Property Flashcards
A landowner died, validly devising his land to his wife “for life or until remarriage, then to” their daughter. Shortly after the landowner’s death, his daughter executed an instrument in the proper form of a deed, purporting to convey the land to her friend. A year later, the daughter died intestate, with her mother, the original landowner’s wife, as her sole heir. The following month, the wife remarried. The wife then executed an instrument in the proper form of a deed, purporting to convey the land to her new husband as a wedding gift.
Who now owns what interest in the land?
(A) The daughter’s friend owns the fee simple.
(B) The wife owns the fee simple.
(C) The wife’s new husband has a life estate in the land for the wife’s life, with the remainder in the daughter’s friend.
(D) The wife’s new husband owns the fee simple.
(A) The landowner’s wife had a determinable life estate, evidenced by the words “for life” and “until remarriage” in the landowner’s will. The daughter had a vested remainder and an executory interest. Both of the daughter’s interests could be assigned to the friend. On the remarriage of the landowner’s wife, the wife’s determinable life estate ended and the land automatically went to the holder of the future interest, the daughter’s friend.
A woman owned land in fee simple absolute. The woman conveyed the land to a friend “for life,” and when the friend died the land was to go to the woman’s neighbor “and her heirs.”
The neighbor died and in her duly probated will devised her entire estate to a local charity. If she had died intestate, her daughter would have been her only heir.
One year after the neighbor died, her daughter executed a quitclaim deed conveying any interest she might have in the land to the woman’s friend.
The common law Rule Against Perpetuities is unmodified in the jurisdiction. There are no other applicable statutes.
Who has what interest in the land?
(A) The friend has a fee simple absolute, because his life estate merged with the remainder conveyed to him by the daughter.
(B) The friend has a life estate and the charity has a vested remainder, because the neighbor’s interest was devisable.
(C) The friend has a life estate and the daughter has a vested remainder, because the deed from the woman created an interest in the neighbor’s heirs.
(D) The friend has a life estate and the woman has a reversion, because the neighbor’s remainder was void under the Rule Against Perpetuities.
(B) The grant to the friend “for life” gives the friend a life estate in the property. The grant to the neighbor “and her heirs” created a vested remainder. Vested remainders are devisable notwithstanding the “and her heirs” language, therefore when the neighbor left her estate to the local charity, the local charity took the vested remainder. For this reason, option B is correct.
Option A assumes that vested remainders are not devisable and is therefore incorrect even though it is true that the doctrine of merger would have turned the friend’s life estate into an interest in fee simple if she later acquired the remainder. Option C is incorrect because the “and her heirs” language does not create an interest in the daughter. Option D is incorrect because the Rule Against Perpetuities does not apply to vested remainders. Including “and her heirs” in the grant does not create a contingent interest even though the woman’s heirs will not be known until her death. Instead, the “and her heirs” language only makes clear that the grant is not a life estate.
A grantor executed an instrument in the proper form of a warranty deed purporting to convey a tract of land to his church. The granting clause of the instrument ran to the church “and its successors forever, so long as the premises are used for church purposes.” The church took possession of the land and used it as its site of worship for many years. Subsequently, the church decided to relocate and entered into a valid written contract to sell the land to a buyer for a substantial price. The buyer wanted to use the land as a site for business activities and objected to the church’s title. The contract contained no provision relating to the quality of title the church was bound to convey. There is no applicable statute. When the buyer refused to close, the church sued the buyer for specific performance and properly joined the grantor as a party.
Is the church likely to prevail?
(A) No, because the grantor’s interest prevents the church’s title from being marketable.
(B) No, because the quoted provision is a valid restrictive covenant.
(C) Yes, because a charitable trust to support religion will attach to the proceeds of the sale.
(D) Yes, because the grantor cannot derogate from his warranty to the church.
(A). The warranty deed conveyed a fee simple determinable title to the church, and the grantor retained the future interest, which is the possibility of reverter. The future interest becomes possessory immediately upon the occurrence of the limitation. A title is unmarketable when a reasonable person would not purchase it. This buyer planned to use the land as a site for business purposes, which would cause the limitation to occur and the title to be forfeited automatically to the grantor.
Six years ago, Oscar, owner of Blackacre in fee simple, executed and delivered to Albert an instrument in the proper form of a warranty deed, purporting to convey Blackacre to “Albert and his heirs.” At that time, Albert was a widower who had one child, Donna.
