PROPERTY LAW Prof. Errol Meidinger Spring 2018 Conceptualizing Property I. Most Basic Types of Arguments a. Rights Arguments -- most basic of the most basic i. Is something fair? ii. Looks at relationships b. Utility Arguments i. Idea is to maximize the “good” 1. Can sometimes lead to policies that may seem unfair to an individual but is maybe better for society as a whole. 2. Looks at what policies will promote that maximization. c. Administrability Arguments i. Judicial Role -- is this something that should be decided by law? Is this something that this court should decide? If yes, how should they be involved? ii. Rules versus Standards 1. If the judge is going to announce a "rule" should it be more like a rule or a standard? a. Rule is clear bright line (18 to vote) that's the plus, the minus is sometimes it can be too rigid. Who is to say that driving 62mph is too dangerous but 59mph is safe? Can be over-inclusive or under-inclusive. b. Standard is very broad (reasonable person standard). Requires a strong judicial role and judge has much more discretion. Bad thing is that it is vague and can be unclear. Good thing is it can yield a much more tailored approach that is much more inclusive. II. Pierson v. Post -- POSSESSION a. Holding: If a person is pursuing a wild animal but has not captured or wounded it, then he does not have possession of it and someone else is free to take possession of it, even if he sees that the first is in pursuit. i. Policy argument is that to avoid quarrels and excess litigation and to preserve peace and order in society there needs to be a strict rule on this issue. b. Dissent: His policy argument is foxes are horrible beasts and they need to be exterminated so a rule is needed to support their extermination. Clear utilitarian argument. c. Another policy argument could be that people should stay away when others are in the middle of hunting in order to avoid danger…being accidentally shot by the hunter. d. Or there’s the market argument…whoever is the better hunter should get the fox. Pierson didn’t even have hounds, as far as we know, so he’s the better hunter. How long are we going to let Post go after the fox…hours…days? e. There’s a fairness component. It could be seen as unjust enrichment for Pierson to exploit Posts labor. But it could also be seen as unjust enrichment for Post to come into court with his lawsuit to try to get the fox that he was unable to catch, but Pierson did catch. III. Popov v. Hayashi (Baseball Case) -- POSSESSION a. Holding: Where an actor undertakes significant but incomplete steps to achieve possession of a piece of abandoned property and the effort is interrupted by the unlawful acts of others, and a 3rd party picks up the property and takes legal and proper control over it, then both parties have valid claims to the property making it an undivided interest and the property should be sold with the proceeds split between the two parties. i. When an actor undertakes significant but incomplete steps to achieve possession of a piece of abandoned property and the effort is interrupted by the unlawful acts of others, he has a legally cognizable pre-possessory interest (right) in the property, which constitutes a qualified right to possession which can support a COA for conversion. ii. But Hayashi was not a wrongdoer, not part of the mob...so when he picked it up and put it in his pocket he attained unequivocal dominion and control. IV. Johnson v. M'intosh COMPETING CLAIMS TO PROPERTY a. Holding: The act of discovery gives the discovering sovereign the power to extinguish the native title of occupancy, so the land Jefferson and Britain acquired from the Indians was transferred to the U.S., which then had the sole discretion to sell it to D. b. Court says that the property was split into different titles. There’s a title of discovery, a title of occupancy, a title of conquest, and a title of purchase. i. Title of Discovery 1. Obtained by the first person to discovery the property. Not quite ownership though. It gives you the right to exclude other nations from the right to acquire the land from the natives who are already on the land. Like a pre-possessory right to acquire it. According to Marshall, the title of discovery is against other imperial powers that haven’t previously discovered that land. ii. Title of Occupancy 1. Obtained by the people who first occupied it. So they have the right to occupy it (to use it). The title cannot be sold as ownership, it is only gives the possessor the power to use the land. iii. Title of Conquest 1. One way of dealing w/ title of occupancy…can extinguish title of occupancy through conquest. However, whether or not title of conquest is legitimate depends on what you do with people that occupied land before conquest. Usually there is an aim at integration but if not, there needs to be a segregation where they still get a right to occupancy on some part of that land or an alternate land. iv. Title of Purchase 1. Gain ownership of land through purchase from previous owners who had ownership through purchase or conquest. V. Elliff v. Texon Drilling Co. – COMPETING CLAIMS TO PROPERTY a. Holding: The law of capture does not protect a neighboring landowner from damages caused by the wrongful drainage of gas and distillate from beneath the land of another (in a shared pool). b. Is TX’s law good, in light of competition? iii. Utilitarian = people need oil…this encourages the drilling of it 2. But isn’t this allowing the taking of others’ private property? c. Maybe if they don’t want it it’s okay. iv. Interesting that the “use it or lose it” concept was used in Texas since it has elements of socialism. c. Texas rationale is that they allow people to own property b/c it promotes use and spurs development which adds to the good of the public. VI. Tapscott v. Lessee of Cobbs – TRANSFER: RELATIVITY OF TITLE a. Holding: A person in possession of a tract of land has a title that is superior to all others except the actual, rightful titleholder. VII. De Peyster v. Michael – DEMOCRATIC PROP: THE ANTI-FEUDAL PRINCIPLE a. Holding: When land is granted in fee simple, any condition placed upon the land that the grantee shall not alienate it or that he must pay a fee to the grantor at the time of any future sale is void because the condition is contrary to the nature of the fee simple. b. Fee Simple = an estate in land characterized by ownership of the entire property for an unlimited duration and by absolute power over distribution c. Rationale: Don’t want lord-tenant relationship i. don’t want too much centralization of land ownership (where you own all this state and can do whatever you want with it) ii. but also don’t want too much fragmentation of land ownership (you own right to house, you own right to lease, you own right to drill, etc.) VIII. Intellectual Property a. International News Service v. Associated Press i. Holding: Publication for profit of news obtained from other news-gathering enterprises is a misappropriation of a property right. ii. Policy argument is if you let anyone take news from entity that put in labor to gather it, and use it for profit, then no one will bother making the effort of gathering the news and putting it into writing. It’s a free rider problem. So if you want people to gather and disseminate news, you have to protect the fruits of their labor. iii. News story was quasi-property of AP. iv. Holmes Dissent 1. If a competing news service capitalizes upon its competitor's enterprise and expense and releases a contemporaneous story implying that it is the original source, then that amounts to being a fraud. He calls it “palming off.” Must give credit to the source of the story. 2. "It is a question of how strong an infusion of fraud is necessary to turn a flavor into a poison." "The dose seems strong enough here to need a remedy from the law." v. Brandeis Dissent 1. The knowledge and property the P seeks to protect has never been held to deserve protection in the past. 2. Also, D's manner of using the stories does not constitute unfair commercial practice. There is no breach of contract or fraud involved in D's manner of purchasing P's newspapers on the open market. 3. D's failure to cite P as its source does not run afoul of any current copyright laws. 4. Courts are not the proper place for a determination of whether the P has a claim here…better for legislature d. Qualitex Co. v. Jacobson Products Co. – TRADEMARK LAW i. Holding: Color alone may be registered as a trademark. ii. Functional products cannot be trademarked b/c it defeats purpose of trademark law in promoting competition in creating better and better products…so trademarking a functional product would obstruct competitors’ ability to improve upon it. iii. But color here serves no functional purpose…just distinguishes P’s brand from others. A trademark must be for a symbol and/or a device and the color serves as a symbol. iv. But Qualitex didn’t register green-gold color in the beginning…it wasn’t intended to serve as a symbol for their company. 1. It evolved and became recognizable with their company. 