I
I. Adverse Possession
A. RULE: For adverse possession, use of the land must be
1. Hostile
a. State of mind:
1) some jurisdictions: objective test: their state of mind is irrelevant, as long as they INTEND to remain
2) some jurisdictions: must have good faith: owner mus believe it was theirs
3) some jurisdictions: bar bad faith claims
4) Can either be:
a) holds the property under claim of title (believes he owns it)
i) if under color of title, then they get the entire parcel described in the paper, otherwise they only get the part they adversely possessed
b) or he acknowledges he has no right to it, but has the intent to claim it for his own
b. If the true owner consents to the possession it is not adverse or hostile regardless of state of mind
1) ** look up what happened in that case where the guy wrote a letter giving permission but it was never received
2. Open and Notorious
a. Improvements on the land can prove this element
b. Not hidden, sufficiently apparent to give notice to TO
3. Continuous
4. Exclusive
5. For the requisite period of time
B. Some states require color of title, some states require taxes to be paid
C. An adverse possessor has all the rights of the True Owner, except against the True Owner
D. Van Valkenburgh v. Lutz
1. Facts: The Lutz’ owned tracks 14 and 15, they created a “traveled way” through a triangular tract of land, they built a shack on that land and cultivated part of it, knowing it was not theirs. The Van Valkenburghs bought the land. Lutz agreed to remove his stuff, but claimed a prescriptive right. Van Valkenburghs erected a fence, inviting this legal action
2. 1st and 2nd litigations
a. 1st law suit was for prescriptive rights (seeks use of some of the land)
1) did this concede that he didn’t claim title??
b. 2nd law suit was for adverse possession (seeks title of land)
1) was the property occupied under claim of title??
2) NO, Lutz agreed to move all his stuff, and acknowledged someone else’s right to the land
3. The Court
a. Argued that the Lutz’s didn’t improve the land (said the shack and the garden were not improvements)
b. Required him to be using the whole land
1) cultivation is an indication that you are treating it like your land
2) Using land gives notice to the true owner that you are there, possessing it adversely
a) if they don’t want to lose the land, they have to intervene, get you off the land
E. Color of Title
1. It looks like, and you believe, you have title, but you really don’t- you have a piece of paper saying you do
2. Assume lots A and B, your parents own A and leave you in their will A and part of B. Your belief, based on the will, is that you own A and part of B
a. IF you rely on that, even if you only occupy a tiny piece of the land, you get ALL of it when adverse possession is satisfied
b. IF you don’t have color of title, you only get the part you adversely possessing
F. Tacking
1. If one person adversely possesses the land, and then another person takes over, they can tack on to the first possessor to satisfy the statute of limitations
a. Does not apply in involuntary change of possessor
2. (Likewise the TO can change, but the statute of limitations keeps going as long as the AP is continuous)
G. Disasbility of T.O.
1. If there is a disability at the time of encroachment, then the statute of limitations doesn’t start to run until the disability is over
2. Includes: mental infirmity, imprisonment, infancy, etc.
II. Prescriptive Easements
A. Open, Visible, and Continuous and Uninterupted use of land under claim of right
1. Not possessing it, you are just using it
2. You concede that someone else owns, but INSIST that you have the right to use it
3. ***What else do we need to know about this?
4. Hostile
III. Future Interest
A. Harper v. Paradise: statute of limitations does not start to run against someone with a future interest, until they actually have possession
1. Life estates, etc. think of Harper v. Paradise
IV. Landlord/ Tenant Law
A. 2 Rules
1. English Rule: Landlord is responsible for ensuring a tenant is out so another can move in
a. PRO English Rule
1) the landlord has better access to knowledge about a tenant holding over
2) access to the information
b. Implied covenant of lease to make the premise available
c. Can absorb risk by absorbing cost into rent
d. CON: landlord could never lease property until the original tenant had already left
1) ENGLISH RULE INCREASES RENT because of the liability on the landlord, for protection
e. Result: collective risk aversion: would rather pay $5 more a month than potentially have to pay double rent under the american rule
1) like insurance, redistribute the risk
2. American Rule: Tenant is responsible for the space once their lease starts... a holding over tenant is their problem
a. The lease gives you title, not necessarily possession
b. Tenant has the right to kick people out at that point, not the landlord
1) like a trespasser would be handled by the tenant, not the landlord
c. PRO American Rule:
1) tenant has a remedy: they are in legal possession, but the remedies are the result of the rule that puts them in the position to need remedies: circular
2) Rent is cheaper, because the burden isn’t on the landlord, so they don’t need to protect themselves
3) the tenant has the option to ask for an express covenant of actual possession
d. CON: burden is on the tenant- so they won’t sign lease until they know
1) have to pay the rent still, and find another place to live... double rent
B. Hannan v. Dusch
1. Facts: Hannan is a new tenant, says it was Dusch’s responsibility to ensure actual possession, Dusch said he put Hannan in legal possession. Dusch wants rent, Hannan wants possession.
2. Pro/Con analysis of English v. American Rule (see above)
3. Dusch wins, American Rule... tenant responsibility
C. Subleases and Assignments:
1. Between Landlord and Tenant there is privity of estate and privity of contract
a. Privity of contract: there is a contract, the liability that arises from this
b. * go over this: Privity of estate: an interest in the land; the parties between whom there is a reversionary interest... (when the possessor stops possessing, who does it go back to?... that’s where the privity of estate is.) Rent runs with privity of estate
2. Sublease:
a. There is privity of estate and privity of contract between the Tenant and his subleasee...
b. But no relationship between Landlord and Subleasee
c. Liability: landlord cannot sue or be sued by Subleasee... T(2) isn’t protect if T(1) is evicted. There is no relationship between T(2) and L... Landlord and Tenant have the only relationship...
3. Assignment:
a. Privity of contract remains between landlord and tenant, but the tenant has given up all his interest in the land... so privity of estate doesn’t exist between landlord and tenant
b. The assignee has a right to indemnity between him and the Tenant, but privity of estate between assignee and Landlord
c. T(1) transfers entire interest to T(2)
1) there can be a partial assignment of all of your interest in just part of the land
d. Liability
1) T(2) is first liable for the rent because rent runs with privity of estate
2) T(1) is still liable for everything... even the things that run with privity of estate
a) if something doesn’t run with the land, then T(1) is liable...
4. Assignment with Assumption
a. Gives rise to privity of contract between L and T(2)
b. What does that mean between L and T(1)
1) think they still have privity of contract
c. You assume liability
d. L becomes a 3rd party benficiary
e. If the landlord and T(2) decide to change the terms, then T(1) is not liable
1) as long as it materially alters...
2) Implied Novation
f. You can assume in a sublease as well
5. Partial Assumption
a. A subleasee or assignee can assume an obligation for certain clauses
1) “use” clause: what the land can be used for
2) “tenant mix” in a mall what kind of tenants are allowed
3) “radius clause” certain things can’t be within certain radius of each other
6. If T wants to be NOT LIABLE... NOVATION AND RELEASE
a. You release yourself of liability, but it’s the only way to get out of a contract
1) It’s the only way to get out of liability- buy yourself out
b. Implied Novation: if T(2) and the Landlord change the terms of the lease... then they have written you out of the lease and you are not liable
7. The Float:
a. If T(2) is paying $1000 to T(1) on the 1st of the month, and T(1) is paying $700 to L on the 30th of the month, the T(1) has a float and can use the money/get the interest during the month
1) put the money in an escrow otherwise T(2) might have to pay twice if T(1) bails
D. Ernst v. Conditt: See attached
1. Facts: T(1) transfers entire interest to T(2), but in the contract they call it a sublet. Who is liable?
2. T(2) argues that T(1) is liable because he said he would be and because he retained an interest in the land by having the right to come back on the land to fix something, but a right to enter is not an interest in the land.
a. But, T(1) always retains privity of contract in a plain assignment... so this is not really an argument
3. Court disagrees with T(2)... finds it was an assignment, and so T(2) is primarily liable, and T(1) is secondarily liable
4. Even if it was a sublease T(2) is still liable, because in the contract he also ASSUMED
E. Melchor: see attached
1. Facts: Melchor leased to Rolm Corp. Who then merged with IBM, and so the new company took an assignment and assumption of lease, and later subleased to Rolm Systems, who also did a partial assumption
2. Does T(3) have the right to enforce aribtration clause against Melchor
3. The Court’s reasoning is WRONG
a. They say that the subleasee can enforce it because the arbitration clause runs with privity of estate BUT there is no privity of estate between T(3) and L!!
b. They went wrong because this is a sublease, not an assignment
4. But why is the Court’s answer Right?
a. Because of the Subleasee’s assumption, they are in privity of contract, and the arbitration clause should be enforced between them
F. See Diagram of Probem C
V. Sale of Land/ Warranties- Part I
A. Sale of Land- 4 part process
1. Locating buyer
2. Negotiating contract
3. Prepare for closing (executory period)
4. Closing the transaction
B. Marketable Title
1. A title is free from reasonable doubt, with no reasonable probability that the buyer will be subject to a lawsuit
a. Actions on this happen between contract of sale and conveyance (since marketability is implied in contract of sale, but merger doctrine usually keeps it out of the deed and not a cause of action after that)
2. Also: problems in the chain of title indicating that the seller doesn’t have the full interest he purports to convey... may be a defect and render a title unmarketable
a. Again it exposes buyer to potential litigation
3. What effects marketable title?
a. Zoning regulations do NOT
b. CCRs do, but can be carved out
c. A violation of a zoning restriction or a CCR does
d. Adverse Possession: not necessarily... two options
1) seller can perfect title through a suit
2) seller can go to court and argue marketable title based on the unreasonableness of someone coming back after however long to reclaim title... if that’s found unreasonable, it’s marketable
4. Conklin v. Davi
a. Bad rule: that you evaluate the rule as of the moment of judgment, not the date of the closing of escrow: Date of Evaluation
1) Insert “time is of the essence” clause
a) you want performance by a drop dead date, with no later fixing
2) True Owner needs to be a party to the adverse possession suit
b. Argument: it is marketable because he adversely possessed it and would win a claim, BUT to be marketable it must be free from LITIGATION, not just unsuccessful litigation
