Chapter 4: Simultaneous Ownership: Estates and Future Interests

Question 1

Affirmative Waste
-Did David, the life tenant, commit affirmative waste when he tore down the apartment house mistakenly believing that it would be worth more money as a parking lot?

Answer 1

-Affirmative waste arises when the life tenant commits injurious acts on the property. Injurious acts means acts that reduce the value of the property.

Question 2

Vest Remainder versus Contingent Remainder
-When the gift was “To David for life and then—self defense being so important—to Ellen and I expect Ellen to earn a black-belt in karate,” did Ellen have a vested remainder or a contingent remainder?

Answer 2

-A remainder is a future interested created in a third person that may become possessory upon the natural termination of the preceding estate. A remainder is vested if it is given to an ascertainable person and not subject to a condition precedent; a remainder is contingent if it is given either to an unascertainable person or is subject to a condition precedent. When in doubt, the common law presumes a vested remainder.

Question 3

Sufficiency of Interest
-Assuming Ellen’s remainder is not vested but contingent, is it a sufficient interest to allow her to state a claim for damages against David for having committed waste?

Answer 3

-In some jurisdictions, courts will give legal relief (damages) to contingent remaindermen if the contingency is fairly certain to vest (The court will in such case impound the funds and distribute them if the remainder vests in interest or in possession)

Question 4

Acceleration of Vested Remainders
-Assuming that Ellen’s remainder is a vested remainder, did it accelerate into possession when David died and Ellen was still a red-belt?

Answer 4

-Vested remainders (even those that are subject to divestment) accelerate into possession whenever and however possible

Question 5

Contingent Remainder: Destructibility/Modern Approach
-Assuming that Ellen’s remainder had been contingent, when David dies before Ellen gets her black belt, was Ellen’s remainder destroyed under the doctrine of destructibility of contingent remainders?

Answer 5

-Under the rule of destructibility of contingent remainders, if the preceding estate ends before the contingency has been satisfied, the remainder is destroyed and the reversion in the grantor or the testator’s heirs becomes transformed into a fee simple. Modernly, however, the remainder is not destroyed but, rather, transformed into a springing executory interest with the grantor or the testator’s heirs having a fee simple subject to the springing executory interest.

Question 6

Fee simple, defeasible fee, or life estate

-When Oscar conveyed, “To Baker for him to live on,” did Oscar convey a fee simple, defeasible fee, or a life estate?

Answer 6

-A fee simple is the largest freehold estate, while a defeasible fee is a fee that either will expire automatically (fee simple determinable) or in a condition subsequent (fee simple on condition subsequent), whereas a life estate is a freehold estate that will expire upon the life tenant’s demise. Whether a grantor conveys a fee simple, defeasible fee, or a life estate is dependent upon the grantor’s intent, as determined by the totality of the circumstances.

Question 7

Reversion for Oscar

-Assuming that Oscar did convey a life estate, does Oscar own a reversion?

Answer 7

-A reversion is the future interest that remains in the grantor or in the successors in interest of a testator when the grantor or testator conveys a vested estate of a lesser quantum. In the quantum of estates, a life estate is a lesser quantum than a fee simple

Question 8

Power of Termination or Right of Entry

-If Oscar conveyed a defeasible fee, did he retain possibility of reverter or a right of entry?

Answer 8

-A possibility of reverter is the future interest remaining in the grantor or the successors in interest of a testator when the transferor conveys an estate estate of the same quantum; a right of entry is the future interest remaining in the grantor or successors in interest of a testator when the transferor conveys a fee on condition subsequent

Question 9

Waste

-Has Charlies committed affirmative waste when he cuts down all of the trees on Orangeacre, a wooded tract?

Answer 9

-Waste is the destruction of the property by one of the tenants. Affirmative waste is when the tenant by affirmative acts, as opposed to waste by failing to act, destroys the property.

Question 10

Sufficiency of Interest
-Assuming that Charlie does not own Orangeacre in fee simple because of the Rule in Shelley’s Case, does Charlie JR own, by his contingent remainder, a sufficient interest to allow him standing to sue Charlie for waste?

Answer 10

-Traditionally, although a contingent remainderman has as a sufficient interest in some jurisdictions to secure injunctive relief, he does not have standing to sue a life tenant for damages for waste.

Question 11

Vested remainder (condition subsequent) v. Contingent Remainder (condition precedent)
-When Oscar conveyed “and then, as an incentive for her to be financially sound, to Ellen when she accumulates $100k in her retirement account,” did Ellen take a contingent remainder or a vested remainder?

Answer 11

-Remainders are contingent or vested. A remainder is contingent when the condition is part of the gift. When the condition follows the gift, the remainder is a vested remainder subject to divestment.

Question 12

Destructibility: Common Law and Modern View
-Assuming the remainder was a contingent remainder, when Charlie dies before Ellen’s remainder becomes a vested remainder, is it destroyed under the doctrine of Destructibility of Contingent Remainders?

