May 01, 2021 Departments

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.

Prof. Shelby D. Green

CASES

COTENANTS: Creditor may reach insurance proceeds from property held in tenancy by the entirety. Terry and Cathy Phillips owned their marital residence as tenants by the entirety until 2010 when they retitled the property in the names of separate revocable trusts as tenants in common. Cathy’s trust held a 99 percent undivided interest in the property, and Terry’s trust held 1 percent. In 2018, a fire severely damaged the house. A casualty insurance policy named only Terry as the policyholder and provided that, at his death, the proceeds would be payable to his spouse or legal representative. A party holding a civil judgment against Terry sought to garnish the insurance payment. Terry and Cathy defended the garnishment, relying on Va. Code Ann. § 55.1-136(C), which protects “proceeds of the sale or disposition of property formerly held as tenancy by the entirety, then conveyed to separate revocable or irrevocable trusts.” They also asserted that their contract rights to insurance payments were intangible personal property held in tenancy by the entirety and as such immune from the claims of the creditors of one spouse. The trial court quashed the garnishment proceeding based on the statute but did not address the common-law tenancy by the entirety issue. The supreme court reversed. First, the payment of insurance proceeds is not a disposition of the property within the meaning of the statute, which contemplates a transfer of some interest in the property. The couple did not sell or otherwise dispose of the property, nor did the insurer acquire an ownership interest in the fire-damaged house. Second, although personal property can be held as tenancy by the entirety, a long series of legislative enactments have superseded the common-law presumption of a tenancy by the entirety in a married couple. Instead, Va. Code Ann. §§ 55.1-135 and 55.1-136(A) require a clear intent and the use of specific language to create this type of ownership. Nothing in the insurance contract contained language of survivorship. (It did not say that upon the named insured’s death, payments would be made exclusively to the surviving spouse.) Rather, the language in the insurance contract merely affirmed that contract rights would continue after the death of the named insured. Jones v. Phillips, 850 S.E.2d 646 (Va. 2020).

EASEMENTS: Landowner’s mistaken belief that use is permissive does not defeat presumption of adversity for prescriptive easement. Residents of a subdivision used a private railroad crossing to access their homes since 1942. Soon after purchasing the railroad and the land underlying the crossing, the Albany & Eastern Railroad filed a quiet title action and sought damages for trespass against the residents for their use of the crossing. The residents counterclaimed that they acquired a prescriptive easement over the crossing. The parties agreed that the residents had used the crossing for more than ten years and that the use was open, notorious, and continuous. The only issue at trial was whether the residents’ use was adverse or permissive. The trial court found for the residents, applying the presumption of adversity that arises when a claimant has demonstrated open, visible, continuous, and unmolested use of land for at least ten years. The appellate court reversed, holding that the nature of the crossing was such that its use by the residents did not put the railroad or its predecessor on notice that the residents’ use was adverse because the railroad and its predecessors mistakenly believed that the crossing was public from 1953 until the railroad filed suit. The supreme court reversed, holding that the presumption of adversity is not defeated by the subjective mistaken understanding of the property owner. That result would “fly in the face of the basic rules of prescriptive rights,” the “principal justification” for which is that “established patterns of land possession and use should be protected and that a diligent occupant should be rewarded at the expense of a careless owner.” Here, the residents and their predecessors diligently used the private railroad crossing to access their properties since 1942. It did not matter that beginning around 1953 the railroad and its predecessors mistakenly believed that the use was permissive. Without evidence that the residents’ use was actually permissive, the railroad could not defeat the presumption of adversity. Albany & Eastern R.R. Co. v. Martell, 469 P.3d 748 (Or. 2020).

