PROPERTY I OUTLINEI. Analytical Tools and Key Concepts

a. Theories of Propertyi. Labor Theory (Locke)

1. You own your own work, so if you mix your work with something, you own the thing

a. E.g., horse manure is abandoned property of the horse’s owners. If you rake the manure into a pile, you’ve put work into it, making the manure yours.

b. Acquisition by Discovery: Native Americans didn’t own the land they occupied b/c they did not put enough (or the right kind of) labor into the land

2. Law of Accession: when two ownerships are mingled together, whoever made the most material contribution gets the property (with the other getting restitution for their labor contributed) (e.g., B painting on A’s canvas to create a valuable artwork)

ii. Utilitarianism1. Property exists in order to maximize the overall happiness or “utility” of

all citizens. (greatest good for greatest number)a. What property allocation promotes overall societal happiness?

i. Distributionii. Asset maximization (see Economics of Property below)

iii. Conservation?iii. Political Rights and Autonomy

1. Property allows for sphere of autonomy (e.g., allows you to howl at the moon in your own backyard)

2. Allows for political freedom (e.g., wealth; not dependent on the gov’t)3. Allows people to be empowered by property (b/c it’s transferrable)

b. Economics of Propertyi. Property rules should maximize net social economic utility of resources (the

ideology that property exists to be used productively or exploited)ii. Communal property encourages over-depletion (e.g., nobody can stop each

other from chopping down trees if they’re communally owned)iii. Externalities

1. A cost that an actor fails to take into account when deciding how to use resources

2. Externalities lead to a misallocation of resources3. Externalities aren’t necessarily inefficient (e.g., changing behavior would

cost $1,000 to save $500 of costs)4. Internalizing Externalities: assuming zero transaction costs, those

harmed would agree to pay the actor to change his behavior, if efficient to do so (e.g., eliminating pollution at cost of $100 to save $300 harm)

iv. Transaction Costs1. Transaction costs are the costs of bringing an externality into the actor’s

decision-making2. Transaction costs may inhibit those harmed from agreeing to pay the

actor; externalities persist when there’s high transaction costs3. Types of Transaction Costs

a. Informational/Organizationali. The more people in the affected group, the more costly

it is to organize themb. Free-rider effect: members of the group affected by an

externality have an incentive to “free-ride” on the benefits of the group’s cost to internalize the externality.

i. E.g., members of community have incentive to donate little/none to pay factory for pollution control equipment, and benefit from others’ contributions.

c. Legal Feesd. Policing after the actor has been paid

v. Benefits of Private Property1. Private property forces the owner to internalize the costs/benefits of

the property; tend to use land more efficientlya. But, there are other ways (e.g., social customs and mores) to

internalize costs from community property. Carol M. Rose, p. 50.

c. Bundle of Rightsi. Property is not the object

ii. Instead, it is the relationship btwn people in respect to an objectiii. “Owning” property is holding a Bundle of Rights against others:

1. Right to Include (rent)2. Right to Exclude (incl. Right to Destroy)

a. E.g. in Jacque v. Steenberg Homes, Inc., the ct held that the property owner had unfettered discretion in not allowing a moving co to drive across his land.

b. As a matter of law, property owners don’t have the right to exclude governmental services. State v. Shack.

c. Other Limitations to Right to Excludei. Rent control and limitations on right to evict tenants

ii. Anti-discrimination statutes3. Right to Possess4. Right to Use5. Right to Transfer (req’s both right to include and right to exclude)

iv. Note: you can have some of the bundle w/o others1. E.g., Rx drugs – you can exclude others from them, you can possess

them, and you can use them; but you can’t sell them2. E.g., the dissent in Moore v. Regents of the University of California

suggests that a property right to excised organs could be a bundle of rights, without the right to sell.

d. Relativity of Titlei. A person can have a relatively better title or right to possession than another,

while simultaneously having a right inferior to yet another person.ii. E.g., A fox is on O’s land and T1 trespasses and takes it. T2 trespasses onto T1’s

land and takes the fox. In a suit btwn T1 and T2, T1 has better title (although it’s inferior to O’s title).

II. Acquisition by Capture

a. Rule of Capture: the first to occupy a ferae naturae (wild animal) has possession of the animal. Mere pursuit is not enough. Pierson v. Post

i. Depriving animals of their natural liberty and bringing them w/in the hunter’s certain control is sufficient (e.g., mortally wounding an animal, securing animals w/ nets, toils, and other traps). Pierson v. Post (dicta)

ii. Policies for the Rule of Capture1. Bright Line Rule

a. Easier to determine who owns the fox (than if ownership belonged to the hunter in pursuit); keeps transaction costs down

2. Encourage the destruction of foxes3. Encourages investment in capture technology (e.g., better guns to kill

foxes)iii. Downsides to the Rule of Capture

1. Neglects to protect the investment in a failed capture and thus removes some incentive to hunt

2. Leads to over-exploitation of resources because of first in time nature of rule (“race to the resource”)

a. This may lead to over-investment in capture technology (see picture of Spindletop oil drills on Moodle page)

b. Custom (Ghen v. Rich)i. Courts may apply a custom that’s inconsistent w/ the common law rule of

capture if: (PINC)1. Not against public policy;2. The custom regards to an isolated community (e.g., whalers off the

coast of Cape Cod);3. The custom has been used/acquiesced in the industry and is necessary

for the industry; and4. Close to the legal rule of capture.

ii. Policy of adopting a custom: the industry knows bestc. Protection from Unfair Competition (Keeble v. Hickeringill)

i. Competition is “good” if it leads to a greater production of the resource (e.g., building a more high-tech duck pond to lure the ducks in K’s pond to H’s land)

ii. Interfering with another’s trade is “bad” when it doesn’t lead to a greater production of the resource (e.g., shooting guns to scare away ducks in a decoy pond)

d. Rights of a Landowner as Against a Trespasseri. Ratione Soli: a landowner acquires constructive possession of wild animals who

are on his land (for the purposes of protection from trespassers)e. Domesticated or Semi-Domesticated Wild Animals

i. If captor captures a wild animal and it escapes, the captor loses possession, and the animal becomes a ferae naturae (subject to the rule of capture).

1. If the captured animal that escapes is not native to the area, the hunter may be on notice it’s another’s property. (e.g., a giraffe escapes from its pen in Mississippi)

ii. Animus Revertendi1. Wild animals that develop an animus revertendi (habit of return)

continue to belong to the captor when they roam at large.

2. Policya. Domesticated animals are valuable to society and this effort to

tame wild animals is rewardedb. Land owner invested labor in training animal to return (although

hunter has argument of putting labor into the hunt)c. But, this is not fair to the hunter. Animals that develop an

animus revertendi aren’t distinguishable from wild animals.iii. Rule of Increase: the offspring of two animals belonging to different owners is

the property of the mother’s owner. (don’t necessarily know who the dad is)f. Other Fugitive Resources

i. Oil and Gas1. Subject to the Rule of Capture (see above)2. Angled Drilling

a. Ratione Soli gives landowner constructive possession of the fugitive resources in/under the land; landowner would have a claim of trespass

3. Today, extraction is heavily regulated to prevent overproduction (e.g., maximum rates of extraction; minimum space btwn drilling sites).

4. Reinjectiona. Common Law: once you reinject the oil/gas it becomes a

fugitive resource, subject to the rule of captureb. Today: injector retains possession of the resourcec. Policy

i. Rule of capture gives powerful disincentive to reinject oil/gas

ii. Reinjection is more efficient than above-ground tanksii. Water

1. Undergrounda. English law: Rule of Captureb. US law: Rule of Reasonable Use

i. Common Law: wasteful uses are unlawful if they harm your neighbor

ii. Today: underground water/oil/gas is heavily regulated2. Surface Water

a. Western Statesi. Prior Appropriation (Rule of Capture): first to capture

the water and put it to a reasonable and beneficial use has a superior right to later appropriators

1. Policy: water is scarce; rule creates an incentive to exploit

ii. If A starts diversion works before B, but B finishes his works first and puts water to beneficial use before A, A wins. Contra Pierson v. Post.

1. Policy: more investment than chasing a fox, B would be on notice of A’s works (digging a big ditch)

b. Eastern States

i. Correlative Riparian Rights: landowners adjoining the water have riparian rights under a reasonable use standard

ii. Factors:1. Value of use the landowner is making of the

water2. Harm to other riparian neighbors3. Suitability to the locale (e.g., A trying to build a

waterpark in a farming town that relies on the water to power a mill)

III. Acquisition by Creation – Intellectual Propertya. Competing Policies

i. Encourage production of intellectual property (writings, arts, invention) by giving exclusive right to exploit the product

1. In International News Service v. Associated Press, INS was copying AP’s news articles and selling it to its customers. The ct held that AP had a quasi-property interest in its news articles as against INS.

ii. Allow competition and avoid monopoly1. “Good” Competition

a. Imitation allows for competitionb. Improvement in price, quality, efficiency in productionc. If property rights are too restrictive, you lose the value of

competition2. Distinguishing Tangible Property

a. Monopolies in tangible property don’t inhibit competition b/c there can be more than one iteration (e.g., more than one wheat field)

b. There can only be one iteration of IPb. Protection Against Copying

i. Generally, there’s no CL protection against copying1. In Cheney Brothers v. Doris Silk Co., Doris copied Cheney’s designs and

sold them at a cheaper price. The ct held that Doris is allowed to copy the design.

ii. Legislative Intellectual Property Protection1. Patents

a. Protects novel, useful, non-obvious processes or productsi. 35 U.S.C. §101: “Whoever invents or discovers any new

and useful process, machine, mfr, or composition of matter, or any new and useful improvement thereof, may obtain a patent…”

ii. E.g., in Diamond v. Chakrabarty, the ct held that P could patent a genetically engineered bacterial strain.

b. Laws of nature, physical phenomena, and abstract ideas are not patentable

c. Lasts 20 years from date of applicationd. Not renewable

2. Copyrights

a. Protect original expression of ideas (not ideas themselves); must be independent creations

i. E.g., in Nichols v. Universal Pictures, P couldn’t © the general idea of conflict btwn parents of lovers from two different racial/religious groups.

b. Lasts until 70 years after the death of the author/creatorc. Subject to “fair use” (e.g., academic settings)d. Liability for Secondary Infringement (MGM v. Grokster)

i. One who distributes a device w/ the object of promoting its use to infringe © is liable

ii. Liable if you induce or encourage infringementiii. Can infer intent from device solely used for

infringement3. Trademarks

a. Protects words/symbols indicating the source of a product/service

b. Arise from use of the mark in commercial activity (lost when abandoned or when the mark becomes generic)

iii. Common Law Intellectual Property Protection1. Right of Publicity

a. Protects your right to control the commercial exploitation of your name/likeness

i. E.g., In White v. Samsung, the ct held that a robot w/ a blonde wig and jewelry standing on a set that resembled wheel-of-fortune violated Vanna White’s right of publicity.

ii. E.g., “Here’s Johnny” port-a-potties intrude on Johnny Carson’s likeness rights

iii. E.g., Bette Midler’s likeness rights were violated where Ford hired Midler’s back-up singer to sing one of Midler’s hit songs and try to sound like her.

b. The right survives death (like property)IV. Acquisition by Find

a. Lost Propertyi. Finder of lost property wins as against anyone except the true owner and prior

possessorsii. Voluntary Bailment (example of relativity of title)

1. Winkfield Rule: cts bar an action by the true owner (bailor) against the present possessor (keeper) if the bailee (finder) has recovered from the present possessor.

a. E.g., Chimney Sweep (CS) finds a jewel and hands it to Jeweler (J) to have it valuated. J refuses to return the jewel. CS sues J and recovers. If True Owner (TO) shows up, he would have to sue CS, but there’s no guarantee that CS still has the money (he may have spent it already).

2. The Winkfield Rule is problematic in involuntary bailment situations b/c the bailor never has a chance to evaluate the trustworthiness of the bailee.

iii. Exceptions: Finder loses as to Locus Owner1. Finder subject to Locus Owner’s right to exclude (CERT)

a. Finder intruded into a private area of a commercial establishment

b. Object is embedded in or attached to the landi. In South Staffordshire Water Co. v. Sharman, an ee

found rings in the muck at the bottom of ER’s pool. Ct held that locus owner wins.

c. Find occurs in occupied private residence (occupier has constructive possession of items in the house) (Hanna v. Peel if the owner occupied the house)

d. If the finder is a trespasser2. Agency principles

a. Where Finder is ee, cases are splitiv. Policy for Protecting Prior Possession

1. Protecting subsequent possession instead would create an incentive to steal

2. Protecting subsequent possession instead would lead to people hiding their property

a. This is bad b/c it has social value (to be marketable)b. Wouldn’t buy security technology (“fencing” the property)

3. We would like for property to end up w/ it’s true ownerb. Mislaid Property

i. Object intentionally placed by true owner, but owner forgot to retrieveii. If found in commercial or private premises, belongs to Locus Owner as against

finder.1. Exception: where there’s no locus owner (e.g., mislaid property in a

park)iii. Policy

1. Facilitate return to true owner2. True owner is more likely to retrace his steps for mislaid property

a. This may be overbroad b/c a true owner may retrace his steps to recover lost property too

3. True owner better off leaving mislaid property w/ locus ownera. But, this doesn’t incentivize the finder to do anything (e.g., if

Finder finds a wallet on a table, he would have incentive to knock it to the floor, and declare he found it there)

c. Abandoned Propertyi. Property that’s voluntarily relinquished w/ no intention of reclaiming by the true

ownerii. Finder is entitled to abandoned property

iii. Exception: where location of the find is in a private location of commercial premises or residence (function of right to exclude)

1. E.g., in Corliss v. Wenner, Wenner’s laborers found 4 lbs of gold coins buried in a jar when building a driveway. Ct held that since the finders were working for Wenner, they were acting on his behalf. The coins, like the dirt they were excavating to build the driveway, belonged to Wenner as owner of the land.

d. Maritime Lawi. At English CL, “wreck” was cargo washed ashore from a ship lost at sea w/ no

survivors; the property went to the crownii. Under traditional maritime law, a ship lost at sea and settled on the ocean floor

remained the owner’s property – unless title was abandoned – but anyone subsequently reducing the ship or its cargo to possession was entitled to a salvage award.

1. E.g., in Columbus-America Discovery Group v. Atlantic Mutual Ins. Co., the insurers of the Central America, which sunk in 1857 and was found in 1992, didn’t abandon their title and were still owners of $1B in gold on board; salvors who found the ship were legally entitled to a salvage award

iii. Some states have a similar scheme of reward for finders of personal propertyiv. Policy

1. Facilitates return to true owner; creates incentive for finders (c.f., the law of finders)

e. Treasure Trovei. At English CL, treasure trove (money/coin, gold, silver plate, or bullion hidden in

the earth) belonged to the king.ii. Today, no separate treasure trove doctrine; cts use lost/mislaid/ abandoned

distinctioniii. See Benjamin v. Lindner Aviation, Inc., where $18k was found in the wing of an

airplane, ct held it to be mislaid b/c no one would abandon so much money.iv. See also, Terry v. Lock Hospitality, where $38k was found in the ceiling by K’ers.

Possession was awarded to hotel owner for the same reasons as Benjamin.1. But, see In re Seizure of $82,000 More or Less, where money was found

in the gas tank of a car. The car had been seized by the gov’t b/c it was used to transport drug proceeds and sold to Buyer. Ct held that money was abandoned b/c the culprits couldn’t claim it w/o risking arrest for drug dealing.

