PROPERTY OUTLINE Ia. PARTITION: termination of concurrent O; ends fractional O, begins exclusive O of a part or of proceeds from sale 1. Partition in kind preferred 2. Partition by sale when: a. physically impractical to partition in kind b. in the interests of O's maximized value for all co-Ts (Delfino) A. Agreement 1. written agreement 2. parol agreement B. Go to Court 1. In Kind a. preferred to partition by sale b. equally divide value, not the square footage -use commissions in Tx i. owelty pymt: if unable to divide exactly, payment for difference ii. improvements: a. equity governs (in all partitions); b. whoever improved gets increased property value c. can't be to embarrass (put into a difficult financial situation) a co-T in assertion of rts. ex. put titty bar next to nice shop [d. note: all must contribute for necessary rzbl improvements] c. to decide if partition in kind is possible, consider: 1. is it possible? i. physical attributes ii. number of practical interests iii. can it be equitably divided iv. zoning regulations v. impractical? 2. what maximizes value for the co-T's i. economic value only ii. homestead not considered 2. By Sale (not preferred, but usually happens) a. burden on party moving for partition by sale (not in kind) b. economic positions of T's doesn't matter; if it is partitionable in kind, then that is done -if not, then partition by sale c. how? i. best if listed and sold by agent ii. not as good to auction (sells cheaper) d. accounting: separate from partition, but usually occurs after partition; when: i. once co-T has taken more than his fair share OR ii. the land is not partitionable in kind C. Parol Partition: a. if performed, then enforced b. if not performed, not enforced c. all parties must consent -perhaps lienholders & potential buyers (check local law) * remember, must fulfill normal SOFs D. Equitable Partition: when a co-T has conveyed part of land to 3P, allows ct to partition to protect 3P if possible w/o prejudice to other co-Ts E. Agreements not to Partition: enforceable unless unrzbl Ib. BANK ACCOUNTS A. 3 reasons for a jt. acct. 1. convenience 2. gift (problem -need to be definite amt) 3. testamentary transfer (problems: bank accts. not formal enough to be a will a. can't ask intent after death b. should sign in front of 2 witnesses) B. ROS: only if explicitly provided; safe harbor lang. a. ex. on death, all sums vest in and belong to survivor as his separate property; must show ownership, not that $ is payable b. creditors can access $, incl. estate admin fees before survivor pd. c. benefit: no probate saves time and money d. "payable to survivor" not enough to create ROS (signature card could suffice w/correct lang., but seldom) e. can cancel ROS at any time f. distinction: ownership (net contrib.) v. possession (all) C. Net Contribution: (input -output + pro-rata interest) §438: rights in proportion to what ea. put in unless clear and convincing evidence to the contrary a. both have rt. to deposit and withdraw any amt. (subj. to accting.) b. bank never liable; governed by deposit agreement, not statute D. POD Account (payable on death) /Totten Trust Acct. a. original payee/trustee present interest and all present rights (no fiduciary duty) b. POD payee/beneficiary has no rts. until OP/Tee dies c. 2 OPs/Trustees, rts. don't begin until both are dead d. no ROS btwn OPs/Trustee unless agreed e. therefore, if OP1 dies, $ goes to OP1 estate; when OP2 dies, POD payee only gets what's left of OP2's $ II. CONVEYANCES: transfers of land A. Overview 1. Enter into listing agreement with agent -includes asking price a. agent's promises i. to list on MLS (Multiple Listing Service); only authorized agents can do this ii. put up a sign b. buyer's promises i. pay commission 1. usually 6% 2. payable at closing 3. payable when ready, willing, able buyer procured, even if not found by agent c. types of agents i. seller's agent ii. buyer's agent: pd. with share of seller's agent's commission; buyer doesn't pay him directly iii. dual agent: represents both; conflict of interests; some states don't allow iv. intermediary/non-agent: doesn't rep. either, but gets paid for nothin' 2. Negotiations & make K a. K does not transfer legal title; agree to buy/sell b. must comply with SOFs (writing, signed by PTBC, price, descrip) c. remedy for boK: specific performance (usually) d. essential terms: i. price or precise formula ii. prop. descrip. iii. date of closing (approx.) iv. signatures e. non-essential terms i. inspections ii. remedy if there is a defect iii. earnest $ (not part of down pymt; creditor towards purchase price) iv. title insurance or assurance 3. Executory period: begins after signing K a. seller still owns (legal