Property Short Outline[1]

8/6/2019 Property Short Outline[1]

http://slidepdf.com/reader/full/property-short-outline1 1/32

We do not have absolute property rights ± public policy could override property rights (eminentdomain; private/public necessity). (Blackstone disagrees: Property ownership is sole, despotic andabsolute).

4 Types of Property:

1- Real Property: Land and all interests in land, including improvements of land

2- Personal Property: Tangible, movable objects that are subject to ownership and not classified as real property3- Choses in Action: A thing in action; what you own is a cause of action to recover money, a debt or athing, and the property in question is usually an intangible item; ex) stock in a corporation; patent/copyright; personal property that one person owns but another possesses, the owner being able toregain possession through a lawsuit; when prof took classmate's $20--classmate has a chose in action4- Chattle Real: An interest in real property that is more than possession, but less than ownership, suchas the tenant¶s interest in the landlord-tenant relationship, or an estate for years in land, which isconsidered a chattel because it lacks the indefiniteness of time essential to real property.

Why do the distinctions matter? 1. Different rules for its transfer:

-with real property, deeds must be recorded; with personal property, you can't sell what you don'thave

-people who inherit real estate are called ³heirs,´ those who inherit personal property are called³next of kin´2. Different legal rules govern3. Different procedural remedies may be available: The Statute of Limitations for bringing suit to recover real estate is typically much longer than the Statute of Limitations to recover personal property.((adverse possession: a method of acquiring title to real estate, accomplished by openly occupying the property to the exclusion of everyone and in defiance of the rights of the real owner for a period of settime. If the owner fails to take appropriate action to oust you within that time, the property is yours))4. Classification may make a difference as to ownership: ex) tenant puts in light fixtures during lease; atend of lease who does it belong to? if real property-->landlord; if personal-->tenant

5. Taxes may apply differently depending on the property interest.6. Difference in applicable law when there is a conflict of laws:

-Real Property: the traditional rule is the law of the place where the land is situated or located isthe law that will control.

-Personal Property/Choses in Action: the controlling law is the law that controls the owner of the property (based on his domicile)

WILD ANIMALS

A. Possession- The only way to get an enforceable property right in a wild animal is by reducing it to possession

B. What Constitutes Possession?

1. Possession is the seizing or holding of personal property, with or without a claim of ownership

2. 2 Elements of Possession: a. Objective manifestation of intent to control b. Actual control - actual seizure or holding of the property



2 Types of Possession: a- Actual possession: direct or immediate occupation or control of the property

b- Constructive possession: the power of exercising control over property that is in the possession of someone else (ex: owner of a house occupied by a lessee, owner of furniture stored in awarehouse)

3. Legal Relativity:a. Courts have consistently held that some degree of control is required for possession.

b. Degree of Control

i. Absolute Dominion (All Steps Necessary to Render Escape Impossible; animal cannot physically escape/completely captured/actual control over animals)

a. Pierson v Post 1. Fact Summary: Post pursued a fox on a public beach. Pierson shot the

fox and claimed it.2. Mere pursuit of a wild animal is not enough to constitute possession or

give a party an enforceable property right.3. The court held that Post had to have actually seized the fox with theintent to do so, before Pierson¶s interference could be actionable

b. Young v. Hichens 1. Fact Summary: Action of trespass (possession required). Young shotout a net to capture a school of fish. The fish were not completelyenclosed in the net. Hichens entered through the opening and capturedthe fish.2. The court defined possession as absolute dominion of control over theanimal. The court held that Young had not yet taken actual possession,nor did he have constructive possession, because all but reducing the

fish to possession is not the same as possession.

c. Buster v. Newkirk 1. P shot and wounded wolf and followed it onto D¶s land where D killed

it and took it.2. Court said that since P had not gained absolute control over the wolf,he couldn¶t get a directed verdict.

ii. All Steps to Render Escape Practically Impossible

a. State v. Shaw

1. Fact Summary: Shaw took fish from a third party¶s nets and wascharged with larceny. To be convicted of larceny, Shaw must have taken the fishfrom the possession of the owner with the intent to deprive.

On trial, the court entered a directed verdict of not guilty for Shaw, because not all steps necessary to render escape of the fish impossiblehad been taken.2. State appeals and higher court holds that the standard for possession

is more relaxed and possession should be defined as taking all steps necessaryto render escape practically impossible.



a. this seems to be a policy decision based on desire not to punish D and not reward him for criminal behavior

iii. why have these two different rules?1. might just be different approaches taken in different jurisdictions

2. theory of relativity: possession might have a different type of legal meaningdepending on the cause of action (civil case/ criminal case) and the purpose for which we are seeking tomake a definition.

4. Always take into account and advise your client: are the benefits of possibly prevailing worth theexpenses of litigation?

C. Prior Possessors: First in Right, First in Time

1. If there are two legitimate claims and not enough to go around, the earlier claim often wins.The rule of first in right, first in time establishes a priority of property rights based on acquisition of theright in question.

a. A prior possessor, even if a wrongful possessor, will prevail. Prior possession eventhough wrongful, is enough to bring suit against a subsequent wrongful possession

-Jus Tertii: making an argument for a 3rd party in attempt to justify entitlementto possessory rights based on the showing of legal title in another person

-wrongdoer, however cannot assert the rights of third parties

2. Exceptions

a. Custom: Custom and usage in a locale can become a source of law & a basis for awarding possession

i. Ghen v. Rich: 1. Fact Summary: Ghen is a whaler pursuing a whale off Cape Cod.

He shoots a bomb lace and hits the whale, which dies of the wound. The whale sinks andtwo days later is discovered on a beach by Ellis, who sells it to Rich.2. The person who was not the first possessor gets an enforceable property right. Thecourt held that the mortal wound inflicted by Ghen, constituted constructive possession based on the custom of the locale.ii. However, Mayu v. Sullivan and Johnson v. Husky Industries--if the custom isunreasonable, then court may not follow it

-courts more likely to accept a custom of the community than the custom of anindustry

When does a communal custom become a source of law: antiquty, continuity, peace,obligatory, certainty, reasonable, principle of law

iii. Mussel hypo: -You find a case where even when A owns the bed and banks of astream, he can¶t recover trout taken by T since they are ferae naturae. You coulddistinguish that in this case the mussels are imbedded in the soil so they are A¶s throughrationi soli.

-You also find a case holding that even in an enclosed pond entirely owned byone person, the custom in the county is that anyone can fish there unless notice is givenotherwise. You could distinguish that there¶s a big difference between a few fish and tonsof mussels. No implied consent to take that much. Community custom might justifyimplicit consent to some fishing, but probably not a massive operation.



- 1. Under the doctrine of Accession (occurs when a wrongdoer takes another's property and changes its identity and value), the court evaluates:

1. Degree of culpability - willful or innocent wrongdoer?2. Degree or extent to which the value of the object has been enhanced/ and or its identity changed ±

the more the change, the more the scale tips toward the wrongdoer (he¶ll still be liable for the originalvalue)

b. If the possessor violated the Criminal Law: Those who broke the criminal law in obtaining possession of the animal do not get title to the animal.

-possession should be untainted

c. Ratione Soli (Constructive Possession): legal conclusion that a person in possession of theland has ³constructive possession: of things that are on or under his land even though they are not actuallyin his control. 1) The animal must be living on the land and 2) It must be captured on the land. If so, thenit is part of the land and the owner of the land owns the animal.

-However, if the animal living on land is captured on another land, title in the animal willgo to the possessor. (so perhaps 2 wrongs can make a right).

-Concept of relativity: Rights acquired through Ratione Soli are treated for some purposes as real property rights (criminal law; i.e. can¶t be guilty of larceny through R.S., there it onlyapplies to Personal property) and for other purposes as personal property (perhaps in resolving civil property disputes).