Three years ago, Albert executed and delivered to Bea an instrument in the proper form of a warranty deed, purporting to convey Blackacre to “Bea.” Donna did not join in the deed. Bea was and still is unmarried and childless.
The only possibly applicable statute in the jurisdiction states that any deed will be construed to convey the grantor’s entire estate, unless expressly limited.
Last month, Albert died, never having remarried. Donna is his only heir.
Blackacre is now owned by
(A) Donna, because Albert’s death ended Bea’s life estate pur autre vie.
(B) Bea in fee simple pursuant to Albert’s deed.
(C) Donna and Bea as tenants in common of equal shares.
(D) Donna and Bea as joint tenants, because both survived Albert.
(B). Vested remainders are devisable notwithstanding the “and her heirs” language, therefore when Albert left Blackacre to Bea, Bea took the vested remainder.
Two sisters own a single tract of land as tenants in common, each holding a one-half interest. The younger sister entered into a three-year written lease with a tenant; the lease described by metes and bounds a specified portion of the land, which consisted of about 40% of the total tract. The tenant went into sole possession of the leased portion of the land. The older sister has sued both the younger sister and the tenant to establish the older sister’s right to possession of the leased portion of the land.
Who is likely to prevail?
(A) The older sister, because the younger sister cannot unilaterally partition the land without the older sister’s consent.
(B) The older sister, because the younger sister may not lease her undivided interest in the land without the older sister’s consent.
(C) The younger sister and the tenant, because the older sister has been excluded only from the specified portion of the land subject to the lease, which makes up less than one-half of the land’s total area.
(D) The younger sister and the tenant, because the younger sister’s lease to the tenant was necessarily for less than a fee simple interest.
(A). Every tenant in common’s interest is undivided, so older sister has a right to possession of the 40% of the parcel that her younger sister has tried to give over to this lessee. The sisters could have agreed on such a scheme, but that didn’t happen here.
A landlord leased an apartment to a tenant by written lease for two years ending on the last day of a recent month. The lease provided for $700 in monthly rent. The tenant occupied the apartment and paid the rent for the first 15 months of the lease term, until he moved to another city to take a new job. Without consulting the landlord, the tenant moved a friend into the apartment and signed an informal writing transferring to the friend his “lease rights” for the remaining nine months of the lease. The friend made the next four monthly $700 rent payments to the landlord. For the final five months of the lease term, no rent was paid by anyone, and the friend moved out with three months left of the lease term. The landlord was on an extended trip abroad, and did not learn of the default and the vacancy until the end of the lease term. The landlord has sued the tenant and the friend, jointly and severally, for $3,500 for the last five months’ rent.
What is the likely outcome of the lawsuit?
(A) Both the tenant and the friend are liable for the full $3,500, because the tenant is liable on privity of contract and the friend is liable on privity of estate as assignee.
(B) The friend is liable for $1,400 on privity of estate, which lasted only until he vacated, and the tenant is liable for $2,100 on privity of contract and estate for the period after the friend vacated.
(C) The friend is liable for $3,500 on privity of estate, and the tenant is not liable, because the landlord’s failure to object to the friend’s payment of rent relieved the tenant of liability.
(D) The tenant is liable for $3,500 on privity of contract, and the friend is not liable, because a sublessee does not have personal liability to the original landlord.
(A). An assignment arises when a tenant transfers all or some of the leased premises to another for the remainder of the lease term, retaining no interest in the assigned premises. In this case, prior to the agreement with the friend, the tenant had privity of contract with the landlord because of the lease. The tenant also had privity of estate because the tenant was in possession of the apartment. Subsequently, an assignment arose when the tenant transferred the premises to the friend for the remainder of the lease term of nine months. The friend was then in privity of estate with the landlord as to all promises that run with the land, including the covenant to pay rent. The tenant was not released by the landlord, however, and thus remains liable on privity of contract.
Sixty years ago by a properly executed and recorded deed, Albert conveyed Greenacre, a tract of land: “To Louis for life, then to Louis’s widow for her life, then to Louis’s child or children in equal shares.” At that time, Louis, who was Albert’s grandson, was six years old.
Shortly thereafter, Albert died testate. Louis was his only heir at law. Albert’s will left his entire estate to First Church.
Twenty-five years ago, when he was 41, Louis married Maria who was then 20 years old; they had one child, Norman. Maria and Norman were killed in an automobile accident three years ago when Norman was 21. Norman died testate, leaving his entire estate to the American Red Cross. His father, Louis, was Norman’s sole heir at law.
Two years ago, Louis married Zelda. They had no children. This year, Louis died testate, survived by his widow, Zelda, to whom he left his entire estate.
