principle exceptions to the SOF requirement.

(a) Part Performance—allows the specific oral agreements when particular acts have been performed by one of the parties to the agreement. Acts held to constitute part performance vary from jurisdiction to jurisdiction.

1 Theory 1—(strict common law doctrine) Unequivocal evidence of a contract. Acts of the parties substantially satisfy the evidentiary requirements of the SOF if the acts make sense only as having been performed pursuant to the oral agreement. Such as:

a Payment—all or part of the purchase price

b Possession—in physical possession

c Improvement—above general husbandry

2 Theory 2—(reasonable reliance) prevents injurious reliance on the contract; if the pl. shows that he would suffer irreparable injury if the contract were not enforced, then the buyer’s taking possession alone is sufficient to set the court in motion. The modern trend is to require proof of:

a an oral contract and

b reasonable reliance on the contract—enough reliance that it would be inequitable to deny specific performance.


c Hickey v. Green- Green orally agreed to sell Hickey a building lot for $15k and accepted but did not deposit Hickey’s ck for part payment. Hickey sold his house expecting to build a new house on the lot. Ms. Green refused to complete the sale. Court held that Hickey’s reliance was reasonable and that equity required specific performance of the oral sale contract unless the Hickey’s agreement to sell their house fell through (in which case they’d receive restitution).

d No reliance—Walker v. Ireton—Ireton orally agreed to sell his farm to Walker for $30k. Parties discussed a written K but no K was every prepared. When Walker asked for a written K, Ireton assured Walker he was honest and none was needed. Walker gave Ireton a $50 ck as part payment and Ireton accepted, but did not cash the ck. Walker then sold his own farm without ever mentioning to Ireton of his intent to do so. Ireton refused to convey. Court ruled for Ireton. The delivery of the check was not sufficient part performance to remove defense of SOF, and Walker’s sale of his own farm was not reasonable reliance on the oral K because the parties neither discussed that action nor was it foreseeable by Ireton.

(b) Equitable Estoppel—May be used to enforce an oral sale K if the seller has caused the buyer reasonably to rely significantly to his detriment upon the seller’s oral agreement to sell. Similar to Theory 2 of Part Performance

(c) Specific Performance—Injunction

1 Irreparable Injury

2 Balance of the Hardships—who is in the better position to avoid the loss, and equitable compensation.

(3) Implied in any contract to sell real property is the obligations of:

(a) Good Faith—each party is required to act in good faith in discharging the express duties of the K. Failure to do so will result in default.

(b) Timely Performance and Closing—most contracts state the date of closing(the completion of the transaction) but if the closing does not occur on the specific date, it still may be enforced in equity if full performance is tendered within a reasonable time after the closing date. To get around the lingering uncertainty add the term— time is of the essence—this expressly makes time an essential term of the agreement, a party able and willing to perform on the closing date is relieved of any future


obligations under the sale of the K if the other party fails to perform on the required closing date, and

(c) Delivery of marketable title. See B

(4) Brokers and Agents—

(a) Brokers. Brokers (listing agent) are hired by sellers to sell the property on the terms and for a commission as specified by the listing agreement. Commission is earned when a broker has produced a buyer who is ready, willing, and able to purchase on the terms of the listing agreement or other terms acceptable to the seller.

1 Majority—in majority of jurisdictions, the broker is entitled to his commission if the deal falls through regardless of the seller’s or buyer’s default.

2 Minority—if the deal falls through because of the seller’s default or the seller refuses to sell on the terms of the listing agreement the broker is entitled to the commission anyway; but if the buyer defaults, no commission is earned.

3 Duties—a listing agent is the seller’s agent and owes to the seller all of the fiduciary duties that come with an agency relationship.

(b) Licari v. Blackwelder—The broker was charged with having withheld from his client the fact that he was negotiating the sale of the property to a 3rd party even before he purchased it; failed to exercise his best efforts to obtain the best price for his client; and misrepresented other facts.

(5) Assurance of Good title—There are 3 ways a Buyer is assured of getting good title to property.

(a) Certificate of Title—The attorney does a direct search of title

(b) Abstract of Title—the abstractor assembles all of the pertinent records and abstracts or abbreviates their contents. The abstractor is usually the Title Company

(c) Local Title Insurance—Issued by a corporate insurer on the basis of a certificate furnished by the local attorney. You are being insured on the original purchase price and if there is something wrong; you would have to pay extra if you want to get the appreciated market value. Advantages include—substitution of K liability for tort liability; and the replacement of a mortal individual assurer by an immortal corporation and some additional protections against defects of the title not appearing on the record.

(6) Lawyer’s Role—role in the sale of commercial property is greater.


B Marketable Title. Every real estate contract contains the implied duty of the seller to supply title free and clear of encumbrances. If the seller cannot convey a merchantable title to the buyer, the buyer is entitled to rescind the K. The law implied the duty to deliver. The obligation can be expressly disclaimed by agreement between the buyer and the seller. Any defect must be substantial and likely to result in injury to the buyer.

(1) Proof of Marketable Title. A seller can deliver marketable title by either:

(a) Production of good record title—a recorded chain of title , showing unbroken transfer of title from some original root of title in the past to the seller, with no recorded encumbrances (e.g., mortgages, liens, easements, or servitudes) or

(b) Proving Title by Adverse Possession—either through a successful quiet title action or evidence sufficient to establish that the rival claim to title would not succeed if asserted and that there is no real likelihood that nay claim will ever be asserted.

(2) Defective Title. The defect in title must be substantial and likely to injure the buyer. Defective title does not always prevent the transaction from taking place. Common defects of title include:

(a) Defective chain of title—the chain of title may have a faulty or nonexistent link. (e.g., describes the wrong land.)

(b) Encumbrances—an encumbrance is a burden on title, such as a mortgage, judgment liens, easements, or covenants.

(c) Zoning Restrictions—use limits imposed by public authority through zoning laws are not regarded as encumbrances on title. The rationale is that all property is subject to the lawful regulation of a public authority, and that all land titles implicitly incorporate such use limits. However, if the existing use of the property violates a zoning ordinance the title will be held unmarketable on the theory that the buyer could not possibly have intended to purchase a violation of law and consequent liability.

(3) Lohmeyer v. Bower. Bower and Lohmeyer entered into a written agreement by which Bower agreed to sell and Lohmeyer agreed to buy a one-story wood-frame house in KS. The lot was burdened by a covenant requiring all residences constructed on the land to be 2-stories tall. The Court stated that the mere existence of the covenant restricting use is an encumbrance making title unmarketable. Only because Lohmeyer had agreed to take title “subject to all encumbrances of record”, did the mere existence of the covenant not make title unmarketable; however, Lohmeyer did not agree to accept existing violations of the covenant. The present and continuing violation of the ordinance sufficiently exposed Lohymeyer to the hazard of litigation to make the title unmarketable. Those existing violations make title unmarketable.

2 exceptions exist:


(a) An easement that benefits the property (utility easement)

(b) If the sale K specifies a particular use that is permitted by the restrictive covenant. (The buyer has bargained for a specific use, not all possible lawful uses).

(4) Default and Remedies. Default occurs when one party has tendered performance in time, and demanded timely performance from the other party, and reciprocal performance is not forthcoming. Remedies include:

(a) Specific Performance—Because land is unique, damages may be inadequate.

1 Sought by Buyer—are generally able to demand specific performance. If the seller’s title is defective, and the buyer still wants the property, the buyer is entitled to abatement of the price to reflect the diminution in value attributable to the defect.

2 Sought by Seller—traditionally have been able to demand, however the trend is to deny the sellers specific performance if they are still able to sell the property at a commercially reasonable price. A seller entitled to specific performance will be required to reduce the price if there is an insubstantial defect in title. If the defect is substantial then the title is not marketable, and the seller is not entitle to specific performance.

3 Equitable Conversion—if a contract is specifically enforceable, this doctrine operates to treat the buyer as the equitable owner from the moment the K becomes effective, even if title passes later.

a Majority—The risk of loss is on the buyer from that moment on.

b Minority—the risk of loss is on the seller until the legal title is conveyed.

c. Massachusetts—Risk of loss on the seller if the loss is substantial and the terms of the contract show that the building constituted and important part of the subject matter of the contract; if the loss is not substantial, either party can enforce the contract, though an abatement in purchase price may be given.

Parties should explicitly agree who bears the risk of loss until title passes and express that agreement clearly in the sale K.

