Keeping Current-Property offers a look at selected recent cases, rulings and regulations, literature and legislation. The editors of Probate & Property welcome any suggestions and contributions from readers.
ADVERSE POSSESSION: Tenancy in common. New York has a 10 year statute of limitations for adverse possession claims and a law providing that exclusive occupancy by one tenant in common for 10 years will be deemed possession of the other co-tenant's share. Construing both statutes, the Court of Appeals held that when there is no ouster, the occupying claimant must hold a total of 20 years, or two consecutive 10 year periods, to establish title by adverse possession. Myers v. Bartholomew, 697 N.E.2d 160 (N.Y. 1998).
BANKRUPTCY: Debtor home builder. Finding that a bankrupt home builder's representations on quality of construction were false, the court ruled that customers' claims against the builder were nondischargeable under the Bankrutcy Code's "false pretenses" exception. In re Ferguson, 222 B.R. 576 (N.D. Ill. 1998).
BROKERS: Liability. A broker who drafts an illegal real estate contract violates the standard of care due to a client; defense costs incurred by the client in defending third party claims stemming from the illegal contract are a proximate result of the breach; and an award of attorneys' fees and costs to the client is appropriate. Greenlee v. Rainbow Auction/Realty Co., 582 N.W.2d 93 (Wis. Ct. App. 1998).
BROKERS: Self-dealing; breach of fiduciary duty. A real estate broker, retained by a land trust to assist in development and sale of the land, purchased the land for herself without disclosure to the trustees. The broker's action was a breach of her fiduciary duty and violated the Illinois Consumer Fraud and Deceptive Practices Act. Damages were assessed in the amount of the broker's net profit from subdividing the land. Kirkruff v. Wisegarver, 697 N.E.2d 406 (Ill. Ct. App. 1998).
CONDOMINIUMS: Statutes of limitation. Restrictions in a horizontal property regime declaration created a property interest subject to a five year statute of limitations, not the 10 year limitations period for written contracts. Bowles v. Schilling, 581 N.W.2d 192 (Iowa Ct. App. 1998).
DEEDS: Delivery. Delivery to the grantor's lawyer for delivery to the grantee on grantor's death was effective even though the delivery to the lawyer was to be kept secret from the grantee and the grantor remained in possession of the property until her death. The court found that the grantor made delivery without a reservation to recall, even though her lawyer said he would have returned the deed to the grantor if she had requested it. Vasquez v. Vasquez, 973 S.W.2d 330 (Tex. Ct. App. 1998).
DEEDS: Warranty of title; duty to defend. The grantee under a warranty deed who settled a third party's title claim could bring an action against the grantor for breach of the warranty of title. Garcia v. Herrera, 959 P.2d 533 (N.M. Ct. App. 1998).
EASEMENTS: Punitive damages. In an "acrimonious" dispute between neighbors, the court found that the dominant tenant exceeded the scope of the easement, which was tantamount to trespass on the servient tenant's land and supported a judgment for both compensatory and punitive damages. Apel v. Katz, 697 N.E.2d 600 (Ohio 1998).
ENVIRONMENT: Insurance. On an issue of first impression in California, and noting various approaches taken in federal and other state courts, the state supreme court held that environmental agency activity before the filing of a complaint is not a "suit" that triggers an insurer's duty to defend under a CGL policy. Foster-Gardner, Inc. v. Nat'l Union Fire Ins. Co., 959 P.2d 265 (Cal. 1998).
HOMESTEAD EXEMPTION: Ex-husband's interest. A former wife, attempting to recover unpaid child support, levied execution on her former husband's interest as a tenant in common with her. The husband's interest could not be reached, because to do so would be in derogation of the husband's homestead rights. Matthews v. Matthews, 961 P.2d 831 (Okla. 1998).
JOINT TENANCY: Ambiguous granting clause. A deed that read to brothers and sister "jointly and severally" was not sufficient to establish a joint tenancy with right of survivorship in light of a state statute that presumptively construes such deeds to create a tenancy in common unless survivorship is clearly provided. James v. Taylor, 969 S.W.2d 672 (Ark. Ct. App. 1998).
LANDLORD AND TENANT: Criminal acts. A South Dakota statute that imposes a duty on lessors to keep
residential premises safe and in good repair does not impose a statutory duty to protect against criminal acts
of third parties; no special relationship exists between landlord and tenant that would support a common law duty to protect against such acts. Walther v. KPKA Meadowlands Ltd. Partnership, 581 N.W.2d 527 (S.D. 1998).
