Keeping Current—Property

Cases

Cotenants: Contributing cotenant may not obtain prejudgment interest in partition action. Sisters Lyon and Martin inherited property from their father. Neither had ever lived on the property, so they agreed to sell the property after making certain renovations and improvements. They agreed that Lyon would perform most of the labor to save money. After the relations between the sisters deteriorated, Martin filed for partition. Lyon counterclaimed, requesting an assignment of the property to her in exchange for her payment to Martin of the value of Martin’s share. Lyon also requested that Martin pay for half of Lyon’s expenditures for maintenance and improvements plus prejudgment interest on these expenses. The trial court determined that Lyon would take title to the property upon payment of Martin’s share of the determined net value of the property but denied the request for prejudgment interest, explaining that the expenses were not reasonably ascertainable because they were not supported by the evidence presented. Lyon appealed, and the supreme court affirmed, but on different grounds. The court explained that prejudgment interest is granted in two kinds of cases: when expressly provided for in a contract or promissory note and when awarded as damages for breach or default in the detention of money. Although partition is a statutory right held by all cotenants, neither injury to a party nor a showing of monetary loss or damages is an element of such action. Thus, partition awards do not trigger prejudgment interest. The court rejected Lyons’s claims that Martin’s untimely payments for her share of the expenses harmed her by depriving her of the time value of her money, stating that damages for such harm are not an available remedy under the partition statute. Instead, the statutory remedies available to cotenants under statute are partition in kind, partition by sale, or assignment and a buy-out of the other party. Allowing Lyon to recoup the time value of her monetary contributions in prejudgment interest would effectively give her more than her fair share of the equity in the property. Martin v. Lyon, 2024 Vt. LEXIS 74 (Vt. Nov. 1, 2024).

Cotenants: Action for partition is subject to defense of unclean hands. Jeffcoat and Perkins, an unmarried couple, lived together in a house in Charleston purchased by Jeffcoat in 2000, which he conveyed to himself and Perkins “jointly with rights of survivorship, and not as tenants in common.” Perkins began suffering from dementia in 2009. In 2015, her only child, Williams, moved from Alabama to be Perkins’s caregiver. Williams was added to Perkins’s bank account and used funds for Perkins’s medical care but also for Williams’s personal expenses. In June 2015, Williams indicated she was taking Perkins to a medical appointment but actually took her to Alabama, where the two lived until Perkins died later that year. In Alabama, Williams filed an action for guardianship and conservatorship without notifying Jeffcoat, who stated he was unaware of Williams’s whereabouts as Perkins refused his repeated requests for information. In November 2015, acting as guardian and conservator, Williams deeded Perkins’s interest in the Charleston house to herself, allegedly severing the joint tenancy. Ten days later, Perkins died. Soon after, Williams filed an action against Jeffcoat in South Carolina seeking partition. Jeffcoat answered, asserting multiple defenses, including unclean hands. The trial court granted summary judgment for Williams, and the appellate court affirmed. The supreme court reversed and remanded. Although the court agreed that the basic facts were not in dispute, it stated that summary judgment is not appropriate when there are genuine competing inferences to be drawn from the facts. The court also noted that the lower court had failed to address the unclean hands issue. Further, a partition action is an equitable action, and the unclean hands doctrine recognizes that one seeking redress in equity must be free of wrongdoing, such as actions that are unfair, dishonest, willful, or unrighteous. The court stated that Jeffcoat may ultimately be unsuccessful in his defense, but summary judgment on the issue was improper. The court also held that Williams’s deed to herself of Perkins’s property interest severed the joint tenancy under the common-law rule that allows severance when any holder conveys her interest to a third party, and Alabama law permits guardians and conservators to convey property. Thus, Williams and Jeffcoat were now tenants in common, and the only issue on remand was whether unclean hands would prohibit Williams’s demand for partition. Williams v. Jeffcoat, 906 S.E.2d 588 (S.C. 2024).

