Outline for Property I
Outline for Property I
Philosophical Backgrounds
I. John Austin
A. Austinian Positivism/Formalism
B. Sovereign declares law as a command to be followed by its
subjects
C. Judges should only look backwards to precedent; they do not
create law
D. A law is changed only by the legislation
i. Hobbes-justifies sovereign with absolute authority
ii. Bentham-legislation based on majority of happy people
II. John Locke
A. Natural Rights
B. Life, liberty and property to be protected by the
government
C. otherwise, government should keep out of peoples business
III. Rational Maximization of Utility
A. Chicago School
B. Market makes utitlity
C. Adam Smith, Richard Posner, Charles Friedman
D. Government and courts should do nothing but maintain the
integrity of the market
E. Issues to be decided by what is most efficient, what is best
use, what is most profitable
IV. Oliver Wendel Holmes
A. Legal Realism
B. Decision based on policy
C. Pick the decision that best benefits society
D. Wash law in the acid of the bad man
E. Law is a prediction
F. Assumes scientific knowledge applies to policy by cause and
effect
V. Critical Legal Studies
A. The law is a conceit to keep the rich and powerful rich and
powerful while oppressing everyone else
B. Extreme expression of Legal Realism
C. Judges create law and then spin it to sound like precedent
strengthens their argument
D. Mediation good, litigation bad (Japanese law based on
Buddhism)
VI. Clarence Thomas
A. Natural law-God given
i. Procreation
ii. Self Preservation
iii. Society
iv. Love of God, learning
B. Trumps Constitution?
VII. Ruhls Theory
A. Chaos theory of law
B. Butterfly in the system screws cause and effect
hypothesis
C. If the system becomes too heavy, it has no hope of
working
D. Cannot predict a complex systems happenings other than to say
there is some order there
E. Complex systems will ultimately destroy themselves
F. Stability in small adaptations
VIII. Henry Maine
A. Historical evolution of obligation
B. Obligation of status
C. Obligation of contract today, but moving back to . . .
D. Obligation of status
Takings
Background
I. 5th Amendment of the U.S. Constitution-no person shall be
deprived of life, liberty, or property, without due process of law;
nor shall private property be taken for public use, without just
compensation
A. Taking?
B. Public Use?
C. Just Compensation?
II. 14th Amendment applies 5th Amendment to the states
Terminology
compensation-usually market value of the property immediately
prior to taking
police power-authority under which regulations or eminent domain
is authorized for the benefit of health, safety and welfare of the
public
eminent domain/condemnation-the ability of the gov. to take by
judicial action private property for public purposes if owner is
compensated
inverse condemnation- owner sues government for using property
without compensation
average reciprocity of advantage-while some regulations
restricting property result in some loss, they also create gains,
things tend to average out in the end, if the loss is not too
heavily visited on the few
essential nexus-tight means-end fit between the state interest
being promoted and the regulation chosen to accomplish such
economic externalities-costs not factored into the sale price of
goods, cf. Dolan in that if Dolans business generates so many bike
riders Tygard must set up a bike easement, the economic loss of
that property affected was not accounted for in the selling of her
goods and therefore is an economic externality
rough proportionality-tight fit between the impact of property
owners development with regulation done in response to
development
reasonable investment backed expectations-expectations that
investment in a property will yield a higher return after
development
Takings-Cases
I. Hawaii Housing Authority v. Midkiff
A. Court affirmed the constitutionality of Hawaii legislatures
use of eminent domain, allowing landowners the opportunity to avoid
capital gains taxes by selling it to tenants of property and
compensating the landowners
B. Where the exercise of eminent domain power is rationally
related to a conceivable public purpose, the Court has never held a
compensated taking to be proscribed by the Public Use Clause
C. Court will not substitute its judgment for the
legislatures
D. Good example of Austinian jurisprudence-Court follows
legislature
E. Property owners got screwed-Locke wouldnt be pleased
F. CLS-another example of the regime bolstering itself-rich
landowners dont have to pay taxes, and rich tenants become
landowners
II. Poletown Neighborhood Council v. City of Detroit
A. A very strapped City of Detroit used eminent domain of
Poletown to set up a plant for General Motors
B. Judgment for defendant affirmed-project is warranted on the
basis that its significance to the people of Detroit and the state
of Michigan has been demonstrated
C. CLS-an area with traditional ethnic roots and solid community
base gets uprooted by the man so a big corporation can move in
D. Austin-Court follows legislature
E. Propertys utility is maximized
F. Property rights of the individual go down the drain-Locke
III. Loretto v. Teleprompter Manhattan CATV Corp.
A. TMCATV placed a cable box permanently on a landlords property
under a New York statute allegedly furthering a public purpose that
all tenants should be able to receive cable
B. Any permanent occupation authorized by government of ones
property is a taking no matter what public interest it serves
C. Such occupation destroys owners rights to possess, use, and
dispose of her property
D. The idea of permanent is effectively attacked in the
dissent
E. Property rights protected-Locke
F. Austin might not like this case because the New York statute
was shot down
IV. Pennsylvania Coal Company v. Mahon
A. Who wins in battle over mineral interests if mining them
might cause a sinkhole
B. Penn. statute (Kohler Act) forbids mining in such a way as to
cause the subsidence of any structure used as a human habitation,
where property is above coal and more than 150 feet from the
mine
C. Act cannot be sustained as an exercise of the police power.
Any act that makes property commercially impractible to mine in
effect destroys the property and is a taking and needs compensation
for the lost economic interest. See investment backed
expectationsD. The general rule is that while property may be
regulated to a certain extent, if regulation goes too far it will
be recognized as a taking (average reciprocity)
i. Balancing test: public interest v. whether or not a
taking
ii. Reciprocity of Advantage: loss of individual v. gain of
public (see zoning)
iii. Diminution in Value: if economic value of land is
diminished, a taking may have occurred (vague-see cases below)
E. Contract is binding, court cannot give more rights than those
bought by surface owners
F. Dissent says legislative act prohibits nuisance-no right to
use property to injure another
G. Surface owner got screwed for big business economic
interests-CLS
H. Austin got screwed because legislative act got revoked by
court
I. Holmes decided economic interest better protected if surface
owners were stupid enough to sign the contract giving up their
mineral interests-legal realist
J. Propertys utility is maximized
K. Locke would be in a muddle-surface rights v. mineral
interests; would probably side with the miners
L. Keystone, 1987, p825 in note 3-Subsidence Act deemed
constitutional because mining a nuisance
V. Penn Central Transportation Co. v. City of New York
A. Do restrictions authorized by New York historical land
preservation statute on the air space over Grand Central Station
constitute a taking
B. Landmarks Preservation Law-protects landmarks and
neighborhoods from precipitate decisions to destroy or
fundamentally alter their character by creating incentive for
owners of the land elsewhere so that they can still expect a
reasonable return on their investment
C. Brennan likens the law to zoning ordinances
i. law sets up a Landmark Preservation Commission
ii. after hearing, board may consider property for landmark
status
iii. owner may seek judicial review if unhappy with status
iv. three separate procedures for altering a landmark
a. certificate of no effect on protected architectural
features
b. certificate of appropriateness
c. insufficient return-provides remedy if showing of economic
hardship made
d. all subject to modification or judicial review if denied
D. Owners can transfer development rights to contiguous
properties on same city block
E. Plaintiff could win only if it showed that the taking of the
airspace above building completely deprived them of all reasonable
beneficial use of the property. Leaving a little is apparently
okay.
F. Court held that restrictions imposed are substantially
related to the promotion of the general welfare and not only permit
reasonable beneficial use of the landmark site but also afford
owners opportunities further to enhance not only the Terminal site
proper but also other properties
G. Dissent argues average reciprocity of advantage violated and
that regulation is a taking; also distinguishes that zoning affects
all land of an area works, while arbitrarily picking certain
buildings to be landmarks doesnt
H. Natural rights and maximization of utility of property dealt
a grave blow
I. While Holmes may not have personally agreed with the case, a
legal realist might applaud the decision for picking the right
public policy to endorse
J. CLS-slight victory in as much as the little guy doesnt have
to pay more taxes if compensation were necessary
VI. Nollan v. California Coastal Commission
A. In order to redevelop property, Nollans had to obtain a
permit from commission subject to condition that they allow a
public easement to pass across a portion of their property so that
the public could access the beach
B. Nollans argued that the condition could not be imposed
without evidence that their development would adversely impact
public access to the beach
C. Public hearing found that private use would block the
sightline of the beach and prevent access
D. Land use regulation does not effect a taking if it
substantially advances legitimate state interests and does not deny
an owner economically viable use of his land
E. Constitutional propriety of regulation disappears if the
condition substituted for the prohibition utterly fails to further
the end advanced as the justification for the prohibition (see
nexus)
F. There is no nexus between the easement and allowing the
public to see the beach. Such an easement would be a taking
G. Dissent argues that Commission made legitimate use of its
police power as authorized by Ca. constitution which protects
public interest in the beach expressly. Also argues that there was
a nexus in that if there is an increase in private use, public use
should not be threatened. Also argues that average reciprocity is
satisfied-no taking
H. legislative act creating Commission foiled-Austin
disapproves
I. Court created a new test-conceivible notion to legitimate
notion-Austin really disapproves
J. property right to exclude the public protected-Locke wins
K. First English, 1987, p847 note 3 and Emanuels p 267-must be
compensated for a temporary taking deemed as such
VII. Lucas v. South Carolina Coastal Council
A. Legislative act to keep erosion of beaches down prohibited
Lucas from developing property he paid $975,000.