LANDLORD AND TENANT: Frustration of purpose. When a new government regulation prohibits a tenant from using the premises for its originally intended purpose, the tenant is relieved from any further obligation to pay rent. Frustration of purpose does not exist, however, if there is a serviceable use still available consistent with the provision in the lease, even if the use is less valuable or less profitable or even unprofitable. Mel Frank Tool & Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802 (Iowa 1998).
LANDLORD AND TENANT: Implied warranty. On an issue apparently of first impression in North Carolina, the court concluded that a tenancy exists when a tenant rents a furnished residence for a short period of time. The landlord impliedly warrants that the premises will be initially suitable for occupancy. Conley v. Emerald Isle Realty, Inc., 502 S.E.2d 688 (N.C. Ct. App. 1998).
LANDLORD AND TENANT: Possession. Focusing on the importance of the tenant's exclusive possession and control characteristic of a lease, the court held that occupants of a YMCA facility are not tenants protected by landlord/tenant statutes, even though occupants can stay on a month-to-month basis and receive discounted rates. Ann Arbor Tenants Union v. Ann Arbor YMCA, 581 N.W.2d 794 (Mich. Ct. App. 1998).
LANDLORD AND TENANT: Right to place sign as license. Under a lease for commercial premises, for a monthly fee, the lessee could place suitable signs on a large monument sign provided by lessor on which other lessees also place signs. The court characterized the right to place the sign on the monument as a license, not a lease. The lessor's removal of the sign was not protected by the forcible entry statute, and treble damages were not available. Keller v. Southwood North Medical Pavilion, Inc., 959 P.2d 102 (Utah 1998).
LANDLORD AND TENANT: Trespass. Although the tenant had guests living on the premises in violation of the lease and without landlord's knowledge, they were not trespassers to whom the landlord owed no duty. The landlord could be held liable for the guests' injuries from a fire. Johnson v. Blackburn, 582 N.W.2d 488 (Wis. Ct. App. 1998).
MORTGAGES: Dragnet clause. In a Chapter 7 bankruptcy case, the court held that the "dragnet" or "after-acquired debt" clause did not apply to the debtor's unrelated business debt to the mortgagee. The clause was in a residential mortgage executed by the debtor husband and his nondebtor wife. Brae Asset Fund, L.P. v. Kelly, 223 B.R. 50 (D. Mass. 1998).
MORTGAGES: Foreclosure; right to growing crops. A perfected Article 9 security interest in growing crops remains attached to the crops despite the transfer of the real property in a foreclosure sale. Moritz Implement Co., Inc. v. Matthews, 959 P.2d 886 (Kan. 1998).
MORTGAGES: Inadvertent release. A mortgagee inadvertently released a mortgage, erroneously believing that the debt had been paid, but the mortgage remained valid if no innocent third parties relied on the release. Mid-Continent Lodging Assocs, Inc. v. First Nat'l Bank of Chicago, 999 F. Supp. 1443 (D.C. Kan. 1998).
RESTRICTIVE COVENANT: Setback violation. After viewing the premises, the trial court concluded that a
deck encroaching into a side yard did not interfere with
the adjoining landowners' use of their property. The state supreme court held the trial court erred in examining the properties, the restrictive covenant should be enforced and the deck removed. The Clifford Family Ltd. Liability Co. v. Cox, 971 S.W.2d 769 (Ark. 1998).
RULE AGAINST PERPETUITIES: Right of first refusal void. Subdivision restrictions granted a right of first refusal to "the lot owner to the right and left" of any lot owner desiring to sell. That right violated Ohio's codification of
the common law rule against perpetuities. The developer-grantor's right of first refusal was likewise void. Schafer v. Deszcz, 698 N.E.2d 60 (Ohio Ct. App. 1997).
SELLER AND BUYER: Right of first refusal. In 1971, the seller sold a 270 acre tract on a contract for deed that gave the buyers a right of first refusal for an adjacent 10 acre tract owned by the seller, at a purchase price of $10,000. In 1993, the seller conveyed the 10 acre tract, then worth $375,000 to $400,000, to a nonprofit conservation corporation. In an action to enforce the right of first refusal, the court held the right to be an unreasonable restraint on alienation and void. The court noted, among other things, the great disparity between the right of first refusal price and the market value of the land almost 23 years later. Urquart v. Teller, 958 P.2d 714 (Mont. 1998).
