Outline for Property I

Outline for Property I

Philosophical Backgrounds

I. John Austin

A. Austinian Positivism/Formalism

B. Sovereign declares law as a command to be followed by its subjects

C. Judges should only look backwards to precedent; they do not create law

D. A law is changed only by the legislation

i. Hobbes-justifies sovereign with absolute authority

ii. Bentham-legislation based on majority of happy people

II. John Locke

A. Natural Rights

B. Life, liberty and property to be protected by the government

C. otherwise, government should keep out of peoples business

III. Rational Maximization of Utility

A. Chicago School

B. Market makes utitlity

C. Adam Smith, Richard Posner, Charles Friedman

D. Government and courts should do nothing but maintain the integrity of the market

E. Issues to be decided by what is most efficient, what is best use, what is most profitable

IV. Oliver Wendel Holmes

A. Legal Realism

B. Decision based on policy

C. Pick the decision that best benefits society

D. Wash law in the acid of the bad man

E. Law is a prediction

F. Assumes scientific knowledge applies to policy by cause and effect

V. Critical Legal Studies

A. The law is a conceit to keep the rich and powerful rich and powerful while oppressing everyone else

B. Extreme expression of Legal Realism

C. Judges create law and then spin it to sound like precedent strengthens their argument

D. Mediation good, litigation bad (Japanese law based on Buddhism)

VI. Clarence Thomas

A. Natural law-God given

i. Procreation

ii. Self Preservation

iii. Society

iv. Love of God, learning

B. Trumps Constitution?

VII. Ruhls Theory

A. Chaos theory of law

B. Butterfly in the system screws cause and effect hypothesis

C. If the system becomes too heavy, it has no hope of working

D. Cannot predict a complex systems happenings other than to say there is some order there

E. Complex systems will ultimately destroy themselves

F. Stability in small adaptations

VIII. Henry Maine

A. Historical evolution of obligation

B. Obligation of status

C. Obligation of contract today, but moving back to . . .

D. Obligation of status

Takings

Background

I. 5th Amendment of the U.S. Constitution-no person shall be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation

A. Taking?

B. Public Use?

C. Just Compensation?

II. 14th Amendment applies 5th Amendment to the states

Terminology

compensation-usually market value of the property immediately prior to taking

police power-authority under which regulations or eminent domain is authorized for the benefit of health, safety and welfare of the public

eminent domain/condemnation-the ability of the gov. to take by judicial action private property for public purposes if owner is compensated

inverse condemnation- owner sues government for using property without compensation

average reciprocity of advantage-while some regulations restricting property result in some loss, they also create gains, things tend to average out in the end, if the loss is not too heavily visited on the few

essential nexus-tight means-end fit between the state interest being promoted and the regulation chosen to accomplish such

economic externalities-costs not factored into the sale price of goods, cf. Dolan in that if Dolans business generates so many bike riders Tygard must set up a bike easement, the economic loss of that property affected was not accounted for in the selling of her goods and therefore is an economic externality

rough proportionality-tight fit between the impact of property owners development with regulation done in response to development

reasonable investment backed expectations-expectations that investment in a property will yield a higher return after development

Takings-Cases

I. Hawaii Housing Authority v. Midkiff

A. Court affirmed the constitutionality of Hawaii legislatures use of eminent domain, allowing landowners the opportunity to avoid capital gains taxes by selling it to tenants of property and compensating the landowners

B. Where the exercise of eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause

C. Court will not substitute its judgment for the legislatures

D. Good example of Austinian jurisprudence-Court follows legislature

E. Property owners got screwed-Locke wouldnt be pleased

F. CLS-another example of the regime bolstering itself-rich landowners dont have to pay taxes, and rich tenants become landowners

II. Poletown Neighborhood Council v. City of Detroit

A. A very strapped City of Detroit used eminent domain of Poletown to set up a plant for General Motors

B. Judgment for defendant affirmed-project is warranted on the basis that its significance to the people of Detroit and the state of Michigan has been demonstrated

C. CLS-an area with traditional ethnic roots and solid community base gets uprooted by the man so a big corporation can move in

D. Austin-Court follows legislature

E. Propertys utility is maximized

F. Property rights of the individual go down the drain-Locke

III. Loretto v. Teleprompter Manhattan CATV Corp.

A. TMCATV placed a cable box permanently on a landlords property under a New York statute allegedly furthering a public purpose that all tenants should be able to receive cable

B. Any permanent occupation authorized by government of ones property is a taking no matter what public interest it serves

C. Such occupation destroys owners rights to possess, use, and dispose of her property

D. The idea of permanent is effectively attacked in the dissent

E. Property rights protected-Locke

F. Austin might not like this case because the New York statute was shot down

IV. Pennsylvania Coal Company v. Mahon

A. Who wins in battle over mineral interests if mining them might cause a sinkhole

B. Penn. statute (Kohler Act) forbids mining in such a way as to cause the subsidence of any structure used as a human habitation, where property is above coal and more than 150 feet from the mine

C. Act cannot be sustained as an exercise of the police power. Any act that makes property commercially impractible to mine in effect destroys the property and is a taking and needs compensation for the lost economic interest. See investment backed expectationsD. The general rule is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking (average reciprocity)

i. Balancing test: public interest v. whether or not a taking

ii. Reciprocity of Advantage: loss of individual v. gain of public (see zoning)

iii. Diminution in Value: if economic value of land is diminished, a taking may have occurred (vague-see cases below)

E. Contract is binding, court cannot give more rights than those bought by surface owners

F. Dissent says legislative act prohibits nuisance-no right to use property to injure another

G. Surface owner got screwed for big business economic interests-CLS

H. Austin got screwed because legislative act got revoked by court

I. Holmes decided economic interest better protected if surface owners were stupid enough to sign the contract giving up their mineral interests-legal realist

J. Propertys utility is maximized

K. Locke would be in a muddle-surface rights v. mineral interests; would probably side with the miners

L. Keystone, 1987, p825 in note 3-Subsidence Act deemed constitutional because mining a nuisance

V. Penn Central Transportation Co. v. City of New York

A. Do restrictions authorized by New York historical land preservation statute on the air space over Grand Central Station constitute a taking

B. Landmarks Preservation Law-protects landmarks and neighborhoods from precipitate decisions to destroy or fundamentally alter their character by creating incentive for owners of the land elsewhere so that they can still expect a reasonable return on their investment

C. Brennan likens the law to zoning ordinances

i. law sets up a Landmark Preservation Commission

ii. after hearing, board may consider property for landmark status

iii. owner may seek judicial review if unhappy with status

iv. three separate procedures for altering a landmark

a. certificate of no effect on protected architectural features

b. certificate of appropriateness

c. insufficient return-provides remedy if showing of economic hardship made

d. all subject to modification or judicial review if denied

D. Owners can transfer development rights to contiguous properties on same city block

E. Plaintiff could win only if it showed that the taking of the airspace above building completely deprived them of all reasonable beneficial use of the property. Leaving a little is apparently okay.

F. Court held that restrictions imposed are substantially related to the promotion of the general welfare and not only permit reasonable beneficial use of the landmark site but also afford owners opportunities further to enhance not only the Terminal site proper but also other properties

G. Dissent argues average reciprocity of advantage violated and that regulation is a taking; also distinguishes that zoning affects all land of an area works, while arbitrarily picking certain buildings to be landmarks doesnt

H. Natural rights and maximization of utility of property dealt a grave blow

I. While Holmes may not have personally agreed with the case, a legal realist might applaud the decision for picking the right public policy to endorse

J. CLS-slight victory in as much as the little guy doesnt have to pay more taxes if compensation were necessary

VI. Nollan v. California Coastal Commission

A. In order to redevelop property, Nollans had to obtain a permit from commission subject to condition that they allow a public easement to pass across a portion of their property so that the public could access the beach

B. Nollans argued that the condition could not be imposed without evidence that their development would adversely impact public access to the beach

C. Public hearing found that private use would block the sightline of the beach and prevent access

D. Land use regulation does not effect a taking if it substantially advances legitimate state interests and does not deny an owner economically viable use of his land

E. Constitutional propriety of regulation disappears if the condition substituted for the prohibition utterly fails to further the end advanced as the justification for the prohibition (see nexus)

F. There is no nexus between the easement and allowing the public to see the beach. Such an easement would be a taking

G. Dissent argues that Commission made legitimate use of its police power as authorized by Ca. constitution which protects public interest in the beach expressly. Also argues that there was a nexus in that if there is an increase in private use, public use should not be threatened. Also argues that average reciprocity is satisfied-no taking

