Property I – Hirokawa 2018 I. Property a. Two types of property: i. Real Property – land and anything that’s erected on it, growing on it, or affixed to it, such as buildings and crops. ii. Personal property – movable property – anything other than land that can be subjected to ownership 1. Tangible – “stuff” that physically exists – animals, jewelry, merchandise 2. Intangible – rights as to stocks, bonds, patents, copyrights b. Hirokawa’s framework of property – allows people to exclude others from their own property i. Property is the foundation of capitalism ii. Use the land as you desire – turns property into economics iii. Use the thing as you desire (whale, fox, mining, found property) iv. Gives us an incentive to pursue economic activity v. Property ownership gives structure 1. Rules of excludability 2. Rules of use vi. Provides social dimensions – you can’t go on other people’s property or take other people’s things II. Quasi Property – separate category of relatively weak rights. They are not really property rights cases a. May be related to material from which a party tries to make a profit – although not necessarily. i. In this mindset, think of the International News case – interrupting the generation of news was interference with something that could lead to property. But they didn’t actually consider it property. b. Basketball home-run ownership case (who owns the hit home run) c. Body parts d. Dead bodies e. The Vanna White v. Samsung case also sort of fits in with this category, in that there is no “property” at stake, because it’s a person’s image i. BUT – the court in White determined that she had a property interest in her appearance, so this case is kind of an outlier. III. Capture a. Pierson v. Post – The fox case – but not really about a fox. It’s about stuff, and when it becomes ours. Whoever first “captures” the thing (deprives it of its liberty) has the legal rights to it regardless of someone else in pursuit (pursuit is not sufficient for possession). b. Post provides the basis for the “rule of capture” i. Elements of capture 1. Intent to capture that particular thing or object 2. Acting on that intent – taking some action to demonstrate that intent (pursuit is insufficient for possession, but satisfies acting on intent) 3. Domination of the thing – deprived the liberty of what you have captured. c. Ghen v. Rich – the whale case – determines who has a better claim to something. The intent to make that thing yours (the whale), acting on that intent (striking it with an explosive harpoon), and domination of the thing (killing and retrieving it) give you a superior claim of ownership over it than to other people. i. Possession goes to the person who took all possible actions to actually take possession. IV. Exclusion – property, as a relationship among people that entitles owners to include (permit) and exclude (deny) a. The right to exclude is as important as the right to sell i. Trespass – protects the right to exclude ii. Jacque v. Steenberg Homes – Mobile home delivery across plaintiff’s property which he did not authorize. The right to exclude others from your land is “one of the most essential sticks in the bundle of rights that are commonly characterized as property.” 1. Exclusion from your property can be for any reason and the right to exclude is very strong. a. Considered one of the most important property rights. iii. State v. Shack – differentiates and balances the right of exclusion with the right to exercise dominion over people. 1. State actors entered private property to provide health services to migrant workers. Owner attempted to prevent access to workers by excluding state aid workers. 2. A man’s right to his real property is not absolute – you cannot use your property to injure the rights of others. 3. The right to exclude is the essence of private property – but it should not be regarded as inviolable. V. Acquisition – by virtue of first possession, one can make an unowned thing one’s own. a. Acquisition by find – determination of who should be holding on to what. i. First step is often to figure out, or guess, how the thing originally got there. ii. Armory v. Delamirie – chimney sweep found a jewel in a chimney. The finder never owned it – he just found it. While an owner may have a superior claim if he can be found, the finder has a right of ownership to it. 1. Fashions a system where we can adjudicate the claim of two people making a claim to possess the same thing that was found. b. Lost, mislaid, and abandoned property i. How do we distinguish between what was mislaid, lost, or abandoned? 1. Mislaid property – Property intentionally placed, but forgotten, with no intent by the owner to relinquish their property. a. Intended to be placed there, but with no intent to relinquish rights If it seems the owner intentionally laid the property down somewhere it was mislaid b. Mislaid property stays where it is found, subject to the claim of the true owner 2. Abandoned property – property that was intentionally placed in the location where it was found, and the rights of it were intentionally relinquished. a. Intent – an intention to place the object in that location and an intention to relinquish the right of ownership over it. b. Abandoned property belongs to the finder. 