C. CCRs
1. Private agreements (Zoning restrictions are public)
2. Conditions, Covenants and Restrictions
3. Lomeyer Case
a. The VIOLATION of the CCRs creates unmarketable title
1) NOT the existence of the CCR because that can be carved out
4. Promises made in deed or lease that restricts the use or occupancy of real property...
5. HAVE TO RECORD
a. They follow the property: if you sell to someone, the covenants are still with the land
6. Strawman Transaction: convey all lots with CCRs to a strawman who conveys it right back to you and now all the properties clearly have the CCRs attached to them
D. Equitable Conversion
1. Traditional Rule: risk of loss transferred with equitable title (when the contract was made), not upon delivery of legal title or possession, so buyer always bears the loss after the contract for sale is made
2. In CA: the person in possession bears the loss, unless you contract around it
E. Merger Doctrine:
1. Folds the old contract into the new one (the contract for sale into the deed)
2. Makes it the final integrated agreement of all our understandings
a. Everything is merged together, so if it isn’t in there, it isn’t important
VI. Warranties- Part II
A. General Warranty
1. General warranty- the 6 covenants:
a. Present and Future warranties
1) Covenant of seisen: grantor guarentees that he owns what he is selling
2) Covenant of Right to Convey: (ie. Grantor is not a trustee with title but no ability to convey... but very similar to covenant of seisen)
3) Covenant against Encumbrances: includes, among other things: mortgages, liens, easements, and covenants
4) Covenant of General Warranty: grantor will defend against lawful claims against the property and will compensate for any loss by an assertion of superior title
5) Covenant of Quiet enjoyment: possession will not be disturbed or their enjoyment, by assertion of superior title
6) Covenant of further assurances: grantor will execute any other documents that are necessary to perfect title
2. Covers all defects in title
3. Present Covenants are breached at time of conveyance and the statutory period allows time for the breach to be discovered (starts to run at time of conveyance/breach)
4. Future Covenants are breached at a later time and statute of limitations starts to run at time of breach
B. Special Warranty Deed
1. I haven’t done anything to foul up the title, can’t say anything about before me
2. Same 6 warranties
a. But only on whatever happened during direct grantor’s tenure
C. Quitclaim Warranty
1. No warranties, take it as it is
D. Brown v. Lober
1. Facts: remote grantor retained 2/3 mineral rights in land conveyed to Bosts (grantor), then grantor conveys to Brown (grantee), who then contracted to sell mineral rights for $6000, but can only sell 1/3 because he didn’t know but he only owns 1/3
2. Brown didn’t have the 2/3 interest because Bosts never had it to give to him... the claim should have been under covenant of seisen, but the statute of limitations had run on that since it is a present covenant and the statute of limitation starts to run at conveyance
3. In order to invoke a future covenant, need to have your possession Interfered with... here, you need to have possession of mineral rights, underground, interfered with - that’s a breach of quiet enjoyment
a. But the interference needs to be by someone with superior title
4. Can’t be an action for marketability: all actions on this happen between contract and conveyance (since it is usually included in the contract but not in the deed)
5. Does this make sense?
a. Assume a world where Brown’s arguments are correct... present covenants would be extended, and future covenants would be strict liability like the present ones... mesh them together - prices will go up
6. What should Brown do?
a. Problem with adverse possession- how are you open and notorious underground?
b. Make a deal with True owner- you start digging, call and tell them you are doing this... they sue you, you share the profits
c. If Bost knew about the 2/3- should have carved it out, or issued a special warranty or quitclaim
E. Rockafellor v. Gray: see attached
1. Facts: Doffing conveys to Rockafeller, who assumes the debt, Doffing owes Gray a mortgage of $500, it’s a lien on the property, then Gray judicial forecloses, Connelly buys it from the foreclosure, sells it to Dixon for $4000 and then Dixon sells to H&G for $7000
2. Rockafellor sues Gray saying they didn’t get jurisdiction over him- he wants the land back
3. H & G files a cross-complaint against Connelly
a. There was a breach of covenant
b. All that was actually conveyed to H&G was a right to sue (chose in action)
c. H&G relied on the GWD issued by Connelly to think they were getting good title
4. Recovery is measured by the stated consideration, Dixon’s stated consideration
VII. Who has title?
A. Common Law: first in time, is first in right
1. Recording is irrelevant
B. Recording Statutes - can divest title from common law
1. Race Statute: whoever records 1st wins
2. Notice Statute: unrecorded conveyance is void against a SBFP4V
a. Doesn’t have to record first
3. Race/ Notice: unrecorded conveyance is void against a SBFP4V who records first
C. Estoppel by Deed: see attached
1. When O conveys to A something he doesn’t have, and then X conveys to O that which he purported to convey to A... it automatically goes to A
a. It is considered that O got the property on A’s behalf
2. Always check the dates, to see if the later divester has actual notice!
D. Delivery
1. Delivery requires INTENT TO DELIVER... which is often shown by manual delivery... but can be shown by other factors if significant enough to show intent
2. Sweeney Case:
a. Facts: Maurice owns property, conveys it to his brother, at some time executes a deed back to himself in the event that John dies before him, the first is recorded, the second is not, they leave with both deeds which Maurice later gives to John to hold, then Maurice dies
b. Delivery requires: manual delivery/ physical possession and intent to deliver
c. The conditional delivery actually vests delivery in the person (unless you were to use an escrow at which point delivery isn’t made until the condition is met)
1) here, the condition to deliver and convey something, satisfies the requirement and actual delivery is made
2) john would’ve had to have given it to an escrow before Maurice ever touched it (giving it to his lawyer later doesn’t count)
d. Conditional Transfer of Title = Absolute Transfer of Title, unless through a 3rd party
VIII. Recording- Double Dealing Grantors
A. Searching Title
1. Search Grantee/Grantor index for names of all Grantors
2. Then Search Grantor Grantee index for all conveyances/encumbrances/etc out from every grantor, covering every year (though not obligated to search all years for all grantors... chain of title comes in)
B. Luthi v. Evans - see attached
1. Facts: Grace Owens assignss oil and gas leases to Tours, assigns everything she has in the county (mother hubbard clause), but she describes 7 leases- this was recorded 2/16/71. In 1975 Owens assigns her interest in a lease not described in the one to tours, to Burris... Burris checks title and finds nothing and he records his lease
2. Common Law
a. Burris got nothing- nemo dat
b. Tours wins
3. Recording Statute
a. Can Burris divest Tours?
1) argues didn’t receive constructive notice
b. Court:
1) mother-hubbard clause is binding on only the parties involved, not beyond
a) to be binding on a subsequent party would have to show actual notice
2) in this case, the fault was with Owens- the recording office couldn’t have done it right because it did not list the property
4. Also, look at intent: seems clear Owens did not intend to convey Kufall lease...
a. If there was no delivery to Tours, then Burris clearly has title
1) Also, To express one is to exclude others (the descriptions of the 7 implies exclusion of the 1)
b. This is the first argument: no intent equals no delivery equals no interest in the land equal Burris has title
C. Types of Recoding Acts
1. Race Statute
a. First to record wins
2. Notice Statute
a. SBFP4V
3. Race/Notice Statute
a. SBFP4V/ who records first
b. Bona Fide: in good faith, without actual or constructive or inquiry notice of A
1) impeaching factors:
a) anything suggesting notice
b) QC deed should raise an eyebrow
c) argue things
c. Purchaser: anyone who takes any voluntary transfer (a donee is a purchaser, but not for value)
d. For Value:
e. Records first
D. Orr v. Byers: see attached
1. Facts: O (Elliott) conveys a lien to A (Orr), and it was recorded under “Eliot”, then O (Elliott) conveys to B (Byers)
2. Common Law: Orr wins
3. Recording Statute: should Byers have been on constructive notice to look up the name “Eliot”?
a. Idem Sonans: as long as it sounds like the right name it’s okay for legal proceedings
b. BUT, for recording... the written name is material
1) it would be an undue burden for purchasers to have to look at every permiation of the name
2) Schechter points out that this encourages concealment and rewards sloppiness
E. California Statute
1. For In rem proceedings: A didn’t record, B then records a notice of action
a. When B gets his judgment and so gets the property, he is not a purchaser, but is treated as such for the purposes of divesting under the statute
2. BUT, if B had simply created a judgment lien on the property after getting a judgment in a torts claim, A wins if he records even at the very end
a. Not considered a purchaser
F. Messersmith: see attached
1. Facts: Caroline conveys property to nephew by QC deed recorded after B and C, and then conveys ½ oil and gas interest in land to B (Smith) recorded, but there was a latent defect in that the notary republic signature was not valid, and then Smith conveyed to C (Seale) recorded
2. Common Law?
a. A (nephew) Frederick has common law title
3. Can C divest?
a. CAN”T shelter under B since B’s recording was not valid because the acknowledgment was not proper- it was a latent defect, but in this jurisdiction that provides constructive notice
b. CAN”T divest on it’s own since the latent defect gives constructive notice in this jurisdiction... so he is not a BFP
4. In another jurisdiction- it is entirely possible that C can divest
G. Zimmer Rule: a race notice statute protect sbfp4v who first records only if all prior conveyances in the chain of title are also recorded (no wild deeds)
1. Wild Deed: there have to be links for you to be able to find all the conveyances.... if there is a wild deed then C would lose to A
H. The Shelter Rule
1. Even if C cannot successfully invoke the recording statute, if B can, C can shelter under B
a. Because they bought it from someone who should have title under the recording statute
b. In a world without this rule: B could win but never sell his land because A could feasibly give notice to every subsequent purchaser... so it makes sense that the next buyer doesn’t need to not know about A
I. Board of Education v. Hughes: see attached
1. 2 ways to understand: the book way and the class way
2. Facts: Hoerger gives something to Hughes the name is left blank and is not filled in until right before it is recorded later, then Hoerger sells to D&W, not recorded until later
a. Recordings: Board records, then Hughes fills in his name and records, and then D&W records
3. Court:
a. There was no conveyance to Hughes until he put his name in (they make Hughes B and Board A)
1) Our Problem: Sweeney rule- conditional delivery vests absolute title
b. Still, Court decides that Hughes is a subsequent purchaser
c. Now, D&W have common law title
1) can Hughes (B) divest?
a) Yes- subsequent bona fide purchaser for value who records (before D&W... Boards recording doesn’t matter because it couldn’t be found if D&W wasn’t recorded)
4. Class Analysis
a. Common Law title: Hughes
1) can D&W divest? (If they can, then the board can shelter)
a) they are everything BUT, they don’t record first
b. Same Answer: Hughes wins
c. Can the Board divest?