O; buyer is equitable O) i. votes ii. taxes b. financing is arranged i. appraisal (banks loan 95% fmv so buyer is on the hook) ii. inspection and adjustments iii. title assurance; problems revealed: 1. concurrent owners 2. seller is life T 3. liens 4. easements 5. restrictive covenants *title search tells you what the status of the property is c. defects in title i. seller has chance to fix before closing + rzbl time ii. if not remedied, buyer can rescind 4. Closing a. doesn't have to be on date exactly unless "time is of the essence" b. deed signed by seller; transfers legal title c. security interest transferred by buyer to bank (first lien) "Deed of Trust" d. $: pays liens => commission => seller e. agent gets commission f. buyer and bank sign promissory note g. buyer pays all closing costs (down pymt, insurance, taxes, etc) h. Doctrine of Merger: any promises in K are no longer enforceable unless maintained in deed B. Contract of Sale /Statute of Frauds 1. within SOFs (Tx Bsns and Comm code) a. K for sale of land or any land interests b. mostly judge made c/L c. some judges are lenient if performance evidences agreements (not in Tx) 2. exceptions NOT Texas majority, Restatement, Hickey a. rzbl reliance (part performance) b. avoid prejudice (estoppel) c. continuing assent of PTBC Texas exception Hooks a. payment of ¢ (partial okay as long as no breach) b. possession c. valuable and permanent improvements permanent; fixtures? i. how affixed ii. intent when affixed iii. customized OR to prevent fraud C. Marketable title: title not subject to such rzbl doubt as would create a just apprehension of its validity in mind of rzbl man; title would not subject me to liability; implied in every K unless expressly disclaimed 1. does seller have what he purports to sell? 2. what makes title unmarketable? a. size b. restrictive covenants c. encumbrances (mortgages, liens) d. easements (if open and notorious => mktbl) e. another has option to buy d. ad possessor selling w/o quieting title f. deeds procured by fraud/duress 3. time to cure if defects before closing 4. violations: a. violation of ordinance = not mktbl (only if violation) b. restrictive covenant = not mktbl even if not violated (b/c risk of lit) 5. remedy: rescind K, get earnest $ back, seek damages 6. if a title co. says they'll insure it doesn't mean its marketable 7. deed extinguishes all terms in K D. Equitable Conversion 1. during K period: a. seller = legal O b. buyer = equitable O 2. must be consistent with parties intent 3. can't lead to unjust results 4. majority: if equitable conversion buyer is liable -must sill go through with k 5. UVPRA: a. risk on party in possession b. seller: legal title + possession =risk c. buyer: legal title or possession = risk d applies to: i. only to destruction of all or part that is material or ii. eminent domain iii. sometimes can be applied by comparison e. insurance: if only one party has insurance, that party pays (held in trust fiction) 6. best solution: put provision in K E. Defects, Duty to Disclose 1. seller/agent must disclose what they know/should know; neither req'd to do inspection 2. §5.008 seller's disclosure form • must be completed before K valid • provides no remedies, but basis for other coa's (fraud, misrep) • (e) says when form not necessary • if buyer gets form after K, has 7 days to back out for any rzn • can you rescind before closing if buyer finds material defect???? • if it's been a while, get new form done 3. DTPA: construed liberally a. four coa's i. breach of warranty, includes Humber warranty (builder W of workman like quality) ii. insurance fraud unk conduct when P can est. a DTP has occurred 1. DTP are against the law 2. many have requirements of knowledge/intent... A) compensatory damages for pecuniary loss (not incl. mental/loss of consortium) B) knowingly (actual awareness which can be inferred) mental + treble eco damages C) intentional: can treble all damages (potential for atty.’s fees, injunct, recission) 3. everyone is a potential P or D (not limited to classes of ppl) 4. not waivable II. THE DEED A. Introduction, Elements of the Valid Deed a) 3 types of W of title 1. Gen W: all defects in title 2. Special W: defects 3. Quitclaim b) requirements of valid deed: 1. id Gor/Gee 2. signed by Gor 3. description of land 4. description of interest conveyed (presumed fsa) 5. expression of present conveying inent (present tense, "grant" "convey") c) delivery d) acceptance e) r.o.w.: city streets, highways, streets, RR, non-navigable streams (not lakes, navigable streams -state owned) • own to middle of r.o.w. if boundary B. Deed Descriptions 1. must be so that land can be rzbl identified or else invalid K 2. hierarchy of intent: (rebuttable presumption) 1. natural monuments 2. artifical monuments 3. adjacent buondaries 4. direction (NW) 5. distances (500 ft) 6. area (5 acres) 7. place names (Quinn's farm) * parol evidence admissable to settle ambiguity * metes and bounds must close C. Execution, Delivery and Acceptance 1. Delivery: words or acts that manifest intent that transfer be immediately operative a. must put deed beyond gor b. recording: rebuttable presumption of delivery and acceptance 2. ways to give land to Gee: a. retain life estate for yourself and be trustee to irrevocable trust (make irrevoc. by recording) b. JT w/ROS: best to make agreement to waste problems: creditors, argument => partition (need to make not partitionable) c. will: problems: probate and creditors d. transfer to A and lease to O; probs: creditors, revoking lease e. fssca O to A but if A dies first, to O 3. conditional delivery: a. deliver to 3P, not Gee, not Gor's agent b. deliver w/written instructions, but you can't get it back c. if written in deed, you don't have to deliver to 3P * must be made irrevocable 4. Escrow a. 3 parties: escrow agent, beneficiary, Gor b. if condition not met, title doesn't pass c. must be K for sale, not gift d. condition can't be in Gor's control e. agent can't be in Gor's control (but can be Gor's atty, 2 hats) D. Financing Real Estate 1. to finance a house you need two things: a. promissory note (loan, K law applies); remedy = sue buyer prsnly b. mortgage or deed of trust (DOT) (collateral); rememdy = FC (judical or non-j) 2. two ways to get collateral a. DOT (three parties); trustee holds deed -if default trustee can sell for bank; trustee is not be chosen by M'gor (but can be his atty); basically is an agent of the bank b. Mortgage (two parites); bank has FC rights (purchase $ mort. is typical house as collateral mortgage) c. note: Mgor is buyer and Mgee is bank/lender 3. Foreclosure: distinguishes mortgage and all jr. mortgages a. judicial (stat. reqs) or non-judicial (power of sale in loan docs) b. Texas: stat. requirements must be met; Mgee has no further duties c. Minority (Murphy): lender must exercise GF & due diligence d. deficiencies: if sold for less than fmv and there's a deficiency (buyer still owes after FC sale), 51.003 lets buyer sue for credit for fmv. (seldom happens) 4. Financing a. institutional financing: promissory note + DOT/mortgage b. seller financing: can be same as bank OR K for deed -K for deed: seller is O in fsa, he only gives deed once all pd. (like rent to own) -in Tex. seller doesn't have to FC, they can take $ on forF (but notice req'd; more money = more notice req'd) [buyer gets no equity] -in some jx's, seller must go through normal FC sale, so he gets equity back E. Covenants of title 1. Present Covenants (look for present tense lang.) a) seizin: "I own what I'm conveying" b) rt. to convey; ex. if co-O, one wouldn't have rt to convey; if trustee, etc c) against encumbrances: (liens, ez, mortgages...) nothing inconsistent w/fee **breached when deed conveyed; SOL runs at execution of deed 2. Future Covenants (in future tense); runs with land a) cov of Warranty (W): Gor will defend v all legal claims to better title b) cov of Quiet Enjoyment QE: I will defend your title if anyone has better title than you (same as general W; not same as LL/T cov of QE) c) future assurances: execute docs needed to ensure you have clear title and can record you deed 3. Texas covenants (not all covs are in all deeds) a) general W (form deed 5.022); (express cov) deficit in land not breach unless sold by acre or fraud/mistake b) against ecumbrances (grant/convey implied covs -5.023) c) no prior conveyances (grant/convey implied cov. 5.023) v. seizin: says I own what I have, but no prior conveyances just says IF I own something, I haven't already conveyed it; present, 4 yr SOL 4. Covs. are Kual promises /are not mandatory /they are subj. to negotiation 5. Quitclaim: whatever I have, I give -no cov. 6. Covenants only apply to what is described in deed a. or if fraud/mutual mistake or sale by the acre 7. breach of cov of W -requirements: a. paramount title when granted (Gor doesn't warrant against trespassers) b. eviction (SOL runs from eviction) i. actual ii. constructive: A) yield to title (then prove paramount) B) judgement against you c. notify Gor to defend you (he can refuse, but you have to tell him) d. exception to eviction: if Gor refuses to give up possession F. Damage for Breach of title Covenants 1. Present Covenants a. don't run with land b. breached at conveyance if ever c. prsnl property (can be assigned if ok in jx -effect: sue remote Gor) d. Texas: cov. against encumbrances is a present cov, but lien breahces are treated like future covenants (eviction, can sue remote Gor) e. notice of encumbrance not a defense (exception: see public ez) f. if someone sells you your own stuff, too bad dummy (can't evict yourself) 2. Future covenants a. do run with land b. breached at eviction (SOL runs at eviction) c. can sue remote Gor d. notice not defense e. can only recover once; A->B->C->X (if X sues B, no one sues C) 3. Breach? a. what covenants in deed? b. what does it take to breach those covenants? c. did the defect exist at time cov. given? 