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Property Outline

Property Outline
Acquisition by Discovery: The right to title was based on the discovery of land, if the
government allows title to vest.
 Johnson v. M’Intosh, SC (US) (1823) (p. 3): P (Johnson) purchased land from the
Chiefs of the Piankeshaw Indians. The Chiefs were duly vested by the tribe to
represent those rights that the Indians had. D (M’Intosh) acquired title to this
same piece of land by grant from the United States. The United States obtained
this land by grant from Virginia. P claimed that he had title from the US grant.
o SC (US): P has title by discovery because Native Americans do not have
the right to transfer land, only hold occupational/aboriginal title
 “Discovery gave an exclusive right to extinguish the Indian title of
occupancy either by purchase or by conquest”
 Property rights are a derivative of the society/government you live
in: Right of property requires power to enforce the title
 Land in abundance: Regulation of title avoid conflicting
settlements and war, creates certainty without discovery
 Drawbacks to communal ownership:
o Inefficient: Each voter needs to acquire information about the land before
voting, no vested interest/benefit from land
o Incentive: People seek most efficient and productive use of land
o Tolerate communal ownership till scarcity an issue
o Regulate to prevent overuse of resources
 Tragedy of the Commons:
o If communal ownership, each person only likely to consider impacts to
themselves rather than whole
o Communal ownership my lead to overuse of resources
o Scarcity = private property v. Abundance = communal
Acquisition by Capture: Mere pursuit is not enough to acquire. A hunter must
either trap or mortally wound a wild animal in order to acquire title to it.
 Pierson [caught] v. Post [pursuit], SC (NY) (1805) (p. 18): P (Post) discovered a
fox on wild and uninhabited land. In an attempt to capture the fox, P began to
hunt and pursue the fox with his dogs. Even though D (Pierson) knew that P was
hunting the fox, D killed the fox and took possession of it. P contends that he
acquired title to the fox because P was the first to hunt it. D maintains that D
acquired title to the fox because D killed it.
o SC (NY): D has title because he killed the fox and attained acquisition by
 “For the sake of certainty, and preserving the peace and order in
 Less litigation
 Maybe more peace and order
o Dissent: P should have title because foxes are a public nuisance and killing
foxes is in the public interest.
 Kill foxes to protect chickens
 Sterk: Valid argument because capture rule defeats
incentive to protect chickens
 Kill foxes for sport:
 Sterk: Unknown whether capture rule will affect sports
 Kill foxes for game/fur
 Sterk: Possibly valid argument because hunters will chose
other profession rather than hunting if capturers have title
Acquisition by Find: The finder of lost property has a title superior to all but the
true owner.
 Armory [finder] v. Delamirie [subsequent possessor], King’s Bench (1722) (p.
98): P (Armory) found a jewel and took it to D (Delamirie)’s jewelry shop to have
it appraised. D’s apprentice removed the stones. D offered three half pence to P
for the jewel. P refused this offer and demanded the jewels to be returned to him.
D refused to return the stone. P sues D.
o The finder of lost property has a title superior to all but the true
o King’s Bench: P wins because he has superior title to D
 Finder does not acquire absolute title: True owner retains absolute
title to lost item
 Finder acquires title superior to the rest of the world
 Best rule for an owner claiming lost items is proof of prior possession: It is much
more likely one can prove this then proving true ownership
 Hannah [finder] v. Peel [property owner], King’s Bench (1945) (p. 101): D (Peel)
owned the house, but never occupied it. P (Hannah) stationed in the house found a
brooch. P told his commanding officer, gave brooch to police, police gave it to D
who then sold it.
o Property owner does not necessarily have title to all that is found on
his property
o King’s Bench: P wins because D never occupied his land and the finder of
property on D’s land has superior title against D (landowner)
 D never lived in house: Brooch not likely his
 D had no knowledge of brooch until P found it
 Bridge v. Hawkesworth: Finder finds a parcel of bank notes on the
floor in the landowner’s shop open to the public (finder wins:
because had better title than the landowner)
 South Staffordshire Water Co. v. Sharman: Find finds rings in mud
at the bottom of a pool that his employer/landowner had him clean
(landowner wins: landowner possesses everything attached to or
under his land)
 Find rule rationale: Finder returns object to true owner
o Incentive for finder: Title claim to finder if true owner not found
o Public place v. Private land: Public finder wins possession because he will
have an incentive to find true owner. Private finder loses possession
because has less incentive to return lost item because item probably
belongs to owner or someone owner knows.
o Employee v. Not employee: Employee loses title to landowner because
has personal, non-legal incentive to return lost item. Non-employee wins
title to landowner because requires more incentive to find true owner.
o Attached/below land v. Surface of land: Finder loses title over lost items
found attached/below land in order to give landowners title over land they
didn’t disturb and still own to prevent snooping. Finder wins title of lost
items on the surface because lower issue of snooping.
Adverse possession requirements
 (1) Actual and exclusive entry: Use of the property in a manner that an
average TO would use it under the circumstances
o Cultivation or improvement for actual occupation (Van Valkenburg v.
 (2) Open and notorious: Such that it would put the reasonably attentive TO
on notice that someone is on their property
o “Sleeping principle”: Penalize the negligent and dormant owner for
sleeping on their rights
o If entry was not reasonably observable, we could not rightfully blame a
TO for being “dormant”
o Notice requirement is aimed at constructive not actual notice: Objective
test whether the AP’s acts would be notice by the reasonably diligent TO,
then the TO is regarded as knowing what should have been known
o Minor encroachments are not notorious enough to give actual or
constructive to TO (Mannillo v. Gorski)
 (3) Continuous for the statutory period:
o Not literally constant: AP may exist even if the AP does not reside on the
property and for long periods does not use it at all
o Common generalization: “AP entry and possession that will ripen into title
by AP is use of the property in the manner that an average TO would use it
under the circumstances, such that neighbors and other observers would
regard the occupant as a person exercising exclusive dominion”
o Continuity in providing adequate notice to TO: Continuous use
fulfilled if property follows normal usage (Howard v. Kunto)
o Tacking: Where several successive purchasers received record of title
in a continuous manner, their privity of estate permits tacking their
time of possession together (Howard v. Kunto)
 (4) Adverse/hostile and under a claim of right:
o Possibly determined from AP’s “state of mind”
o Lease is not adverse where there is permission: If TO gives permission
then it is likely not adverse since permission leads the TO not to take
action without fear of AP (Othens v. Rosier)
o Hostility not necessary: Where all other elements are elements are
established, hostility is presumed and the burden shifts to the TO to
rebut the AP presumption (City of Tonawanda)
o Mistaken possession: Even possession by mistaken thinking is AP if it
is visible and evidences an intent to possess, conduct trumps
knowledge (West v. Tilley, Walling v. Przybylo)
o Reasonable basis for belief of ownership: Require affirmative
evidence that a reasonable person would believe they owned the land
(NY Statute)
o No AP of municipal land: Land held by municipality that is used for
public or governmental purposes is not subject to AP (City of
Claim of title standards:
o Objective standard: State of mind is irrelevant and SOL begins to run at
the time of AP entry
o Good-faith standard: Requires a “I thought I owned it” state of mind,
punishes purposely trespass and protects innocent possessor
o Aggressive trespass standard: Requires a “I thought I did not own it but I
intend to make it mine” state of mind
AP state of mind does matter
 Van Valkenburg [TO] v. Lutz [AP], COA (NY) (1952) (p. 122): D (Lutz, AP)
owned property adjacent to the one in question and partially cleared TO property,
built a one-room structure, tended a garden, kept chickens. After P (Van
Valkenburgh, TO)’s letter, D removed from only part of TO property and claimed
a prescriptive right of way across the land. D wins a right of way across the land.
P sue D for TO property. D claims TO property acquired by AP.
o In order to acquire title by AP, possession must be actual, under claim
of title, and the land must be either enclosed or sufficiently improved
o COA (NY): P (TO) wins because D’s AP state of mind matters
 AP state of mind matters:
 D no claim of title (one portion): In prior case, D admitted
P’s prescription for right of way
 D hostile claim (other portion): D believed land his own
 D did not erect substantial enclosure of land
 D did not cultivate or improve land: Not sufficient AP investment
in the land
o Dissent: The standard for hostility should be objective because it is too
difficult to determine good faith or state of mind
o Dissent: State of mind is irrelevant because everything besides cultivate is
dicta. All that matters is D is taking actions TO would
o Conflict: Court holds that cultivation/improvement on portion of land that
D thought was his does not count for AP. Implication that AP does not
apply to land D thought was his.
Mistaken belief: As long as the person possessing the land treats it as an ordinary
owner would, possession is hostile
 West [TO] v. Tilley [AP], Appellate (NY) (1970) (ANGEL): D (Tilley, AP)
owned land on a shore. D built a wall along the shoreline that extended along the
frontage owned by P (West, TO). D later built an additional wall, creating a
triangular tract of land which D cultivated and maintained.
o Mistaken belief does not defeat hostility requirement
o Appellate (NY): D (AP) wins because mistaken belief still hostile
 D possession open and notorious: Even a casual inspection of the
boundary lines of the property would have revealed AP occupation
 D had claim of right: Hostile intention to possess the land under a
mistaken belief
 D had cultivation and improvement: D’s walling and land
improvement satisfies notice requirement
 Overrule Van Valkenburgh: Holds Van Valkenburgh finding that
AP claim for mistaken garage encroachment was dicta and the case
really turned on AP’s insufficient cultivation of land
Cultivation and improvement
 City of Tonawanda [TO] v. Ellicott Creek Homeowners Assn [AP], Appellate
(NY) (1982) (ANGEL): P (City, TO) recorded title to creek front land, but D
(Ellicott Creek, AP) own property across the road as well as others used the
property for years.
o Presumption of hostility if all other elements are met and burden to
rebut presumption shifts to recorded owner
o AP concession of TO ownership defeats AP claim
o Cultivation and improvement involve more than mowing lawn and
planting trees
o Municipal land for public/governmental purposes not subject to AP
o Appellate (NY): P (TO) wins some land
 Presumption of hostility as long as other elements met
 Cultivation insufficient: Only mowed lawn and planted trees
 Cultivation sufficient: Replaced the dock, put up a light pole,
installed a retaining wall, mowed the grass, granted others
permission to moor boats at his dock
 Use of the land in the usual way by the surrounding area
 Enough to put true owner on notice
 Land held by municipality used for public or governmental
purposes not subject to AP
 Government owns lots of land: Huge burden for
government to monitor all land
People know government has title: Government will not
bring claim against citizens because citizens don’t have
claim of title
 Negative treatment of Van Valkenburgh: AP claim failed because
AP conceded TO ownership
o Possible TO evidence to rebut presumption of hostility:
 Prove TO gave permission to AP to occupy land
 Statement from AP to TO showing knowledge that it was TO’s
o AP concession that AP lacks title before SOL defeats AP claim:
 TO after hearing AP concession will not bring an action
 AP recognition after SOL will not defeat AP claim
Tubolino [AP/Deed] v. Drake [TO], Appellate (NY) (1991) (ANGEL): P
(Tubolino, AP) hunted, fished, trapped, and walked on property. P cut trees and
fallen logs, used wood for heating, and sold timber to logger that P let on property.
P constructed a road, drainage culvert, repaired a footbridge, posted a “no
trespassing” sign. P claimed title against D (Drake, TO) claiming P’s deed was
o Less stringent statutory requirement for AP with a written
o Appellate (NY): AP wins because written instrument and cultivation
 P (AP) cultivation sufficient: Cut timber, constructed road,
installed a drain, put up “no trespass” sign (nature of the property
and the use to which it can be applied)
 Less requirements for AP with written instrument: Lack of
permanent structures is still satisfactory
 Negative treatment of Van Valkenburgh: P’s AP claim succeeds
even though did not build structure or plant vegetables as in Van
o D (TO) possibly argue: P (AP) did not meet building permanent structures
requirement for cultivation in Van Valkenburgh and City of Tonawanda.
Mindset does not matter: Conduct over knowledge satisfies hostility requirement
 Walling [AP] v. Przybylo [TO], COA (NY) (2006) (ANGEL): P (Walling, AP)
owned a lot next to D (Przybylo, TO). P claimed a huge piece of land; bulldozed
and deposited topsoil, placed underground dog wire fence; mowed, graded, raked,
planted, watered grass; placed PVC pipe; installed bird house. P occupied the land
for longer than the SOL. When learning of a survey by D, P sued D to quiet title.
o AP claim will not be defeated by knowledge of another’s legal title:
Adverse conduct prevails over knowledge of TO rights
o COA (NY): AP wins because adverse conduct trumps knowledge of
another’s property rights
 D satisfied all the elements for AP claim
 Subjective mindset does not matter: No regard good faith or bad
faith, conduct over knowledge
Policy: Evaluating subjective knowledge is too difficult and TO
should not “sleep on rights”
 Negative treatment of Van Valkenburgh:
 Van Valkenburgh held knowledge that knowledge of TO
rights defeats AP claim
 Walling holds language was dicta and knowledge that land
belongs to another does not matter and subjective mindset
does not matter
o Walling reversed by NY statute
NY Revised 2008 Statute for Adverse Possession:
 Keep common law requirements: Exclusive and actual, open and notorious
 Different in regards to hostile/claim of right: Require affirmative evidence
that a reasonable person would believe they owned the land
o AP cannot gain title unless AP can produce evidence that would justify a
reasonable basis of ownership (e.g. statement by seller, survey the owner
would take up)
o Overturn Walling: Knowledge that another person owns the land will
defeat an AP claim
 Cultivation and improvement: Act open in such a way that would put a
reasonable person on notice
o De minimus non-structural improvements are considered permissive and
o Depends on the area and the uses of the property
Open and notorious: Minor encroachment is not notorious enough to give actual or
constructive notice to TO
 Mannillo [TO] v. Gorski [AP], SC (NJ) (1969) (p. 136): P (Mannillo, TO) seeks
injunction against D (Gorski, AP) for 15 inch cement steps encroachment. D
claims AP. P claims no AP because no hostile claim of title.
o Mindset does not matter: Mistake over property lines is no bar to
meet hostility/claim of right requirement
o No presumption of notice for minor encroachments
o SC (NJ): Order TO to sell to AP the land rather than AP tear down cement
steps encroachment, use Liability Rule
 Hostility sufficient: D’s mistaken belief no prevent AP claim
 Open and notorious insufficient (not constructive notice): Cement
steps are a minor encroachment that require a survey
 No presumption for minor encroachments: Only TO actual
knowledge of minor encroachments will satisfy open and
notorious requirement
 Burden on AP to conduct survey: AP best position to avoid
 No burden TO: High burden to conduct a survey every time
potential AP builds
o Property Rule:
Injunctive relief to TO and prevent AP from enjoining. TO
controls whether he sells to AP
 Pro: Incentivize TO to use markets and use rights to
negotiate rather than AP
 Pro: Allow TO to set a price that includes subjective value
 Pro: Prevent incentive to steal land
 Con: Overcompensate TO for a good-faith honest mistake
 Con: Too much leverage to TO
o Liability Rule
 Liability Rule: AP must pay money damages
 Pro: Mitigate damages for good-faith belief
 Pro: Mitigate damages if TO not interested
o In difficult/unknown situations, courts choose Liability Rule over
Property Rule
Tacking: Tacking on successive possessions of property is permitted for purposes of
establishing adverse possession if the successive owners are in privity
 Howard [TO] v. Kunto [AP], COA (WA) (1970) (p. 142): D (Kunto, AP) had a
recorded title to tract #1 but mistakenly thought it was for tract #2. D bought land
from Millers who though the mistaken tract was theirs. P (Howard, TO) and D
have summer homes on adjacent property. P tried to convey his land to a 3rd party,
but found his deed was actually for the adjacent lot. P sue D. TC: Find for P (TO)
o Tacking: AP claim by privity with successive owners that satisfy AP
elements under same claim of title
o COA (WA): AP wins because able to tack possession to immediate
 TC found privity problem: No privity because D’s deed from
predecessor did not describe land occupied by D, actual transfer of
possession is insufficient for privity
 Continuous use sufficient: Continued use in summer and continued
improvement of land in the ordinary way of owners
 Sufficiently adequate notice to TO: TO would have
checked in summer
 Privity sufficient: Enough connection between estates to tack
estates to satisfy statutory requirements
 Tacking: AP elements with previous title holders under same claim
of title
 Tacking streamlines title search process
 Prevents need for purchasers to do a survey every time
 Policy: “Favoring early certainty as to the location of land
ownership which enters into a proper interpretation of privity”
o P (TO) counterarguments to D (AP) normal AP claim:
 P argue: Deed evidence of possession
 D argue: Rebut presumption by showing evidence of actual
physical possession
 P argue: D possession not continuous enough for AP claim
D argue: D possession continuous enough for summer home
Possessory estates: Present interests.
 Estate: A divisible bundle of rights, denoting legal relations between persons with
respect to a thing
 Fee interest: Potentially infinite, can also be defeasible, in which this interest
might be cut into smaller parts
 Life interest: Maximum possible duration of a life interest is someone’s lifetime.
Can be transferred, but the interest length stays with the transferor
 Terms of Years: A certain amount of time you are a tenant
Hierarchy of estates
 Alienability: Whether something is eligible to be transferred to another.
 Fee Simple: The most powerful and flexible estate. An estate unencumbered with
restrictions on use or alienability.
o Estate that has the potential to endure forever
o “To B and his heirs.”
o “To B forever”
 Fee tail: Estate has the potential of lasting forever, but will cease whenever the
tenant does not have a lineal descendant to succeed him.
o Only a few states still recognize this type of estate.
o “To B and the heirs of his body.”
 Life estate: Estate will end at the death of the person.
o “To B, so long as he lives”
o “To B for his life.”
 Heirs: Instate successors to A and unknown until A dies
 Issue: A’s descendents (children, grandchildren, etc.)
