Feature

Keeping Current—Property

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

DEEDS: Nullem tempus does not preclude operation of curative act to validate deed out of decedent’s estate before federal tax lien can attach. In 1998, a grantor executed a deed purporting to convey real property to a trust for his son’s benefit. Unfortunately, the deed lacked a second witness as required by statute, Fla. Stat. § 689.01, which effectively negated the conveyance. After the grantor died in 2005, the federal government assessed an estate tax and filed a tax lien on the property, which it maintained remained in the estate because of the defect. The trustee filed a quiet title action, contending that the tax lien did not cover the property because a curative act, Fla. Stat. § 95.231, had operated to cure the defect to validate the deed before the grantor died. The act cures technical defects five years after recording. The district court granted summary judgment to the government, holding that a missing witness was not among the defects the statute operated to cure and that insomuch as the act was essentially a statute of limitations, it did not bind the United States, under the nullem tempus (no time runs against the king) principle articulated in United States v. Summerlin, 310 U.S. 414 (1940). The Eleventh Circuit reversed, first finding that a missing witness was expressly curable and that the act was self-executing; there was no requirement for a court judgment to cure. The court went on to acknowledge the historical purpose of the nullem tempus principle but noted that it had its limits, such as when the statute of limitations has expired before the United States acquires its claim. The principle did not apply here because, by operation of the curative act, the property dropped out of the estate in December 2003, five years after recordation of the deed and two years before death of the grantor. The government’s claim did not accrue before the grantor’s death. Saccullo v. United States, 913 F.3d 1010 (11th Cir. 2019).

 

DEEDS: Failure of grantee to fulfill either of alternative conditions terminates estate in favor of executory interest. In 1972 the town hermit, in a gesture to repay kindnesses bestowed by White, conveyed to him a ten-acre tract of land on the south side of a road

on condition that [White] may desire to and erect some building on said land and live there either part time or year around. There is, however, no requirement that he live or build on the south side of the road if he were to acquire one or more acres on the north side of the road, which would be a far better building location. . . . The main condition being that this be done within ten years, and that [White] has not in some way acquired title to any other area. . . . In case [White] does acquire a more attractive land area to live on or to build a house on, this land area should be transferred to Brigitte [Auger]. . . .

White never built or lived on the land and never acquired other land. In 2016 White attempted to sell the land, but the sale fell through because the prospective purchaser was concerned that White might not hold title free of claims by the other grantee in the deed. White brought a quiet title action, but the trial court ruled for Auger, finding that the deed transferred ownership in the event that White did not live or build on the land within ten years. The supreme court affirmed, finding the deed unambiguous: it explicitly conveyed the land to White on the condition that he “erect some building on said land and live there.” Although the deed allowed White to acquire a different area, the main condition required building and living on the land within ten years. Although the following clauses referring to White not acquiring other land did not explicitly repeat the ten-year language, the court concluded these clauses were part of the main condition and subject to the ten-year limit. The court also held that a 2008 state statute abolishing executory interests applied only to interests created after the enactment of the statute. The executory interest here predated the statute. White v. Auger, 2019 N.H. LEXIS 4 (N.H. Jan. 11, 2019).

 