H. legislative act creating Commission foiled-Austin disapproves

I. Court created a new test-conceivible notion to legitimate notion-Austin really disapproves

J. property right to exclude the public protected-Locke wins

K. First English, 1987, p847 note 3 and Emanuels p 267-must be compensated for a temporary taking deemed as such

VII. Lucas v. South Carolina Coastal Council

A. Legislative act to keep erosion of beaches down prohibited Lucas from developing property he paid $975,000.

B. Property deemed valueless under the act

C. Lucas attacked act as constituting a taking because value rendered useless, but did not attack whether act legitimately advanced health safety and welfare

D. Where the state seeks to sustain regulation that deprives land of all economically beneficial use, court holds the state may resist compensation only if it shows that the proscribed use interests were not part of his title to begin with-remanded to deal with this issue

E. in other words, if Lucas planned development can be said to be a nuisance, he will not be compensated

F. Natural law argument (Notre Dame Law School)

i. standard procedure for a takings case

a. landowner has burden of showing frustration of investment backed expectation by regulation that was reasonable prior to enactment of regulation

b. regulating entity must show regulation is justified by antecedent inquiry into the background principles of nuisance and property law. Showing would succeed if the state could demonstrate the prohibition was necessary to avoid substantial harm to public or private lands and resources, which harm outweighs the social value of the intended use and cannot be avoided by other means-essential nexus and rough proportionality must be satisfied

ii. this procedure should be applied to all land use takings disputes

iii. natural law respects the character of a local community as it has defined itself chiefly within state judge made precedent, rather than solely and deferentially in the too often acquisitive or exclusionary immediacy of legislative enactment

G. Ruling seems to advantage the investor-maximizers of utility would be happy

H. John Locke would also be happy with protection of property rights from gov. interference

VIII. Dolan v. City of Tigard

A. Dolan wished to expand her business but had to get permit subjecting her property to flood control and bike path easements on her property

B. Passed the essential nexus test-the regulation authorizing dedication was justified by and connected to legitimate state interests

C. Rough proportionality-the relationship between the regulation and Dolans planned improvements.

D. In other words, do Dolans further improvements to her property justify the granting of easements to control flooding and traffic-case sent back for a finding on this issue

E. Rehnquist classified citys conditioning of permit adjudicative in its affecting only one individual on one parcel-Souter alters this by saying her request for a variance from the city was adjudicative; citys conditioning was based on enactment. cf. FasanoF. John Locke-thumbs up

G. if Dolan wins, Chicago maximizers of utility thumbs up

H. Turtlerock v. College Station-historical background of rough proportionality in that the money Turtlerock collected for park use actually had to be spent on parks

IX. Galveston

A. Texas Open Beaches Law-mean high tide line to line of vegetation is public domain

B. This property is valueless

C. Easement by continued use (beach adversely possessed by the public)

D. Cannot build on this property

E. No reason to exclude people because of easement

F. No taking because of easement was in place prior to LucasG. If vegetation line ends up behind a house and that house is more than 50% destroyed, it cannot be rebuilt because of Texas Open Beaches Law

Evolution of Takings-

List of cases:

Pennsylvania Coal Company v. Mahon 1922-average reciprocity of advantagePenn Central Transportation Company v. City of New York 1978-unless total diminution of value, no takingLoretto v. Teleprompter Manhattan CATV Corp. 1982-a permanent occupation is a taking no matter whatHawaii Housing Authority v. Midkiff 1984-conceivable notion of HSW for eminent domain; legislature knows bestNollan v. California Coastal Commission 1987-regulation must legitimately further or substantially advance HSW; essential nexusLucas v. South Carolina Coastal Council 1992-if economically backed expectations destroyed, unless development was going to be a nuisance, then a taking has occurred

Dolan v. City of Tigard 1994-rough proportionalityProcedure for takings suit (as of Dolan)

I. Legislative enactment uses police power to bring about a regulation or act of eminent domain to further a goal of health safety and welfare for the public

II. Property owner wishes to sue

A. to avoid eminent domain-must show there is no conceivable notion of public purpose to use of eminent domain

B. to avoid regulation-

i. landowner has burden of showing law does not substantially advance legitimate state interests and that economically viable use of property has been deprived

ii. Regulating entity must show regulation is justified by antecedent inquiry into the background principles of nuisance and property law.

iii. Showing would succeed if the state could demonstrate the prohibition was necessary to avoid substantial harm to public or private lands and resources, which harm outweighs the social value of the intended use and cannot be avoided by other means-essential nexus and rough proportionality must be satisfied

Zoning

Terminology

special use permiti. legislatively authorized uses identified in the zoning ordinance that are regulated by an administrative agency because of special problems of the use presents from a zoning standpoint (day care centers, grocery store, gas stations, hospitals, private schools)

ii. Administrative, not legislative in character

iii. disputes arise on whether proper standards have been articulated for the delgation of authority, whether the standards have been met, and whether the requirements create unconstitutional classifications

variance-departure from zoning regulations granted by an administrative body to avoid overly harsh results from zoning regulation. For instance if a 98 foot parcel is subject to a 100 foot frontage ordinance. Hardship must be unique to the particular lot (for many lots, zoning amendment needed). Variance must not harm surrounding neighborhood. Variances are not recorded on the map and are subject to abuse

non-conforming uses- uses of property that exist prior to adoption of zoning ordinances

amortization-ordinance authorizing non-conforming use to run out after a set period of time-time enough for the owner to make back his initial investment

spot zoning-like parcels being zoned differently without good reason-invalid. Tests for such as follows

i. use permitted must differ drastically from prevailing uses in surrounding area

ii. small area affected, usually one parcel

iii. use benefits one or a few owners rather than the community at large

planned unit developments/cluster zoningi. permits developers to deviate from rigid lot size and building set-back requirements, and in some cases to mix uses within a development.

ii. Criticized for requiring more costly infrastructure such as roads and sewers and for contributing to a sense of isolation.

iii. limited to large tracts of land 10-20 acres

iv. must be harmonious with immediate environs and consistent with municipalitys land use plans

floating zone-no defined boundaries, but float over area to be affected.

i. municipality enacts an ordinance authorizing a particular range of activities, without specifying specific areas in the municipality where the activities can take place

ii. second ordinance anchors the floating zone to a particular tract of land in response to specific development proposals

overlay zones-if a municipality wished to impose different regulations on certain permitted uses in part of an existing zoning district, new regulations are laid over the existing zone map. existing regulations that do not conflict with the overlay district remain in effect, but conflicting ones are preempted

performance standards-control harmful effects of development, shifts from type of use to impact of use. requires municipalities to articulate meaningful and understandable standards and apply them even handedly

aesthetic zoning-the practice of discriminating against activities that depart from the norm, such as radical designs of buildings, unusual types of building materials, and the use of signs to convey messages. cf. Stoyanoff

fiscal zoning/exclusionary zoning-attracts activities such as commercial and light industrial uses that would increase the tax base, and keeps out people who would drain the tax base through increased pressure on public schools, local welfare agencies, public transit systems and the like. cf. Mt. Laurel

builders remedy-enables a particular development plan to go forward so long as it complies with other valid local regulations

How a zoning is passed

I. 10th Amendment-Power not provided by constitution to the federal government is left to the states

II. State authorizes governing bodies to adopt zoning plans by an enabling act (zoning enabling statute)

III. Governing body chooses a zoning /planning commission-prepares master plan of zoning for governing body

IV. Adoption of zoning plan by governing body

V. Any takings issue is referred back to governing body

VI. Map is drawn

VII. Any zoning ordinance must be in accord with master plan (although, all of a municipalitys zoning ordinances together can constitute the master plan)

VIII. Day to day issues of zoning

A. Administrative procedure for handing out permits

B. Buildings Department-day to day enforcement of zoning scheme-administrative (adjudicative) in character-hands out permits

C. Board of Adjustment (appointed) decides on appeals of permits, decides on variances and special use exceptions

D. appeal to district court

A Standard State Zoning Enabling Act

I. Empowers cities

A. to regulate and restrict the height, number of stories and size of buildings and other structures, the percentage of lot that may be occupied, the size of yards, courts, and other open spaces, the density of population, and the lcoation and use of buildings, structures and land for trade, industry, residence or other purposes