3. The State doesn¶t have a property right over wild animals in its territory; only power of regulation (passing statutes)

D. Common Law Rule of Qualified Property Interests

-When a wild animal is reduced to possession, a qualified property interest is acquired. The

property interest in a wild animal is conditional upon possession being maintained-Once a wild animal escapes and is free to go as it chooses, a party loses its qualified

property interest (not necessary that the animal returns to its natural habitat)

Exceptions:1. Animus Revertiendi: If an animal has animus revertiendi or the habit of returning, then a party

does not lose its property right, and the party¶s interest is unqualified (1 escape and return is sufficient)2. Fresh Pursuit: If a wild animal has escaped, and the party is pursuing the animal, the party

does not lose his property right, as long as he is in fresh pursuit.-If O is in fresh pursuit, he may enter private property, under the privilege of necessity, to

regain possession of the animal (But, some courts hold that the pursuit of O ends when the animal of Oenters into the property of a third party)

3. Money Invested: if a party has spent a lot of money to enhance or cultivate their propertyinterest, courts have held they will not lose their property interest if the animal escapes and is captured byanother(S tephens v. Albers)

4. Wild Gas: common law tends to treat gas as wild animal and if the "wild gas" escapes, youlose your qualified property interest (argument can be made to maybe use the Stephens v. Albers rule if you've gone through a lot of expense for the gas)

5. Wild Baseballs (Popov v. Hayashi)- court rules that the value of the ball should be split between the two (equitable division); Schwartz says error in reasoning here



**Interference with an Advantageous Relationship: Courts will hold that if a party¶s propertyinterests are maliciously interfered with they will not lose their property interest if the animal escapes because of the interference. (competition is OKAY as long as you don¶t use unfair means)

-Motive is very important. A bad motive may revoke the privilege of competition. Agood motive may make an action for interference with an advantageous relationship not actionable.

-simulation may be used to assess damages if reasonable and if solid foundation for the projections



LAW OF FINDERS

Policy: a. The law of finders wants to encourage people to find things, because it makes the chance of returning the property to the true owner greater.

b. Some states have passed statutes criminalizing not turning over or reporting lost chattel over a certain

price and then awarding ownership to the finder after a certain period of time.

-The statute may set up a procedure for giving the finder 100% absolute title (after a certain period after turning it in, then the finder gets full title).

-finder will likely have good title against the whole world except for the true owner

Rights & Interests of Finders

-Finding property will give a person a right to it over others who later possess it. (First in right²First intime.)-A finder gets title against all the whole world save the true owner. (TO bears the burden of productionand persuasion on whether he is the true owner)-The finder has a qualified property interest. His interest is 100% until the true owner appears. Then it is

0%.-Since he is not an absolute owner, a finder may have a duty of care. He is considered a gratuitous bailee,liable for only gross negligence.Armory v. Delamire: established the finder as a prior possessor with claim good against the whole worldexcept the true owner; also allows the finder to have a cause of action against subsequent possessors.If the TO is nowhere to be found, the finder may recover 100% of the value of the property from thetortfeasor (we rather penalize the wrongdoer than the innocent party)

-If the TO then returns, the T.O. has a choice of who to bring a suit against. No finder can give or assign greater rights to a transferee than he initially has. (nemo dat qui non habet)

Becoming a Finder a. A person becomes a finder when they reduce something to possession.

b. In order to take possession a finder must: 1-actually come upon or discover the property and 2-have an intent to control the property (and actually control the property)

-specific intent: at the time the party took control of the property, he had an intent tocontrol the property if and only if x condition was met.( Dependent Rel ative revocation: He only had the intention to revoke his first will if hissecond will was valid)-general intent: general intent to control the property

-Peet v. Roth Hotel: Court says the hotel had a general intent to be a bailee for whatever the stone was worth even though it turned out that it was worth a lot more thanthey would have suspected.

-Phelps v. McQuade: The court found the owner had a general, thoughmistaken, intent to pass the jewel to the person standing in front of him

-C orrespondence Exception: if the scam was done by correspondence,there is only an intent to pass title to the specific person (C ondy v.

Lindsey).(in AP, most courts hold that when A makes honest mistake building fence onO¶s property, A had general intent to control the area regardless of whether it washis)

- Intent is defined differently based on different policy considerations: to criminalize antisocial behavior,giving parties their justifiable expectancy, expecting hotels to have a much higher duty of care, wanting



TO to have a better chance at it, desire to effectuate and implement the dead¶s wishes, desire for consistency in the law, etc.

3. actually control the property: seeing something does not give you a property interest.Seeing something is not possession, because there is no control

(but if get pushed out of way, could bring action for tortious interference with

advantageous rltshp.)-if you pick up and put back, no intent to control so no possession-placing buoy over wreck=no possession

Liability of Finder: at common law, the finder is a gratuitous bailee. He has the duty to exercise duecare under the circumstances. ;-if the bailment benefits the bailee, the bailee¶s standard of care rises again

Rights of Finder -finder feeds horse hay: TO benefited from finder¶s action and finder should be able to recover on qua sicontr actual benefit

-Can he claim a right to continue to possess the lost item until the benefit is paid? NO.

-what if there was a reward? If he knew previously of the offer, then he may recover it. If not, then hecannot recover (in a lawsuit).

Finders v. Landowners -a landowner is regarded as being in possession of everything found on or under his land-The owner will be found to be the prior constructive possessor of the object although unaware of its presence there.-owners of the locus in quo: ownership of the place of the find gives them constructive possession over everything found there

-However, An owner is less likely to prevail over a finder if he did not know of the presence of the lostobject on the realty, was not on the premises when the object was found, and was not in possession of the

realty at the time of its likely loss. (Hannah v. Peel)-mislaid property: something someone intentionally placed somewhere and then forgot it

-in a battle between a finder and an owner of premises for mislaid property, the owner of the premises prevails (to keep it for true owner)

How do we reconcile the results of the lost v. mislaid cases?Hannah v. Peel: breech in crevasse of window, finder prevailsBridges v. Hawsworth: parcel of banknotes found on floor of shop, finder prevailsSouth Staffordshire v. Sharman: guy hired to clean out pool of mud finds ring at bottom, O prevailsElwes v. Briggs: O authorized F (who was lessee) to put in a gas holder on premises and F finds sunkenship under the surface, O prevails

-Holmes view: distinction should be drawn between public and private places. If an object isfound in a private place, that the owner of the private place intends to exclude the public from that area,he intends to control everything in that area. If it is a public place, since the owner has opened up the premises to the public, he cannot intend to possess what he is not aware of.

-Pollack : focus on de f acto control. The lost item is given to the person who had possession first.-Salmon: Possession is intent to control, & you can¶t intend to control what you are not aware of -#4: we award the lost property to the first person to reduce it to possession. realistically, if the

owner is unaware of the object, has no intent to control, so we should give it to the finder -#5: we award the goods to the 1st one to reduce the goods to possession. The O of a premises is



Deemed to possess anything that is attached to or under his land-Schwartz: The right of the finder should not be allocated on the basis of possession, but based

on the ultimate policy objective²the true owner getting possession.

Classifications of Found Property Lost property: Lost property has been involuntarily, unintentionally separated from its owner. No

reclaiming is likely, so the finder will prevail over the owner of the location. Stolen property found bysomeone who did not participate in the theft is lost property.

Mislaid property: Mislaid property is voluntarily put in a certain place by the owner who then overlooksor forgets where the property is; acquires no rights to the property. The right of possession of mislaid property belongs to the owner upon which the property is found, as against all persons other than the trueowner. Mislaid property found on private property belongs to the owner of the property.

-An owner mislaying property is supposed to remember its location and return to reclaim it. So the owner of the location is likely to be found in prior constructive possession of it, but this doesn¶t encourage thefinder to disclose his find. A better rule, but not the law, would be to give the property to the finder after a period of time if the true owner fails to show up. (Schwartz)

-If O owns building and T leases it, and F finds something there, it goes to T since a lease is a temporarysale.

Abandoned Property: he owner can remember its location, but refuses to reclaim it. Abandoned property belongs to the finder of the property against all others, including the former owner Abandonment requires: (a) a specific intent to abandon the object and (b) an act abandoning it

-passage of time without the intention to abandon the interest will not constitute abandonment-must show a clear, specific intent from the owner of the chattel to relinquish the chattel

-MLB owns the ball. When it is hit out of the park, they have abandoned their property interest, and thecustom is that the first person who reduces it to possession has title.