The common-law Rule Against Perpetuities is unchanged by statute in the jurisdiction.
In an appropriate action to determine the ownership of Greenacre, the court should find that title is vested in
(A) First Church, because the widow of Louis was unborn at the time of conveyance and, hence, the remainder violated the Rule Against Perpetuities.
(B) Zelda, because her life estate and her inheritance from Louis (who was Albert’s sole heir at law and who was Norman’s sole heir at law) merged the entire title in her.
(C) the American Red Cross, because Norman had a vested remainder interest (as the only child of Louis) that it inherited, the life estate to Louis’s widow being of no force and effect.
(D) Zelda for life under the terms of Albert’s deed, with the remainder to the American Red Cross as the successor in interest to Norman, Louis’s only child.
(D). “To Louis for life” is pretty straightforward. Louis is getting a life estate, and his interest vests when the deed is delivered. No problems there.
Choice A is also wrong, and it raises an important point. When you see the word “widow” in a problem that involves the Rule Against Perpetuities, the unborn widow rule should come to mind. But remember what that rule says: since we don’t know until Louis dies who his widow is and whether she was alive at the time of the grant, the widow can’t be a measuring life for any subsequent interests. The unborn widow rule does not prevent the widow from taking the property; it just means we can’t use her as a measuring life for anyone further down the line.
Next we have “then to Louis’s widow for her life.” This grant is also valid (choice C is incorrect). Louis is the measuring life, and “Louis’s widow” will be an ascertained person as soon as Louis dies. When Louis died, Zelda’s interest vested, so there’s no issue with the Rule Against Perpetuities.But because “living” isn’t a condition of the grant in this fact pattern, the class of “Louis’s child or children” closes—and the interest vests—as soon as Louis dies. Louis can’t have more children. We know Norman is the only one. And it doesn’t matter that Norman has died. Per Norman’s will, the Red Cross is his successor in interest, and it will get the property when Zelda dies.
Abel owned Blackacre in fee simple. Three years ago, Abel and Betty agreed to a month-to-month tenancy with Betty paying Abel rent each month. After six months of Betty’s occupancy, Abel suggested to Betty that she could buy Blackacre for a monthly payment of no more than her rent. Abel and Betty orally agreed that Betty would pay $25,000 in cash, the annual real estate taxes, the annual fire insurance premiums, and the costs of maintaining Blackacre, plus the monthly mortgage payments that Abel owed on Blackacre. They further orally agreed that within six years Betty could pay whatever mortgage balances were then due and Abel would give her a warranty deed to the property. Betty’s average monthly payments did turn out to be about the same as her monthly rent.
Betty fully complied with all of the obligations she had undertaken. She made some structural modifications to Blackacre. Blackacre is now worth 50% more than it was when Abel and Betty made their oral agreement. Betty made her financing arrangements and was ready to complete the purchase of Blackacre, but Abel refused to close. Betty brought an appropriate action for specific performance against Abel to enforce the agreement.
The court should rule for
(A) Abel, because the agreements were oral and violated the statute of frauds.
(B) Abel, subject to the return of the $25,000, because the arrangement was still a tenancy.
(C) Betty, because the doctrine of part performance applies.
(D) Betty, because the statute of frauds does not apply to oral purchase and sale agreements between landlords and tenants in possession.
(C).
Abel and Betty have an oral agreement for Betty to purchase the property, so this is an issue of contract law, not landlord-tenant law (choice B is wrong). And the statute of frauds does apply to all contracts for sale of land, even where the parties are a landlord and a tenant (choice D is wrong). So, at first glance, things aren’t looking too good for Betty.
But the fact pattern has set Betty up perfectly for a claim based on the doctrine of part performance, a major exception to the statute of frauds for land contracts (choice A is wrong). Betty has treated her oral agreement with Abel as binding. She’s made improvements to Blackacre in reliance on their agreement, increasing the property’s value. She’s obtained financing, and she’s ready to close as the parties promised. On these facts, a court is going to give Betty the benefit of her bargain and require Abel to close despite the absence of a written agreement.
Ten years ago, a couple bought a building and moved into its second-floor apartment with their teenage daughter. The couple operated a shoe store on the first floor of the building for many years. When the couple purchased the building, the area was predominantly rural and was zoned for nonresidential use. The municipality’s zoning is cumulative.
Five years ago, the municipality rezoned the area to single-family residential use. The daughter was not aware of this change, since she was away at college.
