WHAT IS PROPERTY?

The term property is extraordinarily difficult to define. The ordinary person defines
property as things that are owned by people. However, the law defines property as rights
among people that concern things.
Legal Positivism
The dominant view in the United States is that property rights arise only through
government; this view is known as legal positivism. For example, in Johnson v.
MIntosh, 21 U.S. 543 (1823), the Supreme Court stressed that in deciding land claims
based on Native American rights, it could only rely on laws adopted by the federal
government, not on natural law or abstract justice.
Natural Law Theory
Natural law theory, in contrast, posits that rights arise in nature as a matter of
fundamental justice, independent of government. The Declaration of Independence is the
high-water mark of this theory in the United States.
Scope of Property Rights
Under our legal system, property rights are limited, not absolute. They exist only to the
extent that they serve a socially useful justification.
[Property as a Bundle of Rights
It is common to describe property as a bundle of rights in relation to things. The most
important rights in this metaphorical bundle are: (1) the right to exclude; (2) the right to
transfer; and (3) the right to use and possess.
Real property consists of rights in land and anything attached to the land (e.g., buildings,
signs, fences, or trees). Personal property consists of rights in things other than land.
There are two main types of personal property: chattels (tangible, visible personal
property such as jewelry, livestock, cars, and books) and intangible personal property
(invisible, intangible things such as stocks, bonds, patents, debts, and other contract
rights).
Dred Scott v. Sandford (1856)

Scott was a slave living in the slave state of Missouri. His owner took him to
Illinois and then to Minnesota, which were both free states. Plaintiff and his
owner returned to Missouri, and Plaintiff was sold to Sanford. Plaintiff sued
Defendant for his freedom, claiming to be a citizen of Missouri, based on having
obtained freedom by domicile for a long period in a free state.
Trial court ruled found for Sandford. Scott appealed.

Issue: Can a slave be considered a citizen and as such become entitled to all the
rights, privileges and immunities granted to citizens under the United States
Constitution?
Holding: Affirmed. Slaves were not intended to be included under the word
citizens in the Constitution. At the time the Constitution was written, slaves were
considered an inferior and subordinate class. No state can introduce a new
member into the political community created by the Constitution. Because Scott is
property, Scott gaining his freedom under the Missouri Compromise would be a
violation of his rights to substantive due process.

Washington Legal Clinic for the Homeless v. Barry (1997)

1984, passage of District of Columbia Right to Overnight Shelter Act. DC

annotated 3-601. 1987, Emergency shelter services for family reform Amendment
Act, authorizing temporary shelter program. After suits, city moved to limit
obligation under above acts.
Poor allocation of space led to city creating allocation program. Documentation
requirements led to suits. Waiting rooms ruled nonpublic forums but no
reasonable grounds for hours violated 1st amend. Court ruled constitutionally
protected right to shelter.
City court ruled that specific hours at waiting rooms of housing office violated the
First Amendment.
Issue: Whether the District of Columbia law creates a constitutionally protection
entitlement to emergency family shelter.
Holding: Reverse the district courts due process ruling. Agree with the city court
that only allowing office waiting room visits violates 1st amend. Homeless lack an
expectation of shelter sufficient to create an expectation of property right the
city does not provide enough shelter, it leave allocation of shelter to
administrators, and nothing prohibits admins from determining allocation.
5th amend prohibits deprivation of property with due process. Need property
interest to have due process. Must have more than a desire for the benefit, must
have entitlement.
To determine whether a particular statute creates a property interest, ask whether
statute place substantive limitations on official discretion. Official discretion must
have explicitly mandatory language. Goldberg v. Kelly, Supreme held that persons
meeting state standards automatically qualified for benefits, therefore had
property interest in reception of benefits. Where eligibility lies at discretion of
admins, no protection exists.
FINDERS OF PERSONAL PROPERTY

Three factors dominate the analysis of finders rights: (1) the presumed intent of the
original owner; (2) the identity of the competing claimants; and (3) the location where the
item is found.

The first person to take possession of lost or unclaimed personal property is a

finder. Possession requires both (1) an intent to control the property and (2) an
act of control.

The rights of a finder and other claimants turn in large part on which of the four
traditional categories the found object fits into: abandoned property, lost property,
mislaid property, or treasure trove.

Property is abandoned when the owner intentionally and voluntarily relinquishes

all right, title, and interest in it.
Property is deemed lost when the owner unintentionally and involuntarily parts
with it through neglect or inadvertence and does not know where it is.
Property is considered mislaid when the owner voluntarily puts it in a particular
place, intending to retain ownership, but then fails to reclaim it or forgets where it
is.
Finally, English law recognized a category called treasure trove, consisting of
gold, silver, currency, or the like intentionally concealed in the distant past by an
unknown owner for safekeeping in a secret location.

As a general rule, an owner retains title to lost or mislaid property found by another. In
contrast, the first person who takes possession of abandoned property acquires title that is
valid against the world, including the prior owner.
Popov v. Hayashi (2002)

Plaintiff attempted to catch home run ball. Due to unlawful actions of crowd,
pushing and kicking, plaintiff was unable to complete action to gain possession.
Both men were pushed to ground by crowd. Ball rolled away and was picked up
by defendant. Defendant had complete control over item.
Popov sued for conversion and trespass to chattel.
Issue: Did Popov control the ball and is Hayashi liable for conversion.
Holding: Both had interests in ball. Hayashi not guilty of conversion. Ball to be
sold and proceeds split. If the crowd surrounding Popov had been orderly, it is
still unknown if Popov would have been able to keep control over the ball. If
plaintiff had lost control of the ball in hypothetical, then conversion is not
applicable. In case, defendant did not knowingly attempt to deprive plaintiff; he
merely picked it off the ground.
Possession requires control and the intent to keep control over an item. Plaintiff

may have intended to control item, but so did everyone else. Popov did not bring
item into exclusive dominion. Attempting to catch ball but failing due to
incidental contact with inanimate object or another person does not confer
ownership.
Benjamin v. Lindner Aviation, 1995

Plaintiff found large sum of currency in property of third party, while working on
the premises of the defendant. Defendant attempted to claim money through
affidavit. Plaintiff attempted to make claim that property was lost or was found
treasure and that he has possession.
Trial court ruled that statute plaintiff attempted to claim under applied to lost, not
mislain property. Money was awarded to third party, the bank who owned the
plane. Lower court ruled against plaintiff, who appealed. Defendant also
appealed, attempting to gain money.
Issues: Are the distinctions between types of property valid and is there evidence
to prove money was mislaid? Does plaintiff or defendant have an interest in the
property?
Holding: Affirm ruling regarding type of property, ownership to bank. The fact
that billed were carefully tied and then concealed shows that the money was
intentionally left in location. Large sum of money likely not abandoned. Mislain
property comes under the ownership of the premises where it was found.
Defendant owned the premises and Plaintiff merely a worker. However, bank, as
true owner had real interest. Issue not valid.
OTHER PERSONAL PROPERTY RULES

7.02 Adverse Possession of Personal Property [67-68]

Most courts hold that one whose possession of a chattel owned by another is actual,
adverse, hostile, exclusive, open and notorious, and continuous for the requisite period
obtains title to it through adverse possession, by analogy to the rules governing real
property.
7.03 Bailments [69-71]
A bailment is the rightful possession of a chattel by someone other than the owner, e.g.,
where A borrows Bs book. In most states, the bailees duty of care for the chattel is
governed by the ordinary negligence standard. However, a bailee who delivers the
chattel to the wrong person is usually held strictly liable.
7.04 Bona Fide Purchasers [72-73]

As a general rule, a seller of personal property cannot pass on better title than he
possesses, even to a bona fide purchaser. However, there are several exceptions that
protect the title of a bona fide purchaser under limited circumstances.

PRESENT ESTATES
Estates and future interests originate in two main sources: deeds and wills. They can
arise from a trust as well, but either a deed or will is normally used to transfer the
property into the trust.
The main problem that estates present is classification. Three main variables are used in
classifying an estate: (1) freehold or nonfreehold? (2) absolute or defeasible? and (3)
legal or equitable?

The law traditionally recognized six basic types of estates: three freehold estates
(fee simple, life estate, fee tail) and three nonfreehold estates (term of years
tenancy, periodic tenancy, and tenancy at will). Today we view freehold estates as
forms of owning land, while nonfreehold estates are merely forms of leasing
land.
o The distinction between the three freehold estates is based on duration.
Fee simple is a freehold estate whose duration is potentially infinite. It
roughly corresponds to the laypersons understanding of ownership. At
one time, it was necessary to use special language to create a fee simple
(e.g., to A and his heirs), but today informal language such as to A
will suffice in most states.
o The life estate is a freehold estate whose duration is measured by the lives
of one or more specified persons. For example, a grant to A for As life
creates a life estate in A for as long as he lives. Alternatively, the duration
may be measured by the life of a person other than the grantee (e.g., to A
for Bs life); this is called a life estate pur autre vie.

9.06 Freehold Estates: Absolute or Defeasible? [103-110]

Each freehold estate is either absolute or defeasible. Most estates are absolute, meaning
that their duration is restricted only by the standard limit that defines that category of
estate. For example, if O conveys Greenacre to A, then A owns a fee simple absolute.
This estate may endure forever, consistent with the basic definition, and will endif at
allonly by escheat. A defeasible estate is subject to a special provision that may end
the estate prematurely, if a particular event occurs, e.g., to A, but if A ever smokes
cigars, then to B.

There are three types of defeasible fee simple estates. The fee simple determinable
automatically expires at a stated time, immediately giving the holder the right to
possession. For example, if O grants land to A for so long as used as a park, and the
park use ceases, then title immediately revests in O. The fee simple subject to a
condition subsequent does not automatically expire when the triggering condition occurs;
rather, the future interest holder must take affirmative action to end the estate. For
instance, if O grants land to A, but if not used as a park, then the land shall return to
me, and the park use ceases, O must take action to end As estate, such as by filing suit
against A. Finally, the fee simple subject to an executory limitation automatically expires
when a stated event occurs, but gives the right to possession to a transferee (e.g., to A,
but if the land is not used as a park, then to B). Defeasible life estates may also be
created, but are less common.
Nelson v. Parker (1997)

Russell Nelson died three months after executing warranty deed which conveyed
land to son for his lifetime, subject to easements etc., by Parker. Parker lived on
property thirteen years prior to Nelsons death. Nelson filed motion to eject
Parker, arguing she did not have a valid life estate.
On cross-motions for summary judgment, the trial court agreed with Parker that
she held a valid life estate and granted her motion for summary judgment. Nelson
appealed. Upon appeal, Nelson characterized the subject to a life estate
language as improperly reserving an interest in a stranger to the deed. Upon
appeal, reversed.
Issue: To what extent is drafter intent to be followed in reading a contract?
Whether a deed subject to a life estate in a third person validly creates that life
estate?
Holding: Trial court judgment affirmed. Inadvertent use of the word
reservation, or other clumsy effort to grant an interest in land should not
frustrate an otherwise clear intent based on mindless adherence to a formal and
outdated rule. Daniel's interest appears from the deed to be a fee simple interest
subject to a life estate. Daniel presumably knew the contents of the deed and
knew of Russell's intentions when the deed was drafted in May, but did not
contest Parker's interest until after the alleged error became uncorrectable by
reason of Russell's death in August. Court is not persuaded that the public policy
of promoting settled rules requires adherence to a vestige of ancient conveyancing
law that has only pernicious effects.

Alby v. Banc One Financial (2006)

Plaintiff sold part of farm to niece. Value was 100,000. Sold for 15,000. Both
contract and deed had clauses providing revert to respondent if mortgaged or
encumbered. Notwithstanding restrictions, niece obtained loan from First Union
Mortgage Corporation, deed of trust. Second deed to obtain loan from Cit Group.

Second loan assigned to petitioner. Niece defaulted on first loan, house sold at
auction to petitioner. Respondent filed action to quiet title.
On competing motions for summary judgment, title quieted to petitioner, on the
grounds that clause was against public policy as an unreasonable restraint on
alienation. Court of appeals reversed, arguing that clause was not a restraint on
alienation and if it was, it was not unreasonable. Petitioner appealed.
Issue: Was the inalienability clause unreasonable under Washington law?
Holding: Affirmed. House is fee simple determinable, which does not allow
unreasonable restriction on alienation. McCausland v. Bankers life Insurance
prohibits unreasonable restrictions. in determining whether restraint is
reasonable, balance utility of the purpose against the consequences. Restriction
only for respondents life. There is utility. Restraint is reasonable and justified.
Affirm and remand with direction to enter summary judgment with directions to
quiet title to respondent.
Dissent: Chief Justice Alexander: Restraint was not reasonable because of the
value state places on free alienability outweighs value to respondents. Requires
weighing utility of restraint against consequences of enforcing restraint. Third
restatement of property. Interests of respondent differ from niece. One to keep
land in family; other to dispose of land. No bargain to get to reduced price.
Property sold as a gift, could have gotten more. Family ownership is overrided by
free alienability of land. Clause is unreasonable.
Justice Chambers: Restrictions on alienation are generally unenforceable.
Inability to mortgage is unreasonable. Restraint could be promissory, disabling or
forfeiture. Attempt to alienate, as per deed, would lead to forfeiture, which is
therefore a restraint.

Hermitage Methodist Homes v. Dominion Trust Co. (1990)

Adams executed his will and created dominion trust. Adams added to will, which
said remaining estate be held in trust and income be given to schools that only
admit whites. Virginia statute and court case allowed for discriminatory gifting.
Discriminatory language of statute removed in 1975. Gifts continued to be made.
Appellee trust filed suit against beneficiaries and attorney general for improper
gifts. Beneficiary used Meek v. Fox to argue that discriminatory gifts are illegal
but still valid.
Lower court ruled for dominion trust.
Issue: Due to the unenforceable provisions of the trust, what should be done with
the gift?
Holding: Affirm lower court ruling that cy pres cannot be used. Reverse ruling
that trust income paid to beneficiary school and instead be paid to Hermitage. A
limitation makes the time of continuance of the estate. A limitation cannot be
altered to extend beyond that period without violating the terms. If limitation is
unlawful, remove language but leave estate intact. If gift limitation is unlawful,
the court must terminate entire gift. Since language cannot be stricken without

changing intent, strike gift. Hermitage interest remains. Since issue has changed;
cy pres doctrine, that says determine testators interest in light of changes, cannot
be used.
CONCURRENT OWNERSHIP
There are three basic types of concurrent estates: tenancy in common, joint tenancy, and
tenancy by the entirety. In a tenancy in common, each co-owner holds an undivided
fractional share in the entire parcel of land, and each is entitled to simultaneous
possession and enjoyment of the whole parcel. Today any devise to two or more
unmarried persons is presumed to create a tenancy in common (e.g., to A and B). A
tenancy in common interest is freely transferable during the holders lifetime and at
death.
The joint tenancy differs from the tenancy in common in that a joint tenant has a right of
survivorship. If O conveys land to A and B as joint tenants, with right of survivorship,
and A dies first, then B holds fee simple absolute. English common law required four
unities to create and continue a joint tenancy. The joint tenants had to acquire title at the
same time; they had to acquire title by the same deed or will; each interest had to be
identical in size; and each tenant had to have an equal right to possession. Today some
states have eroded these requirements. A joint tenancy interest is inalienable.
The tenancy by the entiretynow abolished in many statescan only be created in a
husband and wife (e.g., to A and B, as tenants by the entirety). It requires the same
four unities as the joint tenancy, plus the fifth unity of marriage. It can be terminated
only by divorce, the death of one spouse, or mutual agreement of the spouses. This estate
is controversial because in some states creditors of one spouse cannot levy on property
held in tenancy by the entirety.
In theory, each cotenant has an equal right to possession and enjoyment of the whole
property, regardless of the share of his fractional interest. Thus, under the majority view,
even a cotenant in exclusive possession of the property is not liable to the other cotenants
for rent, absent an ouster. However, each cotenant is entitled to a pro rata share of (1)
rents paid by third persons and (2) profits from the land. While all cotenants are
obligated to pay their share of mortgage payments, taxes, and related assessments, they
are not individually liable in most states for the cost of repairs or improvements, absent
special circumstances.
Any tenant in common or joint tenant may end the cotenancy by suing for partition; the
court will grant partition automatically, with no need to show cause. The court will either
grant partition in kind (physical division of the land) or partition by sale (division of
proceeds from the judicial sale of the land). In addition, a cotenant can always end or

sever the joint tenancy merely by conveying her interest to another person. For example,
if A and B are joint tenants, and B conveys her interest to C, then A and C now have a
tenancy in common, because the unities of time and title are missing.
Cummings v. Anderson (1980)

Respondent and Petitioner bought house as joint tenants. Lived in house from
February 1976 until respondent left. At time of departure, had paid $2800 with
$16350 remaining. Petitioner remained in property and kept paying taxes.
brought suit for partition.
Trial court found respondent had not been ousted by petitioner. Because the
evidence was uncertain with respect to the contributions made by the parties prior
to the departure, assumed to be equal. Court found respondent had made a
partition when she left with community property in excess of $1400 and
abandoned her interest. Court of appeals affirmed order with regards to liability
but divided property in half. Petitioner appeals.
Issue: Whether the conduct of the petitioners son was enough to constitute an
ouster. Whether the respondent had a one-half interest in the equity that was not
affected by her departure with community property.
Holding: Reversed, modified and remanded. (1) Where wife abandoned her
obligation under purchase contract during marriage and husband had not breached
any duty owed by him as a cotenant, wife was precluded from asserting that her
interest in house was equal to that of husband; (2) fact that wife abandoned her
obligations under the contract and took personal property did not cause her to lose
her interest in the house as a cotenant, but, rather, wife had equity in house
bearing same ratio to total equity as ratio of her investment to spouses' total
investment, with husband entitled to offset for a corresponding portion of taxes
and insurance paid by him; and (3) was not entitled to recover rent from husband
on basis of contention that his son's conduct had involved an ouster of wife in
situation in which house was not adaptable to double occupancy

Tenhet v. Boswell (1976)

Joint tenant leased his property to a third person for a term of years but dies
during that term. Remaining tenant sought to establish sole ownership.
Plaintiff brought action to have lease invalidated.
Trial court sustained a demurer to the complaint, case dismissed. Plaintiff
appeals.
Issue: Whether the partial alienation of the interest in the property effected a
severance of the joint tenancy?
Holding: Amended and reversed. Lease does not sever the tenancy but
expires on the death of the lessor. If the lease entered into is valid only during
the life of the lessor, then the conveyance is more a variety of life estate pur

autre vie than a term of years. Such a result is inconsistent with freedom of
alienation.
Under Civil Code sections 683 and 686 a joint tenancy must be expressly
declared in the creating instrument, or a tenancy in common results. This is a
statutory departure from the common law preference in favor of joint tenancy.
Inasmuch as the estate arises only upon express intent, and in many cases such
intent will be the intent of the joint tenants themselves, we decline to find a
severance in circumstances which do not clearly and unambiguously establish
that either of the joint tenants desired to terminate the estate.
As these decisions demonstrate, a joint tenant may, during his lifetime, grant
certain rights in the joint property without severing the tenancy. But when
such a joint tenant dies his interest dies with him, and any encumbrances
placed by him on the property become unenforceable against the surviving
joint tenant. For the reasons stated a lease falls within this rule.
Porter v. Porter (1985)

Appellant Mary Jane and husband purchased house and lost as joint tenants with
right of survivorship. Appellant and husband divorced, with decree granting
Appellant right of exclusive occupancy. Husband married appellee, with no
modification to divorce decree. Appellee filed a complaint for the sale of the
property, alleging husband was tenant in common and the divorce terminated
survivorship, creating joint ownership.
Appellant and appellee moved for summary judgment. Partial summary judgment
granted, finding co-tenancy.
Issue: Whether a divorce decree destroyed a joint tenancy with right of
survivorship in real estate.
Holding: Divorce decree did not destroy the joint tenancy. Reversed and
remanded. If we assume that by granting exclusive occupancy to the appellant the
unity of possession was destroyed, then the joint tenancy was severed. No other
recognized common law joint estate arose and we are left with the conclusion that
the divorce court either granted absolute ownership to one of the parties or
partitioned the property. This result is contrary to the divorce decree. To hold that
the divorce decree severed the joint tenancy in this case would be to convey the
property by implication. Real property cannot be conveyed by implication.

United States v. Craft (2002)

In 1988, IRS assessed $482,000 in unpaid tax liabilities against respondents

husband. Lien attached to his property. Respondent and husband owned property
as tenant in entirety, which they quitclaimed to transfer to respondent. brought
action to quiet title.

