PROPERTY OUTLINE Spring 2011 Prof. Oren RULE OF CAPTURE Rule of Capture vs.

Rule of Reasonable Prospect: Pierson v. Post: - FACTS: P chasing fox on a commons when D intercepts and kills it. - ISSUE: How do you gain property rights in an unowned object? - RULE: Btwn a prior possessor and subsequent possessor, the prior possessor will win. (but not the case here) o Rule of Capture: Must physically hold or mortally wound the animal in order to have property rights. o Rule of Reasonable Prospect: Whoever first has a reasonable prospect of capturing the animal. Prefer Capture to Reasonable Prospect bc: - It is easier to figure out who captured the fox first than it is to figure out who first had a RP. o Advantage to this certainty is that parties know beforehand what their rights are, and will behave accordingly, and there will therefore be fewer cases. - Capture creates an incentive to become a better hunter w/ more accurate tools of capture. o If you are hunting for fun, then RP is better for you, but if you are trying to encourage the killing of foxes, Capture makes more sense. Bright line rules have more influence than less definite ones: - However, the higher the stakes and more varied the fact situations, the more flexible the rule should be, and it will be more worthwhile to go through the costs of making a case-by-case determination. Constructive Possession: - RULE: Trespassers on land should not be entitled to possession bc wild animals on land are in the possession of the land owner. - POLICY REASONING: This rule discourages trespass, so it is not necessary to invest in lots of security to keep others out. o Possession in fact is not always needed for legal possession, nor does possession in fact guarantee legal possession. In assigning property rights, must consider: (1) Does giving this person property rights serve policy goals? (2) Who else is claiming rights? You can award to someone who is not the true owner, just whoever has the best claim at the moment. Custom and Common Usage The customs of hunters might not serve the world at large, so we should consider external interests as well as those within the industry to decide whose custom should apply. Ghen v. Rich: - FACTS: A whaler killed a whale, another person found it on the beach and sold it to another person, ignoring the custom of notifying the whaler.

ISSUE: The person who found the whale did not transfer any property rights to the person he sold it to, as he did not have any to begin with? - RULE: Before you follow custom, look at societys interest assigning property rights is ultimately a matter of policy. Here we follow the custom of the whaling industry bc it is consistent with policy goals of wanting to kill more whales and therefore increase fuel supply. o Even in the absence of custom, here we want the whaler to win bc they were the ones who actually captured the whale, and then did all that was possible to take the animal into their possession. o In Pierson, the custom of Reasonable Prospect did not serve policy goal of killing more foxes, so the ct. did not follow it. Greenpeace Hypo: Intercepting whales from whalers for the policy goal of protecting the whales. - Pierson would ask if this serves society. Is whale hunting still a valuable exercise? - Greenpeace is interfering with capture not competing for it. But does this support societys goals? Keeble v. Hickeringill: - FACTS: Guy builds a duck trap to capture and sells ducks, D scares ducks away on purpose, not trying to kill them in competition. o In Pierson, D was in competition w/ P for the same goal of killing the foxes. Here, D does not share the goal of killing ducks, but rather hindering their killing. (i.e. Ds conduct does not serve the societal goal.) - ISSUE: Is Ds conduct desirable to society? - RULE: Competition vs. interference Rule of capture is not enough. o So, P wins if we want P to contribute ducks to society/the market, and if D is interfering and not competing w/him. Schoolmaster Hypo: It is one thing to compete for students by starting a new school, but another to scare them off to prevent them from attending the old school. - To decide otherwise would give the schoolmaster a monopoly, and result in less education for students. - Being the first schoolmaster only gives you some rights to legal protection. (Legal right to be free from intimidation of students.) RULE: Assignment of rights is a matter of policy, and one can be considered the owner for some issues and not others, depending on the goals. - EXAMPLE: Where the govt owns the wild geese in one case, but not the other. o Case 1 Want to regulate the geese hunting, and the best way to do so is say that the govt owns them. o Case 2 No policy goals served by making govt liable for damage caused by the geese. If it was, this would encourage overhunting of the geese. - Trapping an animal gives you property rights over the animal in general. o Policy reasoning is that there is less incentive to trap if you knew that someone else could come along and take it.

Exception is where another has constructive possession bc it was trapped on their land. If the animal escapes from you, you lose rights to the animal. o Policy reasoning is that this will create an inducement to hang on tight to the animal, mirroring the original goal of trapping the animal in the first place. o Exception is if the animal has Animus Revertendi, or a tendency to return to you then it is considered domesticated. Owners of domesticated animals do not lose title when the animals escape. o Policy reasoning is this creates an incentive to domesticate animals, which makes them less dangerous and easier to use for societys benefit. o Example: A herd of domesticated deer that graze on the commons during the day and return at night. If a hunter kills one, ask whether a reasonable hunter would have been able to tell that they were domesticated? The more likely it is that the hunter should have known, the more likely we are to hold him liable in killing the deer, and more likely to hold the domesticator as the owner of the deer for these purposes.

Applications Beyond Animals: Hammonds v. Central KY Natural Gas: - FACTS: Oil or gas sitting below the land of multiple owners; Owner A drill and collects the oil that is under both A and Bs land. - ISSUE: Who owns the oil? - RULE: Under the Rule of Capture, A owns the oil, the same as a wild animal. - POLICY REASONING: It is impossible to tell whose land the oil was under, so this is a way to encourage the collection of a valuable resource, just like whale oil. HYPO: What if the natural gas is collected, and then is stored in an exhausted natural gas formation? (Cheapest and safest alternative for storage) - The court could reapply the rule of capture a second time, but this would mean the gas company would have to find a different, less efficient means of storage. - Alternatively, the gas company could make an agreement with all of the individual owners of land above the formation. However, depending on the # of owners, this could be difficult. (i.e. high transaction costs) o The Hold-out Problem: Every owner has veto power, and therefore the incentive to hold out for a higher price. Deal is increasingly unlikely as the # of ppl goes up. - Better to analogize gas that has been captured once as a domesticated animal. o Policy reasoning is that while letting a wild animal escape is a bad thing, letting gas escape is a good thing, and so using the rule of capture here does not really work.

Company will be liable for damage caused by the gas, but this will likely be low.

Disadvantages of the Rule of Capture: Creates an incentive for inefficient and wasteful behavior: - Encourages A to put many gas wells close to the border of Bs land, and B will do the same, in order to be the first to capture the oil. It is a waste of societal resources for A and B to engage in this race, and there will be pressure to capture right away, even if that is an economically wasteful thing to do. - This premature capture will reduce long term productivity, especially with animals, but also with oil, bc there will be less oil pressure, making the oil more difficult to recover. - Tragedy of the commons Rule of capture seems to encourage more capture than is economically beneficial. Emergence of Private Property Rights: Demsetz Article: Chopping down a tree represents a loss to greater society, but the chopper has gained the value of the tree, while sustaining only a small portion of the loss to society. (i.e. internal costs are greater than individual external costs) Losses and benefits of chopping down the tree vs. waiting to chop it down. - Externalities: The effect on other people that the actor has no reason to consider in planning their conduct. Bc they have no reason to consider this effect, externalities often lead to inefficient use of resources. (i.e. chopping the tree down today as opposed to letting it appreciate for a year.) o Assumes that ceterus paribus, being economically efficient maximizes the benefit to the whole of society. - Transaction Costs: It can be very difficult to negotiate a deal w/ a whole village to leave the tree alone, as it is not in the interest of any individual to spend more on making a deal. o Free Rider Problem: Incentive is to wait and hope that others take on the transaction costs. o Hold Out Problem: Each individual villager has veto power, which adds to the incentive for a villager to hold out for the maximum possible payment. o May also need to extend resources to enforce the deal - Accordingly, it is very unlikely that a deal will be carried out, unlikely that agreement will be reached. High transaction costs result in the continuation of externalities. o Example: Tragedy of the Commons; Overfishing in international waters, in the interests of each individual to catch as many as possible, while bearing only a small portion of the costs to society. Only way to fix this is to make a deal with all nations, which would be very difficult to make. Encourages actors to ignore the effects of their actions on others. - Emergence of Private Property Rights: Demsetz thinks that there will be the establishment of private property in land to encourage individuals to

consider externalities or rather, externalities become internalities, as you would bear all of the loss of prematurely cutting down the tree. Incentive to think about the future and engage in that conduct that will maximize the value of their trees/land. o The externalities now are actions of the owner that affects other people outside of your property. As the owner, you have no reason to take them into account. However, fewer transaction costs bc you have to deal with fewer people. Demsetz argument also has force where putting things into the commons is concerned. o Example: Air Pollution by factories It is in societys interest to control air pollution, but as the factory would have to bear the cost of putting on controls, they have much less interest in such control. (cost of controls individual portion of whole cost to society) must be negative for there to be an incentive for the factory to institute controls. However, a private property situation is not really possible in this situation (air). An alternative is governmental control. However, under Governmental Control, professional wood choppers have more incentive to organize, and are likely a smaller group than the villager. This is why special interests often prevail smaller transaction costs and greater individual benefits to the wood choppers (as compared to villagers). Weaknesses in Densetzs Argument: o Assumes that primary concern of people is money o Getting from the commons to private property will likely involve a ton of cooperation as well. How will we get there? o Private property as an institution makes it possible to have certain activities, such as steel mills, that create externalities.