B. Property deemed valueless under the act
C. Lucas attacked act as constituting a taking because value
rendered useless, but did not attack whether act legitimately
advanced health safety and welfare
D. Where the state seeks to sustain regulation that deprives
land of all economically beneficial use, court holds the state may
resist compensation only if it shows that the proscribed use
interests were not part of his title to begin with-remanded to deal
with this issue
E. in other words, if Lucas planned development can be said to
be a nuisance, he will not be compensated
F. Natural law argument (Notre Dame Law School)
i. standard procedure for a takings case
a. landowner has burden of showing frustration of investment
backed expectation by regulation that was reasonable prior to
enactment of regulation
b. regulating entity must show regulation is justified by
antecedent inquiry into the background principles of nuisance and
property law. Showing would succeed if the state could demonstrate
the prohibition was necessary to avoid substantial harm to public
or private lands and resources, which harm outweighs the social
value of the intended use and cannot be avoided by other
means-essential nexus and rough proportionality must be
satisfied
ii. this procedure should be applied to all land use takings
disputes
iii. natural law respects the character of a local community as
it has defined itself chiefly within state judge made precedent,
rather than solely and deferentially in the too often acquisitive
or exclusionary immediacy of legislative enactment
G. Ruling seems to advantage the investor-maximizers of utility
would be happy
H. John Locke would also be happy with protection of property
rights from gov. interference
VIII. Dolan v. City of Tigard
A. Dolan wished to expand her business but had to get permit
subjecting her property to flood control and bike path easements on
her property
B. Passed the essential nexus test-the regulation authorizing
dedication was justified by and connected to legitimate state
interests
C. Rough proportionality-the relationship between the regulation
and Dolans planned improvements.
D. In other words, do Dolans further improvements to her
property justify the granting of easements to control flooding and
traffic-case sent back for a finding on this issue
E. Rehnquist classified citys conditioning of permit
adjudicative in its affecting only one individual on one
parcel-Souter alters this by saying her request for a variance from
the city was adjudicative; citys conditioning was based on
enactment. cf. FasanoF. John Locke-thumbs up
G. if Dolan wins, Chicago maximizers of utility thumbs up
H. Turtlerock v. College Station-historical background of rough
proportionality in that the money Turtlerock collected for park use
actually had to be spent on parks
IX. Galveston
A. Texas Open Beaches Law-mean high tide line to line of
vegetation is public domain
B. This property is valueless
C. Easement by continued use (beach adversely possessed by the
public)
D. Cannot build on this property
E. No reason to exclude people because of easement
F. No taking because of easement was in place prior to LucasG.
If vegetation line ends up behind a house and that house is more
than 50% destroyed, it cannot be rebuilt because of Texas Open
Beaches Law
Evolution of Takings-
List of cases:
Pennsylvania Coal Company v. Mahon 1922-average reciprocity of
advantagePenn Central Transportation Company v. City of New York
1978-unless total diminution of value, no takingLoretto v.
Teleprompter Manhattan CATV Corp. 1982-a permanent occupation is a
taking no matter whatHawaii Housing Authority v. Midkiff
1984-conceivable notion of HSW for eminent domain; legislature
knows bestNollan v. California Coastal Commission 1987-regulation
must legitimately further or substantially advance HSW; essential
nexusLucas v. South Carolina Coastal Council 1992-if economically
backed expectations destroyed, unless development was going to be a
nuisance, then a taking has occurred
Dolan v. City of Tigard 1994-rough proportionalityProcedure for
takings suit (as of Dolan)
I. Legislative enactment uses police power to bring about a
regulation or act of eminent domain to further a goal of health
safety and welfare for the public
II. Property owner wishes to sue
A. to avoid eminent domain-must show there is no conceivable
notion of public purpose to use of eminent domain
B. to avoid regulation-
i. landowner has burden of showing law does not substantially
advance legitimate state interests and that economically viable use
of property has been deprived
ii. Regulating entity must show regulation is justified by
antecedent inquiry into the background principles of nuisance and
property law.
iii. Showing would succeed if the state could demonstrate the
prohibition was necessary to avoid substantial harm to public or
private lands and resources, which harm outweighs the social value
of the intended use and cannot be avoided by other means-essential
nexus and rough proportionality must be satisfied
Zoning
Terminology
special use permiti. legislatively authorized uses identified in
the zoning ordinance that are regulated by an administrative agency
because of special problems of the use presents from a zoning
standpoint (day care centers, grocery store, gas stations,
hospitals, private schools)
ii. Administrative, not legislative in character
iii. disputes arise on whether proper standards have been
articulated for the delgation of authority, whether the standards
have been met, and whether the requirements create unconstitutional
classifications
variance-departure from zoning regulations granted by an
administrative body to avoid overly harsh results from zoning
regulation. For instance if a 98 foot parcel is subject to a 100
foot frontage ordinance. Hardship must be unique to the particular
lot (for many lots, zoning amendment needed). Variance must not
harm surrounding neighborhood. Variances are not recorded on the
map and are subject to abuse
non-conforming uses- uses of property that exist prior to
adoption of zoning ordinances
amortization-ordinance authorizing non-conforming use to run out
after a set period of time-time enough for the owner to make back
his initial investment
spot zoning-like parcels being zoned differently without good
reason-invalid. Tests for such as follows
i. use permitted must differ drastically from prevailing uses in
surrounding area
ii. small area affected, usually one parcel
iii. use benefits one or a few owners rather than the community
at large
planned unit developments/cluster zoningi. permits developers to
deviate from rigid lot size and building set-back requirements, and
in some cases to mix uses within a development.
ii. Criticized for requiring more costly infrastructure such as
roads and sewers and for contributing to a sense of isolation.
iii. limited to large tracts of land 10-20 acres
iv. must be harmonious with immediate environs and consistent
with municipalitys land use plans
floating zone-no defined boundaries, but float over area to be
affected.
i. municipality enacts an ordinance authorizing a particular
range of activities, without specifying specific areas in the
municipality where the activities can take place
ii. second ordinance anchors the floating zone to a particular
tract of land in response to specific development proposals
overlay zones-if a municipality wished to impose different
regulations on certain permitted uses in part of an existing zoning
district, new regulations are laid over the existing zone map.
existing regulations that do not conflict with the overlay district
remain in effect, but conflicting ones are preempted
performance standards-control harmful effects of development,
shifts from type of use to impact of use. requires municipalities
to articulate meaningful and understandable standards and apply
them even handedly
aesthetic zoning-the practice of discriminating against
activities that depart from the norm, such as radical designs of
buildings, unusual types of building materials, and the use of
signs to convey messages. cf. Stoyanoff
fiscal zoning/exclusionary zoning-attracts activities such as
commercial and light industrial uses that would increase the tax
base, and keeps out people who would drain the tax base through
increased pressure on public schools, local welfare agencies,
public transit systems and the like. cf. Mt. Laurel
builders remedy-enables a particular development plan to go
forward so long as it complies with other valid local
regulations
How a zoning is passed
I. 10th Amendment-Power not provided by constitution to the
federal government is left to the states
II. State authorizes governing bodies to adopt zoning plans by
an enabling act (zoning enabling statute)
III. Governing body chooses a zoning /planning
commission-prepares master plan of zoning for governing body
IV. Adoption of zoning plan by governing body
V. Any takings issue is referred back to governing body
VI. Map is drawn
VII. Any zoning ordinance must be in accord with master plan
(although, all of a municipalitys zoning ordinances together can
constitute the master plan)
VIII. Day to day issues of zoning
A. Administrative procedure for handing out permits
B. Buildings Department-day to day enforcement of zoning
scheme-administrative (adjudicative) in character-hands out
permits
C. Board of Adjustment (appointed) decides on appeals of
permits, decides on variances and special use exceptions
D. appeal to district court
A Standard State Zoning Enabling Act
I. Empowers cities
A. to regulate and restrict the height, number of stories and
size of buildings and other structures, the percentage of lot that
may be occupied, the size of yards, courts, and other open spaces,
the density of population, and the lcoation and use of buildings,
structures and land for trade, industry, residence or other
purposes
B. to create use zones with differing regulations
C. modify zoning laws and grant variances when in the public
interst to do so
II. Requires cities
A. to createa comprehensive plan designed to accomplish various
public objectives specified in the Standard Act
B. to create procedures to establish, enforce and alter zoning
regulations
C. to establish a zoning commission and an appeal mechanism for
affected landowners
Rezoning
I.Zoning commission advises governing body
II. hearings are held
III. must not be arbitrary or discriminatory
IV. must be in accordance with master plan (or if no plan, with
character of prior zoning ordinances that make up the plan)
V. adopts amendment
VI. may run into spot zoning issues
VII. If small enough area affected, may run into procedural due
process issues (cf. Fasano)
Cases
I. Ambler Realty Co. v. Village of Euclid, Ohio (District
Court)
A. Ambler owned 68 acres of land it wished to develop for
industrial use, most of which was classified by Euclids zoning plan
as single or multi-family use only, with some land classified for
industrial use
B. Ambler sues to enjoin zoning and have ordinance declared null
and void
C. Zoning does not pass the Holmes test in that the diminishment
in value from Amblers inability to develop its property for
industrial purposes outweighs any compensation by benefits acruing
to the land from restrictions imposed by the ordinance on other
land
D. regulation must have a real and substantial relation to
maintenance and preservation of HSW
E. Zoning is really social engineering
F. Zoning unconstitutional-a taking has occurred
G. Austin loses, Locke and economic maximizers win
H. CLS-economic and racial segregation vs. land used for
industrial purposes. No winners here.