District court granted governments motion for summary judgment, holding that
lien attached at the moment of the transfer to respondent, which terminated the
tenancy by entirety and entitled government to one-half the value. Both appealed.
Sixth Circuit held that lien did not attach because husband did not have separate
interest. Cert granted.
Issue: What rights did husband in the entireties property by virtue of state law?
Whether a tenant by entirety possesses property or rights to property to which a
federal tax lien may attach?
Holding: Reversed and remanded, consistent with opinion.
Rationale: Whether interest in husbands property be held as tenant in entirety
depends on state law. Tax lien creates no rights only adds consequences. English
common law provided three legal structures for the concurrent ownership of
property that have survived into modern times: tenancy in common, joint tenancy,
and tenancy by the entirety. The tenancy in common is now the most common
form of concurrent ownership. The common law characterized tenants in common
as each owning a separate fractional share in undivided property. Tenants in
common may each unilaterally alienate their shares through sale or gift or place
encumbrances upon these shares. They also have the power to pass these shares to
their heirs upon death. Tenants in common have many other rights in the property,
including the right to use the property, to exclude from third parties from it, and to
receive a portion of any income produced from it.
According to Michigan law, a tenant by the entirety has, among other rights, the
following rights with respect to the entireties property: the right to use the
property, the right to exclude third parties from it, the right to a share of income
produced from it, the right of survivorship, the right to become a tenant in
common with equal shares upon divorce, the right to sell the property with the
other tenant's consent and to receive half the proceeds from such a sale, the right
to place an encumbrance on the property with the other tenant's consent, and the
right to block the other tenant from selling or encumbering the property
unilaterally.
Excluding property from a federal tax lien simply because the taxpayer does not
have the power to unilaterally alienate it would, moreover, exempt a rather large
amount of what is commonly thought of as property. It would exempt not only the
type of property discussed in Rodgers, but also some community property.
Community property states often provide that real community property cannot be
alienated without the consent of both spouses. Accordingly, the fact that
respondent's husband could not unilaterally alienate the property does not
preclude him from possessing "property and rights to property" for the purposes
of 6321.

Shourek v. Stirling (1993)

Lillian Jonas added the name of her late husband's niece, Suzanne Stirling, to a
checking account and four certificates of deposit. Suzanne made no contribution
to the accounts or the CD's. On March 2, 1991, approximately four hours before
Jonas died, the Stirlings withdrew approximately $65,000 from some of the joint
accounts. Shourek filed suit, alleging conversion.
Trial court gave summary judgment for Stirling. The trial court determined that
Jonas intended Stirling receive the proceeds of the accounts and that, unless there
is clear and convincing evidence of a contrary intent, the owner's wishes are
paramount to other considerations. Appeals court affirmed.
Issue: Whether the Estate had standing to pursue the withdrawn funds? Whether
the withdrawal constituted conversion.
Holding: Reverse and remand. 32-4-1.5-3(a) creates the presumption that the
proceeds in a joint account belong to the joint tenants in the proportion that they
contributed to the account while they were alive. Here, it is undisputed that Lillian
Jonas made all contributions to the joint accounts. As a result, the proceeds in the
accounts presumptively belonged to Jonas during her lifetime unless clear and
convincing evidence of a contrary intent is established.
The right to withdraw and the right of ownership, however, are separate and
distinct rights. The deposit agreements establish a partys right to withdraw funds
and govern the relationship between the bank and the joint tenants. Although the
deposit agreements clearly gave Suzanne the right to withdraw funds fro the
account, the deposit agreements alone do not create an ownership right in the
funds that were withdrawn. In addition to the right to withdraw funds, however,
evidence was presented that the Stirlings were given physical possession of some
of the CDs and that the Stirlings were given a key to Jonas home with
instructions as to where to find the passbooks for the remaining joint accounts.

Parke State Bank v. Akers (1995)

Harold and Ardith Akers were married on October 4, 1986. Early in November of
1986, at Harold's instruction, Parke State Bank (Bank) placed Ardith's name, as
joint tenant with rights of survivorship, on four certificates of deposit which
Harold held in a safe deposit box rented from the Bank. On the same day, Harold
instructed Parke State Bank to name Ardith as a co-lessee of the safe deposit box,
with the same right to access the box as Harold. The rules provided that a deputy
may be appointed in writing in such form and manner approved by the Bank, but
no renter may appoint a deputy without the consent of the other renters.
Harold gave Ms. Hopkins written authorization to enter the safe deposit box; Ms.
Hopkins presented this authorization to the Bank. The Bank permitted her to enter
the box. The Bank never sought, and Ardith never gave, approval to Harold's
selection of Ms. Hopkins as a deputy authorized to enter the box.

Ardith filed an action against the Bank, alleging that the Bank breached the safe
deposit box rental agreement when it permitted Ms. Hopkins to gain access to the
box without seeking Ardith's approval. Ardith sought damages under both breach
of contract and negligence theories.
Trial court awarded judgment for Ardith against the Bank in the amount of $
35,000.00, the full amount of the certificates of deposit, as well as $ 64.18
statutory interest. The Bank appealed, and the Court of Appeals reversedruling
that, although the Bank was Ardith had no damages.
Issue: Whether the evidence supports the trial courts findings? Whether the
banks breach led to damages?
Holding: Trial court affirmed. At the time of the Bank's breach of contract, Ardith
had at least two identifiable interests in the certificates of deposit. First, because
Ardith had access to the safe deposit box, had "intent and capability to maintain
dominion and control" over the certificates of deposit, and was therefore in
constructive possession of the certificates of deposit, Ardith had a present
possessory interest in the certificates. The present possessory interest created in
Ardith the present right to hold the certificates in her possession. Ardith also had a
second important interest in the certificates of deposit. Certificates of deposit are
contracts, and can create third-party beneficiary rights in those parties identified
with rights of survivorship. Because the certificates identified Ardith as holding a
"right of survivorship," Ardith had a contingent beneficial interest as a doneebeneficiary in the certificates of deposit.
At the time the Bank breached its contract and permitted Ms. Hopkins to enter the
box, the Bank destroyed Ardith's present possessory interest in the CDs, an
interest that, given the facts of this case, should have assured her that her
contingent beneficial interest in the CDs would ripen into sole ownership of the
certificates upon Harold's imminent death. The Bank's violation of Ardith's
possessory interest permitted Harold to endorse the certificates of deposit, destroy
her contingent beneficial interest, and distribute the proceeds to Ms. Hopkins and
her children. The trial court properly determined that the Bank's breach
precipitated Ardith's damages, and that the breach was a substantial factor
contributing to Ardith's damages.

Leazenby v. Clinton County Bank & Trust Co., (1976)

Cloyd H. and Elsie G. Leazenby were married in 1951, the second marriage for
each. Mrs. Leazenby executed the trust instrument on August 25, 1969, at the
Clinton County Bank. Cloyd was not present. All of Elsie's property was placed in
the trust. The trust provided that the settlor, Elsie, should receive the income for
life, and that the trustee in its sole discretion was empowered to expend the
income or corpus for her "care, use, maintenance, and/or benefit."
Elsie died on August 13, 1972. On October 5, 1972, the Clinton Circuit Court

admitted her Last Will and Testament to probate. Under the terms of the will, after
payment of all her debts, the remainder of her property was given to the Clinton
County Bank to be added to the trust and distributed pursuant to the terms of the
trust. The will made no provision for Cloyd. Cloyd filed a petition for
appointment of personal representative and issuance of letters testamentary for the
estate of Elsie.
The Court granted the petition and appointed the Clinton County Bank and Trust
Company of Frankfort, as executor of the estate of Elsie G. Leazenby. The
Clinton County Bank filed its Motion to Rescind Order and Strike Petition
alleging that all of the decedent's property had been conveyed to the Clinton
County Bank, as trustee, that there was no probate estate, and that there was no
need for an executor. Cloyd filed objections to the Bank's petition, alleging that
the trust was colorable and illusory and a fraud upon him because it defeated his
statutory right to share in his spouse's estate as provided in IC 1971, 29-1-3-1.
Simultaneously Cloyd filed his election to take against the will of Elsie.
Issue: Did Elsies actions seek to defeat the right of her spouse to a share of her
property?
Holding: Affirmed. The decision relies upon a reasoning similar to that adopted
by the Ohio Supreme Court: It seems incongruous indeed that a trust may be
valid giving the trustee title to and a vested interest in the trust property and yet
the settlors widow, upon electing not to take under his will, may be accorded the
right by judicial fiat to claim a distributive share of the trust property under the
statutes of descent and distribution. We hold, based on the above discussion, that
the retention of a life estate in the income fromthe property transferred to the
trust, and the reservation of powers in the trust instrument to revoke, modify,
amend, or alter the trust, did not invalidate the trust created by Elsie G. Leazenby.
The testimony at trial showed that Elsie and Cloyd kept their accounts separately.
Elsie made the inter vivos trust three years before her death. While she was in a
nursing home the trust income was used to pay her expenses and bills. There is no
evidence that Elsie ever exercised her power to direct the trustee, or ever acted in
any manner that would be inconsistent with, or divest the remainder beneficiaries
of, their interests.

Walker v. Lawson, (1998)

Spring of 1980, Sybille Willard, the decedent in this case, learned that she had
cancer and approached Lawson for legal advice as to the disposition of her estate.
At that time, she was married to Thomas Willard, a second, childless spouse.
Sybilles two sons were by her first husband. She indicated to Lawson that she
wished to leave her entire estate to her two minor sons.
A will was prepared providing that the entire estate pass in trust for the benefit of
Sybilles two sons. The will contained a clause indicating that Thomas was

purposely omitted from any devise as he would be benefitting from the residence
during her lifetime and would be allowed to occupy the residence as the guardian
of her two sons. Sybille died on October 28, 1980, and the will was properly
probated. However, following probation of the will, Lawson prepared a document
by which Thomas elected to take against the will and receive his statutory share
under IC 29-1-3-1. Walker brought suit, alleging that Lawson failed to advise
that Thomas could elect to talk against the will, should have advised to create a
trust.
Trial court granted summary judgment for Lawson. Appeals Court reversed.
Issue: Whether Lawson was negligent in drawing up the will?
Reversed. Summary judgment affirmed. Unlike in Leazenby, Sybille had not
come to Lawson to establish a trust to facilitate the handling of her affairs but had
come for the stated purpose of depriving her husband of any interest in her estate.
Thus Lawson was squarely faced with the law enunciated in Crawfordsville,
supra. The other alternative of establishing a joint tenancy among Sybille and her
sons was equally flawed and would have been considered a transfer in
contemplation of death and thus treated as a testamentary instrument subject to
IC 29-1-3-1.

Chapter 13
FUTURE INTERESTS HELD BY THE TRANSFEROR
13.01 Three Future Interests [159-160]
Future interests are classified according to the identify of the holderthe transferor or
the transferee. Three types of future interests may be held by the transferor: the
reversion, the possibility of reverter, and the right of entry.
13.02 Types of Future Interests [160-161]
[A]

Reversion

When an owner conveys a vested estate smaller than the estate he owns, he retains a
future interest called a reversion. For instance, if O holds fee simple absolute, but
conveys merely a life estate to A, O retains a reversion.
[B]

Possibility of Reverter

When a transferor creates a fee simple determinable, the future interest retained is a
possibility of reverter. For example, if O conveys land to L for so long as used as an
orphanage, O retains a possibility of reverter.

[C]

Right of Entry

The right of entry arises when a transferor creates a fee simple subject to a condition
subsequent (e.g., O conveys to L, but if L fails to use the property as an orphanage, then
O may enter and retake possession).
13.03 Transfer of Interest [161-162]
The reversion is freely transferable. At one time, limits were placed on the transferability
of the possibility of reverter and right of entry during the holders lifetime; today,
however, both of these interests are freely transferable.
13.04 Other Rights of Interest Holder [162-163]
Before the transferors future interest becomes possessory, his rights are quite limited.
He can bring suit if the possessor commits waste and, in some states, can also share in
eminent domain proceeds if the property is condemned.
Lindsay v. Wigal (1969)

Husband and wife had executed a warranty deed to trustees of a church conveying
real estate, specifying that it was a deed of gift and was valid and good as long as
the real estate was or could be occupied for church purposes. The real estate was
used for such purposes continuously from the time of conveyance until 1948. No
religious activities were conducted at the church from 1949 to 1956. In 1966 the
church entered into a contract with the buyers to convey the real estate by
warranty deed to the buyers. The heirs then filed their complaint to quiet title.
Trial court ruled against the buyers, quieted title to the plaintiffs.
Issue: What type of conveyance was created by the warranty deed?
Rationale: The language in the deed, "as long as," provided sufficient evidence
for a ruling on the question of law. The words "as long as" created a determinable
fee with possibility of reverter. There was ample evidence in the record that the
church had abandoned the property and, at that time, the title reverted
automatically to the heirs of the grantors.

Bruch v. Centerview Community Church, Inc (1978)

The grantor conveyed the real estate to the church's predecessor. When the
property ceased to be used for church purposes, it would revert to the grantor. The
property was free and open for use by all orthodox churches. Prior church merged
with defendant. Bruch filed suit to quiet title.
Trial court found for the defendant
Issue: Did the trial court err in instructing the jury? What contingency was
created as part of the fee simple determinable?

Rationale: The language used by the grantors is less than clear and concise. A
deed should be construed strictly against the grantor. It follows that when, as here,
the language of a deed will admit of two constructions, the construction less
favorable to the grantor is to be adopted.
FUTURE INTERESTS HELD BY THE TRANSFEREE

The common law recognized only two broad categories of future interests that could be
held by a transferee: the remainder and the executory interest.
A remainder is a future interest created in a transferee that is capable of becoming
possessory upon the natural termination of a prior estate created by the same instrument.
For example, if A conveys to B for life, and then to C, Cs interest is capable of
becoming possessory when the prior estate (Bs life estate) naturally terminates; C holds
a remainder.

The three types of vested remainders are: the indefeasibly vested remainder; the
vested remainder subject to divestment; and the vested remainder subject to open.
All three vested remainders are (a) created in a living, ascertainable person and
(b) not subject to any condition precedent except the natural termination of the
prior estate. The indefeasibly vested remainder is certain to become a possessory
estate; for example, if A conveys to B for life, and then to C, C (or Cs
successor) will clearly be entitled to possession upon Bs death. In contrast, the
vested remainder subject to divestment is certain to become possessory unless
some specified event occurs (e.g, to B for life, then to C, but if C ever smokes a
cigar, then to D). Finally, the vested remainder subject to open is held by one or
more ascertainable members of a class that may be enlarged by the future addition
of presently unascertainable persons.
The contingent remainder, in contrast, is either (a) created in an unascertainable
person or (b) subject to a condition precedent. For example, suppose A conveys
to B for life, and then to C if C graduates from law school. Cs remainder is
contingent because she must first satisfy a condition precedent (graduating from
law school) before she is eligible to take possession following Bs death.

An executory interest is a future interest created in a transferee that must cut short or
divest another estate or interest in order to become a possessory estate. For example, if
A conveys property to A, but if B returns from France, then to B, A has a form of fee
simple that may potentially endure forever; in order to become a possessory estate, Bs
interest must cut short As fee simple, so B has an executory interest.
14.10 The Rule Against Perpetuities: At Common Law [183-194]

The common law version of the Rule is: No interest is good unless it must vest, if at all,
not later than twenty-one years after some life in being at the creation of the interest. To
comply with the Rule, it must be logically provable that within the specified period a
covered contingent interest will either vest (that is, change into a vested interest or
present estate) or forever fail to vest (that is, never vest after the period ends), based only
on facts existing when the future interest becomes effective.
Bucks v. Banks (1996)

Buck entered into a contract to purchase a 500 acre parcel of land from Lillian E.
Allen. Included in the contract was a provision giving Buck a right of first refusal
to purchase an additional fourteen acres from Allen should she decide to sell that
property. Buck eventually purchased the 500 acres but several years later Allen
entered an agreement with Banks for the sale of the remaining fourteen acres.
Buck filed claim against Allens estate and Banks for breach of contract.
Both sides filed motions for summary judgment. Banks motion succeeded.
Issue: Is the contract in violation of the law against perpetuities?
Holding: Affirmed. Indiana has adopted the Uniform Statutory Rule Against
Perpetuities, IC 32-1-4.5-1 to 32-1- 4.5-6. However, IC 32-1-4.5-2 limits the
applicability of the Uniform Rule and specifically provides that the chapter does
not apply to nonvested property interests arising out of a nondonative transfer.*
Here, the Bucks pre-emptive right to purchase the additional fourteen acres is a
nonvested property interest arising out of a nondonative transfer. As a result, the
Uniform Rule is inapplicable to the pre-emptive right provision. Nonetheless, the
Indiana common law Rule Against Perpetuities, which was codified in 1945 at IC
32-1-4-1 to 32-1-4-6 (1979), is applicable to the provision and requires that an
estate vest within a life or lives in being and twenty-one years and nine months.
The Rule is not concerned with when an estate actually vests; rather, it is
concerned solely with whether it might conceivably vest within the required time
limits.
When interpreting a contract, court must determine intent. In the instant case, the
final provision of the contract provides: It is mutually agreed by and between the
parties hereto that the time of payment shall be of the essence of this contract and
that all of the covenants and agreements herein contained shall extend to and be
obligatory upon the heirs, executors, administrators and assigns of the respective
parties. The language shows that the extension applies to the entire contract,
including pre-emption.

Francis v. Yates (1998)

Parties entered into an agreement in 1988 for sale and purchase of real estate.
Francis would purchase three tracts of land, with option to purchase a fourth tract.
The details of the option were contained in a section of the agreement entitled
Option with Right of First Refusal to Purchase Real Property Part of Offer and

Option to Purchase Real Property. The option was valid for one year. Francis
purchased first three tracts. Yates brought suit when, after nine years, Francis did
not purchase fourth tract. Yates filed a Verified Complaint for Declaratory
Judgment.
Trial court granted summary judgment in favor of Yates.
Issue: Whether the right of first refusal contained in the contract violated the Rule
against Perpetuities thus rendering the contract void.
Holding: Reversed and remanded for further consideration. The applicable
provision dictates: [t]his option and the contract resulting from the exercise
thereof shall bind and inure to the benefit of the heirs, administrators, executors,
successors, and assigns of the respective parties. From this language it is not
apparent that the word option is intended to mean the Option section of the
agreement or if the parties intended this language to apply to both the Option and
right of first refusal. The intent of the parties here is unclear. The contract is
ambiguous and the ambiguity can only be resolved by facts extrinsic to the four
corners of the document. Accordingly, summary judgment is not appropriate.
PART IV: LANDLORD AND TENANT
Chapter 15
INTRODUCTION TO LANDLORD-TENANT LAW

A leasehold estate (also called a nonfreehold estate) is a legal interest that entitles the
tenant to immediate possession of designated land, for either a fixed period of time (e.g.,
five years) or for so long as the tenant (or lessee) and the landlord (or lessor) desire.
The key distinction between a leasehold estate, on the one hand, and interests such as a
license or easement, on the other, is that the holder of a leasehold estate has the right of
exclusive possession. One holding a license or easement merely has a right to use the
land.
15.05 Categories of Leasehold Estates [206-213]
The term of years tenancy endures for a designated period that is either fixed in advance
(e.g., five years) or computed using a formula that is agreed upon in advance. This
tenancy automatically expires when the agreed period ends, without any notice of
termination.
The periodic tenancy lasts for an initial fixed period (e.g., one month) and then
automatically continues for additional equal periods until either the landlord or the tenant
terminates the tenancy by giving advance notice. The classic example is the month-tomonth residential lease.