2. A symbol that develops a secondary meaning connecting it with a particular product may be trademarked. v. Court also says that colors aren’t necessarily so limited, but even if they are…they aren’t trademarking the color for use on all products, just with the products that they use the color on. vi. But if a color depletion or scarcity problem arises with a certain type of product, the trademark doctrine of functionality would be available to prevent the anti-competitive consequences that D’s argument mentions. e. Feist Publications, Inc. v. Rural Telephone Service Co. – COPYRIGHT LAW i. Holding: In order to be copyrightable, a work must be original and possess at least some minimal degree of creativity. ii. Facts are not copyrightable but compilations of facts generally are. 1. But only if the selection and arrangement are original and involve some creativity in the compilation. iii. There is nothing remotely creative about arranging names alphabetically in a white pages directory, as in this case. f. MLK Center for Social Chang v. American Heritage Products–PUBLICITY RIGHTS i. Right to privacy: usually relational right…usually doesn’t survive after person dies and usually you are considered to give up that right when you become a public figure…you are in the public light so you can counter any negative assertions about you. ii. Right to publicity: based on fact that some people do want to put themselves out there and make money off of their publicity. The idea is that publicity has value to it. (ex. Nike want’s MJ’s name on their shoes) 1. general rule is you have right to publicity if you endeavor to make money off your publicity 2. unlike privacy, right to publicity can transfer after death…still valuable (Elvis shit) iii. The court said that if right to publicity dies with the person, then it is weakened while the person is living…by knowing they cannot carry it on. It cheapens it in other words. iv. Just b/c MLK didn’t exploit his name and likeness during his lifetime doesn’t mean others have the right to do that…nor does it strip his family and estate of the right to control, preserve, and extend his status and memory and to prevent unauthorized exploitation thereof by others. v. Dissent: Says what about the First Amendment? At some point you’re saying we cannot talk about anyone? Then it might allow celebrities to keep tabloids from talking about them. Access to Property I. Common Law Trespass = An unprivileged intentional intrusion on property possessed by another a. A trespass is privileged, and thus not wrongful, if: i. The entry is done with the consent of the owner, ii. The entry is justified by the necessity to prevent a more serious harm to persons or property; (even if owner says they don't give consent); or iii. The entry is otherwise encouraged by public policy. b. A trespass is intentional if the D engaged in a voluntary act to go on the property. i. But it isn't necessary to show that the trespasser intended to violate the owner's legal rights….so mistaken entry doesn't relieve the trespasser of liability. 1. Shifts burden on trespasser to know where they cannot go rather than on the owner to make sure everyone knows their property is private. ii. However, the intent requirement is not met if the trespasser is carried onto the property against her will by others. c. The intrusion occurs the moment the non-owner enters the property. i. An intrusion may occur upon physical entry by a person, an agent (employee), or an object that extends over the boundary onto the neighbor's property. ii. A trespass may occur either above or below the surface. iii. Doesn't include anything on the adjacent property if it isn't on, over, or under the other person's property. d. State v. Shack – TRESPASS i. Tejeras and Shack (Ds), both non-profit advocates of migrant farm workers went on Tedesco’s (P) property to talk with some migrant worker clients who lived & worked on the premises. D would only allow Ps to see the workers if it was in the presence of P. Ds protested and refused to leave the property so they were charged with trespassing. ii. HOLDING: An employer may not deny his workers, that he houses on his property, of their privacy; nor can he interfere w/ their opportunity to live w/ dignity and to enjoy associations customary among our citizens. Under NJ law, the ownership of real property doesn’t include right to bar access to gov’t services available to migrant workers. iii. The migrant workers are a highly disadvantaged part of society, which is why the fed gov’t passed statute for their aid which Ps orgs fulfill. The ends sought by the statute wouldn’t be achieved if the intended beneficiaries could be isolated from efforts to reach them. P is entitled to pursue his farming activities w/o interference but court doesn’t see legit need for a right in P to deny the workers opportunity for aid from federal, state, or local services, or from recognized charities. e. Food Lion v. Capital Cities/ABC, Inc. – TRESPASS i. Court found trespass occurred after the initial entry when reporters secretly videotaped the meatpacking process b/c this action exceeded the scope of the initial invitation. f. Desnick v. American Broadcasting Companies – TRESPASS i. TV show exposé on unnecessary procedures carried out by eye doctor. ABC gained access to P’s offices under false pretenses. ii. HOLDING: Gaining access to premises by means of fraudulent misrepresentations is not trespass unless the entry interferes with the ownership or possession/activities of the property. iii. In some cases consent is effective even when it was procured by fraud…ex: otherwise a restaurant critic couldn’t conceal his identity when he ordered a meal. iv. Test patients entered offices that were open to anyone who expressed desire for ophthalmic services and videotaped physicians engaged in professional, NOT personal, communications w/ strangers (test patients) v. There might be a policy interest in allowing investigative reporting but that competes with interest in protecting property. vi. Test patients videotaped their own conversations, not convos btw third parties. g. Uston v. Resorts Int’l Hotel – TRESPASS i. Resorts Intl Hotel has excluded respondent Uston from the blackjack tables in its casino b/c Uston’s use of card counting increases his chances of winning money. 1. Card counting not banned at the time. ii. Current rule for many years disregarded the right of reasonable access, granting proprietors of amusement places an absolute right to arbitrarily eject or exclude...as long as consistent w/ civil rights laws. 1. But w/ common carriers and innkeepers there was less of a right to exclude…public interest in ensuring everyone can get transportation and shelter for a night. iii. But the more private property is devoted to public use, the more it must accommodate the inherent rights of individual members of the general public who use that property. 1. Balance of individual rights against property rights (like common law right of exclusion). iv. RULE: When property owners open their premises to the general public in the pursuit of their own property interests, they have no right to exclude people unreasonably...only if a person disrupts the regular and essential operations of the premises or threatens the security of the premises and its occupants. II. Criminal Trespass a. Criminal proceedings are generally initiated by fed, state, or local gov’t rather than private citizens. b. Purpose = deter wrongful activities and punish those who engage in them. c. may include arrest, criminal complaint or indictment by prosecutor, arraignment (bringing formal charges against accused in court), plea bargaining, and trial. d. Punishment may include a fine payable to the state, probation, and incarceration. III. Trespass to Chattels a. allows owners of personal property to recover damages for intentional interferences w/ the possession of personal property b. owner is entitled to injunctive relief stopping any such interference w/ the chattel c. Mere touching of the object not sufficient to constitute trespass...P must either allege some injury to the property or show either dispossession (taking it away) or intentional using or intermeddling with it. d. Trespass to Computer Systems i. Intel Corp. v. Hamidi 1. Former employee sent numerous emails to his former co-employees criticizing the employer. The emails breached no security barriers nor disrupted the employer's email system. 2. The Supreme Court of California held that no trespass could be shown in the absence of dispossession unless the communication damaged the recipient's computer system or impaired its functioning. IV. Right to Roam a. One time in the U.S., unenclosed and undeveloped land was open to the public for the purpose of hunting, gathering kindling and berries, and walking. b. Today, about half the states still allow hunting on private land unless the owner has posted "no trespassing" signs. c. But the rules changed to place liability on cattle owners for damage that the cattle cause to crops on neighbors' property and now deny cattle owners remedies if their cattle wander onto railroad tracks...creating a "fencing-in system" by which owners have the duty to keep their cattle form invading neighboring property. V. Anti-Discrimination Principle a. Civil Rights Act of 1964: i. Discrimination and desegregation ii. Applies only to places of public accommodations 1. Inns, restaurants, entertainment places iii. Excludes truly "private" establishments iv. Remedy is injunctive relief, cannot sue for damages b. Civil Rights Act of 1866: i. § 1981 1. Right to make contracts (and all benefits, privileges, terms, and conditions of contractual relationship) ii. § 1982 2. Right to sell, lease, inherit, purchase, hold, and convey real and personal property. iii. Thought to merely regulate state conduct (invalidating state statutes and such). c. Civil Rights Act of 1991: i. Provided that § 1982 of CRA1866 applies to private conduct ii. Also allowed damages d. Americans with Disabilities Act of 1990, Title III - Public Accommodations i. Consider 3 things in ABA when looking for a disability discrimination violation: 1. Is the person disabled? [§12102(1)(A) & (2)-(3)] 2. Does the place constitute a public accommodation? [§12181(7),(9)] 3. Does this fall into discrimination as defined in ADA? [§12182-12183, §12187 (exemptions)] e. Hypos from 2/23/11 VI. ADVERSE POSSESSION a. When the following elements are met, the rules in force transfer title from the title holder (“true” or “record” owner) to the adverse possessor. b. One must possess the property in a manner that is: i. actual: must physically occupy the property in some manner...ordinary use to which the land is capable such that an owner would make of it (enclosing property w/ a fence, building on the land, living or conducting a business on the land.) ii. exclusive: cannot share the possession with the true owner...may have to show that the record owner was effectively excluded...but occasional entry by true owner may not defeat the claim iii. visible (open and notorious): sufficiently visible and obvious to put a reasonable (average) owner on notice that her property is being occupied by a non-owner 1. can do this by enclosing the land with a fence or wall, building a structure, clearing the land, laying down a driveway, mowing grass, using land for parking, storage, garbage removal, and/or picnicking, or planting and harvesting crops on the property. 