COMMERCIAL REAL ESTATE TRANSFERS



COMMERCIAL REAL ESTATE TRANSFERS – VOLUNTARY TRANSFER OF PPTY

I. LAND SALE CONTRACTS (p 557-626)

A. CONTRACTS OF SALE: sale of land has 2 steps: (1) contract to sell/purchase ppty is signed (2) closing: seller gives buyer a deed to ppty and buyer give seller consideration

a. STATUTE OF FRAUDS: no interest in ppty can be conveyed w/o writing signed by party to be charged (party against whom it is asserted there is a K) – can consist of several documents when taken together as a whole are evidence of an agreement for the ppty (doesn’t need to be formal)

b. Essential Terms: writing must contain sufficient description of ppty, price, parties, and conditions

c. Specific Performance: since real ppty is unique, cts will use equity powers to force parties to go through sale rather than award damages

d. Oral Revocation: most states: SOF only for making of K, allow oral modification or revocation

e. Time of Performance: if K is not performed on date in agreement then ea party has reasonable time

f. HICKEY v GREEN (Specific Performance)

RULE: Partial performance made in reliance of oral land transfer agreement is sufficient to overcome SOF that K must be in writing

Facts: Hickeys sold home and gave partial payment in reliance of Green conveying ppty, but Green rescind the agreement

- R2d§129: party seeking specific performance must show reasonable reliance and he has changed his position such that injustice can only be avoided by specific performance

B. MARKETABLE TITLE: it’s implied in every K for sale of land that seller will furnish buyer “marketable title” at closing

- title is free from doubts, one that a prudent person would buy, does not mean perfect title just one that’s good enough for title insurance co to be willing to insure

1. Good record title: title must be good based on documents in chain of title, precludes adverse possession

2. Defects in title: private encumbrances, unrecorded easements, covenants, restrictions on use

3. Curing title defects: seller usu. has until closing to cure defects

- minor defect like unrecorded release of lien may be solved by part of purchase price set aside to cover lien

- seller must deliver ppty unencumbered (no outstanding mortgages or liens)

- if an easement benefits the ppty it doesn’t make the title unmarketable

- zoning restrictions don’t make title unmarketable

- easements shown on official maps may make title unmarketable

4. Violation of building codes / Zoning: if the govt can demand correction, title may be unmarketable

- the law does not want someone to buy into a possible lawsuit

5. LOHMEYER v BOWER (Violation of public/private restrictions)

RULE: Marketable title to is title that does not expose buyer to litigation

Facts: Prior to transfer, title search showed ppty has 2 encumbrances & both were violated

- existence of municipal restrictions (zoning) is not grounds for buyer to rescind

- private covenant / restrictions (height requirements) may be encumbrances rendering title unmarketable

- immaterial defects do not diminish value of ppty & is not grounds for buyer to rescind K

6. CONKLIN v DAVI (Adverse possession & impact of marketable title)

RULE: Title only has to be shown to be marketable for 1st time at trial

Facts: Buyer refuses sale, claiming buyer took part of ppty through adverse possession (K didn’t req perfect title, just marketable title)

- when seller’s title is by adverse possession, he may: (1) perfect record title (obtain record title from former owner, quiet title, action to concede outstanding encumbrance) OR (2) enter LSK hoping to convince buyer/ct that marketability of title if just (P chose this)

- Title is marketable if it’s free from reasonable doubt (not every doubt)

- Law will imply that title marketable (even if K is not)

- When ct determines marketability, it does it at final judgment (not at closing)

- If adverse possession is clear, title is marketable (P must est. that outstanding claimants will not succeed if they assert a claim and not such claim will be asserted)

C. RISK OF LOSS: damage to ppty btwn time K is entered and closing

1. Equitable Conversion: btwn time K is entered and closing, buyer has title to ppty (buyer is equitable owner and seller is legal owner), buyer still doesn’t have rt to possession until closing

2. Alternative Approaches: (majority rule) once buyer acquires equitable title (after signing purchase agreement) risk of loss is his – (minority rule) risk of loss remains with seller until closing

3. STAMBOVSKY v ACKLEY (Duty to Disclose Defects)

RULE: Where seller creates condition that materially alters value of LSK & careful buyer is unlikely to discover it, failure to disclose condition creates basis for rescission as a matter of equity

Facts: Ackley sells house she widely publicized as haunted & Stambovsky would not have discovered it

- Doctrine of Caveat Emptor: “Let the buyer beware.” (seller has no duty to disclose info unless there’s a confidential/fiduciary relationship btwn parties or seller actively conceals)

o Req buyer to act prudently and exercise due care

4. JOHNSON v DAVIS (Material Defect Known to Seller)

RULE: Seller has duty to disclose material facts affecting value of ppty when not known or readily observable to buyer

Facts: Davis buys home w/ leaky roof when D said roof did not leak

- Misfeasance: improper performance of an act

- Nonfeasance: failure to perform an act that ought to be

- Buyer has relief for fraudulent misrepresentation IF: (1) seller makes false statements about material facts (2) seller knows representation is false (3) seller intends that buyer rely on it AND (4) buyer is injured by reliance

- Even if D’s misrepresentation after K was executed it is still material

- CL: no liability for nonfeasance but failure to disclose material fact when intended to induce false belief is close to affirmative representation

5. WARRANTIES FROM SELLER: CL rigidly applies “caveat emptor” but modern cts follow implied warranty that building is fit for use contemplated by both parties

6. LEMPKE v DAGENAIS (Implied Warranty of Workmanlike Quality)

RULE: Privity of K is not nec for latent defects that manifest themselves w/in reasonable time after purchase and cause economic harm – requiring privity defeats purpose of implied warrant to good workmanship and could leave innocent buyer w/o remedy

Facts: Lempke purchased house where recently built garage roof has defect

- cts fear that not adhering to privity of K will impose unlimited liability on contractors

- many cts find implied warranty as contract law on basis of public policy

- recovery for purely economic harm is allowed (buyer has rt to expect what was bargained for)

- extension of liability should be limited to latent affect in a limited period of time

II. DEEDS:

A. REQUIREMENTS:

- (1) only the grantor must sign (should be acknowledged before a notary to comply with recording acts), may need signature of spouse