II. Village of Euclid v. Ambler Realty Co. (U.S. Supreme
Court)
A. Amblers land value decreases from $10,000 to $2,500
B. while the meaning of constitutional guarantees never varies,
the scope of their application must contract or expand to meet the
times
C. Euclids governing authorities, presumably representing a
majority of its inhabitants and voicing their will, have determined
not that industrial development shall cease at its boundaries, but
that the course of such development shall proceed within definitely
fixed lines
D. proper function of the police power to do such
E. zoning measures will be struck down as unconstitutional only
if it was clearly arbitrary and unreasonable, having no substantial
relation to HSW
F. HSW really and substantially advanced by zoning ordinance
G. Austin wins, Locke loses
III. Bell v. City of Elkhorn
A. On an area three parcels of which already with commercial
zoning, Hardees, Inc. wanted to build a restaurant.
B. Owners of property 100 feet from the proposed spot filed
counter petition to keep development from happening
C. City plan commission okayed the restaurant
D. plaintiffs allege Elkhorn did not have a separate document
constituting a comprehensive plan, restaurant was spot zoning,
zoning statuts of parcel unconstitutional because it lacked proper
standards
E. statute says master plan may include a comprehensive plan,
formal plan unnecessary
F. defendant said statute could be properly followed by the
zoning ordinance itself
G. Comprehensive plan should contain the following
i. improving the physical environment of the community
ii. promoting the public interest
iii. facilitating the implementation of community policies on
physical development
iv. effecting political and technical coordination in community
development
v. injecting long-range considerations into the determination of
short range actions
vi. bringing professional and technical knowledge to bear on the
making of political decisions concerning the physical development
of the community
H. Most in the majority agree that a zoning ordinance itself can
be a comprehensive plan
I. There is no requirement that the plan be written beyond a
generalized conception
J. language of statute says in accordance with
K. Spot zoning defined as the practice whereby a single lot or
area is granted privileges which are not granted or extended to
other land in the vicinity in the same use district
L. should only be indulged in where it is in the public interest
and not solely for the benefit of the property owner who requests
the zoning
M. three corners of the intersection were zoned commercial
N. The amendatory zoning ordinance did not grant special
privileges to a single parcel inconsistent with the use of property
in the general area
O. Austin wins, maximizers win, Locke loses
IV. Fasano v. Board of County Commissioners
A. group of homeowners sued to oppose a zoning change creating a
mobile home park
B. Once a zoning scheme is adopted, changes should be made in
keeping with the original plan and in keeping with changes in the
character of the neighborhood
C. Ordinances laying down general policies without regard to a
specific piece of property are usually an exercise of legislative
authority, are subject to limited review, and may be attacked upon
constitutional grounds for an arbitrary abuse of authority.
D. A determination whether the permissible use of a specific
piece of property should be changed is usually an exercise of
judicial authority and its propriety is subject to an altogether
different test
E. As a quasi judicial decision, the rezoning is not entitled to
a presumption of legislative validity, the burden of proof was on
the party seeking the change and the decision to change the zoning
had to be justified by evidence of consistency with the adopted
general plan or overriding public need
F. Adjudicative procedures involving a specific property must
follow procedural due process (works for zoning amendments or land
use regulations)
i. Notice
ii. Hearing
iii. Evidence
iv. representation by counsel
v. Non-biased decision maker
vi. decides on basis of evidence at hearing
vii. statement of justification for change connecting it with
standards articulated
viii. appealable
G. Substantive due process-
i. zoning must bear a rational relationship to a permissible
state objective; must be a legitimate use of police power
ii. zoning must completely destroy economic value of property to
violate substantive due process (amount to a taking)
iii. burden of proof is on the attacker of the ordinance
H. Big win for Locke
I. Austin doing back flips in his grave
J. CLS should feel a little empowered by a due process
victory
V. Collard v. Incorporated Village of Flower Hill
A. where a local municipality conditions an amendment of its
zoning ordinance on the execution of a declaration of covenants
providing that no construction may occur on the property so rezoned
without the consent of the municipality, absent a provision that
such consent may not be unreasonably withheld the municipality may
not be compelled to issue such consent or give acceptable reason
for failing to do so
B. Appellants predecessors wanted a change in zone from general
municipal and public purposes district to a business district
C. Village board granted rezoning with conditions
D. no building or structure situated on subject premises will be
altered, extended, rebuilt, renovated or enlarged without the prior
consent of the Board of Trustees of the Village
E. Appellant, after acquiring title, made application to village
board for approval to enlarge and extend existing structure on the
premises
F. Application was denied without reason
G. The imposition of conditions on property sought to be rezoned
may not be classified as a prospective commitment on the part of
the municipality to zone as requested if the conditions are met;
nor would the municipality necessarily be precluded on this account
from later reversing or altering its decision
H. Conditional rezoning is a means of achieving some degree of
flexibility in land use control by minimizing the potentially
deleterious effect of a zoning change on neighboring properties;
reasonably conceived conditions harmonize the landowners need for
rezoning with the public interest and certainly fall within the
spirit of enabling legislation
I. If upon proper proof, the conditions imposed are found
unreasonable, the rezoning amendment as well as the required
conditions would have to be nullified, with the affected property
reverting to the preamendment zoning classification
J. the allegation of the complaint that the village board in
denying appellants application acted in arbitrary and capricious
manner is not an allegation that the board acted in bad faith or
its equivalent
K. Claim dismissed
L. Austin wins, Locke loses, maximizers lose, CLS-system
stinks
VI. Sunnyvale, Texas
A. town of 500 homes
B. Mayhew wanted to build planned unit development of area,
adding 5000 development units (DUs), taking care of all standing
land regulations due to the higher density development
C. current zoning ordinance allowed only for 1 acre zoning
D. his permit was revoked even though he satisfied all the
prerequisites
E. legislative process
i. Planning commission holds a hearing
ii. City Council holds a hearing
iii. they can either amend and go for PUD or deny and return to
1 acre zoning
iv. PUD would be authorized on a floating zone which would only
require amendment
v. town accepted the floating zone, but then rejected the
development offer because the city council is an elected body and
they were probably getting nasty calls from the existing
populace.
F. still in litigation citing Fasano-adjudicative process needs
due process
G. no reasonable investment backed expectations of Mayhew
because he owned the property as farmland way before it could ever
be used for development
VII. State Ex Rel. Stoyanoff v. Berkeley
A. Relators petition pleads that they applied to appellant
Building Commissioner for a building permit to allow them to
construct a single family residence in the City of ladue and that
plans and specification were submitted for the proposed residence
which was unusual in design but complied with all existing building
and zoning regulations and ordinances of the City of Ladue
B. Permit was not approved by the Architectural Board of the
City of Ladue
C. Board set up to make sure buildings and structures conform to
certain minimum architectural standards of appearance and
conformity with surrounding structures and that unsightly,
grotesque and unsuitable structures, detrimental to the stability
of value and to the general welfare and happiness of the community
be avoided and that appropriate standards of beauty and conformity
be fostered and encouraged
D. petition says such an ordinance is unconstitutional because
it is vague and provide no standard nor uniform rules to guide the
architecture board and that aesthetic standards are outside the
scope granted city by statute
E. city says proper exercise of citys governmental, legislative
and police powers, as determined by its legislative body and that
proposed building would have adverse affect on property values of
surrounding houses
F. enabling ordinance says regulations shall promotes general
welfare
G. Court rather arbitrarily says regulations on aesthetics
substantially promote legitimate general welfare
H. Because procedures exist for factual review of architectural
decisions, appellants rights are safeguarded-no arbitrary powers
bestowed upon architecture board.