Recently, the daughter inherited the building from her parents. The daughter immediately moved into the apartment and took over the operation of the shoe store on the first floor. The daughter has learned that a developer is planning to build a large residential community in the area surrounding her building.
The daughter has asked her lawyer for advice regarding her ability to continue operating the shoe store.
Should the lawyer advise the daughter that she can continue to operate her shoe store?
(A) No, because the nonconforming use of the building terminated when the daughter’s parents died.
(B) No, but the municipality must pay her reasonable compensation for her loss resulting from the change in zoning.
(C) Yes, because the shoe store is a nonconforming use.
(D) Yes, because the zoning is cumulative and the building is also used for single-family residential purposes.
(C). Here, there is an existing shoe store with an apartment in the second story on a lot that was previously zoned for non-residential use but is now zoned for single-family residential use. Here, there is an existing shoe store with an apartment in the second story on a lot that was previously zoned for non-residential use but is now zoned for single-family residential use.
Twenty-five years ago, a man who owned a 45-acre tract of land conveyed 40 of the 45 acres to a developer by warranty deed. The man retained the rear five-acre portion of the land and continues to live there in a large farmhouse.
The deed to the 40-acre tract was promptly recorded. It contained the following language:
“It is a term and condition of this deed, which shall be a covenant running with the land and binding on all owners, their heirs and assigns, that no use shall be made of the 40-acre tract of land except for residential purposes.”
Subsequently, the developer fully developed the 40-acre tract into a residential subdivision consisting of 40 lots with a single-family residence on each lot.
Although there have been multiple transfers of ownership of each of the 40 lots within the subdivision, none of them included a reference to the quoted provision in the deed from the man to the developer, nor did any deed to a subdivision lot create any new covenants restricting use.
Last year, a major new medical center was constructed adjacent to the subdivision. A doctor who owns a house in the subdivision wishes to relocate her medical office to her house. For the first time, the doctor learned of the restrictive covenant in the deed from the man to the developer. The applicable zoning ordinance permits the doctor’s intended use. The man, as owner of the five-acre tract, however, objects to the doctor’s proposed use of her property.
There are no governing statutes other than the zoning code. The common law Rule Against Perpetuities is unmodified in the jurisdiction.
May the doctor convert her house in the subdivision into a medical office?
(A) No, because the owners of lots in the subdivision own property benefitted by the original residential covenant and have the sole right to enforce it.
(B) No, because the man owns property benefitted by the original restrictive covenant and has a right to enforce it.
(C) Yes, because the original restrictive covenant violates the Rule Against Perpetuities.
(D) Yes, because the zoning ordinance allows the doctor’s proposed use and preempts the restrictive covenant.
(B). The restrictive covenant created 25 years ago placed a burden (that the land must be kept residential) on the 40-acre tract of land and gave the right to enforce the covenant to the man who retained ownership of the benefitted five-acre tract of land. The man may enforce the covenant because he owns land benefitted by it. The restrictive covenant is not an interest which is affected by the Rule Against Perpetuities.
A businesswoman owned two adjoining tracts of land, one that was improved with a commercial rental building and another that was vacant and abutted a river.
Twenty years ago, the businesswoman conveyed the vacant tract to a grantee by a warranty deed that the businesswoman signed but the grantee did not. The deed contained a covenant by the grantee as owner of the vacant tract that neither he nor his heirs or assigns would “erect any building” on the vacant tract, in order to preserve the view of the river from the commercial building on the improved tract. The grantee intended to use the vacant tract as a nature preserve. The grantee promptly and properly recorded the deed.
Last year, the businesswoman conveyed the improved tract to a businessman. A month later, the grantee died, devising all of his property, including the vacant land, to his cousin.
Six weeks ago, the cousin began construction of a building on the vacant tract. The businessman objected and sued to enjoin construction of the building. Who is likely to prevail?
(A) The businessman, because the commercial building was constructed before the cousin began his construction project.
(B) The businessman, because the cousin is bound by the covenant made by the grantee.
(C) The cousin, because an equitable servitude does not survive the death of the promisor.
(D) The cousin, because the grantee did not sign the deed.
(B). The businesswoman and the grantee created a valid equitable servitude.
The grantee did not sign the deed; however, the grantee accepted the deed and recorded it. An equitable servitude may be created by a writing that complies with the statute of frauds and expresses an intention that the servitude exist. The promise was in a writing—the deed—that satisfied the statute of frauds. The promise restricting the use of the vacant land touched and concerned the land, placing a burden on the vacant tract and giving a benefit to the improved tract. The writing showed an intent that the promise would be binding on the grantee’s heirs and assigns. The grantee recorded the deed. The cousin had constructive notice of the equitable servitude and is bound by it because nothing has occurred that would terminate the equitable servitude.