- (2) any words evidencing an intent to make a transfer will suffice

- (3) deed must name an ascertainable grantee

- (4) ppty must be described

1. Consideration: deed does not need consideration (grantor may give ppty away)

2. Failures in Description of Ppty: describe by metes & bounds, recorded plat, name of ppty, street address; extrinsic evidence can be admissible to clear up ambiguities

- patent ambiguity (on face of deed) can't be resolved by extrinsic evidence

- latent ambiguity (not on face of deed) can always be resolved by extrinsic evidence

- modern trend: allow extrinsic evidence to resolve both ambiguities

B. WARRANTIES OF TITLE: most deeds contain “usual covenants” from seller to buyer

1. Types of deed warranting title:

a. General Warranty deed: warrants title (usu. type of deed and contains usu. covenant)

b. Special warranty deed: only warrants title from defects arising during time grantor held land

c. Quitclaim deed: only transfers whatever interest grantor has

2. Usual Covenant:

a. Present Covenants: “I, the grantor” warrant as of date of deed, I have not breached the covenant”

- covenants are breached when they are made

- SOL begins to run as of date of conveyance

i. Covenant of Seisin: seller covenants he owns the ppty conveyed

ii. Covenant of Rt of Convey: seller warrants he has rt to convey ppty

iii. Covenant Against Encumbrances: seller promises no easements, covenants, mortgages or liens

b. Future Covenants: continuing covenants may be breached at moment of conveyance or afterwards (SOL doesn’t run til there’s an actual breach)

i. Covenant of Quiet Enjoyment: seller warrants that buyer will not be disturbed in possession of ppty by lawful claim of 3rd party

ii. Covenant of Warranty: seller warrants that title of ppty is good & grantor will defend any suit from party claiming paramount title at his own cost

iii. Covenant of Further Assurances: usu. covenant, rare in America, seller promises to perform any acts necessary to perfect buyer’s title to ppty

C. Breach of Covenants: present covenants are “personal” and do not run with the land; future covenants run w/the land

- min cts: covenants against encumbrances run w/ land

1. BROWN v LOBER (Present v Future Covenants)

RULE: Covenant of quiet enjoyment can be breached by constructive eviction (but covenantee’s right of possession must be interfered with)

Facts: Bost sold land to P but conveyed only 1/3 mineral rights

- covenant of quiet enjoyment does not guarantee that there’s no one with paramount title

- unless someone comes in & tries to mine the coal, there is no constructive eviction & no breach

2. FRIMBERGER v ANZELLOTTI (Latent land use violation)

RULE: Latent violation of restrictive land use statute not in land record don’t constitute violation of warranty against encumbrances

Facts: After purchasing ppty, P discovered ppty violated state environment protection statutes

- proper way to deal w/ violations is by contract provisions or language in deed

- Encumbrance: rt or interest in land that may exist in 3rd persons, to the diminution of value of equity in land, but consistent w/ passing of fee by conveyance

3. ROCKAFELLOR v GRAY (Remote Grantees) – READ THIS OVER

RULE: Covenant of seisin does run w/ the land (English Rule) & is broken the moment conveyance is delivered, becoming a chose in action held by covenantee

Facts: Rockafellor purchases land & agrees to assume mortgage to Gray (who forecloses on mortgage)

- Chose in action: rt to bring action or rt to recover debt or money

- Seisin: possession of real ppty under claim of freehold estate

- For covenant to run with land, grantor must convey title or possession (may be assigned to remote buyers)

- A chose in action is a personal rt to sue, not attached to ppty (avoids SOF)

D. DELIVERY: grantor must sign and deliver (leaving on desk is ineffective)

1. Delivery defined: 2 requirements: (1) grantor must manifest intent to make deed effective (words or conduct) AND (2) must immediately give to grantee

a. Evidence of Intent: extrinsic evidence is ok to prove (non)delivery

b. Delivery Cannot be Cancelled: once it’s been delivered, the only way to get it back is to deed it back to grantor

c. Estoppel: Even if no delivery, grantor may be estopped from denying delivery if subsequent good faith purchaser is involved

2. Types of Delivery: 2 types (1) grantor and grantee (2) involves 3rd party intermediary

a. Grantor-grantee Delivery: presumed delivery if: grantee has deed, grantor acknowledged signature (assumed delivered on date of grantor’s signature) – no delivery presumed if: grantor has deed

b. Delivery Subject to a Condition: conditions in the deed are usu. valid; modern cts allow grantor to revoke deed prior to date is passes legal title to grantee; oral condition is not valid

3. SWEENEY, ADMINISTRATRIX v SWEENEY (Unsuccessful Conditional Delivery)

RULE: When deed is handed to grantee but to take effect after death of grantor, deed is considered

properly delivered

Facts: Maurice deeded ppty to brother John and recorded. Simultaneously, John deeded ppty to Maurice

but did not record. Maurice dies but there was intended delivery to Maurice so wife gets ppty.

- Conditional deliveries can only be effected through 3rd person, who delivers deed upon occurrence of condition (death of brother)

- b/c Maurice had deed and John intended to deliver it, Maurice’s heirs have rts to ppty

- Testamentary: made in lieu of a will; not to take effect until after death

4. ROSENGRANT v ROSENGRANT (No intent to part w/ power to retake)

RULE: Where grantor delivers deed but retains rt of retrieval & states deed to operative only after his death, then delivery is not legally sufficient

Facts: Elderly couple tried to transfer deed to nephew but held rt to retrieval & said it was effective only after their death

- Couple was trying to use the deed as a will, so it was constructive delivery (not valid)

- If they want to avoid probate involved with a will (in writing, signed, witnesses) they can est. a revocable trust (hold their farm in a trust, retain possession for life, LE = couple, remainder = Jay)

- Revocable deed: strictly comply w/ legal requirements for delivery (even w/o written instrument)

- Revocable trust: equitable instrument & grantor only manifest intent to create trust (+ signed writing to satisfy SOF)

5. Delivery to 3rd Parties (Escrow): to make a transfer conditional on occurrence of event

a. Escrow: grantor delivers deed to 3rd party w/ instructions to deliver to grantee w/ occurrence of condition (effective so long as grantor doesn’t retain rt to revoke delivery)

- grantee is deemed to receive title when grantor delivered deed into escrow

b. Reservation of Power to Revoke: General Rule: grantor has such ctrl over deed that there’s no delivery (modern cts don’t recognize delivery – some cts recognize delivery if contingency is beyond grantor’s ctrl)

