Real Property Flashcards
Summary
The language in Parent’s deed to Jessie and Karen probably is sufficient to overcome the statutory presumption that a conveyance to two or more persons creates a tenancy in common.
Thus, Jessie and Karen probably became joint tenants in the farm. At Jessie’s death her interest would terminate and Karen would own the farm in fee unless prior to her death Jessie severed the joint tenancy.
Whether the mortgage to Credit Union, executed only by Jessie, severs the joint tenancy depends upon whether the farm is located in a lien- or title-theory jurisdiction. However, even if the farm
is located in a lien-theory jurisdiction where a mortgage would not sever the joint tenancy, when Jessie entered into a contract to sell Buyer her interest in the farm, she likely severed the joint
tenancy and converted it into a tenancy in common. Thus, once the executor deeded Jessie’s interest to Buyer, Karen and Buyer owned the farm as tenants in common.
Credit Union also has a mortgage on one-half of the farm. Because Credit Union recorded the mortgage before Buyer entered into the contract to purchase Jessie’s interest, Buyer had constructive notice from the record of Credit Union’s interest created by Jessie and takes subject to that mortgage even though the deed to Jessie was not recorded.
Because of the doctrine of equitable conversion, Jessie’s interest in the farm at her death is characterized as personalty and passes to Legatee under Jessie’s will.
Does a deed conveying property “jointly in fee” to two daughters
“equally, to share and share alike” create a tenancy in common or a
joint tenancy with right of survivorship in the daughters? Rule
A deed to two or more grantees may create a joint tenancy or a tenancy in common. To create a joint tenancy, the common law traditionally required the existence of four unities (time, title,
interest, and possession). See WILLIAM B. STOEBUCK & DALE A. WHITMAN , THE LAW OF PROPERTY 182–83 (3d ed. 2000). Under the four-unities test, a joint tenancy presumptively is created by a
conveyance to two or more persons if they acquire their interest at the same time, acquire their interest under the same instrument, acquire an equal interest in the property, and acquire the right
to possession of the property.
The four unities are satisfied by Parent’s deed to the daughters, so at common law they clearly took title as joint tenants with right of survivorship. With a joint tenancy, each joint tenant has
the right of survivorship.
Today, in most states, there is a statutory presumption that a conveyance to two or more persons creates a tenancy in common rather than a joint tenancy. See generally SHELDON F. KURTZ ,
MOYNIHAN’S INTRODUCTION TO THE LAW OF REAL PROPERTY 282 (4th ed. 2005). Thus, if the presumption is not rebutted, Jessie and Karen took as tenants in common. Tenants in common
have no right of survivorship.
The standard way to overcome the presumption favoring a tenancy in common is for the deed to use the term “joint tenancy” or “joint tenants,” usually also adding an express reference to “survivorship” or “survivors,” id . at 275–77, and it can be argued that where such language is absent the statutory presumption is not rebutted.
Does a deed conveying property “jointly in fee” to two daughters
“equally, to share and share alike” create a tenancy in common or a
joint tenancy with right of survivorship in the daughters? Application
Although survivorship language is missing in Parent’s deed to Jessie and Karen, the language of the deed could still be construed to overcome the statutory presumption favoring a tenancy in
common. For example, some cases hold that the word “jointly” standing alone rebuts the presumption favoring a tenancy in common, although there are contrary cases holding that a
grantor who uses the word “jointly” in the deed may intend that the grantees “own together” rather than that they own as joint tenants with the right of survivorship. STOEBUCK & WHITMAN , supra, at 185–86. Here, however, Parent’s deed not only used the word “jointly” but added the phrase “equally, to share and share alike.” This phrase, in common with the word “jointly,” may point toward a joint tenancy as it evidences an intent by Parent to give each daughter an equal interest in the farm, another hallmark of a joint tenancy but not essential for a tenancy in common. This additional phrase also reflects the historic conception that joint tenants hold as a unit rather than as separate individuals. See id. at 184.
