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Keeping Current—Propertyoffers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
ADVERSE POSSESSION: Possession and payment of taxes for over 20 years are not sufficient to gain title from public utility. Plaintiffs expanded their restaurant building, with the addition encroaching on land owned by a neighboring public electric company. Plaintiffs had color of title to the disputed land through a 1985 deed to a predecessor in title (the deed purported to convey land that the grantor did not own). Feeling secure in its title, the electric company tore down the encroaching part of plaintiffs’ building. Plaintiffs claimed title by adverse possession and sought damages for the demolition of their building. The trial court granted summary judgment for defendant and the appellate court affirmed. The tax map showed the disputed land belonged to plaintiffs, and they relied on a statute providing that payment of real estate taxes by a person, or his predecessors, for over 20 years raises a presumption of ownership. Tenn. Code Ann. § 28-2-109. The electric company, however, rebutted the presumption by proving record title to the land. Plaintiffs also claimed that the electric company was barred from asserting its title under another Tennessee statute, Tenn. Code § 28-2-110(a), because it had not paid the real estate taxes. This statute, however, could not be used against a municipally owned electric company, which was exempt from real estate taxes. Plaintiffs had also claimed to have acquired adverse possession title under a statute requiring possession for at least seven years of land described by a document of title that has been on the public records for at least 30 years. Tenn. Code § 28-2-105. The 1985 deed was the first in plaintiffs’ chain of title to include the disputed land and, thus, was not on the record long enough to satisfy the statute. The appellate court agreed with plaintiffs that an affidavit made by the electric company’s officer, which recited facts and then concluded plaintiffs had not satisfied the elements of adverse possession, was improperly admitted. Conclusions of law are not proper, but the court simply disregarded the improper portion of the affidavit. White v. Pulaski Electric System, No. M2007-01835-COA-R3-CV, 2008 WL 3850525 ( Tenn. Ct. App. Aug. 18, 2008).
COVENANTS: Owners of subdivision lots had floating easements for utilities under original covenant that did not specify location or to whom easements were reserved. Plaintiffs acquired two lots in a subdivision platted in the 1970s, when the original covenants included provisions regarding power, access, septic tanks, water, a livestock facility, and a provision that all easements required for utilities “across said land” are “specifically reserved.” The covenants did not specify to whom the easements were reserved or where they would be located. Only a few lots were sold, and the developer subsequently vacated the remainder of the subdivision plat and filed a document that purported to annul the covenants except as applied to lots already sold. Plaintiffs sought a declaration that they were entitled to easements for access, utilities including septic and water systems, and a livestock facility. The district court granted summary judgment on all counts in favor of the successor to the developer’s remaining land. The state supreme court affirmed in part but reversed on the utility easements, holding that the vacation of the original plat did not change the plaintiffs’ rights and that the original covenants reserved a utility easement for lot owners. Even though the particular provision did not specify to whom the easements were reserved, the court viewed the document in its entirety and noted that other sections clearly indicated that the rights in the covenants were for the benefit of both the developer and any grantees or successors in title, including plaintiffs. Because the covenants did not specify the location of the easements, the court determined that plaintiffs owned a floating easement, to be located by the trial court on remand. Brumbaugh v. Mikelson Land Co., 185 P.3d 695 (Wyo. 2008).
DEEDS: Deed reserving to life tenants right to sell does not permit transfer as gift. Grantors conveyed land to their children, half to the daughter, the other half to the son and his wife, reserving a life estate and “the right to sell the subject property in fee simple absolute or in any lesser fee during their natural lives.” After one of the grantors died, the surviving grantor executed a deed purporting to transfer the property in five equal shares to her son, his wife, and three grandchildren. The deed recited consideration as “ten or more dollars.” The daughter challenged the transfer. The court ruled that the transfer was valid only if it constituted a sale and a sale requires consideration, which means something bargained for. Although the son and daughter-in-law did provide caretaking services to the grantor, nothing in the facts established that these services were bargained for. As such, the transfer was a gift and not authorized by the reserved right to sell. Weed v. Weed, No. 2007-338, 2008 WL 3982511 ( Vt. Aug. 29, 2008).
