Additional Property and Agency Flashcards
Corp. Liability
Who is liable for what the Corp does?
Liability for what the Corp does
D or O à NOT liable
SH have limited liability – liable only for the price of their stock (i.e. have to pay for their stock but not liable for what corp. does)
Corp. is liable for what the corp. does
Corp. Organization
What acts are necessary for formation?
Acts for Formation:
Each incorporator signs certificate & acknowledges it before a notary.
Deliver it to NY Dept. of State, who confirm w/ the law & filing fees are paid & the Dept. files the certificate.
When dept files à conclusive evidence of valid formation (de jure corporation)
Next, organizational meeting (or can do it by written consent), where they:
MUST adopt any bylaws
MUST elect the initial board of directors
then the BOD takes over management
Corp. Organization Certificate of Incorporation
Information in Certificate of Incorporation:
Name & address of corp. (Corp., Inc. Ltd.)
Name & address of each incorporator (recall, only need 1+)
Agent for service of process MUST be NY sec. of State
Must also give an address for forwarding process to corp.
MAY also name a registered agent for service of process
MAY make a stmt of duration (no stmt = perpetual)
Corporate Purpose
Stock information
Corp. Organization
What is an ultra vires act?
Ultra Vires Act: beyond the scope of the certificate’s Corporate Purpose
Ultra vires contracts are valid & enforceable (used to be void at CL)
SH can seek an injunction
Responsible officers & directors are liable to the corp. for ultra vires losses
éTIP – any time bar gives purpose in certificate think of ultra vires
Corp. Organization
3 Formation Requirements
FORMATION REQUIREMENTS
People
Paper (Certificate of Incorporation)
Acts
Corp. Organization
Stock Information in Certificate
Stock Information in Certificate:
Authorized stock – max. # can sell
# of shares per class
info on par value, rights, preferences & limitations of each class
info on any series of preferred shares
BUT NOTE: at least one class of stock or bonds must have unlimited voting rights & at least one class of stock must have unlimited dividend rights.
Agency & Partnership
Dissolution
Definition: any material change (including death or withdrawal)
Termination: real end of partnership
Wind Up: time b/w when remaining partners liquidate partnership assets to pay creditors
Priority: (1) all outside creditors + inside creditors, (2) capital contributions, (3) share of profits (equal in absence of agreement)
Distribution Rule: each P must receive their loans + capital contributions + share of profits –share of losses
Old Business & New Business à individual general partners still retain liability on brand new business transactions unless notice of dissolution given
Servitudes
Chart: Requirements for the Running of Benefits & Burdens
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Servitudes
Chart: Distinguishing Characteristics of Covenants & Equitable Servitudes
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Agency & Partnership
What is the only type of action a Partnership can bring against a P for breach?
Action for Accounting = the ONLY form of action that can be brought for a partnership against one of its own partners for breach
Can recover losses caused by breach and disgorge profits made by the breaching.
Agency & Partnership
Rights & Liabilities B/w Partners
Rule: General partners are fiduciaries of each other & the partnership
Duty of Loyalty: (1) self-dealing, (2) usurp partnership opportunities, (3) secret undisclosed profit at partnership’s expense.
Specific partnership assets (land, leases) & share in mgmt = owned by the partnership & may not be transferred to 3rd parties
Share of profits & surplus = personal property that individual partners can transfer
Partnership $ use to buy property = partnership property
Personal $ used to buy property = personal property
Agency & Partnership
Limited Liability Company: Formation, Liability, Estoppel
Limited Liability Company
Purpose: Limited liability of SH in Corp but benefits of Partnership Tax.
Formation: file articles of organization AND must publish a summary of the articles once a week for 6 weeks in a row in 2 newspapers
Liabilities: members (i.e. owners) not liable for the debts & obligations of company itself
Must operate like a partnership to get tax benefits:
members control but may delegate to managers
limited liquidity – membership interest no freely transferable
limited life – events of dissolution that is stated in the articles
LLC = limited liability + limited liquidity + limited life + limited tax
Agency & Partnership
Registered Limited Liability Partnership: Formation, Liability, Estoppel
Registered Limited Liability Partnership
Formation: file a certificate of registration w/ Dept. of State that includes the profession you are practicing
Liabilities: no partner is liable for the debts & obligations of the RLLP but partners are always liable for their own personal wrongdoing
Agency & Partnership
Default Rules - Rights & Liabilities B/w Partners
In ABSENCE OF AGMT, N.Y. Default Rules…
Management – each partner entitled to equal control (i.e. 1 partner, 1 vote)
Salary – partners get NO salary
Exception – winding up partnership
Profits - shared EQUALLY
Losses – shared like profits
éEx: Losses are shared 60/40 by agmt. Profits still shared EQUALLY. Always the default.
