Present Possessory Interest

PRESENT POSSESSORY INTEREST Present Possessory Interest Why divide interest over time? Tax advantages (Gruen); minors cannot manage property alone; charitable gifts in remainder so giftor gets credit in life. ♦ FEE SIMPLE ABSOLUTE: “To A” or “To A and her heirs.” WORDS OF LIMITATION—“and his heirs”—defines estate granted to A with no interest to heirs until their inheritance, if designated; length is forever. WORDS OF PURCHASE—“To A”—interest granted to A in land by instrument. INHERITANCE—ORDER OF PREFERENCE: (1) SPOUSE (2) ISSUE: KIDS AND THEIR KIDS (3) PARENTS, IF NO KIDS. HEIRS: PERSONS WHO SURVIVE THE DECEDENT AND ARE DESIGNATED AS INTESTATE SUCCESSORS UNDER STATE’S STATUTE OF DESCENT. DO NOT EXIST UNTIL SOMEONE DIES. ISSUE: CHILDREN AND THEIR CHILDREN ANCESTORS: PARENTS COLLATERALS: ALL PERSONS RELATED BY BLOOD WHO ARE NEITHER DESCENDANTS OR ANCESTORS—BROTHERS AND SISTERS. ESCHEAT: DECEDENT WITH NO HEIRS; PROPERTY GOES TO STATE. ♦ FEE TAIL: “To A and heirs of his body.” Possessory interest descends to A’s issue, generation after generation. When blood line runs out, land is reverted to grantor’s heirs by way of reversion or, if specified, to another branch of family (executory interest). EXCEPTION TO BIG RULE: In minority states, fee tail can be converted to FSA (disentailed) by conveying fee tail in life to another. Example: O conveys Whiteacre “To A and the heirs of her body, and if A dies without issue to B and his heirs.” Majority rule: No fee tail has been created. Majority #1: A has FSA; B has nothing. Majority #2: A has FSEL; B has EI. Minority rule: Fee tail has been created. PRESENT POSSESSORY INTEREST Minority: A has FT; B has remainder. ♦ LIFE ESTATE: “To A for life.” Every life estate is followed by either a remainder, which must be created explicitly, or a reversion, which can be implied. RESTRAINTS ON ALIENATION: CONDITION —imposed by grantor in defeasible fees; if broken, land it forfeited. COVENANT—condition promised by grantee to grantor; if broken, then injunction or damages. Objections to restraints on alienation: restraints make property unmarketable, perpetuate concentrations of wealth, discourage improvements on land, and prevent owner’s creditors from accessing property. Types: → DISABLING RESTRAINT—withholds from grantee power to transfer interest. → FORFEITURE RESTRAINT—if grantee attempts to transfer, forfeited to another. → PROMISSORY RESTRAINT—grantee promises no transfer, enforceable contract. ▪ Absolute restraint on FS is void. (Partial) forfeiture restraint on LE is valid. --White v. Brown 1977: Decedent left will leaving home to plaintiff “to live in and not to be sold.” Question, does plaintiff have FSA or life estate. Rule: a will shall convey all interest testator had, unless contrary intent is expressed in word/context. Assent: “no sale”—illegal restriction on alienation of FSA. Dissent: “no sale”—legal restriction available only on life estate with reversion implied to grantor or heirs intestacy. LAW OF WASTE: → AFFIRMATIVE WASTE—voluntary acts of life tenant which reduce value of property. Life tenant can make large alterations on land, as long as value of land is not diminished. EXCEPTION: “open mines doctrine”—If mines open are open when grant created LE, then LE tenant can drill. If life tenant finds mine, he cannot drill. → PERMISSIVE WASTE—life tenants failure to take reasonable care of property; life tenant may be forced to pay damages or forfeit interest. EXAMPLE: Life tenant must pay interest on mortgage on land, while remaindermen pay principal. If tenant does not pay, can forfeit interest. → AMELIORATIVE WASTE—At common law, if you increase value of property. --Baker v. Weedon 1972: Weedon brought claim to chancery court for immediate sale of property, a farm which had greatly increased in value because interstate bypass was being built on land. PRESENT POSSESSORY INTEREST Remaindermen oppose sale because of continuing potential for increase. Rule: Court will order sale if deterioration/waste and whether sale is “necessary for best interest of all parties.” H: Sale of whole not justified. ♦ FEE SIMPLE DETERMINABLE: “so long as,” “while,” or “until.” Fee simple limited so that it will end automatically when stated event occurs. O retains possibility of reverter. Clock on adverse possession starts the moment defeasing condition/event occurs. ♦ FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT: “but it,” “provided that.” Fee simple that does not automatically terminate, but may be cut short or devised at transferor’s election when stated condition happens. O retains right of entry. Clock of adverse possession starts: (Majority view) when condition subsequent occurs or (Minority view) when right of entry is asserted and refused—doctrine of laches may require re-entry in reasonable time. IF LANGUAGE PRESENTS TOSS UP BETWEEN FSD AND FSCS, THEN CHOOSE FSCS. ♦ DEFEASIBLE LIFE ESTATE Most common prior to 1940 for forfeiture upon remarriage, to provide for spouse until they can remarry. ♦ FEE SIMPLE SUBECT TO AN EXECUTORY INTEREST FS, that upon happening of future stated event, is automatically divested by an executory interest: IN THE TRANSFEREE. FOLLOWED BY EXECUTORY INTEREST—like possibility of reverter/reversion except it is created in transferee rather than transferor and his heirs; contingent on condition precedent, like contingent remainder—but used when following a determinable fee because remainder cannot follow a vested fee simple. PRESENT POSSESSORY INTEREST CONDITION ON USE RULE: A condition attached to defeasible fee is an illegal indirect restraint on alienation, if it: ▪ materially affects marketability adversely, or ▪ expressly limits alienation to an impermissibly small number of persons. Falls City v. RR: City conveys land to RR, as long as site used for RR divisional headquarters . When HQ moves, city wants land back. Rule: reverter provision invalid as restraint on alienation Cast v. Bank: FSCS on condition that son or grandchild occupy farm as residence for 25 years invalid because restricts who can live on property—indirectly affecting who can buy farm. EXCEPTION: Conditions which would otherwise be considered illegal, may be acceptable if they are imposed for publicly beneficial purpose. Mountain Brow Lodge v. Toscano 1968: Gift deed gives Plaintiff property “for use and benefit of second party, only” with possibility of reverter to grantor if property used or transferred to another party. Rule: Clause “in event of sale” is absolute restraint against alienation and void. Because restriction on use was condition limiting land use and not covenant restraining alienability of fee simple, it is valid. POLICY: Majority—alienability will be restricted if for good purpose. RULE: no use restrictions allowed which are designed in spite, malice, or with intent to break up families or discourage marriage. RULE: when defeasible condition is foreseeable at the time use is precluded by eminent domain: Majority: grantee takes whole value of property. Minority: grantor gets difference between value of unrestricted fee and restricted— value determined by likelihood of reverter. WHEN POSSIBILITY OF REVERTER IS TOO REMOTE AND SPECULATIVE, GRANTEE IS JUST SEEN TO HAVE FSA; IF PERFORMANCE WAS IMPOSSIBLE, THEN RESTRICTION INVALIDATED; AND IT IS VERY DIFFICULT TO DETERMINE VALUE OF REVERTER. Ink v. City of Canton 1965: Grantor conveys tract of land to city for use and purpose of public park only. Gov. takes most of land to build freeway. Rule: Because probability of reverter was so small (Who wants to buy land restricted for use as park?), amount if any, by which value of land for any use exceeds its value for specific use, should got to grantor. City must use money gained from sale for parks. PRESENT POSSESSORY INTEREST City of Palm Springs v. Living Desert Reserve: When condemnor owns present possessory interest in land, the action of condemnation itself is imminent violation. Restatement r ule on dividing property in case of eminent domain applies only when a paramount authority, not grantee, interrupts use.