 Ancestors: A’s parents
 Collaterals: All person related by blood to A who are neither descendants nor
 Escheat: If A dies instate without heirs, then his real property escheats to the state
where it is located
Restraints on alienation
 Disabling restraint: Withholds the grantee’s power of transferring his interest
o Absolute restraint (disabling restraint) is void
o Disabling restraints don’t leave anyone to enforce them
 Forfeiture restraint: Grantee’s attempt to transfer his interest forfeits it to another
o Partial restraint (forefeiture restraint) may be valid
o Forefeiture restraint does have enforcers but parties could counter
grantor’s wishes
Promissory restraint: Grantee promises not to transfer his interest
Trust: Trustee holds the legal fee simple and acts as the manger of the property
and may be directed to pay all the income to the life tenant or to the life tenant in
Objections to restraints on alienation
 (1) Restraints make the property unmarketable
 (2) Restraints tend to perpetuate the concentration of wealth by making it
impossible for the owner to sell property and consume the proceeds of sale
 (3) Restraints discourage improvements on land
 (4) Restraints prevent the owner’s creditor’s from reaching the property and
satisfying credit needs
Presumption of fee simple: Restraint on alienation is in of itself insufficient to
overcome presumption
 White v. Brown, SC (TN) (1977) (p. 202): Decedent (Jesse Lide) died with a
handwritten will. Decedent left her house to P (White, sister-in-law) by saying, “I
wish Evelyn White to have my home to live in and not be sold.” P claims grant
gives a fee simple absolute. D (Brown) claim that P was only given a life estate
and that D has the remaining interest.
o In ambiguous cases, the courts will interpret the testatrix intent to
transfer a fee simple rather than a life estate
o SC (TN): Reverse lower courts for P because grant read with presumption
of fee simple absolute
 Restraint on alienation not enough to overcome presumption of fee
simple and create life estate
 TN statute (fee simple presumption statute): Overturn common law
presumption of life estate
 Absolute restraint on alienation contrary to public policy
 Disabling restraint not permitted because no one to enforce
 Fee simple > Life estate:
o Fee simple gives effect to the intent of more grantors
o Fee simple is more likely efficient/productive use of land
 Life estate requires negotiating with remaindermen to contribute to
cost of property upkeep
 Remaindermen negotiation problems: Multiple negotiations, hard
to locate all remaindermen, hard to identify all remaindermen
 Owner in fee simple more likely to make efficient, productive use
of the land without future interest holders
Waste Doctrine: Waste of property by life tenant is an actionable injury for a
 Purpose of waste doctrine:
o Give effect to the intention of the grantor: Law presumes grantor intended
life estate holder to pass possession of property to future interest holder in
approximately the same condition as it was received
o Don’t want to let life estate use land unproductively and inefficiently
o Life estate should not be able to use property in a manner that
unreasonably interferes with expectations of future interest holders
Waste occurs when life tenant permanently impairs the property condition
or value to the future interest holder’s detriment:
o Future interest holder only has a waste claim if life tenant is damaging the
o Life tenant is allowed to do what is reasonable to property: Evaluate how
fee owners would treat the property
Unless strong evidence of grantor’s intent that the land be used a certain way,
a court will generally allow a productive use of land
o Counter remaindermen injunction that is then sold to life tenant to get a
share of the profits that will come from a change in the life estate
(1) Affirmative waste: Voluntary acts that substantially reduces the value of
the property
o Demolition of worthless improvements in order to permit productive use
of land will not constitute waste
(2) Permissive waste: Negligent failure to act and take reasonable care of the
o Failure to pay property taxes, mortgage payments, repair leaky roof
(3) Ameliorative waste: Waste that increase rather than decrease the market
value of the land (Woodrick)
PRO (future interest holder) waste doctrine:
o Not to sell property:
 Grantor wanted remainderman to get something of value and
wanted the remainderman to get the property and not just money
from a sale
 Allowing life tenant to cut down all the trees promote inefficiency:
Property should have time to mature and life tenant is impatient
o To sell property:
 Life tenant is materially devaluing land compared to the potential
 If life tenant fails to sell property now, I foreclose the possibility of
future profit (opportunity cost)
Waste doctrine: In ordering a sale of land, courts must balance the interests of those
who have a present interest and those who have a future interest
 Baker v. Weedon, SC (MS) (1972) (p. 210): John Weedon will granted, “Life
estate to Anna, remainder to Anna’s children or otherwise grantor’s
grandchildren.” D (Anna, life interest) seeks to sell the property in order to escape
financial difficulties. D claims economic waste because D argues she can gain
more from sale than farming. Ps (Baker and remaindermen, future interest) seek
to prevent sale of the property because they believe the value of the property will
increase. Ps seek to take the property after D dies rather than pay interest. TC:
Finds for D, orders sale because of waste.
o A court shall order a judicial sale only if it is in the best interest of
both the freehold tenant and the future estate holder
o SC (MS): Remand to lower court to negotiate a settlement that will best
serve the interests of everyone, reverse order of judicial sale
 Court recognizes D’s financial difficulties
 D economic waste claim insufficient: Best use of the land is its
current farming use
 No judicial sale: Sale would cause great financial loss to
remaindermen who would lose future profits in land
o If lower court cannot negotiate a settlement on remand:
 Partial sale to cover D (life tenant)’s lifetime reasonable needs with
interest to D
 P (remaindermen) pay D (life tenant) a yearly fee
o Data to consider in evaluating D (life tenant)’s reasonable needs:
 Present interest rate
 Estimates of D’s costs and expenses
 Future medical expenses
 Typical court auction data numbers
 Poverty line data to provide minimum threshold for reasonable
Avoiding the life estate restraint on alienability problem:
o Give life estate the power to sell
o Trust: Trustee can do what is best for the property (sell with proceeds
going to D for her reasonable needs)
 Trustee holds legal fee simple as manager of the property and may
be directed to pay all income to the life tenant
 Trustee has duty of impartiality: Must treat all beneficiaries
equally and can stipulate treat someone as principle beneficiary
 Fixes ambiguity: Trustee has legal title to make all decisions and
does not need remaindermen consent
 Creditor protection: Beneficiary cannot assign property interest of
trust to others
Ameliorative waste doctrine: If there is no diminished value to the property by the
life tenant, there is no waste
 Woodrick v. Wood, COA (OH) (1994) (p. 218): D (Wood, life estate) wanted to
remove a barn partially located on the life estate and partially on an adjoining lot.
P (Woodrick, remainderman) sought to enjoin destruction of the barn on the
grounds that it would constitute waste by D to the detriment of P. Evidence
established that removal of the dilapidated barn would actually increase the value
of the parcel as a residential property and that its original use as a stable was no
longer permitted by zoning ordinances. TC: Find for D, no injunction but ordered
D to pay P for cost of barn.
o If a life tenant’s actions do not decrease the value of the property, the
future interest is not harmed and there is no waste claim
o COA (OH): Affirm TC for D because no devaluing of property
No waste claim: D is actually increasing property value by
destroying barn
No contrary grantor intent: No evidence that grantor sought to
keep barn
No injunction: Fear P seeks to use injunction to leverage money
from D to get share of profits from productive change in estate (P
will reap benefits later after life estate ends)
Defensible estate: An estate that will terminate prior to its natural end point, upon the
occurrence of some specified future event
 (1) Fee simple determinable: This is a fee simple estate that will end
automatically if some specified event occurs, and grantor has possibility of
o It is a fee simple because it may last forever
o It is “determinable” because the occurrence of the specified event, it will
automatically end
o Typical language (temporal): Words of durational nature
 “To A so long as”
 “To A while”
 “To A until”
 (2) Fee simple subject to a condition subsequent: Fee simple that does not
automatically terminate, but may be cut short or divested at the transferor’s choice
when a stated condition happens. Grantor has right of entry.
o Grantor has to re-enter the property in order to terminate grantee’s interest
o Typical language (conditional): Not durational in nature
 “To A, but if A is ever adjudicated insane, then G has the right to
 Look for words: “But if,” “provided,” “however,” “that when the
premises,” and/or “on the condition that the premises”
 Policy: If ambiguous, courts favor FSSCS over FSD
o With FSD, after breach the person actually using the property does not
have interest because it automatically reverts back and grantor gains an
interest that he might not know
o With FSSCS, whoever uses the property actually owns it
 (3) Fee simple subject to an executory limitation: This is the same thing as a
fee simple determinable except that it divests in favor of a third person rather than
a grantor.
o Typical language: “To A so long as he is sane, else to B”
 Covenant: Grantor is only able to sue for damages or injunctive relief, but not for
re-entry. Grantor does not get an automatic reverter. Grantee has a fee simple
absolute open to suit for violation of covenant.
o Typical language: “The school district covenants to use the land only for
school purposes”
o Covenant benefits over FSD: Covenants have higher security (never revert
back to grantor/heirs)
 Transfer of future interest (possibility of reverter/right of re-entry):
o Majority rule: Possibility of reverter and right of re-entry are
transferable inter vivos (not in Mahrenholz)
o Minority rule: Common law rule that future interests are not
transferable except to the owner of the possessory fee
 Minority rule allows release not transfer because it prefers fee
simple absolute (release is more likely to get land back to fee
simple absolute and most productive use of land)
 Restriction: A grantor can restrict use but not the alienation of his
conveyed property (Mountain Brow Lodge)
Adverse possession: SOL starts running when the future interest becomes
possessory at the time of breach
Distinguishing fee simple determinable from fee simple subject to condition
 Mahrenholz v. County Board of School Trustees, Appellate Court (IL) (1981) (p.
226): Huttons conveyed a defeasible fee to D (County Board of School Trustees).
The deed read, “This land is to be used for school purposes only; otherwise to
revert to grantors herein.” Huttons conveyed reversionary interest  Jacqumain
 P (Mahrenholz). Huttons died, leaving only legal heir Harry Hutton. Illinois
statute holds possibility of reverter and right of re-entry cannot be conveyed inter
vivos. Harry Hutton conveyed any possibility of reverter or right of re-entry to P.
D used school for classes, then for storage. P claims Huttons deed created a FSD
with P’s possibility of reverter and claim to land. D claims deed created a FSSCS
with P’s right of re-entry. TC: Find for D, deed created FSSCS.
o Court may interpret a deed to contain a FSD rather than a FSSCS,
even without a temporal aspect, if consistent with grantor’s intent
o Appellate Court (IL): Reverse TC for P because deed created FSD with P
holding possibility of reverter
 Illinois statute prevents conveyance of reversionary interest inter
vivos: P acquired any interest from Harry Hutton
 Deed created a FSD: D stopped using property for school purposes
allows Harry Hutton to convey a FSA to P
 “For school purpose only”: Huttons conveyed land only as
long as it was needed and no longer
 “Otherwise revert to grantors”: Trigger an automatic return
of the property to the Huttons
 Precedent holds similar language held as FSD
 Negative treatment of McElvain v. Dorris: Similar language that
results in a FSSCS. Court says parties did not argue the issue so
mistaken dicta
Restraints on alienation are void: Conditions restricting land use are enforceable
 Mountain Brow Lodge No. 82, Independent Order of Odd Fellows v. Toscano,
COA (CA) (1967) (p. 236): Toscano, an active member of P (Mountain Brow
Lodge), deeded property to P. The deed stated that the land was conveyed in
consideration of “love and affection.” The deed provided that the lot shall revert
back to Toscano if P ever failed to use the lot or attempted to sell or transfer it. P
contents that the language is a restraint on who may use the land and the restraint
on alienation is void. D (Toscano heirs, reversionary interest holders) contend that
the language creates a FSSCS. TC: Find for D, deed created a FSSCS.
o The use of land may be restricted in a conveyance
o COA (CA): Affirm TC for D, deed created a FSSCS
 Deed intends a FSSCS: No mean or intend restrain on alienation
 No formal language but grantor’s intent
 “Love and affection”: Toscano was an active member
 “The land is restricted for use of the second party”: Land to
be used for Lodge purposes
 Restrictions on land use are valid as a condition subsequent
o Dissent: Use restrictions are just as effective in making the land
inalienable as restrictions on alienation
 P (Lodge) cannot sell the property and must use it: Practical effect
of restriction on alienation
o Use restriction holds that Lodge must use the land: Implication that Lodge
cannot sell the land
 Lodge maybe able to lease property, but grantors may object to
benefit of second party
PRO use restrictions:
o Cite Mountain Brow Lodge
o Use restrictions allowed to be enforced, P (Lodge) could reach an
agreement with D (Toscano heirs) to sell and release property to a third
 Bilateral monopoly: Market incentive on both P and D to sell their
interest to a third party
o Non-profits benefit community and voiding use restrictions would deter
people from granting to public organizations (promote charity gifts)
o Allow restrictions to non-profits will not create a damaging effect on
grantors (most land granted to private people)
o If void use restrictions, grantors might not sell land they own because they
cannot control how the land will be used by a neighbor (no one wants
hotel next door)
CON use restrictions:
o Distinguish Mountain Brow Lodge: Use restriction there was for public
interest organization rather than private individual
o Land restrictions create unmarketable properties and this not efficient for
market because land will be too expensive for those buying
 P (Lodge) can sell to someone who seeks a meeting hall, but if no
market for meeting hall then practically restraint on alienation
o Tight restriction on use prevents P (Lodge) from getting a mortgage or line
of credit because creditor cannot foreclose property
Valuation of fee simple absolute and a fee simple determinable
Ink v. City of Canton, SC (OH) (1965) (p. 243): Harry Ink conveyed land to D
(City of Canton, FSD) to be used as a park and for no other use. D used the land
as restricted until Ohio state condemned it using eminent domain. Ohio state paid
$130,822 to an account to be paid to those with interest in the land. P (Ink heirs,
reverter holders) claims the right to retake the premises and take the entire
account money because the land is no longer being used as a park. D claims it
gets the entire sum since it has not voluntarily elected to stop using the land for a
o Eminent domain: Grantor should be awarded the difference between
value of the property with restriction (in deed) and increased value
once restriction is removed
o SC (OH): (FSA) – (Valued FSD) = Big right of reverter = P (Ink heirs);
(Valued FSD) = D (City of Canton)
 Precedent: No reverter when eminent domain proceedings prevent
the land from being used as restricted
 Rule unfair: Grantor reverter destroyed; grantee gets more
than original grant
 D paid nothing for the FSD
 D has a fiduciary duty to use the land for a park
 P entitled to value of land with no restriction less the value of the
land with a use restriction
 With FSD valued first, P gains: Represent transaction cost,
more inclined to give money to Ink heirs
 D entitled to the value of the land with a use restriction
o Valuation:
 Court method (P favored): FSA – FSD (valued) = Big right of
 Alternate method (D favored): FSA – Right of reverter (valued) =
Categorizing future interests  First question: Is the future interest in the grantor
(transferor) or in someone else (transferee)?
Future interest in grantor
 Reversion
 Possibility of reverter (FSD)
 Right of re-entry (FSSCS)
Future interest in someone else (transferees)
 Vested remainder: Remainder that is (a) created in a living ascertainable person;
AND (b) not subject to any condition precedent, except the natural termination of
the prior estate. Capable of becoming possessory at the termination of the prior
o Indefeasibly vested remainder: You’re definitely going to get it in the
future. Can’t be taken away.
o Vested remainder subject to partial divestment (subject to open):
You’re going to get something, you just don’t know how big the piece of
the pie will be.
o Vested remainder subject to complete divestment/defeasance:You may
not get it.
Contingent remainder: A remainder is contingent if it is (a) subject to a
condition precedent (other than the natural termination of the prior estate; OR (b)
created in an unascertainable person.
Executory interest: Time gap or when the future interest divests / cuts off
someone else’s interest.
Difference between remainder and executory interests
“To A for life, then to B if B gives A a proper funeral.”
 If we go with the definition that a remainder is capable of becoming possessory at
the termination of the prior estate, B’s interest cannot be a remainder since B will
not have given A a proper funeral by the time A dies. There has to be a time gap.
 B’s interest does not satisfy the definition of remainder and is thus executory
 Executory interest is a residual category: If it doesn’t satisfy the definition of
remainder and it creates a future interest in someone other than the grantor, we
call that an executory interest.
 Note: Executory interests tend not to be hugely important today. We will mostly
consider what type of remainder interest someone has.
 Two ways to become an executory interest:
o (1) Time gap
o (2) The future interest cuts off the grantor/transferor’s interest
Remainder interest: Capable of becoming possessory at the termination of the prior estate
 Indefeasibly vested remainder
o “To A for life, then to B and her heirs”
o Nothing can reduce or eliminate the share that B takes when A dies. B is
going to get it no matter what.
 Vested remainder subject to partial divestment (subject to open)
o “to A for life, then to A’s children and her heirs.” A is alive and has one
child, B.
o Remainder in B is vested (he’s gonna to get something) but not
indefeasibly vested bc B’s interest can be reduced in size if A has more
Contingent remainder
 “To A for life, then to the heirs of B.” B is alive.
o B’s heirs have a contingent remainder
o When B dies, B’s heirs have an indefeasibly vested interest.
expect to be heirs, but that’s it
Heirs are determined at death, and you can’t have a vested remainder in
unascertained devisees
Key factor: Are there identifiable people at the time the conveyance is made?
o NO  contingent interest. You can’t have a vested remainder in
unascertained people
o YES  Vested remainder
“To A for life, then to B and her heirs if B survives A.”
o Another example of contingent remainder. B is an ascertained individual,
but we can nonetheless say B’s interest is contingent.
o B’s interest is subject to condition precedent; it’s all in the same clause;
B’s interest can become possessory if B survives A.
Difference between contingent remainder and vested remainder subject to complete
 “To A for life, then to B and her heirs, but if B does not survive A, to C and his
o B’s interest is not indefeasibly vested
o No guarantee that B’s interest will become possessory
o B’s interest is subject to a condition subsequent
o B may end up with nothing if B does not survive A
o So, what do we call this? Vested remainder subject to complete
o 1st example: The condition requirement is part of the same clause as the
future interest.
o 2nd example: The condition requirement is in a separate clause after the
interest (subsequent condition), separated by commas.
o B has a condition subsequent: Thus we say that B has a vested interest
subject to complete divestment
o Common law rule: Where comma is placed matters!
 If the condition is in the clause before the grant or same clause,
then the condition is a contingent remainder.
 If the condition is in a subsequent clause, then it’s vested interest
subject to divestment.
Grantor intent: Ambiguity between vested remainder (outliving testator) v.
contingent remainder (outliving life tenant)
 Browning v. Sacrison, SC (OR) (1974) (ANGEL): Kate Webb conveyed a life
estate to her daughter, Ada (life tenant), and upon her death a remainder to her
grandsons Franklin Browning and Robert Sacrison. The will stated, “To Ada
Sacrison, a life estate, with remainder over at her death to my grandsons, if either
of them be dead, then to the other.” Franklin died before Ada and P (Franklin’s
wife) argued that Franklin’s indefeasible interest vested at Kate Webb’s death. D
(Robert Sacrison) contends Franklin had a contingent remainder requiring
Franklin to outlive Ada (life tenant). TC: Find for D, P had a contingent
remainder that failed.
o SC (OR): Affirm TC for D because Franklin only had a contingent
remainder on that condition that Franklin outlived Ada (life tenant)
 Acknowledges common law presumption for early vesting
 Counter presumption for early vesting (intent to prevent Franklin’s
father from inheriting): If survivorship requirement, then survive
the life tenant
 Grantor intent: Avoid giving interest to Franklin’s father
 If interest vested and Franklin died single, father could get
property as an heir through intestate succession
 “At the time of my death” specified elsewhere: If grantor
wanted to require survival of grantor, she would have
specified it
 90% of the time testators intend survivorship of life tenant
Court favors early vesting without grantor’s clear contrary intent
 Swanson v. Swanson, SC (OR) (1999) (ANGEL): George Swanson created two
trusts, which left Gertrude (wife, life tenant) a life estate and left the remainder to
his nine children including Bennie Swanson. Bennie died. P (Peggy Swanson,
Bennie Swanson’s wife) claims entitled to Bennie’s remainder because the
interest vested once George Swanson died. D (George Swanson children,
remainermen) claim the trust left a vested remainder subject to complete
o SC (OR): Rule for D because Bennie’s interest was vested subject to
complete divestment, P is not entitled to Bennie’s share
 Acknowledges presumption of early vesting and presumption of
conditions subsequent
 Adhere to presumption for early vesting
 Vested interest in all nine children
 Condition subsequent: Outliving the mother and having children
Hypo: “To my wife for life, remainder to my surviving children”
 Contingent on surviving life tenant: Otherwise “survives” superfluous
 Grantor intent: Kids be alive when it becomes possessory
 Grantor intent: Stay in the bloodline and does not want an estate of dead kids
Rule Against Perpetuities (rule against contingency): If an interest is vested, it is valid
under RAP. If an interest is going to remain contingent for too long, then it is invalid
under RAP
 RAP does not apply to interest in the grantor: “To the school district so long as
the land is used for school purposes, otherwise to revert back to me (grantor)”
 Period of rule: Life being at the time grant is made plus 21 years
 (1) Classify interests of estates:
o (a) Vested remainders subject to partial divestment?
o (b) Contingent remainder?
 (2) Identify event that must happen before future interest holder may take?
 (3) Measuring life:
o (a) Measuring life alive at the time the grant was created?
o (b) Interest will vest or fail within 21 years after measuring life’s
 Majority Rule (including NY): Common law RAP
 Minority Rule: “Wait and see approach” where wait till the perpetuity
period of 21 years and see whether something might be invalid under RAP
actually does vest
RAP applies to commercial transactions
 The Symphony Space, Inc. v. Pergola Properties, Inc., COA (NY) (1996) (p.
292): Broadwest sold the property to P (Symphony Space) for below the market
price in order to avoid taxes. The deal included a lease-back provision and an
option to buy back the property within 50 years. Broadwest sold and assigned the
interest to another party, who transferred the interest to D (Pergola Properties). D
decided to exercise the buy back option. P sued D for a declaratory judgment
arguing the buyback option was void under RAP. TC: Find for P, buyback option
o RAP does apply to commercial transactions except right of first
refusal or options that are part of lease agreements
o COA (NY): Affirm lower courts for P, buyback option invalid under RAP
because exercisable beyond 21 years
 RAP intended to make property more alienable and prevent control
of future interests
 D’s option contract restrains alienability: Nobody will buy a
property knowing the someone else can exercise their option to
 Option contract is not vested: Title is contingent on the person
holding the option
 Unfair to exercise long term option: D sold property to P
Types of joint ownership
 (1) Tenants in Common
o Separate but undivided interests in the property
o The interest of each is descendible and may be conveyed by deed or will
o There are no survivorship rights
 (2) Joint Tenants
o Each tenant owns the undivided whole of the property
o Rights of survivorship (since each tenant owns the entire property,
technically nothing passes when one tenant dies)
o Four requirements for joint tenants under common law (and many states)
 Time: The interest of each joint tenant must be acquired or vest at
the same time
 Title: All joint tenants must acquire title by the same instrument or
by a joint adverse possession
 Interest: All must have equal undivided share and identical
interests measured by duration
 Possession: Each must have a right of possession to the whole
(once joint tenancy is create, one tenant my voluntarily give
exclusive possession to the other joint tenant)
o If any of the unities are severed, the tenancy becomes a tenancy in
o Any one (or both by mutual agreement) tenants can sever the joint tenancy
by conveying his interest to a third party
 (3) Tenancy by the Entirety
o Only created in husband and wife
o Requires the four unities of joint tenants plus unity of marriage
o Neither husband nor wife can defeat the right of survivorship of the other
by conveying to third party (only conveyance by both together)
o Exists in less than half the states
Joint tenancy v. Joint life estate followed by contingent remainders
 Joint tenancy: If one transfer their right to the property, the interest turns into a
tenancy in common and the right to survivorship dissipates
 Joint life estates followed by a contingent remainder: A person can transfer his
interest in his life estate, but the contingent remainder cannot be transferred. So, if
A transfers to B, and A dies before his spouse, B does not get anything.
