Keeping Current

Probate & Property Magazine, September/October 2009, Volume 23, Number 5

Keeping Current | Property 

Keeping Current—Property Editor: Prof. James C. Smith, University of Georgia, Athens, GA 30602, jim@uga.edu. Contributing editors: Prof. William G. Baker, Prof. Ronald Benton Brown, Prof. Matthew J. Festa, Prof. Shelby D. Green, and Prof. John A. Lovett

Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

CASES

EASEMENTS: Conservation easement allowing “residential recreational purposes” does not allow use of land for fee-generating recreational activities sold to the public . The owners purchased 100 acres of land of which the rear 85 acres were subject to a conservation easement. The easement was created “to preserve and protect in perpetuity the natural, open space, scenic, aesthetic and ecological features and values of the Property while not limiting the [owners’] power to utilize the property for residential recreational purposes.” The owners originally planned to hold country musical festivals on the front 15 acres and establish a campground on the protected parcel where the attendees could set up. They abandoned these plans, then decided to use the logging roads on the protected parcel for wagon rides and horse-drawn sleigh rides, hiking, snowshoeing and Nordic skiing, and use a pond on the protected parcel for fishing and ice-skating, all made available to “their paying guests.” The court enjoined the owners’ proposed uses because they would interfere with the conservation easement. The owners argued that the term “residential recreational purposes” should be interpreted by giving the word “residential” the meaning typically used in land use law. The court declined to do so, stating that in “evaluating the language of a deed, courts should give effect to the common or everyday meanings of the words in the instrument.” Whether the two tests would have produced different meanings is unclear, but the court determined that the phrase referred unambiguously to recreational activities by residents who regularly lived on the front 15 acres. The court rejected the owners’ argument that the deed permitted the proposed use because it occasionally referred to “recreational use” without the “residential” modifier and to the owners’ right of “general enjoyment” of the protected parcel. Instead, the court explained, “when the terms are read in the context of the deed as a whole, it was evident that the parties intended the more specific term, ‘residential recreational purposes’ to trump any more general terms.” Windham Land Trust v. Jeffords, 967 A.2d 690 ( Me. 2009).

EMINENT DOMAIN: Tenant may not recover part of condemnation award allocated to fixtures when lease has clause that automatically terminates lease on condemnation. A commercial lease contained a clause that automatically terminated the lease in the event of condemnation. The lease also provided, however, that the lessor “shall not be entitled to any award made to [lessee] for the fair value of, and cost of removal of stock and fixtures, provided a separate award is permitted by the taking authority directly to [lessee].” The court-appointed commissioners assessed the value of land and improvements at $2.4 million and the value of “Immovable Fixtures” at $360,000. The trial court awarded the $360,000 to the tenant, but the appellate court reversed. Because the lease automatically terminated on condemnation, the tenant did not have a compensable interest at the time of the condemnation. Even so, the landlord and the tenant could agree to a split of the landlord’s condemnation award. Was that what the lease required? The court observed that the condemnation award clause was “somewhat confusing” because that “taking authority” does not determine the recipient of a condemnation award; that decision is made by the commissioners, the court, or by lessor and lessee under an agreement. The court held for the lessor because “[t]he commissioners clearly did not make a ‘separate award’ ‘directly’” to the lessee. The editors question whether this decision effectuates the parties’ probable intent. The case highlights the need for careful drafting in commercial leases. From the lessee’s perspective, the lease document should have delayed termination until the completion of all condemnation proceedings and should have provided for the lessee to receive any condemnation funds specifically attributable to stock and fixtures, regardless of the form of the award. Metropolitan Airports Comm’n v. Noble, 763 N.W.2d 639 ( Minn. 2009).

LANDLORD-TENANT: Retaliatory eviction doctrine does not prevent landlord from terminating lease because tenant brought action to recover damages for personal injury. A motel employee rented a room at the Pipeline Inn where he worked on a month-to-month basis. After work one day he slipped and fell on the property, breaking his leg. Initially he was unable to work, but he later resumed work at the motel on a part-time basis. The tenant hired an attorney, who attempted to negotiate a settlement whereby the motel would pay the tenant’s medical expenses. Then the motel terminated his employment and sent him a letter terminating the tenancy. The tenant sued, asserting negligence and retaliatory eviction under the Uniform Residential Landlord and Tenant Act (URLTA). The URLTA prohibits a landlord from retaliating against a tenant “by increasing rent or decreasing services or by bringing or threatening to bring an action for possession after the tenant has . . . sought to enforce rights and remedies granted the tenant” under the URLTA. Alaska Stat. § 34.03.310(a). The trial court granted a directed verdict for the motel on the retaliatory eviction claim, and the landlord prevailed with a jury verdict on the negligence claim. The supreme court affirmed, reasoning that the tenant’s right to seek damages for personal injury was not granted by the URLTA, but arose under tort law. Two justices dissented, focusing on the URLTA requirement that the landlord “keep all common areas of the premises in a clean and safe condition.” For reasons of public policy, they argued, tenants should not risk losing their home if they seek compensation because of injuries caused by unsafe conditions on the premises. Some language in the majority opinion suggests that the tenant could have prevailed if his attorney had framed the issue in terms of habitability and common area maintenance, rather than only in the vocabulary of tort law. Helfrich v. Valdez Motel Corp., 207 P.3d 552 (Alaska 2009).