B. to create use zones with differing regulations

C. modify zoning laws and grant variances when in the public interst to do so

II. Requires cities

A. to createa comprehensive plan designed to accomplish various public objectives specified in the Standard Act

B. to create procedures to establish, enforce and alter zoning regulations

C. to establish a zoning commission and an appeal mechanism for affected landowners

Rezoning

I.Zoning commission advises governing body

II. hearings are held

III. must not be arbitrary or discriminatory

IV. must be in accordance with master plan (or if no plan, with character of prior zoning ordinances that make up the plan)

V. adopts amendment

VI. may run into spot zoning issues

VII. If small enough area affected, may run into procedural due process issues (cf. Fasano)

Cases

I. Ambler Realty Co. v. Village of Euclid, Ohio (District Court)

A. Ambler owned 68 acres of land it wished to develop for industrial use, most of which was classified by Euclids zoning plan as single or multi-family use only, with some land classified for industrial use

B. Ambler sues to enjoin zoning and have ordinance declared null and void

C. Zoning does not pass the Holmes test in that the diminishment in value from Amblers inability to develop its property for industrial purposes outweighs any compensation by benefits acruing to the land from restrictions imposed by the ordinance on other land

D. regulation must have a real and substantial relation to maintenance and preservation of HSW

E. Zoning is really social engineering

F. Zoning unconstitutional-a taking has occurred

G. Austin loses, Locke and economic maximizers win

H. CLS-economic and racial segregation vs. land used for industrial purposes. No winners here.

II. Village of Euclid v. Ambler Realty Co. (U.S. Supreme Court)

A. Amblers land value decreases from $10,000 to $2,500

B. while the meaning of constitutional guarantees never varies, the scope of their application must contract or expand to meet the times

C. Euclids governing authorities, presumably representing a majority of its inhabitants and voicing their will, have determined not that industrial development shall cease at its boundaries, but that the course of such development shall proceed within definitely fixed lines

D. proper function of the police power to do such

E. zoning measures will be struck down as unconstitutional only if it was clearly arbitrary and unreasonable, having no substantial relation to HSW

F. HSW really and substantially advanced by zoning ordinance

G. Austin wins, Locke loses

III. Bell v. City of Elkhorn

A. On an area three parcels of which already with commercial zoning, Hardees, Inc. wanted to build a restaurant.

B. Owners of property 100 feet from the proposed spot filed counter petition to keep development from happening

C. City plan commission okayed the restaurant

D. plaintiffs allege Elkhorn did not have a separate document constituting a comprehensive plan, restaurant was spot zoning, zoning statuts of parcel unconstitutional because it lacked proper standards

E. statute says master plan may include a comprehensive plan, formal plan unnecessary

F. defendant said statute could be properly followed by the zoning ordinance itself

G. Comprehensive plan should contain the following

i. improving the physical environment of the community

ii. promoting the public interest

iii. facilitating the implementation of community policies on physical development

iv. effecting political and technical coordination in community development

v. injecting long-range considerations into the determination of short range actions

vi. bringing professional and technical knowledge to bear on the making of political decisions concerning the physical development of the community

H. Most in the majority agree that a zoning ordinance itself can be a comprehensive plan

I. There is no requirement that the plan be written beyond a generalized conception

J. language of statute says in accordance with

K. Spot zoning defined as the practice whereby a single lot or area is granted privileges which are not granted or extended to other land in the vicinity in the same use district

L. should only be indulged in where it is in the public interest and not solely for the benefit of the property owner who requests the zoning

M. three corners of the intersection were zoned commercial

N. The amendatory zoning ordinance did not grant special privileges to a single parcel inconsistent with the use of property in the general area

O. Austin wins, maximizers win, Locke loses

IV. Fasano v. Board of County Commissioners

A. group of homeowners sued to oppose a zoning change creating a mobile home park

B. Once a zoning scheme is adopted, changes should be made in keeping with the original plan and in keeping with changes in the character of the neighborhood

C. Ordinances laying down general policies without regard to a specific piece of property are usually an exercise of legislative authority, are subject to limited review, and may be attacked upon constitutional grounds for an arbitrary abuse of authority.

D. A determination whether the permissible use of a specific piece of property should be changed is usually an exercise of judicial authority and its propriety is subject to an altogether different test

E. As a quasi judicial decision, the rezoning is not entitled to a presumption of legislative validity, the burden of proof was on the party seeking the change and the decision to change the zoning had to be justified by evidence of consistency with the adopted general plan or overriding public need

F. Adjudicative procedures involving a specific property must follow procedural due process (works for zoning amendments or land use regulations)

i. Notice

ii. Hearing

iii. Evidence

iv. representation by counsel

v. Non-biased decision maker

vi. decides on basis of evidence at hearing

vii. statement of justification for change connecting it with standards articulated

viii. appealable

G. Substantive due process-

i. zoning must bear a rational relationship to a permissible state objective; must be a legitimate use of police power

ii. zoning must completely destroy economic value of property to violate substantive due process (amount to a taking)

iii. burden of proof is on the attacker of the ordinance

H. Big win for Locke

I. Austin doing back flips in his grave

J. CLS should feel a little empowered by a due process victory

V. Collard v. Incorporated Village of Flower Hill

A. where a local municipality conditions an amendment of its zoning ordinance on the execution of a declaration of covenants providing that no construction may occur on the property so rezoned without the consent of the municipality, absent a provision that such consent may not be unreasonably withheld the municipality may not be compelled to issue such consent or give acceptable reason for failing to do so

B. Appellants predecessors wanted a change in zone from general municipal and public purposes district to a business district

C. Village board granted rezoning with conditions

D. no building or structure situated on subject premises will be altered, extended, rebuilt, renovated or enlarged without the prior consent of the Board of Trustees of the Village

E. Appellant, after acquiring title, made application to village board for approval to enlarge and extend existing structure on the premises

F. Application was denied without reason

G. The imposition of conditions on property sought to be rezoned may not be classified as a prospective commitment on the part of the municipality to zone as requested if the conditions are met; nor would the municipality necessarily be precluded on this account from later reversing or altering its decision

H. Conditional rezoning is a means of achieving some degree of flexibility in land use control by minimizing the potentially deleterious effect of a zoning change on neighboring properties; reasonably conceived conditions harmonize the landowners need for rezoning with the public interest and certainly fall within the spirit of enabling legislation

I. If upon proper proof, the conditions imposed are found unreasonable, the rezoning amendment as well as the required conditions would have to be nullified, with the affected property reverting to the preamendment zoning classification

J. the allegation of the complaint that the village board in denying appellants application acted in arbitrary and capricious manner is not an allegation that the board acted in bad faith or its equivalent

K. Claim dismissed

L. Austin wins, Locke loses, maximizers lose, CLS-system stinks

VI. Sunnyvale, Texas

A. town of 500 homes

B. Mayhew wanted to build planned unit development of area, adding 5000 development units (DUs), taking care of all standing land regulations due to the higher density development

C. current zoning ordinance allowed only for 1 acre zoning

D. his permit was revoked even though he satisfied all the prerequisites

E. legislative process

i. Planning commission holds a hearing

ii. City Council holds a hearing

iii. they can either amend and go for PUD or deny and return to 1 acre zoning

iv. PUD would be authorized on a floating zone which would only require amendment

v. town accepted the floating zone, but then rejected the development offer because the city council is an elected body and they were probably getting nasty calls from the existing populace.

F. still in litigation citing Fasano-adjudicative process needs due process

G. no reasonable investment backed expectations of Mayhew because he owned the property as farmland way before it could ever be used for development

VII. State Ex Rel. Stoyanoff v. Berkeley

A. Relators petition pleads that they applied to appellant Building Commissioner for a building permit to allow them to construct a single family residence in the City of ladue and that plans and specification were submitted for the proposed residence which was unusual in design but complied with all existing building and zoning regulations and ordinances of the City of Ladue

B. Permit was not approved by the Architectural Board of the City of Ladue

C. Board set up to make sure buildings and structures conform to certain minimum architectural standards of appearance and conformity with surrounding structures and that unsightly, grotesque and unsuitable structures, detrimental to the stability of value and to the general welfare and happiness of the community be avoided and that appropriate standards of beauty and conformity be fostered and encouraged

D. petition says such an ordinance is unconstitutional because it is vague and provide no standard nor uniform rules to guide the architecture board and that aesthetic standards are outside the scope granted city by statute

E. city says proper exercise of citys governmental, legislative and police powers, as determined by its legislative body and that proposed building would have adverse affect on property values of surrounding houses

F. enabling ordinance says regulations shall promotes general welfare

G. Court rather arbitrarily says regulations on aesthetics substantially promote legitimate general welfare

H. Because procedures exist for factual review of architectural decisions, appellants rights are safeguarded-no arbitrary powers bestowed upon architecture board.