EASEMENT: Easement for access arises over discontinued public highway. Shearer purchased a parcel that lacked frontage on a public highway but abutted a formerly public highway known as Bowker Road. Originally laid out in 1766, it was discontinued in 1898. Bowker Road begins at Whipple Hill Road, a public highway, where a locked gate has barred entrance to Bowker Road for at least 50 years. It is unpaved and unimproved but navigable by car up to Shearer’s property, though not beyond. Raymond owns a parcel that includes the part of Bowker Road that leads to Shearer’s parcel. When Shearer purchased the land, Raymond gave Shearer permission to cross until a dispute arose. Then Shearer sued Raymond, claiming an easement over his land. The trial court ruled in favor of Shearer, and the supreme court affirmed. The court explained that when a highway is constructed over private land, the public acquires an easement of passage over it. When a highway is discontinued, the private land over which that highway traversed is no longer encumbered by the public easement. Under the rule adopted by a majority of jurisdictions, however, the discontinuance of a public highway does not extinguish an abutting landowner’s easement over it, even as it crosses now private land, so long as the use is necessary for ingress and egress. Although the degree of necessity is a question of fact, a landowner need not show that there are no other means of access, but only that the alternative access imposes measurable hardship that is unreasonable under the circumstances. The court remanded for a determination whether Shearer’s use was reasonably necessary to access his property. As to the scope of the easement, the court affirmed the trial court’s application of the rule of reason. Shearer v. Raymond, 2021 N.H. LEXIS 3 (N.H. Jan. 13, 2021).

FORECLOSURE: Assignee from HUD is immune from state statute of limitations for foreclosure actions. In 2010, a bank filed an action to foreclose a mortgage, but the action was dismissed in 2016. Meanwhile, in 2014 the promissory note and the mortgage were assigned to the Department of Housing and Urban Development. Four more assignments followed. In 2018, Winward Bora acquired the property, then filed suit to quiet title and discharge the mortgage based on the running of the New York six-year statute of limitations for foreclosure actions. The district court granted summary judgment for the last assignee, holding that the state statute of limitations did not apply. The Second Circuit Court of Appeals affirmed. The court pointed out that “the United States is not bound by a statute of limitations unless Congress has explicitly expressed one.” Thus, the state’s six-year limitations period on foreclosure actions does not apply to actions brought by the United States or federal agencies. But the question of whether that immunity extends to an assignee of the federal government was a matter of first impression in the Second Circuit. The court found the positions taken by sister circuits persuasive. First, under traditional common-law principles governing assignments, an assignee of the United States stands in its shoes. Second, immunity is warranted because it improves the marketability of instruments held by the United States, thereby giving it greater flexibility in monetizing its claims. The immunity applies even without a showing that the assignment in some way benefits the government or that the loan was insured by the Federal Housing Administration. Windward Bora, LLC, v. Wilmington Sav. Fund Soc’y, 982 F.3d 139 (2d Cir. 2020).

MECHANICS’ LIENS: Lien that includes completed work and anticipated profits is void only to extent of anticipated profits. After the Masseys’ home was destroyed by fire, they hired Duke Builders as the contractor to build their new house. After a series of disagreements, Duke stopped work on the project and the Masseys hired a new contractor to finish the job. Duke filed a materialmen’s lien for both completed work and its estimate of anticipated profits on the work necessary to finish the house. The Masseys filed a lawsuit against Duke and sought to invalidate the lien. The trial court decided the lien amount was illegal because it included anticipated profits and thus the entire lien was void. Duke appealed, and the appellate court affirmed that the lien improperly included anticipated profits but reversed the holding that the entire lien was void. The Masseys appealed. The supreme court affirmed the appellate court on both issues. The court reviewed the applicable statute finding the plain language of the statute, Ga. Code Ann. §44-14-361, restricts liens to the amount due and owing under contract. Liens can include costs and profits, but they are limited to amounts actually due on the work completed at the time of filing and not amounts expected for future work under the contract. Nonetheless, a lien that exceeds the rightful amount is only invalid as to the amount wrongfully claimed. Massey v. Duke Builders, Inc., 849 S.E.2d 186 (Ga. 2020).