3. Lost property – property that was unintentionally placed where the item was found, and the owner did not intend to relinquish an ownership interest. a. Stuff falls out of someone’s pocket – dropped by mistake b. No intent to place or relinquish the property c. It is found in a place where property of the type is not commonly found d. Lost property belongs to the finder, but it still subject to a claim of the true owner. i. BUT – If a man finds a thing as a servant or agent of another, he finds it for that agent, and not himself. South Staffordshire Water Co. v. Sharman – employee who found two rings in a drained pool was not the owner of the rings, they were the property of the employer. 4. Stuff that is attached or buried on property – the owner of the property has a superior claim to it. If something is “attached” to the land or underneath it, it is not lost property. Elwes v. Brigg Gas Co. – land leased to a gas company with rights to all mines and minerals. They found a prehistoric boat. The boat belonged to the lessor – it does not matter that he did not know it was there, it was effectively attached to his land. ii. If you are the finder of property, you don’t have “full” ownership of it – if the original owner claims, and can prove the claim, they may have claim to it. iii. Finders law analysis. 1. Determine if it is attached to the land. 2. If not, look to the intent of the owner who put it there. a. Do the circumstances suggest the owner was trying to relinquish their claim? b. Or is it stuff that was intentionally placed and forgotten about? c. Or are there circumstances that the owner was separated from the stuff and had no idea how it got there. VI. Adverse Possession – Adverse possession is the expiration of a statue of limitations on the owner’s right to eject a trespasser when the trespass is done in a manner where (1) entry is actual exclusive (2) open and notorious (3) adverse (hostile) (4) exclusive (5) continuous for the statutory period. a. Each element of adverse possession must be fully discussed – each generally requires its own IRAC i. Entry – entry (without permission) onto the property of another creates the cause of action (for trespass) and triggers the start of the statute of limitations. 1. Entry must be exclusive – if the actual property owner or members of the public are using the lands along with the adverse possessor the possession is not adverse because the adverse possessor is not excluding others. 2. You must be subjecting the land to your control through domination – something short of domination, like regularly walking across the lawn on the way to school – is not enough. 3. Think about permanent structures or considerable improvements to the land ii. Open and Notorious – entry must be by acts that are sufficiently open and notorious to put a reasonably attentive owner of the property on notice that someone else is using their property. 1. If the adverse possessor’s entry was not reasonably observable, there is insufficient blame on the owner for being “dormant.” a. The notoriety requirement is aimed at constructive, not actual, notice and is an objective test. 2. Constructive use of the property in a way that is reasonably obvious – you are trying to show domination of the land that is open and visible so that others may see that you are making a claim. a. Secret possession is never open and notorious. iii. Adverse (hostile) – adverse and under a claim of right – possession that is contrary to the owner’s interests as an owner 1. Hostility does not imply that you fought over it – means nonpermissive possession contrary to owner’s interests. 2. Permission granted to be on the property defeats “hostility” every time iv. Exclusive – having sole control over the ownership choices and exercising those rights of control 1. Acting like the owner of the property v. Continuous – must be continuous for the statutory period 1. Not to be construed literally – the adverse possessor can come and go, depending on the kind of that property a. Being on a farm most of the time. b. Using a summer fishing camp regularly in summer i. Important to remember though, that if the owner returns and uses the property as an owner would, the adverse possession claim is broken b. Disabilities – tolls the statute of limitations and delays the clock running. i. In order to get the protection of a disability, the owner of the property must have a disability at the time of the first entry by the trespasser. 1. If trespasser enters into the land, and the next day the property owner enters a coma, the disability relief does not apply. 