Document Sample
					             Nature and Meaning of
                 Property-- #9
• Class 9, Sept. 9 -- Chapter 4
• Homework #2 returned & comments.
• Quiz #3--critique
•   Recitation:
•   Cases         Students
•   Stoltzfus - Nathan Fleck; (holding) Luke Harrison
•   Adams - Chris Geswein; (holding) Ryan Holtkamp
•   Jackson - Gretchen Humphrey, (holding) Joshua
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        Quiz #3 -- True or False
• 1. Farm operators with less
   than 10 employees are           • 4. Farmers don’t withhold
   generally exempt from OSHA        federal income taxes from
   inspections.                      independent contractors.

• 2. We can consider               • 5. At least in Indiana, a “tort
   workman’s compensation law        lawyer” would rather avoid
   among the tort-liability          workman's comp recovery
   avoidance or reduction            for his injured client, and
   statutes in Indiana.              recover under common law
                                     tort rules.
• 3. It is legal for a farmer to
  allow his or her 15 year old
  child to drive a 100 pto
  horsepower tractor.
    Homework #2 Comments.
• Parol evidence rule not applicable. This
  rule says, generally, what is written
  overrides what was discussed, but not in
  the document.
• Not promissory estoppel either. This
  applies when a party is stopped from
  performing because the other party has
  made important steps when he or she
  thought there was a deal.
• Not partial performance either. ??
• UCC does not apply to real estate, but it
  applies to the tractor deal.
     Homework #2 -- Comments.

• Most everyone agreed there was a legally
  enforceable deal for the tractor due to the
  “mail box” rule.
• Ah, but maybe the sale of the land should be
  tied to the tractor deal. ??
• The deal for the land is another matter.
• Could it be that it matters whether it is the
  “buyer” or the seller that backs out?
    Homework #2 -- Comments.
• While this buyer may have implied he had the
  money ($380,000 cash), usually a land deal
  is subject to available financing.
 – So that is an out for the buyer.
 – He thought the price was right, but his lender
   may have disagreed.
• “When does the land buyer get out of a
• This may be an interesting topic for a
  research paper.
 What is Great about America?
• What would you say to grades K-3 on
  Sept. 11?
 Property -- An Introduction

• Law is critical to the definition of
• Without laws, there may be no
   property rights, but
• the law limits ones rights in property, and defines
  responsibilities of property owners.
        Real or Personal Property?

• Real property is land, things fixed to the land and
 other things appurtenant to the land (easement), e.g.,
   – land, rights to go over the land (easements)
   – buildings
   – fences
• Personal property is all that is not real estate, e.g.,
   – Tangible items:
      • equipment, machinery
      • livestock, crop inventory …
   – Intangibles:
   Property Distinction Issues

• When does what was personal property
  become real estate?
  – In the case of a sale, specify in the sales
    contract what goes with the land.
• What about growing crops?
  – Part of the land: trees, bushes or grass
  – Annually planted crops: corn, wheat, soybeans,
    vegetables are considered personal property.
Stoltzfus v. Covington County
    • D.Ct. of Appeal of Fl, ‘63, 154 So. 2d 866
    • Action:
    • Issue:

    • Facts:

• Action: Conversion? And injunction to keep
  Gillis off property?
• Facts: Gillis farmed land in ‘61 and ‘62 that he
  tried to buy from Stoltzfuz, but failed to make
  a second payment in 1962.
• Bell bought this farm at a foreclosure sale.

• Bell filed suit to prevent Gillis from removing crops,
  fencing, and asked that he return harvested corn.

• A lower court allowed Gillis to keep the corn and
  to enter to harvest beans and hay, but enjoined
  (order to not) him from harvesting the balance of
  the corn crop.
• Issue: Are annually produced crops part of the
    realty or are they personal property?
• Holding: The crops in dispute were personal
   property (fructus industriales) and not
  (fructus naturales)
   – Gillis as the farmer (like a tenant) would be entitled to
    his crop (or share).
   – Therefore the crops did not belong to the real estate
    mortgagee (i.e., bank).
   – Orders were rendered in favor of Gillis accordingly
• Law/Rule: What is grown annually is personalty,
  and what is not such as timber, fruit trees, sod are
  not, and go with the real estate.
  History of Real Property Rights
• U.S. law has its base in the feudal system of
  England developed after the Norman
  Conquest of 1066.
• Ownership and control was in a pyramid.
  – A king or the Church was at the top.
  – Tracts were granted to friends or allies.
     • “military tenure”
     • Holders of the land supplied soldiers to the
     • A tiller of the soil was at the bottom with few
 History of Real Property Rights

• Leasehold and Freehold estates
• Leasehold is the use of land for a limited
  period of time.
• Freehold:
• fee simple estate, the highest type of
  ownership which is inheritable and
  transferable and divisible into many other
  lesser estates.
       Fee Simple Estate

• Full ownership
• Estates are presumed in “fee” unless they
  are specifically limited such as a life estate
• Transferable by gift, sale, or by
  devise or inheritance,
• Potentially of infinite duration with
  respect to ones heirs or devices.
History of Real Property Rights