ADVERSE POSSESSION: Rationales: CLEARS TITLES TO LAND: AP serves to cure any mistakes that may have been made in the past in conveying land. Banks will not lend money to improve land where ownership is uncertain. Rationale for SOL Evidence decays, finality and certainty within the law, o Short SOL puts burden on the land owner, long SOL puts burden on the adverse possessor, leaving them at risk for a very long period of time. ELEMENTS: Actual o Treating the land like a true owner not required to improve the land. Building a house, farming, fencing, cutting timber, hunting, or fishing may constitute actual possession o Adverse possessor may not have to pay taxes, and may claim actual possession even if the true owner is paying the property taxes. Leasing to a tenant may qualify as actual Open and Notorious o The adverse possessors use must be of such character under the circumstances as would indicate to a reasonably attentive owner that someone else might be claiming the property o Buildings, fences, crops, or husbandry of animals on the premises may constitute an open and notorious presence. (sometimes enclosure or cultivation are statutory requirements) o If O has actual notice of As claim, that is enough. If not, then is As use similar to that of a typical owner of a similar property? Exclusive o If two adverse possessors use the property, it is not exclusive o The first or senior adverse possessor may oust or eject another adverse possessor of the same property without having to restart the statute of limitations o Adverse possessors acting in concert may be considered exclusive Hostile or Adverse o The majority (objective) view The adverse possessor simply needs to occupy the property without the true owners permission and in a way that is inconsistent with the true owners rights. (objective test for hostility) o The minority (bad faith or intentional trespass) view: (ME doctrine) The intent of the adverse possessor is important in determining whether the possession was hostile (Did the adverse possessor have the intent of making the property he was intruding on his own?) o The good faith view Adverse possessor must mistakenly but in good faith believe that the property he is overtaking is actually his. Squatters never get the title in these states Continuous o Does not mean the adverse possessor must be there every day. Seasonal use may be considered continuous, so long as A makes the same use every year that an owner is likely to make.

 Intermittant activities generally do not constitute AP. Tacking is allowed btwn A and As predecessors in title, so long as they are in privity w/ each other. There is tacking on the owners side as well. o If the owner reenters, AP must start the period all over again. Once the statutory period expires, the AP effectively gets title. However, he usually cannot record this title since he has no deed. He can get a judicial determination of AP, which can be recorded as if it were a deed. Need to inspect: A buyer should physically inspect land to be sure that the record owner still owns it, and that there is not an unrecorded AP deed. Adverse Possession via use: VAN VALKENBURGH v. LUTZ Neighbors suing each other in Yonkers over land. o AP and Color of Title (Constructive Possession): Claim based on a written instrument or judgment. Designed to help a party with a good faith claim based on a faulty written instrument. May also have shorter SOL period for COT claims. This is the exception to the rule that the AP acquires title only to the portion of the property actually occupied. Rationales: o SLEEPING RATIONALE: (Punishing sleeping owners) If the record owner had a fair chance to discover and act, we can say they slept on their rights. o EARNING RATIONALE: The adverse possessor has earned the land based on their conduct on the land benefitting society. o FIXING MISTAKES RATIONALE: Securing conveyance of land so not forever at risk. RULES: o The specially lenient rules for COT only apply if you are occupying some of the land ACTUALLY DESCRIBED on the deed. o A title acquired by AP is as entitled to legal protection as any other title. o As btwn 2 possessors, the first has the right to get rid of the second o Actual Possession: Want the AP to use the land in the way that a true owner would, does not need to use every single inch of the land bc this is not what a prudent owner would do. So, an AP with COT only needs to occupy part of the land, since the intent of the party when entering the deed is to enter into ownership of all of the land in the deed, not just part. If not claiming under COT, no constructive AP of the entirety of the land, just what you occupy. o COT should be restricted to mistakes that cannot be easily detected o You cannot claim constructive possession that is owned by someone other than the owner of the land you are on; entry of the land is required. Rational for being more favorable to APs with COT vs. APs w/o COT: o If you have COT, to your knowledge you are following the law; those w/o COT know they are tresspassers. o COT functions to fix inevitable defects that arise from land transfers. AP and Accidental Possession: Unintentional Trespass

HOSTILITY Objective Test: Hostility relates not to the APs state of mind, but rather to their behavior; must be of a kind that would put the diligent record owner on notice of a claim to ownership. o Inquiry is how would the RP owner interpret the actions of the trespasser? Words and acts by the AP are relevant while the statute is running bc they might lull the owner. Mental state is irrelevant though. o Does accidental trespass satisfy the hostility element of AP? YES. Sleeping rationale Satisfied, no requirement of evil intent bc this wouldnt change record owners fair chance of finding out about the trespass and taking action. Earning Rationale Satisfied, improvement to the land is regardless of mental state Fixing Mistakes Rationale Satisfied, dont want the accidental encroacher to be at risk forever. OPEN AND NOTORIOUS: In general, the AP does not need to show that the true owner actually knows, but rather that they should know. o Small encroachments might not be open and notorious. If we require actual knowledge, this puts the burden on the owner to do a survey everytime a neighbor makes improvements, which not everyone will do. o Court basically recommends forced sale of encroached land via a liability rule. This encourages the owner to take on burden of doing surveys, in order to avoid unexpected and forced sale of land. Property rule would say that the invader of property rights must cease and get off Liability rule says that the invader may continue so long as they pay damages o Alternative doctrines for mistaken boundaries: Agreed boundaries Acquiescence Estoppel MANNILLO v. GORSKI: Where neighbors made additions to their house that accidentally went 15 into the next lot, and neither party realized this. o Makes an exception to the objective open and notorious standard says that there must be actual knowledge in such cases of border encroachment.

AP and Tacking: Tacking allows you to tack periods of occupancy together based on privity to reach the statutory period. Must be privity (i.e. grantor-grantee) btwn the AP parties. Rationales for allowing tacking: o Sleeping Rationale: Just as the true owner has slept with respect with one possessor, they have slept with respect to a series of possessors. o Fixing Mistakes Rationale: We dont want to punish the buyer for this error. W/o AP via tacking, owners would be forever suspect to mistakes. o Earning Rationale: Not as strong here dont necessarily have the years of beneficial ownership required by statute, although they did pay for the land RULES: o There is tacking on the OWNERs side as well. o We need privity to tack. The question is, "what relationship ought to be held to constitute privity? Should we insist on a grantor-grantee relationship, or should it be

Ok that we had a series of possessors for the statutory period. The various rationales for adverse possession give us arguments for defining privity either very stringently or very loosely. Under what circumstances should we allow tacking? o NOTE: American courts focus on the earning rationale, English courts focus more on the sleeping rationale. o Where there is a gap in As possession: We should allow A to tack together his periods of possession according to the earning and sleeping rationales. We should not allow the time of the gap in possession to count towards SOL according to the earning rationale, although counting it would be supported by the sleeping rationale. o If A abandons the land and B goes into possession, no tacking; earning rationale is not satisfied. o A can tack against a series of record owner if we didnt allow this, we would be restarting the statute every time there was a new owner, which would extend mistakes for a very long time. (fixing mistakes rationale) HOWARD v. KUNTO: Deeds of houses all off by one, residents have not lived there for SOL. Get the deeds in the end via tacking for AP. o Just need a reasonable relationship btwn owners, not strict privity. o Summer use does not mean non-continuous, as this is the same use as a true owner. Acting as a true owner satisfies the Earning, Sleeping and Fixing Mistakes rationales. If the Kuntos were LNT camping, this is still sufficient, on the rationale that true owner will check on land when it is most likely to be used, and if you say LNT is insufficient, this encourages ppl to exploit lands. o Here, the ct is willing to apply tacking even though the deed does not describe the land, and therefore no privity. Some cts, i.e. in PA, require the deed to describe the land. However, this makes tacking impossible where the AP is accidental and there has been a transfer of title.