2. don't have to prove the actual title holder had notice, just that he could have reasonably been put on notice by going on the property 3. burden being placed on the owner to check on his land...if he leaves it for a certain amount of time and someone else makes use of it, he loses his rights to it iv. continuous: adverse possessor must exercise control over property in ways customarily pursued by owners of that type of property 1. requires such possession and dominion as ordinarily marks the conduct of owners in general in holding, managing, and caring for property of like nature and condition 2. doesn't mean you have to be on the property continuously...using it seasonally (summer cabin) is okay, then court will look at if it the reasonable use was seasonally use, or if year round use is more reasonable v. without the owner's permission (adverse or hostile): 1. the use must be nonpermissive…true owner cannot have permitted the use 2. when the owner hasn't granted or denied permission, courts usually hold there's a presumption that the possession was nonpermissive 3. possession that begins as permissive stays that way unless the owner explicitly revokes permission or the adverse possessor announces that she is ousting the true owner and claiming the property as her own 4. As to the adverse possessor's state of mind, there is an objective and a subjective test 5. objective test = based on possession...makes adverse possessor's state of mind irrelevant 6. subjective test = based on claim of right...requires the adverse possessor to prove a particular attitude on her part in addition to showing that the true owner did not permit the possession vi. For a period defined by state statute, (statutory period): 1. amount of time to adversely possess differs depending on controlling statute c. Color of Title i. exists only by virtue of a written instrument which purports to pass title to claimant, but which is ineffective b/c of a defect in the means of conveyance or b/c the grantor didn't actually own the land he sought to convey. d. Claim of Title e. f. g. h. i. i. no written instrument but used the land in a way that an owner would...like actual possession Tacking i. succeeding periods of possession by different owners may be added together...but can only add original adverse possessor's holding period if they are in privity with each other (the original adverse possessor must have purported to transfer title to the property to the successor). ii. 1 Idea of Tacking = count back from initiation of the suit and tally the number of years that the adverse possessor and previous owners had adverse possession iii. Other Idea of Tacking = just need to show any 10 years where land was adversely possessed...doesn't need to be consecutive Brown v. Gobble – ADVERSE POSSESSION i. adverse possession must be shown by clear and convincing evidence of necessary elements Romero v. Garcia – ADVERSE POSSESSION i. An indefinite and uncertain description of property in a deed may be clarified by subsequent acts of the parties. Nome 2000 v. Fagerstrom – ADVERSE POSSESSION i. A determination of whether a claimant’s physical acts upon the land of another are sufficiently continuous, notorious, and exclusive does not necessarily depend on the existence of significant improvements, substantial activity, or absolute exclusivity. ii. This area of law isn’t susceptible to fixed standards b/c the quality and quantity of acts required for adverse possession depend on character of the land in question. 1. The conditions of continuity and exclusivity require only that land be used for the statutory period as an average owner of similar property would use it. 2. Where the land is rural, as here, a lesser exercise of dominion and control may be reasonable. iii. Use consistent w/ ownership gives visible evidence of claimant’s possession, such that the reasonably diligent owner “could see that the hostile flag was being flown over his property.” 1. Where physical visibility is established, community repute is also relevant evidence that the true owner was put on notice. 2. Hostility is determined by application of an objective test which simply asks whether the possessor acted toward the land as if he owned it, w/o the permission of one w/ legal authority to give possession. Hohfeldian Terminology i. 8 Basic Legal Rights: 1. Four Primary Legal Entitlements a. Rights i. Claims, enforceable by state power, that others act in a certain manner in relation to the rightholder. b. Privileges i. Permissions to act in a certain manner w/o being liable for damages to others and w/o others being able to summon state power to prevent those acts. c. Powers i. State-enforced abilities to change legal entitlements held by oneself or others. d. Immunities i. Security from having one’s own entitlements changed by others. 2. And Their Opposites a. No-Rights i. If one does not have the power to summon the aid of the state to alter/control the behavior of others. b. Duties ii. The absence of permission to act in a certain manner. c. Disabilities iii. The absence of power to alter legal entitlements. d. Liabilities iv. The absence of immunity from having one’s own entitlements changed by others. ii. Opposites = one must have one or the other but not both Right Privilege Power Immunity No-Right Duty Disability Liability iii. Correlatives = a single legal relation from the point of view of the two parties. Right Privilege Power Immunity Duty No-Right Liability Disablity 1. If X has a right against Y that he shall stay off X’s land, the correlative is that Y is under a duty toward X to stay off the place. 2. If A has a duty toward B, then B has a right against A. iv. These concepts are extremely useful b/c: 1. They serve as reminder that all legal rights entail relations among persons. 2. They help disentangle bundles of rights into their constituent parts. j. Policy Justifications for Adverse Possession i. Providing a degree of certainty of ownership to possessors of land by eliminating the possibility of stale claims to land title. 1. Thereby lowering cost of establishing rightful ownership claims by removing the risk that ownership will be disputed on the basis of the distant past. 2. Uncertainty inhibits transactions, or it raises their costs, thereby lowering their profitability. a. People can sell only what they own...if it’s unclear what they own, they’ll be inhibited from entering transactions b/c of risk that they will not in fact be buying or selling what they are purporting to buy or sell. 3. However, it’s almost always more efficient and economical to rely on the boundaries fixed in the record title to identify the record owner than it is to conduct a lawsuit to determine whether the complicated and confusing elements of adverse possession have been met. ii. Encouraging maximum utilization of land. 1. Prevents valuable resources from being left idle for long period of time by specifying procedures for a productive user to take title from an unproductive user. iii. Protect adverse possessor who has relied on the property upon the belief that it had become his own. 1. Diminishing marginal utility of income...the adverse possessor would experience the deprivation of the property as a diminution in his wealth; but the original owner would experience the restoration of the property as an increase in his wealth. So if they have the same wealth, their combined utility will be greater if the adverse possessor is allowed to keep the property. iv. Wealth-Maximization 1. If adverse possessor values property more than original owner...it’s wealthmaximizing to transfer the property to her. a. But if the adverse possessor truly values the property more...she should have to offer the true owner enough money to induce the true owner to sell...requiring this type of transaction will test the proposition that the adverse possessor is the most valued user. i. On the other hand, in that situation that 2 parties must guess what the other’s bottom line is...if the costs of transmitting offers and counter-offers are high, the bargainer may find his best strategy is to avoid bargaining altogether. I. Possessory Estates Estate – an interest in land that is or may become possessory and is measured by some period of time. Fee Simple – this estate has potential to endure forever – longest quantum. Fee Tail – also has potential to endure forever, but ends if and when the first fee tail tenant ahs no lineal descendants to succeed him in possession – second longest quantum. Life Estate – this estate will end at the death of a person (pur autre vie) Leasehold Estate – lasts for a fixed time or by other agreement between landlord and tenant. Freehold Estates – fee simple, fee tail (where not abolished), and life estate are freehold estates, whereas nonfreehold estates are leasholds. A freeholder in possession was treated as having seisin while a leaseholder had only possession (feudal law). Estates in Personal Property – possessory estates and future interests can be created in both real and personal property. No New Estates – no new kinds of estates may be created. Language creating an estate will be construed to mean one of the four (fee simple, fee tail, life estate, leasehold). II. The Fee Simple Fee Simple Absolute – is absolute ownership; potentially indefinite duration with no limitations on inheritability; cannot be divested or end on the happing of any event. (a) Words of Purchase and Words of Limitation – words of purchase identify the person in whom the estate is created (“to A”). Words of limitation describe the type of estate created (“and her heirs.”). (b) Creation – at common law, a fee simple was created by deed only by using the words “and his heirs.” If these words were omitted, the grantee took only a life estate. Under modern law, the requirement of “and his heirs” ahs been abolished in most states. Either a deed or will is presumed to pass the largest estate the grantor or testator owns. (c) Transferability – the Statute Quia Emptores established the basic rule that land is freely alienable. The Statute of Wills granted fee simple owners the right to devise their land or have it descend to their hers where the owner has no will. (1) Definitions – persons who inherit an intestate decedent’s real property are heirs. Person who inherit an intestate decedent’s personal property are next of kin. Heirs and next of kin are determined by the state intestacy statute. Persons who receive a decedent’s real property under a will are devisees, while persons who receive a decedent’s personal property under a will are legatees. In a will, real property is