1) not bona fide because they bought from an unrecorded deed
2) this is the zimmer rule... it’s a wild deed, can’t be found!
a) BFP status is determined at the time of conveyance
b) can argue BFP status either way
J. Guillette v. Daly Dry wall: see attached
1. Facts: Gilmore owns subdivision, conveys lot 1 to Guillette, and the Deed refers to and in fact conveys CCRs on all the properties in the subdivision, then Gilmore sells to Daly whose deed refers to a 1968 plan but doesn’t mention the CCRs, Daly wants to build an apartment building when only single family homes are allowed
2. Common Law: Guillette wins
3. Can Daly divest Guilllette?
a. Daly was put on some sort of notice by mention of “the plan”, so not a BFP
b. Also because it is a “subdivision” should be on notice that this inherently means there must be CCRs
4. What should they have done?
a. Make the CCRs obvious public record
b. STRAWMAN TRANSACTION
1) Gilmore conveys all deeds to X (lawyer, escrow, someone trusted), then X conveys them all back, with the CCRs
2) Now Gilmore conveys lot 1 to Guillette and lot 2 to Daly
3) this puts the CCRs in direct chain of title
5. Now Daly can sue Gilmore for breach of warranties
K. Sabo v. Horvath: see attached
1. Facts: O(Lowry) was trying to get his patent from US government and had been working the land, he conveys to A (Horvath) who records, and then X (government) conveys to O (Lowry) who records, and the O (Lowry) conveys to B (Sabo)
2. Common Law: A (Horvath)
a. O did have something to convey- a serious interest in the land
3. Estoppel by Deed? As soon as O got property did it then become A’s, but would he have had to re-record?
4. Can B divest A?
a. Did B have constructive notice of A?
1) shouldn’t have to search for deeds out from O before the time that O got title
2) A was outside the chain of title
a) court doesn’t want to set precedent that B needs to search outside chain of title
b) would rather put burden on A to re-record
5. Compare to Guillette
a. Guillette they put the burden on the buyer
b. But can distinguish the cases
1) big difference: In Guillette it was a conveyance after Gilmore acquired title, and there were hints to look for it...
c. They are not irreconcilable
L. Harper v. Paradise: see attached
1. Facts: In 1922 O(SH) conveys to A (Maude plus the remaindermen) a life estate, initially not recorded, then in 1928 O (SH) died, and her heirs conveyed to B (Maude) in fee simple absolute to replace the earlier deed and this was recorded and referred to the earlier deed, in 1933 A/B (MH) conveys a trust deed (50 dollar mortgage) to C (Ella), this was recorded, and in 1936 C (Ella) foreclosed, and she bought it and recorded, and in 1955 C (ET) gives a GWD to D (Paradise), and then the original O to A deed gets recorded, in 1972 Maude dies
2. The remainder men and the Paradises are fighting over title
3. Common Law:
a. Maude’s 1922 life estate
4. Once we argue that SH’s heirs are acting on her behalf, then there are 2 inconsistent conveyances
a. The paradises want B to win... so that their chain of title is good and is for fee simple absolute, not for Maude’s life estate
1) BUT, B is not bona fide, because they knew about the A conveyance
2) So Paradise cannot shelter under B
5. Paradise has to establish their own BFP status
a. BUT: the 1928 deed clearly referenced it was replacing the 1922 deed...
1) puts them on inquiry notice to find out
2) also puts C (Ella) on inquiry notice, so they can’t shelter
b. The O to B conveyance was a non-conveyance since one of the heirs was missing, under the statute
6. Adverse Possession?
a. They’ve been on the land 20 year, have color of title
b. If Maude had tried to kick them off they would have won
1) But they would have won a life estate, and the remaindermen would have gotten title when Maude died and adverse possession would have to start again
2) Here, remaindermen don’t have an interest in property until after she dies... there can be no tacking in this situation
M. Waldorf: see attached
1. Facts: Choctaw has a condo building, Waldorf buys #111 on layaway (pays $1000 and then IOU and doesn’t retain title, but has equitable title), then O (Choctaw) gives a mortgage to the bank, including property 111, then O settles his debt with A (Waldorf) for the remaining cost of the condo, so A gets title, but then B (bank) forecloses
2. Who has condo #111?
3. Common Law: Waldorf
a. Equitable title is enough
b. And there was consideration
4. Can B (bank) divest?
a. Waldorf was in possession and that puts the Bank on inquiry notice
5. In this situation, the bank must get estoppel certificates from all tenants before issuing a mortgage
2nd Semester:
IX. Finance: Gradsky
A. 580d: triggered by the nature of the foreclosure
B. Secured Transactions CALIFORNIA STATUTES (these are not the majority rules)
C. Facts: Bess executes a note to the bank for $112k plus interest for a construction loan (which has special rules compared to a purchase money loan), the GC guarentees the loan, Bess defaulted and the time for payment was twice extended, she defaults and the property is sold in an NJF, the bank puts in a credit bid but there is a slice left over $11,565, which is the deficiency, but they can’t go after Bess because of 580d (there are good reasons why banks should not enter a full credit bid)
D. 580d : can’t go after the debtor when there has been a NJF (this is because in a NJF the debtor loses the right of redemption which she would have with a JF, so the creditor loses the right to the deficiency)
E. ISSUE: can the bank go after the deficiency amount from Max, the guarantor? Does 580d apply to him?
1. Upon default by Bess, the Bank has 3 options:
a. JF plus right of deficiency for bank, plus right of redemption for Bess
b. Sue Max for full amount (not allowed at common law, b/c at common law you have exhaust other remedies before going after guarantor... like a guaranty of collection. However this was a guaranty of payment, so they could have gone after Max as soon as she defaulted), if Max had to pay it all, then Max could have gotten the rights of the bank to go after her... subrogation (and 580d would never come into play)
c. NJF, and Bess is protected by 580d
2. Subrogation:
a. A creditor has a promissory note, a trust deed and a guaranty
1) if the guarantor pays the creditor, then they are subrogated to the creditor’s rights (they step into the shoes of the creditor)
b. SO, when the creditor chooses to NJF, they have no right to go after Bess for the deficiency... so if they go after Max and then he is subrogated to their rights, he gets NO RIGHTS to go after Bess for the money he paid
1) plus, if Max could go after Bess then 580d would become irrelevant
3. Court decides:
a. Since the bank was the only one with an option, and the option they chose screwed Max out of any rights to go against Bess, then they are ESTOPPED from going after Max
4. Last Issue: Waivers
a. Avoid the Gradsky problem where the bank can’t get a deficiency against anyone
1) very specific waiver: I waive my right of estoppel that arises from my right of subrogation
b. In the wake of Gradsky there become more and more elaborate waivers, so then it got too complicated
1) Statute: 2856
a) guarantor waives all rights and defenses... So the bank can go after them, even if they can’t go after the debtor
2) Also, if you already have your deal with the bank... and the bank wants to include a waiver, they need to give you consideration for the waiver (consideration could be debtor asking for an extension)
3) BEWARE:
a) go over the problem of the parent/subsidiary company guaranteeing for each other... one is an upstream guaranty and there are problems with that, while the other is a downstream guaranty and that is better.... need to make sure the guarantor is getting something for what they are doing: the right of subrogation, reimbursement or indemnity... And so if it is all waived under 2856 language, then they will be getting nothing and (WHAT IS THE PROBLEM EXACTLY?? If they go into bankruptcy??)
c. 2856 doesn’t apply in residential situations
X. 580b - triggered by the nature of the debt
A. Vendor takes back paper: Vendor conveys property to the purchaser, P gives a down payment to the V, and the P gives the V a note for the rest and a TD on the property
1. “VPMTD” - Vendor Purchase Money Trust Deed
a. Step 1: sale
b. Step 2: loan
c. Step 3: note in favor of bank
d. Step 4: TD in favor of bank
e. Step 5: $80k to Vendor
f. Step 6: $20k not to down vendor
g. Step 7: vpmtd2 to secure balance of purchase price
B. A Vendor who takes back paper CANNOT get a deficiency against the debtor
1. *why would a vendor take back paper? Usually it is for a purchaser who can’t get a loan, so there is a higher risk, and so you can charge oodles more money
C. Part II of 580b: a Lender-held Residential Purchases Money Trust Deed (LRPMTD), the lender is barred from getting a deficiency judgment (residential: owner occupied dwelling of four units or less)
1. SO, when you buy a house on a loan, you are not liable for the note- they can take your house, but they can’t go after a deficiency
D. Grid for 580b
| |VENDOR |LENDOR |
|RESIDENTIAL |No deficiency |No deficiency |
|COMMERCIAL |No deficiency |Yes, can recover a deficiency |
| | |(Kistler v. Vasi... flies in the face of the statute)|
I. Spangler
A. Facts: May Spangler is the vendor- got a $26,100 and a note for $63k for a TD (and the TD is a VPMTD)... the general partnership wanted a construction loan and knew that a bank would insist on a SENIOR trust deed so they had to bargain with May to get her to subordinate her TD to the bank (which she would do because the property was re-zoned so in order to charge a higher price for it she has to subordinate to a construction loan so the property can be used that way), she agreed to do this if the purchaser agreed to waive 580b (which is totally invalid because there can be no waiver of 580d or b by a debtor otherwise they would also be strong-armed into doing this), she also had them each agree personally for joint and several liability (but, since it was a general partnership they were already liable, so this is duplicative), MKS then bought from the partnership, and they took the property “subject to” (or they may have assumed, but they at least took subject to)... so there was a subordination agreement (creditors can trade and re-org for TD positions)
B. MKS defaulted and the bank brought a deficiency action against MKS and Spangler... JF, so they could get deficiency (and the bank had to join Spangler as a junior lien holder, otherwise her lien would remain on the property- in a NJF it would automatically extinguish all junior liens). The bank recovers their deficiency, so now the dispute is just between MKS and Spangler
1. Spangler’s TD is gone, but the note still exists- she is a Sold Out Junior Lienholder (“SOJL”)
2. MKS’ argument: 580b doesn’t allow Spangler to get a deficiency
a. 580b policy: we want to discourage the vendor from selling too high (don’t understand this policy... go over it again)
b. Exception: construction
1) present security value is not a reliable indicator of the ultimate value of the property, since there is going to be a large change based on how the construction changes the use of the property
2) THEREFORE, the policy/ purpose of 580b is not called into action in the Spangler situation, so there is an exception
3) Requirements of the Exception:
a) Vendor has to subordinate their TD to a construction loan
b) the Construction has to change the use of the property
i) this has to be a fundamental change, not just renovation
c) subsequent to the change in use, there is also a change in value of the property
4) In a commercial setting, this encourages ventures and development
a) this also shifts some risk to the purchaser, which makes sense since the success of the project depends entirely on the skill of the purchaser in developing the property
C. Amendment to Statute (Footnote 8 discussion)
1. Eloquent Silence: they declined to amend the portion with respect to vendors in a commercial setting... this inaction should be indicative of the legislatures intent that the vendors not be given special treatment
a. And yet the court grants vendors special treatment... footnote 8 explanation is not good reasoning
b. The court made a judge made exception to 580b, flying in the face of the statute