In inheritance, equitable conversion has been applied when one of the parties to a contract for the sale of land dies and there is an issue about the decedent’s interest is real property or personal property. If equitable conversion has occurred, the seller’s interest


is personal property (right to purchase price), and the buyer is treated as owner of the land. ?

(b) Rescission—If the seller breaches, the buyer may elect to rescind, recover his partial payments already made, and “walk away” from the deal. If the buyer breaches, the seller may elect to rescind the contract and sell the property to another party. The rescission right does not ripen until the closing date, however, because either party has until then to tender performance. An attempted rescission prior to the closing date is not only ineffective but is a breach of the sale K.

(c) Damages—if the pl. does not want (or cannot obtain) specific performance she may obtain money damages. Damages include:

1 Benefit of the Bargain—the measure of damages gives the aggrieved party the difference between the K price and the fair market value of the property at the time of the breach. This is not the future value but the value as of the date of the breach.

2 Jones v. Lee— the Lee’s entered into a K to purchase the Jones’s home for 610K and then unjustifiably refused to perform. Jones later sold the house for 540K and sought to collect 70K difference from the Lees. The award of special and punitive damages was upheld, but the award of compensatory damages was vacated and the case remanded to determine whether the fair market value of the house on the date of the breach had declined. The Court instructed in making the determination, the latter sale for a lesser price may be considered evidence of the market value at the time of the breach, and should be considered with all other relevant evidence.

3 Deposit Retention—Common law rule—is that a seller may elect to retain the entire deposit made by the buyer in the event of the buyer’s breach, even if the deposit exceeds the actual damages to the seller. Economic Efficiency—criticizes this rule an unfair and inefficient because it entitles the seller to a windfall and it deters efficient breaches. Minority—limits retention of the buyer’s deposit to the actual damages incurred by the seller, unless the parties have agreed to retention as liquidated damages.

a Kutzin v. Pirnie—Pirnie’s agreed to purchase the Kutzins’ house and deposited $36K toward the purchase price. The K contained no liquidated damages provision. After the Pirnies unjustifiably failed to perform the Kutzins sought to retain the entire deposit. The court placed the burden of proof upon the party in breach and stressed that the rule was limited to real estate K that did not dispose of the deposit of liquidated damages. Court abandoned common law rule in favor of economic efficiency and unjust enrichment.


4 Out-of-Pocket—Limits the exposure of the seller who breaches innocently (breach in good faith).

a ½ states limit damages awarded against a seller who has breached in good faith to the actual money that the buyer has expended in reliance and interest and fees incurred with obtaining a loan.

b ½ states make the good faith seller in breach liable for the entire benefit of the bargain.

5 Liquidated Damages—Sellers typically protect themselves against a buyer’s breach by stipulating in the K that the buyer’s deposit may be retained as liquidated damages in the event of the buyer’s breach. This is enforceable as long as there is some reasonable relationship between the deposit amount and the actual damages suffered by the seller.

C Duty to Disclose. The common law rule is that absent a fiduciary relationship, a seller has no duty to disclose know defects in property.

(1) Common Law View—Caveat Empetor (Buyer Beware, buy at your own risk) The seller’s duty was to refrain from intentional misrepresentation—the outright lie about the property’s condition. Active concealment of know defect. Caveat Empetor was justified on the theory that buyers ought to use diligence and care to examine the property for themselves—Caveat Empetor has been abandoned today.

(2) Fiduciary Relationships—if the parties were in a fiduciary relationship—a relationship where one party is dependent upon and has special trust in the other—the fiduciary is obligated to reveal all defects know to him. This duty arises from the fiduciary’s obligation to place the other party’s interests ahead of his own.

(3) Imposition of the Affirmative Duty—the trend is that silence can operate as a misrepresentation since other areas of the law have taken this step. The modern rule equates nondisclosure with fraudulent misrepresentation, imbedded in the elements of the modern rule. If there is a defect that the seller does not know about then they do not have a duity to disclose because they don’t know anything about it.

(a) Material Defect—Standards applied.

1 Objective—whether a reasonable person would attach importance to it in deciding to buy

2 Subjective—whether the defect “affects the value or desirability of the property to the buyer.” The mind of this particular buyer.


(b) Undisclosed Defects—Standard applied. What are the remedies for the breach of the seller’s duty:

1 Ability to rescind

2 Have the seller correct the defects

3 Sue for damages

(4) Disclosure of seller-created conditions—the seller is obligated to disclose conditions that:

(a) Are created by the seller(b) Materially impair property value

(c) Are not likely to be discovered by a reasonably prudent buyer using due care.

(d) Stambovsky v. Ackley. Ackley owned a home, and repeatedly publicized various abnormal phenomena that had occurred in the house, encouraging the reputation of the house as haunted by ghosts. Stambovsky agreed to buy the house and then learned that the house was reported to be possessed. He sought to rescind the K. NY Ct. stated that caveat emptor did not apply because the seller promoted the property’s reputation and that the reputation was likely not to be discovered by a reasonably prudent buyer (inspection may not reveal the presence of ghosts) therefore, the reputation materially impaired the value of the K.

(5) Latent Material Defects—Majority rule—the seller must reveal all latent material defects. Latent Material Defect is a defect that:

(a) Materially affects the value or desirability

(b) Is known to the seller (or only accessible to the seller)

(c) Is neither known to or within the reach of the diligent attention and observations of the buyer.

(d) Johnson v. Davis. The Davises purchased Johnson’s house, moved in, and learned within a few days the water leaked in around the windows and from the ceiling in 2 rooms. The Davises sued to rescind. The court found the Johnson misrepresented when they told the Davises that the roof was sound and therefore, were liable for fraud. Also, Johnson was obligated to disclose any facts know to him or accessible only by him that materially affects the value or desirability of the property and which are either unknown to the buyer or cannot be learned by diligent search.


(6) Misrepresentation—in all cases in all jurisdictions there is a duty not to misrepresent.

(a) Misrepresentation—is a statement in which the seller can expect the buyer to rely to his detriment. The critical element is reliance (looks like estoppel).

(b) Seller always has a duty not to make a material misrepresentation.

(c) If you don’t disclose and you a blanket “as is” clause, the clause will not cover latent material defects. However, an “as is” clause that is accompanied by full disclosure is enforceable, as long as what is disclosed is in reasonable contemplation of the buyer.


(7) Implied Warranty of Quality—

(a) Traditional View 1—a builder had no liability to anyone for his poor workmanship unless he had given an express warranty of quality.

(b) Traditional View 2—a builder’s warranty of quality is implied into the K between the owner and the builder but the builder’s liability for economic loss resulting from the breach of this warranty was limited to those with whom he was in privity of K –the immediate purchaser of the structure from the builder or the owner with whom the builder contracted.

(c) Modern View—Implied warranty of quality by the builder of a new home that may be enforced by subsequent purchasers of the structure.

(d) Lempke v. Dagenais. Dagenais build a garage for owners of property who then sold the property to the Lempkes. Shortly after the Lempkes took possession they noticed severe structural problems with the roof of the garage. After some attempts to persuade Dagenais to repair the garage the Lempkes sued Dagenais for negligence and breach of an implied warranty of quality. The court concluded that when a builder sells his structures a warranty of workmanlike quality is implied by law and runs for the benefit of subsequent purchasers with respect to latent defects that become apparent after the remote purchaser acquired title and which could not have been discovered prior to the remote purchaser’s acquisition.

1 No disclaimer—the Implied warranty of quality in favor of subsequent purchasers may not be disclaimed.

2 Limitations period—Courts permit subsequent purchasers to bring suit against the original builder for a “reasonable time”—usually a period long enough for latent defects of the original construction to become apparent.

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


D The Deed. What you get after the sale is complete.

(1) Components—A deed is the usual method by which title is transferred.

(a) Writing Required—the SOF requires a writing signed by the grantor in order to transfer an interest in land. Because the grantor is the only party bound by the deed (distinguish from the K of sale) only the grantor needs to sign the deed.

(b) Notarial Acknowledgement—Notary public attests to the grantors signature and identity. A deed is valid without it though.

(c) The Grant—the first clause of the deed is the granting clause, which recites the parties, the words effecting the grant, the consideration, and the description of the property.

(2) Warranties of Title—A seller’s warranties concerning the state of the title conveyed are expressly contained in the deed. No warranties are implied.