EASEMENTS: Neighbors may place pipes under owner’s land because sanitary district’s easement was dedicated to public use. The landowner’s predecessor granted an easement to a sanitary sewer district for the purpose of locating a sewer lift station on his property. The easement stated that it was “for the perpetual benefit of the grantee” sanitary district and made no mention of any public right to use the easement. After the district built the lift station, a neighbor connected sewer pipes under the landowner’s tract to connect to the lift station. The landowner sought injunctive relief and damages, prevailing on a motion for summary judgment, with the trial court ruling that the easement was an easement in gross benefiting only the sanitary district and not the public at large. Reversing, the state supreme court held that the easement constituted a public dedication. The court applied the rule that an easement is dedicated to public use if the owner clearly acts to dedicate it and if the public entity accepts the dedication. In this case, the sanitary district was a public entity whose primary purpose is to operate a sewer system for the public. The court reasoned that it would defeat the entire purpose of the easement if the public were not allowed to access the sewer system. The mere lack of any explicit textual reference to “the public” does not preclude public access consistent with the purpose of the easement. Tonsager v. Laqua, 753 N.W.2d 394 (S.D. 2008).
FORECLOSURE: Mortgagor waived statute of limitations and discharge in bankruptcy defenses by failing to plead them as affirmative defenses. The Small Business Administration made a mortgage loan in 1993 and in 2005 assigned it to an individual, who began foreclosure proceedings the next year. The mortgagor claimed he was denied due process because the trial court granted “default judgment” to the mortgagee without holding a hearing. The court rejected this claim. The mortgagee moved for summary judgment, with supporting affidavits and exhibits, without requesting a hearing. The trial court granted the motion for summary judgment, which was not a “default judgment.” The mortgagor received notice of the motion for summary judgment and failed to file a response or request a hearing. Failure to respond was deemed an admission of the assertions in the motion. On appeal, the mortgagor for the first time raised a North Dakota statute, which requires that a lender commence a mortgage foreclosure action “within ten years after the claim for relief has accrued.” N.D. Cent. Code § 28-01-15(3). The mortgagor claimed he made his last payment in 1995. The appellate court found a waiver of the statute of limitations because it was not pled as an affirmative defense. Also on appeal, the mortgagor asserted that the debt had been discharged in bankruptcy. The court ruled that the discharge of the debt, by itself, did not bar the mortgage foreclosure. The foreclosure was a bar to holding the bankrupt personally liable, but the mortgagee had sought only to foreclose the mortgage. Although the bankruptcy court could have released the mortgage, the mortgagor failed to show that action or that the mortgage was in any way defective. Gustafson v. Poitra, 755 N.W.2d 479 (N.D. 2008).
MINERALS: Mineral lease giving right to remove minerals did not give right to use idle mine to store wastewater from another mine. By severance deed a coal company acquired “the coal, metals, and timber, together with all the rights, privileges and easements incident thereto, in, on or under” certain lands. Thereafter, the coal company entered into a lease granting “the sole and exclusive right and privilege of mining and removing all of the coal from [a certain vein]” and also the right “generally, to make any use of the leased premises which [lessee] may deem needful or convenient in carrying on its mining or other operations.” The lease specifically permitted lessee to “dump water or refuse on said premises.” All the rights were expressly “limited to such rights as [coal company] owns and has the right to lease,” and nothing in the lease expressly gave lessee the right to use the lease for the support of mining operations on other lands. A corporate affiliate of the lessee operated a coal mine on nearby land. When it could no longer use a nearby river for discharging wastewater (because of high levels of chloride), it discharged the excess wastewater into a mine on the leased premises that had become idle after extraction of the coal. The lessee argued that the discharge of wastewater was permitted by the “deem needful” language in the lease and that its activity was confined to the “voids, tunnels and shafts” created under the lease, over which the coal company had no current possessory interest. The court rejected that argument, relying on a well-settled rule that a conveyance of an interest in coal or a coal estate is a determinable estate that ends when all the coal is removed. Thus, ownership of the space previously occupied by the coal reverts to the grantor by operation of law. This means that the right to use the tunnels and shafts extends only to mining operations within the determinable estate and not to the support of mining operations on other lands. The court read the deed to the coal company to contemplate that the coal and other minerals would be mined from that estate only and that it conveyed only an incidental easement to use the surface estate as was necessary to support those mining operations. Because the coal company was so limited, so was its lessee. Levisa Coal Co. v. Consolidated Coal Co., 662 S.E.2d 44 ( Va. 2008).