Treasure Trove: To be classified as treasure trove, the property must have been hidden or concealed for such a length of time that the owner is probably dead or undiscoverable. Not relevant in modern U.S.law.

Actions to Recover Lost Property 1. Trover: you recover 100% of the value of the chattel; it is the procedural action to recover for

conversion of personal property.2. Conversion: occurs to protect some tangible item of personalty

3. Replevin: seeks the specific recovery of the personal property, along with damages for the valueof the possession lost because of the conversion, and any permanent damages to the property



BAILMENTS

A bailment is the transfer and delivery by an owner or prior possessor (bailor) of personal property toanother (bailee) whose purpose in holding possession is often for the safekeeping for the owner.

Types of Bailments

1: Solely for the benefit of the bailor (gratuitous bailee)-at common law you have to prove g ross ne gl i g ence -a finder is considered gratuitous bailee

2: Solely for the benefit of the bailee-Don¶t even have to prove ordinary N, even if bailee is sl i ghtly N , b/c bailee owes the duty of thehighest degree possible.

3: Mutual benefit bailment-Duty of ordinary care, ordinar y N

More modern approach is that the duty of care owed by any bailee is due care under the circumstances.

Level of control is important: Ex of parking in lot: If you just leave your car there it¶s as if you are

just leasing the space and you only have a landlord-tenant relationship so they have almost no duty of care. However, if they park the car for you and give you a ticket, there is more control (and intent tocontrol) and this is probably a bailment.If you leave a diamond in the trunk they have not necessarily become the bailee of the contents of thetrunk ± just the car itself and anything visible.

Ex-Coat check loses expensive scarf: was there control? Yes;-intent to control hinges on whether we define as general or specific intent (could be disclaimer)

Rule: a suit by the bailee precludes the bailor from suing the thief because of the consensual

relationship (W inkfield case; although if there was really bad settlement could possibly sue the bailee onnegligence)

Example- Safe deposit box: despite not full control, we view it as a bailment as a matter of policy so thatcreditors could garnish from it and also people demand a very high duty of care from a bank Checking account: -debtor/creditor- not a bailment relationship, the bank does not owe you the specificmoney you dropped off. -although a trust/trustee and custodial rltshp would probably be bailments

Collins v. Prestige: clerk on the otherside immediately sees this is the wrong bond and yells out that it iswrong and pushes it back through slot;-majority: D was an involuntary bailee but obtained absolute domion and control and is therefore liable;contract is not always needed for a bailment to be valid (Schwartz agrees)-Schwartz said should have looked at ³did they have intent to control depends if you look at them having

general intent or specific intent´



ADVERSE POSSESSION

In Adverse Possession, the possessor¶s rights are greater than they were in the finder's unit. An adverse possessor may gain full-blown legal title of real and personal property even against the TO after theStatue Of Limitations (SOL) has run.

-The statute of limitations begins to run when the cause of action accrues. As a result, people may

be barred from suing prior to the acknowledgement of a claim.-Adverse possession may apply to both personal property and real property (for personal property

the SL relates to an action for replevin, for real property the SL relates to an action for ejectment)-applies not only to blatant conscious wrongdoers, but also to innocent possessors

How did the doctrine come about? judicial gloss and interpret ation says that when the owner¶s ability to bring an action for ejection expires (when SOL has expired), one may actually gain title by adverse possession

Policy reasons: early rationale to punish O who has delayed in bringing claim; to protect against staleclaims; repose/calm of mind for a possessor; certainty of title; encourages productive use of land

Elements of Adverse Possession

1) Possession of someone else's land: exercising the degree of control of the property that the averageowner of similar property would exercise under similar or like circumstances. The degree will vary withthe nature and location of the property; the standard for possession is objective

-exclusivity is not necessary but is relevant based on the nature of the property as evidence-Mere assertions of ownership, no matter how open and notorious will not suffice

2) Open & Notorious: satisfied if the reasonable person should have known (objective) that he¶s actingas the owner of the property even if he himself doesn¶t realize he¶s not the true O

-a furtive concealed possession is not the sort of control that the average owner would exercise

3) Adverse: possession is only adverse when it is without permission from the true owner -does not require hostility according to most courts-permissive possession may become adverse possession (must expressly communicate his

repudiation)-oral agreement for land violates statute of frauds but can still be used as evidence that a

possession was permissive

-a blatant wrongdoer may sometimes gain possession through AP (exception: a blatant adverse possessor might not get title if he makes false representations to the true owner that he will never claimtitle, he will be estopped from taking a position counter to his prior position) (also some states have passed statutes saying you must have a claim of right--must have a reasonable belief that no one else has

title)

4) Color of Title: color of title refers to a claim to title which appears valid, but may be legally defective;deed or other written instrument that purports to give legal title but for some reason is legally insufficient;this will not be a requirement for adverse possession unless stated in the state's statute

-color of title is a requirement for Constructive Adverse Possession: Normally AP will onlygive you title to the land that you actually occupy and no more. However, if you have a defective deed



(color of title), you are deemed to be in possession of the entire acreage described under that deed; landmust be contiguous, however; and some jurisdictions require good faith for C.A.P.

5) Continuous: possession must be continuous and without interruption throughout the period of thestatute of limitations

-Continuity does not mean every day or even every month, but for continuous, the adverse possessor has to do the same things an average owner would do with the land in that location and climate

-If there is an interruption in the running of the statute, then the count starts over:-abandoning the AP: will be a question of fact for the jury whether he had abandoned it-true owner bringing an action of ejectment will only constitute an interruption if

successful (verdict in an action of ejectment relates back to when the action was first brought)-true owner regains possession (self-help)-Converting the adverse possession into permissive possession; statute stops running as

soon as the possession becomes permissive

Tacking:1. Adverse possessors can combine or tack their period of possession with that of a predecessor, so thatone adverse user need not be in possession for the whole prescriptive period if there is privity of estate or a consensual succession. (must also not be period of interruption, must be continuous)2. Can also tack different owners together: once the statute starts to run against a former owner, itcontinues to run against the current owner since he¶s buying the land subject to those former years of AP

Tolling: In the event that the TO is suffering from a disability (minor, insane etc.) when the COAaccrues, the statute tolls and you can¶t get AP until a certain amount of time after the disability is removed

-the disability must be in existence at the time of the accrual of the cause of action-we don¶t tack disabilities. The disability of a subsequent owner is irrelevant and does not trigger

the tolling provision

-we only take the disability of O at the time the action accrued into account and therefore thesubsequent disability is irrelevant

-when suffering from 2 concurrent disabilities (as opposed to a supervening subsequentdisability), the disabled owner gets the benefit under the tolling provision of whichever disability lasts thelongest. If he never recovers from being nuts, the AP will never get title

Adverse Possessor's Title: the adverse possessor will acquire good title assuming all of the above criteriaare met

-title is free and clear of claims to the property that are dependant upon a continuation of the prior possessors title

-if after the AP acquires title, the O sells to a bonafide purchaser, the AP wins because O no

longer has any title to sell to the BFP-A¶s title should relate back to the moment he went into possession b/c otherwise it would go

against the reasoning behind AP

Adverse Possession of Personal Property: -differences: statute of limitations will generally be shorter; the action known as replevin; personal property is movable and so harder for true owner to locate-the common law rule is that the statute starts running at time of theft; however, many jurisdictions havechanged this



-some apply a discovery rule-the statute does not begin to run until the plaintiff ascertains or with the exercise of due diligence could have ascertained who and where the thief is (an objectivestandard); so requires the owner to make due diligence(side note: UCC defines bona fide/ good faith as "reasonable in fact"; though you may have actedunreasonably, you are held only to know what you actually know instead of what you should know(subjective bona fide standard).