Deeds: Quitclaim deed to property encumbered by deed of trust does not convey fee simple title. In 2007, the Federal Home Loan Mortgage Corporation (Freddie Mac) acquired ownership of a deed of trust securing repayment of a home mortgage loan in the amount of $216,000. In 2013, the homeowner’s association foreclosed for nonpayment of homeowner’s dues and, in 2015, conveyed the property to Nevada New Builds, LLC by quitclaim deed. New Builds then sold the property to Estrada by a recorded quitclaim deed. Estrada brought a quiet title action for a declaration that she received “clean title” via the quitclaim deed. The district court ruled for Freddie Mac. The Ninth Circuit affirmed, agreeing with the district court that New Builds’s title and, thus, Estrada’s title was encumbered by a valid deed of trust. The Ninth Circuit observed: “The Deed of Trust does not simply encumber the property. Legal title is conveyed to the Trustee (typically a third-party title company) under terms which require the Trustee to reconvey title when the encumbrance is paid. And until the encumbrance is paid, the Trustee is the holder of legal title.” Estrada v. Specialized Loan Servicing, LLC, 2024 U.S. App. LEXIS 26731 (9th Cir. Oct. 22, 2024).

Easements: Easement owner cannot use right of way to access land later added to dominant estate. In 1996, subdividers who owned a 71-acre parcel conveyed an 11-acre lot to the Deyshers “[t]ogether with an access easement … over a .386-acre area … (including a portion of the 8’ farm road and bridge) … for the limited purpose of … access to and from that portion of the premises lying west of the stream spanned by said bridge and that portion of the premises lying east of said stream.” Thereafter, the subdividers conveyed two neighboring lots to new owners subject to the easement granted to the Deyshers. Starting in 1999, the Deyshers and one of the neighbors made a series of boundary adjustments, resulting in three more acres (a Parcel B) being added to the Deyshers’ lot. After the plaintiffs purchased the neighboring lot in 2018 and the defendant purchased the Deyshers’ lot and Parcel B in 2019, disputes arose over the defendant’s cutting of vegetation in the easement and their replacement of the bridge component of the farm road. The plaintiffs brought suit seeking declaratory relief that the easement could not be used to access Parcel B. The trial court ruled for the plaintiffs, finding that the intent of the parties when the easement was created was to allow the use of the farm road for the limited purpose of accessing the Deyshers’ lot as it existed at the time of the 1996 grant. The court explained that under the general rule, an appurtenant easement cannot be used to serve a non-dominant estate. The trial court declined to consider the extent of the burden on the servient estate. The supreme court affirmed, agreeing with the trial court that the proper focus of the analysis was the intent of the parties when the easement was created, as discerned from the conveyance instrument. The clear language of the deed precluded use to access the newly created lot, even though originally a part of the larger servient tenement. Given the plain language, there was no need to consider whether the inclusion of after-acquired land increased the burden placed on the easement. Ryan v. Ryan, 2024 N.H. LEXIS 233 (N.H. Oct. 25, 2024).

Ejectment: Foreclosure purchaser cannot obtain possession by summary judgment when there is evidence of improper sale. Martin obtained a $50,000 home equity line of credit, which was secured by a mortgage on residential property. Martin later engaged a law firm for legal representation in his divorce, signing a promissory note for $14,573 for legal fees secured by a second mortgage on the same property. After the legal relationship between Martin and the law firm ended, the home equity lender commenced foreclosure. At the foreclosure sale, Martin’s lawyer purchased the property with a bid of $34,929, that amount being $1 more than the payoff amount on the home equity loan. The lawyer then sent Martin a letter stating Martin owed him $97,500 under the original promissory note, then filed an ejectment action seeking possession of the property and a declaration of forfeiture of Martin’s right of statutory redemption. Martin asserted several defenses and counterclaims. The trial court granted the lawyer’s motion for summary judgment but left the issue of possession unresolved. On appeal, the supreme court noted that without a final judgment, the court is unable to hear an appeal. But the court stated that the order granting summary judgment in the ejectment action was a final order even though it did not expressly indicate a right of immediate possession. In ejectment proceedings, a plaintiff’s right to immediate possession is implicit. Nonetheless, the court reversed the summary judgment because there were genuine issues of material fact regarding the validity of the foreclosure sale. Martin alleged that the lawyer’s bid was so low as to shock the conscience because it was approximately 15 percent of the fair market value of the property. Martin v. Scarborough, 2024 Ala. LEXIS 195, 2024 WL 4863866 (Ala. Nov. 22, 2024).