I. Austin wins
J. Locke wins if you are a private land owner following the
ordinance, loses as a landowner who doesnt want to follow the
ordinance
VIII. Southern Burlington County NAACP v. Township of Mount
Laurel (1975)
A. NAACP sued under equal protection clause-prevents any state
from depriving a citizen of equal protection of laws
B. Trial court found zoning ordinance invalid, but ordered
affirmative action for replacement
C. ordered municipality to make studies of the housing needs of
low and moderate income persons presently or formerly residing in
the community in substandard housing, as well as those in such
income classifications presently employed in the township and
living elsewhere or reasonably expected to be employed therein in
the future and to present a plan of affirmative public action
designed to enable and encourage the satisfaction of the indicated
needs
D. economic segregation the issue, not racial
E. general welfare extended to those in region who wish to live
in Mount Laurel, not just those who already do
F. proper provision for adequate housing of all categories of
people is certainly an absolute essential in promotion of the
general welfare required in all local land use regulation
G. through its zoning ordinances has exhibited economic
discrimination in that the poor have been deprived of adequate
housing and the opportunity to secure the construction of
subsidized housing, and has used federal, state, county and local
finances and resources solely for the betterment of middle and
upper income persons
H. ordinance builds a wall around itself to keep out those
people or entities not adding favorably to the tax base, despite
the location of the municipality or the demand for varied kinds of
housing; all fiscal considerations deemed invalid.
I. Presumptive obligation
i. Procedurally-when it is shown that a developing municipality
in its land use regulations has not made realistically possible a
variety and choice of housing, a facial showing of violation of
substantive due process or equal protection under the state
constitution has been made out and the burden shifts to the
municipality to establish a basis for its action
ii. substantively-the specifics of what the municipal land use
regulation provisions will evidence invalidity and shift the burden
of proof
J. Remedies-adopt amendments to the ordinance to correct
deficiencies-no affirmative action as of yet
K. confines all Mt. Laurel litigation to select judges
L. Austin rolling in grave
M. Locke unhappy if rich and inside Mt. Laurel, happy if outside
and poor
N. Legal realists would applaud if they believed in the purpose
of the policy favored
IX. Southern Burlington County NAACP v. Township of Mount Laurel
(1983)
A. Mt. Laurel I didnt work
B. The deficiencies in its application range from uncertainty
and inconsistency at the trial level to inflexible review criteria
at the appellate level. The waste of judicial energy involved at
every level is substantial and matched only by the often needless
expenditure of talent on the part of the lawyers and experts. The
length and complexity of trials is often outrageous, and the
expense of litigation is so high that a real question develops
whether the municipality can afford to defend or the plaintiffs can
afford to sue.
C. The portion of the regions present need that must be
addressed by municipalities in growth areas will depend then on
conventional fair share analysis, some municipalitys fair share
being more than the present need generated within the municipality
and in some cases less
D. Defenses
i. benign intent-almost never successful
ii. preservation of property values-not successful
iii. fiscal justifications-not successful
iv. other towns better suited-not successful
v. ecological grounds-may succeed
E. Determination of fair share
i. identifying the relevant region
ii. determining its present and prospective housing needs
iii. allocating those needs to the municipality or
municipalities involved
F. reasserts establishment of judicial panel to handle all Mt.
Laurel litigation
G. formulas that accord substantial weight to employment
opportunities in the municipality, especially new employment
accompanied by substantial ratables shall be favored
H. court shall decide proportion of low and moderate income
housing
I. must remove exclusionary ordinances
J. affirmative measures suggest that the municipality provide a
realistic opportunity for lower income housing to be built
i. encouraging or requiring the use of available state or
federal housing subsidies
ii. providing incentives for or requiring private developers to
set aside a protion of their developments for lower income
housing
K. Builders remedy
i. essential to maintain a significant level of Mt. Laurel
litigation and only effective method of enforcing compliance
ii. required by principles of fairness to compensate developers
who have invested substantial time and resources in pursuing such
litigation
iii. the most likely means of ensuring that lower income housing
is actually built
iv. should be granted unless the municipality establishes the
nuisance of such a project
L. Legal realists who like policy applaud
M. Locke ambivalent, but probably more pissed
N. Austin cringes
O. Ruhl would say something this expansive has no chance of
possibly working because the system is to large to manage, as is
obvious by the fact that after eight years they have gotten
nowhere
Zoning suit procedure
zoning ordinance must substantially advance a legitimate public
health, safety, welfare goals
no separate comprehensive plan is necessary
movant attacking zoning must show zoning is arbitrary or
discriminatory
use of property must be rendered completely economically
valueless by zoning
Holmes test-diminishment of value vs. benefits received from
zoning on surrounding area
Substantive due process-
a. zoning must bear a rational relationship to a permissible
state objective; must be a legitimate use of police power
b. zoning must completely destroy economic value of property to
violate substantive due process (amount to a taking)
c. burden of proof is on the attacker of the ordinance
d. incorporation doctrine-Bill of Rights is incorporated into
the 14th Amendment
i. Free speech/expression
ii. Free press
iii. Free exercise of religion
iv. any zoning law that unreasonably restricts these rights
without achieving a compelling state interest may be subject to
attack
Adjudicative procedures involving a specific property must
follow procedural due process (works for zoning amendments or land
use regulations). cf. Fasano
a. Notice
b. Hearing
c. Evidence
d. representation by counsel
e. Non-biased decision maker
f. decides on basis of evidence at hearing
g. statement of justification for change connecting it with
standards articulated
h. appealable
Real Estate Transactions
I.The Participants and Their Roles
A. The Service Groups
1. Most of the work of residential conveyancing is controlled or
performed by brokers
2. broker may fill in standard contract forms, but may not
modify terms or conditions of the contract that would affect legal
relationship of the parties
3. seller hires broker (a listing agent) to sell property on
terms and for a commission specified in the listing agreement
4. Open Listing-the seller authorizes broker to sell but may
sell property on his own time or procure other brokers
5. Exclusive agency- limits seller to one broker, but may sell
property on his own time
6. Exclusive right to sell-only broker may sell
property-commission is owed upon sale
7. Multiple listing-brokers holding exclusive listing may pool
listings through a common clearing house-when property sold,
commission is split between listing and selling broker
8. Brokers primary fiduciary obligation is to the seller
9. attorney approval clauses may be in contract-attorney allowed
to review contract-usually there is a three day period of review
under which the seller or buyers attorney can nix the
transaction
10. Attorney is not involved in closing11. Attorneys role has
diminished, may supply abstract of title- a history of title chain,
but usually a title company does this
B. Conveyancing and the Practice of Law
1. In a complex commercial context. lawyers are essential to
transaction
2. Advantage of retaining an attorney is that buying a house is
huge investment and attorney works purely for buyers interest
3. Disadvantage-already costs a lot of money without adding
attorneys fees
4. South Jersey practice-from the beginning of the transaction
to the end, neither the seller nor buyer is represented by
counsel
5. Start with a broker who is ordinarily a member of a multiple
listing system and who oversees the negotiations up through
closing
6. The broker may have a conflict of interest with the buyer
because she wants to close in order to get paid
7. Attorney broker uses to set up documents may have conflict of
interest because he supposed to be looking out for both buyer and
seller
8. If an attorney does not draft the documents, the broker, the
title company, or the lender does
9. Brokers dont like attorneys because they kill deals
10. In Arizona, the state bar sued a title company for a
declaratory judgment saying what they were doing was practicing law
without a license. Bar Assoc. won, but Arizona legislature passed a
law saying brokers could practice
II. The Basic Documents
A. Margaret H. Wayne Trust v. Lipsky1. Lipsky signed an earnest
money agreement (contract) which contained a liquidated damages
clause putting down $1000 to purchase condominium from Wayne
through broker Reynalds
2. Wayne accepted
3. When the stock market went down, Lipsky decided to back out
of the deal
4. Instead of keeping the $1000 under the liquidated damages
clause, Wayne sued for specific performance-justified by keeping
property off the market after contract signed
5. she sold property and proceeded with a claim for actual
damages
6. Trial court erred in awarding Wayne some $5000 for commission
for Reynaldsa. Ellsworth Dobbs1. If broker provides a ready willing
and able buyer to buy on terms of owner
2. And buyer signs contract with owner
3. And buyer completes transaction by closing
4. Then he gets his commission
5. if transaction is not completed because of sellers breach,
then seller is responsible for brokerage commission if contract is
signed
6. Minority law
7. Transaction never closed, Reynalds should not get
commission
8. Clause in EMK stating defaulter would pay brokerage
commission
9. Wayne and Reynalds settled
10. EMK is a billateral executory (binding in the future)
contract11. Usually a title company holds onto the earnest money as
an escrow agent, not seller or broker
12. Majority law-broker would get commission for providing a
buyer ready, willing and able to buy on owners terms, if seller
does not default-fairer policy
B. The Contract
1. Must satisfy the statute of frauds
2. After negotiations based on buyers offer from listing and
subsequent counter offers, a contract is formed that once signed
governs the relationship between the vendor (seller) and purchaser
during the time between signature and closure
3. Ideally, the contract will be sufficiently clear and detailed
to resolve any difficulties that may arise prior to closing
C. Purchase Agreement (example)
1. purchase price
2. appurtenances and personal property
3. closing; possession
4. deed; title insurance
a. marketable title (see below)
5. real estate taxes, assessments, rents and current operating
expenses
6. condition of the premises
a. habitability (see below)
7. damage or destruction
a. equitable conversion (see below)
8. brokers commission
9. conditions
10. return of earnest money; default
11. entire agreement
D. The Deed
1. Enfeoffment by livery of seisin-grantor and grantee go to
property and in the presence of witnesses grantor hands grantee a
twig or clod of dirt to symbolize conveyance; then they slap the
kids so that they wont forget
2. Deed is subject to statute of frauds, even though it is not a
contract
3. Essential elements of the deed
a. names of grantor and grantee
b. description of the subject property
1. metes and bounds-Commencing on the County Road at the
southwest corner of land thence in a generally southerly direction
by and along said County Road Twenty (20) rods to a stake driven
into the ground; thence at tight angles to said County Road in a
generally easterly direction Fifty (50) rods to a stake driven into
the ground; thence at right angles in a generally northerly
direction Twenty-eight (28) rods more or less to land now or
formerly of Edwin Bickmore, . . . thence in a generally westerly
direction by and along said northerly line of said premises . . .
