Download Property Outline

Joseph Ferraro
Property Outline
Fall 1999/Winter 2000
Prof. Epstein
INTRODUCTION TO FUNDMENTALS
I.
First Possession: Acquisition by Discovery, Capture & Creation
a. Acquisition by Discovery
i. Johnson v. M’Intosh – action of ejectment for land in IL, P has purchase and conveyance from
Piankeshaw Indians, D from US. Indians were in rightful possession of land, but titles depend
on law of nation in which they live. Europeans not only discovered New World but bestowed
upon the Indians civilization and Christianity. Discovery gave title to government by whose
subjects it was made against all other European governments. The rights of the Indians were
not disregarded but impaired  discovery gave exclusive title to those who made it. Right to
soil passed definitively from Britain to US after revolution, even though we already had
possession, i.e. exclusive right to extinguish Indian title of occupancy, either by purchase or
conquest, from Indians resided in government. “An absolute title to lands cannot exist, at the
same time, in different persons, or in different governments. An absolute must be an
exclusive title.” Title by conquest in acquired by force but the conquered should not be
wantonly oppressed. Discovery and conquest working in concert. “The Indian inhabitants are
to be considered merely as occupants … in the possession of their lands, but to be deemed
incapable of transferring the absolute title to others.” Note: American courts have held that
although Indians had “possession” of the land on which they lived, they did not have “title” to
it, and could thus not convey title. Therefore, a title derived from the federal government, or
from one of the states or colonies, has priority over an earlier purported “grant” from an
Indian tribe.
ii. Land owners in the US trace their ownership back to grants from the government, which in
turn traces its title back to the discovery of America by Europeans. This is an example of
chain of title  links in the chain are the conveyances by which a parcel of land moves from
owner to owner over time.
 T1T3T5

T2T4
1. Each stands in the shoes of who came before: T5 is in privity with T1, unlike T4 who
gets item from T2. In a world of priority we have iusterti (justness) for the property
system is kept stable even with marauding.
2. So why does the second chain prevail over the first in Johnson?
iii. Discovery – the sighting or finding of hitherto uncharted territory often accompanied by
landing & symbolic taking of possession giving rise to a inchoate title that must be perfected,
within a reasonable time by settling in and making an effective occupation. In principle only
a res nullius or terra nullius (thing or territory belonging to no one) can be discovered.
However, as here, prior possession by aboriginal populations thought not to matter.
Discovery rule gives you priority, but doesn’t tell you how to deal with the first occupants.
Marshall converts an inter se/in personam discovery rule to an in rem rule and he knows he’s
wrong.
iv. Conquest – taking of possession of enemy territory by the conqueror.
v. In a different forum, Marshall would not be constrained by British common law. With
natural law, one can commend oneself to reason; but with positive law, we are concerned not
with reason but with the law backed by the force of the sovereign. One cannot sue the
sovereign in his own court when he is the maker of all the rights one receives  sovereign
immunity.
vi. Marshall tries to soften the blow by pointing to the advantages of civilization and Christianity,
trying to make this a positive sum game.
vii. Occupancy theory & principle of first in time: While riches of the earth were originally held
in common, avarice led to scarcity & in turn institution of private property created through
agreement that what one was in possession of (what he could grab) was his property. Then,
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b.
governments were created that respected these preexisting property rights. “Prior in time is
higher in right.” NOT first in time. When have a chain of three, prior becomes a more
important principle than first. Without a privity rule no one is going to buy – the ability to
sell is what we like and without privity the only people whop can use property are those
originally acquiring it. Good as a positive theory; weaker as a normative one. See Epstein:
Possession as The Root of Title below.
viii. Labor theory & John Locke: Locke looked to law of nature to answer ? of why any claim to
first possession should be respected. Every man had property in his own person & his labor is
his property as well as a responsibility to society at large. If he removes something from the
state of nature and mixes his own labor into it, he joins himself to it & it becomes his property
to the exclusion of other men.
1. Law of Accession: when one person adds to the property of another by labor alone.
Could be when one improves property of another by mistake.
a. Traditional rule  owner of original materials had title to finished product,
unless product so different from original materials that essentially a new
species had been created. Then maker had title.
i. E.g. Haslem v. Lockwood: P raked manure into heaps in public
street with intent to carry it away next day. D found heaps before
carting and hauled them off. In action in trover original owner of
manure animals who abandoned it, so belong to first occupant, P,
who changed product & added his labor to it. If find property
comparatively worthless & increase its value through labor &
expense, right to ownership not lost by left for a reasonable time to
cart property away.
b. Disproportionate value test  Today look at extent to which maker has
added value to other person’s materials. If value added is wholly
disproportionate to original value, maker gains title, otherwise original
owner has title. However, virtually all cases granting the improver title
require a showing of good faith, i.e. willful trespassers will not gain title.
Note: If original owner recaptures materials by legal action (replevin) or
self-help, at law the improver is not entitled to damages, although courts of
equity have. BUT this does not adequately address issue of subjective
value as a part of just compensation in situations of involuntary exchange.
ix. Locke & Johnson: Locke reasoned Indians did not add an adequate amount of labor to the
land for them to acquire a property interest, whereas possessors cultivated and improved the
land. “Thus, in the beginning, all the world was America.”
Acquisition by Capture
i. Pierson v. Post – Property in animals ferae naturae (wild animals) is acquired by occupancy
[capture] only. But what about situations of less than outright capture?
1. Mere pursuit [spotting & chase] of the fox in question gave Post no legal right to the
fox, but that he became the property of Pierson, who intercepted and killed him.
2. However, mortal wounding or trapping of a wild animal, so that capture is almost
certain, may be deemed possession of the animal since the pursuer manifests an
unequivocal intention of appropriating the animal to his individual use, has deprived
him of his liberty, and brought him within his control  a form of Locke’s industry
and labor requirement. Allowing possession in situations of mere pursuit would
open up a world of litigation otherwise.
3. Dissent calls for looking to custom & arbitration by sportsmen and makes a
distinction between the size of the dogs used to pursue  reasonable prospect
approach. [But would this really lead to the elimination of those pernicious beasts or
perhaps it would be a disincentive to hunt. Not likely since this is a sport and not an
industry. Also NOTE first in time is not the governing principle here really.]
4. L & E Approach: Is some legitimate social goal more efficiently advanced by
majority rule rather than minority rule, or vice-versa? 2 goals suggested: 1)
Minimize considerable damage done to crops, 2) Maximize enjoyment of those
riding. Dissent claims reasonable prospect approach creates a heightened incentive
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for the killing of foxes. Under majority call for manucaption the incentive to hunt
foxes would be lessened. BUT majority rule of first possession does not necessarily
lessen incentive to kill foxes in less sporting way  take an industry approach rather
than sporting one [see Keeble below]. Rules equally efficient at contributing to
objective of killing foxes: choice must be made on other grounds. Actual possession
is clearer, less subject to misinterpretation and easier to enforce than intent rule.
ii. Ghen v. Rich – Custom or usage among American whalers was that the ship or company
which landed the whale and thereby killed it was the owner, even though the whale
immediately sank, floated to the surface several days later, and was found by another. Court
applied this usage and granted company which killed the whale recovery against D who had
bought whale at an auction from the person who recovered it on the beach, making D in effect
pay twice for the whale by giving P value of oil obtained – cost of trying out and preparing for
market.
1. Major concern here with making sure the whaling industry did not go under because
going against usage would make whale hunting too expensive and risky an endeavor.
Emphasis here on the relationship between formal law and informal norms.
2. Hot pursuit outperforms first possession because it allows a better match between
incentives to create labor and the return to labor AND gets rid of potential sources of
injury. Also might want a variable salvage fee, but need to set compensation ahead
of time to avoid bilateral monopoly problem in which finder holds out for full
surplus.
3. BUT remember issue of overhunting [see L&E tradeoffs below], might need to
change things to get a sustainable yield if the capture rules here become too efficient.
iii. Keeble v. Hickeringill – P claimed he had set out some decoys near his own pond to lure
ducks in order to hunt them, and that D fired guns nearby to drive them away. The court held
that P was entitled to recovery, because D’s act was a violent and malicious interference with
P’s livelihood “intending to damnify the plaintiff … and deprive him of his profit”; but the
court noted that if the ducks had been lured away from P’s pond by D’s use of the same type
of decoys for his own business, P would not have been entitled to recover  schoolmaster
example.
1. Courts are more likely to be sympathetic to the interfering D is he acts out of
business competition with the P rather than out of spite or malice. Difference
between “scaring” and “luring.”
2. We want to give encouragement to people with skill and industry to reap the benefits
of their action and deter interference with one’s occupation. Theory of malicious
interference with trade. Otherwise, if we followed a nuisance approach, reciprocity
would become a viable option for both parties and bargaining would be precluded
due to presence of another bilateral monopoly. Nobody shooting is better than
everyone shooting.
3. First in time would be a bad approach here because it would allow a monopoly.
With private property there is always an element of monopoly  we want a
monopoly large enough for the appropriation of use value, but small enough so
new entrance is not precluded.
iv. Ratione soli – the conventional view that an owner of land has constructive possession of wild
animals on his land, i.e. regarded as prior possessors until they take off.
1. A trespasser who captures a wild animal on the land of another might still have no
rights to the animal as against the landowner, even though landowner has not
captured, due constructive possession. Don’t want one to profit from a wrong, so
prefer landowner to trespasser.
2. Domestication: If a wild animal is captured and then escapes to return to its natural
state, the finder’s ownership is extinguished and the animal becomes the property of
whoever recaptures it. BUT the title of the first owner is not lost if the animal,
though wandering without restraint, retains the habit of periodical return to his
master’s domicile. Domestication is indicative of prior ownership. In some
situations, like cows, the environmental circumstance of pasture (& fact there are no
wild cows) is indicative of domestication.
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3.
Above applied even in situations of escaped animals kept for exhibition or breeding
and raising purposes for furs. Title of the original owner is lost if no intention or
tendency of return by animal or no likelihood of recapture. This is for protection of
subsequent bona fide captors.
4. Rule of Increase: An animal belonging to A roams onto B’s land, takes up with one
of B’s animals, if fed by B, and eventually bears a child sired by A’s animal. “It is a
well-settled rule that the offspring follows the condition of the mother. This rule is
expressed in the Latin maxim, partus sequitur ventrem.” [See adverse possession
for more.]
5. US Fish & Game Laws: A State does not stand in the same position as the owner of
a private game preserve and it is pure fantasy to talk of "owning" wild fish, birds, or
animals. Neither the States nor the Federal Government, any more than a hopeful
fisherman or hunter, has title to these creatures until they are reduced to possession
by skillful capture. The "ownership" language of cases such as those [involving
government regulation & confiscation of wild animals] must be understood as no
more than a 19th-century legal fiction expressing "the importance to its people that a
State have power to preserve and regulate the exploitation of an important resource.”
 Douglas v. Seacoast Products State has title to all wild animals in trust for the
public, but can’t take this assertion literally. E.g. is wild geese come and damage
your grain, can’t sue US as owner even though they regulate hunting.
v. Apply “prior in time is higher in right” where it promotes the market but not where it creates
another kind of distortion. Epstein: “The first possession rule does give rise to serious
problems in the case of common-pool assets, such as oil, gas and fish. Yet even here it
furnishes a baseline of entitlements which permits the state to organize forced exchanges that
on average work to the long-term advantage of persons with interests in the pool.”
vi. Other Fugitive Resources: Water
1. Groundwater  subsurface water not connected to any surface watercourse
a. English Rule: absolute ownership [rule of capture] allowing each landlord
over an aquifer to withdraw freely without regard to effects on neighbors 
could in effect draw the entire pool. True even if this injures the
neighboring landowner or if the water is transported to serve other, distant
lands held by the same owner.
b. American Rule: reasonable use [rule of capture w/ slight addition] wherein
wasteful uses of water, if they actually harmed neighbors, were considered
unreasonable & unlawful, or if water was diverted to other properties
owned
c. Prior Appropriation: “first in time is higher in right” – person who first
captures the water and puts it to a reasonable and beneficial use has a right
superior to later appropriators. Popular in arid West where water is scarce.
2. Surface Waters
 Right of transportation on the river is common and free but cannot pull up to a
person’s dock without paying. If every riparian demanded a toll, the hold-out
problem would be enormous. So the river is part public and part private.
 Most common that rules of first possession do not apply. Instead we see
usufrutuary rights in which one is entitled to the fruits but never owns the thing
in question.
a. Common law Riparian (land abutting a stream) Rights
i. No advantage is gained by priority of use. The fact that a riparian
owner has used stream-water for a certain purpose for many years
does not give him any greater rights than if he were making this
use for the first time. [See exception in Dumont, below]
ii. Natural Flow Theory: Each waterfront owner is entitled to the flow
of streams in their natural condition, without material reduction in
quantity or quality as the result of other riparian or non-riparian
owners. One only has a privilege to make limited use of the water
that does not perceptively deplete the volume of water on another
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iii.
iv.



riparian proprietor’s land. This means the upstream owner has
preferred status re: natural uses. “Losers win” & development
along the river is halted  status quo preservation.
1. A natural use = water for drinking, bathing, raising
animals & small quantities for limited irrigation
2. For artificial use; 1) cannot take any water until the
natural need of upstream & downstream owners are
satisfied, 2) everyone has an equal right to this postsatisfaction water for artificial uses. E.g. large-scale
irrigation is artificial use (unless a relatively arid area)
3. An owner may sue for nominal damages if the flow to
him is materially interfered with (even if he would not
have had a use for the water anyway.)
Reasonable Use: A riparian owner is entitled to only so much of
the water as he can put to beneficial use upon his land, with due
regard for the equal and correlative rights of other riparian owners
(i.e. cannot cause harm to the existing reasonable uses of another
riparian proprietor: “The right of no one is absolute but is qualified
by the existence of the same right in all others similarly situated.)
An owner may sue only if he has a beneficial use for the water
with which the actions of another person (riparian or non-riparian)
have interfered. “The only property interest in [water] is
usufructuary.” Get around problem of no projects.
1. There is no primary right in anyone to have the natural
integrity of the stream or lake maintained for its own
sake.
2. One proprietor’s use of all the water in a stream when
others are making no use of it, or when stream is so small
one farmer’s or power generator’s reasonable domestic
use obstructs the entire flow, would & could be
reasonable respectively.
3. While the reasonable use theory has won out in most
American courts, the natural flow preference for “natural
wants” is preserved in the form of a preference for
domestic uses.
Dumont v. Kellogg:
Dumont (D) constructed a dam across a natural water course,
creating a large reservoir and considerably diminishing the flow
of water in the stream below by increased evaporation and
percolation.
Kellogg (P) was proprietor of a mill downstream and sued D for
wrongfully detaining water to prejudice and injury of K
K won in trial court, D appealed on grounds that there were
errors in the judge’s instructions to the jury regarding the
relative rights of riparian proprietors to make use of waters from
common stream.
o Instructions contained natural use theory: no proprietor
has rights to use water to prejudice of those below him,
i.e. cannot divert or diminish the quantity which would
otherwise descent to those below, unless they consent
(can’t deplete amt. of water on riparian prop.’s land).
o Explicitly said: “The rights of a riparian proprietor are
not to be measured by the reasonable demands of his
business. . . . whether defendant needs the water as he
uses it in his business is entirely immaterial.”
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
First, doesn’t matter K put stream to use first – “priority of
appropriation gives to one proprietor no superior right to that of the
others, unless it has continued for a period of times, and under
such circumstances as would be requisite to establish rights by
prescription.” (no 1st possession rule: first in time, higher in right,
but wrong can make a right under prescription approach.)
 Also no diversion here, which is wholly wrong. [See Stratton,
below.]
 Trial judge’s natural use rule wrong, for, in violation of equality of
rights between proprietors, such a rule would give to the lower
proprietor superior advantages over the upper, and in many cases
give him in effect a monopoly of the stream.
 Must consider whether use of the water in question in reasonable –
seek fair participation and reasonable use – to deny any
diminution would be to deny any valuable use.
 An injury incidental to a reasonable enjoyment of the common
right can demand no redress.
 Trial court judge erred, should have allowed proof of reasonable
use. New trial.
v. Only riparian owners are entitled to make use of the water. A
“riparian owner” is one whose land abuts the stream, at least in
part. Thus one whose land is not contiguous with the water at any
point may not carry the water by pipe or ditch to his property.
vi. Mass. Qualification  Stratton v. Mt. Hermon Boys’ School:
 Boys School (D) owns a tract of land through which a stream flows
& pumps/diverts 60,000 gls. to another estate belonging to it but
not contiguous with land adjacent to stream. There water is used
to run Boys School.
 D’s actions caused substantial diminution in the volume of water
downstream which would have naturally flowed to Stratton’s (P)
land & powered his wheel. S sues for wrongful diversion of water
and injury caused by it.
 D requests court to rule diversion to a nonriparian estate owner by
it not conclusive evidence of liability, for still need to determine
whether it had taken an unreasonable quantity of water. Request
denied  TC: D’s right confined to a reasonable use of water for
the benefit of land adjoining water course & persons properly
using such land, & did not extend to taking for use upon other
premises. If there was such use, P entitled to recover at least
nominal damages even though he had sustained no actual loss.
 The diversion must cause actual perceptible damage to the present
or potential enjoyment of the property of the lower riparian
proprietor before a cause of action arises in his favor. ? should not
be one of reasonableness of diversion but the cause of actual
damage to person complaining. Otherwise, every downstream
riparian owner could collect nominal damages even if it doesn’t
case actual injury.
 A proprietor may make any reasonable use of the water of the
stream in connection with his riparian estate and for lawful
purposes within the watershed, provided he leave the current
diminished by no more than is reasonable, having regard for the
like right to enjoy the common property by other riparian owners.
(Reasonable use theory) If he diverts out of the watershed or upon
a disconnected estate the only question is whether there is actual
injury to the lower estate for any present of future reasonable use.
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
Diversion alone without evidence of damage does not warrant a
recovery even of nominal damages. (Diversion addition)
Remember: Rights depend on scarcity in relation to land as a resource becomes
more valuable, one sees a strengthening of the system of private rights and a
weakening of common ones.
b. Prior Appropriation Doctrine: 17 arid states in the West abide by this rule
of “first come first served,” i.e. damming and diversion of streams is
protected in order of priority of use  “prior in time is higher in right.”
The person who first appropriates water & puts it to a reasonable and
beneficial use has a right superior to later appropriators. In some states
user’s time of priority dates from time of application for a permit; in other
right is absolute & dates from time of construction of works need to take
water.
i. A key feature of this system is that water may be appropriated by a
non-riparian owner (although he will still have to procure an
easement over one riparian owner’s property.)
ii. Coffin v. Left Hand Ditch Co.:
 A landowner may transport water from a stream to a point
outside the stream’s watershed in order to irrigate his property;
once he does so, his use gain priority over the subsequent use
by one who abuts the stream.
 This is because in an arid state like CO, water is an extremely
valuable commodity; there are many worthwhile water-related
projects which require large amounts of capital & which will
not be carried out unless the investors know that their right to
the necessary water is assured. Water rises when
appropriated, then, to the dignity of a distinct usufrutuary
estate, or right of property. “Deny the doctrine of …
superiority of right by priority of appropriation and a great
part of the value of all this property is at once destroyed.”
Strict riparianism would prevent the useful and profitable
cultivation of productive soil and sanction its waste upon more
sterile lands in an arid state.
iii. Advantages/Disadvantages to PA in arid lands:
1. A: Get beyond riparian bias v. subdivision and for
“bowling alley” parcels. D: foster premature
development.
2. A: Allows consumptive withdrawal, use & storage of
water: solve dog-in-the-manger problem. D: Could have
inadequate investment in post-diversionary aspects of
development.
3. A: Allows more economical uses of water. D:
appropriators live in environment where overirrigation
becomes credible. The social cost of withdrawing water
becomes a private social gain.
4. A: Avoids uneconomical pro-rationing during droughts
that fails to take into account marginal desires for water.
D: No pooling of risk.
5. A: Otherwise riparian rights are rigid & non-transferable.
D: No market for appropriative rights worthy of name.
6. A: No pooling for cooperative cooperative action.
7. A: The area the water will serve is contained to the
riparian owner’s strip, when it might be better used farther
in. D: evaluation is mixed.
8. A: A valuable public resource would otherwise be given
away to those who have most resources. D: Public water
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still going to those who own private land in proportion to
size of landholding.
iv. Mixed System exists in CA and TX wherein prior appropriation
exists side-by-side with riparian rights. In these systems, though,
riparian rights are generally limited.
vii. Other Fugitive Resources: Oil & Gas
1. Both collect in reservoirs that may underlie land owned by many different people
(even countries) and have a fugitive nature in that they wander from place to place
 minerals ferae naturae.
2. Another application of rules of capture. “[Oil & gas] belong to the owner of the
land, and are part of it, so long as they are on or in it, and are subject to his control;
but when they escape, and go into other land, or come under another’s control, the
title of the former owner is gone. Possession of the land is not necessarily
possession of the gas. [No constructive ownership.]” Riparian rule here.
3. If B starts draining common pool, A can go and do likewise [“He must protect his
own oil and gas. He knows it is wild and will run away if it finds an opening and it
is his business to keep it at home.” Barnard v. Monongahela] or might be able to get
injunction v. excessive drilling.
4. If A reinjects gas or oil under B’s land, use to be B could not recover damages for
use and occupation of her land. Hammonds v. Central KY Gas  under rule of
capture, gas was like a wild animal that was restored to its natural habitat and, as
such, returned to common property. Today, recognized this denies society the
benefits of economical underground storage.
5. Ohio Oil Company v. Indiana:
 Ohio’s school of thought claimed that everyone who bores has the unrestrained
license to waste the entire contents of the reservoir if they want for there can be
no right of ownership in and to the oil and gas before the same have been
appropriated by being brought into the possession of some particular person.
 The restriction on the waste of gas and oil by owners of land, made by Ind. Acts
1893, p. 300, which provides that it shall be unlawful to permit the flow of gas
or oil from a well to escape into the open air, without being confined within the
well or proper pipes or other safe receptacle, for more than two days after gas or
oil shall have been struck in the well, does not take the private property of the
owners of the land without adequate compensation, and therefore without due
process of law, since the owner of the surface has no property right in the gas
or oil until he has actually reduced it to possession, or, if he has any property
right therein, it is a right in common with the coequal right of other land
owners to take from the common source of supply, and therefore subject to the
legislative power to prevent a destruction of the common property by one of
the common owners.
6. Remember risk of monopoly or over-capture.
7. Issue of mitigation of bad consequences through legislative & administrative
regulation  form a unit of all owners through a company so field is managed as
though it had only a single owner trying to maximize its value by putting numerous
wells around the periphery of the most productive plot & divide the take according to
what each plot owner over a pool could have taken. Cartelize. Question that then
arises is whether efficiency gain offsets the monopoly extraction.
8. Such regulation does have its own problems: especially when costs of regulation fall
on small, intensely interested groups & benefits would flow to the public at large &
future generations.
viii. L&E: Fugitive Property and the Rule of First Possession
1. As the above examples demonstrate, the problem of establishing ownership of
fugitive resources can be ameliorated by adopting either of 2 legal rules:
a. The Rule of First Possession; or
b. The Rule of Tied Ownership
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2.
The Rule of First Possession is relatively easy and cheap to apply, but it creates
incentives for some people to preempt others by making uneconomical investments
to obtain ownership of property. This is because the owner of a scarce resource can
rent it to others (rent is the scarcity value of a resource). The rule causes investors to
improve property until the marginal cost equals the marginal value of the sum of
increased production plus transferred ownership. The transfer effect under the rule
causes over-investment in the activities that the law defines as necessary to obtain
legal possession.  Leads to depletion of water, oil, gas, fish, whatever is obtained
through first possession/prior appropriation.
3. With the Rule of Tied Ownership, there is no gap in ownership for ownership of
fugitive property is tied to settled property  constructive possession of wild
animals, riparian water rights: elements of communal ownership. The preemptive
investment is avoided so long as the ownership claims in the resource to which the
fugitive property is tied are already established. This itself, though, can be difficult
as well as communal negotiations. [See Oil above]
4. Rules that tie ownership to possession have the advantage of being easy to
administer and the disadvantage of providing incentives for uneconomic investment
in possessory acts, whereas rules that allow ownership without possession have the
advantage of avoiding preemptive investment and the disadvantage of being costly to
administer.
ix. Demsetz: Toward a Theory of Property Rights
1. There is a close relationship between property rights and externalities (external costs
& benefits or a pecuniary & non-pecuniary manner); externality when cost of
bringing the effect to bear on the decisions of one or more of the interaction persons
is too high to make it worthwhile.
2. Property rights offer guiding incentives to achieve a greater internalization.
3. Emergence of new property rights takes place in response to the desires of the
interacting persons for adjustment to new benefit-cost possibilities. I.e. property
rights develop to internalize externalities when the gains of internalization > cost of
internalization. This is reflected in a process of gradual change in social mores and
in common law precedents.
4. Indians example & effect of fur trade and compulsion to private property.
5. When the resource is uncongested and boundary maintenance, open access is
cheaper than private ownership. As time passes, however, congestion may increase
and the technology of boundary maintenance may improve. Eventually, a point may
be reached where private ownership is cheaper than open access. An economically
rational society will privatize a resource at the point in time where boundary
maintenance costs less than overuse of the resource. [See spectrum below]
6. Communal ownership fails to concentrate the cost associated with any person’s
exercise of his communal right on that person. Negotiating costs are too high to get
otherwise due to hold-out problem & costs of policing the bargain.
7. Private ownership takes into account alternative future time streams of benefits and
costs and selecting that one which an owner believes will maximize the present value
of his privately-owned land rights. Private owner acts as broker between present and
future generations. Effects of a person’s activities on his neighbors & subsequent
generations will not be taken into account fully under communal property  great
externalities. [Epstein agrees  “Vesting ownership in the first possessor makes it
highly likely that a person who owns the land will use it efficiently and protect it
diligently. At every stage the rule reduces transaction costs.”]
8. Could address problem with government. Concentration of costs and benefits on
private owners creates incentives to utilize resources more efficiently.
9. Objections: Unjustified leap from assuming efficiency-maximizing behavior of
individuals to assuming such for society. Members have to agree to the
reorganization. How costly transformation to private property comes about is still a
mystery. Since we have private property, though, cooperation must be possible.
Carol Rose  custom often works as effective means of common resource
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x.
xi.
xii.
xiii.
xiv.
xv.
management, sometimes less costly than private ownership. Demsetz also criticized
on anthropological grounds  ignores how value-laden transition process might be:
ideology can be at work just as much as efficiency. Epstein: provides no
explanation of the transition mechanism from common to private. Violent?
Negotiated? A free-for-all? The transitions can be awkward and bloody. A good
transition is one that satisfies the just compensation constraint discussed earlier.
Utilitarian theory of property
1. Hume: We obey property rules because our self-interest leads us to promote our own
happiness.
2. Bentham: Property is an established expectation. Property and law are born together
and die together. Before laws were made there was no property; take away laws and
property ceases [remember Holmes Haiku].
3. Break from natural rights & dominant theory today.
Meanings & Function of Property
1. Cohen: A relationship among human beings in which the “owner” can exclude
others from certain activities or permit others to engage in them & secure assistance
of law in carrying them out.
2. Primary function of law as 1) promoting efficient use of resources; 2) distributing &
redistributing wealth; 3) nourish individuality & healthy diversity; 4) maintain
independence. Essential to political freedom: free transferability liberates from
feudal dependency but creates another dependency on the market  avoid privilege
& inequality but need some stability to avoid being reduced to a mere commodity.
Pollution & “Tragedy of the Commons”
1. Some say resources in common will always be abused, absent coercive intervention
by the government. Others point out circumstances under which owners of common
resources can cooperate to manage them efficiently [norms].
“Tragedy of the Anti-commons”
1. Entails multiple rights to exclude others and leads to underconsumption. Good for
preventing people from using a resource but counterproductive otherwise  socialist
[storefront space] & capitalist [urban renwal & tenants] markets.
NOTE: To the extent utilization of land or a good doesn’t need front end investment, a
commons is efficient. With front end investment, however, those who sew need to be able to
reap, otherwise no one will bother to sew. Remember with news, etc.
Epstein: Possession as the Root of Title
1. What principles decide which individuals have ownership right over what things?
2. Common and civil law respond that taking possession of unowned things is the only
possible way to acquire ownership of them. But why the Rule of First Possession?
3. From an institutional perspective: 1) judges have limited remedies at their disposal to
apply to redress a violation of a substantive right, so court not apt to chose property
doctrines whose enforcement requires elaborate administrative machinery  look to
natural lines; 2) ability not to order docket forces common law courts to commit
themselves on a succession of little point & denies freedom to switch ground on
larger issues; 3) steady stream of private litigation that does not throw matters of
public ownership into high relief makes it difficult for state to assert its own
ownership claims at some later date, so original acquisition retains a strong private
law character.
4. This emphasizes that law is not philosophy & the quest here is not for universals.
E.g. Pierson v. Post  court & dissent assumed only proper mode of acquiring
ownership of unowned things was taking possession of them while recognizing that
any common law rule could be superseded by any valid statute or public regulation
establishing ownership in some other fashion. The large question – why is first
possession sufficient to support a claim for ownership – received no consideration at
all.
5. Locke’s Labor Theory:
a. Pierson does point to limitations of labor theory, for some labor goes
unrequited when 2 pursue and 1 loses. Furthermore, some things are
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6.
7.
acquired no through labor but through chance & fortune  that person
takes full and indefeasible title even though these was no metaphorical
expenditure of labor in acquisition or cultivation
b. Law of Accession  labor need not give complete ownership to a thing, i.e.
the labor can amount to only a lien for services rendered [like B working
A’s marble thinking it’s his own, A suing to recover possession of improved
marble, & B getting a setoff for value added.] Extending to ? of original
entitlements, if state [X] owned everything, Y’s labor would not give him
absolute title to something of X’s  any individual who takes from the
group acquires at most not the absolute ownership interest but the lien for
services rendered if in good faith. If X is state, hard to imagine anything
else but bad faith & prior knowledge.
c. A claim to bind the rest of the world cannot be obtained by some unilateral
conduct on the part of one person without the consent of the rest of world
whose rights are thereby violated or reduced. Some collective social
institution must lie at its base. No “natural” act can legitimate a social
claim to property.
Contractual/Customary Theories of Entitlement:
a. Remember Ghen v. Rich: custom of the sea taking over positive rule of
property law for it purports to place the law of property on a firmer footing
by referring it back to something other than the assertions of the judges.
b. Problem: A naturalist claiming whale is part of common heritage of
mankind & who will not be bound by claims of the private disputants.
Custom can defeat claim only if so universal & ingrained in all mankind
that there are in effect no strangers to the social contract.
c. Water Law Illustration: English riparianism denied first possession rights to
water  each owner of the riverbank by virtue of that ownership alone had
usufrutuary rights in the flow which prevented total appropriation by
another. Why? Streams have always been public & notorious, so rule
assumes as foundation implied assent & agreement of proprietors of
different lands for all ages. Reason for difference with groundwater 
there is no ground for mutual consent between owners of several lands
underneath, for no knowledge of how much water is taken, how much
originally given, i.e. no notoriety.
d. So riparian system is best understood as a modification of simple rules of
first possession applicable in cases of wild animals or land, to more
complex matter of flowing water. The riparian’s ownership claims rest
securely upon the ownership of lands at the edge of the river, which in turn
can be originally acquired only by first possession  so rules of 1st
possession are extended through a kind of imputation [attribution] rule
which says whoever takes first possession of the shore has an undivided
interest in the water flowing in the watercourse. Custom here establishes
some ground rules preventing 1 person from taking all the water into his
possession.
e. Still, general customs do not determine all the fine details of the system and
a set of positive rules is still required to hash out how and when water may
be removed as well as remedies. Also custom is not uniform over time and
place  natural flow v. reasonable use. The complicated system is not
easily regarded as a natural and intuitive system of property rights. Prior
appropriation in the west clearly demonstrates this. Repudiation of Pierson
because possession creates rights in given thing & future flows  no joint
ownership by all members of state.
All above demonstrates impossibility of generating a robust theory as to why first
possession determines the original acquisition of property rights. But this does not
mean we should rely on a theory of joint/common ownership. 1) It in now way
specifies the way in which any property owned by the collectivity may become
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c.
vested exclusively in a single member thereof  Results in negativism & lack of
use, e.g. ocean floor. (Remember Demsetz); 2) There is nothing which says that those
who prefer common ownership should prevail over those who do not.
8. So, which system has the better claim for allegiance? First Possession. Why?
a. Requires minimal sort of state. Under common ownership requires much
more extensive public control. Begin with a system putting wealth in
private hands.
b. Common ownership lends itself to totalitarian uses and abuses. Difference
between ownership of person & things is matter of degree  system
speaking of collective ownership over things provides a less solid bulwark
v. public control over individual talents than 1st possession system.
c. Some weight should be attached to the rule under which a society in the
past has organized its property institutions. Reshuffling entitlements
amongst comes at great expense even in absence of any clear principle
dictating the reshuffling should take place. First possession has been the
organizing principle of most social institutions and the heavy burden of
persuasion rests upon those who wish to displace.
d. “Vested rights have acquired, as it were, a life of their own.”
Acquisition by Creation
i. One view here is an extension of Locke  if you create something, i.e. expend your labor,
you are in essence first in time and that something is yours and yours alone to exploit 
enjoy fruits of your labor.
1. “Any expenditure of mental or physical effort, as a result of which there is created an
entity, whether tangible or intangible, vests in the person who brought the entity into
being, a proprietary right to the commercial exploitation of that entity, which right is
separate and independent from the ownership of that entity.”
2. In practice the fruits of one’s labor are not always one’s to exploit, nor are there
always full property rights in one’s person.
ii. Property Rights in Information: News and Product Imitation
 Start with a strong presumption that information is beyond privatization. But the
incentive issues become important here. Again, must always question whether the
efficiency gained is enough to offset the monopoly extraction.
1. INS v. AP  Must be allowed to reap what you sew in business.
 News has a dual character: literary quality & news element which itself is not
creation of writer – framers did not want to confer upon first to write events of the
day and exclusive right to spreading that knowledge – common property.
 Case hinges on question of unfair competition, which does not depend on any
property right. The business is extremely useful. When the rights of the one are
liable to conflict with those of the other, each party is under duty so to conduct its
own business as not unnecessarily or unfairly to injure that of the other. (Remember
Keeble) Recognition of property interest between industries though not with public
in turn actually ensures the public is not worse off.
 Must look to rights between businesses – just because no property interest against
public once news is published, there still is property interest between businesses –
becomes quasi-property.
 INS cannot appropriate the quasi-property when it has not contributed to its
acquisition, i.e. not burdened with any part of expense of gathering – unauthorized
interference with business practices of AP precisely at point where profit is to be
reaped in order to divert a material portion of the profit from those who have earned
it to those who have not. We want direct competition, not freeloading.
 This does not provide AP with right of monopoly over news, only postpones
participation by INS in process of distribution to the extent that it prevents reaping
by INS of what it hasn’t sewn – i.e. misappropriation and misrepresentation of AP’s
goods as its own.
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
This differs from ordinary cases of unfair competition in trade principally in that,
instead of selling its own goods as those of the complainant, it substitutes
misappropriation in the place of misrepresentation & sells complainant’s goods as
own. [Important distinction in Cheney below.]
 As between rival news-gathering and publishing agencies news must be regarded as
quasi property, irrespective of the rights of either as against the public, quasiproperty that may be protected in a business situation against unfair competition for
it.
2. Cheney Bros. v. Doris Silk Corp.
 A man’s property is limited to the chattels which embody his invention. Others may
imitate these at their pleasure.
 INS v. AP does not cover this case, the SC was not trying to lay down a general
doctrine – it was specific to facts of that case. To prevent one from enjoyment of
chattel (property) is one thing, but to prevent any imitation, i.e. set up a monopoly, is
quite another and promotes unfair competition. [News can be “imitated” by own
efforts. Need some protection to promote the acquisition of news  see Info
Economics below]
 If a person cannot obtain a patent or copyright on its product, it cannot recovery for
the copying of it by others.
3. Smith v. Chanel, Inc.
 Imitation is the lifeblood of competition.
 A large expenditure of money & labor does not in itself create legally protectable
rights. [see INS dissent as well; counter-Locke]
 A free ride here actually amounts to a public good in the form of comparable goods
for lower prices.
4. Douglas Baird
 Deciding against the AP above did not mean the AP would lose all revenue. People
would still pay for the AP’s news, and its rights would be entirely unaffected in the
towns that the AP served exclusively. [Imitation here would be AP using its own
people to gather the same news and selling this similar product, probably at a
cheaper price due to the introduction of competition. Just taking INS’s product is
quite a different thing.  limited monopoly]
 Granting individuals exclusive rights to the information they gather conflicts with
other rights in a way that granting exclusive rights to tangible property does not. …
For competition depends on imitation. While the first person “copied” may be made
worse off, society as a whole may be better off as long as the freedom to imitate does
not destroy the incentive for people to come up with new devices.
5. Information Economics:
a. Nonappropriability  Producing information costs a lot, but transmitting it
costs relatively little, Producers who bear the cost of production and
transmission are undercut by resellers who bear only the cost of
transmission. This leads producers of information to undersupply because
they cannot appropriate its value to society. A private free market will thus
provide less than efficient amounts of information.
b. Nonrivalry  One person’s use of information or an idea does not
diminish its availability for others to use.
c. Nonexcludability  Excluding some people from learning about a new idea
can be expensive because the transmission is so cheap.
d. Information is thus a public good, and the private market undersupplies
these public goods. State intervention can then come in the form of 1) state
supply, 2) public subsidies, or 3) creation and protection of property rights
in information.
e. NOTE: Even with 3, producers of information can obtain profits from
speculative investments.
iii. Patents & Copyrights
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1.
While the absence of property rights can dampen production, recognition of them
can create costly monopoly power Ps and Cs are limited monopolies meant to
encourage productive incentives but limited in duration in order to promote
competition  must maintain this equilibrium. Breath and duration at issue.
Copyrights are long whereas patents are short.
iv. Persona as Property
1. A celebrity’s “right of publicity” is widely recognized as a kind of property interest,
assignable during life, descendible at death. The property interest includes name,
likeness, and other aspects of one’s identity. Otherwise there is an appropriation of
identity.
2. This right is rooted in right of privacy. But the development occurred for the same
reasons property rights generally are thought to develop: technological advance and
social change generated new demands, new scarcity and new opportunities 
Demsetz. Expansion of market gave persona alienability and heritability. View is an
economic incentive is created to make investments in activities valued by the public.
v. Person as Property: Ownership of Bodily Tissue
1. Moore v. Regents of USC
a. P had been a leukemia patient at the UCLA Medical Center. His doctor
there, in the course of treating P, removed his spleen with his consent. They
then used cells from P’s spleen to establish a “cell line,” which they
patented. The cell line turned out to have great medical and commercial
value – products derived from the cell line were expected to have sales in
the billions of $$s at the time of the suit and UCLA had already earned
hundreds of thousands of dollars in royalties. P sued D on a number of
theories, the most important being conversion [the wrongful exercise of
ownership rights over the personal property of another], lack of informed
consent and breach of fiduciary duty.
b. Conversion: A majority rejected this claim. Once P’s cells had been
removed, he simply did not retain any ownership interest in them. Under
existing law & statutes, human biological materials are not viewed as
“belonging” to the person from whom they have been taken. Furthermore,
to extend conversion liability to bodily tissues that have been removed from
a patient would “threaten with disabling civil liability innocent parties who
are engaged in socially useful activities, such as researchers who have no
reason to believe that their use of a particular cell sample is, or may be,
against a donor’s wishes.” The economic incentive to conduct important
medical research would be destroyed.
c. Consent & Fiduciary Duty: A fully informed patient may always withhold
consent to treatment by a physician whose research plans the patient does
not approve. The fiduciary duty and informed consent theories protect the
patient without punishing innocent parties or creating disincentives to the
conduct of socially beneficial research. P could sue the attending physician
if he could show the doctor did not tell him the cells had commercial value
that the physician intended to exploit.
d. Concurrence: Should also point out the moral issue involved here: allowing
conversion would turn the human vessel into a commodity and have an
impact on human dignity. The Legislature should speak to these issues.
e. Dissents: At the time of the excision of M’s bodily tissue he at least had the
right to do with his own tissue whatever the Ds did with it. The parties here
were not in equal bargaining positions and we need fundamental fairness in
dealing between people in society. There remain numerous barriers to
recovery for M. Fiduciary approach has same effect as conversion approach
ex ante, but does not help M ex post facto.
f. “Bundle of Rights” Approach: “Ownership” of property is not really an allor-nothing concept, but rather a “bundle of rights” including the right to
possess, the right to use, the right to exclude and the right to transfer. The
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court here could have reached much the same result by holding that P had
certain ownership rights in his spleen at the moment of removal, such as the
right to exclude D from commercially exploiting his cells in a market
transaction. The court could have then held that P did not have the right to
transfer his organ by sale. That way, P could have received some
compensation from UCLA for that the court found was the wrongful act
done to him, while the court would have avoided allowing the naked sale of
body parts to researchers.
2. Transplant: A person may not sell his organ to be used in a transplant. 42 USC
§274(e): it is “unlawful for any person to knowingly acquire, receive, or otherwise
transfer any human organ for valuable consideration for use in human transplantation
if the transfer affects interstate commerce” (as virtually any organ transfer would be
found to do.) This ban applies even to direct donor-donee deals, so you commit a
federal crime if you sell, say, your kidney directly to a donee who desperately needs
it.
a. There is an implicit recognition of property rights in body parts here.
b. So gifts alone are permitted, meaning transplant organs are “marketinalienable.”
c. One exception is blood, which can be sold to a blood bank.
3. Remember Demsetz though: Property rights and markets come to mind when
changes in knowledge create new opportunities, new demands & new scarcity. The
idea is so contentious, though, the court understandably acknowledges the need for
further legislative debate. Issues include the benefits of altruistic giving (blood),
commodification and change in moral visions, rise in cost of transplantation, creation
of new source of income for the poor.
4. Extends to issues of frozen embryos, surrogate motherhood, baby-selling &
prostitution.
vi. Demsetz in action again: The electromagnetic spectrum
1. When the resource is uncongested and boundary maintenance is cheap, open access
is cheaper than private ownership. As time passes, however, congestion may
increase and the technology of boundary maintenance may improve. Private
ownership then becomes cheaper than open access. This predicts that property rights
will be created in the electromagnetic spectrum when broadcaster begin to interfere
with each other
2. Tribune Co. v. Oak Leaves Broadcasting
a. Issue became proper allocation of the spectrum. Initially there was a
bottom-up approach in which people just started broadcasting where they
wanted and the spectrum was a common resource. Like night broadcasting
on a ham radio  just to find a free frequency and broadcast from it.
b. Over time radio grew in economic importance, with broadcasting stations
contracting with one another not to broadcast over one another. Still did not
stop others from “intruding” on frequency. P here wanted to create a
private right in a particular frequency through prescription so as to have
predictable client base and be attractive to advertisers, etc. “By usage of a
particular wavelength for a considerable length of time and by reason of
expenditure of a considerable amount of $$ … educating the public to know
that that particular wavelength” was theirs, a right of ownership was thus
carved out. D claimed the spectrum could not be made a matter of private
control. P “has been using said wavelength for a considerable period of
time and has built up a large clientele.”
c. As in the West-East difference in riparian v. prior appropriation water
rights, the circumstances of scarcity and value in the new resource
compelled the court to embrace a private rights approach.
d. First, as with information, we have the economic concerns in which a
valuable industry in its infancy needs protection from unfair competition. P
“succeeded in building up a business and created a good will which [served]
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a designation of some particular output so that it has become generally
recognized as the property of such person. The station has a property
interest in its trade name” [think trademark & persona] that should be
protected from unfair encroachment.
e. Again, the “peculiar circumstances and necessities” existing here, as with
water in the West, compel a doctrine of prior appropriation and a
recognition of rights “which have been acquired by reason of outlay and
expenditure of $$ and investment of time, etc.” “Priority of time creates a
superiority of right, and the fact of priority having been conceded by the
answer it would seem … that the situation should be preserved in the status
in which it was prior to the time D undertook to operate over or near P’s
wavelength” in order to prevent major damage to P’s industry.
f. This promotes alienability and allows the frequency and station name to be
sold to someone else. Cheap, provides definite boundaries and
transferability.
g. TODAY first possession rule will not work, for too many people would
rush in. In order to avoid a monopoly situation have government regulation
and concern with equal representation in a distributional and cultural sense.