LANDLORD-TENANT: Exculpatory clause for “all claims and liabilities” arising from hazard covered by insurance precludes tenant’s action for landlord’s negligence in remodeling leased premises. Hardin Creek leased commercial premises to The Pasta Wench, a pasta manufacturing and distribution business, for a three-year term expiring in 2014. Sidney Greene signed as president of Hardin Creek. The lease, a standard form prepared by Hardin Creek, included several clauses covering insurance and liability. An alterations clause outlined the tenant’s right to change the premises as necessary to suit its needs but further stated that landlord and tenant agreed to “discharge each other from all claims and liabilities arising from or caused by any hazard covered by insurance on the leased premises.” Another paragraph titled “Insurance” referenced the tenant’s duties to maintain insurance in accordance with “sub-paragraphs (a) and (b)” and to indemnify the landlord under “sub-paragraph (c).” However, the section contained no sub-paragraph (c). When a government inspection determined the premises to be structurally noncompliant, Greene, a licensed contractor and the owner of a construction company, agreed to undertake the work in exchange for the tenant’s extension of the lease to 2018. The construction work was done negligently, leading to pipes bursting and the flooding of the tenant’s premises and causing losses so substantial that, despite insurance, the tenant was forced out of business. The tenant sued the landlord, alleging negligence and contract violations. The trial court granted summary judgment for the landlord, citing the exculpatory clause regarding premises insurance as unambiguous and a complete defense to the complaint. A split appellate court reversed, the majority ruling that the exculpatory clause and the insurance provisions of the lease had to be read together to determine the meaning of “covered by insurance” but that the insurance section was facially defective because of the missing sub-paragraph. That court also stated that a contract will not be interpreted to exempt liability for negligence in the absence of clear, explicit words stating that was the parties’ intent. A split supreme court reversed. Focusing solely on the exculpatory clause, the majority noted that contracts exempting persons from liability from negligence are disfavored and strictly construed against those relying on the document. But nothing required the inclusion of the term “negligence” in a contract for an exculpatory clause to be enforceable, and the clause here referred to “all claims.” The court declined to engage in “creative interpretation” to read into the clause an exception for negligence when the parties failed to include it. Because the tenant’s losses were covered by insurance, although inadequate, the plain language barred tenant’s actions against the landlord. The dissent chastised the majority for not viewing the evidence in the light most favorable to the non-movant for summary judgment and for not interpreting the exculpatory language strictly against the landlord-drafter. Agreeing with the appellate court, the dissent insisted that the parties’ intent should be gleaned from review of the whole contract, as opposed to singling out one clause without reference to the rest. Morrell v. Hardin Creek, Inc., 821 S.E.2d 360 (N.C. 2018).

 

LIENS: Real property passing to tortfeasor’s heirs is liable to claim of tort creditor. In 2009 Gregory filed an action against Hardgrove to recover damages for an injury sustained at a motor speedway owned by Hardgrove. Hardgrove died intestate the same year, survived by his children, who were his heirs at law. In 2013, a civil court entered judgment for Gregory, who filed a judgment lien against the estate’s real property in 2014. Before the judgment lien filing, a lender filed a mortgage foreclosure action, which did not name Gregory, with respect to decedent’s real property. Gregory filed a motion to intervene in the foreclosure case, requesting a sale of the property to satisfy his judgment. The trial court dismissed Gregory’s claims as “inchoate” at the time of the decedent’s death, stating that the decedent’s property passed to his heirs by operation of law subject only to liens existing at that time. The appellate court affirmed. The supreme court reversed, finding Gregory was a creditor of the estate when Hardgrove died and had a claim against the property that descended to the heirs. Under Ky. Rev. Stat. § 411.140, “[n]o right of action for personal injury or for injury to real or personal property shall cease or die with the person injuring or injured,” and an action may be brought against heirs. The statute reflects longstanding case law that, after judgment, real property of one who dies intestate may be sold to settle claims against the decedent. Real property cannot pass free and clear to heirs when the personal property of the estate is insufficient to cover the claims of creditors. Gregory v. Hardgrove, 562 S.W.3d 911 (Ky. 2019).

 

