PROPERTY SPRING 2003 I. COMMERCIAL REAL ESTATE TRANSACTIONS A. LAND SALE CONTRACTS: The sale of land is ordinarily a 2-step process: 1st a contract of sale is signed by the buyer and the seller. Then, after a couple of months of more, the closing takes place. At the closing the seller delivers a deed to the buyer, and the buyer hands the seller a check for the purchase price. This two step process is necessary because the buyer, after signing the contract buy before paying the purchase price, needs time to check out the seller’s title, arrange for financing and take steps to move into the premises. You will always have two things in writing – the contract and the deed. a. The Land Sale Contract i. It is a contract + special bilateral executory contract ii. It has: 1. Special statute of frauds (writing + minimum terms) 2. Remedy presumed – specific performance 3. Promises marketable title – implied or expressly 4. Immediate legal consequences in the form of equitable conversion. (as soon as the LSK is signed the buyer is treated as the owner and faces risk of loss). HICKEY v. GREEN (575) o Facts: This is a case of three different land transactions (Green and Hickey, Hickey and the buyer of his house, and Green and the 2nd purchaser). The first check between Hickey and Green was not valid under the Statute of Frauds because Hickey had not filled in the pay to line. Since Green didn’t sign or endorse the check it was not binding. The second two agreements were valid under the Statute of Frauds o Holding: Judge Cotter found an exception to the Statute of Frauds in the form of promissory estoppel and held that there was reasonable reliance by Hickey on the contract and that only through enforcing the contract would the parties be in the same condition as they would have been if the contract was carried out. Here since specific performance was possible Hickey just got the land – if it was not possible then he would have gotten compensatory damages as well. CA courts would NOT likely find the same way because they are more reluctant to pull things out of the Statute of frauds. b. Marketable title i. Definition: A title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person, one which such persons, guided by competent legal advice would be willing to take and for which they would be willing to pay fair value. ii. It is an implied condition of a contract of sale that the seller must convey to the buyer. It demonstrates that the seller has the full right to convey the land and they are conveying it without mortgages or encumbrances. No land will every be perfect with absolute ownership – so marketable title is effectively the best title you can get. iii. It is called marketable title because it is a title that a reasonable person would be willing to pay for. There is an implicit promise of a land sale contract. c. Hierarchy of title i. Clear record title – always marketable and better than marketable title ii. Marketable title – in the middle. It is not the best, but better than unmarketable insured title. iii. Insurable title – this is often not marketable and title companies will often insure land even when they have no clue if the title is good or not. iv. Quick Claim Deed – here there are no assurances of insurable or marketable title. LOHMEYER v. BOWER (580) o Facts: P entered into a contract with D to buy lot 37 of the Berkley Hills addition. A zoning violation made the contract invalid, and D volunteered to buy the necessary land around the property to eliminate the problem, but P refused and brought suit to rescind the contract and demand money back. There were two marketable title problems 1. to build two story houses only, and that the building must be set back. o Holding: The title was held unmarketable because the violations could subject Lohmeyer to litigation. The violation of the two ordinances exposes the party holding lot 37 to the hazard of litigation and makes such title doubtful and unmarketable. CONKLIN v. DAVI (584) o Facts: This is a case of whether title by adverse possession is marketable. P contracted to sell and convey to D a residential property. Purchasers refused to go through with the sale because they said there were defects in the title and misrepresentations on the part of the sellers. If there was dispute about the validity of the title the sellers could have brought an action to quiet title – but this would take longer than the time before the closing – so the buyer would be unsure of his title and that is not good. o Holding: The sellers could have quieted title, or believing the title to be marketable despite imperfections, enter into a contract for sale hoping to convince the buyer of the same. d. Clearing title i. This is the seller’s obligation to make sure that the title is good and clear before the closing and can be done through 1. Actions to quiet title (in rem, quasi in rem) 2. Purchasing the outstanding interest e. Remedies for breach of LSK i. Specific performance ii. Rarely – benefit of bargain damages iii. In CA – consequential and punitive damages f. Doctrine of Equitable Conversion i. When a LSK is signed land ownership changes AUTOMATICALLY by operation of law ii. Results: 1. Risk of physical loss on purchaser 2. Seller holds personal property and purchaser owns real property g. Merger i. After the deed is delivered, the seller has no continuing liabilities – their promises are satisfied in the LSK ii. CAVEAT EMPTOR – buyer beware – do not take the deed if you have doubts about it h. Buyers Protection Measures i. Required Disclosures ii. Warranties of quality i. Closing At closing the title passes if the deed is validly executed and delivered. Valid execution requires a writing signed by the grantor containing an adequate description of the parcel. Valid delivery requires intent by the grantor to immediately part with the legal control. When title passes the LSK is extinguished by merger into the deed. The only basis for suit by buyer after the title passes is an express covenant if any in the deed. There are six possible ones (Seisin, Right to convey, Against Encumbrances, Quiet Enjoyment, Warranty, Further Assurances) i. 4 Post Sale Liabilities 1. Collateral Obligations – ie fixing the roof 2. Disclosure Obligations – seller doesn’t disclose something they are required to 3. Warranty of Fitness – this applies so far only to builders and contractors. LEMPKE v. DAGENAIS – similar to implied warranty of habitability from Landlord-tenant law. 4. Title Warranties in Deed – these substitutes for marketable title promises are implicit in all LSK STAMBOVSKY v. ACKLEY (590) o Facts: P discovered that the house he had contracted to purchase was supposedly possessed by poltergeists and commenced the action to rescind the contract for sale. o Holding: Seller had a duty to disclose this to any potential buyer – it can’t be said that the house was being turned over empty either. The court does not apply caveat emptor here because even if P had done a little more investigation about the house it is not certain that this latent defect could be discovered. This case announces a requirement of the disclosure and the courts belief that sellers are bound to a duty of good faith and fair dealing when disclosing information about their homes. JOHNSON v. DAVIS (595) o Facts: The Davis’s entered into a contract to buy the Johnson’s home. The Johnson’s knew that the roof leaked, but said there were no problems with the house. After the Davis’s made a $31,000 deposit the Johnson’s vacated the home and after rain, the Davis’s saw the flooding and brought action for the recession of the contract and return of their deposit. o Holding: The affirmative representation that the roof was sound was dales representation and entitled the Davis’s to rescind. Shows that the trend is to restrict caveot emptor. The court rescinds the LSK and returns the deposit + interest. B. CONVEYANCING AND DEEDS A deed is just a piece of paper which is said to be a conveyance and not a contract. It is not about the price – the delivery of the deed transfers the title and the contents of the deed are a memorial of that transfer. It has a dual quality of bring a mode of transfer and a memorial of the transaction. Court WILL NOT add to the terms of the deed – even through parole evidence. Deeds are usually signed by the grantor and not the grantee. There are always three dates required: signed, delivered and received. a. Three Types of Deeds i. General Warranty Deed: warrants title against all defects by anyone ii. Special Warranty Deed: Warrants against the grantors own acts only iii. Quitclaim Deed: Contains no warranties of any kind. b. Classification of Deeds: i. By nature of title warranties, and extent of title warranties c. Present Title Warranties: i. Representations about the land title ii. Covenant of seisin ( I own and am in possession) iii. Covenant of the right to convey (I have the power to convey title) iv. Covenant against encumbrances (I have not encumbered the land title with interests less than a fee such as leases, servitudes, etc) FRIMBERGER v. ANZELLOTTI (620) o Facts: In 1978 D’s brother divided the lot into two and constructed homes on each half. In 1984 the land was transferred to D by quit claim deed. In 1985 D transferred property to P by warranty deed. When P sought to renovate the land he found out that he was violating the tidal land statute and then brought suit to seek damages for breach of warranty against encumbrances and misrepresentation o Holding: Defendant ends up winning because this is not an encumbrance. The title involved in marketable title is different than that involved in a covenant against encumbrances. Key – do an environmental study before accepting a deed like this because regulatory problems are not protected by the covenant against encumbrances d. Future Title Warranties – promises not to interfere in the future i. Covenant of warrant – will defend against superior title claims ii. Covenant of Quiet Enjoyment – no disturbance of possession by paramount title. This is identical to the covenant of general warranty and often excluded iii. Covenant for Further Assurance – will execute documents to assure and perfect the title conveyed. ROCKAFELLOR v. GRAY o FACTS: Doffing gave a mortgage to Gray, and title (subject to mortgage) to Rockefellor. Gray foreclosed, and the property was bought by Connelly (did not take possession). Connelly then gave a general warranty deed for $4000 to Dixon (no possession). Dixon gave a special warranty deed to Hansen and Gregerson (no possession). Rockefellor then asserts his paramount title. o HOLDING: Rockefellor is found to be the owner. The foreclosure sale was invalid and void, and the sheriff’s deed to Connelly should be vacated and set aside, and upon