AP and Disability: If the true owner is under a disability when the AP enters the land, in nearly all states he is given extra time within which to bring an ejectment action. Usually given 10 years by statute from the time the disability is lifted. Types of disabilities: o Infacy o Insanity o imprisonment Rationales: o Sleeping Rationale: Makes sense bc the owner has not slept in the same sense a normal owner o Earning Rationale: In tension w/ the sleeping rationale bc what if A knew of Os disability and purposely tried to take advantage of it. o Fixing Mistakes Rationale: also in tension w/ allowing extension bc mistakes last longer

Also puts additional burden on AP bc cant be sure if O was under disability when the C/A accrued.

RULES: o Look at the disability of the person entitled to bring suit when A entered the land, not subsequent record owners. Consistent w/ allowing tacking of owners. Although the disabled owner may be able to have suit brought via a guardian, it is much easier for A to check if O was disabled at the time he entered the land, as opposed to being on notice for later disabilities. It would be even more difficult to find heirs/figure out whether they are under a disability. Also, what happens later to O does not seem relevant. o Having a disability can only help O, not hurt him in terms of SOL.

AP of Chattels: Different rules for running of SOL than regular AP, as chattels by nature are more easily concealed. RULES: o General Rule: (American Rule) A buyer can not get any better title than the seller had. The buyer suffers o Doctrine of Market Overt: (European Rule) A bona fide purchaser can acquire good title from a thief if the sale in question takes place in an open market. Original owner suffers. o Conversion results in the forced sale of the object Who should have the burden of the transaction? Who could have more easily protected themselves? o RULE: A good faith purchaser can get title in situations of voidable title and entrustment because the true owner in these cases could have protected themselves more easily than the purchaser could have. Treat situations of fraud differently from situations of theft You can more easily protect yourself against a person who writes a bad check than a random thief. If goods are entrusted to a dealer of that kind, then that dealer can transfer all the entrusters rights. It does not matter if the merchant had permission to sell. Rationale is that the good faith buyer would have a heavy burden without this rule. Also, the entruster could have investigated whether the dealer was trustworthy, and thus should carry that burden. Discovery Doctrine: When does the SOL begin to run? o The C/A accrued when O knew or should have known through due diligence. o Focus on the actions of the owner to determine when SOL is tolled. Sleeping Rationale: So long as the owner used due diligence to find the property, then they were not sleeping on their rights. Open and notorious element is very hard to apply in such cases as this. o Elements:

Due Diligence in searching for the chattel. This does not necessarily mean reporting to the police, as: Might encourage other thiefs to rob them Could drive the object further underground Discourage ppl from loaning their artwork to the museum. When would a duly diligent person have found the paintings? Transfer of the paintings is taken into account. OKEEFE v. SNYDER: Okeefe claims that the paintings in possession of D were stolen and wants them back.

POSSESSORY ESTATES: Questions: What language creates the estate? What is the duration of the estate? Are any future interests created? Terms: Heirs: Person who takes at the death of the decedent if the decedent died intestate. (aka next of kin) Devisees of Legatees: The ppl who take under a will. o Wills did not come into being until 1540. Until then, the heirs would take the decedents assests. Primogeniture: Common law manner of determining heirs of the intestate decedent; not used in any states today. Hierarchy of Heirs: o Spouse (some or all) o Issue (i.e. lineal descendants) o Parents or anscestors o Collaterals What shares should Heirs receive? o Divide the estate by the # of children, then if one of the children is dead, divide that childs interest btwn their children. Adopted children are treated like birth children Step children inherit from their biological parents o An ancestor represents his children; this is why the child of a living child gets nothing, and the child of a dead child gets the share of their parent. o Non-blood family members are excluded from this scheme bc the law is attempting to replicate the intent of the average instesator, who prefers to keep his assests in the family, and prefers a child who has lost a parent over the widow. Escheat: When there are no heirs and no will, the property will go to the state in which it it located; the state acts as the heir of last resort. Leasehold estates Seisin: Holder of freehold eastes (i.e. FS, FT, LE) has seisin. A transfer to A for a # of years, or a lease to A, does NOT give A seisin. No longer has legal importance, but is conceptually influential. 1. FEE SIMPLE a. FEE SIMPLE ABSOLUTE i. Language: To A, or To A and his heirs. ii. Duration: Forever iii. Future interests: None 1. Traditionally, w/o and his heirs, A would just get a life estate. However, not true today. b. DEFEASIBLE FEES: Contain language in the conveyance that possibly limits its duration. Allows the grantee to have more control over the land. i. FEE SIMPLE DETERMINABLE: 1. Language: Grantor must use clear durational language. (Language of limits) a. To A and his heirs until/so long as/while

2. Duration: So long as the condition is met. 3. Future interests: a. Possibility of reverter: Grantor automatically gets possession if the condition is no longer met. b. Not devisable in all states, but descendible. ii. FEE SIMPLE SUBJECT TO CONDITIONS SUBSEQUENT: 1. Language: Grantor must use clear durational language and carve out the right to reenter. (Language of condition) a. To A and his heirs, but if/upon condition that/provided that 2. Duration: So long as the condition is met 3. Future interests: a. Right of reentry: If the condition is no longer met, the grantor must take affirmative action to reenter. Otherwise, the estate continues. b. Not always devisable under local law. However, it is descendible in ALL states. iii. FEE SIMPLE SUBJECT TO EXECUTORY INTEREST/LIMITATION 1. Language: Creating an interest in a 3rd party, instead of the grantor. a. To A and his heirs for so long as, and if not, to B 2. Duration: So long as the condition is met. The estate in A ends automatically upon violation of the restriction, regardless of whether the language would normally create a FSD or a FSSCS. 3. Future interests: a. Executory interest: If the condition is not met, the estate is terminated automatically in favor of the 3rd party b. Cannot create a right of entry in a 3rd party. c. Devisable by will unless the grantor has limited them c. NOTES: For both FSD and FSSCP, SOL for AP begins to run as soon as the restriction is violated. Classify interests based on in whom it was created, regardless of subsequent transfers. If O wants A to have a FSSCS, but wants B to have the right of entry, we need 2 pieces of paper: o First, create a FSSCS in A, retaining a right of entry in O o Second, O should transfer the right of entry to B In situations like Mahrenholtz, in Illinois, can instead give a FSA to B, then have B convey a FSSCS to A If worried about B making the transfer to A, can additionally give B a FSSCS to make sure B makes the conveyance. o This is preferable to a covenant, which is just enforceable by injunction, not deprivation of the land. 2. FEE TAIL: Now virtually abolished, purpose was to keep an estate w/in a family. a. Language: To A and the heirs of his body. i. A is the tenant in tail b. Duration: For as long as As bloodline continues.

c.

d.

e.

f.

g.

i. A can only give 3rd party X possession during his life (i.e. X can take Pur autre vie) Future interests: Grantor has reversion, meaning that once all of As descendants have died, the estate returns to the grantor. i. At the death of A, regardless of any dealings with X, As issue S would inherit, and so on, with each of As descendents essentially taking a life estate. When the last one dies, it will revert to O ii. Every fee tail s accompanied either by a reversion in the grantor or a remainder in some 3rd party. Reasons to create a fee tail: i. Can control what happens to the land after A dies ii. Can be tailored to Os desires. (i.e. fee tail male, fee tail special (to the children of a certain wife)) Criticisms of fee tail: i. Restraining Alienability: Makes it difficult to use land most productively 1. Banks will not lend money to A if the fee tail is security. ii. All A can do is make a transfer that is good during his life. 1. Not many ppl will want to buy the land. iii. Bad for As creditors iv. O (the past) gets a lot of control over what happens in the future. Accordingly, fee tail in its traditional form no longer exists i. TALTRUMS CASE: ct allowed a fee tail holder to convert it into a fee simple via complicated litigation procedure. What happens today of someone uses fee tail language: i. 1st category: A fee tail can still be created, but if the tenant in tail conveys the land during his life, the taker acquires an ordinary fee simple. 1. This is DE view 2. Conveyance MUST be inter vivos ii. 2nd category: In many states, language that formerly created a fee tail now creates a fee simple 1. PA and NJ take this view. 2. This is also the view that the restatement takes. rd iii. 3 category: Extremely restricted form of fee tail. To A and the heirs of his body, but otherwise to B means that if A dies without issue, then B takes, and it is a fee simple to B. However, if A has issue, B has no interest. (i.e. Test once at As death to see if B has interest.) 1. NY takes this view.

3. LIFE ESTATE: a. Creation: i. Language: 1. To A for life 2. To A for the life of B 3. To A for life, then to B 4. To A for life, but if, to B. ii. Duration: Allows the grantee to enjoy the use of the property for the length of the measuring life, which can be the life tenant or a 3rd party.

b.

c.

d.

e.