Agency & Partnership
Partnership Formation
Rule: “association of 2 or more persons carrying on as co-owners of a business for profit”
Prima facie partnership: contribution of money or services in return for a share of the profits
NOT in return for à wage, salary, fixed rate of interest
Agency & Partnership
Limited Partnership: Formation, Liability, Estoppel
Limited Partnership
Defined: Partnership w/ at least 1 General Partner & at least 1 Limited Partner
Formation: file limited partnership certificate that includes names of ALL GENERAL partners w/ Dept. of State
Liability & Control:
General Ps = personally liable but get to manage
Limited Ps = limited liability so cannot manage
Agency & Partnership
What duties does the Agent owe to the Principal?
Duty to exercise reasonable care
Duty to obey reasonable instructions (i.e. not lie or break the law).
Duty of loyalty - Self-dealing, usurping P’s opportunity, secret profits
Remedies:
Losses caused by the breach &
recovery of profits made by breaching agent
Agency & Partnership
Liabilities of Partners to 3rd Parties
Rule: General partners are personally liable for all partnership obligations & debts.
Partners are agents of partnership so it is liable for torts & contracts entered into w/in the scope of the partnership business.
Incoming partners = not liable for prior debts but capital contribution can be used to satisfy prior debts
Outgoing partners = retain liability on even future debts until notice of their withdrawal has been given to all known & potential creditors
Exception à liability terminates on death
Estoppel: one who represents to a 3rd party that a general liability exists will be liable as if a partnership exists.
Agency & Partnership
Apparent Authority
Apparent Authority – 2 part test:
Principal cloaked agent w/ appearance of authority, and
3rd party reasonably relies on appearance
Secret Limiting Instrument = agent has actual authority but P secretly limited it
Lingering authority = actual authority terminated & agent continues to act on P’s behalf
Agency & Partnership
Ratification
Ratification: authority can be granted after the K has been entered if:
P has knowledge of material facts re: K, and
P accepts its benefits
NY – ratification must be complete – cannot alter any terms of the K
Agency & Partnership
Implied Authority
Implied Authority: authority which agent reasonably believe the P has given b/c:
Necessity – required to complete express tasks
Custom – all tasks customarily performed by persons w/ agent’s title
Prior dealing b/w P & A – agent believe to have been authorized by prior acquiescence of P
Agency & Partnership
Liability on the Contract
Liability on the Contract
If no authority for K à P not liable & A liable.
Authority on K à P liable & A not liable.
Exception: P partially disclosed (identity disclosed) or fully undisclosed (fact of P’s existence not known), authorized agent may be liable at the election of the 3rd party.
Agency & Partnership
Intentional Torts
Rule: intentional torts are generally outside the scope of employment UNLESS
Specifically authorized by the P
Natural in the nature of employment & still in the scope of agency
Conduct was motivated by a desire to serve P
Agency & Partnership
Revocation of Express Authority
P can revoke express authority by:
unilateral act of either party
death or incapacity of P
Exception: Durable POA – written expression of authority to enter into a transaction
Conspicuous language saying survives incapacity or death
Agency & Partnership
Independent Contractor Torts
Rule: no vicarious liability for independent contractor’s torts
Ultrahazardous Activity Exception
Estoppel Exception: if P holds out his IC w/ the appearance of agency, P will be estopped from denying vicarious liability
Compare to agent à A & B present but not C.
Agency & Partnership
Principal’s Liability for Agent’s Contracts
Rule: P liable for Ks entered into by agent if P authorized the agent to enter the K
Express à oral (except land), revocable unless durable POA
Implied à necessity, custom, prior dealings
Apparent à P cloaks & 3rd party relies
Ratification à knowledge + acceptance of benefits
Authorized agents not liable unless undisclosed P.
Agency & Partnership
Liability of Principal for Agent’s Torts
Liability of Principal for Agent Torts
Is agent employee or independent K-or?
Employee = act w/in the scope of employment?
Independent K-or = inherently dangerous activity? duty nondelegable? P negligent in selecting?
Agency & Partnership
What is the 2 part test to determine if a Principal is liable for the tort of an agent?
Principal-agent relationship exists: (1) Assent, (2) Benefit, (3) Control, and
Tort committed in the scope of employment.
Conduct “of the kind” hired to perform?
Occurred “on the job?”
Frolic = new & indpt journey Detour = mere departure from assigned task
Intended to benefit P?