V. Acquisition by Gifta. Elements for Inter Vivos Gifts of Personal Property

i. Delivery1. Donor must place property w/in donee’s exclusive control.2. E.g., in Hocks v. Jeremiah, the ct held that Donor didn’t give subsequent

bonds to Donee where Donor placed them in a joint safe-deposit box in which both had access.

ii. Intention by Donor to make present transfer of the property1. E.g., “I will give you this watch” is not a valid gift. There must be an

intent to transfer title now.2. Note: intent to give and delivery DO NOT have to coincide (e.g., prior

delivery ratified by a subsequent stmt of intent is permissible) (c.f., gifts causa mortis)

iii. Acceptance by the donee1. Usu. presumed by the ct and a non-issue

b. Gifts Causa Mortisi. Gift of personal property made in anticipation of Donor’s imminently

approaching death

ii. Revoked (canceled) or revocable by recovery in healthiii. Same elements as a gift inter vivos (i.e. delivery, intent, and acceptance), but the

elements are applied more strictly1. B/c gifts causa mortis run contrary to the statute of wills2. E.g., must redeliver property previously delivered to the donee as bailee

iv. A gift made by a donor contemplating suicide may be a gift causa mortis (see Erosion of Constructive Delivery – Scherer v. Hyland below)

c. Deliveryi. Policy for the Delivery Requirements

1. Handing over the object makes vivid and concrete to the donor the significance of the act performed. By feeling the “wrench of delivery,” the donor realizes an irrevocable gift has been made.

2. The act is unequivocal evidence of a gift to the actual witnesses of the transaction.

3. Delivery of the object to the donee gives the donee, after the act, prima facie evidence in favor of the alleged gift.

ii. Manual Delivery1. Donor physically transfers possession of an item to the donee2. Limitations:

a. Some items are too cumbersome and bulkyb. Some items aren’t readily available (located far away)c. Impracticable when the donee receives less than complete title

to the item (e.g., a remainder interest)d. Intangible property cannot be manually delivered

iii. Substituted Delivery1. Constructive Delivery

a. Donor physically transfers to the donee the means of obtaining access to and control of the property

i. E.g., in Newman v. Bost, Donor affected constructive delivery of a bureau and other household furniture by handing the donee the keys that unlocked these items.

b. Erosion of Constructive Delivery – Scherer v. Hylandi. Donor received a check from another, endorsed it, and

put it on the table w/ a note giving it to donee. Donor then left and committed suicide.

ii. Ct found constructive delivery adequate where:1. “the evidence of donative intent is concrete and

undisputed,2. there is every indication that the donor

intended to make a present transfer…and3. when the steps taken by the donor…must have

been deemed by the donor as sufficient to pass the donor’s interest…”

2. Symbolic Deliverya. Donor physically hands Donee an object that represents or

symbolizes the gift.b. Usu. involves handing over a written instrument declaring a gift

of the subject matter

3. Generally, substitutes are effective ONLY when manual delivery is impossible or impracticable

a. But see Gruen v. Gruen, where a Father’s letter to Son giving him a future interest in a painting was sufficient, even though it was possible for S to go to F’s house, F to hand S the painting, and S to give it back to F, who retained the possessory interest.

b. See also Rest. (2d) Property, Donative Transfers, §32.2, Illustration 3: A gift of a watch by a document is valid, even though it would be easy to take it off and hand it over. (this view is w/o case support)

c. Policyi. Donor feels the wrench of delivery

ii. Good permanent evidence of the transactioniii. If symbolic delivery always allowed, people will write, “I

will give A this watch,” which is unenforceable.d. Possession

i. Valid gifts transfer possession and ownership of the property.ii. It is possible for Donor to give a gift to Donee, and then have Donee entrust

possession of the property with Donor.iii. One can reserve a life estate in the possession of the gift

1. Presently grants title to the property while reserving possession (Gruen v. Gruen)

iv. Distinguish Bailments1. Non-owner (bailee) has rightful possession (see Voluntary Bailment

above)e. Special Gift Rules

i. Engagement Rings1. Traditional Rule

a. Donor gets the ring back if he’s not at faultb. If the donor’s not at fault, it’s a conditional gift (a gift that’s

conditioned upon the marriage going through)2. Modern Approach

a. Donor gets it back (doesn’t matter who’s at fault)ii. Checks

1. Checks aren’t gifts until they are cashed, b/c the owner can cancel the check before then (lack of delivery)

2. Woo v. Smart held that death acts as revocation on a checkiii. Safety Deposit Boxes

1. To determine if delivery is made, cts consider:a. Who paid for safe deposit box (even if both used it)?b. Who accessed it (even if others had access to it)?

VI. The System of Estates: Possessory Estates

PRESENT ESTATE FUTURE INTERESTFSA NoneFT O: Rev

A: Rem

LE O: RevA: Rem

FSD O: Possibility of reverterA: Executory Interest

FSSCS O: Right of Entry/Power of TerminationFSSEL A: Executory Interest

ALIENABILITY OF POSSESSORY ESTATESESTATE TRANSFERRABLE DEVISABLE INHERITABLE

FSA Yes Yes YesFT Yes No No (except to

heirs of body)LE Yes No No

LE (PAV) Yes Yes YesFSD Yes (today) Yes (today) Yes

FSSCS Yes (today) Yes (today) Yes

ALIENABILITY OF FUTURE INTERESTSESTATE TRANSFERRABLE DEVISABLE INHERITABLE

Rev Yes Yes YesPossibility of Reverter Yes (today) Yes (today) Yes

Right of Entry Yes (today) Yes (today) YesVested Remainder Yes (today) Yes (today) Yes

Contingent Remainder Yes (today) Yes (today) YesExecutory Interest Yes (today) Yes (today) Yes

a. Fee Simple Absolute (FSA)i. The Nature of the Estate

1. Temporal Durationa. FSA lasts forever (------->); the owner has the right to possess

the property forever (if she could live that long)b. There is no future interest. No one presently has the right to

possess the property in the future.2. Scope of the Interest

a. Alienability: While Owner is still alive, she has the right to transfer the property freely to whomever he or she wishes.

b. Devisibility: Owner can will (“devise”) the property as she wishes

c. Inheritability: If decedent dies w/o a will (dies “intestate”), the property passes to the decedent’s heirs (heirs “inherit” the property)

i. Note: while owner is alive, the heirs apparent (parties who think they will receive the owner’s property when she dies) have a mere expectancy, but no property interest (no present right to possess the property in the future). (“No one is heir of the living”)

ii. Creating a FSA

1. Words of Purchase: indicate the party to whom the property is being transferred (“to A”)

2. Words of Limitation: indicate the duration of the estate being conveyed (“and her heirs”)

3. Default Estatea. Common Law

i. The default estate (when the “magic words” aren’t there) was a life estate

ii. Must say “to A and his/her heirs” to create a FSAiii. Exception:

1. Where O conveys Whiteacre “to A for life, remainder to the heirs of B,” the ct interpreted “to the heirs of B” to create an FSA to B

b. Modern Approachi. Default estate is to grant all that Owner has (i.e., an FSA

if he has one)ii. Must say “to A” (words of purchase)

iii. Inheritance of a Fee Simple1. Heirs

a. Heirs are persons who (1) survive the decedent and (2) are designated as intestate successors under the state’s statute of descent.

b. The surviving spouse is designated as an intestate successor of some share in the decedent’s land (depending on who else survives) (e.g., if decedent leaves one child, the spouse takes half)

2. Issuea. Decendants (incl. children, grandchildren, great-grandchildren,

etc.)b. Distribution is made among decedent’s issue per stirpes: if any

child of the decedent dies before the decedent leaving children who survive the decedent, such child’s share goes to his or her children by right of representation

c. Rule of Primogeniture: eldest son inherited the landi. If the eldest son predeceased the decedent leaving

issue, his eldest son or other issue represented himii. This rule was used until 1925. Today, children share

equally.3. Ancestors

a. Parents take as heirs if the decedent leaves no issue4. Collaterals

a. All persons related by blood to the decedent who are neither descendants nor ancestors

b. Incl. brothers, sisters, nephews, nieces, uncles, aunts, and cousins

5. Escheata. If person dies intestate w/o any heirs, the property escheats to

the state where the property is located

b. E.g. O conveys Blackacre “to A for life remainder to B and his heirs.”

i. A has a life estate; B has a remainder interest in FSAii. B dies intestate w/o heirs. The state escheats the

future interest in Blackacre, since B doesn’t have heirs.iii. A dies. The state has a FSA.

iv. Numerous Clauses Principle1. Prohibits new/customized property interests (“you have to order off the

menu”; “unicorns don’t fit in the zoo”)2. E.g., in Johnson v. Whiton, Royal Whiton couldn’t devise land “to my

granddaughter Sarah and her heirs on her father’s side.” Ct held it was a FSA.

3. Policy: reduces transaction costsb. The Fee Tail

i. Creating a Fee Tail: “to A and the heirs of his body”1. Words of Limitation: “heirs of his body” means issue2. Grantor can limit the eligible heirs of the body of the immediate grantee

a. FT male: “to A and the male heirs of his body”b. FT special: “to A and the heirs of his body and to wife Katheryn”

ii. Nature of the Fee Tail1. Possessory Estate

a. Life estate to the immediate grantee, and upon his death, a life estate to his children, and upon each child’s death, a life estate to that child’s children, and so on until there are no “children” to take the fee tail.

b. An interest under a fee tail is transferrable, but not devisable or inheritable (b/c it’s a life estate). The transferee would take a life estate pur autre vie measured by the life of the party who transferred the life estate.

2. Future Interesta. Either a reversion back to the grantor; orb. A remainder interest (if grantor conveys it to another party)c. E.g., “To A and the heirs of his body, and if A dies w/o issue,

then to B and her heirs” gives B a Rem|FSAd. Reversions are freely transferable, devisable, and inheritable.e. Remainders’ transferability, devisability and inheritability

depend on whether they are vested or contingent.3. Fee tail is “disentailed” (i.e., becomes a FSA) by an inter vivos

conveyancea. “Straw Man Transaction”: A (w/ fee tail) wants complete

control over Blackacre. So he conveys it to X (creating a FSA) and X conveys it back to A.

iii. Recognition of the Fee Tail1. Only four states (DE, ME, MA, RI) recognize the fee tail

a. Can still disentail by inter vivos conveyance2. Two Categories of States that Don’t Recognize the Fee Tail

a. Category 1: fee tail language creates a FSA; remainder gifts are void

b. Category 2: one-generation FT: if A doesn’t have any issue, give effect to the remainder; otherwise, FT language creates FSA

c. Life Estatesi. Creating a LE: “to A for life”

ii. Ambiguous Language in Wills1. At CL, the LE was the default estate2. Today, if a will’s language is ambiguous, it’s interpreted as giving as

much as possible (FSA if grantor has it)iii. Possessory Estate/Future Interest

1. Lasts for the duration of the grantee’s life.2. Future Interest

a. Reversion in the grantor, ORb. Remainder interest to a 3d party

iv. Life Estate Pur Autre Vie1. If a life tenant transfers his interest, the grantee holds a life estate pur

autre vie (a LE measured by the life of the original life tenant)2. While the life tenant is still alive, a LE pur autre vie is transferable,

inheritable, and devisable3. Upon life tenant’s death, the life estate pur autre vie immediately

expiresv. Alienability

1. Life estates are transferable (see Life Estate Pur Autre Vie above)2. By definition, life estates cannot be inheritable or devisable3. Restraints on Alienability

a. Disabling restraint: withholds a power to conveyb. Forfeiture restraint: forfeit property if attempt to conveyc. Promissory restraint: promise not to convey property (legally

enforceable K)4. Validity of Restraints on Alienability (Rest. (2d) Property, Donative

Transfers, ch. 4)a. Fee Simple

i. An absolute restraint of any type is voidii. Most courts: A partial restraint (e.g., a restraint as to a

certain time/persons) is also voidiii. Second Restatement: A partial restraint is valid if

reasonableiv. Restraint in the form of a FSSCS (specified use) usually

upheldb. Life Estate

i. Absolute disabling restraint is voidii. Forfeiture restraint is valid

iii. Policy: forfeiture induces the life tenant to pay debts, whereas a disabling restraint, which allows the life tenant to not pay but keep the property, does not

5. Policies Against Restraining Alienationa. Efficiency

i. Want to promote the most productive use of landb. Restrictions Concentrate Wealth

i. Founders didn’t want there to be a landed aristocracyc. Restraints discourage improvements on land

i. No incentive to improve for resaleii. If doesn’t have power to sell the property, no power to

mortgageiii. Creditor might be deceived (house insulated from

collection efforts)vi. Valuation of Life Estate and Remainder

1. The value of a LE depends on: (1) the value of the asset today, (2) the rate of return, (3) and the life tenant’s life expectancy.

2. NPV of LE = value today + PV(interest received in life expectancy)vii. Waste

1. Where two or more persons (e.g. A and B) have rights to possess property at the same time or consecutively, A should not be able to use the property in a manner that unreasonably interferes w/ the expectations of B.

2. Affirmative Wastea. Liability resulting from injurious acts that substantially reduce

the value of the propertyb. Exception: “Open Mines” Doctrine

i. If the mines were opened by the grantor before he created the LE, it is presumed that the grantor intended the life tenant to be able to continue mining. But if the mines were not open before the LE was created, the life tenant cannot open them.

ii. Also applies to cutting down trees3. Permissive Waste

a. Failure to take reasonable care of the property (a Q of neg)4. Substantially Increasing the Property’s Value

a. CL: Ameliorative Waste Action – grantor intended the remaindermen to receive the identical thing granted

b. Today: life tenants can make substantial alterations or even demolish a structure when conditions change, provided the value of the remainder is not diminished by these actions

5. Externality Problem w/ the Waste Doctrinea. Externality: in using the property, the life tenant doesn’t

consider costs to the remaindermenb. Transaction costs may be high b/c the life tenant and the

remaindermen are locked into dealing with each other (i.e. a bilateral monopoly)

6. Factors in Application of the Waste Doctrinea. Nature of the property interests of the competing parties

i. Note: the more certain (and less “iffy”) the future interest of the remaindermen is, the more cts protect their interest

b. Testator’s Intentc. The conduct in questiond. The remedy sought

viii. Problems w/ the Life Estate1. Not much flexibility2. Harder to mortgage b/c need agreement by remaindermen3. Harder to lease the land from life tenant (have to negotiate w/

remaindermen too)ix. Seisin

1. Freehold estates (FSA, FT, LE) all had seisin2. Possession + feudal incidents and services3. Method of Transfer

a. Livery of Seisin: go to land, pick up clod of dirt, hand it to transferee; take out young boy, hit him over the head w/ a stick

d. Leasehold Estatesi. Term of Years

1. Estate ending on a fixed calendar date2. “to A for 99 years”3. Can have “term of years determinable” (“to A for 99 years, if A so long

live)e. Defeasible Estates

i. Fee Simple Determinable (FSD)1. Words of Limitation

a. “to A, so long as [an event]”b. Durational event (“while,” “until,” and “during” also work)

2. Durationa. Lasts as long as the event occurs/doesn’t occur

3. Future Interesta. Possibility of reverterb. The transferor always maintains the possibility of reverter

ii. Fee Simple Subject to a Condition Subsequent (FSSCS)1. Words of Limitation

a. “to A, but if [an event]”b. Conditional language (“provided that,” and “upon the condition

that” also work)2. Future Interest

a. Right of entry (a.k.a. “power of termination”)b. E.g., “to A, but if the land isn’t used for a school, Hutton has the

right to re-enter the land and claim possession”c. Not automatic (like FSD); has to be exercisedd. Held w/ the grantor

iii. Covenants Distinguished1. If a condition imposed by the grantor in creating defeasible fee is

breached, the land is or may be forfeited to the holder of the future interest.

2. A covenant is a promise by the grantee that a specified act will or will not be performed. If a covenant is breached, the promisee may sue for an injunction or damages.

iv. Transferability1. Modern Rule (majority): FSD and FSSCS are transferrable inter vivos or

in a will

2. Some states: you can transfer possibility of reverter, but not a right of entry

3. Some states: attempt to transfer a right of entry destroys it4. CL Rule: FSD and FSSCS are not transferrable inter vivos or in a will

a. Exception (some states): Possibility of Reverter and Right of Entry can be “released” to the person holding current possession (i.e., not enforce his right)

v. Where it is ambiguous whether a FSD or a FSSCS is created:1. Work with the language

a. E.g., in Mahrenholz v. County Bd. of Sch. Trs., the ct noted that in North v. Graham, the word “whenever” was used in the reverter clause, whereas in its case, the word “only” was in the granting clause.