1. In 1600, it was assumed that conveyances were life estates, today however, the presumption is a FS. iii. Future interests: 1. Reversion if the grantor holds the future interest. 2. Remainder if a 3rd party holds the future interest. Waste: Life tenants are entitled to the use, enjoyment, and profits of the land, but cannot commit waste. Rationale for these laws is that LE holder wants to maximize the value now, and the FI holders want to maximize the value in the future. To avoid deadlock and bc sometimes the remainderment is unidentifiable, the following types of waste are not permitted: i. Affirmative/voluntary: Overt conduct that decreases the value of the land. (ex. Destroying a residence or exploiting natural resources.) 1. Exception: Open Mine Doctrine, which permits operation of a mine that was already open. ii. Permissive: Failure to protect or care for the property reasonably. The life tenant must maintain the estate in good repair and pay ordinary taxes. iii. Ameliorative: (NO LONGER RECOGNIZED) Life tenant must have the consent of all future interest holders before taking action to enhance the property value. We dont recognize this bc as long as value increases, this is in line w/ our desire to use land for best use. Reasoning behind the FS presumption: i. Public Policy FS are much more easily alienable, and alienability is much more desirable. Also, FS are easier to administer than life estates. ii. Effectuating the intent of the grantor probably wants to devise all interests in a will, not split them up. Objections to restraints on alienation: i. Prevents highest economic use of the land, as it is not marketable. ii. Perpetuates the concentration of wealth bc cannot dissipate capital iii. Discourages improvements bc it cant be sold, so banks will not lent money backed the land. 1. With life estates, the only way to sell is through the courts. iv. Defrauds creditors bc they cannot reach the land. TRUSTS: i. A trustee holds a legal fee simple and the beneficiaries hold an equitable interest. ii. In deciding to sell land, a trustee is balancing his fiduciary duties to the life tenant and the remainderment. This obligates the trustee to make productive use of the assets, cant make speculative investments. 1. Case law give firm guidance on this 2. Trusts make it easier to alienate assests.

Cases: WHITE v. BROWN: Mrs. Lide dies, leaving a handwritten, holographic will. Generally a will must be witnesses and abide by formalities, but a minority of states will recognize an unwitnessed will if it is in the testators handwriting. Ct orders the house to be sold, and divides the proceeds based on the decision that White got a FS.

Had they decided that she got a life estate, she would have only been given the value of living in the house for the rest of her life, and the remainderment gets the rest. This decision based on a policy presumption of avoiding partial intestacy. Life estates create partial intestacy bc ct would have to treat some of the assets as going to heirs. o Also, presumption of a FS in cases of ambiguous instruments. This presumption applies to all transfers, not just wills we presume that the transferor meant to transfer all of their interests. o Intent is not the only thing we look towards also look at how the RPP would read the instrument. BAKER v. WEEDON: Weedon left his farm to his 3rd wife for her life, and then to his daughters children. Illustrating problems with life estates. NOTE: can also create life estates in personal property, called in personaly. This creates different problems. Contingent Remainderment: An interest that is destroyed if a condition occurs. o In White, all parties wanted the sale, they were just disagreeing in how to divide the proceeds. Here, the ct is being asked to arbitrate btwn life estate holder and the holders of the future interest in whether the land should be sold. Ct holds that if all of the parties cannot agree, sale of the land to provide for Annas reasonable means, o Usual Miss test for sale of land bc of waste is: (neither of these are at issue here) Is the land deteriorating? Is it generating enough income to pay taxes? Ct says that in addition, we should also consider each parties best interest (Best Interest Test). Balance and decide whose is most important. WOODRICK v. WOOD: (Waste) D wants to tear down a rotting barn on her land and develop it for residential purposes. P has 25% remainder interest in the land and doesnt want the barn to be knocked down. Ct. is not willing to grant an injunction, but instead had D pay P the value of the barn, bc knocking it down increases the overall value of the land. At common law, D would have been barred, but since we dont follow the common law, dont assume that the transferee intended the remainderment to receive the land in the same condition MAHRENHOLZ v. COUNTY BOARD OF SCHOOL TRUSTEES: The Huttons conveyed 1 acres of a 40 acre lot to school district, with the restriction that it be used to school purposes only. Huttons retained a future interest, which prevents the school district from conveying full title. H conveyed to J, who conveyed to M. Minority rule used in this case: In Illinois, neither possibility of revert or right of reentry can be conveyed inter vivose or devised. This is a holdover from traditional common law. Thus, in Illinois, the future interest passes by intestate even if the intestator dies w/ a will bc these interests are indivisible there. This is a minority rule, which doesnt make a lot of sense The ct could also have held here that this was a FSA accompanied by a Covenant. However, the first question to ask in that case is whether there is reversion language which prevents this from being a covenant? RULES: In general, future interests ARE transferrable.

The holder of a future interest can release it to the owner of the defeasible estate, even in a state like Illinois. MOUNTAIN BROW LODGE v. TOSCANO: (How far should restrictions on alienability be allowed to go?) Deed says the lodge could lose the land via reverter if they tried to transfer it or ceased using it. Ct rejects what was meant to be a FSD in favor of finding a FSSCS, illustrating a preference in favor of that kind of estate over FSD. o When the Toscanos donated the land they were trying to help the land, not hurt it, and a FSD would hurt it here Ct makes a distinction btwn restraints on land use and restraints on alienation. This distinction seems a little dubious. INK v. CITY OF CANTON: (Valuing defeasible fees) Land that a park is on held in FSD, Ink heirs have possibility of reverter if is not used as a park. The state is making forced sale via eminent domain. How to allocate the award btwn the city and the heirs? Unwilling to pay for the FSD alone To figure out the value of the future interest, discount the difference in value of the land with and w/o the restriction by the probability that there will be a violation of the restriction. o Pay more if the prob of violation is high Basically, the 2 interest when valued separately do not amount to the full value of the land the whole estate is greater than the sum of the parts. o This is a problem caused by defeasible estates. Land cannot be sold unless the estate and future interest holders agree, which can be hard to do. o Also hard to value the interests in a defeasible fee. Solution from Oren: grant the city the interests, but keep possibility of reverter in the new park, not the old one. NOTE: Fee simples are not the only estates that can be made defeasible can also have life estate version of all 3 varieties of defeasible estates.

In cases of doubt btwn the type of estate conveyed: (FSD vs. FSSCS) 1. Do we have a Defeasible Fee at all, or is it a FS accompanied by a covenant? a. Constructional preference against finding a defeasible fee; should prefer the covenant, bc this will not result in the forfeiture of land. (Preference against forfeitures) 2. Constructional preference in favor of FSSCS: a. CA and KY have abolished the FSD in favor of the FSSCS bc forfeiture is more likely if the land is reverting automatically under a FSD. b. Courts do not like forfeitures bc: i. The person is not expecting the land ii. The apparent owner might not be the real owner, since the restriction is operating automatically and w/o notice. c. New restatement creates just one estate, called the Fee Simple Defeasible 3. Also consider how the following will affect the parties: a. How easy it will be to find heirs to convey their interest voluntarily in order to lift the restriction.

b. Cloud on the title will last either until all of the heirs sign off, or the condition is broken. Burdens on alienability: Any defeasible fee simple creates a restriction on alienability, but how far should they be allowed to go? When should a restriction on use be illegal? (Orens balancing test to see whether a restraint goes too far): 1. Consider what the restraint on use does to the chance that the land will be put to its highest and best use. a. NOTE: Restricting land to residential use is not that bad, bc more likely to buy land if you know a factory wont be put next door. 2. To what extent does the restrain close off buyers, limiting alienation of the property to an impermissibly small number of persons? 3. To what extent does the use restriction eliminate externalities? a. Maybe we can allow use restrictions in gifts to charity, bc ppl will be more inclined to make the gift, although this might not be as good from the perspective of the charity. 4. Does the restriction violate public policy? (i.e. race, spite restrictions like to my son provided that his wife can never enter. a. Some restrictions are excessive, as in marriage or remarriage. 5. Will the grant likely result in forfeiture? Public policy against forfeitures bc they mean loss of investments, no incentive to improve the land. a. Should be enforced via injunction or damages, which do not result in forfeiture. 6. How long will the restraint likely last? A restraint on alienability in a leasehold estate is not so bad bc its ends at a certain time. Calculating the present value of a Life Estate
Take a sum of eighty nine cents. If we assume a 6% interest rate, what will it be worth in two years? We first calculate .89 x .06 = 5.34 cents. That gets us to 94.34 cents -- the value after one year. Now let's again assume an interest rate of .06. Now 94.34 X .06 equals 5.66, which added to 94.34 gives a $1. Thus a sum of 89 cents will appreciate to $1 in two years. Therefore the value of a right to receive a $1 in two years is 89 cents.