Thirty (30) rods more or less to the generally northeasterly corner
of said premises; thence in a generally southerly direction by and
along said easterly line of said premises Eight (8) rods more or
less to the generally southeasterly corner of said premises; thence
in a generally westerly direction by and along the southerly line
of said premises Twenty (20) rods more or less to the point of
beginning
2. Government Survey System-the S of the SW of Section 25 of
Township 3 North, Range 3 West, First Principal Meridian
3. By reference to a subdivision plat-Block 8, Lot 7 out of the
Ralph Anderson Survey 192 of Bexar Co., Texas
4. Rules of construction in case property description is
incomplete, inconsistent, or plainly mistaken used to determine the
intentions of the parties, in descending order of importance cf.
Theriault below
a. original survey markers
b. natural monuments
c. artificial monuments
d. maps
e. courses of direction
f. distances
g. common names
h. quantity
c. statement of intention to convey-granting clause
d. must be signed by grantor
e. name of grantee can be written in later and still be binding
for equitable purposes
f. acknowledgement
g. for deed to be effective it must be delivered.
1. cf. Pipes below
2. commercial escrows-tender deed only upon instructions of the
seller-written instructions and deed are delivered upon tendering
to escrow agent
3. relation-back doctrine-buyers title, once acquired out of
escrow, will relate back to the moment the deed was delivered into
escrow-buyer has equitable title from moment deed is tendered to
escrow agent
4. exception: if seller sells property to a bona fide purchaser,
a person who pays real consideration and has no clue of earlier
conveyance in escrow, the bona fide purchaser prevails because he
has legal title (title has not only been delivered, but also
tendered upon bona fide purchaser)
5. Delivery by estoppel-if O grants A title without intending to
deliver and A sells to good faith purchaser B, O is estopped from
denying he transfered title to A
h. a deed delivered upon death is usually ineffective unless it
can pass as a will
4. Statutory forms-laws in most states contain statutory forms
of deeds that may be altered
5. deed in fee simple, general warranty deed-warrants against
lawful claims and demands from all persons-lien free if no subject
to language
6. limited warranty deed (special warranty deed)-warrants
against any encumbrances made by grantor-anything prior to that is
buyers problem
7. quit-claim deed-no warranty
8. Doctrine of Merger-once buyer accepts deed, any promises with
respect to title are merged into the deed-policy underneath is that
upon accepting the deed, the buyer is satisfied that the deed fully
conforms to sellers obligations under the sale of contract (EMK).
The merger doctrine does not extinguish those portions of the
contract that are independent or collateral to the transfer of
title
9. deed poll rule-anyone who accepts tender of a deed is bound
by the deed
a. Green v. White
1. squatter had title to land and mineral interests by adverse
possession
2. record title owner told adverse possessors that they were on
his property
3. record owner sold property to adverse possessors and deeded
over the property to them reserving mineral interests
4. deed poll rule says that if you accept and go by the deed,
you are bound by it
5. record title owner gets rich
6. only way an adverse possessor can get record title is to sue
record title owner and win, judgment decrees land to adverse
possessor, filed for record
E. Theriault v. Murray
1. appeal from judgment contending that the court erred in
relying solely on the distance calls in the Theriaults deed to fix
the southern boundary of their land-judgment vacated, remanded
2. to what boundaries a deed refers is a question of law, the
location of those boundaries is a question of fact
3. controls of boundary in descending order of importance:
monuments, courses, distance and quantity unless the priority
produces absurd results
4. remanded to determine the location of monuments
5. expansions:
a. the construction prevails which is most favorable to the
grantee
b. if the deed contains two descriptions one ambiguous and the
other unambiguous, the later governs in order to sustain the
deed
c. when a tract of land is bound by a monument which has width,
the boundary line extends to the center
F. Pipes v. Sevier1. Leone Pipes directed an attorney to prepare
two sets of deeds-one set to her son Keith and one to her daughter
Beverly
2. Instructions to attorney were to hold them in escrow until
her death
3. Leone, when she could not get the deeds back, had new deeds
prepared, preparing a life estate for herself and Keith, so that
Keiths family would never have the property
4. Keith sued for declaratory judgment voiding all deeds except
the original deeds in escrow
5. Keith died-wife assumed right to property of escrowed
deeds
6. court found that there was no right of recall-judgment
affirmed
7. Donor cannot gift back after transfer complete
8. Delivery to 3rd party is sufficient.
9. If arguing on Leones part say that this is an attempt to make
a will.
III. Title Assurance
A. Vendor contractual obligation to marketable title
1. marketable title-good record title-a recorded chain of title
from some original root of title in the past to the seller, with no
recorded encumbrances or proving title by adverse possession either
by a successful quiet title action or evidence (affidavits, etc.)
sufficient to enable buyer to quiet title.
B. Voorheesville Rod & Gun Club, Inc. v. E.W. Tompkins Co.,
Inc.1. First issue is whether the subdivision regulations apply to
a conveyance of a portion of a parcel of land where it is intended
by the parties that the land shall remain undeveloped
2. If regulations apply, then issue becomes whether defendants
refusal to seek subdivision approval makes title unmarketable
3. plaintiff could not seek approval because they only had
equitable and not legal title
4. plaintiff sued for specific performance to get defendant to
apply for approval from subdivision.
5. Because no provision in the contract requires defendant to
obtain subdivision approval and the only basis for plaintiffs
specific performance claim is its failed assertion of marketable
title, plaintiffs summary judgment is reversed; complaint
dismissed
6. contract stipulated marketable title subject to zoning and
environmental laws, not that defendant had to get subdivision
approval
7. subdivision regulation enough like zoning to imply a subject
to provision on the plaintiff, yet because contract silent as to
defendants obtaining approval, plaintiff cannot imply a term as to
defendants obtaining approval
8. While defendants failure to get approval was a violation of
regulations at the time of contract formation, the violation did
not make title unmarketable
9. specific performance is usual damage remedy because property
is unique and damages are difficult to determine
10. vendor can keep earnest money for breach
11. purchaser may sue for restitution of earnest money or for
compensatory damages for loss on the bargain
12. litigation makes property unmarketable
C. Deed Covenants
1. Covenant of seisin-grantor warrants that he owns what he is
conveying-a present covenant-can only be breached upon delivery-if
breached, grantee gets money back, but must reconvey property to
grantor
2. Covenant of right to convey-grantor warrants he has power to
convey the property-a present covenant-grantees knowledge of lack
of authority to pass title is no defense
3. Covenant against encumbrances-grantor warrants that there are
no liens, mortgages, easements, covenants, restricting use, or
other encumbrances upon the title to the property that are
specifically excepted (subject to) in the deed-present
covenant-grantees knowledge of encumbrances is no defense-damages
based on whether or not encumbrance can be removed
a. if grantee can remove the encumbrance (pay off the lien,
etc.) he is entitled to recover expenditure of removal
b. if not removable unilaterally by the grantee, damages are
measured by difference between unencumbered and encumbered fair
market value at time of conveyance
4. present covenants (1-3) are subject to statute of limitations
from time of conveyance
5. present covenants cannot be assigned by implication. If A
conveys to B by general warranty deed and B conveys to C by
quitclaim or special warranty, C cannot sue A for breaches of
present covenants in a majority of states
6. Covenant of general warranty-grantor warrants that he will
defend against lawful claims of a superior title and will
compensate grantee for any loss suffered by successful assertion of
a superior title-future covenant-breached when grantee is actually
or constructively evicted
7. Covenant of quiet enjoyment-grantor warrants that grantee
will not be disturbed in his possession or enjoyment of property by
someones successful assertion of a superior title to property
(often omitted in a general warranty deed)-future covenant
8. Covenant of further assurances-grantor promises to do
whatever is reasonably necessary to perfect conveyed title if it
turns out imperfect or defective (often redundant)-future
covenant
9. If there is privity of estate between original grantor and a
remote grantee, the benefit of the future covenant given to the
original grantee runs with the estate given to the remote grantee.