2. Grantor’s Intenta. What did the grantor want to happen if the condition was not

fulfilled?3. Default Rule: courts prefer FSSCS over FSD

a. Policy: dislike forfeiturevi. “for ___ purposes”

1. The grantee is still in compliance with a “for ___ purposes” condition if he also uses the land for other things

2. E.g., in Davis v. Skipper, where an FSD was conveyed conditioning that the land be used “for church purposes.” The church executes an oil and gas lease and oil wells are drilled, striking oil. Since the church building was still being used for a church, the land did not revert to grantor.

vii. When does FSD vs. FSSCS matter?1. Transferability (see “Transferability” above)2. Matters for SOL purposes

a. For FSD, the SOL starts running when the condition is brokenb. For FSSCS, the SOL starts running when Grantor makes a

demand to retake the land.c. Some states: SOL starts running when condition doesn’t occur

in either FSD or FSSCS3. Wrap Up Example

a. The deed says “O to A and her heirs, so long as premises aren’t used for sale of alcohol, and if they are, O has a right to re-enter.” A has operated the restaurant for 11 yrs, using alcohol in cooking and serving champagne for no extra cost at brunch. B is considering buying A’s interest and wants to set up a bar.

b. “So long as” language looks like an FSDc. “Right to re-enter” language looks like a FSSCSd. Cts’ preferred construction is a FSSCSe. B wants A’s interest to be a FSD b/c A would win against O

under SOL (adverse possession)i. If it’s a FSSCS, O could still retake the property b/c SOL

doesn’t start running until he makes a demand for the property.

viii. Restraints on Alienability

1. Less likely to strike restraints on alienation when dealing w/ giving gifts to charities/nonprofits

2. More likely to strike restraints on alienation when the condition is unreasonable or void b/c capricious and imposed for spite or malice

a. E.g., in Cast v. Nat’l Bank of Commerce, Trust & Sav. Assn. of Lincoln, the testator left a farm to Richard Cast in fee simple on the condition that “Richard or one of his children shall occupy the farm as his or her residence for 25 years,” w/ forfeiture for breach of condition. Ct held condition void.

b. E.g., in Casey v. Casey, where testator devised land to his son w/ a provision for forfeiture if the son’s daughter were ever to own, possess, or be a guest on the land for more than one week a year, the ct struck the provision.

ix. Condemnation of Defeasible Fees1. Condemnation proceeding: gov’t’al agency makes forced sale (eminent

domain)2. The holder of the possessory estate takes the entire condemnation

award; the holder of the reversionary interest takes nothing3. Rest (2d) Property § 53, comment b: if the defeasible fee would prob.

not end w/in a reasonably short period of time (not taking into account the condemnation), the fee owner should have the entire award

4. Policy: any future interest would be speculativex. Defeasible Life Estates

1. E.g., “O to W for life, so long as she remains unmarried, then to X”2. Today, there’s a forced elective share that a surviving spouse can take

a. If the will allows for less than 50% to wife, the wife can elect to take up to 50% of the estate

b. If the will allows for more than 50% to wife, the wife can elect to follow the will

c. Policy: against restraints on marriage3. Turns on Grantor’s intent:

a. Durational (“so long as”) – good motiveb. Conditional (“but, if”) – bad motive

4. Rest (2d) Property §6.1, comment fa. Restraint against marriage is construed as narrowly as possible,

consistent with the language employed in describing the restraint and, hence, does not automatically include w/in it a restraint against cohabitation w/o marriage

5. Both LEDs and LESCSs are possibleVII. The System of Estates: Future Interests

a. Future Interests in the Transferor (grantor, if inter vivos; testator, if in will)i. Reversion

1. Definitiona. The interest of the Transferor after transferring a vested estate

of a smaller quantum that the vested estate he owns (and the transfer does not specify the ownership of the future interest)

b. Refer to hierarchy of estates above2. Characteristics

a. Always vestedb. Descendible (heirs)c. Devisable (will)d. Transferrable inter vivos

3. How are they created?a. Expressly: O, owning FSA conveys “To A for life, then to revert

to O”b. By default: O, owning FSA, conveys “To A for life”

4. May/May Not be Certain to Become Possessorya. Certain

i. E.g. if O conveys Blackacre “to A for life”, O’s future interest (Rev | FSA) is certain to become possessory, either in O or his heirs/devisees

b. Uncertaini. E.g. O conveys Blackacre “to A for life, then to B and her

heirs if B survives A.” If A dies before B, B gets FSA and the reversion fails to become possessory (i.e. it is “divested”).

ii. Possibility of Reverter1. Definition

a. Transferor conveys a determinable estate of the same quantum that he has

2. Example 1a. O conveys Whiteacre “to Town Library Board, so long as used

for library purposes”b. O has Possibility of Reverter

3. Example 2a. O conveys Greenacre “to A for life”b. Two years later, A conveys Greenacre “to B for life, so long as

no tavern is operated on the property”c. A has conveyed a determinable estate of the same duration as

his (LE)d. A has a possibility of revertere. B has a LED

iii. Right of Entry (a.k.a. Power of Termination)1. Future interest that follows a FSSCS2. Example

a. O conveys Whiteacre “to Town Library Board, but if it ceases to use the land for library purposes, O has the right to re-enter and retake the premises”

b. Board has FSSCSc. O has a Right of Entry

b. Future Interests in the Transfereei. Remainders vs. Executory Interests

1. A Rem becomes possessory immediately at the natural end of the preceding Estate (e.g., the life tenant dies)

2. Executory Interests cut off (“divest”) the preceding Estate before its natural expiration

ii. Vested Remainder (VR)1. A remainder is vested if:

a. Given to an ascertained (born) person, ANDb. Not subject to a condition precedent

2. “Indefeasible” (plain old) Vested Remaindera. Certain of becoming possessory; cannot be divestedb. E.g., O conveys “to A for life, then to B and her heirs.” A: LE; B:

VR | FSA. If B dies before A, B’s future interest goes his heirs/devisees/escheats.

3. Vested Subject to Open (or Partial Divestment)a. Vested Subject to Open occurs w/ class gifts. Here, current

members of the class may have their interest partially divested because of additional class members in the future.

b. E.g., O conveys “to A for life, then to A’s children and their heirs.” B is A’s child at time of grant. A: LE; B: VR subject to open | FSA. B’s interest is Vested Subject to Open b/c A could have more kids.

i. Remainder can begin as contingent and become vested based on later events

ii. E.g., using above example, if at time of grant, A didn’t have kids, A: LE; A’s potential kids: CR | FSA; O: Rev | FSA. If has kids, then the remainder becomes vested.

4. Vested Subject to Divestmenta. E.g., O conveys “to A for life, then to B and her heirs, but if B

does not survive A to C and his heirs.”i. Compare, O conveys “to A for life, then to B and her

heirs if B survives A, and if B does not survive A, to C and his heirs” – a Contingent Remainder

b. Keys to distinguish Contingent Remainders from Vested Remainders Subject to Divestment

i. Order of language1. Read left to right, comma to comma2. Classify interests as you go (vested or

contingent), THEN move to next interest5. Rule of Thumb

a. If a LE followed by future interestsi. If first future interest is a Contingent Remainder in fee

simple1. The following future interest in a Transferee will

be a Contingent Remainderii. If the first future interest is a Vested Remainder in fee

simple1. The following future interest in a Transferee will

be an Executory Interestiii. Contingent Remainder

1. A remainder is contingent if:a. Recipient unascertained, ORb. Is subject to a condition precedent

2. Contingent Remainder if Recipient is Unascertaineda. E.g., O conveys “to A for life, then to the heirs of B.” B’s heirs

are unascertainable until he dies. A: LE; Heirs of B: CR | FSA; O: Rev | FSA.

3. Contingent Remainder if Subject to Condition Precedenta. E.g., O conveys “to A for life, then to B and her heirs if B survives

A, and if B does not survive A, to C and his heirs”i. A: LE; B: CR | FSA; C: CR | FSA; O: Rev | FSA.

ii. Note: these are alternative contingent remaindersiii. Note: O retains a reversion, even thought it seems like

the future interest would either go to B or C. This is because A’s LE can end before he dies. E.g., early CL forfeiture for treason; A and B die simultaneously.

1. This DOES NOT apply to Vested Remainders. If LE is forfeited or ends early, possession goes to the future interest holder (acceleration).

iv. General Rule: when alternative Contingent Remainders follow a LE, throw on a Reversion to O.

b. E.g., O conveys “to A and B for their joint lives, then to the survivor in fee simple.” A and B have CR | FSA b/c (1) the survivor is unascertained, and (2) their future interests have an express condition precedent.” A and B Jointly: LE; A: CR | FSA; B: CR | FSA; O: Rev | FSA.

c. Not a Condition Precedent if Mere Surplusagei. E.g., O conveys “to A for life, and in the event of A’s

death to B and her heirs.” B has VR | FSA.4. If a Remainder-holder transfers to O, the name stays. It does not

become a reversion (although it has the same effect).5. Again, contingent remainders can become vested based on later events

a. E.g., O conveys “to A for life, then to A’s children who shall reach age 21.” A has a 17 yr old child, B. A: LE; B: CR | FSA; O: Rem | FSA.

b. When B turns 21, B: VR | FS subject to openc. If A dies when B is only 17:

i. CL: B’s CR is destroyed b/c not ready for possession; Reverts to O

ii. Modern: O holds by reversion, then goes to B when he turns 21; if B dies before he turns 21, O holds it

iv. Why the Vested/Contingent Distinction Matters1. Note: when it’s ambiguous, VR preferred over CR2. Acceleration:

a. Vested, but not Contingent Remainders, become possessory however and whenever the preceding estate ends

i. E.g., O conveys to “A for life, then to B and his heirs, but if B dies under age 21 to C and his heirs”

1. A: LE; B: Vested Remainder Subject to Divestment | FSA; C: Shifting Executory Interest | FSA

2. If A dies when B is age 17:a. B gets possession. Acceleration.b. B: FSA Subject to Executory Limitation;

C: Executory Interest | FSAii. E.g., O conveys to “A for life, then to B and his heirs if B

reaches age 21”1. A: LE; B: Contingent Remainder | FSA; O: Rev |

FSA2. If A dies when B is age 17:

a. B doesn’t get possession; still contingent

b. CL: contingent remainder is destroyed; O owns Blackacre

3. At early CL, Contingent Remainders were not transferrable inter vivosa. Creditors of remaindermen couldn’t reach them

i. They were inheritable, howeverb. Vested Remainders were assignable and creditors could reach

themc. TODAY, Contingent Remainders are assignable in most JRDs

4. Destructibility of contingent, but not vested remainders5. Contingent, but not Vested Remainders are subject to the rule against

perpetuitiesv. Executory Interests

1. In general, an Executory Interest divests another interest to become possessory

a. If it divests a transferee, it is a Shifting Executory Interestb. If it divests the transferor, it is a Springing Executory Interest

2. Origins in Equitya. Restrictive CL rules and the response in equity

i. No future interest could be created in favor of a transferee if it cuts short a freehold estate

1. E.g., O conveys Whiteacre “to my eldest son A and his heirs, but if A inherits Blackacre, then Whiteacre is to go to my second son B and his heirs.” A: FSA; B: nothing.

ii. No freehold Estate can be created to spring up in the future.

1. O conveys “to A and her heirs when A marries B.” A: nothing; O: FSA

2. Did not prevent the creation of a remainder to commence in the future, provided there was a freehold estate in a transferee to support it. E.g., “to A for life, then to B and her heirs.” Livery of seisin to A was sufficient to create A’s freehold LE and also to sustain B’s remainder.

3. The Rise of the Use

a. E.g., O enfeoffs “X and his heirs to hold to the use of A and his heirs, but if A inherits the family manor, then to the use of O’s second son B and his heirs.”

i. X has legal title; X is subject to a duty enforceable in Equity to hold for the benefit first of A, and then later perhaps to the benefit of B

ii. Note: Shifting Useb. E.g., O enfeoffs “X and his heirs to hold to the use of O and his

heirs, but if A marries B, then for the use and benefit of A”i. Note: Springing Use

c. Gave rise to the bargain and sale deedi. E.g., O sells Blackacre to A for $50, giving a written deed

granting “to A and his heirs”ii. No livery of seisin; O holds legal title

iii. But equity req’s O to hold legal title for the benefit of Ad. Compare Covenant to Stand Seised

i. E.g., O covenants to stand seised for the benefit of Daughter

ii. Love and affection for relatives sufficed as good consideration to raise a use

e. Other Benefitsi. Could effectively deivse property

1. E.g., Enfoeff “X and his heirs to the use of O and then to such persons as O shall appoint by will”

ii. Tax Avoidance1. Feudal incidents due upon descent to heir b/c

of O’s death2. But, avoided if O grants to “A, B, C,…Z as joint

tenants for the use of O and his heirs”a. Add ppl b/c once grantees die, grantor

has to pay taxes (so you appoint a large number of people; if number grows thin, appoint more ppl)

3. Seisin never passes on4. Statute of Uses

a. If a person seised for benefit of another, then seisin (legal title) deemed transferred to beneficiary of the Use

i. E.g., “to X and his heirs for the benefits of A”ii. After the statute, A holds legal title

iii. Incidents dueb. A Use (equitable) was thereby converted to a legal interest

i. Ex. 12: O bargains and sells “to A and his heirs, but if B returns from Rome, then to B and his heirs.”

1. Before the Statute of Usesa. O retained legal title (no livery of

seisin); A and B had only equitable interests (a Use)

2. After the Statute of Uses

a. B: Shifting Executory Interest | FSAb. A: Fee Simple Subject to an Executory

Limitation (FSSEL)c. Note: A and B hold LEGAL title

ii. Ex. 13: O covenants to stand seised for the benefit “of A and her heirs when A marries B.”

1. Before the Statute of Usesa. O retained legal title; A had only an

equitable interest2. After the Statute of Uses

a. A: Springing Executory Interest | FSAb. O: FSSEL

5. Modern Executory Interestsa. Created the Fee Simple Subject to Executory Limitation (FSSEL)

i. A fee simple that upon an event occurring is divested in favor of an Executory Interest held by a transferee

ii. Similar to a Defeasible Fee, except the future interest is held by a transferee, not O

b. Ex. 14: O conveys “to A and his heirs, but if A dies w/o issue surviving him, to B and her heirs”

i. A: FSSELii. B: Shifting Executory Interest | FSA

iii. NOTE: the FSSEL here is a present possessory estatec. Ex. 15: O conveys “to A for life, then to B and her heirs, but if B

dies under the age of 21, to C and her heirs.”i. A: LE

ii. B: Vested Remainder Subject to Divestment | FSSEL1. Subject to loss before it becomes possessory

AND after it becomes possessory (if B isn’t 21)iii. C: Shifting Executory Interest | FSAiv. NOTE: the FSSEL here is a future interestv. Compare, Ex. 8: O conveys “to A for life, then to B and

her heirs, but if B does not survive A to C and his heirs.”1. A: LE2. B: Vested Rem Subject to Divestment | FSA3. C: Shifting Executory Interest | FSA4. Here, the FI is FSA b/c it cannot be divested

after becoming possessory (B survives A)6. Executory Interests and Defeasible Fees

a. Ex. 16: O conveys “to Hartford School Board, its successors and assigns, but if the premises are not used for school purposes during the next 20 yrs, to B and her heirs.”

i. Distinguishing FSSCS1. FI in FSSCS (right of entry) held by O2. FI in FSSEL (executory interest) held by 3d party3. AUTOMATIC divesting if the condition happens;

not an optional right of entryii. Title

1. School Board: FSSEL2. B: Shifting Executory Interest | FSA

b. Ex. 17: O conveys “to Town Library Board so long as the premises are used for library purposes, then to Children’s Hospital.”

i. Distinguishing FSD1. “So long as” language looks like FSD2. In FSD, possibility of reverter goes back to O;

here the future interest goes to a 3d partyii. Title

1. Library Board: FSD2. Children’s Hospital: Shifting Executory Interest

| FSAa. Casebook: FSDb. Primer: FSSELc. Either is acceptable

iii. Logically, “It’s a Unicorn in the Zoo”1. Shouldn’t be an executory interest b/c it

doesn’t divest the FSD2. Shouldn’t be a remainder b/c a remainder can’t

follow a vested fee simplec. Rules of Thumb

i. If grant looks like FSSCS, but FI is in 3d party: FSSEL followed by an Executory Interest

ii. If grant looks like FSD, but FI is in 3d party: FSD or FSSEL followed by an Executory Interest

7. More Problems (p. 238)a. Problem 1. O, owner of Blackacre, comes to you to draft an

instrument of gift. O tells you he wants to convey Blackacre to his son A for life, and upon A’s death O wants Blackacre to go to A’s children if any are alive or, if none are then alive, to O’s daughter B.

i. (a) O conveys “to A for life, then to A’s children and their heirs, but if at A’s death he is not survived by any children, then to B and her heirs.”