Hypo: “To my sister Suzy and my granddaughter Gertrude, as joint tenants with right of
survivorship” Suzy transfer her interests to Brian, then Suzy dies. What happens?
 Common law joint tenancy: When Suzy transferred her rights, it severed the joint
tenancy, creating a tenancy in common, and so Brian maintains his rights
 Joint estates followed by contingent remainder: Had the grantor left out “with
right of survivorship,” it would have created a joint life estate. The purpose of the
extra added language was to make clear the grantor’s purpose that grantor
intended a joint life estate followed by a contingent remainder.
Favor tenancy in common: Joint tenancy is presumed to be “tenancy in common”
unless the grantor explicitly states otherwise
Serving joint tenancy: A joint tenancy can be severed by a transfer to oneself
 Riddle v. Harmon, COA (CA) (1980) (p. 324): P (Riddle, Husband) and Mrs.
Riddle purchased land that they owned as joint tenants. Near her death, Mrs.
Riddle found out that the property would pass under the right of survivorship to
her husband. Mrs. Riddle granted to herself an undivided ½ interest in the
property, converting the joint tenancy into a tenancy in common which is
transferable by will. Mrs. Riddle disposed of the interest by will. P sued D
(Harmon, Mrs. Riddle’s executrix). TC: Find for P, deny severance of joint
o A joint tenant can unilaterally sever a joint tenancy without the use of
an intermediating third party by conveying his property interest to
o COA (CA): Reverse TC for D because a joint tenant can unilaterally sever
a joint tenancy without use of an intermediating third party by conveying
to self
 Common law rule prohibiting severance of joint tenancy by
conveyance to self overturned: Many ways to circumvent rule
including strawman (A  B  A)
 CA statute does not apply: Provides only for a creation of joint
tenancy interest, not severance of a joint tenancy
o No notice requirement to P: Outcome seems unfair because D could draw
up document with instructions to destroy transfer of joint tenancy rights if
P dies first (allowing D to gain all property)
Joint bank accounts
 Majority rule: Each party in a joint bank account has a right only to what
they put in. Possible claim if one joint depositor took out more money than
put in
 NY law: Money in the account is treated as a gift. Each party is entitled to
the whole
 Banks are never liable: Some with authority to access the account has access to all
the funds and there is no claim against the bank for improper withdrawals
Severing co-tenancy: Partition action (partition-in-kind v. partition-in-sale)
 Delfino v. Vealencis, SC (CT) (1980) (p. 338): Ps (Delfinos, own 99/144) are
tenants in common with D (Vealencis, own 45/144). D lives on the land and
operates her garbage removal business there. P does not live on the land. P, who is
a residential developer, proposes to develop on the land and build residential
buildings. P seeks a partition-in-sale in order for P to then buy out D’s land. D
wants partition-in-kind to maintain garbage business.
o A partition-by-sale should only be ordered if the physical attributes of
the land in question are such that a partition is impracticable or
inequitable, and the interests of the owners would be promoted by a
o Partition-in-kind v. Partition-in-sale
 P seeks partition-in-sale: Force D to move because P will likely be
able to outbid D and kick her out
 D seeks partition-in-kind:
 D can continue business and keep home. D retains
subjective value of land
 P hurt because the value of land would decrease because
residents would not like to live near garbage dump
 D gains leverage over P if P wants to buy D out
o SC (CT): Orders partition-in-kind for D
 Recognize D’s subjective value to the land: Business and home
 Partition-in-sale would be to the detriment of D co-tenant who
actually uses the land: D would have to pay to keep land and
unlikely able to buy back land at sale
 “Best interest of both parties” is best served through partition-inkind
Partition-in-sale ordered when:
o (1) Physical attributes of land make partition-in-kind impracticable or
o (2) Interest of owners would be better promoted by partition-by-sale
Courts generally favor partition-in-sale:
o Partition-in-kind is often hard to do: Physically splitting up property can
be difficult on some lands
o Partition-in-sale avoids a messy decision: Order sale and give each money
in accordance with relevant share of land
 Counter: Partition-in-kind permits retention of a person’s
subjective value to land
Court’s interest in partition disputes between co-tenants:
o Holdout problem: People have a tiny percentage of land will refuse to get
bought out of partition without the other side giving significantly more for
the land, extort co-tenant through leverage
o Subjective value: Co-tenant with subjective attachment to land might not
have the means to buy the property as a whole, permit judicial partition
remedy to give effect to subjective value
Ark Land v. Harper (partition-in-kind): Money alone cannot compensate for the
sentimental losses that sale would entail. The fact that the economic value of the
property as a whole would be less if it were partitioned is relevant but not
dispositive (especially with cases of longstanding ownership coupled with
emotional ties to the land).
Johnson v. Hendrickson (partition-in-sale): A sale is justified if it appears to the
satisfaction of the court that the value of the land when divided into parcels is
substantially less than its value when owned by one person. The court gave no
weight to the interest of the family who owned the land.
Spiller Rule and Cohen Rule: Co-tenants obligation to pay rent
 Spiller v. Mackereth, SC (AL) (1976) (p. 348): P (Mackereth) and D (Spiller)
owned a building as tenants in common. A lessee, Auto-Rite, was renting the
building by later vacated, and when moving out Auto-Rite removed the locks. D
began using it as a warehouse and acquired new locks to secure the merchandise
D stored inside. P then wrote a letter demanding D vacate half the building or pay
P half the rental value. TC: Find for P.
o Spiller Rule: Co-tenant in possession does not have to account for the
value of his possession unless co-tenant out of possession has an
alternate (economical) use or co-tenant out of possession has been
o SC (AL): Reverse TC for D and D does not have to pay P rent because no
ouster established
 General rule: Absent agreement to pay rent or ouster of co-tenant,
co-tenant in possession is not liable to co-tenants for value of use
and occupation of the property
 Ouster: Beginning of the SOL for AP or liability or a occupying
co-tenant for rent to other co-tenant
 No ouster of P: No evidence P asked for keys to the locks or was
prevented from entering
 P’s letter to “vacate or pay rent” insufficient: Never stated P’s
desire to enter premises
o Spiller Rule: Co-tent does not have to pay rent to his co-tenant unless
refuses co-tenant request to enter and use property
 Refusal to vacate or pay does not constitute ouster because no
request to enter the premises
 Burden on co-tenant out of possession to negotiate an agreement
ahead of time
o P (Mackereth) remedies:
 (1) Establish ouster:
 Written a letter saying: “I have another person who wants
to see the land”-better case for ouster
 Prove ouster: Tried to physically enter/occupy building and
was prevented by D
 Try to get a new tenant
 (2) Action for mesne profits: Unpaid rent, right to reasonable
market rental value (require establish ouster first-not receive
FMV and show deserve more)
 (3) Partition action or threaten partition
 (4) Accounting action: Agree to pay for the value of your use
for no partition action
 Cohen v. Cohen (1952) (p. 350): Co-tenant is always liable for rent for value of
possession no matter what.
o Cohen Rule: Co-tenant in possession always has to account for the
value of his possession.
o Burden on non-occupying co-tenant to negotiate an agreement beforehand
PRO Spiller Rule:
o Spiller Rule: In family situations, grantor probably intents Spiller Rule
because one child does not need to pay rent if the other child did not try to
use the property beforehand and was not ousted
PRO Cohen Rule:
o Cohen Rule: Reduces controversy and volume of litigation, less
complication (no worry about the value of possession or consider ouster)
Adverse possession and co-tenants
 Common law rule: Adverse possession SOL regarding co-tenants begins once
ouster occurs
 NY law: First 10 years are not adverse, but after 10 years without occupying,
the co-tenancy adverse possession SOL begins running. After 20 years, cotenant in possession has an adverse possession claim
 Problem: Co-tenant not in possession can wait a long time before trying to enter
 Remedy: Courts will look to find any type of ouster
Joint tenant action without consent: A joint tenant, during the existence of a joint
estate, has the right to convey or mortgage his interest in the property, even if the
other joint tenant objects
 Swartzbaugh v. Sampson, COA (CA) (1936) (p. 351): D (Mr. Swartzbaugh,
husband) and P (Mrs. Swartzbaugh, wife) were joint tenants with right to
survivorship. D (Sampson) and D (Mr. Swartzbaugh) started negotiating leasing a
small fraction of the land to build a boxing arena can cut down D’s walnut trees. P
objected. Negotiations resulted in an option for a lease that was later executed. A
second lease was later signed between D (Sampson) and D (Swartzbaugh). P
objects. TC: Motion for non-suit granted for D.
o A joint tenant in possession can lease the premises to a third party
without the consent of his co-tenants
o COA (CA): Affirm TC for D because joint tenants have a right to convey
interest in equal share of property
 D rented out only small portion of land: D only conveyed his
limited interest and not whole property
o General rule: Joint tenant acting without the consent of the other tenant
cannot bind the rights of the other tenant
 Limitation: Joint tenant cannot recover exclusive possession of
joint property from a co-tenant
o P (Mrs. Swartzbaugh, wife) remedies:
 (1) Accounting action: Collect half of actual rent from D
 (2) Action for mesne profits to collect reasonable vale of
property (highest value you could have rented the property
for): Problematic because P would need to prove ouster
 (3) Partition action: Problematic because P seeks whole
Improvements v. Repairs
Improvements: Co-tenant can get credit for the increased value of the land
o No improvement credit when the cost of improves is unnecessary or
o If improvement devalued land, other co-tenant can bring action for waste
Repairs: Co-tenant can get credit for the cost of the repair
o Credit usually full: Repair is a necessary cost
Formula for credits applied to partition action:
o (1) Value of the property after all improvements/repairs were made
o (2) Deduct from that the amount of credits, from both sides
o (3) Split the remaining balance
o (4) Each person gets this amount + respective credits
Tenancy in entirety: Creditors cannot attach a property owned in entirety if the
debt is for only one of the co-tenants
 Married Women’s Property Acts: Gave married women like single women,
control over all their property. Property was immune from husband’s debts.
 Sawada v. Endo, SC SC (HI) (1977) (p. 361): P (Sawada) was injured when hit
by a car operated by D (Endo, husband). D did not have insurance. D owned a
property held in tenancy in entirety with wife. D conveyed the property to D’s
kids after the complaint was served for no consideration. A judgment was entered
for P for the car accident. P sue D to set aside the conveyance of marital property
to the and satisfy P’s judgment. TC: Find for D.
o An estate by the entirety is not subject to the claims of creditors of
only one of the spouses because neither spouse acting alone can
transfer his interest
o SC (HI): Affirm TC for D because marital property held as tenants in
entirety cannot be reached by creditors of one spouse
 “Neither husband nor wife has a separate divisible interest in the
property held by the entirety that can be conveyed or reached by
 Apparently fraudulent permitted because even if there was no
transfer, creditors cannot attach property owned in entirety to
satisfy the debt of one spouse
 Policy: Shortage of homes, no destroy family unit, property
attachment would leave D without a home
o Marital property held as tenants in entirety cannot be severed: If it were a
joint tenancy, creditors could execute a sale of half the interest and gain
the monetary judgment
 NY law: Marital property owned in entirety is attachable, but P would “step
into D’s shoes” and P would take D’s interest in entirety
o Practically only right to survivorship: Cannot sell, partition
o Can live in property, but unlikely
 Pro Sawada Rule:
o Pro: No destroy family unit, scarcity of homes, home is invaluable
 Con Sawada Rule:
o Con: Owners should not shield themselves from legitimate debt by owning
property as tenants in the entirety
Marital property: Divorce and equitable distribution
 In re Marriage of Graham, SC (CO) (1978) (p. 371): P (Ann Graham, wife)
supported D (Dennis Graham, husband) while D was in business school. Upon
divorce, the only real asset they had was D’s MBA degree. P claims that an
education obtained by one spouse during a marriage is marital property subject to
equitable distribution. TC: Find for P, with a judgment for D’s future earnings.
o Majority rule: An educational degree is not property and therefore
not subject to division upon divorce
 SC (CO): Reverse TC for D because an educational degree is not
marital property subject to division upon divorce
 MBA not property: No exchange value or objective
transferable value on an open market, terminated at death,
no inheritable
 MBA has no value: Cannot be assigned, sold, transferred,
or conveyed
o NY law: An education degree is considered property and can be
subject to division upon divorce
 Elkus v. Elkus, Appellate (NY) (1991) (p. 378): P (Frederica von Stade Elkus,
wife) began her singing career when she married D (Elkus, husband). D
accompanied P, served as voice coach, critiqued P, photographed P. After 16
years, P became a huge celebrity and then sought divorce. D claims he sacrificed
his career as a singer and teacher. P claims her career and celebrity status are not
licensed but rather products of her talent, and thus do not constitute property. TC:
Find for P, talent is not property.
o Professional goodwill: An increase in the value of one spouse’s career,
when it is the result of the efforts of the other spouse, constitutes
marital property and is thus subject to equitable distribution
o Appellate (NY): Reverse TC for D because professional goodwill can be
marital property subject to division
 Professional licenses can be considered marital property
 To the extent D’s contributions and efforts led to an increase in
value of P’s career and celebrity, the appreciation was a product of
the marriage and subject to equitable distribution
o Amount contributing spouse will seek (before marriage value, during
marriage value, after marriage value):
 Contributing spouse: (After marriage value) – (before marriage
value) because (during marriage value) – (before marriage value)
obviously marital property
 Defending spouse: No even split because success not due to
contributing spouse’s contributions
 Meaning of marital property can be disputed: Graham (property is something that
can transferred) v. Elkus (property nature does not matter, only evaluate spouse’s
Prima facia discrimination claim under the FHA (p. 431): P must show that he is a
member of a statutorily protected class who applied, was otherwise qualified to
rent/purchase housing, and was rejected although the housing remained available
 (1) P need only allege a discriminatory impact, not intent to discriminate
 (2) D then has the ability to rebut presumption of discrimination with
rational and legitimate reasons to justify D’s actions (e.g. poor credit, tried to
 (3) P then can show that the landlord’s reasoning is just pretextual and
simply an excuse for discrimination
 Courts will be skeptical of landlord’s rebuttals because they probably seek to
conceal their true motivations
 Exception: Residential units not subject to FHA:
o (1) 3603(b)(1): Single family house sold or rented by an owner
o (2) 3603(b)(2): “Mrs. Murphy exemption” that exempts a dwelling that
has four or less units and the owner lives in one of the units
o 3604(c): Exception does not apply to housing advertisements
 Discrimination on the basis of handicap is a violation: Landowner is not
requirement to make property handicap accessible but must allow handicapped
tenant to make reasonable modifications
 Discrimination on the basis of other factors is a violation: Tenants perceive a
threat, tenants feel endangered by diseased/disabled
 Discrimination on the basis of income is not a violation: Income is a legitimate
business reason
FHA: Procedure for making a discrimination claim, discriminatory effect, and
rebutting the presumption
 Soules v. Downs, US COA (2nd Circuit) (1992) (ANGEL): P (Soules) had one 12year-old child and wanted to rent an apartment. D (Downs) was a realtor who
placed an ad for half a two family dwelling. P contacted D regarding the ad. D
asked P whether P had any children and how old they were as she was concerned
the about the first floor elderly tenants who would be disrupted by noisy children.
P contacted HOME who sent testers to D. First tester without kids was accepted.
Second tester with kids was not accepted. Meanwhile, D offered the apartment to
a family with children. D ended up renting to a single woman without children
under 18. P sued D under the FHA. ALJ: Find for D, no discrimination.
o A FHA discriminatory presumption can be rebutted with rational
evidence to the contrary
o US COA (2nd Circuit): Affirm ALJ for D because D rebutted P’s prima
facia case of discrimination by offering evidence against discrimination
 (1) P made a prima facie case for discriminatory effect
 (2) Rebutted presumption: D offered apartment to a family with
children, so no age discrimination
 (2) Rebutted presumption: P had a bad attitude towards D
(3) Reasoning not pretextual (D had reasons for questions about
P’s children): Local health code precludes children under five from
sharing bedroom of same sex, concerned about noise level for
elderly tenants
FHA: Unequal application of a seemingly non-discriminatory policy is
 Fair Housing Justice Center, Inc. v. Silver Beach Gardens Corporation, US DC
(NY) (2010) (ANGEL): D (Silver Beach) had a housing policy in which
prospective purchasers require three references from existing co-op owners. P
(Fair Housing Justice)’s white testers were told not to worry about the policy, it’s
a technicality, and we can find a way around it. P’s black testers were told the
policy was rigid and they must know three people to get in.
o Selective enforcement is enough for a disparate impact claim
o US DC (NY): Denies D’s motion to dismiss for P because prima facie
FHA claim because unequal enforcement of reference policy
 Three reference letters may constitute racial discrimination
particularly where the requirement is enforced selectively
 Satisfies disparate impact requirement: Reference policy
discriminatory even if blacks were not mistreated
 No requirement of “bona fide offer” or actual contact
Types of tenancies
 Term of years: Tenancy for a fixed period of time (does not have to be measured
in years); there is a specific calendar date for the start and end of the term.
o Ex: One year from the date if signing the lease; 5 days from today, 10
months, 99 years, etc. (so long as there is a specific end date)
 Periodic tenancy: Tenancy for an initial fixed period that automatically continues
for additional periods until either L or T terminates the tenancy by giving advance
o Ex: Month to month tenancy or year to year tenancy
 Tenancy at will: Has no fixed duration and endures only so long as both L and T
desire. Both are equally capable of terminating the lease at any time. Lease may
require for a given period of notice such as 30 days.
Tenancy at sufferance: Holdovers
 Tenant might be liable for damages for trespassing: Cost of the space to the
 Some statutes make holdover liable for double rent, some courts require tenant to
be liable for an additional year
 Landlord might be able to bring an action for eviction
Assignments and subleases
Common law: Transfer of entire interest constituted assignment, but anything less
constitutes sublease
Modern rule: Look to the parties’ intent (Ernest v. Conditt)
Privity of contract and Privity of estate
 Landlord suit against tenant who they entered into a contract: Privity of contract
 Landlord suit against assignee (assumes all liability): Privity of estate
 Landlord suit against sublet who assumes all contract liabilities: Privity of
 Landlord suit against sublet: No privity of estate
Hypo: L leases T  T assigns to T1 who “assumes all covenant in the lease”  T1
assigns to T2  T2 assigns to T3
 L has an action against T via privity of contract
 L has an action against T3 via privity of estate
 L probably has an action against T1 via privity of contract
 L does not have an action against T2
Intention of parties: Sublease v. assignment
 Ernst v. Conditt, COA (TN) (1964) (p. 442): P (Ernst) leased land to Rogers, who
built a racetrack and floodlights. Lease was a term of years for one year and 7
days. Rogers and D (Conditt) entered into negotiations to sell the business. They
all met with P and they amended the lease to extend the term and to “sublet” it to
D. D stopped paying rent and ignored a letter explaining rent has to be paid and
property removed under contract.
o In determining whether an assignment or a sub-lease has occurred,
the court looks to the intentions of the parties
o COA (TN): D is liable to P for unpaid rent because Rogers transferred his
entire interest in the lease to D (assignment)
 Intent of Rogers and D was to transfer the entire lease
 “Sublet” and “Rogers will be liable” only refers to the even that if
D defaults, Rogers is liable
o Privity of contract:
 Argue: Case shows that there is not privity of contract because if
there was, the court would have decided that way
 Argue: Court did not decide on privity of contract, simply decided
to find an action through privity of estate
Approval clause: A commercial lessor may not arbitrarily withhold consent to a
 Kendall v. Ernest Pestana, Inc., SC (CA) (1985) (p. 450): Contract stated that in
order for the tenant to sublet or assign, the landlord must approve. Contract does
not say anything about landlord being reasonable. Bixler wanted to assign rights
to P (Kendall) but lease states D (Ernest Pestana, landlord) must consent, which D
refused to do.