MORTGAGES: Mortgage stating a ten-year term is discharged five years after term expires even though not satisfied by payment. In 1992, Waldron granted a mortgage to Providence as security for a loan of $70,660. The instrument stated a term of ten years with no other indication of a maturity date. The mortgage was recorded. In 1996, the parties entered into a modification agreement that reduced the debt to $44,061 and called for repayment over 108 months, beginning January 1, 1997. The modification agreement was not recorded. On the same day, the parties executed an amendment to the mortgage, which stated that 1992 mortgage was modified by consent to extend the maturity date and to reduce the debt to $44,061. However, the amendment did not refer to the 108-month term or any other maturity date. In 2007, Bayview obtained a second mortgage on the property. In 2017, Providence served the current owner of the property with a notice of foreclosure of the 1992 mortgage. Bayview filed a complaint seeking a declaration that the 1992 mortgage was discharged under the Rhode Island ancient mortgages statute, R.I. Stat. §34-26-7. Under the statute, a mortgage is discharged upon the expiration of 35 years from the date of recording, or in the case of a mortgage in which the term or maturity date is stated, five years from the expiration of the term or maturity date, unless an extension of the mortgage, or an acknowledgment by affidavit of the mortgagee that the mortgage is not satisfied, is recorded before the expiration of the applicable time period. The trial court ruled that the 1997 amendment was not effective to extend the 1992 mortgage because it was not recorded; instead, the 1992 mortgage was the operative instrument but had expired by its terms. The supreme court affirmed, relying on the unambiguous terms of the statute. Absent a maturity date stated in the mortgage, it ran for the stated ten-year term, plus five years following expiration of that term—that is, 15 years from 1992. The unrecorded modification agreement did not operate to extend the term. Bayview Loan Servicing, LLC v. Providence Bus. Loan Fund, Inc., 200 A.3d 153 (R.I. 2019).

 

MORTGAGES: Cotenant who signs mortgage but is not named in body of mortgage may be bound. Vodrick and Marcy Perry owned residential real property as joint tenants with the right of survivorship. Vodrick alone signed and initialed a promissory note payable to a mortgage lender. The mortgage on the property defined the borrower as Vodrick and the note as “the promissory note signed by the borrower.” The description of the property did not limit the mortgage to Vodrick’s partial interest, but the mortgage stated that any borrower who co-signed, but who does not execute the note, is only liable under the mortgage and has no obligation to pay the sums secured by it. At the bottom of the mortgage, Vodrick’s name was typed next to “Borrower” and Marcy’s name was handwritten next to “Borrower.” They each signed the mortgage above their respective names and designation and both initialed each page of the mortgage. After they filed for bankruptcy some years later, the trustee asserted that Marcy was not bound by the mortgage because she was not identified as a mortgagor in the instrument. The bankruptcy court denied the assertion. Because of apparently inconsistent rulings under state law, the bankruptcy appellate panel certified to the state court the question whether a signature would always bind a party to a mortgage irrespective of its terms; or whether a signature would never bind a party to a mortgage if the signatory’s name does not appear in the body of the mortgage. The court gave a qualified answer, finding the best position in the middle of the two propositions. It explained that, under state law, any formalities for mortgages are prescribed by statute. Nothing in the statute, Ohio Rev. Code § 147.541(C)(1), requires the mortgagor’s name to appear in the writing in order to be valid for recording; and nothing indicates that the “operative effect” of a mortgage agreement is dependent upon a mortgagor’s name appearing in the agreement other than in the mortgagor’s signature and acknowledgement. Because the name is not a formal requirement, the failure to include it is not fatal to the instrument as a matter of law. Nonetheless, the enforceability of the mortgage also has to be evaluated under contract law. A contract is enforceable if there is intent to be bound. That intent can be shown by a person’s signature; not being named in the body of the contract does not, in itself, negate a signatory’s intent to be bound. Bank of N.Y. Mellon v. Rhiel, 2018 Ohio LEXIS 3007 (Dec. 20, 2018).