(a) Types of Deeds:

1 General Warranty Deed—deed guaranties the 6 present and future covenants concerning title (see below). Each covenant is a promise that title is absolutely free of the warranted defect, regardless of whether the defect arose before or during the time the grantor had title.

2 Grant Deed—in some jurisdiction when the deed states, “I grant” the use of the word grant comes with 2 warranties:

a The covenant against encumbrances

b The covenant of seisin.

3 Special Warranty Deed—warrants that there are no defects in title created by the grantor. This deed type contains the same 6 or fewer covenants of the general warranty deed. the only difference is that the grantor warrants against defects of title that arose during the grantor’s time of holding title. Defects arising before the grantor’s ownership are not covered.

4 Quitclaim Deed—contains no warranties, this deed operates to convey to the grantee whatever interests in the property that the grantor may own. The usual function is to remove apparent and uncontested defects in title without resort to litigation.

5 Merger Doctrine—Traditional rule—any promises in the K of sale with respect to title are “merged” into the deed once the buyer accepts the deed. The buyer can only sue for breach of the deed covenants of title and may not rely on the K of sale’s provisions


with respect to title. Exceptions: fraud, promises deemed collateral to the deed. Merger doctrine now in disfavor—avoid it by saying that the obligation in dispute is a independent or collateral obligation.

(b) Deed Warranties:

1 Present Covenants—a present covenant is broke, if ever, at the time the deed is delivered (the date of the closing). SOL begins o toll o the date of the delivery of the deed. The following are present covenants:

a Covenant of Seisin-- Grantor warrants that he owns the estate that he purports to convey. Breached if the grantor does not in fact own what he purports to convey regardless of whether he is aware of the defect or not.

b Covenant Of Right To Convey—The Grantor warrants that he has the right to convey the property. Breached if the grantor lacks to power and authority to convey the interest whether or not he is aware of the limits on his authority to convey.

c Covenant Against Encumbrances—The grantor warrants that there are no encumbrances on the property. Breached if the title is encumbered at the time of delivery of the deed, whether or not the owner is aware of the encumbrance.

d Frimberger v. Anzellotti. DiLoreto owned property abutting a tidal marsh. He constructed a bulkhead, filled a portion of the marsh, build a house, and sold it to Anzellotti by quitclaim deed. 2 years later, Anzellotti conveyed the property to Frimberger under a general warranty deed. when Frimberger sought to repair the bulkhead he learned that a significant portion of the lot unlawfully encroached on protected wetlands. Rather than seeking a variance fro the use regulation, Frimberger sued Anzelloti on the covenant against encumbrances. The court held that “latent violations” of governmental land use regulations that do not appear on the record, and are unknown to the seller because no official action by the govt. has compelled compliance, at the time the deed was executed, and that have not become an interest do not constitute an encumbrance.

i. prevailing rule is that violations of governmental land use regulations that are not known to the seller


and which have not become the subject of government enforcement are not encumbrances.

2 Future Covenants—promises the Grantor will do some act in the future, such as defending against claims of 3rd parties or compensating the grantee for loss by virtue of failure of title. A future covenant is not breached until the grantee or his successor is evicted from the property, buys up the paramount claim, or is otherwise damaged. SOL begins to toll at the time of eviction or when the covenant is broken in the future. The following are future covenants.

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

b Covenant Of Quiet Enjoyment—The grantor warrants that the grantee will not be disturbed in possession and enjoyments of the property by assertion of superior title. This covenant is usually omitted from general warranty deed because it mirrors the covenant of general warranty.

c Covenant Of Future Assurances—The grantor promises that he will execute any other documents required to perfect the title conveyed. Usually dropped from general warranty deeds because of its open-ended obligation imposed on the seller, or because it adds little to the first 4 covenants, or because the doctrine of after-acquired title has made this covenant redundant.

d Brown v. Lober. Bost conveyed 80 acres to Brown under a general warranty deed containing no exceptions, even though Bost only owned 1/3 of the mineral rights. After the SOL on the present covenants had expired, Brown agreed to sell the mineral rights to Coal for $6K, but was forced to accept only $2K once it learned that Brown only owned 1/3 of the mineral rights. The ct. found that Brown had not be constructively evicted because the mere existence of a paramount title does not constitute a breach of the covenant of quiet enjoyment. If the owner of the other 2/3 of the mineral rights were to start mining coal under Brown’s land, Brown would be actually evicted. If , in order to prevent a real and manifest the threat of mining, Brown purchased the other 2/3 of the mineral rights from the owner, Brown would be constructively evicted, but if Brown


purchased the other 2/3 of mineral rights without such threat it would probably not constitute a constructive eviction.

e To have a adverse possession claim the injured party must start to do the activity claimed in violation (i.e., mine the minerals themselves thus tolling the SOL and carrying the other elements of Adv. Possession).

3 Breach of Future Covenants—Breached only when the grantee’s possession has been disturbed by someone holding superior title. That can occur years after the original transfer and after the SOL has barred suit on the present covenants.

a Benefits runs with the estate. If there is privity of estate b/t the original grantor and the remote grantee the benefit of the future covenant given to the original grantee runs with the estate conveyed to the remote grantee.

i. Privity of estate—that the original grantor conveyed either title or possession and the same interest was conveyed to the remote grantee. If the original grantor had neither title nor possession there is no estate created which the covenant can run. After-acquired title (estoppel by deed)—created because the rule insulates wrongdoers from liability to remote grantees. Courts will grant an “estate” held by the original grantor and passed on to the remote grantee , usually off the mere possibility that the original grantor might later acquire an interest that would be passed on to the remote grantee.

ii. Obligation to Defend—The covenant of general warranty imposes no obligation of the grantor to defend against spurious claims of paramount title. The effect is to require the grantee to defend. Once the 3rd parties paramount claim becomes lawful, the grantee will be able to recover the costs of defense plus damages. But if the 3rd party claim is defeated, the costs of defending are entirely on the grantee.


b Assignment of present covenants.

i. Majority rule (American rule)—is that a present covenant is for the benefit of the immediate grantee and that , if breached when made, the grantee has a chose in action (right to sue) that is not impliedly assigned if the grantee conveys to a remote grantee.

ii. Minority rule (English courts)—that a transfer to a remote grantee implicitly operates to assign the grantee’s chose in action to the remote grantee.

c Rockafellor v. Gray—Connelly acquired title to 80 acres at a foreclosure sale, then conveyed the property by general warranty deed to Dixon, who in turn conveyed by special warranty deed to H&G. The foreclosure sale was invalid so Connelly never owned the 80 acres and thus breached the covenant of seisin given to Dixon, but because Dixon had conveyed by special warranty he had not breached the covenant of seisin the had given to H&G. H&G sued Connelly on the covenant of seisin he had given to Dixon. the Ct. ruled that Dixon’s chose in action was impliedly assigned to H&G by the conveyance to H&G.

4 Damages for Breach—Majority rule is that the grantee may not recover more than what the grantor-in-breach received for the property.

a Suit by the original grantee: Original grantee is limited to a return of his purchase price. Courts are split as to whether interest should accrue from the date of the promise or the date of eviction.

b Suit by the remote grantee—Most all courts agree that if the remote grantee has paid more for the property than the original grantor received, the remote grantee is subject to the general damage limit and will only recover what the original grantor received. But if the remote grantee paid less for the property, courts differ on whether the remote grantee should recover what the remote grantee paid or actual damages up to the amount received by the original grantor.


E Delivery. A deed must be delivered by the grantor in order to be effective to transfer an interest in land. Delivery means that the grantor has said or done things that can demonstrate the grantor’s intent to transfer immediately an interest in land to the grantee. The key is the grantor’s intent, the paper deed if destroyed does not invalidate the deed, and if delivery is proper the deed is valid. A deed cannot convey a future interest, a will can.

(1) Presumed Delivery. Courts hold the presumption that delivery has occurred under any of the following:

(a) Physical Transfer to the grantee

(b) Notarial Acknowledgement of the deed, or

(c) Recording of the Deed.

Courts also hold the presumption that no delivery has occurred if the grantor retains physical custody of the deed.