o Requirement that commercial lessor must be reasonable in consenting
to subletting in commercial leases
o SC (CA): Rule for P (Kendall, sublet) and rejects majority rule because
lessor approval clause in a commercial lease requires that the lessor have a
commercially reasonable objection to invoke his right to prevent lessee
from assigning lessee’s interest in the property to a third party
 Public policy favors free alienability
 Lessor is just as likely to find high quality tenant in assignee as
 Lessor’s interests are protected by the fact that the lessee is
contractually liable to lessor
 Lease contract can only be withheld in good faith
 Lessor may withhold consent in the following circumstances:
 Property is ill suited for proposed use
 Proposed use is illegal
 Proposed use requires altering the premises
o Commercially reasonable depends on the circumstances: Large store
subletting to small store may not be commercially reasonable because
decreases business
o PRO majority rule (Kendall v. Ernst Pestana court rejected):
 Lessor conveyed his property to the original lessee and is under no
obligation to look at anyone else for rent
 Lessee could have bargained for an addition of reasonableness to
the approval clause
 Court must follow stare decisis because many current leases were
prepared in reliance on the majority rule
 Lessor should enjoy increase in market value of the property, not
the lessee
o Landlord makes a lease that cannot be transferred:
 Valid lease: It’s landlord’s property, landlord can do it
 Invalid lease: Similar to Mountain Brow Lodge because a restraint
on alienation
 Valid lease: Dissimilar to Mountain Brow Lodge because in that
case the property holder that wanted to negotiate out of the
restriction would have to locate all the heirs of the grantor, but here
there is only one landlord
Defaulting tenants: Landlord may not use self-help to evict tenant
 Berg v. Wiley, SC (Minn) (1978) (p. 460): Lease provides for no change in the
building structure without prior written permission and for the restaurant to be
operated in a lawful and prudent manner. P (Berg, tenant) remodels without D
(Wiley, landlord)’s permission and fails to meet health code regulations. D
notifies tenant that if lease violations are not remedied in two weeks, D will retake possession. P fired employees and closed restaurant. 15 days later, P does not
address violations. D enters premises and changes the locker. P (tenant) sues D
(landlord) for wrongful eviction.
o A landlord must always go through summary proceedings in order to
evict a tenant for breach and cannot use self-help eviction
o SC (Minn): Rule for P (Berg, tenant) and award P lost profits because P
did not abandon property and adopts modern rule for eviction
 Common law rule: Landlord can execute self-help: (1) Breach; (2)
self-help is peaceable
 Overturn common law rule: Self-help not an option because D
(landlord) did not do it peaceably (changed locks), P has a
wrongful eviction claim
 Adopts modern rule: Landlord must resort to summary
proceedings, and not self-help, to repossess property from a
tenant holding it adversely
 If a landlord exercises self-help, tenant has a claim for
wrongful eviction
 Wrongful eviction damages for tenant: Lost profits
 Tenant abandonment: Landlord can use self-help
 Sufficient evidence of abandonment: Writing a letter,
missing a payment, landlord waiting a reasonable time for a
 Not enough evidence that P (tenant) abandoned property: Jury
should decide abandonment in summary proceedings before
wrongful eviction
o PRO summary proceedings:
 Pro: Benefits breaching tenants because if a landlord exercises
self-help, breaching tenants have a claim for wrongful eviction
where they had no claim before
o CON summary proceedings:
 Con: Hurts landlords because they have a duty to go to court every
time they want to evict a breaching tenant which will raise
litigation costs and rents on other tenants
 Con: Hurts non-breaching tenants because they always had actions
against landlord for wrongful eviction but now non-breaching
tenants must pay higher rent to cover landlord litigation costs
 Pro: Benefits breaching tenants because if a landlord exercises
self-help, breaching tenants have a claim for wrongful eviction
where they had no claim before
Defaulting tenants: A landlord is under a duty to mitigate damages by making
reasonable efforts to re-let an apartment wrongfully vacated by the tenant
 Sommer v. Kridel, SC (NJ) (1977) (p. 469): P (Sommer, landlord) leased
apartment to D (Kridel, tenant). D could not take the apartment and informed P. P
did not take steps to mitigate damages by re-letting D’s apartment to third party,
even though third party was ready and willing to take the lease soon after D
o Landlord has a duty to mitigate damages for a defaulting tenant
o SC (NJ): Rule for D (Kridel, tenant) because landlord has an obligation to
make a reasonable effort to mitigate damages by re-letting the property
 Common law: Landlord could wait until lease was over to bring an
action; or bring another tenant in and hold original tenant liable for
any losses
 Duty to mitigate: Defaulting tenant’s apartment must be
treated like vacant stock
 Landlord must do whatever he can to rent defaulting
tenant’s apartment
 Question of whether landlord treated defaulting tenant
apartment like vacant stock
 Court gives landlord deference in proving mitigation:
Tenant breached the lease
o If landlord does not mitigate damages, what can landlord recover from
breaching tenant:
 Argue: Difference between what he could have recovered by
mitigating and what defaulting tenant was going to pay
 Argue: Landlord who does not mitigate cannot recover anything
from breaching tenant
COA (NY): Landlord has no clear duty to mitigate damages for defaulting
Defaulting landlord: A commercial tenant may vacate (constructive eviction) if the
implied covenant of quiet enjoyment is interfered with by the landlord
 Reste Realty Corp. v. Cooper, SC (NJ) (1977) (p. 483): D (Cooper, tenant) rented
from P (Reste Realty, landlord) on the ground floor of an office building for a one
year lease, then a five year term. Water used to leak into the offices when it rained.
At first, an agent would always help to fix the leak. Agent died two years later. D
left the premises after the leaks continued to be neglected. P sues for the unpaid
rent. P claims that the lease had a clause that tenant takes the property in its
existing condition, which should deny D’s right to constructive eviction.
o Material breach of implied covenant of quiet enjoyment permits a
commercial tenant’s remedy of constructive eviction
o SC (NJ): Rule for D because P constructively evicted D by allowing
flooding and interfering with D’s quiet enjoyment
 Rejects Stewart v. Childs Rule: Tenant’s obligation to pay rent and
landlord’s obligation to upkeep premises are separate covenants.
So even if tenant has a problem with premises, tenant must pay
 Adopts Higgins v. Whiting Rule: Tenant’s obligation to pay rent
and landlord’s obligation to upkeep premises are dependant.
Tenant is not obligated to pay rent when quiet enjoyment breached
 Covenant of quiet enjoyment: Expressed promise by P’s agent to
fix the flooding, D expect defects to be corrected
 Breach of covenant of quiet enjoyment: Landlord did not fix leak
and rendered the premises unfit leased reason
Tenant remedy for material breach: Constructive eviction (D
stopped paying rent and left)
Covenant of quiet enjoyment: Implied promise the tenant’s right of
undisturbed use and enjoyment of property
o Unreasonable to expect tenants to make repairs outside lease premises
o Unreasonable to leave duty for long lasting/structural repairs (elevator,
foundation) to tenant because tenant will likely make bad repairs: Tenant
does not want to invest a lot of money in something he will only benefit
for a relatively
Breach of covenant of quiet enjoyment: Landlord act or omission that
renders the premises substantially unsuitable for the purposes for which they
are leased
Constructive eviction: Commercial tenant has a remedy to breach of quiet
o Constructive eviction remedy does not apply to residential property
o If lease includes a leaking disclaimer, then tenant has no claim because
landlord can disclaim existing defects in the property
Breach covenant damages (recission of lease): Difference between tenant’s
bargain price and price tenant pays for comparable property absent the
Defaulting landlord: An implied warranty of habitability exists in all rentals of all
residential dwellings
 Hilder v. St. Peter, SC (VT) (1984) (p. 493): P (Hilder, tenant) rented an
apartment from D (St. Peter, landlord) that was in terrible condition. When P
moved in, the apartment had a broken kitchen window, no front door key, a
broken toilet, no lights/electricity in the bathroom, leaks and plaster falling from
the ceiling, and a broken sewage pipe. D promised to fix the issues but never did.
P sued D for rent reimbursement and compensatory damages.
o All rentals of residential property have a non-waivable, implied
warranty of habitability
o SC (VT): Rule for P because D breached the implied warranty of
habitability for residential property by not fixing the broken apartment
 Non-waviable, implied covenant of habitability for safe, clean, and
fit for human habitation dwelling
 Poor conditions might have an adverse effect on people
who are not part of the deal (neighbors and general public)
 Tenants might not be aware of their rights
 Evaluating breach of warranty of habitability (not dispositive):
Determine whether the premises are safe
 Local municipal housing code
 Minimum state housing code standards
 Implied warranty of habitability breach procedure:
 Tenant must notify landlord and allow him time to remedy
 If defect not remedied, tenant can seek remedies
Implied warranty of habitability damages:
 Rescission
 Reformation
 Damages: Difference between the value of the residence as
warranted and the value of the residence as defective
(defect, discomfort and annoyance)
 Tenant repair and deduct for rent expense
 Withhold rent until damages calculated
o Evaluating landlord breach of warranty of habitability:
 Lease text
 Contemplation of use and expectations in lease
 Housing codes and standards (not dispositive) (landlord argue
violations are not meant for a private right of action)
o Remedies for breach of implied warranty of habitability:
 Action for damages (Hilder: Residential property)
 Damages is only remedy for immaterial breaches, while
other remedies are for material breaches
 Disadvantages: Tenant bears cost of litigation, require
living in bad condition for a long time to get significant
 Expectancy measure: Difference between value of the
property as warranted and value of the property in its
defective condition (Hilder)
o FMV (habitable) = $1,000
o FMV (uninhabitable) = $600
o Rent = $800
o Damages = $1,000 - $600 = $200/month
 Percentage diminution approach (compromise): Contracted
price multiplied by percentage difference of habitability
and inhabitability
o Rent: $500
o FMV (habitable) = $1,000
o FMV (uninhabitable) = $600
o Percentage diminished = 40%
o Damages = $500 x 0.4 = $200
 Repair and deduct
 Good remedy for small repairs
 Theory that tenant is mitigating damages
 Landlord can bring an action for non-payment of rent, but
will not prevail as long as repair was reasonable
 Not reasonable repair and deduct: Replacing an elevator
 Withhold rent
 If tenant fails to show breach, tenant can be evicted
 If tenant to fails to show breach, court may find tenant
liable for some damages because breach was not material
enough to withhold rent
Court might require tenant to pay rent into escrow to avoid
tenant abuse of withhold rent mechanism
 Constructive eviction (Reste Realty: commercial property)
 Tenant must stop paying rent and vacate: Tenant seeks
recission of lease
 Tenant must show a substantial breach the rendered the
property unusable for its designated purpose
 Good remedy for tenant capable of finding another space
for the same or lesser rent
 If tenant receive lease at a bargain, he might avoid
constructive eviction
 Damages (normal contract measure): Difference between
bargained for lease and the value of a comparable property
o If no breach of implied warranty of habitability, other remedies:
 Breach of expressed contract
 Remedies: Specific performance, damages
 Constructive eviction (Reste Realty: commercial): Must show
breach of the lease was so substantial that it rendered the property
unusable for its designated purpose
 Remedies: Damages (difference between bargain price and
property absent the breach)
o PRO extension of Hilder Rule to commercial leases:
 Commercial leases might still have a disparity in bargaining power.
Small businesses rent with long lease, enough value, and low
o CON extension of Hilder Rule to commercial leases:
 Hilder Rule is concerned with the landlord-tenant disparity in
bargaining power that is not concerned with commercial leases
between sophisticated parties
 Commercial tenants already have the Reste Realty constructive
eviction remedy and should not have an additional remedy
 Hilder Rule protects residential tenants because they have less
options than commercial tenant (residential tenant use constructive
eviction without becoming homeless)
Chicago Board of Realtors, Inc. v. City of Chicago, US COA (7th Circuit) (1978)
(p. 508): Chicago essentially codified the implied warranty of habitability that
established new landlord responsibilities and tenant rights. Rights expanded for
tenants included interest on security depositions, withholding rent equal to terms
violated in a lease, withhold rent for minor repairs (re-coupment), decreased late
fees, and created rebuttable presumption that a landlord who sought to evict a
tenant after the tenant exercised rights conferred by the ordinance is retaliating
against the tenant for exercise of those rights. P (Board, landlord) sought to
declare the ordinance unconstitutional.
o US COA: Rule for D and uphold habitability statute
Landlords will have fewer resources so properties will be kept in
worse repair, available housing will shrink, the cost of housing will
go up
Winners: Middle-class residents
Losers: Some landlords, out-of-state banks, poor tenants, future
Step 1: Contract between seller and buyer
 Reason: Mortgage financing because buyers cannot pay cash
 Reason: Title search, inspection, arrange end of lease/sell house
Step 2: Closing (title for money)
Buyer seeks to avoid sale contract
 Professional inspection provision: Lack of operating conditions of major real
estate component will void contract
 Attorney review provision: Provision allows attorney to make any modifications
to the contract other than purchase price. If parties cannot agree on modifications,
contract can be voided.
o Possible modifications: Change closing date, inspection issues
o Many
o NY law: No attorney review provision because attorney review before
 Mortgage contingency provision: Buyer seeks a mortgage and fails to secure a
mortgage commitment can void the contract
o Buyer duty: Good faith effort of buyer to seek a mortgage
Buyer seeks to enforce sale contract
 Refuse to close (e.g. seller refuses to deliver deed, vacate premises)
 Specific performance action against seller
Seller seeks to avoid sale contract
 Re-negotiate with buyer: Seller offers money for buyer to forebear specific
performance action
 Attorney review provision: Provision allows attorney to make any modifications
to the contract other than purchase price. If parties cannot agree on modifications,
contract can be voided
o Possible modifications: Change closing date
o NY law: No attorney review provision because attorney review before
Seller seeks to enforce sale contract
 Re-negotiate with buyer
 Specific performance action against buyer
 Damages action against buyer
o Recovery: (Contract price – resale price/market value) because seller must
mitigate damages
Leverage escrow: Seller agrees to forebear lawsuit for portion of buyer escrow
o Recovery reduced because seller must mitigate damages (e.g. sell to
someone else)
Bank (mortgagee) lending to borrower (mortgagor)
 Interests against lending full value of home (collateral):
o Foreclosure/litigation proceedings costs
o Foreclosure sales tend to sell homes at a discount: Sale price may not
reach full value, bank does not want to be in home selling business
o Market value changes: Market value may not reach full value of home at
the time of purchase
 Mortgagee remedies if mortgagor defaults:
o Foreclosure sale
o Judicial proceedings
 Mortgagor right of redemption (foreclosed borrower can repurchase): Move to
abolish because bad for borrowers (foreclosure sales lower), lenders (fear not
receive full amount)
o Bidders are reluctant to bid because unsure whether they will keep the
house with original owner retaining right of redemption
o Bidders reluctant to improve home because possibly lose
o Borrowers receive less a foreclosure sale
o Lenders less willing to give out loans because fear not receive full amount
 Solution to right of redemption: Deed of trust when deed is taken by lender and
returned when borrower repays mortgage
Mortgagee duty: Mortgagee conducting a foreclosure sale must exercise good faith
and due diligence in obtaining a fair price for a mortgagor’s property
 Murphy v. Fin. Dev. Corp., SC (NH): P (Murphy) took out a loan with D (FDC).
P fell behind on mortgage payments and D scheduled a foreclosure sale fulfilling
all the statutory requirements of notice. Notice was posted on property and public
buildings. At the foreclosure sale, D made the only bid for $27K and later sold the
property for $38K. P sued D to set aside the foreclosure sale.
o Foreclosure sale requires good faith and due diligence (beyond statute)
in seeking a fair price
o SC (NH): D exercised good faith
 D complied with statutory requirements of notice and sale in
 D postponed the sale and D bid without immediate knowledge of
another buyer
o SC (NH): D failed to exercise due diligence
Fiduciary duty of due diligence: Reasonable person in lenders’
position would have adjourned sale, duty to protect P’s equity by
obtaining a fair price
 D’s sale did not protect P’s equity: $27K sale covered D’s
mortgage but not P’s $19K equity in home
 D had reason to know it could make a profit: D sold property days
later for $9K profit
 D did not give notice to general public: Could have assured
minimum bid, postponed sale, advertised commercially
o SC (NH): Damages = Fair price – foreclosure sale price
Breach of mortgagee duty: Require more than inadequacy of price to invalidate
o (1) Shocks the conscience
o (2) Grossly inadequate
o Other foreclosure defects: Chilled bidding, unusual hour of sale,
Mortgagee duty: Bad for borrowers generally
o During foreclosure sales, lenders have a fiduciary duty to achieve a fair
price for borrower
 Lenders must increase transaction/sale costs to ensure fair price:
Increase notice, postpone sale
 Difficulty in selling foreclosed home: Possible duty to establish
minimum bid or counter bid to raise sale price
o Greater independent duty (higher costs and harder to realize money)
because lenders less likely to lend to borrowers with low assets
Unfair trade practice: Restricts, but does not remove, lender’s ability to foreclose
loans by requiring restructuring or court approved foreclosure
 Commonwealth v. Fremont Investment and Loan, SJC (MA): D (Fremont)
originated thousands of subprime residential mortgage loans that were almost
certain to lead to borrower’s default: (1) Adjustable rate mortgage loans for
introductory period of 3 years or less; (2) introductory rate at least 3% less than
indexed rate; (3) debt-to-income rate was over 50% against the indexed rate; (4)
loan-to-value ratio was 100% or loan featured prepayment penalty. P (MA) sued
D seeking injunction requiring D: (1) advance notice of intent to foreclose; (2)
with loans of four characteristics, work with P to restructure/workout; (3) if no
resolution, seek court approval for foreclosure.
o SJC (MA): D engaged in an unfair trade practice and injunction is granted
 Characteristics 1-3 made foreclosure likely unless borrower could
refinance introductory rate
 Characteristic 4 made refinancing impossible unless housing prices
increased: Without increase borrower unlikely to have equity or
financial capacity to obtain new loan
 D’s executing loan is presumptively unfair: Loan success depends
on unsupported hope of increase home values
o SJC (MA): Definition of unfairness applies to D’s loans
D knew borrowers would default unless home values rose
D warned repeatedly that it needed to consider performance of
loans in declining markets
 FDIC ordered D to cease and desist
o SJC (MA): Injunction order against D serves the public interest
 Balances lenders interests v. borrowers that were subject to
presumptively unfair practices
 No bar to foreclosure: D only required to explore alternatives to
foreclosure and seek court approval for foreclosure
Subprime borrower’s interests:
o Short term: Not longer than introductory rate
o Low risk: Housing prices go up or refinance at low interest rates
o Problem: Refinancing difficult if interest rates go up or home value goes
Subprime lender’s interests:
o Low risk: Collect fees and sell loans as securities
o Loan origination fees
o Prepayment penalties: If borrowers did not sell house, bank gets
prepayment fees
Subprime investor’s interests:
o Short term investment: Loans not kept for more than introductory period
o Attractive interest rates after introductory period and low default risk
o Loans divided into diversified tranches
Policy forward:
o Restrain process of foreclosure
 NO: Lender not getting money on defaulting borrower
o Allow bank to write-down value of loan
 NO: Restructure loans will not ensure that borrowers can make
 NO: Not sure who does negotiation of write-down with borrower
because ownership of loan complicated by securitization
 NO: Restructuring of loan of security owner with low interest no
want write-down because interest is wiped out by write-down
(good for 50% interest owner, terrible for 20% interest owner)
Recording system:
 A deed is valid without recording but an unrecorded deed is likely to lose out to a
recorded deed if both deeds are from the same grantor to the same property
 Protects subsequent bona fide purchasers from prior unrecorded interests
 Recordable instruments: Deeds, mortgages, wills, leases, options, etc.
 Failure to record has no impact on the transaction: Purpose of the recording is to
tell everyone else in the world that I can claim an interest in the property
 Valid notarization required before recording
Title search:
 Title search using the grantor-grantee index: Begin with the grantee index and
go back in time and then go forward in time to the grantor to ensure property was
not conveyed twice
 Tract index: Indexes documents by parcel identification number assigned to each
tract. Does not exist in most states. Tract index are common where property has
been platted by map into various blocks and lots within blocks.
Recording system purpose:
 Notify others of a transfer of property
 Protects those buyers who purchased for consideration a property subsequent to a
prior purchase without any notice that the property was previously conveyed
 Buyer’s obligation to record in order to notify other subsequent purchases (If
buyer does not record, he may have inferior title)
Recording Act:
 Common law: “First in time, first in right”
o O  A then O has no interest to convey to B
o Common law system controls unless person qualifies for protection under
the recording system
 Race jurisdiction (2 jurisdictions): First recorded deed wins
o No consideration of actual notice
o Pro: No need to ascertain/prove what purchaser knew, so off-record
inquiries are limited making transfer of title more efficient
o Con: Subsequent purchaser with notice fraudulently wins over prior
 Notice jurisdiction (FL statute 669): If the subsequent purchaser is either on
actual notice or if the first deed is recorded, then the subsequent purchaser loses.
If the subsequent purchaser has no actual notice and the first deed is not recorded,
then the subsequent purchaser wins.
o Ex: O  A; O  B (without notice); A records. A v. B?
 B wins! B had no notice of A’s unrecorded deed and B relied on
the state of record title at the time of transaction
o Shelter rule: If the subsequent purchaser purchases from someone who
has acquired better title than someone else, that seller can give shelter to
whomever his subsequent purchaser.
 The subsequent purchaser is not in any worse position than the
seller would have been.
 Notice jurisdiction: O  A; O  B (w/o notice); A records; B 
C (w/o notice). A v. C?
 C wins! B has shelter rule because B took without notice
and had better title compared to A. C also has better title
compared to A.
o Pro: Only protects subsequent purchaser without notice
o Con: Less efficient because turns on whether subsequent purchaser had
Race-notice jurisdiction (CA statute 669): To receive recording act protection, a
purchaser must take property without notice and record deed before prior
o Ex: O  A; O  B (without notice); A records. A v. B?