A man arranged to have custom-made wooden shutters installed on the windows of his home. The contractor who installed the shutters did so by drilling screws and brackets into the exterior window frames and the shutters.
The man later agreed to sell the home to a buyer. The sales agreement did not mention the shutters, the buyer did not inquire about them, and the buyer did not conduct a walkthrough inspection of the home before the closing.
The man conveyed the home to the buyer by warranty deed. After the sale closed, the buyer noticed that the shutters and brackets had been removed from the home and that the window frames had been repaired and repainted.
The buyer demanded that the man return the shutters and pay the cost of reinstallation, claiming that the shutters had been conveyed to him with the sale of the home. When the man refused, the buyer sued.
Is the buyer likely to prevail?
(A) No, because the sales agreement did not mention the shutters.
(B) No, because the window frames had been repaired and repainted after removal of the shutters.
(C) Yes, because the shutters had become fixtures.
(D) Yes, because the man gave the buyer a warranty deed and the absence of the shutters violated a covenant of the deed.
(C). How do you tell the difference between a fixture and personal property?
Sometimes the sales agreement will take care of that by listing the fixtures. But we don’t have any suggestion here that this sales agreement does that. States have slightly different definitions, but one common point of emphasis in defining a fixture is the method of attachment. Things that are bolted, screwed, nailed, glued, or cemented are fixtures.
And now we understand why the stimulus gave us that detail about how these shutters were screwed on. That makes them a fixture, and that means that they convey along with the rest of the house. So the buyer should prevail here.
A seller owned a single-family house. A buyer gave the seller a signed handwritten offer to purchase the house. The offer was unconditional and sufficient to satisfy the statute of frauds, and when the seller signed an acceptance, an enforceable contract resulted.
The house had been the seller’s home, but he had moved to an apartment, so the house was vacant at all times relevant to the proposed transaction. Two weeks after the parties had entered into their contract, one week after the buyer had obtained a written mortgage lending commitment from a lender, and one week before the agreed-upon closing date, the house was struck by lightning and burned to the ground. The loss was not insured, because three years earlier, the seller had let his homeowner’s insurance policy lapse after he had paid his mortgage debt in full.
The handwritten contract was wholly silent as to matters of financing, risk of loss, and insurance. The buyer declared the contract voided by the fire, but the seller asserted a right to enforce the contract despite the loss.
There is no applicable statute.
If a court finds for the seller, what will be the likely reason?
(A) The contract was construed against the buyer, who drafted it.
(B) The lender’s written commitment to make a mortgage loan to the buyer made the contract of sale fully binding on the buyer.
(C) The risk of loss falls on the party in possession, and constructive possession passed to the buyer on the contract date.
(D) The risk of loss passed to the buyer on the contract date under the doctrine of equitable conversion.
(D). Under the doctrine of equitable conversion, if the contract is silent regarding the risk of loss, that risk goes to the party with the equitable title. Equitable conversion occurs when the contract is capable of specific performance. This contract was silent regarding the risk of loss, and there were no conditions to be met. The buyer thus had the equitable title at the time of the loss.
A seller contracted to sell land to a buyer for $300,000. The contract provided that the closing would be 60 days after the contract was signed and that the seller would convey to the buyer a “marketable title” by a quitclaim deed at closing. The contract contained no other provisions regarding the title to be delivered to the buyer.
A title search revealed that the land was subject to an unsatisfied $50,000 mortgage and a right-of-way easement over a portion of the land.
The buyer now claims that the title is unmarketable and has refused to close.
Is the buyer correct?
(A) No, because nothing under these facts renders title unmarketable.
(B) No, because the buyer agreed to accept a quitclaim deed.
(C) Yes, because the right-of-way easement makes the title unmarketable.
(D) Yes, because the unsatisfied mortgage makes the title unmarketable.
(C) The buyer has no obligation to close because the title is unmarketable. To be marketable, the title must be to unencumbered property in fee simple. All sellers must provide good and marketable title at the time of closing. The significance of the quitclaim deed is that unlike on a warranty deed, buyers have no remedy against sellers if they discover the defective title after closing.