4. calculation of damages a. how much? i. minority: fmv at eviction ii. majority, Texas: only liable for what you received iii. if improvement (house)=> can sue superior title holder for value of improvement under unjust enrichment iv. if P shows up and you have taken minerals, you owe them for value of minerals v. interest: can't recover unless it was an "investment" and had no possession and recv'd no rent (no benefit recv'd on invstmt) ex) P shows up in yr. 8; 2 yr. SOL, so P sues X for trespass for yrs. 1-6 and rental value + waste for yr. 7-8 b. can't recover appreciation/depreciation c. rationale: like liquidated damages; d. gifts & quitclaims: Gor not liable, but remote Gor can be sued even by Gee who received land as gift of QC e. fraction of acerage: pro rata proportion of sale price f. partial loss of title (subject to an ez, restrictive cov.) i. if can be easily remedied, damages = cost to remove ii. if can't easily removed, damages = decreased value iii. no duty to mitigate damages G. Estoppel by Deed /After Acquired title 1. recoverable when a. cov of seizen b. W of title or c. deed purporting to convey a particular interest *presumption of fsa applies *usually doesn't work for QC b/c not a-c 2. effect: either Gee or Gor is estopped from claiming that anything in the deed is false 3. usually applies with after-acquired title but can apply to: a. mortgage (if Mgor becomes O later, can't say bank's lien is invalid) b. common source (if Gor conveys to two ppl and gets title btwn conveyances) c. recital: stmts of fact; all parties bound by recitals III. EASEMENTS A. Introduction 1. the non-possessory rt. to use someone else's property for a specific purpose 2. Profit a prendre: a special kind of ez, rt to take something from land 3. appurtenant: benefit piece of property (presumption of appurtenant over gross) 4. in gross: personal; no property is benefitted (utility lines to util co. not land) 5. four ways to create an ez: a) express b) implied c) prescriptively d) estoppel B. Express Creation 1. using the deed to create an ez: 2. elements: a) description of proprty b) intent c) signed d) Gee's name e) Gor's name 3. can't reserve an interest to a stranger to the deed; solution: 2 docs. and give ez first 4. be clear b/c presumption of fsa still applies C. Licenses v Easements 1. permission given by occupant of land allowing licensee to do some act that would otherwise be a trespass 2. irrevocable, not subject to the SOFs 3. license + interest in land = irrevocable; ex) if you have a timber profit, you get a license to enter to get on the land => irrevocable D. Implied Easements and Reservations 1. Implied a. by prior use (implied to protect probably intent of Gor and Gee) i. unity of ownership w/apparent use of land by O for benefit of another part (quasi-ez) ii. severance iii. rzbl necessity b. by necessity (arises at severance) i. unity of ownership ii. necessity at time of severance iii. almost abs. necessity 2. reservation a. keep it for yourself b. hard to show reservation by implication E. Prescriptive Easements & by Estoppel 1. estoppel a. verbal rep/tacit approval b. reasonable reliance on expectation rt. will continue (change in position so that it would be unfair) c. foreseeability by servient O that the dominant O will rely 2. prescriptive a. c/L often uses adposs statutes by analogy (10 yrs) b. HELUVA required (use only req'd, not cultivation) c. Tx: must be exclusive of public and fee simple O d. if O is using, it's implied permission = license F. Scope, Modification and Transferability 1. if reasonably foreseeable at time of creation 2. natural change, not sudden 3. => scope can change even if increased burden 4. subdividing: okay if foreseeable that land will become subdivision 5. black letter rules • the more general the language of the ez is, the broader latitude the ct will give in determining how much one can do w/the ez; practice: write specific ez's • implied ez: determine scope of prior use or the necessity • scope of a rx ez = the "adposs" type use • appertenant ez can be used only for the estate for which they are appertenant, even if no extra burden • if can't be policed => ct may terminate ez altogether • if unrzbl