FUTURE INTERESTS: Future interests are classified based on who they are created in. The name does not change. o NOTE: Always classify Os interest last. Classify an interest as reversionary or nonreversionary based on who the interest was created in. Does not change names even if it comes into the hands of the transferor. o Draft Restatement: Not adopted yet; would turn the 5 kinds of future interests into just 1 kind of future interest. (see pg. 272-73) Reversionary Interests: Interests created in O. o Reversion: O will never retain a reversion if they create a vested remainder in any kind of fee simple, regardless of whether it is a defeasible fee or a FSA. O will retain a reversion unless either O transfers some kind of possessory fee simple or if O transfers a vested remainder in some kind of fee simple. In states where fee tail is not recognized, and the language creates a FSA, B has a vested remainder in FS, and O does not have reversion. Once Bs remainder vests, O no longer has a reversion or any kind of future interest anymore. The reversion just disappears. Reversions are devisable. o Possibility of reverter: What O has when he conveys a FS determinable. (Defeasible FS are considered to be of the same quantum as a FSA) o Right of entry: What O has when he conveys a FSSCS. Non-Reversionary Interests: Interests created in transferees. o Vested Remainder: A remainder is vested if (1) it was given to an ascertained person; and (2) there is no unfulfilled condition precedent. O will never Subject to Total Divestment Subject to Open (partial divestment) If a remainder is vested, it takes possession however the preceding estate ends. o Contingent Remainder: A remainder is contingent if (1) it is given to an unascertained person; or (2) there is an unfulfilled condition precedent. A contingent remainder is considered to be less than a vested remainder. Every contingent remainder either vests or fails. A contingent remainder may not take possession until the condition precedent is satisfied. A contingent remainder is transmissible; it is inheritable or devisable. Alternative Contingent Remainders: If you see a contingent remainder in FS in B, then any following interest in C will also be a contingent remainder. (CRs are followed by CRs) o Executory Interest If you see a vested interest subject to divestment, then any following interest will be an executory interest. (VRs are followed by EIs) Statute of Uses (1536) made it possible to have a divesting interest in a 3rd party.

STEPS IN CLASSIFYING FUTURE INTERESTS in 3rd parties:

(1) Classify it as a remainder or an executory interest. a. In order for an interest to qualify as a remainder, it must be capable of becoming possessory immediately at the end of the previous estate. i. If it cannot become possessory at that end of As estate, and there is bound to be a gap, then it is executory. ii. During the gap, O has the interest b. To be executory, Bs interest must divest Os interest in order to get it back. This is something that a remainder cannot do. i. A remainder is polite and waits. ii. An executory interest grasps for the estate. c. A remainder may never follow any kind of possessory fee simple. Any future interest in a transferee that follows a DFS is an executory interest, not a remainder. (2) Is the Remainder Vested or Contingent? a. Criteria for Vested Remainder: i. B is ascertained; and ii. No unsatisfied condition precedent. b. If one of these criteria is not met, then the remainder would be contingent. i. NOTE: The natural termination of the preceding estate is NOT considered to be a condition precedent. (3) What estate will B have when Bs estate becomes possessory? Condition Precedent vs. Condition Subsequent: Determined by the language used to express the condition. If the conditional language appears before the remainder or is a part of the description of the remainderment, it is part of the CP. o But, if it is drafted as an afterthought, then it is a vested remainder subject to divestment. Difference btwn the 2 lies in looking at the language of the conveyance. TRUSTS: Today, virtually all future interests are created via trusts. (see Baker v. Weedom should have made Anna a trustee.) Beneficiaries get all of the income during his or her life. After the life estate/interest ends, there will be others who become beneficiaries. Any land of the trust is held by the trustee in FS, so it can be sold in FS. o However, in managing the trust, the trustee must abide by the equitable interests of the beneficiaries and future beneficiaries. o Life beneficiary A has an equitable life estate, and As children have equitable remainders. Two issues w/ Trusts: o Setting up trusts so creditors cannot get to them. o Should it be possible for trusts to go on forever? THREE ODD RULES: A transfer to A for life, then to As heirs usually means that the grantor wants to control the land in the future. However, this is bad for 2 reasons: (1) Reduces the alienability of the land, which makes it less likely to be used for its highest use.

(2) The past will have too much control over the present; someone in 1911 would have no idea what the highest use of land would be today. To counter these, the common law developed three rules: (1) Doctrine of Destructibility of Contingent Remainders: A contingent remainder is considered to be destroyed if it is still contingent when the preceding estate ended. About states have abolished this rule. a. Could dodge this by creating a trust or an executory interest; accordingly, this doctrine is basically obsolete today. b. TODAY: Unsatisfied contingent remainders go back to O, who has reversion, and O has a DFS until the condition is satisfied i. A child in gestation is treated for its benefit; if it benefits it to be considered in being from the moment of conception, then it is considered so. c. Doctrine of Merger: When a reversion and a life estate are held by the same person, they merge, becoming a FS. i. Can only merge if there is no intervening vested interest. ii. Merger will only apply when the life estate and reversion were originally given to different people. iii. This is also obsolete today. (2) The Rule in Shelleys Case: This rule provides that if one instrument creates a life estate in land in A, and purports to create a remainder in As heirs (or the heirs of As body), and the life estate and remainder are both legal or both equitable, then the remainder becomes a remainder in FS (or Fee Tail) in A. a. Original rationale was to curb medieval tax evasion. b. Today the rationale is to increase alienability, land becomes alienable sooner, bc it gives A both the life estate and the vested remainder sooner. c. Shelleys Rule vs. Doctrine of Merger: i. Sometimes Shelley applies w/o merger applying; merger operates only if the remainder is a vested remainder in FS and there is no interveining vested remainder in the FS. 1. When the intervening interest ends, however, the estate can then go on to merge. 2. Merger cannot occur even when the remainder is contingent in the hands of A. ii. Shelleys rule is very narrow, and the remainder must have been created in the heirs of A, and must have been identified as such in the instrument in order to be triggered; doesnt matter that the parties might become heirs. 1. This rule has been largely abolished, but might still exist in DE. NJ abolished only as to future transactions; if a conveyance became effective before 1934, then Shelley is still effective. (3) Doctrine of Worthier Title: Invalidates an interest created in the grantors own heirs, regardless of remainder or executory interest. a. Promotes alienability bc it cuts off contingent future interests in unidentified future heirs. b. However, now it lacks a rationale; In 1919 Cardozo reformulated it as a rule of construction. Now we just apply it as indicating that the grantor intended to keep a reversion, so long as this is supported by evidence.

c. Many states have rejected it by statute. In NJ, it may still be alive, but as a rule of construction.

RULE AGAINST PERPETUITIES: RAP limits how long an interest may remain contingent, and strikes down future interests that might vest far into the future. Rationale for RAP was that a grantor is entitled to have conditions that deal with the unborn minor children. Within the period of time, the contingent future interest must: 1. Vest Holders must be ascertainable and no unsatisfied condition precedent. This applies to executory interest either at possession or when possession is certain to occur. 2. Fail Generally when it becomes clear that the condition will never be met. RULES: Invalidates any remainder or executory interest that vests too far in the future. o Only applies to Non-reversionary future interests. Reversionary interests are ALL considered to be vested for purposes of RAP. Only future interests in transferees need be concerned. Satisfy it by showing that the interest will vest or fail w/in the time period. o Must show that it is absolutely certain that there is no possibility that the interest might vest too far in the future. Show this by using facts existing at the moment the interest was created. o Proof must be based on facts that exist at the time the interest was created, and look at what might be true from those. o An inter vivos transfer creates an interest when the transfer becomes irrevocable. Wills are not irrevocable until the death of the testator, and therefore create no legal rights until their death. For an interest created by will, the facts are based as they exist at the time the testator dies. Interest must vest or fail within 21 years after the end of a life that was in existence at the time of creation of the interest. o The life is called a Validating life. A validating life must be (1) Logically connected to whether and when the interest can vest; and (2) Can I guarantee that the interest cannot possibly vest more than 21 years after the end of this life? If YES, this is a validating life. If NO, then you need to find another validating life; All you need is one life. o If there is a possibility that the interest will not vest or fail within the common law period (i.e. within 21 years after the validating life), the interest is invalidated. o RULES for Validating Lives: When you have an alternating contingent interest and you find a validating life for one, you have found the validating life for the other. Fertile Octogenarian Rule: The common law conclusively presumes that one can have a child at any time during their lives. What might happen Test: We cannot take advantage of a fact created after the creation of the interests. Facts considered as they were at the creation.

A validating life need not be mentioned in the conveyance. Ask whose lives can affect vesting, and test each one. Inter vivos transfers vs. wills: o If inter vivos, O could still have another child, whose interest could vest more than 21 years after the death of the person in being at the bequest. o If by will, however, facts stay the same as at Os death.

