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Outline: Property (Alexander)

Generally: Ownership = Bundle of Rights

I.  Acquisition of Property and Some Theories of Property

a. Initial Acquisition of Property Rights

i. Rule of CaptureFundamental Rule: First person to take possession of something owns it (Prior in Time)

A mortally wounded or trapped animal (ferae naturae) is considered “captured”

Does not apply to animals that have a habit of returning (animus revertendi)

Case: Pierson v. Post (Pages 17-23)

P (Post) hunting fox with dogs. D(Pierson) stumbled upon and killed fox during the hunt.

Issues:BROADLY: How does one obtain a property interest in a wild animal?

Does pursuit create property interest in wild animals?NARROW: What constitutes Occupancy?

Pursuit does not create a property interest in an animal Court assumes that the land is un-owned (vs. uninhabited).

Holding: Intent is irrelevant Mere pursuit of an animal does not constitute a right to it. Only possession matters. D, who stumbled on fox, recovers because he possessed the animal.

Reasoning: Instrumental reasoning (aim is social goal/benefit): will encourage people to hunt Heavy weight on Justinian and older thinkers. Easier to administer than a pursuit rule since “capture” is definite.

Dissent: Reasonable prospects better rule than rule of capture since it better inspires people to rid the world

of “noxious beasts” by rewarding their labor Courts should leave this up to hunter’s associations and their expertise and customs.

Aside: Locke – once something is mixed with our labor, it becomes ours.

Case: Keeble v. Hickeringill (27-28)

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P (K) had decoy pond to attract ducks. D (H) shot off gun to scare ducks away.

Issues: Did P have possession of the ducks? Can someone purposefully interfere with your livelihood when there is no visible trespass?

Holding: Yes, under Constructive possession Rule: A person who does something so as to impede your livelihood is liable for an action

Reasoning: A person is free to use their land as they wish, and when it is for trade, something socially

valuable, people who interfere are liable for an action. ‘Malicious interference’ Would be alright if D simply set up a competing duck pond since competition is a good thing that

drives towards ultimate economic goal and rid the world of animals goal. Ratione Soli : Landowners possess/own animals on their land till they leave.

More on Rule of Capture:

From Page 31 O T T1

T v. T1

Relativity of title: Trespasser (T) has greater title that T1. O’s title trumps all.

Social Goal: Discourage Trespass Animus Reverendi : Captured wild animals that have the habit of returning belong to the Captor

Rewards efforts to domesticate and has economic benefit. Exception: owner loses escaped wild animals unless a second captor has notice that the

animal escaped from someone with prior possession Reasonableness Test: If someone knows an animal is outside its natural habitat, then captor

cannot recover.

b. Initial Acquisition of Other Fugitive Resources

i. Oil and Gas Fugitive resources are treated with the Rule of Capture: Possession establishes ownership. Underground pools are owned by no one in particular “Tragedy of the Commons” (see Demsetz): Communal ownership drives people to abuse the

resource and causes everyone to use it inefficiently, leading to its depletion Key illustration of the problem: if A,B,C share an underground pool, one member can go ahead

and drill on his property and take it all. Property rights in fugitive resource, barring trespass/theft, are impermanent, so if you lose

possession, you lose the property right.

ii. Water (Common Law)

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In terms of underground pools, common law stated that person owned all stuff below and all the stuff above (hell/heaven) in terms of their land (but now generally regulated by statute).

English Rule: Rule of captureo Same as underground pools

American Rule: Reasonable useo Likelihood that it’s going to lead to over-exploitationo That it does not lead to economic/maximum value system for water.o Must be put to reasonable use.o Can extract only at a reasonable rate.o Today governed by regulations

Surface Streams (rivers, etc)o Riparianism (in the East)

If you are a Riparian land owner, you can take water from the river, but you can’t take so much that it destroys the natural flow of the river

Must leave water for downstream users, so keep the flow intact Also known as theory of correlative rights (Natural-flow theory) Makes sense when there is a lot of water Upshot: No commercial use; but deterred industrialization

o Prior appropriation (started in West) If you have two claimants to water, whoever got there first prevails The Rule of Capture

Excursus: The Tragedy of the Commons and the EconomicDemsetz Article (35)

Normative Thesis (What we ought to do) Positive Thesis (What simply is) Article developing an evolutionary positivist thesis: historically why a regime of private property

rights has emerged out of a regime of common ownership. Also, has a normative message: Private ownership/private property rights is superior to that of

common ownership in an economic sense. In that it is more efficient that common ownership Primary function of property rights is to guide incentives so as to achieve greater

internalization of externalities. Thesis: Property rights emerge in response to desires of the interacting persons for

adjustment to new benefit-cost possibilities. (37) Criterion for optimal state:

o Situation in which resources are allocated among people in such a way that you cannot change anyone’s situation without making someone worse off.

Externalities: What is not taken into account when someone makes a decision about how to use a resource (41)

Externalities: for paper, external costs, external benefits, and pecuniary as well as non-pecuniary externalities. Essentially things not taken into account, “external” to the decisions one makes in regards to what actions to take in regards to his property.

Linked to transaction costs – it is external when the cost of bringing it to effect is too high. Simply put, it’s simply not worth it.

“Internalizing” is the process of bringing these externalities so as they have an impact upon all interacting persons. All of this is linked to transaction costs.

Looks to American Indians: Links development of private rights and the commercial fur trade. As hunting and furs gained value, stopped making sense to have it communally owned. Forrest region made sense to cut up piecemeal. Would not have made sense in prairie.

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Three types of ownership: Communal (all members of the community), Private (where community recognizes rights of a single owner), and State (state may exclude anyone from use of a right as long as it follows political procedures

Communal ownership always involves externalities. Therefore shift to private. If a single person assumes it, will take into account future (is this true?)

o Will take into account the future, while communal ownership places burden on the present.

Demsetz uses the rationale actor model who is not motivated by altruism or anything else

c. By Creation: Intellectual Property Generally:

o We want to recognize laboro Acquisition by creation = Intellectual Property (Creator is the “first” in time)o Federal Law: US Constitution: Art. 1, § 8, Clause 8o Essentially, creating monopolies for a short period of time to encourage inventiono Creating a compromise – encouraging people to create, while at the same time

encouraging competition, meaning lower prices, etc. Federal System (3 Parts): Patents

o 20 yrs. following date of applicationo Application process is expensive and time consumingo Requirements: Utility, Novelty, Non-Obviousness

Copyright o Life of the author +70 years

Tendency of Congress is to extend timeo Used to be the case that getting a copyright was very difficult and time consumingo Since 1978, get copyright as soon as reduced to tangible mediumo Your copyright is attached to it

Trademark o State AND federal law (Lanham Act) o Words and symbols indicating the source of a product or serviceo Grew out of common law of unfair competition

Misappropriation and Copyright o Misappropriation: taking someone else’s product and representing as your owno Palming off: claiming that the product that YOU make is the product of someone else

Case: INS v. Associated Press (51) P (AP) seeks injunction of D from copying it’s bulletin boards and early editions, bribing

employees, so as to sell to D’s customers. D is Misappropriating news, not Palming it off. P has a quasi-interest in the news with respect to D, but not to the public.

o News is common property. Court bypasses IP and uses Unfair Competition (see Keeble) AP owns the right to the commercial value of the information that AP acquired through its labor Dissent (Law Review Article, 57)

o Granting people exclusive information conflicts with other rights that tangible property rights does not (wheat vs. information)

o Competition depends on imitation

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Case: Cheney Brothers v. Doris Silk (55) D copies one of P’s designs and sells it P cannot get patent/copyright protection due to seasonal aspect of the product Issue: Can someone bring an action against a business competitor for imitating uncopyrighed/uncopyrightable things (chattel)? To avoid monopoly and encourage competition, the COMMON LAW allows copying and

imitation. Square this with INS?

o Nature of news v. Silk/Chattelso Private goods are exclusive – only one person can have ito News is a public good, everyone has a right to it. o KEY: Importance of news v. importance of silk patterns

Case: Smith v. Chanel (56) Ct. held that a company cold claim in advertisements that its product was the equivalent of the

more expensive Chanel No. 5. Argued that competition is driven by imitation and that taking away the ability to advertise or say it’s the equivalent would affect this competition.

By taking this ‘free ride’ the copyist serves an important public interest by offering comparable goods at a lower price.

Intellectual Property Cases (59)Dispute Over Protected Not Protects

Nichols v. Universal Pictures

P had a play he thought was copied.Not enough similarities for an action.

Creativity Significant Differences/variations on common theme, human dilemma

Diamond v. Chakrabarty

Patent protection over living organism. He made bacterium that could break down oil.5-4 Decision

Human Ingenuity (Genetic Innovation)

Living thing (Federal Patent Statue does not cover this)Danger to health, environment

White v. Samsung Electronics

Robot Vanna put up. Stifling, but ruled in favor of White.Used to be name, voice, likeness, and signature protectedDissent key. It’s parody!

Commercial exploitation of likeness

Creativity/Parody

Metro –Goldwyn-Mayer v. Grokster

Secondary liability for file-sharing programs. One who distributes a device with the object of promoting its use to infringe copyright is liable for the resulting acts of infringement by third parties.

Artistic Expression Technological Information

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d. Property in One’s Person

Case: Moore v. Regents of the University of California (69) P’s cells used for multi-billion dollar research without his knowing. Wants money. Sues under conversion (wrongful exercise of ownership over personal property belonging to

another) and under breach of fiduciary duty P can only sue for failure to inform over economic and research interest since he could not prove

that their obtaining cells interfered with his own use of them. Some things such as body parts are not alienable. Alexander: Court is wrong here. Say that his cells are the same, but his are different – we all have

faces and T-Cells, but his were unique. Also, since it’s a bundle of rights, what about exclusion? Court concerned with policy issues: (1) body parts as property that can be sold. (2) don’t want

this to become a black market issue (3) ramifications of having researchers deal with this. Dissent:

o At time of excision, had as much right to do with the tissue as the defendants. o Uniform Anatomical Gift Act actually limits sales for transplantation and therapy. Can

argue that it authorizes sales for non-therapeutic uses. Scientists are already doing it anyways.

Law of Accession: When you start out with a raw product and becomes a different produce as a result of someone adding labor, says that the table goes to the person who added the labor if as a result of the addition of the labor, the value of the final product is significantly/substantially greater than the value of the raw product.

Exception: If someone who added the value is a trespasser, final product goes to original owner. So are Moore’s cells different now? Court says: Patented cell line is both factually and legally distinct from cells taken from P’s body.

Federal law protects products of “human ingenuity” and inventive effort, not discovery of naturally occurring raw materials.

Aside: Bundle of Rightso Right to possesso Right to useo Right to transfer (include)o Right to exclude

Arguably the single most important. Some say that if you take it away, it all falls apart.

Alexander: important, but debatable.

e. The Right to Include, The Right to Exclude

Felix Cohen: Property a relationship among people that allows owners to dictate who to include/exclude in regards to the property.

Civil trespass : person enters land and there’s no request to leave. Criminal trespass – person who enters without justification and refuses to leave after owner asks

him to.

Case: Jacque v. Steenberg Homes (87) P told D not allowed to drive mobile homes over their property. Court awarded $1 nominal and $100,000 in punitive damages. The right to exclude one of most important in bundle of rights. Want to prevent self-help remedies. Avert conflicts before they take place.

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Case: State v. Shack (88) Note: NJ case Attorney and official who were barred from seeing migrant workers. Owners suing Officials No trespass. Cannot use property rights to injure rights of others. Court uses the Economic Opportunity Act (federal statutory law): Farmer can NOT prevent

services that are made by federal, State or local services, or from recognized charitable groups seeking to assist him.

Bring up Federal Statute to show general policy, nothing more. Migrant workers – not aware of their rights. Primarily bases its decision on STATE common law: As long as this is not within working hours

and the behavior is not hurtful, the owner has no right to exclude P, farmer will look to NARROW reading (MUST be a federal official providing services)

Aside: Sine qua non – a necessary condition

Case: Uston v. Resorts (Blackboard) Card-counter who is not breaking the rules is stopped from being able to play. Any common law rights to exclude that the casino may have had was trumped by the state statute Common Law right: when property owners open their premises to the general public in pursuit of

their own property interests, they have no right to exclude people unreasonably. Must grant “reasonable access” by all citizens to places of public accommodation Sliding scale : The more PRIVATE you keep your property, the MORE you have a right to

exclude. The more PUBLIC you keep your property, the LESS you have a right to exclude. The Commission alone can decide on these issues regarding rules

Civil Rights Act of 1964Title II: Injunctive Relief Against Discrimination in Places of Public Accommodation.To make out a claim, must state the following:1. D committed discrimination or segregation2. That the S/D was on the basis of race, color, religion, or national origin3. That the discrimination took place in place of public accommodation4. What is a place of public accommodation (must fit in with list of subsection B)

These places in addition must effect commerce (sub C) or must be supported by state action as listed in sub D.

II. Subsequent Acquisitions of Ownership

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a. Found Property “The title of a finder is good against the whole world except the true owner” Owner does not lose title to property if it’s lost or mislaid Bailor = transferor, Baillee = transferee Remember relativity of title – who has the best in regards to the chattel

Case: Armory v. Delamirie (96) Chimney sweep finds jewel. Takes it to jeweler who refuses to return it. P sues in replevin (wants the item itself back). Cause = trover (money damages) Finder of jewel does not have absolute ownership, but it’s good against all but the true

owner. Thieves cannot take possession of something.

Hypothetical: Armory finds jewel but has a hole in his pocket. Schwab finds it. Both say they have possession. But, going to protect Armory as the prior possessor. Relativity of title Want to ensure we stop someone from taking from prior possessor.

Winkfield doctrine: “The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the

bailor.” This ensures that someone is not penalized twice. This applies to voluntary bailment. True owner does not always get to be made whole.

Hypothetical: True owner comes forward. What are his rights against Armory, Delamirie, and Smith? TO can recover against everyone. If Finder only partially recovers, TO can only recover what

Finder has recovered, so is not always made whole.

Hypothetical (Verify): Example: F1 finds a stone and then F2 finds the stone (F1 is first finder). F2 pays F1 damages.

True owner sues F2. What result? After TO sues F2, F2 can sue F1 to get his money back. Once F2 gives TO recovery, F2 acquires

the rights of possession from TO. NO VOLUNTARY BAILMENT.

Voluntary Bailment: Bailor by virtue of being a voluntary bailor has already assumed the risk of the loss. This is a voluntary parting with asset to bailee He has chosen to part with everything and is in best position to evaluate trustworthiness of bailee.

Case: Anderson v. Gouldberg (97) P trespasses and takes logs to D who tries to take them as mill owner. Even though P trespassed, has superior title to D. Does not matter how procured.

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Prior possessors, even TRESPASSERS acquire right of possession over subsequent possessors.

Stops endless line of litigation. THIS IS HORNBOOK LAW. It DOES matter how you acquire the good (Confirm)

Case: Hannah v. Peel (99) P, owner of house requisitioned by gov’t to quarter soldiers. D finds brooch in house, hidden in

window ledge, while staying there. P never moved in or took possession of house. D turned over brooch to police.

If the owner of the house has NOT moved in, owner is NOT in constructive possession of articles inside which he is NOT aware.

D claims the brooch as its finder and I have a good title against the entire world except the owner.

Must look to see if it’s true that homeowner has constructive possession. Do we want to treat the owner as the prior possessor? Distinguish : Armory (Bailee was voluntary) vs. Owner of Locus in Quo Cites prior cases: Bridges : Bundle of bank notes found by finder; F wins because of Armory vs. Delamarie = prior

possessor is as good against whole world except TO. Key: Dropped by accident in store. Sharman : Rings found at the bottom of a pool; O wins because F was on O’s premises for a

LIMITED PURPOSE. If F is there for a LIMITED PURPOSE, O is entitled to objects found on premises.

Elwes: Boat imbedded in mineral; O wins because any object that is IMBEDDED in soil belongs to the OWNER of premises.

Both parties have reasonable expectations and remedy should have been split: EQUITABLE DIVISION. MOST ACQUISTION BY FIND CASE SHOULD BE SOLVED WITH EQUITABLE DIVISION. (See Barry Bonds case and maritime law). Shouldn’t look to see who got brooch FIRST.

Alexander: Case poorly reasoned.

Aside: Ratio decidendi - Reason for basis of decision

Policies: Return object to true owner Meet reasonable expectations of the parties Reward Honesty

o Want to create incentives for Finders not to hide the property but to be honest

Factors: Public/Private Distinciton (Public: Finder, Private: True Owner Surface v. Attached/Under Land (Surface: finder, Attached: TO) Empoyee: Employer has title of goods found by employee.

Property Distinctions: Lost-Mislaid-Abandoned (Which Alexander Rejects) Lost:

o Property true owner no longer owns because of negligence (in common law, if property touches the ground, it is lost. This is silly in modern times though). Finder recovers lost

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property. Subject to exceptions (i.e. F is a trespasser, employee, guest, licensee, property is imbedded in soil, etc)

o Goes along with the policy that we want to maximize the likelihood of returning goods to the true owner; by offering a reward to the finder of the good, the finder receives compensation (the reward), the bailee will take REASONABLE steps to get the good back to the owner.

Mislaid: o Property relinquished with intent to recover it later. Owner of locus in quo recovers

against all but TO. o Goes along with the policy that we want to maximize the likelihood of returning goods to

the true owner. Abandoned :

o Property voluntarily and intentionally given up with no intent to recover. F gets it.

Case: McAvoy v. Medina (105) P finds pocketbook on table in D’s barbershop. P told D to keep it and if owner comes, give it to

owner. P makes demand for money. Court looks at it as mislaid property, so owner of locus in quo, in the hopes that TO gets it

(because purposefully placed there). Distinguish from Bridges because it was placed there instead of found on ground.

Real Issue: Basic question here is the way we want to settle these disputes have one party take the whole

thing?o Winner takes all?o Is this what we really want?

Barry Bonds Case: Split the ball. Both had rights to it.o Big Conference – cited Pierson v. Posto Equitable Division used.

Estray statutes (Note 7, 111) If you find something you have to hand it over to someone and notice is then sent out by agent or

agency. Then after end of time period, owner does not come by, generous award given to a finder Always given, even if true owner comes So why hasn’t the common law thought of this?

o Because common law has stressed idea of possessiono Only one person can have possessiono Whoever has it is the winner.

b. Adverse Possession of Land (112+) Powell: “…statutes of limitations that fix the period of time beyond which the owner of the land

can no longer bring an action, or undertake self-help, for the recovery of land from another person in possession.”