the cross-petition of Hansen & Gregerson entered judgment against Connelly on the covenant of seizing in his deed with interest. e. Patent Transfers i. Patent transfers are simple and are based on a nationwide federal registration system. ii. Two kinds of transfers: 1. Assignment: transfers all ownership of the patent 2. License – gives particular rights of usage DIAMOND SCIENTIFIC CO v. AMBICO, INC o Facts: Before leaving Diamond, Dr. Welter assigned all his patent rights to Diamond Scientific. Later his company then sued him for infringing upon their patent. f. Delivery of Deeds: i. Doctrine of Relation Back: When the grantor of a deed irrevocably delivers the deed into escrow this is constructive delivery to the grantee. Therefore, the date of the transfer of the title is counted as the date of the grantor’s delivery into escrow. g. Bad Deed: i. Forged and Stolen deeds are void. If you deliver a deed to the escrow agent and it gets stolen it can be recorded but it will not be effective. There are NO bona fide purchasers of a stolen deed. ii. Fraud – deeds procured by fraud that are delivered are voidable BUT NOT void. If it is voidable and you don’t do anything about it and the deed gets recorded you lose title to the property. A defrauded deed must be acted upon before a bona fide purchaser steps in and takes good title away from you. 1. It is important to know the date of delivery in these cases. SWEENY, ADMINISTRATIX v. SWEENY o Facts: The plaintiff is Maurice’s estranged wife and she wants all the property to go to her. He is trying to avoid probate and keep the property from his wife. So he deeded it to John with the condition that John’s death before Maurice would make deed one ineffective, but that deed was destroyed in a fire. The issue was whether that second deed was delivered. o Holding: The second deed was found to be delivered to Maurice – it is valid and effective. You can’t set up a transfer that will pass at ones death because that is a will and is invalid. He could have prevented this confusion by setting up either a trust or a joint tenancy with the right of survivorship in himself and John. CHILLEMI v. CHILLEMI (636) o Facts: In this case the husband left the deed with the wife and she recorded it – the court was willing to undue this thought because it was not something that was meant to be recorded. o Holding: Delivery is more about intent than about the location of a piece of paper ROSENGRANT v. ROSENGRANT o Facts: There are 6 nieces and nephews that claim the land should be divided among them but Jay says that the land should be his because his uncle wanted him to have it. There was a deed, and it was handed over and then given back and placed in a security box o Holding: This is not enough. The delivery was not valid because when you deliver the deed you must have the intent to transfer the interest at that moment. The uncle’s interest was not to transfer the property at that time and therefore the deed was not valid. h. Categories of Land Transfers i. Commercial – for consideration ii. Donative – without consideration 1. Gifts (inter vivos) 2. Wills (testamentary) iii. Transfers by operation of law: No consideration or donative intent. Often without paper at all. This includes imminent domain or adverse possession. C. FINANCING REAL ESTATE (MORTGAGES, SECURITY INTEREST IN LAND) a. Three main types: i. Mortgages – a bilateral arrangement between the mortgagor (borrower) and the mortgagee (lender) ii. Deeds of Trust – the most common kind of secured lending in CA. This is trilateral – you need a borrower, a lender, and a trustee of deed of trust iii. Installment Land Contracts b. How Security Interests Affect Land Title: i. Encumbrances: These are a contingent interests. ii. Detract from marketability iii. Security interests are valuable property in themselves iv. The land satisfies the debt if the debt is not paid. c. The Paper Trail: i. Note: A promise to repay the indebtedness. This is not a security interest ii. Security Agreement/Mortgage: This says if you don’t pay the loan the land is accountable for the debt. It personifies the land and is usually for very significant borrowing. d. Buying Land with a Mortgage on it: i. With an Assumption of the Mortgage: The security interest is on the land. You are not only accountable to having the land taken away if the mortgage is not paid, but you also agree to pay the bank back the money. If the interest rate in the original mortgage is low you would do well to take the property and assume the mortgage ii. Subject to the Mortgage: The security interest is on the land. Here you are not personally responsible for the repayment of the loan. You are better off taking land this way unless the interest rates have risen sharply. e. Foreclosure: This is usually for failure to repay a debt. It will satisfy all or part of the debt. i. Process: 1. Borrower defaults on the Note of Security Agreement 2. Creditor serves notice of default 3. Equitable right or redemption – you have the right to try to clean up your act and pay the money due. 4. Foreclosure sale – this closes the equitable right of redemption. 5. Statutory Right of redemption – This is not in all states – this says that even after the foreclosure sale the defaulting mortgagor can come back with the money and by the property back from the purchaser. If this exists in your state and you buy foreclosed property you may have to wait several years to see if they can come up with the money. MURPHEY v. FDIC o Facts: This was a foreclosure sale, but it was not a judicial one, but a sherrif’s sale. The sale was not well advertised and the bid on the property was only for what the debt was even though they knew that the property was worth more than that because they sold it the next day for more money. This means that the debtors couldn’t get that extra money that was over their debt back. o Holding: The borrower had the right to have their equity protected. The bank is accountable to the mortgagor and the mortgagee though good faith and fair dealing and as a matter of law. There are strong public policy reasons here. II. TITLE A. RECORDED LAND TITLES a. Recording Systems i. Title assurances – assurances of the best status of the property that you can get ii. Property Descriptions iii. Land records: Bona fide purchasers and Constructive/Record Notice GOAL = CERTAINTY ABOUT OWNERSHIP b. Six Tools of TITLE ASSURANCE i. Marketable promises in LSK ii. Title Searches iii. Warranties of Title in Deeds iv. Title Insurance v. Title Registration – if available – there are few states that have this practice. CA used to but does not anymore vi. Site Visit – go out and look at who and what are on the land. If you do all six you have a chance of getting good title to the land. c. Land Description – to have title you are going to need to have good land description i. Government Surveys – sections and quarter sections (township/ranges) ii. Metes and Bounds – this happens more on the East Coast although some property in CA has this as well. Here they take a monument and step the boundaries off in relation to that monument iii. Tract Indexes – lots and parcels. Must of the property in SF is based upon this. A city can have both metes and bounds, and tract indexes. d. Transfers of Land Ownership (title transfers) i. There are three important dates: 1. Execution of the deed 2. Delivery of the deed 3. Recording of the deed e. Title Searching: i. Grantee-Grantor Index: The point of this index is that you start with the grantees and search back through the grantors and then search forward through the grantees ii. Grantee Index: Goes backwards in time to see from whom your seller took title from. You want to go back to the ROOT OF TITLE – and depending upon the statute of limitation and the customs of the area in which you are doing the search this could be any length of time. iii. Grantor Index: This searches forward in time f. Bona Fide Purchaser i. A purchaser for consideration ($$$) who has no actual notice of competing earlier claims and no constructive notice of earlier competing claims (eg from land records) ii. A grantee for consideration can receive good title without encumbrances from a grantor who has not title or title subject to encumbrances. This is why with a fraudulently procured deed you can get a BFP to own the land. LUTHI v. EVANS o Facts: Kansas says that the oil and gas lease takes “ownership” to the oil and gas under the land. Owens assigned the same interest twice. The first assignment is from Owens to Tours which included a Mother Hubbard clause (a coverall) the second assignment was from Ownes to Burris and assigned him the Kufhaul lease. Issue becomes whether Burris was a BFP? o Holding: Yes, he was a BFP because he had no constructive notice from the land record. The court held that searching the Mother Hubbard clause was not part of the responsibilities of the title search and that although this leaves Tours at a disadvantage the court emphasizes that the duty should be on the owners to make sure that the descriptions and land records are accurate. ORR v. BYERS o Facts: There was a judgment lien against William Elliott which was written as William Elliot and indexed as William Elliot and William Eliot. o Holding: Here the court did not apply idem sonans – they hold that the spelling is material in determining whether the judgment lien is on the property. g. Recording Acts: The key for exams is to be able to recognize what type of recording act it is and what is required of the BFP. You want to be able to determine who has a better claim to the land. To qualify as the BFP will mean different things under different statutes. h. Types of Recording Statutes: i. Race: Here you want to get the deed registered 1st. ii. Notice: To be a BFP you just must NOT know of previous transactions and that you are the last purchaser iii. Race-notice: Here to be BFP you need to have recorded 1st and no have known about prior purchasers through constructive or actual notice. CA is known for this. i. Chain of Record Title: i. INFORM: inform prospective purchasers about potential competing claims ii. LIMIT: limit what prospective purchasers and title searchers have to work about if they do accept the deed at closing. iii. WILD DEED: this is a recorded deed that is not findable. MESSERSMITH v. SMITH o Facts: For timeline see notes 2/20. This is a statutory action to quiet title to land. There were two deeds. The first had an error in it and so Herbert ripped it up and made a new identical deed. The dispute is over whether that deed is valid. o Holding: The deed was not sufficient to create constructive notice in the records. The court says that because the Caroline to Smith deed was a “recorded unrecordable deed” Smith has nothing to