devised, while personal property is bequeathed. III. Defeasible Fees Defeasible Fee – a fee simple can be created that is defeasible upon the happening of some event. Defeasible fee simple estates have the potential, though not certainty, of infinite duration. Fee Simple Determinable – this estate ends automatically – possibility of reverter - when some specific event happens (“to school so long as used for school purposes”). This is a fee simple so limited that it will end automatically when a stated event happens. For Example: O conveys Blackacre “to School Board so long as the premises are used for school purposes.” The words “so long…purposes” are words of limitation, limiting the duration of the fee simple given. The School Board has a fee simple determinable that will automatically end when Blackacre ceases to be used for school purposes. When that event happens, the fee simple automatically reverts to O. The transferor is conveying a fee simple only until an event happens. Words that merely state the motive of the transferor in making a gift do not create a determinable fee simple (i.e., a conveyance “to the Hartford School Board for school purposes” would give the Board a fee simple absolute). A fee simple determinable may be transferred or inherited in the same manner as any other fee simple, as long as the stated event has not happened, but it remains subject to limitation no matter who holds it. Since there is a possibility that the grantee’s determinable fee may come to an end on the happening of a stated event, the grantor has a future interest called possibility of reverter, which may be retained expressly or may arise by operation of law. (a) Creation – a determinable fee is created by language that connotes that the fee is to last only until a stated event occurs (“so long as,” “until.”). Words of limitation must be used; expression of motive or purpose are inadequate. (b) Transferability – a feesimple determinable may be transferred or inherited but remains the subject of limitation. (c) Correlative Future Interest (Possibility of Reverter) – since there is a possibility that the determinable fee may come to an end, the grantor has a future interest called a possibility of reverter which may be expressly retained (by words in a deed or will) or may arise by operation of law – if condition is violated, land reverts to grantor or his heirs. Fee Simple Subject to Condition Subsequent – a fee simple cut short at the grantor’s election after a specified condition occurs. This fee simple does not automatically end – unlike a determinable – but ends after the condition occurs and the grantor elects to reenter and terminate the estate. this is a fee that does not automatically terminate but may be cut short (divested) at the grantor’s election when a stated condition happens. For Example: O conveys Blackacre “to A, but if liquor is ever sold on the premises, the grantor has a right to reenter and re-take premises.” The words “but if…premises” are words of condition setting forth the condition upon which the grantor can exercise her right of entry. They are not words limiting the fee simple granted A. A has a fee simple subjection to condition subsequent. O has a right of entry. If O does not choose to exercise her right of entry when liquor is sold, the fee simple continues in A. Therefore, it’s not automatic in that O can choose to exercise that right or not – it’s discretionary. That is the essential difference – one is discretionary, the other is absolute. (a) Creation – is created by giving the grantee a fee simple and then providing that it may be cut short if the condition happens (“to school, but if (or upon condition, or provided, or however) it ceases to use the land for school purpose, grantor has a right of reentry. (b) Transferability – this estate may be transferred or inherited until the transferor can and does exercise the right of entry. (c) Correlative Future Interest (Right of Entry) – the grantor’s right of entry (or right to reenter) need not be expressly retained; it will be implied if the words are reasonably susceptible to such an interpretation. (d) Distinguish from Fee Simple Determinable – since the two estates are similar, courts are often called upon to construe ambiguous language. The courts prefer the fee on condition subsequent because the forfeiture is optional, not automatic (did not go this way in Mahrenholz – found determinable). Fee Simple Subject to Executory Limitation – a fee simple that, upon the happening of an event, is automatically divested by an executory interest in a third person (“to school, but if it ceases to use land for school purposes, to hospital.”) IV. The Fee Tail Fee Tail – endures as long as descendants of the original grantee are alive, and is inherited only by the grantee’s descendants. (a) Creation – at common law, the language required was “to A and the heirs of his body,” a term which refers to the grantee’s issue or lineal descendants. (b) Characteristics – the fee tail originally had to important characteristics: (i) the tenant in fee tail could not defeat the rights of the tenant’s lineal descendants; and (ii) the fee tail could be inherited only by issue of the original grantee. Types of Fee Tails – a grantor could specifically tailor a fee tail. A fee tail male limited succession to male descendants of the grantee. A fee tail special could be inherited only by the grantee’s issue by a specific spouse. Future Interests Following Fee Tail – to keep the land in the family on expiration of a fee tail (i.e., a descendant “died without issue”), the land would revert to the grantor or he could direct the land to go to another, thus making possible the future interests of reversion and remainder. Disentailing – today, a fee tail can be converted into a fee simple absolute, cutting off all rights of the original tenant’s issue, by a deed. Modern Law – has been abolished in England and in all but four U.S. states. Where abolished, most courts construe “to A and heirs of his body” to give A a fee simple. A majority of states give a fee simple absolute and a minority give A a life estate. Other’s give a fee simple subject to conditions if a has no children (If a child is born to A, A can convey a fee simple – if no child born to A, A’s estate ends at A’s death). V. The Life Estate Life Estate – endures for a period of one or more human lives. Types of Life Estates (a) For Life of Grantee – the usual life estate is measured by grantee’s life. (b) Pur autre Vie – measured by the life of someone other than the owner of the life estate. (c) In a Class – a life estate canbe created in several persons (“to the child of A for their lives, remainder to B”). The general rule is that the remainder does not become possessory until all life tenants die. (d) Defeasible Life Estates – like a fee simple, it can be made defeasible. (e) Construction – interpretation of ambiguous language as to what estate is created depends on the facts of each case and the grantor’s probable intent – courts tend to favor giving a fee simple, noting that the presume people will give away all of their possessions. Alienability of Life Estates – a life tenant can transfer whatever estate she has but person to whom conveyed only receives what life tenant has (now autre vie). Waste – the life tenant is entitled to the use and enjoyment of the land but cannot waste (i.e., permanent impairment of value of land). (a) Affirmative (voluntary) Waste – occurs when the life tenant destroys property or exploits natural resources. (b) Permissive (Involuntary) Waste – occurs when land is allowed to fall into disrepair. Sale of Property by a Court – if the life tenant and the owners of the remainder are all adults, are competent, and agree, a fee simple in the land can be sold. Even where one or more of the holders of the remainder cannot legally consent to a sale, a court may order a sale if it is in their best interests. Some state statutes authorize sale of a fee simple under certain conditions. VI. Rules Against Restraints on Alienation Rule – a basic principle of the law of property is that land should be alienable. Therefore, certain restrains on alienation are invalid. Types of Restraints – a restraint on alienation can be in forfeiture (if grantee attempts to transfer, land is forfeited to another person), disabling (says any attempt by grantee to transfer is void), promissory (promise not to sell). Restrains on Fee Simple – a total restraint on alienation in any form is void. Partial restraints are usually void but there are a few exceptions, principally for cooperative housing. An increase number of states permit partial restraints if they have a reasonable purpose and are limited in duration (i.e., agreements by cotenants not to partition property). Restraints on Life Estates – a disabling restraint is void. However, forfeiture and promissory restraints are often upheld. A disabling restraint on an equitable life estate, a spendthrift trust, is usually valid. VII. Future Interests Future Interest – a present, nonpossessory interest capable of becoming possessory in the future. Categories Limited – only five kinds of future interests: (1) Reversion; (2) Possibility of Reverter; (3) Right of Entry; (4) Remainder; and (5) Executory Interest. Future Interest in Grantor – three future interest may be retained by grantor: (1) reversion; (2) possibility of reverter; (3) right of entry. Future Interest in Grantees – two future interests in grantees: (1) remainder; (2) executory interest. Legal or Equitable Future Interests – future interests can be legal (created in a deed or conveyance) or equitable (created in a trust). VIII. Reversion Reversion – a reversion is a future interest left in the grantor after she conveys a lesser estate than she has. The interest may be expressly retained or may arise by operation of law. (a) Vested Interest – all reversions are vested interests even though not all reversions will necessarily become possessory. Being vested means the reversion is fully alienable, accelerates into possession on termination of the preceding estate, and is not subject to the Rule against Perpetuities. (b) Distinguish Possibility of Reverter – a reversion is an entirely different interest from a possibility of revert, which arises after a determinable fee is transferred. IX. Possibility of Reverter Possibility of Reverter – a