Use license and periodic franchise.
vii. The Right to Exclude: Trespass
1. Felix Cohen: “[Property] is a relationship among human beings such that the socalled owner can exclude others from certain activities or permit others to engage in
those activities and in either case secure the assistance of the law in carrying out his
decision.”
2. Exclusion and inclusion are necessary and sufficient conditions of transferability.
Both apply to above situation.
3. General Rule: Jacques v. Steenberg Homes
a. The private landowner’s right to exclude others from his or her land is one
of the most essential sticks in the bundle of rights that are commonly
characterized as property.
b. Furthermore, a right is hollow is the legal system provides insufficient
means to protect it.
c. Society has an interest in punishing and deterring intentional trespassers
beyond that of protecting the interests of the individual landowner. Society
has an interest in preserving the integrity of the legal system.
4. Exception: State v. Shack
a. Real property rights are not absolute, and necessity, private or public, may
justify entry upon the lands of another.
b. Property rights serve human values. They are recognized to that end and
are limited by it. “Title to real property cannot include dominion over the
destiny of persons the owner permits to come upon the premises.”
c. A central concern here was the welfare of migrant farmworkers  a highly
disadvantaged segment of society. Property could not be used here to injure
the rights of others by denying workers privacy or interfering with their
opportunities to live with dignity. While the owner here had a right to
pursue his farming activities without interference, there was no legitimate
need for the owner to exclude those attempting to assist the migrant farmworkers. Since no possessory right of the owner was violated, no trespass
occurred.
5. Limitations on the right to exclude find their source in federal or state constitutional
provisions or statutes.
6. Singer  “Reliance interest in property”
a. “When owners grant rights of access to their property to others, they are not
unconditionally free to revoke such access. … When people create relations
of mutual dependence … property right … must be redistributed … to
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protect the interests of more vulnerable persons … distribute resources …
[and] fulfill needs of the more vulnerable persons.”
7. The long relationship between a company and its employees, however, does not
create a reliance interest, whereas Singer disagrees.
8. This is in tradition of Cohen [remember Elements] and the move away from natural
law.
9. Epstein is firm proponent of right to exclude. “Buyers and seller may deal as they
see fit, but so long as there are many buyers and seller market forces will check
abuse. Those who exercise absolute rights in a capricious fashion pay for their folly
by losing their markets.”
a. Absolute rights will not always be advantageous in situations such as
bilateral monopolies, holdout problems, and transaction-cost obstacles.
viii. Trespass Above, Along, and Below One’s Property
1. Cujus est solum, ejua est usque ad coelum ad infernos: “To whomsoever the soil
belongs, he owns also to the sky and to the depths.”
2. Airplace Flights: Above
a. When an airport permits flights to occur directly over a landowner’s
property, and within the “immediate reaches” of his land, the landowner
may sue in trespass. If sovereign immunity prevents a trespass action, the
landowner may nonetheless claim that the direct overflights constitute a
taking of his property which cannot be done without compensation under
the Constitution. However, there must be interference with the owner’s
actual, not just potential, use of the property
b. Airspace outside the immediate reaches of the surface has been transformed
by statutes and regulations into a public highway, meaning flights in this
airspace do not constitute trespass. Really all that is being taken here is
hold-out value and there is compensation in kind through the availability of
air transport. (kind of like Johnson)
c. However, even if these flights interfere with the owner’s use and enjoyment
of his land, this will constitute a nuisance, with some courts also allowing a
taking to have occurred. Federal courts tend to disagree.
3. Encroachments: Along
a. Geragosian v. Union Realty Co.
i. While the encroaching drain and fire escape did not interfere with
the use of the lands in question or with access to a common court,
P was entitled to an injunction for removal of the trespassing
structures.
ii. The protection by injunction of property rights against continuing
trespasses by encroaching structures has sometimes been based
upon the danger that a continuance of the wrong may ripen into
title by adverse possession or prescription. A particular piece of
real estate cannot be replaced by any sum of money. The sanctity
of property is at stake here.
iii. We don’t want to give an incentive to trespass and would rather
have the parties negotiate rather than hold out. Still, might want to
demand removal if willful, as here, and be more tolerant if an
accident.
4. Caves: Below (also see Adverse Possession)
a. Edward et al. v. Sims
i. If, to determine the exact measure of rights of parties involved, it is
necessary that a temporary invasion of the possession of either for
purposes of inspection be had, surely the lesser evil of a temporary
invasion of one’s possession should yield to the higher good of
establishing justice.
ii. Inspection does not deprive the owner of the title to any portion of
his property, not does it deprive him permanently of its use.
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b.
II.
iii. Dissent: A cave or cavern should belong absolutely to him who
owns its entrance, and this ownership should extend even to its
utmost reaches if he has explored and connected these reaches with
the entrance. When the surface owner has discovered a cave and
prepared it for purposes of exhibition, no one ought to be allowed
to disturb him in his dominion over that which he has conquered
and subjected to his uses.
Edwards et al. v. Lee’s Adm’r
i. Damages for trespass to land are usually calculated as the
reasonable rental value of the property, but while there was
recurring use here by P there was no continuous occupation. Here
an analogy is instead made to damages for tortuous use of trade
names and secrets, in which profits received [net profits], rather
than damages sustained, are the basis for recovery
ii. Dissent: The cave should be adjudged as owned jointly by all of
the surface owners above it, in proportion that the length of their
surface ownership bears to the entire length of such exhibitable
portion. Damages should thus be for D’s proportion of the net
profits, not all of them.
iii. Epstein likes the dissent here. As it notices, with the ad infernos
rule in place, “the cave as an entirety could be destroyed as a
profit-producing property, and also as a pleasing and educating
exhibition to the members of the public.” This avoids holdout
problems and bilateral monopoly if have right to exclude. Court
nonetheless rejects profit-sharing because of a dislike of forcing
strangers by circumstance to become partners. Assymetrical inputs
should lead to an asymmetrical ownership design. Remember oil
field management. See adverse possession.
Subsequent Possession: Acquisition of Property by Find, Adverse Possession, and Gift
a. Acquisition by Find
i. “Finder keepers, losers weepers.” Is NOT correct. The finder of lost property holds it, at least
for a certain time, in trust for the benefit of the true owner  he is a custodian or bailee for
the true owner. The importance of privity: “prior in time is higher in right,” not first in time,
returns.  doctrine of relative title
ii. As to all others, however, the finder’s rights are tantamount to ownership, giving him the right
to hold and possess the found good. I.e. “the title of the finder is good as against the whole
world but the true owner.”  interacting with rule of first possession. If a chattel is found
and appropriated by A, and subsequently lost again, A may reclaim it from a second finder, B.
Clark v. Maloney
iii. Armory v. Delamirie
1. P a chimney sweep, finds a jewel and carries it to the shop of D, a goldsmith. He
asks D’s apprentice to examine it and tell him what it is. The apprentice takes out
the stones, and refuses to return them. P sues for the value of the stones. Held for P.
The finder of an object, although he does not by finding acquire absolute ownership,
is entitled to possess it against anyone but the true owner.
iv. Trover = action for money damages resulting from the D’s conversion to his own use of
chattel owned or possessed by the P. This waives P’s right to have the chattel in question and
subjects D to a forced purchase of it. Most courts allow the possessor the right to recover the
full value of the chattel and not some value discounted by the probability the true owner will
appear and reclaim it.
v. Even if the possessor has obtained his possession wrongfully, he will be entitled to recover
from a third person who interferes with that possession. Anderson v. Gouldberg. “Any other
rule would lead to an endless series of unlawful seizures and reprisals in every case where
property had once passed out of the possession of the rightful owner.”
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Joseph Ferraro
1.
vi.
vii.
viii.
ix.
But, Hemholz notes that most cases are not of 2 wrongful possessors but a prior
wrongful possessor and an honest subsequent one. Courts regularly prefer the latter,
quietly defying the common law rule. Rule of prior possession seems to only be
invoked in honest claims. Good faith requirement.
2. In real property situations, courts avoid permanent damages and would rather put the
prior possessor back in possession.
For the finder to gain the above rights, he must nor simply discovery but also possess the
chattels. Just like wild animals, the existence of “possession” is sometimes hard to determine.
The finder must have (1) physical control over the goods and (2) an intent to assume
dominion over them.
Conflict with the owner of real estate
1. If the finder is a trespasser, the owner of the real estate where the object is found
will be preferred. Some minor exceptions.
2. If the finder is somehow an invitee or licensee on the land, though, the authorities are
divided.
a. US: “Finder” is the one who discovers chattel and the title of the finder is
good against the whole world but the true owner, regardless of where it is
found.
b. UK: Lost articles belong to the first possessor, and thus the owner of the
property upon which the goods are found
3. When the object is embedded in the soil courts have tended to give possession to the
owner of the real estate. UK: Elwes v. Brigg Gas Co.: D leases land from P and
found a historic boat buried in the soil. Court found it was the property of the lessor
even though he was ignorant as to its existence.
4. “Lost” v. “mislaid” property
a. An object is “mislaid” rather than lost when it is intentionally put in a
certain place and then forgotten by its owner. Such mislaid objects are
usually held to have been, in effect, placed in the custody of the landowner
[now like a bailee]; therefore the finder does not obtain the right of
possession. Sometimes this is a hard distinction to make. [Brown: “The
doctrine of misplaced goods is apt to be artificial, difficult to apply, and
doubtful in principle.”] McAvoy v. Medina: P, a customer in D’s
barbershop, found a pocketbook that had been left there by some other
customer; the court, in awarding possession to D, stressed that the owner
had intentionally placed the pocketbook on D’s table and had thus entrusted
it to his care.
b. Property which has clearly NOT been intentionally deposited by the owner,
i.e. “lost”, is likely to be awarded to the finder. Bridges v. Hawkesworth: P
found a parcel of banknotes on the floor of D’s public shop [see issue
below]. The court awarded possession to O, on the grounds that the notes
had apparently not been intentionally deposited in the shop, and therefore
never came into D’s custody or protection.
c. Helmholtz & Equitable Division: “By depriving the finder of any share of
mislaid property, the distinction in treatment indirectly encourages him to
secrete what he has found. The distinction has the effect, the Comment
argued, of encouraging dishonesty on the part of finders and, therefore, fails
in its primary goal -- the protection of the true owner. As a practical matter,
a solution was needed which would encourage honesty on the part of all
concerned. Hence, the Comment proposed that "the owner of the locus in
quo . . . and the finder should share in the goods equitably."” Epstein: get
rid of the distinction  fewer the distinctions, the better the system.
Public v. Private Portions of Premises: Courts distinguish between objects found in a private
portion of a landowner’s premises and objects found in a portion open to the public. The
landowner has a better chance of prevailing in the former case because the private nature of
the local demonstrates an intent to possess the place and whatever may be located within it.
Private Ownership and the “Weak” Possession Issue:
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Joseph Ferraro
1.
x.
xi.
xii.
xiii.
xiv.
South Staffordshire Water Co. v. Sharman: Ps, landowners, hired D and a number of
other workmen to clean out a pool on their property. While doing so D found two
gold rings at the bottom of the pool. The court awarded possession to the Ps on the
grounds that (1) they has the right to “say that their pool should be cleaned out in any
way that they thought fit, and to direct what should be done with anything found in
the pool,” and (2) “where a person has possession of house or land, with a manifest
intention to exercise control over it and the things which may be upon or in it, then,
if something is found on that land, whether by an employee of the owner or by a
stranger, the presumption is that the possession of that thing is in the owner of the
locus in quo.” [Also see employee issue below]
2. Hannah v. Peel: P, a hospitalized soldier, discovered a brooch on the windowsill of
his room in D’s private house which has been requisitioned by the government and
never occupied by the prior purchaser owner. The court awarded the find to the
soldier by relying on the fact D had never actually lived in the house and was never
in “physical possession” of the premises, so he never had prior possession of the
private house.
a. Epstein: Items usually go to buyer, makes incentive to raise selling price,
more efficient bearer of risk by being owner. Keeping possession unified is
more efficient.
3. Really both residences were private, and the court’s decision can probably be best
explained on the grounds that it simply seemed fairer to award possession to the
soldier than to the homeowner who had never lived in the house  underlying
equities issue.
4. Had Major Peel resided in the house  “the occupier of a house will almost
invariably possess any lost article on the premises.”
Employees and other agents: With respect to those who find lost articles while in the employ
of another the courts have been lenient, usually awarding the find to the agent and not to the
principle[decorator, abandoned property], in absence of proof that it was part of the latter’s
duties to turn over lost goods to the employer [like a maid].
If finder knows or has a reasonable means of discovering the owner, but appropriates the
goods to his own use anyway, this is a larceny on the criminal side and conversion on the civil
side. Also, there is no right to a reward, but if the owner offers one then return of the chattel
constitutes the performance of a unilateral contract and the reward must come.
“Estray” Statutes have developed requiring notification of a government official of the find if
of a certain price & ownership after about a year with no one claiming. Often construed
narrow to apply only to lost property. L&E: Efficient in that they clear clouds from title and
transfer property t productive users. Provide incentive for owners to monitor property, induce
dissemination of info by finders and reduce search costs of owners who lose or mislay their
property. Wouldn’t want for cheap goods because search costs > value gained.
Treasure Trove: money or coin, gold, silver plate, or bullion hidden in the earth, “the owner
thereof being unknown,” at English common law.
1. Law drew a distinction between treasures hidden in the ground with the intention of
returning to claim them, which went to the king, and abandoned property, which
went to the finder.
2. In UK would go to the king, but in US state has never claimed title to lost property
by virtue of its character as treasure trove  merged with law of lost goods
generally.
Shipwrecks: In UK went to the crown. Under traditional maritime law remained original
owner’s property unless title was abandoned, with subsequent possessor entitled to a salvage
award [contrast of property law].
1. In US, Abandoned Shipwreck Act of 1987: US asserts title to any abandoned
shipwreck embedded in submerged lands of a state and simultaneously transfers its
title to the state in which the wreck is located.
2. L&E: Good in sense of keeping shipping lanes clear and minimizing debris, but
must think of incentives. If salvors were granted complete ownership without any
effort to identify true owner, get moral hazard problems and title controversies. US
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Joseph Ferraro
b.
asserting title avoids this, but giving salvors a reward and fraction of value creates an
incentive for chance salvors and professionals to search for the property and get it to
its rightful owners, satisfying all desires of true owners, society and salvors..
Acquisition by Adverse Possession
i. Purpose
1. Richard Powell: AP around because of social judgments that there should be a
restricted duration for the assertion of “aging claim.”
2. Henry W. Ballantine: “English lawyers regard not the merit of the possessor, but the
demerit of the one out of possession.” Even so, the great purpose is to automatically
quiet all titles which are openly and consistently asserted, to provide of meritorious
titles, and correct errors in conveyancing, i.e. errors in formality.  institutional
significance of SOL
3. Holmes: Look to the person who gains the property rights, not the loser. “A thing
which you have enjoyed and used as your own for a long time, whether property or
opinion, takes root in your being and cannot be torn away without your resenting the
act and trying to defend yourself, however you came by it. The law can ask no better
justification than the deepest instincts of man.”  cognitive psychology approach &
prospect theory  regard loss of asset in hand as more significant than foregoing an
equivalent claim. OR economic interpretation (Posner: diminishing marginal utility
of income). OR moral  cutting off a relationship of dependence.
ii. Caveat: Rule of Increase: Once acquired new title “relates back” to date o event that started
statute of limitations running. Remember Rule of Increase: If B takes A’s animal at time one
w/o A’s consent, offspring is born at time 2 and adverse possession acquired at time 3, B now
acquires baby as well as mother, even if B didn’t possess calf for statutory period.
iii. Epstein: Past and Future: The Temporal Dimension in the Law of Property, Part 1
1. At a normative level, the first possession rule precludes totally the acquisition of
title by adverse possession. If no person is able to profit by his own wrong, then acts
of adverse possession are by definition out of bounds, are flatly illegal, whether done
by private parties or the state.
2. As a matter of high principle, what comes first is best; as a matter of evidence and
proof, however, what comes last is more reliable and certain.
3. Using the doctrine of relative title, of prior (not first) possession, to confer rights
upon the adverse possessor against the rest of the world has the same virtues that the
doctrine of first possession has with respect to land originally unowned. The
doctrine of relative title gives a clear and expeditious temporal rule to resolve
conflicting claims, even by adverse possessors whose claims are precarious against
that of the true (that is, any other prior) owner. The party in possession trumps the
claims of any stranger to the title.
4. The adverse possessor has rights against the rest of the world from the moment that
he claims possession. The rule of first possession survives as the only rule of
acquisition that protects the adverse possessor against all but the true owner. [like
gifts]
5. HOWEVER, the cost of making a determination as between the claim of the original
owner and the adverse possessor mount over time, so that at some point the lines
cross, so that it ceases to be worthwhile to determine the facts on which an original
and remote claim of right rests. … The passage of time, like any other reduction in
the quality of evidence, produces a system of systematic bias for the weaker side …
by giving greater prominence to the random elements of the case. … At some point it
becomes necessary to end litigation, not to redefine its parameters. L&E: Cost of
establishing rightful ownership lowered by removing risk that ownership will be
disputed on the basis of the distant past. Bar stale claims.
6. Statute of Limitations (SOL) is important in preventing certain kinds of cases from
being litigated at all. Ballantine’s point above. SOL enhances the marketability of
title by shortening the period during which prospective purchasers and lenders need
examine the state of the title. I.e., avoid title-clearing costs, especially where title is
in fact impeccable, for it induces individuals to bring suit early, when it is more
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Joseph Ferraro
likely to be manageable. People will not want to make a future investment in land if
they are worried about a title issue. Clearing titles to land. “Protecting bad title is
the only way to protect good title.”
7. The reduction in error, administrative and transaction costs brings about a gain that
can be shared by all parties to the system. Even if there is a bias working in favor of
scoundrels, overall gains from SOL seem so large that the system if efficient.
iv. L&E: Also prevents valuable resources from being left idle for long periods of time by
specifying procedures for a productive user to take title from an unproductive use. [See caves
cases above & below & use requirement.] So only real cost of AP is that owners must
actively monitor their land to eject trespassers who might otherwise become owners through
AP. But these monitoring costs are deemed socially desirable for the use reason.
v. Components of Adverse Possession (with reference to real property)
 “Actual, Open, Notorious, Continuous, Hostile & under Color of Title”
1. Physical Requirements: There must be actual “possession” of the contested
property. This possession itself must be:
a. “Open and notorious”
i. This means the trespass must not be done in secret and an alert
owner should reasonably be able to detect that another person has
entered the property and was asserting a claim to it.
ii. The requirement is met if the possessor can show the owner had
actual notice that the former was in possession of the land and
asserting a claim to it.
iii. Where actual knowledge cannot be shown, the standard is met if
the adverse possessor’s use of the property is similar to that which
a typical owner of similar property would make, such that
neighbors and other observers would regard the occupant as a
person exercising exclusive dominion. Factors determining similar
use include:
1. Nature of the land: a use “consistent with the character of
the premises in question.” Use land in ways one possibly
could. A more noticeable possession would be required
for land within a city than in the wilderness.
2. Fencing or other enclosure: most significant in rural
areas.
3. Acts toward outside world: possessor’s conduct towards
persons other than the true owner .
 D claims possession of an unfenced, unimproved
lot, whose principle value is as a source of sand
and gravel. During statutory period D allows
some persons to remove it and denies permission
to outsiders & brings trespass actions against
those who do w/o permission. He also pays
taxes. P then sues to eject D after the statutory
period. Held: D owns because his acts toward
other people constituted “public acts of
ownership,” especially since kind of possession
depends on nature and situation of property & its
uses. Ewing v. Burnet. [Also consider fact that D
was maximizing potential use of land while P
was letting it sit unproductive.]
iv. Caves and “notoriety” (see Trespass, Below again)
1. Marengo Cave Co. v. Ross: A and B have land lying over
a cave. The entrance is on A’s property and he explores
full cave and opens to public. A’s business, well known to
B, runs for many years under B’s land. SOL expires and
B learns part of cave is under his land and moves to quiet
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Joseph Ferraro
2.
title. A moves to gain title by AP. Court found A’s
possession NOT “open and notorious” in addition to ad
infernos adherence.
Coase & bilateral monopoly: Coase Theorem would
predict result would have no impact on the valuemaximizing use of case because loser could buy out the
winner since TCs are low. This view fails to take into
account the bilateral monopoly issue discussed earlier in
which high negotiation costs foreclose the efficient
transfer. Each party will bargain strategically and want as
big a share of the profits as they can get. So half the cave
ends up cut off. Even if later negotiations get around the
BM problem, the BM TCs are social waste that need
mitigation. Again, forced joint ownership and profitsharing, if not control by a company, would seem ideal.
b.
2.
Exclusive
i. He must not be sharing control of the property with the owner and
the property must not be available to the public generally.
However 2 people can be in joint adverse possession.
c. Actual
i. Mainly distinguished from constructive possession [see below],
which applies where one holds a defective, but written, title to a
described parcel of land and takes actual possession of only a small
portion of it. He will then be held to have “constructive”
possession of the entire parcel. Otherwise, actual possession of the
entire parcel is necessary.
ii. A reasonable percentage of the land claimed must be actually
used. The precise percentage will depend on the nature and utility
of the property
iii. Minerals may be possessed if adequate dominion over the surface
is shown unless the record owner severed these rights and
conveyed them to someone else. Then actual removal would be
necessary.
d. Payment of Taxes
i. While some states in the West make this a prerequisite to an
adverse possession claim, even in ones that do not tax payment is
usually admissible as evidence of the requisite dominion and
notice to the outside world.
Mental Requirements
a. “Hostile” (Adverse)
i. This does not mean possession must be characterized by ill-will
toward the true owner. Possession is adverse as opposed to
subordinate to the true owner, i.e. inconsistent with the owner’s
true rights and without the owner’s consent.
1. Possession by a tenant under a valid lease is NOT hostile,
for there w/ landlord’s permission (unless holding over)
2. Measured by possessor’s objective actions and statements
more than by subjective thoughts.
b. “Claim of right/title”  Courts vary radically in the meaning they attach
to this phrase, but they all refer to the state of mind involved:
i. Objective standard: state of mind is irrelevant [England/US
majority], here claim of right is same as hostility. “Squatters” are
thus allowed to gain title by AP.
ii. Good-faith standard: possessor must have a bona fide belief that
he has title to the property. “To enter upon the land without any
honest claim of right to do so is but a trespass and can never ripen
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Joseph Ferraro
c.
d.
e.
into prescriptive title.” A mere “squatter” is one who possesses the
property but who is well aware that another person owns it, would
never gain title by adverse possession, no matter how long his
occupancy of the land was undisturbed.[US minority]
1. Helmholz observes good faith seems to play a larger role
than might first appear.
iii. Maine Doctrine: If possessor mistakenly believes he holds title,
and it is then shown he would not have held possession if he knew
the property did not belong to him, then no hostility.
iv. Aggressive trespass (Bad-faith) standard: Even if conscious of not
having title and that one could not resist the person who has it, i.e.
intend to hold it until a better owner comes, an individual still
might not say he meant not to acquire a title to it for himself. Title
by AP can still occur. “I thought I did not own it [an intended to
take it].”
1. If have moral issues with allowing this, perhaps require
payment of fair market value to former owner; would
punish and deter consciously wrongful activity. See
Epstein below.
Van Valkenburgh v. Lutz: “Very high bar here.”
i. Here, court said D’s AP claim was not “open and notorious” and
“actual” in that it was unaccompanied by either enclosure or the
use of a significant amount of the land in question as well as
significant improvement of that land.
ii. Also, the possession was not under a “claim of title/right” in the
“good faith” nature described above. “I thought I owned it” is not
true hostility, and then court goes on to say when D had the
opportunity to declare his hostility and assert his rights against the
true owner, he voluntarily chose to concede that P’s legal title
conferred actual ownership of the land and that all he got was an
easement via prescription. This seems to suggest an “aggressive
trespass” element thrown in as well. How can one be good-faith
and bad-faith at the same time? Seems like Maine doctrine
compromise.
iii. Epstein: If believe in AP, Lutz should have had the land and the
psychology should not have been important here. Why? We don’t
want to encourage the kinds of opportunistic, neighbor-war actions
engaged in by P.
Color of title
i. One may possess property under a written instrument purporting to
give him title. If the instrument is invalid for some reason (like
doesn’t match underlying land), the possession is under “color of
title”. This is virtually always sufficient to meet hostility
requirement as well as “claim of right” in states not allowing badfaith “squatter’s claims.”
ii. In some states, color or title is a prerequisite for AP. Often will
then get more lenient AP requirements, like a shorter SOL or See
Constructive Possession
Boundary Disputes
i. Majority view is that one who possesses an adjoining landowner’s
land, under mistaken belief that he has only possessed up to the
boundary of his own land, meets the requirements of hostile
possession and gets it through AP.
ii. Minority view holds that possessor in this kind of mistaken
boundary situation does not gold hostilely if it can be shown that
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Joseph Ferraro
f.
he would not have held the land has he known that he lacked title
to it  Maine Doctrine
1. Criticized on the grounds it rewards the bad-faith
possessor who entered with premeditation  the
intentional wrongdoer.
iii. Mannillo v. Gorski
1. Supports majority view, BUT takes issue with meeting
“open and notorious” requirement in situations of smallarea border disputes.
2. “[T]o permit a presumption of notice to arise in the case
of minor border encroachments not exceeding several feet
would fly in the face of reality and require the true owner
to be on constant alert for possible small encroachments.
… Only when the true owner has actual knowledge
thereof may it be said that the possession is open and
notorious.”
3. See Geragosian in Trespass above for different view.
4. If AP is going to suffer undue hardship, though, may be
equitable relief in form of forcing true owner to convey
land at fair market value without regard to notice issue.
Forced exchange. See Improvements, below.
iv. A & B own adjacent lots. A erects fence under mistaken belief it
is her land three feet onto B’s property. A acts as owner for
statutory period and acquires AP. Then A finds out fence is in
wrong spot and moves fence. 3 years later she changes her mind.
She still has the land for title vested in her before.
v. Doctrine of Agreed Boundaries: If there is uncertainty between
neighbors about true boundary line and parties settle matter in oral
agreement, the line is enforceable if the neighbors then accept the
line for a long period of time [agreement is not tentative] and land
is acquired by AP.
vi. Doctrine of Acquiesence: A long acquiescence, though perhaps
shorter than SOL, is evidence of an agreement between the parties
fixing the line.
vii. Doctrine of Estoppel: Applies when one neighbor makes
representations about or engages in conduct that tends to indicate
the location of a common boundary and the other neighbor then
changes her position in reliance on the representations or conduct.
First neighbor cannot then deny validity of statement or acts. AND
applies when a neighbor remains silent in face of expenditures by
another suggesting the latter’s notion of boundary’s location.
Epstein: The hostile treatment of bad faith possessors documented by
Helmholz is troublesome for it raises specter that original owner has
perpetual right to recover land originally taken in bad faith. Subsequent
possessors in good faith are not protected. An implicit two-tier statute of
limitations is created in which the good faith possessor may be able to claim
a shorter period of limitation while the bad faith possessor is subject to a
second, longer period of limitation. Utilitarianism backs this approach, for
parties who engage in deliberate wrongs constitute a greater threat than
those who make innocent errors or are simply negligent: there is a greater
danger intentional wrongdoers will do it again if successful.
i. This is better than Melamed & Calabresi approach of either using
property or liability rules. Merrill would give good faith
possessors a property rule (injunctive/specific performance/no
damages) and bad faith ones a liability rule (pay damages to true
owner). There is no SOL discussion for bad faith cases, just this
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Joseph Ferraro
3.
compensation approach. These suits could be brought for an
indefinite period of time & return of land if value has declined.
Liability rules are costly to administer and undercut the security of
transactions concern that lies at the base of the rule. 2-tier respects
basic intuition and promotes finality.
Continuity of Possession
a. Adverse possession must be continuous throughout the statutory period.
b. This does not mean the possessor must occupy the property every day
throughout the statutory period. A number of special rules may permit him
to use even time when he is not in actual occupancy towards the statutory
period, or at least prevent him from having to start all over again.
i. Abandonment: If the possessor leaves with no intention to return, a
new entry is required and the process must start all over again.
c. Seasonal possession: If the property is of a kind that seasonal use is all that
most owners of a similar property would make, the possession is deemed
continuous and the entire 12 months of the year are counted toward the
statutory period. See Howard v. Kunto [summer occupancy of beach home
not reasonably designed for year-round living held sufficient.] But there
must still be acts of dominion and control  traces must be left and
cultivation, etc.
d. Interruption by owner: An attempt by the true owner to reestablish his
entitlement to the property may constitute an interruption.
i. Brings a lawsuit: If owner brings ejectment action, this merely
suspends the running of the SOL. If the owner wins the action, the
possession is deemed interrupted and the AP must start over again.
If owner loses or abandons the action, no interruption occurs.
(NOTE: true owner can also move to recover mense profits:
amount equal to the reasonable rental value of land for period of
AP.)
1. Defense of jus tertii: P must recovery on the strength of
P’s title and the weakness of D’s. He must make an
affirmative showing that he holds title, not show some 3 rd
person’s title is superior to the AP’s. D, however, may
show the title is in the third person, thus utilizing the jus
tertii defense
ii. Enters himself: The retaking must meet the same requirements as
the AP, although it need not be exclusive. Some states require a
lawsuit as well & may just be brief.
e. Interruption by non-owner: If B ousts A, who adversely possessed property
owned by O, and B continues to hold the property, then B has interrupted A
and can hold the property. B may NOT tack A’s time of possession onto his
own. If A then comes back and retakes land, he can join his prior time of
possession with this new one since his leaving was involuntary. Some
courts even allow A to add B’s time to his own time so as not to lose the
time taken by B in A’s “race” to get to the SOL period.
i. Brings a lawsuit: AP is entitled to bring a trespass action against
one who enters the land, because trespass is an action that
vindicates possessory, rather than ownership, interest in the land.
“Prior in time, higher in right.”
f. Tacking: One who has adversely possessed property for less than the
statutory period may not yet have title to it, but he nonetheless has a
possessory interest. That interest is capable of bring transferred to another,
by oral transfer, written deed, bequest, or even inheritance. When such a
transfer occurs, the question arises, may the original possessor’s time of
possession be added to the time of possession of the recipient, so as to meet
the statutory requirement?
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Joseph Ferraro
i. Adding together of periods of possession is called tacking.
ii. Allowed wherever the transferor and transferee can be said to be in
relation of “privity” with each other. Generally means that 2
parties must have some continuity of interest, that the recipient
must have a direct relationship (familial or economic) with the
transferor. W/ oral gift, deed, bequest, or inheritance this is almost
always met.
1. In UK “time runs against the true owner from the time
when adverse possession began, and so long as AP
continues unbroken it makes no difference who continues
it.” Not so in US with “privity” (but see Howard)
2. E.g. O bequeaths a life interest “to L for life, remainder to
R” but will is void and title passes to A’s heir X. L is an
AP. If L dies and R takes over, some cts allow R to tack
because privity is there.
iii. Parol description & deed inconsistency: A adversely possesses
strip of B’s land and sells interest to P. If deed from A to P recites
boundaries that include the adversely possessed strip, then the
general principles of tacking would permit P to add A’s time of
possession of the strip to his own possession. But what if A’s deed
recites the true boundaries of A’s land?
1. Tacking will usually be allowed if P can show that the
seller intended to turn over the AP property and orally
referred to this property.
2. But what about where the land possession of which is
turned over is completely different from the land
described in the deed? Howard v. Kunto: “The technical
requirement of ‘privity’ should not be used to upset the
long periods of occupancy of those who in good faith
received an erroneous deed description. Their ‘claim of
right’ is no less persuasive than the purchaser who
believes he is purchasing more land than his deed
described. … ‘Privity’ is no more than judicial
recognition of the need for some reasonable connection
between successive occupants of real property so as to
raise their claim of right above the status of the
wrongdoer or trespasser.” D can tack actual possession of
the incorrect lot to the possession of A, who has purported
to convey that lot to him but had really deeded the next lot
over.
iv. Ouster or Abandonment: As we’ve seen, where only connection
between AP1 and AP2 is that latter was ousted, latter may not tack
former’s possession. Also, if AP1 abandoned land, no tacking by
AP2.
v. Tacking on owner’s side: After an adverse possession has begun,
if true owner conveys record title to another, via will, deed,
inheritance, etc., the time of possession against the first owner gets
added to the time against the subsequent owner.
1. E.g. A adversely possesses O’s land in 1950. In 1960 O
conveys land to X. Under 21 year SOL A will gain title
in 1971.
2. This can take place on both sides.
vi. Effect on future interests
1. Where the true ownership of property is not a fee simple
but split between a present and a future interest, the length
of time needed to adversely possess may be affected.
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2.
4.
If created AFTER entry of possessor, the future interest is
charged with the prior possession, and the SOL continues
to run against the future interest. I.e. future interest takes
subject to whatever claims exist against the property.
 E.g. SOL = 10 years. A enters on O’s land in
1981. In 1982, O dies and will devises land “to
B for life, remainder to C.” In 1997 B (life
tenant) dies without having entered land. C
(remainderman) moves to eject A. A’s claim
matured 1991. Fact C was not in possession is
irrelevant.
3. If created BEFORE entry of possessor, the SOL does not
begin to run against the future interest until it becomes
possessory. SOL is running against an ejectment action,
and such an action does not exist except by a present
possessory interest.
 E.g. O dies in 1982 devising land “to B for life,
remainder to C” by will. In 1983 A enters
adversely upon land. In 1997 B dies. C owns
land and A will not have a chance to become
owner until 10 years after C’s interest became
possessory, i.e. 2007.
4. Epstein: This last approach could postpone perfection of
title for a long time. And we don’t want groundless suits
by remaindermen and unfortunate impediments to the
marketability of title. Perhaps allow right of action before
he is entitled to possession, like an action for waste. High
TCs to tenant for life and remainderman negotiating.
 If 2 are family members, good likelihood life
tenant will regard restoration to the
remainderman as advancing his own interests.
 Where no family connection exists, need another
two-tier system with same limits as disability
and bad faith cases with a long one if life tenant
is young and likely to sue since potential
recovery > expenses, and shorter one for
instances of older life tenant where
remainderman is the one who will sue.
g. Improvements and Encroachments Revisited: Remedies
i. Used to be any buildings or fixtures erected without a right, be it in
good faith or not, became property of landowner.
ii. Today different approach. If good faith improvement, trespasser
usually allowed to remove or get compensation equal to market
value of improvement  “occupying claimant” or “betterment”
acts.
iii. If building is partially on the wrong lot usually not treated like a
fixture and relative hardships of parties will be examined. If
removal very expensive and difficult, not injunctive relief but get
damages. [Think Calabresi & Melamed]
iv. If bad faith, most courts issue an injunction requiring removal of
the encroachment regardless of the balance of convenience or
relative hardship  disincentive to trespass in the first place.
Length of Time Required
a. Stated in statute. Epstein: “A single number stated in advance truncates the
risk of making it clear that some actions cannot be brought. … But … to
much of a good thing is a bad thing. … A short limitations period [say a
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b.
c.
d.
e.
day] increases the likelihood of improper conduct by trespassers to begin
with, by reducing the likelihood of private correction action.” Efficiency
requires balance between the 2. Today 6-10 years with shorter number
effective when taxes are paid.
We’ve already seen changes caused by timing of AP in relation to creation
of a future interest, but SOL can themselves have other exceptions written
into them to change the usual 21 or 15 year period.
Disabilities: If the true owner of the property is under a disability, he is
given extra time within which to bring an ejectment action, and the adverse
possession period is correspondingly lengthened. The disability must exist
at the time the adverse possession begins; otherwise it is immaterial.
i. This means there is no tacking of disabilities, either in the case of
successive disabilities in the same owner or disabilities in each of
two succeeding owners.
ii. If, at the time adverse possession begins the true owner suffers
from two disabilities, whichever disability lasts the longest will
control.
iii. Disability includes infancy, insanity, imprisonment and,
occasionally, being outside the jurisdiction.
iv. One common kind of statute provides that where a disability exists
at the time AP begins, the true owner may bring his action anytime
within 10 years after the lifting of the disability.
v. Examples Facts: O owns land in 1972. A enter adversely on May
1, 1972. Age of majority is 18.
vi. Example 1: O is insane in 1972 and dies insane and intestate in
1995.
1. O’s heir, H, is under no disability in 1995. A acquires
title in 2005. [21 years is met & 10 years after disability is
“lifted.”]
2. H is 6 in 1995. A still acquires title in 2005, for 2 nd
disability cannot be tacked.
3. O has no disability in 1972. O dies intestate in 1990. H is
2 in 1990. A still acquires title in 1993. H’s diability
irrelevant.
4. O is 5 in 1972. In 1982 he becomes mentally ill and dies
intestate in 1997. H is under no disability. A acquires
title in 1993. Only first disability matters and lifts 13
years later at age 18 in 1985. Suit can come anytime in
the next 10 years, but 21 years after possession comes in
only 8 more years, or 1993. So O loses the land 4 years
before he dies!
Problem: A disabled person’s friends or relatives would normally sue to
protect his rights in such a situation, and, on the opposite side, long
extensions unnecessarily interfere with the clearing of land titles.
Epstein: First we should be able to bring speedy action against the infant or
imbecile, even with our fear of their victimization. Something must be
done to avoid loses on the other side. Why have tolling? From error costs
perspective might be OK for these suits seem to have better half-life. BUT,
don’t take this too far (the differences are not all that substantial), for tolling
still tolerates very long periods of delay in comparison with the relatively
short periods routinely allowed under the statute. As prohibition against
tacking reflects, the simple passage of time at some point becomes so
powerful an obstacle to recovery that suits should be barred notwithstanding
the equitable considerations raised by the infancy and insanity disabilities.
There should be definite numbers attached to this to avoid the length that
can come with having both an initial limitations period and a disability
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period. Another two-tier solution: 1) short SOL (6 years) with tolling for
disabilities; 2) outside period of recovery stipulating that all action must be
brought within, say, 15 years after they have accrued. If the P might never
be in a position to bring suit, let it be handled by an appointed guardian
with the capacity to bring suit. True there would remain principle-agent
concerns, but the costs of the alternative are greater.
5. The Government
a. Adverse possession does NOT run again the government. Nullum tempus
occurit regis (no time runs against the king). Claimed state owns land in
trust for all, who should not lose their land because of the negligence of a
few state officials.
b. Some states permit AP in same terms as against private land, others only if
possession continues for a very long period.
6. Rights of Adverse Possessor After Expiration of SOL
a. The possessor then gains good title and the “true owner” loses rights to
eject, and recover mense profits & minerals/timber. Relation back thus
occurs with title taking effect from time of first possession.
b. Easements may not be extinguished.
c. Non-recordable but no need to do so. So one who wants to purchase
property from record owner cannot be sure title has not passed to someone
else by adverse possession unless a physical inspection of the property is
made. Very unlikely though. Still it is hard to prove marketability since
claimant’s time to sue might have been extended via disability. But it still
can be transferred in writing like any other title since there is more than just
possessory interest now.
d. Scope of Property
i. That actually occupied through a particular act of dominion.
ii. Constructive adverse possession: One who enters property under
“color of title” gains title to entire area described in the instrument,
even if only a portion is “actually” possessed.
iii. The parcel of land claimed must be one recognized in the
community as a single parcel likely to be owned by a single owner.
iv. At the very least, then, the part actually occupied and the part
constructively claimed must be contiguous.
v. Conflicting possessions:
1. If any part of the area constructively claimed by the
adverse possessor is actually occupied by the true owner,
the entire constructive (but not actual) claim is destroyed.
2. If part of the land constructively claimed is occupied by a
third person, the constructive claim is vitiated only to the
extent of the land actually occupied by that third person.
7. Epstein: Today effective avoidance measure re: AP are low cost. The conveyancing
and surveying problems that cause these situations have, to a large mesure, been
overcome. There are fewer cases of innocent adverse possession to deal with &
dispossession is a criminal offense in which public force is brought to bear early on.
AP problems are largely solved.
vi. Personal Property (Chattels) & Bona Fide Purchasers
1. O’Keeffe v. Snyder: Bona Fide Issue
a. A thief cannot acquire good title [it is “void”] and therefore cannot transfer
good title to others, regardless of their good faith or ignorance of the theft.
The taken customer must return the chattel to its rightful owner and is
entitled to recover his money from the thief, but this is obviously unlikely to
happen.
b. If goods pass from the owner to someone with a “voidable” title, i.e. under
the transaction of purchase [like via check], the owner may recover the
goods as long as they are in the hands of the person with the voidable title.
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2.
BUT once the voidable titleholder transfers them to a good faith purchaser,
the true owner’s rights are extinguished. UCC §2-403(1)
i. Fraud: One who takes from the true owner gains a voidable title
even if the taking was fraudulent. Thus if A sells goods to B and B
pays in counterfeit money, or a bad check, B has nonetheless
obtained voidable title, and if he immediately re-sells the goods to
C, A cannot get them back from C.
ii. Identity: If A is deceived about B’s identity, B nonetheless gets
voidable title.
c. A second way the true owner of a chattel can lose his right to recover it is
through estoppel. If the owner, by his words or conduct, has expressly or
impliedly represented that the possessor of the goods is the owner of them,
or that he has the authority to sell them, the owner is “estopped” (precluded)
from denying the truth of these representations to one who buys in goodfaith reliance on the representation.
i. Entrusting to merchant. If the merchant, in violation of his
agreement with the true owner, sells the goods to a good faith
purchase, estoppel takes place. UCC §2-403(2) The mere act of
entrusting is sufficient to estop the true owner from recovery.
ii. Why? The need to expedite sales of inventory by protecting buyers
in the ordinary course of business is a widely felt commercial
reality, while the risk to original owners such as those who bring
watches to a retail jeweler for repair is more theoretical than real.
d. L&E: The law must allocate risk that stolen goods will be bought in good
faith. The American rule places the entire risk on the buyer, whereas the
European rule place that risk on the original owner. American rule gives
buyers and extra incentive to verify the seller is truly the owner, the
European an incentive to protect against theft. It is not clear which
allocation is more efficient in the sense of lowering the burden upon
commerce and promoting the voluntary exchange of property.
e. In this case, if the possessor before D had a voidable title, then he could
have conveyed good title to D if D was a good-faith purchaser. Also, if P
had entrusted her painting to Steiglitz, he could have sold the painting and
transferred a good title to a good faith buyer in the ordinary course of
business.
Adverse Possession Issue
a. Traditionally same rules apply to adverse possession of personality as to
realty. However, “open and visible [notorious] possession of personal
property, such as jewelry, may not be sufficient to put the original owner on
actual or constructive notice of the identity of the possessor. For works of
art, nothing short of public display would be necessary, imposing a heavy
burden on purchasers who want to enjoy a painting in private. With real
estate, the property is fixed and cannot be moved or concealed. The owner
knows or should know where it is located and reasonably can be expected to
by aware of open, notorious, visible, hostile, continuous acts of possession.
b. Discovery Rule: The true owner’s cause of action accrues “when she first
knew, or reasonably should have known through the exercise of due
diligence, of the cause of action, including the identity of the possessor.” If
the true owner fails to use diligence to find the possessor, and the use of
such diligence would have identified the possessor, the SOL will begin to
run immediately, even if the possessor keeps the property hidden.
c. Conversely, even if the possessor displays the property openly, if the true
owners fail to learn that the possessor has it and the failure is not due to a
lack of diligence, the SOL will never start to run.
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d.
e.
f.
g.
c.
This shifts the emphasis from the conduct of the possessor to the conduct of
the owner as well as the burden of proof at trial and brings equitable
considerations into the law.
Tacking: The SOL does not begin anew with each change of possession;
tacking is permitted so long as possessors are in privity. “An owner who
diligently seeks his chattel should be entitled to the benefit of the discovery
rule although it may have passed through many hands. Conversely, an
owner who sleeps on his rights may be denied the benefit of the discovery
rule although the chattel may have been possessed by only one person.”
NY has rejected the discovery rule because it provides insufficient
protection for the owners of stolen artwork. SOL for replevin does not
begin to run in favor of a good-faith purchaser until true owner makes a
demand for return and good-faith purchaser refuses.
Native American Graves Protection and Repatriation Act of 1990:
Museums must inventory NA sacred objects and demonstrate they were
acquired with the voluntary consent of an individual or group that had
authority of alienation  burden on museum. Tribes put selves in privity
with one another.
