Additional Property and Agency

Question 1

Corp. Liability

Who is liable for what the Corp does?

Answer 1

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

Question 2

Corp. Organization

What acts are necessary for formation?

Answer 2

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

Question 3

Corp. Organization Certificate of Incorporation

Answer 3

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

Question 4

Corp. Organization

What is an ultra vires act?

Answer 4

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

Question 5

Corp. Organization

3 Formation Requirements

Answer 5

FORMATION REQUIREMENTS

People

Paper (Certificate of Incorporation)

Acts

Question 6

Corp. Organization

Stock Information in Certificate

Answer 6

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.

Question 7

Agency & Partnership

Dissolution

Answer 7

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

Question 8

Servitudes

Chart: Requirements for the Running of Benefits & Burdens

Answer 8

Question 9

Servitudes

Chart: Distinguishing Characteristics of Covenants & Equitable Servitudes

Answer 9

Question 10

Agency & Partnership

What is the only type of action a Partnership can bring against a P for breach?

Answer 10

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.

Question 11

Agency & Partnership

Rights & Liabilities B/w Partners

Answer 11

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

Question 12

Agency & Partnership

Limited Liability Company: Formation, Liability, Estoppel

Answer 12

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

Question 13

Agency & Partnership

Registered Limited Liability Partnership: Formation, Liability, Estoppel

Answer 13

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

Question 14

Agency & Partnership

Default Rules - Rights & Liabilities B/w Partners

Answer 14

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.

Question 15

Agency & Partnership

Partnership Formation

Answer 15

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

Question 16

Agency & Partnership

Limited Partnership: Formation, Liability, Estoppel

Answer 16

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

Question 17

Agency & Partnership

What duties does the Agent owe to the Principal?

Answer 17

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

Question 18

Agency & Partnership

Liabilities of Partners to 3rd Parties

Answer 18

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.

Question 19

Agency & Partnership

Apparent Authority

Answer 19

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

Question 20

Agency & Partnership

Ratification

Answer 20

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

Question 21

Agency & Partnership

Implied Authority

Answer 21

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

Question 22

Agency & Partnership

Liability on the Contract

Answer 22

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.

Question 23

Agency & Partnership

Intentional Torts

Answer 23

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

Question 24

Agency & Partnership

Revocation of Express Authority

Answer 24

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

Question 25

Agency & Partnership

Independent Contractor Torts

Answer 25

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.

Question 26

Agency & Partnership

Principal’s Liability for Agent’s Contracts

Answer 26

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.

Question 27

Agency & Partnership

Liability of Principal for Agent’s Torts

Answer 27

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?

Question 28

Agency & Partnership

What is the 2 part test to determine if a Principal is liable for the tort of an agent?

Answer 28

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

Question 29

Zoning

Answer 29

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

Question 30

Agency & Partnership

Liability of a Limited Partner to 3rd Parties

Answer 30

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

Question 31

Servitudes: Easements

What are the characteristics of a negative easement?

Answer 31

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

Question 32

Servitudes: Easements

Easement in Gross

Answer 32

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

Question 33

Landlord-Tenant Law

What is the Doctrine of Retaliatory Eviction?

Answer 33

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

Question 34

Servitudes: Easements

Easement Appurtenant

Answer 34

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

Question 35

Rule Against Perpetuities (RAP)

NY Statute

Answer 35

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.

Question 36

Landlord-Tenant Law

Implied Covenant of Quiet Enjoyment

Answer 36

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.

Question 37

Landlord-Tenant Law

Duty to Deliver Possession

Answer 37

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)

Question 38

Landlord-Tenant Law

Implied Warranty of Habitability

Answer 38

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

Question 39

Future Interests

Vested Remainders

Vested Remainder Subject to Open

Answer 39

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.

Question 40

Rule Against Perpetuities

What is cy pres?

Answer 40

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.

Question 41

Future Interests

Vested Remainders

What is the difference between vested remainder & contingent remainder?

Answer 41

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

Question 42

Future Interests

Vested Remainders

What is the Common Law of Convenience?

Answer 42

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

Question 43

Future Interests:

Contingent Remainders

What is the Rule in Shelley’s Case?

Answer 43

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.

Question 44

Future Interests:

Vested Remainders

Vested Remainder Subject to Complete Defeasance

Answer 44

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.

Question 45

Future Interests:

Contingent Remainders

What is the Doctrine of Worthier Title?

Answer 45

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.

Question 46

Future Interests:

Vested Remainders

When are remainders vested?

Answer 46

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

Question 47

Defeasible Fees:

Fee Simple Subject to Condition Subsequent

NY - Fee on Condition

Answer 47

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

Question 48

Future Interests:

Contingent Remainders

What is the Rule of Destructibility?

Answer 48

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

Question 49

Present Estates:

Fee Tail

Answer 49

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.

Question 50

Present Interests:

Life Estates

What is the New York rule on ameliorative waste?

Answer 50

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.