hardship => ct may award $ damages rather than injunction to servient O • you cannot change the location of the ez w/o the consent of both parties (servient and dominant owner) • no absolute rt to continue use of the ez if the enjoyment of the servient estate is destroyed • if location not stated/known, the serivient O gets to locate the ez in any place easy and accesible for dominant O (user) • if there's already a road, but location not stated, use the road already made • use is determined by what is reasonably, necessary and convenient; balance intrusion • can't close ez w/o consent of dominant O • it is the duty of the dominant O to build and maintain the ez row 7. transferrability: a. appertenant is transferred automatically with the land b. in gross i. if personal in nature (look at relation of parties), not transferrable ii. if not personal (commercial utility, etc), then transferrable and assignable c. if you don't want the ez to be transferred, best to state it in the writing b/c restatement presumes transferability G. Termination of Easement 1. expressly; grant, by ez's terms; only works if ez created expressly; ex. Willard v. First Church -ez was to last as long as church property to be used for church purposes; or says ez will last until 2010; or fsla...on the condition that...; draft carefully 2. if created by necessity: when necessity ends, the ez ends; occurs when there is a rzbl alternative available; a license to use someone else's property is probably not sufficient b/c they are revocable These work no matter how the ez is created: 3. a release; must comply w/SOFs, can be for ¢ or can be a gift; can and should be recorded in public records, just like an ez 4. by merger: you can't have an ez in your own property; if the dominant estate and seriveint become owned by same ppl, then ez automatically goes away; it is permanenetly extinguished and doesn't come back unless it's remade in one of the four ways 5. by prescription; if the serivent O does something inconsisten w/the use of the domiannt O and makes out the elmenets for the period of time req'd (10 yrs in Tex) => the ez goes away by rx; works no matter how ez created 6. abandonment; two elements a. non-use + b. intent to relinquish the ez = ez goes away, it has been abandoned 7. estoppel; opposite of ez created by estoppel; doesn't matter how ez created, though; if some conduct/action by O of ez that suggests he is not going to use the ez anymore and you've got the O of the servient estae relying on that conduct and changing his position, the O of the ez is estopped to claim it anymore 8. misuse: must be extreme; if difficult to enforce by injuntion, ct will terminate ez H. Easement trigger questions: 1. what rights are there/scope? 2. how was it created? 3. has it been terminated? IV. COVENANTS REGARDING THE USE OF LAND A. Introduction 1. Real Covenant: promise regarding the land and the use of the land; what will (not) be done on the land 2. Negative ez: rt of dominant O to prevent servient O from using his property in a certain way 3. Characteristics of covenants: promissory (contractual) but governed by property law 4. Types of Covenants: i) Real covenant: money damages; ex. homeowner's assoc dues ii) Equitable servitude: injunctive relief; ex. trim hedges A---res. use----maintain fence-----B |benefit |burden C D B. Covenant at Law/Real Covenant 1. burden/benefit or both? a) who is trying to enforce the covenant? C --enforcer = benefit; D = burden b) are there original parties? (if so, there is no running issue) --C is not an original party => running of benefit --D is not an original party => running of burden 2) running of benefit a) covenant in writing (SOFs) b) touches and concerns the land (this is property law, so we want to enforce covs. that have somthing to do w/the land, not random promises) c) partial vertical privity of estate (own as much or less than prior O) 3) running of burden a) covenant in writing (SOFs) b) touch and concern (the burden). c) full vertical privity (exact estate from B to D; p. 862; does D have everything B had?) d) horizontal privity (only btwn the original parties to the covenant): do you have a covenant plus something/some other recognized relationship; i.e. an int. in land. (text 860) i) general horizontal privity = cov + transfer of an int. in property ii) Massachusetts: mutual interest in the same property (LL/T but no co-T; assignees bound, sub-lessees not) e) intent that covenant run i) express (this cov meant to run w/the land) ii) boilerplate lang. "heirs assigns and sucessors" iii) inferred from the type of covenant that it is Special Rule 1: In esse rule (sometimes applies for Real Cov's) cov must either pertain to something already in existence or must use magic words "assings, heirs, sucessors" Special Rule 2: cov must be for land that was meant to be benefitted by it (sometimes applies for Real Cov's and equitable servitudes) C. Equitable Servitude (enforce by injunction) A. if a remote (not original) part, then can it be enforced in equity? 