PERPETUITIES REFORM: (1) In a state that follows the Uniform Statutory Rule Against Perpetuities, (USRAP), instead of striking down void interests at the outset, wait to see if the interests are still contingent after 90 years, then reform the instrument to come as close as possible to Ts intent. (2) Wait and see jurisdictions (PA), on the other hand, you instead wait out the common law perpetuities period. If the interest vests within the validating life, then it is valid, even if there was a possibility that it would not vest. (3) Some states (DE and NJ) have abolished RAP. In NJ a future interest is only void if alienability is suspended for longer than an life in being plus 21 years. This usually only happens when someone creates a legal life estate w/ an unascertainable remainderman. Can get around this by just creating a trust, so long as the trustee has power of sale of assets. Cy Pres Doctrine STEPS: (1) Classify the interest to see if it is subject to the rule. Contingent Remainders Vested Remainders subject to open Executory Interests NOTE: a gift to charity, followed by a 2nd gift to charity is exempted. (2) Decide whether the interest is valid under the rule. What is the event that would vest the interest? Do we have a validating life? CASES: SYMPHONY SPACE v. PERGOLA PROPERTY: Option on a building that could be exercised more than 21 years after the grant was created. Ct says Pergola cannot exercise the option. Symphony gets a huge windfall by getting out of a deal that they entered voluntarily. Public interest concerns: o The lengthy option period is bad bc it effectively means that there is only one possible buyer for as long as the option is in effect; low alienability. o Possessor will therefore avoid making improvements bc not guaranteed to get the benefits of them RAP policy concern was protecting the family property; not well adapted to commercial options. o Broadwest could have also simply kept the right to reenter, and therefore the RAP would not apply, since this would be a reversionary interest.

Applicability of RAP to Commercial Options: Uniform Statutory Rule: Exempts options from RAP. States that use this rule use a caseby-case approach to determine which options are objectionable. No evidence that this increases litigation. Wait and See Approach: If the interest happens w/in 21 years, then it is valid. o However, NY is not a wait and see state. It reduces the age period to 21 years if the grant states a longer period (principle of cy pres come as close as you can to the testators intent) Common Law: Under common law, you make no intent to read the instrument in a way that would save it from RAP.

CONCURRENT INTERESTS: Tenants in Common: (Relay team) Relationship in concurrent ownership in which each has the right to possess the whole, and the rights can be devised. No right of survivorship Grant to A and B The only Unity that is needed is equal possession of the right as a whole. Joint Tenancy: (3-legged race) Right to survivorship, share will automatically pass to co-tenants, no matter who it was devised to. Need actions of A and B to destroy the right of survivorship Undivided interest in the whole estate. Not considered to be a part of decedents estate, so you dont have to go through probate. Grant to A and B as joint tenants and not as tenants in common. o Some states, such as VA, think that this is not enough, and you should refer explicitly to the right of survivorship, although other states think this dangerous. Presume a TIC over a JT; therefore you need clear language to create a JT and overcome the constructional preference against them. Four Unities: Required to create a Joint Tenancy. (PITT) o (1) Time Must take at the same moment. o (2) Title By the same instrument o (3) Interest Same interest o (4) Possession Equal rights to possession of the whole Destroying a Joint Tenancy: A JT is severed by a conveyance bc the time and title unities are no longer present, so parties from then on will take as TIC. o Mortgage in only a minority of jurisdictions using the title theory of mortgages o Partition o Alienation (voluntary (sale or conveyance) and involuntary (attachment by creditor)) o K to sell by one tenant Constructional preference for TIC over JT: This might not always be the best thing. Intent of the grantor: TIC lets A and B pass on to who they want, as opposed to JT where children will not take. Spousal Situations: Some states reverse the preference in situations where the tenants are married, so they dont need to go through probate. Length of Tenancy: JT will last at most for one generation, whereas TIC can be passed on to heirs and the division of ownership continues for a long time. Number of Tenants: JT will never have more individuals w/ a right to possession than the # named in the instrument. In TIC you can have a ton of factions. Tenancy by the Entirety: Recognized by only 19 states, but that includes most of the east coast. There IS a right of survivorship in a TBTE. Grant must just include the words Tenancy by the entirety. To be a TBTE w/ someone, you must be married. Sometimes there is a presumption that if a husband and wife take a tenancy, it is a TBTE unless instrument explicitly says otherwise. o So we not only need the 4 unities, we need a 5th unity unity of person.

If A and B are not married at the time of the conveyance, they do not have the 5th unity. In such cases, JT comes closer to effectuating intent bc there is a right of survivorship. o Bc we dont know who is going to survive, this is a contingent remainder, O retains the reversion.

SEVERANCE: Must be careful in walking the fine line btwn TIC, which has no right of survivorship, and Joint Life Estates, with and indestructible right of survivorship. JT is right in the middle of these. 1. Severance by Conveyance: a. RIDDLE v. HARMON: Woman had a JT w/ husband, tried to sever it by granting herself a TIC. i. By severing, she is taking the chance that her husband will not die before she does. ii. Need 2 pieces of paper to do this, use a strawman or grant to a 3rd party in trust. 1. In some states, you only need 1 pc to end JT, and 1 to start a JT. If A wants to create a JT btwn A and B, some states such as CA and NJ, can do it w/ 1 pc. 2. Common law rule is 2 to transfer though. b. Concerns: i. Certainty about what will happen w/ the land. ii. Ease of transfer, i.e. should it need to go through probate? 2. Notice of Severance: a. JT can sever w/o the knowledge or consent of co-owner, regardless of the # of pieces of paper used. This is a little problematic. However, a notice requirement would mean that you need to show a dead person had received notice, which creates uncertainty as to validity of severance, which decreases alienability. i. Constructive Notice: Recording instrument at courthouse, although this doesnt do too much to put the other JT on notice, since it isnt actual. CA adopted this law after Riddle v. Harmon. b. HARMS v. SPRAGUE: One brother mortgaged out his interest in JT. Does the other brother still have a right of survivorship? i. To figure out if a party gave up right of survivorship, look at the intent of the individual. Ct in this case is saying that a Joint Tenant destroys right of survivorship ONLY by an act which makes clear their intent to destroy it. If no intent, creditors lose their security. 1. However, some states, such as PA, regard a mortgage as being a conveyance of title. ii. Policy rationale: 1. Gives lenders an incentive to deal with all of the joint tenants, not just one. 2. In states like IL, where there is no TBTE, JT are usually husband and wife, holding the family home, dont want to go through probate. Makes more sense to deal w/ both. 3. Banks are better off, bc they have the whole of the value to look for as payment.

Multiple-Party Bank Accounts: O deposits all the money, and has sole control during his life. Presumption is that A can only withdraw money that is in proportion to his deposits. We do presume that A has a right of survivorship, payable on death account. This way, no delay and hassle of probate, common substitute for a will. However, these presumptions are not conclusive, heirs can bring suit to defeat them, Partition: Two kinds of partition: (1) Partition by Sale (proceeds divided according to the interests); and (2) Partition in Kind (physically split the parcel). Presumption is in favor of a partition in kind. o Rationale: Reluctance to have a forced sale. o However, a partition by sale should be ordered when: Impracticable to divide the land; Interests of the holder would be better promoted by the sale. o Also might not want to cause economic waste. DEFINO v. VEALENCIS: 1 party is trying to force a partition of the land, D is only occupying a small portion of it. So long as co-tenancy goes on, w/o partition you need a unanimous agreement. High transaction costs; one tenant can hold out and veto. Solution to this deadlock is to allow any tenant to demand partition. o Agreements not to partition are only upheld if they are reasonable. Ct here says to take into account the interests of all tenants, not just the one who wants the partition, and try to reach a solution that serves all. o However, the ct. must choose, and says that Ds interest outweighs the interest of the land being sold as a unit. Split of the land should respect the proportionate value of the interest. o Owelty payment by one cotenant to another to make sure they get the value of their portion of the land. How do you determine value? Assessments are always much less than the real value of the land, much less the value of each portion of the land. Rights Btwn Co-Tenants During the Tenancy: Ouster: 2 different situations for this, w/ 2 different tests: o Ouster in Adverse Possession: Assertion of absolute ownership Prob want a lot of ouster to make clear claim for ownership is being asserted. Thus, the AP test for ouster is more demanding that for CoTenant rent situations. o Ouster in Co-Tenancy: Demand for rent situations The test is whether or not the tenant in possession refuses a demand by the other co-tenant to enter into the possession of or enter the land.