 A wins! In a race-notice jurisdiction, not only does B have to take
without notice, B must record before A
o Pro:
 Provides incentives to record therefore making public records more
 The order deeds were delivered is irrelevant if one of the deeds
was recorded
Valuable consideration requirement: Recording act protection invoked for
subsequent buyer who paid consideration and who could not know that the title
was previously conveyed
Mother Hubbard Clause: Recording a deed that does not describe with specificity is
not enough to give constructive notice
 Luthi v. Evans, SC (KS) (1978) (p. 651): Owens assigned interest to oil and gases
leases to P (Tours). In the lease, it specifically describes seven different leases. In
the second paragraph, without saying which parties are involved, it says that it is
intended to convey “all of the interest of whatsoever in nature…” The original
lease did not mention Kufahl. Three years later, Owens assigned interests in
Kufahl to D (Burris). Before the assignment of Kufahl to D, Owens believed that
nothing had to with D in any of the descriptions.
o A that does not specifically describe the property covered by the
conveyance is upheld as between the parties to the instrument but
does not impart constructive notice to a subsequent purchaser
o SC (KS): Rule for D because D took conveyance without actual
knowledge of P’s conveyance
 Valid transfer to D: D took without notice of P , but D not
protected from claim of subsequent purchaser
 Mother Hubbard clause is ineffective as to subsequent purchasers
unless they have actual knowledge of the transfer
 Mother Hubbard clauses can be used in emergency: Grantee must
take steps to protect title against subsequent purchaser (take
possession, filing affidavit with more appropriate description
 Burden on prior purchaser:
o Prior purchaser is least cost avoider: Prior purchaser could have avoided
the problem by recording transfer more descriptively
o Prior purchaser burden: Subsequent purchasers should not have the
responsibility of reading every deed in chain of title: Subsequent purchaser
only required to examine every deed whose description describes the
property purchased
 Burden on subsequent purchaser:
o Subsequent purchaser burden: Subsequent purchaser must be required to
look at the deed before purchasing
Faulty acknowledgement: A deed not properly acknowledged is not entitled to be
 Messersmith v. Smith, SC (ND) (1953) (p. 670): Caroline Messermith made a
conveyance to P (Frederick Messersmith) who did not record. Caroline
Messersmith subsequently conveyed to D (Smith), but this conveyance was faulty
because there was no acknowledgement in person. D (Smith) conveyed to D
(Seale). Ds (Smith and Seale) recorded, then P (Frederick) recorded. P sued Ds to
quiet title. D (Seale) claims he purchased without notice of P (Frederick)’s
conveyance and recorded first.
o A faulty acknowledgement of a deed makes all subsequently acquired
deeds in the chain of title inferior to a later recorded adequately
acknowledged deed
o Messersmith situation:
 O  A (not recorded)
 O  B (faulty acknowledgement)
 B records
 A records
 A wins (no title to convey to B)
 BUT: On rehearing, no apply rule:
 O  A (faulty)
 OB
 A records
 B records
 Presumably, title should still be with A because he had good title
and B could see it recorded
o SC (ND): Rule for P because conveyance to D (Smith) was improperly
 P conveyance to D (Smith) defectively acknowledged: Considered
not recorded
 D (Smith) conveyance to D (Seale) ineffective: D (Seale) not
entitled to protection of Recording Act because D (Smith) did not
have title
 Common law rule favors P (Frederick): D (Smith) had no title, D
(Seale) not protected by recording act, so P (Frederick) wins
because “first in time, first in right”
o Petition for rehearing: Rule for P because Caroline Messersmith did not
have title to convey to D (Smith), not simply faulty acknowledgement
 Purchaser with valid title but faulty title should not lose property
because of faulty recording.
 As long as there is a recording, purchaser title will stand.
Wild deed: A deed that is not properly acknowledged is not entitled to be recorded
 Board of Education of Minneapolis v. Hughes, SC (Minn) (1912) (p. 677): P
(Board of Education) sued D (Hughes)
o A deed from a grantor outside the chain of title, even if recorded, is
treated as though it were unrecorded and gives no constructive notice
o Board of Education situation:
 Hoerger  Hughes (without name and date)
 Hoerger  D&W
 D&W  Board
 Board records
 Hughes inserts name into his deed
 Hughes records
 D&W records
o SC (Minn): Ruled for D because a subsequent purchaser with a wild deed
is not protected in a race-notice jurisdiction
 D (Hughes) inserts name after P (Board) gets title: D is a
subsequent purchaser without notice
 P (Board)’s deed is wild until D&W records, which was after D
(Hughes) recorded
 P (Board)’s chain of title incomplete: P (Board) does not have a
complete chain of title until D&W’s wild deed is recorded
 Subsequent purchaser of P (Board)’s property would be unable to
trace chain of title back to Hoerger
o In an notice jurisdiction: Question would be when D (Hughes) signed and
technically purchased, and whether D (Hughes) had notice of D&W or P
(Board) conveyance
o Wild deed: Deed that was recorded, but the person who transferred
the interest did not record
o Until a chain of title is complete, a property cannot be recorded
Subdivision constructive notice: A purchaser from a common grantor in a
subdivision has constructive notice of the restrictions on the rest of the subdivision
and thus acquires title subject to those restrictions
 Guillette v. Daly Dry Wall Inc., SJC (MA) (1975) (p. 680): P (Guillette)
purchased a lot in a subdivision from Gilmore, the owner. Guillette’s deed
contained restrictions imposed for the benefit of other lots on the subdivision (to
restrict buildings to single family homes) and imposed the same restrictions on the
rest of Gilmore’s owned lots. Five years later D (Daly Dry Wall) purchased a lot
from Gilmore, but the deed made no reference to the restrictions. D (Daly) wanted
to build an apartment building on its lot. P (Guillette) seek an injunction against D
o Subsequent purchaser is bound by restrictions contained in deed with
its neighbors from a common grantor, even though he took without
knowledge and his deed did not mention the restrictions
o SJC (MA): Rule for P because D had constructive notice of the
subdivision restrictions, even though not in chain of title
 Gilmore conveyed to P (Guillette) land subject to same restricts as
the rest of the land
D (Daly) deed referred to a recorded subdivision plain, P (Guillette)
deed referred to same plan
Guillette Rule: A purchaser in a subdivision is required to expand his search
of title to include all conveyances made by the grantor of other property
within his subdivision in order to be certain that the grantor did not burden
his remaining property with a use restriction contained in a deed to a third
party (Purchaser is on inquiry notice when purchasing in a subdivision)
Contradicts Luthi v. Evans because D (Daly) should have won since the
restriction was not in the D’s deed
o This case should be read narrowly because the subdivision plan at least
gave Daly some sort of notice: Subdivision map noted all the properties
and gave an indication to buyers where to look
o Having a searchable index online would not make a difference here
because D (Daly) would still have to look through all deeds
Hypo: P. 685, (2)(b):
o OA
o O  B (with notice)
o B records (1990)
o A records (2005)
o B  C (without notice)
o C records (2011)
o Q: A v. C?
 Clearly between A v. B, A has better title since B took with notice
 If A did not record, it is clear that C would win since he has no
notice of the conveyance from O  A and he had every reason to
believe B had title
o Q: Suppose the deed from O  A was in 1970; from O  B from 1990; B
records in 1991; A records in 2005; C records in 2011?
 C argue: Even though A recorded (so technically C is on record
notice of more than one conveyance from O), so he is not looking
in 2005 for a conveyance from O. Rather, he is looking if B
conveyed it to everyone else
 Anti-C: C had record notice since A recorded before C took
 Pro-C: Unlikely C would find recording since it was so long ago
 Morse v. Curtis: If you go back in the chain of title, C could have
nothing, so give C title
 Woods v. Garnet: Others have given title to A, since C was on
record notice of multiple conveyance from O
Bona fide purchaser: Bona fide purchaser status attaches only when the full
purchase price has been paid
 Daniels v. Anderson, SC (IL) (1994) (p. 686): P (Daniels) purchased land from D
(Jacula) and contract of sale gave P (Daniels) right of first refusal if D (Jacula)
ever sold the adjacent parcel. The contract of sale was not recorded and when P
(Daniels) received his deed, it did not include the right of first refusal. D (Jacula)
contracted with D (Zongrafos) for the adjacent parcel for 60K under an
installment contract. D (Zongrafos) put a down payment of 10K and paid another
20K installment. P (Daniels)’s wife told D (Zongrafos) about P (Daniels) right of
first refusal and D (Zongrafos) then paid the remaining 30K. D (Zongrafos) then
received the deed and recorded it. P (Daniels) sued D (Zongrafos) for specific
performance for his right of first refusal. COA (IL): Rule for P, granting specific
performance of option
o Subsequent purchaser who is given actual notice of an option on the
property after beginning payment but before completion is not
considered a bona fide purchaser
o SC (IL): Rule for P (Daniels) because D (Zongrafos) was not a bona fide
subsequent purchaser when D received actual notice of P’s option, P must
pay D for payments made on installments to receive property title
 D (Zongrafos) not considered bona fide purchaser until made all
payments on installment contract
 D (Zongrafos) did not finish paying installments until after
receiving actual notice of P (Daniels)’s option: D is not protected
by Recording Act
 D (Zongrafos) required to convey title to P (Daniels), while P
required to pay D contract price and taxes paid
PRO P (Daniels) prior purchaser:
o Rule: The subsequent purchaser in a installment sales contract is protected
by Recording Act only for the amount the subsequent purchaser has
already paid when the prior purchaser had recorded
o Authority: Daniels v. Anderson
 Daniels Rule: Paying an installment payment does not make you a
bona fide purchaser
o Reason: Common law “first in time rule.” Prior was first in time. Our goal
in having a Recording Act is to protect a subsequent purchaser who has
laid out money in reliance on the stated record title. But we can do that by
just giving the subsequent purchaser back the money the subsequent
purchaser had, and that would be enough to vindicate the goals of the
Recording Act.
PRO D (Zongrafos) installment subsequent purchaser:
o Rule: A subsequent purchaser who makes an installment sales contract for
land without actual notice of a prior purchase becomes the equitable
owner good against al prior unrecorded interest at the time the contract
was made and some payment paid.
 Equitable owner is entitled to protection of Recording Act
o Reason: Prior purchaser was in the best position to avoid the situation by
recording immediately afterwards. The burden on the buyer to check if
there is a recordation before every payment is too high
o Authority: Lewis v. Superior Court
 Lewis Rule: One who makes an installment plan to purchase is a
bona fide purchaser through equitable title unless purchaser has
actual notice
o Distinguish: Daniels v. Anderson
Equitable owner argument is not permissible on appeal because it
was not raised at trial
If trial court had recognized D (Zongrafos) was protected by the
Recording Act, it would not have abused discretion
D (Zongrafos) had actual notice that abrogates Recording Act
Bona fide purchaser: A seller need not be paid in full before the buyer can be
considered a bona fide purchaser (equitable owner)
 Lewis v. Superior Court, COA (CA) (1994) (p. 689): P (Lewis) contracted to buy
a house from Shipley for $2.3M. A few days before closing, D (Fontana Films)
recorded but did not index a lis pendens (lawsuit affecting title in the propertyonce recorded, it’s a lein on title and prior purchaser takes subject to the claim on
the property). P put $350K down with note for $1.95 M. P received the deed and
recorded it. The next day, D’s lis pendens was indexed and served as constructive
notice to subsequent purchasers. P paid the remaining balance to Shipley. P spent
$1M on renovations. P were served with D’s lawsuit and learned about the lis
pendens. P sued D to remove the lis pendens and clear title. D (Fontana Films)
argue the P (Lewis) were not bona fide purchasers with Recording Act protection
because they did not take title until after full payment and indexing of D’s lis
pendens (thus P had constructive notice).
o Constructive notice is not enough to negate a subsequent purchaser,
who has already made payments, from being a bona fide purchaser
(equitable ownership)
o COA (CA): Rule for P (Lewis) because an owner because a bona fide
purchaser through equitable ownership once he makes a down payment
 Overrule Davis v. Ward Rule: Bona fide purchaser status requires
fill payment
 New market considerations require new equitable ownership rule:
 Market considerations: Obligation to pay balance has a
right to secure property title
 Purchaser drastically alter position: Purchaser sells prior
residence and may make significant improvements in new
 Purchaser cannot be adequately redressed by returning
money paid: Real property is unique and loss cannot be
 Contract law: Purchaser equitable title assured by fulfilling
contractual obligations
 Purchaser should not be burdened to undertake a title
search before each payment
 Unfairly penalize financing purchase price rather than
paying full amount upfront
 No rational distinction between payment by mortgage and
financing purchase
P (Lewis) have better title than D (Fontana Films): P recorded
without actual or constructive notice of D’s lis pendens
 P (Lewis) received equitable ownership with payment contract
Contradicts Daniels v. Anderson Rule because subsequent purchaser no
longer needs to do a title search before every payment
Inquiry notice: Subsequent grantees are held to inquiry notice of the contents of
prior recorded deeds in the chain of title
 Harper v. Paradise, SC (GA) (1974) (p. 693): In 1922, Susan Harper conveys
warranty deed to Maude (daughter-in-law) with remainder to Maude’s children.
Maude loses the deed. Susan Harper dies. Grantor’s heirs execute a replacement
deed that re-deeds the property in fee simple to Maude. This deed refers to the lost
deed. In 1928, Maude records deed. Maude executes a security deed for Thornton.
An unbroken chain of title from Thornton to D (Paradise). In 1955, D (Paradise)
acquired title. P (Harper, remaindermen) finds original deed in an old trunk. In
1957, P records original deed. In 1972, Maude dies, her life estate ends, and P
(Harper, remaindermen) sue D (Paradise) to recover possession.
o Subsequent purchaser is placed on inquiry notice and therefore
required to search for other deeds mentioned in the conveying deed in
order to invoke protection of the Recording Act
o Statute of limitations does not start running until interest becomes
o Harper v. Paradise situation:
 Harper  Maude (life estate with remainder to children) (deed lost)
 Harper  Maude (fee simple)
 A  D (Paradise)
 P (Harper, remaindermen) find first deed
 P sue D
o SC (GA): Rule for P (Harper, remaindermen) because replacement deed
mentions original deed and imposes a duty of inquiry notice to ascertain
its contents
 Replacement deed put any subsequent purchaser on notice of the
earlier misplaced deed: Constructive notice of original deed
 Replacement deed not given priority even though recorded earlier
than original deed
 D (Paradise) cannot rely on original deed because any interest
obtained under original deed would only be Maude’s life estate
 D (Paradise) had a duty to ascertain through diligent inquiry the
contents of the original deed
 Failed inquiry notice: D (Paradise) did not make any effort to
inquire as to the interests conveyed in the original deed when D
 No adverse possession: D (Paradise) adverse possession claim does
not begin until Maude (life tenant)’s death in 1972 and future
interest holders acquire a possessory interest
Inquiry notice: Deeds that refer to other instruments may constitute
constructive notice and require off the record search
Inquiry notice: Actual possession gives constructive notice to the world of any right
which the person in possession is able to establish
 Waldorff Ins. and Bonding, Inc. v. Eglin National Bank, COA (FL) (1984) (p.
697): D (Waldorff Ins. and Bonding, Inc.) took possession of a condominium unit
it had contracted to purchase. Subsequent to this physical possession, the owner of
the condominium complex, Choctoaw, mortgaged D (Waldorff)’s unit to P (Eglin
National Bank). P (Eglin Bank) sued to foreclose D (Waldorff)’s unit. P (Eglin
Bank) claims title even though D (Waldorff) was in possession.
o Possession of property constitutes constructive notice of title so
although it is inconvenient for prospective lender to inquire about
every unit separately rather the entire building, they are still required
to do so and ascertain which tenants actually hold an interest in the
o Waldorff v. Eglin situation:
 Choctaw  D (Waldorff) contract of sale
 Choctaw  mortgaged D (Waldorff)’s unit to P (Eglin Bank)
 P (Eglin Bank) records mortgage
 Choctaw  D (Waldorff) deed
 D (Waldorff) records deed
o COA (FL): Rule for D (Waldorff) because P (Eglin) was on inquiry notice
that D was in possession and might have a prior unrecorded deed
 Affirm Phelan v. Brady Rule: Actual possession of a property is
sufficient to give notice to the world of the existence of a right
which the person in possession is able to establish
 Choctaw conveyance to D (Waldorff) vested equitable title to D
 P (Eglin) had constructive notice of D (Waldorff)’s adverse title: P
cannot benefit from Recording Act
 Inquiry notice: When purchasing from an owner who does not have
possession of the property, the subsequent purchaser should inquire as to
anyone who may live in the property to ensure they do not have better title
Coarse theorem:
 When negotiation is possible and there are no transaction costs, rational actors
will bargain to the most efficient outcome regardless of the initial allocation of
property rights
o When two parties are trying to maximize their investment, the legal rule
will have no bearing effect on the outcome (most efficient use of property)
o Market forces will determine who leaves and who remains. All the legal
rule does is determine who has the burden of paying.
 Ex: Two neighboring landowners: Drive-in theater and amusement park
o Amusement park’s lights are interfering with the drive-in theater
Drive-in theater lost value: $40,000
Amusement park’s cost to move the lights: $10,000
Lights as a nuisance: AP moves the lights
Lights not as a nuisance: DI bargains with AP: $10K-$40K for moving the
o Outcome: Same result = Coase theorem
Many parties: Theorem breaks down when one of the parties doesn’t have the
money to negotiate or isn’t rational (holdouts and free-riders)
Few parties: It is up to the court to decide the most efficient outcome and decide
who should have the burden of remedying the nuisance
Most efficient use takes into consideration subjective value to the landowner
Nuisance: An interference with use and enjoyment of land which must be
substantial; it must also be either (a) intentional and unreasonable; or (b) the
unintentional result of negligent, reckless, or abnormally dangerous activity
Nuisance remedies:
 No nuisance: Let the activity continue by denying all relief (plaintiffs came to
o Community will have to buy harmful user out but there is a free rider
o Fair but inefficient result
 Nuisance and injunction: Abate the activity in question by granting plaintiff
injunctive relief (few parties) (Estancias)
o Harmful user must move
o Efficient but (maybe) unfair result
 Nuisance and damages: Let the activity continue if the defendant pays damages
(many parties-holdout) (Boomer)
o Harmful user would have to move because it is cheaper than buying
o Efficient but (maybe) unfair result
 Injunction and indemnification: Abate the activity until plaintiff pays damages
to defendant for leaving (many parties-free rider) (Spur)
o Harmful user has to move but plaintiff bears the cost
o Efficient and fair result
Factors to consider:
 First in time: Those who were there first are unlikely to be held for creating the
nuisance, since they were there before and there was no problem
o Coming to the nuisance: The prevailing view is that moving into the
vicinity of a nuisance does not completely bar a suit for damages or
injunctive relief, but it is a relevant factor (Spur)
 Foreseeability: Was the adverse effect on landowners foreseeable? If not, then it
may not be a nuisance.
 Realist: Transactional costs of bargaining over injunction? Who should we put
the burden on?
Least cost avoider
Free rider problem: Plaintiffs wait to buy out defendant
Holdouts problem: Defendant has a difficult time buying out plaintiffs
Balancing the equities: Measuring harm and evaluating whether an
injunction should be granted (Estancias)
Restatement (social benefit v. harm): What is the harm of the respective parties?
What is the most efficient solution?
o There may be circumstances where the social benefit is much greater than
the harm, but we still say the use is a nuisance (Morgan)
Preference in nuisance remedies:
 Money damages v. Injunction
o Coase theorem
o Injunction: Proper outcome for two parties (Estancias)
o Money damages: Injunction cannot be negotiated without high
transactional costs and value of defendant operations higher than the harm
 Prefer injunction over damages
o Damages does not account for subjective value: Injunction will allow the
parties to negotiate taking into consideration subjective value
o Threat of injunction gives incentive for harmful user to negotiate with
neighbors before he puts in the nuisance
 Takes into consideration their subjective value
 If it were only damages, harmful user would not take into
consideration any subjective value because that is not court
 Prefer damages over injunction
o Save money on negotiating costs when settling with injunction
o Avoid transactional cost issues
o Permits efficient uses which are nuisances, like allowing a factory to
continue operation (Boomer)
Damages and injunction: Nuisance seeks to protect against interference with a
landowner’s use and enjoyment of his property
 Morgan v. High Penn Oil Co., SC (NC) (1953) (p. 731): P (Morgan) lives on nine
acres, about 1,000 feet from D (High Penn Oil Co.)’s oil refinery since 1945.