deed to Seale and therefore Fredrick’s deed is better BOARD OF EDUCATION of MINNEAPOLIS v. HUGHES (696) o Facts: Hoergar sold the same piece of property twice. The Board of Education ends up with a wild deed where there is no way of searching the record to find the problems. This dispute is whether the first purchaser, Hughes, or the second, Duryea and Wilson (who sold to P) have the better title. o Holding: Deed became operative after Hughes filled in his name, and since that was after D&W got the property, Hughes became a subsequent purchaser who recorded first and therefore had better title. GUILLETTE v. DALY DRY WALL (699) o Facts: The recorded deed in the lot of a subdivision refers to a recorded plan which contains restrictions “imposed for the benefit of other lots.” A later deed from the same grantor refers to the same plan, but not the same restrictions. The grantee took the property without notice of the restrictions and claims that he is not bound to them because they were not in the deed or its chain of title o Holding: D should have looked at the referenced restrictions before purchasing the property. If he had done a property search he would have found all Gilmore’s other deeds which included the restrictions. If you are dealing with a common grantor you must search every deed out to see if there are mutual restrictions upon your lot. j. BFP Rules from Recording Acts i. Protection is available for both the BFP or a purchaser from a BFP under the Shelter Rule (686) k. Between the Grantor and the Grantee of the deed i. BFP rules do not apply. Grantee does not need to record, or even be in good faith to prevail over the Grantor DANIELS v. ANDERSON o Facts: Daniels contracted to buy two lots from Jacula along with the option that if an adjacent lot became available they would have the right of first refusal to it. The contract of sale (where this agreement was located) was not recorded and the deed did not mention it. The Jacula’s contracted with the Zografos to buy a piece of adjacent property for $60,000. The Daniels had not been notified. Before they made their final payment, the Zografos were notified of the condition and the Daniels sought specific performance of the preemptive option o Holding: The court applies the pro tanto rule and ordered the Zografo’s to convey the land to the Daniels and the Daniels to pay the Zografo’s the full purchase price. Because the Daniel’s had put the Zografo’s on actual notice – they had the right to take the deed from them. LEWIS v. SUPERIOR COURT o Facts: The Lewis’s contracted to buy a residence from the Shipleys, but before they acquired title Fontana Films recorded a lis pendens against Shipley. It was recorded but not indexed until the day after the Lewises acquired title. When they were later served by the Fontana lawsuit they brought this action to remove the lis pendens and clear the title. o Holding: Unlike in Daniels even though they hadn’t finished paying before it was possible to find out about the lis pendens the court doesn’t apply this. We don’t want to discourage people from not paying cash. l. Inquiry Notice: i. Hints of earlier competing claims recorded in the chain of title. These are the physical facts of use and possession – who and what is on the land. HARPER v. PARADISE – Race-notice statute: Subsequent purchaser is protected against a prior unrecorded instrument only if they are without notice of the prior instrument, and record before the prior instrument is recorded. o FACTS: In 1922 there was an original deed from Susan – Maude for a life estate with Maude’s named children and a remainder to Maude for life remainder to her kids. This deed was lost. In 1927 Susan dies, and in 1928 her heir’s record the instrument that said that Susan gave the land to Maude but that deed was lost. The land was later foreclosed on Maude and went to Thorton, and there was a series of conveyances ending with Paradise. In 1957 the 1922 deed is found and recorded, and in 1972 Maude dies, and the children’s remainder vests in possession. o HOLDING: The Children claim that Paradise only bought a life estate and that when Maude died the land became there’s. The court says that the Paradise brothers couldn’t begin to adversely possess the land until after Maude had died, and this hadn’t happened, so the land went to the children. WALDORFF INSURANCE AND BONDING v. EGLIN NATIONAL BANK (717) o Facts: Waldorff entered into an agreement with Choctaw for condo 111. Choctaw executed a note and mortgage and included condo 111. Waldorff later wrote off Choctaw’s debt to them in exchange for the execution of a quitclaim deed to 111. A year later the bank foreclosed on Choctaw and this case was brought to determine who had ownership of 111. o Holding: Choctaw being relieved of their debt was adequate consideration for unit 111 and although it would have been more difficult it would not have been impossible for the bank to walk on the property and determine the statute of 111. B. MARKETABLE TITLE ACTS, REGISTERED LAND TITLES AND TITLE INSURANCE a. Who cares about Title Assurance? i. Purchaser of the Real Property: They don’t want to take title to something that is not good ii. Seller of Real Property: The LSK obligated them to deliver marketable title at closing iii. Lender/Mortgagee: Land title is security for loan and it must be foreclosable iv. Owner of Real Property: Avoid loss of ownership to holder of better title or encumbrance WALDORFF INSURANCE CO Continued: o Comments: Waldorff’s deed prevails over that of the bank because the bank had inquiry notice. What you don’t know will hurt you here and you can’t be a BFP if had you gone onto the land you would have been put on notice about the condition of unit 111. b. Title Registration i. In most states this is a thing of the past, but we think it may be back in the future ii. In the future this will likely all be done on computers and it will be different from the Torrens system c. Title Insurance: i. Limited financial protection against knowable risk. This insures what you would have found if you did a title search. This gives you more than title assurance and other warranties. It is a way of backing up your title and filling in the holes to protect yourself. 1. Exclusions: Government and environmental regulations. Often you can buy a binder which gets rid of these exclusions but it would cost about 99% of the cost of the land and is not worth it. 2. Exceptions: Recorded interest. Includes names problems, encumbrances, competing records, utility easements, KEY – read the fine print. ii. Two kinds of Insurance 1. An owners policy 2. A mortgagee/lender police – where a percentage of the loan is paid to the insurance company. iii. Organizing the Difference 1. Title Warranties: These warrant against recorded and unrecorded interest – such as adverse possessors. They are limited and usually have a short statute of limitations. 2. Title Registration: This would supplant title insurance. Most people look to see if the cost of registration is less than the cost of insurance and if it is they adopt title registration 3. Title Searches: These give you protection against things that you can find on the title, but not against those things that are recorded but should not be. WALKER ROGGE INC, v. CHELSEA TITLE & GUARANTY CO o Facts: Aiello sells 12+ acres to Kosa using the Shilling Survey, Kosa then using a different survey (the Price-Walker Survey) sells 18+ acres to Walker Rogge. Walker then has a survey done and discovers that the property is only 12+ acres. o Holding: The title insurance company gets off the hook here. The court held that the title search was only for Chelsea’s benefit and not that of Rogge and that he should have at the least walked on the land and done a site visit and then he would have known that he was getting 12 and not 18 acres. LICK MILL CREEK APARTMENTS v. CHICAGO TITLE INSURANCE CO. o Facts: This case shows that environmental problems are not protected by your title insurance. It is not a title problem, only an economic problem and if you want to be protected against environmental problems you should get environmental risk insurance as well. III. LAND USE Land use law is made up of nuisances, servitudes and regulations. All three operate simultaneously and independently to control land use. Any one oft hem can determine the lawful or unlawful use of land. A. NUISANCE Nuisance law exists as part of tort law and property law. You always have a right not to be “nuisanced” upon and you have a duty to not use your land in a way that interferes with other’s use of their land. a. Nuisance Law is reactive: i. It deals with conflicts between neighboring land uses after they have occurred ii. Does not prevent nuisances from occurring. iii. You have to wait for the conflict before you can do anything. b. AKA the Tort of Un-Neighborliness i. It is measured by the neighborhood ii. By what is reasonable for neighbors to do to each other iii. It is not fair to commit nuisance upon your neighbors iv. It is hard to predict what the court will say is unreasonable. c. Nuisance Law’s Golden Rule i. Sic utere tuo ut alinum non laedas – use what you have so that another’s is not harmed ii. In CA it is Civil Code section 3514: “One must use his own rights as not to infringe upon the rights of others” d. Three Categories of Nuisance: i. Public Nuisance: Usually results in abatement of fines. ii. Private Nuisance: Usually looked at as part of a tort analysis, may result in tort damages and injunction iii. Mixed Nuisances: Partially private and partially public. Much of nuisance in CA is done this way. e. Externalities i. Most nuisances deal with externalities ii. It is something you do on your property that has a consequence to your neighbors iii. These depend upon if what your neighbor is doing is a reasonable use for their land. f. Tort Liability Analysis – the THRESHOLD TEST i. Must show substantial harm to P caused by interference with the use of P’s land – no harm – no nuisance ii. The threshold is that you can’t come into court without substantial harm iii. There must be a causal chain (Substantial harm to P Interference with P’s use of land intangible consequence EXTERNALITIES D’s unreasonable use of land) iv. This is usually solely economic damages v. Must show substantial harm + Causation. g. No Economic Damage (Economic Loss Rule) i. Recovery of purely economic damages in absence of either personal injury of property damage is not allowed. ii. There must always be an actual out of pocket loss - not just devaluation of land. h. Restatement 2nd Torts – Analysis of Nuisance Law i. Balance the gravity of the impact of P’s rights vs. the Utility of D’s continuous activity. MORGAN v. HIGH PENN OIL CO (747) o Facts: P owns land where they have