Eminent Domain: Condemnation award is properly distributed to condominium developer even though separate actions between developer and association remain pending in another court. Bloomsbury Estates, LLC (Developer) began developing land in 2006 with plans to construct two buildings in two phases. In 2015, after the completion of Phase I and the sale of condominium units, the Department of Transportation (DOT) initiated a takings action by which it permanently took one-third of the land slated for Phase II and temporarily took another part for an easement. The DOT action delayed the construction of Phase II until 2017. After mediation in 2017, the DOT, Developer, and the condominium homeowners’ association entered a consent judgment fixing $3,950,000 as the amount of just compensation for the entire taking. During the pendency of the takings action, Developer and the association each filed separate complaints against each other regarding various rights to the property, the main issue being whether Developer had successfully extended its development rights to complete Phase II. These actions paralleled the takings action until 2020 when the takings court granted summary judgment to Developer, decoupling the takings action from the parties’ respective suits against each other and ordering the payment of compensation to Developer to fully cover the loss of development rights with the remaining funds to be paid to the association. The association appealed. The appellate court reversed, finding issues of material fact in the parties’ separate actions bearing on the apportionment of funds; specifically, whether a 2013 amendment to the declaration of condominium validly preserved Developer’s development rights for Phase II. Upon further appeal, the supreme court reversed, noting that when the parties signed the consent judgment, neither title nor the respective interests in the property was left for resolution. Only the actual apportionment in accordance with the judgment was left to be done. The reversal allowed the separate actions to continue, meaning that if the association prevailed in its claims, it could obtain a judgment for damages against Developer. Dep’t of Transp. v. Bloomsbury Estates, LLC, 905 S.E.2d 36 (N.C. 2024).

Landlord-Tenant: Tenant has right to jury trial in forcible-entry-and-detainer proceeding. Mercy Housing Management Group, manager of a federally subsidized low-income housing complex, served its tenant Bermudez with a notice to quit on account of violations of her lease, including a guest staying beyond the prescribed time limits and that guest violating rules against maintaining and repairing vehicles on the premises and making threats and harassing another resident. When Bermudez did not vacate, Mercy Housing filed a forcible-entry-and-detainer (FED) action for possession. Bermudez answered and demanded a jury trial on the factual issues. The trial court denied the demand on the ground that there was no constitutional right to a jury trial in civil actions. Bermudez invoked the supreme court’s original jurisdiction, and the court determined that the issue was of sufficient public importance to warrant hearing the case. The court agreed with Bermudez. In Colorado, there is no constitutional right to a trial by jury in civil cases. Instead, such a right derives from either statute or court rule. In county court cases like the one at issue, the governing rules are those within the Colorado Rules of Civil Procedure. Colo. R. Civ. Proc. 338 specifically declares that when the legislature has provided a statutory right to a jury trial, such as in actions for the recovery of specific real property, a jury must decide all issues of fact. The court went on to conclude that the FED action was essentially the same as the common-law action of ejectment, in which the issue of possession was tried by a jury. The court was not concerned that its ruling would cause the courts to become unduly burdened by delay, remarking that some delay is inherent in any fair-minded system of justice. Mercy Hous. Mgmt. Grp. Inc. v. Bermudez, 2024 Colo. LEXIS 991 (Colo. Oct. 21, 2024), opinion withdrawn, 559 P.3d 1163 (Mem.) (Colo. 2024).