MINERALS: Indian tribe may not invoke statutes to impose fiduciary duty on Secretary of Interior to approve coal mining royalty rate increase. The Navajo Nation sued the United States in the Court of Federal Claims in 1993 alleging that the Secretary of the Interior violated fiduciary duties owed to the tribe by failing timely to approve royalty rate increases under a 1964 coal mining lease. The terms of the lease stated that the royalty rates were subject to “reasonable adjustment by the Secretary of the Interior” after 20 years. The tribe alleged that the Secretary breached a fiduciary duty to act in the tribe’s best interest by delaying action on an administrative appeal of the rate increase. The tribe alleged that jurisdiction was proper under the Indian Tucker Act, which abrogates the federal government’s sovereign immunity for certain claims by Indian tribes. 28 U.S.C. § 1505. The Supreme Court ruled against the tribe’s claim in 2003, holding that the tribe failed to establish jurisdiction under the Indian Tucker Act by (1) identifying a substantive source of law that establishes a specific fiduciary duty owed to the tribe and (2) showing that the law mandates compensation for a breach of that duty. United States v. Navajo Nation, 537 U.S. 488 (2003) ( Navajo I ). The Court of Appeals for the Federal Circuit reinstated the tribe’s claim by holding that a fiduciary duty toward the tribe was created by the Navajo-Hopi Rehabilitation Act of 1950, 25 U.S.C. §§ 635(a), 638, and the Surface Mining Control and Reclamation Act of 1977 (SMCRA), 30 U.S.C. § 1300(e). In Navajo II, the Supreme Court ruled unanimously once again to reject the tribe’s jurisdictional claim. Justice Scalia’s opinion held that the Navajo-Hopi Rehabilitation Act is inapplicable because the coal mining lease was executed under the terms of the Indian Mineral Leasing Act of 1938, 25 U.S.C. §§ 396a to 396g, which had been the subject of the decision in Navajo I. The SMCRA is not applicable because it only applies to mineral leases “issued” after 1977. The Court also ruled that no fiduciary duty is created by the federal government’s “comprehensive control” over coal on Indian land. Justice Souter concurred, joined by Justice Stevens, stating that while he disagreed with the Court’s holding in Navajo I, that precedent dictates the outcome in Navajo II. United States v. Navajo Nation, 129 S. Ct. 1547 (2009) ( Navajo II ).

TREES: Tree removal ordinance requiring landowner either to replace removed tree or to contribute to fund for planting trees or shrubs on public property elsewhere in community is valid exercise of police power . A township adopted an ordinance regulating the removal of trees, making it unlawful to cut down, damage, poison, or otherwise destroy a tree without a permit from the township forester. The ordinance contained a tree replacement scheme: one-to-one replacement for subject trees on other treeless areas of the property, with sizes and densities prescribed. If tree replacement was not feasible, the landowner would pay a replacement fee into a fund to be used by the town to plant trees and shrubs elsewhere in the town. A builders’ association challenged the ordinance, arguing, among other things, that because a fee from a tree removed at one end of the town might pay to plant a new shrub on township property more than a mile away, the planting bore no rational relationship to the source of the fees and did not remedy the negative effects of tree removal. The trial court agreed, finding that the payment in escrow for trees not to be replaced on-site failed to address the evils sought to be controlled by the regulation and that the town had failed to establish the requisite nexus between the planting of trees on the public property and the prevention of the evils identified by the ordinance. In reversing, the supreme court explained that although ordinances enacted under the police power are presumptively valid, they are yet subject to the constitutional limitation that they not be unreasonable, arbitrary, or capricious and that the means selected by the legislative body have a real or substantial relation to the object sought to be attained. The trial court erred, however, in applying this test, first, by placing the burden on the township to justify the ordinance and, second, by adopting a narrow and crabbed interpretation of the ordinance that focused on a single goal, omitting consideration of the broader aims underlying it. In particular, the trial court overlooked the legislative finding that tree removal anywhere in the township affected the health, safety, and general well-being of all inhabitants of the township and that maintaining overall biomass for the township by planting trees and shrubs anywhere in the township would go to mitigate these effects. Although replacing trees on the property from which they were removed would be the optimal means of responding to the evil effects of tree removal, the court pointed out that an ordinance is not invalid merely “because it could have done more to combat the evils which it seeks to address.” New Jersey Shore Builders Ass’n v. Township of Jackson, 970 A.2d 992 (N.J. 2009).