1. Suppose A is alive and has no childrena. A: LEb. A’s kids: Contingent Remainder | FSAc. B: Contingent Remainder | FSAd. O: Reversion | FSA

2. Two years after the conveyance, twins, C and D, are born to A.

a. A: LEb. C, D: Vested Remainder Subject to

Divestment and Open | FSAc. B: Shifting Executory Interest | FSA

3. Suppose that A’s child (C) dies during A’s lifetime and that A later dies, survived by his child (D) and B.

a. A: LE ENDEDb. D: FSAc. C’s Heirs: FSA (divesting condition

never occurred)ii. (b) O conveys “to A for life, then to such of A’s children

as survive him, but if none of A’s children survives him, to B and her heirs.” At the time of the conveyance, A is alive and has two children, C and D.

1. A: LE2. C, D: Contingent Remainder | FSA3. B: Contingent Remainder | FSA4. O: Reversion | FSA

iii. (c) O conveys “to A for life, then to B and her heirs, but if A is survived at his death by any children, then to such surviving children and their heirs.” At the time of the conveyance, A is alive and has two children, C and D.

1. A: LE2. B: Vested Rem Subject to Divestment | FSA3. C, D: Shifting Executory Interest | FSA

b. Problem 2. T devises $10,000 “to my cousin, Don Little, if and when he survives his wife.”

i. T’s intent: T wants the money to go to his cousin, but not to his cousin’s wife

ii. Don Little has a Springing Executory Interestiii. Testator’s legatees are divested

c. Trustsi. Generally

1. Trustee has Legal Title2. Beneficiary has Equitable interest

a. Income for specified periodb. Principal (remainder): Distribution of assets at end of the

period3. Ex. 18: O conveys Blackacre “to X in trust to pay the income to A for life,

and then to pay the principal to A’s children who survive A.”a. Equitable Future Interests track Legal Future Interests

i. X: legal FSAii. A: equitable LE

iii. A’s children: equitable contingent remainder | FSAiv. O: equitable reversion | FSA

b. If X sells Blackacre for $200,000 and reinvests the $200,000 in Whiteacre and General Motors stock, the trust property then consists of these latter items

c. Upon A’s death X conveys the trust property to A’s children if any are alive or O if A has no surviving children.

ii. Trust Basics

1. Trustee is a fiduciarya. Trustee must act for the exclusive benefit of the beneficiaries

and is not permitted to benefit personallyb. Trustee is subject to personal liability to the beneficiaries for

breach of fiduciary duties2. No self-dealing. Trustee cannot sell assets to himself as an individual3. Keep Trust assets separate from own4. Acreage accounts5. Impartial treatment of Income and Remainder Beneficiaries6. Exercise prudent management judgment7. Subject to personal liability for breach8. Trusts are not subject to CL rules against restraints on alienation

a. Spendthrift Trustsi. Trusts drafted such that trust beneficiaries have no

power to transfer or borrow against their trust interestsii. Creditors have no power to reach those interests to

satisfy beneficiaries’ debtsiii. Some state statutes make the settlor’s own equitable

interest immune from creditor claimsb. “Perpetual” or “Dynasty” Trusts

i. Trusts that can continue to control the disposition of wealth forever into the future

d. Rules Furthering Marketabilityi. Background

1. People have always wanted to try to control the ownership of their property not just at death but into the future

2. Also sought to prevent future generations from making foolish decisions and squandering wealth

3. After the Statute of Uses, conveyancers began creating increasingly complex arrays of Estates and Future Interests

4. Judicial Response: create rules that curb uncertain Future Interests in order to enhance alienability

ii. Destructability of Contingent Remainders (241-42)1. Rule: A remainder in land is destroyed if it does not vest at or before

the termination of the preceding freehold estate.2. Destruction by Staying Contingent at End of LE

a. Ex. 19: O conveys Blackacre “to A for life, then to B and her heirs if B reaches 21.” A dies when B is age 15. At time of conveyance:

i. A: LEii. B: Contingent Remainder | FSA

iii. O: Reversion | FSAb. B’s Contingent Rem is destroyed b/c it didn’t vest before A died.

3. Destruction by MERGERa. Rule of Merger: If the LE and the next vested estate in fee

simple come into the hands of the same person, the lesser estate is merged into the greater Estate

b. E.g., O conveys Blackacre “to A for life, then to B and her heirs.” A conveys his LE to B.

i. B has LE PLUS Vested Rem | FSA; merges into FSAc. Ex. 20: O conveys Whiteacre “to A for life, then to B and her

heirs if B survives A.”i. At time of conveyance:

1. A: LE2. B: Contingent Remainder | FSA3. O: Rev | FSA

ii. A conveys his LE to O.1. O has the LE and the next vested Estate2. O has FSA!!!3. B’s contingent remainder is destroyed

4. Limitationsa. P. 242, n. 11: Merger doesn’t apply when the LE and the next

vested Estate are created simultaneously in the same person. Transferor’s intent.

b. Destructibility doesn’t apply to Executory Interestsc. Destructibility doesn’t apply to Equitable Interests

5. Example Problem: Suppose Testator devises “to A for life, then in fee simple to B’s children who survive B.”

a. Title at time of devise:i. A: LE

ii. B’s children: Contingent Remainder | FSAiii. T’s heirs: Reversion

b. Suppose that B dies during A’s life, leaving a child, C. Then A dies.

i. C’s Contingent Rem became Vested at B’s death (during A’s life). C owns Blackacre.

c. Suppose A dies during B’s life and B has one child C at the time.i. The condition precedent (to survive B) isn’t yet satisfied.

The Contingent Rem is destroyedd. Suppose A dies during B’s life and B has no children.

i. The Rem was still Contingent at the end of A’s LE (b/c not held by an ascertained person). The Contingent Rem is destroyed. T’s heirs own blackacre.

e. Suppose that A conveys his LE to Bi. B: LE per autrie vie

ii. B’s children: contingent remainder | FSAiii. T’s heirs: Reversion | FSAiv. LE and next vested estate are NOT held by same person.

No merger.f. Suppose A conveys his LE to T’s sole heir, X

i. X: LE per autrie vieii. B’s children: Contingent Remainder | FSA

iii. X: Reversion | FSAiv. X’s LE merges into his Rev | FSAbecomes FSA

6. Current Status of Destructibility of Contingent Remainders (242-43)

a. Abolished in ¾ statesb. E.g., O conveys Whiteacre “to A for life, then to such of A’s

children who reach age 21.” Two years later, A dies, leaving children C and D ages 8 and 4.

i. At CL:1. C, D: Contingent Remainder (to reach 21)2. Since they’re still contingent at the end of A’s

LE, they’re destroyed3. O: FSA

ii. After Abolition:1. O: FSSEL2. C, D: Springing Executory Interest | FSA3. Suppose C is 21 and D is 17. A is alive.

a. A: LEb. C: Vested Rem Subject to Open | FSAc. D: Contingent Remainder | FSA

4. Suppose A dies. Then later, C turns 21. D is 17.a. C: FSSEL (C divested O’s FSSEL)b. D: Shifting Executory Interest | FSA

iii. The Rule in Shelley’s Case1. The Rule

a. IF (1) one instrument (will or deed)b. (2) creates a life estate in land in A, andc. (3) purports to create a remainder in persons described as A’s

heirs (or the heirs of A’s body), andd. (4) the life estate and remainder are both legal or both

equitable,e. THEN A, not his heirs, has the remainder in FSA (or fee fail)f. Simplified Rule. Cannot in same instrument create a LE in a

person and a Reminder in the heirs of that person2. Ex. 21: O conveys Blackacre “to A for life, then to A’s heirs.”

a. Under The Rule in Shelley’s Case:i. A: LE

ii. A: Vested Rem | FSAb. Does Merger apply?

i. LE and next vested estate in the hands of AA: FSAii. Whenever you see a Shelley’s Case issue, always check

for merger after applying the Rule in Shelley’s Casec. What if the grant instead left the remainder in “A’s children?”

i. Rule in Shelley’s Case does NOT apply (“children” ≠ “heirs” or “heirs of A’s body”)

3. E.g., O conveys “to A for life, then to B for life, then to A heirs”a. Under The Rule in Shelley’s Case:

i. A: LEii. B: Vested Remainder | LE

iii. A: Vested Remainder | FSAb. Note: merger does not apply here b/c A does NOT have the

next vested estate after her LE.

c. If B dies during A’s life, his heirs have the vested remainder; merger still doesn’t apply.

4. Applicabilitya. The Rule in Shelley’s Case applies to Contingent Remainders as

well as Vested Remainders in “A’s heirs”b. The Rule in Shelley’s Case does NOT apply to executory interests

5. Status of The Rule in Shelley’s Casea. Abolished in all but three or four statesb. But abolition sometimes not retroactive

i. Cts have applied the rule as late as the 1990s as they construe wills and deeds that predate the abolition

c. Also important to know the Rule b/c it will apply to land situated in a state that sill has it

i. E.g., drafting a will for a TX couple who owns land in ARiv. The Doctrine of Worthier Title

1. Rulea. IF:

i. Inter vivos conveyance of landii. A future interest in Grantor’s heirs (either a Remainder

or an Executory Interest)b. THEN no future interest is created in the heirs of Grantor;

rather, Grantor holds a Reversion2. Ex. 22: O conveys Blackacre “to A for life then to O’s heirs.”

a. In the absence of the Worthier Title Doctrine:i. A: LE

ii. O’s unascertained heirs: Contingent Remainder | FSAiii. O: Rev | FSA

b. Under the Worthier Title Doctrinei. A: LE

ii. O: Reversion | FSAiii. O’s heirs take nothing

3. Status of the Doctrine of Worthier Titlea. Abolished in many statesb. Sometimes survives as a rule of construction

i. E.g., in a grant from O “to A for life, then to O’s heirs” the ct assumes that O intended to retain a Reversion as opposed to making a grant to his heirs

ii. But not a binding rule in those circumstances. Depends upon intent.

v. The Rule Against Perpetuities1. The Rule: No interest is good unless it must vest, if at all, not later than

twenty-one years after some life in being at the creation of the interest2. General Observations

a. Interests subject to the Rule: Contingent Remainders, Executory Interests, Class Gifts (Vested Rem Subject to Open)

b. The interest must EITHER vest OR fail w/in a life in being plus 21 years

c. Life in Being

i. When does the clock start running?1. For a will, the death of the testator (not the

date of the will)2. Inter vivos: Date of delivery of the deed

ii. Whose lifetime to use?1. Generally, someone whose life is causally

connected to vesting or failing of the interest2. E.g., a life tenant for the future interests that

follow3. Ex. 23: O transfers a sum in trust “for A for life, then to A’s first child to

reach 21.”a. Future interest subject to the Rule: A’s first child: Contingent

Rem | FSAb. Contingency: A having a child that attains age 21c. A’s interest is valid: 21 years after A’s life, we will know

whether A’s first child’s interest vests or not. A cannot have kids after he dies.

d. A child is considered “in being” from the date of conception (if later born alive)

4. Ex. 24: O transfers a sum in trust “for A for life, then to A’s first child to reach 25.”

a. Assume A has NO children at all at the time of the granti. Future interest subject to the Rule: A’s first child to

reach 25: Contingent Remainder | FSAii. Contingency: A having a child that attains age 25

iii. A’s interest is invalid: We don’t know if A will have a kid that reaches 25 years old 21 years after A’s death.

iv. Strike out invalid clause: Grant becomes: “for A for life”; A: LE; O: Rev | FSA

b. What if at the time of grant A has a 24 year old child?i. A’s interest is invalid: A’s kid could die before reaching

25. Then, the analysis follows the example above.5. Ex. 25: T devises property “to my grandchildren who reach 21.” T

leaves 2 children and 3 grandchildren under 21.a. Future interest subject to the Rule: T’s grandchildren:

Contingent Remainder | FSAb. Contingency: T’s grandchildren reach 21c. Validating Lives: T (dead), T’s kids, T’s grandchildrend. Grandchildren’s interest is valid: 21 years after T’s children’s

lives, we will know if their grandchildren reach 21.e. What if the same grant occurred in a deed?

i. Can’t use T’s children as validating lives b/c T can have grandchildren other than through his currently living children.

ii. Current children of T could die. T has third child, Z. T and his children other than Z all die. Z has a child, who is a grandchild to T. Z may turn 21 after T dies.

6. The Fertile Octogenarian and Precocious Toddler (P. 247, FN 22)

a. All persons are deemed capable of producing children regardless of age

b. Cannot defeat by evidence that the particular person is medically incapable of producing children

c. Ex. 26: T devises a sum in trust “for A for life, then to A’s children for the life of the survivor of them, then upon the death of the last surviving child of A, to A’s grandchildren.” At the time of T’s death, A is an 80-year old woman w/ two living children, B and C.

i. Title1. A: LE2. B, C: Vested Remainder Subject to Open | LE3. A’s grandchildren: Contingent Remainder | FSA

a. Or Vested Subject to Open if 1 born4. T’s Estate: Reversion | FSA

ii. B and C’s interest is valid. At A’s death, the class (of A’s children) closes.

iii. A’s Grandchildren’s interest is invalid.1. Contingency: A’s grandchildren who survive the

last surviving child of A.2. Validating lives: A, B, C3. A can have another child, X. It is possible for X

to have a child (A’s grandchild) more than 21 years after the end of the validating lives.

4. No vesting (class closing) until death of last child of A – here X – which may be more than 21 years after the end of the lives of A, B and C.

7. Frozen Sperma. If considered the possibility, then many more future interests

would violate the Ruleb. See, Ex. 23: O transfers a sum in trust “for A for life, then to A’s

first child to reach 21”i. Valid b/c A’s first child to reach 21 will do so w/in 21

years of his deathii. But what if a woman is inseminated 5 years after A’s

death that would turn 22 (or fail to do so) 2 years after A’s life?

c. Courts disregard the possibility of posthumous parentage for purpose of Rule Against Perpetuities.

8. Class Gifts (248)a. All or Nothing Rule. Gift to a class must stand or fall as a unity.

That is, if any class member fails the Rule, then all fail.b. In other words:

i. The rule applies to Vested Rem Subject to Openii. They are not “vested” for purposes of the Rule Against

Perpetuitiesc. See Problem 4 below.

9. Problems (248-29)

a. Problem 1: O conveys “to A for life, then to B if B attains the age of 30.” B is now 2 years old.

i. Contingency: B attaining the age of 30.ii. Validating lives: A, B

iii. B’s interest is valid. Use B for the validating life. At the end of B’s life, we’ll know whether or not he reached 30.