6. Estoppel of Grantor: prevents grantor from denying he delivered the deed

a. (e.g. if grantor delivers ppty to A and A breaches trust then sells to C, a BFP – grantor is estopped from denying delivery but may sue A)

b. If wrongful delivery by escrow – majority says grantor not estopped from denying delivery

7. Estoppel by Deed: if grantor conveys ppty he doesn’t own & later acquires, grantee gets that interest

III. REAL ESTATE FINANCE

A. Usu. buyer will make small down payment ( financial institution makes note and mortgage ( borrower is personally liable on note & mortgage gives lender rt to sell the ppty to pay off the note if borrower defaults ( lender is mortgagee, borrower is mortgagor

B. Mortgages & Foreclosure: (early CL) lender would receive title in fee simple absolute if borrower failed to pay; now borrowers are given equitable rt to redeem ppty (rt of redemption can be foreclosed by lender through judicial foreclosure proceeding: decree for ppty to be sold publicly to pay debt & balance goes to mortgagor)

1. MURPHY v FINANCIAL DEV. CORP (Mortgagee’s Duty Upon Foreclosure)

RULE: Mortgagee has duty to protect interest of mortgagor at sale & must exercise good faith & due diligence in obtaining fair price for mortgagor’s ppty

Facts: Fin. Dev. Corp/ foreclosed P’s mortgage, but sold the house to self at foreclosure sale at much lower price than value so they could sell it off for a profit

- inadequacy of price alone doesn’t prove mortgagee acted in bad faith in selling ppty

- D did fail to sue due diligence to get fair price: didn’t advertise sale, rejected offer

C. Deed of Trust: most states permit this so borrower conveys title to ppty to trustee (if borrower defaults, trustee can sell ppty w/o judicial foreclosure proceeding)

D. Installment Contracts: (use if seller finances sale of ppty instead of using 3rd party lender) seller retains title to ppty & promises to convey to buyer when purchase price is paid; if buyer defaults, seller’s interest is treated as a lien that is satisfied only through a judicial sale

1. BEAN v WALKER (Defaulting Vendee)

RULE: When buyer defaults on installment LSK, his payments are not forfeited is he already paid substantial amount on K

Facts: Walker defaulted on LSK after paying more than ½, Bean sued to retake possession

- When vendee defaults, vendor may not bring action in ejectment but must foreclose (when ppty abandoned or small sum paid) or bring action for purchase price

- Buyer is said to hold equitable title (has rt to ppty value increase

- Seller has legal title = personal ppty (rt to money)

- Equity should be used when it leads to unfair disposition or exorbitant loss of money

- Equity of Redemption: mortgagor’s rt to reclaim ppty after it’s been forfeited

IV. RECORDING SYSTEM

A. Purpose is to give notice to public (gives constructive notice)

B. Method: grantee files deed with county recorder (must be “acknowledged” – signed in front of notary public)

1. Grantor-Grantee Index: filed chronologically in 2 books alphabetically

a. 1st, look up year to conveyance & look up grantee’s name to see who the grantor was

b. 2nd, find grantor’s name & look for his name as a grantee (repeat till reach initial conveyance of ppty)

2. Tract Index: each plot is given tract, block & lot #, filed chronologically (simplified title search = when you look it up all the documents pertaining to the lot are listed)

3. LUTHI v EVANS (Effects of Failure to Describe Ppty w/ Specificity)

RULE: “Mother Hubbard” clause is upheld btwn parties listed, but insufficient to give constructive notice to subsequent purchasers w/o actual notice

Facts: Owens assigned oil/gas to Tours, and Burris found no record of it when inspecting title

- “Mother Hubbard” Clause: clause describing ppty as “all of grantor’s ppty in certain county” (means of describing ppty for recorded deeds – least reliable & most difficult to search)

- If a recorded instrument doesn’t sufficiently identify ppty then it is not constructive notice

4. ORR v BYERS (Misspelled Name)

RULE: Title searcher not required to search for all possible spellings of a name

Facts: Byers was unaware of Orr’s lien on Elliott’s ppty b/c Elliott’s name was misspelled in title index

- “Idem Sonans”: “having the same sound,” doctrine presumes that even if incorrectly written ID can be presumed by similar promumciation

o Doctrine is inapplicable where written name is material

o Acceptable for purposes of identification but not for constructive notice to BFP

o Applying the doctrine unduly burdens the transfer of ppty

C. Types of Recording Acts: (at CL, 1st to record has priority)

1. Race Statute: (few states) 1st to record has priority even if w/ notice of prior unrec’d conveyance

2. Notice Statute: subsequent purchaser (BFP) can't prevails over prior grantee if he had notice of prior grantee’s claim (regardless if it was recorded)

3. Race-Notice Statute: to prevail, BFP must both record AND have not actual/constructive notice

4. MESSERSMITH v SMITH (Improperly acknowledge deed)

RULE: An improperly acknowledged instrument is not considered recorded

Facts: Mess took 2nd deed to notary public who got acknowledgment over the phone (not proper)

- BONA FIDE PURCHASER: protected under notice & race-notice statutes

o (1) must purchase ppty (2) must take ppty w/o notice of prior conveyances AND (3) must give valuable consideration

- By recording, there can be no BFP b/c they will have notice

- If don’t record, BFP can cut off your interest in ppty & leave you to sue grantor

V. CHAIN OF TITLE

A. To give notice to subsequent purchaser, instrument must be recorded in “chain of title” (title est’d by grantor’s predecessors up to time of conveyance to grantee)

1. BOARD OF EDUCATION v HUGHES (Prior unrecorded deeds in chain)

RULE: Deed from grantor outside chain of title (even if rec’d) is treated as though not recorded & gives no constructive notice

Facts: Hoeger ( Hughes (left grantee blank); Hoeger ( D+W; D+W ( Board. Board rec’d and Hughes rec’d just before D+W rec’d (so D+W were not rec owners when conveying to Board = Hughes is rightful owner of land)

- Warranty Deed: conveyance explicitly lists covenants concerning quality of title (grantor conveys good, clear title)

- “Wild deed” – deed to ppty that’s recorded but not in the chain of title b/c neither the grantor or grantee is known to the title searcher (Duryea to Board)