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Powell: Also want to avoid stale claims We can limit adverse possession just to cases where adverse possessor has taken adverse

possession in good faith. o Screen out all the squatter cases

Basis of doctrine lies in a statuteo Everybody, every state has a statute of limitationo You must bring cause of action for ejectment within a certain period of timeo Otherwise your cause of action will be barred by statute of limitationso Purpose is to give the adverse possessor a new title of the land

New Title created by operation of lawo Not transferred from old owner to new ownero New Title is treated it relates back to the date when the adverse possession begano So that although the title does not arise till the statute runs, it runs back to when it began

to run. Ballantine: Want to quiet the disputes over titles Holmes: People get attached to their lands and if they have possession and have been using it as

the true owner, to take it away from them causes a deep loss. Elements (Common Law, Page 124):

(1) actual and exclusive Adverse possessor must use it in way of true owner

(2) open and notorious A matter of notice, of fairness

(3) adverse and under claim of right This is what gives us fits Also hear the word hostile (means same thing as adverse) In order to be an adverse possessor not with the permission of the true

owner. Permissive permission cannot rule into adverse permission

(4) continuous and uninterrupted Have to move all the way through statute

Protection if True Owner? File an action

o Best way is to file an ejectment action against themo A successful ejectment proceeding will interrupt statute of limitations

Case: Van Valkenburgh v. Lutz (115) Lutz’s bought plot, and cleared a triangular plot, built one-room structure, and used it to grow

vegetables to sell to people. Bad blood develops between the families. Section 40 of the N.Y. Civil Practice Act applies. NY Statute says you must prove (1) the land is protected by a substantial enclosure or 2) the land

is usually cultivated or improved. Fence does NOT constitute a substantial enclosure. This requirement speaks to notice and open

and notorious requirement. Farming and other odds and ends do NOT constitute improvement to the land. Court uses subjective standard to determine no adverse possession, but also says D had no claim

of title when they thought they were on their land b/c no hostility shown.

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Paradox of court’s reasoning: If you think you are on your property you are not hostile, if you know it’s not your property you can’t be hostile. So how can you show hostility?

In first action D only got an easement showing no hostility according to court. Dissent states the obvious in both cases in that you should measure by how a reasonable person

could use the land. In fact, the looks like the Lutz’s getting screwed. Dissent also pushes for an objective approach to all of this

Judicial Approaches Objective (Sleeping Theory, Reward Theory)

o No state of mind requiremento AP must only act like TO.o Connecticut Doctrine (from Manillo 130)

Subjectiveo (1) Good faith possessor: You think land is actually yourso (2) Willful trespasser: You know land is not yours, but claim title to it

Maine Doctrine Encourages and rewards willful trespasser. Incentives to lie about intentions. Punishes innocent trespasser.

Objective: Easiest to determine. Best evidence.

Helmholz: claims if you look at the facts, courts tend to favor good faith. Courts say they don’t look at it, but the records seem to show that they do so.

Color of Title: Founded on written instrument; INVALID deed. Entry under of color title gives one CONSTRUCTIVE ADVERSE POSSESSION of land. Majority view: COLOR OF TITLE is NOT required for AP in MOST STATES.

o Under color of title, AP may get possession of all of the land the defective writing describes.

o If defective deed purports to give AP 100 acres, and AP only actually possesses 40 of the acres many states will give AP constructive adverse possession of the other 60.

o Look to good faith.

Claim of Title = Claim of Right = Adverse

Problem (130): O owns and is in possession of 100-acre farm since 1975. In 1990, A enters 40 acres based on

invalid deed from Z who had no claim, for full 100acres. A has occupied and improved back 40 for statute of limitations and now sues to evict O claiming constructive adverse possession.

o A cannot evict O from section O is in actual possession O’s actual possession trumps A’s constructive possession

o O’s constructive possession trumps A’s constructive on middle land not covered by either of them.

o A gets possession of actual possession portion. But not the rest of it.

Case: Walling v. Pryzblo (Online Asisgnment) P bought land and cultivated it without knowing it was not theirs. Wins after having satisfied the conditions for adverse possession.

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Case: Mannillo v. Gorski (130) P Owners learn that steps from D are encroaching upon his land Problems occur when an encroachment is small in regards to open and notorious. (134) “only where the true owner has actual knowledge thereof may it be said that the possession

is open and notorious.” Law and economics – if the true owner could have avoided the cost more cheaply than adverse

possessor, then he should be the one to do it. Court says TO must be on notice of possession to make an inquiry as to whether a trespass is

occurring. Court says no presumption of knowledge of minor encroachments along common boundaries.

Possession is NOT open and notorious unless TO has ACTUAL knowledge of the encroachment. This seems spit in the face of the sleeping owner theory and encourages owners NOT to check

out their property. Now, possessor must notify TO of minor encroachments?

Mistaken Boundaries (135) Doctrine of agreed boundaries : Oral agreement over boundaries accepted for a long time is valid Doctrine of acquiescence : Long acquiescence (may be shorter than stat of lim) evidence of parties

fixing boundary line. Doctrine of Estoppel: If 2nd neighbor relies on representations of boundaries from 1st neighbor, 1st

estopped to deny his statements

c. Adverse Possession of Chattels No centralized recording system like in land cases Also, have problems with the “open and notorious” element since chattels are easily moveable

and concealable. All other AP elements apply, although there are differences with this element and there are

different statute running guidelines.

Case: O’Keefe v. Snyder (144) Painter wants the return of some of her paintings that she alleges went missing. D contends they

were a gift. Disputes exist concerning facts and how the paintings were “lost” or “acquired” When does the statute of limitations start? Discovery Rule:

o Cause of action does not accrue till injured party discovers or by exercise of reasonable diligence should discover loss of chattel.

o Shifts the focus to the owner instead of looking for the adverse possessor.o Transfers of chattel will not interrupt statute of limitations.o Statute of limitations basically runs from the time of theft unless TO can show they

exercised due diligence.o Court here wants due diligence from the time of the theft.o Problem w/ discovery rule: Seems like P shouldn’t have to try and find painting at all if P

can prove due diligence would have been useless; court disagrees…wants due diligence early.

o This rule favors the AP, supports sleeping theory which punishes TOs. Bona Fide Purchaser (BFP)

o Borrowed from Roman Law

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o Someone how has acquired goods (or land) through purchase (have to pay valuable consideration) and takes without notice (have to be innocent)

o Want to protect an innocent party Outcome: Paintings divided UCC § 2-403(1): tells us in effect, a thief cannot convey good or voidable title. Thief can only

convey void title UCC § 2-403(2): Or did he acquire from a merchant the paintings were entrusted to and that

would mean he had acquired a good title. Crucial Distinction: Void v. Voidable. Did O’Keefe do enough?

Demand Rule (only for Adverse possessors who are bona fide purchasers) Statute of limitations does not start running until after TO makes demand of return of the chattel

from the bona-fide purchaser (AP) and the AP refuses. AP MUST be a bona-fide purchaser in this situation and TO must make timely demand for return

after learning AP’s identity. Bona fide purchaser – person who buys chattel w/out actual or constructive notice that chattel did

not belong to seller. Innocent purchaser.

Normal Adverse Possession Statute runs when elements of AP shown Open and notorious element hard to show. (favors TO) Disfavored approach.

Aside: A thief cannot transfer anything more than she has, even to a completely innocent buyer.o True owner always gets stolen property unless current owner can establish title by

adverse possessor.o If transferor a thief, thief has no title. Void title.

Delivery of good in exchange for check that was lately dishonoredo Bounced check by purchasero There the title is Voidable vs. voido Snyder would win if he obtained paintings if someone if they had a voidable title, not a

void title

The Native American Graves Protection and Repatriation Act of 1990 (136) Museum can only keep artifacts if they were donated on a voluntary basis. Otherwise, must return

them.

d. Gifts of Personal Property Only applies to personal property, not to land.

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Difficult because the requirements tend to bleed into one another. Requirements:

o Donative Intent: Must agree to legally bind yourself

o Delivery: Traditionally: If it could be handed over, it must be. Gift laws counterpart to consideration Cautionary Function: makes donor feel the “wrench of delivery” Evidentiary Function: Possession is evidence of the gift Manual Delivery: If at all feasible, this must be done. Constructive Delivery: Hand something to donee something that gives access to

the gift (keys) Not recognized if manual is possible. Symbolic Delivery: Can be a writing saying “I give this to you…” Not recognized if manual is possible

o Acceptance: Gift must be accepted Usually implied from Delivery.

Once the elements are satisfied, the gift is irrevocable Law is moving towards a relaxation of the requirements. If you exercise dominion and control over something intended to be a gift, then the gift has been

delivered.

Problems (158)1. O leaves ring on A’s sink. A calls O and O says “Keep it, it’s yours.”

o GIFT o There is clearly intent.o A has possession, law does not require redundant acts o Would not want to hand over then hand back ring

2. O gives ring to A as gift, but it does not fit A’s finger. O says she’ll hold it until A can slim down. o GIFTo There was intent and delivery. After this, gifts are irrevocable.

3. O promises to leave A ring when O dies. o NO GIFTo This is a gift promise.o No delivery, should be in will.

4. A gives engagement ring to B. Engagement is brokenDoes it matter by who?Traditional Rule – Donor cannot recover if donor is at faultBut there is a no-fault approach where it is returned regardless of who breached

5. Check question: Someone signs a check, hands it over, then stops payment.o NO GIFTo What is a check?

A promise by the bank to the check writer to pay. Until the check is endorsed, you can cancel the check.

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o Most people think that person legally bound by check, but not the law in most states.o Point: If you have retained the ability to cancel payment on something, you have not

given up dominion and control.

6. Wristwatch given by a note without manual delivery.o Traditionally, NO GIFTo But Restatement starting to relax.o In response to how people generally view this.

7. Safe Deposit Box where it was joint possessed and had equal access to it. o J planned to give Q everything in it.o Handed her 4 bearer bonds saying “I want to give these to you.”o Q puts them away, but then J clips coupons and collects the interesto J adds 22 more bonds. Only J uses it. o J leaves a note in the box for his death for it to go to Q.o Q only gets first 4 bonds.o Toggles on dominion and control.o Gift causa mortis: Gift made in contemplation of death and conditioned on death

(revocable before donor dies) (if owner recovers, no gift) Courts worry about undermining wills by giving effect to gift causa mortis so

courts (like Newman court –pg 159) strictly construe gift req’ts for gift causa mortis.

Case: Newman v. Bost (159) Deceased gave P a key with life insurance policy inside and told her she was entitled to furniture,

etc. Court found that bureau was valid gift causa mortis, but insurance policy was NOT a gift. Donor never expressed intent to give the insurance policy (especially b/c $$ policies not normally

found in bureaus) It was possible to manually deliver the insurance policy, but this was not done. Bureau was valid gift b/c too large for manual delivery and P got keys. No constructive delivery

of the policy b/c policies not generally found in bureaus and it could be manually delivered. Court ruled it was a gift causa mortis rather than a gift inter vivos Newman court very strict regarding to construing intent and delivery w/ regard to gift causa

mortis (don’t want to undermine wills and statute of frauds). Seems to be the court frowns on what took place between the two No delivery since it was not taken out of the drawer (but would it have made sense to have

someone get it, hand it to her, then put it back?) Court gave her the things in her room based on dominion and control Same idea with the piano – says she has to show she controlled the parlor\ If deceased told agent to deliver policy and agent failed to deliver, NO GIFT b/c NO delivery.

Intent, no delivery. If deceased told P “take the bureau w/ insurance policy” maybe gift. Maybe required manual

delivery of the policy b/c Newman court is so strict. Last line: No such thing as symbolic delivery.

Case: Gruen v. Gruen (166) Father wanted to give his son a painting, but stepmother did not want it to happen. Father did it through a series of letters, but son never took possession of it.

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Essentially, father took present possession out of the bundle of rights Estates: divided ownership temporally

LE – Victor Remainder – Future Interest A future interest and remainder interest is a presently existing property interest. No manual delivery required b/c it would be impractical for dad to fly, give painting to son, then

son gives painting back to dad.o Letters were valid symbolic delivery.o Impractical to have to deliver painting.

Delivery requirements gradually shrinking.

The System of Estates

Generally:

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Estates – You never own land, just an estate in land. Legal abstraction. Living People have no heirs. You can only be an heir apparent. Estate – settling grandfather’s estate (all of the asset that the decedent owns in his or her name at

the time of death) vs. estate (unit of measuring ownership) Unit for measuring ownership temporally.

Words of Limitation (To his heirs)o Sometimes called Words of Inheritanceo Define the estate

Words of purchase (To Robert Bacon)o Who gets the estate

O W

All A (f) B (m) W

Will

A1

B1(f) B2(m) B3(f)

Statutes will say that O’s wife gets something Modern Trend: Give Spouse the entire estate if all of the descendants are of the O and W

o If we don’t have any descendants one or not the other, no step-kids. W will most likely give to kids anyways.

Every state has statute of descent and distributiono Differ in detailso Statute added state means of supplying kinship

People can die partially-testateo With a valid will, but it only covers part of estate.o Heirs take part of the estate, rest would pass under a will

Statute of Descent and Distribution that prescribes intestate succession is just a default statute.o What we use when there is no other method in determining succession of wealth at death.o Don’t have a valid will

O W

All

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A (f) B (m) WWill

A1

B1(f) B2(m) B3(f)

Could give each person in sixths irrespective of placement. Unequal degrees of kinship, all states say basis for taking is by representation

o A and B will take, if they survive O, to exclusion of grandchildren, who are thei children.o 4 grandchildren will take nothing.

New Scenario: Let’s say we knock-off A.

o How do we distribute O’s estate?o Now A1 represents A. (take W away)o Take O’s estate in half between the two. Surviving child will take one halfo A1 takes the other half.o This is the result in every state

New Scenario: Now we have differences

o Some states, will divide estate generationally at children (even though dead) and give so A1 gets half, and B’s kids get to split evenly the other half

Other states, legislatures have looked at that and empirical studies by scholars, posing hypos to people, problem with giving unequal shares to grandchildren who are equally related to O.

o Most people have a strong preference for horizontal equality.o People with same degree of kinship to have same share.o So ¼ each

If B dies and has a wife and children, wife does not take as an heir to O.o If B had left a valid will devising all his estate to W, Wilma still takes nothing from O’s

estate, since B did not have anything at the time.o B cannot devise representation. It’s not a property interest.

Other Notes: Adopted child included, foster and step-children are not Common Law – heirship determined exclusively by kinship

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o Originally defined as blood relationshipso Heirship devised by kinshipo But we’ve broadened kinshipo Blood has been augmented by marriage and adoption

Halfbloods inherit like wholebloods (in most states) What happens if we don’t have any descendants?

o No children or grandchildren. Not married. Never been married.o Have parents, grandparents, etc.o Modern law in all states once we take the spouse’s share out, no descendants, then we go

up to parents. Virtually all states provide cut-off line after grandparents.

o Anyone more remotely related, not going to know decedent. The laughing heir problemo Laughing all the way to the bank

Intestate succession Testate successionDying without a valid will Succession of estate with Passes to heirs Valid will

Passes to devisees (legatees)

Estates (Possessory)

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Non-Freehold Freehold(ie. Leaseholds)

Fee Simple Fee Tail Life Estate

Absolute Defeasible

Determinable Subject to Condition Subsequent

Non-Freehold v. Freehold: SeisinBut we don’t have to know about that.

Non-Freehold Estates:1. Leaseholds2. Mere Leases

Freehold Estates:

I. Fee Simple Closest thing to absolute ownership we have

(1) Heritability(2) Alienability

Thanks to Quia Emptores(3) Transferable

In old times words of inheritance/limitation (“and his heirs”) required. These not required today, but if you see them, remember “and his heirs” gives nothing to the heirs at that time.

Nemo est haeres viventiso “No one is an heir to the living”

Plain of Time:

FSA

Aside (Recall from Above): Words of Purchase: Who has the interest Words of Limitation: Definition of Estate

II. Fee Tail Cuts the line of heirship by limiting land to lineal descendants of tenant Magic Words: “To A and the heirs of his body.”

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O “to A and the heirs of his body.” Can choose gender of tail Limitation: A can transfer to X, but upon A’s death, returns to heirs of the body.

o X only gets for possession of lifetime Fee Tail only exists in Delaware, Maine, Massachusetts, and Rhode Island

o But can convert FT to FS by deed, but NOT by will What happens if line dies out?

FT REVFT

∞REM

Where the FT exists, when it ends, there is either a REVERSION or a REMAINDER.o There is always a correlative future interest in a FEE TAILo O “to A and the heirs of his body, but if A dies w/o issue, then to B”

Remaindero However, if this language is not present, O has retained an interest and therefore the

property will REVERT to him. What happens in states where the FT is abolished (188)?

(Minor: A takes a Life Estate and Issue takes a Remainder in fee simple)o Category 1: limitation “to A and the heirs of his body” creates a FS in A and any gift

over on A’s death without issue is void. A’s issue and B take nothing.o Category 2: limitation “to A and the heirs of his body” creates an FS (NOT FSA) in A,

BUT a gift over to B is valid if A dies without issue. If A leaves surviving issue at his death, B’s interest fails and A’s FS cannot be divested.

New York = Category 2

Notes and Problems (189)

1. O conveys BA to “A and his heirs male” in 1800A has a Fee Tail Male

2. O conveys BA (in Massachusetts) “to A and the heirs of her body.”A dies leaving B as only child and sole heir. B dies without having children, devising property to C. What is the state of the title?

a. O kept a reversion.b. B inherited a Fee Tail.c. B’s will was not valid, since it must be conveyed in FS during B’s lifetime. Land reverted

to O in a FS. d. B had to convey during his lifetime for C to get it.

3. O conveys WA “to A and the heirs of her body, and if A dies without issue to B and his heirs.” A makes conveyance of WA “to C and his heirs.” A marries D and has a son E. A dies intestate. A is survived by O, B, C, D, and E.

a. Who owns WA in Massachusetts?O has not created a reversion. A’s conveyance to C was in FS. So C has it.

b. Category 1?A received a FS from O and conveyed that FS to C because the FT was voided.

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c. Category 2?C again since FT voided. B’s interest was voided as well.

d. Wrinkle: If E had pre-deceased A, then in Category 2 states, B would take because A died without issue and B’s interest divests C’s.

III. Life Estate (189) Good for life of the life tenant or pur autre vie (life estate valid for the life of another, not

necessarily possessor of land). Courts generally do not order sale of land subject to legal life estate unless all interested parties

consent or if the sale is necessary to serve the best interests of all parties (life tenant and remaindermen).