Options: Summary judgment for optionor is improper when there is a dispute as to whether optionee gave proper notice of exercise. In 2015, Scotti sold a residential property to Mimiaga, financing the sale with Mimiaga executing a promissory note for $870,000 that required monthly payments. As part of the same transaction, Mimiaga granted Scotti an option to repurchase the property for $900,000, with the option being exercisable before July 1, 2020. Scotti claimed that on June 1, 2020, he notified Mimiaga in a handwritten letter that he was exercising the option. For reasons largely related to the COVID-19 pandemic, Mimiaga several times asked Scotti for permission to stay on the property with Mimiaga continuing to pay the purchase price. Mimiaga had made plans for a new job in California, but his projected start date kept changing, and, in a series of email exchanges, he indicated an interest in “refinancing the mortgage” to pay off Scotti. Alternatively, at another time, Mimiaga stated that he wanted Scotti to “purchase back” the property from him. In July 2021, Scotti filed a complaint seeking specific performance of the option agreement and filing a lis pendens. Mimiaga counterclaimed, seeking to discharge the lis pendens so that he could refinance to pay off Scotti. The trial court granted Mimiaga’s motion for summary judgment on the grounds that consideration for an option must be separate and distinct from consideration for the sale. Because the parties established the purchase price for the property before considering the option, the option agreement was unsupported by separate consideration. The trial court also found that the option was not exercised, as the evidence failed to show delivery of the written letter. The supreme court reversed, first pointing out that the option agreement clearly stated that it was supported by “good and valuable consideration,” which was conclusive on the consideration issue. The court went on to hold that notice of exercise of the option was given when mailed, and Scotti’s attestation that he mailed the June 1, 2020, handwritten letter notifying Mimiaga of the exercise of his option was sufficient to establish an issue of material fact and to preclude the grant of summary judgment. Moreover, nothing in the agreements indicated that time was of the essence for the exercise of the option, and the communications from Mimiaga requesting to stay on the property after July 2020 and asking Scotti to purchase back the property from him could be viewed as evidence of an implied waiver or an agreement for extensions of time, also raising genuine issues of material fact as to what the parties intended. Scotti v. Mimiaga, 323 A.3d 900 (R.I. 2024).

Premise Liability: Lease agreement assigning duty to maintain common areas to tenant does not prevent negligence action by tenant’s employee against landlord. Robinson, an employee of a commercial tenant, slipped and fell on ice on the leased premises. The lease provided that the tenant was responsible for snow and ice removal on the property. Robinson sued the landlord for negligently failing to maintain its facilities in a safe condition. The trial court entered summary judgment for the landlord, concluding that under the lease, the landlord did not owe Robinson a duty of care to keep the premises safe. The supreme court reversed, stating that a premises owner owes a duty to entrants to use ordinary care to keep the premises in a reasonably safe condition, to warn entrants of dangerous conditions, and to take reasonable precautions to protect them against foreseeable dangers arising out of the arrangements or use of the premises. Although a lessor and lessee in a lease of commercial real estate may agree on which party will maintain the leased premises and which party will be liable for injuries caused by improper failure to maintain, such exculpatory clauses are binding only on the parties to the lease but have no effect on non-signers, even if the landowner maintained no control of the premises. Robinson v. 1 Bouchard St. Realty, LLC, 2024 N.H. LEXIS 230 (N.H. Oct. 22, 2024).

Waste: Life tenant of mineral estate is not entitled to royalties from mining. In 2006, Paul and Cheryl Woods, owners of a parcel of real property, executed a deed conveying a life estate in one-half of the mineral estate to Paul’s parents, Alva and Velma Woods. Thereafter, Paul and Cheryl conveyed the property to Deselms, reserving only a one-half mineral interest in fee. In 2010, in separate transactions, Alva and Velma and Paul and Cheryl entered into leases with mining companies. After Alva died in 2021, the lessees obtained a title opinion stating that Velma Woods was not entitled to royalties from mineral production because she held a life estate but was entitled only to interest on the royalties during her lifetime. A few months later, Velma sold her life estate to Phoenix Capital for $700,000, which filed an action against Deselms, Paul and Cheryl Woods, and the lessees to declare its rights under the deed and to quiet title or, in the alternative, to reform the 2006 deed to allow the life estate to collect the royalties. The trial court ruled in favor of the defendants, holding that a life tenant cannot receive royalties without an agreement with the remainderman or express language in the deed allowing for payment of royalties to the life tenant. It also held that the statute of limitations barred the claim to reform the deed. The supreme court affirmed, first explaining that in contrast to a fee simple owner, the rights of a life tenant are much more limited. In fact, the law of waste prevents a life tenant from opening up new mines or quarries or oil or gas wells or leasing the land for these purposes. All proceeds arising therefrom belong to the remainderman. The only relevant exception to the general rule was not supported by the facts; nothing in the language of the deeds purported to defeat or modify the common-law rule so as to give the life tenant the right to royalties. Moreover, absent ambiguity in the language of the deeds, extrinsic evidence is not allowed to show the parties’ intent otherwise. The cause of action for reformation was barred because it accrued on the recording of the deed more than ten years earlier. Phoenix Cap. Grp. Holdings, LLC v. Woods, 556 P.3d 1148 (Wyo. 2024).