LITERATURE

Inclusive Design and Private Residential Housing. Too often American property lawyers think in terms of a simple dichotomy between public space and private space. The former is understood to be subject to extensive federal, state, and local regulation designed to make certain places (schools, government offices, courthouses, museums, public accommodations) accessible to people with mobility impairments. The second category is often regarded as immune from any kind of accessibility design control. In his important new article, Inclusion by Design: Accessible Housing and Mobility Impairment, 60 Hastings L. J. 699 (2009), Prof. Robin Paul Malloy challenges this false dichotomy and argues that the time has come for the United States to adopt inclusionary design norms for the construction of all new single family private housing. His argument rests on three essential premises. First, Malloy demonstrates that almost all private housing, even if constructed by an individual for her own personal use, has an undeniable public dimension. Here, Malloy is careful to distinguish between the private space of a home and the more public nature of housing. All private housing, he argues, is a type of quasi-public resource because it tends to last much longer than the typical ownership period of its first builder-owner or any single owner. Housing also becomes a quasi-public resource in times of crisis when mass evacuations are necessary as we witnessed after Hurricane Katrina. Private housing also has a public component, Malloy notes, because it benefits from significant public subsidies in the form of mortgage interest deductions from federal taxes and the federal government’s implicit (and now explicit) support of the secondary market for residential mortgage financing. Second, he argues that the private marketplace fails to produce optimal outcomes—sufficient construction of accessible housing—because owners fail to anticipate their own need for, or the long-term market demand for, more accessible housing options. In short, they do not internalize the externalities created by initially building with exclusionary designs. In addition, path dependency makes many developers resistant to adopt new inclusionary designs. Third, Malloy points out the ever-growing number of Americans who will themselves experience a lack of mobility at some point in their lives or whose family members or close friends will experience mobility impairment. All of these facts, he argues, justify the creation of a uniform national design standard that would require all new private housing to be at least capable of being safely and easily visited for an extended period of time by a mobility impaired person. The costs of achieving these standards should not be that great, Malloy advises, if the necessary design features are built-in at the time of initial construction and if the standards become sufficiently widespread that economies of scale kick in and reduce the price of the necessary products. Reaching this vision of accessibility, Malloy concludes, will help the United States achieve its promise of being a fully open and inclusive society.

Estates and Future Interests. The American common law system of estates and future interests is a source of puzzlement to law students and still, occasionally, a source of malpractice claims to practicing lawyers. Over the years, numerous academics and law reform groups have proposed reforms—sometimes radical—to the confusing array of present estates and future interests. Now into the debate enters Prof. D. Benjamin Barros with his new article, Toward a Model Law of Estates and Future Interests, 66 Wash. & Lee L. Rev. 3 (2009). Barros’s aim, as his title suggests, is to offer a model law (not a uniform law) that state legislatures could consider as the basis for future law reform efforts seeking to simplify or rationalize our inherited common law estates system. Barros’s proposed model law is not particularly radical. It aims for “enactibility,” not revolution. It thus seeks to consolidate long-emerging trends in case law and in statutory enactments, while leaving for another day highly controversial ideas—like abolition of the rule against perpetuities—that have caused other reform proposals to founder. Chief among Barros’s suggested changes are (1) complete abolition of the fee tail and fee simple conditional; (2) elimination of the distinction between shifting and springing executory interests; (3) elimination of the distinctions among the fee simple determinable, the fee simple subject to condition subsequent, and the fee simple subject to executory limitation and their replacement with a single “Fee Simple Defeasible”; (4) elimination of any distinction between future interests created in a grantor and those created in a grantee; and (5) ending the distinction between contingent remainders and executory interests. Barros’s map of estates in land and future interests thus would look much simpler than what American case books and treatises still present. Instead of nine estates in land, there would only be the Fee Simple Absolute, the Life Estate, the three classic leasehold tenancies (the Term of Years, the Periodic Tenancy, and the Tenancy at Will), and “Defeasible Interests.” Rather than eight brands of future interests there would be only two: Vested Future Interests (subdivided into Indefeasible Vested Future Interests, Defeasibly Vested Future Interests, and Vested Future Interests in an Open Class) and Contingent Future Interests. In addition to this useful effort at re-categorization, Barros also recommends some specific rule changes, often drawn from the Restatement (Third) of Property: Wills and Other Donative Transfers (Prelim. Draft No. 12, 2007). Interesting examples are the suggestion that the measuring life for a life estate must be a human life and not that of a corporation, an animal, or any nonhuman entity; the recommendation that the unified fee simple defeasible estate should terminate only on the exercise of the accompanying contingent future interest by its holder; and finally the suggestion that all contingent future interests be prospectively subject to the rule against perpetuities. Happily, Barros concludes his instructive article by providing a tidy appendix setting forth the entirety of his proposed scheme along with succinct definitions and explanations of the new categories and the accompanying rules.