I. Austin wins

J. Locke wins if you are a private land owner following the ordinance, loses as a landowner who doesnt want to follow the ordinance

VIII. Southern Burlington County NAACP v. Township of Mount Laurel (1975)

A. NAACP sued under equal protection clause-prevents any state from depriving a citizen of equal protection of laws

B. Trial court found zoning ordinance invalid, but ordered affirmative action for replacement

C. ordered municipality to make studies of the housing needs of low and moderate income persons presently or formerly residing in the community in substandard housing, as well as those in such income classifications presently employed in the township and living elsewhere or reasonably expected to be employed therein in the future and to present a plan of affirmative public action designed to enable and encourage the satisfaction of the indicated needs

D. economic segregation the issue, not racial

E. general welfare extended to those in region who wish to live in Mount Laurel, not just those who already do

F. proper provision for adequate housing of all categories of people is certainly an absolute essential in promotion of the general welfare required in all local land use regulation

G. through its zoning ordinances has exhibited economic discrimination in that the poor have been deprived of adequate housing and the opportunity to secure the construction of subsidized housing, and has used federal, state, county and local finances and resources solely for the betterment of middle and upper income persons

H. ordinance builds a wall around itself to keep out those people or entities not adding favorably to the tax base, despite the location of the municipality or the demand for varied kinds of housing; all fiscal considerations deemed invalid.

I. Presumptive obligation

i. Procedurally-when it is shown that a developing municipality in its land use regulations has not made realistically possible a variety and choice of housing, a facial showing of violation of substantive due process or equal protection under the state constitution has been made out and the burden shifts to the municipality to establish a basis for its action

ii. substantively-the specifics of what the municipal land use regulation provisions will evidence invalidity and shift the burden of proof

J. Remedies-adopt amendments to the ordinance to correct deficiencies-no affirmative action as of yet

K. confines all Mt. Laurel litigation to select judges

L. Austin rolling in grave

M. Locke unhappy if rich and inside Mt. Laurel, happy if outside and poor

N. Legal realists would applaud if they believed in the purpose of the policy favored

IX. Southern Burlington County NAACP v. Township of Mount Laurel (1983)

A. Mt. Laurel I didnt work

B. The deficiencies in its application range from uncertainty and inconsistency at the trial level to inflexible review criteria at the appellate level. The waste of judicial energy involved at every level is substantial and matched only by the often needless expenditure of talent on the part of the lawyers and experts. The length and complexity of trials is often outrageous, and the expense of litigation is so high that a real question develops whether the municipality can afford to defend or the plaintiffs can afford to sue.

C. The portion of the regions present need that must be addressed by municipalities in growth areas will depend then on conventional fair share analysis, some municipalitys fair share being more than the present need generated within the municipality and in some cases less

D. Defenses

i. benign intent-almost never successful

ii. preservation of property values-not successful

iii. fiscal justifications-not successful

iv. other towns better suited-not successful

v. ecological grounds-may succeed

E. Determination of fair share

i. identifying the relevant region

ii. determining its present and prospective housing needs

iii. allocating those needs to the municipality or municipalities involved

F. reasserts establishment of judicial panel to handle all Mt. Laurel litigation

G. formulas that accord substantial weight to employment opportunities in the municipality, especially new employment accompanied by substantial ratables shall be favored

H. court shall decide proportion of low and moderate income housing

I. must remove exclusionary ordinances

J. affirmative measures suggest that the municipality provide a realistic opportunity for lower income housing to be built

i. encouraging or requiring the use of available state or federal housing subsidies

ii. providing incentives for or requiring private developers to set aside a protion of their developments for lower income housing

K. Builders remedy

i. essential to maintain a significant level of Mt. Laurel litigation and only effective method of enforcing compliance

ii. required by principles of fairness to compensate developers who have invested substantial time and resources in pursuing such litigation

iii. the most likely means of ensuring that lower income housing is actually built

iv. should be granted unless the municipality establishes the nuisance of such a project

L. Legal realists who like policy applaud

M. Locke ambivalent, but probably more pissed

N. Austin cringes

O. Ruhl would say something this expansive has no chance of possibly working because the system is to large to manage, as is obvious by the fact that after eight years they have gotten nowhere

Zoning suit procedure

zoning ordinance must substantially advance a legitimate public health, safety, welfare goals

no separate comprehensive plan is necessary

movant attacking zoning must show zoning is arbitrary or discriminatory

use of property must be rendered completely economically valueless by zoning

Holmes test-diminishment of value vs. benefits received from zoning on surrounding area

Substantive due process-

a. zoning must bear a rational relationship to a permissible state objective; must be a legitimate use of police power

b. zoning must completely destroy economic value of property to violate substantive due process (amount to a taking)

c. burden of proof is on the attacker of the ordinance

d. incorporation doctrine-Bill of Rights is incorporated into the 14th Amendment

i. Free speech/expression

ii. Free press

iii. Free exercise of religion

iv. any zoning law that unreasonably restricts these rights without achieving a compelling state interest may be subject to attack

Adjudicative procedures involving a specific property must follow procedural due process (works for zoning amendments or land use regulations). cf. Fasano

a. Notice

b. Hearing

c. Evidence

d. representation by counsel

e. Non-biased decision maker

f. decides on basis of evidence at hearing

g. statement of justification for change connecting it with standards articulated

h. appealable

Real Estate Transactions

I.The Participants and Their Roles

A. The Service Groups

1. Most of the work of residential conveyancing is controlled or performed by brokers

2. broker may fill in standard contract forms, but may not modify terms or conditions of the contract that would affect legal relationship of the parties

3. seller hires broker (a listing agent) to sell property on terms and for a commission specified in the listing agreement

4. Open Listing-the seller authorizes broker to sell but may sell property on his own time or procure other brokers

5. Exclusive agency- limits seller to one broker, but may sell property on his own time

6. Exclusive right to sell-only broker may sell property-commission is owed upon sale

7. Multiple listing-brokers holding exclusive listing may pool listings through a common clearing house-when property sold, commission is split between listing and selling broker

8. Brokers primary fiduciary obligation is to the seller

9. attorney approval clauses may be in contract-attorney allowed to review contract-usually there is a three day period of review under which the seller or buyers attorney can nix the transaction

10. Attorney is not involved in closing11. Attorneys role has diminished, may supply abstract of title- a history of title chain, but usually a title company does this

B. Conveyancing and the Practice of Law

1. In a complex commercial context. lawyers are essential to transaction

2. Advantage of retaining an attorney is that buying a house is huge investment and attorney works purely for buyers interest

3. Disadvantage-already costs a lot of money without adding attorneys fees

4. South Jersey practice-from the beginning of the transaction to the end, neither the seller nor buyer is represented by counsel

5. Start with a broker who is ordinarily a member of a multiple listing system and who oversees the negotiations up through closing

6. The broker may have a conflict of interest with the buyer because she wants to close in order to get paid

7. Attorney broker uses to set up documents may have conflict of interest because he supposed to be looking out for both buyer and seller

8. If an attorney does not draft the documents, the broker, the title company, or the lender does

9. Brokers dont like attorneys because they kill deals

10. In Arizona, the state bar sued a title company for a declaratory judgment saying what they were doing was practicing law without a license. Bar Assoc. won, but Arizona legislature passed a law saying brokers could practice

II. The Basic Documents

A. Margaret H. Wayne Trust v. Lipsky1. Lipsky signed an earnest money agreement (contract) which contained a liquidated damages clause putting down $1000 to purchase condominium from Wayne through broker Reynalds

2. Wayne accepted

3. When the stock market went down, Lipsky decided to back out of the deal

4. Instead of keeping the $1000 under the liquidated damages clause, Wayne sued for specific performance-justified by keeping property off the market after contract signed

5. she sold property and proceeded with a claim for actual damages

6. Trial court erred in awarding Wayne some $5000 for commission for Reynaldsa. Ellsworth Dobbs1. If broker provides a ready willing and able buyer to buy on terms of owner

2. And buyer signs contract with owner

3. And buyer completes transaction by closing

4. Then he gets his commission

5. if transaction is not completed because of sellers breach, then seller is responsible for brokerage commission if contract is signed