MORTGAGES: “Sole remedy” provision in contract for sale of securitized mortgage loans is enforceable even if seller is grossly negligent. The purchaser of a pool of securitized mortgage loans sued the securitization sponsor for breach of contract and gross negligence, claiming the loans did not comport with the Representations and Warranties Agreement (RWA). The RWA and the Pooling and Servicing Agreements contained a “sole remedy” provision, which provided that if a loan in the pool materially breached a representation and warranty, the sole remedy is cure of the breach or repurchase of the loan at a defined repurchase price. The sponsor moved to dismiss the complaint, asserting the sole remedy provision as barring the action. The purchaser maintained that such provisions are unenforceable in the case of gross negligence. The trial dismissed the complaint, but the appellate court reversed. The court of appeals in turn reversed. The court ruled that in a pure breach of contract case, in which a defendant’s conduct does not give rise to separate liability in tort, the public policy rule prohibiting parties from immunizing themselves from liability for grossly negligent conduct applies only to exculpatory or nominal damages clauses. The sole remedy provision here, however, was neither. In the court’s thinking, contractual provisions that merely limit liability or damages must be given effect because those provisions represent the parties’ agreement on the allocation of the risk of economic loss in certain eventualities. The clause here, imposing only reasonable limitations on liability or the remedies available, does not offend public policy so as to be unenforceable. The Restatement (Second) of Contracts § 195 and Restatement (First) of Contracts § 575 provided support for the ruling. The court felt compelled to enforce the bargain, freely made between sophisticated parties. In re Part 60 Put-Back Litig., 36 N.Y.3d 342 (N.Y. 2020).

NUISANCE: Public nuisance ordinance is facially valid, but owner is entitled to judicial review of its challenges before condemnation proceeds. In November 2012, the City of North Little Rock notified Convent Corporation that its vacant building was a public nuisance, unsafe, and unfit for human habitation. A letter further notified Convent that the city was considering condemning the building with a public hearing to be held in February 2013. Convent was also given seven days to address the nuisance or contact the city’s code enforcement department to discuss an abatement plan. Convent requested an administrative hearing, asserted that the city’s process violated Convent’s due process rights, asked for a postponement to allow it to come up with a rehabilitation plan, and disputed the city’s 30-day time limit on appeals. The city council voted to condemn the property, and Convent filed a complaint appealing the city’s decision and bringing claims for common law trespass and violations of the Arkansas Civil Rights Act and the Arkansas and US Constitutions. The trial court dismissed Convent’s claims, finding it had not exhausted its administrative remedies. After a series of appeals and remands, the case came before the supreme court. The supreme court reversed, holding there was no evidence that Convent had sufficient administrative remedies. The court rejected Convent’s facial challenges to the constitutionality of the ordinance, finding the notice and hearing provisions, including instructions regarding appeals, were adequate. The court remanded for consideration of Convent’s trespass claims, civil rights claims, and as-applied constitutional claims. Convent Corp. v. North Little Rock, 615 S.W.3d 706 (Ark. 2021).

WATER: Municipal land use policy does not create any protectable rights in water. The Montana Department of Natural Resources and Conservation (DNRC) granted the application of Utility Solutions, LLC, to expand its water service permit to include gap areas between areas served by the City of Bozeman and other water service providers. The city claimed this expansion conflicted with its plans to serve the same area established in a 2009 growth policy and updated in a 2017 water facility plan. In furtherance of these policies, the city entered into a contract with DNRC to acquire water stored in a DNRC reservoir to serve the area that Utility Solutions also sought to serve. The question before the court was whether the city’s planning policies and DNRC contract create a property interest protectable from adverse effects under Montana’s Water Use Act, which provides that a change in water use shall not “adversely affect the use of the existing water rights of other persons or other perfected or planned uses or developments for which a permit or certificate has been issued or for which a state water reservation has been issued.” Mont. Code Ann. § 85-2-402(2)(a). The supreme court looked to the plain language of the statute in concluding that growth planning policies and attendant water rights acquisition contracts do not qualify as a “planned use” for which a “permit or certificate has been issued or for which a state water reservation has been issued.” The court noted that under the growth statute, Mont. Code Ann. § 76-1-605(2), a growth policy is “not a regulatory document and does not confer any authority to regulate that is not otherwise specifically authorized by law or regulations adopted pursuant to that law.” In other words, a growth policy is just that—a municipal land use policy that does not create any protectable property rights under law. The DNRC water rights acquisition contract also did not confer any statutory rights to the city but only reserved a portion of the water for the city to use for municipal purposes. Bozeman v. Montana Dep’t of Natural Res. and Conservation, 471 P.3d 46 (Mont. 2020).