possibility of reverter is a future interest remaining in the grantor when a fee simple determinable (estate automatically ends on happening of an event) is created. (a) Alienability – at common law, this interest could not be transferred inter vivos. However, today most jurisdiction consider the interest to be freely alienable, both by will and during life. (b) Termination – a majority of states follow rule that a possibility of reverter could endure indefinitely because it was inheritable. However, some states have statutorily limited the period during which this interest can exist. X. Right of Entry Right of Entry – a right of entry arises in a grantor when he creates an estate subject to condition subsequent and retains the power to cut short the estate. (a) Alienability – traditionally, this interest was inalienable inter vivos because it was treated as a chose in action, not a property interest – today, some states treat a right of entry as alienable. (b) Termination – a majority of states follow the common law rule that a right of entry could endure indefinitely because it was inheritable. However, some states have statutorily limited the period during which these interests can exist. XI. Remainder Remainder – a future interest created in a grantee that is capable of becoming a present possessory estate upon the expiration of a prior estate. Characteristics – a remainder must be expressly granted in the same instrument that created the preceding estate. The preceding estate must be a fee tail, life estate, or term of years. The remainder cannot divest a preceding estate prior to its normal termination. Estates in Remainder – a remainder estate may be a fee simple, life esate, a term of eyars, or, where permitted, a fee tail. Classifications of Remainders – remainders are either vested or contingent. The classification affects the applicability of certain rules (Rule Against Perpetuities). (a) Vested Remainder – is created in an ascertained person and is not subject to a condition precedent. “To A for life, then to B in fee simple” creates a vested remainder in B. (1) Indefeasibly Vested – the holder of this interest is certain to acquire possession in the future and will be entitled to retain permanently the estate. (2) Vested Subject to Open – this remainder is vested in a class of persons, at least one of whom is qualified to take possession, but the class members’ shares are not yet fixed because more persons can subsequently become members of the class (A class is closed if other scan no longer enter the class) – “To A for life then to A’s children.” (3) Vested Subject to Divestment – can be completely divested by a condition subsequent or by an inherent limitation of the remainder estate. A remainder can be both vested subject to open and vested subject to complete divestment (i.e., “to A for life, then to children of A, but if no child survives A, to B.”) (4) Alienability – a vested remainder is alienable inter vivos and devisable by will. It descends to heirs if not otherwise disposed of. However, it can be limited so as to be divested at death. (b) Contingent Remainder – is contingent if given to an unacertained person or subject to a condition precedent. (1) Unascertained Person – means a person not yet born or one who cannot be determined until the happening of an event. A contingent remainder in fee simple always creates a reversion in grantor. (2) Condition Precedent – this is an express condition set forth in the instrument which must happen before the remainder becomes possessory (“to A for life, then to B if B survives A.”). (3) Distinguish Conditions Subsequent – whether a condition is precedent or subsequent (as in a vested reaminder subject to divestment) depends on the sequence of the words of the instrument. If the condition is incorporated into the words of a gift, it is precedent (“to A for life, then to B if B survives A, but if B does not survive A, to C.” – condition subsequent attached to B’s remainder). If it later adds words divesting a gift, it is subsequent (“to A for life, then to B, but if B does not survive A, to C.” – there is a divesting clause, giving the property to C if B dies before A, so condition subsequent). When the language is ambiguous, vested remainders are preferred. (4) Alienability – are alienable, devisable, and descendible in most states. XII. Executory Interests Springing Executory Interest – future interest in a grantee that springs out of the grantor subsequent to its creation, thus divesting the grantor (“to A when she marries”). Shifting Executory Interest – future interest in a grantee divests a preceding estate in another grantee prior to its natural termination (“to A, but if B returns form Rome, to B”). XIII. Rules Restricting Contingent Remainders (Mostly Abolished) Destructibility of Contingent Remainders – still in effect in a few states, states that a contingent remainder in land is destroyed if it does not vest before or at the time the preceding freehold estate ends. Thus, in a conveyance “to A for life, remainder to A’s children who reach 21,” the remainder is destroyed if no child of A has reached 21 at A’s death.” The preceding estate can be a fee tail or a life estate. (a) Merger – a life estate can end prior to the death of the life tenant by merger of the life estate into the next vested estate (or reversion in fee simple). If the remainder does not vest on termination of the life estate, it is destroyed. (b) Abolished – this doctrine has been abolished in most states. Rule in Shelley’s Case – if one instrument creates a freehold in land in A, and purports to create a remainder in A’s heirs, and the estates are both legal or equitable, A (and not A’s heirs) has the remainder. (a) Operation of Rule – all U.S. cases applying the rule involve life estates. The future interest involved can be a remainder or executory interest. Merger will occur if the remainder is not subject to some condition precedent or if there is no intervening vested estate., Thus, “to A for life, then to A’s heirs” gives A a remainder which merges with A’s life estate, giving A a fee simple. (b) Rule of Law – this rule can be avoided only by not coming within its terms (i.e., giving A a term of years rather than a life estate). (c) Modern Status – has been abolished in most states. Doctrine of Worthier Title – when an inter vivos conveyance purports to create a future interest in the grantor’s heirs, the future interest is void and the grantor has a reversion. (a) Testamentary Branch of Doctrine – if a person devises land to his heirs, the devise is void an the heirs take by descent – “to A for life, then to Testator’s heirs.” (b) Modern Rule – the testamentary is nonexistent. The modern doctrine applies to personal property as well as to land. (c) Operation of Doctrine – the rule is limited to heirs or next of kin. It ordinarily comes into play when the grantor has a life estate in trust, with a remainder to the grantor’s heirs, and the grantor wants to terminate the trust. (d) Status – the doctrine is still valid in most jurisdictions. Comparisons: (a) Destructability Rule – a rule of law that appliesonly to legal contingent remainders in land. (b) Rule in Shelley’s Case – a rule of law that applies to legal and equitable remainders in land. (c) Doctrine of Worthier Title – a rule of construction that applies to legal and equitable remainders and executory interests in real or personal property. XIII – The Trust Creation of a Trust – to create an express trust, the settlor must manifest an intent to do so. To create a trust of land, a written instrument (deed or will) is required by the Statute of Frauds. But an oral trust of personal property is permitted. Ordinarily, a trust is created by a written instrument naming the trustee, specifying the rights of the life beneficiaries and the remaindermen, and setting forth the powers of the trustee. To create a trust, it is also necessary to deliver property to the trustee to manage. Trustee – any person with legal capacity can be trustee. The settlor can serve as trustee, a beneficiary can serve as trustee, or an independent third party can serve as trustee. (a) Fees – the trustee is entitled to a fee for managing the trust property. The fee can be waived, and frequently, it is where a child manages property as trustee for a parent (or vice versa). Testamentary Trust – a testamentary trust is a trust created by will. It arises at the death of a settlor. Inter Vivos Trust – a trust created by the settlor during life. Revocable Trust – an inter vivos trust can be made either revocable or irrevocable by the settlor. If the trust instrument provides that the trust is revocable and the setllor subsequently revokes the trust, the trust property is returned to the settlor. It is important to note that a donor probably cannot make a revocable gift without creating a trust. Hence, whenever a person wants to make a revocable transfer,a revocable trust is the appropriate route. A revocable trust is a substitute for a will, because it can be revoked until death, and revocable trusts are widely used to avoid probate. Powers of a Trustee – the trustee ordinarily has very broad powers of management, either by the terms of the trust instrument or by statute or common law. The trustee can sell the trust assets and invest the proceeds in other assets. The trustee can give leases and mortgages on real property. Generally the trustee has power to manage the property in the same manner as an intelligent person would manager her own property. Duties of a Trustee – a trustee is held to the highest standards of conduct in administering the trust. If the trustee breaches a fiduciary duty, the trustee is personally liable. (a) Prudent Investor Rule – the trustee has the duty of making the trust property productive, which includes the duty to invest the trust property in a prudent fashion and receive a reasonable return of income. In investing the trust assets, the trustee must exercise that degree of care, skill, and prudence as would be exercised by a reasonably prudent person in managing her own property. In most states the trustee must diversify the trust investments. It is deemed imprudent to keep all the eggs in one basket. (b) Undivided Loyalty – the trustee owes the beneficiaries of the trust undivided loyalty. He must reap no personal advantage from his position and must not put