their dwelling house, a restaurant and trailer accommodations. They supplement their income by taking in lodgers. D operates an oil refinery which is about 1000 feet from P’s property. P’s evidence shows that during the week the refinery emits such nauseating gasses and odors that it substantially impairs the use and enjoyment of their land. o Holding: There is sufficient evidence to establish the existence of an abatable private nuisance and entitle the plaintiffs to injunctive relief. Here there was a sufficient causal chain – there was no other possible cause for the gases. Usually the first user of the land wins because they are acting like everyone else in the neighborhood – when the oil refinery comes in they are creating a nuisance and being un-neighborly. ESTANSCIAS DALLAS CORP. v. SCHULTZ o Facts: P brought this suit to get D permanently enjoined from running the air conditioning unit and tower on their property (the yuppie apartment complex) which was adjacent to P’s residence. o Holding: Based upon the evidence and the nuisance that the Schultz’s suffered they were entitled to the injunction. The Schultz’s were there first. There was substantial harm (couldn’t have normal conversations or use backyard), there was a causal chain (without air conditioning unit the Schultz’s could use their land) and when balancing the equities the interest of the private home is much higher than the interest of this yuppie apartment complex where the tenants can just move elsewhere. i. Potential Nuisance Remedies i. Damages ii. Injunction: (abatement) this is a permanent remedy to a nuisance. Courts will not usually award permanent damages (let the dog bark and get paid $50,000) iii. Self Help: Most common nuisance where this is popular is the dog barking nuisance. You can self help by suing your neighbor if the dog barks, but you can’t self help by killing the dog. BOOMER v. ATLANTIC CEMENT CO. o Facts: D owns a cement plant near Albany – these are actions for an injunction and damages by the neighboring land owners alleging injury to property from dirt, smoke and vibrations coming from the plant. o Holding: The court opted to grant the injunction conditioned upon the payment of permanent damages to the plaintiff’s which would compensate them for the total economic loss to their property present and future caused by D’s operation. Here when doing the balancing the court recognizes that they can’t simply put the cement company out of business because they provide substantial employment to the entire community. However, the property owners have a right to enjoy their property as well, so they come up with this solution. SPUR INDUSTRIES v. DEL E. WEBB o Facts: Spur and his feeding lot had been on the property first. As P’s housing development expanded it got closer to D’s property and because a nuisance to the residents and Dell brought this suit. o Holding: Here there is both a public and a private nuisance. The courts recognize that they need to eliminate the nuisance but also not harm Spur so they hold that Webb must indemnify Spur for the reasonable amount of the cost of moving or shutting down. SERVITUDES (PRIVATE ARRANGEMENTS) B. LAND USE RIGHTS – EASEMENTS, PROFITS and LICENSES a. Servitudes: The use of land counts for 90-98% of the value of the land. b. Catalogue of types of servitude interest in land: i. Licenses ii. Easements iii. Profit ------------------ iv. Real Covenants v. Restrictions vi. Equitable servitudes c. True Servitudes: i. Only the following are TRUE servitudes: Easements, profits, Real covenants, restrictions and equitable servitudes ii. A license is not a servitude because it doesn’t have the capacity to succeed. It is only a one time relationship and it is not engrained into the land title. They are permissive and revocable. Servitudes are not revocable. d. Easements Interests in land that are usually written down and subject to the statute of frauds. Most easements are written and created in deeds. They are supposed to be in writing but there are numerous exceptions (estoppel rules and by implication or prescription). Easements last as long as the land does. i. Benefit or burden land title as appurtenances or encumbrances ii. There is usually a dominant and a servient estate (there is always a servient estate) e. Types of Easements i. Appurtenant – presumed if there is a dominant estate ii. In Gross – Benefits not a piece of land, but attached to a person or an entity iii. Positive (affirmative) – makes use of the servient estate. These are the most common. iv. Negative – restrains the use of the servient estate f. Unwritten Easements: i. Easement by estoppel ii. Implied Easement 1. Implied from prior use 2. Implied By necessity iii. Prescriptive easement WILLARD v. FIRST CHUCH OF CHRIST, SCIENTIST (785) o Facts: Genieve McGuigan owned lots 19 and 20. Peterson bought 19. When he sold to Willard he sold both 19 and 20 even though he didn’t own them. He then went to McGuigan to buy 20. It was subject to an easement for parking during church hours. Willard received the deed 10 days later and although it was mentioned that the lot was used for church parking, there was no mention of the easement clause. Willard filed an action to quiet title. o Holding: The easement is appurtenant and positive. Willard has a good argument because in CA you are not allowed to make a 3 way deal in one instrument and you should do it through two separate deeds (one to the church and one to Peterson). Here the court ignores this and says that there was substantial evidence that the deed intended to convey the easement to the church. They balanced the injustice which would result from refusing to give effect to the grantor’s intent against the interest of Willard. HOLBROOK v. TAYLOR (791) o Facts: Plaintiffs had used the road at all times prior to 1965 including when they were building their home. In 1970 D asked P to pay $500 for the road and P said no, D then erected a steel cable across the road to prevent use and constructed no trespassing signs. P then brought this case. o Holding: The easement had been established by estoppel. This keeps Taylor from preventing them from using the road. The use of the road up to this point shows the approval or tacit approval and this can not be revoked. This does not have the permanence of a written easement and can expire when the reasons for recognizing the easement are gone. VAN SANDT v. ROYSTER (796) o Facts: This is a positive appurtenant easement. This was an action to enjoin D from using and maintaining an underground lateral sewer through and across P’s land. When D refused to cease draining their sewage across P’s land the lawsuit resulted. o Holding: An easement by implication was created here and D could continue to drain his sewage across P’s land. Key is that there was a common grantor and the easement was established when she used the other properties for the sewer line and then subdivided them. She had used one part of the land for the benefit of the others and created a quasi easement. This is not an easement by necessity because it is not the only way to deal with the sewage. This is not an easement by prescription because it is hidden. g. Licenses: Licenses come about because someone doesn’t have a signed writing. If you give permission to cross your backyard, but don’t write it down – this is likely a license. i. The lack of a signed writing may cause easements to fall into licenses ii. These are NOT a servitude because they neither benefit nor burden land title iii. It is Oral and AUTOMATICALLY REVOCABLE. h. Unwritten easements come in Categories i. Easements by estoppel (Holbrook) 1. Executed parole license ii. Implied easements 1. Easements from prior use – this is always the better easement to have. It doesn’t end when necessity does – this only requires some necessity 2. Implied by necessity – this requires strict necessity. iii. Prescriptive easements (most common non-written easement) iv. Public Trust rights OTHEN v. ROSIER o Facts: Othen must cross someone’s land to get to the highway and this case arose when the road he has been using (which he claimed he had rights to by easement of both necessity and prescription) was threatened by the creation of a levee by the Rosier’s with flooded the roadway. o Holding: Othen had neither type of easement. This is not an easement by estoppel – he wasn’t maintaining the road. It wasn’t by necessity because he had other ways to get off the land. We can’t show that the previous owner Hill used this easement in the same way so there is no easement by prior use. It is also not prescriptive because there is no evidence of the use being adverse. Rosier did not stop Othen from using the land. i. Beach Use Cases Most in CA are dealt with through the CA coastal commission – however only recently has this been declared to be an illegitimate state body. i. Key parts: 1. State Sovereignty – out 3 miles from the mean high water line 2. State Sovereignty – foreshore (between high and low water line) Public trust – issue of Matthews case 3. Beach – dry sand – this can be private property but the issue is to what extent it has public trust rights. 4. Uplands – above the line of vegetation – private property MATTHEWS v. BAY HEAD IMPROVEMENT ASSOCIATION (816) o Facts: Matthews becomes the only moveant and asserts that D denied the general public its right of access to the ocean during the summer months by restricting the access of the dry sand to Bay Head residents and guests only. o Holding: The court found for P against the association. They found that all citizens have the right to use the foreshore and that without a way to access it – that is meaningless. The activity of the association was found to be similar to that of a municipality and thus must be opened to the public at large. Anytime that you own land adjacent to water you have to put up with the public making use of the surrounding dry sand beach. It’s not written on your land title because it existed before your land title existed. j. Scope and Transfer of Easements: i. Scope = particularities of use: how, where, when and why explains what is happening on the servient estate. k. Scope of POSITIVE appurtenant easements: i. Time/duration: often meant to exist for only a limited time ii. Types of uses: what kind of easement is it – a right of way? For what purpose iii. Intensities of uses: the way the scope is limited – how many people can use the easement iv. Location of the use: Placement of the easement (geographically) v. Size of the use area: how big the easement is – 12ft vi. Property benefited: It is for the benefit of one particular lot and not to any neighboring ones as well. l. Scope of NEGATIVE appurtenant easements: i. Courts are against this because it is talking about the non-use of part of your land. The cure is real covenants and equitable servitudes m. Misuse: i. Exceeding the scope of an easement results in misuse and/or trespass liability ii. Misuse no longer results in forfeiture, but now the courts provide for trespass liability (Brown v. Voss) n. Scope of Easements in GROSS TWO CATEGORIES i. Personal Easements in Gross: Use only by the named easement holder – you can not sell this, and it is assumed to die with you. No transfer, and no division 1. The only type of these we still see are hunting rights. ii. Commercial Easements in Gross: People always want to try to categorize their easements in gross as being commercial. 