TITLE INSURANCE: Misrepresentation. Reversing a summary judgment for the defendants, the court held that a title insurance company and its lawyer, as well as the seller's employees, could be liable to the buyers for failing to inform them of unpaid construction mortgages on the properties. Menuskin v. Williams, 145 F.3d 755 (6th Cir. 1998).
WATER RIGHTS: Drainage. An adjoining landowner was not entitled to injunctive relief when a township unplugged a culvert under a public road. The landowner had plugged the culvert in 1956 to prevent erosion. The township has a statutory duty to monitor and repair culverts, and if unreasonable harm results, a property owner can seek damages. Knodel v. Kassel Township, 581 N.W.2d 504 (S.D. 1998).
ZONING AND PLANNING: Nonconforming use. Although an owner could continue a nonconforming peat mining operation, it was required to obtain a permit for excavation and fill activities. The court reasoned that requiring the permit would not jeopardize or terminate the owner's nonconforming mining use. Rhod-A-Zalea & 35th, Inc. v. Snohomish County, 959 P.2d 1024 (Wash. 1998).
Condemnation. Gideon Kanner provides nonspecialized counsel with an overview of options generally available to the landowner facing condemnation in What to Do Until the Bulldozers Come? Precondemnation Planning for Landowners, 27 Real Est. L.J. 47 (1998).
Environmental audits. In Mandatory Environmental Auditing: A Better Way to Secure Environmental Protection in the United States and Canada, Nancy Kubasek, M. Neil Browne, Kara Jennings & Carrie Williamson explain how and why mandatory auditing should be used to supplement gains made from traditional command and control regulations. 18 J. Land, Resources & Envtl. L. 261 (1998).
Environmental hazards. Janet M. Johnson provides a "reader-friendly" guide in For Real Estate Lawyers: A Practical Guide to Identifying and Managing Potential Environmental Hazards and Conditions Affecting Commercial Real Estate, 32 Real Prop. Prob. Tr. J. 619 (1998).
Mortgages Restatement. A recent Restatement of Mortgages Symposium at 1998 BYU L. Rev. 1003 (1998), includes articles by Ann M. Burkhart, R. Wilson Freyermuth, Grant S. Nelson & Dale A. Whitman.
Public housing and due process. Robin Minter Smyers examines the rights and responsibilities of public housing managers and tenants and the need for balancing individual and community rights in High Noon in Public Housing: The Showdown Between Due Process Rights and Good Management Practices in the War on Drugs and Crime, 30 Urb. Law. 573 (1998).
Zoning and adult uses. The rise of adult use zoning
and the case law it has engendered is explored by Albert Fredericks in Adult Use Zoning: New York City's Journey on the Well-Travelled Road from Suppression to Regulation of Sexually Oriented Expression, 46 Buff. L. Rev. 433. In the same issue, Herald Price Fahringer examines the subject in Zoning Out Free Expression: An Analysis of New York City's Adult Zoning Resolution, 46 Buff. L. Rev. 403.
Zoning in New York. In Zoning and Land Use, 48 Syracuse L. Rev. 1075 (1998), Terry Rice provides a comprehensive but concise analysis of New York zoning from the "takings" issue through nonconforming uses and variances to adoption of zoning laws.
Connecticut requires property owners who discover significant contamination in the course of an environmental assessment to report it to the state. An owner must devise a plan to remediate the pollution, and penalties in environmental enforcement actions may not be treated as ordinary business expenses or charitable contributions. 1998 Conn. Legis. Serv. P.A. 98-134.
Connecticut adopts rule that a mortgagor is protected when a mortage is assigned, unless given "sufficient" notice. Payments made to the original mortgagee on a negotiable note are effective against the assignee; mere recordation of the assignment is not sufficient notice. Notice under RESPA regulations, among other things, is sufficient. 1998 Conn. Legis. Serv. P.A. 98-147.
Readers interested in a comprehensive review of current developments in real estate law are encouraged to subscribe to the ABA Real Estate Quarterly Report, which is prepared by the Real Property Division's Decisions Committee. for more information on this publication, contact Pam Hollins at email@example.com or (312)988-5651.
Keeping Current Property Editor: Nicholas L. White, School of Law, University of Memphis, Memphis, TN 38152. Contributing editors: Ralph Brashier and Robert Flores.
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