himself in a position where a conflict of interest is possible. The trustee cannot borrow trust funds or buy any of the trust assets. Self-dealing in any form is absolutely prohibited. The prohibition against self-dealing also applies to sales or loans to the trustee’s relatives and business associates, and to corporations of which the trustee is a director, officer, or principal shareholder. The trustee’s good faith or actual benefit to the trust is relevant. XIV – Rule Against Perpetuities Purpose – the three rules discussed above were developed to prevent land dynasties but applied only to contingent remainders. Eventually the rule Against Perpetuities was developed to curb all contingent future interest, including executory interests (which are indestructible). The Rule Against Perpetuities – No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. Interests Subject to the Rule – applies to contingent remainders and executory interest. It does not apply to vested interests: a vested remainder, reversion, possibility of reverter, and right of entry. What-Might-Happen Is Test – if there is any possibility that a contingent interest will vest too remotely, the interest is void. Courts do not wait to see what actually happens, but look at the interest at the time of Creation. Lives in Being – any person who can affect the vesting of the interest and who is alive at the creation of the interest can be a validating life, provided the claimant can prove the interest will vest or fail within 21 yrs of the person’s death. Meaning of “Vest” – the rule does not apply to vested interests. But note that class gifts do not vest in any member of the class until the interests of all class members have vested. Thus, if a gift to one member of the class might vest too remotely, the whole class gift is void (all-or-nothing rule). (a) Executory Interest – an executory interest following a fee simple determinable or divesting a fee simple vests only when the condition happens and it becomes a possessory estate. Remote Possibilities – an interest is void, under the rule, if there is any possibility the interest might vest beyond the permitted period (i.e., the fertile octogenarian; the unborn widow). Application to Defeasible Fees – although a fee simple determinable followed by an executory interest is subject to the Rule, an exception applies to a gift over from one charity to another charity. Note that the Rule is not applicable to a fee simple determinable created by will. Application to Options – generally, options are subject to the Rule. However, a preemptive option (right of first refusal) for a condominium and an option to renew a lease are excepted from the Rule. The Uniform Statutory Rule Against Perpetuities, adopted in about half the states, exempts options. Cy Pres Doctrine – the second reform (the wait-and-see doctrine is the other) of the Rule Against Perpetuities, adopted in a handful of states, is the cy pres doctrine (law French for “as near as possible”). Under the cy pres doctrine, an invalid interest is reformed, within the limits of the rule, to approximate most closely the intention of the creator of the interest. Exercising the reformation power, a court can reduce age contingencies to 21 years or make some other appropriate change to reform the invalid interest. Example: O conveys “to A for life, remainder to A’s children who reach age 25.” The remainder to A’s children is void. Exercising the reformation power, a court may reduce the age contingency to 21 years. Wait-and-See Doctrine – under the common law Rule Against Perpetuities, any possibility of remote vesting voids the interest. The what-might-happen test has come under fire in the last half-century for defeating reasonable dispositions on the assumption of possible events that, in fact, rarely occur. More than half the states have reformed the Rule by adopting the wait-and-see doctrine. Under the wait-andsee doctrine, the validity of interests is judged by actual events as they happen, and not by possible events that might happen. The validity of an interest is not determined at the time the interest is created. It is necessary to wait and see what actually happens. (a) Wait-and-See for the Perpetuities Period – some of the states adopting the wait-and-see doctrine wait out the common law perpetuities period before declaring the contingent interest void. The common law perpetuities period is measured by the lives that can affect vesting plus 21 years. (b) Wait-and-See for 90 Years – the Uniform Statutory Rule Against Perpetuities rejects waiting for the common law perpetuities period and calls for waiting for 90 years. If a contingent interest satisfies the what-might-happen test of the common law, or actually vets within 90 years, it is valid under the Uniform Statute. (c) Criticism – the wait-and-see doctrine has been criticized primarily on two grounds: (i) not knowing whether an interest is valid or void may prove inconvenient; and (ii) the doctrine results in the extension of the dead hand and of more wealth being tied up in trust. (d) Drafting – the wait-and-see doctrine and cy pres doctrine are saving devices for the lawyer who drafts and instrument that violates the common law Rule Against Perpetuities. But no instrument is competently drafted if you must wait and see if it is valid or if it must be reformed by a court. Even in states adopting wait-and-see or cypress, a careful lawyer drafts an instrument that is valid under the common law rule. ESTATES AND COMMON INTERESTS IN PROPERTY I. Future Interests A. Two Ways to Own Property 1. Concurrently -- (husband & wife own house; roommates rent apt together) a) Then they work out amongst themselves how it'll be used. 2. Over Time – (one owning the present right to possess the property and the other a future power to take possession from present owner in specified circumstances.) B. can C. D. a) Present estate holder has right to possess the property while her property rights last b) Future interest holder will obtain right to possess the property when and if the present interest terminates. c) The grantor specifies the circumstances under which the property will shift in the future from the present interest holder to the future interest holder. Estates and future interests originate in two main sources: deeds and wills. They arise from a trust as well, but either a deed or will is normally used to transfer the property into the trust. Dead Hand Problem 1. arises when owners seek to control who owns the property long after they die (see Evans v. Abney) 2. present owner’s conditions may limit what future owners may do w/ their property...interfering w/ freedom of future owners to control the property. 3. If not regulated, the ability to create future interests could clog up real estate market by attaching numerous conditions to property, restricting its use and whether it can be bought or sold. a) Contrary to policy of making land alienable and available for best use. 4. Affected people may be able to remove these restrictions by contract, in which the beneficiaries of the restraints on use or alienation agree to give up their rights. a) But costs of renegotiating the property arrangement may be so high they interfere w/ efficient readjustment of property relations. 5. Rigid enforcement of restrictions imposed long ago by grantors who couldn’t anticipate current conditions would sometimes prevent property from being devoted to its best uses as social circumstances and needs change. Property Law in Feudal England 1. Property law was the entire political and social control. 2. The English property law system can be traced to the Norman Conquest of 1066. a) When William the Conqueror became the King of England, he redistributed land to his supporters in order to protect his reign from foreign and domestic opposition. 3. Over time, the system imposed by King William resulted in two types of landholdings: free tenures (held by the nobles and upper classes) & nonfree tenures (held by peasants) a) The free tenures were by far the more important category, and formed the foundation for the modern system of land ownership. b) One who held land from the king in a free tenure owed both service and incidents to the king in return. (1) The required service might be to provide a specified number of knights on demand, to make an annual payment, or to perform another action. (2) The incidents were specific rights; for example, the incident of wardship allowed the king to take possession of the land after the holder’s death until the orphaned son reached age 21. Often the incidents were fees (the King’s piece of the profits from the land). c) Each person or tenant that had a landholding from the king could create subtenures with others through subinfeudation. (1) Thus, one parcel of land could be the subject of many different tenures. d) Over time, as services became less valuable (e.g., knights were rendered obsolete by changes in war technology), the feudal incidents became much more important to Kings. However, the tenant could circumvent the incidents through subinfeudation (by charging his subtenants fees). 4. The resulting pressure resulted in the 1290 Statute of Quia Emptores, which abolished subinfeudation but, in return, authorized each tenant to substitute another in his stead without the overlord’s consent. a) Accordingly, it became possible to freely transfer land ownership to others. 5. As feudalism declined, the system of free tenures gradually evolved into private ownership of land, in the form of three key estates: the life estate, the fee tail, and the fee simple. II. The Contemporary Estate System A. B. FEE SIMPLE ABSOLUTE 1. This is the greatest bundle of rights in a piece of property...owner can possess it, use it, sell it or give it away, can devise it by will or leave it to heirs. a) Heir = if you inherit when someone dies intestate (w/o a will)...to be an heir, you must be alive when the other person dies, and they must die w/o a will 2. Fee simple is a freehold estate whose duration is potentially infinite. a) It roughly corresponds to the layperson’s understanding of “ownership.” 