II. Gradsky and Spangler together
A. Sham Guarenty situation
1. Can get around 580b with a sham guarentor, but some courts will listen to it, and others won’t
2. Partners in a partnership are already liable for their partnership liabilities...
3. Create another entity, a corporation, and then you become the guarantor with a 2856 waiver... but then some courts will listen to the guarentor’s pleading that the corporation doesn’t really exist and he is really the debtor so it can’t be waived and he is protected. Depends on the court (remember a guarantor can waive for 580 b or d, but the debtor can’t)
B. Non-sham Guaranty
1. There is a real guarantor and the Vendor is a SOJL, who has not done anything to effect the guarantor’s rights... so the vendor CAN go after the guarantor for the deficiency (because there is no estoppel argument), but then the guarantor CANNOT go after the debtor (because that would circumvent the point of the statute)
C. Higher Level:
1. Vendor is the only TD holder, what are their rights against the guarantor?
a. 580 d in an NJF bars deficiency against debtor
b. Because he’s a VPMTD, 580b bars deficiency against debtor even in a JF
c. But the guarentor...
1) argument: it’s gradsky because the vendor destroyed the rights of the guarantor, BUT there are never any rights to go against debtor, whether it is a JF or NJF, therefore the vendor has not destroyed any of the guarantor’s rights, so they can collect against them
2. Same fact pattern, but it’s a lendor held PMTD... in a JF for a commercial property they CAN get a deficiency... so their choice does effect the guarantor’s rights
a. So this is like Gradsky
III. Shin
A. Defaulted on a note secured by a trust deed on CA real property, he also owns real property in Korea... This is an appeal on whether the lien on the Korean property is a violation of the 726 code which says that any action other than a foreclosure on the security is a violation
B. 726
1. There can be but one form of action... and security first rule
2. Classic 726 situation: debtor has real property and other assets, the bank is holding a TD and a note, they go after the debtor personally with the goal of reaching those other assets
a. BUT, 726 says that if you are holding real property collateral, you MUST go after the property first... can’t go after the other assets until you have exhausted your secured remedy
b. IF you sue on a breach of contract claim and 726 is not raised as an affirmative defense as it should be, and then the creditor tries to foreclose, can’t. The debtor can raise the prior action as a sanction and the LIEN is DESTROYED (though the note/debt still exists)
c. IF a bank is a holder of a TD on RP, and the debtor also has a bank account with them... in the event of default banks will tend to slurp up the bank account. This offset is not an “action” but it does violate the security first rule, thus THE LIEN IS DESTROYED... being grabby can destroy your security
1) * courts have now expanded the meaning of “action” to include an extrajudicial seizure method
2) banks CAN: seek a prejudgment writ, if they have become undersecured (a writ of attachment allows the creditor to freeze debtor’s assets)
d. This applies to junior lien holders...
1) if junior lien is involved, they will become senior... and they have standing to assert the 726 defense making them senior, if senior TD messes
C. But, the “action” in Korea was an attempt to FREEZE his other assets to protect their collection of a deficiency (difference between attachment and collection)
1. Question 1: does it constitute an action?
a. They argue it is preparatory because in Korea it is a two step process, so it was just preparation
2. Why would the bank want to tie up this property? If they freeze his assets they can’t hire a big defense team, so the bank is at the advantage.
3. Also: bank only placed an additional action on Shin, but the TD is released as to ALL the defendants...
a. Because violating 726 effects indemnity and contribution rights
D. POLICY FOR 726: don’t handcuff the debtor... don’t want them to have no resources to fund their cases (since Shin may have wanted to sell that property to fund his defense)
1. Don’t want them to have to fight multiple suits, can drain them
2. Also: want to ensure they only get fair market value for property, because without it there is the possibility of a bonus recovery
E. 726 cannot be waived (a guarantor CAN waive it, a debtor CANNOT)
1. 726 does not extinguish the note, only the lien... Important distinction.
2. Language of 726:
a. Must file action seeking deficiency within 3 months of the foreclosure sale
b. Can only get deficiency for the difference in amount between the fair market value and the debt (not the sale price... encourages sale to be for the fair market value)
1) wrinkle: the right of redemption lowers the price and isn’t always factored into the fair market value of the property (this is consistent with protecting the debtor)
c. Junior interests must be joined in a JF, otherwise they remain on the property (in an NJF junior lien holders are automatically wiped out)
IV. Dover
A. Taking property “subject to” or “assuming”
1. If you take “subject to” then the lien still exists on the property and there is a chance your property will be foreclosed
2. If you take assuming, not only does the lien stay on the property, but you assume the debt, the note.
3. (Dover is a 3rd party purchaser- doesn’t mention if she assumes or takes subject to)
B. There was a Lease and a TD2 (presuming there was a TD1 somewhere)
1. Foreclosure: was the lease extinguished?
2. The lease was senior in time, but they agreed to REORDER THE PRIORITIES contractually
a. There was a SUBORDINATION CLAUSE
C. Dover argues: lease was subject to the TD
1. BUT, the title of the foreclosure purchaser dates BACK to the date of the execution of the trust deed...
a. RELATION BACK
1) Situation:
a) January 1st, Debtor gets property
b) February 1st, debtor executes TD (recorded, in favor of creditor)
c) March 1st, debtor executes Lease to T1
d) August 1st, creditor NJFs from the TD, and sells to either himself or a 3rd party
e) Does the purchaser take subject to the lease?
i) NO: the date of the sale relates back to the title as it was on the date of the execution of the TD, NOT at the time of the sale (so, Feb. 1st, not Aug. 1st)
b. We know it is an NJF: side hypo
1) RP worth $100k, TD1 is worth $60k, and TD2 is $50k (undersecured by $10k)
a) Debtor goes into default...
b) Bank 2 doesn’t want to be a SOJL, so they decide to JF and pay off Bank 1... property now has $60k encumbrance on it
2) Non-assuming grantee... who does the creditor go after?
a) TD2 NJFs - purchaser takes subject to, but does not assume
b) Later, TD1 defaults, bank 1 NJFs
i) purchaser is screwed- their interest is JUNIOR to the TD1
c) If bank:
i) NJF- can’t go after debtor
ii) JF- go after debtor
a) NOT the purchaser because the purchaser did not assume
D. Subordination Clause
1. Dover wants to hold them to the lease (probably it is an above market price lease)
a. Some courts: allow purchasers to “pick and choose” whether they want to keep the lease or not
b. This court: No- purchaser cannot just do what is most profitable
1) the lease is junior
a) solution for Dover: BEFORE NJF, go to tenants and tell them that their lease is SENIOR and will remain after the foreclosure sale
i) this would raise the value of property, because leases are already in place
ii) the tenant has already agreed to this in his lease- just have to give notice
a) 3rd party beneficiary
i) (a and b can make a contract to benefit c and c can enforce it)
2) Without such action, a junior lease is extinguished by the NJF... so there has only been a month-to-month tenancy
2. Subordination Non-disturbance Atornment: tenancy will not be disturbed by changing landlords, unless the tenant defaults...
****GET NOTES/ LISTEN TO LECTURE BETWEEN FEB 5TH AND 12TH - Willard case
V. Servitudes
A. Any private agreement that creates an interest in land and is binding on a successor
B. Easement- a grant of an interest in land, that entitles someone to use land in possession of another another
1. Creation:
a. Express agreement
b. Estoppel
c. Implication from existing use When land is divided
d. By necessity when land is divided
e. Prescription
2. Affirmative Easement: right to go onto land, which would be the servient land and do some act on land
3. Negative easement: prevents the owner of the serviant land from doing something on it
4. Easement appurtenant: attached to the land, easement granted to landowner, and has to do with the use of your own land. Your easement appurtenant stays with your land
a. Benefit land is dominant, Burdened land is servient
b. Passes between dominant owners, passes between servient owners
c. Can’t be extended by dominant owner to other parcels owned by him
5. Easement in Gross: that particular person gets the easement... and it effects the servient parcel in some way. Whereever you go, your easement in gross follows
6. Default setting: if you can’t figure it out, it’s an easement appurtenant
7. A person cannot have an easement on his own land
a. Merger doctrine: if dominant and servient parcel come under common ownership, the easement is extinguished...
8. Recording: all easements are outside the scope of recording statute, you can’t use recording statute to divest someone... (its an equitable, can consider the analysis in considering equitable)
C.