We will see this in the context of TRUSTS– all about life estates and future interests. Revocable Trust – single most used substitute for a will

Common to call it a Probate – process by which someone’s estate (all of assets at time of death) is administered,

liquidated, and distributed by court.

Hypothetical:Suppose that I’ve got $5000 and I want to invest and enjoy the interest for the rest of my life. I want to control this till I die. I want to be the owner, but when I die, I want the $5000 or whatever form it takes to go to my sister without a will.Therefore: Revocable Trust (Life estate in one, remainder in another)

$5000 PrincipleYou Trustee Your Sister (Remainder)

Legal Title

Inc

Power to amend You for lifeAnd revoke (life estate)

You would specify the terms. The trustee has a fiduciary benefit, so they cannot personally benefit, but must use the money the way instructed. They have a strict obligation to act in exclusive interest of beneficiaries. Otherwise, you can go to court and slap on surcharges. You can even make yourself the trustee.

Law of Waste (pg 201)o A cannot use property in manner that unreasonably interferes w/ expectations of B (who

takes land after A)o Affirmative Waste: Injurious acts that substantially reduce land value.

Minerals may only be extracted if they were being extracted at the time the interest was created.

Open mines doctrineo Permissive Waste: Not taking reasonable care of property.o The law of waste is a mess and is unpredictable b/c it is too estate and property

dependent.o Think of the timbre question – what if you started chopping down timbre on land.

Common law is vague, but people with subsequent interests can get an injunction.

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o Don’t give legal life estates, put them in trusts! This prevents all law of waste problems, b/c trustee may sell property!

Aside: Numerus Clausus: Cannot make new estates

o Ex: P tries to make fee simple inheritable only on father’s side. Not allowed. You can make fee tail inheritable like this, but not FS.

Lawyer should have said “To A for life, then to A’s heirs on father’s side” A has life estate, heirs on father’s side have remainder.

o The more estates, the higher the transaction costs.o We want to maximize alienability w/out making transaction costs.

Case: White v. Brown (190) Woman constructed a will where the language was not clear about whether she was conveying a

life estate or a fee simple interest. Will said that she devises house to A to live in, but not to be sold.

Does White get a legal life estate or a fee simple with the court saying the remainder going to Jesse Lide’s heirs?

The real question concerns who gets the proceeds once the house is sold? Court uses rules of construction and tries to decide what it is she intended to do. The presumption is a FS and must overcome this presumption because otherwise would be a

restraint on alienation. Court rules it’s an FS. Question about their relationship – the house was dilapidated. Worth only $10,000 so not enough

for a new house. Alexander: Just give them a money Illustrates the problems with a legal life estate. If you had a trust, would have the power of sale if

that’s what was wanted, otherwise have to go to court. Dissent: it’s clear she did not want the house to be sold and did not pass the full estate.

No Restraints on Alienation (195) Direct conflict on policy of alienation Keep property marketable No concentration of wealth Restraints discourage improvements Restraints make it so creditors can’t reach property “Disabling Restraint”

o You may not transfer your interest. Transfers have NO LEGAL EFFECTo Nor may any creditor of yours tries to attach the interesto Imposed on fee simple and life estate is VOID.o White: Was a disabling restraint, so void if a life estate anyways.

“Forfeiture Restraint”o There is a penalty to the holder of the property interest if she tries to transfer the

interest. If she tries to transfer it, she loses it.o On Fee simple is VOIDo On life estate – VALIDo Rationale: Life estate is a lesser interest, so problem of clogging up alienability less.o Also, pay a price, so it’s likely to lead the person not to try the attempt.

“Promissory Restraint”

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o Grantee promises not to transfer. Enforceable by damages or an injunction.

Fee Simple Life EstateDisabling Restraint VOID VOIDForfeiture Restraint VOID VALID

Open Mines Doctrine o Life tenant can extract the minerals if the mine was open at time it was

transferred.

Aside: The stronger the interest of the possesory estate, the more one can do with it. The weaker the possessory estate, the weaker and less she can do with it.

Discounting: Function of the time value of money Time of value of money is reflected in discount rates Discount rates reflect the opportunity cost of money, including inflation

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Ask yourself how much would you have to invest today in order to receive 100 one year from now if you knew the savings’ rate was 5%?

o How much would have to save?o Amount of money is called the present discounted value of $100.

Formula: The amount that you want in the future over 1 + the rate

PV = (y/(1+r)) to the x power (~x)Y = amount to be received in the futureR = discount rateX = number of years

PV = $100/1.05

The older the life beneficiary, the less the value of the life estate and the greater the value for the remainder beneficiary.

$1 million

Value

LE REM

12 years

LE REM

50 years

In real world, fight is over the interest rate

Defeasible Estates

Any possessory estate of future interest can be made defeasible.

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The right of possession is going to be losto Some event/act occurs or does not occur which causes someone’s right of possession of

land (could be personalty) to be lost.

Defeasance

(FSD) (FSEL/FSCS)Limitation (expires) Condition (cut short)

Remedy you get when a covenant is violated is either money damages or an injunction Remedy when you lose defeasible estate is forfeiture

o Courts more wary of this.

Correlative Future Interests:

Fee Simple FI in Grantor FI in GranteeFSD Possibility of Reverter EIFSCS Right of Entry EI(FSEL) - EI

Defeasance: Limitation

o Possessory estate ends naturally and automatically upon the occurrence of a stated act or event. Upon the occurrence, possessory estate immediately expires.

o E.g. At death, life estate ends Condition

o Does not naturally expire. It is cut short

Fee Simple Determinable (FSD): Ends automatically when a stated event takes place. Look for words of duration: “so long as,” “until,” “while,” Must be followed by a future interest: possibility of reverter (grantor) OR executory

interest (another grantee)

Fee Simple Subject To Condition Subsequent (FSCS):Pages 207-8

Does not end automatically, but can be cut short Language of condition : “on condition that,” “but if,” “provided, however” Must be followed by a RIGHT OF ENTRY (grantor) OR executor interest (another

grantee)

Grantor: “What you don’t give away you keep”

Fee Simple Subject to an Executory Limitation (FSEL): Defeasible Fee simple followed by conditional language (not limitational language) followed by

an executor interest.

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Language of condition: “on condition that,” “but if,” “provided, however” Followed by an executory interest An attempt by the transferor to grant to another person See Footnote 28 (208) For exam : can call it an FSCS followed by an EI.

Fee simple with conditional language subject to forfeiture if someone takes an action.

Theoretical Difference between FSD v. FSCS: Statute of Limitations for Adverse Possession Purposes:

o FSD: Runs the moment it endso FSCS: As soon as the Right of Entry is tried and rebuffed.

However, this is not really the case in practice, since by statute or judicial decision, they will both run the moment the violation occurs.

Courts generally prefer FSCS because you don’t have to track down TO Also, no Bonified Purchaser Problems because if FSD is met and A is not aware and sells to

another party… Exception

BAO to CLS on condition that BA is used for education purposes

only; if BA otherwise used, then to X.

X does not need to take any action. Divestment occurs automatically on the breach.

Difference between FSCS and FSEL? Language. It’s an FSD with conditional language. But in practice, there is no difference.

Case: Mahrenholz v. County Board School of Trustees (208)(See below for “Short form of case”)Conveyances:

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1. 1941 – Huttons School Dist. “for school districts”School grounds

2. 1941 – Huttons JacqmainsRemaining landAnd reversionary interest

(Key difference. One or the other)

3. 1959 – Jacqmains Mahrenholz (P1)Same

4. 1973 – Classes cease on school grounds

5. 1977 – Harry Hutton MarenholzAll his interest

6. 1977 – Harry “releases” his int. to school district (Marenholz, see notes, ultimately lost the case) Case toggling on whether it is an FSD (P’s desire) or an FSCS (D’s desire). Illinois statute stated P of Reverter could not be transferred inter vivos. If it’s an FSCS, then Illinois bars the passage of the P of Reverter. But even if no statute,

Jacqmains would have gotten it. Alexander: Illinois statute is crazy

o If something is descendible, but not transferable, then chaos ensues. Court found FSD b/c they said “only” is limitational language. Just b/c “reverter” or “right of entry” is used is not dispositive of intent. These are just legal

terms. Must look at whether language is durational or conditional.

FUTURE INTERESTS

A future interest is a presently existing property interest that may become possessory in the future. If interest holder dies, FI passes to heirs!

Two-Parts: Future Interest + What it will be when it becomes possessory. Can be any of the estate.

1. Reversionary (retained by the grantor or testator)a. Possibility of Reverter (From FSD)b. Right of Entry (FSCS)c. Reversion

2. Non-Reversionary (created in a grantee)a. Remainders

i. Vestedii. Contingent

.b. Executory interests

Typology in Detail:

Reversions

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“A reversion is the interest remaining in the grantor, or in the successor in interest of a testator, who transfers a vested estate of a lesser quantum than that of the vested estate which he has.” (226)

What you haven’t given away, you’ve kept Never has to be expressly created. Arises out of operation of law. Hierarchy: FS>FT>LE>Leasehold Reversions are devisable, alienable and transferable. No such thing as a possibility of reversion (Don’t get confused with vested remainders, but…)

o Vested in one of 2 ways:1. in possession

If someone has right to possess right now Any presently possessed state is vested

2. in interest Simply that the interest is not subject to any condition precedent (and held by someone in being and ascertained) A child in gestation is in being

Possibility of Reverter Follows FSD

Right of Entry Follows FSCS

Problems (227)

1. O owns a fee simple and makes the following transfers. Where is there a reversion>(a) O conveys “to A for life, then to B and her heirs.”

o Yes. In fact O has transferred 2 vested interests.o Both A’s interest and B’s interest are vested, but in 2 different senses. A’s is vested in

possession. B’s interest is not vested in possession because it is a future interest. But B is alive and ascertained and there is no condition precedent. This means there is nothing that has to happen other than the natural expiration of the possessory estate right before B’s interest in order for B’s interest to ripen into possession. We do not think of end of A’s life estate as a condition precedent because it is bound to happen.

o But, did O transfer something of a lesser quantum? No, so NO REVERSION

Aside: “to A for life, then to B if B stops snorting cocaine”o This is a condition precedento Form by which condition is expressed is such that B has to stop snorting cocaine in order

to become entitled for possessiono Is there anything before the expiration of the life estate?

Yes – condition precedent

Instead: “to A for life, then to B, but if B continues to shoot heroin, then to C.”o Now the form is very differento Condition not built in the same way. It’s tacked on.o What has to happen for B to become entitled to take possession?

Only life estate has to end.o So the form is a trigger.

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b. O conveys “to A for life, then to B and the heirs of her body.” Fee tail situation.

o If the state recognizes it, then O has transferred a vested interest to A of a lesser quantum and O has a reversion when B’s heirs die out.

o If the state does not, the B has a fee simple and no reversion.

c. O conveys “to A for life, then to B and her heirs if B attains the age of 21 before A dies. At the time of the conveyance B is 15. (If there is a reversion, what happens to it when B reaches 21 during A’s lifetime?).

Have to ask if O has transferred out a vested estate in a fee simple? It’s a remainder in fee simple, but subject to a condition precedent. If it’s a condition subsequent and the interest is given to an ascertained person, then the interest is

vested. Here it is in precedent form. No pause between granting land and condition In order for B to be entitled to take possession, B must become 21 years old before A dies. Condition is stated in such a way that it is a part of the interest given to B. has not conveyed to anyone a vested estate in the same quantum to begin with, so O has retained

a reversion. As the facts change, change classification. WORDS AND FACTS If B reaches 21, B’s interest is vested and in the same quantum, so no reversion to O. Shortcut: When B’s remainder (contingent) vests, it divests the reversion.

Important Example (230-1)

Example 7: 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.”

B has a contingent remainder. It is subject to a condition precedent. Also, O has a reversion because the life estate can terminate prior to the death of the life tenant. Because A can give up his interest?

Example 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.”

B has a vested remainder subject to complete divestment It has a condition subsequent

Synthesis: Intention of O may have been the same, but the form makes it different. 7 : The condition is first acting as a condition precedent for B, but when repeated after the

comma, it acts as a condition precedent for C. 8: No condition precedent. Language describing interest to B is “then to B and her heirs.” The

rest is tacked on as a condition subsequent. To show that B can lose interest.

Vesting just means not subject to a condition precedent.“Whether a remained is vested or contingent depends upon the language employed. If the conditional element is incorporated into the description of, or into the gift to, the remainderman, then the remainder is contingent; but if after words giving a vested interest, a clause is added divesting it, the remainder is vested.” Gray (231)

Aside: Reversions by definition are vested.

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Classification of Future Interests in a Grantee:

Step 1: Remainder or Executory InterestStep 2: If Remainder, is it a Vested Remainder or a Contingent Remainder?Step 3: If Vested, how is it vested?

Vested indefeasibly, vested subject to open, vested subject to complete divestment, vested subject to limitational defeasance, more than one of these?

Vested Remainder Future party alive and ascertained AND Interest NOT subject to condition precedent. Vested indefeasibly if there is no possible way for remainder to be lost “To A for life, then to B”

o Even if B dies, B’s heirs get remainder. (1) Vested Indefeasibly

o “To A, then to B for life.” B has vested remainder. No condition precedent. No condition period. No possibility that it will be taken away or lost. Exam Answer: Indefeasibly vested remainder in fee simple for B A gets a life estate

(2) Vested Subject Open (Or Partial Divestment)o Remainder given to a class and the class remains openo “To A’s children” (and A is still alive)o Class Gifts:

O “to A for life, then to A’s children” vs. Tom, Dick, and Harry” Class gift because it’s a group and only described by class terminology.

o If class has 0 members, unascertained members of CRo Unascertained members have an EI.o If it is a class gift and the ancestor of the class is still alive, AND one or more

members of the class are in being, then the remainder is vested subject to open. o If class is open and has one member, and that member dies, that member’s interests ARE

INHERITABLE!o Once one member of class ascertained, NO reversionary interest!

i. To A for life, then to B’s heirs (contingent remainder! Living people have no heirs!)

ii. Example exam question and answer: O conveys to A for life then to A’s children. (A has no children)

1. Life estate in A followed by contingent remainder in FS in A’s unborn children followed by a reversion in O in FS (if A has no kids)

2. If A had kid X: Life estate in A followed by vested remainder subject to open in FS in X followed by EI in FS in unborns.

iii. Once 1 member of class ascertained, no more reversion!!iv. To A for life, then to B’s children (B has 1 child X; B is alive)

1. Birth of Y as a child, remainder vested partially to Y and partially divested from X. Executory interests divest the interests that came before it. Y and Z had executory interests as unborn.

(3) Vested subject to complete divestmento Looks like contingent remainders, but written differently.o “To A for life, then to B, but if B dies before A, then to C.”

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B has vested remainder in FS subject to complete divestment (Executory limitation) followed by executory interest in FS in C.

NO REVERSIONo To A for life then to B if B survives A, otherwise to C.

B has CR, C has CR. O has reversion! If A terminates LE early.

Short Cut 2: LE + VR (in FS) subject to complete divestment + EIo A remainder cannot divest another remaindero Can divest a reversion

Short Cut 3: LE + CR (in FS) + CR + Reversiono 2nd CR cannot be executory interest

(4) Subject to complete defeasance (limitational)o A for Life, then to B for life

(5) More than oneo Most commonly, vested subject to open and vested subject to complete divestment

Big Picture: Question is if future interest might become possessory immediately upon the determination of the

possessory estate right before?o Upon the natural termination right before it?

If it’s life estate that the next estate will be automatically or not? If it’s possible it will be possessory immediately, then future interest a remainder. If not possible, not immediate, then that future interest is an executory interest

Remainders take effect not by way of cutting short or divesting the estate right in front of it.

Problem (228) O conveys BA “to A for life, then to B if B gives A proper funeral.”

o A has a life estate.o maintains a reversion if A terminates the life estate before his deatho B has fee simple subject to an executory interest.

B cannot take possession without something happening before.

Contingent RemaindersCR if

(1) Taker is unborn or unascertained.o “to A for life, then to A’s children”o A has no children

(2) Remainder subject to an express condition precedent Only takes one of these elements to make it contingent. Death of prior life tenant is NOT a condition precedent

o “To A for life, in the event of A’s death, to B” B has vested remainder, NOT contingent b/c A’s death is part of definition of LE.

o To A for life, then to A’s kids who reach 21. X is 15 X has CR in fee simple, so do unborns. has reversion.

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Once X reaches 21, vested subject to open, executory interest in unborns, NO more reversion

Contingent remainders only become possessory once condition satisfied.

Shortcut: Anytime you have a life estate followed by a contingent remainder then a reversionLE + CR (in FS) then a Rev (in FS)

Weird CR / EI example T devises $10,000 to D, if and when D survives his wife.

o D has EI. T’s successors in interest have possessory interest in FS. T devises to A for life, then to A’s kids who reach 21. LE + CR. To devises to A’s kids who reach 21. Kids have EI. Rule 1: VR subject to complete divestment always followed by executory interest.

o Executory interests divest. Thus, the interest before MUST be vested, which a CR is NOT.

Rule 2: Contingent remainder always followed by contingent remainder.

Problems (230)

1. O conveys BA “to A for life, and in the event of A’s death to B and her heirs.” Vested remainder to B. No reversion to O

2. O conveys BA “to A for life, then to B for life, then to C and her heirs.” A has possessory life estate. B has a life estate (subject to limitational defeasance), bet vested remained for life C has a remainder, vested indefeasibly.

b. Suppose the remainder to C had been “then to C and her heirs if C survives A and B.” Condition is expressed as a condition precedent C must survive A and B So C has a contingent remainder in a fee simple

3. O conveys “to A and B for their joint lives, then to the survivor in fee simple.” Contingent Remainder

o Exception: When you have a situation where the taker is unascertained, usually, but not a class gift.

o Individual gift and we don’t know who takes.

4. O conveys “to A for life, then to A’s children who shall reach 21.” A’s oldest child B is 17. Reversion in a fee simple.

Special Footnote (2, Page 230):If A dies before B reaches 21, at Common Law, remainder destroyed. Modern law, A’s children take after A’s death when they hit 21.

Seisin?