2. The owner must be disabled at point of entry, otherwise no protection ii. Mental illness can be a disability iii. Age (in appropriate circumstances) c. Breaking continuity – the true owner can grant permissive entry into the property, breaking the possession of the adverse possessor. If this occurs, continuity is not met. i. Permission granted can be any period of time – an hour, a day, a weekend – each would break continuity and reset the statute of limitations. ii. The true owner can also allow others to use the property which would defeat the exclusivity of the trespasser because the owner is acting as the true owner of the property. iii. Any action taken by the true owner, which is an action that an owner would undertake (like making improvements) likely breaks continuity d. Minor encroachments don’t meet the elements necessary for adverse possession – in cases of minor encroachment, owner of the land must have “actual knowledge thereof” of the encroachment in order to satisfy the notoriety requirement element of adverse possession. i. The majority rule is that intent doesn’t matter – hostile actions that are contrary to the true owner’s interest as the owner is seen as making a hostile claim to the property interest itself. VII. ii. Innocent improver – a person who builds on land or improves it by mistake – the original owner gets to keep whatever was improved, but in modern courts, the original owner must pay through a conveyance (at fair market value) of land from the owner to the improver. e. Color of title – refers to a claim founded on a written instrument (deed, will) that is for some reason is defective or invalid. i. Ex. You have a deed, but there is something wrong with it (describes wrong property, wasn’t recorded, wasn’t stamped, etc. so the deed isn’t effective. ii. Looks like it conveys title – but it doesn’t iii. One use specific to adverse possessor, which can satisfy the requirement of hostility or claim of right on the part of an adverse possessor. If trespasser enters an area smaller than the area described in a deed, if he doesn’t enter with color of title, he only would get the part of the land that he possesses through adverse possession – not all of the land that might be on a deed. If he entered with color of title, he gets all of what is described in the deed. f. Claim of title – one way of expressing the requirement of hostility or claim of right on the part of an adverse possessor g. Privity – a relation between two parties that is recognized by law. i. The passing of good title or a transfer of possession of reasonable connection to the property h. Tacking – “tacks” the time of adverse possession by one person to the time completed by the person they bought it from. Allows a possessor, who has something less than the full statutory period fulfilled, to “tack” ownership of a successive adverse possession and meet the statute of limitations requirement. i. Adverse possession against the government – general rule is that adverse possession against the government can’t be claimed. i. How can you adversely claim land that is effectively owned by everyone Adverse Possession of Chattels – if property is stolen, the thief acquires no title to the stolen objects and could not transfer good title to others regardless of their good faith or ignorance of the theft. a. Chattel – moveable items of property which are neither land nor permanently attached to land (building, crops). Personal property. b. Discovery – statute of limitations begins to run from the moment a reasonable person would have discovered that their property was taken. i. By diligently pursuing their goods, owners may prevent the statute of limitations from running. 1. Definition of due diligence is flue and varies – jewelry of moderate value may require an owner to report the theft to the police 2. Artwork of very high value, the diligence required might be more than notifying the police, and the owner might have to do more than just report it and more actively try to give notice that it was stolen. c. To establish title by adverse possession to chattels, the rule has been that the possession must be hostile, actual, visible, exclusive, and continuous d. Trespass to chattel – cause of action is essentially just conversion. Tort where the infringing party has intentionally interfered with another person’s lawful possession of a chattel i. Elements of trespass to chattel 1. Plaintiff owns or has right to possess the personal property 2. The defendant intentionally interfered with the plaintiff’s property without any consent 3. The defendant deprived plaintiff of possession or use of the property 4. The interference caused damages to plaintiff e. Trover – trover is a common law action for money damages resulting from the def’s conversion to his own use of a chattel owned or possessed by the plaintiff i. Unlike replevin, trover seeks financial restitution for the chattel, instead of a return of that chattel. VIII. Ideas – Personhood – a. International News Service v. Associated Press – sets forth that, while “news” is public property, the labor and work it takes to “create” news goes to capture and domination, making it the