VI. Willard
A. Easement
B. Re-grant theory
1. At early common law, could not reserve easement in favor of a 3rd party
C. Common law rule:
D. Woman sells property but wants to reserve parking lot for the church
E. O to X
F. X to O
1. Regrant...
G. McGuigan: she sold to Peterson and then he conveyed back the easement to her...
1. Now she, O can hold the easement, and she can grant it to the church
2. Roundabout way to do it: convey lot to church, have them convey back reserving the easement
H. Statute of Fraud
1. Easements are subject to SOF
a. BUT, in America deed is only signed by the grantor
2. Creation by implication: exception to statute of frauds...
a. legal fiction: when you accept the deed with their signature, you are deemed to be accepting their signature as your own
VII. Holbrook- Licenses
A. Oral or written permission allowing a licensee to do something that otherwise would be a trespass
1. Difference from easement
a. License is revocable
1) but there are irrevocable licenses
a) license coupled with interest such as apprendre profit
b) estoppel
i) when a landowner allows someone to make improvements on their land... you can’t turn around and say no
c) part-performance
b. Only lasts for as long as the nature of the license requires
2. Types of Licenses
a. In Gross- personal to one party
b. Appurtenant- belonging to anyone owning the dominant parcel (license given to parcel)
3. Note: can let people know that license is revocable and then it is
4. Watch out: Irrevocable licenses and Easement are NOT the same thing
a. Some people conflate them... but an irrevocable license are not an interest in land (so for Spencer’s case, it wouldn’t be bread)
B. Holbrook’s have a servient parcel, Taylors have a dominant parcel
1. A License is revokable
a. This is a contractual right
2. An Easement is irrevokable
a. This is an interest in land
3. Court here said it was NOT an easement
a. Taylor argued they got the easement by prescription
1) doesn’t work because there was permissive use
b. BUT, it wasn’t revokable
c. License by estoppel: license that is irrevokable
1) relied on the license right to build their house... would cut off access to their home and diminish the value: so there is reliance, and estoppel
d. This case is the OUTER LIMITS of license by estoppel
1) usually it is because there has been improvements made on the servient land... here the Taylor’s made improvements on their own land, and this was sufficient in this court
2) there was minimal improvements on the servient land: the red dog on the path! (Normally though a repair is not an improvement)
e. Taylor’s lawyer was tricky- asserted prescriptive claim to solicit the evidence of permissive use, then used the permission to argue estoppel
4. License in Gross: personal, just a license to the individual
5. License a pertinent: runs with the land...
VIII. Van Sandt
A. Baily owns lots 19, 20, 4
1. Builds on lot 4, allows sewage to run under lots 19 and 20 to the highway
B. She sells 19 to Jones, who sell to Reynolds, who sells to Van Sandt, our Plaintiff
1. Van Sandt’s house floods with sewage- was there a quasi easement going across 19 and 20?
2. QUASI- EASEMENT: use of one part of your land, for the benefit of the other part of your land
a. It’s not an easement, because it is not an interest in someone else’s land
b. Baily originally had a quasi easement, but what happens to that after some lots are conveyed away?
C. If you sell quasi-sevrvient tenement AND it is apparent, continuous, and necessary: IMPLIED EASEMENT
1. (Easements are created by: license, prescription, implied and express)
D. IMPLIED RESERVATIONS and IMPLIED GRANTS
1. When you sell the quasi servient tenement: implied reservation
a. Because you, as the dominant tenement, RESERVE the right to the easement for yourself
2. When you sell the quasi dominant tenement: implied grant
a. Because you, as the servient tenement, GRANT the right to the easement to the new dominant tenement owner
3. Generally, implied grants were allowed to run, whereas implied reservations are not unless strict necessity...
a. Because when there is an implied reservation, you aren’t getting the entire interest in your land that you think you are getting... but with an implied grant, you are granting the purchaser an extra interest... doesn’t hurt them so it is allowed
b. America
1) to establish an implied reservation, must show STRICT NECESSITY
a) (there is no other way, and this is not a case of strict necessity)
2) Restatement: re-weighing whether an implied reservation can be created any other way
a) plaintiff’s knowledge is important
b) intent at time of conveyance (therefore the court focuses on jones’ knowledge, since van sandt is a subsequent purchaser)
3) Restatement: Finding and Implied Easement
a) determine if it is a grant or a reservation
b) terms of conveyance
c) consideration given for the conveyance
d) wether the claim is made against a simultaneous convyee
e) reciprocity b/n conveyor and conveyee
f) extent of necessity
g) manner in which land was used prior to conveyance (quasi easement)
h) whether that use was apparent to the parties
4. How do you know if it is an implied Reservation or an implied Grant?
a. View it at the moment of severance... IS THE BENEFITTED PARTY THE GRANTEE OR THE GRANTOR? If it’s the grantor, its an implied reservation. If it’s the grantee, is it an implied grant
E. As a Recording Problem
1. Who is trying to shed something: Van Sandt
2. X (Baily) to O (Jones) conveys the lot
3. O (Jones) to A (Baily) - conveys the easement
4. O (jones) to B (Van Sandt) coveys the lot
5. Jones is the double dealing grantor
a. Jones created the interest because he knew it was there, therefore he intended to create the interest in favor of Baily (in an implied grant you need to find intent... if it was apparent we can infer your intent)
b. To create the interest it has to be a REGRANT to the original owner, for their benefit (which it was here to Baily)
c. Implied easements are equitable, how does this effect Van Sandt
1) Van Sandt could sue Jones for breach of warranty
F. In an implied easement, if the dominant and servient tenements come into the same ownership, the easement is extinguished (you can’t have an easement over your own land): DOCTRINE OF MERGER
1. But, if still used, it could be a quasi easement
2. If severed again, could become an easement again
a. Quasi easement is a precondition to an Implied Easement (though not always sufficient alone as a condition to create an implied easement)
IX. Othen v. Rosier
A. Facts: August 1897, Hill conveys 100 acres to X, 1897 conveys 60 acres to X2, 1897 something to X3?, 1904 X2 conveys to Othen, 1913 X3 to Othen, 1924 X to Rosier
B. Posture: Trial court found easement by necessity, On appeal held no easement, Affirmed here
C. Othen’s argument:
1. Argues, Easement by Necessity (he says he needs it)
a. BUT, the necessity has to have existed at the time of severance, so Hill must have needed it
b. Had to be unity of ownership and then strict necessity at time of severance (must have arisn at that moment)
c. Policy: we don’t want to landlock parcels
2. Problem with argument: Othen had burden of proof and did not show that there was no other option to get on/off land- had to prove the severance landlocked him
a. The easement can only arise through the land-locking severance, because of all the parcels, the owner of the land locking parcel is in the best position to know they are land-locking in the inside parcel
3. Court also rejected easement by prescription argument because it was permissive and not enough time...
D. Diagram as a recording problem
1. Look for B- trying to divest A
a. Rosier is B (because Othen has common law- he is saying you took subject to my easement)
b. Rosier is the grantor of the easement (as the grantee from Hill)
c. O is Rosier’s grantor
d. X is Hill
2. X (Hill) conveys to O (Rosier’s Grantor)
3. O (Rosier’s Grantor) conveys easement to A (Hill)
4. O (Rosier’s Grantor) coveys 100 acres to B (Rosier)
5. If there was a TD to a bank and an NJF, easement would still exist because the easement was created at time of severance and so is senior to the TD and so remains
a. Bank would have been on Notice since Othen was using the easemet... probably no BFP status (BFP question is only relevant to the equitable argument)
X. Miller v. Lutherans
A. Commercial Easements in Gross
1. Assignability: they are assignable b/c they have commercial benefit
a. If they were not assignable wouldn’t motivate people to make improvements and invest...
b. But because they are personal rights, they are only assignable if it was intent...
2. They are personal rights
B. Miller Brothers, Frank and Rufus, own land- give a 99 year lease to PSWIC, a corporation they formed and own
1. Leasehold is held by corporation, and they are the landlords
2. PSWIC was to have exclusive use of land/lake they built
3. In 1898 LEASE was encumbered by a deed of trust (not on the title, but on the lease- a 99 year lease is valuable)- “leasehold deed of trust”
4. Also, Leasehold grants exclusive rights to the fishing and boating rights to Frank
a. Easement in gross, over the leasehold
C. 1900 Frank granted to Rufus 1/4 interest in boating, bathing and fishing rights (Katherine does NOT join in this coveyance)
1. Chron of events:
a. Lease, then TD on Lease, then Easement on Lease, then Easement is being fractionalized, then easement is made senior to the TD by the bank
b. 1902 the bank released the rights, so it became senior in time
c. 1903- Foreclosure (JF)
1) purchaser at foreclosure: Poconos Pines Ice Company
2) 1911, as landowners, Frank and Rufus confirm lease title in PPIC
a) (covenant of further assurances)
3) 1911, PPIC confirmed the fishing and boating rights to Frank
d. Frank and Rufus operated bath houses- by a business partnership
1) in 1925 Rufus dies, partnership dissolves
2) Frank and Rufus’s estate grant separate licenses to the rights
e. 1928 Katherine Miller (frank’s wife) takes assignment of the PPIC lease
1) reorders the priority, so the easement is senior to TD
2) “releases” the rights to frank again (otherwise the easement would have been extinguished as a junior interest)
3) the easement was not extinguished because the release acted as a last minute subordination clause (like in Dover)
4) bank is okay with this to encourage development and improvements by Frank and Rufus- if your easement can be taken away, you won’t invest much, too risky
a) if frank and rufus improve, it both increases the value of the leasehold and increases the probability the bank will be paid back
i) especially since there is probably a percentage rent
ii) as a junior interest holder there are things you can work with with the bank
f. 1929: Rufus’ estate granted rights to boat, bathe and fish to the Lutherans
1) Frank and Katherine file for an injunction
a) challenge:
i) existence of bathing rights at all
ii) whether there could have been a conveyance from Frank to Rufus at all
b) Katherine is owner of Leasehold, Frank is owner of Rights
i) she has an estoppel problem because she knew about the conveyance to Rufus (but this issue is ignored in the case)
a) could set up another sham corporation
ii) its an estoppel by deed argument, that once she argues that she has it, then the earlier conveyance kicks in...
D. Bathing rights?
1. Not expressly given (expressio unius...)
2. BUT, was ripened by prescription
a. Open, notorious, exclusive (the bathers were agents for them), hostile (they weren’t given permission for this)
b. Prescription by Frank and Rufus
E. 1/4 interest given to Rufus?
1. Can you divide (as oppose to assigning- different questions)
a. Assignment: personal easements in gross are not assignable
1) commercial easements in gross ARE assignable
a) this is because in a business situation, when you want to retire, you want to be able to assign to someone... whereas for a purely personal easement, if you want to stop swimming, you just stop swimming...
2. Divisibility?
a. Division: creates problem of multiple inconsistent uses
1) the use cannot be divided, has to be used as one stock
b. as a group, if they have to act as one entity, they will be more careful with their interest- act more rationally and with future interests in mind
1) “Tragedy of the commons” – THE ONE STOCK RULE
a) commons would get over grazed because everyone wanted to get as much out of it as possible, whereas if it is your own land, you are careful with the use it, to preserve it for future use.