 

PUBLIC TRUST: State has no affirmative duty to protect public trust resources from effects of climate change. In 2011, several Oregon children sued the state for declaratory and injunctive relief, asking the court to declare that the atmosphere, waters, and natural resources of the state were trust resources and that the state had an affirmative fiduciary duty under the public trust doctrine to protect those resources from the effects of climate change. The trial court dismissed the action on the ground that the claims were non-justiciable under the declaratory judgment act, but that ruling was reversed on appeal. On remand, the parties filed cross-motions for summary judgment. The plaintiffs lost again. In the trial court’s opinion, only submerged and submersible lands were part of the state’s public trust resources, and not navigable waters, beaches, shorelands, islands, fish and wildlife, nor the atmosphere as the plaintiffs asserted. On review, the appellate court did not address what natural resources constituted public trust resources, instead finding the dispositive issue to be whether the state has an affirmative fiduciary duty to protect public trust resources at all. It concluded that under long-held common law principles, the state’s duty is only to refrain from alienating or preventing access to its public trust resources. It is not to protect such resources from harm. Nothing in the common law imposes an affirmative fiduciary duty on the state analogous to a trustee’s duty under the law of trusts. The court went on to clarify that the use of the term “trust” to describe the state’s public trust was just an “imperfect metaphor” to capture the idea that the state is restrained from impairing the public’s right to use public-trust resources. Chernaik v. Brown, 295 Or. App. 584 (Or. Ct. App. 2019).

 

RECORDING: Marketable title act extinguishes easement by necessity. In 2009, the Grays bought a landlocked 90-acre parcel, the Eaton lot. They already owned a 130-acre wooded lot, the Mountain lot, adjacent to the Eaton lot. They bought the Eaton lot after having lost a series of suits seeking to establish access to the Mountain lot, believing that the Eaton lot had either a deeded easement or an easement of necessity over the Front lot, which adjoined a public highway. In 2011, they filed suit alleging an easement of necessity over the Front lot. The defendants raised the Marketable Record Title Act (MRTA) as an affirmative defense. The trial court ruled that an easement by necessity arose when the Eaton lot was severed from the Front lot in 1948 and that the MRTA did not extinguish it because it was created as a matter of law by the severance deed, an exception to the MRTA (i.e., for any easements “granted, excepted, or reserved by a recorded instrument creating such easement”). Vt. Stat. tit. 27, § 604(a)(7). The supreme court reversed. An easement by necessity is not granted but is “a fiction of law” such that it is not covered by the exception. The easement holder failed to record notice of any interest in the easement, so the MRTA extinguishes it. In the court’s view, the broad purpose of the MRTA—to give bona fide purchasers repose with respect to claims of which they have no notice—prevails over any public policy against inaccessibility of land. Gray v. Treder, 2018 Vt. LEXIS 237 (Vt. Dec. 21, 2018).

 

SALES CONTRACTS: Subcontractor who is not in privity with a purchaser is not liable for breach of implied warranty of quality. A condominium association brought suit alleging that the newly constructed condominium buildings contained latent defects resulting in water infiltration and other conditions that rendered the units and common areas unfit for habitation. The defendants were the condominium developer and its general contractor, both of which entered bankruptcy before the plaintiff’s action, and several of the subcontractors who had worked on the condominium project. The complaint asserted each unit was subject to an implied warranty of habitability extending from every subcontractor. The subcontractors moved to dismiss, but the trial court denied their motion, agreeing with the association that the warranty should extend to the subcontractor when the developer-vendor is insolvent. On discretionary appeal, the supreme court addressed what it considered to be the threshold inquiry, i.e., whether a purchaser of a newly constructed home may assert a claim for breach of an implied warranty of habitability against a subcontractor who took part in the construction but who had no contractual relationship with the purchaser. The supreme court explained that loss recoverable under an implied warranty of habitability is a creature of contract, and absent any claim of personal injury or property damage, privity with the subcontractor is required to impose liability, even when the general contractor with whom the homeowner has privity is insolvent. The court expressly overruled an appellate court ruling holding otherwise. The court explained that this result is compelled by the need to preserve the distinction between tort and contract, denying a tort remedy to a party whose complaint is rooted in disappointed contractual or commercial expectations. Sienna Court Condo. Ass’n. v. Chapman Aluminum Corp., 2018 Ill. LEXIS 1244 (Ill. Dec. 28, 2018).