ZONING: Deadline for judicial review runs from issuance of written final land use decision. Yakima County granted Granite Northwest’s conditional use permit to expand its mining operation over the objection of the Confederated Tribes and Bands of Yakima Nation. Yakima Nation appealed the issuance of the permit to the County Hearing Examiner, who upheld the permit, which decision was affirmed by a resolution passed by the County Board of Commissioners on April 10, 2018. Three days later, the county mailed a copy of the resolution to the Yakima Nation. On May 22, 2018, 22 days after adoption of the resolution and 19 days after receipt of the email, Yakima filed a complaint challenging the grant under Washington’s Land Use Petition Act (LUPA), Wash. Rev. Code §36.70C. Under LUPA, affected parties may seek judicial review of a local government’s land use decision by filing a petition in superior court within 21 days of the issuance of the final land use decision. The case raises the issue of when the 21-day filing deadline begins. The Yakima County Code requires a written final land use decision for the purposes of LUPA appeals. If the LUPA appeal deadline is triggered by the date the board adopted the resolution, then Yakima Nation’s LUPA petition was untimely by one day; if the deadline was triggered by the date the written decision was mailed by the county, then the petition was timely by two days. The supreme court ruled that because the plain language of the county code requires land use decisions to be reflected in a writing, the appeal deadline was triggered by the date the written decision was mailed and Yakima Nation’s petition was timely filed. It did not matter that the form of the decision was by resolution; the dispositive fact was that the county code required a written final land use decision, and thus the 21-day filing deadline was triggered three days after the written decision was mailed. Confederated Tribes and Bands of Yakima Nation v. Yakima Cnty, 466 P.3d 762 (Wash. 2020).

ZONING: Substantial improvements pursuant to development permit entitles owner to complete improvements shown on original plans after expiration of permit. In January 1997, Grays Hill Baptist Church obtained a county development permit for a church and a fellowship hall. The permit stated that it expired in two years from the date of approval unless substantial improvements occurred or a final subdivision plat was recorded. In December 1997, the church completed construction of all improvements shown in the plat attached to the permit except for the fellowship hall. The improvements included the church building, parking, paving, and infrastructure for both buildings, but financial constraints prevented moving forward with the fellowship hall at the time. The county issued the church a certificate of compliance. In December 2006, the county created an airport overlay district, which made the church’s property a nonconforming use subject to certain expansion limitations. Soon after, the church requested a construction permit to complete the fellowship hall, which the county denied. The church unsuccessfully sought permitting approval from the County Planning Commission. The trial court reversed, finding the commission confused the construction permit and the development permit and noted the latter expressly encompassed the church, the fellowship hall, and supporting infrastructure. The trial court also noted that substantial improvements occurred within two years of the original permit’s approval. The county appealed, and the appellate court reversed, finding the original permit expired as the original improvements were directed only to the church and parking area. The supreme court reversed, ruling that the development permit approved the fellowship hall, which was clearly shown in the original plat and narrative. The court rejected the argument that the county’s issuance of the certificate of compliance closed out the permit merely because that is their normal procedure. The court further found that the permit contemplated phased construction of one development and not phased development of a greater area. The church and fellowship hall were one unified project and the substantial improvements applied to the whole. No new development permit was required, and the fellowship hall was grandfathered in, free of the restrictions of the airport overlay district. Grays Hill Baptist Church v. Beaufort County, 850 S.E.2d 29 (S.C. 2020).