1. If we used A for the validating life and A died tomorrow, it would be 28 years before we’d know whether B reached 30.

iv. Note: The rule doesn’t req the interest to vest in a certain time. It only req’d that we will know whether it vests or fails to vest w/in a certain time.

b. Problem 2: O conveys “to A for life, then to A’s children for their lives, then to B if B is then alive, and if B is not then alive, to B’s heirs.” Assume that A has no children at the time of conveyance.

i. Title1. A: LE2. A’s potential children: Contingent Rem | LE (b/c

they’re unascertainable)3. B: Contingent Rem | FSA (b/c of the condition)4. B’s heirs: Contingent Rem | FSA

ii. Possible Validating Lives: A, Biii. A’s children’s interest is valid. A’s children will be

ascertained at the end of A’s life.iv. B’s interest is valid. Use B as a validating life. We will

know at the end of B’s life if he survived A’s children.v. B’s heirs’ interest is valid. Use B as a validating life.

The class (B’s heirs) will close at the end of B’s life.c. Problem 3: O, a teacher of property law, declares that she holds

in trust $1,000 “for all members of my present property class who are admitted to the bar.”

i. Title1. O: FSSEL2. Members of the property class who are

admitted to the bar: Springing Executory Interest

ii. Validating life: all the members of the property classiii. The class members’ interest is valid. When all the

members of the property class have died, we will know whether or not they were admitted to the bar.

d. E.g., O holds in trust $1000 “for the first child of A who is admitted to the bar.”

i. The grant is invalid. It is possible for the contingency to remain open 21 years after A’s death. E.g., A has his only kid right before he dies, and the kid passes the bar when he’s 25.

ii. Even if A now has a 22 year old child in law school, that child may die, A has another, A dies, and the new child is admitted to the bar > 21 years after the death of A and his current child.

e. Problem 4: O conveys “to A for life, then to A’s children who reach 25.” A has a child, B, age 26, living at the time of the conveyance. Is the remainder valid?

i. A: LEii. B: Vested Remainder Subject to Open

iii. B’s interest is invalid. A could have another child, C, and A and B die next year. C’s interest would not vest w/in 21 years of A and B’s life. Class gift – all or nothing.

iv. Vested Remainders Subject to Open must close w/in 21 years of a life in being.

f. “After Born Widow Issue”: when a grant refers to a widow, it’s possible that she isn’t alive at the time of the grant. Therefore, she can’t be used as a validating life.

i. Problem 5: O conveys “to A for life, then to A’s widow, if any, for life, then to A’s issue then living.”

1. A: LE2. A’s Widow: Contingent Remainder | LE3. A’s issue “then living”: Contingent Remainder |

FSA4. O: Reversion | FSA5. Widow’s interest is valid. Using A’s life for a

validating life, Widow will be ascertainable at A’s death.

6. A’s issue’s interest is invalid. Using A’s life for a validating life, Widow may live > 21 years after A’s death. Thus, we won’t know 21 years after A’s death who A’s issue will be “then living” at Widow’s death. Can’t use Widow as validating life b/c she may not be born at time of grant.

g. Class Gift Problem – Problem 5: T devises property “to A for life, and on A’s death to A’s children for their lives, and upon the death of A and A’s children, to [the person or persons indicated in the bracketed examples below].” A and B survive T

i. Title1. A: LE2. A’s unascertained kids: CR | LE3. If A has a kid, Z: VR subject to open | FSA

ii. (a) [B if A dies childless]1. B: CR (condition of A dying childless)2. We will know whether A dies childless by the

end of A’s life.3. Valid, using A’s life.

iii. (b) [B if A has no grandchildren then living]

1. B: CR condition of A having no grandchildren then living

a. “Then” is the end of the lives of A’s children

2. A’s life does not validate b/c A could have a child alive more than 21 years after he dies.

3. B’s life does not validate b/c A could have a child alive more than 21 years after B dies.

4. The lives of currently living children of A do not validate b/c A could have an afterborn (new) child who outlives the earlier children by > 21 years.

5. Invalid.iv. (c) [B’s children]

1. B’s kids: CR (unascertainable) or VR subject to open (if has kids at time of grant)

2. We will know who B’s children are at the end of B’s life. B’s life validates.

3. Valid.v. (d) [B’s children then living]

1. B’s kids then living: CR (condition of B having children then living)

a. “Then” is at the death of the lives of A’s children

2. A’s life doesn’t validate b/c A could have a child alive more than 21 years after he dies.

3. B’s life doesn’t validate b/c A could have a child alive more than 21 years after B dies.

4. The lives of A’s currently living children don’t validate b/c A could have an afterborn (new) child who outlives the earlier children by > 21 years.

5. Invalid. Same as (b).vi. (e) [A’s grandchildren]

1. A’s grandchildren: CR (unascertained) or VR subject to open

2. We will we know who A’s grandchildren are at end of A’s children’s lives.

3. A’s life doesn’t validate b/c he could have a child who is still alive > 21 years after A dies.

4. The lives of any currently living children of A don’t validate b/c A could have an afterborn (new) child who outlives the earlier children by > 21 years.

5. Invalidvii. (f) [T’s grandchildren]

1. T’s grandkids: CR (unascertainable) or VR subject to open

2. We will we know who T’s grandchildren are at end of T’s children’s lives

3. T’s children are validating lives4. If T never had any children, then no

grandchildren were added ever (fails to vest immediately)

5. If T has at least one child alive, they are lives in being. At the death of the last of them, we will know who T’s grandkids are.

6. If T had all predeceased children, but grandchildren had been born, the grandchildren’s interests are immediately vested (class closed).

7. Valid10. Savings Clause (note 7, 249)

a. To avoid a Perpetuities problem, sophisticated Trust instruments include a savings clause

b. It provides for termination of Trust (if not already terminated) upon the end of 21 years after a specified life in being

c. E.g., Testator: “Income to A for life, then the income to A’s children to their lives, then the principal to A’s grandchildren”

i. RAP problem: A has an afterborn child. The afterborn child lives more than 21 years after the deaths of A and his other children and any previously born grandchildren

ii. Solution: Terminate 21 years after the death of the survivor of A and A’s issue living at T’s death.

d. Can use an extraneous life in a savings clause. E.g., terminates at “the last person to die who is alive in China at the time of my death.” This is rarely done b/c of administrative burden of keeping track

i. The Restatement says that a savings clause is ineffective if the group of persons is too large to be feasible

11. RAP and Future Interests in Transferors (250)a. Future interests held by transferors are regarded as vested and

therefore not subject to RAPi. Possibility of reverter, right of entry, reversion

b. Ex. 27: O conveys Blackacre “to the School Board so long as it is used for a school.”

i. School Board: FSDii. O: Possibility of Reverter | FSA

iii. VALID under RAPc. Ex. 28: O conveys Blackacre “to the School Board, but if it

ceases to use Blackacre for school purposes, O has a right to re-enter.”

i. School Board: FSSCSii. O: Right of Entry | FSA

iii. VALID under RAP

12. Executory Interests Following Defeasible Feesa. Ex. 29: O conveys Blackacre “to the School Board so long as it is

used for a school, then to A and her heirs.”i. A: Executory Interest | FSA

ii. Invalid under RAPiii. Effect: Strike the clause; O gets Possibility of Reverter

b. Ex. 30: O conveys Blackacre “to the School Board, but if it ceases to use Blackacre for school purposes to A and her heirs.”

i. A: Executory Interest | FSAii. Invalid under RAP

iii. Effect: Strike the clause; Board gets FSA!!!c. How to draft around this?

i. Draft as in Ex 27 or 28 (FSD or FSSCS)1. Then O conveys the Possibility of Reverter or

the Right of Entry to A2. But remember, in some states these interests

are not transferable inter vivosii. Draft as in Ex 27 or 28 (FSD or FSSCS)

1. Then O devises the Possibility of Reverter or the Right of Entry to A

2. If FSD/FSSCS terminates in O’s lifetime, then he conveys (or devises) FSA to A

iii. First convey FSA to A1. Then A conveys FSD or FSSCS to the School

Board13. Options (The Symphony Space, Inc. v. Pergola Properties, Inc.)

a. Options are subject to RAP and are void if exercisable beyond lives in being plus 21 years.

b. In many states, rights of first refusal (a.k.a. “pre-emptive rights”) are subject to RAP and are void if they are exercisable beyond the perpetuities period.

i. In NY, market-price rights of first refusal created in commercial or gov’t (but not family) transactions, are not subject to RAP, but are subject to the CL rule against unreasonable restraints on alienation

c. Uniform Statutory Rule Against Perpetuities (USRAP) and Rest. (3d) Property (minority view): RAP doesn’t apply to options

14. Perpetuity Reform Movementa. Early Reforms

i. First Stage: focus on the actual rather than possible facts existing at the end of the estate preceding the FI

ii. Second Stage: specific statutory repairs designed to avoid purely technical violations by altering the CL conventions in certain specific circumstances

1. Avoid “fertile octogenarian” and “precocious toddler” problems by providing that anyone 65+ or < 13 is deemed incapable of having a child

2. Avoid “unborn widow” by presuming that a gift to the surviving “spouse” of a living person is a gift to a person in being

3. Reform of age contingencies. E.g., if O grants “to A, then to A’s first child to reach 25”, the statute changes 25 to 21.

iii. Third Stage: “immediate reformation”1. Like age contingencies, but more general2. Cy pres: reform a disposition so that it avoids

any perpetuity violation while effectuating the transferor’s intent as nearly as possible

3. Reformation may be made at any timeiv. Wait-and-see approach

1. Rather than invalidating an interest at the time of its creation on the basis of the what-might-happen test, we wait and see whether a contingent interest actually vests w/in some permissible vesting period.

2. Two step process:a. Valid under CL RAP?

i. If yes, there is no waitingii. If no:

b. The interest is valid if in fact it vests or terminates w/in the permissible vesting period. If it is still in existence and not vested at the end of that period, then it is invalid.

i. Not clear what the permissible vesting period is.

b. Uniform Statutory Rule Against Perpetuities (USRAP)i. CL RAP: At time of grant, determine if it’s possible for

the contingent interest to remain contingent 21 years after a life in being.

ii. USRAP: Wait-and-see if the contingent interest remains contingent 90 years after the grant. If it remains contingent after the 90 years, the interest is invalid.

iii. E.g., “to A for life, then to A’s first child to reach age 25”1. Violates CL RAP2. Under USRAP: don’t immediately invalidate,

wait to see if it vests3. If A dies w/ 2 yr old, wait 23 yrs

iv. The USRAP tried to create incentives to not to create RAP problems, but w/ the 90 day wait-and-see approach, the lawyer who drafted the grant is prob. dead when the interest is deemed invalid.

c. Perpetual Trustsi. 20 states have abolished RAP in the case of trusts and

replaced them w/ a rule against suspension of the

power of alienation, as long as the trustee has the power to sell the property

ii. These trusts potentially last forever, as long as the trustee has the power to sell (e.g., “to X in trust, the income to go to my Descendants; Trustee has power to sell”)

iii. Federal Estate Tax1. Federal estate tax levies a tax on any property

interest transferred by will, intestacy or survivorship to another person, except for transfers to spouses and charities.

2. The tax was avoided creating trusts w/ successive LEs. At the death of the life tenant, the tenancy ends, leaving no transfer to be taxed. The trust could continue until RAP called for the assets to be distributed.

a. E.g., T devises property in trust to pay income to daughter A for life, then to pay income to A’s kids for their lives, then to distribute the principal to A’s grandchildren.

b. At T’s death, estate tax is levied on the property, but no estate tax is levied at the death of A or at the death of A’s kids b/c they don’t have interests transferrable on death. An estate tax will be levied at the death of A’s grandchildren.

3. Generation-Skipping Transfer (GST) Tax (1986): if transferor creates a LE in a child that avoids (“skips”) the federal estate tax at the child’s death, a GST tax is due at the child’s death if the property passes to the next generation.

a. E.g., in the above example, no federal estate tax is payable at A’s death b/c A doesn’t have a transmissible interest. At A’s death, a generation-skipping transfer occurs, from T to his grandchildren, so at A’s death the GST tax is levied on the value of the nonexempt corpus of the trust. Upon the death of A’s children, another GST tax is levied.

4. In 1986, provided a $1M exemption from the GST tax for each transferor (doubled for married couples). Inflation adjustments: $1.1M in 2002, $1.5M in 2004, . . . $3.5M in 2009.

iv. Problems Arising from a Persistent Dead Hand

1. The Problem of Inalienabilitya. Property should remain alienable so it

can go to the highest/best useb. If property is tied up in trust, doesn’t

allow others to buy it and put it to better use

c. Perpetual trusts don’t give rise to a problem of inalienability b/c the trustee almost always has the power to sell

2. The Problem of First-Generation Monopolya. Equality btwn ancestors and

descendants vs. donative freedomb. But, descendants may prefer the

property be in trust (spendthrifts, incompetants, divorces)

3. Founding fathers didn’t want us to have a “leisure class”

a. Certainty of receiving trust income makes beneficiaries lazy and unproductive

b. Ppl shouldn’t be protected from fallingc. Effect on indiv: ppl are better off if

they’re able to fallVIII. Co-ownership and Marital Interests

a. Common Law Concurrent InterestsINTEREST TRANSFERRABLE DEVISABLE INHERITABLE

T in C Yes Yes YesJT No; destroys unities No; rt of

survivorshipNo; rt of survivorship

T by E Not unilaterally No; only btwn H and W

No; only btwn H and W

i. Types, Characteristics, Creation1. Tenancy in Common (T in C)

a. Each tenant has a separate, undivided interest in the landb. Transferrable inter vivos, devisable, inheritable

2. Joint Tenancy (JT)a. Like T in C, each tenant has a separate undivided interestb. JTs have a Right of Survivorshipc. Four “Unities” must be met:

i. Time. JTs must acquire title at the same timeii. Title. JTs must acquire title by the same instrument

iii. Interest. JTs must have equal interests.1. C.f., T in C, where tenants can have unequal

interests (e.g., A has 60% and B has 40%)iv. Possession. JTs must have equal right to possession of

the whole (at the time of creation)d. Severing a Joint Tenancy

i. By Conveyance1. Conveying an interest in JT destroys the “unity”

of time and title.2. E.g., A and B are JTs. A sells his interest to X. B

and X are tenants in common.ii. Action for partition

1. E.g., A and B are JTs. A can bring action against B to partition property.

2. Can do physical partition, or divide proceeds from sale btwn JTs.

3. Tenancy by the Entirety (more on this later)a. Four “unities” of joint tenancy + marriageb. Each tenant is seized as to the wholec. Neither H nor W can convey their interest on their own w/o the

other’s consent4. Presumptions

a. At CL, in the case of ambiguity, joint tenancies are favored. Today, tenancies in common are favored.

i. Policy: cts want property to be in fewer handsii. E.g., “to A and B”

1. CL: joint tenancy2. Today: tenancy in common

iii. “To A and B jointly” might not be a JT at CL. “To A and B as JTs and not as T in C,” or “To A and B as JTs w/ no right of survivorship” would be better.

iv. “to H and W”1. CL presumed an intention to create a T by E

5. Problems and Note (p. 278)a. Problem 1. O conveys Blackacre to A, B, and C as joint tenants.

Subsequently A conveys his interest to D.i. Title:

1. D (T in C) w/ [B & C] (JT)ii. B dies intestate, leaving H as his heir.

1. H gets nothing b/c an interest in JT is not inheritable (right of survivorship)

2. D has 1/3 interest in (T in C); C has 2/3 interest in (T in C)

iii. What if B had died leaving a will devising his interest to H?