Beginning in 1950, D dumped large quantities of nauseating gases and ordors into
the air, which invaded P’s land. P sued D for temporary damages and private
nuisance. TC: Find for P (Morgan), $2,500 damages
o Court can issue both damages and injunction against a nuisance when
the victim was there first
o SC (NC): Rule for P (Morgan) granting injunction and temporary damages
because D (High Penn Oil Co)’s odors intentionally and unreasonably
impaired P’s use and enjoyment of his land
 General maxim: Every person should use his property not to injure
Nuisance: Any substantial invasion of another’s interest in the
private use and enjoyment by any form of liability forming conduct
 Intentional nuisance: Unreasonable under the
 Unintentional nuisance: Reckless or negligent
Morgan Rule: An interference with use and enjoyment of land, in order to
give rise to liability, must be substantial. The interference must also either be
intentional and unreasonable or the unintentional result of negligent,
reckless, or abnormally dangerous activity.
Morgan prime example of nuisance: Not simple reliance on benefit to society v.
harm balance
Injunction: Nuisance and balancing of the equities
 Estancias Dallas Corp. v. Schultz, Civil Appeals (TX) (1973) (p. 739): P (Schultz)
lived about five and a half feet from D (Estancias Dallas Corp) property line,
about fifty-five feet from P’s back door, and about seventy feet from P’s bedroom.
P’s unit sounds like a jet airplane or helicopter. P can no longer do any
entertaining in their backyard because of the noise. P cannot carry on a normal
conversation in their home with all their doors and windows closed. The noise
interferes with their sleep at night. P (Schultz) sued D (Estancias Dallas Corp) for
a permanent injunction against the air conditioning and towner on the property
next to P’s residence. TC: Find for P, grant injunction.
o When a nuisance exists, the court must balance the equities and weigh
the injury to the opposing party and the public versus the injury
suffered by the plaintiff to determine if an injunction is appropriate
o Civil Appeals (TX): Rule for P (Schultz) and grant injunction because no
abuse of discretion in balancing of equities
 Devalue of P (Schultz) property: $25K to $10K
 Cost of air conditioning: $80K
 Separate units for eight buildings +$40K
 Cost to change system: $150K to $200K
o Balancing of equities test: P (Schultz) lost a significant amount
 Injury on defendant and public by granting injunction
 No need for D (Estancias) housing
 Burden to remedy issue is $150K-200K but could have
been avoided for $40K originally
 Injury sustained by complainant if injunction denied
 P (Schultz) property significantly decrease $25K  $10K
 No matter which way the court decided, the air conditioning units were not
o If the court gives an injunction, D (Estancias) will have to pay a lot more
to settle wit P (Schultz), but units will continue to be noisy
o If court gives damages, D (Estancias) will have to pay a small damages
amount, but the noisy units will continue
o If the court finds no nuisance, the noisy units will still continue
Nuisance and injunction: Injunction granted knowing D (Estancias) will buy
from P (Schultz). Injunction allows P to bargain for subjective value and
permits successful negotiations
Permanent damages: Courts can grant an injunction conditioned on the payment of
permanent damages to a plaintiff in order to compensate him for the impairment of
property rights caused by the nuisance
 Boomer v. Atlantic Cement Co., COA (NY) (1970) (p. 743): D (Atlantic Cement
Company) runs a large cement plant. Ps (Boomer) and other neighboring
landowners claimed that their property interests were injured because of the high
levels of dirt, smoke, vibration that the plant produced. TC: Find for Ps nuisance,
awarded temporary damages in various specific amounts, awarded $185K
permanent damages, injunction denied because harm to Ps small compared to loss
with an injunction of Ds operations.
o Courts may issue permanent damages rather than an injunction in
cases where the damages done to plaintiffs is small in comparison to
the loss of shutting down defendant’s operation and where there are
many plaintiffs (high transactional costs and holdouts in negotiations
would impede the most efficient use)
o COA (NY): Rule for P (Boomer) with injunction conditioned on D
(Atlantic Cement Company) payment of permanent damages
 No grant injunction but postpone effect because technological
advances that eliminate nuisance are not assured
 High holdout and transactional costs:
 Many Ps so everyone will try to be the last holdout
 Greater the amount of Ps, the higher the transaction costs
 D (Atlantic Cement) will have need to pay every P, so each
P will have an incentive to holdout and have the best
position to leverage more money from D
 Value of plant high: Permit D (Atlantic Cement) plant continue
operation after payment of court ordered permanent damages
 Issue court determined permanent damages:
 Overcomes Ps transactional costs that prevent negotiation
 Allows D cement operation to continue
 CON Boomer v. Atlantic Cement Co. outcome:
o Does not account for subjective values
o Takes away the autonomy of homeowners to bargain for themselves
o Bad message to cement companies:
 Cement companies can ignore the rights of neighbors because they
will only be required to pay money damages
 Injunctions give an incentive for cement companies to take into
consideration people around them since buying injunction rights
are more costly that court awarded permanent money damages
Injunction and indemnification: Where an otherwise lawful activity can become a
nuisance because others have entered the area of activity, an injunction may be
issued conditional upon the complainant paying damages caused by issuance of the
 Spur Industries, Inc. v. Del E. Webb Development Co., SC (AZ) (1972) (p. 750):
D (Spur) owns a feedlot with cow manure and flies. P (Del Webb) builds homes
and apartment units a certain distance from the feedlot. P (Del Webb) expands by
building residences close the feedlot. Flies and odor present a public nuisance to
the residents in Sun City. P (Del Webb) sued D (Spur) to enjoin D’s operation of
the feedlots as a public nuisance.
o In cases of public nuisance, an injunction will be granted even if the
plaintiff came onto the nuisance (which could not be foreseen by
defendant), but plaintiff will be indemnified to pay defendant for loss
o SC (AZ): Rule for P (Del Webb) with D (Spur) enjoined and P pays D’s
removal costs of D’s feedlot because compromise solution for public
 P (Del Webb) suffered an injury from loss of sales for standing
 D (Spur)’s feedlots are a public nuisance: Any condition or place
in populous areas which constitutes a breeding place for
flies…which are capable of carrying and transmitting diseasecausing organisms
 Most efficient outcome: D (Spur) feedlots move away because
value of P (Del Webb)’s residential development is of more value
 Equitable result: P (Del Webb) pays D (Spur) compensation for
 Courts must protect lawful businesses whose activities
becomes nuisances because of unforeseeable encroachment
 “First in time” cases hold parties denied relief after they
knowingly came into a public nuisance
 D (Spur) had no idea that Sun City would force relocation
 D (Spur) must move for public interest
 Unfair for P (Del Webb) to take advantage of low land
prices to chase nuisance away without compensation
 No indemnification and permanent damages: Free rider problem and high
transactional costs
o Risk that negotiations will break down because each homeowner holds out
hoping that other owners will pay
o Court avoids transactional cost: Issue injunction and forcing P (Del Webb)
to pay for D (Spur) removal costs
 Alternative approaches to Spur v. Del Webb remedy:
o No nuisance: Fair and inefficient result
 D (Spur) feedlot would move: Coase theorem says if homeowners
value their right to live feedlot free more than feedlot values
current location, feedlot will move
 Require a large enough consent to decrease the individual
payments to pay for D (Spur)’s removal
 Free rider problem: Homeowners not quick to contribute because
they want the benefit of
Fair result: Feedlot leaves
Inefficient: Free rider issue when homeowners ban together to buy
out feedlot
o Nuisance and grants injunction: Unfair and efficient result (Estancias)
 D (Spur) feedlot would rather move because paying homeowners
for losses they suffer would cost much more than moving
 Unfair: D (Spur) “first in time”
 Efficient: D (Spur) forced to move
o Nuisance and temporary injunction with conditional permanent damages:
Unfair and efficient result (Boomer)
 D (Spur) would have to move because it’s cheaper than buying
 Unfair: D (Spur) “first in time”
 Efficient: D (Spur) forced to move
o Nuisance and injunction with indemnification: Fair and efficient result
 Fair: D (Spur) moves but P (Del Webb) bears the cost
 Efficient: D (Spur) forced to move
Five types of servitudes (easements and covenants):
 A is given the right to enter upon B’s land (easement)
 A is given the right to enter upon B’s land and remove something attached to the
land (profit)
 A is given the right to enforce a restriction on the use of B’s land (negative
easement, real covenant, or equitable servitude depending on other factors)
 A is given the right to require B to perform some act on B’s land (real covenant or
equitable servitude)
 A is given the right to require B to pay money for the upkeep of specified
facilities (real covenant or equitable servitude)
Easement: Allows a person (dominant estate) to use his neighbor’s property (servient
estate) in such a way that remedies issues created by contract or by acquiring a joint
 Contract issue: Contract is only binding on the person contracted with and not a
subsequent purchaser or heir
 Joint tenancy issue: Severable by partition by some later person
Types of easements:
 Affirmative easements: Give a neighbor the right to enter or perform an act on
the servient land
 Negative easements: Forbidding one landowner from doing something on his
land that might harm a neighbor
o English court (right to stop your neighbor from):
 Blocking your windows
 Interfering with air flowing to your land in a defined channel
 Removing support of your building
 Interfering with the flow of water in an artificial stream
Easement appurtenant: Gives a right to whomever owns a parcel of land that the
easement benefits (run with the land) (Willard)
o Requires both dominant tenement and servient tenement
o Usually transferable along the dominant tenement to successive owners
o Courts favor easement appurtenant over an easement in gross
Easement in gross: Gives a right to a specific person without regard to ownership
of land
o Involves on a servient estate
Creation of easements:
 Expressed easement
o Generally requires a written instrument signed by the party being bound
(statute of frauds)
 Easement by estoppel (Holbrook)
o Get permission to use the land and rely on it
o Key factor: Permission before reliance
 Easement by implication (Van Sandt)
o Easement by prior use: At the time of purchase, it was clear that this
easement was implied
o At the time of severance, the severance caused some important prior use to
be locked off
o Necessity is not a requirement, only prior use
 Easement by necessity (Othen)
o Did the time of severance create a necessary easement: Must have been
part of the same property and the easement in question must have been the
only way to reach that property
o Most likely leads to an easement by implication
o Insert into the argument the objective/subjective view of necessity
o Plaintiff has a burden of proof to show that a specific point in time in
which the land was severed created an easement by necessity (Othen)
 Easement by prescription (Othen)
o Similar to adverse possession
o Difference between adverse possession and prescriptive easement is
prescriptive easement has no claim of exclusive use
o Permissive use of an easement kills an easement by prescription claim
Alteration of easement location by servient estate:
 Established rule: The location of an easement, once fixed by the parties,
cannot be changed by the servient owner without permission of the dominant
 3rd Restatement: 4(8) comment f: Servient owner granted the right to change
the location of an easement, at his expense, if the change does not
“significantly lessen the utility of the easement, increase the burdens on the
owner of the easement in its use and enjoyment, or frustrate the purpose for
which the easement was created”
Termination of easements: [see notes]
 Adverse possession
 Using an easement inconsistent with the easement holder’s right
 Abandonment (Presault)
 Estoppel (like Brown)
Easement appurtenant: A grantor can reserve an easement in property for a person
other than the grantee
 Willard v. First Church of Christ, Scientist, SC (CA) (1972) (p. 768): McGuigan
(original grantor) owned two lots, Lot 19 and Lot 20. McGuigen permitted the use
of Lot 20 for D (First Church) parking. McGuigen sold Lot 19 to Peterson. P
(Willard) expressed interest in buying Lot 19 and Lot 20. Peterson signed a
deposit receipt for the sale of two lots even though Peterson did not own Lot 20.
Peterson offered to buy Lot 20 from McGuigen and McGuigen said she would
sell the property subject to D (First Church)’s continued use for parking.
McGuigen’s lawyer drew up an easement of the deed. McGuigen sold the
property to Peterson at reduced price due to D (First Church)’s easement.
Peterson recorded the deed with the easement. P (Willard) then bought the Lot 20
from Peterson and got a deed with no mention of D (First Church)’s easement.
Peterson told P (Willard) that D (First Church would use Lot 20 for parking
without revealing the easement.
o When transferring his entire interest in property to the grantee, a
grantor may reserve a newly created interest in a third party
o Willard v. First Church situation:
 McGuigen  Peterson (parking lot easement for D (First Church)
is in deed)
 Peterson records deed
 Peterson  P (Willard) (deed to P did not mention D (First Church)
o SC (CA): Rule for D (First Church) because an easement can be created in
favor of a third party
 Overrule common law rule: Reservation of an interest is not
 P (Willard) has not relied on common law rule when purchasing
 P (Willard) not prejudiced: D (First Church) used Lot 20 for
parking throughout the purchase period
 Main objective: Carry out McGuigen’s intent
 Follow contracts law
 McGuigen intended to reserve Lot 20 for D use
 Original grantee has likely paid a reduced price on the
property in exchange for land use restrictions
Reservation of easement:
o NY law: Common law rule that a grantor cannot reserve an interest
in a third party
o 3rd Restatement: 2.6(2): An easement can be created in favor of a
third party
Easement by estoppel: A license cannot be revoked after the licensee has erected
improvements on the land at considerable expense while relying on the license
 Holbrook v. Taylor, SC (KY) (1976) (p. 774): D (Holbrook, owner) is the
landowner whose property contains the easement. D (Holbrook) gave P (Taylor,
licensee) permission to use D’s road to move supplies and get to P’s property.
With D (Holbrook)’s knowledge and without objection, P (Taylor) widened
access to the road and constructed a substantial single family home. D (Holbrook)
later raised a steel cable across the road to block passage and set up “no
trespassing” signs. P (Taylor) sue D (Holbrook) to remove the obstructions and
declare P’s right to use the road without interference.
o A licensor is estopped from revoking the license to use of an easement
once the licensee has relied on the privilege given by the license such
as construction of improvements
o SC (KY): Rule for P (Taylor) easement by estoppel because P relied on D
(Holbrook)’s permission to make expenditures and improvements
 Affirm Lashley Telephone Co. v. Durbin: Right to use a roadway
established by estoppel
 No revoke license after licensee erects structures and
improvements at considerable expense
 P (Taylor) had D (Holbrook)’s consent to use the road
 P (Taylor) used the road to build and improve $25K home
 P (Taylor) widened and maintained the road at own additional
o No easement by prescription: P (Taylor) received D (Holbrook)’s
permission so improvements were not adverse
 Estoppel burden: Obligation on servient owner to tell dominant owner before
dominant owner invests in reliance on the easement that the dominant owner
cannot use the easement
 3rd Restatement: 2(10): Normally the change in position that triggers
application the rule stated in this subsection is an investment in
improvements either to the servient estate or to other land of the investor
 3rd Restatement: 4(1) comment g: The expectations that create the servitude
will also define its scope and terms. The relevant expectations are those the
reasonable people in the landowner and the person who relied on the grant of
permission or representation would have under the circumstances.
 3rd Restatement: Servitudes ch.4 Introductory Note: The irrevocable license is
treated the same as any other easement
 PRO Easement by estoppel:
o Reliance: If licensor had told licensee before investment in improvements,
licensee would not be worse off than before permission was given
o Unequal bargaining power: Without easement by estoppel, prior reliance
expenditures are licensor’s leverage to gain money from licensee to regain
access to the easement
o Unfairness: Inequitable to allow licensor to watch licensee expend
considerable money then rescind license
o Least cost avoider: Licensor is in the best position to prevent licensee’s
reliance expenditures
o Reality: Unrealistic and insulting to receive an expressed easement in
writing because licensee wanted to keep good relations with licensor
CON Easement by estoppel:
o Henry v. Dalton: There should always be writing and no easements by
estoppel because statute of frauds applies to bar creation of an irrevocable
oral license
o No notice: Licensor had no notice that there was reliance on the license
o No foreseeability: Licensor did not reasonably foresee estoppel claim
because he was trying to be a good neighbor
o Unfairness: Licensor penalized for failing to prevent use of easement once
improvements are erected
o Least cost avoider: Licensee was in a better position to avoid this conflict
because licensee needed the easement build a house and should have
negotiated for access
Easement by implication: Easement can be implied by circumstances in which the
conveyance was made including prior use; reasonably necessary uses which are
apparent upon reasonably prudent investigation
 Van Sandt v. Royster, SC (KS) (1938) (p. 779): Bailey (common grantor) built a
sewage line connecting her house to the city sewer beneath the street. Bailey then
split her property into two more additional lots and conveyed them to others who
built houses connected to the lateral sewage line. P (Van Sandt) bought Lot 19,
which is closest to the street line without knowledge of the sewage line. P (Van
Sandt) later discovered the line because it was leaking Ds (Royster and Gray)’s
sewage into P’s basement. P (Van Sandt) sued Ds (Royster and Gray) for
injunctive relief to prevent the sewage from flooding into his basement. Ds
(Royster and Gray) claim they have an implied easement to use the sewage line
across P (Van Sandt)’s property.
o Implied easement from prior use can exist even if the land was
originally owned by the same conveyer
o SC (KS): Rule for Ds (Royster and Gray) and deny the injunction because
they have an implied easement to use the sewage line
 Quasi-easement: Use one part of a landowner’s land to benefit
another part
 Original owner conveys quasi-servient tenement to a new owner,
an implied reservation of an easement favored the property
 Ds (Royster and Gray)’s easement over P (Van Sandt)’s property
arose when common grantor split property and sold it
Factors determining an implied easement:
 Property grantor claiming easement
 Intention of parties: Language, circumstances
 Necessity
 Extent of manner or prior use known/might have been
known by the parties
 Continue reasonably necessary uses which would be
apparent upon reasonably prudent investigation
 Necessity: Easement for the sewage drain was necessary for the
comfortable enjoyment of her property
 Necessity: No reasonable person would sell property without
implied easement to use drainage system
 Notice: P (Van Sandt)’s prior owner was aware of the lateral
sewer drain and knew it was built for the common grantor’s
 Constructive notice: P (Van Sandt) had notice because P made
careful inspection of the property and knew the house had modern
plumbing that had to drain into a sewer [inquiry notice]
Elements of easement by implication (prior use):
o (1) Evidence of prior use or quasi-easement on property
 Grantor’s intent of implied easement because subsequent
purchaser knew and connected to sewage lines (Van Sandt)
o (2) Easement must be continuous and apparent
 P (Van Sandt) had constructive notice of sewage line continuous
use (Van Sandt)
o (3) Easement was reasonably necessary for the enjoyment of the
dominant parcel
 Implied grant: Reasonable necessity (convenience)
 Implied reservation: Strict scrutiny (common owner has
knowledge about the implied easement and should have executed
deed reserving easement)
o (4) Easement arose at the time of severance from a common owner
Strict scrutiny necessity:
o NY law (majority): Traditional rule that strict necessity is required
for implied easements in favor of the grantor
 Landlocked without road access
 Reasonable hindrances will not satisfy strict scrutiny
Reasonable necessity:
o 3rd Restatement (minority): Servitudes only require reasonable
necessity for the implied easement in favor of the grantor or grantee
Easement by necessity: Easement by necessity can be implied when the plaintiff
demonstrates: (1) unity of ownership between the alleged dominant and servient
estates, easement is a necessity and not a convenience, necessity existed at the time
the two estates severed; (2) or by prescription if the use was adverse
Othen v. Rosier, SC (TX) (1950) (p. 780): Hill (common grantor) owned a large
parcel of land, which he sold in pieces. In 1896, Hill sold 100 acres to D
(Rosier)’s predecessor possibly land locking the other parcels. In 1897, Hill then
sold 60 acres to P (Othen)’s predecessors. In 1904, P (Othen) acquires the 60
acre parcel. In 1913, P (Othen) acquired the 53 acre parcel. In 1924, D (Rosier)
acquired the 100 acre parcel followed by the 16 acre parcel. P (Othen) had no
direct access from his land to the highway for many years. P (Othen) crossed D
(Rosier)’s land. To avoid flooding, D (Rosier) created a levee that made the
driveway muddy and deprived P (Othen) of use of the roadway. P (Othen) sued
D (Rosier) for an injunction to prevent D from maintaining the levee. Lower
court: Hold for D (Rosier) because P (Othen) has no easement by necessity or
o No easement by necessity when there is a lack of evidence for
easement by necessity at the time of conveyance and the plaintiff had
only used the easement with the owner’s consent
o Othen v. Rosier situation:
 1896: Hill  Rosier (100 acre)
 1897: Hill  Othen (60 acre)
 1899: Hill  Othen (53 acre)
 1899: Hill  Rosier (16 acre)
o SC (TX): Rule for D (Rosier) because no easement by necessity because
roadway over D’s land was a convenience
 (1) Unity of ownership between the alleged dominant and
servient estates: Yes-Tone Survey owned by Hill
 (2) Easement is a necessity: No-Roadway mere convenience
because alternate routes to Belt Line Road after first conveyance
to D (Rosier)
 (3) Necessity existed at the time the two estates were severed: No
necessity existed after first conveyance to D (Rosier)
 Possible that later conveyance to the north land locked P
(Othen)’s parcel
o SC (TX): Rule for D (Rosier) because no easement by prescription
because use of the roadway was not adverse
 D (Rosier)’s roadway was fenced on north and south sides
 D (Rosier) used roadway for general farm purchases, haul wood,
move livestock
 Permissive use: P (Othen) prior use is permissive (used D (Rosier)
gate) or too vague to establish prescriptive right
Easement by necessity: Plaintiff must prove that severance of a common
property led to land locking a parcel of land and creating a necessary
Elements of easement by prescription:
o (1) Adverse use under a claim of right
 Use of another’s land must be adverse and not with the
permission of the owner
o (2) Open and notorious
Adverse use must be conducted so that the use may be discovered
by reasonable inspection
 Cannot be secret or carefully concealed
o (3) Continuous for the prescriptive period
 If the adverse possessor continually asserts his claim of right by
making whatever use is consistent with the nature of the easement,
even if sporadic
o Exclusive use not required
Easement appurtenant scope: If an easement benefits its owner in the use of a
particular parcel of land, any extension of the easement to other parcels is a misuse
of the easement
 Brown v. Voss, SC (WA) (1986) (p. 820): There are three consecutive parcels.