The tenancy at will has no fixed duration and endures only so long as both the landlord
and the tenant desire. Today most tenancies at will arise from implication, not from an
express agreement.
The tenancy at sufferance arises when a person in rightful possession of land wrongfully
continues in possession after the right to possession ends. Most authorities agree that this
is not technically an estate in land, but rather a convenient label. The landlord is free to
evict the tenant at any time.
David Properties Inc. v. Selk (1963)

Plaintiff sold to the defendant a 320-acre tract of land, on which was located a
small and simple dwelling. $5000 of the $50000 purchase price was presumably
paid in cash. A purchase-money mortgage was executed by the defendant to the
plaintiff to secure payment of the remaining $45000, payable in annual
installments of $9000 each. At the time this foreclosure suit was filed, the
defendant had paid four annual installments, but was several months overdue in
payment of the final $9000 installment. Plaintiff continued to live on the property.
Plaintiff and defendant signed a lease after an eviction suit.
The plaintiff did not vacate by date specified, but continued to live there for a
period of almost 23 months after the date set by the lease for him to vacate the
property. Notice had been given to the plaintiff, informing him of the obligation to
leave and additional rent due. Suit brought to collect for damages.
At the final hearing, the defendant conceded that it owed the plaintiff the final
$9000 installment plus interest, which the payment was overdue and the plaintiff
was entitled to foreclose the mortgage. The defendant relied solely upon its
contention that the plaintiff owed it rent for the property at the rate of $300 per
month from the time it first wrote the plaintiff specifying that amount as rent, plus
interest thereon, and that it was entitled to set off that rent against the
indebtedness due under the mortgage. The chancellor found against the defendant
with respect to its claim for rent made in its counterclaim, and dismissed that
counterclaim.
Issue: Did the lower court err in finding for the plaintiff?
Holding: Reversed. Court must be impartial, just because one party is elderly or
senile should not influence decision. If the plaintiff was mentally irresponsible
when the demands for rent of $300 per month were received by him, there is no
slightest suggestion of it in the pleadings or the evidence. The fact that he
appeared to the chancellor to be in that condition when the final hearing was held,
about two years and a half after the first demand was received, could not properly
form the basis of decision by the chancellor, nor can it on this appeal.

Degenhardt v. Ewe Limited Partnership (2011)

EWE is the owner of a fifteen-unit building on Union Street in Bangor. On

January 13, 2009, Degenhardt began living at the Union Street building, at which
time he signed a Guest Registry assigning him to unit 8. Degenhardt also signed
a second document entitled Rules For Union Street Inn (the Rules), which
described the Union Street property as a licensed boarding house with the City of
Bangor. Building licensed as a lodging house with the city.
On September 9, 2009, Degenhardt was arrested for disorderly conduct and spent
the night in jail. Upon returning to the Union Street property the following day,
Degenhardt was told that he was no longer welcome. Degenhardt filed a
complaint in the District Court seeking injunctive relief and damages for illegal
eviction.
The court issued a temporary restraining order against EWE, enabling Degenhardt
to remain living in unit 9. Following a hearing, the court granted Degenhardt's
motion for a preliminary injunction. District court rejected assertion that building
was lodging house.
Issue: Whether the building operated by EWE classified as a lodging house.
Holding: Affirmed. Lodging house means a house where lodgings are rented,
but does not include:
A. A house where lodgings are rented to fewer than 5 lodgers;
(1) The term lodger does not include persons within the 2nd degree of kindred to
the person operating the lodging house;
B. The dormitories of charitable, educational or philanthropic institutions;
or
C. The emergency use of private dwelling houses at the time of conventions or
similar public gatherings.
factors that distinguish a lease from a license in a lodging context:
whether the owner retained keys; had free access to the room; had a right to enter
for repairs; lived in the building; posted a doorman or desk clerk; provided meals,
utilities, cleaning services, towels, linens, utensils, and furnishings; or held the
premises out to the public as a place for travelers or lodgers.

Cotton v. Alexian Brothers Bonaventure House (2003)

The residents, who suffered from AIDS, lived in the supportive residence until it
terminated their residency for inappropriate behavior. The residents filed suit,
contending that their residency was terminated without notice or hearings as
required by the HOPWA.
Both parties moved for summary judgment.
Issue: Whether summary judgment is appropriate?
Holding: Summary judgment denied. Court agreed that residents right to fair
notice was violated. Whether extenuating circumstances excused fair notice is a
matter up to the jury. Claims of intentional infliction of emotion distress also a
matter for a jury.

Jancik v. Department of Housing and Urban Development

(1995)

Defendant owns housing complex. Defendant placed ad that

solicited mature persons to apply. Two volunteers for Leadership
Council for Metropolitan Open Communites attempted to gain
approval. Plaintiff asked them about their ages and ethnicities.
Complaint filed alleging violations of 804(c) of FHA; claimed
that defendant was discriminating based on race and age.
An administrative Law Judge found Jancik found to be in
violation of the FHA. Plaintiff also awarded attorneys fees.
Injunction against Jancik ordered. Defendant appealed.
Issue: Were Janciks advertisements for mature individuals,
discrimination based on age. Were questions about race
discrimination?
Holding: Affirmed. Section 3604(c) makes advertisements of
any kind that show any preference based on age or race illegal.
Courts apply ordinary reader test.

Dicenso v. Cisneros (1996)

Brown was 18, living with boyfriend and daughter. Leased

apartment from Dicenso. Dicenso asked Brown for rent and
began caressing her. Altercation arose months later, over refusal
to pay rent. Brown did not move out after altercation but was
served with five-day notice to vacate. Brown filed discrimination
complaint. HUD investigated.
HUD issued a charge against DiCenso for violations of 804(b)
and 818 of FHA. Judge found that one instance of harassment
was not enough for claim of sexual discrimination. Brown
appealed to HUD, who vacated the ALJ decision. Damages,
penalty and injunction granted.
Issue: Whether to defer to Departments legal conclusions?
Whether one incident of harassment is enough to create a
hostile enough environment to create a sexual discrimination
cause of action?
Holding: HUDs findings should not be binding. One incident
not enough. Chevon v. NRDC, defer to executive agencies when
they have expertise. HUD had not enacted guidelines and would
have used Title VII. Using title VII standard, incident must be
sufficiently severe or pervasive to alter condition to alter
conditions. DiCenso did harass but only once.

Giebeler v. M & B Associates (2002)

Plaintiff has AIDS, which prevented him from working. Plaintiff

sought housing at Defendant owned apartment. Plaintiff did not
meet required income and defendant had policy against cosigning. Suit brought under federal FHAA, California HEFA, etc.
Three theories of discrimination, dispate impact, intentional
decimation and failure to reasonable accommodate.
Court granted summary judgment for defendant. Court ruled
that accommodation which remedies economic status is not an
accommodation.
Issue: Was Giebeler discriminated against?
Holding: Reversed and remanded. To make a claim based on
failure to accommodate, (1) must be handicapped, (2)
defendants must know or reasonably should have known, (3)
accommodations must be necessary to afford equal opportunity
to use dwelling, (4) must have been denied accommodation.
Only "reasonable" accommodations are required by the FHAA.
42 U.S.C. 3604(f)(3)(B). Language of the FHAA provides scant
guidance concerning the reach of the accommodation
requirement. U.S. Airways v. Barnett guides analysis concerning
the reach of the accommodation obligation under the FHAA, in
two respects: First, Barnett holds that an accommodation may
indeed result in a preference for disabled individuals over
otherwise similarly situated nondisabled individuals. And
second, Barnett indicates that accommodations may adjust for
the practical impact of a disability, not only for the immediate
manifestations of the physical or mental impairment giving rise
to the disability.
To prove that an accommodation is necessary, "[p]laintiffs must
show that, but for the accommodation, they likely will be denied
an equal opportunity to enjoy the housing of their
choice." Smith & Lee, Imposition of burdensome policies,
including financial policies, can interfere with disabled persons'
right to use and enjoyment of their dwellings, thus necessitating
accommodation. Shapiro v. Cadman Towers
CREATION OF THE TENANCY

The lease is the heart of the landlord-tenant relationship. Almost all states have a Statute
of Frauds that requires a lease for a term of more than one year to be in writing, to set
forth the key lease terms, and to be appropriately signed.
The common law did not restrict a landlords freedom in selecting or evicting tenants.
Today federal and state statutes prohibit certain types of discrimination in the rental or
sale of real property. For instance, the Fair Housing Act of 1968, 42 U.S.C. 36013619, bars discrimination based on race, color, religion, sex, familial status, national
origin, or handicap in connection with the sale or rental of most dwellings.
In general, the rental amount and other lease terms result from private negotiation
between the parties. Some jurisdictions, however, have enacted rent control ordinances
that limit the amount of rent a landlord may charge and otherwise regulate the landlordtenant relationship.
There are two views on the landlords duty to deliver possession. The majority or
English view requires the landlord to deliver actual possession of the leased premises
to the tenant when the lease term begins, in addition to the legal right to possession. The
minority or American view is that the landlord need only deliver the legal right to
possession, and thus has no duty to oust a holdover tenant.
The prevailing view is that the tenant has no duty to take possession unless an express
lease covenant so requires. However, an implied covenant to occupy and operate a
business will be found in a commercial lease where all or most of the rent is computed as
a percentage of the tenants sales.
CONDITION OF LEASED PREMISES
In the 1970s, courts began to recognize a new tool in the fight against substandard rental
housing: the implied warranty of habitability. Under this doctrine, each residential lease
is deemed to contain an implied warranty that the landlord will deliver the premises in
habitable condition and maintain them in that condition during the lease term.
In general, the tenant must notify the landlord of the defect and allow a reasonable time
for repairs to be completed. If the landlord fails to act, the tenant may remain in
possession and also: (1) withhold rent; (2) sue for damages; or, in some jurisdictions, (3)
repair the defects and deduct the cost from rent due the landlord. Alternatively, the tenant
may terminate the lease and sue for damages.
Statutes in more than 30 states now impose a warranty of habitability in residential
leases. This statutory warranty largely parallels the common law warranty, although there
are key differences. For example, often the statutory warranty can be waived by the
tenant, while the common law warranty cannot.

At common law, the landlord was generally not liable for personal injury to tenants or
others caused by dangerous conditions on leased premises, even if the landlord was
negligent. The modern trend, however, is to require a residential landlord to exercise
reasonable care to prevent such injuries.
Traditionally, any chattel permanently affixed to the premises by the tenant was a fixture,
and thus became the property of the landlord. In order for a chattel to become a fixture
today, the tenant must intend for it to become a permanent part of the premises.
Johnson v. Scandia Associates, Inc. (1999)

Substantive Facts: Scandia Associates, Inc., owns and operates an apartment

complex in northeast Indianapolis through agent Oxford Management Co.
Johnson sued Scandia for physical injuries caused by an electric shock she
received when simultaneously touching two kitchen appliances while cooking in
her apartment.
The defendants moved to dismiss both claims. The trial court denied the motion
as to the negligence claim, but dismissed the warranty claim.
Issue: Did Johnson state a claim against the defendant? Was there a warranty
between the parties?
Holding: Affirm. Court overruled the doctrine of caveat emptor, holding that a
warranty of fitness for habitation may be implied in a builder-vendors sale of a
new house to the first purchaser. We concluded that the complaint contained facts
sufficient to state a claim in that it relies on the concept of implied warranty of
fitness of habitation
There is no mention of a warranty of habitability. Because the writing does not
show that Scandia expressly warranted the apartments habitability, Johnsons
assertion can mean just one thing: Scandia Associates impliedly warranted the
habitability of Johnsons apartment. Johnson pleads no facts which, if true, tend to
show that the agreement formed with Scandia gives a warranty of habitability.
Her failure to plead a factual basis showing that Scandia actually extended the
warranty as part of the agreement results in a failure to state a valid claim that the
warranty was breached.
TRANSFER OF LEASEHOLD INTEREST

Most states use an objective test in distinguishing between an assignment and a sublease.
If a tenant transfers the right of possession for the entire remaining term of the lease, the
transfer is an assignment. However, if only part of the remaining term is transferred, a
sublease arises.

 18.03 Assignment [264-267]

An assignment creates a triangle of relationships among the original lessor, the original
lessee who transfers her right (the assignor), and the person who receives the right (the
assignee). Privity of contract continues between the lessor and the assignor; privity of
contract is created between the assignor and the assignee; and privity of estate arises as a
matter of law between the lessor and the assignee.
The assignor remains liable to the original lessor for all covenants in the original lease,
because they remain in privity of contract, absent a novation. The privity of estate
between the lessor and assignee requires both of them to perform those covenants in the
original lease that run with the land, and, as a practical matter, most lease covenants do
so run. For example, suppose that A leases to B who assigns to C. If no one pays rent to
A, both B and C are liable.
18.04 Sublease [267-268]
A sublease creates a new landlord-tenant relationship. Suppose A leases to B, and B (as
sublessor) leases to C (as sublessee). Privity of contract and privity of estate remain
between A and B; privity of contract and privity of estate arise between B and C.
The sublessor remains liable to the original lessor for all covenants in the original lease.
Similarly, the sublessee is liable to the sublessor for the covenants in the sublease.
However, the sublessee has no obligations to the original lessor.
18.06 Tenants Right to Assign or Sublease [269-275]
Tenants are free to assign or sublease their interests in theory, absent a contrary
agreement. However, the vast majority of leases expressly restrict this freedom. Some
lease clauses flatly prohibit transfer; others give the lessor the sole discretion to approve
or deny a transfer; still others require the lessor to act reasonably in deciding whether to
consent.
Jaber v. Miller (1951)

Jaber rented a building from the owner for a five-year term beginning March 1,
1946, and ending March 1, 1951. The lease called for rent of $200 per month and
stated that the lease would terminate if the premises were destroyed by fire. Lease
transferred to Norber. The form of the instrument from Defendant to Norber and
Son was titled Contract and Assignment, and stated that Defendant assigned the
lease contract to Norber and Son for the remainder of the lease period.
Norber and Son paid cash and executed promissory notes .Norber and Son agreed

to pay $200 per month and Defendant reserved the right to retake the property if
Norber and Son failed to pay the rent. The instrument entitled Contract and
Assignment contained no reference to fire ending the lease. Miller obtained a
transfer of the lease from Norber and Son. Plaintiff was unable to pay $700 at the
four month intervals and agreed with Defendant to divide the payments into
monthly installments of $175 each. Plaintiff and Defendant then executed the
notes in controversy, which Defendant accepted in substitution of the other unpaid
notes.

Jaber brought suit to cancel the notes. Plaintiff asserted that the Defendants
transfer to Norber and Son was a sublease and that the notes represented rent.
Plaintiff then argued, under the rule that the sublease terminates when the primary
lease terminates (such as by the fire), that Plaintiffs sublease ended with the fire.
Lower court ruled that transfer was a sublease.
Issue: Was the transfer of the Contract and Assignment from Defendant Jaber
to Norber and Son an assignment or a sublease?
Holding: Assignment. Lower court reversed. Intention of the parties is to govern
the determination of whether a given instrument if an assignment or a sublease.
The transfer from Defendant Jaber to Norber and Son was an assignment because
the document was titled as an assignment, the language was of an assignment and
the execution of promissory notes is not an act usually done in a lease situation,
but does indicate deferred payments under an assignment.

Kendall v. Ernest Pestana, Inc. (1985)

The Defendant was the assignee of leased hangar space owned by the City of San
Jose. Prior to assigning their interest to the Defendant, the assignors entered into a
25-year sublease with Mr. Bixler. Mr. Bixler in turn wanted to sell his business
and assign the lease to the Plaintiffs. When Mr. Bixler requested permission to
assign his interest, the Defendant refused. Plaintiff sought declaratory relief.
Trial court found for Plaintiff. Defendant appealed.
Issue: Whether in the absence of a provision that such consent will not be
unreasonably withheld, a lessor may unreasonably and arbitrarily withhold his or
her consent to an assignment.
Holding: Reversed and remanded. May not arbitrarily without consent.
Reasonableness a matter of fact. The law generally favors the free alienability of
property. A leasehold interest is freely alienable, though contractual restrictions on
the alienability of leasehold interests are permitted.
When a lease allows assignment only with the prior consent of the lessor, the
consent may only be withheld where the lessor has a commercially reasonable
objection to the assignment, even in the absence of a provision in the lease stating
that consent to assignment will not be unreasonably withheld.

The lessors interest in the character of his or her tenant is protected by his right to
object to the assignment on reasonable commercial grounds. Also, the original
lessee will still be liable to the lessor as a surety even if the lessor consents to the
assignment and the assignee expressly assumes the obligations of the lease.
A lease is a contract, and every contract has a duty of good faith and fair dealing.
Some of the factors to be considered in determining good faith and commercial
reasonableness are financial responsibility of the assignee, suitability of the use
for the particular property, legality of the proposed use, need for alteration of the
premises, and the nature of the occupancy. Denying consent based on personal
taste, convenience, or sensibility is not commercially reasonable.
Tippecanoe Assocs. II, LLC v. Kimco Lafayette 671, Inc., (2005)

In 1973, SES leased store to Kroger Company for an initial term of twenty years,
with four options to renew the lease. The lease contained a restrictive covenant
preventing SES from leasing space in the shopping center to another grocery
store. Kroger operated a supermarket at the leased premises until 1982. In 1983,
Kroger assigned their leases to Pay Less Super Markets, Inc., which at the time
operated two other grocery stores within two miles of the Sagamore Center. No
grocery store in the center since 1982. Kimco filed a complaint asking the trial
court to declare the restrictive covenant unenforceable.
Trial court granted request, finding that use of property has changed and covenant
is unenforceable. Appeals court reversed.
Issue: Whether state law permits the covenants enforcement by someone who
has never occupied the center? Is the restrictive covenant still enforceable?
Holding: Reversed. Covenant unenforceable. The shopping center obviously
receives no benefit from permitting a transfer of the covenant. And it seems
unlikely that a prospective new tenant would be significantly motivated by the
prospect of recouping its investment by selling a restrictive covenant to a nearby
competitor if the tenant's business fails. In any event, the effect of permitting a
covenant to be sold separately from the operation it is designed to protect is
perhaps to add some minimal value to the original lessee, but at considerable cost
to the lessor and the public. None of these rationales suggests a powerful reason
to permit a secondary market in restrictive covenants divorced from the real estate
they are designated to protect. It is one thing to conclude that restrictive covenants
in leases of shopping center tenants should be enforceable to protect the interests
of the center and those tenants who have a current protectible interest within the
center. It is quite another to permit enforcement of an anticompetitive covenant by
someone foreign to the center who simply acquires the right to exclude
competition without making any investment in the center. And the interest of the
original lessee, Kroger in this case, may well be fully served by permitting
enforcement of the covenant as long as it or a successor operates a grocery store
in the center.

THE SALES CONTRACT

20.01 Anatomy of a Sales Transaction [300-302]
Every real property transaction has four basic stages: (1) locating the buyer; (2)
negotiating the contract; (3) preparing for the closing; and (4) closing the transaction.
In most states, the real estate broker is the main professional in home sales transactions.
The broker negotiates the deal, prepares the contract, handles the transaction until the
closing, and sometimes supervises the closing. As a specialized type of agent, the broker
owes a fiduciary duty to the principal, including obligations of care, skill, diligence,
loyalty, and good faith.
20.04 Requirements for Valid Contract [306-311]
[A]

Basic Elements

All types of contracts must meet the same minimum requirements of offer, acceptance,
consideration, and so forth. However, a contract for the sale of an estate or interest in
real property is enforceable only if it also satisfies the Statute of Frauds.
The typical Statute of Frauds imposes three requirements: (1) the essential terms of the
sales contract (2) must be contained in a memorandum or other writing that (3) is signed
by the party against whom enforcement is sought. To contain the essential terms, the
writing must normally identify the parties, contain words showing an intent to buy or sell,
state the purchase price, and adequately describe the property.

There are two main exceptions to the Statute of Frauds: part performance and
equitable estoppel. Courts differ somewhat on the actions that constitute part
performance, but one common formula requires that the buyer both (1) take
possession of the property and (2) either pay part or all of the purchase price or
make improvements to the property. Estoppel arises where (1) one party has been
induced by the other to substantially change position in justifiable reliance on an
oral contract and (2) serious or irreparable injury would result from refusing
enforcement of the contract.

Technically, a buyer is purchasing title to the land, not the land itself. Accordingly, the
prudent buyer will negotiate an express contract condition that specifies the quality of
title the seller must deliver. If the contract is silent on the issue, the law fills the gap with
an implied covenant that the seller must deliver marketable title.

In general, marketable title is title free from reasonable doubt, but not from every
doubt. For example, title is unmarketable if the seller does not own the estate he
purports to be selling or if his title is subject to any lien, easement, or other
encumbrance.