(d) Sweeney v. Sweeney. Maurice Sweeney, estranged from his wife Maria, wished to ensure that upon his death his brother John would take Maurice’s farm and tavern, rather than Maria. Maurice executed and recorded a deed of the property to John, and John executed a deed of the property to Maurice, which was not recorded. Both deeds were prepared at the same time by the town clerk, who gave the originals to Maurice. Maurice gave both deeds to John. When Maurice died, Maria contended that the unrecorded but fully executed deed from John to Maurice had been delivered to Maurice and operated to vest title in Maurice. Accordingly, she claimed her elective share in Maurice’s estate, including the farm and tavern. John asserted that there had been no delivery because he had never intended to deliver the deed to Maurice or, in the alternative, that there was an oral condition attached to the delivery. The court ruled that because the John-Maurice deed had been manually delivered to Maurice there arose the presumption of delivery, which was not rebutted by the fact that the motivation of John and Maurice was to defeat Maria’s elective share by ensuring that title to the farm was in John at Maurice’s death, but to cause title to return to Maurice if and only if John died before Maurice.

(2) Attempted Delivery. An attempt to deliver a deed:

(a) At the death of the grantor is almost always ineffective. If the grantor intends that the deed become effective only upon his death, the deed is void unless it can be admitted as a will. (Usually void by the Statute of Wills).


(b) During his life, the grantor’s death does not destroy the delivery already accomplished by that intent to be effective during his life.

(c) Rosengrant v. Rosengrant. The Rosengrants (childless) owned a farm which they wished to convey to their nephew, effective at their death. They executed a deed of the farm (during their life, thus creating a life estate?) which they handed to the nephew, the nephew then handed to the banker for safekeeping. They instructed the banker to keep the deed until they died, then give it to the nephew to be recorded. the banker put the deed in an envelope marked with both parties name (the rosengrants and the nephew) and kept it in a bank vault. After their death, the nephew retrieved and recorded the deed. The court cancelled the deed stating that it was never delivered during the Rosengrants lifetime because there was never intent to give “outright ownership” at the time of delivery. The bank’s policy to write both parties name on the envelope provided justification.

F The Mortgage—NOT ON THE EXAM—THANK YA LAWD!

G Title Assurance. How current owners can obtain assurance that they actually have good title to the land they purchased.

(1) Recording Acts—the recording system developed to keep record of deeds and mortgage demonstrating title to real property. The purpose to provide certainty in the real estate transaction—our market system would not work if the buyer didn’t believe that when he bought a property, he actually owned it. Recording acts apply if:

(a) The grantee is protected in that jurisdiction

(b) The document can be recorded.

(2) Types of Recording Acts—

(a) Race Statute—the concept of underlying the earliest type of recording acts—a race statute—was literally a race to the county courthouse to be the first one to record the conveyance. Notice of a prior transfer of an interest in property is irrelevant. (2 states still have this North Carolina and Louisiana).

1 Recordation cuts off the possibility that either a prior unrecorded purchaser or a later purchaser could prevail.


(b) Notice Statute—Subsequent bona fide purchaser without notice of a prior unrecorded transfer prevails over the prior purchaser who fails to record (1/2 of American states recognize this statute):

1 BFP: one who gives valuable consideration to purchase the property and is without notice of prior unrecorded conveyance

2 True: even if the subsequent BFP has not recorded.

(c) Race-Notice Statute—Protects subsequent BFPs who lack notice of prior conveyance and record before the prior purchaser.

1 Encourages Recording

2 Eliminates Disputes over which of the 2 conveyances was first delivered. .

3 Recordation cuts off the possibility that either a prior unrecorded purchaser or a later purchaser could prevail.

(3) Consequences of NOT Recording: There are 2 important consequences to failure to record:

(a) Common law rule applies—If nobody has recorded the common law principle of “first-in-time, first-in-right” apply, except in a notice jurisdiction when the subsequent BFP lacks notice.

(b) Grantor can convey good title to a later purchaser: Without recordation, the grantor is left with the power to convey good title to a later purchaser. The Grantor may be liable to losing first purchaser for the proceeds received from the second purchaser.

(4) When is an instrument recorded? To be recorded, an instrument must be eligible for recording and be entered into the records in a manner that complies with the jurisdiction’s requirements. Common instances when instrument of the record that is wholly or partially unrecorded:

(a) Instrument not indexed. The recorder’s failure to index and instrument or to index it so improperly that I cannot be found by a diligent searcher using the standard search methods.

(b) Omnibus or Mother Hubbard clauses: A variation on the improperly indexed instrument is an instrument that accurately describes 1 parcel and also includes “all other land owned by the grantor in the county”. These clauses ‘sweep the cupboard bare”. The recorder can only record this instrument by reference, because it is an unreasonable burden on the recorder to search the records to identify all the other property owned by


the grantor. They are void against the later purchasers of the grantor’s property because a diligent searcher of the index will never locate any reference to the omnibus clause.

(c) Luthi v. Evans . Owens owned interests in 8 oil and gas leases. She assigned to International Tours her interest in those leases under an assignment that specifically described each of the seven different parcels and included an omnibus clause that assigned to Tours Owen’s interest in “all oil and gas leases” owned by Owens, where or not such leases are specifically identified by the assignment. The 8th lease was not specifically described. 4 years after Tours recorded the assignment Owens assigned her interest in the 8th lease to Burris who obtained an abstract of title which did not reveal the existence of the omnibus clause in the Owens to Tours assignment. the court held that the omnibus clause in the assignment did not give constructive notice to the later purchaser, Burris.

(d) Misspelled Names—Jurisdictions are divided over whether a misspelled name in a recorded instrument gives constructive notice. all jurisdictions agree that if the misspelling is so significant that it does not even sound like the correct name, there is no constructive notice. the problem that divides jurisdictions is whether the misspelling that sounds like the correct name supplies constructive notice

1 Doctrine of idem sonans. Holds that a misspelling that sounds substantially identical to the correct name gives constructive notices. This doctrine is NOT the prevailing rule with respect to the issue of constructive notice from the real estate records.

2 Orr v. Byers. Orr obtained a judgment against Elliott, but Orr’s lawyers prepared the judgment by spelling Elliott’s name as “Elliot.” And abstract of judgment, listing the judgment debtor as “Elliot” or “Eliot” was recorded in CA, and indexed under those 2 names only. Elliott later conveyed property subject to the judgment lien to Byers and Orr sought to foreclose his lien against the parcel acquired by Byers from Elliott. The Court held that idem sonans did not apply in CA., and that the recorded instrument did not give constructive notice of Orr’s lien. Byer prevailed. If Byer had actual notice of Orr’s lien he would have lost.

(5) Notice: to be protected under the notice or race-notice jurisdictions, a BFP must be without actual or constructive notice at the time they pay the consideration.

(a) Actual Notice—real, actual knowledge of the prior unrecorded transaction.


(b) Constructive Notice—

1 Record Notice: the entire world is responsible for constructive notice of the contents of the record.

2 Inquiry Notice: what a reasonable person should have known based upon the facts present. In most states a subsequent purchaser has the obligation to make reasonable inquiries, and is charged with knowledge of what those reasonable inquiries would reveal.

a Record reference to an unrecorded instrument—if a recorded instrument refers expressly to an unrecorded instrument, a purchaser is under an obligation in many states to inquire about the substance of the unrecorded instrument to which the record refers.

b Harper v. Paradise. Harper conveyed her farm to Maude for Life, remainder to Maude’s children. The deed was mislaid and thus not recorded. After Harper died her children executed a quitclaim deed to Maud by conveying any interest they may have in the farm (which is nothing). Maude executed a deed of trust to Thornton for a $50 loan. Thornton foreclosed after a default and rec’d a sheriffs deed which she recorded. Then, Thornton conveyed to the Paradises. Later the deed was found by Maude’s children who recorded. Her children sued after her death to recover possession of the property. The court found that the Paradise’s could not rely on the GA statute protecting the title of innocent purchasers from heirs who lack actual notice of prior claims because the Maude-Thornton deed made reference to the Harper-Maude deed. Thornton owned only the LE possession of Maude and at her death the future interest of her children was vested.

(6) Chain of Title Problems. Chain of title is the recorded sequence of transactions by which title has passed from a sovereign to the present claimant. The period of time for which records must be searched and the documents must be examined within that time period. The meaning of chain of title varies from jurisdiction to jurisdiction.

(a) IF an instrument is improperly indexed, some jurisdictions say that it is not recorded.


(b) Shelter rule—Deals with the notice, race-notice issue. The only way to protect a subsequent BFP is to protect further down the chain. Only when the person would actually be the winner can the people down the line be protected.