LITERATURE

HOUSING: In Community Land Trusts: Institutionalizing the Human Flourishing Theory of Property, 29 Cornell J. L. & Pub. Pol’y 621 (2020), Prof. John A. Lovett discusses the community land trust (CLT) in the context of its capacity for achieving Prof. Gregory Alexander’s human flourishing theory of property. He begins his essay with a brief history of the device. In the late 1960s and 1970s, community activists, working mainly in marginalized rural places, established the first handful of CLTs to give African-American farmers a chance to acquire farms with security of tenure on one large tract of land in southwest Georgia. This concept of property ownership subsequently became an important form of long-term affordable housing in urban areas. Prof. Lovett’s thoughtful essay offers some ideas for confronting the challenges of taking this model to scale and achieving the property-law reforms urged by the CLT movement.

LAND USE: Prof. Colin Crawford, in It’s Been a Long Time Coming: A Short Manifesto for Urgently Needed Changes in Land Use Law & Regulation, 4 J. Comp. Urb. L. & Pol’y 28 (2020), argues that existing land use law propagates social, economic, and environmental problems and proposes reforms that will lead to a more equitable and healthy society. First, he criticizes traditional zoning, which focuses on exclusion, as entrenching racial, ethnic, and socioeconomic biases in urban planning, exacerbating housing costs, and creating sprawl. He argues for inclusive zoning codes that restrict only uses that genuinely threaten public health, safety, and welfare. Next, he promotes mixed-use density that facilitates efficient land uses, such as creating “15-minute cities” where residents can walk or cycle from their homes to places of work, commerce, and recreation. To accomplish these goals, Prof. Crawford acknowledges that local governments must be allowed to use their police powers to a degree beyond which current eminent domain jurisprudence likely permits. Also, federal land use regulation is needed to correct the inequitable patchwork of inconsistent development patterns that have resulted from city-by-city planning control. He outlines a concept of cooperative federalism, similar to environmental law, in which the federal government lays a foundation for basic acceptable land use policy, over which local governments have primary authority.

MINERALS: Prof. Keith B. Hall ponders the law of trespass, in Ruminations on the Continuing Evolution of Trespass Law in the Context of Mineral Development, 8 L.S.U. J. of Energy L. & Resources 505 (2020). What interests him is how trespass is evolving to deal with disputes over oil and gas and mining activities. In his article, he examines the movement in the law by focusing on recent disputes in several scenarios, including migrations into the subsurface from nearby natural gas storage operations, hydraulic fracturing, horizontal drilling, pooling agreements, and good faith trespass. The resolution of these disputes, he states, is often complicated by the difficulties of drawing boundaries between the respective interests of surface and subsurface owners, achieving the right level of mineral extraction, and assessing the nature and degree of injury brought by an intrusion. Prof. Hall’s study does not suggest any particular rule that will always work to resolve the disputes, but he does offer a valuable layout of the trends.

PROPERTY TAXES: Real property taxes are the most important revenue source for local governments. But ensuring stable government revenues means placing the entire burden of property value fluctuations on households, often causing property taxes to increase when homeowners are in financial distress. Prof. Andrew T. Hayashi, in Countercyclical Property Taxes, 40 Va. Tax Rev. 1 (2020), focuses special attention on the ways that property taxes can help, but also burden, communities as they try to recover from an economic downturn. The latter circumstance occurs when local governments seek to keep property tax revenues stable after property values fall by raising the effective property tax rates. Prof. Hayashi points out that stability of tax revenues comes at significant costs to property owners. When local governments fail to allow property taxes to fall along with property values, it drives some homeowners to default on their mortgage loans, to resort to tax-refund anticipation loans, and to reduce discretionary spending at the time when this spending is most needed to prop up the local economy. Prof. Hayashi suggests that some tax policies need to be “countercyclical,” that is, embrace a regime that mitigates community risk and makes recessions shallower. His recommendations for how local property tax laws can better achieve distributional and risk management goals should be taken to heart.