1. cov in writing or recognized substitute a) covenant in writing b) rne (never retroactive): i) common O sells one or more lots subject to restrictions ii) that benefit the land retained by the common O iii) intent: that all the land be similarly restricted (sales brochures, map of subdivision, etc) 2. touch and concern 3. PTBC has i) notice of cov or a) actual b) constructive: if recorded deed, constructive notice c) inquiry notice: if you're aware of a fact that would make rzbl man inquire, you're charged w/notice ii) did not pay for his int (not a BFP; gift) [BFP: no notice and pd. ¢] 4. intent (that cov run, be enforceable later) 5. cov. lends itself to equitable enforcement (part of basic injunctive relief; if ct. can't frame adequate injunction that can't really be enforced, ct. will not get involved) B. don't forget: 1. sometimes special rule 2 applies 2. laches and estoppel D. Touch and Concern: does the covenant affect 1. way land is used 2. value of the land 3. quality of life on the land E. Construction 1. if ambiguous => interpret in favor of free enjoyment 2. do not read restriction on use/enjoymt into the cov by implication 3. interpret rzbly but strictly 4. gives words ordinary meaning per intent E. Enforcement /Termination 1. who can enforce? a) if special rule 2, must have property interest; look for facility, ez that everyone can use b) if something doesn't benefit all (like ez) have 1 prop. O sue c) in Texas, hoa's can enforce (must enforce rzbly) 2. Termination a) waiver /abandonment i) how do you keep an exception from being a waiver? • make purpose for exception clear • continue to police strictly • put an end to the exception when applicable ii) must not be too distant or sporadic iii) must show general consent of prop. O's iv) not waiver if O didn't complain of a non-material violation that did not affect him b) void: i) if too ambiguous to enforce ii) FHA violation A. discriminatory effect B. disparate impact (on minority) C. rzbl accomondations c) change: i) must be w/in the community and not just on the outside ii) object/purposes of cov. must be thwarted iii) can't be of value to the O's anymore d) by agreement: i) all or ii) quorum (no. to term. by agreement) e) express termination V. PRIORITIES AND THE RECORDING SYSTEM A. Equitable Interests and the Priorities Rules 1. The general rule: first in time, first in right 2. The first exception: you can't enforce equitable rights against a bfp/gfpfv. a) equitable int. • the person who is first in time • restrictive covenants enforceable in equity (all the neighbors that seek a rt to enforce an injunction) • rt of recission for fraud or mutual mistake • rt. to fill in the missing Gee's name • mortgages in some states, incl. Texas (in lien states) • rights arising by estoppel (ez's by estoppel, estoppel by deed, et cetera; someone who thought they got the property, but O didn't have anything yet, but O subsequentaly gets the property and person gets by estoppel) • beneficiaries in a trust, no matter how the trust is created; includes instructive trusts • a purchaser on a K for sale b) bfp/gfpv (pd. value to acquire their int. w/o notice of prior claims) • the person who is second in time • pd. value to acquire their int w/o notice of prior claims • for good and valuable consideration = rebuttable presumption of a bfp 3) The second exception: a) someone req'd to record but didn't • someone acquired their int. by virtue of a doc. that has to be record'd • someone is claiming their int by a doc. that had to be recorded • person earlier in time • something that must be recorded • recording: gives constructive notice to those who have an obligation to look/search (all those that would claim an interest in land of any type) b) The third exception: someone protected by statute • what category of ppl are protected (person later in time) • good faith creditors are protected (Tx) • pp that purchase for valuable consideration but no notice (in Tx statute) • policy: to encourage ppl to take advantage of a system that tells everyone who owns what • every state has a statute, but they're all different 4) Third Exception: a) someone whose conduct supports estoppel • first person who by words or conduct, does something that supports the estoppel b) bfp/gfpv B. The Recording System /The Recording Statute and Basic Principles 1) tract index: you find prop. based on descripion; hard