Acquisition by Gift
i. Inter vivos gift – an ordinary gift that is not revocable once made.
ii. Gift causa mortis – a gift made in contemplation of immediate approaching death that is
automatically revoked if the donor survives. Big worry about fraud.
iii. Requirements: (for both kinds), 1) there must be a delivery from the donor to the donee either
of the subject matter of the gift or of a written instrument embodying the terms of the gift; 2)
the donor must possess an intent to make a gift; and 3) the donee must accept the gift.
iv. Delivery – control of the subject matter must pass from donor to donee.
1. Without this requirement, gifts would be enforceable even if the only evidence
showing they had been made was an oral statement on the part of the alleged donor.
This leaves open possibility of fraud and ill-founded claims.
a. E.g. Safety Deposit Box: A rents a safety deposit box with his sister B. A
planned to give her everything he put in the box. A hands B four $5,000
bearer bonds, saying “I want to give these to you.” B puts the bonds in the
safety deposit box. A clips the coupons and collects the interest. Over the
years A adds 22 bonds to the box as well as a diamond ring. A places a
note in the box saying “Upon my death B gets the contents of this box. A
dies, but B only gets the first four bonds hand delivered to her for the
remaining contents were never delivered even though B was a joint tenant.
2. If an object can be handed over, it must be. However, in some instances manual
transfer of the subject matter of the gift does not necessarily have to take place. It is
sufficient if the grantor deprives himself of control or dominion of the subject matter.
3. Third Person: If donor puts property into hands of a third person and this person retransfers the property to the donee, no difficulty of delivery arises. BUT if the redelivery does not occur, the transfer is not necessarily adequate delivery:
a. Agency Test: Transfer to a 3rd person constitutes a valid delivery only if the
3rd party is acting as an independent agent of the donee. If the 3rd party is
the donor’s agent, the donor has not parted with dominion and control.
b. E.g., A tells B, “I want to give toy my insurance policy in that bureau over
there, so C [his servant], please get it and give it to her. C never does. The
gift is not valid.
4. Symbolic and Constructive Delivery: Some types of property, because of their
nature, cannot physically be delivered. Other types of property, while theoretically
capable of manual delivery, would be highly inconvenient to deliver. Yet to
dispense with the delivery requirement altogether would bring up the fraud concerns
again. “Symbolic delivery” = instead of thing itself, some other object is handed
over in its place. “Constructive delivery” = donor delivers the means of obtaining
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possession and control of the subject matter, rather than making a manual transfer of
the subject matter itself.
a. These kinds of transfers will not be allowed unless actual delivery is
impossible or impractical.
b. The donor must also part with dominion and control of property in question
here.
c. Use of key: The delivery of a key to a locked receptacle will often
constitute adequate constructive delivery of the receptacle’s contents. Use
of the key will be upheld whenever the manual transfer of the contents
would be impractical or inconvenient. Newman v. Bost: O gives various
keys to P telling her that everything in the house is hers. The keys unlock
several items of heavy furniture, including a bureau in which O’s life
insurance policy is. Held, delivery of keys constituted constructive
possession of all lockable furniture items since manual delivery would have
been impractical. BUT the keys did not give constructive possession to the
policy since it could have been manually delivered. “Where the articles are
present and are capable of manual delivery, this must be had.”
d. Intangibles: The subject matter of the gift can be intangible in the sense of
a claim of some sort against another person. Since physical transfer is not
possible, constructive or symbolic delivery is recognized.
i. Some intangibles have a document so closely associated with them
that the document is treated as the embodiment of the claim.
Business custom is to assign the obligation by transferring the
document. Any negotiable instrument falls within this class
(promissory notes, bonds) as do stock certificates, insurance
policies and savings account passbooks. Delivery of these
documents is sufficient to constitute delivery of intangible claim
represented by it.
1. E.g. O has a savings account with a bank. O hands the
bank book to B saying “the money is yours.” Before B
can withdraw the money or change the title on the
account, O dies. B still owns the account.
2. E.g. Checks. O writes a check to B on her checking
account. Before B can cash the check, O dies. No gift
occurs until the check is paid, because the donor retains
dominion and control of funds; donor could stop payment
or die, revoking command to bank to pay the $$.
e. Property Already in Donee’s Possession: Where the transaction is an
ordinary inter vivos gift, nearly all courts hold that no further act of delivery
is necessary.
i. E.g. O owns a pearl ring. While visiting her daughter, A, O leaves
the ring on the bathroom sink. After O leave, A discovers the ring.
When A telephones to tell O of the discovery, O tells A to keep the
ring as a gift. No additional act of delivery is necessary.
ii. E.g. A doesn’t telephone O. A week later at a dinner with friends,
A surprises O by producing the ring. O takes the ring, looks at it,
and gives it back to A, saying “I want you to have it. It’s yours.”
A tries on the ring but it is too large. O says “Let me wear it until
you can get it cut down.” O leaves wearing the ring and is struck
by a car and killed. A sues O’s executor for the ring. This is a
valid inter vivos gift when O first handed it over and O became a
bailee when it was handed back. A owns the ring.
iii. Causa Mortis gifts: The courts are split here as to whether the preexisting possession is sufficient delivery. Many claim there must
be a redelivery to effect this kind of gift.
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Written Instrument: Delivery to the donee of a written instrument “under
seal” stating the particulars of a gift constitutes sufficient delivery; but there
is a split where it is unsealed. With lack of seals today, many say unsealed
is also OK.
1. E.g. Gruen v. Gruen: O writes to son, P, that O wishes to
give him his valuable Klimt painting, but wishes to retain
possession for his lifetime. The letter, together with other
correspondence, sufficed to meet delivery requirement
and physical delivery was not required. See later.
2. A minority of courts hold this isn’t OK in situations
where manner of writing is quite informal.
g. Gifts Causa mortis: Courts are generally more hostile to these gifts and
impose stricter requirements for delivery, requiring actual physical delivery
in many such cases. Newman v. Bost. In any case where the donor dies
shortly after making the gift, the court will presume the gift is causa mortis
unless evidence is presented to the contrary. Also, many courts have held
that where a gift is followed by suicide, the gift should never be regarded as
a present unless there was actual delivery. Other courts don’t make this
distinction.
i. Courts are still sensitive to the use of causa mortis gifts as a
substitute for a will, so some of them require the gift be phrased as
a condition subsequent, i.e. the gift takes effect immediately with
failure to die acting as a condition subsequent that revokes the
previous donation. The modern trend is to not be a slave to such
construction.
ii. The essential feature here is that the gift is revoked if the donor
does not die of the contemplated peril.
iii. One situation in which delivery is not required is where the owner
of the property declares a trust for the benefit of another, with
himself as trustee.
v. Intent – There must be an intent to make a present transfer, not one to take effect in the
future. A promise to make a future gift is not enforceable for lack of consideration.
1. E.g. O says “I promise to leave you this ring when I die.” Not valid because not
causa mortis and as an inter vivos gift there was no delivery or intent to give a
present gift.
2. Courts do find that there has been a present gift of the right to the subject matter,
with only the enjoyment postponed to a later date. In the case of personal property,
there may be a present transfer of title, with the right of enjoyment postponed until a
future date.
a. A donor may make a valid gift of a future interest in personal property,
subject to the donor’s life estate. Even though the donor does not
immediately deliver the subject matter of the gift to the donee, the intent to
make a present gift will usually be found to have been satisfied.
i. Gruen v. Greun
1. O wishes to make a present gift of a painting to P, subject
to O’s possession of the painting for his lifetime. Painting
remains in O’s possession until 1980 when P’s stepmother
refuses to hand it over contending: 1) O never intended to
make an ownership transfer and only expressed intent to
make a gift, 2) is physical delivery of the object is
possible this actual (not written) delivery must take place
for the gift to be valid.
2. Held for P. A donor must intend a present gift, but O did
make evident his intent to make a gift of a remainder
interest in the painting (subject to O’s life interest). The
very purpose of the remainder-subject-to-a-life-interest
f.
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structure used by O was to permit O to keep possession of
the painting during his lifetime, so it would be illogical
(& not required) for O to deliver the painting to P. A
written instrument was enough to meet the requirement.
3. Esptein: Artwork a non-productive asset so can afford to
create divisions, unlike land.
vi. Acceptance – The giving of a gift is a bilateral transaction requiring an acceptance of the gift
on the part of the donee. If the gift is beneficial, the court will presume an acceptance (arises
in 3rd party situations)
vii. Bank Accounts – Where the depositor of funds wishes to give another person either present
or future rights in the funds, he may set up the account in four basic ways: (1) by opening
account in other person’s name; (2) by acting as trustee for the other person [“A in trust for
B” – Totten Trust]; (3) having the account jointly in his own name and that of the other,
subject to withdrawal by either; (4) by depositing in his own name, but with a clause stating
“payable on death” to the other person – “P.O.D. account”
1. When depositor dies before the other person, “bank protection” statutes permit the
bank to pay over the funds to the survivor and it will not be liable to the decedent’s
estate. But this does not establish who is entitled to the $$.
a. Person depositing funds frequently maintained right to control and
withdraw funds during his life. Courts used to say this prevented any gifts
during the depositor’s lifetime as well as after his death, so survivor lost
right to the funds.
i. Modern view is that a valid gift can arise after his death  the
“poor man’s will.”
b. But, the survivor is only entitled to the money only where a donative intent
on the part of the depositor existed. If it is shown A put B’s name on the
account merely as a convenience, so that B could pay A’s bills, and that A
had no intent to make a gift to B during A’s life or of the balance at A’s
death, B will have no survivorship rights (or that B holds in trust for A’s
estate). Still, there is a presumption in favor of B in the absence of clear
and convincing evidence to the contrary. UCC upholds this. Of course a
will by A can revoke this right.
2. When both parties are still alive, in the case of a Totten Trust or POD, the courts
presume the depositor has the right to withdraw all funds.
a. For joint accounts, courts assume all funds are half-owned by each joint
tenant, but the UCC allows withdrawal in proportion to the net contribution
of each.
THE SYSTEM OF ESTATES (SANS LEASEHOLDS)
III.
Possessory (Freehold) Estates
a. Up From Feudalism: American property law is derived from English land law, itself a product of the
social structure of the Middle Ages  Feudalism
i. Feudalism = all land was treated as owned, in the first instance, by the king. He then in turn
gave possession (but not untrammeled ownership) of various parcels to his lords and barons,
who had a corresponding obligation to provide the kind with a certain # of soldiers.
1. Subinfeudation – Each lord [tenant in chief] then had the right to give possession of
a parcel to an underling, in return for either production of a number of soldiers, or for
other services called incidents [homage & fealty, aids, forfeiture]. His holding of the
land was said to be in tenure. The three major free tenures were military [knight
service & grand sergeanty], economic [socage] and religious [frankalmoign], and
there were unfree tenures of peasants called villiens who held copyhold land. The
party receiving possession was said to be a vassal. His holding of the land was said
to be in tenure. He could in turn give possession of this land to someone else,
creating a new tenure. This process of tenures within tenures was called
subinfeudation.
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2.
b.
The key aspect of subinfeudation was that each person in the chain who at one point
held possession kept his place in the chain. Thus if A held Blackacre “of the king”
and wished to give possession to B, he made sure that B held in tenure from him, not
from the king. B had to render his services directly to A, not to the king.
3. Statute Quia Emptores (1290): This gave tenants (persons who held in tenure from
another) the right to convey their interest in the property without penalty. The statute
forbade subinfeudation in fee simple after it became a way for lords to avoid &
devalue feudal incidents The great lords thus conceded to all free tenants the right to
substitute a new tenant for all or part of their land without the lord’s consent.
a. Established principle of free alienation of land.
b. Worked with escheat and forfeiture to gradual get rid of existing mesne
lordships and most land came to be held directly from the crown.
c. E.g. A held Blackacre “of the king” and, prior to 1290, granted tenure to B.
After 1290, B could convey his interest to C without penalty. However, C
would then hold his tenure from A, rather than B. C was freely substituted
for B in the chain of ownership.
4. Quia Emptores thus prevented any new tenures from being created. Gradually the
whole feudal system fell apart with money, rents, taxes and market demands taking
over  a gradual move from status to contract. An efficient political system here
ended up being economically inefficient due to blocking of deals at high levels of the
bureaucracy.
ii. The concept of estate: Out of the system of feudalism developed a system of estates in land.
It is never really correct to say that X “owns” Blackacre. Instead, one owns an “estate in
Blackacre” which may be extensive (fee simple absolute) or more limited (term of years).
1. Estate = interest in land that (1) is or may become possessory, (2) is measured in
term of duration. Re: duration, a given parcel of land may be split into two or more
time periods. If O, the outright owner in fee simple, bequeaths Blackacre “to A for
life, remainder to B, but if B dies without issue, then to C,” as soon as O dies A,B,
and C all acquire estates, with A’s present and B’s and C’s future.
2. Estates in land are traditionally divided into freehold and non-freehold, the
distinction resting on the feudal concept of seisin, with the freehold having it and the
non-freehold not.
3. Freehold estates = 1) Fee simple (absolute or defeasible); 2) Fee Tail; 3) Life Estate
4. Non-freehold estates = 1) Estate for years (lease); 2) Periodic Estate (month-tomonth); 3) Estate at Will; 4) Estate at sufferance.
5. Example of Seisin: O has a fee simple absolute interest in Blackacre, so he has seisin
of Blackacre. O grants a life interest in Blackacre to A and keeps a reversion (the
right to regain possession of Blackacre after A’s death) in himself. A life estate is
freehold, so A gains seisin as soon as he enters the property. Then A gives B a 20
year lease. Even if B enters, he does not gain seisin since he has a non-freehold
estate. A is in constructive possession of Blackacre while B is in actual possession.
6. Apart from the ones recognized, no new estates may be created. If someone tries to
do so, he will generally be treated as establishing one of the conventional estates.
This is an attempt to prevent undue restraints on alienation. Holmes: “A man cannot
create a new kind of inheritance.” E.g. “to my granddaughter Sarah and he heirs on
her father’s side” takes a fee simple.
The Fee Simple
i. Fee Simple Absolute = the most unrestricted estate and that of longest duration in AngloAmerican law.
1. The common law was restrictive with respect to the words needed to create a fee
simple absolute. Such an interest could be conveyed only by use of the words “and
his heirs.” Thus a conveyance “to A and his heirs” gave A a fee simple absolute,
but a conveyance “to A” or “to A forever” or anything not this merely gave A a life
estate. BUT a grant “to A or his heirs” was acceptable.
a. This does not mean A’s heirs obtain any interest from the conveyance.
Once the conveyance is made A could transfer to land to B, and upon A’s
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death A’s heirs would get nothing. This is because the words “and his heir”
are words of limitation, which describe the estate being transferred, and not
words of purchase, which indicate who is getting the estate. So if’s A’s
potential heir B is a spendthrift who has creditors after him, they cannot go
after B’s interest and A could use sells the property if he wanted and spend
all the proceeds.
b. This reading prevented a divided interest in land that, unlike a chattel,
would devalue the item due to risk.
c. This was only needed for conveyances. In a devise (a will), “to A” sufficed
to give A a fee simple. Today, most states have abolished the “and his heir”
requirement, but some still strictly adhere to the words of limitation
necessity.
2. Inheritance of a Fee Simple: A fee simple is inheritable under intestacy statutes.
Always down before over. These are just default rules one can always draft around.
a. Heirs: If a person dies intestate (w/o will), the decedent’s real property
descends to his heirs. Heirs survive the decedent and are identified at his
death. No one is an heir of the living. With primogeniture there was only
one heir  the son.
b. Issue: Issue = descendants. If the decedent leaves any issue, they take to
the exclusion of any other kindred in the category of heirs. Issue refers to
children as well as any other further descendants. Today children share
equally but used to be primogeniture in which eldest son took all.
c. Ancestors: Parents take as heirs if the decedent leaves no issue.
d. Collaterals: All persons related by blood to the decedent who are neither
descendants nor ancestors. These are brothers, sisters, nieces, aunts, etc.
e. Escheat: If an intestate person dies without any heirs, the property escheats
to the state where the property is located.
f. E.g. O conveys Blackacre “to A and his heirs.” A dies intestate and without
issue. Blackacre will only escheat to the state if no ancestors or collaterals
are around.
g. E.g. O conveys Blackacre “to A for life, remainder to B and his heirs.” B
dies intestate without heirs. A then dies. Blackacre then goes to O, or if O
is not alive his heirs, and if there are none of those, it escheats to the state.
ii. Fee Simple Defeasible = “capable of being annulled,” i.e. a fee simple “with strings
attached.” Although one who holds a fee simple defeasible may use and hold the property
forever, or convey it, or have it be inherited by his heirs, he must use it subject to a
restriction. The estate is defeasible on the happening of a future event. There are three kinds:
1. Fee simple determinable – a fee simple which automatically comes to an end when a
stated event occurs.
a. The most common function of the fee simple determinable is to prevent the
property from being put to a certain use which the grantor opposes. E.g. O,
the holder of the fee simple absolute in Blackacre, conveys the property “to
A and his heir so long as the premises are not used for the sale of booze,
and if they are so used, then the premises shall revert to O.” A conveys the
property to B, who build a bar. When he sells his first drink, B’s interest
ends and to property reverts to O.
b. The creator of the fee simple determinable is left with an interest, i.e. the
right to regain title if the stated event occurs. This is the possibility of
reverter.
c. While the fee simple determinable is not subject to the Rule Against
Perpetuities (see below), many states have enacted SOLs which bar a
possibility of reverter after a certain period.
d. The words used to create a fee simple determinable are ones which make it
clear the estate is to ed automatically upon the occurrence of the stated
event. Includes a conveyance made “so long as …” or “until …” or
“during ...” or “while used as …” Also, a provision that upon occurrence
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2.
3.
c.
of the stated event, the property is to “revert” to the grantor is a sign of a
fee simple determinable.
Fee simple subject to a condition subsequent – This is also geared to the happening
of a particular event, but unlike the above, the fee simple subject to a condition
subsequent does not automatically end when the event occurs. Instead the grantor
has a right to take back the property, but nothing happens until he affirmatively
exercises that right.
a. The words used to create this estate generally must meet two requirements:
1) it must indicate that the grant is subject to a condition by such phrases as
“upon express condition that,” “upon condition that,” “provided that,” or
“but if;” and 2) it is generally a good idea to also include a provision that if
the event occurs the grantor may re-enter the property and terminate the
estate.
b. If the right of re-entry/entry clause is absent, many modern courts will not
treat the grant as a condition subsequent and treat the condition only as a
covenant on which the grantor can recover damages when broken.
c. Where it exists, the grantor is said to have a “right of entry for condition
broken” or a “power of termination.”
d. Again, the Rule of Perpetuities does not apply but many SOLs exist.
Condition subsequent v. fee simple determinable
a. Sometimes it can make a great deal of difference whether something is a fee
simple determinable or a fee simple subject to a condition subsequent.
Remember, the former estate ends automatically on the happening of the
stated event, whereas the latter requires the grantor or his heirs to actually
re-enter or bring suit.
b. Marenholz v. County Board of School Trustees
i. O conveys property to the Ds, providing that “this land to be used
for school purpose only; otherwise to revert to Grantors herein.”
The Os die intestate leaving S as their only heir. Ds stop holding
classes on the property and use it for storage purposes. S, without
having taken any legal steps to re-enter the land, coveys to P all of
his interest in the Hutton School grounds. The Ps bring suit to
acquire title and argue that the deed from the Os to the Ds createda
fee simple determinable, that title reverted to S automatically when
the Ds stopped using the grounds for school purposes, and that S’s
conveyance of his interest in the property was effective to give P a
fee simple absolute.
ii. Held, the original deed from O to D created a fee simple
determinable, leaving a possibility of reverter in the Os and their
heirs. The use of the word “only” immediately following the grant
suggests a limited grant. So too does the latter phrase which
suggest a mandatory rather than a permissive return. Still to be
determined if the grounds ceased to be used for a school purpose
though.
c. It used to be, and in some places still is, the rule that possibilities or reverter
and rights of entry descended to heirs upon death but were not transferable
inter vivos. They were not thought of as tangible “things’ or “property
interests.” Other states claim the former is transferable but the latter is not.
d. SOL: it begins running on the possibility of reverter either not at all or, in
some states, as soon as the determinable fee ends. With the right of entry,
theoretically it should not begin until the grantor attempts to exercise the
right. But in many states it begins to run as soon as the condition occurs
and often for a shorter time.
The Fee Tail
i. The fee tail developed out of the desire of the heads of rich families to ensure that property
would remain within his family indefinitely. After the Statute de Donis Conditionalibus, if O
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had a son, A, he would attempt to reach his objective by making a conveyance or bequest “to
A and the heirs of his body.” Upon A’s death the property would go to A’s heirs, then to the
heirs of that person, and so on through the centuries. It could NOT be conveyed to someone
outside of the family.
ii. The words needed to create the fee tail are ones which indicate the property is to pass only to
the issue of each tenant in tail (not to collateral heirs) and that the property is to revert to the
grantor or the grantor’s heirs if the bloodline of descent runs out, or, is specified in the
instrument, to some other branch of the family. Granting “to A and the heirs of his body” is
the most common way of doing this. Another e.g.  “to my son A and the heirs of his body,
and if A dies without issue, to my daughter B and her heirs.” Here A is given a fee tail and B
is given a remainder is fee simple to become possessory when and if the fee tail expires.
Every fee tail has a reversion or remainder after it.
1. E.g. G conveys “to A and the heirs of his body.” A then has a child. A then
alienates the land “to B and his heirs.” A dies, leaving C as the heir of his body. In
this situation, C has remedy against B and the perpetuity is allowed to stand. An
action, called formedon in descender, would give B no more than an estate per autre
vie (see Life Estates below), meaning at C’s death, his descendants could recover
from B. If C died without heirs, the G or G’s descendants would recover the land
from B.
2. If C died and then A died leaving no surviving descendants, the land would revert to
G.
iii. Common Recovery: A procedure whereby a tenant in tail in possession could in effect
extinguish all interests of his descendants, remaindermen in tail and reversioners. This was a
collusive lawsuit wherein X, B’s friend, brought a real action claiming the land was his and he
was entitled to immediate possession. B then pleaded faintly and admitted X was the owner,
to the prejudice of any remaindermen. Today those parties would be indispensable, but then
they were not.
iv. Abolition of the fee tail in the US: The fee tail, due to its odious use as a means of
perpetuating a hereditary aristocracy, received a hostile reception and is pretty much dead.
The various treatments are:
1. Fee simple conditional (upon having issue): A few states, like SC, take a fee tail to
mean that A, once he has a child, may convey the property in fee simple to a third
person. If A does die with issue, and has not conveyed the property, the survivors
who take the property probably also take a fee simple conditional.
2. Disentailable fee tail: In Delaware, Massachusetts, Maine and RI recognize the fee
tail but permit a simple “disentailing conveyance” to a 3rd party by a deed executed
during life, so the latter may receive a fee simple.
a. E.g. O conveys Blackacre in Mass. “to A and the heirs of her body.” A
dies leaving her only child B as her sole heir. B dies without having had
children, devising all her property to C. Because the transfer was not
executed by deed during B’s life, C does not her the property – it reverts
back to O and his heirs.
3. Fee tail for one generation in Connecticut and Ohio, where only grantee gets fee tail
(may not make a disentailing conveyance) and the issue get the property in fee
simple absolute.
4. Life estate in grantee, followed by fee simple to the issue in eight states.
5. In 27 states the fee tail is simply converted into a fee simple absolute by statute or
somehow abolished.
a. Category 1: the fee simple in A is created, and any gift over on A’s death
without issue is void. So in above example, neither A’s issue [necessarily]
nor B get anything.
b. Category 2: the fee simple in A is created, and a gift over to B if A dies
without issue will be given effect only if, at A’s death, A leaves no
surviving issue. If A leaves issue, B’s interest fails and A’s fee simple
cannot be divested thereafter. A can devise the fee simple to whomever he
wants. Acts like a fee simple subject to an executory limitation.
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c.
d.
E.g. O conveys Whiteacre “to A and the heirs of her body, and if A dies
without issue to B and his heirs.” A makes a conveyance of Whiteacre “to
C and his heirs.” A then marries D and has a son E. A dies intestate. A is
survived by O, B, C, D, and E.
i. In Mass: C owns Whiteacre because it was conveyed via a
“disentailing conveyance” during A’s life.
ii. In Category 1: Also goes to C, for the gift over to B is void and the
conveyance stands.
iii. In Category 2: Again to C because A left surviving issue, E,
which allowed her to transfer. If E had predeceased A, then B
would get Whiteacre.
The Life Estate
i. Lasts for the lifetime of a person. Ordinarily, the lifetime by which the life estate is
“measured” is that of the holder of the life estate. Occasionally the measuring life is that of
someone other than the holder of the life estate – e.g. “to A for the life of B, then to C in fee
simple.” This is an estate “per autre vie” in which, upon the death of the life tenant, the
estate can continue, since the measuring life may still exist.
ii. The words needed to create life estate are usually “to B during his life” or “to B for life.”
One may also use “to B until he dies” or “to B and then at his death to B’s children in fee
simple”. Every life estate is followed by a future interest – either a reversion in the transferor
or a remainder in a transferee.
iii. Normally the life tenant does not have the right to sell or even mortgage the property. If a
transfer gives those rights and that’s it, it is interpreted as a fee simple. If they are attached to
the usual “to B for life,” then this is allowed but if not conveyed or mortgaged, the property
does not go to B’s heirs.
iv. Estate now of limited utility: A life estate in real property is very inflexible and of limited
utility. For a life tenant to convey a fee simple in the property she must get the written
consent of all the remaindermen. Even worse, there can be situations in which the
remaindermen cannot be ascertained until the life estate ends. If A devised property “to my
wife B for life, then to her surviving issue,” no matter how old B is she could have another
child, perhaps through adoption. One cannot get the consent of the “unborn,” and the
property is effectively unsalable. The power of disposition to sell or mortgage described
above is one way to alleviate this.
1. White v. Brown
a. Mrs. Lide died leaving a will which provided, “I wish Evelyn White to have
my home to live in and not to be sold.” Lide’s niece, Brown, claimed the
will created a life estate and she retained a remainder interest. White wuited
to quiet title, contending the will created a fee simple estate. TC found for
B and W appealed.
b. Unless the words and context of a will clearly evidence an intention to
convey only a life estate, it will be interpreted as conveying a fee simple
estate. Her attempted restrain on alienation must be declared void as
inconsistent with the incidents and nature of the estate and contrary to
public policy. Dissent said life estate.
2. Restraints on Alienation suffer from 4 objections: 1) they make property
unmarketable, 2) they perpetuate the concentration of wealth by making it
impossible for an owner to sell and consume the proceeds of sale, 3) they discourage
improvements on land since can’t sell or mortgage, and 4) they prevent owner’s
creditors from reaching the property, working hardship on creditors.
a. Disabling restraint – withholds from grantee power of transferring his
interest.
b. Forfeiture restraint – if the grantee attempts to transfer his interest, it is
forfeited to another person.
c. Promissory restraint – grantee promises not to transfer his interest and is
enforceable via contract remedies.
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3.
v.
vi.
vii.
viii.
Epstein: If they want to make partial restrictions let them, and Restatement agrees if
the restraint is reasonable. This is like giving White a fee simple but with a disabling
restraint. In fact, just make a trust!
A better way is the use of an equitable life estate. Today most life estates are created in
trusts. Subdivisions are easier with money than with land. An equitable life estate is one in
which legal ownership [fee simple] of the property is given to a trustee, and the use of the
property is the only thing given to a life tenant. The trustee is given the right to sell, rent,
mortgage or otherwise administer the property as he deems fit. After the life tenant dies the
trust can continue or end with legal vesting in a 3 rd person. Anna could have been made the
trustee or a beneficiary. A legal life estate should always be avoided, especially in a modern
economy that considers land just another income-producing asset that can swiftly appreciate
in value and must be managed effectively.
Valuation Issue & Epstein: The judge in White ordered the house sold and the proceeds
divided among the life tenant and remaindermen. Treat like a bond or any other straight
financial instrument. What about opportunity cost? As interest rates go up value of
investment goes down  must discount present value from returns. Book treatment OK with
an asset but not with real estate due to market changes. Treat each year’s interest as a
separate asset. Strip the financial asset. Also take into account inflation and risk of nonpayment. Captial-Asset Pricing Model. Divide by how long person will live, but every
financial period gets its own separate analysis. Do a generation-splitting trust which makes
the remaindermen’s value go down. Put the money in a trust and have the payout follow the
return for years of life. This does not make wife a thief here, it’s what her husband would
want, she needs to be taken care of. If we need to give her more rights than a life estate we
can give her power to invade the corpus for her need and impose a neutral 3rd party to
determine this. Otherwise we get too much to the kids and not enough to the wife.
Baker v. Weedon
1. Weedon’s will bequeathed all his property to his third wife, Anna (P). The
remainder interest was willed to Anna’s children, if any, with Weedon’s
grandchildren designated as beneficiaries if P died without any children. Years later
the state highway department sought a right of way through the land and contacted
the grandchildren who first became aware of their interest as remaindermen. They
agreed to let Anna receive a substantial portion of any sale, but Anna sought an order
permitting her to sell all of part of the farm property. The Ds opposed the sale
because of its growing value as commercial property. The Chancellor approved the
sale and the Ds appealed, challenging the right of the court to sell property in which
they had a future interest.
2. A court may order the sale of property which is held subject to a future interest, but
only if sale is necessary for both the best interests of both the life tenant and the
remaindermen. Here the court said there would be a significant financial loss to the
remaindermen if too much of the land was sold prematurely. The case was
remanded and only enough should be sold to provide adequate resources for Anna,
unless no agreement could be reached.
3. Epstein: The trust here would make the remaindermen’s value go down, but we
have to think of this in terms of Milton Friedman’s permanent income theory, where
each person should think of themselves as having periods in their life with different
marginalities of $$. People are always in credit markets, borrowing on their income
and then saving for the future. A trust should have the corpus to the wife and kids
that satisfies their consumption patterns, i.e. decouple the sequencing of wealth. So
that uncertainties, such as sickness, don’t complicate matters and effect the kids’
interest, get insurance plans. Another instance here of the shortcomings of a legal
life estate.
Duties of a Life Tenant
1. No Waste. A should not be able to use the property in a manner that unreasonably
interferes with the expectations of B, i.e. fails to maximize the property’s value.
Whenever ownership of property is divided between a present and future interest,
there is the possibility that acts of the present holder will be to the detriment of the
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IV.
future interest. The doctrine of waste provides that if the present interest’s acts 1)
substantially reduce the value of the future interest; and 2) are unreasonable under
the circumstances, the holder of the future interest has a cause of action. Most
commonly, waste is committed by a life tenant or a tenant for a term of years.
2. Types of Waste
a. Voluntary (Affirmative) waste: exists where an affirmative act causes
unreasonable, permanent damage to the holder of the future interest, usually
in the form of an act that substantially reduces the value of the property.
i. If the damage is committed by a 3rd person, the present holder is
without fault unless he was negligent.
ii. The present holder is not liable for acts of God and has no duty to
rebuild.
iii. Voluntary waste may even exist where the value of the property
increases as a result. This is ameliorative waste. In England the
identical thing was to be delivered to the remaindermen, but here if
the value of the remainder is not diminished, it’s OK.
b. Permissive waste: results from omission by the present owner to care for
the property adequately and reasonably.
c. Equitable waste: the holder of the legal fee simple in a trust situation is
normally immune from legal liability for waste, but sometimes his conduct
may be enjoined if it damages the interests of holders of an executory
interest.
d. “Open mines” doctrine: If the mines were opened by the grantor before he
created the life estate, it is presumed the grantor intended the life tenant to
continue mining. If the mines were not open, the life tenant cannot open
them.
3. Remedies for Waste include damages based upon diminution of value if the future
interest is sure to become possessory; an injunction if the future interest is not certain
to become possessory; or a sale by judicial order as in Baker.
4. The life tenant must make reasonable repairs but is not required to rebuild a
structure, say damaged by fire.
5. The life tenant must pay all property taxes.
6. And make current interest payments on any mortgage, but the life tenant does not
have the duty to make payment son the principle, even if it comes due when he is in
possession.
7. There is no duty to insure, and the life tenant cannot convey a fee simple or any other
estate greater than the one he holds.
ix. Defeasible Life Estate
1. This often occurred with bequests to wives. Second husbands were thought
responsible for their wives, thus cutting off any funds from the first husband 
forfeiture upon remarriage. E.g. A devises “to B, for so long as she remain my
widow, and then to my son C.”
2. The common law in general dislikes restraint on marriage and courts will strike
down any defeasible life estates intended to coerce abstention from marriage. A
devise “to A for life, but if a marries, then to B” is thought to penalize marriage,
whereas “to A for life so long as A remains unmarried, then to B” is thought not to.
The modern trend in general is toward interpreting defeasible life estates as fee
simple determinables. Today, such restraints are also said not to automatically
include a restraint against cohabitation without marriage.
Future Interests
a. Whereas the estates discussed above are possessory, a number of estates are non-possessory. These
estates may or will become possessory in the future and are called future estates. Even though they
are not possessory, they nonetheless exist in the present and give legal rights to their owners.
b. The recognized future interests are:
i. Interests retained in the transferor are:
1. Reversion (left in grantor after conveying a lesser estate)
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2.
3.
c.
Possibility of Reverter (follows fee simple determinable)
Right of entry (power of termination following an interest subject to a condition
subseqent)
ii. Interests retained in the transferee are:
1. Vested remainder
2. Contingent remainder
3. Executory interest
Future Interests in the Transferor
i. Reversion
1. A reversion is created when the holder of a vested estate transfers to another a
smaller estate [“a vested estate of a lesser quantum”]  the reversion is the interest
which remains in the grantor, i.e. his right to future possession.
a. E.g. A hold a fee simple absolute in Blackacre. He conveys “to B for life.”
A has retained a reversion, which will become possessory in A (or his
heirs) upon B’s death.
2. Implicit Reversion: The grantor need not specifically reserve a reversion in himself.
As long as the estate conveyed is smaller than the grantor’s original estate, he retains
a reversion
3. Even when the grantor holds less-than-fee-simple interest, he can create a reversion
in himself by transferring a still smaller estate. If A held a fee tail, and conveyed “to
B for life,” A would have a reversion in fee tail.
a. Two life estates: If A owns a life estate and conveys to B for life, A has
reversion. Here, B’s life estate can terminate before A’s, but A’s cannot
terminate before B’s.
4. If a leasehold interest is created, such as O conveys “to A for 20 years,” common
law did not class this a reversion since the grantor was said to still hold seisin.
Instead, the landlord had a freehold subject to a term of years. Today, it’s a
reversion subject to the lease term.
5. A reversion will not necessarily ever become possessory depending upon the nature
of the conveyace. If events occur in such a way that the reversion can never become
possessory, it is said to have been divested (think the clothing analogy: it’s shed.)
a. O conveys Blackacre “to A for life.” O has a reversion in fee simple that is
certain to become possessory. At A’s death either O or O’s heirs will be
entitled to possession.
b. O conveys Blackacre “to A for life, then to B and the heirs of her body.” O
has a reversion in fee simple that is not certain to become possessory. If
only will is B’s blood line runs out.
c. O conveys Blackacre “to A for life, then to B and his heirs if B survives A.”
O has a reversion in fee simple that is not certain to become possessory. If
B dies before A, O will be entitled to possession. BUT if A dies before B,
O’s reversion is divested and will never become possessory. B now has the
fee simple absolute.
6. REMEMBER: If the grantor has given up something less than a fee simple, he
retains a reversion. If he conveys a fee simple determinable, he retains a possibility
of reverter.
7. Reversions are themselves alienable inter vivos; devisable and descendible. In 5c, if
O had conveyed his reversion to X, and B survived A, X would take nothing.
ii. Possibility of Reverter
1. As seen above, this occurs when the owner of a fee simple absolute conveys a fee
simple determinable, i.e. carves out a determinable estate of the same quantum.
[Could happen with determinable life estate but usually doesn’t.] The grantor is said
to retain a possibility of reverter since it is not certain the fee simple determinable
will ever come to an end, i.e. the condition will ever be met.
2. A possibility of reverter is inheritable and devisable with some disputes about inter
vivos conveyancing.
iii. Right of Entry
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1.
d.
As seen above, this occurs when the owner of a fee simple absolute conveys an estae
subject to a condition subsequent. The grantor is said to have a right of entry or right
of entry for condition broken.
Future Interests in the Transferee
i. Remainders: A remainder is a future interest which can become possessory only upon the
expiration of a prior possessory interest, created by the same instrument. This means:
 A grantor must convey a present possessory estate to one transferee;
 He must create a non-possessory estate in another transferee by the same instrument;
 The second, non-possessory estate (the remainder) must be capable of becoming
possessory only on the “natural” expiration of the prior estate.
1. Vested Remainders
a. A remainder is vested if 1) it is given to an ascertained person and 2) it is
not subject to a condition precedent (other than the natural termination of
the preceding estate).
i. E.g. O conveys Blackacre “to A for life, remainder to B and his
heirs.” B has a vested remainder. His identity is ascertained and
there is no “unnatural” condition precedent.
b. Indefeasibly vested remainder: is certain to become possessory at some
future time and cannot be divested. The remainderman need not come into
possession – his successors in interest may also. The above example is an
clear example of this.
i. E.g. O conveys “to A for life, and in the event of A’s death [or
upon A’s death] to B and his heirs.” B’s remainder is also
indefeasibly vested, with the “in the event” clause taken as another
way to say A has a life estate.
c. Vested remainder subject to open/partial divestment: exists when it is
possible to point to one or more persons and say that they (or their
successors) are certain to have a possessory interest someday, but there
remains a chance others will share in this interest. The principle situation
where this exists regards gifts made to “children” when the possibility exists
that additional children will be born subsequently.
i. E.g. O conveys “to A for life, remainder to B’s children and their
heirs.” At the time of the conveyance B has one child, X.
Immediately following the conveyance, B has a vested remainder
subject to open. If another child, Y, is born to B, X’s remainder
“opens up” to give Y a half-interest in it. The remainder stays
open until either A dies, in which case only B’s then-living
children will take anything, or B dies, thus closing the class of
children.
d. Vested remainder subject to complete defeasance/subject to divestment:
These arise in situations where the remainderman exists, his identity is
ascertained, and his interest is not subject to a condition precedent, but it
cannot be said with certainty that his interest will ever in fact become
possessory. This defeasance can occur either through natural termination or
through “divestment.”
i. A vested remainder may fail to become possessory because it
naturally expires before all prior interests end. O conveys “to A
for life, then to B for life.” B’s interest is a vested remainder
subject to complete defeasance through expiration, since B could
die before A.
1. If a remainder is in fee simple determinable, it can be
viewed as vested subject to defeasance by natural
expiration.
ii. The other way in which a remainder subject to defeasance can fail
to become possessory is if it is divested, i.e. cut off prior to its
natural termination. This can happen with executory interests or a
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2.
conveyance subject to a condition subsequent and involving a
right of reentry. See below for making the distinctions.
Contingent Remainders
a. All remainders that are not vested are contingent. A remainder is
contingent is 1) it is given to an unascertained person or 2) it is made
contingent upon some event occurring other than the natural termination ofd
the preceding estate, i.e. subject to a condition precedent.
b. Unascertained remaindermen: are either unborn or not yet ascertained.
i. Unborn: O conveys “to A for life, then to the children of B.” At
the time of the conveyance, B has no children. The remainder is
thus contingent in the unborn children and may become vested due
to later events. So, if prior to A’s death, B has a child, X, X would
have a vested remainder subject to open.
ii. Unascertained persons: The most commons example of this is a
remainder in favor of the heirs of a living person. O conveys “to A
for life, then to the heirs of B.” B is alive and, since no living
person has heirs, the heirs cannot be ascertained until B dies. Also
a conveyance in favor of a widow of a living person might be held
to be contingent. O conveys “to A for life, then to his widow.” A
is married to B. Contingent because there is no way to know if B
will survive A or will still be married to him when A dies.
c. Condition precedent: Where a remainder is subject to a condition
precedent, it is contingent. The fact that some condition must be met before
the remainder could possibly become possessory is by itself enough to make
it contingent.
i. E.g. O conveys “to A for life, then, if B is living at A’s death, to B
in fee simple.” B must meet the condition precedent of surviving
A, before his remainder can become possessory. This makes his
remainder contingent.
ii. E.g. O conveys “to A for life, then to B and her heirs if B survives
A.” Even though it seems like the if part here comes after “to B
and her heirs,” it is actually part of the same clause and subjects
B’s remainder to a condition precedent, i.e. B must survive A to
take possession.
iii. Distinguishing from condition subsequent: The difference
between the two is one of words alone/construction and NOT one
of substance. Traditional Test = If the condition is incorporated
into the clause (precedent) which gives the gift to the
remaindermen, then the remainder is contingent. If, on the other
hand, one clause creates the remainder, and a subsequent clause
takes the remainder away, the remainder is vested (subject to
divestment).
iv. E.g. O conveys “to A for life, remainder to B and his heirs, but if
B dies before A, to C and his heir.” B’s remainder is not
contingent because no condition was attached in the clause giving
B his interest and a second clause was added to take it away  a
condition subsequent. A condition precedent is state with respect
to C’s interest  a shifting executory interest discussed below.
v. E.g. O conveys “to A for life, then if B survives A, to B and his
heirs; otherwise to C and his heirs.” B has a contingent remainder
because the condition of survivorship is incorporated into the very
gift to B, making it a condition precedent.
vi. It is helpful to look for the phrase “but if.” Where the condition
occurs following this phrase, it is almost always an indication that
the remainder is being taken away and is therefore subject to a
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condition subsequent. By contrast “then if” is usually indicative
of a condition precedent.
vii. Alternative contingent remainders: are likely to occur where a
condition precedent involves survivorship. E.g. O conveys “to A
for life, then to B and his heirs if B survives A, and if B does not
survive A to C and his heirs.” B’s remainder is contingent upon B
surviving A. C’s remainder is contingent upon B not surviving A.
B and C have alternative contingent remainders. There is also a
reversion in O because the life estate can terminate prior to the
death of the life tenant. [If this has read “to A for life, then to B
and his heirs, but if B dies before A, to C and his heirs;” B would
have a vested remainder subject to divestment and C would have
an executory interest.]
viii. If the first future interest created is a contingent remainder in fee
simple, the second future interest in a transferee will also be a
contingent remainder. If the first future interest created is a vested
remainder in fee simple, the second future interest in a transferee
will be a divesting executory interest.
ix. Where it is not clear whether the remainder is contingent or vested,
courts show a preference for the vested construction.
3. Why worry about whether a remainder is vested or contingent?
a. A vested remainder accelerates into possession whenever and however the
preceding estate ends. A contingent remainder cannot become possessory
so long as it remains contingent.
b. At early common law a contingent remainder was not
assignable/transferable since it was thought of as the mere possibility of a
thing rather than a thing that could be transferred. Today most states allow
contingent remainders to be transferred.
c. At common law a contingent remainder was destroyed if it did not vest
upon termination of the preceding life estate. See below. There was no
comparable doctrine destroying vested remainders. Again, most states have
abolished the doctrine of destructibility of contingent remainders.
d. Contingent remainder are subject to the Rule against Perpetuities whereas
vested remainders are not.
e. Also in some states the holder of a contingent remainder may not have
standing to sue for waste, partition, or for a trust accounting, whereas a
vested remainderman has such standing.
ii. Executory Interests: a future interest in a transferee that must, in order to become possessory
1) divest or cut short some interest in another transferee (shifting), 2) divest the transferor in
the future (springing). NOTE: there is no difference in legal consequence between the two.
1. Common-Law Restrictions (pre-1536 Statute of Uses)
a. No springing interests: No future interest could be created to spring up in
the future. This was a direct consequence of the requirement that seisin be
delivered by a present transfer of possession. Here the estate would take
effect in the future by “springing” out of its present owner.
i. E.g. O conveys “to A and her heirs when A marries B.” A takes
nothing and O is left with the fee simple.
b. No shifting interests: A grantor could not give to any grantee an estate
which would cut another estate short, i.e. would shift interest. This also
derives from the immediate livery of seisin requirement.
i. E.g. O conveys “to my eldest son A and his heir, but if A inherits
Blackacre then to B and his heirs.” A takes a fee simple absolute
and B takes nothing because O cannot shift title.
ii. This meant a fee simple determinable could be followed only by a
possibility of reverter in the grantor and NOT by a shifting interest
to a third person. E.g. O conveys “to A and his heirs so long as the
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2.