Privity of estate means that the future covenants run with the land
as they are conveyed to successive grantees. A to B to C to D if by
warranty deed and A goofed on future covenants, D has an action. If
A goofed on present covenants, there are no future covenants to run
with the land.
10. General warranty deed-contains all six covenants above
11. Special warranty deed-same covenants as above, but only for
those defects that occur during the grantors ownership
12. Quit-claim-no warranties to title- in some states, inquiry
notice is assumed upon tender of a quitclaim deed
13. Damages-grantee may not recover more than what the grantor
in breach received for the property
14. After-acquired title (estoppel by deed)- If grantor conveys
an interest in property he does not own, and then later acquires
the unowned interest, this doctrine operates to send that
after-acquired title immediately to the grantee or his successors
in interest. The grantor is estopped from denying the scope of the
original deed
D. St. Paul Title Insurance Corp. v. Owen1. what liability do
grantors have to remote grantees under a warranty deed where
certain covenants of title contained in the deeds are found to run
with the land?
2. Al Owen by warranty deed covenant of quiet enjoyment and
warranty to brother James Owen Jr.
3. James Owen by statutory warranty deed (special warranty deed)
to Dennis Carlisle Jr.
4. Carlisle mortgaged to UCMIM2, then to GECC replacing
mortgage. St. Paul Title Insurance Corp is GECCs subrogee
5. Carlisle defaulted
6. Circuit Court found Carlisle did not have title and that GECC
was not entitled to foreclose
7. GECC sued Albert Owen and James R. Owen, Jr. for breaching
covenants of title
8. when a covenant of title runs with the land, all grantors,
back to and including the original grantor-covenantor, become
liable upon a breach of the covenant to the assignee or grantee in
possession or entitled to the possession, and the latter may sue
the original or remote grantor, regardless of whether he has taken
from the immediate grantor with a warranty
9. breach occurred when the trial court ruled in the foreclosure
proceedings that Carlisle possessed no interest in the property
which had been mortgaged
10. covenants of quiet enjoyment and warranty ran with the
land
11. Action against Al Owen okay
12. James Owen did nothing to affect the purported title
conveyed, did not breach any of the covenants of title contained in
the statutory warranty deed delivered to Carlisle, and is therefore
not liable
13. since there is no evidence that the remote grantors received
any consideration for their conveyances purportedly conveying title
to subject property, appellant, as subrogee of GECC is entitled to
an award of nominal damges only, for the breach of the covenant of
quiet enjoyment contained in Albert Owens deed
14. Why didnt Carlisle have title?
E. Recording Acts
1. recording system-protects land titles-stipulates who has
priority in case of conflict
2. clerks job to stamp and index a deed, mortgage, judgment and
tax liens, or installment sale contracts-wills and divorces under
separate index
a. grantor-grantee index-books organized by date, pages
organized by alphabet, each page in order of transaction
b. tract index-organized by property description chronologically
as to transaction
3. Old system-whether recorded or not, first in time, first in
right-if no deed is recorded to a property, first in time wins
4. Recording
a. carrot-if you record, you have a better chance at
protection
b. stick-if you dont record, you could lose title
5. recording provides constructive notice (usually)
6. Actual notice- real actual knowledge of a prior unrecorded
deed; evidence outside the record is necessary for
establishment
7. Constructive Notice
a. record notice-the entire world is charged with constructive
notice of the contents of the record
b. Inquiry notice-
1. who lives on the property
2. record reference to an unrecorded deed
3. deeds from a common grantor or character of neighborhood
(subdivisions, etc. see implied easements, below)
8. if clerk fails to index or indexes incorrectly, searcher is
not held to constructive notice
9. recording does not apply to interests created by the
operation of law
a. adverse possession
b. death
c. divorce
d. prescriptive or implied easements
10. Race Acts-whoever records first has title
11. Notice Acts
a. addresses inequity of permitting a later purchaser to prevail
over an earlier purchaser if later purchaser knows of prior
purchase
b. a subsequent bona fide purchaser paying valuable
consideration without prior notice of unrecorded transfer prevails
over prior purchaser who does not record, even if subsequent
purchaser has not recorded
c. simply put-no conveyance is valid against a subsequent bona
fide purchaser who has no notice of the conveyance, unless the
conveyance is recorded
d. Texas is a notice state
12. Race-Notice Acts
a. protects subsequent bona fide purchasers without notice of
prior purchase who record before the prior purchaser
b. no conveyance is valid against a subsequent bona fide
purchaser who has no notice of the conveyance and who has recorded
first
13. How to run a title search
a. searcher need only have property description to run title
b. start with grantee index and work your way back; then go
forward through grantor index
c. searcher must exercise reasonable diligence-liable to buyer
if results are provided to buyer, even if search is done for
seller, may even suffer from tort liability
1. ceiling- where you put you finger down on the page
(limited/unlimited)
2. floor-where you lift your finger from the page
(limited/unlimited)
3. courts will generally pick the title that best maintains the
integrity of the recording system
-In a notice state
-limited ceiling, R wins over B
-unlimited ceiling B beats everybody
-limited ceiling Y beats B + R
-unlimited ceiling B beats Y + R
-limited ceiling, limited floor S beats everybody
-unlimited floor, limited ceiling Y beats everybody
4. Marketable title acts-cutoff for diligent title search (50
years, e.g.), usually long enough back to satisfy any statute of
limitations-does not take care of twin title chain problems, cf.