2. Deed rec’d before grantor obtains title: doctrine of estoppel applies (so grantee will get ppty), but cts split whether recorded deed is in chain of title

3. Subdivision Restrictions: cts split whether this is in chain of title since it imposes on buyer burden of searching all deeds flowing from common grantor

a. GUILLETTE v DALY DRY WALL (Restrictions in neighbor’s deed)

RULE: Subsequent buyer from common grantor in subdivision has constructive notice of restrictions on

rest of subdivision & acquires title subject to those restrictions

Facts: Daly tried to build apartment building in lot for single family homes

- not all cts agree with this

4. Recording instrument that refers to unrec’d instrument: the buyer must make an inquiry re contents of unrec’d instrument

5. Rec’d instrument that’s defective: inquiry must be made

6. Knowledge: cts are split if there’s constructive notice when a prior deed is rec’d after a later deed from the same owner

a. If buyer has knowledge of prior defective deed, he has duty to make inquiries about it

B. Protected Persons: creditors and subsequent purchasers are often protected by recording statutes, but donees and devisees are not (so cts have to look at consideration to determine if someone is a purchaser or donee)

1. DANIELS v ANDERSON (Equitable conversion theory waived)

RULE: BFP status only applies when full purchases price is paid

Facts: Zografos paid most of purchase price before discovering Daniels’ rt of 1st refusal (but he loses b/c he is not considered BFP if he has notice before fully paying off ppty)

- Payment of Value Rule: BFP status attaches only when full purchase price has been paid

- Equitable conversion: doctrine that vests equitable title in purchaser once binding LSK is executed

- Pro Tanto: partial payment on claim or purchase

- Buyer who has notice of the outstanding interest pays consideration at his peril

- Ct could have divided the ppty btwn the 2 purchasers (here, they chose for Daniels to have all)

2. LEWIS v SUPERIOR CT (Lis pendens rec’d but not indexed)

RULE: Seller need not pay in full before buyer can be considered a BFP (opposite of Daniels)

Facts: Buyer gave note 1 day before lis pendens was properly indexed

- Lis pendens: notice of lawsuit affecting title to ppty

- Purchaser w/o notice who makes down payment should have rt to ppty secured

- Overrules “payment of value” rule b/c nowadays buyers cannot pay off homes immediately

3. Purchase not completed: Subsequent grantee is entitled to reimbursement of consideration from prior grantee that obtains legal title

4. Inquiry Notice: (1. actual 2. constructive 3. inquiry) grantee has duty to inquire about documents that are referred to by documents in chain of title

a. HARPER v PARADISE (Duty to Inquire)

RULE: In race-notice, subsequent grantees must inquire about contents of prior rec’d deeds in chain of

title

Facts: Harper’s 1st deed was missing but the 2nd deed referred to contents of the 1st deed

- Deed in chain of title gives constructive notice of all other deeds to which it refers

5. Inquiry from subdivision: if from looks of neighborhood there is some sort of restriction on the lot, a buyer is put on inquiry notice of contents of deeds that come from neighborhood’s common grantor

6. Inquiry from possession: (maj) buyer is charged with knowledge that could be revealed by physical inspection of the premises

a. WALDORFF INSURANCE v EGLIN BANK (Possession of condominium)

RULE: Actual possession gives constructive notice to world

Facts: Bank attempts to foreclose condo when 1 unit is openly possessed/owned by another party

7. Marketable Title Acts: forbid the assertion of stale claims (30-50 yrs old)

8. Title Registration (Torrens Act): once the county set up a tract index, owners may bring action against all the world to vest absolute title in the land

- owner’s title is then registered & he’s issued a certificate of title (title to ppty)

- when owner sells ppty, govt cancels old certificate and issues a new one

- if stolen and sold to BFP then owner can seek compensation from fund est’d to help the defrauded

- no one can acquire title by adverse possession b/c you need a certificate

- Exception: when party in actual possession claims an interest in the ppty

9. Title Insurance: assure against defects in the record

- doesn’t run w/ the land (must be purchased by each owner)

- mortgagee’s policy doesn’t insure the homeowner

a. WALKER ROGGER v CHELSEA TITLE (Title policy or title search)

RULE: Title co can be held liable under title policy if it fails to conduct or disclose results of reasonable title examination (not tort negligence)

Facts: Chealsea didn’t tell Walker that prior deed indicated tract was smaller than what Walker paid

- Title co doesn’t insure quantity of land (need express guaranty of quantity of land in policy)

- Some cts believe title co should be liable in tort if insured had reasonable expectation that title co will search the title (but it really depends on the K)

- It is suggested that Walker had a rt to know of defects that insurer finds in official title records

b. LICK MILL APT v CHICAGO TITLE (Hazardous substances)

RULE: Title insurance policies protect condition of owner’s title to land, not physical cond of land

Facts: Apt owners wanted title co to indemnify them for costs of cleaning up hazardous substances

- Insuring clauses usu. only cover: title being incorrectly vested, defect/lien/encumbrance, lack of rt of access to land, or unmarketable title

- Marketability of title does not include ppty value (you can hold good title to land that is valueless)

- Encumbrances are taxes, assessments, & liens on ppty (a lien could be imposed for clean up costs but it was not done here)

NUISANCE

I. NUISANCE

A. Interference w/ person’s rt to quiet enjoyment of land (must be invasion of land – particles, gases, noise, vibration)

- CL principle: one must use land so as not to injure her neighbor (sic utere tuo alienum non laedas)

1. Private Nuisances: 3 elements

a. (1) must be substantial interference w/ P’s use & enjoyment of land caused by D

b. (2) D must act intentionally (intend to produce offense) OR unintentionally & negligently (wanton & reckless) AND

c. (3) P must be entitled to use & quiet enjoyment of land (must be in possession but need not be owner)

- Ct will evaluate: the extent & character of harm, burden it will cause D to correct the harm, social value of land invaded & suitability of land to locality

d. Nuisance at law (nuisance per se): “absolute” nuisance at all times, regardless of location, surrounding or manner it is conducted/maintained

e. Nuisance at fact (nuisance per accidens): nuisance due to location or circumstances

2. Public Nuisance:

- Adversely affects public as a whole (may be crime – use penal sanction)