1. There’s no difference b/c interests in JTs are not devisable either.

b. Problem 2. T devises Blackacre “to A and B as joint tenants for their joint lives, remainder to the survivor.”

i. Title:1. A & B: LE2. A & B: Contingent remainder | FSA3. T: Rev | FSA

ii. Note: this has virtually the same effect as JT. But, in JT, if A conveyed to X, X would be a (T in C) w/ B, destroying the right of survivorship

c. Problem 3. A and B are planning to be married. Two weeks before the ceremony, they buy a house and take title in “A and B as tenants by the entirety.”

i. Title:1. No tenancy by the entirety b/c not married yet2. Joint tenancy was created b/c it better

approximated their intent (right of survivorship)3. Tenancy in common (default) is also reasonable

ii. Several years after the marriage, A moves out of the house and conveys his interest in the house to his brother C.

1. The conveyance converts the JT into a (T in C). C and A are (T in C).

d. Note 4. Deed to grantees “jointly, as (T in C), w/ equal rights and interest in said land, and to the survivor thereof, in fee simple. . . . To Have and to Hold the same unto the said parties hereto, equally, jointly, as tenants in common, w/ equal rights and interest for the period or term of their lives, and to the survivor thereof at the death of the other.”

i. Ct: deed created JT b/c it provided for survivorship6. Avoidance of Probate

a. JTs are the practical equivalent of a will but at the joint tenant’s death probate of the property is avoided. A JT avoids probate b/c no interest passes on the joint tenant’s death.

b. Probate is the judicical supervision of the administration of the decedent’s property that passes to others at the decedent’s death. Probate is costly; administrators, lawyers and ct costs must be paid.

c. If a creditor acts during a joint tenant’s life, the creditor can seize and sell the joint tenant’s interest in property, severing the JT. At the joint tenant’s death, his interest disappears, and there is nothing to seize.

d. When a joint tenant dies, his share of the jointly held property is subject to federal estate taxation, even though “nothing passes” at the tenant’s death.

7. Unequal Sharesa. The unity of “interest” req’s joint tenants to have equal shares.

It is increasingly ignored by courts in situations where it counts. b. E.g., If A and B take title as joint tenants and A furnishes $5k and

B $10k, and the parties intend the proceeds from sale of the joint tenancy property to be divided 1/3 and 2/3 if sold during their joint lives, a JT is created, and if the property is sold, the ct will divide the proceeds according to their intent

ii. Severance of Joint Tenancies

1. A joint tenant can destroy the JT and convert it into a (T in C) by transferring the interest from herself to herself as tenancy in common. Riddle v. Harmon.

a. MN allows a joint tenant to create a (J in C) by signing a “Declaration of Election to Sever Survivorship of Joint Tenancy” (a deed is usu. the norm). Hendrickson v. Minneapolis Federal Sav. & L. Ass’n.

b. Straw Man Transactions (SMT)i. Before this rule, joint tenants needed a SMT to destroy

the JT. E.g., H and W are joint tenants; W conveys to Atty, destroying the JT; Atty conveys back to W.

ii. SMTs can also create a JT. E.g., A owns FSA; conveys to Atty; Atty conveys back to A and B as joint tenants. (Must meet the four “unities”)

2. Creating an Indestructible Right of Survivorshipa. Create a joint LE w/ Contingent Rem | FSA to the survivorb. Create a (T in C) in FSSEL w/ an executory interest in the

survivorc. Create a fee simple to take effect in possession in the future

3. Invitation for Fraud. Suppose W writes a deed in her own handwriting: “I convey my interest in Blackacre to myself, to terminate the JT w/ H.” She shows her daughter and puts it in her desk. Then, H dies and W destroys the deed.

4. Death of Joint Tenants.a. Uniform Simultaneous Death Act § 3: if joint tenants die in a

common disaster and there is “no sufficient evidence” of the order of death, one-half of the property is distributed as if A survived and one-half as if B survived.

b. Uniform Probate Code § 2-803(c)(2): If one joint tenant murders the other, the murder severs the JT and converts it into a (T in C)

5. Gen’lly mortgages do not sever JTs (they’re considered liens on the property, not conveyances). Harms v. Sprague.

a. This gives lendees/mortgagees incentive to join all joint tenants in the loan

b. The mortgagee could tell the joint tenant to sever the JT (by partition action or straw man transaction), but this might not work b/c the severance may lower the property value

c. Under the “title theory”, the mortgage is considered a conveyance, severing a JT

6. Questions and Problems (pp. 288-89)a. Problem 1. Suppose Wm and J are JTs of Blackacre. J takes out

a mortgage of $5k. Wm dies. The property is worth $5k.i. J succeeds Wm in ownership. The mortgage expands to

the whole property.b. Question 2a. A and B own Blackacre in JT. A conveys a 10 yr

term of years in Blackacre to C. After five years, A dies, devising all of his property to D. What are B’s rights?

i. Some JRDs: D takes from A b/c A had (T in C) (lease affected severance); D gets ½; B gets ½

ii. Some JRDs: No severance; need clearer intent to destroy right of survivorship. The lease expires when landlord dies; lessee is left w/ nothing. Tenhet v. Boswell

iii. If A dies after the lease expires, some JRDs hold that the lease affects a temporary severance during the lease; after the lease, the JT re-emerges

c. Problem 2b. Suppose that A and B sign a written agreement giving B the rentals from and possession of the land for her life. Does the agreement destroy the unity of possession? Upon A’s subsequent death, who owns the land?

i. 4 unities must be present at the creation of the JT. After the JT’s created, the parties can make agreements like this.

ii. Since the JT isn’t severed, B would have right of survivorship upon A’s death.

d. Problem 3. H and W, owners of Blackacre in JT, are getting a divorce. They sign a divorce agreement providing that Blackacre will be sold and the proceeds divided equally btwn H and W. Before Blackacre is sold, W dies. Does H have survivorship rights in Blackacre?

i. Some JRDs: divorce automatically converts a JT btwn the former H and W into a tenancy in common

ii. Some JRDs: May partition the property in divorce decree. The intention to sell does not sever the JT. W’s estate can sue for specific performance of the K to sell the land and have the proceeds divided.

iii. Joint Tenancy Bank Accounts1. Types of JT Bank Accounts

a. Example. O deposits $5k in a joint and survivor bank account w/ A as JTs. Determine what kind of acct it is from O’s intent.

b. “True Joint Tenancy.” O intends to make a present gift to A of one-half the sum deposited in addition to survivorship rights to the whole sum on deposit.

c. “Payable-on-Death” Account. O intends to give only survivorship rights.

d. “Convenience” Account. O intends that A only have power to draw on the account to pay O’s bills; no survivorship rights.

2. Assume survivorship rights were intended unless there’s evidence to the contrary.

3. During the lifetime of the parties, cts assume the joint account belongs to the parties in proportion to the net contribution of each party.

4. Problems (pp. 290-91)a. Problem 1a. O, a widower, opens a joint bank account with his

niece, A. O tells A, “I’ll want your name on this account so that

in case I am sick you can go and get the money for me.” O dies. Is A entitled to the money in the bank account?

i. No. O intended to create a convenience account (no survivorship rights). A is not entitled to the money.

b. Problem 1b. Suppose that O also gives A a right of access to O’s safe deposit box by adding A’s name to the signature card giving access; the lease agreement signed w/ the bank provides that the contents of the box are owned in JT w/ right of survivorship. The box contains $328k in bonds and cash. Is A entitled to the bonds and cash?

i. Don’t pay attention to the bank K; it doesn’t reflect O’s intent. Since there is no expression of intent, presume right of survivorship.

ii. But, the fact that it’s a large sum of money is evidence that he didn’t want to bestow a right of survivorship.

iii. Need more info. What other family members did he have? How rich was he? What did she do for him?

c. Problem 2. H and W and their son, S, open a joint savings account. H and W are in their sixties. The money deposited in the savings account comes from savings from H’s salary that H formerly had in a separate savings account. H dies. W, claiming that the entire amount in the savings account is hers, withdraws the balance. Does S have any rights to the money?

i. Possible to have different types of account for the same account

ii. Maybe supposed to be True Joint Tenancy btwn H and W, and a convenience account for S

d. Problem 3. A and B have a joint savings account of $40k. How much of the account can A’s creditor reach?

i. Creditors can reach the proportion in net contribution of each party

ii. If B contributed all $40k, A’s creditor would be able to reach what B contributed, intending to be given to A (if true joint tenancy)

iv. Relations among Concurrent Owners1. Partition

a. Generallyi. Applies to JT and T in C (not T by E)

ii. Can agree on partition or bring an action to partitionb. Partition by Sale: sell the property; divide proceeds (more

common)c. Partition in Kind: physically split up property (preferred)d. Factors

i. Impractible/inequitable1. Difficult to make physical partition

a. E.g., In re McDowell. A and B are heirs to an old rocking chair.

b. HELD: A gets possession for 6 mo., then B gets possession for 6 mo., then A, etc.

2. Numerous fractional small interestsii. Best interests of the parties

1. Economic Efficiencya. E.g., Johnson v. Hendrickson. Widow:

wants partition in kind; Cotenants: want partition by sale

b. HELD: partition sale if physical partition “cannot be made w/o great prejudice to the owners” (sale may be ordered if the value of the share of each cotenant is less than his share of money equivalent that could be obtained for the whole”

c. E.g., Gray v. Crotts. One cotenant arg: upon physical partiion, he should be awarded the part of property adjacent to his home.

d. HELD: divide prop by 4, draw lots2. Fairness

a. E.g., Delfino v. Vealencis. Ct ordered partition in kind where D resided and ran family bus. on prop, even though it was more efficient to partition by sale.

b. E.g., Ark Land Co. v. Harper. A bought 2/3 of family farm, but other heirs refused to sell. Ct ordered partition in kind b/c heirs’ emotional attachment to the land. The fact that the econ value of the prop as a whole would be less if it were partitioned is not dispositive.

c. Owelty: compensation for adverse impact on ex-cotenant’s land

e. An agreement never to bring an action to partition the land is unenforceable as a restraint on alienation.

2. Sharing the Benefits and Burdens of Co-ownershipa. Liability of Cotenant for Rent/Occupancy (Spiller v. Mackereth)

i. A tenant in possession has no liability to a cotenant not in possession for rental value, UNLESS the tenant has ousted the cotenant.

ii. Ouster. Occupying cotenant refuses a demand of the other cotenants to be allowed into use and enjoyment of the land

iii. Methods of Ouster1. Ask cotenant for access and be denied2. Set up a competing use and cotenant objects

iv. If can’t agree on use of property, partitionb. Leasing an Interest in Tenancy (Swartzbaugh v. Sampson)

i. In JT, a cotenant’s lease of his interest in tenancy does not affect a severance.

ii. Whether in (T in C) or JT, a tenant does not have the power to do anything to prejudice the joint tenant’s interest.

c. Accounting for Benefits, Recovering Costsi. Rents and Profits

1. Each cotenant is entitled to a pro-rata share of rents received from 3d parties. If tenant refuses to pay, cotenants can bring an accounting action against him to force pmt.

2. Also, each cotenant entitled to pro rata share of profits if tenant exploits natural resources on the property (e.g., minerals, timber).

3. Accounting is based on actual receipts, not FMVii. Taxes, Mortgage Pmts, and Other Carrying Charges

1. All cotenants are obligated to pay proportionate share of mortgage, tax, and other carrying charges.

2. If one cotenant pays more than his share, may recover excess in a contribution action, or may use excess pmt as a credit in an accounting or partition action.

3. But, where cotenant is in sole possession of the property, cannot recover these pmts unless they exceed the reasonable rental value of the property.

iii. Repairs1. Absent agreement, no rt to contribution from

cotenants as to pmt for necessary repairs.2. But, paying cotenant receives a credit for

reasonable cost of repairs in a partition or accounting action.

iv. Improvements1. No right to contribution from other cotenants

for expenditures for improvements2. In a partition in kind action, improved portion is

awarded to improving cotenanta. Or divide the property but order pmt

(owelty) from noncontributing tenants to the improver

3. In a partition by sale action, proceeds distributed to award the improver the added value

4. In an accounting, the improver is allowed all increments in value attributable to the improvements

b. Marital Interests

COMMON LAW SYSTEM COMMUNITY PROPERTY SYSTEM

During marriage – what can creditors reach?

Before MWPAH’s creditors could reach H’s prop (W had none)After MWPAGroup 1: creditor stands in H’s shoes, but not W’sGroup 2: creditor stands in debtor spouse’s shoesGroup 3: creditor can’t reach T by E propertyGroup 4: creditor can reach either spouse’s ROS

Creditors can reach debtor spouse’s share of CP

Rights upon divorce Before No-Fault DivorcesEach took separate property; W got alimonyAfter No-Fault DivorcesH and W take their own separate property“Marital property” subject to equitable distribution

H and W take their own separate propertyCommunity property split in half

Rights upon death

*exception for FT special held w/ other W

Traditional CL SystemPERS prop:- W took ½ H’s prop if no issue; 1/3 if had issue- H took all W’s PERS propREAL prop:- Dower – W took LE in 1/3 H’s FSAs and FTs*- Curtesy – H took LE in all W’s FSAs and FTs if they had kidsModern CL SystemForced elective share: spouse can elect to take ½ of ALL spouse’s prop

Surviving spouse takes ½ of community propertyDeceased spouse can do what he wants w/ separate property and ½ of community property

i. Common Law Marital Property System1. During Marriage

a. At marriage, a woman ceased to be a legal personb. Except for the W’s paraphernalia (clothes, ornaments), all

personal property owned by the wife at the time of the marriage or acquired thereafter became the property of H.

c. H had jure uxoris: right of possession to all W’s lands; this right was alienable by H and reachable by H’s creditors

d. Married Women’s Property Acts (MWPA) gave women legal control over her property (H couldn’t sell; not subject to H’s debts)

e. Effect of MWPAi. Group 1 (empty group)

1. H’s creditors can reach H’s share of the T by E, subject to the W’s right of survivorship.

2. W’s creditors cannot reach W’s share of T by E w/out H’s consent.

ii. Group 2: Creditor “steps in the shoes of the debtor” (gets present possession + right of survivorship)

iii. Group 3: creditor can’t reach any of the T by E propertyiv. Group 4: creditor can get either spouse’s right of

survivorship onlyf. Policy for Group 3

i. T by E tenant doesn’t have a separate interest for creditor to reach

ii. Family wealth protection: T by E prop is a financial nest egg that’s immune to creditors

iii. For T in C and JT, a homestead exemption precludes creditors from reaching tools of the trade and a tenant’s homestead (capped at a certain amount)

iv. No cap for T by Ev. Exception: T by E is not exempt from execution if the

creditor is the IRSg. Federal Forfeiture Law

i. In United States v. 1500 Lincoln Avenue, gov’t brought civil forfeiture proceeding against H b/c illegally sold drugs out of his pharmacy (held in T by E). HELD: H’s right of survivorship is forfeited.

ii. In United States v. Lee, gov’t sought to execute forfeiture judgment against H’s home (held in T by E), that wasn’t used for crim activity. HELD: house unavailable for forfeiture.

h. Group 2 Example (p. 320, n. 3)i. H and W owned home in NY as T by E. H abandoned W.

X, a creditor of H, levied on H’s interest in the dwelling and purchased it at execution sale. X demanded from W one-half the reasonable rental value. W refused.

ii. Group 2: X “steps into H’s shoes” (gets present possession + right of survivorship)

iii. Spiller v. Machareth rule: W doesn’t owe X rent, unless ouster

i. Personal Property in T by E (p. 320, n. 4)i. Some states allow T by E in personal property

ii. Example: Suppose that a JRD recognizes T by E only in real property. H and W own their home as T by E.