-some apply a Demand and Refusal Rule: If someone is a bona fide purchaser the s/l does notstart to run until there has been a demand by the TO to get the painting back and a refusal by the bfp(though once the t.o. knows where the good are, the t.o. must make its demand for the property within areasonable period of time).(side note: the defense of laches: a defense may be raised that the opposing party has failed to raise aclaim against you for an unreasonable amount of time and you relied upon the delay to your greatdetriment)

Areas in which Adverse Possession does not work

1. Future Interests- The owner of a future interest, since they have no standing to bring a cause of actionagainst an adverse possessor, cannot be affected by the doctrine of adverse possession or an easement by prescription. If all a person owns is a future interest, then you can¶t adversely affect the interest

-AP commences before the conveyance: If the statute begins to run before the conveyance of afuture interest, the statute continues to run

-AP commences after the conveyance: then the AP will have to start over once the title passes tothe inheritor

2. State Interests- One can¶t get title to the government¶s land through AP since they has sovereignimmunity

-The state can get title by adverse possession since you can sue the private individuals that work for the state (as sovereign immunity doesn't extend to employees)

3. Easements Interests- an easement is not extinguished by adverse possession of the property, the APwould have had to obstruct or interfere with the easement for the statutory period, so that a cause of actionwould have accrued for the person doing the easement

Prescription- companion doctrine for adverse possession-In the area of prescription, O owns the property. A for the period of the statute of limitations uses O¶sland. A will by prescription gain the right to use the land²an easement by prescription.(side note: an easement appurtenant is attempted to be gained when you use someone else¶s land to benefit your land for the period of s/l)

-Easement by prescription can be gained by long-continued adverse use; the elements are the same asfor AP (actual use, open & notorious, adverse, continous, for the statutory period)(sidenote hypo: Does A have an easement by prescription to the light and air? No, since no cause of action has accrued since O never could have sued A for looking out his window at the view.)



GIFTS AND MODES OF TRANSFERRING WEALTH

A. Terminology -Basis: The values assigned to a taxpayer¶s investment in property and used primarily for computing gain or loss from transfer of the property. Basis sets the starting value of capital assetsto determine the extent of a gain or a loss on the sale or transfer of the assets

-Step up in Basis: The basis of property, given gratuitously at death (transferred by inheritance),is the property¶s fair market value at the date of death.-Carry over Basis: The basis of property transferred by the gift or in trust, equaling thetransferor¶s basis-Elements of a gift ± Donative intent, delivery, and acceptance are all necessary. There areexceptions, refer to relevant sections.-Intestacy-act of dying without a will

B. Taxes

-Estate tax-applies when you die and seek to transfer your wealth at death by will or intestacy, or in amanner the IRS considers to be testamentary in manner.

-Generation skipping tax (GST): the generation skipping tax imposes a tax on both outright giftsand transfers in trust to or for the benefit of persons more than one generation younger than the donor,such as grandchildren. The generation-skipping tax will be imposed only if the transfer avoids incurring a

gift or estate tax at each generation level.

Schwartz seems to feel the primary purpose of gifts/estates is to benefit a person's beneficiaries.-seeking tax savings can sometimes undermine the purpose/intent of the donor

C. Types of Gifts

1. 5 Million dollar exemption: there is a once in a life time exemption of five million dollars from

taxable gifts (technically it is a taxable gift, but you do not pay taxes on it)

2. Will: A will is a written document that leaves the estate of the person who signed the will tonamed beneficiaries.-advantage: you retain absolute control of your property until death. The beneficiaries have no property right, only an expectancy prior to death.-shortfalls: subject to probate; subject to formalities (2 witnesses and in presence of testator)

3. Irrevocable Intervivos gifts -annual excl usion: a living donor may make a non-revocable gift of 13k to as many different people as he wants to each year, completely tax free (spouse can also give 13K so 26 K total)-cannot be passed on in trust, living donor must make the gift

4. Revocable Intervivos Trust: most prominent estate planning vehicle-trust is created (and now owns the assets put in); it is revocable-in the event of incompetency, the trustee will have the power to use the property to benefit thedonor and his beneficiaries (should appoint someone outside of family because if that person diedwith power of trustee, trust might be included in his estate as well)-no significant tax advantages; trust will be included in donor¶s estate; and while the donor isliving the income received under the trust is taxed on the income of the donor



-justify the validity of revocable trust? While a will does not take effect until the date of thetestators death, a revocable trust conveys an interest in the trust's beneficiaries immediately

5. Irrevocable Intervivos Trust: irrevocable gift during your lifetime that is made in the form of atrust- Benefi t s: avoids probate. you may still qualify for the annual exclusion that applies to intervivos

gifts, capped at the amounts those gifts are normally subject to-T ax consequences:a) Income tax: generally you can avoid having any future income taxation attributed to the donor.

-exception: if you provide flexibility under the trust, depending on who is selected as thetrustee and how you draft his powers, the income may be attributable to you for incometax purposes

b) Estate tax: normally once you make the irrevocable intervivos trust, such property will not beincluded in your estate for the purposes of the estate tax and will be considered a gift (exceptions:unless the donor names himself as one of the trustees or beneficiaries).

c) Gift tax: a gift tax will generally be computed on the trust in April the year after you made the

gift (remember, the annual exclusion may apply; 5M lifetime gift deduction may apply).-When calculating the value of the gifts for subsequent grandchildren, none of the tax exemptionswill apply.

6. Specialized Intervivos Trusts:

a. GRAT (Grantor Retained Annuity Trust) -a GRAT is a irrevocable intervivos trust (made during life); the donor retains the right to getan annuity for a fixed period of time-At the end of the term, any remaining value in the trust is passed on to a beneficiary of thetrust as a gift.

-The value of the gift given to beneficiaries under a GRAT is calculated at the time theGRAT is created and taxes are based on this value (so if the value ends up higher than this,this will be received tax free)

b. GRUT (Grantor Retained UniTrust) -the value of the annuity to be paid out under the trust varies from year to year

c. Personal Residence Trust -you take a personal residence and you transfer it into an irrevocable trust for a period of time-The gift tax on the property will be calculated based on the day the trust was created. On thatdate, since the beneficiary only has a future interest, the present value of the gift to the beneficiary will be calculated based on the length of the period of the trust and the interest

rate (accordingly, the present value of the gift may be less than the actual value).-Cost: after the term of the trust ends, the beneficiaries will own the property-Example: O could remain in the residence and pay rent

-benefit 1: low gift tax;-benefit 2: because the income of the trust is going to be payable to the donor¶s spouse or

his children, there will no income tax payable by the kids based on the rent they receive-why? b/c for income tax purposes, the grantor is treated as the owner of the trust



d. CRAT (Charitable Remainder Annuity Trust) -Grantor creates an irrevocable trust and retains an annuity (which must be at least 5%),under which he retains a right to keep the annuity for the balance of his lifetime (though thiscan be paid to a specified beneficiary); when the grantor dies, the remaining property in thetrust then goes to his beneficiary, which must be a charity.

-there is 100% tax deduction under a CRAT and its value is not included in the grantor'sestate for estate tax purposes.-advantages:

-In the year the donor creates the trust, the present value of the charitable gift isdeductible on his income tax return-At the grantor's death, the trust will not be subject to estate taxes.-avoid a capital gains tax

e. CRUT (Charitable Remainder UniTrust) -similar to CRAT, except the annuity is not a fixed amount based on the original value, but is based on a fixed amount of the trust based on its value from year to year.-One disadvantage of a CRUT is that the grantor lacks stability (does not know how much the

annuity will pay).-one advantage of the CRUT is that if the trust is not making income, the annuity does nothave to be paid that year

f. CLAT (Charitable Lead Annuity Trust) -create a trust whereby a fixed annuity is paid to a charity for a period of time and when theterm expires the remainder of the gift goes to the grantor's children.-the charitable portion of the gift is tax free, you also avoid an estate tax-the value of the gift to the kids is calculated based on the day the trust is created- Normally only done after death (to avoid income tax on the grantor)

g. Present Interest Trust

-way to give future gift but qualify for the annual exclusion anyway-must give the trustee absolute discretion to pay out income/principle as he sees fit-until minor turns 21, trustee has absolute discretion; when he turns 21, principle andundistributed income gets paid to the former minor (but parent cannot be the trustee for own child no annual exclusion)

h. Life Insurance Trust -trust owns the policy-can arrange the policy so that the proceeds can be received free and clear of estate tax andgift tax (insurer cannot retain incidence of ownership in the policy and trustee must give each beneficiary notice and the reasonable time to withdraw)

7. Joint Ownership

a. Tenancy in Common -no right of survivorship-owners can own unequal shares-the interests of the owners are undivided; there is a unity of possession

b. Joint Tenancy -there is a right of survivorship (upon death, the interest is transferred to the other)



-must have an equal interest in the property, and must be unity of time and title

c. Tenancy in Entirety -there is right of survivorship, limited to husband and wife rltshp-different than joint tenancy: cannot be unilaterally destroyed by an action of partition or destroyed by way of a conveyance from one owner to a third party.