(c) Wild Deeds—A deed which is outside the chain of title. If a complete stranger to the record chain of title records a conveyance (a wild deed), the conveyance does not give constructive notice because it is not within the chain of title.

(d) Estoppel by deed—I convey it before I own it am I subsequently stopped from conveying my title? Most jurisdictions say that if the record is clean, the person wins.

(e) Board of Education of Minneapolis v. Hughes. In MN, a race-notice jurisdiction, Hoerger conveyed a lot to D&W, who did not record. D&W then conveyed the lot to the BOE, who did record, after which Hoerger conveyed the same lot to Hughes, who lacked notice of the conveyance from Hoerger to D&W. Hughes recorded. The court stated that Hughes prevailed over BOE because the conveyance form D&W to the BOE was outside the chain of title and did not impart constructive notice. At the time Hughes purchased from Hoerger, a diligent title search would reveal Hoerger to be the record owner. Even thought the deed to the BOE was recorded first, it would appear to be a deed made by a complete stranger to the chain of title because the Hoerger to D&W link was not recorded a diligent title searcher would never find the D&W to BOE conveyance.

(7) Expanded Chain of Title ( ALWAYS ON EXAM ) —deeds from a common grantor. Reciprocal implied covenants restricting land use may be implied by a developer’s conveyance of property subject to express covenants burdening the developer’s retained land, but such a covenant does not appear in the chain of title of the retained land, if it is conveyed without the implied covenant being made express.

(a) Jurisdictions are split, most concluded that the burden on title searchers to locate and read all deeds out from a common grantor is unreasonable.

(b) Few states conclude that purchasers of property from a common grantor have constructive notice of the contents of all deeds out from a common grantor, thus imposing the practical burden of searching all deeds from a common grantor.

(c) Guillette v. Daly Dry Wall, Inc. A developer conveyed a lot to Guillette under a recorded deed that restricted the lot’s use to a single-family residence, and recited that “same restrictions are hereby imposed on


each of the lots now owned by the seller” This was effective to impose the single-family residence use restriction on all the developer’s remaining lots. Later the developer conveyed a restricted lot to Daly under a recorded deed that made no mention of any restrictions. Daly obtained a permit to construct 36 apartments on the lot. The other owners sought to restrict this use. The court held that Daly acquired the lot with constructive notice of the restriction even thought the restriction was not in the chain of title from the developer to Daly. The Guillette rule requires a purchaser to expand his search of title to include all conveyances made by the grantor of other adjacent property he owned, in order to be certain that the grantor did not burden his remaining property with a use restriction contained in a deed to a 3rd party. Jurisdictions rejecting this rule reason that this search burden is unreasonable.

(8) Title Insurance. For a fee, a title insurer agrees to defend title and to compensate for the loss of the insured title to the claim of a paramount owner. Generally, title insurers will not insure unless the purchaser’s deed is recorded and the insurer is satisfied that no rival would have a better title.

(a) Coverage. (Duty to disclose)The scope of coverage is determined by the K for insurance. The usual policy insures only that the title stated in the policy is a good record title. The policy does not insure against claims or interest that are not part of the record. Courts impose on title insurers a duty to disclose anything they know about the parcel in question that is material or important, breach of which is an actionable tort. Jurisdictions are split that the title insurance company has a duty to disclose

1 Maj.—no independent tort action outside the policy (overwhelmingly)

2 Min.—duty to disclose the title search

(b) Walker Rogge v. Chelsea Title. Kosa acquired title from Aiello under a deed that state the total acreage was 12.486 acres, based on a survey. Walker agreed to purchase the tract from Kosa after being shown a different survey stating the property’s total acreage as 1833 acres. The Kosa-Rogge K state that the acreage was 19 acres. and stipulated that the price was to be reduced by $16k per acre if the tract was in fact smaller than 19 acres, the K referred to the 2nd survey. Walker hired Chelsea title to examine and insured title. Chelsea did so and issued a policy that excepted from coverage matters that could be disclosed by an accurate survey. At the time the policy was issued Chelsea had in it files the Aiello-Kosa deed, which stated the acreage to be 12.489. The court held that the K exception immune them from K liability , but there was evidence that Chelsea had undertaken a duty to only insure title, and that


any search of title was for its own benefit and ancillary to its duty to insure.

(c) Marketable Title and Encumbrances-- Courts limit the scope of this coverage to title rather than extending it to cover diminutions of value that affect marketability but have no bearing on the clarity or certainty of ownership. Insurance policy typically insure for: 1 Defects in title

2 Liens

3 Encumberances upon title

4 Unmarketable title.

5 Lack of right of access

(d) Lick Mill v. Chicago Title. Lick Mill Apts. Purchased and developed a portion of a 30-acre tract that had been formerly the site of chemical processing plants and warehouses. Chicago title insured the title against defects, liens, encumbrances, and unmarketability. Prior to insuring the title Chicago Title hired Caroll to inspect the site and Carroll reported the presence of certain pipes, tanks, and pumps. When the title was insured the records of various government agencies disclosed the presence of hazardous substances on the property, but that it was not clear whether those records were inspected by or know to either Lick Mill or Chicago Title. After Lick Mill took the title it was required to expend considerable sums to remove and clean up the toxins on the site. Lick Mill then sought to recover those costs from Chicago Title. Alleging that the toxins made the title unmarketable and constituted an encumbrance on title.

1 Distinguish-

a Loymeyer v. Bower—enabled the buyer to rescind his purchase contract; a violation of a public ordinance = encumbrance. This did affect marketability of title; if they don’t fix it they are exposed to the hazards of litigation.

b Frimberger v. Anzellotti—a present violation of a zoning law did not constitute unmarketable title for purposes of breach of the covenant of general warranty. The difference in the result is due to the ex post, ex ante posture of the problem.

c Loymeyer—when the deal is still inchoate it makes sense to allow it to unravel, for that permits avoidance of damage before it hardens, but when it is done (Frimberger and Lick Mill) a finding of unmarketable title shifts costs, perhaps unfairly.


2 Diligent investigations on Lick Mills part would have enabled it to avoid the loss, shifting the loss to Chicago Title would greatly increase the scope of liability for title insurers, thus raising the cost of title insurance generally and probably imperiling the continuing existence of some insurers. (public policy issue)

II Land Use Controls

A The Law of Nuisance—A nuisance is any substantial non-trespassory invasion of another’s interest in the use and enjoyment of their land.

(1) Private Nuisance—is an interference with the use and enjoyment of land, in order to give rise to liability, must be substantial; it must also be intentional or unreasonable, or the unintentional result (not on final) of negligent, reckless, or abnormally ultrahazardous activity.

(a) Unreasonableness—in case of air and water pollution, noise, odors, etc. There’s intent, but liability only arises when the resulting interference is substantial and unreasonable. Instead of looking at social benefits v. Costs (RST view), the relevant inquiry is whether the level of interference rises to a level of liability. A lot of courts won’t even consider the social benefit of the intentional nuisance (Jost-like view)

(b) Morgan v. High Penn Oil. High Penn operated an oil refinery that emitted noxious fumes several times each week, polluting the air for about a 2-mile radius from the refinery. Along with many other people who owned land within that radius, Morgan sued to enjoin the refinery’s operations, alleging that the noxious odors made me sick and deprived him of use and enjoyment of his property. High Penn intended to operate the refinery and knew or should have known that its operation would produce the noxious odors and the court assumed its use was unreasonable but did not explain quite why. The court applies the Jost-like view but you don’t see the court in expressly stating how they are viewing it seems to be a mixture of the RST and the Jost approach which is not uncommon.

(c) Lateral and Subjacent Support.

1 Lateral support of land—is that provided to one piece of land by parcels of land surrounding.

2 Subjacent support—where one person owns surface rights and another subsurface rights.


(2) Remedies. 4 outcomes of a Nuisance Suit.

(a) No nuisance, the use continues without constraint (Property Rule)

1 If challenged the activity if found not to be a nuisance the use right is allocated to the challenged user and is implicitly protected by the property rule.

2 The challenged user cannot be forced to stop without his consent

3 The use will continue unless the challenged use is the less valuable one and the transaction costs do not inhibit its transfer.

(b) Enjoin the nuisance to stop it (Estancias Dallas Corp v. Schultz) (Property Rule)

1 If a challenged activity is found to be a nuisance and the challenger’s use is protected by a property rule, the challenged activity will be enjoined and it will thus stop.