2) want to maintain the value of the interest...
c. The interest IS ASSIGNABLE, BUT IS NOT DIVISIBLE
1) Frank can assign to Rufus an interest in the profit stream...
a) the interest is assignable, but that gives him the right to the profits not to the use, because there is no independent right to use since it cannot be divided
3. Argument not addressed: does Rufus have a 1/4 interest in the bathing rights since it was prescription probably together and there was intent for it to be...
a. You can only assign an easement if the grantor intended it to be assignable, so by prescription there is no intent...
b. Or argue that it is assignable because they lumped in the bathing rights with fishing and boating rights... so they infer the intent from this
c. Counter: tacking argument...
1) opposite of tacking: can’t tack onto the one with the land interest
d. BASIC: looking for intent, and anyway to infer it is an argument
XI. Brown v. Voss
A. Scope of Easement:
1. You can’t extend your easement to another parcel you got
B. Motion in limine (to exclude irrelevant evidence)
1. $11k was spent on a house on the dominant parcel
a. Improvement on dominant parcel (Holbrook would be the authority, but it was already a stretch)
C. Posture: trial court found an easement, court of appeals reversed, supreme court reversed them
1. Analysis: (THIS CASE IS A GROSS ABIRATION... VERY RARE EXCEPTION
a. Supreme court found that the trial court did not abuse its discretion
b. This is an easement a pertinent
1) Rule this court establishes is VERY discretionary (“no harm, no foul”- but what if you put even more houses on the dominant parcel so that there are 3 cars coming in and out everyday...)
a) court was looking for substantial injury instead of following a rule
2) Problem: increases chance of litigation
D. Majority Rule: thou shalt not use an easement to benefit a non-dominant parcel
1. If a servient owner finds that a non-dominant parcel is being served by the easement, can bring a suit for injunctive relief
a. Proof of violation cuts off easement entirely
XII. Negative Easements
A. Common Law, 4 types of negative easements
1. LAWS
2. Light, Air, Water, Support
a. Don’t block my light, don’t get in my air, don’t dig under my house...
3. California has a View easement
B. Negative: they control the servient owner’s behavior
XIII. Covenants
A. Real Covenant (promise, not a right)
1. Without a view easement, this is a solution to a situation where a dominant parcel doesn’t want his view blocked
a. Servient parcel becomes the burdened party
b. Dominant parcel becomes the benefitted party
1) the burdened party executes a promise in favor of the benefitted party
2) (reciprocity is irrelevant)
2. If someone buys the burdened party, are they bound by the same promise??
a. Does the burden of the covenant run to the assignee of the promissor?? (in the absence of an assumption)
1) (they were not a party to the original contract)
B. Spencer’s Case Labels/Analysis
1. B is the Burdened Party/ Promissor
2. A is the Promissee
3. C is the Assignee of the Promissor
4. D is the assignee of the Promissee
5. (Policy, courts did not want to encourage the running of covenants)
6. Spencer’s Case laid out requirements:
a. In order for the burden of a convenant to run at law, there are several requirements that all must be met:
1) “In esse” if the subject matter of the covenant is not in being at the moment of the execution of the covenant, then the covenant must expressly bind the assigns of the promissor in order to run
2) “Touch and Concern” has to have something to do with land use
a) cannot be a covenant to bake bread for your neighbor
b) how attenuated can this be?
c) nature of the concern? Does it effect land values?
i) does it raise the property value of the benefitted land?
3) “Privity” the covenant must be passed between people in privity. There needs to be both horizontal (between A and B) and vertical (between B and C) privity
a) horizontal privity: an interest in land must pass at the moment of the execution of the covenant (the covenant itself is not enough to create privity)
i) jelly sandwich: can’t just pass jelly to someone, need bread to put it on in order to pass it.
ii) horizontal privity does not matter which direction the land interest goes, could be either way
b) vertical privity: if C takes all of B’s interest, then there is vertical privity. A sublease is NOT sufficient to create vertical privity (pay attention to this, this would be a good trick on the exam)
c) This is the difference between equitable servitude and a covenant
b. 2 Further requirements which are NOT part of Spencer’s case, but exist
1) Statute of Frauds: has to be in writing
2) Notice: there has to be notice to the burdened party
a) recording issue
b) this requires a recording statute diagram/analysis
c. Real Covenants don’t arise through estoppel, prescription or implication
d. Default: Equitable Servitude (which is an interest in land, like a real covenant)
1) first argue, it’s a covenant
2) if it doesn’t fly, argue equitable servitude... this is equitable
a) Elements
i) intent to bind
ii) touch and concern
iii) notice: actual, constructive or inquiry
a) use recording analysis
iv) Has to be in esse
3) Different from real covenants:
a) they are enforceable against possessors and owners, so no privity requirement
i) ie. It is enforceable against a subleasee
b) Real covenant under common law doesn’t require notice... equitable servitudes don’t
i) need notice to put burden on plaintiff to establish prima facie case... for real covenants the burden is on defendant
c) ES used to not have to be recorded, but now it does have to be recorded and is subject to recording statute
4) Recipricol Covenants
a) give a covenant to someone else and they give it right back (like in a subdivision)
b) to be reciprocal, the parcels must be contiguous, related and effecting each other
c) they are not retroactive
e. Spencer’s Case Hypo:
1) neighbors agree: trees at 20 feets, mow lawns weekly, right to cross property
a) focus on covenant in breach, and the party in breach
b) Sam let his trees go wild, Sam is Queens successor
i) did the covenant run to him as the burdened party?
ii) Queen and Sam go on the right (BURDENED PARTY GOES ON THE RIGHT)
iii) Rogers and Thompson on the left (the benefitted parties go on the left)
iv) draw lots- burdened parcel on right, benefitted on the left
c) Rogers is the original promissee, A
d) Queen is original promissor, B
e) Sam is assignee of promissor, C
f) Thompson is assignee of promisse, D
i) B has made a promise to A about the trees
ii) A sold lot 2 to D
iii) B sold lot 1 to C
a) there was no express binding of assignees
2) Questions:
a) were the trees in esse?
i) we don’t know- if not, the spencer’s case fails, if so, then okay
b) touch and concern? yes, most likely
c) privity?
i) A and B?
a) yes, because the agreement to let them drive across each others property is an easement, which is sufficient
ii) Vertical privity?
a) assignees, so yes.
d) Is the benefit assertable by D, a stranger?
i) benefits will run whereas burdens won’t (even if there was no privity between A and D, it probably still would run, most definitely against B, maybe even against C) - this is because inheriting a burden takes more of a relationship
a) and, if B gets the parcel back, the covenant will start again because of the doctrine of after acquired title
i) otherwise people can do collusive things and shed liens and burdens, just by transferring it and then getting it back
ii) basically, can’t use C to launder the property
e) At common law, C is burdened in our hypo
i) Recording Statute issue
a) an interest in land has to be properly recorded
b) Sam is B, because he is trying to divest)
c) Queen is O
d) Rogers is A, because the first interest O gave was to Rogers
e) O to A (coveys benefit of covenant, burdening lot 1)
f) O to B (coveys title to Lot 1)
i) at common law, the burden runs
ii) can Sam get rid of burden by invoking recording statute?
iii) was O to A property recorded?
g) If properly recorded, cannot invoke it
h) If not properly recorded,
i) assume patent defect and therefore not properly recorded... Maybe inquiry notice???
ii) all arguments
i) Did he know about the covenants at the time of conveyance?
C. At common law, if C knew what was going on but there was a failure of horizontal privity, C could laugh and break it.... until Tulk v. Moxhay
XIV. Tulk v. Moxhay
A. Sold his land with a covenant not to use land for anything other than a garden accessible to public, expressly binding the assigns
1. Land passed to Moxhay
a. He admitted he was aware of the covenant, but decided he wanted to alter property
b. Tulk filed an injunction
B. Tulk is A, on the left side, the benefitted party
C. B is Elms
D. C is Moxhay
1. In england at the time, only landlord/tenant would satisfy horizontal privity, so not satisfied here
2. Does the burden run to C?
a. At common law the burden does not run because of the absence of horizontal privity
1) the court carves out an exception, using equity:
a) if we don’t enforce this against C, then the As of the world wouldn’t sell- don’t want to alienate property
b) Doctrine of Equitable Servitude
i) requires NOTICE, in lieu of Privity requirement
a) (Content is the same as if using a recording statute: if you knew or should have known...)
b) ** ask about this... it doesn’t seem like the same thing as the recording statute- is this a separate valid doctrine??)
c) parallel concerns
ii) Also, since buyer knew he was buying burdened property, don’t want him to be unjustly enriched by being able to shake the burden and get more money for the same piece of property
XV. Sanborn
A. Series of conveyances out from McClaughlin with restrictions
1. Lots out are restricted for single family dwelling CCRs
2. Defendants take lot 86
a. They get an abstract of title
b. Residences all around
c. They start to build a gas station- is there a negative easement?
1) Not light, air, water or support...
2) But the plaintiffs, homeowners in the development, thought they were buying in a subdivision
d. Issue: can a reciprocal negative easement be implied in a subdivision when the grantees deed is silent
1) Reciprocal Negative easement: if owner deeds out lots restricted, then all the lots that remain become restricted with the same restrictions
a) like Guillette, except there it was expressed... this is IMPLIED
b) this only effects land that has a logical nexis together (land so situated as to bear the relation)
2) Analysis:
a) have to trace back to a common owner
b) common owner granted lots with same restrictions
c) constructive notice???
3. Our case Recording analysis:
a. McClaughlin is O
b. O gave to A (Sanborn) lot 1 plus CCRs
c. O gave to B (McClean) lot 86, looks like fee simple, but turns out to be restricted
1) If B had looked at other deeds, he wouldn’t see anything in them talking about restrictions on his land (this is how to distinguish Guillette)
2) Court says B’s burden is Constructive Notice:
a) look for deeds out from common grantor
b) look for language in deed restricted your own parcel/ see express unilateral restrictions
c) then have to assume that unilateral express conditions give rise to implied reciprocity burdening you
i) Fall Back: Inquiry Notice
ii) Problem: can’t have an implied covenant, so if these are not easements there is a problem
a) Statute of Frauds: need a writing for an interest in land
iii) Answer: this is an EQUITABLE SERVITUDE
a) Implied, reciprocal, negative, equitable, servitude (IRNES)
4. Spencer’s case analysis:
a. Questions to ask in analysis:
1) which covenant is being breached?