A buyer and a seller entered into a written contract for the sale of land. The contract satisfied the requirements of the statute of frauds. Because the buyer needed time to obtain financing, the buyer and the seller did not agree upon a closing date, and the written contract did not contain a stated closing date. Ten days after signing the contract, the buyer and the seller orally agreed to rescind the contract.
The next day, the seller sold the land to a third party.
Two days after that sale, the original buyer told the seller that she had changed her mind and wanted to complete their contract. When the seller told her that he had sold the land to a third party, she sued him for breach of the written contract.
For whom will the court find?
(A) For the buyer, because the agreement to rescind the contract was not in a writing signed by the buyer and the seller.
(B) For the seller, because the oral rescission was valid.
/end
(B). Although real estate contracts must be in writing to be binding at law, these contracts may be rescinded orally unless the contract provides otherwise.
An owner of land contracted to sell it to a buyer for $100,000, its fair market value at that time. After an unanticipated zoning change increased the land’s fair market value to $150,000 during the executory period, the owner refused to close.
Wishing to avoid a lawsuit, the buyer assigned the contract (which the contract did not forbid) in an arm’s-length transaction to an investor, who is experienced in buying and selling real estate. The investor paid the buyer $25,000. The investor knew of the owner’s refusal to close, and the owner continued to refuse to close despite the investor’s demands that he do so.
The investor has sued the owner for specific performance.
Who will likely prevail?
(A) The investor, because an assignee of the original party purchaser in a real estate contract is entitled to specific performance under these circumstances.
(B) The investor, because she has elected to waive the owner’s lack of marketable title caused by the zoning change.
(C) The owner, because the investor is not a bona fide assignee without notice, and thus does not have clean hands.
(D) The owner, because the investor, who is experienced in buying and selling real estate, is entitled to money damages but not to specific performance.
(A). A valid real estate contract creates an obligation to close regardless of changes in the value of the property. The default remedy for breach of the duty to close is specific performance. Option A is correct because buyers are entitled to assign their interests in real estate contracts unless the contract specifies otherwise. Assignment does not change the default remedy.
When a buyer and a seller executed a valid contract for the sale of a house, the buyer gave the seller $1,000 as earnest money. The contract noted that the earnest money tendered would be applied to the purchase price at the time of sale but was silent as to remedies in the event of any default.
Just before the closing, the buyer lost her job. The buyer told the seller that she could no longer purchase the house and asked him to return the earnest money. The seller accurately told the buyer that the seller’s actual losses exceeded the amount of the earnest money; that if the seller sued the buyer for damages, he would receive a minimum of $5,000; and that it would be difficult for him to sell the house in the current market.
Should the buyer get the earnest money back?
(A) No, because the contract was silent regarding remedies.
(B) No, because the seller’s actual losses exceeded the amount of the earnest money.
(C) Yes, because the buyer is no longer ready, willing, and able to purchase the house.
(D) Yes, because the reason for the buyer’s default was not anticipated.
(B). This question is about when buyers are entitled to a return of their earnest money (aka “deposit” / “down payment”). If the earnest money bears a reasonable relationship to the seller’s actual damages, the seller can keep it as liquidated damages as long as the contract contemplates that the seller will keep the earnest money, as it does here.
A seller entered into a written contract to sell a tract of land to an investor. The contract made no mention of the quality of title to be conveyed. The seller and the investor later completed the sale, and the seller delivered a warranty deed to the investor. Soon thereafter, the value of the land increased dramatically. The investor entered into a written contract to sell the land to a buyer. The contract between the investor and the buyer expressly provided that the investor would convey a marketable title. The buyer’s attorney discovered that the title to the land was not marketable and had not been marketable when the original seller had conveyed to the investor. The buyer refused to complete the sale. The investor sued the original seller for breach of contract, claiming damages from the seller’s failure to convey marketable title, which resulted in the investor’s loss of the sale to the subsequent buyer.
Who is likely to prevail on this count?
(A) The investor, because the law implies in such a contract a covenant that the title will be marketable.
(B) The investor, because the original seller is liable for all reasonably foreseeable damages.
(C) The original seller, because her contract obligations as to title merged into the deed.
(D) The original seller, because she did not expressly agree to convey marketable title.
(C). Although a covenant that title will be marketable is implied in a contract for the sale of land, the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted. The investor’s remedy, if there is one, would be based on the deed he received and not on the contract of sale.
A buyer and a seller entered into a written contract for the sale of an identified parcel of land. The contract expressly provided that the buyer was to pay $150,000 cash for the land at the time of the closing but did not state the closing date. The parties had not agreed on the closing date because the buyer was not sure at the time the contract was signed how she would raise the cash.