Literature

Real Estate Contracts: In Cake-And-Eat-It-Too Clauses, 2024 Wis. L. Rev. 87 (2024), Prof. Tanya J. Monestier asserts that liquidated damages and election of remedies clauses are legally incompatible, although a surprising number of courts give effect to both in the same agreement, reasoning that they represent the parties’ intent and should be enforced under freedom of contract. In Prof. Monestier’s view, the two clauses cannot be reconciled, and no amount of freedom of contract logic can get around this fact. These clauses, in effect, allow the seller to have his cake (a minimum guarantee of damages) and to eat it, too (to sue for more if damages exceed the liquidated amount). The clauses often come as a surprise to purchasers and can result in substantial costs, particularly in highly volatile real estate markets, as seen during the COVID-19 pandemic. She urges courts to see that the very nature of a liquidated damages clause forecloses the option of an accompanying election clause. This is because the essence of liquidated damages is that it is an exclusive remedy; the parties opt to pre-determine damages themselves rather than have a court do it after the fact. It is well known that not all contract clauses are enforceable merely because they appear in the contract; instead, courts routinely deem contractual provisions unenforceable for a variety of reasons: unconscionability, fraud, and public policy. Indeed, every purported liquidated damages clause must be determined to be a valid risk allocation mechanism instead of a penalty. In the absence of legislation prohibiting such clauses, it should be up to the courts carefully to scrutinize them and reject them in appropriate cases.

Housing: In The Evolution of Inclusion: The Mount Laurel Doctrine at Fifty, 48 Nova L. Rev. 264 (2024), Prof. Paula A. Franzese looks back and offers a critical assessment of the successes and failures of the long-celebrated Mt. Laurel doctrine established nearly 50 years ago, in Southern Burlington County NAACP v. Township of Mount Laurel, 336 A.2d 713 (N.J. 1975). The New Jersey Supreme Court, rebuking the exclusionary zoning schemes common in 20th-century suburban development, ruled that every developing municipality must provide its fair share of the regional need for low- and moderate-income housing. The plaintiffs challenged the New Jersey Township of Mount Laurel’s zoning practices as racially discriminatory. The court cast the issue as one of economic discrimination, making plain that home ownership was the principal means to upward economic mobility but, because of exclusionary zoning, denied to large segments of the population. In compelling detail, Prof. Franzese shows how the court’s pronouncement was met with popular opposition and further frustrated by the ineptitude of the administrative agency charged with oversight and management of the Mount Laurel imperative. It took three more trips to the supreme court before the ruling produced meaningful results. Prof. Franzese celebrates the persistence of the court —it resisted the entrenched system of exclusion in favor of fairness, rights, and the general welfare of all citizens of the state.

Housing: In his essay, Why Can’t We Build? Explanations and Reasons for the Building Crisis, 17 N.Y.U J. L. & Liberty 379 (2024), Prof. David Schleicher offers both disheartening and hopeful insight into the seemingly intractable issue of access to housing. As to the former, he suggests that although there is ample need and land to build, existing residents oppose new construction in their communities because they want to exclude others and keep market prices for their homes high. This attitude is described as localism, which tends to be parochial and selfish; politicians choose not to go against the wishes of their constituents and have the power to veto or make costly new construction. But what is hopeful are the moves by several states and cities, preempting localism and relaxing zoning rules and the permitting processes that historically have served as barriers and have increased the cost of building in places otherwise suitable for homes. Some governments are imposing housing mandates. In the end, he urges increased efforts to dismantle the structures of localism to enable more housing for open communities.

Legislation

Michigan makes criminal the intentional recording of spurious or fraudulent conveyances in the public records. Such an act constitutes a felony punishable by imprisonment and a fine. 2024 Mich. P.A. 154.

Delaware gives terminated tenant employees the right to a lease. The landlord must offer a written rental agreement within five business days of termination of employment. The offer may be conditioned on the tenant employee financially qualifying as a tenant and meeting the landlord’s income, credit, or other financial requirements for renting dwellings. This law does not apply if the termination of employment was for cause. 84 Del. Laws 494.