- If permitted by statute or ordinance than not public nuisance

- Private individuals may bring public nuisance suits only if show especially injurious to her & harm suffered is different than harm to public generally (only needs to have interest in land)

a. Unintentional Act: ct must consider gravity of harm and conduct of D

b. Compared to Trespass: nuisance involves interference with quiet enjoyment of land but trespass involves interference w/ rt to possess

3. MORGAN v HIGH PENN OIL (Negligence is not element if Act is Intentional)

RULE: Private nuisance occurs w/ substantial interference w/ use & enjoyment of land and the interference is either intentional and unreasonable or unintentional and the result of negligence, recklessness, or abnormally dangerous activity

Facts: Trailer park owner sued for injunction of nearby oil refinery that produced nauseating fumes

- oil refinery is lawful business so not nuisance per se

- Private nuisance is a substantial nontrespassory invasion of another’s interest in private land use

o If unintentional: D’s conduct must be negligent, reckless or ultrahazardous

o If intentional: D’s conduct must be unreasonable under circumstances

▪ D knows results from his actions (or knows substantially certain)

▪ Liable regardless of degree of care or skill exercised to avoid injury

II. REMEDIES

A. 2 types: (1) injunction forbidding activity (2) damages

B. Weighing Value of Offending Conduct: if conduct is of good social value, suitable at that location, and impractical to prevent invasion then P might get damages instead of injunction

1. ESTANCIAS v SCHULTZ (Rule of Necessity)

RULE: When balancing equities in a nuisance action, the “rule of necessity” must be narrowly construed.

Facts: Schultzes sued Estancia to permanently enjoin it from operating excessively loud air conditioner.

- cts must always balance equities to determine injunction or damages

- “doctrine of comparative injury” = balancing of equities: if ct finds injury to P slight and benefit to public then ct will award an injunction

2. BOOMER v ATLANTIC CEMENT (Economic Consideration)

RULE: Ct can grant injunction if D pays permanent damages to P to compensate for impairment of ppty rts caused by the nuisance

Facts: Ct found cement plant was nuisance to neighbors but denied injunction

- General Rule: where damages are substantial, an injunction will abate the nuisance

- B/c the cement plant was necessary, ct could have granted injunction for effective date far enough in the future to allow technological development or have D pay permanent damages

3. SPUR INDUSTRIES v WEBB DEV. (Preexisting Lawful Industries)

RULE: A lawful activity can become a nuisance if others enter the area and ask for it to be enjoined; but party that creates the nuisance may be req’d to compensate for cost of injunction

Facts: Spur owned a cattle feedlot, but Webb moved in and wanted injunction

- state statutes say anything that constitutes breeding ground for flies is public nuisance

- party that comes to nuisance usu. can't get injunction if he knows of nuisance & accepts the area BUT b/c this is a public nuisance an injunction is ok (but P will have to compensate D for moving)

EASEMENTS, SERVITUDES, ETC.

I. EASEMENTS

A. Easement = rt of some person to make limited use of another’s land for any period (nonpossessory interest)

1. 2 types:

a. Affirmative Easement: rt to go onto land of another and use it

b. Negative Easement: rt to make owner of servient land not do something that he’s usu. entitled to do

i. Cts usu. don’t like these (unless: light, air, subjacent support, flow of artificial stream)

ii. Always appurtenant to a dominant tenement

iii. Ct will usu. see them as covenants or servitudes

2. Easement Appurtenant = confers a benefit on dominant tenement (burdened land is servient tenement)

a. (e.g. If A has rt of way to cross B’s land to get to A’s farm - A’s land = dominant estate, B’s =servient)

3. Easement in Gross = personal to owner (not appurtenant to dominant tenement)

a. Servient land is burdened but there’s not benefited land (utility rts, billboards)

b. MILLER v LUTHERAN ASSOC (Assignability of Easement in Gross)

RULE: Easement in gross is divisible and when 2 or more persons own an easement in gross, their actions must be made w/ common consent (“one stock”)

Facts: 2 persons licensed to use the lake w/o knowing of the 2nd owner of interest of rights

- allow assignment of interests where it is intent of parties

4. Creation of Easements: created by express agreements, implication, necessity, prescription, OR estoppel

a. Gen’ly easements are created by grant

b. WILLARD v FIRST CHURCH

RULE: Grantor can reserve an easement for 3rd persons

Facts: McGuigan sold lot of Peterson who sold it to Willard w/o mentioning easement.

5. Profit: rt to enter onto land of another (entry is implied under easement) & taking something (coal)

6. License: permission to enter /do acts on land of another

a. Most can be revoked at will of landowner (some become irrevocable in certain circumstances)

b. Irrevocable license (e.g. license coupled w/ an interest, rt to pick up the car you bought)

c. HOLBROOK v TAYLOR (Licensee’s reliance)

RULE: License is irrevocable licensee has relied on license to his expense/detriment

Facts: Holbrook tried to block off road after Taylor use it extensively while building house on his land

7. Creation by Implication: easement may be implied when nec to carry out intent of parties or req’d by public policy

a. 2 types:

i. Easement by necessity: if at the time grantor divides land & conveys part of it to another & only means of ingress/egress is over remaining land, an easement will be implied for his benefit

1. the easement ends when the necessity terminates

2. OTHEN v ROSIER (Easement of Necessity)

RULE: Easement can be created by implied reservation only if: show there was a unity of ownership btwn dominant & servient estates, easement is necessity & not just convenience, & necessity existed at time 2 estates were severed; easement by prescription can only be acquired if use is adverse

Facts: P used road on D’s ppty to access highway, but D later built over it & impassable for P

- mere fact the P’s land is completely surrounded by land of another does not per se give P an easement of necessity over D’s land if there was no privity ownership

ii. Intended easement based on quasi-easement: this easement is like easement of necessity but it already existed when the parcels get sold – only needs to be reasonably necessary

1. Implied easements: scope of use depends on quasi-easement use (changed by rx foreseeable changes in use of dominant estate)

2. doesn’t have to be granted

3. VAN SANDT v ROYSTER (Implied Easement)

RULE: An easement can be implied from circumstances surrounding the conveyance of the land, including prior use of land; ea party is assumed to know reasonably necessary uses which are apparent upon rx prudent investigation; an easement can be implied for grantor OR grantee on basis of necessity

Facts: P claims he never granted an easement for a sewer drain connected to his house & 2 others

- Quasi-easement: when landowner uses portion of estate to benefit remainder of estate (a use in the nature of an easement arises, even though it is not specifically granted)