-Joint ownership is expensive from an estate planning point of view.

-estate tax: -a. tenancy in common: will be includable in estate-b.joint tenancy/tenancy in entirety: property interest of the party that dies will escapeestate taxation at death (unfortunately IRC 2040 taxes this loophole)

-non marital: includable in estate in proportion of consideration paid for it-marital: IRS automatically includes 50% in the first decedent¶s estate

-capital gains tax:

-gain is measured by the amount realized on the sale of the asset, less your basis on the

asset (the amount to originally bought it for)-in a tenancy in entirety, to avoid a huge capital gains tax: after one spouse dies, the other can renounce 50% of the jointly owned property. you could have put a provision in eachspouses will that all property passes to the other person under the will.

-Since when property passes under a will it is required to be 100% included inthe decedent's estate, it will get a 100% step up in basis.

-estate planning and unity of possession:

-exclusion: one co-owner may not restrict the other from any portion of the property-transfer of interest: one co-owner cannot restrict another co-owner from assigning hisinterest to a third person-duty to account to y for those business activities; but not for small improvements or

maintenance (in the absence of an express agreement)-however if the repairs were made in order to rent out the premises, then he canget a credit for the repairs

-if x makes a lot of improvements, he can possibly seek this value later when the property is sold

-creditors could reach x¶s ½ of the estate if x was insolvent in a tenancy in common-remember: for joint tenancy, needs to be unity of time, title and interest

-in a tenancy in entirety, creditors cannot reach a deceased persons tenancy upon death; thedeceased¶s interest will pass free and clear to the other person (at least in NY)-for gift tax purposes, if x puts in all the money into a joint account, no gift is calculated under thegift tax until y makes a withdrawal

8. Private Family Annuity -owner of the asset sells it to another party. consideration is rendered by the buyer promising to pay the seller an annuity for the duration of the seller's lifetime. this asset will now be out of thesellers estate for estate tax purposes and will not be considered a gift to the buyer (annuitycalculated must be sufficiently high)

9. LLC: Limited Liability Corporation -for income tax purposes, there is no taxation of the corporation



-advantages: offers far greater privacy and less public scrutiny than does corporate law.-convenient way for a person to convey benefits to his family by giving them minoritymembership interests (gift tax will be low as a minority interest is worth less)

10. Totten Trust -a totten trust is a trust formed when a grantor deposits his or her own funds in a bank account in

trust for a beneficiary-the trust is revocable-if x dies in debt, creditors can reach the property before y-since x retains so much power, the income is attributable to x for income tax and estate tax purposes-y will only be entitled to the money in the account if y survives x-y has no rights to the account while x is living-benefits: simple to draft, avoids probate-costs: cannot suit unique needs of clients

11. P.O.D. (payable on death)-A person opens a security account and states that on his death, the proceeds of his account will

be payable to another person-the p.o.d. account is treated, for all practical purposes like a totten trust- benefits: avoids statute of wills, very simple to create-costs: cannot suit unique needs of clients

12. Power of Attorney -An authorization to give someone else the power to act on your behalf and bind you; does notneed to be a lawyer -under the common law, the death or incompetency of a principle revoked the power of attorney.

-most states now permit the creation of a durable power of attorney: power survives theincompetency (doesn¶t change death rule)

-agent is held to a fiduciary standard, he must act in the best interest of the principle

-limitation: powers of agent not clearly spelled out as clearly as there would be in a trust, agent'sauthority terminates when the principle dies

D. Why do people want to make irrevocable intervivos gifts?

-gift tax and estate tax rates are the same; also there is an aggregation of your estate when youdie; so why would you want to make a gift since it may push you into a higher bracket?

1. annual exclusion: non-revocable gift of 13K to as many different people as he wants to eachyear; so gift will be free and clear of gift and estate tax

2. unlimited educational and medical deduction (must pay directly)

3. any asset a donor gifts to another person that then appreciates in value will not be subject to atransfer tax.

-the growth in value of the gift received by the donee will be received free and clear of anestate tax or a gift tax.

4. GRAT5. CRAT6. Avoid probate

Costs: affordability; loss of control; carry over basis (done has same basis as donor)



SUBSTANTIVE LAW OF GIFTS

in order for a gift to be valid, there must be:-donative intent-delivery-acceptance (a donee has ability to disclaim or renounce gift)

2 types of gifts: Irrevocable intervivos gifts and causa mortis (revocable)-a gift causa mortis will be includable in estate for estate tax because its revocable; an irrevocableintervivos will not (though its subject to gift tax-same rate)

Purpose of the delivery requirement: -want to impress upon the donor significance of what he¶s doing (ritualistic)-delivery also provides evidence of donative intent because he now has possession-sets up a procedure for a donor to follow

Could a donor constitute himself as a bailee for a donee? No, not without a delivery 1st.Could donor make deed of gift? Yes, but the deed must still be delivered.

If a gift is delivered, even if the donee doesn¶t know about the gift, acceptance is presumed (however, this presumption can be overcome).

Transfer of legal title vs. equitable title:Ex: Father orally says I declare myself as trustee of these two horses for the benefit of my minor son x.common law says he will have enforceable property rights. (but NY statute says you can¶t do this orally)Ex: signs a press release stating she is gifting the library to HU (books remain); then dies

-press release was viewed as a deed of gift; and since there was a delivery of the deed, it wasviewed as constructive/symbolic delivery and delivery was satisfied

Gift causa mortis:

-if a donor recovers from the illness that prompted the gift, the gift is automatically revoked by operationof law-in some jurisdictions, if the donee of the gift causa mortis after receiving the gift, redelivers the gift, byoperation of law this will revoke the gift.-unlike a will, title passes to the donee immediately upon delivery-the donor may always revoke a gift causa mortis before his death-general rule that if the donor outlives the donee, the gift will be revoked

-simultaneous death? NY 2-1.16 EPTL: when the disposition of property depends on the disposition of death, the property of each person shall be distributed as if that person had survived (died later)-where a testamentary disposition of property depends upon the time of death of two or more beneficiariesdesignated to take alternatively by right of survivorship (ex: will has two beneficiaries; the surviving

beneficiary will take, whoever lives longer; then both die together), the property will de divided amongstthe parties and sent to each estate-where there is a joint tenancy or tenancy in the entirety with a right of survivorship and there issimultaneous death, 1/2 will go to the husband's estate, 1/2 to the wife¶s-insurance policy: proceeds will be distributed as if the beneficiary predeceased the insured-However, NY 2-1.16 EPTL states that an express manifestation of intention in a will counter to thisstatute will be honored (you can state what happens in the event of simultaneous death in your will).-The above statute does not deal with a gift causa mortis. Well, gifts causa mortis do not necessarily fitinto any of the above categories (perhaps we apply the policy of the statute-but difficult to say)



(Not every deathbed gift is necessarily a gift causa mortis²could meet the irrevocable intervivosrequirements (depending on intent of the donor).

-if irrevocable intervivos, then returning something back to the donor will likely be held to be bailment)

What if x does not die of the precipitating peril or illness that caused X to make the gift, but dies of someother cause of death? authority is divided.

What is the effect of a donor of a gift causa mortis stating in his will that he hereby revokes the gift hemade to y and would instead like to give to z? such a statement in a will, will not revoke the gift; other side would want to argue we want to honor the grantor¶s intent

Ex: X honestly believes that any time he sits down in the dentist chair he may die. He gives friend ring but then asks for it back. Authority is divided. Schwartz said should use objective standard, but somecases apply subjective.