2) who is breaching it?
3) who made that covenant?
b. Answers:
1) covenant to only have residences
2) McLean is breaching it
3) McClaughlin made it
c. C is McLean
d. B is McLaughlin
1) who did B make the promise to?...
2) A is Sandborn
e. Analysis:
1) in esse? Yes
2) touch and concern? Yes
3) privity?
a) horizontal privity, yes
b) vertical privity, yes
4) STATUTE OF FRAUDS PROBLEM
a) at common law it works, otherwise not
5. Problem: at point is this created?? If you have inconsistent pattern of conveyances...
a. Policy:
1) look at grantor’s intent
2) look at grantee’s intent
6. The equitable servitude analysis similar to covenants
XVI. Snow v. Van Dam
A. Shakelford owns the whole tract on the shore, south of thatcher road is lots, the Ps all live in these lots... They were conveyed with single family dwelling (sfd) CCRs
1. Northern tract was divided in a “revised plan on 1919"
B. Analysis
1. Restrictions were made in the jan/23/23 deed...
a. Can Ps enforce it? Need parties with standing...
b. Who can envoke the benefit of the CCRs?
1) Ps need to show that in the absence of an express statement, they were the intended benefitted parties
a) likened to recipricol easements, but there is a statute of frauds problem, since it is creating an interest in land not in writing
b) scheme can be shown by substantial uniformity
2. Diagram as Spencer’s case
a. Think of the covenant in breach
1) the covenant on lot D
b. Think of who was in breach
1) Van Dam is the party in breach
c. Think of who created/promised the covenant
1) the grantor, here it is Clark because he took the deed from Shackelford
2) So, R.C. Clark was the promisor of the covenant
d. Think of who is the Promisee
1) Shakelford
e. Think of who is invoking the benefit?
1) “Group 1" the Ps
f. So, B is RC Clark
g. B grants to A, Shakelford, a promise
h. B conveys lot D to Van Dam “subject to”
i. TIMING PROBLEM on benefit side... Ps are NOT the successors in interest
1) Ps had already gotten their lots, so how could they be successors to A??
2) compare this case to Sanborn... how is this different from an equitable easement?
3) How do Ps who bought in 1907 get to benefit from something that didn’t exist until 1923?
a) Like a 3rd party beneficiary situation...
i) no express assignment is needed if you make the promise be for the benefit of someone else
b) Court uses this doctrine.. Even though there might be a statute of frauds problem
3. Distinguishing Sandborn
a. Distinction: Sanborn used the scheme to imply a covenant... Here, the covenant was express, and they used implication and scheme to imply the benefit to determine standing (it’s a more limited use)
1) Snow: identified the benefitted parties
XVII. Citzens’ for Covenant
A. Husband and Wife own 2 parcels... Parcel 1 is part of Skywood Subdivisions, Parcel 2 is part of Friar subdivision
1. June 5th, 1958: skywood subdivisions, owner records declaration...
2. May 10th 1977: Friar subdivision, declaration of restrictions...
a. Then started splitting up the land
b. Original deed referred to a map, not to CCRs...
3. They want to run a winery, get permit from the city... but Anderson claims that CCRs are not enforceable...
a. Ps are unincorporated association and individual landowners...
B. Spencer’s Case Diagram
1. Which covenant was in breach?
a. SFD covenant
2. Who breached it?
a. The Andersons (Anderson are probably C)
1) they are remote assignees of the promissor
3. Who created the covenant?
a. Funny Glitch: you can’t hold a covenant on your own land... So was it the original owner?
1) declaration was recorded in 1958, but they didn’t come into being until the land was transferred...
2) the original grantee of the lot has to be the person making the promise not to violate the covenant
a) no 3rd party bene, so the bene must be to the original grantor
4. Who is asserting the benefit of the covenant?
a. D is the citizens group and individual landowners
C. CA civil code 1468 originally said that covenants only existed between an owner of land and another owner of land... (two parcel owners, not a grantor and grantee) The amendment to this hadn’t kicked in until after the 1958 Skywood transaction
1. Governed by the older rule, this would mean that the covenant does not run with the land... 1462 said a covenant can run as a benefit but not as a burden (so, covenant is not enforceable against C)
a. THIS IS THE EXACT OPPOSITE OF SPENCER’S CASE (in spencer’s case you have to transfer a land interest in order for it to run!) This is craziness
D. New 1468 (with amendment):
1. Friar’s parcel, the covenant does burden Anderson
E. Creation issue: Anderson argues they were never created, which would mean it doesn’t matter if they were recorded!
1. Deeds were silent, so did the CCRs take effect?
a. Court Distinguishes Werner & Reily
1) Werner: same as Sanborn, they were giving out restrictions, and then stopped
2) Reily: tried to put restrictions on land he had already sold... like Snow... successfully conferred a benefit on land he no longer owned
a) damaging language from Murry v Lovell
i) if it isn’t in the deed, it doesn’t exist
ii) just dicta: the facts in Reily were that there was no prerecorded declaration
b. Court distinguishes these... and talks about policy
1) terrible to say it has to be in a deed somewhere instead of specifically... they describle Guillette as a nightmare searching scheme
2) 2 different doctrines:
a) First Deed Theory
i) as soon as the first deed is conveyed restricted, then all are restricted...
b) All First Deeds Theory
i) each first deed out needs to contain the language
c. NEW RULE: if the restriction was recorded before the sale, then later purchasers are assumed to agree to it...
1) if covenant is created upon conveyance of land to B, the promissor... mutual servitudes are created at the time of conveyance even if there are no additional references to them in the deed
a) BUT, what about the statute of frauds?
i) court ignores this problem completely
ii) B never signed a writing incorporating the promise
2) Covenant doesn’t take effect until conveyance: analogous to Quasi Easements
a) common owner, severs, giving rise to the easement...
b) own multiple parcels, creates a quasi covenant (not a term), then the severence causes the covenant to come into existence
F. Building off This Case
1. Hypo 1:
a. 1977 the owner of tract, grantor records a declaration of restrictions
b. 1978 grantor sells lot 1
c. 1979 grantee of lot 1 executes a TD encumbering lot
d. 1980 bank NJFs and sells it to a 3rd party purchaser
e. Is the 3rd party purchaser BOUND by those covenants?
1) Yes, b/c the covenant is made at the first conveyance out, and it is after 1968 so 1468 was amended... a covenant b/n a grantor and grantee may run
2) Covenant came into existence in 1978 upon first conveyance out... grantee executes TD, which is subject to covenant, which is subject to covenant, title from an NJF dates back to the date of the TD, so it is subject to the covenants...
3) plain vanilla nemo dat
2. Hypo 2 - CA common law
a. 1976: grantor executes a TD on entire subdivision
b. 1977: grantor records declaration of restrictions (junior to TD)
c. 1978: grantor sells lot 1 (so covenants come into existence)
d. 1979: grantor’s TD forecloses and subdivision is sold to a 3rd party purchaser
e. Is the 3rd party purchaser bound by the covenants?
1) No- covenants were recorded subsequent to TD... so TD is senior
a) covenant was junior interest, extinguished by NJF
2) NJF title relates back to time of TD
3) Recording:
a) O(grantor) executes TD to A (bank)
b) O(grantor) executes Lot 1 to B (foolish purchaser)
c) B executes covenants in favor of O (since this is the moment of creation)
d) O executes covenants in favor of B
e) TD is senior in TIME...
f. (Normal common law rule: can’t have a declaration of restrictions independent of the creation of the covenants... CA makes it so you can create them, and then they spring into being at time of conveyance)
3. Hypo 3
a. 1977: grantor records Declaration of Restrictions
b. 1978 grantor executes a TD on all his lots (recorded)
c. 1979: grantor sells lot 1
d. 1980: TD default, NJF, 3rd party purchaser buys it
e. Is the 3rd party purchaser bound by the covenants
1) No, the declaration of restrictions does not create the covenants... so the TD is not subject to, and title relates back to time of TD when no covenants
2) BUT, can you argue that the TD was a conveyance of an interest which triggered the covenants? It does not have to be a covenant in Fee
a) this conveyance probably does enact the covenants...
i) argue that makes covenants senior, so they do apply
ii) looks like Van Sandt... quasi covenant kind of like a quasi easement... By millisecond, the bank can’t grant the benefit of the covenant until it already has the land
a) bank can give the covenant until it has the covenant... nemo dat
b) So, the conveyance of the lien created the covenants
i) So, the bank is the creator/promissor of the covenants...
ii) TD has to be subject to covenants b/c it granted them
iii) Citizen’s: it is implied that as soon as the grantee takes, they implicitly give the benefits, b/c they are agreeing to take the burden
iv) True, the grantor still owns property, but they granted an interest...
a) by taking the TD with the declaration of restrictions on record, they are deemed to have taken subject to
3) the declaration of restrictions is like the grantor creating theoretically jelly... then the grantor gives bread to first grantor, suddenly the jar fills with jelly and spreads itself on the bread and gives itself back to itself
f. What if there was no conveyance of Lot 1?
1) Arguably a MERGER problem...
a) if burdened and benefitted parcels are united, there is a strong argument that the covenants are extinguished by merger
b) could see this on the BAR
c) can’t have a covenant on your own land!!
g. In this hypo: Spencer’s diagram
1) B is bank, A is grantor, A grants TD to B, B grants covenants to A, B sells to C 3rd party, and the burden runs...
4. Hypo: real
a. She buys condo, covenant says homeowners association may ammend rules, she knows this, she also knows of an oral rule about no pets, later rule is amended to say no pets, and is recorded
b. Homeowners argue: she took with notice
c. She argues: statute of frauds problem
1) but she bought subject to the power to amend...