Palamarg14. Shelter Rule- the protection given a bona fide
purchaser shelters subsequent purchasers even if they have
notice
F. Mugaas v. Smith et ux1. Action to quiet title between Mugaas,
who claims by adverse possession a strip of land and Smith, a bona
fide purchaser of the property in dispute
2. fence which demarcated line disintegrated
3. that Mugaas ceased to use strip in question in such a way
that her claim of adverse possession was apparent did not divest
her of the title she had acquired
4. Smith argues that a bona fide purchaser should be able to
rely on the record
5. Smith produced no evidence eradicating Mugaas right to
adverse possession
6. Smiths only remedy is to sue the seller
G. Chain of Title
1. a deed outside the chain of title is a wild deedH. Palamarg
Realty Co. v. Rehac1. See diagram
2. Rehac and Piatowski-Taylor chain
3. Worth and Sharp-Appleby chain
4. New Jersey is a race notice jurisdiction
5. statutes have been consistently interpreted to mean that the
subsequent purchaser will be bound only by those instruments which
can be discovered by a reasonable search of the particular chain of
title
6. Del Tufo may have had actual notice
7. after acquired title (see above) shoots through- Taylor chain
has strong maintenance of the system of record argument
8. Del Tufo has bona fide purchaser advantage (if no actual
notice)
9. Custom in New Jersey is to search title only 60 years
back
10. remanded
I. Ball v. Vogtner1. Ball-judgment lien against Mary Morgan
2. Vogtner-bona fide purchaser without notice-chain of title
searched Mary Collins and missed judgment lien (wild deed)
3. court held that judgment lien did not constitute constructive
notice to Vogtners because it was not in the Vogtners chain of
title
4. majority of states hold that improperly indexed deed still
provides constructive notice
5. minority hold proper indexing to be proper recording
J. Hatcher v. Hall1. plaintiff sought a determination of rights
and status under a written agreement between lessors and lessee of
property to be used as a gas station
2. agreement was recorded but was not properly acknowledged
3. court held it did not record
4. lease stipulated that lease would run with the land if
property conveyed
5. Willard bought property from lessee without notice for
valuable consideration
6. Hatcher bought property from Willard
7. Hatcher knew about the lease, but is sheltered by Willards
good title-see Shelter Rule above
8. Inquiry notice-one is put on inquiry and charged with notice
only when the inquiry becomes a duty, and the failure to make it a
negligent omission
9. Halls lease goes bye-bye
K. Title Insurance
1. For a fee, title insurer agrees to defend title and to
compensate for the loss of the insured title to the claim of a
paramount owner. Its a bet that their title search is better than
you losing-not insured against claims or interests that are not
part of the record
2. title insurance covers the insured only against risks already
in existence at the time the policy is issued but for an unlimited
time after issuance
3. title insurance insures against risks that are generally
beyond the control of the insured, but often discoverable by, and
thus, to some extent, subject to the control of the insurer
4. title insurance only really covers defects in record
title-exceptions not covered:
a. claims by an adverse possessor
b. a prescriptive easement (any easement not of record)
c. an encroachment across property boundary (anything that might
be found upon inspection of the premises)
d. a sewer line running across the property
e. a mechanics lien for work done prior to closing but filed
after closing
f. a violation of a zoning ordinance
g. unrecorded mortgage of which the purchaser had heard
unconfirmed rumors
5. damages based on interpretation of the policy
a. difference between current market value with defect and
without
b. cost of removing defect
c. if complete failure of title, damages are fair market value
of the property
L. Moore v. Title Insurance Co. of Minnesota1. action against
defendant tile company for negligence in failing to discover
certain liens against property and for breach of contract-appealed
from judgment for defendant
2. Moore retained Title Co. to clear title to certain apartments
owned by Nieman, whose company Sierra Solar Systems, Inc. was in
bankruptcy
3. title report listed three liens for $30,000, $30,000-40,000
and $30,000
4. agreement stipulated-if property subject to any other liens,
buyer shall have the option to terminate agreement, all deposits
returned and buyer shall not be liable to seller for any amount nor
may seller enforce this agreement
5. when trying to sell the property, plaintiffs discovered more
liens
6. plaintiffs could not get financing because they had to pay
off all outstanding liens, which they did not have money to do
7. title company said they only had to defend against two of the
new liens, but that the other liens were filed after Sierra Solar
Systems, Inc., transferred property to Nieman
8. property was lost at trustees sale
9. plaintiffs contention was that defendant was negligent in
searching title and that that negligence kept them from exercising
their option to terminate the contract
10. plaintiffs also contend that title company should have same
liability as an abstractor of title
11. Title company contends that it is not an abstractor of title
and as an insurer it should only be liable for contract breach
12. title company argues that any duty on the part of an insurer
to search the record has to be expressed and/or implied from the
title policy and that the title company has no such duty under the
tile policy
13. Heyd v. Chicago Title Insurance Companya. title insurance
company has two duties if they render a title report and then issue
a policy on that report
b. when rendering a title report, the title insurance company
serves as an abstractor of title and must list all matters of
public record adversely affecting title
c. when title company fails to perform this duty, it may be held
liable in tort for all damages proximately caused by breach
14. the insurance company holds itself out as a searcher of
titles and provides the information for the applicants to act upon,
and the applicants expect and rely on this information in closing
their deals-tort liability exists
15. Case becomes an issue of whether or not plaintiff would not
have gone through with the contract if they had known of the other
liens
16. Trial court could have gone either way, appellate will not
disturb the trial courts findings of fact
M. Lender Liability
1. The further on down the line, a lender will care less and
less if title is good, while the owner will care more and more
because of his equity in the property
N. Page v. Frazier1. Page wanted to purchase a small abutting
unimproved parcel to their property
2. Applied for a mortgage-application had the following
language:
a. responsibility of the attorney for the mortgagee is to
protect the interest of the mortgagee notwithstanding
1. the mortgagor shall be obligated to pay the legal fees of the
attorney
2. the mortgagor is billed for such legal services by the
mortgagee
b. the mortgagor may, at his own expense, engage an attorney of
his own selection
3. Frazier (attorney, vice-president and trustee of bank)
examined title and certified that it was free and clear of defect
of record
4. When Page tried to enter an agreement of first refusal on the
parcel, the buyers could not find title to the property
5. trial court found that Frazier was negligent in the
performance of his title examination, but that he had no duty to
the Pages to guaranty title
6. trial court found that frazier was an independent contractor
to the bank and his negligence could not be imputed to the bank,
which did not expressly or impliedly warranty title to Page
7. On appeal, plaintiffs argue attorney-client privilege
existed
8. even if did not exist, negligent misrepresentation to Frazier
should not be barred
9. Fraziers negligence must be imputed to the bank
10. bank misrepresented to them sufficiency of title to the
parcel
11. no statutory claim because statute is for improved
property
12. no implied attorney client privilege
13. because of conflict of interest, there is no negligence on
the part of Frazier
14. mortgage agreement had strong exculpatory language that
should have kept Page from relying on title report
15. In the absence of some evidence of affirmative conduct on
the part of the bank, there could be no reasonable understanding or
reliance by the plaintiffs at the time the plaintiffs would have
had to rely on such conduct
16. no express or implied warranty on the part of the bank
17. no misrepresentation by the bank
18. judgment for defendant affirmed
IV. The Condition of the Premises
A. Skelly Oil Company v. Ashmore1. purchaser Skelly suing
Ashmore on two counts
2. specific performance of a contract to sell property
3. an abatement in the purchase price of $10,000 being the
proceeds received by the vendors under an insurance policy on a
building on the property
4. building was destroyed by fire between signing of the
contract and closing
5. vendors appeal from a judgment for Skelly
6. property was leased out at time of contract
7. when they couldnt get the guy with the lease out, Skelly
accepted contract to buy subject to lease
8. when building was destroyed, Ashmore goofed and told Skelly
he had insurance on the property
9. at closing, attorneys for Skelly requested the insurance be
applied to the price; ashmore refused
10. contract of sale contained no provision as to who assumed
the risk of loss occasioned by destruction of the building
11. five ways to look at situation
a. burden on purchaser even though vendor retains possession
b. burden on vendor until legal title is conveyed although
purchaser is in possession
c. burden on vendor until legal tile conveyed unless vendor
defaults on specific performance
d. the burden of loss is on the party in possession
e. burden on vendor unless there is something in the contract or
conduct from which the court can infer a different intention
12. court will not go with a. above because of equitable
conversion
13. based on the idea that signing the contract can be and ought
to be the time title passes (equitable title)-sellers interest in
property becomes a security interest
14. Massachusetts rule-when the conveyance is to be made of the
whole estate, including both land and buildings, for an entire
price, and the value of the buildings constitutes a large part of
the total value of the estate, and the terms of the agreement show
that they constituted an important part of the subject matter of
the contract the contract is to be construed as subject to the
implied condition that it no longer shall be binding if before the
time for the conveyance to be made, the buildings are destroyed by
fire
15. if buildings do not constitute so material a part of the
estate of the estate to be conveyed as to result in an annulling of
the contract, specific performance may be decreed.