Property and Social Status. Material possessions are important to many individuals not just because they satisfy immediate needs and desires for sustenance, shelter, and entertainment, but also because they often define who we are in society. Property, in other words, serves not just tangible economic needs, but also communicates important messages about our social status. This status signaling function of property is the subject of Prof. Nestor M. Davidson’s important new article, Property and Relative Status, 107 Mich. L. Rev. 757 (2009). Davidson, one of the rising stars in property theory today and a recent recruit into the Obama Administration’s new leadership team at the Department of Housing and Urban Development, draws on and synthesizes a vast array of research from the fields of sociology, psychology, economics, and anthropology to explore the status-signaling function of property. He argues that understanding this function can complicate and enrich the three leading “discourses” about the role and purpose of property today. First, it challenges the law and economics-oriented explanation of property as primarily a tool to incentivize economic activity and risk taking and to allocate scarce resources. Status signaling, he claims, can lead to over-incentivizing the pursuit of (and thus over-investment in) certain “positional,” status-enhancing goods, to excessive materialism, and to economically inefficient status races, all at the expense of investment in goods or activities that might produce more actual well-being. Second, it complicates the idea that property’s primary purpose is to enhance the individual’s sense of identity and “personhood” because status signaling may lead many individuals to spend too much time defining themselves in terms of other people’s possessions and especially in terms of the symbolic meaning created for certain objects by mass advertising. Finally, it even complicates the communitarian vision espoused by some theorists who see property as an institution that establishes webs of social relationships that are as much about tying people together in a community as about negative liberty. Here, property’s status-signaling function can contribute to the potential of some close knit communities to use property and property law to practice exclusion of others and outsiders. Turning to doctrine, Davidson does not claim that understanding status signaling will lead to a complete overhaul of any major fields of property law, but he does suggest ways in which such an understanding might further enrich some doctrinal developments. His doctrinal analysis is most intriguing when he focuses on land use law and suggests that some exclusionary zoning law practices and common interest community rules are better understood as attempts by majorities in some communities to protect and control the status signaling qualities of their homes rather than as conflicts between individual property rights and broader social claims on their properties. In the end, Davidson’s article on property and relative status is theoretically challenging and should be read by those who want to keep up with one of the most important, cutting-edge property law scholars in the academy today.

LEGISLATION

Alabama adopts the Uniform Real Property Electronic Recording Act. Electronic signatures, filing, recording, and storage are authorized by the Act. Unfortunately for those who would like to see the world of real property recording move into the 21st century, adoption of the Act does not result in electronic recording. Many other barriers, statutory, regulatory, customary, and financial, must be breached before electronic recording becomes the norm in real estate transactions. The Uniform Real Property Electronic Recording Act has been adopted by at least 18 states. 2009 Ala. Acts 510.

Alabama authorizes the publication of probate documents on the Internet. The person filing or recording the documents with the probate office must redact or make illegible the Social Security number or birth date appearing on the documents. The judge of probate may redact or make illegible a Social Security number or birth date appearing in recorded documents. 2009 Ala. Acts 567.

Alabama enacts the Alabama Manufactured Home Certificate of Title Act. This Act establishes a title law specifically for manufactured homes, including registration, liens, and transfers. 2009 Ala. Acts 746.

Alabama enacts the Alabama S.A.F.E. Mortgage Licensing Act of 2009. The Act provides for the licensing and regulation of mortgage loan originators, and it coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Ala. Acts 627.

Colorado adopts the Colorado Designated Beneficiary Act. The Act provides protections and benefits to unmarried couples (both different sex and same sex) who designate each other as beneficiaries. The rights under the Act are similar to the benefits granted to married couples. The terms of subsequent wills, trusts, powers of attorney, and so on, will override the designated beneficiary agreement. 2009 Colo. Sess. Laws 107.