- Necessity: (eg. Sewer drainage) reservation of use may be implied in favor of prior quasi-dominant estate, even if not reference is made to it in the deed (quasi-servient estate)

- Notice: in fairness to grantee of quasi-servient estate, reserved use must give notice of existence & necessity (in public records)

- Implied grant: dominant tenement is the parcel conveyed to the grantee

- Implied reservation: parcel retained by the grantor (greater necessity req’d than grant)

B. Prescription: same elements as adverse possession (can't obtain permission of owner)

a. to est. easement by prescription, must show he: openly, continuously, under claim of adverse rt to owner of soil w/ his knowledge & acquiescence

b. this is use of land (not possession)

c. time period set by statutes (req open, notorious, continuous, adverse use under claim of rt)

d. scope: limited to original use

e. MATTHEWS v BAY HEAD ASSOC (public trust doctrine)

RULE: Public’s rt to use beach (under public trust doctrine) includes rt to go through private pty as is rx necessary

Facts: P claim that Assoc deny public its rts to access & use beaches during summer

- public interest doctrine acknowledges that ownership of land near beach is vested in state in trust of people

C. Scope of Easements – excessive or improper use of easement usu. justifies injunctive relief & provable damages (but usu. doesn’t extinguish the easement)

a. Express Easement: depends on the language used (easement appurtenant to 1 parcel can't be used for benefit of separate parcel)

b. BROWN v VOSS (attempt to expand scope of use of easement to nondominant tenement)

RULE: An extension of an easement to another parcel is misuse of the easement (=trespass)

Facts: P was allowed to use the easement to access Parcel B but built a house that lay on both Parcel B+C. D then blocked off the road easement & P seeks injunction.

- the ct did not follow the general rule b/c D waited till after P spent $11K on a home before acting

- also, there was no damage to D’s land to allow the continued use (ct has discretion)

D. TERMINATION OF EASEMENT

1. Easement can be terminated in several ways:

a. If A acquires title to both dominant & servient estate (a subsequent separation doesn’t revive it)

b. Release easement by written/oral instrument accompanied by an act on reliance of that

c. Easement owner had clear intent to abandon it and acts to indicate that intent

d. Easement of necessity terminates when necessity no longer exists

e. Structure is terminated for an easement in a structure

2. PRESAULT v US (from commercial to recreational use)

RULE: An easement is terminated by abandonment when nonuse AND act manifesting either a present intent o relinquish the easement OR a purpose inconsistent w/ its future existence

Facts: Govt try to convert a RR easement into a nature trail across P’s ppty

- ct determines this is an easement (not fee simple interest) b/c govt only took as much as nec

- CL: scope of an easement can be adjusted if the change is consistent w the original grant

o may expand use of easement but not change use that’s not rx foreseeable at time of est. easement

- Here the RR removed all of its equipment = abandoned

- P is entitled to 5th Amendment compensation if the easement was in existence when govt tried to establish the trail b/c the trail was not w/I the scope of the easement

II. COVENANTS

A. Real Covenants are promises to use or not to use land in a specified way (enforceable by law)

1. they run w/ the land but are not an interest in the land (can be affirmative or negative)

a. benefited land is to dominant tenement; burdened land is to servient tenement

b. MUST be in writing (deed, grantee is bound even w/o signature)

c. Burden runs w/ the land IF:

i. (1) it is the intent of the contracting parties AND

ii. (2) privity of estate AND

1. horizontal privity – btwn the 2 parties of the promise

2. vertical privity – btwn promisor and successors in interest

3. for the burden to run, all cts req vertical privity; some cts also req horizontal privity

iii. (3) covenant “touches & concerns” the land

iv. If the assignee gives consideration to the promisor then he must ALSO have notice of covenant

d. For the benefit to run:

i. (1) orig parties to promise must intend that it run w. land

ii. (2) must be vertical privity

iii. (3) covenant must touch and concern the land

B. Equitable Servitudes: a covenant enforceable at equity against the assignees of burdened land (doesn’t matter whether covenant runs w/ land)

1. most cts feel this is an interest in land & req it to be in writing

2. If there is a reciprocal scheme in the neighborhood, ct must enforce it (e.g. other house have restriction)

a. It must either be negative or restrictive (not affirmative) & must be part of developer’s scheme of development

b. Enforcement by 3rd parties IF:

i. (1) there’s an intent that servitude by binding on assignees

ii. (2) vertical privity is req’d

iii. (3) covenant must touch & concern the land

iv. (4) BFP w/o notice doesn’t take subj to convenent (notice can be actual, constructive, inquiry)

3. Prior buyers may enforce (if implied equ. serv. then can only enforce what was effective at time he made the purchase)

a. 2 theories: (1) prior B received implied reciprocal servitude in remaining land owned by common grantor so subsequent purchasers take notice (2) prior B may enforce as 3rd party beneficiary

b. TULK v MOXHAY

RULE: Covenant will be enforceable in equity against person who purchases land w/ notice of it

Facts: P had covenant which req’d maintenance of garden on land but B tried to build a house there

- gen’ly a covenant that doesn’t run w. the land will not be enforced against subsequent vendee

- but if vendee buys ppty w/ notice of covenant restricting use, it may be enforced against him

c. SANBORN v McLEAN (Inquiry Notice)

RULE: If not written, an equitable servitude can be implied if there is a scheme for development

Facts: D tried to build a gas station on their lot in a residential district but neighbors said no

- from common grantor, a reciprocal negative easement arises & runs w/ the land to Bs w/ notice

- D is put on notice b/c all the lots had uniform use

d. NEPONSIT v EMIGRANT BANK (Affirmative covenant)

RULE: Affirmative covenant to pay for improvements done in connection, but not on land does touch & concern the land (homeowners assoc as agents of actual ppty can enforce the covenant)

Facts: Bank to title to ppty & refused to pay charges under the covenant (assoc fee)

- this case fulfills all 3 req of covenant: intent, privity, touch & concern

- Test of whether covenant runs w/ the land: if it imposes a burden on an interest in the land that also increases the value of different interest in the same/related land (what degree the covenant substantially affects the legal rts of parties to the covenant)

o b/c payment of fee is essential to enjoy the land, it touches & concerns the land

- cts hesitate to enforce affirmative covenants b/c:

o (1) don’t like to compel acts that req long term supervision

o (2) may leave successor w/ personal liability

o (3) unlimited duration is like perpetual rent

III. SERVITUDES IN GROSS

A. Servitude in gross = benefit is personal to covenantee & burden touches & concerns the land

1. English Rule: not binding on assigns of the burdened land b/c an equitable servitude was analogous to a negative easement. A servitude would run only if there was both a servient and dominant tenement.