Sub-agents = missing A & C usually
Borrowed agents = missing C usually
Zoning
Rule: pursuant to police powers, Govt may enact statutes to reasonably control land use
Variance:
undue hardship and
would not affect value of surrounding property value
Non-conforming use: once lawful nonconforming use cannot be eliminated all at once w/o paying just compensation
Unconstitutional Exactions: those amenities that Govt. seeks in exchange for granting permission to build (small park, several new street lights, wider roads)
must be reasonably related both in nature and scope to the IMPACT of the proposed development OR UNCONS
Agency & Partnership
Liability of a Limited Partner to 3rd Parties
Liability of a Limited Partner to 3rd Parties
Was partnership formed properly (i.e. filing made)?
no = no LL
Is the partner a general partner?
yes = no LL
Is the partner participating in control of the business such that the person dealing w/ partnership reasonably believes that he is a general partner?
yes = no LL
Is the partner knowingly permitting his name to be used improperly in the partnership name?
yes = no LL
Otherwise, partner’s liability limited to contribution
Servitudes: Easements
What are the characteristics of a negative easement?
Negative easements bar the subservient landowner from building something that would block your (L-A-S-S):
Light
Air
Support
Streamwater from artificial flow
Minority states: scenic view
MUST be in writing & signed by that Grantor
Servitudes: Easements
Easement in Gross
Some personal or pecuniary advantage not related to the use or enjoyment of his land.
Servient land burdened but no dominant land exists.
Examples:
billboard
right to swim in someone’s pond
right to lay power lines across someone’s land
Landlord-Tenant Law
What is the Doctrine of Retaliatory Eviction?
If T lawfully reports LL for housing code violations, LL is barred from penalizing T by:
raising rent
ending the lease
harassing T
taking any other reprisals
Servitudes: Easements
Easement Appurtenant
Benefits holder in physical use or enjoyment of his property.
It takes 2 parcels of land – dominant & servient tenement
Ex: A grants B right of access across his land (#1) to get to B’s land (#2). Since 2 parcels, appurtenant. A has the servient tenement & B holds the easement appurtenant to B’s dominant tenement. IT IS ALWAYS AN EASEMENT TO THE DOMINANT PARCEL.
EA Passes AUTOMATICALLY w/ the dominant tenement regardless of whether mentioned in conveyance
Burden passes automatically w/ SERVIENT estate unless purchaser is bona fide purchaser w/o notice of easement
Rule Against Perpetuities (RAP)
NY Statute
Where an interest would be invalid b/c made on condition of attaining age of 21 years or more, age contingency is reduced to 21 years
Common law fertile octogenarian principle is modified: presumes woman over the age of 55 cannot have a child – possibility that might have a child by adoption is disregarded
NY suspension rule (tested w/ Trusts and will): applies CL RAP to restrictions on power to sell or transfer
Interest void if suspends power to sell or transfer for period longer than lives in being plus 21 years
I.e. for a conveyance to be valid under the suspension rule, there must be persons in being who could join together in a conveyance of the full fee simple title within lives in being plus 21 years.
Landlord-Tenant Law
Implied Covenant of Quiet Enjoyment
Rule: T has a right to quiet use and enjoyment of the premises w/o interference from LL
Applies to both residential & commercial leases
Breach:
LL actually wrongfully evicts or excludes
Constructive Eviction: (SING)
éSubstantial Interference – chronic problem b/c LL fails to act
éNotice: T gives LL notice & LL fails to correct
éGet out: T vacates w/in reasonable amt of time after LL fails to fix problem
LL NOT generally liable for other T’s wrongful acts, except (1) common areas, & (2) duty not to permit nuisance on premises.
Landlord-Tenant Law
Duty to Deliver Possession
LL Duty to Deliver Possession
English Rule (Majority): must deliver actual physical possession so if holdover T, LL breaches & owes T damages
American Rule (Min.): must deliver legal possession (i.e. keys & title)
Landlord-Tenant Law
Implied Warranty of Habitability
Standard: Premises must be fit for basic human habitation.
Does NOT apply to commercial leases
CANNOT WAIVE
Breach: no heat, no running water or plumbing
T’s Entitlements: (MRRR)
Move out & terminate lease
Repair himself & deduct from rent
Reduce rent or withhold all until ct. determines fair rental value
Remain in possession & seek money damages
Future Interests
Vested Remainders
Vested Remainder Subject to Open
Remainder vested in a group, at least one of whom is qualified to take possession
Each class member’s share is subject to partial dimunition
Ex: To A for life, then to B’s children.
A is alive & B has 2 kids, C & D.
C & D have vested remainders subject to open.
Rule Against Perpetuities
What is cy pres?
Cy pres = “as near as possible”
Both Wait & See and Uniform Statutory RAP embrace cy pres
If a given transfer violates the RAP, court may reform it in a way that most closely matches grantor’s intent, while still complying w/ the RAP.