Before P (Brown) and D (Voss) owned the land, predecessors of Parcel A
(servient estate) gave parcel B (dominant estate) an expressed easement
appurtenant. D (Voss) owns Parcel A, while P (Brown) owns Parcel B and Parcel
C. P (Brown) wanted to combine Parcel B and Parcel C and continue to use the
easement. D (Voss) placed logs, a concrete pit, and a chain link fence to prevent P
(Brown)’s use of the easement to reach Parcel C. Parcel C has no easement rights.
P (Brown) sued D (Voss) for removal of the obstructions and an injunction
against further obstruction. TC: P (Brown) made no unreasonable use, P expended
$11K in building, Parcel C would become landlocked if injunction granted. TC:
Award each party $1 in damages. TC: Deny D (Voss) injunction against P (Brown)
continued use of easement.
o The dominant owner subject to an easement appurtenant may not
extend the easement rights to other parcels owned by him, but
injunctive relief may not be an appropriate remedy for the servient
o SC (WA): Rule for D (Voss) that P (Brown) misused the easement
because the easement appurtenant to one land may not be extended to
other parcels
 Parcel C was not part of the dominant estate under the expressed
easement: P (Brown) had no expressed easement rights to Parcel C
 Misuse: P (Brown) extended use of easement to Parcel C
o SC (WA): Rule for P (Brown) by denying injunction against P’s continued
use of easement because consider equitable relief to P
 Only technical misuse: P (Brown)’s home located partially on
Parcel B and Parcel C
 Reliance: P (Brown) relied on use of easement in making
improvements: D (Voss) waited until after extensive reliance
before preventing use
 No burden: P (Brown) did not materially increase the burden on
the easement: No increase in volume or type of traffic or burdened
servient estate
 No hardship: D (Voss) would suffer no appreciable hardship or
damage with P (Brown)’s continued use of easement
3rd Restatement: 4(10): The manner, frequency, and intensity of use [of
easement] may change over time…to accommodate normal development of
the dominant estate or enterprise benefited by the servitude. Unless
authorized by the terms of the servitude, the holder is not entitled to cause
unreasonable damage to the servient estate or interfere unreasonably with its
PRO Brown v. Voss approach (equitable relief with misuse):
o Approach appropriate as long as no unreasonable burden on servient estate
and benefits to dominant estate outweigh burdens on servient estate
o Liability rules are more efficient than property rules because of high
search costs: Dominant estate is unlikely to be aware of the traditional
legal rule leading to high costs
CON Brown v. Voss approach (equitable relief with misuse):
o Power of private eminent domain to the dominant estate
o Eliminates any need for the parties to negotiate to a consensual solution
o Doubtful other parcel landlocked without easement extension
Easement scope and abandonment: (1) Reasonable foreseeability at the time of
creation governs easement scope; (2) An easement is terminated by abandonment
when nonuse is coupled with an act manifesting either a present intent to relinquish
the easement or a purpose inconsistent with its future use
 Presault v. US, US COA (1996) (p. 831): Under the Rails-to-Trails Act, the
Federal Government sought to convert discontinued railway lines into recreational
public hiking and biking trail. Previously, the railroad had a right-of-way
easement over P (Presault) property which P owns in fee simple. In 1970, the
railroad discontinued service. In 1975, the railroad removed the tracks. In 1986,
the railway conversion to public trail was approved. P (Presault) sued D (US)
claiming the conversion of the former railway easement into a public trail went
beyond the scope of the original easement as well as constituted a government
taking without just compensation.
o (1) The scope of an easement is determined by the reasonably
foreseeable use at the time the easement grant was made
o (2) Easement abandonment requires more than nonuse: “Acts by the
dominant tenement conclusively and unequivocally manifesting either
a present intent to relinquish the easement or a purpose inconsistent
with its future use”
o US COA: Rule for P (Presault) that railway easement conversion to public
trail went beyond scope of reasonably foreseeable use and constituted a
taking without just compensation
 D (US)’s railroad easement scope limited to the transportation of
goods and persons via railroad
 Conversion of railway to public trail was not consistent with the
original terms of the railroad easement
 Public trail burdens on P (Presault) servient estate great: Increased
traffic, traffic impossible to contain
o US COA: Rule for P (Presault) that railway easement was abandoned and
D (US)’s conversion constituted a taking without compensation
 Removal of the rails and all railroad equipment constituted an
 D (US) did not attempt to reinstate railroad service after removal
 Possibility to restore railway service does not negate abandonment
 Collection of license and crossing frees from persons crossing the
track does not negate abandonment
Alternative method to terminate easement: Expressed and recorded release
of easement
Negative easement: Right to prevent your neighbor from doing something that
affects your enjoyment
Real covenant: Promise by your neighbor not to interfere with your enjoyment
No difference between covenant and an enforceable servitude
Elements of equitable servitude:
 (1) Intent that the benefit and/or burden of the covenant run to successors of
the original parties (Tulk, Neoponsit)
 (2) Notice on the part of the purchasers of the original promisor (Sanborn)
 (3) The covenant touch and concern the land (Neoponsit)
 *(4) Standing: There must be privity to enforce the covenant (Neoponsit)
Termination of covenants:
 Merger: Unity of ownership of the benefit and burden by the same person
 Release: A formal written and recorded release of covenant
 Acquiescence: Plaintiff has failed to enforce prior servitude breaches and then
seeks to enforce covenant against defendant
 Abandonment: Resembles acquiescence except that it makes the servitude
unenforceable as to the entire parcel rather than only as to the plaintiff
 Unclean hands: Equitable doctrine where the court will refuse to enjoin a
violation of a servitude that the plaintiff previously violated
 Laches: Equitable doctrine which involves an unreasonable delay by the plaintiff
to enforce a servitude against the defendant causing prejudice to the defendants
(does not extinguish servitude but bars enforcement)
 Estoppel: Defendant relied upon plaintiff’s conduct making it inequitable to
allow the plaintiff to enforce servitude
 Condemnation: Eminent domain
 Prescription: Servient owner wrongfully and physically prevents the easement
from being used for the prescriptive period
Restrictive covenant termination:
Purpose of the restrictive covenant has been so thwarted by changes in the
subdivision that it becomes inequitable to enforce them
o Burden on covenant remover to prove conditions substantially changed
and there is no substantial benefit to beneficiaries
Violations of the restrictive covenant constitute abandonment or waiver of
the covenant
o Violations must be so general as to frustrate the purpose of the restrictive
3rd Restatement: Modification and termination because of changed conditions:
 A court may modify when change has taken place since creation of servitude that
makes it impossible as a practical matter to accomplish the purpose, or if
modification is not practicable or would be ineffective, court may terminate
servitude (compensation to beneficiaries is sometimes awarded as condition for
 If purpose can be accomplished but, because of changed conditions the servient
estate is not longer suitable for uses permitted by the servitude, court may modify
to permit other uses to preserve the benefits of the original servitude
3rd Restatement: Modification and termination of certain affirmative covenants:
 Covenant to pay money or provide services terminates after a reasonable time if
the instrument creating the covenant does not specify the total sum due or a
definite termination point
 Covenant to pay money or provide services in exchange for services or facilities
may be modified or terminated if the obligation becomes excessive in relation to
the cost of providing the services or facilities or to the value received by burdened
 These do not apply to obligations to a common-interest community or to
obligation imposed pursuant to a conservation covenant
Covenant enforceable in equity: A covenant will be enforceable in equity against a
person who purchases land with notice of the covenant
 Tulk v. Moxhay, Court of Chancery (1948) (p. 854): P (Tulk) sold to Elms a
portion of Leiscester Square with a covenant to maintain it as a garden. Elms
conveyed the land to D (Moxhay), whose deed did not contain the covenant. D
(Moxhay) took the property with actual knowledge of the covenant. P (Tulk) sued
D (Moxhay) to enforce the covenant.
o A party shall not be permitted to use the land in a manner
inconsistent with the covenant entered into by his predecessors
o Court of Chancery: Rule for P (Tulk) because a D (Moxhay) is bound by a
covenant which he had actual notice
 Disregard English Rule of horizontal privity: D (Moxhay) actual
notice of covenant allows enforcement in equity
 Violation of prior covenant would frustrate prior grantor P (Tulk)
intent and render prior grantor property worthless
Sales price affected by covenant: D (Moxhay) likely paid less with
land restriction
 Prevent inequity: If D (Moxhay) allowed to build on the land, D
would have unrestricted land for the price of restricted land
Horizontal Privity Rule: Without recording system, privity rule was intended to
protect bona fide purchasers from prior, unnoticed covenants
Overrule Horizontal Privity Rule: With recording system, privity rule can be
disregarded because subsequent purchasers would be on notice of prior covenants.
Reciprocal negative easement: An equitable servitude can be implied on a lot, even
when the servitude is not created by a written instrument, if there is a scheme for
development of a residential subdivision and the purchaser of the lot had notice of it
 Sanborn v. McLean, SC (Mich) (1925) (p. 859): D (McLean) owned Lot 86 in a
subdivision. The subdivision was completely residential. D (McLean) started to
erect a gas filling station at the rear of D’s lot. Ps (Sanborn, et. al.) are neighbors
in the subdivision. Ps (Sanborn, et al.) sued to enjoin D (McLean)’s gas station
claiming it is a violation of the “general fixed plan” that they should be used for
residential purposes. Some of Ps (Sanborn, et al) deeds had residential use
restrictions. D (McLean) argues that D’s dead had no restrictions, no restrictions
appear in the chain of title, and D purchased without actual or constructive notice
of any real covenant.
o A negative easement must originate from a common owner, runs with
the land, and applies to any owner with actual or constructive notice
o View of uniformly restricted subdivision places an owner on inquiry
notice of any existing covenants
o SC (Mich): Rule for P (Sanborn, et. al.) granting injunction against D
(McLean)’s gas station because reciprocal negative easement applies to
D’s lot and D was on inquiry notice of the common scheme of the
residential subdivision
 (1) Common grantor creating the covenant must intend the
covenant run with the land
 First lots sold in the subdivision sold with a residential use
restriction for mutual benefit that applied to all the common
grantor’s lots
 Reciprocal negative easement for residential use from the
common grantor attached to D (McLean)’s Lot 86
 (2) Subsequent purchaser had either actual or constructive notice
 Constructive notice: D (McLean)’s abstract of title showed
Lot 86 was part of a much larger subdivision
 Constructive notice: General plan for the residential district
had been observed by all purchasers whether restricted or
 Inquiry notice: Strictly uniform residential use of
neighboring lots placed a burden on D (McLean) to
discover reason for uniformity
 (3) Covenant must touch or concern the land
 Residential use restriction in subdivision
 (4) Standing: There must be privity to enforce the covenant
 All the lots in the general plan were subject to the
residential use restriction after common grantor sold first
parcel (reciprocal negative easement)
Scope of Sanborn: Unclear because holding may only apply when there is
evidence that the original common grantor intended that all lots have a restriction
Comparison to Guillette: Much greater level of constructive notice
o The first deed said restrictions apply to all lands in the subdivision
o The deed exclusively mentions the subdivision
Common scheme: Plan usually imposes uniform restrictions on all lots but
uniformity is not required. The plan may be that some lots are intended to be
restricted in certain ways, while others are restricted in other ways or not at all
Implied negative restrictions:
o Majority Rule: Sanborn Rule with implied negative restrictions from
a general plan
o Minority Rule: Equitable servitudes must be created by a written
instrument identifying the burdened lot and will not be implied from
the existence of restrictions on other lots in a subdivision
o MA law: Covenants are not implied by a general plan, but covenants
on the burdened lot are in writing a general plan may be used to show
that the neighbors in the subdivision were intended as beneficiaries
and may enforce covenants
o VA law: Equitable servitudes limited to covenants imposed by a
common grantor on all lots in a subdivision that is subject to a general
development plan
Elements of covenant enforcement on subsequent purchasers:
o (1) Common grantor creating the covenant must intend the covenant
run with the land
o (2) Subsequent purchaser had either actual or constructive notice
o (3) Covenant must touch or concern the land
o (4) Standing: There must be privity to enforce the covenant
Enforceable affirmative covenants: An affirmative covenant to pay money for
improvements or done in connection with, but not upon the land which is to be
subject to the burden of the covenant does touch and concern the land, can be
 Neoponsit Property Owners’ Association, Inc. v. Emigrant Industrial Savings
Bank, COA (NY) (1938) (p. 864): The deed to D (Emigrant Bank)’s property, and
every deed in the chain of title, had an affirmative covenant requiring
homeowners to pay association fees to P (Neoponsit Association) in return for
maintaining nearby roads and parks. The covenant stated that failure to pay the
association fee would result in a lien on the land until fully paid. P (Neoponsit
Association) brought an action to foreclose a lien and enforce the covenant for
annual maintenance charge against D (Emigrant Bank)’s property.
o Covenant that runs with the land if the purpose and effect
substantially alters the legal rights which otherwise would flow from
ownership of land and which are connected with the land
o Neoponsit Rule: Affirmative covenants to pay dues to homeowner
associations are made enforceable
o COA (NY): Rule for P (Neoponsit Association) because affirmative
covenant was intended by the common grantor to run with the land, the
fees touched and concerned the land, and P had standing to enforce fee
 (1) Common grantor creating the covenant must intend the
covenant run with the land
 All the deeds have affirmative covenants to pay P
 (2) Subsequent purchaser had either actual or constructive notice
 All owners have notice of the affirmative covenant
 (3) Covenant must touch or concern the land:
 Substantially alters the legal interest in the land
 Reject rule that affirmative covenants are unenforceable
 Payment of annual charge permitted owners to acquire right
of common enjoyment to roads, beaches, public spaces and
 Burden inseparably attached to the land and held by
homeowners who enjoy the benefit
 (4) Standing: There must be privity to enforce the covenant
 Issue: P (Association) never owned roads or other public
places mentioned in covenant
 P (Association) formed as a convenient means of advancing
common interests of the individual owners
 Almost impossible to separate interests of P (Association)
and individual owners
3 Restatement: 3(2) (discards touch and concern requirement): All negative
and affirmative covenants are initially unobjectionable and that the
intentions of the parties should be given effect except when covenants are
illegal, unconstitutional, or violate public policy
CON affirmative covenant enforcement (market outsourcing):
o Affirmative covenants tend not to “concern the land” because theoretically
any affirmative action can be done by other people on the market than
o Contrast restrictive covenants: Restrictions cannot be outsourced to the
market because there is no where you can go to get an equivalent benefit
o If a homeowner assigns the annual charge to an assignee, and a subsequent
homeowner wants to get out of the covenant, the subsequent homeowner
must find the assignee
CON affirmative covenant enforcement (policy):
o Reluctance to order acts requiring continuing judicial supervision
o Enforcement may impose a large personal liability on a successor
o Affirmative obligation, unlimited in time, resembles a feudal service
o Affirmative covenants seen as clogs on titles
Enforceable covenant in changing environment: A restrictive covenant establishing
a common scheme subdivision cannot be terminated so long as: (1) the character of
the subdivision has not been adversely affected by the surrounding area; (2) the
covenant is of real and substantial value to the subdivision landowners
 Western Land Co. v. Truskolaski, SC (NV) (1972) (p. 882): D (Western Land Co)
subdivided a development outside of Reno, NV. D (Western Land) subjected the
subdivision to a restrictive covenant for single-family dwellings and prohibited
any stores, butcher shops, grocery or mercantile business of any kind. The land
around the subdivision was originally mainly residential and agricultural. The
surrounding area became more populated and more commercial with three
shopping centers constructed around the subdivision. The traffic within the
subdivision remained low. D (Western Land) sought to build a shopping center
within the subdivision. Ps (Truskolaski, et al.) homeowners D (Western Land) to
enjoin the building of the shopping center. D argued that circumstances had
changed so drastically that the purposes of the residential restriction have been
o Restrictive covenants are still enforceable if they still have real and
substantial value to its beneficiaries and even if the there are more
valuable uses of the restricted property
o SC (NV): Rule for Ps (Truskolaski, et. al.) and enjoin D (Western Land)’s
shopping center because circumstances have not changed drastically
enough and Ps benefit from safe traffic
 Residential restriction purpose not thwarted
 Lower level of traffic led to a safe environment for children
 Safety would be compromised with commercial traffic
 City proposal to rezone subdivision for commercial use insufficient
 Zoning ordinance does not override private restrictions
 Court cannot terminate restrictive covenant merely because
of a change in zoning
 D (Western Land) economic waste argument (more valuable land
use) insufficient
 Economic efficiency does not trump earlier restrictions
 Ps (Truskolaski, et. al.) still receive substantial benefit from
the residential use restriction
 Minor violations do not abrogate the residential restriction
 D (Western Land) argues that homeowners violated by
having a nursery and contractor’s office in home
 Violations are too isolated to frustrate the purpose of the
residential restriction
o Holdout issue: Court recognized the holdout incentive not to release the
residential use restriction in order to gain financial leverage
 Generally courts will not remove restrictive covenant if still
beneficial to homeowners
Courts may remove restrictive covenant if homeowners seek to
gain judicial leverage over
Enforceable covenant by single owner: A landowner in a subdivision under a
restrictive covenant has the right to insist upon adherence to the covenant even
when the other owners consent to its release
 Rick v. West, SC (NY) (1962) (p. 887): P (Rick) sold land in a subdivision with a
single family home restriction. The land was rezoned for industrial use. P (Rick)
first sought to sell the remaining tract to an industrialist, then to Peekskill Hospital.
D (West) thwarted both plans by refusing to consent to the release of the covenant.
P (Rick) and other homeowners sued D (West) to remove the restrictive covenant
claiming it was no longer enforceable because of a change in circumstances
o Even if a single resident insists on enforcing a covenant, the court will
protect the rights of the single resident
o SC (NY): Rule for D (West) and enforce restrictive covenant
 Restrictive covenant purpose not thwarted: Benefit that P (Rick)
created still exists
 D (West) relied on restrictive covenant when she purchased the
property and has a right to continued reliance
 Balancing of equities irrelevant: D (West) right to enforce
covenant deserves court’s protection
o No holdout issue: Only one resident refusing release so no concern about
gaining judicial leverage
 Termination of covenants because of changed circumstances:
o 3rd Restatement: 7(10): When a change has taken place since the
creation of a servitude that makes it impossible as a practical matter
to accomplish the purpose for which the servitude was created, a
court may modify the servitude to permit the purpose to be
accomplished. If modification is not practicable, or would not be
effective, a court may terminate the servitude.
o NY law: A servitude may be extinguished if it is of no actual or
substantial benefit to the persons seeking enforcement
o MA law: A servitude may be extinguished if restrictions would
impede reasonable use of the land for purposes which it is most
suitable and would tend to impair the growth of the neighborhood or
municipality in a manner inconsistent with public interest or
contribute to property deterioration
Unsuccessful covenant abandonment: A covenant running with the land cannot be
terminated by abandonment when the owner still holds title in fee simple absolute
 Pocono Springs Civic Association, Inc. v. MacKenzie, Sup Ct (PA) (1995) (p.
892): D (MacKenzie) owned a parcel of land in a subdivision that was subject to
an affirmative covenant to pay association fees. The property became worthless.
D (MacKenzie) tried to abandon the property: not paying taxes, offering it for sale,
attempting to give it back to P (Pocono Association), offering it for sale through
the tax bureau. No one took title to D (MacKenzie)’s property. P (Pocono
Association) sued D (MacKenzie) to collect association fees.
o To abandon property and escape affirmative covenant, an owner must
voluntarily relinquish all right, title, claim, and possession with the
intention of terminating ownership, but without vesting it in any other
person and with the intention of not reclaiming future possession or
resuming ownership, possession, or enjoyment
o Sup Ct (PA): Rule for P (Pocono) because D (MacKenzie) still had
recorded deed and “perfect” title and had not abandoned the property
 D (MacKenzie) has not relinquished rights or title to property:
Owners of property in fee simple, neither title or deed sold or
o D (MacKenzie) should have transferred property to an insolvent owner
who does not care about P (Pocono Association) fees
Cannot abandon property while retaining fee title: Abandoning a fee estate would
result in a person losing an interest would someone gaining, leading to a lack of
title clarity
Condominium use restriction: Presumption of rationality with recorded use
restrictions in condominium declaration
 Nahrstedt v. Lakeside Village Condominium Association, Inc., SC (CA) (1994) (p.