2. American Rule: easements in gross permits burden to run w/ the land so servitude in gross would too

3. R3d: a servitude may not be enforceable at its inception b/c it violates public policy, imposes an unrx indirect restraint on alienation/trade, unconscionable

a. For covenant to run with the land (1) orig parties must have intended that the covenant run w/ land (2) privity of estate must extist btwn the party claiming the benefit of the covenant & the rt to enforce it & party upon whom the burden of the covenant is to be imposed AND (3) covenant must be deemed to touch & concern the land with which it runs

b. CAULLETT v STANLEY (Personal Covenants don’t Run w/the Land)

RULE: Restrictive covenants don’t run w/ the land (in law or equity) if the benefit would not touch and concern the land

Facts: developer sold lot to P and deed included a covenant giving developer the rt to build on it

- covenant did not directly influence the occupation, use or enjoyment of the land

- a covenant usu. can't run w/ the land unless there is both a burdened & benefited land

o exception: burden is in gross & benefit attaches to ppty (b/c benefit helps alienation of ppty)

o but if the burden attaches to the land & the benefit is personal then it doesn’t run

- if covenant doesn’t run w/ land at law, equity may enforce the servitude

o but doesn’t apply here as equitable servitude b/c it was in gross

- most jx req dominant estate for burden to run

c. HILL v COMMUNITY (Restriction violates FHA)

RULE: Ambiguous restrictive covenants should be construed in favor of free use & enjoyment of ppty & against restrictions

Facts: residents sued to enjoin from allowing AID group home move in

- to enforce restrictive covenant, look at 4 general rules of construction:

o (1) lang is unclear / ambiguous – should be in favor of free enjoyment

o (2) restrictions on use or enjoyment will not be read into covenant by implication

o (3) covenant must be interpreted rx AND

o (4) words must be given their ordinary & intended meaning

d. SHELLEY v KRAEMER (Discrimination)

RULE: Restrictive covenants based on race is discriminatory & forbidden by the equal protection clause of the 14th Amendment.

Facts: Black couple buying home unaware of restrictive covenant

IV. TERMINATION OF SERVITUDES

A. Many ways to terminate: abandoned, neighborhood changes so no longer beneficial, hardship, ct sanction

1. WESTERN LAND v TRUSKOLASKI

RULE: Restrictive covenant for residential area can't be terminated if residential character of area hasn’t been adversely affected by the surrounding area & it has real/substantial value to the landowner

Facts: Homeowners want to prevent shopping center even though surrounding areas is getting more commercialized

- as long as orig purpose of covenant can still be accomplished & substantial benefit is still there, the covenant will stand even if there is grtr value as a commercial area

- a zoning ordinance doesn’t override the privately placed restrictions

- there must be general consent of ppty owners to abandon the restrictive covenant

2. RICK v WEST (just 1 person)

RULE: a landowner in a subdivision under a restrictive covenant has the rt to insist on adherence to covenant even though other owners consent to release

Facts: D bought land from P and refused to release the covenant when P attempted to sell to hospital

- R3d: the ct can modify a servitude if changes since creation have made it impossible to accomplish the purpose which the servitude was created

3. POCONO SPRINGS ASSOC v MacKENZIE (Attempt to abandon fee simple)

RULE: Covenant running w/ land can't be terminated by abandonment if owner still holds title in fee simple absolute

Facts: owner of lot attempted to abandon it to avoid paying assoc fees

V. HOMEOWNERS’ ASSOC

1. NAHRSTEDT v LAKESIDE ASSOC (no cats)

RULE: Trial ct will hear evidence & decide if restriction is rx where particular facts apply

Facts: P wants to continue living w/ her cats in violation of covenants, conditions & restrictions

- leg usu. presume validity of restrictions

- restrictions that are arbitrary, against public policy or impose burden that outweighs benefit will not be enforced

- enforcement doesn’t depend on indiv conduct but on rx of restriction

- some cts have greater deference for restrictions in master deed to promote stability & predictability to majority of owners (discourage costly litigation)

ZONING

I. Zoning Power: only state has power to zone (power is delegated to cities & counties by “enabling statutes”

1. Goal: orderly development of community (promote economic growth, community health, welfare, safety)

2. How: segregates uses of land into geographic regions

3. can regulate density of population (commercial v residential)

4. Constitutional Consideration: if zoning will change the area, due process req that landowners in the area be given a hearing; must be for legit govt purpose; Equal Protection Clause req all landowners in similar situations be treated equally; if zoning amounts to taking then just compensation must be given

A. Taking: local govt properly exercises police power when it phases out uses that are inconsistent w/ newly enacted zoning changes (nonconforming uses). Landowners must be given rx time to cease nonconforming use (length of time based on dollar value of the improvements of land)

5. EUCLID v AMBLER

RULE: Zoning ordinances are a valid exercise of police power & do not violate constitutional protection of ppty rts

- restriction (no industrial or apartments) will be suited for fire, health, traffic, safer, cleaner, more enjoyable

- ct will not enjoin ordinance if just ppty value is affected

II. ADMINISTRATION OF ZONING ORDINANCE

A. Enabling Acts inevitably req local zoning authority to adopt a comprehensive plan (may lead to litigation)

1. PA NORTHWEST v ZONING BOARD (nonconforming use)

RULE: If zoning law/regulation has effect of depriving ppty owner of lawful pre-existing nonconforming use of ppty, it amounts to taking & owner must be justly compensated

Facts: adult bookstore was open and given only 90 dys to comply w/ ordinance

- lawful nonconforming use est. vested ppty rt in owner that can't be abrogated or destroyed unless it is a nuisance, is abandoned or extinguished by eminent domain

2. Variances: boards of zoning have been est. locally (empowered to grant variances for conditions that are unique to a particular lot)

a. Variance is license of official authorization to depart from zoning law

b. “Special exception” – allowance in zoning ordinance for special uses that are considered essential but are not fundamentally incompatible w. original zoning regulation

i. Ordinance allowing a gas storage tank underground has to set forth the req for permitting it

c. COMMONS v WESTWOOD (variance)