SPILLER v. MACERETH: TIC, Spiller in possession of the whole building. Mac says that he owes her the rental value of the building. Did Spiller oust Mac? No, bc Mac did not seek to occupy, and Spiller did not refuse her occupation of her share. (1) Spiller View: (Usually the majority rule) Tenant in possession only has to pay rent in a limited situation Will have to pay rent for occupying the whole only if the other co-tenant is really serious about entering into possession. Advantages to this is that you can make full use of the land, so it doesnt sit vacant. (2) Holt Minority View: Some jurisdictions say the co-tenant has ousted when they refuse a demand to pay rent or vacate . However, there is a chance that the property will go vacant, bc paying rent will discourage possession. (3) Cohen View: co-tenant in possession always has to pay rent whether or not there has been an ouster. o Which rule is the best? Which provides for the most certainty? Cohen, w/ spiller, you must figure out whether there has been an ouster. Which accords w/ likely expectations of the parties? Should we have different rules for commercial context? Spiller is most likely to lead to partition, which can be useful to overcome inefficient use of deadlock. SWARTZBAUGH v. SAMPSON: Husband and wife are JT. Husband leases land, wife does not approve. o Lease does not sever JT, bc it is not a full conveyance. o Wife has an action for Mesne Profits; she can do one of two things: She can try to assert her right to share possession w/ Sampson, and get of the reasonable rental value; or She can accept the lease as leasing out her title too, and get of what her husband is entitled to. o Do Co-tenancy rules adequately protect the non-leasing tenant? Encourage lenders to deal w/ all tenants? In a TBTE, one spouse cannot lease community property for more than a year w/o the others consent.

Accounting for Benefits; Recovering Costs Cotenant who pays Carrying Charges can sue the others for contribution, i.e. their portion of the expenses. This makes sense bc by paying the carrying charges, the cotenant is protecting the other interests. o If there is a cotenant in possession, cannot get carrying charges from the nonoccupying tenant that exceed the reasonable rental value of the land, which is a disincentive for one cotenant to go into complete possession. However, since we DO want them to go into complete possession to discourage waste, this seems a little odd. Repairs or improvements: Cotenant can only get credit for repairs at partition; cannot sue for contribution.

o o

Repairs: Encourages cotenant to seek partition, which is not a good thing, bc there is a possibility of deadlock. Odd rule. Improvements: Improver cannot seek contribution, just gets the change in value of the property at sale.

Marital Interests Tenancy By The Entirety SAWADA v. ENDO: Can the creditor of one spouse reach their interest in land held in TBTE? o Creditors can only reach interests that can be conveyed voluntarily. JT: Can convey interest voluntarily, and then creditor and remaining spouse are in TIC. Common Law Traditional view of TBTE: During the duration of the marriage, the husband controls the land, and at the end of the marriage, husband gets it back. Modern TBTE: Married Womans Property act husbands debtors may not reach wifes assets. o Ct could just abolish TBTE, as many states have done o Group 2: creditors can only touch one partys possession and right of survivorship, for the other, it remains intact. o Group 3: Both spouses must consent to conveyance o

SERVITUDES A way of accomplishing private interests that control land use; Servient might suffer some reduction in value, but Dominant must get a greater increase in value, so there is a net increase in the value of the land to society. Classify servitudes in 2 ways: o Affirmative OR Negative, AND o Appurtenant OR In Gross. EASEMENTS: 1. Types of Easements: a. Affirmative Easements: Entitles the holder to do a physical act on anothers land, most often a right of way. b. Negative Easements: Enables its holder to prevent the owner of land from making certain uses of the land. Any outside of the 4 go under RC theory. i. Not to block windows ii. Flow of air iii. Support to building iv. Artificial streams of water c. Appurtenant: An easement that benefits a specific piece of land. Would increase the value of Dominant. Flows w/ the ownership of the benefitted land. d. In Gross: An easement for which there is no benefitted estate Servient. Benefits whoever holds the easement. There is no land for it to flow w/, so it is transferred by the holder. e. PROFIT: Right to go on land an remove a product of the land. Functionally identical to easements. i. Easements also come in all of the varieties that present estates come in, i.e. defeasible FS, etc., depending on the language used in the grant. 2. Creation of Easements: a. Express Creation: Created in a deed or will; must be in writing and recorded. i. Easement by Reservation: When the grantor conveys land and reserves an easement for himself. ii. Espressio unius est exclusion alterius: The express mention of one thing excludes all others. iii. 3rd Parties: Traditionally, easements cannot be reserved in favor of a 3rd party. This rule is still followed in some jurisdictions. 1. Instead, find a way to make the 3rd party a party to the transaction. This usually requires 2 pieces of paper. 2. However, most modern courts have abandoned this rule. b. Easement Implied by Prior Existing Use: i. Severance from a common owner. 1. Can sell part and retain part, or sell pieces simultaneously. ii. Use must have existed prior to the severance, and have been reasonably apparent and continuous at the time of the severance. 1. Quasi-easement, bc still under a common owner. 2. Purchaser must have known about it. iii. Easement must be reasonably necessary to the enjoyment of the dominant estate.

1. Easements created by reservation require a finding of strict or absolute necessity, bc the seller could have reserved it expressly instead. 2. Easements of Light and Air CANNOT be created by implication. c. Easement by Necessity: i. Strict necessity; i.e. effectively unusable w/o disproportionate effort or expense. ii. Parcels must have been under common ownership just before a conveyance. iii. The necessity must have come into existence at the time of the conveyance breaking up the common ownership, and be caused by this conveyance. 1. Necessity that comes into existence post-conveyance does NOT get an easement, even if the alternative means of access disappears. 2. However, the use is NOT required before the severance. iv. Usually find easements by necessity for landlocked parcels: Landlocked parcels are economic waste, and parties must have intended the easement, or they would not have bought the landlocked parcel. d. Easement by Prescription: i. Gained under principles of Adverse Possession. 1. Hostile Use w/o permission. 2. Exclusive The cts kind of fudge this one 3. Open and notorious 4. Continuous and uninterrupted a. Infrequent use may not qualify. ii. SOL: Begins to run when Servient gains a C/A against Dominant. 1. Cannot claim a prescriptive easement against yourself, so use by Servient cannot be counted. iii. There can be tacking on the Dominant side of the easement. iv. Scope: 1. Use that is substantially broader or more burdensome than during running of SOL will NOT be allowed. 2. Cannot create negative easements by prescription. e. Easement by Estoppel: i. Where A gives permission B to use As land, under circumstances where A could reasonably foresee that B would substantially change position on the belief that permission would not be revoked, and B does change position. 1. Commercial use may indicate substantial reliance on the permission. ii. Can be oral permission. iii. Not all jurisdictions offer easement by estoppel (TX doesnt.) They put burden on user to obtain a writing. f. Condemning an Easement: i. Remedy open to owners of landlocked land who cannot claim easement any other way. Must pay the owner of servient compensation for the value of the easement.

ii. Just requires necessity, but NOT all of the elements of easement by necessity. g. Right of Access: To land held in public trust, i.e. tide zone on beaches. Effectively creating a kind of easement by necessity, but w/o a right. Cant just have the legislature grant the public access, bc this would amount to a taking. i. Burden created by recognizing horizontal/vertical access? ii. Benefit of allowing that access? 3. Scope of Easements: a. Appurtenant: Use due to normal, foreseeable development of the dominant estate will be allowed, so long as it does not impose an unreasonable burden on the servient estate. i. Cts are unwilling to allow much expansion on express easements. ii. Unreasonable interference by the servient estate is not allowed. b. In Gross: What did the parties reasonably foresee or contemplate when the easement was created? c. Extension of the use for the benefit of additional property is NOT allowed. i. Bright line rule (Endorsed by Restatement) ii. But, in Brown v. Voss, forced sale of an easement for damages posed on servient estate. When parties hate each other, injunctions do not really guarantee that they will solve the problem. d. Relocation of Easements: i. Common Law: Easement is fixed, and servient owner may NOT relocate. ii. Modern: Servient owner MAY relocate, so long as it does not materially inconvenience the Dominant owner. e. Repair and Maintenance: Servient owner is not obligated to repair, Dominant owner has the right to repair, but may only seek contribution equal to Servients use of the repair. 4. Transfer of Easements: i. Is there intent? ii. Would there be some kind of unreasonable increase in the burden if assignment were allowed? b. Easements Appurtenant: i. Normally passes with transfer of the dominant estate. ii. Also pass w/ the servient estate unless the new owner is a bona fide purchaser w/o notice c. Easements In Gross: i. Common Law: Benefits of easements in gross are NOT transferrable. ii. Modern: Commercial easements are freely alienable, so long as the alienation does not increase the burden on the servient estate. 1. Non-Commercial easements will sometimes be considered assignable if there is an INTENTION to do so. a. Close relationship btwn the parties or a lack of compensation suggests that the parties did not intend to allow assignment. d. Subdivision of an Estate w/ access to an Easement: i. Old Rule: Easement appurtenant can only be used by the original dominant estate.