6. Minority law

7. Transaction never closed, Reynalds should not get commission

8. Clause in EMK stating defaulter would pay brokerage commission

9. Wayne and Reynalds settled

10. EMK is a billateral executory (binding in the future) contract11. Usually a title company holds onto the earnest money as an escrow agent, not seller or broker

12. Majority law-broker would get commission for providing a buyer ready, willing and able to buy on owners terms, if seller does not default-fairer policy

B. The Contract

1. Must satisfy the statute of frauds

2. After negotiations based on buyers offer from listing and subsequent counter offers, a contract is formed that once signed governs the relationship between the vendor (seller) and purchaser during the time between signature and closure

3. Ideally, the contract will be sufficiently clear and detailed to resolve any difficulties that may arise prior to closing

C. Purchase Agreement (example)

1. purchase price

2. appurtenances and personal property

3. closing; possession

4. deed; title insurance

a. marketable title (see below)

5. real estate taxes, assessments, rents and current operating expenses

6. condition of the premises

a. habitability (see below)

7. damage or destruction

a. equitable conversion (see below)

8. brokers commission

9. conditions

10. return of earnest money; default

11. entire agreement

D. The Deed

1. Enfeoffment by livery of seisin-grantor and grantee go to property and in the presence of witnesses grantor hands grantee a twig or clod of dirt to symbolize conveyance; then they slap the kids so that they wont forget

2. Deed is subject to statute of frauds, even though it is not a contract

3. Essential elements of the deed

a. names of grantor and grantee

b. description of the subject property

1. metes and bounds-Commencing on the County Road at the southwest corner of land thence in a generally southerly direction by and along said County Road Twenty (20) rods to a stake driven into the ground; thence at tight angles to said County Road in a generally easterly direction Fifty (50) rods to a stake driven into the ground; thence at right angles in a generally northerly direction Twenty-eight (28) rods more or less to land now or formerly of Edwin Bickmore, . . . thence in a generally westerly direction by and along said northerly line of said premises . . . Thirty (30) rods more or less to the generally northeasterly corner of said premises; thence in a generally southerly direction by and along said easterly line of said premises Eight (8) rods more or less to the generally southeasterly corner of said premises; thence in a generally westerly direction by and along the southerly line of said premises Twenty (20) rods more or less to the point of beginning

2. Government Survey System-the S of the SW of Section 25 of Township 3 North, Range 3 West, First Principal Meridian

3. By reference to a subdivision plat-Block 8, Lot 7 out of the Ralph Anderson Survey 192 of Bexar Co., Texas

4. Rules of construction in case property description is incomplete, inconsistent, or plainly mistaken used to determine the intentions of the parties, in descending order of importance cf. Theriault below

a. original survey markers

b. natural monuments

c. artificial monuments

d. maps

e. courses of direction

f. distances

g. common names

h. quantity

c. statement of intention to convey-granting clause

d. must be signed by grantor

e. name of grantee can be written in later and still be binding for equitable purposes

f. acknowledgement

g. for deed to be effective it must be delivered.

1. cf. Pipes below

2. commercial escrows-tender deed only upon instructions of the seller-written instructions and deed are delivered upon tendering to escrow agent

3. relation-back doctrine-buyers title, once acquired out of escrow, will relate back to the moment the deed was delivered into escrow-buyer has equitable title from moment deed is tendered to escrow agent

4. exception: if seller sells property to a bona fide purchaser, a person who pays real consideration and has no clue of earlier conveyance in escrow, the bona fide purchaser prevails because he has legal title (title has not only been delivered, but also tendered upon bona fide purchaser)

5. Delivery by estoppel-if O grants A title without intending to deliver and A sells to good faith purchaser B, O is estopped from denying he transfered title to A

h. a deed delivered upon death is usually ineffective unless it can pass as a will

4. Statutory forms-laws in most states contain statutory forms of deeds that may be altered

5. deed in fee simple, general warranty deed-warrants against lawful claims and demands from all persons-lien free if no subject to language

6. limited warranty deed (special warranty deed)-warrants against any encumbrances made by grantor-anything prior to that is buyers problem

7. quit-claim deed-no warranty

8. Doctrine of Merger-once buyer accepts deed, any promises with respect to title are merged into the deed-policy underneath is that upon accepting the deed, the buyer is satisfied that the deed fully conforms to sellers obligations under the sale of contract (EMK). The merger doctrine does not extinguish those portions of the contract that are independent or collateral to the transfer of title

9. deed poll rule-anyone who accepts tender of a deed is bound by the deed

a. Green v. White

1. squatter had title to land and mineral interests by adverse possession

2. record title owner told adverse possessors that they were on his property

3. record owner sold property to adverse possessors and deeded over the property to them reserving mineral interests

4. deed poll rule says that if you accept and go by the deed, you are bound by it

5. record title owner gets rich

6. only way an adverse possessor can get record title is to sue record title owner and win, judgment decrees land to adverse possessor, filed for record

E. Theriault v. Murray

1. appeal from judgment contending that the court erred in relying solely on the distance calls in the Theriaults deed to fix the southern boundary of their land-judgment vacated, remanded

2. to what boundaries a deed refers is a question of law, the location of those boundaries is a question of fact

3. controls of boundary in descending order of importance: monuments, courses, distance and quantity unless the priority produces absurd results

4. remanded to determine the location of monuments

5. expansions:

a. the construction prevails which is most favorable to the grantee

b. if the deed contains two descriptions one ambiguous and the other unambiguous, the later governs in order to sustain the deed

c. when a tract of land is bound by a monument which has width, the boundary line extends to the center

F. Pipes v. Sevier1. Leone Pipes directed an attorney to prepare two sets of deeds-one set to her son Keith and one to her daughter Beverly

2. Instructions to attorney were to hold them in escrow until her death

3. Leone, when she could not get the deeds back, had new deeds prepared, preparing a life estate for herself and Keith, so that Keiths family would never have the property

4. Keith sued for declaratory judgment voiding all deeds except the original deeds in escrow

5. Keith died-wife assumed right to property of escrowed deeds

6. court found that there was no right of recall-judgment affirmed

7. Donor cannot gift back after transfer complete

8. Delivery to 3rd party is sufficient.

9. If arguing on Leones part say that this is an attempt to make a will.

III. Title Assurance

A. Vendor contractual obligation to marketable title

1. marketable title-good record title-a recorded chain of title from some original root of title in the past to the seller, with no recorded encumbrances or proving title by adverse possession either by a successful quiet title action or evidence (affidavits, etc.) sufficient to enable buyer to quiet title.

B. Voorheesville Rod & Gun Club, Inc. v. E.W. Tompkins Co., Inc.1. First issue is whether the subdivision regulations apply to a conveyance of a portion of a parcel of land where it is intended by the parties that the land shall remain undeveloped

2. If regulations apply, then issue becomes whether defendants refusal to seek subdivision approval makes title unmarketable

3. plaintiff could not seek approval because they only had equitable and not legal title

4. plaintiff sued for specific performance to get defendant to apply for approval from subdivision.

5. Because no provision in the contract requires defendant to obtain subdivision approval and the only basis for plaintiffs specific performance claim is its failed assertion of marketable title, plaintiffs summary judgment is reversed; complaint dismissed

6. contract stipulated marketable title subject to zoning and environmental laws, not that defendant had to get subdivision approval

7. subdivision regulation enough like zoning to imply a subject to provision on the plaintiff, yet because contract silent as to defendants obtaining approval, plaintiff cannot imply a term as to defendants obtaining approval

8. While defendants failure to get approval was a violation of regulations at the time of contract formation, the violation did not make title unmarketable

9. specific performance is usual damage remedy because property is unique and damages are difficult to determine

10. vendor can keep earnest money for breach

11. purchaser may sue for restitution of earnest money or for compensatory damages for loss on the bargain

12. litigation makes property unmarketable

C. Deed Covenants

1. Covenant of seisin-grantor warrants that he owns what he is conveying-a present covenant-can only be breached upon delivery-if breached, grantee gets money back, but must reconvey property to grantor

2. Covenant of right to convey-grantor warrants he has power to convey the property-a present covenant-grantees knowledge of lack of authority to pass title is no defense