House burns down, and H dies five days later. Who does ins. co. pay?

iii. When house burned, ins. money becomes T in C; W loses right of survivorship

2. Termination of Marriage by Divorcea. Generally

i. At common law, each owned separate property; upon divorce, split up property. W would get alimony; lifetime obligation by support. Reduced if W’s at fault.

ii. No fault divorce was introducediii. Equitable distribution of marital property (more like

community property)b. “Property” subject to division

i. Some states: all property of both spousesii. Others: Marital Property

1. Some states: all prop acquired during marriage by whatever means (incl. earnings, gift, inheritance)

2. Some states: only earnings during marriageiii. W generally doesn’t get alimonyiv. Rehabilitative alimony: if W needs support for limited

time to enter the job market and become self-sufficientc. Professional Degrees

i. MAJ: professional degrees (e.g., MBA, JD) are not marital property

ii. MIN: reimbursement alimony: get pmts from educated spouse for cost of contribution to education (not value)

iii. NY: medical license is marital property; different from reimbursement alimony b/c gets share of value of the license

d. Career and Celebrity Statusi. NY: career/celebrity status is marital property

ii. NY Domestic Relations Law: contribution to career/potential career is considered

iii. Counterarg: this double counts earnings if the ee remarries

e. Goodwilli. Professional goodwill: reputation that will probably

generate future businessii. Professional goodwill is marital property (even w/o

contribution by other spouse)3. Termination of Marriage by Death of One Spouse

a. Common Lawi. Personal Property (traditional view):

1. W – takes 1/3 if there’s surviving issue; ½ if none

2. H – takes all W’s personal propertyii. Real property

1. Dower – W gets LE in 1/3 of each parcel in which H was seised during marriage and which could be inheritable by W’s issue

a. Translation: W gets LE in 1/3 of H’s FSAs and FTs (except FT special held w/ another W)

b. Attached at moment of marriage. Purchasers/creditors take subject to W’s rights.

c. Note: H can escape giving W land by holding it in JT w/ another (not inheritable)

2. Curtesy – H gets LE in all of W’s land seized during marriage and inheritable by issue, but only if H & W had issue born alive and capable of inheriting.

a. Translation: H gets LE in all W’s FSAs and FTs as long as H and W have kids.

b. H is not protected from purchasers & creditors like W

c. W wasn’t allowed to do anything w/her land, husband had control so it’s his fault if he did anything bad to property.

iii. Problems (p. 336)1. O conveys to “A & B as JT w/ rt. of

survivorship.” O dies, survived by wife W. Is W entitled to dower?

a. Yes. W is entitled to LE in 1/3 prop.2. O conveys: “to A & B as JT w/ rt. of

survivorship.” A is married to W. A conveys to C. C is married to X. A dies, then C dies.

a. Is land subject to W’s dower rts? No. JT that A & B held was converted to T in C btwn C & B.

b. Is land subject to X’s dower rts? Yes, b/c T in C has no rt. of survivorship. X has LE 1/3 prop (dower).

c. If B is married to H (husband) then B dies, H gets LE in all prop (curtesy).

3. H desires to purchase Brownacre. He wants to be able to deal w/ the property after the purchase w/o any interference from W.

a. Take the prop as LE w/ remainder to someone else. Not inheritable, so no dower.

b. H could set up a corp. to own Brownacre. H owns stock in a corp.

(shares = personal property); W doesn’t get dower.

b. The Modern Elective Sharei. Spouses can take a share (usually ½ or 1/3) of all real &

PERS property that decedent spouse owned at death.ii. Spouse does not have to take forced share, but can

elect to take through the will, if available.iii. Problem (p. 337)

1. Jurisdiction = ½ elective forced share of prop passing by will or intestacy. H takes out $60K life ins. policy, payable to W. H & W buy house worth $60k as JT. H dies owning $120K in personalty. Devises everything to D. How is H’s estate distributed?

2. W gets: $60k life ins.; $60k JT in house; $60k personal prop

3. D gets $60k personal propertyii. The Community Property System

1. Introductiona. Community Property – earnings during marriage and the rents,

profits, & fruits of earnings. (d/n exist in marital property states)b. Separate Property – property that is not CP (prop acquired

before marriage or during marriage by gift, devise, descent)c. Tracing principle – community property exchange for something

else; that something else = community propertyi. In TX, income earned from separate prop during

marriage is CP (differs by JRD)d. Transmutation – (MAJ) can change community prop to separate

prop by mutual agreement2. Community Property Compared with Common Law Concurrent Interests

a. Can agree to hold property as JT or T in C (CP JRDs don’t recognize T by E)

i. Must hold T in C or JT as separate propertyb. Distinguish JTs and CP

i. CP: for H and W only; JTs: any 2 pplii. JT can be unilaterally severed into T in C

iii. JT has right of survivorshipc. Problem (p. 340)

i. H, married to W saves $5k of his earnings and deposits in a savings acct in his name. H withdraws the $5k and buys a lot, taking title in H and W as JT. H dies, devising all his separate and CP to S. Who owns the lot?

1. When H puts $5k in savings acct, it’s still CP2. When buys the lot, JT is invalid b/c can’t convey

CP unilaterally. The lot is CP.3. When H dies, W gets ½ and S gets ½

3. Management of Community Property

a. H & W have equal managing powers. In CP you are joint managers & each spouse can handle the disposition. Manager’s duty is that you are fiduciary for spouse. Duty of good faith. Creditors can reach whoever is manager. Spouses in CP state can sue each other.

b. Some states say you can make valid gift during lifetime of spouse but she can set them aside. After death, you have to sue trustee of estate. E.g., H makes a lot of gift to all these women so W sues his estate for her share that he gave that was hers. She got it.

4. Mixing Community Property with Separate Propertya. Three Approaches

i. Inception of Right: The character of property is determined at the time of acquisition. Spouse is entitled to reimbursements of ½ pmts made by CP.

ii. Time of Vesting: The character of property is determined when title vests. E.g., if you paid off installment K after marriage, CP.

iii. Pro Rata Sharing: Community payments “buy in” a pro rata share of title.

b. Problems (p. 342-43)i. During marriage H takes out $50k life ins. policy on his

life, paying premiums out of his earnings. Named beneficiary is H’s son, S. At H’s death, who is entitled to the $50k?

1. Ins. policy is CP; W gets ½; S gets ½ii. Suppose H took out the policy before marriage and $3k

in premiums were paid before marriage and $7k in premiums were paid after marriage from community funds. At H’s death who is entitled to the $50k?

1. Inception of Right: Acquired policy when unmarried, so it’s separate property. W entitled to reimbursement for ½ of $7k. W gets $3.5k. S gets the rest ($46.5k).

2. Time of Vesting: Ins. policy vested when H died, and he was paying out of CP, so it’s CP. W gets $25k; S gets $25k.

3. Pro Rata Sharing: 30% of policy was paid w/ separate property; 70% paid w/ CP. Therefore, $15k is separate property; $35k is CP. W gets ½ of CP ($17.5k); S gets the rest ($32.5k).

iii. During marriage, H purchases land for $20k, using $5k of his separate funds as a down pmt and CP for the rest. H sells the land for $40k. Who is entitled to the proceeds?

1. Approach #1: whole thing is CP b/c $5k is considered a gift to the community. Title was taken in the name of H and W.

2. Approach #2: pro rata based on pmts: ¼ of it is separate property; ¾ is CP

iv. Suppose W owns and operates a jewelry store before marriage. At marriage to H it is worth $100k. Five years after marriage the jewelry store is sold for $250k. Who is entitled to the proceeds?

1. Approach 1: Look to it as a real prop asset; how much of 250k is due to appreciation in value? (e.g., what are other similar lands selling for?) The amount after appreciation is CP.

2. Appraoch 2: reimbursement model; get reimbursed to extent person was compensated by taking out a paycheck

5. Migrating Couplesa. Property’s character is determined by spouses’ domicile when

acquiredb. Once characterized, the character of property does not change

character unless both parties consent.i. I.e., subsequent moves btwn CL and CP states are

disregardedc. Personal property : at death, law of decedent’s domicile

governs disposition.d. Real property : at death, law where land is located governs

disposition.e. Example: H and W live in OH (CL). H accumulates personal

property worth $500k. Under OH law, W has, at H’s death, an elective share of one-half of H’s property. After retirement, H and W move to TX, a CP state. H dies leaving a will devising all his property to D. TX doesn’t have an elective share statute. What are W’s rights?

i. B/c prop acquired in OH, it’s separate property. Stays separate when move to TX. Since there’s no elective share statute, W doesn’t get anything.

ii. If the states were switched, the prop is CP. At death, W gets ½ of CP + ½ of H’s share b/c of the forced elective share.

iii. Solution: promise to devise to W in williii. Rights of Domestic Partners

1. CL marriage req’s: (1) intent to be H and W; and (2) hold yourselves out to be H and W

2. Marvin v. Marvin (CA): imply K from conduct3. Most states that recognize CL marriage req express K4. American Law Institute proposal: rights arise from conduct, not from

express promises per seIX. Leaseholds: The Law of Landlord and Tenant

a. The Leasehold Estatesi. Term of Years

1. Any fixed, calculable amount of time

2. Can be terminable earlier (e.g., terminates if credit score drops)3. No notice req to end lease4. Note: Term of Years Determinable: term of years, w/ event that

terminates the tenancyii. Periodic Tenancy

1. Fixed period of time, to continue for successive periods (e.g., month-to-month; year-to-year)

2. Continues until notice to terminatea. CL notice required for termination:

i. Year-to-year or longer – six months notice.ii. Period of less than a year – notice equal to the period of

the lease, not to exceed six monthsiii. Lease terminates on the last day of a period.

b. Statutory notice – thirty days notice.iii. Problems (p. 364)

1. LL leases Whiteacre “to T for one year, beginning October 1.” The following September 30, T moves out w/o giving L any notice. What are LL’s rights?

a. Tenancy is a term of years; no notice req’d.b. If the lease had been “to T from year to year, beginning October

1,” the tenancy is a periodic tenancy. Req’s 6 mo. notice; if no notice, liable for rent.

c. If lease was made w/ no fixed term “at annual rent of $24k payable $2k/mo. on the 1st of each mo, the tenancy is a periodic tenancy. Period = month to-month or year to year.

2. T, a month-to-month tenant, notified L on 11/16/01 that she would vacate as of 11/30/01. T subsequently vacated on that date and paid no further rent to L. L relet the premises beginning 4/1/02. What result?

a. Not month’s notice; can’t terminate in mid-period; on hook for December

iv. Tenancy at Will1. Exists for an unspecified duration, but can be terminated at any time by

either the landlord or tenant.2. Terminates at the death of either of the parties.3. Most states req 30 days notice4. CL rule: If it’s terminable by only one, imply that it is also terminable by

the other.a. Rule is no longer valid b/c it’s based on livery of seisin and it

goes against the weight of the parties.5. Numerous Clauses Principle

a. Where a lease is for unspecified duration, but tenant alone has the right to terminate, it’s a life tenancy terminable. This resembles a Life Estate Determinable.

b. Where the landlord alone has the right to terminate, cts bring back the CL rule and imply a right to terminate in the tenant (making it a Tenancy at Will).

i. Note: if we rejected the CL rule, the tenant would have a lease resembling a LE pur autrie vie

c. Sometimes where a tenancy isn’t a Term of Years or a Periodic Tenancy, it arbitrarily defaults to a Tenancy at Will. (e.g., L leases “to T for the duration of the war.”)

v. Tenancy at Sufferance1. Generally

a. Tenancy at sufferance arises when a tenant remains in possession (holds over) after termination of the tenancy.

b. When tenant holds over, LL can:i. Seek eviction; or

ii. Consent to the creation of a new tenancy.c. Once you make an election, you can’t change your mind.

Crechale & Polles, Inc. v. Smithd. Absent evidence to the contrary, a LL who accepts rent from his

holdover tenant will be held to have consented to a renewal or extension of the leasing.

i. E.g., in Crechale & Polles, Inc., LL first sought eviction, then accepted rent pmt. HELD: once LL elects eviction, but fails to pursue his remedy of ejecting the tenant, and accepts monthly checks for rent due, he in effect agrees to an extension of the lease on a month-to-month basis.

e. Leaving equipment. In Caserta v. Action for Bridgeport Community, where tenant vacated in timely fashion but left office equip, ct held no holdover b/c didn’t interfere w/ LL’s use of the premises.

2. Holdover Termsa. Most JRDs, holding over gives rise to a periodic tenancy

i. Length of the period based on (1) how rent is computed in the original lease, or (2) length of the original term or period. MAX length is 1 yr.

ii. Other than length of period, same terms from original lease apply

b. Some JRDs convert holdover tenancy into a tenancy at will; tenant liable for the reasonable value of use and occupation.

c. Some statutes provide that LLs may demand double rent from holdover tenants. Policy: compensate LL, protect the prospective new tenant, deter holdover tenants.

b. The Leasei. Generally. Factors to determine if a lease exists: parties’ intention, # of

restrictions on use, exclusivity of possession, the degree of control retained by granting party, presence/absence of incidental services.

ii. Conveyance vs. Contract1. Historically, granting lease was conveyance of term of years2. K law – agreement to provide space for rent

a. If one side breaches, might excuse performanceb. Modern trend to treat as K

iii. Statute of Frauds. Agreements to transfer interests in land subject to SOF (applies to leases for more than 1 yr)

c. Leases and Discriminationi. Fair Housing Act of 1968, 42 USC § 3601-19, 3631

1. Protected Classes (§3604). Race, color, religion, sex, familial status, nat’l origin, handicap

2. Applicability. FHA applies to private individuals who are selling/leasing property. Note: §3604(c) applies to sellers/owners and newspapers.

3. Nondiscrimination (§ 3604). (a) Unlawful to refuse to sell/rent on account of protected class; (c) Unlawful to publish ads that indicate preference/limitation/discrim based on protected class.

4. Exemptions (§3603(b))a. Exemptions don’t apply to 3604(c) –discrim in advertisingb. (b)(1) – FHA doesn’t apply to a seller/owner of single family

house IF:i. Seller doesn’t own more than 3 single family houses

ii. Seller occupies house before saleiii. Seller doesn’t hire a broker, and does not advertise

c. (b)(2) – FHA doesn’t apply to renting rooms/units if owner maintains/occupies one of such living quarters as his residence

5. Note: if no facial discrimination, P need only prove discriminatory impact, not discriminatory intent

6. Burden shifting. When P shows D unlawfully discriminated, the burden shifts to D to show a legitimate business purpose. If D does so, the burden shifts back to the P to show the proffered reason was pretextual.

ii. Civil Rights Act of 1866, 42 USC § 19821. All citizens of the US shall have the same right . . . as is enjoyed by white

citizens thereof to inherit, purchase, lease sell, hold, and convey real and personal property.

2. Note: applies only to race and nat’l origin discrimination3. Note: besides showing discrimination, P needs to prove discriminatory

intentiii. Race/Nat’l Origin Examples

1. Mrs. Murphy has an apt to rent. She puts the following ad in a local newspaper: “For rent: Furnished basement apartment in private white home.” Black couple is denied b/c of race.

a. FHA Analysisi. Under § 3604(a), violates FHA (refusing to rent b/c of

race). But, this violation is exempted b/c Murphy falls under §3603(b)(2) exemption (owner lives in house).

ii. Under § 3604(c), violates FHA (discrim in advertising). §3603(b) exemptions don’t apply to §3604(c) violations.

b. §1982 Analysisi. Violates §1982 b/c discrimination on basis of race

2. Mrs. Murphy places ad: “furnished apartment basement in private home, available only speakers of Polish, German or Swedish.”

a. FHA Analysis. Nat’l origin discrimination. Although not facially discriminatory (b/c anybody can speak those languages), it has discriminatory effect.

3. Mrs. Murphy doesn’t place an ad, but refuses to rent to a German b/c of his race.

a. FHA Analysis. No violation b/c Murphy falls under exemption in § 3603(b)(2).

b. §1982 Analysis. Violation b/c discrim in leasing on basis of nat’l origin.

iv. Family Status1. Seller/Owner can discriminate on basis of family status if he shows a

legitimate business purpose.a. E.g., occupancy. No FHA violation where Owner limited

occupancy to 4 ppl and denied family of H, W and 3 kids.b. Compare, situation where Owner rents a 2-bedroom apartment

to a family w/ H, W, and 2 kids, but denies family of one adult and 3 kids.