Fifteen days after the contract was signed, the seller learned that he could sell the land to a third party for $200,000.
The seller asked the buyer if she would agree to rescind the contract. The buyer refused. The seller then told her that he would not complete the transaction, contending that the contract was unenforceable under the statute of frauds because an essential element (time for performance) was not agreed upon by the parties and was not expressly stated in the written agreement. The seller sold the land to the third party.
The buyer brought an appropriate action against the seller for breach of contract. For which party is the court likely to find?
(A) The buyer, because of the doctrine of unjust enrichment.
(B) The buyer, because the court will infer that performance within a reasonable time was intended.
(C) The seller, because the contract is unenforceable under the statute of frauds.
(D) The seller, because time of performance is presumed to be of the essence.
(B) While the lack of an essential element may sometimes implicate the statute of frauds, there is no rule requiring parties to a contract for the sale of real property to agree in writing to the timing of performance. In such a case, a court will infer that performance within a reasonable time was intended.
(A) is wrong b/c unjust enrichment does not apply to a situation where the claimant has not given anything of value.
A niece inherited vacant land from her uncle. She lived in a distant state and decided to sell the land to a colleague who was interested in purchasing the land as an investment. They orally agreed upon a price, and, at the colleague’s insistence, the niece agreed to provide him with a warranty deed without any exceptions. The price was paid, the warranty deed was delivered, and the deed was promptly recorded. Neither the niece nor the colleague had, at that point, ever seen the land.
After recording the deed, the colleague visited the land for the first time and discovered that it had no access to any public right-of-way and that none of the surrounding lands had ever been held in common ownership with any previous owner of the land.
The colleague sued the niece for damages. For whom will the court find?
(A) The colleague, because lack of access makes title unmarketable.
(B) The colleague, because the covenants of warranty and quiet enjoyment in the deed were breached.
(C) The niece, because no title covenants were breached.
(D) The niece, because the agreement to sell was oral.
Lack of access may render title unmarketable under a contract of sale; however, the time to challenge marketable title is prior to the acceptance of the deed. Under the doctrine of merger, the remedy, if any, would be under one of the title covenants in the deed. Lack of access does not violate any of the title covenants. The colleague received the title the niece said she had. No one had a superior title and thus the covenants of seisin, right to convey, quiet enjoyment, and general warranty were not breached. The covenant against encumbrances provides protection for interests held by third parties such as easements for access. The land was not subject to an express easement nor may any easement be implied based on either prior use or necessity because the lands were never held in common ownership.
(D) is wrong b/c although the statute of frauds does require that an agreement to sell land be in writing, if the parties have both fully performed under an oral contract (as they did here), the relationship is the same as if the parties had fully complied with the statute initially. It is too late for the colleague, having accepted the deed, to now assert that the statute of frauds invalidates the oral agreement.
Six months ago, a man told his cousin that he would give her his farm as a gift on her next birthday. The cousin then entered into a valid written contract to sell the farm to an investor with the closing to take place “one week after [the cousin’s] next birthday.”
The man failed to convey the farm to the cousin on her birthday. One week after the cousin’s birthday, on the intended closing date, the investor first learned of the cousin’s inability to convey the farm because the man had breached his promise. The investor considered suing the cousin but realized that she could not compel the cousin to convey the farm because it was still owned by the man.
Two weeks after the cousin’s birthday, the man died. Under his valid will, the man devised the farm to the cousin. Within a week, the executor of the man’s estate gave the cousin an executor’s deed to the farm in compliance with state law. The investor promptly learned of this transfer and demanded that the cousin convey the farm to her. The cousin refused.
The investor sued the cousin for specific performance. Who will likely prevail?
(A) The cousin, because the contract to convey was not signed by the legal owner of the farm as of the date of the contract and was therefore void.
(B) The cousin, because she received title by devise rather than by conveyance.
(C) The investor, because the contract to convey merged into the executor’s deed to the cousin.
(D) The investor, because the contract to convey remained enforceable by her within a reasonable period of time after the proposed closing date.
(D). A person can sign a valid contract of sale for land even if that person does not own the land at the time of signing. The contract in this case was valid and did not provide that time was of the essence. Thus, the investor should be able to enforce the contract within a reasonable period of time. The cousin acquired the land two weeks after the intended closing date, which was within a reasonable time period afterward.