A specific performance decree mandates that the breaching party perform the sales
contract. Because specific performance is an equitable remedy, it is not always available
even if a breach has occurred. It will be awarded only if the usual remedy of money
damages is inadequate. In addition, the court has broad discretion in deciding whether to
grant this remedy and may refuse it, for example, if this would cause unusual hardship to
the breaching party.
The basic measure of damages for breach of a real property sales contract is the
difference between the contract price and the fair market value of the property at the time
of the breach. However, in many states the seller is not liable for such damages if the
breach was caused by good faith inability to convey marketable title. Finally, especially
when full loss of bargain damages are not available, the non-breaching party may receive
incidental damagesreimbursement of out-of-pocket expenses incurred in reliance on
the contract.
Brown v. Branch (2001)

Substantive Facts: Rhonda Branch and Clifford Brown were engaged in a tenyear relationship. Sometime during that ten-year period, Brown purchased a home
on State Road 135 in southern Indiana that the parties referred to as the "135
house." The couple lived in the home for one year early in their relationship. In
1995, Branch moved to Missouri, found a job, and enrolled in a business school
program. Shortly thereafter, Brown telephoned her and said that if she moved
back to Indiana, Branch would "always have the 135 house" and that she "won't
be stuck on the street. You will have a roof over your head." R. at 476. Brown also
proposed marriage, and Branch accepted. Branch quit her job, dropped out of
school after finishing the semester, and moved back to Indiana. Branch and
Brown then lived together for two brief periods before the relationship eventually
ended. Branch sued Brown when he failed to convey the house.
Bench trial conveyed house to Branch. Appeals Court affirmed.
Issue: Does the Statute of Frauds apply to the promise in question? Is the theory
of reliance applicable in this situation?
Holding: Reversed trial court. The Statute of Frauds does not define the term
"sale." However, the law is settled that "a right to the possession of real estate is
an interest therein, and any contract which seeks to convey an interest in land is
required to be in writing." Despite Browns protest to the contrary, there was
sufficient evidence before the trial court to show that he made a promise to
Branch to convey real estate. However, that promise falls within the Statute of
Frauds, and because it was not in writing it generally would be unenforceable.

If what the party gave up in reliance on an oral promise was no greater than what
the party would have given up in any event, then the consideration is deemed
insufficient to remove the oral promise from the operation of the Statute of
Frauds. According to the court neither the actions involved in moving ones
household to a new location nor the mere relinquishment of an existing
employment are sufficient to constitute independent consideration.
Posik v. Layton (1997)

Substantive Facts: Nancy Layton was a doctor practicing at the Halifax Hospital
in Volusia County and Emma Posik was a nurse working at the same facility when
Layton decided to remove her practice to Brevard County. In order to induce
Posik to give up her job and sell her home in Volusia County, to accompany her to
Brevard County, and to reside with her "for the remainder of Emma Posik's life to
maintain and care for the home," Layton agreed that she would provide essentially
all of the support for the two, would make a will leaving her entire estate to Posik,
and would "maintain bank accounts and other investments which constitute nonprobatable assets in Emma Posik's name to the extent of 100% of her entire nonprobatable assets." Also, as part of the agreement, Posik agreed to loan Layton $
20,000 which was evidenced by a note. The agreement provided that Posik could
cease residing with Layton if Layton failed to provide adequate support, if she
requested in writing that Posik leave for any reason, if she brought a third person
into the home for a period greater than four weeks without Posik's consent, or if
her abuse, harassment or abnormal behavior made Posik's continued residence
intolerable. In any such event, Layton agreed to pay as liquidated damages the
sum of $ 2,500 per month for the remainder of Posik's life.
Some four years after the parties moved to Brevard County and without Posik's
consent, Layton announced that she wished to move another woman into the
house. Layton moved out and took up residence with the other woman. Layton
served a three-day eviction notice on Posik.

Layton sued to enforce the terms of the agreement and to collect on the note
evidencing the loan made in conjunction with the agreement. Layton defended on
the basis that Posik first breached the agreement. Layton counterclaimed for a
declaratory judgment as to whether the liquidated damages portion of the
agreement was enforceable.
The trial judge found that because Posik's economic losses were reasonably
ascertainable as to her employment and relocation costs, the $2,500 a month
payment upon breach amounted to a penalty and was therefore unenforceable.
The court further found that although Layton had materially breached the contract
within a year or so of its creation, Posik waived the breach by acquiescence.
Finally, the court found that Posik breached the agreement by refusing to continue

to perform the house work, yard work and cooking for the parties and by her
hostile attitude which required Layton to move from the house. Although the trial
court determined that Posik was entitled to quantum meruit, it also determined
that those damages were off-set by the benefits Posik received by being permitted
to live with Layton. The court did award Posik a judgment on the note executed
by Layton.
Issue: Whether Posiks actions constituted a breach or waiver? Issue: Whether
Posik is entitled to collect damages?
Holding: Affirmed, reversed and remanded. Based upon Lauper, a property
division, per se, applies only to marriages. Accordingly, the trial court had no
authority to divide property absent a marriage contract or similar agreement, and
the court correctly granted summary judgment to appellee on appellant's breach of
contract claim.
We disagree with the trial court that waiver was proved in this case. Posik
consistently urged Layton to make the will as required by the agreement and her
failure to do so was sufficient grounds to declare default. And even more
important to Posik was the implied agreement that her lifetime commitment
would be reciprocated by a lifetime commitment by Layton -- and that this mutual
commitment would be monogamous. When Layton introduced a third person into
the relationship, although it was not an express breach of the written agreement, it
explains why Posik took that opportunity to hold Layton to her express
obligations and to consider the agreement in default.
We also disagree with the trial court that Posik breached the agreement by
refusing to perform housework, yard work, provisioning the house, and cooking
for the parties. This conduct did not occur until after Layton had first breached the
agreement. One need not continue to perform a contract when the other party has
first breached. Therefore, this conduct did not authorize Layton to send the threeday notice of eviction which constituted a separate default under the agreement.

Bethurem v. Hammett (1987)

In 1983, appellants, the Bethurems, contracted to purchase a residence from

appellees, the Hammetts. In exchange for the realty, Bethurem made a cash down
payment and agreed to monthly installment payments for the purchase-price
balance. In 1985, a dispute arose from encroachment of the residence structure,
the garage and the cemented-in fence into the dedicated city street, as then
confirmed by surveys by both parties. Bethurem sued to rescind agreement,
claiming Hammett misrepresented property.
Trial court found for Hammett.
Issue: Was the breach of the agreement a misrepresentation?
Holding: Reversed and remanded. A purchaser has the right to rely upon the
representations of the seller as to the boundaries of the land, and if the seller

misrepresents the true boundary of the land, whether innocently or intentionally, it

is ground for rescission by the purchaser.
The most practical test [for marketability] is as to whether the title is such that a
third person may reasonably raise a question after the time the contract would
have been completed. If the conditions of the title warrants such an attack, the
purchaser may reject the title as unmarketable. In this case, the fence encroached
approximately 17 feet into the city street, the garage encroached approximately
eight feet, and the actual residence encroached approximately four feet. Clearly,
such substantial encroachments subjected Buyer to potential litigation involving
the purchased property. Furthermore, a reasonably prudent person familiar with
the nature and extent of these encroachments would decline to purchase at an
otherwise reasonable market price. Accordingly, we find that the title was
unmarketable.
That three-part misrepresentation analysis also supports the right to rescission in
this case. First, the breach of the covenant of merchantability and the breach of
the covenant of compliance with the city ordinance amount to a misrepresentation
of the interest in the realty being sold, in a material and substantial aspect.
Second, Buyers relied on that misrepresentation. We note that these
representations were included in the contractual documents and were a constituent
part of the written undertaking which both parties signed. Furthermore, it is
difficult to imagine that Buyers would have been willing to purchase the property
had they known that the encroachments existed, raising the marketability
problems.
The third and final criterion under Hagar v. Mobley, supra, is that Buyers suffered
injury as a result of Sellers' false representations. There can be no doubt of injury
where, as here, the false representation would subject Buyers to the expense to
remove the encroachments for legal property usage. Dukas v. Tolmach, supra.
Furthermore, the fact that the buyers came to be in possession of property by
purchase as now subject to difficulty of resale also constitutes injury and
monetary damage.
Citizens State Bank of New Castle v. Countrywide Home Loans, Inc (2011)

April 27, 2005, Countrywide obtained mortgage for property owned by Clouds,
foreclosed upon house on August 28, 2006. Judgment for $229,416.66.
Countrywide gained deed at sheriffs sale. Clouds previously promissory note in
favor of Citizens State Bank of New Castle. Citizens filed suit after Clouds failed
to pay. Default judgment for $109,859.38. At foreclosure, Countrywide did not
name Citizens Bank as a party. On April 19, 2007 Countrywide conveyed title to
the property to the Federal National Mortgage Association, by limited warranty

deed. Countrywide brought action against Citizens to foreclose any interest

Citizens may have in Cloud property. Citizens filed separate complaint against
FNMA to foreclose the judgment lien.
Trial court consolidated the complaints. Both parties moved for summary
judgment, trial court directed Citizens Bank to redeem Countrywide's mortgage
within 30 days or be forever barred from asserting its judgment lien against the
subject property. Appeals court reversed.
Issue: Whether the doctrine of merger should apply? Which party has an interest
in the subject property?
Holding: Reverse, remand with instruction to enter judgment for Citizens.
Because merger extinguishes the mortgagee's lien, the mortgagee no longer has
any lien priority to assert with respect to any undisclosed junior liens. Instead the
junior liens remain attached to the property. Indiana holds the view that whether
a merger has occurred depends on the intent of the parties, especially the one in
whom the interests unite.
In this case the evidence before the trial court rebuts the presumption that
Countrywide intended that the two estates remain separate. The limited warranty
deed transferring the property to FNMA declares in part, that Countrywide grants
and conveys the same and warrants the title . . . against the acts of the Grantor
and all persons claiming lawfully by, through or under the Grantor.
But at the very least by April 19, 2007 when Countywide transferred its interest
in the real estate to FNMA Countrywide's intent was manifest: conveyance of
title in fee simple, free from all encumbrances. Such a transfer would not have
been possible absent a merger of the mortgage with the lien. In essence by
conveying title to a third party by way of warranty deed, albeit limited,
Countrywide demonstrated that it intended a merger of its interests.

Dinsmore v. Fleetwood Homes of Tennessee, Inc (2009)

Supreme Court ruled on warranty of habitability in Johnson v. Scandia. Doctrine

of caveat emptor in the sale of a new house previously overruled and a warranty
of fitness for habitation may be implied in a builder-vendor's sale of a new house
to the first purchaser. Court extended implied warranty to subsequent purchasers,
limited to latent or hidden defects. Dinsmore brought suit, claiming implied
warranty.
Summary judgment granted for Fleetwood.
Issue: Does an implied warranty of habitability extend to mobile homes?
Holding: Reversed. Pursuant to Indiana Code section 32-2-2-9, the legislature has
provided specific steps that a builder must take in order to disclaim implied
warranties, such as the warranty of habitability. Fleetwood has not argued nor
has it designated evidence to establish that it had properly disclaimed all implied
warranties as provided by the statute.

U.S. Bank, N.A. v. Integrity Land Title Corp. (2010)

In January 2006, a buyer of real property secured a mortgage loan from lender
Texcorp. Prior to the release of funds, Texcorp contracted with Integrity to prepare
a title commitment, conduct the mortgage closing, and provide Texcorp, its
successors and/or assigns, with an insured first and superior mortgage lien against
the subject real property. Based on its title search, Integrity issued a title
commitment which indicated that the title search had uncovered no judgments
against the seller of the real property. Based on Integritys commitment, Southern
National Title Insurance Corporation (Southern) issued and underwrote a
mortgage insurance policy (the Policy) naming Texcorp and its successors
and/or assigns as the insured. Texcorp approved a mortgage loan in the amount of
$123,090.00. Integritys title search had not revealed a 1998 foreclosure judgment
on the property from LPP Mortgage LTD.
LPP filed suit to enforce judgment lien. US Bank succeeded to LPP and filed suit
against integrity. Trial court granted LPP the lien.
Trial court dismissed US Banks motion against Integrity. Appeals court affirmed.
Issue: Whether the issuance of a title commitment and subsequently issued title
insurance policy give rise in Indiana to a tort cause of action for negligent
misrepresentation against a title insurer or commitment issuer, separate and apart
from the contractual obligations of the title policy.
Holding: Affirmed the trial court with respect to its grant of Integritys motion for
summary judgment on U.S. Bank's contract claim and reverse with respect to the
trial courts grant of Integritys motion for summary judgment on U.S. Banks tort
claim. Courts in other jurisdictions split. Court not had occasion to address this
precise issue, but liability for the tort of negligent misrepresentation has been
recognized in Indiana. Integrity should have known that Texcorp (U.S. Banks
predecessor in interest), in closing the loan to buyer, would act in justifiable
reliance on the statement in the preliminary commitment that title was free and
clear of any encumbrances. In fact, supporting affidavits established that Texcorp
directly communicated with Integrity and instructed Integrity to prepare a title
commitment, conduct the mortgage closing, and provide an insured first and
superior mortgage lien against the subject real property.
Here, the relationship between Integrity and Texcorp was of an advisory nature.
Integrity had superior knowledge and expertise, was in the business of supplying
title information, and was compensated for the information it provided to Texcorp.
Integrity deliberately provided specific information in response to a request by
Texcorp, to guide Texcorp in its transaction with a third party, and Integrity
affirmatively vouched for the accuracy of the information. On these facts, we are
convinced that applicable tort law permits U.S. Banks tort claim to go forward.

Keybank National Association v. NBD Bank (1998)

Toole Real Estate at Sections 13 and 14, Township 12 North, Range 1 West. In
1985, Loudermilks obtained Toole by properly recorded deed, Later in 1985,
Loudermilk executed a promissory note in the principal amount of $2,100,000.00.
The note was secured by a mortgage on Toole given to NBD. Mortgage
erroneously described: Range 1 East. The mortgage was indexed in the
Recorders office consistent with the legal description contained in the mortgage
and, thus, out of the chain of title of the Toole Real Estate.
In 1990, Loudermilk conveyed the Toole real estate, together with an additional
parcel of real estate to Frazier Farms, LTD (Frazier). The deed representing this
conveyance contained the correct legal description and was recorded in 1990. In
1992, Frazier quitclaimed a parcel of real estate which included a portion of the
Toole real estate to Loudermilks son, Tracy Loudermilk (Tracy). The address
of this property was 3345 Pitkin Road and the correct legal description was
Sections 13 and 14 Township 12 North, Range 1 West. The quitclaim deed
representing this conveyance contained the following erroneous legal description:
Sections 13 and 14 Range 12 North, Range 1 West. This quitclaim deed was
recorded in 1992. The deed was recorded in the Toole Real Estate chain of title
despite the error in the legal description because there are no properties identified
by two range designations and, thus, it was obvious from the face of the deed that
the Range 12 North should have read Township 12 North.

In 1994, Tracy executed a promissory note in favor of Keybank in the amount of

$92,050.00. Tracy executed a mortgage in favor of Keybank to secure the note.
The Keybank mortgage contained the same error in the legal description as the
quitclaim deed. The Keybank mortgage was recorded in 1994. Again, the
mortgage was recorded within the Toole Real Estate chain of title despite the
defect in the legal description. Tracy filed for Chapter 7 in late 1994. In 1995,
Keybank initiated foreclosure. Neither NBD nor Keybank discovered the errors in
the mortgages.
At bench trial, court determined that quitclaim deed and Keybanks mortgage
were null due to error. Trial court ruled that NBDs mortgage had priority.
Procedural Issue: Whether the errors made the mortgages null?
Substantive Issue: Which mortgage has priority?
Holding: Reversed. Mortgages can still be upheld if it is obvious what was
supposed to be mortgaged. The error in the legal description was obvious because
a legal description cannot have two Range designations. Therefore, the
Keybank mortgage was valid because the precise tract intended, the 3345 Pitkin
Road property, could be located despite the typographical error in the legal
description. Moreover, the mortgage had been properly recorded within the chain
of title despite the error.

An otherwise valid instrument which is not entitled to be recorded, improperly

recorded, or recorded out of the chain of title does not operate as constructive
notice, although binding upon persons having actual notice. In the present case,
the NBD mortgage was recorded outside the chain of title. Therefore, Keybank
had no constructive notice. Nor has there been any contention that Keybank had
been directly and personally given actual notice of the NBD mortgage.
Garza v. Lorch (1998)

On March 21, 1996, Garza entered into a Real Estate Purchase and Option
Agreement with Troy Morgan. Pursuant to this agreement, Morgan acknowledged
a $60,000 debt to Garza and delivered a quitclaim deed for thirty acres to satisfy
the debt. Abbott, the drafting attorney did not include a legal description of the
property in either document because Morgan was to have a survey conducted and
the description later attached as Exhibit A, as referred to in each document.
Garza received the exhibit containing the legal description, which he placed in his
desk with the other two documents. Garza never attempted to record the deed.
On August 5, 1996, Morgan executed and delivered to Lorch a quitclaim deed for
twenty-eight acres, a substantial portion of the property previously deeded to
Garza. Prior to purchasing this real estate for $150,000, Lorch had a title search
completed, obtained a title insurance policy and paid off all recorded liens. Lorch
recorded the deed on August 12, 1996. In December of 1996, while Garza was
working on part of the property that he believed Morgan still owned but had
actually been deeded to Lorch, Garza and Lorch had a conversation, during which
Lorch informed Garza he own all of the property.

Garza filed a declaratory judgment against Lorch, and later an amended complaint
against Lorch, Morgan and Abbott, alleging Lorch had constructive notice of
Garza unrecorded deed and that the transfer was fraudulent. Abbott and Lorch
filed for summary judgment.
Trial court granted summary judgment for Abbott and summary judgment and
attorney fees in favor of Lorch. Court ruled Garza had failed to show Abbotts
actions harmed Garza or that Lorch has notice of Garzas deed.
Issue: Whether the courts ruling of summary judgment is supported by the
evidence?
Holding: Affirmed Garza offers no argument that his damage was proximately
caused by Abbotts failure to include a legal description of the real estate in the
documents. Therefore, this issue is waived. Notwithstanding waiver, we find that
as a matter of law Abbotts alleged negligence in no way caused Garzas damage.
Garza admits that he received the legal description of the real estate within fifteen
days of accepting the quitclaim deed. After receiving the legal description, Garza
had ample time, prior to Morgans transfer to Lorch, to record the completed deed
and to avoid all damage.

Garza offers several facts to support notice argument: Lorch is a mortgage broker
who knew Morgans credit history; Lorch did not pay enough for the property, a
portion of the land was staked off and Lorch and Garza discussed ownership of
the land. Court rejects all; First argument irrelevant; no proof of underpaying;
staked may have been removed before Lorch took possession and conversation
occurred after Lorch took possession.
In addition to the notice argument, Garza asserts that the trial court erred in
granting summary judgment in favor of Lorch on the fraudulent conveyance
claim. Specifically, Garza baldly claims that the deed from Morgan to Lorch was
to avoid Garzas claims in violation of IC 32-2-7-17.
Here, the designated evidence in the record does not raise a question of material
fact as to fraudulent intent. Specifically, there is no evidence that the transaction
between Lorch and Morgan was out of the ordinary, as Lorch ran a title search,
obtained title insurance and paid off all liens prior to the closing. Therefore, the
trial court properly granted summary judgment on Garzas declaratory judgment
action against Lorch.