ii. Restatement Rule: No desirable bright line rule, just stay w/in normal development/burden on servient estate. e. Divisibility of an Easement: i. One Stock Rule: (Common Law Rule) Holders of the easement must operate via unanimous consent. 1. Depends on potential for deadlock to minimize the partially external damage. ii. Two-fold Test: (Restatement Rule) 1. Was there intent on the part of the original parties to allow the easement to be divided? 2. Would it unreasonably increase the burden on the servient estate? 5. Termination of Easements a. Abandonment: Need intent + conduct i. Mere non-use is insufficient; need affirmative conduct as well. ii. Words alone are insufficient b. Merger: If the dominant and servient estates ever are owned by the same person AFTER the creation of the easement, the easement is destroyed and must be re-created. c. Condemnation: If the servient land is condemned, the easement is terminated d. Necessity: If an easement by necessity or implication is no longer necessary, it will likely be extinguished. e. Release: Easement holder can release via writing. f. Estoppel: Servient owner changes position in reasonable reliance of the holders assurance that the easement would no longer be enforced. g. Prescription: Servient estate may terminate the easement via AP. h. Eminent Domain LICENSES: A personal privilege to enter upon anothers land, which is REVOCABLE and not an interest in land. May be given ORALLY. 1. Assume that oral permission is a license. 2. Licenses become irrevocable if the license makes substantial expenditures on the land in reliance on a promise that the license will be permanent or of long duration.

1. 2. 3. 4.

REAL COVENANTS Intent to bind successors Touch and concern Notice Privity of estate a. Horizontal privity b. Vertical privity

EQUITABLE SERVITUDES 1. Intent to bind successors 2. Touch and concern 3. Notice

REAL COVENANTS: 1. A covenant is a contract btwn 2 parties that, bc it meets certain requirements, is binding against one who later buys the land. a. Covenants are subject to legal relief (MONEY DAMAGES). b. Covenants must be in writing in order to run. c. Devised to make Negative Easements outside of the original 4 enforceable against successors to land. (We should have just made them easements though) 2. Running of the covenant Privity: a. Common Law: More onerous requirements for running of the burden than for running of the benefit. i. Horizontal Privity: landlord/tenant or grantor/grantee relationship. 1. Both horizontal and vertical privity must exist for the burden to run. 2. Only vertical privity needed for the running of the benefit. ii. Vertical Privity: 1. Strict vertical privity required for the burden to run; D must take the same estate. (Bird riding on a wagon) 2. Estate must just be carved out of As estate for the benefit to run. b. Restatement (Modern): Only restriction is that tenants will not be subject to the burden of affirmative covenants if they cannot easily perform them. EQUITABLE SERVITUDES/RESTRICTIVE COVENANTS: 1. Equitable Servitudes, aka Restrictive Covenants, are a special type of restriction on how the land will be used. a. Enforced at equity (INJUNCTION or specific performance). b. Must be in writing in order to run. c. Equitable Servitudes sink their tentacles into the burdened land. 2. Running of the benefit and burden: a. Notice: Agreement will NOT be enforced against the purchaser of the burdened estate unless he had either actual or constructive notice. This is easier to satisfy than horizontal Privity. i. Actual notice just means however they happen to know of the agreement. ii. Constructive notice is established if the agreement is recorded anywhere in the purchasers chain of title, or from inquiry notice, meaning based on the facts available to the purchaser, the RPP would be suspicious enough to make an investigation. (i.e. neighborhood) b. Restatement (Modern): Only restriction is that tenants will not be subject to the burden of affirmative covenants if they cannot easily perform them.

3. Developers Building Plan: Subdivision building plans will generally bind all parcels to the use or restriction. a. If the plat discloses the restriction, and is filed before the purchase, the parcels are bound by it. b. If the plat does not disclose the restriction, the parcels will NOT be bound. If it is amended later on, parcels sold before will still not be bound, even though parcels sold after the amendment will be bound. c. Implied Reciprocal Servitude: A way to create an ES w/o writing. i. A purchases Lot 1 with a restriction, and the seller promises that the other lots will be similarly restricted. B then purchases Lot 2, but the restriction is not contained in the deed; B will still be held to the restriction, but ONLY if he had (1) actual notice; or (2) the reciprocal servitude is in his chain of title. ii. So if B did not check the title of Lot 1, nor knew that A was restricted, B is considered an innocent buyer. However, if the developer enacted a general plan of restriction, B is more likely to be restricted. iii. Such methods of creating an ES w/o writing are not allowed in all jurisdictions, and the restatement increases evidence required. d. Homeowners Association Fees: If they are to maintain common areas, such fees are considered to T&C the promisors land. i. Association has standing as an Alter Ego or Agency for homeowners, but only if they were expressly assigned the right to enforce the covenant in the deed. COMMON INTEREST COMMUNITIES: 1. Guarenteed maintenance of facilities will increase desirability of neighborhood. a. Gated communities b. Condominiums c. Co-ops 2. In judging such restrictions, use bright line test to determine reasonableness for the development as a whole: a. Does it violate public policy? b. Is the restriction wholly arbitrary? i. w/in scope? ii. Further purpose of community? iii. In bad faith? c. Is it a burden on the land which far outweighs any benefit? 3. Restatement: So long as there is some kind of rational benefit from the restriction, we will keep it in place. 4. Equitable restrictions can also be used to facilitate the selection of neighbors, so long as they do not constitute an unreasonable restraint on alienation or are in violation of antidiscrimination laws. MODIFICATION AND TERMINATION OF COVENANTS AND SERVITUDES: 1. Agreement by ALL parties a. Must be in writing, since the original had to be in writing. 2. Abandonment a. Want to make it difficult to abandon title to land bc:

i. Anyone could acquire land just by going on it it would create a scramble for title btwn individuals. ii. Would be situations where there was no owner, no one liable for injuries on the land, etc. 3. Termination of covenants to pay money or provide services: a. Restatement 7.12: i. Termination after a reasonable time if the covenant does not specify the total sum due or does not have a termination date. However, so long as the benefitted estate is getting something for the covenant, this will not apply ii. Only has to pay for facilities actually used. iii. This section does NOT apply to common interest communities. 4. Changed Conditions: a. Is the covenant is still of real and substantial value to owners? i. Rationales: 1. Domino Effect 2. Windfalls ii. Real and substantial value? 1. Price: Is the covenant helping or hurting the price of the land? 2. Cheating: To what extent are people violating the covenant? 3. Zoning: When there is a conflict btwn zoning an covenant, the more restrictive use prevails. Zoning requirements are not dispositive, but can still be used as evidence. b. MODIFICATION: Restatement 3rd: i. Have conditions so changed that it is impossible to accomplish the purposes for which the servitude was created? ii. Court can modify the servitude, so long as it does not harm the value of the servitude to the other landowners. c. Giving Damages Instead of an Injunction: i. Damages may be more economically efficient, avoid waste. ii. However, damages may not make the benefitted owner whole. iii. Also, damages only pay a minimal price to the landowner, while all of the gains of trade go to the developer. 5. Passage of time will NOT cause a covenant or servitude to be extinguished. a. Some states, however, have enacted statutes that say covenants expire after a certain number of years unless they are recorded.

For a question where a party is upset over the breach of a covenant: Almost always start w/ ES theory, bc it gives an injunction, which is likely what the client wants. ES theory is also easier to enforce than suing under RC theory. Intent? o Look for clear evidence of assignability. Can the benefit run? o Standing to bring action? o Can the burden run? o Is there NOTICE?

Is the benefit in gross? Traditional English Law: Burden of a covenant will not run if the benefit is in gross. Restatement 3rd gets rid of that rule. Rationales: Facilitating environmental conservation Tough to locate In Gross holders (this doesnt make a lot of sense though) Burden will only run if both the benefit AND the burden TOUCH and CONCERN land. Policy Argument: Do we want this burden to run? Affirmative or Negative covenant? Ct is not likely to enforce affirmative covenants: o Reluctant to order a series of acts o Large liability in damages o How to supervise the carrying out of an injunction. Dont want some kinds of covenants to run: o Restraints on alienation o Agreements that create a monopoly o Agreements based on the individual capabilities of the original parties. Economic Argument: Will the benefits be greater than the cost of the covenant? Is this covenant rational? Does it depend on the identity of the original parties? o If YES, we do not enforce it bc it is an economic burden w/o commensurate benefit. o If NOT, will the land owners be better off w/ the covenant than w/o it?

Restatement 3rd: Eliminated separate rules for RC theory, so it will likely decline Eliminates the T&C test, asks instead whether the covenant is illegal, unconstitutional, or against public policy. o This doesnt give us much more certainty, but at least it focuses attention on the real questions of why the covenant shouldnt run. o Restatement (Modern): Only restriction is that tenants will not be subject to the burden of affirmative covenants if they cannot easily perform them. o