Most cases hold that fears of death from an external source (war, being shot, ect.) are not legitimate to

support causa mortis gifts.

Delivery Element:-Normal standard: actual delivery of the gift; the donee gets possession and control

-Constructive delivery: delivery to the donee of the means of obtaining possession and control-however, if an actual delivery is feasible then an actual delivery will be required (why? Ritualisticfunction) -what if donor had duplicate key that he held onto? Authority split. (can argue that¶sevidence of lack of donative intent)

-also conflict of authority on whether delivery of a map counts as constructive delivery(note for constructive or symbolic delivery there still needs to be delivery of the symbol)

-under most state laws, if the deed is recorded, there is a conclusive presumption that the deed wasdelivered from the grantor to the grantee

-If the donee is already in possession of the gift, then all that is needed is the donative intent (don¶t need are-delivery).-you can also deliver gift to the agent of someone

-can you be an agent without knowing you¶re one? Authority split.-you can also give gift to your agent to give to someone (??); donor¶s state of minds as to who is his agentrelevant)((Note: what property conveyed under a will? Neither a present nor future interest, merely an expectancy)-when dealing with gifts causa mortis perhaps we relax the agency delivery requirement since the gifts arerevocable anyways

Some states hold you cannot effectuate a gift causa mortis by symbolic delivery because it violates all of the policy of the statute of wills. therefore, if you want to effectuate a gift causa mortis, you must do it bya delivery of the subject matter of the gift; not by way of a substitute of a symbolic delivery of a deed of gift.

Personal Property Future Interest -generally you can create a future interest in personal property (Exception: can¶t create fee tail in personal prop)



-you cannot create future interest in a consumable-it is possible to have a gift intervivos of personal property in which the donor retains possession andenjoyment for the balance of his lifetime and the donee is given a future interest and it does not violate thestatute of wills (but delivery/donative intent will still need to be satisfied)-the owner of a future interest has enforceable rights

NY Elective Share: NY Elective Share: if a surviving spouse is not happy with the provisions made for the spouse in the decedents will, the spouse can waive the will and get 1/3 of the assets owned by thedecedent at death outright (within the decedent's probate assets), as well as 1/3 of testamentary substitutes(substitutes to a will; revocable trust, intervivos future interest gift).

Effect of the gift of a check: -authority split-UCC states that a check, by itself, does not operate as the assignment of funds in the bank to the donee.

-many courts have interpreted the UCC to mean that a check does not operate as an assignment of funds (effects the donor/donee relationship). a check is accordingly just a promise to pay (agratuitous promise, not supported by any consideration), with no present transfer taking place byway of an assignment.

-Ex: suicide with checks written: well, if this is a gift causa mortis, there is a preliminary question of whether suicide is a threat from some internal bodily malady? would have to view the internal processesof the mind as being some internal malady; but would such a gift causa mortis be in violation of public policy? split of authority between cases. majority opinion in smith upholds it, minority/dissent rejects it(Schwartz says it should be a gift)

Engagement ring-at common law, It depends on who was at fault in causing the marriage not to occur. If B is at fault, hecannot get the ring back. If G is at fault or the break is mutual B can get the ring back.-Many states have passed statutes that abolish actions for breach of promise for engagement(however, you may be able to sue for the ring or the value thereof under an unjust enrichment theory)



BONA FIDE PURCHASERS OF PERSONAL PROPERTY

A. Bonafide-ness

-some cases and UCC use subjective standard (what they actually knew, even if negligent)-other cases use an objective standard (whether BFP exercised due care and diligence)

B. General Rule -As a general rule, a seller of personal property can¶t convey a better title than that which heholds. (nemo dat qui non habet)( Note:-in NY, a bfp will become a converter from date there is a demand/refusal. in contrast, the bfp under the common law becomes a converter as of the day he purchased the goods.)--A BFP is under a pre-existing duty to return all items

-Ex: BFP insures car. There is clause that states insured party has to be the sole and unconditionalowner of the car. Consequently, the insurance company is not liable for the damages. If not for the clause, BFP might have recovered.

-The BFP who innocently purchases and later sells stolen goods is liable in trover for the full market

value of the goods as of the date of conversion.-The majority holds that a BFP is a converter on the day he purchases the goods (in NY, needs to be a demand and refusal for conversion)

C. Exceptions (to nemo dat qui non habet)

1. Market Overt-In an open, legally regulated public market, buyers can acquire good title to productsregardless of any defects in the seller's title. (no jurisdiction has adopted this in the US)

2. Sale of Money or Negotiable Instruments-A BFP who buys money or negotiable instruments (check, barrer bond, stock) will prevail

over the true owner.-promotes commerce, business and free trade

3. Estoppel (Possession Plus)

-If an owner, by his words or conduct, has expressly or impliedly represented that the possessor (bailee/business partner, etc.) of the goods is the owner of them, or that he has the authority to sellthem, the owner is estopped from denying the truth of these representations to a BFP who buys ingood faith reliance on the representation-does silence constitute representation that could be considered estoppel? Authority split-Ex: BFP comes in and store wrongfully sells him O¶s watch. At common law, burden would beon t he BFP here and leans toward the O recovering. However, under the UCC the BFP wouldactually prevail.

UCC expands doctrine-a purchaser who buys goods in the ordinary course of business from a merchant to whom thegoods who have been entrusted (that is in the business of selling those goods) will be protected.

-not speaking of a BFP but of a ³buyer In the ordinary course of business´²good faith, buyer must be without knowledge that the sale to him is in violation of the ownershiprights of a 3rd party (subjective standard)

-exception: sale from pawnbroker; sales in bulk; and there must be validconsideration (and not just the cancellation of a pre-existing debt)



4. BFP of Legal Title Chops Off All Equities

a) The BFP of legal title will chop off equitable title, and the BFP will prevail.-the BFP will cut off O¶s remedies, and the BFP will prevail. Since BFP and O¶s equities arein balance, we leave title where it is ± with BFP.

-General intent vs. specific intent will come up here again

- UCC: 2-403(1): a person with voidable title, has the power to transfer a good title to a good faith purchaser for fair value (reflects phelps so far.)-UCC continues: When the goods have been delivered under a transaction of purchase the purchaser has such power even though (a) the transferor was deceived as to the identity of the purchaser.

-In a trust arrangement, the trustee has the legal title in paintings, while the beneficiaries haveequitable title. Say the trustee wrongfully sells the paintings to a BFP-the equities are in balance,so the title is left where it is- in the BFP.

-O prevails b/c there is no balance of equity. There is no reason to protect BFD b/c it was a -gift andnot out of pocket. A BFP will prevail but not a BFD.(If BFD expended a tremendous amount of money in reliance upon the gift he might prevail)

-Ex: BFP turns around and sells to P, a purchaser, who knows of the original fraud. What result?-The BFP of the legal title will cut off all equities.-P will be protected, or sheltered by the BFP, b/c we want the BFP¶s title to be worth something.-we draw the line here at the frauder getting it back (this is not allowed)

Courts are divided as to whether bonafideness is an objective or a subjective standard. In the area of realestate, most courts have adopted a subjective standard.

Illustrations:

i. Oà F (fraud- person to person) à BFP (BFP will prevail b/c voidable title, and unless rescinded,BFP will get legal title)

ii. Oà Fà P (purchaser but has reason to believe fraud has been perpetrated) under thesecircumstances he can¶t qualify under exception 5 and the general rule is that a river cannot riseabove its source.

iii. Oà Fà BFD (O would prevail because b/c we don¶t have a BFP. Donor did not pay anything. Heis not out of pocket. O is going to prevail even against the BFD) (perhaps under unjustenrichment or equitable principles, if the donee relied on the gift and had a change of position,under those circumstances he may have a better claim)

iv. OàFà BFD à BFP (BFP will prevail)

v. Oà Fà BFPà P à D (BFP owns the property outright so a regular, non- fraudulent participant getstitle b/c what would the title be worth?)

vi. OàFà BFP à F (F cannot have a washed sale curing from his defect. So this may be an exceptionto an exception) F cannot be sheltered

5. Factor¶s acts-Authorized Agent/Entrustment -A factor is an agent a person has authorized to sell his goods



-Courts hold that where an agent is entrusted with merchandise and is cloaked with theauthority to sell, even though the agent violates the instructions of the sale, the BFP will be protected.-if consideration is grossly inadequate, then P is not really a purchaser, but a donee, and itraises the question of whether P can be bonafide.