CONDITION OF THE PROPERTY

21.01 Let the Buyer Beware? [327-328]
The common law afforded the buyer of real property almost no remedy for defective
conditions, whether discovered before or after the close of escrow. Over the last 50
years, the law has moved steadily away from this view. There is a clear trend toward
holding sellers, brokers, and sometimes builders responsible to buyers for significant
defects in dwellings.
21.02 Sellers Duty to Disclose Defects [328-334]
[A]

Common Law Approach

Traditionally, the seller of real property had no duty to disclose hidden or latent defects to
the buyer, absent a fiduciary duty or other special circumstances. A buyer could recover
only when the seller intentionally misrepresented facts about the property or physically
concealed known defects.
[B]

Modern Trend Toward Requiring Disclosure

Today in most states a seller of residential property who knows of a latent defect that

substantially affects the value or desirability of the property must disclose it to the buyer.
See, e.g., Johnson v. Davis, 480 So. 2d 625 (Fla. 1985). Under this standard, most
significant physical or legal defects in the house or lot must be disclosed. The law is less
clear concerning the sellers duty to disclose intangible defects, such as whether a
house has a reputation for being haunted. See, e.g., Stambovsky v. Ackley, 572 N.Y.S.2d
672 (App. Div. 1991) (disclosure required).
21.03 Brokers Duty to Disclose Defects [334]
The real estate broker representing the buyer has long been required to disclose known
defects in the property as part of his fiduciary duty. Some jurisdictions also require the
sellers agent to disclose such defects to the buyer.
21.04 Builders Implied Warranty of Quality [335-337]
At common law, the builder who constructed a new home and then sold it to a buyer had
no liability for defects, even if the home was negligently built. Today, however, most
jurisdictions hold thatas a matter of lawan implied warranty accompanies the sale of
a new home by a builder, developer, or other merchant of housing. The warranty
provides that the house has been constructed in a workmanlike manner and is fit for
human habitation.
21.05 Risk of Loss Before Conveyance [337-339]
Under the traditional doctrine of equitable conversion, the buyer is deemed to be the
equitable owner of the land during the period between formation of the contract and close
of escrow. For example, if A contracts to sell her home to B, and the home burns down
before escrow closes, B is still obligated to purchase. A minority of states follows the
emerging view that the risk of loss remains with the seller until either possession or title
are transferred to the buyer.
THE MORTGAGE
22.01 The Role of Security for Debt [341-342]
Virtually all land purchases are financed with borrowed money. The lender will require
that the borrower post security for the loan, so thatif the loan is not repaid as promised
the lender may cause the security to be sold and repay the loan from the sales proceeds.
22.02 What Is a Mortgage? [342-343]
A mortgage is the conveyance of an interest in real property as security for performance

of an obligation. The obligation is almost always a loan of money evidenced by a

promissory note. If the borrower (the mortgagor) fails to make the payments required by
the note or otherwise defaults on the obligation, the lender (the mortgagee) may cause the
secured property to be sold and apply the sales proceeds to satisfy the unpaid debt. This
process is called foreclosure.
22.03 Evolution of the Mortgage [343-344]
By the seventeenth century, English courts routinely allowed the mortgagor to recover the
property if the entire loan was repaid within a reasonable period after its due date; this
right became known as the mortgagors equity of redemption. A mortgagee could petition
the court to end or foreclose this equity of redemption, and set a final date for payment, a
process called strict foreclosure. Because strict foreclosure was often unfair to the
mortgagor, most states adopted legislation that mandated judicial foreclosurea public
sale of the property under court supervision and distribution of excess sales proceeds to
the mortgagor. Finally, with the development of the power of sale mortgage, foreclosure
could occur through a public auction sale without any judicial involvement; this is called
power of sale foreclosure.
22.04 Creation of a Mortgage [344-346]
Because the mortgage is viewed as the transfer of an interest in real property, the
formalities required for an effective deed also apply to the mortgage. At a minimum, (1)
the material terms of the mortgage (names of parties, description of property, words
manifesting intent, etc.) must be set forth in a writing signed by the mortgagor and (2) the
mortgage must be delivered to the mortgagee.
22.05 The Secured Obligation [346-349]
The mortgage is a nullity unless it secures an obligation. Typically, the mortgage secures
repayment of a loan evidenced by a promissory note. The promissory note is simply a
specialized form of contract between the lender and the borrower; it includes the loan
amount, interest rate, term, and repayment schedule. Such notes often contain a
prepayment clause (allowing the mortgagor to repay the loan in advance of the due date
in return for payment of a monetary penalty) and a due-on-sale clause (allowing the
mortgagee to demand repayment of the entire loan if the mortgaged property is sold or
otherwise transferred).
22.06 Foreclosure of Mortgage [349-352]
[A]

Judicial Foreclosure

Judicial foreclosure is a specialized type of litigation. The successful mortgagee receives

a judgment that states the amount due on the mortgage, directs the property to be sold at
public auction, and specifies the terms of the sale. Once the sale occurs, it must be

confirmed by the court; the court has the power to deny confirmation if needed to protect
the mortgagors legitimate interests (e.g., if the sale was conducted in an illegal manner).
[B]

Power of Sale Foreclosure

The power of sale foreclosure is a purely private procedure, without judicial involvement.
It is permitted only when authorized by the express terms of the mortgage. While most
states allow this form of foreclosure, statutory safeguards are generally provided for the
mortgagor. For example, specified advance notice must be provided to the mortgagor
and to the public, the auction must occur in a public location, and so forth. Most states
allow the mortgagor to bring suit to cancel the sale only where the bid price is so grossly
inadequate as to shock the conscience or if fraudulent or unconscionable conduct has
occurred.
22.07 Special Mortgagor Protection Laws [352-354]
[A]

Anti-Deficiency Legislation

If the price received at foreclosure does not fully pay the secured debt, the mortgagee
may then be able to sue the mortgagor to receive a deficiency judgmenta judgment
requiring the mortgagor to pay the unpaid balance. However, legislation in some states
restricts such actions. Many states limit the amount of any deficiency judgment to the
difference between (1) the unpaid balance and (2) the fair market value of the property.
Some states bar deficiency judgments altogether.
[B]

Statutory Redemption

About half the states allow the mortgagor to redeem the property after foreclosure in a
process called statutory redemption. In such states, the mortgagor may recover title by
paying a set amount (usually the foreclosure sale price plus other expenses) to the
successful bidder within a specific period.
22.08 An Alternative Financing Device: The Installment Land Contract [354-356]
The installment land contract is frequently used as an alternative to the mortgage. Under
such a contract, the buyer (or vendee) agrees to pay the purchase price in installments to
the seller (or vendor) over a period of years. The contract provides that the vendor retains
title until all payments are made, and then transfers title to the vendee. The vendee
usually holds possession during the contract period.
22.09 Other Financing Devices [357-358]
The deed of trust is another financing device.. The borrower (or trustor) executes a
written instrument conveying an interest in the property to a neutral third party (the
trustee), as security for an obligation owed to the lender (or beneficiary). If the trustor

defaults, the trustee is empowered to conduct an auction sale and repay the beneficiary
with the sales proceeds. More basically, in any situation where the parties actually intend
a deed, lease, or other instrument to be security for debt, the courts will treat it as a
equitable mortgage, regardless of the form of the transaction.

Chapter 23
THE DEED
23.01 The Deed in Context [359-360]
The deed is the basic document used to transfer an estate or other interest in land during
the owners lifetime. One who transfers title by deed is a grantor; one who receives title
is a grantee.
23.03 Types of Deeds [361-362]
[A]

General Warranty Deed

The general warranty deed contains six specific covenants of title that warrant against
any defect in the grantors title, as described in Chapter 26. For example, the covenant
against encumbrances warrants that there are no mortgages, easements, liens or other
encumbrances on the property at the time the deed is delivered.
[B]

Special Warranty Deed

The special warranty deed usually contains the six title covenants found in the general
warranty deed, but applies them only to defects caused by the acts or omissions of the
grantor. For example, suppose A, having no title whatever to a parcel of land, purports to
convey title to B, and B in turn conveys to C using a special warranty deed; because the
title defect was caused by A, not B, B is not liable to C.
[C]

Quitclaim Deed

The quitclaim deed contains no title covenants. By its use, the grantor does not warrant
that she owns the property orif she has any titlethat her title is good. This type of
deed merely conveys whatever right, title, or interest the grantor may have in the land.
23.04 Requirements for Valid Deed [363-373]
[A]

Essential Deed Components

In general, a deed must be in writing, be signed by the grantor, identify the grantor and
grantee, contain words of conveyance, and adequately describe the land. In addition, the
grantor must deliver the deed to the grantee, and the grantee must accept.
[B]

Delivery

A deed is not effective until it is delivered. In order to deliver a deed, the grantor must
manifest by words or actions an intent that the deed be immediately effective to transfer
an interest in land to the grantee. The typical grantor delivers a deed through the act of

physically handing it to the grantee, with words indicating the required intent. Yet, as an
early English judge observed, As a deed may be delivered to a party without words, so
may a deed be delivered by words without any act of delivery.
[C]

Acceptance

In theory, the grantee must accept the deed in order to for the conveyance to be effective.
However, the law presumes that a grantee will accept a beneficial conveyance, so the
issue rarely arises.
23.05 Interpretation of Deeds [373-374]
The central rule in deed interpretation is to follow the intent of the grantor and the
grantee. If ambiguity remains, extrinsic evidence (e.g., statements and conduct of the
parties) will be considered.
23.06 Recordation of Deeds [374]
Virtually all deeds are recorded, meaning that the information contained in the deed is
entered into the public land records maintained by the appropriate local government
agency, usually a recorders office. Recordation is not required in order for a deed to be
valid. Yet the prudent grantee will immediately record in order to protect his title against
later claimants.
23.07 Effect of Forgery [374-375]
A forged deed is completely void. It conveys nothing to the grantee or any subsequent
grantee in the chain of title, including any bona fide purchaser.
23.08 Effect of Fraud [375-376]
A deed induced by the grantees fraud (fraud in the inducement) is voidable in an action
brought by the true owner against the grantee, but not against a bona fide purchaser from
that grantee. However, when fraud prevents the grantor from knowing that he is
executing a deed at all (fraud in the inception), the deed is void for all purposes, just like
a forged deed.
23.09 Estoppel by Deed [376]
Under this doctrine, if a grantor uses a warranty deed to convey title to land he does not
own, but then later does acquire title to the same land, it automatically passes to the
innocent grantee.

Chapter 24
FUNDAMENTALS OF LAND TITLE
24.01 The Problem of Conflicting Title Claims [378]
The legal principles used to resolve conflicting title claims are a compromise between
two goals: respecting the property rights of current owners and facilitating the transfer of
property rights to new owners.
24.02 General Rule: First in Time Prevails [379]
The traditional rule is that the person whose interest is first delivered prevails over
anyone who acquires an interest later. However, the recording acts adopted in most states
carve out two exceptions to this basic first-in-time rule.
24.03 First Exception to General Rule: Subsequent Bona Fide Purchaser Prevails
[379-380]
Almost all states recognize a major exception to the first-in-time rule: the bona fide
purchaser doctrine. In a title dispute between a first-in-time owner and a later bona fide
purchaser, the bona fide purchaser prevails. The recording act in each state defines the
precise requirements for bona fide purchaser status. Roughly half of the states are notice
jurisdictions, about half are race-notice jurisdictions, and two states do not recognize the
exception at all.
24.04 Who Is a Bona Fide Purchaser?: Notice Jurisdictions [380-384]
In a notice jurisdiction, a bona fide purchaser is a subsequent purchaser who pays
valuable consideration for an interest in real property, without any notice of an interest
that a third party already holds in the land. Suppose O conveys to A, and then O conveys
to B, who pays value to O and has no notice of As interest. As a bona fide purchaser, B
prevails over A.
24.05 Who Is a Bona Fide Purchaser?: Race-Notice Jurisdictions [384-385]
In a race-notice jurisdiction, a bona fide purchaser is a subsequent purchaser for value
without notice of any prior interest who also records his deed first. Suppose O conveys
to A; then O conveys to B, who pays value to O, has no notice of As interest, and who
records before A does. B prevails over A.
24.06 What Constitutes Notice? [385-389]
[A]

Basics

The law recognizes four types of notice: actual notice; record notice; inquiry notice; and

imputed notice. Actual notice simply means knowledge of the prior interest. Imputed
notice arises from a special relationship between two or more people; if one has
knowledge of a fact (e.g., an agent for a principal) the other (e.g., the principal) is also
deemed to know the fact.
[B]

Record Notice (aka Constructive Notice)

Record notice (or constructive notice) means notice of any prior interest that would be
revealed by an appropriate search of the public records affecting land title. A subsequent
purchaser is charged with notice of such a prior interest even if he never actually
conducts a title search.
[C]

Inquiry Notice

If a purchaser of real property has actual notice of facts that would cause a reasonable
person to investigate further, he is deemed to know the additional facts that inquiry would
uncover whether he inquires or not; this is called inquiry notice.
24.07 Second Exception to General Rule: The Shelter Rule [389]
Under the shelter rule, a grantee from a bona fide purchaser is protected as a bona fide
purchaser, even though the grantee would not otherwise qualify for this status. Suppose
O conveys to A, and then to B (a bona fide purchaser). Before B can convey to C, A
notifies C about the O-A deed; because C has notice, C cannot be a bona fide purchaser.
However, under the shelter rule, C prevails over A.
24.08 Special Rule for Race Jurisdictions: First Purchaser for Value to Record
Prevails [389-390]
Under a race recording statute, the first purchaser for value to record prevails. If O
conveys to A for value, and then O conveys to B for value, B prevails if she records her
deed before A does, even if B knows about the O-A deed.
24.09 Why Protect the Bona Fide Purchaser? [390-391]
One reason is that the doctrine prevents fraud and quasi-criminal conduct, while a race
statute allows the sophisticated to plunder the naive. Another is grounded in comparative
fault; as between the prior buyer (who can avoid the conflict by recording promptly) and
the later buyer (who cannot), it makes sense to allocate the loss to the person who is best
situated to avoid it.

Chapter 25

THE RECORDING SYSTEM

25.01 The Recording System in Context [393-394]
The recording acts in almost all states provide that a subsequent purchaser is charged
with constructive notice of a prior recorded interesteven if he fails to search the records
and accordingly cannot qualify for protection as a bona fide purchaser. However, not
all recorded documents provide constructive notice.
25.02 Purposes of the Recording System [394-395]
The recording system serves two basic purposes: (1) it protects existing owners from
losing their property to later purchasers by providing constructive notice; and (2) it
protects new buyers by allowing them to qualify for bona fide purchaser protection after
careful title searching reveals no prior interests.
25.03 Anatomy of the Recording System [395-396]
The recording system functions much like a specialized library. Deeds and other
instruments are placed in the public land records; a written catalogue (usually consisting
of two indices) lists all recorded documents. A title searcher must examine the indices
that affect the parcel at issue, read the relevant documents, and independently evaluate
their legal significance to determine the state of title.
25.04 Procedure for Recording Documents [396-397]
Virtually all states require that the document be acknowledged before a notary public or
similar official in order to qualify for recordation. Most states also restrict the types of
documents that are recordable. The actual recording process is quite simple. One merely
presents the original document to the appropriate local official and pays a small fee. The
official stamps the date and time of recordation on the original, a copy of the document
is filed in the land records, and later the relevant indices (usually the grantor-grantee
index and the grantee-grantor index) are updated to include the document.
25.05 Procedure for Searching Title [397-401]
The title searcher first searches in the grantee-grantor index back in time to determine
when the current owner received title; she then repeats the process from owner to owner
back in time. Shifting to the grantor-grantee index, she now searches forward in time,
under the name of each owner, to determine if any of them made conveyances during
their respective period of ownership other than the known conveyances to each other.
Finally, she reads the relevant documents and evaluates their legal significance.
25.06 Recorded Documents that Provide Constructive Notice [401]

A recorded document provides constructive notice if it meets the formal requirements for
recording, contains no technical defects, is recorded in the chain of title, and is properly
indexed.
25.07 Recorded Documents that Do Not Provide Constructive Notice [402-409]
[A]

Defective Document

A recorded document that fails to meet the requirements for recording does not provide
constructive notice. For example, if the acknowledgment is defective on its face (e.g.,
because it shows the notarys commission had previously expired), the document is
deemed to be unrecorded.
[B]

Document Outside the Chain of Title

Recorded documents that cannot be located using the standard title search described
above are deemed to be outside the chain of title, and do not provide constructive
notice. For example, suppose O conveys to A (who fails to record), A then conveys to B
(who records), and finally O conveys title to C (who records). Because the recorded A-B
deed cannot be found in a standard title search, it is outside the chain of title and provides
no notice to C.
[C]

Improperly Indexed Document

In most states, a document that is improperly indexed or non-indexed does provide

constructive notice. However, a minority of states (including California and New York)
treat such a document as unrecorded.
25.08 Effect of Marketable Title Acts [409-410]
Many states have enacted marketable title acts. If an owner has a clear record chain of
title back to a root of title (e.g., a deed) for a specified period (usually 20 to 40 years),
then a typical marketable title act will provide that title is free from all interests that were
recorded before the root of title.
Chapter 26
METHODS OF TITLE ASSURANCE
26.01 Title Assurance in Context [414]
How can an owner protect against a title defect that is discovered after close of escrow?
There are three basic methods of title assurance: (1) covenants of title; (2) title opinions
and abstracts; and (3) title insurance.

 26.02 Covenants of Title [415-423]

[A]

What Are Title Covenants?

A deed usually contains express promises by the grantor about the state of title being
conveyed. These promises are known as title covenants or covenants of title. If one of
these covenants is breached, the grantee (and sometimes his successors) may recover
damages from the grantor.
[B]

Scope of Title Covenants

The law has traditionally recognized six title covenants. The covenant of seisin warrants
that the grantor is the owner of the estate described in the deed; the covenant of right to
convey warrants that the grantor has the legal right to convey title; and the covenant
against encumbrances warrants that there are no encumbrances on the land. These three
are called the present covenants. The covenant of warranty is the grantors promise to
defend the title against other claimants, while the covenant of quiet enjoyment warrants
that the grantees possession will not be disturbed by anyone with superior title. Finally,
the covenant of further assurances is a promise that the grantor will take other actions
that are reasonably necessary to perfect the grantees title. These final three are known as
the future covenants.
]C]

Remedies for Breach of Covenant

A present covenant is breachedif at allonly when escrow closes and, accordingly, the
relevant statute of limitations then begins running. Either the original grantee or her
successors may sue for breach of a present covenant. In contrast, a future covenant is
breached only when the grantee is actually or constructively evicted by one holding
superior title; in most states, only the grantee has standing to sue. The measure of
damages for breach of most covenants is measured by the grantees purchase price plus
interest.
26.03 Title Opinions and Abstracts [423-424]
Another method of title assurance is an attorneys opinion of title based on the
examination of public records. Alternatively, an attorney might provide a title opinion
based on an abstract of title (a summary of title records prepared by a nonlawyer). The
title opinion was once the dominant method of title assurance in the United States;
however, the importance of this method is diminishing due to the widespread use of title
insurance.
26.04 Title Insurance Policies [424-432]
[A]

What Is Title Insurance?

A title insurance policy is a contract of indemnity between the issuing company (the
insurer) and the property owner or mortgagee (the insured). In the policy, the insurer
promises to compensate or indemnify the insured against losses caused by covered title
defects.
[B]

Scope of Title Insurance Policies

Most title insurers use standard policy forms developed by the American Land Title
Association. The standard ATLA owners policy covers four types of risks: (1) if title to
the estate is actually held by someone other than the insured; (2) if there is an
encumbrance on the insureds title; (3) if title is unmarketable; and (4) if the insured has
no right of access. However, the broad coverage afforded by the standard policy is
limited by various exceptions and exclusions. For example, matters that could be
discovered through an inspection or survey (e.g., adverse possession) are typically
excluded from coverage.
[C]

Negligence Liability

In some states, a title insurer can be held liable in negligence for failing to conduct a
reasonably diligent title search for the benefit of the insured before issuing the title
policy.
26.05 Registration of Title [432-433]
In a few states, a government agency is empowered to determine who holds title. Under
such a title registration system, the agency issues a certificate that conclusively
establishes land title. The certificate identifies the current title holder and lists all
easements, covenants, liens, and other encumbrances.

PART VI: OTHER TRANSFERS OF LAND TITLE

Chapter 27
ADVERSE POSSESSION
27.03 Requirements for Adverse Possession [437-446]

The adverse possessor must take actual possession of the land. Under the
majority view, this means that the claimant must physically use the particular
parcel of land in the same manner that a reasonable owner would, given its nature,
character, and location.

The claimant must hold exclusive possession. His possession must not be shared
with either the true owner or the general public, but must be as exclusive as would
characterize an owners normal use for such land.
The claimants acts of possession must be open and notoriousso visible and
obvious that a reasonable owner who inspects the land will receive notice of an
adverse title claim.
In most states, the requirement of adverse or hostile possession under a claim of
right is met if the claimant merely uses the land as a reasonable owner would
without permission from the true owner. In a minority of states, however, the
claimant must believe in good faith that he owns title to the land.
The requirement of continuous possession means that the claimants acts of
possession must be as continuous as those of a reasonable owner, given the
nature, location, and character of the land. However, successive periods of
adverse possession by persons in privity can be combined to satisfy the statutory
duration requirement; this process is known as tacking.
The period for adverse possession varies from state to state. Most states use
periods of 10, 15 or 20 years.
o The limitations period for adverse possession is extended or tolled when
the owner is unable to protect his rights due to a disability such as infancy,
mental illness, or sometimes imprisonment. Adverse possession is not
available against land owned by the federal government or many state
governments.

Fraley v. Minger (2005)

Belews purchased tract of land in 1954, sold and regained it by 1963. Southern
boundary adjacent to Plaintiffs land. 1955, Mingers purchased area east of tract,
not including the tract. Mingers believed the tract was unclaimed, grazed cattle
there. Mingers erected a fence in 1972. In 1996, Belew conveyed tract to Fraley
by guardian deed.
Minger challenged claim in October 1996, arguing that he had openly and
adversely possessed the tract for over twenty years. Fraley contended Minger
had not established hostile claim of ownership nor had paid necessary taxes.
Lower court found for Minger. Appealed. Transferred from Indiana Court of
Appeals.
Issue: Do the Mingers have an interest in the tract.
Holding: Reversed and remanded with instruction to enter judgment for Fraley.
Rationale: Statutory period for achieving possession is 10 years. The following
elements are required to establish adverse possession: control, intent, notice and
duration. The court held that adverse possession was proven. Previous court
ruling, Echerling. The trial court found Minger paid taxes for area adjacent to
disputed land. No finding about payment for land. Indiana Code 32-21-7-1
requires adverse possession requires the paying of taxes.