16. Massachusetts rule and equitable conversion have the same
effect if the buildings on the property are not material to the
estate
17. Dissenting opinion notes that specific performance may not
be an equitable remedy and that the case should have been remanded
to lower court for a finding of actual damages suffered by Skelly
or the compensation to which it is entitled if it still wants
specific performance-that is more in keeping with the Massachusetts
rule
B. Equitable Conversiona. application to death of a party
1. if seller dies, leaves an estate that owns personal
property-a contract right-and not real property
2. if buyer dies, buyers estate includes the real property, as
long as estate performs
b. application to loss of property
1. buyer has risk of loss
2. insurance must be credited against purchase price
C. Risk of loss goes with party in possession
D. mutual concurrent constructive conditions precedent-roughly,
if I contracted to buy a cow and was tendered a dead cow, I could
walk away from the deal without breach because of MCCCP
E. Uniform Vendor and Purchaser Risk Act (UVPRA)
a. if contract does not otherwise expressly provides
otherwise
b. If when neither the legal title nor the possession of the
subject matter of the contract has been transferred, all or a
material part thereof is destroyed without fault of the purchaser
or is taken by eminent domain, the vendor cannot enforce the
contract, and the purchaser is entitled to recover any portion of
the price that he has paid
c. If, when either the legal title or the possession of the
subject matter of the contract has been transferred, all of any
part thereof is destroyed without fault of the vendor or is taken
by eminent domain, the purchaser is not thereby relieved from a
duty to pay the price, nor is he entitled to recover any portion
thereof that he has paid
F. Remedies for defects in property after transferred
1. Duties of disclosure
a. traditionally, intentional misrepresentation or active
concealment were only actionable under common law
b. buyer beware is slowly being abandoned
c. fiduciary relationships-fiduciary obligated to reveal all
defects known to him
d. disclosure of seller-created conditions
1. created by seller
2. materially impair the property
3. not likely to be discovered by a reasonably prudent buyer
using due care
e. disclosure of latent material defects1. materially affects
value or desirability
2. known to the seller
3. neither known to or within the reach of the diligent
attention and observations of the buyer-courts split on objective
or subjective buyer
f. statutory disclosure obligations
g. brokers disclosure obligations-reasonably diligent
investigation duty
2. Implied warranty of quality
a. traditionally, only an express warranty provided a duty for
builder
b. then implied warranty was built in between builder and first
buyer, but no further because of privity of contract
3. fitness of purpose-needs fit product-warranty thereof
(implied
a. Schipper v. Levitt-furnace attached to water heater, pipes
under foundation, kept house warm-kid tried to take a bath and was
badly burned by hot water-house was not fit for living in
b. Humber v. Morfort-plaintiff tried to use fire place and
burned house down-sued builder for breach of implied
warranty-fitness of purpose trumps caveat emptor
G. Tusch Enterprises v. Coffin1. Tusch sued Vander Bouegh
(owner) and Coffin (contractor) for negligence, misrepresentation,
express warranty and implied warranty of habitability
2. all four claims dismissed by summary judgment
3. alleges economic damages for negligent manufacture of the
apartments-economic losses are not recoverable in
negligence-summary judgment affirmed for negligence count
4. misrepresentation claim considered on basis of
nondisclosure
5. if a reasonable person would have been so apprised, and the
seller was under a duty to inform the buyer of the concealed facts,
then intent to deceive is not necessary to make a prima facie
showing
6. there are issues of material fact with misrepresentation
claim-summary judgment reversed
7. No express warranty on behalf of Coffin to Vander Bouegh or
Tusch-summary judgment affirmed
8. parol evidence rule precludes Tusch from making assertion
that Vander Bouegh warrantied expressly
9. earnest money agreement stated Tusch made inspection of the
premises and relies solely upon its inspection
10. written real estate contract has merger clause and states
that Tusch has inspected property and Vander Boueghs express
warranties are clearly laid out-no warranty that the apartments
were well constructed
11. express warranty properly dismissed by summary judgment
12. warranty of habitability not expressly stated or
disclaimed
13. implied warranty of habitability is a creature of public
policy and waived with difficulty
14. court decides there is no disclaimer of warranty of
habitability
15. does not matter that Tusch does not dwell in apartments, the
warranty covers the product, not its use
16. court notes that the ordinary home builder is not in a
position to discover defects in structure and by virtue of superior
knowledge, skill and experience in the construction of houses, a
builder vendor is generally better positioned than the purchaser to
know whether a house is suitable for habitation-also extends
warranty to builders and contractors
17. Vander Bouegh might be a builder developer-summary judgment
reversed
18. No privity of contract between Coffin and Tusch
19. There is enough to take whether Coffin was a builder to a
jury
20. the extension to buyers of an implied warranty of
habitability is limited to latent defects not discovery by a
subsequent purchasers reasonable inspection which manifest
themselves within a reasonable time
21. Burden is on the subsequent owner to show that the defect
had its origin and cause in the builder vendor
H. Thomson v. McGinnis1. Action for negligence and fraud-summary
judgment granted to defendants-plaintiff appeals
2. Defendants agreed to have the furnace inspected and to
certify the working condition of the heating system
3. McGinnis hired Stephens to certify the heater, which involved
listening to the heater while he was in the house-McGinnis provided
the certification form
4. Plaintiff later discovered that there was no safety shut off
switch
5. Stephens had no certification in heating or air
conditioning
6. he signed certification only at the direction of McGinnis
7. plaintiff later found pipes were covered in asbestos and
could not be removed
8. Teter v. Old Colony Co. vendors real estate broker may be
liable to purchaser if the broker makes material misrepresentations
with regard to fitness or habitability of residential property or
fails to disclose defects or conditions in the property that
substantially affect its value or habitability, of which the broker
is aware or reasonably should be aware, but the purchaser is
unaware and would not discover by a reasonably diligent
inspection
9. plaintiff in Teter wished to hold engineering firm as agent
for real estate company for negligently inspecting a cracked
wall-no liability because of absence of any evidence demonstrating
that the broker retained any control over the manner in which the
engineering firm performed its inspection of the premises
10. Court finds that McGinnis did exercise some control over
actions of Stephens-agency issue needs to go to court
11. Also a negligent hiring count-court holds that while a real
estate broker bears no responsibility to conduct an independent
investigation of a latent defect, when such broker volunteers to
secure an inspection of the premises by retaining on behalf of the
buyer a third party to conduct the inspection, then that broker may
be held liable to the buyer for civil damages if the broker in
retaining said third party and if such negligence proximately
causes harm to the buyer
12. where the exercise of reasonable diligence would disclose
facts demonstrating that the contractor was clearly incompetent for
the particular task contemplated, a reasonably prudent broker
should not retain the contractor
13. appellant presented sufficient evidence to preclude summary
judgment
I. Parker v. Columbia Bank1. Action for fraud, fraudulent
concealment, negligent misrepresentation, negligence, breach of
fiduciary duty, and breach of contract-appeal from Columbias motion
to dismiss
2. Parkers entered a contract with Evangelos for construction of
a 5,000 square foot house at a cost of $385,000
3. Parkers entered a contract with the Brookeville Development
Partnership for $160,000-land contract, not the construction
contract included a provision that its execution would be
contingnet on the Parkers obtaining a loan to finance the
purchase
4. Parkers allege that Galeone, senior vice president of bank
cultivated a relationship of trust and confidence with them and
they came to regard him and Columbia as an advisor and consultant
on the project
5. Galeone allegedly represented
a. he was experienced in the placement and administration of
loans similar to the construction loan needed for the house while
in fact he had never administered a laon involving draw payments to
a builder
b. Columbia had thoroughly investigated Paleologos and
determined he was qualified to undertake the project, while in fact
the investigation was perfunctory and overlooked information which
would show hes not qualified
c. Galeone and Columbia would protect the Parkers interests
while in fact he would only protect it as far as it coincided with
Columbias
d. construction draws would only be issued after Columbia had
obtained inspections to insure the work had been done in accordance
with the draw schedule, while in fact Columbia intended to advance
funds, if requested by Paleologos, ahead of the draw schedule and
regardless of inspections
e. in response to the Parkers specific inquiries, Galeone told
them that in the event of a default by the builder, Columbia would
find or recommend another builder and would see the house was
completed within budget while in fact Columbia did not offer such
protection
6. Columbia issued a commitment letter providing $529,000 for
the Parkers
7. Columbia disbursed $234,290 of the loan proceeds to the
Parkers, $85,000 of which was paid by the Parkers to Evangelos and
the remainder to pay for the land
8. construction loan provides that disbursements will be made by
two party checks payable to both borrowers and the general
contractor, unless Lender exercises its rights hereunder to make
disbursements directly to any party
9. alleged that Columbia was making a relationship with
Paleologos
10. although 80% of loan was disbused, only 40% of house was
complete
11. Parkers received notice of mechanics lien
12. turns out that to complete house, Paleologos would need
another $350,000
13. Property was foreclosed by bank
14. Fraud
a. defendant made a false representation
b. falsity was known to defendant or was made with reckless
indifference
c. made for the purpose of defrauding the person claiming
injury
d. person not only relied upon the misrepresentation, but had a
right to rely upon it in the full belief of its truth and would not
have done so if misrepresentation had not been made
e. damages
15. Judgment reversed on count of fraud
16. breach of contract-Columbia was not contractually obligated
to make sure that the Parkers loan remained in balance; rather it
was the Parkers who were obligated to maintain the loan in
balance
17. no breach of implied duty of good faith-the duty of good
faith merely obligates a lender to exercise good faith in
performing its contractual obligations; it does not obligate a
lender to take affirmative actions that the lender is clearly not
required to take under its loan documents
18. In order to state a cause of action regarding the remaining
claims, the Parkers must demonstrate a duty owed to them by
Columbia
19. there is no duty because there is no contractual basis to
provide a predicate for a duty of reasonable care
20. Tokarz test for fiduciary duty
a. taking any extra services on behalf of the borrowers other
than furnishing the money for construction
b. received any greater economic benefit from the transaction
other than the mortgage received
c. exercised extensive control over the construction
d. were asked by the borrowers if there were any lien actions
pending
21. court held Columbia did not do any of these extraordinary
things to constitute a duty of care to the Parkers
22. every claim affirmed as to dismissal except
fraud-reversed
V. Financing the Acquisition and Development of Land
A. lenders want recovery of principal and realization of a
profit on the loan (interest)
B. U.S. has preempted state usury statutes-rates based on
combination of limits established by the marketplace as well as