3.
property in used during the next 20 years for agricultural purposes,
and then to B and his heirs. A has a fee simple determinable and
the shifting interest in B is invalid. O has a possibility of reverter.
iii. It also meant there could be no interest in a third party after a fee
simple subject to a condition subsequent. E.g. O conveys “to A
for life, then to B and his heirs, but if B marries C before A’s estate
ends, then to D and his heirs.” B has a remainder in fee simple
subject to divestment if the condition subsequent is met. D’s
interest is an invalid shifting interest.
iv. The rule was not applicable to leaseholds.
c. No gap between the end of an estate and the start of a succeeding remainder
was allowed
Rise of the Use in the Court of Chancery (Equity)
a. In the case of land law, the jurisdiction of the equity courts applied to cases
where a use was established. Thus O, the owner of a legal fee simple in
Blackacre, might transfer legal title to T as trustee, for the use of O. If T
failed to use the property for O’s benefit, the court of equity could
intercede, to force T to use the property for O’s benefit. The court had no
power to affect the legal title, which would remain in T.
b. The person in whose favor a use is created is called the cestui que use 
(the one for whose benefit the feoffment was made).
c. The use could be employed to create shifting and springing interests which
were no available at common law. Thus O could convey “to T and his heirs
for life, for the use of A and his heirs, but if A or his heirs should fail to live
on the property, then to the use of B and his heirs.” If A or his heirs failed
to live on the property, then the equitable title would “shift” to B, whereas
such a shifting estate was not valid with respect to the legal title.
d. In addition to a feoffment to uses, the bargain and sale deed could be used
to create a use. A bargain and sale was an agreement by which the owner of
land promised in writing to sell the land to another, or to hold it for the
other’s use. This deed gave the beneficiary equitable title to the property.
The Statute of Uses (1536)
a. Uses were used to escape the feudal incidents of tenure. The Statute
provided that where one person is seised of land to the use of another
person, the latter shall be seised of the same size estate as he had in use. In
other words, the equitable estate was converted in the corresponding legal
estate and the beneficiaries became owners.
i. E.g. O conveys “to T and his heirs, to the use of A and his heirs.”
The Statute transforms A’s equitable fee simple into a legal fee
simple and T’s legal estate is consequently nullified. The Statute
thus “executes” the use in A.
b. The Statute does NOT apply if the person who is holding to the use of
another is not himself seised in the first instance. If O conveys “to T and
his heirs for 999 years, to the use of A for life, then to the use of B and his
heirs,” the Statute does not apply for T is the holder of a non-freehold term
of years & does not have seisin. Leasehold loophole.
c. The Statute thus expanded legal future interests by converting “shifting
uses” and “springing uses” in equity into legal “shifting executory interests”
and “springing executory interests.” The bargain and sale became a
powerful way of transferring a legal estate without going through the hassle
of livery of seisin. The entire transaction could be done in secret & far from
the property just by raising a use on which the statute could operate.
i. E.g. After 1536, O bargain and sells “to A and his heirs, but if B
returns from Rome, then to B and his heirs.” The use in A and
shifting use in B were executed, leaving as the state of legal title:
Fee simple in A subject to a shifting executory interest in B in fee
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4.
5.
simple. NOTE: A does not have a fee simple subject to a condition
subsequent because, as would also be with a fee simple
determinable, the gift is over to a third person.
ii. E.g. After 1536, O covenants to stand seised for the benefit “of A
and her heirs when A marries B.” The state of the legal title is fee
simple in A subject to a springing executory interest in A in fee
simple.
d. The Statute also allowed for gaps between two future interests. O bargains
and sells “to A for life, and one day after A’s death, to B and his heirs.”
The Statute makes this a legal life estate in A, legal reversion in O, and
springing executory interest in B in fee simple.
e. Furthermore one could now have legal contingent remainders following a
term of years and legal interest in a stranger after a fee simple determinable.
Modern Executory Interests
a. The Statute of Uses thus created a new estate: a fee simple subject to an
executory limitation (be it springing or shifting). This is a fee simple that,
upon the happening of a stated event, is automatically divested by an
executory interest in a transferee. NOT a transferor! A possibility of
reverter or a right of reentry can be created only in the transferor; an
executory interest can be created only in a transferee/third-person. The
latter kind of fee simple can be created either in possession or in remainder.
i. E.g. O conveys “to A and his heir, but if A dies without issue
surviving him, to B and her heirs.” A has a possessory fee simple
subject to an executory limitation (or subject to divestment by B’s
executory interest). B’s future interest can become possessory
only by divesting A.
ii. E.g. O conveys “to A for life, then to B and her heirs, but if B dies
under the age of 21, to C and her heirs.” B is 15. B has a vested
remainder in fee simple subject to an executory limitation (or
subject to divestment by C’s executory interest if B dies under 21.
iii. E.g. O conveys “to A and his heirs one year from now.” A is given
a springing executory interest that will divest O’s fee simple one
year from now.
b. Executory interests are ordinarily treated as contingent interests, because
they are subject to a condition precedent. But where an executory interest is
to become possessory upon an event certain to happen (as in the last
example above) it may be treated as a vested interest.
Executory Interest v. Remainder
a. While both are created in persons other than the grantor, a remainder never
cuts off a prior interst, but merely awaits the prior interest’s natural
termination. An executory interest, on the other hand, is generally one
which divests, or cuts off, a prior interest before that prior interest’s natural
termination.
b. Test: Use the same test described above re: conditions precedent v.
conditions subsequent! E.g. O bargain and sells “to A for life, then to B and
his heirs if B survives A, otherwise to C and his heirs.” The limitation on
B’s interest is state in the same clause as the gift to B (condition precedent),
so B and C each have equitable contingent remainders that are executed by
the Statute into alternate legal contingent remainders. BUT if O conveyed
“to A for life, the to B and his heirs, but if B should die before A, to C and
his heirs, (condition subsequent), B’s interest would be vested subject to
divestment because the divesting language comes in a separate clause. C’s
interest would then be an executory interest, divesting B’s interest.
c. Exception: the fee simple determinable. Under the common law there
could not be a remainder following this in someone other than the
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transferor. If it is in a stranger, the interest is called an executory interest,
even though it does not cut short the fee simple determinable.
e.
f.
The Trust
i. Later it was held that the Statute of Uses did not apply if the feoffee to uses (the trustee) was
given active duties. Ordinary use was considered the duty to protect the property and convey
it to the beneficiary.
ii. A trustee manages the property for the benefit of the beneficiaries. He is a fiduciary held to a
high standard of conduct. He takes the entire legal interest in personal property and often the
legal fee simple in land. He can sell trust assets and reinvest the proceeds unless the trust
instrument says not to. The net income is paid to the beneficiaries and upon termination
assets are handed over to beneficiaries entitled thereto.
iii. Thus there is a duality of ownership: the legal and equitable.
iv. Broadway National Bank v. Adams: The Spendthrift Trust
1. A settlor may provide that the income of a trust cannot be alienated by the
beneficiary or reached by his creditors.
2. Although restraints on alienation may be void as against public policy when attached
to legal estates, the same is not true with equitable interests. Since the beneficiary
does not acquire full legal title with all of its incidents and attributes, limitations on
his power to alienate the property are not repugnant to the public interest.
3. The creditors could have ascertained the nature of D’s estate via public records
before giving him $$, and they are still allowed to reach all the property of the debtor
not exempted by law.
4. NOTE: The spendthrift trust is only allowed for inherited wealth. It can be set up for
another, but not for oneself.
Rules Furthering Marketability by Destroying Contingent Future Interests
i. Epstein: Multiple interests in real estate often reduce the economic marketability of title. The
existence of any future interest creates a standard bilateral monopoly problem between life
tenant in possession and assorted remaindermen. Even if there are only 2 players, contract for
sale with a 3rd party requires agreement as to 1) the price and 2) the division of the proceeds.
Subjective value can make agreement on the first difficult and asymmetries can make the
second near impossible. The parties may both disagree about the appropriate discount rate by
which to evaluate the remainder or about the expected life of the life tenant.
1. At least with vested remainders we know who the parties to the transaction are.
Contingent interests in people unborn or unascertainable make the problems here
even more acute. To destroy contingent interests and thus make land marketable,
judges invented a number of rules.
ii. The Rule in Shelley’s Case
1. If one instrument (a will or conveyance) creates a freehold (usually a life estate) in
A, and purports to create a remainder in A’s heirs (or the heirs of A’s body), and the
estates are both legal or both equitable, the remainder becomes a remainder in fee
simple (of fee tail) in A.
a. E.g. O conveys “to A for life, remainder to A’s heirs.” Without the rule the
state of the title would be: life estate in A, contingent remainder in A’s
heirs. With the rule, the state of the title is: life estate in A, vested
remainder fee simple in A (NOT A’s heirs). Then, by the doctrine of
merger (see below), A’s life estate will merge into his remainder in fee
simple, and A simply holds a present fee simple. This makes the land
immediately alienable by A and not tied up for his lifetime.
2. Furthermore the rule applies where there are: 1) a freehold in the ancestor; 2) a
remainder created by the same instrument in the ancestor’s heirs, or the heir’s of the
ancestor’s body, and 3) the same “quality” in both freehold and remainder, i.e. both
legal or both equitable.
a. In the US the freehold in the ancestor must be a life estate.
b. But it does not have to be a present, possessory one. The life estate may
itself be a remainder, e.g. O conveys “to A for life, remainder to B for life,
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remainder to B’s heirs.” The rule applies for B who now has a remainder in
fee simple.
c. The heirs (or heirs of the body) cannot have a springing or shifting
executory interest.
i. E.g. O devises “to A for life, remainder to B and his heirs, but if B
dies without issue surviving him, to C for life, and then to C’s
heirs.” The life estate in C, and the subsequent interest in C’s
heirs, are executory interests rather than remainders. This is
because the remainder to B and his heirs is not a contingent
remainder but rather a vested remainder subject to divestment. At
the time of the devise, the state of the title is: life estate in A,
vested remainder in fee simple in B, subject to divestment;
executory life estate in C, and executory fee simple in C’s heirs. If
B then dies without issue while A is still living, C’s interest will
then be transformed in a vested remainder for life with a
contingent remainder to his heirs via the rule. The doctrine of
merger will then be activated to give C a remainder in fee simple.
ii. Keep in mind the remainder must be given to the heirs of the
ancestor. If O conveys “to A for life, remainder to the heirs of B,”
the rule does not apply.
d. Also, the remainder must be to the “heirs.” A remainder to “A’s issue” or
“A’s children” is not sufficient to make the rule applicable. It must refer to
an indefinite line of succession rather than a specific class of takers. This
makes sense when one understands the purpose of the rule as one furthering
marketability in the face of uncertainty.
i. E.g. O conveys “to A for life, then to A’s children and their heirs.”
The Rule does not apply.
e. And the estates must be both legal or equitable. If O conveys “to T for life
of A, in trust to collect the rents and pay them to A, remainder to the heirs
of A,” the life estate is equitable but the remainder is legal. The Rule does
not apply and the state of the title is: legal life estate in T, equitable life
estate in A, contingent legal remainder in fee simple in A’s heirs, and
reversion in O.
3. The Rule will apply even though there is another estate (either vested or contingent)
between the life estate and the remainder and there is no subsequent merger.
a. E.g. O conveys “to A for life, remainder to B for life, remainder to A’s
heirs.” The state of the title is: life estate in A, vested remainder for life in
B, vested remainder in fee simple in A.
4. The Rule is a rule of law, not of construction. Even if the grantor makes clear that he
wants the remainder to be in the ancestor’s heirs (and not in the ancestor himself),
his intent will be irrelevant.
5. Today most states have abolished the Rule via statute or common law. Even where
it exists, it is easy to draft around.
iii. The Doctrine of Worthier Title
1. This is another rule whose aim is to have property pass by descent rather than by
purchase. The doctrine provides that where there is an inter vivos conveyance of
land by a grantor to a person, with a limitation over to the grantor’s own heirs either
by way of remainder or executory interest, no future interest in the heirs is created
but a reversion is retained by the grantor. In other words the remainder is void.
a. E.g. O conveys “to A for life, remainder to O’s heirs.” The Doctrine makes
the remainder void and O is left with a reversion.
2. The main effect here is that, since the remainder is completely nullified, an inter
vivos conveyance by O of his reversion, or a devise of it in his will, will prevent the
heirs from taking anything. Alienability is furthered for O can convey the reversion
whereas his unascertainable heirs cannot convey the future interest.
3. The Doctrine frequently applies to allow a settlor to terminate a trust.
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E.g. O conveys “to T as trustee, to pay the income there from to O fro life,
then to convey the premises to O’s heirs.” The Doctrine will invalidate the
equitable remainder in O’s heirs, leaving an equitable reversion in O. Later,
if O wishes to terminate the trust, he will probably be able to do so; only the
consent of persons having a beneficial interest in the trust is required, and
because of the Doctrine, O is the only such person. NOTE: If the
conveyance directed the trustee to distribute the trust on O’s death “to O’s
surviving issue” the Doctrine would NOT apply.
4. Also, while the Doctrine started out as a rule of law, it has been transformed into a
rule of construction, i.e. where the grantor’s language and the surrounding
circumstances indicate that he intended to keep a reversion, the Doctrine applies. It
merely establishes a presumption that a reversion rather than a remainder is really
intended, but evidence can prove it the other way.
5. Finally, the Doctrine often applies to personal property as well.
iv. Destructibility of Contingent Remainders
1. A contingent remainder was deemed “destroyed” unless it vested at or before the
termination of the preceding freehold estates
a. E.g. O conveys “to A for life, remainder to the first son of A who reaches
21.” At A’s death, he has one son B age 16. Since B did not meet the
contingency by the time the prior estate expired, B’s contingent remainder
is destroyed. O’s reversion then become possessory.
b. This also came out of the desire for seisin and an aversion to seisin
springing out of O’s estate when B turns 21.
2. At common law a contingent remainder could be destroyed through 1) normal
expiration of the supporting freeholds; and 2) merger of the supporting freeholds.
a. Normal expiration: the preceding freehold has a natural termination before
the condition precedent is satisfied. This is like the above example where B
fails to reach the age of 21 by the time A’s life estate terminates.
Exceptions:
i. But if the contingent remainder vests at precisely the same moment
that the supporting prior freehold terminates, the remainder is not
destroyed.
1. E.g. O conveys “to A for life, remainder to his surviving
children.” A dies, survived by son B. During A’s life
estate, B’s remainder was contingent, since it was subject
to the condition that he survive A. Since that remainder
vested at precisely the moment of A’s death, the
remainder was not destroyed and B takes title.
ii. Even if the freehold immediately preceding the contingent
remainder terminates, there will be no destruction if there is
another supporting freehold which still exists.
1. E.g. O conveys “to A for life, remainder to B for life,
remainder to B’s first son who shall reach 21 and his
heirs.” B dies leaving a 19-year old son. Although B’s
life estate has terminated, there remains another preceding
freehold, A’s life estate. Since the seisin remains in A,
the destructibility doctrine does not apply. B’s son retains
his contingent interest, and when an if he reaches 21, that
interest will vest (assuming A has not yet died).
iii. Also an equitable contingent remainder will not be destroyed by
termination of the prior freehold.
1. E.g. O conveys “to T and his heirs in trust to pay income
from the land to A for life, then in trust to convey the land
to A’s first son to reach 21.” A dies leaving an 18-year
old son. Three years later, when the son reaches 21, he
a.
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b.
should get the land for his contingent remainder was an
equitable one, i.e. legal title remained in T.
iv. The same applies if the remainder is a leasehold interest.
1. E.g. O conveys “to A for 999 years.” A dies devising the
term “to B for life, remainder to the first son of B to reach
21.” B dies leaving a 19-year old son. Although the son
has a contingent remainder, this remainder was not
destroyed by its failure to vest at A’s death. When the
son reaches 21, he will hold an interest in the land for the
remainder of the 999 year term.
Merger: The basic rule of merger is that whenever successive vested estates
are owned by the same person, the smaller of the two estates is absorbed by
the larger.
i. E.g. O conveys “to A for life, remainder to B and her heirs.” A
conveys his life estate to B, the life estate and the remainder
merge, giving B a fee simple. RULE: If the life estate and the
next vested estate in fee simple some into the hands of one person,
the lesser estate is merged into the larger.
ii. Extension to life estate followed by contingent remainder and
reversion: E.g. O conveys “to A for life, then to B and her heirs if
B survives A.” A conveys his life estate to O; the life estate
merges into the reversion, destroying B’s contingent remainder.
iii. E.g. O conveys “to A for life, remainder to A’s first son for life if
he reaches 21, remainder to B and his heirs.” When A has a 19year old son he conveys his life estate to B. B now has two
successive vested estates the life estate and B’s own vested
remainder in fee simple), and the smaller estate (the life estate) is
merged into the fee simple and disappears. Since the son’s
contingent remainder has not yet vested at the time A’s life estate
disappears, the contingent remainder is destroyed.
iv. The two vested estates in question must not be separated by a 3 rd
vested estate in someone else. [“to A for life, then to B for life,
then to C and his heirs. A conveys life estate to C  no merger]
But a contingent remainder that falls between two vested estates
will not prevent the two from merging.
v. A fee tail will NOT merge into a fee simple
vi. If a life estate and the next vested estate are created in the same
person simultaneously, the two estates do not merge so as to
destroy contingent remainders.
1. E.g. O dies, devising Blackacre “to A for life, remainder
to A’s first son and his heirs.” (At the time of O’s death,
A has no sons.) A is also O’s heir. A therefore holds
both a life estate and the reversion (which he gets by
descent). No merger occurs however because the life
estate and the reversion were created simultaneously in
the same person.
2. BUT, if the person in whom the 2 vested estates were
simultaneously created then transfers them to a 3 rd person,
merger will now take place. Say in the above e.g. before
A had a son he transferred his 2 estates to B. In the hands
of B the life estate and reversion would merge, destroying
the contingent remainder in the unborn son. B could then
convey back to A, who would then acquire a fee simple
and disinherit his unborn child.
vii. The last example shows the unscrupulous ends to which the merger
doctrine could be put. To thwart this danger, conveyancers
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adopted the device of “trustees to preserve contingent remainder.”
Future interests created in a trust were NOT subject to the
destructibility doctrine. This is because the future interests in trust
are legally vested, even if the equitable interest is contingent.
c. A child will be treated retroactively as in being from the time of conception
is the child is later born alive  Reeve v. Long. Important for a situation
like “to A for life, then to A’s first son and his heirs” & A dies w/o a son
but one is born to his widow 6 months later.
d. The destructibility doctrine does NOT apply to executory interests, for the
holder of an executory interest grabs seisin from another person rather than
letting it sit in abeyance.
e. Still, after the Statute of Uses was enacted, the doctrine was not abolished.
Instead the Doctrine of Purefoy v. Rogers was followed in which no
limitation capable of taking effect as a contingent remainder shall, if created
inter vivos, be construed as a springing use under the Statute of Uses. This
maintained the destructibility doctrine in full force.
i. E.g. O bargains and sells “to A for life, then to A’s oldest son who
reaches 21.” At the time of the bargain and sale A does not have a
21-year old son. As of that day, the gift to A’s son can be
construed as a contingent remainder. If A dies when his oldest son
is 19, the interest in the son will be regarded as a contingent
remainder and will be held destroyed. The title does no revert to O
and jump out as a springing executory interest when the son turns
21.
3. TODAY, about half the states have abolished the doctrine and the Purefor rule is of
no importance.
v. The Rule Against Perpetuities
1. “No interest is good unless it must vest, if at all, not later than 21 years after some
life in being at the creation of the interest.” John Gray
a. This means an interest is invalid unless it can be said, with absolute
certainty, that it will either vest or fail to vest, before the end of the period
equal to 1) a life in existence at the time the interest is created plus 2) an
additional 21 years.
i. E.g. O conveys his fee simple interest in Blackacre “to A for life,
remainder to the first son of A whenever born who becomes a
clergyman.” At the date of the conveyance, A has no son who is
presently a clergyman. A’s son could be born to A after the date of
he conveyance, and this son could become a clergyman more than
21 years after the death of A and of any sons born before the
conveyance. Since this remote vesting is possible, the contingent
remainder is invalid.
b. The validity of the interest must be judged at the time it is created, not at the
time he interest actually vests.
2. Interests to which the Rule applies: All legal and equitable interests in property
created in transferees are subject to the Rule, but it only applies to:
a. Contingent Remainders – A contingent remainder violates the Rule if it
might not vest or fail before the end of lives in being plus 21 years.
i. E.g. O conveys “to A for life, then to A’s first child to reach 21.”
A is the validating life. Any child of A who reaches 21 will
necessarily do so within 21 years of A’s death. A could breed and
die immediately after the conveyance, and that newborn child’s
interest must vest, if at all, within 21 years after the death of A.
ii. E.g. O conveys “to A for life, remainder to the first son of A to
reach the age of 25 and his heirs.” At the time of the conveyance,
A has no child age 25 or older. There is no validating life and the
contingent remainder is void. If A bred and died, and all other of
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b.
c.
d.
A’s children under 25 die, A will not reach 25 21 years after A’s
death. A has a life estate and there is a reversion in O.
NOT Vested Remainders – A vested remainder can NEVER violate the
Rule. A vested remainder, by definition, vests at the moment it is created.
This is true even if possession does not occur until the future  the
remainder vests “in interest,” not possession, immediately.
i. E.g. O conveys “to A for life, remainder to A’s children for life,
remainder to B and his heirs.” The gift to B does not violate the
Rule because it vested in interest on the date of the conveyance.
ii. E.g. T bequeaths a fund in trust to pay the income to A for life,
then for A’s children, but if none of A’s children reaches 25, to B.
1) The gift to A’s children only has a condition subsequent  it is
vested subject to divestment and does not violate the Rule, which is
only concerned with contingent interests. 2) The gift to B is void
because it is subject to a condition precedent that may be satisfied
more than 21 years after the death of A.
Executory Interests – An executory interest is not vested at its creation, so
such an interest might violate the Rule.
i. E.g. O conveys “to the School Board for as long as used for a
school, then to A and her heirs.” A’s executory interest violates
the Rule. It will not necessarily vest within A’s lifetime or within
21 years after A’s death. It may become possessory centuries from
now. A’s interest is struck and O has a possibility of reverter
ii. E.g. O conveys “to the School Board, but if it ceases to use
Blackacre for school purposes to A and her heirs.” The School
Board has a fee simple subject to a (purported) executory interest.
A’s executory interest, however, violates the Rule for the same
reason given above. The School Board thus has a fee simple.
NOT Reversionary Interests – because these interests, life vested
remainders, are deemed to vest as soon as they are created and in
transferors.
i. E.g. O conveys “to School Board as long as used for a school.”
The School Board has a fee simple determinable, O has a
possibility of reverter  both are exempt from the Rule.
ii. E.g. O conveys “to School Board, but if it ceases to be used for
school purposes, O has a right to reenter.” The School Board has a
fee simple subject to a condition subsequent; O has a right of entry
exempt from the Rule.
iii. Brown v. Independent Baptist Church of Woburn
1. Converse died leaving her property to the Church unless
she predeceased her husband. She did not. The residue
of her estate was left to certain residuary legatees. The
bequest to the Church was to last so long as it continued
as a church, but the Church ceased operating as such
sometime after her death. The trial court held failed
because it violated the Rule Against Perpetuities.
2. The estate in the land was a determinable fee with a
possibility of reverter. But the Rule does not apply to
reversionary interests like this. A reversionary interest
carries with it whatever interest the grantor had  it does
not create a new future interest which may or may not
vest within the time period allowed by the Rule. Hence
titled passed to the heirs with proceeds from sale going to
them.
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3.
iv. A number of states have limited such interests to a specified
number of years, usually 30, after which the possessory fee
becomes absolute, but most still allow for this difference.
v. Gifts switched from one charity to another do not violate the
Rule Against Perpetuities. E.g. “to the Red Cross, but if the Red
Cross ceased to exist, to the World Health Organization.”
e. Options to Purchase Land “In Gross”
i. An option to purchase “in gross” will be unenforceable if it could
be exercised beyond the end of the Perpetuities period, even
though the optionee paid real money for the belief it would be
exercisable.
ii. Central Delaware Country Authority v. Greyhound Corp.
1. In 1941, Greyhound Corp. sold a parcel to the Authority.
The deed conveyed the property in fee simple, but stated
that the property “shall be kept available for and shall be
used only for public purposes. … In the event that at any
time hereinafter said use shall be abandoned … then
[seller], its successors and assigns, shall have the right to
repurchase, retake and reacquire the same” upon payment
of an amount equal to the original purchase price. In
1980 the Authority stopped using the land for public
purposes but continued to maintain the land. In 1983 the
Authority brought action to quiet title, contending the
deed’s public use restriction violated the Rule.
2. The court held the restriction was an option to purchase,
not an interest subject to a condition subsequent. An
option to repurchase is subject to the Rule. Since the
option was not exercised within 21 years after the 1941
grant, the option was void.
iii. NOTE: Central Delaware demonstrates that when 2
interpretations of a grant are possible, the court prefers the
interpretation under which the Rule would apply. This is because
courts attach great importance to the public policy behind the Rule
– the encouragement of property transferability.
f. NOT Options to Purchase as Part of a Lease
i. If an option to purchase is part of a lease of that property and is
only exercisable during the lease term, then the option is NOT
treated as subject to the Rule. The option is though to give the
lessee and incentive to improve the property here and does not
restrict alienation very much.
Analysis of “lives in being” & The Validating Life
a. The perpetuities period for a particular interest begins at creation of the
interest and continues until 21 years after the death of persons alive at the
creation of interest who can affect vesting of the interest. These do not
necessarily have to be persons explicitly named in the instrument, but they
must be persons who can affect vesting of the interest.
i. E.g. T devises Blackacre “to T’s descendants living 21-years after
T’s death.” The interest in T’s descendants will vest 21 years after
T’s death, or fail before that time if T’s descendants all die within
21 years. So, the gift is valid.
ii. E.g. T devises “to T’s descendants living 22 years after T’s
death.” T’s present descendants could all die in a common disaster
11 months after, leaving alive a 1 month old grandchild. The gift
might vest in that child 21 years and 1 month after all the relevant
lives in being at T’s death expire. Remember “breed and die” here.
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b.
c.
d.
iii. E.g. O, a teacher, declares a trust of $100 for the first student to be
sworn in as a judge. The gift will vest or fail within the lives of the
students in the class. The condition precedent will necessarily be
met, if it ever is, before the last surviving student dies.
iv. E.g. O transfers a fund in trust to pay the income “to A for life,
then to pay the principle to A’s children who reach 21.” The
remainder is valid because it will vest, at the latest, 21 years after
A’s death, for all A’s children must reach 21 within 21 years after
A dies.
v. E.g. O conveys “to A for life, then to B if B attain the age of 30.”
B is now 2. The conveyance is good because B can be his own life
in being. The 21 year limitation only pertains to a person 1) in
being when the conveyance was created & 2) and who lives after B
dies.
Like destructibility, the Rule also includes any actual periods of gestation
involved. A person is in being from the time of conception, if later born
alive. A child en ventre sa mere when the perpetuities period begins counts
as a life in being.
i. E.g. T bequeaths “to T’s grandchildren who reach twenty-one.”
The gift is valid. T’s children are the validating lives  all of T’s
grandchildren must reach 21, if they ever do, within 21 years after
the death of T’s children plus any actual periods of gestation. Say
T leaves a child, A, in the womb at T’s death; A is a life in being at
T’s death if later born alive. Suppose A is the last survivor of T’s
children and at A’s death A leaves a child, B, in the womb. B, a
posthumous child of a posthumous child, can take if she reaches
21.
The measuring life or lives must be in being when the perpetuities period
starts to run. Generally, the perpetuities period begins when the
instrument takes effect. If an interest is created by WILL, the
measuring lives must be in being at the testator’s death. If it is a DEED
or IRREVOCABLE TRUST, the measuring lives must be persons in
being when the deed or trust takes effect.
“Measuring life” is commonly used to refer to a life or lives that measure a
period of time during which a valid interest will either vest or fail. Really, 2
types of lives are involved here. 1) Relevant lives: persons who can affect
vesting and fix the perpetuities period, 2) Validating life: a person among
the relevant lives about whom one can say “The interest in question will
necessarily vest or fail during this person’s life OR at his death OR
within 21 years after his death.” This validating life is what is called the
measuring life and must be found to validate the interest.
i. E.g. T devises Blackacre to A for life, remainder to A’s children
who reach 25.” The relevant lives are A and A’s children. [A can
affect both the time the remainder vests in possession and, by
producing children, the identity of the remaindermen. A’s children
supply the ID of these remaindermen and can affect the condition
precedent by reaching 25] Now we must test whether the
remainder will vest or fail for ALL of the class member within 21
years after the death of such person. All of A’s children will not
necessarily reach 25 within 21 years after the death of A and A’s
presently living children (breed and die). There are no validating
lives.
ii. E.g. If the above example said “who reach 21,” the necessary proof
could be made with reference to A as the validating life, for all of
A’s children must reach 21 21 years after A’s death.
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“Perpetuities period”: Again, to say that an interest will not necessarily vest
or fail within the perpetuities period means it will not vest or fail within the
lives of persons who can affect vesting of the particular interest plus 21
years thereafter. Each interest thus has an inherent perpetuities period
applicable to it alone.
f. If persons who affect vesting in the same way are so numerous or so
difficult to ascertain that it is impracticable to say when the last of them
dies, none of such persons can be used to govern the perpetuities period &
all are excluded as measuring lives. The perpetuities period cannot be
measured by lives in being that cannot be traced or that can only be traced
at unreasonable cost.
i. E.g. T bequeaths a sum “to the first descendant of A to marry a
person now alive.” A affects vesting by birthing a descendant
beneficiary. A’s descendants now alive affect vesting by
marrying. All other persons now alive can affect vesting by
marrying a descendant of A, but all such persons cannot be
measuring lives. It is not feasible to ascertain when the last of
these people dies so they cannot be used to measure the length of
the applicable perpetuities period. With them out, the gift is void
because it may vest long after the death of A and A’s descendants
now alive (more may be born later).
Special Situations Arising From The “What-Might-Happen” Test
a. Jee v. Audley
i. Audley set up a will bequeathing the interest of 1,000 pounds to
his wife for life and then to his niece, Mary Hall and her lawful
issue. If Mary died “in default” of lawful issue, the gift was to be
divided equally among the daughter, then living, of John and
Elizabeth Jee. At the time of A’s death, the Jees were quite old
and had 4 daughters (P). Mary Hall was unmarried and 40.
ii. Aspect 1 [Happening of Event]: Mary Hall was given a fee
simple (fee tails were not allowed in personal property); & the “in
default” language was construed to mean upon a general failure of
issue of Mary Hall, i.e. when her bloodline ran out. Her bloodline
might run out at her death, or centuries hence if she does
eventually have kids. The latter possibility gave rise to the
possibility that the gift might vest too remotely. A gift over upon
failure of a bloodline is the equivalent of a gift over upon any
remote event that may happen more than 21 years after the
death of all living persons. We also have the remoteness issue at
work here. So Mary Hall could not be a validating life. The
instrument would only have been valid if the money was given if
and only if there were no issue of Mary Hall living at her death 
it would vest or fail at Mary’s death.
iii. Aspect 2 [Fertile Octogenarian]: There is a conclusive
presumption that any person, regardless of age or physical
condition, is capable of having children. The Jees and the Jees’
daughters could not be validating lives because the gift might vest
in an afterborn daughter of the Jees more than 21 years after all
these persons are dead (breed and die). The will should have given
the gift over the daughters now living who are then living, i.e.
living at the time of both Audley’s death and then Mary Hall’s
death and all would have been valid given the existence of the
above redraft as well.
1. E.g. T devises a fund in trust for A (aged 80) for life,
then for A’s children for their lives, then to A’s
grandchildren then living. The remainder to A’s
e.
4.
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b.
c.
grandchildren is void. A might have conceived a child
after T’s death [a life not in being at the beginning of the
perpetuities period] and the remainder to A’s
grandchildren might vest at the death of such a child. In
other words if all other parties in being at the start of the
perpetuities period were killed off, just leaving this postT’s death child, call him X, then X could have kids B & C
(A’s grandkids) and die, causing the gift to “vest” well
over 21 years after lives in being.
Class Gift: If a gift is made to all members of a class, the entire gift fails
unless it can be said that each member of the class must have his interest
vest or fail within the lives in being plus 21 years. It must rise and fall as a
unit. Problems arise where the class obtains new members following a
testator’s death. A class must be closed, for a class gift is not vested in any
member until the interests of all members have vested. A gift that is vested
subject to open is NOT vested under the Rule! A class closes
physiologically at the death of the parent of the class.
i. E.g. T bequeaths property “to A for life, then to A’s children who
reach 25.” A has a child, B, age 26, living at the time of the
conveyance. It is possible that another child, C, will be born after
T’s death. If A and B die, C’s interest will vest too remotely, i.e.
more than 21 years hence. The gift is thus invalid as to children
born after T’s death and the rest of the class, i.e. even B living at
the time of the conveyance.
ii. E.g. T devises property “to A for life, and on A’s death to A’s
children for their lives, and upon the death of A and A’s children,
to […]” A and B survive T. REVISIT ME
1. [B if A dies childless] = valid, A is the validating life,
interest will vest (or not) at his death
2. [B if A has no grandchildren then living] = invalid, A
could have an afterborn child X who lives more than 21
years after the death of T, A and A’s children alive at the
time of the conveyancing. Then, X has a child Y (A’s
grandchild) also born after the perpetuities period. The
class was thus not necessarily closed until this afterborn
child X died.
3. [B’s children] = valid, B is the validating life and the
interest will vest (or not vest) after B’s death.
4. [B’s children then living] = invalid; the class of B’s
children is still subject to open. B could have an afterborn
child M  B is not dead and the class of children is thus
subject to open.
5. [A’s grandchildren] = invalid; again, not taking account
of afterborn children (parents) that could give birth to
grandchildren born after the perpetuities period.
6. [T’s grandchildren] = valid; T is dead and the class of
children (parents) is closed (no chance of afterborn
children/parents, who in turn are the validating lives.)
iii. Savings Clause: will be put into trust to terminate it and distribute
the assets at the expiration of specified measuring lives plus 21
years, if the trust has not earlier terminated. E.g. stipulating that a
trust will terminate “21 years after the death of the survivor of A
and A’s issue living at my death.” This eliminates the problem of
A having an afterborn child.
Unborn Widow: If an interest is created that will flow through “the widow”
of X, it must fail. The “widow” is not necessarily the person who is married
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5.
6.
to X when the interest is created, i.e. X could later marry someone born
after the interest is created, who would not be a relevant life-in-being
(validating life) for the purposes of the vesting of the interest in question.
The “unborn widow” could live longer than 21 years after the death of X,
the only life in being, it is invalid.
i. E.g. T bequeaths Blackacre “to A for life, then to A’s widow, then
to the issue of A and A’s widow who survive them.” At the time
of T’s death, A is married to B. B could either predecease or
divorce A, and A could then marry someone born after the
bequeathing, C, and is not certain to vest 21 years after A’s death,
i.e. C could die more than 21 years after A, the only validating life.
The “Wait-And-See Doctrine”
a. This rule determines the validity of an instrument at the time it vests,
rather than the time it is created; i.e. the interest fails if it “does not vest”
within the period of the rule. If the interest actually vests within lives in
being at the time of the creation plus 21 years, the fact that things might
have worked out differently is irrelevant. This doctrine has been adopted in
a majority of states.
i. E.g. T devises property “to A for life, then to A’s children who
reach 25.” The lives in being [relevant lives] are A and all of A’s
children alive at T’s death. The perpetuities period is 21 years
after the death of A and all A’s living children. If the contingent
remainder vests within that time, it is valid.
ii. E.g. O conveys “to A and his heirs, but if A or his heirs ever use
Blackacre for other than residential purposes, to B and his heirs.”
Under the traditional “what-might-happen” test the gift over to B is
void because the premises can cease to be used for residential
purposes more than lives in being plus 21 years. Under the waitand-see test, if the interest to B actually vests within the required
period, then it is valid.
iii. Fertile octogenarian and unborn widow cases become almost
impossible to occur: so long as the octogenarian does not in fact
have a child or the widow referred to in the instrument turns out to
be someone born prior to the instrument.
iv. Class Gifts change in that the interest of each class member will in
fact vest in time, allowing those members of the class whose
interests have not yet vested to have a valid interest under the rule.
b. USRAP & 90 years: The Uniform Statutory Rule Against Perpetuities
provides for a wait and see period of 90 years rather than the common law
lives in being plus 21 years. It allows for use of either the common law or
statutory periods, and if the interest fails under the what-might-happen test,
this wait and see test of 90 years may be used, i.e. it is valid if it actually
vests within 90 years. If it does not it will be reformed by the court to most
closely approximate the dispositive plan of the donor and vest within 90
years. It also abolishes application of the Rule to options and other
commercial transactions & makes it easier for donors to create trusts for an
extended period of time.
Reformation
a. Other courts have authorized courts to reform interests violating the Rule so
as to carry out most closely the intent of the transferor within the
perpetuities period & takes place at the time the violation is called to the
attention of the court. This approach gives relief to victims of the rule but
also requires a lawsuit
b. Statutes: Other states (IL & NY) simply get around fertile octogenarian by
claiming no one over 55 can have children & unborn widow by saying the
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7.
8.
V.
existing spouse is intended. They also reduce to age 21 any age
contingency in excess of 21 that causes a violation of the Rule.
In most states the Rule has lost its status, with some states even abolishing it.
Dynasty Trusts
a. In 1986 Congress closed a loophole which claimed no estate tax was levied
at the death of a life tenant because it ceases at his death and cannot be
transferred. E.g. T devises property in trust to pay income of daughter A for
life, then income of A’s children for lives, then to distribute principle to A’s
grandchildren (with a savings clause to avoid a perpetuities violation).
Taxes happen at T’s death and the death of A’s grandchildren, which could
be over 100 years after T’s death.
b. Congress said the death tax is due at the expiration of each generation 
generation-skipping transfer tax at the highest rate of taxation.
c. Dynasty trust (tax-exempt) was one exception = $1 million exemption from
the tax.
d. If Rule is followed, trust can endure for lives in being plus 21 years. If
USRAP, endure for 90 years. In other states (like IL) it can endure forever.
e. Purchase of life insurance can allow the trust principle to grow over $1
million.
Co-ownership and Marital Interests
 Now we go from consecutive rights of possession to concurrent rights of present or future possession.
 EPSTEIN: Transfer comprises 2 issues: 1) What kinds of interest do you create in property w/ a
transfer? [All barter arrangements are inefficient.] Obvious is what you own, but can be errors. More
complicated when get into issue of subdivision. Doctrine of estates allows for partition of land over
time. Disadvantages: Must police the boundaries between the generations (waste) & externality
problem  more complicated the state of title more difficult outsiders to deal with owners of the land
[trust  powerful separation of property. Epstein critical of Rule v. Perpetuities.
o Joint Tenancy: people with concurrent interests in the same piece of property. Here get
issues of gains from trade & social partnership. Future interest importance fades in
comparison to common interest. With more people and limited amount of land, get more and
more common ownership situations.
o Conveyancing risk & security/business risk (how after). With joint tenancy have both risks.
Conveyancing = know what kind of tenancy? Default provisions for court are? Important
because right of survivorship not apparent on face. Security = adverse possession & ouster
issue. At time of formation looks like Paretian bliss but does it remain stable?
o Pro rata v. non pro rata inferences. Positive correlations work well, for one will work for
benefit of other or commonality if interest like husband & wife, i.e. not strangers.  pro rata.
Can a single discontent break the arrangement? Only place where all must consent is tenancy
by entirety.  bilateral monopoly problem
a. Common Law Concurrent Interests
i. Tenants in Common: (1) have separate but undivided interests in the property; (2) interest of
each is descendible and may be conveyed by deed or will; (3) no survivorship rights.
1. Requires only one unity  the unity of possession. This means each tenant in
common is entitled to possession of the whole property. Since no other unities are
required, the tenant may receive their interests at different times and by different
conveyances.
2. Also, tenants in common may have unequal shares, like an “undivided ¼ interest in
A” and an “undivided ¾ interest in B.” If the conveyance mentions nothing about
the size of the interest, equal shares are presumed, but evidence can rebut this.
3. No survivorship rights means each t.i.c. can make a testamentary transfer of his
interest as well as lease it to a third party (although he may have a duty to share rents
with his co-tenant.
a. E.g. T devises Blackacre “to A and B” or “to A and B as tenant in
common.” A and B are tenants in common. A conveys interest to C. B
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and C are now t.i.c.. B dies intestate, meaning B’s heir is a tenant in
common with C.
b. E.g. A dies intestate and is survived by S & D. Under a local intestacy
statute, when the wife is not alive, the kids share equally. S & D thus have
title as tenant in common, each holding an undivided ½ interest. (Once
called coparceny)
4. There is a presumption in favor of the t.i.c., as long as the co-tenants are not husband
and wife. (See below)
ii. Joint Tenants: Joint tenants are regarded as the single owner of a single, unified interest in
real or personal property: each tenant is seised per my et per tout (by the share & by the
whole). One cannot have a greater interest than the other. Each owns the undivided whole,
so when one joint tenant dies nothing passes to surviving joint tenants. Estate continues in
survivors freed from decedent’s participation.
1. The most significant feature here is that each joint tenant has a right of
survivorship. If there are 2 j.t.s, and one dies, the other becomes the sole survivor
of the interest that the two of them previously held jointly. There is also a right of
possession as in the t.i.c., whereby each tenant is entitled to occupy the entire
premises, subject only to the right of occupancy by other tenants. (See below)
2. Four “unities” essential to joint tenancy creation:
a. Time – interest of each joint tenant must be acquired or vest at same time.
i. This prohibits the owner of a fee simple to create a j.t. in himself
and another in common law.
b. Title – all j.t.s must acquire title by same instrument [deed or will] or by a
joint adverse possession. J.t. NEVER arises by intestate succession or other
act of law.
c. Interest – all must have equal undivided shares and identical interests
measured by duration. One j.t. cannot have a ¼ interest and another ¾
interest.
d. Possession – each must have right to possession of the whole. After j.t.
created, one j.t. can give exclusive possession to other j.t.
3. W/o these 4 unities, a tenancy in common is created AND if unities exist at time j.t.
is created but are later severed, j.t. turns into t.i.c.. I.e. mutual agreement to destroy
a unity by j.t.s can cause the conversion as well as unilateral action of conveying
interest to a third party. Also, any one can bring action for judicial partition.
4. E.g. T devises Blackacre “to A and B for their joint lives, remainder to the
survivor.” What is the state of the title? 2 views here: 1) creates a joint tenancy in
fee simple; 2) creates a joint life estate, with a contingent remainder in fee simple to
the survivor. If so, the right of survivorship cannot be destroyed, as it can in the case
of the conventional joint tenancy in fee simple.
5. Coneyance by A “to A and B as joint tenants” was prohibited at common law since
the unities of time and title were missing. If such a conveyance was desired, a
“straw man” was needed. A would convey to the straw man C who would then
convey to A and B as joint tenant. Today, statutes and case law authorize the holder
of a fee simple to create a joint tenancy in himself and another.
iii. Tenancy by the Entirety: created only in husband and wife (except in Hawaii where allow
for reciprocal beneficiaries). Like above except add 5th unity of marriage. However, BOTH
are seized of the entirety, meaning neither husband or wife can defeat right of survivorship
by individual 3rd party conveyance  only a conveyance by husband and wife together can do
so.  difference from other tenancies. Divorce terminates this by terminating 5 th unity.
1. E.g. A & B take title in a house in “A and B as tenants by the entirety.” Years after
the marriage, A moves out of the house and conveys the interest to his brother, C. In
states where such a conveyance is allowed, it cannot affect the other spouse’s right to
the entire estate if the latter survives. If A predeceases B, B will own the property
outright and C will get nothing. If B dies before A, C owns the property outright.
iv. Presumptions & Ambiguous Language: Today old presumption in favor of joint tenancies to
curb division of land has reversed in favor of tenancies in common via statutes. So “to A and
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b.
B as joint tenants and not as tenants in common” will create joint tenancy, but anything less
may not.
1. E.g. “to A and B” jointly” is ambiguous and most courts hold it is a tenancy in
common.
2. Some states also require an express provision for survivorship, while others have
done away with joint tenancy entirely.
v. Avoidance of Probate: Joint tenancies are popular amongst married couples because
survivorship & no passage of interest on death makes it practical equivalent of a will but with
no probate, i.e. judicial supervision of administration of decedent’s property. Originally way
around primogeniture. [Remember: a joint tenant cannot pass her interest in a joint tenancy
by will.] W/ creditors, if acts during j.t.’s life, can seize and sell joint interest & sever j.t..