• Life estate
• rights similar to the fee estate holder-- use
  it, rent it, pay the taxes, maintain it, …
• but, the rights vanish with death as well as
  the rights of a “stand-in” tenant in common
  law (Indiana).
Life Estates and Remainders

• A life estate may be transferred, gifted
  or sold, but
• The life tenant cannot devise (by will)
  nor can it be inherited—interest ends at
   Life Estates and Remainders

• Life tenant must leave the property “as he or
  she received it!”
• Life estates are often provided for surviving
• to insure income, and perhaps a place to
  live (and for other relatives or “companions.”
• Usually with the remainder designated to
  children (or the grandchildren)
• Problems, problems, problems!
 Adams v. Adams, Ct. of Appeals
            of Ky., ‘63, 371 S.W. 2d 637

• Action:

• Issue:

• Facts:
• Action: By nephews for right under the will to
    operate the farm, for conversion of the timber, and to
    have the court set a “fair” rent.
•   Facts: In ‘51 Adams died, and left an estate in a 400-
    acre farm to his surviving spouse for life or until she
•   with a power in his nephews to operate the farm
•   a succeeding life estate in the nephews with their
    issue as the remaindermen.
•   LT, pl., Adams, collected rent and paid the owners
    expenses (taxes, insurance, and repairs)
•   LT also sold off timber from the land.

• Holding:

• Law:
• Issue: What are the rights and duties of the LT relative
  to the nephews and their issue (remaindermen)?
• Applicable Law: The LT must pay the owner’s
  expenses and preserve the estate as found (devised or
  given) for the remaindermen.
• Holding: LT must pay the taxes, and maintain the
  property and cannot shift those expenses.
   – A rent set by the chancellor of $4,200 is not
   – By Ky Statute LT is liable in treble damages for the
      timber removed without permission or accounting.
   Problems with life estates!
• Maintenance of the property and “proper” rental
• Insurance coverages on facilities
   – No common law duty to insure!
   – And life tenants are not responsible for acts of
     nature nor those of third parties
   – Who should be the insured parties?
• Improvements -- Businesses need to respond to
  opportunities and “good investments” e.g., Govn’t program
  options, say CRP
• Dealing with third parties such as in eminent
  domain situations.
    Real Estate Co-ownership --
       Tenancy in common
• Each co-tenant owns an undivided interest in the
  whole property interest.
• Each tenant’s interest may be sold or mortgaged.
• At death, a tenant’s interest passes by will or by
  intestacy (law of descent) as inheritance.
• Individual co-tenants may “make deals”
   – Without a “vote”
   – But, required to account to the other tenant(s)
   – Right to partition prevails
      • One co-tenant may force a sale!!
   Real Estate Co-ownership --
      Tenancy in common
• TIC is a typical way that sisters and brothers
  and others take from a decedent.
• Given the above, is there a better way?
• Sisters and brothers often are “at odds!”
• Better ways or additional tools:
   – always use “buy- sell agreements” (Restrictive
    Transfer Arrangements)
  – Use a trust with “built in features,” such as
      Real Estate Co-ownership --
             Joint tenancy
• Created by “magic words” of conveyance
• Presumption is against joint tenancy
• Each tenant owns an undivided interest in the
• Each tenant’s interest may be sold or mortgaged.
• Upon a joint tenant’s death, his or her interest
  passes to the surviving tenant or tenants by
  process of law.
• Right to partition exists for ordinary joint tenancy.
• A typical form of ownership
   – for spouses
   – for older persons and their only child.
     Jackson v. O’Connell,S. Ct. of Ill,
             1961, 177 N.E. 194

• Action:
• Issue:
• Facts:
• Action: To determine the parties’ interests.
• Applicable law: Property law with respect to joint
  tenancy and tenancy in common.
• Facts: Neil devised properties to his three sisters,
  Nellie, Anna and Katherine as joint tenants
   – Nellie later quitclaimed (deeded) all her interest in
     the properties to Anna.
   – The next year Nellie died.
   – Later, Anna died, and by her will, she left
     “whatever interest she had in real estate to four
• Issue: What is the interest of the four nieces? Or
  what is the effect of Nellie’s deed to Anna?
• Holding:
• Defendant, Katherine, has 2/3s after Anna’s
  death. The 1/3 undivided interest devised to
  Anna in joint tenancy, goes by right of
  survivorship to Katherine at Anna’s death.
• Katherine has 2/3s of the properties, and
  the four nieces share 1/3, the share
  Nellie took out of the joint tenancy when
  he deeded it to Anna.
• Query: What fraction does each niece
  have and what is the co-ownership form
• Law/Rule:
• A joint tenant has a right to convey his or
  her interest which severs that interest
  from the other joint tenant(s),
• but the other joint tenants remain as such
  with respect to their original interests.
   Real Estate Co-ownership --
     Tenancy by the entirety
– In Indiana, tenants by the entirety is
  reserved for married (traditional)
    • No right to partition!
    • Right to survivorship, like ordinary
      joint tenants
– TBTE is the law in 19 states, including
  Real Estate Co-ownership --
            Community property
– All property acquired during marriage is
  owned equally by spouses, I.e., it is
  community property.
– Property acquired before marriage
  remains separate property.
– Gifts and inheritances are also separate
– Recognized in nine states and in Alaska
  by “election.”

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