2 The challenger can continue his use at his pleasure.

3 If the enjoined activity is the more valuable the use right will likely be shifted to the enjoined user unless the transaction costs prevent the transfer.

(c) Award damages to landowners affected by the nuisance but permit it to continue (Boomer v. Atlantic ) (Liability rule)

1 The view of transaction costs In situations where there are a large number of landowners affected by a more valuable use that is, on balance a nuisance, the presence of holdout transaction costs may prompt a court to protect the use right of the numerous landowners by a liability rule instead of a property rule.

2 The damages awarded are permanent damages—an amount sufficient to compensate now for all past and future injury that may be inflicted by continuation of the nuisance.

(d) Enjoin the use (though maybe not a nuisance) and award damages to the enjoined user. (Spur Industries v. Del E. Webb) (not on exam; Liability Rule)

The court may enjoin an activity, but require the benefitted landowners compensate the enjoined actor for the lost use. This may occur when: The pl. asserts that his activity is more valuable It is not clear that either

The challenged activity is a nuisance or If it is, equity favors an unadorned injunction and


It is unlikely that ht e pl. is able or willing to acquire the use right in the market.

(e) Estancias Dallas Corp v. Schultz. Estancias Dallas constructed an apt complex in Dallas adjacent to Schultz’s residence. To save $40K Estancias located its central air conditioning unit about 5 feet from Schultz’s lot line. 55 ft. from his house, and 70 feet from his bedroom. The air conditioner was quite noisy, and prevented Schultz from entertaining outdoors, and even interfered with an indoor conversation and his sleep. To change the location of the unit would cost Estancias 140k-200k. The apts. could not be rented in sweltering Dallas without air conditioning. The value of Schultz’s house was 25K.

(f) Boomer v. Atlantic Cement Co . Atlantic Cement’s factory produced dirt, smoke, noise, and vibration that substantially interfered with the use and enjoyment of land owned by a large number of neighbors. The factory was a nuisance and an award of damage instead of a injunction was warranted. Remanded for the determination of the amount of permanent damages to be awarded for the ‘servitude’ thus created over the affected land. The court reasoned technological impossibility of abatement, coupled with recognition that the factory was the more valuable use (it produced positive externalities in the form of jobs and other economic benefits to the region), but that the holdout possibility might well frustrate a marker transfer of the right if the factory was enjoined from further operation.

(g) Property Rule—under either property rule outcomes, any later transfer of the right must be voluntary and economically efficient transfers may be inhibited by high transaction costs

(h) Liability Rule—under the liability rule outcomes the judicial system forces a transfer of rights upon compensation to the other party. The justification for using liability rules instead of property rules is that this will produce a socially efficient outcome.

B The Law of Servitudes.

Estates in Land—give the holder the right to exclusive possession/occupation of the property.

Servitudes—give the holder the right to use someone else’s property, or to restrict the owner’s use of the owner’s property

(1) Various Types of Servitudes—Depending on what remedy is sought for enforcement, these agreements create either a real covenant or a equitable servitude.

(a) The Easement—the right to enter and perform an act on some servient parcel of land.


1 Affirmative easement—the right to enter or perform on the parcel of land. Ex. A is given the right to enter upon B’s land.

2 Negative Easement—prevents the owner of the parcel fro doing something with their land. Ex. A is given the right to enforce a restriction o the use of B’s land.

3 Can be characterized as appurtenant/in gross

4 Falls within the SOF—being an interest in land; creation requires a:

a Written instrument signed by the party to be bound

b In addition to the exceptions for fraud, part performance, and estoppels, and easement may be created by:

i. Implication, or

ii. Prescription

5 Can have duration comparable to any of the possessory estates. An Easement can be in fee simple (perpetual duration) or for life, or for a term of years.

(b) The Profit—to take off the land that is traditionally thought of as part of the land (e.g., timber, mineral rights, wild game, and fish).

Example A is given the right to enter upon B’s land and remove something attached to the land.

1 Can be characterized as appurtenant/in gross

2 Falls within the SOF—being an interest in land.

(c) Real Covenants/Equitable Servitudes—

1 Real Covenants—Covenants enforceable at law with the remedy as damages.

2 Equitable Servitudes—Covenants enforceable in equity with the remedy as an injunction.

Depending upon several factors, including the remedy that A seeks in the even the restriction is breached. Examples—

3 A is given the right to enforce a restriction on the use of B’s land—This is a negative covenant because B cannot use the land in some way.


4 A is given the right to require B perform some act on B’s land—This is an affirmative covenant which states that B must/has to act.

5 A is given the right to require B to pay money for the upkeep of specified facilities—Affirmative obligation, but it is different from 3 and 4 because in this example, it is a payment of money and is going to be used for something in connection with the land.

(d) Appurtenant—an easement or profit that benefits a particular parcel of land. This ‘benefit’ is transferred along with the titled to the parcel to each subsequent owner. This type of easement/profit benefits the easement owner in the use of the land. Requires:

1 Dominant tenement (or estate) and

2 Servient tenement.

3 The easement attached to and benefits the dominant tenement.

4 This type of easement usually is transferrable. Transfers along to with the dominant tenement to successive owners. However, appurtenant easements can be made personal to the easement owner only and are not transferable to others.

(e) In Gross—The easement/profit is held by a particular person, not in connection with the ownership of a specific parcel of land. The easement owner benefits personally rather than in connection with the use of the land which that person owns.

1 Involves only a Servient Estate

2 Does not benefit any land

3 May be alienable or inalienable

4 Said to be personal, but they are personal only in the sense that they do not attach to any parcel of land owned by the easement owner, not in the sense that they may not be transferred to another person.

(2) Creation of Easements--

(a) Easement created by Grant—Easement created by grant in a deed need to identify the property, describe the easement (nature of right), must be in writing, should be notarized and recorded

1 Willard v. 1 st Church of Christ, Scientist . The trial court went by the common law rule that "one cannot 'reserve' an interest in property to a stranger to the title." However, the court notes that


times are changing, and now they want to give effect to the intent of the grantor. The court adds this rule frustrates the grantor's intent, and b/c it produces an inequitable result b/c original grantee presumably paid a smaller price for title to the property. Here, McGuigan testified she discounted the land to Peterson. There was also no evidence of any reliance by the insurance title company. No evidence of a policy issued, thus no showing of alliance to an insurance company. And Willard couldn't say he had no knowledge of the easement, as the land was being used as such while he was in the negotiating process, and after Willard acquired title.

a At common law—the grantor cannot reserve an easement in favor of a 3rd party (stranger of title

b Modern law—Rst. 3rd of Servitudes; an easement can be created in favor of a 3rd party,

2 Reservation—is a provision in a deed creating some new servitude which did not exist before as an independent interest.

Example: O conveys Blackacre to A reserving a 20-foot-wide easement of way along the south boundary of Blackacre.

The easement did not exist as an independent interest prior to the conveyance by O.

3 Exception—is a provision in a deed that excludes from the grant some preexisting servitude on the land.

Example: After the above conveyance, A conveys Blackacre to B, except for the easement previously reserved by O.

(b) Licenses—oral or written permission given by the occupant of land allowing the licensee to do some act that otherwise would be a trespass (like plumber coming to fix the drain) License is revocable where an easement is not. Exceptions to the rule that a license is revocable (irrevocable licenses treated like easements)

1 A license coupled with an interest cannot be revoked—when a license is tied together with some other legally recognized interest the license is irrevocable until that other interest is vindicated.

Example O grants A the right to take timber from property owned by O—A has an interest (a profit) and an irrevocable license to enter the land an take the timber.


2 A license can also become irrevocable under the rules of estoppels.

3 Holbrook v. Taylor. When a person has a license which includes the right to erect structures and acquire interest in the land in the nature of an easement by making improvements thereon, the licensor may not revoke the license and restore his premises to their former condition after the licensee has exercised the privilege given by the license and erected the improvements at considerable expense. When the land owner or previous landowners granted permission to adjoining landowners in the use of an easement on the land, and watched while the current party spent substantial money in reliance on this representation, the original landowner is estopped from. The court looked to the intent of the party as part of the prescription claim. Here, the land was granted permission by appellant since 1944 to be used as an easement, which gave the appellees to feel as if they had license to be on the land as well. They acquired an interest by improving on the land by building the $500 worth on the ingress/egress road. This building was done in reliance on the road being property of both parties (mentioned above). Furthermore, there was no dispute as to who could and could no use the roadway until the fall of 1970. In sum, appellants agreed tacitly (w/o consent) to allow the use of the easement, and thus should not be denied now.