3. Covenant against encumbrances-grantor warrants that there are no liens, mortgages, easements, covenants, restricting use, or other encumbrances upon the title to the property that are specifically excepted (subject to) in the deed-present covenant-grantees knowledge of encumbrances is no defense-damages based on whether or not encumbrance can be removed

a. if grantee can remove the encumbrance (pay off the lien, etc.) he is entitled to recover expenditure of removal

b. if not removable unilaterally by the grantee, damages are measured by difference between unencumbered and encumbered fair market value at time of conveyance

4. present covenants (1-3) are subject to statute of limitations from time of conveyance

5. present covenants cannot be assigned by implication. If A conveys to B by general warranty deed and B conveys to C by quitclaim or special warranty, C cannot sue A for breaches of present covenants in a majority of states

6. Covenant of general warranty-grantor warrants that he will defend against lawful claims of a superior title and will compensate grantee for any loss suffered by successful assertion of a superior title-future covenant-breached when grantee is actually or constructively evicted

7. Covenant of quiet enjoyment-grantor warrants that grantee will not be disturbed in his possession or enjoyment of property by someones successful assertion of a superior title to property (often omitted in a general warranty deed)-future covenant

8. Covenant of further assurances-grantor promises to do whatever is reasonably necessary to perfect conveyed title if it turns out imperfect or defective (often redundant)-future covenant

9. If there is privity of estate between original grantor and a remote grantee, the benefit of the future covenant given to the original grantee runs with the estate given to the remote grantee. Privity of estate means that the future covenants run with the land as they are conveyed to successive grantees. A to B to C to D if by warranty deed and A goofed on future covenants, D has an action. If A goofed on present covenants, there are no future covenants to run with the land.

10. General warranty deed-contains all six covenants above

11. Special warranty deed-same covenants as above, but only for those defects that occur during the grantors ownership

12. Quit-claim-no warranties to title- in some states, inquiry notice is assumed upon tender of a quitclaim deed

13. Damages-grantee may not recover more than what the grantor in breach received for the property

14. After-acquired title (estoppel by deed)- If grantor conveys an interest in property he does not own, and then later acquires the unowned interest, this doctrine operates to send that after-acquired title immediately to the grantee or his successors in interest. The grantor is estopped from denying the scope of the original deed

D. St. Paul Title Insurance Corp. v. Owen1. what liability do grantors have to remote grantees under a warranty deed where certain covenants of title contained in the deeds are found to run with the land?

2. Al Owen by warranty deed covenant of quiet enjoyment and warranty to brother James Owen Jr.

3. James Owen by statutory warranty deed (special warranty deed) to Dennis Carlisle Jr.

4. Carlisle mortgaged to UCMIM2, then to GECC replacing mortgage. St. Paul Title Insurance Corp is GECCs subrogee

5. Carlisle defaulted

6. Circuit Court found Carlisle did not have title and that GECC was not entitled to foreclose

7. GECC sued Albert Owen and James R. Owen, Jr. for breaching covenants of title

8. when a covenant of title runs with the land, all grantors, back to and including the original grantor-covenantor, become liable upon a breach of the covenant to the assignee or grantee in possession or entitled to the possession, and the latter may sue the original or remote grantor, regardless of whether he has taken from the immediate grantor with a warranty

9. breach occurred when the trial court ruled in the foreclosure proceedings that Carlisle possessed no interest in the property which had been mortgaged

10. covenants of quiet enjoyment and warranty ran with the land

11. Action against Al Owen okay

12. James Owen did nothing to affect the purported title conveyed, did not breach any of the covenants of title contained in the statutory warranty deed delivered to Carlisle, and is therefore not liable

13. since there is no evidence that the remote grantors received any consideration for their conveyances purportedly conveying title to subject property, appellant, as subrogee of GECC is entitled to an award of nominal damges only, for the breach of the covenant of quiet enjoyment contained in Albert Owens deed

14. Why didnt Carlisle have title?

E. Recording Acts

1. recording system-protects land titles-stipulates who has priority in case of conflict

2. clerks job to stamp and index a deed, mortgage, judgment and tax liens, or installment sale contracts-wills and divorces under separate index

a. grantor-grantee index-books organized by date, pages organized by alphabet, each page in order of transaction

b. tract index-organized by property description chronologically as to transaction

3. Old system-whether recorded or not, first in time, first in right-if no deed is recorded to a property, first in time wins

4. Recording

a. carrot-if you record, you have a better chance at protection

b. stick-if you dont record, you could lose title

5. recording provides constructive notice (usually)

6. Actual notice- real actual knowledge of a prior unrecorded deed; evidence outside the record is necessary for establishment

7. Constructive Notice

a. record notice-the entire world is charged with constructive notice of the contents of the record

b. Inquiry notice-

1. who lives on the property

2. record reference to an unrecorded deed

3. deeds from a common grantor or character of neighborhood (subdivisions, etc. see implied easements, below)

8. if clerk fails to index or indexes incorrectly, searcher is not held to constructive notice

9. recording does not apply to interests created by the operation of law

a. adverse possession

b. death

c. divorce

d. prescriptive or implied easements

10. Race Acts-whoever records first has title

11. Notice Acts

a. addresses inequity of permitting a later purchaser to prevail over an earlier purchaser if later purchaser knows of prior purchase

b. a subsequent bona fide purchaser paying valuable consideration without prior notice of unrecorded transfer prevails over prior purchaser who does not record, even if subsequent purchaser has not recorded

c. simply put-no conveyance is valid against a subsequent bona fide purchaser who has no notice of the conveyance, unless the conveyance is recorded

d. Texas is a notice state

12. Race-Notice Acts

a. protects subsequent bona fide purchasers without notice of prior purchase who record before the prior purchaser

b. no conveyance is valid against a subsequent bona fide purchaser who has no notice of the conveyance and who has recorded first

13. How to run a title search

a. searcher need only have property description to run title

b. start with grantee index and work your way back; then go forward through grantor index

c. searcher must exercise reasonable diligence-liable to buyer if results are provided to buyer, even if search is done for seller, may even suffer from tort liability

1. ceiling- where you put you finger down on the page (limited/unlimited)

2. floor-where you lift your finger from the page (limited/unlimited)

3. courts will generally pick the title that best maintains the integrity of the recording system

-In a notice state

-limited ceiling, R wins over B

-unlimited ceiling B beats everybody

-limited ceiling Y beats B + R

-unlimited ceiling B beats Y + R

-limited ceiling, limited floor S beats everybody

-unlimited floor, limited ceiling Y beats everybody

4. Marketable title acts-cutoff for diligent title search (50 years, e.g.), usually long enough back to satisfy any statute of limitations-does not take care of twin title chain problems, cf. Palamarg14. Shelter Rule- the protection given a bona fide purchaser shelters subsequent purchasers even if they have notice

F. Mugaas v. Smith et ux1. Action to quiet title between Mugaas, who claims by adverse possession a strip of land and Smith, a bona fide purchaser of the property in dispute

2. fence which demarcated line disintegrated

3. that Mugaas ceased to use strip in question in such a way that her claim of adverse possession was apparent did not divest her of the title she had acquired

4. Smith argues that a bona fide purchaser should be able to rely on the record

5. Smith produced no evidence eradicating Mugaas right to adverse possession

6. Smiths only remedy is to sue the seller

G. Chain of Title

1. a deed outside the chain of title is a wild deedH. Palamarg Realty Co. v. Rehac1. See diagram

2. Rehac and Piatowski-Taylor chain

3. Worth and Sharp-Appleby chain

4. New Jersey is a race notice jurisdiction

5. statutes have been consistently interpreted to mean that the subsequent purchaser will be bound only by those instruments which can be discovered by a reasonable search of the particular chain of title

6. Del Tufo may have had actual notice

7. after acquired title (see above) shoots through- Taylor chain has strong maintenance of the system of record argument

8. Del Tufo has bona fide purchaser advantage (if no actual notice)

9. Custom in New Jersey is to search title only 60 years back

10. remanded

I. Ball v. Vogtner1. Ball-judgment lien against Mary Morgan

2. Vogtner-bona fide purchaser without notice-chain of title searched Mary Collins and missed judgment lien (wild deed)

3. court held that judgment lien did not constitute constructive notice to Vogtners because it was not in the Vogtners chain of title

4. majority of states hold that improperly indexed deed still provides constructive notice

5. minority hold proper indexing to be proper recording

J. Hatcher v. Hall1. plaintiff sought a determination of rights and status under a written agreement between lessors and lessee of property to be used as a gas station