E.g. if conveyance would have violated RAP b/c conditioned on reaching excess of 21 yrs., the flawed age contingency will be knocked down to 21 yrs.
Future Interests
Vested Remainders
What is the difference between vested remainder & contingent remainder?
Vested Remainder Subject to Complete Defeasance = if conditional language occurs after the comma, following the language of remainder, it is a condition subsequent.
Contingent remainder = if conditional language occurs before the remainder language, it is indeed a condition precedent and have to have a contingent remainder
Future Interests
Vested Remainders
What is the Common Law of Convenience?
Open class: possible for others to join
Closed class: maximum # has been set so person’s born thereafter are shut out
To determine whether a class is open or closed:
class closes whenever any member can demand possession Ex: To A for life, then to B’s children. A is alive, B has 2 kids, C&D. Class closes at B’s death AND RofC says it closes at A’s death b/c that is when C&D can demand possession, even though B is still alive & could have more kids. Afterborn children get nothing.
Womb Rule: Child of B in womb at A’s death will share w/ C&D.
If A predeceases C or D à share goes to devisees.
éNY – statute – see WILLS
Future Interests:
Contingent Remainders
What is the Rule in Shelley’s Case?
Common Law:
O conveys: “To A for life, then on A’s death, to A’s heirs.”
A is alive so A has no heirs (i.e. unascertained).
Present & future interests merge giving A fee simple absolute. (to promote alienability)
Rule of law (i.e. not construction) so applies even if contrary to grantor’s intent.
Today:
Rule is virtually abolished (NY)
A would have a life estate, A’s unknown heirs have a contingent remainder & O has a reversion b/c A could die w/o heirs.
Future Interests:
Vested Remainders
Vested Remainder Subject to Complete Defeasance
VRSTCD: when conditional language follows language that taken alone & set off by commas would create a vested remainder, the condition is a condition subsequent.
Right to possession could be cut short b/c condition subsequent.
Ex: O conveys to A for life, remainder to B, provided however that if B dies under age of 25, to C.
A = LE; B = VRSTCD; C = shifting executory interest.
If A dies & B is not 25 yet he still takes but he needs to live to age 25 for his estate to retain interest.
O has a reversion b/c it is possible tat C or C’s heirs may not exist when condition is breached.
Future Interests:
Contingent Remainders
What is the Doctrine of Worthier Title?
Grantor, who is alive, may not create a future interest in his heirs (b/c they are unascertained).
Ex: O conveys, “To A for life, then to O’s heirs.”
If Doctrine did not apply it would just be life estate for A & contingent remainder for O’s heirs but b/c of Doctrine, contingent remainder is void, thus giving O a reversion.
Promotes alienabilty.
Rule of construction so grantor’s intent controls – if he really wants to create a contingent remainder in yet unknown heirs –that intent is binding.
éNY – abolished w/ respect to transfers taking place after 9/1/67.
Future Interests:
Vested Remainders
When are remainders vested?
A remainder is vested if it is BOTH created in an ascertained person and is not subject to any condition precedent.
Only remainders are capable of being vested
Defeasible Fees:
Fee Simple Subject to Condition Subsequent
NY - Fee on Condition
Fee Simple Subject to Condition Subsequent
“To A but if X event occurs, grantor reserves the right to re-enter and re-take.”
Grantor must use clear durational language and reserve the right to re-enter.
NOT automatic – estate only terminates when condition occurs and Grantor re-enters.
Future interest: right of re-entry (NY – right of reacquisition) which is synonymous w/ right of termination
Future Interests:
Contingent Remainders
What is the Rule of Destructibility?
CL RULE: If the condition precedent has not been fulfilled by the end of the proceeding estate (i.e. still contingent), the contingent remainder is destroyed.
Ex 17: To A for life, and if B reaches age 21, to B.” A has died leaving behind B who is only 19.
Today: O or O’s heirs would hold the estate subject to B’s springing executory interest.
éNY – abolished rule of destructibility
Present Estates:
Fee Tail
Fee Tail
“To A and the heirs of his body.”
Pass directly to lineal blood descendants no matter what.
Today it creates fee simple absolute – attempt to create it renders estate fee simple absolute.
Future interests (if it is recognized) reversion in Grantor & remainder in 3rd party.
éNY has abolished this.
Present Interests:
Life Estates
What is the New York rule on ameliorative waste?
NY Rule on Ameliorative Waste
Life tenant may make improvements that a prudent fee simple owner would make under the circumstances UNLESS the remaindermen object
Look for improvements that prudent, reasonable fee simple owner would make under circumstances.