A seller owns a 400-acre tract of land with 5,000 feet of frontage on a county highway. The seller and a buyer entered into a written agreement for the sale of a portion of the tract identified only as “a parcel of land, containing not less than 100 acres and having not less than 1,000 feet of frontage on the county highway, whose exact location and dimensions are to be determined by the parties hereto, at a price of $8,000 per acre.”
Shortly after the execution of the agreement, the parties met to stake out the parcel of land to be sold, but they could not agree. The disagreement intensified, and the seller repudiated the contract.
The buyer has sued the seller for specific performance. The seller has asserted all available defenses. Is the buyer entitled to specific performance of the contract?
(A) No, because a contract for the sale of real property that requires further agreement on an essential element cannot be specifically enforced.
(B) No, because the purchase price was not fixed by, nor determinable under, the contract terms.
(C) Yes, because the contract bound the parties to act in good faith and to agree upon the specific land to be conveyed.
(D) Yes, because the equity powers of the court enable the court to appoint a master, or to take other appropriate action, to identify the land to be conveyed.
(A). The statute of frauds requires a writing evidencing an agreement to sell real property to identify the land to be sold. Although courts are sometimes lenient with this requirement, the writing must contain some evidence of the specific real property to be sold. The writing in this case noted that the parties were yet to agree on what land was to be conveyed. Thus, the statute of frauds makes the contract unenforceable. Equity cannot provide relief for this omission.
A man borrowed money from a lender and mortgaged land that he owned to secure repayment of the loan. Before he had completely repaid the loan, the man conveyed the land to an investor, who expressly assumed the loan. The note and mortgage did not contain a due-on-sale clause.
After the investor had made several payments on the loan, she defaulted on two payments. The lender notified the man and the investor of its intention to accelerate the loan pursuant to the terms of the note and mortgage unless the default was cured within 60 days. When neither the man nor the investor made the required payment, the lender accelerated the loan and initiated foreclosure proceedings, naming both the man and the investor as party defendants. The foreclosure sale resulted in a deficiency. The lender has sought a deficiency judgment against only the man, because the investor has become insolvent in the meantime.
Will the court likely find the man liable for the deficiency?
(A) No, because the investor’s express assumption of the loan released the man from liability.
(B) No, because the lender must first seek to obtain a deficiency judgment against the investor.
(C) Yes, because even after the assumption, the man remains liable as a surety of the investor in the absence of a release from the lender.
(D) Yes, because the note and mortgage did not contain a due-on-sale clause.
(C). A promissory note creates a personal obligation for the borrower to repay the debt while a mortgage gives lenders an in rem right to foreclose on the encumbered property in the event of default. The encumbered property is collateral on the loan. When a borrower transfers the collateral property and the investor assumes the loan, the investor becomes liable on the debt, but that alone does not release the man from his liability. Option C is correct because the man remains liable for the loan until the lender consents to release the man from the debt. This rule protects lenders by preventing borrowers from avoiding liability on their debts by transferring their obligations. Lenders can look back to the original borrower for payment since it is that borrower’s creditworthiness on which they relied when underwriting the loan.
A man borrowed $150,000 from a bank to remodel his home and executed a promissory note agreeing to repay the loan over a 10-year period. The loan was secured by a mortgage on the home. The bank promptly recorded the mortgage, which was the only lien on the home at that time. Several months later, the man borrowed $40,000 from his mother in order to purchase a new truck and gave his mother a mortgage on the home to secure repayment of the debt. The mother promptly recorded the mortgage.
The man later lost his job and was struggling to make loan payments to both the bank and his mother. To accommodate the man’s financial situation, the bank extended the amortization period of its loan to substantially reduce the amount of each monthly payment. The bank did not alter the interest rate or increase the principal amount of the loan. At the time of the modification of the bank loan, the man was not in default in his payments to his mother. Neither the bank nor the man informed the mother of the modification of the bank loan.
After the man later missed five payments to his mother, she commenced a foreclosure action. While the action was pending, the mother learned of the bank’s loan modification. The mother asserted that her mortgage had become a first lien on the home and that the bank’s mortgage had become a second lien.
Is the mother’s assertion correct?
(A) No, because the bank’s loan modification was not detrimental to the rights of the mother.
(B) No, because the man was not in default in his payments to his mother at the time of the bank’s loan modification.
(C) Yes, because the bank’s loan modification was made without the mother’s prior consent.
(D) Yes, because the bank’s loan modification was material.
(A). In this case, the mortgage to the bank has priority over the mortgage to the man’s mother because it was recorded first. The loan modification does not change the priority of the mortgages unless it is detrimental to the junior mortgage.