Chapter 28
TRANSFER OF PROPERTY AT DEATH
At death, the property of the decedent is transferred according to the terms of his will,
which may create a trust effective at death. If there is no will, the property will either (1)
be distributed to his family members as determined by state law or, if none exist, (2)
escheat to the state.
The will is a written instrument, effective only upon death, by which an owner disposes
of property. The person making the will is called a testator (if male) or a testatrix (if
female).
The transfer of real property by will is known as a devise, and the recipient is a devisee.
In contrast, the transfer of personal property by will is known as a legacy, and the
recipient is a legatee.
In general, a will is effective if it is (1) in writing and (2) signed by the testator at the end,
(3) in the presence of two witnesses who themselves sign the will to attest to its
execution. An exception to these requirements is the holographic willone entirely in
the handwriting of the testatorwhich is valid in most states without witnesses.
28.04 Intestate Succession [463-466]
Many Americans die intestatewithout a valid willand their property is distributed
according to the state law of intestate succession. In general, the decedents property is
transferred to the closest living relatives, with a strong preference for the surviving
spouse and issue (lineal descendants of the decedent, such as children, grandchildren,
etc.). If the decedent leaves no spouse or issue, the estate goes to the surviving parents or
other ancestors. Where no spouse, issue, or ancestors survive, the estate goes to
collaterals (other blood relatives of the decedent, e.g., siblings).
28.05 Escheat [466]
If one dies intestate without heirs, his estate passes to the state in which the property is
located; this process is called escheat.
Irving Trust Co. v. Day (1942)

Appelles claim property rights to the estate of Helena Synder, as per an

instrument she signed prior to her marriage; which surrendered any interest in her
husbands property. Synders husband executed a will which gave Synder $2,000.
18 of New York Decedent Estate Law allowed spouse to surrender interest in
estate. Synder moved to surrender her interests in husbands estate.

Trial court held that the will was not a contract and therefore could not surrender.
Appellate Division held that it was. Court of Appeals did not rule but held that a
wife cannot by agreement make the husbands right created by law immune from
the right of the State to change the law which created the right nor waive in
advance a right created for her benefit if the law does not permit such a waiver.
Issue: Was the Court of Appeals correct that the will is a contract under State
Law? Whether Title 18 of the New York Decedent Estate Law works an
impairment of the obligation of contract, forbidden by Article I, 10 of the
Constitution, or a deprivation of property without due process, forbidden by the
Fourteenth Amendment. Whether inheriting property was a constitutionally
protected right?
Holding: Affirmed. Rights of succession to the property of a deceased, whether
by will or by intestacy, are of statutory creation, and the dead hand rules
succession only by sufferance. Nothing in the Federal Constitution forbids the
legislature of a state to limit, condition, or even abolish the power of testamentary
disposition over property within its jurisdiction.
Chapter 29
NUISANCE

The Restatement (Second) of Torts defines a private nuisance as a nontrespassory

invasion of anothers interest in the private use and enjoyment of land. This definition is
overbroad, however, because not all such invasions are private nuisances. The traditional
distinction between nuisance and trespass hinges on the nature of the intrusion. If there is
a physical entry onto the land of another, the case is evaluated as a potential trespass.
However, cases involving fumes, smoke, light or other nontrespassory conduct are
governed by nuisance principles.
29.04 Elements of Private Nuisance [472-477]
[A]

Intentional Interference

As the Restatement (Second) of Torts provides, a persons harmful conduct is deemed

intentional if either (1) he acts for the purpose of causing the harm or (2) he knows that
the harm is resulting or substantially certain to result from his conduct.
[B]

Nontrespassory Interference

As noted above, the harmful conduct must be nontrespassory.

[C]
Unreasonable Interference
States vary widely on what constitutes unreasonable interference. Some equate

unreasonableness with serious injury to the plaintiff; others use a multi-factor test
including such items as the character of the neighborhood, the nature of the conduct, its
proximity to the plaintiffs land, its frequency and duration, etc. Under the Restatement
(Second) of Torts approach, adopted in about one-third of the states, interference is
unreasonable if the gravity of the harm outweighs the utility of the defendants conduct.
[D]

Substantial Interference

Slight inconveniences or petty annoyances do not give rise to nuisance liability. But if a
normal person living in the community would regard the interference as strongly
offensive or seriously annoying, then the level of interference is substantial.
[E]

Interference with Use and Enjoyment of Land

Nuisance liability arises only from interference with the interests of an owner, tenant, or
other land occupant in the use and enjoyment of land (e.g., if fumes from defendants
factory destroy plaintiffs apple orchard).
29.06 Remedies for Private Nuisance [478-482]
[A]

Injunction

The traditional remedy in private nuisance cases was an injunction against the offending
conduct. However, in almost all jurisdictions today, the plaintiff no longer has an
automatic right to this remedy. Instead, the court will use a balancing test (called
balancing the equities) to determine if an injunction is appropriate on the facts of the
particular case. In general, a court will issue an injunction only if the resulting benefit to
the plaintiff is greater that the resulting damage to the defendant. See, e.g., Boomer v.
Atlantic Cement Co., 309 N.Y.S.2d 312 (N.Y. 1970).
[B]

Damages

If the nuisance is deemed permanent, the plaintiff receives damages for past and future
harm in one lawsuit. Damages are measured by the extent to which the nuisance
diminishes the fair market value of the affected property. However, if the nuisance is
temporary or continuing, the plaintiff only receives damages to compensate for past harm
(usually measured by diminished rental value or use value), and must sue again in the
future as additional damages are suffered.
29.07 Public Nuisance [482-483]
A public nuisance is an unreasonable interference with a right common to the general
public. Restatement (Second) of Torts, 821B(1). Almost any intentional conduct that
unreasonably interferes with the public health, safety, welfare, or morals may constitute a
public nuisance. Examples include keeping diseased cattle, detonating explosives on a

residential street, and operating an unlicensed casino. Usually a public nuisance action is
brought by a city or other governmental entity. A private party may sue only if he has
suffered special injury.
Armory Park Neighborhood Ass'n v. Episcopal Community Servs., (1985)

Defendant services provider opened a neighborhood center which provided one

daily free meal to indigent persons, plaintiff association sued services provider,
claiming acts of patrons injured residents, causing a nuisance.
Trial court granted preliminary injunction. Appellate court vacated.
Issue: Whether the actions of the defendant created a nuisance that affected
plaintiffs use and enjoyment of property.
Holding: Injunction granted. Damage to plaintiff was special in nature. Plaintiffs
could sue to recover or enjoin the nuisance. Testimony found a link between the
acts of the defendant and the injuries suffered by the plaintiffs. Evidence of
multiple trespasses supported the conclusion that interference caused by operation
was unreasonable.

Parker v. Obert's Legacy Dairy, LLC, (2013)

Plaintiffs neighbors sued defendant dairy for nuisance when the dairy began a
concentrated feeding operation on land it had formerly used to grow crops for the
dairy.
Trial court granted summary judgment to defendant based on Indiana Right to
Farm Act, 32-30-6-9, which barred nuisance claims against agriculture
operations, absent a significant change and converting land was not significant.
Issue: Was summary judgment appropriate?
Holding: Affirmed. Obert used tract to farm and produce dairy. Operation and
farm serve as one entity under 32-30-6-3. Permit covers both.

TRESPASS
30.01 The Right to Exclude [485-486]
As the Supreme Court has explained, the right to exclude is one of the most essential
sticks in the bundle of rights that are commonly characterized as property. Kaiser Aetna
v. United States, 444 U.S. 164, 176 (1979).
30.02 What Is a Trespass? [486-488]
At common law, any intentional and unprivileged entry onto land owned or occupied by

another constituted a trespass. The element of intent has a special meaning in trespass
law. A trespasser is strictly liable; good faith and fault are irrelevant. The doctrine only
requires that the defendant intend to enter the land as a matter of her free choice, not that
she had an intent to trespass. The modern law of trespass largely follows the common
law approach.
30.04 Trespass and Freedom of Speech [489-491]
The First Amendment protects the right of freedom of speech from government action,
not private action. Accordingly, the Constitution does not require a private landowner to
open his land to demonstrators or others who wish to exercise the right of free speech,
even if the land is a shopping center or is otherwise generally open to the public.
However, some states have interpreted their state constitutions to provide that shopping
center owners cannot bar such free speech activities.
30.05 Trespass and Beach Access [491-492]
Under the public trust doctrine, state governments typically control wet-sand beaches
below the mean high tide line; accordingly, the public is free to use these beaches. Some
jurisdictions allow the public to use the dry sand beach as welleven if it is privately
ownedbased on customary rights, the public trust doctrine, or other theories.
30.06 Encroachments [492-493]
An encroachment is a permanent or continuing trespass caused by the construction of a
building or other improvement that partially extends onto anothers land. The common
law treated the encroachment like any other trespass; the successful plaintiff was allowed
to choose either damages or an injunction forcing removal of the encroachment. But
where the encroachment results from a good faith mistake and the injury to the plaintiff is
relatively minor, most modern courts will refuse an injunction and only award damages.
30.07 Good Faith Improvers [493]
Most states provide relief to the good faith improverone who improves land owned by
another under the mistaken but good faith belief that he owns it. For example, many
states allow the good faith improver to either (1) remove the improvements or (2) receive
compensation equal to the amount by which the improvements increase the market value
of the land.
Jacque v. Steenberg Homes, Inc (1997)

Steenberg was contracted to deliver a mobile home, could not use public road due
to unsafe conditions. Passed through Jacque home despite protests and warnings.
Jacque sued for trespass.

Jury awarded $100,000 in punitive damages, circuit court set aside the award as
excessive. Court of Appeals affirmed.
Issue: Whether an award of nominal damages for intentional trespass to land may
support a punitive damage award. Whether the $ 100,000 in punitive damages
awarded by the jury is excessive.
Holding: Affirmed. To determine whether, as a matter of law, the question of
punitive damages should have been submitted to the jury, this court reviews the
record de novo. The nature of the nominal damage award in an intentional
trespass to land case further supports an exception to Barnard. Because a legal
right is involved, the law recognizes that actual harm occurs in every trespass. The
action for intentional trespass to land is directed at vindication of the legal right.
The law infers some damage from every direct entry upon the land of another. The
law recognizes actual harm in every trespass to land whether or not compensatory
damages are awarded. Thus, in the case of intentional trespass to land, the
nominal damage award represents the recognition that, although immeasurable in
mere dollars, actual harm has occurred.
The potential for harm resulting from intentional trespass also supports an
exception to Barnard. A series of intentional trespasses, as the Jacques had the
misfortune to discover in an unrelated action, can threaten the individual's very
ownership of the land. The conduct of an intentional trespasser, if repeated, might
ripen into prescription or adverse possession and, as a consequence, the individual
landowner can lose his or her property rights to the trespasser

State v. Shack (1971)

Defendants, an attorney and health service worker, entered on private property to

aid a migrant farmworker housed there. The owner-employer said he would allow
defendants to meet with the migrant workers they sought, but only in his presence
in his office. When defendants asserted they had a right to meet alone with the
worker, the owner summoned the police to remove them for trespass.
Defendants convicted of trespass. Appeals court affirmed.
Issue: Did employer have a right to have the defendants removed?
Holding: Reversed. Owner did not have the right to bar governmental services
available to the workers, hence there was no trespass. Employer could not assert a
right to isolate the migrant worker in a way significant to the worker's well-being.
Chapter 32
EASEMENTS

32.01 The Easement in Context [508-509]

The law recognizes five basic categories of affirmative easements: (1) express easements;

(2) easements implied from prior existing use; (3) easements by necessity; (4)
prescriptive easements; and (5) irrevocable licenses or easements by estoppel. Certain
negative easements are also recognized.
32.02 What Is an Easement? [509-511]
[A]

Easement Defined

In general, an affirmative easement is a nonpossessory right to use land in the possession

of another. For example, if A owns an easement that allows her to travel over land owned
by B, A holds an affirmative easement. In contrast, a negative easement entitles an owner
to prevent another owner from doing a particular act on the second owners land.
[B]

Easement Terminology

In the example above, As land that is benefitted by the easement is called the dominant
tenement, while Bs land that is burdened by the easement is called the servient tenement.
Every easement is classified as either appurtenant or in gross. An easement appurtenant
benefits the easement holder in his capacity as owner of the dominant tenement.
Conversely, an easement in gross benefits the holder in a personal sense, whether or not
he owns particular land.
32.03 Express Easements [512-513]
An express easement is voluntarily created in a deed, will, or other written instrument. It
may arise either by grant or by reservation. In order to create an express easement, the
writing must identify the parties, manifest an intent to create an easement, describe the
affected land, and be signed by the grantor.
32.04 Easements Implied from Prior Existing Use [513-517]
Three elements are required for an easement implied from prior existing use: (1)
severance of title to land held in common ownership; (2) an existing, apparent, and
continuous use when severance occurs, and (3) reasonable necessity for the use at time of
severance.
32.05 Easements by Necessity [517-520]
Two elements are generally required for an easement by necessity: (1) severance of title
to land held in common ownership; and (2) strict necessity at the time of severance.
Under the majority view, strict necessity exists when the parcel in question has no legal
right of access to a public road. Some courts only require reasonable necessity.
32.06 Prescriptive Easements [521-524]

In order for a prescriptive easement to arise, the claimants use must generally be (1)
open and notorious, (2) adverse and under a claim of right, and (3) continuous and
uninterrupted for the statutory period. Adverse possession principles are frequently used
in interpreting these elements.
32.07 Irrevocable Licenses or Easements by Estoppel [525-526]
Ordinarily, a license is revocable. A license that becomes irrevocable, however, becomes
the functional equivalent of an easement. Three elements are necessary to create an
irrevocable license: (1) a license; (2) the licensees expenditure of substantial money or
labor in good faith reliance; and (3) the licensors knowledge or reasonable expectation
that reliance will occur.
32.08 Other Types of Easements [527]
In addition, an easement may be implied from a subdivision map or plat, may be created
through eminent domain, and may arise by implied dedication.
32.09 Scope of Easements [527-530]
The scope of an easement may evolve over time as the manner, frequency, and intensity
of use change. In general, the scope of an easement turns on the intent of the parties.
The law usually presumes that the parties to an express or implied easement intended that
the easement holder would be entitled to do anything reasonably necessary for the full
enjoyment of the easement, absent evidence to the contrary.
32.10 Transfer of Easements [530-531]
Any transfer of title of the dominant tenement also automatically transfers the benefit of
an appurtenant easement, absent an agreement to the contrary. The law governing the
transfer of easements in gross, in contrast, is more complex. In some states, an easement
in gross is transferable only if it is for a commercial purpose (e.g., a railroad easement).
In other states, any easement in gross is freely transferable, unless the original parties had
a contrary intent.
32.11 Termination of Easements [531-533]
Easements may be terminated in many ways. For example, an easement is deemed
abandoned where the holder both (1) stops using it for a long period and (2) takes other
actions that clearly manifest intent to relinquish the easement. Similarly, just as one may
acquire an easement by prescription, the servient owner may terminate an easement by
prescription.
32.13 Licenses [535]

A license is an informal permission that allows the licensee to use the land of another for
a narrow purpose (e.g., as a spectator at a football game). A license may be created
orally, but may generally be revoked at any time.
Chapter 33
REAL COVENANTS
A real covenant is a promise concerning the use of land that (1) benefits and burdens the
original parties to the promise and also their successors and (2) is enforceable in an
action for damages. A real covenant may be either affirmative (a promise to perform an
act) or negative (a promise not to perform an act).
33.04 Creation of a Real Covenant [541-552]
[A]

Perspectives on the Real Covenant

Two points are vital to understanding. First, the law distinguishes between the original
parties to the covenant and their successors. Second, each real covenant has two
sidesthe burden (the promissors duty to perform the promise) and the benefit (the
promissees right to enforce the promise).
[B]

Requirements for the Burden to Run

[1]

Generally

In order for the successor to the original promissor to be obligated to perform the promise
(that is, for the burden to run), the law traditionally requires that six elements must be
met: (1) the promise must be in a writing that satisfies the Statute of Frauds; (2) the
original parties must intend to bind their successors; (3) the burden of the covenant must
touch and concern land; (4) horizontal privity must exist; (5) vertical privity must exist;
and (6) the successor must have notice of the covenant.
[2]

Touch and Concern

In order to touch and concern land, the covenant must relate to the direct use or
enjoyment of the land. For example, a covenant that restricts the height of future
buildings on a parcel meets this requirement. In contrast, a covenant that requires an act
having no connection whatsoever to the particular parcel of land (e.g., dancing a jig in the
village square) does not touch and concern.
[3]

Horizontal Privity

The law traditionally requires that the original parties have a special relationship in order

for the burden to run, called horizontal privity. In some states, horizontal privity exists
between the promissor and the promissee who have mutual, simultaneous interests in the
same land (e.g., landlord and tenant). Other states extend horizontal privity to the
grantor-grantee relationship as well.
[4]

Vertical Privity

Vertical privity concerns the relationship between an original party and his successors.
Vertical privity exists only if the successor succeeds to the entire estate in land held by
the original party.
[C]

Requirements for the Benefit to Run

The law requires only four elements for the benefit of a real covenant to run to
successors: (1) the covenant must be in a writing that satisfies the Statute of Frauds; (2)
the original parties must intend to benefit their successors; (3) the benefit of the covenant
must touch and concern land; and (4) vertical privity must exist.
33.05 Termination of Real Covenants [552-553]
Two of the major defenses to enforcement of a real covenant are abandonment and
changed conditions. Abandonment occurs when the conduct of the person entitled to the
benefit of the covenant demonstrates the intent to relinquish her rights. Under the
changed conditions doctrine, a covenant becomes unenforceable when conditions in the
area of the burdened land have so substantially changed that the intended benefits of the
covenant cannot be realized.
33.06 Remedies for Breach of Real Covenants [553]
This historic remedy for breach of a real covenant is damages, measured by the difference
between the fair market value of the benefitted property before and after the defendants
breach.
33.07 Scholarly Perspectives on Real Covenants [553-554]
The real covenant has attracted much scholarly attention in recent years. Most scholars
agree that the requirements of touch and concern, horizontal privity, and vertical privity
should be either abolished or greatly relaxed.
33.08 The Restatement (Third) of Property: Servitudes [554-555]
The new Restatement (Third) of Property: Servitudes would greatly simplify this area by
combining the real covenant and the equitable servitude into one doctrine: the servitude.
Under this approach, a contract or conveyance creates a servitude if: (1) the parties so
intend; (2) it complies with the Statute of Frauds; and (3) it is not illegal,

unconstitutional, or violative of public policy.

Shelley v. Kraemer (1948)

Neighborhood where Shellys purchased home subject to racially-restrictive

zoning covenant. Kraemer brought suit to reverse the sale.
Circuit court declined to enforce covenant on the grounds that not all home
owners signed the covenant. Missouri Supreme Court reversed. Petitioner
appealed.
Issue: Does the action of the state court in enforcing the restrictive covenant
deprive Petitioner of rights guaranteed by the Fourteenth Amendment and acts of
Congress?
Holding: Yes; reversed. Restrictive agreements, standing alone, could not be
regarded as a violation of any Fourteenth Amendment rights. Requirement for
state action was not met in a purely private and voluntary covenant. State action
by virtue of the Supreme Court of Missouris decision to enforce the restrictive
covenant.
The Court held that in granting judicial sanction to an agreement which, by its
terms, would deprive the Petitioners of equal protections guaranteed by the
Fourteenth Amendment is an action which cannot stand. Therefore, the Court held
that the Supreme Court of Missouri had to be reversed.
Because the Court decided the case on the question of equal protection it was
unnecessary to consider the Petitioners arguments regarding due process and
whether the Petitioners had been denied privileges and immunities accorded to
citizens of the United States.
Hurd v. Hodge was a companion case from the District of Columbia; the Equal
Protection Clause does not explicitly apply to United States territory which is not
inside a state, but the Court found that both the Civil Rights Act of 1866, and
treating persons in the District like those in the States, forbade restrictive
covenants.
The Fourteenth Amendments guarantee of equal protection applies in this case to
prohibit the enforcement of the restrictive covenant at issue due to the fact that the
provisions of the Fourteenth Amendment apply only where there is state action,
which is found in this case due to the action of the Supreme Court of Missouri in
enforcing the agreement, the result of which is to deprive the Petitioners of their
property.