NUISANCE: Sovereign immunity shields county from liability for actions taken in abating a nuisance. The county inspector visited a residential property after receiving a nuisance complaint alleging that the property was cluttered with inoperable vehicles, trash, and other debris. After the owner failed subsequently to comply with several notices of violation and a formal notice of abatement, the inspector obtained and executed an administrative warrant to seize and remove numerous items from the property. The owner filed a civil complaint against the county seeking compensatory and punitive damages for due process and equal protection violations and various tort law claims relating to the county’s abatement actions and seizures. The district dismissed the tort claims, holding that the county was entitled to immunity, and granted partial summary judgment to the county on the constitutional claims. The state supreme court affirmed. Although Nevada has waived its sovereign immunity, one of the exceptions to the waiver protects officers of a political subdivision of the state from liability for the performance of “a discretionary function or duty.” Nev. Rev. Stat. § 41.032. Applying a two-part test, the court determined that the county inspector’s actions fell within the scope of discretionary-act immunity: the investigation of the nuisance necessarily involved “an element of judgment or choice,” and the decision to abate the nuisance was “based on considerations of social, economic, and political policy.” Because of the fact-specific nature of nuisance claims, the court’s ruling would seem to cover most nuisance investigations and abatement actions. Ransdell v. Clark County, 192 P.3d 756 ( Nev. 2008).
SALES CONTRACTS: After closing, seller cannot get price increase because of additional acreage of land. The agreement described the subject matter as land “estimated to be 2,759 acres more or less . . . .” The agreement set the price as $1,050 per acre and provided that it was being sold for the consideration of $2,896,950, stating that in the event of a discrepancy between the total price and the price per acre, the latter would control. Later the Act of Cash Sale (the deed) provided an accurate boundary description of the land and further described it as “approximately 2759 acres more or less.” Over a year after the conveyance, the seller discovered that the land contained nearly 20% more land, which was also a surprise to the buyer. The seller brought an action to collect additional money. The crucial question was whether the sale was per aversionem (a sale in gross of the land) or a sale on a per-acre basis, which turned on the intent of the parties in executing the Act of Cash Sale. The parties could depart from the intent reflected in the prior agreement, if they mutually agreed. This occurred because the two writings had multiple differences. The use of the term “more or less” coupled with the facts that the Act of Cash Sale did not mention the per acre price convinced the court that it was a sale per aversionem . Under a Louisiana statute, a seller per aversionem cannot seek an increase in the purchase price after the act of sale. The court dismissed any claim that the Act of Cash Sale did not reflect the parties’ true intent. If that had been the case, the seller should have sought reformation. The seller also claimed that the buyer had violated a right of first refusal reserved by the seller. The right of first refusal had an express exception for a resale to named members of the Dugas family or any entity that they controlled. For tax purposes, the buyer sold the land to other individuals, who on the same day transferred title to a limited liability company controlled by the Dugas family. The court concluded that this fit within the intent of the exception. Long-Fork, L.L.C. v. Petite Riviere, L.L.C., 987 So. 2d 831 (La. Ct. App. 2008).
ZONING: Government may deny building permit if use consistent with zoning is not likely. Through public auction New York City sold a lot containing a former school building, located at 605 East 9th Street. The developer paid $3.15 million and accepted a deed that restricted development to “community facility use” as defined by New York City’s zoning resolution. Permitted uses under that resolution included “college or school student dormitories,” as well as apartment buildings up to 10 stories. The developer sought a building permit to construct a 19-story dormitory, which would be configured like an ordinary apartment building. The city department of buildings denied the permit because the developer could not show that the dormitory would be operated by, or on behalf of, at least one college or school. In the developer’s challenge to that decision, an appellate court ruled that the department’s refusal to issue the permit was “an impermissible administrative anticipatory punishment,” explaining that if actual use violated the zoning resolution, the city could either revoke or refuse to issue a certificate of occupancy. The court of appeals reversed, pointing out that while the mere possibility of a future illegal use is not an adequate ground for denying a permit, the city could properly insist on a showing that the applicant could implement its proposed plan when the city reasonably believes that legal use will prove impracticable. The court pointed out that if the developer went forward only to find that it could not legally use the building, the city would either have to waive the restrictions or order the building torn down. Neither of these recourses would likely produce a desirable outcome, because, under the first, the aims of the zoning scheme would be frustrated and, under the second, valuable resources would be wasted. In re 9th and 10th Street L.L.C. v. Board of Standards and Appeals , 885 N.E.2d 881 (N.Y. 2008).