for clerks to maintain 2) grantor-grantee index a) look in grantee index under seller's name b) go backwards in time until you find a deed to seller until you reach the "root of title" c) switch to grantor index d) search forward in time under the name of ea. grantor i) look in each year until you find the deed to the next person; search from the date the grantor conveyed until grantee records ii) note every encumbrance during that period C. Types of Recording Acts 1) race: first one who validly records, wins 2) notice: first in unless 2d in time does not have notice (constructive or otherwise) 3) race-notice: first in time unless later pruchaser: a) is w/o notice and b) records before prior notice is recorded 4) Texas: notice state; applies to GFP and creditors 5) Texas: Mother Hubbard clauses are constructive notice (means you grant everything you have); if you title search, you must look at everything granted 6) Tx Recording Statutes §11.001: to be effectively recorded: • eligible for recording • recorded in county where prop. located §11.003: after 12/31/1981, can't record unless: • grantee address or • fee • but still valid if no address §11.004: county clerk's duty: • correctly record w/in rzbl time any instrument validated • give receipt • record in right place • index • libel for damages up to $500 §12.001: instrument concerning property: • may be recorded if validated (sworn, notary) AND • signed in presence of 2+ witnesses §13.001: validity of unrecorded instrument: • valid btwn parties to instrument and gee's heirs • valid against subsequent purchaser w/notice • valid against not BFP (gift) §13.002: recording = notice §13.003: instruments previously recorded in other counties • valid against creditor, subsequent PFV • IF they did not have notice • AFTER it is recorded in county where land is *a forged deed is totally invalid, even if recorded 7) Notice: a) express b) inquiry: if someone has notice of facts that would put a rzbl person on inquiry => charged w/noitce of what you would have found if investigated i) quitclaim (if in your chain of title, check and see why) ii) restrictive covs in the entire area may give you constructive notice c) constructive i) recording (indexing not req'd) ii) if no acknowledgement, not notice iii) possession D. The Bona Fide Purchaser a) no notice of any type b) at time he paid ¢ (has to be pd. in full before notice received) i) consideration: 1. $, not nominal ¢, but sufficient 2. labor/goods 3. loan (for lien); DOT, mortgage 4. forebearance 5. debt forgiveness 6. promise to pay if promise is in the form of a negotiable instrument (& actually negotiated in most jx's) ii) not consideration • promise to pay (see #6 above) • pre-existing debt (can't secure pre-ex debt for ¢ b/c they didn't give up anything) not in Tx, check local law iii) not nominal ¢; must be "sufficient"; Texas: can't be grossly inadequate compared to fmv of thing acquired • what interest you acquire compared to • value given up to get the interest • 20/50 rule: if ¢ is 50% of fmv or higher, that is 'sufficient' if someone has pd. 20% or less, prob. not sufficient anything btwn 20-50% depends on the facts/lawyers • it's a rule of thumb (ie oil/gas leases speculative, so under 20 maybe ok) • LIENS: if you lend someone $50 on a property worth $50k, you have a $50 lien so that is sufficient for the int. you get • don't look at the 20/50 rule until all the ¢ has been paid iv) ¢ must actually be pd. before notice recv'd; ¢ not pd until after notice means the purchaser is not in good faith re: that amt. pd after notice • look at amt pd before notice E. Gaps in the Record and other Problems w/Recording 1) if you pay part ¢ and then receive notice: a) give to 1st in time person, but they have to pay later purchaser the amt. he pd. in good faith b) make 2d in time person pay 1st in time person the money and 2d person can keep it 2) if restriction put on one deed to create rne, then in some jx's = notice to all purchasers, even if not mentioned in chain of title (Guillette case) F. Creditors and the Priority System 1) Purchaser: exchange ¢ (BFE) for int. in land; has exchanged value in order to get the int. claimed in the property ex. if you give $ for an int. in land (as collateral) you are a purchaser! 2) Creditor: someone whose rights arise by law if they've taken the steps necessary to perfect a lien on the property **see worksheet** ex) judgment liens, mechanics liens 3) if you're a creditor and you foreclose, for the amt. over "bidding your debt," you are a purchaser ex. if you have a lien for $50,000 and you bid $60,000, you're a purchaser for $10,000 4) who cares? if you're a creditor, exceptions 1 & 3 do not apply VI. TEXAS HOMESTEAD A.