property of whomever “creates” the news. When you use someone else’s news story, you are wrongfully using their property. b. White v. Samsung Electronics – Vanna White robot. The right of publicity had developed to protect the commercial interest of a celebrity whose “product” is their appearance. i. If their appearance is commercially exploited, there has been an invasion of their right, regardless of whether their actual likeness was used. ii. Sort of goes to capture – domination and monetization of a public persona, and when a persona becomes property. c. Moore v. Regents of the University of CA – doctor removed blood and tissue samples, and altered them to make a cell line. They patented the cell line and received significant income from it. i. The cause of action in Moore was conversion 1. Conversion – wrongful possession or claim of property right over the property of someone else. a. Recall that this is what failed in Pierson v. Post – the court said the foxhunters never had possession, you didn’t complete the capture, so you don’t have rights. 2. In order to establish conversion, plaintiff must show an actual interference with his ownership right. If the plaintiff cannot show title to property allegedly converted, nor possession of it, he cannot maintain an action for conversion ii. The court concluded that once cells leave a patient’s body, they are no longer that patient’s property. iii. It also goes to creation – the doctor took that biological tissue and changed it, and added value to it. This was domination. The spleen was the fox, and Moore never actually possessed or dominated it. The scientists took it, made it something, and exerted dominance over it. That made it theirs. iv. Removal of the cells and income therefrom was not adequate to maintain a case for conversion. IX. Transfers – Voluntary transfers – acquisition by gift a. Elements of a voluntary transfer i. Intent to make a transfer ii. Delivery 1. Constructive, or 2. Symbolic iii. Acceptance b. Intent is not just the intent that someone else has it. The intent is more related to immediacy – You have some right, right now to something. i. A gift that is given “one day” in the future is not a gift, because there’s no immediate intention to actually transfer ownership of the item. ii. Intent must be “you get the right to ownership right now.” c. Delivery – generally there are three kinds of delivery i. Actual – physical delivery – you had over the actual property or thing. 1. General rule is that if it can be physically delivered, it must be to be considered a gift. ii. Constructive – delivery of things not capable of being physically provided, but something that facilitates access. 1. Handing over a key or some other object that will provide access to the subject matter of the gift 2. Ex. – giving a key to a house iii. Symbolic delivery – giving something that’s symbolic of the property that is given; an instrument to symbolize transfer of ownership 1. Ex. – a deed to a house d. Gruen v. Gruen – Case between wife and son involving ownership of a painting given by decedent father, who wrote in a letter he wished to give it to him, but sought to retain possession for his lifetime. Plaintiff never sought to obtain it. i. The litigated issue involved whether there was delivery. There was no manual or actual physical delivery of the painting – it remained in the possession of the father the entire time. ii. This argument failed though – the intent element was fulfilled. It was a present transfer of ownership for a future time. The letter implied the son acquired ownership from the letters. iii. It was symbolic delivery from the letters, which were effectively delivered. X. Deeds – deed is a symbolic object which transfers the deed of ownership from one person to another. a. Required to contain a description of the property b. Often has an acknowledgement, signed in front of a notary, which substantiates the people signing the document. i. BUT, an unsigned deed can be valid in almost all states c. Equitable conversion – doctrine of equitable conversion applies when there is a contract for the sale of property i. The doctrine converts the contract interest of the buyer from a contract interest to a title interest ii. Converts the title interest of the owner into a personal property interest and an interest to be paid 1. Particularly applicable to installment contracts (seller financed mortgage) iii. If there’s a default and the seller wants to act on that equity, they have to foreclose on the equity and extinguish the title interest of the purchaser. They have to do a foreclosure to extinguish the buyer’s interest in the property. 