1. You don’t have to have an interest in personal property located on the servient estate. 2. These are more flexible because they are usually transferable and divisible/ but limited to the “one stock” rule MILLER v. LUTHERAN CONFERENCE & CAMP ASSOCIATION (824) o FACTS: This is the case with the crazy Pocono Pines Ice Company and Frank and Rufus Miller. The court breaks it down into three issues: o Whether Frank’s 1899 fishing and boating easement is transferable? o Was the fishing and boating easement extinguished by transfer of ¼ shares? o What about the bathing (swimming) easement? o HOLDING: The court says that (1) is transferable, commercial due to the interest of the various Pocono’s companies and the fact that it is transferable. (2) The court doesn’t want this to be divided due to the “one-stock” rule, (3) when Frank gave Rufus the rights to bathing even though he didn’t have them, this became a prescriptive easement and in the deed this gave Rufus color of title. Because they own the lake as a partnership in the company, they both get the bathing rights. BROWN v. VOSS (833) o FACTS: P owned a parcel and had access to it through an easement on a parcel owned by D. When P bought more land, he began developing a single family residence on it, and using the easement to access that parcel as well as the first. D barred P’s use and blocked the road. P sued for removal of the obstructions and an injunction against D. Question became to what extent the holder of an easement can traverse the servient estate to reach not only the dominant estate, but a contingent parcel when those parcels are used in such a way that there is not an increase burden on the servient estate. o HOLDING: The P was denied the injunction. RULE: an easement appurtenant to a parcel of land may not be extended by the owner of the dominant estate to other parcels whether adjoining or distinct tracks to which the easement is not appurtenant. However, Voss can’t block the easement because Brown is still using it to get to the initial parcel. The court BALANCES THE EQUITIES and sees that there is no more relative harm being done by the extra use of the easement. o This would be different if they were going to develop 100 lots that all needed to use the easement instead of just one. o. Easement Duration: Easements last indefinitely unless limited by a stated duration. p. Terminating Easements: i. Some end by merger (when one person has ownership of the dominant and servient estate) ii. Some end when need for easement is gone. iii. Some are terminated by release or abandonment iv. Public trust easements (Bayhead) are almost impossible to terminate q. 5 Categories for terminating easements: i. SELF-LIMITATIONS: Easement ends on its own terms. These can be limited time or purpose. ii. FORMAL RECORDED ACTIONS BY OWNER OF THE EASEMENT: (recordable in land records) 1. Merger – merging of dominant and servient estate 2. Release – Dominant estate deeds back the easement to the servient estate iii. UNFORMAL, UNWRITTEN, UNRECORDED ACTIONS: 1. Abandonment: More than non-use of the easement is required for abandonment. There must be an overt action or evidence that the easement will never be used again (taking up railroad tracks) 2. Prescription: Servient estate owner’s prescripts back the right of way. They block the right of way and make it impossible to use the easement. If you do this for the prescriptive period the easement will no longer exist. Also difficult to establish. iv. DESTRUCTION OF THE SERVIENT ESTATE 1. Self-limitation: If you have an easement for stairs, and the building burns down, you no longer have an easement to use them. When the purpose of the easement is no longer there, the easement doesn’t exist v. MISUSE AND STATUTORY STANDARDS: Misuse no longer terminates easements. r. CAL law – Civil Code Section 811 says that the only ways to terminate an easement under CA law are: Merger, destruction of servient estate, incompatible acts, and disuse of prescriptive easement. PRESAULT v. UNITED STATES (843) o FACTS: P claim to be the owners in fee simple of the land where the railroad tracks formerly ran. They claim that after the tracks were abandoned, the land reverted to them, and that the Rails to Trails act is unconstitutional because it took their land from them without compensation. The court looked at whether the initial type of right the railroad had (easement or fee simple). They decided that it was an easement (this in only in VT, in CA railroad tracks are held in fee simple….anywhere else this would have been a fee simple) o HOLDING: The act did equal a taking, and they were awarded $234,000 plus interest from the time the government opened the trail. The government argued that even though it was an easement, the easement had not ended because it was for transportation and this was what was happening on the trail. The court held that the pulling up of the ties and rails was evidence of abandonment and that it was reabsorbed by the servient estate and the government must now compensate them for the new easement. s. Negative Easements i. These are not often recognized because they suppress the use and development of the servient estate. ii. English Common Law Categories: Not to block or destroy 1. Windows 2. Air flow 3. Support 4. Water flow REVIEW OF EASEMENTS: HOW TO DETERMINE WHAT YOU HAVE!?!? 1. Do you have a use right? a. If it’s a right of way = easement 2. So you have an easement – is it appurtenant or in gross? Positive or negative? a. If it can be appurtenant it WILL be appurtenant b. Most use rights will be positive. If it looks negative the law is unlikely to recognize it. 3. Is it for PROFIT? a. Is the easement owner going to take something (oil, hay, gas) from the servient estate? b. Appurtenant or in gross? 4. Is there a License? a. If there is nothing in writing and you don’t have something that looks like an easement, you default into license. You want an easement, because licenses can be revoked. b. You can tell it’s a license because it is oral, revocable, and never appurtenant. c. You default into the license if you can’t prove an easement. C. LAND USE PROMISES: Real Covenants, Equitable Servitudes, and Common Restrictions. a. Real Covenants: Come with damage remedies at law. These are treated as contracts and you can get damages for breach of that contract. b. Equitable Servitudes: These are generally not enforceable with damages. They are enforceable only through injunctive remedy. They run with the land as obligations and agreements by the virtue of notice. You are bound to these through notice of the servitude. (Tulk v. Moxhay) i. Are in writing b/c of Statute of Frauds ii. Most of notice will come from Land record c. Restatement 2nd lumps the two together and holds that they are all enforceable under the rules of equitable servitude – but also allows damage remedies. d. Language of Covenants i. Instead of “servient estate” – “Burdened Land” ii. Instead of “dominant estate” – “Benefited Land” iii. If the burden or benefit is in gross – be alert for problems. Most will be appurtenant. Most in Gross will not run with the land. e. Traditional Criteria for succession: (not important for exam) i. Mutual intent ii. Touch and concern iii. Privity, privity, privity f. Modern Approach (important for exam) i. Intention Rules! ii. Provided there is no “notice” TULK v. MOXHAY (864) o FACTS: In 1808 P sold land (Leicester Square) to Elms with a deed including limitations that he could not build upon the land and must keep it in good shape. D got the land from Elms, but that deed contained no similar covenant and he purchased with notice of the covenant in the deed from 1808. D wanted to build upon the square and P filed for an injunction. o HOLDING: The injunction was granted and affirmed. You don’t want people to sell their land to make restrictions disappear. Moxhay was liable for the promise to leave the garden open because he knew about the restriction (had actual notice) when he bought the property. The equitable principle of the privity of contracts you knew about it, you’re stuck with it. o This is not a negative easement because it was not one of the recognized types o It is not a real covenant because of the horizontal privity o It is not a plain old contract because the contractual promises are only between the initial parties. SANBORN v. McLEAN (870) o FACTS: McLean owned property and started to build a gas station on it. They and the contractor were enjoined by P. P claims that the gas station would be a nuisance per se and that it is a violation of the general plan fixed for the use of the lots of the street for residential purposes only. o HOLDING: D is enjoined from building the gas station. There is a reciprocal negative easement on the land because the land all came from a common grantor and the easements arise out of the benefit accorded by restricting the land sold by the grantor. Although D’s actual title does not mention the restrictions, all the other deeds out of the common grantor do, and the McLeans’s can't be BFP’s because they could have found out about the restriction by looking at the other deeds. Even though there was no formal common plan, one existed by the way in which the subdivision developed. It is important to look at what the true intention of the McLaughlin’s (common grantor) was. o This case is not even law in Michigan anymore – its just good to think about. g. Common Interest Developments Combine Varieties of Servitudes i. Use Rights – easements and ii. Use Promises – real covenants and equitable servitudes iii. The essence of the common interest development is the COMMON PLAN. Most take the form of the subdivision map and use of rights and easements as well as agreements. iv. Usually contain promises, covenants, and equitable servitudes – all restrictions (like a charge for maintenance). These are all affirmative obligations attached to each unit. h. California CC&R’s i. Covenants – real covenants ii. Conditions – Conditional fees iii. Restrictions – equitable servitudes NEPONSIT PROPERTY OWNER’S ASSN. v. EMIGRANT BANK (875) o FACTS: Depression