[NOTE: This is a close question, and applicants should receive equal credit for reasoned analyses that consider the possibilities, whether they conclude that the deed creates a tenancy in common or a joint tenancy. However, an applicant’s conclusion should not affect the rest of the analysis because the remaining calls assume Jessie and Karen took from Parent as joint tenants with right of survivorship.]
Lastly, a deed is effective between the parties even if it is not recorded. Id . at 872. Thus, the daughters acquired a tenancy in common or a joint tenancy, notwithstanding their failure to
record their deed of gift.
Assuming a joint tenancy with right of survivorship was created in
the two daughters, was it severed when one of the two joint tenants
granted a mortgage on, and entered into a contract for the sale of,
the farm?
If the deed of gift created a joint tenancy, Jessie’s mortgage severed that joint tenancy as to her one-half interest if the state follows the “title theory” instead of the “lien theory” of mortgages.
In any event, Jessie’s contract of sale severed the joint tenancy. Therefore, Karen had no right of survivorship and the deed from the executor to Buyer caused Karen and Buyer to acquire a title
to the farm as tenants in common.
Assuming a joint tenancy with right of survivorship was created in
the two daughters, was it severed when one of the two joint tenants
granted a mortgage on, and entered into a contract for the sale of,
the farm? Rule
When property is held by two persons in joint tenancy, a conveyance by one joint tenant of her entire ownership interest severs the joint tenancy as to the conveyed share. This is because the conveyance severs at least the unities of time and title between the remaining co-tenant and the new co-tenant. See Jackson v. O’Connell , 177 N.E.2d 194, 194–95 (Ill. 1961); KURTZ , supra , at 278–79.
When, as here, a joint tenant transfers a lesser interest, such as a mortgage, a severance of the joint tenancy may also occur. Courts usually resolve the issue by trying to decide whether the
transfer destroyed any of the four unities. In the case of mortgages, some states follow the “title theory,” which says that the mortgagee
takes title to the property for the duration of the mortgage. In “title theory” states, a mortgage granted by one joint tenant severs the joint tenancy as to the conveyed share. This would convert the joint tenancy into a tenancy in common. Other states follow the “lien theory” of mortgages, which says that the mortgagor retains title and the mortgagee takes only a lien on the property. This would leave the four unities intact, and thus Jessie would remain a joint tenant with her sister. See People v. Nogarr , 330 P.2d 858 (Cal. Ct. App. 1958); KURTZ , supra , at 279; STOEBUCK & WHITMAN , supra , at 184–85, 191.
Assuming a joint tenancy with right of survivorship was created in
the two daughters, was it severed when one of the two joint tenants
granted a mortgage on, and entered into a contract for the sale of,
the farm? Application
If Jessie’s grant of the mortgage did not sever the joint tenancy, her contract to sell her interest in the farm to Buyer almost certainly had that effect. See STOEBUCK & WHITMAN , supra , at 190–91; 2 A. JAMES CASNER , AMERICAN LAW OF PROPERTY § 6.2, at 11 (1952); Annotation, What Acts by One or More of Joint Tenants Will Sever or Terminate the Tenancy , 64 A.L.R.2d 918, 935–36 (1959). Although Jessie retained legal title until the contract closed, under the four unities analysis she no longer had the same interest as her sister. This follows from the doctrine of equitable conversion (discussed in Point Four below) because her interest (but not Karen’s interest) is now subject to Buyer’s equitable interest or title. Because the joint tenancy was severed, Karen had no right of survivorship and, therefore, did not become the sole owner of the farm at Jessie’s
death. [NOTE: Many applicants may not address the distinction between the title- and lien-theory jurisdictions and should not be penalized for failing to do so. What is important is that applicants
recognize the legal issue and come to a resolution. Furthermore, without regard to the mortgage, applicants should address the effect of the contract with Buyer. Also, if a jurisdiction does not
recognize the doctrine of equitable conversion, the execution of the contract would not sever the joint tenancy.] Since the joint tenancy was severed, the deed from the executor to Buyer caused Karen and
Buyer to hold the farm as tenants in common.