1. Recall the case where the person as in an installment contract mortgage and had made many payments on the contract. That equity goes to his interest in the property, and the title holder to the property cannot just extinguish their rights to that equity. They must foreclose, not just cancel the contract and keep all money paid. d. Estoppel by deed – is an equitable doctrine which holds that title to property acquired by someone after that person has purportedly transferred the property so someone else. i. As soon as the seller actually acquires title, it passes to the person to whom it was sold. ii. Estoppel by deed says if you transfer an interest of property before you get it, but later acquire the interest, you are estopped from challenging that transfer (not allowed to challenge the transfer) iii. The property is merely treated as transferred, even if it was only transferred later XI. Transfers of Real Property – a real estate transfer is not the transfer of ownership’s interest of title. It is an agreement that the seller will sell, and the buyer will buy. a. Three kinds of brokers agreements i. Open listing 1. Seller contracts with the broker to list the property, advertise it, in an open listing. They are only able to get a commission if they are the one who finds a buyer and contracts that buyer to actually buy. ii. Exclusive agency listing – there is only one broker for the sale, and whenever a sale is facilitated, they receive a broker fee even if they were not the one who facilitated the sale. 1. They are entitled to commission when they have found a ready, willing, and able buyer. iii. Exclusive right to sell – broker earns a commission no matter who secures the buyer. b. A real estate broker is a fiduciary, and owes his principal fidelity and good faith, and cannot create a situation where his own interests conflict with those of his clients. i. Broker must act in good faith and fair dealing 1. A person who contracts with a broker relies on them because they act in your behalf and the person who engages with them generally don’t have the knowledge to engage in the sale of property. XII. Statute of Frauds – applies to any transfer of an interest in real property. Requires, among other things, that there be a writing for the sale of real property. a. The question in a statute of frauds issue is whether the memorandum or document is enforceable – not whether it’s a valid contract. b. Requires a written memorandum, signed by the party to be charged, with a sufficiently detailed description of the property with names of parties and all essential elements agreed on. i. Memorandum does not have to be formal – it can be anything in writing that contains 1. The names of the parties 2. A sufficiently detailed description of the property 3. A time for compliance 4. The price which has been agreed upon. ii. If the memorandum fulfills these requirements, it is not subject to the SoF. If it fails the statute of frauds, it is likely unenforceable unless it fits within two exceptions. c. Exceptions to the statute of frauds i. Doctrine of Part Performance – To get an agreement out of the statute of fraud under part performance, the partying trying to 1. Allows for specific performance of an oral agreement when particular acts have been performed by one of the parties, and those acts are of the type that could only be explained by the existence of a contract between the parties. 2. If the party can show either payment, possession, or improvement, then the contract can be enforceable. a. Generally requires a showing that two of those categories are met. 3. Payment – can’t be a miniscule amount, and must be somewhat significant in relation to total amount. If there’s a check that says for sale of x property, it can probably be explained as something that exists only because of a contract 4. Improvement – if improvements are made to a property, it looks like you are supposed to be there and are authorized to do so. This can occasionally be the only basis for part performance. 5. Doctrine of part performance is not about showing injury – it is above proving an agreement existed. ii. Promissory Estoppel – This doctrine is concerned with avoiding or remedying injustice, and focuses on the injury if the contract is not enforced. 1. Elements of Promissory Estoppel a. A promise of the type that is typically relied upon b. Detrimental reliance on that promise c. Under circumstances where equity must intervene in order to prevent injustice. XIII. Marketable Title – Title that is reasonably free from doubts as to its quality and does not subject the buyer to litigation as to the validity of the title. a. Seller produces marketable title – that is their duty to get to closing i. The only way to clear a marketable title defect is to remove the encumbrance b. If the buyer does not object to the state of title seller is producing, then they waive their right to object i. If the deal has closed, it’s not a marketable title question. Marketable title problems disappear once closing has happened because those issues are assumed to have been met when closing occurs. If there are still problems, warranties of title step in c. Lohmeyer v. Bower – the purchaser of real property may choose to cancel sale if the title to land is found to be unmarketable. i. Plaintiff entered into contract to buy lot, but later learned that there was a