case. In 1911 P stipulated that all land he owned be developed as a residential community and filed this with the county office. In 1917 P conveyed the lot to the Dryers along with the covenant that they would pay $4.00 each year for the maintenance. The Dryers then sold the land to D. D refused to pay the maintenance charge. and P brought this action to foreclose a lien upon the land o HOLDING: The court found that the covenant was a restrictive covenant that touched and concerned the land, and that there is privity of estate between D and P. Because you need a piece of land to hold the benefit – the court says that the property owners association is acting for the property purchasers and acting on their behalf – and that there is vicarious vertical privity because the owners association is a stand in for the individual various owners. CAULETTE v. STANLEY STILLWELL & SONS (888) o FACTS: An example of a covenant the court will NOT enforce. D conveyed the land to P for $4000. The deed included a covenant that the grantors (a contractor) be given the right of first refusal to build the original dwelling on the premises. After negotiations fell through between D and P this suit was brought. Because this agreement did not state a time by which the building must occur it is void by the Rule against Perpetuities o HOLDING: The court found that this was not an enforceable covenant. D had no claim, right or interest in the land, D had no cause of action against P by virtue of the contract, and the clause was null and void. There was a personal nature of the promise made, but this is not an enforceable covenant. RATIONALE: The meaning was not free and clear of doubt, the covenant does not touch and concern the land, and the burden is personal so it does not run with the land. o Stillwell could have accomplished what he wanted to do by: Using an option of 1st refusal that if land is ever build on - that he would have the right of 1st refusal to build Make it a conditional fee... “But if the land is ever building on without using Stilwell as contractor, the land reverts to Stilwell.” i. Servitudes i. Enforcement: 1. Created: 2. Scope: specific nature of the rights and agreements 3. Terminated: Ended, expired or no longer enforceable. j. Covenants There are lots of limitations on the enforcement of covenants. Some of these limitations and difficulties have to do with the creation and some with the transfer of that covenant to a future owner. MUST LOOK AT BOTH: whether it is enforceable at the time of creation, and at the present. i. Scope of Covenant 1. Can be illegal 2. May be narrowed because it is against the public policy favoring the transferability of land, or favoring free market competition, or against public and constitutional policies outlawing discrimination. ii. Common Reasons why a covenant will not be enforceable 1. Enforcing party does not hold the benefit – you must be the owner of the benefited estate or you have no reason to seek to enforce the covenant. 2. The covenant was not validly created 3. It is unreasonable to attach it to the land title or it is against public policy 4. Enforcement would be an unconstitutional state action (involving in the courts in any discrimination action makes it a constitutional issue) HILL v. COMMUNITY OF DAMIEN OF MOLOKAI (893) o FACTS: The community was providing housing to people with AIDS and other terminal illnesses. When the leased the house in Albuquerque in a residential neighborhood the neighbors felt that the value of their property was going down and that having a group home violated the restrictive covenant of the planned community and they sought to get an injunction. o HOLDING: The community was entitled to continue operating its group home under the restrictive covenant and under the Fair Housing Act. On the Single Family Use Covenant the court held that this community was acting in a single family manner. They shared their meals together and there is also public policy that encourages the incorporation of group homes into such residential communities. Under the FHA argument you are entitled to make a reasonable accommodation and the court feels that not enforcing the covenant is a reasonable accommodation because it is not an undue hardship. Counting AIDS as a disability also set precedence that the court would look upon AIDS as a recognized disability covered by the FHA. SHELLY v. KRAEMER (905) o FACTS: In 1911, 30 of the 39 property owners agreed that they would not sell or rent to non-whites for 55 years. In 1945 the Shelly’s (black) bought property in the area, and the trial court found they had no knowledge of the restriction. In 1945 the other property owners brought suit and argued that the agreement was effective and that enforcement of it violated no constitutional rights because it was a private agreement. o HOLDING: The 14th amendment prohibits judicial enforcement of restrictive covenants based upon race of color. The covenant itself is legal, but when they take it to the courts for enforcement it violates the 14th amendment. KEY: when courts decide to issue an injunction this is a state action and therefore they can not issue an injunction which is discriminatory o Even though these types of racial restrictions still exist in deeds you can now go to the courts and record the removal of the restriction. k. Terminating Real Covenants i. Self Limitations ii. Waiver by all benefit holders (requires 100% agreement – unless in CA where this is 51% plus court approval). This is the reaction of other residents to what individual lot owners do to violate the covenant. If they are seeking to enforce the covenant – this is NOT waiver. iii. Doctrine of Changed Circumstances: The circumstances have become so different from the time the covenant was created that it is no longer enforceable. It can still appear on the land title but it is not enforceable. This is more than just years passing – there is no longer any pattern of use agreements that make this contractual system make sense. It is close to the doctrine of impossibility. It applies ONLY to covenants and sometimes equitable servitudes (BUT NOT TO EASEMENTS) iv. Statutory Limits: 1. On Duration: Most common is 30 years – and if you want the covenant to continue you have to reinforce it every 30 years 2. On Remedy: this is the MA approach 3. Marketable Title Acts: If this applies it is in addition to more particular statutes. v. Bankruptcy: Because covenants are in the nature of contractual rights they are subject to release with bankruptcy. When subdivisions go through bankruptcy the easements are not released, but the covenants are. WESTERN LAND CO. v. TRUSKOLASKI (911) o FACTS: Case was brought to prevent appellant from constructing a shopping center in the subdivision. Over the years as Reno had expanded the area around the subdivision had become more commercial, but not the subdivision itself. Appellants argue that such substantial changes have occurred that the covenant is no longer enforceable. o HOLDING: The court holds that there is not sufficient evidence to eliminate the restrictive covenant. The Subdivision owners are still benefiting from the covenant and thus the circumstances have not become so different from the time the covenant was created as to find it unenforceable. The benefit is still of substantial value to the benefited land. It is only changed conditions if there is NO MORE benefit in the covenant to the owners of the homes…it only cares about changes within in the subdivision itself RICK v. WEST (916) o FACTS: Rick owned the land which was subdivided and contained the covenant restricting the land to single family use. West bought land in 1956. The land was rezoned in 1957 as industrial, but West would not release her covenant. When Rick sought to sell the land to the hospital West refused again to release the covenant. P sued claiming that the covenant was no longer enforceable because of changed conditions. o HOLDING: The restriction is not outmoded and when it affords real benefit to the person seeking to enforce it (West) no pecuniary damage award can be given in lieu of enforcement. Cardozo - No balancing of the equities can ever put Rick in a greater position than West. Covenants will remain enforceable unless you come up with VERY STRONG reasons why they shouldn’t be. This shows that a minority of 1 can bring down the entire deal if they want the covenant to remain. POCONO SPRINGS CIVIC ASSOCIATION v. MACKENZIE (921) o FACTS: D bought the land and then found that it was not suitable for development. They tried to abandon it by turning it over to P, and P did not want it back. They offered it to P as a gift, didn’t work. They stopped paying taxes and let the county try to sell it, didn’t work, they signed a statement declaring their intention to abandon the land, didn’t work, and they didn’t accept mail regarding the property. This case was brought to get them to pay back association fees. o HOLDING: Appellants intent to abandon the land didn’t matter – the law states that real property can’t be abandoned and D must pay the back association fees. They still have perfect title to the land because it had never been bought or sold. The burden of landownership runs with the land title and remains with the title owner until it is transferred to someone else. o Solutions: they could have deeded it to someone judgment proof, or filed for bankruptcy. D. PUBLIC LAND USE REGULATION (Police Power and Zoning) a. Common Interest Communities: These are communities that run as somewhat private governments. There are separately owned units, with reciprocal use rights or agreements, and usually a homeowner or unit owners association. b. Owners Association: i. Corporate entitle or limited liability company ii. Established in a declaration and charter (from state) iii. Has the power to enforce: Original covenants in declaration and By-laws. Covenants in the original declaration are weightier than those bylaws adopted by the association on a majority vote. c. Types of Common Interest Communities: i. Subdivision: Almost always individually owned lots with SFR on them. Almost always residential in nature ii. Condominium: May look the same as subdivision, but the residences are not on individual lots. There are no lot lines. The ground is owned in common, only the interior walls are owned in private (aka Flying Freehold). Zero Lot line development pattern. iii. Cooperative: Here you don’t own any real estate but you own shares in the cooperative. Everyone is liable for the upkeep of the cooperative. People here are more closely tied, because they are all responsible. If you want to buy into a cooperative you want to know how credit worthy all other people are. These were established as a method of discrimination, but