 

WATER: Water court jurisdiction over “water matters” does not extend to ownership of shares in water ditch company. A buyer of a ranch obtained water rights and shares of stock in a water ditch company as part of his purchase. When he purchased, the land was subject to a recorded conservation easement providing that all water rights “shall remain with the land.” Thirteen years later he sold the ranch and the water rights but did not include the shares in the sale. The holder of the easement sued him and obtained a judgment requiring him to convey the shares to his purchaser. The ranch seller then brought a separate action in the state’s water court for inverse condemnation under a theory of judicial taking. A water court has “exclusive jurisdiction of water matters” within its jurisdiction. Colo. Rev. Stat. § 37-92-203. The water court dismissed the case for lack of subject matter jurisdiction on the basis that “water matters” refers to water use, not ownership, pursuant to state supreme court precedent. The supreme court affirmed, construing its past cases distinguishing between cases involving water use and ownership of water rights. The property subject to the ranch seller’s taking claim, the supreme court concluded, was not the right to use water, but the actual shares in the water ditch company, which concerned ownership. The water court had properly dismissed the landowner’s case for lack of subject matter jurisdiction. Allen v. Colorado, 433 P.3d 581 (Colo. 2019).

LITERATURE

COTENANTS. Much of the land in Appalachia is held as “heirs property,” that is, property owned by cotenants many of whom are relatives who acquired title through inheritance without probate. Because title is fractionated and often some heirs are unknown, “heirs property” is often abandoned or neglected, resulting in concerns not only for wealth losses to the owners, but to society because of barriers to development. Prof. Jesse J. Richardson, in an article from a symposium on the social and economic past and plight of Appalachia, Receivership: Another Option for Partition of Heirs Property, 120 W. Va. L. Rev. 917 (2018), offers the tool of receivership as an effective and flexible device for protecting the interests of the co-owners, yet enabling the receiver to commission the rehabilitation of the property toward productive use. Although receivership is most often used in urban contexts, Prof. Richardson believes is it still well-suited to address the barriers to economic development presented by “heirs property” in rural Appalachia. A receiver would have the power to cause a forced sale of the property to consolidate ownership but would give present owners every opportunity to retain the property, compensating those whose interests are sold at as close to fair market value as the circumstances allow. He offers case studies from a number of cities that have successfully employed receivership, usually pursuant to legislation, to address abandoned and neglected properties. As he envisions its operation, receivership promises to be a useful adjunct or alternative to partition.

 

EASEMENTS. Easements are a mess. So begins Prof. Kenneth A. Stahl, in The Trespass/Nuisance Divide and the Law of Easements, 86 Geo. Wash. L. Rev. 966 (2018), in which he challenges the courts to reconceive easements under a different property law regime. Prof. Stahl asserts that easements are fraught with obfuscations, with outcomes often zero-sum. That is largely because courts need to employ fictions to prove consent as an exception to the right to exclude. He sees existing rules as formalistic; for example, the rule that an easement by necessity arises only if the necessity existed at severance, rather than coming later. He believes that at the heart of the problem is a category mistake—easements are treated as a species of the law of trespass, when they should be treated more as nuisances. This re-characterization would solve most of the problems with easements by allowing a flexible balancing of the competing interests of both neighbors. By focusing on neighborliness, which undergirds nuisance theory, the courts should see the similarities between the law of easements and the law of nuisance that distinguishes both from the law of trespass. Easement cases involve neighboring landowners in which both are asserting property rights against each other, whereas in trespass, only a single landowner’s rights are at issue. In making the case for this re-conceptualization, Prof. Stahl joins the growing chorus of commentators who assert that the right to exclude may need to yield for better accommodation between neighboring landowners.