Vested v. Contingent Remainders (232)

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1. Timing of taking possessionVested accelerates possession as soon as life estate terminates

2. Vested remainders have always been fully transferable.Contingent ones were not readily transferableToday, in cast majority of states it isNot so good anymore

3. Destructibility ruleOnly for contingentDestroyed too

4. Rule Against Perpetuities Not to vested remainders except class giftsBut to contingent and Exec. Interests.

Executory Interest (233) Future interest in a transferee that must, in order to become possessory,

(1) divest or cut short some interest in another transferee(shifting executory interest)(2) divest the transferor in the future (springing executory interest

Problems (238)

(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.” At the time of conveyance, A is alive and has not children. What is the state of the title?

A has a possessory life estate Contingent remainder to A’s children

o Class gift and no members of the class presently livingo All unborno No express condition precedent, but does not matter due to unborn

Contingent remainder to Bo B is identified and in being, but expressed to condition precedento Possession only if at A’s death, there are no children of A then alive

Reversion in a fee simple to O LE + CR + CR + REV

Suppose twins C and D are born to A. Only thing to happen to make remainder vest is to have children. As soon as child born,

remainder vests in that child. Vested to children subject to partial divestment/open Executory interest to unborn members of class also subject to complete divestment What happens if C and D pre-decease A, and A has no other children who survive A?

o Then C and D’s interest completely divested. Subject to condition subsequent If A not survived by anyone, then divested by B. B therefore has an executory interest C and D have a vested remainder in fee simple subject to open/partial divestment and subject to

complete divestment subject to executory to B. No reversion because the vesting of the remainder in C and D simultaneously divested the

reversion in O

Suppose C dies during A’s lifetime, and that A is survived by B and D? State of title: Upon A’s death, D and C’s successors in interest. C’s interest is not divested by

virtue of C predeceasing A, because it only requires that some child survives.

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(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 time of conveyance, A is alive and has two children C and D.

State of title: A has a possessory life estate. C and D have contingent remainders. B has a contingent a contingent remainder since it is subject to a condition precedent. Not an executory interest because if it takes effect, it will not do so by divesting interest before it, because the interest before it isn’t vested, it’s contingent, so it’s not doing any divesting, so the only thing that B’s interest can be is a contingent remainder.

Alternative contingent remainders – where vesting of one precludes the vesting of another. Also, technical reversion. Ref to bottom of 231. Once you have a vested remainder in a fee simple, a vested remainder of any kind, then you

cannot have a reversion because of the arithmetic of the states. If you have LE + VR in FS = FS

o Suppose LE conveyed LE to VR, then VR has possessiono Two would merge and would become a FS

E.g. O to A for life, then to B for lifeo Then you have a vested remainder in B, but you still have a reversiono Since VR not in FS

Do not say there are multiple contingent remainders of each individual child

And don’t say two separate contingent remainders: one for living and one for unborn. Only say it’s one interest for born and unborn.

(c) O conveys “to A for life, then to B and her heirs, but if Possessory LE in A Vested Remainder in FS for B

o Vested how? Subject to complete divestmento Executory interest in which C and D along with unborn children in A have an

interest No reversion because B has a vested remainder in FS

o If VR in FS no reversion Why is B’s interest vested? Why isn’t this contingent?

o Because it is given to a living and ascertained person Bo Second, not subject to express condition precedento Condition expressed in condition subsequent formo To A’s surviving children.

Why is it not a condition precedent subject to B?o Is there anything that has to happen first?o Easiest way to understand it is to go back to 231o 1st full paragraph

(2) T devises $10,000 “to my cousin, Don Little, if and when he survives his wife.” Don Little has executory interest. T’s successors have a FSCS followed by executory interest.

Rule Against Perpetuities:

Background:

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Suppose Bill Gates puts money into a trust (future interest stuff is most likely contained in a trust).

Bill $$ TrusteeUpon death of survivorIncome

Inc. to my grandchildren for Their lives

My children For their lives upon deaths

Inc. To my GGC for

lives

This becomes like a fee tail Create a cut-off line Dead hand should not be able to control wealth of people they don’t know

Common Law:“No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest.”

- J. Gray (245)

Mechanics:

1. Only non-vested interests:o Contingent Remainderso Executory Interestso Class Gifts (Exception)

Corollary: For class gifts, either all interests are valid or all invalid Includes the interest of class members who have already vested.

o Note: Vested Subject to Open is not included

2. Perpetuity Period:o Lives in being + 21 yearso Lives in gestation count as in being

3. Clock Starts Running:o Inter Vivos: Date of delivery of the deedo Testamentary Transfer (will): Date of testator’s death.

4. Initial Certainty of Vesting (or Failing)o At beginning of the perpetuity period, must be able to say with respect to each interest

subject to the rule that come what may, it is absolutely certain that the interest will either vest or not vest within the lives of everyone who was in being when the perpetuity clock began to run plus 21 years.

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o Look for the validating life at the time of creation of the interest and see if it will vest in 21 years of that life’s death. Also, lives in being can validate their OWN interest.

o If you cannot say this, the interest was invalid from the beginning. o Overrides any intent of the parties.

5. The “Validating Life” or “The What-Might-Happen” Testo For each candidate, ask what might happen.

6. Suggested Method:o 1. What are the contingencies?

What is the event or act that must occur for the interest to vest or fail? What lives are causally connected to events in first step? Looking at the validating life.

o 2. Identify the person causally connected with the events.o 3. Is there an invalidating chain of events?

Rules: If you devise to your grandkids it is always valid. If you grant to your grandkids inter vivos, it is NOT valid.

If devised, all devisees kids are born, lives in being. If granted IV, grantor could have kid after grant who could have kid 21 years after everyone else

dies.

Example (246)

Example 23: O transfers a sum in trust “for A for life, then to A’s first child to reach 21.”

o Interests: A has a life estate. A’s children have a contingent remainder. O has a reversion.o A is the validating life.o Valid – must vest or fail within 21 years of A’s life.

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

o Interests: See above.o But not valid, since A’s children will not reach 25 at his death.

Example 25: T devises property “to my grandchildren who reach 21.” T leaves two children and three

grandchildren under 21.o Interests: Grandchildren have vested remainders subject to open. o Validating life is survivor of T’s children.o All grandchildren will reach 21 by 21 years after death of that child.

What if it was a deed?o Not valid. o Chain of events: After deeded, C is borno AB (Children) have deeded title. XYZ (Grandchildren). All die.o One month after C is born, T dies. T is last life in beingo C can have a child anytime and who knows when grandchild reaches 21.

Example 26:

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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 time if T’s death, A is an 80-year old woman with two living children, B and C. The remainder of A’s grandchildren is void.

o T dies. A has a child X. Everyone dies (A,B,C). X has a child after 30 years. When does that child turn 21?

o A has a life estate. B and C have vested remainders subject to open (if not alive, would be contingent remainders).

Problems (248)

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

Interests: A has a life estate. A’s children have contingent remainders. Takers are unborn, so subject to the rule. B has a contingent remainder in fee simple (subject to a contingent precedent). B’s heirs have contingent remainder. Reversion in O.

LE +CR+CR+Reversion RAP: (1) A is the validating life for A’s children, and it is valid. (2) B is his own validating life. He will either get it or he won’t. (3) B is also validating life for heirs and makes theirs valid.

Examples:

Black Acre1. O Ringo so long as BA is used as a strawberry field

Deed

Ringo: Fee Simple Determinable. O: Possibility of Reverter

Black Acre2. O A and the heirs of his body, but if A dies w/o issue, then to B

Deed

(1) Does the state recognize the Fee Tail? If it has statutorily abolished the Fee Tail, determine if it is Category 1 or Category 2. Category 1: A has an FSA, B has nothing Category 2: A gets FS, but not absolute. It is FS subject to an executory limitation.

o Would only divest if A died with no issueo B has an executory interest

If in MA where fee tail not barred, A has fee tail and B has a vested remainder (nothing happens but natural termination.

SHORTCUT: If you have a fee tail followed by a future interest in another transferee, it is a remainder.

3. O (deed) to Bill so long as he remains faithful to his marriage vows; if he ever violates those vows, to Hillary.

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Bill has an FSD. Hillary has an EI (Why not Remainder? No logical reason. A remainder cannot follow a fee simple). So it’s an EI.

If to Bill for life so long as (determinable life estate)…Hilary has a remainder if rest of language the same.

4. O (deed) to A for 99 years, then to B if B is then alive A has a leasehold. B has a remainder (can take possession immediately? Yeah)

o If you can say yes, it’s a remainder Contingent remainder since there is a condition precedent. Leasehold + CR + Reversion

5. O (deed) to A for life then to B for life, then to B’s children. (B has 1 child, X) (My answers here on out): A has life estate. B has a vested remainder in a life estate. X has a vested remainder in fee simple

subject to open.

6. O (deed) to A for life, then to my children; but if any child of mine predeceases A leaving issue who survive A, then to such a surviving issue.

A has a life estate; Children have a contingent remainder in fee simple. Surviving issue have an executory interest. (DO WE KNOW THIS?)

7. O (deed) to A for life, then to such of A’s children as survive her A has a life estate. A’s children have a contingent remainder.

8. O (will) to A for life, then to my heirs A has a life estate Heirs have a contingent remainder in fee simple. (DO WE KNOW THIS?) After life estate – Remainder Fee Simple – Executory Interest/Possibility of Reverter

9. O (deed) to A for life, then to B; but if B ever starts drinking alcohol again, then to C A has a life estate B has vested remainder subject to executory limitation. C has an executory interest.

10. O (deed BA) to A for life, then to B so long as BA is organically farmed A has a life estate B has a fee simple determinable

10a. “if B does not organically, then to C.” B has an indefeasible remainder in an FSD followed by C’s EI B validates C’s interest

10c. “if BA is not ever not org. farmed, then to C.” Rule Against Perpetuities B has an FSA

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RAP for Executory Interests:

1. O (BA deed) to A so long as the Cornell tower stands; if it ever falls, then to B. FSD followed by an executory interest. EI is void because condition precedent could take forever. So only FSD remains with a possibility of reverter.

2. O (BA deed) to A; (but if) the Cornell Tower ever falls, then to B. FSEL or FS condition subsequent followed by an executor interest. EI is void in same way as the previous one. Consequences: FSA with no right of entry. Same with all FSEL cases.

Different way we conceptualize the two ways we look at defeasible feesFSD does not occupy plane of time

(Chart) FSD

…… (P of R) ∞

FSCS

On a separate line. EI cuts it sort…becomes an FSA

Aside:Case 1:

Possibility of reverter, which is immune to RAP. So A cannot sell land that has automatic forfeiture. So due to economics, there is an outer limit on duration in some states.

o Such as NY, where you register it and it terminates after a time.

Case 2: Suppose that you wanted to create an EI and give a defeasible fee to A. You also want a right of

possession to B without creating an executory interest. Could first have a paper giving a FSD or FSCS to A keeping P of R. Then P of R to B. Two paper trick.

o But in Illinois, you’re screwed since not P or R transferable inter vivos.

Perpetuity Reform:

Reform: Apply common law rule and if none of the interests violate rule, then go no further. But if you have a voidable interest, must move on to whatever reform version of the rule are in effect, which there are a number of.

“Wait and See”o You wait and see what actually happened before you strike an interest down.o If the interest is valid under common law rule, then fine, but then you give it a

second bite at the apple. o How long do you wait? Varies. No real answer.o Forces the court to trace lives back and this can be burdensome. o USRAP (Uniform Statutory) one attempt – but could not agree on causal lives.

Wait and See for 90 years If it has not vested, junk it.

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Take 69 year average life span and add 21 years to it.

USRAP Take interest in question when it was first created and apply the Common Law Rule If it is valid, end of story. Second Chance. Gee…90 years is a long time to wait. But most cases, will find that things have settled long before that.

Examples:

T (will money) to trusteeTo A for life, then to A’s children for the life of the survivor of them, then to A’s then-living descendants (A is alive, has two kids X and Y)

o Common Law: Void.o But the remainder to A’s children is valid. o If A’s last surviving child dies within 90 years after T’s death, remainder is valid.o If A’s last surviving child lives beyond 90 years after T’s death, remainder void.

O devises to A for life, then to A’s kids for life, then to A’s then-living descendant. (A alive and has no kids)

A may have a kid after O dies, everyone else dies, and that kid has kid 22 years later. “then to A’s then-living descendant” invalid But under USRAP, we wait 90 years. If A’s kids are not all dead w/in 90 years, still invalid.

To A’s first kid to reach 30. 2 kids X, Y, not 30, A alive. Invalid, b/c A could have kid after grant, X, Y die, kid takes 30 years to reach 30. Under USRAP, we wait 90 years to see if A has a kid that reaches 30.

No alienability problems b/c 90 years approximates lives-in-being anyway! Plus we usually won’t have to wait 90 years.

Table: 272 NY has a rule against suspension of the power of alienation The Two Lives Rule NY unlike the majority of states the RAP applies to commercial transactions such as options.

Savings Clause (249, note 7) I think my interest is valid but just in case it is not, trust terminates 21 years after death of last

survivor of group of people. “Trust is to terminate and all interests are to vest no later than 21 years after the survivor of A and

A’s issue living at my death (see note directly)” (2) Distribution Clause – in event of termination, in any undistributed income shall be distributed

in A’s issue then living…or if no issue is then living, then to American Red Cross

Chapter 5: Concurrent Estates (275)

Tenancy in Common Joint Tenancy

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Tenancy by the entirety

(1) Tenancy in Common Own by the share, not by the whole Each tenant owns undivided interest in the land. (if 3 tenants, each tenant has 1/3 undivided

interest if they own equal shares). Each tenant is individually entitled to possess the whole. If I own 1/3 of a farm I have right to corn from whole farm! PRESUMPTION OF TIC Partition: Physically splitting up land in TIC or JT according to shares. Example:

o Forest –each owns a halfo A and B’s one half is undivided so that when timber is harvested is entitled to one-half

regardless of where the timber is taken from.o Don’t physically slice up the land.o Shares undivided.

Shares separates, so each cotenant can transfer their interest to anybody they want and upon their death, their shares are transferrable by will and intestacy.

(2) Joint Tenancy Own by the share and by the whole Each JT has undivided interest, but owns entire parcel as well. If A and B own land, and B dies first, then A automatically becomes the sole owner of the entire

parcel of land. o Don’t think of the right of survivorship being transferred to Ao Rather, A’s interest is by the whole which was encumbered by B’s share while he was

alive, but since B is dead, it is not longer encumbered by B’s share. Right of Survivorship:

o If A and B are JT each owning ½ interest.o When B dies his interest is terminated and A gets whole interest in estate.o When one JT dies, their interest terminates.o If JT’s die at same time look at pg 284

Right of survivorship can be terminated by any joint tenant during lifetime, but only by deeding to another party.

o If A and B are joint tenants. A is absolutely free to transfer ½ interest to X and that conveyance by a deed will sever the joint tenancy and it has turned into a tenancy in common.

o Right of survivorship has been terminated.o Now tenants in common with no right to survivorshipo B cannot block A from doing this. Must be done by deed.o A cannot sever by will (CANNOT TRANSGER BY WILL)

JT may transfer share w/out consent, but transfer destroys JT w/ respect to transferee. (AND CANNOT TRANSFER BY WILL)

o If A, B, and C have JT w/ each having 1/3. If A sells his interest to X, JT is terminated with respect to X and B,C.

o B and C are still joint tenants in common for the 2/3 remaining, but X is tenant in common w/ both B and C.

o This severance must occur inter vivos. Cannot occur in will. Because once JT dies, his interest terminates, so it can NOT pass by will.

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When you create a JT, be specific and MENTION right of survivorship b/c ambiguities turned into TIC.

Four Unities (476): o Time: Interest acquired at the same time.o Title: Acquire title by same instrument or joint AP.o Interest: Equal undivided shareso Possession: Each tenant must have possession of the whole.

Four unities emphasizes title and that you must get it by same interest or AO. Upshot: People who inherit, inherit as TIC. People who get as devisees can be joint tenants (children under a will). Heirs take under law, Devisees take by will Presumption: Favors tenancy in common (modern law) Reverse of old common law presumption.

o If you just say “jointly” they will construe it as a tenancy in common.o “to A and B as joint T’s and not as T’s in common”o Some lawyers will throw in additional language like survivorship.o Is tricky…look at Michigan where courts (footnote 4, 277)

(3) Tenancy by the Entirety Except in a few states that permit reciprocal beneficiaries, you have to be married. They own by the whole ONLY. There is a right of survivorship.

o But since they don’t own by the share acting individually, no unilateral severance Divorce will sever tenancy by the entirety and enter into tenants in common Consent is needed to transfer Conveyance to a husband and wife is presumed TE under common law and modern law where it

still exists Fewer than half the states have TE

Problems (278)

1. O conveys BA to ABC as joint tenants. A conveys interest to D. Then B dies intestate leaving H as his heir. State of title?

o ABC as joint tenantso No severance of connection between B and C, only A’s interest.o Right after A conveys to D, D has a tenant in common and B/C has a joint tenancy.o Each has 1/3rd o D has 1/3rd as tenant in commono B/C has 2/3rd which they hold as joint tenants.o But vis-à-vis D, they have in common

1a. What happens then when B dies intestate with H as heir?o H gets nothing because right of survivorship. C gets 2/3rds.o D and C tenants in common. ( D has 1/3rd)

2. T devises BA “to A and B as joint tenants for their joint lives, remaining to the survivor.” What interests are created by the devise?

o Joint life estate in A and B, contingent remainder to survivor. O has a reversion.

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How does a joint tenancy in fee simple differ?o Joint tenancy has no reversion.

With a true joint tenancy, is it possible for A or B acting along to terminate the right of survivorship?

o Yes Here T has created a separate property interest called a remainder to the survivor. A or B acting

alone cannot terminate that. So if you want to take indestructible right of survivorship, this is how you do it.

3. A and B are planning to be married. They buy a house and take title in “A and B as tenants by the entirety.” Several years after the marriage, A moves out of the house and conveys interest in house to brother C. C brings action to partition the property. Result?

o “Partition action”o Can C bring an action to partition the property?o A and B were not actually married when they got the property.o Court will order it divided or soldo If it was joint tenancy, then can get land too.

Suppose it did matter – should court say as joint tenants or tenants in common?o Joint tenancy is closer to tenancy by the entirety by right of survivorship

How should they have planned things?o Straw man?o Buy the house, transfer the title to trustee with directions, trustee for A and B, with

directions to reconvey it to them.

Case: Riddle v. Harmon (280) Severance of joint tenancies. She had a child from a different marriage, out of wedlock, and concerned that he’s not going to

leave the house to their child. What does she do?

o She should have given it to a straw-man, then could have it conveyed back to her.o Would have severed the joint tenancy and they would have owned it in common.