4 Differing Views:

a Shepard v Purvine: An oral license promptly acted upon in the manner the plaintiffs acted is just as valid, binding, and irrevocable as a deeded right of way.

b Henry v. Dalton: and oral license to do an act on the land of the licensor, while it justified anything done by the licensee before revocation is revocable at the option of the licensor (at their own peril); required by public policy. This prevents the burdening of lands with restrictions founded upon oral agreements, easily misunderstood.

c Transactions costs: who is the lowest cost avoider, it is not that burdensome to require if you are the licensee to put it in writing

(c) Easement by Estoppel—if a licensor grants a license on which the licensee reasonably relied on to make substantial improvements to the property, equity requires that the licensor be stopped from revoking the license. License made irrevocable though estoppel continues to exist until the reasonable expectations of the parties have been satisfied. See B above.


(d) Easement by Implication—an implied easement arises where the prior use waws or might have been know of by the parties can be assumed to have contemplated its continuance.

1 Quasi Easement—You can’t have an easement on your own property, but you can make use on one part of your own land for the benefit of another part, this is a quasi-easement.

2 Elements necessary to establish an implied easement from prior use.:

a Common owner prior to division

b Prior use must be reasonably necessary for the use and enjoyment of the quasi-dominant estate.

c Prior use must be continuous, not sporadic

d Parties must intend, at time of division, to continue prior use.

e Prior use must be apparent, but does not necessarily mean that it is visible. (Notice)

f Property law assumes that if the grantor had been using the other parcels to benefit the parcel they chose to keep then they would not have cut off that right, it is implied by law.

3 Van Sandt v. Royster. Pl. discovered his basement filled with sewage from the df. house. Df. had been draining sewage across pl. land. Pl. sued to stop this practice. Prior owner of both lots had created a quasi easement, so easement by reservation implied from prior use had been validly created when she conveyed title to each of the purchasers.

4 If the dominant and servient tenement come into the same ownership, easement is extinguished, and will not be revived by the land being divided again. but a new easement by implication may be created, if intended.

(f) Easement by Necessity—where property has been divided by a common owner in such a manner that an easement for access is absolutely necessary (e.g., landlocked).

1 Elements needed:

a Unity of ownership alleged of the dominant and servient estates


b that a roadway is a necessity, not a mere convenience.

c that the necessity existed at the time of severance of the 2 estates (no other roadway existed at the time of conveyance) (critical element)

2 Necessity must exist at the moment the parcel is divided. NO prior use is needed.

3 Othen v. Rosier. Hill owned a large parcel of land, which eh divided up and sold. One of the parcels was landlocked and acquired by Othen (pl.), who would cross Rosier’s (df.) land to reach the public road. When Hill had conveyed the parcel to Rosier, he had owned other land that was continuous to Othen’s parcel and a public roadway. Othen had an easement implied by necessity across some other property, but not Rosier’s.

4 Easement by necessity lasts as long as the necessity exists; if necessity is removed (by creating a new public road), the easement is terminated.

5 The servient estate owner is permitted to select a reasonably convenient location for the easement, because he can best minimize the damage to the servient estate.

6 Important to look at the sequence of events in which the parcels are conveyed.

(g) Easement by Prescription—Adverse use for a sufficient period of time can ripen into an easement by prescription. Similar to Adverse Possession.

1 Elements needed--

a open and notorious

b continuous

c Throughout the prescriptive period

d Exclusive use of the property

2 Public Prescriptive Use. Where the public uses, can be acquired by the public at large. Owners must be put on notice the adverse right is being claimed by the general public, not by individuals.

(h) Bona Fide Purchaser w/o Notice—any of these if you are a bona fide purchaser w/o notice you will take free of the easement regardless of how it came into being, by expression, by implication, by prescription.


(3) Assignability of an Easement. See appurtenant and Easement in gross.

(a) Miller v. Lutheran Conference and Camp. Pocono grants to Frank and heirs and assigns the exclusive right to fish and boat in the lake. Then, Frank granted to Rufus ¼ interest in the right to fish, boat, and bathe in the lake. Rufus dies, and his estate granted licenses to Lutheran to boat, fish, and bathe in the lake. Frank sued to stop Lutheran from sue of the lake. The court said that bathing right acquired by prescriptive use, so there was an easement in gross acquired. Since this was a commercial easement, it was intended to be transferable, but even though they were transferable, they were not divisible.

1 Recreational easements in gross are not assignable—intended to be personal, and we don’t want to burden the servient land beyond the original contemplation of the parties.

2 Easement in gross is divisible when the creating instrument so indicates or when the easement is exclusive (or if it would create a burden on the servient estate).

(b) Benefits automatically pass to the assignees of the land to which they are appurtenant, if the parties so intend and the burdened party has notice of the easement.

(4) Scope of Easements—the scope of an easement involves two separate questions:

How extensively and intensively may the easement hold use the easement?

To what degree may the owner of the servient estate use or interfere with the easement?

(a) Parties intention to Control—The overriding principle in determining the scope of an easement is to identify and uphold the parties’ intentions, but this is not always easy. The courts examine the following factors.

1 Easement by Grant

2 Easement by Implication (Prior Use/Necessity)

3 Easement by Prescription.

(b) How conditions have changed to affect the originally intended use

1 Change in location of easement—if an easement specifies a specific location, or one has been agreed to by the parties conduct, the location is permanently fixed unless the parties agree to a change.


2 Enlargement of the dominant estate—an easement, however created, cannot be used for the benefit of land that is not the dominant estate.

3 Brown v. Voss. Easement existed b/t Parcel A (servient) and parcel B (dominant). B subsequently acquired another parcel of land and used the easement for both parcels of land. There was no increase in burden to the servient estate by this use.

a when an easement is created by an express grant, the extent of the right acquired is to be determined from the terms of the grant properly construed to give effect of the intention of the parties. Grant gave easement to Parcel B, not parcel C. doesn’t matter that C is now combined into the same ownership w/ the dominant estate; have to look at what parties intended to agree on when easement was created.

b An easement appurtenant to one parcel of land may not be extended by the owner of the dominant estate to other parcels owned by him, whether adjoining or distinct tracts, to which the easement is not appurtenant.

c Just because there is no added burden on the servient estate, doesn’t mean that there’s no misuse of the easement. If an easement is appurtenant to a particular parcel of land, and extension to the other parcels is a misuse.

(c) What changes in use were reasonably foreseeable by the parties? didn’t talk about.

(5) Termination of Easements—Once the easement has been extinguished it cannot be revived—it must be created anew in one of the ways easements are formed.

(a) Expiration—expire by its terms if by grant; or when purpose of easement has ceased.

1 Necessity—expires when the necessity is eliminated

2 Estoppel-expires when the licensee gets full value of expenditures made in reliance on the license.

(b) Merger—If dominant and servient estates merge (get same owner), easement is extinguished.

(c) Release—a waiver; generally, it must be written, oral release is valid through equitable estoppels (when servient owner relied on it to his substantial detriment)


(d) Abandonment—if the easement holder manifests a clear and unequivocal intention to abandon the easement. Mere nonuse will not suffice to prove this. Abandonment is established by either a present intent to relinquish the easement or purpose inconsistent with its future existence.

1 Can be abandonment if not sued within the statutory period

2 Act of obtaining alternative means of access to the dominant parcel could constitute an intent.

3 Presault v. United States. RR had right of way easement on Pl.’s property, for its rail line. then RR ceased operations over that portion , and removed tracks. RR then entered into an agreement with the US. for the lines to be used as a public trail. Pl sued b/c government taking their property. The court looked at the intent of the parties when the conveyance was made. Since the estate was acquired solely for RR’s needs it was an easement, not a fee tail. Intent was to grant an easement for RR lines, and it was not reasonably foreseeable that it would be used as a public trail. RR intended to abandon the easement when they removed the tracks, and there was no intent to revive the use of the easement for that purpose.

(e) Estoppel. If the servient owner relies upon a statement or representation by the easement owner.

(f) Condemnation—if the government exercises their power of eminent domain (taking)

(g) Prescription—if the servient owner wrongfully and physically prevents the easement from being sued for the prescriptive period, the easement is terminant.