LEGISLATION

ALASKA decreases rental rates in assisted senior living facilities. Rates will be set based on the level of need, and future increases are tied to adjustments in the Social Security cost of living index. 2020 Alaska Sess. Laws ch. 23.

ARIZONA restricts annexations. The law applies where annexation would result in unincorporated territory being completely surrounded by the annexing jurisdiction or a combination of that jurisdiction and other incorporated cities or towns. 2020 Ariz. Sess. Laws 77.

CALIFORNIA requires zoning for affordable housing. The law requires cities and counties to zone at least 25 percent of their share of the regional housing need for moderate—and above—moderate-income housing to sites with zoning that allows multifamily housing. In practice, this means that large areas of local jurisdictions must allow at least fourplexes in traditional single-family residential neighborhoods in an effort to expand the “missing middle” housing supply. 2020 Cal. Stat. ch. 193.

COLORADO enacts Immigrant Tenant Protection Act. The act prohibits a landlord from demanding, requesting, or collecting information regarding a tenant’s immigration status and disclosing or threatening to disclose this information to law enforcement agencies. Landlords are also prohibited from leasing units to applicants based on immigration status. 2020 Colo. Sess. Laws ch. 187.

IDAHO amends unlawful detainer law. Residential tenants found guilty of unlawful detainer have 72 hours after entry of the court order to remove their personal belongings before the landlord is authorized to remove and dispose of the property. Commercial tenants and tenants of larger tracts of land have seven days or longer, if authorized by the court, to remove their property. 2020 Idaho Sess. Laws 340.

NEVADA temporarily stays residential evictions. The law aims to encourage landlords and tenants to enter into expedited alternative dispute resolution programs. 2020 Nev. Stat. ch. 5.

NEW MEXICO extends maximum duration for leases of state public lands to local governments. The act increases the lease terms from 25 to 40 years and adds economic development as a permitted use. By extending the lease term, the intent is to make leases of public lands more attractive for financing economic development projects. 2020 N.M. Laws 21.

NEW YORK enacts reverse mortgage foreclosure law. Prior to accelerating a loan or acting to foreclose, lenders must notify the Department of Financial Services and engage in DFS-specified loss mitigation processes. The new law prevents lenders from making advance payments on mortgage insurance or tax liabilities. 2020 N.Y. Laws 337.

OREGON temporarily limits lenders’ remedies during the pandemic. The law applies to the failure to make full and timely mortgage payments and prohibits foreclosure and the imposition of default interest rates and late fees. Lenders have brought numerous judicial challenges, claiming the moratorium is overly broad. 2020 Or. Laws 4.

UTAH clarifies what property is eligible for property tax exemption. Primary residential property under construction is entitled to the exemption, provided the owner files a declaration stating that the property will be used as the primary residence upon completion. 2020 Utah Laws 40.

WASHINGTON exempts infill developments from some environmental review. The exemption applies in areas where current density and intensity of use is “roughly equal to” or lower than projections in the jurisdiction’s comprehensive plan. Previously, infill developments were categorically exempt only where project density was lower than that in the comprehensive plan. 2020 Wash. Sess. Laws 87.

WYOMING provides exemptions for veterans from property tax. The act also expands the ways veterans can claim the property tax exemption to include notification to their county assessor by mail and requires county assessors to notify taxpayers of the exemption. 2020 Wyo. Sess. Laws 89.

Audio Version

You can now access this article through ModioLegal. Click here to learn more.

Entity:
Topic:

Prof. Shelby D. Green

Keeping Current—Property Editor: Prof. Shelby D. Green, Elisabeth Haub School of Law at Pace University, White Plains, NY 10603, sgreen@law.pace.edu. Contributors: Prof. Darryl C. Wilson and Jacob Stillwell.