Colorado enacts the Uniform Durable Power of Attorney Act. By default, financial powers of attorney under the Act are durable. The principal must sign the power, and the power becomes presumptively valid if the signature is acknowledged. Witnesses are not required. Provisions are made for electronic signatures. The Uniform Durable Power of Attorney Act, promulgated in 2006, has been adopted by at least three states. 2009 Colo. Sess. Laws 106.

Colorado modifies its mortgage broker licensing act. The revised Act coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Colo. Sess. Laws 303.

Florida imposes limits on lis pendens. The Act authorizes the sale of real property exempt from a recorded lis pendens when it has expired, been withdrawn, or been discharged. 2009 Fla. Laws 39.

Georgia modifies its licensing of mortgage lenders and mortgage brokers. The revised law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Ga. Laws 66.

Idaho adopts the Idaho S.A.F.E. Mortgage Licensing Act of 2009. The Act coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Idaho Sess. Laws 97.

Indiana enacts the Transfer on Death Property Act. A transfer on death deed is revocable until the death of the grantor. The beneficiary has no rights in the property before death. The Act applies to both real and personal property. 2009 Ind. Acts 143.

Indiana encourages foreclosure prevention agreements for residential mortgages. Before foreclosure of a residential mortgage, the mortgagor and mortgagee must conduct a settlement conference. The parties are encouraged to enter into a foreclosure prevention agreement, as outlined by the statute. 2009 Ind. Acts 105.

Indiana modifies its law for mortgage loan originators, lenders, and brokers. The revised law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Ind. Acts 156.

Indiana regulates escrow transactions in real estate closings. The Act establishes good funds rules and rules for escrow accounts. 2009 Ind. Acts 92.

Maine mandates smoke and carbon monoxide detectors. The detectors must be powered by both electrical service and batteries. They must be installed in apartments, new residential construction, and all other residential property that is transferred after October 1, 2009. 2009 Me. Laws 162.

Maine regulates real estate settlement agents and exchange facilitators. The law establishes license and insurance requirements. Attorneys while engaged in the performance of professional duties are exempt. 2009 Me. Laws 61.

Maryland modifies the law regulating mortgage lenders and mortgage loan originators. The revised law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Md. Laws 4.

Montana expands the coverage of its mortgage broker and loan originator act to include mortgage lenders. The revised law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Mont. Laws 321.

Nebraska changes provisions relating to mortgage origination and installment loans. The revised law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Neb. Laws 328.

Nevada enacts the Uniform Durable Power of Attorney Act. By default, financial powers of attorney under the Act are durable. The principal must sign the power, and the power becomes presumptively valid if the signature is acknowledged. Witnesses are not required. Provisions are made for electronic signatures. The Uniform Durable Power of Attorney Act, promulgated in 2006, has been adopted by at least three states. 2009 Nev. Stat. 64.

New Mexico adopts the Appraisal Management Company Registration Act. Under this Act, an appraisal management company, defined as a person who administers appraisers to fulfill requests for appraisal services, must register with the state appraisal licensing board, file a bond, and otherwise comply with the board’s rules. The Act imposes stringent requirements on appraisal management companies to reduce fraud in the appraisal process. 2009 N.M. Laws 214.

New Mexico enacts the New Mexico Mortgage Loan Originators Act. A mortgage loan originator is an individual who for compensation or gain or in the expectation of compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan. Mortgage loan originators must meet educational requirements, pass a test, and obtain a license. The law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 N.M. Laws 122.

Oklahoma adopts the Oklahoma Carbon Capture and Geologic Sequestration Act. The Act establishes a regulatory scheme for an applicant to obtain a permit for the operation of a carbon sequestration facility. 2009 Okla. Sess. Laws 429.

Oklahoma modifies its law on mortgage brokers and mortgage loan originators and enacts the Oklahoma Secure and Fair Enforcement for Mortgage Licensing Act. Under the Act, a mortgage loan originator means an individual who for compensation or gain or in the expectation of compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan. Mortgage loan originators must meet educational requirements, pass a test, and obtain a license. The law coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Okla. Sess. Laws 190.

Virginia enacts the Uniform Durable Power of Attorney Act. By default, financial powers of attorney under the Act are durable. The principal must sign the power, and the power becomes presumptively valid if the signature is acknowledged. Witnesses are not required. Provisions are made for electronic signatures. The Uniform Durable Power of Attorney Act, promulgated in 2006, has been adopted by at least three states. 2009 Va. Acts 830.

Washington modifies its law for mortgage loan originators, lenders, and brokers. The Act coordinates with the Nationwide Mortgage Licensing System and Registry and the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 2009 Wash. Laws 120.

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