Candlewood Lake Assn v. Scott (2001)

Candlewood is an association of property owners. Scott is owner of two lots,

conveyed by his father by general warranty deed subject to restrictions.
Association is authorized to assess fees against property owners for maintenance,
etc. Candlewood brought suit against Scott for unpaid fees.
Trial court granted summary judgment for Lakewood, $29,465.54 plus costs.
Issue: What restrictions exist on the parties deeds? Do the covenants run with the
land or are they personal?
Holding: Judgment affirmed. Defendant argued that he is not subject to the
covenant because covenant does not run with the land and he has not joined the
association. Three requisites to run with the land: 1. Intent of the original grantor,
2. The covenant must affect the land, 3. There must be privity of estate between
the parties.
Deed restrictions affirmatively state clear intent that restrictions shall run with
the land. Covenant clearly affects the land by increasing value. The defendant is
an assignee of his father, obtaining not only the rights incident to his fathers
ownership but also the obligations imposed by the covenants in the deed
restrictions.

Girl Scouts of Southern Ill. v. Vincennes Ind. Girls, Inc., (2013)

Vicennes granted camp to Girl Scouts, on the condition that camp be used for
scouting purposes for 49 years. If not, reverter to Vicennes. Indiana statute limited
duration of such conditions to 30 years. Scouting use continued for 44 years
until January 2009, when GSSI ceased using Camp Wildwood as a Girl Scout
facility and decided to sell.
Vicennes brought suit to quiet title and enjoin Girl Scouts from selling. GSSI
counterclaimed to quiet title, alleging that VIG's reversionary interest expired by
operation of the statute in 1995, or by the terms of the deed when VIG was
administratively dissolved in 2004
The trial court granted summary judgment quieting title in VIG, and GSSI
appealed. The appeal was initially filed in the Court of Appeals, but because the
trial court's judgment declared a state statute unconstitutional, Appellate Rule
4(A)(1)(b) gives Supreme Court mandatory and exclusive jurisdiction over the
appeal. The case was therefore transferred to Supreme Court under Appellate Rule
6, and proceeded as a direct appeal.
Issue: Did the administrative dissolving of Vicennes affect its ownership of the
title? Does the Indiana statute retroactively affect the conveyance at issue?
Holding: Affirmed. VIG's corporate existence continued (albeit in a limited
capacity) even while it was administratively dissolved, and its reinstatement was
retroactive as if the ... dissolution had never occurred. Accordingly, the
dissolution did not terminate VIG's existence or surrender its charter, and so its
reversionary rights did not terminate by operation of the deed.

Though VIG retained a possibility of reverter in its conveyance to GSSI, the deed
reveals that it retained other rights as well and we are concerned with VIG's
entire bundle of rights, rather than any one of them individually. Deeds, like
contracts, are read as a whole, and we determine the parties' intent by the
unambiguous language they used, presuming they intended each part to have
meaning. Applying that standard here shows that the parties' central focus was to
impose a contract obligation on GSSI to use Camp Wildwood for and as a Girl
Scouts camping site and facilities for a period of forty-nine years. The remaining
provisions are subsidiary, framed in terms of enforcing that obligation:
Reading those provisions together makes clear that VIG's reversionary interest
works in tandem with the charitable-use requirement to create a valid condition
subsequent. Such conditions are generally disfavored and strictly construed, so
that nothing short of express provisions for forfeiture and either a reverter . . . or
a right to retake the property in the donor or his heirs [will] enable a donor to
effectively impose a condition subsequent. St. Mary's Med. Ctr. v. McCarthy,
829 N.E.2d 1068, 1075-76 (Ind.Ct.App.2005), reh'g denied (internal citations and
quotations omitted). And VIG's deed does just that: it requires GSSI to use the
camp for Scouting purposes for 49 years, expressly provides for forfeiture in case
of nonuse, and creates a possibility of reverter to enforce that condition. The
condition would therefore be enforceable, regardless of its duration.
[B]ecause VIG's interest imposes a land-use restriction similar to a restrictive
covenant, it deserves the same level of Contracts Clause protection. Since the
parties bargained for a 49-year land use limitation on Camp Wildwood,
terminating that restriction after just 30 years would substantially impair VIG's
contract rights. Indiana Code section 32-17-10-2 is therefore unconstitutional as
applied retroactively to the land-use restriction in VIG's deed to GSSI.
Benjamin Crossing Homeowners' Association, Inc. v. Heide & Wilkerson (2011)

Homes operated by Defendant subject to restrictive covenant prohibiting business

from being conducted. Plaintiffs used their homes to conduct child-care services,
forbidden by the covenant. Plaintiffs filed a complaint seeking damages and a
declaratory judgment that defendant could not enforce a restrictive covenant to
prohibit the operation of a child care home in their respective residences.
Defendant countersued, seeking injunction prohibiting the operation of child care
homes.
Summary judgment for the plaintiffs.
Is the covenant independent of the ordinance that established the community?
Does Ind. Code 36-7-4-1108 prohibit homeowners' association from enforcing a
restrictive covenant banning the operation of businesses in residences in the
planned unit development?

Reversed and remanded. The statutory prohibition under Indiana Code Section
36-7-4-1108 restricts the authority of a municipality when enacting or enforcing a
zoning ordinance. The prohibition against a zoning ordinance barring the
operation of a child care home in a residence is directed to the municipality and
renders any such ordinance unenforceable by the municipality. On the other hand,
the restrictive covenants in the Declaration set out the mutual obligations and
rights of property owners to each other. Those restrictive covenants are
enforceable by the private parties to the Declaration and were not vitiated by the
adoption of the planned unit development ordinance that included them. Thus, we
hold that the restrictive covenants did not cease to exist independently when they
were adopted and included in the planned unit development ordinance that
established Benjamin Crossing.

Nordbye v. BRCP/GM Ellington (2011)

Plaintiff is a former tenant of a residential rental property that was financed, at

least in part, through the federal Low-Income Housing Tax Credit (LIHTC)
program. The purpose of the LIHTC program is to encourage the development of
low-income rental housing through the allocation of tax credits pursuant to
section 42 of the Internal Revenue Code (IRC).
In December 1990, Rose City Village Limited Partnership, the original owner of
the project, entered into a Low-Income Housing Tax Credit Reservation and
Extended Use Agreement (the extended use agreement) with the Department. The
original owner agreed, among other things, that it would maintain 100 percent of
the project as low-income housing for 30 years and that, as a condition precedent
to the issuance of tax credits, it would record a "declaration of land use restrictive
covenants."
In 2006, the previous owner sold the project to the present owner, BRCP and
despite the three-year safe harbor provision of the release agreement, BRCP
issued a 30-day, no-cause eviction notice to plaintiff.

Plaintiff filed action, seeking declaratory and injunctive relief to enforce the
original owner's commitment to maintain the property as low-income housing for
the remainder of the declaration's 30-year term. Defendant moved for summary
judgment.
Procedural History: Trial court granted defendant motion and denied the
plaintiffs cross-motion.
Did the trial court err in granting summary judgment?
Holding: Reversed and remanded. In section 2(b) of the declaration, the original
owner of the project and the Department agreed that the use restrictions set forth
in the declaration would be covenants running with the Project land,
encumbering the project for the term of the declaration and binding all successors

in title for the stated duration. Section 2(b) further provides that the benefits of
the covenants and restrictions shall inure to the Department and any past, present
or prospective tenant of the Project. (Emphasis added.) Finally, under section
8(b) of the declaration, both the Department and any individual who meets the
income limitation applicable under section 42 (whether prospective, present or
former occupant) shall be entitled . . . to enforce specific performance of
obligations owed under that document. (Emphasis omitted.) Thus, under the
declaration, plaintiff is an intended third-party beneficiary of the use restrictions
and, pursuant to section 8(b), she is independently entitled to enforce those use
restrictions, even if the Department has waived its ability to do so.
BRCP further argues that, in all events, it is not bound by the use restrictions set
forth in the declaration because the declaration did not succeed in creating
covenants that run with the land at law. To create a covenant running with the land
and binding on successors, four requirements 14 must be met: (1) there must be
privity of the estate between the promisor and his successors; (2) the promisor and
promisee must intend that the covenant run; (3) the covenant must touch.
The trial court determined that the declaration was recorded as a restrictive
covenant in the property's 14 chain of title, and the Department does not dispute
that the declaration successfully created covenants running with the land. and
concern the land of the promisor; and (4) the promisee must benefit in the use of
some land possessed by him as a result of the performance of the promise.
Specifically, BRCP argues that the first and fourth requirements are not satisfied.
BRCP's argument fails because the declaration itself expressly provides that all of
the requirements under Oregon law for creation of a restrictive covenant running
with the land are deemed satisfied. In section 2(b), the parties to the declaration
agreed that any and all requirements of the laws of the State of Oregon to be
satisfied in order for the provisions of this Declaration to constitute deed
restrictions and covenants running with the land shall be deemed to be satisfied in
full[.]

Chapter 34
EQUITABLE SERVITUDES
34.01 The Equitable Servitude in Context [558-559]
The equitable servitude is the primary modern tool for enforcing private land use
restrictions. The usual remedy for violation of an equitable servitude is an injunction,
which often provides more effective relief than compensatory damages.
34.02 What Is an Equitable Servitude? [559-560]
An equitable servitude is a promise concerning the use of land that (1) benefits and
burdens the original parties to the promise and their successors and (2) is enforceable by
injunction.
34.03 Evolution of the Equitable Servitude [560]
The equitable servitude was born in the famous decision of Tulk v. Moxhay, 41 Eng. Rep.
1143 (1848), where Englands chancery court held that a promise to maintain a privatelyowned park in an open state, uncovered by buildings, was enforceable in equity against a
successoreven though the promise could not have been enforced as a real covenant.
34.04 Creation of an Equitable Servitude [561-565]
[A]

Requirements for the Burden to Run

In order for the burden of an equitable servitude to bind the original promissors
successors, four elements must be met: (1) the promise must be in a writing that satisfies
the Statute of Frauds or implied from a common plan; (2) the original parties must intend
to burden successors; (3) the promise must touch and concern land; and (4) the
successor must have notice of the promise.
[B]

Requirements for the Benefit to Run

Only three elements are required for the benefit to run to successors: (1) the promise must
be in writing or implied from a common plan; (2) the original parties must intend to
benefit successors; and (3) the promise must touch and concern land.
34.05 Special Problem: Equitable Servitudes and the Subdivision [565-568]
If a developer manifests a common plan or common scheme to impose uniform
restrictions on a subdivision, most courts conclude that an equitable servitude will be
implied in equity, even though the Statute of Frauds is not satisfied. The common plan is
seen as an implied promise by the developer to impose the same restrictions on all of his
retained lots.

 34.06 Termination of Equitable Servitudes [568-573]

There are many defenses to enforcement of an equitable servitude. For example, the
landmark decision of Shelley v. Kraemer, 334 U.S. 1 (1948), established that raciallyrestrictive covenants were unconstitutional and hence unenforceable. Similarly, when
there has been such a major change in neighborhood conditions that enforcement of the
restriction would not provide substantial benefit to the dominant land, it is unenforceable
under the doctrine of changed conditions.
34.07 Remedies for Breach of Equitable Servitudes [573]
The standard remedy for breach of an equitable servitude is an injunction. When the
breach at issue is the failure to pay money, courts will usually impose a lien on the
affected property, which the plaintiff may collect by foreclosing.
34.08 The Restatement (Third) of Property: Servitudes [573-576]
As noted in Chapter 33, the Restatement (Third) of Property: Servitudes brings the
prospect of revolutionary change to this area by greatly simplifying the law governing the
real covenant and the equitable servitude.
Chapter 36
FUNDAMENTALS OF ZONING
36.01 The Land Use Revolution [589-590]
At the dawn of the twentieth century, there were essentially no governmental restraints on
how a private owner could use her land, except for the nuisance doctrine. Today,
however, almost every parcel of land is subject to a maze of ordinances, regulations, and
statutes that restrict use.
36.02 What is Zoning? [590]
Initially, zoning referred to the form of land use regulation that emerged in the 1920s, by
which a community was divided into geographical districts or zones where particular land
uses were allowed. Today zoning is often used loosely to mean all forms of land use
regulation.
36.03 The Birth of Zoning [590-592]
Zoning is best understood as a response to problems created by rapid urbanization
overcrowding, disease, traffic, smoke, odors, and the like. Comprehensive, standardized

zoning spread quickly throughout the United States in the 1920s. The catalyst that
produced this growth was the 1922 Standard State Zoning Enabling Act, issued as a
model act for state legislatures to adopt. Today, most zoning ordinances are still based on
this Act and, accordingly, are remarkably similar.
36.04 A Sample Zoning Ordinance [592-594]
The typical state zoning enabling act empowers a city council or other local legislative
body to: (1) adopt a comprehensive plan; (2) enact a zoning ordinance; and (3) delegate
administrative authority to an appointed board. The zoning ordinance usually divides the
community into separate zones, specifies the uses permitted in each zone, and also
imposes height and bulk regulations on the buildings that house each particular use.
36.05 The Constitutionality of Zoning [594-597]
The Supreme Court upheld the constitutionality of zoning in the famous decision of
Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). The Court held that a
zoning ordinance would be upheld against substantive due process and equal protection
attack unless it was arbitrary and unreasonable, having no substantial relation to the
public health, safety, welfare, or morals. Euclid is still the most important decision in
American zoning law.
36.06 Zoning and the Nonconforming Use [597-600]
In general, zoning regulates only future development. Thus, virtually all zoning
ordinances allow the prior nonconforming use to continue. A nonconforming use is a use
of land that lawfully existed before the zoning ordinance was enacted, but that does not
comply with the ordinance.
36.07 Zoning and Vested Rights [600-601]
In most states, an owner who obtains a building permit and makes substantial
expenditures in good faith reliance on the permit obtains a vested right to the use,
regardless of any later change in the zoning law.
Buchanan v. Warley (1917)

Contract signed between the parties to purchase real estate, for the purpose of
building a house, will not be required to pay if not legally allowed to occupy.
Warley, as a colored man, would not be allowed to occupy house due to zoning
restrictions. Buchanan brought suit for fulfillment of the contract.
Buchanan sued Warley in Jefferson County Circuit Court to complete the sale.
Warley cited the city ordinance as the reason for non-completion of the sale. The
question went to the Kentucky Court of Appeals. Buchanan alleged that the

ordinance violated the Due Process clause of the Fourteenth Amendment. The
Kentucky Court of Appeals upheld the statute.
Issue: Is the contract legally enforceable? Does the Louisville statute violate the
Due Process clause of the Fourteenth amendment?
Holding: Reversed. Statute ruled unconstitutional. The Court recognized
Louisville's interest in exercising its police power and the "promotion of the
public health, safety, and welfare." However, the Civil Rights Act of 1866 and the
Fourteenth Amendment "[assured] to the colored race the enjoyment of all the
civil rightsenjoyed by white persons." Louisville's interest did not justify the
ordinance, which would "deny rights created or protected by the Federal
Constitution."

City of Birmingham v. Monk (1951)

Zoning law declared it illegal for blacks to occupy residences in white residential
zones and vice versa. Suit brought by Monk.
District court granted injunctive relief. Appeal of final judgment granting
injunctive relief.
Issue: Whether or not the zoning laws constitute a legitimate exercise of the
police power of the State or are unconstitutional.
Holding: Affirmed. The Fourteenth Amendment prevents State interference with
property rights save by due process of law and 'property is more than the mere
thing which a person owns,' it includes the right to use, acquire and dispose of it
and more specifically the right to residential occupancy for lawful purposes
without discriminatory restriction.

Euclid v. Ambler Realty Co., (1926)

Amber Realty Company (Appellee) challenged the enforcement of a zoning

ordinance on the ground that the enforcement would constitute an unconstitutional
taking by devaluing his land.
Trial court ruled that the ordinance was unconstitutional.
Issue: Is the ordinance constitutional?
Holding: Reversed. he decision of the lower court is reversed.
The ordinance must find its justification in some aspect of the police power,
asserted for the public welfare. The line, which separates the legitimate from the
illegitimate exercise of power is not capable of precise demarcation. The court
will use the doctrine of nuisance to determine if the zoning ordinance is
legitimate. Since the apartment houses are parasitic in nature, the Appellant was
within its rights to exclude them from residential, single-family homes. The
desirability of a neighborhood is, in the courts opinion, greatly diminished by
apartment houses.

City of Edmonds v. Oxford House (1995)

Oxford House, opened a group home for 10-12 adults recovering from drug or
alcohol addiction. The City of Edmonds, promulgated a definition of family, for
purposes of single- family zoning. The definition only allowed fewer than 5
unrelated persons to live together, while any number of related persons could live
together. Oxford House charged the city with failing to give reasonable
accommodation under the Fair Housing Act (FHA). Edmons sought a declaration
that FHA did not apply to the citys zoning code.
Trial court found for Edmonds. Appeals court reversed.
Issue: Does the ordinance fall within FHA exemption?
Holding: Affirmed. The code provision governed family living and had been
enacted to foster the family character of a neighborhood rather than the living
space per occupant. Particularly, since an unlimited number of related persons
could live together under the Code, it was not enacted to set a maximum
occupancy.
TOOLS FOR ZONING FLEXIBILITY
37.01 A Modern Approach to Zoning [603-604]
The Standard State Zoning Enabling Act recognized three devices that would add
flexibility to zoning: the zoning amendment, the variance, and the special exception.
Today these devices are used quite frequently. In addition, two newer layers have been
added to this historic foundation: novel forms of zoning and the subdivision regulation
process.
37.02 Zoning Amendments [605-609]
[A]

Basics

A zoning ordinance may be modified by a zoning amendment adopted by a city council or

other local governmental entity. Traditionally, such an amendment is viewed as
legislative action, just like the adoption of the initial zoning ordinance. Accordingly, it
will withstand due process and equal protection attack unless it is clearly arbitrary and
unreasonable, having no substantial relation to the public health, safety, morals, or
general welfare.
[B]

Spot Zoning and Other Restrictions

Because of the danger that the zoning amendment process might be abused to favor
particular owners, however, almost all states impose additional restrictions on rezoning.
Most jurisdictions will invalidate such an amendment if it constitutes spot zoning:
rezoning that confers a special benefit on a small parcel of land regardless of the public

interest or the comprehensive plan. A few states allow rezoning only to correct an
original zoning mistake or if neighborhood conditions have fundamentally changed.
Others treat rezoning as quasi-judicial action, subject to a more rigorous standard of
judicial review.
37.03 Variances [610-613]
A variance is an authorized deviation from strict enforcement of the zoning ordinance in
a particular case due to special hardship. The Standard State Zoning Enabling Act
empowered the local zoning board to grant in specific cases such variance from the
terms of the ordinance as will not be contrary to the public interest where, owing to
special conditions, a literal enforcement of the provisions of the ordinance will result in
unnecessary hardship, and the spirit of the ordinance will be observed and substantial
justice done. Most states still use this standard or one similar to it. Courts generally
define hardship to mean that the owner cannot receive a reasonable return under the
existing zoning due to some special characteristic of the property (e.g., irregular lot size)
that is not shared by other parcels in the district.
37.04 Special Exceptions (aka Conditional or Special Uses) [613-615]
The special exception is a use that is authorized by the zoning ordinance if specified
conditions are met. The zoning board reviews applications for special exceptions on a
case-by-case basis to ensure that the conditions are satisfied.
37.05 New Zoning Tools [615-617]
A number of new zoning tools have emerged in recent years. For example, under
conditional zoning the city or other zoning entity states the conditions that must be met
before a particular parcel will be rezoned, but does not legally bind itself to rezone the
land; the developer unilaterally satisfies the conditions and presumably receives approval.
Another technique is the floating zone, where the zoning entity approves the creation of a
new zoning district with particular characteristics, but does not specify its location; a
developer can then apply for rezoning to attach the floating zone to her property.
37.06 The Subdivision Process [617-618]
A subdivision is the legally-recognized division of one parcel of land into multiple
parcels. Subdivision approval is required for almost all residential housing tracts and for
some commercial developments as well. In many jurisdictions, the city or other zoning
entity is required to approve any subdivision application that meets the minimum
standards imposed by local ordinances; in others, the zoning entity has discretion to deny
the application if required by the public, health, safety, or welfare.