But after death there is nothing to seize. Still, not a check on federal estate taxation. If
husband and wife, ½ subject to taxation BUT qualifies for marital deduction. If not husband
and wife, portion of value of jointly held property attributable to the consideration furnished
by decedent is taxable.
vi. Unequal Shares: Old rule of j.t. requirement of equal shares makes little sense today and
courts often ignore. So if A furnishes 1/3 purchase price & B 2/3, and parties intended
proceeds from a sale during their lives to be divided according to these interests, the court will
divide the proceeds according to their intent. See joint and survivor bank accounts & taxing
[“consideration paid test”  decedent j.t. taxed on fractional share of decedent’s
consideration furnished.]
Severance of Joint Tenancies
i. Normally results from the creation of a tenancy in common.
ii. Conveyance by one joint tenant: the j.t. can convey his interest to a third party. Since he
doesn’t have unity of time or title with the original j.t., the j.t. is destroyed.
1. 2 people: 2 original j.t.s A & B. A conveys interest to C, B and C become tenants in
common.
2. 3 or more people: Conveyance by one to a stranger produces a t.i.c. as between
stranger and remaining j.t.s, but the j.t. continues as between the original members.
a. E.g. A, B & C hold Blackacre as j.t.s. A conveys his interest to X. The
conveyance by A severs the joint tenancy as between A and the other 2. X
holds an undivided 1/3 interest in the property as t.i.c. with B & C. B & C
holds a 2/3 interest, but as j.t.s with each other. If X dies, his interest goes
to his heirs or devisees. If B dies, his interest goes to C [can’t pass interest
via will].
iii. Conveyance between joint tenants: Same analysis as above. As to the interest conveyed, the
grantee becomes a t.i.c. As to the interest not conveyed, the j.t. survives.
iv. Conveyance to one’s self: Most of the time need to convey to a “straw man,” thus breaking
the joint tenancy, who then reconveys to the original joint tenant, leaving him with a tenancy
in common. Exception: One court has held the conveyance to oneself is good enough:
1. Riddle v. Harmon: Ms. Riddle was a joint tenant of a parcel of real estate with
Harmon, her husband. She wants to give the property to someone other than H so
executes a deed giving her an undivided ½ interest. & as will leaving it to someone
else & dies.
2. A joint tenancy may be terminated by the conveyance by one joint tenant of his
interest in the joint tenancy property to himself. This does not give j.t. any
greater power than he originally had via straw man.
3. NOTE: The other j.t. would not necessarily ever learn about the termination until
R’s death. This could violate his reliance interest & be an invitation to fraud  the
deed here was never recorded and did not meet any sort of formalities: it could have
been forged by a beneficiary.
v. If 2 joint tenants die in a common disaster & there’s no evidence of order of death, Uniform
Simultaneous Death Act splits the property 50-50.
vi. Wrongful acts, such as murder of one j.t. by another, may cause a severance.
vii. Mortgages
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1.
2.
c.
d.
If the mortgage is treated as a title, then granting the mortgage is a severance since it
is a conveyance. If the mortgage is defaulted on, the mortgagee can foreclose on the
undivided ½ interest of the mortgagor. The interest of the other party is not affected.
If the mortgage is treated as a lien, i.e. merely a security for repayment, it does not
act as a severance, at least in that the right of survivorship is not destroyed. BUT if
the mortgagor dies before the other tenant:
a. Some states hold the mortgage can be enforced against the decedent’s
interest  so treated like title theory: foreclosing mortgagee auctions off
the decedent’s ½ interest w/ survivor given right to pay off mortgage.
b. Others take view the mortgage is not effect if the mortgagor dies before the
other tenant.  Harms v. Sprague: P & brother B own property as joint
tenants & B mortgages out & dies. A mortgage on a joint tenant’s interest
does not survive the mortgagor since his interest seeks to exist when he
dies. P then is not successor of deceased but sole owner by virtue of
conveyance.
viii. Leases
1. Most courts hold a lease, which applies only to the lessor’s interest in the property, is
NOT a severance. See Swartzbaugh below.
2. If the lessor predeceases the other joint tenant, most courts hold that the lease is
invalid against the non-lessor joint tenant. Tenhet v. Boswell.
ix. Separation Agreements between husbands and wives can sever a joint tenancy & rights of
survivorship no longer apply. H & W become tenants in common.
Joint Tenancy Bank Accounts
i. A “true joint tenancy” bank account is one in which O intends to make a present gift to A of
½ the sum deposited in addition to survivorship rights to whole sum on deposit.
ii. A “payable on death” POD account is one in which O intends to make a gift to A only of
survivorship rights. This really acts like a will and in some states is not allowed since it is not
a testamentary instrument signed and witnessed in accordance with the Statute of Wills.
Recently Uniform Probate Code has authorized them.
iii. A “convenience” account is one in which O may intend A only to have power to draw on the
account to pay O’s bills and not have survivorship rights.
iv. For a bank the joint tenancy account has the least risk since it’s OK to give sum to one joint
tenant or survivor, i.e. least strings attached. However, it also welcomes litigation to
determine true intention of depositor. Burden of proof is on those challenging the surviving
joint tenant to prove account was “convenience,” etc. While all parties are alive, presumption
is the account belongs to the parties in proportion to their net contribution.
1. Donative intent is required: The surviving party is entitled to the account only where
a donative intent on the part of the depositor existed. If A puts B’s name on as a
convenience, so B could pay A’s bills, and A had no intent to make a gift to B either
during A’s lifetime or of the balance at A’s death, B has no survivorship rights.
Relations Among Concurrent Owners
i. Partition: Any tenant in common or joint tenant (but not a tenant by the entirety) can bring
an equitable action for partition if the parties can’t reach agreement among themselves. Court
will either divide the property or order it sold and the proceeds distributed. Each tenant
normally has an absolute right to partition.
1. Partition in kind: Each tenant is given a physical parcel of the property
proportional to his interest. A large farm, all of whose acreage is roughly
comparable, might be subdivided.
2. Partition by sale: If above not possible, or would be unfair to one party, the court
orders the property sold and the proceeds divided.
a. The preference is for partition rather than sale. Partition by sale only
approved if division in kind would be extremely unfair to one party. Where
the party resisting partition by sale lives on the property or conducts his
business there, courts are especially reluctant to evict.
b. Delfino v. Valencis: Partition sales are employed only where partition in
kind is unworkable. P wants to convert entire plot to residential
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development, D’s garbage business compels a partition by sale. Court says
opposite. D’s business situated so that partition in kind feasible & interests
of all the tenants in common, not just the economic gain of one or group,
should be the sole consideration. D would lose both home and livelihood.
c. NOTE: In most cases where parties disagree about type of partition, courts
end up selling since it becomes fairer. Economic efficiency will be better
served in most instances by sale  here gain to D probably outweighed by
loss of ability to develop whole parcel. If D’s use really was more valuable,
in theory he should be able to be the highest bidder at the sale.
d. ALSO, if division would seriously depreciate the value of the share of each
cotenant, it might be better to sell the whole and split.
3. Agreement not to partition: Parties can agree they will not partition in the future,
but since partition is an equitable action, the court may disregard the agreement if it
is for an unreasonably long period of time or circumstances have changed.
4. EPSTEIN: Re: 2 methods:
a. Sale & use the trust model where all have interest in fund but no claim to a
specific asset. Maybe it will work, have problems with asymmetries 
subjective value = value to a given holder of an asset which cannot be
captured through market sale  great danger of sale, for prejudiced person
which subjective value.
b. Partition  respects subjective value of one side but can result in one
fellow being left with useless land. Neither of these solution make both
parties better off. Compensation as owelty = form of compensation you
can be required to pay in these situations if partition  try to make this a
Pareto improvement. Never know which of these is better presumption /
default rule. Today move toward sale because of change in view of land 
asset rather than homestead.
ii. Sharing the Benefits and Burdens of Co-ownership
1. Possession: each co-tenant has the right to occupy the entire premises, subject only
to a similar right in the other co-tenants. Also, he has no duty to account for the
value of his exclusive possession, i.e. calculate the reasonable rental value of his sole
possession & pay ½ to the other tenant. Nor is he liable for any profits he makes
from the use of the land. Otherwise the non-occupying co-owner could merely
refuse his right to possession and convert the status of the occupying tenant from coowner to rent-paying tenant.
2. Ouster: BUT if the occupying tenant refuses to permit the other tenant equal
occupancy, he must account to his co-tenant for the latter’s share of the fair rental
value. Here there is said to be an ouster of the tenant refused occupancy,
a. Ouster occurs only when the out-of-possession tenant physically attempts
to occupy and the occupying tenant refuses this access. Ouster does NOT
occur where the o-o-p tenant simply demands the occupying tenant pay rent
or vacate.
b. Spiller v. Mackereth: Absent an owner physically barring a cotenant from
entry upon the owned premises, the owner is not liable to the cotenant for
rent. Here M’s demand letter of vacation or ½ the rental value was not
enough because he was not demanding equal use/enjoyment of the
premises.
c. EPSTEIN: Mackereth was playing a threat game that creates a loss through
a transfer w/ a barn only being ½ used. Got along when had tenant because
someone else in possession  pro rata [share & share alike  everyone
at the average.] stakes in property in possession. Allocated 3rd party
benefits & losses 50-50. Gets around bilateral monopoly problem. If
one person had to manage property determine a fixed management fee
about equal to expenses and what an outside firm would charge  form of
owelty.
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3.
4.
5.
6.
i. When one guy goes in, pro rata not there anymore. Spiller
could simply become tenant & pay M half of rent  treat as
assignment to preserve pro rata. Difficult to manage as business
matter, for as tenant S wants rent as low as possible, M high.
Level of contract specificity is very high.
ii. With tax bill, make exclusive possessor pay it  possible
argument. S says come oust me, but if she had ½ the space she had
to use it would put her at a disadvantage. Threat position is to
lease half the premises but not very attractive. She could demand
partition or sale with latter being most advantageous. S might then
try to offer her money to go away.
d. Fiduciary Issue: Normally cotenants are not fiduciaries w/r/t one another.
Sometime, though, courts find a relationship of familial or confidential trust
that requires each to act as such w/r/t the other. Also occurs where one
cotenant buys his interest at a foreclosure sale OR there is a claim of
adverse possession by cotenant in exclusive possession  latter is not
easily achieved.
Leases Again: Swartzbaugh v. Sampson: The act of one joint tenant without
express or implied authority from, or consent of, his co-tenant cannot bind or
prejudicially affect the rights of that co-tenant; but, a lease to all of the joint property
by one joint tenant is not a nullity but rather is valid to the extent of his interest in the
joint property. The excluded joint tenant (Mrs. Swartzbaugh) cannot maintain
an action against a third party to cancel the lease where the third party is in
exclusive possession of the leased property.
a. Her remedies included:
i. partition,
ii. ouster [if she tries to enter and is barred entry she would get ½ the
rent],
iii. accounting
b. Epstein: Really an undue influence, lack of capacity case in background.
Lease normally gives possession to lessee and then they physically occupy
it. Here get removal of trees and erection of boxing pavilion. change of
use. Veto right more likely in a change of use, meaning default terms
don’t seem to fit very well. Doesn’t make sense that Mrs. S gets same use
as Sampson. Husband’s share rights increased  wealth transfer. When
husband dies, increase rent. Can’t preserve pro rata when radical use
change of premises. Partition would be difficult, while husband would get
pavilion, wife would want 50%. If arena area worth more, no owelty for
took entrepreneurial risk. Opinion right in not canceling leases but
unresponsive on issue of change of use.
Depletion: If tenant in possession takes away and sells mineral resources, he will be
liable to co-tenants or their share of the profits he has made.
Adverse Posssession: A has sole possession of property for statutory period. Unless
A has actively blocked B from taking joint possession, or has otherwise put B on
notice that he is repudiating B’s ½ interest, the requisite hostility as to B does not
exist.
a. A conveyance in fee simple will be held to represent the necessary
declaration of hostility.
Accounting for Benefits, Recovering Costs
a. Accounting is an equitable proceeding in which a cotenant who collects
from 3rd parties rents and other payments arising from the co-owned land
must account to co-tenants for amount received. Accounting is based on
receipts, not fair market value.
b. A cotenant paying more than his share of taxes, mortgage payments, and
other necessary carrying charges generally has a right to contribution
from the other co-tenants, at least up to the amount of the value of their
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e.
share, unless tenant paying taxes is in sole possession and realizes all
benefits, during accounting.
c. W/ necessary repairs & improvements, a cotenant making them has no
affirmative right of contribution from other cotenants in absence of an
agreement. This is the rule “by weight of authority and of reason.”
Necessary repairs might get deducted from rents received during an
accounting BUT the tenant paying for improvements is NEVER permitted
to recover. But if the rents he collects increase, he may collect the increase
up to the cost of improvements. This pays heed to the value of the
improvements and not their costs  the improver bears the full downside
risk.
iii. Epstein: Governing structure amongst cotenants an issue. 2 basic forms: 1) Simple form
small # of people where everyone has equal dignity (husband, wife)  flat sort of
arrangement. Use pro rata for allocation of expenses and revenues; 2) Industrial
organization: fear =moment # involved exceeds small # must introduce hierarchy. Need
complicated agreements for allocation of expenses and revenues. Usually follows structural
arrangement  asymmetrical system. Require a contract solution. Spiller shows you can get
problem situation even in a 2-party scenario  agency costs. Spiller  tradeoff, if follow
judicial solution avoid problems of valuation but lose right incentive structure for
reconfiguration of property. Pro-rata to non-pro-rata switch involves contractual
arrangements.
1. Swartzbaugh  is simple change by way of lease same thing as an irrevocable
change of use? NO Mrs. Could move to become a joint partner: form of ratification
& conversion back to pro rata. Each gets 50% of grove and boxing arena. W/
asymmetry incentives create more conflicts. Here she wants to cancel lease entirely
so her vision binds both. Usually fundamental changes in a business have to be
unanimously agreed to. 2 ways to partition here. One would do implicit transfer of
wealth. Could do 50-50, she gets walnut & he gets 40% walnut & 10% arena.
Difficulty is Delfino one  is grove unmanageable as a smaller isolated unit AND
worry about sale. OR take like amount of land & she’ll get all the revenues. 10%
held to each & 80% in joint tenancy. Hard to get court to do this. Business
planning is an essential part of property law  need limited partnership
arrangements.
Marital Interests
 English System = husband and wife have separate property with ownership given to the spouse
who acquires the property.
 Continental System = community property in which husband and wife are a marital partnership
and should share their acquests equally.  triumphs when spousal property is divided upon
divorce or at death, but not otherwise
i. The Common Law Marital Property System
1. During Marriage (Fiction that Husband & Wife Are One)
a. Property relationship of wife to husband used to be one of dependency 
both were one but that one was the husband. All personal property &
earnings became the husband’s as well as lands  jure uxoris, alienable by
husband and reachable by his creditors.
b. Married Women’s Property Acts gave a married woman control over
her property & earnings, if not full equality. In some states this has
abolished the tenancy by the entirety.
c. NOTE: A husband cannot contract with a wife for services [think Morone
from contracts]
2. Rights of Creditors
a. Minority View: Allow the creditor to attach the debtor’s interest in the
entirety. If the debtor is the surviving spouse, the creditor has a lien on the
entire estate. But if the debtor dies first while the parties are still married,
the creditor’s lien is probably extinguished. In NY creditor steps into
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3.
debtor’s shoes and a tenancy in common is created. What happends then
depends on who dies first, H or W.
b. Majority View: A creditor may not attach or force a sale of the debtor’s
interest in the entirety while the other spouse is still alive. Sawada v. Endo:
this result follows from the indivisibility of tenancies by the entirety. Only
exception is in forfeiture proceedings against property used for the illegal
sale or distribution of drugs: US v. 1500 Lincoln Ave.
i. Epstein: Law of forfeiture  can wife sever her stuff from his
under a criminal action? Mixed reaction. Don’t want an innocent
party to have their property forfeited. Prob: issue of credibility of
innocence and costly case-by-case determination v. potentially
costly extreme rule.
Epstein: Marriage is a deal; a very complex transaction. A contract at barter.
Marriages that work  don’t know what their legal principles of operation turn out
to be really.
a. When things fall apart you worry about legal relationships. Sawada 
marriage couple vis-à-vis the external world. Tenancies by the entirety
influences whether ½ of estate can go to satisfy tort creditor. Epstein – rule
that severs for protection of 3rd person (wife here). Rules out partition and
makes life of who wants freedom as miserable as possible.
b. Pro rata & non pro rata again in marriage situation. Prenuptuals as
non pro rata arrangement. When young always arranged by parents.
Business side can overwhelm sentimental side and reason why wealth
marries wealth. Prenup normal in 2nd marriages, otherwise have wealth
transfer. Need to take into account future inheritance of kids on both sides.
c. Norm in marriage is one of relative reciprocity. Non pro rata
arrangements tend to drive divorce. Greater trust, more asymmetrical the
roles.
d. Divorce – need property rules that talk about split. Ideal rule is contract.
How should intangile property be divided between spouses (like degree or
singing coaching, etc.) After divorce want situation where one guy expends
capital at advantage of other, want for rectification at end. “I Gave Him the
Best Years of my Life.” NY recognizes  confer celebrity.
i. Most courts find no reimbursement for a professional degree [In re
Marriage of Graham], but some follow a refurbishment theory for
spouse’s contribution. Mahoney v. Mahoney.
e. Death – financial obligations may linger on. In olden times a widow may
be free to marry but had to honor lingering support. Cash & realty  wife
given an allowance & dowry  any property seized as a freehold &
inheritable estate then wife gets 1/3 of each parcel for natural rights. She
could attach the dowry on a purchase and became a clog on alienation and
joint interest in the property. Husband could beat dowry by putting money
in trust.
i. New Forced Share Rules  look at husband’s estate & she gets
X % unless she wants a will. Usually not a problem because estate
usually goes to wife. Issue w/ mistress involved.
f. Common law does not treat marriage as an entity. Can only pool by
agreement. So when separate each gets own unless pool. Community
property  any assets acquired during marriage part of a partnership.
After 1970 both made equal partners. Difficulty  assets acquired
prior commingled with those during marriage, must figure what’s
separate & what’s community. Mobile issue  say move to different states
with different regimes. Quasi-community property.
g. Where pro rata works it makes life very simple. Where it is not & have
high specialization need greater contractualization. Don’t be deceived by
affection.
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LEASEHOLDS: THE LAW OF LANDLORD AND TENANT
 Epstein: Why create them at all? Financing is a subordinate concern. Use pattern is important 
people are more mobile, so terms of years are of major importance. Important in multiple properties [13
apartments & 1 elevator] where there’s a public good. With no landlord would have either 13 elevators or
others inefficiencies. Hallways common too  like a highway. Pro rata problem all over again. Need
incentive structures to have people live on high floors. Common elements provided by landlord, tax to do
it. Think of leases as many-one problem  2 party relationship but multiple tenants.
 First ask why does lease survive in way future interests over life estates does not? Must be some
productive gain. But what? Lease has to end and must sort out what tenant takes and what he leaves 
issues of waste that need costly policing. Socially, what if improvement on property harms a third party.
Landlord or tenant liable? Freehold/lease affinity  interest payment on a mortgage looks like a lease
payment. Shortage or longage of capital is not decisive feature.
o Radical disjunction between utilities of ownership amongst successive periods. Try to find
way to get rid of property in periods of low utility and keep it in periods of high utility & find
someone’s whose needs are the opposite. Need right set of remedies  continual right to renew
lease (rent control) is like a fee simple but compels L leaving a property vacant.
o Many-one relationships. Landlord like a buffalo  can be hunted to extinction. Systematic
compulsion to overuse. Strong leases protect other tenants  help the good and hurt the bad, so
get good tenants. Public housing keeps bad apples in. L has comparative advantage.
VI.
Tradition, Tension, and Change in Landlord-Tenant Law
a. The Leasehold Estates
i. The Term of Years = an estate that lasts for some fixed period of time or for a period
computable by a formula that results in fixing calendar dates for beginning and ending,
once the term is created or becomes possessory.
1. While no limit on # of years at common law some US statutes limit
2. Early termination can take place upon the happening of some event or condition.
3. No notice of termination is necessary since duration is fixed.
ii. The Periodic Tenancy = lease for a period of some fixed duration that continues for
succeeding periods until either the landlord or tenant gives notice of termination. E.g.:
“to A from month to month” or “year to year.” If notice is not given the period is
automatically extended for another period.
1. Under common law ½ year notice is required to terminate a year-to-year
tenancy. If term is less than a year, notice must be given equal to the length of the
period, but not to exceed six months
2. Notice must terminate tenancy on final day of the period, not in the middle.
3. Death of landlord or tenant has no effect on duration of a term of years or periodic
tenancy.
4. A lease with no stated duration but that only provides for a monthly rent makes
the tenancy a month-to-month periodic one.
 Epstein: Why rule of renewal say month from first day of month? Housing
market dead in some periods, alive in other. Where things turn over on first of
month, if found out in middle of month little time to find new place  counter
form of strategic behavior.
iii. The Tenancy at Will = tenancy of no fixed period that endures so long as both landlord and
tenant desire. No prior notice is required. If a lease provides it can be terminated by one
party, it is necessarily at the will of the other as well if a tenancy at will has been created.
Such a unilateral power, however, can also be grafted upon the other 2 tenancies.
1. Also, tenancy is analyzed by what it would be if the right of termination were not
present. If it would otherwise be an estate for years, it becomes determinable estate
for years, if periodic estate, determinable periodic estate,
2. Garner v. Gerrish: A lease which grants the tenant the right to terminate the
agreement at a date of his choice creates a determinable life tenancy on behalf of the
tenant. The old common law notion that “when the lease is made to have and to hold
at the will of the lessee, this must also be at the will of the lessor” is an antiquated
notion with its origins in livery of seisin.
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a.
b.
Epstein: transaction is like a gift because of continual years of cheap rent.
Mr. Donovan never tried to repudiate. D’s executor wants to upset lease to
get more $$ for property. If he doesn’t sue the tenant, he’ll be sued because
he’s not following duty to maximize. With this pattern definitely think
gifts. A bear promise to make a gift is usually not enforceable. Court treats
as one transaction.
o Doctrine of Mutuality: test of fairness  I will not be bound unless
you are bound: Coke likes this. Question of mutuality: is it a strong
notion? Default rule or mandatory term? Court says intervention not
necessary  nothing wrong between original parties, simply a
completed gift. Freedom of contract solution  mutuality has lost its
home.
3. L leasing to T for as many years as L desires is a determinable tenancy at will.
4. “to T for the duration of the war” is a term of years, for the end of the war is a
definite event that will eventually happen.
5. Philpot v. Field: “to T for a term of 20 years and so long thereafter as T used the
premises for a particular purpose” is not a tenancy at will since there is demonstrated
intent to create a perpetual right to lease the land.
iv. The Tenancy at Sufferance: Holdovers = when a tenant remains in possession (holds over)
after termination of the tenancy. Landlord can then move 1) for eviction (plus damages) or )
consent (express or implied) to creation of a new tenancy.
1. Crechale & Polles, Inc. v. Smith: Once a landlord elects to treat a tenant as a
trespasser and refuses to extend the lease on a month-to-month basis, but fails to
pursue his remedy of ejecting the tenant, and accepts monthly checks for rent due,
he in effect agrees to an extension of the lease on a month-to-month basis. Normally
when a tenant holds over, the landlord has the option of treating him as a trespasser
or as a tenant for another year. L worried about being able to find a buyer. Having
claimed in a letter S was a trespasser, C should not later have accepted a monthly
check for rent due.
a. Epstein: If periodic tenancy there is no holdover. Underlying lease must
have a fixed termination date (term of years). One would want to contract
about holdover: double or triple the rent, change the locks [can cause
physical confrontation], remove furniture at their expense. Take double
month’s rent as security deposit. Want breach as something planned-for.
2. Holding over thus gives rise to a periodic tenancy measured by the way rent is
computed w/ maximum length limited to one year. Usually subject to same terms
and conditions as original lease.
3. There are a number of statutory responses to this, resulting in conversion to tenancy
at will w/ liability for reasonable value of use and occupation (even if less than rent)
& double-rent, which could have been used in Crechale if landlord had called for this
and stuck to it.
4. Damages = fair rental value of leased premises + any special damages. Rent
reserved in lease usually a good indication of this fair rental value.
5. An incoming tenant also has right to evict a holdover tenant and recover damages.
The Lease
i. Conveyance v. contract: A lease is both a conveyance and a contract. It transfers possessory
interest making it a conveyance that transfers property rights AND it contains a number of
contractual promises, such as agreement to pay rent. Chattles Real. Today we’ve moved
from lease-as-conveyance to favor of contractual view.
ii. Statute of Frauds: Leases for more than one year must be in writing.
iii. Form leases and question of “bargaining power”: A lease contemplates a continuing
relationship between landlord and tenant. The use of form leases, however, raises question
about unequal bargaining power and the take-it-or-leave-it problem. Posner contends the real
problem is monopoly power, not form leases, since the form is just a way to avoid high costs
that assumes the absence of competition. A statutory lease as a response can itself fall victim
to landlords political power, creating “landlord’s leases.”
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c.
d.
Discrimination w/r/t Leases [Epstein]
i. Common law view on anti-discrimination provisions:
1. Anyone could deal with whomever they wanted, for good or bad reason.
2. Exception came in situation of monopoly power. Do something to counter
singleness of supply & exercise of arbitrary power in such situations. Monopolist in
private sector like a sovereign.
3. What counts as discrimination?
a. If charge 2 people different rates, have you discriminated? If 2 are similarly
situated then yes. Econ  if discriminated, rate differences might be
justified if cost differences supply them.  demand-driven that is not cost
justified is bad discrimination.
ii. Anti-discrimination laws are different  say large number of circumstances in which
discrimination is irrational or bigoted, etc. What fall on the list? Race? Sex? Age came
later. Disability. Last 2 difficult. Sexual preference.
iii. What about dual motive cases? One that’s regarded as rational and one which statute regards
as prohibitive. Can you plead cost justification that would have gotten you out of old
monopoly rule? Maybe  look to reasonable accommodation  look for an undue hardship
in especially disability situation.
iv. Housing discrimination:
1. Discrimination pretty unimportant
2. Race question extensive & litigated  less important in day to day behavior than
was 30 years ago.
3. Boom area is disability. Adds 10% to cost of project. Lots of litigation here because
others did not tend to add $$.
Delivery of Possession
i. Hannan v. Dusch
1. A landlord, who without any express covenant as to delivery of possession leases
property to a tenant, is not required under the law to oust trespassers and wrongdoers
so as to have it open for entry by the tenant at the beginning of the term.
2. There is an implied covenant on the part of the landlord to ensure legal right of
possession.
3. American Rule: [applicable] a landlord does no impliedly covenant against the
wrongful acts of others, and is not responsible for the tortuous acts of 3 rd parties
unless he expressly contracts so. Where a new tenant fails to obtain possession of
rented premises solely because a former tenant wrongfully holds over, his remedy is
against the former tenant and not against the landlord. Rationale: otherwise would
prohibit landlord from leasing the premises while in the possession of a tenant whose
term is about to expire  both have equal knowledge. Also makes landlord liable
for tort of a 3rd person. Remedy: A tenant may sue to recover possession & damages
from the person wrongfully in possession.
4. English Rule: in the absence of express provisions to the contrary, there is in every
lease an implied covenant by the landlord that the premises will be open to entry by
the tenant at the time fixed by the lease for the beginning of the term. Rationale:
landlord in much better position to know whether a prior tenant will hold over, so
place burden on him  otherwise like new tenant knowingly contracting for a
lawsuit. Remedy: Tenant can terminate the lease & sue landlord for damages; or, if
3rd party is in possession of only part of the premises, take possession of the
remainder with a proportionate abatement in rent & damages.
5. H should have brought an action for unlawful entry or unlawful detainer against the
former tenant. Otherwise landlord held responsible for a tort in which he has not
participated.
ii. There is still a split between the American & English rule.
iii. Landlocked parcel: T leases large piece of land for hunting and trapping only to find there is
no public access to the land. “One of the primary obligations of a lessor to his lessee is to
deliver the thing leased. Furthermore, in Louisiana a lessor, in the absence of a stipulation to
the contrary, is required to place his lessee into actual possession of the leased premises.
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e.
[English Rule] … In the case sub judice neither Moore's petition nor the Board's exception
indicates that the parties stipulated any exception to the delivery of actual possession.
Therefore it is clear that the Board breached its obligation to place Moore in actual possession
of the leased premises. … Lease is a contract by which one party gives to another the
enjoyment of a thing for consideration. In view of the fact that possession of the thing leased
is the very object of a contract of lease, it is reasonable to expect the price the lessee paid for
possession should be reduced or entirely refunded if possession of the leased premises fails …
whether the lessor is also liable for damages must be determined in light of other Civil Code
articles and the circumstances of each case. Moore v. Cameron Parish School Bd.
iv. Overlapping leases: The lessors had previously leased the same property to another party for
the same term as was provided in the lease, but this party did not possess or occupy the space.
“A tenant who enters into a lease with full knowledge of the facts and is in full undisturbed
possession of the premises at the time an action for unpaid rent is instituted and prosecuted
may not assert want of title to the premises on the part of his landlord as a defense -- whether
the question of title is concerned with lack of the type of titular interest as would be
represented in the execution and delivery of a prior lease for the same term on the same
premises or otherwise. It follows, therefore, that the lessors were entitled to recover the
unpaid rent and the lessees were not entitled to recover the rental payments previously made.”
Campbell v. Henshey.
v. Construction delay w/ excusal clause: T leases building from L that is under construction w/
possession to be delivered on a specific date. 8 months later it’s not ready & T sues to rescind
lease and recover advance rent. Lease contains a clause excusing L from liability for failure
to deliver possession if building is still under construction. Possible approaches:
1. Fox Paper, Ltd. V. Schwarzman: “Interpretation of a lease is governed by the
same rules as are applicable to contracts generally, and, where the intent of the
parties is unambiguously set forth in a written agreement, the court will concern
itself with the parties' intent only insofar as it may be discerned from the four
corners of the document. Moreover, the proper aim of the court, which may not
rewrite the contract, is to arrive at a construction which will give meaning to all of
the language employed by the parties. The parties expressed their intent that delay in
completion of the defendant's work would do more than simply abate the obligation
to pay rent. … the plaintiff "terminated" the lease for failure to fulfill an obligation
that had not yet arisen and that, because the defendant committed no breach, he is
entitled to dismissal of the complaint … plaintiff's purported termination of the lease,
tantamount to a refusal to take possession upon or after commencement of the term,
constituted a breach by it of the lease, thus entitling the defendant to summary
judgment on his counterclaims to the extent that the plaintiff is adjudged to be in
breach of the lease.”
2. Seabrook v. Commuter Hous. Co.: The clause in question was unconscionable 
“an expert cannot hide behind legal clauses of this kind when dealing with an
occasional lessee that has neither a knowledge of real estate law nor the advice of
legal counsel.”
3. Hartwig v. 6465 Realty Co: “Although a lease of an apartment in a building then
under construction provided that, if the landlord should be unable to give possession
on the commencement date of the lease, then the lease should remain effective and
the payment of rent should be postponed until possession was delivered, it was
implicit that such postponement should be only for a reasonable time. In this
case, the building was untenantable until the certificate of occupancy was finally
issued. By that time, over eight months had elapsed since the date for occupancy
fixed in the lease and one fifth of the demised term had expired. The landlord's bald
conclusory assertions do not prove that there were factors beyond his control. The
tenant was properly granted summary judgment for $ 1,030, which he had paid in
advance as a month's rent and security.”
Subleases and Assignments
i. Unless the parties agree otherwise, either may transfer his interest. A landlord can transfer his
reversion and the tenant may either assign or sublease his right to occupy.
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ii. Privity of Estate: An assignment creates a new landlord-tenant relationship. The assignee
and the original landlord are now in privity of estate. If L assigns to L1, L1 and T are now
landlord and tenant and in privity of estate. The same would happen with T.
1. IMPORTANCE: The assignee obtains the benefit and bears the burden of any
covenant running with the land.
a. E.g. L & T make a lease, in which T promises to pay $200 per month and L
promises to keep the place in repair. T assigns to T1, L assigns to L1. Both
the promise to pay rent and the promise to make repairs run with the land,
L1 may sue T1 if he doesn’t pay the rent, and T1 and sue L1 if he doesn’t
make repairs.
2. A SUBLEASE does NOT establish privity of estate between sublessee and lessor.
So the sublessee is NOT liable for covenants. L cannot sue S for the rent, but T can
sue S.
iii. Privity of Contract: This privity can serve as the basis of a lawsuit where privity of estate is
absent. So if S made a separate contract with L to pay $150 rent each month, L could then
sue S.
iv. Original Parties to a lease are in both privities. If one of them assigns his interest, the
privity of estate between them is ended, but NOT the privity of contract. So a party to the
original lease will NOT normally be able to escape liability by assigning his interest.
v. Sublease v. Assignment: Ernst v. Conditt
1. E leased a tract of land to Frank Rogers for 1 year and 7 days with no right to assign
or sublet without approval of the lessors. Rogers then sold his business to C who
wanted a two year lease. Both went to E’s home and extended and amended the
existing lease to 2 years and “sublet” the premises to C. The document stated Rogers
remained personally liable under the terms of the extended lease. At the end of the
lease term E sued C for past-due rent and removal of improvements constructed on
the property. TC held the document constituted an assignment, not a sublease, so C,
not Rogers, was liable.
2. Common Law:
a. If transfer is a sublease  no privity of estate exists between E and C, for a
sublease is a transaction whereby a tenant grants an interest in the
leased premises less than his own (even by one day!), or reserves to
himself a reversionary interest in the term [like the landlord]; i.e.
transfers his interest for a length of time less than the remainder of the lease
term. R would be liable.
b. If transfer is an assignment  privity does exist, for an assignment
conveys the whole term of the lease, leaving no interest nor
reversionary interest in the grantor or assignor. C would be directly
liable here.
c. NOTE: Most courts hold a right of re-entry by the lessee is not a true
reversion, while a minority find it creates a sublease.
3. Modern Rule: The intention of the parties governs in construing deeds, leases, etc.,
not the presence or absence of a reversion.
4. Common Law and Modern Rule point to assignment, not sublease. Rogers did not
retain any interest in the lease & did not reserve the right of re-entry in the event of a
breach of any of the covenants in the lease [which would have probably created a
sublease: substantial minority view], even if he did remain liable. C had right to
possession for entire term of lease, including right to remove improvements. Writing
“sublet” is not conclusive.
vi. Can have partial assignments  transfer of interest in some physical part of the premises.
vii. Premature Termination:
1. If landlord exercises a power to forfeit the primary lease because of some breach by
the original tenant, then the landlord is entitled to possession as against sublessees
and assignees.
2. If original tenant merely gives up the primary lease voluntarily, i.e. “surrenders” it,
the rights of sublessees and assignees remain intact: they are in privity of estate.
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viii. Conflicts with Ernst: Privity of Estate & Privity of Contract
1. L leases to T for 3 years. 1 year later T “subleases & assigns” to T1 “for period one
year from date.” Neither T not T1 pay rent to L. Since a sublease, T would be
directly liable to L, not T1. If instrument of transfer said T1 had “agreed to pay the
rents” reserved in the head lease, this does not relieve T of his liability on his
promises. BUT, it does give him direct remedy against T1 on the occasion of a
failure to perform, even if T transfers interest to someone else.
2. L leases to T for 3 years at set monthly rent paid in advance of first of each month &
no subletting or assigning without permission of L. 6 months later T, with L’s
permission, transfers to T1 for balance of term, i.e. assignment. T1 pays for a while
and then defaults. L sues T for rent due. Possibilities:
a. South Bay Center v. Butler: The undisputed lease itself provided that an
assignment would not be deemed a release of the tenants from their
obligations under the lease. Even without that express provision, the
original tenants would have remained liable on the covenants following the
assignment because of the privity of contract existing by virtue of the lease
An assignment of a lease by a tenant does not destroy the privity of
contract which results from the making of the lease agreement. Therefore,
it has been held, a tenant who assigns his lease remains liable,
nevertheless, on his express covenants in the lease after the assignment even
though the landlord consents to the assignment; accepts rent from the
assignee; enters into the lease with the understanding that the tenant will
immediately thereafter assign the lease; and, even though the assignee
expressly assumes the obligations of the assigned lease.
b. Buck v J.M. McEntee & Sons: In an assignment by the lessee of a lease
there still remains privity of contract between the lessor and the original
lessee, and there is also privity of estate between the lessor and assignee,
enabling the lessor to recover from either the original lessee or assignee
upon the original lessee's covenant to pay rent. … A lessee, who, by
the express covenants of the lease, has obligated himself to pay rental, is not
relieved of that obligation by an assignment of the lease, even though the
lessor consents to the assignment, in the absence of an agreement by the
lessor to accept the assignee and release the lessee.
ix. Epstein: Assignment and Sublease Issue
1. See how anti-discrimination law comes into play. Say T wants to make assignment
but is racist, will landlord be held responsible? Is T governed by fair housing law?
Yes  vicarious liability or insertion of proper terms in head lease.
2. Assignment = assign rights from one person to another. Discharge of obligation to
original assignee.
3. More costly for someone who hold a right to monitor affairs of 2 than 1 individuals.
With 2 will say it was other person’s fault. W/ 1 this element drops out of equation.
4. Cannot make assignments that impose a surcharge on the innocent debtor by splitting
a cause of action.
5. Sublease dominates because S has the full responsibility for the entire premise.
Although sublease minimizes costs on landlord, monitoring costs will go up.
Landlord is in privity of contract & estate with tenant  but if probability of
something going wrong is issue, subtenant might not be as careful as tenant. For L
sublease is good but does create additional problems.
6. Any alteration bringing in a 3rd person is a drag on the L-T relation, so clause saying
no subletting or none w/o landlord’s permission. But if L doesn’t allow upon
renegotiation good T could walk away.
7. Virtue of assignment  original tenant now guarantor  surety. Subrogation
 I pay off your obligation to X.
8. Interpretive question: If look at 4-corners who are we to question. But functionalist
approach strengthens case for deviation.
x. Agreements by the Parties About Transfer: Kendall v. Ernest Pestana, Inc.
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1.
Absent contractual language to the contrary in a commercial lease, a lessor may
not arbitrarily withhold consent to an assignment. The basic social policy in this
area is that interests in property, including those of a leasehold nature, should be
freely alienable, i.e. restrictions on alienability are to be strictly construed against the
lessor. [Doesn’t matter if assignment or sublease.]
2. The lessor does have a reversionary interest so he is entitled to assurance that the
lessee will not sublet to an irresponsible person who will commit waste, in addition
to other reasonable rationales for denying permission to sublet.
3. Absent some sort of reasonable basis for denial of permission, however, it seems that
public policy favoring free alienability should override whatever minor interest a
lessor might have in arbitrarily denying permission to sublet. Can’t withhold
consent simply because property values had increased and the lease was now
below-market.
4. Remember, this is a limited rule, for the lessor can contract into the lease the power
to arbitrarily veto a sublease [termination and recapture clause] and does not apply to
residential leases.
5. Residential real property is said to involve different public policies that commercial
real property estates  could create plethora of litigation.
6. Some states allow arbitrary refusal but, if tenant then abandons premises, the
landlord is under a duty to mitigate damages.
7. Epstein: $$ issue. T will want more from A in a lump sum. Underlying property
starts to shift in value. If have to get cooperation of landlord, L is going to want this
new $$. Sometimes property goes down in value. A isn’t going to want to pay
higher rent.
a. Moving from precarious to non-precarious tenant. But with sublet can’t get
to the guy, so would want assignment. L said if want assignment, give me
more money. Advantage of tenant getting $$ though is avoid bilateral
holdout problem [L is the “dog in the manger”] otherwise negotiation
by A with L & T. Create monopoly situation. Non-discrimination
provision as antidote to holdout problem. If his risk is no greater than it
was before then no problem and allocate surplus to former tenant. If L
wanted some of this surplus he could raise original rent to anticipate this.
b. Nothing gained by keeping middleman in transaction  A is better
arrangement
c. Never assume elimination of single risk with eliminate all risks. Utility of
landlord at least as great or greater than it was before transaction took place.
Strict Pareto superiority.
d. While lack of arbitrary powers seems Pareto superior we get them anyway.
Model assumes only one value at work. Only way to control holdout
problem is to create externality or boundary problem. L wants rent, T
involved in high risk ventures, so could make out well or T could go
bankrupt  concern about volatility of T behavior because gains nothing
from upside and loses everything from downside  net worth not
necessarily a perfect proxy to determine financial stability.
e. Trade off 2 factors  no dominant solution  in some cases holdout risk
big, in others small. Court doesn’t see point is in equilibrium. Regulation
will be a failure.
f. What happen if ex ante know there’s a potential holdout problem.
g. Long-term lease is a financing arrangement. If interest rates change wildly,
so will value of stream. Could have renegotiation if change of possession
or control.
xi. Reasonableness & Economic Protection: L refuses consent to T to assign lease to T1
because L is in negotiations over a new lease with T1, a tenant in another of L’s buildings. L
wants to avoid losing T1 as a tenant. Krieger v. Helmsley-Spear, Inc.: “The ground asserted
for withholding consent was insufficient in law. The clause is for the protection of the
landlord in its ownership and operation of the particular property -- not for its general
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f.
economic protection.” Variation: T1 is not a current tenant but wants to set up a business
that will compete with L’s in same area. Pay ‘N Pak Stores, Inc. v. Superior Ct: “the
landlord here did not necessarily act unreasonably in refusing to consent to a sublease to a
competitor. If his behavior was reasonable, than he was acting within his express powers
under the lease, (1) to withhold consent reasonably, and (2) to restrict the premises to the
existing use. It is not necessary to imply a covenant against competition in this lease in order
to decide that Pay 'N Pak could refuse its consent to these subleases. It is necessary only to
measure its express powers under the lease, an issue turning on the factual question of
reasonableness under the circumstances. That issue is for the trier of fact.”
xii. Religious Objections in a Commercial Environment: The general rule is that in the absence
of an express restriction by contract or statute, a tenant has an unrestricted right to assign or
sublet as he wills. Provisions restricting assignment or subletting are restraints which are
not viewed with favor by the courts. … If, however, the lease contains an express covenant
restricting assignment or subletting without the landlord's consent, the landlord may
arbitrarily refuse his consent for any reason, or indeed for no reason. To the extent that
rejection of a proposed subtenancy is based upon the supposed needs or dislikes of the
landlord, a policy of judicial disapproval of such subjective criteria is discernible.
1. Differences of creed may be taken into account when the property is owned by a
religious institution and is used "for religious purposes". With this exception there
can be no quarrel. But the building involved in this case is not a religious edifice - it is a commercial office building, some floors of which are used by an educational
institution with religious affiliation, for pedagogic, administrative and fund-raising
activities and the rest by a diverse group of profit-making businesses and nonprofit
foundations. And the landlord is not a religious institution -- it is a foundation
holding title to real estate for the benefit of the university, whose charter describes its
activities as "exclusively for educational purposes", with "persons of every religious
denomination equally eligible to offices and appointments." … I therefore hold that
when a religious or religiously affiliated or educational institution operates a
commercial enterprise or owns commercial property, it is to be held to the
established standards of commercial responsibility, its acts and conduct being
vested with no greater and no lesser sanctity than those of any other owner. If this
be so, then the contentions of the defendant as to the inappropriateness of Yeshiva
University and Planned Parenthood occupying space in the same commercial office
building are of little moment.
xiii. Formalism v. Intentionalism:
1. L and T have a lease that only prohibits assignment without consent. L wishes to
lease to T1 and refuses consent for T to do so, so T subleases with T1. L sues to
terminate head lease. Walgreen Arizona Drug Co. v. Plaza Center Corp.:
Formalism is the way to go, even if it might seem a sublease short one day of
being an assignment has the intention of being an assignment. “What Tower
Plaza is contending in reality is that in hindsight it should have prohibited or
controlled subleases as well as assignments. This, of course, is not what was agreed
upon. Under Arizona law, the arrangement between Walgreen and Fed-Mart was a
sublease, which is fully permitted under the terms of the original lease. The trial
court properly determined that the Walgreen/Fed-Mart transaction did not constitute
a breach of the lease.”
2. L lease to T for five years at a monthly rent and covenants not to sublet or assign
without L’s permission. T, with L’s permission, assigns to T1 (who does not
expressly assume obligations of the lease). T1 assigns to T2 w/o L’s permission. T2
defaults in rent & L sues T1 for amount due. Rule in Dumpor’s Case: Strict
application of the rule would terminate L’s prohibition against assignment
when L consented the first assignment unless he specifically reserved the right
to prohibit future assignments. Most courts do not apply this to subleases. If T1
had expressly assumed the obligations of the lease, a minority would have found for
L L can himself contract around this.