Termination of Conservation Easements. Conservation easements, like diamonds, are supposed to last forever. But what should happen if the owner of property burdened by a conservation easement and the easement holder (usually a charitable organization or a municipal government) agree that circumstances have changed so much since the easement’s creation that it is no longer possible or practical to accomplish its original purpose? In her new article, Conservation Easements: Perpetuity and Beyond, 34 Ecology L.Q. 673 (2007), Prof. Nancy A. McLaughlin confronts this thorny problem. Her primary argument is that American courts should treat the donation of a perpetual conservation easement as creating the equivalent of a charitable trust relationship between the holder of the conservation easement and the members of the public it was intended to benefit. Because of this equivalency, she argues, conservation easements should only be terminable or modifiable by a court in a cy pres proceeding in which the public is represented by a state attorney general or similar public representative. A court could then only terminate or modify a conservation easement if the proponents of change show that it is impossible or impractical to accomplish the grantor’s intentions. A cy pres court would also have flexibility in fashioning compensation. It could award monetary damages to the holder and stipulate they be used for equivalent conservation purposes or perhaps require substitute land to be set aside for conservation purposes. McLaughlin finds support for her approach in a number of places, including the Uniform Conservation Easement Act, section 7.11 of the Restatement (Third) of Property: Servitudes, the Uniform Trust Code, federal tax law, and a number of recent cases in which courts have supervised settlements that were essentially grounded in these cy pres principles. McLaughlin also nicely summarizes the public interests that support making conservation easements perpetual or at least quite difficult to terminate or modify—namely, the importance of honoring donors’ conservation intentions and the desire to avoid chilling future donors’ willingness to grant conservation easements. In the most surprising part of her article, McLaughlin also suggests that in some situations the parties’ objectives are better served by the creation of alternative, nonperpetual forms of conservation easements. For example, a municipality may seek to create a development buffer zone around an urban area for a significant period of time while recognizing that eventually growth might be appropriate in the designated area. Here she describes how “term-terminable” and “conditionally and freely terminable conservation easements” might be usefully deployed. With this important article, McLaughlin has added to her already significant body of work exploring the rapidly growing use of conservation easements in U.S. property law.
Eminent Domain Reform Fails the Poor. As regular readers of this magazine know, the U.S. Supreme Court’s decision in Kelo v. City of New London, 545 U.S. 469 (2005), spurred many states to enact significant eminent domain reform through legislative initiatives or statewide referenda. Most of these reforms have sought to ban or at least limit condemnation for economic development purposes—the precise kind of eminent domain action involved in Kelo. Some states have also imposed tighter limits on blight condemnations as well, either by changing the procedures and level of proof needed or by narrowing the definition of blight and limiting blight condemnations to particular structures. Other states have more or less left the rules and procedures for blight condemnation untouched while restricting or banning economic development condemnations. In his essay, The Law and Expressive Meaning of Condemning the Poor After Kelo, 101 Nw. U. L. Rev. 365 (2007), Prof. David A. Dana contends that many of these post- Kelo reform efforts are flawed because they privilege condemnations for blight removal over condemnations for economic development and thus privilege the stability of middle class households over poor households. Linking the different types of reforms to the various opinions in the Kelo decision itself, he is especially critical of states that have codified Justice Sandra Day O’Connor’s approach—that is, subjecting economic development condemnations to careful scrutiny but leaving wide-ranging blight condemnations, like those sanctioned by the Supreme Court in Berman v. Parker, 348 U.S. 26 (1954), subject to almost complete judicial deference. Dana claims that this brand of post- Kelo eminent domain reform not only fails to protect the poor from exploitative blight condemnations but also imposes “expressive harms” by sending the message that poor (and often minority) households are “fundamentally unequal in importance” to middle- and upper-income households. In those states that have banned both economic development and blight condemnations (Florida) or in those that have banned economic development condemnations and narrowly circumscribed blight condemnations (Indiana, Wisconsin, and Minnesota, for instance), Dana laments that legislatures have not been motivated by concerns about the poor or equality in living conditions, but only by a powerful commitment to property rights that does not countenance any differential treatment based on the economic class of the property owner.