zoning ordinance providing that no building could be built within 3 feet of a side or rear setback. The house on the property was violating this ordinance. The lot was also in violation, as there was a restriction in the deed requiring only two story houses be placed on the lot. 1. (as a general rule, laws aren’t marketable title problems) ii. The seller’s solution was to purchase additional land to correct the setback violation issue, but Lohmeyer refused. iii. Court held that the violation of the ordinance and an additional violation of the restrictions imposed by the deed encumbered the title and exposed the party holding it to the hazard of litigation. This made the title doubtful and unmarketable. XIV. Duty to disclose defects – historically, the doctrine of caveat emptor applies – buyer beware. Do a thorough investigation and inquiry and ensure what you are purchasing is what you want. a. Duty to disclose is a step away from strict caveat emptor b. Seller still does not have a duty to disclose obviously discoverable things (the house is painted green). c. If the buyer can’t find out about a defect with due diligence, there may be a duty by the seller to disclose. d. Stambovsky v. Ackley – nondisclosure of a condition that materially impairs the value of a contract and that is within the knowledge of the seller or unlikely to be discovered by a prudent purchaser constitutes a basis for rescission of the contract. i. House was haunted as a matter of law. ii. It was haunted because the seller created the haunting by telling the world it was haunted. Published stories, gave tours, etc. 1. When there is a condition, created by the seller, that materially impairs the value of a contract and is within the knowledge of the seller, or it is unlikely to be discovered by a reasonably prudent buyer, nondisclosure of that condition constitutes a basis for rescission. e. Material defects are judged by applying one of two tests i. Whether a reasonable person would attach importance to it in deciding to buy ii. Whether the defect affects the value of desirability of the property to the buyer. XV. Deeds - Deeds are not contracts – they are evidence of a transfer of title. Three types a. General warranty deeds – warrants title against all defects in title, whether they arose before or after the grantor took title i. Strongest type of deed ii. At the time the deed becomes effective, seller warrants he has power to sell iii. Comes with all PRESENT covenants and FUTURE covenants of title b. Special warranty deed – contains warranties only against the grantor’s own acts but not the acts of others i. Contains warranties only against the grantor’s own acts, but not against the acts of others ii. Comes with all PRESENT covenants of title, but contains no future covenants iii. If the defect is a mortgage on the land executed by the grantor’s predecessor in ownership, the grantor is not liable. c. Quitclaim deed – contains no warranties of any kind – merely conveys whatever title the grantor has, if any. i. Weakest type of deed. ii. Seller transfers title by quitting their claim 1. “Whatever I have, I am giving it to you.” iii. Comes with no present or future covenants of title d. Customary for a deed to show that some consideration was paid by the grantee to the grantor, in order to indicate that the grantee is a bona fide purchaser entitled to the protection of the recording acts against prior unrecorded instruments. e. Must contain a description of the tract i. Done by referencing natural or artificial monuments XVI. Types of Covenants a. Present Covenants i. Breached at the time the deed is delivered ii. Either there are existing encumbrances at that time, or there are none 1. Encumbrances is a claim or other issue by a third party that literally burdens or restrains your full ownership rights and lessens the value of that property iii. Covered by general warranty and special warranty deeds iv. “Present Covenants” 1. A covenant of seisin – grantor warrants that he owns the estate that he is trying to convey a. This is a thing of mine that I’m selling to you 2. A covenant of right to convey – grantor warrants that he has the right to convey the property a. Serves the same purpose as the covenant of seisin, but a person who has seisn might not have the right to convey. i. Ex – a trustee may have legal title but be forbidden by the trust to convey it. 3. A covenant against encumbrances – grantor warrants that there are no encumbrances on the property a. E.g., existing mortgages, liens, easements, or covenants v. “Future Covenants” – specific about interference of the title in the future, that is related to the seller, which interrupts the new owners ownership claim 1. Covenant of general warranty – grantor warrants that he will defend against lawful claims and compensate grantee for any loss that the grantee may sustain by assertion of superior title 2. Covenant of quiet enjoyment – Grantor warrants that the grantee will not be disturbed in possession and enjoyment of property by assertion of superior title a. Basically identical with the covenant of general warranty and is often omitted from general warranty deeds 3. Covenant of further assurances – grantor promises that he will execute any other documents required to perfect the title conveyed vi. Frimberger v. Anzellotti – latent violations of state or municipal land use regulations is not considered an encumbrance which makes the title to the land unmarketable. 