XVIII. Neponsit
A. P is an assignee of NRC...
B. Transaction chron:
1. NRC owns whole tract of land, developed for residential use, lots were described in a map, Sold lot to Deyer and there was a covenant for an annual charge...
a. The covenant was a type of secured transaction
1) when the annual fee isn’t paid, it creates and adds a lien on the property, growing over time as the dues aren’t paid
2) Here, this lien was NOT junior to the TD... the TD was created after sale
C. Spencer’s case:
1. Covenant in breach- the annual charge
2. B is the promissor, is Deyer...
a. B grants A covenant and A grants B the lot
3. A is NRC
4. C is the bank...
5. Who is asserting benefit?
a. NPOA (homeowners assoc)
b. PROBLEM: they are not in vertical privity with NRC
1) SOLUTION: 3rd party beneficiary situation
D. Covenants- generally
1. Money is usually seen as a personal covenant, which doesn’t touch and convern
a. Touch and Concern
1) Intent is critical
2) Privity of estate
2. Affirmative positive covenants don’t usually run... But negative ones do
a. Neg: easier to enforce not letting someone do something... rather than managing that something be done properly
1) Exception (sometimes): a covenant to pay money is easily enforceable
E. Here, Does the covenant/burden run to the bank?
1. Touch and Concern?
a. We don’t want to cause a drop in land value that doesn’t have a corresponding rise...
b. [no one really knows the answer to this touch and concern problem]
c. Generally covenants not to compete do touch and concern
d. Remember Melchor where they found a covenant to arbitrate ran with the land
e. Assume this touches and concerns as an exception to a positive covenant
2. Privity?
a. Association is not in direct privity of estate
1) direct assigness are the homeowners... this is like Snow
2) if no privity, not enforceable...
a) BUT, association is the agent of the homeowners
i) Do they have standing? There is a standing issue but court ignores it and calls them agents
ii) Agency solution is more simple and elegant
a) court flirts with: look behind the corporate form of the Ps... like alter ego, but this is hard to prove (and there is an estoppel problem with having them assert this)
XIX. Caullett
A. 1/1959, deed said the grantors reserve the right to be the builder/constructor of the original dwelling or building on the premises...
1. Caullett is the grantee, is B, created the covenant
2. Promisee is Stanley Stillwell
3. There is horizontal privity b/c the property was conveyed
B. Is the covenant enforceable?
1. No- too vague
a. BUT, even if it weren’t too vague:
1) doesn’t touch and concern...
a) problem with reasoning: this goes to whether it runs with the land, but we just want to know if it is enforceable (this probably isn’t even relevant)
b) BUT, they also might want to clear it up, so they can sell the property (like quiet title)
c) the benefit is in gross, because it runs to the person personlly and not to anyone else (it will always benefit A, not D)
i) Rules:
a) generally there is a burdened property and a benefitted property
i) BUT, where there is no benefitted parcel, the burden does not run... (ie. If B promises to landscape A’s land... it T&Cs As property, A can enforce against B, D can enforce against B, but A/D can’t enforce against C
b) Also: when there is no corresponding benefitted parcel
i) benefit is in gross, so it will not be enforced
ii) don’t want to decrease the value of one land, when another parcel is not being increased
|COVENANTS (worried about burdening a parcel without |Burden In Gross |Burden Appurtenant |
|benefitting a corresponding one) | | |
|Benefit In Gross |personal contract, nothing runs with the land |burden will NOT run, benefit can run |
|Benefit Appurtenant |Benefit runs, Burden does NOT run |Yes, burden will run (standard) |
|EASEMENTS |Burden in Gross |Burden Appurtenant |
|Benefit in Gross |NO WAY!!! (by definition) |Miller- burden of easement on lease runs |
| | |The benefit runs- commercial easement was assignable |
|Benefit Appurtenant |NO WAY! |Standard Easement (express/implied) |
A. Caullette won: Offensive Non-mutual Collateral Estoppel, for the other parcel owners
1. Stillwell is collaterally estopped from asserting that the burden runs... (issue preclusion)
I. Western Land
A. There is a subdivision in Reno... when it was subdivided there were covenants for SFD... now they want to open a shopping mall on the buffer parcel
1. Argue: convenants no longer make sense and don’t have value because of the changes in the neighborhood
a. Court: there is still a value of the covenant
b. To prove it, they would have had to have shown:
1) The residential character of the neighborhood has been adversly effected
a) outside of development maybe, but inside is still Res.
b) the inquiry is one for INSIDE the subdivision
c. Court finds that inside subdivision, covenants remain valuable
1) RULE: (harsh but accurate reading): if the covenant passes the threshold of remaining a benefit to the interior parcel, then the value of the buffer parcel doesn’t matter [Threshold Rule]
a) can’t complain: you bought subject to the restriction
b) It has to change A LOT to extinguish a covenant
i) why? Reliance Interest
a) you buy into the dwelling in reliance on the covenants as part of your bargain and rely on the buffer parcel acting as a buffer
2. Other arguements:
a. there was a proposed change in zoning for the area
1) BUT, they didn’t change it AND, zoning wouldn’t have mattered, the most restrictive trumps
b. Value of Properties
1) doesn’t matter, as long as covenant meets threshold
c. Evidence homeowners violated the covenants
1) not enough
d. Abandonment of waiver b/c a home was used as a business
1) he didn’t show they weren’t also SFDs
B. Other ways to Terminate a Covenant
1. MERGER:
a. When the lands come under common ownership, extinguishes as to those properties
b. Query: Parcels 1 and 2 are unified... covenant disappears between them, the common owner then pays owners of parcels 3,4,5,6 not to enforce and he builds a non-conforming dwelling, but then sells it to G and H.... the non-conforming building is on G, can H enforce against G?? Does the covenant spring back into existence when they are separated again?
2. MUTUAL AGREEMENT
a. In a small enough subdivision, could do it
b. It’s recision by agreement, but you need uniminity
3. EXPIRATION
a. In some states covenants expire after 50 years... unless they vote to keep it
4. EXPRESS EXPIRATION
a. Saw this in Snow
5. Spin off issue: attorneys fee clauses in covenant agreements... (if you want to challenge homeowners assoc you have to pay their fees, ie, if you shoot the king, don’t miss!)
a. Even though the fee clause is unilateral, in CA you can probably get your fees if you win!
1) CC1717: reciprocity statute
a) as a defendant, don’t automatically assert a fee clause, if will come back to bite you! (And it might not even be enforced against your opponent)
II. Fact pattern: L/T, L has duty to mitigate in long term lease
A. Tenant is in Real estate business and leases an entire office building for 5 years... After 3 he leaves... LL is paying a mortgage... can’t find a tenant that will rent at a rate that allows him to pay mortgage... SO he chooses to sell the property! Can he recover brokers fees, prepayment fee to his lender, etc.
1. Is it foreseeable?
a. Yes! Tenant was in Real Estate business!
b. Plus, the tenant had lease ENTIRE building!
2. Election of remedies?
a. Should he have just relet and sued for the difference in rent prices?
b. Tenant should put in lease- only appropriate means of mitigation is reletting
B. Imagine: Debtor is LL, there is RP, there are 3 tenants, income is coming in... there is a note and a TD in favor of the bank
1. The landlord defaults... after default there is still cash flowing in to the landlord from the tenants– Does the Bank get that Money?!?!?
2. Assignment of Rents: separate recorded document that authorizes the secured party to quickly go into court and get that money that is going to the LL
a. Starve the debtor, so he can’t fight hard in court
III. Morgan– Nuissance
A. Morgan owns a tract of land bought in 2 purchases... On it they have a trailer park and a restaurant and a home... they live in the home. D has an oil refinery... there is a distance b/n them and oil refinery that has churches and homes... D is giving off noxious gas
B. P asked D to stop, they didn’t, so they filed this for injunctive relief
C. Maxim: so use your property so that others are not injured
1. Unreasonable? Intent?
2. Can’t be trivial
3. Non-tresspassatory?
a. Is smoke a trespass? Particulate matter?
4. Invasion
5. Intentional
a. When your conduct is unreasonable, it is intentional...
b. Unintentional when: negligent, reckless, ultra hazardous
c. Intentional: purpose or knowledge
6. Strict Liability?
D. Court found: Oil co knew with substantial certainty
E. Nuissance
1. Intentional Nuissance
a. Conduct unreasonable?
b. Degree of knowledge of result?
c. Strict liability
1) doesn’t matter how much you tried to avoid the harm
2) this directly conflicts with the evaluation of reasonableness
F. Court finds a tort:
1. Conduct was unreasonable, we don’t care if they tried to avoid it
2. Temporary damages..
3. Timeline:
a. 1945: builds trailor park
b. 1950: builds oil refinery
c. 1953: judgment
4. Temp damages: 1950-53
a. Don’t award future damages, b/c there is an order to stop
b. Enjoining the Nuissance:
1) BALANCE social utility and value
a) Carroll Towing
b) D can try to buy off the injunction
i) if refinery pays them $5 mil
ii) D can keep operating... but what about other neighbors?
a) not bound by that pay-off
c) Problem: if you give the right to ONE person, everyone else might lose out
i) Offensive non-mutual collateral estoppel applies!
d) Oil co can enter into an agreement with all potential Ps
i) covenant not to sue, but need to have it run to the assignees or it is worthless
G. Coming to the Nuissance
1. If someone buys near the refinery... no A/R argument
a. If it was A/R then property values would be nothing...
b. Or, it would be a nuissance easement by prescription (they acquired the right to pollute simply by polluting!)
H. Nuissance Per Se
1. Nuclear waste leaks..
I. Mitigation Techniques
1. Ex/ electric power plant, should it power with oil, natural gas or solar power?
a. Oil costs $1 (per kw/hr)
b. NG costs $1.25
c. Solar costs $1.60
d. Oil is preferred b/c cheaper
1) suit is brought and they are enjoined... so they switch to natural gas... but there is a carbon tax
2) solar becomes preferred...
a) as enterprises reflect the true cost of their behavior
2. Strict Liability in Torts:
a. If you have a cheap forklift and an expensive one, you prefer cheap, BUT
1) expensive is much safer... so the cheaper will result in more injuries
2) the expensive one is cheaper in the long run!!
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- how do i sell stocks i own
- i ask or i asked
- synonyms for i believe or i think
- i choose or i chose
- i think i found the one
- i bet or i ll bet
- humss cw mpig i 11 humss cw mpig i 12 humss cw mpig i 13
- i took a deep breath and listened to the old brag of my heart i am i am i am
- i feel like the things i should say are the things i can t say
- i have loved words and i have hated them and i hope i have made them right
- i looked and looked at her and i knew as clearly as i know th
- i e 577 02 9006 yah shua 577 02 9006 holy spirit i i e yah shu