not discrimination rights apply to them as well. NAHRSTEDT v. LAKESIDE VILLAGE CONDOMINIUM ASSN. (927) o FACTS: All residents are subject to the same CC&R’s and this included a pet restriction. When P bought a unit in 1988 she moved in with her 3 cats. When the association found out, they asked her to get rid of the cats, and then assessed fines for the time she remained in violation of the restriction. P brought the suit to claim that the restriction was unreasonable, and that she hadn’t known about it when she bought the unit. o HOLDING: The pet restriction is enforceable. Allowing litigation of this sort would be a waste of $ and make CC&R’s useless. The standard is that the servitude is enforced if it is not unreasonable – and this is not unreasonable. d. When is a Servitude Unreasonable? i. When it violates public policy ii. Fails to relate to the burdened land iii. Restrictions on the burdened land fail to benefit the benefited land ANALYSIS RECOMMENDATIONS: Look at the servitudes field in general. The only way to see if there is a servitude is to look for burdened estate. If you cant find burdened land look for a lease or something. Once you find the servient estate you look to see if someone has the right to use the land – this leads to positive easement or license. You are not likely going to find negative easements. If you see something that looks like a negative easement it is going to be a building restriction and then a covenant. If you have an affirmative covenant they are going to look at the reasonableness and see if it is reasonable. e. LAND USE REGULATIONS Lease power – the power of the government to engage in: i. Police power ii. Zoning and rezoning (non-conforming land uses) f. Government Regulation of Land use: Purpose of the government land use regulation is to foster Stability and Compatibility of land uses: i. Control undesirable changes in land use ii. Prevent conflicting land uses g. Legitimacy of Government Land use Regulations: Must be: i. Reasonable ii. Serve the General Welfare (public interest of the whole community) iii. Not violate the Constitutional guarantees (prevent taking without just compensation, personal expression, etc) BY AND LARGE will not be found unconstitutional as long as it is reasonable and comports with Constitutional guarantees h. POLICE POWER i. Inherent in State Sovereignty ii. Delegated to the local government (municipalities) generally through statutes at the state level (Zoning Enabling Act) i. Inherent Sovereign Powers of Government i. Tax ii. Take (condemnation) – the power to take private property and make it public property with compensation iii. Regulate (police power) – the is not exercised by the police, but the planners and legislative parties of the municipality j. Types of Zoning Use Regulations i. Zoning ordinances – most common: usually a map and text ii. Comprehensive plan – usually imbedded in the zoning ordinance or is separate about the various land uses in a municipality (Important in CA) iii. Subdivision ordinances k. CALIFORNIA Land Use Regulations i. General Plan (comprehensive plan) controlling document ii. Zoning Ordinances (map and text) iii. Subdivision Ordinances VILLAGE OF EUCLID v. AMBER REALTY (960) o FACTS: Appellee is the owner of 68 acres of land, and after the zoning ordinance it fell into 3 different zoning categories. The ordinance is assailed on the grounds that it is a derogation of the 14th amendment and that it deprives appellee of liberty and property without due process of the land and offends provisions of the state of Ohio. o HOLDING: The ordinance is not an invalid exercise of authority – all other provisions should be dealt with on a step by step basis. Euclididian Zoning arouse out of this case which is: Comprehensive, proactive (future orientated), uniform and cumulative. o Proactive: Future orientates. Zoning regulations regulate future growth and development. The purpose is to avoid getting conflicting uses next to each other o Uniform: Within a given zone or zoning district all uses are to be uniform. This creates the homogeneity of American cities and suburbs. o Cumulative: You can have higher uses in lower or more industrial use zones. This is ok. o KEYS: Zoning is usually lawful unless arbitrary and unreasonable, there is a PRESUMPTION OF LEGISLATIVE VALIDITY. If you cant say that it is arbitrary and unreasonable or doesn’t serve the general welfare it will be upheld l. Zoning Changes i. When the municipality changes (when more people need job, etc) ii. When the general welfare changes (when welcoming oil refineries into town has polluted the air, and now you need to clean that up) iii. Most land has been zoned and rezoned numerous times m. Non-Conforming Uses: i. Pre-existing (before zoning) ii. Lawful iii. Allowed to continue for a time, although amortization may be required. iv. Most non-conforming uses tend to be required to end in a reasonable time (5 years is common here) in CA the period used is in relation to taxes. PA NORTHWESTERN v. ZONING HEARING BOARD (974) o FACTS: P opened an adult bookstore, having gained all the appropriate permits and certificates, and 4 days later the Moon Township board published their intention to rezone the city ordinance to regulate “adult commercial enterprises.” On May 28 (24 days after P purchased) they adopted the ordinance and gave him 90 days to move. P brought suit. o HOLDING: The amortization period here was unconstitutional on its face for this non-conforming use. This was not a comprehensive rezoning; it was a targeted reaction to a new and offending use. The amortization and discontinuance of a lawful pre-existing nonconforming use is per se confiscatory and violation of PA Constitution. It is unconstitutional because it is confiscatory, there is no time to recoup their investment – this is the MINORITY APPROACH. n. Administrative Law Concepts i. Deference (by court to local decision) ii. Delegation ( from one part of government to another) from city to local agencies (planning commission) iii. Discretion (range of available choices) – In CA there is wide discretion to the police power. o. ZONING: i. Inherent police power – delegated through the Zoning enabling Act. It divides the power between the Zoning board of adjustment, the planning commission and the Zoning Administrator p. Variance v. Special Exception: Both are seeking a change in use from the ordinance i. VARIANCE: Request that the terms of the ordinance must be changed for you. You NEED to allege that the variation you are seeking is not your fault, and the ordinance is making it so you can’t use your land at all. This is an argument of UNIQUE HARDSHIP. 3 Characteristics: Unique hardship, not self imposed, allowing variance is not detrimental to the general welfare. ii. SPECIAL EXCEPTION: This is a request that you can build on your property something not allowed by the ordinance. This is always a kind of use forecasted in the ordinance (school, church, etc). In CA and most places this is a conditioned exception and we call them conditional uses and you get a Conditional Use Permit or a CUP. COMMONS v. WESTWOOD ZONING BOARD OF ADJUSTMENT (985) o FACTS: The lot is not large enough to build a house on. The Common’s have owned the property since 1920’s and the ordinance was adopted in 1947. This was not a non-conforming use because they hadn’t yet used the land. The Common’s are plaintiffs here because they want to sell the land and the LSK is contingent upon the variance. The Common’s claim that they tried to buy the required land from neighbors and no one would let them – they have to allege that this is an undue hardship, and that allowing the variance won’t change the neighborhood. o HOLDING: The court finds that the board was wrong in not allowing the variance, but they don’t award it, and instead send it back to the board of zoning adjustment. Here they are just serving as a safety check for a board that is not elected and otherwise has no way of being regulated. Use Variances have now been outlawed in CA, but not site variances COPE v. INHABITANTS OF THE TOWN OF BRUNSWICK (994) o FACTS: P is trying to build 8 apartment buildings in a suburban residential zone. The board decided that the application for special exception was not met under criteria #’s 2 and 4. o HOLDING: The court decided that #’s 2 and 4 were unconstitutional and since those were the only 2 requirements not met by Cope, the permit should be awarded. The criteria were unconstitutional because they were, 1) arbitrary and unreasonable, 2) gave too much discretion to the ZBA, and 3) the remedy is to allow the building q. Rezoning: Legislative changes in zoning map or text i. Downzoning: Reactive or preemptive, restricting to a less intensive use (PA Northwester) ii. Upzoning: permitting a more intensive use (City of Rochester) iii. Spot Zoning: This can be downzoning or upzoning. It is when there is a little spot of commercial property in a sea of residential zoning. STATE v. CITY OF ROCHESTER o FACTS: This is an issue of spot zoning. Here the PLV rules because there is wide discretion in local legislature, deference by the court, and no subdelegation by the local legislature. o HOLDING: The court upholds the rezoning because it is NOT spot zoning. This is an example of Zoning Creep. When there are similar zones nearby and the more intense use is swallowing up the less intensive use. The court says that the City of Rochester has this discretion because they were elected, and if they get it wrong, they won’t get voted in next time. IV. TAKINGS A. Eminent Domain and Inverse Condemnation – the power to take a. The government can take private property and transfer it to the government i. Private property ii. Taken iii. Public Use iv. Just Compensation – usually measured by fair market value of the property if you had a willing buyer and a willing seller. b. The power to do this is inherent in the sovereignty of every state – this also happens in other countries. c. Private property can be any type of property (real, personal, and intellectual) – anything owned can be condemned. When you are looking to see if something has been taken there is a transfer from private property interest to government property. The government doesn’t have to take the entire property – they can take only a portion, and condemnation is concerned with ONLY that portion. d. It must be used for PUBLIC PURPOSE – anything as broad as the general welfare. HAWAII HOUSING AUTHORITY v. MIDKIFF (1098) – US Supreme Court o FACTS: Hawaii enacted the Land Reform Act in 1967 to try to get some of the land away from the few owners, and redistribute it to those people who were currently leasing land. They created this mechanism for condemning residential estates and then transferring