Rather than granting to a straw, deeds to herself. o Old Common Law Rule requires 2 people to have a valid deed.o Can’t deed to yourself.

Courts have found ways of creating joint tenancies. Save her by saying no need to stick to archaic rules.

Previously if A and B wanted to create a joint tenancy between themselves that A owned, a pretty common scenario, A and B are going to get married, A wants to add B’s name as joint tenant, avoiding probate, etc, you use a strawman because you can’t deed to yourself.

Courts in California have already done away with the situation…in California can now deed to yourself and to a second party as joint tenants.

We’re now saying we’re dispensing of the need to go through a straw to sever a joint tenancy. The straw is just a fictitious devise used to satisfy an ancient relic of ancient times and serves no

useful modern function. Just gets in the way of sensible intentions. Perfectly sensible result, but many jurisdictions still require the straw transaction problem. Not a

universal reform. Now, does anybody see a problem that results with a joint tenancy unilaterally severable by going

through a straw or by deeding to yourself?o Can bring it up in secret. Secret severance.

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o No requirement in common law that the severance be made public. Or that notice be given publically. So if I wanted to sever, and have property go to my child from a prior marriage,

o Can put a deed in a safe deposit box and wait to see what happens.o California has tried to deal with the problem by saying in order for severance to be

allowed, have to record the severing instrument. Recordation: is not necessary for a deed to be valid. All that’s necessary is that it needs to be in

writing, signed, and delivered.o Has advantages.o Usually are recorded.o By requiring recordation, will give notice to non-severing party.o Presupposes that non-severing party, in case of Riddles, when he get around to making

estate plan, is going to do a title search, will find this deed of severance.o Do most husbands and wives do a title search when making estate plans?

Hypo Page 284 #2: On basis of medical testimony, B survived A since blood was spurting from B’s neck, it indicates

that heart was still pumping. That established evidence of order of death. B survived A. Amended reasonably…presumptively…default rule is now that there is a 120 hour survival

requirement. Must survive the party by 120 hours.

Relations Among Concurrent Owners Severance – only joint tenancy

o Means termination of the joint tenant’s right of survivorship Partition occurs with respect to joint tenants or tenants in common.

o Fundamental termination of concurrent estate.o 2 forms of partition:

By Sale: Sell the land and divide proceeds according to share. In Kind: Physically divide and distribute land to tenants accordingly.

o This can be difficult with the topographical features of land. o Owelty: Equalization payment when one party got more than the other.

Party pays the other one to equal things out. Court prefer partition in kind and there is a presumption for in kind. (Although in actuality this is

lip-service and sale is done more often) To have partition by sale OVER in kind:

o In kind must be impractical AND interests of all parties must be served.o For physical partition to be impractical:

Weird land shapes, not easy to break up. Lots of owners so partition in kind is more difficult. Prejudice cannot be pure speculation.

An agreement never to bring an action to partition land is UNENFORCEABLE b/c it is a restraint on alienation.

o But you can have a restraint not to partition until title is quieted b/c this actually furthers alienability.

Chair case: Joint custody – share it till they get tired of passing it back and forth.

Case: Delfino v. Vealencis (292) D land garbage use who lives on property. Issue of partitioning land but cannot agree on how.

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o Deflino owns 70%, Vealencis owns 30%.o Delfino wants to partition by sale so that they can get at it.

What is the black letter law: partition in kindo Common in courts is partition in sale: (see statute 292 footnote)

The trial ct. concludes that partition in kind is impractical, and it’s going to jeopardize the interest of the Delfino’s (land worth more as a whole than its parts).

Connecticut Supreme Ct. reverses and orders is unusual. Most courts would do what the trial court did More common view is that the courts will not weight the homestead

o Why do you suppose the more typical case do not weigh it? Trial Court’s argument is bogus, but typical. Results were bogus since they made her pay owelty to the other side.

Sharing the Benefits and Burdens of Co-Ownership.Case: Spiller v. Machereth (300)

The lessee vacates and one of the co-tenants enters into possession of the warehouse. Other cotenant writes a letter demanding that the letter vacates or pays half the rental value. D brings suit. Spiller wins because the Ct. says he did not prevent Mackereth from preventing use.

o Not encroaching upon his part. Majority Rule: For one cotenant to take it all

o In order for other to have it, must have denied right of entry. Each cotenant is free to possess the entire parcel without paying rent or fair rental value to the

other party unless the tenant in possession has ousted the tenant out of possession. Ouster here?

o Locks on the building. But Mackereth’s attorney uses letter alone constituting ouster. Ouster: T1 in TIC not required to pay rent to other tenants if T1 is using whole of land unless

there is ouster. o One party attempts to AP land and stat of lim begins to run (This one HARD to meet) o Tenant in possession denies entry to another tenant. (T2 must actually request entry and

be denied. T1 changing locks is not ouster unless T1 refuses to give T2 new key)o Refusal to pay rent asked for by other tenant is NOT ouster.o Minority view for ouster establishes liability for rents on continued occupancy after

demand to pay rent.o You are only liable for the rent AFTER ouster.o Courts may find that family members have a fiduciary duty to each other, makes it hard

to claim AP.

Hypo: Husband and wife where wife leaves because she’s just finally been able to screw up enough courage to leave after years of being beaten.

She’s been routinely beaten by her husband, experiencing multiple contusions, etc. And then she sues for 1/2t rent. Does she win or not? Constructive ouster. Get of there. Legal fiction. When we want to pretend when something that doesn’t exist, actually does exist.

Ouster (refer above as well): One of the benefits of the ouster rule, is the fact that ouster has a vagueness to it, that it’s not

absolutely clear what constitutes ouster has some advantages to it. It has disadvantages since we don’t know what circumstances show it. But advantages: court can take some equitable

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considerations into account. Can take party’s expectations into account. And can look at them to determine whether or not party in possession has to pay rent.

Tenant in possession for adverse has to overcome presumption that possession is not adverse. Final point: Any one cotenant can unilaterally lease the premises to a third party.

o Doing so allows the tenant out of possession to get actual rent the lessor recovers from the lessee.

If the tenant out of possession is ousted by virtue of the lease, then the tenant out of poss. May recover ½ the fair rental value and that may be advantageous if the lessor co-tenant has entered into a bad deal. Where the rent is less than the fair rental value. But to do so, there has to be ouster.

If the type of tenancy is a joint tenancy, and one joint tenant unilaterally leases to a third party, the lease may or may not constitute a severance. The jurisdictions are divided over a lease and whether it severs it or not.

Landlord Tenant LawResidential and commercial leases

1960’s change. Led by changes in the common law, then statutes, residential landlord/tenant law called a revolution

Lease o A contracto A conveyance – leasehold; transferring an estate in land.o Subject to statute of frauds.

Statute of frauds says any transfer of land for a leasehold for one year or more must be in writing.

Basic types of leasehold estates: Term of years Periodic Tenancy Tenancy at Will (Tenancy at Sufferance – holdover)

I. Term of Years. Has a fixed term. Can be for one day. Does not have to be for years. Lease automatically ends at the end of the period (no notice req’t)

II. Periodic Tenancy Tenancy w/ fixed period, but at end of period lease automatically renews for another fixed period

equal to the first, unless proper notice given by L or T. L OR TO can give notice. Upon renewal, all terms of original lease remain in effect. Notice requirements differ from state to state Common law requirements depended on the length of the period. For a period of a year or more, 6 months notice was required. If the period was for less than a year, then the notice had to be for the length of the period, but not

more than 6 months. The notice had to terminate the tenancy on the final day of the period. If it was a month to month tenancy, you had to give 30 days’ notice. And assuming the period

began on the first of the month, the notice had to provide it would end on the 30th of the next month

Quite commonly, statutes require a 30 day notice

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III. Tenancy at Will No fixed period. Lasts as long as the landlord or tenant want it to Either can terminate it unilaterally. If it’s a tenancy at will, if it’s terminable by one, it must be by the other But possible to have a tenancy that is terminable unilaterally by one party but not the pother.

o Eg. Term of years that is terminable by the landlord but not the tenant (not a tenancy at will) Must be terminable by both parties.

Terminates at the death of L or T or if T transfers an interest (such as a reversion).

IV. Tenancy at Sufferance (Holdover Tenant) T remains in possession after lease period ends. Common law gives L 2 options

o Eviction plus damageso Consent (express/implied) to creation of new tenancy.

Problems: 364

1. On Oct. 1, L leases WA to “to T for one year, beginning Oct. 1.” Following Sept 30th, T moves out without giving L any notice. What are L’s rights?

o Term of years, so no notice necessary. What if the lease had been “to T from year to year, beginning October 1?”

o Periodic tenancy so would have to say March 30th he would terminate. What if the lease had been for no fixed term “at an annual rental of $24,000 payable

$2,000 per month on the first of each month?”o Periodic tenancy.o No presumption in favor of anythingo But seems to stress “annual”

2. T, a month-to-month tenant, notified L, on Nov 16, 2001, that she would vacate as of November 30, 2001. T vacated on date and stopped paying rent. L, relet premises after reasonable efforts April 1, 2002. No statute prescribing terminating month-to-month in jurisdiction. K sues for unpaid rents. Outcome?

o L will recover for December.o Gave notice, but not good notice, since common law requires 30 day notice.o No universal law for unrented period.o But, would be a redundant notice for any further months.

Holdover Doctrine: Suppose you’ve been in a lease for 1 year that is supposed to end June 30, and June 30 has come

and gone and you remain in possession. Landlord learns July 3rd you’re thereo Evict meo New Tenancyo If landlord chooses second option, what type of tenancy is created?

Either a term of years or periodic tenancy More likely to be a periodic tenancy (369) Maximum is one year Do we really want to hold someone for a 5-year lease?

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Case: Crechale & Polles, Inc. v. Smith (369) T held over 5 year lease. L wrote T telling him to vacate. Court treated this letter as election of T as a trespasser. T then sent monthly checks which L cashed some. L then stopped cashing and told T that T was being held over for new tenancy of 5 years. Court says L elected T as trespasser and then couldn’t change mind to make T create new

tenancy. Once L accepted monthly checks, L was, in effect, agreeing to periodic tenancy of month-to-

month. Problem w/ this case. L never actually evicted T so did L really elect T as a trespasser? Court favored T and wanted to limit T’s liability. Court says that once L has elected T as a trespasser, acceptance of monthly payments from T

implicitly creates a month-to-month periodic tenancy. Case implicitly reflects a judicial dislike of holdover doctrine Does not want to hold the holdover to new tenancy for a year. So reduces it to a month.

Discrimination: Fair Housing Act (FHA) (376)

o Only discriminatory effect need be shown, no intent necessary.o If P makes out prima facie case, burden shifts to D to show legitimate purpose why no

discrimination, P then has chance to show purpose just a pretext.o Drug use is NOT a handicap. o

Civil Rights Act of 1866 (42 USC 1982)o Not used till new life was breathed into it in 1968 in decision (page 379)o Cover RACE ONLYo NO EXCEPTIONS.o Covers buying, leasing, inheriting, selling, holding, conveying.o Does NOT cover advertising (FHA does)o Broader coverage for racial discrimination than FHA.o Also, P MUST show discriminatory intent.

1866: prohibits private and public discrimination (379) but only racial discrimination Fair Housing: race, but also color, religion, sex, familial status, or national origin. So in some respects, one is broader, other narrower and vice versa State and local legislation is broader since it may include marital status Marital status is not covered by FHA, BUT familial status is. (You can’t discriminate b/c there

are kids)

Problems (380-382)

KEY:How do you make out the case for a violation of the Fair Housing Act?

379: Kushner article.o (1) Discriminatory Treatment (intentional discrimination)

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Usually single P and D discriminated on basis of race or one of other proscribed basis intentionally.

What the P will do is show that he or she was eligible for apt (applied for, financially eligible, good credit rating, was able to pay rent, was in all respects a fit tenant), and that the D rejected the application, and rented the apt. to another applicant who was otherwise like P but of a different race or national origin, or kept the apt. on the market.

Once P makes prima facie case, burden shifts to D to show that D has reasonable business reason or other to reject P. If D fulfills burden, then it shifts back to P to establish that D’s so-called business was merely pre-textual

Burden shifting procedure is the standard process by which the courts determine if there is a breach under discriminatory treatment

o (2) Disparate Impact (non-intentional) Effect not intent Policy of D, usually is a public agency, state or local, facially neutral policy has a

discriminatory impact upon a racial or ethnic group protected by the statute. Suppose that a zoning contract targets families, but then ended up affecting

African American families.

Problem 3: A puts up ad “Furnished apartment in white home” Black couple applies and is rejected b/c of

race.o Advertisement and rejection are separate acts.o (seldom told it’s for race in real life).o FHA 3604(c) is violated by advertisement.

Very broad. Any statement.o 3604(a) NOT violated b/c of exception in 3603 for private homes.o On exam check out 3603 section b1o Dealing with a homeowner. A non-merchant. o Refusal to rent b/c of race violates 1982.o But the advertisement itself is not a violation under 1982.

If it only said “rented only to persons speaking Polish, German, or Swedish?o Go to section c because it reflects a rejection of 3604c.o Is there a violation of a? no because of Ms. Murphy exception.o Of 1982? No.

Suppose it was in private house, refuses to rent to all Germans?o Would say that 1982 violation not there because of “race,” but Supreme Court in case

covered racial discrimination as that was understood in 1866.o Court said that in 1866, people talked about the German race, the Irish race, and so on.

(page 380)o Important case…extends 1982 to cover national origin so long as people talked about the

Italian race in 1966. If they talk about whatever race then, it’s covered.

Ordinary Reader Test for ambiguous cases.o Would the ordinary reader see that this indicates a preference based on race or national

origin?o For example “No Spanish speakers:” ordinary reader may see this discriminating against

Latinos.

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Eg. A house with a basement apt. The owner lives upstairs and rents it out. Or a duplex and one of the units is occupied by the owner. Why except this.

o Can’t tell people who they want to live with. Privacy concernso 3604(b)(2) is referred to as the Mrs. Murphy exception

Does the regular exclusion of minority models violate 3604c?o Court ruled that one or a few advertisement, but a long-standing practice of excluding

people of color as models to depict customers in all neighborhoods except in neighborhoods where people of color live and using people of color as models to depict service employees in neighborhoods where people of color don’t live, that’s a violation of 3604c. All regardless of intent of advertiser. This is the ordinary reader test. How would the hypothetical ordinary reader understand the message being sent?

o On the facts of the case, we think that the ordinary reader would think this would scare people of color away.

L need only make “reasonable accommodations” for handicapped. No need to accommodate for a violent mentally disabled person.

o Also, no pets policy prevails if there is no reasonable way to accommodate a person w/ pet needs.

Case: Starrett City: in Brooklyn (380) Ceiling quotas for people of color to prevent white flight. A group of applicants of people of color said it was a violation of the FHA and they won.

o Intersection of two policies of FHA.o Which policy has to override? Anti-discrimination policy must win when ceiling quota is

permanent, not temporary, and when it is designed not to counter-act past racial situation.o If it was temporary and meant to counteract past discrimination.

Sublease / Assignment (L and T lease, now T wants to give property to T2)Case:Ernst v. Conditt (388)

Head lease1 year

Ernst Rogers1. Cov. to pay rent2. Make repairs

Sues to recover rent Sublet or assignment?

Conditt

Rogers rents the premises for a go-kart business Sets up his business, then decides he wants to sell the business. Lease includes clause 5 (388):

o Approval clause: commonly found in commercial leases and in residential ones Ernst is not letting Rogers off the hook. So Rogers then enters agreement with Conditt. Enter into

agreement in which Rogers says I hereby sublet the premises to Conditt.

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Conditt pays the rent for 3 months. And then stops paying rent because he’s been advised he does not have to pay rent. Then Ernst sues Conditt directly for the rent.

All of the parties need to agree is whether the transfer from Rogers to Conditt is a sublet or an assignment.

o Why does it matter if it’s a sublet or an assignment?o Privity of estate and privity of contract

Privity of Contract: There is a contractual relationship Privity of Estate: Estate relationship Can only be privity of estate between one pairing One has a possessory estate. The other has a reversionary estate. If SUBLEASE:

o Privity of estate between Ernst and Rogers but not with Conditt.o Privity of contract between Ernst and Rogerso Privity of contract between Rogers and Conditto Would there be privity of contract between Ernst and Conditt?

No. Ernst would lose. If ASSIGNMENT

o Privity of estate between Ernst and Conditt but not between Ernst and Rogers Because Assignee is taking over the full estate.

o By an assignment, the transferee assumes the entire remaining estate that the assignor has.

Court says it’s not going to follow traditional methods. It’s not going to look with common law/formulistic and look if they intended to assign

Court held that transfer was an assignment. Ignoring the language…So there is no difference...”distinction without a difference” Under the traditional common law approach is mechanical. Did the transferor reserve some

unit in estate, then it is an assignment. Intent test: language of the parties. Language is not controlling. What is controlling is

whether or not the transferor reserved an interest. o No differenceo Ernst left clause saying I’m going to give permission, but as long as you remain liable to

the head lease. In order for Rogers to be released, there needs to be something called a novation. Ernst has to discharge or release from Rogers from lease. Mere approval of Rogers’ transfer in and of itself a novation. Takes something much more explicit.

Is the court right? 394 (quote): when lease is made, transferor may exact promise Rogers may require that Conditt make a promise to Rogers that Conditt will perform the promises

that Rogers made in the head lease. If Conditt makes promise, does not let Rogers off the hook.

o Does give Rogers a direct remedy against Conditt if her fails to make remedy. Novation Example

o Person with Life insurance – have a contracto Mom and Dad beneficiaries

Called Donee beneficiaries if Person has been paying They did not pay one penny for consideration Routine in life insurance.

o Suppose insurance company says not going to pay penny…Anticipatory repudiationo Even though did not furnish any consideration, could go to court and get relief against the

MET for breach of contract.

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o Mom and Dad have contract rights under the doctrine since Yah and the MET intend for third party to get stuff.

Look back at promises made if Conditt promised Rogers…Ernst is the one who benefits.o If in jurisdiction, Ernst is the beneficiary, then it establishes privity of contract between

Ernst and Conditt. Language of agreement with Rogers and Ernst (389)

o Rogers says for value received and in consideration of the promise to faithfully perform…

o When Conditt said he would do it, it THEN recognizes 3rd Part benefic. Doctrine, then it would not matter estates issue since Ernst recovers regardless.