The Tenant Who Defaults
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Joseph Ferraro

What happens in situations where the tenant in possession fails to pay rent, fails to observe some
other lease obligation or holds over & landlord wishes to recover possession.
i. The Tenant in Possession
1. Berg v. Wiley
a. W, the lessor of commercial property to B for the purposes of operating a
restaurant thereon, locked B out of the premises when B delayed making
certain remodeling changes to meet health code requirements [failed to
procure written permission from W for remodeling and operated restaurant
in an unlawful and imprudent manner, both in violation of clauses in the
lease.].
b. The evidence first supports the jury’s finding that B did not abandon or
surrender the premises, and lockout was thus not justified on the ground
of abandonment and surrender.
c. As to self-help procedures employed by landlords to remove defaulting
tenants, the common-law rule was to permit such removal if 1) the
landlord is legally entitled to possession and 2) the landlord’s means of
reentry are peaceable. [Flipside is that tenant may recover damages for
wrongful conviction when the opposite is so.] W contended that only
actual or threatened violence constitutes a non-peaceable entry. This is not
correct.
d. First the reentry was not accomplished in a peaceable manner. Second,
there is a long-applied public policy to discourage landlords from taking
the law into their own hands by barring self-help to dispossess a breaching
tenant.
e. A landlord may not remove a breaching or defaulting tenant’s possession or
bar the tenant’s access to the leasehold without resorting to judicial
remedies. W’s failure to resort to a summary procedure rendered the
lockout wrongful as a matter of law.
2. Common-law rule still left open possibility of criminal prosecution.
3. While a flat prohibition against self-help is the trend, it is not the majority rule.
Some say you can contract into lease an agreement not to seek summary proceeding
and evict provided there is no breach of the peace. What constitutes reasonable or
permissible force, however, is open to strict interpretation.
4. While Berg involved a commercial lease, it can also apply equally to residential
leases, for loss of residence has a greater psychological impact, and in commercial
setting there might be more equal bargaining power.
5. Due Process can be a concern but has not arisen due to presence of a
proceeding. Only concern came with distraint (distress for rent) under which a
landlord could seize a defaulting tenant’s property found on the premises and retain
it until overdue rent was paid, all without a hearing.
6. Force of statute is even applicable in situations where subsidized housing is provided
for battered women in return for work, attendance at school, or taking part in
counseling sessions. YWCA could not give notice and change locks after several
women were unhappy with the way their case was being treated and refused to attend
session.
7. Epstein: L is not going to throw out T if rent-paying. If one to two days late, have a
breach of lease w/ strict forefeiture, L is not going to exercise. Then have to re-rent
property and reputational effects will keep new Ts away. Even if there are right to
exercise on at-will basis, people will still think long and hard before executing them
in this situation. Like employment contract at will and firing for being a minute late.
Can exercise but ramifications will come to haunt the person.
8. Summary Proceedings
a. YWCA above cited as a complaint the cost and inconvenience of resorting
to summary proceedings.
b. Before SP, expensive & lengthy ejectment process was only remedy for L.
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c.
SP is intended to be quick and efficient means by which to recover
possession after termination of tenancy. It requires only a few days notice
to T and range of issues is kept narrow. [TRO is available for even faster
process.] Sometimes habitability is an issue raised by tenant.
d. More often the defenses one can raise are restricted.
e. Sometimes Due Process issue arises.
f. SP can still be time-consuming & expensive, even if uncontested, with
delays cause for a variety of reasons including stay of eviction orders,
trials, failure of marshal to evict, etc. An inordinate amount of $$ is lost
through lengthy eviction process, which gets reflected in higher rents.
9. Epstein: Landlord in best position to deal with holdover tenant. Major & minor
breaches  contract issue
a. What remedy? In holdover situation one option is pro-ration of rent.
But this doesn’t meet expectation level of damages. Need storage &
alternative accommodations  2 day loss becomes 7 day loss. Problem
here. Is breach substantial enough so as to allow other fellow to walk or
small enough that he should still do business with other person? Huge
debate about which is better. Give big cannons to people.
ii. Tenant Who Abandons Possession
1. L can treat T’s abandonment as a an express or implied surrender and accept it,
thus terminating the lease. No further rent then becomes due.
a. L often just takes possession himself or lease to someone else
b. Securing the premises against vandalism is not surrender whereas making
alterations or removing T’s possessions is.
c. If lease makes T liable for any rent accruing after termination, or any
shortfalls, courts will often partially enforce. L will be entitled to difference
between agreed-to rents & sums received from re-letting, but also has duty
to mitigate [see below].
i. This is really just a way of measuring landlord’s damages. Most
courts award L the net value of the lease, i.e. the present value of
the amount by which rentals that would have been due during the
rest of the term exceed the rent that is (or could have been)
received from a substitute tenant. If agreed-upon rent is equal to
fair market value, L would get no damages
2. L can inform tenant he is attempting to re-let on the tenant’s behalf. Here there is
no termination of the original lease and the tenant will remain liable for 1) all rents
coming due if no tenant is found, assuming L searches w/ reasonable diligence, 2)
difference between rent paid by new tenant and rent reserved in original lease.
a. If there’s a duty to mitigate, then no notice is required or if lease provides
as such.
b. If reletting produces excess, Restatement says L should turn over the
surplus to T, but the few cases on the subject don’t let the tenant profit by
his breach.
c. If L plans to try to relet, he is almost always better off telling T that he
will do this for the latter’s account. In most states he is not liable to T
for any excess rent received & even where he is, he can probably
revoke the agency before signing for the higher rent. By acting on T’s
behalf, he reserves the right to recover from T in the future if the new
tenant defaults or pays less than expected in the original lease.
3. Right to Leave Vacant
a. Traditional view is that L has no duty to try to find a new tenant he does
not wish to accept. He can simply let the property stay vacant & recover
rent even if a perfectly suitable tenant requests the right to lease the
premises.
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g.
i. Rationale: Lease is a conveyance, not a contract  T has bought
the leasehold estate and L has no obligation to re-sell it for him.
Also don’t want to invite vandalism.
b. Duty to mitigate: L should attempt to find a suitable replacement tenant so
as to diminish economic waste & prevent damage.
i. Sommer v. Kridel: D vacated apartment before end of lease term.
Place burden of proof upon L to show he has used reasonable
diligence. This can include whether L offered or showed
apartment to any prospective tenants or put an ad in the paper.
Here L turned away a prospective tenant. BUT defaulting tenant
can still be responsible for cost of this search. This court applies
duty to residential but not necessarily commercial property.
ii. If landlord fails to mitigate, there is authority saying 1) he gets
no rent subsequent to abandonment & 2) he recovers difference
between agreed rents & amount of loss he could have reasonably
avoided. But some place this burden of proof on the abandoning
tenant.
iii. Epstein: L in apartments familiar with the market  in best
situation to mitigate. Say agricultural lease w/ 99 years of use.
Remaining obligations of L are slim to none. But with an
apartment L has many remaining obligations because will need to
relet in his own lifetime. L provides common services in the
building, repairs, heat, etc. L better off when tenant is present 
can inform if any problems, have normal wear and tear, might be
less if vacant though. W/ 100 tenants and 100 vacancies, might be
temptation to mothball. Should you receive money for services
never rendered if T never moves in? No. Reason for mitigating
contract rule (service rule).
4. Rent & Damages
a. If the tenant is in possession, the landlord may terminate the lease and
recover possession, regardless of wording of a forfeiture clause.
b. In some state, where created by statute, L can also recover damages =
difference (reduced to present value) between the rent reserved in the lease
for the unexpired term and the reasonable rental value of the premises for
that period where he contract provides for it or landlord has relet in
mitigation.  Doctrine of anticipatory breach. Absent such a statute, don’t
get this option.
i. If there’s abandonment, repudiation is clear-cut and anticipatory
breach will apply if jurisdiction extends that contract principle to
leases.
5. Security Deposits are in place to protect L if T defaults or damages premises, but
there’s a lot of room for abuse, so statutes have attacked by placing limits on amt.,
placing them in a trust or escrow account, giving T priority in obtaining deposit over
L’s creditors, L cannot commingle this money with other funds of his own, L must
pay interest on it, submit itemized list of deductions, etc.
a. Other times deemed “consideration” or “advance rent” or “liquidated
damages” [thought this is often regarded as unenforceable]
b. Rent Acceleration: all of rent for entire term is due and once and payable if
there’s a breach. Majority of courts accept but L can’t then occupy.
Duties, Rights & Remedies [Especially Regarding Condition of Leased Premises]
i. General moral hazard problem: Once a lease is entered into, L has an incentive to neglect
everyday repairs because cost is primarily borne by T, & T has incentive to neglect
maintenance, especially toward end of lease, because costs soon shift to L.
ii. Landlord’s Duties; Tenant’s Rights & Remedies
1. Quiet Enjoyment & Constructive Eviction: Reste Realty Corp v. Cooper
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a.
b.
c.
d.
e.
f.
g.
h.
P sued D to recover back rent. D rented basement and whenever it rained,
water ran off the driveway into D’s offices. D’s complaints were ignored.
Then D notified P of intent to vacate and did so.
Right of Quiet Enjoyment is implied in a lease and interfered with via 1) a
3rd party’s assertion of title superior to that of the L, used to evict T, 2) acts
of the landlord, or persons claiming under him, which interfere with T’s
possession or use of the premises. Today expanded to include beneficial
enjoyment.
Where this right is breached substantially by the landlord, the Doctrine of
Constructive Eviction is available as remedy for T. An act or omission be
the landlord which renders the premises substantially unsuitable for the
purpose for which they are leased, or seriously interferes with the
beneficial enjoyment of the premises, is a breach of the covenant of quiet
enjoyment and constitutes a constructive eviction of the tenant.
Duty to vacate: A tenant’s right to claim a constructive eviction will be
lost if he does not vacate the premises within a reasonable time after the
right comes into existence.
Vs. Actual Conviction: Actual if T’s possession of all or part of the
premises is literally taken from him. Constructive if his use or enjoyment
is substantially impaired.
Partial Eviction: If there is actual partial eviction, T is relieved of ALL
liability for rent notwithstanding continued occupation of the balance.
Restatement rejects this rule, i.e. can’t withhold all rent. If constructive
partial eviction, T not relieved of obligation to pay rent.
Damages = losses realized while in possession [business profits] & losses
resulting from higher rent for equivalent replacement premises. This is at
fair market value standard, i.e. the benefit of his bargain  extent to which
lease was worth more than other leases of similar (but habitable) property.
Illegal Lease: A court can find a lease an illegal, unenforceable contract
made in violation of statutory prohibitions if the code applied before the
lease was entered into. Minor technical violations do not render a lease
illegal, nor do those of which L had neither actual or constructive notice. T
is then T at sufferance and L is entitled to reasonable rental value of
premises given their condition. T has leverage  can withhold rent & still
stave off landlord’s inevitable action to evict for nonpayment.
Epstein
 Eviction  For non-payment of rent it’s up there but not highest. Could get rent in other ways. Tenant
destructive to property up there. Or if the tenant is a “bad egg.” Then landlord has to act like cop. L will
treat their misconduct like a constructive eviction.

If lease is short don’t play constructive eviction game – just go when it’s over. Sequence of performance is
important  discovery defects before signing the lease.
 But clause that if repairs aren’t successful you have an option to cancel.
 Treat this as a major breach justifying at least walking out & damages & higher rent at other location &
business interruption. Don’t need to use breach is a solely defensive posture  counterclaim. If L knows
you well it decreases likelihood of suit.
 L’s defense  T’s prior knowledge of the problem. But there was a promise to fix it here. But regardless
knowledge is a powerful defense. Then has lack of being a permanent condition defense. Ct says recurring
is good enough. AND L warrants to defects not only in demised premises but in other areas he controls,
like the driveway here. If problem is the guy upstairs, more complicated. If single instance T probably
responsible, his derelictions would have to be persistent.
 Say has other offices above. Must she give up all or keep half? To extent she’s innocent party probably
have option to treat as partial constructive eviction. But could leave and have L get another tenant for the
above floor. W/ remedies, give option to innocent party.
 Must she leave if landlord can rent for 50% where it’s 30% if she stays? Risk tenants take when they move
out is she must pay a portion if she loses. L then says blame T.
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2.
Implied Warranty of Habitability: Hilder v. St. Peter
a. In the rental of any residential dwelling unit an implied warranty exists in
the lease, whether oral or written, that the landlord will deliver over and
maintain, throughout the period of the tenancy, premises that are safe, clean
and fit for human habitation. It is implied for tenancies for a specific period
or at will and covers all latent and patent defects [some courts in dispute
about latter].
b. A tenant who enters into a lease with knowledge of any defect in the
essential facilities cannot be said to have assumed the risk, thereby losing
protection of the warranty.
c. A violation of the housing code constitutes prima facie evidence of a
breach.
d. The landlord is not liable for defects caused by the tenant.
e. Damages = recission, reformation or damages. Damages = difference
between value of dwelling as warranted and value as it exists in its
defective condition. Agreed-upon rent can be looked to as evidence of fair
market value. PLUS damages for T’s discomfort & annoyance arising from
breach.
f. Also have a right to withhold rent, i.e. refuse to pay part or all of the rent
until the defects are repaired. Burden and expense of bringing suit is then
on landlord. T must show L had notice of defect & it existed for time rent
was withheld. Once L corrects, T must pay rent when becomes due again.
i. Abatement: Three approaches to calculating reduction:
1. Rent reduced from what agreed upon to fair market
value of premises in defective condition;
2. Deduct difference between rental value as it would have
been if lease had been complied with and rental value in
condition it actually was;
3. Proportional Value Rule: Reduction in an amount equal
to the proportion of the rent which the fair rental value of
the premises in their actual condition bears to the fair
rental value they would have had had they been as
warranted. This is middle ground and enables T to keep
some of the benefits of his bargain yet prevents tenant
from living rent free.
g. When L is notified and fails to repair in reasonable amount of time, and T
repairs defects himself, T may deduct expense of repair from future rent,
even if in total they equal the full rental payment per month.
h. Can also get punitive damages if breach is willful and wanton or fraudulent
in nature.
i. T does NOT have to abandon residence as in constructive eviction 
consideration of the possible hardship of doing this.
j. NOTE: 1) a good handful of jurisdictions have yet to adopt the standard,
so constructive eviction is not dead, 2) it does not apply across the board to
all residential leases, 3) sometimes not extended to the commercial
situation.
k. E.g. L’s maintenance staff goes on strike and garbage piles up and stinks. L
has breach implied warranty and damages = difference between fair market
value (warranted) and value during the breach.
l. The warranty is not a guarantee over every amenity in a lease, only over
those materially affecting one’s health.
m. E.g. L offers a run-down house for rent at $100 a month. T finds a number
of defect and agrees w/ L to take place for only $50 a month. T takes
possession and subsequently fails to pay rent. T can still assert breach of
i.w.h. for public policy reasons. Remember Foisy v. Wyman.
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Epstein
 Don’t want habitability issue to shut down the market. L will revamp the building and open it to rich
tenants or raze the building.
 If leases are incomplete we set default terms in favor of the tenant. E.g. duty of repair shift that makes
sense in urban residential environment.
 Latent & patent defects  asymmetrical information issue. Tort liability issue move to liability for both
kinds of defects. But you can’t run a system in which no one is in compliance with the law.
 VT land control  distortions in market because restricted supply of land on which to live. Improve
quality of housing but reduce quantity and especially amount for the poor.
 Housing Codes. If every building below you’re shutting down market. So they just impose a gentle fine.
Doesn’t improve lot of tenant really.
3.
h.
Retaliatory Eviction: most states forbid retaliatory actions by statute or judicial
decision. They create a rebuttable presumption of retaliatory puposes if the landlord
seeks to terminate a tenancy, increase rent, or decrease services w/in some given
period after a good-faith complaint or other action by a tenant based on the
conditions of the premises. Burden is usually placed on landlord to show he has
given T reasonable opportunity to find other housing.
4. Landlord’s Tort Liability: Majority of jurisdictions neither impose strict liability
nor recognize a general duty of care on the part of landlords: hold to conventional
common law exceptions.
a. Landlord liable if he conceals a defect or should have known about the
danger even if he does not have actual knowledge of it. But there is no
duty of inspection. There is not liability for latent defects.
b. There is a duty to make common areas safe and take notice of strangers
c. Most courts hold there is no duty to install security measures and
protect against the criminal acts of a 3 rd person, but the tide is turning.
d. These are duties around which L cannot contract.
iii. Tenant’s Duties; Landlord’s Rights & Remedies
1. General duty not to commit waste  breached if T makes such a change as to
affect a vital and substantial portion of the premises; as would change its
characteristic appearance; the fundamental purpose of the erection; or the uses
contemplated, or a change of such nature as would affect the very realty itself,
extraordinary in scope & effect, or unusual in expenditure. Don’t unduly interfere
with value of landlord’s reversion.
a. Removal of fixtures: May T remove? Old test was one of intention, but
modern tendancy is to consider whether removal will damage L’s interest.
Can premises be restored to their normal condition?
2. Duty to repair existed at common law in which T would make such repairs as would
keep the buildings windtight and watertight, thus preserving property in same
condition as when he got it. Today this is L’s duty. If there’s an express promise,
courts sometimes enforce but other times don’t interpret as duty to repair ordinary
wear and tear.
3. If destruction, at common law still had duty to repair and reconstruct due to interest
in the land. If only had an interest in part of the land, there is no interest in the soil
so no duty  like contractual frustration today, so no duty.
Problem of Affordable Housing
i. Chicago Bd. of Realtors v. City of Chicago
1. True beneficiaries of housing-market regulations are not poor people but middle
class people. Here Ls are forbidden to charge interest on late payments of rent.
Those who own their own home get an advantage, as landlords convert rental
property (which is now less attractive) to owner property, thus increasing the supply
of owner housing and decreasing its price. Similarly, more affluent tenants benefit,
since they are more attractive to landlords because they are less likely to take
advantage of devices like rent strikes. The losers are poor tenants, newer tenants,
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i.
and landlords. Ls will reduce resources they devote to the quality of housing by
making provisions more costly and raising rents.
2. Why is statute constitutional? Police powers of state. Health & safety. Scrutinize
means to seek safety end. What level of scrutiny is appropriate? Rationality is
pretty much any justification, i.e. all you need is to find one person it benefits.
Posner & Easterbrook in constitutional schitzophrenia.
3. Ls have clauses saying refuse to repair but always have repair crews on hand. Why?
Want to refuse unreasonable requests. I oblige to repair everything get cost passed
on to Ts.
4. Why is Posner wrong on Coase? Why not a rent increase? Distribute charge for
derelict on all tenants. If inefficiency introduced, transfer payments doesn’t get rid
of it. Selection process gets cranked up and marginal tenants can’t get in.
5. Rent Control. Prices kept systematically below market level. On renewal,
automatic  need just cause to get person out, like persistent non-payment of rent or
destruction of property. Benefits sitting tenants. Public choice in action  protect
Chicago buyers and sellers. Number of available units go down. Supply remains
strangely misshapen. Could look at from community standard too. But get evasion
through subletting. Owner turns into a creditor. Neighborhood never renews itself.
W/o regulation, get people staying in neighborhood anyway  better to have mix.
6. If trying to make constitutional challenge in land use regulation, you lose.
Everything can be nullified by standard of scrutiny and review utilized.
7. Always 2 ways to think of reforms like rent control  ex ante and transitional
perspectives. Elimination brings question of what to do with elderly person who
can’t find housing. When find big losers get huge opposition to things going on. To
overcome 1) steamroll and don’t give a damn – let the old suffer, 2) play transition
game  instead of set date for abolishment, get increase in periods and then let be
free. Eases pain and allows adjustments on private side, 3) change jurisdictional
unit. Can’t reverse social experiments very easily  have to buy out of system: 4)
pay-off resistors.
8. Public housing: emerged in interwar years, depression screwed up land markets,
overcame constitutional objections & public use demand, prob. w/ exclusivity, public
use was taken as public as a whole. Large concentrations of people in tall buildings
run by government proved disastrous. Eviction policies went to hell, they get run
down. Today little effort for gov to get into landlord business  rather get involved
as lender to private developers. Vouchers-like. Also, no more high-rises, scatter
housing kept low to ground with no elevators mixed in with units commercially
viable. New model very successful. Must take hard line on eviction question.
Externalities are not pre-designated good or bad.
Epstein: How think about leases?
i. Start with owner & reason why dividing ownership with another. Both parties recognize may
want to transfer interest acquired to some other individual. How do rights & duties work?
Contract & state regulation  what works better? System essentially private. Everyone
comes in by consent. If make it difficult for tenant to get a sublease, he’s gonna demand
compensation through reduction of rent or adjustment of some collateral term. L is going to
ask: creating externality or holdout [bilateral monopoly] problem? E.g. consent clause
creates hold-out problems. Berg v. Wiley  # of difficulties w/ repossession by landlord,
some externality risks (peaceable v. non-peaceable  there state has appropriate role for
regulation). Doctrine of mitigation of damages. Why? Pros & Cons. All things held
constant, we don’t want a situation in which one party is allowed to spend all sorts of $$ and
will turn out to be of no advantage to the other side. Don’t spend that money & we’ll
guarantee you profit you would have had if the $$ had been spent. Important element in any
kind of system design. MacClaine case  forced substitutes can be difficult. Have a clause:
“In event X decides to terminate, X agrees to forefeit the deposit & liquidated damages for 2
months.”
1. Case 1: all units fungible one to the other
2. Case 2: some units more desirable than another.
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ii. In 1 effect of breach should be to put T’s unit at bottom of queue for L. In 2 if new tenant
wants the unit abandoned. Not clear substitute T would act as mitigation in most instances.
TRANSFERS OF LAND
VII.
The Land Transaction
a. Introduction
i. State v. Buyers Service Co.: The practice of law includes conveyancing, the preparation of
legal instruments of all kinds, and, in general, all advice to clients, and all action for them in
matters connected with the law. Preparation of instruments held as unauthorized practice of
law not for economic protection of profession, but for protection of public from potentially
severe consequences that may flow from erroneous advice given by untrained lay people.
Also applies to preparation of title abstracts & instructing clients in manner in which to
execute legal documents. Real estate and mortgage loan closings also covered. Finally,
mailing or carrying instruments to courthouse for recording covered.
ii. BUT, even if buyers and sellers are not represented by counsel, it’s OK as long as they are
adequately informed of the conflicting interests of the brokers and title insurance companies
who only profit if the deal is closed and of the risks of proceeding w/o a lawyer.
iii. Courts have deemed allowing licensed real estate brokers to complete standard form
contracts for the sale of land is in the public benefit.
iv. Epstein: Buyers & sellers in same economic social class. Different from L&T leasing.
1. Transactions costs for stocks lower than for land. Fungibility  all stocks the same.
No sort of financing, no high inspection costs. Even in best of all possible worlds,
bumpier world in land.
2. First find a real estate agent. They usually get 6%. Many want to cut out the
middleman. Broker would say I can get you more contacts & expand the market.
For buyer broker expands services. Cross-listing. Now comprehensive listing
services that make prior argument a lot less credible. So what else can a broker
accomplish? They can save you time. Also, if parties who have never done this
before get together, they can screw it up very easily  need experienced hand to
guide the 2. When you need a broker, you need him big-time.
3. Loan issue and financing. Broker helps you to secure a mortgage & seller-financing.
Latter almost like a lease to the buyer, and then seller conveys title. Bank mortgage
more often used. Buyer gets the loan.
4. Sellers will often put clause whereby they can find loan if buyer can’t according to
agreement. Broker can help with this financing. After agree orally on an agreement,
must quickly get something in writing. Why? For legal enforceability (Statute of
Frauds) and so parties know when negotiations have ended: don’t want any more
negotiation or weaseling out.
5. Now need title assurance. Check the chain of title and for any encumbrances: tax
liens that must be paid, material men who improved property and have liens on
property, adverse possession, mortgage from prior owner. Sweep property clean by
holding back of financing equal to liquidated nature of debt. Also, examine for
latent defects (termites, asbestos, lead paint, etc.).
6. Closing: have final pro rations re: taxes already paid, etc. Usually held in the title
office. 98% go through OK, but in some instances the thing blows up.
7. Lawyer hiring. Is lawyer necessarily better at managing portfolio. Is lawyer really
going to look out for your interests? Broker has a long-term interest in the town &
high exchange of information about broker’s reputation. Lawyers are incompetent
with title searching, paralegals often do this. Claiming only lawyers can do this is
rather protectionist. You want person to do a transaction for you who’s done a lot
of them.
b. Contract of Sale
i. Statute of Frauds: The Statute of Frauds is applicable in all states to any contract for the
sale of land, or for the sale of any interest in land. Therefore, either the contract itself, or a
memorandum of it, must be in writing.
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1.
2.
3.
Memorandum satisfying: A memorandum of the parties’ agreement, summarizing
some terms but not the entire oral agreement, will satisfy the Statute if it specifies the
following: (1) the names of the parties; (2) the land to be conveyed; (3) normally,
the purchase price; and (4) the signature of the party to be charged (i.e., the party
against whom enforcement is sought). (Example: Seller writes a letter to Buyer,
confirming the provisions of their oral contract for the sale of Blackacre. This letter
will constitute a sufficient memorandum if Buyer seeks to enforce the contract
against Seller, but not if Seller seeks to enforce it against Buyer.)
a. NOTE: Tearing up or whiting out names on a deed previously conveyed
but not recorded are bad shortcuts that have no effect.
Part performance exception: There is one major exception to the Statute of Frauds
for land sale contracts: under the doctrine of part performance, a party (either buyer
or seller) who has taken action in reliance on the contract may be able to gain at least
limited enforcement of it.
a. Acts by vendor: If the vendor makes a conveyance under the contract, he
will then be able to sue for the agreed-upon price, even if the agreement to
pay that price was only oral.
b. Acts by purchaser: Courts are split as to what acts by the purchaser
constitute part performance entitling him to specific performance.
i. Possession plus payment: Many states hold that if the buyer takes
possession, and also makes payments, this will be sufficient part
performance that the seller will be required to convey the property.
ii. Improvements: Also, in many states, a buyer who takes
possession and then either makes permanent improvements,
iii. Change of position in reasonable reliance on the agreement:
must be accompanied by taking of possession in some states, in
others not required where accompanied by seller’s agreement an
oral contract was made.
1. Hickey v. Green: S & P orally agree on sale. P gives S a
deposit check for $500, but S keeps and doesn’t endorse
or deposit. Neither party contemplates a subsequent
written agreement. P enters into binding contract to sell
his house & S reneges after receiving higher bid from
someone else. Here specific performance might be the
only way to provide equity.
2. NOTE: Check doesn’t count a memorandum because
not specific enough. Can be transferred without
consideration. Condition is invalid on a negotiable
instrument  either sign of don’t sign, can’t attach
conditions. Note is slower & has assignability and can
draft any condition you want. So this check does not
count.
3. Epstein doesn’t like this doctrine at all. Screws up
other transaction and marketable titles. SOF would have
powerful forcing function here  detrimental reliance has
too wide a set of rules.
Epstein: SOL important for protection and security of property. Title by livery of
seisin is highly precarious  tells you transfer took place but no indication of terms
of the transfer. Introduce 2 major pillars of modern transaction: 1) writing is
absolutely necessary, 2) system of recordation is critical way of giving notice to 3 rd
parties. “If you’re litigating, you’ve lost.” Look to those kinds of transactions where
durability is sufficiently long that memory is not an adequate guard. Basic
prohibition: no promise to convey real estate shall be enforced against a given party
unless the transaction is evidenced by a document of sufficient fullness, etc.
a. What takes you OUT of Statute of Frauds? Actions done by individuals in
reliance on contract  detrimental reliance and promissory estoppel.
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b.
Part Performance: Making improvements even w/o taking possession &
start inspections. Or start changing names on utilities, etc. Start to take
possession. Pay seller some money in form of down payment or purchase
price.
c. Could sue for increase in market value of house due to buyer’s
improvements. But is lien equal to increase in value of property or cost of
the improvement? Subjective value interest becomes very hard. Difficult
for a court to set proper values on this. Remedy has tremendous valuation
problems and leads to form of under-protection.
d. Specific performance  problem of proof, but with evidence of permanent
improvements not a problem. Temporary improvement, like curtains, not as
solid. Know this wouldn’t be a lease because of improvements  don’t
make these kinds of gifts. Ask what facts tell you about type of transaction.
e. Reversibility: Ask how easy it is to undo improvements in question.
Evidentiary: Ask what facts tell you about permanence of transaction 
work against fraud.
f. Possession not sufficient part performance  reversibility very easy.
Switching utilities has problem of perhaps missing consent  could be a
unilateral action. Again with sum of money not sufficient because very
reversible. Get a signature; don’t spend the $$.
ii. Time for performance: In a suit for damages, the time stated in the contract will be deemed
to be of the essence, unless the parties are shown to have intended otherwise. (Example:
Seller refuses to close on the date specified in the contract. Buyer may bring a suit for
damages for the delay, even if it is only a few days.)
1. Equity: But in a suit in equity (i.e., a suit for specific performance), the general rule
is that time is not of the essence. Therefore, even if the contract specifies a particular
closing date, either party may obtain specific performance though he is unable to
close on the appointed day (so long as he is ready to perform within a reasonable
time after the scheduled day). (Example: The sale contract specifies a November 1
closing date. Buyer has trouble lining up his financing, so he can’t close on
November 1. The contract is silent about whether time is of the essence. By
November 15, Buyer has his financing lined up, and asks Seller to close. Seller now
refuses. In the absence of strong evidence that the parties intended time to be of the
essence, Buyer will probably get a court to order Seller to convey even though Buyer
missed the November 1 closing date.)
iii. Marketable title: Nearly all land sale contracts require the vendor to convey a marketable
title. (Even if the contract is silent on this issue, an obligation to convey a marketable title will
be implied by the court.)
1. Definition of "marketable title": A marketable title is one that is free from
reasonable doubt about whether the seller can convey the rights he purports to
convey. Thus it is not sufficient that a court would probably hold the title good in a
litigation. Instead, the title must be free from reasonable doubt so that the buyer will
be able to resell in the future. The purchaser is not required to "buy a lawsuit".
2. Defects making title unmarketable: Here are some of the defects that might make
title unmarketable:
a. Record chain: First, anything in the prior chain of title indicating that the
vendor does not have the full interest which he purports to convey, may be
a defect. (Examples: A substantial variation between the name of the
grantee of record in one link and the name of the grantor in the following
link is a defect. Similarly, a substantial variation in the description of the
land between one deed and the next may be a defect.)
b. Encumbrances: Second, even if the vendor has valid title to the property,
an encumbrance on the property will normally constitute a defect.
i. Mortgage or lien: Thus an outstanding mortgage would be an
encumbrance making the title unmarketable. (However, the vendor
has the right to pay off the mortgage at the closing, out of the sale
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proceeds.) Similarly, liens (e.g., a lien for unpaid taxes, or a lien
gotten by a judgment creditor) are defects.
ii. Easement: An easement will be a defect if it reduces the "full
enjoyment" of the premises.
iii. Use restrictions: Similarly, privately-negotiated use restrictions
(e.g., a covenant whose burden runs with the land, to the effect that
only residential structures will be built) can be a defect.
iv. Land-use and zoning violations: Most courts hold that violations
of building codes are not encumbrances on title. But a violation of
a zoning ordinance usually is treated as an encumbrance.
1. Lohmeyer v. Bower: A party cannot convey good
merchantable title if violations of covenants or zoning
ordinances exist on the subject property at the time it is to
be sold. Here, it is the existence of the violation of the
ordinance & covenant, NOT the presence of those things
themselves, that makes the title unmerchantable.
c. Adverse Possession: Title obtained by adverse possession may still be
marketable. However the seller has the burden of establishing that such title
exists. Once the burden is met, the court must then decide whether a
likelihood exists that adverse claimants would challenge the title to the
property and whether they would succeed if such a challenge was made. If
the court finds the chance of a successful challenge minimal, the title is
marketable. Conklin v. Davi.
i. Epstein: Want to know where adverse possession claim is  is it
in middle of your house or off in an unused corner of the property?
If adverse possession should say it out front. Sensible seller will
say it and give title insurance  demonstrates comfort for buyer.
Title company is like a judge and has incentive to make correct
assessment  buyer free rides on this. But when double rates they
have some suspicions. Want insurance to protect your objective
and subjective losses.
3. NOTE: Landlocked parcel title probably marketable because its nature affects
price only, otherwise the parcel’s title can be free from all encumbrances.
4. Agreement and notice: But the parties may agree that certain kinds of defects will
not constitute unmarketable title. This agreement will normally take place in the
contract of sale. (Example: Buyer and Seller agree that a particular easement held by
X across the property will not render title unmarketable. The court will enforce this
agreement.) Also, the buyer may be held to be on notice of certain defects, and
therefore held to have implicitly agreed to take subject to them (e.g., where a right of
way across the property is very visible to anyone who looks even casually at the
property).
5. There is a split as to whether a title insurance company’s guarantee makes the
title marketable.
6. Time for measuring marketability: Unless the contract specifies otherwise, the
vendor’s title is not required to be marketable until the date set for the closing. Thus
the vendor may sign a contract to sell property which he does not yet own (or on
which there are several defects in title), and the purchaser cannot cancel the contract
prior to the closing date because of this fact.
iv. Remedies for failure to perform: Where one party fails to perform a land sale contract, the
other party may have two remedies: (1) a suit for damages; and (2) a suit for specific
performance.
1. Damages: If one party breaches a land sale contract, the other may almost always
sue for money damages. Generally, P recovers the difference between the market
price and the contract price (the "benefit of the bargain" rule).
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a.
UNMARKETABLE TITLE: Buyers get restitution but not benefit of the
bargain  unreasonable to make a seller pay such damages when seller
may not have known of defect in title when contract was signed.
2. Specific performance: Usually, an action for specific performance may be brought
against the defaulting party, whether the defaulter is buyer or seller. Most commonly,
the seller changes his mind, and buyer is able to get a decree of specific performance
ordering seller to convey the property. (Each parcel of land is deemed unique, so the
court presumes that money damages would not be adequate to compensate the
buyer.)
3. Deposit: If buyer is unable to close on the appointed date, most courts do not allow
him to recover his deposit (on the theory that a suit to recover a deposit is in effect an
action at law, and time will be deemed to be of the essence in a suit at law).
v. Equitable conversion: For many purposes, the courts treat the signing of the contract as
vesting in the purchaser equitable ownership of the land. (Conversely, the vendor is treated as
becoming the equitable owner of the purchase price.)
1. Risk of loss: Most courts hold that since the vendee acquires equitable ownership of
the land as soon as the contract is signed, the risk of loss immediately shifts to him.
This is true even if the vendee never takes possession prior to the casualty.
(Example: S contracts to sell land to B. Prior to the closing, while S is still in
possession, a hurricane destroys the house located on the land. Most courts hold that
the loss falls upon B — B must still pay the agreed-upon purchase price, and does
not receive any abatement of price, nor does he get his deposit back.)
a. Exceptions: But courts following this majority rule have a couple of key
exceptions to it: (1) the vendor bears any loss resulting from his own
negligence; and (2) the vendor bears the loss if at the time it occurred, he
could not have conveyed title (e.g., because his title was unmarketable).
b. Insurance: But very importantly, courts who place the risk of loss on the
purchaser give him the benefit of the vendor’s insurance.
vi. The Duty to Disclose Defects
1. A seller who misrepresents the condition of the property will normally be liable to
the buyer for damages under the doctrine of deceit or “fraudulent
misrepresentation.” Buyer will have to show 1) a false statement concerning a
material fact; 2) knowledge by the seller that representation is false; 3) an intent by
the seller that the buyer rely; 4) injury to the buyer (in form of house being worth
less)
a. Non-disclosure: Traditionally seller has not been liable for merely failing
to disclose material defects of which he is aware. Today most states hold a
seller has an affirmative duty to disclose material defects of which he is
aware and that he will be liable in damages if he doesn’t do so.
i. Johnson v. Davis: Where the seller of a home knows of facts
materially affecting the value of the property which are not readily
observable and are not known to the buyer, the seller is under a
duty to disclose them. Deposit returned to buyer and contract
cancelled.
ii. Courts are especially likely to find the seller liable for
nondisclosure where the seller has brought about the defect or
condition.
1. Stambovsky v. Ackley: Owners encouraged house’s
haunted reputation, so estopped to deny ghosts’ existence.
A prudent purchaser exercising due care is unlikely to
discover this fact so peculiarly in seller’s knowledge.
iii. Some states have enacted legislation shielding sellers from failing
to disclose psychological or prejudicial factors that might affect
market value.
b. Brokers are usually not held under a similar duty.
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c.
c.
Hazardous Waste: CERCLA imposes strict liability for cleanup costs on a
current owner or any prior owner at the time it was contaminated. Buyer
has duty to make all appropriate inquiry  environmental assessment
industry has grown. Some states make duty to disclose here.
2. Merger: Contract of sale merges into deed and deed becomes final expression of
parties’ deal. Under this any of the seller’s representation or warranties would be
extinguished when the buyer closed on the deal and took the deed. This would seem
to prevent recovery, but the doctrine has fallen into disfavor & few courts use.
3. Epstein: Some are known to be subpar, some might not manifest themselves until
later, etc. Is seller going to hold some residual liability? Warranties difficult to
value over time. What if waiver is optimal strategy? Believe in inspections in a big
way  leads to an adjustment of the entire basic contract. Don’t like duty to
disclose  rather tie things up and force them into the contract. Most cases are lowprobability events. Drafting is either seller promising it’s clean or buyer taking as-is.
a. Arg in favor rests upon 2 conclusions:
i. [wrong premise] cases of nonfeasance & no person is under duty
to aid a stranger. Imprecise translation here. Nondisclosure is
nonfeasance, but like a good Samaritan case. Epstein  silly: here
situation arises out of consensual transaction between 2 parties.
Misapplication. Excessive form of individualism.
ii. [better argument]: trying to run system of nondisclosure requires
fleshing out full course of action. If party wants to lie about a
point, it’s probably important. Nondisclosure not like fraud.
Epstein  plausible but wrong. Too over-general. Could mandate
disclosures and list them in advance (FDA). Uneasiness about
disclosing neighborhood effects. Also issue of latent virtue 
probably don’t have to disclose: defect rather than asset doctrine.
vii. The Implied Warranty of Quality
1. Most courts allow a purchaser of a used home to sue the original builder or
contractor for breach of the implied warranty of quality, if a defect is latent when the
purchaser buys, and appears within a reasonable time after construction. Privity of
contract seems no longer to be generally required for these suits.
a. Lempke v. Dagenais: Purchaser of a used home could recover against
builder for pure economic loss [cost of repairing and replacing faulty
garage] provided 1) the defects were latent at the time P purchased so they
couldn’t be discovered by reasonable inspection, 2) defect manifested itself
within a reasonable time after construction. P has burden of showing the
defect was caused by the particular builder.
The Deed
i. Description of the property:
1. Types of description: There are three main ways of describing land in a deed. Their
use varies by region and type of land:
a. Metes and bounds: A "metes and bounds" description begins by
establishing a starting point (usually based on a visible landmark or
"monument"). Then a series of "calls and distances" is given, each of which
represents a line going in a certain direction for a certain distance.
(Example: "From the southwest corner of East and Main Street, then
running north 50 degrees 26 minutes for 273 feet, then west 59 degrees 8
minutes for 100 feet," etc.)
b. Government survey: In many rural areas, especially west of the
Mississippi, the description method uses the U.S. government survey. Land
is divided into six-mile-square tracts called "townships"; each township is
divided into 36 one-mile-square tracts called "sections"; each section
contains 640 acres, each of which can be directly referred to.
c. Plat: The "plat" method relies on the recording of a map or "plat" of
property by a developer, in which the plat shows the location of individual
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lots. (Example: "Lot 2 in Block 5 in Highwood, a subdivision platted on a
map filed in the Register’s Office of the County of Westchester on June 13,
1910.")
2. Forgery: A forged deed is void. BUT most courts hold that a deed procured by
fraud is voidable by the grantor in an action against a grantee, but a subsequent bona
fide purchaser from the grantee who is unaware of the fraud prevails over the
grantor. Place loss on the person who could have prevented it.
ii. Warranties of Title
1. Quitclaim Deed: merely conveys whatever interest the grantor has without making
any promises.
2. Special Warranty Deed: Contains warranties only against the grantor’s own acts
but not the acts of others.
3. Warranty Deed: Grantor is held to be making various promises about the state of
his ownership, i.e. warrant against all defects in title whether they arose before or
after grantor took title. These promises are called "covenants for title."
4. Epstein: Warranty has powerful signaling effect of seller’s belief in good title.
Seller or title insurance company as provider. Company protection against claims
that are false, fraudulent or groundless. Warranty deed has no such component.
Company one capable of revision up & down, unlike warranty deed.
5. The covenants: The covenants fall into three basic groups: EXPAND
a. Seisin and conveyance: The covenants of "seisin" and of "right to
convey" mean that the grantor has an indefeasible estate in the quality and
quantity which he purports to convey. (Example: These covenants might be
breached if the grantor purported to convey a fee simple absolute, but
actually only owned and conveyed a fee simple subject to condition
subsequent or a fee simple subject to an executory limitation.)
i. NOTE: A few courts hold the covenant of the right to convey is
not breached where some 3rd party is in adverse possession that has
not yet ripened into title, whereas the covenant of seisin is
breached by such adverse possession.
ii. One can have seisin but not the right to convey  trust.
b. Against encumbrances: The covenant "against encumbrances" is a
promise that there are no encumbrances against the property, that is, no
impediments to title which do not affect the fee simple but which diminish
the value of the land. (Examples: Mortgages, liens, easements and use
restrictions are all encumbrances, so if the grantor gives a deed containing a
covenant against encumbrances, the existence of any of these will constitute
a breach of that covenant.)
c. Quiet enjoyment and general warranty: The covenants of "quiet
enjoyment" and "warranty" represent a continuing contract by the grantor
that the grantee will be entitled to continued possession of the land in the
future. (Example: These covenants would be breached if a third person not
only asserted that he had paramount title, but commenced proceedings to
eject the grantee.) The grantor thus warrants he will compensate the grantee
for any loss he sustains by assertion of the superior title.
i. A special covenant would only apply to persons claiming under the
grantor.
d. Further assurances: grantor promises he will execute any other
documents required to perfect the title conveyed.
6. Present vs. future covenants: Be sure to distinguish between: (1) present
covenants; and (2) future covenants.
a. Present covenants: The covenants of seisin, right to convey, and against
encumbrances are present covenants. They are breached, if at all, at the
moment the conveyance is made. Thus a breach can occur even though
there is no eviction — all the grantee needs to do to recover on the claim is
to show that title was in fact defective on the date of the conveyance.
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b.
7.
8.
9.
Future covenants: By contrast, the covenants of quiet enjoyment and
warranty are future covenants. They are breached only when an eviction
occurs. (Example: Grantor conveys Blackacre to Grantee under a warranty
deed. Ten years later, Grantee discovers that X has a paramount title to that
held by Grantor. This is a breach of the present covenants (seisin, right to
convey and against encumbrances), even though there is no eviction. But it
is not a breach of the future covenants (quiet enjoyment and warranty),
because X has not tried to evict Grantee.)
i. Brown v. Lober: In 1957 P purchases land from D & gets
warranty deed. In 74, P grants an option on the land’s coal-mining
rights to X. P then discovers that a prior grantor reserved to
himself 2/3 of the land’s coal rights. In 76 D sues for breach of
covenant of quiet enjoyment (can’t do breach of warranty of seisin
only because SOL has run out).
ii. To sue for breach of covenant of quiet enjoyment, P must show
actual or constructive eviction [w/ latter, grantee may purchase
the 3rd party’s title in order to avoid eviction and then sue the
grantor  BUT give notice to grantor of someone asserting
superior title: if don’t grantor will have opportunity in subsequent
suit between grantee and grantor to argue that his own title really
wasn’t defective!] Here there was neither, since no one holding
paramount title interfered w/ P’s right to possess the coal. No
constructive eviction by fact P required to renegotiate contract w/
X for lesser amount. If mere existence of paramount title were
enough to constitute constructive eviction, there would be no
difference between warranty of quiet enjoyment & seisin.
iii. Epstein: W/ mineral, so long as landscape undisturbed, out of luck
on future covenants unless have some other insurance. Adverse
possession  notice to rest of world of claim that you have:
recordation does the same. Marengo cave: how give notice w/r/t
occupation of cave? Mineral rights give same problem. If no one
is doing anything with the minerals, non-use demonstration not
adequate. Someone needs to come in and start digging the coal.