Answer 12

-Where still recognized, a contingent remainder is destroyed if it does not vest upon the termination of the life estate. Modernly, however, the interest of the remainderman becomes a springing executory interest that will vest in possession if, and when, the contingency is satisfied.

Question 13

Acceleration
-Assuming, however, that Ellen’s remainder was a vested remainder, does Ellen acquire Whiteacre upon the death of Charles?

Answer 13

-A vested remainder accelerates into possession however and whenever possible

Question 14

Rule in Shelley’s Case
-When Otto conveyed Blackacre “to Abel for life, then to Abel’s closest relatives who would inherit Abel’s property under the laws of this state if Abel were to die without a will,” were these words sufficient to trigger the Rule in Shelley’s Case?

Answer 14

-The Rule in Shelley’s Case states that when O conveys to A for life with a remainder to A’s heirs, A’s heirs take nothing and A has a remainder. Heirs are the individuals who take by operation of law when a person dies intestate, that is, without a will.

Question 15

Merger
-Assuming that Otto’s conveyance triggered the Rule in Shelley’s Case so that Abel received a life estate plus a remainder, how then does the merger doctrine then come into play?

Answer 15

-The merger doctrine states that if one person owns a life estate and that same person owns the next vested estate, such as a vested remainder, the life estate merges into the vested estate.

Question 16

Affirmative Waste
-Does Abel Jr. have a cause of action against Abel for affirmative waste because Abel cut down every tree on Blackacre when many of the trees were diseased, although Abel had a secondary reason of making the property ready for a housing complex, and when Abel Jr. was at best part of the class of contingent remaindermen if the Rule of Shelley’s case was not applicable?

Answer 16

-A life tenant can be sued by remaindermen for affirmative waste, which is the destruction of property. In some jurisdictions, contingent remaindermen do not have standing to sue for waste.

Question 17

Vested or Contingent Remainder
-When Otto conveyed Greenacre “to Baker for life, then to Baker’s children, Charlie and David-and I expect, anticipate, and demand that Charlie and David graduate from medical school,” did Charlie and David receive vested or contingent remainders?

Answer 17

-A remainder is vested if it is given to an ascertainable person and not subject to a condition precedent; a remainder is contingent if it is given either to an unascertainable person or subject to a condition precedent. When in doubt, the common law presumes a vested remainder.

Question 18

Destructibility of Contingent Remainders
-Assuming Charlie and David had contingent remainders, what are the consequences to them in light of the common law doctrine (State X has codified all common law rules of Property law) of Destructibility of Contingent Remainders after the death of Baker?

Answer 18

-Under the common law, a contingent remainder that does not vest in possession or interest upon the termination of the preceding life estate is destroyed; the owners of the reversion thereupon own the estate in fee simple.

Question 19

Acceleration of Vested Remainders
-Assuming that the remainders to Charlie and David were indefeasibly vested or vested subject to divestment, what were the consequences when Baker’s life estate ended and Charlie and Baker id not yet graduate from medical school?

Answer 19

-Vested remainders, even those that are subject to divestment, are never destroyed, but rather, accelerate into possession whenever and however possible.

Question 20

Sufficiency of Interest
-Is a contingent remainder that is contingent on a 45-year-old high school dropout becoming a lawyer too contingent to be recognized as a property interest to allow that remainderman–or his successor assuming the restraint is invalid–to sue the life tenant for legal waste?

Answer 20

-A contingent remainderman can sue a life tenant for waste, but only if the interest is not too contingent (whether an interest is too contingent must necessarily depend upon the totality of circumstances, including, but not limited to, the probability of vesting).

Question 21

Affirmative Waste
-Did Harriet commit an affirmative waste when he razed the apartment building and put up a parking space, resulting in Greenacre losing 3% of its value?

Answer 21

-Affirmative waste arises when the life tenant commits injurious acts on the property. Injurious acts mean acts that reduce the value of the property.

Question 22

Direct Restraint on Alienation
-Does the option contract which provides that CDE can purchase Greenacre from XYZ “at any time” act as an invalid direct restraint on alienation?

Answer 22

-Direct restraints on alienation generally are not recognized. A direct restraint is one which prohibits the transfer of the property outright or limits it to an unacceptably small class of person.

Question 23

Rule Against Perpetuities
-Does the option contract, which provides that CDE can exercise the option to purchase the leased property from XYZ “at any time” violate the common law Rule Against Perpetuities?

Answer 23

-The Rule Against Perpetuities provides that no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. In deciding what an “interest is, there is a split of authority as to whether commercial options come within the Rule Against Perpetuities, as there is with respect whether the RAP modernly even has any vitality at all. Where the RAP is recognized, the classical application is the “what might happen” test.

Question 24

Construction
-Assuming that the option is found to have violated the RAP, can CDE still be allowed to exercise the option which it tried to do within 10 years of creation on the theory that the option can be construed to not violate the rule?

Answer 24

-Where there is a violation of RAP, the court may construe or interpret the violating clause in a manner that is consistent with the parties intent in a way that does not violate the rule. In construing the instrument, the court may consider both extrinsic and intrinsic evidence.