Chapter 38
MODERN ZONING CONTROVERSIES
38.01 The Transformation of Zoning [619-621]
The nature of zoning has evolved over time to serve new goals, including protecting
property values, preserving neighborhood character, preventing environmental
degradation, enhancing the property tax base, and encouraging economic development.
This process, in turn, has generated extensive litigation.
38.02 Zoning and the Constitutional Framework [621-623]
The federal Constitution is the ultimate constraint on the zoning power. Zoning
challenges most frequently involve the Equal Protection, Due Process, and Takings
Clauses, plus the First Amendment protection for freedom of speech. Because state
constitutions usually include provisions that parallel the Constitutionand the supreme
court of each state has the ultimate authority to interpret its state constitutionzoning
challenges are sometimes premised on a state constitutional ground.
38.03 Family Zoning [623-628]
[A]

Village of Belle Terre v. Boraas

The Supreme Court upheld family zoning against due process and equal protection
challenges in Village of Belle Terre v. Boraas, 416 U.S. 1 (1974). The ordinance
permitted only one-family dwellings, and defined family such that no more than two
unrelated persons could inhabit the same home. The Court found that the ordinance was
merely social and economic regulation that should be reviewed under the traditional
deferential standard accorded to zoning. The ordinance easily met this test because it
reduced the traffic, parking, noise, and other urban problems caused by group living
arrangements, and thus was rationally related to public health, safety, and welfare.
[B]

Moore v. City of East Cleveland

Three years later, the Supreme Court addressed a related issue in Moore v. City of East
Cleveland, 431 U.S. 494 (1977). The ordinance at issue defined the term family so
narrowly that certain blood relatives were excluded. A divided Court struck down the
ordinance because it directly interfered with the sanctity of the family, while Belle Terre
involved unrelated persons.
38.05 Aesthetic Zoning [634-636]
Today most courts recognize that land use controls based on aesthetics are valid. One
widespread form of aesthetic zoning is the architectural design review ordinance. The
usual ordinance establishes an administrative board that evaluates the design of proposed

single-family homes and other structures in light of specified criteria.

38.06 Growth Control and Zoning [636-637]
Local ordinances that restrict the rate of growth are generally upheld against due process
and equal protection attacks. Because such ordinances mitigate the impacts of
uncontrolled growth on traffic, noise, parking, public services, and other potential
problems, they are rationally related to the traditional police power goals of public health,
safety, and welfare.
Chapter 39
EMINENT DOMAIN
Federal, state, and local governments have the inherent power to take private property for
public use over the owners objection, through a process known as eminent domain.
Attempts in recent decades to expand the eminent domain power to new arenas such as
urban renewal and commercial development have sparked controversy.
Under the modern view, whether a public purpose exists is defined by the purpose
underlying the government action. As long as the property is taken for a legitimate public
purposeone within the scope of the police powerthe public use requirement is
satisfied.
In Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984), the Supreme Court
interpreted the public use test to allow Hawaii to condemn property from a landlord and
then convey it to the tenant. The Court explained that its review was limited to
determining if the legislature rationally could have believed that the condemnation would
serve a permissible public purpose. Fee simple ownership of land in Hawaii was highly
concentrated in a few owners. Thus, the statute merely regulated an oligopoly to reduce
its social and economic evils, which the Court viewed as a classic exercise of the police
power.
40.03 The Pennsylvania Coal Co. v. Mahon Revolution and Its Aftermath: 19221978 [656-660]
The Supreme Courts decision in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922)
is recognized as the birthplace of the regulatory takings doctrine. There, Pennsylvania
adopted a statute that prohibited the mining of coal under residential areas in a manner
that caused the subsidence of any dwelling. In effect, this required that pillars of coal be
left in place underground to support the land surface; prior Pennsylvania law had
recognized that such pillars were an estate in land (a support estate) separate from the
rights in removable coal. The Court found that the statute took the coal companys entire
support estateso the extent of the taking was greatand that this was not justified by

the public interest. Because the statute made it illegal to mine the pillars, this had very
nearly the same effect for constitutional purposes as appropriating the coal. The Court
struck down the statute as an unconstitutional taking.
40.05 Basic Modern Standard for Regulatory Takings: Penn Central
Transportation Co. v. New York City [662-666]
The basic standard used to resolve most regulatory takings cases today is found in Penn
Central Transportation Co. v. New York City, 438 U.S. 104 (1978). There, the Supreme
Court characterized its past takings decisions as essentially ad hoc, factual inquiries. It
then proceeded to create a balancing test for determining when a regulation constituted a
taking. The factors were: (1) [t]he economic impact of the regulation on the claimant,
(2) particularly, the extent to which the regulation has interfered with distinct,
investment-back expectations, and (3) the character of the governmental action.
40.07 Special Rule for Loss of All Economically Beneficial or Productive Use:
Lucas v. South Carolina Coastal Council (1992) [669-673]
The Supreme Court carved out another special rule in Lucas v. South Carolina Coastal
Council, 505 U.S. 1003 (1992). There, a South Carolina statute prohibited construction
on plaintiffs oceanfront lots, as part of the states program (among other things) to
protect life and property from hurricane risks. Under the Courts test, a regulation that
denies the landowner all economically beneficial or productive use of his land is a taking
unless the regulation is justified by background principles of the states law of property
and nuisance. Finding that the statute had taken all value from plaintiffs land, the Court
remanded the case so that a state court could determine whether the statute was justified
under prior property or nuisance law.
United States v. Willow River Power Co. (1945)

Facts: Defendant had previously been paid $25,000 by Court of Claims as

compensation for the impaired efficiency of their power plant on the St. Croix
River. United States had previously raised the water level.
Dams and mills had previously been built on the St. Croix River. The land and
appurtenant rights to the river were obtained by the defendant, who then built
hydroelectric power plants.
Loss of power was the only basis for the award given. No flooding or injuries
were sustained, that were reported. Water level was above previously established
high water marks but only nominal damage was reported.
Issue: Was the damage the result of taking private property?
Holding: Property rights were not infringed and the reward must be reverse.
The court acknowledges that the water could have economic value. But economic
interest does not equal property rights. Willows assertion that economic interest

equals property rights is one that has not been seen by the Court.
The court relied on a previous case, United States v. Cress, which stated that
unobstructed water flow was part of the land. The court was of the opinion that
Cress was not material because water flow was not unobstructed. The court also
cited United States v. Chandler-Dunbar Co, which involved the argument that
water power inherent in a navigable stream due to its fall in passing riparian
lands belongs to the shore owner as an appurtenant to his lands. In Chandler, the
court ruled that water flow was an interest but was not protected when it
conflicted with government plans for the betterment of the community.
Kelo v. City of New London (2005)

City wished to build research facility, attempted to purchase land from owners.
Petitioners refused and city exercised eminent domain power. Petitioners brought
suit to prevent seizing of property.
Trial court granted injunctive relief to some petitioners. Connecticut Supreme
Court reversed, allowing all seizing.
What is the standard to determine whether seizing of property is for public use? Is
the citys proposed purpose for public use, within the meanings of the takings
clause?
Affirmed. Though the city could not take petitioners' land simply to confer a
private benefit on a particular private party, the takings at issue here would be
executed pursuant to a carefully considered development plan, which was not
adopted "to benefit a particular class of identifiable individuals. Moreover, while
the city is not planning to open the condemned land--at least not in its entirety--to
use by the general public, this "Court long ago rejected any literal requirement
that condemned property be put into use for the . . . public." Rather, it has
embraced the broader and more natural interpretation of public use as "public
purpose." Without exception, the Court has defined that concept broadly,
reflecting its longstanding policy of deference to legislative judgments as to what
public needs justify the use of the takings power.
Land at issue is depressed and city has formulated a plan to increase jobs.
Petitioners' proposal that the Court adopt a new bright-line rule that economic
development does not qualify as a public use is supported by neither precedent
nor logic. Promoting economic development is a traditional and long-accepted
governmental function, and there is no principled way of distinguishing it from
the other public purposes the Court has recognized.

Pennsylvania Coal Co. v. Mahon (1922)

Parties entered into contract to allow mining of coal on plaintiffs property. Coal
was discovered underground but the digging would have to go under the
plaintiffs house, which would necessitate removing supports. The deed conveys
the surface but reserves the right to remove all the coal under the surface. Kohler
Act prohibits taking of coal in such a way to endanger human habitation, with
exceptions. Plaintiff filed suit for injunctive relief.
Trial court dismissed Mahons request for injunctive relief. Pennsylvania
Supreme Court reversed, ruling that Kohler act was a legitimate exercise of the
states police power.
Issue: Whether the Kohler act was a legitimate exercise of police power?
Holding: Reversed Plymouth Coal Co. v. Pennsylvania, held it competent for the
legislature to require a barrier sufficient for the safety of the employees. But that
was a requirement for the safety of employees invited into the mine, and secured
an average reciprocity of advantage that has been recognized as a justification of
various laws.
The rights of the public in a street purchased or laid out by eminent domain are
those that it has paid for. If in any case its representatives have been so short
sighted as to acquire only surface rights without the right of support, we see no
more authority for supplying the latter without compensation than there was for
taking the right of way in the first place and refusing to pay for it because the
public wanted it very much. The protection of private property in the Fifth
Amendment presupposes that it is wanted for public use, but provides that it shall
not be taken for such use without compensation. When this seemingly absolute
protection is found to be qualified by the police power, the natural tendency of
human nature is to extend the qualification more and more until at last private
property disappears. But that cannot be accomplished in this way under the
Constitution of the United States.

Lucas v. South Carolina Coastal Council (1992)

The landowner purchased two residential lots on which he intended to build

homes. In 1988, State enacted the Beachfront Management Act, S. C. Code Ann.
48-39-250 et seq., which barred the landowner from erecting any permanent
habitable structures on his two parcels. A state trial court found that this
prohibition rendered the landowner's parcels valueless. Lucas filed suit for
compensation.
Trial court found for plaintiff. State Supreme Court reversed. Cert granted.
Issue: Whether the bill accomplished a taking of private property under the 5th
and 14th amendments?
Reversed. Where the State seeks to sustain regulation that deprives land of all
economically beneficial use, it may resist compensation only if the logically
antecedent inquiry into the nature of the owners estate shows that the proscribed
use interested were not part of his title to being with. The notion that title is

somehow held subject to the "implied limitation" that the State may subsequently
eliminate all economically valuable use is inconsistent with the historical compact
recorded in the Takings Clause that has become part of our constitutional culture.
The Takings Clause does not require compensation when an owner is barred from
putting land to a use that is proscribed by those "existing rules or understandings"
is surely unexceptional. When, however, a regulation that declares "off-limits" all
economically productive or beneficial uses of land goes beyond what the relevant
background principles would dictate, compensation must be paid to sustain it.
THE FEDERAL GOVERNMENT AND PRIVATE PROPERTY
The Founding Fathers upheld the economic view of property. The state and federal
governments were the mere contractual agents of the people, not sovereign lords over
them. All rights, not specifically delegated to the government, remained with the people
including the common-law provisions of private property. Consequently, the
constitutional rights regarding free speech, freedom of religion, the right of assembly, and
private property rights are all claims that individuals may hold and exercise against the
government itself.
The British common law has established the legal limits to property rights through case
precedents, reflecting the practical needs of trade long before the North American
colonies even existed. The common law provided a clear picture of ownership to the
Founding Fathers. If one uses his possessions to create a health hazard or nuisance to
others, he is fully liable for damages. The very boundaries of private property are defined
by common law liabilities. After many case precedents the common law courts begin to
sharply define the boundaries of private property. Owners may then negotiate, mutually
reaching an arrangement, without going to battle in court over a legal ambiguity or
seeking a new statute.
Heart of Atlanta Motel, Inc. v. United States (1964)

Heart of Atlanta Motel had 216 rooms available to guests and had historically
rented rooms only to whites. Appellant solicits business from outside the State of
Georgia through advertising in national travel magazines and other media.
Approximately 70% of its guests are from outside the state. Plaintiff brought suit,
arguing a violation of Thirteen Amendment rights and Congressional overreach
based on the commerce clause.
District Court found for Defendant. Circuit Court of Appeals affirmed.
Issue: Did Congress have the power to prohibit racial discrimination in private
businesses?
Holding: Affirmed. Court found no merit in the arguments pursuant to the
Thirteenth Amendment, finding it difficult to conceive that such an amendment

might be applicable in restraining civil rights legislation. Having observed that

75% of the Heart of Atlanta Motel's clientele came from out-of-state, and that it
was strategically located near Interstates 75 and 85 as well as two major Georgia
highways, the Court found that the business clearly affected interstate commerce.
Therefore, Congress may use the Commerce Clause to regulate the ability of
commercial institutions to deny service on the basis of race under its power to
regulate interstate commerce.
Katzenbach v. McClung (1964)

Ollies refused to serve Negroes. The restaurant was not close to a highway,
served mostly locals, and did not advertise out of state. However, 46% of its food
was purchased from a supplier who bought the food outside of the state. Plaintiff
sued in Northern District of Alabama to enjoin the enforcement of Title II of the
Civil Rights Act of 1964.
District court enjoined enforcement. Cert to Supreme Court
Issue: Can Ollies discriminate in violation of the Civil Rights Act because it was
not engaged in interstate commerce?
Holding: Reversed. In the aggregate, Ollies conduct could have a harmful effect
on interstate commerce. Furthermore, the Civil Rights Act of 1964 applied to
establishments when a substantial portion of their food supplies moved in
commerce.

Levitt & Sons, Inc. v. Division Against Discrimination (1960)

After separate and unsuccessful attempts were made by three African-Americans

to purchase homes from appellant development corporations, Levitt brought suit
challenging constitutionality of New Jersey Law Against Discrimination.
Trial court determined law was constitutional but dismissed complaints against
Levitt. Appeals court affirmed.
Issue: Whether the New Jersey law was constitutional? Does the law apply to
Levitt?
Holding: Affirmed with regards to constitutionality, remanded with instructions
to continue complaints against Levitt. Court held that the type of housing listed in
section 5(k) to be only illustrations of the meaning of the phrase being considered,
rather than an exhaustive enumeration. The reason for this conclusion lies in the
Legislature's use of the words "shall include." Because Levitt received state funds,
it falls under the law.

Jones v. Mayer (1968)

Petitioner attempted to buy a home and the Respondent refused to sell. Jones
brought legal action, arguing refusal was on basis of race.

The District Court ruled in favor of Respondents motion to dismiss the case.
Circuit court affirmed.
Issue: Does 1982 affect discrimination in private subdivision housing?
Holding: Reversed. Section 1982 bars all racial discrimination, private as well as
public, in the sale or rental of property. In order to do what it purports to do, this
regulation, must encompass every racially motivated refusal to sell or rent, and
cannot be confined to officially sanctioned segregation in housing. It is the view
of the Court that, through examination of the legislative history in this case,
Congress meant exactly what it said in enacting this statute.
The statute is a valid exercise of the power of Congress to enforce the Thirteenth
Amendment. If Congress has power under the Thirteenth Amendment to eradicate
conditions that prevent African-Americans from buying and renting property
because their race or color, then no federal statute calculated to achieve that
objective can be thought to exceed the constitutional power of Congress simply
because it reaches beyond state action to regulate the conduct of private
individuals. The Court concludes that the Thirteenth Amendment, through its
enabling clause, allows Congress the power to create such a statute

STATUTE OF FRAUDS
Certain agreements must satisfy the statute of frauds, which requires the agreement
to:
1.
2.
3.
4.

be memorialized in a writing or record;

be signed by or on behalf of the party against whom enforcement is sought;
indicate that a contract has been made between the parties;
state with reasonable certainty the essential terms of the unperformed promises, in
the case of non-goods contracts;
5. specify the term of quantity, in the case of contracts for the sale of goods. UCC
2-201 specifically states that "a record is not insufficient because it omits or
incorrectly states a term agreed upon but the contract is not enforceable . . .
beyond the quantity of goods shown in the record."
The following types of agreements fall within the statute of frauds:
1. Agreements that by its terms cannot be performed within a year from the making
of the contract The statute of frauds only applies if the contract specifically
precludes performance within one year, not merely if performance would appear
impossible to complete within one year of the making of the contract. (see
6.04[3] for an exception to this writing requirement)

2. Promise to answer for the debt, default or miscarriage of another A promise by a

surety or guarantor to a creditor to pay the debt or perform the obligation of a
principal debtor must be in writing where the creditor has reason to know of the
surety/guarantor relationship. Many states likewise require a writing to
memorialize a promise by an executor or other personal representatives to pay the
obligations of the estate which they represent with their own funds. This
requirement does not apply when the promise merely involves payment of
another's debts with funds that belong to the debtor or which the promisor holds
for the purpose of paying the debtor's obligations.
3. Agreements made upon consideration of marriage, other than mutual promises to
marry, e.g., to provide a dowry or child support.
4. Agreements for the sale of land and for an interest in land (see 6.04[2] for an
exception)
5. Agreements for the lease of real property for longer than one year
6. Agreement by a purchaser of real property to pay an indebtedness secured by a
mortgage or deed of trust upon the property, unless assumption of the
indebtedness by the purchaser is specifically provided for in the conveyance of
the property.
7. Contracts for the sale of goods for the price of $500 or more [UCC 2-201];
under the proposed revision, the price threshold is raised to $5,000 (see 6.04[1]
for an exception)
8. Contracts for sale of other personal property e.g, intellectual property, royalties
in the amount or value exceeding $5,000 [UCC 1-206]
9. Leases of goods in the total amount of $1,000 or more [UCC 2A-201]
10. Agreements which creates a security interest in personal property if it is not in
possession of the secured party, and agreements for the assignment of contract
rights [UCC 9-203(1)(a)]
Other types of agreements upon which different states have imposed a writing
requirement include:
1. agreements that by its terms cannot be performed during the lifetime of the
promisor;
2. agreements by which a principal appoints an agent to execute a contract which is
itself within a provision of the statute of frauds ("equal dignities" rule)
3. promises to pay debts, the enforcement of which was barred by the statute of
limitations
4. promises to pay debts discharged in bankruptcy
5. to pay a commission to a real estate agent
Signature
An agreement that falls within the statute of frauds must be signed by or on behalf of the
party against whom enforcement is sought. An agreement may consist of several writings
or records and only one need be signed if the circumstances clearly indicate that the
various writings relate to the same transaction.

A signature may include any mark or symbol with which the signer intends to
authenticate writing. The signature may be written, printed, stamped, engraved, or
otherwise marked on the writing. Signatures may include initials, imprinted signatures,
letterhead, and firm logos.
Avoidance of the Writing Requirement
Contracts for the sale of goods that fall within the statute of frauds may be enforced,
at least partially, in the absence of a writing, in the following circumstances:
1. where payment has been made and accepted or the goods have been received and
accepted Such partial performance makes only the portion performed and
accepted enforceable, not the oral contract in its entirety.
2. in a contract for specially manufactured goods where the seller cannot sell such
goods to third parties in the normal course of his business, once the seller has
made a substantial beginning in manufacturing or procurement of such goods,
provided that the seller can establish that the goods were intended for the buyer.
3. where the party against whom enforcement is sought admits in a pleading,
testimony or otherwise under oath that a contract was made but the contract is
only enforceable up to the quantity of goods admitted. [UCC 2-201(3)(c)]
Contracts for the Sale of Real Estate
Despite failure to satisfy the statute of frauds, a contract for the sale of real property will
be enforceable if the buyer has taken possession and has made permanent improvements
upon it. The extent of the improvements made that will justify enforcement varies from
jurisdiction to jurisdiction. [See Restatement 129, comment a]
Contracts That Cannot be Completed Within One Year
In a contract which cannot by its terms be completed within one year, lack of a writing
will not preclude enforcement once full performance has been completed.
Equitable Estoppel
Where the promisor makes a representation pertaining to the writing and the party
seeking to enforce the contract relied to his detriment upon such representation e.g.,
that the writing has been executed, that the statute of frauds will not be raised as a
defense to the enforcement, or that the statute of frauds does not apply to the transaction
in question the promisor may be estopped from raising the lack of writing as a bar to
enforcement.
Promissory Estoppel

A non-goods contract that fails to satisfy the statute of frauds may nevertheless be
enforceable if the promisor's promise foreseeably induces action or forbearance on the
part of the promisee or a third person and enforcement is the only means of avoiding an
injustice. [Restatement 139] Mere reliance on the oral contract itself is generally not
enough to justify estoppel; most cases require some additional statement or promise.
Some courts have refused to apply promissory estoppel to cases involving goods
contracts because UCC 2-201(3), which enumerates the circumstances under which the
writing requirement may be avoided, does not include estoppel. However, section 1-103,
which applies to all commercial transactions, indicates that principles of law and equity,
including estoppel, are to supplement the specific provisions.