Another Way to Look at It: Transferor retains reversionary interest in sublease, none in assignment. Whole estate is

transferred in assignment.o Assignment creates privity of estate b/w L and assignee.o Sublease, no privity of estate b/w L and sublessee.

Problem C: 394

KL T

1. pay rent2. make repairs

T1 Assumes T’s covs in head lease

assigns

Privity of estate T2

assigns

T3(Defaults on rent and trashes apt)

Subleases and Assignments

Problem C (394) All assignments. By virtue of the fact, privity of estate was transferred down the chain. Privity of estate between L and T3 Privity of contract: no termination by assignment

o Must be novation. o There is no novation on the facts here. Therefore it exists before L and T.

Privity of contract – What is T liable to L for?o The head lease requirement.o The contractual relationship hasn’t changed one iota.o Not changed at all between L and T.o Still fully enforced.

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o L can hold T liable for T3 trashing the apartment.o So L at least has T as defendant.

No privity of contract between L and T1o But privity of contract between T and T1 is created. Not from the assignment alone. In

order to create privity of contract, the assignee must expressly state that the assignee is assuming the obligations under the head lease.

o There must be language identical to the head lease. That T1 assumes all the covenants of the lease.

o Creates 3rd party beneficiary contract. (if jurisdiction recognizes it). Then it creates privity of contract between L and T1.

Between T2 and T3 – any privity of contract between the two? No The contract duties were not affected by assignment. Must be a novation. Assignment itself is not a release. There is not one here. So, privity of contract remains. T has privity of contract, not estate with L T1 has privity of contract, not estate with L

o Two Defendants so far T2 has no privity of Contract or Estate with L T3 privity of estate, but not of contract.

Now relationship among the three D’s. Suppose L chooses to bring action from T. And successfully recovers. What actions can T take?

o T can surely take from T1 on basis of T1’s promise made to T. o T can be made whole by T1.

Subrogation: T becomes surety T having paid off L, T becomes surety. Acquires all rights that L can by stepping into his shoes.

So T can now recover from T1 just as L could have. Could T have recovered from T2? No contractual relationship, but on basis of subrogation?

o No Can T recover from T3?

o Yes, on basis of subrogation. If T wants to be made whole? T1 and T3 Suppose L chooses to sue T1? What recourse does T1 have?

o Sue T3 based on subrogation.o Can he recover from T2? T2 is sort of dead. Off-limits.

Case: Kendall v. Ernest Pestana Inc. (395) Terms of Rogers and Ernst – approval clause (Clause 5) Suppose that the landlord refused to give consent to the sublease/assignment.

o Refused since landlord said I don’t feel like it. Or for whatever reason. Is this permissible? The real question is where there is an approval/consent clause, is there in the absence of a

requirement written into the approval clause, is there an implied requirement that the landlord act reasonably. Not uncommonly these clauses will include a reasonable clause. Reasonableness assumed to be based off of commercially available factors. Can’t stop based just on blue eyes or democrat. Can do it over credit rating.

Can they refuse to assign or sublease?

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o Common law rule for commercial and residential leases imposing a reasonableness requirement, the landlord may refuse to act however they want.

A consent clause and approval clause – restraint on alienation.o Attempt at alienation. Trying to transfer an estate. It’s a restraint on that.

Common Law strongly disfavors this. Why would common law be different?

o Historically, the relationship between landlord and tenant extremely personal in natureo Landlord had to be able to control who was in possession of the premises. o Gave them a lot more control.o Dropped the stricture against alienation as to leasehold estates.

Still the majority rule. As to both residential and commercial leases, landlord may refuse for any reason or no reason. A growing minority of states has changes this rule and implied a reasonableness requirement but only in the context of commercial leases. Not in the context of residential leases. In the context of residential leases, the personal nature of the residential relationship still is a permissible thing for unreasonable factors.

In the states that have applied a reasonable requirement, the parties, if they are of equal bargaining power, may contract around this. The reasonableness requirement is only a default rule.

Now codified in California civil code. In NY, real property says that for buildings that 4 or more units, there is a requirement of reasonableness. But this is also a default rule. Nearly everywhere as to residential leases, no reasonableness requirement unless the lease says otherwise.

o So in general, if they refuse, not reason needs to be given.

Duties, Rights, Remedies regarding condition of leased premises (421)

Traditional Common Law Background:Caveat Lessee: You better protect yourself because we aren’t going to and the landlord isn’t either

Possession: I. Actual Possession (minority)

o If holdover tenant, landowner’s responsibility to eject II. Legal Possession (majority)

o Landlord had no legal impediments to transferring possession, so it was new tenant’s responsibility.

Tenant’s Duties: Implied duty to pay rent (dependent o landlord’s covenant of quiet enjoyment) Now dependant on Warranty of Habitability

o T does not have to pay rent, can still live on premises if landlord breaches WH Implied duty to avoid waste Implied duty to make repairs.

Landlord’s Duties NO implied duty to repair NO implied covenant or warranty of fitness for intended use NO implied cov or warranty of habitability Duty to deliver possession (make sure title was not defective, T still had duty to evict holdovers.) Implied covenant of title

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Implied covenant of quiet enjoyment. (CQE)o Dependant on pay rent

Duties above those when not listed in a contract. Duties were independent of one another, so any breach did not stop either side from doing what they were supposed to do. Exception: CQE and Rent Payment.

Common-law exceptions to caveat lessee: (ie implied duty of care on L) (1) furnished dwelling doctrine

o If for a short term like the summer and for immediate occupancy, the landlord was responsible for making it habitable.

o Opposite of what existed normallyo You had to inspect it yourself, although practically speaking, no way for you to see the

defects.o So there was a shift to the landlord.

(2) latent defecto Cannot be reasonably discovered.

(3) common areaso Places that are shared that are outside the leased premises as to which the tenant has

exclusive possession, no real basis for imposing a duty of care on the tenant (4) nuisance

o If the problem is a nuisance, it has spillover effects, 3rd party effects (5) fraudulent misrepresentation (6. promise by L to repair)

o Whenever there is a promise, express or oral, and they did it negligently or not at all, then the landlord is responsible for that.

o Otherwise, not responsible.

Covenant of Quiet Enjoyment:Stage I: Limited in scope

Actual eviction by Landlord or Agent.

Stage II: If there was a duty by the landlord by virtue lease, but if there was a clause in the lease imposing

on L a duty on L to repair and L breaches duty to repair, and the result of that breach is to substantially interfere with the tenant’s enjoyment of the premises, then that is a violation of the covenant of quite enjoyment.

Breach of L’s duty which substantially interferes w/ T’s enjoyment – breach of CQE If breach happens, T has option of leaving premises in a timely manner (vacate and stop paying

rent), and as an affirmative defense use constructive eviction when L tries to go after rent. Always implied in commercial and residential leases. “under this rule…” key statement

Stage: IIIQuiet Enjoyment and Constructive Eviction

CQE becomes the source of a duty. Now operates independently as creating a duty Not the case in the traditional understanding of CQE. It originally operated derivatively of

another duty. The lease might itself say that a landlord is under a duty to repair.

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Reste is saying if tenant shows if there is a problem with CQE, don’t have to show anything. Anything stopping her, and vacates premises, she may stop paying rent and in an action by the landlord assert constructive eviction as an affirmative defense.

Pause: often CQE run together with doctrine of constructive conviction.o Can have a breach of CQE without implicating constructive eviction.o Suppose: there is a violation of CQE because of material breach in condition of premises.

But tenant stays and pays rent. May the tenant then bring an action against the landlord for damages. Yes. No constructive eviction involved, but there is a breach of the CQE. So they are separate. Constructive conviction is a remedy. It is one of the available remedies to a tenant where there has been a substantial breach of CQE. Remedy is available only where the tenant has vacated possession. If tenant remains in possession, must continue to pay rent.

Case: Reste Realty v. Cooper (422) Basement apt. flooded. Constituting a waiver. Problem was there was inadequate ceiling. How are you supposed to know that? Can’t determine

that?o Latent defect

She signed the second lease extending it. o At this point she knew about it. Clear waiver there.o Agent promised he would fix it. o If you make the promise, must make sure the thing done adequately.

Was it necessary for the courts to make the doctrinal change?o She was promised it anyway. o Court could have reached the same result based on the promise by the agent.

Common areas breach – intersection of leased and non-leased premiseso Latent defectso Promise by L to repair

So why did the court do it? It’s NJ and they wanted to change the law.o Broaden the scope.

Breach of CQE must be substantial AND continuous o Problems :o Under CQE, if you stop paying rent, must leave in a timely fashion.

Getting a new place can be hard.o As Tenant, making prediction that defect is substantially bad that it violates the CQE. But

it might turn out you’re wrong and then you’re cooked. But then if you stay, have to pay rent and file lawsuit against the landlord.

o Some have responded by saying that tenant can look for declaratory judgments. But sensible since it gets out from bull horns

o Cannot have constructive eviction without violation of CQE

The Law: If L breaches covenant of quiet enjoyment T may vacate the premises and terminate the tenancy

and not pay rent. T must ACTUALLY leave though and within a reasonable timeo T can abandon and not pay rent OR can remain and sue for damages

Reasonable depends on court, but generally sympathetic.

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Reste Realty did away w/ caveat lesee exception requirements (many states have not adopted this approach yet and still require L to breach duty imposed by lease)

If act or omission of L renders premises unsuitable for purpose which leased or interferes with enjoyment, a breach of CQE

Reste made CQE independent obligation of L L not liable for patent defects, but is liable for latent defects. T must give L notice of the problem and reasonable time to fix it before claiming constructive

eviction.

Problems (430)

2a. Is excessive noise caused by other tenants a breach of CQE?o Traditionally, landlords not responsible for actions for 3rd parties including own tenantso A number of jurisdictions still follow this ruleo Under that rule, T has no recourseo However, a number of states have rejected that view and all three of the cases cited reject

it:o If the L has the legal power or authority to control the other tenant’s noise, then the tenant

has the legal duty to do so.o How do they have power? Clause in lease? Not uncommon for lease to say that tenants

are obligated to avoid excessive noise. o Alternatively there may be a statute, like NJ, saying tenants must avoid excessive noise.

Modern trend. 2b. Falls in common area exception, so the landlord is responsible for that. But all that the

landlord is obligated to do is take reasonable steps, and that’s what they did. Landlord is not an insurer against criminal activity. As long as that, no breach of CQE

2c. Trespass on property – Demonstration case. o Additional factors: There was a provision in the lease where the L promised it would

provide security guards and the L did not.o The police said that they would not remove the demonstrators w/o a request by L and the

L did not.o These additional factors were crucial for the caseo Otherwise, would have a violation of CQE anytime when someone trespassed. It’s

tenants, not L’s responsibility.

Constructive Partial Eviction (429) If L makes only part of premises uninhabitable, there is a constructive partial eviction. (T still

inhabits other part) T is generally NOT relieved of duty to pay rent here. Some jurisdiction extend partial actual to partial constructive and allow T to stop paying rent for

partial constructive eviction.

Implied Warranty of Habitability (431) : Residential ONLY Breach when premises are “uninhabitable” in eyes of reasonable person.

o Conditions occasioned by work-stoppages (janitor strike), acts of 3rd parties, or natural disasters are w/in scope of WH.

o L must deliver/maintain safe, healthy, clean place fit 4 human habitation.

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o Covers latent AND patent defects. Violation of housing code show prima facie breach. (Hilder 434)

CANNOT BE WAIVED! CANNOT BE WAIVED! NO WAIVING! o Public policy reason: We don’t want public living in filth and we don’t want L taking

advantage of T.o Also, if we allow waiver, T might waive, but transaction costs would increase b/c

neighbors would have to sue to have sewage cleaned up. WH forces L to internalize externalities.

o T must notify L about problem and L has reasonable time to fix it.o T’s options once WH breached and L notified and failed to fix w/in reasonable time.

Stay, pay rent, then sue to get reimbursed Stay, w/hold rent, then raise WH as a defense when L sues and pay reduced rent

that court decides. Terminate lease, leave and sue for damages (special / consequential) Put rent money towards repairs. Special and consequential damages always available

o Damages: Diminished value. Difference b/w value of dwelling as warranted and value as it exists in defective

condition (435) When determining fair market value, K price may be used. But if K price takes

into account defects, then the defective value and the FMV would be equal! This would be constructive waiver.

To combat this, courts have said as a matter of law there must be a difference b/w warranted FMV and defective FMV.

Defective rent, as a matter of public policy, may be $0. Even though living in the apartment is better than on the streets (which actually costs $0), public policy makes it $0.

Other courts will use the agreed rent. Agreed rent vs. fair rental value in the condition as it currently exists.

Special and consequential damages always available Standard of warranty of habitability:

o How do we determine – court says if there is a housing code, the housing code is a substantial violation of the housing code, serves as prima facie evidence that there is a violation of IWH

o Important; Court emphasizes that housing code not essential to establishing it. In some states, in order to show there is a violation, you must show that there is a substantial violation of a housing code.

Case: Hilder v. St. Peter (431) Suppose no warranty of habitability and only CQE. Would the result have been different? She has remained in possession

o A breach of CQE? Procedurally she should be able to remain in possession and if she does so she must continue to pay tent.

o But I mentioned that there are a few courts that say if there is a violation of CQE, only remedy of constructive eviction.

Traditional way of analyzing CQE – violated only if there is a term on the lease that imposes landlord to fix things or exception to caveat lessee

o Term of lease? Noo Exceptions

Many defects: Clogged Toilet (Discoverable, Patent Defect), Water Leakage (Latent Defect), etc.

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Causes substantial interference with P’s ability to enjoy the premises.o Violation of quiet enjoyment.

So, question: is there anything that the warranty of habitability do that CQE doesn’t? Go back to Reste Realty – could court from Reste used the warranty of habitability that it did?

o Same result for them?o Couldn’t since it is a commercial lease in Resteo A good reason why we need the CQEo Warranty of Habitability does not apply to commercial leases.o CQE will have to do the work

NY: RPL Section 235-b IWH: meant to apply to multi-unit apts rented by people in the business.

o Type of landlordo Not universally recognized, but generally (in IWH chart)

What would tenant lawyer have told Hilder to do in IWH – stay in possession, but don’t pay Can’t do it in CQE Damages likely to be substantially greater under CQE than IWH Unequal bargaining power between landowners and tenants Universal assumption of unequal bargaining power.

o Does that ring true? That between landlords and tenants there is unequal bargaining power.

o But maybe advantageous – evidentiary function FRV = negative here (fair rental value)

o So why did the court did not use agreed contract price?o Could be value as is. Then it would be 0.o Would be indirect means of showing to waive IWHo If you use second price, where the defect exists at the inception of the lease and it is

patent, then there will be no difference between the two.

CQE vs. Warranty of Habitability?Why do we still need CQE?

CQE IWHCommercial and Residential Residential Only

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If dealing with Residential Lease and premises defective, are you always going to be able to deal with it under IWH? Times when CQE better?A number of exceptions exist:

A. Single family homesB. Lease by non-merchant L’sC. Agricultural/rural areas

Universally applicable in residential leases in all states? No.Good handful of states have not recognized it.

Advantages: Remain in possession and withhold rentPunitive damages.Damages in tort for injury

Problems (439):

4a: High-rise apartment where there is a strike and trash piles up in front of building. Is this a breach of the IWH?

o Court says landlord no absolute insurers.o But has unqualified obligation to keep place clean. o Statutory.

4b: Tenant lives in fashionable East Side. The lease provides for a lot of fancy amenities.o 235-B: and in accord in uses reasonably intended by the partieso Does quoted language extend IWH?o There is a floor below which you cannot drop below…o How do you interpret phrase “uses reasonably intended by the parties…” so as not

included the warranties of the lease?o Ct. said that statutory reference - reasonably expected, not looking at spectrum of

contractual obligations, reflects the legislatures concern that the land is suitable for living.o Ordinary tenant test.

4c. May tenant assert breach?o L will say that contract price reflects the defects and you took as is.o That you waived it. o Because we agreed to knock down the rent.o But now you are asserting that?

You cannot waive it. No waiver of the warranty of recoverability.

Retaliatory Eviction (439) L cannot evict to get retaliation for T exercising rights under WH, CQE. Many jurisdictions presume retaliation if eviction w/ certain time of complaint

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Either by statute or…will be a rebuttable presumption that if a landlord tries to terminate a tenancy or increase the rent or decrease the services over a stated period of time after the T has filed a complaint that will be rebuttably presumed it will be response to T’s good faith complaint

Time varies by jurisdiction from 90 to 80 days. Presumption is rebuttable. Burden shifts to L…states that rent increase, etc is in not in response…

Tenant’s Duties (Not sure if we covered this) (441-444) Duty not to commit waste. This means NO changing the premises substantially. Duty not to commit permissive waste at COMMON LAW Duty to make minor repairs. WH negates duty to make minor repairs. If premises destroyed, at common law T still required to pay. L can evict T for breach that is material or substantial. Tenant has duty not to commit a nuisance, L

Recording Statutes:Title Assurance:

3 ways to do it: To show vendor has marketable title. (not mutually exclusive)1. Recording system

Private system where burden is on private purchaser Recording deed/other papers. No requirement of recordation for paper to be

valid, but it protects against subsequent purchasers not on notice!2. Title Registration (Torrens system)

Government System. Clerk does all the work for you Do not get it confused with Recordation.

3. Title insurance. Used by almost everybody that buys land commercially or residentially Protects for gaps or flaws in title.

Indexes:I. Tract Index:

Parcels filed by a number Do the search under the number of the tract.

II. Grantor-Grantee Index Run backwards under grantee index using sellers’ name Run back a certain amount of time, then run forward in grantor index and make

sure everything checks out.Recording System (580)

Recordation is not legally required. Deeds and other instruments affecting title such as wills, court decrees, tax documents, anything that affects titles, do not have to be recorded to be valid. All that a deed ahs to be done for it to be valid is it has to be in writing, signed by party to be charged, and delivered (for statute of frauds).

So why should people record?o Function of recordation is NOT validity BUT to protect yourself from prior unrecorded

instruments. Race Type : First person to record; Notice irrelevant.

o Only two states are like this. Notice Type : BFP took without notice. Subsequent purchaser wins whether or not he recorded if

second buyer took without notice.o In pure, no requirement for subsequent BFP to record.

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o Only that BFP, gave valuable consideration, and took without notice.o Notice: Actual; Constructive (Record/Inquiry)

Record: On notice for all prior recorded notices.o Why you do a title search

Inquiry: If given notice of facts that reasonable person would make inquiry you’re on notice.

Race-Notice: o Protected if take without prior notice and you record first.