900): P (Nahrstedt) bought a condominium unit subject to a negative covenant in
the recorded declaration banning pets. P (Nahrstedt) has three cats. D (Lakeside
Association) discovered the cats, asked P (Nahrstedt) to remove the cats, and
assessed fines each month the cats remained. P (Nahrstedt) sued D (Lakeside
Association) claiming the pet restriction was unreasonable because her cats
remained indoors, caused no harm to neighbors, and P had no notice of the pet
o Reasonableness of a condominium use restriction is determined by
reference to the common interest development as a whole, rather than
the facts of the objecting homeowner
o SC (CA): Rule for D (Lakeside Association) because a presumption of
validity is given to a recorded master deed unless the restrictions are
 Constructive notice: P (Nahrstedt) have constructive notice of the
pet restriction in the recorded master deed
 Efficiency: If allow challenges to condominium use restrictions,
courts and associations will encounter high costs of litigation
 Deference: Courts must give deference to master deed restrictions
in order to protect expectations
 Protect owner expectations of use
 Protect buyers who bought on reliance on restriction
 Presumption of validity not rebutted by P (Nahrstedt)
o Presumption of validity applies to recorded amendments to condominium
 Nahrstedt standard: Presumption of validity in a master deed unless:
o Covenant violates public policy
o Covenant is arbitrary and bears no rational relationship to the
protection, preservation, operation, or purpose of the affected land
o Burden of covenant outweighs its benefit
3rd Restatement: 3(1): Presumption that a servitude is valid unless:
o Illegal
o Unconstitutional
o Violates public policy: Unreasonably burdens constitutional right;
imposes an unreasonable restrain of alienation
Cooperative business judgment rule: Corporate business judgment rule for a
shareholder-tenant challenge to a decision of a residential cooperative cooperation
 40 West 67th Street Corp. v. Pullman, COA (NY) (2003) (p. 913): D (Pullman)
was a shareholder-tenant in a cooperative. D (Pullman) allegedly terrorized the
tenants above him. P (40 West) voted 2,048 shares to zero declaring D
(Pullman)’s conduct “objectionable” and directing the Board to terminate his
proprietary lease and cancel his shares. NY statute requires competent evidence
that the tenant’s conduct is objectionable before termination of tenancy. P (40
West) sued D (Pullman) for possession and ejectment from the cooperative,
declaratory judgment canceling D’s shares, and a money judgment for use and
o The “business judgment rule” is the proper standard when evaluating
decisions by residential cooperative corporations, even when the
decision to terminate a member’s tenancy lacks competent evidence
o COA (NY): Rule for P (40 West) because cooperative corporation
decisions are given deference and not held to the judicial standard of
competent evidence
 Apply Levandusky standard of review: Corporate judgment rule
for a shareholder-tenant challenge to a decision of a residential
cooperative corporation
 Deference to P (40 West) determination as long as:
 Acts for purpose of the cooperative
 Within scope of authority
 Good faith
 No apply NY statute (competent evidence rule): Concern over
arbitrary and punitive landlord actions not present in cooperativeshareholder context
 D (Pullman) agreed to abide by P (40 West) rules or forfeit tenancy
and cooperative shares
 P (40 West) satisfies Levandusky standard: Within scope of
authority, overall welfare of cooperative, good faith
No compensation: Zoning ordinances are a valid exercise of the police power and
thus do not violate the constitutional protection of property rights
Village of Euclid v. Ambler Realty Co, SC (US) (1926) (p. 930): D (Village of
Euclid) adopted a comprehensive zoning plan to regulate and restrict the use of
land, as well as the size of the lots and the heights of buildings. This ordinance
divided the village into six use districts: single-family dwellings, two-family
dwellings, public buildings, industrial operations, sewage plants and junkyards.
The ordinance was enforced by the inspector of buildings and board of zoning
appeals. The board is authorized to make rules, impose penalties, and interpret the
ordinance in harmony with its general purpose and intent. P (Ambler Realty)’s
property fell in residential use, public buildings, and industrial use zones. P
(Ambler Realty) sought to sell its land for industrial use. P (Ambler Realty)
claims it can gain $10K per acre for industrial use, while only $2.5K per acre for
residential use. The expected use of a nearby road was for industrial and trade
purposes. P (Ambler Realty) sued D (Village of Euclid) claiming the ordinance
violates constitutional due process and equal protection rights.
o A municipality may place zoning restrictions to limit the use of land
within its borders without offending landowner’s 14th Amendment
o SC (US): Rule for D (Village of Euclid) and uphold zoning ordinance
because it is a valid exercise of police power
 Previously valid regulations: Building height restrictions,
construction materials, exclusion of trades in residential areas
 Commissions report benefits of zoning: Appropriate firefighting
measures, increased safety, reduced traffic, increased home
 Apartment buildings bad: Heavy traffic, overcrowding, excessive
noise, damage character of single-family neighborhoods
 Zoning is valid exercise of police power: Substantially related to
the public health, safety, morals, or general welfare
 Allow exclusion of apartment buildings and industrial uses from
residential zones
o Euclid Rule: Unless proven arbitrary or unreasonable, a zoning
ordinance is presumed a valid exercise of police power will be
constitutionally upheld
Yes compensation: If a zoning law or regulation has the effect of depriving a
property owner of the lawful pre-existing nonconforming use of his property, it
amounts to a taking for which the owner must be justly compensated
 PA Northwestern Distributors, Inc. v. Zoning Hearing Board, SC (PA) (1991) (p.
945): P (PA Northwestern Distributors) opened an adult bookstore. The Board of
Supervisors met and amended the Moon Township Zoning Ordinance to impose
extensive restrictions on the location and operation of adult commercial
enterprises. It also includes an amortization provision which gave all those who
operated pre-existing businesses in conflict with this ordinance a period of ninety
days to comply. P (PA Northwestern) appealed to D (Zoning Hearing Board) who
upheld the ordinance. In TC, P (PA Northwestern) sued D (Zoning Hearing Board)
claiming the zoning ordinance and amortization period constituted a taking. TC:
Find for D, uphold zoning ordinance.
o A zoning ordinance that has the effect of depriving a owner of a
nonconforming use of his property constitutes a taking requiring just
o SC (PA): Rule for P (PA Northwestern) because amortization provision of
zoning ordinance constitutes a taking
 Lawful nonconforming use establishes a vested property right
 Nuisance
 Abandoned
 Extinguished by eminent domain
 Amortization provision deprives P (PA Northwestern) of lawful
use of property by forcing it to cease operations with 90 days
 Restricts future use
 Extinguishes present lawful nonconforming use
 Amortization provision requires just compensation because
amortizing nonconforming uses would hinder economic
development and discourage investment
Amortization period:
o PA Northwestern Distributors Rule: No amortization provision
permitted without just compensation
o Other jurisdictions: Amortization provision allowed without just
compensation to allow owner to re-coop investment within a
reasonable period
o PA Northwestern Distributors amortization period more likely upheld in
smaller situations (e.g. signs)
Factors evaluating the reasonableness of an amortization period:
o Nature of the use in question
o Amount invested in
o Number of improvements
o Public detriment caused by the use
o Character of the surrounding neighborhood
o Amount of time needed to “amortize” the investment
Nonconforming use:
o Nonconforming uses rarely disappear
o Right to continue a nonconforming use runs with the land
o One conforming use can change to another nonconforming use if the
change reduces the impact of the use in question
o Operations cease or destruction of a nonconforming use lead the
nonconforming use to be discontinued
Regulate that does not constitute a taking:
 Valid regulation of harm/nuisance (Hadacheck, Miller)
Valid, broad regulations with reciprocity of advantage (Village of Euclid)
Regulation constitutes a taking requiring just compensation:
 Permanent physical occupation (Loretto)
 Loss of all economically beneficial value, except if restricted by background
principles (common law nuisance) before regulation (Lucas, PA Northwestern)
Evaluate interference with reasonable return on investment at the time of purchase (Penn
Central analysis):
 Economic impact by regulation on plaintiff:
o Prohibition on prospective use or existing use
 Existing use prohibition is more likely to get compensated
 If doesn’t interfere with existing use, how would the government
know they were taking?
o Extent to which regulation interfered with reasonable investment backed
expectation at the time of purchase
o Elimination of all economically beneficial use (Lucus)
 Restriction prohibits activity that violates background principles
(common law nuisance): No compensation
 Character of governmental actions:
o Concentrated losses or reciprocity of advantage across the population
 Concentrated losses are likely to result in compensation: Harm
falls on a few people and political process will not protect
 Reciprocity of advantage goes across the population not likely to
result in compensation: Harm falls on many people who can seek
relief in the political process
o Permanent physical invasion (Loretto)
o Government preventing harm/nuisance or acting arbitrarily (Hadacheck)
o Public program adjusting the benefits and burdens of economic life to
promote the common good
 Penn Central analysis: Evaluates the property as a whole rather than discrete
segments to determine the purchaser’s reasonable investment backed expectations
at the time of purchase
 Penn Central: Remanded case did not find a taking
 Palazzolo: Purchasing after regulations enacted does not bar a takings claim
(regulations are not equivalent to background principles)
Eminent domain: Takings of private property for use by other private citizens
pursuant to an economic development plan intended for a public purpose are valid
under the Takings Clause
 Kelo v. City of New London, SC (US) (2005) (p. 1065): D (City of New London)
proposed a development plan in an effort to revitalize the local economy. D (New
London) appointed a corporation to negotiate and purchase the private property
necessary to implement the plan. Negotiations with P (Kelo) and others broke
down. D (New London) initiated condemnation proceeding under eminent domain.
D (New London) made not claim P (Kelo) property were in poor conditions. P
(Kelo) sued D (New London) claiming the condemnation action constituted a
taking that was not for public use. TC: Find for D (New London), valid exercise
of eminent domain for public use.
o The government taking of private property in order to implement an
economic development plan constitutes “public use” under the 5th
o SC (US): Rule for D (New London) and uphold eminent domain
proceedings because taking for economic development constitutes public
use and constitutionally valid
 Taking property from one private citizen and giving it to another
does not itself invalidate “public use”: No requirement that land
intended only for “use by the public”
 Economic development plan is an authorized takings if intended
for a public purpose
 “Public use”: Deference to legislative judgments
 Plan promotes local economy and public welfare
 Overall character furthers public purposes: Job growth,
increased tax revenue, economic development
 Eminent domain favoring certain private parties will receive
stricter scrutiny
Distinguish Kelo v. City of New London from precedent:
o Berman v. Parker: Condemn land for transformation of blighted areas
o Hawaii v. Midkiff: Condemn land to break up oligopoly
o Previous cases involve a discrete harm with a distinct parcel of land
o Previous cases involve land which contributed to the broad problem
o In Kelo: No difference between P (Kelo)’s property and any other
Yes compensation: A permanent physical occupation of an owner’s property
authorized by the government constitutes a taking of property, regardless of the
interests it may serve
 Loretto v. Teleprompter Manhattan CATV Corp., SC (US) (1982) (p. 1082): New
York statute provided that a landlord may not interfere with the installation of
cable facilities upon his property or premises. Landlord only entitled to $1
installation fee. P (Loretto) bought an apartment building with cables previously
installed by D (Teleprompter). P (Loretto) sued D (Teleprompter) claiming a
taking without just compensation.
o Physical occupation is a taking per se requiring just compensation
o SC (US): Rule for P (Loretto) because permanent physical occupation is a
taking requiring just compensation
 Power to exclude is one of the most important elements of property
rights: Interfered by physical occupation
 Right to sell property devalued by physical occupation
State is free to regulate conditions, not occupation, without
o Loretto Rule: Any government regulation resulting in permanent
physical occupation is a taking requiring just compensation
Compare Euclid (zoning constitutional) v. Loretto (physical occupation
o Euclid: Only limit the ability for landlord to use property
o Loretto: Cable boxes physically occupy part of landowner’s property
o Unlike zoning, permanent physical occupation affects few landowners and
greater interest in judicial compensation:
 Administrative costs deciding compensation low
 Not a case of compensating wrongdoers
 Political process checks less efficient: Fear single out
individual owners
No compensation: A regulation that deprives an owner of property for the purpose
of prohibiting a nuisance is an exercise of the police power and therefore does not
result in taking
 Hadacheck v. Sebastian, SC (US) (1915) (p. 1096): P (Hadacheck) owns land
within the limits of the City of Los Angeles. An ordinance prohibits any person to
establish or operate a brickyard or any other facility for the manufacture or
burning of brick within city limits. P (Hadacheck) originally bought land outside
of the city and did not expect to fall within its limits. Land value for brick-making
purpose is $800K while only $60K for other purposes. P (Hadacheck) already
made significant investments and set up expensive machinery for the
manufacturing of bricks. P was convicted of violating the ordinance. P
(Hadacheck) sued D (Sebastian, police) claiming regulatory ordinance is a taking
requiring just compensation.
o Legislature can define a nuisance and enforce harm reducing
o SC (US): Rule for D (Sebastian) because a regulation prohibiting a
nuisance is a constitutional exercise of police power that does not require
just compensation
 As long as not arbitrary, states hold police power to regulate
nuisances that cannot be limited by private interests
 As long as there is a rational basis for regulation, courts will not
interfere with legislative regulation
 Affidavits claiming P (Hadacheck) brickyard is a nuisance:
Discomfort of residents, nearby residential purposes
 P (Hadacheck) not deprived of economic value of land: P only
prohibited from operating brickyard, P not prohibited from
removing clay and other non-prohibited uses
 Reason for upholding government regulation: Weak common law nuisance claim
o No homes by P (Hadacheck) brickyard: Residents lack standing to enforce
common law nuisance
o Any common law claim against pre-existing nuisance owner will be weak
because new residents came to the nuisance
Yes compensation: While property may be regulated to a certain extent, if that
regulation goes too far in diminishing the economic value of the property, it will be
recognized as a taking
 Pennsylvania Coal Co. v. Mahon, SC (US) (1922) (p. 1103): D (PA Coal)
executed a deed conveying surface property rights to P (McMahon). The deed
stated that D (PA Coal) reserves the right to remove coal under the surface and P
(McMahon) takes with that risk. The Kohler Act prohibits the mining of coal in
such a way that would cause the sinking of, among other things, any structure
used for human habitation. Exceptions include mining of land whose surface is
also owned by the owner and is more than 150 feet from improved property. D
(PA Coal) began mining coal that caused P (McMahon)’s house to sink. P
(McMahon) sued D (PA Coal) for an injunction claiming protection under the
Kohler Act.
o Government regulation can go “too far” and constitute a taking
requiring just compensation
o SC (US): Rule for D (PA Coal) and deny enforcement of Kohler Act
because government regulation can go too far to diminishing private
property and contract rights
 Public interest in nuisance/harm prevention low: Exception for
mining when owner owns surface and land beneath
 P (McMahon) no claim of safety: P took property with knowledge
of D (PA Coal)’s rights
 No violate contract rights: Enforcing Kohler Act in P
(McMahon)’s favor would subvert bargain
 No elimination of D (PA Coal)’s interest
 No give P (McMahon) more property rights than had: P
bargained for only surface rights
 Public interest not sufficient to warrant taking of D (PA
Coal)’s coal
Maybe compensation: A law which does not interfere with an owner’s primary
expectation concerning the use of the property, and allows the owners to receive a
reasonable return on his investment does not effect a taking
 Penn Central Transportation Company v. City of New York, SC (US) (1978) (p.
1113): D (NYC Landmarks Preservation Commission) designated Grand Central
Terminal (GCT) as a landmark which was owned by P (Penn Central). Landmark
law restricted changes to GCT’s exterior architectural features without D
(Commission)’s approval. GTC had been used as a railroad terminal, office space,
and concessions. P (Penn Central) entered into a lease agreement with P (UGP) to
build a 55-story office building above GTC, with P (UGP)’s agreement to pay
$1M during construction and $3M thereafter. P (UGP)’s proposals were rejected
by D (Commission). P (Penn Central) and P (UGP) sued D (Commission)
claiming the landmarks law was a taking requiring just compensation.
o Government regulation that interferes with reasonable investment
backed expectations at the time of purchase constitutes a taking
requiring just compensation
o SC (US): Remand case for reasonable investment backed expectations
analysis and determine whether a taking had occurred
 Evaluate interference with reasonable return on investment:
Consider investment backed expectations
 Evaluate property as a whole rather than distinct segments:
Restriction on airspace use above GTC does not prove taking
 Evaluate primary expected use: No restriction on GTC existing use
as a terminal and allow reasonable return
 Comprehensive landmark scheme: No singling GTC for
significantly diminished economic value
 Not a bar to GTC airspace: D (Commission) only rejected office
building proposals
 Taking claim diminished by transferable development rights: P
(McMahon) can use property rights elsewhere
Factors of Penn Central analysis:
o Economic impact on plaintiff and interference with investmentbacked expectations:
 Pre-existing use or prospective use
 Big harm on property owner (Lucas) or de minimus harm
o Character of governmental action:
 Physical occupation (Loretto)
 Regulating harm/nuisance (Hadacheck)
 Concentrated losses or reciprocity of advantage
o Evaluate property as a whole instead of subdivided interests
Yes compensation: A land-use regulation that deprives an owner of all economically
valuable use of property by prohibiting uses that are permitted under background
principles of property and nuisance law results in a taking
 Lucas v. South Carolina Coastal Council, SC (US) (1992) (p. 1131): South
Carolina Legislature enacted a Coastal Zone Management Act that restricted
owners of coastal zone land that qualified as a “critical area.” Owners of land had
to obtain a permit from D (SC Coastal Council) before putting land to prospective
use. P (Lucas) bought two lots on a South Carolina island for $975K and intended
to build single family homes on them. The lots did not fall within the original
“critical area” and adjacent lots already had similar structures. The Beachfront
Management Act prohibited the construction of occupiable improvements
between the sea and a line drawn 20 feet landward. P (Lucas) sued D (SC Coastal
Council) claiming the Beachfront Management Act constituted a taking by
banning construction and depriving P of any reasonable economic use of the lots.
o Government regulation that makes property “valueless” constitutes a
taking per se requiring just compensation unless the regulation codified
background principles (common law nuisance)
o SC (US): Remand for P (Lucas) to determine whether P’s land rendered
valueless by D (SC Coastal Council) regulation
 Land-use regulation that denies an owner of economically viable
use of his land constitutes a taking
 Equivalent of a physical taking
 Government affect on property values goes “too far” when
owner loses all beneficial use
 Disregard public harm (no compensation) and public benefit
(compensation) distinction in determining compensation:
 Distinction not objective
 Distinction can circumvent regulations that go “too far”
o Lucus Rule: State only allowed to deprive a owner of all economically
beneficial property without compensation when the regulated interest
was not part of the title (translation: loss of all property value without
compensation when already prohibited use by background principles)
 Protect property owner from being rendered economically
worthless by new legislation
 Limitation consistent with background principles of property and
nuisance law
Maybe compensation: The acquisition of title after the enactment of a regulation
does not bar a challenge to the regulation under the Takings Clause
 Palazzolo v. Rhode Island, SC (US) (2001) (p. 1152): Shore Gardens, Inc. (SGI)
owned waterfront land in Rhodes Island. Three proposals for property
development were denied by D (Rhode Island Coastal Resources Management
Council). SGI lost its charter and title passed to P (Palazzolo) as sole shareholder.
P (Palazzolo)’s proposals were also denied by D (Council). P (Palazzolo) sued D
(Council) alleging a taking requiring just compensation under a Lucas claim
(deprived of all economically beneficial use) and Penn Central (interference with
reasonable investment backed expectations).
o Government regulation enacted before an owner took the subjected
property will not categorically bar a taking claim
o SC (US): Rule for P (Palazzolo) that existing regulations when P took
property are not a categorical bar to takings claim and remand for Penn
Central analysis
 Future owners have a right to challenge unreasonable land use
limitations and claim compensation: Prevent restraint on alienation
 State always required to justify regulations
 Prior purchasers might not have had ripened takings claim
 Different purchasers had different expectation of land use
 P (Palazzolo) acquisition of title after regulations does not bar his
takings claim
 Lack of notice
 Prior owner non-execution of rights should not be a bar to
rights asserted by subsequent owner: No permit unequal
protection of background principles
New municipal regulation does not necessarily become a
background principle of property
 No Lucus claim: P (Palazzolo) retained some development value
(substantial residence on island)
 Possible Penn Central claim: Remand to evaluate interference with
reasonable investment backed expectations
o Palazzolo Rule: Subsequent purchasers and successive title holders
after regulations have been enacted are not categorically barred from
making takings claims (translation: transferring land after a
regulation does not bar takings claim)