C Covenants running with the Land.

Estates in Land—give the holder the right to exclusive possession/occupation of the property.

Servitudes—give the holder the right to use someone else’s property, or to restrict the owner’s use of the owner’s property

(1) Real Covenants—A promise about land usage that runes with an estate in land, meaning that it binds or benefits subsequent owners of the estate. A real covenant may be affirmative or negative. The promise to use the land in some fashion is affirmative; A promise not to use the land in a specified fashion is a negative covenant. Both types are enforceable.

(a) Benefit and Burden—A promise about land usage burdens some land and normally benefits other land.


(b) Runs with the land—if one party breaches a covenant made with another person –even if it concerns land usage—the issues presented are purely a matter of contract law.

(c) Remedy—Money damages.

(d) Development of the Real Covenant—

1 English—only the immediate parties to the covenant are able to sue to enforce the covenant or were liable for the breach

2 American—real covenants may be created when a fee simple is transferred or even between neighbors with no transfer of title; Horizontal privity of estate.

(e) Covenant, not condition—A real covenant is a promise concerning land, it is not a condition of continued land use. Conditions concerning land use are Defeasible estates.

(f) Creation—may not be created by implication or prescription; only created by written instrument. (hence contract law)

(g) Enforceability by or against successors—Because the burden of a real covenant exposes the successor to liability that is potentially unlimited, this burden out to be imposed only to those people who acquire the identical estate that was initially burdened. Elements are as follows.

1 Intent—the original parties must have intended the burden (or benefit, or both) to run. Explicit statement “successors, heirs, and assigns.”

2 Horizontal Privity—The older discarded view—horizontal privity of the estate between the original parties—is required for the burden to run, but not for the benefit to run. Three relationships:

a Landlord-Tenant View—Horizontal privity is met only if the original parties were landlord and tenant—no longer recognized in America.

b Grantor-Grantee—Promise has to be related to the grant (it has to be in the actual grant and needs to exist at the time of conveyance).

c Simultaneous Interest—Fee and easement—that exists AT ALL TIMES that the covenant is created.

d RST does not require Horizontal Privity.

3 Vertical Privity—All courts require vertical privity---of the estate between the original promisor and the successor to the burdened


estate—for either the benefit or burden to run, but is more easily met for benefits to run than for burdens to run. STEPPING INTO THE SHOE= taking EXACTLY what the person that had it before you had.

a Harder to establish vertical privity to enforce the burden of the covenant than it is for the benefit of the covenn it is for the benefit of the covenant.

b Benefit—RST says that the benefit will run to the assigns of any interest in land, not just to the assigns of an estate of the same duration as held by the original promisee.

c Neposit exception: a homeowner’s association may sue to enforce the benefitof a covenant even thought the association succeeds to no land owned by the original promisee. The association is regarded as the agent of the real parties in interest who own the land.

d There is no vertical privity btwn adverse possessor and the person that he is taking it away from (particularly w/ respect to an affirmative obligation).

4 Touch and Concern—the substance of the promise must touch and concern the burdened land and in most states, the benefitted states as well. Common if the real covenant is in gross (personal), the burden will not run.

(2) Equitable Servitudes—A covenant about land use that will be enforced in equity (by an injunction) against a successor to the burdened estate who acquired it with notice of the covenant. Covenant does NOT need to meet all the criteria of a real covenant to be enforceable. Covenants are more likely to be enforces as an equitable servitude rather than a real covenant because they are easier to enforce by or against successors and most people prefer enforcement of a covenant by injunction than damages for its breach.

(a) Differences b/t equitable servitudes and Real covenants—

1 Remedy—injunction.

2 No privity needed--

3 Creation—may be created by implication in many jurisdictions—real covenants can only be created expressly and in writing.

(b) Property theory of E.S.—at first it started out as a promise enforced in equity, now its and interest in land. unlike a covenant, which only attaches to estate in land., E.S. burdens the land itself, not the estate (similar to an easement)


(c) romo

(f) Neponsit v. Emigrant-- covenant on the land requires members of residential community to pay maintenance charges; does this covenant run with the land? Held, yes. A covenant touches and concerns the land when it substantially affects the legal rights of the parties to the covenant. By paying the fees, a land owner acquires an easement to the public spaces so it clearly touches and concerns the land. Vertical privity—association is a convenient instrument for parties who do have vertical privity

(g) Hill v. Community of Damien of Molokai (1996): Community is a group AIDS home; neighbors sued to enforce restrictive covenant limiting property use to “single family home”. Held, ambiguous restrictive covenants should be construed in favor of the free use and enjoyment of property and against restrictions; term “family” is ambiguous and so it is construed against restrictions; restrictive covenants violate the FHA when they have a discriminatory intent, effect or constitute a failure to make reasonable accommodations.

(h) RST 3 rd of Property —Servitude is valid unless illegal or unconstitutional or violates public policy. Violation of public policy may be because:

1 its arbitrary, spiteful, or capricious

2 Unreasonably burdens a fundamental constitutional right

3 imposes an unreasonable restraint on alienation

4 Imposes and unreasonable restraint on trade or competition

5 Is unconscionable.

(i) Caullet v. Stanley Stillwell. D sold P property with the condition that his construction company would build the house. P and D couldn’t negotiate so P sued to quiet title. Clause too vague and it didn’t touch and concern the land. To constitute a real rather than a personal covenant, the promise must exercise direct influence on the occupation, use, or enjoyment of the premises. It cannot be a use incidental to the performance of a promise. There must be a reasonable limitation or proscription to the land (like limiting for residential purposes), but this provision is not similar.

(j) Termination of E.S.—See Real Covenant Termination. also

(k) Termination by Changed Condition—because E.S. are enforceable in equity, the following equitable defense, if proven, will effectively extinguish an E.S. by blocking its enforcement.


1 Change conditions within the affected area—a covenant will no longer be enforced in equity if condition have so radically and thoroughly changed within the area affected by a covenant usually a subdivision that the covenant can no longer achieve its purpose.

2 Changed conditions in surrounding area—The nature and character of the surrounding area has so changed that it would now be inequitable to enforce the servitude. To succeed it is necessary to establish that the extrinsic changes in the neighborhood have been so pervasive that all the benefitted lots have lost the benefit of the covenant.

i. Western v. Truskolaski-- lots in a subdivision were restricted to single-family dwellings; residents sued to enjoin the construction of a shopping center on one of the plots of land. Held, the residential character of the neighborhood remained of value to the landowners; changed conditions do not invalidate a residential covenant where the character of the subdivision remains residential (isolated deviations do not effect a waiver); a change in zoning will not override a private restrictive covenant, even where economic efficiency would be served by invalidating covenant

ii. Rick v. West-- lots restricted to residential use and all but one resident agree to release covenant in order to build a hospital; suit to void covenant for changed conditions. Held, a landowner in a subdivision under a restrictive covenant has the right to insist upon adherence to the covenant even when other owners consent to its release; holdout landowner relied on covenant in purchasing property and expectations should be upheld; enforced unless unconscionable or oppressive (Restatement § 7.10 applies here as well to give discretion to terminate)

iii. Holdout problem—Balance the hardships—Even when injunctive relief is otherwise appropriate, a court may deny an injunction if the hardship imposed by the injunction is very large in relation to the benefits produced, but this principle is rarely invoked by the courts in servitude cases, and may be more theoretical than actual.

(l) Affirmative Covenants to pay money—perpetual burden—Affirmative covenants to pay money (usually dues to a HOA) may be enforced either by foreclosure of the equitable lien created by nonpayment or by suit to recover as money damages the unpaid dues. The burden of these covenants is personal and may not be easily avoided.


1 Pocono Springs v. MacKenzie-- Δ attempt to sell land under covenant to pay association fees and when they can’t sell it they attempt to abandon it. Held, a covenant running with the land cannot be terminated by abandonment when the owner still holds title in fee simple absolute. [Restatement § 7.12 now permits court to terminate covenants to pay maintenance fees after a reasonable period of time.]

III Legislative Land Use Controls

A The Law of Zoning. The proactive response to nuisance laws with early principles of (1) separation of uses (2) production of single-family home (3) low-rise development (4) medium-density of population.

B Eminent Domain and Regulatory Takings.

Property 2 Outline

Documents

Transcript of Property 2 Outline