2. agreement was recorded but was not properly acknowledged

3. court held it did not record

4. lease stipulated that lease would run with the land if property conveyed

5. Willard bought property from lessee without notice for valuable consideration

6. Hatcher bought property from Willard

7. Hatcher knew about the lease, but is sheltered by Willards good title-see Shelter Rule above

8. Inquiry notice-one is put on inquiry and charged with notice only when the inquiry becomes a duty, and the failure to make it a negligent omission

9. Halls lease goes bye-bye

K. Title Insurance

1. For a fee, title insurer agrees to defend title and to compensate for the loss of the insured title to the claim of a paramount owner. Its a bet that their title search is better than you losing-not insured against claims or interests that are not part of the record

2. title insurance covers the insured only against risks already in existence at the time the policy is issued but for an unlimited time after issuance

3. title insurance insures against risks that are generally beyond the control of the insured, but often discoverable by, and thus, to some extent, subject to the control of the insurer

4. title insurance only really covers defects in record title-exceptions not covered:

a. claims by an adverse possessor

b. a prescriptive easement (any easement not of record)

c. an encroachment across property boundary (anything that might be found upon inspection of the premises)

d. a sewer line running across the property

e. a mechanics lien for work done prior to closing but filed after closing

f. a violation of a zoning ordinance

g. unrecorded mortgage of which the purchaser had heard unconfirmed rumors

5. damages based on interpretation of the policy

a. difference between current market value with defect and without

b. cost of removing defect

c. if complete failure of title, damages are fair market value of the property

L. Moore v. Title Insurance Co. of Minnesota1. action against defendant tile company for negligence in failing to discover certain liens against property and for breach of contract-appealed from judgment for defendant

2. Moore retained Title Co. to clear title to certain apartments owned by Nieman, whose company Sierra Solar Systems, Inc. was in bankruptcy

3. title report listed three liens for $30,000, $30,000-40,000 and $30,000

4. agreement stipulated-if property subject to any other liens, buyer shall have the option to terminate agreement, all deposits returned and buyer shall not be liable to seller for any amount nor may seller enforce this agreement

5. when trying to sell the property, plaintiffs discovered more liens

6. plaintiffs could not get financing because they had to pay off all outstanding liens, which they did not have money to do

7. title company said they only had to defend against two of the new liens, but that the other liens were filed after Sierra Solar Systems, Inc., transferred property to Nieman

8. property was lost at trustees sale

9. plaintiffs contention was that defendant was negligent in searching title and that that negligence kept them from exercising their option to terminate the contract

10. plaintiffs also contend that title company should have same liability as an abstractor of title

11. Title company contends that it is not an abstractor of title and as an insurer it should only be liable for contract breach

12. title company argues that any duty on the part of an insurer to search the record has to be expressed and/or implied from the title policy and that the title company has no such duty under the tile policy

13. Heyd v. Chicago Title Insurance Companya. title insurance company has two duties if they render a title report and then issue a policy on that report

b. when rendering a title report, the title insurance company serves as an abstractor of title and must list all matters of public record adversely affecting title

c. when title company fails to perform this duty, it may be held liable in tort for all damages proximately caused by breach

14. the insurance company holds itself out as a searcher of titles and provides the information for the applicants to act upon, and the applicants expect and rely on this information in closing their deals-tort liability exists

15. Case becomes an issue of whether or not plaintiff would not have gone through with the contract if they had known of the other liens

16. Trial court could have gone either way, appellate will not disturb the trial courts findings of fact

M. Lender Liability

1. The further on down the line, a lender will care less and less if title is good, while the owner will care more and more because of his equity in the property

N. Page v. Frazier1. Page wanted to purchase a small abutting unimproved parcel to their property

2. Applied for a mortgage-application had the following language:

a. responsibility of the attorney for the mortgagee is to protect the interest of the mortgagee notwithstanding

1. the mortgagor shall be obligated to pay the legal fees of the attorney

2. the mortgagor is billed for such legal services by the mortgagee

b. the mortgagor may, at his own expense, engage an attorney of his own selection

3. Frazier (attorney, vice-president and trustee of bank) examined title and certified that it was free and clear of defect of record

4. When Page tried to enter an agreement of first refusal on the parcel, the buyers could not find title to the property

5. trial court found that Frazier was negligent in the performance of his title examination, but that he had no duty to the Pages to guaranty title

6. trial court found that frazier was an independent contractor to the bank and his negligence could not be imputed to the bank, which did not expressly or impliedly warranty title to Page

7. On appeal, plaintiffs argue attorney-client privilege existed

8. even if did not exist, negligent misrepresentation to Frazier should not be barred

9. Fraziers negligence must be imputed to the bank

10. bank misrepresented to them sufficiency of title to the parcel

11. no statutory claim because statute is for improved property

12. no implied attorney client privilege

13. because of conflict of interest, there is no negligence on the part of Frazier

14. mortgage agreement had strong exculpatory language that should have kept Page from relying on title report

15. In the absence of some evidence of affirmative conduct on the part of the bank, there could be no reasonable understanding or reliance by the plaintiffs at the time the plaintiffs would have had to rely on such conduct

16. no express or implied warranty on the part of the bank

17. no misrepresentation by the bank

18. judgment for defendant affirmed

IV. The Condition of the Premises

A. Skelly Oil Company v. Ashmore1. purchaser Skelly suing Ashmore on two counts

2. specific performance of a contract to sell property

3. an abatement in the purchase price of $10,000 being the proceeds received by the vendors under an insurance policy on a building on the property

4. building was destroyed by fire between signing of the contract and closing

5. vendors appeal from a judgment for Skelly

6. property was leased out at time of contract

7. when they couldnt get the guy with the lease out, Skelly accepted contract to buy subject to lease

8. when building was destroyed, Ashmore goofed and told Skelly he had insurance on the property

9. at closing, attorneys for Skelly requested the insurance be applied to the price; ashmore refused

10. contract of sale contained no provision as to who assumed the risk of loss occasioned by destruction of the building

11. five ways to look at situation

a. burden on purchaser even though vendor retains possession

b. burden on vendor until legal title is conveyed although purchaser is in possession

c. burden on vendor until legal tile conveyed unless vendor defaults on specific performance

d. the burden of loss is on the party in possession

e. burden on vendor unless there is something in the contract or conduct from which the court can infer a different intention

12. court will not go with a. above because of equitable conversion

13. based on the idea that signing the contract can be and ought to be the time title passes (equitable title)-sellers interest in property becomes a security interest

14. Massachusetts rule-when the conveyance is to be made of the whole estate, including both land and buildings, for an entire price, and the value of the buildings constitutes a large part of the total value of the estate, and the terms of the agreement show that they constituted an important part of the subject matter of the contract the contract is to be construed as subject to the implied condition that it no longer shall be binding if before the time for the conveyance to be made, the buildings are destroyed by fire

15. if buildings do not constitute so material a part of the estate of the estate to be conveyed as to result in an annulling of the contract, specific performance may be decreed.

16. Massachusetts rule and equitable conversion have the same effect if the buildings on the property are not material to the estate

17. Dissenting opinion notes that specific performance may not be an equitable remedy and that the case should have been remanded to lower court for a finding of actual damages suffered by Skelly or the compensation to which it is entitled if it still wants specific performance-that is more in keeping with the Massachusetts rule

B. Equitable Conversiona. application to death of a party

1. if seller dies, leaves an estate that owns personal property-a contract right-and not real property

2. if buyer dies, buyers estate includes the real property, as long as estate performs

b. application to loss of property

1. buyer has risk of loss

2. insurance must be credited against purchase price

C. Risk of loss goes with party in possession

D. mutual concurrent constructive conditions precedent-roughly, if I contracted to buy a cow and was tendered a dead cow, I could walk away from the deal without breach because of MCCCP

E. Uniform Vendor and Purchaser Risk Act (UVPRA)

a. if contract does not otherwise expressly provides otherwise

b. If when neither the legal title nor the possession of the subject matter of the contract has been transferred, all or a material part thereof is destroyed without fault of the purchaser or is taken by eminent domain, the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he has paid

c. If, when either the legal title or the possession of the subject matter of the contract has been transferred, all of any part thereof is destroyed without fault of the vendor or is taken by eminent domain, the purchaser is not thereby relieved from a duty to pay the price, nor is he entitled to recover any portion thereof that he has paid