Is a buyer subject to a prior recorded mortgage when the buyer has
no actual notice of the mortgage and the previous deed in the chain
of title to the seller was unrecorded?
Buyer cannot qualify as a bona fide purchaser because Buyer had constructive notice of Credit Union’s recorded mortgage. The failure to record the deed of gift from Parent to Jessie and Karen should not impair the mortgage because the non-recording of that deed would not interfere with Buyer’s ability to find the mortgage during a title search. Thus, Buyer takes the farm subject to Credit Union’s interest.
Is a buyer subject to a prior recorded mortgage when the buyer has
no actual notice of the mortgage and the previous deed in the chain
of title to the seller was unrecorded? R & A
Assuming Buyer acquired an interest from Jessie, Buyer may claim to be a bona fide purchaser, who should take free of Credit Union’s mortgage. To qualify as a bona fide purchaser, a person must (i) pay value for an interest and (ii) not have actual, inquiry, or constructive notice of the competing prior-in-time interest. See STOEBUCK & WHITMAN , supra , at 879–83. Although Buyer paid value, see id . at 879–80, and lacked actual notice of the mortgage, Buyer had constructive notice of the mortgage because the mortgage was properly recorded before Buyer entered into the contract to buy Jessie’s interest. Had Buyer made a proper title search by looking in the grantor-grantee index for all of Jessie’s transactions as a grantor, the mortgage would have been discovered. Therefore, Buyer takes subject to Credit Union’s interest. [NOTE: The mortgage is not a “wild deed” that could be deemed unrecorded because it is outside of the buyer’s chain of title or recorded out of sequence (too early or too late). Since the facts state that the grantor-grantee index operates in this jurisdiction, if Buyer had searched under Jessie’s name as grantor, Buyer would have found her mortgage to Credit Union. In the typical wild deed case, the prior interest outside of the chain of title is created by someone other than the buyer’s grantor.]
[NOTE: As an aside, Buyer’s search would also reveal the fact that Jessie and her sister lacked record title because they never recorded the deed of gift from Parent. However, here that would not be a title objection because Buyer agreed to accept a title that was not marketable.]
Does a deceased seller’s interest in the proceeds of sale due under
an executory real estate contract pass to the beneficiary of the real
or personal property under the deceased seller’s will?
When Jessie entered into the contract of sale, the doctrine of equitable conversion transformed her interest into personalty. As a result, Devisee acquired no interest in the farm under Jessie’s
will. Rather, the sales proceeds pass to Legatee. The doctrine of equitable conversion splits title to the property when a real estate contract is signed. Buyer obtained equitable title, and Jessie as seller retained legal title as trustee to secure payment of the remainder of the purchase price. See STOEBUCK & WHITMAN , supra , at 786–87.
Equitable conversion only applies to a contract that is specifically enforceable; here there are no facts suggesting that Jessie or Buyer would be unable to obtain specific performance. Buyer cannot reject title because of the outstanding mortgage as Buyer agreed to accept a title without any warranties and regardless of its marketability. When equitable conversion applies, the seller’s legal title is considered personal property, and the buyer’s equitable title is considered real property. Id . When Jessie died, her share passed to Legatee, who took personal property under Jessie’s will.
[NOTE: The preceding analysis depends upon Jessie’s share prior to her death being classified as a tenancy in common because (1) the mortgage severed Jessie’s joint tenancy share, or (2) the contract of sale to Buyer severed Jessie’s joint tenancy share. If, on the other hand, Jessie died still owning a one-half interest as joint tenant, no part of the farm or its proceeds passed to Legatee or Devisee under Jessie’s will. Rather, by right of survivorship, Karen owned the entire
farm free and clear of the rights of Credit Union and Buyer because their interests, being wholly derivative from Jessie, would also expire at Jessie’s death. See KURTZ , supra , at 279; STOEBUCK &
WHITMAN , supra , at 191.]