1. Innocent misrepresentations: a. Representation of material fact b. Made for the purpose of inducing the purchase c. The representation is untrue d. There is justifiable reliance by plaintiff on the def representation, and e. Damages b. Estoppel by Deed i. Legal principle that prevents a person from asserting or denying the truth of anything that he or she stated in a deed, especially regarding who has valid ownership of property. ii. Doctrine of after acquired title – title to property acquired by someone else after that person has purportedly transferred the property to someone else. iii. If you transfer an interest of property before you get it but later acquire the interest, you are estopped (not allowed) to challenge that transfer. iv. Ex – seller (a) sells to B, and is estopped from denying that the transaction occurred for the sake of reselling to C. c. Delivery – transfer of land by deed is only effective upon legal delivery of the deed with the intent to pass title. i. Execution of the attestation clause is prima facie proof that a deed was delivered ii. Recording a deed puts OTHER people on notice that there is ownership. iii. Similar to gifts, delivery of deed must be made with the intent to pass title immediately iv. Conditional delivery is possible, but only by placing the deed in the hands of a third person to be kept by him until whatever event upon the happening of which the deed is to be delivered happens. v. Legal delivery is not just a symbolic gesture – it necessarily carries all the force and consequence of absolute, outright ownership at the time of delivery or it is no delivery at all. 1. Delivery can be overt – physically handing it over 2. But it can also be less obvious – a deed may be delivered to the party when the grantor executes a deed and places it in a safe deposit box that the grantee will “take” the land at the grantors death. a. Provided that the grantor intends to pass title or a future interest to the grantee at the time he puts it in the safety deposit box, there has been delivery (even though actual delivery won’t take place until he dies b. BUT – if grantor delivers a deed to which he reserves a right of retrieval that is attached to it (such as in an envelope that can be retrieved by the grantor) then there is no delivery XVII. Mortgages a. Borrower is mortgagor – lender is mortgagee i. To borrow money, the mortgagor typically executes a promissory note which makes a personal obligation to pay the debt. ii. Purchaser of real property with a mortgage has some right, but not all rights because they haven’t actually purchased it yet. iii. Strict foreclosure – extinguishes the mortgagor’s equity of redemption, and is a foreclosure of a mortgage without a sale of the mortgaged property. iv. Foreclosure by sale – give title to court, it’s put up for auction, and any remainder goes back to the original owner. v. At a foreclosure sale, if the property is sold for more than the amount that is owed on the property, the remainder is returned to the mortgagor. 1. During a foreclosure sale, the mortgagee must exert every reasonable effort to obtain a fair and reasonable price under the circumstances. a. BUT, inadequacy of price alone is insufficient to demonstrate bad faith unless the price is so low as to shock the judicial conscience. vi. Bank must exercise due diligence in obtaining a fair price 1. Due diligence test – whether a reasonable man in the lenders’ place would have adjourned the sale or taken other measures to receive a fair price b. Mortgage alternatives – installment land contract i. Vendor/vendee relationship from Bean v. Walker – a seller/mortgagee conveys equitable title to property to his buyer/mortgagor at the time of the loan, such that when the mortgagor defaults on his payment obligations, the mortgagee must take legal action to reclaim the title 1. Seller financed mortgage – they hold on to title and accept installment payments over time. ii. Mortgagor must consider the money paid towards the agreement, and can’t just revoke title. XVIII. Recording Acts – establishes a system of public record of land titles allowing anyone to ascertain who owns what land by searching the public records a. Seeks to protect the innocent purchaser (bona fide) i. Bona fide purchaser 1. A purchaser (no gifts) for value (more than a peppercorn) without notice of prior unrecorded instruments a. Actual notice – purchaser has actual knowledge of prior instrument that can convey interest (not notice of someone saying it, actual interest of the recording instrument – actual knowledge that