RULE: Zoning board has power to grant variance where strict application of it would result in undue hardship upon developer of ppty & variance would not substantially impair public good & intent & purpose of zone plan & ordinance

Fact: Builder trying to construct a home on a lot below local zoning ordinance’s minimum size reqmt

- “undue hardship” – notion that no effective use can be made of ppty in the event that variance is denied

o An owner is not entitled to have his ppty zoned to its most profitable use

o If there is not use of ppty then must call for eminent domain & must have compensation

o If not related to public health, safety, or morals them must grant variance request

o Burden of proof on the applicant

d. COPE v BRUNSWICK (excessive discretion granted to local zoning board)

RULE: Local zoning boards & municipals don’t have inherent authority to regulate the use of private ppty. The power of a town & local zoning boards comes from the state. Power to regulate private ppty can't be delegated from the legislature to a municipality or from a municipality to a local administrative body w/o sufficiently detailed statement of policy to provide a guide to rx determine an owner’s rts & prevent arbitrariness.

Facts: 2 apartment builders appealed to local zoning board’s decision to deny them a zoning exception to construct multi-unit apartment buildings.

3. Amending Zoning Ordinances: local leg body has power to amend (don’t need to follow rec’d)

a. Spot zoning: local leg body amends zoning ordinance to permit new zone that’s limited in size (not more than 1 lot) & doesn’t conform to the comprehensive plan.

b. STATE v CITY ROCHESTER (no spot zoning)

RULE: Municipality’s amendment of zoning ordinance using police power will be upheld unless it is unsupported by any rational basis related to promoting public health, safety, morals, or general welfare OR it amounts to taking w/o compensation

Facts: 3rd party neighbors challenge validity of City Council zoning ordinance amendment (from single family residence to high density use)

- In passing a zoning ordinance, a city council must make a legislative judgment that the classification will promote public health, safety, moral, and general welfare

- When a municipality adopts or amends a zoning ordinance, it acts in a legislative capacity under its delegated police powers

- Special-use permits applies use standards set by zoning ordinance to particular individual use

o Denial of request for special use that conforms w/ zoning ordinance is prima facie arbitrary & unrx if it is shown not to be supported by written findings of substantial evidence showing use impermissible under permit standards

c. Discretionary Zoning (Non-Euclidean Zoning):

i. Cluster zoning: putting families closer together to have parks

ii. Floating zoning: can create a new zone but not geographic location

iii. Planned unit development: apartments

EMINENT DOMAIN

I. Eminent Domain = power of the govt to take privately owned land for public use (5th Amendment – just compensation must be made for the taking)

A. Govt Taking: express (trial to determine condemn & value) & implied

B. Public Use: condemnation of private ppty for private use is forbidden (power of eminent domain only extends for public use – so govt can't take land to sell to others

1. HAWAII HOUSING v MIDKIFF (public use that benefits indiv owners)

RULE: A taking involves the transfer of ppty from 1 private owner to another satisfies Public Use Clause of 5th Amendment if it is rationally related to conceivable public purpose.

Facts: ½ of HI’s lands were owned by 72 people & state wanted to break up their estate

- just b/c ppty taken by eminent domain is transferred to private parties doesn’t mean the taking was for private purpose

II. Types of Taking

A. Physical invasion (inverse taking) – if the govt invades ppty substantially, it must pay for the de facto taking even though no condemnation proceeding (incl noise, vibration, odor, nuisance)

1. LORETTO v TELEPROMPTER (permanent physical occupation)

RULE: Permanent physical occupation of ppty authorized by govt constitutes a taking of ppty which req just compensation, regardless of the public interest it may serve

Facts: New building owner sues cable co for installing cables on building by state statute.

- when the intrusion is a permanent physical occupation then it’s a taking (regardless if it supports public interest or only has slight economic impact)

B. Taking by Regulating: if govt regulates land to pt that it loses all its value, injured party can either sue to have regulation invalidated or seek damages in an inverse condemnation suit (problems is not all value lost)

1. Harm: if the goal of regulation is to protect the public from harm then it is a valid exercise of police power

2. Loss of economic value: there must be practically no economic value left

a. HADACHECK v SEBASTIAN (Harm Test)

RULE: A regulation that deprives an owner of ppty for purpose of prohibiting a nuisance is an exercise of police power & isn’t a taking so no compensation

Facts: P built a brickyard outside city limits, then city grew and said he violated ordinance

- private interest must yield to growth

b. PENN COAL v MAHON (Total Restriction on Land Use)

RULE: While ppty may be regulated to a certain extent, if that regulation goes too far in diminishing the economic value of ppty, it will be recognized as a taking

Facts: Co sold surface rights to some land but retained rt to min underneath which was prohibited by statute

- govt can't pay for every little thing when they use police power, but it is limited to due process

- when diminution reaches a certain magnitude, there must be eminent domain & compensation

- here govt can't use statute to prevent mining coal if its not a public nuisance

- Dissent: the restriction may be for 1 person but it for a public end

c. PENN CENTRAL v NY (Historical landmarks)

RULE: Law that doesn’t interfere w. owner’s primary expectation concerning the use of the ppty & allows him to receive rx rtn on his investment doesn’t effect a taking which demands compensation

Facts: Penn made plans to construct office over Grand Central Terminal but blocked by Preserve Law

- Here the act transfers P development rights, doesn’t interfere w/ primary purpose

- destruction of rts is a taking except (1) prohibit nuisance and (2) prohibitions covering broad area that secure an average reciprocity of advantage – like zoning

d. LUCAS v SC COASTAL (Ppty value extinguished)

RULE: Land use regulation that deprives owner of all economically valuable use of ppty by prohibiting uses that are permitted under background principles of ppty & nuisance law results in taking

Facts: P claims that SC statute that barred him from building on this island was a taking

- regulations that deny ppty owner “all economically viable use of his land” constitutes 1 of the discrete categories of regulatory deprivations that req compensation w.o the usu. case specific inquiry into the public interest advanced in support of the restraint

- a state should only be allowed to deprive the owner of all economically beneficial use of ppty w/o needing to pay compensation when the interest in the regulated use was not party of the title to begin with

- look to nuisance law

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