Eminent Domain Reform and the Poor—A Rebuttal. Prof. Ilya Somin, an advocate on the property owners’ side in Kelo and the landmark Michigan Supreme Court decision in County of Wayne v. Hathcock, 684 N.W.2d 765 (Mich. 2004), has responded to Prof. Dana with his own essay, Is Post- Kelo Eminent Domain Reform Bad for the Poor?, 101 N.W. U. L. Rev. 1931 (2007). Although Somin generally agrees with Dana that scholars should devote more attention to understanding the practical effects of post- Kelo reform efforts, he strongly disagrees with most of Dana’s claims. First, he argues that of the 35 states that had enacted post- Kelo reforms by the time of his essay’s publication, at least 17 of the reforms offer little or no protection to any property owner—whether poor, middle class, or upper class. This is the case because they contain blight exceptions that are so broad (typically geared to “sound growth” or “economic or social liability”) that virtually any condemnation whose actual goal is economic development can be justified on the basis of blight eradication. Of the remaining “reforms” that do offer substantial new protection to property owners compared to what existed before Kelo, a good half dozen ban both economic development as well as blight takings or come close to accomplishing the latter by banning the transfer of the condemned blighted property to private parties or by limiting blight condemnations to extreme cases where property is unsafe for human occupation. As to the remaining states, Somin explains, only nine actually fit Dana’s description of reforms that protect middle- and upper-class property owners without substantially protecting the poor from blight condemnations. But even in these states, Sonim argues, the reform efforts are not worthless or harmful. They can offer additional protection for poor persons, especially if they live in nonblighted areas that are nevertheless vulnerable to economic development takings. (Here Somin has in mind residents of communities like Poletown, whose working class Detroit neighborhood was notoriously condemned to make way for a GM factory in the name of economic development.) Finally, Somin discusses intriguing survey evidence to rebut Dana’s “expressive harm” theory. This evidence suggests that lower-income individuals and renters generally oppose economic development takings and support post- Kelo reform efforts with as much fervor as supposedly more favored middle- and upper-class individuals and homeowners. This opposition may stem from many factors, at least one of which is many poorer households’ firsthand or indirect exposure to urban renewal condemnations. In the end, Somin makes a strong case for either banning blight condemnations altogether or at least limiting them much more carefully to make sure they are not used to benefit developers and high-income individuals at the expense of the poor, outcomes that Dana would probably welcome, too.
Sign Amortization and Takings. Many states have enacted sign amortization laws, which require the removal of certain preexisting signs after a specified number of years. A few state courts have found such laws to be unconstitutional, but most courts, including the U.S. Supreme Court in Markham Advertising Co., Inc. v. Washington, 393 U.S. 316 (1969), have rejected constitutional challenges under both the First and Fifth Amendments to the U.S. Constitution and similar provisions of state constitutions. In Sign Amortization Laws: Insight into Precedent, Property, and Public Policy, 35 Cap. U. L. Rev. 891 (2007), Prof. Stephen Durden criticizes the latter decisions as relying on conclusionary assertions that the laws serve legitimate governmental interests under the police power—primarily traffic safety and aesthetic interests. Durden urges that recent developments in Supreme Court takings jurisprudence now warrant a new look at sign amortization laws. The key development, he says, is the Supreme Court’s decision in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005). Lingle repudiated the so called “ Agins test,” which implied that municipal land use regulations must “substantially advance legitimate state interests” to pass constitutional muster. Id. at 531. This holding, he contends, effectively undercuts the rationales offered by the Supreme Court in Markham and several leading Florida Supreme Court decisions for upholding the constitutionality of sign amortization laws. Durden calls for courts to look more closely at the nature of the property interests at stake when sign amortization laws declare previously legal signs illegal. They should question whether the distinction between on-site and off-site signage has any constitutional significance. They should more carefully consider the magnitude and character of the burden that the laws impose on those property interests. And they should apply the various factors of the Supreme Court’s Penn Central approach to regulatory takings analysis with more rigor.