Problems (582)

Problem 2: o O (Whiteacre) to A, not rec’d. o O (Whiteacre) to B, not rec’d (bfp)o A recordso A (WA) to C (bfp)o B recordso C records

Notice: Between A and B, B has priority, since B is a subsequent BFP B had no notice of A’s unrecorded instrument All that’s required under a notice-

type statute. C has priority over B, since C is a subsequent BFP from the record owner. C wins under notice statue since bought from A. Race-Notice: Between A and B, A has priority since B did not record first. B was subsequent and did not have notice, but did not record. Under a race-notice, have to have two elements satisfied. Because A has priority over B, A can transfer superior rights to C. By virtue of

so-called shelter rule.(See footnote 9, page 581) When A sells to C, C is protected. C has priority over B Shelter Rule: If you buy from someone protected by statute, you are

sheltered by statute too.

The Law of Servitudes (667) These are not ownership interests. They are use interests. Estates – ownership interests Servitudes – use interests They give somebody the right to use land that is owned by someone else Property Right (in rem) v. Contract Right (in personam)

o Property right trumpso Contract Rights are against a specific Persono Property Rights are enforceable against the entire world, as seen in easements.

Servitudes (generally) Easements (and profits a prendre) Real covenants Equitable servitudes

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5 Functional Types as seen on Page 667o (1) A is given a right to enter upon B’s Land (Easement)o (2) A is given right to enter and remove something from attached land (Profit a Prendre)

Like an easement but lets you remove thingso (3) A is given right to enforce restriction on use of B’s Land

Depending on remedy: An easement of a negative sort or a restrictive real covenant or a restrictive equitable servitude.

o (4) A given right to require B to perform some act on B’s land Real covenant or equitable servitude.

o (5) A right to require B to pay money for upkeep of specified facilities. Same as 4

I. Easements License

o Revocable at will Easiest of the three: Easements

Easements

Affirmative (Positive) NegativeGives holder a positive right Right to restrict somebodyTo do something with respect Using their land in some wayTo land they don’t own

Eg. Right of way Eg. Conservation easementsPopular for tax breaksPrivately owned, going to makeNot subject to development in futureUniform Act now in place

Easements only a USE INTEREST! Negative easements are a different form of/way of creating a restrictive covenant

o Home owner’s associationso Gated communities

Second axis classification Easements

Appurtenant In GrossBenefit a piece of land Exist independent of landAttach to the land Benefit someone personallyPreference for this Only person who has intended

benefit may exercise it.No Dominant estate.

Servient Estate/Tenement: Burdened Land.o The one encumbered by the easement

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Dominant Estate/Tenement: Benefitted Land Example : If neighbor and I agree benefit to whoever owns land it is in gross. No dominant estate

in an easement in gross. Not revocable. Must be in writing (subject to statute of frauds) Easement is an interest in land.

Case: Willard v. First Church of Christ (672) Can you reserve an easement for a third party? Language: “Subject to an easement for automobile parking during church hours for their benefit” Deed says nothing, but was on notice since in recording device.

o Not a BFP and not protected from recording statute. Traditionally – grantor could reserve easement for herself, but not 3rd party. Feudal Law: Third Parties strangers to the deed.

o Court says this is bad. Opinion problem: Court is very modern and changes the law so it is consistent with parties

intentions. o But then distinguishes between reservation and exception. Footnote Page 673o So the court changes the law as to reservation, but not to exception

Exception: pre-existing interest Reservation: piece of paper operating to create a new interest, and then trying to transfer the

interest to grantor. Regrant theory. o Grantor conveys to grantee, then creates easement, and then in scintialla of time later,

grants easement back to the grantor. o It’s a total legal fiction. o There’s nothing wrong with a legal fiction to create sensible results…it’s supposed to

make a difference. Dumber than hell. Strange since this is a court that wants to get rid of antiquated rules. A number of objections to creating distinctions:

o How does a party know whether is reserved it or excepted it. o Language – how do we know?o Lawyers routinely use these things interchangeably

o So then what are lay people supposed to make this distinction? Quasi-Easement

o Not a real easemento Legal fiction timeo One parcel of land that has not been divided where the owner of that land uses one

portion for the benefit of another part. Think of right of way/sidewalk on your own property Use of it benefits your own land

Is this easement a app or in gross? Measure duration by reference to estates. So an easement will be in a fee simple absolute or a

FSD or a LE or in a term of years In what estate is this parking easement?

o What is the dominant estate?o If they sell the lot, can someone else benefit?o “Such easement to run with the land” – classic language.o Here: Appurtenant; FSD – “so long as”o Aimed to benefit property, not people.

But not clear what church.

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NY: cannot reserve easement in third party; Recently affirmed. o If client comes in and wants an easement – use two pieces of paper.o So you would issue an easement to the church when you still owned it.o Could deed lot 20 to church, then have church deed to Peterson reserving an easement to

itselfo “The continued was against trees.o It’s a dumb rule – any rule you can avoid using 2 pieces of paper is a strange rule.

Case: Othen v. Rosier (689)Easements by Necessity

Creation of Easements1. Grant (deed)2. Necessity3. Prescription

Othen is landlocked and claims an easement by necessity.o Should be an easy case, but loses because of the history of it all.

Easement by Necessity:1. Unity of ownership of dominant and servient estates2. Must be severance between the dominant and the servient estate.3. Necessity at the time of the severance Othen loses because of third one. Rosier puts up levee because of heavy rain. Othen (Dominant Estate); Rosier (Servient Estate) Othen had to show necessity at time of severance between dominant and servient estates. Easement by necessity arises by implication – intention of the parties (prevailing theory)

o At time of severance, did they mean to give easement over servient estate? Modern tendency not to show it that strictly (no reasonable access by way of Third Restatement

vs. Old tendency that it was completely strict). Party claiming the easement has burden to show necessity NOW and AT TIME estates split.

Othen’s other Theory: Necessity by Prescription Gives you an easement or use Does not give you an estate The US courts have developed a theory by analogy with the law of adverse possession:

o Open and notoriouso Continuous and uninterruptedo Statute of Limitation Applies.o Adverse

Use by express or implied permission or license can NEVER ripen into easement by prescription.

If owner puts up gates that are closed, and public closes gates, permissive use. If owner is using easement as well as AP, no prescription, b/c no adversity.

o Exclusivity is relaxed in prescription b/c you are not getting title and as long as owner is not using as well, this is satisfied.

Ct. Says Othen failed by exclusivity. Court says that it was permissive; That Rosen maintained control.

Precsriptive Easements: Based on Roman idea that rights can be acquired by the passage of time. How do you disrupt to stop prescriptive easement?

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o Will a letter by owner of land by user prevent a prescriptive easement?o It depends on theory jurisdiction uses for prescriptiono See Note 1 on 697-8

Rather than AP, some use Lost Grant Theory (MINORITY)o Acquiescence is required to show easement acquired. Evidence of non-acquiescence, then

NO easement by prescription.o If O merely writes a letter to AP saying “stop using road”, this is evidence of non-

acquiescence, so no easement by prescription.o MUCH different for real AP, where letter would not be good enough, P must actually

evict. Symbolic Easement? Easement by Estoppel

o Stand by and watch you use my land.o If you rely on in detriment, then have acquired easement by estoppel.o Detrimental reliance upon a license express or oral, may ripen into an easement. o Not recognized in all jurisdictions, an easement by estoppel not possible because of

statute of frauds, but some to protect your reliance interests.

Public Trust Doctrine (701)How can public acquire easement? Prescription.Public easements:

Prescription Implied dedication

o Has implied or dedicated beach for public uses.o Not widely recognized, but there.

Customo Oregon Supreme Court uses custom to extend public easement over the beach.o Public has a right to use the dry sand portion of the beach.o Can use Native American use and White man used lands publicly

So bundle of twigs never tried to exclude beach front property But not widely used

Public trusto Traditionally: Commerce, Fishing, and Navigation. o Limited Lands:

Ocean (jus gentium) Navigable waterways (even some non-navigable that flowed into navigable ones) Tidal pools Beds under oceans Wet-sand area

Case: Matthews v. Bay Head Improvement Association (701) Issue: Public Access to the beaches

o People want to be able to reach the wet sand portion of which they have every right under the public trust

o But in many locations, they are blocked by privately owned dry sando So is there a basis for the public to reach the wet sand area over the dry sand area?

Prior to the NJ case, the NJ court had decided Neptune City v. Avon (703)o Avon extended the public trust doctrine to include recreationo So does it follow under Avon, does it mean public can cross over dry sand anywhere?

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o No. only across municipally owned property. o Avon:

Recreation Public access across municipally owned dry-sand beach property. Quasi-municipal

Does it follow from Matthews that any one can drive over the sand anywhere? What is nature of Bay Head Organization?

o Private entity, but seems to have power normally associated with a city. Bay Head has monopoly of the beach. Does it follow that members of the public are free to cross any portion of the beach at least where

the beach is managed by a quasi-public organization or institution at any time they wants? Does it say? (704) Says can be molded (705)

Does the court put any kind of a restriction or establish any criteria that limit the public easement over the dry sand portion of the beach which is privately owned?

Public Trust says that ocean and wet sand are owned in public trust for the benefit of the public.o At common law people used wet sand and ocean for commercial uses.o NJ Sup Ct expanded uses covered by public easement in Avon case to include recreation.o Avon extended public trust to include dry sand portion of beach owned by municipality.

This was not covered in common law.o Matthews extends this range to privately owned dry sand (privately owned by a quasi-

municipality). Massachusetts courts have refused to use the public trust doctrine. Court is not saying here that it is ordering all private owners of dry sand portions to give access to

the public whenever and wherever they want to traipse across the beach.o Public must be given reasonable access.o Standards?o Yes the court gave a 4-Pronged Test:o 705: “Precisely what private…”

Location of dry sand extent and availability of… Nature and extent of pub demand usage of sand by owner

Big question left open – what about privately owned dry sand area of the beach not owned by some quasi-club, but by a private person

o Answered in Case in Note 1: Raleigh Avenue caseo NJ case affirmed: 879 A.2d 112 (NJ 2005)o Club could not exclude public:

No ability to access area, etc. Uses for prescriptive easement are limited to the use for which prescription came about. If

prescription came from walking, cars may NOT use the easement.

Back to Servitudes: Easements Covenants (real) Equitable servitudes

o Rest 3d: Collapses the distinctions.o Turning now from easements to covenants

Negative Easements – really just the same as restrictive covenants (736). Historical Accident

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“The right of a dominant owner to stop the servient owner from doing something on the servient land.

English courts recognized only 4 negative easementso Right to prevent neighbor from blocking windowo Right to prevent someone from blocking airo Right to prevent from supporting buildingo Right to prevent obstruction of water flow from artificial stream.

Limited neg easements recognized b/c o Not easy to discover (especially w/out recording system)o They could come through prescription, but this means that anything neighbor HAS NOT

done for 20 years would come through prescriptiono US – cannot arise out of prescription.o Negative easements rarely granted.

US courts have followed England w/ few expansionso Scenic easementso Conservation Easements: Grant easement to gov’t to prevent land development and keep

land open.o Façade preservationo Primary Residenceo Solar Easement.o But Really 4 unless statute authorizes it.

Negative easements not important b/c equitable servitudes (ES) takes care of them!

Covenants: Want to maximize land use, but law of nuisance does not cover everything.

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England restricted privity to L-T relationships. Only leasehold covenants allowed US courts expanded privity to include the grantor/grantee relationship.

o For promise to run w/ land it MUST be made incident to land transfer.o A transfers land to B and B promises no pink flamingoes. OKo A and B own land next to each other and B promises. NO GOOD.

When you join gated community, you sign a Covenants, Conditions, and Restrictions Document.o Restrictive Covenants (Promises + Negatives)o Affirmative Covenants (Pay Dues)

People find covenants useful things. Willingly promise to do certain things in exchange because they know everyone is doing the same thing.

But if you just entered into contract with your neighbor and sold your property, your successor would have to renegotiate the deal regarding the covenant.

If a straightforward contract, only good between you and your neighbor.

You Neighbor(BA) (WA)

Promise not to build multi-familyHomes

Zenon Xerxes

Transaction costs are high. So you want to create not just contract rights, but property rights. Property are in rem rights. Not simply in personam

This is what the law of real covenants and equitable servitudes deals with. See Chart on 743 Courts have said we will allow these covenants to be enforced by and/or against parties other than

the original promisor/promisee only if certain requirements are met:o (1) privity of estate: exists only if promisor and promisee in L-T relationship.o Have horizontal privity with each othero US extended definition: We define it to exist whenever there is a grantor-grantee

relationship between the promisor and the promisee. o If promise made incident to conveyance, horizontal privity exists. o Can satisfy through a straw person. Convey to straw person, then convey back.

You must understand that it is essential to separate the running of the burden of the covenant to the running of the benefit. There are DIFFERENT requirements.

Real Covenants (see above as well)“A promise respecting the use of land that runs with the land at law.í”

Originally under First Restatement:o Horizontal privity required for Burden to Run, but NOT for benefit. o Worried about it running with burden, but not with benefit.

Horizontal Privity: Between original contracting parties. Vertical Privity: Relationship between original promisor/ee and their successors.

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o Restatement said for Burden to run, there had to be vertical privity between the original promisor and the D where vertical privity was defined as the D succeeding to the same estate that the original promisor had.

o Excluded adverse possessors. No succession. 3rd Restatement Junks this

o Takes position that horizontal privity is not needed at all.o Wantsto merge real covenants and equitable servitudes.o Not horizontal privity for horizontal privity o States that it is ridiculous

Problems (744):1. A and B neighboring landowners decide they will mutually restrict lots to single-family residential use. Sign an agreement for themselves and heirs/assignees that the lot will be used for that purpose only. B sells to C. C builds an apartment house. A sues C for damages. Results?

Here dealing with running of the burden. Who is the P and who is the D?

o If P is original promisee, then you’re not dealing with the running of the benefit.o If D is not the original promisor, but some remote party, then you are dealing with the

running of the burden Who is suing? Original contracting party A, so not dealing with the running of the benefit. Who is trying to get benefit?

o If is an original contracting party, A or B, then not dealing with the running of the benefit.

Who is the party against whom we are trying to get it enforced? o No they weren’t then we’re dealing with the running of the burdeno Only the burden

Under 1st Restatement – is there horizontal privity?o Not under English law, since no landlord-tenanto Under first Rest – there is none because no conveyance. No grantor-grantee stuff.o Not enforceable against C.

Let’s suppose A is the breaching party.o Now it’s running of the benefit. o P is not an original contracting party (C)o Can C enforce promise made by A to B? Against A?o Yes, since traditional law did not require horizontal privity for the benefit.o C would be able to get damages from A and enforce as a real covenant.

Vertical privity is required for benefit and burden. More stringently defined for the burden than the benefit.

745: Restatement Third trying to wipe away distinction between benefit and burden. With respect to real covenants and equitable servitudes, let’s treat negative promises the same as easements. That means, let’s make them enforceable against all owners and possessors.

Let’s distinguish between negative and affirmative promises. Sensible. Affirmative requirement requires you to do something. More onerous. May impose personal liability on you. Affirmative will require it. Affirmative has more concern than negative one. Affirmative covenant over time.

As to affirmative covenants – lessees, legal life tenants, and AP’s separately. Lessees – get all of the benefits of some affirmative covenant Legal Life tenants – AP’s – subject to all of the burdens of affirmative covenants

o But gain the benefits of affirmative covenants only under limited circumstances.

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o Both cases as to lessees and adverse possessors, there is no complete reciprocity between benefits and burdens.

Equitable Servitudes:Case: Tulk v. Moxhay (746)

Tulk (Leiscter Sq. garden) to Elms Elms made promises: not to build (restrictive covenant) Elms to Moxhay (actual notice) Tulk goes to court of equity (type of remedy determines whether the court looks at it as an

equitable servitude or a real covenant). o Equitable Servitude = Injunctiono Real Covenant = Moneyo Will look at elements differently.

Cannot be enforced here because there is no horizontal privity between the two parties. Ct. bypasses this by saying if you purchased and had notice of restrictive covenant, equity will

enforce it against you without horizontal benefit. Fountainhead of law of equitable servitudes.

o Limited to restrictive covenants.

Requirements: Burden

o (1) Intento (2) Touch and concern

Burden must do thiso (3) Notice

Today, coterminous with recording statute. Protected by recording statute only if you are a BFP Notice relevant only for purchasers How will notice be satisfied: (1) actual (2) record (3) inquiry Properly recorded and in chain of title (record)

Benefito Most do not require vertical privity to run with the land.o Means that a 3rd party beneficiary who is not successor of land from the promisee of the

covenant may enforce the covenant based on 3rd party beneficiary doctrine Example: Suppose A and B agree that A transfer BA to B and B promises A that B will not

develop BA and that the Nature Conservatory has the right to enforce that restrictive covenant. o The Nature Conserv has not succeeded to land. Not in privity of estate. But it is a third

party beneficiary of the contract. Some jurisdiction will not allow it to run w/o vertical privity (NY) Creates problems when you run into”

o Developer deeding out lotso Homeowner’s associations

Case: Neonponsitn (755) First case to recognize homeowners associations have standing even though they do not own any

land. No vertical privity strictly speaking. But court says there is privity in substance because they are the agent of all owners in Neponsit

AND because they took from the original developer.

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Neponsit (755) establishes precedent that affirmative covenants to pay money to homeowners association are enforceable.

Touch and Concern: Courts have struggled to define this (Refers to Neponsit case = if it substantially effects value of the land, then it touches and

concerns. If not, no) Think of guitar promise vs. development promise So still complicated. Not helpful since it’s after the fact – a court tells you if it touches and concerns AFTER the fact. But no other attempts to define.

Straight Forward public policy test – covenant not enforceable if it is unconstitutional. Eg. A racially restrictive covenant (see Shelly v. Kramer, 1948) Or if it is illegal (FHA) Settled law = touch and concern.

Real Covenants (Trad’l)

Horizontal Privity Vertical Privity Touch and ConcernBurden Yes Yes – Same est.Benefit No

Equitable Servitudes

Horizontal Privity Vertical Privity Touch and ConcernBurden No No YesBenefit No Most, no Yes

Most covenants treated as equitable servitudes.