1. How operate joint tenancy? Are you taking minerals out
in proportion to what each owns, i.e. pro rate. OR digger
keeps all? Both bad. If one guy gets easy coal, other has
harder time. W/ share-alike running the accountings is
crazy. SO people will not buy undivided interest if going
to be partners with a stranger.
Statute of limitations: The main reason for distinguishing between present and
future covenants involves the statute of limitations. The statute starts to run on a
present covenant at the time the conveyance is made. It starts to run on a future
covenant only when an eviction occurs. Therefore, if many years pass from the time
of the conveyance, and the grantee discovers that someone has paramount title, the
grantee is likely to be out of luck: the time for suing on the present covenants is
likely to have passed (since that clock started running at the time of the conveyance),
yet there will be no breach of the future covenants if the holder of the paramount title
has not attempted to eject the grantee. (Thus on the facts of the above example,
Grantee is likely to be out of luck, with his present covenants time-barred and his
future covenants not yet breached due to the absence of any ejectment action by X.)
Prior Knowledge of defect: Ordinarily, such knowledge does not nullify the
various covenants. Jones v. Grow Inv. & Mortgage Co.
More on Encumbrances: A vendor can have valid title, but it can be subject to the
following encumbrances:
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a.
Mortgage: An outstanding mortgage make the title unmarketable. BUT
the vendor has the right to pay off the mortgage at the closing out of the
sale proceeds.
b. No discharge of record: Sometimes an old mortgage granted by a prior
owner is not shown on the record as being discharged. This is not fatal if 1)
the vendor has an unrecorded satisfaction of mortgage in his possession, 2)
some much time has passed that the SOL has almost certainly barred any
attempt to foreclose the mortgage.
c. Liens: Like unpaid taxes, judgments obtained by creditors, mechanic’s
liens. Vendor has a right to pay these off too.
d. Easement: A defect is it reduces the “full enjoyment” of the premises. (But
if it’s notorious & visible, purchaser will probably be deemed to have seen
it & agreed to be subject to it.
e. Use restrictions: Privately-negotiated restrictions, like on types of
buildings or locations, are defect even if they are also imposed on
neighboring property. Title should say it will pass “subject to restrictions of
record” An obsolete restriction is not a defect or one that merely matches
existing law.
f. Encroachments: A defect if it seriously interferes with the use &
enjoyment the premises.
g. Land-use and zoning violations: A violation of land-use restrictions
imposed by law may or may not be treated as encumbrances.
i. Frimberger v. Anzellotti: Latent violations of state or municipal
land use regulations 1) that do not appear on the land records, 2)
that are unknown to the seller of the property, 3) as to which the
agency charged w/ enforcement has taken no official action to
compel compliance at the time of the deed was executed, and 4)
that have not ripened into an interest that can be recorded on the
land records do not constitute an encumbrance for the purpose of
the deed warranty.
ii. Epstein: P wants amount of money needed to bring land up to
condition required. But if get money, DEP has no interest in
enforcing. P was a developer, so DEP is saying we’re watching
you & will come down hard on past and future violations in the
future. To find measure of damages have to assess need to know
what compliance means, but don’t know what that is here.
10. Enforcement by future grantee (running of covenants): A second reason for
distinguishing between the present and future covenants concerns whether the
covenant runs with the land, i.e., whether it is enforceable by subsequent grantees.
a. Present covenants: The present covenants usually do not run with the land.
Since they are broken at the moment of conveyance, they immediately
become choses in action (present right to sue). At common law these were
not assignable.
i. A minority of courts hold [English rule] a breach of one of the
present covenants does run with the land, relying on the fact that
the prohibition on the assignment of choses in action no longer
exists.
ii. Rockafellor v. Gray: But remember it must be brought within the
proper SOL which begins running at the first conveyance.
iii. Epstein: Rockafellor: Original P had lien [mortgage] done to
Gray. P was aware of mortgage, so just fine. G brings a
foreclosure against all with an interest in property inferior to your
own. R is not going to be bound by a foreclosure to which he is
not a party. G goes ahead with foreclosure and has a sheriff’s sale,
taking amt needed to pay off the debt. Connelly got by quitclaim
deed. C then sells property by a general warranty deed to Dixon
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who conveys by special warranty deed to Hansen. [D not
guaranteeing sheriff’s sale was OK]. R brings suit to vacate
foreclosure & joins everyone involved with mortgage. R wins.
Then second lawsuit, where in event R gets way, H sues hell out of
C to get some $$. View covenants as assignment  so carry with
it right to bring same action assignor has against original
warrantor. $4,000 what C originally warranty. To hold him
responsible for what others did not good. If buyer wanted full
protection need general. C could introduce parol evidence BUT
issue of being remote and the problem of subsequent people
relying on the externality. So can’t recover greater amount than
the $4,000 cited in deed. ALSO C never went into possession, nor
did Dixon, so C said, but court said warranty runs with land even if
don’t take seisin. Assignability will be presumed for efficiency
arguments.
b. Future covenants: But the future covenants do run with the land. Must have
title or possession to sue under these.
c. Example: O conveys to G1 under a warranty deed. G1 conveys to G2. G2
discovers that X has always held a paramount title superior to O’s. G2
cannot sue O on the present covenants (seisin, right to convey and against
encumbrances), because these do not run with the land. But he may sue O
for breach of the future covenants (warranty and quiet enjoyment). (But
remember that these future covenants will not be breached unless X actually
sues to eject G2.)
11. Measure of damages: If the grantor breaches any of these warranties, the grantee’s
recovery is generally limited to the purchase price paid+ incidental damages — the
grantee may not recover for any appreciation in the value of the land since the
conveyance.
a. Breach of covenant of seisin: return of all or a portion of the purchase
price. If the title of 20 of 100 acres fails, A gets 1/5 purchase price.
b. Breach of covenant against emcumbrances: If the encumbrance is easily
removable (like a mortgage), the measure is the cost of removal. If it is
hard to remove, damages = difference between value of land w/
encumbrance and w/o it. Damages are limited by the total price received by
the warrantor.
c. Intermediate transaction: Where the party suing is not the original
covenantee, but a remote grantee, his damages are limited to the amount
paid by this intermediate grantor to the convenantor. See Rockafellor. If O
sells to A for $10,000, and A sells to B for $5,000, under this view B would
be limited to $5,000 damages in a warranty suit against O.
d. A conveys Blackacre to B by warranty deed for $20,000. B conveys
Blackacre to C by _______ deed for $15,000. O, the true owner, ousts
C. In the jurisdiction present covenants are breached when made & the
chose in action is not assigned. NOTE: Ouster makes recovery on future
covenants possible.
i. Deed from B to C is a quitclaim deed. For C, the presence of an
intermediate deed without covenants does not prevent the remote
grantee from suing the original covenantor. B cannot recover
anything from A  the present covenant were breached when A
conveyed to B.
ii. Deed from B to C is a general warranty deed. C has not sued or
settled with B. B can recover from A
iii. FINISH THESE!
12. Estoppel by Deed: Suppose A conveys Blackacre to B by warranty deed, at a time
when A does not own Blackacre. If A later acquires Blackacre, many courts hold
that title to Blackacre immediately passes to B by the doctrine of estoppel by deed.
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iii. Delivery
1. For a deed to be valid, it must not only be executed but delivered. This requirement
is satisfied by “words or conduct of the grantor which evidence his intention to
make his deed presently operative so as to vest title in the grantee and to surrender
his own control over the title.
a. Thus the requirement is not physical at all but rather an intent that the
deed shall operate at once.
i. The presence or absence of a manual transfer may give rise to a
presumption of delivery or non-delivery. If the grantor retains
possession, there may be a presumption that delivery was not
intended, but this may be rebutted by a showing of intent to the
contrary. And vice-versa.
2. If the delivery is valid, title passes immediately to the grantee. Thereafter, return
of the deed to the grantor has no effect either to cancel the prior delivery or to
reconvey title to him. The only way title can get back to the grantor is if a new,
formally satisfactory, conveyance takes place.
3. Sweeny, Administratrix v. Sweeney: Maurice gave property to D by deed which was
recorded, and D deeded the property back to M, who wished to be protected in the
event D predeceased him, but that deed was not recorded.
a. Where the deed is transferred to the grantee subject to conditions or
reservations not expressed in the deed, courts generally hold that there is a
valid delivery and the conditions are of no effect. This lends stability to
record titles, since no examination of any fact not states in the recorded
deed is required.
b. A conditional delivery can only be made by placing the deed in the
hands of a 3rd person to be kept until the happening of the condition 
escrow. Conditional delivery to a grantee vests absolute title in the latter.
c. NOTE: A few courts hold where the deed is handed over to the grantee but
the extrinsic evidence shows the deed is to take effect at the death of the
grantor, there is no delivery, i.e. that the transfer is testamentary and void if
it does not follow the formal requirements of a will
d. A minority disagrees, finding such an approach a relic of primitive
formalism and that there is no logical reason why a deed should not be held
in escrow by the grantee as well as by any other person  conditional
delivery is purely a question of intention.
e. Epstein: 1) M  J if M dies first. 2) J  M if M J dies first. Wife wants
John’s possession to be seen as a bailment. Giving to lawyer is another
bailment. Bailments don’t undo original transaction. Addition of explicit
oral condition. Looking at through Rockefellor, parol evidence would be
allowed, but this court refuses to allow this evidence. If goes to 3 rd party
willing to allow parol because less inclined to fraud. Two different attitudes
to parol evidence.
4. Delivery Without Handing Over
a. If the grantor intends to pass title or a future interest to the grantee now,
there has been a delivery even though possession may be postponed until
the grantor’s death.
i. E.g. O might today hand A a deed to Blackacre or put it in a safety
deposit box, with a clause in the deed stating that the “right to
possession under this deed shall accrue after the death of O.” This
would be construed as the present grant of a future interest in the
property, and would be valid.  the future estate vests at the time
it is delivered.
b. If the grantor intents that no interest should arise until his death, no
delivery during life has taken place; the deed cannot take legal effect at
death because the grantor intended it to be a will, not a deed, and the
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d.
instrument is not executed with two witnesses in accordance with the
Statute of Wills.
i. Rosengrant v. Rosengrant: Harold and Mildred prepared a deed
conveying the property to D but then left it with an escrow & he
was only to take it if they died and record it.
ii. Where a grantor delivers a deed under which he reserves a right of
retrieval and attaches to that delivery the condition that the deed is
to become operative only after the death of grantors and further
continues to use the property as if no transfer has occurred,
grantor’s actions are nothing more than an attempt to employ the
deed as if it were a will.
1. A right of retrieval or a right to revoke a deed indicates
the grantor has not parted with control of the deed and
therefore there was no intent to create a present estate.
But if the deed is intended to take immediate effect, a
right to revoke an estate granted in the deed will not
prevent valid delivery as long as the reservation is
contained in the deed itself.
c. Escrow: Used in situations of conditions and must be a stranger to the
transaction. The escrow ensures the deed is removed from the grantor’s
control. Deposit of a deed with an escrow does not act to transfer legal title.
Title remains in the grantor until stated conditions or events take place.
Once the event occurs, the title automatically vests in the grantee UNLESS
the jurisdiction recognizes “relation back” to the moment the deed was first
put in escrow.
i. This is most important when the grantor dies or becomes
incapacitated before the condition occurs. This allows the
transaction to still be completed by the escrow.
d. Revocable Trust: Grantor signs a declaration of trust providing he holds
the property in trust, retaining the right to possession and to all rents and
profits for his life and on his death the title passes to the grantee. He also
retains the right to revoke the trust and reclaim legal title for himself. He
need not deliver not record the trust instrument. Legal title is then held by
the grantor as a trustee, with equitable beneficial interests of a life estate in
the grantor and remainder in the grantee. This also avoids probate.
The Mortgage & Installment Contracts
i. Nature of mortgage: A mortgage is a financing arrangement, in which the person buying
property (or one who already owns property) receives a loan [mortgagor], and the property is
pledged as security to guarantee repayment of the loan to the mortgagee.
1. Two documents: There are two documents associated with every mortgage: (1) the
"note" (or "bond"); and (2) the mortgage itself.
a. The note: The note is the buyer’s personal promise to make the
repayments. If there is a foreclosure against the property and the foreclosure
sale does not yield enough to cover the outstanding mortgage debt, the note
serves as the basis for a deficiency judgment against the borrower for the
balance still due.
b. Mortgage: The mortgage itself is a document which gives the lender the
right to have the property sold to repay the loan if the borrower defaults.
Since the mortgage in effect gives the mortgagee an interest in the land, the
mortgage is recorded. The mortgagor’s interest in the property is the
“equity of redemption.”
2. Sale of mortgaged property: Usually, when mortgaged property is sold the
mortgage is paid off at the closing. But property can be sold without paying off the
mortgage, either by: (1) having the purchaser take "subject to" the mortgage; or (2)
having the purchaser "assume" the mortgage.
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a.
3.
Sale "subject to" mortgage: If the purchaser merely takes "subject to" the
mortgage, he is not personally liable for payment of the mortgage debt.
True, the mortgagee can foreclose if the buyer does not make the payments.
But the mortgagee may not sue the buyer for any balance still remaining on
the loan after foreclosure; that is, the mortgagee may not get a deficiency
judgment against the purchaser. (But the mortgagee may in this instance sue
the original mortgagor for this balance.)
b. Assumption: If the new buyer assumes payment of the mortgage, he is
liable, both to the original mortgagor and to the mortgagee, for re-payment
of the mortgage loan. Thus the mortgagee can get a deficiency judgment
against the assuming purchaser.
c. Acceleration Clause: Enables mortgagee, upon transfer of the mortgagor’s
equity, to declare the whole amount of the mortgage debt due and, upon
failure to pay, to foreclose.
Foreclosure: Foreclosure is the process by which the mortgagee may reach the land
to satisfy the mortgage debt, if the mortgagor defaults.
a. History: Originally if the mortgagor had not paid the full sum by the “law
day” it was due, his interest was completely extinguished.
i. Courts of equity the gave some relief to these mortgagors by
ordering the mortgagee to accept payment by the mortgagor even
after default  equity of redemption.
ii. This made life more difficult for the lenders since even after
default the mortgagor continued indefinitely to have the right to
pay his debt and get the property back. This made the property
unsalable. The “bill to foreclose” gave the mortgagee some relief
to cut off the mortgagor’s right of redemption. The court could
order 1) strict foreclosure of the right, which would bar the
mortgagor from redeeming unless he paid up within a certain
period of time, 2) a foreclosure by sale in which the property
would be sold by an officer of the court, with the proceeds of the
sale used first to pay off the mortgagee’s claims and the balance
paid to the mortgagor. The latter is standard today.
iii. Some states also give the mortgagor a statutory right to buy back
the title from the purchaser at a foreclosure sale within a specific
period after the foreclosure sale. This is different from the
judicially created right to redeem from the mortgagee (the equity
of redemption), rather than the statutory right to redeem from the
purchaser. The statutory right does not come into play until the
borrower’s equity is extinguished at foreclosure sale.
iv. Second Mortgages: are subject to the prior rights of the first
mortgagee; if the sum brought upon foreclosure sale is insufficient
to payoff both the 1st & 2nd mortgages, the first is paid off first.
2nd mortgages thus carry higher interest rates
b. Judicial foreclosure: Usually, foreclosure is judicially supervised — the
foreclosing mortgagee must institute a lawsuit, and the actual foreclosure
sale takes place under supervision of a government official (usually a
sheriff).
c. Private foreclosure sale: Some states allow the mortgage lender to use a
document called a "deed of trust" rather than a "mortgage." The deed of
trust allows the lender (or a third person) to hold the property as "trustee,"
and to sell it in a private sale if the borrower defaults. However, the private
sale must be held in a commercially reasonable manner so as to bring the
highest price possible — if the lender does not do this, he will owe damages
to the borrower in the amount that the borrower might have gotten back
(representing the borrower’s equity above the mortgage amount) had the
sale been a commercially reasonable one.
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VIII.
i. Murphy v. Financial Development Corp.: To prevent the lender
from conducting a sale that fetches an unfairly low price (so that
the borrower either has to pay a deficiency or loses some or all of
his equity), statutes and courts require the lender to use good faith
and due diligence to get the highest possible price at the sale: like
a fiduciary. If the lender does not do this, he may lose his right to
a deficiency judgment and may even have to pay the borrower
damages eql to the amount of equity that the borrower would have
realized from a properly-conducted sale.
ii. Here D made the only bid at the sale for the amount owed on the
mortgage: $27,000. D took title and sold to another for $38,000.
Only prior appraisal showed it worth $46,000. While the
inadequacy of the price alone does nott show a lack of good faith
and due diligence, it did when coupled with the fact D should have
known the price was low and immediately sold for a higher price,
profiting from a quick turnaround sale. Ps get damages =
difference between fair market price for property & price obtained
at foreclosure. NOTE: Proving circumstances such as these can
be difficult.
iii. Epstein: Courts will intervene ex post where they believe real
advantage was taken: non-contractual rule: we never want a lender
in a mortgage foreclosure system to come out richer by virtue of
the breach than he does by virtue of the finance.
d. Deficiency Judgments: Occur when the amount a house brings in on a
foreclosure sale is less than the mortgage debt.
i. Judicial: Sale price is ordinarily not challenged and the amount
realized is applied to the debt. The mortgagee is then entitled to a
deficiency judgment for the difference, collectible out of the
general assets of the borrower.
ii. Private: The sale is scrutinized more closely to assure the
mortgagee acted fairly and may deny deficiency judgment if there
are sufficient grounds to set the sale aside.
iii. In many state there are antideficiency statutes due to the
hardships such judgments can cause.
ii. Installment contracts: Land can be bought under an installment contract, which provides
financing by the seler. The buyer makes a down payment, and pays the rest of the purchase
price in installments (usually monthly). Here, the buyer does not receive his deed until after
he has paid all (or, sometimes, a substantial portion) of the purchase price.
1. Forfeiture: If the installment buyer defaults, the seller does not need to go through
complex foreclosure proceedings — he can just exercise his contractual right to
declare the contract forefeited (in which case the seller theoretically gets to keep
whatever has been paid on account). But modern courts often hold that if the buyer
has paid a substantial portion of the purchase price, and the seller would be unjustly
enriched by a complete forfeiture, ordinary foreclosure proceedings (applicable to
mortgages) must be used.
a. Bean v. Walker: The vendee in a land sale contract acquires an interest in
the property of such a nature that it must be extinguished before the vendor
may resume possession. The vendee acquires equitable title and vendor
hold legal title in trust for the vendee, subject to the vendor’s equitable lien.
Here seller must use foreclosure proceedings where the buyer made
substantial improvements to property and had paid almost ½.
b. Accepting late payments may waive the seller’s right to forefeiture in the
future and may mislead the purchaser into thinking promptness is not
required. Seeing similar development here as with mortgages.
Title Assurance
a. The Recording System
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i. Introduction
1. A deed is valid and good against the grantor upon delivery without recordation.
2. Statutes require that a deed be acknowledged by a notary public or other public
official before it is entitled to recordation.
3. Recording acts protect purchasers for value and lien creditors against prior,
unrecorded instruments. At common law: “Prior in time is higher in right.”
a. If two conflicting claims to a parcel were both legal, the first in time
prevailed, unless the earlier claimant was estopped, by virtue of his actions,
from asserting his interest.
b. If the two were equitable, the earlier prevailed again unless there was
estoppel or the later claimant then acquired legal title in good faith (i.e.
without notice of the prior equitable interest) and for a valuable
consideration.
c. If the conflict was between the holder of a legal interest and the holder of
an equitable interest, the legal interest always prevailed if the claim was
earlier in time and even prevailed if it was later in time is the title was
acquired in good faith and for valuable consideration.
i. E.g. O mortgages Blackacre to A. Then O conveys Blackacre to B
who doesn’t know of the mortgage. At common law B takes the
land subject to A’s mortgage. [Under equity, thought, B would be a
bona fide purchase and would be protected against A’s mortgage.]
4. Under the recording acts, a subsequent bona fide purchaser is protected against
prior unrecorded instruments.
ii. The Indexes
1. Tract Index = indexes parcel by ID # assigned to tract. Not generally used.
2. Grantor-grantee system = Have a grantor index in which all instruments are indexed
alphabetically & chronologically under grantor’s surname. Same idea for grantee.
3. Searching title  go backward in time to “root of title” and search forward from that
source. Use grantee index to search backwards and grantor index to search forward.
4. Luthi v. Evans: O assigned all her interests in 7 oil & gas leases to D. Instrument
further assigned O’s interest in all her other oil & gas leases “whether or not the
same are specifically enumerated above”  Mother Hubbard Clause. Assignment
recorded on Feb 16, 1971. On Jan 30, 1975, O assigned a lease that had not been
specifically enumerated in the first instrument to P. P’s check of records & abstracts
of title did not reveal prior assignment.
a. An instrument that uses a Mother Hubbard Clause is not sufficiently
specific as to be effective against subsequent purchasers and mortgages via
constructive notice, unless they have actual knowledge of the transfer. It is
only valid as between the parties to the instrument.
b. The purpose of the recordation statutes is to provide notice to subsequent
purchasers of instruments affecting specific tracts of land. The land
conveyed must be described with sufficient specificity. So the subsequent
taker’s rights are good.
5. Recorders have traditionally been protected by government immunity from liability
for negligence.
6. The first assignee that lost in the above example can have a constructive trust
imposed on the conveyor to prevent unjust enrichment  she must give the first
assignee the amount she received from the second.
7. Epstein: These statutes are direct repudiation of maxim of “prior in time is higher in
right.” Efficiency gains great enough to swamp any inconveniences  systematic
application gives everybody loser and everybody wins.
a. Recordation must be complete set of books  idea of voluntary system
means can’t discharge the function. Must be a state monopoly. How
convert system from state monopoly to competitive recording industry for
benefit of consumers? Give everyone uniform access to system.
Competing companies can come and do with the info what they want. Start
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with monopoly system and convert into competitive industry. How fund
the system? Property or recordation tax.
iii. Types of Recording Acts
1. Race Statute = purchaser who win the race to record prevails. Whether a
subsequent purchaser has actual knowledge of the prior purchaser’s claim is
irrelevant.
a. E.g. O conveys Blackacre to A, who does not record. O then coveys it to B
for valuable consideration. B actually knows of the deed to A. B records
the deed from O to B. Under a race statute, B prevails over A & owns
Blackacre.
b. This limits inquiry into matters off the record. But if a prior instrument has
been recorded (so as to give constructive notice of its contents) this is
important.
c. A lawyer should check the record at the last second, just before paying the
SS but dos not have to ask his client about actual notice.
2. Notice Statute = If a subsequent purchaser has notice of a prior unrecorded
instrument, the purchaser cannot prevail over the prior grantee.
a. So in the above example, B would not prevail over A because B has
notice of A’s prior deed.
b. This statute protects a subsequent purchaser against prior unrecorded
instruments even though the subsequent purchaser fails to record.
i. E.g. O conveys Blackacre to A, who does not record. O then
conveys to B for a valuable consideration. B has no knowledge of
A’s deed. B prevails over A even though he does not record.
ii. Suppose after conveyance to B and before B records, A records.
Then C wants to purchase from B. C, searching title, would find
A’s deed on record & C would then have to ascertain from facts
off the record whether B had notice of A’s deed. If B did not, B
prevails over A, and C can buy from B and prevail over A.
1. Here C claims under the shelter rule = a person who
takes from a bona fide purchaser protected by the
recording acts has the same rights as the grantor. This
does not extent to B’s grantor, O. If O repurchased
Blackacre from B, O would not prevail over A. There is
too much risk of collusion to allow that.
c. A lawyer should check the record at the last second, just before paying over
the $$, to make sure that no one has recently recorded (which would give
constructive notice). He should also ask his client if he has actual notice of
any such transaction. There is no special hurry to record the deed.
3. Race-Notice Statute = A subsequent purchaser is protected against prior unrecorded
instruments only if the subsequent purchaser: 1) is without notice of the prior
instrument and 2) records before the prior instrument is recorded.
a. E.g. O conveys Blackacre to A, who does not record. O then conveys to B
who does not know of A’s deed. Then A records. Then B records. A
prevails over B because, even though B has no notice of A’s deed, B did not
record before A.
b. A lawyer should check the record at the last minute and ask his client is he
has any notice. Furthermore he should put the $$ in escrow until the new
deed is recorded due to the danger that, after paying, the holder of a prior
conveyance will record before he has a chance to.
4. O conveys Blackacre to A, who does not record. O dies, leaving H as his heir. H
conveys Blackacre to B, who records. B purchases for valuable consideration and
without notice of the deed from O to A.
a. B is the winner even though O conveyed to A, since A did not record. A’s
deed not binding as to rest of world if have protection of recording statute.
What about H? Say he takes under will & promptly records. Statute only
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5.
6.
7.
8.
9.
protects subsequent purchasers (not donees). Notice has 2 conditions:
must be innocent takers & purchasers. In H’s interest to immediately sell.
If O is = H (privity), like both coming out of O. A could then have a cause
of action v. O’s estate.
O conveys Whiteacre to A, who does not record. O then conveys to B, who
purchases in good faith and for a valuable consideration, but does not record. A then
records and conveys to C. C is also a bona fide purchaser. B records. C records.
a. O  A; then O  B, A records first. If stops here, under race-notice A
prevails over B (relative title). THEN A to C; B records; C records. B
takes & records first, but looks like C wins under both. To say A has
better title than B means he can convey it. First part answers all priorities.
The second stage is distraction. Worry about incentive effects. Do not
want to destroy sanctity of A’s title. Under notice, C has notice of A.
Shelter rule in action  once you get good title what you do is OK no
matter what notice is involved.
O borrows $10,000 from A and gives A a mortgage on Blackacre, which is worth
$50,000. A does not record. O then borrows $14,000 from B and, after telling B of
the prior mortgage to A, gives B a mortgage on Blackacre. B records. O then
borrows $5,000 from C and gives C a mortgage on Blackacre. C has no notice of
A’s mortgage. C records. O then defaults. Blackacre sells for $20,000 at the
foreclosure sale. How distribute the amount?
a. Priorities: in race-notice or notice A prevails (in race B prevails). Between
B and C, B prevails because he’s given notice to the world. A>B>C.
Between A & C: C>A. CIRCULARITY happens when B records. NO
REAL ANSWER.
Epstein: Never lose by recording early. Wait and risks are enormous even if safe
against person before you. Dominant strategy for all players at all times.
A lawyer or other agent in charge of a closing is liable in negligence to the grantee
for failure to record a deed promptly if the grantee suffers as a result.
Formal Requirements
a. The instrument must be one which is fact eligible to be recorded to offer
protection. If it is not, the purchaser will not be protected even if the
recording clerk makes a mistake and accepts the document.
b. Messersmith v. Smith: O conveys to A, who does not record. O then
conveys to B who has no notice of A’s deed and gives valuable
consideration, but the deed in improperly acknowledged because O does not
appear before the notary public. The improper acknowledgement is not
apparent from the face of the deed & the recorder accepts. B then conveys
to C, who has no notice of A’s deed and who records. Only after that does
A record his deed. C is not entitled to the benefit of recording as against A,
because a deed in C’s chain of title (the deed to C’s grantor) was not
capable of being recorded even though it in fact was. Therefore it does not
give constructive notice to subsequent purchasers.
i. Epstein: Seems like it should be the notary’s responsibility. Let
the transaction stand and punish the notary. Innocent requirement
of recordation (notary) becomes an off-record risk. Most treat this
decision as absolutely maddening. Don’t mess up title w/r/t
extrinsic circumstances. Literal interpretation of statute has
problems like this.
c. O conveys to A by deed with a defective acknowledgment. A records deed.
[Ordering different from above] O then conveys to B who records.
Epstein: O already on record as having conveyed to someone else. B
should be on notice of a bad transaction  buyer must investigate. So
don’t have sympathy for B BUT do we have sympathy for A who mucked
up? Seems like same thing. Epstein has some sympathy for A because
defect is relatively inconsequential. Get A against B rather than O against
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d.
B like Messersmith. Defect should not stop you. B in first case gets notice
of faulty green light, but here it’s a red light.
Some courts find a notary public who either intentionally or negligently tool
acknowledgment of the grantor’s signature when she was not present
breached duty and corporate employer was liable in tort for damages.
iv. Inquiry Notice
1. Even if the purchaser has neither actual nor record notice of a prior unrecorded
conveyance, he may be found to have been on inquiry notice of it. Inquiry notice
exists where the circumstances are such that a purchaser is in possession of facts
which would have lead a reasonable person in his position to make an
investigation, which would in turn advise him of the existence of the prior
unrecorded right. Just as a purchaser is on record notice even though he never sees
the prior recorded instrument, so a purchaser is on inquiry notice even if he does not
if fact make the investigation.
a. References in record: An instrument which is definitely within the
purchaser’s chain of title may contain a reference to another document,
one which might be either outside of the chain of title or not recorded at all.
The traditional rule has been that while such a recital does not place the
purchaser on records notice of the referred-to instrument, he is placed upon
inquiry notice of it. If he fails to make the inquiries, and these inquiries
would have yielded him reasonably definite knowledge of the instrument,
he will lose his status as a bona fide purchaser.
i. Harper v. Paradise: S conveyed farm to M for life remainder in
fee to M’s kids. Deed misplaced and not recorded until years later.
S died while deed presumed lost, heirs gave M a quitclaim deed
“to take the place of the deed made by S.” After Maude’s death,
her kids (P) claimed under the deed which has named M as life
tenant and her children as remaindermen. D claimed title to the
same land, through a security deed executed by M to secure a loan
which became in default.
ii. The earlier deed specifically referred to an earlier, unrecorded deed
& put subsequent purchaser on notice of the its existence. So
purchaser claiming under later deed not entitled to priority even
though it was recorded first.
iii. Violation of Epstein’s rule: don’t create life estate like this.
Paradises were sent to hell. If read first deed would find life estate,
but 2nd makes it look like fee simple on notice. Mention is made of
the lost deed. Becomes difficult situation to look. Doctrine of
inquiry notice  if there is any other instrument that is referred
to you are duty-bound to read it. Effect on draftees: don’t want
to put notice in deed that refers to external events. Epstein
would have determined other way  here no reason to indicate
claims elsewhere were inconsistent with those contained in the
deed.
2. Leases: Should recorded memorandum of put subsequent purchaser to inquiry
notice of contents?
a. E.g. O leases space to A & lease contains non-competition clause. A
memorandum of the lease is recorded, but the full lease referring to the
clause is not. O leases another space to B, a competitor. Some courts hold
no constructive notice given, others say is.
3. Notice based on possession of property: Most important source of inquiry notice is
possession of parcel by person who is not the record owner. Purchaser is generally
held to have a duty to 1) view property, to see if it’s in possession of someone other
than owner, 2) if there is such a possessor, to inquire as to the source of his rights in
the property. If the possessor has rights under an unrecorded instrument, & the court
is satisfied the possessor would have informed any inquirers about these rights, the
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subsequent purchaser will be deemed to be on notice of there rights even though he
never in fact learned about the possession at all.
a. Combined with an equitable claim under contract: Above can be
combined with doctrine that a vendee under a land-sale contract has
equitable rights to the property that can take precedence over the rights of
the vendor’s creditors. By putting these two doctrines together, it can
happen that a person who has an unrecorded contract to buy property from a
vendor, and who then takes possession, will have priority over a later deed
or mortgage issues by that same vendor and recorded. Furthermore, if the
vendee in possession then pays off the contract (even after the competing
mortgage or deed has been recorded), the vendee will usually take title free
and clear.
i. Waldorff Insurance and Bonding, Inc. v. Eglin National Bank:
P contracts in writing to buy a condo unit from C, the developer,
on April 4, 1973. P pays $1,000 as a deposit against a total
purchase price of $23,550. That same month, P begin 1.5 years of
continual occupancy of the unit & pays carrying fees. On October
10, 1973, C executes a note & mortgage for the entire development
(including P’s unit) in favor of D. D promptly records. In 1974, P
agrees to write off a $35,000 debt owed to it by C and in return C
executes a quitclaim deed to the unit in favor of P. This is
recorded in 1975. In 1976, D tries to foreclose against P’s interest.
ii. The ’73 contract between C and P created an equitable interest on
P’s part. Since P was in possession, this should have put D on
notice that P might be asserting some interest to the property. P’s
equitable claim was thus superior to the later, but recorded,
mortgage by C in favor of D. When P “paid” the remaining price
due under the purchase contract, this freed P of D’s lien.
b. Possession consistent with record title: then purchaser is generally
entitled to assume that the possessor has no additional, unrecorded rights.
E.g. Record shows title to Blackacre held by A and B as tenants in
common. B conveys undivided ½ interest to A, but deed not recorded. A is
in sole possession. B purports to convey ½ interest to C, who has no
knowledge of unrecorded conveyance to A. Despite A’s sole possession, C
was not put on inquiry notice, since that possession was consistent with the
record title. [Remember: either tenant has right to full possession & use of
the property.
i. Exception for tenants: Why? Informal unrecorded modifications
of lease rights (extension to term, option to purchase) are so
common that the usual assumption that the possessor has no right
not shown in the record is unwarranted.
v. Marketable Title Acts
1. This legislation shortens the period of time for which the land records must be
examined  typically last 30 or 40 years. Acts like a SOL.
2. All claimants of an interest in land, to be safe, must file a notice of claim every 30-40
years after the recording of their instruments of acquisition.
3. If a person has an unbroken chain of title from the present back to his “root of title,”
then he has the sort of title in favor of which the extinguishments feature of the acts
will operate. His “root of title” is the most recent transaction in his chain of title
that has been of record at least forty years [even if it is a forgery].
4. They do not require a person seeking their benefit to be a bona fide purchaser. In
fact, no purchase or other transaction affecting the land need occur to trigger the
extinguishments of old defects and interests.
a. E.g. In 1889 O, owner of Blackacre, gives X a 99-year lease which is
recorded in 1889. In 1890, O conveys to A, the deed reciting that it is
subject to X’s lease. In 1920 A conveys to B, the deed making no mention
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5.
6.
of the lease. All deeds were recorded. In 1941, B conveys to C, the deed
making no mention of the lease.
i. Under a 40-year act, C’s title to Blackacre would be free and clear
of the lease in 1960, when the 1920 deed from A to B that makes
no mention of the lease has been on record for 40 years.
ii. This assumes X is not in possession  if he was the act would
not bar his rights. Purchaser must still make a physical
inspection of the property.
iii. It is immaterial the recorded lease gave constructive notice to
B and C, or that both had actual knowledge of its existence.
iv. In 1981, C or his successor then has a new root of title  the 1941
deed from B to C – and any claims or interests antedating its
existence will be extinguished.
v. If the 1920 deed had made a reference to the lease, C would have
had to wait until 1981 to show a chain of title claim at least 40
years old.
vi. X should file a claim every 40 years after the date of his lease.
Dangerous to rely on 30-year search: There may be a separate chain of title, begun
more than 30 years ago, that derives from the same grantor as the one who is the
original grantor of the chain you are now looking for: if you go back only 30 years,
you may never discover this other chain – and it may have priority.
a. Heifner v. Bradford
i. In 1916, S conveys fee simple to W. Deed reserves to S oil & gas
rights. Transaction is immediately recorded. S dies in 1931 &
bequeaths oil & gas rights to daughters. Daughters leave these
interests to their children. Instruments recording these interest is
recorded in 1957.
ii. MEANWHILE, in 1936, W, without mentioning S’s oil & gas
reservation, conveys Blackacre by warranty deed to his children
and it’s recorded. After some transfers among the W children
(recorded in 1980), William & Shirley Waters hold surface
interests. They claim, in 1983, the ACT gives them clear title to
oil & gas interests.
iii. HELD, S’s grandkids, not W, own the oil & gas rights. A claimant
gets the benefit of the Act only when he and his predecessors have
an unbroken chain of title going back 40 years. The chain is
broken is there has been a recording of a different claim to the
property, even if this opposing claim is outside the chain of title of
the person claiming the benefit of the Act. Here, the S bequests
were recorded in 1957 & broke W’s chain, even though a searcher
in the position of Ws as of the date of the 1980 conveyance would
not have discovered the 1957 recording by tracing the W’s title
back 40 years. A marketable title is subject to an interest arising
out of a title transaction which may be part of an independent
chain of title.
The acts except certain interests, which do not have to be rerecorded: mineral rights,
easements, interests of persons in possession, claims of federal government.
LAND USE CONTROLS
IX.
Private Land-Use Controls: Servitudes
a. Easements = privilege to use the land of another.
i. Definitions
1. Affirmative Easement = one which entitles its holder to do a physical act on the
land of another. Most are of this type. E.g. right of way.
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a.
2.
3.
4.
Negative Easement = enables it holder to prevent the owner of land from
making certain uses of that land. See below.
Appurtenant Easement = one which benefits its holder in the use of a certain piece
of land.
a. The land for whose benefit the appurtenant easement is created is called the
dominant tenement. The land that is burdened, or used, by the easement if
called the servient tenement. The easement runs with the dominant
tenement and goes to successive owners. It cannot be detached without the
consent of both the dominant and servient tenment.
i. E.g. Blackacre, owned by S, stands between Whiteacre, owned by
D, and the public road. S gives D the right to pass over a defined
portion of Blackacre to get from Whiteacre to the road. This right
of way is an affirmative easement that is appurtenant to Whiteacre.
Blackacre is the servient tenement and Whiteacre is the dominant
tenement.
b. For an easement to be appurtenant, its benefit must be intimately tied to a
particular piece of land (the dominant tenement).
Easement in Gross = One who benefit is not tied to any particular piece of land.
The easement is thus personal to its holder. E.g. giving a friend the right to come
onto Blackacre at any time to use its pool.
Profit = The right to go onto the land of another and remove the soil or a product of
it. Right to mine minerals or drill for oil or capture wild game or fish is a profit.
Duration = can be as long as any possessory estate.
5.
ii. Creation
1. Express Creation: By deed or will. A, owner of Blackacre, could give B, owner of
Whiteacre, a deed expressly stating B has the right to use a particular strip of
Blackacre as a right of way, for a certain period of time.
a. Statute of Frauds: There must be a writing, singed by the owner of the
servient estate. Any recording act will also apply, so if the holder of the
easement does not record, he may lose the easement as against a subsequent
bona fide purchaser of the servient estate.
b. If the deed stresses that the interest is being created only for a specific,
relatively narrow purpose, an easement, not a possessory estate, is
created.
c. The owner may convey the land to someone else and reserve for himself an
easement in it.  easement by reservation. The regrant theory allows for
this to be possible.
i. This is different from an exception = a provision in a deed that
excludes from the grant some preexisting servitude on the land.
See Willard below. The terms today are often synonymous.
d. At common law, it was not possible for an owner to convey that land to one
person, and to establish by the same deed an easement in a third person.
An easement could not be created in a “stranger to the deed.”
i. MODERN VIEW: Permits an easement to be created by a deed in
a 3rd person neither grantor nor grantee. Willard v First Church of
Christ, Science: O sells 2 lots [19/20] to A. 19 has a building on
it; 20 is vacant and used by O’s church as a parking lot. O’s deed
for 20 to A is expressly made “subject to an easement for car
parking during church hours for church benefit.” A records deed
to 20 and sells both to B. Deed received by B does not contain the
easement. Several months later B finds out about the easement
clause in the first deed & brings action to quiet title.
ii. Held for D, common-law rule has no place today. Frustrates
grantor’s purpose and inequitable because grantee has paid a
presumably lower price for land with the easement. O testified she
discounted price to A by 1/3.
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LICENSE: A right to use the licensor’s land that is revocable at the will of
the licensor. This quality of revocability is the main feature which
distinguishes licenses from easements. Exceptions to this are:
i. If the licensee holds an interest in personal property located on the
licensor’s land, the license is said to be “couple with an interest.”
This license may only be revoked if this would not unfairly
interfere with the licensee’s rights in the chattel.
1. E.g. A sells B furniture on A’s land and tells B he has 2
years to remove it. A cannot revoke the license & court
will extend for long enough to give B a reasonable time to
get the furniture off.
ii. Estoppel: If the use would have been an easement except that it
did not meet the SOF [say oral] and the licensee makes substantial
expenditures on the land in reliance on the licensor’s promise that
the license will be permanent or of long duration.
1. Holbrooke v. Taylor: D gave permission for a road to be
constructed over his property to be used by a coal mining
company. It was used by them until the mine closed. 20
years later P bought a 3 acre sight adjoining D’s land and
built a home on it. While P’s home was being built, D let
him use it for construction. Then D gave P express
permission to use & repair the roadway. Then a dispute
arose & suit was filed. A right to use of the road arose via
a grant through estoppel  P made substantial
expenditures, constructed & used all with D’s permission.
2. Some courts don’t like this idea, for it can burden land
with restrictions easily misunderstood. But usually if there
is an investment of improvements either to the servient
estate or the other land of the investor it makes the license
irrevocable.
Creation by Implication: Two parties end up situated in such a way that an
easement could be created, even though no express language to that effect is used.
This is therefore an exception to the SOF requirement and means there must be
strong circumstantial evidence the parties did in fact intend to create or reserve the
easement. Requirements:
a. Land is divided up so the owner of a parcel is either selling part or retaining
part, or is subdividing the property and selling pieces to different grantees.
i. The owner must sell part and retain part or sell the pieces
simultaneously to more than one grantee. An easement in gross
cannot be created by implication.
b. The use for which the implied easement is claimed existed prior to the
severance referred to in 1).
i. There must have been a “quasi-easement” in favor of one portion
of the property and against the other portion, while both were
under common ownership. The benefited portion is the quasidominant tenement and the burdened portion is the quasi-servient
tenement.
ii. This is not an absolute necessity in some courts.
iii. This requirement is met only if the prior use is apparent. That is,
the use must be one which the grantee either in fact knew about
when he received his interest, or could have learned about with
reasonable inspection.
1. Underground sewer: “Apparent” is not the same thing
as “visible.” All that is required is that the existence of
the use would be disclosed by inspection, even if not
physically seen. Where sewer pipes run underground
e.
2.
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3.
from house one, under houses 2 and 3 and into the main
sewer system, the quasi-easements under houses 2 and 3
and apparent even though not visible. Van Sandt v.
Royster.
c. The easement is at least reasonably necessary to the enjoyment of what is
claimed to be the dominant tenement.
i. Not clear if degree of necessity is to be measured by use prior to
severance or claimed after severance.
ii. Where the implied easement is created by grant (in favor of
grantee), most courts require only reasonable necessity. Thus the
fact the grantee could use his property without the easement will
not be fatal to his claim. But where the easement is reserved (in
favor of grantor) most courts require that it be strictly or absolutely
necessary.
1. Minority position is that strict necessity does not need to
be proved even for an implied reservation, although a
somewhat greater degree of necessity will be required
than in the case of an implied grant.
2. Van Sandt again: B owned 3 lots & in 1904 built a
private lateral drain running from house on easternmost
lot across the other 2. B conveyed one lot to M by
general warranty deed w/o reservation or exceptions.
Title then passed to D. Also conveyed a lot to J in same
way. Then sewer breaks.
3. Look to the intention of the parties first. Parties to a
conveyance will be assumed to know and to contemplate
the continuance of reasonably necessary uses which have
so altered the premises as to make them apparent upon
reasonably prudent investigation.
4. Where the land may be used without an easement, but
cannot be used without disproportionate effort and
expense, an easement may be implied in favor of either
the grantor or grantee on the basis of necessity alone.
d. NOTE: The law does not favor implied easement since they are in
derogation of the rule that written instruments speak for themselves. They
also retard building and improvements, and violate the policy of recording
acts. The implication of easements is based on the theory that when one
conveys property he includes, or intends to include, in the conveyance
whatever is necessary for its beneficial use and enjoyment and to retain
whatever is necessary for the use and enjoyment of the land retained. An
easement in favor of the grantee will be implied more readily than one in
favor of the grantor.
e. Epstein: Bilateral monopoly problem in Van Sandt: a neighboring
landowner could hold out. But there is a concern with a surcharge of the
easement. Could control by saying you can’t hook a second home onto the
pipe  no additional lot constraint & house addition constraint slightly
more difficult. Cure for opportunism by Lot 4 guy = put limit of current use
under situation.
i. Pipe created before conveyances  owners were not taking
advantage of each other. Grantor’s got no opportunism. If current
use is efficient use respect it. Dispute comes from back-up
problem, but need not invalidate the easement because of this 
treat it as a tort of strict liability, but difficult to discover source of
back-up. If a persistent occurrence, though, would want a repair.