3. The most common form is fee simple absolute, the largest aggregation of property rights recognized under American law. 4. At one time, it was necessary to use special language to create a fee simple (e.g., “to A and his heirs”), but today informal language such as “to A” will suffice in most states. a) Today owners are presumed to convey all the interests they own in property they convey, unless the conveyance states otherwise. DEFEASIBLE FEES 1. Each freehold estate is either absolute or defeasible. Most estates are absolute, meaning that their duration is restricted only by the standard limit that defines that category of estate. A defeasible estate is subject to a special provision that may end the estate prematurely, if a particular event occurs, e.g., “to A, but if A ever smokes cigars, then to B.” 2. Fee Simple Determinable a) Automatically expires at a stated time, immediately giving the holder the right to possession (called a reverter). (1) Ex: if O grants land “to A for so long as used as a park,” and the park use ceases, then title immediately revests in O. 3. Fee Simple Subject to a Condition Subsequent 4. a) Does not automatically expire when the triggering condition occurs; rather, the future interest holder must take affirmative action to end the current holder’s interest and take possession (called a right of entry). (1) Ex: if O grants land “to A, but if not used as a park, then the land shall return to me,” and the park use ceases, O must take action to end A’s estate, such as by filing suit against A. b) Court's don’t' love this type of fee b/c if the grantor waits forever to assert his right of entry, the property is tied up during that whole time and thus isn’t being used the best way it can be. (1) Although, there are ways around this by using doctrines like laches (sleeping on your rights)...if grantor takes too long the court may deny him his right of entry; or on the doctrine of reliance...if grantor takes a long time and grantee assumed he could keep property and so invests money in it, then court may deny grantor his right of entry. Fee Simple Subject to an Executory Limitation a) Interest automatically expires when a stated event occurs, but gives the right to possession to a third party (executory interest). (1) This type of conveyance is subject to the rule against perpetuities. b) Ex: “to A, but if the land is not used as a park, then to B” c) This type of fee arises out of creating trusts (think executor). d) Shifting executory interest = wherein the grantor gives the land to a second party, but qualifies it by, upon the occurrence of a specified condition, divesting the second party of the land in favor of a third party. COMPARE: e) Springing executory interest = wherein the grantor cuts short the grantor's own interest in the property in favor of the grantee, but contingent upon the occurrence of a specific condition. (1) Ex: O to A for life, then three years later, to B if B graduates from law school, and then to C. (a) After A dies it goes back to O’s estate which has a reversionary interest for three years after A’s death. Then after those three years, if B graduates law school it springs from O’s estate to B. Otherwise, it springs from O’s estate to C. C. D. E. F. LIFE ESTATE 1. When a conveyance is to the grantee "for life" it creates a life estate. 2. The difference btw a life estate and a fee simple is that the owner of a fee simple can choose who will own the property after they die, but a life estate grantee cannot...after the life estate grantee dies, the interest either reverts to the grantor or the remainder shifts to a third party. 3. If the remainder shifts to a third party, that remainder might be vested or contingent. a) Vested remainders = ones that are certain to shift to an identifiable third party. (1) Absolutely vested remainders = the third party is not subject to change (2) Vested remainders subject to open = may be shared with more people that are born in the future. b) Contingent remainders = may shift to third party but only upon the happening of a condition (1) These are also subject to the rule against perpetuities. FEE TAIL 1. An estate that is to remain in a certain family. a) It cannot be conveyed to anyone outside of that family, at least until the blood line dies out. Then it would be conveyed to the original grantor of the fee tail (well his heirs). 2. Most states got rid of the fee tail b/c it has a negative effect on the real estate market...severely limits alienability. 3. Some states deem any fee tail conveyance as just a fee simple absolute. 4. Other states deem fee tail conveyances as life estates in the grantee with a remainder of fee simple in her heirs. Rule in Shelley’s Case 1. When a grantor tries to transfer from "O to A for life, and then to A's heirs," Shelley's rule changes it to "O to A". Meaning A has a fee simple absolute. 2. So if a deed or will (1) created a life estate or fee tail in real property in one person and (2) also created a remainder in fee simple in that person’s heirs, and (3) the estate and remainder were both legal or both equitable, then the future interest belonged to that person, not the person’s “heirs.” 3. Only used occasionally now. 4. Justification: O and A don't know who A's heirs are until he dies. The Doctrine of Worthier Title 1. In the case of a conveyance of "O to A for life, and then to O's heirs," this doctrine changed it to "O to A for life, and then to O." 2. So if an owner transferred real property to one party, and by the same instrument transferred the following remainder or executory interest to the owner’s heirs, then under this doctrine, the owner received a reversion and the “heirs” received nothing. 3. This still exists...unless instrument uses sufficiently clear language indicating that the grantor actually intends to give the remainder to his own heirs. 4. Justification: O’s heirs can’t be determined until O dies. III. Interpretation of Ambiguous Conveyances A. Grantors often use unclear, and sometimes conflicting, language in describing the kind of estate conveyed. B. In interpreting ambiguous conveyances, two policies are important: 1. Courts first seek to implement the intent of the grantor. 2. When grantor's intent is unclear, courts turn to public policy considerations: a) attempt to further the free use and alienability of property by a presumption against finding a future interest b) There’s a presumption against forfeitures...that can sometimes be in tension w/ the principle of promoting the grantor's intent. (1) Courts sometimes try to implement the contractual agreement the parties would've most likely adopted had they anticipated the ambiguity. (2) Other times, courts ignore the presumed intent of parties and focus on the social goal of promoting free use and alienability of property. C. Fee Simple versus Defeasible Fee 1. Wood v. Board of County Commissioners of Fremont County (WY, 1988) a) Wood (P) conveyed land to D for purpose of constructing a county hospital, but the deed didn't state for how long and it didn't express what would happen to the estate if it was not so used. D built and operated hospital on land for 40 years before putting it up for sale. P brought suit claiming right to reversion was in the grant, which supposedly became effective when land ceased to be used for its intended purpose. P contends language in deed created either fee simple determinable or fee simple subject to a condition subsequent. b) RULE: A grant of fee simple determinable must clearly state that the estate will terminate if not used in accordance w/ the grant. c) A fee simple determinable is characterized by its expiration upon the happening of an uncertain event and the grant must clearly state that the estate will expire automatically upon the happening of an event. The grant here clearly stated the condition but failed to state that the grant wouldn't continue to be valid if the condition was not met...the absence of that language evidences an intent not to convey a fee simple determinable. A fee simple subject to a condition subsequent must have language clearly stating the grantor's intent to create a discretionary power to terminate the estate he conveys. No such language was used in the conveyance here. Therefore, P retained no interest in the property. 2. Cathedral of the Incarnation in the Dioceses of Long Island v. Garden City Co. (1999) a) Stewart conveyed land to Cathedral and its successors forever for use of the Church but w/o any power to grant the same or any part thereof in any manner whatsoever. The deed also had restriction that premises were not to be used for any other purposes than as grounds for buildings or institutions connected to the Cathedral and devoted to its religious or educational purposes. Later, the Cathedral had to file for bankruptcy and filed suit so it could sell the property free of the use restrictions. NY statutes entitled charities to bring such suits if the restriction substantially impeded them in achieving their purposes. b) Court found that absent any language in the deed providing for the automatic termination of the Cathedral's estate if the land were no longer used for church purposes, it couldn't find a possibility of reverter. But Without stating any analysis, the court interpreted the use limitation to create a right of entry. D. Fee Simple versus Life Estate 1. Edwards v. Bradley (VA, 1984) a) A condition totally prohibiting the alienation of a vested fee simple estate, or requiring forfeiture upon alienation, is void. Exceptions include when land is granted to corporate entities for their special purposes and conditional limitations imposed by a life estate. b) A life estate may be created by implication as well as by explicit language, provided the will shows the requisite intent. c) The intent of the grantor is to be upheld if the will can be reasonably construed to effectuate such intent, as long as it is consistent w/ the law. d) The language of a will is to be construed in the context of its attendant circumstances. E. Trusts and the Cy Pres Doctrine 1. When a settlor makes a charitable trust and has a general intent to contribute to some charity, and the particular charitable purpose identified by the settlors becomes impracticable or impossible to achieve, courts may apply the cy pres doctrine to carry out the settlor’s charitable intent so far as possible by authorizing that the trust income be used for some other charity. a) This doctrine requires courts to determine whether the settlor’s intent was general or particular (did grantor intend to aid only the particular charity mentioned in the trust, or would the grantors have intended the trust to benefit some other charity if the first beneficiary ceased to exist?). IV. Regulatory Rules A. Future interests are regulated by both common law rules and statutes. B. The main structural rules include: 1. The Rule Prohibiting the Creation of New Estates; 2. The Rule Against Unreasonable Restraints on Alienation; 3. The Rule Against Perpetuities; 4. The Interpretive Rule Prohibiting “Waste” of the Present Estate; 5. The Prohibition on Invalid Racial Conditions; and 6. The Rule Against Unreasonable Restraints on Marriage i. Rule against Creation of New Estates (The Numerous Clausus Doctrine) A. Intended to discourage social hierarchy characteristic of feudalism and to promote a market system involving wide dispersal of property rights to prevent monopolies. B. Rule is that if a conveyance doesn’t fit w/in any established categories (including fee simple absolute subject to covenants, defeasible fees, life estates, leaseholds, and in a few states fee tails), then it must be interpreted to create the most closely analogous estate. 