2. Cohabitantsa. Refusal to rent to 2 heterosexual cohabitants; not family

discrimination b/c not a familyb. Unmarried homosexual cohabitants; discrim based on sexual

orientation – not covered by statutei. Some state legislation – coverage is broader; prohibits

discrim based on sexual orientation; may also give right to unmarried heterosexual cohabitants

v. Discrimination Based on Sex1. Discrimination in terms/conditions. Several weeks into the tenancy, LL

started harassing Tenant demanding sexual favors. HELD: FHA violation b/c discriminates against person in terms/conditions of rental (3604(b))

vi. Discrimination Based on Handicap1. Handicap = (1) physical or mental impairment which substantially limits

one or more major life activities; (2) record of having such an impairment; or (3) regarded as having such an impairment.

2. Handicap doesn’t incl. illegal use/addiction of controlled substance3. Discrimination incl. not making reasonable accommodations to afford

handicapped persons equal opportunity to use/enjoy a dwelling4. Examples

a. LL approached by gay couple; doesn’t rent for fear of AIDSi. Discrim on basis of handicap (“regarded as”

handicapped)b. Evicts mentally ill tenant b/c threatening

i. How to you make reasonable accommodations? Hold classes to educate fearful tenants?

c. Tenant has mental condition that is lessened by companion dog. LL refuses tenant to have dog.

i. If possible to allow pets in building, have to accommodate

d. Delivery of Possessioni. Who has the duty to deliver physical possession by ousting a holdover tenant?

1. Note: the Q is whether the LL has a duty to provide physical possession, not access. Therefore, tenant can’t win against LL if can’t access a land-locked parcel.

2. Note: in all JRDs, there is an implied covenant that the LL assures the tenant the legal right of possession; that is, at the beginning of the term there shall be no legal obstacle to the tenant’s right of possession.

ii. English Rule1. Where the lease is silent, LL makes an implied covenant that tenant will

be able to take physical possession.2. Rationale

a. LL’s Knowledge. LL is much more likely to know the relevant facts (is there a tenant in the space now; likelihood he will holdover, etc.); he’s probably a frequent player in ouster suits

b. Efficiency. LL can most cheaply litigate the case b/c of his knowledge (if tenant sued, LL would probably be a trial witness)

c. Express Covenant Available. The tenant could demand or the LL could provide that the LL has the duty to ouster holdovers. The rule is most likely in accord w/ parties’ intent/expectations

3. Remediesa. Where LL breached the implied covenant; new tenant can

terminate the lease and sue for out-of-pocket damagesb. If holdover is partially occupying:

i. Take possession of the remainder, pay rent pro-rataii. Delay occupancy until holdover is evicted; pro-rate rent

c. Proceed against holdover tenantiii. American Rule

1. Where the lease is silent, there is no implied covenant that tenant will be able to take physical possession. New tenant must proceed against the holdover.

2. Rationalea. Tenant is most interested in ouster.b. LL generally not responsible for a wrong to a 3d party

e. Subleases and Assignmentsi. Nature of Subleases and Assignments

SUBLEASE ASSIGNMENTLL|

T1|

T2

LL|T1T2 (“fills the shoes of T1”)

T1 grants part of his estate T1 conveys his entire estateLL v. T1 – privity of K; privity of estateLL v. T2 – no privity

LL v. T1 – privity of KLL v. T2 – privity of estate

Sublettor (T2) is not liable to LL Assignee (T2) is liable to LL

1. Assignments

a. “Entire term” goes to the length of the lease, not the amount of land.

i. E.g., T1 transfers 5 of 20 acres for the rest of the term. This is a partial assignment.

ii. E.g., T1 transfers 5 of 20 acres, but reserves the power of termination. Still partial assignment. (MIN: sublease)

2. In sublease or assignment, if the primary lease btwn LL and T1 is prematurely terminated:

a. If surrendered by tenant, then rts of sublesee/assignee remains intact

b. If breach by original tenant; LL entitled to possession (can evict T2)

ii. Determining Sublease or Assignment1. CL Distinction. If the instrument purports to transfer the lessee’s estate

for the entire remainder of his term it is an assignment, regardless of its form or the parties’ intention. If the instrument purports to transfer the lessee’s estate for less than the entire term, it is a sublease, regardless of its form or of the parties’ intention.

2. Modern Rule. Ascertain the intention of the parties.3. Language not dispositive. Words such as “sublet” and “assign” are not

dispositive in determining the nature of the lease.iii. Liability to LL

1. T1 Still “On the Hook”. The obligations and liabilities of a lessee to a lessor under the express covenants of a lease, are not in anywise affected by an assignment or a subletting to a 3d party, in the absence of an agreement/action that amounts to a waiver.

a. E.g., LL leases to T1 for 3 yrs. T1 transfers to T2 for the balance of the term. T2 defaults. LL can sue T1 for the rent due.

2. T2 is liable to LL if:a. T2 has an assignment. T2 is liable to LL b/c he has privity of

estate.b. K btwn T2 and T1 results in LL being a 3d party beneficiary.

i. E.g., LL leases to T1 a term of 3 years. T1 subleases to T2 for 1 yr. In the instrument of transfer there was a promise where T2 “agreed to pay the rents” reserved in the head lease. Although privity of K is btwn T1 and T2, LL is a 3PB to the K and can sue T2 on a 3PB theory.

iv. Example. LL lease to T for a term of 3 yrs; T covenants to pay rent and keep the premises in good repair. T assigns her entire interest to T1, who agrees in the instrument of assignment to “assume all the covenants in the lease” btwn L and T; T1 assigns his entire interest to T2; T2 assigns his entire interest to T3. T3 defaults on rent and fails to keep the premises in good repair. Liability?

DIAGRAM LIABILITYLL|TT1*T2T3*T1 assumes all covenants in lease

LL v. T: yes – privity of KLL v. T1: yes – LL is 3PBLL v. T2: noLL v. T3: yes – privity of estate

v. Approval Clause. Provision that states T1 may not sublease/assign to T2 w/o LL’s consent.

1. Arbitrary Disapprovala. Majority Rule: Lessor may arbitrarily refuse to approve

proposed assigneeb. Minority Rule: Lessor may not refuse to approve a proposed

assignee unless he has a commercially reasonable objection to the assignment

i. This only serves as a default rule where the lease/assignment is silent. The rule can be K’ed out of.

ii. This rule only applies to commercial leases.iii. “Commercially Reasonable”

1. Approval clauses are for the protection of LL in ownership and operation of a particular property, not for its general economic protection

2. Denying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable

2. Terminate and Recapture Clause. Provision where T1 would give notice to LL before subleasing/assigning to T2; LL would then have the option to terminate the lease w/ T1 and enter into a new lease w/ T2.

3. Rule in Dumpor’s Case. In a series of assignments, if LL consents to the first assignment, he waives any objection to future assignments.

a. This is a default rule and can be K’ed out off. Defaulting Tenants

i. The Tenant in Possession1. CL Rule: LL may rightfully use self-help to retake leased premises from a

tenant in possession w/o incurring liability for wrongful eviction provided: (1) the LL is legally entitled to possession; and (2) the LL’s means of reentry are peaceable. Otherwise, LL has to resort to the cts in an action for eviction.

a. Narrow construction of “peaceable.” LL’s means of reentry are non-peaceable when possession is adversely held.

2. Modern trend: Self-help is never available to dispossess a tenant in possession who hasn’t abandoned or voluntarily surrendered the premises.

a. Where JRD bans self-help, it’s a mandatory rule, and can’t be K’ed out of

b. In some JRDs, the prohibition on self-help applies only to residential leases. Residential tenant suffers a greater psychological impact; more likely equal bargaining power in commercial lease.

3. Summary eviction procedures. Quick, efficient means to recover possession after termination of a tenancy. Reqs only few days’ notice to the tenant; range of issues subject to litigation is kept narrow.

ii. The Tenant Who has Abandoned Possession1. Duty to Mitigate

a. CL rule (MIN): LL has no duty to mitigate damages when tenant abandons possession of the premises.

b. Modern rule (MAJ): LL has a duty to mitigate damages when tenant abandons possession of the premises

i. Policy: efficiency. Put the duty of filling the premises on the LL b/c it’s cheaper for him and he’s more experienced in filling spaces.

c. Extent of Duty to Mitigatei. Must make reasonable efforts to fill the space, incl.

offering to show the space, advertising in local newspapers, etc.

ii. If there are several vacancies, the LL has to treat the abandoned premises as part of the vacant stock.

d. If LL doesn’t mitigate:i. MAJ: LL gets what the tenant owes minus damages he

could have mitigatedii. MIN: absolves tenant of all rent

e. Surrender vs. Abandonmenti. Abandonment: tenant vacates w/ no intention of

paying; doesn’t terminate lease; T liable for unpaid rent subject to duty to mitigate

ii. Surrender: tenant offers to terminate the lease; LL accepts

1. One way to surrender is to abandon the property; if LL accepts, that ends the lease and no further rent is due

iii. If tenant abandons and LL relets: Go by intent of LL. If LL wanted to terminate the lease agreement, no liab for rent. If LL was just mitigating, tenant liable for excess.

2. LL’s Remedies and Security Devicesa. LL’s Remedies

i. Sue for unpaid rentii. Action for breach: not keeping in good repair

iii. Terminate lease; evict tenantb. Recovering Diff btwn Stated Rent and FMV

i. If tenant abandons, he’s liable for unpaid rentii. If tenant remains in possession and K rate < FMV, can’t

evict tenant and then demand FMVc. Security Deposits

i. Pay upfront an amount (1-2 mo. rent) as against damages that may occur

ii. Subject to abuseiii. Statutory reforms:

1. Limit the amount2. LL has to pay interest on amount3. Treat LL as a trustee; can’t comingle deposit w/

personal moniesg. Duties, Rights, and Remedies (Esp. Regarding the Condition of Leased Premises)

i. Landlord’s Duties; Tenant’s Rights and Remedies1. CL: LL had limited obligations (caveat lessee); T takes prop as is

a. Assumptions: This assumed leases for agricultural purposes (care more about farmland than housing). Also, most ppl living on the farm would be able make repairs to the house.

2. Quiet Enjoyment and Constructive Evictiona. Common Law

i. At CL, lease covenants were independent of each other.ii. Exception: an implied covenant of quiet enjoyment

that the LL will not wrongfully interfere w/ the tenant’s possession of the premises was interdependent w/ the promise to pay rent

1. Covenant expanded to incl. beneficial use/enjoyment of property

iii. Exceptions: Implied Duties1. In short term lease of furnished dwellings,

implied duty to make and keep premises habitable

2. Duty to disclose latent (hidden) defects3. Duty to maintain common areas4. Abatement of nuisance on property5. If makes promise to make repairs; duty to make

repairsb. Constructive Eviction

i. Any act or omission of LL which renders the premises substantially unsuitable for the purpose for which they are leased or which seriously interferes w/ the beneficial enjoyment of the premises

ii. Act/omission = breach of ICQE or of CL implied dutiesiii. Substantial Interference

1. Renders premises unsuitable for rental purpose2. In Reste Realty Corp v. Cooper, regular rain

causing flooding was substantial interference.iv. Partial Eviction

1. Actual eviction of part of premises relieves the obligation to pay any/all rent

2. Constructive partial eviction results in a pro-rata rent reduction

c. Tenant Remediesi. Tenant can abandon premises

ii. Tenant can stay in possession and sue for damages equal to the difference btwn the value of the property w/ and w/o the breach

d. Problems (p. 429-30)i. L fails to control excessive noise made by neighboring

tenants of T who commonly party long and loud into the night. HELD: constructive eviction.

ii. Apt building is site of criminal activity (burglary and vandalism by 3d parties). L installs deadbolt locks on all entrance doors and hires private security, but problems continue. HELD: LL had duty, but discharged it by making reasonable efforts.

iii. T performs abortions. LL does nothing about protestors outside the building and in the lobby, harassing customers. HELD: breach of covenant of quiet enjoyment

e. Illegal Leasesi. If at time lease is entered into, housing code violations,

lease is voidable b/c illegal; T can escape liab. for rentii. Not important today b/c of implied warranty of

habitability3. The Implied Warranty of Habitability

a. Standard: premises must be safe, clean and fit for human habitation

i. Objective test: reasonable person find premises uninhabitable?

1. Refer to housing codes2. Is the defect in “essential facilities”?3. Does the defect impact T’s health/safety?

ii. LL has burden to show premises don’t breach warranty of habitability

iii. Limited to residential leasesiv. Non-waivable: covers latent and patent defects; T can’t

assume the risk; can’t be waived by lease provisionb. Remedies

i. Basic K remedies (damages, rescission, reformation)ii. Remain in Possession and Withhold Rent

1. Breach of IWOH is defense to summary eviction and action to collect back rent

2. If partial breach, may withhold all rent and ct will determine partial back rent owed

iii. Remain in Possession and “Repair and Deduct”1. Repair defects and deduct from rent pmts

iv. Remain in Possession and Sue for Damages1. Hilder rule: damages = FMV as warranted –

FMV as exists2. Kline rule: damages = agreed rent – FMV as

existsv. Terminate Lease and Sue for Damages

c. Discomforture/annoyance damages are available.d. Problems (p. 439)

i. L’s janitorial staff goes on strike for 2 wks. Trash piles up to the height of the buildings first-floor windows. HELD: L breached implied warranty of habitability (strict liability)

ii. T’s lease in fancy apt building provides for: door attendant, elevator, swimming pool, gym, etc. Statute req’s that dwellings be fit for habitation, safe and health, and in accord w/ “the uses reasonably intended by the parties.” The pool breaks. HELD: no breach of habitability, despite the statute. T still can sue for damages.

iii. L offers run-down house for $100/mo. T finds a lot of defects and says “it’s worth $50/mo.” L agrees to lease for $50/mo. T doesn’t pay rent. HELD: no waiver of implied warranty of habitability (nonwaivable). Defense to eviction suit is to reduce rent by appropriate amount:

1. Hilder formula: FMV as exists = $50; FMV as warranted?

2. Kline formula:a. Agreed rent: $50b. FMV as exists: $50? If so, no damages

e. Retaliatory Evictioni. Most states prohibit eviction for good faith complaint

by tenantii. If termination w/in X mo., presumed to be w/in

retaliation; burden shifts to LL to show legit purposef. LL’s Tort Liability

i. If 3d party’s injured on premises:1. MAJ: no LL liability for tenant/3d party unless

falls under CL implied duties; or expressly warranted

2. MIN – duty under negii. Problems

1. L leases land to T for one yr, knowing T intends to use the land to board and rent horses and to operate a riding trail. T holds over, and T’s customer is injured when her horse slips on a soft, narrow riding trail and falls on her. HELD: LL liable b/c implied duty to repair conditions at the outset of the term. (Prob. wrong result.)

2. L lease farm; T’s son gets injured from an auger. HELD: LL not liable b/c of inherent danger of being on a farm. T knows more about farms.

3. T’s daughter badly injured when struck by boys racing their bikes on a parking lot owned by LL and used by tenants. HELD: LL liable – implied duty to keep safe common areas.

4. T’s daughter injured on the street, off LL’s property. HELD: LL not liable.

5. Tenants attacked/injured in parking lot owned by LL. HELD: duty to keep common areas safe.

a. Some JRDs: no duty to prevent 3d party activity; may be liability if notice

iii. Exculpatory clauses invalid in most JRDsii. Tenant’s Duties; Landlord’s Rights and Remedies

1. Law of Wastea. Affirmative waste (e.g., bad remodeling)

i. Degree of effect on the use and value of the leased premises is relevant, as is its permanence; so too should be the length of the term remaining at the time the tenant makes the changes in Q

b. Permissive wastei. Duty of repair: on tenant as to routine things

ii. Limited b/c implied warranty of habitability