Easement of Necessity: Two parcels may be so situated than an easement over one
is “strictly necessary” to the enjoyment of the other. If so, the courts are willing to
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4.
find an easement by necessity. Unlike the easement by implication, this does not
require that there have been an actual prior use before severance. BUT the
necessity must be strict rather tan reasonable.
a. Landlocked Parcels: Most common example where access to a public
road can only be gained via a right of way over adjoining property.
b. At one time, both the alleged dominant tenement and the alleged
servient tenement must have been owned by the same person. If this
requirement is met, it does not matter that no actual use of the claimed right
of way occurred until must later.
i. Othen v. Rosier: P & D owned tracts of land formerly part of one
larger parcel. In order to reach any public highways, P must cross
over someone else’s property. P had used a road running across
D’s property, which D kept in repair. D erected a levee on his
property which made the road virtually impassable. P filed suit for
injunctive relief.
ii. In order to create an easement by necessity, the necessity must
have existed at the time that the estate was created, in addition to
unity of ownership of the estates & necessity of roadway. Here, no
easement may be implied for the road because the original owner
did not reserve such an easement when he first sold the property
now owned by D. P also did not acquire an easement by
prescription because use of the road was under a claim of right 
it was permissive & under license.
iii. NOTE: Some states have statues providing for condemnation of
private ways w/ payment of damages made for land given to the
landlocked, benefited property.
c. The duration of this easement will be only for so long as the necessity
exists.
d. There is some conflict over the degree of necessity required for this
easement. Most courts require strict necessity, but some grant the easement
where access to the land exists but it is claimed to be inadequate, difficult,
or costly.
e. NOTE: When the dominant and servient tenements come into the same
ownership, the easement is extinguished altogether. When the united title is
subsequently redivided, a new easement by implication can arise if the
circumstances at that time indicate a new easement was intended.
f. General Average Contribution: A owns 5 adjoining tracts 1-5. All had
been previously owned by O as one tract. A purchased each lot from O in a
separate transaction. Lots 1 & 2 are bounded by a public road on the north,
3 & 4 on the south. 5 is landlocked and has no access to road except
through one of the other four lots. A dies intestate. B, C, D, E & F are the
heirs. F gets Lot 5. F sues owners of 1-4, claiming easement by necessity.
i. Trouble because can’t say by necessity need to go to north or
south. Area of spaces is the same = 1/5. Equivalent value
independent of access to road. Want easement to go over land
where its construction would entail lowest cost. Guy with servient
tenement should benefit from owelty  5 landowners should pay
$20 to 1 to offset $100 easement. If that’s what’s done they have
no incentive to find inefficient solution  more expensive it is
more people will have to contribute. This is like General Average
Contribution from torts  pro rate the contribution.
Easements by Prescription: Similar yet different from adverse possession. AP
involves an SOL running on the right to bring an action to recover possession the
land, leaving Aper in indefeasible possession. Easements involve use and not
possession of land.
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a.
b.
c.
d.
e.
f.
g.
h.
Fiction of the lost grant = Reluctant to allow an easement without there
ever having been consent between the parties, this held in the distant past it
was assumed the holder of the claimed servient estate granted an easement
to the holder of the claimed dormant estate.
In US refer to the SOL applicable to AP actions and apply it by analogy
to easements.
SOL period begins to run when the owner of the servient tenement gains a
cause of action against the owner of the dominant tenement.
The use must be adverse to the rights of the holder of the servient tenement,
and not with the latter’s permission. It must not be permissive and the
owner must have acquiesced (i.e. didn’t object).
i. E.g. In 1978 A makes a road across O’s land. In 1990 O writes A
a letter saying “You are notified that the portion of my land which
you made into a road is my private property. No person has the
right to cross this land & you are liable in damages. I forbid you to
pass over any portion of my land.” A ignores O’s letter and
continues to use the road for the prescriptive period of 20 years.
The letter interrupted the prescription because it rebutted any claim
of acquiescence. [W/ AP would need physical ousting.]
ii. BUT if the jurisdiction doesn’t follow the fiction of the lost grant,
the owner must effectively interrupt or stop the adverse use.
Generally, one who acquires an easement by prescription does not have to
pay damages.
Hostility is not required but continuous and uninterrupted use is. The
attitude of non-subordination on the part of the user must be continuous,
and the use itself must be reasonably continuous measured by the needs of
the user.
The use does not have to be exclusive. If A uses P’s driveway frequently
and adversely, the requisite continuity is not destroyed by the fact that B
also uses the driveway just as often. Only the attitude of non-subordination,
not the physical use, must be continuous. So, if after the prescriptive period
has passed, A erects a fence over the driveway, B can get it removed. While
a common driveway might have began as permissive, the use was
presumptively adverse to A and A’s use presumptively adverse to B.
Public Prescriptive Easements: Obtained by long and continuous use by
the public under a claim of right. The landowner must be put on notice, by
the kind and extent of use, that an adverse right is being claimed by the
genera public, not by individuals. Also could use the theory of implied
dedication  where landowner evidences an intent to dedicate and the state
accepts by maintaining the land used by the public.
i. The public as a whole has something like an easement on the
navigable waterways and on seashores. Under the public trust
doctrine the state hold title to navigable waterways and tidelands
in trust for the public and must safeguard the public’s interest in
these lands.
ii. Public access requires a way of access from inland to the coast and
a lateral easement up and down the beach.
iii. Access to seashore: The public is guaranteed the right to use the
tidelands portion of the ocean shore for swimming, bathing, and
other recreational purposes. Tidelands = between mean high-tide
and mean low-tide mark of ocean. This applies even if the
property is in public hands. Even if a municipality were to transfer
a particular stretch of ocean tide lands to a private buyer, the public
would have a quasi-easement to continue to use the property for
recreational purposes.
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iv. Access through private property: Some courts have held that the
public has a quasi-easement, or right of access, through private
property to get to public ocean-front property. Matthews v. Bay
Head Improvement Association: the public must be given
“reasonable access” through private property, not an absolute right,
to get to the publicly-owned shore front (though the court did not
say how much access should be required, or who should give it.)
The court also held that the public had the right to sunbathe on
privately-owned dry-sand areas as an adjunct to the right to use the
tidelands themselves. Membership of the association must be open
to the public at large.
1. Could see this as raising a serious takings claim!
2. Epstein: don’t use public trust doctrine & socialize the
system  buy the land back & condemn it outright: a
taking. Court here only extended to association’s need.
 Bad rhetoric about changing & evolving conditions to
justify any result whatsoever.
3. If can have access in any one of multiple points, picking
would be done better through political process.
Otherwise have too much of a distortion.
4. Public use doctrine clearly has enormous role to play w/r/t
intellectual property. Ideas & theorems said to be
intrinsically inside public domain like beach. Also have
stuff subject to private ownership only for a limited time
(INS case). Could say after a patent expires gov takes
over, but that’s a disaster. So public domain does not
mean state rights. Public has a remainder interest  want
incentives to create but don’t want to block efficient use.
iii. Assignability
1. The benefits (unless there is a contrary agreement) and burdens of appurtenant
easements pass automatically to assignees of the land to which they are appurtenant.
Where the benefit is in gross, however, the benefit may not be assignable.
2. Modern courts are much more willing to allow assignment and transfer of easements
in gross. Such courts tend to distinguish between easements that are primarily
commercial and those that are primarily personal.
a. Personal: Creator probably granted easement because of friendship with
beneficiary. So he probably does not intend another to have the right to
transfer this privilege.
b. Commercial: In contrast, alienability is much more likely to be intended
by the parties in this context. This is the view of the Restatment.
c. Non-commercial: Even this may be alienable under the modern view if the
parties explicitly or impliedly so agree.
3. Divisibility: The traditional view prohibited the division of such an easement into
smaller parts.
a. Under the modern view even those easements in gross that would be
alienable are not necessarily divisible. Such an easement may be assigned
to more than one person, but they may not generally make separate uses;
they must hold “as one.”
4. Miller v. Lutheran Conference & Camp Association: F & R formed Pocono Spring
Water Ice Co. to have the exclusive use of Lake Naomi, a manmade lake. By deed
the Co. granted “to F and his assigns forever, the exclusive right to fish and boat in
all the waters.” Then F granted R, his heirs & assigns forever, a ¼ interest in the
fishing, boating, & bathing rights” of the Lake. 29 years later the executors of R’s
estate granted a 1 year license to D to boat, bathe & fish. F & his wife filed suit to
enjoin D from using the lake in the grounds the rights to use the lake were easements
in gross & therefore inalienable & indivisible.
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a.
5.
6.
7.
iv. Scope
1.
2.
3.
4.
5.
The first deed did NOT convey any bathing rights. BUT, D establish title to
them via prescription because the rights were used systematically for
commercial purposes. An adverse enjoyment of an easement in gross may
ripen into title thereto by prescription; so F & R acquired title to bathing
rights by prescription.
b. F made a valid assignment of a ¼ interest to R. The initial rights were
conveyed to F, his heirs and assigns, showing the grantor’s intent attached
to assignability.
c. BUT the easements must be used or exercised as an entirety. They cannot
be commercially used without P’s consent. The executors of R’s estate do
not by themselves have the right to grant a license to D.
About the only easements in gross not assignable are recreational easements 
there’s fear of burdening the servient land beyond the original contemplation of
the parties.
Why not treat F & R as tenants in common and give same remedies of partition,
ouster & accounting? When have joint owners inviting endless trouble when allow
them to go their separate ways. Like mineral rights. Better specify which way you
want it to go.
Why no riparian rights? Sophisticated discussion  intuition is riparian rights is
situation when have transition between private regime in land and public regime in
water in a state of nature  don’t have information who was there first. If waterbody is manmade, must ask if fellow who does creation means to create riparian
rights. If he doesn’t mean to create, shouldn’t force him to. When drafting, make
clear whether or not there are riparian rights.
If the easement is expressly created, the terms of the conveyance will normally
control  it usually spells out physical area involved & allowable use.
If it is implied, the court will look to the use as it existed prior to the conveyance.
If it is prescriptive the allowable use is determined by reference to the adverse use
that continued during the statutory period and created the easement. He is limited to
the same general pattern, not the precise use of that time. I.e. the present use must be
sufficiently similar to the older use that the court may conclude the property owner
would not have objected to this new use.
a. One major concern is the increase in burden, if any, on the servient
tenement
Development: Sometimes the dominant estate undergoes a change in use.
a. The court will normally allow a use that arises from the normal,
foreseeable development of the dominant estate, where this would not
impose an unreasonable burden on the servient estate.
An easement appurtenant is, by definition, used for the benefit of a particular
dominant estate. The holder of that dominant estate will normally not be allowed to
extend his use of the easement so that additional property owed by him (or by
others) is benefited. This is true even if the use for the benefit of the additional
property does not increase the burden in the servient estate.
a. Brown v. Voss: D owns parcel A and P owns parcel B. A stands between
B an the road. C is on the other side of B, even more landlocked. An
easement has long existed across parcel A for the benefit of parcel B. (A is
servient, B is dominant), P builds a house located partly on B and partly on
C. P also builds a driveway leading from the easement across B, then
across C, then back to the house. D asserts P has no right to use the
easement for the benefit of parcel C and blocks the easement. P sues to
have the obstruction removed & D counterclaims for trespass.
b. Held for D. An easement appurtenant to one parcel of land may not be
extended by the owner of the dominant estate to other parcels owned by
him, whether adjoining or distinct tracts to which the easement is not
appurtenant. The express grant of easement from D’s predecessor to P’s
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predecessor made it clear only parcel B, not C, was the dominant tenement.
When P built house partly on C & built extra driveway, he was misusing
easement & trespassed, for which D can recover damages. This holds even
though the burden on A was not increased. D does not get an injunction
because there was no substantial injury to him.
c. Epstein: Crazy hold-out game coming from bad blood between neighbors
where negotiation will do no good. Court rejects old rule because it ends up
distorting things. Case probably should have come out the other way, but
this is an isolated dispute. Being a jerk is the single most expensive thing
you could do. No way land can move simply because 2 owners are in
disagreement with one another. Usual rule is if easement goes to plot A,
can’t also let it go to plot B. Negotiate the problems.
6. The owner of the servient tenement cannot make unrestricted use of his property. He
may change with the times and make any use of the servient tenement that does not
unreasonably interfere with the easement, as well as accommodate normal
development of the dominant estate
7. If the easement is for a particular portion of the servient tenement, the servient owner
may not force the easement holder to use a different portion without permission of
the dominant owner.
v. Termination
1. Can generally occur via:
a. Natural expiration (if easement if of limited duration and not a fee simple)
OR the purpose no longer applies.
b. Destruction via merger of dominant and servient estates.
c. Destruction of the servient estate.
d. Prescription  servient owner or 3rd person uses servient property
inconsistent with the easement for the SOL period. Servient owner
wrongfully and physically prevents the easement from being used for the
prescriptive period.
e. Easement holder executes a release.
f. Forfeiture  burden on servient tenement is materially increased and there
is no way to scale back the use to its original level.
g. Tax sale of servient property.
h. Estoppel: Holder’s conduct is reasonably likely to leas the owner of the
servient estate to change his position in reliance and latter in fact does so.
i. Abandonment in certain circumstances [unlike an estate, since an easement
is merely a use.]  usual way easement is terminated
2. Government Takings: Presault v. US:
a. 1899  Presault’s predecessors in title let railway have a right of way
[NOT a fee simple]. Railroad allowed to take under eminent domain, but
why should railroad get this and not other private companies? Otherwise
would get a holdout problem w/ railroad  needs contiguous properties &
want it to look more like a river, but w/o taking any 1 person can stop the
line. But there’s still an offense that this is a private company.
b. When the use changes it must be consistent with the terms of the original
grant. Using the railroad as a public regulation trail is clearly different.
c. The Railroad also abandoned the easement in 1975  acts by owner of
dominant tenement that conclusively and unequivocally manifested either a
present intent to relinquish the easement or a purpose inconsistent with its
future existence.
d. 5th amend  can’t take for public use w/o just compensation. Say railroad
only operates in Vermont. By virtue of monopoly position line must
transport anyone that wants to be transported unless “just cause” can be
shown. Doesn’t say has to be taken by public body, only for public use.
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Severance effect  by taking part of land render rest of it useless. OR
enhance value of residual land. Letting government do condemnation &
then letting it out is cumbersome.
f. If have eminent domain power, always concern of excessive use if
delegated to private parties. So can use as long as there’s public use.
Otherwise unlawful conversion. Problem of excess condemnation: when
holdout problem disappears, so should eminent domain.
g. In VT excess property condemnation issue serious enough that it couldn’t
go beyond power of railroad.
h. 1920 transportation act  let ICC know of abandonment. Why? A great
regulatory extension of power. Original act only applied to interstate lines
& didn’t allow commission to set rates but said couldn’t charge more for
part of the trip than whole of trip. Overcome peculiar inversions w.
monopoly power. Rate of return of regulation. If shut losing line down get
a monopoly. If have comprehensive rates can’t allow abandonment.
i. At time statute is passed every reversionary interest diminishes in value.
Miscalculation of act  to create subsidy stuff created transportation
regime transition havoc.
j. Gov argued SOL has run from the 20s, but seemed like another taking in
1986. Gov’s position seemed like right time to file a suit was never 
either too early or too late.
k. Say railroad files in 1975. Regulatory v. physical taking. Latter is if gov
goes in an occupies land  per se offense & gov must compensate. Reg
taking eaves you in possession of land but restricts way you can use it.
Easier for gov to win under reg than physical because of less scrutiny. Gov
says it’s a regulatory taking because no dispossession.
l. Who has done taking  state gov or federal government. P’s lawyer is
incompetent because only one defendant of US  also have city & state of
VT BUT has to be that stupid  can never sue US in state court & can’t get
jurisdiction over state in federal court  can’t join both govs in lawsuit.
m. 3 components of value lost in this case takings lawyer want back: 1) loss
from direct physical occupation [how value]? Who knows, no ordinary
market value. Epst: look at value of total parcel & easement. This doesn’t
take into account severance value 2) issue of disruption to rest of land]. 3)
nuisance value.
vi. Negative Easements
1. English recognized 1) blocking windows, 2) interfering with air flow, 3) removing
support of your building, 4) interfering with flow of water in artificial stream.
2. Problem of negative easements: increase risk to purchaser that the land is subject
to undiscoverable rights. Also, if allow to develop by prescription, the conditions
under which land use could be changed would be ridiculously limited.
3. Seems like these rights would more naturally be acquired by a covenant  promise
by A that A will not do something. For most part this is what’s done, but here some
negative easements are recognized, including solar easements and conservation
easements.
Covenants Running with the Land
i. Background
1. These are promises which may under certain circumstances run with the land. A
covenant running with the land is simply a contract between 2 parties, which,
because it meets certain technical requirements has the additional quality that it is
binding against one who later buys the promisor’s land.
2. They typically involve a promise to pay for certain benefits received by the
promisor’s land, or a promise by the promisor that he will or will not do certain
things with his land.
3. Covenant is created by promises between parties (promissory). Easement is
created by is attachment to the land (real). Is it created by operation of law or
e.
b.
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4.
agreement of parties? Is it a trepass or restrict way in which he uses his land?
Now calling a negative easement what we’ve been calling a covenant only because
recognized by law in ancient time.
Enforceable at Law: Real Covenants
a. Requirements for running of burden:
i. The promise must be enforceable between the original parties.
ii. The original parties must intend that the burden will run.
iii. The burden must “touch and concern” the promisor’s land.
iv. There must be privity of estate.
b. There are 2 ends of a covenant: the benefit and the burden.
A
B
Privity between original parties
(horizontal privity)
Promisee;
benefit to
Whiteacre
←Privity between promisee
and assignee (vertical privity)
D
Promisor;
burden on
Blackacre
Privity between promisor
and assignee (vertical privity)
C
c.
d.
e.
f.
g.
If A, before an assignment, sues B, A is suing on the contract. There is
privity of contract between A and B and the law of contracts governs  it is
enforceable between the original parties.
If A conveys Whiteacre to D, D must allege the benefit runs to him. The
burden remains with B. If B conveys Blackacre to C, and A sues, A must
allege the burden runs to C.
If both estates are conveyed to D and C respectively, and D sues C, D must
allege that both the benefit and the burden run.
The test for the running of the burden is more onerous than that for the
benefit.
HORIZONTAL PRIVITY: Both parties must have a mutual interest in
the same land, apart from the covenant! So if A has an easement
appurtenant in B’s Blackacre, and B promises A not to construct a factory
on Blackacre, A and B are in privity of estate because of the existence of the
easement.
i. Also, if the promise had been in a deed conveying Blackacre from
A to B, A and B would be in privity of estate.  successive
relationship
ii. First Restatement held horizontal privity was necessary for the
burden to run but NOT for the benefit to run. The Third
Restatement says it is not required at all.
iii. The covenant itself can be a negative or affirmative promise &
subjects the promisor to personal liability for damages collectable
out of his assets.
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h.
iv. Straw Man Technique: Say A and B want to mutually restrict
their lots to a single-family residential use. If they sign an
agreement wherein each promises on behalf of herself, and her
heirs and assigns, that the lot will be used for only such purposes
that is contract inforceable between the two of them. HOWEVER,
B sells her lot to C & C builds an apartment house. With not
privity of estate, the burden does not run. Use of a straw man
would get around this. A and B convey their lots to X. X conveys
A’s lot back to A by a deed containing a promise by the grantee A
for the benefit of B, and X does the same for B with respect to A’s
benefit.
1. Straw man model is problematic. Secretary wants
quitclaim deed. If she goes bankrupt, it’s hers. Capital
gains, all different problems arise.
v. In strict world of contract can’t have 3rd party beneficiaries. If A &
B acquire property by separate titles don’t have privity of estate. If
B acquires from A, privity of estate. Covenants are usually
embedded in a conveyance from one party to the other. We want
the covenants contained in the deeds. From assignee’s point of
view, prudent title examiner can pick it up. If in separate
agreement would get no sense. So privity of estate means nothing
more than embedding agreements in transfer of land from A to
B. A must have some land retained in his benefit by the
transaction.
VERTICAL PRIVITY: The real covenant runs with the estate in land.
i. For the burden to run, the successor must have an estate of the
same duration as the promisor had. I.e., if promisor had fee
simple, so must successor. Like landlord-tenant law.
ii. The benefit runs to a successor of any interest in land, and not to a
successor of the whole estate.
iii. E.g., O conveys one acre of a two-acre tract to A. The recorded
deed contains covenants by A, and her heirs and assigns, that 1) the
tract will be used for residential purposes only and that 2) A, and
her heirs and assigns, will keep trees on A’s lot trimmed so they do
not shade the solar collector on O’s house.
1. B, an adverse possessor, ousts A and remains in
possession for SOL period. B then opens a restaurant and
lets the trees grow. O sues B for damages.
2. A leases her tract to C for 2 years. C opens a school &
doesn’t cut the trees. O sues C for damages.
3. First Restatement: Neither is in privity of estate with A,
so neither is liable for damages.
4. Third Restatement: Discards vertical privity doctrine
and draws distinction between negative and affirmative
covenants. Negative covenants are treated like
easements, so they run to all subsequent owners and
possessors of the burdened and benefited property. Thus
BOTH would be liable on the covenant forbidding
residential use. Affirmative covenants, requiring the
burdened owner to perform an act, are treated
differently. Burdens & benefits succeed to estates of the
same duration as held by the original parties.
 Burdens run to adverse possessor. B would be
liable.
 Lessees and life tenants: Lessees must only
perform covenants that are more reasonably
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5.
performed by lessees rather than buy landlords.
Life tenants succeed to burdens, but their
liability is limited to the value of the life estate.
C would be liable if it were more reasonable for
her to cut the trees than A.
 SAME RULE APPLIED TO EQUITABLE
SERVITUDES.
Enforceable in Equity: Equitable Servitudes
a. At law a covenant running with the land can only culminate is $$ damages.
This is OK where the covenant is a promise to pay for benefits received on
the land or an affirmative promise to take certain acts on the land. But
where the promise is a negative one, involving restrictions on building, $$
damages are usually not the desired relief. Rather, an injunction against
the forbidden construction is desired.
b. Law/Equity distinction. In system w/ recordation it’s less important
because if there’s notice forewarned is forearmed.
c. Tulk v. Moxhay: P was owner of empty piece of land in Leicester Square
& several houses surrounding. He sold vacant ground to Elms, the deed
containing Elms’ promise to maintain the vacant ground as a garden, with
no structures on it. Title eventually passed to D, whose deed contained no
such promises, but who knew of E’s original covenant. P sued D for an
injunction to prevent him from building.
i. P granted an injunction even though covenant was not enforceable
at law. Rely on theory of unjust enrichment  E paid lower price
for garden, in view of restriction of its use. If E could convey to D
free of restriction, nothing could be more inequitable than to let the
original purchaser sell property the next day for a greater price.
ii. Court stressed that D was on notice via actual knowledge.
Restriction probably would not be binding if D had neither actual
not constructive notice.
d. Equitable Servitude = covenant respecting use of land enforceable against
successor owners or possessors in equity regardless of its enforceability at
law. The parties must:
i. Intend the promise to run.
ii. Subsequent purchasers must be on actual or constructive notice of
the covenant.
iii. Covenant must touch and concern the land.
iv. Horizontal privity is of no importance. Vertical privity may be
required for enforcement of benefit in equity.
v. An ES burdens the land itself and not the estate, so it is like an
easement.
e. Once the original promisor has conveyed the burdened land, the promisor
cannot be sued on the covenant in law or equity. He has lost control of the
land when he assigns his entire interest, so it would be unfair to penalize
him for the conduct of some future owner.
ii. Creation
1. Real covenant  created by written instrument signed by covenantor & SOF
governs. If deed containing a real covenant is signed by the grantor only, it contains
promise by grantee, & grantee accepts, it’s enforceable.
a. CANNOT arise via estoppel, implication or prescription.
2. Neponsit Property Owners’ Association, Inc. v. Emigrant Industrial Savings Bank
a. Vertical Privity Issue: Here had homeowner’s association set up by
developer to collect annual fees from homeowners in a sub-division; the
fees are used to maintain any common areas and to enforce building
restrictions. The association does not in its own name hold any of the land
in the subdivision, yet is suing to collect annual fees. Generally the courts
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b.
c.
d.
e.
f.
permit such suits. In substance, if not in form, there is privity of estate
between the Association & the individual landowner. Might use a 3rd party
beneficiary theory here.
i. RECALL: Affirmative easement cannot be created in favor of a
3rd party, but a negative easement in the form of an equitable
servitude can. Irrational technical distinction.
Touch & Concern Issue: Courts have been wary of enforcing affirmative
covenants, and not negative covenants, against successors. Most of the
cases where the courts finds a covenant does NOT touch and concern the
land involve covenants to pay $$. Here, though, the covenant was held to
t&c in substance if not in form. The covenant alters the legal rights of
ownership of the land by providing that the burden of paying the cost of
maintaining public improvements is inseparably attached to the land which
enjoys the benefits of such improvements. The corporation is acting as the
agent of the property owners & could be considered in privity in substance.
Esptein: So long as have clarity of terms, clear intentions of assignability
of both benefit and burden, & notice, it’s OK. Court never asks whether
any of these maxims make sense. On burden side, key ? is whether or not
covenants “touch & concern” the land. Are they affirmative? Court
babbles its way to decision. Intuition is that everyone would be better off if
scheme is observed. As far as affirmative obligations go, it’s very easy to
discharge. So result is dead-correct. Nothing about these covenants slow
down alienation, unlike a covenant restricting land use. On benefits side,
concentrated enforcement in hands of a property-owners association. In
usual situation developer is original “association”. After down to a small
fraction of units, builder doesn’t have largest stake anymore, time to turn
control over. So developer’s organization → homeowner’s organization.
They may not own property, but that doesn’t matter. There to represent
everyone in a political system.
The Third Restatement discards touch and concern and makes the
appropriate inquiry one of public policy. Look only to unreasonable
rational & irrational restraints on trade & unconscionability. See:
Affirmative covenants to pay money arising out of commercial transactions
will be initially enforceable & will become unenforceable only if one of the
following rules becomes applicable:
i. The instrument that created the covenant does not specify the total
sum due or a definite termination point.
ii. Can be modified or terminated it the obligation becomes excessive
in relation to the cost of providing the services or facilities or to the
value received by the burdened estate.
iii. The two above rules do not apply to obligations to a community
organization.
Exclusive Dealing Clause: Court will scrutinize contract to determine
whether the promisor’s rights as landowner (not just contracting party) are
deeply implicated by the clause: Caullett v. Stanley Stilwell & Sons, Inc.:
The deed contained a covenant stating: “The grantors reserve the right to
build or construct the original dwelling or building on said premises.”
i. Restrictions on the use of property will not be enforced unless their
meaning is clear and free from doubt. Here the provision is
unenforceable because its descriptive of neither the structure to be
built, the cost of the structure, or the duration of P’s obligation.
ii. ALSO touch & concern not met  deed provision must define in
some measurable and reasonably permanent fashion the
proscriptions of, and limitations on, the uses to which the premises
may be put. The benefit is purely personal to the grantor and is not
directed toward the improvement of neighboring property  it
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3.
cannot pass incident to any retained land & does not burden the
conveyed premises.
iii. Epstein: This thing seems to take effect whenever landowner
wants to build a house: this could be a while from know & don’t
know if builder will even be around or the same. Too risky on
both sides. Can get a bilateral monopoly if builder is set in
there. Contract is void for vagueness. Analysis off – can’t
delegate duties: quality control issues huge. Right to build a house
that imposes duty to build before you get it. The form of this
transaction, on either side it’s a nightmare. Treat this as a service
arrangement rather than a restrictive covenant to knock it out.
BUT seems like buyer gets a great purchase price. Could find an
unfairness → looks like theft. Likelihood of rescinding not very
good or desirable. Then talk about damages: find out fair market
value and get expectation damages. So, if want to tie land sales to
services, must understand economic and technical execution.
g. If an easement in gross is created, the burden will run with the servient
land. O grants a billboard company an easement to erect signs. The
easement, benefiting the billboard company in its business and not as an
owner of land, is in gross. O transfers the land to A. If A has notice of the
easement, A is bound. There still may be a policy objection to this, though.
i. Third Restatement adds it will terminate if it is impossible or
impracticable to locate the beneficiaries of a servitude held in
gross.
h. Covenant to pay $$ may also provide that is the debt is not paid, there shall
be a lien on the land  it runs with the land and is enforceable even if
promise to pay $$ is one which doesn’t “touch and concern” the land.
i. Epstein: ARTICLE
Equitable servitude  May be implied under certain limited circumstances, but
cannot arise out of prescription because it is a promise.
a. Sanborn v. McLean
i. P and D trace title to their adjoining lots back to proprietor of the
subdivision. Residences are built on all the surrounding lots. P
objects to D’s erection of a gas station on her lot.
ii. Implied Reciprocal Servitude OR Reciprocal Negative Easement:
If the owner of 2 or more lots, so situated as to bear the relation,
sells one with restrictions of benefit to the land retained, the
servitude becomes mutual and, during the period of restraint, the
owner of the lot or lots retained can do nothing forbidden to the
owner of the lot sold. It must start with a common owner.
iii. The restrictions here were imposed for the benefit of the lands
retained by original grantor to carry out scheme of a residential
district & a negative reciprocal easement attached to his lot, which
later became D’s.
iv. They are not personal to owners but are operative upon use of the
land by any owner having actual or constructive notice. Here the
strict uniform nature of the neighborhood should have tipped D
off, if not a mere inquiry w/ neighbors. Injunction granted.
v. ALSO, recording of other deeds with mention of the restriction
provides constructive notice  like recordation issues  duty to
search parallel record outside of the direct chain of title.
vi. Also only applied where there is a general development plan in
existence at the time the prior purchaser bought.
vii. NOTE: Some states adhere more strictly to the SOF requirement.
viii. Subdivision as a checkerboard --> everyone wants the gas station
but no one wants it next to their tract due to car volume, etc. How
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organize this setup. Court here not impressed by argument that
changed circumstances releases one from covenant. Otherwise rest
of the system would fall apart. Could write a time limit into the
easement. [Like Neponsit]. Can’t have covenants that run forever.
Really need zoning here & regulation of area, i.e. a comprehensive
plan.. Maybe not by government though, maybe community
association. Intermediate solution to majority rule & holdout
problem = supermajority. Not perfect, but helpful. Might even
want to think of a compensated takings. Want to maximize value
here.
ix. Issue is whether or not covenant was binding on McLean. His
deed did not inform him lot was restricted to residential use.
McLean loses because should have had notice from plan of
neighborhood  knew or should have known. Constructive
notice + common grantor : must originate from a common
scheme. BUT grantor never filed a master plan. Today absence of
that would probably lead case to come out the other way. Opinion
says once convey first house by covenant, it will hold with every
other one even if not in their deeds. So treat it as if you have to
respect. Court sees this as an optimizing solution to overcome
prisoner’s dilemma. Gives you duty to start talking to the
neighbors & find out  like possession notice in the form of other
people. This is the outer limit of winning.
4. Defeasible Fees may be employed to control land use. The remedy for breach here
is forefeiture, not damages, injunction, or enforcement of a lien. Can create a right
of enforcement in a 3rd party. Not really used.
iii. Scope: Public Policy Restrictions on Freedom of Contract[Mainly Equitable Servitudes]
1. Hill v. Community of Damien of Molokai: “No lot shall ever be used for any other
purpose than single family residence.”  restrictive covenant.
a. Generally enforced but the definition of family is expanding and here
expanded to the point to include an AIDS group home.
b. Dead end street with a lot of traffic. Try to make it seem like something
other than bigotry is going on. Also try to show a diminution in property
value from the traffic. But not persuasive because normal family could
have had same effect OR look to exogenous effects  reflection of bigotry
at large. Plain language is not good here. Average reciprocity of advantage
in having old mother-in-law with you, not from AIDS hostel. Strongest aid
court has here is by creating ambiguity by looking at zoning code. If wand
to find out intent of parties, don’t look to document of which parties had no
knowledge. When have a deal already done, modification is not good. If
courts have a political agenda, always move into defining exercise.
c. Whenever get clause out of step with current realities, there is intellectual &
emotional tendency to place strong gains on linguistic interpretation. If
you’re doing policy, just say it’s policy: don’t deconstruct.
d. What do we mean by single family residence if weren’t dealing w/
handicapped at all? Census  if answer this as a communal home, then as
linguistic matter linguistic purpose does not change. Don’t pick your
purpose to suit your purpose.
e. Economic interpretation of ordinary language. There will be all sorts of
deviations from nuclear family model. Say everyone moving in meets
definition but there are variations. Tolerate those deviations which fall in a
class such as we think all individuals would on balance be better off if they
were tolerated  Pareto optimal. AIDS situation  improve situation of
party who gets benefit but subjectively perceived as burden to everyone
else  strong distributional consequences. Do not check subjective
legitimacy of preferences  check objectively & treat AIDS case as
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traditional version of better off-worse off problem. Restrictive covenant
system gives information  want to put in places where neighborhood
would be helpful. Is there anywhere else to set this up? Problem: don’t
know when we’re switching from private restrictions to general restraint on
trade. Enforce covenant  get better locational decisions rather than
guerilla warfare.
f. Here just have underground public policy grounds. FHA  family
definition issue again. Disparate treatment v. disparate impact. Latter is
regardless of intent. Problem could be order of intent. With aggregate
drafting figuring out individual intentions can be difficult. Aggressive
judges would announce evils of discrimination so if any in the deliberative
process strike down the agreement. But here not enforce because slight
degree of suspicion is enough. Temporal element & intentionality.
g. Impact  does prohibition against non-single families impact the AIDS
guys as harshly as, say, fraternity guys. AIDS folks might not be able to go
anywhere else. But what about other covenants  set-back from the street,
etc.? Could use same argument against: accommodation has to be
reasonable: like comparative negligence. General trend  in practice
hardship arguments tend to be difficult.
2. Shelley v. Kraemer: Restrictive covenants based on race or color.
a. Judical enforcement of racially restrictive covenants constitutes
impermissible state action in support of racial discrimination.
b. 1940s first round of racial consciousness. Don’t know if Missouri law
would permit reverse covenant: blacks covenanting to keep out whites. If
they can’t, equal protection argument stands strong. BUT if want to strike
down want to have both be able to enforce in order to get around parity
issue.
c. 14th amendment issue: is a restrictive covenant property? If gov has to
compensate if take it, arg that it’s property. Here don’t let themselves get
involved in this problem. Here only look at equal protection side & state
action. But is suing over a contract state action? & damages are in
conformity with what expectation would have been, so no one is really
taking any action. Slippery slope to every judicial action as state action and
public/private distinction breaks down. Shelley is therefore wrong, even
though in favor of the result.
d. Usually contrasted with Buchanan: checkerboard ordinance by zoning.
Guy in white block sells to black. That’s state action.
e. Extremely difficult to reconcile civil rights laws with property laws.
Today taken care of via legislation & Title VIII of the Civil Rights Act
of 1968 & Fair Housing Act.
iv. Termination
1. Change of Neighborhood: Often a restricted, residential-only area becomes
surrounded by commercial & other non-residential development. An owner of one
of the restricted plots adjoining the newly developed area might then want to arguew
the neighborhood has so changed that it is unfair to enforce the covenant and
diminish his property value.
a. Western Land Co. v. Truskolaski: So long as the original purpose of
restrictive covenants can be accomplished and substantial benefit inure to
the restricted area by their enforcement, the covenants will stand even
though the subject property has a greater value if used for other purposes.
i. Epstein: Do we have any proof guy will get value that’s greater to
him than other people’s? Could be everyone else will make less $$
and he will gain more. If that’s so, covenants are still a value
maximizing solution. What if reverse the numbers? Might want
the covenant broken, but have compensation. But have to go
household by household  say all gains are dissipated by the
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compensation measuring system: gains destroyed. Forced to 2
extremes. Strong libertarian say stick with status quo ante. Here
court is valuing benefits to him smaller than burden to community.
Regardless of who gains how much, as long as there is a
substantial loss to beneficiaries of covenant, it stays  SIZE OF
LOSS IS SUBSTANTIAL FEATURE: don’t look at
comparative benefits. We know covenants retain their substantial
values  internal integrity remains, i.e.no one is violating within.
ii. Changed conditions  issue here as not troublesome as matter of
principle as it is with property rights that bind strangers. Western
Land made key distinction whether change was in governed
area or in environment.
b. Rick v. West: Courts will not engage in balancing of equities but will
enforce restrictive covenants unless there is a substantial change of
conditions in the general neighborhood.
i. W has less than 1% of the land and no other neighbors we know
of. The subdivision that died. Buyout/holdout problem written
across this situation. R tries to play changed condition argument,
but here land condition hasn’t changed at all. Instead should give
W damages & start at $1. But have R bring map to see if there are
any other holdouts & where she is  physical relationship
between 2 plots. Advise R to locate hospital as far from her as
possible  no traffic, etc. Court treats property rights as
injunctive relief issue  don’t balance the interests, equities,
harships. But we see this with partition in joint tenancies.
Coming to the nuisance issue  allow low level interference or
continue to operate at diminished level. Injunction extreme here.
Like Geragosian trespass case too. Traditional can get moved to
damages if, say, there’s an economic interest as stake with the
holdout [say West was an industry employing 75% of the time].
ii. Ex ante world: Rick II should say convenants will not go into
effect until X %age is in residential use. Or limit covenant to one
geographic area.
c. Restatement  if in hard property rights jurisdiction get hard practicability
stance. It must be impossible as a practical matter to accomplish the
purpose for which the servitude was created. Very stringent standard.
d. Epstein: Changed conditions doctrine unduly interferes with property
rights and court should specifically enforce covenants in spite of
changed conditions.
2. Abandonment: A servitude, like an easement, may be extinguished by
abandonment so long as there is a showing of an intent by the beneficiary to
abandon it, as manifested by his conduct.
a. Pocono Springs Civic Association v MacKenzie: Here no authority existed
that allowed for abandonment of real property when owned in fee simple
with perfect title.
i. If abandonment is illegal, can go after their personal assets. For if
only attached to land just wouldn’t bother to pay  it’s a personal
covenant. Payoff in lump sum. Land as liability.
ii. As contract argue frustration & impossibility.
v. Common Interest Communities
1. Condominiums = Each unit is owned in fee simple by an individual while the land
beneath, hallways & common areas are owned by the unit owners as tenants in
common.
a. Failure of one unit owner to pay mortgage interest or taxes does not
jeopardize other unit owners.
b. Each purchaser becomes an association member & abides by its bylaws.
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c.
X.
Here equitable servitudes take form of restrictions on particular activities.
Courts generally enforce such restrictions but only to the extent that they
are reasonable. Furthermore, many courts insist that the restriction must be
reasonable as applied to the particular homeowner before the court, so that
it is not enough that the restriction is reasonable in a general sense.
d. Nahrstedt v. Lakeside Village Condominium Association, Inc.:
Restrictions regarding pet ownership are reasonable and therefore
enforceable when they prohibit conduct which, while otherwise lawful,
interferes with the rights of other condo owners to the peaceful and quiet
enjoyment of their property.
i. BUT each situation must be judged on its own specific facts, so
remand to determine if D’s cats are such an interference.
e. Epstein: take dogs on beach  low density yes, high density no, but
transition issue. Now take to condominium. Play the partition game BUT
w/r/t animals that live in the residence, there can be crossover in the
common areas. So get an all or none situation because difficult to work
the time split. Epstein loves the private sorting system. In court it’s like
the Social Contract  have to make some sacrifices. BUT still look at
reasonableness as to condo as a whole  ex ante utility. Public policy not
part of this analysis. Woman only assumes noise is the problem, but can be
sanitation as well.
Legislative Land-Use Controls: Zoning
a. The principle type of public land use regulation done on the local, municipal level and deriving from
the state’s police power.
b. Use Zoning
i. Municipality is divided into districts, in each of which only certain uses of land are permitted.
This method of zoning was approved in Village of Euclid v. Ambler Realty Co.:
1. P, a realty company, owned vacant land in Village it wished to develop for industrial
purposes. The land lay in a district that the Village had zoned for residential uses
only. P claimed that the acre value of its land was thereby reduced from $10,000 per
acre to $2,500 per acre and that the ordinance was unconstitutional violation of P’s
due process and equal protection rights.
2. A zoning measure will be struck down as unconstitutional only if it is clearly
arbitrary and unreasonable, having no substantial relation to the public health, safety
and morals or general welfare. The use zoning scheme, insofar as it reduced traffic
and noise in residential areas, and facilitated fire prevention passed muster under this
general standard. The court refused to evaluate the wisdom of each minor provision
of the ordinance since the overall reasonableness was clear.
ii. “Euclidean” Zoning thus arose = division of a municipality into separate use districts.
iii. Cumulative Use Scheme = each successive district permitted all the uses allowed in the
previous districts, and added some new ones. Thus single family residential use was allowed
in every district, even heavy industrial.
1. Today, residential use is generally not allowed in a district zoned for industrial use.
Problems of safety and nuisance.
iv. Standard State Zoning Enabling Act governs and requires the creation of a planning
commission [recommend a comprehensive plan] and a board of adjustment [grants variance].
c. Exclusionary Zoning & Growth Controls
i. Exclusionary Zoning = measures whose purpose or effect is to close an entire community to
unwanted groups  typically people of low income who might put a heavy burden on the
public fisc yet contribute little to it, resulting in increased property taxes & reduced land
values.
ii. Growth Controls = limit access to everyone, rich & poor, to enhance property values. Quota
schemes that stop of slow development.
iii. South Burlington County NAACP v. Township of Mount Laurel: Municipal land
regulations must provide a realistic opportunity for low and moderate income housing and not
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zone for the benefit of the local tax rate. The housing must be in direct proportion to the
percentage of lower income residences in the city. This comes out of the police power
iv. Exclusionary zoning techniques include:
1. Minimum housing-cost requirements (invalidated by courts)
2. Minimum floor-area requirements (mixed judicial reaction)
3. Minimum lot-size requirements (upheld in most cases)
4. Minimum setback requirements (upheld because increase light & air and reduce fire
danger).
5. Barring mobile or manufactured homes.
v. The Federal law is not helpful in bringing down exclusionary zoning.
vi. Tiebout Hypothesis: consumers benefit from being able to “vote with their feet” among
municipalities offering varying packages of public goods and taxation policies. The
specialization and competition enhances the efficiency of metropolitan organization for
people can get the public goods they most prefer.
1. Response: Distributes wealth away from people with low incomes & generate
spillovers between communities that can result in inefficiencies.
XI.
Eminent Domain & Problem of Regulatory Takings
a. 5th Amendment
3/6/00
Can be too much or too little regulation. For whose benefit is the regulation done? We like those things with pro
rata effects and wary of things that favor certain groups.
What’s scrutiny level in Con Law? Concerns those things not written  police power determination.
For some nuisances private rights faction will not work  come from multiple sources.
Can a zoning law replicate a system of covenants? Maybe, if there’s enough homogeneity in the town. Ones who
take expansive view of police power take similar view with kinds of action government can take.
Public Choice issue  under name of community can commit as many sins as can under the market. When does
collective deliberation survive public choice critique?
In Euclid have the optimistic scenario of what gov can do. Told in abstract the pillar of society are single-family
homes and the bad thing is tenements. Original impulse of zoning was progressive  homogenous regions
preferred to those with complicated uses. Has been vigorous counterattack on this.
Euclid big defeat for private property.
Mount Laurel  world has changed from Euclid. No parasites  desperate community trying to shield selves:
strong communitarian overtones. If you’re running exclusionary system, we’re going to rig the game in favor of
outsiders.
PUD  new planned unit doesn’t conform to zoning  private contracting around. People who own the land are
the “bigtime” movers. They become fanatic because of value of land as a development.
Promise to overtax the new arrivals to make sure new services are coming out of the new folks. Local battle of
developers on side of landowners. Kids require resources & are walking liabilities  the tax bill goes up for the
whole community. These people don’t want their $$ going to support someone else’s children. So town put
children covenants on there.
Can release covenants on existing units OR on vacant land left in Mt. Laurel, just unrestrict that.
Fundamental question: Why allow any restrictions at all for people who can build infrastructure themselves. Let
these people help themselves.
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Joseph Ferraro
REVIEW
Don’t start with trivial points. Show clear organization  analyze not by party but by transaction: go
chronologically. Also, don’t pretend to have certainty when there is none. Indicate which policy is stronger.
Time management  don’t go off at great length.
Beware of the outlines answer.
Signal when you are excluding things.
RAP drafting devices to save & statutory changes.
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