F. Remedies for defects in property after transferred

1. Duties of disclosure

a. traditionally, intentional misrepresentation or active concealment were only actionable under common law

b. buyer beware is slowly being abandoned

c. fiduciary relationships-fiduciary obligated to reveal all defects known to him

d. disclosure of seller-created conditions

1. created by seller

2. materially impair the property

3. not likely to be discovered by a reasonably prudent buyer using due care

e. disclosure of latent material defects1. materially affects value or desirability

2. known to the seller

3. neither known to or within the reach of the diligent attention and observations of the buyer-courts split on objective or subjective buyer

f. statutory disclosure obligations

g. brokers disclosure obligations-reasonably diligent investigation duty

2. Implied warranty of quality

a. traditionally, only an express warranty provided a duty for builder

b. then implied warranty was built in between builder and first buyer, but no further because of privity of contract

3. fitness of purpose-needs fit product-warranty thereof (implied

a. Schipper v. Levitt-furnace attached to water heater, pipes under foundation, kept house warm-kid tried to take a bath and was badly burned by hot water-house was not fit for living in

b. Humber v. Morfort-plaintiff tried to use fire place and burned house down-sued builder for breach of implied warranty-fitness of purpose trumps caveat emptor

G. Tusch Enterprises v. Coffin1. Tusch sued Vander Bouegh (owner) and Coffin (contractor) for negligence, misrepresentation, express warranty and implied warranty of habitability

2. all four claims dismissed by summary judgment

3. alleges economic damages for negligent manufacture of the apartments-economic losses are not recoverable in negligence-summary judgment affirmed for negligence count

4. misrepresentation claim considered on basis of nondisclosure

5. if a reasonable person would have been so apprised, and the seller was under a duty to inform the buyer of the concealed facts, then intent to deceive is not necessary to make a prima facie showing

6. there are issues of material fact with misrepresentation claim-summary judgment reversed

7. No express warranty on behalf of Coffin to Vander Bouegh or Tusch-summary judgment affirmed

8. parol evidence rule precludes Tusch from making assertion that Vander Bouegh warrantied expressly

9. earnest money agreement stated Tusch made inspection of the premises and relies solely upon its inspection

10. written real estate contract has merger clause and states that Tusch has inspected property and Vander Boueghs express warranties are clearly laid out-no warranty that the apartments were well constructed

11. express warranty properly dismissed by summary judgment

12. warranty of habitability not expressly stated or disclaimed

13. implied warranty of habitability is a creature of public policy and waived with difficulty

14. court decides there is no disclaimer of warranty of habitability

15. does not matter that Tusch does not dwell in apartments, the warranty covers the product, not its use

16. court notes that the ordinary home builder is not in a position to discover defects in structure and by virtue of superior knowledge, skill and experience in the construction of houses, a builder vendor is generally better positioned than the purchaser to know whether a house is suitable for habitation-also extends warranty to builders and contractors

17. Vander Bouegh might be a builder developer-summary judgment reversed

18. No privity of contract between Coffin and Tusch

19. There is enough to take whether Coffin was a builder to a jury

20. the extension to buyers of an implied warranty of habitability is limited to latent defects not discovery by a subsequent purchasers reasonable inspection which manifest themselves within a reasonable time

21. Burden is on the subsequent owner to show that the defect had its origin and cause in the builder vendor

H. Thomson v. McGinnis1. Action for negligence and fraud-summary judgment granted to defendants-plaintiff appeals

2. Defendants agreed to have the furnace inspected and to certify the working condition of the heating system

3. McGinnis hired Stephens to certify the heater, which involved listening to the heater while he was in the house-McGinnis provided the certification form

4. Plaintiff later discovered that there was no safety shut off switch

5. Stephens had no certification in heating or air conditioning

6. he signed certification only at the direction of McGinnis

7. plaintiff later found pipes were covered in asbestos and could not be removed

8. Teter v. Old Colony Co. vendors real estate broker may be liable to purchaser if the broker makes material misrepresentations with regard to fitness or habitability of residential property or fails to disclose defects or conditions in the property that substantially affect its value or habitability, of which the broker is aware or reasonably should be aware, but the purchaser is unaware and would not discover by a reasonably diligent inspection

9. plaintiff in Teter wished to hold engineering firm as agent for real estate company for negligently inspecting a cracked wall-no liability because of absence of any evidence demonstrating that the broker retained any control over the manner in which the engineering firm performed its inspection of the premises

10. Court finds that McGinnis did exercise some control over actions of Stephens-agency issue needs to go to court

11. Also a negligent hiring count-court holds that while a real estate broker bears no responsibility to conduct an independent investigation of a latent defect, when such broker volunteers to secure an inspection of the premises by retaining on behalf of the buyer a third party to conduct the inspection, then that broker may be held liable to the buyer for civil damages if the broker in retaining said third party and if such negligence proximately causes harm to the buyer

12. where the exercise of reasonable diligence would disclose facts demonstrating that the contractor was clearly incompetent for the particular task contemplated, a reasonably prudent broker should not retain the contractor

13. appellant presented sufficient evidence to preclude summary judgment

I. Parker v. Columbia Bank1. Action for fraud, fraudulent concealment, negligent misrepresentation, negligence, breach of fiduciary duty, and breach of contract-appeal from Columbias motion to dismiss

2. Parkers entered a contract with Evangelos for construction of a 5,000 square foot house at a cost of $385,000

3. Parkers entered a contract with the Brookeville Development Partnership for $160,000-land contract, not the construction contract included a provision that its execution would be contingnet on the Parkers obtaining a loan to finance the purchase

4. Parkers allege that Galeone, senior vice president of bank cultivated a relationship of trust and confidence with them and they came to regard him and Columbia as an advisor and consultant on the project

5. Galeone allegedly represented

a. he was experienced in the placement and administration of loans similar to the construction loan needed for the house while in fact he had never administered a laon involving draw payments to a builder

b. Columbia had thoroughly investigated Paleologos and determined he was qualified to undertake the project, while in fact the investigation was perfunctory and overlooked information which would show hes not qualified

c. Galeone and Columbia would protect the Parkers interests while in fact he would only protect it as far as it coincided with Columbias

d. construction draws would only be issued after Columbia had obtained inspections to insure the work had been done in accordance with the draw schedule, while in fact Columbia intended to advance funds, if requested by Paleologos, ahead of the draw schedule and regardless of inspections

e. in response to the Parkers specific inquiries, Galeone told them that in the event of a default by the builder, Columbia would find or recommend another builder and would see the house was completed within budget while in fact Columbia did not offer such protection

6. Columbia issued a commitment letter providing $529,000 for the Parkers

7. Columbia disbursed $234,290 of the loan proceeds to the Parkers, $85,000 of which was paid by the Parkers to Evangelos and the remainder to pay for the land

8. construction loan provides that disbursements will be made by two party checks payable to both borrowers and the general contractor, unless Lender exercises its rights hereunder to make disbursements directly to any party

9. alleged that Columbia was making a relationship with Paleologos

10. although 80% of loan was disbused, only 40% of house was complete

11. Parkers received notice of mechanics lien

12. turns out that to complete house, Paleologos would need another $350,000

13. Property was foreclosed by bank

14. Fraud

a. defendant made a false representation

b. falsity was known to defendant or was made with reckless indifference

c. made for the purpose of defrauding the person claiming injury

d. person not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth and would not have done so if misrepresentation had not been made

e. damages

15. Judgment reversed on count of fraud

16. breach of contract-Columbia was not contractually obligated to make sure that the Parkers loan remained in balance; rather it was the Parkers who were obligated to maintain the loan in balance

17. no breach of implied duty of good faith-the duty of good faith merely obligates a lender to exercise good faith in performing its contractual obligations; it does not obligate a lender to take affirmative actions that the lender is clearly not required to take under its loan documents

18. In order to state a cause of action regarding the remaining claims, the Parkers must demonstrate a duty owed to them by Columbia

19. there is no duty because there is no contractual basis to provide a predicate for a duty of reasonable care

20. Tokarz test for fiduciary duty

a. taking any extra services on behalf of the borrowers other than furnishing the money for construction

b. received any greater economic benefit from the transaction other than the mortgage received

c. exercised extensive control over the construction

d. were asked by the borrowers if there were any lien actions pending

21. court held Columbia did not do any of these extraordinary things to constitute a duty of care to the Parkers

22. every claim affirmed as to dismissal except fraud-reversed

V. Financing the Acquisition and Development of Land

A. lenders want recovery of principal and realization of a profit on the loan (interest)

B. U.S. has preempted state usury statutes-rates based on combination of limits established by the marketplace as well as