 

DEEDS. In Massachusetts Has a Problem: The Unconstitutionality of the Tax Deed, 13 U. Mass. L. Rev. 274 (2018), Prof. Ralph D. Clifford asserts that the tax deed, under which a delinquent taxpayer can lose all the value in her property in a strict foreclosure proceeding, is unconstitutional. He maintains that the procedure in Massachusetts and in states with similar mechanisms offends due process by failing to provide a pre-foreclosure hearing to determine whether there is a tax deficiency, and if so, the amount. He also contends that the tax-deed procedure violates the takings clause because the taxpayer loses the entire value of the property, including that which exceeds the amount of the delinquent taxes. He urges that tax deeds no longer be used in favor of alternative methods of tax collection and suggests that, in the meantime, a Section 1983 action might be in order to address the violations.

PROPERTY THEORY. Beaches are contentious areas. Prof. Josh Eagle, in Are Beach Boundaries Enforceable? Real-Time Locational Uncertainty and the Right to Exclude, 93 Wash. L. Rev. 1181 (2018), analyzes the efforts by waterfront property owners fully to privatize the upper, dry-sand parts of the beach. The owners assert that their right to exclude is inherent in their title, bringing constitutional attacks against a multitude of public programs designed to facilitate public use of the dry-sand areas. Prof. Eagle views their claims as shaky because they depend in the first instance on establishing property. But the inherent changeable nature of waterfront boundaries—shifting with waves, currents, tides, winds, and other weather events, producing “real-time locational uncertainty”—severely undercuts the owners’ claims to property and hence the right to exclude. Through several graphic illustrations, he makes the case that the traditional line of demarcation, the mean high-tide line, is too fluid. Prof. Eagle is doubtful that courts are willing to undertake the seeming impossible task of sorting through, for coherence, the various common law theories—avulsion, accretion (both natural and artificial), and divergence—for more certain or discernable boundaries. Noting that states have employed various approaches to open up the dry-sand areas, such as appurtenant easements as an adjunct to the public trust doctrine, customary rights, and public prescriptive easements, he proposes a new regime in which the state grants to waterfront landowners a stable exclusion line, at the top of the beach, to give each landowner the right to prevent unreasonable public use of adjacent beach areas. Whether this new line in the sand will remain fixed or dissolve like sand remains to be seen.

LEGISLATION

MASSACHUSETTS requires homeowners’ associations in Boston to allow electric vehicle charging stations. Such stations must be allowed in separate areas allocated to the homeowner’s exclusive use, and within common elements, provided, however, that the common element is within a reasonable distance of the dedicated parking spot. This right is subject to reasonable restrictions imposed by the associations. 2018 Mass. ch. 370.

 

MASSACHUSETTS allows the imposition of tax on short-term housing rentals. Local governments may charge up to six percent (and for Boston up to 6.5 percent) on the total amount of rent for each short-term occupancy when the charge exceeds $15 for any stay. 2018 Mass. ch. 337.

 

MICHIGAN amends its lien law to include design professionals. By granting a lien, the law enforces and protects the rights of persons performing design services, including architects, engineers, and surveyors. 2018 Mi. P.A. 367.

 

MICHIGAN amends its marketable record title act to specify information required for giving notice. Divesting instruments must contain liber and page or other county-assigned unique identifying number to a previously recorded conveyance or other title transaction that created the divestment. 2018 Mi. ALS 572.

 

NEW JERSEY commemorates the 50th anniversary of the signing of the Fair Housing Act. In the commemoration, the state commits to promoting fair housing policies and fostering inclusive communities in accordance with the Act. 2018 N.J. SJR 84.

 

NEW YORK regulates real estate appraisal management companies. The law requires registration, the preparation of reports, and adherence to standards of conduct. 2018 N.Y. Laws 517.

 

OHIO adopts Notary Public Modernization Act. The amendments provide for notary licensing, an education program, and criminal background checks. They also authorize notarization of documents executed by a designated alternative signer, electronic seals, and online notarization. 2017 Ohio SB 263.

 

OHIO authorizes multi-parcel auctions. The act authorizes auctions of real or personal property “in which multiple parcels or lots are offered for sale in various amalgamations, including as individual parcels or lots, combination of parcels or lots, and all parcels or lots as a whole.” The sale must be advertised accordingly. 2017 Ohio HB 480.  

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