6. Judicial Sale in Rem -A BFP who buys at a judicial sale in rem MAY prevail over the true owner.-however ,a BFP at a judicial sale in personam will not prevail

7. Recording Exception -If there is a recording requirement with respect to a transaction, and the purchaser fails torecord, the purchaser can pass on a better title than he has, and a BFP may still prevail.

D. Damages & Remedies 1. Damages only arise under the general rule (nemo dat) and the BFP is liable. A BFP will

not be held liable under one of the exceptions.

2. The general rule is that the BFP will be liable in trover for conversion.

3. The BFP is liable for the full market value of the goods at the time and place of conversion. (discourage thieves since they¶ll know the BFP can then sue them for breachof warranty for this larger amount)

--however, the court may take equitable considerations into account when there isno wrongdoer and allow a lesser recovery

4. What if fluctuations in value are not due to wrongdoer but b/c of the market?-Damages will depend on the jurisdiction (written on p. 48)

5. -If BFP offers to give O the goods back, and O accepts them, O will still have a cause of action for conversion; however, his damages will be limited to nominal damages (thedifference in value).

-If BFP offers to give O the goods back, O can refuse to accept the goods and insist thatBFP pay by satisfying a judgment for trover or conversion. Majority view: BFP cannotforce O to take the goods back. O can force BFP to pay fair market value.

-Courts will draw a distinction between willful conscious wrongdoers and innocentwrongdoers.

6. When the BFP satisfies the judgment, legal title will pass to the BFP.

-when BFP buys goods he¶s a converter-in possession but no title-Some courts say that to some extent the title may relate back to the day the BFP

bought the goods



THE RECORDING SYSTEM

A. In General

1. The general rule that you can¶t give more than you has less importance in the area of real estate, because of recording requirements.

2. As between the grantor and grantee, title passes upon the delivery of the deed.

--Ex: original owner selling bridge twice might have power to convey better title than hehas because of the recording requirements of the jurisdiction

Basic Types of Jurisdictions:

a) notice statute: grantee number 2 will be protected if he is 1) a subsequent BFP without notice of the prior unrecorded rights of a prior unrecorded deed by grantee number one, even thoughgrantee number 2 has not yet recorded.

- The subsequent BFP is not required to record to prevail against prior unrecordedclaimants, although the BFP must record to protect his interest against later subsequent purchasers.- Once O executes the deed, O is left with nothing. As between O and A, title will pass

from the grantor to the grantee

-example of notice statute p. 57

b) race notice statute: grantee number two is protected and given priority over grantee number one, provided 1) he is a subsequent bona fide purchaser without notice of the prior unrecorded deed 2)he must record his deed before grantee one records his deed.

- Courts define notice in a race-notice state as actual, constructive or inquiry notice.-example of race notice statute p. 57

c) race statute: take an objective approach, only look at who recorded first. as between twograntees from the same grantor, he who records first prevails, even if not bona fide

-example of race statute p. 57

B. What Constitutes Notice1. what constitutes adequate notice will vary by jurisdiction

2. Actual Notice -If a subsequent purchaser is shown to have actual notice of the existence of the prior unrecordedinterest, he will not gain the protection of the recording act in a notice or race notice jurisdiction.

3. Inquiry Notice -When the purchaser hears or observes something that would cause an ordinarily prudent person to inquire further and that investigation would have revealed some unrecorded interestin the property, the purchaser is deemed to have notice of the unrecorded claim.-reasonable person might check out who is in possession of the property, or look at the

physical condition of the property- Some jurisdictions say that if you know someone is in possession of land that you areabout to buy, then you have a duty to make a reasonable inquiry.-However, possession may not always charge a diligent purchaser with notice-law requires that a person make a reasonable physical inspection of property beforetaking an interest in it and to make reasonable inquiries about ownership that such aninspection would trigger.



4. Constructive or Record Notice -refers to knowledge or notice a purchaser could gain by searching the deed records-if document is properly recorded in the chain of title of property, all people in the world aredeemed to have record notice of its terms.

C. Mechanics of Recording 1. Grantor-Grantee Index - Every deed that is recorded is indexed under both the grantor index and the grantee index

(separate volumes of recording)-Problem: not everything is recorded in the grantor-grantee index. though a living intervivos

instruments are recorded, when someone takes under a will, that is not recorded in the index.

- It is not enough to just see if O got it from someone, you must be sure the person O gotit from also had valid title. (Typically, it is sufficient to go back 60-70 years in the index.)

2. Tract-Index (more modern)-shows all transactions in connection with a particular tract of land

D. Purposes and Policy Considerations of Recording

2 basic purposes:a) it protects existing owners from losing their property to later purchasers by providing

constructive notice; and b) it protects new buyers by allowing them to qualify for bona fide purchaser protection

after careful title searching reveals no prior interests

- prospective purchaser is deemed to have constructive notice of all recorded documentsregarding the property- for the recording system to work, courts often favor maintaining the integrity of the system over

seeking equity and justice in any individual case

E. Functions of the Recording System -determine a priority of rights-informational-assures title

p. 58-61 of outline: Recording Hypos

H. The Problem of Circular Lien:-these statutes are in effect for mortgages as well-problem occurs in notice and race notice jurisdictions where C prevails over A, who prevails over B, who prevails over C; there are different approaches as to what to do:

1-divide assets proportionally2-allocate it on basis of who was first in time3-allocate it based on sequence of recordation4-in any given situation, try to give party its justifiable expectancy, to the extentwe can do so. When it is not possible to give each party his full expectancy, loss



should fall on the party most responsible for causing the problem (note: you donot ordinarily have a duty to help someone out who does not record) (also note:legal duty not to produce a chilling effect on the sale)

I. Proper Recordation (When is a deed deemed to be properly recorded to affordconstructive or record notice?)

1. Approach One: a filed, but not recorded deed may accord constructive notice2. Approach Two: proper indexing is required for recording, otherwise how else would

a subsequent purchaser get notice of the prior deed (so must be indexed under proper name)

- the recording of a deed gives record notice to a subsequent searcher only if that searcher wouldhave found the document

- A deed recorded outside the chain of title does not constitute constructive or record notice eventhough it is physically recorded (p. 65 read a little ???) (Board of Ed v. Hughes)

(note: an oral authorization of agency may be sufficient when appointing someone as your agent

to fill in your deed to real estate)

-filling in a deed makes you a purchaser; this is separate from actually recording

J. The Problem of Estoppel by Deed

-estoppel by deed: where O makes a conveyance of property to A before he has obtained title, and thenhe does get title, the title passes immediately to A upon his receipt of title. The grantor, O, is estoppedfrom denying the validity of his earlier deed (though it usually needs to be warranted).

If A had conveyed a quit claim deed or a special warranty deed, it may have be unreasonable for B to

rely on the deed to his detriment, and A might not be estopped, because there was not a completewarranty.-a full warranty/general warranty deed: expressly guarantees the grantor¶s good clear title, free of alldefects not mentioned in the deed-quit claim deed: conveys a grantor¶s complete interest or claim in certain real property but that neither warrants nor professes that the title is valid (If I own it, it¶s yours, if not, tough noogies).

- A few jurisdictions hold that the existence of a quitclaim deed anywhere in the chain of title putsthe purchaser on inquiry notice as to the possible inadequacy of the title held by the grantor under that quitclaim deed (conflict of authority p. 68)

-special warranty deed: grantor warrants only against defects that the grantor created or that came after he was the owner

2 Approaches to estoppel by deed and when to start your search:1) while the estoppel by deed doctrine applies as between the original grantor and grantee, the

doctrine is not binding against a subsequent BFP. (approach one: ryczkowski/majority/Schwartz

preferred).