an instrument that passes title exists b. Record notice – is it recorded in the land record office (constructive notice) c. Inquiry notice – where the circumstances suggest that inquiry should be made as to the state of title. i. Inquiry only requires reasonable inquiries ii. Ex. – if it was previously sold, or someone was living there, or it was transferred by quitclaim deed. 2. In order to be a bona fide purchaser, you need ALL THREE of these. b. Also serves to securely record the records of ownership c. In most states, recording the deed doesn’t make it effective – it puts the rest of the world on notice that the person filing it has the claim to the property d. Three kinds of recording acts i. Race recording – first to record deed in land record office has superior title 1. You could buy the property second from someone selling to two people, but if you are first to record, you would get it. ii. Notice recording – the bone fide purchaser is protected against all prior unrecorded instruments. 1. Bona fide purchaser – requires a showing of the tree kinds of notice a. Actual notice – purchaser has actual knowledge of prior instrument that can convey interest (not notice of someone saying it, actual interest of the recording instrument – actual knowledge that an instrument that passes title exists b. Record notice – is it recorded in the land record office (constructive notice) c. Inquiry notice – where the circumstances suggest that inquiry should be made as tot the state of title. i. Inquiry only requires reasonable inquiries iii. Race-Notice recording – protects the bona fide purchaser who records first. 1. Recording first is not enough – you have to be a bona fide purchaser is not enough, you have to also first record. e. Determining whether a statute is race-notice, race, or notice. i. Things to look for 1. Race and race notice there will be some mention of getting there first or recording first. a. Only a claim if it is first duly recorded before the other. 2. Race will have no mention of bona fide purchaser 3. Notice will have no mention of recording first 4. Race notice will have mention of both XIX. Recording acts cases – a. Luthi v. Evans – A recorded instrument of conveyance, in order to give constructive notice to a subsequent purchaser or mortgagee, should describe the land conveyed with sufficient specificity i. The issue is whether if a deed is recorded whether the world at large is informed of the recording and ownership and puts people on notice as to ownership. ii. The deed exists, but is hard to find. iii. Mother Hubbard Clause – a deed or other instrument in writing which is intended to convey an interest in real estate which describes the property to be conveyed as “all of the grantor’s property in certain county.” 1. Remember that a Mother Hubbard clause might not give notice to subsequent purchasers a. Must ask whether it gives notice of the actual property to be sold to subsequent purchasers. iv. In situations where an instrument of conveyance containing a sufficient description of the property conveyed is duly recorded but not properly indexed, the fact that it was not properly indexed by the register of deeds will not prevent constructive notice. b. Orr v. Beyers – When recording instruments, proper identification of the parties is critical to future efforts to enforce judgments. c. Board of Education of Minneapolis v. Hughes – A deed which is a nullity when delivered because the name of the grantee is omitted may become operative without a new execution or acknowledgment if the grantee, with either express or implied authority from the grantor, inserts his name in the blank space left for grantee. i. There grantor implied authority to insert grantee’s name by providing the deed with a blank space for the grantee and intimating that it could be filled in. d. Guillette v. Daly Dry Wall – Recorded deed refers to a recorded plan with restrictions to all lots in the development. A later deed referenced the plan but not the restriction. Court ruled that the later grantee is bound by the restriction in previous deeds. Any subsequent grantee, if within the scope of the common scheme, is an intended beneficiary of the restrictions and may enforce them. e. Harper v. Paradise – related to constructive notice. Lost deed which conveyed property to surviving heirs. A new deed was issued, which referenced the lost deed. In such an instance, because the new deed referenced an existing lost deed, they had a duty to determine whether the lost deed had ever been filed. There was constructive notice that they were on inquiry notice (circumstances suggest that you need to make an inquiry as to the validity of title). This puts them on notice they have a responsibility to undertake a reasonable inquiry or provide notice that they actually did this (by an affidavit). Where a person acquires land rights without knowledge of existing prior conveyances, his rights receive priority over previous conveyances from the same owner which were not recorded.