ownership back to the lessees. When Appellee’s land was to be divided, they did not comply, and brought this action requesting the act be declared unconstitutional and its enforcement enjoined. o HOLDING: The court found that the act is constitutional and compared it to BERMAN v. PARKER where there was a purchase of land to redevelop slum areas – the act was a comprehensive approach to correcting market problems. This shows that you can take private property as the government and then resell it, the fact that it ends up in private hands again does not mean that it violates the public use right. Must look at the ENDS and the MEANS and here there was a valid purpose served and just compensation provided, and the act was not unconstitutional. The courts don’t really have a role in 2nd guessing the legislature when they use condemnation power so long as they can come up with SOME public purpose. e. Inverse Condemnation – when the Government has already taken, but not paid i. Action by a property owner for the just compensation after the government has taken their private property ii. This assumes that the government has acted for a public purpose iii. It is a cause of action – not an inherent power of government. LORETTO v. TELEPROMPTER MANHATTAN CATV (1117) US Supreme Court o FACTS: Loretto bought the building and didn’t know that the previous owner had granted D permission to install cable on the building. In 1973 NY State enacted 828 so that landlords could not interfere with the installation of cable TV on their premises. They saw a public purpose in bringing cable TV to the masses. P brought this class action alleging that D and their installation was trespass and that relying on 828 there was a taking without just compensation. o HOLDING: The Supreme Court agreed that this was a valid regulation, but because it frustrates the property rights compensation should be paid. A permanent physical occupation is always a taking, and is always due just compensation. They know that this is a permanent occupation because it has taken away Loretto’s right to exclude (a basic stick in her property bundle). The basic rights of property are to POSSESS, USE and DISPOSE of your property however you want, and 828 interferes with all of these. o Blackmun disagrees and holds that you should apply the balancing test – you must look at all the circumstances and put together an estimation if it is really a taking, and then pay just compensation o Marshall responds by saying that this is easier than a balancing test because it is a bright line rule, and clearly shows when the government should pay and makes the results easier to interpret. B. Regulatory Taking of Real Property a. Assessing the reasonableness of Government land use Regulations: i. Generally speaking, land use regulations are going to be held valid because there is a strong deference on the part of the courts not to mess with what the legislative body decides. b. Reasonableness Analysis: If a land use regulations goes wrong – it will do so in one of these three ways: i. ENDS – public purpose(s). Is the regulation really helping the public? ii. MEANS – Type of regulation and how well it really serves the public purpose. Does it solve the problem it is supposed to solve? iii. IMPACT – Consequences for the property owner. Regulations must be reasonable in ALL three. c. Limitations on Land Use Regulations: i. Internal Limitations: o Constraints in the Enabling Act o Public Interest Justifications – general welfare (no spot zoning, etc) o Appropriate procedure ii. External Limitations: o Statutory Limitations – you can’t use regulations to discriminate, etc. o Constitutional Limitations – a. 1st amendment right to freedom of expression, association, religion b. Equal protection – no racial discrimination, etc c. Takings – Right not to be deprived of property without just compensation or without due process of the law. th d. Four Key 20 Century Land Use Regulation & Taking Cases (US Supreme Court) HADACHECK v. SEBASTIAN (1132) o FACTS: 1915. P owned a brick making business in LA and had been there for many years. As the city expanded it ate up his property and then he was convicted of a misdemeanor for violating an ordinance that made it illegal to operate a brickyard within the city limits. P wants the ordinance to be found in violation of the state constitution and the 14th amendment. o HOLDING: The ordinance was not a violation of the state constitution or the 14th amendment. These targeted ordinances were very popular in the late 19th century, and it was lawful because it was a lawful exercise of police power, the court saw the operation as noxious so they could eliminate it without it being a taking, this serves a public interest in protecting the citizens of LA. This was just a result of the growing development of LA and the price you pay for development. There is a HIGH Presumption of legislative validity – regulations are going to be found legal unless really really unreasonable, and here he could still take his clay and make the bricks elsewhere. PENNSYLVANIA COAL v. MAHON (1140) o FACTS: 1922. The Kohler Act (1921) prevented mining within 150 feet of an improved property belonging to another person. There are various estates at issue – the surface estate, the support estate and the mineral estate. This took away the coal company’s rights to mine the underground land. o HOLDING: The act can not be sustained as an exercise of police power so far as it affects the right to mine coal where that right has been reserved. The act is a taking of the coal company’s surface estate without due process or just compensation. There are no facts that make the risk so dangerous that they should give P more property rights than he bought (he only bought the rights to the top of the land). o COMMENTS: The case gets sent back for more opinion because there was no discussion about the effect of this on public land. Here the Mahon’s are dismissed because there is no public interest, if it was a public road and there was a public interest you would balance that public purpose against the harm to regulate – and it may lean towards the act being valid. When regulations go too far they become takings when they extinguish all value to the other party it seems to be sufficient to require that the ordinance be invalidated or the party be compensated. PENN CENTRAL TRANSPORATION v. CITY OF NEW YORK (1151) o FACTS: 1978. P’s property was declared a national landmark and they lost some rights to their property and they are also required to do maintenance and keep the exterior in “good repair” and must have any alterations approved by the Commission. Union General Properties wants to develop an office building above Penn central and will pay buco bucks for it. They submitted 2 designs to the Commission, both were shot down, and instead of seeking judicial review they filed this suit. o HOLDING: The restrictions did not constitute a taking, they are related to the general welfare and they not only permit reasonable beneficial use of the property to P, they afford P other opportunities to enhance that site and other property as well. Look at the 3 balancing concerns: 1) economic impact on claimant, 2) extent to which regulation interferes with an investment backed expectation, 3) character and extent of government action. e. SUBSTANTIVE DUE PROCESS BALANCING i. Regulation must substantially advance legitimate state interests ii. Regulation must not deny an owner economically viable use of his land f. Reasonableness Balancing Factors i. Economic impact on claimant ii. Extent regulations interfere with the reasonable/distinct investment backed expectations iii. Character and extent of government actions. LUCAS v. SOUTH CAROLINA COASTAL COUNCIL o FACTS: Lucas bought two lots not in critical area, but later after the passing of the Beachfront Management Act Lucas can’t build on the land. The Act as imposed on Lucas was held invalid unless just compensation was paid. o HOLDING: In the end the state bought the lots from Lucas and then had to sell them to a developer because they were in financial trouble. The reason the lots were held to have no value to Lucas was based upon the stipulation made by the council. If this stipulation would not have been made it is likely that the Act would not have been found invalid because even though he couldn’t build on his land he could still do other things with it. TAKINGS! 1) Categorical Takings a. Permanent physical occupation (Loretto) – ALWAYS a taking b. Denial of all economically beneficial use is a taking, unless non-use is justified based upon background principles of state property law (common law nuisance, land title limitations) 2) Non-Per Se Takings: a. Ad hoc balancing factors under Penn Central – Always unique circumstances. Economic impact on claimant, investment backed expectation, character and extent of government action. 3) Never a Taking: a. Abate or prevent nuisance (Hadacheck) PALAZZOLO v. RHODE ISLAND (1193) o FACTS: P took on investors and they bought property, they couldn’t decide how to develop the land and eventually broke apart and P bought out all the interest and receives title in 1978. By that point a wet land regulation had been placed upon the land, and the stat said he should have known about the regulation before he got the land and he is not a BFP because there was notice. o HOLDING: When he got the land in 1978 he did not have any real expectation that he would be able to develop upon the land. He has no expectation – but he has the right to sue if the regulation when it was adopted had regulated the land into inutility or non-use. Because of the WHOLE PARCEL RULE – and the fact that he could still build upon a portion of his property, it had not been regulated into non-use and the regulation was valid. C. Regulatory Taking of Intellectual Property (Trade Secrets) RUCKLESHAUS v. MONSANTO COMPANY – SUPPLEMENT I o FACTS: Some crazy pesticide company that makes Round-up sues because over time with the changing regulations, their trade secrets were not kept private and they see them as regular property and that this constitutes as a taking and they deserve just compensation. o HOLDING: o The date pre-1972 – no argument because there was no investment backed expectation that it would be kept private. o After 1978 – no argument because you knew you could send in your trade secrets or not, and if you sent them you knew there would be exclusive use for 10 years, and then limited use for 5 more. o Between 1972-1978 – this was a taking during this period because they were assured of the protection f their trade secrets, and they were told that if the EPA used their data that they would be compensated.
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