-duty to search: you should only logically have to search the grantor index book from the

dat e the g rant ee index vol ume showed g rant or as havin g acquired t i tl e. (court is saying

that deeds that are recorded before that person had title do not provide actual or

constructive notice to subsequent purchasers)



2) you need to check out each prior owner from the t ime he was born to see if he made aconveyance out. (approach two: minority/holmes/ayer approach)

-(O¶s bankruptcy does not prevent estoppel by deed)

Determining When to Stop Your Search

1) Approach One: once a title searcher finds a deed from the prior owner to someone in the chain of title, he can stop checking the grantor index. The searcher does not need to check out O until the present day. He can stop as soon as his chain of title is complete. (Morse case)

-this discourages diligent title searching2) Approach Two: you must check out each prior owner until the present day

K. Deeds Out from a Common Grantor - When a developer owns a development, he may impose covenants or restrictions on purchasersto ensure that the development will follow a given scheme. There are three ways that a covenantor restriction may be imposed on subsequent deeds.

1) Express Covenants- expressly created by the terminology in the deed.-there can be express covenants that touch upon the land and was intended by the parties torun with a transfer of the land

2) Implied Covenant (Implied Reciprocal Negative Covenant)

- a jurisdiction may imply a reciprocal covenant on the part of the grantor when it finds therehas been a uniform scheme of restriction having been imposed

3) Covenants Running with the Land- If a covenant touches upon and concerns the land (restricts the use that can be made of the property) and there is an intention that it runs with the land (the original parties must have

intended for the covenant to run with the land), it will be enforceable against a subsequent purchaser even though he was not party to the original contract (exchange of covenants).

-however, depending on the jurisdiction, a subsequent purchaser may be bound only if he hasconstructive or record notice of the restriction:

a. Approach 1: Buffal o Academ y (sidenote: every purchase and sales agreement has an implied obligation on the partof the seller, that the seller at the time of closing will have a marketable title (titlefree from any encumbrances; owner has outright ownership and there are norestrictions on the use of the property)

-Rule: a subsequent BFP without actual or constructive notice of a covenant

that runs with the land will take free and clear title. (extends to impliedcovenants as well)

b. Approach 2: S anborn v. McLean Rule: a subsequent purchaser of a lot has a duty to check out all of the deeds out

from a common grantor in a chain of title (all of the deeds conveyed by O in thelot) for express or implied warranties.



-also held that a purchaser may have actual notice if he visits/checks out the possession of the property and sees that there is apparently a uniform scheme of restriction (should have made reasonable inquiry)

L. Unrecorded Interests

1. Easements- since easements arise by operation of law, they are not subject to the recordingrequirements.

a) easements can be express and arise by explicit grant b) easements can also arise by a matter of strict necessityc) easements can also be impl ied

-required elements for easement by implication:

-to at one point have common ownership of the entire land in 1 person-one portion had to have been used for the benefit of the other portion-such use must have been apparent-such use must have been reasonably necessary to fully enjoy the other portion

-so even though the easement is not in your chain of title, nor findable the deedfrom O to X (from the deeds the grantor conveyed out), the easement may still beimplied by operation of law.

-so you should visit/see the possession of the land; both an easement bynecessity and an easement by implication are likely to place thesubsequent purchaser on notice

2. Adverse Possession- adverse possessor is not subject to the recording laws-in a priority dispute between an adverse possessor and a subsequent BFP of landconveyed after the adverse possessor has ³title,´ the adverse possessor will prevail

M. The Problem of Indefinite Reference

-An indefinite reference is a reference in a recorded instrument to some unrecorded right or interest of another party.

-a court concluded that since there was a reference in the recorded in the option to the lease, Cwas held to have constructive notice (this places a cloud over the title to the property)- Many states today have passed statutes that say an indefinite reference does not constituteconstructive or record notice; an indefinite reference will not prevent a title from beingmarketable.

N. Duty to Make Inquiry Outside Registry of Deeds

Impact of Possession on Property:

-Does B, the subsequent purchaser, who has no record or constructive notice, have any duty tocheck out the possession of the property? The authority is divided. -Approach 1: the subsequent purchaser is held to have notice of any facts that wouldhave been revealed by a reasonable inquiry relating to someone else being in possession.-Approach 2: if the subsequent purchaser does not have ACTUAL notice, he will nothave notice. As long as you are in good faith and subjectively believe the facts to be, youare not chargeable and you may take free and clear



-Approach 3: if you actually know that someone else is in possession of the property,then you have a duty to make an inquiry and are held to know what a reasonable inquirywould have revealed-Exception: when the possession is consistent with the record title, a subsequent purchaser may not have a duty to inquire

O. Parties Protected by the Recording Laws 1. Purchaser for Value: grantee receives the benefit of the recording act only if he gives valuefor his interest.2. Creditor: depends on jx;

-subsequent purchaser might be able to cover a mortgagor but probably not a creditor -some jx will protect the judgment of a creditor

3. Tenant: common law had the rule that says buyers beware²basically the common lawenunciated a rule that when you lease premises you are in essence a purchaser

-however: subsequent tenant who has no notice of the prior unrecorded deed should be protected

4. Donee: A BFD does not prevail in the area of personal property or real property. A doneeshould be protected only if there is detriment.

5. Consideration Required: Unless the consideration is grossly inadequate, for example, if property is worth 1 million, and B only pays O $1, B will get protection of the recording laws

-pre-existing debt: under UCC it is valuable consideration; however, real property lawdoesn¶t have to follow UCC so have to look at the circumstances (p. 83)



ESTATES IN LAND

An estate is the amount, degree, nature and quality of a person¶s interest in land or other property and is the type of right or title that a person has in land or real property.

2 Types: Freehold estates and Non-Freehold estates

Freehold Estate

- estate in which the owner of the estate has seisin; the owner is in possession of the property under a

claim of freehold

-seisin must be in someone at all times

a. Size of an Estate: common law measures estates with respect to size in terms of potential

duration (how long an interest can possibly last)

b. Fee Simple: the largest estate at common law; the estate will last as long as a person was lineal

(direct descendents, children, grandchildren, etc.) and or collateral relatives (cousins, brothers,sisters, etc); you have a title that may potentially last forever

i. Fee Simple Absolute: largest kind of freehold estate; will potentially last forever

-O to A and his heirs

ii. Fee Simple Determinable: grantor conveys title to the grantee but is subject to

a condition, which if occurs, title reverts back to the grantor

-to A and his heirs so long as bananas are not consumed on premises

(O has inheritable future interest known as possibility of reverter)

iii. F

ee Simple with a Right of Entry:

a grantor conveys title to the grantee, but it issubject to a condition, which if occurs, O will have a right of entry

-to A and his heirs but if bananas are consumed upon the premises O

and his heirs may re-enter and retake

-so here there is only a right to retake; legal title doesnt automatically

pass back to O like in fee simple determinable (there may be practical

differences in waiver, adverse possession, conveyances to 3rd

parties

(p.84-5)

iv. Fee Simple subject to an Executory interest

a) Shifting executory interest: to A and his heirs, but if the Red Sox win

then it goes to B and his heirs; B would have a shifting executory

interest and A would have fee simple subject to a shifting executor

interest

b) Springing Executory Interest: to A and his heirs, from and after the time

the Red Sox win the pennant; until sox win, seisin is in O; if they win it

would spring from O to A



c. Fee Tail Estate: 2nd

largest estate; property interest is inheritable by lineal descendants, but not

be collateral relatives; if the person dies without any descendants , the property would go back

to the person who made the conveyance

-to A and the heirs of his body (heirs of his body are words of limitation)

-O will have retained a future interest known as a reversion (if he got it back through

reversion he would again have a fee simple absolute)

d. Life Estate: 3rd

largest type of freehold estate; normally not inheritable; 2 types:

-life estates created by operation of law (ex: dower)

-conventional life estates created by agreement of the parties



Documents

Property Short Outline[1]