Termination of Covenants:Case: Western Lan Co. v. Truskolaski (786)

Changed conditions doctrineo Planned development unit made in Reno Nevada in 1941.o 20 years later, Reno changed a lot. The character of the area around the sub-division has

become highly commercialized.. Western Land’s retained land subject to residence restriction. Land all around has become traffic-y. Conditions have changed and they argue that should be grounds for terminating equitable

servitude as it pertains to the land.o Rejected

Further argues that zoning will change since Reno has filed intent to rezone. Ct. still unmoved. Ct. says that is perfectly fined, but it hasn’t’ yet, but even if it is, it still does not prevent the

single residential unit restriction from taking effect. Seldom do zooming and private servitudes conflict. Usually zoning is broader, more permissive than servitudes. That’s the case here.

Ct. says that changed conditions will cause an equitable servitude to terminate only if (789) the purposes the restriction s have been so thwarted that there is no value to homeowners.

o “As long as the original purpose of the covenants…” Western’s land is doubtless more valuable if it goes commercial.

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o Then let’s say all of land on Plum lane go commercial. Then quite possibly all the lots on Plumas St. do the same thing.

o Then the second tier of lots have become the border/buffer lots. o To prevent the restriction from being completely wiped out, the standard is, so long as the

restriction benefits someone, even though the value of somebody’s lot can be increased if it is lifted.

o Buffer lots would benefit if it’s lifted. Changed Conditions Doctrine operates quite narrowly: E. Servitude will be terminated only quite

rarely. Only when there is no room for anyone to benefit. That will seldom be the case. Maybe another remedy: Rather than enjoining Western for using it for commercial purposes,

allow them to use it commercially, but then grant damages. If case that Western valued land commercially and that it would gain more than the interior

owners lost, then it would buy the injunction from the entitlement from them. o But we don’t live in a transaction-less environment.o It’s prob. high because of so many parties.

Under Rest courts may modify or terminate the servitude to permit uses under conditions designed to preserve original servitudes.

o Court could allow some forms of commercial uses w/ low traffic for example.o Courts may modify servitude slightly.

Coase Theorem: Regardless of court’s decision to whom it is going to award the property entitlement, the property

entitlement is going to wind up in the hands of the party that values it more highly in the absence of transaction costs. If in world of 0 transaction costs, and court gets it wrong by giving entitlement to someone who does not value it as highly, it will end up in hands of party who values it the most, since they will bargain till they get it.

o But, transaction costs do exist and they prohibit proper exchange. So, what we might do is instead award damages.

o See Note 2 on 792. Deals with transaction cost problems. Property rule/liability rule

o Calabrisi Two ways by which we can protect any entitlement or property interest Property Rule: Any rule that protects an entitlement in a way that prevents

anybody from taking the entitlement without the permission of the entitlement holder

Basically means an injunction Liability Rule: Weaker means of protecting an entitlement.

If this way, that means that somebody can take the entitlement from you if she is willing to compensate you for it. Not guaranteed to keep the entitlement. Only, if you lose it do you get compensation (damages).

o Ask yourself when it is economically efficient to protect via the property rule and via the liability rule.

o Generally speaking -Calabrisi’s theory – where transaction costs high, courts should use liability rule.

Case: Rick v. West (790) Contracts to sell 50 lots to hospital. Wants to sell, but can’t since there is one hold out person. Conditions have changed and have changed substantially. Doubtless the better use of the property

is to use it as a hospital. But Catherine West bought the lot for single-family residential unit. Standing on her rights to maintain it.

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Ct. says she has every right to do so. Relying on a decision by Cardozo, Ct. says it is not a question of balancing equities. We do not balance equities here.

o Then Rick would clearly win. The harm done to West pales in comparison to benefits if the restriction were lifted.

o Cardozo, no balance of equities. Choice is for him alone. Will be protected by all of the power of the law. Ct. grants the injunction and stops him from allowing him to sell to hospital

Restatements: Would the results change?o Under Subsection 2: Court can modify servitude if the servient estate is no longer suitable

for uses permitted.o If arguing the case today, modify servitude non-conforming uses designed to preserve the

benefits. Make the modification as narrow as possible. Eliminate all uses other than a hospital.

o Just allow the hospital in. Minimize noise impact. o Arguments under Section 7.10(2)o Intended to relax the strictures.

Case: Poconos v. MacKenzie (793) Could not develop property so valueless.

But part of homeowner’s association and still had to pay dues Abandonment Doctrine

o Cannot abandon good/perfect title because FSA has to go somewhereo Abandonment is really a transfer and must be done with statute of frauds.

Under PA law, tax sale get it without covenants.

Common Interest Communities: Not limited to gated communities. Est. 30% of US population lives in some form of housing regulated by a common interest

community/homeowner’s association. 80% of all new developments are regulated in this manner. Become an important form of legal practice.

Case: Nahrstedt v. Lakeside Village Condominium (800) What is the legal standard regulating the internal rules or bylaws of homeowner associations? Sued condo association stating that as it applied to her, no pet covenant is unreasonable. Appellate division argued that the property legal standard is exactly what she is arguing.

o The “as-applied” standard. o We determine whether a restriction is valid or not based on unreasonable, and the

statutory standard should be applied on a case-by-case standard. Supreme Court reverses. Says we apply it across the board.

o What does court mean by real meaning of the word reasonable? Vs. Restatement? Restatement (810): Direct restraint is valid if reasonable. Direct restraint involves with the operation of a free market economy Indirect restraint invalid only if it lacks rational justification. Less demanding

than reasonableness. Include use restrictions like pers.

Word about the reasonableness posed by the California statute: Relationship with touch and concern requirement. Overlap between the two?

o Touch and concern requirement a way of examining the reasonableness of the servitude.

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But not identical Touch and Concern – applies across the board to all covenants and equitable servitudes Reasonableness imposed by statue – implies only to CIC’s.

o If you’re in a CIC, use restriction will have to pass muster under touch and concern requirement.

California Statute: Creates presumption of validity if there originally o Was in initial regulation of CCRo Would it have mattered if it had been added after the original.o If it’s in the original document, you get more deference. People initially relied on it.

Restraints on alienation – direct vs. indirecto Indirect includes use restrictions like no pets.o Restatement 3rd: valid unless it “lacks rational justification.”

Balance benefits against the harms Here, pet allergies, etc. See how the justification works – and look at each rule as it applies to the owner.

o Think of satellite vs. trucks in front of lawn o What about political flag restrictions?o If the restriction was in the original document, much harder to strike down. There was

consent.o Constitutional Rights aren’t enforceable against private actors. So can’t go after

homeowner associationso Alexander’s Problem” Assumes people have read it.

Business Judgment Standard: o Decision of corporate board is legitimate so long as it was made in good faith and

honestly.o Decision may be unreasonable, as long as made in good faith.

Takings:

Background.

Gov’t Power Effect Gov’t ObligationsPolice Power Regulation No CompensationEminent Domain“Public Use”“Just Compensation”

Condemnation (ie. forced sale) “Just Compensation”

Example: Zoning – does not need to compensateo Look to Fifth Amendment

“Taking” which triggers compensation requirement “Regulation” does not trigger compensation requirement.

o If we treat it as a categorical distinction and said compensation requirement only happened when gov’t exercised when used for eminent domain, gov’t could easily just regulate the hell out of a parcel of land.

Taking = Eminent Domain Eminent Domain:

o Power to condemn property.o Rationales: Utility, Fairness (why we compensate)o Two requirements to take: Public Use, Just Compensation

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Kelo: Taking was for purpose of economic development. This was held to be a valid “public use” Standard of review for “public use” is EXTREMELY deferential to the legislature If legislature is doing its job properly, unless evidence of corruption, court defers Court does not second guess legislature, not their job Kelo, Midkiff, Parker…all passed States responded to Kelo by limiting eminent domain. Const provides broad (easily met)

guidelines for eminent domain which a state may restrict.

Case: Kelo v. City of New London (945) Looked to Hawaii v. Midkiff which stated public use was dead. Issue: Exercise of gov’ts eminent domain power for the purpose of economic development in an

area that is not economically blighted satisfies the public use requirement? Area was not economically blighted and in past (Berman v. Parker) where it can transfer for the

purpose of economic development if blighted. Court deferential to legislature.

o Midkiff: says a public benefit: ending oligopolyo Berman: public benefit: ending economic blighto City of New London: public benefit: create jobs and increase taxes.

Standard argument used in economic cases As long as city has well-considered plan, then it’s fine. Deferential approach is recognition that the exercise of eminent domain is a representation of the

popular will. If you don’t like what is being done here, change the eminent domain statute. Don’t make the constitution the way to exercise this. Change the eminent domain statute. Lots of states did after Kelo.

Kelo established a constitutional floor, not a ceiling. o That’s what federalism is all about- o Reaction seems to say that Stevens got it right. 60% did. Forbid eminent domain for

non-blighted areas.

Takings: Dealing with a government measure that looks to be a regulation on the surface. But normally, government is extending police power and regulating how land is to be used.

o No compensation neededo Then owner says you’ve regulated so much that it is tantamount to taking

Major Question: Is the government action a taking? Supreme Court has two methods to see if it is a de facto taking:

(1) Per Se Rules(2) Balancing

Per Se Rules:(1) Case: Loretto v. Teleprompter Manhattan CATV Corp. (960)

“Permanent Physical Occupation.” Required owners of residential buildings to put up access to cable tv.

o Fixed a little box to the roof and ran a wire down the side. Supreme Court not only agrees with owner, but also says it is a per se taking. Any time that a gov’t action has the effect that the gov’t or someone under its authority and

coming in and permanent physically occupying someone’s property, it does not matter how great the public need is, it doesn’t matter how small the economic impact on the landowner is (here, the access to cable tv made the building likely more valuable).

Court finds it is a permanent physical inquiry then nothing else matters. Move immediately to damages.

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Court distinguishes cases from physical invasionso Occupation vs. invasiono Invasion that does not constitute a per se taking (eg) that it may turn out to be a taking

after using the balancing method, can be a takingo Like the overhead flight thing.

Common Law: if you own land you own up to the heavens, then you own up to the heavens and down to hell.

Cosby case – military flying planes over the property.o Court said it was a taking, but not a per se taking.

Blackman picks at the Achilles heels. Points out that “permanent” is not so clear. After all, the cable and box will be there only so long as the building is used for residential purposes. If it’s used for anything else, box does not have to be there. Also points out, maybe this is not going to be so physical after all. Maybe it’s not going to be an occupation.

But where do you draw the line? What is a permanent physical occupation? o Sprinklers, Television Waves…

Second Per Se Rule: Noxious use (public-harm-abatement) doctrine If I go to court after a city orders me to cut down my trees, even if it hurts property, it’s not a per

se taking if it protects city, etc. City is protecting against public nuisance.

Regulatory Takings1. Government authorized permanent physical occupation by the government, agent of

government or authorized 3rd party constitutes a per se taking. (Loretto)2. Noxious-Use Doctrine: If regulation has, at its purpose, abatement of a noxious use, then the

regulation is per se NOT a taking, regardless of its economic impact on owner (After Lucas, this test sort of relegated to balancing approach) (Hadacheck)

3. Total-Takings (Lucas): A regulation that deprives owner of all economically beneficial use is a per se taking unless the restriction could have been achieved through the common law of nuisance.

o Destroys noxious-use doctrine as a per se rule.

Balancing Diminution-in-value: If regulation goes too far, taking. Must figure this out by looking at the

diminution in value and balancing the following factors:o Economic impact of regulation on ownero Extent to which regulation interferes w/ investment-backed expectationso Extent of Public benefito Promotion of health, safety, morals, welfareo Character of gov’t action (the more the action looks like a trespass, the more likely there

is a taking…the more it looks like a nuisance, the less likely there is a taking)

Conceptual Severance What is the denominator for the diminution in value? Do we divide up the bundle of rights or do we look at the property as a whole? In Mahon court divided up property b/c PA law divided estate into 3 parts. In Penn Central, NO conceptual severance, they look at the property as a whole. But, after Lucas the state of conceptual severance is unclear.

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Rest of Takings Law: BalancingCase: Pennsylvania Coal v. Mahon (980)

Holmes v. Brandeis Kohler Act: forbid mining that could damage land. Penn Coal sold the surface to Mahon and in the agreement it retained the right to the coal under

the surface and also provided expressly in the agreement that it retained in effect the right to remove all of the support of the surface.

o Explicit waiver by Mahon of the surface owner the right of support. Must allow them to mine. There is an attack on the Kohler Act saying that it attacks their rights

under the 5th Amendment. Court: General Rule “that while property may be regulated, if regulated too far it will be

regulated as a taking. This is as clear as mud.” (983) What guidance does Holmes give us to say a guideline goes too far:

o Multi-factored balancing process. o No per se rule here. Taking several factors into account and weighing them. Statement of

the general rule is the source of the doctrine of regulatory takings. Before this case, thought no doctrine of regulatory takings.

o Look at the benefit v. burden. Not public nuisance – single private house Balancing: (1) Diminution in value:

o Degree of diminution is high in this case since the value of the coal is so high.o Would be 100%o Brandeis disagrees. Agrees that diminution in value is highly relevant, but disagrees by

extent on diminution of value. Denominator Problem:

o Nominator/denominatoro Holmes: Coal in place/Coal in placeo Brandeis: Coal in place/Everythingo If you limit the denominator to one aspect of the bundle. It will be very great. 100%. But

if you do what Brandeis says, then the degree of diminution in value is much less.o This is so important.

In Penn law, there is severance of property rights. Unusually treats the support right as a separate estate. Treats the surface as one estate. Air right as a separate estate. And the support right as a third, separate estate. Because PA law separates it, easier for Holmes to do the same thing. We should keep it separate from the entire property interest. What Holmes is doing is sometimes called “conceptual severance”

Court engaged in conceptual severance, since PA state law had already done this. Brandeis says we may have an average reciprocity here as well. Kohler Act protecting not just

one home, but in all of them. Disagrees with Holmes saying this is a public nuisance, not a private nuisance as Holmes characterizes it

Once you see that this problem is affecting all of these homes, it also benefits them. Balancing:

o Diminution in valueo Av. Reciprocity of Advantage.

Next most significant case:

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Case: Penn Central v. City of New York (990) Applying Balancing approach, Supreme Court says it is not a taking 996: “in engaging in…”

o “essentially ad hoc, factual inquiries”o Multi-factored, case by case.

What are the factors?o Economic Impact: Diminution of value

Penn Owners say that it destroys airspace Under Common Law, it is separate property, so diminution is big (100%) under

conceptual severance (998) Court could not be clearer in ejecting conceptual severance. Denominator is not the airspace, but the block as a whole.

o Distinct investment-back expectations If gov’t frustrates plan landowner already has off the ground. But here, not done anything but talked about it. No reliance here since it has yet to crystallize.

o Character of the governmental action The more it is trespasser in nature, then it is… If it short of a permanent physical trespass, then we are more likely to find that it

is a taking. Trespass v. Nuisance. Here: is the government evenhanded? Look to “fairness.”

(Where did the court get the second factor? From a law review article the single most important/influential article that has ever been written. HLS. 1003 at bottom. Note 2)

Court says no singling out since part of plan to protect landmarks. Government says it is not like overflight airspace. Renquist (Dissent):

o Engaged in conceptual airspace.o Other point more traction:

TDR’s – Transferrable Development Rights Regulatory Scheme from 1970’s by which the owners of buildings in Manhattan

who are prevented from using airspace above their buildings are permitted to use that airspace to develop the space above of buildings they own.

Can transfer What you are really doing is that the TDR is a form of compensation, but you

don’t get into question of compensation unless you determine there is a taking. And you Brennan have concluded no taking, so what is the relevance of talking

of TDR anyways. If we had it, must be just compensation, and the TDR is unlikely to match the opportunity cost of GTC

TDR – compensation question, not the taking issue. Aside: TDR is a mitigation: effect/measure (from German)

o German Taking’s law will do –when it has something that has a strong impact on landowner’s value, take some measure in kind to mitigate the impact of the regulatory action on the landowner.

o Argument in support of Penn: Tel Aviv dean says court should find no taking when there is long-term

reciprocity of advantage. Here, they have a long-term benefit of attracting businesses to a landmark in

place of short term. Almost a gov’t “giving”

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Case: Lucas v. South Carolina Coastal (1006) Doctrinally – what is this adding? Per se rule – if gov’t takes all of the value of a land – anytime a gov’t land use reg. has the effect

of wiping out the economic value of the owner’s land, where the economic impact is a 100% wipeout, then that is a per se taking.

100% wipeout = per se taking (unless prohibited under nuisance law) Bundle of rights discussion “Background principles of the State’s law of property and nuisance already placed upon

land ownership” A land use law that has the effect of reducing the effect of someone’s land to 0 is not a per se

taking if Sulman can show that under the State law (will vary from state to state) that the nuisance law (historically) said no you cannot use the land in that way because that use is a nuisance, then all the legislature is doing is saying you can’t use the land in a way that we’ve never permitted. Legislature is not saying something we don’t already know.

1010: “The harmful or noxious principle was the court’s early attempt to describe…” o He is getting rid of noxious use principleo Because it depends on how you look at it: An ad on a highway can be a nuisance or

something beautiful.o Statute regulating this could be stopping a public harm or conferring a public benefit.o Any regulation that you can characterize as abating a public harm can be as easily

characterized as a public benefit. If you characterize it as a noxious use, then it falls into per se rule of no taking, but if you choose to characterize it as a public benefit, then it is not in the per se no taking.

Problem: Shifitng the power to determine if per se taking from legislatures to courtso Nuisance law is judge made law, not gov’to Why should judges be doing this instead of people?

Case: Tahoe-Sierra v. Tahoe Regional Planning Agency (1031) Private-Public interest conservative law firm. Wanted to expand the scope of Lucas and the per se taking rule and have Lucas apply to the case

a temporary taking. Argument that P’s make is that when the Tahoe regional planning agency imposed 2 moratoria in

the basin, you could not develop your property, that constituted a total taking for that period of time.

Saying it was conceptual severance in terms of TIME not SPACE. Penn Central: Space Tries to say look, it is taking 32 months out of a bundle of rights and reducing it to 0. Under Lucas – it’s a total taking per se.

o Want to expand Lucas Stevens shuts this down. Our decision in Lucas is not dispositive of question. 1037: KEY

o “An interest in real property is defined by the metes and bounds that describe geographic dimensions and the term of years that describes the temporal aspect…

o Land would recover value once the restriction lifted.o Different if state law came in and said it was cutting up interest into 32 month interests.

The value of which was totally wiped out. Owner’s interest a fee simple estate. This was a temporal conceptual severance.

Finally: Stevens finally says -we do not say it impossible there is not a taking ONLY saying no per se taking under Lucas. Has to go back for analysis under balancing under Penn. Court only determined no Lucas taking.

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