1. Means that grantors must put their conveyances in a recognizable form if they want courts to recognize the package of rights they intended to create. 2. Also means certain packages of rights won’t be recognized. a) One example is the abolition of the fee tail. C. Johnson v. Whiton (MA, 1893) 1. Royal Whiton executed a will bequeathing 1/3 of his property to Sarah Whiton (D) "and her heirs on her father's side," remainder over to his four other grandchildren. All five grandchildren contracted to sell the land to Johnson (P), who then refused to accept the deed, claiming that D could not convey a fee simple absolute. P sued to recover his deposit. 2. RULE: Grantors may not create new types of inheritance, and any attempt to do so will result in the full fee being conveyed. 3. Oliver Wendell Holmes, Jr. -----Under old English law, to take land by descent a person had to be "of the blood of the first purchaser," that is, the closest relative on the father's side, if the father was the grantor. Therefore, it was permissible to restrict inheritance to particular lineal decedents using words of limitation such as those contained in Royal Whiton's will. 4. However, under modern MA law, inherited property may pass from one line to the other. Therefore, Royal Whiton's attempt to create an estate descending only to heirs on the father's side was a new kind of inheritance (fee tail). As such, it must be rejected, leaving the estate a fee simple. Furthermore, the policy against restrains on alienation weighs against depriving D of her ability to convey an unqualified fee. Judgment for D. ii. Rule against Unreasonable Restraints on Alienation --See Relations Among Neighbors—XIII. iii. Rule against Perpetuities A. No conveyance of an interest in property is valid unless it vests, if at all, no later than 21 years (plus 9 months) after the death of some life in being at the creation of the interest. B. Policy Behind the Rule 1. We don't like dead hand control. a) To combat that, the rule places some limits on the ability of current owners to create future interests. 2. The rule arguably promotes the free transfer of property in the marketplace by limiting the creation of future interests. C. ELEMENTS: 1. Whether the interest vests, if at all (not the moment when the conveyance happens) a) ex: if life estate is given to A and B gets the remainder...it's inevitable that B will get remainder, b/c A will die eventually, so the interest will vest in B when A dies. b) ex: if life estate is given to B if she has a child by the age of 30...then the interest won't necessarily vest. If by 30, B doesn't have a child, then we know the interest will never vest. But until then we don't know...unless she has a kid. c) There are certain things that are automatically vested, those things are not subject to the rule against perpetuities. (1) Anything that is an interest of the grantor (reverter, right of entry, reversion, or vested remainder)is not subject to the rule. (2) But there are times when interests go to numerous people at different times. Then each transfer of interest is independently subject to the rule against perpetuities. (a) ex: O-->A-->B-->C-->O ... rule applies to A, B, C but not O (3) The rule does apply to executory interests, contingent remainders, or vested remainders that are subject to open. (4) The rule does NOT apply to vested remainders that are subject to divestment (defeasible remainders) 2. Life in being = ascertainable people at the time of the creation of the interest a) Watch out for children...may take more than 21 years for vesting b) Watch out for labels (spouse, wife, widow)...that's where the rule might produce some complicated results b/c there could be an argument that they aren't life in beings b/c they weren't around, or in that label, at the time of creation. c) Also in O-->A for life-->B....even if A conveys his interest to C, C still only has the interest as long as A is alive, so the focus is still on the time of creation of the interest itself. 3. Then you compare the vesting to the life in being PLUS 21 years. a) If the interest vests, it must do so within 21 years of any of the life in beings. b) If it will vest w/in 21 years of any of the parties at creation, then the interest survives the rule for everyone. c) But if it is possible that it would not vest w/in 21 years of all the parties at the creation, then the interest is invalid for everyone. D. Some courts have gone to the wait and see approach 1. They won't hold that a future interest violates the rule until the perpetuities period has passed and they are certain that the future interest has not vested w/in that period. 2. A/K/A they wait to see if there's a vesting after 21 years after last life in being dies. a) If so, it won't allow it. b) If not, it will. 3. They often use this when it's too complicated to determine beforehand and they don't want to prematurely hold the vesting invalid. E. Cy Pres (equitable reformation) 1. When a conveyance may violate the rule against perpetuities b/c it contains an age limit greater than 21 (O to A for life, then to first child of B to attain 25 years of age [when B has no children at the time])...then a) in that case, a court may reduce the age contingency to 21 if this will validate the future interest. F. Uniform Statutory Rule Against Perpetuities (adopted in more than half the states) 1. would validate future interests in donative transfers (those created in gifts, trusts, or wills) that otherwise violate the traditional rule, if the interest vests at any time w/in 90 years of the date of its creation. G. Abolition of the Rule 1. 15 states have abolished or substantially altered the rule against perpetuities to allow the creation of "dynasty" trusts of either real or personal property. a) Such trusts generate income for beneficiaries in perpetuity (or at any rate for a very long time) and take advantage of federal tax code provisions that make the gift tax free. 2. Some states abolished the rule either directly or indirectly—by adopting a very long perpetuities period. 3. Others abolished the rule for personal property but kept it for real property. 4. Others reformed the rule by allowing trusts w/ unvested future interests to last forever but limited the time period during which the power of alienation of the trust corpus (the principal giving rise to income) can be suspended...ensuring that the property can become alienable after the perpetuities period. 5. Some state abolished the rule as long as the trustee retains the power to alienate the trust corpus. 6. And some states abolished the rule but required the trust corpus to be distributed within a set time period. V. Concurrent Ownership and Family Property A. Tenancy in Common 1. All tenants have the right to possess the entire parcel unless the co-tenants agree otherwise by contract a) The fractional amounts in ownership are only important for how the purchase price will be divided when the property is sold. 2. When a tenant in common dies, his interest goes to his devisees under his will, or to his heirs if he hasn't left a will or otherwise disposed of the property. 3. Generally not all tenants have to live there at the same time to be tenants in common. 4. Question of at what point does a tenant in common have to pay a co-tenant rent (Olivas v. Olivas). 5. Carr v. Deking (Washington, 1988) a) RULE: A cotenant may lawfully lease his own interest in the common property to another w/o the consent of the other tenant and w/o the other tenant joining in the lease. B. Joint Tenancy 1. Each tenant has right to possess the entire parcel but they have traditionally been required to possess equal fractional interests in the property. 2. Right of survivorship = when a joint tenant dies, her property interest is immediately transferred to the remaining joint tenants in equal shares. 3. Formalities of Creation: a) unity of time = each joint tenant's interest must be created at the same moment in time b) title = all joint tenants must acquire title by the same instrument (title) c) interest = all joint tenants must possess equal fractional undivided interests in the property and their interests must last the same amount of time d) possession = all joint tenants must have the right to possess the entire parcel **Some states have abolished one or more of these formalities. 4. Severance = a joint tenant who transfers her property interest can destroy the right of survivorship of her fellow owners. 5. Tenhet v. Boswell (CA, 1976) a) RULE: A lease entered into by a joint tenant does not sever the joint tenancy. And a lease entered into by a joint tenant expires upon the death of that tenant. C. Tenancy by the entirety 1. available only to married couples 2. abolished in majority of states but still available in 20 3. similar to joint tenancy except: a) co-owners must be legally married; b) property cannot be partitioned except through a divorce proceeding; c) in most states, the individual interest of each spouse cannot be sold, transferred, or encumbered by a mortgage w/o the consent of the other spouse, with the result that the right of survivorship cannot be destroyed by transfer of the interest of one party; and d) in most states, creditors cannot attach property held through tenancy by the entirety to satisfy debts of one of the spouses.