California allows victims of domestic violence, sexual assault, or stalking to terminate a residential tenancy. The tenant must notify the landlord that the tenant has been a victim of domestic violence and intends to terminate the tenancy. The tenant must give notice within 60 days after the date of a judicial order or a peace officer’s report. The tenant may quit the premises and is discharged from payment of rent for any period following 30 days from the date of the notice. Other tenants obligated on the lease are not released. 2008 Cal. Stat. 440.
Delaware provides for licensing and regulation of mortgage loan originators by the state bank commissioner. A mortgage loan originator is defined broadly to include any person who negotiates, solicits, explains, or finalizes the terms of a mortgage loan on behalf of an originating entity, who is an independent contractor, and who is compensated by such originating entity in whole or in part, either directly or indirectly. Mortgage loan originators do not include clerical workers, substantial equity owners, and officers or managers who do not communicate directly with the customers. Mortgage loan originators must meet educational requirements, pass a test, and obtain a license. 76 Del. Laws 421 (2007).
Delaware adopts the Mortgage Rescue Fraud Protection Act. Like many other jurisdictions, Delaware enacts legislation to prevent fraud and overreaching against mortgagors who are in default on a debt secured by a security interest in residential real property. The Act imposes stringent requirements on those who attempt to profit from the growing number of mortgage defaults. “Foreclosure consultant” is broadly defined to include anyone who solicits or contacts a homeowner and represents or offers to provide services for a pending foreclosure. Lawyers and others who are normally involved in the process are generally exempt. 76 Del. Laws 419 (2007).
Illinois adopts the Uniform Environmental Covenants Act. Environmental covenants are established as an interest in real property. The covenants arise as a result of environmental remediation or mitigation that imposes activity and use limitations on the property. The covenant is perpetual, unless otherwise specifically limited. It attaches to the property, runs with the land, and cannot be extinguished except in accordance with its terms. Such covenants must be recorded and approved by the state department of environmental protection or the relevant federal agency. 2007 Ill. Laws 845.
New Jersey enacts the Permit Extension Act of 2008. The purpose of the Act is to extend permits for the development of real property until at least July 2010. The legislation acknowledges the current economic recession and difficulty of obtaining capital for development. Numerous permits are exempted from the Act, including permits with specified expiration dates and certain environmentally sensitive permits. 2008 N.J. Laws 78.
New Jersey adopts the Save New Jersey Homes Act of 2008. The purpose of the legislation is to prevent or reduce foreclosures by providing eligible borrowers with a three-year extension “during which the interest rate on the introductory rate mortgage shall not increase above the original introductory rate.” The borrower must complete and return a certification of extension to the creditor in accordance with the provisions of the law. Among other promises, the borrower must (1) agree to continue to pay monthly payments at the introductory rate during the period of extension, (2) agree to pay taxes, insurance, and any other amounts due under the terms of the mortgage, (3) agree to pay any interest deferred by the extension, and (4) agree to execute necessary modifications of the mortgage instruments. In addition to the usual federal supremacy issues, this Act, which applies “[n]otwithstanding any law or contract right to the contrary,” raises substantial constitutional issues. 2008 N.J. Laws 86.
New York requires 90-day notice before foreclosure of high-cost or subprime residential mortgage loan. The lender must send the notice after default and in accordance with specific statutory requirements. The lender cannot commence a foreclosure action before the 90-day period expires. The Act also imposes substantial additional duties on mortgage brokers and servicers. Criminal penalties are established for residential mortgage fraud, which includes any written statement that contains materially false information or conceals information about any material fact. 2008 N.Y. Laws 472.
North Carolina enacts the Emergency Program to Reduce Home Foreclosures Act. For subprime loans, mortgage servicers are required to mail to borrowers a written statement about the availability of resources to avoid foreclosure at least 45 days before the filing of a notice of hearing in a foreclosure proceeding on a primary residence. The commissioner of banks can extend the time by an additional 30 days. 2008 N.C. Sess. Laws 226.